FI BU .S . DI TRICT COURT

EASTERN DISTRICT OF TEXA S

JUL m 7 2004UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF TEXAS BY DAVID J . MALAND `RK,TEXARKANA DIVISION n

TERRY WALKER, Individually and on Behalf ofHimself and All Others Similarly Situated ,

Plaintiff,

vs .

RENT-A-CENTER, INC ., J . ERNEST TALLEY,

MITCHELL E . FADEL, ROBERT D . DAVIS, MARKE. SPEESE , L. DOWELL ARNETTE, LAURENCE M .

BERG, PETER P . COPSES, J .V. LENTELL,MORGAN STANLEY DEAN WITTER CO., BEAR,

STEARNS , CO., LEHMAN BROTHERS , HOLDING,

INC., and ROBINSON HUMPHREY CO . ,

Defendan ts .

E rU . Y

Case No . 5 :02cv3 (DF)

THIRD AMENDED CONSOLIDATED CLASS ACTION COMPLAINT

Table of Contents

Page

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

JURISDICTION AND VENUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2

PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

A. Plaintiffs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2

B. Defendants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

DEFENDANTS' WRONGFUL COURSE OF CONDUCT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

A. Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

B. Material Omi tted Information Conce rning The Falsification Of RCII' s

Financial Repo rt ing, Repo rted Operating Expenses , And The Purported

Success Of Its Growth Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

1 . RCII's Failure To Repo rt Expenses In Connection With Free Time. . . . . . . . . . .9

2. Improperly Deferring Operating Expenses In Order To ShowPositive Earnings Results During The Class Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17

3 . Violations of SEC Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18

4 . Breakdown Of Internal Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

C. Material Omitted Information Concern ing RCII's Nonpayment O fOvertime Wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21

D. Material Omi tted Information Concerning RCII's Customer Delinquenc y

Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25

DEFENDANTS' MATERIALLY FALSE AND MISLEADING STATEMENTS

DURING THE CLASS PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26

DEFENDANTS' SCHEME UNRAVELS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57

POST-CLASS PERIOD EVENTS FURTHER DEMONSTRATING DEFENDANTS '

FRAUD .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

ADDITIONAL SCIENTER ALLEGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60

A. Insider Selling During The Class Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60

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B. RCII's Secondary Offering During The Class Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62

C. RCII's Management Information Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62

D. Judicial Determination Of The Individual Defendants' Direct Involvement

In Store-Level Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65

NO SAFE HARBOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .68

CLASS ACTION ALLEGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .68

FRAUD-ON-THE-MARKET DOCTRINE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .70

THE INDIVIDUAL DEFENDANTS' GUIDANCE TO SECURITIES ANALYSTS . . . . . . . . . . . . . . . . .72

LOSS CAUSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .73

FIRST CLAIM (Violation Of Section 10(b) Of The 1934 Act And Rule 1 Ob- 5

Promulgated Thereunder) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .75

SECOND CLAIM (Violation of Section 20(a) Of The 1934 Act) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .78

THIRD CLAIM (Violation Of Section 20A Of The 1934 Act) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .79

FOURTH CLAIM (Violation of Section 11 of the 1933 Act) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .80

FIFTH CLAIM (Violation of Section 12(a)(2) of the 1933 Act) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .87

SIXTH CLAIM (Violation of Section 15 of the 1933 Act) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .95

JURY TRIAL DEMAND .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .96

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INTRODUCTION

Plaintiffs, by their attorneys, on behalf of themselves and the class they seek to

represent, for their Third Amended Consolidated Class Action Complaint, make the following

allegations against defendants upon information and belief (except as to allegations specifically

concerning plaintiffs and their counsel, which are based on personal knowledge) based upon the

thorough investigation conducted by and under the supervision of plaintiffs' counsel, which

included reviewing and analyzing information and financial data relating to the relevant time

period concerning defendant Rent-A-Center, Inc . (RCII or the Company) and obtained from

numerous public and proprietary sources (such as LEXIS-NEXIS, Dow Jones and Bloomberg),

including, among other things, filings with the Securities and Exchange Commission, publicly

available annual reports, press releases, published interviews, news articles and other media

reports (whether disseminated in print or by electronic media), and reports of securities analysts

and investor advisory services, in order to obtain the information necessary to plead plaintiffs'

claims with particularity. Plaintiffs' investigation also included interviewing or consulting with

numerous individuals, including former RCII employees who worked at the Company during the

Class Period (between April 25, 2001 and October 8, 2001), and who are knowledgeable about

RCII's business and operations and/or the industry and markets in which RCII operates . Except

as alleged herein, the underlying information relating to defendants' misconduct and the

particulars thereof are not available to plaintiffs and the public and lie exclusively within the

possession and control of defendants and other RCH insiders, thus preventing plaintiffs from

further detailing defendants' misconduct . Plaintiffs believe that further substantial evidentiary

support will exist for the allegations set forth below after a reasonable opportunity for discovery .

JURISDICTION AND VENUE

2. The claims asserted in this action arise under Sections 11, 12(a)(2) and 15 of the

Securi ties Act of 1933 (1933 Act) [15 U .S .C. §§ 77k, 771(2) and 77o], Sections 10(b), 20(a) and

20A of the Securities Exchange Act of 1934 (1934 Act) [15 U .S.C. §§ 78j(b), 78t(a) and 78t-1] ,

and Rule 1Ob-5 promulgated thereunder by the SEC [17 C .F.R. § 240 .10b-5] .

This Court has jurisdiction over the subject matter of this action pursuant to 28

U.S .C. §§ 1331 and 1337, Section 22 of the 1933 Act [15 U.S .C. § 77v], and Section 27 of the

1934 Act [15 U.S.C. § 78aa] .

4 . As set forth in the Court's September 29, 2003 decision denying defendants '

motion to transfer venue pursuant to 28 U.S.C. § 1404(b), venue is proper in this District .

In connection with the acts, conduct and other wrongs alleged in this complaint ,

defendants, directly or indirectly, used the means and instrumentalities of interstate commerce ,

including the mail, the internet, telephone communications and the facilities of the nationa l

securities markets .

PARTIES

A. Plaintiffs

6. Lead Plaintiffs . Lead plaintiffs Elizabeth Bergbower and Mark Rice purchased

the securities of RCII at artificially inflated prices during the Class Period, as set forth in the

certifications that are attached as Exhibit A, and were damaged thereby . The Court previously

appointed these lead plaintiffs pursuant to an Order dated October 10, 2002 .

7. Additional Plaintiffs . Numerous additional plaintiffs purchased RCII secu rities in

the open market during the Class Period and were damaged thereby. These plaintiffs have

signed appropriate certifications under the Private Securities Litigation Reform Act (PSLRA) ,

and, if needed, are willing and able to serve as class representatives .

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B. Defendants

8. Defendant RCII is a Delaware corporation with its principal executive office s

located at 5700 Tennyson Parkway, Plano, Texas, 75024 . RCII operates a chain of rent-to-own

(RTO) stores that offer leases to consumers on household goods .

9. Nominal defendant J . Ernest Talley was RCII's Chairman of the Board (sinc e

May 1989) and its Chief Executive Officer (since November 1994) until October 8, 2001, when

he suddenly left the Company . Talley made numerous untrue public statements during the Class

Period, including, among others, statements to analysts, statements quoted in the Company's

press releases, and statements filed with the SEC . During the Class Period, while in possession

of adverse undisclosed information about the Company, Talley sold 1,955,000 shares of RCII

common stock for $78,933,125 in illegal insider trading proceeds . Pursuant to the Court's Order

of August 11, 2003, Michael Craig Talley, Mark Andrew Talley and Matthew Talley have been

substituted as party defendants for J . Ernest Talley in their capacity as the Independent Co-

Executors of the Estate of J . Ernest Talley .

10. Defendant Mark E . Speese was a director of RCII from 1990 to October 8, 2001 .

Since that time, Speese has served as RCII's Chief Executive Officer and Chairman of the

Board . Speese previously served as Vice Chairman from September 1999 until March 2001 .

From 1990 until April 1999, Speese served as President, and as Chief Operating Officer from

November 1994 until March 1999. Defendant Speese made numerous untrue public statements

during the Class Period, including, among others, statements to analysts, statements quoted in th e

Company' s press releases, and statements filed with the SEC . During the Class Period, while in

possession of adverse undisclosed information about the Company, defendant Speese sol d

575,000 shares of RCII common stock for $23,215,625 in illegal insider trading proceeds .

3

11 . Defendant Mitchell E. Fadel has served as RCII's President since July 2000, as

Chief Operating Officer since December 2002, and as a director since December 2000 .

Defendant Fadel made numerous untrue public statements during the Class Period, including,

among others, statements to analysts, statements quoted in the Company's press releases, and

statements filed with the SEC .

12. Defendant Robert D. Davis has served as RCII's Senior Vice President-Financ e

since September 1999 , Chief Financial Officer since March 1999 , and Treasurer since January

1997 . Defendant Davis made numerous untrue public statements during the Class Period,

including, among others, statements to analysts, statements quoted in the Company' s press

releases , and statements filed with the SEC .

13. Defendants Talley , Speese, Fadel and Davis (the Individual Defendants) were at

all relevant times during the Class Period controlling persons of RCII within the meaning of

Section 20(a) of the 1934 Act . Because of their positions with the Company, the Individual

Defendants had access to undisclosed adverse information about its business, operations, balance

sheets, accounting policies, operational trends, financial condition, and present and future

business prospects through access to internal corporate documents (including the Company's

operating plans, budgets, forecasts and reports of actual operations compared thereto),

conversations and connections with other corporate officers and employees, attendance at

management meetings and meetings of the board and committees thereof, and through reports

and other information provided to them in connection therewith . In fact, one former RCII senior

executive explained that, during the Class Period, defendant Talley "controlled everything ."

14. As officers, directors and controlling persons of a publicly-held company whose

common stock was, and is, registered with the SEC, traded on the Nasdaq National Marke t

4

(NASDAQ ), and governed by the provisions of the federal secu rities laws, the Individual

Defendan ts each had a duty to promptly disseminate accurate, complete and truthful information

with respect to the Company 's financial condition and performance , growth, operations, financial

statements, business, earnings , management, and present and future business prospects, and to

correct any previously-issued statements that had become mate rially misleading or untrue, so

that the market price of the Comp any 's publicly-traded securities would be based upon truthful,

complete and accurate information . The Individual Defendants ' misrepresentations and

omissions during the Class Period violated these specific requirements and obligations .

15 . The Individual Defendants part icipated in the drafting , preparation and/or

approval of the various public and shareholder and investor reports and other communications

concerning RCII that are complained of herein and were aware of, or were severely reckless in

disregarding, the misstatements contained therein and omissions therefrom, and were aware of,

or were severely reckless in disregarding, their materially false and misleading nature . Because

of their positions with RCII, each of the Individual Defendants had access to the advers e

undisclosed information about RCII's business prospects and financial condition and

performance as particularized herein, and knew, or were severely reckless in disregarding, that

these adverse facts rendered the statements complained of herein materially false and misleading .

16 . The Individual Defendants, because of their positions of control and authority a s

officers and controlling persons of the Company, were able to and did control the content of the

various SEC filings, press releases and other public statements concerning the Company during

the Class Period. Each of the Individual Defendants was provided with copies of the documents

alleged herein to be materially false and misleading prior to or shortly after their issuance and/or

had the ability and/or opportunity to prevent their issuance or cause them to be corrected .

Accordingly, each of the Individual Defendants is responsible for the accuracy of the public

reports, releases and statements detailed herein, and is therefore primarily liable for the

representations contained therein .

17. Each of the Individual Defendants is liable as a participant in the fraudulen t

scheme and course of business that operated as a fraud or deceit on purchasers of RCII common

stock by disseminating materially false and misleading statements and/or concealing mate rial

adverse facts . The scheme : ( 1) deceived the investing public concerning RCII ' s business,

operations , management and the true value of RCII common stock ; (2) enabled defendants

Talley and Speese to sell over $ 102 million in RCII stock for personal gain at a rtificially inflated

prices without disclosing the material adverse facts about the Company to which they were

privy; (3) allowed RCII to sell its common stock in a secondary public offe ring on May 25, 2001

(the Secondary Offering), du ring the time that defendants had access to mate rial undisclosed

adverse information about the Company; and (4) caused plaintiffs and other members of the

Class to purchase RCII securities at art ificially inflated prices .

DEFENDANTS' WRONGFUL COURSE OF CONDUCT

18. The material adverse information set forth below was omitted and/or

misrepresented in both : (a) defendants' public statements concerning the Company's purported

ability to prosper during an economic downturn (including those statements disseminated

through securities analysts) ; and (b) RCII's publicly filed financial statements, which showed

that the Company was experiencing "record" financial results throughout the Class Period .

19. First, as specified below, defendants falsely represented that RCII's business was

uniquely able to thrive in the throes of a weakening economy and that its business prospects

remained strong, without disclosing the true state of affairs at the Company . As set forth below,

defendants knew, or were severely reckless in not knowing, that, among other things : (i) as the

6

economy faltered, and as the Company began suffering the adverse effects of RCN's overly

aggressive growth strategy, the Company improperly grantedfree time to customers without

properly accounting for such usage as an expense; (ii) as a result of the significant use of free

time, and because of the severe downturn in customer demand, the Company had a substantial

amount of rental merchandise that should have been written off ; (iii) the Company deferred a

significant amount of operating expenses in order to show positive financial results during the

Class Period ; (iv) the Company engaged in a widespread scheme to force employees to work off-

the-clock, and then violated federal and state law by refusing to pay overtime wages ; and (v) the

Company created the appearance of success by essentially erasing delinquent customers from its

computer system, even though the customers were behind on their payments .

20. Second, defendants falsified RCII's financial statements issued during the Class

Period. As detailed below, defendants falsely inflated the Company's reported earnings by : (i)

failing to recognize depreciation expenses in connection with RCII's use of free time ; (ii)

delaying the recognition of impairment in the value of rental merchandise; and (iii) improperl y

deferring a significant amount of operating expenses . Nonetheless, at all relevant times during

the Class Period, defendants represented that RCII's financial statements, when issued, were

prepared in accordance with GAAP (which are those principles recognized by the accounting

profession and the SEC as the uniform rules, conventions and procedures necessary to define

accepted accounting practice at a particular time) . However, in violation of GAAP and SEC

reporting requirements, defendants engaged in improper accounting practices to manipulate

expenses and to inflate the Company's reported earnings during the Class Period.

21 . As set forth in detail below, if RCII had recorded expenses properly, the

magnitude of the accounting adjustments would have almost exceeded the entirety of th e

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Company's reported earnings during the Class Period. Nothing could be more material to

purchasers of RCII stock.

A. Background

22. Under the direction of defendant Talley, and prior to the start of the Class Period,

RCII embarked upon an overly aggressive expansion program. This expansion program

continued into the Class Period, and resulted in RCII becoming the largest rent-to-own operato r

in the country. Since March 1993, RCII's company-owned store base grew from 27 to 2,179,

primarily through acquisitions . During this period, RCII acquired over 2,000 company-owned

stores and over 350 franchised stores in more than 60 separate transactions, including six

transactions where the Company acquired in excess of 70 stores . In May 1998, RCII acquired

substantially all of the assets of Central Rents, which operated 176 stores, for approximately

$100 million in cash. In August 1998, RCII acquired Thom Americas for approximately $900

million in cash, including the repayment of certain debt of Thom Americas . Prior to this

acquisition, Thom Americas was RCII's largest competitor, operating 1,409 company-owned

stores and franchising 65 stores in 49 states and the District of Columbia .

23. In the second half of 2000, RCII resumed its strategy of increasing its store base .

For the year ended December 31, 2000, RCII opened 36 new stores, acquired 74 stores and

closed 27 existing stores . The 74 acquired stores were the result of 19 separate acquisition

transactions for an aggregate purchase price of approximately $42 .5 million in cash . During the

first quarter of 2001, RCII acquired four stores for approximately $1 .7 million in cash in three

separate transactions and opened an additional 23 new stores .

B. Material Omitted Information Concerning The Falsification Of RCII'sFinancial Reporting, Reported Operating Expenses, And The PurportedSuccess Of Its Growth Strategy

24. Throughout the Class Period, each of RCII's financial statements was represented

to have been prepared in accordance with GAAP. These representations were materially false

and misleading because defendants knowingly employed (or were severely reckless in

employing) numerous deceptive accounting practices that were intended to (and in fact did)

artificially inflate reported current earnings .

25. By failing to file financial statements with the SEC that conformed to GAAP (an d

the rules and regulations of the SEC), RCII repeatedly disseminated financial statements that are

"presumed to be misleading or inaccurate ."1 In fact, RCII's actual financial performance was

materially distorted and its Class Period financial statements were materially false and

misleading, as defendants knew or were severely reckless in disregarding .

1. RCII's Failure To Report Expenses In Connection With Free Time

26. Under GAAP, depreciation expense is determined by allocating the historical cos t

of tangible capital assets, " less salvage value (if any), over the estimated useful life" of the asset

"in a systematic and rational manner." Accounting Terminology Bulletin No . 1 ¶ 56 (Aug .

1953) . In addition, Statements of a Business Enterprise , Concepts Statement (CON) No . 5, § 85

(1984) states that , "[e]xpenses and losses are generally recognized when an entity 's economic

benefits are used up in delivering or producing goods, rendering services , or other . . . . central

operations or when previously recognized assets are expected to provide reduced or no further

benefits." (Emphasis added) .

1 Regulation S-X (17 C .F.R. § 210.4-01(a)(1)) states that financial statements filed with the SECthat are not prepared in conformity with GAAP are presumed to be misleading and inaccurate .

27. RCII's audited annual financial statements included in its 2000 Form 10-K

disclosed the following policies of accounting for rental merchandise :

Rental merchandise is carried at cost, net of accumulated depreciation .Depreciation is provided using the income forecasting method, which is intendedto match as closely as practicable the recognition of depreciation expense with

the consumption of the rental merchandise, and assumes no salvage value . Theconsumption of rental merchandise occurs during periods of rental and directlycoincides with the receipt of rental revenue over the rental-purchase agreementperiod, generally 18 to 36 months . Under the income forecasting method ,

merchandise held for rent is not depreciated, and merchandise on rent isdepreciated in the proportion of rents received to total rents provided in therental contract . . . .

(Emphasis added) .

28. However, as defendants failed to disclose, RCII created the appearance of growt h

by aggressively using customer promotions and discounts before and during the Class Period.

The promotions used by RCII included due date adjustments, rental extensions and, most

notably, grantingfree time, whereby customers would not pay rental fees for a certain period of

time. RCII offered up to thirteen weeks of free time to already established customers, including

significantly past due customers . These practices went far beyond mere business judgment and

marketing practices . Indeed, RCII fraudulently counted each free time period as a new customer

and contract regardless of whether the customer was an already existing customer or was

financially able to continue after the free time period .

29. According to a former RCII senior executive who reported directly to defendant

Talley concerning operations and accounting issues during the Class Period, RCII engaged in

this deliberate scheme to inflate its reported earnings because the Company's recently

opened/acquired stores were severely underperforming :

At the same time Ernie [Talley] hired me, which is winter of `01, the Companyhad just opened or had opened a couple of hundred stores that were pretty newstores and again, on the daily report everybody [including the IndividualDefendants] gets consolidated reports, there was also a new store list which broke

10

out all the new stores and how well they were doing, where they were, all thenumbers, etc . They were doing terrible . These stores were not performinganywhere close to what they were supposed to . As a matter of fact, at one pointin time, this was 85% of the stores opened less than a year were running rightbelow $40,000 a month and that was $20,000 below company average . So thenew stores were just performing horribly but they had ramped up all the expenses

and overhead . Now, this juggling of expenses and bills was accomplished andmanaged to offset the lack of revenue produced by the new stores . . . . [Y]ou hadto do something in the other, in the core stores, to offset that revenue that thosestores weren't bringing in.

30. This source explained that, despite the fact that rental merchandise on free time

was being used for substantial periods of time by customers, it was not properly being

depreciated over the estimated useful life of the rental merchandise - resulting in a deferral of

depreciation expense :

A store manager can award as much free rent to the customer as he wants to, butif you or I looked at the overlaying numbers it would look as though you had a lotof customers on the books and they are all going to pay you a lot of money, aren'tthey? Well, yeah, at some point. Well here's the thing. In that spring [of 2001],the Company started making lots of promotional offers which included what theycall a "free until ." And this really was the genesis of my complaints abou tcustomer accounts because I knew that it was a faulty number. The customer canrent a product and take out an agreement June 1st and really not make thepayment until August or September, but he's counted as a customer on the books .. . . [T]he Company doesn't recognize that . . . free rent anywhere as a cost ofdoing business .

31 . These discounts and promotions were used by defendants to materiall y

manipulate financial results during the Class Period, as well as to manipulate reported customer

count numbers . As a result of free time promotions, the depreciation of rental merchandise was

materially understated. Rental merchandise on free time was being used for substantial periods

of time by customers and was not being properly depreciated by RCII . For example, according

to the former RCII senior executive described above who reported directly to defendant Talley,

and who was specifically hired to help RCII "improve" its financial performance at the time of

the Secondary Offering :

11

[Defendants] shaped and managed the processes that contributed to the numbersto prop those numbers up and . . . they kept massaging the pricing structure andmassaging the structure of the rental agreements that were being booked - making

it appear as though things were going great .

32. According to this source, RCII frequently used free time in order to report low

delinquencies and high customer counts :

The store managers gave away astronomical amounts of free rent to solve all sortsof problems. The Company always reported to the public becauseanalysts/investors like to know that in a high-risk business with subprimecustomers, or sub, sub, sub-prime customers, you're managing your

delinquencies . And the Company always had the lowest delinquency in the

industry . The problem is, on the other side of the ledger, they only collectedabout 84-85% of the potential rent that was due, because of the rent that wa s

given away . It was given away to get the low delinquencies . "If you can't makethe payment, I'll give you the payment . And if you don't rent from me, howabout if I don't charge you for anything for three or four weeks ."

33. Defendants' use of free time caused RCII to violate GAAP in other ways as well .

For example, GAAP provides that circumstances involving possible losses "shall be accrued by a

charge to income" if. (i) information indicates that it is probable that an asset had been impaired

or a liability had been incurred at the date of the financial statements ; and (ii) the amount of the

loss can be reasonably estimated. Accounting for Contingencies, Statement of Financial

Accounting Standards (SFAS) No. 5, § 8 (1975) .

34. Similarly, with respect to long-lived assets, such as rental merchandise ,

Accountingfor the Impairment ofLong-Lived Assets and Long-Lived Assets to be Disposed Of,

SFAS No . 121 (1995), requires that where events or changes in circumstances indicate that the

carrying value of long - lived assets may not be recoverable, then : (1) the entity shall estimate the

future undiscounted cash flows resulting from the asset, and (2) compare the estimated future

cash flows against the carrying (i .e., the reported) value of the asset . If the sum of the expected

future cash flows is less than the carrying value, the entity is required to record an impairment

loss to the extent that the carrying value of the asset(s) exceeds the fair value . In estimatin g

12

future cash flows to measure impairment, assets are required to be grouped at the lowest level s

for which there are identifiable cash flows .

35. In regard to the accounting for impairment of rental merchandise, RCII's financia l

statements for the fiscal year ended 2000 stated :

Rental merchandise which is damaged and inoperable, or not returned by thecustomer after becoming delinquent on payments, is written-off when suchimpairment occurs .

The Company evaluates all long-lived assets, including all intangible assets andrental merchandise, for impairment whenever events or changes in circumstancesindicate that the carrying amounts . . . of such assets cannot be recovered by theundiscounted net cash flows they will generate .

36. However, as defendants failed to disclose, RCII delayed the recognition o f

missing or damaged inventory. In fact, defendants' increasing use of free time and the

drastically reduced demand for RCII's products were indications of the softening marke t

conditions in which the Company found itself by the beginning of the Class Period .

37. According to the former RCII senior executive described above who reported

directly to defendant Talley :

The company charges off merchandise at the end of every month . Some of it wason rent and they'd deem it uncollectible . Customer won't pay or you know,somebody broke in and stole my big screen TV and gee I hope you don't find outwho. But they call it "skipped/stolen chargoffs ." This amounts to a huge number .But it also includes all units written off as missing inventory or damagedinventory or inventory that just can't be serviced and repaired. And a lot of it wasdue, as we pointed out to Ernie [Talley] and other people in that period when wewere traveling a lot, that a lot of it was due to managers not counting inventory,not controlling inventory, no security in process . As a matter of fact, oddlyenough, in 2000 stores, each store having probably $400,000 worth of inventoryassigned to it at any given time, there was no recording of that inventorymovement whatsoever. No tracking of it . You could walk in and out with anynumber of pieces of inventory, as long as you were on the payroll and nobodyasked questions. And you know, when you're talking about DVDs, color TVs,stereos, big screens, etc ., nobody really knew how much was missing . It all fellunder the "skipped/stolen" write-off category . The interesting conflict there i sthat the Company, while running the lowest delinquency rates in the industry, hadthe highest charge-off rates in the industry . Well, gee, how could that be ?

13

Because they were continually writing off missing inventory . And anothercontributing factor is, the remaining value left in the inventory you write off is aproduct of what your depreciation method is . So because of the depreciationmethod that Rent-A-Center used, which is the same that all the other publiccompanies uses, you rarely ever write off a piece of merchandise that doesn'thave a substantial amount of remaining value left in it . Because it onlydepreciates when it's on rent .

I do know that you had lots of discussion between the CFO, Ernie Talley, and theComptroller of the company on inventory write-off methods and inventorydepreciation because they had a lot of goods that were laying around for longperiods of time. And all this inventory was not depreciating . So the problem forthe Company was, how do we get rid of this old, used buildup of inventory andnot take a hit when we sell it, because the accumulated depreciation, you know,minus, will have an impact on the books .

38. The adverse market conditions set fo rth above were clearly indications of "event s

or changes in circumstances" contemplated under SFAS No. 121, warranting timely assessments

as to the valuation of the Company's rental merchandise .

39 . As demonstrated by the following table (which is partially based on informatio n

provided by the former RCII senior executive described above who reported directly to

defendant Talley on operations and accounting issues), the average effect on operating profit and

net eanaingsl(loss) during the Class Period of additional depreciation and impairment charges for

rental merchandise totaled $60 million ($20 million per quarter) :

14

Average effect on operating profit and ne tearnings I (loss) of depreciation and impairment

charge s80,000 -~----

70,000as--t-- Operating profit00060 ,,

reported00050 ,

Operating profit as0 40,000

,revise d

00030 , ~- Net earnings a s

00020 reported,

00010 -3IE-- Net earnings, as,revised

0

(10,000)Quarte r

40. This source also explained that the Individual Defendants had direct knowledge o f

these improper accounting practices . For example, the source described how defendant Talley

required all senior executives to be at RCII's corporate headquarters every Saturday during the

Class Period so that Talley could remain fully informed as to what was going on inside the

Company :

Ernie would sit in the office on Saturday morning and he would make his rounds .He'd go sit in these guys' offices for 15-20 minutes and kind of get a little verbalreport .

Every Saturday morning, Ernie had a good picture of what was happening in thefield .

All the Senior VPs, the Advertising Manager, the IT Director. Rent-A-Centerwas a full bore company . Everybody came to work on Saturday morning.

For example, [Talley] would come to my office, sit down, light up a cigar andsay, "well, have you figured out why so many people are leaving? "

15

I said to Ernie, "basically we got to change everything because all these guys[Senior Vice Presidents] are getting beat over the head to get numbers . They haveno concept of why, or what they're trying to do except they know this number and

they don't know how to get it by any other means. And senior executives and

regional directors are going along with the process .

[Talley' s] response usually was , "well, you know, whatever it takes to get thisbusiness on the books. I just wish they could do a better job of it ." . . . [H]isopinion was , "it's probably controllable , and right now, we got to do it," but hedidn 't feel like stopping it.

41 . This same source stated that defendant Fadel (the Company's current President

and COO) said to "his assembly of senior executives and department heads of home office" in

the spring of 2003 that "he knew and [ defendant] Mark Speese knew that most of the business to

the stores were carefully orchestrated dog and pony shows," and he "doubted that anything good

came from them and that they saw anything that was real ." In fact , the same source stated that

RCII's VP ofAdvertising, Ann Davids, complained about the excessive use of free time given

the amount of money RCII was already spending on advertising and marketing .

42. In sum, defendants did not to disclose to investors du ring the Class Period that

RCII failed to depreciate equipment while it was on free time and, therefore, failed to recognize

depreciation expense in line with the consumption of the equipment . The granting of significant

free time, both incidence and length of time of agreements, materially reduced the expected

future benefits of the rental merchandise, which was not recognized by RCII - in contravention

of GAAP and the Company's own stated accounting policies . Moreover, defendants knew (or

were severely reckless in not knowing) that RCII delayed the recognition of impairment in the

value of rental merchandise in violation of GAAP and in direct contravention of RCA's publicl y

16

disclosed accounting policies . As a result, RCII materially understated expenses and overstated

net earnings by at least $60 million during the Class Period .

2. Improperly Deferring Operating Expenses In Order To Show PositiveEarnings Results During The Class Perio d

43 . GAAP normally reflects application of the "all-inclusive" income statement

concept . This concept recognizes all income and expenses, even irregularly occurring losses or

costs, in the results of operations in the period incurred, unless GAAP provides otherwise . This

"all-inclusive" concept is intended, among other things, to prevent discretionary omissions of

losses or gains from income, thereby avoiding a presentation of a more or less favorable report of

performance than is justified . Recognition and Measurement in Financial Statements of

Business Enterprises, CON No . 5, § 35 (1984) .

44. In addition, GAAP states that the "recognition of revenues, expenses, gains, and

losses and the related increments or decrements in assets and liabilities - including matching of

costs and revenues, allocation, and amortization - is the essence of using accrual accounting to

measure performance of business enterprises . The goal of accrual accounting for a business

enterprise is to account in the periods in which they occur for the effects of transactions and

other events and circumstances, to the extent that those financial effects are recognizable and

measurable ." CON No. 3, § 85 (emphasis added) .

45. However, as defendants failed to disclose, RCII improperly deferred a significan t

amount of operating expenses throughout the Class Period in order to overstate reported

earnings . For example, according to a former Store Manager for RCII, the Company routinely

failed to pay monthly bills submitted by the individual retail stores during the Class Period :

"there would be some months they [RCII's Corporate Headquarters] would pay some bills and

other months they wouldn't . . . then they would double or triple the following month ."

17

According to a former RCII Collections Manager, 2001 was not a typical time for the Company,

as many monthly bills submitted to the Company were not being paid on time . For example,

"the water was shut off on a number of occasions and there were notices from the gas company

about possible shut-offs ." As a result of not paying these expenses, the Company was able to

show positive earnings during the Class Period .

46. As further evidence that the Company was secretly deferring expenses in order to

bolster its financial results, according to a former Store Manager for RCII, during the first

quarter 2001, his store showed significant increases in profits even though there was no increase

in business : "We went from averaging about $30,000 . . . to upper $40,000s in profit . . . my store

didn't gain any agreements [additional business] to do that . . . so for that to happen, it means

you're not paying something . "

47. The Company's practice of deferring expenses and cutting costs reached such an

extreme that, according to a former Store Manager for RCII, defendant Talley was forced by

threats of legal action to personally appear at one of the Company's retail stores in the fall of

2001 to write checks to employees who were due compensation for overtime and who had not

been paid.

3. Violations of SEC Regulation s

48. Item 7 of Form 10-K and Item 2 of Form 10-Q, Management's Discussion and

Analysis of Financial Conditions and Results of Operations (MD&A), require the issuer to

furnish information required by Item 303 of Regulation S-K [17 C .F.R. 229.303] . In discussing

results of operations, Item 303 of Regulation S-K requires the registrant to :

[d]escribe any known trends or uncertainties that have had or that the registrantreasonably expects will have a material favorable or unfavorable impact on netsales or revenues or income from continuing operations .

49. The Instructions to Paragraph 303(a) state :

18

The discussion and analysis shall focus specifically on material events anduncertainties known to management that would cause reported financialinformation not to be necessarily indicative of future operating results . . . .

50. In addition, the SEC, in its May 18, 1989 Interpretive Release No . 34-2683 1, has

indicated that registrants should employ the following two step analysis in determining when a

known trend or uncertainty is required to be included in the MD&A disclosure pursuant to Item

303 of Regulation S-K :

A disclosure duty exists where a trend, demand, commitment, event or uncertaintyis both presently known to management and reasonably likely to have materialeffects on the registrant's financial condition or results of operations .

51 . However, RCII's Class Period financial statements failed to disclose the natur e

and extent of promotional and discount activities, adverse market conditions, declining customer

demand, the negative impact of an overly aggressive growth strategy, their effect on the stated

value of merchandise, and the adverse impact of this on operating expenses and net earnings

during the Class Period. All of this was necessary for a proper understanding and evaluation of

the Company's operating performance and an informed investment decision .

4. Breakdown Of Internal Controls

52. RCII also suffered from a chronic and systematic breakdown of its interna l

accounting controls and procedures such that its internal financial reporting was inherently

corrupt, subject to manipulation and unreliable, resulting in materially false and misleadin g

financial statements . For example, according to the former RCII executives discussed above :

(a) The control environment was such that defendants' philosophy and operatingstyle was at times controlling, dictatorial, intimidating and numbers driven ;

(b) The controls to count and monitor the movement of inventory in stores werenot effective or non-existent;

(c) The fundamental design of controls to ensure the correct recording ofdepreciation and impairment of missing or damaged merchandise by stor e

19

managers, was ineffective, as bonuses were distributed to store managersbased on higher store profit numbers ; and

(d) There was insufficient internal review by defendants to ensure that expenseswere being timely recognized and reported .

53. Section 13(b)(2)(B) of the Exchange Act requires every issuer that has securities

registered pursuant to Section 12 of the Exchange Act, such as RCII to : (a) make and keep

books, records and accounts that, in reasonable detail, accurately and fairly re flect the

transactions and disposition of the assets of the issuer ; and (b) devise and maintain a system of

internal accounting controls sufficient to reasonably assure , among other things, that transactions

are recorded as necessary to permit preparation of financial statements in conformity with

GAAP . These provisions require an issuer to employ and supervise reliable personnel, to

maintain reasonable assurances that tr ansactions are executed as authorized , to properly record

transactions on an issuer' s books and, at reasonable intervals , to compare accounting records

with physical assets .

54. RCII's lack of adequate internal controls increased the opportunity for defendant s

to commit the fraud alleged above, and rendered the Company's Class Period financial

statements inherently unreliable and non-compliant with GAAP . Nonetheless, throughout the

Class Period, the Company consistently issued materially false and misleading financial

statements without ever disclosing the existence of the significant and material deficiencies in its

internal accounting controls . 2

2 In addition to the violations of GAAP noted above, the Company presented its financial resultsand statements in a manner that also violated the following fundamental accounting principles :(a) that interim financial reporting should be based upon the same accounting principles andpractices used to prepare annual financial statements (APB No. 28, § 12) ; (b) that financialreporting should provide information that is useful to present and potential investors andcreditors and other users in making rational investment, credit, and similar decisions wasviolated (CON 1, § 34 (1978)) ; (c) that financial reporting should provide information about th e

20

C. Material Omitted Information Concerning RCII's Nonpayment Of OvertimeWages

55 . Defendants failed to disclose that RCII's apparent success was the result of,

among other things, a widespread scheme of failing to pay a significant amount of salary

expenses . Defendants knowingly (or with severe recklessness) engaged in a scheme to de flate

reported employee salaries by forcing employees to work off- the-clock , falsifying employee

timecards and blatantly denying payment of ove rt ime pay to employees . This scheme was in

violation of both the Fair Labor St andards Act (FLSA) and state overt ime and wage payment

laws .

56. Plaintiffs have obtained statements from 683 employees who stated that the

nonpayment of overtime was widespread at RCII, rather than just a claim from one or two peopl e

who claim they were not paid properly . (A summary of these statements is attached as Exhibi t

B .) For example :

economic resources of an enterprise, the claims to those resources, and effects of transactions,events, and circumstances that change resources and claims to those resources was violated(CON 1, § 40) ; (d) that financial reporting should provide information about how management ofan enterprise has discharged its stewardship responsibility to owners (stockholders) for the use ofenterprise resources entrusted to it was violated . To the extent that management offers securitiesof the enterprise to the public, it voluntarily accepts wider responsibilities for accountability toprospective investors and to the public in general (CON 1, § 50) ; (e) that financial reportingshould provide information about an enterprise's financial performance during a period wasviolated. Investors and creditors often use information about the past to help in assessing theprospects of an enterprise . Thus, although investment and credit decisions reflect investors'expectations about future enterprise performance, those expectations are commonly based a tleast partly on evaluations of past enterprise performance (CON 1, § 42) ; (f) that financialreporting should be reliable in that it represents what it purports to represent was violated . Thatinformation should be reliable as well as relevant is a notion that is central to accounting (CON2, §§ 58-59); (g) completeness, which means that nothing is left out of the information that maybe necessary to insure that it validly represents underlying events and conditions was violated(CON 2, § 79) ; and (h) that conservatism be used as a prudent reaction to uncertainty to try toensure that uncertainties and risks inherent in business situation are adequately considered wasviolated. The best way to avoid injury to investors is to try to ensure that what is reportedrepresents what it purports to represent (CON 2, §§ 95, 97) .

21

(a) Jon Daniels, an Executive Assistant Manager in Spokane, Washington, statedthat he worked hundreds of hours of overtime for which he was never paid .

The Company would assure him that they would try to make it up at someother time. These empty promises were never fulfilled and he has worked

700-900 hours of overtime for which he has never been paid.

(b) Edward Moore, an account manager in Montclair, California, stated that hewas not required to punch in or out at the store and that he would be paid onlyfor eight (8) hours a day regardless of how many hours he actually worked .He also stated that his paycheck always reflected the same amount and neverincreased as a result of extra hours spent on the job .

(c) Robert Davis, a sales manager in Philadelphia, Pennsylvania, stated that heworked 13-14 hour days and was paid "straight time" only. Mr. Davis statedthat he was given no time off, no sick leave, and was not paid overtime for theextra hours he worked.

(d) Cynthia Galvan, a store manager and UO manager in Fort Worth, Texas statedthat she worked more than 40 hours per week and never received anyovertime pay.

(e) Ronald Allen, an UO manager in Renton Washington, Merced, California, andReno, Nevada, stated that he worked approximately 20 hours per week "off-the-clock" and was never compensated at an overtime rate .

(f) Timothy Mohrmann, a store manager in Palatka, Florida, stated that heworked 50-60 hours per week and received no payment for overtime .

(g) Another source stated that in order to offset lost revenues, the Company wasincurring huge amounts of unpaid labor by forcing its employees to work off-the-clock all the time .

57. Numerous employees also provided statements demonstrating manipulation

and/or alteration of employee timecards that allowed defendants to further their fraudulen t

scheme. For example, as set forth in Exhibit B :

(a) Heidi Johnsen, a credit manager in Sacramento, California, stated that shewitnessed a store manager changing the hours worked by employees after theemployees had clocked themselves in and out . She further stated that themanager would not input overtime hours worked by employees for fear ofbeing reprimanded by his superiors . Additionally, Ms . Johnsen, like otheremployees described above, was never paid overtime wages she was entitledto.

(b) Eron Engstrom, an account manager in Springfield and Eugene, Oregon,stated that he witnessed his store manager altering time records to delete

22

overtime work by store employees. He stated that the Company madepromises to pay overtime wages, but after the hours were actually worked, theCompany refused to pay the proper overtime wages .

(c) Juan Barajas, an account manager in Modern, California, stated that storemanagers altered timecards in the Company computers at the end of the day todelete overtime worked by employees . Mr. Barajas also stated that directionsto alter these records came from "upper management . "

(d) Gilbert Blanco, a credit manager from Fresno, California, stated that he wasinstructed by his store manager to clock out all employees at 8 :00 p .m.

regardless of how much time each employee worked. He further stated thatinstructions to alter hours worked by employees came from the RegionalDirector, who was instructed by defendants Talley and Speese .

(e) Crystal Verdugo, a sales manager in Woodyear, California, stated that thestore manager would clock employees in and out depending on what was"needed" for the month .

(f) Johnny Troesch, an YO manager in Bakersfield, California, stated thatemployees were clocked out by store managers while the employees were stillworking and that managers would override timecards .

(g) Michael Pankrante, a credit manager at Store 00714, stated that employeesworked overtime hours and that the Company did not pay proper overtimewages . He stated that both the store manager and the market manager wouldclock employees out while the employees were still on the job . Further, Mr .Pankrante stated that directions to eliminate overtime pay came from RegionalDirectors in faxed memorandums wherein "no overtime" was highlighted orin conference call meetings because "corporate" did not want any moreovertime and could not afford the overtime .

(h) Mike Duggan, a market manager in Marysville, California, stated that whenstore managers filled out their time sheets each week, they would claim thatany employees working overtime were performing management duties at least51 % of the time and that these assertions were patently false . He furtherstated that employee timecard records show the exact same amount of hoursfor every employee every week .

58. Moreover, at least ten class action lawsuits have been filed against RCII, amon g

others, alleging that the Company forced employees to work off-the-clock and failed to pa y

overtime in violation of federal and state laws . These actions, among other things, demonstrat e

the pervasive nature of the Company's efforts to avoid salary expenses . For example :

23

(a) Kemper et al. v. Rent-A-Center Inc. (Cause No . 4:00CV435-RH) in theNorthern District of Florida - filed on behalf of all Inside/Outside AssistantManagers (I/Os) and Executive Assistant Managers (EAs) in the UnitedStates, except California, for failure to pay proper overtime compensation .

(b) Kevin Rose et al. v. Rent-A-Center Inc ., et al. in the Superior Court of ClarkCounty Washington - filed on behalf of all present and former non-management employees in Washington for forcing employees to work off-the-clock in violation of Washington overtime and wage payment laws .

(c) Jeremy Burdusis et al. v . Rent-A-Center, Inc., et al in the Superior Court ofLos Angeles County, California - filed on behalf of all California non-management store level employees for forcing employees to work off-the-clock in violation of California overtime and wage laws .

(d) Isreal French, et al. v. Rent-A-Center, Inc ., et al. in the Superior Court of LosAngeles County, California - filed on behalf of all California non-management store level employees for forcing employees to work off-the-clock in violation of California overtime and wage laws .

(e) Rob Pucci, et al. v. Rent-A-Center, Inc. in the Circuit Court of MultnomahCounty, Oregon - filed on behalf of all Oregon non-management levelemployees for forcing employees to work off-the-clock in violation of Oregonovertime and wage laws .

(f) Shafer v. Rent -A-Center, Inc. in the Superior Court of Los Angeles County,California - filed on behalf of store managers for all unpaid overtimecompensation .

59. Defendants knew, or were severely reckless in not knowing, that the Company' s

violations of these federal and state wage laws were pervasive and material . For example, as

explained more fully below in paragraphs 122-25, RCII maintained a computerized information

management system that enabled the Individual Defendants to monitor employee staffing at

locations throughout the United States on a daily basis . According to RCII, this system allowed

senior management (including the Individual Defendants) to closely monitor each store's

performance to ensure each store's adherence to established operating guidelines . Each RCII

executive received at the end of each day a daily summary of the number of employees at each

store, the number of regular and overtime hours each employee worked each day, and th e

24

amount each employee was paid for these hours . According to a former RCII senior executive

who worked directly for defendant Talley, senior management (including the Individual

Defendants) reviewed this information each day. Finally, according to the Company, senior

management (including the Individual Defendants) reviewed each regional director's summary

of this information on a daily basis.

D. Material Omitted Information Concerning RCII's Customer DelinquencyRates

60. Throughout the Class Period, defendants claimed that RCII had the best

delinquent payment numbers of any company in the rent-to-own industry . However, defendants

failed to disclose that RCII was only able to accomplish this by, among other things, instituting a

program referred to as the keystroke closeout .

61 . For example, when a RCII customer became delinquent, store managers were

instructed to tell the customer to return the unit and cancel the contract, and then either walk

away or rent another unit on free time. This way, the customer was not counted as delinquent .

62. During the Class Period, this practice created the false impression that RCII' s

business was thriving. However, in reality, this practice was having an extremely negative

impact on RCII. According to a former RCII senior executive who reported directly to defendant

Talley, because of the aggressive use of keystroke closeouts, RCII was only realizing 83% of its

contracted rentals receivable (which, according to this same source, was as much as 10% below

the industry average) .

63. This source complained about RCII's improper use of keystroke closeouts to

defendant Fadel and others in senior management . The source told management that this

practice provided investors with a false impression of the Company . Defendant Fadel responded

by telling the source to "mind his own business . "

25

DEFENDANTS' MATERIALLY FALSE AND MISLEADING STATEMENTSDURING THE CLASS PERIO D

64. As set forth below, defendants touted RCII's purported financial success, falsely

stating that the Company was experiencing "record" financial results . In fact, RCII's financial

reporting was falsified in myriad ways to create the appearance of financial success through an

intentional and undisclosed scheme to inflate financial results . The nature of this scheme was

never disclosed to investors during the Class Period . As a result, all of RCII's periodic reports of

earnings and operating expenses throughout the Class Period, as well as its financial projections

given to investors and securities analysts, were materially false and misleading and omitted

material information.

65. Both immediately before and during the Class Period, RCII was experiencing

serious problems that undermined its ability to attain growth consistent with public expectations .

These problems included, among other things, the underperformance of stores that were opened

as part of the Company's overly aggressive expansion strategy, which was compounded by a

weakening economy. However, as set forth below, rather than publicly disclose these material

problems, defendants engaged in various improper practices that were designed to fraudulently

manipulate and inflate RCII's reported financial performance in an effort to misrepresent and

fraudulently conceal the true state of affairs of the Company's deteriorating financial results and

to bolster the market price of its securities .

66. On or about April 25, 2001, the first day of the Class Period, RCII announced its

financial results for the first quarter of 2001 (i .e ., the period ended March 31, 2001) . RCII

falsely reported that net earnings were $25 million, or $0 .69 per diluted share - representing a

19.7% increase above the prior year's first quarter earnings :

Net earnings for the quarter ended March 31, 2001 were $25 .0 million, or $0 .69per diluted share, representing an increase of 19 .7% over the net earnings of $20 . 9

26

million, or $0 .61 per diluted share , reported for the same period in the prior year.The increase in net earnings and earnings per diluted share areprimarily

attributable to the Company's increase in revenues, operational improvements inexisting stores and reduced interest expense resulting from a reduction inoutstanding debt . At March 31, 2001, outstanding debt totaled $703.1 million,

down approximately $100.8 million from the balance at March 31 , 2000. For the

quarter ended March 31 , 2001, the Company generated $32.0 million in operating

cash flow and reduced debt outstanding by $37 .9 million .

The press release also falsely touted the Company's "record" performance :

"We are pleased to announce that demand remained very strong throughout thefirst quarter, which led to our outstanding operating results and illustrates theresilience of our business in a weakening economy," commented J .E. Talley, the

Company's Chairman and Chief Executive Officer . Mr. Talley added, "We

remain optimistic about our future growth plans and operating results and lookforward to another record quarter for our Company."

(Emphasis added . )

67. These statements in RCII's April 25, 2001 press release were materially false and

misleading, and were known by defendants to be materially false and misleading at the time of

their issuance, or defendants were severely reckless in disregarding as such, for the reasons set

forth in paragraphs 18 through 63, above. Defendants also knew or were severely reckless in

disregarding that, in violation of GAAP, RCII understated expenses and overstated net earnings

(by at least $60 million during the Class Period) by : (a) failing to depreciate rental merchandise

while on "free time" ; (b) delaying the recognition of impairment in the value of rental

merchandise; and (c) deferring a significant amount of operating expenses . Defendants also

knew or were severely reckless in disregarding that RCII's apparent success was the result of a

widespread scheme to force employees to work off-the-clock and then refuse to pay overtime

wages. Defendants also knew or were severely reckless disregarding that, contrary to their

assertions that RCII's business was thriving, the Company actually had a substantial number of

delinquent customers who were essentially erased through the "keystroke closeout" program .

27

68. Analysts reported defendants' positive statements . For example, on April 26,

2001, an analyst at Robinson-Humphrey reported that :

We are reiterating our BUY rating and $52 price target following strong 1 Q01EPS of $0 .69, which exceeded our estimate by $0 .03 per share.

The gain in customers is particularly noteworthy not only because it is a harbingerof future growth, but also because it comes during a weakening economy, whichindicates the relative insensitivity of the RTO business to the changes in th e

economy .

69. Similarly, an analyst with Morgan Stanley Dean Witter & Co. issued a report on

April 27, 2001 that reported defendants' materially false and misleading statements, lauding the

Company's first quarter performance and reiterating its "outperform" rating :

1Q01 EPS of $0.69 (up 13%) were $0.03 above our forecast.

Upside reflected an 8 .8% rise in 1Q01 same-store sales compared with our +6%forecast and achieved despite a tough comparison (comps rose 14 .1 % in 1 Q00) .

Customer growth remained strong, up 4-5% versus last year.

RCII likely benefiting from growth of rent-to-own customers in a deterioratingeconomy and increased store manager retention, which is key to improving store-level execution . .

2001 EPS raised $0.03 to incorporate upside to 1Q01 EPS .

Further upside could be driven by continued strong rental growth (+12% in 1Q01)and gross margin opportunities on cash sales (GM was 29 .9% in 1 Q01 vs . our16.5% forecast) .

Reiterate Outperform on dominant operator in rent -to-own industry .

Our price target of $50 is based on the stock achieving a P/E multiple of 14-15times our 2002E EPS of $3 .45

We believe RCII shares offer investors the opportunity to benefit from acceleratedorganic growth as the company leverages the strong financial performance of itsnow fully integrated store base and opens new stores (which are dilutive toearnings during the first six months of operation) . RCII's track-record of

28

successful acquisition integration, proven ability to drive improved operatingperformance at acquired stores (through better management and by shifting storeproduct offerings toward a higher margin, higher price-point sales mix), and a stillhighly fragmented rent-to-own industry imply that the company will be makingfurther acquisitions in the near-term.

1Q01 Sales and EPS Well Above Our Forecast

RCII reported 1Q01 EPS of $0 .69 (up 13%) which was $0 .03 above our forecast .The upside reflected an 8 .8% rise in 1 Q01 same-store sales compared with our+6% forecast and the powerful comps were achieved despite a tough comparison

(comps rose 14 .1 % in 1 Q00) .

Importantly, customer growth remained strong during the quarter, up 4-5% versuslast year. We believe RCII is likely benefiting from growth of rent-to-owncustomers in a deteriorating economy as well as increased store managerretention, which is key to improving store-level execution and driving salesgrowth. Same-store sales also benefited from the upscaling of the merchandiseassortments in favor of higher end products, which continues to raise the averageprice per unit on rent (APU) .

Depreciation of rental merchandise as a % of rental revenues was 20 .6%, flat withlast year and in line with our forecast .

Operating income grew 7% to $62 .5 million, with the EBIT margin narrowing 70basis points to 14 .2% .

Raising 2001E EP S

We have raised our 2001E EPS by $0.03 to $3 .03 to incorporate the upside versusour 1 Q01 EPS forecast. Moving through the balance of 2001, we believe furtherEPS upside could be driven by continued strong rental revenue growth (whichwas up 12% in 1Q01) as well as gross margin opportunities either on cash sales(GM was 29.9% in 1Q01 vs . our 16 .5% forecast) or as rental revenues (which arehigher gross margin) become a higher percentage of the sales mix following thestrong cash sales (driven by early purchases of rental merchandise) .

We continue to project that RCII can generate consistent annual EPS growth of12-15% over the next 5-years without making further acquisitions.

70. And on April 30, 2001, Hoak Breedlove Wesenski & Co . issued a research report

that reported defendants' materially false and misleading statements, focusing on RCII' s

29

"stronger than anticipated" earnings results for the first quarter of 2001, explaining that the

Company's "[u]nderlying fundamentals are strong," increasing its projection of the Company's

2001 earnings to $3 .06 per share, up from $3 .05, and reiterating its "strong buy" rating on the

Company's stock .

STRONG BUY

Target Price : $50

Results for the 1Q were stronger than anticipated with actual EPS of $0 .69 per

share, up 13% from $0.61 last year. Our forecast was $0 .66 per share . . . . Wehave modestly increased our forecast this year from $3 .05 per share to $3 .06.

The collection rate remains in the normal range and the inventory mix is strong

(on rent versus off rent) .

Underlying fundamentals are strong. Our target price is $50, which equates toroughly a 14 times multiple on next year's earnings. The stock is very cheap,trading at 12 times the forecast for this year and 11 times the forecast for nextyear.

The dynamics of the business model remain very solid. New customer growthaccounted for roughly 50% of the same-store sales gain . The collection ratioremains at or below historic norms . Inventory remains in a solid position . . . .

Investors should remember that excluding goodwill, earnings in the 1 Q were$0.86 per share, up from $0 .79 .

71 . The publication by analysts of defend ants ' materially false and misleading

statements caused the price of RCII common stock to rise to $46 .60 by May 22, 2001 .

72. Defendants' statements as reported by analysts following the Company (as se t

forth in paragraphs 68-70 above) were materially false and misleading, and were known b y

defendants to be materially false and misleading at the time of their issuance, or defendants wer e

30

severely reckless in disregarding as such, for the reasons set forth in paragraphs 18 through 63 ,

above. Defendants also knew or were severely reckless in disregarding that, in violation o f

GAAP, RCII understated expenses and overstated net earnings (by at least $60 million during th e

Class Period) by : (a) failing to depreciate rental merchandise while on "free time"; (b) delayin g

the recognition of impairment in the value of rental merchandise ; and (c) deferring a significant

amount of operating expenses . Defendants also knew or were severely reckless in disregarding

that RCII's apparent success was the result of a widespread scheme to force employees to work

off-the-clock and then refuse to pay overtime wages . Defendants also knew or were severel y

reckless in disregarding that, contrary to their assertions that RCII's business was thriving, th e

Company actually had a substantial number of delinquent customers who were essentially erase d

through the "keystroke closeout" program.

73 . On or about May 24, 2001, the Company filed its Form 10-Q for the first quarter

of 2001 (i .e., the period ending March 31, 2001) . The Form 10-Q, which was signed b y

defendant Davis, falsely reported the value of the Company' s assets as follows :

March 31, 200 1Unaudited

December 31, 200 0

Consolidated Balance Sheets (In Thousands of Dollars)

Rental merchandise, net

On rent 515,395 477,095

Held for rent 110,869 110,13 7

Total Assets $ 1,511,577 $ 1,486,910

74. The Form 10-Q also falsely repo rted the Company' s earnings for the first quarter

of 2001 :

Three Months Ended March 31 ,

2001 2000

Unaudited

Consolidated Statements of Earnings (In Thousands of Dollars, except per share data)

31

Total Store Expenses 357,080 315,524

Total O eratin Expenses 377,217 333,974

Net Earnings 24,998 20,88 9

Diluted Earnings Per Common Share 0 .69 0.6 1

75. In the section of the 10-Q entitled "Management 's Discussion and Analysis of

Financial Condition and Results of Operations," the Company falsely described its "aggressiv e

growth strategy" :

We have pursued an aggressive growth strategy since we were acquired in 1989by J . Ernest Talley, our Chairman of the Board and Chief Executive Officer. . . .

We plan to accomplish our future growth through selective and opportunisticacquisitions, with an emphasis on new store development .

76. The Form 10-Q also falsely desc ribed the components of RCII' s income and

expenses :

Depreciation of Rental Merchandise. We depreciate our rental merchandise using

the income forecasting method. The income forecasting method of depreciationdoes not consider salvage value and does not allow the depreciation of rentalmerchandise during periods when it is not generating rental revenue . For income

tax purposes we depreciate our merchandise using the modified accelerated costrecovery system, or MACRS, with a three year life .

Cost of Merchandise Sold. Cost of merchandise sold represents the book value

net of accumulated depreciation of rental merchandise at time of sale .

77. The Form 10-Q also falsely described the Company 's upcoming Secondary

Offering, and the business strategy employed at the time :

In the second half of 2000, we resumed our strategy of increasing our store baseand annual revenues and profits through opportunistic acquisitions and new storeopenings . During the first quarter of 2001, we acquired four stores for

approximately $1 .7 million in cash in three separate transactions and opened an

additional 23 stores . We also closed six stores, merging four with existing storesand selling two stores. As of May 7, 2001 we have acquired an additional 11stores for approximately $3.6 million in cash in three separate transactions duringthe second quarter of 2001 . In addition, we have also opened another six storesand closed two, merging one with an existing store and selling the other . It is our

intention to increase the number of stores in which we operate by an average ofapproximately 10-15% per year over the next several years .

32

We have filed a registration statement with the SEC for a public offering of

3,200,000 shares of our common stock, 1,000,000 of which will be offered by usand 2,200,000 of which will be offered by selling stockholders . We anticipate

using the net proceeds to pay down existing long-term debt .

78. The section of the Form 10-Q entitled "Results of Operations" falsely describe d

the Company's financial results for the first quarter of 2001 :

Depreciation of Rental Merchandise. Depreciation of rental merchandise

increased by $9.1 million, or 12 .7%, to $80.8 million for the three months ended

March 31, 2001 from $71 .7 million for the three months ended March 31, 2000 .

This increase was primarily attributable to an increase in the number of units onrent. Depreciation of rental merchandise expressed as a percent of store rentalsand fees revenue increased to 20.6% in 2001 from 20 .5% in 2000 .

Cost of Merchandise Sold. Cost of merchandise sold decreased by $1 .3 million,

or 5 .6%, to $21 .5 million for the three months ended March 31, 2001 from $22 .8

million for the three months ended March 31, 2000 . This decrease was primarily

a result of a decrease in the number of items sold .

Operating Profit. Operating profit increased by 3 .9 million, or 6 .7%, to $62.5

million for the three months ended March 31, 2001 from $58 .6 million for thethree months ended March 31, 2000. Operating profit as a percentage of total

revenue decreased to 14 .2% for the three months ended March 31, 2001 from14.9% for the three months ended March 31, 2000 . This decrease is attributableto the infrastructure expenses and initial costs associated with our new storegrowth initiatives .

Net Earnings . Net earnings increased by $4 .1 million, or 19 .7%, to $25 .0 million

for the three months ended March 31, 2001 from $20 .9 million for the threemonths ended March 31, 2000 . This increase is primarily attributable to anincrease in revenues, operational improvements in existing stores and reducedinterest expenses resulting from a reduction in outstanding debt .

79. These statements in RCII's Form 10-Q for the first quarter of 2001 wer e

materially false and misleading , and were known by defendants to be materially false and

misleading at the time of their issuance , or defendants were severely reckless in disregarding as

such , for the reasons set forth in paragraphs 18 through 63, above . Defendants also knew or

were severely reckless in disregarding that , in violation of GAAP, RCII understated expenses

33

and overstated net earnings (by at least $60 million during the Class Period) by : (a) failing to

depreciate rental merchandise while on "free time" ; (b) delaying the recognition of impairment

in the value of rental merchandise ; and (c) deferring a significant amount of operating expenses .

Defendants also knew or were severely reckless in disregarding that RCII's apparent success was

the result of a widespread scheme to force employees to work off-the-clock and then refuse to

pay overtime wages. Defendants also knew or were severely reckless in disregarding that,

contrary to their assertions that RCII's business was thriving, the Company actually had a

substantial number of delinquent customers who were essentially erased through the "keystroke

closeout" program .

80. In a May 24, 2001 press release, the Company announced that it priced its publi c

offering of 3,200,000 shares of common stock at $42 .50 per share . Defendants explained that

the offering consisted of 1,000,000 primary shares and 2,200,000 shares held by selling

stockholders (Talley and Speese) . Defendants also stated that RCII would use approximately

$39.7 million from the net proceeds to pay down existing debt .

81 . These statements in RCII's May 24, 2001 press release were materially false an d

misleading, and were known by defendants to be materially false and misleading at the time of

their issuance, or defendants were severely reckless in disregarding as such, for the reasons set

forth in paragraphs 18 through 63, above. Defendants also knew or were severely reckless in

disregarding that, in violation of GAAP, RCII understated expenses and overstated net earnings

(by at least $60 million during the Class Period) by: (a) failing to depreciate rental merch andise

while on " free time"; (b) delaying the recognition of impairment in the value of rental

merchandise ; and (c) deferring a significant amount of operating expenses . Defendants also

knew or were severely reckless in disregarding that RCII' s apparent success was the result of a

34

widespread scheme to force employees to work off-the-clock and then refuse to pay overtime

wages . Defendants also knew or were severely reckless in disregarding that, contrary to their

assertions that RCII's business was thriving, the Company actually had a substantial number of

delinquent customers who were essentially erased through the "keystroke closeout" program .

82. The final Registration Statement for the Secondary Offering was filed on May 24 ,

2001, and the Prospectus was filed on May 25, 2001 (collectively referred to as the Prospectus) .

The Prospectus was signed by, among others, defendants Talley, Speese, Fadel and Davis . In

connection with the Secondary Offering, defendants sold 3,200,000 shares to the investing public

at a price of $42.50 per share, raising a total of $136,000,000 .

83. The first page of the Prospectus provided the following false description of RCII's

business :

We have demonstrated a strong track record of growth, expanding from 717owned or franchised stores at December 31, 1996 to 2,535 at March 31, 2001,primarily through acquisitions . Over that same period, we experienced acompounded annual growth rate in sales of 61 % and a compounded annualgrowth rate in earnings per share before non-recurring items of 38% . In 2000, wehad total revenues of $1 .6 billion, 13 .0% growth over 1999, driven primarily bysame store sales gains of 12.6%. Earnings per share in 2000 before a non-recurring gain was $2.62, representing 50.6% growth over 1999 .

84. The Prospectus falsely described the Company's growth strategy :

Our strategy includes :

- OPENING NEW STORES AND ACQUIRING EXISTING RENT-TO-OWN STORES - We intend to expand our business both by opening newstores in targeted markets and by acquiring existing rent -to-own stores .

- ENHANCING STORE OPERATIONS - We continually seek to improvestore performance through strategies intended to produce gains inoperating efficiency and profitability , including gains in revenues andoperating margins in newly acquired stores .

- BUILDING OUR NATIONAL BRAND - We have implemented astrategy to increase our name recognition and enhance our national brand .As a part of a national branding strategy , in April 2000 we launched a

35

national advertising campaign featuring John Madden as our nationaladvertising spokesperson .

85. The Prospectus also included the Company' s false income statement for the firs t

quarter of 2001 :

Three Months Ended March 31 ,

2000 2001

Consolidated Statements of Earnings n Thousands , Except Per Share Data)

Total Store Expenses 315,524 357,080

Total Operating Expenses 333,974 377,21 7

Net Earnings 20,889 24,99 8

Diluted Earnings Per Common Share 0 .61 0 .6 9

86. The Prospectus also falsely stated the Company's assets on its balance sheet fo r

the first quarter of 2001 :

December 31 ,1999 2000 March 31, 200 1

(Unaudited)Consolidated Balance Sheets (In Thousands )

Rental Merchandise, Net

On rent 425,469 477,095 515,39 5

Held for rent 105,754 110,137 110,869

Total Assets $1,485,000 $1,486,910 $1,511,577

87. In the section of the Prospectus entitled "Management's Discussion and Analysi s

of Financial Condition and Results of Operations," defendants provided a false overview of th e

Company's growth strategy:

We have pursued an aggressive growth strategy since we were acquired in 1989by J . Ernest Talley, our Chairman of the Board and Chief Executive Officer . Wehave sought to acquire underperforming stores to which we could apply ouroperating model as well as open new stores . As a result, the acquired stores havegenerally experienced more significant revenue growth during the initial periodsfollowing their acquisition than in subsequent periods .

36

We plan to accomplish our future growth through selective and opportunisticacquisitions, with an emphasis on new store developments . Typically, a newlyopened store is profitable on a monthly basis in the sixth to ninth month after itsinitial opening. Historically, a typical store has achieved break-even profitabilityin 12 to 15 months after its initial opening . . . . A newly opened store historicallyhas achieved results consistent with other stores that have been operating withinthe system for greater than two years by the end of its third year of operation .

88. The MD&A also falsely described the Company's depreciation method for renta l

merchandise :

We depreciate our rental merchandise using the income forecasting method . Theincome forecasting method of depreciation does not consider salvage value anddoes not allow the deprecation of rental merchandise during pe riods when it is notgenerating rental revenue . For income tax purposes we depreciate ourmerchandise using the modified accelerated cost recovery system , or MACRS,with a three year class life .

89. The Prospectus also falsely described the Company's financial results for the first

quarter of 2001 :

Net Earnings. Net earnings increased by $4 .1 million, or 19 .7%, to $25 .0 millionfor the three months ended March 31, 2001 from $20.9 million for the threemonths ended March 31, 2000. This increase is primarily attributable to anincrease in revenues, operational improvements in existing stores and reducedinterest expenses resulting from a reduction in outstanding debt .

90. The Prospectus also provided false information concerning the Company' s

operations - and, in particular, RCII' s rental purchase agreements and collections practices :

RENTAL PURCHASE AGREEMENTS

Our customers generally enter into weekly or monthly rental purchaseagreements, which renew automatically upon receipt of each payment. We retaintitle to the merchandise during the term of the rental purchase agreement .Ownership of merchandise transfers to the customer if the customer hascontinuously renewed the rental purchase agreement for a period of 12 to 36months, depending upon the product, or exercises a specified early purchaseoption. Although we do not conduct a formal credit investigation of eachcustomer, a potential customer must provide store management with sufficientpersonal information to allow us to verify their residence and sources of income .References listed by the customer are contacted to verify the informatio n

37

contained in the customer's rental purchase order form . Rental payments are

generally made in cash, by money order or debit card. Approximately 85% of our

customers pay in the store on a weekly basis .

PRODUCT TURNOVE R

A minimum rental term of 18 months is generally required to obtain ownership of

new merchandise. We believe that only approximately 25% of our initial rentalpurchase agreements are taken to the full term of the agreement, although theaverage total life for each product is approximately 22 months, which includes theinitial rental period, all re-rental periods and idle time in our system . Turnover

varies significantly based on the type of merchandise rented, with certainconsumer electronics products, such as camcorders and video cassette recorders,generally rented for shorter periods, while appliances and furniture are generally

rented for longer periods . To cover the relatively high operating expenses

generated by greater product turnover, rental purchase agreements require higheraggregate payments than are generally charged under other types of purchaseplans, such as installment purchase or credit plans .

COLLECTION S

Store managers use our computerized management information systems to track

collections on a daily basis. If a customer fails to make a rental payment whendue, store personnel will attempt to contact the customer to obtain payment and

reinstate the agreement, or will terminate the account and arrange to regainpossession of the merchandise. We attempt to recover the rental items as soon aspossible following termination or default of a rental purchase agreement,generally by the seventh to tenth day. Collection efforts are enhanced by thenumerous personal and job-related references required of first-time customers, thepersonal nature of the relationships between the stores' employees and customersand the fact that, following a period in which a customer is temporarily unable tomake payments on a piece of rental merchandise, that customer generally may re-rent a piece of merchandise of similar type and age on the terms the customerenjoyed prior to that period. Charge-offs due to lost or stolen merchandise,

expressed as a percentage of store revenues, were approximately 2 .2% for the first

three months of 2001, 2 .5% in 2000, 2 .3% in 1999 and 2 .5% in 1998 . In an effortto improve collections at the stores acquired during 2000, we implemented ourcollection procedures in these stores, including our management incentive plans,which provide incentives to reduce the percentage of delinquent accounts .

38

MARKETING

We promote the products and services in our stores through direct mailadvertising, radio, television and secondary print media advertisements . Ouradvertisements emphasize such features as product and brand-name selection,prompt delivery and the absence of initial deposits, credit investigations or long-term obligations . Advertising expense as a percentage of store revenue for thefirst three months of 2001 was approximately 4 .1 %, and for each of the yearsended December 31, 2000 and 1999, was 4.0%. As we obtain new stores in our

existing market areas, the advertising expenses of each store in the market can bereduced by listing all stores in the same market-wide advertisement .

91 . Moreover, the Prospectus incorporated by reference the Company's first quarter

10-Q for the period ending March 31, 2001, which, as set forth above, was materially false and

misleading .

92. These statements in RCII's Prospectus for the Secondary Offering were materiall y

false and misleading , and were known by defendants to be materially false and misleading at the

time of their issuance , or defendants were severely reckless in disregarding as such, for the

reasons set forth in paragraphs 18 through 63, above . Defendants also knew or were severely

reckless in disregarding that, in violation of GAAP, RCII understated expenses and overstated

net earnings (by at least $60 million during the Class Period) by: (a) failing to depreciate rental

merchandise while on "free time"; (b) delaying the recognition of impairment in the value of

rental merchandise ; and (c) deferring a significant amount of operating expenses . Defendants

also knew or were severely reckless in disregarding that RCII' s apparent success was the result

of a widespread scheme to force employees to work off-the-clock and then refuse to pay

overtime wages . Defendants also knew or were severely reckless in disregarding that , contrary

to their assertions that RCII' s business was thriving, the Comp any actually had a subst antial

number of delinquent customers who were essentially erased through the "keys troke closeout"

program.

39

93. Following the apparent success of RCII's Secondary Offering, Lehman Brothers

issued a research report on May 31, 2001 that reported defendants' materially false and

misleading statements and revised its 2001 EPS estimate "[g] iven the strong 1Q results ($0 .03

above official estimates)" :

RCII successfully completed a 3 .2 million secondary offering, priced on May 24

at $42 .50. With modest dilution to earnings, we are revising our original 2001EPS estimates .

We remain bullish on the shares, and believe RCII is well-positioned to increaseits already-dominant 27% market share of the highly fragmented Rent-to-Own

industry .

Attractive Valuation : RCII shares currently trade at 14 .9x and 13 .1x our 2001 and

2002 EPS estimates of $3 .02 and $3.45 respectively. Given the company's

resilience to economic downturns, we reiterate our BUY rating and $52 pricetarget .

** *

Rent-A-Center has successfully completed its 3 .2 million secondary offering,

consisting of 1 million primary shares and 2 .2 million shares held by selling

stockholders. The company plans to use approximately $39 .7 million of the net

proceeds to pay down existing debt.

Estimates Revised. Rent-A-Center recently reported IQ EPS of $0 .69, $0.03

ahead of expectations . Additionally, we are assuming $0.02 dilution to 2001

earnings per share and $0.04 to 2002 earnings . As such , we have raised ouroriginal 2001 EPS estimate to $3.02 from $3 .00. Our 2Q and 3Q EPS estimatesremain unchanged at $0 .74 and $0 .76 respectively. . . . [W]e are maintaining ourfull-year 2002 EPS estimate of $3.45, as strong earnings growth offsets dilutionfrom the company's secondary offering .

Strong Performance Irrespective of Economic Downturn . Unlike the cyclicalnature of retailing, RTO companies tend to perform well irrespective of slowingmacroeconomic conditions . While a majority of RTO customers are constrainedby limited cash and credit, rent-to-own stores are unaffected by a downturn in the

business cycle . The RTO industry's remarkable resilience in economicdownturns is quite evident in the company's solid results, as Rent-A-Centerrecently reported an 8 .8% same-store sales gain in1QO1, beating EPS expectations

by $0.03, on top of 50% EPS gains and same-store sales of 12 .6% in 2000-quiteimpressive during a year in which most retailers fell short of original earnings

40

expectations . The rental-purchase transaction allows customers to avoid taking

on additional debt and can be a more attractive option in a weakermacroeconomic environment . Based on data from the APRO, as well as Rent-A-Center's historical operating data, average revenue per store has maintained afairly steady growth rate despite fluctuations in GDP. This is not to say that the

RTO industry is completely void of cyclicality . The RTO business is somewhat

seasonal in nature, with softer customer growth during the summer months when

people spend less time indoors. Customer growth typically strengthens heading

into fall as colder weather arrives . It is important to note that at any given time

the company has high visibility on sales, three to four months out due to therecurring nature of existing rental agreements (the company estimates the averagerental agreement is 4 .3 months) . This recurring revenue insulates Rent-A-Center

from temporary weaknesses in customer growth .

FULL YEAR 2001 AND 2002 ESTIMATE S

In 2001, we forecast a 15% increase in EPS to $3 .02 . We project that total

revenue will increase 10% to $1 .77 billion, driven by a 6% increase in same-storesales and a 7% increase in square footage from the addition of an estimated 137

stores . We forecast total rental revenue of $1 .6 billion, a 10 .5% increase over

2000 levels . We look for decrease of 15 basis points in merchandise depreciation

to 20.35% of rental fees. We estimate store level operating margin will remainconsistent with year-ago levels at 20.28% of store revenue, with flat store-level

gross margin at 76 .38% of store revenue . We also expect a 5-basis-point

reduction in G&A expense to 2 .95% of total revenue, due to leverage of the sales

gain. The net result is an estimated operating margin increase of 15 basis points

to 15.42% of total revenue . With an estimated $63 .5 million in interest expense, a

46.3% tax rate and 37 .2 million shares outstanding expected, we forecast 15%

growth in diluted EPS .

94. Defendants' statements as reported by analysts following the Company (as set

forth in paragraph 93 above) were materially false and misleading, and were known by

defendants to be materially false and misleading at the time of their issuance, or defendants were

severely reckless in disregarding as such, for the reasons set forth in paragraphs 18 through 63,

above. Defendants also knew or were severely reckless in disregarding that, in violation of

GAAP, RCII understated expenses and overstated net earnings (by at least $60 million during the

Class Period) by : (a) failing to depreciate rental merchandise while on "free time" ; (b) delaying

the recognition of impairment in the value of rental merchandise ; and (c) deferring a significant

amount of operating expenses . Defendants also knew or were severely reckless in disregardin g

41

that RCII's apparent success was the result of a widespread scheme to force employees to work

off-the-clock and then refuse to pay overtime wages. Defendants also knew or were severely

reckless in disregarding that, contrary to their assertions that RCII's business was thriving, the

Company actually had a substantial number of delinquent customers who were essentially erased

through the "keystroke closeout" program .

95. On June 20, 2001, Morgan Stanley Dean Witter issued a research report on th e

Company, reporting defendants' materially false and misleading statements, and "reinstat[ing ]

coverage of Rent-A-Center with an Outperform rating" :

Our price target of $60, raised from $50 previously, is based on the stockachieving a P/E multiple of 14-15 times our goodwill-adjusted 2002E EPS of$4.08 .

We forecast 12-15% EPS organic growth through 100+ new stores/year and +4-6% sustainable comps supported by national branding strategy .

Summary and Investment Conclusion

We have reinstated coverage of Rent-A-Center (RCII) with an Outperform ratingand a price target of $60 (up from $50 previously), based on the stock achieving aP/E multiple of 14-15 times our goodwill-adjusted 2002E EPS of $4 .08. Webelieve RCII shares can achieve that valuation given the company's recent trendof above-plan same-store sales (same-store sales in 1Q01 rose 8 .8% comparedwith our +6% forecast) and our expectation that RCII's business model willcontinue to benefit from a deterioration in the US economy (which shouldincrease RCII's pool of potential customers and improve store-level retention andexecution) . Our $60 price target is also supported by a discounted free cash flowanalysis, which assumes an equity cost of capital of 10% and a conservative 5 .0multiple on estimated terminal value EBITDA in 2010 .

** *

We believe RCII shares offer investors the opportunity to benefit from acceleratedorganic growth as the company leverages the strong financial performance of itsnow fully integrated store base and opens new stores (which are dilutive toearnings during the first six months of operation) . We project that RCII cangenerate consistent annual EPS growth of 12-15% over the next five yearswithout making further acquisitions . This would be achieved through a

42

combination of +4-6% annual same-store sales gains, 3-4% annual unit growth(about 100 new stores a year), modest annual EBIT margin improvement (10-20basis points) as the company continues to leverage operating efficiencies in itsexisting base of acquired and mature stores, and the benefit of deleveraging(interest expense was 3 .7% of sales in 1 Q01 versus 4 .8% in 1 Q00) .

Importantly, we are not assuming any further acquisitions in our earningsforecasts or our projected EPS growth rate . However, RCII's track record ofsuccessful acquisition integration, proven ability to drive improved operatingperformance at acquired stores (through better management and by shifting storeproduct offerings toward a higher margin, higher price-point sales mix), and a stillhighly fragmented rent-to-own industry suggest that the company is in a positionto make further acquisitions in the near term . In addition, key competitorRentway (RWY, $8, Not Rated) recently suspended its aggressive acquisitionstrategy in order to digest a series of acquisitions (roughly 30) made over the pastfew years and has suffered a management shakeup following the uncovering ofaccounting irregularities. As a result, we expect RCII to supplement its organicgrowth plans with continued acquisitions (roughly 50-150 stores a year) that

could push RCII's EPS growth above our organic 12-15% forecast, closer to 20%over the next 3-5 years .

** *

Our $60 price target is conservatively based on RCII achieving a PIE multiple of14-15 times our goodwill-adjusted 2002E EPS of $4 .08, which would be withinour 12-15% EPS growth rate forecast . We believe RCII's valuation will continueto improve given (1) the company's recent trend of above-plan same-store sales(we believe this has continued into March); (2) our expectation that RCII' sbusiness model will continue to benefit from a deterioration in the US economy(this should increase RCA's pool of potential customers and improve store-levelretention and execution) ; and (3) the market's growing recognition that RCIIenjoys better earnings visibility (due to the recurring and predictable nature of therent-to-own transaction) than most other retailers . Our price target of $60 is alsosupported by our discounted free cash flow valuation analysis, which assumes anequity cost of capital of 10% and a conservative 5 .0 multiple on estimatedterminal value EBITDA in 2010.

Recent Results and Earnings Outlook

1Q01 Sales and EPS Well Above Our Forecast

RCII reported 1Q01 EPS of $0.69 (up 13%), which was $0 .03 above our forecast .The upside reflected an 8.8% rise in 1Q01 same- store sales , compared with our+6% forecast. The powerful comps were achieved despite a tough comparison(comps rose 14.1% in 1Q00) .

43

Importantly, customer growth remained strong during the quarter, up 4-5% versus

a year earlier. We believe RCII is likely benefiting from growth of rent-to-own

customers in a deteriorating economy as well as increased retention of storemanagers, which is key to improving store-level execution and driving sales

growth . Same-store sales also benefited from the upscaling of the merchandiseassortments in favor of higher end products, which continues to raise the average

price per unit on rent (APU) .

Depreciation of rental merchandise as a percentage of rental revenues was 20 .6%,

flat with last year and in line with our forecast . In addition, RCII benefited from a

powerful jump in gross margin on cash merchandise sales (up 12 .5% overall) to

29.9% versus 16 .5%, helped by a combination of RCII's updated assortment and

the seasonal benefit of tax refunds, which put more cash in the typical RCII

customer's pockets . The store expense ratio rose to 57 .0% from 55 .1%, reflecting

the drag of 36 new stores opened during 4Q00 and 23 new stores in 1 Q01 that

resulted in about $0 .08 (and building field infrastructure to support the stores) of

EPS dilution during the quarter (keep in mind that due to the time required toramp up the balance of merchandise on rent (BOR) to a profitable level, newstores are typically dilutive to EPS during the first 6-9 months of operation) .

Operating income grew 7% to $62 .5 million, with the EBIT margin narrowing 70

basis points to 14.2%. Lower interest expense of $16 .1 million versus $18 .8

million in 1 Q00 helped push the rate of pretax income growth up to 16% .

Raised 2001E EPS .

We raised our 2001E EPS by $0 .03 to $3 .03 to incorporate the upside versus our

1Q01 EPS forecast and then made a $0 .02 downward adjustment back to $3 .01

(on May 31, 2001) to incorporate dilution (net of debt reduction) from RCII'sissuance of about 1 million shares . We made no change to our 2002E EPS of

$3 .45 given the anticipated benefits from debt reduction and a lower forecast taxrate (45% instead of 46 .2%) .

For the rest of 2001, we believe further EPS upside could be driven by continuedstrong rental growth (up 12% in 1Q01) as well as gross margin opportunities

either on cash sales (GM was 29 .9% in 1Q01 versus our 16 .5% forecast) or asrental revenues (higher gross margin) become a higher percentage of the sales mixfollowing the strong cash sales (driven by early purchases of rental merchandise) .

We continue to project that RCII can generate consistent annual EPS growth of12-15% over the next five years without making further acquisitions . This would

be achieved through a combination of +4-6% annual same-store sales gains, 3-4%annual unit growth (about 100 new stores a year), modest annual EBIT marginimprovement (10-20 basis points) as the company continues to leverage operatin g

44

efficiencies in its existing base of acquired and mature stores, and the benefit of

deleveraging (interest expense was 3.7% of sales in 1 Q01 versus 4 .8% in 1 Q00) .

Convenience and Service Differentiates RCII from the Competition .

** *

We believe RCII's customer service distinguishes the company from its

competitors . First, the stores are conveniently located in easily accessible, highlyvisible sites (again, RCII competes for real estate with Payless ShoeSource and

Blockbuster, Inc .) . RCII has also expanded (currently operates 10 urbanlocations) into urban areas (where most mom-and-pop rent-to-own operators tendto avoid doing business) . Second, RCII stores showcase an upscale selection of

brand-name merchandise (e .g ., Dell, Whirlpool, La-Z-Boy, Magnavox) indesirable merchandise categories (electronics, furniture, computers, and

appliances) . Third, RCII offers same-day delivery and installation of merchandise

for no additional cost . Finally, perhaps RCII's most unrecognized intangible assetis its strong personal relationship with its customers versus traditional retailers .

We believe that RCII's store managers know nearly all of the 350-400 customerswho visit the store (remember, 90% of its customers pay weekly in cash) on a

first-name basis . These solid customer relationships could help drive incrementalbusiness for RCII and also improve collectibility .

Importantly, RCII closely monitors employee performance at the store levelthrough its management information system, which also helps ensure adherenceto established operating guidelines . . . .

96. On July 11, 2001, SWS Securities issued a research report on RCII, reporting

defendants ' materially false and misleading statements , and reiterating a "BUY rating and target

price of $59 share":

Highlights :

Many retailers have fallen victim to a generally sluggish economy and haverecently reported disappointing results .

• Despite a tough economic environment (or maybe because of it), we believe Rent-A-Center continues to experience healthy same-store sales trends (around 6%) .

To us, this shows the resilience of the concept and the company's ability toexecute .

45

We remain comfortable with our revenue and EPS estimates of $440 million and$0.74, respectively, for the second quarter ended June 2001 . The company willreport second quarter results on July 30, 2001 after the close of the market andwill host a conference call the next day .

We believe our EPS estimate of $3 .46 for 2002 could prove conservative as 2000and 2001 new store openings begin to contribute to earnings .

• We are reiterating our BUY rating and target price of $59 per share, which isbased on 17x our FY 2002 EPS estimate of $3 .46. The forward PE multiple is at

the midpoint of the expected EPS growth rate of 15% to 20% .

97. On July 24, 2001, Lehman Brothers issued a research report, reportin g

defendants' materially false and misleading statements, and previewing the Company's secon d

quarter earnings announcement :

Investment Conclusio n

RCII will report 2Q EPS on Monday, July 30, after the close . We believe RCIIwill at least achieve our 2Q EPS estimate of $0 .74 (which is consensus) .

We remain comfortable with our 2Q estimate of $0 .74 versus $0.66 last year,which is consensus . The range on the Street is $0 .73-0.75 . Our $0 .74 estimateincludes the dilutive effect of new store openings of approximately $0 .07-$0.08.

** *

Attractive Valuation . RCII shares currently trade at 15 .8x and 13 .9x our 2001 and2002 EPS estimates of $3 .02 and $3.45 respectively . This represents a 29%discount to the S&P 500 based on our 2001 estimate. Over the past five years, theshares have traded between a 78% discount and a 140% premium to the S&P 500 .

FULL YEAR 2001 AND 2002 ESTIMATE S

In 2001, we forecast a 15% increase in EPS to $3 .02. We project that totalrevenue will increase 10% to $1 .77 billion, driven by a 6% increase in same-storesales and a 7% increase in square footage from the addition of an estimated 137stores . We forecast total rental revenue of $1 .6 billion, a 10 .5% increase over2000 levels . We look for decrease of 15 basis points in merchandise depreciationto 20.35% of rental fees. We estimate store level operating margin will remainconsistent with year-ago levels at 20.28% of store revenue, with flat store-levelgross margin at 76.38% of store revenue . We also expect a 5-basis-pointreduction in G&A expense to 2 .95% of total revenue, due to leverage of the salesgain. The net result is an estimated operating margin increase of 15 basis point s

46

to 15 .42% of total revenue . With an estimated $63 .5 million in interest expense, a46.3% tax rate and 37 .2 million shares outstanding expected, we forecast 15%growth in diluted EPS .

For 2002, we estimate a conservative 14 .5% increase in EPS to $3 .45, based on

total revenue growth of 10% to $1 .94 billion, along with a 10% increase in rental

fees and 6% same-store sales growth .

98 . Defendants' statements as reported by analysts following the Company (as se t

fo rth in paragraphs 95-97 above) were materially false and misleading, and were known by

defendants to be materially false and misleading at the time of their issuance, or defendants were

severely reckless in disregarding as such, for the reasons set forth in paragraphs 18 through 63,

above. Defendants also knew or were severely reckless in disregarding that, in violation of

GAAP, RCII understated expenses and overstated net earnings (by at least $60 million during the

Class Period) by: (a) failing to depreciate rental merchandise while on "free time"; (b) delaying

the recognition of impairment in the value of rental merchandise ; and (c) deferring a significant

amount of operating expenses. Defendants also knew or were severely reckless in disregarding

that RCII's apparent success was the result of a widespread scheme to force employees to work

off-the-clock and then refuse to pay overtime wages. Defendants also knew or were severely

reckless in disregarding that, contrary to their assertions that RCII's business was thriving, the

Company actually had a substantial number of delinquent customers who were essentially erased

through the "keystroke closeout" program .

99. On or about July 30, 2001, RCII announced financial results for the second

quarter of 2001 (i .e ., the period ended June 30, 2001). According to the defendants :

The Company, the nation's largest rent-to-own operator, had net earnings for thequarter ended June 30, 2001 of $27.5 million, or $0 .74 per diluted share,representing a 20.4% increase from the comparable 2000 period net earnings of$22.9 million, or $0 .66 per diluted share, when excluding the one-time gaindiscussed below .

47

Net earnings for the six months ended June 30, 2001, were $52 .5 million, or $1 .43

per diluted share, representing an increase of 20 .1 % over the net earnings of $43 .8

million, when excluding the one time gain, or $1 .27 per diluted share for the same

period in the prior year .

"We are pleased that we were able to meet our earnings targets for the secondquarter of 2001 in such a challenging economic environment," commented J .

Ernest Talley, the Company's Chairman and Chief Executive Officer . "Despite a

softening economy that is impacting most traditional retailers, we achieved 8 .7%

same store sales increases, as well as, our consensus earnings estimates ."

Mitchell E . Fadel, the Company's President commented, "We continue to lay thefoundation for future earnings growth with our new store and acquisitionprogram. In the second quarter, we acquired 74 stores for approximately $32 .7

million. We believe these attractively-valued acquisitions will be accretive toearnings in 2002 and are representative of other opportunities we are reviewing toacquire stores from smaller operators ." Fadel continued, "Since we beganopening new stores again in October 2000, the Company has opened 84 locations .

While, as we expected, these stores are currently dilutive to earnings byapproximately $0 .08 per quarter, we are pleased with their performance to dateand expect them to drive earnings growth in the future as they mature ."

[Talley concluded,] "We expect diluted earnings per share to be $0 .68 to $0.70 in

the third quarter of 2001 and $2.87 to $2 .91 for the 2001 fiscal year. We remainconfident in the fundamentals of our business and as we look to 2002, we expect .

. . earnings of $3 .85 to $3 .95 per share ."

100. These statements in RCII's July 30, 2001 press release were materially false an d

misleading, and were known by defend ants to be materially false and misleading at the time of

their issuance, or defendants were severely reckless in disregarding as such, for the reasons set

fo rth in paragraphs 18 through 63, above. Defendants also knew or were severely reckless in

disregarding that, in violation of GAAP, RCII understated expenses and overstated net earn ings

(by at least $60 million du ring the Class Period) by: (a) failing to depreciate rental merch andise

while on " free time"; (b) delaying the recognition of impairment in the value of renta l

48

merchandise; and (c) deferring a significant amount of operating expenses . Defendants also

knew or were severely reckless in disregarding that RCII's apparent success was the result of a

widespread scheme to force employees to work off-the-clock and then refuse to pay overtime

wages . Defendants also knew or were severely reckless in disregarding that, contrary to their

assertions that RCII's business was thriving, the Company actually had a substantial number of

delinquent customers who were essentially erased through the "keystroke closeout" program .

101 . In response to this unexpected shortfall in the Company's earnings results, th e

price of RCII stock tumbled more than $12 .00 per share, from $48 .20 per share on July 30, 2001 ,

to $36.08 per share on July 31, 2001 - a decline of 25% .

102. In an interview with Amanda Lang and Pat Kiernan on CNN's The Money Gang

on July 31, 2001, the Company's president, Mitch Fadel, falsely stated that RCII had favorabl e

operating results for the second quarter and was faced with "surprise" expenses that led to the

revised earnings estimate:

Fadel: Yes, we did have a great second quarter. Our same-store salecomps were 8 .7 percent . Cash flow was tremendous, and we had arecord profit quarter, over 20 percent earnings growth from lastyear, as you pointed out. As well as a record quarter for us, we hada great second quarter in all aspects from growth, revenue andprofit and cash flow, for that matter . It was a great second quarterfor us .

Kiernan: So, what about the third quarter ?

Fadel : Well, we've had some surprises from an expense standpoint . Thedemand for our business continues to be very good . We had somesurprises, insurance, our insurance renewal was much higher thanwe had anticipated. The energy costs, utilities mainly and heatingand this time of year, air conditioning, in our stores, much higherthan we expected .

103. These statements during Mitch Fadel's July 31, 2001 interview on CNN were

materially false and misleading, and were known by defendants to be materially false an d

49

misleading at the time of their issuance , or defendants were severely reckless in disregarding as

such, for the reasons set fo rth in paragraphs 18 through 63, above . Defendants also knew or

were severely reckless in disregarding that , in violation of GAAP, RCII understated expenses

and overstated net earn ings (by at least $60 million during the Class Pe riod ) by: (a) failing to

depreciate rental merchandise while on "free time"; (b) delaying the recognition of impairment

in the value of rental merchandise ; and (c) deferring a significant amount of operating expenses .

Defendan ts also knew or were severely reckless in disregarding that RCII's apparent success was

the result of a widespread scheme to force employees to work off -the-clock and then refuse to

pay overtime wages . Defendants also knew or were severely reckless in disregarding that,

contrary to their asse rt ions that RCII 's business was thriving, the Company actually had a

substantial number of delinquent customers who were essentially erased through the "keystroke

closeout" program .

104. The earn ings warnings surp rised analysts . For example , Morgan Stanley issued a

research report on July 31, 2001 that reported defendants' materially false and misleading

statements, and lowered its 2001 earnings estimate from "$3 .01 to $2 .87," while reiterating its

"outperform" rating based on the false belief (fostered by defendants) that the Company's

"customer growth remains strong" :

Summary and Investment Conclusion

Last night after the market closed, Rent-A-Center (RCII) reported F2QO1 EPS of$0.74 (up 12%) which was $0.01 above our forecast and in-line with Street

consensus . However, the company also announced revised guidance for 2H01and 2002 that has prompted a meaningful cut to our EPS estimates (our F2001 E

EPS goes to $2 .87 from $3 .01 and our goodwill adjusted F2002E EPS is now$3.85 down from $4.08) and downward revisions are due to unexpected expensesthat have significantly reduced our operating profit growth forecast for F2002 .

And we believe this will, at least temporarily, impair RCII's multiple (despitesigns of accelerating top line growth due to acquisitions) .

50

We maintain our Outperform rating given that we believe RCII's long termgrowth outlook is intact and may be enhanced by a recent acceleration in top linegrowth that is supported by accretive acquisitions (74 in 2Q00) and increased

advertising . In addition, customer growth at RCII remains strong (up 4% in2Q01) and we believe our revised EPS could prove conservative . However, weexpect the shares to pullback meaningfully today and have lowered our pricetarget to $50 from $60 (which assumes the shares will trade at 13 times ourdownwardly revised goodwill adjusted F2002E EPS of $3 .85) to adjust for RCII'ssignificantly weakened near-term EPS growth outlook (2002E EPS are nowprojected to rise just 6% in 2002 instead of 15%) .

Our new $50 price target is supported by our discounted free cash flow analysis,which assumes an equity cost of capital of 10% and a conservative 5 .0 multipleon estimated terminal value EBITDA in 2010 .

Going forward, we still believe RCII shares offer investors the opportunity tobenefit from accelerated organic growth as the company leverages the strongfinancial performance of its now fully integrated store base and opens new stores(which are dilutive to earnings during the first six months of operation) . In ourview, RCII remains positioned to generate CAGR in EPS of 12% over the next 5-years without making further acquisitions. This would be achieved through acombination of +4-6% annual same store sales gains, 3-4% annual unit growth(about 100 new stores a year), modest annual EBIT margin improvement (10-20

bps) as the company continues to leverage operating efficiencies in its existingbase of acquired and mature stores, and the benefit of deleveraging .

Lowering estimates due to unexpected expenses

RCII has apparently been con fronted with several unexpected expense pressuresthat should impair profitability in 2H01 and into F2002 . We are lowe ring ourF2001E EPS from $3 . 01 to $2 .87 to reflect the impact of higher insuranceexpenses ( liability, auto, and workman's compensation ), investments in MIS(internal network -VPN line access fees), and energy/utility cost vari ances . Weare lowering our F2002E EPS by $0.23 (net of $0 . 05-$0.10 accretion from 74acquired stores in F2Q01) from $4 .08 to $3 . 85, which re flects about $0.18 due toinsurance expenses pressures, $0.05-$0.08 due to investments in MIS (internalnetwork-VPN line access fees) and $0.03-$0 . 05 due to unfavorable energy andutility cost variances . Impo rtantly, our new forecast does not assume any benefitfrom potential accretive acquisition opportunities in 2H01 .

105. Similarly, on the same day, Lehman Brothers issued a research report in which i t

reported defendants' materially false and misleading statements, and also reiterated its previous

"Buy" rating despite lowering its 2001 earnings estimate for RCII from $3 .02 to $2.90 .

51

Moreover, Lehman Brothers noted that "[m]anagement indicated that customer count was stead y

through the quarter - encouraging considering that the RTO business is somewhat seasonal in

nature."

106. On August 1, 2001, SunTrust Robinson Humphrey issued a research report on

RCH that reported defendants' materially false and misleading statements, lowering EP S

estimates following the 2Q01 earnings release but maintaining its "BUY" rating on the stock :

Lowering EPS estimates for RCII following the company's 2Q earn ings releaseand subsequent downward guidance . Our 3Q EPS est . goes to $0.68 from $0.76;our 12/01 est . goes to $2 .87 from $3 .02, and our 12/02 EPS est . goes to $3 .85from $4.00 .

The main culprit behind the EPS reduction is a 45% increase in insuranceexpense, while higher utilities/communications expenses and minimal stock-option dilution compounded the bottom line impact . Although the expenseincreases are not good news, we do not believe they are core-business issues(meaning revenue remains strong even in a tough environment) . Accordingly, wemaintain our BUY rating on the stock .

We believe the stock could rebound to at least the $40 area over the short term .Maintain our BUY rating .

107. On August 1, 2001, Bear Steams issued a research report on RCII that reported

defendants' materially false and misleading statements, maintaining its "ATTRACTIVE" rating

with a 12-to-18 month target price of $41 :

Key Points

RCII REPORTS AS EXPECTED 2Q01 EPS . RCII reported as expected 2Q01EPS of $0.74 vs . $0.66 last year. Total revenues increased 12 .9% to $442 .8MMin 2Q01 vs . $392.2MM last year and our projection for a 12 .1% increase to$439.7MM. In 2Q01, same-store sales increased 8 .7% vs. 12.2% a year ago andour estimate of 5%. The operating margin decreased by 70 bps to 15 .1 % vs .15.8%, in line with our estimate .

52

LOWERING 3Q01 AND FULL YEAR EPS ESTIMATES . We are lowe ring our3Q01 EPS estimate by $0.07 to 0 . 68 vs . $0.68 last year and our 2001 EPSestimate by $0 .14 to $2 . 87 vs. $2.62 a year ago . However, we are raising our2002 EPS by $0.30 to $3 .75 because of the elimination of about $30MM ingoodwill amortization due to the new FASB rule to be implemented at the end of2001 . Including goodwill amortization, we actually are lowering our 2002 EPSestimate by about $0 .35 to $3 .15.

MAINTAIN ATTRACTIVE RATING . We maintain our Attractive rating, as wecontinue to believe that RCII is a consistent operator and solid cash generator,with a somewhat recession-resistant business . Although the comp any surprisedeveryone by lowering its 3Q01 and full year earnings guidance, we think that thefundamental business is intact , as evidenced by the solid same-store sales andcustomer growth over the past year and a half. We believe shares of RCII shouldtrade between in line with its current 2001 P/E multiple of about 12x and ourprojected long-term EPS growth rate of approximately 10%-12%. Applying alOx-12x multiple to our 2002 EPS estimate of $3.75 yields a 12 to 18 monthtarget p rice of about $41 (applying the mid-point of the range) .

SUMMARY. Yesterday, RCII reported as expected 2Q01 EPS of $0 .74 vs .$0.66 last year and our estimate of $0 .74. Total revenues increased 12 .9% to$442.8MM in 2Q01 vs. $392.2MM last year and our projection for a 12 .1 %increase to $439.7MM. In 2Q01, same-store sales increased more than expectedto 8 .7% vs. 12.2% a year ago and our estimate of 5% . The same-store sales gainin the quarter includes about 85% of the store base and was driven by a solid 4%increase in customer growth. The operating margin decreased by 70 bps to 15 .1%in 2Q01 due to increases in salaries and other expenses (100 bps to 56 .8% ofsales) that were partially offset by increases in store level gross profit (20 bps to76.8% of sales) . The company generated about $31 MM in cash from operationsduring 2Q01 and approximately $63MM in IHO1 . The company repaid about$76MM in debt in 1H01 and ended 2Q01 with $665MM in debt vs . $839.8MMlast year. The company continued to act as an industry consolidator, acquiring 74stores in 2Q01 in nine separate transactions for $32 .7MM, bringing the totalnumber of acquired stores in 1H01 to 78 . RCII also opened 20 stores in 2Q01 andended the quarter with 2,275 stores in 50 states, Washington, DC, and PuertoRico. The company's ColorTyme subsidiary franchised 347 rent-to-own stores,334 of which operate under the name ColorTyme and 13 of which operate underthe Rent-A-Center name. RCII has opened five new stores and acquired one sofar in 3Q01, and has already signed leases on 27 additional stores .

REASONS FOR SURPRISE REDUCTION IN COMPANY EARNINGSGUIDANCE. In the middle of June, RCII added 16 additional labor hours to allstores (about $0 .02-$0.03 in EPS per quarter) in an effort to drive sales andimprove customer service and decided to spend a little more on advertising (about$0.01-$0.02 in EPS per quarter) to help drive same-store sales . The company

53

claims it had a cushion within its guidance to allow for these additional expenses .However, RCII claims it was surprised by a few things in July that led the

company to lower its earnings guidance . First, and most significantly, was thecompany's insurance renewal, which comes up each year in August . In workingon the renewal in late June/early July, RCII encountered significantly higherinsurance costs for worker's compensation, auto, and general liability. As aresult, the company's total insurance costs increased by about 45% to $40MM-$41MM from $28MM last year, or about $0 .04-$0.05 in EPS per quarter. Inaddition to higher insurance rates, the weak worker's compensation claims rateover the past year has led to higher insurance premiums . RCII is working onways to better manage its worker's compensation claims, which accounted forabout 60%-70% of the insurance rate increase . Second, although the companyhad been forecasting higher energy/utility bills, these costs are coming in higherthan planned (about $0.01 in EPS per quarter) . Third, the company'stelecommunications costs have increased more than expected (about $800 perstore for 500 stores, or $400K per month, which translates into about $0 .03 inEPS per quarter) due to one of RCII's DSL carriers (Northpoint Communications)going out of business. This impacted about 500 stores linked up to the company'sintranet, which is used to communicate with the stores . The company has beenscrambling to replace those 500 stores' intranet needs with other DSL and framerelay carriers . In the meantime RCII hooked up the effected stores via traditionalphone lines to communicate with the stores . Fourth, increased shares outstandingfrom the May follow-on offering of 3 .2MM shares and stock option dilution isexpected to reduce EPS by about $0 .02-$0.03 per quarter . All these reductionsshould be offset by accretion from acquisitions of about $0 .05-$0.10 per share .

We believe the company lost a fair amount of credibility with this reduction inearnings guidance because some of these "surprises" should have bee nanticipated. In addition, we think the company must find a better balancebetween its emphasis on expansion and sales and its attention to operatingexpenses and profitability.

RCII COMPLETED FOLLOW-ON EQUITY OFFERING OF 3 .2MMSHARES. On May 24, RCII completed the public offering of 3 .2MM shares ofits common stock at $42.50, 1MM of which was offered by the company and2.2MM of which was offered by Chairman and CEO J . Ernest Talley (1 .7MMshares) and Director Mark E . Speese (500,000 shares) . Management insidersreduced their ownership in the company to about 17 .1 % of the fully diluted sharesoutstanding following the offering from 26 .5% prior to the offering. Mr. Talleynow owns approximately 12.3% of the shares outstanding vs. 19.5% before theoffering and Mr. Speese currently owns about 4 .8% of the shares outstanding vs .7% prior to the deal . RCII used approximately $46MM of the net proceeds ofroughly $136MM to pay down existing debt, which was about $665MM on June30 .

54

LOWERING 3Q01 AND FULL YEAR EPS ESTIMATES . In a surprise

move, the company lowered its earnings guidance for 3Q01, 2001, and 2002 . We

are lowering our 3Q01 EPS estimate by $0 .07 to 0 .68 vs . $0.68 last year and our

2001 EPs estimate by $0.14 to $2.87 vs . $2.62 a year ago. However, we are

raising our 2002 EPS by $0 .30 to $3 .75 because of the elimination of about

$30MM in goodwill amortization due to the new FASB rule to be implemented at

the end of 2001 . Including goodwill amortization, we actually are lowering our

2002 EPS estimate by about $0.35 to $3 .15 .

MAINTAIN ATTRACTIVE RATING . We maintain our Attractive rating, aswe continue to believe that RCII is a consistent operator and solid cash generator,

with a somewhat recession-resistant business . Although the company surprised

everyone by lowering its 3Q01 and full year earnings guidance, we think that thefundamental business is intact, as evidenced by the solid same-store sales andcustomer growth over the past year and a half . As we previously stated, we are

lowering our 3Q01 EPS estimate by $0 .07 to 0 .68 vs . $0.68 last year and our 2001

EPS estimate by $0.14 to $2.87 vs . $2 .62 a year ago. However, we are raising our

2002 EPS by $0 .30 to $3 .75 because of the elimination of about $30MM ingoodwill amortization due to the new FASB rule to be implemented at the end of

2001 . Including goodwill amortization, we actually are lowering our 2002 EPSestimate by about $0 .35 to $3 .15. We believe shares of RCII should tradebetween in line with its current 2001 P/E multiple of about 12x and our projected

long-term EPS growth rate of approximately 10%-12% . Applying a lOx-12x

multiple to our 2002 EPS estimate of $3 .75 yields a 12-to 18-month target pric e

of about $41 (applying the mid-point of the range) .

EARNINGS REVIEW. In 2Q01, RCII's total revenues increased 12 .9% to

$442.8MM vs . $392.2 MM last year and our projection for a 12 .1% increase to

$439.7MM. Same-store sales increased more than expected to 8 .7% in 2Q01 vs .

12.2% a year ago and our estimate of 5% . The same-store sales gain in the

quarter includes about 86% of the store base and was comprised of a solid 4%increase in customer growth and about a 4.7% price increase related to a higher

priced product assortment. The increase in customer growth is good news forRCII because it means that the company is expanding its customer base ratherthan overloading existing customers with rental items . Sales strength was broad-

based across product categories and regions, with good performances in higherend products such as large screen TVs and Sony PlayStation 2's . In 3Q01, we

project a 9 .4% increase in total revenues to $443MM vs . $405MM a year ago andsame store sales of about 4% vs . 14% last year. We expect the recent strength in

same-store sales to moderate in 3Q01 due to the strong comparison from a yearago and as layoffs further impact the company's core customer base .

The 2Q01 operating margin decreased 70 bps to 15 .1% of sales vs. 15.8% lastyear, in line with our estimate. 2Q01 store level gross profit increased by 20 bpsto 76.8% of revenues from 76 .7% last year and our estimate of 76 .8% due tohigher sales (as opposed to rerenting) of previously rented merchandise . The

slight store level gross profit improvement was offset by a 100-bp increase i n

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salaries and other expense to 56 .8% of revenues in 2Q01 from 55 .8% a year ago

and our estimate of 57% resulting from increased advertising, labor, and energy

costs as well as staffing and training for the new stores . In 3Q01, we expect the

operating margin to decrease by 190 bps to 13 .8% of revenues compared with

15.7% last year primarily due to. expected increases in advertising, insurance,

energy, and telecom costs as well as dilution from new store openings .

Net interest expense decreased $2 .6MM to $15 .7MM in 2Q01 vs . $18.3MM last

year due to lower debt balances ($665MM vs . $839.8MM last year) . Factoring in

a tax rate of 46% vs . 47.5% last year, and 37 .2MM shares outstanding yields the

company's 2Q01 EPS from operations of $0 .74 vs . $0.66 last year and our

estimate of $0 .74. New stores diluted EPS by a planned and expected $0 .08 in

2Q01 and are expected to impact EPS by approximately $0 .30 per year . This

dilution already has been factored into our model . Due to revised guidance andexpected increases in operating expenses in 2H01, we are lowering our 3Q01 EPSestimate by $0.07 to 0 .68 vs . $0.68 last year and our 2001 EPS estimate by $0 .14

to $2 .87 vs . $2.62 a year ago . However, we are raising our 2002 EPS by $0 .30 to

$3 .75 because of the elimination of about $30MM in goodwill amortization due tothe new FASB rule to be implemented at the end of 2001 . Including goodwill

amortization, we actually are lowering our 2002 EPS estimate by about $0 .35 to

$3.15 .

BALANCE SHEET AND OTHER ITEMS . Total inventories increased about

8 .2% (less than the 12 .9% top line growth) to $63 1MM in 2Q01 vs . $583 .2MMdue to solid sales growth and good inventory management . Merchandise

inventory on rent increased about 8.6% to $507MM in 2Q01 vs . $466.8MM a

year ago while idle inventory increased about 6 .5% to $124M vs . $116.4MM last

year. Idle inventory was about 19 .7% of total inventory compared to 20% in

2Q00, which is in line with the historic rate of approximately 20% . RCII repaid

about $76MM in debt in 1H01 and ended 2Q01 with $665MM in debt vs.

$839.8MM last year. Capital expenditures were about $17 .6MM in 2Q01 vs.

$15 .4MM last year . We maintain our 2001 capital expenditures projection ofabout $45MM vs. almost $37 .9MM a year ago .

108 . On August 1, 2001, SWS Securities issued a research report on RCII that reported

defendants' materially false and misleading statements, maintaining its "BUY" rating on the

Company' s stock :

Rent-A-Center reported Q201 EPS of $0 .74, which was in line with estimates .

Management is revising guidance downward for 2001 and 2002 based onunexpectedly higher expenses.

Among the positives, same-store sales trends appear to be healthy, new stores are

opening in line with plans, and collections seem to be as expected .

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While the cost overrun issue is disappointing, the fundamentals still appear to be

intact . As such, we are maintaining our BUY rating on the stock . We are

lowering our 12-month price target from $59 to $46 per share based on 12x our

FY02 cash EPS estimate of $3 .86 per share.

109. Defendants' statements as reported by analysts following the Company (as set

forth in paragraphs 104-08 above ) were materially false and misleading, and were known by

defendants to be materially false and misleading at the time of their issu ance , or defendants were

severely reckless in disregarding as such , for the reasons set forth in paragraphs 18 through 63,

above. Defendants also knew or were severely reckless in disregarding that, in violation of

GAAP, RCII understated expenses and overstated net earnings (by at least $60 million during the

Class Period) by: (a) failing to depreciate rental merchandise while on "free time"; (b) delaying

the recognition of impairment in the value of rental merchandise ; and (c ) deferring a significant

amount of operating expenses. Defendants also knew or were severely reckless in disregarding

that RCII 's apparent success was the result of a widespread scheme to force employees to work

off-the-clock and then refuse to pay overt ime wages. Defendants also knew or were severely

reckless in disregarding that , contrary to their assertions that RCII 's business was th riving, the

Company actually had a substantial number of delinquent customers who were essenti al ly erased

through the "keystroke closeout" program .

DEFENDANTS' SCHEME UNRAVELS

110. On October 8, 2001, after the close of trading, RCII issued a press release

announcing its earnings for the third quarter of 2001 (the period ended September 30, 2001) .

The Company announced that earnings would be between $0 .50 to $0.52 per share, well below

the July 30, 2001 third quarter earnings estimates of $0 .68 to $0.70 per share :

The Company . . . revised expectations for its 2001 third quarter earn ings.Management indicated that same store sales growth for the third quarter endedSeptember 30, 2001 was 4 .6% and that total store revenues were toward the lowend of previous guidance at $433 .5 million . In-store sales promotions caused a

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decrease in gross margins and increases in labor and advertising expenses will

negatively impact reported earnings per share . As a result of these factors, the

Company now expects to report diluted earnings per share of between $0 .50 to

$0.52 per share. . . .

(Emphasis added) . In response to this announcement, the price of RCII common stock dropped

by 19%, from a $25 per share close on October 8, 2001 to $20 .13 on October 9, 2001 .

111 . As analysts later explained, rather than being related to the third quarter of 2001 ,

the increase in expenses related to problems that were actually occurring as early as the first

quarter of 2001 . As set forth in detail above, RCII delayed recording these expenses in the

appropriate periods in order to fraudulently bolster earnings and report positive growth . In fact,

several former RCII employees have identified at least $60 million in additional expenses for

depreciation and impairment over and above the expenses disclosed on October 8, 2001 that

were necessary to correctly state financial results for the Class Period .

POST-CLASS PERIOD EVENTS FURTHERDEMONSTRATING DEFENDANTS' FRAU D

112. Analysts reacted harshly to defendants' belated disclosure . For example, on

October 9, 2001, SWS Securities issued a report in which it lowered its rating on RCII stoc k

from "BUY" to "ACCUMULATE ."

113. On October 11, 2001, Morgan Stanley issued a research report changing its

earnings forecast :

Summary and Investment Conclusio n

We maintain our Outperform rating on RCII given our belief that RCII's long-term growth is intact, despite another round of downward estimate revisions .However, near-term, we believe the earnings reductions and lack of visibility onF4Q01 and F2002 earnings could impair RCII's multiple temporarily . On 10/8,RCII preannounced disappointing F3QO1 results despite a +4 .6% same-store gain(which was at the low end of our forecast) . We believe the shortfall resultedprimarily from greater than expected expense pressures from labor (overtime),advertising, and other store level expenses (which combined with F3QO1 total

store sales of just $433 .5M accounted for about $0.10 of the shortfall) . Also, in-

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store promotional activity adversely impacted gross margin (by acceleratingdepreciation expense) and contributed roughly $0.03-$0.04 to earnings shortfall.Importantly, RCII also announced that J . Ernest Talley, Chairman & CEO isretiring (effective immediately) and appointed Mark Speese the new Chairmanand CEO of RCII . In connection with the retirement, RCII's board approved therepurchase of $25 million of J . Ernest Talley's common stock holdings (RCII alsoholds an option to purchase an additional $25 million of his remaining holdings) .

Our price target remains $35 which assumes the shares will trade at 10 times ourF2002E EPS of $3 .55 (reduced from $3 .65) .

F3QO1 same store sales at low end of range

RCII reported a +4 .6% F3QO1 comp gain (vs . F3QOO's +14%) which was at thelow end of our range +4-6% forecast . F3QO1 total store revenue of $433 .5M wasup 11%. However, expense management at the store level (primarily overtimeand advertising costs) remained an issue during F3QO1 . In addition, RCII begandiscounting and promoting merchandise during F3Q0J, by altering agreementterms on some items (which accelerated depreciation and adversely impactedgross margin) . However, we believe the discounting and promotional activityfailed to generate significant incremental traffic and transactions . For F4Q01, weforecast a +5.0% comps gain versus F4QOO's 9 .2% comp increase.

Management change and stock buyback

RCII announced (on 10/8) that J . Ernest Talley, Chairman & CEO is retiring(effective immediately) and RCII appointed Mark Speece as new Chairman &CEO. In connection with the retirement, RCII's board approved the repurchase of$25 million of J . Ernest Talley's common stock holdings in RCII (currently holds2.9 million shares of RCII) . In addition, the company holds an option to purchasean additional $25 million of Mr. Talley's remaining holdings .

Lowering Estimates

We are lowering our F3Q01E EPS from $0.64 to $0.50 to reflect the impact ofdiscounting activity and expense pressures from overtime, higher advertisingcosts and other store level expenses . Our merchandise depreciation ratio (as apercent of rentals) is now 21 .4% instead of 20.7% and reflects the impact ofhigher depreciation associated with discounting activity . Our store expense ratiois now 60 .2% (was 58.6%) and reflects the impact of expense pressures fromlabor, advertising and other store level expenses . We also reduced or F4QO1EEPS to $0 .62 (from $0.67) . Our forecast still assumes a +5% same store salesgain and our total revenue growth forecast (+11 %) is unchanged. However, ourpre-goodwill operating margin forecast is now 14.4% (was 15.2%) and reflects ahigher merchandise depreciation ratio (now 20 .6% was 20.4%) and store expenseratio (now 59.5% was 58 .8%). We also reduced our F2002E EPS to $3 .55 from$3.65, up 11% from goodwill adjusted F2001E EPS of $3 .20. However, there

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could be further downside to our already reduced estimates given expensepressures and the impact ofpromotional/discounts on merchandise depreciation .

(Emphasis added. )

114. In a November 13, 2001 research report, SunTrust Robinson Humphrey stated :

We are reiterating our BUY rating on Rent-A-Center as we believe the new CEO,who had been President for about 10 years prior to retiring at about age 42, isreturning the company to its historical "underpromise and overdeliver" strategywith respect to quarterly EPS growth . During the next 12-15 months, we believethis strategy will result in increased investor confidence and greater predictabilityand stability, which when combined with rising profitability, should lead to amaterially higher P/E multiple .

115 . On November 13, 2001, SWS Securities stated : "We believe that management has

a clear understanding of what caused them to miscue recently . More importantly, a plan is

already being put in place to address those issues . . . . On all these fronts, it appears to us that

management is taking aggressive corrective action ." (Emphasis added.)

116. Finally, on November 14, 2001, Bear Stearns acknowledged in a research report

that "the company surprised everyone in the past several months with significantly higher

operating expenses ." (Emphasis added.)

ADDITIONAL SCIENTER ALLEGATIONS

A. Insider Selling During The Class Perio d

117. While defendants were issuing materially false favorable statements about the

Company's financial condition and business prospects, and concealing or obscuring negative

information, defendants Talley and Speese, who had access to confidential information and were

aware of the truth about the Company and its financial condition, were benefiting from the illegal

course of business or course of conduct described above by selling large blocks of th e

Company's stock at artificially inflated prices without disclosing the material facts about the

Company to which they were privy. Such sales were unusual in their amount and in their timing.

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The insider sales of RCII common stock by defendants Talley and Speese in the Secondary

Offering (totaling $102 ,148,750) imposed upon them an additional duty of full disclosure of all

of the material facts alleged in this complaint .

118. The following table shows the heavy insider selling (totaling more than $102

million ) by defendants Talley and Speese during the Class Period :

Defendant TransactionDate

Shares Price Value

Talley 5/31/01 1,000,000 $40 .38 $40,375,000

Talley 5/31/01 955,000 $40 .38 $38,558,125

Total 1,955,000 $78,933,12 5

Speese 5/31/01 575,000 $40 .38 $23,215,625

Total 575,000 $23,215,62 5

Total InsiderSelling B yIndividualDefendants

2,530,000 $102,148,75 0

119. The timing of the stock sales by defendants Talley and Speese during the Clas s

Period was not consistent with their prior sales in earlier periods and did not reflect their desire

to sell stock as part of a regular trading program or as part of their regular financial or estate

planning . Instead, defendants' Class Period stock sales were highly unusual, as furthe r

demonstrated by the fact that they did not sell any of their RCII stock in the nine month period

prior to the start of the Class Period, compared to sales of more than 2 .5 million shares of RCII

stock during the Class Period for proceeds of more than $102 million .

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B. RCII 's Secondary Offering During The Class Perio d

120. Defendants' scienter is also established by virtue of their efforts during the Class

Period to sell RCII stock in a secondary public offering . This public offering occurred while the

price of the Company's stock was artificially inflated.

121 . Numerous studies confirm that many companies artificially inflate operatin g

results in the months proceeding a public stock offering (such as the Secondary Offering in this

case) . For example, one commentator noted that "one incentive for earnings management is to

increase the stock price before an equity offering." Christine Weidman, The Powers of Auditors,

camagazine.com (Dec. 2002), available at www.camagazine.com (emphasis added) . In addition,

Messrs. DuCharme, Malatesta and Sefcik of the University of Washington School of Business

found that :

four] results support the view that some firms opportunistically manipulateearnings upward before stock issues rendering themselves vulnerable tolitigation.

Larry L. DuCharme, Paul H. Malatesta, Stephan E . Sefcik, Earnings Management, Stock Issues,

and Shareholder Lawsuits, JFE Vol . 71, No. 1 (forthcoming, final draft Dec . 2002) (emphasis

added) .

C. RCII's Management Information System s

122. According to the Prospectus, the Individual Defendants had several systems in

place demonstrating that they had actual knowledge (or at least were severely reckless in

disregarding) that their statements during the Class Period were materially false and misleading .

For example, RCII used a comprehensive reporting system, whereby individual store managers

informed management concerning the day-to-day operations of each individual store . According

to the Prospectus :

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We organize our network of stores geographically with multiple levels of

management. At the individual store level, each store manager is responsible forcustomer and credit relations, delivery and collection of merchandise, inventorymanagement, staffing, training store personnel and certain marketing efforts .

Three times each week, the store manager is required to audit the idle inventoryon hand and compare the audit to our computer report, with the marketmanager performing a similar audit at least once a month . In addition, ourindividual store managers track their daily store performance for revenuecollected as compared to the projected performance of their store. Each storemanager reports to a market manager within close Proximity who typicallyoversees six to eight stores . Typically, a market manager focuses on developingthe personnel in his or her market and on ensuring that all stores meet our quality,cleanliness and service standards. In addition, a market manager routinely auditsnumerous areas of the stores operations, including gross profit per rentalagreement, petty cash, and customer order forms. A significant portion of amarket manager's and store manager's compensation is dependent upon storerevenues and profits, which are monitored by our management reporting systemand our tight control over inventory afforded by our direct shipment practice .

As of March 31, 2001, we had 302 market managers who, in turn,reported to 50 regional directors . Regional directors monitor the results of theirentire region, with an emphasis on developing and supervising the marketmanagers in their region . Similar to the market managers, regional directors areresponsible for ensuring that store managers are following the operationalguidelines, particularly those involving store presentation, collections, inventorylevels, and order verification . The regional directors report to nine seniorexecutives at our headquarters. The regional directors receive a significantamount of their compensation based on the profits the stores under theirmanagement generate .

Our executive management team at the home office directs andcoordinates purchasing, financial planning and controls, employee training,personnel matters and new store site selection. Our executive management teamalso evaluates the Performance of each region, market and store, including theuse of on-site reviews . All members of our executive management team receive asignificant amount of their total compensation based on the profits generated bythe entire company. As a result, our business strategy emphasizes strict costcontainment .

(Emphasis added. )

123 . RCII also had a report ing tool called the High Touch Operating System (HTOS).

According to a former RCII senior executive who reported directly to defendant Talley, HTO S

reports every customer or inventory transaction in each and every store, each day, on a real-time

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basis . The same source stated that this information is then reported to management at RCII's

home office every night in a consolidated report, printed out, and presented to each RCII

executive for his or her review the following morning . Thus, the Individual Defendants receive d

a detailed consolidated report regarding, among other things, customer counts, units on rent ,

delinquencies , profits, losses , utility expenses, salaries , for every store on every day during the

Class Period .

124. Each report clearly identified each instance in which a customer was given "fre e

time" and the specific reason why the free time was given . According to this source, there was

never a single instance during the Class Period when the Individual Defendants did not know the

precise amount of free time given at each store and what the cost of this time was to RCII on a

storewide and consolidated basis. Moreover, the Individual Defendants also knew - for each

store - the number of customers and units on rent, utility costs, salary and overtime costs, and

advertising and marketing costs .

125 . Defendants admitted their knowledge of each category of data - on a daily basis -

when they touted the precision, detail and breadth of the HTOS system in the Prospectus :

Through a licensing agreement with High Touch, Inc ., we utilize anintegrated computerized management information and control system . Each storeis equipped with a computer system utilizing point of sale software developed byHigh Touch. This system tracks individual components of revenue, each item inidle and rented inventory, total items on rent, delinquent accounts and otheraccount information. We electronically gather each day's activity report, whichprovides our executive management with access to all operating and financialinformation about any of our stores, markets or regions and generatesmanagement reports on a daily , weekly, month-to-date and year-to-date basisfor each store and for every rental purchase transaction . The system enables usto track each of our approximately 2,000,000 units of merchandise and each ofour approximately 1,300,000 rental purchase agreements, which often includemore than one item of merchandise . In addition, the system performs a dailysweep of available funds from our stores' depository accounts into our centraloperating account based on the balances reported by each store . Our system alsoincludes extensive management software and report-generating capabilities . The

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reports for all stores are reviewed on a daily basis by executive managementand unusual items are typically addressed the following business day. Utilizingthe management information system, our executive management, regional

directors, market managers and store managers closely monitor the productivityof stores under their supervision according to our prescribed guidelines .

The integration of the management information system developed by HighTouch with our accounting system, developed by Lawson Software, Inc .,facilitates the production of the financial statements . These financial statementsare distributed monthly to all stores, markets, regions and the executivemanagement team for their review .

D. Judicial Determination Of The Individual Defendants ' Direct Involvement InStore-Level Operation s

126. Defendants were sued in two separate Title VII putative class actions prior to th e

start of the Class Period . The first case, Wilfong v. Rent-A-Center, was filed in federal court in

the Southern District of Illinois in August 2000 . The Wilfong plaintiffs asserted that RCII

systematically engaged in the nationwide discrimination of women and minorities . The second

case, Bunch v . Rent -A-Center, was filed in the Weste rn District of Missouri in December 2000 .

The Bunch plaintiffs alleged that defendants engaged in the systematic disc rimination of women .

127. In Wilfong, U.S. District Judge David R. Herndon granted plaintiffs ' motion for

class certification in December 2001 . Judge Herndon's findings reveal an appalling practice by

Talley and the other defendants of discriminating against women and minorities . According to

Judge Herndon, plaintiffs alleged a practice of unlawful discrimination by RCII's top executives

that was adhered to by management at every level of the Company in its decisions to hire, fire,

promote and demote its female and minority employees . Wilfong, 2001 U.S. Dist . LEXIS 22718,

* 10-12 (S .D. Ill. Dec. 27, 2001). Judge Herndon found that the plaintiffs "offered much more

thanjust evidence of the validity of their personal allegations of discrimination ." Id. at * 10.

Judge Herndon found that the plaintiffs presented compelling evidence that Talley, among othe r

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RCII officers, engaged in this conduct . Judge Herndon attributed the following statements to

defendant Talley:

"A woman's place is not in my stores ."

"Women don't belong in rent-to-own."

"Get rid of women any way you can ."

"Women should be home taking care of their husbands and children, chained to astove, not working in my stores ."

Id.

128. Judge Herndon also found compelling evidence of discrimination in similar

statements attributed to other top RCII executives:

"I have never had one female store manager working for me and have neverpromoted a woman ."

"In case you didn't notice, we do not employ women ."

"I regularly throw away women's applications ."

"The day I hire a woman will be a cold day in hell ."

"You can do the vacuuming because that's a woman's job ."

"You were fired because you're a woman ."

Id. at *10-12 .

129. Further, according to William "Gus" Roberts, a former Regional Director

overseeing more than 50 stores in the Midwest, "[i]t was just no secret . The Renters Choice

folks [RCII's predecessor company], in my opinion, were not big on women in the workplace ."

Roberts Dep . at 14 . Roberts also stated that shortly after the August 1998 takeover of Renters

Choice by RCH, all of RCII's Regional Directors from across the nation were warned in a

meeting in Dallas not to hire "black women over 40 who may be pregnant," and were advised

"you're just asking for trouble, so let's just stay away from it ." Roberts Dep . at 26.

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130. Judge Herndon found that the plaintiffs presented compelling evidence that the

number of women at RCII dropped almost 50% in absolute number during 2000 and that one

explanation of this drop was defendant Talley's "directive to get rid of women any way possible .

The statistics demonstrate . . . that there is a class of women affected by the company-wide

policy of sex discrimination at Rent-A-Center ." Wilfong, 2001 U .S . Dist LEXIS 22718 at *11-

12 . The court also found that "the company has, for all intents and purposes, almost no human

resources department, and plaintiffs provide documentary evidence that Mr. Talley and other top

officials insert themselves in almost every aspect of the operation of the stores ." Id. (emphasis

added) .

131 . The court's findings in Wilfong were based upon substantial and compelling

evidence relating to the Class Period in this case, which included Talley's deposition ,

documentary evidence and 275 sworn declarations by victims of RCII's conduct . The court

found that the allegations in Wilfong were substantially identical to the allegations in Bunch.

Moreover, one of plaintiffs' sources, a Regional Director at RCII who reported directly to senior

executives, stated that discrimination was part of the normal operations at RCII and that he, like

every other Regional Director, was told to never hire black women over the age of 40 . Further,

by May 14, 2001, squarely within the Class Period in this case, the EEOC had won a motion to

intervene as a plaintiff in the Wilfong case.

132. In the Bunch litigation, plaintiffs deposed defendant Talley on May 21, 2001 .

After two hours of testimony were recorded, a break was taken and at that time, defense counsel

approached putative class counsel for a formal demand for settlement. Counsel agreed to

suspend the deposition at that time pending the submission of a demand and RCII's response .

Plaintiffs extended a formal demand for settlement on June 1, 2001 . RCII ultimately settled th e

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Bunch action for $16 million dollars and announced this settlement 15 days after the end of the

Class Period .

NO SAFE HARBOR

133. The statutory safe harbor provided for forward-looking statements under certain

circumstances does not apply to any of the allegedly false statements pleaded in this complaint .

Many of the specific statements pleaded herein were not identified as "forward-looking

statements" when made .

134. To the extent there were any forward-looking statements, there were n o

meaningful cautionary statements identifying important factors that could cause actual results to

differ materially from those in the purportedly forward-looking statements . Alternatively, to the

extent that the statutory safe harbor does apply to any forward-looking statements pleaded

herein, defendants are liable for those false forward-looking statements because at the time each

of those forward-looking statements was made, the particular speaker knew that the particular

forward-looking statement was false, and/or the forward-looking statement was authorized

and/or approved by an executive officer of RCII who knew that those statements were false

when made .

CLASS ACTION ALLEGATION S

135. Plaintiffs bring this action as a class action pursuant to Federal Rule of Civil

Procedure 23(a) and (b)(3) on behalf of a Class , consisting of all those who purchased or

otherwise acquired RCII securities between Apri l 25, 2001 and October 8, 2001 , inclusive, and

who were damaged thereby . Excluded from the Class are defend ants, the officers and directors

of the Company and its subsidiaries and affiliates , at all relevant times, members of their

immediate families and their legal representatives, heirs , successors or assigns and any entity in

which defend ants have or had a controlling interest .

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136. The members of the Class are so numerous that joinder of all members is

impracticable . Throughout the Class Period, RCII common shares were actively traded on the

NASDAQ. While the exact number of Class members is unknown to plaintiffs at this time and

can only be ascertained through appropriate discovery, plaintiffs believe that there are thousands

of members in the proposed Class. Record owners and other members of the Class may be

identified from records maintained by RCII or its transfer agent and may be notified of the

pendency of this action by mail, using the form of notice similar to that customarily used in

securities class actions .

137. Plaintiffs' clams are typical of the claims of the members of the Class as all

members of the Class are similarly affected by defendants' wrongful conduct in violation of

federal law that is complained of herein .

138 . Plaintiffs will fairly and adequately protect the interests of the members of the

Class, are ready, willing and able to direct, manage and control the prosecution of this action,

have knowledge and understanding of the action, and have retained counsel competent and

experienced in class and securities litigation .

139. Common questions of law and fact exist as to all members of the Class and

predominate over any questions solely affecting individual Class members . Among the

questions of law and fact common to the Class are :

(a) whether the federal securities laws were violated by defendants' acts andomissions as alleged herein;

(b) whether defendants participated in and pursued the common course ofconduct complained of herein;

(c) whether statements made by defendants to the investing public during theClass Period misrepresented and/or omitted to disclose material factsabout the business, operations and management of RCII ; and

69

(d) to what extent the members of the Class have sustained damages and theproper measure of damages .

140. A class action is superior to all other available methods for the fair and efficient

adjudication of this controversy since joinder of all members is impracticable . Furthermore, as

the damages suffered by individual Class members may be relatively small, the expense and

burden of individual litigation make it impossible for members of the Class to individually

redress the wrongs done to them. There will be no difficulty in the management of this action as

a class action .

FRAUD-ON-THE-MARKET DOCTRINE

141 . The market for RCII's securities was open, well-developed and efficient at all

relevant times. As a result of these materially false and misleading statements and failures to

disclose, RCII securities traded at artificially inflated prices during the Class Period . Plaintiffs

and other members of the Class purchased or otherwise required RCII securities relying on the

integrity of the market price of RCII's securities and market information relating to the

Company, and have been damaged thereby .

142 . During the Class Period, defendants materially mislead investors by publicl y

issuing false and misleading statements and omitting to disclose material facts necessary to make

defendants' statements, as set forth herein, not false and misleading. Said statements and

omissions were materially false and misleading in that they failed to disclose material adverse

information and misrepresented the truth about the Company, its business and operations, as

alleged herein .

143. At all relevant times, the material misrepresentations and omissions particularized

in this Complaint directly or proximately caused or were a substantial contributing cause of the

damages sustained by plaintiffs and other members of the Class . As described herein, during the

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Class Period, defendants made or caused to be made a series of materially false and misleading

statements about RCII's business, prospects and operations . These material misstatements and

omissions had the cause and effect of creating in the market an unrealistically positiv e

assessment of RCII and its business, prospects and operations, thus causing the Company's

securities to be overvalued and artificially inflated at all relevant times . Defendants' materially

false and misleading statements during the Class Period resulted in plaintiffs and other members

of the Class purchasing the Company's securities at artificially inflated prices, thus causing the

damages complained of herein .

144. At all relevant times, the market for RCII's securities was efficient for the

following reasons, among others :

(a) RCII's stock met the requirements for listing, and was listed and activelytraded on the NASDAQ, a highly efficient and automated market ;

(b) As a regulated issuer, RCII filed periodic public reports with the SEC andthe NASDAQ ;

(c) RCII regularly communicated with public investors via established marketcommunication mechanisms, including regular dissemination of pressreleases on the national circuits of major newswire services and otherwide-ranging public disclosures, such as communications with thefinancial press, securities analysts and other similar reporting services ; and

(d) RCII was followed by several securities analysts employed by majorbrokerage firms (including Lehman Brothers, Hoak Breedlove Wesenski& Co. and Morgan Stanley) who wrote reports that were distributed to thesales force and certain customers of their respective brokerage firms .Each of these reports was publicly available and entered the publicmarketplace, in part, through RCII's dissemination .

145 . As a result of the foregoing, the market for RCII's securities promptly digested

current information regarding the Company from all publicly available sources and reflected

such information in RCII's securities' prices . Under these circumstances, all purchasers of

71

RCII's securities during the Class Period suffered similar injury through their purchase of RCII's

securities at artificially inflated prices and presumption of reliance applies .

THE INDIVIDUAL DEFENDANTS' GUIDANCE TO SECURITIES ANALYSTS

146. The Individual Defendants provided guidance to securities analysts and use d

analysts as a conduit to provide materially false and misleading information to the securities

markets . RCII was followed by securities analysts employed by brokerage firms that, throughout

the Class Period, reported information provided to them by the Individual Defendants and made

recommendations concerning the Company's securities based on the information provided by the

Individual Defendants . Among the securities firms that followed the Company during the Class

Period were Morgan Stanley, Hoak Breedlove Wesenski & Co., Lehman Brothers, Robinson

Humphrey and Bear Stearns . In writing their reports, analysts reflected information provided by

the Individual Defendants and the Individual Defendants' confirmation that information in the

analysts' reports did not materially vary from the Individual Defendants' internal knowledge of

the Company's current operations and future prospects .

147. Prior to and during the Class Period, it was the Company's frequent practice to

have its top officers and key members of its management team, including the Individual

Defendants, communicate regularly with securities analysts at the firms identified above (among

others) on a regular basis to discuss, among other things, the Company's financial results, and to

provide detailed guidance to these analysts with respect to the Company's business . These

communications included, but were not limited to, conference calls, meetings, analyst briefings

and investor conferences where the defendants discussed relevant aspects of the Company's

operations and financial prospects . The Individual Defendants knew that by participating in

these regular and direct communications with analysts, the Company disseminated informatio n

72

to the investing community, and that investors relied and acted on such information by

purchasing and selling the Company's securities .

148. Many of the analyst reports issued during the Class Period were remarkably

similar or reported substantially the same facts after meetings with the Company . This confirms

that the information contained in analyst reports came from RCII and the Individual Defendants .

149. The Individual Defendants engaged in the above-referenced communications wit h

analysts to cause or encourage them to issue favorable reports concerning RCII, and used these

communications to present the operations and prospects of RCII to the marketplace in a falsely

favorable light to artificially inflate the market price of RCII's securities . RCH also endorsed the

reports of analysts, adopted them as its own, and placed its imprimatur on them as well as on the

projections, forecasts and statements contained therein, as set forth in more detail above . Despite

their duty to do so, the Individual Defendants failed to correct these statements during the Class

Period.

150. The investment community, and in turn investors, relied and acted on th e

information communicated in these written reports that recommended that investors purchase

RCII securities . The Individual Defendants manipulated and inflated the market price of RCII

securities by falsely presenting to analysts, through regular meetings, and during both telephonic

and written communications, the prospects of the Company, as well as by failing to disclose the

true adverse information about the Company that was known only to them .

LOSS CAUSATION

151 . Plaintiffs and the Class were damaged as a result of defendants' fraudulent

conduct . RCII's stock price rose substantially on defendants' positive statements during the

Class Period . For example, RCII's common stock closed at $36 .09 on April 24, 2001 - the day

before the start of the Class Period. The stock price closed at $37.33 per share on quadruple

73

volume the next day, April 25, 2001 - the day of the first positive statement at issue . This

increase shows a direct relationship between the positive statement and an increase in the share

price. Moreover, the stock price steadily increased as analysts reported defendants' positive

statements, climbing to a close of $39 .75 seven business days later (May 4, 2001), $46 .60

nineteen business days later (May 22, 2001), $51 .50 thirty-nine days later (June 20, 2001) and

$52.60 forty-eight days later (June 29, 2001) . The stock price did not decline until negative

information was revealed later in the Class Period .

152. The stock price dropped just as significantly on negative information . Defendants

withheld material information in an effort to maintain an artificially high stock price .

Defendants' public statements were designed and intended to support the culpable omissions by

reassuring and inducing investors .

153. For example, RCII's stock price closed at $48 .20 on July 30, 2001 . When

defendants issued a negative statement at the end of the day - a statement that continued to hide

the complete truth about defendants' true financial condition - the stock price dropped

precipitously. Indeed, by the close of the market the next day, July 31, 2001, the stock price

dropped to $36.08. This was the first time since the April 25, 2001 statement that the stock price

dropped below the pre-Class Period price of $36 .09. The stock price continued to decline slowly

until defendants' scheme unraveled on October 8, 2001 . The stock price fell from $25 .00 to

$20.00 (20%) in one day on this negative information. The stock continued to trade at low levels

during the 90 days after the end of the Class Period .

74

FIRST CLAIM

Violation Of Section 10(b) Of The 1934 Act AndRule lOb -5 Promulgated Thereunder

154. Plaintiffs repeat and reallege each and every allegation contained above as if fully

set forth herein.

155 . This claim is brought against defendants RCII, Talley, Fadel, Davis and Speese .

156. During the Class Period, defendants carried out a plan, scheme and course o f

conduct that was intended to and , throughout the Class Pe riod, did: (i) deceive the investing

public , including plaintiffs and other Class members , as alleged herein ; (ii) enable defendants

Talley and Speese to sell for personal gain over $ 102 million in RCII stock at artificially inflated

prices without disclosing the material adverse facts about the Company to which they were

privy; ( iii) allow RCII to sell common stock in the Seconda ry Offe ring during the time

defendants had access to material undisclosed adverse information about the Comp any ; and (iv)

cause plaintiffs and other members of the Class to purchase RCII's secu rities at artificially

inflated prices . In furtherance of this unlawful scheme, plan and course of conduct, defendants,

and each of them, took the actions set forth herein .

157. Defendants : (a) employed devices, schemes and artifices to de fraud; (b) made

untrue statements of material fact and/or omitted to state material facts necessary to make the

statements not misleading; and (c) engaged in acts, practices and a course of business that

operated as a fraud and deceit upon the purchasers of the Company's securities in an effort to

maintain artificially high market prices for RCII's securities in violation of Section 10(b) of the

1934 Act and Rule lOb-5 . All defendants are sued either as primary participants in the wrongful

and illegal conduct charged herein or as controlling persons as alleged below .

75

158. Defendants, individually and in concert, directly and indirectly, by the use, means

or instrumentalities of interstate commerce and/or of the mails, engaged and participated in a

continuous course of conduct to conceal adverse material information about the business,

operations and future prospects of RCII as specified herein .

159. These defendants employed devices, schemes and artifices to defraud, while i n

possession of material adverse non-public information and engaged in acts, practices and a

course of conduct as alleged herein in an effort to assure investors of RCII's value and

performance and continued substantial growth, which included the making of, or the

participation in the making of, untrue statements of material facts and omitting to state material

facts necessary in order to make the statements made about RCII and its business operations and

future prospects in the light of the circumstances under which they were made, not misleading,

as set forth more particularly herein, and engaged in transactions, practices and a course of

business that operated as a fraud and deceit upon the purchasers of RCII securities during the

Class Period .

160. Each of the Individual Defendants' primary liability, and controlling perso n

liability, arises from the following facts, among others : (i) they were high-level executives and/or

directors at the Company during the Class Period and members of RCII's management team or

had control thereof; (ii) each of these defendants, by virtue of his responsibilities and activities as

a senior officer and/or director of the Company was privy to and participated in the creation,

development and reporting of the Company's internal budgets, plans, projections and/or reports ;

(iii) each of these defendants enjoyed significant personal contact and familiarity with the other

defendants and was advised of and had access to other members of the Company's management

team, internal reports and other data and information about the Company's finances, operations

76

and sales, at all relevant times ; and (iv) each of these defendants was aware of the Company's

dissemination of information to the investing public that they knew or were severely reckless in

disregarding was materially false and misleading.

161 . Defendants had actual knowledge of the misrepresentations and omissions o f

material facts set forth herein, or acted with severe reckless disregard for the truth in that they

failed to ascertain and to disclose such facts, even though such facts were available to them .

Defendants' material misrepresentations and/or omissions were knowingly made (or made with

severe recklessness) for the purpose and effect of concealing RCII's true operating condition and

future business prospects from the investing public and supporting the artificially inflated price

of its securities . As demonstrated by defendants' overstatements and misstatements of the

Company's business, operations and earnings throughout the Class Period, defendants, if they

did not have actual knowledge of the misrepresentation and omissions alleged, were severely

reckless in failing to obtain such knowledge by deliberately refraining from taking those steps

necessary to determine whether those statements were false or misleading .

162. As a result of the dissemination of the materially false and misleading informatio n

and failure to disclose mate rial facts , as set forth above , the market price of RCII securities was

art ificially inflated during the Class Period. Plaintiffs and other members of the Class did not

know that market prices of RCII securities were artificially inflated, and directly or indirectly

relied on either the false and misleading statements made by defendants , or on the integrity of the

NASDAQ, and/or on the absence of material adverse information that w as known to defendants

(or were severely reckless in disregarding as such) but not disclosed in public statements by

defendants during the Class Period . Plaintiffs and the other members of the Class acquired RCII

securities during the Class Period at artificially high p rices and were damaged thereby.

77

163. At the time of said misrepresentations and omissions, plaintiffs and other

members of the Class were ignorant of their falsity, and believed them to be true . Had plaintiffs

and the other members of the Class and the marketplace known of the true financial condition

and business prospects of RCII, which were not disclosed by defendants, plaintiffs and other

members of the Class would not have purchased or otherwise acquired RCII securities, or, if they

had acquired such securities during the Class Period, would not have done so at the artificially

inflated prices that they paid .

164. By virtue of the foregoing, defendants have violated Section 10(b) of the 1934

Act, and Rule lOb-5 promulgated thereunder .

165 . As a direct and proximate result of defendants' wrongful conduct, plaintiffs and

the other members of the Class suffered damages in connection with their respective purchases

and sales of the Company's securities during the Class Period.

SECOND CLAIM

Violation of Section 20(a) Of The 1934 Act

166. Plaintiffs repeat and reallege each and every allegation contained above as if fully

set forth herein .

167. This claim is brought against defendants Talley, Fadel, Davis and Speese .

168. Defendants Talley, Fadel, Davis and Speese acted as controlling persons of RCI I

within the meaning of Section 20(a) of the 1934 Act . By virtue of their high-level positions, and

their ownership and contractual rights, participation in and/or awareness of the Company's

operations and/or intimate knowledge of the false financial statements filed by the Company

with the SEC and disseminated to the investing public, defendants had the power to influence

and control - and did influence and control - directly or indirectly, the decision-making of the

Company, including the content and dissemination of the various statements that plaintiffs

78

contend are false and misleading . Defendants were provided with, or had unlimited access to,

copies of the Company's reports, press releases, public filings and other statements alleged by

plaintiffs to be misleading prior to and/or shortly after these statements were issued and had the

ability to prevent the issuance of the statements or cause the statements to be corrected .

169. In particular, each of these defendants had direct and supervisory involvement in

the day-to-day operations of the Company and, therefore, is presumed to have had the power to

control or influence the particular transactions giving rise to the securities violations as alleged

herein, and exercised the same.

170. As set forth above, RCII and defendants Talley, Fadel, Davis and Speese eac h

violated Section 10(b) and Rule 1 Ob-5 by their acts and omissions as alleged in this complaint .

By virtue of their positions as controlling persons, defendants Talley, Fadel, Davis and Speese

are liable pursuant to Section 20(a) of the 1934 Act. As a direct and proximate result of

defendants' wrongful conduct, plaintiffs and other members of the Class suffered damages in

connection with their purchases of the Company's securities during the Class Period .

THIRD CLAIM

Violation Of Section 20A Of The 1934 Act

171 . Plaintiffs repeat and reallege each and every allegation contained above as if fully

set forth herein .

172. This claim is brought by plaintiffs against defendants Talley and Speese . As set

forth in Exhibit A, each of the plaintiffs purchased RCII common stock contemporaneously with

sales of RCII stock by defendants Talley and Speese.

173. By virtue of their positions as senior insiders of RCII, among other things,

defendants Talley and Speese were in possession of material, non-public information about th e

79

Company at the time of their collective sales of more than $102 million of their RCII stock to

plaintiffs and members of the Class at artificially inflated prices .

174. By virtue of their part icipation in the scheme to de fraud investors described

herein, and their sales of stock while in possession of material, non-public information about th e

adverse information detailed herein, these defendants violated the 1934 Act and applicable rules

and regulations thereunder .

175 . Plaintiffs and all other members of the Class who purchased shares of RCII stock

contemporaneously with the sales of RCII stock by defendants : (1) have suffered substantial

damages in that they paid artificially inflated prices for RCII stock as a result of the violations of

Sections 10(b), 20(a) and Rule l Ob-5 described herein; and (2) would not have purchased RCII

stock at the prices they paid, or at all, if they had been aware that the market prices had been

artificially inflated by defendants' false and misleading statements .

176. Defendants Talley and Speese are required to account for all such stock sales an d

to disgorge their profits or ill-go tten gains .

FOURTH CLAIM

Violation of Section 11 of the 1933 Act

177. This Claim is brought pursuant to Section 11 of the 1933 Act (15 U .S.C. § 77k) ,

against all defendants, on behalf of plaintiffs and those Class members who purchased shares

issued in connection with, or traceable to, the public offering of 3 .2 million shares of Rent-A-

Center, Inc. common stock on or about May 25 , 2001 at $42 .50 per share (Secondary Offering) .

178. Plaintiffs and the other members of the Class purchased Rent-A-Center, Inc .

common stock pursuant or traceable to the Registration Statement and Prospectus for th e

Secondary Offering, dated May 25, 2001 .

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179. Rent-A-Center, Inc . (RCII) is the registrant for the shares sold to plaintiffs an d

other members of the Class.

180. Defendants J . Ernest Talley, Mitchell E. Fadel, L. Dowell Annette, Robert D .

Davis, Laurence M . Berg , Peter P . Copses , J .V. Lentell and Mark E . Speese signed the

Registration Statement for the Secondary Offering, which was filed with the SEC pursuant to th e

1933 Act, and were thus soliciting the public to purchase RCII stock .

181 . Defendants Morgan Stanley & Co . Inc ., Bear, Steams & Co . Inc ., Lehman

Brothers Inc . and The Robinson -Humphrey Co., LLC were at all relevant times integrated

financial services institutions that acted as co-underwriters of RCII's Secondary Offering .

182. The defendants named herein were responsible for the contents and dissemination

of the Registration Statement and Prospectus .

183. The Registration Statement and Prospectus contained the following untru e

statements of material fact :

We have demonstrated a strong track record of growth, expanding from 717owned or franchised stores at December 31, 1996 to 2,535 at March 31, 2001,primarily through acquisitions . Over that same period, we experienced acompounded annual growth rate in sales of 61 % and a compounded annualgrowth rate in earnings per share before non-recurring items of 38%. In 2000, wehad total revenues of $1 .6 billion, 13 .0% growth over 1999, driven primarily bysame store sales gains of 12.6%. Earnings per share in 2000 before a non-recurring gain was $2 .62, representing 50 .6% growth over 1999 .

Our strategy includes :

- OPENING NEW STORES AND ACQUIRING EXISTING RENT-TO-OWN STORES - We intend to expand our business both by opening newstores in targeted markets and by acquiring existing rent-to-own stores.

- ENHANCING STORE OPERATIONS - We continually seek to improvestore performance through strategies intended to produce gains inoperating efficiency and profitability, including gains in revenues andoperating margins in newly acquired stores .

81

BUILDING OUR NATIONAL BRAND - We have implemented a strategy toincrease our name recognition and enhance our national brand . As a part of anational branding strategy , in Apri l 2000 we launched a national advertisingcampaign featuring John Madden as our national advertising spokesperson.

Three Months Ended March 31 ,

2000 2001

Consolidated Statements of Earnings (In Thousands, Except Per Share Data )

Total Store Expenses 315,524 357,080

Total Operating Expenses 333,974 377,21 7

Net Earnings 20,889 24,99 8

Diluted Earnings Per Common Share 0 .61 0 .69

December 31 ,1999 2000 March 31, 200 1

(Unaudited)Consolidated Balance Sheets (In Thousands)

Rental Merchandise, Ne t

On rent 425,469 477,095 515,395

Held for rent 105,754 110,137 110,869

Total Assets $1,485,000 $1,486,910 $1,511,57 7

We have pursued an aggressive growth strategy since we were acquired in 1989by J . Ernest Talley, our Chairman of the Board and Chief Executive Officer . Wehave sought to acquire underperforming stores to which we could apply ouroperating model as well as open new stores . As a result, the acquired stores havegenerally experienced more significant revenue growth during the initial periodsfollowing their acquisition than in subsequent periods .

We plan to accomplish our future growth through selective and opportunisticacquisitions, with an emphasis on new store developments . Typically, a newlyopened store is profitable on a monthly basis in the sixth to ninth month after itsinitial opening. Historically, a typical store has achieved break-even profitabilityin 12 to 15 months after its initial opening . . . . A newly opened store historicall y

82

has achieved results consistent with other stores that have been operating withinthe system for greater than two years by the end of its third year of operation .

We depreciate our rental merchandise using the income forecasting method . The

income forecasting method of depreciation does not consider salvage value anddoes not allow the deprecation of rental merchandise during periods when it is notgenerating rental revenue . For income tax purposes we depreciate ourmerchandise using the modified accelerated cost recovery system, or MACRS,with a three year class life .

Net Earnings. Net earnings increased by $4 .1 million, or 19 .7%, to $25.0 million

for the three months ended March 31, 2001 from $20 .9 million for the threemonths ended March 31, 2000. This increase is primarily attributable to anincrease in revenues, operational improvements in existing stores and reducedinterest expenses resulting from a reduction in outstanding debt.

RENTAL PURCHASE AGREEMENT S

Our customers generally enter into weekly or monthly rental purchaseagreements, which renew automatically upon receipt of each payment. We retaintitle to the merchandise during the term of the rental purchase agreement .Ownership of merchandise transfers to the customer if the customer hascontinuously renewed the rental purchase agreement for a period of 12 to 36months, depending upon the product, or exercises a specified early purchaseoption. Although we do not conduct a formal credit investigation of eachcustomer, a potential customer must provide store management with sufficientpersonal information to allow us to verify their residence and sources of income .References listed by the customer are contacted to verify the informationcontained in the customer's rental purchase order form . Rental payments aregenerally made in cash, by money order or debit card . Approximately 85% of ourcustomers pay in the store on a weekly basis .

PRODUCT TURNOVER

A minimum rental term of 18 months is generally required to obtain ownership ofnew merchandise. We believe that only approximately 25% of our initial rentalpurchase agreements are taken to the full term of the agreement, although theaverage total life for each product is approximately 22 months, which includes theinitial rental period, all re-rental periods and idle time in our system . Turnovervaries significantly based on the type of merchandise rented, with certain

83

consumer electronics products, such as camcorders and video cassette recorders,

generally rented for longer periods . To cover the relatively high operatingexpenses generated by greater product turnover, rental purchase agreementsrequire higher aggregate payments than are generally charged under other types ofpurchase plans, such as installment purchase or credit plans .

COLLECTION S

Store managers use our computerized management information systems to trackcollections on a daily basis . If a customer fails to make a rental payment whendue, store personnel will attempt to contact the customer to obtain payment andreinstate the agreement, or will terminate the account and arrange to retainpossession of the merchandise . We attempt to recover the rental items as soon aspossible following termination or default of a rental purchase agreement,generally by the seventh to tenth day . Collection efforts are enhanced by thenumerous personal and job-related references required of first-time customers, thepersonal nature of the relationships between the stores' employees and customersand the fact that, following a period in which a customer is temporarily unable tomake payments on a piece of rental merchandise, that customer generally may re-rent a piece of merchandise of similar type and age on the terms the customerenjoyed prior to that period. Charge-offs due to lost or stolen merchandise,expressed as a percentage of store revenues, were approximately 2 .2% for the firstthree months of 2001, 2 .5% in 2000, 2 .3% in 1999 and 2.5% in 1998 . In an effortto improve our collections at the stores acquired during 2000, we implementedour collection procedures in these stores, including our management incentive

plans, which provide incentives to reduce the percentage of delinquent accounts .

** *

MARKETING

We promote the products and services in our stores through direct mailadvertising, radio, television and secondary print media advertisements . Ouradvertisements emphasize such features as product and brand-name selection,prompt delivery and the absence of initial deposits, credit investigations or long-term obligations . Advertising expense as a percentage of store revenue for thefirst three months of 2001 was approximately 4 .1 %, and for each of the yearsended December 31, 2000 and 1999, was 4 .0%. As we obtain new stores in ourexisting market areas, the advertising expenses of each store in the market can bereduced by listing all stores in the same market-wide advertisement .

84

184. However, the Registration Statement and Prospectus omitted to state the

following material facts required to be stated therein or necessary to make the statements therein

not misleading :

(a) RCII improperly granted free time to customers at the time of the

Secondary Offering. As the Company was suffering the adverse effects of a weakening

economy and an overly aggressive growth strategy, RCII created the appearance of

growth by aggressively using customer promotions and discounts . Most notably, the

Company granted customers free time, whereby customers would not pay rental fees for a

certain period of time . RCII counted each free time period as a new customer and

contract, regardless of whether the customer was already an existing customer or was

financially able to continue after the free time period .

(b) RCII improperly deferred operating expenses . The Company improperly

deferred a significant amount of operating expenses in order to show positive financial

results at the time of the Secondary Offering.

(c) RCII refused to pay a significant amount of salary expenses . The

Company's apparent success at the time of the Secondary Offering was the result of,

among other things, a widespread scheme to force employees to work off-the-clock, and

the Company's refusal to pay overtime wages .

(d) RCII manipulated its customer delinquency rates . The Company created

the appearance of success at the time of the Secondary Offering by, among other things,

erasing delinquent customers from its computer system, even though the customers were

actually behind on their payments .

85

(e) RCII falsified financial statements at the time of the Secondary Offering

by failing to properly account for a significant amount of expenses . As the Company was

suffering effects of a weakening economy and an overly aggressive growth strategy, RCII

falsely inflated the Company's reported earnings by : (i) failing to recognize depreciation

expenses in connection with RCA's use of free time ; (ii) delaying the recognition of

impairment in the value of rental merchandise ; and (iii) improperly deferring a significant

amount of operating expenses . Thus, contrary to the Company's publicly stated policies,

RCII was in fact failing to record in its financial statements substantial amounts of

expenses in order to continue to appear to be profitable, whereas, otherwise, it would not

have been able to create the appearance of growth at the time of the Secondary Offering .

185 . At the times they purchased RCII shares, plaintiffs and the other members of the

Class were without knowledge of the facts concerning the wrongful conduct alleged in paragraph

184 and could not have reasonably discovered those facts prior to the Secondary Offering.

186. None of the defendants named herein made a reasonable investigation or

possessed reasonable grounds for the belief that the statements contained in the Registration

Statement and Prospectus were true and without omissions of any material facts and were not

materially misleading.

187. Defendants are strictly liable to plaintiffs and the Class for the misstatements and

omissions contained in the Registration Statement and Prospectus .

188. This action has been brought within one year after the discovery of the untrue

statements or the omissions, or after such discovery should have been made by the exercise of

reasonable diligence, and within three years after the security was bona fide offered to the public .

Plaintiffs allege that RCII's announcement of October 8, 2001 caused a precipitous drop in th e

86

price of RCII common stock. Plaintiffs filed their first complaint against RCH, Talley and

Speese on or about January 4, 2002 . As evidenced by the filing of the original complaint,

plaintiffs began an investigation into the possible causes of the drop in RCII's stock price less

than three months after the stock price drop occurred . Plaintiffs' investigation into the potential

causes of this price drop was diligent . Through their investigation, plaintiffs discovered facts

indicating that the prospectus and registration statement for the Secondary Offering contained

untrue statements or omissions, and that additional defendants were responsible for same . Thus,

plaintiffs filed their Amended Complaint on November 25, 2002, ten months after the filing of

the original complaint. In the Amended Complaint, plaintiffs alleged 1933 Act claims against

RCII, Talley and Speese, and defendants Fadel, Davis, Arnette, Berg, Copses, Lentell, Morgan

Stanley, Bear Steams, Lehman Brothers and Robinson Humphrey .

189. As a result of the foregoing, plaintiffs and the other members of the Class who

purchased RCII common stock pursuant or traceable to the Registration Statement and

Prospectus have sustained damages. The value of RCII shares has declined substantially

subsequent to and due to defendants' violations of the federal securities laws .

FIFTH CLAIM

Violation of Section 12(a)(2) of the 1933 Ac t

190. This claim is brought by plaintiffs against all defendants pursuant to Section

12(a)(2) of the 1933 Act on behalf of the Class members who purchased shares issued in

connection with, or traceable to, the public offering of 3 .2 million shares of Rent-A-Center, Inc.

common stock on or about May 25, 2001 at $42 .50 per share (Secondary Offering) .

191 . Plaintiffs and the other members of the Class purchased Rent-A-Center, Inc .

common stock pursuant to or traceable to the Registration Statement and Prospectus for the

Secondary Offering, dated May 25, 2001 .

87

192. Rent-A-Center, Inc . (RCII) is the registrant for the shares sold to plaintiffs an d

other members of the Class .

193 . Defendants J . Ernest Talley, Mitchell E . Fadel, L. Dowell Arnette, Robert D .

Davis , Laurence M. Berg , Peter P . Copses, J .V. Lentell and Mark E . Speese signed the

Registration Statement for the Secondary Offering, which was filed with the SEC pursuant to th e

1933 Act, and were thus soliciting the public to purchase RCII stock .

194. Defendants Morgan Stanley & Co . Inc., Bear, Steams & Co . Inc., Lehman

Brothers Inc . and The Robinson-Humphrey Co., LLC were at all relevant times integrated

financial services institutions that acted as co -underwriters of RCII's Secondary Offering .

195. Defendants named herein were sellers, offerors and/or solicitors of sales of share s

of RCII stock to plaintiffs and the members of the Class pursu ant to the Registration Statement

and Prospectus . The acts of solicitation by the defendants included participating in the

preparation of the Registration Statement and Prospectus .

196. The Registration Statement and Prospectus contained the following untru e

statements of material fact:

We have demonstrated a strong track record of growth, expanding from 717owned or franchised stores at December 31, 1996 to 2,535 at March 31, 2001,primarily through acquisitions . Over that same period, we experienced acompounded annual growth rate in sales of 61% and a compounded annualgrowth rate in earnings per share before non-recurring items of 38% . In 2000, wehad total revenues of $1 .6 billion, 13 .0% growth over 1999, driven primarily bysame store sales gains of 12.6%. Earnings per share in 2000 before a non-recurring gain was $2 .62, representing 50.6% growth over 1999 .

Our strategy includes :

- OPENING NEW STORES AND ACQUIRING EXISTING RENT-TO-OWN STORES - We intend to expand our business both by opening newstores in targeted markets and by acqui ring existing rent-to-own stores .

88

- ENHANCING STORE OPERATIONS - We continually seek to improvestore performance through strategies intended to produce gains inoperating efficiency and profitability, including gains in revenues andoperating margins in newly acquired stores .

BUILDING OUR NATIONAL BRAND - We have implemented a strategy toincrease our name recognition and enh ance our national brand . As a part of a

national branding strategy, in April 2000 we launched a national advertising

campaign featuring John Madden as our national advertising spokesperson .

Three Months Ended March 31 ,

2000 2001

Consolidated Statements ofEarnings (In Thousands, Except Per Share Data )

Total Store Expenses 315,524 357,080

Total Operating Expenses 333,974 377,21 7

Net Earnings 20,889 24,998

Diluted Earnings Per Common Share 0 .61 0 .6 9

December 31 ,1999 2000 March 31, 2001

(Unaudited )Consolidated Balance Sheets (In Thousands)

Rental Merchandise, Ne t

On rent 425,469 477,095 515,39 5

Held for rent 105,754 110,137 110,86 9

Total Assets $1,485,000 $1,486,910 $1,511,57 7

We have pursued an aggressive growth strategy since we were acquired in 1989by J. Ernest Talley, our Chairman of the Board and Chief Executive Officer . Wehave sought to acquire underperforming stores to which we could apply ouroperating model as well as open new stores. As a result, the acquired stores havegenerally experienced more significant revenue growth during the initial periodsfollowing their acquisition than in subsequent periods .

89

We plan to accomplish our future growth through selective and opportunistic

acquisitions, with an emphasis on new store developments . Typically, a newly

opened store is profitable on a monthly basis in the sixth to ninth month after itsinitial opening. Historically, a typical store has achieved break-even profitability

in 12 to 15 months after its initial opening . . . . A newly opened store historicallyhas achieved results consistent with other stores that have been operating withinthe system for greater than two years by the end of its third year of operation .

We depreciate our rental merchandise using the income forecasting method . The

income forecasting method of depreciation does not consider salvage value anddoes not allow the deprecation of rental merchandise during periods when it is notgenerating rental revenue . For income tax purposes we depreciate ourmerchandise using the modified accelerated cost recovery system, or MACRS,with a three year class life.

Net Earnings. Net earnings increased by $4 .1 million, or 19 .7%, to $25.0 millionfor the three months ended March 31, 2001 from $20 .9 million for the threemonths ended March 31, 2000 . This increase is primarily attributable to anincrease in revenues, operational improvements in existing stores and reduced

interest expenses resulting from a reduction in outstanding debt .

RENTAL PURCHASE AGREEMENT S

Our customers generally enter into weekly or monthly rental purchaseagreements, which renew automatically upon receipt of each payment . We retaintitle to the merchandise during the term of the rental purchase agreement .Ownership of merchandise transfers to the customer if the customer hascontinuously renewed the rental purchase agreement for a period of 12 to 36months, depending upon the product, or exercises a specified early purchaseoption. Although we do not conduct a formal credit investigation of eachcustomer, a potential customer must provide store management with sufficientpersonal information to allow us to verify their residence and sources of income .References listed by the customer are contacted to verify the informationcontained in the customer's rental purchase order form . Rental payments aregenerally made in cash, by money order or debit card . Approximately 85% of ourcustomers pay in the store on a weekly basis .

90

PRODUCT TURNOVER

A minimum rental term of 18 months is generally required to obtain ownership of

new merchandise. We believe that only approximately 25% of our initial rentalpurchase agreements are taken to the full term of the agreement, although theaverage total life for each product is approximately 22 months, which includes theinitial rental period, all re-rental periods and idle time in our system . Turnover

varies significantly based on the type of merchandise rented, with certainconsumer electronics products, such as camcorders and video cassette recorders,generally rented for longer periods . To cover the relatively high operating

expenses generated by greater product turnover, rental purchase agreementsrequire higher aggregate payments than are generally charged under other types ofpurchase plans, such as installment purchase or credit plans .

COLLECTIONS

Store managers use our computerized management information systems to track

collections on a daily basis. If a customer fails to make a rental payment whendue, store personnel will attempt to contact the customer to obtain payment andreinstate the agreement, or will terminate the account and arrange to retainpossession of the merchandise. We attempt to recover the rental items as soon as

possible following termination or default of a rental purchase agreement,generally by the seventh to tenth day. Collection efforts are enhanced by thenumerous personal and job-related references required of first-time customers, thepersonal nature of the relationships between the stores' employees and customersand the fact that, following a period in which a customer is temporarily unable tomake payments on a piece of rental merchandise, that customer generally may re-rent a piece of merchandise of similar type and age on the terms the customerenjoyed prior to that period. Charge-offs due to lost or stolen merchandise,expressed as a percentage of store revenues, were approximately 2 .2% for the first

three months of 2001, 2 .5% in 2000, 2 .3% in 1999 and 2 .5% in 1998 . In an effortto improve our collections at the stores acquired during 2000, we implementedour collection procedures in these stores, including our management incentiveplans, which provide incentives to reduce the percentage of delinquent accounts .

MARKETING

We promote the products and services in our stores through direct mailadvertising, radio, television and secondary print media advertisements . Ouradvertisements emphasize such features as product and brand-name selection,prompt delivery and the absence of initial deposits, credit investigations or long-term obligations . Advertising expense as a percentage of store revenue for thefirst three months of 2001 was approximately 4 .1 %, and for each of the year s

91

ended December 31, 2000 and 1999, was 4 .0%. As we obtain new stores in our

existing market areas, the advertising expenses of each store in the market can bereduced by listing all stores in the same market-wide advertisement .

197. However, the Registration Statement and Prospectus omitted to state the

following material facts required to be stated therein or necessary to make the statements therein

not misleading:

(a) RCII improperly granted free time to customers at the time of th e

Secondary Offering. As the Company was suffering the adverse effects of a weakening

economy and an overly aggressive growth strategy, RCII created the appearance of

growth by aggressively using customer promotions and discounts . Most notably, the

Company granted customers free time, whereby customers would not pay rental fees for a

certain period of time . RCII counted each free time period as a new customer and

contract, regardless of whether the customer was already an existing customer or was

financially able to continue after the free time period .

(b) RCII improperly deferred operating expenses . The Company improperly

deferred a significant amount of operating expenses in order to show positive financial

results at the time of the Secondary Offering .

(c) RCII refused to pay a significant amount of salary expenses . The

Company's apparent success at the time of the Secondary Offering was the result of,

among other things, a widespread scheme to force employees to work off-the-clock, and

the Company's refusal to pay overtime wages .

(d) RCII manipulated its customer delinquency rates . The Company created

the appearance of success at the time of the Secondary Offering by, among other things,

erasing delinquent customers from its computer system, even though the customers were

actually behind on their payments .

92

(e) RCII falsified financial statements at the time of the Secondary Offering

by failing to properly account for a significant amount of expenses . As the Company was

suffering effects of a weakening economy and an overly aggressive growth strategy, RCII

falsely inflated the Company's reported earnings by : (i) failing to recognize depreciation

expenses in connection with RCII's use of free time ; (ii) delaying the recognition of

impairment in the value of rental merchandise ; and (iii) improperly deferring a significant

amount of operating expenses . Thus, contrary to the Company's publicly stated policies,

RCII was in fact failing to record in its financial statements substantial amounts of

expenses in order to continue to appear to be profitable, whereas, otherwise, it would not

have been able to create the appearance of growth at the time of the Secondary Offering .

198. Defendants owed to the purchasers of RCII shares, including plaintiffs and other

members of the Class who purchased RCII shares in connection with or traceable to the

Secondary Offering, the duty to make a reasonable and diligent investigation of the statements

contained in the offering materials, including the Registration Statement and Prospectus

contained therein, to insure that such statements were true and that there was no omission to state

a material fact required to be stated in order to make the statements contained therein not

misleading.

199. Plaintiffs and the Class did not know, or in the exercise of reasonable diligence

could not have known, of the material untruths and omissions contained in the Registration

Statement and Prospectus .

200. By reason of the foregoing, plaintiffs and the members of the Class who

purchased shares in or traceable to the Secondary Offering have been damaged .

93

201 . By reason of the conduct alleged herein, defendants violated, and/or controlled a

person who violated, Section 12(a)(2) of the 1933 Act. Accordingly, plaintiffs and members of

the Class who hold RCII shares purchased pursuant to the Registration Statement and Prospectus

have the right to rescind and recover the consideration paid for their RCII shares and hereby elect

to rescind and tender their RCII shares to defendants . Plaintiffs and the Class members who

have sold the RCII shares they purchased pursuant to the Secondary Offering are entitled to

rescissory damages .

202 . Plaintiffs, individually and representatively, hereby tender RCII shares to

defendants that they and other Class members similarly situated continue to own, on behalf of all

members of the Class who continue to own such securities, in return for the consideration paid

for those securities together with interest thereon.

203. This action has been brought within one year after the discovery of the untru e

statements or the omissions, or after such discovery should have been made by the exercise of

reasonable diligence, and within three years after the security was bona fide offered to the public .

Plaintiffs allege that RCII's announcement of October 8, 2001 caused a precipitous drop in the

price of RCII common stock . Plaintiffs filed their first complaint against RCII, Talley and

Speese on or about January 4, 2002 . As evidenced by the filing of the original complaint,

plaintiffs began an investigation into the possible causes of the drop in RCII's stock price less

than three months after the stock price drop occurred . Plaintiffs' investigation into the potential

causes of this price drop was diligent . Through their investigation, plaintiffs discovered facts

indicating that the prospectus and registration statement for the Secondary Offering contained

untrue statements or omissions, and that additional defendants were responsible for same . Thus,

plaintiffs filed their Amended Complaint on November 25, 2002, ten months after the filing o f

94

the original complaint. In the Amended Complaint, plaintiffs alleged 1933 Act claims against

RCII, Talley and Speese, and defendants Fadel, Davis, Annette, Berg, Copses, Lentell, Morgan

Stanley, Bear Steams, Lehman Brothers and Robinson Humphrey .

SIXTH CLAIM

Violation of Section 15 of the 1933 Act

204. This claim is brought against defendants J . Ernest Talley, Mitchell E. Fadel, L .

Dowell Annette, Robert D . Davis, Laurence M. Berg, Peter P . Copses, J .V. Lentell and Mark E .

Speese.

205. Defendants were controlling persons of RCII within the meaning of Section 15 o f

the 1933 Act . By virtue of their high-level positions and/or their ownership of the Company's

stock and/or participation in the Company's operations, each of the defendants named herein had

the power to influence and control, and did influence and control, the decision-making of the

Company, including the content and dissemination of the Registration Statement and Prospectus

for RCII's Secondary Offering on May 25, 2001 . Each of the defendants named herein were

provided with or had unlimited access to copies of the Company's Registration Statement and

Prospectus prior to and/or shortly after these statements were issued and had the ability to

prevent the issuance of the statements or cause the statements to be corrected .

206. By virtue of their positions as controlling persons, each of the defendants named

herein are liable to plaintiffs and the members of the Class who purchased shares in or traceable

to the Secondary Offering, pursuant to Section 15 of the 1933 Act, for RCII's violations of

Sections 11 and 12(a)(2) of the 1933 Act, as alleged above .

WHEREFORE, plaintiffs pray for relief and judgment, as follows :

95

a. Determining that this action is a proper class action, and certifying plaintiffs as

class representatives under Rule 23 of the Federal Rules of Civil Procedures and plaintiffs'

counsel as class counsel ;

b. Awarding compensatory damages in favor of plaintiffs and the other Class

members against all defendants, jointly and severally, for all damages sustained as a result of

defendants' wrongdoing, in an amount to be proven at trial, including interest thereon ;

c . Awarding plaintiffs and the Class their reasonable costs and expenses incurred in

this action, including counsel fees and expert fees ; and

d. Such other and further relief as the Court may deem just and proper .

JURY TRIAL DEMAND

Plaintiffs hereby demand a trial by jury .

Dated : July 7, 2004

PATTON, HALTOM, ROBERTS, McWILLIAMS,& GREER, LLP

2900 St . Michaels D rive , Suite 400Century Bank Plaz aTexarkana, Texas 75503(903) 334-711 1(903) 3340407 (facsimile)

By :Geo ge Me iamState Bar N . : 13877000Richard A. Adam sState Bar No . : 0078695 6

Plaintiffs' Liaison Counsel

96

MILBERG WEISS BERSHAD &SCHULMAN LLP

Brian C. KerrOne Pennsylvania PlazaNew York, New York 10119(212) 594-5300(212) 868-1229 (facsimile)

NIX, PATTERSON & ROACH, LLPCary PattersonJeffrey J . AngelovichBradley E. Beckworth205 Linda DriveP.O. Box 679Daingerfield, Texas 75638

(903) 645-7333(903) 645-4415 (facsimile)

Plaintiffs' Co-Lead Counsel

97

Exhibit A

CERTIFICATION OF PROPOSED LEAD PLAINTIFFPURSUANT TO FEDERAL SECURITIES LAW S

I, 6 (-V- lG _ c C_s- -,declare the following as to the claims asserted, or to be

asserted, under the federal securities laws :

1 . 1 have reviewed the Rent-A-Center, Inc . (NASDAQ: RCII) complaint prepared by Milberg

Weiss Bershad Hynes & Lerach LLP , whom I designate as my counsel in this action for all purposes .2 . 1 did not acquire Rent-A-Center, Inc . (NASDAQ : RCII) stock at the direction of plaintiffs

counsel or in order to part icipate in any private action under the federal securities laws .3 . I am willing to se rve as a lead plaintiff either individually or as pa rt of a group . A lead

plaintiff is a representative party who acts on behalf of other class members in directing the action, an dwhose duties may include testifying at deposition and trial .

4. I will not accept any payment for se rving as a representative party beyond my pro ratashare of any recove ry, except reasonable costs and expenses , such as lost wages and travel expenses,directly related to the class representation , as ordered or approved by the court pursuant to law.

5 . I have not sought to serve or served as a representative party for a class in an action under

the federal securities laws within the past three years , except :6. I understand that this is not a claim form , and that my ability to share in any recove ry as a

member of the class is unaffected by my decision to serve as a representative party.7 . Since April 25, 2001 , I have made the following transactions in Rent-A-Center, Inc .

(NASDAQ : RCII), and will provide records of those transactions upon request:

No. of Shares Bu /Sell Date Price Per Share

Sc~ U S /mss 6 Zs~

Please use and attach additional pages if necessary .

I declare under penalty of perjury that the foregoing is true and correc t

Executed this day of 2002

Print Name 0genature

CERTIFICATION OF PROPOSED LEAD PLAINTIFFPURSUANT TO FEDERAL SECURITIES LAW S

1, Eliznbe' PJ3,-JVhaWel- declare the following as to the claims asserted, or to beasserted, under the federal securiti s laws :

1 . I have reviewed the Rent-A-Center, Inc . (NASDAQ: RCII) complaint prepared by Milberg

Weiss Bershad Hynes & Lerach LLP, whom I designate as my counsel in this action for all purposes .

2 . I did not acquire Rent-A-Center, Inc. (NASDAQ: RCII) stock at the direction of plaintiffscounsel or in order to participate in any private action under the federal securities laws .

3 . I am willing to serve as a lead plaintiff either individually or as part of a group . A leadplaintiff is a representative party who acts on behalf of other class members in directing the action, andwhose duties may include testifying at deposition and trial .

4. I will not accept any payment for serving as a representative party beyond my pro rata

share of any recovery, except reasonable costs and expenses, such as lost wages and travel expenses,directly related to the class representation, as ordered or approved by the court pursuant to law.

5 . 1 have not sought to serve or served as a representative party for a class in an action under

the federal securities laws within the past three years, except :

6 . I understand that this is not a claim form, and that my ability to share in any recovery as amember of the class is unaffected by my decision to serve as a representative party .

7 . Since April 25, 2001, I have made the following transactions in Rent-A-Center, Inc .(NASDAQ: RCII), and will provide records of those transactions upon request :

No. of Shares Bu /Sell Date Price Per Share

5OO ~~~'9 (a I

Please use and attach additional pages if necessary .

I declare under penalty of perjury that the foregoing is true and correct

-thExecuted this day of , 2002

'Uf! A"7 er ~ wePrint Name ignatu

Exhibit B

Name LocationAcevedo, Victor CAAcosta, Jose C AAcree, Stephen III CAAdolphus, Jeffery Inglewood, CAAhlert, Jonathan CAAlbion, James Bakersfield, CAAlcazar, Carlos Santa Rosa, CAAlgiardro, Rivas Paramount, CAAlhashim, Hussain CAAllen, Ronald Merced, CA ; Renton, WA & Reno, NVAllred, Jeffrey Inglewood, CAAlmanza, Mauria Ceres, CAAlto, David Yakima, W AAlvarado, Ismael CAAlvarez, Frank CAAlvarez, Luis Sacramento, C AAmes, Brian Oakland, CAAnyika, Afam Bellingham & Mt . Vernon, WAApplegate, Jason Redding, CAAraiza, Juan Norwalk, CAArnold, Carl Fresno & Visalia, CAAspeitia, Christopher South Gate, CAAttar, Patricia Tacoma, WAAuila, Oscar C AAvalos, Mauricio Hollywood, CAAvery, Wayne III Crenshaw, CAAvila, John Sacramento, CAAyala, Jess CABaca, Orlando CABadolato, Jerry Tacoma, WABagsby, Corey C ABailey, Jason White Center & Renton, W ABalderos, Javier CABallard, Rebecca Riverside, CABarajas, Juan Redwood City, CABarker, Eric Portland & Hillsboro, O RBarnett, Stefanie CABarrett, Michael Riverside, CABarron, Scott CABarry, John Fairfield, CA

Position ComplaintAccount Manager NBT/UOTAccount Manager NBT/UOTAccount Manager NBT/UOTAccount Manager NBT/UOTDriver; Sales & Credit 10 ; Acct. Man . NBT/UOTAccount Manager NBT/UOTAccount & 10 Manager NBT/UOTAccount Manager NBT/UOT10 Manager NBT/UOT10 Manager NBT/OTC10 Manager NBT!UOTAccount Manager NBT/UOTAccount; 10 ; Store Manager & EA NBT/UOTAccount Manager NBT/UOTSales Manager NBTIUOT10 Manager NBT/UOTAccount Manager NBT/UOTAccount & 10 Manager NBT/UOTAccount Manager NBT/UOTCredit & Sales 10 NBT/UOTAccount Manager & 10 NBT/UO TStore & Sales 10 Manager NBT/UOT10 Assistant Manager NBT/UOTAccount Manager NBT/UOTDri ver ; Account & 10 Manager NBT/UOTAccount Manager NBT/UOTAccount Manager NBT/UOTAccount Manager & Credit 10 NBT/UOTAccount, Assistant & 10 Manager NBT/UOTClerk & 10 Manager NBT/UOTAccount & 10 Manager NBTIUOTAccount & Assistant Manager NBT/OTCAccount & 10 Manager NBT/UOTAccount Manager & Sales 10 NBTIUOTAccount & 10 Manager NBT/UOTAcct. Manager & Store Manager NBT/UOT10 Sales Manager NBT/UOTAccount Manager & Sales 10 NBT/UOTAccount Manager NBT/UOT10 Manager NBT/UOT

Basco, Michael Vallejo, CA Account & Store Manager ; Sales 10 NBT/UOTBastedenbeck, Roy Portland, OR Account Manager NBT/UOTBedford, Lea Lynnwood, WA 10 Manager NBT/UOTBills, Matt Longview & Kelso, WA Account Manager NBT/UOTBoyes, Thomas Spokane, WA 10 Manager NBT/UOTBrown, Aaron Scott Vancouver, WA & Portland, OR Account & 10 Manager NBT/UOTBurright, Christopher Everett, WA Account Manager NBTBurton, Kendrick Seattle, WA Account Manager NBTCader, Michael Yuba City, Marysville, Auburn, Ca. & Longview, WA Account & Store Manager; EA NBT/UOTCalcote, Bertram Seattle, WA Sales 10 & Store Manager NBT/OTCCantrell, Duane Lakewood, WA Account Manager NBTChavez, Emidio Kennewick & Yakima, WA Exec . Assistant ; Acct. Manager & 10 NBT/OTCClaytor, Charles Lynnwood, WA Executive Assistant OTCClopton, Heather Jackson, WA Account Manager NBT/UOTColtman, Graham Beaverton, OR Account Manager NBTCondo, Running Wolf Santa Rosa, CA Account & 10 Manager NBT/UOTCook, Alan Tacoma, WA Account Manager NBT/OTCCook, Mike Kennewick, WA Account & 10 Manager NBTCooley, Donald Bremerton & Port Orchard, WA Account Manager & 10 NBTCota, Michael Bremerton & Port Orchard, WA Account & 10 Manager NBT/UOTCotton, Al Port Orchard, WA Account Manager NBTDaniels, Jon Spokane, WA Executive Assistant NBT/UOTDavis, Jeffrey Portland, OR 10 Manager NBT/UOTDavis, Mark Auburn & Lakewood, WA 10 Manager NBT/UOTDavis, Patrick Walla Walla, WA Account Manager & Sales 10 NBT/UOTDavis, Paul Auburn, WA Account Manager NBT/UOTDavis, Samuel Bellingham, WA Account & Credit 10 Manager NBT/OTCDesormier, Tony Bremerton & Port Orchard, WA Sales 10 : Credit 10 & EA NBT/OTCDixon, Jamal Lakewood & Tacoma, WA Account & Sales Manager NBT/UOTDobbins, Ben Walla Walla, WA Account Manager NBT/UOTDowell, Michael Everett, WA Account Manager NBT/UOTEades, Trevor Longview, WA Account Manager NBTEmery, Karl Seattle, WA Account Manager & Manager NBT/UOTEstrada, Frank Spokane & Kennewick, WA Account & 10 Manager NBTFarias, Kevin Tacoma, WA Account & 10 Manager NBTForrest, James Medford, OR Account Manager NBT/UOTFuentez, Hector Yakima, WA Account Manager NBT/UOTFundahn, Dale Spokane, WA Account Manager NBT/UOTGano, Gregory Beaverton & Portland, OR Sales 10 NBT/UOTGaron, David Vancouver, WA & Portland, OR 10 & Store Manager & EA NBT/UOTGarza, JoaQuin Yakima, WA Account & 10 Manager NBT/UOT

Gates, ChadGold, OwenGray, DanielGrayson, RandyGrenz, RyanHamilton, Christian DHanson, MarcusHarrington, BrandonHarrington, DustinHarris, DerrickHarris, FloydHatcher, ChrisHayes, Davi dHeller, DanyettaHendrix, JeremyHenry, GeraldHess, DonHiggins, DamonHiles, BrettHill, StevenHoleman, RichardJain, YatinJensen, FloydKazen, JusufuKim, ChunKinkez, JonathanKirsch, BruceKrous, ChrisKunkel, EdLabom, Robert J . IIILane, KatarinaLarsen, TiffanyLarson, GregLawyer, NathanielLennon, MarkLennon, MatthewLeslie, JoeLicuallen, Brett A .Looney, John J .Macedo, FernandoMaciel, Heather

Seattle, WA Account Manager & Delivery Driver NBT/UOTVancouver, WA 10 Manager NBT/UOTLakewood, WA; Bayshore, Central Islip & Freeport, N Acct . & Gen . Manager; Credit 10 & EA NBT/UOTEverett, WA Account Manager NBT/UOTMt. Vernon & Oak Harbor, WA Account ; Store & 10 Manager NBT/UOTLongview, WA Account Manager NBT/OTCYakima, WA 10 & Stor Manager NBT/UOTYakima, WA Account & Assistant 10 Manager NBT/OTCYakima, WA Account & Store Manager; EA; 10 NBT/UOTSeattle, WA Account Manager NBTAberdeen, WA Sales 10 NBT/OT CEverett & Seattle, WA Sales 10 & Account Manager NBT/UOTLakewood, WA Account Manager NBT/UOTVancouver, WA Account Manager & Sales 10 NBT/OTCMt. Vernon & Oak Harbor, WA Account Manager & Sales 10 NBT/UOTSeattle, WA Account & 10 Manager NBT/UOTSpokane, WA Account Manager & 10Olympia, WA Account Manager UOTTacoma, WA Account & 10 Manager NBT/OTCYakima, WA Account & 10 Manager NBT/UOTSpokane, WA Account & 10 Manager NBTIOTCLynnwood, WA Account Manager NBT/UOTWalla Walla, WA Account Manager NBT/UOTBurien, WA Account Manager NBTLynnwood & Shoreline, WA Account ; 10 & Store Manager; EA NBT/UOTSeattle, WA Account Manager NBT/UOTSeattle, WA Account Manager NBT/UOTSpokane, WA 10 Manager NBT/UOTTacoma, WA Account Manager NBTSeattle, WA Account & 10 Manager NBT/UOTLongview, WA 10 Manager & Executive Assistant NBT/UOTLynnwood, WA Account Manager NBT/UOTSpokane, WA Account & 10 Manager NBT/UOTOlympia, Centralia, Renton & Tacoma, WA 10; EA; Store & 10 Sales Manager NBTYakima, WA Sales 10 NBTAberdeen, WA Account Manager NBT/OTCVancouver, WA 10 & Account Manager NBT/UOTVancouver, WA & Portland, OR Account Manager NBT/UOTOlympia & Bremerton, WA Account ; 10 & Store Manager NBT/UOTCA Manager NBT/UOTModesto, CA Account Manager NBT/UOT

Madrigal, Jose M . Sunnyside, WA Account & 10 Manager NBTMajerus , Michael Seattle , WA 10 Manager NBTMaldonado , Crisoforo CA Account Manager NBT/UOTMaldonado , Dominic CA Account Manager NBT/UOTMaldonado , Ruben Lake Stockton, CA Account Manager NBT/UO TMalone, Robert Los Angeles , CA Account Manager NBT/UOTMaradan , Sidney CA Manager NBT/UOTMarquette , Karaden Everett, WA Account Manager NBTMa rten , Scott Wentatchee , WA Account Manager NBT/UOTMa rtin , Chris San Diego , CA Account & Credit Manager NBT/UOTMa rtin , Miguel CA Account Manager NBT/UOTMa rtin , Theodis Vallejo, CA Account Manager NBT/UOTMartinez , Eileen CA Account Manager NBT/UOTMart inez , James Sacramento , CA Account Manager NBT/UOTMart inez , Jorge CA Account & Sales Manager NBT/UOTMa rtinez , Julio Santa Ana, CA Account Manager NBT/UOTMa rtinez , Paul Salinas , CA Account Manager ; Sales 10 & Credit I(NBT/UOTMa rtinez, Ricardo CA Account Manager NBT/UOTMatsumoto , Shane Spokane, WA Account Manager NBT/OTCMatthew, Miller Auburn , WA Account & Assistant Manager NBT/UOTMatthews , Christopher Yuba City, CA Account & 10 Manager NBT/UOTMatthews, Timothy Tacoma, WA Assistant Manager NBT/OTCMattison , Joseph Portland , OR Account Manager NBT/UOTMcCann , Jason T . Spokane , WA Account Manager NBT/UOTMcCord, Ethan Vacaville , CA & Wichita, KS Credit & Sales 10 NBT/UOTMcCoy, David R . Breme rton & Port Angeles, WA Executive AssistantMcDaniel , JD CA Executive Assistant NBT/UOTMcGowan, Alvin CA Account Manager NBT/UOTMcIntyre , Daniel Pasadena, CA Account & Sales Manager NBT/UOTMcKeith , Eddie CA 10 Credit Manager NBT/UOTMcLeod , Scott Sr. San Burnandino , CA Sales 10 Manager NBT/UOTMcMahan, Matthew Spokane, WA Sales 10 Manager NBT/OT CMedford , Paul CA Account Manager NBT/UOTMejia, Luis Santa Ana, CA Account Manager NBT/UOTMejia, Richard Las Benos & Modesto , CA Account Manager NBT/UOTMendoza, Hugo Inglewood & Florence , CA Account Manager NBT/UOTMendoza , John CA Account & 10 Manager NBT/UOTMesa , Richard CA 10 Manager NBT/UOTMetcalf, Joseph M . Kennewick , WA Assistant & Store Manager NBT/UO TMeza , Ernie Centralia, WA Executive Manager NBT/UO TMikus , Dawn Union City, CA Account Manager NBT/UO T

4

Miller, Arguster CA Account Manager & Sales 10 NBT/UOTMiller, Kevin Bellingham , WA Account Manager UOT/OTCMiller, Matthew Auburn , WA Account & Assistant Manager NBT/OTCMills, Ker ry Seatt le , WA Account & 10 Manager NBT/OTCMillsep , Robert CA Account Manager NBT/UOTMilner, Scott Seatt le , Shoreline , Olympia & Lacey, WA Account Manager NBT/UOTMilton, Jacob CA Account Manager NBT/UOTMincinski , Michael Pacoima, CA Store Manager NBT/UOTMinear, Donald CA Account Manager NBT/UOTMitchell , John CA 10 Manager NBT/UOTMitchell, Robert Spokane , WA Account & Credit 10 Manager NBT/OTCMondie , Joseph CA 10 & Credit Manager NBT/UOTMontelongo , Marco CA Account & Credit 10 Manager NBT/UOTMonte ro, Brad CA Credit IO & Manager NBT/UOTMoodie , Edgar CA Account Rep . NBT/UOTMoore , Calvin CA Account Manager NBT/UOTMoore , Edward Jr. Montclair , CA Account Manager NBT/UOTMoreno , Fred CA Account Manager & Credit 10 NBT/UOTMoreno , Guillermo II CA Account Manager & 10 /Credit Sales NBT/UOTMoreno , Lonnie Vancouver, WA Credit & Store Manager NBT/UOTMorgan , Jill Everett & Mt . Vernon , WA Account Manager NBT/UOTMorris , Vincent Gresham, OR & Lynnwood, WA Account Manager NBT/UOTMorton , Travis CA Sales Manager NBT/UOTMotley , Croslyn Pomona, CA 10 Credit Manager & Store Manager NBT/UOTMott, Gary Albany, OR Account & 10 Manager NBT/UOTMueller, Steven CA Account Manager NBT/UOTMullen , Peter CA Sales 10 NBT/UOTMurdock, Eric CA Account Manager NBT/UOTNarciso , Ricky Inglewood , CA Account Manager NBTNavarru , Cesar CA Assistant Manager NBT/UOTNeffstad , Sherry Redwood City, CA Account Manager NBT/UOTNeighbors , Michael Evere tt, WA Account Manager NBTNicholson, Demetrius Los Angeles , CA 10 Manager NBT/UOTNixon , Lawrence Everett, WA Account & Collection Manager NBT/UOTNonez , Jose CA Account Manager NBT/UOTO'Dell, Jason CA Account Manager NBT/UOTO'Keefe, Daniel Seattle , WA 10 Manager & Executive Assistant NBT/UOTO'Riley, Ryan CA Account Manager NBT/UOTOchoa, Pedro CA Account Manager NBT/UOTOgas , George II Sacremento , CA Account Manager & Assistant 10 NBT/UOTOgle, Darren Seattle , WA Account Manager NBT

Olea, Brian Oak Harbor, WA Account Manager & Sales 10 NBT/UOTOliver, Wesley Santa Ana, CA 10 & Account Manager NBT/UOTOrtega , Richard Santa Ana, CA Assistant & 10 Manager NBT/UO TOrtenzio, Daniel CA Sales 10 NBT/UOTOrtiz, Aki CA Account Manager NBT/UOTOrvis, Jeffrey Centralia , WA 10 UOTOwa, Ma rvee Montclair , CA Account & Assistant Manager NBT/UOTPaguaga , Adrian CA Credit Manager NBT/UOTPankrato , Michael Fresno , CA Account & 10 Manager NBT/UOTParker, Chad Kennewick, WA Account Manager NBT/UOTPatterson, B rian Evere tt, WA Account & 10 Manager NBT/UOTPerez , Carlos CA 10 Manager NBT/UOTPerez , Paula Modesto , CA 10 Manager NBT/UOTPesonen , Michael Clearlake , CA Account Manager NBT/UOTPeterson , Cherie Longview, WA Account & 10 Manager NBT/OTCPeterson , Kyle Bellingham, WA Account & 10 Manager NBTPetway, Andre Sr. CA Sales 10 NBT/UOTPillow, Arthur Jr. CA Account Manager NBT/UOTPimentel, Raul San Jose, CA Account Manager NBT/UOTPinkney , Cliff Lancaster, CA Account Manager NBT/UOTPiper, Scott Santa Ana , CA Sales & Credit IO Manager NBT/UO TPippin, Spencer Hillsboro , OR Account & 10 Manager NBT/UO TPitts, Denise Sacramento , CA Account Manager NBT/UOTPorter, Keith CA Account & 10 Manager NBT/UOTPrutman, Ness CA Account Manager NBT/UOTPutnam, Joseph CA 10 Manager NBT/UOTQuarks, Tammie San Diego , CA Sales IO NBT/UO TQuimby, Lannette Modesto , CA 10 Manager NBT/UOTRabledo , Grabriel Kennewick, WA 10 Manager NBT/UOTRails, Frederick Seattle , WA Account & Assistant Manager NBT/UOTRamirez , Cesar Inglewood , CA Account Manager & Driver NBT/UOTRamirez , Glori a Oakland , CA 1 0 Manager & Executive Assistant NBT/UOTRamirez , Ricardo Lancaster & Ventura, CA Account & 10 Manager NBT/UOTRamos, Fransisco CA Sales 10 & Store Manager NBT/UOTRamos , Lazaro Walla Walla, WA Account Manager NBT/UOTRandall , Janal CA Account Manager NBT/UOTRanjel , Danny San Jose , CA Assistant Manager & Sales 10 NBT/UOTRaper , Brian Bellingham , WA Account Manager NBT/OTCRatliff, Joseph Lynwood, WA Executive Assistant NBT/OT CRay, Erik CA Sales 10 & Account Manager NBT/UO TReidt, Erin Spokane , WA Account Manager NBT/OTC

Remick, Travis Vallejo & Vacaville, CAReyes, Cesar Anaheim, CARibeira , Ken Seattle & Renton, WARich, Todd D . Yakima, WARichardson, Daniel CARidge , Angela Mercell, CARidrigues, Roy Seattle, WARihan , Basem CARiley, Jeffery CARiley, Marcus CARinggold, Martin CARith, Ty CARobertson, Daniel CARobinson, John San Fransisco, CARobledo, Gabriel Kennewick, WARobles , Jeffrey Norwalk & Garden Grove, CARodrigues , Roy Seattle, WARodriguez , Jorge CARonzands, Dennis Mt. Vernon & Everett, WARowlands , Denis Mt . Vernon & Everett, W ARubio, Jose Jr . Santa Ana, CARuckriegel, Kevin Spokane, W ARueds , Oscar Salinas & San Jose, CARuiz, Abel Sunnyside, WARuiz, Armando Longbeach, CARuiz, Hector Portland, OR & Vancouver, W ARuleigh, Derrick Los Angeles & Inglewood, CARusakiewiez , Steve Oakland, CARussell , Diane M . Calif. & Orego nRussell , Jamie Inglewood, CARussell , Lee Kennewick, WASailors , Jason CASainz , Victor Los Angeles, CASalazar, Manny Vancouver, WA & Portland, O RSalinass, Gary Vancouver, WASalinass , Oscar CASanchez, Francisco Wenatchee, WASanchez, Gabriel Buena Park, CASanchez, Michael Richmond, CASanchez, Robert San Jose, CASanesanonk, David CA

Account Manager NBT/UOTAccount Manager & 10 Sales NBT/UOTAccount & 10 Manager NBT/OTCAccount Manager NBT/OTCAccount Manager NBT/UOTSales 10 & EA Manager NBT10 Manager NBT/OTCSales 10 & Credit 10 NBTCredit 10 NBT/UOTAccount & EA Manager & 10 NBT/UOTAccount Manager NBT/UOTAccount Manager NBT/UOTAccount Manager NBT/UOTAccount Manager & EA NBT/UOT10 Manager NBT/OT CAccount & 10 Manager NBT/UOT10 Manager NBT/UOTAccount Manager NBT/UOT10 Manager NBT/UOT10 Manager NBT/OTCSales 10 & Store Manager NBT/UOTAccount Manager; Sales 10 & Credit I(NBT/OTC10 & Account Manager NBT/UOTAccount Manager NBT/UOTAccount Manager NBT/UOTAccount Manager NBTAccount Manager NBT/UOTAccount & 10 Manager NBT/UOTAccount & 10 Manager NBT/UOTSales & Assistant Manager NBT/UOTAccount Manager NBT/UOTAccount Manager & 10 NBT/UOT10 Manager NBT/UOTExecutive Assistant NBT/UOTAccount Manager NBT/UOTAccount Manager NBT/UOTAccount Manager NBT/OTCSales Manager NBT/UOTTruck Driver & Account Manager NBT/UOTAccount Manager NBT/UOTAccount Manager NBT/UOT

Saurn, Kevin Bremerton & Port Orchard, WA Account & 10 Manager ; EA NBT/UOTSavoy, Eric CA Credit 10 NBT/UOTScharton, Stephen Montclair, CA Credit Manager NBT/UOTSchulman, Bill CA Account Manager NBT/UOTScovill, Alan CA Acct. & Assistant Manager & Credit 10 NBT/UOTSeeley, Bucky CA Account Manager NBT/UOTSeitz, Laurie Seattle, WA 10 Manager NBT/OTCSelzle, Henry CA Account Manager NBT/UOTSettecase, Robert Wenatchee, WA Trainee NBTSewell, Timothy Everett, WA Account Manager NBT/OTCSharp, Steven F. Montclair, CA Account Manager NBT/UOTShaw, Brian Yuba City, CA Account & Store Manager NBT/UOTShaw, Danielle CA Account Manager NBT/UOTShepard, Darryl H . Everett, WA Account Manager NBT/OT CShort, Jacque Mt . Vernon, WA Account, Store & Sales 10 Manager NBT/UOTSiao, Wilfredo Seattle, WA Acount Manager & Executive Assista n NB TSizemore, Mike Vancouver, WA Account Manager NBT/OTCSmalls, Anthony CA Account Manager NBT/UOTSmeragliuolo, Lawrence CA Sales Manager NBT/UOTSmith, Darrell E. Centralia, WA Account; 10 ; & Store Manager ; EA NBTIOTCSmith, Michael CA Account Manager NBT/UOTSmith, Michael Sr. Seattle, WA Account Manager NBTStaton, Moses K . Seattle, WA Account Manager NBT/OTCStevens, Scott Lakewood, WA Account & Credit 10 Manager NBT/OTCStewart, Lawrence CA Account Manager NBT/UOTStock, Anthony San Diego, CA Account & 10 Manager NBT/UOTStoll, Rick Coeur d'Alene, ID & Opportunity, WA Account & 10 Manager NBT/OTCStrayhorn, David CA Account & Credit 10 Manager NBTJUOTStrong, LaSalle Jr . CA Account Manager NBT/UOTSttecase, Robert Wenatchee, WA Account Manager Trainee NBT/OT CSullivan, Benjamin Sacramento, CA Account & Store Manager ; Sales 10 ; E NBT/UOTSwendell, Curtis CA Account Manager & Credit 10 NBT/UOTTapp, Howard Vancouver, WA & Portland, OR Account & 10 Manager NBT/OTCTate, Jermaine Fresno, CA 10 & Account Manager NBT/UOTTaveras, Adrianne CA Sales Manager NBT/UOTTaylor, Guy Fontana & Moreno Valley, CA 10 & Account Manager NBT/UOTTaylor, Paul Seattle, WA Account Manager NBT/UOTTaylor, Robert Yakima, WA Account Manager NBT/UOTTemple, Lance CA Account Manager NBT/UOTTerry, James Inglewood & Riverside, CA Account & 10 Manager NBT/UOTThomas, Albert CA Account & 10 Manager NBT/UOT

Thomas, Derrick Bakersfield , CA Account Manager NBT/UOTThomas, Keith Oakland , CA Account Manager NBT/UOTThomas, Rex CA Account Manager NBT/UOTThompson, Byron Long Beach , CA Sales 10 & Account Manager NBT/UOTThorsen, Steven Mt . Vernon & Lynnwood, WA Account Manager & Executive Assista NBT/UOTTillman, Jataun Paramount, CA Account Manager NBT/UOTTolliver, Lawrence Nowalk & Long Beach , CA Account Manager NBT/UOTToscano, Richard CA Account Manager NBT/UOTTroesch, John CA Account & 10 Manager NBTIUOTTurner, Creig Hayward & Union City, CA Account Manager & Credit 10 NBT/UOTTzintzun, Maria Sacremento , CA Assistant Manager NBT/UO TUribe, Charlie Salinas & San Jose, CA Account & 10 Manager NBT/UOTValdez, Axel CA Account Manager NBT/UOTVan Matre , Richard Modesto , CA Sales 10 & Executive Manager NBT/UOTVarela, Billy CA 10 Manager NBT/UOTVasquez, Robe rt Fresno , CA Credit & Sales 10 NBT/UOTVasquez , Roman Jr. Montclair , CA 10 & Account Manager NBT/UOTVega, Antonioa Jr. CA Account & Credit Manager NBT/UOTVega, Ramiro Santa Ana & Long Beach , CA 10 NBT/UOTVelasquez, Chris CA Account & Sales Manager NBT/UOTVelasquez, Jorge CA Account Manager NBT/UOTVenetianer, Mark Santa Ana & Tustin, CA Credit 10 NBT/UOTVera, Raymond CA Account Manager NBT/UOTVillanueva, David Fresno, CA Account & 10 Manager NBT/UOTVillard, Eric Walla Walla, WA Account Manager NBT/OTCVillaro, Eric Walla Walla , WA Account Manager NB TVillegas , Jose Jr. CA Account Manager NBT/UOTVink, Matthew Chico & Redding , CA Account Manager, Sales 10 , EA NBT/UOTVinson, Steven CA Account Manager NBT/UOTVivar, Maryury CA Credit 10 Manager NBT/UOTVo, Vinit CA Account Manager NBT/UOTWagner , Geoffrey Evergreen , WA Delivery Driver & Account Manager NBT/OTCWalsh, Arthur CA Account Manager NBT/UOTWalters, Warren San Diego , CA Account Manager & Sales 10 NBT/UOTWalton, Arrae Phoeniz, AZ & Lynnwood, WA Account Manager & Sales 10 NBTWalton, Eddy Vancouver, WA Account Manager NBT/UO TWatson, Kevin Fontana & San Bernidino, CA Account Manager NBT/UO TWatson, Steven Yuba City, CA Account Manager NBT/UOTWelcome, Timothy Renton, WA Account Manager NBTWells, Anthony Yakima, WA 10 Manager NBT/UOTWelsh, John ' White Center & Renton , WA Account Manager NBT/UOT

Wevick, Steve Reseda, CA Assistant Manager NBT/UOTWhitesel, David CA Account Manager NBT/UOTWhobrey, Johnathan Auburn, Kent, & Tacoma, WA 10 Manager & Executive Assistant NBT/UOTWideman, Mike Oakdale, CA Account & 10 Manager NBT/UOTWilkens, Darren Antioch, CA Account Manager NBT/UOTWilliams, Demetrius Paramount, CA 10 Manager NBT/UOTWilliams, Horace CA Account Manager; Sales 10; EA NBT/UOTWilliams, Rodney CA Account Manager NBT/UOTWilliams, Terrence CA Driver ; Acct . Man. Sales & Credit 10 NBT/UOTWilliams, Vernon El Cajon, CA Account Manager NBT/UOTWillis, Marsell CA Account Manager NBT/UOTWilmer, Kenneth Mount Vernon, WA Account Manager NBT/UOTWilson, Barry Los Angeles, CA Account & 10 Manager NBT/UOTWilson, Bonnie Albany, OR Acct. Manager & Executive Assistant NBT/UOTWilson, James Seattle, WA Assistant Manager NBT/UOTWingfield, Joseph Sacremento, CA Account Manager & 10 NBT/UOTWinn, Andrew Port Orchard, WA 10 Manager NBTWise, Akili CA Account & 10 Manager NBT/UOTWolcott, Eric Aberdeen, WA Account Manager NBT/UOTWoo, Patrick CA Account & Credit 10 Manager NBT/UOTWorkman, Chad CA Account Manager NBT/UO TZamudio, Lora Wenatchee, WA Account & Credit 10 Manager NBT/UO TZingrich, Kristi San Jose, CA Sales & Credit 10 NBTIUOTBean, Michael Hanford, CA Account & 10 Manager NBT/UOTBeck, Gary CA 10 Manager NBT/UOTBelcher, John Long Beach & Paramount, CA Store & Assistant Store Manager NBT/UOTBell, Rashaad Richmond, CA Account Manager & Delivery NBT/UOTBerger, Stephen Antioch, CA Delivery Driver NBT/UOTBertholet, Joshua CA Account Manager NBTIUOTBetances, Jose Ceres, CA Account Manager NBT/UOTBiyak, Sosh CA Account Manager NBT/UOTBlanco, Gilbert Fresno, CA Account & 10 Manager NBT/UOTBlesie, Scott Long Beach, CA Account & Collections Manager NBT/UOTBlumbert, Paul Modesto, CA Account Manager NBT/UOTBlume, Tracy San Diego, CA Account Manager & Credit 10 NBT/UO TBooker, Carl CA Account & 10 Manager NBT/UOTBoyer, Jason Antioch, CA Account & 10 Manager NBT/UOTBradley, Michael CA Account Manager NBT/UOTBragg, Jeremy Sr . CA Account Manager & Credit 10 NBT/UOTBrodbeck, Richard CA Account Manager & 10 NBTIUOTBroussard, Van Inglewood, CA Account Manager NBT/UOT

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Brown , Travis CA Account Manager NBT/UOTB ry ant , Rick Paramount, CA 10 Manager NBT/UOTBryant, Thabiti CA Account Manager NBT/UOTBuckner , John San Diego , CA Account Manager NBT/UOTBurrell, Dominick Riverside & Montclair , CA Account Manager NBT/UOTByrnes , Tadd CA Store Manager NBT/UOTCardwell, Levert Paramount, CA Sales Manager NBT/UO TCampa, Edward Salinas , CA Account Manager NBT/UO TCampbell, Dwayne Riverside , CA Account Manager NBT/UOTClark, Jamie Oakland , CA Account Manager NBT/UOTClark, Timothy CA Account Manager NBT/UOTClay, Robert II Hayward , CA Account Manager NBT/UOTCofferan , Bobby CA 10 Sales Manager NBT/UOTColgan, Bill CA Account Manager NBT/UOTContreras , Laura Covina , CA Credit 10 NBT/UOTContreras , Lucia CA Account Manager & 10 NBT/UOTCooper, Alvin San Diego , CA Account Manager NBT/UOTCopus, Shannon CA Account & 10 Manager NBT/UOTCorona, Jesse CA Credit & Sales 10 NBT/UOTCorso, Kris CA Account Manager NBT/UOTCortes, Jose CA Account Manager NBT/UOTCruz, David Montclair, CA Account & 10 Manager NBT/UOTCruz, Reynaldo Colton, CA Account & Sales Manager NBT/UOTCuellar, Luis Pittsburg, CA Account & 10 Manager NBT/UOTCuevas, Habdul San Diego , CA Account Manager NBT/UOTDailey, Rawland Bakersfield , CA Sales & Assistant Manager NBT/UOTDavid , Christopher Sacremento , CA Account Manager NBT/UOTDavis , Glenn CA 10 Manager NBT/UO TDavis , Glen M . Baypoint & Richmond, CA Account Manager NBT/UOTDavis, J . N . San Diego , CA Account Manager NBT/UOTDavis, Jeffery Fresno, CA 10 Manager NBTIUOTDavis, Marlon San Pablo , CA Account Manager NBT/UOTDavis, Michael San Fransisco , CA Account & Credit Manager NBT/UOTDelaney , Ardeus CA Account Manager NBT/UOTDeLaRosa , Salvador CA Account Manager NBT/UOTDeckard, Tippu Inglewood , CA Account & Credit Manager NBT/UOTDeLemos , Brandon Sonoma Vallejo, CA Account Manager NBT/UOTDelgado, Juan CA Executive Assistant NBT/UO TDeLozier, Tommy Marrysville , CA Account & Assistant Manager NBT/UOTDiebold , Scott Ukiah , CA Credit 10 NBT/UOTDilao, Eduardo Long Beach , CA Account Manager NBT/UOT

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Dodson, MyronDominguez, DavidDorer, DavidDotson, RandyDurazo, SergioEley, TrimaineElliott , MichaelEmanuele , JosephEmerson , KennethEscobor, MichaelEspinoza, JaimeEstrada, PedroEvans, ShawnFerguson, ByronFerreros, RobertFinizza, DavidFinnerty, DanielFisher, Harold IIIFlores, AlexFlores, LuisFlores, RalphFlores, WalterFlores , StanleyFlower, JimFong , MichaelFord , SheltonFo rt, JameelFradiue , FergusonFranco, ChristianBrandon, FrostFuentes , Larry Jr.Fyfe, ShaunGamez, LeahGanas , NicolasGarcia , AntonioGomez, EnriqueGonsalves , AlfredGonzalez, JuanGearton, SeanGreen , DeshonGrossi , Ronald

Corona, CASanta Rosa, CAC AInglewood, CACASan Jose, CACACorona, CACASan Fransisco, CACACACAChula Vista, CAHayward, CACovina, CASan Diego, CACACACACAPasdena, CAInglewood & Highland Park, CASanta Ana, CACAStockton, CACompton, CAMoreno Valley, CACAMadera, CACAOroville, CAPomona, CAModesto, CACACAClear Lake, CACASan Pablo, CAMontclair, CASanta Rosa, CA

Account, Sales & Credit 10 Manager NBT/UOTAccount Manager NBT/UOTAccount & 10 Manager NBT/UOTAccount Rep . NBT/UOTAccount Manager NBT/UOTAccount & Credit 10 Manager NBT/UOT10 Sales Manager NBT/UOTAccount Manager & 10 Sales NBT/UOTAccount Manager NBT/UOTAccount Manager NBT/UOTAccount & 10 Sales Manager NBT/UOTSales Manager NBT/UOTAccount Manager NBT/UOTAccount Manager NBT/UOTAccount Manager NBT/UOT10 Manager NBT/UOTAccount Manager NBT/UOTAccount Manager NBT/UOTAccount Manager & Executive Assista NBT/UOTSales 10 NBT/UO TAccount Manager NBT/UOTAccount Manager NBT/UOTAccount Manager NBT/UOTAccount Manager NBT/UOTAccount Manager NBTIUOT10 Manager NBT/UOTAccount Manager NBT/UOTAccount Manager NBT/UOTAccount Manager NBT/UOTAccount Manager NBT/UOTAccount Manager NBT/UOTAccount Manager NBT/UO T10 Manager NBT/UOTAccount Manager NBT/UOTSales Manager NBT/UOTAccount Manager NBT/UOTAccount Manager NBT/UO TAccount & 10 Manager NBT/UOTAccount & Sales 10 Manager NBT/UOTAccount Manager NBT/UOTAccount Manager NBT/UOT

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Grubbs, Michael Sr.Guidey, Joseph Jr .Guman, DennisGuy, Johnnie Jr .Guzman, ArmandoGwennap, JamesHall, JosephHarbin, Joe IIIHarper, RussellHernandez, Er anHernandez, ErnestoHernandez, MartinHill, Travi sHodge, DanielHori, JoshuaHosford, BarbaraHoward, AlvinHoward, RashiiHowells, PhilipHua, TaiHubbell, RomanHunt, AmberHutchison, Danalheke, GeorgeIlescas, BillyIllescas, DavidIngram, JeffIrvine, ThomasJahnsen, HeidiJaime, GabrielJames, AlanJimenez, FabianJiran, Barry lIJohnson, AnthonyJohnson, DemonteJohnson, KevinJones, KevinJones, LoranJones, MichaelJones, ToneyKatzenmeyer, Eric

Hayward, CACACACASanta Rosa, CACACACACASan Diego, CACACAOceanside, CACAVallejo, CAVallejo, CACASanta Ana, CARiverside, CASanta Ana, CALong Beach, CACAVictorville, CACACACACABakersfield, CASacremento, CAHollywood, CACACACACAAuburn, CASacremento, CAC AHayward, CASacremento, CAPomona, CACA

Account ManagerAccount ManagerAccount ManagerAccount ManagerAccount ManagerAccount ManagerAccount ManagerAccount ManagerAccount ManagerAccount ManagerAccount ManagerSales ManagerAccount ManagerAccount ManagerAccount Manager & Sales 10Account Manager & 10Account Manage rSales 10 & Assistant ManagerAccount & Credit ManagerAccount ManagerAccount Manager10 ManagerAccount ManagerAccount ManagerAccount ManagerAccount ManagerSales ManagerCredit & Sales 1 010 Credit & Sales Manager10 & Store ManagerAccount Manage rSales ManagerCredit ManagerAccount & Credit ManagerAccount & Sales ManagerAccount ManagerAccount Manager & Credit 10Account & Sales ManagerAccount Manage rAccount ManagerAccount Rep .

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NBT/UOTNBT/UOTNBT/UOTNBT/UOTNBT/UOTNBT/UOTNBT/UOTNBT/UOTNBT/UOTNBT/UOTNBT/UOTNBT/UOTNBT/UOTNBT/UOTNBT/UOTNBT/UOTNBT/UOTN BT/UOTNBT/UOTNBT/UOTNBT/UOTNBT/UOTNBT/UOTNBT/UOTNBT/UOTNBT/UOTNBT/UOTNBT/UOTNBT/UOTNBT/UOTNBT/UOTNBT/UOTNBT/UOTNBT/UOTNBT/UOTNBT/UOTNBT/UOTNBT/UOTNBT/UOTNBT/UOTNBT/UOT

Keith, David CA Assistant Manager NBT/UOTKellman, Andrew Oceanside, CA 10 Manager NBT/UOTKennedy, Irvin Long Beach, CA Assistant & Credit Manager NBT/UOTKnight, Russell Merced, CA & Renton, WA Account Manager & 10 Credit NBT/UOTKoeneke, Steven CA Account Manager & 10 Credit NBT/UOTKotsiopoulos, Kostas CA Account Manager & 10 NBT/UOTLam, Mark Long Beach, CA Account Manager NBT/UOTLaval, Yevett Yuba City, CA Sales 10 & Assistant; Account Manag NBT/UOTLawrence, Chavarria CA Account Manager NBT/UOTLewis, Billy Inglewood & Los Angeles, CA Account Manager NBT/UOTLewis, Derrick CA Account Manager NBT/UOTList, Scott Covina & Long Beach, CA Sales 10 & Account Manager NBT/UOTLittle, James Lancaster, CA Assistant & Account Manager NBT/UOTLopez, Justin CA Collections & Sales Supervisor NBT/UOTLopez, Benito III CA Account Manager NBTIUOTLopez, James M . CA Account Manager NBT/UOTLopez, Rodrigo CA Account Manager NBT/UOTLostaunau, Jacob Bakersfield, CA Account Manager NBT/UOTLovely, Robert CA Account Manager NBT/UOTLugo, Edwin CA Account Manager NBT/UOTLuna, Johnny Madera, CA 10 Manager NBT/UOTLyles, James CA Acct. Manager; Collections & SaleslO NBT/UOTAnderson, Nathanael Springfield, OR Accoung Manager NBT/UOTAndrews, Mikel Hillsboro, OR Account & Credit 10 Manager NBT/UOTBarker, Eric Hillsboro & Portland, OR Account & General Manager NBT/UOTBennett, Mel Bend, OR Manager NBT/UOTBoggs, Tyler Oroville, CA Account ; IO & Executive Manager NBT/UOTBonds, Jerry Hillsboro & Beaverton, OR Account & 10 Manager NBT/UOTBoyd, Shane Medford, OR Account & 10 Manager NBT/UOTBradford, Brett Portland, OR Account & 10 Manager NBT/UOTBruce, Mikah Portland, OR Driver & Account Manager NBT/UOTBardusis, Jeremy Sacremento, CA 10 ; Sales & Credit Manager NBT/UOTCampbell, Rusty Portland, OR Account Manager NBT/UOTCarrasco, Alan Portland, OR Account Manager NBT/UOTChess, Jeremy Albany & Salem, OR Account Manager NBT/UOTCowger, Michael Bend, OR Account & 10 Manager NBT/UOTChittenden, Randal Salem, OR Account Manager NBT/UOTClemmons, Chad Albany & Corvallis, OR Account Manager NBT/UOTCleveland, Velma Portland, OR Customer Service Rep & Acct . Manags NBT/UOTCorroo, Matthew Portland, OR Account Manager NBT/UOTCowley, Waymon Portland, OR Account Manager NBT/UOT

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Dale, Casey Medford, OR Account Manager NBT/UOTDenman, Brett Portland, OR Account Manager NBT/UOTDevlin, Chad Salem, OR Account Manager NBT/UOTDougherty, William Salem, OR Account Manager NBT/UOTEngstrom, Eron Springfield, OR Acct . Manager ; Credit & Sales 10 ; EA NBT/UOTFife, Shawn Portland, OR Account Manager NBT/UOTForrest, James Medford, OR Account Manager NB TFurrer, Brian Portland, OR Account Manager NBTGallagher, Kyle Portland, OR Account Manager NBT/UOTGano, Gregory Portland, OR Sales 10 & Executive Assistant NBT/UOTGibson, Justin Eugene & Portland, OR Account Manager NBT/UOTGust, Robert Salem, OR Account Manager NBTHargrave, Robert Jr. Portland, OR Account Manager NBT/UOTHarris, Dan Jr. Oroville, CA Account Manager NBT/UOTHauenstein, Kyle Portland & Hillsboro, OR Account & 10 Manager NBT/UOTHayes, Joshua OR 10 NBT/UOTHoyle, Joshua Albany & Corvallis, OR Account Manager NBT/UOTHuss, Casey Portland, OR 10 Manager NBT/UOTHutchins, Ted Springfield, OR Account & 10 Manager NBT/UOTHuyna, Jeff Portland, OR Account Manager NBT/UOTJackson, Jerry Eugene, OR 10 Manager NBTIUOTJimenez, Daniel Albany, OR Account Manager NBT/UOTJimenez, Nathan Albany, OR Account Manager NBT/UOTJubber, Dan Eugene, OR 10 & Store Manager; EA NBT/UOTKemagis, Brian Vancouver, WA Account & 10 Manager NBT/UOTKeyser, John Bend, OR Account & 10 Manager NBT/UO TMayer, John Bend, OR Assistant & 10 Manager NBT/UO TMcPheeters, Daniel Springfield, OR Account Manager NBT/UOTMedina, Tye Beaverton, OR Acocunt Manager NBT/UOTMelendez, Carlos Portland, OR Account Manager & Executive Assista NBT/UO TMiller, Mark Eugene & Springfield, OR Account Manager NBT/UOTMoore, Myron Portland, OR 10 & Assistant Manager NBT/UOTMuir, Tina Corvallis, OR Account & Sales 10 Manager NBT/UO TMurray, James Portland, OR 10 Manager NBT/UOTMurray, Richard OR Account Manager NBT/UOTNettles, Brian Eugene & Springfield, OR Account & Sales Manager NBT/UOTPatton, Sam Portland, OR 10 & Account Manager NBT/UOTPeraza, Alexander Portland, OR Sales Rep NBTPeterson, Blaine Beaverton, OR Account Manager NBT/UO TPucci, Robert OR Account Manager & Manager NBT/UO TReisner, William Eugene & Portland, OR Account Manager NBT/UOT

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Rios, JenniferRoper, JeffryRose, KevinRosillo, RobertSchmidt, BlainSexton, ClaytonSherrill, ChrisSizemore, JacobSmith, DavidStewart, CameronSumpter, LandonTaylor, LarlTreat, GregUhrig, JeremiWhitman, ChristopherWilliams, CharlesWilson, BonnieWilson, ShilohWright, DavidYoungs, DavidShoemaker, JoeJohnsen, HeidiMohrmann, TimothyBoardman, NeilHarrington, BrandonDelutis, PatrickBizjak, JoshMatthews, TerryDavis, RobertMcDonald, AaronHeriberto, RosaOlson, ToddVerdugo, CrystalGalvan, CynthiaSmith, Joh nPerez, PedroUrrabas, RichardHuffman, JohnTroesch, JohnnyTucker, StuartCobbins, Donald

Medford, OREugene, O RPortland, OR & Vancouver, WASalem, O RBend, ORPortland, ORPortland, Powell, Beaverton & Hillsboro, ORMedford, O RMedford, ORMedford, ORCorvallis, Albany & Bend,ORMedford, O RPortland, ORHillsboro & Salem, ORBend, ORSpringfield, ORAlbany, O RPortland & Beaverton, ORPortland, ORPortland, ORHickory, NCSacremento, CAPalatka, FLGreenville, NCYakima, WANYRedding, CAHarrisburg, PAPhiledelphia, PAEustist, FLPhiladelphia, PAMinnesotaWoodyear, CAFt. Worth, TXAustin, TXCorporate OfficeSan Diego, CAKansas CityBakersfield, CASt . Louis, MOTN

Account Manager & Executive Assista NBT/UOTDeliverer; Collections & Acct . Managei NBT/UOT10 & Store Manager; EA NBT/UOTAccount Manager NBT/UOTAccount Manager NBT/UOTDelivery Specialist & Acct . Manager NBT/UOT10 & Store Manager ; EA NBT/UOT10 Manager NBT/UOTAccount & 10 Manager NBT/UOT10 & Store Manager NBTIUOTSales Manager NBT/UOTAccount Manager NBT/UOT10 & EA Manager NBT/UOTAccount Manager NBT/UOTAccount & 10 Manager NBT/UOTAccount Manager NBT/UOTAccount Manager NBTIUO TAccount & 10 Manager NBT/UOTAccount & 10 Manager; EA NBT/UOTAccount & 10 Manager NBT/UOTAccount Manager UOTSales Manager NBT/UOTStore Manager UOTExecutive Assistant UOTAssistant Manager UOTStore Manager UOTAccount Manager NBT/UOTAccount Manager UO TSales Manager UO TAccount Manager UOTAssistant Manager UOTAssistant & Credit Manage rSales Manager UOTStore & 10 Manager UOTAssistant Manage rStaff Accountant/Inventory Payables UOTCredit 10

10 Manager OTCAccount & Store Manager UOTAssistant Manage r

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Pankrante, Michael Credit Manager OTCOsorio, Nestor CA Market/District Manager UOTHooker, Michael St. Louis, MO Manager UOTDuggan, Mike Marysville, CA Market Manager UO T

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