UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): December 1, 2020 (November 24, 2020)

 

 

The Aaron’s Company, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Georgia   1-39681   85-2483376

(State or other jurisdiction of

incorporation or organization)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

 

400 Galleria Parkway SE, Suite 300

Atlanta, Georgia

  30339-3194
(Address of principal executive offices)   (Zip code)

Registrant’s telephone number, including area code:

(678) 402-3000

Not Applicable

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Exchange Act:

 

Title of each class

 

Trading

Symbols(s)

 

Name of each exchange

on which registered

Common Stock, Par Value $0.50 Per Share   AAN   New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 under the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 under the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

 

 


Item 1.01.

Entry into a Material Definitive Agreement

On November 29, 2020, in connection with the previously announced Separation (as defined below), The Aaron’s Company, Inc. (the “Company”) entered into a Separation and Distribution Agreement with PROG Holdings, Inc. (formerly Aaron’s Holdings Company, Inc.) (“PROG”), pursuant to which PROG agreed to transfer its Aaron’s Business segment to the Company (the “Separation”) and distribute 100% of the outstanding shares of common stock of the Company to PROG shareholders in a tax-free distribution (the “Distribution”). The Distribution was effectuated as of 11:59 p.m., Eastern Time, on November 30, 2020 (the “Effective Time”), to shareholders of PROG as of the close of business on November 27, 2020. As a result of the Distribution, the Company is now an independent publicly traded company and its common stock is listed on the New York Stock Exchange under the symbol “AAN.”

In connection with the Separation and Distribution, on November 29, 2020, the Company entered into various agreements with PROG contemplated by the Separation and Distribution Agreement to provide a framework for the Company’s relationship with PROG after the Separation and Distribution, including the following agreements:

 

   

Transition Services Agreement, dated as of November 29, 2020;

 

   

Tax Matters Agreement, dated as of November 29, 2020; and

 

   

Employee Matters Agreement, dated as of November 29, 2020.

Summaries of the Separation and Distribution Agreement, Transition Services Agreement, Tax Matters Agreement and Employee Matters Agreement can be found in the section entitled “Certain Relationships and Related Person Transactions” of the Company’s information statement, dated November 19, 2020 (the “Information Statement”), which was filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission (the “Commission”) on November 19, 2020, and are incorporated herein by reference. The descriptions of these agreements contained therein and herein do not purport to be complete and are subject to, and are qualified in their entirety by, reference to the full text of these agreements, which are attached hereto as Exhibits 2.1 (Separation and Distribution Agreement), 10.1 (Transition Services Agreement), 10.2 (Tax Matters Agreement) and 10.3 (Employee Matters Agreement), respectively, each of which is incorporated herein by reference.

Also in connection with the Separation and Distribution, on November 29, 2020, Prog Leasing, LLC (“Progressive Leasing”), Aaron’s, LLC and the Company entered into an Assignment Agreement (the “Assignment Agreement”). Pursuant to the Assignment Agreement, Progressive Leasing conveyed to Aaron’s, LLC an undivided and equal ownership interest in certain software related to Progressive Leasing’s digital decisioning platform (the “Shared Software”). Progressive Leasing also conveyed to Aaron’s, LLC all of Progressive Leasing’s interest in certain software models related to the Shared Software, and Aaron’s, LLC conveyed certain data to Progressive Leasing under the Assignment Agreement. The description of the Assignment Agreement contained herein is qualified in its entirety by reference to the full text of the Assignment Agreement, which is attached hereto as Exhibit 10.4 and is incorporated herein by reference.

Revolving Facility

In connection with the Separation and Distribution, on November 9, 2020, Aaron’s, LLC, the Company, the several banks and other financial institutions from time to time party thereto and Truist Bank, as administrative agent, entered into a credit agreement providing for a $250 million senior unsecured revolving credit facility (the “Revolving Facility”), under which revolving borrowings became available at the Effective Time. The Company is a guarantor of the Revolving Facility with Aaron’s, LLC, now a wholly-owned subsidiary of the Company, as borrower. The Revolving Facility includes (i) a $35 million sublimit for the issuance of letters of credit on customary terms, and (ii) a $25 million sublimit for swing line loans on customary terms.

The Company expects that the Revolving Facility will be used to provide for working capital and capital expenditures, to finance future permitted acquisitions and for other general corporate purposes.


Incremental Facilities

Aaron’s, LLC will have the right from time to time to request to increase the size of the Revolving Facility or add certain incremental revolving or term loan facilities (the “Incremental Facilities”). The aggregate principal amount of all such Incremental Facilities may not exceed $150 million.

Interest Rate

Borrowings under the Revolving Facility bear interest at a rate per annum equal to, at the option of Aaron’s, LLC, (i) LIBOR plus the applicable margin of 1.50% - 2.50% for revolving loans, based on total leverage, or (ii) the base rate plus the applicable margin, which will be 1.00% lower than the applicable margin for LIBOR loans.

Maturity

The loans and commitments under the Revolving Facility mature or terminate on November 9, 2025.

Guarantees

Obligations of Aaron’s, LLC under the Revolving Facility are jointly and severally guaranteed by the Company and certain of its existing and future direct and indirect U.S. subsidiaries (but excluding (i) unrestricted subsidiaries and (ii) immaterial subsidiaries).

Springing Security

The Revolving Facility is unsecured as of the Effective Time. In the event that the total net leverage ratio exceeds 1.25 to 1.00 as of the end of any period of four consecutive fiscal quarters, Aaron’s, LLC, the Company and the other guarantors will be required to provide a first priority perfected lien on substantially all of their respective assets and the proceeds thereof, excluding certain excluded assets. If triggered, the liens securing the Revolving Facility and the Franchise Loan Facility described below will be pari passu.

Certain Covenants and Events of Default

The Revolving Facility contains customary financial covenants including (a) a maximum total net leverage ratio of 2.50 to 1.00 and (b) a minimum fixed charge coverage ratio of 1.75 to 1.00.

In addition, the Revolving Facility contains a number of covenants that, among other matters and subject to certain exceptions, will restrict the Company’s ability and the ability of its other restricted subsidiaries to:

 

   

incur additional indebtedness;

 

   

pay dividends and other distributions;

 

   

make investments, loans and advances;

 

   

engage in transactions with its affiliates;

 

   

sell assets or otherwise dispose of property or assets;

 

   

alter the business conducted;

 

   

merge and engage in other fundamental changes;

 

   

prepay, redeem or repurchase certain debt; and

 

   

incur liens.

The Revolving Facility contains certain customary representations and warranties, affirmative covenants and provisions relating to events of default.


Franchise Loan Facility

In connection with the Separation and Distribution, on November 17, 2020, the Company entered into a franchise loan facility agreement in connection with a franchise loan facility (the “Franchise Loan Facility”) as a guarantor for a senior unsecured franchise loan facility in an aggregate principal amount of $25 million, with Aaron’s, LLC as sponsor, the Company as guarantor, the several banks and other financial institutions from time to time party thereto and Truist Bank, as servicer, with advances under the Franchise Loan Facility becoming available as of the Effective Time.

The Franchise Loan Facility operates as a guarantee by the Company, Aaron’s, LLC and certain of its subsidiaries of certain debt obligations of some of the sales and lease ownership franchisees of the Company under a franchise loan program with one of the banks in the Revolving Facility. In the event these franchisees are unable to meet their debt service payments or otherwise experience an event of default, the Company, Aaron’s, LLC and certain of its subsidiaries would be unconditionally liable for the outstanding balance of the franchisees’ debt obligations under the franchisee loan program, which would be due in full within 90 days of the event of default.

Interest Rate

Funded participations under the Franchise Loan Facility bear interest at a rate per annum equal to LIBOR plus the applicable margin of 1.50% - 2.50% for revolving loans, based on total leverage.

Termination Date and Extension

The Franchise Loan Facility is available for 364 days after November 17, 2020, with the ability for Aaron’s, LLC to request extensions for additional 364-day periods.

Guarantees

Obligations of Aaron’s, LLC under the Franchise Loan Facility are jointly and severally guaranteed by the Company and certain of its existing and future direct and indirect U.S. subsidiaries (but excluding (i) unrestricted subsidiaries and (ii) immaterial subsidiaries).

Springing Security

The Franchise Loan Facility is unsecured as of the Effective Time. In the event that the total net leverage ratio exceeds 1.25 to 1.00 as of the end of any period of four consecutive fiscal quarters, Aaron’s, LLC, the Company and the other guarantors will be required to provide a first priority perfected lien on substantially all of their respective assets and the proceeds thereof, excluding certain excluded assets. If triggered, the liens securing the Franchise Loan Facility and the Revolving Facility will be pari passu.

Certain Covenants and Events of Default

The Franchise Loan Facility contains customary financial covenants including (a) a maximum total net leverage ratio of 2.50 to 1.00 and (b) a minimum fixed charge coverage ratio of 1.75 to 1.00.

In addition, the Franchise Loan Facility contains a number of covenants that, among other things and subject to certain exceptions, will restrict the Company’s ability and the ability of its restricted subsidiaries to:

 

   

incur additional indebtedness;

 

   

pay dividends and other distributions;

 

   

make investments, loans and advances;

 

   

engage in transactions with its affiliates;

 

   

sell assets or otherwise dispose of property or assets;

 

   

alter the business conducted;

 

   

merge and engage in other fundamental changes;

 

   

prepay, redeem or repurchase certain debt; and

 

   

incur liens.


The Franchise Loan Facility contains certain customary representations and warranties, affirmative covenants and provisions relating to events of default.

Summaries of the Revolving Facility and Franchise Loan Facility can be found in the section entitled “Description of Material Indebtedness and Guarantees” of the Information Statement, which is incorporated herein by reference. The descriptions of these agreements contained herein and therein are qualified in their entirety by reference to the full text of these agreements, which are attached hereto as Exhibits 10.5 and 10.6, respectively, each of which is incorporated herein by reference.

 

Item 2.01.

Completion of the Acquisition or Disposition of Assets

The information set forth in Item 1.01 is incorporated herein by reference.

 

Item 2.03.

Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant

The information included in Item 1.01 related to the Revolving Facility and the Franchise Loan Facility is incorporated by reference into this Item 2.03.

 

Item 5.01.

Changes in Control of Registrant

The Distribution described in the Information Statement was consummated on November 30, 2020.

 

Item 5.02.

Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers

Appointment of Directors

As previously announced, as of the Effective Time, the Board of Directors of the Company (the “Board”) consists of Kelly H. Barrett, Walter G. Ehmer, Hubert L. Harris, Jr., Douglas Lindsay and John W. Robinson III. In addition, as previously announced, the composition of the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee of the Company as of the Effective Time is as follows:

 

Audit Committee

 

Compensation Committee

 

Nominating & Corporate

Governance Committee

Kelly H. Barrett (Chair)

Walter G. Ehmer

Hubert L. Harris, Jr.

 

Walter G. Ehmer (Chair)

Kelly H. Barrett

Hubert L. Harris, Jr.

 

Hubert L. Harris, Jr. (Chair)

Kelly H. Barrett

Walter G. Ehmer

Effective as of the Effective Time, John W. Robinson III was appointed Chairman of the Board.

Biographical information of the Company’s directors can be found in the Information Statement under the section entitled “Board of Directors Following the Distribution,” which is incorporated herein by reference.

Classification of the Board

As of the completion of the Separation and Distribution, as previously announced, the Board was divided into three classes: Class I directors, Class II directors, and Class III directors. The directors designated as Class I directors will have terms expiring at the Company’s 2021 annual meeting of shareholders. The directors designated as Class II directors will have terms expiring at the Company’s 2022 annual meeting of shareholders, and the directors designated as Class III directors will have terms expiring at the Company’s 2023 annual meeting of shareholders.


Each Class I director elected at the Company’s 2021 annual meeting of shareholders, each Class II director elected at the 2022 annual meeting of shareholders and each Class III director elected at the 2023 annual meeting of shareholders will hold office until the 2024 annual meeting of shareholders and, in each case, until his or her respective successor shall have been duly elected and qualified or until his or her earlier resignation or removal. Commencing with the Company’s 2024 annual meeting of shareholders, each director will be elected annually and will hold office until the next annual meeting of shareholders and until his or her respective successor shall have been duly elected and qualified or until his or her earlier resignation or removal.

The classes of directors are as follows:

 

Class I

  

Class II

  

Class III

Hubert L. Harris, Jr.    Kelly H. Barrett    Walter G. Ehmer
John W. Robinson III    Douglas A. Lindsay   

Executive Officers

Following the consummation of the Separation and Distribution and as previously announced, the officers of the Company are the following:

 

   

Officer

  

Position

  Douglas A. Lindsay    Chief Executive Officer
                               Steve Olsen    President
  C. Kelly Wall    Chief Financial Officer
  Rachel G. George    General Counsel, Corporate Secretary and Chief Corporate Affairs Officer
  Robert P. Sinclair, Jr.    Corporate Controller and Chief Accounting Officer

Biographical information regarding Messrs. Lindsay, Olsen and Wall and Ms. George can be found in the Information Statement under the section entitled “Management,” which is incorporated herein by reference. Robert P. Sinclair, Jr., age 59, previously served as Vice President, Corporate Controller of PROG since 1999.

In connection with their new positions, Messrs. Lindsay, Olsen and Wall will receive the following compensation:

 

   

Mr. Lindsay’s base salary will be $850,000 with a target annual incentive award of $1,000,000. Mr. Lindsay will also receive a target long-term incentive award of $3,550,000.

 

   

Mr. Olsen’s base salary will be $600,000 with a target annual incentive award of $600,000. Mr. Olsen will also receive a target long-term incentive award of $800,000.

 

   

Mr. Wall’s base salary will be $500,000 with a target annual incentive award of $325,000. Mr. Wall will also receive a target long-term incentive award of $500,000.

Adoption of The Aaron’s Company, Inc. 2020 Equity and Incentive Plan

In connection with the Separation and Distribution, The Aaron’s Company, Inc. 2020 Equity and Incentive Plan (the “Equity Plan”) became effective as of the Effective Time following its approval and adoption by the Board and the Company’s sole shareholder. A summary of the Equity Plan can be found in the Company’s Information Statement under the section entitled “Compensation Discussion and Analysis,” which is incorporated herein by reference. The description of the Equity Plan set forth under this Item 5.02 is qualified in its entirety by reference to the full text of the Equity Plan, filed as Exhibit 10.13 hereto, which is incorporated herein by reference.


Adoption of The Aaron’s Company, Inc. Deferred Compensation Plan

In connection with the Separation and Distribution, The Aaron’s Company, Inc. Deferred Compensation Plan (the “Deferred Compensation Plan”) became effective as of the Effective Time following its approval and adoption by the Board. A summary of the Deferred Compensation Plan can be found in the Company’s Information Statement under the section entitled “Compensation Discussion and Analysis,” which is incorporated herein by reference. The description of the Deferred Compensation Plan set forth under this Item 5.02 is qualified in its entirety by reference to the full text of the Deferred Compensation Plan, filed as Exhibit 10.14 hereto, which is incorporated herein by reference.

Adoption of The Aaron’s Company, Inc. Compensation Plan for Non-Employee Directors

In connection with the Separation and Distribution, The Aaron’s Company, Inc. Compensation Plan for Non-Employee Directors (the “Compensation Plan”) became effective as of the Effective Time following its approval and adoption by the Board. A summary of the Compensation Plan can be found in the Company’s Information Statement under the section entitled “Compensation Discussion and Analysis,” which is incorporated herein by reference. The description of the Compensation Plan set forth under this Item 5.02 is qualified in its entirety by reference to the full text of the Compensation Plan, filed as Exhibit 10.7 hereto, which is incorporated herein by reference.

Approval of the Executive Severance Pay Plan of The Aaron’s Company, Inc.

In connection with the Separation and Distribution, the amendment and restatement of the Executive Severance Pay Plan of Aaron’s, Inc., which was renamed the Executive Severance Pay Plan of The Aaron’s Company, Inc. (the “Severance Plan”) became effective as of the Effective Time following its approval by the Board. A summary of the Severance Plan can be found in the Company’s Information Statement under the section entitled “Compensation Discussion and Analysis,” which is incorporated herein by reference. The description of the Severance Plan set forth under this Item 5.02 is qualified in its entirety by reference to the full text of the Severance Plan, filed as Exhibit 10.8 hereto, which is incorporated herein by reference.

Indemnification Agreements

Each director of the Company entered into an Indemnification Agreement with the Company, the form of which is filed as Exhibit 10.9 hereto, and is incorporated herein by reference.

Adoption of Amended and Restated Severance and Change-in-Control Agreements

Douglas A. Lindsay and C. Kelly Wall entered into Severance and Change-in-Control Agreements with Aaron’s, Inc. in February 2019 and August 2020, respectively (the “Severance Agreements”). In connection with the Separation and Distribution, the Severance Agreements are being amended and restated, effective as of the Effective Time. The Severance Agreements are being amended and restated, among other things, to refer to The Aaron’s Company, Inc., but will otherwise remain substantially the same as their current Severance Agreements, which agreements are described in the Company’s Information Statement under the section entitled “Compensation Discussion and Analysis,” which is incorporated herein by reference. The description of the Severance Agreements set forth under this Item 5.02 is qualified in its entirety by reference to the full text of the Severance Agreements for Messrs. Lindsay and Wall, filed as Exhibits 10.10 and 10.11 hereto, respectively, which are incorporated herein by reference.

Robinson Transition Agreement

In connection with the completion of the Separation and Distribution, on November 30, 2020, the Company and PROG entered into a Transition Agreement (the “Transition Agreement”) with John W. Robinson III, pursuant to which Mr. Robinson retired as PROG’s President and Chief Executive Officer as of the Effective Time. In addition, and as previously disclosed, Mr. Robinson transitioned to Chairman of the Board of the Company as of the Effective Time. In connection with Mr. Robinson’s transition, Mr. Robinson’s employment agreement with PROG was terminated.


As approved by PROG’s Compensation Committee and as previously disclosed, the Transition Agreement provides that all stock options, restricted stock awards, and performance share units granted by PROG to Mr. Robinson in 2018, 2019 and 2020 will be 100% vested as promptly as practicable following the completion of the Separation and Distribution. Other than with respect to vesting, Mr. Robinson’s equity awards are being treated in the same manner as all other equity awards under the Employee Matters Agreement.

The description of the Transition Agreement set forth under this Item 5.02 is qualified in its entirety by reference to the full text of the Transition Agreement, filed as Exhibit 10.12 hereto, which is incorporated herein by reference.    

 

Item 5.03.

Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year

On November 24, 2020, the Company amended and restated its Articles of Incorporation (the “Amended and Restated Articles of Incorporation”) and its Bylaws (the “Amended and Restated Bylaws”). A description of certain provisions of the Amended and Restated Articles of Incorporation and the Amended and Restated Bylaws can be found in the Company’s Information Statement under the section entitled “Description of Our Capital Stock,” which is incorporated herein by reference. The descriptions contained therein and herein are qualified in their entirety by reference to the full text of the Amended and Restated Articles of Incorporation and the Amended and Restated Bylaws, which are attached hereto as Exhibits 3.1 and 3.2, respectively, each of which is incorporated herein by reference.

 

Item 8.01.

Other Events

On December 1, 2020, the Company issued a press release announcing the completion of the Separation and Distribution and the commencement of the Company’s existence as an independent publicly traded company. A copy of the press release is attached hereto as Exhibit 99.1.

 

Item 9.01.

Financial Statements and Exhibits

(d) Exhibits

 

Exhibit No.

  

Description of Exhibit

2.1    Separation and Distribution Agreement, dated as of November 29, 2020, by and between PROG Holdings, Inc. (formerly Aaron’s Holdings Company, Inc.) and The Aaron’s Company, Inc.
3.1    Amended and Restated Articles of Incorporation of The Aaron’s Company, Inc.
3.2    Amended and Restated Bylaws of The Aaron’s Company, Inc.
10.1    Transition Services Agreement, dated as of November 29, 2020, by and between PROG Holdings, Inc. (formerly Aaron’s Holdings Company, Inc.) and The Aaron’s Company, Inc.
10.2    Tax Matters Agreement, dated as of November 29, 2020, by and between PROG Holdings, Inc. (formerly Aaron’s Holdings Company, Inc.) and The Aaron’s Company, Inc.
10.3    Employee Matters Agreement, dated as of November 29, 2020, by and between PROG Holdings, Inc. (formerly Aaron’s Holdings Company, Inc.) and The Aaron’s Company, Inc.
10.4    Assignment Agreement, dated as of November 29, 2020, by and among Prog Leasing, LLC, Aaron’s, LLC and The Aaron’s Company, Inc.
10.5    Credit Agreement among Aaron’s, LLC, The Aaron’s Company, Inc. (formerly Aaron’s SpinCo, Inc.), the several banks and other financial institutions from time to time party thereto and Truist Bank, as administrative agent, dated November 9, 2020
10.6    Loan Facility Agreement and Guaranty among Aaron’s, LLC, The Aaron’s Company, Inc., the participants from time to time party thereto and Truist Bank, as servicer, dated November 17, 2020
10.7    The Aaron’s Company, Inc. Compensation Plan for Non-Employee Directors
10.8    Executive Severance Pay Plan of The Aaron’s Company, Inc. (as amended and restated)
10.9    Form of Indemnification Agreement of The Aaron’s Company, Inc.
10.10    Amended and Restated Severance and Change-in-Control Agreement by and between The Aaron’s Company, Inc. and Douglas A. Lindsay, dated as of November 30, 2020
10.11    Amended and Restated Severance and Change-in-Control Agreement by and between The Aaron’s Company, Inc. and Kelly Wall, dated as of November 30, 2020
10.12    Transition Agreement, dated as of November  30, 2020, by and among PROG Holdings, Inc. (formerly Aaron’s Holdings Company, Inc.), Aaron’s, LLC, The Aaron’s Company, Inc., John W. Robinson III, and Progressive Finance Holdings, LLC (solely for purposes of Sections 1(a), 15, and 18)
10.13    The Aaron’s Company, Inc. 2020 Equity and Incentive Plan (incorporated by reference to Exhibit 99.1 to the Company’s Registration Statement on Form S-8 filed with the Commission on November 19, 2020).
10.14    The Aaron’s Company, Inc. Deferred Compensation Plan (incorporated by reference to Exhibit 99.3 to the Company’s Registration Statement on Form S-8 filed with the Commission on November 19, 2020).
99.1    Press Release of The Aaron’s Company, Inc., dated December 1, 2020


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

   

THE AARON’S COMPANY, INC.

   

By:

 

/s/ C. Kelly Wall

     

C. Kelly Wall

     

Chief Financial Officer

Date: December 1, 2020

     

Exhibit 2.1

Execution Version

SEPARATION AND DISTRIBUTION AGREEMENT

By and Between

AARON’S HOLDINGS COMPANY, INC.

and

THE AARON’S COMPANY, INC.

Dated as of November 29, 2020

 


TABLE OF CONTENTS

 

          Page  

ARTICLE I DEFINITIONS

     2  

Section 1.01.

    

Definitions

     2  

ARTICLE II THE SEPARATION

     20  

Section 2.01.

    

Transfer of Assets and Assumption of Liabilities

     20  

Section 2.02.

    

Nonassignable Contracts and Permits

     23  

Section 2.03.

    

Certain Matters Governed Exclusively by Ancillary Agreements

     23  

Section 2.04.

    

Termination of Agreements

     24  

Section 2.05.

    

Shared Contracts

     25  

Section 2.06.

    

Bank Accounts; Checks

     25  

Section 2.07.

    

Novation of Liabilities; Release of Guarantees

     26  

Section 2.08.

    

Provision of Corporate Records

     27  

Section 2.09.

    

Disclaimer of Representations and Warranties; Waiver of Bulk-Sale and Bulk-Transfer Laws.

     27  

Section 2.10.

    

Financing Arrangements; SpinCo Minimum Cash.

     28  

Section 2.11.

    

Transition Committee

     29  

ARTICLE III ACTIONS PENDING THE DISTRIBUTION

     29  

Section 3.01.

    

Actions Prior to the Distribution

     29  

Section 3.02.

    

Conditions Precedent to Consummation of the Distribution

     31  

Section 3.03.

    

Sole and Absolute Discretion

     32  

ARTICLE IV THE DISTRIBUTION

     33  

Section 4.01.

    

The Distribution

     33  

Section 4.02.

    

Fractional Shares

     33  

Section 4.03.

    

Sole and Absolute Discretion of Parent

     34  

ARTICLE V MUTUAL RELEASES; INDEMNIFICATION; COOPERATION; INSURANCE

     34  

Section 5.01.

    

Release of Pre-Distribution Claims

     34  

Section 5.02.

    

Indemnification by SpinCo

     36  

Section 5.03.

    

Indemnification by Parent

     37  

Section 5.04.

    

Indemnification Obligations Net of Insurance Proceeds and Third-Party Proceeds

     38  

Section 5.05.

    

Procedures for Indemnification of Third-Party Claims

     38  

Section 5.06.

    

Direct Claims; Additional Matters

     40  

Section 5.07.

    

Management of Certain Actions and Shared Actions

     42  

Section 5.08.

    

Right of Contribution

     43  

Section 5.09.

    

Covenant Not to Sue

     43  

Section 5.10.

    

Remedies Cumulative

     44  

 

i


Section 5.11.

    

Survival of Indemnities

     44  

Section 5.12.

    

Limitation on Liability

     44  

Section 5.13.

    

Insurance Matters

     44  

Section 5.14.

    

Guarantees, Letters of Credit and Other Obligations

     45  

ARTICLE VI ACCESS TO INFORMATION; CONFIDENTIALITY

     46  

Section 6.01.

    

Agreement for Exchange of Information; Archives

     46  

Section 6.02.

    

Ownership of Information

     48  

Section 6.03.

    

Compensation for Providing Information

     48  

Section 6.04.

    

Record Retention

     48  

Section 6.05.

    

Financial Information Certifications

     49  

Section 6.06.

    

Limitations of Liability

     50  

Section 6.07.

    

Litigation Matters; Production of Witnesses; Records; Cooperation

     50  

Section 6.08.

    

Privileged Matters

     51  

Section 6.09.

    

Confidential Information

     53  

ARTICLE VII CERTAIN INTELLECTUAL PROPERTY MATTERS

     54  

Section 7.01.

    

Legal Names and Other Parties’ Trademarks

     54  

Section 7.02.

    

Domain Names

     55  

Section 7.03.

    

Licenses to Information and Other Intellectual Property

     55  

ARTICLE VIII FURTHER ASSURANCES AND ADDITIONAL COVENANTS

     57  

Section 8.01.

    

Further Assurances

     57  

Section 8.02.

    

Late Payments

     58  

Section 8.03.

    

Inducement

     58  

Section 8.04.

    

Post-Effective Time Conduct

     59  

Section 8.05.

    

Receipt of Misdirected Assets; Consumer Inquiries

     59  

ARTICLE IX DISPUTE RESOLUTION

     59  

Section 9.01.

    

Disputes

     59  

Section 9.02.

    

Negotiation and Mediation

     60  

Section 9.03.

    

Arbitration

     60  

Section 9.04.

    

Continuity of Service and Performance

     63  

ARTICLE X TERMINATION

     63  

Section 10.01.

    

Termination

     63  

Section 10.02.

    

Effect of Termination

     63  

ARTICLE XI MISCELLANEOUS

     63  

Section 11.01.

    

Counterparts; Entire Agreement; Conflicts; Corporate Power

     63  

Section 11.02.

    

Governing Law

     64  

Section 11.03.

    

Assignability

     64  

 

ii


Section 11.04.

    

Third-Party Beneficiaries

     65  

Section 11.05.

    

Notices

     65  

Section 11.06.

    

Severability

     65  

Section 11.07.

    

Publicity

     66  

Section 11.08.

    

Expenses

     66  

Section 11.09.

    

Headings

     66  

Section 11.10.

    

Survival of Agreements

     66  

Section 11.11.

    

Waivers of Default

     66  

Section 11.12.

    

Consent to Jurisdiction

     67  

Section 11.13.

    

Specific Performance

     67  

Section 11.14.

    

Amendments

     67  

Section 11.15.

    

Interpretation

     67  

Section 11.16.

    

Group Members

     68  

Section 11.17.

    

Force Majeure

     68  

Section 11.18.

    

Mutual Drafting

     68  

Section 11.19.

    

No Reliance on Other Party

     68  

Section 11.20.

    

Limited Liability

     68  

Section 11.21.

    

No Set-Off

     69  

 

 

iii


SEPARATION AND DISTRIBUTION AGREEMENT

This SEPARATION AND DISTRIBUTION AGREEMENT is entered into on November 29, 2020, by and between AARON’S HOLDINGS COMPANY, INC., a Georgia corporation (“Parent”), and THE AARON’S COMPANY, INC., a Georgia corporation (“SpinCo”). Parent and SpinCo are sometimes referred to herein, individually, as a “Party” and, together, as the “Parties”. Capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed to them in ARTICLE I.

R E C I T A L S

WHEREAS, Parent, acting through itself and its direct and indirect Subsidiaries, currently conducts the Progressive Leasing and Vive Business and the Aaron’s Business;

WHEREAS, the board of directors of Parent has determined that it is appropriate, desirable and in the best interests of Parent and its shareholders to separate SpinCo from the rest of Parent and to establish SpinCo as a separate, publicly traded company, such that, following the Distribution: (i) Parent will own and conduct, directly and indirectly, the Progressive Leasing and Vive Business, and (ii) SpinCo will own and conduct, directly and indirectly, the Aaron’s Business; and in furtherance of the foregoing, to effect the Spin-Off as more fully described in this Agreement;

WHEREAS, Parent currently intends that, at the Effective Time, Parent shall distribute to the Record Holders, on a pro rata basis, all of the outstanding shares of SpinCo Common Stock, as more fully described in this Agreement (the “Distribution”);

WHEREAS, SpinCo has been incorporated solely for these purposes and has not engaged in activities except for activities undertaken in preparation for the Distribution;

WHEREAS, for U.S. federal income tax purposes, (i) the transfer by Parent of the SpinCo Assets and the SpinCo Liabilities (including, for the avoidance of doubt, all of the equity interests of Aaron’s) to SpinCo, as more fully described in this Agreement (the “Contribution”) in actual or constructive exchange for the issuance by SpinCo to Parent of all of the shares of SpinCo Common Stock and (ii) the Distribution, taken together, are intended to qualify as a transaction that is generally tax-free for U.S. federal income tax purposes under Section 355 and Section 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the “Code”), and this Agreement together with the Ancillary Agreements, is intended to be, and is hereby adopted as, a “plan of reorganization” within the meaning of Treasury Regulation Section 1.368-2(g);

WHEREAS, Parent and SpinCo have prepared, and SpinCo has filed with the Commission, the Form 10, which includes the Information Statement, and which sets forth disclosure concerning SpinCo, the Separation and the Distribution; and

WHEREAS, it is appropriate and desirable to set forth the principal corporate transactions required to effect the Spin-Off and certain other agreements that will govern certain matters relating to the Spin-Off and the relationship of Parent, SpinCo and their respective Group Members following the Spin-Off.

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:

 

1


ARTICLE I

DEFINITIONS

Section 1.01. Definitions. Reference is made to Section 11.15 regarding the interpretation of certain words and phrases used in this Agreement. In addition, for the purpose of this Agreement, the following terms shall have the meanings set forth below:

AAA” has the meaning set forth in Section 9.03(a).

AAA Rules” has the meaning set forth in Section 9.03(a).

Aaron’s” means Aaron’s, LLC, a Georgia limited liability company and successor to Aaron’s, Inc.

Aaron’s Business” means (a) the business, operations and activities of the “Aaron’s Business” segment of Parent conducted at any time prior to the Effective Time by either Party or any of their respective Group Members, including as described in the Information Statement, and (b) any terminated, divested or discontinued businesses, operations and activities that, at the time of termination, divestiture or discontinuation, primarily related to the business, operations or activities described in clause (a) as then conducted, including those set forth on Schedule I.

Action” means any claim, demand, action, suit, countersuit, arbitration, inquiry, subpoena, discovery request, proceeding or investigation of any nature (whether criminal, civil, legislative, administrative, regulatory, prosecutorial or otherwise) by or before any Governmental Authority or any Federal, state, local, foreign or international arbitration or mediation tribunal.

Affiliate” (including, with a correlative meaning, “affiliated”) means, when used with respect to a specified Person, a Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with such specified Person. For the purpose of this definition, “control” (including, with correlative meanings, “controlled by” and “under common control with”), when used with respect to any specified Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or other interests, by contract, agreement, obligation, indenture, instrument, lease, promise, arrangement, release, warranty, commitment, undertaking or otherwise. The Parties agree that, for the purposes of this Agreement and the Ancillary Agreements, no Parent Group Member shall be deemed to be an Affiliate of any SpinCo Group Member and no SpinCo Group Member shall be deemed to be an Affiliate of any Parent Group Member.

Agent” means Computershare Trust Company, N.A., or such other trust company or bank duly appointed by Parent to act as distribution agent, transfer agent and registrar for the SpinCo Common Stock in connection with the Distribution.

Agreement” means this Separation and Distribution Agreement, including the Schedules hereto.

Ancillary Agreements” means the TSA, TMA, EMA, TAA, the Transfer Documents, the Internal Reorganization Documents and any other instruments, assignments, documents and agreements executed in connection with the implementation of the transactions contemplated by this Agreement by the Parties or their Affiliates (but as to which no Third Party is a party).

Arbitration Act” means the Federal Arbitration Act, 9 U.S.C. Section 1, et seq.

 

2


Assets” means, with respect to any Person, all assets, properties, claims and rights (including goodwill) of such Person, wherever located (including in the possession of vendors or other third Persons or elsewhere), of every kind, character and description, whether real, personal or mixed, tangible or intangible, or accrued or contingent, in each case whether or not recorded or reflected or required to be recorded or reflected on the books and records or financial statements of any Person, including the following:

(a) all accounting and other books, records and files, whether in paper, microfilm, microfiche, computer tape or disc, magnetic tape, electronic or any other form;

(b) all apparatus, computers and other electronic data processing equipment, fixtures, machinery, furniture, office and other equipment, including hardware systems, circuits and other computer and telecommunication assets and equipment, automobiles, trucks, aircraft, rolling stock, vessels, motor vehicles and other transportation equipment, special and general tools, test devices, prototypes and models and other tangible personal property;

(c) all inventories of materials, parts, raw materials, components, supplies, work-in-process and finished goods and products;

(d) all interests in real property of whatever nature, including buildings, land, structures, improvements and fixtures thereon, and all easements and rights-of-way appurtenant thereto, and all leasehold interests, whether as owner, mortgagee or holder of a Security Interest in real property, lessor, sublessor, lessee, sublessee or otherwise;

(e) (i) all interests in any capital stock or other equity, partnership, membership, joint venture or similar interests of any Subsidiary or any other Person; (ii) all bonds, notes, debentures or other securities issued by any Subsidiary or any other Person; (iii) all loans, advances or other extensions of credit or capital contributions to any Subsidiary or any other Person; (iv) all other investments in securities of any Person; and (v) all rights as a partner, joint venturer or participant;

(f) all license agreements, leases of personal property, open purchase orders for raw materials, supplies, parts or services, unfilled orders for the manufacture and sale of products and other contracts, agreements or commitments and all rights arising thereunder;

(g) all deposits, letters of credit, performance bonds and other surety bonds;

(h) all written (including in electronic form) technical information, data, specifications, research and development information, engineering drawings, operating and maintenance manuals and materials and analyses prepared by consultants and other Third Parties;

(i) all United States, state, multinational and foreign intellectual property, including Patents, Trademarks, Other Intellectual Property, licenses from Third Parties granting the right to use any of the foregoing and all tangible embodiments of the foregoing in whatever form or medium;

(j) all computer applications, programs, software and other code (in object and source code form), including operating software, network software, firmware, middleware, design software, design tools, systems documentation, instructions, ASP, HTML, DHTML, SHTML and XML files, cgi and other scripts, APIs, web widgets, algorithms, models, methodologies, files, documentation related to any of the foregoing and all tangible embodiments of the foregoing in whatever form or medium now known or yet to be created;

 

3


(k) all Internet URLs, domain names, social media handles and Internet user names and all UPC numbers or equivalent company name pre-fix numbers;

(l) all websites, databases, content, text, graphics, images, audio, video, data and other copyrightable works or other works of authorship including all translations, adaptations, derivations and combinations thereof;

(m) all cost information, sales and pricing data, customer prospect lists, supplier records, customer and supplier lists, customer and vendor data, correspondence and lists, product literature and other advertising and promotional materials, artwork, design, development and manufacturing files, vendor and customer drawings, formulations and specifications, server and traffic logs, quality records and reports and other books, records, studies, surveys, reports, plans, business records and documents;

(n) all prepaid expenses, trade accounts and other accounts and notes receivable (whether current or non-current);

(o) all claims or rights against any Person arising from the ownership of any other Asset, all rights in connection with any bids or offers, all claims, causes in action, lawsuits, judgments or similar rights, all rights under express or implied warranties, all rights of recovery and all rights of setoff of any kind and demands of any nature, in each case whether accrued or contingent, whether in tort, contract or otherwise and whether arising by way of counterclaim or otherwise;

(p) all Insurance Proceeds and rights under insurance policies and all rights in the nature of insurance, indemnification or contribution;

(q) all licenses, permits, consents, approvals and authorizations that have been issued by any Governmental Authority and all pending applications therefor, and in each case all rights thereunder;

(r) Cash, bank accounts, lock boxes and other deposit arrangements;

(s) interest rate, currency, commodity or other swap, collar, cap or other hedging or similar agreements or arrangements; and

(t) all goodwill as a going concern and other intangible properties.

Business Day” means a day other than a Saturday, a Sunday or a day on which banking institutions located in Atlanta, Georgia are authorized or obligated by Law or executive order to close.

Business Entity” means any corporation, general or limited partnership, trust, joint venture, unincorporated organization, limited liability entity or other entity.

Cash” means cash, cash equivalents, bank deposits and marketable securities, as well as petty cash in registers, in each case, whether denominated in United States dollars or otherwise.

Code” has the meaning set forth in the recitals.

Commission” means the Securities and Exchange Commission.

Common Privileges” has the meaning set forth in Section 6.08.

Confidential Information” has the meaning set forth in Section 6.09(a).

 

4


Consents” means any consents, waivers or approvals from, or notification requirements to, any Third Party.

Contribution” has the meaning set forth in the recitals.

Custodial Party” has the meaning set forth in Section 6.04(b).

Direct Claim” has the meaning set forth in Section 5.06(a).

Disclosure Schedules” means the disclosure schedules attached hereto.

Disputes” has the meaning set forth in Section 9.01.

Distribution” has the meaning set forth in the recitals.

Distribution Date” means the date, determined in accordance with Section 4.03, on which the Distribution occurs.

Distribution Ratio” means the number of shares of SpinCo Common Stock to be distributed in respect of each share of Parent Common Stock in the Distribution, which ratio shall be determined by the board of directors of Parent prior to the Record Date.

Domain Names” means the domain name registrations owned by a Parent Group Member or a SpinCo Group Member, including those listed on Section 7.02(a) or Section 7.02(b) of the Disclosure Schedules.

Effective Time” has the meaning set forth in Section 4.01(b).

EMA” means the Employee Matters Agreement dated as of the date of this Agreement by and between Parent and SpinCo.

Environmental Law” shall mean any Law relating to pollution, protection or restoration of or prevention of harm to the environment or natural resources, including the use, handling, transportation, treatment, storage, disposal, Release or discharge of Hazardous Materials or the protection of or prevention of harm to human health and safety.

Environmental Liabilities” means all Liabilities relating to, arising out of or resulting from any Hazardous Materials, Environmental Law or contract or agreement relating to environmental, health or safety matters (including all removal, remediation or cleanup costs, investigatory costs, response costs, natural resources damages, property damages, personal injury damages, costs of compliance, including with any product take back requirements, or with any settlement, judgment or other determination of Liability and indemnity, contribution or similar obligations) and all costs and expenses, interest, fines, penalties or other monetary sanctions in connection therewith.

Escalation Notice” has the meaning set forth in Section 9.02(a).

Exchange Act” means the Securities Exchange Act of 1934, as amended, together with the rules and regulations promulgated thereunder.

 

5


Existing Parent Financing Arrangements” means (a) the Second Amended and Restated Revolving Credit and Term Loan Agreement, dated as of September 18, 2017, among Aaron’s, Inc. the guarantors named therein, the lenders party thereto and Truist Bank (formerly SunTrust Bank), as administrative agent, as amended, (b) the Fourth Amended and Restated Loan Facility Agreement and Guaranty, dated as of October 25, 2017, among Aaron’s, Inc. the guarantors named therein, the participants party thereto and Truist Bank (formerly SunTrust Bank), as servicer, as amended, (c) the Note Purchase Agreement, dated as of April 14, 2014, by Aaron’s, Inc. and Aaron Investment Company as Issuers of Series A Senior Notes due April 14, 2021, as amended, and (d) the Note Purchase Agreement, dated as of April 14, 2014, by Aaron’s, Inc. and Aaron Investment Company as Issuers of Series B Senior Notes due April 14, 2021, as amended.

First Post-Distribution SEC Report” has the meaning set forth in Section 11.07.

Force Majeure” means, with respect to a Party, an event beyond the control of such Party (or any Person acting on its behalf), which by its nature could not reasonably have been foreseen by such Party (or such Person), or, if it could reasonably have been foreseen, was unavoidable, and includes acts of God, unusually severe weather conditions, floods, riots, fires, explosions, sabotage, civil commotion or civil unrest, interference by civil or military authorities, cyberattacks, epidemics, pandemics, acts of war (declared or undeclared) or armed hostilities, other regional, national or international calamities or acts of terrorism, strikes, labor stoppages, or slowdowns or other industrial disturbances; or failures of energy sources or distribution or transportation facilities. Notwithstanding the foregoing, the receipt by a Party of an unsolicited takeover offer or other acquisition proposal, even if unforeseen or unavoidable, and such Party’s response thereto shall not be deemed an event of Force Majeure.

Form 10” means the registration statement on Form 10 filed by SpinCo with the Commission pursuant to Section 12(b) of the Exchange Act to effect the registration of SpinCo Common Stock to be distributed in the Distribution, as such registration statement may be amended or supplemented from time to time.

Georgia Courts” has the meaning set forth in Section 11.12.

Governmental Approvals” means any notices, reports or other filings to be given to or made with, or any Consents, licenses, authorizations, registrations or permits to be obtained from, any Governmental Authority, including, for the avoidance of doubt, state regulators.

Governmental Authority” means any supranational, international, national, federal, state, provincial or local court, government, department, commission, board, bureau, agency, official or other regulatory, administrative or governmental authority, including the NYSE and any similar self-regulatory body under applicable securities Laws.

Group” means either the Parent Group or the SpinCo Group, as the context requires.

Group Action” means any past, present or future Action involving Parent, a Parent Group Member, a Parent Indemnitee (but only if in a capacity entitling such Person to the rights of a Parent Indemnitee), SpinCo, a SpinCo Group Member, or a SpinCo Indemnitee (but only if in a capacity entitling such Person to the rights of a SpinCo Indemnitee), in each case other than any such matter solely between Parent, any Parent Group Member or Parent Indemnitee (only if in a capacity entitling such Person to the rights of a Parent Indemnitee), on the one hand, and SpinCo, any SpinCo Group Member, or SpinCo Indemnitee (only if in a capacity entitling such Person to the rights of a SpinCo Indemnitee), on the other hand, arising with respect to a controversy, dispute or claim under this Agreement or any Ancillary Agreement.

 

6


Group Member” means any Business Entity that is a part of either the Parent Group or the SpinCo Group, as the context requires. “Group Members” mean Business Entities of either or both of the Parent Group or the SpinCo Group, as the context requires.

Hazardous Materials” means any chemical, material, substance, waste, pollutant, emission, discharge, release or contaminant that could result in Liability under, or that is prohibited, limited or otherwise regulated by or pursuant to, any Environmental Law, including petroleum, petroleum products and byproducts, asbestos and asbestos-containing materials, urea formaldehyde foam insulation, electronic, medical or infectious wastes, polychlorinated biphenyls, radon gas, radioactive substances, chlorofluorocarbons and all other ozone-depleting substances, and anything defined as a hazardous substance, extremely hazardous substance, solid waste, hazardous waste, hazardous material or toxic substance under a relevant Environmental Law.

Indemnifying Party” has the meaning set forth in Section 5.04(a).

Indemnitee” has the meaning set forth in Section 5.04(a).

Indemnity Payment” has the meaning set forth in Section 5.04(a).

Information” means information in written, oral, electronic or other tangible or intangible forms, including studies, reports, records, books, contracts, instruments, surveys, specifications, drawings, blueprints, diagrams, models, prototypes, samples, flow charts, data, marketing plans, customer names, Privileged Information, and other technical, financial, employee or business information or data; provided that “Information” does not include Patents, Trademarks, or Other Intellectual Property.

Information Statement” means the information statement, included with the Form 10 and to be sent to the holders of Parent Common Stock in connection with the Distribution, as such Information Statement may be amended from time to time.

Insurance Proceeds” means, with respect to any insured party, those monies:

(a) received by an insured (or its successor-in-interest) from an insurance carrier;

(b) paid by an insurance carrier on behalf of the insured (or its successor-in-interest); or

(c) received (including by way of set-off) from any Third Party in the nature of insurance, contribution or indemnification in respect of any Liability;

in any such case net of any applicable premium adjustments (including reserves and retrospectively rated premium adjustments), net of any costs or expenses incurred in the collection thereof and net of any Taxes resulting from the receipt thereof.

Intended Tax Treatment” has the meaning set forth in the TMA.

Intercompany Accounts” has the meaning set forth in Section 2.04(a).

Intercompany Agreements” has the meaning set forth in Section 2.04(a).

Internal Reorganization” means the transactions described in the Plan of Reorganization, including the Contribution.

 

7


Internal Reorganization Documents” means the documents and agreements pursuant to which the Internal Reorganization shall be implemented.

Law” means any supranational, international, national, federal, state, provincial, local or similar law (including common law), statute, code, order, ordinance, rule, regulation, treaty (including any Tax treaty), license, permit, authorization, approval, Consent, decree, injunction, binding judicial or administrative interpretation or other requirement, in each case enacted, promulgated, issued or entered by a Governmental Authority, whether now or hereinafter in effect and, in each case, as amended.

Liabilities” means any and all debts, liabilities, obligations, responsibilities, response actions, losses, damages (whether compensatory, punitive, consequential, incidental, treble or other), expenses, fines, penalties and sanctions, absolute or contingent, matured or unmatured, liquidated or unliquidated, foreseen or unforeseen, joint, several or individual, asserted or unasserted, accrued or unaccrued, known or unknown, whenever arising, including those arising under or in connection with any Law or other pronouncements of Governmental Authorities having the effect of Law, Action, threatened Action, order or consent decree of any Governmental Authority or any award of any arbitration tribunal, and those arising under any contract, guarantee, commitment or undertaking, whether sought to be imposed by a Governmental Authority, private party, or Party, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute, or otherwise, and including any costs, expenses, interest, attorneys’ fees, disbursements and expenses of counsel, expert and consulting fees and costs related thereto or to the investigation or defense thereof.

Licensed Parent Information” means information and data in written, oral, electronic or other tangible or intangible forms, that, immediately after the Effective Time, is owned by a Parent Group Member, that, immediately prior to the Effective Time, was used or held for use in the Aaron’s Business as established by reasonably sufficient evidence; provided that “Licensed Parent Information” does not include Patents, Trademarks, personally identifiable information (except as otherwise mutually agreed to by the relevant Parent Group Member and SpinCo), or customer, vendor and supplier lists that are protectible under trade secret laws, in each instance, that are owned by a Parent Group Member immediately after the Effective Time or any information or data that the Parent Group Member owner thereof would be prohibited from licensing to SpinCo under applicable Law, and provided further that in the event any Licensed Parent Information would also be Licensed Parent Other IP (under the definition of that term), such Licensed Parent Information shall be deemed to be Licensed Parent Other IP (and not Licensed Parent Information).

Licensed Parent Other IP” means: (a) published and unpublished works of authorship and copyrights therein, and all applications, registrations, and renewals in connection therewith; (b) software, data, databases and compilations of information; and (c) inventions (whether patentable or not), invention disclosures, shop rights, formulas, processes, developments, technology, designs, trade secrets and know-how that, immediately after the Effective Time, are owned by a Parent Group Member and, immediately prior to the Effective Time, were used or held for use in the Aaron’s Business as established by reasonably sufficient evidence; provided that “Licensed Parent Other IP” does not include Patents, Trademarks, personally identifiable information (except as otherwise mutually agreed to by the relevant Parent Group Member owner and SpinCo), or customer, vendor and supplier lists that are protectible under trade secret laws, in each instance, that are owned by a Parent Group Member immediately after the Effective Time or any other personal information or data that the Parent Group Member owner thereof would be prohibited from licensing to SpinCo under applicable Law.

Licensed SpinCo Information” means information and data in written, oral, electronic or other tangible or intangible forms that, immediately after the Effective Time, is owned by a SpinCo Group Member, that, immediately prior to the Effective Time, was used or held for use in the Progressive

 

8


Leasing and Vive Business as established by reasonably sufficient evidence; provided that “Licensed SpinCo Information” does not include Patents, Trademarks, personally identifiable information (except as otherwise mutually agreed to by the relevant SpinCo Group Member owner and Parent), or customer, vendor and supplier lists that are protectible under trade secret laws, in each instance, that are owned by a SpinCo Group Member immediately after the Effective Time or any information or data that the SpinCo Group Member owner thereof would be prohibited from licensing to Parent under applicable Law, and provided further that in the event any Licensed SpinCo Information would also be Licensed SpinCo Other IP (under the definition of that term), such Licensed SpinCo Information shall be deemed to be Licensed SpinCo Other IP (and not Licensed SpinCo Information).

Licensed SpinCo Other IP” means: (a) published and unpublished works of authorship and copyrights therein, and all applications, registrations, and renewals in connection therewith; (b) software, data, databases and compilations of information; and (c) inventions (whether patentable or not), invention disclosures, shop rights, formulas, processes, developments, technology, designs, trade secrets and know-how (that, immediately after the Effective Time, is owned by a SpinCo Group Member that, immediately prior to the Effective Time, was used or held for use in the Progressive Leasing and Vive Business as established by reasonably sufficient evidence; provided that “Licensed SpinCo Other IP” does not include Patents, Trademarks, personally identifiable information (except as otherwise mutually agreed to by the relevant SpinCo Group Member owner and Parent), or customer, vendor and supplier lists that are protectible under trade secret laws, in each instance, that are owned by a SpinCo Group Member immediately after the Effective Time or any other information or data that the SpinCo Group Member owner thereof would be prohibited from licensing to Parent under applicable Law.

New SpinCo Financing Arrangements” means the SpinCo Credit Facility and such additional or alternative financing arrangements and agreements with respect to indebtedness for borrowed money as shall have been agreed by Parent and entered into by SpinCo prior to or at the Effective Time.

New Parent Financing Arrangements” means the Parent Credit Facility and such additional or alternative financing arrangements and agreements with respect to indebtedness for borrowed money entered into by Parent prior to or at the Effective Time.

Non-Custodial Party” has the meaning set forth in Section 6.04(b)(i).

NYSE” means the New York Stock Exchange.

Other Intellectual Property” means all rights, title or interest in, under or in respect of: (a) published and unpublished works of authorship and copyrights therein, and all applications, registrations, and renewals in connection therewith; (b) software, data, databases and compilations of information; (c) inventions (whether patentable or not), invention disclosures, shop rights, formulas, processes, developments, technology, designs, trade secrets and know-how; (d) websites (including the layout, design and contents of the web pages and underlying codes); (e) sale, marketing, advertising and promotional materials; (f) social media user names, identifiers and profiles, and rights in telephone numbers; (g) rights of publicity and privacy, rights to personal information and moral rights; (h) all copies and tangible embodiments of any of the foregoing (in whatever form or medium) that are in a Party’s or its Group Member’s possession or control; (i) all rights pertaining to any of the foregoing arising under international treaties and convention rights; (j) the right and power to assert, defend and recover title to any of the foregoing; (k) all rights to assert, defend and recover for any past, present and future infringement, misuse, misappropriation, impairment, unauthorized use or other violation of any of the foregoing; and (l) all administrative rights and common law rights arising from the foregoing; provided that “Other Intellectual Property” does not include Patents or Trademarks.

 

9


Other Party Marks” has the meaning set forth in Section 7.01(a).

Parent” has the meaning set forth in the preamble.

Parent Accounts” has the meaning set forth in Section 2.06(a).

Parent Action” means those Group Actions (a) primarily relating to, arising out of or resulting from the Parent Assets, the Parent Liabilities or the Progressive Leasing and Vive Business, including any shareholder derivative or securities class action primarily relating to, arising out of or resulting from the Parent Assets, the Parent Liabilities or the Progressive Leasing and Vive Business which is (i) brought by any current or former equity security holder of the publicly traded equity securities of Parent or Aaron’s and (ii) arises exclusively from any acts, omissions, disclosures, or lack of disclosure occurring prior to the Effective Time, irrespective of the facts alleged, or (b) set forth on Section 1.01(a) of the Disclosure Schedules.

Parent Assets” means any and all Assets of the Parties or their respective Subsidiaries as of the Effective Time, other than the SpinCo Assets, including:

(a) all issued and outstanding equity interests of each Parent Group Member that are owned by either Party or any members of its Group as of the Effective Time, other than, for the avoidance of doubt, the Parent Common Stock;

(b) all shares of capital stock or other equity interests held by any SpinCo Group Member in certain Business Entities that have been or shall be contributed to, or otherwise transferred, conveyed, or assigned to, the Parent Group as listed on Section 1.01(b) of the Disclosure Schedules;

(c) the Assets of either Party or its Group Members as of the Effective Time listed or described on Section 1.01(c) of the Disclosure Schedules (which for the avoidance of doubt is not a comprehensive listing of all Parent Assets and is not intended to limit the other clauses of this definition of “Parent Assets”);

(d) all Cash of either Party or its Group Members as of the Effective Time (other than the SpinCo Minimum Cash and any SpinCo Third-Party Deposited Cash);

(e) any and all other Assets that are expressly provided by this Agreement or any Ancillary Agreement as Assets to be retained by or transferred to or owned by Parent or any other Parent Group Member;

(f) any and all rights, title or interests in, and claims thereto, of either Party or any of its Group Members as of the Effective Time related to the Parent Portion of any Shared Contract;

(g) any and all rights, title or interests in, and claims thereto, of either Party or any of its Group Members as of the Effective Time under the Parent Contracts;

(h) any and all rights, title or interests in, and claims thereto, of either Party or any of its Group Members as of the Effective Time to any Parent Intellectual Property;

(i) any and all rights, title or interests in, and claims thereto, of either Party or any of its Group Members as of the Effective Time to any Domain Names listed on Section 7.02(b) of the Disclosure Schedules;

 

10


(j) all other rights, title or interests in, and claims thereto, of either Party or any of their Group Members as of the Effective Time with respect to Information that is primarily related to the Parent Assets (including, for the avoidance of doubt, the Parent Intellectual Property), the Parent Liabilities, the Progressive Leasing and Vive Business or the Parent Group Members, in each case as compared to the SpinCo Assets, SpinCo Liabilities, Aaron’s Business or SpinCo Group Members;

(k) a non-exclusive license to the Licensed SpinCo Information upon the terms and subject to the conditions set out in Section 7.03(b) below;

(l) any and all rights, title or interests in, and claims thereto, of either Party or any of its Group Members as of the Effective Time to the real property listed on Section 1.01(d) of the Disclosure Schedules;

(m) the Assets of either Party or its Group Members as of the Effective Time relating to, arising out of or resulting from any Parent Action;

(n) all approvals, registrations, permits or authorizations of either Party or any its Group Members issued by any Governmental Authority as of the Effective Time (other than the SpinCo Permits).

The Parties agree that all assets transferred pursuant to Section 2.02 shall be Parent Assets for purposes of this Agreement and the Ancillary Agreements regardless of when such assets are assumed by Parent or a Parent Group Member or designee.

Parent Common Stock” means the common stock, $0.50 par value per share, of Parent.

Parent Contracts” means all contracts, agreements, arrangements, commitments or understandings to which either Party or any of its Group Members is a party or by which it or its Assets is bound, whether or not in writing, in each case immediately prior to the Effective Time (other than the SpinCo Contracts).

Parent Derivative Works” has the meaning set forth in Section 7.03(b)(iii).

Parent Disclosure Sections” means all information set forth in or omitted from the Form 10 or Information Statement and any other documents filed with the Commission to the extent relating to (a) the Parent Group, (b) the Parent Liabilities, (c) the Parent Assets or (d) the substantive disclosure set forth in the Form 10 and Information Statement relating to Parent’s board of directors’ consideration of the Spin-Off, including the section entitled “Reasons for the Separation.”

Parent Group” means (a) Parent, (b) each Business Entity identified on Section 1.01(e) of the Disclosure Schedules and (c) each other Business Entity that is or becomes a direct or indirect Subsidiary of Parent at or after the Effective Time, including in each case any such Business Entity that is formed or acquired after the date hereof or any Business Entity that is merged or consolidated with and into Parent or any Subsidiary of Parent, in each case, other than any SpinCo Group Member.

Parent Group Member” means any Group Member of the Parent Group.

Parent Indemnitees” has the meaning set forth in Section 5.02.

 

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Parent Intellectual Property” means (a) the Patents and Trademarks set forth on Section 1.01(f) of the Disclosure Schedules and any other Patents or Trademarks owned by either Party or any of its Group Members that, as of the Effective Time, are primarily used or held for use in the Progressive Leasing and Vive Business, as compared to the Aaron’s Business; (b) the Other Intellectual Property owned by either Party or any of its Group Members that, as of the Effective Time, is primarily used or held for use in the Progressive Leasing and Vive Business, as compared to the Aaron’s Business; (c) the rights to any Patents, Trademarks, and Other Intellectual Property that are exclusively allocated to Parent or a Parent Group Member pursuant to any Ancillary Agreement; and (d) a non-exclusive license, upon the terms and subject to the conditions set forth in Section 7.03(b) below, to the Licensed SpinCo Other IP.

Parent Liabilities” means, without duplication, the following Liabilities of either Party or any of its Group Members (which for the avoidance of doubt, shall not include any Shared Action Liabilities:

(a) all Liabilities relating to, arising out of or resulting from actions, inactions, events, omissions, conditions, facts or circumstances occurring or existing prior to the Effective Time (whether or not such Liabilities cease being contingent, mature, become known, are asserted or foreseen, or accrue, in each case before, at or after the Effective Time), of any member of the Parent Group and, prior to the Effective Time, any member of the SpinCo Group, in each case that are not SpinCo Liabilities or Shared Action Liabilities;

(b) all Liabilities relating to, arising out of or resulting from the Parent Portion of any Shared Contracts;

(c) the Liabilities listed or described on Section 1.01(g) of the Disclosure Schedules;

(d) all Liabilities that are expressly provided by this Agreement or any Ancillary Agreement as Liabilities to be assumed or retained by, or allocated to, any Parent Group Member, and all agreements, obligations and Liabilities of any Parent Group Member under this Agreement or any of the Ancillary Agreements;

(e) all Liabilities relating to, arising out of or resulting from the Existing Parent Financing Arrangements or the New Parent Financing Arrangements other than costs and expenses paid prior the Effective Time by SpinCo or a SpinCo Group Member;

(f) all Liabilities relating to, arising out of or resulting from any Parent Action;

(g) all Liabilities relating to, arising out of or resulting from any untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, with respect to the Parent Disclosure Sections; and

(h) all Liabilities arising out of claims made by Third Parties (including Parent’s or SpinCo’s respective directors, officers, shareholders, employees and agents) against any member of the Parent Group or the SpinCo Group to the extent relating to, arising out of or resulting from the Parent Assets or the Progressive Leasing and Vive Business; provided, that this clause (h) shall not apply to any Shared Action Liabilities.

The Parties agree that all Liabilities transferred pursuant to Section 2.02 shall be Parent Liabilities for purposes of this Agreement and the Ancillary Agreements regardless of when such Liabilities are assumed by Parent or a Parent Group Member or designee.

 

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Parent Credit Facility” means a secured or unsecured credit facility to be entered into prior to the Distribution and in connection with the Separation, by and among a subsidiary of Parent, as borrower, an administrative agent, certain arrangers and each of the financial institutions from time to time party thereto, providing for a revolving credit facility in such amount as shall have been agreed by Parent.

Parent Licensed Purposes” has the meaning set forth in Section 7.03(b)(i).

Parent Portion” has the meaning set forth in Section 2.05(a).

Parent Transfer Documents” has the meaning set forth in Section 2.01(b).

Party” has the meaning set forth in the preamble.

Patents” means (a) all national, regional and international patents and patent applications, including provisional patent applications; (b) all patent applications filed either from the patents, patent applications or provisional applications in clause (a) or from an application claiming priority from any of these, including divisionals, continuations, continuations-in-part, converted provisionals, and continued prosecution applications; (c) all patents that have issued or in the future issue from the foregoing patent applications specified in clauses (a) and (b), including utility models, petty patents, design patents, registered industrial designs, and certificates of invention; (d) all patent term extensions or restorations by existing or future extension or restoration mechanisms, including any supplementary protection certificates and the like, as well as any revalidations, reissues, re-examinations, oppositions and the like of the foregoing patents or patent applications specified in clauses (a), (b) and (c); (e) all similar rights, including so-called pipeline protection, or any importation, revalidation, confirmation or introduction patent or registration patent or patents of addition to each of such foregoing patent applications and patents; (f) the right and power to assert, defend and recover title to any of the foregoing; and (g) all rights to assert, defend and recover for any past, present and future infringement, misuse, misappropriation, impairment, unauthorized use or other violation of any of the foregoing.

Person” means any (a) individual; (b) Business Entity; or (c) Governmental Authority.

Plan of Reorganization” means the reorganization plan and structure set forth on Schedule II.

Prime Rate” means the rate that Bloomberg displays as Prime Rate by Country United States at http://www.bloomberg.com/markets/rates-bonds/key-rates/ or on a Bloomberg terminal at PRIMBB Index.

Privileged Information” means any information, in written, oral, electronic or other tangible or intangible forms, including any communications by or to attorneys (including attorney-client privileged communications), memoranda and other materials prepared by attorneys or under their direction (including attorney work product), as to which a Party or its respective Group Members would be entitled to assert or have asserted a privilege or immunity, including the attorney-client privilege and attorney work product protection.

Progressive Leasing and Vive Business” means all businesses, operations and activities (whether or not such businesses, operations or activities are or have been terminated, divested or discontinued) conducted at any time prior to the Effective Time by either Party or any of their respective Group Members, other than the Aaron’s Business.

Providing Party” has the meaning set forth in Section 6.01(a).

 

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Record Date” means the close of business on the date to be determined by the Parent board of directors, or a duly authorized committee thereof, as the record date for determining the shareholders of Parent entitled to receive shares of SpinCo Common Stock in the Distribution, as determined in accordance with Section 4.03.

Record Holders” has the meaning set forth in Section 4.01(b)(i).

Records Facility” has the meaning set forth in Section 6.04(b)(i).

Release” shall mean any release, spill, emission, discharge, leaking, pumping, pouring, dumping, injection, deposit, disposal, dispersal, leaching or migration of Hazardous Materials into the environment (including ambient air, surface water, groundwater and surface or subsurface strata).

Representative” has the meaning set forth in Section 6.09(a).

Requesting Party” has the meaning set forth in Section 6.01(a).

Retained Information” has the meaning set forth in Section 6.04(a).

Security Interest” means any mortgage, security interest, pledge, lien, charge, claim, option, right to acquire, voting or other restriction, right-of-way, covenant, condition, easement, encroachment, restriction on transfer or other encumbrance of any nature whatsoever.

Separation” means (a) the Internal Reorganization, (b) any actions to be taken pursuant to ARTICLE II and (c) any other transfers of Assets and assumptions of Liabilities, in each case, between a Group Member of one Group and a Group Member of the other Group, provided for in this Agreement or in any Ancillary Agreement.

Shared Action” means any of the following:

(a) any Third-Party Claim (i) that first arises after the Effective Time (A) and in respect of which the loss, claim, accident, occurrence, event or happening giving rise to any Third-Party Claim existed or occurred prior to the Effective Time, or (B) and relates to, arises out of or results from actions, inactions, events, omissions, conditions, facts or circumstances occurring or existing prior to the Effective Time, including any shareholder derivative or securities class action (x) brought by any current or former equity security holder of the publicly traded equity securities of Parent or Aaron’s and (y) arising exclusively from any acts, omissions, disclosures, or lack of disclosure occurring prior to the Effective Time, irrespective of the facts alleged, and (ii) that is not a Parent Action or a SpinCo Action; and

(b) any Third-Party Claim relating to, arising out of or resulting from any Action by any Third Party, including any shareholder derivative action, asserted against any member of either Group directly based on any act or omission, or alleged act or omission, taken to effect the Distribution and the other transactions contemplated by this Agreement and the Ancillary Agreements, other than any Third-Party Claims which constitute Liabilities under clause (h) of the definition of “SpinCo Liabilities” and clause (g) of the definition of “Parent Liabilities” and

(c) any Actions set forth in Schedule III.

Shared Action Liability” means any Liabilities relating to, arising out of or resulting from any Shared Action.

 

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Notwithstanding the foregoing, the Shared Actions Liabilities shall not include any Liabilities governed by the TMA or the EMA.

Shared Contract” means any contract or agreement of any member of either Group (a) that is set forth on Section 1.01(h) of the Disclosure Schedules, or (b)(i) that relates in any material respect to both the Progressive Leasing and Vive Business and the Aaron’s Business, and (ii) either (A) that the Parties specifically intended to amend or divide, modify, partially assign or replicate (in whole or in part) the respective rights and obligations under and in respect of such contract or agreement prior to the Effective Time, but were not able to do so prior to the Effective Time, or (B) the existence of which either Party discovers prior to the date that is eighteen (18) months after the Distribution and had the Parties given specific consideration to such contract or agreement they would have amended or divided, modified, partially assigned or replicated (in whole or in part) the respective rights and obligations under and in respect of such contract or agreement.

Shared Privileges” has the meaning set forth in Section 6.08(d).

SpinCo” has the meaning set forth in the preamble.

SpinCo Accounts” has the meaning set forth in Section 2.06(a).

SpinCo Action” means those Group Actions (a) primarily relating to, arising out of or resulting from the SpinCo Assets, the SpinCo Liabilities or the Aaron’s Business, including any shareholder derivative or securities class action primarily relating to, arising out of or resulting from the SpinCo Assets, the Spinco Liabilities or the Aaron’s Business which is (i) brought by any current or former equity security holder of the publicly traded equity securities of Parent or Aaron’s and (ii) arises exclusively from any acts, omissions, disclosures, or lack of disclosure occurring prior to the Effective Time, irrespective of the facts alleged or (b) set forth on Section 1.01(i) of the Disclosure Schedules.

SpinCo Assets” means, without duplication, only the following Assets:

(a) all issued and outstanding equity interests of each SpinCo Group Member that are owned by either Party or any members of its Group as of the Effective Time, other than the SpinCo Common Stock;

(b) except with respect to any Assets constituting Cash, all Assets of either Party or its Group Members as of the Effective Time reflected as assets of SpinCo or another SpinCo Group Member on the SpinCo Balance Sheet, and all Assets acquired after the date of the SpinCo Balance Sheet that, had they been acquired on or before such date and owned as of such date, would have been included or reflected on the SpinCo Balance Sheet if prepared in accordance with GAAP applied on a consistent basis, subject to any dispositions of such Assets subsequent to the date of the SpinCo Balance Sheet; it being understood that (i) the SpinCo Balance Sheet shall be used to determine the types of, and methodologies used to determine, those Assets that are included in the definition of SpinCo Assets pursuant to this clause (c); and (ii) the amounts set forth on the SpinCo Balance Sheet with respect to any Assets shall not be treated as minimum amounts or limitations on the amount of such Assets that are included in the definition of SpinCo Assets pursuant to this clause (c);

(c) (i) the SpinCo Minimum Cash and (ii) any Cash that is restricted as to withdrawal or usage by a Third Party pursuant to a SpinCo Contract, including lease deposits with landlords (“SpinCo Third-Party Deposited Cash”);

 

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(d) the Assets listed or described on Section 1.01(j) of the Disclosure Schedules (which for the avoidance of doubt is not a comprehensive listing of all SpinCo Assets and is not intended to limit the other clauses of this definition of “SpinCo Assets”);

(e) any and all other Assets of either Party or any of its Group Members as of the Effective Time that are expressly provided by this Agreement or any Ancillary Agreement as Assets to be retained by or assigned or allocated to SpinCo or any other SpinCo Group Member;

(f) any and all rights, title or interests in, and claims thereto, of either Party or any of its Group Members as of the Effective Time related to the SpinCo Portion of any Shared Contract;

(g) any and all rights, title or interests in, and claims thereto, of either Party or any of its Group Members as of the Effective Time under the SpinCo Contracts;

(h) any and all rights, title or interests in, and claims thereto, of either Party or any of its Group Members as of the Effective Time to any SpinCo Intellectual Property;

(i) any and all rights, title or interests in, and claims thereto, of either Party or any of its Group Members as of the Effective Time to any Domain Names listed on Section 7.02(a) of the Disclosure Schedules;

(j) all other rights, title or interests in, and claims thereto, of either Party or any of their Group Members as of the Effective Time with respect to Information that is primarily related to the SpinCo Assets (including, for the avoidance of doubt, the SpinCo Intellectual Property), the SpinCo Liabilities, the Aaron’s Business or the SpinCo Group Members, in each case as compared to the Parent Assets, Parent Liabilities, Progressive Leasing and Vive Business or Parent Group Members;

(k) a non-exclusive license to the Licensed Parent Information upon the terms and subject to the conditions set out in Section 7.03(c) below;

(l) any and all rights, title or interests in, and claims thereto, of either Party or any of its Group Members as of the Effective Time to the real property described or listed on Section 1.01(k) of the Disclosure Schedules (the “SpinCo Real Property”);

(m) the Assets of either Party or its Group Members as of the Effective Time relating to, arising out of or resulting from any SpinCo Action;

(n) all approvals, registrations, permits or authorizations issued by any Governmental Authority as of the Effective Time that relate primarily to the Aaron’s Business or the SpinCo Assets, as compared to the Progressive Leasing and Vive Business or the Parent Assets (the “SpinCo Permits”); and

(o) except with respect to any Assets constituting Cash, all other Assets owned or held immediately prior to the Effective Time by Parent or any of its Subsidiaries that are determined by Parent, in good faith prior to the Distribution, to be primarily related to or primarily used in the Aaron’s Business.

The Parties agree that all assets transferred pursuant to Section 2.02 shall be SpinCo Assets for purposes of this Agreement and the Ancillary Agreements regardless of when such assets are assumed by SpinCo or a SpinCo Group Member or designee.

Notwithstanding the foregoing, the SpinCo Assets shall not in any event include any Asset referred to in clauses (a) through (m) of the definition of “Parent Assets”.

 

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SpinCo Balance Sheet” means the pro forma combined balance sheet of the Aaron’s Business, including the notes thereto, as of September 30, 2020, included in the Information Statement.

SpinCo Common Stock” means the common stock, $0.50 par value per share, of SpinCo.

SpinCo Contract” means the following contracts, agreements, arrangements, commitments or understandings to which either Party or any of its Group Members is a party or by which it or its Assets is bound, whether or not in writing, in each case, immediately prior to the Effective Time:

(a) (i) any contract, agreement, arrangement, commitment or understanding listed on Section 1.01(l) of the Disclosure Schedules and (ii) any other contract, agreement, commitment or understanding that relates primarily to the Aaron’s Business as compared to the Progressive Leasing and Vive Business (other than Parent Assets arising under any Shared Contracts);

(b) any guarantee, indemnity, representation or warranty of any SpinCo Group Member or Parent Group Member in respect of any other SpinCo Contract, any SpinCo Liability or the Aaron’s Business;

(c) any contract, agreement, arrangement, commitment or understanding that relates primarily to any SpinCo Intellectual Property or pursuant to which either Party or any of its Group Members is licensed or sublicensed an interest in any Patents, Trademarks, or Other Intellectual Property primarily used or held for use in the Aaron’s Business;

(d) any employment, change of control, retention, consulting, indemnification, termination, severance, incentive bonus or other similar agreements with any employee, contractor or consultant of SpinCo or a SpinCo Group Member, including those change of control agreements set forth on Section 1.01(m) of the Disclosure Schedules; and

(e) any other contract, agreement, arrangement, commitment or understanding or portion thereof that is otherwise expressly provided pursuant to this Agreement or any Ancillary Agreement to be assigned to SpinCo or a SpinCo Group Member;

provided, however, that: (i) such contracts, agreements, arrangements, commitments or understandings that are expressly provided to be retained by Parent or a Parent Group Member pursuant to any provision of this Agreement or any Ancillary Agreement shall not be SpinCo Contracts; (ii) such contracts, agreements, arrangements, commitments or understandings that relate to debt instruments, insurance arrangements, or employee benefit plans or programs shall be SpinCo Contracts only to the extent expressly provided for under the terms of this Agreement or any Ancillary Agreement; and (iii) the rights and obligations of Parent and the Parent Group Members under this Agreement and the Ancillary Agreements shall not be SpinCo Contracts.

SpinCo Credit Facility” means a secured or unsecured credit facility to be entered into prior to the Distribution and in connection with the Separation, by and among a subsidiary of SpinCo, as borrower, an administrative agent, certain arrangers and each of the financial institutions from time to time party thereto, providing for a revolving credit facility in such amount as shall have been agreed by Parent.

SpinCo Derivative Works” has the meaning set forth in Section 7.03(c)(iii).

 

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SpinCo Group” means (a) SpinCo, (b) each Business Entity identified on Section 1.01(n) of the Disclosure Schedules, (c) each Business Entity that is or becomes a direct or indirect Subsidiary of SpinCo as of the Effective Time (after giving effect to the Internal Reorganization) and (d) each Business Entity that becomes a direct or indirect Subsidiary of SpinCo after the Effective Time, including in each case any such Business Entity that is formed or acquired after the date hereof or any Business Entity that is merged or consolidated with and into SpinCo or any Subsidiary of SpinCo.

SpinCo Group Member” means any Group Member of the SpinCo Group, including for the avoidance of doubt, Aaron’s.

SpinCo Indemnitees” has the meaning set forth in Section 5.03.

SpinCo Intellectual Property” means: (a) the Patents and Trademarks set forth on Section 1.01(o) of the Disclosure Schedules, and any other Patents and Trademarks owned by either Party or any of its Group Members that, as of the Effective Time, are primarily used or held for use in the Aaron’s Business, as compared to the Progressive Leasing and Vive Business; (b) the Other Intellectual Property owned by either Party or any of its Group Members that, as of the Effective Time, is primarily used or held for use in the Aaron’s Business, as compared to the Progressive Leasing and Vive Business; (c) the rights to any Trademarks, and Other Intellectual Property that are exclusively allocated to SpinCo or a SpinCo Group Member pursuant to any Ancillary Agreement; and (d) a non-exclusive license, upon the terms and subject to the conditions set forth in Section 7.03(c) below, to the Licensed Parent Other IP.

SpinCo Liabilities” means, without duplication, the following Liabilities of either Party or any of its Group Members (which for the avoidance of doubt, shall not include any Shared Action Liabilities):

(a) all Liabilities reflected as liabilities or obligations on the SpinCo Balance Sheet, and all Liabilities arising or assumed after the date of the SpinCo Balance Sheet that, had they arisen or been assumed on or before such date and been existing obligations as of such date, would have been included or reflected on the SpinCo Balance Sheet if prepared in accordance with GAAP applied on a consistent basis, subject to any discharge of such Liabilities subsequent to the date of the SpinCo Balance Sheet; it being understood that (i) the SpinCo Balance Sheet shall be used to determine the types of, and methodologies used to determine, those Liabilities that are included in the definition of SpinCo Liabilities pursuant to this clause (a); and (ii) the amounts set forth on the SpinCo Balance Sheet with respect to any Liabilities shall not be treated as minimum amounts or limitations on the amount of such Liabilities that are included in the definition of SpinCo Liabilities pursuant to this clause (a);

(b) all Liabilities, including any Environmental Liabilities, relating to, arising out of or resulting from actions, inactions, events, omissions, conditions, facts or circumstances occurring or existing prior to the Effective Time (whether or not such Liabilities cease being contingent, mature, become known, are asserted or foreseen, or accrue, in each case before, at or after the Effective Time), in each case, to the extent that such Liabilities relate to, arise out of or result from the Aaron’s Business or a SpinCo Asset; provided, that this clause (b) shall not apply to any Shared Action Liabilities;

(c) all Liabilities relating to, arising out of or resulting from the SpinCo Contracts, any SpinCo real property or facility, the SpinCo Intellectual Property, the SpinCo Permits, the SpinCo Real Property or the SpinCo Portion of any Shared Contract;

(d) the Liabilities listed or described on Section 1.01(p) of the Disclosure Schedules;

(e) all Liabilities that are expressly provided by this Agreement or any Ancillary Agreement as Liabilities to be assumed or retained by, or allocated to, any SpinCo Group Member, and all agreements, obligations and Liabilities of any SpinCo Group Member under this Agreement or any of the Ancillary Agreements;

 

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(f) all Liabilities relating to, arising out of or resulting from the New SpinCo Financing Arrangements other than costs and expenses paid prior to the Effective Time by Parent or a Parent Group Member;

(g) all Liabilities relating to, arising out of or resulting from any SpinCo Action;

(h) all Liabilities relating to, arising out of or resulting from any untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, with respect to all information contained in the Form 10 and Information Statement and any other documents filed with the Commission in connection with the Spin-Off, other than with respect to the Parent Disclosure Sections; and

(i) all Liabilities arising out of claims made by Third Parties (including Parent’s or SpinCo’s respective directors, officers, shareholders, employees and agents) against any Parent Group Member or SpinCo Group Member to the extent relating to, arising out of or resulting from the SpinCo Assets, the Aaron’s Business or the other businesses, operations, activities or Liabilities referred to in clauses (a) through (h) above; provided, that this clause (i) shall not apply to any Shared Action Liabilities.

The Parties agree that all Liabilities transferred pursuant to Section 2.02 shall be SpinCo Liabilities for purposes of this Agreement and the Ancillary Agreements regardless of when such Liabilities are assumed by SpinCo or a SpinCo Group Member or designee.

SpinCo Licensed Purposes” has the meaning set forth in Section 7.03(c)(i).

SpinCo Minimum Cash” means, as of immediately before the Effective Time on the Distribution Date, an amount of Cash equal to approximately the SpinCo Minimum Cash Amount.

SpinCo Minimum Cash Amount” means the amount set forth on Schedule IV.

SpinCo Permits” has the meaning set forth in the definition of SpinCo Assets.

SpinCo Portion” has the meaning set forth in Section 2.05(a).

SpinCo Real Property” has the meaning set forth in the definition of SpinCo Assets.

SpinCo Third-Party Deposited Cash” has the meaning set forth in the definition of SpinCo Assets.

SpinCo Transfer Documents” has the meaning set forth in Section 2.01(c).

Spin-Off” means the Separation and the Distribution.

Stored Records” has the meaning set forth in Section 6.04(b)(i).

Subsidiary” means, with respect to any Person, any Business Entity of which such Person: (a) beneficially owns, either directly or indirectly, more than 50% of (i) the total combined voting power of all classes of voting securities of such Business Entity; (ii) the total combined equity interests; or (iii) the capital or profit interests, in the case of a partnership; or (b) otherwise has the power to vote, either directly or indirectly, sufficient securities to elect a majority of the board of directors or similar governing body.

 

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TAA” means the Technology Assignment Agreement to be entered into by and between Parent (and/or a Parent Group Member) and SpinCo (and/or a SpinCo Group Member) in connection with the Separation, the Distribution and the other transactions contemplated by this Agreement.

Tangible Information” means Information that is contained in written, electronic or other tangible forms.

Tax or Taxes” has the meaning set forth in the TMA.

Tax Law” has the meaning set forth in the TMA.

Tax Return” has the meaning set forth in the TMA.

Third Party” means a Person that is not a Parent Group Member or a SpinCo Group Member.

Third-Party Claim” means any assertion by a Third Party of any claim, or the commencement by any Third Party of any Action, against any Parent Group Member or SpinCo Group Member.

Third-Party Proceeds” has the meaning set forth in Section 5.04(a).

TMA” means the Tax Matters Agreement to be entered into by and between Parent and SpinCo in connection with the Separation, the Distribution and the other transactions contemplated by this Agreement.

TSA” means the Transition Services Agreement dated as of the date of this Agreement between Parent and SpinCo.

Trademarks” means (a) all trademarks, trade names, brand names, domain names, service marks, trade dress, logos and all other source indicators, including all goodwill associated therewith, (b) the right and power to assert, defend and recover title to any of the foregoing; (c) all rights to assert, defend and recover for any past, present and future infringement, dilution, misuse, misappropriation, impairment, unauthorized use or other violation of any of the foregoing, and (d) all applications, registrations, renewals and common law rights in connection therewith.

Transfer Documents” has the meaning set forth in Section 2.01(c).

Transition Committee” has the meaning set forth in Section 2.11.

ARTICLE II

THE SEPARATION

Section 2.01. Transfer of Assets and Assumption of Liabilities.

(a) The Parties acknowledge that the Separation is intended to result in the SpinCo Group owning the SpinCo Assets and assuming the SpinCo Liabilities, and the Parent Group owning the Parent Assets and assuming the Parent Liabilities, as set forth below in this ARTICLE II and in the applicable Ancillary Agreements. Prior to the Distribution and subject to Section 2.01(e), Section 2.02 and Section 2.04, in accordance with the Internal Reorganization Documents, to the extent not previously effected prior to the date hereof pursuant to the Internal Reorganization and to the extent that the Internal Reorganization Documents do not otherwise provide:

 

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(i) Parent shall, and shall cause any Business Entity that shall be a Parent Group Member as of or after the Effective Time to, contribute, assign, transfer, convey and deliver to SpinCo or a Business Entity designated by SpinCo that shall be a SpinCo Group Member as of or after the Effective Time, and SpinCo or such SpinCo designee shall accept from Parent and the applicable Parent Group Members, all of Parent’s and such Parent Group Members’ respective direct or indirect rights, title and interest in and to all of the SpinCo Assets held by Parent or a Parent Group Member, including all of the outstanding shares of capital stock or other ownership interests in the SpinCo Group Members (other than SpinCo), which shall result in SpinCo owning directly or indirectly all of the SpinCo Group Members (it being understood that if a SpinCo Asset shall be held by a SpinCo Group Member, unless otherwise contemplated by the Internal Reorganization Documents, such SpinCo Asset may be assigned, transferred, conveyed and delivered for all purposes hereunder as a result of the transfer of all or substantially all of the equity interests in such SpinCo Group Member to SpinCo or another SpinCo Group Member).

(ii) SpinCo or the applicable SpinCo Group Member(s) shall accept, assume and agree faithfully to perform, discharge and fulfill all of the SpinCo Liabilities held by Parent or any Parent Group Member, and SpinCo or the applicable SpinCo Group Member(s) shall be responsible for all of the SpinCo Liabilities in accordance with their respective terms (it being understood that if a SpinCo Liability shall be a Liability of a SpinCo Group Member, unless otherwise provided by the Internal Reorganization Documents, such SpinCo Liability may be assumed for all purposes hereunder as a result of the transfer of all or substantially all of the equity interests in such SpinCo Group Member by SpinCo or another SpinCo Group Member), without regard for the manner in which or circumstances under which such SpinCo Liabilities arose or against whom they are asserted. SpinCo or the applicable SpinCo Group Member(s) shall be responsible for all SpinCo Liabilities, regardless of when or where such SpinCo Liabilities arose or arise, or whether the facts on which they are based occurred prior to, at or after the Effective Time, regardless of where or against whom such SpinCo Liabilities are asserted or determined (including any such SpinCo Liabilities arising out of claims made by Parent’s or SpinCo’s respective Group Members or Affiliates or by Representatives of Parent or SpinCo or their respective Group Members or Affiliates against either Party or any of its Group Members or Affiliates) or whether asserted or determined prior to the date hereof, and regardless of whether relating to, arising out of or resulting from or alleged to relate to, arise out of or result from negligence, recklessness, violation of Law, fraud or misrepresentation by either Party or any of its Group Members or Affiliates or any of their respective Representatives.

(iii) Parent and SpinCo shall cause SpinCo and any Business Entity that shall be a SpinCo Group Member as of or after the Effective Time to contribute, assign, transfer, convey and deliver to Parent or a Business Entity designated by Parent that shall be a Parent Group Member as of or after the Effective Time, and Parent or such Parent designee shall accept from SpinCo and the applicable SpinCo Group Members, all of SpinCo’s and such SpinCo Group Member’s respective direct or indirect rights, title and interest in and to all Parent Assets held by a SpinCo Group Member, including all of the outstanding shares of capital stock or other ownership interests in the Parent Group Members (other than Parent), which shall result in Parent owning directly or indirectly (other than through SpinCo or any SpinCo Group Member) all of the Parent Group Members (it being understood that if a Parent Asset shall be held by a Parent Group Member, unless otherwise provided by the Internal Reorganization Documents, such Parent Asset may be assigned, transferred, conveyed and delivered for all purposes hereunder as a result of the transfer of all or substantially all of the equity interests in such Parent Group Member to Parent or another Parent Group Member).

 

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(iv) Parent or the applicable Parent Group Member(s) shall accept, assume and agree faithfully to perform, discharge and fulfill, all of the Parent Liabilities held by any SpinCo Group Member, and Parent or the applicable Parent Group Member(s) shall be responsible for all of the Parent Liabilities in accordance with their respective terms (it being understood that if a Parent Liability shall be a Liability of a Parent Group Member, unless otherwise provided by the Internal Reorganization Documents, such Parent Liability may be assumed for all purposes hereunder as a result of the transfer of all or substantially all of the equity interests in such Parent Group Member by Parent or another Parent Group Member), without regard for the manner in which or circumstances under which such Parent Liabilities arose or against whom they are asserted. Parent or the applicable Parent Group Member(s) shall be responsible for all Parent Liabilities, regardless of when or where such Parent Liabilities arose or arise, or whether the facts on which they are based occurred prior to, at or after the Effective Time, regardless of where or against whom such Parent Liabilities are asserted or determined (including any such Parent Liabilities arising out of claims made by Parent’s or SpinCo’s respective Group Members or Affiliates or by Representatives of Parent or SpinCo or their respective Group Members or Affiliates against either Party or any of its Group Members or Affiliates) or whether asserted or determined prior to the date hereof, and regardless of whether relating to, arising out of or resulting from or alleged to relate to, arise out of or result from negligence, recklessness, violation of Law, fraud or misrepresentation by either Party or any of its Group Members or Affiliates or any of their respective Representatives.

(b) In furtherance of the assignment, transfer, conveyance and delivery of the SpinCo Assets and the assumption of the SpinCo Liabilities in accordance with Section 2.01(a)(i) and Section 2.01(a)(ii): (i) Parent shall execute and deliver, and shall cause the other Parent Group Members to execute and deliver, such bills of sale, deeds, stock powers, certificates of title, assignments of contracts and other instruments of transfer, conveyance and assignment (including assignments of Patents, Trademarks or domain names) as and to the extent necessary to evidence the transfer, conveyance and assignment of all of Parent’s and the other Parent Group Members’ (other than SpinCo and the other SpinCo Group Members) right, title and interest in and to the SpinCo Assets to SpinCo and the SpinCo Group Members, and (ii) SpinCo shall execute and deliver, and shall cause the other SpinCo Group Members to execute and deliver, such assumptions of contracts and other instruments of assumption as and to the extent necessary to evidence the valid and effective assumption of the SpinCo Liabilities by SpinCo and the SpinCo Group Members. All of the foregoing documents contemplated by this Section 2.01(b) shall be referred to collectively herein as the “Parent Transfer Documents.”

(c) In furtherance of the assignment, transfer, conveyance and delivery of Parent Assets and the assumption of Parent Liabilities in accordance with Section 2.01(a)(iii) and Section 2.01(a)(iv): (i) SpinCo shall execute and deliver, and shall cause the other SpinCo Group Members to execute and deliver, such bills of sale, deeds, stock powers, certificates of title, assignments of contracts and other instruments of transfer, conveyance and assignment (including assignments of Patents, Trademarks or domain names) as and to the extent necessary to evidence the transfer, conveyance and assignment of all of SpinCo’s and the other SpinCo Group Members’ right, title and interest in and to the Parent Assets to Parent and the Parent Group Members, and (ii) Parent shall execute and deliver, and shall cause the other Parent Group Members to execute and deliver, such assumptions of contracts and other instruments of assumption as and to the extent necessary to evidence the valid and effective assumption of the Parent Liabilities by Parent and the Parent Group Members. All of the foregoing documents contemplated by this Section 2.01(c) shall be referred to collectively herein as the “SpinCo Transfer Documents” and, together with the Parent Transfer Documents, the “Transfer Documents.”

(d) Except to the extent otherwise provided by Section 2.02, in the event that it is discovered after the Effective Time that there was an omission of (i) the transfer or conveyance by SpinCo (or a SpinCo Group Member) or the acceptance or assumption by Parent (or a Parent Group Member) of any Parent Asset or Parent Liability, as the case may be, or (ii) the transfer or conveyance by Parent (or a Parent Group Member) or the acceptance or assumption by SpinCo (or a SpinCo Group Member) of any SpinCo Asset or SpinCo Liability, as the case may be, the Parties shall use commercially reasonable efforts to promptly effect such transfer, conveyance, acceptance or assumption of such Asset or Liability. Any transfer, conveyance, acceptance or assumption made pursuant to this Section 2.01(d) shall be treated by the Parties for all purposes as if it had occurred immediately prior to the Effective Time, except as otherwise required by applicable Law.

 

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(e) Except to the extent otherwise provided by Section 2.02, in the event that it is discovered after the Effective Time that there was (i) a transfer or conveyance by SpinCo (or a SpinCo Group Member) or the acceptance or assumption by Parent (or a Parent Group Member) of any SpinCo Asset or SpinCo Liability, as the case may be, or (ii) a transfer or conveyance by Parent (or a Parent Group Member) or the acceptance or assumption by SpinCo (or a SpinCo Group Member) of any Parent Asset or Parent Liability, as the case may be, the Parties shall use commercially reasonable efforts to promptly transfer or convey such Asset back to the transferring or conveying Party or to rescind any acceptance or assumption of such Liability, as the case may be. Any transfer or conveyance made or acceptance or assumption rescinded pursuant to this Section 2.01(e) shall be treated by the Parties for all purposes as if such Asset or Liability had never been originally transferred, conveyed, accepted or assumed, as the case may be, except as otherwise required by applicable Law.

Section 2.02. Nonassignable Contracts and Permits.

(a) Notwithstanding anything to the contrary contained herein, this Agreement shall not constitute an agreement to assign any Asset or Liability if an assignment or attempted assignment of the same without the consent of another Person would constitute a breach thereof or in any way impair the rights of a Party thereunder or give to any Third Party any rights with respect thereto. If any such consent is not obtained or if an attempted assignment would be ineffective or would impair such party’s rights under any such Asset or Liability so that the party entitled to the benefits and responsibilities of such purported transfer (the “Intended Transferee”) would not receive all such rights and responsibilities, then (i) the party purporting to make such transfer (the “Intended Transferor”) shall use commercially reasonable efforts to provide or cause to be provided to the Intended Transferee, to the extent permitted by Law, the benefits of any such Asset or Liability and the Intended Transferor shall promptly pay or cause to be paid to the Intended Transferee when received all moneys received by the Intended Transferor with respect to any such Asset and (ii) in consideration thereof the Intended Transferee shall pay, perform and discharge on behalf of the Intended Transferor all of the Intended Transferor’s Liabilities thereunder in a timely manner and in accordance with the terms thereof which it may do without breach and, at the Intended Transferor’s request, the Intended Transferee shall promptly reimburse or prepay (at the Intended Transferor’s election) the Intended Transferor for all amounts paid or due by the Intended Transferor on behalf of the Intended Transferee with respect to such non-assignable Asset or Liability. In addition, the Intended Transferor and the Intended Transferee shall each take such other actions as may be reasonably requested by the other Party in order to place the other Party, insofar as reasonably possible, in the same position as if such Asset had been transferred as provided hereby and so all the benefits and burdens relating thereto, including possession, use, risk of loss, Liability, potential for gain and dominion, control and command, shall inure to the Intended Transferee.

(b) If and when such consents and approvals are obtained, the transfer of the applicable Asset shall be effected in accordance with the terms of this Agreement.

Section 2.03. Certain Matters Governed Exclusively by Ancillary Agreements. Each of Parent and SpinCo agrees on behalf of itself and its Group Members that, except as explicitly provided in this Agreement or any Ancillary Agreement, (a) the TMA shall exclusively govern all matters relating to Taxes between such parties (including the control of Tax related proceedings), (b) the EMA shall exclusively govern the allocation of Assets and Liabilities related to the employee and employee benefits-related matters described therein, including the existing equity plans with respect to employees and former employees of Group Members of both the Parent Group and the SpinCo Group (it being

 

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understood that any such Assets and Liabilities, as allocated pursuant to the EMA, shall constitute SpinCo Assets, SpinCo Liabilities, Parent Assets or Parent Liabilities, as applicable, hereunder and shall be subject to ARTICLE V hereof), (c) the TSA shall exclusively govern all matters relating to the provision of certain services identified therein to be provided by each Party to the other on a transitional basis following the Distribution, and (d) the TAA shall exclusively govern all matters relating to ownership of certain proprietary software identified therein. In the case of any conflict between this Agreement and the referenced agreements in relation to any matters addressed by the referenced agreements, the referenced agreements shall control.

Section 2.04. Termination of Agreements.

(a) Except as set forth in Section 2.04(b) or as otherwise provided in the Internal Reorganization Documents, in furtherance of the releases and other provisions of Section 6.01, effective immediately prior to the Effective Time, SpinCo and each other SpinCo Group Member, on the one hand, and Parent and each other Parent Group Member, on the other hand, hereby terminate any and all agreements, arrangements, commitments and understandings, oral or written, entered into prior to the Effective Time, between or among Parent and/or any other Parent Group Member, on the one hand, and SpinCo and/or any other SpinCo Group Member, on the other hand, as to which there are no Third Parties (“Intercompany Agreements”), including all intercompany accounts payable or accounts receivable between or among Parent and/or any other Parent Group Member, on the one hand, and SpinCo and/or any other SpinCo Group Member, on the other hand (“Intercompany Accounts”); provided that the provisions of this Section 2.04(a) shall not terminate any rights or obligations (i) between or among Parent and any of the Parent Group Members; or (ii) between or among SpinCo and any of the SpinCo Group Members. No such terminated Intercompany Agreement (including any provision thereof that purports to survive termination) shall be of any further force or effect after the Effective Time. Each Party shall, at the reasonable request of the other Party, take, or cause to be taken, such other actions as may be necessary to effect the foregoing. The Parties, on behalf of their respective Group Members, hereby waive any advance notice provision or other termination requirements with respect to any Intercompany Agreement.

(b) The provisions of Section 2.04(a) shall not apply to any of the following Intercompany Agreements (or to any of the provisions thereof): (i) the Intercompany Agreements and Intercompany Accounts listed or described on Section 2.04(b) of the Disclosure Schedules; (ii) this Agreement and the Ancillary Agreements (and each other Intercompany Agreement expressly provided by this Agreement or any Ancillary Agreement to be entered into by either Party or any other Group Member of its Group or to be continued from and after the Effective Time); (iii) any Intercompany Agreements or Intercompany Accounts to which any Third Party is a party; (iv) any Shared Contracts; and (v) any other Intercompany Agreements that this Agreement or any Ancillary Agreement expressly contemplates will survive the Effective Time. To the extent that the rights and obligations of Parent or another Parent Group Member under any agreements, arrangements, commitments or understandings not terminated under this Section 2.04(b) constitute SpinCo Assets or SpinCo Liabilities, they shall be assigned or assumed by SpinCo or the applicable SpinCo Group Member or designee pursuant to this Agreement. To the extent that the rights and obligations of SpinCo or another SpinCo Group Member under any agreements, arrangements, commitments or understandings not terminated under this Section 2.04(b) constitute Parent Assets or Parent Liabilities, they shall be assigned or assumed by Parent or the applicable Parent Group Member or designee pursuant to this Agreement.

 

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Section 2.05. Shared Contracts.

(a) The Parties shall, and shall cause their respective Group Members to, use their respective commercially reasonable efforts to work together (and, if necessary and desirable, to work with the Third Party to such Shared Contract) in an effort to divide, partially assign, modify and/or replicate (in whole or in part) the respective rights and obligations under and in respect of any Shared Contract, such that (i) a SpinCo Group Member is the beneficiary of the rights and is responsible for the obligations related to that portion of such Shared Contract relating to the Aaron’s Business (the “SpinCo Portion”), which rights shall be a SpinCo Asset and which obligations shall be a SpinCo Liability and (ii) a Parent Group Member is the beneficiary of the rights and is responsible for the obligations related to such Shared Contract not relating to the Aaron’s Business (the “Parent Portion”), which rights shall be a Parent Asset and which obligations shall be a Parent Liability. Nothing in this Agreement shall require the division, partial assignment, modification or replication of a Shared Contract unless and until any necessary Consents are obtained or made, as applicable. If the Parties, or their respective Group Members, as applicable, are not able to enter into an arrangement to formally divide, partially assign, modify and/or replicate such Shared Contract prior to the Effective Time as contemplated by the previous sentence, then the Parties shall, and shall cause their respective Group Members to, cooperate in any reasonable and permissible arrangement to provide that, following the Effective Time and until the earlier of one year after the Distribution Date and such time as the formal division, partial assignment, modification and/or replication of such Shared Contract as contemplated by the previous sentence is effected, (A) the Assets associated with the SpinCo Portion of such Shared Contract shall be enjoyed by SpinCo or another SpinCo Group Member; (B) the Liabilities associated with the SpinCo Portion of such Shared Contract shall be borne by SpinCo or another SpinCo Group Member; (C) the Assets associated with the Parent Portion of such Shared Contract shall be enjoyed by Parent or another Parent Group Member; and (D) the Liabilities associated with the Parent Portion of such Shared Contract shall be borne by Parent or another Parent Group Member.

(b) Each of Parent and SpinCo shall, and shall cause its Group Members to, (i) treat for all relevant Tax purposes the portion of each Shared Contract inuring to its respective businesses as Assets owned by, and/or Liabilities of, as applicable, such Party, or its Group Members, as applicable, not later than the Effective Time, and (ii) neither report nor take any Tax position (on a Tax Return or otherwise) inconsistent with such treatment (unless required by applicable Law).

(c) Nothing in this Section 2.05 shall require any member of any Group to make any non-de minimis payment (except to the extent advanced, assumed or agreed in advance to be reimbursed by any member of the other Group), incur any non-de minimis obligation or grant any non-de minimis concession for the benefit of any member of any other Group in order to effect any transaction contemplated by this Section 2.05.

Section 2.06. Bank Accounts; Checks.

(a) Parent and SpinCo each agrees to take, or cause their respective Group Members to take, prior to the Effective Time, all actions necessary to amend all SpinCo Contracts governing each bank and brokerage account owned by any SpinCo Group Member (collectively, the “SpinCo Accounts”), so that such SpinCo Accounts, if currently linked (whether by automatic withdrawal, automatic deposit or any other authorization to transfer funds from or to, hereinafter “linked”) to any bank or brokerage account owned by Parent or another Parent Group Member (collectively, the “Parent Accounts”) are de-linked from the Parent Accounts effective at or prior to the Effective Time.

(b) With respect to any outstanding checks issued by Parent, SpinCo, or any of their respective Group Members prior to the Effective Time, such outstanding checks shall be honored following the Effective Time by the Person owning the account on which the check is drawn.

 

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(c) As between Parent and SpinCo (and their respective Group Members) all payments and reimbursements received after the Effective Time by either Party (or any of its respective Group Members) in respect or satisfaction of a business, Asset or Liability of the other Party (or any of its respective Group Members), shall be held by such Party in trust for the use and benefit of the Party entitled thereto and, as promptly as commercially practicable or as otherwise agreed between the Parties, upon receipt by such Party of any such payment or reimbursement, such Party shall pay over, or shall cause its applicable Group Member to pay over, to the other Party the amount of such payment or reimbursement.

Section 2.07. Novation of Liabilities; Release of Guarantees.

(a) Novation of SpinCo Liabilities.

(i) Each of Parent and SpinCo, at the request of the other Party, shall use commercially reasonable efforts to obtain, or cause to be obtained, any Consent, substitution, approval or amendment required to novate or assign all SpinCo Liabilities and obtain in writing the unconditional release of Parent and each other Parent Group Member that is a party to any such arrangements, so that, in any such case, SpinCo and the designated SpinCo Group Members shall be solely responsible for such SpinCo Liabilities; provided, however, that, except as otherwise expressly provided in this Agreement or the Ancillary Agreements, neither Parent nor SpinCo (nor any of their respective Group Members) shall be obligated to contribute any capital, pay any consideration, grant any concession or incur any additional Liability to any Third Party other than ordinary and customary fees to a Governmental Authority from whom such Consents, substitutions, approvals, amendments, terminations or releases are requested.

(ii) If Parent or SpinCo is unable to obtain, or to cause to be obtained, any such required Consent, substitution, approval, amendment, termination or release, Parent or the applicable Parent Group Member shall continue to be bound by such arrangement and, unless not permitted by the terms thereof or by Law, SpinCo shall, as agent or subcontractor for Parent or such Parent Group Member, as the case may be, pay, perform and discharge fully all the obligations or other Liabilities of Parent or such Parent Group Member, as the case may be, that constitute SpinCo Liabilities thereunder from and after the Effective Time. Parent shall cause each Parent Group Member without further consideration, to pay and remit, or cause to be paid or remitted, to SpinCo, promptly all money, rights and other consideration received by it or another Parent Group Member in respect of SpinCo’s performance as agent or subcontractor for Parent or such Parent Group Member, as the case may be, with respect to such Liabilities of Parent or the applicable Parent Group Member (unless any such consideration is a Parent Asset). If and when any such Consent, substitution, approval, amendment, termination or release shall be obtained or the obligations under such arrangements shall otherwise become assignable or able to be novated, Parent or the applicable Parent Group Member shall promptly assign or novate, or cause to be assigned or novated, all its obligations and other Liabilities thereunder or any obligations of Parent or a Parent Group Member to SpinCo or its designated SpinCo Group Member without payment of further consideration and SpinCo or such SpinCo Group Member shall, without the payment of any further consideration, assume such obligations.

(b) Novation of Parent Liabilities.

(i) Each of Parent and SpinCo, at the request of the other Party, shall use commercially reasonable efforts to obtain, or cause to be obtained, any Consent, substitution, approval or amendment required to novate or assign all Parent Liabilities and obtain in writing the unconditional release of SpinCo and each other SpinCo Group Member that is a party to any such arrangements, so that, in any such case, Parent and the designated Parent Group Member shall be solely responsible for such Parent Liabilities; provided, however, that, except as otherwise expressly provided in this Agreement or the Ancillary Agreements, neither Parent nor SpinCo (nor any of their respective Group Members) shall be obligated to contribute any capital, pay any consideration, grant any concession or incur any additional Liability to any Third Party other than ordinary and customary fees to a Governmental Authority from whom such Consents, substitutions, approvals, amendments, terminations or releases are requested.

 

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(ii) If Parent or SpinCo is unable to obtain, or to cause to be obtained, any such required Consent, substitution, approval, amendment, termination or release, SpinCo or the applicable SpinCo Group Member shall continue to be bound by such arrangement and, unless not permitted by the terms thereof or by Law, Parent shall, as agent or subcontractor for SpinCo or such SpinCo Group Member, as the case may be, pay, perform and discharge fully all the obligations or other Liabilities of SpinCo or such SpinCo Group Member, as the case may be, that constitute Parent Liabilities, thereunder from and after the Effective Time. SpinCo shall cause each SpinCo Group Member without further consideration, to pay and remit, or cause to be paid or remitted, to Parent, promptly all money, rights and other consideration received by it or a SpinCo Group Member in respect of Parent’s performance as agent or subcontractor for SpinCo or such SpinCo Group Member, as the case may be, with respect to such Liabilities of SpinCo or the applicable SpinCo Group Member (unless any such consideration is a SpinCo Asset). If and when any such Consent, substitution, approval, amendment, termination or release shall be obtained or the obligations under such arrangements shall otherwise become assignable or able to be novated, SpinCo or the applicable SpinCo Group Member shall promptly assign or novate, or cause to be assigned or novated, all its obligations and other Liabilities thereunder or any obligations of SpinCo or a SpinCo Group Member to Parent or its designated Parent Group Member without payment of further consideration and Parent or such Parent Group Member shall, without the payment of any further consideration, assume such obligations.

Section 2.08. Provision of Corporate Records.

(a) Without limitation of the Parties’ rights and obligations pursuant to ARTICLE VI, prior to or as promptly as reasonably practicable after the Effective Time, Parent shall deliver to SpinCo all corporate books and records of the SpinCo Group Members in its or its Group Members’ possession or control that are SpinCo Assets.

(b) Without limitation of the Parties’ rights and obligations pursuant to ARTICLE VI, prior to or as promptly as reasonably practicable after the Effective Time, SpinCo shall deliver to Parent all corporate books and records of the Parent Group Members in its or its Group Members’ possession or control that are Parent Assets

Section 2.09. Disclaimer of Representations and Warranties; Waiver of Bulk-Sale and Bulk-Transfer Laws.

(a) EACH OF PARENT (ON BEHALF OF ITSELF AND EACH PARENT GROUP MEMBER) AND SPINCO (ON BEHALF OF ITSELF AND EACH SPINCO GROUP MEMBER) UNDERSTANDS AND AGREES THAT, EXCEPT AS EXPRESSLY SET FORTH HEREIN OR IN ANY ANCILLARY AGREEMENT, NO PARTY TO THIS AGREEMENT, ANY ANCILLARY AGREEMENT OR OTHERWISE, IS: (X) REPRESENTING OR WARRANTING TO ANY OTHER PARTY HERETO OR THERETO IN ANY WAY AS TO (I) THE ASSETS, BUSINESSES OR LIABILITIES TRANSFERRED, LICENSED OR ASSUMED AS PROVIDED HEREBY OR THEREBY; (II) ANY APPROVALS OR NOTIFICATIONS REQUIRED IN CONNECTION HEREWITH OR THEREWITH; (III) THE VALUE OR FREEDOM FROM ANY SECURITY INTERESTS OF, OR ANY OTHER MATTER CONCERNING, ANY ASSETS OF SUCH PARTY; (IV) THE ABSENCE OR PRESENCE OF ANY DEFENSES TO OR RIGHT OF SETOFF AGAINST OR FREEDOM FROM COUNTERCLAIM WITH RESPECT TO ANY PROCEEDING OR OTHER ASSET, INCLUDING ANY ACCOUNTS RECEIVABLE, OF EITHER PARTY; OR (V) THE LEGAL SUFFICIENCY OF ANY CONVEYANCE AND ASSUMPTION INSTRUMENTS OR ANY OTHER

 

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ANCILLARY AGREEMENT TO CONVEY TITLE TO ANY ASSET OR THING OF VALUE UPON THE EXECUTION, DELIVERY AND FILING OF SUCH CONVEYANCE AND ASSUMPTION INSTRUMENTS OR SUCH OTHER ANCILLARY AGREEMENTS; OR (Y) MAKING ANY OTHER REPRESENTATIONS OR GRANTING ANY WARRANTIES, EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE. EACH PARTY SPECIFICALLY DISCLAIMS ANY OTHER WARRANTIES, WHETHER WRITTEN OR ORAL, OR EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF CONDITION, QUALITY, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR USE OR PURPOSE, TITLE, VALUE, FREEDOM FROM ENCUMBRANCE OR CONFORMITY TO MODELS OR SAMPLES OF MATERIALS, OR THE PRESENCE OR ABSENCE OF ANY HAZARDOUS MATERIALS IN OR ON, OR DISPOSED OR DISCHARGED FROM, SUCH ASSETS, OR ANY WARRANTY AS TO THE VALIDITY OF ANY PATENTS OR THE NON-INFRINGEMENT OF ANY PATENTS, TRADEMARKS, OR OTHER INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES. EXCEPT AS MAY EXPRESSLY BE SET FORTH IN THIS AGREEMENT OR IN ANY ANCILLARY AGREEMENT, ALL SUCH ASSETS ARE BEING TRANSFERRED OR LICENSED ON AN “AS IS,” “WHERE IS” BASIS AND WITH ALL FAULTS (AND, IN THE CASE OF ANY REAL PROPERTY, BY MEANS OF A QUITCLAIM OR SIMILAR FORM OF DEED OR CONVEYANCE) AND THE RESPECTIVE TRANSFEREES OR LICENSEES SHALL BEAR THE ECONOMIC AND LEGAL RISKS THAT (A) ANY CONVEYANCE AND ASSUMPTION INSTRUMENT OR ANY OTHER ANCILLARY AGREEMENT MAY PROVE TO BE INSUFFICIENT TO VEST IN THE TRANSFEREE GOOD AND MARKETABLE TITLE, FREE AND CLEAR OF ALL SECURITY INTERESTS; AND (B) ANY NECESSARY CONSENTS ARE NOT OBTAINED OR THAT ANY REQUIREMENTS OF LAWS, AGREEMENTS, SECURITY INTERESTS OR JUDGMENTS ARE NOT COMPLIED WITH. EACH OF PARENT (ON BEHALF OF ITSELF AND EACH PARENT GROUP MEMBER) AND SPINCO (ON BEHALF OF ITSELF AND EACH SPINCO GROUP MEMBER) HEREBY NEGATES ANY RIGHTS OF THE OTHER PARTY AND ITS GROUP MEMBERS UNDER STATUTES TO CLAIM DIMINUTION OF CONSIDERATION AND ANY CLAIMS BY SUCH OTHER PARTY FOR DAMAGES BECAUSE OF REDHIBITORY VICES OR DEFECTS, WHETHER KNOWN OR UNKNOWN, IT BEING THE INTENTION OF THE PARTIES HERETO THAT ALL BUSINESSES, ASSETS, LIABILITIES AND BUSINESS ENTITIES TRANSFERRED HEREUNDER ARE TO BE ACCEPTED BY THE APPLICABLE RECEIVING PARTY HEREUNDER IN THEIR PRESENT CONDITION.

(b) SpinCo hereby waives compliance by itself and each and every other SpinCo Group Member with the requirements and provisions of any “bulk-sale” or “bulk transfer” Laws of any jurisdiction that may otherwise be applicable with respect to the transfer or sale of any or all of the SpinCo Assets to SpinCo or another SpinCo Group Member.

(c) Parent hereby waives compliance by itself and each and every other Parent Group Member with the requirements and provisions of any “bulk-sale” or “bulk transfer” Laws of any jurisdiction that may otherwise be applicable with respect to the transfer or sale of any and all of the Parent Assets to Parent or a Parent Group Member.

Section 2.10. Financing Arrangements; SpinCo Minimum Cash.

(a) Prior to or effective as of the Effective Time, (a) SpinCo shall enter into the New SpinCo Financing Arrangements, (b) Parent shall repay, or cause to be repaid, in full all amounts owed by Parent or its Subsidiaries under the Existing Parent Financing Arrangements, and (c) Parent shall enter into the New Parent Financing Arrangements. Parent and SpinCo agree to take all necessary actions to assure the full release and discharge of (i) Parent and the other Parent Group Members from any obligations of Parent or any other Parent Group Member applicable to them pursuant to the New SpinCo Financing

 

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Arrangements as of no later than the Effective Time, and (ii) SpinCo and the other SpinCo Group Members from any obligations of SpinCo or any other SpinCo Group Member applicable to them pursuant to the New Parent Financing Arrangements or the Existing Parent Financing Arrangements, in each case as of no later than the Effective Time.

(b) Prior to the Effective Time, and in connection with the entrance into the New Parent Financing Arrangements, Parent shall have the right to use all available Cash of the Parent Group and the SpinCo Group for purposes of repaying in full the Existing Parent Financing Arrangements, provided, however, that as of immediately prior to the Effective Time, SpinCo and the SpinCo Group Members shall have, in the aggregate, a Cash balance equal to the SpinCo Minimum Cash. Prior to the Effective Time, SpinCo and Parent shall, or shall cause their respective Group Members to, transfer (including by one (1) or more transfers or capital contributions), to the other Party (or their respective Group Members), as the case may be, Cash such that SpinCo and the SpinCo Group Members shall have, in the aggregate, as of immediately prior to the Effective Time a Cash balance equal to, but not in excess of, the SpinCo Minimum Cash. Any remaining Cash held by the Parent Group or the SpinCo Group (other than, for the avoidance of doubt, any SpinCo Third-Party Deposit Cash), after taking into account the transfers contemplated by this Section 2.10(b) and establishing the SpinCo Minimum Cash with SpinCo, shall be deemed to be a Parent Asset as of the Effective Time.

Section 2.11. Transition Committee. Prior to or after the Effective Time, the Parties may establish a transition committee (the “Transition Committee”) consisting of an equal number of members from Parent and SpinCo. To the extent determined by the Parties, the Transition Committee shall be responsible for monitoring and managing all matters related to any of the transactions contemplated by this Agreement or any Ancillary Agreements. The Transition Committee shall have the authority to (a) establish one or more subcommittees from time to time as it deems appropriate or as may be described in this Agreement or any Ancillary Agreements, with each such subcommittee comprised of one or more members of the Transition Committee or one or more employees of either Party or any member of its respective Group, and each such subcommittee having such scope of responsibility as may be determined by the Transition Committee from time to time; (b) delegate to any such committee any of the powers of the Transition Committee; and (c) combine, modify the scope of responsibility of, and disband any such subcommittees and (d) modify or reverse any such delegations. The Transition Committee shall establish general procedures for managing the responsibilities delegated to it under this Section 2.11, and may modify such procedures from time to time. All decisions by the Transition Committee or any subcommittee thereof shall be effective only if mutually agreed by both Parties. The Parties shall utilize the procedures set forth in ARTICLE IX to resolve any matters as to which the Transition Committee is not able to reach a decision.

ARTICLE III

ACTIONS PENDING THE DISTRIBUTION

Section 3.01. Actions Prior to the Distribution. Prior to the Effective Time and subject to the to the terms and conditions set forth herein, including those specified in Section 3.02, and subject to Section 4.03, Parent and SpinCo shall take, or cause to be taken, the actions specified in this Section 3.01.

(a) Parent shall, prior to the Distribution, mail notice of Internet availability of the Information Statement or the Information Statement to the Record Holders.

(b) SpinCo shall prepare, file with the Commission and use its reasonable best efforts to cause to become effective any registration statements or amendments thereto required to effect the establishment of, or amendments to, any employee benefit and other plans necessary or appropriate in connection with the transactions contemplated by this Agreement or any of the Ancillary Agreements.

 

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(c) Parent and SpinCo shall take all such action as may be necessary or appropriate under the securities or blue sky Laws of the states or other political subdivisions of the United States or of other foreign jurisdictions in connection with the transactions contemplated by this Agreement or any of the Ancillary Agreements.

(d) SpinCo shall prepare and file, and shall use reasonable best efforts to have approved prior to the Distribution, an application for the listing of the SpinCo Common Stock to be distributed in the Distribution on the NYSE, subject to official notice of distribution.

(e) The individuals listed in the Information Statement as members of the SpinCo board of directors who will join the board at or prior to the Effective Time shall have been duly elected or appointed as such, effective prior to or as of the Effective Time, and such individuals shall be the members of the SpinCo board of directors as of the Effective Time, and the individuals listed as officers of SpinCo in the Information Statement shall have been duly elected or appointed to hold such positions set forth in the Information Statement, effective prior to or as of the Effective Time; provided, however, that to the extent required by any Law or requirement of the NYSE or any other national securities exchange, as applicable, one or more independent directors shall be appointed by the existing board of directors of SpinCo and begin their respective term(s) prior to the date on which “when-issued” trading of the SpinCo Common Stock begins on such national securities exchange and shall serve on SpinCo’s audit committee, and nominating and executive compensation committee.

(f) (i) Parent shall deliver or cause to be delivered to SpinCo resignations from SpinCo positions, effective as of the Effective Time, of each individual who will be an employee of any Parent Group Member after the Effective Time and who is an officer or director of any SpinCo Group Member immediately prior to the Effective Time and (ii) SpinCo shall deliver or cause to be delivered to Parent resignations from Parent positions, effective as of the Effective Time, of each individual who will be an employee of any SpinCo Group Member after the Effective Time and who is an officer or director of any Parent Group Member immediately prior to the Effective Time, except, in the case of each of (i) and (ii), as set forth on Section 3.01(f) of the Disclosure Schedules.

(g) Parent and SpinCo shall take all actions as may be necessary or appropriate so that, immediately prior to the Effective Time, the articles of incorporation and the bylaws of SpinCo, each in substantially the form filed as an exhibit to the Form 10, shall be in effect.

(h) Parent shall enter into a distribution agent agreement with the Agent or otherwise provide instructions to the Agent regarding the Distribution.

(i) Parent shall, to the extent possible, give the NYSE not less than ten (10) days’ advance notice of the Record Date in compliance with Rule 10b-17 under the Exchange Act, and the applicable rules and regulations of the NYSE.

(j) (i) Parent and SpinCo shall take all actions necessary such that, on or prior to the Distribution, Parent will change its name to PROG Holdings, Inc. and (ii) Parent shall prepare and file, and shall use its reasonable best efforts to have approved, a supplemental listing application with the NYSE to facilitate its name change.

(k) Parent and SpinCo shall take all actions as may be necessary or appropriate to approve the stock-based employee benefit plans of SpinCo (and the grants of adjusted awards over Parent stock by Parent and of awards over SpinCo stock by SpinCo) in order to satisfy the requirements of Rule 16b-3 under the Exchange Act and the applicable rules and regulations of the NYSE.

 

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(l) Parent and SpinCo shall reasonably cooperate with King & Spalding LLP, as tax counsel to Parent, to deliver customary representation letters in connection with the tax opinion described in Section 3.02(i).

(m) (i) SpinCo shall have entered into the New SpinCo Financing Arrangements, (ii) Parent shall have repaid, or caused to be repaid, in full all amounts owed by Parent or its Subsidiaries under the Existing Parent Financing Arrangements, and (iii) Parent shall have entered into the New Parent Financing Arrangements.

(n) Parent and SpinCo shall, subject to Section 4.03, take all reasonable steps necessary and appropriate to cause the conditions set forth in Section 3.02 to be satisfied and to effect the Distribution on the Distribution Date.

(o) From the date of the Balance Sheet Date to prior to the Distribution, SpinCo shall, and shall cause the SpinCo Group Members to, make or have made capital and other expenditures, and operate its cash management, accounts payable and receivables collection systems in the ordinary course of business, in each case, consistent with prior practice except as required in connection with the transactions contemplated by this Agreement and the Ancillary Agreements.

Section 3.02. Conditions Precedent to Consummation of the Distribution. In addition to Parent’s rights under Section 4.03, the Distribution shall not occur unless each of the following conditions shall have been satisfied (or waived by Parent, in whole or in part, in its sole and absolute discretion):

(a) Board Approval. This Agreement and the transactions contemplated hereby, including the declaration of the Distribution, shall have been duly approved and authorized by the Board of Directors of Parent in accordance with applicable Law and the organizational documents of Parent, and such approval shall not have been withdrawn.

(b) Completion of Internal Reorganization and Separation; Liabilities Under Financing Arrangements. Subject to Section 2.02, the Internal Reorganization shall have been completed. The Separation, and all applicable pre-Effective Time steps set forth in ARTICLE II, shall have been completed and Parent shall be satisfied, in its sole discretion, that, as of the Effective Time, (i) neither Parent nor any Parent Group Member shall have any further Liability under any of the Existing Parent Financing Arrangements or the New SpinCo Financing Arrangements and (ii) neither SpinCo nor any SpinCo Group Member shall have any further Liability under any of the Existing Parent Financing Arrangements or the New Parent Financing Arrangements.

(c) Execution of Ancillary Agreements. The Parties shall have executed and delivered or, where applicable, shall have caused their respective Group Members to execute and deliver, the Ancillary Agreements that are contemplated by this Agreement to be executed and delivered on or prior to the Effective Time.

(d) Effectiveness of Form 10; Mailing or Notice of Internet Availability of Information Statement. The Form 10 shall have been declared effective by the Commission, no stop order suspending the effectiveness of the Form 10 shall be in effect and no proceedings for such purpose shall be pending before or threatened by the Commission, and notice of Internet availability of the Information Statement or the Information Statement shall have been mailed to the Record Holders.

 

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(e) Listing on NYSE. The SpinCo Common Stock to be distributed in the Distribution shall have been accepted for listing on the NYSE, subject to official notice of Distribution.

(f) No Injunction or Prohibition. No order, injunction or decree issued by any Governmental Authority of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Distribution or any of the other transactions related thereto, including the Separation, contemplated by this Agreement or any Ancillary Agreement shall be in effect, and no other event shall have occurred or failed to occur that prevents the consummation of the Distribution or any of the other transactions related thereto, including the Separation, contemplated by this Agreement or any Ancillary Agreement. The Distribution shall not violate or result in a breach of applicable Law or any material contract of any Party.

(g) Satisfaction of Actions Prior to Distribution. The actions set forth in Section 3.01 shall have been completed.

(h) Governmental Approvals. Parent and SpinCo shall have received all Governmental Approvals and all Consents necessary to effect the Distribution and the other transactions related thereto, including the Separation, contemplated by this Agreement or any Ancillary Agreement, and to permit the operation of the Progressive Leasing and Vive Business and the Aaron’s Business after the Distribution Date, and such Governmental Approvals and Consents shall be in full force and effect.

(i) Tax Opinion. Parent shall have received an opinion of King & Spalding LLP satisfactory to the Parent Board of Directors to the effect that the Spin-Off will qualify for the Intended Tax Treatment.

(j) Solvency Opinion. A nationally recognized valuation or accounting firm or investment bank acceptable to Parent in its sole discretion shall have delivered one or more opinions to the Parent Board of Directors at the time or times requested by the Parent Board of Directors confirming the solvency and financial viability of Parent before the consummation of the Distribution and each of Parent and SpinCo after the consummation of the Distribution, such opinions shall have been in form and substance acceptable to Parent in its sole discretion and such opinions shall not have been withdrawn or rescinded.

(k) No Circumstances Making Distribution Inadvisable. No other events or developments shall exist or shall have occurred that, in the judgment of the Parent Board of Directors, in its sole and absolute discretion, makes it inadvisable to effect the Separation, the Distribution or the transactions contemplated by this Agreement or any Ancillary Agreement.

Section 3.03. Sole and Absolute Discretion. The foregoing conditions are for the sole benefit of Parent and not for the benefit of any other Person and shall not give rise to or create any duty on the part of Parent or Parent’s board of directors to waive or not waive any such condition or in any way limit the right of Parent to terminate this Agreement as set forth in ARTICLE X or alter the consequences of any such termination from those specified in such Article. Any determination made by the Parent Board of Directors prior to the Distribution concerning the satisfaction or waiver of any or all of the conditions set forth in Section 3.02 shall be conclusive and binding on the Parties. If Parent waives any material condition, it shall promptly issue a press release disclosing such fact and file a Current Report on Form 8-K with the Commission describing such waiver.

 

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ARTICLE IV

THE DISTRIBUTION

Section 4.01. The Distribution.

(a) SpinCo shall cooperate with Parent to accomplish the Distribution and shall, at the direction of Parent, use its reasonable best efforts to promptly take any and all actions necessary or desirable to effect the Distribution. Parent shall select any investment bank or manager in connection with the Distribution, as well as any financial printer, distribution agent and financial, legal, accounting and other advisors for Parent. Parent or SpinCo, as the case may be, will provide, or cause its applicable Group Member(s) to provide, to the Agent all share certificates and any information required in order to complete the Distribution.

(b) Subject to the terms and conditions set forth in this Agreement:

(i) after completion of the Internal Reorganization and on or prior to the Distribution Date, for the benefit of and distribution to the holders of record of issued and outstanding shares of Parent Common Stock as of the close of business on the Record Date (“Record Holders”), Parent will deliver to the Agent all of the issued and outstanding shares of SpinCo Common Stock then owned by Parent and book-entry authorizations for such shares;

(ii) Parent shall instruct the Agent to distribute, as soon as practicable following the Effective Time, to each Record Holder (or such Record Holder’s bank or brokerage firm on such Record Holder’s behalf) electronically, by direct registration in book-entry form: (A) the number of whole shares of SpinCo Common Stock to which such Record Holder is entitled based on the Distribution Ratio; and (B) Cash, if applicable, in lieu of fractional shares obtained in the manner provided in Section 4.02;

(iii) The Distribution shall be effective at 11:59 p.m. Eastern Standard Time on the Distribution Date (the “Effective Time”).

(iv) On or as soon as practicable after the Distribution Date, the Agent will mail to each Record Holder an account statement indicating the number of shares of SpinCo Common Stock that have been registered in book-entry form in the name of such Record Holder.

(v) SpinCo agrees to provide all book-entry transfer authorizations for shares of SpinCo Common Stock that Parent or the Agent shall require (after giving effect to Section 4.02) in order to effect the Distribution.

(c) Each share of SpinCo Common Stock distributed in the Distribution shall be validly issued, fully paid and nonassessable and free of preemptive rights.

Section 4.02. Fractional Shares.

(a) Notwithstanding anything herein to the contrary, no fractional shares of SpinCo Common Stock shall be issued in connection with the Distribution, and any such fractional share interests to which a Record Holder would otherwise be entitled shall not entitle such Record Holder to vote or to any other rights as a shareholder of SpinCo. In lieu of any such fractional shares, each Record Holder who, but for the provisions of this Section 4.02, would be entitled to receive a fractional share interest of SpinCo Common Stock pursuant to the Distribution, shall be paid Cash, without any interest thereon, as hereinafter provided. The Agent and Parent shall, as soon as practicable after the Effective Time, (i)

 

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determine the number of whole shares and fractional shares of SpinCo Common Stock allocable to each Record Holder or beneficial owner of Parent Common Stock as of the close of business on the Record Date, (ii) aggregate all such fractional shares into whole shares and sell the whole shares obtained thereby in open market transactions at then prevailing trading prices on behalf of such Record Holders or beneficial owners who would otherwise be entitled to fractional share interests and (iii) distribute to each such Record Holder, or for the benefit of such beneficial owner, such Record Holder’s or beneficial owner’s ratable share of the net proceeds of such sale, based upon the average gross selling price per share of SpinCo Common Stock after making appropriate deductions for any amount required to be withheld under applicable Tax Law and less any brokers’ charges, commissions or transfer Taxes. The Agent, in its sole discretion, will determine the timing and method of selling such fractional shares, the selling price of such fractional shares and the broker-dealer through which such fractional shares will be sold; provided, however, that the designated broker-dealer is not an Affiliate of Parent or SpinCo. Neither Parent nor SpinCo will pay any interest on the proceeds from the sale of fractional shares.

(b) Any SpinCo Common Stock or Cash in lieu of fractional shares with respect to SpinCo Common Stock that remain unclaimed by any Record Holder or beneficial owner 180 days after the Effective Time shall be delivered to SpinCo, SpinCo shall hold such SpinCo Common Stock for the account of such Record Holder or beneficial owner and the Parties agree that all obligations to provide such SpinCo Common Stock and Cash, if any, in lieu of fractional share interests shall be obligations of SpinCo, subject in each case to applicable escheat or other abandoned property Laws, and Parent shall have no Liability with respect thereto.

Section 4.03. Sole and Absolute Discretion of Parent. Parent shall, in its sole and absolute discretion, determine the Record Date, the Distribution Date and all terms of the Distribution and the Separation, including the form, structure and terms of any transactions and/or offerings to effect the Distribution and the Separation and the timing of and conditions to the consummation thereof. In addition and notwithstanding anything to the contrary set forth below, Parent may at any time and from time to time until the Distribution decide to abandon the Distribution or the Separation, or modify or change the terms of the Distribution or the Separation, including by accelerating or delaying the timing of the consummation of all or part of the Distribution or the Separation. Nothing shall in any way limit Parent’s right to terminate this Agreement or the Distribution as set forth in ARTICLE X or alter the consequences of any such termination from those specified in ARTICLE X.

ARTICLE V

MUTUAL RELEASES; INDEMNIFICATION; COOPERATION; INSURANCE

Section 5.01. Release of Pre-Distribution Claims.

(a) Except as provided in Section 5.01(c) and Section 5.01(d), effective as of the Effective Time, SpinCo does hereby, for itself and each other SpinCo Group Member, their respective successors and assigns and Affiliates, and, to the extent permitted by Law, all Persons who at any time prior to the Effective Time have been shareholders, directors, officers, agents or employees of any SpinCo Group Member (in each case, in their respective capacities as such) remise, release and forever discharge (i) Parent and the other Parent Group Members, their respective successors and assigns and Affiliates, (ii) all Persons who at any time prior to the Effective Time are or have been shareholders, directors, officers, agents or employees of any Parent Group Member (in each case, in their respective capacities as such), and their respective heirs, executors, administrators, successors and assigns, and (iii) all Persons who at any time prior to the Effective Time are or have been shareholders, directors, officers, agents or employees of any SpinCo Group Member (in each case, in their respective capacities as such) and who are not, as of immediately following the Effective Time, directors, officers, agents or employees of

 

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SpinCo or a SpinCo Group Member, in each case from (A) all SpinCo Liabilities; (B) all Liabilities arising from or in connection with the transactions and all other activities to implement the Separation and the Distribution and (C) all Liabilities arising from or in connection with actions, inactions, events, omissions, conditions, facts or circumstances occurring or existing prior to the Effective Time (whether or not such Liabilities cease being contingent, mature, become known, are asserted or foreseen, or accrue, in each case before, at or after the Effective Time), in each case to the extent relating to, arising out of or resulting from the Aaron’s Business, the SpinCo Assets or the SpinCo Liabilities.

(b) Except as provided in Section 5.01(c) and Section 5.01(e), effective as of the Effective Time, Parent does hereby, for itself and each other Parent Group Member, their respective successors and assigns and Affiliates, and, to the extent permitted by Law, all Persons who at any time prior to the Effective Time have been shareholders, directors, officers, agents or employees of any Parent Group Member (in each case, in their respective capacities as such) remise, release and forever discharge (i) SpinCo and the other SpinCo Group Members, their respective successors and assigns and Affiliates, (ii) all Persons who at any time prior to the Effective Time are or have been shareholders, directors, officers, agents or employees of any SpinCo Group Member (in each case, in their respective capacities as such), and their respective heirs, executors, administrators, successors and assigns in each case from (A) all Parent Liabilities; (B) all Liabilities arising from or in connection with the transactions and all other activities to implement the Separation and the Distribution and (C) all Liabilities arising from or in connection with actions, inactions, events, omissions, conditions, facts or circumstances occurring or existing prior to the Effective Time (whether or not such Liabilities cease being contingent, mature, become known, are asserted or foreseen, or accrue, in each case before, at or after the Effective Time), in each case to the extent relating to, arising out of or resulting from the Progressive Leasing and Vive Business, the Parent Assets or the Parent Liabilities.

(c) Nothing contained in Section 5.01(a) or Section 5.01(b) shall impair any right of any Person to enforce this Agreement, any Ancillary Agreement or any Intercompany Agreement that is specified in Section 2.04(b) as not to terminate as of the Effective Time, in each case in accordance with its terms. Nothing contained in Section 5.01(a) or Section 5.01(b) shall release any Person from:

(i) any Liability provided in or resulting from any agreement among any Parent Group Member(s) or SpinCo Group Member(s) that is specified in Section 2.04(b) as not to terminate as of the Effective Time, or any other Liability specified in such Section 2.04(b) as not to terminate as of the Effective Time;

(ii) any Liability, contingent or otherwise, assumed, transferred, assigned or allocated to the Group of which such Person is a member in accordance with, or any other Liability of any member of any Group under, this Agreement or any Ancillary Agreement;

(iii) any Liability provided in or resulting from any other agreement or understanding that is entered into after the Effective Time between one Party (and/or a member of such Party’s Group), on the one hand, and the other Party (and/or a member of such Party’s Group), on the other hand;

(iv) any Liability for the sale, lease or receipt of goods, property or services purchased, obtained or used in the ordinary course of business by a member of one Group from a member of the other Group prior to the Effective Time;

(v) any Liability that the Parties may have with respect to indemnification or contribution pursuant to this Agreement or any Ancillary Agreement or otherwise for claims brought against the Parties by Third Parties, which Liability shall be governed by the provisions of this ARTICLE V, and, if applicable, the appropriate provisions of the relevant Ancillary Agreement; or

 

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(vi) any Liability the release of which would result in the release of any Person other than a Person released pursuant to this Section 5.01.

In addition, nothing contained in Section 5.01(a) or Section 5.01(b) shall release any Group Member from honoring its obligations existing immediately prior to the Effective Time to indemnify, or advance expenses to, any Person who was a director, officer or employee of such Group Member at or prior to the Effective Time, to the extent such Person was entitled in such capacity to such indemnification or advancement of expenses pursuant to obligations existing immediately prior to the Effective Time; provided, that if a director, officer or employee receives indemnification payments from Parent (or any Parent Group Member) or SpinCo (or any SpinCo Group Member), as the case may be, with respect to a particular Liability for which such Person is entitled to indemnification, such Person shall not be entitled to receive indemnification payments from the other Party (or any member of such Party’s Group) with respect to the same Liability to the extent of the indemnification payments previously so received by such Person, as the case may be; and provided, further, that to the extent applicable, Section 5.02 or Section 5.03 shall determine whether any Party shall be required to indemnify the other in respect of such Liability.

(d) Without limiting the rights of either Party under Section 5.04, Section 5.05 or Section 5.06, SpinCo shall not make, and shall not permit any other SpinCo Group Member to make, any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification, against Parent or any other Parent Group Member, or any other Person released pursuant to Section 5.01(a), with respect to any Liabilities released pursuant to Section 5.01(a).

(e) Without limiting the rights of either Party under Section 5.04, Section 5.05 or Section 5.06, Parent shall not make, and shall not permit any other Parent Group Member to make, any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification against SpinCo or any other SpinCo Group Member, or any other Person released pursuant to Section 5.01(b), with respect to any Liabilities released pursuant to Section 5.01(b).

(f) It is the intent of each of the Parties hereto by virtue of the provisions of this Section 5.01 to provide for a full and complete release and discharge of all Liabilities existing or arising from all acts and events occurring or failing to occur or alleged to have occurred or to have failed to occur and all conditions existing or alleged to have existed on or before the Effective Time between the Parent Group, on the one hand, and the SpinCo Group, on the other hand (including any contractual agreements or arrangements existing or alleged to exist between the Parties or any of their respective Group Members on or before the Effective Time), except as expressly set forth in Section 5.01(a) or Section 5.01(b). At any time, at the request of the other Party, each Party shall cause each Group Member of its respective Group to execute and deliver releases reflecting the provisions of this Section 5.01.

Section 5.02. Indemnification by SpinCo. Following the Effective Time and subject to Section 5.04, SpinCo shall, and shall cause the other SpinCo Group Members to, indemnify, defend and hold harmless Parent, each other Parent Group Member and each of their respective Affiliates, and each of their respective former and current directors, officers and employees, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the “Parent Indemnitees”), from and against any and all Liabilities of the Parent Indemnitees relating to, arising out of or resulting from, directly or indirectly, any of the following items (without duplication):

(a) any SpinCo Liability;

 

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(b) any failure of SpinCo or any other SpinCo Group Member or any other Person to pay, perform or otherwise promptly discharge any SpinCo Liability in accordance with its terms, whether prior to, at or after the Effective Time;

(c) any breach by SpinCo or any other SpinCo Group Member of this Agreement or any Ancillary Agreement unless such Ancillary Agreement expressly provides for separate indemnification, or for no indemnification, therein (which shall be controlling); and

(d) any breach by SpinCo of any of the representations and warranties made by SpinCo on behalf of itself and the SpinCo Group Members in Section 11.01(e).

in each case, regardless of when or where the loss, claim, accident, occurrence, event or happening giving rise to the Liability took place, or whether any such loss, claim, accident, occurrence, event or happening is known or unknown, or reported or unreported and regardless of whether such loss, claim, accident, occurrence, event or happening giving rise to the Liability existed prior to, on or after the Effective Time or relates to, arises out of or results from actions, inactions, events, omissions, conditions, facts or circumstances occurring or existing prior to, on or after the Effective Time.

Section 5.03. Indemnification by Parent. Following the Effective Time and subject to Section 5.04, Parent shall, and shall cause the other Parent Group Members to, indemnify, defend and hold harmless SpinCo, each other SpinCo Group Member and each of their respective former and current directors, officers and employees, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the “SpinCo Indemnitees”), from and against any and all Liabilities of the SpinCo Indemnitees relating to, arising out of or resulting from, directly or indirectly, any of the following items (without duplication):

(a) any Parent Liability;

(b) any failure of Parent or any other Parent Group Member or any other Person to pay, perform or otherwise promptly discharge any Parent Liability in accordance with its terms, whether prior to, at or after the Effective Time;

(c) any breach by Parent or any other Parent Group Member of this Agreement or any Ancillary Agreement unless such Ancillary Agreement expressly provides for separate indemnification, or for no indemnification, therein (which shall be controlling); and

(d) any breach by Parent of any of the representations and warranties made by Parent on behalf of itself and the Parent Group Members in Section 11.01(e).

in each case, regardless of when or where the loss, claim, accident, occurrence, event or happening giving rise to the Liability took place, or whether any such loss, claim, accident, occurrence, event or happening is known or unknown, or reported or unreported and regardless of whether such loss, claim, accident, occurrence, event or happening giving rise to the Liability existed prior to, on or after the Effective Time or relates to, arises out of or results from actions, inactions, events, omissions, conditions, facts or circumstances occurring or existing prior to, on or after the Effective Time.

 

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Section 5.04. Indemnification Obligations Net of Insurance Proceeds and Third-Party Proceeds.

(a) The Parties intend that any Liability subject to indemnification, contribution or reimbursement pursuant to this Agreement or any Ancillary Agreement will be reduced by (i) Insurance Proceeds that actually reduce the amount of, or are paid to the applicable Indemnitee in respect of, such Liability or (ii) other amounts recovered (net of any out-of-pocket costs or expenses incurred in the collection thereof) from any Third Party that actually reduce the amount of, or are paid to the applicable Indemnitee in respect of, such Liability (“Third-Party Proceeds”). Accordingly, the amount that either Party (an “Indemnifying Party”) is required to pay to any Person entitled to indemnification or reimbursement pursuant to this Agreement (an “Indemnitee”) will be reduced by any Insurance Proceeds or Third-Party Proceeds theretofore actually recovered by or on behalf of the Indemnitee from a Third Party in respect of the related Liability. If an Indemnitee receives a payment required by this Agreement from an Indemnifying Party in respect of any Liability (an “Indemnity Payment”) and subsequently receives Insurance Proceeds or Third-Party Proceeds in respect of such Liability, then the Indemnitee will pay to the Indemnifying Party an amount equal to the excess of the Indemnity Payment received over the amount of the Indemnity Payment that would have been due if such Insurance Proceeds or Third-Party Proceeds had been received, realized or recovered before the Indemnity Payment was made.

(b) The Parties hereby agree that an insurer or any other Third Party that would otherwise be obligated to pay any claim or amount shall not be relieved of the responsibility with respect thereto or have any subrogation rights with respect thereto by virtue of any provision contained in this Agreement or any Ancillary Agreement, it being expressly understood and agreed that no insurer or any other Third Party shall be entitled to a “wind-fall” (i.e., a benefit they would not be entitled to receive in the absence of the indemnification or release provisions), and shall not be deemed to be Third Party beneficiaries, by virtue of any provision of this Agreement or any Ancillary Agreement. Parent and SpinCo shall, and shall cause each Parent Group Member and SpinCo Group Member, respectively, to, use commercially reasonable efforts to seek to collect or recover, or allow the Indemnifying Party to collect or recover, any Insurance Proceeds and any Third-Party Proceeds that may be collectible or recoverable respecting the Liabilities for which indemnification may be available pursuant to this ARTICLE V; provided, however, that any such actions by an Indemnitee will not relieve the Indemnifying Party of any of its obligations under this Agreement, including the Indemnifying Party’s obligation promptly to pay directly or reimburse the Indemnitee for costs and expenses actually incurred by the Indemnified Party. Notwithstanding the foregoing, an Indemnifying Party may not delay making any indemnification payment required under the terms of this Agreement, or otherwise satisfying any indemnification obligation, pending the outcome of any Action to collect or recover Insurance Proceeds or Third Party Proceeds, and an Indemnitee need not attempt to collect any Insurance Proceeds or Third Party Proceeds prior to making a claim for indemnification or receiving any Indemnity Payment otherwise owed to it under this Agreement or any Ancillary Agreement.

Section 5.05. Procedures for Indemnification of Third-Party Claims.

(a) If an Indemnitee shall receive notice or otherwise learn of a Third-Party Claim with respect to which an Indemnifying Party may be obligated to provide indemnification to such Indemnitee pursuant to this Agreement or any Ancillary Agreement, such Indemnitee shall give such Indemnifying Party written notice thereof as soon as reasonably practicable, but no later than fifteen (15) days after becoming aware of such Third-Party Claim (or sooner if the nature of the Third-Party Claim so requires). Any such notice shall describe the Third-Party Claim in reasonable detail, or, in the alternative, include copies of all notices and documents (including court papers) received by the Indemnitee relating to the Third-Party Claim. Notwithstanding the foregoing, the failure of any Indemnitee or other Person to give notice as provided in this Section 5.05(a) shall not relieve the related Indemnifying Party of its obligations under this ARTICLE V, except to the extent that such Indemnifying Party is actually and materially prejudiced by such failure to give notice in accordance with this Section 5.05(a).

 

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(b) With respect to any Third-Party Claim that is not a Shared Action Liability:

(i) The Indemnifying Party shall have the right, exercisable by written notice to the Indemnitee within fifteen (15) calendar days after receipt of notice from an Indemnitee in accordance with Section 5.05(a) (or sooner, if the nature of such Third-Party Claim so requires), to assume and conduct the defense of (and seek to settle or compromise) such Third-Party Claim at its own expense and with its own counsel (which counsel shall be reasonably satisfactory to the Indemnitee) provided that the Indemnifying Party shall agree promptly to reimburse to the extent required under this ARTICLE V the Indemnitee for the full amount of any Liability resulting from such Third-Party Claim. Notwithstanding the foregoing, if the Indemnifying Party assumes such defense and, in the course of defending such Third-Party Claim, (A) the Indemnifying Party discovers that the facts presented at the time the Indemnifying Party acknowledged its indemnification obligation in respect of such Third-Party Claim were not true in all material respects and (B) such untruth provides a reasonable basis for asserting that the Indemnifying Party does not have an indemnification obligation in respect of such Third-Party Claim, then (x) the Indemnifying Party shall not be bound by such acknowledgment, (y) the Indemnifying Party shall promptly thereafter provide the Indemnitee written notice of its assertion that it does not have an indemnification obligation in respect of such Third-Party Claim and (z) the Indemnitee shall have the right to assume the defense of such Third-Party Claim.

(ii) Until such time as the Indemnifying Party has assumed the defense of such Third-Party Claim, the Indemnified Party shall have the right to control the defense of such Third-Party Claim. If the Indemnifying Party (A) elects not to assume the defense of a Third-Party Claim in accordance with this Agreement, (B) fails to notify the Indemnitee that is the subject of such Third-Party Claim, of its election to assume the defense of such Third-Party Claim within fifteen (15) days after the receipt of the notice referred to in Section 5.05(a) (or sooner if the nature of the Third-Party Claim so requires) or (C) after assuming the defense of a Third-Party Claim, fails to take reasonable steps necessary to defend diligently such Third-Party Claim within ten (10) days after receiving written notice from the Indemnitee to the effect that the Indemnifying Party has so failed, the Indemnitee shall be entitled to continue to conduct and control the defense of such Third-Party Claim at the cost and expense of the Indemnifying Party. For the avoidance of doubt, the Indemnitee’s right to indemnification for a Third-Party Claim shall not be adversely affected by assuming the defense of such Third-Party Claim.

(iii) An Indemnitee that does not conduct and control the defense of any Third-Party Claim, or an Indemnifying Party that does not conduct and control the defense of any Third-Party Claim, nevertheless shall have the right to employ separate counsel (including local counsel as necessary) of its own choosing to monitor and participate in (but not control) the defense of any Third-Party Claim for which it is a potential Indemnitee or Indemnifying Party, but the fees and expenses of such counsel shall be at the expense of such Indemnitee or Indemnifying Party; provided, however, that such expense shall be the responsibility of the Indemnifying Party (A) if the Indemnifying Party and the Indemnitee are both named parties to the proceedings and the Indemnitee shall have reasonably concluded that representation of both parties by the same counsel would be inappropriate due to actual or potential conflicts of interest (in which case the Indemnifying Party shall not be responsible for expenses in respect of more than one local counsel for the Indemnitee in any single jurisdiction) or (B) the Indemnitee assumes the defense of the Third-Party Claim pursuant to Section 5.05(b)(ii)(C) after the Indemnifying Party has failed, in the reasonable judgment of the Indemnitee, to diligently defend the Third-Party Claim after having elected to assume its defense. Each Party shall cooperate with the Party entitled to conduct and control the defense of such Third-Party Claim hereunder in such defense and make available to the controlling Party, at the non-controlling Party’s expense, all witnesses, information and materials in such Party’s possession or under such Party’s control relating thereto as are reasonably required by the controlling Party.

 

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(iv) No Indemnifying Party shall settle, compromise or consent to entry of any judgment with respect to any Third-Party Claim without the prior written consent of the applicable Indemnitee or Indemnitees, which consent shall not be unreasonably withheld, delayed or conditioned; provided, however, that, subject to the immediately following provision, such Indemnitee(s) shall not withhold consent if the settlement, compromise or judgment (A) contains no finding or admission of any violation of Law or any violation of the rights of any Person, (B) is solely for monetary damages which the Indemnifying Party has agreed to pay in full and (C) includes a full, unconditional and irrevocable release of the Indemnitee; and provided, further, that in no event shall an Indemnitee be required to consent to any entry of judgment or settlement if the effect thereof is (x) to permit any injunction, declaratory judgment, other order or other nonmonetary relief to be entered, directly or indirectly, against any Indemnitee or (y) in the reasonable judgment of such Indemnitee, as reflected in a written objection delivered by such Indemnitee to the Indemnifying Party within the period of twenty one (21) days following receipt of the request for consent described above, to have a material adverse financial impact or a material adverse effect upon the ongoing operations of such Indemnitee or, if applicable, its Group Members.

(v) Except to the extent an Indemnitee has assumed the defense of a Third-Party Claim pursuant to clause (C) of the second sentence of Section 5.05(b)(ii), no Indemnitee shall settle, compromise or consent to entry of any judgment with respect to any Third-Party Claim without the prior written consent of the applicable Indemnifying Party, which consent shall not be unreasonably withheld, delayed or conditioned.

(vi) The Parties hereby agree that if a Party presents the other Party with a notice containing a proposal to settle or compromise, or consent to the entry of a judgment with respect to, a Third-Party Claim for which either Party is seeking to be indemnified hereunder and the Party receiving such proposal does not respond in any manner to the Party presenting such proposal within thirty (30) days (or within any such shorter time period that may be required by applicable Law or court order) of receipt of such proposal, then the Party receiving such proposal shall be deemed to have consented to the terms of such proposal, including for the purposes of Section 5.05(b)(iv) and Section 5.05(b)(v).

Section 5.06. Direct Claims; Additional Matters.

(a) Any claim for indemnification under this Agreement or any Ancillary Agreement which does not result from a Third-Party Claim (a “Direct Claim”) must be asserted by a written notice given by the Indemnitee to the applicable Indemnifying Party; provided, that the failure by an Indemnitee to so assert any such Direct Claim shall not prejudice the ability of the Indemnitee to do so at a later time except to the extent (if any) that the Indemnifying Party is actually and materially prejudiced thereby. Such Indemnifying Party shall have a period of thirty (30) days after the receipt of such notice within which to respond thereto. If such Indemnifying Party does not respond within such thirty (30) day period, such Indemnifying Party shall be deemed to have refused to accept responsibility to provide indemnification with respect to such claim. If such Indemnifying Party does not respond within such thirty (30) day period or rejects such claim in whole or in part, such Indemnitee shall be free to pursue such remedies as may be available to such Indemnitee as provided by this Agreement or the Ancillary Agreements, as applicable, without prejudice to its continuing rights to pursue indemnification or contribution hereunder.

(b) In the event of payment by or on behalf of any Indemnifying Party to any Indemnitee in connection with any Third-Party Claim, such Indemnifying Party shall be subrogated to and shall stand in the place of such Indemnitee as to any events or circumstances in respect of which such Indemnitee may have any right, defense or claim relating to such Third-Party Claim against any claimant or plaintiff asserting such Third-Party Claim or against any other Person. Such Indemnitee shall cooperate with such Indemnifying Party in a reasonable manner, and at the cost and expense of such Indemnifying Party, in prosecuting any subrogated right, defense or claim.

 

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(c) In the event of an Action relating to a Liability that has been allocated to an Indemnifying Party pursuant to the terms of this Agreement or any Ancillary Agreement in which the Indemnifying Party is not a named defendant, if the Indemnifying Party shall so request, the Parties shall endeavor to substitute the Indemnifying Party for the named defendant or add the Indemnifying Party as an additional named defendant, to the extent practicable. If such substitution or addition cannot be achieved for any reason or is not requested, the named defendant shall allow the Indemnifying Party to manage the Action as set forth in, and subject to, Section 5.05 and this Section 5.06, the Indemnifying Party shall fully indemnify the named defendant against all costs of defending the Action (including court costs, sanctions imposed by a court, attorneys’ fees, experts, fees and all other external expenses), the costs of any judgment or settlement and the cost of any interest or penalties relating to any judgment or settlement.

(d) If (i) a Party incurs any Liability arising out of this Agreement or any Ancillary Agreement; (ii) an adequate legal or equitable remedy is not available for any reason against the other Party to satisfy the Liability incurred by the incurring Party; and (iii) a legal or equitable remedy may be available to the other Party against a Third Party for such Liability, then the other Party shall use its commercially reasonable efforts to cooperate with the incurring Party, at the incurring Party’s expense, to permit the incurring Party to obtain the benefits of such legal or equitable remedy against the Third Party.

(e) Indemnity Payments or contribution payments in respect of any Liabilities for which an Indemnitee is entitled to indemnification or contribution under this ARTICLE V shall be paid reasonably promptly (but in any event within sixty (60) days of the final determination of the amount that the Indemnitee is entitled to indemnification or contribution under this ARTICLE V) by the Indemnifying Party to the Indemnitee as such Liabilities are incurred upon demand by the Indemnitee, including reasonably satisfactory documentation setting forth the basis for the amount of such Indemnity Payments or contribution payments, including documentation with respect to calculations made and consideration of any Insurance Proceeds that actually reduce the amount of such Liabilities. The indemnity and contribution provisions contained in this ARTICLE V shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of any Indemnitee; and (ii) the knowledge by the Indemnitee of Liabilities for which it might be entitled to indemnification or contribution hereunder. THE PARTIES UNDERSTAND AND AGREE THAT THE RELEASE FROM LIABILITIES AND INDEMNIFICATION OBLIGATIONS HEREUNDER AND UNDER THE ANCILLARY AGREEMENTS MAY INCLUDE RELEASE FROM LIABILITIES AND INDEMNIFICATION FOR LOSSES RELATING TO, RESULTING FROM, OR ARISING OUT OF, DIRECTLY OR INDIRECTLY AND IN WHOLE OR IN PART, AN INDEMNITEE’S OWN NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL FAULT.

(f) In the event that an Indemnity Payment pursuant to this ARTICLE V shall be denominated in a currency other than United States dollars, the amount of such payment shall be translated into United States dollars using the most recent foreign exchange rate of the applicable currency set forth in the exchange rate section of The Wall Street Journal as of the date that notice of the claim with respect to such Liability shall be given to the Indemnifying Party.

(g) The provisions of Section 5.02 through Section 5.12 hereof shall not apply with respect to Taxes or Tax matters (including the control of Tax related proceedings), which shall be governed by the TMA.

 

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Section 5.07. Management of Certain Actions and Shared Actions. This Section 5.07 shall govern the management and direction of pending and future Actions in which members of the Parent Group or the SpinCo Group are named as parties, but shall not alter the allocation of Liabilities set forth in ARTICLE II unless otherwise expressly set forth in this Section 5.07.

(a) From and after the Distribution, the SpinCo Group shall direct the defense or prosecution of any (i) Actions set forth on Schedule V and (ii) Actions (other than Actions set forth on Schedule V) that constitute only SpinCo Liabilities or involve only SpinCo Assets. If an Action that constitutes only a SpinCo Liability or involves only SpinCo Assets is commenced after the Distribution naming a member of the Parent Group as a party thereto, then SpinCo shall use its reasonable best efforts to cause such member of the Parent Group to be removed as a party to such Action and Parent shall use reasonable best efforts to cooperate with SpinCo’s effort.

(b) From and after the Distribution, the Parent Group shall direct the defense or prosecution of any of any (i) Actions set forth on Schedule VI and (ii) Actions (other than Actions set forth on Schedule VI) that constitute only Parent Liabilities or involve only Parent Assets. If an Action that constitutes only a Parent Liability or involves only Parent Assets is commenced after the Distribution naming a member of the SpinCo Group as a party thereto, then Parent shall use its reasonable best efforts to cause such member of the SpinCo Group to be removed as a party to such Action and SpinCo shall use reasonable best efforts to cooperate with Parent’s effort.

(c) From and after the Distribution, the Parties shall separately but cooperatively manage (whether as co-defendants or co-plaintiffs) any Shared Actions. The Parties shall reasonably cooperate and consult with each other, and to the extent permissible and necessary or advisable, maintain a joint defense in a manner that would preserve for both Parties and their respective Affiliates any attorney-client privilege, joint defense or other privilege with respect to any Shared Action. Notwithstanding anything to the contrary herein, and except as set forth in Schedule III, the Parties may jointly retain counsel (in which case the cost of counsel shall be shared equally by the Parties) or retain separate counsel (in which case each Party will bear the cost of its separate counsel) with respect to any Shared Action; provided that the Parties shall bear their own discovery costs and shall share equally joint litigation costs. In any Shared Action, each of Parent and SpinCo may pursue separate defenses, claims, counterclaims or settlements to those claims relating to the Progressive Leasing and Vive Business or the Aaron’s Business, respectively; provided that each Party shall in good faith make reasonable best efforts to avoid adverse effects on the other Party. Notwithstanding anything to the contrary herein, (i) if a judgment is obtained with respect to a Shared Action, the Parties shall endeavor in good faith to allocate the Liabilities in respect of such judgment between them based on the Progressive Leasing and Vive Business and the Aaron’s Business, and otherwise shall share equally such Liabilities and (ii) if a recovery is obtained with respect to a Shared Action, the Parties shall endeavor in good faith to allocate the Assets in respect of such recovery between them based on their respective injuries, and otherwise shall share equally such Assets. A Party that is not named as a defendant in a Shared Action may elect to become a Party to such Shared Action, and the Party named in such Shared Action shall reasonably cooperate to have such first Party named in such Shared Action.

(d) No Party managing an Action pursuant to Section 5.07 shall consent to entry of any judgment or enter into any settlement of or compromise any such Action without the prior written consent of the other Party (not to be unreasonably withheld, conditioned or delayed); provided, however, that such non-managing Party shall be required to consent to such entry of judgment or to such settlement that the managing Party may recommend if the judgment or settlement (i) contains no finding or admission of any violation of Law or any violation of the rights of any Person, (ii) involves only monetary relief which the managing Party has agreed to pay and (iii) includes a full and unconditional release of the non-managing Party. Notwithstanding the foregoing, in no event shall a non-managing Party be required to consent to an entry of judgment or settlement if the effect thereof (x) is to permit any injunction, declaratory judgment, other order or other nonmonetary relief to be entered, directly or indirectly, against the non-managing

 

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Party’s Group or (y) in the reasonable judgment of such non-managing Party, as reflected in a written objection delivered by such non-managing Party to the managing Party within the period of twenty one (21) days following receipt of the request for consent described above, to have a material adverse financial impact or a material adverse effect upon the ongoing operations of such non-managing Party or, if applicable, its Group Members.

Section 5.08. Right of Contribution.

(a) If any right of indemnification contained in Section 5.02 or Section 5.03 is held unenforceable or is unavailable for any reason (other than in accordance with the terms of this Agreement, in which case this Section 5.08 shall not apply), or is insufficient to hold harmless an Indemnitee in respect of any Liability for which such Indemnitee is entitled to indemnification hereunder, then the Indemnifying Party shall contribute to the amounts paid or payable by the Indemnitees as a result of such Liability (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and its Group Members, on the one hand, and the Indemnitees entitled to contribution, on the other hand, as well as any other relevant equitable considerations.

(b) Solely for purposes of determining relative fault pursuant to this Section 5.08: (i) any fault associated with the business conducted with the Assets and Liabilities subject to Section 2.02 where such Assets and Liabilities are SpinCo Assets or SpinCo Liabilities and Parent or a Parent Group Member is the Intended Transferor with respect to such Assets or Liabilities (except for the gross negligence or intentional misconduct of Parent or a Parent Group Member) shall be deemed to be the fault of SpinCo and the other SpinCo Group Members, and no such fault shall be deemed to be the fault of Parent or any other Parent Group Member; (ii) any fault associated with the business conducted with the Assets and Liabilities subject to Section 2.02 where such Assets and Liabilities are Parent Assets or Parent Liabilities and SpinCo or a SpinCo Group Member is the Intended Transferor (except for the gross negligence or intentional misconduct of SpinCo or a SpinCo Group Member) shall be deemed to be the fault of Parent and the other Parent Group Members, and no such fault shall be deemed to be the fault of SpinCo or any other SpinCo Group Member; (iii) any fault associated with the ownership, operation or activities of the Progressive Leasing and Vive Business prior to the Effective Time shall be deemed to be the fault of Parent and the Parent Group Members, and no such fault shall be deemed to be the fault of SpinCo and the other SpinCo Group Members; and (iv) any fault associated with the ownership, operation or activities of the Aaron’s Business prior to the Effective Time shall be deemed to be the fault of SpinCo and the SpinCo Group Member, and no such fault shall be deemed to be the fault of Parent or any other Parent Group Member. The Parties agree that it would not be just and equitable if contribution were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above.

(c) The provisions of Section 5.04 through Section 5.12 and Section 8.02 through Section 8.05 shall govern any contribution claims.

Section 5.09. Covenant Not to Sue. Each Party hereby covenants and agrees that none of it, its Group Members, or any Person claiming through it shall bring suit or otherwise assert any claim against any Indemnitee, or assert a defense against any claim asserted by any Indemnitee, before any court, arbitrator, neutral mediator or administrative agency anywhere in the world, alleging that: (a) the assumption or retention of any SpinCo Liabilities by SpinCo and other SpinCo Group Members on the terms and conditions set forth in this Agreement and the Ancillary Agreements is void or unenforceable for any reason; (b) the assumption or retention of any Parent Liabilities by Parent and the Parent Group Members on the terms and conditions set forth in this Agreement and the Ancillary Agreements is void or unenforceable for any reason, or (c) the provisions of this ARTICLE V are void or unenforceable for any reason.

 

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Section 5.10. Remedies Cumulative. The remedies provided in this ARTICLE V shall be cumulative and, subject to the provisions of ARTICLE VIII, shall not preclude assertion by any Indemnitee of any other rights or the seeking of any and all other remedies against any Indemnifying Party; provided that the procedures set forth in this ARTICLE V shall be the exclusive procedures governing any indemnity action brought under this Agreement.

Section 5.11. Survival of Indemnities. The rights and obligations of each of Parent and SpinCo and their respective Indemnitees under this Agreement, including this ARTICLE V shall survive (a) the sale or other transfer by any Party or its Affiliates of any Assets or businesses or the assignment by it of any Liabilities or (b) any merger, consolidation, business combination, sale of all or substantially all of its Assets, restructuring, recapitalization, reorganization or similar transaction involving any Parent Group Member or SpinCo Group Member.

Section 5.12. Limitation on Liability. IN NO EVENT SHALL PARENT, SPINCO OR ANY OTHER GROUP MEMBER HAVE ANY LIABILITY TO THE OTHER OR TO ANY OTHER GROUP MEMBER, OR TO ANY OTHER SPINCO INDEMNITEE OR PARENT INDEMNITEE, AS APPLICABLE, UNDER THIS AGREEMENT OR ANY ANCILLARY AGREEMENT FOR ANY SPECIAL, PUNITIVE OR EXEMPLARY DAMAGES, WHETHER OR NOT CAUSED BY OR RESULTING FROM NEGLIGENCE OR BREACH OF OBLIGATIONS HEREUNDER AND WHETHER OR NOT INFORMED OF THE POSSIBILITY OF THE EXISTENCE OF SUCH DAMAGES; PROVIDED, HOWEVER, THAT THE PROVISIONS OF THIS SECTION 5.12 SHALL NOT LIMIT AN INDEMNIFYING PARTY’S INDEMNIFICATION OBLIGATIONS HEREUNDER WITH RESPECT TO ANY LIABILITY ANY INDEMNITEE MAY HAVE TO ANY THIRD PARTY FOR ANY SPECIAL, PUNITIVE OR EXEMPLARY DAMAGES, EXCEPT AS OTHERWISE PROVIDED IN THE ANCILLARY AGREEMENTS.

Section 5.13. Insurance Matters.

(a) The Parties intend by this Agreement that, to the extent permitted under the terms of any applicable occurrence-based insurance policy, each of Parent and SpinCo, their respective Group Members, and each of their respective directors, officers and employees will have and will be fully entitled to continue to exercise all rights that any of them may have as of the Effective Time as an insured, additional insured, or loss payee under any occurrence-based policy or any agreements related to such occurrence-based policies in effect before the Effective Time, with respect to events occurring before the Effective Time. The party to whom each occurrence-based insurance program is assigned at the Effective Time is specified on Section 5.13 of the Disclosure Schedules, and the counterparty will continue to have rights to pursue coverage under such policy(s) pursuant to the terms of this Section 5.13.

(b) The Parties intend by this Agreement that, to the extent permitted under the terms and conditions of any applicable claims made or discovery insurance policy, each of Parent and SpinCo, their respective Group Members, and each of their respective directors, officers and employees will continue to exercise all rights that any of them may have as of the Effective Time as an insured, additional insured, or loss payee under any claims made or discovery insurance policy, or any agreements related to such claims made or discovery policies in effect before the Effective Time, with respect to events occurring before the Effective Time. The respective entity inheriting each claims made or discovery insurance program is specified on Section 5.13 of the Disclosure Schedules, and the counterparty will have rights to coverage under such policy(s) pursuant to the terms of this Section 5.13.

(c) After the Effective Time, Parent (and each other Parent Group Member) and SpinCo (and each other SpinCo Group Member) shall not, without the consent of Parent or SpinCo, respectively (such consent not to be unreasonably withheld, conditioned or delayed), provide any insurance carrier with a

 

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release or amend, modify or waive any rights under any insurance policy if such release, amendment, modification or waiver thereunder would materially adversely affect any rights of any Group Member of the other Party with respect to insurance coverage otherwise afforded to such other Party for pre-Distribution claims; provided, however, that the foregoing shall not (i) preclude any Group Member from presenting any claim or from exhausting any policy limit, (ii) require any Group Member to pay any premium or other amount or to incur any Liability or (iii) require any Group Member to renew, extend or continue any policy in force.

(d) The provisions of this Agreement are not intended to relieve any insurer of any Liability under any policy.

(e) No member of the Parent Group or any Parent Indemnitee will have any Liabilities whatsoever as a result of the insurance policies in effect at any time before the Effective Time, including as a result of (i) the level or scope of any insurance, (ii) the creditworthiness of any insurance carrier, (iii) the terms and conditions of any policy, or (iv) the adequacy or timeliness of any notice to any insurance carrier with respect to any claim or potential claim.

(f) Except to the extent otherwise provided in Section 5.13(c), in no event will Parent, any other Parent Group Member or any Parent Indemnitee have any Liability or obligation whatsoever to any SpinCo Group Member if any insurance policy is terminated by an insurer, is unavailable due to liquidation of an insurer, or inadequate to cover any Liability of any SpinCo Group Member for any reason whatsoever, or is not renewed or extended beyond the current expiration date of any such insurance policy.

(g) This Agreement shall not be considered an attempted assignment of any policy of insurance or a contract of insurance and shall not be construed to waive any right or remedy of any Parent Group Member in respect of any insurance policy or any other contract or policy of insurance.

(h) Nothing in this Agreement will be deemed to restrict any SpinCo Group Member from acquiring at its own expense any other insurance policy in respect of any Liabilities or covering any period.

(i) To the extent that any insurance policy provides for the reinstatement of policy limits, and both Parent and SpinCo desire to reinstate such limits, the cost of reinstatement will be shared by Parent and SpinCo as the Parties may agree. If either Party, in its sole discretion, determines that such reinstatement would not be beneficial, that Party shall not contribute to the cost of reinstatement and will not make any claim thereunder nor otherwise seek to benefit from the reinstated policy limits.

(j) Upon the reasonable request of the other Party, each of SpinCo and Parent will share such information as is reasonably necessary in order to permit the other Party to manage and conduct its insurance matters in an orderly fashion and provide the other Party with any assistance that is reasonably necessary or beneficial in connection with such Party’s insurance matters.

Section 5.14. Guarantees, Letters of Credit and Other Obligations.

(a) On or prior to the Effective Time or as soon as practicable thereafter, Parent shall (with the reasonable cooperation of the applicable Parent Group Members) use its commercially reasonable efforts to have any SpinCo Group Members removed as guarantor of or obligor for any Parent Liability. On or prior to the Effective Time or as soon as practicable thereafter, SpinCo shall (with the reasonable cooperation of the SpinCo Group Members) use its commercially reasonable efforts to have any Parent Group Members removed as guarantor of or obligor for any SpinCo Liabilities.

 

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(b) On or prior to the Effective Time or as soon as practicable thereafter, (i) to the extent required to obtain a release from a guarantee, letter of credit or other obligation of any SpinCo Group Member with respect to Parent Liabilities, Parent shall execute a substitute document in the form of any such existing guarantee or letter of credit, as applicable, or such other form as is agreed to by the relevant parties to such guarantee agreement, letter of credit or other obligation, except to the extent that such existing guarantee contains representations, covenants or other terms or provisions either (A) with which Parent would be reasonably unable to comply or (B) which would be reasonably expected to be breached and (ii) to the extent required to obtain a release from a guarantee, letter of credit or other obligation of any Parent Group Member with respect to SpinCo Liabilities, SpinCo shall execute a substitute document in the form of any such existing guarantee or letter of credit, as applicable, or such other form as is agreed to by the relevant parties to such guarantee agreement, letter of credit or other obligation, except to the extent that such existing guarantee contains representations, covenants or other terms or provisions either (A) with which SpinCo would be reasonably unable to comply or (B) which would be reasonably expected to be breached.

(c) If the Parties are unable to obtain, or to cause to be obtained, any such required removal as set forth in Section 5.14(a) and Section 5.14(b), (i) with respect to Parent Liabilities, (A) Parent shall, and shall cause the other Parent Group Members to, indemnify, defend and hold harmless each of the SpinCo Indemnitees from and against any Liability arising from or relating to such guarantee, letter of credit or other obligation, as applicable, and shall, as agent or subcontractor for the SpinCo Group guarantor or obligor, pay, perform and discharge fully all of the obligations or other Liabilities of such guarantor or obligor thereunder, and (B) Parent shall not, and shall cause the other Parent Group Members not to, agree to renew or extend the term of, increase any obligations under, or transfer to a third Person, any loan, guarantee, letter of credit, lease, contract or other obligation for which a SpinCo Group Member is or may be liable unless all obligations of the SpinCo Group Members with respect thereto are thereupon terminated by documentation satisfactory in form and substance to SpinCo in its sole and absolute discretion and (ii) with respect to SpinCo Liabilities, (A) SpinCo shall, and shall cause the other SpinCo Group Members to, indemnify, defend and hold harmless each of the Parent Indemnitees for any Liability arising from or relating to such guarantee, letter of credit or other obligation, as applicable, and shall, as agent or subcontractor for the applicable Parent Group guarantor or obligor, pay, perform and discharge fully all of the obligations or other Liabilities of such guarantor or obligor thereunder, and (B) SpinCo shall not, and shall cause the other SpinCo Group Members not to, agree to renew or extend the term of, increase any obligations under, or transfer to a third Person, any loan, guarantee, letter of credit, lease, contract or other obligation for which a Parent Group Member is or may be liable unless all obligations of the Parent Group Members with respect thereto are thereupon terminated by documentation satisfactory in form and substance to Parent in its sole and absolute discretion.

ARTICLE VI

ACCESS TO INFORMATION; CONFIDENTIALITY

Section 6.01. Agreement for Exchange of Information; Archives.

(a) Except in the case of an adversarial Action or threatened adversarial Action by either Parent or SpinCo or a Person or Persons in its Group against the other Party or a Person or Persons in its Group, and subject to Section 6.01(b), each of Parent and SpinCo, on behalf of its respective Group (in such capacity, the “Providing Party”), shall provide, or cause to be provided, to the other Party (the “Requesting Party”), at any time after the Effective Time, as soon as reasonably practicable after written request therefor, any Information (or a copy thereof) in the possession or under the control of the Providing Party or its Group Members to the extent that (i) such Information relates to the Aaron’s Business, or any SpinCo Asset (including, for the avoidance of doubt, any SpinCo Intellectual Property)

 

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or SpinCo Liability, if SpinCo is the requesting Party, or to the Progressive Leasing and Vive Business, or any Parent Assets or Parent Liability, if Parent is the requesting Party; (ii) such Information is required by the requesting Party to comply with its obligations under this Agreement or any Ancillary Agreement; or (iii) such Information is required by the requesting Party to comply with any obligation imposed by any Governmental Authority, including the Commission; provided, however, that, in the event that the Information requested by the requesting Party is not owned by the requesting Party and the Providing Party determines that any such provision of Information could be commercially detrimental, violate any Law or agreement, or, subject to the provisions of Section 6.08, waive any attorney-client privilege or attorney work product protection or other applicable privilege or immunity, such Party shall not be required to provide access to or furnish such Information to the other Party; provided, however, that both Parent and SpinCo shall take all commercially reasonable measures to permit the compliance with this Section 6.01(a) in a manner that avoids any such harm or consequence. Both Parent and SpinCo intend that any provision of access to or the furnishing of Information pursuant to this Section 6.01 that would otherwise be within the ambit of any legal privilege shall not operate as waiver of such privilege. The Providing Party shall only be obligated to provide such Information in the form, condition and format in which it then exists and in no event shall such Providing Party be required to perform any improvement, modification, conversion, updating or reformatting of any such Information, and nothing in this Section 6.01(a) shall expand the obligations of the Parties under Section 6.04.

(b) Without limiting, and subject to, the foregoing, until the first SpinCo fiscal year end occurring after the Effective Time (and for a reasonable period of time afterwards as required for each of SpinCo and Parent to prepare consolidated financial statements or complete a financial statement audit for the fiscal year during which the Distribution Date occurs), each of SpinCo and Parent shall use its commercially reasonable efforts to cooperate with the Requesting Party’s Information requests to enable (i) the Requesting Party to meet its timetable for dissemination of its earnings releases, financial statements and management’s assessment of the effectiveness of its disclosure controls and procedures and its internal control over financial reporting in accordance with Items 307 and 308, respectively, of Regulation S-K promulgated under the Exchange Act and (ii) the Requesting Party’s auditors to timely complete their annual audit and quarterly reviews of financial statements, including, to the extent applicable, such auditor’s audit of its internal control over financial reporting and management’s assessment thereof in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, the Commission’s and Public Company Accounting Oversight Board’s rules and auditing standards thereunder and any applicable Laws. As part of such efforts, to the extent requested by the Requesting Party and reasonably necessary for the purposes described in clauses (i) and (ii) of the foregoing sentence, the other Party shall authorize and direct its auditors to make available to the Requesting Party’s auditors, within a reasonable time prior to the date of the Requesting Party’s auditors’ opinion or review report, both (x) the personnel who performed or will perform the annual audits and quarterly reviews of such other Party and (y) work papers related to such annual audits and quarterly reviews, to enable the Requesting Party’s auditors to perform any procedures they consider reasonably necessary to take responsibility for the work of the Requesting Party’s auditors as it relates to the Requesting Party’s auditors’ opinion or report.

(c) Parent and SpinCo each agree that it will only process personal data provided to it by the other Group in accordance with all applicable privacy and data protection Law obligations and will implement and maintain at all times appropriate technical and organizational measures to protect such personal data against unauthorized or unlawful processing and accidental loss, destruction, damage, alteration and disclosure. In addition, each Party agrees to provide reasonable assistance to the other Party in respect of any obligations under privacy and data protection legislation affecting the disclosure of such personal data to the other Party and will not knowingly process such personal data in such a way to cause the other Party to violate any of its obligations under any applicable privacy and data protection legislation.

 

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(d) To the extent any books or records are subject to restrictions or limitations set forth in the EMA, such restrictions and limitations shall apply to such books or records, notwithstanding any provisions of this Agreement.

(e) Notwithstanding anything in the foregoing, the Parties’ obligations to provide Information and cooperation with respect to Taxes shall be governed by the TMA, and not by this Section 6.01.

Section 6.02. Ownership of Information. The provision of any Information pursuant to Section 6.01 shall not affect the ownership of Information (which shall be determined solely in accordance with the terms of this Agreement and the Ancillary Agreements), or constitute the grant or conference of rights of license or otherwise in or to any such Information.

Section 6.03. Compensation for Providing Information. The Requesting Party agrees to reimburse the Providing Party for the reasonable costs, if any, of creating, gathering, copying, transporting and otherwise complying with the request with respect to such Information (including any reasonable costs and expenses incurred in any review of Information for purposes of protecting the Privileged Information of the Providing Party or in connection with the restoration of backup media for purposes of providing the requested Information). Except as may be otherwise specifically provided elsewhere in this Agreement or in any Ancillary Agreement, such costs shall be computed in accordance with the Providing Party’s standard methodology and procedures and if there is no such standard methodology and procedures, then on a commercially reasonable basis.

Section 6.04. Record Retention.

(a) Except as otherwise required by Law or agreed in writing, or as otherwise provided in any Ancillary Agreement, each Parent Group Member and each SpinCo Group Member shall use its commercially reasonable efforts to retain, for the retention periods set forth in Parent’s record retention policies and procedures as in effect as of the Effective Time, such other commercially reasonable policies and procedures as may be in adopted by the applicable Group after the Effective Time as provided herein, or such longer period as required by Law, this Agreement or the Ancillary Agreements, all Information in such Group Member’s possession substantially relating to the other Group or its businesses, its former businesses, its Assets or Liabilities, this Agreement or the Ancillary Agreements (the “Retained Information”). Each Parent Group Member or SpinCo Group Member may amend its record retention policy after the Effective Time so long as (i) the amended policy complies with applicable Law, (ii) the amended policy treats the Retained Information in the same manner as such Group Member’s other Information and (iii) the amended policy does not allow for the destruction of any Retained Information prior to the earliest date after the Effective Time on which such member would have been able to destroy such Retained Information under the applicable Parent Group policy in effect as of the Effective Time. If any member of either Group amends its record retention policy in compliance with the preceding sentence in a manner that reduces the retention period for any Retained Information, it shall provide SpinCo, in the case of any such amendment by a Parent Group Member, or Parent, in the case of any such amendment by a SpinCo Group Member, written notice detailing the changes to the record retention policy, and the Party receiving such notice and its Group Members shall have the opportunity to obtain any Retained Information that would be eligible for destruction under the revised policy at least ninety (90) days prior to the destruction of such Retained Information. Notwithstanding the foregoing, the TMA will govern the retention of Tax related records and the exchange of Tax related information, and the EMA will govern the retention of employment and benefits related records.

(b) Without limiting the foregoing:

 

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(i) The Parties agree and acknowledge that it is not practicable to separate all Tangible Information belonging to the Parties, and that following the Effective Time, each Party will have some of the Tangible Information of the other Party stored at internal or Third Party records storage locations (each, a “Records Facility”). Tangible Information held in a Records Facility maintained or arranged for by the Party other than the Party that owns such Tangible Information is referred to as “Stored Records”. The Party that maintains the Records Facility where Stored Records are held is referred to as the “Custodial Party” and the Party that owns the Stored Records held in the other Party’s Records Facility is referred to as the “Non-Custodial Party”.

(ii) Each Party shall use commercially reasonable efforts: (A) to maintain the Stored Records as to which it is the Custodial Party in accordance with its regular records retention policies and procedures and the terms of this Section 6.04; and (B) to comply with the requirements of any litigation hold that relates to Stored Records as to which it is the Custodial Party that relate to (x) any Action that is pending as of the Effective Time; or (y) any Action that arises or becomes threatened or reasonably anticipated after the Effective Time as to which the Custodial Party has received a notice of the applicable litigation hold from the Non-Custodial Party.

Section 6.05. Financial Information Certifications.

(a) In order to enable the principal executive officer(s), principal financial officer(s) and principal accounting officer(s) (as such terms are defined in the rules and regulations of the Commission) of Parent to make any certifications required of them under Section 302 or 906 of the Sarbanes-Oxley Act of 2002 and the applicable rules and regulations thereunder, SpinCo shall, within a reasonable period of time following a request from Parent in anticipation of filing such reports, provide Parent with certifications in support of the certifications of Parent’s principal executive officer(s), principal financial officer(s) and principal accounting officer(s) required under Section 302 or 906 of the Sarbanes-Oxley Act of 2002 and the applicable rules and regulations thereunder with respect to Parent’s Quarterly Report on Form 10-Q filed with respect to the fiscal quarter during which the Distribution Date occurs (unless such quarter is the fourth fiscal quarter), each subsequent fiscal quarter through the third fiscal quarter of the year in which the Distribution Date occurs and Parent’s Annual Report on Form 10-K filed with respect to the fiscal year during which the Distribution Date occurs. Such certifications shall be provided in substantially the same form and manner as Parent officers and other key executives provided to the principal executive officer(s), principal financial officer(s) and principal accounting officer(s) of Parent prior to the Effective Time (reflecting any changes in certifications necessitated by the Spin-Off or any other transactions related thereto) or as otherwise agreed upon between Parent and SpinCo.

(b) In order to enable the principal executive officer(s), principal financial officer(s) and principal accounting officer(s) (as such terms are defined in the rules and regulations of the Commission) of SpinCo to make any certifications required of them under Section 302 or 906 of the Sarbanes-Oxley Act of 2002 and the applicable rules and regulations thereunder, Parent shall, within a reasonable period of time following a request from SpinCo in anticipation of filing such reports, provide SpinCo with certifications in support of the certifications of SpinCo’s principal executive officer(s), principal financial officer(s) and principal accounting officer(s) required under Section 302 or 906 of the Sarbanes-Oxley Act of 2002 and the applicable rules and regulations thereunder with respect to SpinCo’s Quarterly Report on Form 10-Q filed with respect to the fiscal quarter during which the Distribution Date occurs (unless such quarter is the fourth fiscal quarter), each subsequent fiscal quarter through the third fiscal quarter of the year in which the Distribution Date occurs and SpinCo’s Annual Report on Form 10-K filed with respect to the fiscal year during which the Distribution Date occurs. Such certifications shall be provided in substantially the same form and manner as Parent officers and other key executives provided to the principal executive officer(s), principal financial officer(s) and principal accounting officer(s) of Parent prior to the Effective Time (reflecting any changes in certifications necessitated by the Spin-Off or any other transactions related thereto) or as otherwise agreed upon between Parent and SpinCo.

 

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Section 6.06. Limitations of Liability.

(a) Each of Parent (on behalf of itself and each other member of the Parent Group) and SpinCo (on behalf of itself and each other member of the SpinCo Group) understands and agrees that neither Party is representing or warranting in any way as to the accuracy or sufficiency of any Information exchanged or disclosed under this Agreement.

(b) Neither Parent nor SpinCo shall have any Liability to the other Party in the event that any Information exchanged or provided pursuant to this Agreement that is an estimate or forecast, or that is based on an estimate or forecast, is found to be inaccurate in the absence of willful misconduct by the providing Person. Neither Parent nor SpinCo shall have any Liability to the other Party if any Information is destroyed after commercially reasonable efforts by SpinCo or Parent, as applicable, to comply with the provisions of Section 6.04.

Section 6.07. Litigation Matters; Production of Witnesses; Records; Cooperation.

(a) From and after the Effective Time, SpinCo (or an applicable member of the SpinCo Group) shall assume and, except as provided in ARTICLE V, be responsible for managing, and shall have the authority to manage, the defense or prosecution, as applicable, and resolution (including settlement) of, any SpinCo Action. From and after the Effective Time, Parent (or an applicable member of the Parent Group) shall assume and, except as provided in ARTICLE V, be responsible for managing, and shall have the authority to manage, the defense or prosecution, as applicable, and resolution (including settlement) of, any Parent Action. For the avoidance of doubt and notwithstanding anything to contrary in this Section 6.07(a) or Section 6.07(d), from and after the Effective Time, any Shared Actions and any Actions set forth on Schedule V or Schedule VI shall be managed (including settlement) in accordance with and subject to Section 8.06.

(b) At all times after the Effective Time, but only with respect to a Third-Party Claim (and to avoid doubt, not in the case of an adversarial Action by one Party or its Group Members against the other Party or its Group Members), each of Parent and SpinCo shall, and shall cause the other members of its Group to, use commercially reasonable efforts to make available, upon written request, the former, current and future directors, officers, employees, other personnel and agents of its Group Members (whether as witnesses or otherwise) and any books, records or other documents within its control or that it otherwise has the ability to make available, to the extent that such Person (giving consideration to business demands of such directors, officers, employees, other personnel and agents) or books, records or other documents may reasonably be required in connection with any Action or threatened or contemplated Action (including preparation for such Action) in which Parent or SpinCo, as applicable, may from time to time be involved, regardless of whether such Action is a matter with respect to which indemnification may be sought hereunder. The requesting Party shall bear all reasonable out-of-pocket costs and expenses in connection therewith.

(c) Without limiting the foregoing, the Parties shall use their commercially reasonable efforts to cooperate and consult to the extent reasonably necessary with respect to any Actions or threatened or contemplated Actions against each other’s Group in respect of which both Parties (or their respective Group Members) may have Liabilities or may possess relevant Information, other than an Action by one or more Group Members against one or more Group Members of the other Group.

 

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(d) Upon the reasonable request of Parent or SpinCo, in connection with any Action as to which cooperation contemplated by this ARTICLE VI is requested or provided, Parent and SpinCo will enter into a mutually acceptable common interest agreement so as to maintain, to the extent appropriate and practicable, any applicable attorney-client privilege or work product immunity, or other privilege, immunity or protection of any member of either Group.

Section 6.08. Privileged Matters. The Parties recognize that legal and other professional services that have been and will be provided prior to the Effective Time have been rendered for the collective benefit of each of the Parent Group and each of their respective members and the SpinCo Group and each of their respective members, and that each of the Group Members shall be deemed to be the client with respect to such services. To allocate the interests of each Party in the Privileged Information or any other Information (including, for the avoidance of doubt, any Information about Patents, Trademarks, or Other Intellectual Property) in connection with legal or other professional services that have been provided prior to the Effective Time for the collective benefit of each of the Parties and their respective Group Members, whether or not such a privilege, immunity or protection exists or the existence of which is in dispute (collectively, “Common Privileges”), the Parties hereto agree as follows:

(a) Parent shall be entitled, in perpetuity, to control the assertion or waiver of all privileges, immunities and protections in connection with Privileged Information which relates to activity prior to the Effective Time regarding the Progressive Leasing and Vive Business and, subject to Section 6.08(c), not to the Aaron’s Business, whether or not the Privileged Information is in the possession of or under the control of any Parent Group Member or any SpinCo Group Member. Parent also shall be entitled, in perpetuity, to control the assertion or waiver of all privileges, immunities and protections in connection with Privileged Information which relates to activity prior to the Effective Time regarding any pending or future Action that is, or which Parent reasonably anticipates may become, a Parent Liability and that is not also, or that Parent reasonably anticipates will not become, a SpinCo Liability or a Shared Action Liability, whether or not the Privileged Information is in the possession of or under the control of any Parent Group Member or any SpinCo Group Member.

(b) Subject to Section 6.08(c), SpinCo shall be entitled, in perpetuity, to control the assertion or waiver of all privileges, immunities and protections in connection with Privileged Information which relates to activity prior to the Effective Time regarding the Aaron’s Business and not to the Progressive Leasing and Vive Business, whether or not the Privileged Information is in the possession of or under the control of any Parent Group Member or any SpinCo Group Member. SpinCo also shall be entitled, in perpetuity, to control the assertion or waiver of all privileges, immunities and protections in connection with Privileged Information which relates to activity prior to the Effective Time regarding any pending or future Action that is, or which SpinCo reasonably anticipates may become, a SpinCo Liability and that is not also, or that SpinCo reasonably anticipates will not become, a Parent Liability or a Shared Action Liability, whether or not the Privileged Information is in the possession of or under the control of any Parent Group Member or any SpinCo Group Member.

(c) If the Parties do not agree as to whether certain Information is Privileged Information, then such Information shall be treated as Privileged Information, and the Party that believes that such information is Privileged Information shall be entitled to control the assertion or waiver of all privileges, immunities and protections in connection with any such Information unless the Parties otherwise agree or until a court orders otherwise. The Parties shall use the procedures set forth in ARTICLE IX to resolve any disputes as to whether any information relates to any pending or future Action that is, or is reasonably anticipated to become, a SpinCo Liability or a Parent Liability.

 

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(d) Subject to the restrictions in this Section 6.08, the Parties agree that they shall have equal right to assert all Common Privileges not allocated pursuant to the terms of Section 6.08(a), Section 6.08(b), or Section 6.08(c) (collectively, “Shared Privileges”), and all privileges, immunities and protections relating to any Actions or other matters that involve both Parties (or one or more of their respective Group Members) and in respect of which both Parties have Liabilities under this Agreement (including any Shared Action Liability), and that no such Shared Privilege may be waived by either Party (or any of its Group Members) without the consent of the other Party. Consent shall be in writing, or shall be deemed to be granted unless written objection is made within twenty (20) days after notice upon the other Party requesting such consent.

(e) If a dispute arises between any Parent Group Member, on the one hand, and any SpinCo Group Member, on the other hand, regarding whether a Shared Privilege should be waived to protect or advance the interests of either Party and/or their respective Group Members, each Party agrees that it shall (i) negotiate with the other Party in good faith; (ii) endeavor to minimize any prejudice to the rights of the other Party; and (iii) not unreasonably withhold consent to any request for waiver by the other Party. In the event of any Action or other dispute between or among any of the Parties, or any of their respective Group Members, either such Party may use any Privileged Information in which the other Party or its Group Members has a Shared Privilege, without obtaining the consent of the other Party; provided, that such use shall be limited to the Action or other dispute between the relevant Parties and/or the applicable Group Members, respectively, and shall not operate as or be used by either Party as a basis for asserting a waiver of the Shared Privilege with respect to Third Parties; and provided, further, that the Parties shall, and shall cause their applicable Group Members to, use reasonable efforts to maintain any such Shared Privilege with respect to Third Parties.

(f) Upon receipt by either Party hereto or by any Group Member of its Group of any subpoena, discovery or other request which arguably calls for the production or disclosure of Privileged Information or other Information subject to a Shared Privilege or as to which the other Party or a member of such other Party’s Group has the sole right hereunder to assert a privilege, immunity or protection, or if either Party obtains knowledge that any of its Group’s current or former directors, officers, agents or employees have received any subpoena, discovery or other requests which arguably call for the production or disclosure of such Privileged Information, such Party shall promptly notify the other Party of the existence of the request (which notice shall be in writing and delivered no later than seven (7) Business Days following the receipt of any such subpoena, discovery or other request) and shall provide the other Party a reasonable opportunity to review the Privileged Information or other Information and to assert any rights it or any Group Member of its Group may have under this Section 6.08 or otherwise to prevent the production or disclosure of such Privileged Information. Each Party shall bear its own expenses in connection with any such request.

(g) Any furnishing of, or access to, Information pursuant to this Agreement is made in reliance on the agreement of Parent and SpinCo, as set forth in this ARTICLE VI to maintain the confidentiality of the Privileged Information and to assert and maintain all applicable privileges, immunities and protections. The access to Privileged Information or other Information being granted and the agreement to provide witnesses herein, the furnishing of notices and documents and other cooperative efforts provided hereby, and the transfer of Privileged Information between and among the Parties hereto and of their respective Group Members pursuant hereto shall not be deemed a waiver of any privilege, immunity or protection that has been or may be asserted under this Agreement or otherwise. The Parties further agree that (i) the exchange by one Party to the other Party of any Privileged Information that should not have been transferred pursuant to the terms of this ARTICLE VI shall not be deemed to constitute a waiver of any privilege, immunity or protection that has been or may be asserted under this Agreement or otherwise with respect to such Privileged Information; and (ii) the Party receiving such Privileged Information shall promptly return such Privileged Information to the Party who has the right to assert the privilege, immunity or protection.

 

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(h) In furtherance of, and without limitation to, the Parties’ agreement under this Section 6.08, Parent and SpinCo shall, and shall cause their applicable Group Members to, use reasonable efforts to maintain their respective separate and joint privileges, immunities and/or protections, including by executing joint defense and/or common interest agreements where necessary or useful for this purpose.

Section 6.09. Confidential Information.

(a) Subject to Section 6.09(e) and except as otherwise provided in this Agreement or any Ancillary Agreement, Parent, on behalf of itself and each of the Parent Group Members, and SpinCo, on behalf of itself and each of the SpinCo Group Members, agrees to hold, and to cause its respective directors, officers, employees, agents, accountants, counsel and other advisors and representatives (each, a “Representative”) to hold, in strict confidence, with at least the same degree of care that applies to Parent’s confidential and proprietary information pursuant to policies in effect as of the Effective Time, all business, operations or other information, data or material (in each case whether in written, oral, electronic or other tangible or intangible form) concerning or belonging to the other Party (or its Assets, Liabilities or business) or the other Party’s Group Members (or their respective Assets, Liabilities or businesses) that is either in its possession (including such information in its possession prior to the Effective Time) or furnished by the other Party or the other Party’s Group Members or their respective Representatives at any time pursuant to this Agreement or any Ancillary Agreement (except, in each case, to the extent that such information, data or material has been: (i) in the public domain or generally available to the public, other than as a result of a disclosure by such Party or any of its Group Members or any of their respective Representatives in violation of this Agreement; (ii) later lawfully acquired from other sources by such Party or any of its Group Members, which sources are not themselves bound by a confidentiality obligation or other contractual, legal or fiduciary obligation of confidentiality with respect to such information, data or material; or (iii) independently developed or generated without reference to or use of such information, data or material of the other Party or any of its Group Members) (collectively, “Confidential Information”), and shall not use any such Confidential Information other than for such purposes as may be expressly permitted hereunder or thereunder. If any Confidential Information of one Party or any of its Group Members is disclosed to another Party or any of its Group Members in connection with providing services to such first Party or any of its Group Members under this Agreement or any Ancillary Agreement, then such disclosed Confidential Information shall be used only as required to perform such services.

(b) Each Party agrees not to release or disclose, or permit to be released or disclosed, any Confidential Information to any other Person, except its Representatives who need to know such information in their capacities as such (and who will be advised of their obligations hereunder with respect to such information), and except in compliance with Section 6.09(e).

(c) Without limiting the provision of Section 6.01(c), each Party acknowledges that it and its respective Group Members may presently have and, following the Effective Time, may gain access to or possession of confidential or proprietary information of, or personal information relating to, Third Parties (i) that was received under confidentiality or non-disclosure agreements entered into between such Third Parties, on the one hand, and the other Party or the other Party’s Group Members, on the other hand, prior to the Effective Time; or (ii) that, as between the Parties, was originally collected by the other Party or the other Party’s Group Members and that may be subject to and protected by privacy, data protection or other applicable Laws. As may be provided in more detail in an applicable Ancillary Agreement, each Party agrees that it shall hold, protect and use, and shall cause its Group Members and its and their respective Representatives to hold, protect and use, in strict confidence the confidential and proprietary

 

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information of, or personal information relating to, Third Parties in accordance with privacy, data protection or other applicable Laws and the terms of any agreements that were either entered into before the Effective Time or affirmative commitments or representations that were made before the Effective Time by, between or among the other Party or the other Party’s Group Members, on the one hand, and such Third Parties, on the other hand.

(d) Notwithstanding the limitations set forth in this Section 6.09, with respect to financial and other information related to the SpinCo Group Members for the periods during which such SpinCo Group Members were Subsidiaries of Parent, Parent shall be permitted to disclose such information in its earnings releases, investor calls, rating agency presentations and other similar disclosures to the extent such information has customarily been included by Parent in such disclosures and in its reports, statements or other documents filed or furnished with the Commission in accordance with applicable Law, rules or regulations.

(e) In the event that either Party or any of its Group Members is requested or required (by oral question, interrogatories, requests for information or documents, subpoena, civil investigative demand or similar process) by any Governmental Authority or pursuant to applicable Law to disclose or provide any Confidential Information of the other Party or its Group Members, such Party shall, unless prohibited by such request or requirement of the applicable Governmental Authority or under applicable Law, provide the other Party with written notice of such request or demand as promptly as practicable under the circumstances so that such other Party shall have an opportunity to seek an appropriate protective order, and shall reasonably cooperate with such other Party in connection therewith, at such other Party’s own cost and expense. In the event that such other Party fails to receive such appropriate protective order in a timely manner and the Party receiving the request or demand reasonably determines that its failure to disclose or provide such Confidential Information shall actually prejudice the Party receiving the request or demand, then the Party that received such request or demand may thereafter disclose or provide Confidential Information to the extent required by such Law (as so advised by counsel) or by lawful process or such Governmental Authority and shall use reasonable best efforts to ensure that confidential treatment is accorded such Confidential Information.

ARTICLE VII

CERTAIN INTELLECTUAL PROPERTY MATTERS

Section 7.01. Legal Names and Other Parties Trademarks.

(a) Except as otherwise specifically provided in any Ancillary Agreement or in this ARTICLE VII, promptly after the Effective Time, each Party shall cease (and shall cause all of its respective Group Members to cease): (i) making any use of any names or Trademarks that include (A) any of the Trademarks of the other Party or such other Party’s Affiliates and (B) any names or Trademarks confusingly similar thereto or dilutive thereof, with respect to each Party, of the other Party or any of such other Party’s Affiliates ((A) and (B) collectively, in respect of each Party in reference to the other Party or such other Party’s Affiliates, the “Other Party Marks”), and (ii) holding themselves out as having any affiliation with the other Party or such other Party’s Affiliates; provided, however, that the foregoing shall not prohibit any Party or any Group Member thereof from (1) in the case of any SpinCo Group Member, making factual and accurate reference in a non-prominent manner that it was formerly affiliated with Parent or in the case of any Parent Group Member, making factual and accurate reference in a non-prominent manner that it was formerly affiliated with SpinCo, (2) making use of any Other Party Mark in a manner that would constitute “fair use” under applicable Law if any unaffiliated Third Party made such use or would otherwise be legally permissible for any unaffiliated Third Party without the consent of the Party owning such Other Party Mark, (3) in connection with publicly displaying materials

 

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in existence as of the Effective Time that are owned by a Party or any Group Member thereof immediately after the Effective Time, but that bear any Other Party Marks, for archival purposes or historical purposes (such as in a museum or museum-like display), and (4) making references in internal historical, corporate and tax records.

(b) Notwithstanding the foregoing requirements of Section 7.01(a), no Group Member shall be required to change any name including the words “Aaron’s” in any Third Party contract or license, or in property records with respect to real or personal property; provided, however, that on a prospective basis from and after the Effective Time each Group Member shall change the name in any new or amended Third Party contract or license or property record.

Section 7.02. Domain Names.

(a) At the expense of SpinCo, each of Parent and SpinCo will use commercially reasonable efforts to ensure the Domain Names in Section 7.02(a) of the Disclosure Schedules are: (i) listed with SpinCo or, on behalf of SpinCo, appropriate local counsel or other designated agent of SpinCo as the owner/registrant; (ii) managed by SpinCo in a SpinCo-controlled registrar account; and (iii) placed on SpinCo domain name servers, in each case within twelve (12) months following the Effective Time.

(b) At the expense of Parent, each of SpinCo and Parent will use commercially reasonable efforts to ensure the Domain Names in Section 7.02(b) of the Disclosure Schedules are: (i) listed with Parent or, on behalf of Parent, appropriate local counsel or other designated agent of Parent as the owner/registrant; (ii) managed by Parent in a Parent-controlled registrar account; and (iii) placed on Parent domain name servers, in each case within twelve (12) months following the Effective Time.

Section 7.03. Licenses to Information and Other Intellectual Property.

(a) Statement of Intent. It is the intent of the Parties, in granting licenses to portions of their respective Information and Other Intellectual Property, to allow: (i) Parent to continue to use Information and Other Intellectual Property that was used by Parent in the conduct of the Progressive Leasing and Vive Business as conducted as of the Effective Time but is owned by SpinCo immediately after the Effective Time, and to continue to conduct the Progressive Leasing and Vive Business as conducted prior to the Effective Time and (ii) SpinCo to use Information and Other Intellectual Property that was used by Parent in the conduct of the Aaron’s Business as conducted as of the Effective Time and is owned by Parent immediately after the Effective Time, and to conduct the Aaron’s Business as conducted by Parent prior to the Effective Time. Each Party agrees, for itself and its respective Group Members, that it will exercise the rights licensed to it under this Section 7.03 in a manner that complies with all applicable Laws.

(b) Licensed SpinCo Information and Licensed SpinCo Other IP.

(i) Subject to the terms and conditions of this Section 7.03(b) and any other applicable provisions of this Agreement, SpinCo grants to Parent (for itself and the beneficial use of the Parent Group Members), and Parent accepts from SpinCo, a non-exclusive, non-transferable (except as expressly provided herein), revocable (only to the extent set forth in Section 7.03(b)(ii)), royalty-free, fully paid-up, worldwide license (without the right to sublicense except as expressly provided below) to use, make, have made, sell, offer for sell, have sold, import, reproduce, copy, distribute, perform, display, modify, duplicate, and create derivative works and improvements of the Licensed SpinCo Information and Licensed SpinCo Other IP, only on and in connection with the conduct of the Progressive Leasing and Vive Business as conducted as of the Effective Time (the “Parent Licensed Purposes”). If any Licensed SpinCo Information or Licensed SpinCo Other IP is, or to the extent that it includes, SpinCo’s

 

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Confidential Information, Parent shall comply with the provisions of this Agreement applicable to its use and disclosure of SpinCo’s Confidential Information. Parent may sublicense the rights licensed to Parent under this Section 7.03(b) to Parent’s contractors only for purposes of providing services to Parent and only for the Parent Licensed Purposes; provided, however, that prior to sublicensing any rights in any Information or Other Intellectual Property that is, or to the extent that it includes, SpinCo’s Confidential Information, Parent shall first require the contractor to execute a binding written agreement pursuant to which such contractor agrees to be bound by provisions directed to the use and disclosure of such Confidential Information that are consistent with Parent’s obligations with respect to such Confidential Information as provided in this Agreement.

(ii) Parent’s license to the Licensed SpinCo Information and the Licensed SpinCo Other IP shall terminate thirty (30) days after its receipt of SpinCo’s written notice of Parent’s breach of any material term of this Agreement applicable to the Licensed SpinCo Information and the Licensed SpinCo Other IP, unless Parent cures such breach and notifies SpinCo in writing of such cure during such thirty (30) day period. In the event of such termination, Parent shall (A) cease any and all use of the Licensed SpinCo Information and the Licensed SpinCo Other IP, and Parent shall have no further right to use the Licensed SpinCo Information and the Licensed SpinCo Other IP anywhere, in any way, or for any purpose, whatsoever, and (B) return, or at SpinCo’s direction, destroy all copies of Licensed SpinCo Information and the Licensed SpinCo Other IP. Unless and until SpinCo terminates Parent’s license to the Licensed SpinCo Information and the Licensed SpinCo Other IP in accordance with this Section 7.03(b)(ii), such license shall be perpetual.

(iii) As between the parties, Parent shall own all derivative works of the Licensed SpinCo Information or Licensed SpinCo Other IP, including all intellectual property rights thereto, created by or on behalf of Parent or any Parent Group Member (“Parent Derivative Works”); provided, however, that to the extent Parent’s or a Parent Group Member’s use of the Parent Derivative Works would infringe, misappropriate, or otherwise violate SpinCo’s copyright or Other Intellectual Property rights in and to the Licensed SpinCo Information or Licensed SpinCo Other IP, (A) Parent (on behalf of itself and the Parent Group Members) may use such Parent Derivative Works only in connection with the Parent Licensed Purposes and only as set forth in this Agreement, and (B) Parent’s right (on behalf of itself and the Parent Group Members) to use and employ such Parent Derivative Works shall terminate upon any termination of the license granted pursuant to this Section 7.03(b).

(c) Licensed Parent Information and Licensed Parent Other IP.

(i) Subject to the terms and conditions of this Section 7.03(c) and any other applicable provisions of this Agreement, Parent hereby grants to SpinCo (for itself and the beneficial use of the SpinCo Group Members), and SpinCo accepts from Parent, a non-exclusive, non-transferable (except as expressly provided herein), revocable (only to the extent set forth in Section 7.03(c)(ii)), royalty-free, fully paid-up, worldwide license (without the right to sublicense except as expressly provided herein) to use, make, have made, sell, offer for sell, have sold, import, reproduce, copy, distribute, perform, display, modify, duplicate, and create derivative works and improvements of the Licensed Parent Information and Licensed Parent Other IP, only on and in connection with the conduct of the Aaron’s Business as conducted as of the Effective Time (the “SpinCo Licensed Purposes”) and only in accordance with this Agreement. If any Licensed Parent Information or Licensed Parent Other IP is, or to the extent that it includes Parent’s Confidential Information, SpinCo shall comply with the provisions of this Agreement applicable to its use and disclosure of Parent’s Confidential Information. SpinCo may sublicense the rights licensed to SpinCo under this Section 7.03(c) to SpinCo’s contractors only for purposes of providing services to SpinCo and only for the SpinCo Licensed Purposes; provided, however, that prior to sublicensing any rights in any Information or Other Intellectual Property that is or includes Parent’s Confidential Information, SpinCo shall first require the contractor to execute a binding written agreement pursuant to which such contractor agrees to be bound by provisions directed to the use and disclosure of such Confidential Information that are consistent with SpinCo’s obligations with respect to such Confidential Information as provided in this Agreement.

 

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(ii) SpinCo’s license to the Licensed Parent Information and the Licensed Parent Other IP shall terminate thirty (30) days after its receipt of Parent’s written notice of SpinCo’s breach of any material term of this Agreement applicable to the Licensed Parent Information and the Licensed Parent Other IP, unless SpinCo cures such breach and notifies Parent in writing of such cure during such thirty (30) day period. In the event of such termination, SpinCo shall (A) cease any and all use of the Licensed Parent Information and the Licensed Parent Other IP, and SpinCo shall have no further right to use the Licensed Parent Information and the Licensed Parent Other IP anywhere, in any way, or for any purpose, whatsoever, and (B) return, or at Parent’s direction, destroy all copies of Licensed Parent Information and the Licensed Parent Other IP. Unless and until Parent terminates SpinCo’s license to the Licensed Parent Information and the Licensed Parent Other IP in accordance with this Section 7.03(c)(ii), such license shall be perpetual.

(iii) As between the parties, SpinCo shall own all derivative works of the Licensed Parent Information or Licensed Parent Other IP, including all intellectual property rights thereto, created by or on behalf of SpinCo or any SpinCo Group Member (“SpinCo Derivative Works”); provided, however, that to the extent SpinCo’s or a SpinCo Group Member’s use of the SpinCo Derivative Works would infringe, misappropriate, or otherwise violate Parent’s copyright or Other Intellectual Property rights in and to the Licensed Parent Information or Licensed Parent Other IP, (A) SpinCo (on behalf of itself and the SpinCo Group Members) may use such Spinco Derivative Works only in connection with the SpinCo Licensed Purposes and only as set forth in this Agreement, and (B) SpinCo’s right (on behalf of itself and the SpinCo Group Members) to use and employ such SpinCo Derivative Works shall terminate upon any termination of the license granted pursuant to this Section 7.03(c).

(d) Use by Subsidiaries.

(i) Any Subsidiary of Parent shall have the same right to use and exploit the Licensed SpinCo Information and the Licensed SpinCo Other IP as Parent. Any Subsidiary of SpinCo shall have the same right to exploit the Licensed Parent Information and the Licensed Parent Other IP as SpinCo. Each Subsidiary that exercises such right shall be bound by, and shall comply with all of the terms and conditions of, this Agreement as though it were “Parent” or “SpinCo,” as applicable, hereunder, but Parent or SpinCo, as applicable, shall at all times remain responsible for all use or other exploitation of the Licensed SpinCo Information, Licensed SpinCo Other IP, Licensed Parent Information, or Licensed Parent Other IP, as applicable, under this Agreement by such Subsidiary.

(ii) If at any time a prior Subsidiary of Parent no longer meets the definition of a Subsidiary of Parent or should cease to exist, such prior Subsidiary shall cease to have the right to use or exploit such Licensed SpinCo Information and Licensed SpinCo Other IP. If at any time a prior Subsidiary of SpinCo no longer meets the definition of a Subsidiary of SpinCo or should cease to exist, such prior Subsidiary shall cease to have the right to exploit such Licensed Parent Information and Licensed Parent Other IP.

ARTICLE VIII

FURTHER ASSURANCES AND ADDITIONAL COVENANTS

Section 8.01. Further Assurances.

 

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(a) Subject to Section 3.03 and ARTICLE IX, in addition to the actions specifically provided for elsewhere in this Agreement, each of the Parties shall, and shall cause each of its respective Group Members to, use commercially reasonable efforts, prior to and after the Effective Time, to take, or cause to be taken, all actions, and to do, or cause to be done, all things, reasonably necessary, proper or advisable under applicable Laws and agreements to consummate and make effective the transactions contemplated by this Agreement and the Ancillary Agreements and to permit the operations of the Progressive Leasing and Vive Business and the Aaron’s Business after the Effective Time; provided, however, that neither Parent nor SpinCo (nor any of their respective Group Members) shall be obligated under this Section 8.01 to pay any consideration, grant any concession or incur any additional Liability to any Third Party other than ordinary and customary fees paid to a Governmental Authority.

(b) Without limiting the foregoing, prior to and after the Effective Time, each Party shall, and shall cause its Group Members to, cooperate with the other Party, without any further consideration, but at the expense of the requesting Party, (i) to execute and deliver, or use commercially reasonable efforts to execute and deliver, or cause to be executed and delivered, all instruments, including any instruments of conveyance, assignment and transfer as such Party may reasonably be requested to execute and deliver by the other Party, (ii) to make, or cause to be made, all filings with, and to obtain, or cause to be obtained, all Consents of any Governmental Authority or any other Person under any permit, license, agreement, indenture or other instrument, to obtain, or cause to be obtained, any Governmental Approvals or other Consents required to effect the Spin-Off, (iii) to make, or cause to be made, all filings with a Governmental Authority necessary to ensure the assignment, transfer or other modification of Governmental Approvals as may be required pursuant to any Environmental Law and (iv) to take, or cause to be taken, all such other actions as such Party may reasonably be requested to take by the other Party from time to time, in each case consistent with the terms of this Agreement and the Ancillary Agreements, in order to effectuate the provisions and purposes of this Agreement and the Ancillary Agreements and the transfers of the Parent Assets and the SpinCo Assets and assignments and assumptions of Parent Liabilities and the SpinCo Liabilities as provided by this Agreement and the other transactions contemplated hereby.

(c) With respect to a particular Asset that (i) if primarily used or held for use in the Aaron’s Business would be a SpinCo Asset and, if not so primarily used or held for use, would be a Parent Asset or (ii) if primarily used or held for use in the Progressive Leasing and Vive Business would be a Parent Asset and, if not so primarily used or held for use, would be a SpinCo Asset, each Party shall, and shall cause its Group Members to, reasonably cooperate with the other Party, without any further consideration, but at the expense of the requesting Party, in an investigation or analysis to determine whether such Asset is a SpinCo Asset or a Parent Asset and, if such determination is made to the reasonable satisfaction of both Parties, confirm in writing the status of such Asset. Each Party hereto shall cooperate with the other Party and use its commercially reasonable efforts to set up procedures and notifications as are reasonably necessary or advisable to effectuate the determination process provided by this Section 8.01(c).

Section 8.02. Late Payments. Except as provided in any Ancillary Agreement, any amount not paid by Group Member to another Group Member when due pursuant to this Agreement or any Ancillary Agreement (and any amounts billed or otherwise invoiced or demanded and properly payable that are not paid within sixty (60) days of the date of such bill, invoice or other demand) shall accrue interest at a rate per annum equal to the Prime Rate plus 2%.

Section 8.03. Inducement. SpinCo acknowledges and agrees that Parent’s willingness to cause, effect and consummate the Separation and the Distribution has been conditioned upon and induced by SpinCo’s covenants and agreements in this Agreement and the Ancillary Agreements, including SpinCo’s assumption of the SpinCo Liabilities pursuant to the Separation and the provisions of this Agreement and SpinCo’s covenants and agreements contained in ARTICLE V.

 

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Section 8.04. Post-Effective Time Conduct. The Parties acknowledge that, after the Effective Time, each Party shall be independent of the other Party, with responsibility for its own actions and inactions and its own Liabilities relating to, arising out of or resulting from the conduct of its business, operations and activities following the Effective Time, except as may otherwise be provided in any Ancillary Agreement, and each Party shall (except as otherwise provided in ARTICLE V, including Section 5.02 and Section 5.03) use commercially reasonable efforts to prevent such Liabilities from being inappropriately borne by the other Party.

Section 8.05. Receipt of Misdirected Assets; Consumer Inquiries.

(a) Except to the extent otherwise provided in connection with Section 2.02, in the event that at any time and from time to time after the Effective Time, Parent or a Parent Group Member shall receive from a Third Party an Asset of the SpinCo Group (including any remittances from account debtors in respect of the SpinCo Group), Parent shall promptly transfer, or cause its Group Member to promptly transfer, such Asset to the appropriate SpinCo Group Member and such SpinCo Group Member shall accept such transfer.

(b) Except to the extent otherwise provided in connection with Section 2.02, in the event that at any time and from time to time after the Effective Time, SpinCo or a SpinCo Group Member shall receive from a Third Party an Asset of the Parent Group (including any remittances from account debtors in respect of the Parent Group), SpinCo shall promptly transfer, or cause its Group Member to promptly transfer, such Asset to the appropriate Parent Group Member and such Parent Group Member shall accept such transfer.

(c) In the event that at any time and from time to time after the Effective Time, Parent or any Parent Group Members shall receive any consumer or Governmental Authority inquiry or complaint relating to any product leased or sold in connection with the Aaron’s Business prior to the Effective Time, Parent shall, or shall cause its Group Member to, promptly forward such consumer or Governmental Authority inquiry or complaint to the appropriate SpinCo Group Member for handling.

(d) In the event that at any time and from time to time after the Effective Time, SpinCo or any SpinCo Group Members shall receive any consumer or Governmental Authority inquiry or complaint relating to any product leased or sold in connection with the Progressive Leasing and Vive Business prior to the Effective Time, Parent shall, or shall cause its Group Member to, promptly forward such consumer or Governmental Authority inquiry or complaint to the appropriate Parent Group Member for handling.

(e) Each Party hereto shall cooperate with the other Party and use its commercially reasonable efforts to set up procedures and notifications as are reasonably necessary or advisable to effectuate the transfers and communications contemplated by this Section 8.05.

ARTICLE IX

DISPUTE RESOLUTION

Section 9.01. Disputes. Except as otherwise specifically provided in any Ancillary Agreement, the procedures for discussion, negotiation and arbitration set forth in this ARTICLE IX shall apply to all disputes, controversies or claims (whether arising in contract, tort or otherwise) that may arise out of, relate to, arise under or in connection with, this Agreement or any Ancillary Agreement, or the transactions contemplated hereby or thereby (including, all actions taken in furtherance of the transactions contemplated hereby or thereby on or prior to the Effective Time), between or among any Parent Group Member and any SpinCo Group Member (collectively, “Disputes”). Each Party hereto agrees on behalf

 

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of itself and its respective Group Members that the procedures set forth in this ARTICLE IX shall be the sole and exclusive remedy in connection with any Dispute, controversy or claim relating to any of the foregoing matters and irrevocably waives any right to commence any Action in or before any Governmental Authority, except as expressly provided in Section 11.13 and except to the extent provided under the Arbitration Act in the case of judicial review of arbitration results or awards. EACH PARTY ON BEHALF OF ITSELF AND ITS RESPECTIVE GROUP MEMBERS IRREVOCABLY WAIVES ANY RIGHT TO ANY TRIAL IN A COURT THAT WOULD OTHERWISE HAVE JURISDICTION OVER ANY CLAIM, CONTROVERSY OR DISPUTE SET FORTH IN THE FIRST SENTENCE OF THIS SECTION 9.01.

Section 9.02. Negotiation and Mediation.

(a) The Parties hereto agree to use commercially reasonable efforts to resolve expeditiously any Dispute between them or any of their respective Group Members with respect to the matters covered hereby that may arise from time to time on a mutually acceptable negotiated basis. In furtherance of the foregoing, and if other means of resolving the Dispute are not effective, a Party hereto involved (or a Group Member of which is involved) in a Dispute, in order to pursue such Dispute further, shall deliver a notice (an “Escalation Notice”) requesting an in-person meeting involving representatives of the Parties hereto at a senior level of management of the Parties hereto (or if the Parties hereto agree, of the appropriate strategic business unit or division within each Party). A copy of any such Escalation Notice shall be given to the General Counsel, or like officer, of each Party involved in the Dispute (which copy shall state that it is an Escalation Notice pursuant to this Agreement). Any agenda, location or procedures for such discussions or negotiations between the Parties may be established by the Parties from time to time; provided, however, that the Parties shall use commercially reasonable efforts to meet within twenty (20) Business Days of the Escalation Notice.

(b) If the Parties are unable to resolve the dispute within thirty (30) Business Days after the date of the Escalation Notice, any Party hereto will have the right to begin arbitration under Section 9.03.

(c) The Parties may, by mutual consent, select a mediator to aid the Parties in their discussions and negotiations. Any opinion expressed by any such mediator shall be strictly advisory and shall not be binding on the Parties, nor shall any opinion expressed by any such mediator be admissible in any arbitration proceedings. Costs of any mediation shall be borne equally by the Parties, except that each Party shall be responsible for its own expenses. Mediation is not a prerequisite to seeking arbitration under Section 9.03.

(d) The Parties agree that all discussions and negotiations between the Parties during the foregoing proceedings will be inadmissible as evidence and without prejudice to the legal position of a Party in any subsequent Action.

Section 9.03. Arbitration.

(a) Except as otherwise set forth herein, any arbitration hereunder will be submitted to and administered by the American Arbitration Association (the “AAA”) in accordance with its Procedures for Large, Complex Commercial Disputes then prevailing (the “AAA Rules”). Unless otherwise agreed by the Parties in writing, any Dispute to be decided in arbitration hereunder shall be decided (i) before a sole arbitrator if the amount subject to such Dispute, together with all then-existing Disputes arising out of substantially the same facts, and inclusive of all claims and counterclaims, totals less than $10 million; or (ii) by an arbitral tribunal of three arbitrators if (A) the amount subject to such Dispute, together with all then-existing Disputes arising out of substantially the same facts, inclusive of all claims and counterclaims, is equal to or greater than $10 million or (B) either Party elects in writing to have such

 

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Dispute decided by three arbitrators; provided, however, that the Party that makes a request referred to in the foregoing clause (B) shall solely bear the increased costs and expenses associated with a panel of three arbitrators (i.e., the additional costs and expenses associated with the two additional arbitrators (as determined by the arbitrator)). In the event that arbitration shall be before an arbitral tribunal of three arbitrators in accordance with clause (ii) of the preceding sentence, any references to the “arbitrator” in this ARTICLE IX shall be deemed to refer to such arbitration panel or each such arbitrator or any such arbitrator, as the context indicates or requires.

(b) If the arbitration shall be before an arbitral tribunal of three independent arbitrators, the panel of three arbitrators shall be chosen as follows: (i) the AAA shall send to the Parties a list setting forth the names of fifteen (15) potential arbitrators and (ii) the Parties shall alternatively strike from the combined list until three names remain, which shall be the selected arbitrators. If the arbitration shall be before a sole arbitrator, then the sole arbitrator shall be appointed by agreement of the Parties within fifteen (15) Business Days from the date of receipt of written demand of either party. If the Parties cannot agree to a sole arbitrator, then upon written application by either party, the sole independent arbitrator shall be appointed as follows: (A) the AAA shall send to the Parties a list setting forth the names of ten (10) potential arbitrators and (B) the Parties shall alternatively strike from the combined list until one name remains, which shall be the selected arbitrators. Any arbitrator selected pursuant to this Section 9.03(b) shall be neutral and disinterested with respect to each of the Parties and the matter and shall be reasonably competent in the applicable subject matter of the Dispute, with any determinations as to whether an arbitrator satisfies such criteria to be made by the AAA.

(c) The arbitrator selected pursuant to Section 9.03(b) will set a time for the hearing of the matter, which will commence no later than 180 days after the selection of the arbitrator pursuant to Section 9.03(b). The arbitrator may extend such period at the arbitrator’s discretion pursuant to a reasoned request from either Party or on the arbitrator’s own initiative if it is necessary to do so. The arbitrator shall use the arbitrator’s best efforts to reach a final decision and render the same in writing to the Parties not later than sixty (60) days after Dispute being fully submitted to the arbitrator for decision, unless otherwise agreed by the Parties in writing. Failure of the arbitrator to do so, however, shall not be a basis for challenging the decision.

(d) The decision of the arbitrator or a majority of the arbitration panel will be final and binding on the Parties, and judgment thereon may be had and will be enforceable in any court having jurisdiction over the Parties. Arbitration awards will bear interest from the date of the award at an annual rate of the Prime Rate plus 5%. To the extent that the provisions of this Agreement and the AAA Rules conflict, the provisions of this Agreement shall govern.

(e) The Parties may obtain and take discovery as permitted by the arbitrator, in the arbitrator’s discretion, including as to the type of discovery and parameters on the timing and/or completion of such discovery, and consistent with the AAA Rules.

(f) The arbitrator shall have full power and authority to determine issues of arbitrability but shall otherwise be limited to interpreting or construing the applicable provisions of this Agreement or any Ancillary Agreement, and will have no authority or power to limit, expand, alter, amend, modify, revoke or suspend any condition or provision of this Agreement or any Ancillary Agreement; it being understood, however, that the arbitrator will have full authority to implement the provisions of this Agreement or any Ancillary Agreement and to fashion appropriate remedies for breaches of this Agreement (including interim or permanent injunctive relief); provided, however, that the arbitrator shall not have (i) any authority in excess of the authority a court having jurisdiction over the Parties and the controversy or dispute would have absent these arbitration provisions or (ii) any right or power to award special, punitive or exemplary damages, except to the extent such damages are expressly permitted by the

 

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terms of this Agreement (including Section 5.12 hereof) or any Ancillary Agreement (provided that this clause (ii) shall not limit the award of any such damages to the extent they are included in any Liabilities to Third Parties as to which the provisions of this ARTICLE IX are applicable). It is the intention of the Parties that in rendering a decision the arbitrator gives effect to the applicable provisions of this Agreement and the Ancillary Agreements and follows applicable Law (it being understood and agreed that judicial review is limited to the matters set forth in Section 9.03(i)).

(g) If a Party fails or refuses to appear at and participate in an arbitration hearing after due notice, the arbitrator may hear and determine the controversy upon evidence produced by the appearing Party. Any decision rendered under such circumstances shall be as valid and enforceable as if the Parties had appeared and participated fully at all stages.

(h) The expenses of the arbitration, including the arbitrator’s fees and expert witness fees, incurred by the Parties to the arbitration, may be awarded to the prevailing Party, in the discretion of the arbitrator, or may be apportioned between the Parties in any manner deemed appropriate by the arbitrator. Unless and until the arbitrator makes any such award or apportionment, the fees of the arbitrator and all other arbitration costs shall be borne equally by each Party involved in the matter and each Party shall be responsible for its own attorney’s fees and other costs and expenses, including the costs of witnesses selected by such Party.

(i) Any arbitration award shall be an award with a holding in favor of or against a Party on each claim and shall include a statement of the reasoning on which the award rests. The award must also be in adequate form so that a judgment of a court may be entered thereupon. Judgment upon any arbitration award hereunder may be entered in any court having jurisdiction thereof. Any award shall not be vacated or appealed except on the basis of (i) the award being procured by fraud or corruption, (ii) the arbitrator being partial or corrupt or (iii) the arbitrator exceeding the scope of the power granted to the arbitrator in this Agreement.

(j) Regardless of whether an Escalation Notice has been delivered, prior to the time at which the arbitrator is appointed pursuant to Section 9.03(b), either Party may seek one or more temporary restraining orders in a court of competent jurisdiction, subject to Section 11.12, if necessary in order to preserve and protect the status quo and/or to prevent irreparable harm. Neither the request for, nor the grant or denial of, any such temporary restraining order shall be deemed a waiver of the obligation to arbitrate as set forth herein, and the arbitrator may order the Parties to petition the court to dissolve, continue or modify any such order. Any such temporary restraining order shall remain in effect until the first to occur of the expiration of the order in accordance with its terms or the dissolution thereof.

(k) Except as required by Law, the Parties shall hold, and shall cause their respective officers, directors, employees, agents and other representatives to hold, the existence, content and result of mediation or arbitration in confidence in accordance with the provisions of ARTICLE IX and except as may be required in order to enforce any award. Each of the Parties shall request that the arbitrator comply with such confidentiality requirement.

(l) If at any time the arbitrator shall fail to serve as such for any reason, the Parties shall select a new arbitrator who shall be disinterested as to the Parties and the matter in accordance with the procedure set forth herein for the selection of the initial arbitrator. The extent, if any, to which testimony previously given shall be repeated or as to which the replacement arbitrator elects to rely on the stenographic record (if there is one) of such testimony shall be determined by the arbitrator.

(m) Any arbitration proceedings hereunder shall take place in Atlanta, Georgia, unless another location is otherwise agreed to in writing by the Parties.

 

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(n) The interpretation of the provisions of this ARTICLE IX, only insofar as they relate to the agreement to arbitrate and any procedures pursuant thereto, shall be governed by the Arbitration Act and other applicable U.S. federal Law. In all other respects, the interpretation of this Agreement shall be governed as set forth in Section 11.02.

Section 9.04. Continuity of Service and Performance. Unless otherwise agreed in writing, the Parties will continue to provide service and honor all other commitments under this Agreement and each Ancillary Agreement during the course of dispute resolution pursuant to the provisions of this ARTICLE IX with respect to all matters not subject to such Dispute to the extent such Party is obligated to do so pursuant to the underlying agreement.

ARTICLE X

TERMINATION

Section 10.01. Termination. This Agreement and all Ancillary Agreements may be terminated and the Distribution may be amended, modified or abandoned at any time prior to the Effective Time by and in the sole and absolute discretion of Parent without the approval of any Person, including SpinCo. After the Effective Time, this Agreement may not be terminated except by an agreement in writing signed by a duly authorized officer of each of the Parties.

Section 10.02. Effect of Termination. In the event of such termination, this Agreement shall become null and void and no Party, nor any of its directors, officers, agents or employees, shall have any Liability of any kind to any Person by reason of this Agreement.

ARTICLE XI

MISCELLANEOUS

Section 11.01. Counterparts; Entire Agreement; Conflicts; Corporate Power.

(a) This Agreement and each Ancillary Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement. Each Party acknowledges that it and the other Party may execute this Agreement and any Ancillary Agreement by manual, stamp or mechanical signature, and that delivery of an executed counterpart of a signature page to this Agreement or any Ancillary Agreement (whether executed by manual, stamp or mechanical signature) by facsimile or by email in portable document format (PDF) shall be effective as delivery of such executed counterpart of this Agreement or any Ancillary Agreement. Each Party expressly adopts and confirms a stamp or mechanical signature (regardless of whether delivered in person, by mail, by courier, by facsimile or by email in portable document format (PDF)) made in its respective name as if it were a manual signature delivered in person, agrees that it shall not assert that any such signature or delivery is not adequate to bind it to the same extent as if it were signed manually and delivered in person and agrees that, at the reasonable request of the other Party at any time, it shall as promptly as reasonably practicable cause this Agreement or Ancillary Agreement to be manually executed (any such execution to be as of the date of the initial date hereof) and delivered in person, by mail or by courier.

(b) This Agreement, the Ancillary Agreements and the exhibits, Schedules and annexes hereto and thereto contain the entire agreement between the Parties with respect to the subject matter hereof, supersede all previous agreements, negotiations, discussions, writings, understandings, commitments and conversations with respect to such subject matter and there are no agreements or understandings between the Parties other than those set forth or referred to herein or therein.

 

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(c) It is the intention of the Parties that the Transfer Documents shall be consistent with the terms of this Agreement and the other Ancillary Agreements. In the event of any conflict or inconsistency between the Transfer Documents and this Agreement, the provisions of this Agreement shall control over the inconsistent provisions of such Transfer Documents. The Parties agree that the Transfer Documents are not intended and shall not be construed in any way to enhance, modify or decrease any of the rights or obligations of Parent, any Parent Group Member, SpinCo or any SpinCo Group Member from those contained in this Agreement and the other Ancillary Agreements.

(d) Except as otherwise expressly provided in this Agreement, and subject to the preceding paragraph (c), in the event of any conflict or inconsistency between the provisions of this Agreement and the provisions of any Ancillary Agreement other than the Transfer Documents, the provisions of such Ancillary Agreement shall control over the inconsistent provisions of this Agreement as to matters specifically addressed in the Ancillary Agreement. For the avoidance of doubt, the TMA shall govern all matters (including any indemnities and payments among the parties and each other member of their respective Groups and the allocation of any rights and obligations pursuant to agreements entered into with Third Parties) relating to Taxes or otherwise specifically addressed in the TMA.

(e) Parent represents on behalf of itself and each other Parent Group Member, and SpinCo represents on behalf of itself and each other SpinCo Group Member, as follows:

(i) each such Person has the requisite corporate or other power and authority and has taken all corporate or other action necessary in order to execute, deliver and perform each of this Agreement and each Ancillary Agreement to which it is a party and to consummate the transactions contemplated hereby and thereby; and

(ii) this Agreement and each Ancillary Agreement to which it is a party has been (or, in the case of any Ancillary Agreement, will be on or prior to the Effective Time) duly executed and delivered by it and constitutes, or will constitute, a valid and binding agreement of it enforceable in accordance with the terms thereof.

Section 11.02. Governing Law. This Agreement, and, unless expressly proved therein, each Ancillary Agreement, (and any claims or disputes arising out of or related hereto or thereto or to the transactions contemplated hereby or thereby or to the inducement of any party to enter herein or therein, whether for breach of contract, tortious conduct or otherwise and whether predicated on common law, statute or otherwise) shall be governed by and construed and interpreted in accordance with the Laws of the State of Georgia irrespective of the choice of Laws principles of the State of Georgia, including all matters of validity, construction, effect, enforceability, performance and remedies.

Section 11.03. Assignability. This Agreement shall inure to the benefit of and be binding upon the Parties and their respective successors and permitted assigns. Except as specifically provided in any Ancillary Agreement, none of this Agreement, any of the Ancillary Agreements or any of the rights, interests or obligations hereunder or thereunder may be assigned or delegated, in whole or in part, by operation of Law or otherwise, by any party without the prior written consent of the other party to the agreement being so assigned or delegated, and any such assignment without such prior written consent shall be null and void. Except as specifically provided in any Ancillary Agreement, no such consent shall be required for the assignment of a party’s rights and obligations under this Agreement or the Ancillary Agreements if: (a) any party to this Agreement or any Ancillary Agreement (or any of its successors or permitted assigns) (i) shall consolidate with or merge into any other Person and shall not be the continuing or surviving Business Entity of such consolidation or merger or (ii) shall transfer all or substantially all of its properties and/or Assets to any Person; and (b) in any such case, the resulting, surviving or assignee Person expressly assumes all of the obligations of the relevant party (or its successors or permitted assigns, as applicable) under this Agreement and all applicable Ancillary Agreements. No assignment permitted by this Section 11.03 shall release the assigning party from Liability for the full performance of its obligations under this Agreement or such Ancillary Agreement(s).

 

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Section 11.04. Third-Party Beneficiaries. Except for the indemnification and contribution rights under this Agreement of any Parent Indemnitee or SpinCo Indemnitee in their respective capacities as such under ARTICLE V and for the releases under Section 5.01 of any Person provided therein, and for the rights of insureds pursuant to Section 5.13, (a) the provisions of this Agreement and each Ancillary Agreement are solely for the benefit of the Parties hereto and their respective Group Members, after giving effect to the Distribution, and their permitted successors and assigns, and are not intended to confer upon any Person except the Parties and their respective Group Members, after giving effect to the Distribution, and their permitted successors and assigns, any rights or remedies hereunder and (b) there are no third-party beneficiaries of this Agreement or any Ancillary Agreement and neither this Agreement nor any Ancillary Agreement shall provide any other Third Party with any remedy, claim, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement or any Ancillary Agreement.

Section 11.05. Notices. All Notices shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by overnight courier service, by electronic mail transmission (return receipt requested) or by registered or certified mail (postage prepaid, return receipt requested) to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 11.05):

If to Parent, to:

PROG Holdings, Inc.

256 W. Data Drive

Draper, Utah 84020

Attn: Marvin Fentress

Email: marvin.fentress@progleasing.com

If to SpinCo to:

The Aaron’s Company, Inc.

400 Galleria Parkway SE, Suite 300

Atlanta, Georgia 30339

Attn: Rachel George

Email: rachel.george@aarons.com

Either Party may, by notice to the other Party, change the address to which such notices are to be given.

Section 11.06. Severability. In the event that any one or more of the terms or provisions of this Agreement or any Ancillary Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or any Ancillary Agreement, or the application of such term or provision to Persons or circumstances or in jurisdictions other than those as to which it has been determined to be invalid, illegal or unenforceable, and the Parties shall use their commercially reasonable efforts to substitute one or more valid, legal and enforceable terms or provisions into this Agreement (or the applicable Ancillary Agreement) which,

 

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insofar as practicable, implement the purposes and intent of the Parties. Any term or provision of this Agreement or any Ancillary Agreement held invalid or unenforceable only in part, degree or within certain jurisdictions shall remain in full force and effect to the extent not held invalid or unenforceable to the extent consistent with the intent of the parties as reflected by this Agreement. To the extent permitted by applicable Law, each party waives any term or provision of Law which renders any term or provision of this Agreement to be invalid, illegal or unenforceable in any respect.

Section 11.07. Publicity. From and after the Effective Time, each of Parent and SpinCo shall consult with the other prior to issuing, and shall, subject to the requirements of Section 6.09, provide the other Party the opportunity to review and comment upon, that portion of any press releases or other public statements in connection with the Spin-Off or any of the other transactions contemplated hereby or by any Ancillary Agreement and prior to making any filings with any Governmental Authority or national securities exchange with respect thereto (including the Information Statement, the Parties’ respective Current Reports on Form 8-K to be filed on the Distribution Date, the Parties’ respective Quarterly Reports on Form 10-Q filed with respect to the fiscal quarter during which the Distribution Date occurs, or if such quarter is the fourth fiscal quarter, the Parties’ respective Annual Reports on Form 10-K filed with respect to the fiscal year during which the Distribution Date occurs, each such Quarterly Report on Form 10-Q or Annual Report on Form 10-K, a “First Post-Distribution SEC Report”). Each Party’s obligations pursuant to this Section 11.07 shall terminate on the date on which such Party’s First Post-Distribution SEC Report is filed with the Commission.

Section 11.08. Expenses. Except as expressly set forth in this Agreement or in any Ancillary Agreement, (a) all Third Party fees, costs and expenses incurred by either the Parent Group or the SpinCo Group in connection with effecting the Spin-Off prior to or on the Distribution Date, whether payable prior to, on or following the Distribution Date, will be borne and paid by Parent (but excluding for the avoidance of doubt, Liabilities under clause (f) of the definition of “SpinCo Liabilities”) and (b) all Third Party fees, costs and expenses incurred by either the Parent Group or the SpinCo Group in connection with the Spin-Off following the Distribution Date, will be borne and paid by the Party incurring such fee, cost or expense; provided, that, notwithstanding anything in this Agreement to the contrary, (I) that Parent’s obligations under the foregoing clause (a) shall not exceed the amount set forth on Schedule VII and (II) that any costs and expenses incurred in obtaining any Consent or novation from a Third Party in connection with the assignment to and assumption by a Party or any of its Group Members of any contracts, commitments or understandings in connection with the Separation shall be borne by the Party or Group Member to which such contract, commitment or understanding is being assigned.

Section 11.09. Headings. The article, section and paragraph headings contained in this Agreement and the Ancillary Agreements are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement or any Ancillary Agreement.

Section 11.10. Survival of Agreements. Except as expressly set forth in this Agreement or any Ancillary Agreement, the representations, warranties, covenants and agreements in this Agreement and each Ancillary Agreement and the Liabilities for the breach of any obligations contained herein or therein shall survive the Effective Time and shall remain in full force and effect thereafter.

Section 11.11. Waivers of Default. No failure or delay of any Party (or its applicable Group Members) in exercising any right or remedy under this Agreement or any Ancillary Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such right or power, or any course of conduct, preclude any other or further exercise thereof or the exercise of any other right or power. Waiver by any Party of any default by the other Party of any provision of this Agreement shall not be deemed a waiver by the waiving Party of any subsequent or other default, nor shall it prejudice the rights of the waiving Party.

 

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Section 11.12. Consent to Jurisdiction. Subject to the provisions of ARTICLE IX, each of the Parties irrevocably submits to the exclusive jurisdiction of (a) the Georgia State-Wide Business Court, and (b) the United States District Court for the Northern District of Georgia (the “Georgia Courts”), for the purposes of any suit, action or other proceeding to compel arbitration or for provisional relief in aid of arbitration in accordance with ARTICLE IX or for provisional relief to prevent irreparable harm, and to the non-exclusive jurisdiction of the Georgia Courts for the enforcement of any award issued thereunder. Each of the Parties further agrees that service of any process, summons, notice or document by United States registered mail to such Party’s respective address set forth in Section 11.05 shall be effective service of process for any action, suit or proceeding in the Georgia Courts with respect to any matters to which it has submitted to jurisdiction in this Section 11.12. Each of the Parties irrevocably and unconditionally waives any objection to any Georgia Court’s exercise of personal jurisdiction over the Parties and the laying of venue of any action, suit or proceeding arising out of this Agreement, any Ancillary Agreement or the transactions contemplated hereby or thereby in the Georgia Courts, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.

Section 11.13. Specific Performance. The Parties agree that irreparable damage would occur in the event that the provisions of this Agreement were not performed in accordance with their specific terms. Accordingly, it is hereby agreed that the Parties shall be entitled to (a) an injunction or injunctions issued in any arbitration in accordance with ARTICLE IX to enforce specifically the terms and provisions hereof, (b) provisional or temporary injunctive relief in accordance with Section 9.03(j) in any Georgia Court, and (c) enforcement of any such award of an arbitral tribunal or a Georgia Court in any court of the United States, or any other any court or tribunal sitting in any state of the United States or in any foreign country that has jurisdiction, this being in addition to any other remedy or relief to which they may be entitled.

Section 11.14. Amendments. No provisions of this Agreement or any Ancillary Agreement shall be deemed waived, amended, supplemented or modified unless such waiver, amendment, supplement or modification is in writing and signed by an authorized representative of both Parties and their relevant Group Members, as the case may be.

Section 11.15. Interpretation. In this Agreement and in any Ancillary Agreement, (a) words in the singular shall be deemed to include the plural and vice versa and words of one gender shall be deemed to include the other gender as the context requires; (b) the terms “hereof,” “herein” and “herewith” and words of similar import, unless otherwise stated, shall be construed to refer to this Agreement (or the applicable Ancillary Agreement) as a whole (including all of the Schedules hereto and thereto) and not to any particular provision of this Agreement (or such Ancillary Agreement); (c) Article, Section or Schedule references are to the Articles, Sections and Schedules of or to this Agreement (or the applicable Ancillary Agreement), unless otherwise specified; (d) unless otherwise stated, all references to any agreement (including this Agreement and each Ancillary Agreement) shall be deemed to include the schedules, exhibits and annexes to such agreement; (e) any capitalized terms used in any Schedule to this Agreement (or to any Ancillary Agreement) but not otherwise defined therein shall have the meaning as defined in this Agreement (or the applicable Ancillary Agreement) to which such Schedule is attached, as applicable; (f) any reference herein to this Agreement or any Ancillary Agreement, unless otherwise stated, shall be construed to refer to this Agreement or such Ancillary Agreement as amended, supplemented or otherwise modified from time to time, in accordance with the terms thereof; (g) the word “including” and words of similar import when used in this Agreement (or the applicable Ancillary

 

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Agreement) means “including, without limitation,” unless otherwise specified; (h) unless otherwise specified, the word “or” shall not be exclusive; (i) unless otherwise specified in a particular case, the word “days” refers to calendar days; and (j) unless expressly stated to the contrary in this Agreement or in any Ancillary Agreement, all references to “the date hereof”, “the date of this Agreement”, “hereby” and “hereupon” and words of similar import shall all be references to November 29, 2020.

Section 11.16. Group Members. Parent shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by a Parent Group Member and SpinCo shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by a SpinCo Group Member.

Section 11.17. Force Majeure. Neither Party shall be deemed in default of this Agreement or, unless otherwise expressly provided therein, any Ancillary Agreement for failure to fulfill any obligation so long as and to the extent to which any delay or failure in the fulfillment of such obligations is prevented, frustrated, hindered or delayed as a consequence of circumstances of Force Majeure. In the event of any such excused delay, the time for performance shall be extended for a period equal to the time lost by reason of the delay. A Party claiming the benefit of this provision shall, as soon as reasonably practicable after the occurrence of any such event: (a) provide notice to the other Party of the nature and extent of any such Force Majeure condition; and (b) use commercially reasonable efforts to remove any such causes and resume performance under this Agreement or any Ancillary Agreement as soon as reasonably practicable; provided, that, prior to any Party invoking the benefit of this provision as a result of a Force Majeure with respect to the COVID-19 pandemic, such Party shall use commercially reasonable efforts to mitigate the impact of the COVID-19 pandemic with respect to its failure or potential failure to fulfill any obligation under this Agreement or any Ancillary Agreement.

Section 11.18. Mutual Drafting. This Agreement and the Ancillary Agreements shall be deemed to be the joint work product of the Parties and any rule of construction that a document shall be interpreted or construed against a drafter of such document shall not be applicable.

Section 11.19. No Reliance on Other Party. The Parties hereto represent to each other that this Agreement is entered into with full consideration of any and all rights which the Parties hereto may have. The Parties hereto have relied upon their own knowledge and judgment and have conducted such investigations they and their in-house counsel have deemed appropriate regarding this Agreement and the Ancillary Agreements and their rights in connection with this Agreement and the Ancillary Agreements. The Parties hereto are not relying upon any representations or statements made by any other Party, or any such other Party’s employees, agents, representatives or attorneys, regarding this Agreement, except to the extent such representations are expressly set forth or incorporated in this Agreement. The Parties hereto are not relying upon a legal duty, if one exists, on the part of any other Party (or any such other Party’s employees, agents, representatives or attorneys) to disclose any information in connection with the execution of this Agreement or its preparation, it being expressly understood that no Party hereto shall ever assert any failure to disclose information on the part of any other Party as a ground for challenging this Agreement or any provision hereof.

Section 11.20. Limited Liability. Notwithstanding any other provision of this Agreement, no individual who is a shareholder, director, employee, officer, agent or representative of Parent or SpinCo, or any of their respective Group Members, in such individual’s capacity as such, shall have any Liability in respect of or relating to the covenants or obligations of Parent or SpinCo, as applicable, under this Agreement or any Ancillary Agreement or in respect of any certificate delivered with respect hereto or thereto and, to the fullest extent legally permissible, each Parent and SpinCo, for itself and its respective Group Members and its and their respective shareholders, directors, employees and officers, waives and agrees not to seek to assert or enforce any such Liability that any such Person otherwise might have pursuant to applicable Law.

 

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Section 11.21. No Set-Off. Except as expressly set forth in any Ancillary Agreement or as otherwise mutually agreed to in writing by the Parties, none of the Parties nor any member of their respective Groups shall have any right of set-off or other similar rights with respect to (a) any amounts received pursuant to this Agreement or any Ancillary Agreement; or (b) any other amounts claimed to be owed to the other Parties or any member of their respective Groups arising out of this Agreement or any Ancillary Agreement.

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the Parties have caused this Separation and Distribution Agreement to be executed by their duly authorized representatives.

 

AARON’S HOLDINGS COMPANY, INC.

By:

 

/s/ Steven A. Michaels

 

Name: Steven A. Michaels

 

Title: Chief Executive Officer, Progressive Leasing

THE AARON’S COMPANY, INC.

By:

 

/s/ Douglas A. Lindsay

 

Name: Douglas A. Lindsay

 

Title: Chief Executive Officer

[Signature Page to Separation and Distribution Agreement]

Exhibit 3.1

AMENDED AND RESTATED

ARTICLES OF INCORPORATION

OF

THE AARON’S COMPANY, INC.

I.

The name of the corporation is The Aaron’s Company, Inc. (the “Corporation”).

II.

The Corporation is organized pursuant to the provisions of the Georgia Business Corporation Code (the “Code”).

III.

The Corporation shall have perpetual duration.

IV.

The Corporation is organized for the following purposes:

To buy, sell, rent and lease office and residential furniture and accessories and other personal property of all kinds; to manufacture, sell and deliver furniture of any kind whatsoever; and generally to manufacture, produce, assemble, fabricate, import, purchase or otherwise acquire, invest in, own, hold, use, maintain, service or repair, sell, rent, lease, pledge, mortgage, exchange, export, distribute, assign and otherwise dispose of and to trade and deal in and with, at wholesale or retail, goods, wares, merchandise, commodities, articles of commerce and property of every kind and description; and to engage in, conduct and carry on a general manufacturing, importing and exporting, merchandising, leasing, mercantile and trading business in any and all branches thereof.

To do each and every thing necessary, suitable or proper for the accomplishment of any of the purposes or the attainment of any one or more of the objects herein enumerated, or which shall at any time appear conducive to or expedient for the protection or benefit of the Corporation.

IN FURTHERANCE OF AND NOT IN LIMITATION of the general powers conferred by the laws of the State of Georgia and the objects and purposes herein set forth, it is expressly provided that to such extent as a corporation organized under the Code may now or hereafter lawfully do, the Corporation shall have the power to do, either as principal or agent and either alone or in connection with other corporations, firms or individuals, all and anything necessary, suitable, convenient or proper for, or in connection with, or incident to, the accomplishment of any of the purposes or the attainment of any one or more of the objects herein enumerated, or designed directly or indirectly to promote the interests of the Corporation or to enhance the value of its properties; and in general to do any and all things and exercise any and all powers, rights and privileges which a corporation may now or hereafter be authorized to do or to exercise under the Code or under any act amendatory thereof, supplemental thereto or substituted therefor.

The foregoing provisions of this Article IV shall be construed both as purposes and powers and each as an independent purpose and power. The foregoing enumeration of specific purposes and powers herein specified shall, except when otherwise provided in this Article IV, be in no wise limited or restricted by referenced to, or inference from, the terms of any provision of this or any other Article of these Amended and Restated Articles of Incorporation.


V.

The Corporation shall have authority to issue shares of capital stock consisting of One Hundred Twelve Million, Five Hundred Thousand (112,500,000) shares of Common Stock, par value $0.50 per share (“Common Stock”), and Five Hundred Thousand (500,000) shares of Preferred Stock, par value $1.00 per share (“Preferred Stock”).

The Corporation may purchase its own shares of capital stock out of unreserved and unrestricted earned surplus and capital surplus available therefor and as otherwise provided by law. Shares so acquired shall become treasury shares of the Corporation. The Board of Directors of the Corporation (the “Board of Directors”) may from time to time distribute to shareholders out of capital surplus of the Corporation a portion of its assets, in cash or in property.

Section 1. Terms of the Common Stock. The powers, preferences and rights of the Common Stock, and the qualifications, limitations or restrictions thereof, shall be as follows:

 

  (a)

Voting. At each annual or special meeting of shareholders, each holder of Common Stock shall be entitled to one (1) vote in person or by proxy for each share of Common Stock standing in such person’s name on the stock transfer records of the Corporation in connection with the election of directors and all other actions submitted to a vote of shareholders.

 

  (b)

Dividends and Other Distributions. The record holders of the Common Stock shall be entitled to receive such dividends and other distributions in cash, stock or property of the Corporation as may be declared thereon by the Board of Directors out of funds legally available therefor.

Section 2. Terms of the Preferred Stock. The following are the designations, powers, preferences and rights of the preferred stock and the qualifications, limitations and restrictions thereof:

 

  (a)

Except as otherwise provided by applicable law, or by the resolution or resolutions of the Board of Directors providing for the issue of any series of a Preferred Stock, the holders of shares of Preferred Stock, as such holders, (i) shall not have any right to vote, and are hereby specifically excluded from the right to vote, in the election of directors or for any other purpose, and (ii) shall not be entitled to notice of any meeting of shareholders.

 

  (b)

Before any sum or sums shall be set aside or applied to the purchase of any outstanding shares of Stock, and before any dividend shall be declared or paid or any distribution ordered or made upon the Stock (other than a dividend payable in shares of Stock), the Corporation shall have complied with the dividend and sinking fund requirements (if any) set forth in any resolution or resolutions of the Board of Directors with respect to the issue of any series of Preferred Stock of which any shares shall at the time be outstanding.

 

  (c)

Subject to the provisions of the immediately preceding paragraph, and to such other limitations as may be specified in any resolution or resolutions of the Board of Directors providing for the issue of any series of Preferred Stock, the holders of outstanding shares of Stock shall be entitled to the exclusion of the holders of shares of Preferred Stock of any and all series, to receive such dividends payable with respect to the Stock as may be declared by the Board of Directors from time to time.

 

  (d)

In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, after payment shall have been made to the holders of shares of Preferred Stock of the full amount to which any series of the Preferred Stock is entitled as set forth in the resolution or resolutions of the Board of Directors providing for the issue thereof, the holders of outstanding shares of Stock shall be entitled, to the exclusion of the holders of shares of Preferred Stock of any and all series, to share in all remaining assets of the Corporation available for distribution to its shareholders ratably according to the number of shares of Stock held by them. Neither the merger nor consolidation of the Corporation with or into any other corporation or corporations, nor the merger or consolidation of any other corporation or corporations into or with the Corporation, nor the sale, transfer, mortgage, pledge or lease by the Corporation of all or any part of its assets shall be deemed to be a liquidation, dissolution or winding up of the Corporation.


  (e)

The Preferred Stock may be issued from time to time in one or more series of any number of shares, except that the aggregate number of shares issued and not canceled of any and all such series shall not exceed the total number of shares of Preferred Stock hereinabove authorized. Each series of Preferred Stock shall be distinctively designated by number, letter or descriptive words.

 

  (f)

Authority is hereby expressly granted to and vested in the Board of Directors to issue the Preferred Stock at any time, or from time to time, as Preferred Stock of any one or more series, and, in connection with the establishment of each such series, to fix by resolution or resolutions providing for the issue of the shares thereof the voting powers, if any, and the designation, preferences and relative rights of each such series of Preferred Stock to the full extent now or hereafter permitted by these Amended and Restated Articles of Incorporation and the laws of the State of Georgia, including, without limiting the generality of the foregoing, all of the following matters which may vary between each series:

 

  (1)

The distinctive designation of such series and the number of shares which constitute such series, which number may be increased or decreased either before or subsequent to the issuance of any shares of such series (but not below the number of shares of such series then outstanding), from time to time by action of the Board of Directors;

 

  (2)

The dividend rate of such series, the dates of payment thereof, and any limitations, restrictions or conditions on the payment of dividends, including whether dividends shall be cumulative and, if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends on the shares of each series;

 

  (3)

The price or prices at which, and the terms, times and conditions on which, the shares of such series may be redeemed at the option of the Corporation or at the option of the holders of such shares;

 

  (4)

The amount or amounts payable upon the shares of such series in the event of voluntary or involuntary liquidation, dissolution or winding up of the Corporation, and the relative rights of priority, if any, of payment to the holders of shares of each series;

 

  (5)

Whether or not the shares of such series shall be entitled to the benefit of a purchase, retirement or sinking fund to be applied to the redemption or purchase of such series, and if so entitled, the amount of such fund and the manner of its application, including the price or prices at which the shares of such series may be redeemed or purchased through the application of such fund;

 

  (6)

Whether or not the shares of such series shall be made convertible into, or exchangeable for, shares of any other class or classes of stock of the Corporation, or the shares of any other series of Preferred Stock, and, if made so convertible or exchangeable, the conversion price or prices, or the rate or rates of exchange, and the adjustments thereof, if any, at which such conversion or exchange may be made, and any other terms and conditions of such conversion or exchange;

 

  (7)

Whether or not the shares of such series shall have any voting rights, and, if voting rights are so granted, the extent of such voting rights and the terms and conditions under which such voting rights may be exercised.

 

  (8)

Whether or not the issue of any additional shares of such series or of any future series in addition to such series shall be subject to restrictions in addition to the restrictions, if any, on the issue of additional shares imposed in the resolution or resolutions fixing the terms of any outstanding series of Preferred Stock theretofore issued pursuant to this Section 2(f), and, if subject to additional restrictions, the extent of such additional restrictions; and


  (9)

Whether or not the shares of such series shall be entitled to the benefit of limitations restricting the purchase of, the payment of dividends on, or the making of other distributions in respect of stock of any class of the Corporation, and the terms of any such restrictions; provided, however, that such restrictions shall not include any prohibition on the payment of dividends or with respect to distributions in the event of voluntary or involuntary liquidation established for any outstanding series of Preferred Stock theretofore issued.

VI.

None of the holders of any capital stock of the Corporation of any kind, class or series now or hereafter authorized shall have preemptive rights with respect to any shares of capital stock of the Corporation of any kind, class or series now or hereafter authorized.

VII.

Section 1. Number of Directors. Subject to any rights granted to holders of shares of any class or series of Preferred Stock then outstanding, the number of directors which shall constitute the Board of Directors shall be fixed from time to time by resolution adopted by the affirmative vote of a majority of the total number of directors then in office; provided that the number of directors that shall constitute the whole Board of Directors shall be at least three and no decrease in the size of the Board of Directors shall have the effect of shortening the term of an incumbent director.

Section 2. Classes. From the effective date of these Amended and Restated Articles of Incorporation until the election of the directors at the 2024 annual meeting of shareholders, the Board of Directors shall be divided into three classes, each class to be as nearly equal in number as practicable, designated Class I, Class II and Class III. The term of office of the initial Class I directors shall expire at the 2021 annual meeting of shareholders, the term of office of the initial Class II directors shall expire at the 2022 annual meeting of shareholders and the term of office of the initial Class III directors shall expire at the 2023 annual meeting of shareholders. Each Class I director elected at the 2021 annual meeting of shareholders, each Class II director elected at the 2022 annual meeting of shareholders and each Class III director elected at the 2023 annual meeting of shareholders shall hold office until the 2024 annual meeting of shareholders and, in each case, until his or her respective successor shall have been duly elected and qualified or until his or her earlier resignation or removal. Commencing with the 2024 annual meeting of shareholders, each director shall be elected annually and shall hold office until the next annual meeting of shareholders and until his or her respective successor shall have been duly elected and qualified or until his or her earlier resignation or removal. Effective as of the conclusion of the 2024 annual meeting of shareholders (the “Declassification Time”), the Board of Directors will no longer be staggered under Section 14-2-806 of the Code and directors shall no longer be divided into three classes. Prior to the Declassification Time, any increase or decrease in the number of directors shall be so apportioned among the classes as to make all classes as nearly equal in number as practicable.

VIII.

No director of the Corporation shall be personally liable to the Corporation or its shareholders for monetary damages for breach of his duty of care or other duty as a director; provided, that this provision shall eliminate or limit the liability of a director only to the extent permitted from time to time by the Code or any successor law or laws.

IX.

These Amended and Restated Articles of Incorporation contain amendments requiring shareholder approval and were duly adopted in accordance with the applicable provisions of Section 14-2-1003 of the Code by the Board of Directors of the Corporation on November 11, 2020 and by the sole shareholder of the Corporation on November 11, 2020.


IN WITNESS WHEREOF, THE AARON’S COMPANY, INC., has caused these Amended and Restated Articles of Incorporation to be executed by its duly authorized officer on this 24th day of November, 2020.

 

THE AARON’S COMPANY, INC.
By:  

/s/ Christopher K. Wall

  Name: Christopher K. Wall
  Title: Chief Financial Officer

Exhibit 3.2

AMENDED AND RESTATED BYLAWS

OF

THE AARON’S COMPANY, INC.

ARTICLE I

OFFICES

Section 1. Registered Office and Agent. The corporation shall continuously maintain in the state of Georgia a registered office that may be the same as any of the corporation’s places of business. In addition, the corporation shall continuously maintain a registered agent whose business office is identical with the registered office. The registered agent may be an individual who resides in the state of Georgia, a domestic corporation or nonprofit domestic corporation, or a foreign corporation or nonprofit foreign corporation authorized to transact business in the state of Georgia.

Section 2. Other Offices. In addition to having a registered office, the corporation may have other offices, located in or out of the state of Georgia, as the corporation’s board of directors may designate from time to time.

ARTICLE II

SHAREHOLDERS MEETINGS

Section 1. Annual Meetings. The annual meeting of shareholders of the corporation shall be held at the principal office of the corporation or at such other place in the United States as may be determined by the board of directors, at 10:00 a.m. on the last business day of the fifth month following the close of each fiscal year or at such other time and date following the close of the fiscal year as shall be determined by the board of directors, for the purpose of electing directors and transacting such other business as may properly be brought before the meeting.

Section 2. Special Meetings.

(a) Special meetings of shareholders of one or more classes or series of the corporation’s shares shall be called by the chief executive officer or the secretary (i) when so directed by the chairman or by a majority of the entire board of directors; or (ii) upon the demand of holders of at least twenty-five percent (25%) of all votes entitled to be cast on each issue to be considered at a proposed special meeting of shareholders. The business that may be transacted at any special meeting of shareholders shall be limited to that proposed in the notice of the special meeting given in accordance with Section 3 (including related or incidental matters that may be necessary or appropriate to effectuate the proposed business).


(b) Promptly after the date of receipt of written shareholder demands (the “Demand Date”) purporting to comply with the provisions of the Georgia Business Corporation Code, as amended from time to time (the “Code”), and these bylaws, the chief executive officer or the secretary of the corporation shall determine the validity of the demand. If the demand is valid, the chief executive officer or the secretary of the corporation shall call a special shareholders meeting by mailing notice within 20 days of the Demand Date.

(c) The time, date and place of any special shareholders meeting shall be determined by the board of directors and shall be set forth in the notice of meeting.

Section 3. Participation in Meetings by Remote Communication. The board of directors, acting in its sole discretion, may establish guidelines and procedures in accordance with applicable provisions of the Code and any other applicable law for the participation by shareholders and proxyholders in a meeting of shareholders by means of remote communications, and may determine that any meeting of shareholders will not be held at any place but will be held solely by means of remote communication. Shareholders and proxyholders complying with such procedures and guidelines and otherwise entitled to vote at a meeting of shareholders shall be deemed present in person and entitled to vote at a meeting of shareholders, whether such meeting is to be held at a designated place or solely by means of remote communication.

Section 4. Notice of Meetings. Written notice of every meeting of shareholders, stating the place, date and hour of the meeting (and the means of remote communications, if any, by which shareholders and proxyholders may be deemed to be present in person and vote at such meeting), shall be given personally or by mail to each shareholder of record not less than 10 nor more than 60 days before the date of the meeting. Such notice may be given in any manner permitted by, and shall be deemed to be effectively given at the times as provided in, the Georgia Business Corporation Code. A shareholder’s attendance at a meeting waives objection to lack of notice or defective notice of such meeting, unless the shareholder at the beginning of the meeting objects to the holding of the meeting or transacting business at the meeting, and waives objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the shareholder objects to considering the matter when it is presented. A shareholder may waive notice of a meeting before or after the date and time stated in the notice, which waiver must be in writing, signed by the shareholder entitled to such notice and be delivered to the corporation for inclusion in the minutes or filing with the corporate records.

 

 

2


Section 5. Quorum. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of shareholders except as otherwise provided by statute, by the articles of incorporation, or by these bylaws. If a quorum is not present or represented at any meeting of shareholders, a majority of the shareholders entitled to vote thereat, present in person or represented by proxy, may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting (and the means of remote communications, if any, by which shareholders and proxyholders may be deemed to be present in person and vote at such meeting) shall be given to each shareholder of record entitled to vote at the meeting.

Section 6. Voting. When a quorum is present at any meeting, action on a matter brought before such meeting is approved if the votes cast favoring the action exceed the votes cast opposing the action, unless the matter is one upon which by express provision of law, these bylaws or of the articles of incorporation, a different vote is required, in which case such express provision shall govern and control the decision of the question. Each shareholder shall at every meeting of shareholders be entitled to one vote, in person or by proxy, for each share of the capital stock having voting power registered in his or her name on the books of the corporation, but no proxy shall be voted or acted upon after 11 months from its date, unless otherwise provided in the proxy.

Section 7. Shareholder Proposals.

(a) No shareholder proposal or resolution (each a “Shareholder Proposal”), whether purporting to be binding or nonbinding on the corporation or its board of directors, shall be considered at any annual or special meeting of shareholders unless:

 

  (i)

If such Shareholder Proposal relates solely to the nomination and election of directors, it satisfies the requirements of Article III, Section 3; or

 

  (ii)

With respect to any Shareholder Proposal to be considered at a special shareholders meeting called pursuant to Article II, Section 2, subsection (a)(i), the shareholder(s) proposing to make such Shareholder Proposal provided the information set forth in subsection (b) of this Section 7 to the board of directors within 14 days after the date of the notice calling such special shareholders meeting (or if less than 21 days notice of the meeting is given to shareholders, such information was delivered to the president not later than the close of the seventh day following the date on which the notice of the shareholders’ meeting was mailed); or

 

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  (iii)

With respect to any Shareholder Proposal to be considered at a special shareholders meeting called pursuant to Article II, Section 2, subsection (a)(ii), the shareholder(s) proposing to make such Shareholder Proposal provided the information set forth in subsection (b) of this Section 7 to the board of directors concurrently with the filing of the initial demand by shareholders relating to such special shareholders meeting; or

 

  (iv)

With respect to any Shareholder Proposal to be considered at any regular meeting of shareholders, other than as described in clause (i) hereof, the shareholder(s) proposing to make such Shareholder Proposal provided the information set forth in subsection (b) of this Section 7 to the board of directors between 90 to 120 days prior to the regular meeting at which they wish the Shareholder Proposal to be considered. For the purposes of determining whether information was provided at the times or within the specified periods, the date of the applicable meeting shall be as set forth in the notice of meeting given by the corporation, and such times and periods will be determined without regard to any postponements, deferrals or adjournments of such meeting to a later date.

(b) The following information must be provided to the board of directors, within or at the times specified in subsection (a) above, in order for the Shareholder Proposal to be considered at the applicable shareholders meeting:

 

  (i)

The Shareholder Proposal, as it will be proposed, in full text and in writing;

 

  (ii)

The purpose(s) for which the Shareholder Proposal is desired and the specific meeting at which such proposal is proposed to be considered;

 

  (iii)

The name(s), address(es), and number of shares held of record by the shareholder(s) making such Shareholder Proposal (or owned beneficially and represented by a nominee certificate on file with the corporation);

 

  (iv)

The number of shares that have been solicited with regard to the Shareholder Proposal and the number of shares the holders of which have agreed (in writing or otherwise) to vote in any specific fashion on said Shareholder Proposal; and

 

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  (v)

A written statement by said shareholder(s) that they intend to continue ownership of such voting shares through the date of the meeting at which said Shareholder Proposal is proposed to be considered.

(c) Failure to fully comply with the provisions of this Section 7 shall bar discussion of and voting on the Shareholder Proposal at the applicable regular or special shareholders meeting. Any Shareholder Proposal that does not comply with the requirements of this Section 7 shall be disregarded by the chairman of the meeting, and any votes cast in support of the Shareholder Proposal, unless the Shareholder Proposal has been validly submitted by another shareholder, shall be disregarded by the chairman of such meeting.

(d) The provisions of this Section 7 shall be read in accordance with and so as not to conflict with the rules and regulations promulgated by the Securities and Exchange Commission and any stock exchange or quotation system upon which the corporation’s shares are traded. Nothing in these bylaws shall be deemed to require the consideration at any meeting of shareholders of any Shareholder Proposal that, pursuant to law, the corporation may refuse to permit consideration thereof.

Section 8. Consent of Shareholders. Any action required or permitted to be taken at any meeting of shareholders may be taken without a meeting if all of the shareholders consent thereto in writing, setting forth the action so taken. Such consent shall have the same force and effect as a unanimous vote of shareholders.

Section 9. List of Shareholders; Inspection of Records.

(a) The corporation shall keep at its registered office or principal place of business, or at the office of its transfer agent or registrar, a record of its shareholders, giving their names and addresses and the number, class and series, if any, of the shares held by each. The officer who has charge of the stock transfer books of the corporation shall prepare and make, before every meeting of shareholders or any adjournment thereof, a complete list of the shareholders entitled to vote at the meeting or any adjournment thereof, arranged in alphabetical order, with the address of and the number and class and series, if any, of shares held by each. The list shall be produced and kept open at the time and place of the meeting and shall be subject to inspection by any shareholder during the whole time of the meeting for the purposes thereof. The said list may be the corporation’s regular record of shareholders if it is arranged in alphabetical order or contains an alphabetical index.

 

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(b) Shareholders are entitled to inspect the corporate records as and to the extent provided by the Code; provided, however, that only shareholders owning more than two percent (2%) of the outstanding shares of any class of the corporation’s stock shall be entitled to inspect (1) the minutes from any board, board committee or shareholders meeting (including any records of action taken thereby without a meeting); (2) the accounting records of the corporation; or (3) any record of the shareholders of the corporation.

ARTICLE III

DIRECTORS

Section 1. Powers. Except as otherwise provided by any legal agreement among shareholders, the property, affairs and business of the corporation shall be managed and directed by its board of directors, which may exercise all powers of the corporation and do all lawful acts and things which are not by law, by any legal agreement among shareholders, by the articles of incorporation or by these bylaws directed or required to be exercised or done by the shareholders.

One member of the board of directors shall be selected by the board to serve as chairman. The chairman shall preside at all meetings of shareholders and the board and shall have such other powers and duties as may be assigned by the board of directors and as otherwise may be set forth herein. Except where by law the signature of the chief executive officer is required, the chairman shall possess the same power as the chief executive officer to sign all certificates representing shares of the corporation and all bonds, mortgages and other contracts requiring a seal, under the seal of the corporation.

Section 2. Number and Election . The number of directors constituting the entire board and the term of office for each director shall be as provided for in the articles of incorporation. The directors shall be elected by a majority of the votes cast at the annual meeting of shareholders at which a quorum is present; provided, however that directors shall be elected by a plurality of the votes cast at such meeting for which (a) the president receives a notice that a shareholder has nominated a candidate for election to the board of directors in compliance with the advance notice requirements for shareholder nominees for director set forth in Article III, Section 3; and (b) such nomination has not been withdrawn by such shareholder on or prior to the tenth (10th) day preceding the date that the corporation first mails its notice of meeting for such meeting to the shareholders. A majority of the votes cast means that the number of votes cast “for” a director’s election exceeds the number of votes cast “against” that director’s election. The following shall not be a vote cast: (1) a share otherwise present at the meeting but for which there is an abstention and (2) a share otherwise present at the meeting as to which a shareholder gives no authority or discretion, including “broker nonvotes.”

 

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In the event an incumbent director fails to receive a majority of the votes cast (unless, pursuant to the immediately preceding paragraph, the director election standard is a plurality of the votes cast), the incumbent director shall promptly tender his or her resignation to the board of directors. The Nominating and Corporate Governance Committee of the board of directors will make a recommendation to the board of directors on whether to accept or reject the resignation, or whether other action should be taken. The board of directors, taking into account the recommendation of the Nominating and Corporate Governance Committee, will determine whether to accept or reject such resignation, or what other action should be taken, within 100 days from the date of the certification of election results. Directors shall be natural persons who have attained the age of 18 years, but need not be residents of the state of Georgia.

Section 3. Nominations.

(a) If any shareholder intends to nominate or cause to be nominated any candidate for election to the board of directors (other than any candidate to be sponsored by and proposed at the instance of the management), such shareholder shall notify the president by first class registered mail sent not later than the close of business on the sixtieth (60th) day nor earlier than the close of business on the one hundred twentieth (120th) day prior to the first anniversary of the preceding year’s annual meeting (provided, however, that in the event that (i) the date of the annual meeting is more than thirty (30) days before or more than seventy (70) days after such anniversary date, or (ii) no annual meeting was held during the preceding year, notice by the shareholder must be so delivered not earlier than the close of business on the one hundred twentieth (120th) day prior to such annual meeting and not later than the close of business on the later on the sixtieth (60th) day prior to such annual meeting or the tenth (10th) day following the day on which public announcement of the date of such meeting is first made by the corporation). Such notification shall contain the following information with respect to each nominee, to the extent known to the shareholder giving such notification:

 

  (i)

Name, address and principal present occupation;

 

  (ii)

To the knowledge of the shareholder who proposed to make such nomination, the total number of shares that may be voted for such proposed nominee;

 

  (iii)

The names and address of the shareholders who propose to make such nomination, and the number of shares of the corporation owned by each of such shareholders; and

 

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  (iv)

The following additional information with respect to each nominee: age, past employment, education, beneficial ownership of shares in the corporation, past and present financial standing, criminal history (including any convictions, indictments or settlements thereof), involvement in any past or pending litigation or administrative proceedings (including threatened involvement), relationship to and agreements (whether or not in writing) with the shareholder(s) (and their relatives, subsidiaries and affiliates) intending to make such nomination, past and present relationships or dealings with the corporation or any of its subsidiaries, affiliates, directors, officers or agents, plans or ideas for managing the affairs of the corporation (including, without limitation, any termination of employees, any sales of corporate assets, any proposed merger, business combination or recapitalization involving the corporation, and any proposed dissolution or liquidation of the corporation), such individual’s written consent to being named in a proxy statement as a nominee and to serving as director if elected and all additional information relating to such person that would be required to be disclosed, or otherwise required, pursuant to Sections 13 or 14 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations promulgated thereunder, in connection with any acquisition of shares by such nominee or in connection with the solicitation of proxies by such nominee for his or her election as a director, regardless of the applicability of such provisions of the Exchange Act.

(b) Any nominations not in accordance with the provisions of this Section 3 may be disregarded by the chairman of the meeting, and upon instruction by the chairman, votes cast for each such nominee shall be disregarded. In the event, however, that a person should be nominated by more than one shareholder, and if one such nomination complies with the provisions of this Section 3, such nomination shall be honored, and all shares voted for such nominee shall be counted.

Section 4. Vacancies. All vacancies, including vacancies resulting from any increase in the number of directors or from removal of a director, shall be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director. If there are no directors in office, then vacancies shall be filled through election by the shareholders. Any director elected to fill a vacancy shall serve the unexpired term of his or her predecessor and until his or her successor is duly elected and qualified; provided that any director filling a vacancy by reason of an increase in the number of directors, where such vacancy is filled by the directors, shall serve until the next annual meeting of shareholders and until his or her successor is duly elected and qualified.

 

 

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Section 5. Meetings and Notice. The board of directors of the corporation may hold meetings, both regular and special, either within or without the state of Georgia. Regular meetings of the board of directors may be held without notice at such time and place as shall from time to time be determined by resolution of the board. Special meetings of the board may be called by the chairman of the board or chief executive officer or by any two directors on one day’s oral, telegraphic or written notice duly given or served on each director personally, or three days’ notice deposited, first class postage prepaid, in the United States mail. Such notice shall state a reasonable time, date and place of meeting, but the purpose need not be stated therein. A director may waive any notice required by the Code, the articles of incorporation, or these bylaws before or after the date and time of the matter to which the notice relates, by a written waiver signed by the director and delivered to the corporation for inclusion in the minutes or filing with the corporate records. Attendance of a director at a meeting shall constitute a waiver of notice of such meeting and waiver of all objections to the place and time of the meeting, or the manner in which it has been called or convened except when the director states, at the beginning of the meeting, any such objection or objections to the transaction of business.

Section 6. Quorum. At all meetings of the board a majority of directors shall constitute a quorum for the transaction of business, and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board, except as may be otherwise specifically provided by law, by the articles of incorporation, or by these bylaws. If a quorum shall not be present at any meeting of the board, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.

Section 7. Conference Telephone Meeting. Unless the articles of incorporation or these bylaws otherwise provide, members of the board of directors, or any committee designated by such board, may participate in a meeting of such board or committee by means of conference telephone or similar communications equipment whereby all persons participating in the meeting can hear each other. Participation in such a meeting shall constitute presence in person.

Section 8. Consent of Directors. Unless otherwise restricted by the articles of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the board of directors or of any committee thereof may be taken without a meeting, if all members of the board or committee, as the case may be, consent thereto in writing, setting forth the action so taken, and the writing or writings are delivered to the corporation for inclusion in the minutes or filing with the corporate records. Such consent shall have the same force and effect as a unanimous vote of the board.

 

 

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Section 9. Committees. The board of directors may, by resolution passed by a majority of the whole board, designate from among its members one or more committees, each committee to consist of two or more directors. The board may designate one or more directors as alternate members of any committee, who may replace any absent member at any meeting of such committee. Any such committee, to the extent provided in the resolution, shall have and may exercise all of the authority of the board of directors in the management of the business and affairs of the corporation except that it shall have no authority with respect to (1) amending the articles of incorporation or these bylaws; (2) adopting a plan of merger or consolidation; (3) the sale, lease, exchange or other disposition of all or substantially all of the property and assets of the corporation; (4) a voluntary dissolution of the corporation or a revocation thereof; and (5) any other action limited by law. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the board of directors. A majority of each committee may determine its action and may fix the time and place of its meetings, unless otherwise provided by the board of directors. Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required.

Section 10. Removal of Directors. At any shareholders meeting with respect to which notice of such purpose has been given, any director may be removed from office, with cause, by the vote of shareholders representing a majority of the issued and outstanding capital stock entitled to vote for the election of directors, and any vacancy created by such removal shall be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and a director so chosen shall hold office until the next annual meeting and until his or her successor is duly elected and qualified unless sooner displaced.

Section 11. Compensation of Directors. Directors shall be entitled to such reasonable compensation for their services as directors or members of any committee of the board as shall be fixed from time to time by resolution adopted by the board, and shall also be entitled to reimbursement for any reasonable expenses incurred in attending any meeting of the board or any such committee.

ARTICLE IV

OFFICERS

Section 1. Number. The officers of the corporation shall be chosen by the board of directors, which shall include a chief executive officer, a president, a chief financial officer and a secretary, and which may include one or more vice presidents (any one or more of whom may be given an additional designation of rank or function), assistant officers, and such other officers as the board of directors shall deem appropriate. Any number of offices may be held by the same person.

Section 2. Compensation. The salaries of all officers shall be fixed by the board of directors or a committee or officer appointed by the board.

 

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Section 3. Term of Office. Unless otherwise provided by resolution of the board of directors, the principal officers shall be chosen annually by the board at the first meeting of the board following the annual meeting of shareholders of the corporation, or as soon thereafter as is conveniently possible. Subordinate officers may be elected from time to time. Each officer shall serve until his or her successor shall have been chosen and qualified, or until his or her death, resignation or removal.

Section 4. Removal. Any officer may be removed from office at any time, with or without cause, by the board of directors whenever in its judgment the best interest of the corporation will be served thereby.

Section 5. Vacancies. Any vacancy in an office resulting from any cause may be filled by the board of directors.

Section 6. Powers and Duties. The officers shall each have such powers and duties as generally pertain to their respective offices, as well as such powers and duties as from time to time may be conferred by the board of directors. In addition, the following officers shall each have the powers and duties set forth below:

(a) Chief Executive Officer. The chief executive officer shall be the chief executive officer of the corporation and shall, in the absence of the chairman of the board, preside at all meetings of shareholders, and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. Except where by law the signature of the president is required, the chief executive officer shall possess the same power as the president to sign all certificates representing shares of the corporation and all bonds, mortgages and other contracts requiring a seal, under the seal of the corporation.

(b) President. The president shall, in the absence of the chairman of the board and the chief executive officer, preside at all meetings of shareholders. The president shall have general and active management of the business of the corporation and shall see that all orders and resolutions of the board of directors are carried into effect. The president shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required by law to be otherwise signed and executed.

(c) Chief Financial Officer. The chief financial officer shall have charge of and be responsible for all funds, securities, receipts and disbursements of the corporation and shall deposit or cause to be deposited, in the name of the corporation, all moneys or other valuable effects in such banks, trust companies or other depositories as shall, from time to time, be selected by or under authority of the board of directors. The chief financial officer shall keep or cause to be kept full and accurate records of all receipts and disbursements in books of the corporation.

 

 

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(d) Vice President. In the absence of the president or in the event of the president’s inability or refusal to act, the vice president (or in the event there be more than one vice president, the vice president in the order designated, or in the absence of any designation, then in the order of their election) shall perform the duties of the president, and when so acting, shall have all the powers of and be subject to all the restrictions upon the president. The vice presidents shall perform such other duties and have such other powers as the board of directors may from time to time prescribe.

(e) Secretary. The secretary shall cause minutes of all meetings of the board of directors and shareholders to be recorded and kept and shall perform like duties for the standing committees when required. The secretary shall give, or cause to be given, notice of all meetings of shareholders and special meetings of the board of directors, and shall perform such other duties as may be prescribed by the board of directors or president, under whose supervision the secretary shall be. The secretary shall have custody of the corporate seal of the corporation and the secretary, or an assistant secretary, shall have authority to affix the same to the instrument requiring it and when so affixed, it may be attested by the secretary’s signature or by the signature of such assistant secretary. The board of directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by such officer’s signature.

(f) Assistant Officers. Any assistant officer of the corporation shall have such duties and authority as the officer such assistant officer assists and, in addition, such other duties and authority as the board of directors or chief executive officer shall from time to time assign.

(g) Other Officers. Any other officer of the corporation shall have such duties and authority as the board of directors or chief executive officer shall from time to time assign.

Section 7. Voting Securities of Corporation. Unless otherwise directed by the board of directors, the chief executive officer shall have full power and authority on behalf of the corporation to attend and to act and vote at any meetings of security holders of corporations in which the corporation may hold securities, and at such meetings shall possess and may exercise any and all rights and powers incident to the ownership of such securities which the corporation might have possessed and exercised if it had been present. The board of directors by resolution from time to time may confer like powers upon any other person or persons.

 

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ARTICLE V

CAPITAL STOCK

Section 1. No Certificates for Shares. Shares of the corporation’s stock will be issued without certificates as “Book Entry” shares and entered on the books of the corporation and registered as they are issued. Within a reasonable time after the issuance or transfer of shares without certificates, the corporation’s transfer agent shall send the shareholder a written notification of the information required on certificates by applicable law, rule or regulation.

Section 2. Transfers.

(a) Transfers of shares of the capital stock of the corporation shall be made only on the books of the corporation by the registered holder thereof, or by his or her duly authorized attorney, or with a transfer clerk or transfer agent appointed as provided in Section 4 of this Article upon the presentation proper evidence of authority to transfer by the record holder, and the payment of all taxes thereon.

(b) The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and for all other purposes, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by law.

(c) Shares of capital stock may be transferred upon receipt of proper transfer instructions from the registered owner of such Book Entry shares, or from a duly authorized agent or attorney. No transfer shall affect the right of the corporation to pay any dividend upon the stock to the holder of record as the holder in fact thereof for all purposes, and no transfer shall be valid, except between the parties thereto, until such transfer shall have been made upon the books of the corporation as herein provided.

(d) The board may, from time to time, make such additional rules and regulations as it may deem expedient, not inconsistent with these bylaws, the articles of incorporation or applicable law, rule or regulation, concerning the issue, transfer and registration of shares of the capital stock of the corporation.

Section 3. Record Date. In order that the corporation may determine the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect

 

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of any change, conversion or exchange of stock or for the purpose of any other lawful action, the board of directors may fix, in advance, a record date, which shall not be more than 70 days and, in case of a meeting of shareholders, not less than 10 days prior to the date on which the particular action requiring such determination of shareholders is to be taken. If no record date is fixed for the determination of shareholders entitled to notice of and to vote at any meeting of shareholders, the record date shall be at the close of business on the day next preceding the day on which the notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. If no record date is fixed for other purposes, the record date shall be at the close of business on the day next preceding the day on which the board of directors adopts the resolution relating thereto. A determination of shareholders of record entitled to notice of or to vote at a meeting of shareholders shall apply to any adjournment of the meeting unless the board of directors shall fix a new record date for the adjourned meeting.

Section 4. Transfer Agent and Registrar. The board of directors may appoint one or more transfer agents or one or more transfer clerks and one or more registrars.

ARTICLE VI

GENERAL PROVISIONS

Section 1. Distributions. Distributions upon the capital stock of the corporation, subject to the provisions of the articles of incorporation, if any, may be declared by the board of directors at any regular or special meetings, pursuant to law. Distributions may be paid in cash, in property, or in shares of the corporation’s capital stock, subject to the provisions of the articles of incorporation. Before payment of any distribution, there may be set aside out of any funds of the corporation available for distributions such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing distributions, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interest of the corporation, and the directors may modify or abolish any such reserve in the manner in which it was created.

Section 2. Fiscal Year. The fiscal year of the corporation shall be fixed by resolution of the board of directors.

Section 3. Seal. The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization and the words “Corporate Seal” and “Georgia”. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. In the event it is inconvenient to use such a seal at any time, the signature of the corporation followed by the word “Seal” enclosed in parentheses shall be deemed the seal of the corporation.

 

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Section 4. Savings Clause. To the extent these bylaws conflict with any provision of any state or federal law as such laws may be amended from time to time, these bylaws shall be construed so as not to conflict with said law, and any discretionary actions made hereunder shall be made in accordance with applicable law.

ARTICLE VII

INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 1. Indemnification of Directors and Officers. To the fullest extent permitted by law, the corporation shall indemnify, defend and hold harmless any person (an “Indemnified Person”) who is or was a party, or is threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, and whether formal or informal (a “Proceeding”) (other than an action or suit by or in the right of the corporation) by reason of the fact that he or she is or was a director or officer of the corporation, or, while a director or officer of the corporation, is or was serving in another Corporate Status (as defined below) against all expenses (including, but not limited to, attorneys’ fees and disbursements, court costs and expert witness fees) (collectively, “Expenses”), and against all judgments, fines, penalties and amounts paid in settlement (including any excise tax assessed with respect to an employee benefit plan) (collectively, “Liabilities”) that may be imposed upon or incurred by him or her in connection with or resulting from such Proceeding, if he or she acted in good faith and, in the case of conduct in his or her official capacity, in a manner he or she reasonably believed to be in the best interests of the corporation, and in all other cases, in a manner he or she reasonably believed to not be opposed to the best interests of the corporation, and with respect to any criminal Proceeding, had no reasonable cause to believe his or her conduct was unlawful. “Corporate Status” describes (a) the status of a person who is or was a director or officer of the corporation or an individual who, while a director or officer of the corporation, is or was serving at the corporation’s request as a director, officer, partner, trustee, employee, administrator or agent of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan, entity, or other enterprise, and (b) a person’s service in connection with an employee benefit plan at the corporation’s request if such person’s duties to the corporation also impose duties on, or otherwise involve services by, such person to the plan or to participants in or beneficiaries of the plan.

Section 2. Indemnification of Directors and Officers for Derivative Actions. The corporation shall indemnify, defend and hold harmless any Indemnified Person who is or was a party, or is threatened to be made a party, to any threatened, pending or completed Proceeding by or in the right of the corporation, by reason of the fact that he or she is or was a director or officer of the corporation, or, while a director or officer of the corporation, is or was serving in another Corporate

 

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Status (a) to the fullest extent permitted by law, against all Expenses that may be imposed upon or incurred by him or her in connection with or resulting from such Proceeding, if he or she acted in good faith and, in the case of conduct in his or her official capacity, in a manner he or she reasonably believed to be in the best interests of the corporation and in all other cases, in a manner he or she reasonably believed to not be opposed to the best interests of the corporation, and with respect to any criminal Proceeding, had no reasonable cause to believe his or her conduct was unlawful, and (b) to the fullest extent permitted by law (including through a determination by a court of competent jurisdiction pursuant to Section 14-2-854 of the Code) against all Expenses and Liabilities that may be imposed upon or incurred by him or her in connection with or resulting from such Proceeding.

Section 3. Indemnification Upon Successful Defense on Merits, Etc. Notwithstanding any other provision of this Article VII, to the extent that an Indemnified Person is, by reason of his or her Corporate Status, a party to and is successful on the merits or otherwise in any Proceeding, the Indemnified Person shall be indemnified against Expenses imposed upon or incurred by him or her in connection with the Proceeding, regardless of whether the Indemnified Person has met the standards set forth in the Code or in this Article VII and without any further action or determination by the board of directors of the corporation or otherwise. If an Indemnified Person is not wholly successful in such Proceeding but is successful on the merits or otherwise as to one or more but less than all claims, issues or matters in such Proceeding, the corporation shall indemnify the Indemnified Person against all Expenses imposed upon or incurred by him or her in connection with each claim, issue or matter with respect to which the Indemnified Person was successful. For the purposes of this Section 3 and without limiting the foregoing, (a) the termination of any claim, issue or matter in any such Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter, and (b) a decision by any government, regulatory or self-regulatory authority, agency or body not to commence or pursue any investigation, civil or criminal enforcement matter or case or in any civil suit, shall be deemed to be a successful result as to such claim, issue or matter. If an Indemnified Person is entitled under any provision of the Code or this Article VII to indemnification by the corporation for some or a portion of the Expenses or Liabilities imposed upon or incurred by him or her in connection with the investigation, defense, appeal or settlement of a Proceeding covered by this Article VII, but is not entitled to indemnification for the total amount thereof, the corporation shall nevertheless indemnify the Indemnified Person for the portion of such Expenses and Liabilities imposed upon or incurred by him or her to which the Indemnified Person is entitled.

 

 

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Section 4. Indemnification and Advancement of Expenses for Directors and Officers When Acting as a Witness, Etc. To the fullest extent permitted by law, any Indemnified Person who acts as a witness or other participant in any Proceeding, shall be indemnified by the corporation against all Expenses imposed upon or incurred by the Indemnified Person in connection therewith.

Section 5. Indemnification of Employees and Agents. The board of directors shall have the power to cause the corporation to provide to any person who is or was an employee or agent of the corporation all or any part of the right to indemnification and other rights of the type provided under Sections 1, 2, 3, 4, 7 and 12 of this Article VII (subject to the conditions, limitations, obligations and other provisions specified herein), upon a resolution to that effect identifying such employee or agent (by position or name) and specifying the particular rights provided, which may be different for each employee or agent identified. Each employee or agent of the corporation so identified shall be an “Indemnified Person” for purposes of the provisions of this Article VII.

Section 6. Effectuation of Rights. Sections 1, 2, 3, 4 and 7 of this Article VII are intended to, and shall be deemed to, satisfy the requirements for authorization referred to in Section 14-2-859(a) of the Code or any successor provision and any other requirements of applicable law such that the corporation shall be obligated to the maximum extent possible to provide such indemnification and advancement of Expenses without any further requirements for authorization or action referred to in Sections 14-2-853(c) or 14-2-855(c) of the Code or any successor provision, or otherwise. The corporation shall act in good faith and expeditiously take all actions necessary or appropriate to make available the indemnification, advancement of Expenses and other rights provided for Indemnified Persons in this Article VII, and shall expeditiously take all actions necessary or appropriate to remove any impediments or obstacles to such indemnification, advancement of Expenses and other rights. To the extent any determination of entitlement to indemnification is required for purposes of the Code or this Article VII, at the request of the Indemnified Person, such determination shall be made by Special Legal Counsel (as defined below) proposed by the Indemnified Person and reasonably acceptable to the corporation. In the event of any dispute as to whether an Indemnified Person is entitled to indemnification or advancement of Expenses under the Code or this Article VII, the Indemnified Person shall be entitled to an expeditious and final adjudication in the Georgia State-Wide Business Court (the “Business Court”), which the corporation agrees shall be the exclusive venue for any court action to determine whether the Indemnified Person is entitled to such indemnification or advancement of Expenses. The corporation shall seek expedited resolution of the matter and agrees that the Business Court may summarily determine the corporation’s obligation to advance Expenses. The corporation irrevocably waives trial by jury with respect to the determination whether an Indemnified Person is entitled to indemnification or advancement of Expenses. If an Indemnified Person, pursuant to this Section 6, seeks a judicial adjudication of his or her rights under this Article VII, the Indemnified Person shall be entitled to recover from the corporation, and shall be indemnified by the corporation against, any and all Expenses actually and reasonably incurred by him of her in such judicial adjudication, but only if he or she prevails therein.

 

 

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If it shall be determined in such judicial adjudication that the Indemnified Person is entitled to receive part but not all of the indemnification or advancement of expenses sought, the Expenses incurred by the Indemnified Person in connection with such judicial adjudication shall be appropriately prorated. As used in this Section 6, “Special Legal Counsel” means an attorney with an active membership in good standing in the State Bar of Georgia who is experienced in matters of corporate law and neither he or she, nor his or her law firm, presently is, nor in the past five years has been, retained to represent: (i) the corporation or the Indemnified Person in any other matter material to either such party; or (ii) any other party to the Proceeding giving rise to a claim for indemnification, provided that the term “Special Legal Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the corporation or the Indemnified Person in an action to determine the Indemnified Person’s rights under the Code or this Article VII.

Section 7. Advances. Expenses imposed upon or incurred by an Indemnified Person in defending any Proceeding of the kind described in Sections 1, 2 and 3 hereof shall be paid by the corporation in advance of the final disposition of such action, suit or proceeding as set forth herein. The corporation shall promptly pay the amount of such Expenses to the Indemnified Person, but in no event later than ten days following the Indemnified Person’s delivery to the corporation of a written request for an advance pursuant to this Section 7, together with a reasonable accounting of such expenses; provided, however, that the Indemnified Person shall furnish the corporation a written affirmation of his or her good faith belief that he or she has met the standard of conduct set forth in the Code or that the proceeding involves conduct for which liability has been eliminated under a provision of the articles of incorporation, as authorized by paragraph (4) of subsection (b) of Section 14-2-202 of the Code or any successor provision, and a written undertaking and agreement, executed personally or on his or her behalf, to repay to the corporation any advances made pursuant to this Section 7 if it shall be ultimately determined that the Indemnified Person is not entitled to be indemnified by the corporation for such amounts. The corporation shall make the advances contemplated by this Section 7 regardless of the Indemnified Person’s financial ability to make repayment. Any advances and undertakings to repay pursuant to this Section 7 shall be unsecured and interest-free.

Section 8. Non-Exclusivity. Subject to any applicable limitation imposed by the Code or the articles of incorporation, the indemnification and advancement of expenses provided by or granted pursuant to this Article VII shall not be exclusive of any other rights to which a person seeking indemnification or advancement of expenses may be entitled under applicable law or any bylaw, resolution or agreement, including as may be approved by the corporation’s shareholders.

 

 

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Section 9. Insurance. The corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or who, while a director, officer, employee, or agent of the corporation, is or was serving as a director, officer, trustee, general partner, employee or agent of a Subsidiary or, at the request of the corporation, of any other organization or in any other Corporate Status, against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the corporation would have the power to indemnify him or her against such liability under the provisions of this Article VII.

Section 10. Security. The corporation may designate certain of its assets as collateral, provide self-insurance or otherwise secure its obligations under this Article VII, or under any indemnification agreement or plan of indemnification adopted and entered into in accordance with the provisions of this Article VII, as the board of directors deems appropriate.

Section 11. Amendment. Any amendment to this Article VII that limits or otherwise adversely affects the right of indemnification, advancement of expenses, or other rights of any Indemnified Person hereunder shall, as to such Indemnified Person, apply only to claims, actions, suits or proceedings based on actions, events or omissions (collectively, “Post Amendment Events”) occurring after such amendment and after delivery of notice of such amendment to the Indemnified Person so affected. Any Indemnified Person shall, as to any claim, action, suit or proceeding based on actions, events or omissions occurring prior to the date of receipt of such notice, be entitled to the right of indemnification, advancement of expenses and other rights under this Article VII to the same extent as if such provisions had continued as part of the bylaws of the corporation without such amendment. This Section 11 cannot be altered, amended or repealed in a manner effective as to any Indemnified Person (except as to Post Amendment Events) without the prior written consent of such Indemnified Person.

Section 12. Agreements. In addition to the rights provided in this Article VII, the corporation shall have the power, upon authorization by the board of directors, to enter into an agreement or agreements providing to any person who is or was a director, officer, employee or agent of the corporation indemnification rights substantially similar to, or greater than, those provided in this Article VII.

 

 

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Section 13. Continuing Benefits. The indemnification and advancement of expenses provided by or granted pursuant to this Article VII shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the spouse, heirs, devisees, executors, administrators and other legal representatives of such a person.

Section 14. Successors. For purposes of this Article VII, the terms “the corporation” or “this corporation” shall include any corporation, joint venture, trust, partnership or unincorporated business association that is the successor to all or substantially all of the business or assets of this corporation, as a result of merger, consolidation, sale, liquidation or otherwise, and any such successor shall be liable to the persons indemnified under this Article VII on the same terms and conditions and to the same extent as this corporation.

Section 15. Severability. Each of the sections of this Article VII, and each of the clauses set forth herein, shall be deemed separate and independent, and should any part of any such section or clause be declared invalid or unenforceable by any court of competent jurisdiction, such invalidity or unenforceability shall in no way render invalid or unenforceable any other part thereof or any other separate section or clause of this Article VII that is not declared invalid or unenforceable. If any section, clause or part of this Article VII is determined to be invalid or unenforceable, the corporation in good faith shall expeditiously take all necessary or appropriate action to provide the Indemnified Persons with rights under this Article VII (including with respect to indemnification, advancement of Expenses and other rights) that effect the original intent of this Article VII as closely as possible.

Section 16. Additional Indemnification. In addition to the specific indemnification rights set forth herein, the corporation shall indemnify each of its directors and officers and advance expenses to its directors and officers to the full extent permitted by action of the board of directors without shareholder approval under the Code or other laws of the state of Georgia as in effect from time to time.

ARTICLE VIII

AMENDMENTS

The board of directors shall have power to alter, amend or repeal the bylaws by majority vote of all of the directors, but any bylaws adopted by the board of directors may be altered, amended or repealed and new bylaws adopted, by the shareholders by majority vote of all of the shares having voting power.

 

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ARTICLE IX

FORUM FOR ADJUDICATION OF DISPUTES

Unless the corporation consents in writing to the selection of an alternative forum, to the fullest extent permitted by law, the sole and exclusive forum for any shareholder (including a beneficial owner) to bring (a) any derivative action or proceeding brought on behalf of the corporation, (b) any action asserting a claim of breach of a fiduciary or legal duty owed by any current or former director, officer, employee, shareholder, or agent of the corporation to the corporation or the corporation’s shareholders, including a claim alleging the aiding and abetting of any such breach of fiduciary duty, (c) any action asserting a claim against the corporation, its current or former directors, officers, employees, shareholders, or agents arising pursuant to any provision of the Code or the corporation’s articles of incorporation or bylaws (as either may be amended from time to time), (d) any action asserting a claim against the corporation, its current or former directors, officers, employees, shareholders, or agents governed by the internal affairs doctrine, or (e) any action against the corporation, its current or former directors, officers, employees, shareholders, or agents asserting a claim identified in O.C.G.A. § 15-5A-3 shall be the Georgia State-Wide Business Court (the “Chosen Court”).

To the fullest extent permitted by law, if any action the subject matter of which is within the scope of the preceding paragraph is filed in a court (a “Foreign Court”) other than the Chosen Court (a “Foreign Action”) in the name of any shareholder, such shareholder shall be deemed to have consented to (i) the personal jurisdiction of the Chosen Court in connection with any action brought in any such Foreign Court to enforce the preceding sentence and (ii) having service of process made upon such shareholder in any such action by service upon such shareholder’s counsel in the Foreign Action as agent for such shareholder. This Article IX shall not apply to any action asserting claims arising under the Exchange Act or under the Securities Act of 1933, as amended.

 

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Exhibit 10.1

Execution Version

TRANSITION SERVICES AGREEMENT

By and Between

AARON’S HOLDINGS COMPANY, INC. (TO BE KNOWN AS PROG HOLDINGS, INC.)

and

THE AARON’S COMPANY, INC.

Dated as of November 29, 2020

 


TABLE OF CONTENTS

 

ARTICLE I DEFINITIONS

     1  

Section 1.01.

  Definitions      1  

ARTICLE II SERVICES

     5  

Section 2.01.

  Services      5  

Section 2.02.

  Additional Services      5  

Section 2.03.

  Performance of Services      6  

Section 2.04.

  Changes in the Performance of Services      7  

Section 2.05.

  Transitional Nature of Services      7  

Section 2.06.

  Subcontracting      7  

Section 2.07.

  Contract Manager      8  

ARTICLE III SERVICE CHARGES

     9  

Section 3.01.

  Charges for Services      9  

Section 3.02.

  Reimbursement for Out-of-Pocket Costs and Expenses      9  

ARTICLE IV BILLING; TAXES

     9  

Section 4.01.

  Billing and Payment      9  

Section 4.02.

  Late Payments      9  

Section 4.03.

  Taxes      10  

Section 4.04.

  No Set-Off      10  

ARTICLE V TERM AND TERMINATION

     10  

Section 5.01.

  Term      10  

Section 5.02.

  Early Termination      10  

Section 5.03.

  Reduction of Services      11  

Section 5.04.

  Interdependencies      11  

Section 5.05.

  Effect of Termination      11  

Section 5.06.

  Information Transmission      12  

ARTICLE VI ACCESS; SYSTEM SECURITY

     12  

Section 6.01.

  Access      12  

Section 6.02.

  System Security      12  

ARTICLE VII CONFIDENTIALITY; PROTECTIVE ARRANGEMENTS

     13  

Section 7.01.

  Confidentiality      13  

Section 7.02.

  Privacy and Data Protection Laws      13  

ARTICLE VIII LIMITED LIABILITY AND INDEMNIFICATION

     13  

Section 8.01.

  Limitations on Liability      13  

 

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Section 8.02.

  Obligation to Re-Perform; Liabilities      14  

Section 8.03.

  Third-Party Claims      14  

Section 8.04.

  Provider Indemnity      14  

Section 8.05.

  Indemnification Procedures      15  

Section 8.06.

  Liability for Payment Obligations      15  

Section 8.07.

  Exclusions of Other Remedies      15  

ARTICLE IX MISCELLANEOUS

     15  

Section 9.01.

  Further Assurances      15  

Section 9.02.

  Title to Intellectual Property      15  

Section 9.03.

  Independent Contractors      15  

Section 9.04.

  Group Members      16  

Section 9.05.

  Counterparts; Entire Agreement; Corporate Power      16  

Section 9.06.

  Governing Law      17  

Section 9.07.

  Assignability      17  

Section 9.08.

  Third-Party Beneficiaries      17  

Section 9.09.

  Notices      17  

Section 9.10.

  Severability      18  

Section 9.11.

  Force Majeure      18  

Section 9.12.

  Headings      19  

Section 9.13.

  Survival of Covenants      19  

Section 9.14.

  Waivers of Default      19  

Section 9.15.

  Dispute Resolution      19  

Section 9.16.

  Specific Performance      20  

Section 9.17.

  Amendments      20  

Section 9.18.

  Precedence of Schedules      20  

Section 9.19.

  Interpretation      20  

Section 9.20.

  Mutual Drafting      21  

 

 

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TRANSITION SERVICES AGREEMENT

This TRANSITION SERVICES AGREEMENT (this “Agreement”) is entered into on November 29, 2020 and is effective as of the Effective Time, by and between Aaron’s Holdings Company, Inc., a Georgia corporation (“RemainCo”), and The Aaron’s Company, Inc., a Georgia corporation (“SpinCo”). RemainCo and SpinCo are sometimes referred to herein, individually, as a “Party,” and, collectively, as the “Parties.” Capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed to such terms in Article I hereof.

R E C I T A L S:

WHEREAS, the Board of Directors of RemainCo has determined that it is appropriate, desirable and in the best interests of RemainCo and its shareholders to effectuate the Separation and the Distribution as described in the Separation and Distribution Agreement between RemainCo and SpinCo dated as of November 29, 2020 (the “Separation Agreement”);

WHEREAS, the Separation Agreement provides, among other things, subject to the terms and conditions thereof, for the Separation and the Distribution and for the execution and delivery of certain other agreements, including this Agreement; and

WHEREAS, in order to facilitate and provide for an orderly transition in connection with the Separation and the Distribution, the Parties desire to enter into this Agreement to set forth the terms and conditions pursuant to which each of the Parties shall provide Services to the other Party for a transitional period.

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:

ARTICLE I

DEFINITIONS

Section 1.01. Definitions. For purposes of this Agreement (including the recitals hereof), the following terms have the following meanings, and capitalized terms used but not otherwise defined herein shall have the meaning ascribed to them in the Separation Agreement:

Accessing Party” has the meaning set forth in Section 6.02(a).

Action” means any claim, demand, action, suit, countersuit, arbitration, inquiry, subpoena, discovery request, proceeding or investigation of any nature (whether criminal, civil, legislative, administrative, regulatory, prosecutorial or otherwise) by or before any Governmental Authority or any federal, state, local, foreign or international arbitration or mediation tribunal.

Additional Services” has the meaning set forth in Section 2.02.


Affiliate” has the meaning set forth in the Separation Agreement.

Agreement” has the meaning set forth in the Preamble.

Ancillary Agreements” has the meaning set forth in the Separation Agreement.

Business Entity” has the meaning set forth in the Separation Agreement.

Charge” and “Charges” have the meaning set forth in Section 3.01.

Confidential Information” means all Information that is either confidential or proprietary.

Contract Manager” has the meaning set forth in Section 2.07.

Dispute” has the meaning set forth in Section 9.15(a).

Distribution” has the meaning set forth in the Separation Agreement.

Distribution Date” means the date on which the Distribution is consummated.

e-mail” has the meaning set forth in Section 9.09.

Effective Time” means 11:59 Eastern Standard Time on the Distribution Date.

Force Majeure” means, with respect to a Party, an event beyond the control of such Party (or any Person acting on its behalf), which by its nature could not reasonably have been foreseen by such Party (or such Person), or, if it could reasonably have been foreseen, was unavoidable, and includes acts of God, unusually severe weather conditions, floods, riots, fires, explosions, sabotage, civil commotion or civil unrest, interference by civil or military authorities, cyberattacks, epidemics, pandemics, acts of war (declared or undeclared) or armed hostilities, other regional, national or international calamities or acts of terrorism, strikes, labor stoppages, or slowdowns or other industrial disturbances; or failures of energy sources or distribution or transportation facilities. Notwithstanding the foregoing, the receipt by a Party of an unsolicited takeover offer or other acquisition proposal, even if unforeseen or unavoidable, and such Party’s response thereto shall not be deemed an event of Force Majeure.

Governmental Authority” means any supranational, international, national, federal, state, provincial or local court, government, department, commission, board, bureau, agency, official or other regulatory, administrative or governmental authority, including the New York Stock Exchange or any similar self-regulatory body under applicable securities Laws.

Group” means either the RemainCo Group or the SpinCo Group.

Group Member” means any Business Entity that is a part of either the RemainCo Group or the SpinCo Group, as the context requires.

 

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Information” means information in written, oral, electronic or other tangible or intangible forms, including studies, reports, records, books, contracts, instruments, surveys, specifications, drawings, blueprints, diagrams, models, prototypes, samples, flow charts, data, marketing plans, customer names, Privileged Information, and other technical, financial, employee or business information or data; provided that “Information” does not include Patents, Trademarks, or Other Intellectual Property.

Initial Services” has the meaning set forth in Section 2.01(b).

Interest Payment” has the meaning set forth in Section 4.02.

Law” has the meaning set forth in the Separation Agreement.

Liabilities” has the meaning set forth in the Separation Agreement.

Party” or “Parties” has the meaning set forth in the Preamble.

Payment Date” has the meaning set forth in Section 4.01.

Person” means any (a) individual; (b) Business Entity; or (c) Governmental Authority.

Provider” means, with respect to any Service, the Party providing (or causing its other Group Members to provide) such Service under this Agreement.

Provider Indemnitees” has the meaning set forth in Section 8.03.

Recipient” means, with respect to any Service, the Party receiving (either directly or through its other Group Members) such Service under this Agreement.

Recipient Indemnitees” has the meaning set forth in Section 8.04.

RemainCo” has the meaning set forth in the Preamble.

RemainCo Business” means the “Progressive Leasing and Vive Business” as defined in the Separation Agreement.

RemainCo Group” means the “Parent Group” as defined in the Separation Agreement.

RemainCo Group Member” means “Parent Group Member” as defined in the Separation Agreement.

Representatives” means, with respect to any Person, any of such Person’s directors, officers, employees, agents, accountants, counsel, and other advisors or representatives.

Security Regulations” has the meaning set forth in Section 6.02(a).

Separation” has the meaning set forth in the Separation Agreement.

Separation Agreement” has the meaning set forth in the Recitals.

 

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Service Period” means, with respect to any Service, the period commencing on the later of (a) the Effective Time and (b) the date on which any Additional Service becomes a “Service” pursuant to the terms of this Agreement, and ending on the earlier of (i) the date that a Party terminates the provision of such Service pursuant to Section 5.02, and (ii) the termination date specified with respect to such Service set forth on Schedule A or Schedule B hereto.

Services” means the Initial Services and any Additional Services agreed to by the Parties in accordance with Section 2.02.

SpinCo” has the meaning set forth in the Preamble.

SpinCo Business” means the “Aaron’s Business” as defined in the Separation Agreement.

SpinCo Group” has the meaning set forth in the Separation Agreement.

Subsidiary” means, with respect to any Person, any Business Entity of which such Person: (a) beneficially owns, either directly or indirectly, more than 50% of (i) the total combined voting power of all classes of voting securities of such Business Entity; (ii) the total combined equity interests; or (iii) the capital or profit interests, in the case of a partnership; or (b) otherwise has the power to vote, either directly or indirectly, sufficient securities to elect a majority of the board of directors or similar governing body.

Systems” has the meaning set forth in Section 6.02(a).

Tax” has the meaning set forth in the Separation Agreement.

Taxing Authority” means, with respect to any Tax, the governmental entity or political subdivision thereof that imposes such Tax and the agency (if any) charged with the collection of such Tax for such entity or subdivision.

Termination Charges” shall mean, with respect to the termination of any Service pursuant to Section 5.02(a)(i), the sum of (a) any and all costs, fees and expenses (other than any severance or retention costs) payable by the Provider of such Service to a Third Party principally because of the early termination of such Service; provided, however, that the Provider shall use reasonable efforts to minimize any costs, fees or expenses payable to any Third Party in connection with such early termination of such Service and credit any such reductions against the Termination Charges payable by Recipient; and (b) any additional severance and retention costs, if any, because of the early termination of such Service that the Provider of such terminated Service incurs to employees who had been retained primarily to provide such terminated Service (it being agreed that the costs set forth in this clause (b) shall only be the amount, if any, in excess of the severance and retention costs that such Provider would have paid to such employees if the Service had been provided for the full period during which such Service would have been provided hereunder but for such early termination).

Third Party” means any Person other than the Parties or any of their respective Affiliates.

 

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Third-Party Claim” means any assertion by a Third Party of any claim, or the commencement by any Third Party of any Action, against any Party or any of its respective Affiliates.

ARTICLE II

SERVICES

Section 2.01. Services.

(a) Commencing as of the Effective Time, SpinCo shall use commercially reasonable efforts to provide (or cause another applicable member of the SpinCo Group to provide) to RemainCo (or another applicable member of the RemainCo Group) the services set forth on Schedule A.

(b) Commencing as of the Effective Time, RemainCo shall use commercially reasonable efforts to provide (or cause another applicable member of the RemainCo Group to provide) to SpinCo (or another applicable member of the SpinCo Group) the services set forth on Schedule B (collectively with the services set forth on Schedule A, the “Initial Services”).

Section 2.02. Additional Services.

(a) After the Effective Time and at any time prior to the twelve-month anniversary of the Distribution Date, each of RemainCo and SpinCo may request the other Party to (i) provide additional (including as to volume, amount, level or frequency, as applicable) or different services which the other Party is not expressly obligated to provide under this Agreement if such services are of the type and scope provided between the RemainCo Group and the SpinCo Group, in each case during the twelve months preceding the Distribution Date, (ii) expand the scope of any Service or (iii) expand the duration for which any Service is provided (such additional or expanded services, the “Additional Services”). The Party receiving such request for Additional Services shall consider such request in good faith and shall notify the requesting Party as promptly as practicable as to whether it will or will not provide the Additional Services; provided, however, that neither Party shall be obligated to provide any Additional Service if it does not, in its commercially reasonable judgment, have adequate resources to provide such Additional Service or if the provision of such Additional Service would significantly disrupt the operation of such Party’s or its Group Members’ businesses.

(b) If a Party agrees to provide Additional Services pursuant to Section 2.02(a), then the Parties shall in good faith attempt to negotiate the terms of a supplement to Schedule A and/or Schedule B, as applicable, which will describe in reasonable detail the service or service category, as applicable, project scope, term, price and payment terms to be charged for such Additional Services; it being understood, however, that the Service Provider shall not be required to provide any Additional Services if the Parties are unable to reach agreement on the terms thereof. If and to the extent agreed to in writing, the supplement to Schedule A and/or Schedule B, as applicable, shall be deemed part of this Agreement as of such date and the Additional Services shall be deemed “Services” provided hereunder, in each case subject to the terms and conditions of this Agreement.

 

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Section 2.03. Performance of Services.

(a) Subject to Section 2.06, Provider shall perform, or cause to be performed (through one (1) or more of its applicable Group Members, or through a Third-Party service provider in accordance herewith), all Services in a manner that is substantially similar in all material respects to the analogous services provided by or on behalf of Provider or any of its Subsidiaries to its applicable functional group or Subsidiary prior to the Effective Time and that in any event, conforms in all material respects with the terms of Schedule A and/or Schedule B. It is understood and agreed that the Service Provider is not a professional provider of the types of services included in the Services and that Provider personnel performing Services have other responsibilities and will not be dedicated full-time to performing Services hereunder.

(b) Nothing in this Agreement shall require Provider to perform or cause to be performed any Service to the extent that the manner of such performance would constitute a violation of any applicable Law or any existing contract, agreement or permit with a Third Party. If Provider is or becomes aware of any such potential violation, Provider shall use commercially reasonable efforts to promptly advise Recipient of such potential violation, and Provider and Recipient will mutually seek an alternative that addresses such potential violation. The Parties agree to cooperate in good faith and use commercially reasonable efforts to obtain any necessary Third Party consents required under any existing contract, agreement or permit with a Third Party to allow Provider to perform, or cause to be performed, all Services to be provided hereunder in accordance with the standards set forth in this Section 2.03. Recipient shall reimburse Provider for all reasonable out-of-pocket costs and expenses (if any) incurred by Provider or any of its Group Members in connection with obtaining any such Third-Party consent that is required to allow Provider to perform or cause to be performed such Services. If, with respect to a Service, the Parties, despite the use of such commercially reasonable efforts, are unable to obtain a required Third-Party consent, or the performance of such Service by Provider would constitute a violation of any applicable Law, the Provider shall, to the extent reasonably practicable, use commercially reasonable efforts in good faith to provide alternative services that are substantially similar to the applicable Services for which consent was not obtained, or the performance of which would constitute a violation of any applicable Law; provided, that nothing in this Section 2.03(b) shall obligate any Provider (or any Subsidiary of a Provider) to violate any applicable Law or breach any of its contractual obligations to a Third Party in connection with the provision of such alternative Services.

(c) It is the intent of the Provider to plan and staff such that the Provider can properly perform the Services that Provider has agreed to perform under this Agreement, and the Provider does not anticipate the need for any rationing or limitation of Services. Notwithstanding the foregoing, the Recipient acknowledges and agrees that the Provider shall have the right to establish reasonable priorities between the needs of the Provider, on the one hand, and the needs of the Recipient, on the other hand, as to the provision of any Service if the Provider determines that such priorities are necessary to avoid any adverse effect on the Provider. If any such priorities are established, the Provider shall advise the Recipient as soon as possible of any Service that will be materially delayed as a result of such prioritization, and will use commercially reasonable efforts to minimize the duration and impact of such delays.

 

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(d) Neither Provider nor any of its Subsidiaries shall be required to perform or cause to be performed any of the Services for the benefit of any Third Party or any other Person other than Recipient and its Group Members.

(e) EXCEPT AS EXPRESSLY PROVIDED IN THIS SECTION 2.03 OR SECTION 8.04, EACH PARTY ACKNOWLEDGES AND AGREES, ON ITS OWN BEHALF AND ON BEHALF OF ITS GROUP MEMBERS, THAT ALL SERVICES (AND ANY RELATED PRODUCTS) PROVIDED UNDER THIS AGREEMENT ARE PROVIDED ON AN “AS-IS” BASIS, THAT RECIPIENT ASSUMES ALL RISK AND LIABILITY ARISING FROM OR RELATING TO ITS USE OF AND RELIANCE UPON THE SERVICES, AND THAT PROVIDER MAKES NO OTHER REPRESENTATIONS OR GRANTS ANY WARRANTIES, EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE, WITH RESPECT TO THE SERVICES. PROVIDER SPECIFICALLY DISCLAIMS ANY OTHER WARRANTIES, WHETHER WRITTEN OR ORAL, OR EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF QUALITY, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR USE OR PURPOSE OR THE NON-INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.

(f) Each Party shall be responsible for its own compliance with any and all Laws applicable to its performance under this Agreement. No Party shall knowingly take any action in violation of any such applicable Law that results in Liability being imposed on the other Party.

Section 2.04. Changes in the Performance of Services. Subject to the performance standards for Services set forth in this Article II, Provider may make changes from time to time in the manner of performing the Services if Provider is making similar changes in performing analogous services for itself and if Provider furnishes to Recipient reasonable prior written notice (in content and timing) of such changes; provided, that if such change shall adversely affect the timeliness or quality of, or increase the Charges for, the applicable Service, the Parties shall cooperate in good faith to agree on modifications to such Services as are commercially reasonable in consideration of the circumstances.

Section 2.05. Transitional Nature of Services. The Parties acknowledge the transitional nature of the Services and agree to cooperate in good faith and to use commercially reasonable efforts to avoid a disruption in the transition of the Services from Provider to Recipient (or its designee).

Section 2.06. Subcontracting. Provider may not hire or engage any Third Parties to perform any of the Services on its behalf except (a) for those Services specifically designated on Schedule A or Schedule B, as applicable (collectively, the “Subcontracting Services”) or (b) as mutually agreed in writing by the Parties. If Provider hires or engages any Third Parties to perform any Subcontracting Service, then (a) Provider shall use the same degree of care (but at least reasonable care) in selecting each such Third Party as it would if such Third Party was being retained to provide similar services to Provider and (b) Provider shall in all cases remain responsible (as primary obligor) for all of its obligations under this Agreement with respect to the scope of such Subcontracting Services, the performance standard for such Subcontracting

 

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Services set forth in this Article II and the content of the Subcontracting Services provided to Recipient. Provider shall be liable for any breach of its obligations under this Agreement by any Third-Party service provider engaged by Provider to provide any Subcontracting Service. Subject to the confidentiality provisions set forth in Article VII, Provider shall, and shall cause its Affiliates to, provide, upon fifteen (15) Business days’ prior written notice, any Information within Provider’s or its Affiliates’ control that Recipient reasonably requests in connection with any Subcontracting Services being provided to Recipient by a Third Party, including any applicable invoices, agreements documenting the arrangements between such Third Party and Provider and other supporting documentation; provided, further, that Recipient may make no more than three request(s) per Third Party during any calendar quarter.

Section 2.07. Contract Manager.

(a) Each Party shall appoint an individual to act as its primary point of operational contact for the administration and operation of this Agreement (each, a “Contract Manager”) who shall have overall responsibility for coordinating all activities undertaken by such Party hereunder, for acting as a day-to-day contact with the other Party, and for making available to the other Party the data, facilities, resources and other support services required for the performance of the services in accordance with the terms of this Agreement; provided that for each Service, the Contract Manager shall be permitted to delegate the foregoing responsibilities for such Service to an individual identified on the Schedules, and such representative shall be deemed to be the Contract Manager with respect to such Service. The initial Contract Managers for the Parties are set forth on Schedule A and Schedule B. The Parties may change their respective Contract Managers from time to time upon notice to the other Party in accordance herewith.

(b) Prior to performing any Service, the Contract Managers will use reasonable efforts to cooperate with each other to agree on the scope of the Service if such scope is not otherwise designated in Schedule A or Schedule B, as applicable. In the event that either Provider, or its Contract Manager, anticipate or become aware that the work to be performed for any Service will either (i) exceed the estimates provided on Schedule A or Schedule B, if applicable, for such Service or (ii) result in a material deviation from the scope of such Service, including a material increase in hours and/or related Charges to perform the Service that would exceed estimates or budgets, then, prior to commencing further work on the Service, the Provider’s Contract Manager will provide notice to the Recipient’s Contract Manager (which notice need not be provided in compliance with Section 9.09) and such Contract Managers will use reasonable efforts to cooperate with each other to determine and discuss the matter and appropriate next steps. Notwithstanding anything to the contrary in this Agreement, Provider shall not be in breach of this Agreement for any delay in the performance of any Service as a result of Provider complying with its obligations under this Section 2.07(b).

 

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ARTICLE III

SERVICE CHARGES

Section 3.01. Charges for Services. The compensation to be received by Provider for each Service provided under this Agreement will be the fees or charges set forth in or calculated in the manner set forth in Schedule A or Schedule B, as applicable, relating to the particular Service, subject to any escalation, reduction or other modifications specifically provided for in such Schedule (each fee constituting a “Charge” and, collectively, “Charges”). During the term of this Agreement, the amount of a Charge for any Service may be modified to the extent of (a) any adjustments mutually agreed to by the Parties; (b) any Charges applicable to any Additional Services; and (c) any adjustment in the rates or charges imposed by any Third-Party provider that is providing Services; provided that Provider will notify Recipient in writing of any such change in rates at least thirty (30) days prior to the effective date of such rate change. In consideration for the provision of a Service, Recipient shall pay to Provider, in the manner set forth in Article IV, the Charge for such Service as set forth in or calculated in the manner set forth in Schedule A or Schedule B, as applicable.

Section 3.02. Reimbursement for Out-of-Pocket Costs and Expenses. Recipient shall reimburse Provider for reasonable out-of-pocket costs and expenses incurred by Provider or any member of its Group in connection with providing the Services (including reasonable travel-related expenses) to the extent that such costs and expenses are not reflected in the Charges for such Services; provided, however, that any such cost or expense in excess of two-thousand dollars ($2,000) that is not consistent with historical practice between the Parties for any individual Service (including business travel and related expenses) shall require advance written approval of Recipient; provided, further, that if Recipient does not provide such advance written approval and the incurrence of such cost or expense is reasonably necessary for Provider to provide such Service in accordance with the standards set forth in this Agreement, Provider shall not be required to perform such Service. Any authorized travel-related expenses incurred in performing the Services shall be charged to Recipient in accordance with Provider’s then-applicable business travel policies.

ARTICLE IV

BILLING; TAXES

Section 4.01. Billing and Payment. Within twenty-five (25) calendar days after the end of each month during the term of this Agreement, Provider will invoice Recipient for the applicable Charges (along with any expenses for which Provider is entitled to reimbursement pursuant to this Agreement, if known at that time) on a monthly basis, in arrears, for the prior month then ended. The invoice shall set forth in reasonable detail for the period covered by such invoice (a) the Services rendered, and (b) the Charges for such month for each type of Service provided, calculated in accordance with Schedule A or Schedule B, as applicable, and shall be accompanied by any applicable third party invoices and other documentation reasonably necessary for the Recipient to evaluate the invoiced amounts. Upon the Recipient’s request, Provider shall provide to Recipient reasonable additional detail and supporting documentation regarding invoiced amounts. All amounts due and payable hereunder shall be paid in U.S. dollars by wire transfer of immediately available funds to an account or accounts designated in writing from time to time by Provider within thirty (30) days after the receipt of such invoice (the “Payment Date”). In the event of any billing dispute, Recipient shall promptly pay any undisputed amount.

Section 4.02. Late Payments. Invoiced amounts not paid when due (including any undisputed amounts) shall accrue interest at a rate per annum equal to five percent (5%) calculated from the applicable Payment Date (the “Interest Payment”).

 

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Section 4.03. Taxes. Without limiting any provisions of this Agreement, Recipient shall bear any and all Taxes and other similar charges (and any related interest and penalties) imposed on, or payable with respect to, any fees or charges, including any Charges, payable by it pursuant to this Agreement, including all sales, use, value-added, and similar Taxes, but excluding any Taxes on Provider’s income. Notwithstanding anything to the contrary in the previous sentence or elsewhere in this Agreement, Recipient shall be entitled to withhold from any payments to Provider any such Taxes that Recipient is required by applicable Law to withhold and shall pay such Taxes to the applicable Taxing Authority.

Section 4.04. No Set-Off. Except as mutually agreed in writing by the Parties, no Party nor any member of its Group shall have any right of set-off or other similar rights with respect to (a) any amounts received pursuant to this Agreement or (b) any other amounts claimed to be owed to the other Party or any of member of its Group arising out of this Agreement.

ARTICLE V

TERM AND TERMINATION

Section 5.01. Term. This Agreement shall commence at the Effective Time and shall terminate upon the earliest to occur of (a) the last date on which either Party is obligated to provide any Service to the other Party in accordance with the terms of this Agreement; and (b) the mutual written agreement of the Parties to terminate this Agreement in its entirety. Unless otherwise terminated pursuant to Section 5.02, this Agreement shall terminate with respect to each Service as of 11:59 p.m. Eastern Time on the last day of the Service Period for such Service. Prior to the termination date for any Service, the Parties may, by mutual written consent extend the Service Period for such Service as mutually agreed by the Parties. To the extent that Provider’s ability to provide a Service is dependent on the continuation of a specified Service, Provider’s obligation to provide such dependent Service shall terminate automatically with the termination of such supporting Service.

Section 5.02. Early Termination.

(a) Without prejudice to Recipient’s rights with respect to Force Majeure, Recipient may from time to time terminate this Agreement with respect to the entirety of any Service (but not any portion thereof) (i) for any reason or no reason, upon the giving of at least thirty (30) days’ prior written notice to Provider; provided, however, that such termination shall be subject to the obligation to pay any applicable Termination Charges pursuant to Section 5.05, or (ii) if Provider has failed to perform any of its material obligations under this Agreement with respect to such Service, and such failure shall continue to be uncured by Provider for a period of at least thirty (30) days after receipt by Provider of written notice of such failure from Recipient; provided, however, that Recipient shall not be entitled to terminate this Agreement with respect to the applicable Service if, as of the end of such period, there remains a good faith Dispute between the Parties (undertaken in accordance with the terms of Section 9.15) as to whether Provider has cured the applicable breach.

 

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(b) Provider may terminate this Agreement with respect to the entirety of any Service (but not any portion thereof) at any time upon prior written notice to Recipient, if Recipient has failed to perform any of its material obligations under this Agreement with respect to such Service, including making payment of Charges when due, and such failure shall continue to be uncured by Recipient for a period of at least thirty (30) days after receipt by Recipient of a written notice of such failure from Provider; provided, however, that Provider shall not be entitled to terminate this Agreement with respect to the applicable Service if, as of the end of such period, there remains a good faith Dispute between the Parties (undertaken in accordance with the terms of Section 9.15) as to whether Recipient has cured the applicable breach.

Section 5.03. Reduction of Services. Recipient may from time to time request a reduction in part of the scope of any Service. If requested to do so by Recipient, the Parties shall discuss in good faith appropriate adjustments to the relevant Charges. If, after such discussions, the Parties do not mutually agree on any requested reduction of the scope of any Service and the relevant Charges in connection therewith, then (a) there shall be no change to the Charges under this Agreement and (b) unless the Parties otherwise agree in writing, there shall be no change to the scope of any Services under this Agreement. If, after such discussions, the Parties mutually agree to any reduction of Service, Schedule A and/or Schedule B, as applicable, shall be appropriately supplemented to reflect such reduction in Service.

Section 5.04. Interdependencies. The Parties acknowledge that there may be interdependencies among the Services being provided under this Agreement that may not be identified on Schedule A or Schedule B, as applicable, and agree that, if the Service Provider’s ability to provide a particular Service in accordance with this Agreement is materially and adversely affected by the termination of another Service in accordance with Section 5.02, then the Parties shall negotiate in good faith (prior to such termination) to amend Schedule A or Schedule B, as applicable, relating to such affected continuing Service and (ii) if after such negotiation, the Parties are unable to agree on such amendment, Provider’s obligation to provide such affected continuing Service shall, instead, terminate automatically with the termination of another Service in accordance with Section 5.02.

Section 5.05. Effect of Termination. Upon the termination of any Service pursuant to this Agreement, Provider shall have no further obligation to provide the terminated Service, and Recipient shall have no obligation to pay any future Charges or other amounts relating to such Service provided, however, that Recipient shall remain obligated to Provider for (a) the Charges and any other amounts owed and payable in respect of Services provided prior to the effective date of termination for such Service and (b) solely in the case of when Recipient terminates any Service pursuant to Section 5.02(a)(i), any applicable Termination Charges. In the event that any Service is terminated other than at the end of a month, and the Charge associated with such Service is determined on a monthly basis, Provider shall bill Recipient on a pro rata basis based on the number of days in the current calendar month that Recipient used such Service. In connection with the termination of any Service, the provisions of this Agreement not relating solely to such terminated Service shall survive any such termination, and in connection with a termination of this Agreement, Article I, this Article V, Article VII, and Article VIII and all Liability for all due and unpaid Charges and other amounts and Termination Charges shall continue to survive indefinitely.

 

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Section 5.06. Information Transmission. Provider, on behalf of itself and its Group Members, shall use commercially reasonable efforts to provide or make available, or cause to be provided or made available, to Recipient, in accordance with Section 6.01 of the Separation Agreement, any Information received or computed by Provider for the benefit of Recipient concerning the relevant Service during the Service Period; provided, however, that, except as otherwise agreed in writing by the Parties, (a) Provider and its Subsidiaries shall be reimbursed for their reasonable costs in accordance with Section 6.03 of the Separation Agreement for creating, gathering, copying, transporting and otherwise providing such Information and (b) Provider shall use commercially reasonable efforts to maintain any such Information in accordance with Section 6.04 of the Separation Agreement.

ARTICLE VI

ACCESS; SYSTEM SECURITY

Section 6.01. Access.

(a) Recipient shall provide (or cause any applicable member of its Group to provide) to Provider (or any applicable member of its Group to provide) such reasonable access, during regular business hours, to the employees, representatives, facilities and books and records of Recipient (or such member of its Group) as Provider (or such member of its Group) shall reasonably request in order to enable Provider (or such member of its Group) to provide any applicable Services required under this Agreement. Provider shall (and shall cause any applicable member of its Group to) conform with and abide by the confidentiality and security provisions in Section 6.02 and Article VII, as applicable, in connection with such access.

(b) Each Party shall (and shall cause the members of its Group and its personnel and the personnel of its Affiliates and Sub-Contractors providing or receiving Services to), when on the property of the other Party or any of its Group Members, or when given access to any facilities, infrastructure or personnel of the other Party or any of its Group Members, follow applicable Laws and all of the other Party’s policies and procedures concerning health, safety, conduct and security which are made known to the Party receiving such access from time to time.

Section 6.02. System Security.

(a) If any Party or any of its Group members is given access to the other Party’s (or such other Party’s Group Members) computer systems or software (collectively, the “Systems”) in connection with provision of any Services, the Party and/or its Group Members given access (the “Accessing Party”) shall comply with all of the other Party’s system security policies, procedures and requirements that have been provided to the Accessing Party in advance and in writing (collectively, “Security Regulations”), and shall not tamper with, compromise or circumvent any security or audit measures employed by such other Party (or such other Party’s Group Members). The Accessing Party shall access and use only those Systems of the other Party (or such other Party’s Group Members) or only the component, module, area or portion of any such system, where applicable, to which it has been granted the right of access and use.

(b) Each Party shall use commercially reasonable efforts to ensure that only those of its personnel (or the personnel of such Party’s Group Members) who are specifically authorized to have access to the Systems of the other Party (or such other Party’s Group Members) gain such access, and use commercially reasonable efforts to prevent unauthorized access, use, destruction, alteration or loss of information contained therein, including notifying its personnel of the restrictions set forth in this Agreement and of the Security Regulations.

 

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(c) If, at any time, the Accessing Party determines that any of its personnel has sought to circumvent, or has circumvented, the Security Regulations, that any unauthorized Accessing Party personnel has accessed the Systems, or that any of its personnel has engaged in activities that may lead to the unauthorized access, use, destruction, alteration or loss of data, information or software of the other Party (or such other Party’s Group Members), the Accessing Party shall promptly terminate any such Person’s access to the Systems and immediately notify the other Party. In addition, in such case such other Party shall have the right to deny personnel of the Accessing Party access to its Systems upon written notice to the Accessing Party. The Accessing Party shall use commercially reasonable efforts to cooperate with the other Party in investigating any apparent unauthorized access to such other Party’s Systems.

ARTICLE VII

CONFIDENTIALITY; PROTECTIVE ARRANGEMENTS

Section 7.01. Confidentiality. Each Party agrees that the specific terms and conditions of this Agreement and any information conveyed or otherwise received by or on behalf of a Party in conjunction herewith shall be Confidential Information subject to the confidentiality provisions (and exceptions thereto) set forth in Section 6.09 of the Separation Agreement.

Section 7.02. Privacy and Data Protection Laws. Each Party shall comply in all material respects with all applicable state, federal and foreign privacy and data protection Laws that are applicable to the provision of the Services under this Agreement.

ARTICLE VIII

LIMITED LIABILITY AND INDEMNIFICATION

Section 8.01. Limitations on Liability.

(a) THE LIABILITIES OF PROVIDER AND ITS GROUP MEMBERS AND THEIR RESPECTIVE REPRESENTATIVES, COLLECTIVELY, UNDER THIS AGREEMENT FOR ANY ACT OR FAILURE TO ACT IN CONNECTION HEREWITH (INCLUDING THE PERFORMANCE OR BREACH OF THIS AGREEMENT), OR FROM THE SALE, DELIVERY, PROVISION OR USE OF ANY SERVICES PROVIDED UNDER OR CONTEMPLATED BY THIS AGREEMENT, WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE AND STRICT LIABILITY) OR OTHERWISE, SHALL NOT EXCEED THE AGGREGATE AMOUNT OF CHARGES PAID AND PAYABLE TO SUCH PROVIDER FOR ALL SERVICES BY THE RECIPIENT PURSUANT TO THIS AGREEMENT.

(b) IN NO EVENT SHALL EITHER PARTY, ANY MEMBER OF ITS GROUP OR ANY OF THEIR RESPECTIVE REPRESENTATIVES HAVE ANY LIABILITY TO THE OTHER PARTY OR ANY MEMBER OF ITS GROUP OR ANY OF THEIR RESPECTIVE REPRESENTATIVES UNDER THIS AGREEMENT FOR ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, PUNITIVE, EXEMPLARY, REMOTE, SPECULATIVE OR SIMILAR DAMAGES IN EXCESS OF COMPENSATORY DAMAGES

 

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OF THE OTHER PARTY (INCLUDING LOST PROFITS OR LOST REVENUES) IN CONNECTION WITH THE SALE, DELIVERY, PROVISION OR USE OF OR FAILURE TO PROVIDE SERVICES PROVIDED UNDER OR CONTEMPLATED BY THIS AGREEMENT (OTHER THAN ANY SUCH LIABILITY WITH RESPECT TO A THIRD-PARTY CLAIM), AND EACH PARTY HEREBY WAIVES ON BEHALF OF ITSELF, ITS GROUP MEMBERS AND ITS REPRESENTATIVES ANY CLAIM FOR SUCH DAMAGES, WHETHER ARISING IN CONTRACT, TORT OR OTHERWISE.

(c) The limitations in Section 8.01(a) and Section 8.01(b) shall not apply in respect of any Liability arising out of or in connection with (i) either Party’s Liability for breaches of confidentiality under Article VII, (ii) the Parties’ respective obligations under Section 8.03 or 8.04 or (iii) the willful misconduct, gross negligence or fraud of or by the Party to be charged.

Section 8.02. Obligation to Re-Perform; Liabilities. In the event of any breach of this Agreement by Provider with respect to the provision of any Services (with respect to which Provider can reasonably be expected to re-perform in a commercially reasonable manner), Provider shall, at the request of Recipient, promptly correct in all material respects such error, defect or breach or re-perform in all material respects such Services at the sole cost and expense of Provider. The remedy set forth in this Section 8.02 shall be the sole and exclusive remedy of Recipient for any such breach of this Agreement with respect to the provision of such Services; provided, however, that the foregoing shall not prohibit Recipient from exercising its right to terminate this Agreement in accordance with the provisions of Section 5.02(a)(ii) or to seek specific performance in accordance with Section 9.16 or to seek and obtain indemnification under Section 8.04. Any request for re-performance in accordance with this Section 8.02 by Recipient must be in writing and specify in reasonable detail the particular error, defect or breach, and such request must be made no more than thirty (30) days from the later of (a) the date on which such breach occurred and (b) the date on which such breach was reasonably discovered by Recipient.

Section 8.03. Third-Party Claims. Recipient shall indemnify, defend and hold harmless Provider, its Group Members and each of their respective Representatives, and each of the successors and assigns of any of the foregoing (collectively, the “Provider Indemnitees”), from and against any and all claims of Third Parties relating to, arising out of or resulting from Recipient’s use or receipt of the Services provided by Provider hereunder, other than Third-Party Claims arising out of Provider’s breaches of its obligations under Article VII or the gross negligence, willful misconduct or fraud of any Provider Indemnitee.

Section 8.04. Provider Indemnity. Provider shall indemnify, defend and hold harmless Recipient, its Group Members and each of their respective Representatives, and each of the successors and assigns of any of the foregoing (collectively, the “Recipient Indemnitees”), from and against any and all Liabilities relating to, arising out of or resulting from the sale, delivery or provision of any Services provided by Provider hereunder, but only to the extent that such Liability relates to, arises out of or results from Provider’s breaches of its obligations under Articles VII, gross negligence, willful misconduct or fraud.

 

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Section 8.05. Indemnification Procedures. The procedures for indemnification set forth in Sections 5.05, 5.06 and 5.07 of the Separation Agreement shall govern claims for indemnification under this Agreement.

Section 8.06. Liability for Payment Obligations. Nothing in this Article VIII shall be deemed to eliminate or limit, in any respect, any Party’s express obligation in this Agreement to pay Charges, Termination Charges or other specified reimbursements for Services rendered in accordance with this Agreement.

Section 8.07. Exclusions of Other Remedies. Without limiting the rights under Section 9.16, the provisions of Sections 8.02, 8.03 and 8.04 shall, to the maximum extent permitted by applicable Law, be the sole and exclusive remedies of the Provider Indemnitees and the Recipient Indemnitees, as applicable, for any Liability, whether arising from statute, principle of common or civil law, principles of strict liability, tort, contract or otherwise under this Agreement.

ARTICLE IX

MISCELLANEOUS

Section 9.01. Further Assurances. Subject to the limitations or other provisions in this Agreement, each of the Parties shall, and shall cause each of its respective Group Members to, use commercially reasonable efforts, to take, or cause to be taken, all actions, and to do, or cause to be done, all things, reasonably necessary, proper or advisable under applicable Laws and agreements to consummate and make effective the transactions contemplated by this Agreement; provided, however, that neither Party (nor any of their respective Group Members) shall be obligated under this Section 9.01 to pay any consideration, grant any concession or incur any additional Liability to any Third Party.

Section 9.02. Title to Intellectual Property. Except as expressly provided for under the terms of this Agreement or the Separation Agreement, Recipient acknowledges that it shall acquire no right, title or interest (including any license rights or rights of use) in any intellectual property that is owned or licensed by Provider, by reason of the provision of the Services hereunder. Recipient shall not remove or alter any copyright, trademark, confidentiality or other proprietary notices that appear on any intellectual property owned or licensed by Provider, and Recipient shall reproduce any such notices on any and all copies thereof. Recipient shall not attempt to decompile, translate, reverse engineer or make excessive copies of any intellectual property owned or licensed by Provider, and Recipient shall promptly notify Provider of any such attempt, regardless of whether by Recipient or any Third Party, of which Recipient becomes aware.

Section 9.03. Independent Contractors. The Parties each acknowledge and agree that they are separate entities, each of which has entered into this Agreement for independent business reasons. The relationships of the Parties hereunder are those of independent contractors and nothing contained herein shall be deemed to create a joint venture, partnership or any other relationship between the Parties. Employees performing Services hereunder do so on behalf of, under the direction of, and as employees of, Provider, and Recipient shall have no right, power or authority to direct such employees, unless otherwise specified with respect to a particular Service on the Schedules hereto.

 

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Section 9.04. Group Members. SpinCo shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by a SpinCo Group Member and RemainCo shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by a RemainCo Group Member.

Section 9.05. Counterparts; Entire Agreement; Corporate Power.

(a) This Agreement may be executed in one (1) or more counterparts, all of which shall be considered one (1) and the same agreement, and shall become effective when one (1) or more counterparts have been signed by each of the Parties and delivered to the other Party. Each Party acknowledges and agrees that delivery of an executed counterpart of a signature page to this Agreement (whether executed by manual, stamp or mechanical signature) by facsimile or by email in portable document format (PDF) shall be effective as delivery of such executed counterpart of this Agreement or any Ancillary Agreement. Each Party expressly adopts and confirms a stamp or mechanical signature (regardless of whether delivered in person, by mail, by courier, by facsimile or by email in portable document format (PDF)) made in its respective name as if it were a manual signature delivered in person, agrees that it shall not assert that any such signature or delivery is not adequate to bind it to the same extent as if it were signed manually and delivered in person and agrees that, at the reasonable request of the other Party at any time, it shall as promptly as reasonably practicable cause this Agreement to be manually executed (any such execution to be as of the date of the initial date hereof) and delivered in person, by mail or by courier.

(b) This Agreement, the Separation Agreement and the other Ancillary Agreements and the Exhibits, Schedules and annexes hereto and thereto contain the entire agreement between the Parties with respect to the subject matter hereof, supersede all previous agreements, negotiations, discussions, writings, understandings, commitments and conversations with respect to such subject matter, and there are no agreements or understandings between the Parties other than those set forth or referred to herein or therein.

(c) Parent represents on behalf of itself and, to the extent applicable, each other Parent Group Member, and SpinCo represents on behalf of itself and, to the extent applicable, each other SpinCo Group Member, as follows:

(i) each such Person has the requisite corporate or other power and authority and has taken all corporate or other action necessary in order to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby; and

(ii) this Agreement has been duly executed and delivered by it and constitutes a valid and binding agreement of it and is enforceable in accordance with the terms hereof.

 

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Section 9.06. Governing Law. This Agreement (and any claims or disputes arising out of or related hereto or to the transactions contemplated hereby or to the inducement of any Party to enter herein, whether for breach of contract, tortious conduct or otherwise and whether predicated on common law, statute or otherwise) shall be governed by and construed and interpreted in accordance with the Laws of the State of Georgia, irrespective of the choice of Laws principles of the State of Georgia, including all matters of validity, construction, effect, enforceability, performance and remedies.

Section 9.07. Assignability. This Agreement shall inure to the benefit of and be binding upon the Parties and their respective successors and permitted assigns. Neither this Agreement or any of the rights, interests, or obligations hereunder or thereunder may be assigned or delegated, in whole or in part, by operation of Law or otherwise, by any Party without the prior written consent of the other Party, and any such assignment without such prior written consent shall be null and void. No such consent shall be required for the assignment of a Party’s rights and obligations under this Agreement if: (a) any Party (or any of its successors or permitted assigns) (i) shall consolidate with or merge into any other Person and shall not be the continuing or surviving Business Entity of such consolidation or merger or (ii) shall transfer all or substantially all of its properties and/or Assets to any Person, and (b) in any such case, the resulting, surviving or assignee Person expressly assumes all of the obligations of the relevant party (or its successors or permitted assigns, as applicable) under this Agreement. No assignment permitted by this Section 9.07 shall release the assigning party from any Liability for the full performance of its obligations under this Agreement.

Section 9.08. Third-Party Beneficiaries. Except as provided in Article VIII with respect to the Provider Indemnitees and the Recipient Indemnitees in their respective capacities as such, (a) the provisions of this Agreement are solely for the benefit of the Parties and are not intended to confer upon any other Person except the Parties any rights or remedies hereunder; and (b) there are no other third-party beneficiaries of this Agreement and this Agreement shall not provide any other Third Party with any remedy, claim, Liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement.

Section 9.09. Notices. Except as specifically set forth in this Agreement, all notices, requests, claims, demands or other communications under this Agreement shall be in writing and shall be given or made (and except as provided herein shall be deemed to have been duly given or made upon receipt) by delivery in person, by overnight courier service, by certified mail, return receipt requested, by facsimile, or by electronic mail (“e-mail”), so long as confirmation of receipt of such e-mail is requested, to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 9.09):

If to RemainCo, to:

PROG Holdings, Inc.

256 W. Data Drive

Draper, Utah 84020

Attn: Marvin Fentress

Email: marvin.fentress@progleasing.com

 

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If to SpinCo to:

The Aaron’s Company, Inc.

400 Galleria Parkway SE, Suite 300

Atlanta, Georgia 30339

Attn: Rachel George

Email: rachel.george@aarons.com

Either Party may, by notice to the other Party, change the address to which such notices are to be given.

Section 9.10. Severability. If any provision of this Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement, or the application of such term or provision to Persons or circumstances or in jurisdictions other than those as to which it has been determined to be invalid, illegal or unenforceable, and the Parties shall use their commercially reasonable efforts to substitute one or more valid, legal and enforceable terms or provisions into this Agreement which, insofar as practicable, implement the purposes and intent of the Parties. Any term or provision of this Agreement held invalid or unenforceable only in part, degree or within certain jurisdictions shall remain in full force and effect to the extent not held invalid or unenforceable to the extent consistent with the intent of the Parties as reflected by this Agreement. To the extent permitted by applicable Law, each Party waives any term or provision of Law which renders any term or provision of this Agreement to be invalid, illegal or unenforceable in any respect.

Section 9.11. Force Majeure. No Party shall be deemed in default of this Agreement for any delay or failure to fulfill any obligation hereunder so long as and to the extent to which any delay or failure in the fulfillment of such obligations is prevented, frustrated, hindered or delayed as a consequence of circumstances of Force Majeure. Without limiting the termination rights contained in this Agreement, in the event of any such excused delay, the time for performance shall be extended for a period equal to the time lost by reason of the delay. A Party claiming the benefit of this provision shall, as soon as reasonably practicable after the occurrence of any such Force Majeure, (a) provide written notice to the other Party of the nature and extent of such Force Majeure condition; and (b) use commercially reasonable efforts to remove any such causes and resume performance under this Agreement as soon as reasonably practicable, unless this Agreement has previously been terminated under Article V or this Section 9.11; provided, that, prior to any Party invoking the benefit of this provision as a result of a Force Majeure with respect to the COVID-19 pandemic, such Party shall use commercially reasonable efforts to mitigate the impact of the COVID-19 pandemic with respect to its failure or potential failure to fulfill any obligation under this Agreement. Recipient shall be (i) relieved of the obligation to pay Charges for the affected Service(s) throughout the duration of such Force Majeure and (ii) entitled to permanently terminate such Service(s) if the delay or failure in providing such Services because of a Force Majeure shall continue to exist for more than thirty (30) consecutive days (it being understood that Recipient shall not be required to provide any advance notice of such termination to Provider).

 

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Section 9.12. Headings. The Article, Section and Paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

Section 9.13. Survival of Covenants. Except as expressly set forth in this Agreement, the covenants, representations and warranties and other agreements contained in this Agreement, and Liability for the breach of any obligations contained herein, shall survive the Separation and Distribution and shall remain in full force and effect thereafter.

Section 9.14. Waivers of Default. No failure or delay of any Party in exercising any right or remedy under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such right or power, or any course of conduct, preclude any other or further exercise thereof or the exercise of any other right or power. Waiver by any Party of any default by the other Party of any provision of this Agreement shall not be deemed a waiver by the waiving Party of any subsequent or other default, nor shall it prejudice the rights of the waiving Party.

Section 9.15. Dispute Resolution.

(a) In the event of any controversy, dispute or claim (a “Dispute”) arising out of or relating to any Party’s rights or obligations under this Agreement (whether arising in contract, tort or otherwise), calculation or allocation of the costs of any Service or otherwise arising out of or relating in any way to this Agreement (including the interpretation or validity of this Agreement), such Dispute shall be resolved by submitting such Dispute first to the relevant Contract Manager of each Party, and the Contract Managers shall seek to resolve such Dispute through informal good faith negotiation. In the event that the Contract Managers fail to meet or, if they meet and fail to resolve a Dispute within twenty (20) Business Days, then either Party may pursue the remedy set forth in Section 9.15(b).

(b) If the procedures set forth in Section 9.15(a) have been followed with respect to a Dispute and such Dispute remains unresolved, such Dispute shall be resolved in accordance with the dispute resolution process referred to in Article XI of the Separation Agreement.

(c) In any Dispute regarding the amount of a Charge or a Termination Charge, if such Dispute is finally resolved pursuant to the dispute resolution process set forth or referred to in Sections 9.15(a) and (b) and it is determined that the Charge or the Termination Charge, as applicable, that Provider has invoiced Recipient, and that Recipient has paid to Provider, is greater or less than the amount that the Charge or the Termination Charge, as applicable, should have been, then (i) if it is determined that Recipient has overpaid the Charge or the Termination Charge, as applicable, Provider shall within ten (10) calendar days after such determination reimburse Recipient an amount of cash equal to such overpayment, plus the Interest Payment, accruing from the date of payment by Recipient to the time of reimbursement by Provider; and (ii) if it is determined that Recipient has underpaid the Charge or the Termination Charge, as applicable, Recipient shall within ten (10) calendar days after such determination reimburse Provider an amount of cash equal to such underpayment, plus the Interest Payment, accruing from the date such payment originally should have been made by Recipient to the time of payment by Recipient.

 

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Section 9.16. Specific Performance. Subject to Section 9.15, in the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement, the Party or Parties who are, or are to be, thereby aggrieved shall have the right to specific performance and injunctive or other equitable relief (on an interim or permanent basis) in respect of its rights or their rights under this Agreement, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative. The Parties agree that the remedies at law for any breach or threatened breach are inadequate compensation for any loss and that any defense in any Action for specific performance that a remedy at law would be adequate is waived. Any requirements for the securing or posting of any bond with such remedy are hereby waived by each of the Parties. Unless otherwise agreed in writing, Provider shall continue to provide Services and the Parties shall honor all other commitments under this Agreement during the course of dispute resolution pursuant to the provisions of Section 9.15 and this Section 9.16 with respect to all matters not subject to such Dispute; provided, however, that this obligation shall only exist during the term of this Agreement.

Section 9.17. Amendments. No provisions of this Agreement shall be deemed waived, amended, supplemented or modified by a Party, unless such waiver, amendment, supplement or modification is in writing and signed by the authorized representative of the Party against whom enforcement of such waiver, amendment, supplement or modification is sought.

Section 9.18. Precedence of Schedules. Each Schedule attached to or referenced in this Agreement is hereby incorporated into and shall form a part of this Agreement; provided, however, that the terms contained in such Schedule shall only apply with respect to the Services provided under that Schedule. In the event of a conflict between the terms contained in an individual Schedule and the terms in the body of this Agreement, the terms in the Schedule shall take precedence with respect to the Services under such Schedule only. No terms contained in individual Schedules shall otherwise modify the terms of this Agreement.

Section 9.19. Interpretation. In this Agreement, (a) words in the singular shall be deemed to include the plural and vice versa and words of one gender shall be deemed to include the other gender as the context requires; (b) the terms “hereof,” “herein” and “herewith” and words of similar import, unless otherwise stated, shall be construed to refer to this Agreement as a whole (including all of the Schedules hereto) and not to any particular provision of this Agreement; (c) Article, Section or Schedule references are to the Articles, Sections and Schedules of or to this Agreement, unless otherwise specified; (d) unless otherwise stated, all references to any agreement (including this Agreement) shall be deemed to include the schedules, exhibits and annexes to such agreement; (e) any capitalized terms used in any Schedule to this Agreement but not otherwise defined therein shall have the meaning as defined in this Agreement; (f) any reference herein to this Agreement, unless otherwise stated, shall be construed to refer to this Agreement as amended, supplemented or otherwise modified from time to time, in accordance with the terms thereof; (g) the word “including” and words of similar import when used in this Agreement means “including, without limitation,” unless otherwise specified; (h) unless otherwise specified, the word “or” shall not be exclusive; (i) unless

 

20


otherwise specified in a particular case, the word “days” refers to calendar days; and (j) unless expressly stated to the contrary in this Agreement, all references to “the date hereof”, “the date of this Agreement”, “hereby” and “hereupon” and words of similar import shall all be references to November 29, 2020.

Section 9.20. Mutual Drafting. This Agreement shall be deemed to be the joint work product of the Parties and any rule of construction that a document shall be interpreted or construed against a drafter of such document shall not be applicable to this Agreement.

[Remainder of page intentionally left blank]

 

21


IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized representatives as of the date first written above.

 

AARON’S HOLDINGS COMPANY, INC.

By:

 

/s/ Steven A. Michaels

 

Name:

 

Steven A. Michaels

 

Title:

 

Chief Executive Officer, Progressive Leasing

THE AARON’S COMPANY, INC.

By:

 

/s/ Douglas A. Lindsay

 

Name:

 

Douglas A. Lindsay

 

Title:

 

Chief Executive Officer

[Signature Page to Transition Services Agreement]

Exhibit 10.2

Execution Version

TAX MATTERS AGREEMENT

By and Among

AARON’S HOLDINGS COMPANY, INC.

and

THE AARON’S COMPANY, INC.


TABLE OF CONTENTS

 

         Page  

ARTICLE I DEFINITION OF TERMS

     2  

ARTICLE II PREPARATION AND FILING OF TAX RETURNS

     10  

Section 2.1

  Consolidated Returns      10  

Section 2.2

  Separate Entity Tax Returns      10  

Section 2.3

  Tax Reporting Practices      11  

Section 2.4

  Right to Review Tax Returns      12  

Section 2.5

  Carrybacks and Amended Tax Returns      13  

Section 2.6

  Apportionment of Tax Attributes      14  

Section 2.7

  Coordination      15  

ARTICLE III ALLOCATION OF TAX LIABILITIES

     15  

Section 3.1

  General Rule      15  

Section 3.2

  Attribution of Taxes      15  

ARTICLE IV TAX PAYMENTS

     16  

Section 4.1

  Payment of Amounts Due      16  

Section 4.2

  Treatment of Indemnification and Other Payments      17  

ARTICLE V TAX REFUNDS

     18  

Section 5.1

  Tax Refunds      18  

ARTICLE VI DEDUCTION AND REPORTING OF EMPLOYEE AWARDS

     18  

Section 6.1

  HoldCo and SpinCo Income Tax Deductions in Respect of Certain Equity Awards and Compensation      18  

ARTICLE VII TAX-FREE STATUS

     18  

Section 7.1

  Representations and Warranties      18  

Section 7.2

  Restrictions on SpinCo      19  

Section 7.3

  Opinions and Rulings      20  

Section 7.4

  Procedures Regarding Opinions and Rulings      20  

Section 7.5

  Protective 336(e) Election      21  

ARTICLE VIII REPORTING, COOPERATION AND RECORD RETENTION

     21  

Section 8.1

  Assistance and Cooperation      21  

Section 8.2

  Return Information      22  

Section 8.3

  Non-Performance      22  

Section 8.4

  Costs      22  

Section 8.5

  Retention of Tax Records      22  

Section 8.6

  Access to Tax Records      23  

ARTICLE IX TAX PROCEEDINGS

     23  

Section 9.1

  Notice      23  

Section 9.2

  Control of Tax Proceedings      23  

 

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ARTICLE X INTEREST PAYMENTS

     25  

Section 10.1

  Interest Under This Agreement      25  

ARTICLE XI DISAGREEMENTS

     26  

Section 11.1

  Interaction with Article IX of the Separation Agreement      26  

Section 11.2

  Discussion      26  

Section 11.3

  Referral to Independent Arbiter      26  

ARTICLE XII TERM AND COSTS

     27  

Section 12.1

  Effective Date      27  

Section 12.2

  Survival      27  

Section 12.3

  Expenses      27  

Section 12.4

  Payments      27  

Section 12.5

  Interest      27  

ARTICLE XIII GENERAL PROVISIONS

     28  

Section 13.1

  Counterparts; Entire Agreement; Conflicts; Corporate Power      28  

Section 13.2

  Governing Law      28  

Section 13.3

  Assignability      29  

Section 13.4

  Third-Party Beneficiaries      29  

Section 13.5

  Notices      29  

Section 13.6

  Severability      30  

Section 13.7

  Headings      30  

Section 13.8

  Waivers of Default      30  

Section 13.9

  Consent to Jurisdiction      30  

Section 13.10

  Specific Performance      31  

Section 13.11

  Amendments      31  

Section 13.12

  Interpretation      31  

Section 13.13

  Group Members      31  

Section 13.14

  Force Majeure      32  

Section 13.15

  Mutual Drafting      32  

Section 13.16

  No Reliance on Other Party      32  

Section 13.17

  Limited Liability      32  

Section 13.18

  No Set-Off      32  

Section 13.19

  Waiver of Trial      33  

Section 13.20

  HoldCo or SpinCo Affiliates      33  

 

ii


TAX MATTERS AGREEMENT

This TAX MATTERS AGREEMENT (this “Agreement”) is made and entered into as of November 29, 2020, by and among Aaron’s Holdings Company, Inc., a Georgia corporation (“HoldCo”), and The Aaron’s Company, Inc., a Georgia corporation and a wholly owned subsidiary of Holdco (“SpinCo” and together with HoldCo, the “Parties,” and each a “Party”). Any capitalized term used herein without definition shall have the meaning given to it in the Separation Agreement, dated as of the date hereof, by and between Aaron’s, Inc., a Georgia corporation, HoldCo and SpinCo (as such agreement may be amended from time to time, the “Separation Agreement”).

RECITALS

WHEREAS, the Board of Directors of HoldCo has determined that it is in the best interests of HoldCo and its shareholders to separate the SpinCo Business from the Progressive Business and to divest the SpinCo Business in the manner contemplated by the Separation Agreement;

WHEREAS, contemporaneously with this Agreement, HoldCo and SpinCo are entering into the Separation Agreement;

WHEREAS, prior to the Distribution Time, and subject to the terms and conditions set forth in the Separation Agreement, HoldCo will consummate the SpinCo Contribution, and following the SpinCo Contribution, HoldCo will distribute (the “Distribution”) all of the issued and outstanding shares of SpinCo’s common stock, $0.50 par value per share (“SpinCo Common Stock”), to holders of HoldCo’s common stock, $0.50 par value per share (“HoldCo Common Stock”);

WHEREAS, subject to the terms and conditions of the Separation Agreement, the Distribution shall be made without consideration, by way of a pro rata dividend;

WHEREAS, it is the intention of the Parties that the SpinCo Contribution and the Distribution, taken together, qualify as a reorganization described in Sections 368(a)(1)(D) and 355 of the Internal Revenue Code of 1986, as amended (the “Code”); and

WHEREAS, the Parties wish to (i) provide for the payment of Tax liabilities and entitlement to refunds thereof, allocate responsibility for, and cooperation in, the filing and defense of Tax Returns, and provide for certain other matters relating to Taxes and (ii) set forth certain covenants and indemnities relating to the preservation of the intended tax treatment of certain transactions contemplated hereby and by the other Transaction Documents.

NOW, THEREFORE, in consideration of these premises, and of the representations, warranties, covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:


ARTICLE I

DEFINITION OF TERMS

For purposes of this Agreement (including the recitals hereof), the following terms have the following meanings:

Action” means any claim, action, suit, arbitration, investigation or other Proceeding, in each case, by any Person or Governmental Authority before any Governmental Authority.

Active Business” means each of the Progressive Business and the SpinCo Business.

Affiliate” has the meaning set forth in the Separation Agreement.

Aaron’s Canada” means Aaron’s Canada, ULC, a Nova Scotia unlimited liability company.

AIC” means Aaron Investment Company, LLC, a Delaware limited liability company (which converted from a corporation to a limited liability company in connection with the Separation).

Ancillary Agreement” has the meaning set forth in the Separation Agreement.

Business Day” means a day other than a Saturday, a Sunday or a day on which banking institutions located in Atlanta, Georgia are authorized or obligated by Law or executive order to close.

Capital Stock” means all classes or series of capital stock of a Person, including (i) common stock, (ii) all options, warrants and other rights to acquire such capital stock and (iii) all instruments properly treated as stock in such Person for U.S. federal income tax purposes.

Combined Group” means any group that filed or was required to file (or will file or be required to file) a Tax Return on an affiliated, consolidated, combined, unitary, fiscal unity or other group basis under any applicable Tax Law.

Combined Income Tax Return” means any Tax Return filed in respect of U.S. federal, state, local or non-U.S. Income Taxes for a Combined Group.

Distribution Date” means the date on which the Distribution is consummated.

Distribution Tax-Related Losses” means (a) all Distribution Taxes imposed pursuant to any settlement, Final Determination, judgment or otherwise and (b) all reasonable accounting, legal and other professional fees and court costs incurred in connection with such Distribution Taxes, in each case, resulting from the failure of the Spin-Off to qualify for the Intended Tax Treatment.

 

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Distribution Taxes” means any and all Taxes required to be paid by or imposed on HoldCo or any of its Affiliates resulting from, or directly arising in connection with, the failure of the Spin-Off to qualify for the Intended Tax Treatment.

Distribution Time” means the time established by HoldCo as the effective time of the Distribution, Eastern Time, on the Distribution Date.

Due Date” means (a) with respect to a Tax Return, the date (taking into account all valid extensions) on which such Tax Return is required to be filed under applicable Law and (b) with respect to a payment of Taxes, the date on which such payment is required to be made, which shall in any case be no later than the payment date required to avoid the incurrence of interest, penalties and additions to Tax.

Extraordinary Transaction” means any action that is not in the ordinary course of business, but shall not include any action expressly required or permitted by the Separation Agreement or any other Transaction Document or that is undertaken pursuant to the Spin-Off.

Final Determination” means the final resolution of liability for any Tax, which resolution may be for a specific issue or adjustment or for a taxable period, (a) by IRS Form 870 or 870-AD (or any successor forms thereto), on the date of acceptance by or on behalf of the taxpayer, or by a comparable form under the laws of a state, local, or non-U.S. taxing jurisdiction, except that a Form 870 or 870-AD or comparable form shall not constitute a Final Determination to the extent that it reserves (whether by its terms or by operation of law) the right of the taxpayer to file a claim for refund or the right of the Tax Authority to assert a further deficiency in respect of such issue or adjustment or for such taxable period (as the case may be); (b) by a decision, judgment, decree, or other order by a court of competent jurisdiction, which has become final and unappealable; (c) by a closing agreement or accepted offer in compromise under Sections 7121 or 7122 of the Code, or a comparable agreement under the laws of a state, local, or non-U.S. taxing jurisdiction; (d) by any allowance of a refund or credit in respect of an overpayment of Tax, but only after the expiration of all periods during which such refund may be recovered (including by way of offset) by the jurisdiction imposing such Tax; (e) by a final settlement resulting from a treaty-based competent authority determination; or (f) by any other final disposition, including by reason of the expiration of the applicable statute of limitations or by mutual agreement of the Parties.

Force Majeure” has the meaning set forth in the Separation Agreement.

Group” means the HoldCo Group or the SpinCo Group or both such Groups, as the context requires.

HoldCo Consolidated Return” means any Combined Income Tax Return that includes any member of the HoldCo Group.

HoldCo Consolidated Taxes” means any U.S. federal Income Taxes attributable to any HoldCo Consolidated Return.

Holdco Entity” means any Subsidiary of HoldCo from and after the Distribution Time.

 

3


HoldCo Group” means, individually or collectively, as the case may be, HoldCo and any HoldCo Entities.

HoldCo Tainting Act” means (a) any action (or the failure to take any action) within its control by HoldCo or any member of the HoldCo Group (including entering into any agreement, understanding or arrangement or any negotiations with respect to any transaction or series of transactions), (b) any event (or series of events) involving the Capital Stock of HoldCo, any assets of HoldCo or any assets of any member of the HoldCo Group, or (c) any breach by HoldCo or any member of the HoldCo Group of any representation, warranty or covenant made by such Person in this Agreement, in each case, that would affect the Intended Tax Treatment or otherwise cause the Spin-Off to fail to qualify for the Intended Tax Treatment, other than, in each case, any action required by the Separation Agreement or any other Transaction Document or undertaken pursuant to the Distribution.

HoldCo Taxes” means, without duplication, and after accounting for any adjustment pursuant to a Final Determination, (a) any HoldCo Consolidated Taxes, (b) any Income Taxes of (i) SpinCo or any member of the SpinCo Group for (A) any Pre-Distribution Period and (B) to the extent attributable to assets or activities of the Progressive Business, as determined pursuant to Section 3.2, any Post-Distribution Period or (ii) HoldCo or a member of the HoldCo Group, but excluding in either case any Taxes included in clause (a)(i) of the definition of SpinCo Taxes, (c) any Other Taxes of (i) SpinCo or any member of the SpinCo Group attributable to assets or activities of the Progressive Business, as determined pursuant to Section 3.2, or (ii) HoldCo or a member of the HoldCo Group, but excluding in either case any Taxes included in clause (b)(i) of the definition of SpinCo Taxes, (d) any Taxes imposed on SpinCo or any member of the SpinCo Group under Treasury Regulations Section 1.1502-6 (or any equivalent provision of other Tax Law) as a result of SpinCo or any member of the SpinCo Group being or having been included as part of, or ceasing to be part of or owned by, a Combined Group with any Person that is not a member of the SpinCo Group on or prior to the Distribution Date, (e) subject to Section 3.1(c), any Taxes attributable to a HoldCo Tainting Act, (f) any Taxes of HoldCo or any Subsidiary of HoldCo or former Subsidiary of HoldCo, including members of the SpinCo Group (each, immediately prior to the Distribution Time) attributable to the Spin-Off (including the settlement of any intercompany transactions), and (g) any Transfer Taxes; provided, that HoldCo Taxes shall not include any Taxes included in clauses (c), (d) and (e) of the definition of SpinCo Taxes.

HoldCo Tax Opinion” means the tax opinion of the Tax Advisor, described in Section 3.02(i) of the Separation Agreement, to the effect that the Spin-Off will qualify for the Intended Tax Treatment.

Income Tax Returns” means all Tax Returns that relate to Income Taxes.

Income Taxes” means all Taxes based upon, measured by, or calculated with respect to (i) net income or profits (including any capital gains tax), (ii) multiple bases (including corporate franchise and business Taxes) if one or more bases upon which such Tax is determined is described in clause (i) above, and (iii) in each case, any such Tax that is a minimum Tax. The term “Income Taxes” shall also include any Taxes that are (i) imposed by a jurisdiction for the privilege of doing business in such jurisdiction and (ii) based on gross revenue, gross receipts or modified gross receipts (including the Ohio commercial activity tax, the Texas “margin” Tax and any similar Taxes imposed by any other jurisdiction, but excluding, for the avoidance of doubt, any sales or use Taxes).

 

4


Intended Tax Treatment” means that (i) the Spinco Contribution and Distribution, taken together, will qualify as a “reorganization” under Section 368(a)(1)(D) of the Code; (ii) no income, gain or loss will be recognized by HoldCo or SpinCo on the SpinCo Contribution and the Distribution, or otherwise in connection with the Spin-Off, under Section 355, 361 or 1032 of the Code, as applicable, other than intercompany items or excess loss accounts taken into account pursuant to Treasury Regulations promulgated pursuant to Section 1502 of the Code; and (iii) no income, gain or loss will be recognized by any holder of HoldCo Common Stock upon the receipt of SpinCo Common Stock in the Distribution (except with respect to the receipt of cash in lieu of fractional share of SpinCo Common Stock, if any) under Section 355 of the Code.

IRS” means the United States Internal Revenue Service.

Law” means any U.S. or non-U.S. federal, national, supranational, state, provincial, local or similar statute, law, ordinance, regulation, rule, code, administrative pronouncement, treaty, order, requirement or rule of law (including common law).

Mixed Business Tax Return” means any Separate Entity Tax Return that reflects or reports Taxes that relate to at least one asset or activity that is part of the Progressive Business, on the one hand, and at least one asset or activity that is part of the SpinCo Business, on the other hand.

Other Taxes” means Taxes other than Income Taxes.

Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof, without regard to whether any entity is treated as disregarded for U.S. federal income tax purposes.

Post-Distribution Period” means any Tax Period beginning after the Distribution Date, and, in the case of any Straddle Period, the portion of such Straddle Period beginning the day after the Distribution Date.

Pre-Distribution Period” means any Tax Period ending on or before the Distribution Date, and, in the case of any Straddle Period, the portion of such Straddle Period ending on the Distribution Date.

Privilege” means any privilege that may be asserted under applicable Law, including, any privilege arising under or relating to the attorney-client relationship (including the attorney-client and work product privileges), the accountant-client privilege and any privilege relating to internal evaluation processes.

Progressive Business” has the meaning assigned to the term “Progressive Leasing and Vive Business” in the Separation Agreement.

 

5


Proposed Acquisition Transaction” means a transaction or series of transactions (or any agreement, understanding or arrangement, within the meaning of Section 355(e) of the Code and Treasury Regulations Section 1.355-7, or any other regulations promulgated thereunder, to enter into a transaction or series of transactions), whether such transaction is supported by management or shareholders of SpinCo, is a hostile acquisition, or otherwise, as a result of which SpinCo would merge or consolidate with any other Person or as a result of which one or more Persons would (directly or indirectly) acquire, or have the right to acquire, from SpinCo and/or one or more holders of outstanding shares of SpinCo Capital Stock (or the Capital Stock of any direct or indirect parent thereof), a number of shares of such Capital Stock that would, when combined with any other direct or indirect changes in ownership of such Capital Stock pertinent for purposes of Section 355(e) of the Code, comprise fifty percent (50%) or more of (i) the value of all outstanding shares of such Capital Stock as of the date of such transaction, or in the case of a series of transactions, the date of the last transaction of such series, or (ii) the total combined voting power of all outstanding shares of voting stock of SpinCo (or any direct or indirect parent thereof) as of the date of such transaction, or in the case of a series of transactions, the date of the last transaction of such series. Notwithstanding the foregoing, a Proposed Acquisition Transaction shall not include (A) the adoption by SpinCo of a shareholder rights plan or (B) issuances by SpinCo that satisfy Safe Harbor VIII (relating to acquisitions in connection with a person’s performance of services) or Safe Harbor IX (relating to acquisitions by a retirement plan of an employer) of Treasury Regulations Section 1.355-7(d). For purposes of determining whether a transaction constitutes an indirect acquisition, any recapitalization resulting in a shift of voting power or any redemption of shares of stock shall be treated as an indirect acquisition of shares of stock by the non-exchanging shareholders. This definition, and the application thereof, is intended to monitor compliance with Section 355(e) of the Code and shall be interpreted accordingly. Any clarification of, or change in, the statute or regulations promulgated under Section 355(e) of the Code shall be incorporated in this definition and its interpretation, subject to the reasonable review of HoldCo and its Tax Advisors in consultation with SpinCo and its Tax Advisors.

Refund” means any refund (or credit in lieu thereof) of Taxes (including any overpayment of Taxes that can be refunded or, alternatively, applied to other Taxes payable) or other reduction or offset of Taxes otherwise payable, including any interest paid on or with respect to such refund of Taxes. The amount of any Refund shall be determined net of any Taxes actually imposed by any Tax Authority on the Party receiving the refund, after accounting for the provisions of Section 5.1.

Restricted Period” means the period beginning at the Distribution Time and ending on the two (2)-year anniversary of the day after the Distribution Date.

Separate Entity Tax Return” means any Tax Return, other than any HoldCo Consolidated Return, relating to the Progressive Business, the SpinCo Business, or both the Progressive Business and SpinCo Business.

Separation” has the meaning set forth in the Separation Agreement and, for the avoidance of doubt, includes the SpinCo Contribution.

 

6


SpinCo Active Business Entity” means any entity conducting the SpinCo Business as of the Distribution Date.

SpinCo Business” has the meaning assigned to the term “Aaron’s Business” in the Separation Agreement.

SpinCo Consolidated Return” means any Combined Income Tax Return that includes SpinCo or any SpinCo Entity that is not a HoldCo Consolidated Return.

SpinCo Contribution” has the meaning assigned to the term “Contribution” in the Separation Agreement.

SpinCo Entity” means any Subsidiary of SpinCo from and after the Distribution Time.

SpinCo Group” means, individually or collectively, as the case may be, SpinCo and any SpinCo Entities.

SpinCo Tainting Act” means (a) any action (or the failure to take any action) within its control by SpinCo or any member of the SpinCo Group (including entering into any agreement, understanding or arrangement or any negotiations with respect to any transaction or series of transactions), (b) any event (or series of events) involving the SpinCo Capital Stock (or the Capital Stock of any direct or indirect parent thereof), any assets of SpinCo or any assets of any member of the SpinCo Group, or (c) any breach by SpinCo or any member of the SpinCo Group of any representation, warranty or covenant made by such Person in this Agreement, in each case, that would affect the Intended Tax Treatment or otherwise cause the Spin-Off to fail to qualify for the Intended Tax Treatment; provided, that, SpinCo Tainting Act shall not include any action required by the Separation Agreement or any other Transaction Document or undertaken pursuant to the Distribution.

SpinCo Taxes” means, without duplication, and after accounting for any adjustment pursuant to a Final Determination, (a) any Income Taxes (other than HoldCo Consolidated Taxes) for any Post-Distribution Period of (i) HoldCo or any member of the HoldCo Group attributable to assets or activities of the SpinCo Business, as determined pursuant to Section 3.2, or (ii) SpinCo or a member of the SpinCo Group, but excluding in either case any Taxes included in clauses (b)(i)(B), (d) and (f) of the definition of HoldCo Taxes, (b) any Other Taxes of (i) HoldCo or any member of the HoldCo Group attributable to assets or activities of the SpinCo Business, as determined pursuant to Section 3.2, and (ii) SpinCo or a member of the SpinCo Group, but excluding in either case any Taxes included in clauses (c)(i), (f) and (g) of the definition of HoldCo Taxes, (c) any Income Taxes of AIC and Aaron’s Canada for any taxable period, (d) subject to Section 3.1(c), any Taxes attributable to a SpinCo Tainting Act, and (e) any Taxes attributable to an Extraordinary Transaction effected after the Distribution on the Distribution Date by SpinCo or a member of the SpinCo Group; provided, that SpinCo Taxes shall not include any Taxes included in clause (e) of the definition of HoldCo Taxes.

Spin-Off” means the Separation and the Distribution.

Straddle Period” means any Tax Period that begins on or before and ends after the Distribution Date.

 

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Subsidiary” means, with respect to any Person (a) a corporation more than fifty percent (50%) of the voting or capital stock of which is owned, directly or indirectly, by such Person or (b) a partnership, joint venture, association, joint stock company, trust, unincorporated organization or other entity in which such Person, directly or indirectly, owns any of the equity economic interests thereof or for which such Person, directly or indirectly, has the power to elect or direct the election of any of the members of the governing body or with respect to which such Person otherwise has control (e.g., as the managing partner or managing member of a partnership or limited liability company, as the case may be).

Tax” means (a) all taxes, charges, fees, duties, levies, imposts, or other similar assessments, imposed by any governmental authority or political subdivision thereof, including, but not limited to, net income, gross income, gross receipts, excise, real property, personal property, sales, use, service, service use, license, lease, capital stock, transfer, recording, franchise, business organization, occupation, premium, windfall profits, profits, customs, duties, payroll, wage, withholding, social security, employment, unemployment, insurance, severance, workers compensation, excise, stamp, alternative minimum, estimated, value added, ad valorem, import, export, unclaimed property, escheat and other taxes, charges, fees, duties, levies, imposts, or other similar assessments, or any interest, penalties or additions to tax, or additional amounts, in respect of any of the foregoing and (b) all liabilities in respect of any items described in clause (a) payable by reason of transferee or successor liability, contract, operation of Law, or Treasury Regulations Section 1.1502-6(a) (or any predecessor or successor thereof or any analogous provision of Tax Law).

Tax Advisor” means a tax counsel or accountant of recognized standing in the relevant jurisdiction that is reasonably acceptable to the Parties, provided that, with respect to the HoldCo Tax Opinion, Tax Advisor shall mean King & Spalding LLP.

Tax Attribute” means a net operating loss, net capital loss, investment credit, foreign tax credit, excess charitable contribution, general business credit or any other Tax Item that could reduce a Tax or create a Tax Benefit.

Tax Authority” means, with respect to any Tax, the governmental entity or political subdivision thereof that imposes such Tax and the agency (if any) charged with the collection of such Tax for such entity or subdivision.

Tax Benefit” means any refund, credit, or other reduction in Tax payments, in each case, as determined on a “with and without” basis, that is actually received or recognized by a Party or any member of its Group. For the avoidance of doubt, the term “Tax Benefit” shall include any such benefit actually received or recognized as a result of a step-up in Tax basis or an increase in any Tax Attribute.

Tax Item” means any item of income, gain, loss, deduction, expense, or credit, or other attribute that may have the effect of increasing or decreasing any Tax.

Tax Law” means any Law relating to any Tax.

Tax Period” means, with respect to any Tax, the period for which the Tax is reported as provided under the Code or other applicable Tax Law.

 

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Tax Proceeding” means an audit, review, examination, or any other administrative or judicial proceeding with the purpose or effect of re-determining Taxes (including any administrative or judicial review of any claim for refund).

Tax Records” means any Tax Returns, Tax Return work papers, documentation relating to any Tax Proceedings, and any other books of account or records (whether or not in written, electronic or other tangible or intangible forms and whether or not stored on electronic or any other medium) required to be maintained under the Code or other applicable Tax Laws or under any record retention agreement with any Tax Authority.

Tax Representation Letter” means the representation letter(s) delivered by HoldCo and SpinCo to the Tax Advisor in connection with the rendering by the Tax Advisor of the HoldCo Tax Opinion.

Tax Return” means any report of Taxes due, any claim for refund of Taxes paid, any information return with respect to Taxes, or any other similar report, statement, declaration, or document required to be filed under the Code or other Tax Law, including any attachments, exhibits, or other materials submitted with any of the foregoing, and including any amendments or supplements to any of the foregoing.

Transaction Documents” means the Separation Agreement and the Ancillary Agreements.

Transfer Tax” means any sales, use, privilege, transfer (including real property transfer), intangible, recordation, registration, documentary, stamp, duty or similar Tax imposed with respect to the Spin-Off.

Treasury Regulations” means the regulations promulgated from time to time under the Code.

Unqualified Tax Opinion” means an unqualified “will” opinion of a Tax Advisor, on which each of the Parties may rely to the effect that a transaction will not affect the Intended Tax Treatment or otherwise cause the Spin-Off to fail to qualify for its Intended Tax Treatment. Any such opinion must assume that the Spin-Off would have qualified for the Intended Tax Treatment if the transaction in question did not occur and may assume the accuracy of, and may rely upon, customary assumptions, representations and undertakings reasonably satisfactory to HoldCo and SpinCo contained in certificates delivered by an officer of HoldCo or SpinCo, as the case may be.

INDEX OF DEFINED TERMS

 

Term

   Section

Agreement

   Preamble

Carryback

   2.5(a)

Code

   Recitals

Distribution

   Recitals

HoldCo

   Preamble

Indemnified Party

   4.2(a)

 

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Term

   Section

Indemnifying Party

   4.2(a)

Independent Arbiter

   11.2

Notified Action

   7.4

Parties

   Preamble

Party

   Preamble

Past Practice

   2.3(a)

Post-Distribution Ruling

   7.3(a)

Refund Party

   5.1(a)

Retention Date

   8.5

Section 336(e) Election

   7.5

Separation Agreement

   Preamble

SpinCo

   Preamble

SpinCo Common Stock

   Recitals

ARTICLE II

PREPARATION AND FILING OF TAX RETURNS

Section 2.1 Consolidated Returns.

(a) Except as provided in the TSA, HoldCo shall prepare and file all HoldCo Consolidated Returns, and shall, subject to Section 4.1(a), pay all Taxes shown to be due and payable on such Tax Returns.

(b) SpinCo shall prepare and file all SpinCo Consolidated Returns, and shall, subject to Section 4.1(a), pay all Taxes shown to be due and payable on such Tax Returns.

Section 2.2 Separate Entity Tax Returns.

(a) Except as provided in the TSA, HoldCo shall prepare and file (or shall cause to be prepared and filed) any Separate Entity Tax Returns required to be filed by, or with respect to, any member of the HoldCo Group, and shall, subject to Section 4.1(a), pay, or cause the applicable HoldCo Entity to pay, all Taxes shown to be due and payable on such Tax Returns.

(b) Except as set forth in Section 2.2(c), SpinCo shall prepare and file (or shall cause to be prepared and filed) any Separate Entity Tax Returns required to be filed by, or with respect to, any member of the SpinCo Group and shall, subject to Section 4.1(a), pay, or cause the applicable SpinCo Entity to pay, all Taxes shown to be due and payable on such Tax Returns.

(c) Except as provided in the TSA, HoldCo shall (or shall cause a HoldCo Entity to) prepare any Tax Return required to be filed by, or with respect to, any member of the SpinCo Group for any Tax Period that ends before the Distribution Date and may elect to prepare (or cause a HoldCo Entity to prepare) any Tax Return required to be filed by, or with respect to, any member of the SpinCo Group for any Straddle Period. At SpinCo’s timely prior written request and expense, HoldCo shall (or shall cause a HoldCo Entity to) prepare any other Tax

 

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Return required to be filed by, or with respect to, any member of the SpinCo Group for any Straddle Period. SpinCo shall file, or cause the applicable SpinCo Entity to file, any such Tax Returns and, subject to Section 4.1(a), pay, or cause the applicable SpinCo Entity to pay, all Taxes shown to be due and payable on such Tax Returns.

(d) Notwithstanding anything in this Section 2.2 to the contrary, SpinCo shall prepare and file all Income Tax Returns required to be filed by AIC and Aaron’s Canada, and shall pay all Taxes shown to be due and payable on such Tax Returns.

Section 2.3 Tax Reporting Practices.

(a) Past Practices. With respect to any Tax Return for which a Party is responsible for preparing such Tax Return in accordance with the terms of this Agreement or the TSA (unless the items reported on such Tax Return could not reasonably be expected to affect Tax Items reported on any Tax Return filed by the other Party or members of its Group), such Tax Return shall be prepared in accordance with the practices, accounting methods, elections or conventions applied in respect of any applicable Tax Item for Pre-Distribution Periods, as modified by the remainder of this Section 2.3(a) (“Past Practice”). To the extent any Tax Items are not covered by Past Practice, or the Parties jointly determine that variance from Past Practice is required by applicable Tax Law (including as a result of a determination that there is not “substantial authority” for such position if reported in accordance with Past Practice), subject to the review rights described in Section 2.4, the Tax Return shall be prepared in the manner reasonably determined by the Party responsible for preparing such Tax Return in accordance with the terms of this Agreement or the TSA, following good faith consultation with the other Party.

(b) Reporting of Spin-Off. The Tax treatment of the Spin-Off reported on any Tax Return (whether such Tax Return is for a Pre-Distribution Period or a Post-Distribution Period) shall be consistent with the Intended Tax Treatment. The Tax treatment of the Spin-Off reported on any Tax Return for which SpinCo is responsible for preparing in accordance with the terms of this Agreement shall be consistent with that on any Tax Return filed or to be filed by HoldCo or any member of the HoldCo Group or caused or to be caused to be filed by HoldCo, to the extent that SpinCo has knowledge of such reporting. In furtherance of the foregoing, HoldCo shall, at least thirty (30) Business Days prior to the Due Date of any applicable Tax Return, provide to SpinCo, to the extent HoldCo has not previously made available, such information with respect to the Intended Tax Treatment and otherwise with respect to the intended tax treatment of the Spin-Off as will enable SpinCo to file any Tax Return it is responsible for preparing in accordance with the terms of this Agreement. If SpinCo determines, in consultation with HoldCo and their respective Tax Advisors that there is no “substantial authority” for such reporting position, such disputed item (or items) shall be referred for resolution in accordance with Article XI. In the event that the resolution of such disputed item (or items) with respect to a Tax Return is inconsistent with such Tax Return as filed, the Parties shall, as promptly as practicable, amend the applicable Tax Returns to properly reflect the final resolution of the disputed item (or items).

 

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Section 2.4 Right to Review Tax Returns.

(a) Review of HoldCo-Prepared Tax Returns with Separate SpinCo Tax Liability. Except with respect to HoldCo Consolidated Returns, which shall be governed by Section 2.4(d), HoldCo shall, at least thirty (30) Business Days prior to the Due Date for such Tax Return, or as soon thereafter as reasonably practical, submit to SpinCo a draft of any Tax Return HoldCo is required or permitted to file under this Article II to the extent such Tax Return reflects a Tax liability reasonably expected to be borne by SpinCo (or a member of the SpinCo Group). HoldCo shall consider in good faith any reasonable changes to such Tax Return submitted by SpinCo, provided that such changes are submitted no later than fifteen (15) Business Days after HoldCo’s submission to SpinCo of such Tax Return (or, in the case of a draft Tax Return delivered later than fifteen (15) Business Days prior to the Due Date, as soon thereafter as reasonably practical, but in no event later than five (5) Business Days prior to the Due Date), and the Parties shall negotiate in good faith to resolve any disputed items relating to any such Tax Return prior to the filing thereof.

(b) Review of SpinCo-Prepared Tax Returns with Separate HoldCo Tax Liability. Except with respect to SpinCo Consolidated Returns, which shall be governed by Section 2.4(d), SpinCo shall, at least thirty (30) Business Days prior to the Due Date for such Tax Return, or as soon thereafter as reasonably practical, submit to HoldCo a draft of each Tax Return it is required or permitted to file under this Article II to the extent such Tax Return reflects a Tax liability reasonably expected to be borne by HoldCo. SpinCo shall consider in good faith any reasonable changes to such Tax Return submitted by HoldCo, provided that such changes are submitted no later than fifteen (15) Business Days after SpinCo’s submission to HoldCo of such Tax Return (or, in the case of a draft Tax Return delivered later than fifteen (15) Business Days prior to the Due Date, as soon thereafter as reasonably practical, but in no event later than five (5) Business Days prior to the Due Date), and the Parties shall negotiate in good faith to resolve any disputed items relating to any such Tax Return prior to the filing thereof.

(c) Dispute Mechanics. In the event the Parties are unable to resolve through good faith negotiations any disputed items with respect to any Tax Return described in Section 2.4(a) or Section 2.4(b), the applicable Tax Return shall be filed or caused to be filed as prepared by the Party responsible for preparing such Tax Return in accordance with the terms of this Agreement prior to the Due Date, and such disputed item (or items) shall be referred for resolution in accordance with Article XI. In the event that the resolution of such disputed item (or items) with respect to a Tax Return is inconsistent with such Tax Return as filed, the Party responsible for preparing the applicable Tax Return in accordance with the terms of this Agreement (with cooperation from the other Party) shall, as promptly as practicable, amend such Tax Return to properly reflect the final resolution of the disputed item (or items). In the event that the amount of Taxes shown to be due and owing on a Tax Return is adjusted pursuant to applicable dispute resolution procedures, proper adjustment shall be made to the amounts previously paid or required to be paid in a manner that reflects such resolution.

(d) Review of Consolidated Returns. With respect to all HoldCo Consolidated Returns and SpinCo Consolidated Returns for the taxable year which includes the Distribution Date, HoldCo or SpinCo, as applicable shall use the closing of the books method under Treasury Regulation Section 1.1502-76, unless otherwise agreed by HoldCo and SpinCo, with respect to the determination of any Tax liability. HoldCo shall provide a draft, prepared in a manner that is consistent with Past Practice, of the portions of any HoldCo Consolidated Return that reflects a

 

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Tax liability reasonably expected to be borne by SpinCo (or a member of the SpinCo Group) to SpinCo for its review and comment at least thirty (30) Business Days prior to the Due Date for such HoldCo Consolidated Return; provided, however, that nothing herein shall prevent HoldCo from timely filing any such HoldCo Consolidated Return; provided, further, HoldCo shall not be required to provide such draft if it determines in its sole discretion to waive any liability SpinCo may have in respect of such Tax liability and agrees such Tax shall not be treated as a SpinCo Tax. SpinCo shall provide a draft, prepared in a manner that is consistent with Past Practice, of the portions of any SpinCo Consolidated Return that reflects a Tax liability reasonably expected to be borne by HoldCo (or a member of the HoldCo Group) to HoldCo for its review and comment at least thirty (30) Business Days prior to the Due Date for such SpinCo Consolidated Return, provided, however, that nothing herein shall prevent SpinCo from timely filing any such SpinCo Consolidated Return; provided, further, SpinCo shall not be required to provide such draft if it determines in its sole discretion to waive any liability HoldCo may have in respect of such Tax liability and agrees such Tax shall not be treated as a HoldCo Tax. Any disputes that the Parties are unable to resolve shall be resolved pursuant to Article XI. In the event that any dispute is not resolved prior to the Due Date for the filing of any HoldCo Consolidated Return or SpinCo Consolidated Return, such HoldCo Consolidated Return or SpinCo Consolidated Return, as applicable, shall be timely filed by the relevant Party, and the Parties agree to amend such HoldCo Consolidated Return or SpinCo Consolidated Return, as applicable, as necessary to reflect the resolution of such dispute in a manner consistent with such resolution.

Section 2.5 Carrybacks and Amended Tax Returns.

(a) Carrybacks. Except to the extent otherwise consented to by HoldCo in writing or prohibited by applicable Law, SpinCo (or the appropriate member of the SpinCo Group) shall elect to relinquish, waive or otherwise forgo the carryback of any loss, credit or other Tax Attribute from any Post-Distribution Period to any Pre-Distribution Period or Straddle Period with respect to members of the SpinCo Group (a “Carryback”). In the event that SpinCo (or the appropriate member of the SpinCo Group) is prohibited by applicable Law to relinquish, waive or otherwise forgo a Carryback (or HoldCo consents to a Carryback), HoldCo shall cooperate with SpinCo, at SpinCo’s expense, in seeking from the appropriate Tax Authority such Refund as reasonably would result from such Carryback, to the extent that such Refund is directly attributable to such Carryback, and shall pay over to SpinCo the amount of such Refund within ten (10) Business Days after such Refund is received; provided, however, that SpinCo shall indemnify and hold the members of the HoldCo Group harmless from and against any and all collateral Tax consequences resulting from or caused by any such Carryback, including, without limitation, the loss or postponement of any benefit from the use of Tax Attributes generated by a member of the HoldCo Group if (i) such Tax Attributes expire unutilized, but would have been utilized but for such Carryback, or (ii) the use of such Tax Attributes is postponed to a later taxable period than the taxable period in which such Tax Attributes would have been utilized but for such Carryback. Notwithstanding the foregoing, the second sentence of this Section 2.5(a) shall not apply to any Refund of HoldCo Consolidated Taxes.

(b) Amended Tax Returns. Except as provided in Section 2.3(b), Section 2.4(c) or Section 2.4(d) to reflect the resolution of any dispute pursuant to Article XI, any amended Tax Return with respect to any member of the SpinCo Group, or any Mixed Business Tax Return, may be made only (i) with respect to any Income Tax Return which includes Pre-

 

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Distribution Periods or any Tax Return if the applicable original Tax Return was filed before the Distribution Date, by HoldCo and (ii) with respect to any other Tax Return, by the Party responsible for preparing the applicable Tax Return in accordance with the terms of this Agreement. Such Party shall not file or cause to be filed any such amended Tax Return without the prior written consent of the other Party, if such filing, assuming it is accepted, could reasonably be expected to change the Tax liability of such other Party (or any member of its Group) for any Tax Period, which consent shall not be unreasonably withheld, conditioned or delayed. If any Party permitted to make an amended Tax Return under this Section 2.5(b) is not permitted to file such amended Tax Return under applicable Law, such Party shall provide the amended Tax Return to the other Party which shall file (or cause to be filed) such amended Tax Return as promptly as reasonably practicable thereafter.

Section 2.6 Apportionment of Tax Attributes.

(a) Tax Attributes arising in a Pre-Distribution Period will be allocated to (and the benefits and burdens of such Tax Attribute will inure to) the members of the HoldCo Group and the members of the SpinCo Group in accordance with HoldCo’s historical practice (except as otherwise required by applicable Tax Law), the Code, Treasury Regulations, and any applicable state, local and non-U.S. Law, as determined by HoldCo in its reasonable discretion and consistent with Past Practice, as applicable. The HoldCo Group or the SpinCo Group, as applicable, shall be responsible for the payment of any fees and expenses that become payable in connection with the utilization of any Tax Attributes allocated to it hereunder.

(b) HoldCo shall in good faith (and without being required to undertake an attribute or similar study) advise SpinCo in writing of the portion, if any, of Tax Attributes, or other consolidated, combined or unitary attribute, which shall be allocated or apportioned to the members of the SpinCo Group under applicable Law. HoldCo shall consult in good faith with SpinCo regarding such allocation of Tax Attributes and determinations as to basis and valuation, and shall consider in good faith any reasonable comments timely received from SpinCo. In the event that SpinCo disagrees with any such determination, HoldCo and SpinCo shall endeavor in good faith to resolve such disagreement, and, failing that, the allocations and apportionments under this Section 2.6(b) shall be determined in accordance with the dispute resolution provisions of Article XI as promptly as practicable. To the extent applicable Law requires any member of the HoldCo Group to make a payment to a member of the SpinCo Group, or any member of the SpinCo Group to make a payment to a member of the HoldCo Group, with respect to any Tax Attribute, or other consolidated, combined or unitary attribute, as a result of the Spin-Off, such payment shall be made in accordance with the provisions of this Agreement.

(c) All members of the HoldCo Group and SpinCo Group shall prepare all Tax Returns and compute all Taxes for Post-Distribution Periods in accordance with the final allocation of Tax Attributes delivered under Section 2.6(b), except as otherwise required by a Final Determination. In the event of an adjustment to any Tax Attribute as a result of a Final Determination, HoldCo or SpinCo, as applicable, shall promptly notify the other Party in writing of such adjustment, and the reduction or increase in Tax Attributes shall be allocated to the Party to which such Tax Attribute was initially allocated pursuant to this Section 2.6 and, if necessary, an appropriate adjustment payment shall be made by the applicable Party, consistent with the other provisions of this Agreement.

 

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(d) For the avoidance of doubt, HoldCo shall not be liable to any member of the SpinCo Group for any failure of any determination under this Section 2.6 to be accurate under applicable Tax Law, provided such determination was made in good faith.

Section 2.7 Coordination. Nothing in this Article II (including a Party’s timely payment of Taxes, or filing of a Tax Return, pursuant to the provisions hereof) shall limit a Party’s right to indemnification under the provisions of Article III of this Agreement. The Parties acknowledge that the provisions set forth herein relating to the preparation and filing of Tax Returns may be modified by the terms of the TSA.

ARTICLE III

ALLOCATION OF TAX LIABILITIES

Section 3.1 General Rule.

(a) HoldCo Liability. HoldCo shall be liable for, and shall indemnify and hold harmless each member of the SpinCo Group from and against, without duplication, (i) all HoldCo Taxes, (ii) all Taxes incurred by a member of the SpinCo Group resulting from the breach by a member of the HoldCo Group of any of its representations, warranties or covenants hereunder, and (iii) any costs and expenses related to the foregoing (including reasonable attorneys’ fees and expenses).

(b) SpinCo Liability. SpinCo shall be liable for, and shall indemnify and hold harmless each member of the HoldCo Group from and against, without duplication, (i) all SpinCo Taxes, (ii) all Taxes incurred by a member of the HoldCo Group by reason of the breach by a member of the SpinCo Group of any of its representations, warranties or covenants hereunder and (iii) any costs and expenses related to the foregoing (including reasonable attorneys’ fees and expenses).

(c) Notwithstanding Section 3.1(a) and (b), any liability for any Taxes attributable to both a HoldCo Tainting Act and a SpinCo Tainting Act shall be shared by HoldCo and SpinCo according to relative fault.

Section 3.2 Attribution of Taxes.

(a) General. For all purposes of this Agreement, a Tax and any Tax Items shall be considered attributable to the SpinCo Business on the one hand and the Progressive Business on the other (but not both) to the extent that such Tax and/or Tax Item would result if such Tax Return were prepared on a separate basis taking into account only the operations and assets of the SpinCo Business on the one hand and only the operations and assets of the Progressive Business on the other hand (but not both), as applicable, which allocation shall, in respect of Income Taxes, be jointly determined by HoldCo and SpinCo in good faith and subject to dispute resolution under Article XI, (i) using Past Practices and (ii) applying the highest applicable statutory marginal corporate income Tax rate in effect for the applicable Tax Period. With respect to any other Tax Items, HoldCo and SpinCo shall jointly determine in good faith consistent with Past Practices and subject to dispute resolution under Article XI, which Tax Items are properly attributable to assets or activities of the SpinCo Business and Progressive Business, respectively (and in the case of a Tax Item that is properly attributable to both the SpinCo Business and the Progressive Business, the allocation of such Tax Item between the SpinCo Business and the Progressive Business).

 

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(b) Straddle Period Tax Allocation. HoldCo and SpinCo shall take all actions necessary or appropriate to close the taxable year of SpinCo and each member of the SpinCo Group for all Tax purposes as of the close of the Distribution Date to the extent permissible or required under applicable Law. If applicable Law does not require or permit SpinCo or any SpinCo Entity, as the case may be, to close its taxable year on the Distribution Date, then the allocation of Tax Items required to determine any Taxes or other amounts attributable to the portion of the Straddle Period ending on, or beginning after, the Distribution Date shall be made by means of a closing of the books and records of SpinCo or the applicable member of the SpinCo Group as of the close of the Distribution Date; provided that exemptions, allowances or deductions that are calculated on an annual or periodic basis shall be allocated between such portions in proportion to the number of days in each such portion; provided, further, that real property and other property or similar periodic Taxes shall be apportioned on a per diem basis.

(c) Extraordinary Transactions. Notwithstanding anything to the contrary in this Agreement, the Parties shall report any Extraordinary Transactions taking place on the Distribution Date after the Distribution Time as occurring on the day after the Distribution Date pursuant to Treasury Regulations Section 1.1502-76(b)(1)(ii)(B) or any similar or analogous provision of state, local or non-U.S. Law.

ARTICLE IV

TAX PAYMENTS

Section 4.1 Payment of Amounts Due.

(a) Payment of Liability with Respect to Tax Due. Each Party allocated Taxes shown on a Tax Return to be filed in accordance with Article II and responsible for the payment of such Taxes under this Agreement shall, at least two (2) Business Days prior to the Due Date for filing any such Tax Return, pay such amount to the Party responsible for filing such Tax Return in accordance with the terms of this Agreement. For the avoidance of doubt, however, the obligation described under this Section 4.1(a) shall not commence prior to the date the other Party first was given the opportunity to exercise any review rights available to it with respect to the relevant Tax Return (whether under Article II or otherwise) or the date any dispute with respect to such Tax Return is resolved pursuant to Section 2.4(c), nor shall interest accrue during any such time period.

(b) Adjustments Resulting in Underpayments. In the case of any adjustment pursuant to a Final Determination with respect to any Tax Return, the Party responsible for filing the applicable Tax Return in accordance with the terms of this Agreement shall pay (or cause to be paid) to the applicable Tax Authority when due any additional Tax due with respect to such Tax Return required to be paid as a result of such adjustment pursuant to such Final Determination. Such Party shall compute the amount attributable to the SpinCo Group or the HoldCo Group (as the case may be) in accordance with this Agreement and SpinCo shall pay to

 

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HoldCo any amount due HoldCo (or HoldCo shall pay SpinCo any amount due SpinCo) under this Agreement no later than the later of (i) two (2) Business Days prior to the Due Date for payment and (ii) ten (10) Business Days after the date of receipt of a written notice and demand from such Party for payment of the amount due, accompanied by a statement detailing the Taxes paid and describing in reasonable detail the particulars relating thereto. For the avoidance of doubt, however, the obligation described under this Section 4.1(b) shall not commence to the extent the other Party was not previously notified of the potential adjustment under the provisions of Article X, in which case the obligation shall accrue on the date of the other Party’s receipt of written notice and demand under clause (ii) of this Section 4.1(b), and interest shall accrue only from such later date.

(c) Discharge of Indemnity. A Party (or any member of its Group) seeking indemnity under Article III shall provide written notice of, and a reasonable basis for, its claim to the other Party (or Parties, or any member of their respective Groups) from which it is seeking indemnification, and such other Party (or Parties, or the applicable member of their respective Groups) shall discharge its (or their) indemnification obligations, subject to Section 4.1(b), by paying the relevant amount within ten (10) Business Days of demand therefor. If any Party (or any member of its Group) disputes in good faith the fact or the amount of its indemnification obligation, then no payment of the amount in dispute shall be required until any such good faith dispute is resolved in accordance with Article XI, but interest shall accrue from the date payment would otherwise have been due.

Section 4.2 Treatment of Indemnification and Other Payments.

(a) Any Tax indemnity payment required to be made by a Party responsible to make an indemnification payment pursuant to this Agreement (the “Indemnifying Party”) shall be reduced by any corresponding Tax Benefit to the indemnified Party (the “Indemnified Party”) actually realized or recognized during or prior to the taxable year in which the indemnification payment is made or during the two (2) subsequent taxable years. For the avoidance of doubt, a Tax Benefit is treated as corresponding to a Tax indemnity payment to the extent the Tax Benefit realized is directly attributable to the same Tax Item (or adjustment of such Tax Item pursuant to a Final Determination) that gave rise to the Tax indemnity payment.

(b) To the extent permitted by applicable Tax Law, HoldCo and SpinCo agree to treat (and to cause each member of their respective Group to treat) any payment required by this Agreement (other than payments with respect to interest accruing after the Distribution Date) as either a contribution by HoldCo to SpinCo or a distribution by SpinCo to HoldCo, as the case may be, occurring immediately prior to the Distribution.

 

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ARTICLE V

TAX REFUNDS

Section 5.1 Tax Refunds.

(a) Each Party (and its Affiliates) shall be entitled to, and the other Party shall, at the written request and expense of the first Party (such Party, the “Refund Party”), use commercially reasonable efforts to claim, all Refunds that relate to Taxes for which the Refund Party (or its Affiliates) is liable under Article III. To the extent that a particular Refund of Taxes may be allocable to a Tax Period or reflected on a Tax Return with respect to which the Parties may share liability under this Agreement, the portion of such Refund to which each Refund Party will be entitled shall be determined by comparing the relative liability of such Refund Party for the Taxes shown on the applicable Tax Return, taking into account the facts as utilized for purposes of claiming such Refund. Any Refund to which a Refund Party is entitled that is received by the other Party shall be paid to such Refund Party within ten (10) days of, in the case of a cash Refund, such other Party’s actual receipt of the Refund from the applicable Tax Authority or, in the case of any Refund that reduces or offsets Taxes otherwise payable by such other Party, the earlier of the Due Date for such Tax liability or the date such Tax liability is actually paid.

(b) To the extent that the amount of any Refund under this Section 5.1 is later reduced by a Tax Authority or pursuant to a Final Determination in a Tax Proceeding, such reduction shall be allocated to the Refund Party and, if necessary, an appropriate adjustment payment shall be made to the other Party, consistent with the other provisions of this Agreement.

ARTICLE VI

DEDUCTION AND REPORTING OF EMPLOYEE AWARDS

Section 6.1 HoldCo and SpinCo Income Tax Deductions in Respect of Certain Equity Awards and Compensation. Unless otherwise required by applicable Law, the reporting of any Income Tax deductions by the HoldCo Group or the SpinCo Group in respect of equity awards and other compensation shall be governed by the EMA or TSA, as applicable.

ARTICLE VII

TAX-FREE STATUS

Section 7.1 Representations and Warranties.

(a) SpinCo. SpinCo hereby represents and warrants, or covenants and agrees, as appropriate, that the statements and representations made in the Tax Representation Letter, to the extent they relate to SpinCo or the SpinCo Group are, or, as applicable, will be, from the time presented or made (and, if applicable, through and including the Distribution Time (and thereafter as relevant)) true, correct and complete in all respects.

(b) HoldCo. HoldCo hereby represents and warrants, or covenants and agrees, as appropriate, that the statements and representations made in the Tax Representation Letter, to the extent relating to HoldCo or the HoldCo Group are, or, as applicable, will be, from the time presented or made (and, if applicable, through and including the Distribution Time (and thereafter as relevant)), true, correct and complete in all respects.

(c) No Contrary Plan. Each of HoldCo and SpinCo represents and warrants that neither it, nor any of its Subsidiaries, has any plan or intent to take any action which is inconsistent with any statements or representations made in the Tax Representation Letter.

 

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Section 7.2 Restrictions on SpinCo.

(a) During the Restricted Period, SpinCo shall not (other than as expressly required under the Separation Agreement):

(i) enter into any Proposed Acquisition Transaction, approve any Proposed Acquisition Transaction for any purpose, or facilitate in any manner or allow any Proposed Acquisition Transaction to occur with respect to SpinCo;

(ii) merge or consolidate with any other Person or liquidate or partially liquidate, including any action that is treated as a liquidation for U.S. federal Income Tax purposes;

(iii) approve or allow the discontinuance, cessation, or sale or other transfer (to an Affiliate or otherwise) of, or a material change in, any Active Business;

(iv) approve or allow the sale, issuance, or other disposition (to an Affiliate or otherwise), directly or indirectly, of any share of, or other equity interest or an instrument convertible into an equity interest in, any SpinCo Active Business Entity;

(v) in the case of the SpinCo Group (including any successors to any member of the SpinCo Group), sell or otherwise dispose of more than thirty-five percent (35%) of its consolidated gross assets, or approve or allow the sale or other disposition (including in any transaction treated for U.S. federal income Tax purposes as a sale, transfer or disposition) (to an Affiliate or otherwise) of more than thirty-five percent (35%) of its consolidated gross assets or more than thirty-five percent (35%) of the consolidated gross assets of any SpinCo Active Business Entity (whether to an Affiliate or otherwise), in each case, excluding (A) sales in the ordinary course of business and measured based on fair market values as of the Distribution Date and (B) any transfers to a Person that is a disregarded entity separate from the transferor for federal income tax purposes (provided, that for purposes of this Section 7.2(a), a merger of SpinCo or one of its Subsidiaries with and into any Person that is not a wholly owned Subsidiary of SpinCo shall constitute a disposition of all of the assets of SpinCo or such Subsidiary);

(vi) amend its certificate of incorporation (or other organizational documents), or take any other action or approve or allow the taking of any action, whether through a stockholder vote or otherwise, affecting the voting rights of SpinCo stock (including through the conversion of any Capital Stock into another class of Capital Stock);

(vii) purchase, directly or through any Affiliate, any of its outstanding stock, except to the extent such purchases satisfy Section 4.05(1)(b) of Revenue Procedure 96-30 (as in effect prior to the amendment by Revenue Procedure 2003-48);

(viii) with respect to the Distribution, take any action or fail to take any action, or permit any member of the SpinCo Group to take any action or fail to take any action, that is inconsistent with any representation or covenant made in the Tax Representation Letter; or

 

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(ix) take any action or permit any other member of the SpinCo Group to take any action (including any transactions with a third-party or any transaction with any Affiliate) that is inconsistent with, or individually or in the aggregate (taking into account other transactions described in this Section 7.2) would be reasonably likely to adversely affect, the Intended Tax Treatment.

Section 7.3 Opinions and Rulings. SpinCo and its Affiliates shall be permitted to take the actions described in Section 7.2, if, prior to taking any such actions:

(a) SpinCo notifies HoldCo that it desires to seek a private letter ruling from the IRS, or a ruling from another applicable Tax Authority that confirms that such action or actions will not adversely affect the Intended Tax Treatment, taking into account such actions and any other relevant transactions in the aggregate (a “Post-Distribution Ruling”), and HoldCo consents in writing to the pursuit of such Post-Distribution Ruling, which consent shall not be unreasonably withheld, conditioned or delayed, and which ruling (and any representations on which it is based) shall, once received, be in form and substance satisfactory to HoldCo in its discretion, which discretion shall be reasonably exercised in good faith to prevent the imposition on HoldCo, or responsibility for payment by HoldCo, of Distribution Taxes; or

(b) SpinCo shall have received an Unqualified Tax Opinion that confirms that such action or actions will not adversely affect the Intended Tax Treatment, taking into account such actions and any other relevant transactions in the aggregate, in form and substance satisfactory to HoldCo in its discretion, which discretion shall be reasonably exercised in good faith to prevent the imposition on HoldCo, or responsibility for payment by HoldCo, of Distribution Taxes (including any representations or assumptions that may be included in such Unqualified Tax Opinion).

(c) HoldCo’s evaluation of a Post-Distribution Ruling or Unqualified Tax Opinion may consider, among other factors, the appropriateness of any underlying assumptions, representations, and covenants made in connection with such Post-Distribution Ruling or Unqualified Tax Opinion. SpinCo shall (i) bear all costs and expenses of securing any such Post-Distribution Ruling or Unqualified Tax Opinion and (ii) reimburse HoldCo for all reasonable out-of-pocket costs and expenses that HoldCo may incur in good faith in pursuing or evaluating any such Post-Distribution Ruling or Unqualified Tax Opinion. Except as provided in this Section 7.3, following the Distribution Time, neither SpinCo nor any of its Subsidiaries shall seek any guidance from, initiate any communication with, the IRS or any other Tax Authority (whether written, verbal or otherwise) at any time concerning the Spin-Off (including the impact of any transaction on the tax treatment of the Spin-Off) without the prior approval of HoldCo (such approval not to be unreasonably withheld, conditioned or delayed).

Section 7.4 Procedures Regarding Opinions and Rulings. If SpinCo notifies HoldCo that it desires to take one of the actions described in Section 7.2 (a “Notified Action”), HoldCo shall, at SpinCo’s sole expense, cooperate with SpinCo and use its reasonable best efforts to seek to obtain a Post-Distribution Ruling or permit SpinCo to obtain an Unqualified Tax Opinion for the purpose of permitting SpinCo to take the Notified Action unless HoldCo shall have waived the requirement to obtain such ruling or opinion.

 

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Section 7.5 Protective 336(e) Election. Pursuant to Treasury Regulation Sections 1.336-2(h)(1)(i) and 1.336-2(j), if and to the extent determined by HoldCo, HoldCo shall make a timely protective election under Section 336(e) of the Code and the Treasury Regulations issued thereunder and any similar provision of state or local Tax Law (and any related elections as determined by HoldCo) with respect to the Distribution (collectively, a “Section 336(e) Election”). If and to the extent that the Intended Tax Treatment does not apply with respect to the Spin-Off and HoldCo is liable for any resulting Distribution Tax-Related Losses (including any Taxes attributable to the Section 336(e) Election), then, to that extent, HoldCo will be entitled to annual payments from SpinCo of the Tax Benefit of the SpinCo Group arising from the step-up in Tax basis resulting from the Section 336(e) Election, determined using a with and without methodology (treating any deductions attributable to the step-up in tax basis resulting from the Section 336(e) Election as the last items claimed for any taxable period including after the utilization of any available Tax Attributes) and assuming for this purpose that the SpinCo Group is subject to federal income tax at a rate of 21% and state income tax at a rate of 4.57%.

ARTICLE VIII

REPORTING, COOPERATION AND RECORD RETENTION

Section 8.1 Assistance and Cooperation.

(a) The Parties shall cooperate (and cause the members of their respective Groups to cooperate) with each other and with each other’s representatives, including accounting firms and legal counsel, in connection with Tax matters relating to the Parties and their respective Groups including (i) preparation and filing of Tax Returns, (ii) determining the liability for and amount of any Taxes due (including estimated Taxes) or the right to and amount of any Refund, (iii) examinations of Tax Returns, and (iv) any Tax Proceeding. Such cooperation shall include making all information and documents in such Party’s possession relating to the other Party and the members of its Group available to such other Party as provided in this Article VIII and the execution of any document (including the grant of any power of attorney or similar document) reasonably requested by another Party in connection with the filing of a Tax Return or a Refund claim of the Parties or any of the members of their respective Groups or any Tax Proceeding of any of the Parties or the members of their respective Groups. Each Party shall make its employees, advisors, and facilities available, without charge (except as otherwise provided in the TSA), on a reasonable and mutually convenient basis in connection with the foregoing matters in a manner that does not interfere with the ordinary business operations of such Party. The Parties shall use commercially reasonable efforts to provide any information or documentation requested by the other Party in a manner that permits the other Party (or its Affiliates) to comply with Tax Return filing deadlines or other applicable timing requirements.

(b) Any information or documents provided under this Section 8.1 shall be kept confidential by the Party receiving the information or documents, except as may otherwise be necessary in connection with the filing of Tax Returns or in connection with any administrative or judicial proceedings relating to Taxes. Notwithstanding any other provision of this Agreement or any other agreement, (i) no Party nor any of its Affiliates shall be required to provide another Party or any Affiliate thereof or any other Person access to or copies of any information or procedures (including the proceedings of any Tax Proceeding) other than information or procedures that reasonably relate to the Taxes (including any Taxes for which the first Party is liable under this Agreement), business or assets of the first Party or any of its

 

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Affiliates or are necessary to prepare Tax Returns for which the first Party is responsible for preparing the applicable Tax Return in accordance with the terms of this Agreement and (ii) in no event shall any Party or its Affiliates be required to provide another Party, any of its Affiliates or any other Person access to or copies of any information if such action could reasonably be expected to result in the waiver of any Privilege. In addition, in the event that a Party determines that the provision of any information to another Party or any of its Affiliates could be commercially detrimental, violate any Law or agreement or waive any Privilege, the first Party shall use reasonable best efforts to permit compliance with its obligations under this Section 8.1 in a manner that avoids any such harm or consequence.

Section 8.2 Return Information. SpinCo and HoldCo acknowledge that time is of the essence in relation to any request for information, assistance or cooperation made by HoldCo or SpinCo pursuant to Section 8.1 or this Section 8.2. Each Party shall provide to the other Parties information and documents relating to its Group reasonably required by the other Parties to prepare Tax Returns. Any information or documents a Party responsible for preparing a Tax Return in accordance with the terms of this Agreement requires to prepare such Tax Returns shall be provided in such form as such Party reasonably requests and in sufficient time for such Party to prepare such Tax Returns on a timely basis.

Section 8.3 Non-Performance. If a Party (or any of its Affiliates) fails to comply with any of its obligations set forth in this Article VIII upon reasonable request and notice by the other Party (or any of its Affiliates) and such failure results in the imposition of additional Taxes, the non-performing Party shall be liable in full for such additional Taxes.

Section 8.4 Costs. Each Party shall devote the personnel and resources necessary in order to carry out this Article VIII and shall make its employees available on a mutually convenient basis to provide explanations of any documents or information provided hereunder. Except as otherwise provided in the TSA, each Party shall carry out its responsibilities under this Article VIII at its own cost and expense.

Section 8.5 Retention of Tax Records. Each Party shall preserve and keep all Tax Records exclusively relating to the assets and activities of its Group for Pre-Distribution Periods, and HoldCo shall preserve and keep all other Tax Records relating to Taxes of the Groups for Pre-Distribution Periods, for so long as the contents thereof may become material in the administration of any matter under the Code or other applicable Tax Law, but in any event until the later of (i) the expiration of any applicable statutes of limitations, or (ii) seven (7) years after the Distribution Date (such later date, the “Retention Date”). After the Retention Date, each Party may dispose of such Tax Records upon ninety (90) Business Days’ prior written notice to the other Party. If, prior to the Retention Date, a Party reasonably determines that any Tax Records which it would otherwise be required to preserve and keep under this Section 8.5 are no longer material in the administration of any matter under the Code or other applicable Tax Law and the other Party agrees, then such first Party may dispose of such Tax Records upon ninety (90) Business Days’ prior notice to the other Party. The notified Party shall have the opportunity, at its cost and expense, to copy or remove, within such ninety (90) Business Day period, all or any part of such Tax Records. If, at any time prior to the Retention Date, a Party determines to decommission or otherwise discontinue any computer program or information technology system used to access or store any Tax Records, then such Party may decommission or discontinue such

 

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program or system upon ninety (90) Business Days’ prior notice to the other Party and the other Party shall have the opportunity, at its cost and expense, to copy, within such ninety (90) Business Day period, all or any part of the underlying data relating to the Tax Records accessed by or stored on such program or system.

Section 8.6 Access to Tax Records. The Parties and their respective Affiliates shall make available to each other for inspection and copying during normal business hours upon reasonable notice all Tax Records (and, for the avoidance of doubt, any pertinent underlying data accessed or stored on any computer program or information technology system) in their possession and shall permit the other Party and its Affiliates, authorized agents and representatives and any representative of a Tax Authority or other Tax auditor direct access during normal business hours upon reasonable notice to any computer program or information technology system used to access or store any Tax Records, in each case to the extent reasonably required by the other Party in connection with the preparation of Tax Returns or financial accounting statements, audits, litigation, or the resolution of items under this Agreement. To the extent any Tax Records are required to be or are otherwise transferred by the Parties or their respective Affiliates to any person other than an Affiliate, the Party or its respective Affiliate shall transfer such records to the other Party at such time.

ARTICLE IX

TAX PROCEEDINGS

Section 9.1 Notice. Within ten (10) Business Days after an Indemnified Party becomes aware of the commencement of a Tax Proceeding that may give rise to Taxes for which an Indemnifying Party is responsible pursuant to Article III, such Indemnified Party shall notify the Indemnifying Party of such Tax Proceeding, and thereafter shall promptly forward or make available to the Indemnifying Party copies of notices and communications relating to such Tax Proceeding. The failure of the Indemnified Party to notify the Indemnifying Party of the commencement of any such Tax Proceeding within such ten (10) Business Day period or promptly forward any further notices or communications shall not relieve the Indemnifying Party of any obligation which it may have to the Indemnified Party under this Agreement except to the extent that the Indemnifying Party is materially prejudiced by such failure.

Section 9.2 Control of Tax Proceedings.

(a) HoldCo Income Tax Returns.

(i) HoldCo shall be entitled to contest, compromise and settle in its sole discretion any adjustment to any Tax Item that is proposed, asserted or assessed in connection with any Tax Proceeding with respect to (A) any HoldCo Consolidated Return or (B) any Separate Entity Tax Return that relates solely to Taxes for which HoldCo is liable under this Agreement.

 

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(ii) If SpinCo Taxes are asserted in any Tax Proceeding otherwise controlled by HoldCo under this Section 9.2(a), HoldCo shall (i) keep SpinCo timely informed of the actions proposed to be taken by HoldCo with respect to such assertion in such Tax Proceeding, (ii) permit SpinCo to participate (at SpinCo’s cost and expense) in the aspects of such Tax Proceeding that relate solely to such SpinCo Taxes and (iii) not settle any aspect of such Tax Proceeding that relates to such SpinCo Taxes without the prior written consent of SpinCo, which consent shall not be unreasonably withheld, delayed or conditioned.

(b) SpinCo Income Tax Returns.

(i) SpinCo shall be entitled to contest, compromise and settle in its sole discretion any adjustment to any Tax Item that is proposed, asserted or assessed in connection with any Tax Proceeding with respect to (A) any SpinCo Consolidated Return or (B) any Separate Entity Tax Return that relates solely to Taxes for which SpinCo is liable under this Agreement.

(ii) If HoldCo Taxes are asserted in any Tax Proceeding otherwise controlled by SpinCo under this Section 9.2(b), SpinCo shall (i) keep HoldCo timely informed of the actions proposed to be taken by SpinCo with respect to such assertion in such Tax Proceeding, (ii) permit HoldCo to participate (at HoldCo’s cost and expense) in the aspects of such Tax Proceeding that relate solely to such HoldCo Taxes, and (iii) not settle any aspect of such Tax Proceeding that relates to such HoldCo Taxes without the prior written consent of HoldCo, which consent shall not be unreasonably withheld, delayed or conditioned.

(c) Separate Entity Tax Returns.

(i) Except as set forth in Section 9.2(a) and Section 9.2(b), HoldCo shall be entitled to contest, compromise and settle any adjustment to any Tax Item that is proposed, asserted or assessed in connection with any Tax Proceeding with respect to any Separate Entity Tax Return prepared by HoldCo or a HoldCo Entity pursuant to Section 2.2; provided, that to the extent that any aspect of such Tax Proceeding relates to SpinCo Taxes or would reasonably be expected to materially adversely affect the Tax position of SpinCo or any SpinCo Entity, HoldCo shall (i) keep SpinCo informed in a timely manner of the actions proposed to be taken by HoldCo with respect to such aspects of such Tax Proceeding, (ii) permit SpinCo to participate (at SpinCo’s cost and expense) in such aspects of such Tax Proceeding, and (iii) not settle any such aspect of such Tax Proceeding without the prior written consent of SpinCo, which shall not be unreasonably withheld, delayed or conditioned.

(ii) Except as set forth in Section 9.2(a) and Section 9.2(b), SpinCo shall be entitled to contest, compromise and settle any adjustment to any Tax Item that is proposed, asserted or assessed in connection with any Tax Proceeding with respect to any Separate Entity Tax Return prepared by SpinCo or a SpinCo Entity pursuant to Section 2.2; provided, that to the extent that any aspect of such Tax Proceeding relates to HoldCo Taxes or would reasonably be expected to materially adversely affect the Tax position of HoldCo or any HoldCo Entity, SpinCo shall (i) keep HoldCo informed in a timely manner of the actions proposed to be taken by SpinCo with respect to such aspects of such Tax Proceeding, (ii) permit HoldCo to participate (at HoldCo’s cost and expense) in such aspects of such Tax Proceeding, and (iii) not settle any such aspect of such Tax Proceeding without the prior written consent of HoldCo, which shall not be unreasonably withheld, delayed or conditioned.

 

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(d) Distribution Taxes. Notwithstanding the other provisions of this Section 9.2, HoldCo shall be entitled to contest, compromise and settle any Tax Proceeding relating to the Intended Tax Treatment or that would otherwise give rise to Distribution Taxes; provided, that to the extent that any aspect of such Tax Proceeding (i) would reasonably be expected to materially adversely affect the Tax position of SpinCo or a SpinCo Entity, or (ii) SpinCo has previously acknowledged its potential liability under this Agreement for any Distribution Tax-Related Losses arising out of such Tax Proceeding in writing, HoldCo shall (A) keep SpinCo informed in a timely manner of the actions proposed to be taken by HoldCo with respect to such aspects of such Tax Proceeding, (B) permit SpinCo to participate (at SpinCo’s cost and expense) in such aspects of such Tax Proceeding, and (C) not settle any such aspect of such Tax Proceeding without the prior written consent of SpinCo, which shall not be unreasonably withheld, delayed or conditioned.

(e) Non-Income Tax Returns. The Party responsible for preparing the applicable Tax Return in accordance with the terms of this Agreement shall be entitled to contest, compromise and settle any adjustment that is proposed, asserted or assessed pursuant to any Tax Proceeding with respect to any Tax Return other than an Income Tax Return, provided, that to the extent that any aspect of such Tax Proceeding relates to Taxes for which the other Party is liable under this Agreement or would reasonably be expected to materially adversely affect the Tax position of the other Party, the first Party shall (i) keep the other Party informed in a timely manner of the actions proposed to be taken by the first Party with respect to such aspects of such Tax Proceeding, (ii) permit the other Party to participate (at such other Party’s cost and expense) in such aspects of such Tax Proceeding, and (iii) not settle any such aspect of such Tax Proceeding without the prior written consent of the other Party, which shall not be unreasonably withheld, delayed or conditioned.

ARTICLE X

INTEREST PAYMENTS

Section 10.1 Interest Under This Agreement. Anything herein to the contrary notwithstanding, to the extent an Indemnifying Party makes a payment of interest to an Indemnified Party under this Agreement with respect to the period from the date that the Indemnified Party made a payment of Tax to a Tax Authority to the date that the Indemnifying Party reimbursed the Indemnified Party for such Tax payment, the interest payment shall be treated as interest expense to the Indemnifying Party (deductible to the extent provided by law) and as interest income by the Indemnified Party (includible in income to the extent provided by law). The amount of the payment shall not be adjusted to take into account any associated Tax Benefit to the Indemnifying Party or increase in Tax to the Indemnified Party.

 

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ARTICLE XI

DISAGREEMENTS

Section 11.1 Interaction with Article IX of the Separation Agreement. In the event of any dispute between the Parties as to any matter covered by this Agreement, the Parties shall agree as to whether such dispute shall be governed by the procedures set forth in Section 11.2 and Section 11.3 of this Agreement or in Article IX of the Separation Agreement. If the Parties cannot agree within thirty (30) days from the time such dispute arises as to which procedure will govern such dispute, such disagreement shall be resolved pursuant to Article IX of the Separation Agreement. For the avoidance of doubt, Section 11.2 and Section 11.3 of this Agreement shall not apply to any dispute that is governed by Article IX of the Separation Agreement.

Section 11.2 Discussion. The Parties mutually desire that collaboration will continue between them. Accordingly, the Parties will, and will cause the respective members of their Groups to, use reasonable efforts to resolve via bilateral discussion all disagreements in respect of their respective rights and obligations under this Agreement. In furtherance thereof, in the event of any dispute or disagreement between any member of the HoldCo Group and any member of the SpinCo Group as to the interpretation of any provision of this Agreement or the performance of the other Party’s obligations hereunder, representatives of each of the Parties, including members of their respective Tax departments, shall negotiate in good faith to resolve such dispute. With respect to any dispute governed by Section 11.2 and Section 11.3 of this Agreement, the Parties agree that the dispute resolution procedures specified in this Section 11.2 and Section 11.3 shall be the sole and exclusive procedures for the resolution of disputes; provided, however, that any Party may seek a preliminary injunction or other preliminary judicial relief in aid of arbitration before any court of competent jurisdiction if such action is necessary to avoid irreparable damage. Despite such action, the Parties shall continue to participate in good faith in the procedures specified in this Section 11.2 and Section 11.3.

Section 11.3 Referral to Independent Arbiter. In the event any dispute governed by Section 11.2 and this Section 11.3 is not resolved by bilateral discussion, the Parties shall appoint, with respect to any matter requiring the determination of the Parties’ rights and obligations under this Agreement, a U.S. law firm of national standing or, with respect to any other matter, an internationally recognized independent public accounting firm (in each case, the “Independent Arbiter”) to resolve such dispute. In this regard, the Independent Arbiter shall make determinations with respect to the disputed items based solely on representations made by HoldCo and SpinCo and their respective representatives, and not by independent review, and shall function only as an expert and not as an arbitrator. The Parties shall require the Independent Arbiter to resolve all disputes no later than thirty (30) days after the submission of such dispute to the Independent Arbiter, and agree that all decisions by the Independent Arbiter with respect thereto shall be final and conclusive and binding on the Parties. The Independent Arbiter shall resolve all disputes in a manner consistent with this Agreement and, to the extent not inconsistent with this Agreement, in a manner consistent with Past Practices, except as otherwise required by applicable Law. The Parties shall require the Independent Arbiter to render all determinations in writing and to set forth, in reasonable detail, the basis for such determination. The fees and expenses of the Independent Arbiter shall be borne by the Parties based on the inverse of the percentage that the Independent Arbiter’s resolution of the disputed items (before such allocation) bears to the total amount of the disputed items as originally submitted to the Independent Arbiter (for example, if the total amount of the disputed items as originally submitted to the Independent Arbiter equals $1,000 and the Independent Arbiter awards $600 in favor of the first Party’s position, sixty percent (60%) of the fees and expenses of the Independent Arbiter would be borne by the other Party and forty percent (40%) of the fees and expenses of the Independent Arbiter would be borne by the first Party); provided, that if the matters referred to the Independent Arbiter cannot reasonably be reduced to monetary amounts (e.g., if such matters relate to the Parties’ rights and obligations under this Agreement) the Independent Arbiter shall make a good faith allocation of such fees and expenses based on the foregoing principle.

 

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ARTICLE XII

TERM AND COSTS

Section 12.1 Effective Date; Prior Agreements.

(a) Except as expressly set forth in this Agreement, this Agreement shall become effective as of the Distribution Time.

(b) As of the Distribution Time, (i) all prior intercompany Tax allocation agreements or arrangements between one or more members of the HoldCo Group, on the one hand, and one or more members of the SpinCo Group, on the other hand, shall be terminated; and (ii) amounts due under such agreements as of the Distribution Time shall be settled as of the Distribution Time. Upon such termination and settlement, no further payments by or to HoldCo or by or to SpinCo, with respect to such agreements shall be made, and all other rights and obligations resulting from such agreements between the Parties and their Affiliates shall cease at such time.

Section 12.2 Survival. The representations and warranties set forth in this Agreement shall each survive the Distribution. The covenants and agreements set forth in this Agreement shall each survive until the full performance of all covenants and agreements set forth herein, in accordance with their terms. Notwithstanding anything in this Agreement to the contrary, this Agreement shall remain in effect and its provisions shall survive for one year after the full period of all applicable statutes of limitation (giving effect to any extension, waiver or mitigation thereof) and, with respect to any claim hereunder initiated prior to the end of such period, until such claim has been satisfied or otherwise resolved.

Section 12.3 Expenses. Except as otherwise provided in this Agreement or the TSA, each Party and its Affiliates shall bear their own expenses incurred in connection with preparation of Tax Returns, Tax Proceedings, and other matters related to Taxes under the provisions of this Agreement.

Section 12.4 Payments. Except as otherwise specified herein, any payment required to be made pursuant to this Agreement shall be made within sixty (60) days of notice thereof (including the reasonable basis of the demand therefor). All payments required to be made between the Parties under this Agreement shall be made in immediately available funds.

Section 12.5 Interest. Any payment required to be made under this Agreement shall bear interest at the rate equal to the “prime” rate as published in the Wall Street Journal, Eastern Edition, for the period from and including the Due Date (in the case of any amount relating to payment of Taxes or filing of a Tax Return), or otherwise the date immediately following the date the obligation originated (after accounting for any grace period), through and including the date of payment.

 

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ARTICLE XIII

GENERAL PROVISIONS

Section 13.1 Counterparts; Entire Agreement; Conflicts; Corporate Power.

(a) This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement. Each Party acknowledges that it and the other Party may execute this Agreement by manual, stamp or mechanical signature, and that delivery of an executed counterpart of a signature page to this Agreement (whether executed by manual, stamp or mechanical signature) by facsimile or by email in portable document format (PDF) shall be effective as delivery of such executed counterpart of this Agreement. Each Party expressly adopts and confirms a stamp or mechanical signature (regardless of whether delivered in person, by mail, by courier, by facsimile or by email in portable document format (PDF)) made in its respective name as if it were a manual signature delivered in person, agrees that it shall not assert that any such signature or delivery is not adequate to bind it to the same extent as if it were signed manually and delivered in person and agrees that, at the reasonable request of the other Party at any time, it shall as promptly as reasonably practicable cause this Agreement to be manually executed (any such execution to be as of the date of the initial date hereof) and delivered in person, by mail or by courier.

(b) The Separation Agreement, this Agreement and the other Ancillary Agreements, and any exhibits, schedules or annexes hereto and thereto, contain the entire agreement between the Parties with respect to the subject matter hereof, supersede all previous agreements, negotiations, discussions, writings, understandings, commitments and conversations with respect to such subject matter and there are no agreements or understandings between the Parties other than those set forth or referred to herein or therein.

(c) HoldCo represents on behalf of itself and each other member of the HoldCo Group, and SpinCo represents on behalf of itself and each other member of the SpinCo Group, as follows:

(i) each such Person has the requisite corporate or other power and authority and has taken all corporate or other action necessary in order to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby; and

(ii) this Agreement has been duly executed and delivered by it and constitutes, or will constitute, a valid and binding agreement of it enforceable in accordance with the terms thereof.

Section 13.2 Governing Law. This Agreement (and any claims or disputes arising out of or related hereto or to the transactions contemplated hereby or to the inducement of any party to enter herein, whether for breach of contract, tortious conduct or otherwise and whether predicated on common law, statute or otherwise) shall be governed by and construed and interpreted in accordance with the Laws of the State of Georgia irrespective of the choice of Laws principles of the State of Georgia, including all matters of validity, construction, effect, enforceability, performance and remedies.

 

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Section 13.3 Assignability. This Agreement shall inure to the benefit of and be binding upon the Parties and their respective successors and permitted assigns. None of this Agreement or any of the rights, interests or obligations hereunder may be assigned or delegated, in whole or in part, by operation of Law or otherwise, by any Party without the prior written consent of the other Party to this Agreement being so assigned or delegated, and any such assignment without such prior written consent shall be null and void. No such consent shall be required for the assignment of a Party’s rights and obligations under this Agreement if: (a) any party to this Agreement (or any of its successors or permitted assigns) (i) shall consolidate with or merge into any other Person and shall not be the continuing or surviving business entity of such consolidation or merger or (ii) shall transfer all or substantially all of its properties and/or assets to any Person; and (b) in any such case, the resulting, surviving or assignee Person expressly assumes all of the obligations of the relevant party (or its successors or permitted assigns, as applicable) under this Agreement. No assignment permitted by this Section 13.3 shall release the assigning party from liability for the full performance of its obligations under this Agreement.

Section 13.4 Third-Party Beneficiaries. The provisions of this Agreement are solely for the benefit of the Parties hereto and their respective group members and their permitted successors and assigns, and are not intended to confer upon any Person except the Parties and their respective Group members and their permitted successors and assigns, any rights or remedies hereunder and there are no third-party beneficiaries of this Agreement and this Agreement shall not provide any other third party with any remedy, claim, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement.

Section 13.5 Notices. All notices shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by overnight courier service, by electronic mail transmission (return receipt requested) or by registered or certified mail (postage prepaid, return receipt requested) to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 13.5):

If to HoldCo, then to:

PROG Holdings, Inc.

256 W. Data Drive

Draper, Utah 84020

Attn: Marvin Fentress

Email: marvin.fentress@progleasing.com

If to SpinCo, then to:

The Aaron’s Company, Inc.

400 Galleria Parkway SE, Suite 300

Atlanta, Georgia 30339

Attn: Rachel George

Email: rachel.george@aarons.com

 

29


Either Party may, by notice to the other Party, change the address to which such notices are to be given.

Section 13.6 Severability. In the event that any one or more of the terms or provisions of this Agreement the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement, or the application of such term or provision to Persons or circumstances or in jurisdictions other than those as to which it has been determined to be invalid, illegal or unenforceable, and the Parties shall use their commercially reasonable efforts to substitute one or more valid, legal and enforceable terms or provisions into this Agreement which, insofar as practicable, implement the purposes and intent of the Parties. Any term or provision of this Agreement held invalid or unenforceable only in part, degree or within certain jurisdictions shall remain in full force and effect to the extent not held invalid or unenforceable to the extent consistent with the intent of the parties as reflected by this Agreement. To the extent permitted by applicable Law, each party waives any term or provision of Law which renders any term or provision of this Agreement to be invalid, illegal or unenforceable in any respect.

Section 13.7 Headings. The article, section and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

Section 13.8 Waivers of Default. No failure or delay of any Party (or its applicable Group members) in exercising any right or remedy under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such right or power, or any course of conduct, preclude any other or further exercise thereof or the exercise of any other right or power. Waiver by any Party of any default by the other Party of any provision of this Agreement shall not be deemed a waiver by the waiving Party of any subsequent or other default, nor shall it prejudice the rights of the waiving Party.

Section 13.9 Consent to Jurisdiction. Subject to the provisions of ARTICLE IX of the Separation Agreement and Article XI of this Agreement, each of the Parties irrevocably submits to the exclusive jurisdiction of (a) the Georgia State-Wide Business Court, and (b) the United States District Court for the Northern District of Georgia (the “Georgia Courts”), for the purposes of any suit, action or other proceeding to compel arbitration or for provisional relief in aid of arbitration in accordance with ARTICLE IX of the Separation Agreement or Article XI of this Agreement, as applicable, or for provisional relief to prevent irreparable harm, and to the non-exclusive jurisdiction of the Georgia Courts for the enforcement of any award issued thereunder or hereunder. Each of the Parties further agrees that service of any process, summons, notice or document by United States registered mail to such Party’s respective address set forth in Section 13.5 shall be effective service of process for any action, suit or proceeding in the Georgia Courts with respect to any matters to which it has submitted to jurisdiction in this Section 13.9. Each of the Parties irrevocably and unconditionally waives any objection to any Georgia Court’s exercise of personal jurisdiction over the Parties and the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in the Georgia Courts, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.

 

30


Section 13.10 Specific Performance. The Parties agree that irreparable damage would occur in the event that the provisions of this Agreement were not performed in accordance with their specific terms. Accordingly, it is hereby agreed that the Parties shall be entitled to (a) an injunction or injunctions issued in any arbitration in accordance with ARTICLE IX of the Separation Agreement to enforce specifically the terms and provisions hereof, (b) provisional or temporary injunctive relief in accordance with Section 9.03(j) of the Separation Agreement in any Georgia Court, and (c) enforcement of any such award of an arbitral tribunal or a Georgia Court in any court of the United States, or any other any court or tribunal sitting in any state of the United States or in any foreign country that has jurisdiction, this being in addition to any other remedy or relief to which they may be entitled.

Section 13.11 Amendments. No provisions of this Agreement shall be deemed waived, amended, supplemented or modified unless such waiver, amendment, supplement or modification is in writing and signed by an authorized representative of both Parties and their relevant Group members, as the case may be.

Section 13.12 Interpretation. In this Agreement, (a) words in the singular shall be deemed to include the plural and vice versa and words of one gender shall be deemed to include the other gender as the context requires; (b) the terms “hereof,” “herein” and “herewith” and words of similar import, unless otherwise stated, shall be construed to refer to this Agreement as a whole (including all of the Schedules hereto) and not to any particular provision of this Agreement; (c) Article, Section or Schedule references are to the Articles, Sections and Schedules of or to this Agreement, unless otherwise specified; (d) unless otherwise stated, all references to any agreement (including this Agreement) shall be deemed to include the schedules, exhibits and annexes to such agreement; (e) any capitalized terms used in any Schedule to this Agreement but not otherwise defined therein shall have the meaning as defined in this Agreement; (f) any reference herein to this Agreement, unless otherwise stated, shall be construed to refer to this Agreement as amended, supplemented or otherwise modified from time to time, in accordance with the terms thereof; (g) the word “including” and words of similar import when used in this Agreement means “including, without limitation,” unless otherwise specified; (h) unless otherwise specified, the word “or” shall not be exclusive; (i) unless otherwise specified in a particular case, the word “days” refers to calendar days; and (j) unless expressly stated to the contrary in this Agreement, all references to “the date hereof”, “the date of this Agreement”, “hereby” and “hereupon” and words of similar import shall all be references to November 29, 2020.

Section 13.13 Group Members. HoldCo shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by a member of the HoldCo Group and SpinCo shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by a member of the SpinCo Group.

 

31


Section 13.14 Force Majeure. Neither Party shall be deemed in default of this Agreement for failure to fulfill any obligation so long as and to the extent to which any delay or failure in the fulfillment of such obligations is prevented, frustrated, hindered or delayed as a consequence of circumstances of Force Majeure. In the event of any such excused delay, the time for performance shall be extended for a period equal to the time lost by reason of the delay. A Party claiming the benefit of this provision shall, as soon as reasonably practicable after the occurrence of any such event: (a) provide notice to the other Party of the nature and extent of any such Force Majeure condition; and (b) use commercially reasonable efforts to remove any such causes and resume performance under this Agreement as soon as reasonably practicable; provided, that, prior to any Party invoking the benefit of this provision as a result of a Force Majeure with respect to the COVID-19 pandemic, such Party shall use commercially reasonable efforts to mitigate the impact of the COVID-19 pandemic with respect to its failure or potential failure to fulfill any obligation under this Agreement.

Section 13.15 Mutual Drafting. This Agreement shall be deemed to be the joint work product of the Parties and any rule of construction that a document shall be interpreted or construed against a drafter of such document shall not be applicable.

Section 13.16 No Reliance on Other Party. The Parties hereto represent to each other that this Agreement is entered into with full consideration of any and all rights which the Parties hereto may have. The Parties hereto have relied upon their own knowledge and judgment and have conducted such investigations they and their in-house counsel have deemed appropriate regarding this Agreement and their rights in connection with this Agreement. The Parties hereto are not relying upon any representations or statements made by any other Party, or any such other Party’s employees, agents, representatives or attorneys, regarding this Agreement, except to the extent such representations are expressly set forth or incorporated in this Agreement. The Parties hereto are not relying upon a legal duty, if one exists, on the part of any other Party (or any such other Party’s employees, agents, representatives or attorneys) to disclose any information in connection with the execution of this Agreement or its preparation, it being expressly understood that no Party hereto shall ever assert any failure to disclose information on the part of any other Party as a ground for challenging this Agreement or any provision hereof.

Section 13.17 Limited Liability. Notwithstanding any other provision of this Agreement, no individual who is a shareholder, director, employee, officer, agent or representative of HoldCo or SpinCo, or any of their respective Group members, in such individual’s capacity as such, shall have any liability in respect of or relating to the covenants or obligations of HoldCo or SpinCo, as applicable, under this Agreement or in respect of any certificate delivered with respect hereto and, to the fullest extent legally permissible, each HoldCo and SpinCo, for itself and its respective Group members and its and their respective shareholders, directors, employees and officers, waives and agrees not to seek to assert or enforce any such liability that any such Person otherwise might have pursuant to applicable Law.

Section 13.18 No Set-Off. Except as otherwise mutually agreed to in writing by the Parties, none of the Parties nor any member of their respective Groups shall have any right of set-off or other similar rights with respect to (a) any amounts received pursuant to this Agreement; or (b) any other amounts claimed to be owed to the other Parties or any member of their respective Groups arising out of this Agreement.

 

32


Section 13.19 Waiver of Trial. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND ANY OF THE TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (II) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (III) IT MAKES SUCH WAIVERS VOLUNTARILY AND (IV) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 13.19.

Section 13.20 HoldCo or SpinCo Affiliates. If, at any time, HoldCo or SpinCo acquires or forms one or more Affiliates that are includable in the HoldCo Group or SpinCo Group, as the case may be, such entities shall be subject to this Agreement and all references to the HoldCo Group or SpinCo Group, as the case may be, herein shall thereafter include a reference to such Affiliates.

 

33


IN WITNESS WHEREOF, each Party has caused this Agreement to be executed on its behalf by a duly authorized officer on the date first set forth above.

 

AARON’S HOLDINGS COMPANY, INC.

By:

 

/s/ Steven A. Michaels

Name: Steven A. Michaels

Title: Chief Executive Officer, Progressive Leasing

THE AARON’S COMPANY, INC.

By:

 

/s/ Douglas A. Lindsay

Name: Douglas A. Lindsay

Title: Chief Executive Officer

[Signature Page to Tax Matters Agreement]

Exhibit 10.3

Execution Version

EMPLOYEE MATTERS AGREEMENT

between

AARON’S HOLDINGS COMPANY, INC.

(TO BE KNOWN AS PROG HOLDINGS, INC.)

and

THE AARON’S COMPANY, INC.

dated as of

November 29, 2020


TABLE OF CONTENTS

 

     Page  

ARTICLE I DEFINITIONS

     1  

Section 1.1 Definitions

     1  

Section 1.2 Interpretation

     6  

ARTICLE II ASSIGNMENT OF EMPLOYEES

     6  

Section 2.1 Active Employees

     6  

Section 2.2 Former Employees

     7  

Section 2.3 Employment Law Obligations

     7  

Section 2.4 Employee Records

     8  

ARTICLE III EQUITY AND INCENTIVE COMPENSATION PLANS

     10  

Section 3.1 General Principles

     10  

Section 3.2 Tax Reporting and Withholding; Payment of Option Exercise Price

     11  

Section 3.3 Restricted Stock Units, Restricted Stock and Performance Stock Units

     13  

Section 3.4 Stock Options

     16  

Section 3.5 Employee Stock Purchase Plan

     18  

Section 3.6 Section 16(b) of the Exchange Act; Code Section 409A

     18  

Section 3.7 Certain Bonus Payments

     18  

Section 3.8 Employment Treatment

     19  

ARTICLE IV GENERAL PRINCIPLES FOR ALLOCATION OF LIABILITIES

     19  

Section 4.1 General Principles

     19  

Section 4.2 Sponsorship and/or Establishment of SpinCo Plans

     21  

Section 4.3 Service Credit

     22  

Section 4.4 Plan Administration

     22  

ARTICLE V RETIREMENT PLAN

     23  

Section 5.1 General Principles

     23  

Section 5.2 Retirement Plan Transfer

     23  

Section 5.3 RemainCo Common Stock Fund

     24  

Section 5.4 Transfer of Accounts

     24  

ARTICLE VI DEFERRED COMPENSATION PLAN

     24  

Section 6.1 Establishment of the Deferred Compensation Plan

     24  

Section 6.2 Assumption of Liabilities from RemainCo

     25  

Section 6.3 Transfer of Rabbi Trust Assets

     25  

Section 6.4 Cooperation for Annual Enrollment

     25  

ARTICLE VII WELFARE PLANS

     26  

Section 7.1 Establishment of RemainCo Welfare Plans

     26  

Section 7.2 Transitional Matters Under SpinCo Welfare Plans

     26  

Section 7.3 Continuity of Benefits, Benefit Elections and Beneficiary Designations

     27  

Section 7.4 Insurance Contracts

     28  

 

i


Section 7.5 Third-Party Vendors

     28  

Section 7.6 Claims Experience

     29  

Section 7.7 Allocation of Demutualization Proceeds

     29  

Section 7.8 Transition Services Agreement

     29  

ARTICLE VIII BENEFIT ARRANGEMENTS

     29  

ARTICLE IX WORKERS’ COMPENSATION AND UNEMPLOYMENT COMPENSATION

     29  

Section 9.1 General Principles

     29  

Section 9.2 Crossover Claims

     29  

Section 9.3 Additional Details

     30  

ARTICLE X EMPLOYMENT, SEVERANCE AND OTHER MATTERS

     30  

Section 10.1 Employment, Severance, Change-in-Control and Retention Agreements

     30  

Section 10.2 Severance Plan

     31  

Section 10.3 Accrued Time Off

     31  

Section 10.4 Leaves of Absence

     31  

Section 10.5 Director Programs

     32  

Section 10.6 Restrictive Covenants in Employment and Other Agreements

     32  

Section 10.7 Non-Solicitation

     33  

ARTICLE XI GENERAL PROVISIONS

     33  

Section 11.1 Preservation of Rights to Amend

     33  

Section 11.2 Confidentiality

     33  

Section 11.3 Administrative Complaints/Litigation

     34  

Section 11.4 Reimbursement and Indemnification

     34  

Section 11.5 Costs of Compliance with Agreement

     35  

Section 11.6 Fiduciary Matters

     35  

Section 11.7 Form S-8

     35  

Section 11.8 Entire Agreement

     35  

Section 11.9 Binding Effect; No Third-Party Beneficiaries; Assignment

     35  

Section 11.10 Amendment

     36  

Section 11.11 Failure or Indulgence Not Waiver; Remedies Cumulative

     36  

Section 11.12 Notices

     36  

Section 11.13 Counterparts

     36  

Section 11.14 Severability

     37  

Section 11.15 Governing Law

     37  

Section 11.16 Dispute Resolution

     37  

Section 11.17 Performance

     37  

Section 11.18 Construction

     37  

Section 11.19 Effect if Distribution Does Not Occur

     38  

 

ii


EMPLOYEE MATTERS AGREEMENT

This EMPLOYEE MATTERS AGREEMENT is entered into as of November 29, 2020 between Aaron’s Holdings Company, Inc., a Georgia corporation (“RemainCo”), and The Aaron’s Company, Inc., a Georgia corporation (“SpinCo”). RemainCo and SpinCo are sometimes referred to herein, individually, as a “Party,” and, collectively, as the “Parties.” Capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed to such terms in Article I hereof.

RECITALS

WHEREAS, SpinCo is a wholly owned subsidiary of RemainCo;

WHEREAS, the Board of Directors of RemainCo has determined that it is appropriate, desirable and in the best interests of RemainCo and its shareholders to effectuate the Distribution as described in the Separation and Distribution Agreement between RemainCo and SpinCo dated as of November 29, 2020 (the “Separation Agreement”);

WHEREAS, the Separation Agreement provides, among other things, subject to the terms and conditions thereof, for the Distribution and for the execution and delivery of certain other agreements, including this Agreement, in order to facilitate and provide for the separation of SpinCo from RemainCo; and

WHEREAS, in order to ensure an orderly transition under the Separation Agreement, it will be necessary for the Parties to allocate between them assets, liabilities and responsibilities with respect to certain employee compensation, benefit plans and programs, and certain employment matters.

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained, the Parties, intending to be legally bound, agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1 Definitions. As used in this Agreement, the following terms shall have the meanings set forth in this Section 1.1:

Additional RemainCo Stock Award” has the meaning set forth in Section 3.3(b)(i).

Additional SpinCo Stock Award” has the meaning set forth in Section 3.3(a)(ii).

Affiliate” has the meaning set forth in the Separation Agreement.

Agreement” means this Employee Matters Agreement together with all Schedules hereto and all amendments, modifications and changes hereto and thereto entered into in accordance with Section 11.10.


Ancillary Agreements” has the meaning set forth in the Separation Agreement.

Benefit Arrangement” means any contract, agreement, policy, practice, program, plan, trust or arrangement (other than any Welfare Plan, RemainCo Retirement Plan, RemainCo Deferred Compensation Plan, SpinCo Retirement Plan, SpinCo Deferred Compensation Plan or any bonus, stock-based compensation or other form of incentive compensation), providing for benefits, perquisites or compensation of any nature to any Employee, or to any family member, dependent or beneficiary of any such Employee, including, travel and accident, tuition reimbursement, vacation, sick, personal or bereavement days, and holidays.

COBRA” means the U.S. Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, as codified at Part 6 of Subtitle B of Title I of ERISA and at Code Section 4980B and any similar applicable state law.

Code” means the U.S. Internal Revenue Code of 1986, as amended.

Confidential Information” has the meaning set forth in the Separation Agreement.

Crossover Claim” has the meaning set forth in Section 9.2.

Distribution” has the meaning set forth in the Separation Agreement.

Distribution Date” has the meaning set forth in the Separation Agreement.

Employee” means any RemainCo Employee, Former RemainCo Employee, SpinCo Employee or Former SpinCo Employee.

Employee Transfer Date” means 11:59 p.m. Eastern Time on the Distribution Date.

ERISA” means the U.S. Employee Retirement Income Security Act of 1974, as amended.

Former RemainCo Employee” has the meaning set forth in Section 2.2(b).

Former SpinCo Employee” has the meaning set forth in Section 2.2(c).

NYSE” means the New York Stock Exchange.

Parent Group Member has the meaning set forth in the Separation Agreement.

Participating RemainCo Employers” has the meaning set forth in Section 7.1.

Party” or “Parties” has the meaning set forth in the preamble to this Agreement.

Person” has the meaning set forth in the Separation Agreement.

Post-Distribution RemainCo Share Price” means the simple average of the volume weighted average per share price of RemainCo Common Stock trading on the NYSE on each of the first three trading days following the Distribution Date.

 

2


Post-Distribution SpinCo Share Price” means the simple average of the volume weighted average per share price of SpinCo Common Stock trading on the NYSE on each of the first three trading days following the Distribution Date.

Pre-Distribution RemainCo Share Price” means the volume weighted average per share price of RemainCo Common Stock trading “regular way” on the NYSE on the Distribution Date.

Privacy Contract” means any contract entered into in connection with applicable privacy protection laws or regulations.

Registration Statement Effectiveness Date” means the first date on which the registration statement on Form S- 8 (or other appropriate form) contemplated by Section 11.7 shall be effective under the Securities Act of 1933.

RemainCo” has the meaning set forth in the preamble to this Agreement.

RemainCo Benefit Arrangement” means any Benefit Arrangement sponsored or maintained by a member of the RemainCo Group on the Employee Transfer Date.

RemainCo Business” means the “Progressive Leasing and Vive Business” as defined in the Separation Agreement.

RemainCo Common Stock” means the common stock of RemainCo, par value $0.50 per share.

RemainCo Deferred Compensation Plan” means the Aaron’s, Inc. Deferred Compensation Plan, 2020 Restatement, as it may be amended from time to time.

RemainCo Employee” means any individual who is employed by a member of the RemainCo Group on the Employee Transfer Date.

RemainCo Equity Compensation Award” means each RemainCo RSA, RemainCo RSU, RemainCo PSU, RemainCo Option, Additional RemainCo Stock Award and Replacement RemainCo Option.

RemainCo ESPP” means the Aaron’s, Inc. Employee Stock Purchase Plan, 2020 Restatement, as it may be amended from time to time.

RemainCo Equity Plan” means any equity plan sponsored or maintained by a member of the RemainCo Group immediately prior to the Distribution Date, including the Aaron Rents, Inc. 2001 Stock Option and Incentive Award Plan and the Aaron’s, Inc. Amended and Restated 2015 Equity and Incentive Award Plan, 2020 Restatement, as it may be amended from time to time.

RemainCo Group” means RemainCo and its Subsidiaries, other than any SpinCo Group Members.

RemainCo Options” means options to purchase shares of RemainCo Common Stock granted pursuant to any of the RemainCo Equity Plans before the Distribution Date.

 

3


RemainCo Option Exercise Price Ratio” means, with respect to a RemainCo Option, the quotient obtained by dividing (i) the per share exercise price of such RemainCo Option immediately prior to the Distribution Date, by (ii) the Pre-Distribution RemainCo Share Price.

RemainCo PSUs” means all outstanding performance share units issued under any of the RemainCo Equity Plans before the Distribution Date.

RemainCo PSU (Employee Method)” means unvested performance share units issued under any of the RemainCo Equity Plans in 2018 or 2019, which a RemainCo Employee, RemainCo Retiree or SpinCo Employee has elected (whether affirmatively or by default) to be adjusted in connection with the Distribution in accordance with Section 3.3(a)(ii)(A) or Section 3.3(b)(ii)(A), as applicable.

RemainCo PSU (Shareholder Method)” means unvested performance share units issued under any of the RemainCo Equity Plans in 2018 or 2019, which a RemainCo Employee, RemainCo Retiree or SpinCo Employee has elected (whether affirmatively or by default) to be adjusted in connection with the Distribution in accordance with Section 3.3(a)(ii)(B) or 3.3(b)(ii)(B), as applicable.

RemainCo Retirees” means the holders of one or more RemainCo RSUs, RemainCo PSUs, RemainCo RSAs or RemainCo Options under any of the RemainCo Equity Plans who will not be a RemainCo Employee or a SpinCo Employee and will not, as of the Distribution Date, be a member of the Board of Directors of either RemainCo or SpinCo, including those listed on Schedule 1.1(b).

RemainCo Retirement Plan” means Aaron’s, Inc. Employees Retirement Plan as it may be amended from time to time.

RemainCo RSAs” means all outstanding restricted stock awards granted under any of the RemainCo Equity Plans before the Distribution Date.

RemainCo RSA (Employee Method)” means unvested restricted stock awards issued under any of the RemainCo Equity Plans in 2018 and 2019 which a RemainCo Employee, RemainCo Retiree or SpinCo Employee has elected (whether affirmatively or by default) to be adjusted in connection with the Distribution in accordance with Section 3.3(a)(ii)(A) or Section 3.3(b)(ii)(A), as applicable.

RemainCo RSA (Shareholder Method)” means unvested restricted stock awards issued under any of the RemainCo Equity Plans in 2018 or 2019 which a RemainCo Employee, RemainCo Retiree or SpinCo Employee has elected (whether affirmatively or by default) to be adjusted in connection with the Distribution in accordance with Section 3.3(a)(ii)(B) or 3.3(b)(ii)(B), as applicable.

RemainCo RSUs” means restricted stock units issued under any of the RemainCo Equity Plans before the Distribution Date that are not subject to performance conditions.

RemainCo Stock Awards” means RemainCo RSUs, RemainCo PSUs and RemainCo RSAs granted under any of the RemainCo Equity Plans.

 

4


RemainCo Welfare Plan” means any Welfare Plan sponsored or maintained by any one or more members of the RemainCo Group on the Employee Transfer Date.

RemainCo Welfare Plan Participants” has the meaning set forth in Section 7.1.

Replacement RemainCo Option” has the meaning set forth in Section 3.4(b).

Replacement SpinCo Option” has the meaning set forth in Section 3.4(a).

Replacement SpinCo Stock Award” has the meaning set forth in Section 3.3(a)(i).

Separation Agreement” has the meaning set forth in the recitals to this Agreement.

SpinCo” has the meaning set forth in the preamble to this Agreement.

SpinCo Benefit Arrangement” means any Benefit Arrangement sponsored or maintained by a member of the SpinCo Group on the Employee Transfer Date.

SpinCo Business” means the “Aaron’s Business” as defined in the Separation Agreement.

SpinCo Common Stock” means the common stock of SpinCo, par value $0.50 per share.

SpinCo Deferred Compensation Plan” means the deferred compensation plan adopted by SpinCo and approved by RemainCo, as sole shareholder of SpinCo prior to the Distribution.

SpinCo Employee” means any individual who is employed by a member of the SpinCo Group on the Employee Transfer Date.

SpinCo Equity Compensation Award” means each Replacement SpinCo Stock Award, Additional SpinCo Stock Awards and Replacement SpinCo Option.

SpinCo Equity Plan” means the equity and incentive plan adopted by SpinCo and approved by RemainCo, as sole shareholder of SpinCo prior to the Distribution under which the SpinCo stock-based awards described in Article III shall be issued.

SpinCo ESPP” means the employee stock purchase plan adopted by SpinCo and approved by RemainCo, as sole shareholder of SpinCo prior to the Distribution.

SpinCo Group” has the meaning set forth in the Separation Agreement.

SpinCo Group Member” has the meaning set forth in the Separation Agreement.

SpinCo Retirement Plan” means a defined contribution retirement plan intended to be qualified under Code Section 401(a) that is sponsored by any member of the SpinCo Group on the Employee Transfer Date.

SpinCo Welfare Plan” means any Welfare Plan sponsored or maintained by any one or more members of the SpinCo Group on the Employee Transfer Date.

 

5


Subsidiary” has the meaning set forth in the Separation Agreement.

TSA” has the meaning set forth in the Separation Agreement.

WARN” means the U.S. Worker Adjustment and Retraining Notification Act, and any applicable state or local law equivalent.

Welfare Plan” means a “welfare plan” as defined in ERISA Section 3(1) and also means a cafeteria plan under Code Section 125 and any benefits offered thereunder, including pre-tax premium conversion benefits, a dependent care assistance program, contribution funding toward a health savings account and flex or cashable credits.

Section 1.2 Interpretation. In this Agreement, (a) words in the singular shall be deemed to include the plural and vice versa and words of one gender shall be deemed to include the other gender as the context requires; (b) the terms “hereof,” “herein” and “herewith” and words of similar import, unless otherwise stated, shall be construed to refer to this Agreement as a whole (including all of the Schedules hereto) and not to any particular provision of this Agreement; (c) Article, Section or Schedule references are to the Articles, Sections and Schedules of or to this Agreement, unless otherwise specified; (d) unless otherwise stated, all references to any agreement (including this Agreement) shall be deemed to include the schedules, exhibits and annexes to such agreement; (e) any capitalized terms used in any Schedule to this Agreement but not otherwise defined therein shall have the meaning as defined in this Agreement; (f) any reference herein to this Agreement, unless otherwise stated, shall be construed to refer to this Agreement as amended, supplemented or otherwise modified from time to time, in accordance with the terms thereof; (g) the word “including” and words of similar import when used in this Agreement means “including, without limitation,” unless otherwise specified; (h) unless otherwise specified, the word “or” shall not be exclusive; (i) unless otherwise specified in a particular case, the word “days” refers to calendar days; and (j) unless expressly stated to the contrary in this Agreement, all references to “the date hereof”, “the date of this Agreement”, “hereby” and “hereupon” and words of similar import shall all be references to November 29, 2020.

ARTICLE II

ASSIGNMENT OF EMPLOYEES

Section 2.1 Active Employees.

(a) SpinCo Employees. Except as otherwise set forth in this Agreement, effective as of the Employee Transfer Date, the employment of the SpinCo Employees will commence with, or be continued by, a member of the SpinCo Group. Each of the Parties agrees to execute, and to seek to have the applicable employees execute, such documentation as may be necessary to reflect such assignments and transfers.

(b) RemainCo Employees. Except as otherwise set forth in this Agreement, effective as of the Employee Transfer Date, the employment of the RemainCo Employees will commence with, or be continued by, a member of the RemainCo Group. Each of the Parties agrees to execute, and to seek to have the applicable employees execute, such documentation as may be necessary to reflect such assignments and transfers.

 

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(c) At-Will Status. Notwithstanding the above or any other provision of this Agreement, nothing in this Agreement shall create any obligation on the part of any member of the RemainCo Group or any member of the SpinCo Group to continue the employment of any employee for any period following the date of this Agreement or the Distribution or to change the employment status of any employee from “at will” to the extent such employee is an “at will” employee under applicable law.

(d) Severance. The Distribution and the assignment, transfer or continuation of the employment of employees as contemplated by this Section 2.1 shall not be deemed a severance of employment or separation from service of any employee for purposes of this Agreement and, any plan, policy, practice or arrangement of any member of the RemainCo Group or any member of the SpinCo Group.

(e) Change of Control/Change in Control. Neither the completion of the Distribution nor any transaction in connection with the Distribution shall be deemed a “change of control” or “change in control” for purposes of any plan, policy, practice or arrangement relating to directors, employees or consultants of any member of the RemainCo Group or any member of the SpinCo Group.

Section 2.2 Former Employees.

(a) General Principles. Except as otherwise provided in this Agreement, each former employee of any member of the RemainCo Group or any member of the SpinCo Group as of the Employee Transfer Date will be considered a former employee of the RemainCo Group or the SpinCo Group based on his employer as of his last day of employment with any Parent Group Member or SpinCo Group Member.

(b) Former RemainCo Employees. For purposes of this Agreement, former employees of the RemainCo Group shall be deemed to include all employees who, as of their last day of employment, were employed by the RemainCo Group and will not be either a SpinCo Employee or a RemainCo Employee and the individuals listed on Schedule 2.2(b) (collectively, the “Former RemainCo Employees”).

(c) Former SpinCo Employees. For purposes of this Agreement, former employees of the SpinCo Group shall be deemed to include all employees who, as of their last day of employment, were employed by the SpinCo Group and will not be either a SpinCo Employee or a RemainCo Employee (collectively, the “Former SpinCo Employees”).

Section 2.3 Employment Law Obligations.

(a) WARN Act. Effective as of the Employee Transfer Date, (i) the RemainCo Group shall be responsible for providing any necessary WARN notice (and meeting any similar state law notice requirements) with respect to any termination of any RemainCo Employee and (ii) the SpinCo Group shall be responsible for providing any necessary WARN notice (and meeting any similar state law notice requirements) with respect to any termination of any SpinCo Employee.

 

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(b) Compliance With Employment Laws. Effective as of the Employee Transfer Date, (i) each member of the RemainCo Group shall be responsible for adopting and maintaining any policies or practices, and for all other actions and inactions, necessary to comply with employment-related laws and requirements relating to the employment of its RemainCo Employees and the treatment of any applicable Former RemainCo Employees in respect of their former employment, and (ii) each member of the SpinCo Group shall be responsible for adopting and maintaining any policies or practices, and for all other actions and inactions, necessary to comply with employment-related laws and requirements relating to the employment of its SpinCo Employees and the treatment of any applicable Former SpinCo Employees in respect of their former employment.

Section 2.4 Employee Records. The following provisions shall apply, except as may be otherwise provided in the TSA:

(a) Records Relating to RemainCo Employees and Former RemainCo Employees. All records and data in any form relating to RemainCo Employees and Former RemainCo Employees shall be the property of the RemainCo Group, except that records and data pertaining to such an employee and relating to any period that such employee was (i) employed by any member of the SpinCo Group or (ii) covered under any employee benefit plan sponsored by any member of the SpinCo Group (to the extent that such records or data relate to such coverage) prior to the Employee Transfer Date shall be jointly owned by those members of the SpinCo Group and the RemainCo Group.

(b) Records Relating to SpinCo Employees and Former SpinCo Employees. All records and data in any form relating to SpinCo Employees and Former SpinCo Employees shall be the property of the SpinCo Group, except that records and data pertaining to such an employee and relating to any period that such employee was (i) employed by any member of the RemainCo Group or (ii) covered under any employee benefit plan sponsored by any member of the RemainCo Group (to the extent that such records or data relate to such coverage) prior to the Employee Transfer Date shall be jointly owned by those members of the RemainCo Group and the SpinCo Group.

(c) Sharing of Records. The Parties shall use their respective commercially reasonable efforts to provide the other Party such employee-related records and information as necessary or appropriate to carry out their respective obligations under applicable law (including any relevant privacy protection laws or regulations in any applicable jurisdictions or Privacy Contract), this Agreement, any other Ancillary Agreement or the Separation Agreement, and for the purposes of administering their respective employee benefit plans and policies. All information and records regarding employment, personnel and employee benefit matters of RemainCo Employees and Former RemainCo Employees shall be accessed, retained, held, used, copied and transmitted on and after the Employee Transfer Date by members of the RemainCo Group in accordance with all applicable laws, policies and Privacy Contracts relating to the collection, storage, retention, use, transmittal, disclosure and destruction of such records. All information and records regarding employment, personnel and employee benefit matters of SpinCo Employees and Former SpinCo Employees shall be accessed, retained, held, used, copied and transmitted on and after the Employee Transfer Date by members of the SpinCo Group in accordance with all applicable laws, policies and Privacy Contracts relating to the collection, storage, retention, use, transmittal, disclosure and destruction of such records.

 

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(d) Access to Records. To the extent not inconsistent with this Agreement and any applicable privacy protection laws or regulations or Privacy Contracts, access to such records on and after the Employee Transfer Date will be provided to members of the RemainCo Group and members of the SpinCo Group in accordance with the Separation Agreement. In addition, notwithstanding anything to the contrary, the RemainCo Group shall be provided reasonable access to those records necessary for their administration of any plans or programs on behalf of RemainCo Employees and Former RemainCo Employees on and after the Employee Transfer Date as permitted by any applicable privacy protection laws or regulations or Privacy Contracts. The RemainCo Group shall also be permitted to retain copies of all restrictive covenant agreements with any SpinCo Employee or Former SpinCo Employee in which any member of the RemainCo Group has a valid business interest. In addition, the SpinCo Group shall be provided reasonable access to those records necessary for their administration of any plans or programs on behalf of SpinCo Employees and Former SpinCo Employees on and after the Employee Transfer Date as permitted by any applicable privacy protection laws or regulations or Privacy Contracts. The SpinCo Group shall also be permitted to retain copies of all restrictive covenant agreements with any RemainCo Employee or Former RemainCo Employee in which any member of the SpinCo Group has a valid business interest.

(e) Maintenance of Records. With respect to retaining, destroying, transferring, sharing, copying and permitting access to all such information, RemainCo and SpinCo shall (and shall cause their respective Subsidiaries to) comply with all applicable laws, regulations, Privacy Contracts and internal policies, and shall indemnify and hold harmless each other from and against any and all liability, claims, actions, and damages that arise from a failure (by the indemnifying party or its Subsidiaries or their respective agents) to so comply with all applicable laws, regulations, Privacy Contracts and internal policies applicable to such information.

(f) No Access to Computer Systems or Files. Except as set forth in the Separation Agreement or any Ancillary Agreement, no provision of this Agreement shall give (i) any member of the RemainCo Group direct access to the computer systems or other files, records or databases of any member of the SpinCo Group or (ii) any member of the SpinCo Group direct access to the computer systems or other files, records or databases of any member of the RemainCo Group, unless specifically permitted by the owner of such systems, files, records or databases.

(g) Relation to Separation Agreement. The provisions of this Section 2.4 shall be in addition to, and not in derogation of, the provisions of the Separation Agreement governing Confidential Information, including Section 6.09 of the Separation Agreement.

(h) Confidentiality. Except as otherwise set forth in this Agreement, all records and data relating to Employees shall, in each case, be subject to the confidentiality provisions of the Separation Agreement and any other applicable agreement and applicable law.

(i) Cooperation. Each Party shall use commercially reasonable efforts to cooperate to share, retain and maintain data and records that are necessary or appropriate to further the purposes of this Section 2.4 and for each Party to administer its respective benefit plans to the extent consistent with this Agreement and applicable law, and each Party agrees to cooperate as long as is reasonably necessary to further the purposes of this Section 2.4. Except as provided under any Ancillary Agreement, no Party shall charge another Party a fee for such cooperation.

 

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ARTICLE III

EQUITY AND INCENTIVE COMPENSATION PLANS

Section 3.1 General Principles.

(a) For the avoidance of doubt, the provisions of this Article III shall not apply unless the Distribution takes place. RemainCo and SpinCo shall take any and all reasonable action as shall be necessary and appropriate to further the provisions of this Article III.

(b) Where an award granted under one of the RemainCo Equity Plans is replaced by an award under the SpinCo Equity Plan in accordance with the provisions of this Article III, such award generally shall be on terms which are in all material respects identical to the terms of the award which it replaces (including any requirements of continued employment) but subject to any necessary changes to take into account (i) that the award relates to SpinCo Common Stock, (ii) that the SpinCo Equity Plan is administered by SpinCo, (iii) if applicable, that the grantee under the award is employed or affiliated with a new employer or plan sponsor, and (iv) the adjustments required by this Article III. Where an award granted under one of the RemainCo Equity Plans is adjusted in accordance with the provisions of this Article III, such award shall otherwise continue to retain the same terms and conditions of the original award, subject to any necessary changes to take into account that the grantee under the award is employed or affiliated with a new employer or plan sponsor, if applicable, and the adjustments required by this Article III.

(c) Subject to Section 3.8, following the Distribution, a grantee who has outstanding awards under one or more of the RemainCo Equity Plans and/or replacement or additional awards under the SpinCo Equity Plan shall be considered to have been employed by the applicable plan sponsor before and after the Distribution for purposes of (i) vesting and (ii) determining the date of termination of employment as it applies to any such award.

(d) No award described in this Article III, whether outstanding or to be issued, adjusted, substituted or cancelled by reason of or in connection with the Distribution, shall be adjusted, settled, cancelled, or exercisable, until in the judgment of the administrator of the applicable plan or program such action is consistent with all applicable law, including federal securities laws. Any period of exercisability will not be extended on account of a period during which such an award is not exercisable in accordance with the preceding sentence.

(e) Except as otherwise expressly provided in this Article III, from and after the Distribution Date, (i) SpinCo shall have sole responsibility for the administration of the SpinCo Equity Plan and the settlement of the SpinCo Equity Compensation Awards, and no member of the RemainCo Group shall have any liability or responsibility therefor, and (ii) RemainCo shall have sole responsibility for the administration of the RemainCo Equity Plans and the settlement of the RemainCo Equity Compensation Awards, and no member of the SpinCo Group shall have any liability or responsibility therefor. Notwithstanding the foregoing, SpinCo and its designees shall have exclusive authority and discretion with respect to all employment-related determinations or decisions required or permitted to be made by the applicable sponsor, administrator or employer entity under the terms of the RemainCo Equity Plans with respect to RemainCo Equity Compensation Awards held by SpinCo Employees, and RemainCo and its designees shall have

 

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exclusive authority and discretion with respect to all employment-related determinations or decisions required or permitted to be made by the applicable sponsor, administrator or employer entity under the terms of the SpinCo Equity Plan with respect to SpinCo Equity Compensation Awards held by RemainCo Employees. RemainCo and SpinCo agree to administer the RemainCo Equity Compensation Awards and SpinCo Equity Compensation Awards, respectively, in accordance with any determination or decision made by the other Party in accordance with the preceding sentence upon reasonable notice of such determination or decision.

(f) Notwithstanding Section 3.1(e), in the case of any outstanding RemainCo Equity Compensation Awards or SpinCo Equity Compensation Awards with respect to which (i) the award is vested as of the Distribution Date (or to the extent partially vested as of the Distribution Date) and (ii) a valid deferral election is in effect as of the Distribution Date, (x) RemainCo (or one or more members of the RemainCo Group, as designated by RemainCo) shall have sole responsibility for the settlement of those SpinCo Equity Compensation Awards held by RemainCo Employees, RemainCo Retirees or, as of the Distribution Date, members of the Board of Directors of RemainCo and (y) SpinCo (or one or more members of the SpinCo Group, as designated by SpinCo) shall have sole responsibility for the settlement of those RemainCo Equity Compensation Awards held by SpinCo Employees or, as of the Distribution Date, members of the Board of Directors of SpinCo.

(g) No fractional shares of Common Stock shall be issued or delivered pursuant to operation of Sections 3.3 or 3.4, and any fractional share otherwise payable shall be forfeited.

(h) Following the Distribution Date, (i) RemainCo shall be responsible for the payment of any dividend payable with respect to RemainCo RSAs and (ii) SpinCo shall be responsible for the payment of any dividend payable with respect to Additional SpinCo Stock Awards that are restricted stock awards.

Section 3.2 Tax Reporting and Withholding; Payment of Option Exercise Price.

(a) SpinCo (or one or more members of the SpinCo Group, as designated by SpinCo) shall be responsible for (i) the satisfaction of all tax reporting and withholding requirements in respect of the issuance, vesting or settlement, on or after the Distribution Date, of RemainCo Equity Compensation Awards and SpinCo Equity Compensation Awards held by SpinCo Employees and, as of the Distribution Date, members of the Board of Directors of SpinCo and (ii) remitting the appropriate tax or withholding amounts to the appropriate taxing authorities in respect of the distribution and vesting of all such awards.

(b) RemainCo (or one or more members of the RemainCo Group, as designated by RemainCo) shall be responsible for (i) the satisfaction of all tax reporting and withholding requirements in respect of the issuance, vesting or settlement, on or after the Distribution Date, of RemainCo Equity Compensation Awards and SpinCo Equity Compensation Awards held by RemainCo Retirees, RemainCo Employees and, as of the Distribution Date, members of the Board of Directors of RemainCo and (ii) remitting the appropriate tax or withholding amounts to the appropriate taxing authorities in respect of the distribution and vesting of all such awards.

 

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(c) Upon the exercise of a Replacement RemainCo Option or a Replacement SpinCo Option, the exercise price of such stock option will be remitted in cash by the option administrator to the issuer of the option (the appropriate member of the RemainCo Group or the SpinCo Group, as applicable) and the applicable withholding taxes of such stock option will be remitted in cash by the option administrator to the entity (the appropriate member of the RemainCo Group or the SpinCo Group, as applicable) responsible for payroll taxes, withholding and reporting with respect to the option pursuant to this Section 3.2. Upon vesting or payment, as applicable, of RemainCo Stock Awards, Replacement SpinCo Stock Awards, Additional SpinCo Stock Awards and Additional RemainCo Stock Awards, the applicable withholding will be remitted in cash by the administrator to the entity (the appropriate member of the RemainCo Group or the SpinCo Group, as applicable) responsible for payroll taxes, withholding and reporting with respect to such awards pursuant to this Section 3.2. To the extent necessary to provide the withholding amount in cash to the entity responsible for payroll taxes, withholding, and reporting (e.g., in the case of share withholding), the issuer of the applicable award will provide the withholding amount in cash. If shares of SpinCo Common Stock or RemainCo Common Stock is withheld to satisfy tax withholding obligations in respect of the exercise, vesting or settlement of a RemainCo Equity Compensation Award or a SpinCo Equity Compensation Award, to the extent a Party is not responsible pursuant to this Section 3.2 for satisfying the applicable tax withholding and remittance requirements, such Party shall cooperate with the other Party and remit to the responsible Party cash in an amount sufficient to satisfy such requirements. Notwithstanding the foregoing, the method of remittance of the exercise price of any stock option or any applicable withholding taxes may vary for legal or administrative reasons.

(d) Any U.S. Federal, state and local income tax deduction arising as a result of the exercise, vesting or settlement of any RemainCo Equity Compensation Awards or SpinCo Equity Compensation Awards shall, in each case, be claimed (as permitted by applicable law and accounting principles) by the Party (or one of its Subsidiaries) that employs the individual with respect to whom such compensation deduction arises at the time that it arises or, if such individual is not then employed by any Party or a Subsidiary of a Party, by the Party that most recently employed such individual.

(e) Each Party shall use commercially reasonable efforts to cooperate to share, retain and maintain data and records that are necessary or appropriate to further the purposes of this Section 3.2, and each Party agrees to cooperate as long as is reasonably necessary to further the purposes of this Section 3.2. Without limiting the generality of the preceding sentence, the Parties shall reasonably cooperate so that the tax benefit of any deductions may be transferred to the other Party if it is determined by the Parties to be reasonable and appropriate and complies with applicable law and accounting principles. Except as provided under any Ancillary Agreement, no Party shall charge another Party a fee for such cooperation.

 

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Section 3.3 Restricted Stock Units, Restricted Stock and Performance Stock Units.

(a) SpinCo Holders.

(i) 2020 Stock Awards to SpinCo Employees and RemainCo Retirees. Each grantee under any of the RemainCo Equity Plans (A) who will be a SpinCo Employee or a RemainCo Retiree and (B) in each case, who holds, as of the Distribution Date, one or more unvested RemainCo Stock Awards that were granted on or after January 1, 2020, shall receive, effective as of the Distribution Date and immediately prior to the Distribution, as a replacement award in substitution for each such RemainCo Stock Award (which shall be cancelled), a number of shares of restricted stock, restricted or deferred stock units or performance share units, as applicable, with respect to and payable in shares of SpinCo Common Stock (“Replacement SpinCo Stock Award”) under the SpinCo Equity Plan having a value immediately after the Distribution Date equal to the value of the shares of RemainCo Common Stock subject to the RemainCo Stock Award (calculated using the Pre-Distribution RemainCo Share Price), as calculated pursuant to the following provisions. In each case, the number of Replacement SpinCo Stock Award shall be equal to (C) divided by (D), where (C) is the Pre-Distribution RemainCo Share Price multiplied by the number of RemainCo Stock Awards that are being cancelled and replaced pursuant to this Section 3.3(a)(i), and (D) is the Post-Distribution SpinCo Share Price, with the resulting number of shares subject to the Replacement SpinCo Stock Award being rounded down to the nearest whole share or unit. Except as provided in the foregoing provisions of this Section 3.3(a)(i), Replacement SpinCo Stock Awards shall be granted on terms which are in all material respects identical (including with respect to vesting) to the terms of the applicable RemainCo Stock Awards which they replace.

(ii) Pre-2020 Stock Awards to SpinCo Employees.

(A) Employee Method Election. Each SpinCo Employee or RemainCo Retiree who holds, as of the Distribution Date, a RemainCo RSA (Employee Method) and/or RemainCo PSU (Employee Method) shall receive, effective as of the Distribution Date and immediately prior to the Distribution, as a replacement award in substitution for each such a RemainCo RSA (Employee Method) and/or RemainCo PSU (Employee Method) (which shall be cancelled), a Replacement SpinCo Stock Award under the SpinCo Equity Plan having a value immediately after the Distribution Date equal to the value of the shares of RemainCo Common Stock subject to the RemainCo RSA (Employee Method) and/or RemainCo PSU (Employee Method) (calculated using the Pre-Distribution RemainCo Share Price), as calculated pursuant to the following provisions. In each case, the number of Replacement SpinCo Stock Award shall be equal to (C) divided by (D), where (C) is the Pre-Distribution RemainCo Share Price multiplied by the number of RemainCo RSA (Employee Method) and/or RemainCo PSU (Employee Method) that are being cancelled and replaced pursuant to this Section 3.3(a)(ii)(A), and (D) is the Post-Distribution SpinCo Share Price, with the resulting number of shares subject to the Replacement SpinCo Stock Award being rounded down to the nearest whole share or unit. Except as provided in the foregoing provisions of this Section 3.3(a)(ii)(A), Replacement SpinCo Stock Awards shall be granted on terms which are in all material respects identical (including with respect to vesting) to the terms of the applicable RemainCo RSA (Employee Method) and/or RemainCo PSU (Employee Method) which they replace.

 

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(B) Shareholder Method Election; Vested Stock Awards. Each SpinCo Employee or RemainCo Retiree who holds, as of the Distribution Date, (A) a RemainCo RSA (Shareholder Method) and/or RemainCo PSU (Shareholder Method) or (B) a vested RemainCo Stock Award that has not been settled as of the Distribution Date shall receive, effective as of the Distribution Date and immediately prior to the Distribution, for each such RemainCo Stock Award, an additional number of shares of restricted stock, restricted or deferred stock units or performance share units, as applicable, with respect to and payable in shares of SpinCo Common Stock (the “Additional SpinCo Stock Awards”) under the SpinCo Equity Plan. In each case, the number of shares of SpinCo Common Stock subject to an award of Additional SpinCo Stock Awards shall be equal to the number of shares of SpinCo Common Stock that would have been distributed in the Distribution with respect to the number of shares of RemainCo Common Stock subject to the grantee’s RemainCo Stock Awards, with the resulting number of shares subject to the Additional SpinCo Stock Award being rounded down to the nearest whole share or unit. Except as provided in the foregoing provisions of this Section 3.3(a)(ii)(B). Additional SpinCo Stock Awards shall be granted on terms which are in all material respects identical (including with respect to vesting) to the terms of the RemainCo Stock Awards with respect to which they are granted.

(iii) Stock Awards to SpinCo Directors. Each grantee under any of the RemainCo Equity Plans (A) who will not be a SpinCo Employee but will serve on the Board of Directors of SpinCo immediately after the Distribution Date and (B) who holds, as of the Distribution Date, one or more unvested RemainCo Stock Awards or vested RemainCo Stock Awards that have not been settled as of the Distribution Date shall receive, effective as of the Distribution Date and immediately prior to the Distribution, for each such RemainCo Stock Awards, an Additional SpinCo Stock Award under the SpinCo Equity Plan. In each case, the number of shares of SpinCo Common Stock subject to an award of Additional SpinCo Stock Awards shall be equal to the number of shares of SpinCo Common Stock that would have been distributed in the Distribution with respect to the number of shares of RemainCo Common Stock subject to the grantee’s RemainCo Stock Award, with the resulting number of shares subject to the Additional SpinCo Stock Award being rounded down to the nearest whole share or unit. Except as provided in the foregoing provisions of this Section 3.3(a)(iii). Additional SpinCo Stock Awards shall be granted on terms which are in all material respects identical (including with respect to vesting) to the terms of the RemainCo Stock Awards with respect to which they are granted.

(b) RemainCo Holders.

(i) 2020 Stock Awards to RemainCo Employees. Each grantee under any of the RemainCo Equity Plans (A) who will be a RemainCo Employee and (B) who holds, as of the Distribution Date, one or more unvested RemainCo Stock Awards that were granted on or after January 1, 2020, shall receive, effective as of the Distribution Date and immediately prior to the Distribution, for each such RemainCo Stock Award (in lieu of receiving any SpinCo restricted stock, restricted or deferred stock units or performance share units, as applicable, in connection with such RemainCo Stock Award), a number of additional restricted stock, restricted or deferred stock units or performance share units, as applicable, with respect to and payable in RemainCo Common Stock (the “Additional RemainCo Stock Awards”), under one of the RemainCo Equity Plans. In each case, the number of shares of RemainCo Common Stock subject to an Additional RemainCo Stock

 

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Award shall be equal to the product of (C) and (D), where (C) is the number of shares of RemainCo Common Stock covered by the original RemainCo Stock Award and (D) is equal to (x) the Pre-Distribution RemainCo Share Price minus the Post-Distribution RemainCo Share Price, divided by (y) the Post-Distribution RemainCo Share Price, with the resulting number of shares subject to the Additional RemainCo Stock Award being rounded down to the nearest whole share or unit. Except as provided in the foregoing provisions of this Section 3.3(b)(i), Additional RemainCo Stock Awards shall be granted on such terms which are in all material respects identical (including with respect to vesting) to the terms of the RemainCo Stock Awards with respect to which they are granted.

(ii) Pre-2020 Stock Awards to RemainCo Employees.

(C) Employee Method Election. Each RemainCo Employee who holds, as of the Distribution Date, a RemainCo RSA (Employee Method) and/or RemainCo PSU (Employee Method) shall receive, effective as of the Distribution Date and immediately prior to the Distribution, for each such RemainCo RSA (Employee Method) and/or RemainCo PSU (Employee Method) (in lieu of receiving any SpinCo restricted stock or performance share units, as applicable, in connection with such RemainCo RSA and/or RemainCo PSU (Employee Method)), an Additional RemainCo Stock Award, under one of the RemainCo Equity Plans. In each case, the number of shares of RemainCo Common Stock subject to an Additional RemainCo Stock Award shall be equal to the product of (C) and (D), where (C) is the number of shares of RemainCo Common Stock covered by the original RemainCo RSA (Employee Method) and/or RemainCo PSU (Employee Method) and (D) is equal to (x) the Pre-Distribution RemainCo Share Price minus the Post-Distribution RemainCo Share Price, divided by (y) the Post-Distribution RemainCo Share Price, with the resulting number of shares subject to the Additional RemainCo Stock Award being rounded down to the nearest whole share or unit. Except as provided in the foregoing provisions of this Section 3.3(b)(ii)(A), Additional RemainCo Stock Awards shall be granted on such terms which are in all material respects identical (including with respect to vesting) to the terms of the RemainCo Stock Awards with respect to which they are granted.

(D) Shareholder Method Election. Each RemainCo Employee who holds, as of the Distribution Date, a RemainCo RSA (Shareholder Method) and/or RemainCo PSU (Shareholder Method) shall receive, effective as of the Distribution Date and immediately prior to the Distribution, for each such RemainCo RSA (Shareholder Method) and RemainCo PSU (Shareholder Method), an Additional SpinCo Stock Award under the SpinCo Equity Plan. In each case, the number of shares of SpinCo Common Stock subject to an award of Additional SpinCo Stock Awards shall be equal to the number of shares of SpinCo Common Stock that would have been distributed in the Distribution with respect to the number of shares of RemainCo Common Stock subject to the grantee’s RemainCo RSA (Shareholder Method) or RemainCo PSU (Shareholder Method), as applicable, with the resulting number of shares subject to the Additional SpinCo Stock Award being rounded down to the nearest whole share or unit. Except as provided in the foregoing provisions of this Section 3.3(b) (ii)(B), Additional SpinCo Stock Awards shall be granted on terms which are in all material respects identical (including with respect to vesting) to the terms of the RemainCo RSA (Shareholder Method) or RemainCo PSU (Shareholder Method) with respect to which they are granted.

 

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(iii) Stock Awards to RemainCo Directors. Each grantee under any of the RemainCo Equity Plans (A) who will not be a RemainCo Employee but will serve on the Board of Directors of RemainCo immediately after the Distribution Date and (B) who holds, as of the Distribution Date, one or more unvested RemainCo Stock Awards or vested RemainCo Stock Awards that have not been settled as of the Distribution Date shall receive, effective as of the Distribution Date and immediately prior to the Distribution, for each such RemainCo Stock Award, an Additional SpinCo Stock Award under the SpinCo Equity Plan. In each case, the number of shares of SpinCo Common Stock subject to an award of Additional SpinCo Stock Awards shall be equal to the number of shares of SpinCo Common Stock that would have been distributed in the Distribution with respect to the number of shares of RemainCo Common Stock subject to the grantee’s RemainCo Stock Award, with the resulting number of shares subject to the Additional SpinCo Stock Award being rounded down to the nearest whole share or unit. Except as provided in the foregoing provisions of this Section 3.3(b)(ii), Additional SpinCo Stock Awards shall be granted on terms which are in all material respects identical (including with respect to vesting) to the terms of the RemainCo Stock Awards with respect to which they are granted.

(c) Any dividend with respect to an unvested RemainCo RSA that is accrued but unpaid as of the Distribution Date shall be adjusted consistent with the manner in which the RemainCo RSA to which such dividend relates is adjusted in accordance with this Section 3.3.

Section 3.4 Stock Options.

(a) SpinCo Holders. Each grantee under any of the RemainCo Equity Plans who will be a SpinCo Employee immediately after the Distribution Date shall receive, effective as of the Distribution Date and immediately prior to the Distribution, as a replacement award in substitution for each unvested and vested but unexercised RemainCo Option (which shall be cancelled), an option to purchase a number of shares of SpinCo Common Stock with respect to a number of shares of SpinCo Common Stock, as applicable, under the SpinCo Equity Plan (a “Replacement SpinCo Option”) in accordance with the following provisions:

(i) The number of shares of SpinCo Common Stock subject to a Replacement SpinCo Option shall be equal to the product of (i) the number of shares of RemainCo Common Stock subject to a RemainCo Option as of the Distribution Date and (ii) fraction, the numerator of which is the Pre-Distribution RemainCo Share Price and the denominator of which is the Post-Distribution SpinCo Share Price, with the resulting number of shares subject to the Replacement SpinCo Option being rounded down to the nearest whole share.

(ii) The per share exercise price of such Replacement SpinCo Option (rounded up to the nearest cent) shall be equal to the product obtained by multiplying (A) the Post-Distribution SpinCo Share Price, by (B) the RemainCo Option Exercise Price Ratio of the corresponding RemainCo Option.

 

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Replacement SpinCo Options shall not be exercisable until the Registration Statement Effectiveness Date. Except as provided in the foregoing provisions of this Section 3.4(a), Replacement SpinCo Options granted under this Section 3.4(a) shall be granted on terms which are in all material respects identical (including with respect to vesting) to the terms of the RemainCo Options which they replace.

(b) RemainCo Holders. Each grantee under any of the RemainCo Equity Plans who will be a RemainCo Retiree or RemainCo Employee immediately after the Distribution Date, and who holds as of the Distribution Date one or more unvested or vested but unexercised RemainCo Options shall receive, effective as of the Distribution Date and immediately prior to the Distribution, in substitution for each such RemainCo Option (which shall be cancelled), an option to purchase a number of shares of RemainCo Common Stock with respect to a number of shares of RemainCo Common Stock, as applicable, under one of the RemainCo Equity Plans (a “Replacement RemainCo Option”) in accordance with the following provisions:

(i) The number of shares of RemainCo Common Stock subject to a Replacement RemainCo Option shall be equal to the product of (i) the number of shares of RemainCo Common Stock subject to a RemainCo Option as of the Distribution Date and (ii) a fraction, the numerator of which is the Pre-Distribution RemainCo Share Price and the denominator of which is the Post-Distribution RemainCo Share Price, with the resulting number of shares subject to the Replacement RemainCo Option being rounded down to the nearest whole share.

(ii) The per share exercise price of such Replacement RemainCo Option (rounded up to the nearest cent) shall be equal to the product obtained by multiplying (x) the Post-Distribution RemainCo Share Price, by (y) the RemainCo Option Exercise Price Ratio of the corresponding RemainCo Option.

Except as provided in the foregoing provisions of this Section 3.4(b), Replacement RemainCo Options shall be granted on terms which are in all material respects identical (including with respect to vesting) to the terms of the RemainCo Options which they replace.

(c) Notwithstanding anything to the contrary in this Section 3.4, the exercise price, the number of shares of RemainCo Common Stock and SpinCo Common Stock subject to each Replacement RemainCo Option and Replacement SpinCo Option, and the terms and conditions of exercise of such options shall be determined in a manner consistent with the requirements of Section 409A of the Code. For purposes of Section 409A of the Code, the Pre-Distribution RemainCo Share Price shall be treated as the fair market value of a share of RemainCo Common Stock immediately prior to the substitutions described in this Section 3.4 and the Post-Distribution RemainCo Share Price and the Post-Distribution SpinCo Share Price shall be treated as the fair market value of a share of RemainCo Common Stock and the fair market value of a share of SpinCo Common Stock, respectively, immediately after such substitutions.

 

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Section 3.5 Employee Stock Purchase Plan.

(a) The last purchase for all eligible Employees under the RemainCo ESPP for calendar year 2020 shall be with respect to the November 13, 2020 pay period. From and after such date, SpinCo Employees shall cease to be eligible to participate in the RemainCo ESPP, other than with respect to any final purchase to be made with respect to such last pay period. Notwithstanding the forgoing, the administrator of the RemainCo ESPP may establish an alternate date for (i) the cessation of SpinCo Employees’ participation in the RemainCo ESPP, and/or (ii) the last purchase for calendar year 2020 under the RemainCo ESPP, as it determines to be necessary or advisable to accommodate the operation and administration of the RemainCo ESPP.

(b) Effective on the Distribution Date, SpinCo shall adopt the SpinCo ESPP under which the options to purchase SpinCo Common Stock shall be granted to eligible SpinCo Employees, which SpinCo ESPP may have terms that are comparable to those in effect, as of immediately prior to the Distribution Date, under the RemainCo ESPP, including with such changes as are necessary and appropriate to reflect the Distribution and such other changes, modifications or amendments to the SpinCo ESPP as may be required by applicable law.

Section 3.6 Section 16(b) of the Exchange Act; Code Section 409A.

(a) By approving the adoption of this Agreement, the respective boards of directors of RemainCo and SpinCo intend to exempt from the short-swing profit recovery provisions of Section 16(b) of the Exchange Act, by reason of the application of Rule 16b-3 thereunder, all acquisitions and dispositions of equity incentive awards by directors and executive officers of each of RemainCo and SpinCo, and the respective boards of directors of RemainCo and SpinCo also intend to expressly approve, in respect of any stock-based award, the use of any method for the payment of an exercise price and the satisfaction of any applicable tax withholding (specifically including the actual or constructive tendering of shares in payment of an exercise price and the withholding of option shares from delivery in satisfaction of applicable tax withholding requirements) to the extent such method is permitted under the applicable equity incentive plan and award agreement.

(b) Notwithstanding anything in this Agreement to the contrary (including the treatment of supplemental and deferred compensation plans, outstanding long-term incentive awards and annual incentive awards as described herein), RemainCo and SpinCo agree to negotiate in good faith regarding the need for any treatment different from that otherwise provided herein to ensure that, to the extent deemed desirable by RemainCo and SpinCo, the treatment of such supplemental or deferred compensation or long-term incentive award, annual incentive award or other compensation does not cause the imposition of a tax under Code Section 409A.

Section 3.7 Certain Bonus Payments.

(a) The Compensation Committee of the Board of Directors of RemainCo shall determine the annual incentive bonuses in respect of 2020 payable to eligible RemainCo Employees, Former RemainCo Employees, SpinCo Employees and Former SpinCo Employees prior to the Distribution Date, which annual incentive bonuses shall be payable at the time determined by the Compensation Committee of the Board of Directors; provided, however, that such annual incentive bonuses shall be payable no later than 212 months after the end of 2020, so as to continue to be exempt from Section 409A of the Code.

 

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(b) SpinCo shall assume responsibility for the payment of bonuses to SpinCo Employees, Former SpinCo Employees and the individuals listed on Schedule 3.7(b) earned under RemainCo’s annual incentive plan (“SpinCo Bonus Obligations”). RemainCo shall retain responsibility for the payment of bonuses to RemainCo Employees and Former RemainCo Employees earned under RemainCo’s annual incentive plan. To the extent any of the SpinCo Bonus Obligations are paid by RemainCo, SpinCo shall promptly reimburse RemainCo for all such payments, including RemainCo’s share of the related payroll taxes, but in no event later than 30 days following SpinCo’s receipt of RemainCo’s written notice of such payments.

Section 3.8 Employment Treatment.

(a) Continuous employment with the SpinCo Group and the RemainCo Group following the Distribution Date will be deemed to be continuing service for purposes of vesting and exercisability for the SpinCo Equity Compensation Awards and the RemainCo Equity Compensation Awards. However, in the event that a SpinCo Employee terminates employment after the Distribution Date and becomes employed by the RemainCo Group, for purposes of Article III, the SpinCo Employee will be deemed terminated and the terms and conditions of the applicable equity plan under which grants were made will apply. Similarly, in the event that a RemainCo Employee terminates employment after the Distribution Date and becomes employed by the SpinCo Group, for purposes of Article III, the RemainCo Employee will be deemed terminated and the terms and conditions of the applicable equity plan under which grants were made will apply. In addition, a non-employee member of the Board of Directors of RemainCo or SpinCo will be treated in a similar manner to that described in this Section 3.8.

(b) If, after the Distribution Date, RemainCo or SpinCo identifies an administrative error in the individuals identified as holding RemainCo Equity Compensation Awards and SpinCo Equity Compensation Awards, the amount of such awards so held, the vesting level of such awards, or any other similar error, RemainCo and SpinCo will mutually cooperate in taking such actions as are necessary or appropriate to place, as nearly as reasonably practicable, the individual and RemainCo and SpinCo in the position in which they would have been had the error not occurred.

ARTICLE IV

GENERAL PRINCIPLES FOR ALLOCATION OF LIABILITIES

Section 4.1 General Principles.

(a) (i) Each member of the RemainCo Group and each member of the SpinCo Group shall take any and all reasonable action as shall be necessary or appropriate so that active participation in the RemainCo Retirement Plan and RemainCo Deferred Compensation Plan by all SpinCo Employees and Former SpinCo Employees shall terminate in connection with the Distribution as and when provided under this Agreement (or if not specifically provided under this Agreement, as of 11:59 p.m. on the day before the Employee Transfer Date). Each member of the SpinCo Group shall cease to be a participating employer under the terms of the RemainCo

 

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Retirement Plan as of such time. Each member of the SpinCo Group shall cease to be an active participating employer under the terms of the RemainCo Deferred Compensation Plan as of such time, but, consistent with clause (iii) below, shall continue to have obligations to pay benefits to SpinCo Employees and Former SpinCo Employees under such plan and shall continue to be grantors under the rabbi trust established for such plan with respect to assets attributable to the SpinCo Employees’ and Former SpinCo Employees’ benefits, until such time as the liabilities under the RemainCo Deferred Compensation Plan and the assets under such plan’s rabbi trust are transferred to the SpinCo Deferred Compensation Plan and such plan’s rabbi trust, respectively.

(ii) Each member of the SpinCo Group and each member of the RemainCo Group shall take any and all reasonable action as shall be necessary or appropriate so that active participation in the SpinCo Welfare Plans and SpinCo Benefit Arrangements by all RemainCo Employees and Former RemainCo Employees shall terminate in connection with the Distribution as and when provided under this Agreement (or if not specifically provided under this Agreement, as of 11:59 p.m. on the day before the Employee Transfer Date), and each member of the RemainCo Group shall cease to be a participating employer under the terms of such SpinCo Welfare Plans and SpinCo Benefit Arrangements as of such time.

(iii) Except as otherwise provided in this Agreement, one or more members of the SpinCo Group (as designated by SpinCo) shall continue to be responsible for or assume, effective as of the Employee Transfer Date, all employee benefits liabilities for SpinCo Employees and Former SpinCo Employees, and any assets relating to such employee benefits for SpinCo Employees and Former SpinCo Employees shall be transferred to, or continue to be held by, one or more members of the SpinCo Group (as designated by SpinCo); and one or more members of the RemainCo Group (as designated by RemainCo) shall continue to be responsible for or assume, effective as of the Employee Transfer Date, all employee benefits liabilities for RemainCo Employees and Former RemainCo Employees, and any assets relating to such employee benefits for RemainCo Employees and Former RemainCo Employees shall be transferred to, or continue to be held by, one or more members of the RemainCo Group (as designated by RemainCo).

(b) Except as otherwise provided in this Agreement, effective as of the Employee Transfer Date, one or more members of the SpinCo Group (as determined by SpinCo) shall assume or continue the sponsorship of, and no member of the RemainCo Group shall have any further liability for or under, the following agreements, obligations and liabilities, and SpinCo shall indemnify each member of the RemainCo Group, and the officers, directors, and employees of each member of the RemainCo Group, and hold them harmless with respect to such agreements, obligations or liabilities:

(i) any and all individual agreements entered into between any member of the RemainCo Group and any SpinCo Employee or Former SpinCo Employee;

(ii) any and all agreements entered into between any member of the RemainCo Group and any individual who is an independent contractor providing services primarily for the business activities of the SpinCo Group;

 

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(iii) any and all wages, salaries, incentive compensation (as the same may be modified by this Agreement), commissions and bonuses payable to any SpinCo Employees or Former SpinCo Employees after the Employee Transfer Date, without regard to when such wages, salaries, incentive compensation, commissions and bonuses are or may have been earned;

(iv) any and all moving expenses and obligations related to relocation, repatriation, transfers or similar items incurred by or owed to any SpinCo Employees or Former SpinCo Employees, whether or not accrued as of the Employee Transfer Date (other than such expenses and obligations incurred by RemainCo prior to the Employee Transfer Date as a result of which there is an existing liability as of the day before the Employee Transfer Date, all of which shall remain RemainCo’s obligation);

(v) any and all immigration-related, visa, work application or similar rights, obligations and liabilities related to any SpinCo Employees or Former SpinCo Employees; and

(vi) any and all liabilities and obligations whatsoever with respect to claims made by or with respect to any SpinCo Employees or Former SpinCo Employees in connection with any employee benefit plan, program or policy not otherwise retained or assumed by any member of the RemainCo Group pursuant to this Agreement, including such liabilities relating to actions or omissions of or by any member of the SpinCo Group or any officer, director, employee or agent thereof prior to the Employee Transfer Date.

(c) Except as otherwise provided in this Agreement, effective as of the Employee Transfer Date, no member of the SpinCo Group shall have any further liability for, and RemainCo shall indemnify each member of the SpinCo Group, and the officers, directors, and employees of each member of the SpinCo Group, and hold them harmless with respect to any and all liabilities and obligations whatsoever with respect to, claims made by or with respect to any RemainCo Employees or Former RemainCo Employees in connection with any employee benefit plan, program or policy not otherwise retained or assumed by any member of the SpinCo Group pursuant to this Agreement, including such liabilities relating to actions or omissions of or by any member of the RemainCo Group or any officer, director, employee or agent thereof prior to the Employee Transfer Date.

Section 4.2 Sponsorship and/or Establishment of SpinCo Plans. Welfare Plans in which both (i) RemainCo Employees or Former RemainCo Employees and (ii) SpinCo Employees or Former SpinCo Employees participate shall be divided into two separate plans, with one covering RemainCo Employees and Former RemainCo Employees sponsored by a member of the RemainCo Group, and the other covering SpinCo Employees and Former SpinCo Employees sponsored by a member of the SpinCo Group.

 

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Section 4.3 Service Credit.

(a) Service for Eligibility and Vesting Purposes. Except as otherwise provided in any other provision of this Agreement, for purposes of eligibility and vesting under the SpinCo Retirement Plan, SpinCo Deferred Compensation Plan, SpinCo Welfare Plans and SpinCo Benefit Arrangements, SpinCo shall, and shall cause each member of the SpinCo Group to, credit each SpinCo Employee and Former SpinCo Employee with service for any period of employment with any member of the RemainCo Group prior to the Employee Transfer Date to the same extent such service would be credited if it had been performed for a member of the SpinCo Group.

(b) Service for Benefit Purposes. Except as otherwise provided in any other provision of this Agreement, and except to the extent the following would result in a duplication of benefits, (i) for purposes of benefit levels and accruals and benefit commencement entitlements under the SpinCo Retirement Plan, SpinCo Deferred Compensation Plan, SpinCo Welfare Plans and SpinCo Benefit Arrangements, SpinCo shall, and shall cause each member of the SpinCo Group to, credit each SpinCo Employee and Former SpinCo Employee with service for any period of employment with any member of the RemainCo Group prior to the Employee Transfer Date to the same extent that such service is taken into account pursuant to the terms of the RemainCo Retirement Plan, RemainCo Deferred Compensation Plan, SpinCo Welfare Plans and SpinCo Benefit Arrangements, and (ii) for purposes of benefit levels and accruals and benefit commencement entitlements under the RemainCo Retirement Plan, RemainCo Deferred Compensation Plan, SpinCo Welfare Plans and SpinCo Benefit Arrangements, RemainCo shall, and shall cause each member of the RemainCo Group to, credit each RemainCo Employee and Former RemainCo Employee with service for any period of employment with any member of the SpinCo Group prior to the Employee Transfer Date to the same extent such service would be credited if it had been performed for a member of the RemainCo Group.

(c) Evidence of Prior Service. Notwithstanding anything to the contrary, but subject to applicable law and the TSA, if applicable, upon reasonable request by one Party to the other Party, the first Party will provide to the other Party copies of any records available to the first Party to document such service, plan participation and membership of such Employees and cooperate with the first Party to resolve any discrepancies or obtain any missing data for purposes of determining benefit eligibility, participation, vesting and calculation of benefits with respect to any Employee.

Section 4.4 Plan Administration.

(a) Administration. SpinCo shall use its best efforts to, and shall cause each member of the SpinCo Group to use its best efforts to, administer its benefit plans in a manner that does not jeopardize the tax-favored status of the tax-favored benefit plans maintained by any member of the RemainCo Group. RemainCo shall use its best efforts to, and shall cause each member of the RemainCo Group to use its best efforts to, administer its benefit plans in a manner that does not jeopardize the tax-favored status of the tax-favored benefit plans maintained by any member of the SpinCo Group.

(b) Participant Elections and Beneficiary Designations. All participant elections and beneficiary designations made under any plan sponsored by a member of the RemainCo Group or SpinCo Group prior to the effective date as of which assets or liabilities relating to that plan are transferred or allocated to a member of the SpinCo Group or RemainCo Group, as applicable, shall continue in effect under any plan maintained by any member of the SpinCo Group or RemainCo Group, as applicable, to which liabilities are transferred or allocated pursuant to this Agreement until such time as any applicable participant changes his elections or beneficiary designations in accordance with the procedures of the relevant plan, as the case may be, including deferral, investment, and payment form elections, dividend elections, coverage options and levels, beneficiary designations and the rights of alternate payees under qualified domestic relations orders.

 

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ARTICLE V

RETIREMENT PLAN

Section 5.1 General Principles. Aaron’s, Inc. shall establish and adopt the SpinCo Retirement Plan effective as of November 6, 2020, for the benefit of the individuals employed in the SpinCo Business, and such individuals shall cease active participation in the RemainCo Retirement Plan as of that date. The SpinCo Retirement Plan shall continue to be maintained and sponsored by a member of the SpinCo Group on and after the Employee Transfer Date, and the RemainCo Retirement Plan shall continue to be maintained and sponsored by a member of the RemainCo Group on and after the Employee Transfer Date. The RemainCo Group and the SpinCo Group shall each be responsible for the funding of their respective retirement plans on and after the Employee Transfer Date.

Section 5.2 Retirement Plan Transfer. The SpinCo Retirement Plan shall contain provisions that will provide, among other things, benefits for each SpinCo Employee and Former SpinCo Employee, who is a participant with a remaining account balance in the RemainCo Retirement Plan immediately prior to the effective date of transfer of assets and liabilities from the RemainCo Retirement Plan to the SpinCo Retirement Plan (and each beneficiary and alternate payee of such person) (the “SpinCo Retirement Plan Beneficiaries”) substantially identical (except as provided in this Article V, and except that the SpinCo Retirement Plan may provide only a frozen RemainCo Common Stock fund and a frozen SpinCo Common Stock fund (i.e., a stock fund that will not allow new purchases of RemainCo Common Stock or SpinCo Common Stock (including any employer matching contributions in SpinCo Common Stock), respectively, but will allow participants to sell RemainCo Common Stock or SpinCo Common Stock, respectively) unless and until SpinCo otherwise determines, upon satisfaction of the requirements of applicable law, to allow purchases of SpinCo Common Stock in the SpinCo Common Stock fund) to those in effect for the SpinCo Retirement Plan Beneficiaries under the RemainCo Retirement Plan. Each SpinCo Employee who was an active participant in the RemainCo Retirement Plan on the day prior to the effective date of the SpinCo Retirement Plan shall participate in the SpinCo Retirement Plan effective from and after the effective date of the SpinCo Retirement Plan. SpinCo Employees and Former SpinCo Employees shall not make or receive additional contributions under the RemainCo Retirement Plan on and after the effective date of the SpinCo Retirement Plan, unless any such SpinCo Employee or Former SpinCo Employee shall become employed by any member of the RemainCo Group after such date and such member participates in the RemainCo Retirement Plan. A RemainCo Employee or Former RemainCo Employee shall not make or receive contributions under the SpinCo Retirement Plan unless any such RemainCo Employee or Former RemainCo Employee shall become employed by any member of the SpinCo Group on and after the effective date of the SpinCo Retirement Plan and such member participates in the SpinCo Retirement Plan. In the event a participant (other than a SpinCo Employee or RemainCo Employee) or his or her alternate payee or beneficiary has a remaining account balance in the RemainCo Retirement Plan immediately prior to the effective date of the transfer of assets from the RemainCo Retirement Plan to the SpinCo Retirement Plan in accordance with Section 5.4 and it cannot be determined prior to such effective date whether such participant is a Former SpinCo Employee or a Former RemainCo Employee, such participant shall be deemed to be a Former RemainCo Employee for purposes of this Article V.

 

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Section 5.3 RemainCo Common Stock Fund. The RemainCo Retirement Plan may be amended, on or prior to the Distribution Date, to the extent determined to be necessary and appropriate by the sponsor of the RemainCo Retirement Plan, to provide that, following the Distribution and, if the transfer of assets described in Section 5.4 has not yet occurred, until such transfer: (i) the RemainCo Common Stock fund will hold the assets of the accounts of the SpinCo Retirement Plan Beneficiaries invested in the RemainCo Common Stock fund; (ii) the SpinCo Retirement Plan Beneficiaries will be prohibited from increasing their holdings in the RemainCo Common Stock fund; and (iii) the SpinCo Retirement Plan Beneficiaries may elect to liquidate their holdings in the RemainCo Common Stock fund and invest those monies in any other investment fund offered under the RemainCo Retirement Plan . RemainCo shall cause the RemainCo Retirement Plan to provide that SpinCo Retirement Plan Beneficiaries shall participate in the RemainCo Retirement Plan in respect of their accounts thereunder; provided, however, the sponsor of the RemainCo Retirement Plan may in its discretion provide that the RemainCo Common Stock fund shall no longer be offered as an investment alternative under the RemainCo Retirement Plan.

Section 5.4 Transfer of Accounts. As soon as administratively practicable after the effective date of the SpinCo Retirement Plan with a target transfer date of December 8, 2020, RemainCo will cause to be transferred from the trust under the RemainCo Retirement Plan to the trust under the SpinCo Retirement Plan the aggregate amount credited to the accounts of the SpinCo Retirement Plan Beneficiaries . The transfer shall, to the extent reasonably possible, be an in-kind transfer, subject to the reasonable consent of the trustee of the SpinCo Retirement Plan trust, and shall include the transfer of the aggregate assets held in the accounts relating to each SpinCo Retirement Plan Beneficiary under the RemainCo Retirement Plan and any participant loan notes held under such plan.

ARTICLE VI

DEFERRED COMPENSATION PLAN

Section 6.1 Establishment of the Deferred Compensation Plan. Effective as of the Distribution Date, SpinCo shall establish the SpinCo Deferred Compensation Plan, which shall have substantially the same terms as the RemainCo Deferred Compensation Plan as of such effective date. Notwithstanding the foregoing, SpinCo may make such changes, modifications or amendments to the SpinCo Deferred Compensation Plan as may be required by applicable law or as are necessary and appropriate to reflect the Distribution. Under the SpinCo Deferred Compensation Plan, SpinCo shall assume and honor the terms of all QDROs and any other domestic relations orders in effect under the RemainCo Deferred Compensation Plan in respect of SpinCo Employees immediately prior to the Distribution Date.

 

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Section 6.2 Assumption of Liabilities from RemainCo. Effective as of the Distribution Date, SpinCo shall under the SpinCo Deferred Compensation Plan assume all liabilities under the RemainCo Deferred Compensation Plan for the benefit of SpinCo Employees and Former SpinCo Employees determined as of, or immediately prior to, the Distribution Date; and the RemainCo Deferred Compensation Plan shall be relieved of all liabilities for those benefits. RemainCo shall retain all liabilities under the RemainCo Deferred Compensation Plan for the benefit of RemainCo Employees and Former RemainCo Group Employees. From and after the Distribution Date, SpinCo Employees and Former SpinCo Employees shall cease to be participants in the RemainCo Deferred Compensation Plan.

Section 6.3 Transfer of Rabbi Trust Assets. Effective as of the Distribution Date (or as soon as administratively practicable thereafter), RemainCo shall cause assets held in the rabbi trust for the RemainCo Deferred Compensation Plan to be transferred to the rabbi trust that SpinCo shall establish for the SpinCo Deferred Compensation Plan. Assuming the total value of the assets held in the RemainCo rabbi trust as of the Distribution Date is equal to the value of the total benefit liabilities under the RemainCo Deferred Compensation Plan as of the Distribution Date, the total value of the assets transferred to the SpinCo rabbi trust will be equal to the benefit liabilities assumed by the SpinCo Deferred Compensation Plan. If the total value of the assets held in the RemainCo rabbi trust as of the Distribution Date is greater than the value of the total benefit liabilities under the RemainCo Deferred Compensation Plan as of the Distribution Date, any excess asset value will be divided between the RemainCo rabbi trust and the SpinCo rabbi trust in proportion to the benefit liabilities of the RemainCo Deferred Compensation Plan and the SpinCo Deferred Compensation Plan, respectively, following the transfer of liabilities as provided in Section 6.2. If the total value of the assets held in the RemainCo rabbi trust is less than the value of the total benefit liabilities under the RemainCo Deferred Compensation Plan as of the Distribution Date, the asset value will be divided between the RemainCo rabbi trust and the SpinCo rabbi trust in proportion to the benefit liabilities of the RemainCo Deferred Compensation Plan and the SpinCo Deferred Compensation Plan, respectively. The assets transferred from the RemainCo rabbi trust to the SpinCo rabbi trust will be transferred in kind, and RemainCo and SpinCo shall agree on the division of specific assets with the understanding that corporate owned life insurance policies in the RemainCo rabbi trust on the lives of SpinCo Employees shall be transferred to the SpinCo rabbi trust; to the extent the asset allocation formula above permits, corporate owned life insurance policies in the RemainCo rabbi trust on the lives of Former SpinCo Employees also shall be transferred to the SpinCo rabbi trust; and to the extent the asset allocation formula above permits, assets other than corporate owned life insurance policies shall remain in the RemainCo rabbi trust.

Section 6.4 Cooperation for Annual Enrollment. The Parties agree that, until the end of the first enrollment period after the Distribution Date or such earlier or later date as mutually agreed by RemainCo and SpinCo, they will work cooperatively to utilize the existing administrative structure and service providers for the RemainCo Deferred Compensation Plan to engage in an annual enrollment process for all eligible SpinCo Employees and RemainCo Employees, consistent with past practice, regardless of whether such enrollment process has concluded as of the Distribution Date.

 

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ARTICLE VII

WELFARE PLANS

Section 7.1 Establishment of RemainCo Welfare Plans.

(a) Except as provided below, the members of the RemainCo Group who had previously adopted a SpinCo Welfare Plan and were participating employers therein on the day before the Employee Transfer Date (“Participating RemainCo Employers”) will, at 11:59 p.m. on that date, withdraw from such participation, and, effective as of the Employee Transfer Date, one or more of the Participating RemainCo Employers has assumed sponsorship, under newly established welfare plans, of the coverage and benefits which were offered under such plans to the RemainCo Employees and the Former RemainCo Employees (and their eligible spouses and dependents as the case may be) of the Participating RemainCo Employers (collectively, the “RemainCo Welfare Plan Participants”). Such coverage and benefits shall then be provided to the RemainCo Welfare Plan Participants on an uninterrupted basis under the newly established RemainCo Welfare Plans which shall contain substantially the same benefit provisions as in effect under the corresponding SpinCo Welfare Plan on the day before the Employee Transfer Date. Except as provided below, effective as of the Employee Transfer Date, liabilities relating to the RemainCo Welfare Plan Participants shall be spun off from each SpinCo Welfare Plan and allocated to the corresponding new RemainCo Welfare Plan.

(b) As a result of withdrawal from participation in the SpinCo Welfare Plans by the Participating RemainCo Employers, the RemainCo Welfare Plan Participants ceased to be eligible for coverage under the SpinCo Welfare Plans at 11:59 p.m. on the day before the Employee Transfer Date, RemainCo Welfare Plan Participants shall not participate in any SpinCo Welfare Plans on and after the Employee Transfer Date, unless they shall become employed after such date by any member of the SpinCo Group that participates in such plans and meet the terms and conditions of participation thereunder. SpinCo Employees and Former SpinCo Employees shall not participate in any RemainCo Welfare Plans, unless they shall become employed on and after the Employee Transfer Date by any member of the RemainCo Group that participates in such plans and meet the terms and conditions of participation thereunder.

Section 7.2 Transitional Matters Under SpinCo Welfare Plans.

(a) Treatment of Claims Incurred.

(i) Self-Insured Benefits. RemainCo has assumed and is responsible for the funding of payment for any unpaid covered claim and eligible expense:

(A) Incurred by any RemainCo Welfare Plan Participant prior to the Employee Transfer Date under a SpinCo Welfare Plan that is not described in section 7.2(a)(ii) below, to the extent such participant has coverage under such plan as, or through, an employee or former employee of a Participating RemainCo Employer on the date such claim or expense is incurred; or

 

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(B) Incurred by any RemainCo Employee or Former RemainCo Employee prior to the Employee Transfer Date under a SpinCo Benefit Arrangement that is not described in section 7.2(a)(ii) below. No member of the SpinCo Group shall be responsible for any liability with respect to any such claims or expenses.

(ii) Insured Benefits. With respect to benefits that, prior to the Employee Transfer Date, were provided for under the SpinCo Welfare Plans through the purchase of insurance, SpinCo shall cause the SpinCo Welfare Plans to fully perform, pay and discharge all claims of RemainCo Welfare Plan Participants that were incurred prior to the Employee Transfer Date.

(iii) Claims Incurred. Effective on the Distribution Date, RemainCo shall be responsible for the stop loss contract maintained by it immediately prior to the Distribution Date and SpinCo shall be responsible for the stop loss contract maintained by it immediately prior to the Distribution Date. For purposes of this Section 7.2(a), a claim or liability is deemed to be incurred prior to the Distribution Date shall continue to be covered under the applicable stop loss contract of RemainCo or SpinCo.

(b) Credit for Deductibles and Other Limits. With respect to each RemainCo Welfare Plan Participant, the RemainCo Welfare Plans will give credit for the plan year which includes the Distribution Date for any amount paid, number of services obtained or visits provided under the comparable type SpinCo Welfare Plan by such RemainCo Welfare Plan Participant in such plan year toward deductibles, out-of-pocket maximums, limits on number of services or visits, or other similar limitations to the extent such amounts are taken into account under the comparable type SpinCo Welfare Plan. For purposes of any life-time maximum benefit limit payable to a RemainCo Welfare Plan Participant under any RemainCo Welfare Plan, the RemainCo Welfare Plans will recognize any expenses paid or reimbursed by a SpinCo Welfare Plan with respect to such participant prior to the Employee Transfer Date to the same extent such expense payments or reimbursements would be recognized in respect of an active plan participant under that SpinCo Welfare Plan.

(c) COBRA. Effective as of the Employee Transfer Date, SpinCo has assumed and will satisfy all requirements under COBRA with respect to all SpinCo Employees and Former SpinCo Employees and their qualified beneficiaries, including for individuals who are already receiving benefits as of such date under COBRA.

Section 7.3 Continuity of Benefits, Benefit Elections and Beneficiary Designations.

(a) Benefit Elections and Designations. As of the Employee Transfer Date (or such other date provided for under this Agreement), RemainCo has caused the RemainCo Welfare Plans to recognize and give effect to all elections and designations (including all coverage and contribution elections and beneficiary designations) made by each RemainCo Welfare Plan Participant under, or with respect to, the corresponding SpinCo Welfare Plan for plan year which includes the Distribution Date.

 

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(b) Health Savings Accounts and Flexible Spending Accounts. Before the Distribution Date, RemainCo shall, or shall cause a member of the RemainCo Group to, establish a Welfare Plan that will provide health savings account and flexible spending account benefits to RemainCo Employees on and after the Distribution Date (a “RemainCo Plan”). It is the intention of the Parties that all activity under a RemainCo Employee’s health savings account and flexible spending account under a SpinCo Welfare Plan (a “SpinCo Plan”) for the year in which the Distribution Date occurs be treated instead as activity under the corresponding account under the RemainCo health savings account and flexible spending account , such that (i) any period of participation by a RemainCo Employee in a SpinCo Plan during the year in which the Distribution Date occurs will be deemed a period when such RemainCo Employee participated in the corresponding RemainCo Plan; (ii) all expenses incurred during such period will be deemed incurred while such RemainCo Employee’s coverage was in effect under the corresponding SpinCo Plan; (iii) all elections and reimbursements made with respect to such period under the SpinCo Plan will be deemed to have been made with respect to the corresponding RemainCo Plan; and (iv) for purposes of determining the total annual employer contribution made on behalf of a RemainCo Employee, employer contributions made with respect to such period under the SpinCo Plan will be deemed to have been made with respect to the corresponding RemainCo Plan. The Parties shall use commercially reasonable efforts to ensure that as of the Distribution Date any health or dependent care flexible spending accounts of RemainCo Employees (whether positive or negative) (the “Transferred Account Balances”) under SpinCo Welfare Plans that are health or dependent care flexible spending account plans are transferred to the extent deemed necessary or appropriate by the administrator of the SpinCo Welfare Plans, as soon as administratively practicable after the Distribution Date, from the SpinCo Welfare Plans to the corresponding RemainCo Welfare Plans. Such RemainCo Welfare Plans shall assume responsibility as of the Distribution Date for all outstanding health or dependent care claims under the corresponding SpinCo Welfare Plans of each RemainCo Employee for the year in which the Distribution Date occurs and shall assume and agree to perform the obligations of the corresponding SpinCo Welfare Plans from and after the Distribution Date.

Section 7.4 Insurance Contracts. To the extent any SpinCo Welfare Plan is funded through the purchase of an insurance contract or is subject to any stop loss contract, RemainCo and SpinCo will cooperate and use their commercially reasonable efforts to replicate such insurance contracts for RemainCo (except to the extent changes are required under applicable state insurance laws) and to maintain any pricing discounts or other preferential terms for both RemainCo and SpinCo for a reasonable term. Neither Party shall be liable for failure to obtain such pricing discounts or other preferential terms for the other Party. Each Party shall be responsible for any additional premiums, charges or administrative fees that such Party may incur pursuant to this Section 7.4.

Section 7.5 Third-Party Vendors. Except as provided below, to the extent any SpinCo Welfare Plan is administered by a third-party vendor, RemainCo and SpinCo will cooperate and use their commercially reasonable efforts to replicate any contract with such third-party vendor for SpinCo and to maintain any pricing discounts or other preferential terms for both RemainCo and SpinCo for a reasonable term. Neither Party shall be liable for failure to obtain such pricing discounts or other preferential terms for the other Party. Each Party shall be responsible for any additional premiums, charges or administrative fees that such Party may incur pursuant to this Section 7.5.

 

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Section 7.6 Claims Experience. Notwithstanding the foregoing, RemainCo and SpinCo shall use commercially reasonable efforts to ensure that any claims experience under the SpinCo Welfare Plans attributable to RemainCo Welfare Beneficiaries shall be available to the RemainCo Welfare Plans, as permitted by any applicable privacy protection laws or regulations or Privacy Contracts.

Section 7.7 Allocation of Demutualization Proceeds. To the extent demutualization or similar proceeds were paid or credited to the SpinCo Group or a SpinCo Welfare Plan prior to the Employee Transfer Date with respect to an insurance contract that funded a SpinCo Welfare Plan covering RemainCo Welfare Plan Participants and such proceeds remain unallocated as of the Employee Transfer Date, SpinCo shall transfer to RemainCo as soon as practicable following the Employee Transfer Date a pro rata portion of such proceeds, according to the proportion of the total number of RemainCo Employees and Former RemainCo Employees participating in such plan as of the day before the Employee Transfer Date to the total number of employees participating in such plan as of the day before the Employee Transfer Date.

Section 7.8 Transition Services Agreement. The Parties acknowledge that the RemainCo Group or the SpinCo Group may provide administrative services for certain of the other Party’s benefit programs for a transitional period under the terms of the TSA. The Parties agree to enter into a business associate agreement (if required by applicable health information privacy laws) in connection with the TSA. Further, notwithstanding anything in this Agreement to the contrary, the requirements set forth in this Article VII shall be subject to the terms and conditions of the TSA between the RemainCo Group and the SpinCo Group.

ARTICLE VIII

BENEFIT ARRANGEMENTS

Except as otherwise provided under this Agreement, effective as of the Employee Transfer Date, RemainCo Employees and Former RemainCo Employees are no longer eligible to participate in any SpinCo Benefit Arrangement.

ARTICLE IX

WORKERS’ COMPENSATION AND UNEMPLOYMENT COMPENSATION

Section 9.1 General Principles. Subject to Section 9.2, effective as of the Employee Transfer Date, (a) SpinCo shall have (and, to the extent it has not previously had such obligations, assume) the obligations for all claims and liabilities relating to workers’ compensation and unemployment compensation benefits for all SpinCo Employees and Former SpinCo Employees and (b) RemainCo shall have (and, to the extent it has not previously had such obligations, assume) the obligations for all claims and liabilities relating to workers’ compensation and unemployment compensation benefits for all RemainCo Employees and Former RemainCo Employees.

Section 9.2 Crossover Claims. Section 9.1 shall not apply to a workers’ compensation claim of a SpinCo Employee, Former SpinCo Employee, RemainCo Employee or Former RemainCo Employee attributable to or arising in connection with work or services by such employee or former employee prior to the Employee Transfer Date and which (a) arises in connection with (i) both (A) work or services performed for the RemainCo Business and (B) work

 

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or services performed for the SpinCo Business or (ii) work or services performed for both the RemainCo Business and the SpinCo Business, (b) arises in connection with work or services performed by a SpinCo Employee or Former SpinCo Employee on behalf of a member of the RemainCo Group in the normal course of such employee’s duties, or (c) arises in connection with work or services performed by a RemainCo Employee or Former RemainCo Employee on behalf of a member of the SpinCo Group in the normal course of such employee’s duties (any such claim in (a), (b) or (c), a “Crossover Claim”). With respect to any Crossover Claim, effective as of the Employee Transfer Date, (i) SpinCo shall have (and to the extent it has not previously had such obligations, assume) the obligations for all Crossover Claims for which the last injurious exposure occurred at a location owned or operated by an SpinCo Group Member, and (ii) RemainCo shall have (and to the extent it has not previously had such obligations, assume) the obligations for all Crossover Claims for which the last injurious exposure occurred at a location owned or operated by a Parent Group Member. In the event that ownership or operation of such a location is not known with respect to a Crossover Claim, responsibility for the claim will be allocated to SpinCo if the employee was employed by an SpinCo Group Member at the time of last injurious exposure and to RemainCo if the employee was employed by a Parent Group Member at the time of last injurious exposure.

Section 9.3 Additional Details. SpinCo and RemainCo shall use commercially reasonable efforts to provide that workers’ compensation and unemployment insurance costs are not adversely affected for either of them by reason of the Distribution. For the avoidance of doubt, the obligations for a workers’ compensation claim will be allocated between the Parties in accordance with Section 9.1 or 9.2, as applicable, even if the claim is registered or becomes registered by the state workers’ compensation authority in the name of a Party (or the Affiliate of a Party) other than the Party to which the claim is allocated in accordance with Section 9.1 or 9.2, as applicable. The Party to which a workers’ compensation claim is allocated pursuant to Sections 9.1 and 9.2 shall be responsible for all related costs and expenses, including compensation payments, medical payments, Disabled Workers’ Relief Fund payments, self-insured assessments, legal fees and expenses, administration costs and expenses, and violations of specific safety requirement assessments/fines.

ARTICLE X

EMPLOYMENT, SEVERANCE AND OTHER MATTERS

Section 10.1 Employment, Severance, Change-in-Control and Retention Agreements.

(a) SpinCo Obligations. Effective as of the Employee Transfer Date, RemainCo hereby assigns to SpinCo, and SpinCo hereby accepts such assignment and assumes, RemainCo’s rights and obligations arising under the employment, severance, change-in-control, retention and similar agreements listed on Schedule 10.1(a)(i) (the “SpinCo Obligations”), and SpinCo agrees to honor the terms and conditions of those agreements applicable to SpinCo as a successor under the terms of such agreements. Except for SpinCo’s assumption of such agreements as described above, the terms of such agreements shall in all other respects be unaffected. The Parties agree that the SpinCo Employees who are covered by the employment, severance, change-in-control, retention and similar agreements described above are express beneficiaries of this Section 10.1(a). To the extent any of the SpinCo Obligations are paid by RemainCo, SpinCo shall promptly reimburse RemainCo for all such payments made pursuant to the agreements listed on Schedule 10.1(a)(ii), including RemainCo’s share of the related payroll taxes, but in no event later than 30 days following SpinCo’s receipt of RemainCo’s written notice of such payments.

 

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(b) RemainCo Obligations. RemainCo shall continue to be responsible for and remain obligated under the employment, severance, change-in-control, retention and similar agreements described in Schedule 10.1(b) and agrees to honor the terms and conditions of those agreements.

(c) Additional Obligations. SpinCo and RemainCo shall each be solely responsible for any other employment arrangement entered into by any member of the SpinCo Group or any member of the RemainCo Group, respectively, and that are not otherwise allocated by this Agreement to a member of either the RemainCo Group or the SpinCo Group.

(d) Effect on Equity Awards. Notwithstanding any provision of this Article X, and except as otherwise provided in Article III, RemainCo shall remain responsible for administering and settling the RemainCo Equity Compensation Awards, and SpinCo shall remain responsible for administering and settling the SpinCo Equity Compensation Awards. Any provision in an employment, severance, change-in-control, retention and similar agreements described in Schedule 10.1(a) or 10.1(b) which provides for the accelerated vesting of equity awards shall apply in accordance with its terms to RemainCo Equity Compensation Awards and SpinCo Equity Compensation Awards on and after the Employee Transfer Date.

Section 10.2 Severance Plan. On and after the Employee Transfer Date, (i) RemainCo shall have no liability or obligation under any RemainCo severance plan or policy with respect to SpinCo Employees, Former SpinCo Employees and those individuals listed on Schedule 10.2(i), including under the RemainCo Group’s Executive Severance Pay Plan and (ii) SpinCo shall have no liability or obligation under any SpinCo severance plan or policy with respect to RemainCo Employees, Former RemainCo Employees and those individuals listed on Schedule 10.2(ii), including under the SpinCo Group’s Executive Severance Pay Plan. Except as otherwise provided in this Agreement, effective on and after the Employee Transfer Date, SpinCo shall assume and shall be responsible for administering all payments and benefits under the applicable RemainCo severance policies or any termination agreements with Former SpinCo Employees whose employment terminated prior to the Employee Transfer Date for an eligible reason under such policies or in accordance with such agreements.

Section 10.3 Accrued Time Off. SpinCo shall recognize and assume all liability for all vacation, holiday, sick leave, flex days, personal days and paid-time off with respect to SpinCo Employees, and SpinCo shall credit each SpinCo Employee with such accrual effective as of the Employee Transfer Date.

Section 10.4 Leaves of Absence. SpinCo will continue to apply the appropriate leave of absence policies applicable to inactive SpinCo Employees who are on an approved leave of absence as of the Employee Transfer Date. Leaves of absence taken by SpinCo Employees prior to the Employee Transfer Date shall be deemed to have been taken as employees of a member of the SpinCo Group.

 

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Section 10.5 Director Programs. RemainCo shall retain responsibility for the payment of any fees payable in respect of service on the RemainCo Board of Directors that are payable but not yet paid as of the Employee Transfer Date, including responsibility for the fees payable under the Amended and Restated Compensation Plan for Non-Employee Directors, and SpinCo shall not have any responsibility for any such payments. Until the first annual meeting of RemainCo following the Distribution Date, RemainCo shall continue to maintain the Amended and Restated Compensation Plan for Non-Employee Directors on the substantially the same terms and conditions as in effect immediately prior to the Distribution Date, except for such modifications that are required to comply with applicable law or necessary and appropriate to reflect the Distribution. Until the first annual meeting of SpinCo following the Distribution Date, SpinCo shall maintain a non-employee director compensation plan containing terms and conditions substantially the same as RemainCo’s Amended and Restated Plan for Non-Employee Directors as in effect immediately prior to the Distribution Date, except for such modifications that are required to comply with applicable law or necessary and appropriate to reflect the Distribution.

Section 10.6 Restrictive Covenants in Employment and Other Agreements.

(a) To the fullest extent permitted by the agreements described in this Section 10.6(a) and applicable law, RemainCo hereby assigns, or shall cause a member of the RemainCo Group to assign, to SpinCo or a member of the SpinCo Group, as designated by SpinCo, all agreements containing restrictive covenants (including confidentiality and non-competition provisions) between a member of the RemainCo Group and a SpinCo Employee or Former SpinCo Employee, with such assignment effective as of the Employee Transfer Date. To the extent that assignment of such agreements is not permitted, effective as of the Employee Transfer Date, each member of the SpinCo Group shall be considered to be a successor to each member of the RemainCo Group for purposes of, and a third-party beneficiary with respect to, all agreements containing restrictive covenants (including confidentiality and non-competition provisions) between a member of the RemainCo Group and a SpinCo Employee or Former SpinCo Employee whom SpinCo reasonably determines have substantial knowledge of the business activities of the SpinCo Group, such that each member of the SpinCo Group shall enjoy all the rights and benefits under such agreements (including rights and benefits as a third-party beneficiary), with respect to the business operations of the SpinCo Group; provided, however, that in no event shall RemainCo be permitted to enforce such restrictive covenant agreements against SpinCo Employees or Former SpinCo Employees for action taken in their capacity as employees of a member of the SpinCo Group.

(b) To the fullest extent permitted by the agreements described in this Section 10.6(b) and applicable law, SpinCo hereby assigns, or shall cause a member of the SpinCo Group to assign, to RemainCo or a member of the RemainCo Group, as designated by RemainCo, all agreements containing restrictive covenants (including confidentiality and non-competition provisions) between a member of the SpinCo Group and a RemainCo Employee or Former RemainCo Employee, with such assignment effective as of the Employee Transfer Date. To the extent that assignment of such agreements is not permitted, effective as of the Employee Transfer Date, each member of the RemainCo Group shall be considered to be a successor to each member of the SpinCo Group for purposes of, and a third-party beneficiary with respect to, all agreements containing restrictive covenants (including confidentiality and non-competition provisions) between a member of the SpinCo Group and a RemainCo Employee or Former RemainCo Employee whom RemainCo reasonably determines have substantial knowledge of the business

 

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activities of the RemainCo Group, such that RemainCo and each member of the RemainCo Group shall enjoy all the rights and benefits under such agreements (including rights and benefits as a third-party beneficiary), with respect to the business operations of the RemainCo Group; provided, however, that in no event shall SpinCo be permitted to enforce such restrictive covenant agreements against RemainCo Employees or Former RemainCo Employees for action taken in their capacity as employees of a member of the RemainCo Group.

Section 10.7 Non-Solicitation.

(a) During the 18 month period commencing on the Distribution Date (“Non-Solicitation Period”), RemainCo will not, directly or indirectly, on its own behalf or in conjunction with any person or legal entity, recruit, solicit, or induce, or attempt to recruit, solicit or induce, or hire SpinCo’s Chief Executive Officer or any of those employees reporting directly to SpinCo’s Chief Executive Officer at any time during the Non-Solicitation Period to terminate their employment relationship with the SpinCo Group. The foregoing restriction does not include the placement of general advertisements for employment with the RemainCo Group in the same types of print or electronic publications used by the RemainCo Group to advertise for employment prior to the Distribution Date and consistent with RemainCo Group practice prior to the Distribution Date or hiring any individual who responds to such general advertisements. RemainCo will advise any third parties recruiting on RemainCo’s behalf of the obligation set forth in this Section 10.7 and will direct those third parties to comply with that obligation.

(b) During the Non-Solicitation Period, SpinCo will not, directly or indirectly, on its own behalf or in conjunction with any person or legal entity, recruit, solicit, or induce, or attempt to recruit, solicit or induce, or hire RemainCo’s Chief Executive Officer or any of those employees reporting directly to RemainCo’s Chief Executive Officer at any time during the Non-Solicitation Period to terminate their employment relationship with the RemainCo Group. The foregoing restriction does not include the placement of general advertisements for employment with the SpinCo Group in the same types of print or electronic publications used by the SpinCo Group to advertise for employment prior to the Distribution Date and consistent with SpinCo Group practice prior to the Distribution Date or hiring any individual who responds to such general advertisements. SpinCo will advise any third parties recruiting on SpinCo’s behalf of the obligation set forth in this Section 10.7 and will direct those third parties to comply with that obligation.

ARTICLE XI

GENERAL PROVISIONS

Section 11.1 Preservation of Rights to Amend. The rights of each member of the RemainCo Group and each member of the SpinCo Group to amend, waive, or terminate any plan, arrangement, agreement, program, or policy referred to herein shall not be limited in any way by this Agreement.

Section 11.2 Confidentiality. Each Party agrees that any information conveyed or otherwise received by or on behalf of a Party in conjunction herewith that is not otherwise public through no fault of such Party is confidential and is subject to the terms of the confidentiality provisions set forth in the Separation Agreement.

 

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Section 11.3 Administrative Complaints/Litigation.

(a) Except as otherwise provided in this Agreement, on and after the Employee Transfer Date, SpinCo shall assume, and be solely liable for, the handling, administration, investigation and defense of actions, including ERISA, occupational safety and health, employment standards, union grievances, wrongful dismissal, discrimination or human rights and unemployment compensation claims asserted at any time against RemainCo or any member of the RemainCo Group by any SpinCo Employee or Former SpinCo Employee (including any dependent or beneficiary of any such Employee) or any other person, to the extent such actions or claims arise out of or relate to employment or the provision of services (whether as an employee, contractor, consultant or otherwise) to or with respect to the business activities of any member of the SpinCo Group, whether or not such employment or services were performed before or after the Distribution.

(b) Except as otherwise provided in this Agreement, on and after the Employee Transfer Date, RemainCo shall assume, and be solely liable for, the handling, administration, investigation and defense of actions, including ERISA, occupational safety and health, employment standards, union grievances, wrongful dismissal, discrimination or human rights and unemployment compensation claims asserted at any time against SpinCo or any member of the SpinCo Group by any RemainCo Employee or Former RemainCo Employee (including any dependent or beneficiary of any such Employee) or any other person, to the extent such actions or claims arise out of or relate to employment or the provision of services (whether as an employee, contractor, consultant or otherwise) to or with respect to the business activities of any member of the RemainCo Group, whether or not such employment or services were performed before or after the Distribution.

(c) To the extent that any legal action relates to a putative or certified class of plaintiffs, which includes both RemainCo Employees (or Former RemainCo Employees) and SpinCo Employees (or Former SpinCo Employees) and such action involves employment or benefit plan related claims, reasonable costs and expenses incurred by the Parties in responding to such legal action shall be allocated among the Parties equitably in proportion to a reasonable assessment of the relative proportion of Employees included in or represented by the putative or certified plaintiff class. The procedures contained in the indemnification and related litigation cooperation provisions of the Separation Agreement shall apply with respect to each Party’s indemnification obligations under this Section 11.3.

Section 11.4 Reimbursement and Indemnification. Except as otherwise provided in the TSA, RemainCo and SpinCo hereto agrees to reimburse the other Party, within 60 days of receipt from the other Party of reasonable verification, for all costs and expenses which the other Party may incur on its behalf as a result of any of the respective RemainCo and SpinCo Retirement Plans, Deferred Compensation Plans Welfare Plans, and Benefit Arrangements. All liabilities retained, assumed or indemnified against by SpinCo pursuant to this Agreement, and all liabilities retained, assumed or indemnified against by RemainCo pursuant to this Agreement, shall in each case be subject to the indemnification provisions of the Separation Agreement. Notwithstanding

 

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anything to the contrary, (i) no provision of this Agreement shall require any member of the SpinCo Group to pay or reimburse to any member of the RemainCo Group any benefit-related cost item that a member of the SpinCo Group has previously paid or reimbursed to any member of the RemainCo Group; and (ii) no provision of this Agreement shall require any member of the RemainCo Group to pay or reimburse to any member of the SpinCo Group any benefit-related cost item that a member of the RemainCo Group has previously paid or reimbursed to any member of the SpinCo Group.

Section 11.5 Costs of Compliance with Agreement. Except as otherwise provided in this Agreement or any other Ancillary Agreement, each Party shall pay its own expenses in fulfilling its obligations under this Agreement.

Section 11.6 Fiduciary Matters. RemainCo and SpinCo each acknowledge that actions required to be taken pursuant to this Agreement may be subject to fiduciary duties or standards of conduct under ERISA or other applicable law, and no Party shall be deemed to be in violation of this Agreement if it fails to comply with any provisions hereof based upon its good faith determination (as supported by advice from counsel experienced in such matters) that to do so would violate such a fiduciary duty or standard. Each Party shall be responsible for taking such actions as are deemed necessary and appropriate to comply with its own fiduciary responsibilities and shall fully release and indemnify the other Party for any liabilities caused by the failure to satisfy any such responsibility.

Section 11.7 Form S-8. Before the Distribution or as soon as reasonably practicable thereafter and subject to applicable law, SpinCo shall prepare and file with the SEC a registration statement on Form S-8 (or another appropriate form) registering under the Securities Act of 1933 the offering of a number of shares of SpinCo Common Stock at a minimum equal to the number of shares subject to the SpinCo Equity Compensation Awards. SpinCo shall use commercially reasonable efforts to cause any such registration statement to be kept effective (and the current status of the prospectus or prospectuses required thereby shall be maintained) as long as any SpinCo Equity Compensation Awards may remain outstanding.

Section 11.8 Entire Agreement. This Agreement, together with the documents referenced herein (including the Separation Agreement, the Ancillary Agreements and the plans and agreements referenced herein), constitutes the entire agreement and understanding between the Parties with respect to the subject matter hereof and supersedes all prior written and oral and all contemporaneous oral agreements and understandings with respect to the subject matter hereof and there are no agreements or understandings between the Parties other than those set forth or referred to herein or therein. To the extent any provision of this Agreement conflicts with the provisions of the Separation Agreement, the provisions of this Agreement shall be deemed to control with respect to the subject matter hereof.

Section 11.9 Binding Effect; No Third-Party Beneficiaries; Assignment. This Agreement shall inure to the benefit of and be binding upon the Parties and their respective successors and permitted assigns. This Agreement is solely for the benefit of the Parties and should not be deemed to confer upon any third parties any remedy, claim, liability, reimbursement, cause of action or other right in excess of those existing without reference to this Agreement. Nothing in this Agreement is intended to amend any employee benefit plan or affect the applicable plan sponsor’s

 

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right to amend or terminate any employee benefit plan pursuant to the terms of such plan. The provisions of this Agreement are solely for the benefit of the Parties, and no current or former Employee, officer, director or independent contractor or any other individual associated therewith shall be regarded for any purpose as a third-party beneficiary of this Agreement. None of this Agreement or any of the rights, interests or obligations hereunder may be assigned or delegated, in whole or in part, by operation of law or otherwise, by any Party without the prior written consent of the other Party to this Agreement being so assigned or delegated, and any such assignment without such prior written consent shall be null and void. No such consent shall be required for the assignment of a Party’s rights and obligations under this Agreement if: (a) any party to this Agreement (or any of its successors or permitted assigns) (i) shall consolidate with or merge into any other Person and shall not be the continuing or surviving business entity of such consolidation or merger or (ii) shall transfer all or substantially all of its properties and/or assets to any Person; and (b) in any such case, the resulting, surviving or assignee Person expressly assumes all of the obligations of the relevant party (or its successors or permitted assigns, as applicable) under this Agreement. No assignment permitted by this Section 11.9 shall release the assigning party from liability for the full performance of its obligations under this Agreement.

Section 11.10 Amendment. No provisions of this Agreement shall be deemed waived, amended, supplemented or modified by a Party, unless such waiver, amendment, supplement or modification is in writing and signed by the authorized representative of the Party against whom enforcement of such waiver, amendment, supplement or modification is sought.

Section 11.11 Failure or Indulgence Not Waiver; Remedies Cumulative. No failure or delay of any Party (or its applicable Group members) in exercising any right or remedy under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such right or power, or any course of conduct, preclude any other or further exercise thereof or the exercise of any other right or power. Waiver by any Party of any default by the other Party of any provision of this Agreement shall not be deemed a waiver by the waiving Party of any subsequent or other default, nor shall it prejudice the rights of the waiving Party. All rights and remedies existing under this Agreement or the Schedules attached hereto are cumulative to, and not exclusive of, any rights or remedies otherwise available.

Section 11.12 Notices. All notices or other communications under this Agreement shall be in writing and shall be deemed to be duly given when delivered or mailed in accordance with the provisions of the Separation Agreement.

Section 11.13 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement. Each Party acknowledges that it and the other Party may execute this Agreement by manual, stamp or mechanical signature, and that delivery of an executed counterpart of a signature page to this Agreement (whether executed by manual, stamp or mechanical signature) by facsimile or by email in portable document format (PDF) shall be effective as delivery of such executed counterpart of this Agreement. Each Party expressly adopts and confirms a stamp or mechanical signature (regardless of whether delivered in person, by mail, by courier, by facsimile or by email in portable document format (PDF)) made in its respective name as if it were a manual signature delivered in person, agrees that it shall not assert that any such signature or delivery is not adequate to bind it

 

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to the same extent as if it were signed manually and delivered in person and agrees that, at the reasonable request of the other Party at any time, it shall as promptly as reasonably practicable cause this Agreement to be manually executed (any such execution to be as of the date of the initial date hereof) and delivered in person, by mail or by courier.

Section 11.14 Severability. In the event that any one or more of the terms or provisions of this Agreement the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement, or the application of such term or provision to Persons or circumstances or in jurisdictions other than those as to which it has been determined to be invalid, illegal or unenforceable, and the Parties shall use their commercially reasonable efforts to substitute one or more valid, legal and enforceable terms or provisions into this Agreement which, insofar as practicable, implement the purposes and intent of the Parties. Any term or provision of this Agreement held invalid or unenforceable only in part, degree or within certain jurisdictions shall remain in full force and effect to the extent not held invalid or unenforceable to the extent consistent with the intent of the parties as reflected by this Agreement. To the extent permitted by applicable Law, each party waives any term or provision of Law which renders any term or provision of this Agreement to be invalid, illegal or unenforceable in any respect.

Section 11.15 Governing Law. This Agreement (and any claims or disputes arising out of or related hereto or to the transactions contemplated hereby or to the inducement of any party to enter herein, whether for breach of contract, tortious conduct or otherwise and whether predicated on common law, statute or otherwise) shall be governed by and construed and interpreted in accordance with the laws of the State of Georgia irrespective of the choice of laws principles of the State of Georgia, including all matters of validity, construction, effect, enforceability, performance and remedies.

Section 11.16 Dispute Resolution. Except as specifically provided in this Agreement, in the event of any controversy, dispute or claim (a “Dispute”) arising out of or relating to any Party’s rights or obligations under this Agreement (whether arising in contract, tort or otherwise), such Dispute shall be resolved in accordance with the dispute resolution process referred to in Article XI of the Separation Agreement.

Section 11.17 Performance. Each of RemainCo and SpinCo shall cause to be performed, and hereby guarantees the performance of all actions, agreements and obligations set forth herein to be performed by any member of the RemainCo Group and any member of the SpinCo Group, respectively. The Parties each agree to take such further actions and to execute, acknowledge and deliver, or to cause to be executed, acknowledged and delivered, all such further documents as are reasonably requested by the other for carrying out the purposes of this Agreement or of any document delivered pursuant to this Agreement.

Section 11.18 Construction. This Agreement shall be construed as if jointly drafted by the Parties and no rule of construction or strict interpretation shall be applied against any Party.

 

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Section 11.19 Effect if Distribution Does Not Occur. Notwithstanding anything in this Agreement to the contrary, if the Separation Agreement is terminated prior to the Distribution Date, this Agreement shall be of no further force and effect.

 

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed in their names by a duly authorized officer as of the date first written above.

 

AARON’S HOLDINGS COMPANY, INC.

By:

 

/s/ Steven A. Michaels

 

Name: Steven A. Michaels

 

Title: Chief Executive Officer, Progressive Leasing

THE AARON’S COMPANY, INC.

By:

 

/s/ Douglas A. Lindsay

 

Name: Douglas A. Lindsay

 

Title: Chief Executive Officer

[Signature Page to Employee Matters Agreement]

Exhibit 10.4

Execution Version

ASSIGNMENT AGREEMENT

THIS ASSIGNMENT AGREEMENT (this “Agreement”) is made and entered into as of November 29, 2020 (the “Effective Date”), by and between Prog Leasing, LLC, a Delaware limited liability company (“Progressive”), Aaron’s, LLC, a Georgia limited liability company (“Aarons”), and The Aaron’s Company, Inc., a Georgia corporation (“SpinCo”). Capitalized terms not defined in the body of this Agreement shall have the definitions set forth in Schedule A. Each of Progressive, Aaron’s, and SpinCo may be referred to herein individually as a “Party” and collectively as the “Parties”.

R E C I T A L S

WHEREAS, Progressive desires to contribute, convey, assign and transfer to Aaron’s, and Aaron’s desires to accept and acquire from Progressive, an undivided and equal ownership interest in Progressive’s right, title and interest in, to and under (including all Intellectual Property Rights in and to) the Shared Software;

WHEREAS, Progressive also desires to contribute, convey, assign and transfer to Aaron’s, and Aaron’s desires to accept and acquire from Progressive, all of Progressive’s right, title and interest in, to and under (including all Intellectual Property Rights in and to) the Assigned IP together with all goodwill associated therewith, and all applications, registrations and renewals in connection therewith; and

WHEREAS, Aaron’s desires to contribute, convey, assign and transfer to Progressive certain Customer Data, and Progressive desires to accept and acquire from Aaron’s, (solely to the extent permitted under and subject to all applicable terms, conditions, restrictions and limitations contained in any applicable terms of use and/or privacy policies, and applicable law), an undivided and equal ownership interest in Aaron’s right, title and interest in the Customer Data.

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:

1. Conveyance and Ownership of Shared Software.

(a) Conveyance and Assignment. Pursuant to and in accordance with the terms and conditions of this Agreement, as of the Effective Date, Progressive hereby contributes, conveys, assigns and transfers to Aaron’s, and Aaron’s hereby accepts and acquires from Progressive, an undivided and equal ownership interest in all of Progressive’s right, title and interest in, to and under the Shared Software.

(b) Ownership and Exploitation of Shared Software and Software Improvements. The Parties each hereby confirm that as of the Effective Date and as a result of the contribution, conveyance, assignment and transfer contemplated by Section 1(a), the Shared Software shall be owned by the Parties. Subject to the terms of this Agreement, each Party may use and commercially exploit the Shared Software for its own benefit in any manner without the consent of the other Party and without any obligation, accounting, or payment of any fee to the other Party. However, the Parties shall not file for any intellectual property protection worldwide for any Shared Software or Software Improvements without written permission from the other Party obtained in advance of such filing.

(c) Prosecution and Enforcement of Shared Software. In the event that any Party becomes aware of or suspects an infringement or misappropriation by a third party of the Shared Software, such Party shall promptly notify the other Party in writing. Any Party shall have the right to bring an Action for infringement, misappropriation, or other violation with respect to the Shared Software (“Enforcement Action”) without the consent of the other Party, except that the Parties may cooperate, at their respective


own expense, in any Enforcement Action with respect to alleged infringement, misappropriation, or other violation of Shared Software. If a Party pursues an Enforcement Action against an alleged infringer, that Party shall control the Enforcement Action and pay all fees and expenses associated with the Enforcement Action and receive all awards for damages and all settlement proceeds. If applicable law requires the other Party to join the Enforcement Action in order for a Party to bring the Enforcement Action, the other Party shall join the Action, and any reasonable, documented out-of-pocket costs incurred by the non-asserting Party in connection its participation in the Enforcement Action shall be paid by the asserting Party.

(d) Defense of Shared Software Rights. Each Party shall promptly notify the other Party of any Action with respect to the Shared Software that is brought against the notifying Party. Each Party may decide in its sole discretion whether to defend against any Action with respect to the Shared Software that is brought against the Party. Each Party shall be fully responsible for its own defense against any Action brought against the Party with respect to the Shared Software. Each Party shall bear all expenses related to the Party’s defense against such Action. If applicable law requires the other Party to join the Action in order for the Party to defend an Action, the other Party shall join the Action, and any reasonable, documented out-of-pocket costs incurred by the other Party in connection its participation in the Action shall be paid by the requesting Party. If a Party desires to participate in the defense of Action brought against the other Party, the Parties shall cooperate and negotiate a joint-defense strategy litigation plan, including the sharing of costs and expenses, in an effort to protect the Shared Software.

2. Conveyance of Assigned IP. Pursuant to and in accordance with the terms and conditions of this Agreement, as of the Effective Date, Progressive hereby contributes, conveys, assigns and transfers to Aaron’s, and Aaron’s hereby accepts and acquires from Progressive, all of Progressive’s right, title and interest in, to and under the following: (a) all Assigned IP; (b) all goodwill associated therewith; (c) the right, if any, to register, prosecute, maintain and defend such Assigned IP before any public or private agency or registrar; (d) the right to bring Actions, defend against Actions, or recover damages or other compensation for past, present or future infringements, dilutions, misappropriations, or other violations of such Assigned IP, including the right to sue and obtain equitable relief in respect of such infringements, dilutions, misappropriations or other violations; and (e) the right to fully and entirely stand in the place of Progressive in all matters related thereto.

3. Improvements.

(a) As between the Parties, any improvements, enhancements, variations, deviations, changes or modifications to the Shared Software (“Software Improvements”) created, developed or reduced to practice by or on behalf of any Party following the Effective Date shall be owned solely by that Party.

(b) No Party has a duty or obligation to exchange, disclose, license or provide any Software Improvements created, developed or reduced to practice by or on behalf of such Party to the other Party. No Party has a right or license to use or commercially exploit the other Party’s Software Improvements, except by a separate written agreement signed by each Party.

(c) Any improvements, enhancements, variations, deviations, changes or modifications to the Assigned IP created by or on behalf of Aaron’s following the Effective Date shall be owned by Aaron’s (“Aaron’s Model Improvements”) and, for the avoidance of doubt, Progressive shall have no rights or interests in or to any of the Aaron’s Model Improvements. Any improvements, enhancements, variations, deviations, changes or modifications to the Progressive Models created by or on behalf of Progressive following the Effective Date shall be owned by Progressive (“Progressive Model Improvements”), and, for the avoidance of doubt, Aaron’s shall have no rights or interests in or to any of the Progressive Model Improvements.

 

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(d) Notwithstanding anything to the contrary in Section 3(c), if Progressive provides assistance to Aaron’s pursuant to the TSA with respect to the Shared Software or the Assigned IP, and in doing so (i) Progressive is provided access to, or Aaron’s discloses to Progressive, any Software Improvements or any of Aaron’s Model Improvements, (ii) Progressive solely creates any Software Improvements for Shared Software or any Aaron’s Model Improvements, or (iii) the Parties jointly create Software Improvements for Shared Software or any Aaron’s Model Improvements (collectively, “TSA IP Improvements”), Aaron’s hereby grants a perpetual, irrevocable, sublicensable, transferable, fully-paid up, non-exclusive license to use, reproduce, make, modify, display, perform, and distribute the TSA IP Improvements, in whole or in part, for Progressive’s business activities, including Progressive’s operation of the Shared Software and the Progressive Models.

4. Conveyance of Aaron’s Customer Data.

(a) Pursuant to and in accordance with the terms and conditions of this Agreement, as of the Effective Date, Aaron’s hereby contributes, conveys, assigns and transfers to Progressive, and Progressive hereby accepts and acquires (solely to the extent permitted under and subject to all applicable terms, conditions, restrictions and limitations contained in any applicable terms of use and/or privacy policies, and applicable law (collectively, “Applicable Terms and Applicable Law”)), an undivided and equal ownership interest in and to all of Aaron’s right, title and interest in, to and under the Customer Data, provided, however, that Progressive may use the Customer Data solely for Progressive’s business activities, including Progressive’s operation of the Shared Software and Progressive Models.

(b) Progressive acknowledges and agrees that (i) the foregoing conveyance (including as to scope, duration, and territory) is expressly limited to the rights that Aaron’s, as of the Effective Date, has to convey to Progressive, including under the Applicable Terms and Applicable Law, (ii) Progressive shall, and shall cause its Affiliates to, comply with and abide by the Applicable Terms and Applicable Law, (iii) none of Aaron’s or its successors or assigns shall be obligated to obtain any additional consents, permissions, or license or sublicense rights in connection with the conveyance of the Customer Data contemplated by this Section 4, (iv) Progressive shall not distribute, convey, or assign the Customer Data to any third party, nor shall Progressive use the Customer Data for any product or service marketing; and (v) THE CUSTOMER DATA IS PROVIDED “AS IS” WITHOUT ANY WARRANTY OF ANY KIND. PROGRESSIVE AGREES THAT PROGRESSIVE’S USE OF THE CUSTOMER DATA IS AT PROGRESSIVE’S SOLE RISK. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EXCEPT AS OTHERWISE EXPRESSLY SET FORTH BY THIS AGREEMENT, AARON’S EXPRESSLY DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES, WHETHER WRITTEN, ORAL, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, CONCERNING THE CUSTOMER DATA, THE VALIDITY, ENFORCEABILITY AND SCOPE OF AARON’S INTELLECTUAL PROPERTY RIGHTS RELATED THERETO, THE ACCURACY, COMPLETENESS, SAFETY, OR USEFULNESS FOR ANY PURPOSE INCLUDING ALL IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR ANY PARTICULAR PURPOSE, TITLE, NON-INFRINGEMENT, QUALITY, USEFULNESS, COMMERCIAL UTILITY, ADEQUACY, OR COMPLIANCE WITH ANY LAW, DOMESTIC OR FOREIGN, AND IMPLIED WARRANTIES ARISING FROM COURSE OF DEALING, COURSE OF PERFORMANCE, USAGE OR TRADE PRACTICE. WITHOUT LIMITATION TO THE FOREGOING, AARON’S SHALL HAVE NO LIABILITY WHATSOEVER TO PROGRESSIVE OR ANY OTHER PERSON FOR OR ON ACCOUNT OF ANY INJURY, LOSS, OR DAMAGE, OF ANY KIND OR NATURE, SUSTAINED BY, OR ANY DAMAGE ASSESSED OR ASSERTED AGAINST, OR ANY OTHER LIABILITY INCURRED BY OR IMPOSED ON PROGRESSIVE OR ANY OTHER PERSON, ARISING OUT OF OR IN CONNECTION WITH OR RESULTING FROM THE USE AND PRACTICE OF THE CUSTOMER DATA. Progressive shall defend, indemnify and hold Aaron’s harmless from and against any and all losses, damages, liabilities, deficiencies, claims, actions, judgments, settlements, interest, awards, penalties, fines, costs or expenses of

 

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whatever kind, including reasonable attorneys’ fees and the cost of enforcing any right to indemnification, relating to or arising from any unauthorized access or use of the Customer Data, including but not limited to any data breach or security incident involving all or any portion of the Customer Data. For the avoidance of doubt, “third party” as used in this Section does not include entities that are Affiliates of Progressive as of the Effective Date. Further, notwithstanding anything to the contrary, Progressive may use the information contained in the Customer Data for product or service marketing if that information: (i) was possessed by Progressive before receipt of the Customer Data from Aaron’s; (ii) is or becomes a matter of public knowledge through no fault of Progressive; (iii) is rightfully received by Progressive from a third-party without a duty of confidentiality; (iv) is independently developed by Progressive; or (v) is used by Progressive with Aaron’s prior written consent.

5. Disclaimers. THE SHARED SOFTWARE AND ASSIGNED IP ARE PROVIDED “AS IS” WITHOUT ANY WARRANTY OF ANY KIND. AARON’S AGREES THAT AARON’S USE OF THE SHARED SOFTWARE AND ASSIGNED IP IS AT AARON’S SOLE RISK. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EXCEPT AS OTHERWISE EXPRESSLY SET FORTH BY THIS AGREEMENT, PROGRESSIVE EXPRESSLY DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES, WHETHER WRITTEN, ORAL, EXPRESS, IMPLIED STATUTORY OR OTHERWISE, CONCERNING THE PERFORMANCE OF THE SHARED SOFTWARE AND ASSIGNED IP, THE VALIDITY, ENFORCEABILITY AND SCOPE OF PROGRESSIVE’S INTELLECTUAL PROPERTY RIGHTS RELATED THERETO, THE ACCURACY, COMPLETENESS, SAFETY, USEFULNESS FOR ANY PURPOSE OR LIKELIHOOD OF SUCCESS (COMMERCIAL, REGULATORY OR OTHER) OF THE SOFTWARE AND ANY OTHER TECHNICAL INFORMATION, TECHNIQUES, MATERIALS, METHODS, PRODUCTS, SERVICES, PROCESSES OR PRACTICES AT ANY TIME MADE AVAILABLE BY PROGRESSIVE INCLUDING ALL IMPLIED WARRANTIES OF MERCHANTABILITY, QUALITY, FITNESS FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT AND WARRANTIES ARISING FROM A COURSE OF DEALING, COURSE OF PERFORMANCE, USAGE OR TRADE PRACTICE. WITHOUT LIMITATION TO THE FOREGOING, PROGRESSIVE SHALL HAVE NO LIABILITY WHATSOEVER TO AARON’S OR ANY OTHER PERSON FOR OR ON ACCOUNT OF ANY INJURY, LOSS, OR DAMAGE, OF ANY KIND OR NATURE, SUSTAINED BY, OR ANY DAMAGE ASSESSED OR ASSERTED AGAINST, OR ANY OTHER LIABILITY INCURRED BY OR IMPOSED ON AARON’S OR ANY OTHER PERSON, ARISING OUT OF OR IN CONNECTION WITH OR RESULTING FROM (A) THE USE AND PRACTICE OF THE SHARED SOFTWARE OR ASSIGNED IP, OR (B) THE USE OF OR ANY ERRORS OR OMISSIONS IN ANY SOFTWARE OR ANY TECHNICAL INFORMATION, TECHNIQUES, OR PROCEDURES OR PROCESSES DISCLOSED BY PROGRESSIVE. PROGRESSIVE DOES NOT WARRANT THAT THE SHARED SOFTWARE OR ASSIGNED IP WILL OPERATE IN COMBINATION WITH HARDWARE, SOFTWARE, SYSTEMS OR DATA NOT PROVIDED BY PROGRESSIVE, EXCEPT AS EXPRESSLY SPECIFIED IN ANY DOCUMENTATION THAT MAY BE PROVIDED, OR THAT THE OPERATION OF THE SHARED SOFTWARE OR THE ASSIGNED IP WILL BE UNINTERRUPTED OR ERROR-FREE.

6. Restrictions on Direct or Indirect Transfers and Use.

(a) During the Restricted Period, SpinCo shall not, and shall cause its Affiliates to not, (i) consummate, or enter into any definitive purchase agreement that would result in the consummation of, a Control Transaction, or (ii) Transfer the Shared Software, Software Improvements, Assigned IP or Aaron’s Model Improvements (other than pursuant to a Permitted Transfer), in each case with respect to the foregoing clauses (i) and (ii) without the prior written consent of Progressive; provided, that in the case of any Control Transaction or Transfer that SpinCo or its Affiliates would be prohibited from consummating pursuant to Section 7.2 of the TMA, this Section 6(a) shall not prohibit the consummation of such Control Transaction or Transfer if SpinCo or its Affiliates are permitted to consummate such Control Transaction or Transfer pursuant to Section 7.3 of the TMA.

 

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(b) If, during the Restricted Period, SpinCo or its Affiliates engages in any merger, consolidation, asset sale, acquisition, liquidation, dissolution, restructuring, reorganization, recapitalization, other business combination transaction or stock issuance that does not constitute a Control Transaction (a “Non-Control Transaction”), then SpinCo shall not, and shall cause its Affiliates to not, disclose or permit the disclosure of the Shared Software, Software Improvements, Assigned IP and Aaron’s Model Improvements to any entity or entities (i) in connection with the consummation of the Non-Control Transaction, or (ii) resulting from such Non-Control Transaction, in each case without the prior written consent of Progressive; provided, that in the case of any Non-Control Transaction that SpinCo or its Affiliates would be prohibited from consummating pursuant to Section 7.2 of the TMA, this Section 6(b) shall not prohibit the consummation of such Non-Control Transaction if SpinCo or its Affiliates are permitted to consummate such Non-Control Transaction pursuant to Section 7.3 of the TMA; provided, further, that SpinCo and its subsidiaries may, without the prior written consent of Progressive, use the Shared Software, Software Improvements, Assigned IP and Aaron’s Model Improvements in the furtherance of a business resulting from a Non-Control Transaction if such business is primarily engaged in the Aaron’s Business following the consummation of such Non-Control Transaction.

(c) During the Restricted Period, SpinCo shall, and shall cause its Affiliates to, use and commercially exploit the Shared Software, Software Improvements, Assigned IP and Aaron’s Model Improvements solely with respect to the conduct and operation of the Aaron’s Business.

(d) For the avoidance of doubt, SpinCo’s franchisees shall not be permitted access to the Shared Software or Software Improvements, or the Assigned IP or Aaron’s Model Improvements, during the Restricted Period, nor shall the Shared Software, Software Improvements, Assigned IP or Aaron’s Model Improvements be Transferred to SpinCo’s franchisees during the Restricted Period; provided, that SpinCo’s franchisees may use the software code embodying the Shared Software, Software Improvements, Assigned IP and Aaron’s Model Improvements for their intended purpose and function if and only if such software code is at all times hosted and exclusively controlled by Aaron’s or its Controlled Subsidiaries, and such franchisees are denied at all times any access to such software code in any form or media.

For purposes of this Agreement:

Aaron’s Business” has the meaning set forth in the Separation Agreement. In addition, for purposes of this Agreement the Aaron’s Business shall also include any business, operations and activities conducted by SpinCo or its Affiliates after the consummation of the Distribution (as defined in the Separation Agreement) that primarily consists of the direct-to-consumer leasing, lending, or retail sales from an on-line marketplace of inventory owned by SpinCo or subsidiaries at the time the inventory is presented to the consumer on the internet or through other digital or non-digital channels.

Controlled Subsidiary” means any subsidiary of SpinCo engaged in the Aaron’s Business and in which SpinCo owns, directly or indirectly, 100% of the capital stock and profits interests of such subsidiary at all times following any Permitted Transfer of the Shared Software, Software Improvements, Assigned IP or Aaron’s Model Improvements.

 

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Control Transaction” mean a transaction or a series of related transactions in which (a) a person or “group” of persons acquires, directly or indirectly, including by merger, consolidation, asset sale, acquisition, liquidation, dissolution, restructuring, reorganization, recapitalization or other business combination transaction, control of at least a majority of the total equity or assets of SpinCo or (b) (i) SpinCo merges with or into another entity, or such entity merges with or into SpinCo, and (ii) the shareholders of SpinCo cease to own more than 50% of the voting capital stock of the combined company or entity resulting from such transaction or series of related transactions (with it being acknowledged that any transaction or series of related transactions that does not constitute a Control Transaction under clause (b) shall not be deemed to be a Control Transaction under clause (a)).

Permitted Transfer” means a Transfer (a) any Controlled Subsidiary of SpinCo; provided that as a condition to any such Transfer, SpinCo shall cause such Controlled Subsidiary to be subject to the same prohibitions set forth in this Section 6 as if such Controlled Subsidiary were an original party hereto, or (b) the pledging or granting of any security interest to one or more third-party lenders in connection with a bona-fide financing transaction (a “Bona Fide Financing Transaction”); provided, that any credit facility, indenture or other lending arrangement entered into by SpinCo in connection with any such Bona Fide Financing Transaction shall provide that any lender or creditor of SpinCo or its Affiliates will not be entitled to Transfer the Shared Software, Software Improvements, Assigned IP or Aaron’s Model Improvements, including in the event of any foreclosure.

Restricted Period” means the period commencing on the Distribution Date (as defined in the Separation Agreement) and ending on the date that is the twelve (12) anniversary of the consummation of the Distribution (as defined in the Separation Agreement).

Separation Agreement” means the Separation and Distribution Agreement by and between Aaron’s Holdings Company, Inc. and SpinCo in the form provided by the Parties in connection with the execution of this Agreement.

Transfer” means a transfer, sale, assignment, pledge, hypothecation or gift of, creation of a security interest in or encumbrance or other lien on, or any other disposal, whether or not voluntary.

7. Limitation of Liability.

(a) IN NO EVENT SHALL PROGRESSIVE OR ITS AFFILIATES BE LIABLE FOR ANY SPECIAL, INCIDENTAL, INDIRECT, EXEMPLARY, PUNITIVE, OR CONSEQUENTIAL DAMAGES WHATSOEVER (INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF BUSINESS REVENUES OR PROFITS, BUSINESS INTERRUPTION, LOSS OR CORRUPTION OF DATA OR BUSINESS INFORMATION, OR ANY OTHER PECUNIARY LOSS) ARISING OUT OF THE USE OF OR INABILITY TO USE THE SHARED SOFTWARE AND ASSIGNED IP. IN NO EVENT SHALL AARON’S OR ITS AFFILIATES BE LIABLE FOR ANY SPECIAL, INCIDENTAL, INDIRECT, EXEMPLARY, PUNITIVE, OR CONSEQUENTIAL DAMAGES WHATSOEVER (INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF BUSINESS REVENUES OR PROFITS, BUSINESS INTERRUPTION, LOSS OR CORRUPTION OF DATA OR BUSINESS INFORMATION, OR ANY OTHER PECUNIARY LOSS) ARISING OUT OF THE USE OF OR INABILITY TO USE THE CUSTOMER DATA. THE FOREGOING LIMITATIONS SHALL APPLY TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, REGARDLESS OF WHETHER A PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND REGARDLESS OF WHETHER ANY REMEDY FAILS OF ITS ESSENTIAL PURPOSE.

 

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(b) EXCEPT FOR PROGRESSIVE’S INDEMNITY OBLIGATION IN SECTION 4(B), TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY’S CUMULATIVE AGGREGATE LIABILITY TO THE OTHER PARTY SHALL BE LIMITED TO FIVE HUNDRED U.S. DOLLARS (U.S. $500.00). THIS SECTION 7(B) APPLIES REGARDLESS OF HOW THE LIABILITY AROSE OR THE THEORY OF LIABILITY, INCLUDING WITHOUT LIMITATION CONTRACT OR TORT (INCLUDING PRODUCTS LIABILITY, STRICT LIABILITY, NEGLIGENCE AND MISREPRESENTATION).

8. Representations and Warranties. Progressive hereby represents and warrants to Aaron’s and SpinCo, and Aaron’s and SpinCo hereby represent and warrant to Progressive, that the execution, delivery and performance of this Agreement (i) is within its legal right, power and capacity, (ii) has been duly authorized, and (iii) does not require it to obtain any consent or approval that has not been obtained.

9. Confidentiality.

(a) Standard of Care; Restrictions on Use or Disclosure. Each Party agrees to treat as strictly confidential all Confidential Information received from the other Party, and shall use the same degree of care to avoid unauthorized use, reproduction or disclosure of the discloser’s Confidential Information as it employs with its own confidential and proprietary information, but not less than a reasonable degree of care. Without limiting the generality of the preceding sentence, no Party shall: (a) use or reproduce any Confidential Information of the other Party except for the purpose of exercising its rights and performing its obligations under the Agreement; or (b) disclose or permit the disclosure of any Confidential Information of the other Party except with the other Party’s prior written consent in each instance. Notwithstanding anything to the contrary herein, any Party may disclose the terms and conditions of this Agreement in confidence to its attorneys, accountants, professional advisors and bankers in the ordinary course of business, as well as to current and potential investors in connection with a proposed financing or acquisition transaction involving a Party. For Confidential Information that does not constitute “trade secrets” under applicable law, these confidentiality obligations will expire five years after the termination or expiration of this Agreement. For Confidential Information that constitutes a “trade secret” under applicable law, these confidentiality obligations will continue until such information ceases to constitute a “trade secret” under applicable law.

(b) Compelled Disclosure. If a Party is requested or required to disclose Confidential Information disclosed to them by the other Party by any order or requirement of a court, administrative agency or other governmental body, such Party will promptly notify the other in writing in advance of such order or requirement so that the disclosing Party may seek a protective order or other relief or, in the disclosing Party’s sole discretion, waive compliance with the terms of this Agreement. In the event that no such protective order or other remedy is obtained, or that the disclosing Party waives compliance with the terms of this Agreement, the receiving Party will disclose only that portion of the Confidential Information which is advised by competent legal counsel as being legally required to be disclosed and will exercise all reasonable efforts to obtain reliable assurance that confidential treatment will be given to such Confidential Information.

(c) Ownership of Confidential Information. As between Progressive and Aaron’s, each Party shall retain all right, title and interest in and to any Confidential Information of such Party, including any improvements or modifications thereto, that the Party may provide in connection with this Agreement. At any time upon the disclosing Party’s written request, the receiving Party shall promptly return to the other Party, or destroy, all Confidential Information of the disclosing Party obtained by the receiving Party under the Agreement, and all copies and reproductions thereof, except for Confidential Information related to or associated with the Shared Software, including but not limited to the source code for the Shared Software.

 

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10. Further Assurances.

(a) Progressive agrees that at any time and from time to time, without further consideration, it will promptly execute and deliver all further instruments and documents and take all further actions requested by Aaron’s to perfect, protect, secure or more fully evidence Aaron’s and its successors or assignees’ respective right, title and interest in, to and under the Shared Software or the Assigned IP, or to enable Aaron’s or such successors or assignees (or any agent or designee of any of the foregoing) to exercise or enforce any of their respective rights hereunder, including reasonable cooperation and assistance in the prosecution or defense of any Action that may arise in connection with any of the rights assigned hereby.

(b) Aaron’s agrees that at any time and from time to time, without further consideration, it will promptly execute and deliver all further instruments and documents and take all further actions requested by Progressive to perfect, protect, secure or more fully evidence Progressive’s and its successors or assignees’ respective right, title and interest in, to and under the Customer Data or to enable Progressive or such successors or assignees (or any agent or designee of any of the foregoing) to exercise or enforce any of their respective rights hereunder, including reasonable cooperation and assistance in the prosecution or defense of any Action that may arise in connection with any of the rights assigned hereby.

11. Entire Agreement. This Agreement, including the Schedules hereto and the other documents referred to herein which form a part hereof, embodies the entire agreement and understanding between the Parties hereto with respect to the subject matter hereof and supersedes all prior oral or written agreements and understandings relating to the subject matter hereof. No statement, representation, warranty, covenant or agreement of any kind not expressly set forth in this Agreement or the Schedules hereto and the other documents referred to herein shall affect, or be used to interpret, change or restrict, the express terms and provisions of this Agreement.

12. No Waiver. Waiver by any Party of any default by the other Party of any provision of this Agreement shall not be deemed a waiver by the waiving Party of any subsequent or other default, nor shall it prejudice the rights of the waiving Party. No failure or delay by any Party in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall a single or partial exercise thereof prejudice any other right or further exercise thereof or the exercise of any other right, power or privilege.

13. No Third-Party Beneficiaries; Binding Effect. Nothing in this Agreement, express or implied, is intended or shall be construed to confer upon, or give to, any person, other than Progressive and Aaron’s, any rights, remedies, obligations, or liabilities hereunder. This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective successors, heirs, personal representatives, legal representatives, and permitted assigns.

14. Severability. If any provision of this Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement, or the application of such term or provision to Persons or circumstances or in jurisdictions other than those as to which it has been determined to be invalid, illegal or unenforceable, and the Parties shall use their commercially reasonable efforts to substitute one or more valid, legal and enforceable terms or provisions into this Agreement which, insofar as practicable, implement the purposes and intent of the Parties. Any term or provision of this Agreement held invalid or unenforceable only in part, degree or within certain jurisdictions shall remain in full force and effect to the extent not held invalid or unenforceable to the extent consistent with the intent of the Parties as reflected by this Agreement. To the extent permitted by applicable Law, each Party waives any term or provision of law which renders any term or provision of this Agreement to be invalid, illegal or unenforceable in any respect.

 

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15. Governing Law; Submission to Jurisdiction.

(a) This Agreement (and any claims or disputes arising out of or related hereto or to the transactions contemplated hereby or to the inducement of any Party to enter herein, whether for breach of contract, tortious conduct or otherwise and whether predicated on common law, statute or otherwise) shall be governed by and construed and interpreted in accordance with the laws of the State of Georgia, irrespective of the choice of laws principles of the State of Georgia, including all matters of validity, construction, effect, enforceability, performance and remedies.

(b) In the event of any controversy, dispute or claim (a “Dispute”) arising out of or relating to any Party’s rights or obligations under this Agreement (whether arising in contract, tort or otherwise), such Dispute shall be resolved in accordance with the dispute resolution process set out in Article XI of the Separation Agreement.

16. Headings. The Article, Section and Paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement

17. Mutual Drafting. This Agreement shall be deemed to be the joint work product of the Parties and any rule of construction that a document shall be interpreted or construed against a drafter of such document shall not be applicable to this Agreement.

18. Interpretation. In this Agreement, (a) words in the singular shall be deemed to include the plural and vice versa and words of one gender shall be deemed to include the other gender as the context requires; (b) the terms “hereof,” “herein” and “herewith” and words of similar import, unless otherwise stated, shall be construed to refer to this Agreement as a whole (including all of the Schedules hereto) and not to any particular provision of this Agreement; (c) Article, Section or Schedule references are to the Articles, Sections and Schedules of or to this Agreement, unless otherwise specified; (d) unless otherwise stated, all references to any agreement (including this Agreement) shall be deemed to include the schedules, exhibits and annexes to such agreement; (e) any capitalized terms used in any Schedule to this Agreement but not otherwise defined therein shall have the meaning as defined in this Agreement; (f) any reference herein to this Agreement, unless otherwise stated, shall be construed to refer to this Agreement as amended, supplemented or otherwise modified from time to time, in accordance with the terms thereof; (g) the word “including” and words of similar import when used in this Agreement means “including, without limitation,” unless otherwise specified; (h) unless otherwise specified, the word “or” shall not be exclusive; (i) unless otherwise specified in a particular case, the word “days” refers to calendar days; and (j) unless expressly stated to the contrary in this Agreement, all references to “the date hereof”, “the date of this Agreement”, “hereby” and “hereupon” and words of similar import shall all be references to the Effective Date.

19. Counterparts. This Agreement may be executed in one (1) or more counterparts, all of which shall be considered one (1) and the same agreement, and shall become effective when one (1) or more counterparts have been signed by each of the Parties and delivered to the other Party. Each Party acknowledges and agrees that delivery of an executed counterpart of a signature page to this Agreement (whether executed by manual, stamp or mechanical signature) by facsimile or by email in portable document format (PDF) shall be effective as delivery of such executed counterpart of this Agreement. Each Party expressly adopts and confirms a stamp or mechanical signature (regardless of whether delivered in person, by mail, by courier, by facsimile or by email in portable document format (PDF)) made in its respective name as if it were a manual signature delivered in person, agrees that it shall not assert that any

 

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such signature or delivery is not adequate to bind it to the same extent as if it were signed manually and delivered in person and agrees that, at the reasonable request of the other Party at any time, it shall as promptly as reasonably practicable cause this Agreement to be manually executed (any such execution to be as of the date of the initial date hereof) and delivered in person, by mail or by courier.

 

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

 

PROGRESSIVE:

By:

 

/s/ Marvin A. Fentress

Name: Marvin A. Fentress

Title: General Counsel

AARON’S:

By:

 

/s/ C. Kelly Wall

Name: C. Kelly Wall

Title:

 

Chief Financial Officer

SPINCO:

By:

 

/s/ C. Kelly Wall

Name: C. Kelly Wall

Title: Chief Financial Officer

[Signature Page to Assignment Agreement]

Exhibit 10.5

CREDIT AGREEMENT

dated as of November 9, 2020

among

AARON’S, LLC,

as the Borrower,

AARON’S SPINCO, INC.,

as Holdings

THE LENDERS FROM TIME TO TIME PARTY HERETO,

and

TRUIST BANK,

as Administrative Agent, Swingline Lender and an Issuing Bank

BANK OF AMERICA, N.A.,

and

JPMORGAN CHASE BANK, N.A.,

as Co-Syndication Agents

BBVA USA,

CITIZENS BANK, N.A.,

FIFTH THIRD BANK, NATIONAL ASSOCIATION,

and

REGIONS BANK,

as Co-Documentation Agents

TRUIST SECURITIES, INC.,

BOFA SECURITIES, INC.,

and

JPMORGAN CHASE BANK, N.A.,

as Joint Lead Arrangers and Joint Book Runners


TABLE OF CONTENTS

 

         Page  

Article I. DEFINITIONS; CONSTRUCTION

     1  

Section 1.1

  Definitions      1  

Section 1.2

  Classifications of Loans and Borrowings      33  

Section 1.3

  Accounting Terms and Determination      33  

Section 1.4

  Terms Generally      34  

Section 1.5

  Letter of Credit Amounts      34  

Section 1.6

  Times of Day      34  

Article II. AMOUNT AND TERMS OF THE COMMITMENTS

     34  

Section 2.1

  General Description of Facilities      34  

Section 2.2

  Revolving Loans      35  

Section 2.3

  Procedure for Revolving Borrowings      35  

Section 2.4

  Swingline Commitment      35  

Section 2.5

  [Reserved]      35  

Section 2.6

  Procedure for Borrowing of Swingline Loans; Etc.      35  

Section 2.7

  Funding of Borrowings      37  

Section 2.8

  Interest Elections      38  

Section 2.9

  Optional Reduction and Termination of Commitments      39  

Section 2.10

  Repayment of Loans      39  

Section 2.11

  Evidence of Indebtedness      39  

Section 2.12

  Optional Prepayments      40  

Section 2.13

  Mandatory Prepayments      40  

Section 2.14

  Interest on Loans      41  

Section 2.15

  Fees      41  

Section 2.16

  Computation of Interest and Fees      42  

Section 2.17

  Inability to Determine Interest Rates      43  

Section 2.18

  Illegality      44  

Section 2.19

  Increased Costs      44  

Section 2.20

  Funding Indemnity      46  

Section 2.21

  Taxes      46  

Section 2.22

  Payments Generally; Pro Rata Treatment; Sharing of Set-offs      48  

Section 2.23

  Mitigation of Obligations      50  

Section 2.24

  Letters of Credit      51  

Section 2.25

  Increase of Commitments; Additional Lenders      55  

Section 2.26

  Defaulting Lenders      60  


Section 2.27

  Refinancing Facilities      62  

Section 2.28

  Extension of Revolving Loans and Term Loans      64  

Article III. CONDITIONS PRECEDENT TO EFFECTIVENESS

     65  

Section 3.1

  Conditions To Effectiveness      65  

Section 3.2

  Conditions to Funding Availability Date      66  

Section 3.3

  Each Credit Event      67  

Section 3.4

  Delivery of Documents      68  

Article IV. REPRESENTATIONS AND WARRANTIES

     68  

Section 4.1

  Existence; Power      68  

Section 4.2

  Organizational Power; Authorization      68  

Section 4.3

  Governmental Approvals; No Conflicts      68  

Section 4.4

  Financial Statements      69  

Section 4.5

  Litigation and Environmental Matters      69  

Section 4.6

  Compliance with Laws and Agreements      69  

Section 4.7

  Investment Company Act, Etc.      69  

Section 4.8

  Taxes      69  

Section 4.9

  Margin Regulations      70  

Section 4.10

  ERISA      70  

Section 4.11

  Ownership of Property      70  

Section 4.12

  Disclosure      70  

Section 4.13

  Labor Relations      71  

Section 4.14

  Subsidiaries      71  

Section 4.15

  Solvency      71  

Section 4.16

  Anti-Corruption Laws and Sanctions      71  

Section 4.17

  No Affected Financial Institutions      71  

Section 4.18

  Inactive Subsidiaries      71  

Section 4.19

  Collateral Representations      71  

Article V. AFFIRMATIVE COVENANTS

     72  

Section 5.1

  Financial Statements and Other Information      72  

Section 5.2

  Notices of Material Events      74  

Section 5.3

  Existence; Conduct of Business      75  

Section 5.4

  Compliance with Laws, Etc.      75  

Section 5.5

  Payment of Obligations      75  

Section 5.6

  Books and Records      75  

Section 5.7

  Visitation, Inspection, Etc.      75  

Section 5.8

  Maintenance of Properties; Insurance      76  

 

ii


Section 5.9

  Use of Proceeds and Letters of Credit      76  

Section 5.10

  Additional Subsidiaries; Guarantees      76  

Section 5.11

  Further Assurances      78  

Section 5.12

  Collateral      78  

Section 5.13

  Additional Real Estate      79  

Section 5.14

  Designation of Subsidiaries      79  

Article VI. FINANCIAL COVENANTS

     81  

Section 6.1

  Total Net Debt to EBITDA Ratio      81  

Section 6.2

  Fixed Charge Coverage Ratio      81  

Article VII. NEGATIVE COVENANTS

     81  

Section 7.1

  Indebtedness      81  

Section 7.2

  Negative Pledge      84  

Section 7.3

  Fundamental Changes      85  

Section 7.4

  Investments, Loans, Etc.      86  

Section 7.5

  Restricted Payments      87  

Section 7.6

  Sale of Assets      87  

Section 7.7

  Transactions with Affiliates      88  

Section 7.8

  Restrictive Agreements      88  

Section 7.9

  Sale and Leaseback Transactions      88  

Section 7.10

  Legal Name, State of Formation and Form of Entity      88  

Section 7.11

  Accounting Changes      89  

Section 7.12

  Hedging Transactions      89  

Section 7.13

  Activities of Inactive Subsidiaries      89  

Section 7.14

  Government Regulation      89  

Section 7.15

  Ownership of Subsidiaries      89  

Section 7.16

  Use of Proceeds      89  

Section 7.17

  Amendment of Organizational Documents      90  

Section 7.18

  Activities of Holdings      90  

Article VIII. EVENTS OF DEFAULT

     90  

Section 8.1

  Events of Default      90  

Section 8.2

  Application of Funds      93  

Article IX. THE ADMINISTRATIVE AGENT

     95  

Section 9.1

  Appointment of Administrative Agent      95  

Section 9.2

  Nature of Duties of Administrative Agent      95  

Section 9.3

  Lack of Reliance on the Administrative Agent      96  

Section 9.4

  Certain Rights of the Administrative Agent      96  

 

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Section 9.5

  Reliance by Administrative Agent      96  

Section 9.6

  The Administrative Agent in its Individual Capacity      96  

Section 9.7

  Successor Administrative Agent      97  

Section 9.8

  Authorization to Execute other Loan Documents      98  

Section 9.9

  Withholding Tax      98  

Section 9.10

  Administrative Agent May File Proofs of Claim      98  

Section 9.11

  Collateral and Guaranty Matters      99  

Section 9.12

  Right to Realize on Collateral and Enforce Guarantee.      99  

Article X. MISCELLANEOUS

     100  

Section 10.1

  Notices      100  

Section 10.2

  Waiver; Amendments      103  

Section 10.3

  Expenses; Indemnification      105  

Section 10.4

  Successors and Assigns      106  

Section 10.5

  Governing Law; Jurisdiction; Consent to Service of Process      110  

Section 10.6

  WAIVER OF JURY TRIAL      111  

Section 10.7

  Right of Setoff      111  

Section 10.8

  Counterparts; Integration      111  

Section 10.9

  Survival      111  

Section 10.10

  Severability      112  

Section 10.11

  Confidentiality      112  

Section 10.12

  Interest Rate Limitation      112  

Section 10.13

  Patriot Act      112  

Section 10.14

  No Advisory or Fiduciary Responsibility      113  

Section 10.15

  Acknowledgement and Consent to Bail-In of Affected Financial Institutions      113  

Section 10.16

  Certain ERISA Matters      114  

Section 10.17

  Acknowledgement Regarding Any Support QFCs      115  

 

iv


Schedules

 

Schedule 1.1(a)    -      Applicable Margin and Applicable Percentage
Schedule 1.1(b)    -      Lender Commitments
Schedule 1.1(c)    -      Progressive Finance Subsidiaries
Schedule 1.1(d)    -      Inactive Subsidiaries
Schedule 2.24    -      Existing Letters of Credit
Schedule 4.14    -      Subsidiaries
Schedule 7.1    -      Outstanding Indebtedness
Schedule 7.2    -      Existing Liens
Schedule 7.4    -      Existing Investments

Exhibits

 

Exhibit A    -      Form of Assignment and Acceptance
Exhibit B    -      Form of Guarantee Agreement
Exhibit C    -      Form of Borrower Guarantee Agreement
Exhibit 2.3    -      Notice of Revolving Borrowing
Exhibit 2.6    -      Notice of Swingline Borrowing
Exhibit 2.8    -      Form of Conversion/Continuation
Exhibit 3.1(b)(iv)    -      Form of Secretary’s Certificate
Exhibit 3.1(b)(vii)    -      Form of Officer’s Certificate
Exhibit 5.1(c)    -      Form of Compliance Certificate
Exhibit 5.12    -      Form of Security Agreement

 


CREDIT AGREEMENT

THIS CREDIT AGREEMENT (this “Agreement”) is made and entered into as of November 9, 2020, by and among AARON’S, LLC, a Georgia limited liability company (the “Borrower”), AARON’S SPINCO, INC., a Georgia corporation (“Holdings”), the several banks and other financial institutions from time to time party hereto (the “Lenders”) and TRUIST BANK, in its capacity as Administrative Agent for the Lenders (the “Administrative Agent”).

W I T N E S S E T H:

WHEREAS, the Borrower has requested that the Lenders establish a $250,000,000 revolving credit facility (including a $35,000,000 letter of credit subfacility and a $25,000,000 swingline subfacility) in favor of the Borrower; and

WHEREAS, subject to the terms and conditions of this Agreement, the Lenders, the Issuing Banks and the Swingline Lender, to the extent of their respective Commitments as defined herein, are willing severally to establish the requested revolving credit facility, letter of credit subfacility and swingline subfacility in favor of the Borrower;

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the Borrower, Holdings, the Lenders and the Administrative Agent agree as follows:

ARTICLE I.

DEFINITIONS; CONSTRUCTION

Section 1.1 Definitions. In addition to the other terms defined herein, the following terms used herein shall have the meanings herein specified (to be equally applicable to both the singular and plural forms of the terms defined):

Accepting Lenders” shall have the meaning given to such term in Section 2.28.

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

Acquisition Agreement” shall have the meaning set forth in Section 2.25(c).

Additional Lenders” shall have the meaning given to such term in Section 2.25(a).

Adjusted LIBO Rate” shall mean, with respect to each Interest Period for a Eurodollar Borrowing, the rate per annum obtained by dividing (i) LIBOR for such Interest Period by (ii) a percentage equal to 1.00 minus the Eurodollar Reserve Percentage.


Administrative Agent” shall have the meaning assigned to such term in the opening paragraph hereof.

Administrative Questionnaire” shall mean, with respect to each Lender, an administrative questionnaire in the form prepared by the Administrative Agent and submitted to the Administrative Agent duly completed by such Lender.

Affected Financial Institution” shall mean (a) any EEA Financial Institution or (b) any UK Financial Institution.

Affiliate” shall mean, as to any Person, any other Person that directly, or indirectly through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such Person. For purposes of this definition “Control” shall mean the power, directly or indirectly, either to (i) vote ten percent (10%) or more of securities having ordinary voting power for the election of directors (or persons performing similar functions) of a Person or (ii) direct or cause the direction of the management and policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. The terms “Controlling”, “Controlled by”, and “under common Control with” have meanings correlative thereto.

Agent Parties” shall have the meaning given to such term in Section 10.1(b).

Aggregate Revolving Commitments” shall mean, collectively, all Revolving Commitments of all Lenders at any time outstanding. On the Effective Date, the amount of Aggregate Revolving Commitments is $250,000,000.

Agreement” shall have the meaning given to such term in the introductory paragraph hereof.

Anti-Corruption Laws” shall mean all laws, rules, and regulations of any jurisdiction applicable to Holdings, the Borrower and its Subsidiaries from time to time concerning or relating to bribery or corruption.

Applicable Lending Office” shall mean, for each Lender and for each Type of Loan, the “Lending Office” of such Lender (or an Affiliate of such Lender) designated for such Type of Loan in the Administrative Questionnaire submitted by such Lender or such other office of such Lender (or an Affiliate of such Lender) as such Lender may from time to time specify to the Administrative Agent and the Borrower as the office by which its Loans of such Type are to be made and maintained.

Applicable Margin” shall mean (a) with respect to all Base Rate Loans outstanding on any date, a percentage per annum determined by reference to the applicable Total Net Debt to EBITDA Ratio in effect on such date and the column applicable to Base Rate Loans in Schedule 1.1(a) attached hereto and (b) with respect to all Eurodollar Loans outstanding on any date and all letter of credit fees, a percentage per annum determined by reference to the applicable Total Net Debt to EBITDA Ratio in effect on such date and the column applicable to Eurodollar Loans in Schedule 1.1(a) attached hereto; provided, that a change in the Applicable Margin resulting from a change in the Total Net Debt to EBITDA Ratio shall be effective on the second day after which the Borrower has delivered the financial statements required by Section 5.1(a) or (b) and the Compliance Certificate required by Section 5.1(c); provided further, that if at any time the Borrower shall have failed to deliver such financial statements and such certificate, the Applicable Margin shall be at Level V until such time as such financial statements and certificate are delivered, at which time the Applicable Margin shall be determined as provided above. Notwithstanding the foregoing, the Applicable Margin from the Effective Date until the financial statements and Compliance Certificate for the Fiscal Quarter ending on June 30, 2021 are delivered shall be at Level II.

 

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Applicable Percentage” shall mean, with respect to the commitment fee, as of any date, the percentage per annum determined by reference to the applicable Total Net Debt to EBITDA Ratio in effect on such date as set forth on Schedule 1.1(a) attached hereto; provided, that a change in the Applicable Percentage resulting from a change in the Total Net Debt to EBITDA Ratio shall be effective on the second day after which the Borrower has delivered the financial statements required by Section 5.1(a) or (b) and the Compliance Certificate required by Section 5.1(c); provided, further, that if at any time the Borrower shall have failed to deliver such financial statements and such certificate, the Applicable Percentage shall be at Level V until such time as such financial statements and certificate are delivered, at which time the Applicable Percentage shall be determined as provided above. Notwithstanding the foregoing, the Applicable Percentage for the commitment fee from the Effective Date until the financial statements and Compliance Certificate for the Fiscal Quarter ending on June 30, 2021 are delivered shall be at Level II.

Approved Fund” shall mean any Person (other than a natural Person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business and that is administered or managed by (i) a Lender, (ii) an Affiliate of a Lender or (iii) an entity or an Affiliate of an entity that administers or manages a Lender.

Arrangers” shall mean Truist Securities, Inc., BofA Securities, Inc. and JPMorgan Chase Bank, N.A., in their capacities as joint lead arrangers and joint bookrunners.

Assignment and Acceptance” shall mean an assignment and acceptance entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 10.4(b)) and accepted by the Administrative Agent, in the form of Exhibit A attached hereto or any other form approved by the Administrative Agent.

Auto Borrow Agreement” has the meaning set forth in Section 2.6(e).

Availability Period” shall mean the period from the Funding Availability Date to the Revolving Commitment Termination Date.

Bail-In Action” shall mean the exercise of any Write-Down and Conversion Powers by the applicable Resolution Authority in respect of any liability of an Affected Financial Institution.

Bail-In Legislation” shall mean (a) with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law, regulation or requirement for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule and (b) with respect to the United Kingdom, Part I of the United Kingdom Banking Act 2009 (as amended from time to time) and any other law, regulation or rule applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms or other financial institutions or their affiliates (other than through liquidation, administration or other insolvency proceedings).

 

3


Base Rate” shall mean the highest of (i) the per annum rate which the Administrative Agent publicly announces from time to time to be its prime lending rate, as in effect from time to time, (ii) the Federal Funds Rate, as in effect from time to time, plus one-half of one percent (0.50%) per annum and (iii) the Adjusted LIBO Rate determined on a daily basis for an Interest Period of one (1) month, plus one percent (1.00%) per annum (any changes in such rates to be effective as of the date of any change in such rate). The Administrative Agent’s prime lending rate is a reference rate and does not necessarily represent the lowest or best rate charged to customers. The Administrative Agent may make commercial loans or other loans at rates of interest at, above or below the Administrative Agent’s prime lending rate. Each change in the Administrative Agent’s prime lending rate shall be effective from and including the date such change is publicly announced as being effective. If the Base Rate shall be less than zero, Base Rate shall be deemed to be zero for the purposes of this Agreement.

Benchmark Replacement” shall mean the sum of: (a) the alternate benchmark rate (which may include Term SOFR) that has been selected by the Administrative Agent and the Borrower giving due consideration to (i) any selection or recommendation of a replacement rate or the mechanism for determining such a rate by the Relevant Governmental Body or (ii) any evolving or then-prevailing market convention for determining a rate of interest as a replacement to the Screen Rate for U.S. dollar-denominated syndicated credit facilities and (b) the Benchmark Replacement Adjustment; provided that, if the Benchmark Replacement as so determined would be less than zero, the Benchmark Replacement will be deemed to be zero for the purposes of this Agreement.

Benchmark Replacement Adjustment” shall mean, with respect to any replacement of the Screen Rate with an Unadjusted Benchmark Replacement for each applicable Interest Period, the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) that has been selected by the Administrative Agent and the Borrower giving due consideration to (i) any selection or recommendation of a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of the Screen Rate with the applicable Unadjusted Benchmark Replacement by the Relevant Governmental Body or (ii) any evolving or then-prevailing market convention for determining a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of the Screen Rate with the applicable Unadjusted Benchmark Replacement for U.S. dollar-denominated syndicated credit facilities at such time.

Benchmark Replacement Conforming Changes” shall mean, with respect to any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “Base Rate,” the definition of “Interest Period,” timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation notices, length of lookback period and other technical, administrative or operational matters) that the Administrative Agent decides may be appropriate to reflect the adoption and implementation of such Benchmark Replacement and to permit the administration thereof by the Administrative Agent in a manner substantially consistent with market practice (or, if the Administrative Agent decides that adoption of any portion of such market practice is not administratively feasible or if the Administrative Agent determines that no market practice for the administration of the Benchmark Replacement exists, in such other manner of administration as the Administrative Agent decides is reasonably necessary in connection with the administration of this Agreement).

Benchmark Replacement Date” shall mean the earlier to occur of the following events with respect to the Screen Rate:

(a) in the case of clause (a) or (b) of the definition of “Benchmark Transition Event,” the later of (i) the date of the public statement or publication of information referenced therein and (ii) the date on which the administrator of the Screen Rate permanently or indefinitely ceases to provide the Screen Rate; or

 

4


(b) in the case of clause (c) of the definition of “Benchmark Transition Event,” the date of the public statement or publication of information referenced therein.

Benchmark Transition Event” shall mean the occurrence of one or more of the following events with respect to the Screen Rate:

(a) a public statement or publication of information by or on behalf of the administrator of the Screen Rate announcing that such administrator has ceased or will cease to provide the Screen Rate, permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the Screen Rate;

(b) a public statement or publication of information by the regulatory supervisor for the administrator of the Screen Rate, the U.S. Federal Reserve System, an insolvency official with jurisdiction over the administrator for the Screen Rate, a resolution authority with jurisdiction over the administrator for the Screen Rate, or a court or an entity with similar insolvency or resolution authority over the administrator for the Screen Rate, which states that the administrator of the Screen Rate has ceased or will cease to provide the Screen Rate permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the Screen Rate; or

(c) a public statement or publication of information by the regulatory supervisor for the administrator of the Screen Rate announcing that the Screen Rate is no longer representative.

Benchmark Transition Start Date” shall mean (a) in the case of a Benchmark Transition Event, the earlier of (i) the applicable Benchmark Replacement Date and (ii) if such Benchmark Transition Event is a public statement or publication of information of a prospective event, the 90th day prior to the expected date of such event as of such public statement or publication of information (or if the expected date of such prospective event is fewer than 90 days after such statement or publication, the date of such statement or publication) and (b) in the case of an Early Opt-in Election, the date specified by the Administrative Agent or the Required Lenders, as applicable, by notice to the Borrower, the Administrative Agent (in the case of such notice by the Required Lenders) and the Lenders.

Benchmark Unavailability Period” shall mean, if a Benchmark Transition Event and its related Benchmark Replacement Date have occurred with respect to the Screen Rate and solely to the extent that the Screen Rate has not been replaced with a Benchmark Replacement, the period (x) beginning at the time that such Benchmark Replacement Date has occurred if, at such time, no Benchmark Replacement has replaced the Screen Rate for all purposes hereunder in accordance with Section 2.17(b)-(e) and (y) ending at the time that a Benchmark Replacement has replaced the Screen Rate for all purposes hereunder pursuant to Section 2.17(b)-(e).

Beneficial Ownership Certification” shall mean a certification regarding beneficial ownership as required by the Beneficial Ownership Regulation.

Beneficial Ownership Regulation” shall mean 31 C.F.R. § 1010.230.

Benefit Plan” shall mean any of (a) an “employee benefit plan” (as defined in ERISA) that is subject to Title I of ERISA, (b) a “plan” as defined in and subject to Section 4975 of the Code or (c), any Person whose assets include (for purposes of ERISA Section 3(42) or otherwise for purposes of Title I of ERISA or Section 4975 of the Code) the assets of any such “employee benefit plan” or “plan”.

 

5


Borrower” shall have the meaning set forth in the introductory paragraph hereof.

Borrower Guarantee Agreement shall mean the Borrower Guarantee Agreement, substantially in the form of Exhibit C, made by the Borrower in favor of the Administrative Agent for the benefit of the holders of (i) Hedging Obligations owed by Holdings or any Subsidiary Loan Party to any Lender or Affiliate of any Lender and (ii) Treasury Management Obligations owed by Holdings or any Subsidiary Loan Party to any Lender or Affiliate of any Lender.

Borrowing” shall mean a borrowing consisting of (i) Loans of the same Class and Type, made, converted or continued on the same date and in the case of Eurodollar Loans, as to which a single Interest Period is in effect, or (ii) a Swingline Loan.

Business Day” shall mean (i) any day other than a Saturday, Sunday or other day on which commercial banks in Charlotte, North Carolina are authorized or required by law to close and (ii) if such day relates to a Borrowing of, a payment or prepayment of principal or interest on, a conversion of or into, or an Interest Period for, a Eurodollar Loan or a notice with respect to any of the foregoing, any day on which dealings in Dollars are carried on in the London interbank market.

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

Capital Stock” shall mean, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.

Cash Collateralize” shall mean, in respect of any Obligations, to provide and pledge (as a first priority perfected security interest) cash collateral for such Obligations in Dollars, to the Administrative Agent pursuant to documentation in form and substance reasonably satisfactory to the Administrative Agent (and “Cash Collateralization” and “Cash Collateral” have a corresponding meaning).

Cash Equivalents” shall mean, as at any date, (i) securities issued or directly and fully guaranteed or insured by the United States or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than twelve months from the date of acquisition, (ii) Dollar denominated time deposits and certificates of deposit of (A) any Lender, (B) any domestic commercial bank of recognized standing having capital and surplus in excess of $500,000,000 or (C) any bank whose short-term commercial paper rating from S&P is at least A-1 or the equivalent thereof or from Moody’s is at least P-1 or the equivalent thereof (any such bank being an “Approved Bank”), in each case with maturities of not more than two hundred seventy (270) days from the date of acquisition, (iii) commercial paper and variable or fixed rate notes issued by any Approved Bank

 

6


(or by the parent company thereof) or any variable rate notes issued by, or guaranteed by, any domestic corporation rated A-1 (or the equivalent thereof) or better by S&P or P-1 (or the equivalent thereof) or better by Moody’s and maturing within six months of the date of acquisition, (iv) repurchase agreements entered into by any Person with a bank or trust company (including any Lender) or recognized securities dealer having capital and surplus in excess of $500,000,000 for direct obligations issued by or fully guaranteed by the United States in which such Person shall have a perfected first priority security interest (subject to no other Liens) and having, on the date of purchase thereof, a fair market value of at least one hundred percent (100%) of the amount of the repurchase obligations and (v) investments, classified in accordance with GAAP as current assets, in money market investment programs registered under the Investment Company Act of 1940 which are administered by reputable financial institutions having capital of at least $500,000,000 and the portfolios of which are limited to Investments of the character described in the foregoing clauses (i) through (iv).

Change in Control” shall mean the occurrence of one or more of the following events: (i) any sale, lease, exchange or other transfer (in a single transaction or a series of related transactions) of all or substantially all of the assets of Holdings to any Person or “group” (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder in effect on the date hereof), (ii) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or “group” (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the date hereof) of thirty-three and one third (3313) or more of the total voting power of shares of stock entitled to vote in the election of directors of Holdings; (iii) during any period of twenty-four (24) consecutive months, a majority of the members of the board of directors or other equivalent governing body of Holdings cease to be composed of individuals (A) who were members of that board or equivalent governing body on the first day of such period, (B) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (A) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (C) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (A) and (B) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body; or (iv) Holdings shall cease to own and control, of record and beneficially, directly one hundred percent (100%) of the outstanding Capital Stock in the Borrower.

Change in Law” shall mean (i) the adoption of any applicable law, rule or regulation after the date of this Agreement, (ii) any change in any applicable law, rule or regulation, or any change in the interpretation, implementation or application thereof, by any Governmental Authority after the date of this Agreement, or (iii) compliance by any Lender (or its Applicable Lending Office) or any Issuing Bank (or, for purposes of Section 2.19(b), by such Lender’s or such Issuing Bank’s holding company, if applicable) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement; provided, that for purposes of this Agreement, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.

Charges” shall have the meaning given to such term in Section 10.12.

 

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Class refers to whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans, Swingline Loans or Term Loans and when used in reference to any Commitment, refers to whether such Commitment is a Revolving Commitment or a Swingline Commitment.

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

Collateral” shall mean all tangible and intangible property, real and personal, of any Loan Party that is or purports to be the subject of a Lien to the Administrative Agent to secure the whole or any part of the Obligations or any Guarantee thereof, and shall include, without limitation, all casualty insurance proceeds and condemnation awards with respect to any of the foregoing; provided that all rights, title, interests in the Specified Asset transferred to the Borrower or Holdings from Prog Leasing, LLC pursuant to that certain assignment agreement to be executed by Borrower, Holdings and Prog Leasing, LLC on the Funding Availability Date shall be (i) excluded from Collateral and (ii) no rights thereto shall be granted to the Administrative Agent or the Lenders pursuant to any Collateral Document, in each case of clauses (i) and (ii), at any time before the date that is 1 year after the Funding Availability Date, regardless of whether a Trigger Event occurs before such date.

Collateral Documents” shall mean, collectively, the Security Agreement, any Real Estate Documents, all assignments of key man life insurance policies and all other instruments and agreements now or hereafter securing or perfecting the Liens securing the whole or any part of the Obligations or any Guarantee thereof, all UCC financing statements, fixture filings and stock powers, and all other documents, instruments, agreements and certificates executed and delivered by any Loan Party to the Administrative Agent and the Lenders in connection with the foregoing.

Commitment” shall mean a Revolving Commitment or a Swingline Commitment or any combination thereof (as the context shall permit or require).

Commodity Exchange Act” shall mean the Commodity Exchange Act (7 U.S.C. Section 1 et seq.), as amended from time to time, and any successor statute.

Communications” shall have the meaning given to such term in Section 10.1(b).

Compliance Certificate” shall mean a certificate from the principal executive officer or the principal financial officer of the Borrower in the form of, and containing the certifications set forth in, the certificate attached hereto as Exhibit 5.1(c).

Consolidated EBITDA” shall mean for Holdings, the Borrower and its Restricted Subsidiaries for any period, an amount equal to the sum of (i) Consolidated Net Income for such period plus (ii) to the extent deducted in determining Consolidated Net Income for such period, but without duplication, (A) Consolidated Interest Expense, (B) income tax expense, (C) depreciation (excluding depreciation of rental merchandise) and amortization, (D) all other non-cash charges (including, without limitation, any non-cash charges, expenses or losses incurred in connection with any stock option plan, cash incentive plan or any other employee benefit plan or agreement, but excluding any such non-cash charges or losses (1) representing an accrual or reserve for future cash charges or losses, (2) to the extent that there were cash charges or losses with respect thereto in past accounting periods, and (3) representing a write-down of current assets; provided that in the case of (1) and (2), if any such non-cash charges or losses represent an accrual or reserve for potential cash items in any future period, the cash payment in respect thereof in such future period shall be subtracted from Consolidated EBITDA in such future period to the

 

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extent paid), (E) closing costs, fees and expenses incurred during such period in connection with the transactions contemplated by the Transaction Documents (including the amendments thereto), in each case paid during such period to Persons that are not Affiliates of Holdings or any of its Restricted Subsidiaries, (F) up to $43,500,000 in restructuring charges incurred in Fiscal Year 2020 in connection with the closure and consolidation of Borrower-operated stores, (G) up to $14,700,000 in advisory fees and expenses incurred or paid by the Borrower to one or more of its third party consultants in the first Fiscal Quarter of 2020, (H) business optimization, restructuring and transition expenses, costs, charges, accruals or reserves incurred within two (2) years of any Permitted Acquisition, which for the avoidance of doubt shall include severance payments and costs, legal defense and settlement costs (including any costs paid in satisfaction of judgments), relocation costs, costs related to the closure, opening, curtailment and/or consolidation of facilities, retention charges, systems establishment costs, spin-off costs, integration costs, signing costs, retention and completion bonuses, amortization of signing bonuses, inventory optimization expenses, contract termination costs, transaction costs, costs related to entry into new markets, consulting fees, recruiter fees; (I) business optimization, restructuring and transition related expenses, costs, charges, accruals or reserves which are unrelated to any Permitted Acquisition or divestiture of assets, all as determined on a consolidated basis for Holdings, the Borrower and its Restricted Subsidiaries for such period; (J) loss of on-lease and off-lease inventory, physical damage to stores, infrastructure, capital assets and other assets of the business and loss of revenue, in each case, (1) to the extent reasonably identifiable by the Borrower as having resulted from significant weather events or other natural disasters in areas that have been declared a federal disaster or otherwise qualify for federal emergency assistance, (2) to the extent occurring within twelve (12) months after the occurrence of such significant weather event or natural disaster, and (3) net of all related insurance proceeds received related thereto (including, without limitation, all business interruption insurance and casualty insurance), all as determined on a consolidated basis for Holdings and its Restricted Subsidiaries for such period; (K) the amount of cost savings and synergies projected by the Borrower in good faith to be reasonably anticipated to be realized from actions taken or committed to be taken during such period in connection with any Permitted Acquisition or any permitted disposition of assets (in each case calculated on a Pro Forma Basis as though such cost savings and synergies had been realized on the first day of such period, net of the amount of actual benefits realized prior to or during such period from such actions); provided that such actions have been taken or have been committed to be taken, and the benefits resulting therefrom are anticipated by the Borrower in good faith to be realized within twenty-four (24) months after the completion of the related Permitted Acquisition or permitted disposition of assets; and provided, further, that the aggregate amount for all such items under this clause (K) shall not exceed $25,000,000 in the aggregate during the term of this Agreement; (L) (1) expenses, costs, charges, accruals or reserves relating to the formation of Holdings and the Restructuring, in each case, to the extent paid in cash prior to the Effective Date or within six (6) months after the Effective Date and (2) non-cash expenses, costs, charges, accruals or reserves relating to the formation of Holdings and the Restructuring, in each case, to the extent incurred prior to the Effective Date or within 2 years after the Effective Date, including, for the avoidance of doubt, any amortization or accruals for prior cash payments to the extent such cash payment were made prior to the Effective Date or within six (6) months after the Effective Date; (M) expenses, cost, charges, accruals or reserves relating to the repositioning, relocating, remodeling, consolidation and closure of retail locations, offices or operating centers, all as determined on a consolidated basis for Holdings, the Borrower and its Restricted Subsidiaries for such period; and (N) up to $447,000,000 in impairment charges or asset write-offs or write-downs related to goodwill in the first Fiscal Quarter of 2020. Notwithstanding the foregoing, the amounts added back to Consolidated Net Income in reliance on clauses (ii)(H), (ii)(I), (ii)(J) and (ii)(M) above shall not exceed, in the aggregate during any four fiscal quarter period, the greater of (i) $40,000,000 and (ii) 20% of Consolidated EBITDA for such period (calculated prior to adding back any such amounts).

 

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

Consolidated Fixed Charges” shall mean, for Holdings, the Borrower and its Restricted Subsidiaries for any period, the sum (without duplication) of (a) Consolidated Interest Expense paid or payable for such period plus (b) Consolidated Lease Expense.

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

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

Consolidated Net Income” shall mean, for any period, the net income (or loss) of Holdings, the Borrower and its Restricted Subsidiaries for such period determined on a consolidated basis in accordance with GAAP, but excluding therefrom (to the extent otherwise included therein) (a) any extraordinary gains or losses, (b) any gains attributable to write-ups of assets, (c) any equity interest of Holdings, the Borrower or any Restricted Subsidiary of Holdings in the unremitted earnings of any Person that is not a Restricted Subsidiary and (d) any income (or loss) of any Person accrued prior to the date it becomes a Restricted Subsidiary or is merged into or consolidated with Holdings, the Borrower or any Restricted Subsidiary on the date that such Person’s assets are acquired by Holdings, the Borrower or any Restricted Subsidiary, except to the extent provided for in the definition of Pro Forma Basis in connection with a Permitted Acquisition. For the avoidance of doubt, Consolidated Net Income (i) shall exclude any income (or loss) for such period of Unrestricted Subsidiaries and (ii) shall include any amounts actually distributed in cash by Unrestricted Subsidiaries to Holdings, the Borrower or any Restricted Subsidiary.

Consolidated Total Debt” shall mean, at any time, all then currently outstanding obligations, liabilities and indebtedness of Holdings, the Borrower and its Restricted Subsidiaries on a consolidated basis of the types described in the definition of “Indebtedness”.

Default” shall mean any condition or event that, with the giving of notice or the lapse of time or both, would constitute an Event of Default.

Default Interest” shall have the meaning set forth in Section 2.14(c).

Defaulting Lender” shall mean, at any time, subject to Section 2.26(b), (i) any Lender that has failed for two (2) or more Business Days to comply with its obligations under this Agreement to make a Loan, to make a payment to the applicable Issuing Bank in respect of a Letter of Credit or to the Swingline Lender in respect of a Swingline Loan or to make any other payment due hereunder (each a “funding obligation”), unless such Lender has notified the Administrative Agent and the Borrower in writing that such failure is the result of such Lender’s determination that one or more conditions precedent to funding has not been satisfied (which conditions precedent, together with any applicable Default, will be specifically identified in such writing), (ii) any Lender that has notified the Administrative Agent in writing, or has stated publicly, that it does not intend to comply with any such funding obligation hereunder, unless

 

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such writing or public statement states that such position is based on such Lender’s determination that one or more conditions precedent to funding cannot be satisfied (which conditions precedent, together with any applicable Default, will be specifically identified in such writing or public statement), (iii) any Lender that has defaulted on its obligation to fund generally under any other loan agreement, credit agreement or other financing agreement, (iv) any Lender that has, for three (3) or more Business Days after written request of the Administrative Agent or the Borrower, failed to confirm in writing to the Administrative Agent and the Borrower that it will comply with its prospective funding obligations hereunder (provided that such Lender will cease to be a Defaulting Lender pursuant to this clause (iv) upon the Administrative Agent’s and the Borrower’s receipt of such written confirmation), (v) any Lender with respect to which a Lender Insolvency Event has occurred and is continuing or (vi) any Lender that has become the subject of a Bail-In Action. Any determination by the Administrative Agent that a Lender is a Defaulting Lender will be conclusive and binding, absent manifest error, and such Lender shall be deemed to be a Defaulting Lender (subject to Section 2.26(b)) upon notification of such determination by the Administrative Agent to the Borrower, the Issuing Banks, the Swingline Lender and the Lenders.

Delaware Divided LLC” shall mean any Delaware LLC which has been formed upon the consummation of a Delaware LLC Division.

Delaware LLC” shall mean any limited liability company organized or formed under the laws of the State of Delaware.

Delaware LLC Division” shall mean the statutory division of any Delaware LLC into two or more Delaware LLCs pursuant to Section 18-217 of the Delaware Limited Liability Company Act.

Dollar(s)” and the sign “$” shall mean lawful money of the United States of America.

Domestic Controlled Affiliate” shall mean each Affiliate of the Borrower that is (a) Controlled by the Borrower, and (b) incorporated or organized under the laws of any State of the United States, the District of Columbia or Puerto Rico.

Domestic Subsidiary” shall mean any Subsidiary which is incorporated or organized under the laws of any State of the United States, the District of Columbia or Puerto Rico.

Early Opt-in Election” shall mean the occurrence of:

(a) (i) a determination by the Administrative Agent or (ii) a notification by the Required Lenders to the Administrative Agent (with a copy to the Borrower) that the Required Lenders have determined that U.S. dollar-denominated syndicated credit facilities being executed at such time, or that include language similar to that contained in Section 2.17(b)-(e) are being executed or amended, as applicable, to incorporate or adopt a new benchmark interest rate to replace the Screen Rate, and

(b) (i) the election by the Administrative Agent or (ii) the election by the Required Lenders to declare that an Early Opt-in Election has occurred and the provision, as applicable, by the Administrative Agent of written notice of such election to the Borrower and the Lenders or by the Required Lenders of written notice of such election to the Administrative Agent.

 

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EEA Financial Institution” shall mean (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clause (a) or (b) of this definition and is subject to consolidated supervision with its parent.

EEA Member Country” shall mean any of the member states of the European Union, Iceland, Liechtenstein, and Norway.

EEA Resolution Authority” shall mean any public administrative authority or any person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.

Effective Date” shall mean the date hereof.

Environmental Indemnity” shall mean each environmental indemnity made by each Loan Party with respect to Real Estate required to be pledged as Collateral in favor of the Administrative Agent for the benefit of the holders of the Obligations, in each case in form and substance reasonably satisfactory to the Administrative Agent.

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

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

ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder.

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

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

 

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

EU Bail-In Legislation Schedule” shall mean the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor Person), as in effect from time to time.

Eurodollar” when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, bears interest at a rate determined by reference to the Adjusted LIBO Rate.

Eurodollar Reserve Percentage” shall mean the aggregate of the maximum reserve percentages (including, without limitation, any emergency, supplemental, special or other marginal reserves) expressed as a decimal (rounded upwards to the next 1/100th of 1%) in effect on any day to which the Administrative Agent is subject with respect to the Adjusted LIBO Rate pursuant to regulations issued by the Board of Governors of the Federal Reserve System (or any Governmental Authority succeeding to any of its principal functions) with respect to eurocurrency funding (currently referred to as “eurocurrency liabilities” under Regulation D). Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without the benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under Regulation D. The Eurodollar Reserve Percentage shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.

Event of Default” shall have the meaning provided in Article VIII.

Excluded Swap Obligation” shall mean, with respect to any Guarantor, any Swap Obligation if, and to the extent that, all or a portion of the Guarantee of such Guarantor of, or the grant by such Guarantor of a security interest to secure, such Swap Obligation (or any Guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Guarantor’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act and the regulations thereunder at the time the Guarantee of such Guarantor, or the grant by such Guarantor of a security interest, becomes effective with respect to such Swap Obligation; provided that, for the avoidance of doubt, in determining whether any Guarantor is an “eligible contract participant” under the Commodity Exchange Act, the “keepwell” provision set forth in Section 24 of the Guarantee Agreement and Section 24 of the Borrower Guarantee Agreement shall be taken into account. If a Swap Obligation arises under a Master Agreement governing more than one Hedging Transaction, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to Hedging Transactions for which such Guarantee or security interest is or becomes excluded in accordance with the first sentence of this definition.

 

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Excluded Taxes shall mean with respect to the Administrative Agent, any Lender, any Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (i) Taxes imposed on or measured by net income or franchise taxes (A) imposed by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its Applicable Lending Office is located or (B) that are Other Connection Taxes, (ii) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which any Lender is located and (iii) in the case of a Foreign Lender, any withholding tax that (A) is imposed on amounts payable to such Foreign Lender pursuant to a law in effect at the time such Foreign Lender becomes a party to this Agreement, (B) is imposed on amounts payable to such Foreign Lender pursuant to a law in effect at any time that such Foreign Lender designates a new lending office, other than taxes that have accrued prior to the designation of such lending office that are otherwise not Excluded Taxes, (C) is attributable to such Foreign Lender’s failure to comply with Section 2.21(e), and (D) is imposed under FATCA.

Existing Credit Agreement” shall mean that certain Second Amended and Restated Revolving Credit and Term Loan Agreement dated as of September 18, 2017 (as amended, restated, supplemented or otherwise modified from time to time) among the Borrower, the lenders from time to time party thereto and Truist Bank, as administrative agent.

Existing Letters of Credit” shall mean the letters of credit set forth on Schedule 2.24.

FATCA” shall mean Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreements entered into pursuant to Section 1471(b)(1) of the Code and any fiscal or regulatory legislation, rules or official practices adopted pursuant to any intergovernmental agreement, treaty or convention among Governmental Authorities entered into in connection with the implementation of the foregoing.

Federal Funds Rate” shall mean, for any day, the rate per annum (rounded upwards, if necessary, to the next 1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with member banks of the Federal Reserve System, as published by the Federal Reserve Bank of New York on the next succeeding Business Day; provided, (i) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day and (ii) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate charged to Truist Bank or any other Lender selected by the Administrative Agent on such day on such transactions as determined by the Administrative Agent.

Fee Letters shall mean each of (a) that certain letter agreement dated as of October 19, 2020 by and among the Borrower and the Arrangers and (b) that certain letter agreement dated as of October 19, 2020 by and between the Borrower and Truist Securities, Inc.

Fiscal Quarter” shall mean any fiscal quarter of Holdings.

Fiscal Year shall mean a fiscal year of Holdings.

Fixed Charge Coverage Ratio” shall mean, at any date, the ratio of (i) Consolidated EBITDAR for the four (4) consecutive Fiscal Quarters ending on such date to (ii) Consolidated Fixed Charges for the four (4) consecutive Fiscal Quarters ending on such date.

 

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Flood Insurance Laws” shall mean, collectively, (i) the National Flood Insurance Reform Act of 1994 (which comprehensively revised the National Flood Insurance Act of 1968 and the Flood Disaster Protection Act of 1973), as now or hereafter in effect or any successor statute thereto, (ii) the Flood Insurance Reform Act of 2004, as now or hereafter in effect or any successor statute thereto and (iii) the Biggert –Waters Flood Insurance Reform Act of 2012, as now or hereafter in effect or any successor statute thereto.

Foreign Lender shall mean any Lender that is not a United States person under Section 7701(a)(30) of the Code.

Foreign Pledge Date” shall have the meaning set forth in Section 5.10(b).

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

Funding Availability Date” shall mean the first date on which all the conditions precedent in Section 3.2 are satisfied (or waived in accordance with Section 10.2).

GAAP” shall mean generally accepted accounting principles in the United States applied on a consistent basis and subject to the terms of Section 1.3.

Governmental Authority” shall mean the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).

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

Guarantee Agreement” shall mean the Guarantee Agreement, substantially in the form of Exhibit B, made by Holdings and the Subsidiary Loan Parties in favor of the Administrative Agent for the benefit of the holders of the Obligations.

Guarantors” shall mean, collectively, (i) Holdings, (ii) each Subsidiary Loan Party, including each Person that joins as a Subsidiary Loan Party pursuant to Section 5.10 or otherwise, (iii) with respect to (A) any Hedging Obligations between any Loan Party (other than the Borrower) and any Lender or Affiliate of a Lender that are permitted to be incurred pursuant to Section 7.12 and any Treasury Management Obligations owing by any Loan Party (other than the Borrower), the Borrower and (B) the payment and performance by each Specified Loan Party of its obligations under its Guarantee with respect to all Swap Obligations, the Borrower and (iv) the successors and permitted assigns of the foregoing.

 

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Hazardous Materials” shall mean all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.

Hedging Obligations” of any Person shall mean any and all obligations of such Person, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired under (i) any and all Hedging Transactions, (ii) any and all cancellations, buy backs, reversals, terminations or assignments of any Hedging Transactions and (iii) any and all renewals, extensions and modifications of any Hedging Transactions and any and all substitutions for any Hedging Transactions.

Hedging Transaction” of any Person shall mean (i) any transaction (including an agreement with respect to any such transaction) now existing or hereafter entered into by such Person that is a rate swap transaction, swap option, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap or option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option, spot transaction, credit protection transaction, credit swap, credit default swap, credit default option, total return swap, credit spread transaction, repurchase transaction, reverse repurchase transaction, buy/sell-back transaction, securities lending transaction, or any other similar transaction (including any option with respect to any of these transactions) or any combination thereof, whether or not any such transaction is governed by or subject to any master agreement and (ii) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a “Master Agreement”), including any such obligations or liabilities under any Master Agreement.

Holdings” shall have the meaning set forth in the introductory paragraph hereto.

Inactive Subsidiaries” shall mean the Subsidiaries of Holdings identified on Schedule 1.1(d).

Incremental Funds Certain Provision” shall have the meaning set forth in Section 2.25(c).

Incremental Revolving Commitment” shall have the meaning set forth in Section 2.25(a).

Incremental Term Loan” shall have the meaning set forth in Section 2.25(a).

Indebtedness” of any Person shall mean, without duplication (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person in respect of the deferred purchase price of property or services (other than trade payables incurred in the ordinary course of business; provided, that for purposes of Section 8.1(g), trade payables overdue by more than one hundred twenty (120) days shall be included in this definition except to the extent that any of such trade payables are being disputed in good

 

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faith and by appropriate measures), (iv) all obligations of such Person under any conditional sale or other title retention agreement(s) relating to property acquired by such Person, (v) all Capital Lease Obligations of such Person, (vi) all obligations, contingent or otherwise, of such Person in respect of letters of credit, acceptances or similar extensions of credit, (vii) all Guarantees of such Person of the type of Indebtedness described in clauses (i) through (vi) above, (viii) all Indebtedness of a third party secured by any Lien on property owned by such Person, whether or not such Indebtedness has been assumed by such Person, (ix) all obligations of such Person, contingent or otherwise, to purchase, redeem, retire or otherwise acquire for value any Capital Stock of such Person, and (x) Off-Balance Sheet Liabilities. The Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer, except to the extent that the terms of such Indebtedness provide that such Person is not liable therefor.

Indemnified Taxes” shall mean (i) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of the Borrower under any Loan Document and (ii) to the extent not otherwise described in (i), Other Taxes.

Intercreditor Agreement” shall mean an intercreditor agreement to be entered into upon the occurrence of the Trigger Event by the Administrative Agent, on behalf of the Lenders and other holders of the Obligations, and Truist Bank, as servicer under the Loan Facility Agreement, on behalf of the Participants as defined in the Loan Facility Agreement, which intercreditor agreement shall provide for the ratable sharing of collateral and the proceeds thereof as provided more specifically therein.

Interest Period” shall mean with respect to any Eurodollar Borrowing, a period of one, two, three or six months; provided, that:

(i) the initial Interest Period for such Borrowing shall commence on the date of such Borrowing (including the date of any conversion from a Borrowing of another Type), and each Interest Period occurring thereafter in respect of such Borrowing shall commence on the day on which the next preceding Interest Period expires;

(ii) if any Interest Period would otherwise end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day, unless such Business Day falls in another calendar month, in which case such Interest Period would end on the next preceding Business Day;

(iii) any Interest Period which begins on the last Business Day of a calendar month or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period shall end on the last Business Day of such calendar month; and

(iv) (A) no Interest Period for a Revolving Loan may extend beyond the Revolving Commitment Termination Date or any Refinancing Revolving Maturity Date, as the case may be, and (B) no Interest Period for a Term Loan may extend beyond the applicable Maturity Date.

Investments shall have the meaning given to such term in Section 7.4.

Issuing Bank” shall mean, with respect to a particular Letter of Credit, (a) Truist Bank, in its capacity as issuer of such Letters of Credit hereunder, (b) JPMorgan Chase Bank, N.A., in its capacity as issuer of such Letters of Credit hereunder, (c) Bank of America, N.A., in its capacity as issuer of such Letters of Credit hereunder, and (d) any successor issuer of such Letter of Credit hereunder.

 

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LC Commitment” shall mean, with respect to (a) Truist Bank, $14,000,000, (b) Bank of America, N.A., $10,500,000 and (c) JPMorgan Case Bank, N.A., $10,500,000.

LC Disbursement” shall mean a payment made by the applicable Issuing Bank pursuant to a Letter of Credit.

LC Documents” shall mean the Letters of Credit and all applications, agreements and instruments relating to the Letters of Credit.

LC Exposure” shall mean, at any time, the sum of (i) the aggregate undrawn amount of all outstanding Letters of Credit at such time, plus (ii) the aggregate amount of all LC Disbursements that have not been reimbursed by or on behalf of the Borrower at such time. The LC Exposure of any Lender shall be its Pro Rata Share of the total LC Exposure at such time.

LC Sublimit” shall mean that portion of the Aggregate Revolving Commitments that may be used by the Borrower for the issuance of Letters of Credit in an aggregate face amount not to exceed $35,000,000.

Lender Insolvency Event” shall mean that (i) a Lender or its parent corporation is insolvent, or is generally unable to pay its debts as they become due, or admits in writing its inability to pay its debts as they become due, or makes a general assignment for the benefit of its creditors, (ii) a Lender or its parent corporation is the subject of a bankruptcy, insolvency, reorganization, liquidation or similar proceeding, or a receiver, trustee, conservator, custodian or similar Person charged with reorganization or liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in such capacity, has been appointed for such Lender or its parent corporation, or such Lender or its parent corporation has taken any action in furtherance of or indicating its consent to or acquiescence in any such proceeding or appointment or (iii) a Lender or its parent corporation has been adjudicated as, or determined by any Governmental Authority having regulatory authority over such Person or its assets to be, insolvent; provided that, for the avoidance of doubt, a Lender Insolvency Event shall not be deemed to have occurred solely by virtue of the ownership or acquisition of any equity interest in or control of a Lender or a parent corporation thereof by a Governmental Authority or an instrumentality thereof so long as such ownership or acquisition does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender.

Lenders” shall have the meaning assigned to such term in the opening paragraph of this Agreement and shall include, where appropriate, the Swingline Lender and each Additional Lender that joins this Agreement pursuant to Section 2.25 or 2.27.

Letter of Credit” shall mean any standby letter of credit issued pursuant to Section 2.24 by an Issuing Bank for the account of the Borrower pursuant to the LC Sublimit and the Existing Letters of Credit.

 

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LIBOR” shall mean, for any applicable Interest Period with respect to any Eurodollar Loan, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) for deposits in Dollars for a period equal to such Interest Period appearing on the display designated on Reuters Screen LIBOR01 Page (or any successor page) as the London interbank offered rate for deposits in Dollars at approximately 11:00 a.m. (London, England time) on the day that is two (2) Business Days prior to the first day of the Interest Period; provided, that if the Administrative Agent determines that the relevant foregoing sources are unavailable for the relevant Interest Period, LIBOR shall mean the rate of interest determined by the Administrative Agent to be the average (rounded upward, if necessary, to the nearest 1/100th of 1%) of the rates per annum at which deposits in Dollars are offered to the Administrative Agent two (2) Business Days preceding the first day of such Interest Period by leading banks in the London interbank market as of or about 10:00 a.m. for delivery on the first day of such Interest Period, for the number of days comprised therein and in an amount comparable to the amount of the Eurodollar Loan of the Administrative Agent; provided, further, that, if LIBOR would be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.

Lien” shall mean any mortgage, pledge, security interest, lien (statutory or otherwise), charge, encumbrance, hypothecation, assignment, deposit arrangement, or other arrangement having the practical effect of any of the foregoing or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement and any capital lease having the same economic effect as any of the foregoing). A covenant not to grant a Lien or a “negative pledge” shall not be determined a Lien for purposes of this Agreement.

Loan Documents” shall mean, collectively, this Agreement, the LC Documents, the Fee Letters, all Notices of Borrowing, all Notices of Conversion/Continuation, the Intercreditor Agreement, if any, the Guarantee Agreement, the Borrower Guarantee Agreement, the Collateral Documents (if any), all collateral documents pursuant to Section 5.10(b), and any and all other instruments, agreements, documents and writings executed in connection with any of the foregoing.

Loan Facility Agreement” shall mean that certain Loan Facility Agreement and Guaranty dated as of the Effective Date, by and among the Borrower, Truist Bank, as Servicer and the financial institutions from time to time a party thereto, as Participants, as amended, restated, amended and restated, refinanced, replaced, supplemented or otherwise modified from time to time.

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

Loan Parties” shall mean Holdings, the Borrower and the Subsidiary Loan Parties.

Loans” shall mean all Term Loans, Revolving Loans and Swingline Loans in the aggregate or any of them, as the context shall require.

Master Agreement” shall have the definition set forth in the definition of “Hedging Transaction”.

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

 

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Material Domestic Subsidiary” shall mean any Domestic Subsidiary of Holdings (other than the Borrower) that is a Restricted Subsidiary that has not already become a Subsidiary Loan Party that (i) at any time (A) accounted for five percent (5.0%) of Consolidated EBITDA for any period of four (4) Fiscal Quarters ended or (B) holds assets in an amount equal to or greater than five percent (5.0%) of the aggregate fair market value (as reasonably determined by the Borrower) of the total assets of Holdings, the Borrower and its Restricted Subsidiaries determined on a consolidated basis as of the last day of the most recent Fiscal Quarter, or (ii) when taken together with other Domestic Subsidiaries that are Restricted Subsidiaries that are not already Subsidiary Loan Parties, (x) accounted for ten percent (10.0%) of Consolidated EBITDA for any period of four (4) Fiscal Quarters ended or (y) holds assets in an amount equal to or greater than ten percent (10.0%) of the aggregate fair market value (as reasonably determined by the Borrower) of the total assets of Holdings, the Borrower and its Restricted Subsidiaries determined on a consolidated basis as of the last day of the most recent Fiscal Quarter. Upon the acquisition of a new Domestic Subsidiary or the merger or consolidation of any Person with or into an existing Domestic Subsidiary (or the acquisition of other assets by an existing Domestic Subsidiary), in each case, that is a Restricted Subsidiary, the qualification of the affected Domestic Subsidiary as a “Material Subsidiary” pursuant to the foregoing requirements of this definition shall be determined on a Pro Forma Basis as if such Domestic Subsidiary had been acquired or such merger, consolidation or other acquisition had occurred, as applicable, at the beginning of the relevant period of four (4) consecutive Fiscal Quarters.

Material Indebtedness” shall mean, as of any date of determination, Indebtedness (other than the Loans and Letters of Credit) of any one or more of Holdings, the Borrower and the Restricted Subsidiaries in an aggregate principal amount greater than an amount equal to two percent (2.0%) of the aggregate book value of the total assets of Holdings, the Borrower and its Restricted Subsidiaries determined on a consolidated basis as of the last day of the most recently ended Fiscal Quarter for which financial statements have been delivered; provided, that, Indebtedness of Progressive Finance and Progressive Finance Subsidiaries shall not constitute “Material Indebtedness” so long as no Loan Party Guarantees or otherwise becomes obligated with respect to any such Indebtedness.

Material Real Estate” shall mean Real Estate with a fair market value (as reasonably determined by the Borrower in consultation with the Administrative Agent) in excess of $10,000,000.

Material Subsidiary” shall mean at any time any direct or indirect Restricted Subsidiary of Holdings having: (a) assets in an amount equal to at least five percent (5.0%) of the aggregate book value of the total assets of Holdings, the Borrower and its Restricted Subsidiaries determined on a consolidated basis as of the last day of the most recent Fiscal Quarter at such time; or (b) revenues or net income in an amount equal to at least five percent (5.0%) of the total revenues or net income of Holdings, the Borrower and its Restricted Subsidiaries on a consolidated basis for the 12-month period ending on the last day of the most recent Fiscal Quarter at such time.

Maturity Date” shall mean, (a) with respect to any Incremental Term Loan, the earlier of (i) the maturity date set forth in the applicable documentation with respect thereto and (ii) the date on which the principal amount of such outstanding Incremental Term Loan has been declared or automatically have become due and payable (whether by acceleration or otherwise) and (b) with respect to any Refinancing Term Loan, the earlier of (i) the maturity date set forth in the applicable Refinancing Facility Amendment and (ii) the date on which the principal amount of such outstanding Refinancing Term Loan has been declared or automatically have become due and payable (whether by acceleration or otherwise).

 

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Maximum Incremental Facility Amount” shall mean $150,000,000.

Maximum Rate” shall have the meaning given to such term in Section 10.12.

Moody’s” shall mean Moody’s Investors Service, Inc., and any successor thereto.

Mortgaged Property” shall mean, collectively, the Real Estate subject to the Mortgages, including, but not limited to, any Real Estate for which a Mortgage is required to be delivered after the occurrence of the Trigger Event pursuant to Section 5.13.

Mortgages” shall mean, collectively, each mortgage, deed of trust, trust deed, security deed, debenture, deed of immovable hypothec, deed to secure debt or other real estate security documents delivered by any Loan Party to the Administrative Agent from time to time, all in form and substance reasonably satisfactory to the Administrative Agent, as the same may be amended, amended and restated, extended, supplemented, substituted or otherwise modified from time to time.

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

Net Cash Proceeds” shall mean the aggregate cash or Cash Equivalents proceeds received by Holdings or any Domestic Subsidiary that is a Restricted Subsidiary in respect of any (i) sale or disposition by Holdings or any of its Restricted Subsidiaries of any of its assets, (ii) any casualty insurance policies or eminent domain, condemnation or similar proceedings or (iii) any issuance of Indebtedness not permitted under Section 7.1, in each case net of direct costs incurred in connection therewith (including legal, accounting and investment banking fees, and sales commissions), taxes paid or payable as a result thereof and, in the case of any sale or disposition or casualty, eminent domain, condemnation or similar proceeding, the amount necessary to retire any Indebtedness secured by a Lien permitted under this Agreement (ranking senior to any Lien of the Administrative Agent) on the related property; it being understood that “Net Cash Proceeds” shall include any cash or Cash Equivalents received upon the sale or other disposition of any non-cash consideration received by Holdings or any Domestic Subsidiary that is a Restricted Subsidiary in connection with any sale or disposition by Holdings or any of its Restricted Subsidiaries of any of its assets, any casualty insurance policies or eminent domain, condemnation or similar proceedings or any issuance of Indebtedness not permitted under Section 7.1.

Non-Defaulting Lender” shall mean, at any time, a Lender that is not a Defaulting Lender.

Notes” shall mean any promissory notes issued hereunder at the request of any Lender.

Notice of Conversion/Continuation shall have the meaning set forth in Section 2.8(b).

Notice of Revolving Borrowing” shall have the meaning as set forth in Section 2.3.

Notice of Swingline Borrowing shall have the meaning as set forth in Section 2.6.

Notices of Borrowing” shall mean, collectively, the Notices of Revolving Borrowing and the Notices of Swingline Borrowing.

 

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Obligations” shall mean, collectively, (i) all amounts owing by the Loan Parties to the Administrative Agent, any Issuing Bank, any Lender (including the Swingline Lender) or the Arrangers pursuant to or in connection with this Agreement or any other Loan Document or otherwise with respect to any Loan or Letter of Credit including without limitation, all principal, interest (including any interest accruing after the filing of any petition in bankruptcy or the commencement of any insolvency, reorganization or like proceeding relating to Holdings, the Borrower or any Restricted Subsidiary, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), all reimbursement obligations, fees, expenses, indemnification and reimbursement payments, costs and expenses (including all fees and expenses of counsel to the Administrative Agent, any Issuing Bank and any Lender (including the Swingline Lender) incurred pursuant to this Agreement or any other Loan Document), whether direct or indirect, absolute or contingent, liquidated or unliquidated, now existing or hereafter arising hereunder or thereunder, and all obligations and liabilities incurred in connection with collecting and enforcing the foregoing, (ii) all Hedging Obligations owed by any Loan Party or any Restricted Subsidiary to any Lender or Affiliate of any Lender and (iii) all Treasury Management Obligations between any Loan Party or any Restricted Subsidiary and any Lender or Affiliate of any Lender, together with all renewals, extensions, modifications or refinancings of any of the foregoing; provided, that, “Obligations” of a Guarantor shall exclude any Excluded Swap Obligations of such Guarantor.

OFAC” shall mean the U.S. Department of the Treasury’s Office of Foreign Assets Control.

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

OSHA” shall mean the Occupational Safety and Health Act of 1970, as amended from time to time, and any successor statute.

Other Connection Taxes” shall mean, with respect to the Administrative Agent, any Lender, any Issuing Bank or any other recipient, Taxes imposed as a result of a present or former connection between such Administrative Agent, Lender, Issuing Bank or recipient and the jurisdiction imposing such Tax (other than connections arising from such Person having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document).

Other Taxes” shall mean any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 2.23(b)).

Participant” shall have the meaning set forth in Section 10.4(d).

 

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Participant Register” shall have the meaning set forth in Section 10.4(e).

Patriot Act” shall mean the USA PATRIOT Act, Title III of Pub. L. 107-56 (signed into law October 26, 2001), as amended and in effect from time to time.

Payment Office” shall mean the office of the Administrative Agent located at 303 Peachtree Street, N.E., Atlanta, Georgia 30308, or such other location as to which the Administrative Agent shall have given written notice to the Borrower and the other Lenders.

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

Permitted Acquisition” shall mean any Acquisition (whether foreign or domestic) so long as (a) immediately before and after giving effect to such Acquisition, no Default or Event of Default is in existence (except, in the case of an Acquisition subject to the Incremental Funds Certain Provision, in which case there is no Default or Event of Default immediately before or immediately after execution and delivery of the applicable Acquisition Agreement and there is no Specified Event of Default at the date the applicable Permitted Acquisition is consummated), (b) such Acquisition has been approved by the board of directors of the Person being acquired prior to any public announcement thereof, (c) to the extent such Acquisition is of a Person or Persons that are not organized in the United States and/or of all or substantially all of the assets of a Person located outside the United States and the aggregate EBITDA attributable to all Foreign Subsidiaries that are Restricted Subsidiaries for the most recently ended twelve month period (giving pro forma effect to such Acquisition; provided that, in the case of an Acquisition subject to the Incremental Funds Certain Provision, the date of determination for giving pro forma effect to such Acquisition to determine compliance with this clause (c) shall, at the option of the Borrower, be the date of execution of the applicable Acquisition Agreement, and such determination shall be made after giving effect to such Acquisition (and the other transactions to be entered into in connection therewith (including any incurrence of Indebtedness and the use of proceeds thereof)); provided that such Acquisition must close within ninety (90) days of the signing of the applicable Acquisition Agreement) exceeds twenty percent (20%) of Consolidated EBITDA for the most recently ended twelve month period, the Borrower complies with Sections 5.10(b) and 5.12 hereof and (d) immediately after giving effect to such Acquisition, Holdings, the Borrower and its Restricted Subsidiaries will not be engaged in any business other than (A) substantially the same business as presently conducted or such other businesses that are reasonably related thereto, including but not limited to the business of leasing and selling furniture, consumer electronics, computers, appliances and other household goods and accessories inside and outside of the United States of America, through both independently-owned and franchised stores, providing lease-purchase solutions, credit and other financing solutions to customers for the purchase and lease of such products, the manufacture and supply of furniture and bedding for lease and sale in such stores, and the provision of virtual rent-to-own programs inside and outside of the United States of America (including but not limited to point-of-sale lease purchase programs), (B) any other businesses which are ancillary or complementary to, or reasonable extensions or expansions of, the business of Holdings, the Borrower and its Restricted Subsidiaries as conducted as of the Effective Date, as reasonably determined in good faith by the Borrower and (C) any businesses that are materially different from the business of Holdings, the Borrower and its Restricted Subsidiaries as conducted as of the Effective Date provided that any Investments made, funds expended or financial support provided by Holdings, the Borrower and/or its Restricted Subsidiaries in connection with such alternative lines of business shall not exceed $50,000,000 in the aggregate at any time outstanding. As used herein, Acquisitions will be considered related Acquisitions if the sellers under such Acquisitions are the same Person or any Affiliate thereof.

 

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Permitted Amendments” shall have the meaning given to such term in Section 2.28.

Permitted Encumbrances” shall mean

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

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

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

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

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

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

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

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

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

Permitted Investments” shall mean:

 

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

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

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

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

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

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

Pro Forma Basis” shall mean, for purposes of calculating compliance with respect to any asset sale (including any disposition of property to a Delaware Divided LLC pursuant to a Delaware LLC Division), casualty event, Permitted Acquisition, Restricted Payment or incurrence of Indebtedness, or any other transaction subject to calculation on a “Pro Forma Basis” as indicated herein (including without limitation, for purposes of determining compliance with the financial covenants in Article VI, and determining the Applicable Margin and Applicable Percentage) that such transaction shall be deemed to have occurred as of the first day of the period of four Fiscal Quarters most recently ended (the “Reference Period”) for which the Borrower has delivered financial statements pursuant to Section 5.1(a) or (b). For purposes of any such calculation in respect of any Permitted Acquisition, (a) income statement and cash flow statement items attributable to the Person or property subject to such Permitted Acquisition shall be included in Consolidated EBITDA for such Reference Period after giving pro forma effect thereto as if such Permitted Acquisition occurred on the first day of such Reference Period; (b) any Indebtedness incurred or assumed by Holdings, the Borrower or any Restricted Subsidiary (including the Person or property acquired) in connection with such transaction and any Indebtedness of the Person or property acquired which is not retired in connection with such transaction (i) shall be deemed to have been incurred as of the first day of the applicable period and (ii) if such Indebtedness has a floating or formula rate, shall have an implied rate of interest for the applicable period for purposes of this definition determined by utilizing the rate which is or would be in effect with respect to such Indebtedness as at the relevant date of determination; (c) capital expenditures attributable to the Person or property acquired shall be included beginning as of the first day of the applicable period; and (d) except as permitted pursuant to clauses (I), (J) and (K) of the definition of Consolidated EBITDA, no adjustments for unrealized synergies shall be included. For purposes of any such calculation in respect of (a) the designation of any Restricted Subsidiary as an Unrestricted Subsidiary, (i) income statement and cash flow statement items (whether positive or negative) attributable to such Subsidiary shall be excluded to the extent relating to any period occurring prior to the

 

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date of such designation and (ii) Indebtedness of such Subsidiary shall be excluded and deemed to have been retired as of the first day of the Reference Period and (b) the designation of any Unrestricted Subsidiary as an Restricted Subsidiary, (i) income statement and cash flow statement items (whether positive or negative) attributable to such Subsidiary shall be included to the extent relating to any period prior to the date of such designation to the extent such items are not otherwise included in such income statement and cash flow statement items for Holdings, the Borrower and its Restricted Subsidiaries in accordance with any defined terms set forth in this Section 1.01.

Pro Forma Compliance Certificate” shall mean a certificate of a Responsible Officer of the Borrower containing (x) reasonably detailed calculations of the financial covenants set forth in Article VI recomputed as of the end of the period of the four Fiscal Quarters most recently ended for which the Borrower has delivered financial statements pursuant to Section 5.1(a) or (b) after giving effect to the applicable transaction on a Pro Forma Basis and (y) if delivered in connection with any Permitted Acquisition, certifications that clauses (i) through (iv) of the definition of “Permitted Acquisition” have been satisfied (or will be satisfied in the time permitted under this Agreement).

Pro Rata Share” shall mean (a) with respect to any Commitment of any Lender at any time, a percentage, the numerator of which shall be such Lender’s Commitment (or if such Commitments have been terminated or expired or the Loans have been declared to be due and payable, such Lender’s Revolving Credit Exposure or Term Loans, as applicable), and the denominator of which shall be the sum of such Commitments of all Lenders (or if such Commitments have been terminated or expired or the Loans have been declared to be due and payable, all Revolving Credit Exposure or Term Loans, as applicable, of all Lenders) and (b) with respect to all Commitments of any Lender at any time, the numerator of which shall be the sum of such Lender’s Revolving Commitment (or if such Revolving Commitments have been terminated or expired or the Loans have been declared to be due and payable, such Lender’s Revolving Credit Exposure) and Term Loans and the denominator of which shall be the sum of all Lenders’ Revolving Commitments (or if such Revolving Commitments have been terminated or expired or the Loans have been declared to be due and payable, all Revolving Credit Exposure of all Lenders funded under such Commitments) and Term Loans.

Progressive Finance” shall mean Aaron’s Holdings Company, Inc., a Georgia corporation.

Progressive Finance Subsidiaries” shall mean the direct and indirect Subsidiaries of Progressive Finance identified on Schedule 1.1(c) hereto.

PTE” shall mean a prohibited transaction class exemption issued by the U.S. Department of Labor, as any such exemption may be amended from time to time.

Real Estate” shall mean all real property owned in fee by Holdings, the Borrower and its Restricted Subsidiaries.

Real Estate Documents” shall mean, collectively, Mortgages covering all Material Real Estate owned by the Loan Parties, duly executed by each applicable Loan Party, together with (A) title insurance policies, current as-built ALTA/ACSM Land Title surveys certified to the Administrative Agent, zoning letters, building permits and certificates of occupancy, in each case relating to such Real Estate and reasonably satisfactory in form and substance to the Administrative Agent, (B) (x) “Life of Loan” Federal Emergency Management Agency Standard Flood Hazard determinations, (y) notices, in the form required under the Flood Insurance Laws, about special flood hazard area status and flood disaster assistance duly

 

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executed by each Loan Party, and (z) if any improved real property encumbered by any Mortgage is located in a special flood hazard area, a policy of flood insurance in minimum amounts required by applicable Law and that is on terms reasonably satisfactory to the Administrative Agent, (C) evidence that counterparts of such Mortgages have been recorded in all places to the extent necessary or desirable, in the judgment of the Administrative Agent, to create a valid and enforceable first priority Lien (subject to Permitted Encumbrances) on such Real Estate in favor of the Administrative Agent for the benefit of the holders of the Obligations (or in favor of such other trustee as may be required or desired under local law), (D) if requested by the Administrative Agent, an opinion of counsel in each state in which such Real Estate is located in form and substance and from counsel reasonably satisfactory to the Administrative Agent, (E) a duly executed Environmental Indemnity with respect thereto, (F) Phase I Environmental Site Assessment Reports, consistent with American Society of Testing and Materials (ASTM) Standard E 1527-05, and applicable state requirements, on all of the owned Real Estate, dated no more than six (6) months prior to the date on which the Trigger Event occurred (or date of the applicable Mortgage if provided post-closing) or later if accompanied by no change affidavits, prepared by environmental engineers satisfactory to the Administrative Agent, all in form and substance satisfactory to the Administrative Agent, and such environmental review and audit reports, including Phase II reports, with respect to the Real Estate of any Loan Party as the Administrative Agent shall have reasonably requested, in each case together with letters executed by the environmental firms preparing such environmental reports, in form and substance reasonably satisfactory to the Administrative Agent, authorizing the Administrative Agent and the Lenders to rely on such reports, and the Administrative Agent shall be reasonably satisfied with the contents of all such environmental reports and (G) such other reports, documents, instruments and agreements as the Administrative Agent shall reasonably request, each in form and substance reasonably satisfactory to Administrative Agent.

Refinancing Facility” shall have the meaning assigned to such term in Section 2.27(a).

Refinancing Facility Amendment” shall have the meaning assigned to such term in Section 2.27(a).

Refinancing Revolving Facility” shall mean any Refinancing Facility that is a revolving facility.

Refinancing Revolving Maturity Date” shall mean the maturity date of any Refinancing Revolving Facility.

Refinancing Term Loan” shall mean any Refinancing Facility that is a term loan.

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

Regulation T” shall mean Regulation T of the Board of Governors of the Federal Reserve System, as the same may be in effect from time to time, and any successor regulations.

Regulation U” shall mean Regulation U of the Board of Governors of the Federal Reserve System, as the same may be in effect from time to time, and any successor regulations.

Regulation X” shall mean Regulation X of the Board of Governors of the Federal Reserve System, as the same may be in effect from time to time, and any successor regulations.

 

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Related Parties” shall mean, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person’s Affiliates.

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

Relevant Governmental Body” shall mean the Federal Reserve Board and/or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Federal Reserve Board and/or the Federal Reserve Bank of New York or any successor thereto.

Required Lenders” shall mean, at any time, Lenders holding at least fifty-one percent (51.0%) of the Aggregate Revolving Commitments and the Term Loans at such time or if the Lenders have no Commitments outstanding, then Lenders holding at least fifty-one percent (51.0%) of the Revolving Credit Exposure and the Term Loans; provided, that, to the extent that any Lender is a Defaulting Lender, such Defaulting Lender and all of its Revolving Commitments, Revolving Credit Exposure and Term Loans shall be excluded for purposes of determining Required Lenders.

Required Revolving Lenders” shall mean, at any time, Lenders holding at least fifty-one percent (51.0%) of the aggregate outstanding Revolving Commitments at such time or, if the Lenders have no Revolving Commitments outstanding, then Lenders holding at least fifty-one percent (51.0%) of the aggregate Revolving Credit Exposure; provided that to the extent that any Lender is a Defaulting Lender, such Defaulting Lender and all of its Revolving Commitments and Revolving Credit Exposure shall be excluded for purposes of determining Required Revolving Lenders.

Resolution Authority” shall mean an EEA Resolution Authority or, with respect to any UK Financial Institution, a UK Resolution Authority.

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

Restricted Payment” shall have the meaning set forth in Section 7.5.

Restricted Subsidiary” shall mean any Subsidiary other than an Unrestricted Subsidiary. Unless otherwise indicated, all references to “Restricted Subsidiary” hereunder shall mean a Restricted Subsidiary of Holdings. For the avoidance of doubt, the Borrower shall be a Restricted Subsidiary of Holdings for all purposes of the Loan Documents.

Restructuring” shall mean the reorganization of Aaron’s Holdings Company, Inc., a Georgia corporation (“Aaron’s Holdings”) and its Affiliates pursuant to which Aaron’s Progressive Holding Company and its Subsidiaries will cease to be Subsidiaries of the Borrower pursuant to a spinoff and separation transaction as further disclosed to the Administrative Agent and the Lenders.

 

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Revolving Commitment” shall mean, with respect to each Lender, the obligation of such Lender to make Revolving Loans to the Borrower and to participate in Letters of Credit and Swingline Loans in an aggregate principal amount not exceeding the amount set forth with respect to such Lender on Schedule 1.1(b), or in the case of a Person becoming a Lender after the Effective Date through an assignment of an existing Revolving Commitment, the amount of the assigned “Revolving Commitment” as provided in the Assignment and Acceptance executed by such Person as an assignee, or the joinder executed by such Person, as the same may be increased or decreased pursuant to terms hereof, or in any documentation executed by such Lender in connection with an Incremental Revolving Commitment, Incremental Term Loan or Refinancing Facility, as applicable.

Revolving Commitment Termination Date” shall mean the earliest of (i) November 9, 2025, (ii) the date on which the Revolving Commitments are terminated pursuant to Section 2.9(b) or Section 8.1, (iii) the date on which all amounts outstanding under this Agreement have been declared or have automatically become due and payable (whether by acceleration or otherwise) and (iv) the Termination Date (if the Restructuring has not been consummated prior to the Termination Date).

Revolving Credit Exposure” shall mean, for any Lender, the sum of such Lender’s Revolving Loans, LC Exposure and Swingline Exposure.

Revolving Loan” shall mean a loan made by a Lender (other than the Swingline Lender) to the Borrower under its Revolving Commitment, which may either be a Base Rate Loan or a Eurodollar Loan.

S&P” shall mean Standard & Poor’s, a Standard & Poor’s Financial Services LLC business.

Sanctioned Country” shall mean, at any time, a country, region or territory that is, or whose government is, the subject or target of any Sanctions.

Sanctioned Person” shall mean, at any time, (i) any Person listed in any Sanctions-related list of designated Persons maintained by OFAC, the U.S. Department of State, the United Nations Security Council, the European Union or any EU member state, (ii) any Person located, organized or resident in a Sanctioned Country, (iii) any Person owned or controlled by any such Person or (iv) any Person otherwise the subject of any Sanctions.

Sanctions” shall mean economic or financial sanctions or trade embargoes administered or enforced from time to time by (i) the U.S. government, including those administered by OFAC or the U.S. Department of State or (ii) the United Nations Security Council, the European Union, any EU Member State or Her Majesty’s Treasury of the United Kingdom.

Screen Rate” shall mean the rate specified in clause (i) of the definition of Adjusted LIBO Rate.

Security Agreement” shall mean the security agreement in the form of Exhibit 5.12.

SOFR” with respect to any day means a rate per annum equal to the secured overnight financing rate published for such day by the Federal Reserve Bank of New York, as the administrator of the benchmark, (or a successor administrator) on the Federal Reserve Bank of New York’s Website.

 

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Solvent” shall mean, with respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including subordinated and contingent liabilities, of such Person; (b) the present fair saleable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts and liabilities, including subordinated and contingent liabilities as they become absolute and matured; (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay as such debts and liabilities mature; and (d) such Person is not engaged in a business or transaction, and is not about to engage in a business or transaction, for which such Person’s property would constitute an unreasonably small capital. The amount of contingent liabilities (such as litigation, guaranties and pension plan liabilities) at any time shall be computed as the amount that, in light of all the facts and circumstances existing at the time, represents the amount that would reasonably be expected to become an actual or matured liability.

Specified Asset” shall mean that certain asset disclosed to the Administrative Agent and Lenders prior to the Effective Date.

Specified Event of Default” shall mean an Event of Default arising under Section 8.1(a), (b), (h) or (i).

Specified Loan Party” shall mean each Loan Party that is, at the time on which the relevant Guarantee or grant of the relevant security interest under the Loan Documents by such Loan Party becomes effective with respect to a Swap Obligation, a corporation, partnership, proprietorship, organization, trust or other entity that would not be an “eligible contract participant” under the Commodity Exchange Act at such time but for the “keepwell” provision in Section 24 of the Guarantee Agreement and Section 24 of the Borrower Guarantee Agreement.

Specified Representations” shall mean the representations of the Loan Parties contained in Sections 4.1, 4.2, 4.3(a), 4.3(b), 4.6 (insofar as it relates to the execution, delivery and performance of the Loan Documents), 4.7, 4.9, 4.15, 4.16 and 4.17.

Subsidiary” shall mean, with respect to any Person (the “parent”), any corporation, partnership, joint venture, limited liability company, association or other entity the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, partnership, joint venture, limited liability company, association or other entity of which securities or other ownership interests representing more than fifty percent (50.0%) of the equity or more than fifty percent (50.0%) of the ordinary voting power, or in the case of a partnership, more than fifty percent (50.0%) of the general partnership interests are, as of such date, owned, controlled or held, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent. Unless otherwise indicated, all references to “Subsidiary” hereunder shall mean a Subsidiary of Holdings.

Subsidiary Loan Party” shall mean any Subsidiary (other than a Foreign Subsidiary) that is party to the Guarantee Agreement (whether as original party thereto or by subsequent joinder thereto).

Swap Obligations” shall mean with respect to any Guarantor, any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of Section 1a(47) of the Commodity Exchange Act.

 

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Swingline Commitment” shall mean the commitment of the Swingline Lender to make Swingline Loans in an aggregate principal amount at any time outstanding not to exceed $25,000,000.

Swingline Exposure” shall mean, with respect to each Lender, the principal amount of the Swingline Loans in which such Lender is legally obligated either to make a Base Rate Loan or to purchase a participation in accordance with Section 2.7, which shall equal such Lender’s Pro Rata Share of all outstanding Swingline Loans.

Swingline Lender” shall mean Truist Bank in its capacity as provider of Swingline Loans hereunder.

Swingline Loan” shall mean a loan made to the Borrower by the Swingline Lender under the Swingline Commitment.

Swingline Rate” shall mean, for any Interest Period, the rate as offered by the Administrative Agent and accepted by the Borrower. The Borrower is under no obligation to accept this rate and the Administrative Agent is under no obligation to provide it.

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

Termination Date” shall mean the earlier of (a) December 31, 2020 and (b) the date on which the Borrower delivers written notice to the Administrative Agent that it has determined to abandon the Restructuring.

Term Loans” shall mean any term loan made by a Lender to the Borrower pursuant to Section 2.25 or Section 2.27.

Term SOFR” shall mean the forward-looking term rate based on SOFR that has been selected or recommended by the Relevant Governmental Body.

Total Net Debt to EBITDA Ratio” shall mean, at any date of determination, the ratio of (a) the sum of (i) Consolidated Total Debt as of such date minus (ii) Unrestricted Cash in an aggregate amount not to exceed at any time the aggregate amount of unrestricted cash of Holdings, the Borrower and its Restricted Subsidiaries on deposit with, or otherwise held by, any Lenders or Affiliate thereof (including, for the avoidance of doubt, cash in accounts that are subject to an account control agreement in favor of the Administrative Agent) to (b) Consolidated EBITDA for the four consecutive Fiscal Quarters ending on such date.

Transaction Documents” shall mean, collectively, the Loan Documents and the Loan Facility Documents.

Treasury Management Obligations” shall mean, collectively, (a) any treasury or other cash management services, including deposit accounts, automated clearing house (ACH) origination and other funds transfer, depository (including cash vault and check deposit), zero balance accounts and sweeps, return items processing, controlled disbursement accounts, positive pay, lockboxes and lockbox accounts, account reconciliation and information reporting, payables outsourcing, payroll processing, trade finance services, investment accounts, securities accounts and supply chain financing, and (b) card services, including credit cards (including purchasing cards and commercial cards), prepaid cards, including payroll, stored value and gift cards, merchant services processing, and debit card services.

 

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Trigger Event” shall mean that (a) the Total Net Debt to EBITDA Ratio for the period of four Fiscal Quarters most recently ended, as calculated in the most recently delivered Compliance Certificate pursuant to Section 5.1(c), exceeds 1.25 to 1.0 or (b) a Trigger Event (as defined in the Loan Facility Agreement) under the Loan Facility Agreement has occurred.

Type”, when used in reference to a Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate or the Base Rate.

UK Financial Institution” shall mean any BRRD Undertaking (as such term is defined under the PRA Rulebook (as amended from time to time) promulgated by the United Kingdom Prudential Regulation Authority) or any person falling within IFPRU 11.6 of the FCA Handbook (as amended from time to time) promulgated by the United Kingdom Financial Conduct Authority, which includes certain credit institutions and investment firms, and certain affiliates of such credit institutions or investment firms.

UK Resolution Authority” shall mean the Bank of England or any other public administrative authority having responsibility for the resolution of any UK Financial Institution.

Unadjusted Benchmark Replacement” shall mean the Benchmark Replacement excluding the Benchmark Replacement Adjustment.

Uniform Commercial Code” or “UCC” shall mean the Uniform Commercial Code as in effect from time to time in the State of New York.

United States or U.S. shall mean the United States of America.

Unrestricted Cash” shall mean, as of any date of determination, the aggregate amount (without duplication) of cash and Cash Equivalents of Holdings, the Borrower and its Restricted Subsidiaries to the extent the same would be reflected on a consolidated balance sheet of Holdings and its Restricted Subsidiaries if the same were prepared as of such date; provided, that, “Unrestricted Cash” of Foreign Subsidiaries shall be net of repatriation costs.

Unrestricted Subsidiary” shall mean, collectively, each Subsidiary designated by the Borrower as an Unrestricted Subsidiary pursuant to Section 5.14.

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

Write-Down and Conversion Powers” shall mean (a) with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule and (b) with respect to the United Kingdom, any powers of the applicable Resolution Authority under the Bail-In Legislation to cancel, reduce, modify or change the form of a liability of any UK Financial Institution or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers.

 

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Section 1.2 Classifications of Loans and Borrowings. For purposes of this Agreement, Loans may be classified and referred to by Class (e.g. a “Revolving Loan” or “Term Loan”) or by Type (e.g. a “Eurodollar Loan” or “Base Rate Loan”) or by Class and Type (e.g. “Revolving Eurodollar Loan”). Borrowings also may be classified and referred to by Class (e.g. “Revolving Borrowing”) or by Type (e.g. “Eurodollar Borrowing”) or by Class and Type (e.g. “Revolving Eurodollar Borrowing”).

Section 1.3 Accounting Terms and Determination.

(a) Unless otherwise defined or specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared, in accordance with GAAP as in effect from time to time, applied on a basis consistent with the most recent audited consolidated financial statement of Holdings delivered pursuant to Section 5.1(a); provided, that if the Borrower notifies the Administrative Agent that the Borrower wishes to amend any covenant in Article VI to eliminate the effect of any change in GAAP on the operation of such covenant (or if the Administrative Agent notifies the Borrower that the Required Lenders wish to amend Article VI for such purpose), then the Borrower’s compliance with such covenant shall be determined on the basis of GAAP in effect immediately before the relevant change in GAAP became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Borrower and the Required Lenders.

(b) Notwithstanding any other provision contained herein, (i) all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein shall be made, without giving effect to any election under Accounting Standards Codification Section 825-10 (or any other Financial Accounting Standard having a similar result or effect) to value any Indebtedness or other liabilities of any Loan Party or any Restricted Subsidiary of any Loan Party at “fair value”, as defined therein and (ii) all liability amounts shall be determined excluding any liability relating to any operating lease, all asset amounts shall be determined excluding any right-of-use assets relating to any operating lease, all amortization amounts shall be determined excluding any amortization of a right-of-use asset relating to any operating lease, and all interest amounts shall be determined excluding any deemed interest comprising a portion of fixed rent payable under any operating lease, in each case to the extent that such liability, asset, amortization or interest pertains to an operating lease under which the covenantor or a member of its consolidated group is the lessee and would not have been accounted for as such under GAAP as in effect on December 31, 2015.

(c) Notwithstanding the above, the parties hereto acknowledge and agree that all calculations of the financial covenants in Article VI (including for purposes of determining the Applicable Margin and the Applicable Percentage and any transaction that by the terms of this Agreement requires that any financial covenant contained in Article VI be calculated on a Pro Forma Basis) shall be made on a Pro Forma Basis with respect to (a) sales, leases, transfers and/or involuntary dispositions of property in any period of twelve months with an aggregate fair market value in excess of $15,000,000, (b) any Acquisition, (c) any incurrence of any Incremental Term Loan and/or Incremental Revolving Commitment, (d) any determination of whether a Domestic Subsidiary qualifies as a “Material Subsidiary” pursuant to the definition of “Material Domestic Subsidiary” or (e) any payment of a Restricted Payment occurring during such period.

 

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Section 1.4 Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including” and the word “to” means “to but excluding”. Unless the context requires otherwise (i) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as it was originally executed or as it may from time to time be amended, restated, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (ii) any reference herein to any Person shall be construed to include such Person’s successors and permitted assigns, (iii) the words “hereof”, “herein” and “hereunder” and words of similar import shall be construed to refer to this Agreement as a whole and not to any particular provision hereof, (iv) all references to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles, Sections, Exhibits and Schedules to this Agreement and (v) all references to a specific time shall be construed to refer to the time in the city and state of the Administrative Agent’s principal office, unless otherwise indicated.

Section 1.5 Letter of Credit Amounts. Unless otherwise specified herein, the amount of a Letter of Credit at any time shall be deemed to be the stated amount of such Letter of Credit in effect at such time; provided, however, that with respect to any Letter of Credit that, by its terms or the terms of any LC Document related thereto, provides for one or more automatic increases in the stated amount thereof, the amount of such Letter of Credit shall be deemed to be the maximum stated amount of such Letter of Credit after giving effect to all such increases, whether or not such maximum stated amount is in effect at such time.

Section 1.6 Times of Day. Unless otherwise specified, all references herein to times of day shall be references to Eastern time (daylight or standard, as applicable).

ARTICLE II.

AMOUNT AND TERMS OF THE COMMITMENTS

Section 2.1 General Description of Facilities. Subject to and upon the terms and conditions herein set forth, (i) the Lenders hereby establish in favor of the Borrower a revolving credit facility pursuant to which the Lenders severally agree (to the extent of each Lender’s Revolving Commitment) to make Revolving Loans to the Borrower in accordance with Section 2.2, (ii) the Issuing Banks may issue Letters of Credit in accordance with Section 2.24, (iii) the Swingline Lender may make Swingline Loans in accordance with Section 2.4, and (iv) each Lender agrees to purchase a participation interest in the Letters of Credit and the Swingline Loans pursuant to the terms and conditions hereof; provided, that in no event shall the aggregate principal amount of all outstanding Revolving Loans, Swingline Loans and outstanding LC Exposure exceed at any time the Aggregate Revolving Commitments from time to time in effect.

 

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Section 2.2 Revolving Loans. Subject to the terms and conditions set forth herein, each Lender severally agrees to make Revolving Loans in Dollars, ratably in proportion to its Pro Rata Share of the Revolving Commitments, to the Borrower, from time to time during the Availability Period, in an aggregate principal amount outstanding at any time that will not result in (i) such Lender’s Revolving Credit Exposure exceeding such Lender’s Revolving Commitment, or (ii) the sum of the aggregate Revolving Credit Exposures of all Lenders exceeding the Aggregate Revolving Commitments. During the Availability Period, the Borrower shall be entitled to borrow, prepay and reborrow Revolving Loans in accordance with the terms and conditions of this Agreement; provided, that the Borrower may not borrow or reborrow should there exist a Default or Event of Default.

Section 2.3 Procedure for Revolving Borrowings. The Borrower shall give the Administrative Agent written notice (or telephonic notice promptly confirmed in writing) of each Revolving Borrowing substantially in the form of Exhibit 2.3 attached hereto (a “Notice of Revolving Borrowing”) (x) prior to 11:00 a.m. on the requested date of each Base Rate Borrowing and (y) prior to 11:00 a.m. three (3) Business Days prior to the requested date of each Eurodollar Borrowing. Each Notice of Revolving Borrowing shall be irrevocable and shall specify: (i) the aggregate principal amount of such Borrowing, (ii) the date of such Borrowing (which shall be a Business Day), (iii) the Type of such Revolving Loan comprising such Borrowing and (iv) in the case of a Eurodollar Borrowing, the duration of the initial Interest Period applicable thereto (subject to the provisions of the definition of “Interest Period”). Each Revolving Borrowing shall consist entirely of Base Rate Loans or Eurodollar Loans, as the Borrower may request. The aggregate principal amount of each Eurodollar Borrowing shall be not less than $1,000,000 or a larger multiple of $500,000, and the aggregate principal amount of each Base Rate Borrowing shall not be less than $1,000,000 or a larger multiple of $100,000; provided, that Base Rate Loans made pursuant to Section 2.5 or Section 2.24(d) may be made in lesser amounts as provided therein. At no time shall the total number of Eurodollar Borrowings outstanding at any time exceed twelve. Promptly following the receipt of a Notice of Revolving Borrowing in accordance herewith, the Administrative Agent shall advise each Lender of the details thereof and the amount of such Lender’s Revolving Loan to be made as part of the requested Revolving Borrowing.

Section 2.4 Swingline Commitment. Subject to the terms and conditions set forth herein, the Swingline Lender agrees to make Swingline Loans to the Borrower in Dollars, from time to time during the Availability Period, in an aggregate principal amount outstanding at any time not to exceed the lesser of (i) the Swingline Commitment then in effect and (ii) the difference between the Aggregate Revolving Commitments and the aggregate Revolving Credit Exposures of all Lenders; provided, that the Swingline Lender shall not be required to make a Swingline Loan to refinance an outstanding Swingline Loan. The Borrower shall be entitled to borrow, repay and reborrow Swingline Loans in accordance with the terms and conditions of this Agreement.

Section 2.5 [Reserved].

Section 2.6 Procedure for Borrowing of Swingline Loans; Etc.

(a) Except in connection with any Auto Borrow Agreement, the Borrower shall give the Administrative Agent written notice (or telephonic notice promptly confirmed in writing) of each Swingline Borrowing (“Notice of Swingline Borrowing”) prior to 10:00 a.m. on the requested date of each Swingline Borrowing. Each Notice of Swingline Borrowing shall be irrevocable and shall specify: (i) the principal amount of such Swingline Loan, (ii) the date of such Swingline Loan (which shall be a Business Day) and (iii) the account of the Borrower to which the proceeds of such Swingline Loan should be credited. The Administrative Agent will promptly advise the Swingline Lender of each Notice of Swingline Borrowing. Each Swingline Loan shall accrue interest at the Swingline Rate or any other interest rate as agreed between the Borrower and the Swingline Lender and shall have an Interest Period (subject to the definition thereof) as agreed between the Borrower

 

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and the Swingline Lender. The aggregate principal amount of each Swingline Loan shall be not less than $100,000 or a larger multiple of $50,000, or such other minimum or maximum amounts agreed to by the Swingline Lender and the Borrower. The Swingline Lender will make the proceeds of each Swingline Loan available to the Borrower in Dollars in immediately available funds at the account specified by the Borrower in the applicable Notice of Swingline Borrowing not later than 1:00 p.m. on the requested date of such Swingline Loan. The Administrative Agent will notify the Lenders on a quarterly basis if any Swingline Loans occurred during such quarter.

(b) The Swingline Lender, at any time and from time to time in its sole discretion, may, on behalf of the Borrower (which hereby irrevocably authorizes and directs the Swingline Lender to act on its behalf), give a Notice of Revolving Borrowing to the Administrative Agent requesting the Lenders (including the Swingline Lender) to make Base Rate Loans in an amount equal to the unpaid principal amount of any Swingline Loan. Each Lender will make the proceeds of its Base Rate Loan included in such Borrowing available to the Administrative Agent for the account of the Swingline Lender in accordance with Section 2.6, which will be used solely for the repayment of such Swingline Loan.

(c) If for any reason a Base Rate Borrowing may not be (as determined in the sole discretion of the Administrative Agent), or is not, made in accordance with the foregoing provisions, then each Lender (other than the Swingline Lender) shall purchase an undivided participating interest in such Swingline Loan in an amount equal to its Pro Rata Share thereof on the date that such Base Rate Borrowing should have occurred. On the date of such required purchase, each Lender shall promptly transfer, in immediately available funds, the amount of its participating interest to the Administrative Agent for the account of the Swingline Lender. If such Swingline Loan bears interest at a rate other than the Base Rate, such Swingline Loan shall automatically become a Base Rate Loan on the effective date of any such participation and interest shall become payable on demand.

(d) Each Lender’s obligation to make a Base Rate Loan pursuant to Section 2.6(b) or to purchase the participating interests pursuant to Section 2.6(c) shall be absolute and unconditional and shall not be affected by any circumstance, including without limitation (i) any setoff, counterclaim, recoupment, defense or other right that such Lender or any other Person may have or claim against the Swingline Lender, the Borrower or any other Person for any reason whatsoever, (ii) the existence of a Default or an Event of Default or the termination of any Lender’s Revolving Commitment, (iii) the existence (or alleged existence) of any event or condition which has had or could reasonably be expected to have a Material Adverse Effect, (iv) any breach of this Agreement or any other Loan Document by any Loan Party, the Administrative Agent or any Lender or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. If such amount is not in fact made available to the Swingline Lender by any Lender, the Swingline Lender shall be entitled to recover such amount on demand from such Lender, together with accrued interest thereon for each day from the date of demand thereof at the Federal Funds Rate. Until such time as such Lender makes its required payment, the Swingline Lender shall be deemed to continue to have outstanding Swingline Loans in the amount of the unpaid participation for all purposes of the Loan Documents. In addition, such Lender shall be deemed to have assigned any and all payments made of principal and interest on its Loans and any other amounts due to it hereunder, to the Swingline Lender to fund the amount of such Lender’s participation interest in such Swingline Loans that such Lender failed to fund pursuant to this Section 2.6, until such amount has been purchased in full.

 

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(e) In order to facilitate the borrowing of Swingline Loans, the Borrower and the Swingline Lender may mutually agree to, and are hereby authorized to, enter into an auto borrow agreement in form and substance reasonably satisfactory to the Swingline Lender and the Administrative Agent (the “Auto Borrow Agreement”) providing for the automatic advance by the Swingline Lender of Swingline Loans under the conditions set forth in the Auto Borrow Agreement, subject to the conditions set forth herein. At any time an Auto Borrow Agreement is in effect, advances under the Auto Borrow Agreement shall be deemed Swingline Loans for all purposes hereof, except that Borrowings of Swingline Loans under the Auto Borrow Agreement shall be made in accordance with the Auto Borrow Agreement. For purposes of determining the aggregate Revolving Credit Exposure of all Lenders at any time during which an Auto Borrow Agreement is in effect, the outstanding amount of all Swingline Loans shall be deemed to be the sum of the outstanding amount of Swingline Loans at such time plus the maximum amount available to be borrowed under such Auto Borrow Agreement at such time.

Section 2.7 Funding of Borrowings.

(a) Each Lender will make available each Loan to be made by it hereunder on the proposed date thereof by wire transfer in immediately available funds by 11:00 a.m. to the Administrative Agent at the Payment Office; provided, that the Swingline Loans will be made as set forth in Section 2.6. The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts that it receives, in like funds by the close of business on such proposed date, to an account maintained by the Borrower with the Administrative Agent or at the Borrower’s option, by effecting a wire transfer of such amounts to an account designated by the Borrower to the Administrative Agent.

(b) Unless the Administrative Agent shall have been notified by any Lender prior to 5:00 p.m. one (1) Business Day prior to the date of a Borrowing in which such Lender is participating that such Lender will not make available to the Administrative Agent such Lender’s share of such Borrowing, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent on such date, and the Administrative Agent, in reliance on such assumption, may make available to the Borrower on such date a corresponding amount. If such corresponding amount is not in fact made available to the Administrative Agent by such Lender on the date of such Borrowing, the Administrative Agent shall be entitled to recover such corresponding amount on demand from such Lender together with interest at the Federal Funds Rate for up to two (2) days and thereafter at the rate specified for such Borrowing. If such Lender does not pay such corresponding amount forthwith upon the Administrative Agent’s demand therefor, the Administrative Agent shall promptly notify the Borrower, and the Borrower shall immediately pay such corresponding amount to the Administrative Agent together with interest at the rate specified for such Borrowing. Nothing in this Section 2.7(b) shall be deemed to relieve any Lender from its obligation to fund its Pro Rata Share of any Borrowing hereunder or to prejudice any rights which the Borrower may have against any Lender as a result of any default by such Lender hereunder.

(c) All Borrowings shall be made by the Lenders on the basis of their respective Pro Rata Shares. No Lender shall be responsible for any default by any other Lender in its obligations hereunder, and each Lender shall be obligated to make its Loans provided to be made by it hereunder, regardless of the failure of any other Lender to make its Loans hereunder.

 

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Section 2.8 Interest Elections.

(a) Each Borrowing initially shall be of the Type specified in the applicable Notice of Borrowing, and in the case of a Eurodollar Borrowing, shall have an initial Interest Period as specified in such Notice of Borrowing. Thereafter, the Borrower may elect to convert such Borrowing into a different Type or to continue such Borrowing, and in the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in this Section 2.8. The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. This Section 2.8 shall not apply to Swingline Borrowings, which may not be converted or continued.

(b) To make an election pursuant to this Section 2.8, the Borrower shall give the Administrative Agent prior written notice (or telephonic notice promptly confirmed in writing) of each Borrowing substantially in the form of Exhibit 2.8 attached hereto (a “Notice of Conversion/Continuation”) that is to be converted or continued, as the case may be, (x) prior to 11:00 a.m. one (1) Business Day prior to the requested date of a conversion into a Base Rate Borrowing and (y) prior to 11:00 a.m. three (3) Business Days prior to a continuation of or conversion into a Eurodollar Borrowing. Each such Notice of Conversion/Continuation shall be irrevocable and shall specify (i) the Borrowing to which such Notice of Conversion/Continuation applies and if different options are being elected with respect to different portions thereof, the portions thereof that are to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to Section 2.8(b)(iii) and Section 2.8(b)(iv) shall be specified for each resulting Borrowing); (ii) the effective date of the election made pursuant to such Notice of Conversion/Continuation, which shall be a Business Day, (iii) whether the resulting Borrowing is to be a Base Rate Borrowing or a Eurodollar Borrowing; and (iv) if the resulting Borrowing is to be a Eurodollar Borrowing, the Interest Period applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of “Interest Period”. If any such Notice of Conversion/Continuation requests a Eurodollar Borrowing but does not specify an Interest Period, the Borrower shall be deemed to have selected an Interest Period of one month. The principal amount of any resulting Borrowing shall satisfy the minimum borrowing amount for Eurodollar Borrowings and Base Rate Borrowings set forth in Section 2.3.

(c) If, on the expiration of any Interest Period in respect of any Eurodollar Borrowing, the Borrower shall have failed to deliver a Notice of Conversion/Continuation, then, unless such Borrowing is repaid as provided herein, the Borrower shall be deemed to have elected to convert such Borrowing to a Base Rate Borrowing. No Borrowing may be converted into, or continued as, a Eurodollar Borrowing if a Default or an Event of Default exists, unless the Administrative Agent and each of the Lenders shall have otherwise consented in writing. No conversion of any Eurodollar Loans shall be permitted except on the last day of the Interest Period in respect thereof.

(d) Upon receipt of any Notice of Conversion/Continuation, the Administrative Agent shall promptly notify each Lender of the details thereof and of such Lender’s portion of each resulting Borrowing.

 

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Section 2.9 Optional Reduction and Termination of Commitments.

(a) Unless previously terminated, all Revolving Commitments and the Swingline Commitment shall terminate on the Revolving Commitment Termination Date.

(b) Upon at least three (3) Business Days’ prior written notice (or telephonic notice promptly confirmed in writing) to the Administrative Agent (which notice shall be irrevocable), the Borrower may reduce the Aggregate Revolving Commitments in part or terminate the Aggregate Revolving Commitments in whole; provided, that (i) any partial reduction shall apply to reduce proportionately and permanently the Revolving Commitment of each Lender, (ii) any partial reduction pursuant to this Section 2.9 shall be in an amount of at least $5,000,000 and any larger multiple of $1,000,000, and (iii) no such reduction shall be permitted which would reduce the Aggregate Revolving Commitments to an amount less than the aggregate outstanding Revolving Credit Exposures of all Lenders. Any such reduction in the Aggregate Revolving Commitments shall result in a proportionate reduction (rounded to the next lowest integral multiple of $100,000) in the Swingline Commitment and the LC Sublimit.

Section 2.10 Repayment of Loans.

(a) The outstanding principal amount of all Revolving Loans made by the Lenders pursuant to Section 2.2 shall be due and payable by Borrower (together with accrued and unpaid interest thereon) on the Revolving Commitment Termination Date.

(b) The principal amount of each Swingline Borrowing shall be due and payable (together with accrued interest thereon) on the earlier of (i) the last day of the Interest Period applicable to such Borrowing and (ii) the Revolving Commitment Termination Date.

(c) The Borrower unconditionally promises to pay to the Administrative Agent, for the account of each applicable Lender, the unpaid principal amount of the Incremental Term Loans of such Lender in installments payable on the dates set forth in the definitive documentation therefor (and on such other date(s) and in such other amounts as may be required from time to time pursuant to this Agreement).

Section 2.11 Evidence of Indebtedness.

(a) Each Lender shall maintain in accordance with its usual practice appropriate records evidencing the Indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender from time to time, including the amounts of principal and interest payable thereon and paid to such Lender from time to time under this Agreement. The Administrative Agent shall maintain appropriate records in which shall be recorded (i) the Revolving Commitment of each Lender, (ii) the amount of each Loan made hereunder by each Lender, the Class and Type thereof and, in the case of each Eurodollar Loan, the Interest Period applicable thereto, (iii) the date of each continuation thereof pursuant to Section 2.8, (iv) the date of each conversion of all or a portion thereof to another Type pursuant to Section 2.8, (v) the date and amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder in respect of such Loans and (vi) both the date and amount of any sum received by the Administrative Agent hereunder from the Borrower in respect of the Loans and each Lender’s Pro Rata Share thereof. The entries made in such records shall be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded; provided, that the failure or delay of any Lender or the Administrative Agent in maintaining or making entries into any such record or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans (both principal and unpaid accrued interest) of such Lender in accordance with the terms of this Agreement.

 

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(b) This Agreement evidences the obligation of the Borrower to repay the Loans and is being executed as a “noteless” credit agreement. However, at the request of any Lender (including the Swingline Lender) at any time, the Borrower agrees that it will prepare, execute and deliver to such Lender a promissory note payable to such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the Borrower and the Administrative Agent. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment permitted hereunder) be represented by one or more promissory notes in such form payable to the payee named therein (or to such payee and its registered assigns).

Section 2.12 Optional Prepayments.

The Borrower shall have the right at any time and from time to time to prepay any Borrowing, in whole or in part, without premium or penalty, by giving irrevocable written notice (or telephonic notice promptly confirmed in writing) to the Administrative Agent no later than (i) in the case of prepayment of any Eurodollar Borrowing, 11:00 a.m. not less than three (3) Business Days prior to any such prepayment, (ii) in the case of any prepayment of any Base Rate Borrowing, not less than one Business Day prior to the date of such prepayment, and (iii) in the case of Swingline Borrowings, 11:00 a.m. on the date of such prepayment. Each such notice shall be irrevocable and shall specify the proposed date of such prepayment and the principal amount of each Borrowing or portion thereof to be prepaid. Upon receipt of any such notice, the Administrative Agent shall promptly notify each affected Lender of the contents thereof and of such Lender’s Pro Rata Share of any such prepayment. If such notice is given, the aggregate amount specified in such notice shall be due and payable on the date designated in such notice, together with accrued interest to such date on the amount so prepaid in accordance with Section 2.14(d); provided, that if a Eurodollar Borrowing is prepaid on a date other than the last day of an Interest Period applicable thereto, the Borrower shall also pay all amounts required pursuant to Section 2.20. Each partial prepayment of any Loan (other than a Swingline Loan) shall be in an amount not less than $1,000,000 and in integral multiples of $500,000. Each prepayment of a Borrowing shall be applied ratably to the Loans comprising such Borrowing and in the case of a prepayment of any Incremental Term Loan, ratably to all outstanding Incremental Term Loans, and to the scheduled principal installments thereof in direct order of maturity.

Section 2.13 Mandatory Prepayments.

If at any time the Revolving Credit Exposure of all Lenders exceeds the Aggregate Revolving Commitments at such time, as reduced pursuant to Section 2.9 or otherwise, by no later than the following Business Day, the Borrower shall repay Swingline Loans and Revolving Loans in an amount equal to such excess, together with all accrued and unpaid interest on such excess amount and any amounts due under Section 2.20. Each such prepayment shall be applied ratably first to the Swingline Loans to the full extent thereof, then to the Revolving Base Rate Loans to the full extent thereof, and finally to Revolving Eurodollar Loans to the full extent thereof. If after giving effect to prepayment of all Swingline Loans and Revolving Loans, the Revolving Credit Exposure of all Lenders exceeds the Aggregate Revolving Commitments at such time, the Borrower shall Cash Collateralize its reimbursement obligations with respect to all Letters of Credit in an amount equal to such excess plus any accrued and unpaid fees thereon.

 

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Section 2.14 Interest on Loans.

(a) The Borrower shall pay interest with respect to the Revolving Loans made to the Borrower pursuant to Section 2.2: (i) on each Base Rate Loan at the Base Rate plus the Applicable Margin in effect from time to time and (ii) on each Eurodollar Loan at the Adjusted LIBO Rate for the applicable Interest Period in effect for such Loan plus the Applicable Margin in effect from time to time.

(b) The Borrower shall pay interest on each Swingline Loan at the Swingline Rate in effect from time to time.

(c) If an Event of Default has occurred and is continuing, at the option of the Required Lenders, or automatically in the case of an Event of Default under Sections 8.1(a), (g) or (h), the Borrower shall pay interest (“Default Interest”) with respect to all Eurodollar Loans at the rate otherwise applicable for the then-current Interest Period plus an additional two percent (2%) per annum until the last day of such Interest Period, and thereafter, and with respect to all Base Rate Loans (including all Swingline Loans) and all other Obligations hereunder (other than Loans), at an all-in rate in effect for Base Rate Loans plus an additional two percent (2%) per annum.

(d) Interest on the principal amount of all Loans shall accrue from and including the date such Loans are made to but excluding the date of any repayment thereof. Interest on all outstanding Base Rate Loans shall be payable quarterly in arrears on the last day of each March, June, September and December and on the Revolving Commitment Termination Date. Interest on all outstanding Eurodollar Loans shall be payable on the last day of each Interest Period applicable thereto, and, in the case of any Eurodollar Loans having an Interest Period in excess of three (3) months or ninety (90) days, respectively, on each day which occurs every three (3) months or ninety (90) days, as the case may be, after the initial date of such Interest Period, and on the Revolving Commitment Termination Date. Interest on each Swingline Loan shall be payable on the maturity date of such Loan, which shall be the last day of the Interest Period applicable thereto, and on the Revolving Commitment Termination Date. Interest on any Loan which is converted into a Loan of another Type or which is repaid or prepaid shall be payable on the date of such conversion or on the date of any such repayment or prepayment (on the amount repaid or prepaid) thereof. All Default Interest shall be payable on demand.

(e) The Administrative Agent shall determine each interest rate applicable to the Loans hereunder and shall promptly notify the Borrower and the Lenders of such rate in writing (or by telephone, promptly confirmed in writing). Any such determination shall be conclusive and binding for all purposes, absent manifest error.

Section 2.15 Fees.

(a) The Borrower shall pay to the Administrative Agent for its own account fees in the amounts and at the times agreed upon by the Borrower and the Administrative Agent in the Fee Letters. The Borrower shall pay all fees and other amounts separately agreed in writing that are due and payable on or prior to the Funding Availability Date.

 

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(b) Commitment Fee. The Borrower agrees to pay to the Administrative Agent for the account of each Lender a commitment fee, which shall accrue at the Applicable Percentage (determined daily in accordance with Schedule 1.1(a)) on the daily amount of the unused Revolving Commitment of such Lender during the Availability Period. For purposes of computing commitment fees with respect to the Revolving Commitments, the Revolving Commitment of each Lender shall be deemed used to the extent of the outstanding Revolving Loans and LC Exposure, but not Swingline Exposure, of such Lender.

(c) Letter of Credit Fees. The Borrower agrees to pay (i) to the Administrative Agent, for the account of each Lender, a letter of credit fee with respect to its participation in each Letter of Credit, which shall accrue at the Applicable Margin for Eurodollar Revolving Loans then in effect on the average daily amount of such Lender’s LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) attributable to such Letter of Credit during the period from and including the date of issuance of such Letter of Credit to but excluding the date on which such Letter of Credit expires or is drawn in full (including without limitation any LC Exposure that remains outstanding after the Revolving Commitment Termination Date) and (ii) to each Issuing Bank for its own account a fronting fee with respect to Letters of Credit issued by such Issuing Bank, which shall accrue at the rate of 0.125% per annum on the average daily amount of the LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the Availability Period (or until the date that such Letter of Credit is irrevocably cancelled, whichever is later), as well as such Issuing Bank’s standard fees with respect to issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder.

(d) Payments. The fees described in Sections 2.15(b) and 2.15(c) above shall be payable quarterly in arrears on the last day of each March, June, September and December, commencing on December 31, 2020 and on the Revolving Commitment Termination Date (and if later, the date the Loans and LC Exposure shall be repaid in their entirety).

(e) Anything herein to the contrary notwithstanding, during such period as a Lender is a Defaulting Lender, such Defaulting Lender will not be entitled to commitment fees accruing with respect to its Revolving Commitment during such period pursuant to Section 2.15(b) or letter of credit fees accruing during such period pursuant to Section 2.15(c) (without prejudice to the rights of the Lenders other than Defaulting Lenders in respect of such fees); provided that (x) to the extent that a portion of the LC Exposure of such Defaulting Lender is reallocated to the Non-Defaulting Lenders pursuant to Section 2.26, such fees that would have accrued for the benefit of such Defaulting Lender will instead accrue for the benefit of and be payable to such Non-Defaulting Lenders, pro rata in accordance with their respective Revolving Commitments, and (y) to the extent any portion of such LC Exposure cannot be so reallocated, such fees will instead accrue for the benefit of and be payable to the applicable Issuing Bank. The pro rata payment provisions of Section 2.22 shall automatically be deemed adjusted to reflect the provisions of this Section 2.15(e).

Section 2.16 Computation of Interest and Fees.

All computations of interest and fees hereunder shall be made on the basis of a year of three hundred sixty (360) days for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or fees are payable (to the extent computed on the basis of days elapsed); provided that interest hereunder based on the Administrative Agent’s prime lending rate shall be computed on the basis of a year of three hundred sixty-five (365) days (or three hundred sixty-six (366) days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day). Each determination by the Administrative Agent of an interest amount or fee hereunder shall be made in good faith and, except for manifest error, shall be final, conclusive and binding for all purposes.

 

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Section 2.17 Inability to Determine Interest Rates.

(a) If prior to the commencement of any Interest Period for any Eurodollar Borrowing,

(i) the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Borrower, absent manifest error) that, by reason of circumstances affecting the relevant interbank market, adequate means do not exist for ascertaining LIBOR (including, without limitation, because the Screen Rate is not available or published on a current basis) for such Interest Period, provided that no Benchmark Transition Event or Early Opt-In Election shall have occurred at such time or for such Interest Period, or

(ii) the Administrative Agent shall have received notice from the Required Lenders that the Adjusted LIBO Rate does not adequately and fairly reflect the cost to such Lenders (or Lender, as the case may be) of making, funding or maintaining their (or its, as the case may be) Eurodollar Loans for such Interest Period,

the Administrative Agent shall give written notice (or telephonic notice, promptly confirmed in writing) to the Borrower and to the Lenders as soon as practicable thereafter. In the case of Eurodollar Loans, until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (x) the obligations of the Lenders to make Eurodollar Revolving Loans or to continue or convert outstanding Loans as or into Eurodollar Loans shall be suspended and (y) all such affected Loans shall be converted into Base Rate Loans on the last day of the then current Interest Period applicable thereto unless the Borrower prepays such Loans in accordance with this Agreement. Unless the Borrower notifies the Administrative Agent at least one (1) Business Day before the date of any Eurodollar Borrowing for which a Notice of Revolving Borrowing or Notice of Conversion/Continuation has previously been given that it elects not to borrow on such date, then such Borrowing shall be made as a Base Rate Borrowing.

(b) Notwithstanding anything to the contrary herein or in any other Loan Document, upon the occurrence of a Benchmark Transition Event or an Early Opt-in Election, as applicable, the Administrative Agent and the Borrower may amend this Agreement to replace the Screen Rate with a Benchmark Replacement. Any such amendment with respect to a Benchmark Transition Event will become effective at 5:00 p.m. on the fifth (5th) Business Day after the Administrative Agent has posted such proposed amendment to all Lenders and the Borrower so long as the Administrative Agent has not received, by such time, written notice of objection to such amendment from Lenders comprising the Required Lenders of each Class. Any such amendment with respect to an Early Opt-in Election will become effective on the date that Lenders comprising the Required Lenders of each Class have delivered to the Administrative Agent written notice that such Required Lenders accept such amendment. No replacement of the Screen Rate with a Benchmark Replacement pursuant to these provisions will occur prior to the applicable Benchmark Transition Start Date.

(c) In connection with the implementation of a Benchmark Replacement, the Administrative Agent will have the right to make Benchmark Replacement Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Benchmark Replacement Conforming Changes will become effective without any further action or consent of any other party to this Agreement.

 

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(d) The Administrative Agent will promptly notify the Borrower and the Lenders of (i) any occurrence of a Benchmark Transition Event or an Early Opt-in Election, as applicable, and its related Benchmark Replacement Date and Benchmark Transition Start Date, (ii) the implementation of any Benchmark Replacement, (iii) the effectiveness of any Benchmark Replacement Conforming Changes and (iv) the commencement or conclusion of any Benchmark Unavailability Period. Any determination, decision or election that may be made by the Administrative Agent or Lenders pursuant to this Section 2.17(b)-(e), including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action, will be conclusive and binding absent manifest error and may be made in its or their sole discretion and without consent from any other party hereto, except, in each case, as expressly required pursuant to this Section 2.17(b)-(e).

(e) Upon the Borrower’s receipt of notice of the commencement of a Benchmark Unavailability Period, the Borrower may revoke any request for a Eurodollar Borrowing of, conversion to or continuation of Eurodollar Loans to be made, converted or continued during any Benchmark Unavailability Period and, failing that, the Borrower will be deemed to have converted any such request into a request for a Borrowing of or conversion to Base Rate Loans. During any Benchmark Unavailability Period, the component of Base Rate based upon the Adjusted LIBO Rate will not be used in any determination of Base Rate.

Section 2.18 Illegality. If any Change in Law shall make it unlawful or impossible for any Lender to make, maintain or fund any Eurodollar Loan and such Lender shall so notify the Administrative Agent, the Administrative Agent shall promptly give notice thereof to the Borrower and the other Lenders, whereupon until such Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such suspension no longer exist, the obligation of such Lender to make Eurodollar Loans, or to continue or convert outstanding Loans as or into Eurodollar Loans, shall be suspended. In the case of the making of a Eurodollar Borrowing, such Lender’s Revolving Loan shall be made as a Base Rate Loan as part of the same Revolving Borrowing for the same Interest Period and if the affected Eurodollar Loan is then outstanding, such Loan shall be converted to a Base Rate Loan either (a) on the last day of the then current Interest Period applicable to such Eurodollar Loan if such Lender may lawfully continue to maintain such Loan to such date or (b) immediately if such Lender shall determine that it may not lawfully continue to maintain such Eurodollar Loan to such date. Notwithstanding the foregoing, the affected Lender shall, prior to giving such notice to the Administrative Agent, designate a different Applicable Lending Office if such designation would avoid the need for giving such notice and if such designation would not otherwise be disadvantageous to such Lender in the good faith exercise of its discretion.

Section 2.19 Increased Costs.

(a) If any Change in Law shall:

(i) impose, modify or deem applicable any reserve, special deposit or similar requirement that is not otherwise included in the determination of the Adjusted LIBO Rate hereunder against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate) or any Issuing Bank; or

 

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(ii) impose on any Lender or on any Issuing Bank or the eurodollar interbank market any other condition affecting this Agreement or any Eurodollar Loans made by such Lender or any Letter of Credit or any participation therein; or

(iii) subject any Lender or Issuing Bank to any Taxes (other than Indemnified Taxes or Excluded Taxes) on its loans, loan principal, letters of credit, commitments or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto;

and the result of the foregoing is to increase the cost to such Lender of making, converting into, continuing or maintaining a Eurodollar Loan or to increase the cost to such Lender or such Issuing Bank of participating in or issuing any Letter of Credit or to reduce the amount received or receivable by such Lender or such Issuing Bank hereunder (whether of principal, interest or any other amount), then the Borrower shall promptly pay, upon written notice from and demand by such Lender on the Borrower (with a copy of such notice and demand to the Administrative Agent), to the Administrative Agent for the account of such Lender, within five (5) Business Days after the date of such notice and demand, additional amount or amounts sufficient to compensate such Lender or such Issuing Bank, as the case may be, for such additional costs incurred or reduction suffered.

(b) If any Lender or any Issuing Bank shall have determined that on or after the date of this Agreement any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender’s or such Issuing Bank’s capital (or on the capital of such Lender’s or such Issuing Bank’s parent corporation) as a consequence of its obligations hereunder or under or in respect of any Letter of Credit to a level below that which such Lender or such Issuing Bank or such Lender’s or such Issuing Bank’s parent corporation could have achieved but for such Change in Law (taking into consideration such Lender’s or such Issuing Bank’s policies or the policies of such Lender’s or such Issuing Bank’s parent corporation with respect to capital adequacy or liquidity) then, from time to time, within five (5) Business Days after receipt by the Borrower of written demand by such Lender (with a copy thereof to the Administrative Agent), the Borrower shall pay to such Lender such additional amounts as will compensate such Lender or such Issuing Bank or such Lender’s or such Issuing Bank’s parent corporation for any such reduction suffered. For the avoidance of doubt, Lenders may only make claims for compensation pursuant to this Section 2.19, in respect of a Change in Law, to the extent such claims are a consequence of its obligations hereunder or under or in respect of any Letter of Credit.

(c) A certificate of a Lender or an Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or such Issuing Bank or such Lender’s or such Issuing Bank’s parent corporation, as the case may be, specified in Sections 2.19(a) or (b) shall be delivered to the Borrower (with a copy to the Administrative Agent) and shall be conclusive, absent manifest error. The Borrower shall pay any such Lender or such Issuing Bank, as the case may be, such amount or amounts within ten (10) days after receipt thereof.

(d) Failure or delay on the part of any Lender or any Issuing Bank to demand compensation pursuant to this Section 2.19 shall not constitute a waiver of such Lender’s or such Issuing Bank’s right to demand such compensation.

 

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Section 2.20 Funding Indemnity. In the event of (a) the payment of any principal of a Eurodollar Loan other than on the last day of the Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion or continuation of a Eurodollar Loan other than on the last day of the Interest Period applicable thereto, or (c) the failure by the Borrower to borrow, prepay, convert or continue any Eurodollar Loan on the date specified in any applicable notice (regardless of whether such notice is withdrawn or revoked), then, in any such event, the Borrower shall compensate each Lender, within five (5) Business Days after written demand from such Lender, for any loss, cost or expense attributable to such event. In the case of a Eurodollar Loan, such loss, cost or expense shall be deemed to include an amount determined by such Lender to be the excess, if any, of (A) the amount of interest that would have accrued on the principal amount of such Eurodollar Loan if such event had not occurred at the Adjusted LIBO Rate applicable to such Eurodollar Loan for the period from the date of such event to the last day of the then current Interest Period therefor (or in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Eurodollar Loan) over (B) the amount of interest that would accrue on the principal amount of such Eurodollar Loan for the same period if the Adjusted LIBO Rate were set on the date such Eurodollar Loan was prepaid or converted or the date on which the Borrower failed to borrow, convert or continue such Eurodollar Loan. A certificate as to any additional amount payable under this Section 2.20 submitted to the Borrower or by any Lender (with a copy to the Administrative Agent) shall be conclusive, absent manifest error.

Section 2.21 Taxes.

(a) Any and all payments by or on account of any obligation of the Borrower hereunder shall be made free and clear of and without deduction for any Indemnified Taxes; provided, that if the Borrower shall be required to deduct any Indemnified Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.21) the Administrative Agent, any Lender or any Issuing Bank (as the case may be) shall receive an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.

(b) In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

(c) The Borrower shall indemnify the Administrative Agent, each Lender and each Issuing Bank, within five (5) Business Days after written demand therefor, for the full amount of any Indemnified Taxes paid by the Administrative Agent, such Lender or such Issuing Bank, as the case may be, on or with respect to any payment by or on account of any obligation of the Borrower hereunder (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section 2.21) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender or an Issuing Bank, or by the Administrative Agent on its own behalf or on behalf of a Lender or an Issuing Bank, shall be conclusive absent manifest error.

(d) As soon as practicable after any payment of Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

 

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(e) Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the Code or any treaty to which the United States is a party, with respect to payments under this Agreement shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law or reasonably requested by the Borrower as will permit such payments to be made without withholding or at a reduced rate. Without limiting the generality of the foregoing, each Foreign Lender agrees that it will deliver to the Administrative Agent and the Borrower (or in the case of a Participant, to the Lender from which the related participation shall have been purchased), as appropriate, two (2) duly completed copies of (i) Internal Revenue Service Form W-8ECI, or any successor form thereto, certifying that the payments received from the Borrower hereunder are effectively connected with such Foreign Lender’s conduct of a trade or business in the United States; (ii) Internal Revenue Service Form W-8BEN or W-8BEN-E, or any successor form thereto, certifying that such Foreign Lender is entitled to benefits under an income tax treaty to which the United States is a party which reduces the rate of withholding tax on payments of interest; (iii) Internal Revenue Service Form W-8BEN or W-8BEN-E, or any successor form prescribed by the Internal Revenue Service, together with a certificate (A) establishing that the payment to the Foreign Lender qualifies as “portfolio interest” exempt from U.S. withholding tax under Code section 871(h) or 881(c), (B) stating that (1) the Foreign Lender is not a bank for purposes of Code section 881(c)(3)(A) or the obligation of the Borrower hereunder is not, with respect to such Foreign Lender, a loan agreement entered into in the ordinary course of its trade or business, within the meaning of that section; (2) the Foreign Lender is not a ten percent (10%) shareholder of the Borrower within the meaning of Code section 871(h)(3) or 881(c)(3)(B) and (3) the Foreign Lender is not a controlled foreign corporation that is related to the Borrower within the meaning of Code section 881(c)(3)(C); or (iv) such other Internal Revenue Service forms as may be applicable to the Foreign Lender, including Forms W-8IMY or W-8EXP. Each such Foreign Lender shall deliver to the Borrower and the Administrative Agent such forms on or before the date that it becomes a party to this Agreement (or in the case of a Participant, on or before the date such Participant purchases the related participation) and (C) if a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower and the Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Administrative Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower and the Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause (C), “FATCA” shall include any amendments made to FATCA after the date of this Agreement. In addition, each such Foreign Lender shall deliver such forms promptly upon the obsolescence or invalidity of any form previously delivered by such Foreign Lender. Each such Foreign Lender shall promptly notify the Borrower and the Administrative Agent at any time that it determines that it is no longer in a position to provide any previously delivered certificate to the Borrower (or any other form of certification adopted by the Internal Revenue Service for such purpose).

 

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(f) If any party determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 2.21 (including by the payment of additional amounts pursuant to this Section 2.21), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this paragraph (f) (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such indemnified party is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this paragraph (f), in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this paragraph (f) the payment of which would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid. This paragraph shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.

(g) For purposes of this Section 2.21, the term “Lender” includes Issuing Bank and the term “applicable law” includes FATCA.

Section 2.22 Payments Generally; Pro Rata Treatment; Sharing of Set-offs.

(a) The Borrower shall make each payment required to be made by it hereunder (whether of principal, interest, fees or reimbursement of LC Disbursements, or of amounts payable under Section 2.19, 2.20 or 2.21, or otherwise) prior to 12:00 noon, on the date when due, in immediately available funds, free and clear of any defenses, rights of set-off, counterclaim, or withholding or deduction of taxes. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at the Payment Office, except payments to be made directly to the applicable Issuing Bank or the Swingline Lender as expressly provided herein and except that payments pursuant to Sections 2.19, 2.20 and 2.21 and 10.3 shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be made payable for the period of such extension. All payments hereunder shall be made in Dollars.

(b) If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, unreimbursed LC Disbursements, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards payment of principal and unreimbursed LC Disbursements then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and unreimbursed LC Disbursements then due to such parties.

 

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(c) If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Revolving Loans or participations in LC Disbursements, Term Loans or Swingline Loans that would result in such Lender receiving payment of a greater proportion of the aggregate amount of its Revolving Loans and participations in LC Disbursements, Term Loans and Swingline Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Revolving Loans and participations in LC Disbursements, Term Loans and Swingline Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Revolving Loans and participations in LC Disbursements, Term Loans and Swingline Loans; provided, that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this Section 2.22(c) shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in LC Disbursements, Term Loans or Swingline Loans to any assignee or participant, other than to Holdings or any Subsidiary or Affiliate thereof (as to which the provisions of this Section 2.22(c) shall apply). The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation.

(d) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or an Issuing Bank hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the applicable Issuing Bank, as the case may be, the amount or amounts due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders or the applicable Issuing Bank, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or such Issuing Bank with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.

(e) Notwithstanding anything herein to the contrary, any amount paid by the Borrower for the account of a Defaulting Lender under this Agreement (whether on account of principal, interest, fees, reimbursement of LC Disbursements, indemnity payments or other amounts) will be retained by the Administrative Agent in a segregated non-interest bearing account until the Revolving Commitment Termination Date, at which time the funds in such account will be applied by the Administrative Agent, to the fullest extent permitted by law, in the following order of priority: first, to the payment of any amounts owing by such Defaulting Lender to the Administrative Agent under this Agreement; second, to the payment of any amounts owing by such Defaulting Lender to the Issuing Banks and the Swingline Lender under this Agreement; third, to the payment of interest due and payable to

 

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the Lenders hereunder that are not Defaulting Lenders, ratably among them in accordance with the amounts of such interest then due and payable to them; fourth, to the payment of fees then due and payable to the Lenders hereunder that are not Defaulting Lenders, ratably among them in accordance with the amounts of such fees then due and payable to them; fifth, to the payment of principal and unreimbursed LC Disbursements then due and payable to the Lenders hereunder that are not Defaulting Lenders, ratably in accordance with the amounts thereof then due and payable to them; sixth, to the ratable payment of other amounts then due and payable to the Lenders hereunder that are not Defaulting Lenders; and seventh, to pay amounts owing under this Agreement to such Defaulting Lender or as a court of competent jurisdiction may otherwise direct.

Section 2.23 Mitigation of Obligations.

(a) If any Lender requests compensation under Section 2.19, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.21, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the sole judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable under Section 2.19 or Section 2.21, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower agrees to pay all costs and expenses incurred by any Lender in connection with such designation or assignment.

(b) If any Lender requests compensation under Section 2.19, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority of the account of any Lender pursuant to Section 2.21, or if any Lender is a Defaulting Lender, or if any Lender is not an Accepting Lender pursuant to Section 2.28, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions set forth in Section 10.4(b)) all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender); provided, that (i) the Borrower shall have received the prior written consent of the Administrative Agent, which consent shall not be unreasonably withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal amount of all Loans owed to it, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (in the case of such outstanding principal and accrued interest) and from the Borrower (in the case of all other amounts) and (iii) in the case of a claim for compensation under Section 2.19 or payments required to be made pursuant to Section 2.21, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.

(c) The Borrower shall not be required to compensate a Lender or an Issuing Bank under Section 2.19, 2.20 or 2.21 for any taxes, increased costs or reductions incurred more than six (6) months prior to the date that such Lender or such Issuing Bank notifies the Borrower of such increased costs or reductions and of such Lender’s or such Issuing Bank’s intention to claim compensation therefor; provided, further, that if any Change in Law giving rise to such increased costs or reductions is retroactive, then such six-month period shall be extended to include the period of such retroactive effect.

 

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Section 2.24 Letters of Credit.

(a) During the Availability Period, each Issuing Bank, in reliance upon the agreements of the other Lenders pursuant to Section 2.24(d) and 2.24(e), may, in its sole discretion, issue, at the request of the Borrower, Letters of Credit denominated in Dollars for the account of the Borrower or any Restricted Subsidiary on the terms and conditions hereinafter set forth; provided, that (i) each Letter of Credit shall expire on the earlier of (A) the date one year after the date of issuance of such Letter of Credit (or in the case of any renewal or extension thereof, one year after such renewal or extension) and (B) the date that is five (5) Business Days prior to the Revolving Commitment Termination Date; (ii) each Letter of Credit shall be in a stated amount of at least $250,000; and (iii) the Borrower may not request on behalf of itself or any Restricted Subsidiary any Letter of Credit, if, after giving effect to such issuance (A) the aggregate LC Exposure would exceed the LC Sublimit, (B) the aggregate LC Exposure plus the aggregate outstanding Revolving Credit Exposure of all Lenders would exceed the Aggregate Revolving Commitments or (C) the LC Exposure of such Issuing Bank would exceed the LC Commitment of such Issuing Bank. Upon the issuance of each Letter of Credit each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the applicable Issuing Bank without recourse a participation in such Letter of Credit equal to such Lender’s Pro Rata Share of the aggregate amount available to be drawn under such Letter of Credit (i) on the Effective Date with respect to all Existing Letters of Credit and (ii) on the date of issuance with respect to all other Letters of Credit. Each issuance of a Letter of Credit shall be deemed to utilize the Revolving Commitment of each Lender by an amount equal to the amount of such participation.

(b) To request the issuance of a Letter of Credit (or any amendment, renewal or extension of an outstanding Letter of Credit), the Borrower shall give the applicable Issuing Bank and the Administrative Agent irrevocable written notice at least three (3) Business Days prior to the requested date of such issuance specifying the date (which shall be a Business Day) such Letter of Credit is to be issued (or amended, extended or renewed, as the case may be), the expiration date of such Letter of Credit, the amount of such Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit. In addition to the satisfaction of the conditions in Article III, the issuance of such Letter of Credit (or any amendment which increases the amount of such Letter of Credit) will be subject to the further conditions that such Letter of Credit shall be in such form and contain such terms as such Issuing Bank shall approve and that the Borrower shall have executed and delivered any additional applications, agreements and instruments relating to such Letter of Credit as such Issuing Bank shall reasonably require; provided, that in the event of any conflict between such applications, agreements or instruments and this Agreement, the terms of this Agreement shall control.

(c) At least two (2) Business Days prior to the issuance of any Letter of Credit, the applicable Issuing Bank will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has received such notice and if not, such Issuing Bank will provide the Administrative Agent with a copy thereof. Unless such Issuing Bank has received notice from the Administrative Agent on or before 5:00 p.m. the Business Day immediately preceding the date such Issuing Bank is to issue the requested Letter of Credit directing such Issuing Bank not to issue the Letter of Credit because such issuance is not then permitted hereunder because of the limitations set forth in Section 2.24(a) or that one or more conditions specified in Article III are not then satisfied, then, subject to the terms and conditions hereof, such Issuing Bank shall, on the requested date, issue such Letter of Credit in accordance with such Issuing Bank’s usual and customary business practices.

 

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(d) The applicable Issuing Bank shall examine all documents purporting to represent a demand for payment under a Letter of Credit promptly following its receipt thereof. The applicable Issuing Bank shall notify the Borrower and the Administrative Agent of such demand for payment and whether such Issuing Bank has made or will make a LC Disbursement thereunder; provided, that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse such Issuing Bank and the Lenders with respect to such LC Disbursement. The Borrower shall be irrevocably and unconditionally obligated to reimburse the applicable Issuing Bank for any LC Disbursements paid by such Issuing Bank in respect of such drawing, without presentment, demand or other formalities of any kind. Unless the Borrower shall have notified the applicable Issuing Bank and the Administrative Agent prior to 11:00 a.m. on the Business Day immediately prior to the date on which such drawing is honored that the Borrower intends to reimburse such Issuing Bank for the amount of such drawing in funds other than from the proceeds of Revolving Loans, the Borrower shall be deemed to have timely given a Notice of Revolving Borrowing to the Administrative Agent requesting the Lenders to make a Base Rate Borrowing on the date on which such drawing is honored in an exact amount due to such Issuing Bank; provided, that for purposes solely of such Borrowing, the conditions precedent set forth in Section 3.3 hereof and the minimum borrowing limitations set forth in Section 2.3 hereof shall not be applicable. The Administrative Agent shall notify the Lenders of such Borrowing in accordance with Section 2.3, and each Lender shall make the proceeds of its Base Rate Loan included in such Borrowing available to the Administrative Agent for the account of such Issuing Bank in accordance with Section 2.7. The proceeds of such Borrowing shall be applied directly by the Administrative Agent to reimburse such Issuing Bank for such LC Disbursement.

(e) If for any reason a Base Rate Borrowing may not be (as determined in the sole discretion of the Administrative Agent), or is not, made in accordance with the foregoing provisions, then each Lender (other than the applicable Issuing Bank) shall be obligated to fund the participation that such Lender purchased pursuant to Section 2.24(a) in an amount equal to its Pro Rata Share of such LC Disbursement on and as of the date which such Base Rate Borrowing should have occurred. Each Lender’s obligation to fund its participation shall be absolute and unconditional and shall not be affected by any circumstance, including without limitation (i) any setoff, counterclaim, recoupment, defense or other right that such Lender or any other Person may have against the applicable Issuing Bank or any other Person for any reason whatsoever, (ii) the existence of a Default or an Event of Default or the termination of the Aggregate Revolving Commitments, (iii) any adverse change in the condition (financial or otherwise) of Holdings, the Borrower or any of its Restricted Subsidiaries, (iv) any breach of this Agreement by Holdings, the Borrower or any other Lender, (v) any amendment, renewal or extension of any Letter of Credit or (vi) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. On the date that such participation is required to be funded, each Lender shall promptly transfer, in immediately available funds, the amount of its participation to the Administrative Agent for the account of the applicable Issuing Bank. Whenever, at any time after the applicable Issuing Bank has received from any such Lender the funds for its participation in a LC Disbursement, such Issuing Bank (or the Administrative Agent on its behalf) receives any payment on account thereof, the Administrative Agent or such Issuing Bank, as the case may be, will distribute to such Lender its Pro Rata Share of such payment; provided, that if such payment is required to be returned for any reason to the Borrower or to a trustee, receiver, liquidator, custodian or similar official in any bankruptcy proceeding, such Lender will return to the Administrative Agent or such Issuing Bank any portion thereof previously distributed by the Administrative Agent or such Issuing Bank to it.

 

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(f) To the extent that any Lender shall fail to pay any amount required to be paid pursuant to Sections 2.24(d) or (e) on the due date therefor, such Lender shall pay interest to the applicable Issuing Bank (through the Administrative Agent) on such amount from such due date to the date such payment is made at a rate per annum equal to the Federal Funds Rate; provided, that if such Lender shall fail to make such payment to such Issuing Bank within three (3) Business Days of such due date, then, retroactively to the due date, such Lender shall be obligated to pay interest on such amount at the Base Rate plus an additional two percent (2%) per annum.

(g) If any Event of Default shall occur and be continuing, on the Business Day that the Borrower receives notice from the Administrative Agent or the Required Lenders demanding the deposit of Cash Collateral pursuant to this Section 2.24(g), the Borrower shall deposit in an account with the Administrative Agent, in the name of the Administrative Agent and for the benefit of the applicable Issuing Bank and the Lenders, an amount in cash equal to one hundred five percent (105%) of the LC Exposure as of such date plus any accrued and unpaid interest thereon; provided, that the obligation to deposit such Cash Collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or notice of any kind, upon the occurrence of any Event of Default with respect to the Borrower described in Sections 8.1(h) or (i). Such deposit shall be held by the Administrative Agent as collateral for the payment and performance of the obligations of the Borrower under this Agreement. The Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of the Administrative Agent and at the Borrower’s risk and expense, such deposits shall not bear interest. Interest and profits, if any, on such investments shall accumulate in such account. Moneys in such account shall be applied by the Administrative Agent to reimburse the Issuing Bank for LC Disbursements for which it had not been reimbursed and to the extent so applied, shall be held for the satisfaction of the reimbursement obligations of the Borrower for the LC Exposure at such time or, if the maturity of the Loans has been accelerated, with the consent of the Required Lenders, be applied to satisfy other obligations of the Borrower under this Agreement and the other Loan Documents. If the Borrower is required to provide an amount of Cash Collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the extent not so applied as aforesaid) shall be returned to the Borrower within three (3) Business Days after all Events of Default have been cured or waived.

(h) Promptly following the end of each Fiscal Quarter, each Issuing Bank shall deliver (through the Administrative Agent) to each Lender and the Borrower a report describing the aggregate Letters of Credit outstanding at the end of such Fiscal Quarter. Upon the request of any Lender from time to time, the applicable Issuing Bank shall deliver to such Lender any other information reasonably requested by such Lender with respect to each Letter of Credit then outstanding.

(i) The Borrower’s obligation to reimburse LC Disbursements hereunder shall be absolute, unconditional and irrevocable and shall be performed strictly in accordance with the terms of this Agreement under all circumstances whatsoever and irrespective of any of the following circumstances:

(i) Any lack of validity or enforceability of any Letter of Credit or this Agreement;

 

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(ii) The existence of any claim, set-off, defense or other right which Holdings, the Borrower or any Subsidiary or Affiliate of Holdings may have at any time against a beneficiary or any transferee of any Letter of Credit (or any Persons or entities for whom any such beneficiary or transferee may be acting), any Lender (including any Issuing Bank) or any other Person, whether in connection with this Agreement or the Letter of Credit or any document related hereto or thereto or any unrelated transaction;

(iii) Any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect;

(iv) Payment by an Issuing Bank under a Letter of Credit against presentation of a draft or other document to such Issuing Bank that does not comply with the terms of such Letter of Credit;

(v) Any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section 2.24, constitute a legal or equitable discharge of, or provide a right of setoff against, the Borrower’s obligations hereunder; or

(vi) The existence of a Default or an Event of Default.

Neither the Administrative Agent, the Issuing Banks, the Lenders nor any Related Party of any of the foregoing shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to above), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the Issuing Banks; provided, that the foregoing shall not be construed to excuse any Issuing Bank from liability to the Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by such Issuing Bank’s failure to exercise due care when determining whether drafts or other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree, that in the absence of gross negligence or willful misconduct on the part of an Issuing Bank (as finally determined by a court of competent jurisdiction), such Issuing Bank shall be deemed to have exercised due care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented that appear on their face to be in substantial compliance with the terms of a Letter of Credit, the applicable Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit.

(j) Unless otherwise expressly agreed by the applicable Issuing Bank and the Borrower when a Letter of Credit is issued and subject to applicable laws, each Letter of Credit shall be governed by the “International Standby Practices 1998” (ISP98) (or such later revision as may be published by the Institute of International Banking Law & Practice on any date any Letter of Credit may be issued) and to the extent not inconsistent therewith, the governing law of this Agreement set forth in Section 10.5.

 

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(k) In the event of any conflict between the terms hereof and the terms of any LC Document, the terms hereof shall control.

(l) Notwithstanding that a Letter of Credit issued or outstanding hereunder is in support of any obligations of, or is for the account of, a Restricted Subsidiary, the Borrower shall be obligated to reimburse the applicable Issuing Bank hereunder for any and all drawings under such Letter of Credit. The Borrower hereby acknowledges that the issuance of Letters of Credit for the account of Restricted Subsidiaries inures to the benefit of the Borrower, and that the Borrower’s business derives substantial benefit from the businesses of such Restricted Subsidiaries.

(m) Any Issuing Bank may resign as an “Issuing Bank” hereunder upon 30 days’ prior written notice to the Administrative Agent, the Lenders and the Borrower; provided that on or prior to the expiration of such 30-day period with respect to such resignation, the applicable Issuing Bank shall have identified a successor Issuing Bank reasonably acceptable to the Borrower willing to accept its appointment as successor Issuing Bank, and the effectiveness of such resignation shall be conditioned upon such successor assuming the rights and duties of the resigning Issuing Bank. In the event of any such resignation as Issuing Bank, the Borrower shall be entitled to appoint from among the Lenders a successor Issuing Bank hereunder; provided, however, that no failure by the Borrower to appoint any such successor shall affect the resignation of the resigning Issuing Bank except as expressly provided above. The Borrower may terminate the appointment of any Issuing Bank as an “Issuing Bank” hereunder by providing a written notice thereof to such Issuing Bank, with a copy to the Administrative Agent. Any such termination shall become effective upon the earlier of (i) such Issuing Bank acknowledging receipt of such notice and (ii) the third Business Day following the date of the delivery thereof; provided that no such termination shall become effective until and unless the LC Exposure attributable to Letters of Credit issued by such Issuing Bank (or its Affiliates) shall have been reduced to zero. At the time any such resignation or termination shall become effective, the Borrower shall pay all unpaid fees accrued for the account of the resigning or terminated Issuing Bank pursuant to Section 2.15(c). Notwithstanding the effectiveness of any such resignation or termination, the resigning or terminated Issuing Bank shall remain a party hereto and shall continue to have all the rights of an Issuing Bank under this Agreement with respect to Letters of Credit issued by it prior to such resignation or termination, but shall not be required to issue any additional Letters of Credit.

Section 2.25 Increase of Commitments; Additional Lenders.

(a) From time to time after the Funding Availability Date but before the termination of this Agreement and in accordance with this Section 2.25, the Borrower may from time to time, upon at least five (5) Business Days’ prior written notice to the Administrative Agent (who shall promptly provide a copy of such notice to each Lender), propose to increase the Aggregate Revolving Commitments (each such increase, an “Incremental Revolving Commitment”) or to establish one or more term loans (each, an “Incremental Term Loan”); provided, that:

(i) the aggregate amount of all Incremental Revolving Commitments plus the aggregate initial principal amount all Incremental Term Loans shall not exceed the Maximum Incremental Facility Amount during the term of this Agreement;

 

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(ii) any Incremental Revolving Commitment or establishment of an Incremental Term Loan shall be in a minimum principal amount of $10,000,000 and in integral multiples of $5,000,000 in excess thereof;

(iii) no Default or Event of Default shall exist and be continuing at the time of the establishment of any Incremental Revolving Commitment or Incremental Term Loan;

(iv) the conditions set forth in Section 3.3 shall be satisfied as of the date of the establishment of any Incremental Revolving Commitment or Incremental Term Loan;

(v) the Borrower shall have provided to the Administrative Agent a Pro Forma Compliance Certificate, in form and detail reasonably acceptable to the Administrative Agent, demonstrating compliance with the financial covenants in Article VI after giving effect to such Incremental Revolving Commitment or Incremental Term Loan on a Pro Forma Basis (assuming for purposes hereof, that the Aggregate Revolving Commitments (including any Incremental Revolving Commitments) are fully drawn and funded); provided, that, in the case of an Incremental Term Loan subject to the Incremental Funds Certain Provision, such compliance will be determined at the option of the Borrower either (A) at the time of funding of such Incremental Term Loan, or (B) at the time the applicable Acquisition Agreement is entered into (but not more than ninety (90) days prior to the consummation of such Permitted Acquisition or such later date as Administrative Agent may agree in writing);

(vi) the Administrative Agent shall have received all documents (including resolutions of the board of directors of the Loan Parties and opinions of counsel to the Loan Parties) it may reasonably request relating to such Incremental Revolving Commitments or such establishment of such Incremental Term Loan, all in form and substance reasonably satisfactory to the Administrative Agent;

(vii) (A) the Applicable Margin of each Incremental Term Loan shall be as set forth in the definitive documentation therefor; provided that if the Initial Yield applicable to any such Incremental Term Loans exceeds the sum of the Applicable Margin then in effect for Eurodollar Term Loans plus one fourth of the Up-Front Fees paid in respect of any then existing Term Loans (the “Existing Yield”), then the Applicable Margin of any then existing Term Loans shall increase by an amount equal to the difference between the Initial Yield and the Existing Yield, and (B) any Incremental Term Loans made pursuant to this Section 2.25 shall have a maturity date no earlier than the latest existing Maturity Date or the then applicable Revolving Commitment Termination Date and shall have a Weighted Average Life to Maturity no shorter than any other then-existing Incremental Term Loan;

(viii) any Incremental Revolving Commitments under this Section 2.25 shall have terms identical to those for the Revolving Commitments under this Agreement, other than with respect to the payment of Up-Front Fees;

(ix) no Lender shall have any obligation to provide any Incremental Revolving Commitment or any Incremental Term Loan, and any decision by a Lender to provide any Incremental Revolving Commitment or any Incremental Term Loan shall be made in its sole discretion independently from any other Lender;

 

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(x) the Borrower may designate a bank or other financial institution that is not already a Lender to provide all or any portion of any Incremental Revolving Commitments or an Incremental Term Loan, so long as (i) such Person (an “Additional Lender”) becomes a party to this Agreement pursuant to a lender joinder agreement or other document in form and substance satisfactory to the Administrative Agent that has been executed by the Borrower and such Additional Lender, (ii) any such Person proposed by the Borrower to become an Additional Lender must be reasonably acceptable to the Administrative Agent and, if such Additional Lender is to provide a Revolving Commitment, each of the Issuing Banks and the Swingline Lender;

(xi) any Incremental Revolving Commitments or establishment of an Incremental Term Loan shall be pursuant to an agreement in writing entered into by the Loan Parties, the Administrative Agent and each Person (including any existing Lender) that agrees to provide a portion of such Incremental Revolving Commitments or Incremental Term Loan, as applicable (each an “Incremental Facility Amendment”), and upon the effectiveness of such Incremental Facility Amendment pursuant to the terms thereof, the Commitments, as applicable, shall automatically be increased by the amount of the Commitments added through such Incremental Facility Amendment and Schedule 1.1(a) shall automatically be deemed amended to reflect the Commitments of all Lenders after giving effect to the addition of such Commitments;

(xii) with respect to any Incremental Revolving Commitments, (i) if any Revolving Loans are outstanding upon giving effect to any Incremental Revolving Commitments, the Borrower shall, if applicable, prepay one or more existing Revolving Loans (such prepayment to be subject to Section 2.20) in an amount necessary such that after giving effect to such Incremental Revolving Commitments, each Lender will hold its Pro Rata Share of outstanding Revolving Loans and (ii) effective upon such increase, the amount of the participations held by each Lender in each Letter of Credit then outstanding shall be adjusted automatically such that, after giving effect to such adjustments, the Lenders shall hold participations in each such Letter of Credit in proportion to their respective Revolving Commitments;

(xiii) the Borrower shall pay any applicable upfront or arrangement fees in connection with such Incremental Revolving Commitments or Incremental Term Loan;

(xiv) subject to the limitations set forth in Section 2.25(a)(vii), the amortization or other repayment requirements, the pricing and the use of proceeds applicable to any such Incremental Term Loan shall in each case be set forth in the definitive documentation with respect to such Incremental Term Loan;

(xv) any such Incremental Revolving Commitment or Incremental Term Loan shall (A) rank pari passu in right of payment as the other Loans and Commitments, (B) not be guaranteed by any Person that is not a Guarantor, and (C) if the Trigger Event has not occurred, shall be unsecured and, if the Trigger Event has occurred, shall be secured by the Collateral on a pari passu basis with the existing Obligations;

(xvi) all other terms and conditions with respect to any such Incremental Revolving Commitments shall be reasonably satisfactory to the Administrative Agent, the Issuing Bank and the Swingline Lender; and

 

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(xvii) all other terms and conditions with respect to any such Incremental Term Loan shall be set forth in the applicable Incremental Facility Amendment and be reasonably satisfactory to the Lenders providing such Incremental Term Loan.

(b) Upon the effectiveness of any such Incremental Revolving Commitment or any Incremental Term Loan, the Commitments and Pro Rata Share of each Lender will be adjusted to give effect to the Incremental Revolving Commitments and/or the Incremental Term Loans, as applicable, and Schedule 1.1(a) shall automatically be deemed amended accordingly.

(c) Notwithstanding anything to the contrary in this Section 2.25, if the proceeds of any Incremental Term Loan are being used to finance a Permitted Acquisition made pursuant to an acquisition agreement, binding on Holdings, the Borrower or any of its Restricted Subsidiaries, entered into in advance of the consummation thereof that does not provide for a “financing out” (an “Acquisition Agreement”), and the Borrower has obtained on or prior to the closing thereof binding commitments of Lenders and/or Additional Lenders to fund such Incremental Term Loan, then the conditions to the funding and incurrence of any such Incremental Term Loan may, at the option of the Borrower, be limited as follows: (A) the condition set forth in Section 3.3(b) shall apply only with respect to Specified Representations, (B) all representations and warranties of each Loan Party (excluding for the avoidance of doubt any target entities or subsidiaries thereof to be acquired in connection with any Permitted Acquisition) set forth in the Loan Documents shall be true and correct in all material respects (other than those representations and warranties that are expressly qualified by a Material Adverse Effect or other materiality, in which case such representations and warranties shall be true and correct in all respects) at the date the applicable Acquisition Agreement is executed and delivered; provided, that to the extent such representation or warranty relates to a specific prior date, such representation or warranty shall be true and correct in all material respects (other than those representations and warranties that are expressly qualified by a Material Adverse Effect or other materiality, in which case such representations and warranties shall be true and correct in all respects) only as of such specific prior date; (C) the representations and warranties in the Acquisition Agreement made by or with respect to the Person or assets subject to the Permitted Acquisition that are material to the interests of the Lenders shall be true and correct in all material respects, but only to the extent that Holdings, the Borrower and/or any of its Restricted Subsidiaries, as applicable, has the right to terminate its or their obligations under the Acquisition Agreement or not consummate such Permitted Acquisition as a result of a breach of such representations in such Acquisition Agreement and (D) the reference to “no Default or Event of Default” in Section 3.3(a) shall mean (1) the absence of a Default or Event of Default at the date the applicable Acquisition Agreement is executed and delivered and (2) the absence of a Specified Event of Default at the date the applicable Permitted Acquisition is consummated. For purposes of clarity, the establishment of Incremental Revolving Commitments shall not be subject at any time to the Incremental Funds Certain Provision. Nothing in the foregoing constitutes a waiver of any Default or Event of Default under this Agreement or of any rights or remedies of Lenders and the Administrative Agent under any provision of the Loan Documents. The provisions of this paragraph are collectively referred to in this Agreement as the “Incremental Funds Certain Provision”.

For purposes of determining compliance on a Pro Forma Basis with the financial covenants in Article VI or other ratio requirement under this Agreement, or whether a Default or Event of Default has occurred and is continuing, in each case in connection with the consummation of an Acquisition using proceeds from an Incremental Term Loan that qualifies to be subject to the Incremental Funds Certain Provision, the date of determination shall, at the option of the Borrower,

 

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be (A) the date of funding of such Incremental Term Loan, or (B) the date of execution of such Acquisition Agreement, and such determination shall be made after giving effect to such Acquisition (and the other transactions to be entered into in connection therewith, including any incurrence of Indebtedness and the use of proceeds thereof) on a Pro Forma Basis, and, for the avoidance of doubt, if such financial covenants or other ratio requirement is subsequently breached as a result of fluctuations in the ratio that is subject of such financial covenants or other ratio requirement (including due to fluctuations in Consolidated EBITDA of Holdings, the Borrower and its Restricted Subsidiaries on a consolidated basis or the EBITDA (calculated in a manner consistent with the calculation of Consolidated EBITDA) of the acquired Person or assets), at or prior to the consummation of such Acquisition (and the other transactions to be entered into in connection therewith), such financial covenants or other ratio requirement will not be deemed to have been breached as a result of such fluctuations solely for the purpose of determining whether such Acquisition (and the other transactions to be entered into in connection therewith) constitutes a Permitted Acquisition; provided; that (x) if the Borrower elects to have such determination occur at the time of entry into the applicable Acquisition Agreement (and not at the time of consummation of the Acquisition), (I) the Incremental Term Loan to be incurred shall be deemed incurred at the time of such election (unless the applicable Acquisition Agreement is terminated without actually consummating the applicable Permitted Acquisition, in which case such Acquisition and related Incremental Term Loan will not be treated as having occurred) and outstanding thereafter for purposes of calculating compliance, on a Pro Forma Basis, with any applicable financial covenants or other ratio requirement in this Agreement (even if unrelated to determining whether such Acquisition is a Permitted Acquisition) and (II) such Permitted Acquisition must close within ninety (90) days (or such later date as Administrative Agent may agree in writing) of the signing of the applicable Acquisition Agreement and (y) EBITDA (calculated in a manner consistent with the calculation of Consolidated EBITDA) of the acquired business shall be disregarded for all purposes under this Agreement other than determining whether such Acquisition is a Permitted Acquisition until the consummation of such Permitted Acquisition.

(d) For purposes of this Section 2.25, the following terms shall have the meanings specified below:

(i) “Initial Yield” shall mean, with respect to Incremental Term Loans or Incremental Revolving Commitments, the amount (as determined by the Administrative Agent) equal to the sum of (A) the margin above the Adjusted LIBO Rate on such Incremental Term Loans or such Incremental Revolving Commitment, as applicable (including as margin the effect of any “LIBOR floor” applicable on the date of the calculation), plus (B) (x) the amount of any Up-Front Fees on such Incremental Term Loans or such Incremental Revolving Commitments, as applicable (including any fee or discount received by the Lenders in connection with the initial extension thereof), divided by (y) the lesser of (1) the Weighted Average Life to Maturity of such Incremental Term Loans or such Incremental Revolving Commitments, as applicable, and (2) four.

(ii) “Up-Front Fees” shall mean the amount of any fees or discounts received by the Lenders in connection with the making of Loans or extensions of credit, expressed as a percentage of such Loan or extension of credit. For the avoidance of doubt, “Up-Front Fees” shall not include any arrangement fee paid to any Arranger.

 

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(iii) “Weighted Average Life to Maturity” shall mean, when applied to any Indebtedness at any date, the number of years obtained by dividing (i) the sum of the products obtained by multiplying (x) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (y) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment by (ii) the then outstanding principal amount of such Indebtedness.

Section 2.26 Defaulting Lenders.

(a) If a Lender holding a Revolving Commitment becomes, and during the period it remains, a Defaulting Lender, the following provisions shall apply, notwithstanding anything to the contrary in this Agreement:

(i) the LC Exposure and the Swingline Exposure of such Defaulting Lender will, subject to the limitation in the proviso below, automatically be reallocated (effective no later than one (1) Business Day after the Administrative Agent has actual knowledge that such Lender with a Revolving Commitment has become a Defaulting Lender) among the Non-Defaulting Lenders pro rata in accordance with their respective Revolving Commitments (calculated as if the Defaulting Lender’s Revolving Commitment was reduced to zero and each Non-Defaulting Lender’s Revolving Commitment had been increased proportionately); provided that the sum of each Non-Defaulting Lender’s total Revolving Credit Exposure may not in any event exceed the Revolving Commitment of such Non-Defaulting Lender as in effect at the time of such reallocation; and

(ii) to the extent that any portion (the “unreallocated portion”) of the LC Exposure and the Swingline Exposure of any Defaulting Lender cannot be reallocated pursuant to Section 2.26(a)(i) above for any reason, the Borrower will, not later than two (2) Business Days after demand by the Administrative Agent (at the direction of the Issuing Bank and/or the Swingline Lender), (x) Cash Collateralize the obligations of the Defaulting Lender to such Issuing Bank or the Swingline Lender in respect of such LC Exposure or such Swingline Exposure, as the case may be, in an amount at least equal to the aggregate amount of the unreallocated portion of the LC Exposure and the Swingline Exposure of such Defaulting Lender, (y) in the case of such Swingline Exposure, prepay and/or Cash Collateralize in full the unreallocated portion thereof, or (z) make other arrangements satisfactory to the Administrative Agent, the applicable Issuing Bank and the Swingline Lender in their sole discretion to protect them against the risk of non-payment by such Defaulting Lender;

provided that neither any such reallocation nor any payment by a Non-Defaulting Lender pursuant thereto nor any such Cash Collateralization or reduction will constitute a waiver or release of any claim the Borrower, the Administrative Agent, any Issuing Bank, the Swingline Lender or any other Lender may have against such Defaulting Lender or cause such Defaulting Lender to be a Non-Defaulting Lender.

(b) If the Borrower, the Administrative Agent, the Issuing Banks and the Swingline Lender agree in writing in their discretion that any Defaulting Lender has ceased to be a Defaulting Lender, the Administrative Agent will so notify the parties hereto, whereupon as of the effective date specified in such notice, and subject to any conditions set forth therein, the LC Exposure and the Swingline Exposure of the other Lenders shall be readjusted to reflect the inclusion of such Lender’s Commitment, and such Lender will purchase at par such portion of outstanding Revolving

 

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Loans of the other Lenders and/or make such other adjustments as the Administrative Agent may determine to be necessary to cause the Revolving Credit Exposure of the Lenders to be on a pro rata basis in accordance with their respective Revolving Commitments, whereupon such Lender will cease to be a Defaulting Lender and will be a Non-Defaulting Lender (and such Revolving Credit Exposure of each Lender will automatically be adjusted on a prospective basis to reflect the foregoing). If any Cash Collateral has been posted with respect to the LC Exposure or the Swingline Exposure of such Defaulting Lender, the Administrative Agent will promptly return such Cash Collateral to the Borrower; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrower while such Lender was a Defaulting Lender; provided, further, that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Non-Defaulting Lender will constitute a waiver or release of any claim of any party hereunder arising from such Lender’s having been a Defaulting Lender.

(i) So long as any Lender is a Defaulting Lender, no Issuing Bank will be required to issue, amend, extend, renew or increase any Letter of Credit, and the Swingline Lender will not be required to fund any Swingline Loans, as applicable, unless it is satisfied that one hundred percent (100%) of the related LC Exposure and Swingline Exposure after giving effect thereto is fully covered or eliminated by any combination satisfactory to the applicable Issuing Bank or the Swingline Lender, as the case may be, of the following:

(ii) in the case of a Defaulting Lender, the Swingline Exposure and the LC Exposure of such Defaulting Lender is reallocated to the Non-Defaulting Lenders as provided in Section 2.26(a)(i);

(iii) in the case of a Defaulting Lender, without limiting the provisions of Section 2.26(a)(ii), the Borrower Cash Collateralizes its reimbursement obligations in respect of such Letter of Credit or such Swingline Loan in an amount at least equal to the aggregate amount of the unreallocated obligations (contingent or otherwise) of such Defaulting Lender in respect of such Letter of Credit or such Swingline Loan, or the Borrower makes other arrangements satisfactory to the Administrative Agent, the applicable Issuing Bank and the Swingline Lender, as the case may be, in their sole discretion to protect them against the risk of non-payment by such Defaulting Lender; and

(iv) in the case of a Defaulting Lender, the Borrower agrees that the face amount of such requested Letter of Credit or the principal amount of such requested Swingline Loan will be reduced by an amount equal to the unreallocated, non-Cash Collateralized portion thereof as to which such Defaulting Lender would otherwise be liable, in which case the obligations of the Non-Defaulting Lenders in respect of such Letter of Credit or such Swingline Loan will, subject to the limitation in the proviso below, be on a pro rata basis in accordance with the Commitments of the Non-Defaulting Lenders, and the pro rata payment provisions of Section 2.22 will be deemed adjusted to reflect this provision; provided that the sum of each Non-Defaulting Lender’s total Revolving Credit Exposure may not in any event exceed the Revolving Commitment of such Non-Defaulting Lender as in effect at the time of such reduction.

 

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Section 2.27 Refinancing Facilities.

(a) The Borrower may from time to time, add one or more tranches of term loans or revolving credit facilities to this Agreement (each a “Refinancing Facility”) pursuant to an agreement in writing entered into by the Loan Parties, the Administrative Agent and each Person (including any existing Lender) that agrees to provide a portion of such Refinancing Facility (each a “Refinancing Facility Amendment”) pursuant to procedures reasonably specified by the Administrative Agent to refinance all or any portion of any outstanding Term Loan or any Revolving Loan then in effect; provided, that:

(i) such Refinancing Facility shall not have a principal or commitment amount (or accreted value) greater than the Loans and, in the case of a revolving facility, the Revolving Loans and any undrawn available commitments in respect of such revolving facility being refinanced (plus accrued interest, fees, discounts, premiums and reasonable expenses);

(ii) no Default or Event of Default shall exist on the effective date of such Refinancing Facility or would exist after giving effect to such Refinancing Facility;

(iii) no existing Lender shall be under any obligation to provide a commitment to such Refinancing Facility and any such decision whether to provide a commitment to such Refinancing Facility shall be in such Lender’s sole and absolute discretion;

(iv) such Refinancing Facility shall be in an aggregate principal amount of at least $25,000,000 and each commitment of a Lender to such Refinancing Facility shall be in a minimum principal amount of at least $5,000,000, in the case of a Refinancing Revolving Facility and at least $1,000,000 in the case of a Refinancing Term Loan (or, in each case, such lesser amounts as the Administrative Agent and the Borrower may agree);

(v) each Person providing a commitment to such Refinancing Facility shall meet the requirements in Section 10.04(b);

(vi) the Borrower shall deliver to the Administrative Agent:

(A) a certificate of each Loan Party dated as of the date of such Refinancing Facility signed by a Responsible Officer of such Loan Party (1) attaching evidence of appropriate corporate authorization on the part of such Loan Party with respect to such Refinancing Facility as the Administrative Agent may reasonably request and (2) in the case of the Borrower, certifying that, before and after giving effect to such Refinancing Facility, (I) all representations and warranties of each Loan Party set forth in the Loan Documents shall be true and correct in all material respects (other than those representations and warranties that are expressly qualified by a Material Adverse Effect or other materiality, in which case such representations and warranties shall be true and correct in all respects); provided, that to the extent such representation or warranty relates to a specific prior date, such representation or warranty shall be true and correct in all material respects (other than those representations and warranties that are expressly qualified by a Material Adverse Effect or other materiality, in which case such representations and warranties shall be true and correct in all respects) only as of such specific prior date, and (II) no Default or Event of Default shall exist;

 

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(B) such amendments to the other Loan Documents as the Administrative Agent may reasonably request to reflect such Refinancing Facility;

(C) customary opinions of legal counsel to the Loan Parties as the Administrative Agent may reasonably request, addressed to the Administrative Agent and each Lender (including each Person providing any commitment under any Refinancing Facility), dated as of the effective date of such Refinancing Facility;

(D) to the extent requested by any Lender (including each Person providing any commitment under any Refinancing Facility), executed promissory notes evidencing such Refinancing Facility, issued by the Borrower in accordance with Section 2.11(b); and

(E) any other certificates or documents that the Administrative Agent shall reasonably request, in form and substance reasonably satisfactory to the Administrative Agent.

(vii) the Administrative Agent shall have received documentation from each Person providing a commitment to such Refinancing Facility evidencing such Person’s commitment and such Person’s obligations under this Agreement in form and substance reasonably acceptable to the Administrative Agent;

(viii) such Refinancing Facility (A) shall rank pari passu in right of payment as the other Loans and Commitments; (B) shall not be guaranteed by any Person that is not a Guarantor; and (C) if the Trigger Event has not occurred, shall be unsecured and, if the Trigger Event has occurred, shall be secured on a pari passu basis;

(ix) such Refinancing Facility shall have such interest rates, interest rate margins, fees, discounts, prepayment premiums, amortization and a final maturity date as agreed by the Loan Parties and the Lenders providing such Refinancing Facility; provided that (A) to the extent refinancing a Revolving Loan and constituting a Refinancing Revolving Facility, such Refinancing Facility shall have a termination date no earlier than the Revolving Commitment Termination Date and (B) to the extent refinancing a Term Loan or constituting term loan facilities, such Refinancing Term Loan shall have a maturity date no earlier than the latest then existing Maturity Date, and will have a Weighted Average Life to Maturity that is not shorter than the Weighted Average Life to Maturity of, the Term Loan being refinanced;

(x) if such Refinancing Facility is a Refinancing Revolving Facility then (A) such Refinancing Facility shall have ratable voting rights as the other Revolving Loans (or otherwise provide for more favorable voting rights for the then outstanding Revolving Loans) and (B) such Refinancing Facility may provide for the issuance of Letters of Credit for the account of Holdings, the Borrower and its Restricted Subsidiaries on terms substantially equivalent to the terms applicable to Letters of Credit under the existing revolving credit facilities or the making of swing line loans to the Borrower on terms substantially equivalent to the terms applicable to Swingline Loans under the existing revolving credit facilities;

 

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(xi) each Borrowing of Revolving Loans and participations in Letters of Credit pursuant to Section 2.24 shall be allocated pro rata among the Revolving Loans;

(xii) subject to Section 2.27(a)(ix) above, such Refinancing Facility will have terms and conditions that are substantially identical to, or less favorable, when taken as a whole (as determined by the Borrower in its reasonable judgment), to the Lenders providing such Refinancing Facility than, the terms and conditions of the Revolving Loan or Term Loan being refinanced; provided, however, that such Refinancing Facility may provide for any additional or different financial or other covenants or other provisions that are agreed among the Borrower and the Lenders thereof and applicable only during periods after the then latest Revolving Commitment Termination Date or latest Maturity Date in effect; and

(xiii) substantially concurrent with the incurrence of such Refinancing Facility the Borrower shall apply the Net Cash Proceeds of such Refinancing Facility to the prepayment of outstanding Loans being so refinanced (and, in the case of a Refinancing Facility that refinances a Revolving Loan, the Borrower shall permanently reduce the amount of the commitments to the Revolving Loan being refinanced by the amount of the Net Cash Proceeds of such Refinancing Facility (other than Net Cash Proceeds applied to pay accrued interest, fees, discounts and premiums)).

(b) The Lenders hereby authorize the Administrative Agent to enter into, and the Lenders agree that this Agreement and the other Loan Documents shall be amended by, such Refinancing Facility Amendments to the extent (and only to the extent) the Administrative Agent deems necessary in order to establish Refinancing Facilities on terms consistent with and/or to effect the provisions of this Section 2.27. The Administrative Agent shall promptly notify each Lender as to the effectiveness of each Refinancing Facility Amendment. In addition, if so provided in the Refinancing Facility Amendment for a Refinancing Revolving Facility and with the consent of each Issuing Bank, participation in Letters of Credit under the existing revolving credit facilities shall be reallocated from Lenders holding revolving commitments under the existing revolving credit facilities which are being refinanced to Lenders holding revolving commitments under such Refinancing Revolving Facility in accordance with the terms of such Refinancing Facility Amendment.

Section 2.28 Extension of Revolving Loans and Term Loans. The Borrower may from time to time, subject to the consent of the Administrative Agent, make one or more offers to all the Lenders holding a Revolving Commitment or to all of the Lenders holding a Term Loan to make one or more amendments or modifications to (a) allow the maturity and scheduled amortization (if any) of such Loans and Commitments of the accepting Lenders to be extended and (b) increase or decrease the Applicable Margin, Applicable Percentage, and/or fees payable with respect to such Loans and Commitments (if any) of the accepting Lenders (“Permitted Amendments”) pursuant to procedures reasonably specified by the Administrative Agent. Permitted Amendments shall become effective only with respect to the Loans and/or Commitments of the Lenders that accept the applicable offer (such Lenders, the “Accepting Lenders”) and, in the case of any Accepting Lender, only with respect to such Lender’s Loans and/or Commitments as to which such Lender’s acceptance has been made. Each Loan Party and each Accepting Lender shall execute and deliver to the Administrative Agent such written agreements as the Administrative Agent shall reasonably require to evidence the acceptance of the Permitted Amendments and the terms and conditions thereof, and the Loan Parties shall also deliver such certified resolutions, legal opinions and other documents as requested by the Administrative Agent. The Administrative Agent shall promptly notify each

 

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Lender as to the effectiveness of any Permitted Amendment. Each of the parties hereto hereby agrees that (x) upon the effectiveness of any Permitted Amendment, this Agreement shall be deemed amended to the extent (but only to the extent) necessary to reflect the existence and terms of the Permitted Amendments evidenced thereby and only with respect to the Loans and Commitments of the Accepting Lenders as to which such Lenders’ acceptance has been made and (y) any applicable Lender who is not an Accepting Lender may be replaced by the Borrower in accordance with Section 2.23(b).

ARTICLE III.

CONDITIONS PRECEDENT TO EFFECTIVENESS

Section 3.1 Conditions To Effectiveness. This Agreement shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 10.2):

(a) The Administrative Agent (or its counsel) shall have received the following:

(i) a counterpart of this Agreement signed by or on behalf of each party hereto or written evidence satisfactory to the Administrative Agent (which may include facsimile or form of electronic attachment (e.g., “.pdf” or “.tif”) transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement;

(ii) a duly executed Guarantee Agreement by Holdings and the Domestic Subsidiaries identified as Guarantors on Schedule 4.14 and (B) a duly executed Borrower Guarantee Agreement (with respect to the Hedging Obligations and Treasury Management Obligations of Holdings and the Restricted Subsidiaries of the Borrower);

(iii) a certificate of the Secretary or Assistant Secretary of each Loan Party, substantially in the form attached hereto as Exhibit 3.1(b)(iv), attaching and certifying copies of its bylaws or operating agreement, as applicable, and of the resolutions of its board of directors (or equivalent governing body), authorizing the execution, delivery and performance of the Loan Documents to which it is a party and certifying the name, title and true signature of each officer of such Loan Party executing the Loan Documents to which it is a party;

(iv) certified copies of the articles of incorporation or other charter documents of each Loan Party, together with certificates of good standing or existence, as may be available from the Secretary of State of the jurisdiction of incorporation of such Loan Party;

(v) a favorable written opinion of King & Spalding LLP, counsel to the Loan Parties, addressed to the Administrative Agent and each of the Lenders, and covering such matters relating to the Loan Parties, the Loan Documents and the transactions contemplated therein as the Administrative Agent or the Required Lenders shall reasonably request;

(vi) a certificate, dated the Effective Date substantially in the form attached hereto as Exhibit 3.1(b)(vii) and signed by a Responsible Officer confirming compliance with the conditions set forth in Sections 3.3(a), (b) and (c);

 

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(vii) the Form 10 (including the information statement and other exhibits contemplated thereby, in each case, in the form and to the extent so filed) in the form most recently filed (whether or not publicly) with the U.S. Securities and Exchange Commission prior to the Effective Date;

(viii) all documentation and other information with respect to the Loan Parties that the Administrative Agent or such Lender reasonably believes is required by regulatory authorities under applicable “know-your-customer” and anti-money laundering rules and regulations, including without limitation the Patriot Act; and

(ix) such other documents, certificates, information or legal opinions as the Administrative Agent or the Lenders may reasonably request, all in form and substance satisfactory to the Administrative Agent and the Lenders.

For purposes of determining compliance with the conditions specified in this Section 3.1, each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received notice from such Lender prior to the proposed Effective Date specifying its objection thereto.

Section 3.2 Conditions to Funding Availability Date. The obligation of each Lender to make a Loan and of any Issuing Bank to issue, amend, renew or extend any Letter of Credit, on the Funding Availability Date is subject to the satisfaction of the following conditions:

(a) The Effective Date shall have occurred.

(b) The Termination Date shall not have occurred.

(c) The Restructuring shall have occurred (or substantially concurrently with the Funding Availability Date, will occur).

(d) The Administrative Agent (or its counsel) shall have received the following:

(i) if requested by any Lender, a Note for such Lender;

(ii) a certificate of the Secretary or Assistant Secretary of each Loan Party certifying that its articles of incorporation or other charter documents, as applicable, bylaws or operating agreement, as applicable, and the resolutions of its board of directors (or equivalent governing body) delivered to the Administrative Agent on the Effective Date, have not been amended or superseded since the Effective Date (or if any of the same have been amended or superseded, attaching such amended or superseded articles of incorporation or other charter documents, bylaws or operating agreement, and/or resolutions of its board of directors);

(iii) a favorable written opinion of King & Spalding LLP, counsel to the Loan Parties, addressed to the Administrative Agent and each of the Lenders, and covering such matters relating to the Loan Parties, the Loan Documents and the transactions contemplated therein as the Administrative Agent or the Required Lenders shall reasonably request;

 

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(iv) all obligations (other than contingent indemnification obligations for which no demand has been made) under the Existing Credit Agreement shall have been repaid in full (or substantially concurrently with the Funding Availability Date, will be repaid in full) and the Existing Credit Agreement shall have been terminated;

(v) a solvency certificate, dated as of the Funding Availability Date and signed by the chief financial officer of Borrower, confirming that the Borrower is Solvent, and Holdings, the Borrower and its Restricted Subsidiaries on a consolidated basis, are Solvent before and after giving effect to any Revolving Loans and any other extensions of credit on the Funding Availability Date and the consummation of the other transactions contemplated herein; and

(vi) a duly executed Notice of Borrowing.

(e) The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Funding Availability Date, including reimbursement or payment of all out-of-pocket expenses (including reasonable fees, charges and disbursements of counsel to the Administrative Agent) required to be reimbursed or paid by the Borrower hereunder, under any other Loan Document and under any agreement with the Administrative Agent or the Arrangers.

Section 3.3 Each Credit Event. The obligation of each Lender to make a Loan on the occasion of any Borrowing and of any Issuing Bank to issue, amend, renew or extend any Letter of Credit (including a request for a credit extension relating to an advance under a Refinancing Facility), is subject to the satisfaction of the following conditions, in each case, subject to the Incremental Funds Certain Provision, as applicable:

(a) at the time of and immediately after giving effect to such Borrowing or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, no Default or Event of Default shall exist; and

(b) at the time of and immediately after giving effect to such Borrowing or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, all representations and warranties of each Loan Party set forth in the Loan Documents shall be true and correct in all material respects (other than those representations and warranties that are expressly qualified by Material Adverse Effect or other materiality, in which case such representations and warranties shall be true and correct in all respects); provided, that to the extent such representation or warranty relates to a specific prior date, such representation or warranty shall be true and correct in all material respects (other than those representations and warranties that are expressly qualified by Material Adverse Effect or other materiality, in which case such representations and warranties shall be true and correct in all respects) only as of such specific prior date;

(c) since the date of the audited financial statements of the Borrower described in Section 4.4, there shall have been no change which has had or could reasonably be expected to have a Material Adverse Effect; and

(d) the Borrower shall have delivered the required Notice of Borrowing or written notice requesting the issuance of a Letter of Credit as required under Section 2.24, as applicable.

 

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Each Borrowing and each issuance, amendment, extension or renewal of any Letter of Credit (including a request for a credit extension relating to an advance under a Refinancing Facility) shall be deemed to constitute a representation and warranty by the Borrower on the date thereof as to the matters specified in Sections 3.3(a), (b) and (c).

Section 3.4 Delivery of Documents. All of the Loan Documents, certificates, legal opinions and other documents and papers referred to in this Article III, unless otherwise specified, shall be delivered to the Administrative Agent for the account of each of the Lenders and shall be in form and substance satisfactory in all respects to the Administrative Agent.

ARTICLE IV.

REPRESENTATIONS AND WARRANTIES

Each of Holdings and the Borrower represents and warrants to the Administrative Agent and each Lender as follows:

Section 4.1 Existence; Power. Holdings, the Borrower and each of its Restricted Subsidiaries (a) is duly organized, validly existing and in good standing as a corporation, partnership or limited liability company under the laws of the jurisdiction of its organization, (b) has all requisite power and authority to carry on its business as now conducted, and (c) is duly qualified to do business, and is in good standing, in each jurisdiction where such qualification is required, except where a failure to be so qualified could not reasonably be expected to result in a Material Adverse Effect.

Section 4.2 Organizational Power; Authorization. The execution, delivery and performance by each Loan Party of the Transaction Documents to which it is a party are within such Loan Party’s organizational powers and have been duly authorized by all necessary organizational, and if required, partner, member or stockholder, action. This Agreement has been duly executed and delivered by the Borrower, and constitutes, and each other Transaction Document to which any Loan Party is a party, when executed and delivered by such Loan Party, will constitute, valid and binding obligations of the Borrower or such Loan Party (as the case may be), enforceable against it in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity.

Section 4.3 Governmental Approvals; No Conflicts. The execution, delivery and performance by Holdings and the Borrower of this Agreement, and by each Loan Party of the other Transaction Documents to which it is a party (a) do not require any consent or approval of, registration or filing with, or any action by, any Governmental Authority, except those as have been obtained or made and are in full force and effect or where the failure to do so, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect, (b) will not violate any applicable law or regulation or the charter, by-laws or other organizational documents of Holdings, the Borrower or any of its Restricted Subsidiaries or any judgment or order of any Governmental Authority binding on Holdings, the Borrower or any of its Restricted Subsidiaries, (c) will not violate or result in a default under any indenture, material agreement or other material instrument binding on Holdings, the Borrower or any of its Restricted Subsidiaries or any of its assets or give rise to a right thereunder to require any payment to be made by Holdings, the Borrower or any of its Restricted Subsidiaries and (d) will not result in the creation or imposition of any Lien on any asset of Holdings, the Borrower or any of its Restricted Subsidiaries, except Liens (if any) created under the Loan Documents.

 

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Section 4.4 Financial Statements. The Borrower has furnished to each Lender the audited consolidated balance sheet of the Borrower and its Restricted Subsidiaries as of December 31, 2019, and the related consolidated statements of income, shareholders’ equity and cash flows for the Fiscal Year then ended prepared by Ernst & Young. Such financial statements fairly present the consolidated financial condition of the Borrower and its Restricted Subsidiaries as of such dates and the consolidated results of operations for such periods in conformity with GAAP consistently applied. Since December 31, 2019, there have been no changes with respect to Holdings, the Borrower and its Restricted Subsidiaries which have had or could reasonably be expected to have, singly or in the aggregate, a Material Adverse Effect.

Section 4.5 Litigation and Environmental Matters.

(a) No litigation, investigation or proceeding of or before any arbitrators or Governmental Authorities is pending against or, to the knowledge of the Borrower, threatened against or affecting Holdings, the Borrower or any of its Restricted Subsidiaries (i) as to which there is a reasonable possibility of an adverse determination that could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect or (ii) which in any manner draws into question the validity or enforceability of this Agreement or any other Transaction Document.

(b) Except as could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect, none of Holdings, the Borrower or any of its Restricted Subsidiaries (i) has failed to comply in any material respect with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law or (ii) has become subject to any Environmental Liability. None of Holdings, the Borrower or any of its Restricted Subsidiaries (x) has received notice of any claim with respect to any Environmental Liability or (y) knows of any basis for any Environmental Liability that, in each case, could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.

Section 4.6 Compliance with Laws and Agreements. Holdings, the Borrower and each Restricted Subsidiary is in compliance with (a) all applicable laws, rules, regulations and orders of any Governmental Authority, and (b) all indentures, agreements or other instruments binding upon it or its properties, except where non-compliance, either singly or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

Section 4.7 Investment Company Act, Etc. None of Holdings, the Borrower or any of its Restricted Subsidiaries is (a) an “investment company” or is “controlled” by an “investment company”, as such terms are defined in, or subject to regulation under, the Investment Company Act of 1940, as amended, or (b) otherwise subject to any other regulatory scheme limiting its ability to incur debt.

Section 4.8 Taxes. Holdings, the Borrower and its Restricted Subsidiaries and each other Person for whose taxes Holdings, the Borrower or any Restricted Subsidiary could become liable have timely filed or caused to be filed all Federal income tax returns and all other tax returns that are required to be filed by them, and have paid all taxes shown to be due and payable on such returns or on any assessments made against it or its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority, except (a) to the extent the failure to do so would not have a Material Adverse Effect or (b) where the same are currently being contested in good faith by appropriate proceedings and for which Holdings, the Borrower or such Restricted Subsidiary, as the case may be, has set aside on its books adequate reserves. The charges, accruals and reserves on the books of Holdings, the Borrower and its Restricted Subsidiaries in respect of such taxes are adequate, and no tax liabilities that could be materially in excess of the amount so provided are anticipated.

 

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Section 4.9 Margin Regulations. None of the proceeds of any of the Loans or Letters of Credit will be used, directly or indirectly, for “purchasing” or “carrying” any “margin stock” with the respective meanings of each of such terms under Regulation U or for any purpose that violates the provisions of the Regulation T, U or X. None of Holdings, the Borrower or its Restricted Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying “margin stock.”

Section 4.10 ERISA. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. The present value of all accumulated benefit obligations under each Plan (based on the assumptions used for purposes of Statement of Financial Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $20,000,000 the fair market value of the assets of such Plan, and the present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $20,000,000 the fair market value of the assets of all such underfunded Plans.

Section 4.11 Ownership of Property.

(a) Each of Holdings, the Borrower and its Restricted Subsidiaries has good title to, or valid leasehold interests in, all of its real and personal property material to the operation of its business.

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

Section 4.12 Disclosure.

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

 

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(b) As of the Effective Date, the information included in the Beneficial Ownership Certification is true and correct in all respects.

Section 4.13 Labor Relations. There are no strikes, lockouts or other material labor disputes or grievances against Holdings, the Borrower or any of its Restricted Subsidiaries, or, to the Borrower’s knowledge, threatened against or affecting Holdings, the Borrower or any of its Restricted Subsidiaries, and no significant unfair labor practice, charges or grievances are pending against Holdings, the Borrower or any of its Restricted Subsidiaries, or to the Borrower’s knowledge, threatened against any of them before any Governmental Authority. All payments due from Holdings, the Borrower or any of its Restricted Subsidiaries pursuant to the provisions of any collective bargaining agreement have been paid or accrued as a liability on the books of Holdings, the Borrower or any such Restricted Subsidiary, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect.

Section 4.14 Subsidiaries. Schedule 4.14 sets forth the name of, the ownership interest of Holdings in, the jurisdiction of incorporation of, and the type of, each Subsidiary and identifies each Subsidiary that is a Subsidiary Loan Party, in each case as of the Effective Date.

Section 4.15 Solvency. After giving effect to the execution and delivery of the Loan Documents (including the provisions of Sections 8, 9 and 23 of the Guarantee Agreement and Sections 8, 9 and 23 of the Borrower Guarantee Agreement) and the making of the Loans under this Agreement, (a) the Borrower is Solvent on the Effective Date and (b) the Loan Parties on a consolidated basis are Solvent.

Section 4.16 Anti-Corruption Laws and Sanctions. The Borrower and Holdings have implemented and maintain in effect policies and procedures designed to ensure compliance in all material respects by Holdings, the Borrower its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions, and Holdings, the Borrower its Subsidiaries and their respective officers (in such capacity), employees (in such capacity) and, to the knowledge of Holdings or the Borrower, its directors and agents, are in compliance with Anti-Corruption Laws and applicable Sanctions. None of (a) Holdings, the Borrower any Subsidiary or any of their respective officers (in such capacity) or employees (in such capacity), or (b) to the knowledge of Holdings or the Borrower, any director or agent of Holdings or any Subsidiary is a Sanctioned Person. No Borrowing or Letter of Credit, used by the Borrower, Holdings or any Subsidiary of the proceeds thereof or other transactions contemplated hereby will violate Anti-Corruption Laws or applicable Sanctions.

Section 4.17 No Affected Financial Institutions. No Loan Party is an Affected Financial Institution.

Section 4.18 Inactive Subsidiaries. The Inactive Subsidiaries do not (a) have assets with an aggregate book value in excess of $1,000,000, (b) have revenue in excess of $1,000,000 in the aggregate and (c) conduct any business activities.

Section 4.19 Collateral Representations.

After the execution and delivery of the Collateral Documents following the occurrence of the Trigger Event in accordance with Section 5.12:

 

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(a) The provisions of the Collateral Documents are effective to create in favor of the Administrative Agent, for the benefit of the holders of the Obligations, a legal, valid and enforceable first priority Lien (subject to Liens permitted by Section 7.2) on all right, title and interest of the respective Loan Parties in the Collateral described therein. Except for filings completed prior to the occurrence of the Trigger Event and as contemplated hereby and by the Collateral Documents, no filing or other action will be necessary to perfect or protect such Liens.

(b) No Mortgage encumbers improved real property that is located in an area that has been identified by the Secretary of Housing and Urban Development as an area having special flood hazards and in which flood insurance has been made available under the National Flood Insurance Act of 1968, except to the extent that the applicable Loan Party maintains flood insurance with respect to such improved real property in compliance with the requirements of Section 4.19(c).

(c) Each Loan Party maintains, if available, fully paid flood hazard insurance on all Flood Hazard Properties, with such deductibles as are commercially acceptable for Persons of established reputation engaged in similar business as the Loan Parties and on such terms and in such amounts as required by Flood Insurance Laws or as otherwise reasonably required by the Administrative Agent.

ARTICLE V.

AFFIRMATIVE COVENANTS

Each of Holdings and the Borrower covenant and agree that so long as any Lender has a Commitment hereunder or the principal of and interest on any Loan or any fee or any LC Disbursement remains unpaid or any Letter of Credit remains outstanding:

Section 5.1 Financial Statements and Other Information. The Borrower will deliver to the Administrative Agent and each Lender:

(a) as soon as available and in any event within ninety (90) days after the end of each Fiscal Year, a copy of the annual audited report for such Fiscal Year for Holdings, the Borrower and its Restricted Subsidiaries, containing a consolidated balance sheet of Holdings, the Borrower and its Restricted Subsidiaries as of the end of such Fiscal Year and the related consolidated statements of income, stockholders’ equity and cash flows (together with all footnotes thereto) of Holdings, the Borrower and its Restricted Subsidiaries for such Fiscal Year, setting forth in each case in comparative form the figures for the previous Fiscal Year, all in reasonable detail and reported on by Ernst & Young or other independent public accountants of nationally recognized standing (without a “going concern” or like qualification, exception or explanation and without any qualification or exception as to scope of such audit) to the effect that such financial statements present fairly in all material respects the financial condition and the results of operations of Holdings, the Borrower and its Restricted Subsidiaries for such Fiscal Year on a consolidated basis in accordance with GAAP and that the examination by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards. It is understood and agreed that the requirements of this Section 5.1(a) (x) shall be satisfied by delivery of the applicable annual report on Form 10-K of Holdings to the Securities and Exchange Commission if delivered within the applicable time period noted herein and is available to the Lenders on EDGAR and (y) are effective as of the Effective Date;

 

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(b) as soon as available and in any event within forty-five (45) days after the end of each Fiscal Quarter of each Fiscal Year (other than the last Fiscal Quarter), an unaudited consolidated balance sheet of Holdings, the Borrower and its Restricted Subsidiaries as of the end of such Fiscal Quarter and the related unaudited consolidated statements of income and cash flows of Holdings, the Borrower and its Restricted Subsidiaries for such Fiscal Quarter and the then elapsed portion of such Fiscal Year, setting forth in each case in comparative form the figures for the corresponding quarter and the corresponding portion of the previous Fiscal Year, all certified by the chief financial officer, treasurer or controller of the Borrower as presenting fairly in all material respects the financial condition and results of operations of Holdings, the Borrower and its Restricted Subsidiaries on a consolidated basis in accordance with GAAP, subject to normal year-end audit adjustments and the absence of footnotes. It is understood and agreed that the requirements of this Section 5.1(b) (x) shall be satisfied by delivery of the applicable quarterly report on Form 10-Q of Holdings to the Securities and Exchange Commission if delivered within the applicable time period noted herein and is available to the Lenders on EDGAR and (y) are effective as of the Effective Date;

(c) concurrently with the delivery of the financial statements referred to in Sections 5.1(a) and (b) above, a certificate of a Responsible Officer, (i) certifying as to whether there exists a Default or Event of Default on the date of such certificate, and if a Default or an Event of Default then exists, specifying the details thereof and the action which the Borrower has taken or proposes to take with respect thereto, (ii) setting forth in reasonable detail calculations demonstrating compliance with Article VI and (iii) stating whether any change in GAAP or the application thereof has occurred since the date of the Borrower’s audited financial statements referred to in Section 4.4 and, if any change has occurred, specifying the effect of such change on the financial statements accompanying such certificate;

(d) concurrently with the delivery of the financial statements referred to in Section 5.1(a) above, a certificate of the accounting firm that reported on such financial statements stating whether they obtained any knowledge during the course of their examination of such financial statements of any Default or Event of Default (which certificate may be limited to the extent required by accounting rules or guidelines);

(e) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed with the Securities and Exchange Commission, or any Governmental Authority succeeding to any or all functions of the Securities and Exchange Commission, or with any national securities exchange, or distributed by Holdings to its shareholders generally, as the case may be, it being agreed that the requirements of this Section 5.1(e) may be satisfied by the delivery of the applicable reports, statements or other materials to the Securities and Exchange Commission to the extent that such reports, statements or other materials are available to the Lenders on EDGAR;

(f) promptly following any request therefor, such other information regarding the results of operations, business affairs and financial condition of Holdings, the Borrower or any Restricted Subsidiary as the Administrative Agent or any Lender may reasonably request;

 

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(g) as soon as available and in any event within 60 days after the end of each Fiscal Year, a forecasted income statement, balance sheet, and statement of cash flows for the following Fiscal Year, in each case, on a quarter by quarter basis for such forecasted Fiscal Year information; and

(h) concurrently with the delivery of the financial statements referred to in Sections 5.1(a) and (b), for any period in which there exist any Unrestricted Subsidiaries, unaudited consolidating financial statements reflecting adjustments necessary to eliminate the accounts of Unrestricted Subsidiaries (if any) from such financial statements delivered pursuant to Section 5.1(a) and (b), all in reasonable detail and certified by the chief executive officer, chief financial officer, treasurer or controller of the Borrower as fairly presenting in all material respects the financial condition, results of operations, shareholders’ equity and cash flows of Holdings, the Borrower and its Restricted Subsidiaries in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes.

Section 5.2 Notices of Material Events. The Borrower will furnish to the Administrative Agent and each Lender prompt written notice of the following:

(a) the occurrence of any Default or Event of Default;

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

(c) the occurrence of any event or any other development by which Holdings, the Borrower or any of its Restricted Subsidiaries (i) fails to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) becomes subject to any Environmental Liability in excess of $10,000,000, (iii) receives notice of any claim with respect to any Environmental Liability in excess of $10,000,000 or (iv) becomes aware of any basis for any Environmental Liability in excess of $10,000,000 and in each of the preceding clauses, which individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect;

(d) the occurrence of any ERISA Event that alone, or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of Holdings, the Borrower and its Restricted Subsidiaries in an aggregate amount exceeding $10,000,000;

(e) any change in the information provided in the Beneficial Ownership Certification that would result in a change to the list of beneficial owners identified in parts (c) or (d) of such certification; and

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

Each notice delivered under this Section 5.2 shall be accompanied by a written statement of a Responsible Officer setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.

 

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Section 5.3 Existence; Conduct of Business. Holdings will, and will cause each of its Restricted Subsidiaries to, do or cause to be done all things necessary to preserve, renew and maintain in full force and effect its legal existence and its respective rights, licenses, permits, privileges, franchises, patents, copyrights, trademarks and trade names material to the conduct of its business and will continue to engage in (a) substantially the same business as presently conducted or such other businesses that are reasonably related thereto, including but not limited to the business of leasing and selling furniture, consumer electronics, computers, appliances and other household goods and accessories inside and outside of the United States of America, through both independently-owned and franchised stores, providing lease-purchase solutions, credit and other financing solutions to customers for the purchase and lease of such products, the manufacture and supply of furniture and bedding for lease and sale in such stores, and the provision of virtual rent-to-own programs inside and outside of the United States of America (including but not limited to point-of-sale lease purchase programs), (b) any other businesses which are ancillary or complementary to, or reasonable extensions or expansions of, the business of Holdings, the Borrower and its Restricted Subsidiaries as conducted as of the Effective Date, as reasonably determined in good faith by the Borrower and (c) any businesses that are materially different from the business of Holdings, the Borrower and its Restricted Subsidiaries as conducted as of the Effective Date provided that any Investments made, funds expended or financial support provided by Holdings, the Borrower and/or its Restricted Subsidiaries in connection with such alternative lines of business shall not exceed $25,000,000 in the aggregate at any time outstanding; provided, that nothing in this Section 5.3 shall prohibit any merger, consolidation, liquidation or dissolution permitted under Section 7.3.

Section 5.4 Compliance with Laws, Etc. Holdings will, and will cause each of its Restricted Subsidiaries to, comply with all laws, rules, regulations and requirements of any Governmental Authority applicable to its business and properties, including without limitation, all Environmental Laws, ERISA and OSHA, except where the failure to do so, either individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

Section 5.5 Payment of Obligations. Holdings will, and will cause each of its Restricted Subsidiaries to, pay and discharge at or before maturity, all of its obligations and liabilities (including without limitation all tax liabilities and claims that could result in a statutory Lien) before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) Holdings, the Borrower or such Restricted Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect.

Section 5.6 Books and Records. Holdings will, and will cause each of its Restricted Subsidiaries to, keep proper books of record and account in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities to the extent necessary to prepare the consolidated financial statements of Borrower in conformity with GAAP.

Section 5.7 Visitation, Inspection, Etc. Holdings will, and will cause each of its Restricted Subsidiaries to, permit any representative of the Administrative Agent or any Lender, to visit and inspect its properties, to examine its books and records and to make copies and take extracts therefrom, and to discuss its affairs, finances and accounts with any of its officers and with its independent certified public accountants, all at such reasonable times and as often as the Administrative Agent or any Lender may reasonably request after reasonable prior notice to the Borrower; provided, however, if a Default or an Event of Default has occurred and is continuing, no prior notice shall be required. All reasonable expenses incurred by the Administrative Agent and, at any time after the occurrence and during the continuance of a Default or an Event of Default, any Lenders in connection with any such visit, inspection, audit, examination and discussions shall be borne by the Borrower.

 

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Section 5.8 Maintenance of Properties; Insurance. Holdings will, and will cause each of its Restricted Subsidiaries to, (a) keep and maintain all property material to the conduct of its business in good working order and condition, ordinary wear and tear excepted, except where the failure to do so, either individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect and (b) maintain with financially sound and reputable insurance companies, insurance with respect to its properties and business, and the properties and business of its Restricted Subsidiaries, against loss or damage of the kinds customarily insured against by companies in the same or similar businesses operating in the same or similar locations (including, after the occurrence of the Trigger Event, flood insurance as described in the definition of Real Estate Documents). In addition, and not in limitation of the foregoing, Holdings shall maintain and keep in force insurance coverage on its inventory, as is consistent with best industry practices. The Loan Parties shall at all times cause the Administrative Agent to be named as additional insured on all of its casualty and liability policies. Promptly after the occurrence of the Trigger Event, the Loan Parties shall cause each issuer of an insurance policy to provide the Administrative Agent with an endorsement (i) showing the Administrative Agent as lender’s loss payee with respect to each policy of property or casualty insurance and naming the Administrative Agent and each Lender as an additional insured with respect to each policy of liability insurance, (ii) providing that 30 days’ notice will be given to the Administrative Agent prior to any cancellation of, material reduction or change in coverage provided by or other material modification to such policy and (iii) reasonably acceptable in all other respects to the Administrative Agent.

Section 5.9 Use of Proceeds and Letters of Credit. The Borrower will use the proceeds of all Loans (a) to finance working capital needs, (b) to refinance existing debt (including, without limitation, the remaining principal amount of the loans and accrued and unpaid interest thereon owing under the Existing Credit Agreement), (c) to finance Permitted Acquisitions and (d) for other general corporate purposes of Holdings, the Borrower and its Restricted Subsidiaries, in each case, not in contravention of any law or Loan Document. No part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that would violate any rule or regulation of the Board of Governors of the Federal Reserve System, including Regulations T, U or X. All Letters of Credit will be used for general corporate purposes.

The Borrower will not request any Borrowing or Letter of Credit, and the Borrower shall not use, and the Borrower shall ensure that Holdings and its Subsidiaries and its or their respective directors, officers, employees and agents shall not use, the proceeds of any Borrowing or Letter of Credit (1) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws, (2) for the purpose of funding, financing or facilitating any activities, business or transaction of or with any Sanctioned Person, or in any Sanctioned Country or (3) in any manner that would result in the violation of any Sanctions applicable to any party hereto.

Section 5.10 Additional Subsidiaries; Guarantees.

(a) Within ten (10) Business Days (or such later date as the Administrative Agent may agree in its sole discretion) after any Subsidiary is acquired or formed (including, without limitation, upon the formation of any Subsidiary that is a Delaware Divided LLC) or after any Unrestricted Subsidiary is designated as a Restricted Subsidiary, the Borrower shall (i) notify the Administrative Agent and the Lenders thereof, (ii) if such Subsidiary is a Material Domestic Subsidiary, cause such Subsidiary to become a Subsidiary Loan Party by (x) executing agreements

 

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in the form of Annex I to the Guarantee Agreement and (y) if the Trigger Event has occurred, a security agreement or a joinder agreement thereto granting to the Administrative Agent for the benefit of the holders of the Obligations a first priority security interest and lien in all of its assets pursuant to the Collateral Documents, in form reasonably satisfactory to the Administrative Agent, and (iii) if such Subsidiary is a Material Domestic Subsidiary, cause such Domestic Subsidiary to deliver simultaneously therewith similar documents applicable to such Domestic Subsidiary described in Section 3.1 as reasonably requested by the Administrative Agent. In the event that any Domestic Subsidiary that is not already a Subsidiary Loan Party becomes a Material Domestic Subsidiary at any time after its formation or acquisition, the Borrower shall have up to ten (10) Business Days (or such later date as the Administrative Agent may agree in its sole discretion) to cause it to (x) become a Subsidiary Loan Party by executing agreements in the form of Annex I to the Guarantee Agreement and (y) deliver simultaneously therewith similar documents applicable to such Domestic Subsidiary described in Section 3.1 as reasonably requested by the Administrative Agent.

(b) Upon any acquisition or formation of additional Foreign Subsidiaries by the Borrower after the Effective Date (subject to Section 7.4) , and to the extent the aggregate EBITDA attributable to all Foreign Subsidiaries that are Restricted Subsidiaries whose stock has not been pledged to secure the Obligations pursuant to this Section 5.10(b) for the most recently ended twelve month period exceeds twenty percent (20%) of Consolidated EBITDA for the most recently ended twelve month period (the “Foreign Pledge Date”), the Borrower (i) shall notify the Administrative Agent and the Lenders thereof, (ii) deliver stock certificates and related pledge agreements, in form satisfactory to a collateral agent acceptable to the Administrative Agent, evidencing the pledge of sixty-six percent (66%) of the issued and outstanding Capital Stock entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) and one hundred percent (100%) of the issued and outstanding Capital Stock not entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) of one or more Foreign Subsidiaries directly owned by a Loan Party to secure the Obligations to the extent necessary such that, after giving effect to such pledge, the EBITDA attributable to all Foreign Subsidiaries that are Restricted Subsidiaries whose stock has not been pledged to secure the Obligations pursuant to this Section 5.10(b) for the most recently ended twelve (12) month period does not exceed twenty percent (20%) of Consolidated EBITDA, and (iii) cause such Foreign Subsidiary whose stock is pledged pursuant to the immediately preceding Section 5.10(b)(ii) to deliver simultaneously therewith similar documents applicable to such Foreign Subsidiary described in Section 3.1 as reasonably requested by the Administrative Agent; provided that in no event shall any such Foreign Subsidiary be required to join the Guarantee Agreement or otherwise to guarantee any of the Obligations. Upon the occurrence of the Foreign Pledge Date, the Borrower will be required to comply with the terms of this Section 5.10(b) within thirty (30) days after any new Foreign Subsidiary that is a Restricted Subsidiary is acquired or formed. Upon the occurrence of the Foreign Pledge Date and within a reasonable time thereafter, the Administrative Agent shall enter into an intercreditor agreement, in form and substance satisfactory to the Required Lenders, with all other creditors of the Borrower having a similar covenant with the Borrower.

(c) Notwithstanding anything to the contrary in this Agreement, (i) none of the Inactive Subsidiaries shall be required to become a Subsidiary Loan Party or to execute the Guarantee Agreement, subject to compliance with Section 7.13 and (ii) the Borrower shall cause each Inactive Subsidiary to be dissolved as soon practicable without incurring adverse tax consequences unless otherwise permitted by the Administrative Agent with such consent not to be unreasonably withheld, conditioned or delayed.

 

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(d) Holdings will cause any Domestic Subsidiary or any other Domestic Controlled Affiliate that provides a Guarantee or otherwise becomes liable (including as a borrower or co-borrower) in respect of the obligations under any other agreement providing for the incurrence of Indebtedness that is pari passu with the Indebtedness under this Agreement to become a Subsidiary Loan Party by executing agreements in the form of Annex I to the Guarantee Agreement and deliver simultaneously therewith similar documents applicable to such Domestic Subsidiary described in Section 3.1 as reasonably requested by the Administrative Agent.

Section 5.11 Further Assurances. Promptly upon request by the Administrative Agent, or any Lender through the Administrative Agent, (i) correct any material defect or error that may be discovered in any Loan Document or in the execution or acknowledgment thereof, and (ii) do, execute, acknowledge and deliver any and all such further acts, certificates, assurances and other instruments as the Administrative Agent, or any Lender through the Administrative Agent, may reasonably require from time to time in order to carry out more effectively the purposes of the Loan Documents, or, after the occurrence of the Trigger Event, to grant, preserve, protect or perfect the Liens created by the Collateral Documents or the validity or priority of any such Lien, all at the expense of the Loan Parties.

Section 5.12 Collateral.

(a) Promptly upon, and in any event within thirty (30) days of, the occurrence of the Trigger Event (or such longer periods as the Administrative Agent shall agree in its sole discretion), Holdings shall, and shall cause the Loan Parties, to (i) grant Liens in favor of the Administrative Agent, for the benefit of the Lenders and the other holders of the Obligations, in substantially all of its personal property (with exceptions as provided in the Security Agreement) by executing and delivering to the Administrative Agent a Security Agreement and such other Collateral Documents in form and substance reasonably satisfactory to the Administrative Agent, and authorizing and delivering, at the request of the Administrative Agent, such UCC financing statements or similar instruments required by the Administrative Agent to perfect the Liens in favor of the Administrative Agent, for the benefit of the Lenders and the other holders of the Obligations, and granted under any of the Loan Documents, (ii) grant Liens in favor of the Administrative Agent, for the benefit of the Lenders and the other holders of the Obligations, in all fee ownership interests in Material Real Estate by executing and delivering to the Administrative Agent such Real Estate Documents as the Administrative Agent shall reasonably require and (iii) deliver such other documentation (including, without limitation, certified organizational documents, resolutions, lien searches, title insurance policies, surveys, environmental reports and legal opinions) reasonably requested by the Administrative Agent and to take all such other actions that such Loan Party would be required to deliver pursuant to Section 5.13 with respect to any Material Real Estate. In addition, Holdings shall, or shall cause the applicable Loan Party to (x) pledge all of the Capital Stock of the Borrower and any such Domestic Subsidiary that is a Restricted Subsidiary to the Administrative Agent as security for the Obligations by executing and delivering a Security Agreement in form and substance reasonably satisfactory to the Administrative Agent, (y) pledge sixty-six percent (66%) of the issued and outstanding Capital Stock entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) and one hundred percent (100%) of the issued and outstanding Capital Stock not entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) of the Foreign Subsidiaries that are Restricted Subsidiaries directly owned by the Loan Parties and (z) deliver the original certificates evidencing such pledged capital stock to the Administrative Agent, together with appropriate powers executed in blank. In the event of the occurrence of the Trigger Event, the requirements of this Section 5.12(b), and not those of Section 5.10(b), shall govern the pledge

 

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of Capital Stock in Foreign Subsidiaries. Concurrently with the grant of Liens in the first sentence of this Section 5.12(a), the Administrative Agent and the Servicer (as defined in the Loan Facility Agreement) shall enter into the Intercreditor Agreement in form and substance reasonably satisfactory to the Administrative Agent, the Required Lenders and the Servicer (as defined in the Loan Facility Agreement). Notwithstanding anything to the contrary herein, or otherwise in any Loan Document, the Administrative Agent shall not enter into, accept, or record any mortgage in respect of any Material Real Estate until the Administrative Agent shall have received written confirmation (which confirmation shall, for purposes hereunder, include email) from each Lender that flood insurance compliance has been completed by such Lender with respect to such Material Real Estate (such written confirmation not to be unreasonably conditioned, withheld or delayed); provided, that, the inability of a Loan Party to deliver, enter into, or record a Mortgage with respect to any Material Real Estate within the time period required by this Section 5.12 due to the failure of the Administrative Agent to receive written confirmation from each Lender that flood insurance compliance has been completed by such Lender with respect to such Material Real Estate within such time period shall not be deemed to be a failure by such Loan Party to satisfy the requirements of this Section 5.12.

(b) Holdings and the Borrower agree that, following the delivery of any Collateral Documents required to be executed and delivered by this Section 5.12, the Administrative Agent shall have a valid and enforceable, first priority perfected Lien on the property required to be pledged pursuant to Section 5.12(a) and Section 5.12(b) (to the extent that such Lien can be perfected by execution, delivery and/or recording of the Collateral Documents or UCC financing statements, or possession of such Collateral), free and clear of all Liens other than Liens expressly permitted by Section 7.2. All actions to be taken pursuant to this Section 5.12 shall be at the expense of the Borrower or the applicable Loan Party, and shall be taken to the reasonable satisfaction of the Administrative Agent.

Section 5.13 Additional Real Estate. To the extent otherwise permitted hereunder, if any Loan Party proposes to acquire a fee ownership interest in Material Real Estate after the occurrence of the Trigger Event, it shall within ninety (90) days of such acquisition (or such longer period as the Administrative Agent shall agree in its sole discretion) provide to the Administrative Agent Real Estate Documents in regard to such Material Real Estate. Notwithstanding anything to the contrary herein, or otherwise in any Loan Document, the Administrative Agent shall not enter into, accept, or record any mortgage in respect of any Material Real Estate until the Administrative Agent shall have received written confirmation (which confirmation shall, for purposes hereunder, include email) from each Lender that flood insurance compliance has been completed by such Lender with respect to such Material Real Estate (such written confirmation not to be unreasonably conditioned, withheld or delayed); provided, that, the inability of a Loan Party to deliver, enter into, or record a Mortgage with respect to any Material Real Estate within the time period required by this Section 5.13 due to the failure of the Administrative Agent to receive written confirmation from each Lender that flood insurance compliance has been completed by such Lender with respect to such Material Real Estate within such time period shall not be deemed to be a failure by such Loan Party to satisfy the requirements of this Section 5.13.

Section 5.14 Designation of Subsidiaries.

(a) The Borrower may at any time designate any Restricted Subsidiary acquired or formed after the Effective Date as an Unrestricted Subsidiary or any Unrestricted Subsidiary as a Restricted Subsidiary; provided that (a) no Default or Event of Default shall exist immediately prior or immediately after giving effect to such designation; (b) the Borrower shall have delivered to the

 

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Administrative Agent a Pro Forma Compliance Certificate demonstrating that after giving effect to such designation on a Pro Forma Basis, the Loan Parties would be in compliance with the financial covenants in Article VI measured as of the last day of the most recently ended Fiscal Quarter for which financial statements are required to have been delivered hereunder; (c) no Restricted Subsidiary may be designated as an Unrestricted Subsidiary if such Restricted Subsidiary or any of its Subsidiaries (i) owns any equity interests or Indebtedness of, or owns or holds any Liens on, any property of Holdings or any Restricted Subsidiary or (ii) Guarantees any Indebtedness of Holdings or any Restricted Subsidiary (after giving effect to the release of the Guarantee of the Obligations by such Subsidiary in connection with the designation of such Subsidiary as an Unrestricted Subsidiary); (d) any Unrestricted Subsidiary that has been re-designated as a Restricted Subsidiary may not subsequently be re-designated as an Unrestricted Subsidiary; and (e) no Restricted Subsidiary may be designated as an Unrestricted Subsidiary unless concurrent with such designation such Restricted Subsidiary is designated as an “unrestricted subsidiary” (or otherwise not be subject to the covenants) under any Indebtedness.

(b) The designation of any Restricted Subsidiary as an Unrestricted Subsidiary shall constitute an Investment (which must be an Investment permitted pursuant to Section 7.4) by its direct parent (whether the Borrower or a Restricted Subsidiary) in such Subsidiary on the date of such designation in an amount equal to the outstanding amount of all Investments by Holdings, the Borrower and its Restricted Subsidiaries in such Subsidiary on such date.

(c) The designation of any Unrestricted Subsidiary as a Restricted Subsidiary shall constitute (i) the incurrence on the date of such designation of any Investment, Indebtedness or Liens of such Subsidiary existing on such date and (ii) for purposes of calculating the outstanding amount of Investments by Holdings, the Borrower and its Restricted Subsidiaries in all Unrestricted Subsidiaries, a return on all Investments by Holdings, the Borrower and its Restricted Subsidiaries in such Subsidiary in an amount equal to the outstanding amount of all such Investments in such Subsidiary on the date of such designation.

(d) If at any time any Unrestricted Subsidiary (i) owns any equity interests or Indebtedness of, or owns or holds any Liens on, any property of Holdings, the Borrower or any Restricted Subsidiary, (ii) Guarantees any Indebtedness of Holdings, the Borrower or any Restricted Subsidiary or (iii) ceases to be an “unrestricted subsidiary” (or otherwise becomes subject to the covenants) under any Indebtedness, then the Borrower shall, concurrent therewith, re-designate such Unrestricted Subsidiary as a Restricted Subsidiary.

Notwithstanding any of the definitions or covenants contained in this Agreement to the contrary, Holdings and the Borrower will not, and will not permit any Restricted Subsidiary to, consummate any transaction that results in the transfer (whether by way of any Restricted Payment, Investment, or any sale, conveyance, transfer, or other disposition, or a designation of a Subsidiary as an Unrestricted Subsidiary or of an Unrestricted Subsidiary as a Subsidiary, and whether in a single transaction or a series of related transactions) of material intellectual property rights (including patents, trademarks, service marks, tradenames, copyrights, proprietary leasing records and systems and other intellectual property) from Holdings, the Borrower or any Restricted Subsidiary to any Unrestricted Subsidiary. Except as expressly set forth herein, Unrestricted Subsidiaries will not be subject to any of the covenants set forth in this Agreement.

 

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ARTICLE VI.

FINANCIAL COVENANTS

Holdings and the Borrower covenant and agree that so long as any Lender has a Commitment hereunder or the principal of or interest on or any Loan remains unpaid or any fee or any LC Disbursement remains unpaid or any Letter of Credit remains outstanding:

Section 6.1 Total Net Debt to EBITDA Ratio. Holdings, the Borrower and its Restricted Subsidiaries shall maintain, as of the last day of each Fiscal Quarter, a Total Net Debt to EBITDA Ratio of not greater than 2.50:1.00.

Section 6.2 Fixed Charge Coverage Ratio. Holdings, the Borrower and its Restricted Subsidiaries shall maintain, as of the last day of each Fiscal Quarter, a Fixed Charge Coverage Ratio of not less than 1.75:1.00.

ARTICLE VII.

NEGATIVE COVENANTS

Holdings and the Borrower covenant and agree that so long as any Lender has a Commitment hereunder or the principal of or interest on any Loan remains unpaid or any fee or any LC Disbursement remains unpaid or any Letter of Credit remains outstanding:

Section 7.1 Indebtedness. Holdings will not, and will not permit any of its Restricted Subsidiaries to, create, incur, assume or suffer to exist any Indebtedness, except:

(a) Indebtedness created pursuant to the Loan Documents;

(b) Indebtedness existing on the date hereof and set forth on Schedule 7.1 and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof (immediately prior to giving effect to such extension, renewal or replacement) or shorten the maturity or the weighted average life thereof;

(c) Indebtedness of the Borrower or any Restricted Subsidiary incurred after the Effective Date to finance the acquisition, construction or improvement of any fixed or capital assets, including Capital Lease Obligations and any Indebtedness assumed in connection with the acquisition of any such assets or secured by a Lien on any such assets prior to the acquisition thereof; provided, that such Indebtedness is incurred prior to or within ninety (90) days after such acquisition or the completion of such construction or improvements or extensions, renewals, and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof (immediately prior to giving effect to such extension, renewal or replacement) or shorten the maturity or the weighted average life thereof; provided further, (x) the aggregate principal amount of such Indebtedness, as of any date of determination, does not at any time exceed three percent (3.0%) of the aggregate book value of the total assets of Holdings, the Borrower and its Restricted Subsidiaries determined on a consolidated basis as of the last day of the most recently ended Fiscal Quarter for which financial statements have been delivered, and (y) the aggregate principal amount of such Indebtedness incurred by Foreign Subsidiaries under this Section 7.1(c), together with the principal amount of Indebtedness permitted to be incurred under Section 7.1(i) does not exceed twenty percent (20%) of the aggregate book value of the total assets of Holdings, the Borrower and its Restricted Subsidiaries measured on a consolidated basis in accordance with GAAP as of the end of the immediately preceding Fiscal Quarter for which financial statements have been delivered (giving effect to any Acquisition financed with such Indebtedness on a Pro Forma Basis);

 

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(d) Indebtedness of the Borrower owing to any Restricted Subsidiary that is a Loan Party and of any Restricted Subsidiary that is a Loan Party owing to the Borrower or any other Restricted Subsidiary that is a Loan Party;

(e) Guarantees by the Borrower of Indebtedness of any Restricted Subsidiary of the Borrower that is a Loan Party and by any Restricted Subsidiary of the Borrower that is a Loan Party of Indebtedness of the Borrower or any other Restricted Subsidiary of the Borrower that is a Loan Party;

(f) Guarantees by the Borrower of Indebtedness of certain franchise operators of the Borrower; provided such guarantees are given by the Borrower in connection with (i) loans made pursuant to the terms of the Loan Facility Agreement or (ii) loans made pursuant to terms of any other loan facility agreements and guaranteed on an unsecured basis with terms otherwise reasonably acceptable to the Administrative Agent entered into after the date hereof in an aggregate principal amount at any time outstanding not to exceed, as of any date of determination, three percent (3.0%) of the aggregate book value of the total assets of Holdings, the Borrower and its Restricted Subsidiaries determined on a consolidated basis as of the last day of the most recently ended Fiscal Quarter for which financial statements have been delivered;

(g) endorsed negotiable instruments for collection in the ordinary course of business;

(h) Guarantees by Borrower of permitted Indebtedness of Foreign Subsidiaries that are Restricted Subsidiaries;

(i) unsecured Indebtedness of Foreign Subsidiaries that are Restricted Subsidiaries (whether such Indebtedness represents loans made by the Borrower or any of its Restricted Subsidiaries or by a third party) so long as (i) after giving effect to the incurrence of such Indebtedness on a Pro Forma Basis (as evidenced by a Pro Forma Compliance Certificate delivered to the Administrative Agent), (A) Holdings, the Borrower and its Restricted Subsidiaries would be in compliance with the financial covenants in Article VI measured as of the last day of the most recently ended Fiscal Quarter for which financial statements are required to have been delivered hereunder, (B) no Default or Event of Default has occurred and is continuing, or would result therefrom and (C) the aggregate principal amount of such Indebtedness, together with the amount of and Indebtedness permitted to be incurred by such Foreign Subsidiaries under Section 7.1(c), does not exceed twenty percent (20%) of the aggregate book value of the total assets of Holdings, the Borrower and its Restricted Subsidiaries measured on a consolidated basis in accordance with GAAP as of the end of the immediately preceding Fiscal Quarter for which financial statements have been delivered (giving effect to any Acquisition financed with such Indebtedness on a Pro Forma Basis) and (ii) (A) the terms of such Indebtedness do not provide for any scheduled repayment (including payment at maturity), mandatory redemption or sinking fund obligations (other than customary mandatory prepayments upon a change of control, asset sale, event of loss, unpermitted debt issuance and customary acceleration rights after an event of default) prior to the date that is 91 days after the Revolving Commitment Termination Date and the latest Maturity Date

 

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in effect at the time of the incurrence or issuance of such Indebtedness; (B) the covenants, events of default, guarantees and other non-economic terms of such Indebtedness are either (1) customary for similar Indebtedness in light of then-prevailing market conditions (as reasonably determined by the Borrower) or (2) reasonably satisfactory to the Administrative Agent, (C) any financial maintenance covenants with respect to such Indebtedness are not more restrictive to Holdings and its Restricted Subsidiaries than those set forth in this Agreement; and (D) such Indebtedness shall not be Guaranteed by any Person that is not a Loan Party (or that does not simultaneously become a Loan Party);

(j) secured Indebtedness in an aggregate principal amount not to exceed the greater of (i) $15,000,000 and (ii) ten percent (10%) of Consolidated EBITDA for the period of four (4) Fiscal Quarters most recently ended prior to the date of determination for which financial statements were delivered under Section 5.1(a) or (b); provided, that, (i) no Default or Event of Default has occurred and is continuing or would result therefrom, (ii) after giving effect to the incurrence thereof on a Pro Forma Basis (as evidenced by delivery of a Pro Forma Compliance Certificate to the Administrative Agent), Holdings, the Borrower and its Restricted Subsidiaries would be in compliance with the financial covenants in Article VI measured as of the last day of the most recently ended Fiscal Quarter for which financial statements are required to have been delivered hereunder, (iii) the terms of such Indebtedness do not provide for any scheduled repayment (including payment at maturity), mandatory redemption or sinking fund obligations (other than customary mandatory prepayments upon a change of control, asset sale, event of loss, unpermitted debt issuance and customary acceleration rights after an event of default) prior to the date that is 91 days after the Revolving Commitment Termination Date and the latest Maturity Date in effect at the time of the incurrence or issuance of such Indebtedness; (iv) the covenants, events of default, guarantees and other non-economic terms of such Indebtedness are either (A) customary for similar Indebtedness in light of then-prevailing market conditions (as reasonably determined by the Borrower) or (B) reasonably satisfactory to the Administrative Agent, (v) any financial maintenance covenants with respect to such Indebtedness are not more restrictive to Holdings and its Restricted Subsidiaries than those set forth in this Agreement; (vi) such Indebtedness shall not be Guaranteed by any Person that is not a Loan Party (or that does not simultaneously become a Loan Party); and (vii) such Indebtedness shall not include any restriction on the ability of Holdings and its Restricted Subsidiaries to grant Liens in favor of the Administrative Agent in accordance with the terms hereof; and

(k) any other unsecured Indebtedness of Holdings, the Borrower or any Restricted Subsidiary that is a Loan Party so long as after giving effect to the incurrence of such Indebtedness on a Pro Forma Basis (as evidenced by delivery of a Pro Forma Compliance Certificate to the Administrative Agent), (i) Holdings, the Borrower and its Restricted Subsidiaries would be in compliance with the financial covenants in Article VI measured as of the last day of the most recently ended Fiscal Quarter for which financial statements are required to have been delivered hereunder, (ii) no Default or Event of Default has occurred and is continuing, or would result therefrom, (iii) the terms of such Indebtedness do not provide for any scheduled repayment (including payment at maturity), mandatory redemption or sinking fund obligations (other than customary mandatory prepayments upon a change of control, asset sale, event of loss, unpermitted debt issuance and customary acceleration rights after an event of default) prior to the date that is 91 days after the Revolving Commitment Termination Date and the latest Maturity Date in effect at the time of the incurrence or issuance of such Indebtedness; (iv) the covenants, events of default, guarantees and other non-economic terms of such Indebtedness are either (A) customary for similar Indebtedness in light of then-prevailing market conditions (as reasonably determined by the

 

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Borrower) or (B) reasonably satisfactory to the Administrative Agent, (v) any financial maintenance covenants with respect to such Indebtedness are not more restrictive to Holdings and its Restricted Subsidiaries than those set forth in this Agreement; and (vi) such Indebtedness shall not be Guaranteed by any Person that is not a Loan Party (or that does not simultaneously become a Loan Party).

Section 7.2 Negative Pledge. Holdings will not, and will not permit any of its Restricted Subsidiaries to, create, incur, assume or suffer to exist any Lien on any of its assets or property now owned or hereafter acquired (other than any shares of stock of Holdings that are repurchased by the Borrower and retired or held by Holdings), except:

(a) Permitted Encumbrances;

(b) any Liens on any property or asset of the Borrower or any Restricted Subsidiary existing on the Effective Date set forth on Schedule 7.2; provided, that such Lien shall not apply to any other property or asset of the Borrower or any Restricted Subsidiary;

(c) purchase money Liens upon or in any fixed or capital assets to secure the purchase price or the cost of construction or improvement of such fixed or capital assets or to secure Indebtedness incurred solely for the purpose of financing the acquisition, construction or improvement of such fixed or capital assets (including Liens securing any Capital Lease Obligations); provided, that (i) such Lien secures Indebtedness permitted by Section 7.1(c), (ii) such Lien attaches to such asset concurrently or within ninety (90) days after the acquisition, improvement or completion of the construction thereof; (iii) such Lien does not extend to any other asset and (iv) the Indebtedness secured thereby does not exceed the cost of acquiring, constructing or improving such fixed or capital assets together with all interest, fees and costs incurred in connection therewith;

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

(e) extensions, renewals, or replacements of any Lien referred to in Sections 7.2(a) through 7.2(d); provided, that the principal amount of the Indebtedness secured thereby is not increased and that any such extension, renewal or replacement is limited to the assets originally encumbered thereby;

(f) Liens securing the Obligations;

(g) Liens on shares of stock of any Foreign Subsidiary that is a Restricted Subsidiary to the extent that the Obligations are secured pari passu with any other Indebtedness or obligations secured thereby;

(h) Liens securing Indebtedness permitted by Section 7.1(j); and

 

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(i) Liens securing obligations incurred in the ordinary course of business (other than Indebtedness) in an aggregate principal amount not to exceed at any time $5,000,000.

Section 7.3 Fundamental Changes.

(a) Holdings will not, and will not permit any Restricted Subsidiary to, merge into or consolidate into any other Person, or permit any other Person to merge into or consolidate with it, or sell, lease, transfer or otherwise dispose of (in a single transaction or a series of transactions) all or substantially all of its assets (in each case, whether now owned or hereafter acquired and including, in each case, pursuant to a Delaware LLC Division) or all or substantially all of the stock of any of its Restricted Subsidiaries (in each case, whether now owned or hereafter acquired) or liquidate or dissolve; provided, that (i) any Inactive Subsidiary may (A) liquidate into its immediate parent company or dissolve, (B) merge into any other Inactive Subsidiary or (C) merge into the Borrower or any other Restricted Subsidiary that is a Loan Party; provided that the Borrower or such Restricted Subsidiary that is a Loan Party is the survivor of such merger, and (ii) if at the time thereof and immediately after giving effect thereto, no Default or Event of Default shall have occurred and be continuing (except, in the case of an Acquisition subject to the Incremental Funds Certain Provision, in which case there is no Default or Event of Default immediately before or immediately after execution and delivery of the applicable Acquisition Agreement and there is no Specified Event of Default at the date the applicable Permitted Acquisition is consummated) (A) the Borrower or any Restricted Subsidiary may merge with a Person (other than Holdings); provided, that (x) if the Borrower is party to such merger, the Borrower shall be the surviving Person and (y) if the Borrower is not a party to such merger, such Restricted Subsidiary or, in connection with a Permitted Acquisition, such Person if upon consummation of such merger such Person becomes a Restricted Subsidiary, is the surviving Person, (B) any Restricted Subsidiary may merge into another Restricted Subsidiary or the Borrower; provided, however, that if the Borrower is a party to such merger, the Borrower shall be the surviving Person, provided, further, that if any Restricted Subsidiary to such merger is a Subsidiary Loan Party, the Subsidiary Loan Party shall be the surviving Person, (C) any Restricted Subsidiary may sell, transfer, lease or otherwise dispose of all or substantially all of its assets to the Borrower or to a Subsidiary Loan Party, or (D) any other Restricted Subsidiary may liquidate or dissolve if the Borrower determines in good faith that such liquidation or dissolution is in the best interests of the Borrower, is not materially disadvantageous to the Lenders, and such Restricted Subsidiary dissolves into another Subsidiary Loan Party or the Borrower; provided, that any such merger involving a Person that is not a wholly-owned Restricted Subsidiary immediately prior to such merger shall not be permitted unless also permitted by Section 7.4.

(b) Holdings will not, and will not permit any of its Restricted Subsidiaries to, engage in any business other than (i) substantially the same business as presently conducted or such other businesses that are reasonably related thereto, including but not limited to the business of leasing and selling furniture, consumer electronics, computers, appliances and other household goods and accessories inside and outside of the United States of America, through both independently-owned and franchised stores, providing lease-purchase solutions, credit and other financing solutions to customers for the purchase and lease of such products, the manufacture and supply of furniture and bedding for lease and sale in such stores, and the provision of virtual rent-to-own programs inside and outside of the United States of America (including but not limited to point-of-sale lease purchase programs), (ii) any other businesses which are ancillary or complementary to, or reasonable extensions or expansions of, the business of Holdings, the Borrower and its Restricted Subsidiaries as conducted as of the Effective Date, as reasonably determined in good faith by the

 

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Borrower and (iii) any businesses that are materially different from the business of Holdings, the Borrower and its Restricted Subsidiaries as conducted as of the Effective Date provided that any Investments made, funds expended or financial support provided by Holdings, the Borrower and/or its Restricted Subsidiaries in connection with such alternative lines of business shall not exceed $25,000,000 in the aggregate at any time outstanding.

Section 7.4 Investments, Loans, Etc. Holdings will not, and will not permit any of its Restricted Subsidiaries to, purchase, hold or acquire (including pursuant to any merger with any Person that was not a wholly-owned Restricted Subsidiary prior to such merger), any Capital Stock, evidence of indebtedness or other securities (including any option, warrant, or other right to acquire any of the foregoing) of, make or permit to exist any loans or advances to, any obligations of, or make or permit to exist any investment or any other interest in, any other Person (all of the foregoing being collectively called “Investments”), or purchase or otherwise acquire (in one transaction or a series of transactions) any assets of any other Person that constitute a business unit, or create or form any Subsidiary, except:

(a) Investments (other than Permitted Investments) existing on the date hereof and set forth on Schedule 7.4 (including Investments in Restricted Subsidiaries);

(b) Permitted Investments;

(c) Permitted Acquisitions;

(d) Investments made by the Borrower in or to any Subsidiary Guarantor and by any Subsidiary Guarantor to the Borrower or in or to another Subsidiary Guarantor;

(e) loans or advances to employees, officers, stockholders or directors of the Borrower or any Restricted Subsidiary in the ordinary course of business; provided, however, that the aggregate amount of all such loans and advances does not exceed $2,000,000 at any time outstanding;

(f) loans to franchise operators and owners of franchises acquired or funded pursuant to the Loan Facility Agreement and the other credit facility agreements referenced in Section 7.1(f);

(g) Guarantees permitted under Section 7.1(f);

(h) the acquisition or ownership of stock, obligations or securities received in settlement of debts (created in the ordinary course of business) owing to any Subsidiary Loan Party or any of their Restricted Subsidiaries;

(i) loans to and other investments in Foreign Subsidiaries that are Restricted Subsidiaries; provided that, the aggregate amount of such outstanding loans to and investments in such Foreign Subsidiaries do not exceed the amount permitted under Section 7.1(i);

(j) Investments in investment grade corporate bonds and variable rate demand notes having a rating of BBB+ (or the equivalent) or higher, at the time of acquisition thereof, from S&P or Moody’s and in either case maturing within two years from the date of acquisition thereof in an aggregate amount not to exceed $100,000,000 at any time;

 

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(k) other Investments (other than Investments in Unrestricted Subsidiaries); provided, that, (i) no Default or Event of Default has occurred and is continuing or would result therefrom and (ii) after giving effect to the payment thereof on a Pro Forma Basis, Holdings, the Borrower and its Restricted Subsidiaries would be in compliance with the financial covenants in Article VI measured as of the last day of the most recently ended Fiscal Quarter for which financial statements are required to have been delivered hereunder;

(l) other Investments (other than Investments in Unrestricted Subsidiaries) not to exceed $50,000,000 at any time; and

(m) other Investments not to exceed, as of any date of determination, an amount equal to three percent (3.0%) of the aggregate book value of the total assets of Holdings, the Borrower and its Restricted Subsidiaries determined on a consolidated basis as of the last day of the most recently ended Fiscal Quarter for which financial statements have been delivered; provided, that, (i) no Default or Event of Default has occurred and is continuing or would result therefrom and (ii) after giving effect to the payment thereof on a Pro Forma Basis, Holdings, the Borrower and its Restricted Subsidiaries would be in compliance with the financial covenants in Article VI measured as of the last day of the most recently ended Fiscal Quarter for which financial statements are required to have been delivered hereunder.

Section 7.5 Restricted Payments. Holdings will not, and will not permit its Restricted Subsidiaries to, declare or make, or agree to pay or make, directly or indirectly, any dividend on any class of its Capital Stock, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, retirement, defeasance or other acquisition of, any shares of Capital Stock or Indebtedness subordinated to the Obligations of the Borrower or any options, warrants, or other rights to purchase such Capital Stock or such subordinated Indebtedness, whether now or hereafter outstanding (each, a “Restricted Payment”), except for (a) dividends payable by Holdings solely in shares of any class of its common stock, (b) Restricted Payments made by any Restricted Subsidiary to Holdings or to another Loan Party and (c) other Restricted Payments made by Holdings in cash so long as (x) no Default or Event of Default has occurred and is continuing or would result therefrom and (y) after giving effect to the payment thereof on a Pro Forma Basis, Holdings, the Borrower and its Restricted Subsidiaries would be in compliance with the financial covenants in Article VI measured as of the last day of the most recently ended Fiscal Quarter for which financial statements are required to have been delivered hereunder.

Section 7.6 Sale of Assets. Holdings will not, and will not permit any of its Restricted Subsidiaries to, convey, sell, lease, assign, transfer or otherwise dispose of (including any disposition of property to a Delaware Divided LLC pursuant to a Delaware LLC Division), any of its assets, business or property, whether now owned or hereafter acquired, or, in the case of any Restricted Subsidiary, issue or sell any shares of such Restricted Subsidiary’s Capital Stock to any Person other than the Borrower or a Subsidiary Loan Party (or to qualify directors if required by applicable law), except (a) the sale or other disposition for fair market value of obsolete or worn out property or other property not necessary for operations disposed of in the ordinary course of business, (b) the sale of inventory and Permitted Investments in the ordinary course of business, (c) sales and dispositions permitted under Section 7.3(a) and sale leaseback transactions permitted under Section 7.9, (d) sales of assets in connection with the sale of a store owned by Borrower to a franchisee of Borrower, (e) other sales of assets made on or after the date hereof not to exceed, as of any date of determination, an amount equal to five percent (5.0%) of the aggregate book value of the total assets of Holdings, the Borrower and its Restricted Subsidiaries determined on a consolidated basis as of the last day of the most recently ended Fiscal Quarter for which financial statements have been delivered, and (f) the sale or other disposition of assets in an amount at least equal to the fair market value of such asset (as reasonably determined in good faith by the Borrower) and at least 75% of the cash consideration of which is paid to the Borrower or the Restricted Subsidiary in cash or Cash Equivalents.

 

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Section 7.7 Transactions with Affiliates. Holdings will not, and will not permit any of its Restricted Subsidiaries to, sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except (a) in the ordinary course of business at prices and on terms and conditions not less favorable to Holdings or such Restricted Subsidiary than could be obtained on an arm’s-length basis from unrelated third parties, (b) transactions between or among Holdings, the Borrower and its wholly-owned Restricted Subsidiaries not involving any other Affiliates, (c) any Restricted Payment permitted by Section 7.5 and (d) transactions permitted under Section 7.4(e).

Section 7.8 Restrictive Agreements. Holdings will not, and will not permit any Restricted Subsidiary to, directly or indirectly, enter into, incur or permit to exist any agreement that prohibits, restricts or imposes any condition upon (a) the ability of Holdings or any Restricted Subsidiary to create, incur or permit any Lien upon any of its assets or properties, whether now owned or hereafter acquired, or (b) the ability of any Restricted Subsidiary to pay dividends or other distributions with respect to its Capital Stock, to make or repay loans or advances to Holdings or any other Restricted Subsidiary, to Guarantee Indebtedness of Holdings or any other Restricted Subsidiary or to transfer any of its property or assets to Holdings or any Restricted Subsidiary of Holdings; provided, that (i) the foregoing shall not apply to restrictions or conditions imposed by law or by this Agreement, any other Transaction Document, the Loan Facility Agreement, or any other indenture, note purchase agreement or loan agreement in connection with any permitted refinancing of the Loan Facility Agreement, so long as the restrictions and conditions in such other indenture, note purchase agreement or loan agreement are no more burdensome in any material respect than those imposed by the Loan Facility Agreement, (ii) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Restricted Subsidiary pending such sale; provided such restrictions and conditions apply only to the Restricted Subsidiary that is sold and such sale is permitted hereunder, (iii) Section 7.8(a) shall not apply to restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Agreement if such restrictions and conditions apply only to the property or assets securing such Indebtedness and (iv) Section 7.8(a) shall not apply to customary provisions in leases restricting the assignment thereof.

Section 7.9 Sale and Leaseback Transactions. Holdings will not, and will not permit any of its Restricted Subsidiaries to, enter into any arrangement, directly or indirectly, whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereinafter acquired, and thereafter rent or lease such property or other property that it intends to use for substantially the same purpose or purposes as the property sold or transferred; provided, however, that the Borrower may engage in such sale and leaseback transactions so long as the aggregate fair market value of all assets sold and leased back does not exceed $150,000,000 from and after the date hereof.

Section 7.10 Legal Name, State of Formation and Form of Entity. Holdings will not, and will not permit any Restricted Subsidiary to, without providing ten (10) days prior written notice to the Administrative Agent (or such lesser period as the Administrative Agent may agree), change its name, state of formation or form of organization.

 

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Section 7.11 Accounting Changes. Holdings will not, and will not permit any Restricted Subsidiary to, make any significant change in accounting treatment or reporting practices, except as required by GAAP, or change the fiscal year of Holdings or of any Restricted Subsidiary, except to change the fiscal year of a Restricted Subsidiary to conform its fiscal year to that of Holdings.

Section 7.12 Hedging Transactions. Holdings will not, and will not permit any of the Restricted Subsidiaries to, enter into any Hedging Transaction, other than Hedging Transactions entered into in the ordinary course of business to hedge or mitigate risks to which the Borrower or any Restricted Subsidiary is exposed in the conduct of its business or the management of its liabilities. Solely for the avoidance of doubt, the Borrower acknowledges that a Hedging Transaction entered into for speculative purposes or of a speculative nature is not a Hedging Transaction entered into in the ordinary course of business to hedge or mitigate risks.

Section 7.13 Activities of Inactive Subsidiaries. Unless any Inactive Subsidiary has become a Subsidiary Loan Party in accordance with the terms of Section 5.10 of this Agreement, the Borrower will not permit such Inactive Subsidiary to engage in any business activity other than (a) maintaining its existence and/or winding up its affairs and (b) activities related to the completion of any ongoing tax audits, and (x) no Loan Party shall make any additional Investment in any Inactive Subsidiary other than in connection with the business and activities set forth in Sections 7.13(a) and (b) above and (y) no Inactive Subsidiary shall incur Indebtedness of any type (including, without limitation, any guaranties).

Section 7.14 Government Regulation. Holdings will not, and will not permit any of its Subsidiaries to, (a) be or become subject at any time to any law, regulation, or list of any Governmental Authority of the United States (including, without limitation, the OFAC list) that prohibits or limits the Lenders or the Administrative Agent from making any advance or extension of credit to the Borrower or from otherwise conducting business with the Loan Parties, or (b) fail to provide documentary and other evidence of the identity of the Loan Parties as may be reasonably requested by the Lenders or the Administrative Agent at any time to enable the Lenders or the Administrative Agent to verify the identity of the Loan Parties or to comply with any applicable law or regulation, including, without limitation, Section 326 of the Patriot Act at 31 U.S.C. Section 5318.

Section 7.15 Ownership of Subsidiaries. Notwithstanding any other provisions of this Agreement to the contrary, Holdings will not, and will not permit any of the Restricted Subsidiaries to (a) permit any Person (other than the Borrower, any other Loan Party or any wholly owned Restricted Subsidiary thereof) to own any Capital Stock of any Restricted Subsidiary, except to qualify directors if required by applicable law, and except for any dispositions of Restricted Subsidiaries otherwise permitted under this Agreement, or (b) permit any Restricted Subsidiary to issue or have outstanding any shares of preferred Capital Stock.

Section 7.16 Use of Proceeds. Holdings will not, and will not permit any of its Restricted Subsidiaries to,

(a) Use any part of the proceeds of any Loan, whether directly or indirectly, for any purpose that would violate any rule or regulation of the Board of Governors of the Federal Reserve System, including Regulations T, U or X.

(b) Request any Borrowing or Letter of Credit, or use or allow its respective directors, officers, employees and agents to use, the proceeds of any Borrowing or Letter of Credit (i) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws, (ii) for the purpose of funding, financing or facilitating any activities, business or transaction of or with any Sanctioned Person, or in any Sanctioned Country or (iii) in any manner that would result in the violation of any Sanctions applicable to any party.

 

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Section 7.17 Amendment of Organizational Documents. Holdings will not, and will not permit any of its Restricted Subsidiaries to, amend, modify or waive any of its rights in a manner materially adverse to the Lenders or any Loan Party under its charter, by-laws or other organizational document, except in any manner that would not have an adverse effect on the Lenders, the Administrative Agent, Holdings, the Borrower or any of its Restricted Subsidiaries.

Section 7.18 Activities of Holdings. Holdings will not engage in any operations, business or activity other than (a) owning the Capital Stock in its Subsidiaries, (b) maintaining its corporate existence including the issuance of Capital Stock, holding director and shareholder meetings, and entering into those agreements and arrangements incidental thereto and incurring and paying fees, costs and expenses relating to thereto, (c) participating in tax, accounting, corporate and other administrative activities or other activities incidental thereto as a member of the consolidated group of companies including the Loan Parties, (d) executing, delivering and the performance of rights and obligations under the Loan Documents, (e) the consummation of the Restructuring and the other transactions contemplated by the Loan Documents, (f) making any Restricted Payment permitted by this Agreement, (g) making capital contributions to the other Loan Parties, (h) executing, delivering and the performance of rights and obligations under any employment agreements and any documents related thereto, (i) making Investments permitted under this Agreement, (j) providing indemnification to its officers and directors in the ordinary course of business, (k) the performing of activities in preparation for and consummating any public offering of its Capital Stock or any other issuance or sale of its Capital Stock, (l) the holding of any cash and Cash Equivalents (but not owning or operating any property), (m) the entry into and performance of its obligations with respect to contracts and other arrangements entered into in the ordinary course of business providing for indemnification to officers, managers, directors and employees, (n) any activities incidental to the foregoing or required to comply with applicable law, and (o) any action or transaction permitted hereunder.

ARTICLE VIII.

EVENTS OF DEFAULT

Section 8.1 Events of Default. If any of the following events (each an “Event of Default”) shall occur:

(a) the Borrower shall fail to pay any principal of any Loan or of any reimbursement obligation in respect of any LC Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment or otherwise; or

(b) the Borrower shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount payable under Section 8.1(a)) payable under this Agreement or any other Loan Document, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of three (3) Business Days; or

(c) any representation or warranty made or deemed made by or on behalf of Holdings, the Borrower or any other Restricted Subsidiary in or in connection with this Agreement or any other Loan Document (including the Schedules attached thereto) and any amendments or modifications hereof or waivers hereunder, or in any certificate, report, financial statement or other document submitted to the Administrative Agent or the Lenders by any Loan Party or any representative of any Loan Party pursuant to or in connection with this Agreement or any other Loan Document shall prove to be incorrect in any material respect when made or deemed made or submitted; or

 

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(d) the Borrower or Holdings shall fail to observe or perform any covenant or agreement contained in Sections 5.1, 5.2, 5.3 (solely with respect to the Borrower’s or Holdings’ existence) or 5.11 or Article VI or VII; or

(e) (i) the Borrower or Holdings shall fail to observe or perform any covenant or agreement contained in Section 5.12, and such failure shall remain unremedied for ten (10) Business Days after the earlier of (A) any officer of the Borrower becomes aware of such failure or (B) notice thereof shall have been given to the Borrower by the Administrative Agent or any Lender or (ii) any Loan Party shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those referred to in Sections 8.1(a), (b), (d) and (e)(i) above), and such failure shall remain unremedied for thirty (30) days after the earlier of (A) any officer of the Borrower becomes aware of such failure or (B) notice thereof shall have been given to the Borrower by the Administrative Agent or any Lender; or

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

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

(h) Holdings, the Borrower, any Material Subsidiary, or, to the extent such action could reasonably be expected to have a Material Adverse Effect, any other Restricted Subsidiary, shall (i) commence a voluntary case or other proceeding or file any petition seeking liquidation, reorganization or other relief under any federal, state or foreign bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a custodian, trustee, receiver, liquidator or other similar official of it or any substantial part of its property, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in Section 8.1(i), (iii) apply for or consent to the appointment of a custodian, trustee, receiver, liquidator or other similar official for Holdings, the Borrower or any such Material Subsidiary or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing; or

 

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

(j) Holdings, the Borrower, any Material Subsidiary or, to the extent such action could reasonably be expected to have a Material Adverse Effect, any other Restricted Subsidiary shall become unable to pay, shall admit in writing its inability to pay, or shall fail to pay, its debts as they become due; or

(k) an ERISA Event shall have occurred that when taken together with other ERISA Events that have occurred, could reasonably be expected to result in liability to Holdings, the Borrower and its Restricted Subsidiaries in an aggregate amount exceeding, as of any date of determination, an amount equal to two percent (2.0%) of the aggregate book value of the total assets of Holdings, the Borrower and its Restricted Subsidiaries determined on a consolidated basis as of the last day of the most recently ended Fiscal Quarter for which financial statements have been delivered, or otherwise having a Material Adverse Effect; or

(l) judgments and orders for the payment of money in excess of in the aggregate, as of any date of determination, an amount equal to two percent (2.0%) of the aggregate book value of the total assets of Holdings, the Borrower and its Restricted Subsidiaries determined on a consolidated basis as of the last day of the most recently ended Fiscal Quarter for which financial statements have been delivered, to the extent not covered by insurance for which the insurance carrier has acknowledged coverage, shall be rendered against Holdings, the Borrower, any Material Subsidiary or, to the extent such action could reasonably be expected to have a Material Adverse Effect, any other Restricted Subsidiary, and to the extent such judgments or orders have not been discharged either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be a period of thirty (30) consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or

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

(n) a Change in Control shall occur or exist; or

 

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(o) any provision of any Guarantee Agreement or the Borrower Guarantee Agreement shall for any reason cease to be valid and binding on, or enforceable against, any Guarantor, or any Guarantor shall so state in writing, or any Guarantor shall seek to terminate its Guarantee under the Guarantee Agreement or the Borrower Guarantee Agreement, as applicable; or

(p) any other Loan Document, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or thereunder or satisfaction in full of all the Obligations, ceases to be in full force and effect; or any Loan Party or any other Person contests in any manner the validity or enforceability of any Loan Document; or any Loan Party denies that it has any or further liability or obligation under any Loan Document, or purports to revoke, terminate or rescind any Loan Document, or an event of default occurs under any other Loan Document (after giving effect to any applicable grace period); or

(q) the Administrative Agent shall not have or shall cease to have a valid and perfected lien in any material portion of the Collateral purported to be covered by the Collateral Documents for any reason other than the failure of the Administrative Agent to take any action within its control;

then, and in every such event (other than an event with respect to Holdings or the Borrower described in Sections 8.1(h) or (i)) and at any time thereafter during the continuance of such event, the Administrative Agent may, and upon the written request of the Required Lenders shall, by notice to the Borrower, take any or all of the following actions, at the same or different times: (i) terminate the Commitments, whereupon the Commitment of each Lender shall terminate immediately; (ii) declare the principal of and any accrued interest on the Loans, and all other Obligations owing hereunder, to be, whereupon the same shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; (iii) exercise all remedies contained in any other Loan Document; and (iv) exercise any other remedies available at law or in equity; and that, if an Event of Default specified in either Section 8.1(h) or 8.1(i) shall occur, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon, and all fees, and all other Obligations shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower.

Section 8.2 Application of Funds.

After the exercise of remedies provided for in Section 8.1 (or immediately after an Event of Default specified in either Section 8.1(h) or 8.1(i)), any amounts received on account of the Obligations shall be applied by the Administrative Agent in the following order:

(a) first, if there is any collateral securing the Obligations hereunder at such time, to the reimbursable expenses of the Administrative Agent incurred in connection with such sale or other realization upon the collateral, until the same shall have been paid in full;

(b) second, to the fees and other reimbursable expenses of the Administrative Agent and the Issuing Banks then due and payable pursuant to any of the Loan Documents, until the same shall have been paid in full;

(c) third, to all reimbursable expenses, if any, of the Lenders then due and payable pursuant to any of the Loan Documents, until the same shall have been paid in full;

 

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(d) fourth, to the fees due and payable under the Loan Documents and interest then due and payable under the terms of the Loan Documents, until the same shall have been paid in full;

(e) fifth, to the aggregate outstanding principal amount of the Term Loans on a pro rata basis among each class thereof (allocated pro rata among the Lenders in respect of their Pro Rata Shares), to the aggregate outstanding principal amount of the Revolving Loans, the LC Exposure, the Hedging Obligations and the Treasury Management Obligations, until the same shall have been paid in full, allocated pro rata among any Lender and any Lender or Affiliate of a Lender holding Hedging Obligations or Treasury Management Obligations, based on their respective Pro Rata Shares of the aggregate amount of such Revolving Loans, LC Exposure, the Hedging Obligations and Treasury Management Obligations;

(f) sixth, to additional Cash Collateral for the aggregate amount of all outstanding Letters of Credit until the aggregate amount of all Cash Collateral held by the Administrative Agent pursuant to this Agreement is equal to one hundred five percent (105%) of the LC Exposure after giving effect to the foregoing Section 8.2(e); and

(g) to the extent any proceeds remain, to the Borrower or other parties lawfully entitled thereto.

All amounts allocated pursuant to the foregoing Sections 8.2(c) through (f) to the Lenders as a result of amounts owed to the Lenders under the Loan Documents shall be allocated among, and distributed to, the Lenders pro rata based on their respective Pro Rata Shares; provided, that all amounts allocated to that portion of the LC Exposure comprised of the aggregate undrawn amount of all outstanding Letters of Credit pursuant to Sections 8.2(e) and (f) shall be distributed to the Administrative Agent, rather than to the Lenders, and held by the Administrative Agent in an account in the name of the Administrative Agent for the benefit of the Issuing Banks and the Lenders as Cash Collateral for the LC Exposure, such account to be administered in accordance with Section 2.24(g).

Excluded Swap Obligations with respect to any Guarantor shall not be paid with amounts received from such Guarantor or its assets, but appropriate adjustments shall be made with respect to payments from other Loan Parties to preserve the allocation to Obligations otherwise set forth above in this Section 8.2.

Notwithstanding the foregoing, Hedging Obligations and Treasury Management Obligations may be excluded from the application described above without any liability to the Administrative Agent, if the Administrative Agent has not received written notice, together with such supporting documentation as the Administrative Agent may reasonably request, from the applicable Lender or Affiliate of a Lender. Each such Lender or Affiliate of a Lender not a party to this Agreement that has given the notice contemplated by the preceding sentence shall, by such notice, be deemed to have acknowledged and accepted the appointment of the Administrative Agent pursuant to the terms of Article IX for itself and its Affiliates as if a “Lender” party hereto.

 

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ARTICLE IX.

THE ADMINISTRATIVE AGENT

Section 9.1 Appointment of Administrative Agent.

(a) Each Lender irrevocably appoints Truist Bank as the Administrative Agent and authorizes it to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent under this Agreement and the other Loan Documents, together with all such actions and powers that are reasonably incidental thereto. The Administrative Agent may perform any of its duties hereunder or under the other Loan Documents by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions set forth in this Article IX shall apply to any such sub-agent and the Related Parties of the Administrative Agent and any such sub-agent and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent.

(b) Each Issuing Bank shall act on behalf of the Lenders with respect to any Letters of Credit issued by it and the documents associated therewith until such time and except for so long as the Administrative Agent may agree at the request of the Required Lenders to act for such Issuing Bank with respect thereto; provided, that such Issuing Bank shall have all the benefits and immunities (i) provided to the Administrative Agent in this Article IX with respect to any acts taken or omissions suffered by such Issuing Bank in connection with Letters of Credit issued by it or proposed to be issued by it and the application and agreements for letters of credit pertaining to the Letters of Credit as fully as the term “Administrative Agent” as used in this Article IX included such Issuing Bank with respect to such acts or omissions and (ii) as additionally provided in this Agreement with respect to such Issuing Bank.

Section 9.2 Nature of Duties of Administrative Agent. The Administrative Agent shall not have any duties or obligations except those expressly set forth in this Agreement and the other Loan Documents. Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default or an Event of Default has occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except those discretionary rights and powers expressly contemplated by the Loan Documents that the Administrative Agent is required to exercise in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 10.2), and (c) except as expressly set forth in the Loan Documents, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to Holdings or any of its Subsidiaries that is communicated to or obtained by the Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be liable for any action taken or not taken by it or its sub-agents with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 10.2) or in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall not be deemed to have knowledge of any Default or Event of Default unless and until written notice thereof is given to the Administrative Agent by the Borrower or any Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with any Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements, or other terms and conditions set forth in any Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article III or elsewhere in any Loan Document, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.

 

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Section 9.3 Lack of Reliance on the Administrative Agent. Each of the Lenders, the Swingline Lender and the Issuing Banks acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each of the Lenders, the Swingline Lender and the Issuing Banks also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, continue to make its own decisions in taking or not taking of any action under or based on this Agreement, any related agreement or any document furnished hereunder or thereunder. Each of the Lenders, the Swingline Lender and Issuing Banks represents and warrants that (i) the Loan Documents set forth the terms of a commercial lending facility and (ii) it is engaged in making, acquiring or holding commercial loans in the ordinary course and is entering into this Agreement as a Lender, the Swingline Lender or an Issuing Bank for the purpose of making, acquiring or holding commercial loans and providing other facilities set forth herein as may be applicable to such Lender, the Swingline Lender or an Issuing Bank, and not for the purpose of purchasing, acquiring or holding any other type of financial instrument, and each Lender, the Swingline Lender and each Issuing Bank agrees not to assert a claim in contravention of the foregoing. Each Lender, the swingline Lender and each Issuing Bank represents and warrants that it is sophisticated with respect to decisions to make, acquire and/or hold commercial loans and to provide other facilities set forth herein, as may be applicable to such Lender, the Swingline Lender or such Issuing Bank, and either it, or the Person exercising discretion in making its decision to make, acquire and/or hold such commercial loans or to provide such other facilities, is experienced in making, acquiring or holding such commercial loans or providing such other facilities.

Section 9.4 Certain Rights of the Administrative Agent. If the Administrative Agent shall request instructions from the Required Lenders with respect to any action or actions (including the failure to act) in connection with this Agreement, the Administrative Agent shall be entitled to refrain from such act or taking such act, unless and until it shall have received instructions from such Lenders; and the Administrative Agent shall not incur liability to any Person by reason of so refraining. Without limiting the foregoing, no Lender shall have any right of action whatsoever against the Administrative Agent as a result of the Administrative Agent acting or refraining from acting hereunder in accordance with the instructions of the Required Lenders where required by the terms of this Agreement.

Section 9.5 Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed, sent or made by the proper Person. The Administrative Agent may also rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person and shall not incur any liability for relying thereon. The Administrative Agent may consult with legal counsel (including counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or not taken by it in accordance with the advice of such counsel, accountants or experts.

Section 9.6 The Administrative Agent in its Individual Capacity. The bank serving as the Administrative Agent shall have the same rights and powers under this Agreement and any other Loan Document in its capacity as a Lender as any other Lender and may exercise or refrain from exercising the same as though it were not the Administrative Agent; and the terms “Lenders”, “Required Lenders”, “holders of Notes”, or any similar terms shall, unless the context clearly otherwise indicates, include the Administrative Agent in its individual capacity. The bank acting as the Administrative Agent and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of business with Holdings or any Subsidiary or Affiliate of Holdings as if it were not the Administrative Agent hereunder.

 

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Section 9.7 Successor Administrative Agent.

(a) The Administrative Agent may resign at any time by giving notice thereof to the Lenders and the Borrower. Upon any such resignation, the Required Lenders shall have the right to appoint a successor Administrative Agent, subject to the approval by the Borrower if no Default or Event of Default shall exist at such time. If no successor Administrative Agent shall have been so appointed, and shall have accepted such appointment within thirty (30) days after the retiring Administrative Agent gives notice of resignation, then the retiring Administrative Agent may, on behalf of the Lenders and the Issuing Bank, appoint a successor Administrative Agent, which shall be a commercial bank organized under the laws of the United States of America or any state thereof or a bank which maintains an office in the United States, having a combined capital and surplus of at least $500,000,000.

(b) If the Person serving as Administrative Agent is a Defaulting Lender pursuant to clause (v) of the definition thereof, the Required Lenders may, to the extent permitted by applicable law, by notice in writing to the Borrower and such Person remove such Person as Administrative Agent and, in consultation with the Borrower, appoint a successor. If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within thirty (30) days (or such earlier day as shall be agreed by the Required Lenders) (the “Removal Effective Date”), then such removal shall nonetheless become effective in accordance with such notice on the Removal Effective Date.

(c) Upon the acceptance of its appointment as the Administrative Agent hereunder by a successor, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Administrative Agent, and the retiring or removed Administrative Agent shall be discharged from its duties and obligations under this Agreement and the other Loan Documents. If within forty-five (45) days after written notice is given of the retiring Administrative Agent’s resignation under this Section 9.7 no successor Administrative Agent shall have been appointed and shall have accepted such appointment, then on such 45th day (i) the retiring Administrative Agent’s resignation shall become effective, (ii) the retiring Administrative Agent shall thereupon be discharged from its duties and obligations under the Loan Documents and (iii) the Required Lenders shall thereafter perform all duties of the retiring Administrative Agent under the Loan Documents until such time as the Required Lenders appoint a successor Administrative Agent as provided above. After any retiring or removed Administrative Agent’s resignation or removal hereunder, the provisions of this Article IX shall continue in effect for the benefit of such retiring or removed Administrative Agent and its representatives and agents in respect of any actions taken or not taken by any of them while it was serving as the Administrative Agent.

(d) In addition to the foregoing, if a Lender becomes, and during the period it remains, a Defaulting Lender, and if any Default has arisen from a failure of the Borrower to comply with Section 2.26(a)(ii), then the Issuing Bank and the Swingline Lender may, upon prior written notice to the Borrower and the Administrative Agent, resign as Issuing Bank or as Swingline Lender, as the case may be, effective at the close of business Charlotte, North Carolina time on a date specified in such notice (which date may not be less than five (5) Business Days after the date of such notice).

 

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Section 9.8 Authorization to Execute other Loan Documents. Each Lender hereby authorizes the Administrative Agent to execute on behalf of all Lenders all Loan Documents other than this Agreement, including, without limitation, the Intercreditor Agreement after the occurrence of the Trigger Event.

Section 9.9 Withholding Tax. To the extent required by any applicable law, the Administrative Agent may withhold from any interest payment to any Lender an amount equivalent to any applicable withholding tax. If the Internal Revenue Service or any authority of the United States or other jurisdiction asserts a claim that the Administrative Agent did not properly withhold tax from amounts paid to or for the account of any Lender (because the appropriate form was not delivered, was not properly executed, or because such Lender failed to notify the Administrative Agent of a change in circumstances that rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason), such Lender shall indemnify the Administrative Agent (to the extent that the Administrative Agent has not already been reimbursed by the Borrower and without limiting the obligation of the Borrower to do so) fully for all amounts paid, directly or indirectly, by the Administrative Agent as tax or otherwise, including penalties and interest, together with all expenses incurred, including legal expenses, allocated staff costs and any out of pocket expenses.

Section 9.10 Administrative Agent May File Proofs of Claim.

(a) In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to any Loan Party, the Administrative Agent (irrespective of whether the principal of any Loan or any Revolving Credit Exposure shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise:

(i) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans or Revolving Credit Exposure and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders, Issuing Banks and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders, Issuing Banks and the Administrative Agent and its agents and counsel and all other amounts due the Lenders, Issuing Banks and the Administrative Agent under Section 10.3) allowed in such judicial proceeding; and

(ii) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same.

(b) Any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender and each Issuing Bank to make such payments to the Administrative Agent and, if the Administrative Agent shall consent to the making of such payments directly to the Lenders and the Issuing Banks, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Section 10.3.

(c) Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender or any Issuing Bank any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or to authorize the Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.

 

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Section 9.11 Collateral and Guaranty Matters. The Lenders irrevocably authorize the Administrative Agent, at its option and in its discretion:

(a) to release any Lien on any property granted to or held by the Administrative Agent under any Loan Document (i) upon the termination of all Revolving Commitments, the Cash Collateralization of all reimbursement obligations with respect to Letters of Credit in an amount equal to 105% of the aggregate LC Exposure of all Lenders, and the payment in full of all Obligations (other than contingent indemnification obligations and such Cash Collateralized reimbursement obligations), (ii) that is sold or to be sold as part of or in connection with any sale permitted hereunder or under any other Loan Document or the designation of any Restricted Subsidiary as an Unrestricted Subsidiary pursuant to Section 5.14, or (iii) if approved, authorized or ratified in writing in accordance with Section 10.2; and

(b) to release any Loan Party from its obligations under the applicable Collateral Documents if such Person ceases to be a Loan Party as a result of a transaction permitted hereunder.

Upon request by the Administrative Agent at any time, the Required Lenders will confirm in writing the Administrative Agent’s authority to release its interest in particular types or items of property, or to release any Loan Party from its obligations under the applicable Collateral Documents pursuant to this Section 9.11. In each case as specified in this Section, the Administrative Agent is authorized, at the Borrower’s expense, to execute and deliver to the applicable Loan Party such documents as such Loan Party may reasonably request to evidence the release of such item of Collateral from the Liens granted under the applicable Collateral Documents, or to release such Loan Party from its obligations under the applicable Collateral Documents, in each case in accordance with the terms of the Loan Documents and this Section 9.11.

Section 9.12 Right to Realize on Collateral and Enforce Guarantee. Anything contained in any of the Loan Documents to the contrary notwithstanding, Holdings, the Borrower, the Administrative Agent and each Lender hereby agree that (i) no Lender shall have any right individually to realize upon any of the Collateral or to enforce the Collateral Documents, it being understood and agreed that all powers, rights and remedies hereunder and under the Collateral Documents may be exercised solely by the Administrative Agent, and (ii) in the event of a foreclosure by the Administrative Agent on any of the Collateral pursuant to a public or private sale or other disposition, the Administrative Agent or any Lender may be the purchaser or licensor of any or all of such Collateral at any such sale or other disposition and the Administrative Agent, as agent for and representative of the Lenders (but not any Lender or Lenders in its or their respective individual capacities unless the Required Lenders shall otherwise agree in writing), shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such public sale, to use and apply any of the Obligations as a credit on account of the purchase price for any collateral payable by the Administrative Agent at such sale or other disposition.

 

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ARTICLE X.

MISCELLANEOUS

Section 10.1 Notices.

(a) Written Notices.

(i) Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications to any party herein to be effective shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows:

To the Borrower:                     Aaron’s, LLC

400 Galleria Parkway SE, Suite 300

Atlanta, GA 30339

Attn: Chief Financial Officer

Telecopy Number: (855) 778-8565

with a copy to:

Aaron’s, LLC

400 Galleria Parkway SE, Suite 300

Atlanta, GA 30339

Attn: General Counsel

Telecopy Number: (855) 778-8565

To the Administrative Agent:  Truist Bank

3333 Peachtree Road

Atlanta, Georgia 30326

Attention: Tesha Winslow

Telecopy Number: (404) 439-7327

With a copy to:                        Truist Bank

Agency Services

303 Peachtree Street, N.E. / 25th Floor

Atlanta, Georgia 30308

Attention: Agency Services

Telecopy Number: (404) 495-2170

To an Issuing Bank:                 Truist Bank

25 Park Place, N.E. / Mail Code 3706 / 16th Floor

Atlanta, Georgia 30303

Attention: Standby Letter of Credit Dept.

Telecopy Number: (404) 588-8129

 

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JPMorgan Chase Bank, N.A.

10 S. Dearborn Street, Floor L2S

Chicago, IL 60603-2300

Attention: CLS Non Agented Servicing Team (Rajesh Gadige)

Telephone: 806-790-5009

Telecopy Number: 214-307-6874

Bank of America, N.A.

401 N. Tryon St; NC1-021-06-01

Charlotte, NC 28255

To the Swingline Lender:        Truist Bank

Agency Services

303 Peachtree Street, N.E. / 25th Floor

Atlanta, Georgia 30308

Attention: Agency Services

Telecopy Number: (404) 495-2170

To any other Lender:               the address set forth on the

Administrative

Questionnaire or in the Assignment and

Acceptance that such Lender executes

Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All such notices and other communications shall, when transmitted by overnight delivery, or faxed, be effective when delivered for overnight (next-day) delivery, or transmitted in legible form by facsimile machine, respectively, or if mailed, upon the third Business Day after the date deposited into the mails or if delivered by hand, upon delivery; provided, that notices delivered to the Administrative Agent, an Issuing Bank or the Swingline Lender shall not be effective until actually received by such Person at its address specified in this Section 10.1.

(ii) Any agreement of the Administrative Agent, the Issuing Banks and the Lenders herein to receive certain notices by telephone or facsimile is solely for the convenience and at the request of the Borrower. The Administrative Agent, the Issuing Banks and the Lenders shall be entitled to rely on the authority of any Person purporting to be a Person authorized by the Borrower to give such notice and the Administrative Agent, the Issuing Banks and Lenders shall not have any liability to the Borrower or other Person on account of any action taken or not taken by the Administrative Agent, the Issuing Banks or the Lenders in reliance upon such telephonic or facsimile notice. The obligation of the Borrower to repay the Loans and all other Obligations hereunder shall not be affected in any way or to any extent by any failure of the Administrative Agent, the Issuing Banks and the Lenders to receive written confirmation of any telephonic or facsimile notice or the receipt by the Administrative Agent, the Issuing Banks and the Lenders of a confirmation which is at variance with the terms understood by the Administrative Agent, the Issuing Banks and the Lenders to be contained in any such telephonic or facsimile notice.

 

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(b) Electronic Communications.

(i) Notices and other communications to the Lenders and the Issuing Banks hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by Administrative Agent; provided that the foregoing shall not apply to notices to any Lender or any Issuing Bank pursuant to Article II unless such Lender, such Issuing Bank, as applicable, and Administrative Agent have agreed to receive notices under such Article II by electronic communication and have agreed to the procedures governing such communications. Administrative Agent or Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications.

(ii) Unless Administrative Agent otherwise prescribes, (A) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement); provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next Business Day for the recipient, and (B) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing Section 10.1(b)(ii)(A) of notification that such notice or communication is available and identifying the website address therefor

(iii) The Borrower agrees that the Administrative Agent may, but shall not be obligated to, make Communications (as defined below) available to the Issuing Banks and the other Lenders by posting the Communications on Debt Domain, Intralinks, Syndtrak, ClearPar or a substantially similar electronic system (each, an “Electronic System”).

(iv) Any Electronic System used by the Administrative Agent is provided “as is” and “as available.” The Agent Parties (as defined below) do not warrant the adequacy of such Electronic Systems and expressly disclaim liability for errors or omissions in the Communications. No warranty of any kind, express, implied or statutory, including, without limitation, any warranty of merchantability, fitness for a particular purpose, non-infringement of third-party rights or freedom from viruses or other code defects, is made by any Agent Party in connection with the Communications or any Electronic System. In no event shall the Administrative Agent or any of its Related Parties (collectively, the “Agent Parties”) have any liability to any Loan Party, any Lender, any Issuing Bank or any other Person or entity for damages of any kind, including, without limitation, direct or indirect, special, incidental or consequential damages, losses or expenses (whether in tort, contract or otherwise) arising out of any Loan Party’s or the Administrative Agent’s transmission of Communications through an Electronic System. “Communications” means, collectively, any notice, demand, communication, information, document or other material provided by or on behalf of any Loan Party pursuant to any Loan Document or the transactions contemplated therein which is distributed by the Administrative Agent, any Lender or any Issuing Bank by means of electronic communications pursuant to this Section 10.1, including through an Electronic System.

 

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Section 10.2 Waiver; Amendments.

(a) No failure or delay by the Administrative Agent, any Issuing Bank or any Lender in exercising any right or power hereunder or any other Loan Document, and no course of dealing between any Loan Party and the Administrative Agent, or any Lender, shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power or any abandonment or discontinuance of steps to enforce such right or power, preclude any other or further exercise thereof or the exercise of any other right or power hereunder or thereunder. The rights and remedies of the Administrative Agent, the Issuing Banks and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies provided by law. No waiver of any provision of this Agreement or any other Loan Document or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted by Section 10.2(b), and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or the issuance of a Letter of Credit shall not be construed as a waiver of any Default or Event of Default, regardless of whether the Administrative Agent, any Lender or any Issuing Bank may have had notice or knowledge of such Default or Event of Default at the time.

(b) Except as otherwise provided in this Agreement, including, without limitation, as provided in Section 2.17 with respect to the implementation of a Benchmark Replacement Rate or Benchmark Conforming Changes (as set forth therein), no amendment or waiver of any provision of this Agreement or the other Loan Documents, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Borrower, Holdings and the Required Lenders or the Borrower, Holdings and the Administrative Agent with the consent of the Required Lenders and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, that no amendment or waiver shall: (i) increase the Commitment of any Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby, (iii) postpone the date fixed for any payment of any principal of, or interest on, any Loan or LC Disbursement or interest thereon or any fees hereunder or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date for the termination or reduction of any Commitment, without the written consent of each Lender affected thereby, (iv) change Section 2.22(b) or (c) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender, (v) change any of the provisions of this Section 10.2 or the definition of “Required Lenders”, “Required Revolving Lenders” or any other provision hereof specifying the number or percentage of Lenders which are required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender; (vi) release any guarantor or limit the liability of any such guarantor under any guaranty agreement (other than the release of a Guarantor in connection with its designation as a Unrestricted Subsidiary pursuant to the terms of Section 5.14), without the written consent of each Lender; (vii) release all or substantially all collateral (if any) securing any of the Obligations or agree to subordinate any Lien in all or substantially all of the collateral securing the Obligations to any other creditor of Holdings, the Borrower or any Restricted Subsidiary, without the written consent of each Lender; (viii) prior to the Revolving Commitments Termination Date, unless also signed by Required Revolving Lenders, no such amendment or waiver shall, (A) waive any Default or Event of Default for purposes of Section 3.3, (B) amend, change, waive, discharge or terminate Sections 3.3 or 8.1 in a manner adverse to such Lenders or (C) amend, change, waive, discharge or terminate this Section 10.2(b)(viii); or (ix) change Section 2.9(b) in a manner that would alter the ratable reduction or termination of Commitments required thereby, without the written consent of each Lender; provided, further, that no such agreement shall

 

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amend, modify or otherwise affect the rights, duties or obligations of the Administrative Agent, the Swingline Lender or any Issuing Bank without the prior written consent of such Person. Notwithstanding anything contained herein to the contrary, this Agreement may be amended and restated without the consent of any Lender (but with the consent of the Borrower and the Administrative Agent) if, upon giving effect to such amendment and restatement, such Lender shall no longer be a party to this Agreement (as so amended and restated), the Commitments of such Lender shall have terminated (but such Lender shall continue to be entitled to the benefits of Sections 2.19, 2.20, 2.21 and 10.3), such Lender shall have no other commitment or other obligation hereunder and shall have been paid in full all principal, interest and other amounts owing to it or accrued for its account under this Agreement; provided, further, that (w) a Refinancing Facility Amendment shall be effective if signed by the Loan Parties, the Administrative Agent, each Person that agrees to provide a portion of the applicable Refinancing Facility and, if such Refinancing Facility is a Refinancing Revolving Facility, each Issuing Bank and the Swingline Lender, (x) this Agreement may be amended (or amended and restated) to change, modify or alter Section 2.22 or Article VIII or any other provision hereof relating to the pro rata sharing of payments among the Lenders to the extent necessary to implement any Refinancing Facility in accordance with Section 2.27 with the written consent of the Administrative Agent, the Borrower, the other Loan Parties, the Lenders providing such Refinancing Facility and, if such Refinancing Facility is a Refinancing Revolving Facility, each Issuing Bank and the Swingline Lender thereunder, (y) any Permitted Amendments allowing for extensions of the maturity date(s) of any Loans and/or Commitment shall be effective if signed by the Administrative Agent, the Loan Parties and those Lenders willing to extend the maturity date(s) of such Loans and/or Commitments hereunder (it being understood that each Lender with a Loan or Commitment being extended shall have the opportunity to participate in such extension on the same terms and conditions as each other Lender with the same Type of Loan or Commitment) and (z) this Agreement may be amended with the written consent of the Administrative Agent, the Additional Lenders, as applicable, and the Borrower (A) to add one or more Incremental Revolving Commitments or Incremental Term Loans to this Agreement, in each case subject to the limitations in Section 2.25, and to permit the extensions of credit and all related obligations and liabilities arising in connection therewith from time to time outstanding to share ratably (or on a basis subordinated to the existing facilities hereunder) in the benefits of this Agreement and the other Loan Documents with the obligations and liabilities from time to time outstanding in respect of the existing facilities hereunder (including, in the case of any Incremental Term Loan, customary mandatory prepayment provisions reasonably acceptable to the Administrative Agent if the Lenders providing such Incremental Term Loan so require) and (B) in connection with the foregoing, to permit, as deemed appropriate by the Administrative Agent and approved by the Required Lenders, the Lenders providing such additional credit facilities to obtain comparable tranche voting rights with respect to each such Incremental Revolving Commitment or Incremental Term Loan and to participate in any required vote or action required to be approved by the Required Lenders or by any other number, percentage or class of Lenders hereunder.

(c) Notwithstanding anything to the contrary herein, no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder, except that the Commitment of such Lender may not be increased or extended, and amounts payable to such Lender hereunder may not be permanently reduced, without the consent of such Lender (other than reductions in fees and interest in which such reduction does not disproportionately affect such Lender).

 

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Section 10.3 Expenses; Indemnification.

(a) The Borrower shall pay (i) all reasonable, out-of-pocket costs and expenses of the Administrative Agent, the Arrangers and their respective Affiliates, including the reasonable fees, charges and disbursements of counsel for the Administrative Agent, the Arrangers and their respective Affiliates, in connection with the syndication of the credit facilities provided for herein, the preparation and administration of the Loan Documents and any amendments, modifications or waivers thereof (whether or not the transactions contemplated in this Agreement or any other Loan Document shall be consummated), including the reasonable fees, charges and disbursements of counsel for the Administrative Agent, the Arrangers and their respective Affiliates, (ii) all reasonable out-of-pocket expenses incurred by any Issuing Bank in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) all out-of-pocket costs and expenses (but limited, in the case of legal fees and expenses, to the reasonable and documented fees, disbursements and other charges of one counsel to the Administrative Agent and the Lenders taken a whole, and, if necessary, of one local counsel in any relevant material jurisdiction and, if necessary, of one regulatory counsel in any material specialty and, in the case of an actual or perceived conflict of interest, one additional counsel to the affected indemnified persons taken as a whole) incurred by the Administrative Agent, the Arrangers, any Issuing Bank or any Lender in connection with the enforcement or protection of its rights in connection with this Agreement and the other Loan Documents, including its rights under this Section 10.3, or in connection with the Loans made or any Letters of Credit issued hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit.

(b) The Borrower shall indemnify the Administrative Agent (and any sub-agent thereof), the Arrangers, each Lender and each Issuing Bank, and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses (including the fees, charges and disbursements of any counsel for any Indemnitee), and shall indemnify and hold harmless each Indemnitee from all fees and time charges and disbursements for attorneys who may be employees of any Indemnitee, incurred by any Indemnitee or asserted against any Indemnitee by any third party or by the Borrower or any other Loan Party arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or thereunder or the consummation of the transactions contemplated hereby or thereby, (ii) any Loan or Letter of Credit or the use or proposed use of the proceeds therefrom (including any refusal by an Issuing Bank to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) the use by any Person of any information or materials obtained through Syndtrak or any other Internet Web Sites, (iv) any actual or alleged presence or Release of Hazardous Materials on or from any property owned or operated by Holdings or any of its Subsidiaries, or any Environmental Liability related in any way to Holdings or any of its Subsidiaries, or (v) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by the Borrower or any other Loan Party, and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or (y) result from a claim brought by the Borrower or any other Loan Party against an Indemnitee for breach in bad faith of such Indemnitee’s obligations hereunder or under any other Loan Document, in each case so long as the Borrower or such Loan Party has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction. This Section 10.3(b) shall not apply to Taxes other than any Taxes that represent losses, claims, damages, liabilities, etc. arising from a non-Tax claim.

 

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(c) From and after the occurrence of the Trigger Event, the Borrower shall pay, and hold the Administrative Agent, the Arrangers, each Issuing Bank and each of the Lenders harmless from and against, any and all present and future stamp, documentary, and other similar taxes with respect to this Agreement and any other Loan Documents, any collateral described therein, or any payments due thereunder, and save the Administrative Agent, the Arrangers, each Issuing Bank and each Lender harmless from and against any and all liabilities with respect to or resulting from any delay or omission to pay such taxes.

(d) To the extent that the Borrower fails to pay any amount required to be paid to the Administrative Agent, the Arrangers, any Issuing Bank or the Swingline Lender under Sections 10.3(a), (b) or (c) hereof, each Lender severally agrees to pay to the Administrative Agent, the Arrangers, such Issuing Bank or the Swingline Lender, as the case may be, such Lender’s Pro Rata Share (determined as of the time that the unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided, that the unreimbursed expense or indemnified payment, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent, the Arrangers, such Issuing Bank or the Swingline Lender in its capacity as such.

(e) To the extent permitted by applicable law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to actual or direct damages) arising out of, in connection with or as a result of, this Agreement or any agreement or instrument contemplated hereby, the transactions contemplated therein, any Loan or any Letter of Credit or the use of proceeds thereof.

(f) All amounts due under this Section 10.3 shall be payable promptly after written demand therefor.

Section 10.4 Successors and Assigns.

(a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Administrative Agent and each Lender, and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an assignee in accordance with the provisions of Section 10.4(b), (ii) by way of participation in accordance with the provisions of Section 10.4(d) or (iii) by way of pledge or assignment of a security interest subject to the restrictions of Section 10.4(f) (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in Section 10.4(d) and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

 

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(b) Any Lender may at any time assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitments, Loans, and other Revolving Credit Exposure at the time owing to it); provided that any such assignment shall be subject to the following conditions:

(i) Minimum Amounts.

(A) in the case of an assignment of the entire remaining amount of the assigning Lender’s Commitments, Loans and other Revolving Credit Exposure at the time owing to it or in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund, no minimum amount need be assigned; and

(B) in any case not described in Section 10.4(b)(i)(A), the aggregate amount of the Commitment (which for this purpose includes Loans and Revolving Credit Exposure outstanding thereunder) or, if the applicable Commitment is not then in effect, the principal outstanding balance of the Loans and Revolving Credit Exposure of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent or, if “Trade Date” is specified in the Assignment and Acceptance, as of the Trade Date) shall not be less than $5,000,000, unless each of the Administrative Agent and, so long as no Event of Default has occurred and is continuing, the Borrower otherwise consents.

(ii) Proportionate Amounts. Each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement with respect to the Loans, other Revolving Credit Exposure or the Commitments assigned.

(iii) Required Consents. The following consents (and no others) shall be required for any assignment:

(A) the prior written consent of the Borrower (such consent not to be unreasonably withheld or delayed) shall be required unless (x) an Event of Default has occurred and is continuing at the time of such assignment or (y) such assignment is to a Lender, an Affiliate of a Lender or an Approved Fund;

(B) the prior written consent of the Administrative Agent (such consent not to be unreasonably withheld or delayed) shall be required for assignments to a Person that is not a Lender with a Commitment, an Affiliate of a Lender or an Approved Fund;

(C) the prior written consent of each Issuing Bank (such consent not to be unreasonably withheld or delayed) shall be required for any assignment that increases the obligation of the assignee to participate in exposure under one or more Letters of Credit (whether or not then outstanding), and the prior written consent of the Swingline Lender (such consent not to be unreasonably withheld or delayed) shall be required for any assignment in respect of the Revolving Commitments; and

 

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(D) any consent required pursuant to Section 10.4(b)(i)(B).

(iv) Assignment and Acceptance. The parties to each assignment shall deliver to the Administrative Agent (A) a duly executed Assignment and Acceptance, (B) a processing and recordation fee of $3,500, (C) an Administrative Questionnaire unless the assignee is already a Lender and (D) the documents required under Section 2.21(e) if such assignee is a Foreign Lender.

(v) No Assignment to Certain Persons. No such assignment shall be made to (A) Holdings or any of Holdings’ Affiliates or Subsidiaries or (B) to any Defaulting Lender or any of its Subsidiaries, or any Person who, upon becoming a Lender hereunder, would constitute any of the foregoing persons described in this Section 10.4(b)(v)(B).

(vi) No Assignment to Natural Persons. No such assignment shall be made to a natural person.

Subject to acceptance and recording thereof by the Administrative Agent pursuant to Section 10.4(c), from and after the effective date specified in each Assignment and Acceptance, the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Sections 2.19, 2.20, 2.21 and 10.3 with respect to facts and circumstances occurring prior to the effective date of such assignment; provided that, except to the extent otherwise expressly agreed by the affected parties, no assignment by a Defaulting Lender will constitute a waiver or release of any claim of any party hereunder arising from such Lender’s having been a Defaulting Lender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not fully comply with this Section 10.4(b) shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 10.4(d). If the consent of the Borrower to an assignment is required hereunder (including a consent to an assignment which does not meet the minimum assignment thresholds specified above), the Borrower shall be deemed to have given its consent ten Business Days after the date notice thereof has actually been delivered by the assigning Lender (through the Administrative Agent) to the Borrower, unless such consent is expressly refused by the Borrower prior to such tenth Business Day.

(c) The Administrative Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at one of its offices in Atlanta, Georgia a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts (and stated interest) of the Loans and Revolving Credit Exposure owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). Information contained in the Register with respect to any Lender shall be available for inspection by such Lender at any reasonable time and from time to time upon reasonable prior notice; information contained in the Register shall also be available for inspection by the Borrower at any reasonable time and from time to time upon reasonable prior notice. In establishing and maintaining the Register, Administrative Agent shall serve as Borrower’s agent solely for tax purposes and solely with respect to the actions described in this Section 10.4(c), and the Borrower hereby agrees that, to the extent Truist Bank serves in such capacity, Truist Bank and its officers, directors, employees, agents, sub-agents and affiliates shall constitute “Indemnitees”.

 

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(d) Any Lender may at any time, without the consent of, or notice to, the Borrower, the Administrative Agent, the Swingline Lender or the Issuing Banks sell participations to any Person (other than a natural person, Holdings or any of Holdings’ Affiliates or Subsidiaries or a Defaulting Lender) (each, a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent, the Lenders, the Issuing Banks and the Swingline Lender shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement.

(e) Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver with respect to the following to the extent affecting such Participant: (i) increase the Commitment of any Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby, (iii) postpone the date fixed for any payment of any principal of, or interest on, any Loan or LC Disbursement or interest thereon or any fees hereunder or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date for the termination or reduction of any Commitment, without the written consent of each Lender affected thereby, (iv) change Section 2.22(b) or (c) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender, (v) change any of the provisions of this Section 10.4 or the definitions of “Required Lenders” or “Required Revolving Lenders” or any other provision hereof specifying the number or percentage of Lenders which are required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the consent of each Lender; (vi) release any Guarantor or limit the liability of any such Guarantor under the Guarantee Agreement or the Borrower Guarantee Agreement without the written consent of each Lender except to the extent such release is expressly provided under the terms of such agreement; or (vii) release all or substantially all collateral (if any) securing any of the Obligations. Subject to this Section 10.4, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.19, 2.20, and 2.21 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 10.4(b). To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.7 as though it were a Lender; provided such Participant agrees to be subject to Section 2.22 as though it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as an agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loans or other obligations under the Loan Documents (the “Participant Register”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any commitments, loans, letters of credit or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury

 

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Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.

(f) A Participant shall not be entitled to receive any greater payment under Section 2.19 and Section 2.21 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower’s prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.21 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 2.21(e) as though it were a Lender.

(g) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including without limitation any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

Section 10.5 Governing Law; Jurisdiction; Consent to Service of Process.

(a) This Agreement and the other Loan Documents shall be construed in accordance with and be governed by the law (without giving effect to the conflict of law principles thereof) of the State of New York.

(b) Each of Holdings and the Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the United States District Court for the Southern District of New York, and of the Supreme Court of the State of New York sitting in New York County, Borough of Manhattan and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any other Loan Document or the transactions contemplated hereby or thereby, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such District Court or New York state court or, to the extent permitted by applicable law, such appellate court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or any other Loan Document shall affect any right that the Administrative Agent, any Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against the Borrower or its properties in the courts of any jurisdiction.

(c) Each of Holdings and the Borrower irrevocably and unconditionally waives any objection which it may now or hereafter have to the laying of venue of any such suit, action or proceeding described in Section 10.5(b) and brought in any court referred to in Section 10.5(b). Each of the parties hereto irrevocably waives, to the fullest extent permitted by applicable law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

 

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(d) Each party to this Agreement irrevocably consents to the service of process in the manner provided for notices in Section 10.1. Nothing in this Agreement or in any other Loan Document will affect the right of any party hereto to serve process in any other manner permitted by law.

Section 10.6 WAIVER OF JURY TRIAL. EACH PARTY HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.6.

Section 10.7 Right of Setoff. In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, each Lender and each Issuing Bank shall have the right, at any time or from time to time upon the occurrence and during the continuance of an Event of Default, without prior notice to the Borrower, any such notice being expressly waived by the Borrower to the extent permitted by applicable law, to set off and apply against all deposits (general or special, time or demand, provisional or final) of the Borrower at any time held or other obligations at any time owing by such Lender and such Issuing Bank to or for the credit or the account of the Borrower against any and all Obligations held by such Lender or such Issuing Bank, as the case may be, irrespective of whether such Lender or such Issuing Bank shall have made demand hereunder and although such Obligations may be unmatured. Each Lender and the Issuing Bank agree promptly to notify the Administrative Agent and the Borrower after any such set-off and any application made by such Lender and such Issuing Bank, as the case may be; provided, that the failure to give such notice shall not affect the validity of such set-off and application.

Section 10.8 Counterparts; Integration. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by telecopy), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. This Agreement, the other Loan Documents, and any separate letter agreement(s) relating to any fees payable to the Administrative Agent constitute the entire agreement among the parties hereto and thereto regarding the subject matters hereof and thereof and supersede all prior agreements and understandings, oral or written, regarding such subject matters.

Section 10.9 Survival. All covenants, agreements, representations and warranties made by any Loan Party herein, in the Loan Documents and in the certificates or other instruments delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent, any Issuing Bank or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated. The

 

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provisions of Sections 2.19, 2.20, 2.21 and 10.3 and Article IX shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any provision hereof. All representations and warranties made herein, in the Loan Documents, in the certificates, reports, notices, and other documents delivered pursuant to this Agreement shall survive the execution and delivery of this Agreement and the other Loan Documents, and the making of the Loans and the issuance of the Letters of Credit.

Section 10.10 Severability. Any provision of this Agreement or any other Loan Document held to be illegal, invalid or unenforceable in any jurisdiction, shall, as to such jurisdiction, be ineffective to the extent of such illegality, invalidity or unenforceability without affecting the legality, validity or enforceability of the remaining provisions hereof or thereof; and the illegality, invalidity or unenforceability of a particular provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

Section 10.11 Confidentiality. Each of the Administrative Agent, each Issuing Bank and each Lender agrees to take normal and reasonable precautions to maintain the confidentiality of any information designated in writing as confidential and provided to it by Holdings or any Subsidiary, except that such information may be disclosed (a) to any Related Party of the Administrative Agent, any such Issuing Bank or any such Lender, including without limitation accountants, legal counsel and other advisors, (b) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (c) to the extent requested by any regulatory agency or authority, (d) to the extent that such information becomes publicly available other than as a result of a breach of this Section 10.11, or which becomes available to the Administrative Agent, any Issuing Bank, any Lender or any Related Party of any of the foregoing on a nonconfidential basis from a source other than the Borrower, (e) in connection with the exercise of any remedy hereunder or under any other Loan Document or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to provisions substantially similar to this Section 10.11, to any actual or prospective assignee or Participant and (g) with the consent of the Borrower. Any Person required to maintain the confidentiality of any information as provided for in this Section 10.11 shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such information as such Person would accord its own confidential information.

Section 10.12 Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which may be treated as interest on such Loan under applicable law (collectively, the “Charges”), shall exceed the maximum lawful rate of interest (the “Maximum Rate”) which may be contracted for, charged, taken, received or reserved by a Lender holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section 10.12 shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Rate to the date of repayment, shall have been received by such Lender.

Section 10.13 Patriot Act. The Administrative Agent and each Lender hereby notifies the Loan Parties that, pursuant to the requirements of the Patriot Act, it is required to obtain, verify and record information that identifies each Loan Party, which information includes the name and address of such Loan Party and other information that will allow such Lender or the Administrative Agent, as applicable, to identify such Loan Party in accordance with the Patriot Act.

 

112


Section 10.14 No Advisory or Fiduciary Responsibility. In connection with all aspects of each transaction contemplated hereby (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document), each of Holdings and the Borrower acknowledges and agrees and acknowledges its Subsidiaries’ understanding that: (i) (A) the services regarding this Agreement provided by the Administrative Agent and/or the Lenders are arm’s-length commercial transactions between the Borrower and each other Loan Party, on the one hand, and the Administrative Agent and the Lenders, on the other hand, (B) each of the Borrower and the other Loan Parties have consulted their own legal, accounting, regulatory and tax advisors to the extent they have deemed appropriate, and (C) the Borrower and each other Loan Party is capable of evaluating and understanding, and understands and accepts, the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents; (ii) (A) each of the Administrative Agent and the Lenders is and has been acting solely as a principal and, except as expressly agreed in writing by the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary, for the Borrower, any other Loan Party, or any of their respective Affiliates, or any other Person and (B) neither the Administrative Agent nor any Lender has any obligation to the Borrower, any other Loan Party or any of their Affiliates with respect to the transaction contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents; and (iii) the Administrative Agent, the Lenders and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Borrower, the other Loan Parties and their respective Affiliates, and each of the Administrative Agent and Lenders has no obligation to disclose any of such interests to the Borrower, any other Loan Party of any of their respective Affiliates. To the fullest extent permitted by law, each of the Borrower and the other Loan Parties hereby waive and release any claims that it may have against the Administrative Agent and each Lender with respect to any breach or alleged breach of agency or fiduciary duty in connection with any aspect of any transaction contemplated hereby.

Section 10.15 Acknowledgement and Consent to Bail-In of Affected Financial Institutions. Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any Affected Financial Institution arising under any Loan Document, to the extent such liability is unsecured, may be subject to the write-down and conversion powers of the applicable Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:

(a) the application of any Write-Down and Conversion Powers by the applicable Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an Affected Financial Institution; and

(b) the effects of any Bail-in Action on any such liability, including, if applicable (i) a reduction in full or in part or cancellation of any such liability, (ii) a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such Affected Financial Institution, its parent undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document or (iii) the variation of the terms of such liability in connection with the exercise of the write-down and conversion powers of the applicable Resolution Authority.

 

113


Section 10.16 Certain ERISA Matters.

(a) Each Lender (x) represents and warrants, as of the date such Person became a Lender party hereto, to, and (y) covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto, for the benefit of, the Administrative Agent and not, for the avoidance of doubt, to or for the benefit of the Borrower or any other Loan Party, that at least one of the following is and will be true:

(i) such Lender is not using “plan assets” (within the meaning of Section 3(42) of ERISA or otherwise) of one or more Benefit Plans with respect to such Lender’s entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments or this Agreement;

(ii) the transaction exemption set forth in one or more PTEs, such as PTE 84-14 (a class exemption for certain transactions determined by independent qualified professional asset managers), PTE 95-60 (a class exemption for certain transactions involving insurance company general accounts), PTE 90-1 (a class exemption for certain transactions involving insurance company pooled separate accounts), PTE 91-38 (a class exemption for certain transactions involving bank collective investment funds) or PTE 96-23 (a class exemption for certain transactions determined by in-house asset managers), is applicable with respect to such Lender’s entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement;

(iii) (A) such Lender is an investment fund managed by a “Qualified Professional Asset Manager” (within the meaning of Part VI of PTE 84-14), (B) such Qualified Professional Asset Manager made the investment decision on behalf of such Lender to enter into, participate in, administer and perform the Loans, the Letters of Credit, the Commitments and this Agreement, (C) the entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement satisfies the requirements of sub-sections (b) through (g) of Part I of PTE 84-14 and (D) to the best knowledge of such Lender, the requirements of subsection (a) of Part I of PTE 84-14 are satisfied with respect to such Lender’s entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement; or

(iv) such other representation, warranty and covenant as may be agreed in writing between the Administrative Agent, in its sole discretion, and such Lender.

(b) In addition, unless either (1) sub-clause (i) in the immediately preceding clause (a) is true with respect to a Lender or (2) a Lender has provided another representation, warranty and covenant in accordance with sub-clause (iv) in the immediately preceding clause (a), such Lender further (x) represents and warrants, as of the date such Person became a Lender party hereto, to, and (y) covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto, for the benefit of, the Administrative Agent and not, for the avoidance of doubt, to or for the benefit of the Borrower or any other Loan Party, that the Administrative Agent is not a fiduciary with respect to the assets of such Lender involved in such Lender’s entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement (including in connection with the reservation or exercise of any rights by the Administrative Agent under this Agreement, any Loan Document or any documents related hereto or thereto).

 

114


Section 10.17 Acknowledgement Regarding Any Support QFCs.

To the extent that the Loan Documents provide support, through a guarantee or otherwise, for Hedging Obligations or any other agreement or instrument that is a QFC (such support, “QFC Credit Support” and each such QFC a “Supported QFC”), the parties acknowledge and agree as follows with respect to the resolution power of the Federal Deposit Insurance Corporation under the Federal Deposit Insurance Act and Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (together with the regulations promulgated thereunder, the “U.S. Special Resolution Regimes”) in respect of such Supported QFC and QFC Credit Support (with the provisions below applicable notwithstanding that the Loan Documents and any Supported QFC may in fact be stated to be governed by the laws of the State of New York and/or of the United States or any other state of the United States)

(a) In the event a Covered Entity that is party to a Supported QFC (each, a “Covered Party”) becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer of such Supported QFC and the benefit of such QFC Credit Support (and any interest and obligation in or under such Supported QFC and such QFC Credit Support, and any rights in property securing such Supported QFC or such QFC Credit Support) from such Covered Party will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if the Supported QFC and such QFC Credit Support (and any such interest, obligation and rights in property) were governed by the laws of the United States or a state of the United States. In the event a Covered Party or a BHC Act Affiliate of a Covered Party becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under the Loan Documents that might otherwise apply to such Supported QFC or any QFC Credit Support that may be exercised against such Covered Party are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if the Supported QFC and the Loan Documents were governed by the laws of the United States or a state of the United States. Without limitation of the foregoing, it is understood and agreed that rights and remedies of the parties with respect to a Defaulting Lender shall in no event affect the rights of any Covered Party with respect to a Supported QFC or any QFC Credit Support.

(b) As used in this Section 10.18, the following terms have the following meanings:

BHC Act Affiliate” of a party means an “affiliate” (as such term is defined under, and interpreted in accordance with, 12 U.S.C. 1841(k)) of such party.

Covered Entity” shall mean any of the following:

(i) a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. §252.82(b);

(ii) a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. §47.3(b); or

(iii) a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. §382.2(b).

Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§252.81, 47.2 or 382.1, as applicable.

QFC” has the meaning assigned to the term “qualified financial contract” in, and shall be interpreted in accordance with, 12 U.S.C. 5390(c)(8)(D).

(remainder of page left intentionally blank)

 

 

115


IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed under seal in the case of the Borrower and Holdings by their respective authorized officers as of the day and year first above written.

 

AARON’S, LLC
By  

/s/ C. Kelly Wall

  Name: C. Kelly Wall
  Title: Authorized Officer
[SEAL]

AARON’S, LLC

CREDIT AGREEMENT


AARON’S SPINCO, INC.
By  

/s/ C. Kelly Wall

  Name: C. Kelly Wall
  Title: Authorized Officer
[SEAL]

AARON’S, LLC

CREDIT AGREEMENT


TRUIST BANK,

as Administrative Agent, as an Issuing Bank, as

Swingline Lender and as a Lender
By  

/s/ Tesha Winslow

Name: Tesha Winslow
Title: Director

AARON’S, LLC

CREDIT AGREEMENT


BANK OF AMERICA, N.A.,
as a Lender and an Issuing Bank
By  

/s/ Ryan Maples

Name: Ryan Maples
Title: Sr. Vice President

AARON’S, LLC

CREDIT AGREEMENT


JPMORGAN CHASE BANK, N.A.,
as a Lender and an Issuing Bank
By  

/s/ Alexander Vardaman

Name: Alexander Vardaman
Title: Authorized Officer

AARON’S, LLC

CREDIT AGREEMENT


BBVA USA,
as a Lender
By  

/s/ Heather Allen

Name: Heather Allen
Title: Senior Vice President

AARON’S, LLC

CREDIT AGREEMENT


CITIZENS BANK, N.A.,

as a Lender

By  

/s/ Douglas M Kennedy

Name: Douglas M Kennedy
Title: SVP

AARON’S, LLC

CREDIT AGREEMENT


FIFTH THIRD BANK, NATIONAL ASSOCIATION,

as a Lender

By  

/s/ Mary Ramsey

Name: Mary Ramsey
Title: Senior Vice President

AARON’S, LLC

CREDIT AGREEMENT


REGIONS BANK.,
as a Lender
By  

/s/ Cheryl L. Shelhart

Name: Cheryl L. Shelhart
Title: Director

AARON’S, LLC

CREDIT AGREEMENT


SYNOVUS BANK.,

as a Lender

By  

/s/ Chandra Cockrell

Name: Chandra Cockrell
Title: Corporate Banker

AARON’S, LLC

CREDIT AGREEMENT


FIRST HORIZON BANK.,
as a Lender
By  

/s/ Terence J Dolch

Name: Terence J Dolch
Title: Senior Vice President

AARON’S, LLC

CREDIT AGREEMENT


SCHEDULE 1.1(a)

APPLICABLE MARGIN AND APPLICABLE PERCENTAGE

 

Pricing

Level

  

Total Net Debt to

EBITDA Ratio

  

Applicable Margin

for Eurodollar Loans

  

Applicable Margin
for Base Rate Loans

  

Applicable
Percentage for
Commitment Fee

I    Less than 0.75:1.00    1.50% per annum    0.50% per annum    0.20% per annum
II   

Less than 1.25:1.00 but

greater than or equal to

0.75:1.00

   1.75% per annum    0.75% per annum    0.25% per annum
III   

Less than 1.75:1.00 but

greater than or equal to

1.25:1.00

   2.00% per annum    1.00% per annum    0.30% per annum
IV   

Less than 2.25:1.00 but

greater than or equal to

1.75:1.00

   2.25% per annum    1.25% per annum    0.35% per annum
V   

Greater than or equal to

2.25:1.00

   2.50% per annum    1.50% per annum    0.35% per annum

Schedule 1.1(a)


EXHIBIT A

FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT

[Date to be supplied]

Reference is made to the Credit Agreement dated as of November 9, 2020 (as amended and in effect on the date hereof, the “Credit Agreement”), among Aaron’s, LLC, a Georgia limited liability company (the “Borrower”), Aaron’s Spinco, Inc., a Georgia corporation (“Holdings”), the lenders from time to time party thereto (the “Lenders”) and Truist Bank, as Administrative Agent for the Lenders, an Issuing Bank and Swingline Lender. Terms defined in the Credit Agreement are used herein with the same meanings.

The [name of assignor] (the “Assignor”) hereby sells and assigns, without recourse, to [name of assignee] (the “Assignee”), and the Assignee hereby purchases and assumes, without recourse, from the Assignor, effective as of the Assignment Date set forth below, the interests set forth below (the “Assigned Interest”) in the Assignor’s rights and obligations under the Credit Agreement, including, without limitation, the interests set forth below in the Commitments of the Assignor on the Assignment Date and Loans owing to the Assignor which are outstanding on the Assignment Date, together with, in the case of any assignment of Revolving Commitments, the participations in the LC Exposure and the Swingline Exposure of the Assignor on the Assignment Date, but excluding accrued interest and fees to and excluding the Assignment Date. The Assignee hereby acknowledges receipt of a copy of the Credit Agreement.

From and after the Assignment Date:

(i) the Assignee shall be a party to and be bound by the provisions of the Credit Agreement and, to the extent of the Assigned Interest, have the rights and obligations of a Lender thereunder; and

(ii) the Assignor shall, to the extent of the Assigned Interest, relinquish its rights and be released from its obligations under the Credit Agreement.

This Assignment and Acceptance is being delivered to the Administrative Agent together with (i) if the Assignee is a Foreign Lender, any documentation required to be delivered by the Assignee pursuant to Section 2.21(e) of the Credit Agreement, duly completed and executed by the Assignee, and (ii) if the Assignee is not already a Lender under the Credit Agreement, an Administrative Questionnaire in the form supplied by the Administrative Agent, duly completed by the Assignee. The Assignee shall pay the fee payable to the Administrative Agent pursuant to Section 10.4(b)(iv) of the Credit Agreement.

The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Acceptance and to consummate the transactions contemplated hereby, and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of the Borrower, Holdings, any of their respective Subsidiaries or Affiliates or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by the Borrower, Holdings, any of their respective Subsidiaries or Affiliates or any other Person of any of their respective obligations under any Loan Document.


The Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Acceptance and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it meets all requirements under Section 10.4(b)(iii), (v) and (vi) of the Credit Agreement for eligibility as an assignee (subject to receipt of such consents as may be required under the Credit Agreement), (iii) from and after the Effective Date (defined below), it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 5.1 thereof, as applicable, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance and to purchase the Assigned Interest on the basis of which it has made such analysis and decision independently and without reliance on the Administrative Agent or any other Lender, and (v) if it is a Foreign Lender, attached to the Assignment and Acceptance is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by the Assignee; and (b) agrees that (i) it will, independently and without reliance on the Administrative Agent, the Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.

From and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor for amounts which have accrued to but excluding the Effective Date and to the Assignee for amounts which have accrued from and after the Effective Date, unless otherwise agreed in writing by the Administrative Agent.

This Assignment and Acceptance shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Acceptance may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Acceptance by telecopy shall be effective as delivery of a manually executed counterpart of this Assignment and Acceptance. This Assignment and Acceptance shall be governed by and construed in accordance with the laws of the State of New York.

 

Assignment Date:                                                                              

Legal Name of Assignor:                                                                  

Legal Name of Assignee:                                                                  

Assignee’s Address for Notices:

                                                                                                             

                                                                                                             

                                                                                                             

 


Effective Date of

Assignment: (“Effective

Date”):

 

Assignor[s]

   Assignee[s]      Aggregate
Amount of
Revolving
Commitments
for all Lenders
     Amount of
Revolving
Commitments
Assigned
     Percentage
Assigned of
Revolving
Commitments
    Aggregate
Amount of
Term Loan
[Commitments]
for all Lenders
     Amount of
Term Loan
[Commitments]
Assigned
     Percentage
Assigned of
Term Loan
[Commitments]
    CUSIP
Number
 
      $ ____________      $ _________        _____   $ ____________      $ _________        _____  
      $ ____________      $ _________        _____   $ ____________      $ _________        _____  
      $ ____________      $ _________        _____   $ ____________      $ _________        _____  

The terms set forth above are hereby agreed to:

 

[Name of Assignor], as Assignor
By  

                     

Name:
Title:
[Name of Assignor], as Assignor
By  

 

Name:
Title:


The undersigned hereby consents to the within assignment:

 

[Aaron’s, LLC
By  

                     

Name:
Title:

Truist Bank,

as Administrative Agent

By  

 

Name:
Title:

Truist Bank,

as an Issuing Bank

By  

 

Name:
Title:

JPMorgan Chase Bank, N.A.,

as an Issuing Bank

By  

 

Name:
Title:

Bank of America, N.A.,

as an Issuing Bank

By  

 

Name:
Title:


Truist Bank,

as Swingline Lender

By  

                     

Name:
Title:]1

 

1 

Consents to be included to the extent required by Section 10.4(b) of the Credit Agreement.


EXHIBIT B

FORM OF GUARANTEE AGREEMENT

THIS GUARANTEE AGREEMENT (this “Agreement”), dated as of November 9, 2020, is by and among AARON’S, LLC, a Georgia limited liability company (the “Borrower”), AARON’S SPINCO, INC., a Georgia corporation (“Holdings”), each of the Subsidiaries of the Borrower identified on the signature pages hereto (together with Holdings, each, individually, a “Guarantor” and collectively, the “Guarantors”) and TRUIST BANK, a North Carolina banking corporation, as administrative agent (the “Administrative Agent”) for the several banks and other financial institutions (the “Lenders”) from time to time party to the Credit Agreement, dated as of the date hereof, by and among the Borrower, Holdings, the Lenders, the Issuing Banks, and Truist Bank, as Administrative Agent and as Swingline Lender (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”; capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement).

W I T N E S S E T H:

WHEREAS, pursuant to the Credit Agreement, the Lenders have agreed to establish a revolving credit facility in favor of the Borrower;

WHEREAS, (a) Holdings is the direct parent of the Borrower and (b) each of the other Guarantors is a direct or indirect Subsidiary of the Borrower and, in each of the cases of clause (a) and (b) above, will derive substantial benefit from the making of Loans by the Lenders and the issuance of Letters of Credit by the Issuing Banks; and

WHEREAS, it is a condition precedent to the obligations of the Administrative Agent, each Issuing Bank the Swingline Lender and the Lenders under the Credit Agreement that each Guarantor execute and deliver to the Administrative Agent a Guarantee Agreement in the form hereof, and each Guarantor wishes to fulfill said condition precedent;

NOW, THEREFORE, in order to induce Lenders to extend the Loans and each Issuing Bank to issue Letters of Credit and to make the financial accommodations as provided for in the Credit Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

Section 1. Guarantee.

Each Guarantor unconditionally guarantees, jointly with the other Guarantors and severally, as a primary obligor and not merely as a surety, (a) the due and punctual payment of all Obligations, including without limitation, (i) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by the Borrower under the Credit Agreement in respect of any Letter of Credit, when and as due, including payments in respect of reimbursement or disbursements, interest thereon and obligations to provide cash collateral, and (iii) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the Loan Parties to the


Administrative Agent, the Issuing Banks and the Lenders under the Credit Agreement and the other Loan Documents, (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of the Loan Parties under or pursuant to the Credit Agreement and the other Loan Documents, (c) the due and punctual payment and performance of all Hedging Obligations between any Loan Party and any Lender or Affiliate of any Lender, and (d) all Treasury Management Obligations between any Loan Party and any Lender or Affiliate of any Lender, together with all renewals, extensions, modifications or refinancings of any of the foregoing (all the monetary and other obligations referred to in the preceding Sections 1(a) through 1(d) being collectively called the “Guaranteed Obligations”), provided that Guaranteed Obligations shall exclude any Excluded Swap Obligations. Each Guarantor further agrees that the Guaranteed Obligations may be extended or renewed, in whole or in part, without notice to or further assent from such Guarantor, and that such Guarantor will remain bound upon its guarantee notwithstanding any extension or renewal of any Guaranteed Obligations.

Section 2. Obligations Not Waived.

To the fullest extent permitted by applicable law, each Guarantor waives presentment or protest to, demand of or payment from the other Loan Parties of any of the Guaranteed Obligations, and also waives notice of acceptance of its guarantee and notice of protest for nonpayment. To the fullest extent permitted by applicable law, the obligations of each Guarantor hereunder shall not be affected by (a) the failure of the Administrative Agent, any Issuing Bank or any Lender to assert any claim or demand or to enforce or exercise any right or remedy against the Borrower or any other Guarantor under the provisions of the Credit Agreement, any other Loan Document, any agreement relating to Hedging Obligations or Treasury Management Obligations or otherwise, (b) any rescission, waiver, amendment or modification of, or any release from any of the terms or provisions of, this Agreement, any other Loan Document, any agreement relating to Hedging Obligations or Treasury Management Obligations, any guarantee or any other agreement, including with respect to any other Guarantor under this Agreement or (c) the failure to perfect any security interest in, or the release of, any of the security held by or on behalf of the Administrative Agent, any Issuing Bank or any Lender.

Section 3. Guarantee of Payment.

Each Guarantor further agrees that its guarantee hereunder constitutes a guarantee of payment when due and not of collection, and waives any right to require that any resort be had by the Administrative Agent, any Issuing Bank or any Lender to any of the security held for payment of the Guaranteed Obligations or to any balance of any deposit account or credit on the books of the Administrative Agent, any Issuing Bank or any Lender in favor of the Borrower or any other Person.

Section 4. No Discharge or Diminishment of Guarantee.

The obligations of each Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason (other than the indefeasible satisfaction in full of the Guaranteed Obligations and the termination of all of the Commitments under the Credit Agreement or the termination of its guarantee hereunder to the extent provided in Section 12 below), including any claim of waiver, release, surrender, alteration or compromise of any of the Guaranteed Obligations, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Guaranteed Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Guarantor hereunder shall not be discharged or impaired or otherwise affected by the failure of the Administrative Agent, any Issuing Bank or any Lender to assert any claim or demand or to enforce any remedy under the Credit Agreement, any other Loan Document, any agreement relating to Hedging Obligations or Treasury Management Obligations or any other agreement, by any waiver or modification of any provision of any thereof, by any default,


failure or delay, willful or otherwise, in the performance of the Guaranteed Obligations, or by any other act or omission that may or might in any manner or to the extent vary the risk of any Guarantor or that would otherwise operate as a discharge of each Guarantor as a matter of law or equity (other than the indefeasible satisfaction in full of the Guaranteed Obligations and the termination of all of the Commitments under the Credit Agreement or the termination of its guarantee hereunder to the extent provided in Section 12 below).

Section 5. Defenses of Borrower Waived.

To the fullest extent permitted by applicable law, each Guarantor waives any defense based on or arising out of any defense of any Loan Party or the unenforceability of the Guaranteed Obligations or any part thereof from any cause, or the cessation from any cause of the liability of any Loan Party, other than the final and indefeasible satisfaction in full of the Guaranteed Obligations and the termination of all of the Commitments under the Credit Agreement or the termination of its guarantee hereunder to the extent provided in Section 12 below. The Administrative Agent, the Issuing Banks and the Lenders may, at their election, foreclose on any security held by one or more of them by one or more judicial or nonjudicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the Guaranteed Obligations, make any other accommodation with any other Loan Party or any other guarantor, without affecting or impairing in any way the liability of any Guarantor hereunder except to the extent the Guaranteed Obligations have been fully, finally and indefeasibly satisfied in full and all of the Commitments under the Credit Agreement have been terminated or the termination of its guarantee hereunder to the extent provided in Section 12 below. Pursuant to applicable law, each Guarantor waives any defense arising out of any such election even though such election operates, pursuant to applicable law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of such Guarantor against the Borrower or any other Guarantor or guarantor, as the case may be, or any security.

Section 6. Agreement to Pay; Subordination.

In furtherance of the foregoing and not in limitation of any other right that the Administrative Agent, any Issuing Bank or any Lender has at law or in equity against any Guarantor by virtue hereof, upon the failure of the Borrower or any other Loan Party to pay any Guaranteed Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, each Guarantor hereby promises to and will forthwith pay, or cause to be paid, to the Administrative Agent for the benefit of the Lenders in cash the amount of such unpaid Guaranteed Obligation. Upon payment by any Guarantor of any sums to the Administrative Agent, all rights of such Guarantor against any Loan Party arising as a result thereof by way of right of subrogation, contribution, reimbursement, indemnity or otherwise shall in all respects be subordinate and junior in right of payment to the prior indefeasible payment in full in cash of all the Obligations. If any amount shall erroneously be paid to any Guarantor on account of such subrogation, contribution, reimbursement, indemnity or similar right, such amount shall be held in trust for the benefit of the Administrative Agent, the Issuing Banks and the Lenders and shall forthwith be paid to the Administrative Agent to be credited against the payment of the Guaranteed Obligations, whether matured or unmatured, in accordance with the terms of the Loan Documents.

Section 7. Information.

Each Guarantor assumes all responsibility for being and keeping itself informed of other Loan Parties’ financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations and the nature, scope and extent of the risks that such Guarantor assumes and incurs hereunder, and agrees that none of the Administrative Agent, the Issuing Banks or the Lenders will have any duty to advise any of the Guarantors of information known to it or any of them regarding such circumstances or risks.


Section 8. Indemnity and Subrogation.

In addition to all such rights of indemnity and subrogation as the Guarantors may have under applicable law (but subject to Section 6), the Borrower agrees that in the event a payment in respect of any Guaranteed Obligations shall be made by any Guarantor under this Agreement, the Borrower shall indemnify such Guarantor for the full amount of such payment and such Guarantor shall be subrogated to the rights of the person to whom such payment shall have been made to the extent of such payment.

Section 9. Contribution and Subrogation.

Each Guarantor (a “Contributing Guarantor”) agrees (subject to Section 6) that, in the event a payment shall be made by any other Guarantor under this Agreement in respect of any Guaranteed Obligations and such other Guarantor (the “Claiming Guarantor”) shall not have been fully indemnified by the Borrower as provided in Section 8, the Contributing Guarantor shall indemnify the Claiming Guarantor in an amount equal to the amount of such payment multiplied by a fraction of which the numerator shall be the net worth of the Contributing Guarantor on the date hereof and the denominator shall be the aggregate net worth of all the Guarantors on the date hereof (or, in the case of any Guarantor becoming a party hereto pursuant to Section 21, the date of the Supplement hereto executed and delivered by such Guarantor). Any Contributing Guarantor making any payment to a Claiming Guarantor pursuant to this Section 9 shall be subrogated to the rights of such Claiming Guarantor under Section 8 to the extent of such payment; provided that no Contributing Guarantor shall be obligated to indemnify any Claiming Guarantor hereunder to the extent such Guaranteed Obligations constitute Excluded Swap Obligations of such Contributing Guarantor

Section 10. Subordination.

Notwithstanding any provision of this Agreement to the contrary, all rights of the Guarantors under Section 8 and Section 9 and all other rights of indemnity, contribution or subrogation under applicable law or otherwise shall be fully subordinated to the indefeasible payment in full in cash of the Guaranteed Obligations. No failure on the part of the Borrower or any Guarantor to make the payments required under applicable law or otherwise shall in any respect limit the obligations and liabilities of any Guarantor with respect to its obligations hereunder, and each Guarantor shall remain liable for the full amount of the obligations of such Guarantor hereunder.

Section 11. Representations and Warranties.

Holdings represents and warrants as to itself that all representations and warranties relating to it contained in the Credit Agreement are true and correct. Each other Guarantor represents and warrants as to itself that all representations and warranties relating to it (as a Restricted Subsidiary of the Borrower) contained in the Credit Agreement are true and correct.

Section 12. Termination.

The guarantees made hereunder (a) shall terminate when all the Guaranteed Obligations (other than Guaranteed Obligations consisting of (i) unliquidated Hedging Obligations owed by any Loan Party to any Lender or Affiliate of any Lender that are not then due and payable at the time of such termination or as a result thereof, and (ii) ongoing Treasury Management Obligations between any Loan Party and any Lender or Affiliate of any Lender that are not then due and payable at the time of such termination or


as a result thereof) have been satisfied in full and all of the Commitments under the Credit Agreement have been terminated and (b) shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any such Guaranteed Obligation is rescinded or must otherwise be restored by any Lender or any Issuing Bank or any Guarantor upon the bankruptcy or reorganization of the Borrower, any Guarantor or otherwise. In connection with the foregoing, the Administrative Agent shall execute and deliver to such Guarantor or such Guarantor’s designee, at such Guarantor’s expense, any documents or instruments, in form reasonably satisfactory to the Administrative Agent, which such Guarantor shall reasonably request from time to time to evidence such termination and release.

Section 13. Binding Effect; Several Agreement; Assignments.

Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants, promises and agreements by or on behalf of the Loan Parties that are contained in this Agreement shall bind and inure to the benefit of each party hereto and their respective successors and assigns. This Agreement shall become effective as to any Loan Party when a counterpart hereof executed on behalf of such Loan Party shall have been delivered to the Administrative Agent, and a counterpart hereof shall have been executed on behalf of the Administrative Agent, and thereafter shall be binding upon such Loan Party and the Administrative Agent and their respective successors and assigns, and shall inure to the benefit of such Loan Party, the Administrative Agent, the Issuing Banks and the Lenders, and their respective successors and assigns, except that no Loan Party shall have the right to assign its rights or obligations hereunder or any interest herein (and any such attempted assignment shall be void). If (a) all of the Capital Stock of a Guarantor (other than Holdings) is sold, transferred or otherwise disposed of pursuant to a transaction permitted by the Credit Agreement or (b) a Guarantor (other than Holdings) ceases to be a Restricted Subsidiary as a result of a transaction permitted by the Credit Agreement, then such Guarantor shall be released from its obligations under this Agreement without further action. This Agreement shall be construed as a separate agreement with respect to each Loan Party and may be amended, modified, supplemented, waived or released with respect to any Loan Party without the approval of any other Loan Party party hereto and without affecting the obligations of any other Guarantor hereunder.

Section 14. Waivers; Amendment.

No failure or delay of the Administrative Agent of any kind in exercising any power, right or remedy hereunder and no course of dealing between any Guuarantor on the one hand and the Administrative Agent or any holder of any Guaranteed Obligation on the other hand shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or remedy hereunder, under any other Loan Document, under any agreement relating to Hedging Obligations or Treasury Management Obligations or any abandonment or discontinuance of steps to enforce such a power, right or remedy, preclude any other or further exercise thereof or the exercise of any other power, right or remedy. The rights and remedies of the Administrative Agent hereunder and of the Lenders and the Issuing Banks under the other Loan Documents and under any agreement relating to Hedging Obligations or Treasury Management Obligations are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by any Guarantor therefrom shall in any event be effective unless the same shall be permitted by Section 14(b), and then such waiver and consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on any Guarantor in any case shall entitle such Guarantor to any other or further notice in similar or other circumstances.

Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to a written agreement entered into between each affected Loan Party party hereto with respect to which such waiver, amendment or modification relates and the Administrative Agent, with the prior written consent of the Required Lenders (except as otherwise provided in the Credit Agreement).


Section 15. Notices.

All communications and notices hereunder shall be in writing and given as provided in Section 10.1 of the Credit Agreement.

Section 16. Severability.

Any provision of this Agreement held to be illegal, invalid or unenforceable in any jurisdiction, shall, as to such jurisdiction, be ineffective to the extent of such illegality, invalidity or unenforceability without affecting the legality, validity or enforceability of the remaining provisions hereof or thereof; and the illegality, invalidity or unenforceability of a particular provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

Section 17. Counterparts; Integration.

This Agreement may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single contract (subject to Section 13), and shall become effective as provided in Section 13. Delivery of an executed signature page to this Agreement by facsimile transmission or form of electronic attachment (e.g., “.pdf” or “.tif”) shall be as effective as delivery of a manually executed counterpart of this Agreement. This Agreement constitutes the entire agreement among the parties hereto regarding the subject matters hereof and supersedes all prior agreements and understandings, oral or written, regarding such subject matter.

Section 18. Rules of Interpretation.

The rules of interpretation specified in Section 1.4 of the Credit Agreement shall be applicable to this Agreement. As used herein, the term “Lender” includes any (a) Affiliate of a Lender that is owed Hedging Obligations or Treasury Management Obligations by any Loan Party and (b) the Issuing Banks.

Section 19. Governing Law; Jurisdiction; Consent to Service of Process.

This Agreement shall be construed in accordance with and be governed by the law (without giving effect to the conflict of law principles thereof) of the State of New York.

Each Loan Party party hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the United States District Court for the Southern District of New York, and of the Supreme Court of the State of New York sitting in New York County, Borough of Manhattan and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any other Loan Document or the transactions contemplated hereby or thereby, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York state court or, to the extent permitted by applicable law, such Federal court. Each Loan Party party hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Administrative Agent, any Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against any Loan Party party hereto or its properties in the courts of any jurisdiction.


Each Loan Party party hereto irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any such suit, action or proceeding described in Section 19(b) and brought in any court referred to in Section 19(b). Each party hereto irrevocably waives, to the fullest extent permitted by applicable law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

Each Loan Party party hereto irrevocably consents to the service of process in the manner provided for notices in Section 10.1 of the Credit Agreement. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law.

Section 20. Waiver of Jury Trial.

EACH PARTY HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (i) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND (ii) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 20.

Section 21. Additional Guarantors.

Pursuant to Section 5.10 of the Credit Agreement, each Restricted Subsidiary that is a Material Domestic Subsidiary that was not in existence on the date of the Credit Agreement is required to enter into this Agreement as a Guarantor upon becoming a Material Domestic Subsidiary. Upon execution and delivery after the date hereof by the Administrative Agent and such Restricted Subsidiary of an instrument in the form of Annex 1, such Restricted Subsidiary shall become a Guarantor hereunder with the same force and effect as if originally named as a Guarantor herein. The execution and delivery of any instrument adding an additional Guarantor as a party to this Agreement shall not require the consent of any other Guarantor hereunder. The rights and obligations of each Guarantor hereunder shall remain in full force and effect notwithstanding the addition of any new Guarantor as a party to this Agreement.

Section 22. Right of Setoff.

If an Event of Default shall have occurred and be continuing, each Lender and each Issuing Bank are hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other Indebtedness at any time owing by such Lender or such Issuing Bank to or for the credit or the account of any Guarantor against any or all the obligations of such Guarantor now or hereafter existing under this Agreement and the other Loan Documents or under any agreement relating to Hedging Obligations or Treasury Management Obligations held by such Lender or such Issuing Bank, irrespective of whether or not such Person shall have made any demand under this Agreement or any other Loan Document and although such obligations may be unmatured. The rights of each Lender and each Issuing Bank under this Section 22 are in addition to other rights and remedies (including other rights of setoff) that such Lender or such Issuing Bank, as the case may be, may have.


Section 23. Savings Clause.

It is the intent of each Loan Party party hereto and the Administrative Agent that each such Loan Party’s maximum obligations hereunder shall be, but not in excess of:

in a case or proceeding commenced by or against any Loan Party under the provisions of Title 11 of the United States Code, 11 U.S.C. §§101 et seq. (the “Bankruptcy Code”) on or within two years from the date on which any of the Guaranteed Obligations are incurred, the maximum amount which would not otherwise cause the Guaranteed Obligations (or any other obligations of any Loan Party owed to the Administrative Agent, the Issuing Banks or the Lenders) to be avoidable or unenforceable against such Loan Party under (i) Section 548 of the Bankruptcy Code or (ii) any state fraudulent transfer or fraudulent conveyance act or statute applied in such case or proceeding by virtue of Section 544 of the Bankruptcy Code; or

in a case or proceeding commenced by or against any Loan Party under the Bankruptcy Code subsequent to two years from the date on which any of the Guaranteed Obligations are incurred, the maximum amount which would not otherwise cause the Guaranteed Obligations (or any other obligations of any Loan Party to the Administrative Agent, the Issuing Banks or the Lenders) to be avoidable or unenforceable against such Loan Party under any state fraudulent transfer or fraudulent conveyance act or statute applied in any such case or proceeding by virtue of Section 544 of the Bankruptcy Code; or

in a case or proceeding commenced by or against any Loan Party under any law, statute or regulation other than the Bankruptcy Code (including, without limitation, any other bankruptcy, reorganization, arrangement, moratorium, readjustment of debt, dissolution, liquidation or similar debtor relief laws), the maximum amount which would not otherwise cause the Guaranteed Obligations (or any other obligations of any Loan Party to the Administrative Agent, the Issuing Banks or the Lenders) to be avoidable or unenforceable against such Loan Party under such law, statute or regulation including, without limitation, any state fraudulent transfer or fraudulent conveyance act or statute applied in any such case or proceeding.

The substantive laws under which the possible avoidance or unenforceability of the Guaranteed Obligations (or any other obligations of any Loan Party to the Administrative Agent, the Issuing Banks or the Lenders) as may be determined in any case or proceeding shall hereinafter be referred to as the “Avoidance Provisions”. To the extent set forth in Section 23(a)(i), (ii), and (iii), but only to the extent that the Guaranteed Obligations would otherwise be subject to avoidance or found unenforceable under the Avoidance Provisions, if any Loan Party is not deemed to have received valuable consideration, fair value or reasonably equivalent value for the Guaranteed Obligations, or if the Guaranteed Obligations would render such Loan Party insolvent, or leave such Loan Party with an unreasonably small capital to conduct its business, or cause such Loan Party to have incurred debts (or to have intended to have incurred debts) beyond its ability to pay such debts as they mature, in each case as of the time any of the Guaranteed Obligations are deemed to have been incurred under the Avoidance Provisions and after giving effect to the contribution by such Loan Party, the maximum Guaranteed Obligations for which such Loan Party shall be liable hereunder shall be reduced to that amount which, after giving effect thereto, would not cause the Guaranteed Obligations (or any other obligations of such Guarantor to the Administrative Agent, the Issuing Banks or the Lenders), as so reduced, to be subject to avoidance or unenforceability under the Avoidance Provisions.

This Section 23 is intended solely to preserve the rights of the Administrative Agent, the Issuing Banks and the Lenders hereunder to the maximum extent that would not cause the Guaranteed Obligations of any Loan Party to be subject to avoidance or unenforceability under the Avoidance Provisions, and neither any Loan Party nor any other Person shall have any right or claim under this Section 23 as against the Administrative Agent, the Issuing Banks or Lenders that would not otherwise be available to such Person under the Avoidance Provisions.


Section 24. Keepwell. Each Qualified ECP Guarantor hereby jointly and severally absolutely, unconditionally and irrevocably undertakes to provide such funds or other support as may be needed from time to time by each Specified Loan Party to honor all of such Specified Loan Party’s obligations under this Agreement and the other Loan Documents and under any agreement relating to Hedging Obligations or Treasury Management Obligations in respect of Swap Obligations (provided, however, that each Qualified ECP Guarantor shall only be liable under this Section 24 for the maximum amount of such liability that can be hereby incurred without rendering its obligations under this Section 24 or otherwise under this Agreement voidable under applicable law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount). The obligations of each Qualified ECP Guarantor under this Section 24 shall remain in full force and effect until the Obligations have been indefeasibly satisfied and performed in full and all of the Commitments under the Credit Agreement have been terminated. Each Qualified ECP Guarantor intends that this Section 24 constitute, and this Section 24 shall be deemed to constitute, a “keepwell, support, or other agreement” for the benefit of each Specified Loan Party for all purposes of Section la(18)(A)(v)(II) of the Commodity Exchange Act. For purposes of this Section 24, “Qualified ECP Guarantor” means in respect of any Swap Obligation, each Loan Party that has total assets exceeding $10,000,000 at the time the relevant Guarantee or grant of the relevant security interest becomes effective with respect to such Swap Obligation or such other Loan Party as constitutes an “eligible contract participant” under the Commodity Exchange Act or any regulations promulgated thereunder and can cause another Person to qualify as an “eligible contract participant” at such time by entering into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

(signatures follow)


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

 

AARON’S, LLC,

as the Borrower

By:  

                 

Name:
Title:

AARON’S SPINCO, INC.,

as Holdings

By:  

 

Name:
Title:

AARON INVESTMENT COMPANY, LLC

as a Guarantor

By:  

 

Name:
Title:
AARON’S BUSINESS REAL ESTATE HOLDINGS, LLC, as a Guarantor
By:  

 

Name:
Title:

AARON’S LOGISTICS, LLC,

as a Guarantor

By:  

 

Name:
Title:

AARON’S US HOLDCO, INC.,

as a Guarantor

By:  

 

Name:
Title:


ENVIZZO, LLC,

as a Guarantor

By:  

                 

Name:
Title:

WOODHAVEN FURNITURE INDUSTRIES, LLC,

as a Guarantor

By:  

     

Name:
Title:


EXHIBIT C

FORM OF BORROWER GUARANTEE AGREEMENT

THIS BORROWER GUARANTEE AGREEMENT (this “Agreement”), dated as of November 9, 2020, is by and among AARON’S, LLC, a Georgia limited liability company (the “Borrower”), AARON’S SPINCO, INC., a Georgia corporation (“Holdings”), each of the Subsidiaries of the Borrower identified on the signature pages hereto (each such Subsidiary individually, a “Subsidiary Loan Party” and collectively, the “Subsidiary Loan Parties”) and TRUIST BANK, a North Carolina banking corporation, as administrative agent (the “Administrative Agent”) for the several banks and other financial institutions (the “Lenders”) from time to time party to the Credit Agreement, dated as of the date hereof, by and among the Borrower, AARON’S SPINCO, INC., a Georgia corporation (“Holdings”), the Lenders, the Issuing Banks, and Truist Bank, as Administrative Agent and as Swingline Lender (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”; capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement).

W I T N E S S E T H:

WHEREAS, pursuant to the Credit Agreement, the Lenders have agreed to establish a revolving credit facility in favor of the Borrower;

WHEREAS, (a) Holdings is the direct parent of the Borrower and (b) the Borrower is the parent of each Subsidiary Loan Party and, in each of the cases of clause (a) and (b) above, will derive substantial benefit from the provision of certain hedging products and treasury management services to Holdings and the Subsidiary Loan Parties, the obligations in respect of which constitute the Guaranteed Obligations (defined below); and

WHEREAS, it is a condition precedent to the obligations of the Administrative Agent, the Issuing Banks, the Swingline Lender, and the Lenders under the Credit Agreement that the Borrower execute and deliver to the Administrative Agent this Agreement, and the Borrower wishes to fulfill said condition precedent.

NOW, THEREFORE, in order to induce Lenders to provide certain treasury management and hedging products to the Subsidiary Loan Parties in connection with Hedging Obligations and Treasury Management Obligations and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

Section 1. Guarantee.

The Borrower unconditionally guarantees, jointly with Holdings and the other Subsidiary Loan Parties and severally, as a primary obligor and not merely as a surety, the due and punctual payment and performance of (a) all Hedging Obligations between Holdings or any Subsidiary Loan Party and any Lender or Affiliate of any Lender, and (b) all Treasury Management Obligations between Holdings or any Subsidiary Loan Party and any Lender or Affiliate of any Lender, together with all renewals, extensions, modifications or refinancings of any of the foregoing (all the monetary and other obligations referred to in the preceding Sections 1(a) and 1(b) being collectively called the “Guaranteed Obligations”). The Borrower further agrees that the Guaranteed Obligations may be extended or renewed, in whole or in part, without notice to or further assent from the Borrower, and that the Borrower will remain bound upon its guarantee notwithstanding any extension or renewal of any Guaranteed Obligations.


Section 2. Obligations Not Waived.

To the fullest extent permitted by applicable law, the Borrower waives presentment or protest to, demand of or payment from the Subsidiary Loan Parties of any of the Guaranteed Obligations, and also waives notice of acceptance of its guarantee and notice of protest for nonpayment. To the fullest extent permitted by applicable law, the obligations of the Borrower shall not be affected by (a) the failure of the Administrative Agent or any Lender to assert any claim or demand or to enforce or exercise any right or remedy against Holdings or any Subsidiary Loan Party under the provisions of the Credit Agreement, any other Loan Document, any agreement relating to Hedging Obligations or Treasury Management Obligations or otherwise, (b) any rescission, waiver, amendment or modification of, or any release from any of the terms or provisions of, this Agreement, any other Loan Document, any agreement relating to Hedging Obligations or Treasury Management Obligations, any guarantee or any other agreement, or (c) the failure to perfect any security interest in, or the release of, any of the security held by or on behalf of the Administrative Agent or any Lender.

Section 3. Guarantee of Payment.

The Borrower further agrees that its guarantee hereunder constitutes a guarantee of payment when due and not of collection, and waives any right to require that any resort be had by the Administrative Agent or any Lender to any of the security held for payment of the Guaranteed Obligations or to any balance of any deposit account or credit on the books of the Administrative Agent or any Lender in favor of the Borrower or any other Person.

Section 4. No Discharge or Diminishment of Guarantee.

The obligations of the Borrower shall not be subject to any reduction, limitation, impairment or termination for any reason (other than the indefeasible satisfaction in full of the Guaranteed Obligations and the termination of all of the Commitments under the Credit Agreement or the termination of its guarantee hereunder to the extent provided in Section 12 below), including any claim of waiver, release, surrender, alteration or compromise of any of the Guaranteed Obligations, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Guaranteed Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of the Borrower shall not be discharged or impaired or otherwise affected by the failure of the Administrative Agent or any Lender to assert any claim or demand or to enforce any remedy under the Credit Agreement, any other Loan Document, any agreement relating to Hedging Obligations or Treasury Management Obligations or any other agreement, by any waiver or modification of any provision of any thereof, by any default, failure or delay, willful or otherwise, in the performance of the Guaranteed Obligations, or by any other act or omission that may or might in any manner or to the extent vary the risk of Holdings or any Subsidiary Loan Party or that would otherwise operate as a discharge of Holdings and each Subsidiary Loan Party as a matter of law or equity (other than the indefeasible satisfaction in full of the Guaranteed Obligations and the termination of all of the Commitments under the Credit Agreement or the termination of its guarantee hereunder to the extent provided in Section 12 below).

Section 5. Defenses of Borrower Waived.

To the fullest extent permitted by applicable law, the Borrower waives any defense based on or arising out of any defense of any Loan Party or the unenforceability of the Guaranteed Obligations or any part thereof from any cause, or the cessation from any cause of the liability of any Loan Party, other than the final and indefeasible satisfaction in full of the Guaranteed Obligations and the termination of all of the Commitments under the Credit Agreement or the termination of its guarantee hereunder to the extent


provided in Section 12 below. The Administrative Agent and the Lenders may, at their election, foreclose on any security held by one or more of them by one or more judicial or nonjudicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the Guaranteed Obligations, make any other accommodation with any other Loan Party or any other guarantor, without affecting or impairing in any way the liability of the Borrower except to the extent the Guaranteed Obligations have been fully, finally and indefeasibly satisfied in full and all of the Commitments under the Credit Agreement have been terminated or the termination of its guarantee hereunder to the extent provided in Section 12 below. Pursuant to applicable law, the Borrower waives any defense arising out of any such election even though such election operates, pursuant to applicable law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of the Borrower against Holdings or any Subsidiary Loan Party or any other guarantor, as the case may be, or any security.

Section 6. Agreement to Pay; Subordination.

In furtherance of the foregoing and not in limitation of any other right that the Administrative Agent or any Lender has at law or in equity against the Borrower by virtue hereof, upon the failure of Holdings or any Subsidiary Loan Party to pay any Guaranteed Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, the Borrower hereby promises to and will forthwith pay, or cause to be paid, to the Administrative Agent for the benefit of the Lenders in cash the amount of such unpaid Guaranteed Obligation. Upon payment by the Borrower of any sums to the Administrative Agent, all rights of the Borrower against Holdings or any Subsidiary Loan Party arising as a result thereof by way of right of subrogation, contribution, reimbursement, indemnity or otherwise shall in all respects be subordinate and junior in right of payment to the prior indefeasible payment in full in cash of all the Obligations. If any amount shall erroneously be paid to any Loan Party on account of such subrogation, contribution, reimbursement, indemnity or similar right, such amount shall be held in trust for the benefit of the Administrative Agent and the Lenders and shall forthwith be paid to the Administrative Agent to be credited against the payment of the Guaranteed Obligations, whether matured or unmatured, in accordance with the terms of the Loan Documents.

Section 7. Information.

The Borrower assumes all responsibility for being and keeping itself informed of the Subsidiary Loan Parties’ financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations and the nature, scope and extent of the risks that the Borrower assumes and incurs hereunder, and agrees that none of the Administrative Agent or the Lenders will have any duty to advise the Borrower of information known to it or any of them regarding such circumstances or risks.

Section 8. Indemnity and Subrogation.

In addition to all such rights of indemnity and subrogation as the Borrower may have under applicable law (but subject to Section 6), Holdings and each of the Subsidiary Loan Parties agrees that in the event a payment in respect of any Guaranteed Obligations shall be made by the Borrower under this Agreement, Holdings and the Subsidiary Loan Parties, on a joint and several basis, shall indemnify the Borrower for the full amount of such payment and the Borrower shall be subrogated to the rights of the person to whom such payment shall have been made to the extent of such payment; provided that neither Holdings nor any Subsidiary Loan Party shall be obligated to indemnify the Borrower hereunder to the extent such Guaranteed Obligations constitute Excluded Swap Obligations of Holdings or such Subsidiary Loan Party.


Section 9. Contribution and Subrogation.

Holdings and each Subsidiary Loan Party (each a “Contributing Guarantor”) agrees (subject to Section 6) that, in the event a payment in respect of any Guaranteed Obligations shall be made by the Borrower (the “Claiming Guarantor”) shall not have been fully indemnified by Holdings and the Subsidiary Loan Parties as provided in Section 8, the Contributing Guarantor shall indemnify the Claiming Guarantor in an amount equal to the amount of such payment multiplied by a fraction of which the numerator shall be the net worth of the Contributing Guarantor on the date hereof and the denominator shall be the aggregate net worth of all the Loan Parties on the date hereof. Any Contributing Guarantor making any payment to the Claiming Guarantor pursuant to this Section 9 shall be subrogated to the rights of such Claiming Guarantor under Section 8 to the extent of such payment; provided that neither Holdings nor any Subsidiary Loan Party shall be obligated to indemnify the Borrower hereunder to the extent such Guaranteed Obligations constitute Excluded Swap Obligations of Holdings or such Subsidiary Loan Party.

Section 10. Subordination.

Notwithstanding any provision of this Agreement to the contrary, all rights of the Borrower under Section 8 and Section 9 and all other rights of indemnity, contribution or subrogation under applicable law or otherwise shall be fully subordinated to the indefeasible payment in full in cash of the Obligations. No failure on the part of the Borrower, Holdings or any Subsidiary Loan Party to make the payments required under applicable law or otherwise shall in any respect limit the obligations and liabilities of any Loan Party with respect to its obligations hereunder, and each Loan Party shall remain liable for the full amount of the obligations of such Loan Party hereunder.

Section 11. Representations and Warranties.

The Borrower represents and warrants as to itself that all representations and warranties relating to it contained in the Credit Agreement are true and correct.

Section 12. Termination.

The guarantees made hereunder (a) shall terminate when (i) all the Guaranteed Obligations have been satisfied in full and all of the Commitments under the Credit Agreement have been terminated or, if earlier, when all the Obligations as defined in the Credit Agreement (other than Obligations consisting of (x) unliquidated Hedging Obligations owed by any Loan Party to any Lender or Affiliate of any Lender that are not then due and payable at time of such termination or as a result thereof, and (y) any ongoing Treasury Management Obligations between any Loan Party and any Lender or Affiliate of any Lender that are not then due and payable at time of such termination or as a result thereof) have been satisfied in full and all of the Commitments under the Credit Agreement have been terminated, or (ii) as to the Guaranteed Obligations of any particular Subsidiary Loan Party, when and to the extent (1) all of the capital stock of such Subsidiary Loan Party is sold, transferred or otherwise disposed of pursuant to a transaction permitted by the Credit Agreement, or (2) such Subsidiary Loan Party ceases to be a Subsidiary as a result of a transaction permitted by the Credit Agreement, in which case under this Section 12(ii) the Borrower shall be released from its guarantee obligations hereunder with respect to such Subsidiary Loan Party without further action, and (b) shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any such Guaranteed Obligation is rescinded or must otherwise be restored by any Lender or any Loan Party upon the bankruptcy or reorganization of the Borrower, Holdings, any Subsidiary Loan Party or otherwise. In connection with the foregoing, the Administrative Agent shall execute and deliver to such Loan Party or such Loan Party’s designee, at such Loan Party’s expense, any documents or instruments, in form reasonably satisfactory to the Administrative Agent, which such Loan Party shall reasonably request from time to time to evidence such termination and release.


Section 13. Binding Effect; Several Agreement; Assignments.

Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants, promises and agreements by or on behalf of the Loan Parties that are contained in this Agreement shall bind and inure to the benefit of each party hereto and their respective successors and assigns. This Agreement shall become effective as to any Loan Party when a counterpart hereof executed on behalf of such Loan Party shall have been delivered to the Administrative Agent, and a counterpart hereof shall have been executed on behalf of the Administrative Agent, and thereafter shall be binding upon such Loan Party and the Administrative Agent and their respective successors and assigns, and shall inure to the benefit of such Loan Party, the Administrative Agent and the Lenders, and their respective successors and assigns, except that no Loan Party shall have the right to assign its rights or obligations hereunder or any interest herein (and any such attempted assignment shall be void). This Agreement shall be construed as a separate agreement with respect to each Loan Party and may be amended, modified, supplemented, waived or released with respect to any Loan Party without the approval of any other Loan Party and without affecting the obligations of any other Loan Party hereunder.

Section 14. Waivers; Amendment.

No failure or delay of the Administrative Agent of any kind in exercising any power, right or remedy hereunder and no course of dealing between any Loan Party on the one hand and the Administrative Agent or any holder of any Guaranteed Obligation on the other hand shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or remedy hereunder, under any other Loan Document, under any agreement relating to Hedging Obligations or Treasury Management Obligations or any abandonment or discontinuance of steps to enforce such a power, right or remedy, preclude any other or further exercise thereof or the exercise of any other power, right or remedy. The rights and remedies of the Administrative Agent hereunder and of the Lenders, under the other Loan Documents and under any agreement relating to Hedging Obligations or Treasury Management Obligations are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted by subsection (b) below, and then such waiver and consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on any Loan Party in any case shall entitle such Loan Party to any other or further notice in similar or other circumstances.

Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to a written agreement entered into between each affected Loan Party with respect to which such waiver, amendment or modification relates and the Administrative Agent, with the prior written consent of the Required Lenders (except as otherwise provided in the Credit Agreement).

Section 15. Notices.

All communications and notices hereunder shall be in writing and given as provided in Section 10.1 of the Credit Agreement.


Section 16. Severability.

Any provision of this Agreement held to be illegal, invalid or unenforceable in any jurisdiction, shall, as to such jurisdiction, be ineffective to the extent of such illegality, invalidity or unenforceability without affecting the legality, validity or enforceability of the remaining provisions hereof or thereof; and the illegality, invalidity or unenforceability of a particular provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

Section 17. Counterparts; Integration.

This Agreement may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single contract (subject to Section 13), and shall become effective as provided in Section 13. Delivery of an executed signature page to this Agreement by facsimile transmission or form of electronic attachment (e.g., “.pdf” or “.tif”) shall be as effective as delivery of a manually executed counterpart of this Agreement. This Agreement constitutes the entire agreement among the parties hereto regarding the subject matters hereof and supersedes all prior agreements and understandings, oral or written, regarding such subject matter.

Section 18. Rules of Interpretation.

The rules of interpretation specified in Section 1.4 of the Credit Agreement shall be applicable to this Agreement. As used herein, the term “Lender” includes any Affiliate of a Lender that is owed Hedging Obligations or Treasury Management Obligations by any Loan Party.

Section 19. Governing Law; Jurisdiction; Consent to Service of Process.

This Agreement shall be construed in accordance with and be governed by the law (without giving effect to the conflict of law principles thereof) of the State of New York.

Each Loan Party hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the United States District Court for the Southern District of New York, and of the Supreme Court of the State of New York sitting in New York County, Borough of Manhattan, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any other Loan Document or the transactions contemplated hereby or thereby, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such District Court or New York state court or, to the extent permitted by applicable law, such appellate court. Each Loan Party agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Administrative Agent, any Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against any Loan Party or its properties in the courts of any jurisdiction.

Each Loan Party irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any such suit, action or proceeding described in this Section 19 and brought in any court referred to in this Section 19. Each party hereto irrevocably waives, to the fullest extent permitted by applicable law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.


Each Loan Party irrevocably consents to the service of process in the manner provided for notices in Section 10.1 of the Credit Agreement. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law.

Section 20. Waiver of Jury Trial.

EACH PARTY HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (a) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND (b) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 20.

Section 21. [Reserved.].

[Reserved.]

Section 22. Right of Setoff.

If an Event of Default shall have occurred and be continuing, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other Indebtedness at any time owing by such Lender to or for the credit or the account of the Borrower against any or all the obligations of the Borrower now or hereafter existing under this Agreement and the other Loan Documents or under any agreement relating to Hedging Obligations or Treasury Management Obligations held by such Lender, irrespective of whether or not such Person shall have made any demand under this Agreement or any other Loan Document and although such obligations may be unmatured. The rights of each Lender under this Section 22 are in addition to other rights and remedies (including other rights of setoff) that such Lender may have.

Section 23. Savings Clause.

(a) It is the intent of each Loan Party and the Administrative Agent that each Loan Party’s maximum obligations hereunder shall be, but not in excess of:

(i) in a case or proceeding commenced by or against any Loan Party under the provisions of Title 11 of the United States Code, 11 U.S.C. §§101 et seq. (the “Bankruptcy Code”) on or within two years from the date on which any of the Guaranteed Obligations are incurred, the maximum amount which would not otherwise cause the Guaranteed Obligations (or any other obligations of any Loan Party owed to the Administrative Agent or the Lenders) to be avoidable or unenforceable against such Loan Party under (i) Section 548 of the Bankruptcy Code or (ii) any state fraudulent transfer or fraudulent conveyance act or statute applied in such case or proceeding by virtue of Section 544 of the Bankruptcy Code; or


(ii) in a case or proceeding commenced by or against any Loan Party under the Bankruptcy Code subsequent to two years from the date on which any of the Guaranteed Obligations are incurred, the maximum amount which would not otherwise cause the Guaranteed Obligations (or any other obligations of any Loan Party to the Administrative Agent or the Lenders) to be avoidable or unenforceable against such Loan Party under any state fraudulent transfer or fraudulent conveyance act or statute applied in any such case or proceeding by virtue of Section 544 of the Bankruptcy Code; or

(iii) in a case or proceeding commenced by or against any Loan Party under any law, statute or regulation other than the Bankruptcy Code (including, without limitation, any other bankruptcy, reorganization, arrangement, moratorium, readjustment of debt, dissolution, liquidation or similar debtor relief laws), the maximum amount which would not otherwise cause the Guaranteed Obligations (or any other obligations of any Loan Party to the Administrative Agent or the Lenders) to be avoidable or unenforceable against such Loan Party under such law, statute or regulation including, without limitation, any state fraudulent transfer or fraudulent conveyance act or statute applied in any such case or proceeding.

(b) The substantive laws under which the possible avoidance or unenforceability of the Guaranteed Obligations (or any other obligations of any Loan Party to the Administrative Agent or the Lenders) as may be determined in any case or proceeding shall hereinafter be referred to as the “Avoidance Provisions”. To the extent set forth in Section 23(a)(i), (ii), and (iii), but only to the extent that the Guaranteed Obligations would otherwise be subject to avoidance or found unenforceable under the Avoidance Provisions, if any Loan Party is not deemed to have received valuable consideration, fair value or reasonably equivalent value for the Guaranteed Obligations, or if the Guaranteed Obligations would render such Loan Party insolvent, or leave such Loan Party with an unreasonably small capital to conduct its business, or cause such Loan Party to have incurred debts (or to have intended to have incurred debts) beyond its ability to pay such debts as they mature, in each case as of the time any of the Guaranteed Obligations are deemed to have been incurred under the Avoidance Provisions and after giving effect to the contribution by such Loan Party, the maximum Guaranteed Obligations for which such Loan Party shall be liable hereunder shall be reduced to that amount which, after giving effect thereto, would not cause the Guaranteed Obligations (or any other obligations of such Loan Party to the Administrative Agent or the Lenders), as so reduced, to be subject to avoidance or unenforceability under the Avoidance Provisions.

This Section 23 is intended solely to preserve the rights of the Administrative Agent and the Lenders hereunder to the maximum extent that would not cause the Guaranteed Obligations of any Loan Party to be subject to avoidance or unenforceability under the Avoidance Provisions, and neither any Loan Party nor any other Person shall have any right or claim under this Section 23 as against the Administrative Agent or Lenders that would not otherwise be available to such Person under the Avoidance Provisions.

Section 24. Keepwell. The Borrower, as a Qualified ECP Guarantor, hereby jointly and severally with any other Qualified ECP Guarantor, absolutely, unconditionally and irrevocably undertakes to provide such funds or other support as may be needed from time to time by each Specified Loan Party to honor all of such Specified Loan Party’s obligations under the Guarantee Agreement and the other Loan Documents and under any agreement relating to Hedging Obligations or Treasury Management Obligations in respect of Swap Obligations (provided, however, that the Borrower shall only be liable under this Section 24 for the maximum amount of such liability that can be hereby incurred without rendering its obligations under this Section 24 or otherwise under this Agreement voidable under applicable law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount). The obligations of the Borrower under this Section 24 shall remain in full force and effect until the


Obligations have been indefeasibly satisfied and performed in full and all of the Commitments under the Credit Agreement have been terminated. The Borrower intends that this Section 24 constitute, and this Section 24 shall be deemed to constitute, a “keepwell, support, or other agreement” for the benefit of each Specified Loan Party for all purposes of Section la(18)(A)(v)(II) of the Commodity Exchange Act. For purposes of this Section 24, “Qualified ECP Guarantor” means in respect of any Swap Obligation, each Loan Party that has total assets exceeding $10,000,000 at the time the relevant Guarantee or grant of the relevant security interest becomes effective with respect to such Swap Obligation or such other Loan Party as constitutes an “eligible contract participant” under the Commodity Exchange Act or any regulations promulgated thereunder and can cause another Person to qualify as an “eligible contract participant” at such time by entering into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

(signatures follow)


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

 

AARON’S, LLC,

as the Borrower

By:  

 

Name:  
Title:  

AARON’S SPINCO, INC.,

as a Guarantor

By:  

 

Name:  
Title:  

AARON INVESTMENT COMPANY, LLC

as a Guarantor

By:  

 

Name:  
Title:  
AARON’S BUSINESS REAL ESTATE HOLDINGS, LLC, as a Guarantor
By:  

                                  

Name:  
Title:  

AARON’S LOGISTICS, LLC,

as a Guarantor

By:  

 

Name:  
Title:  

AARON’S US HOLDCO, INC.,

as a Guarantor

By:  

 

Name:  
Title:  

ENVIZZO, LLC,

as a Guarantor

By:  

 

Name:  
Title:  


WOODHAVEN FURNITURE INDUSTRIES, LLC,

as a Guarantor

By:  

                          

Name:  
Title:  


TRUIST BANK, as
Administrative Agent
By:  

                              

  Name:
  Title:


EXHIBIT 2.3

FORM OF NOTICE OF REVOLVING BORROWING

[Date]

Truist Bank,

as Administrative Agent

for the Lenders referred to below

303 Peachtree Street, N.E. / 25th Floor

Atlanta, GA 30308

Attention: Agency Services

Ladies and Gentlemen:

Reference is made to the Credit Agreement, dated as of November 9, 2020 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the undersigned, as Borrower, Holdings, the Lenders, the Issuing Banks, and Truist Bank, as Administrative Agent and as Swingline Lender. Terms defined in the Credit Agreement are used herein with the same meanings. This notice constitutes a Notice of Revolving Borrowing, and the Borrower hereby requests a Revolving Borrowing under the Credit Agreement, and in that connection the Borrower specifies the following information with respect to the Revolving Borrowing requested hereby:

 

  (A)

Aggregate principal amount of Revolving Borrowing: __________________1

 

  (B)

Date of Revolving Borrowing (which is a Business Day): _______________

 

  (C)

Interest Rate basis: ______________________2

 

  (D)

Interest Period: ________________________3

 

  (E)

Location and number of Borrower’s account to which proceeds of Revolving Borrowing are to be disbursed: _______________________________

 

 

 

 

1 

With respect to Eurodollar Borrowings, not less than $1,000,000 or a larger multiple of $500,000, and with respect to Base Rate Borrowings, not less than $1,000,000 or a larger multiple of $100,000.

2 

Eurodollar Borrowing or Base Rate Borrowing.

3 

Which must comply with the definition of “Interest Period”


The Borrower hereby represents and warrants that the conditions specified in paragraphs (a), (b) and (c) of Section 3.3 of the Credit Agreement are satisfied.

 

Very truly yours,
AARON’S, LLC
By  

                                                  

Name:
Title:


EXHIBIT 2.6

FORM OF NOTICE OF SWINGLINE BORROWING

[Date]

Truist Bank,

as Administrative Agent

for the Lenders referred to below

303 Peachtree Street, N.E. / 25th Floor

Atlanta, GA 30308

Attention: Agency Services

Ladies and Gentlemen:

Reference is made to the Credit Agreement, dated as of November 9, 2020 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the undersigned, as Borrower, Holdings, the Lenders, the Issuing Banks, and Truist Bank, as Administrative Agent and as Swingline Lender. Terms defined in the Credit Agreement are used herein with the same meanings. This notice constitutes a Notice of Swingline Borrowing, and the Borrower hereby requests a Swingline Borrowing under the Credit Agreement, and in that connection the Borrower specifies the following information with respect to the Swingline Borrowing requested hereby:

 

  (A)

Principal amount of Swingline Borrowing: _______________________1

 

  (B)

Date of Swingline Loan (which is a Business Day): _______________________

 

  (C)

Location and number of Borrower’s account to which proceeds of Swingline Loan are to be disbursed: _________________________________________

The Borrower hereby represents and warrants that the conditions specified in paragraphs (a), (b) and (c) of Section 3.3 of the Credit Agreement are satisfied.

 

AARON’S, LLC
By  

                          

Name:
Title:

 

 

1 

Not less than $100,000 or a larger multiple of $50,000.


EXHIBIT 2.8

FORM OF NOTICE OF CONVERSION/CONTINUATION

[Date]

Truist Bank,

as Administrative Agent

for the Lenders referred to below

303 Peachtree Street, N.E. / 25th Floor

Atlanta, GA 30308

Attention: Agency Services

Ladies and Gentlemen:

Reference is made to the Credit Agreement, dated as of November 9, 2020 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the undersigned, as Borrower, Holdings, the Lenders, the Issuing Banks, and Truist Bank, as Administrative Agent and as Swingline Lender. Terms defined in the Credit Agreement are used herein with the same meanings. This notice constitutes a Notice of Conversion/Continuation and the Borrower hereby requests the conversion or continuation of a Revolving Borrowing under the Credit Agreement, and in that connection the Borrower specifies the following information with respect to the Revolving Borrowing to be converted or continued as requested hereby:

 

  (A)

Borrowing to which this request applies: _____________________

 

  (B)

Principal amount of Borrowing to be converted/continued: ___________________

 

  (C)

Effective date of election (which is a Business Day): _____________________

 

  (D)

Interest rate basis: _____________________1

 

  (E)

Interest Period: __________________2

 

AARON’S, LLC
By  

                              

Name:
Title:

 

 

 

1 

Eurodollar Borrowing or Base Rate Borrowing.

2 

Which must comply with the definition of “Interest Period”


EXHIBIT 3.1(b)(iv)

FORM OF SECRETARY’S CERTIFICATE

OMNIBUS

OFFICER’S CERTIFICATE

November 9, 2020

Reference is hereby made to that certain Credit Agreement, dated as of the date hereof (the “Credit Agreement”), by and among Aaron’s, LLC, Aaron’s SpinCo, Inc., the several banks and other financial institutions from time to time party thereto, as lenders, and Truist Bank, as administrative agent. Pursuant to Section 3.l(a)(iii) of the Credit Agreement, each of the undersigned, as an Authorized Officer to the entities set forth on Schedule I-1 to I-4 hereto (each a “Company” and together the “Companies”) in his representative capacity on behalf of the applicable Company hereby certifies that:

(a) Annexed hereto as Exhibit A is a true, correct and complete copy of the articles of incorporation or certificate of formation, as applicable, of each Company, including any and all amendments thereto, as in effect on the date hereof, the same has not been amended, altered, revoked or rescinded as of the date hereof; and as of the date hereof, no action for the dissolution of the Companies is pending.

(b) Annexed hereto as Exhibit B is a true, correct and complete copy of the bylaws or limited liability company agreement, as applicable, of each Company, including any and all amendments thereto, as in effect on the date hereof and the same has not been amended, altered, revoked or rescinded as of the date hereof.

(c) Annexed hereto as Exhibit C is a true, correct and complete copy of a certificate of good standing or existence from the Secretary of State of the applicable jurisdiction of organization of each Company, certified as of recent date by such Secretary of State and since such date, no change has occurred in the legal existence and good standing of the Corporation.

(d) Attached hereto as Exhibit D is a true, complete and correct copy of resolutions duly adopted by the Board of Directors, Sole Member, or Sole Manager, as applicable, of the Companies. Such resolutions are in full force and effect on and as of the date hereof and the same has not been amended, altered, revoked or rescinded and such resolutions are filed with the records of the Companies, and are the only resolutions relating to the transactions contemplated thereby that have been adopted by the Board of Directors, Sole Member or Sole Manager, as applicable, of the Companies.

(e) Annexed hereto as Exhibit E is the incumbency and specimen signature of the duly elected and qualified officers of each Company as of the date hereof. Each person set forth on Exhibit E holds the respective office set forth opposite his or her name, is duly authorized to execute and deliver the Loan Documents and the signature set forth opposite of each such person is his or her genuine signature.

[Signature Page Follows]


IN WITNESS WHEREOF, the undersigned has caused this Omnibus Officer’s Certificate to be executed on behalf of each Company listed on Schedule I-1 as of the date set forth above.

 

By:  

                          

  Steve Olsen
  Authorized Officer

I, the undersigned, an Authorized Officer, of each Company listed on Schedule I-1, do hereby certify solely on behalf of each Company listed on Schedule I-1 and not in my individual capacity that Steve Olsen is a duly elected and qualified Authorized Officer of each Company listed on Schedule I-1 and the signature above is his genuine signature.

 

By:  

                     

  C. Kelly Wall
  Authorized Officer


IN WITNESS WHEREOF, the undersigned has caused this Omnibus Officer’s Certificate to be executed on behalf of each Company listed on Schedule I-2 as of the date set forth above.

 

By:  

 

  Douglas A. Lindsay
  Authorized Officer

I, the undersigned, an Authorized Officer, of each Company listed on Schedule I-2, do hereby certify solely on behalf of each Company listed on Schedule I-2 and not in my individual capacity that Douglas A. Lindsay is a duly elected and qualified Authorized Officer of each Company listed on Schedule I-2 and the signature above is his genuine signature.

 

By:  

                          

  Steve Olsen
  Authorized Officer


IN WITNESS WHEREOF, the undersigned has caused this Omnibus Officer’s Certificate to be executed on behalf of each Company listed on Schedule I-3 as of the date set forth above.

 

By:  

                              

  Robert W. Kamerschen
  Authorized Officer

I, the undersigned, an Authorized Officer, of each Company listed on Schedule I-3, do hereby certify solely on behalf of each Company listed on Schedule I-3 and not in my individual capacity that Robert W. Kamerschen is a duly elected and qualified Authorized Officer of each Company listed on Schedule I-3 and the signature above is his genuine signature.

 

By:  

                          

  Robert P. Sinclair, Jr.
  Authorized Officer


IN WITNESS WHEREOF, the undersigned has caused this Omnibus Officer’s Certificate to be executed on behalf of each Company listed on Schedule I-4 as of the date set forth above.

 

By:  

                     

  Ariel Maidansky
  Authorized Officer

I, the undersigned, an Authorized Officer of Aaron’s, LLC, a direct parent of each Company listed on Schedule I-4, do hereby certify solely on behalf of each Company listed on Schedule I-4 and not in my individual capacity that Ariel Maidansky is a duly elected and qualified Authorized Officer of each Company listed on Schedule I-4 and the signature above is his genuine signature.

 

By:  

                          

  C. Kelly Wall
  Authorized Officer


EXHIBIT 3.1(b)(vii)

FORM OF OFFICER’S CERTIFICATE

November 9, 2020

Reference is made to that certain Credit Agreement, dated as of November 9, 2020 (the “Credit Agreement”), by and among Aaron’s, LLC, a Georgia limited liability company (the “Borrower”), Aaron’s Spinco, Inc., a Georgia corporation (“Holdings”), the Lenders party thereto from time to time, and Truist Bank, as Administrative Agent. Terms defined in the Credit Agreement are used herein with the same meanings. This certificate is being delivered pursuant to Section 3.1(a)(vi) of the Credit Agreement.

I, C. Kelly Wall, an Authorized Officer of the Borrower, DO HEREBY CERTIFY on behalf of the Borrower that:

 

  (a)

all representations and warranties of each Loan Party set forth in the Loan Documents are true and correct in all material respects (other than those representations and warranties that are expressly qualified by Material Adverse Effect or other materiality, in which case such representations and warranties are true and correct in all respects) on and as of the date hereof; provided, that to the extent such representation or warranty relates to a specific prior date, such representation or warranty is true and correct in all material respects (other than those representations and warranties that are expressly qualified by Material Adverse Effect or other materiality, in which case such representations and warranties are true and correct in all respects) only as of such specific prior date;

 

  (b)

no Default or Event of Default exists as of the date hereof; and

 

  (c)

since December 31, 2019, which is the date of the audited financial statements of the Borrower described in Section 4.4 of the Credit Agreement, there has been no change which has had or could reasonably be expected to have a Material Adverse Effect.

[Signature page follows]


IN WITNESS WHEREOF, I have hereunto signed my name as of the date first written above.

 

AARON’S, LLC

a Georgia limited liability company

By:  

 

Name:

Title:

 


EXHIBIT 5.1(c)

FORM OF COMPLIANCE CERTIFICATE

[Date]

 

To:

Truist Bank, as Administrative Agent

303 Peachtree St., N.E. / 25th Floor

Atlanta, GA 30308

Attention:                     

Ladies and Gentlemen:

Reference is made to the Credit Agreement, dated as of November 9, 2020 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the undersigned, as Borrower, Holdings, the other Guarantors from time to time party thereto, the lenders from time to time party thereto, the Issuing Banks, and Truist Bank, as Administrative Agent, an Issuing Bank and Swingline Lender. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Credit Agreement.

I, _____________, being the duly elected and qualified, and acting in my capacity as [Chief Financial Officer][Controller][Treasurer] of the Borrower, hereby certify to the Administrative Agent and each Lender as follows:

[Use the following paragraph 1 for fiscal year-end financial statements]

1. [Attached hereto as Schedule 1 are the audited annual financial statements required by Section 5.1(a) of the Credit Agreement for the Fiscal Year ending [_______] together with the audit report of Ernst & Young or other independent public accountants of nationally recognized standing required by such section. The consolidated financial statements of Holdings, the Borrower and its Restricted Subsidiaries attached hereto fairly present in all material respects the financial condition and results of operations of Holdings, the Borrower and its Restricted Subsidiaries as at the end of such Fiscal Year on a consolidated basis, and the related statements of income and cash flows of Holdings, the Borrower and its Restricted Subsidiaries for such Fiscal Year, in accordance with generally accepted accounting principles consistently applied (subject to normal year-end audit adjustments and the absence of footnotes).]

[Use the following paragraph 1 for fiscal quarter-end financial statements]

1. [Attached hereto as Schedule 1 are the unaudited financial statements required by Section 5.1(b) of the Credit Agreement for the Fiscal Quarter ending [___________, ___]. The consolidated financial statements of Holdings, the Borrower and its Restricted Subsidiaries attached hereto fairly present in all material respects the financial condition and results of operations of Holdings, the Borrower and its Restricted Subsidiaries as at the end of such Fiscal Quarter on a consolidated basis, and the related statements of income and cash flows of Holdings, the Borrower and its Restricted Subsidiaries for such Fiscal Quarter, in accordance with generally accepted accounting principles consistently applied (subject to normal year-end audit adjustments and the absence of footnotes).]

3. Based upon a review of the activities of Holdings, the Borrower and its Restricted Subsidiaries and the financial statements attached hereto during the period covered thereby, as of the date hereof, [there exists no Default or Event of Default][a Default or Event of Default exists and set forth below are the details thereof and a description of the action which the Borrower has taken or proposes to take with respect thereto].


4. Set forth on Schedule 2 are detailed calculations demonstrating compliance with the financial covenants set forth in Article VI of the Credit Agreement.

5. Since the date of the Borrower’s audited financial statements referred to in Section 4.4 of the Credit Agreement, [no change in GAAP or the application thereof has occurred][a change in GAAP or the application thereof has occurred and below is a description of the effect of such change on the financial statements accompanying this certificate].

 

 

Name:                                                                         

Title: [Chief Financial

Officer][Controller][Treasurer]


EXHIBIT 5.12

FORM OF SECURITY AGREEMENT

THIS SECURITY AND PLEDGE AGREEMENT (as amended, restated, amended and restated, modified and supplemented from time to time, this “Agreement”) is entered into as of [            ] among the parties identified as “Obligors” on the signature pages hereto and such other parties that may become Obligors hereunder after the date hereof (each individually an “Obligor” and collectively the “Obligors”), and TRUIST BANK, in its capacity as Administrative Agent (in such capacity, the “Administrative Agent”) for the holders of the Secured Obligations (defined below).

RECITALS

WHEREAS, pursuant to that certain Credit Agreement (as amended, modified, supplemented, increased, extended, restated, refinanced and replaced from time to time, the “Credit Agreement”) dated as of November 9, 2020 among Aaron’s, LLC, a Georgia limited liability company (the “Borrower”), Aaron’s Spinco, Inc., a Georgia corporation (“Holdings”), the Lenders from time to time party thereto, the Issuing Banks from time to time party thereto, and Truist Bank, in its capacities as Administrative Agent and as Swingline Lender, the Lenders have agreed to make Loans to the Borrower and each Issuing Bank has agreed to issue Letters of Credit to the Borrower upon the terms and subject to the conditions set forth therein; and

WHEREAS, this Agreement is required by the terms of the Credit Agreement.

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

1. Definitions.

(a) Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to such terms in the Credit Agreement, and the following terms which are defined in the Uniform Commercial Code in effect from time to time in the State of New York except as such terms may be used in connection with the perfection of the Collateral and then the applicable jurisdiction with respect to such affected Collateral shall apply (the “UCC”): Accession, Account, Adverse Claim, As-Extracted Collateral, Chattel Paper, Commercial Tort Claim, Consumer Goods, Deposit Account, Document, Electronic Chattel Paper, Equipment, Farm Products, Financial Asset, Fixtures, General Intangible, Goods, Instrument, Inventory, Investment Company Security, Investment Property, Letter-of-Credit Right, Manufactured Home, Money, Proceeds, Securities Account, Securities Intermediary, Security, Security Entitlement, Software, Supporting Obligation and Tangible Chattel Paper.

(b) In addition, the following terms shall have the meanings set forth below:

Administrative Agent” has the meaning provided in the introductory paragraph hereof.

Agreement” has the meaning provided in the introductory paragraph hereof.    

Borrower” has the meaning provided in the recitals hereof.

Collateral” has the meaning provided in Section 2 hereof.


Copyright License” shall mean any written agreement, naming any Obligor as licensor, granting any right under any Copyright.

Copyrights” shall mean (a) all registered United States copyrights in all Works, now existing or hereafter created or acquired, all registrations and recordings thereof, and all applications in connection therewith, including, without limitation, registrations, recordings and applications in the United States Copyright Office, and (b) all renewals thereof.

Credit Agreement” has the meaning provided in the recitals hereof.

Excluded Accounts” shall mean (a) deposit and/or securities accounts the balance of which consists exclusively of (i) withheld income taxes and federal, state or local employment taxes in such amounts as are required in the reasonable judgment of the Borrower to be paid to the IRS or state or local government agencies within the following two (2) months with respect to employees of any of the Loan Parties or (ii) amounts required to be paid over to an employee benefit plan pursuant to DOL Reg. Sec. 2510.3-102 on behalf of or for the benefit of employees of one or more Loan Parties, (b) all tax accounts (including, without limitation, sales tax accounts), accounts used solely for payroll, accounts maintained solely in trust for the benefit of third parties and fiduciary purposes, escrow accounts, zero balance or swept accounts and employee benefit accounts (including 401(k) accounts and pension fund accounts), in each case, so long as such account is used solely for such purpose, (c) any deposit and/or securities account maintained in a jurisdiction outside of the United States and (d) accounts the balance of which consists exclusively of amounts to be paid to employees in the ordinary course of business.

Excluded Property” shall mean, with respect to any Obligor, (a) any owned real property located outside the United States, (b) any owned real property located in the United States that is owned in fee by an Obligor which is not Material Real Estate, (c) any leased real property, (d) any copyrights, copyright licenses, patents, patent licenses, trademarks or trademark licenses for which a perfected Lien thereon is not effected either by filing of a Uniform Commercial Code financing statement or by appropriate evidence of such Lien being filed in either the United States Copyright Office or the United States Patent and Trademark Office, (e) any personal property for which the attachment or perfection of a Lien thereon is not governed by the Uniform Commercial Code (including motor vehicles and other assets subject to certificates of title), (f) the Capital Stock in any Unrestricted Subsidiary, (g) the Capital Stock in any Foreign Subsidiary that is a Restricted Subsidiary to the extent not required to be pledged to secure the Obligations pursuant to Section 5.10(b) of the Credit Agreement, (h) any property which, subject to the terms of Section 7.8 of the Credit Agreement, is subject to a Lien of the type described in Section 7.2(c) of the Credit Agreement pursuant to documents which prohibit such Loan Party from granting any other Liens in such property, (i) Excluded Accounts, (j) those assets over which the granting of a Lien in such assets in favor of the Administrative Agent would be prohibited by applicable law, regulation or contract (including any requirement under or in accordance with such law, rule or regulation to obtain consent from a third party, including any governmental or regulatory authority), so long as (i) any contractual restriction is not incurred in contemplation of the owning entity’s becoming a Restricted Subsidiary or the entry of such owning entity into the Loan Documents and (ii) such contract is permitted under this Agreement, in each case, after giving effect to Sections 9-406, 9-407, 9-408 and 9-409 of the Uniform Commercial Code or any other applicable law or principle of equity, other than any receivables and proceeds thereof (the assignment of which is expressly deemed effective under the Uniform Commercial Code notwithstanding such prohibition), (k) any intent-to-use trademark application prior to the filing of a “Statement of Use” or “Amendment to Allege Use” with respect thereto, to the extent, if any, that, and solely during the period, if any, in which the grant or enforcement of a security interest therein would impair the validity or enforceability of such

 

2


intent-to-use trademark application under applicable federal law, (l) assets to the extent a security interest in such assets would result in material adverse tax consequences (including, without limitation, as a result of the operation of Section 956 of the United States Code or any similar law or regulation in any applicable jurisdiction), as reasonably determined by the Borrower in good faith, (m) at any time before the date that is 1 year after the Funding Availability Date, the Specified Asset and (n) other assets to the extent the Borrower and the Administrative Agent agree in writing that the cost of obtaining or perfecting a security interest in such assets is excessive in relation to the value of the security afforded thereby; provided, however, that the security interest granted to the Administrative Agent under this Agreement or any other Loan Document shall attach immediately to any asset of any Loan Party at such time as such asset ceases to meet any of the criteria for “Excluded Property” described in any of the foregoing clauses (a) through (n) above.

Material Agreements” shall mean (a) all agreements, indentures or notes governing the terms of any Material Indebtedness and (b) all other agreements, documents, contracts, indentures and instruments pursuant to which a default, breach or termination thereof would reasonably be expected to result in a Material Adverse Effect.

Obligor” and “Obligors” have the meanings provided in the introductory paragraph hereof.

Patent License” shall mean any agreement, whether written or oral, providing for the grant by or to an Obligor of any right to manufacture, use or sell any invention covered by a Patent.

Patents” shall mean (a) all letters patent of the United States or any other country and all reissues and extensions thereof, and (b) all applications for letters patent of the United States or any other country and all divisions, continuations and continuations-in-part thereof.

Pledged Equity” shall mean, with respect to each Obligor, (a) one hundred percent (100%) of the issued and outstanding Capital Stock of each Domestic Subsidiary that is a Restricted Subsidiary and (b) sixty-six percent (66%) of the issued and outstanding Capital Stock entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) and one hundred percent (100%) of the issued and outstanding Capital Stock not entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) in each Foreign Subsidiary that is a Restricted Subsidiary, directly owned by any Obligor, including without limitation the Capital Stock of the Subsidiaries owned by such Obligor as set forth on Schedule 1 hereto, in each case together with the certificates (or other agreements or instruments), if any, representing such Capital Stock, and all options and other rights, contractual or otherwise, with respect thereto, including, but not limited to, the following:

(1) all Capital Stock representing a dividend thereon, or representing a distribution or return of capital upon or in respect thereof, or resulting from a stock split, revision, reclassification or other exchange therefor, and any subscriptions, warrants, rights or options issued to the holder thereof, or otherwise in respect thereof; and

(2) in the event of any consolidation or merger involving the issuer thereof and in which such issuer is not the surviving Person, all shares of each class of the Capital Stock of the successor Person formed by or resulting from such consolidation or merger, to the extent that such successor Person is a direct Subsidiary of an Obligor; provided that if such successor Person is a Foreign Subsidiary or a Domestic Subsidiary that is an Excluded Subsidiary, such Capital Stock shall be limited to the amount described in clause (b) hereof.

 

3


Secured Obligations” shall mean, without duplication, (a) all Obligations and (b) subject to the limitations set forth in Section 10.3 of the Credit Agreement, all out-of-pocket costs and expenses (including, without limitation, the reasonable and documented fees, disbursements and other charges of one outside counsel) incurred in connection with enforcement and collection of the Obligations.

Trademark License” shall mean any agreement, written or oral, providing for the grant by or to an Obligor of any right to use any Trademark.

Trademarks” shall mean (a) all trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, logos and other source or business identifiers, and the goodwill associated therewith, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all applications in connection therewith, whether in the United States Patent and Trademark Office or in any similar office or agency of the United States, any state thereof or any other country or any political subdivision thereof, or otherwise and (b) all renewals thereof.

UCC” has the meaning provided in Section 1(a) hereof.    

Work” shall mean any work that is subject to copyright protection pursuant to Title 17 of the United States Code.

2. Grant of Security Interest in the Collateral. To secure the prompt payment and performance in full when due, whether by lapse of time, acceleration, mandatory prepayment or otherwise, of the Secured Obligations, each Obligor hereby grants to the Administrative Agent, for the benefit of the holders of the Secured Obligations, a continuing security interest in, and a right to set off against, any and all right, title and interest of such Obligor in and to all of the following, whether now owned or existing or owned, acquired, or arising hereafter (collectively, the “Collateral”): (a) all Accounts; (b) all Money; (c) all Chattel Paper; (d) those certain Commercial Tort Claims set forth on Schedule 2 hereto; (e) all Copyrights; (f) all Copyright Licenses; (g) all Deposit Accounts; (h) all Documents; (i) all Equipment; (j) all Fixtures; (k) all General Intangibles; (l) all Goods; (m) all Instruments; (n) all Inventory; (o) all Investment Property; (p) all Letter-of-Credit Rights; (q) all Patents; (r) all Patent Licenses; (s) all Pledged Equity; (t) all Software; (u) all Supporting Obligations; (v) all Trademarks; (w) all Trademark Licenses; (x) all books and records related to the Collateral; and (y) all Accessions and all Proceeds of any and all of the foregoing.

Notwithstanding anything to the contrary contained herein, the security interests granted under this Agreement shall not extend to any Excluded Property; provided that upon the occurrence of an event that renders property to no longer constitute Excluded Property, a security interest in such property shall be automatically and simultaneously granted hereunder and shall be included as Collateral hereunder.

The Obligors and the Administrative Agent, on behalf of the holders of the Secured Obligations, hereby acknowledge and agree that the security interest created hereby in the Collateral (i) constitutes continuing collateral security for all of the Secured Obligations, whether now existing or hereafter arising and (ii) is not to be construed as an assignment of any Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks or Trademark Licenses.

3. Representations and Warranties. Each of the Obligors hereby represents and warrants to the Administrative Agent, for the benefit of the holders of the Secured Obligations, that:

 

4


(a) Ownership. Such Obligor is the legal and beneficial owner of its Collateral and has the right to pledge, sell, assign or transfer the same. There exists no Adverse Claim with respect to the Pledged Equity of such Obligor other than non-consensual Liens permitted by Section 7.2 of the Credit Agreement.

(b) Security Interest/Priority. This Agreement creates a valid security interest in favor of the Administrative Agent, for the benefit of the holders of the Secured Obligations, in the Collateral of such Obligor and, when properly perfected by filing a UCC-1 financing statement in the appropriate jurisdiction, shall constitute a valid and perfected security interest in such Collateral (including all uncertificated Pledged Equity consisting of partnership or limited liability company interests that do not constitute Securities), to the extent such security interest can be perfected by filing under the UCC, free and clear of all Liens except for Liens permitted by Section 7.2 of the Credit Agreement. The taking of possession by the Administrative Agent of the certificated securities (if any) evidencing the Pledged Equity and all other Instruments constituting Collateral (and any necessary endorsements) will perfect the Administrative Agent’s security interest in all the Pledged Equity evidenced by such certificated securities and such Instruments (subject to Permitted Liens). With respect to any Collateral consisting of a Deposit Account, Security Entitlement or assets held in a Securities Account (in each case, other than Excluded Accounts), upon execution and delivery by the applicable Obligor, the bank or Securities Intermediary, as applicable, and the Administrative Agent of an agreement granting control to the Administrative Agent over such Collateral, the Administrative Agent shall have a valid and perfected security interest in such Collateral, subject to Permitted Liens. Notwithstanding anything to the contrary in the foregoing, the Obligors and the Administrative Agent acknowledge and agree that no account control agreement shall be required with respect to any Deposit Account or Securities Account that has a balance (or which holds assets with a fair market value) less than $5,000,000.

(c) Types of Collateral. None of the Collateral consists of, or is the Proceeds of, As-Extracted Collateral, Consumer Goods, Farm Products, Manufactured Homes or standing timber.

(d) Equipment and Inventory. With respect to any Equipment and/or Inventory of such Obligor, such Obligor has exclusive possession and control of such Equipment and Inventory of such Obligor except for (i) Equipment leased by such Obligor as a lessee, (ii) Equipment or Inventory in transit with common carriers, (iii) mobile goods, (iv) Equipment or Inventory out for repair or refurbishment, (vi) Equipment or Inventory kept with third parties in the ordinary course of business, and/or (vii) Equipment or Inventory in possession of employees in the ordinary course of business. Subject to the foregoing, no Inventory of such Obligor is held by a Person other than such Obligor pursuant to consignment, sale or return, sale on approval or similar agreement.

(e) Authorization of Pledged Equity. All Pledged Equity is duly authorized and validly issued, is fully paid and, to the extent applicable, non-assessable and is not subject to the preemptive rights, warrants, options or other rights to purchase of any Person, or equityholder, voting trust or similar agreements outstanding with respect to, or property that is convertible, into, or that requires the issuance and sale of, any of the Pledged Equity, except to the extent expressly permitted under the Loan Documents.

(f) No Other Capital Stock, Instruments, Etc. As of the Closing Date, such Obligor owns all certificated Capital Stock in any Subidiary that is required to be pledged and delivered to the Administrative Agent hereunder, other than as set forth on Schedule 1 hereto, and all such certificated Capital Stock has been delivered to the Administrative Agent.

 

5


(g) Partnership and Limited Liability Company Interests. Except as previously disclosed to the Administrative Agent in writing, none of the Collateral consisting of an interest in a partnership or a limited liability company (i) is dealt in or traded on a securities exchange or in a securities market, (ii) by its terms expressly provides that it is a Security governed by Article 8 of the UCC, (iii) is an Investment Company Security, (iv) is held in a Securities Account or (v) constitutes a Security or a Financial Asset.

(h) Contracts; Agreements; Licenses. Such Obligor has no Material Agreements which are non-assignable by their terms, or as a matter of law, or which prevent the granting of a security interest therein for which consent has not been obtained.

(i) Consents; Etc. There are no restrictions in any articles of incorporation, articles of formation, articles of organization, bylaws, operating agreement or other applicable agreement of formation or organization governing any Pledged Equity or any other document related thereto which would limit or restrict (i) the grant of a Lien pursuant to this Agreement on such Pledged Equity, (ii) the perfection of such Lien or (iii) the exercise of remedies in respect of such perfected Lien in the Pledged Equity as contemplated by this Agreement. Except for (i) the filing or recording of UCC financing statements, (ii) the filing of appropriate notices with the United States Patent and Trademark Office and the United States Copyright Office, (iii) obtaining control to perfect the Liens created by this Agreement (to the extent required under Section 4(a) hereof), (iv) such actions as may be required by laws affecting the offering and sale of securities, (v) such actions as may be required by applicable foreign laws affecting the pledge of the Pledged Equity of Foreign Subsidiaries, (vi) any approvals that may be required to be obtained from any bailee or landlord to collect the Collateral, and (vii) consents, authorizations, filings or other actions which have been obtained or made, no material consent or material authorization of, filing with, or other act by or in respect of, any arbitrator or Governmental Authority and no consent of any other Person (including, without limitation, any stockholder, member or creditor of such Obligor), is required for (A) the grant by such Obligor of the security interest in the Collateral granted hereby or for the execution, delivery or performance of this Agreement by such Obligor, (B) the perfection of such security interest (to the extent such security interest can be perfected by filing under the UCC, the granting of control (to the extent required under Section 4(a) hereof) or by filing an appropriate notice with the United States Patent and Trademark Office or the United States Copyright Office) or (C) the exercise by the Administrative Agent or the holders of the Secured Obligations of the rights and remedies provided for in this Agreement.

(j) Commercial Tort Claims. As of the Closing Date, such Obligor has no Commercial Tort Claims seeking damages in excess of $2,000,000 in any individual instance or $5,000,000 in the aggregate when taken together with all Commercial Tort Claims of all of the other Obligors, other than as set forth on Schedule 2 hereto.

(k) Copyrights, Patents and Trademarks.

(i) Schedule 3 hereto includes all registrations or applications for Copyrights, Patents and Trademarks and all material Copyright Licenses, Patent Licenses and Trademark Licenses (excluding “off-the-shelf” licenses pursuant to standard licensing terms which have not been modified or customized by a third party for the Obligor) owned by such Obligor in its own name, or to which any Obligor is a party, as of the date hereof.

(ii) All registrations or applications pertaining to such Copyrights, Patents and Trademarks as have been set forth on Schedule 3 hereto have been duly and properly filed, and to any Obligor’s knowledge, each Copyright, Patent and Trademark of such Obligor is valid, subsisting, unexpired, enforceable and has not been abandoned.

 

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(iii) Except as set forth on Schedule 3 hereto, none of such Copyrights, Patents and Trademarks is the subject of any exclusive licensing or franchise agreement as of the date hereof.

(iv) Except as could not reasonably be expected to have a Material Adverse Effect, to such Obligor’s knowledge, no holding, decision or judgment has been rendered by any Governmental Authority that would limit, cancel or question the validity of any such Copyright, Patent or Trademark.

(v) No action or proceeding is pending, seeking to limit, cancel or question the validity of any Copyright, Patent or Trademark of any Obligor or Subsidiary of any Obligor that could reasonably be expected to have a Material Adverse Effect.

4. Covenants. Each Obligor covenants that until such time as the Secured Obligations arising under the Loan Documents have been paid in full and the Commitments have expired or been terminated, such Obligor shall:

(a) Instruments/Chattel Paper/Pledged Equity/Control.

(i) If any amount in excess of $2,000,000 in any individual instance or $5,000,000 in the aggregate payable under or in connection with any of the Collateral shall be or become evidenced by any Instrument or Tangible Chattel Paper, or if any property constituting Collateral shall be stored or shipped subject to a Document, ensure that such Instrument, Tangible Chattel Paper or Document is either in the possession of such Obligor at all times or, if requested by the Administrative Agent to perfect its security interest in such Collateral, is delivered to the Administrative Agent duly endorsed in a manner reasonably satisfactory to the Administrative Agent. Such Obligor shall ensure that any Collateral consisting of Tangible Chattel Paper is marked with a legend reasonably acceptable to the Administrative Agent indicating the Administrative Agent’s security interest in such Tangible Chattel Paper.

(ii) Deliver to the Administrative Agent promptly upon the receipt thereof by or on behalf of such Obligor, all certificates and instruments constituting Pledged Equity. Prior to delivery to the Administrative Agent, all such certificates constituting Pledged Equity shall be held in trust by such Obligor for the benefit of the Administrative Agent pursuant hereto. All such certificates representing Pledged Equity shall be delivered in suitable form for transfer by delivery or shall be accompanied by duly executed instruments of transfer or assignment in blank, substantially in the form provided in Exhibit 4(a) hereto (or other form acceptable to the Administrative Agent in its reasonable discretion).

(iii) Execute and deliver all agreements, assignments, instruments or other documents as reasonably requested by the Administrative Agent for the purpose of obtaining and maintaining control with respect to any Collateral consisting of (A) Deposit Accounts, (B) Investment Property, (C) Letter-of-Credit Rights and (D) Electronic Chattel Paper.

(b) Filing of Financing Statements, Notices, Etc. Such Obligor shall execute and deliver to the Administrative Agent such agreements, assignments or instruments (including affidavits, notices, reaffirmations and amendments and restatements of existing documents, as the Administrative Agent may reasonably request) and do all such other things as the Administrative Agent may reasonably deem necessary or appropriate (i) to assure to the Administrative Agent its

 

7


security interests hereunder, including (A) such instruments as the Administrative Agent may from time to time reasonably request in order to perfect and maintain the security interests granted hereunder in accordance with the UCC, (B) with regard to Copyrights, a Notice of Grant of Security Interest in Copyrights in the form of Exhibit 4(b)(i) hereto, (C) with regard to Patents, a Notice of Grant of Security Interest in Patents for filing with the United States Patent and Trademark Office in the form of Exhibit 4(b)(ii) hereto and (D) with regard to Trademarks, a Notice of Grant of Security Interest in Trademarks for filing with the United States Patent and Trademark Office in the form of Exhibit 4(b)(iii) hereto, (ii) to consummate the transactions contemplated hereby and (iii) to otherwise protect and assure the Administrative Agent of its rights and interests hereunder. Furthermore, such Obligor also hereby irrevocably makes, constitutes and appoints the Administrative Agent, its nominee or any other person whom the Administrative Agent may designate, as such Obligor’s attorney in fact with full power and for the limited purpose to prepare and file (and, to the extent applicable, sign) in the name of such Obligor any financing statements, or amendments and supplements to financing statements, renewal financing statements, notices or any similar documents which in the Administrative Agent’s reasonable discretion would be necessary or appropriate in order to perfect and maintain perfection of the security interests granted hereunder, such power, being coupled with an interest, being and remaining irrevocable until such time as the Secured Obligations arising under the Loan Documents have been paid in full and the Commitments have expired or been terminated. Such Obligor hereby agrees that a carbon, photographic or other reproduction of this Agreement or any such financing statement is sufficient for filing as a financing statement by the Administrative Agent without notice thereof to such Obligor wherever the Administrative Agent may in its sole discretion desire to file the same.

(c) Collateral Held by Warehouseman, Bailee, Etc. If any Collateral with a book value in excess of $5,000,000 is at any time in the possession or control of a warehouseman, bailee or any agent or processor of such Obligor and the Administrative Agent so reasonably requests (i) notify such Person in writing of the Administrative Agent’s security interest therein, (ii) instruct such Person to hold all such Collateral for the Administrative Agent’s account and subject to the Administrative Agent’s instructions and (iii) use commercially reasonable efforts to obtain a written acknowledgment from such Person that it is holding such Collateral for the benefit of the Administrative Agent.

(d) Commercial Tort Claims. (i) Promptly forward to the Administrative Agent an updated Schedule 2 listing any and all Commercial Tort Claims by or in favor of such Obligor seeking damages in excess of $2,000,000 in any individual instance or $5,000,000 in the aggregate for all Commercial Tort Claims of the Obligors not subject to a Lien in favor of the Administrative Agent for the benefit of itself and the other holders of the Secured Obligations and (ii) execute and deliver such statements, documents and notices and do and cause to be done all such things as may be reasonably required by the Administrative Agent, or required by law to create, preserve, perfect and maintain the Administrative Agent’s security interest in any Commercial Tort Claims initiated by or in favor of any Obligor.

(e) Books and Records. Each Obligor shall mark its books and records (and shall cause the issuer of the Pledged Equity of such Obligor to mark its books and records) to reflect the security interest granted pursuant to this Agreement.

(f) Nature of Collateral. At all times maintain the Collateral as personal property and not affix any of the Collateral to any real property in a manner which would change its nature from personal property to real property or a Fixture to real property, unless the Administrative Agent shall have a perfected Lien on such Fixture or real property.

 

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(g) Issuance or Acquisition of Capital Stock in Partnership or Limited Liability Company. Not without executing and delivering, or causing to be executed and delivered, to the Administrative Agent such agreements, documents and instruments as the Administrative Agent may reasonably require, issue or acquire any Pledged Equity consisting of an interest in a partnership or a limited liability company that (i) is dealt in or traded on a securities exchange or in a securities market, (ii) by its terms expressly provides that it is a Security governed by Article 8 of the UCC, (iii) is an Investment Company Security, (iv) is held in a Securities Account or (v) constitutes a Security or a Financial Asset.

5. Authorization to File Financing Statements. Each Obligor hereby authorizes the Administrative Agent to prepare and file such financing statements (including continuation statements) or amendments thereof or supplements thereto or other instruments as the Administrative Agent may from time to time deem necessary or appropriate in order to perfect and maintain the security interests granted hereunder in accordance with the UCC (including authorization to describe the Collateral as “all personal property”, “all assets” or words of similar meaning).

6. Advances.

(a) Upon the occurrence of an Event of Default and during the continuation thereof, or (b) upon the failure of any Obligor to perform any of the covenants and agreements contained herein or in any other Loan Document if, with respect to this clause (b), the Administrative Agent reasonably determines that the taking of a particular action is required prior to the expiration of any applicable cure period(s) in order to prevent an impairment of its rights in and to any Collateral, then in either case, the Administrative Agent may, at its sole option and in its sole discretion upon notice to the applicable Obligors, perform the same and in so doing may expend such sums as the Administrative Agent may reasonably deem advisable in the performance thereof, including, without limitation, the payment of any insurance premiums, the payment of any taxes, a payment to obtain a release of a Lien or potential Lien, expenditures made in defending against any adverse claim and all other expenditures which the Administrative Agent may make for the protection of the security hereof or may be compelled to make by operation of law. All such sums and amounts so expended shall be repayable by the Obligors on a joint and several basis promptly upon timely notice thereof and demand therefor, shall constitute additional Secured Obligations and shall bear interest from the date said amounts are expended as Default Interest. No such performance of any covenant or agreement by the Administrative Agent on behalf of any Obligor, and no such advance or expenditure therefor, shall relieve the Obligors of any Default or Event of Default. The Administrative Agent may make any payment hereby authorized in accordance with any bill, statement or estimate procured from the appropriate public office or holder of the claim to be discharged without inquiry into the accuracy of such bill, statement or estimate or into the validity of any tax assessment, sale, forfeiture, tax lien, title or claim except to the extent such payment is being contested in good faith by an Obligor in appropriate proceedings and against which adequate reserves are being maintained in accordance with GAAP.

7. Remedies.

(a) General Remedies. During the continuance of an Event of Default, the Administrative Agent shall have, in addition to the rights and remedies provided herein, in the Loan Documents, in any other documents relating to the Secured Obligations, or by law (including, but not limited to, levy of attachment, garnishment and the rights and remedies set forth in the UCC of the jurisdiction applicable to the affected Collateral), the rights and remedies of a secured party under the UCC (regardless of whether the UCC is the law of the jurisdiction where the rights and remedies are asserted and regardless of whether the UCC applies to the affected Collateral), and further, the Administrative Agent may, with or without judicial process or the aid and assistance of others, (i) enter on any premises on which any of the Collateral may be located and, without resistance or interference by the Obligors, take possession of the Collateral, (ii) dispose of any

 

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Collateral on any such premises, (iii) require the Obligors to assemble and make available to the Administrative Agent at the expense of the Obligors any Collateral at any place and time designated by the Administrative Agent which is reasonably convenient to both parties, (iv) remove any Collateral from any such premises for the purpose of effecting sale or other disposition thereof, and/or (v) without demand and without advertisement, notice, hearing or process of law, all of which each of the Obligors hereby waives to the fullest extent permitted by law, at any place and time or times, sell and deliver any or all of the Collateral held by or for it at a public or private sale (which in the case of a private sale of Pledged Equity, may be to a restricted group of purchasers who will be obligated to agree, among other things, to acquire such securities for their own account, for investment and not with a view to the distribution or resale thereof), at any exchange or broker’s board or elsewhere, by one or more contracts, in one or more parcels, for cash, upon credit or otherwise, at such prices and upon such terms as the Administrative Agent deems advisable, in its sole discretion (subject to any and all mandatory legal requirements). Each Obligor acknowledges that any such private sale may be at prices and on terms less favorable to the seller than the prices and other terms which might have been obtained at a public sale and, notwithstanding the foregoing, agrees that such private sale shall be deemed to have been made in a commercially reasonable manner and, in the case of a sale of Pledged Equity, that the Administrative Agent shall have no obligation to delay sale of any such securities for the period of time necessary to permit the issuer of such securities to register such securities for public sale under the Securities Act of 1933. Neither the Administrative Agent’s compliance with applicable law nor its disclaimer of warranties relating to the Collateral shall be deemed to adversely affect the commercial reasonableness of any sale. To the extent the rights of notice cannot be legally waived hereunder, each Obligor agrees that any requirement of reasonable notice shall be met if such notice, specifying the place of any public sale or the time after which any private sale is to be made, is personally served on or mailed, postage prepaid, to the Obligors in accordance with the notice provisions of Section 10.1 of the Credit Agreement at least ten (10) days before the time of sale or other event giving rise to the requirement of such notice. The Administrative Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Each Obligor further acknowledges and agrees that any offer to sell any Pledged Equity which has been (i) publicly advertised on a bona fide basis in a newspaper or other publication of general circulation in the financial community of New York, New York (to the extent that such offer may be advertised without prior registration under the Securities Act of 1933), or (ii) made privately in the manner described above shall be deemed to involve a “public sale” under the UCC, notwithstanding that such sale may not constitute a “public offering” under the Securities Act of 1933, and the Administrative Agent may, in such event, bid for the purchase of such securities. The Administrative Agent shall not be obligated to make any sale or other disposition of the Collateral regardless of notice having been given. To the extent permitted by applicable law, any holder of Secured Obligations may be a purchaser at any such sale. To the extent permitted by applicable law, each of the Obligors hereby waives all of its rights of redemption with respect to any such sale. Subject to the provisions of applicable law, the Administrative Agent may postpone or cause the postponement of the sale of all or any portion of the Collateral by announcement at the time and place of such sale, and such sale may, without further notice, to the extent permitted by law, be made at the time and place to which the sale was postponed, or the Administrative Agent may further postpone such sale by announcement made at such time and place.

(b) Remedies Relating to Accounts. During the continuance of an Event of Default, whether or not the Administrative Agent has exercised any or all of its rights and remedies hereunder, (i) each Obligor will promptly upon the request of the Administrative Agent instruct all of its account debtors to remit all payments in respect of Accounts to a mailing location selected by the Administrative Agent and (ii) the Administrative Agent shall have the right to enforce any Obligor’s rights against its customers and account debtors, and the Administrative Agent or its designee may notify any Obligor’s customers and account debtors that the Accounts of such Obligor have been assigned to the Administrative Agent or of the Administrative Agent’s security interest therein, and may (either in its own name or in the name of an Obligor or both) demand, collect (including without limitation by way of a lockbox arrangement), receive,

 

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take receipt for, sell, sue for, compound, settle, compromise and give acquittance for any and all amounts due or to become due on any Account, and, in the Administrative Agent’s discretion, file any claim or take any other action or proceeding to protect and realize upon the security interest of the holders of the Secured Obligations in the Accounts. Each Obligor acknowledges and agrees that the Proceeds of its Accounts remitted to or on behalf of the Administrative Agent in accordance with the provisions hereof shall be solely for the Administrative Agent’s own convenience and that such Obligor shall not have any right, title or interest in such Accounts or in any such other amounts except as expressly provided herein. Neither the Administrative Agent nor the holders of the Secured Obligations shall have any liability or responsibility to any Obligor for acceptance of a check, draft or other order for payment of money bearing the legend “payment in full” or words of similar import or any other restrictive legend or endorsement or be responsible for determining the correctness of any remittance. Furthermore, during the continuance of an Event of Default, (i) the Administrative Agent shall have the right, but not the obligation, to make test verifications of the Accounts in any manner and through any medium that it reasonably considers advisable, and the Obligors shall furnish all such assistance and information as the Administrative Agent may require in connection with such test verifications, (ii) upon the Administrative Agent’s request and at the expense of the Obligors, the Obligors shall use commercially reasonable efforts to cause independent public accountants or others satisfactory to the Administrative Agent to furnish to the Administrative Agent reports showing reconciliations, aging and test verifications of, and trial balances for, the Accounts and (iii) upon three (3) Business Days’ prior written notice to the Obligors, the Administrative Agent in its own name or in the name of others may communicate with account debtors on the Accounts to verify with them to the Administrative Agent’s satisfaction the existence, amount and terms of any Accounts.

(c) Deposit Accounts. Upon the occurrence of an Event of Default and during the continuation thereof, the Administrative Agent may (i) prevent withdrawals or other dispositions of funds in Deposit Accounts (other than Excluded Accounts) maintained with the Administrative Agent and (ii) exercise control pursuant to any control agreement governing a Deposit Account (other than Excluded Accounts) not maintained with the Administrative Agent.

(d) Access. In addition to the rights and remedies hereunder, during the continuance of an Event of Default, the Administrative Agent shall have the right to peaceably enter and remain upon the various premises of the Obligors without cost or charge to the Administrative Agent, and use the same, together with materials, supplies, books and records of the Obligors for the purpose of collecting and liquidating the Collateral, or for preparing for sale and conducting the sale of the Collateral, whether by foreclosure, auction or otherwise. In addition, the Administrative Agent may remove Collateral, or any part thereof, from such premises and/or any records with respect thereto, in order to effectively collect or liquidate such Collateral.

(e) Nonexclusive Nature of Remedies. Failure by the Administrative Agent or the holders of the Secured Obligations to exercise any right, remedy or option under this Agreement, any other Loan Document, any other document relating to the Secured Obligations, or as provided by law, or any delay by the Administrative Agent or the holders of the Secured Obligations in exercising the same, shall not operate as a waiver of any such right, remedy or option. No waiver hereunder shall be effective unless it is in writing, signed by the party against whom such waiver is sought to be enforced and then only to the extent specifically stated, which in the case of the Administrative Agent or the holders of the Secured Obligations shall only be granted as provided herein. To the extent permitted by law, neither the Administrative Agent, the holders of the Secured Obligations, nor any party acting as attorney for the Administrative Agent or the holders of the Secured Obligations, shall be liable hereunder for any acts or omissions or for any error of judgment or mistake of fact or law other than their bad faith, gross negligence, willful misconduct or a material breach of the Administrative Agent’s or such holder’s obligations hereunder. The rights and remedies of the Administrative Agent and the holders of the Secured Obligations under this Agreement shall be cumulative and not exclusive of any other right or remedy which the Administrative Agent or the holders of the Secured Obligations may have.

 

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(f) Retention of Collateral. In addition to the rights and remedies hereunder, the Administrative Agent may, in compliance with Sections 9-620 and 9-621 of the UCC or otherwise complying with the requirements of applicable law of the relevant jurisdiction, accept or retain the Collateral in satisfaction of the Secured Obligations. Unless and until the Administrative Agent shall have provided such notices, however, the Administrative Agent shall not be deemed to have retained any Collateral in satisfaction of any Secured Obligations for any reason.

(g) Deficiency. In the event that the proceeds of any sale, collection or realization are insufficient to pay all amounts to which the Administrative Agent or the holders of the Secured Obligations are legally entitled, the Obligors shall be jointly and severally liable for the deficiency, together with interest thereon at the rate provided for Default Interest in the Credit Agreement, together with, subject to the limitations set forth in Section 10.3 of the Credit Agreement, the costs of collection and the fees, charges and disbursements of counsel. Any surplus remaining after the full payment and satisfaction of the Secured Obligations shall be returned to the Obligors or to whomsoever a court of competent jurisdiction shall determine to be entitled thereto. Notwithstanding any provision to the contrary contained herein, in any of the other Loan Documents or in any other documents relating to the Secured Obligations, the obligations of each Obligor under the Credit Agreement and the other Loan Documents shall be limited to an aggregate amount equal to the largest amount that would not render such obligations subject to avoidance under Section 548 of the Bankruptcy Code of the United States or any other applicable Debtor Relief Law (including any comparable provisions of any applicable state law).

8. Rights of the Administrative Agent.

(a) Power of Attorney. In addition to other powers of attorney contained herein, each Obligor hereby designates and appoints the Administrative Agent, on behalf of the holders of the Secured Obligations, and each of its designees or agents, as attorney-in-fact of such Obligor, irrevocably and with power of substitution, with authority to take any or all of the following actions during the continuance of an Event of Default:

(i) to demand, collect, settle, compromise, adjust, give discharges and releases, all as the Administrative Agent may reasonably determine;

(ii) to commence and prosecute any actions at any court for the purposes of collecting any Collateral and enforcing any other right in respect thereof;

(iii) to defend, settle or compromise any action brought and, in connection therewith, give such discharge or release as the Administrative Agent may deem reasonably appropriate;

(iv) to receive, open and dispose of mail addressed to an Obligor and endorse checks, notes, drafts, acceptances, money orders, bills of lading, warehouse receipts or other instruments or documents evidencing payment, shipment or storage of the Goods giving rise to the Collateral of such Obligor on behalf of and in the name of such Obligor, or securing, or relating to such Collateral;

(v) to sell, assign, transfer, make any agreement in respect of, or otherwise deal with or exercise rights in respect of, any Collateral or the Goods or services which have given rise thereto, as fully and completely as though the Administrative Agent were the absolute owner thereof for all purposes;

 

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(vi) to adjust and settle claims under any insurance policy relating thereto;

(vii) to execute and deliver all assignments, conveyances, statements, financing statements, renewal financing statements, security agreements, affidavits, notices and other agreements, instruments and documents that the Administrative Agent may reasonably determine necessary in order to perfect and maintain the security interests and liens granted in this Agreement and in order to fully consummate all of the transactions contemplated herein;

(viii) to institute any foreclosure proceedings that the Administrative Agent may deem appropriate;

(ix) to sign and endorse any drafts, assignments, proxies, stock powers, verifications, notices and other documents relating to the Collateral;

(x) to exchange any of the Pledged Equity or other property upon any merger, consolidation, reorganization, recapitalization or other readjustment of the issuer thereof and, in connection therewith, deposit any of the Pledged Equity with any committee, depository, transfer agent, registrar or other designated agency upon such terms as the Administrative Agent may reasonably deem appropriate;

(xi) upon prior written notice to the Obligors, to vote for a shareholder resolution, or to sign an instrument in writing, sanctioning the transfer of any or all of the Pledged Equity into the name of the Administrative Agent or one or more of the holders of the Secured Obligations or into the name of any transferee to whom the Pledged Equity or any part thereof may be sold pursuant and subject to Section 7 hereof;

(xii) to pay or discharge taxes, liens, security interests or other encumbrances levied or placed on or threatened against the Collateral;

(xiii) to direct any parties liable for any payment in connection with any of the Collateral to make payment of any and all monies due and to become due thereunder directly to the Administrative Agent or as the Administrative Agent shall direct;

(xiv) to receive payment of and receipt for any and all monies, claims, and other amounts due and to become due at any time in respect of or arising out of any Collateral; and

(xv) to do and perform all such other acts and things as the Administrative Agent may reasonably deem to be necessary, proper or convenient to accomplish the purposes of the Loan Documents.

This power of attorney is a power coupled with an interest and shall be irrevocable until such time as the Secured Obligations arising under the Loan Documents have been paid in full and the Commitments have expired or been terminated. The Administrative Agent shall be under no duty to exercise or withhold the exercise of any of the rights, powers, privileges and options expressly or implicitly granted to the Administrative Agent in this Agreement, and shall not be liable for any failure to do so or any delay in doing so. The Administrative Agent shall not be liable for any act or omission or for any error of judgment or any mistake of fact or law in its individual capacity or its capacity as attorney-in-fact except acts or omissions resulting from its bad faith, gross negligence, willful misconduct or a material breach of its obligations hereunder. This power of attorney is conferred on the Administrative Agent solely to protect, preserve and realize upon its security interest in the Collateral.

 

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(b) Assignment by the Administrative Agent. The Administrative Agent may from time to time assign the Secured Obligations to a successor Administrative Agent appointed in accordance with the Credit Agreement, and such successor shall be entitled to all of the rights and remedies of the Administrative Agent under this Agreement in relation thereto.

(c) The Administrative Agent’s Duty of Care. Other than the exercise of reasonable care to assure the safe custody of the Collateral while being held by the Administrative Agent hereunder, the Administrative Agent shall have no duty or liability to preserve rights pertaining thereto, it being understood and agreed that the Obligors shall be responsible for preservation of all rights in the Collateral, and the Administrative Agent shall be relieved of all responsibility for the Collateral upon surrendering it or tendering the surrender of it to the Obligors. The Administrative Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which the Administrative Agent accords its own property, which shall be no less than the treatment employed by a reasonable and prudent agent in the industry, it being understood that the Administrative Agent shall not have responsibility for taking any necessary steps to preserve rights against any parties with respect to any of the Collateral. In the event of a public or private sale of Collateral pursuant to Section 7 hereof, the Administrative Agent shall have no responsibility for (i) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relating to any Collateral, whether or not the Administrative Agent has or is deemed to have knowledge of such matters, or (ii) taking any steps to clean, repair or otherwise prepare the Collateral for sale.

(d) Liability with Respect to Accounts. Anything herein to the contrary notwithstanding, each of the Obligors shall remain liable under each of the Accounts to observe and perform all the conditions and obligations to be observed and performed by it thereunder, all in accordance with the terms of any agreement giving rise to each such Account. Neither the Administrative Agent nor any holder of Secured Obligations shall have any obligation or liability under any Account (or any agreement giving rise thereto) by reason of or arising out of this Agreement or the receipt by the Administrative Agent or any holder of Secured Obligations of any payment relating to such Account pursuant hereto, nor shall the Administrative Agent or any holder of Secured Obligations be obligated in any manner to perform any of the obligations of an Obligor under or pursuant to any Account (or any agreement giving rise thereto), to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or as to the sufficiency of any performance by any party under any Account (or any agreement giving rise thereto), to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times.

(e) Voting and Payment Rights in Respect of the Pledged Equity.

(i) So long as no Event of Default shall exist, each Obligor may (A) exercise any and all voting and other consensual rights pertaining to the Pledged Equity of such Obligor or any part thereof for any purpose not inconsistent with the terms of this Agreement or the Credit Agreement and (B) receive and retain any and all dividends (other than stock dividends and other dividends constituting Collateral which are addressed hereinabove), principal or interest paid in respect of the Pledged Equity to the extent they are allowed under the Credit Agreement; and

(ii) During the continuance of an Event of Default and upon one (1) Business Day’s prior written notice to the Obligors, (A) all rights of an Obligor to exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant to clause (i)(A) above shall cease and all such rights shall thereupon become vested in the Administrative Agent which shall then have the sole right to exercise such voting and other consensual rights, (B) all rights of an Obligor to receive the dividends, principal and interest payments which it would otherwise be authorized to receive and retain pursuant to clause (i)(B) above shall cease and all such rights

 

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shall thereupon be vested in the Administrative Agent which shall then have the sole right to receive and hold as Collateral such dividends, principal and interest payments, and (C) all dividends, principal and interest payments which are received by an Obligor contrary to the provisions of clause (ii)(B) above shall be received in trust for the benefit of the Administrative Agent, shall be segregated from other property or funds of such Obligor, and shall be forthwith paid over to the Administrative Agent as Collateral in the exact form received, to be held by the Administrative Agent as Collateral and as further collateral security for the Secured Obligations. Upon the cure or waiver of such Event of Default in accordance with the terms of the Credit Agreement, the Administrative Agent shall as soon reasonably practicable repay to each Obligor all dividends, interest, principal or other distributions received by the Administrative Agent pursuant to this clause (ii) that such Obligor would otherwise have been permitted to retain pursuant to the terms of clause (i) above that (x) were not applied to repay the Obligations in accordance with the Credit Agreement and other Loan Documents and (y) that the Administrative Agent is not otherwise required to hold for the repayment of the Obligations in accordance with the Credit Agreement and other Loan Documents.

(f) Releases of Collateral. (i) If any Collateral shall be sold, transferred or otherwise disposed of by any Obligor in a transaction permitted by the Credit Agreement, the Administrative Agent, at the request and sole expense of such Obligor, shall promptly execute and deliver to such Obligor all releases and other documents, and take such other action, reasonably necessary to evidence such release of the Liens created hereby or by any other Collateral Document on such Collateral. (ii) The Administrative Agent may release any of the Pledged Equity from this Agreement or may substitute any of the Pledged Equity for other Pledged Equity without altering, varying or diminishing in any way the force, effect, lien, pledge or security interest of this Agreement as to any Pledged Equity not expressly released or substituted, and this Agreement shall continue as a lien on all Pledged Equity not expressly released or substituted.

9. Application of Proceeds. Upon the acceleration of the Obligations under the Loan Documents pursuant to Section 8.1 of the Credit Agreement, any payments in respect of the Secured Obligations and any proceeds of the Collateral, when received by the Administrative Agent or any holder of the Secured Obligations in Money or its equivalent, will be applied in reduction of the Secured Obligations in the order set forth in Section 8.2 of the Credit Agreement.

10. Continuing Agreement.

(a) This Agreement shall remain in full force and effect until such time as the Secured Obligations arising under the Loan Documents have been paid in full and the Commitments have expired or been terminated, at which time this Agreement and the liens and security interests of the Administrative Agent hereunder shall be automatically terminated and the Administrative Agent shall, upon the request and at the expense of the Obligors, forthwith execute and deliver all UCC termination statements and/or other documents reasonably requested by the Obligors evidencing such termination and/or release.

(b) This Agreement shall continue to be effective or be automatically reinstated, as the case may be, if at any time payment, in whole or in part, of any of the Secured Obligations is rescinded or must otherwise be restored or returned by the Administrative Agent or any holder of the Secured Obligations as a preference, fraudulent conveyance or otherwise under any Debtor Relief Law, all as though such payment had not been made; provided that in the event payment of all or any part of the Secured Obligations is rescinded or must be restored or returned, but subject to the limitations of Section 10.3 of the Credit Agreement, all reasonable costs and expenses (including without limitation any reasonable legal fees and disbursements) incurred by the Administrative Agent or any holder of the Secured Obligations in defending and enforcing such reinstatement shall be deemed to be included as a part of the Secured Obligations.

 

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11. Amendments; Waivers; Modifications, Etc. This Agreement and the provisions hereof may not be amended, waived, modified, changed, discharged or terminated except as set forth in Section 10.2 of the Credit Agreement; provided that any update or revision to Schedule 2 hereof delivered by any Obligor shall not constitute an amendment for purposes of this Section 11 or Section 10.2 of the Credit Agreement.

12. Successors in Interest. This Agreement shall be binding upon each Obligor, its successors and assigns and shall inure, together with the rights and remedies of the Administrative Agent and the holders of the Secured Obligations hereunder, to the benefit of the Administrative Agent and the holders of the Secured Obligations and their successors and permitted assigns.

13. Notices. All notices required or permitted to be given under this Agreement shall be in conformance with Section 10.1 of the Credit Agreement.

14. Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by telecopy), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. It shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart. Delivery of an executed counterpart of a signature page of this Agreement by facsimile transmission or by any other electronic imaging means (including .pdf), shall be effective as delivery of a manually executed counterpart of this Agreement.

15. Headings. The headings of the sections hereof are provided for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement.

16. Governing Law; Submission to Jurisdiction; Venue; WAIVER OF JURY TRIAL. The terms of Sections 10.5 and 10.6 of the Credit Agreement with respect to governing law, submission to jurisdiction, venue, consent to service of process and waiver of jury trial are incorporated herein by reference, mutatis mutandis, and the parties hereto agree to such terms.

17. Severability. If any provision of this Agreement is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Agreement shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

18. Entirety. This Agreement, the other Loan Documents, and any separate letter agreements with respect to fees payable to the Administrative Agent or the Issuing Bank, constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof.

19. Other Security. To the extent that any of the Secured Obligations are now or hereafter secured by property other than the Collateral (including, without limitation, real property and securities owned by an Obligor), or by a guarantee, endorsement or property of any other Person, then the Administrative Agent shall have the right to proceed against such other property, guarantee or endorsement during the continuance of any Event of Default, and the Administrative Agent shall have the right, in its sole discretion, to determine which rights, security, liens, security interests or remedies the Administrative Agent shall at any time pursue, relinquish, subordinate, modify or take with respect thereto, without in any way modifying or affecting any of them or the Secured Obligations or any of the rights of the Administrative Agent or the holders of the Secured Obligations under this Agreement, under any other of the Loan Documents or under any other document relating to the Secured Obligations.

 

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20. Joinder. At any time after the date of this Agreement, one or more additional Persons may become party hereto by executing and delivering to the Administrative Agent a Guarantor Joinder Agreement. Immediately upon such execution and delivery of such Guarantor Joinder Agreement (and without any further action), each such additional Person will become a party to this Agreement as an “Obligor” and have all of the rights and obligations of an Obligor hereunder and this Agreement and the schedules hereto shall be deemed amended by such Guarantor Joinder Agreement.

21. Joint and Several Obligations of Obligors.

(a) Subject to Section 21(c), each of the Obligors is accepting joint and several liability hereunder, in consideration of the financial accommodation to be provided by the holders of the Obligations, of each of the Obligors and in consideration of the undertakings of each of the Obligors to accept joint and several liability for the obligations of each of them.

(b) Subject to Section 21(c), each of the Obligors jointly and severally hereby irrevocably and unconditionally accepts, not merely as a surety but also as a co-debtor, joint and several liability with the other Obligors with respect to the payment and performance of all of the Secured Obligations arising under this Agreement, the other Loan Documents and any other documents relating to the Secured Obligations, it being the intention of the parties hereto that all the Secured Obligations shall be the joint and several obligations of each of the Obligors without preferences or distinction among them.

(c) Notwithstanding any provision to the contrary contained herein, in any other of the Loan Documents or in any other documents relating to the Secured Obligations, the obligations of each Guarantor under the Credit Agreement, the other Loan Documents and the other documents relating to the Secured Obligations shall be limited to an aggregate amount equal to the largest amount that would not render such obligations subject to avoidance under Section 548 of the United States Bankruptcy Code or any comparable provisions of any other Debtor Relief Law.

22. Consent of Issuers of Pledged Equity. Each issuer of Pledged Equity party to this Agreement hereby acknowledges, consents and agrees to the grant of the security interests in such Pledged Equity by the applicable Obligors pursuant to this Agreement, together with all rights accompanying such security interests as provided by this Agreement and applicable law, notwithstanding any anti-assignment provisions in any operating agreement, limited partnership agreement or similar organizational or governance documents of such issuer.

[SIGNATURE PAGES FOLLOW]

 

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Each of the parties hereto has caused a counterpart of this Agreement to be duly executed and delivered as of the date first above written.

 

OBLIGORS:     AARON’S, LLC,
    a Georgia limited liability company
    By:    
    Name:  
    Title:  
   

AARON’S SPINCO, INC.,

a Georgia corporation

    By:    
    Name:  
    Title:  
    [TBD],8
    By:    
    Name:  
    Title:  

 

8

To include all Subsidiary Guarantors at the time of entry into the Agreement.

AARON’S, LLC

SECURITY AND PLEDGE AGREEMENT


Accepted and agreed to as of the date first written above.

 

TRUIST BANK, as Administrative Agent
By:    
Name:  
Title:  

AARON’S, LLC

SECURITY AND PLEDGE AGREEMENT


EXHIBIT 4(a)

IRREVOCABLE [STOCK][UNIT] POWER

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers to:

 

 

the following equity interests of ____________________, a _________ [corporation][limited liability company]:

No. of Shares ____________    Certificate No. ______________

and irrevocably appoints ______________ its agent and attorney-in-fact to transfer all or any part of such equity interests and to take all necessary and appropriate action to effect any such transfer. The agent and attorney-in-fact may substitute and appoint one or more persons to act for him.

Dated: ____________, 20___

 

 

By:  

                                         

Name:  

 

Title:  

 


EXHIBIT 4(b)(i)

NOTICE

OF

GRANT OF SECURITY INTEREST

IN

COPYRIGHTS

United States Copyright Office

Ladies and Gentlemen:

Please be advised that pursuant to the Security and Pledge Agreement dated as of [     ] (as the same may be amended, modified, extended or restated from time to time, the “Agreement”) by and among the Obligors party thereto (each an “Obligor” and collectively, the “Obligors”) and Truist Bank, as Administrative Agent (the “Administrative Agent”) for the holders of the Secured Obligations referenced therein, the undersigned Obligor has granted a continuing security interest in and continuing lien upon the copyrights and copyright applications set forth on Schedule 1 hereto to the Administrative Agent for the ratable benefit of the holders of the Secured Obligations.

The undersigned Obligor and the Administrative Agent, on behalf of the holders of the Secured Obligations, hereby acknowledge and agree that the security interest in the foregoing copyrights and copyright applications (i) may only be terminated in accordance with the terms of the Agreement and (ii) is not to be construed as an assignment of any copyright or copyright application.

 

Very truly yours,

 

[Obligor]
By:  

                    

Name:  
Title:  
[Address]
Acknowledged and Accepted:
TRUIST BANK, as Administrative Agent
By:  

                         

Name:  
Title:  
[Address]


EXHIBIT 4(b)(ii)

NOTICE

OF

GRANT OF SECURITY INTEREST

IN

PATENTS

United States Patent and Trademark Office

Ladies and Gentlemen:

Please be advised that pursuant to the Security and Pledge Agreement dated as of [     ] (as the same may be amended, modified, extended or restated from time to time, the “Agreement”) by and among the Obligors party thereto (each an “Obligor” and collectively, the “Obligors”) and Truist Bank, as Administrative Agent (the “Administrative Agent”) for the holders of the Secured Obligations referenced therein, the undersigned Obligor has granted a continuing security interest in and continuing lien upon the patents and patent applications set forth on Schedule 1 hereto to the Administrative Agent for the ratable benefit of the holders of the Secured Obligations.

The undersigned Obligor and the Administrative Agent, on behalf of the holders of the Secured Obligations, hereby acknowledge and agree that the security interest in the foregoing patents and patent applications (i) may only be terminated in accordance with the terms of the Agreement and (ii) is not to be construed as an assignment of any patent or patent application.

 

Very truly yours,

 

[Obligor]
By:  

                                         

Name:
Title:
[Address]
Acknowledged and Accepted:
TRUIST BANK, as Administrative Agent
By:  

                         

Name:
Title:
[Address]


EXHIBIT 4(b)(iii)

NOTICE

OF

GRANT OF SECURITY INTEREST

IN

TRADEMARKS

United States Patent and Trademark Office

Ladies and Gentlemen:

Please be advised that pursuant to the Security and Pledge Agreement dated as of [     ] (as the same may be amended, modified, extended or restated from time to time, the “Agreement”) by and among the Obligors party thereto (each an “Obligor” and collectively, the “Obligors”) and Truist Bank, as Administrative Agent (the “Administrative Agent”) for the holders of the Secured Obligations referenced therein, the undersigned Obligor has granted a continuing security interest in and continuing lien upon the trademarks and trademark applications set forth on Schedule 1 hereto to the Administrative Agent for the ratable benefit of the holders of the Secured Obligations.

The undersigned Obligor and the Administrative Agent, on behalf of the holders of the Secured Obligations, hereby acknowledge and agree that the security interest in the foregoing trademarks and trademark applications (i) may only be terminated in accordance with the terms of the Agreement and (ii) is not to be construed as an assignment of any trademark or trademark application.

 

Very truly yours,

 

[Obligor]
By:  

                    

Name:
Title:
[Address]
Acknowledged and Accepted:
TRUIST BANK, as Administrative Agent
By:  

                         

Name:
Title:
[Address]

Exhibit 10.6

EXECUTION VERSION

LOAN FACILITY AGREEMENT

AND GUARANTY

by and among

AARON’S, LLC,

THE AARON’S COMPANY, INC.

(f/k/a AARON’S SPINCO, INC.),

TRUIST BANK, as Servicer

and

EACH OF THE PARTICIPANTS PARTY HERETO

Dated as of November 17, 2020

TRUIST SECURITIES, INC.,

BANK OF AMERICA, N.A.,

and

JPMORGAN CHASE BANK, N.A.,

as Joint Lead Arrangers and Joint Bookrunners


Table of Contents

 

ARTICLE I DEFINITIONS

     1  

Section 1.1

  Definitions      1  

Section 1.2

  Accounting Terms and Determination      34  

Section 1.3

  Times of Day      34  

Section 1.4

  Other Definitional Terms      34  

Section 1.5

  Exhibits and Schedules      35  

ARTICLE II LOAN FACILITY

     35  

Section 2.1

  Establishment of Facility Commitment; Terms of Loans      35  

Section 2.2

  Conveyance of Participant’s Interest      39  

Section 2.3

  Funding of Advances; Swing Line; Funding of Participant’s Interest in Loans      39  

Section 2.4

  Participant Commitment Fees      41  

Section 2.5

  Interest on Funded Participations      41  

Section 2.6

  Default Interest      43  

Section 2.7

  Voluntary Reduction of the Unutilized Commitment      43  

Section 2.8

  Extension of Commitments      44  

Section 2.9

  Wind-Down Events      45  

Section 2.10

  Reserve Requirements; Change in Circumstances; Change in Lending Offices      45  

Section 2.11

  Pro Rata Treatment      46  

Section 2.12

  Payments      46  

Section 2.13

  Sharing of Setoffs      47  

Section 2.14

  Canadian Dollar Provisions      47  

Section 2.15

  Excess Loan Commitments Resulting From Exchange Rate Changes      48  

Section 2.16

  Interest Act      49  

Section 2.17

  Reallocation and Cash Collateralization of Defaulting Participant Exposure      49  

ARTICLE III SERVICER’S SERVICING OBLIGATIONS; DISTRIBUTION OF PAYMENTS

     50  

Section 3.1

  Servicer’s Obligations with Respect to Loans; Collateral; Non-Recourse      50  

Section 3.2

  Application of Payments      51  

Section 3.3

  Monthly Servicing Report      52  

ARTICLE IV LOAN DEFAULT; RIGHT TO MAKE GUARANTY DEMAND

     52  

Section 4.1

  Notice Of Loan Defaults      52  

Section 4.2

  Waiver or Cure By The Sponsor of Covenant Defaults and Loan Payment Defaults      53  

Section 4.3

  [Reserved]      53  

Section 4.4

  Rights during Response Period      53  

Section 4.5

  Rights after Response Period and for Loan Defaults other than Loan Payment Defaults      53  

ARTICLE V REPRESENTATIONS AND WARRANTIES

     54  

Section 5.1

  Existence; Power      54  

Section 5.2

  Organizational Power; Authorization      54  

Section 5.3

  Governmental Approvals; No Conflicts      54  

 

i


Section 5.4

  Financial Statements      54  

Section 5.5

  Litigation and Environmental Matters      54  

Section 5.6

  Compliance with Laws and Agreements      55  

Section 5.7

  Investment Company Act, Etc.      55  

Section 5.8

  Taxes      55  

Section 5.9

  Margin Regulations      55  

Section 5.10

  ERISA      55  

Section 5.11

  Ownership of Property      55  

Section 5.12

  Disclosure      56  

Section 5.13

  Labor Relations      56  

Section 5.14

  Subsidiaries      56  

Section 5.15

  Representations and Warranties with Respect to Specific Loans      56  

Section 5.16

  Solvency      57  

Section 5.17

  Anti-Corruption Laws and Sanctions      57  

Section 5.18

  No Affected Financial Institutions      57  

Section 5.19

  Inactive Subsidiaries      57  

Section 5.20

  Collateral Representations      58  

ARTICLE VI AFFIRMATIVE COVENANTS

     58  

Section 6.1

  Financial Statements and Other Information      58  

Section 6.2

  Notices of Material Events      60  

Section 6.3

  Existence; Conduct of Business      60  

Section 6.4

  Compliance with Laws, Etc.      61  

Section 6.5

  Payment of Obligations      61  

Section 6.6

  Books and Records      61  

Section 6.7

  Visitation, Inspection, Etc.      61  

Section 6.8

  Maintenance of Properties; Insurance      61  

Section 6.9

  Use of Proceeds      62  

Section 6.10

  Additional Subsidiaries      62  

Section 6.11

  Further Assurances      63  

Section 6.12

  Collateral      63  

Section 6.13

  Additional Real Estate      64  

Section 6.14

  Designation of Subsidiaries      65  

ARTICLE VII FINANCIAL COVENANTS

     66  

Section 7.1

  Total Net Debt to EBITDA Ratio      66  

Section 7.2

  Fixed Charge Coverage Ratio      66  

ARTICLE VIII NEGATIVE COVENANTS

     66  

Section 8.1

  Indebtedness      66  

Section 8.2

  Negative Pledge      68  

Section 8.3

  Fundamental Changes      69  

Section 8.4

  Investments, Loans, Etc.      70  

Section 8.5

  Restricted Payments      71  

Section 8.6

  Sale of Assets      72  

Section 8.7

  Transactions with Affiliates      72  

Section 8.8

  Restrictive Agreements      72  

Section 8.9

  Sale and Leaseback Transactions      73  

Section 8.10

  Legal Name, State of Formation and Form of Entity      73  

Section 8.11

  Accounting Changes      73  

Section 8.12

  Hedging Transactions      73  

 

ii


Section 8.13

  Activities of Inactive Subsidiaries      73  

Section 8.14

  Government Regulation      73  

Section 8.15

  Ownership of Subsidiaries      73  

Section 8.16

  Amendment of Organizational Documents      74  

Section 8.17

  Activities of Holdings      74  

ARTICLE IX CREDIT EVENTS AND REMEDIES

     74  

ARTICLE X GUARANTY

     77  

Section 10.1

  Unconditional Guaranty      77  

Section 10.2

  Continuing Guaranty      78  

Section 10.3

  Waivers      78  

Section 10.4

  Additional Actions      78  

Section 10.5

  Additional Waivers      78  

Section 10.6

  Postponement of Obligations      79  

Section 10.7

  Effect on Additional Guaranties      79  

Section 10.8

  Reliance on Guaranty and Purchase Obligation; Disclaimer of Liability      79  

Section 10.9

  Reinstatement of Obligations      80  

Section 10.10

  Right to Bring Separate Action      80  

Section 10.11

  Subordination of Liens      80  

Section 10.12

  Exercise of Remedies With Respect to Collateral      80  

Section 10.13

  Rights Of Sponsor Upon Payment; Cooperation By Servicer      81  

ARTICLE XI INDEMNIFICATION

     82  

Section 11.1

  Indemnification      82  

Section 11.2

  Notice Of Proceedings; Right To Defend      83  

Section 11.3

  Third Party Beneficiaries      84  

ARTICLE XII SURVIVAL OF LOAN FACILITY

     84  

ARTICLE XIII CONDITIONS PRECEDENT TO EFFECTIVENESS

     84  

Section 13.1

  Conditions to Effectiveness      84  

Section 13.2

  Conditions to Funding Availability Date      85  

ARTICLE XIV THE SERVICER

     86  

Section 14.1

  Appointment of Servicer as Agent      86  

Section 14.2

  Nature of Duties of Servicer      86  

Section 14.3

  Lack of Reliance on the Servicer      87  

Section 14.4

  Certain Rights of the Servicer      87  

Section 14.5

  Reliance by Servicer      87  

Section 14.6

  Indemnification of Servicer      87  

Section 14.7

  The Servicer in its Individual Capacity      87  

Section 14.8

  Holders of Participation Certificates      88  

Section 14.9

  Collateral and Guaranty Matters      88  

Section 14.10

  Right to Realize on Credit Party Collateral and Enforce Guarantee      88  

ARTICLE XV MISCELLANEOUS

     89  

Section 15.1

  Notices      89  

Section 15.2

  Amendments, Etc.      91  

Section 15.3

  No Waiver; Remedies Cumulative      91  

Section 15.4

  Payment of Expenses, Etc.      92  

Section 15.5

  Right of Setoff      92  

 

iii


Section 15.6

  Benefit of Agreement; Assignments; Participations      92  

Section 15.7

  Governing Law; Submission to Jurisdiction      94  

Section 15.8

  Counterparts      94  

Section 15.9

  Severability      94  

Section 15.10

  Independence of Covenants      94  

Section 15.11

  No Joint Venture      94  

Section 15.12

  Repurchase Right      95  

Section 15.13

  Confidentiality      95  

Section 15.14

  Headings Descriptive; Entire Agreement      96  

Section 15.15

  Patriot Act      96  

Section 15.16

  Acknowledgment and Consent to Bail-In of Affected Financial Institutions      96  

Section 15.17

  Certain ERISA Matters      96  

Section 15.18

  Acknowledgement Regarding any Supported QFCs      98  

 

iv


EXHIBITS      
Exhibit A    -    Form of Assignment and Acceptance Agreement
Exhibit B    -    Form of Canadian Loan Agreement
Exhibit C    -    Form of US Loan Agreement
Exhibit D    -    Form of Guaranty Agreement
Exhibit E    -    Form of Participation Certificate
Exhibit F    -    Form of Monthly Servicing Report
Exhibit G    -    Form of Security Agreement
SCHEDULES      
Schedule 1.1(a)    -    Pricing Grid
Schedule 1.1(b)    -    Participant Commitments
Schedule 1.1(c)    -    Progressive Finance Subsidiaries
Schedule 1.1(d)    -    Inactive Subsidiaries
Schedule 5.14    -    Subsidiaries
Schedule 8.1    -    Outstanding Indebtedness
Schedule 8.2    -    Existing Liens
Schedule 8.4    -    Existing Investments

 

v


LOAN FACILITY AGREEMENT AND GUARANTY

THIS LOAN FACILITY AGREEMENT AND GUARANTY (the “Agreement”) made as of this 17th day of November, 2020, by and among AARON’S, LLC, a Georgia limited liability company having its principal place of business and chief executive office at 400 Galleria Parkway SE, Suite 300, Atlanta, GA 30339 (“Sponsor”), THE AARON’S COMPANY, INC. (f/k/a AARON’S SPINCO, INC.), a Georgia corporation having its principal place of business and chief executive office at 400 Galleria Parkway SE, Suite 300, Atlanta, GA 30339 (“Holdings”), TRUIST BANK (“Truist”) and each of the other lending institutions listed on the signature pages hereto (Truist, such lenders, together with any assignees thereof becoming “Participants” pursuant to the terms of this Agreement, the “Participants”) and TRUIST BANK, a banking corporation organized and existing under the laws of North Carolina having its principal office in Charlotte, North Carolina, as Servicer (in such capacity, the “Servicer”).

W I T N E S S E T H:

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

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

ARTICLE I

DEFINITIONS

Section 1.1 Definitions. In addition to the other terms defined herein, the following terms used herein shall have the meanings herein specified (such meanings to be equally applicable to both the singular and plural forms of the terms defined):

Aaron’s” shall mean the Sponsor.

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

ACH Authorization” shall mean an authorization from a Borrower to automatically debit Loan payments from a deposit account of such Borrower, substantially in the form attached to the Servicing Agreement as Exhibit A or such other form as the Servicer may require from time to time.

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

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


 

“Adjusted Canadian LIBO Rate”    =

 

      Canadian LIBOR

          
      1.00 - LIBOR Reserve Percentage  

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

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

 

“Adjusted US LIBO Rate”    =

 

      US LIBOR

          
      1.00 - LIBOR Reserve Percentage  

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

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

Affected Financial Institution” shall mean (a) any EEA Financial Institution or (b) any UK Financial Institution.

Affiliate” shall mean, as to any Person, any other Person that directly, or indirectly through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such Person. For purposes of this definition “Control” shall mean the power, directly or indirectly, either to (i) vote ten percent (10%) or more of securities having ordinary voting power for the election of directors (or persons performing similar functions) of a Person or (ii) direct or cause the direction of the management and policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. The terms “Controlling”, “Controlled by”, and “under common Control with” have meanings correlative thereto.

Agent Parties” shall have the meaning given to such term in Section 15.1(b)(iv).

Agreement” shall have the meaning given to such term in the introductory paragraph hereof.

Amortization Period” shall mean (i) with respect to a US Borrower, 18 or 24 months, as determined from time to time by Aaron’s; provided, however, in the event any US Line of Credit Commitment is terminated upon 90 days’ notice from the Servicer, all amounts outstanding under such US Line of Credit Commitment shall be due and payable in full no later than the 24-month anniversary of such termination, and (ii) with respect to a Canadian Borrower, 24 months; provided, however, in the event any Canadian Line of Credit Commitment is terminated upon 90 days’ notice from the Servicer, all amounts outstanding under such Canadian Line of Credit Commitment shall be due and payable in full no later than the 24-month anniversary of such termination.

 

2


Anti-Corruption Laws” shall mean all laws, rules, and regulations of any jurisdiction applicable to Holdings, the Sponsor and its Subsidiaries from time to time concerning or relating to bribery or corruption.

Applicable Margin” shall mean, with respect to all Funded Participations, as of any date, the percentage per annum determined by reference to the applicable Total Net Debt to EBITDA Ratio in effect on such date for Loans as set forth on Schedule 1.1(a) attached hereto; provided, that a change in the Applicable Margin resulting from a change in the Total Net Debt to EBITDA Ratio shall be effective on the second day after which the Sponsor has delivered the financial statements required by Section 6.1(a) or (b) and the compliance certificate required by Section 6.1(c); provided, further, that if at any time the Sponsor shall have failed to deliver such financial statement and such certificate when due hereunder, the Applicable Margin shall be at Level V until such time as such financial statements and certificates are delivered, at which time the Applicable Margin shall be determined as provided above. Notwithstanding the foregoing, the Applicable Margin from the Effective Date until the financial statements and certificate of a Responsible Officer of the Sponsor delivered pursuant to Section 6.1(c) for the Fiscal Quarter ending June 30, 2021 are delivered shall be at Level II.

Applicable Percentage” shall mean, with respect to the Participant Commitment Fee, as of any date, the percentage per annum determined by reference to the applicable Total Net Debt to EBITDA Ratio in effect on such date as set forth on Schedule 1.1(a) attached hereto; provided, that a change in the Applicable Percentage resulting from a change in the Total Net Debt to EBITDA Ratio shall be effective on the second day after which the Sponsor has delivered the financial statements required by Section 6.1(a) or (b) and the compliance certificate required by Section 6.1(c); provided, further, that if at any time the Sponsor shall have failed to deliver such financial statement and such certificate when due hereunder, the Applicable Percentage shall be at Level V until such time as such financial statements and certificates are delivered, at which time the Applicable Percentage shall be determined as provided above. Notwithstanding the foregoing, the Applicable Percentage from the Effective Date until the financial statements and certificate of a Responsible Officer of the Sponsor delivered pursuant to Section 6.1(c) for the Fiscal Quarter ending on June 30, 2021 are delivered shall be at Level II.

Arrangers” shall mean Truist Securities, Inc., BofA Securities, Inc. and JPMorgan Chase Bank, N.A., in their capacities as joint lead arrangers and joint bookrunners.

Asset Disposition” shall mean (i) all sales of Merchandise; (ii) all Merchandise which is determined to have been stolen; (iii) all Merchandise that is destroyed, lost or otherwise removed from the premises of a Borrower other than pursuant to a Lease Contract or by outright sale or for repair work; and (iv) all “skipped” Merchandise which is Merchandise subject to a Lease Contract.

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

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

Bail-In Action” shall mean the exercise of any Write-Down and Conversion Powers by the applicable Resolution Authority in respect of any liability of an Affected Financial Institution.

 

3


Bail-In Legislation” shall mean (a) with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law, regulation or requirement for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule and (b) with respect to the United Kingdom, Part I of the United Kingdom Banking Act 2009 (as amended from time to time) and any other law, regulation or rule applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms or other financial institutions or their affiliates (other than through liquidation, administration or other insolvency proceedings).

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

Benchmark” shall mean, initially, Canadian LIBOR or US LIBOR, as applicable; provided, however, that if a Benchmark Transition Event or an Early Opt-in Election, as applicable, has occurred with respect to such benchmark rate, then “Benchmark” with respect to such currency shall mean the applicable Benchmark Replacement to the extent that such Benchmark Replacement has become effective pursuant to Section 2.5(e)

Benchmark Replacement” shall mean, with respect to any then-current Benchmark, the sum of: (a) the alternate benchmark rate (which may include Term SOFR) that has been selected by the Servicer and the Sponsor giving due consideration to (i) any selection or recommendation of a replacement rate or the mechanism for determining such a rate by the Relevant Governmental Body with respect to such currency or (ii) any evolving or then-prevailing market convention for determining a rate of interest as a replacement to such Benchmark for syndicated credit facilities denominated in the currency applicable to such Benchmark at such time and (b) the Benchmark Replacement Adjustment; provided that, if the Benchmark Replacement as so determined would be less than zero, the Benchmark Replacement will be deemed to be zero for the purposes of this Agreement.

Benchmark Replacement Adjustment” shall mean, with respect to any replacement of any then-current Benchmark with an Unadjusted Benchmark Replacement for each applicable Payment Period, the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) that has been selected by the Servicer and the Sponsor giving due consideration to (i) any selection or recommendation of a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement by the Relevant Governmental Body or (ii) any evolving or then-prevailing market convention for determining a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement for syndicated credit facilities denominated in the currency applicable to such Benchmark at such time.

Benchmark Replacement Conforming Changes” shall mean, with respect to any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “Payment Period”, timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation notices, length of lookback period and other technical, administrative or operational matters) that the Servicer decides may be appropriate to reflect the adoption and implementation of such Benchmark Replacement and to permit the administration thereof by the Servicer in a manner substantially consistent with market practice (or, if the Servicer decides that adoption of any portion of such market practice is not administratively feasible or if the Servicer determines that no market practice for the administration of the Benchmark Replacement exists, in such other manner of administration as the Servicer decides is reasonably necessary in connection with the administration of this Agreement).

 

4


Benchmark Replacement Date” shall mean the earlier to occur of the following events with respect to the applicable Benchmark:

(a) in the case of clause (a) or (b) of the definition of “Benchmark Transition Event,” the later of (i) the date of the public statement or publication of information referenced therein and (ii) the date on which the administrator of such Benchmark permanently or indefinitely ceases to provide such Benchmark; or

(b) in the case of clause (c) of the definition of “Benchmark Transition Event,” the date of the public statement or publication of information referenced therein.

Benchmark Transition Event” shall mean the occurrence of one or more of the following events with respect to then-current Benchmark with respect to any given currency:

(a) a public statement or publication of information by or on behalf of the administrator of such Benchmark announcing that such administrator has ceased or will cease to provide such Benchmark, permanently or indefinitely; provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide such Benchmark;

(b) a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark, the U.S. Federal Reserve System, an insolvency official with jurisdiction over the administrator for such Benchmark, a resolution authority with jurisdiction over the administrator for such Benchmark, or a court or an entity with similar insolvency or resolution authority over the administrator for such Benchmark, which states that the administrator of such Benchmark has ceased or will cease to provide such Benchmark permanently or indefinitely; provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide such Benchmark; or

(c) a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark announcing that such Benchmark is no longer representative.

Benchmark Transition Start Date” shall mean (a) in the case of a Benchmark Transition Event, the earlier of (i) the applicable Benchmark Replacement Date and (ii) if such Benchmark Transition Event is a public statement or publication of information of a prospective event, the 90th day prior to the expected date of such event as of such public statement or publication of information (or if the expected date of such prospective event is fewer than 90 days after such statement or publication, the date of such statement or publication) and (b) in the case of an Early Opt-in Election, the date specified by the Servicer or the Required Participants, as applicable, by notice to the Sponsor, the Servicer (in the case of such notice by the Required Participants) and the Participants.

Benchmark Unavailability Period” shall mean, with respect to any then-current Benchmark, if a Benchmark Transition Event and its related Benchmark Replacement Date have occurred with respect to such Benchmark and solely to the extent that such Benchmark has not been replaced with a Benchmark Replacement, the period (x) beginning at the time that such Benchmark Replacement Date has occurred if, at such time, no Benchmark Replacement has replaced such Benchmark for all purposes hereunder in accordance with Section 2.5(d)(iii)-(vi) and (y) ending at the time that a Benchmark Replacement has replaced such Benchmark for all purposes hereunder pursuant to Section 2.5(d)(iii)-(vi).

Beneficial Ownership Certification” shall mean a certification regarding beneficial ownership as required by the Beneficial Ownership Regulation.

 

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Beneficial Ownership Regulation” shall mean 31 C.F.R. § 1010.230.

Benefit Plan” shall mean any of (a) an “employee benefit plan” (as defined in ERISA) that is subject to Title I of ERISA, (b) a “plan” as defined in and subject to Section 4975 of the Code or (c), any Person whose assets include (for purposes of ERISA Section 3(42) or otherwise for purposes of Title I of ERISA or Section 4975 of the Code) the assets of any such “employee benefit plan” or “plan”.

Borrower” shall mean a US Borrower or a Canadian Borrower, as the case may be.

Borrower Payment Date” shall mean, with respect to any Loans, the last day of each calendar month; provided, however, if such day is not a Business Day, the next succeeding Business Day.

Borrower Rate” shall mean, (a) with respect to each US Loan, the Prime Rate per annum plus any additional margin per annum specified for such US Loan by Sponsor in the applicable Funding Approval Notice, such margin not to exceed ten percent (10.0%) per annum calculated based upon the actual number of days elapsed in a 360 day year; provided that, at no time may there be more than five different Borrower Rates for US Line of Credit Loans, and no more than five different Borrower Rates for US Revolving Loans and US Term Loans and (b) with respect to each Canadian Loan, the Canadian Prime Rate per annum plus any additional margin per annum specified for such Canadian Loan by Sponsor in the applicable Funding Approval Notice, such margin not to exceed ten percent (10.0%) per annum calculated based upon the actual number of days elapsed in a 360-day year; provided that, at no time may there be more than five different Borrower Rates for Canadian Line of Credit Loans, and no more than five different Borrower Rates for Canadian Revolving Loans and Canadian Term Loans.

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

Canadian Borrower” shall mean any Franchisee domiciled in Canada (other than in the Province of Quebec) that is primarily liable for repayment of a Canadian Loan as a result of having executed Canadian Loan Documents as maker, or its permitted assignee.

Canadian Borrower Payment Date” shall mean, with respect to any Canadian Loans, the last day of each calendar month; provided, however, if such day is not a Canadian Business Day, the next succeeding Canadian Business Day which is also a Business Day.

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

Canadian Dollar Equivalent” shall mean, on any date, (i) with respect to any amount denominated in Canadian Dollars, such amount and (ii) with respect to any amount denominated in US Dollars, the amount of Canadian Dollars that would be required to purchase the amount of such US Dollars on such date based upon the Exchange Rate as of the applicable date of determination.

Canadian Dollars” or “Cdn$” shall mean the lawful currency of Canada.

Canadian Franchisee” shall mean those certain store operators located in Canada (other than in the Province of Quebec) that own and operate stores under the Aaron’s franchise.

 

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Canadian Funded Participation” shall mean, for any Participant, the portion of such Participant’s Funded Participation in Canadian Dollars.

Canadian LIBOR” shall mean the rate per annum equal to the Canadian Dealer Offered Rate, or a comparable or successor rate which is approved by the Servicer, appearing on the applicable Reuters screen or the Bloomberg screen page, as selected by the Servicer, as the London interbank offered rate for deposits in Canadian Dollars at approximately 11:00 a.m. (London time) two business days prior to the first day of such one-month interest period for a one-month period. If for any reason such rate is not available, Canadian LIBOR shall be, for any such interest period, the rate per annum reasonably determined by the Servicer as the rate of interest at which Canadian Dollar deposits in an amount comparable to the aggregate outstanding Funded Participations in US Dollars are offered to the Servicer by prime banks in the Canadian Dollar market reasonably selected by the Servicer determined as of 10:00 a.m. (Charlotte, North Carolina time) two Business Days prior to the first day of such interest period for a term comparable to such interest period; provided, that, if Canadian LIBOR would be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.

Canadian Line of Credit Commitment” shall mean a commitment to make Canadian Line of Credit Loans to a Canadian Borrower in Canadian Dollars pursuant to a Canadian Loan Agreement.

Canadian Line of Credit Loans” shall mean Advances made to a Canadian Borrower pursuant to a Canadian Line of Credit Commitment.

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

Canadian Loan” shall mean either a Canadian Term Loan, a Canadian Revolving Loan or a Canadian Line of Credit Loan, as the case may be.

Canadian Loan Agreement” shall mean a Loan Agreement setting forth the terms and conditions, as between a Canadian Borrower and the Servicer, under which the Servicer has established a Canadian Loan Commitment to make Advances to such Canadian Borrower pursuant to the Canadian Loan Commitment, substantially in the form of Exhibit B, with such changes as may be mutually agreed by the Sponsor and the Servicer (it being understood that the Servicer will not unreasonably withhold or delay its agreement to any such changes requested by the Sponsor).

Canadian Loan Commitment” shall mean the commitment by the Servicer to make Advances to any Canadian Borrower in Canadian Dollars in the amount not exceeding, and upon the terms described in, the applicable Funding Approval Notice and the applicable Canadian Loan Documents, which Canadian Loan Commitment may be a Canadian Line of Credit Commitment, a Canadian Revolving Commitment or a Canadian Term Loan Commitment.

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

 

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Canadian Master Note” shall mean a Canadian Line of Credit Note, a Canadian Revolving Note or a Canadian Term Note, as the case may be.

Canadian Prime Rate shall mean, on any date of determination, the higher of (a) the reference rate of interest, expressed as an annual rate, publicly announced or posted from time to time by Bloomberg on page BTMM for Canadian Money Market rates or (b) the average one month Bankers’ Acceptance rate quoted on Reuters Service, page CDOR, as at approximately 10:00 a.m. (Toronto, Ontario time) on such day plus 1% per annum.

Canadian Revolving Commitment” shall mean a commitment to make Canadian Revolving Loans to a Canadian Borrower pursuant to a Loan Agreement.

Canadian Revolving Loans” shall mean Advances made to a Canadian Borrower pursuant to a Canadian Revolving Commitment.

Canadian Revolving Note” shall mean that certain Revolving Note, executed by a Canadian Borrower in favor of the Servicer, evidencing such Canadian Borrower’s obligation to repay all Canadian Revolving Loans made to it pursuant to a Canadian Revolving Commitment, substantially in the form of Exhibit A-3 to the Canadian Loan Agreement, with such changes as the Sponsor and the Servicer shall agree to from time to time.

Canadian Security Agreement” shall mean any security agreement executed by a Canadian Borrower substantially in the form required by the Servicing Agreement.

Canadian Subfacility Amount” shall mean Cdn$25,000,000, as such amount may be reduced pursuant to Section 2.7, Section 2.9 or Article IX.

Canadian Term Loan Commitment” shall mean a commitment to make Canadian Term Loans to a Canadian Borrower pursuant to a Canadian Loan Agreement.

Canadian Term Loans” shall mean Advances made to a Canadian Borrower pursuant to a Canadian Term Loan Commitment.

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

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

Capital Stock” shall mean, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.

 

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Cash Collateralize” shall mean, in respect of any obligations, to provide and pledge (as a first priority perfected security interest) cash collateral for such obligations in US Dollars or Canadian Dollars, as applicable, with the Servicer pursuant to documentation in form and substance, reasonably satisfactory to the Servicer (and “Cash Collateralization” has a corresponding meaning).

Cash Equivalents” shall mean, as at any date, (i) securities issued or directly and fully guaranteed or insured by the United States or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than twelve months from the date of acquisition, (ii) Dollar denominated time deposits and certificates of deposit of (A) any Participant, (B) any domestic commercial bank of recognized standing having capital and surplus in excess of $500,000,000 or (C) any bank whose short-term commercial paper rating from S&P is at least A-1 or the equivalent thereof or from Moody’s is at least P-1 or the equivalent thereof (any such bank being an “Approved Bank”), in each case with maturities of not more than two hundred seventy (270) days from the date of acquisition, (iii) commercial paper and variable or fixed rate notes issued by any Approved Bank (or by the parent company thereof) or any variable rate notes issued by, or guaranteed by, any domestic corporation rated A-1 (or the equivalent thereof) or better by S&P or P-1 (or the equivalent thereof) or better by Moody’s and maturing within six months of the date of acquisition, (iv) repurchase agreements entered into by any Person with a bank or trust company (including any Participant) or recognized securities dealer having capital and surplus in excess of $500,000,000 for direct obligations issued by or fully guaranteed by the United States in which such Person shall have a perfected first priority security interest (subject to no other Liens) and having, on the date of purchase thereof, a fair market value of at least one hundred percent (100)% of the amount of the repurchase obligations and (v) investments, classified in accordance with GAAP as current assets, in money market investment programs registered under the Investment Company Act of 1940 which are administered by reputable financial institutions having capital of at least $500,000,000 and the portfolios of which are limited to Investments of the character described in the foregoing clauses (i) through (iv).

Change in Control” shall mean the occurrence of one or more of the following events: (i) any sale, lease, exchange or other transfer (in a single transaction or a series of related transactions) of all or substantially all of the assets of Holdings to any Person or “group” (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder in effect on the date hereof), (ii) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or “group” (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the date hereof) of thirty-three and one third percent (3313%) or more of the total voting power of shares of stock entitled to vote in the election of directors of Holdings; (iii) during any period of twenty-four (24) consecutive months, a majority of the members of the board of directors or other equivalent governing body of Holdings cease to be composed of individuals (A) who were members of that board or equivalent governing body on the first day of such period, (B) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (A) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (C) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (A) and (B) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body; or (iv) Holdings shall cease to own and control, of record and beneficially, directly one hundred percent (100%) of the outstanding Capital Stock of the Sponsor.

 

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Closing Date” shall mean, for any Loan, the date upon which all Loan Documents have been executed and delivered and the conditions precedent to funding such Loan have been satisfied.

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

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

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

Communications” shall have the meaning given to such term in Section 15.1(b)(iv).

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

Consolidated EBITDA” shall mean for Holdings, the Sponsor and its Restricted Subsidiaries for any period, an amount equal to the sum of (i) Consolidated Net Income for such period plus (ii) to the extent deducted in determining Consolidated Net Income for such period, but without duplication, (A) Consolidated Interest Expense, (B) income tax expense, (C) depreciation (excluding depreciation of rental merchandise) and amortization, (D) all other non-cash charges (including, without limitation, any non-cash charges, expenses or losses incurred in connection with any stock option plan, cash incentive plan or any other employee benefit plan or agreement, but excluding any such non-cash charges or losses (1) representing an accrual or reserve for future cash charges or losses, (2) to the extent that there were cash charges or losses with respect thereto in past accounting periods, and (3) representing a write-down of current assets; provided that in the case of (1) and (2), if any such non-cash charges or losses represent an accrual or reserve for potential cash items in any future period, the cash payment in respect thereof in such future period shall be subtracted from Consolidated EBITDA in such future period to the extent paid), (E) closing costs, fees and expenses incurred during such period in connection with the transactions contemplated by the Transaction Documents (including the amendments thereto), in each case paid during such period to Persons that are not Affiliates of Holdings or any of its Restricted Subsidiaries, (F) up to $43,500,000 in restructuring charges incurred in Fiscal Year 2020 in connection with the closure and consolidation of Sponsor-operated stores, (G) up to $14,700,000 in advisory fees and expenses incurred or paid by the Sponsor to one or more of its third party consultants in the first Fiscal Quarter of 2020, (H) business optimization, restructuring and transition expenses, costs, charges, accruals or reserves incurred within two (2) years of any Permitted Acquisition, which for the avoidance of doubt shall include severance payments and costs, legal defense and settlement costs (including any costs paid in satisfaction of judgments), relocation costs, costs related to the closure, opening, curtailment and/or consolidation of facilities, retention charges, systems establishment costs, spin-off costs, integration costs, signing costs, retention and completion bonuses, amortization of signing bonuses, inventory optimization expenses, contract termination costs, transaction costs, costs related to entry into new markets, consulting fees, recruiter fees; (I) business optimization, restructuring and transition related expenses, costs, charges, accruals or reserves which are unrelated to any Permitted Acquisition or divestiture of assets, all as determined on a consolidated basis for Holdings, the Sponsor and its Restricted Subsidiaries for such period; (J) loss of on-lease and off-lease inventory, physical damage to stores, infrastructure, capital assets and other assets of the business and loss of revenue, in each case, (1) to the extent reasonably identifiable by the Sponsor as having resulted from significant weather events or other natural disasters in areas that have been declared a federal disaster or otherwise qualify for federal emergency assistance, (2) to the extent

 

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occurring within twelve (12) months after the occurrence of such significant weather event or natural disaster, and (3) net of all related insurance proceeds received related thereto (including, without limitation, all business interruption insurance and casualty insurance), all as determined on a consolidated basis for Holdings and its Restricted Subsidiaries for such period; (K) the amount of cost savings and synergies projected by the Sponsor in good faith to be reasonably anticipated to be realized from actions taken or committed to be taken during such period in connection with any Permitted Acquisition or any permitted disposition of assets (in each case calculated on a Pro Forma Basis as though such cost savings and synergies had been realized on the first day of such period, net of the amount of actual benefits realized prior to or during such period from such actions); provided that such actions have been taken or have been committed to be taken, and the benefits resulting therefrom are anticipated by the Sponsor in good faith to be realized within twenty-four (24) months after the completion of the related Permitted Acquisition or permitted disposition of assets; and provided, further, that the aggregate amount for all such items under this clause (K) shall not exceed $25,000,000 in the aggregate during the term of this Agreement; (L) (1) expenses, costs, charges, accruals or reserves relating to the formation of Holdings and the Restructuring, in each case, to the extent paid in cash prior to the Effective Date or within six (6) months after the Effective Date and (2) non-cash expenses, costs, charges, accruals or reserves relating to the formation of Holdings and the Restructuring, in each case, to the extent incurred prior to the Effective Date or within two (2) years after the Effective Date, including, for the avoidance of doubt, any amortization or accruals for prior cash payments to the extent such cash payments were made prior to the Effective Date or within six (6) months after the Effective Date; (M) expenses, cost, charges, accruals or reserves relating to the repositioning, relocating, remodeling, consolidation and closure of retail locations, offices or operating centers, all as determined on a consolidated basis for Holdings, the Sponsor and its Restricted Subsidiaries for such period; and (N) up to $447,000,000 in impairment charges or asset write-offs or write-downs related to goodwill in the first Fiscal Quarter of 2020. Notwithstanding the foregoing, the amounts added back to Consolidated Net Income in reliance on clauses (ii)(H), (ii)(I), (ii)(J) and (ii)(M) above shall not exceed, in the aggregate during any four fiscal quarter period, the greater of (i) $40,000,000 and (ii) 20% of Consolidated EBITDA for such period (calculated prior to adding back any such amounts).

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

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

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

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

Consolidated Net Income” shall mean, for any period, the net income (or loss) of Holdings, the Sponsor and its Restricted Subsidiaries for such period determined on a consolidated basis in accordance with GAAP, but excluding therefrom (to the extent otherwise included therein) (i) any extraordinary gains or losses, (ii) any gains attributable to write-ups of assets, (iii) any equity interest of Holdings, the Sponsor or any Restricted Subsidiary of Holdings in the unremitted earnings of any Person that is not a Restricted

 

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Subsidiary and (iv) any income (or loss) of any Person accrued prior to the date it becomes a Restricted Subsidiary or is merged into or consolidated with Holdings, the Sponsor or any Restricted Subsidiary on the date that such Person’s assets are acquired by Holdings, the Sponsor or any Restricted Subsidiary, except to the extent provided for in the definition of Pro Forma Basis in connection with a Permitted Acquisition. For the avoidance of doubt, Consolidated Net Income (i) shall exclude any income (or loss) for such period of Unrestricted Subsidiaries and (ii) shall include any amounts actually distributed in cash by Unrestricted Subsidiaries to Holdings, the Sponsor or any Restricted Subsidiary.

Consolidated Total Debt” shall mean, at any time, all then currently outstanding obligations, liabilities and indebtedness of Holdings, the Sponsor and its Restricted Subsidiaries on a consolidated basis of the types described in the definition of “Indebtedness”.

Credit Agreement” shall mean that certain Credit Agreement, dated as of the Effective Date, by and among Sponsor, the lenders from time to time parties thereto and Truist Bank, as Administrative Agent, as amended, restated, replaced, refinanced, supplemented or otherwise modified from time to time.

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

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

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

Credit Party Collateral” shall mean all tangible and intangible property, real and personal, of any Credit Party that is or purports to be the subject of a Lien to the Servicer to secure the whole or any part of the obligations of the Credit Parties under the Operative Documents (including any Guarantee thereof), and shall include, without limitation, all casualty insurance proceeds and condemnation awards with respect to any of the foregoing; provided that all rights, title or interests in the Specified Asset transferred to the Sponsor or Holdings from Prog Leasing, LLC pursuant to that certain assignment agreement to be executed by the Sponsor, Holdings and Prog Leasing, LLC on the Funding Availability Date shall be (i) excluded from the Credit Party Collateral and (ii) no rights thereto shall be granted to the Servicer or the Participants pursuant to any Credit Party Collateral Document, in each case of clauses (i) and (ii), at any time before the date that is 1 year after the Funding Availability Date, regardless of whether a Trigger Event occurs before such date.

Credit Party Collateral Documents” shall mean, collectively, the Security Agreement, any Real Estate Documents, all assignments of key man life insurance policies and all other instruments and agreements now or hereafter securing or perfecting the Liens securing the whole or any part of the obligations of the Credit Parties under the Operative Documents (including any Guarantee thereof), all UCC financing statements, fixture filings and stock powers, and all other documents, instruments, agreements and certificates executed and delivered by any Credit Party to the Servicer and the Participants in connection with the foregoing.

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

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

 

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

Defaulting Participant” shall mean, at any time, subject to Section 2.17(b), (i) any Participant that has failed for two (2) or more Business Days to comply with its obligations under this Agreement to fund any Participant Funding (each a “funding obligation”), unless such Participant has notified the Servicer and the Sponsor in writing that such failure is the result of such Participant’s determination that one or more conditions precedent to funding has not been satisfied (which conditions precedent, together with any applicable Credit Event, will be specifically identified in such writing), (ii) any Participant that has notified the Servicer in writing, or has stated publicly, that it does not intend to comply with any such funding obligation hereunder, unless such writing or public statement states that such position is based on such Participant’s determination that one or more conditions precedent to funding cannot be satisfied (which conditions precedent, together with any applicable Credit Event will be specifically identified in such writing or public statement), (iii) any Participant that has defaulted on its obligation to fund generally under any other loan agreement, credit agreement or other financing agreement, (iv) any Participant that has, for three (3) or more Business Days after written request of the Servicer or the Sponsor, failed to confirm in writing to the Servicer and the Sponsor that it will comply with its prospective funding obligations hereunder (provided that such Participant will cease to be a Defaulting Participant pursuant to this clause (iv) upon the Servicer’s and the Sponsor’s receipt of such written confirmation), (v) any Participant with respect to which a Participant Insolvency Event has occurred and is continuing or (vi) any Participant that has become the subject of a Bail-In Action. Any determination by the Servicer that a Participant is a Defaulting Participant will be conclusive and binding, absent manifest error, and such Participant shall be deemed to be a Defaulting Participant (subject to Section 2.17(b)) upon notification of such determination by the Servicer to the Sponsor and the Participants.

Delaware Divided LLC” shall mean any Delaware LLC which has been formed upon the consummation of a Delaware LLC Division.

Delaware LLC” shall mean any limited liability company organized or formed under the laws of the State of Delaware.

Delaware LLC Division” shall mean the statutory division of any Delaware LLC into two or more Delaware LLCs pursuant to Section 18-217 of the Delaware Limited Liability Company Act.

Domestic Controlled Affiliate” shall mean each Affiliate of the Sponsor that is (a) Controlled by the Sponsor, and (b) incorporated or organized under the laws of any State of the United States, the District of Columbia or Puerto Rico.

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

Early Opt-in Election” shall mean the occurrence of:

(a) (i) a determination by the Servicer or (ii) a notification by the Required Participants to the Servicer (with a copy to the Sponsor) that the Required Participants have determined that U.S. dollar-denominated syndicated credit facilities being executed at such time, or that include language similar to that contained in Section 2.5(b)-(e) are being executed or amended, as applicable, to incorporate or adopt a new benchmark interest rate to replace the applicable Benchmark, and

 

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(b) (i) the election by the Servicer or (ii) the election by the Required Participants to declare that an Early Opt-in Election has occurred and the provision, as applicable, by the Servicer of written notice of such election to the Sponsor and the Participants or by the Required Participants of written notice of such election to the Servicer.

EEA Financial Institution” shall mean (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clause (a) or (b) of this definition and is subject to consolidated supervision with its parent.

EEA Member Country” shall mean any of the member states of the European Union, Iceland, Liechtenstein, and Norway.

EEA Resolution Authority” shall mean any public administrative authority or any person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.

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

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

Environmental Indemnity” shall mean each environmental indemnity made by each Credit Party with respect to Real Estate required to be pledged as Credit Party Collateral in favor of the Servicer for the benefit of the holders of the obligations under the Operative Documents, in each case in form and substance reasonably satisfactory to the Servicer.

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

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

ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder.

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

 

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ERISA Event shall mean (i) any “reportable event”, as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (ii) the existence with respect to any Plan of an “accumulated funding deficiency” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (iii) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (iv) the incurrence by the Sponsor or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (v) the receipt by the Sponsor or any ERISA Affiliate from the PBGC or a plan administrator appointed by the PBGC of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (vi) the incurrence by the Sponsor or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (vii) the receipt by the Sponsor or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Sponsor or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA.

EU Bail-In Legislation Schedule” shall mean the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor Person), as in effect from time to time.

Exchange Rate” shall mean the offered rate at which Canadian Dollars may be exchanged into US Dollars or US Dollars may be exchanged into Canadian Dollars, as the case may be, as set forth at approximately 11:00 a.m. on such day on the Reuters NFX Page (or if such page is not available, or the rate does not appear on such page, the comparable page on the Telerate or Bloomberg Service). In the event that such rate does not appear on the applicable page of any such services, the “Exchange Rate” shall be determined by reference to such other publicly available services for displaying exchange rates as may be agreed upon by the Servicer and the Sponsor, or, in the absence of such agreement, such Exchange Rate shall instead be the offered spot rate of exchange of the Servicer or, if the Servicer shall so determine, one of its affiliates in the market where its foreign currency exchange operations in respect of Canadian Dollars are then being conducted, at or about 10:00 a.m., local time, on such date for the purchase or sale of US Dollars for delivery two Business Days later; provided that if at the time of any such determination, for any reason, no such spot rate is being quoted, the Servicer, after consultation with the Sponsor, may use any reasonable method it deems appropriate to determine such rate, and such determination shall be conclusive absent manifest error. The Exchange Rate shall be initially the Exchange Rate as of the Effective Date and shall be reset periodically on each Reset Date pursuant to Section 2.14(c).

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

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

Existing Loan Facility Agreement” shall mean that certain Fourth Amended and Restated Loan Facility Agreement and Guaranty dated as of October 25, 2017 (as amended, restated, supplemented or otherwise modified from time to time) by and among the Sponsor, the participants party thereto and the Servicer.

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

 

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Facility Commitment” shall have the meaning set forth in Section 2.1(a).

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

Federal Funds Rate” shall mean, for any day, the rate per annum (rounded upwards, if necessary, to the next 1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with member banks of the Federal Reserve System, as published by the Federal Reserve Bank of New York on the next succeeding Business Day; provided, (i) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day and (ii) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate charged to Truist Bank or any other Participant selected by the Servicer on such day on such transactions as determined by the Servicer.

Fee Letter shall mean that certain letter agreement dated as of October 19, 2020, by and among the Sponsor, Truist Securities, Inc., BofA Securities, Inc. and JPMorgan Chase Bank, N.A., setting forth certain fees applicable to the loan facility described herein, either as originally executed or as hereafter amended or modified.

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

Financing Statement” shall mean, (a) with respect to a US Loan, a document that among other things, describes the Collateral, the proper filing of which perfects a security interest in the Collateral described therein under the laws of the state in which such document is filed and (b) with respect to a Canadian Loan, a document that among other things, describes the Collateral, the proper filing of which perfects a security interest in the Collateral described therein under the laws of the province or territory in which such document is filed.

Fiscal Quarter” shall mean any fiscal quarter of Holdings.

Fiscal Year shall mean a fiscal year of Holdings; references to a Fiscal Year with a number corresponding to any calendar year (e.g., the “Fiscal Year 2020”) refers to the Fiscal Year ending during such calendar year.

Fixed Charge Coverage Ratio” shall mean, at any date, the ratio of (i) Consolidated EBITDAR for the four (4) consecutive Fiscal Quarters ending on such date to (ii) Consolidated Fixed Charges for the four (4) consecutive Fiscal Quarters ending on such date.

Flood Insurance Laws” shall mean, collectively, (i) the National Flood Insurance Reform Act of 1994 (which comprehensively revised the National Flood Insurance Act of 1968 and the Flood Disaster Protection Act of 1973), as now or hereafter in effect or any successor statute thereto, (ii) the Flood Insurance Reform Act of 2004, as now or hereafter in effect or any successor statute thereto and (iii) the Biggert –Waters Flood Insurance Reform Act of 2012, as now or hereafter in effect or any successor statute thereto.

Foreign Pledge Date” shall have the meaning given to such term in Section 6.10(b).

Foreign Subsidiary” shall mean any Subsidiary of the Sponsor that is not a Domestic Subsidiary.

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

 

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Franchisee” shall mean a Canadian Franchisee or a US Franchisee, as the case may be.

Franchisee Borrowing Base” shall mean, on any date of determination, an amount equal to a multiple of Rental Revenue for the most recently ended three calendar months, as determined for each Borrower by Aaron’s and specified in the Funding Approval Notice for such Borrower.

Franchisee Loan shall mean either a Canadian Loan or a US Loan, as the case may be.

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

Funded Participation” shall mean (x) with respect to any Participant other than Truist Bank, the portion of such Participant’s Participating Commitment that has been funded in US Dollars or Canadian Dollars, and (y) with respect to Truist Bank, the portion of the Facility Commitment (including Swing Line Advances) that has been funded in US Dollars or Canadian Dollars, less the aggregate Funded Participations of all other Participants.

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

Funding Availability Date” shall mean the first date on which all the conditions precedent in Section 13.2 are satisfied (or waived in accordance with Section 15.2).

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

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

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

 

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

Guarantors” shall mean, collectively, Holdings, Aaron Investment Company and certain other Restricted Subsidiaries of the Sponsor that from time to time become parties to the Guaranty Agreement and their respective successors and permitted assigns.

Guaranty Agreement” shall mean that certain Guaranty Agreement, dated as of the Effective Date, executed by Holdings, the Sponsor and certain Restricted Subsidiaries of the Sponsor in favor of the Servicer and the Participants, substantially in the form of Exhibit D, as the same may be amended, restated, supplemented or otherwise modified from time to time.

Hazardous Materials” shall mean all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.

Hedging Transaction” of any Person shall mean (i) any transaction (including an agreement with respect to any such transaction) now existing or hereafter entered into by such Person that is a rate swap transaction, swap option, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap or option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option, spot transaction, credit protection transaction, credit swap, credit default swap, credit default option, total return swap, credit spread transaction, repurchase transaction, reverse repurchase transaction, buy/sell-back transaction, securities lending transaction, or any other similar transaction (including any option with respect to any of these transactions) or any combination thereof, whether or not any such transaction is governed by or subject to any master agreement and (ii) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a “Master Agreement”), including any such obligations or liabilities under any Master Agreement.

Holdings” shall have the meaning set forth in the introductory paragraph hereto.

Inactive Subsidiaries” shall mean the Subsidiaries of Holdings identified on Schedule 1.1(d).

Indebtedness” of any Person shall mean, without duplication (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person in respect of the deferred purchase price of property or services (other than trade payables incurred in the ordinary course of business; provided, that for purposes of Section 9.6, trade payables overdue by more than one hundred twenty (120) days shall be included in this definition except to the extent that any of such trade payables are being disputed in good faith and by appropriate measures), (iv) all obligations of such Person under any conditional sale or other title retention agreement(s) relating to property acquired by such Person, (v) all Capital Lease Obligations of such Person,

 

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(vi) all obligations, contingent or otherwise, of such Person in respect of letters of credit, acceptances or similar extensions of credit, (vii) all Guarantees of such Person of the type of Indebtedness described in clauses (i) through (vi) above, (viii) all Indebtedness of a third party secured by any Lien on property owned by such Person, whether or not such Indebtedness has been assumed by such Person, (ix) all obligations of such Person, contingent or otherwise, to purchase, redeem, retire or otherwise acquire for value any Capital Stock of such Person, and (x) Off-Balance Sheet Liabilities. The Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer, except to the extent that the terms of such Indebtedness provide that such Person is not liable therefor.

Intercreditor Agreement” shall mean an intercreditor agreement to be entered into upon the occurrence of the Trigger Event by the Servicer, on behalf of the Participants, and Truist Bank, as administrative agent under the Credit Agreement, on behalf of the holders of the Obligations as defined in the Credit Agreement, which intercreditor agreement shall provide for the sharing of collateral and the proceeds thereof as provided more specifically therein.

Lease Contract” shall mean a contract between a Borrower and a customer to lease Merchandise in the form approved by the Sponsor (and which may include purchase options).

Lien” shall mean any mortgage, pledge, security interest, lien (statutory or otherwise), charge, encumbrance, hypothecation, assignment, deposit arrangement, or other arrangement having the practical effect of any of the foregoing or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement and any capital lease having the same economic effect as any of the foregoing). A covenant not to grant a Lien or a “Negative Pledge” shall not be determined a Lien for purposes of this Agreement.

Line of Credit Commitment” shall mean either a US Line of Credit Commitment or Canadian Line of Credit Commitment, as the case may be.

Line of Credit Loans” shall mean either a US Line of Credit Loan or Canadian Line of Credit Loan, as the case may be.

Line of Credit Note” shall mean either a US Line of Credit Note or Canadian Line of Credit Note, as the case may be.

Loan Agreement” shall mean either a US Loan Agreement or a Canadian Loan Agreement, as the case may be.

Loan Commitment” shall mean either a US Loan Commitment or a Canadian Loan Commitment, as the case may be.

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

Loan Documents” shall mean, the US Loan Documents and the Canadian Loan Documents

 

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

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

Loan Term” shall mean, with respect to any Loan, the prescribed term of the Loan Commitment relating to such Loan, as documented in the applicable Loan Documents, and any term-out period thereafter; provided, however, that the Loan Term shall not exceed (x) in the case of a Line of Credit Commitment, 364 days subject to extension in accordance with the terms of the applicable Loan Agreement, plus, in the event that the Line of Credit Commitment is terminated upon ninety (90) days’ prior notice from the Servicer, the Amortization Period and (y) in the case of a US Revolving Commitment and a US Term Loan Commitment, four (4) years and (z) in the case of a Canadian Revolving Commitment and a Canadian Term Loan Commitment, two (2) years.

Loans” shall mean either a US Loan or Canadian Loan, as the case may be.

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

Master Note” shall mean either a US Master Note or a Canadian Master Note, as the case may be.

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

Material Domestic Subsidiary” shall mean any Domestic Subsidiary of Holdings (other than the Sponsor) that is a Restricted Subsidiary that has not already become a Guarantor that (i) at any time (A) accounted for five percent (5.0%) of Consolidated EBITDA for any period of four (4) Fiscal Quarters ended or (B) holds assets in an amount equal to or greater than five percent (5.0%) of the aggregate fair market value (as reasonably determined by the Sponsor) of the total assets of Holdings, the Sponsor and its Restricted Subsidiaries determined on a consolidated basis as of the last day of the most recent Fiscal Quarter, or (ii) when taken together with other Domestic Subsidiaries that are Restricted Subsidiaries that are not already Guarantors, (x) accounted for ten percent (10.0%) of Consolidated EBITDA for any period of four (4) Fiscal Quarters ended or (y) holds assets in an amount equal to or greater than ten percent (10.0%) of the aggregate fair market value (as reasonably determined by the Sponsor) of the total assets of Holdings, the Sponsor and its Restricted Subsidiaries determined on a consolidated basis as of the last day of the most recent Fiscal Quarter. Upon the acquisition of a new Domestic Subsidiary or the merger or consolidation of any Person with or into an existing Domestic Subsidiary (or the acquisition of other assets by an existing Domestic Subsidiary), in each case, that is a Restricted Subsidiary, the qualification of the

 

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affected Domestic Subsidiary as a “Material Domestic Subsidiary” pursuant to the foregoing requirements of this definition shall be determined on a Pro Forma Basis as if such Domestic Subsidiary had been acquired or such merger, consolidation or other acquisition had occurred, as applicable, at the beginning of the relevant period of four (4) consecutive Fiscal Quarters.

Material Indebtedness” shall mean, as of any date of determination, Indebtedness of any one or more of Holdings, the Sponsor and its Restricted Subsidiaries in an aggregate principal amount greater than an amount equal to two percent (2.0%) of the aggregate book value of the total assets of Holdings, the Sponsor and its Restricted Subsidiaries determined on a consolidated basis as of the last day of the most recently ended Fiscal Quarter for which financial statements have been delivered; provided, that, Indebtedness of Progressive Finance and Progressive Finance Subsidiaries shall not constitute “Material Indebtedness” so long as no Credit Party Guarantees or otherwise becomes obligated with respect to any such Indebtedness.

Material Real Estate” shall mean Real Estate with a fair market value (as reasonably determined by the Sponsor in consultation with the Servicer) in excess of $10,000,000.

Material Subsidiary” shall mean at any time any direct or indirect Restricted Subsidiary of Holdings having: (a) assets in an amount equal to at least five percent (5.0%) of the aggregate book value of the total assets of Holdings, the Sponsor and its Restricted Subsidiaries determined on a consolidated basis as of the last day of the most recent Fiscal Quarter at such time; or (b) revenues or net income in an amount equal to at least five percent (5.0%) of the total revenues or net income of Holdings, the Sponsor and its Restricted Subsidiaries on a consolidated basis for the 12-month period ending on the last day of the most recent Fiscal Quarter at such time

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

Maximum Commitment Amount” shall mean Twenty-Five Million and No/100 Dollars ($25,000,000), as such amount may be reduced pursuant to Section 2.7, Section 2.9 or Article IX.

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

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

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

Mortgaged Property” shall mean, collectively, the Real Estate subject to the Mortgages, including, but not limited to, any Real Estate for which a Mortgage is required to be delivered after the occurrence of the Trigger Event pursuant to Section 6.13.

Mortgages” shall mean, collectively, each mortgage, deed of trust, trust deed, security deed, debenture, deed of immovable hypothec, deed to secure debt or other real estate security documents delivered by any Credit Party to the Servicer from time to time, all in form and substance reasonably satisfactory to the Servicer, as the same may be amended, amended and restated, extended, supplemented, substituted or otherwise modified from time to time.

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

 

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Non-Defaulting Participant” shall mean, at any time, a Participant that is not a Defaulting Participant.

Notes” shall mean, collectively, the Canadian Line of Credit Notes, the Canadian Master Notes, the Canadian Revolving Notes, the Canadian Term Notes, the US Line of Credit Notes, the US Master Notes, the US Revolving Notes and the US Term Notes.

OFAC” shall mean the U.S. Department of the Treasury’s Office of Foreign Assets Control.

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

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

Operative Documents” shall mean this Agreement, the Guaranty Agreement, the Servicing Agreement, the Fee Letter, the Intercreditor Agreement, if any, the Credit Party Collateral Documents, if any, and any other documents delivered by Sponsor or any Guarantor to the Servicer or the Participants in connection herewith or therewith.

PAD Authorization” shall mean a pre-authorized debit authorization executed by Borrower authorizing the Servicer to cause a specified account of Borrower to be debited to pay amounts payable, such authorization to be in the form attached to the Servicing Agreement as Exhibit K or such other form as the Servicer may require from time to time.

Parent Company” shall mean, with respect to a Participant, the bank holding company (as defined in Federal Reserve Board Regulation Y), if any, of such Participant, and/or any Person owning, beneficially or of record, directly or indirectly, a majority of the shares of such Participant.

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

Participant Canadian Monthly Payment Date” shall mean the last day of each calendar month; provided, however, if such day is not a Canadian Business Day, the next succeeding Canadian Business Day which is also a Business Day.

Participant Canadian Quarterly Payment Date” shall mean the last day of each calendar quarter; provided, however, if such day is not a Canadian Business Day, the next succeeding Canadian Business Day which is also a Business Day.

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

Participant Funding” shall mean a funding by the Participants of their respective Participant’s Interest in Advances or Loans in US Dollars or Canadian Dollars.

 

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Participant Insolvency Event” shall mean that (i) a Participant or its Parent Company is insolvent, or is generally unable to pay its debts as they become due, or admits in writing its inability to pay its debts as they become due, or makes a general assignment for the benefit of its creditors, (ii) a Participant or its Parent Company is the subject of a bankruptcy, insolvency, reorganization, liquidation or similar proceeding, or a receiver, trustee, conservator, custodian or similar Person charged with reorganization or liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in such capacity, has been appointed for such Participant or its Parent Company, or Participant or its Parent Company has taken any action in furtherance of or indicating its consent to or acquiescence in any such proceeding or appointment or (iii) a Participant or its Parent Company has been adjudicated as, or determined by any Governmental Authority having regulatory authority over such Person or its assets to be, insolvent; provided that, for the avoidance of doubt, a Participant Insolvency Event shall not be deemed to have occurred solely by virtue of the ownership or acquisition of any equity interest in or control of a Participant or its Parent Company thereof by a Governmental Authority or an instrumentality thereof so long as such ownership or acquisition does not result in or provide such Participant with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Participant (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Participant.

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

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

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

Participant’s Unused Commitment” shall mean, with respect to any Participant, the difference between such Participant’s Participating Commitment Amount and the US Dollar Equivalent of such Participant’s Funded Participation.

Participating Commitment” shall mean the commitment of each Participant to fund its Participant’s Interest in outstanding US Loans in US Dollars and in outstanding Canadian Loans in Canadian Dollars, in an aggregate amount (on a US Dollar Equivalent basis) not to exceed such Participant’s Participating Commitment Amount.

Participating Commitment Amount” shall mean the amount set forth opposite each Participant’s name on Schedule 1.1(b) attached hereto, as such amount may be modified by assignment pursuant to the terms hereof; provided, that, following the termination of the Facility Commitment, each Participant’s Participating Commitment Amount shall be deemed to be its Pro Rata Share of the aggregate principal amount of all Loan Commitments.

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

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

 

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

Permitted Acquisition” shall mean any Acquisition (whether foreign or domestic) so long as (a) immediately before and after giving effect to such Acquisition, no Credit Event or Unmatured Credit Event is in existence, (b) such Acquisition has been approved by the board of directors of the Person being acquired prior to any public announcement thereof, (c) to the extent such Acquisition is of a Person or Persons that are not organized in the United States and/or of all or substantially all of the assets of a Person located outside the United States and the aggregate EBITDA attributable to all Foreign Subsidiaries that are Restricted Subsidiaries for the most recently ended twelve month period (giving pro forma effect to such Acquisition) exceeds twenty percent (20%) of Consolidated EBITDA for the most recently ended twelve month period, the Sponsor complies with Section 6.10(b) hereof and (d) immediately after giving effect to such Acquisition, Holdings, the Sponsor and its Restricted Subsidiaries will not be engaged in any business other than (A) substantially the same business as presently conducted or such other businesses that are reasonably related thereto, including but not limited to the business of leasing and selling furniture, consumer electronics, computers, appliances and other household goods and accessories inside and outside of the United States of America, through both independently-owned and franchised stores, providing lease-purchase solutions, credit and other financing solutions to customers for the purchase and lease of such products, the manufacture and supply of furniture and bedding for lease and sale in such stores, and the provision of virtual rent-to-own programs inside and outside of the United States of America (including but not limited to point-of-sale lease purchase programs), (B) any other businesses which are ancillary or complementary to, or reasonable extensions or expansions of, the business of Holdings, the Sponsor and its Restricted Subsidiaries as conducted as of the Effective Date, as reasonably determined in good faith by the Sponsor and (C) any businesses that are materially different from the business of Holdings, the Sponsor and its Restricted Subsidiaries as conducted as of the Effective Date provided that any Investments made, funds expended or financial support provided by Holdings, the Sponsor and/or its Restricted Subsidiaries in connection with such alternative lines of business shall not exceed $50,000,000 in the aggregate at any time outstanding. As used herein, Acquisitions will be considered related Acquisitions if the sellers under such Acquisitions are the same Person or any Affiliate thereof.

Permitted Encumbrances” shall mean

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

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

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

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

 

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

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

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

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

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

Permitted Investments” shall mean:

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

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

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

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

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

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

 

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

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

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

Pro Forma Basis” shall mean, for purposes of calculating compliance with respect to any asset sale (including any disposition of property to a Delaware Divided LLC pursuant to a Delaware LLC Division), casualty event, Permitted Acquisition, Restricted Payment or incurrence of Indebtedness, or any other transaction subject to calculation on a “Pro Forma Basis” as indicated herein (including without limitation, for purposes of determining compliance with the financial covenants in Article VII, and determining the Applicable Margin and Applicable Percentage) that such transaction shall be deemed to have occurred as of the first day of the period of four Fiscal Quarters most recently ended (the “Reference Period”) for which the Sponsor has delivered financial statements pursuant to Section 6.1(a) or (b). For purposes of any such calculation in respect of any Permitted Acquisition, (a) income statement and cash flow statement items attributable to the Person or property subject to such Permitted Acquisition shall be included in Consolidated EBITDA for such Reference Period after giving pro forma effect thereto as if such Permitted Acquisition occurred on the first day of such Reference Period; (b) any Indebtedness incurred or assumed by Holdings, the Sponsor or any Restricted Subsidiary (including the Person or property acquired) in connection with such transaction and any Indebtedness of the Person or property acquired which is not retired in connection with such transaction (i) shall be deemed to have been incurred as of the first day of the applicable period and (ii) if such Indebtedness has a floating or formula rate, shall have an implied rate of interest for the applicable period for purposes of this definition determined by utilizing the rate which is or would be in effect with respect to such Indebtedness as at the relevant date of determination; (c) capital expenditures attributable to the Person or property acquired shall be included beginning as of the first day of the applicable period; and (d) except as permitted pursuant to clauses (I), (J) and (K) of the definition of Consolidated EBITDA, no adjustments for unrealized synergies shall be included. For purposes of any such calculation in respect of (a) the designation of any Restricted Subsidiary as an Unrestricted Subsidiary, (i) income statement and cash flow statement items (whether positive or negative) attributable to such Subsidiary shall be excluded to the extent relating to any period occurring prior to the date of such designation and (ii) Indebtedness of such Subsidiary shall be excluded and deemed to have been retired as of the first day of the Reference Period and (b) the designation of any Unrestricted Subsidiary as an Restricted Subsidiary, (i) income statement and cash flow statement items (whether positive or negative) attributable to such Subsidiary shall be included to the extent relating to any period prior to the date of such designation to the extent such items are not otherwise included in such income statement and cash flow statement items for Holdings, the Sponsor and its Restricted Subsidiaries in accordance with any defined terms set forth in this Section 1.1.

Pro Forma Compliance Certificate” shall mean a certificate of a Responsible Officer of the Sponsor containing (x) reasonably detailed calculations of the financial covenants set forth in Article VII recomputed as of the end of the period of the four Fiscal Quarters most recently ended for which the Sponsor has delivered financial statements pursuant to Section 6.1(a) or (b) after giving effect to the applicable transaction on a Pro Forma Basis and (y) if delivered in connection with any Permitted Acquisition, certifications that clauses (i) through (iv) of the definition of “Permitted Acquisition” have been satisfied (or will be satisfied in the time permitted under this Agreement).

 

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

Progressive Finance” shall mean Aaron’s Holdings Company, Inc., a Georgia corporation.

Progressive Finance Subsidiaries” shall mean the direct and indirect Subsidiaries of Progressive Finance identified on Schedule 1.1(c) hereto.

PTE” shall mean a prohibited transaction class exemption issued by the U.S. Department of Labor, as any such exemption may be amended from time to time.

Real Estate” shall mean all real property owned in fee by Holdings, the Sponsor and its Restricted Subsidiaries.

Real Estate Documents” shall mean, collectively, Mortgages covering all Material Real Estate owned by the Credit Parties, duly executed by each applicable Credit Party, together with (A) title insurance policies, current as-built ALTA/ACSM Land Title surveys certified to the Servicer, zoning letters, building permits and certificates of occupancy, in each case relating to such Real Estate and reasonably satisfactory in form and substance to the Servicer, (B) (x) “Life of Loan” Federal Emergency Management Agency Standard Flood Hazard determinations, (y) notices, in the form required under the Flood Insurance Laws, about special flood hazard area status and flood disaster assistance duly executed by each Credit Party, and (z) if any improved real property encumbered by any Mortgage is located in a special flood hazard area, a policy of flood insurance in minimum amounts required by applicable law and that is on terms reasonably satisfactory to the Servicer, (C) evidence that counterparts of such Mortgages have been recorded in all places to the extent necessary or desirable, in the judgment of the Servicer, to create a valid and enforceable first priority Lien (subject to Permitted Encumbrances) on such Real Estate in favor of the Servicer for the benefit of the Participants (or in favor of such other trustee as may be required or desired under local law), (D) if requested by the Servicer, an opinion of counsel in each state in which such Real Estate is located in form and substance and from counsel reasonably satisfactory to the Servicer, (E) a duly executed Environmental Indemnity with respect thereto, (F) Phase I Environmental Site Assessment Reports, consistent with American Society of Testing and Materials (ASTM) Standard E 1527-05, and applicable state requirements, on all of the owned Real Estate, dated no more than six (6) months prior to the date on which the Trigger Event occurred (or date of the applicable Mortgage if provided post-closing) or later if accompanied by no change affidavits, prepared by environmental engineers satisfactory to the Servicer, all in form and substance satisfactory to the Servicer, and such environmental review and audit reports, including Phase II reports, with respect to the Real Estate of any Credit Party as the Servicer shall have reasonably requested, in each case together with letters executed by the environmental firms preparing such environmental reports, in form and substance reasonably satisfactory to the Servicer, authorizing the Servicer and the Participants to rely on such reports, and the Servicer shall be reasonably satisfied with the contents of all such environmental reports and (G) such other reports, documents, instruments and agreements as the Servicer shall reasonably request, each in form and substance reasonably satisfactory to Servicer.

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

Related Parties” shall mean, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person’s Affiliates.

 

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

Relevant Governmental Body” shall mean the Federal Reserve Board and/or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Federal Reserve Board and/or the Federal Reserve Bank of New York or any successor thereto.

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

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

Required Participants” shall mean (x) at any time prior to termination of the Facility Commitment, Participants holding at least fifty-one percent (51%) of the sum of (A) the aggregate Funded Participations, plus (B) the Participant’s Unused Commitments, and (y) at any time on and after the termination of the Facility Commitment, Participants holding at least fifty-one percent (51%) of the aggregate outstanding Funded Participations at such time; provided however, that to the extent that any Participant is a Defaulting Participant, such Defaulting Participant and all of its Participating Commitments, Funded Participations and Participant’s Unused Commitments shall be excluded for purposes of determining Required Participants.

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

Reset Date” shall have the meaning assigned to such term in Section 2.14(c).

Resolution Authority” shall mean an EEA Resolution Authority or, with respect to any UK Financial Institution, a UK Resolution Authority.

Response Period” shall mean with respect to any Loan, a period of thirty (30) days commencing on the day next succeeding the day on which the Sponsor receives a notice from the Servicer that a Loan Payment Default has occurred and is continuing; provided, however, that no Response Period for any Loan shall extend beyond the Final Termination Date.

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

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

Restricted Subsidiary” shall mean any Subsidiary other than an Unrestricted Subsidiary. Unless otherwise indicated, all references to “Restricted Subsidiary” hereunder shall mean a Restricted Subsidiary of Holdings. For the avoidance of doubt, the Sponsor shall be a Restricted Subsidiary of Holdings for all purposes under the Operative Documents.

 

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Restructuring” shall mean the reorganization of Aaron’s Holdings Company, Inc., a Georgia corporation (“Aarons Holdings”) and its Affiliates pursuant to which Aaron’s Progressive Holding Company and its Subsidiaries will cease to be Subsidiaries of the Sponsor in a spinoff and separation transaction as further disclosed to the Servicer and the Participants.

Revolving Commitment” shall mean either a US Revolving Commitment or Canadian Revolving Commitment, as the case may be.

Revolving Loans” shall mean either a US Revolving Loan or Canadian Revolving Loan, as the case may be.

S&P” shall mean Standard & Poor’s, a Standard & Poor’s Financial Services LLC business.

Sanctioned Country” shall mean, at any time, a country, region or territory that is, or whose government is, the subject or target of any Sanctions.

Sanctioned Person” shall mean, at any time, (i) any Person listed in any Sanctions-related list of designated Persons maintained by OFAC, the U.S. Department of State, the United Nations Security Council, the European Union or any EU member state, (ii) any Person located, organized or resident in a Sanctioned Country, (iii) any Person owned or controlled by any such Person or (iv) any Person otherwise the subject of any Sanctions.

Sanctions” shall mean economic or financial sanctions or trade embargoes administered or enforced from time to time by (i) the U.S. government, including those administered by OFAC or the U.S. Department of State or (ii) the United Nations Security Council, the European Union, any EU Member State or Her Majesty’s Treasury of the United Kingdom.

Security Agreement” shall mean the security agreement in the form of Exhibit G.

Servicer” shall mean Truist Bank and its successors and assigns.

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

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

SOFR” with respect to any day means a rate per annum equal to the secured overnight financing rate published for such day by the Federal Reserve Bank of New York, as the administrator of the benchmark, (or a successor administrator) on the Federal Reserve Bank of New York’s Website.

Solvent” shall mean, with respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including subordinated and contingent liabilities, of such Person; (b) the present fair saleable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts and liabilities, including subordinated and contingent liabilities as they become absolute and matured; (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s

 

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ability to pay as such debts and liabilities mature; and (d) such Person is not engaged in a business or transaction, and is not about to engage in a business or transaction, for which such Person’s property would constitute an unreasonably small capital. The amount of contingent liabilities (such as litigation, guaranties and pension plan liabilities) at any time shall be computed as the amount that, in light of all the facts and circumstances existing at the time, represents the amount that would reasonably be expected to become an actual or matured liability.

Specified Asset” shall mean that certain asset disclosed to the Servicer and the Participants prior to the Effective Date.

Sponsor” shall have the meaning set forth in the opening paragraph hereof.

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

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

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

Subordinated Debt” shall have the meaning set forth in Section 10.6.

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

SWIFT” shall mean Society for Worldwide Interbank Financial Telecommunication.

Swing Line Advances” shall have the meaning set forth in Section 2.3(a).

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

Termination Date” shall mean the earlier of (a) December 31, 2020 and (b) the date on which the Sponsor delivers written notice to the Servicer that it has determined to abandon the Restructuring.

Term Loans” shall mean either a US Term Loan or Canadian Term Loan, as the case may be.

Term SOFR” shall mean the forward-looking term rate based on SOFR that has been selected or recommended by the Relevant Governmental Body.

 

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Total Net Debt to EBITDA Ratio” shall mean, at any date of determination, the ratio of (a) the sum of (i) Consolidated Total Debt as of such date minus (ii) Unrestricted Cash in an aggregate amount not to exceed at any time the aggregate amount of unrestricted cash of Holdings, the Sponsor and its Restricted Subsidiaries on deposit with, or otherwise held by, any Participant or Affiliate thereof (including, for the avoidance of doubt, cash in accounts that are subject to an account control agreement in favor of the Servicer) to (b) Consolidated EBITDA for the four consecutive Fiscal Quarters ending on such date.

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

Trigger Event” shall mean that (a) the Total Net Debt to EBITDA Ratio for the period of four Fiscal Quarters most recently ended, as calculated in the most recently delivered Compliance Certificate pursuant to Section 6.1(c), exceeds 1.25 to 1.0 or (b) a Trigger Event (as defined in the Credit Agreement) under the Credit Agreement has occurred.

UK Financial Institution” shall mean any BRRD Undertaking (as such term is defined under the PRA Rulebook (as amended from time to time) promulgated by the United Kingdom Prudential Regulation Authority) or any person falling within IFPRU 11.6 of the FCA Handbook (as amended from time to time) promulgated by the United Kingdom Financial Conduct Authority, which includes certain credit institutions and investment firms, and certain affiliates of such credit institutions or investment firms.

UK Resolution Authority” shall mean the Bank of England or any other public administrative authority having responsibility for the resolution of any UK Financial Institution.

Unadjusted Benchmark Replacement” shall mean the Benchmark Replacement excluding the Benchmark Replacement Adjustment.

Uniform Commercial Code” or “UCC” shall mean the Uniform Commercial Code as in effect from time to time in the State of New York.

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

Unrestricted Cash” shall mean, as of any date of determination, the aggregate amount (without duplication) of cash and Cash Equivalents of Holdings, the Sponsor and its Restricted Subsidiaries to the extent the same would be reflected on a consolidated balance sheet of Holdings and its Restricted Subsidiaries if the same were prepared as of such date; provided, that, “Unrestricted Cash” of Foreign Subsidiaries shall be net of repatriation costs.

Unrestricted Subsidiary” shall mean, collectively, each Subsidiary designated by the Sponsor as an Unrestricted Subsidiary pursuant to Section 6.14.

US Borrower” shall mean any Franchisee domiciled in the United States of America that is primarily liable for repayment of a US Loan as a result of having executed US Loan Documents as maker, or its permitted assignee.

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

US Dollar Equivalent” shall mean, on any date, (i) with respect to any amount denominated in US Dollars, such amount and (ii) with respect to any amount denominated in Canadian Dollars, the amount of US Dollars that would be required to purchase the amount of such Canadian Dollars on such date based upon the Exchange Rate as of the applicable date of determination.

 

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US Franchisee” shall mean those certain store operators located in the United States of America that own and operate stores under the Aaron’s franchise.

US Funded Participation” shall mean, for any Participant, the portion of such Participant’s Funded Participation in US Dollars.

US LIBOR” shall mean, for any Payment Period the offered rate for deposits in US Dollars, for a period of one month and in an amount comparable to the aggregate outstanding Funded Participations in US Dollars as of the first day of such Payment Period, appearing on the display designated on Reuters Screen LIBOR01 Page (or any successor page) as the London interbank offered rate for deposits in US Dollars at approximately 11:00 a.m. (London, England time) on the day that is two Business Days prior to the first day of the interest period; provided, that if the Servicer determines that the relevant foregoing sources are unavailable for the relevant Payment Period, LIBOR shall mean the rate of interest determined by the Servicer to be the average (rounded upward, if necessary, to the nearest 1/100th of 1%) of the rates per annum at which deposits in US Dollars are offered to the Servicer two (2) Business Days preceding the first day of such interest period by leading banks in the London interbank market as of 10:00 a.m. for delivery on the first day of such Payment Period, for the number of days comprised therein and in an amount comparable to the amount of the Funded Participation of the Servicer; provided, further, that, if US LIBOR would be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.

US Line of Credit Commitment” shall mean a commitment to make Line of Credit Loans to a US Borrower in US Dollars pursuant to a US Loan Agreement.

US Line of Credit Loans” shall mean Advances made to a US Borrower pursuant to a US Line of Credit Commitment.

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

US Loan shall mean either a US Term Loan, a US Revolving Loan, a US Line of Credit Loan or an Existing Loan, as the case may be.

US Loan Agreement” shall mean a Loan and Security Agreement setting forth the terms and conditions, as between a US Borrower and the Servicer, under which the Servicer has established a US Loan Commitment to make Advances to such Borrower pursuant to the US Loan Commitment, substantially in the form of Exhibit C, with such changes as may be mutually agreed by the Sponsor and the Servicer (it being understood that the Servicer will not unreasonably withhold or delay its agreement to any such changes requested by the Sponsor); provided, however, that any loan agreement or line of credit agreement executed by any Borrower and the Servicer prior to the Effective Date shall be substantially in the form required under the Existing Loan Facility Agreement (with such changes as may be mutually agreed by the Sponsor and the Servicer, it being understood that the Servicer will not unreasonably withhold or delay its agreement to any such changes requested by the Sponsor).

US Loan Commitment” shall mean the commitment by the Servicer to make Advances to a US Borrower in US Dollars in the amount not exceeding, and upon the terms described in, the applicable Funding Approval Notice and the applicable Loan Documents, which US Loan Commitment may be a US Line of Credit Commitment, US Revolving Commitment or a US Term Loan Commitment.

 

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

US Master Note” shall mean a US Line of Credit Note, US Revolving Note, or US Term Note, as the case may be.

US Revolving Commitment” shall mean a commitment to make US Revolving Loans to a US Borrower pursuant to a Loan Agreement.

US Revolving Loans” shall mean Advances made to a US Borrower pursuant to a US Revolving Commitment.

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

US Term Loan Commitment” shall mean a commitment to make US Term Loans to a US Borrower pursuant to a Loan Agreement.

US Term Loans” shall mean Advances made to a US Borrower pursuant to a US Term Loan Commitment.

US Term Note” shall mean that certain Term Note, executed by a US Borrower in favor of the Servicer, evidencing such US Borrower’s obligation to repay all US Term Loans made to it pursuant to a US Term Loan Commitment, substantially in the form of Exhibit A-3 to the Loan Agreement, with such changes as the Sponsor and the Servicer shall agree to from time to time.

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

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

Write-Down and Conversion Powers” ” shall mean (a) with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule and (b) with respect to the United Kingdom, any powers of the applicable Resolution Authority under the Bail-In Legislation to cancel, reduce, modify or change the form of a liability of any UK Financial Institution or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers.

 

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Section 1.2 Accounting Terms and Determination.

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

(b) Notwithstanding any other provision contained herein, (i) all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein shall be made, without giving effect to any election under Accounting Standards Codification Section 825-10 (or any other Financial Accounting Standard having a similar result or effect) to value any Indebtedness or other liabilities of any Credit Party or any Restricted Subsidiary of any Credit Party at “fair value”, as defined therein and (ii) all liability amounts shall be determined excluding any liability relating to any operating lease, all asset amounts shall be determined excluding any right-of-use assets relating to any operating lease, all amortization amounts shall be determined excluding any amortization of a right-of-use asset relating to any operating lease, and all interest amounts shall be determined excluding any deemed interest comprising a portion of fixed rent payable under any operating lease, in each case to the extent that such liability, asset, amortization or interest pertains to an operating lease under which the covenantor or a member of its consolidated group is the lessee and would not have been accounted for as such under GAAP as in effect on December 31, 2015.

(c) Notwithstanding the above, the parties hereto acknowledge and agree that all calculations of the financial covenants in Article VII (including for purposes of determining the Applicable Margin and the Applicable Percentage and any transaction that by the terms of this Agreement requires that any financial covenant contained in Article VII be calculated on a Pro Forma Basis ) shall be made on a Pro Forma Basis with respect to (a) sales, leases, transfers and/or involuntary dispositions of property in any period of twelve months with an aggregate fair market value in excess of $15,000,000, (b) any Acquisition, (c) any incurrence of any Incremental Term Loan (as defined in the Credit Agreement) and/or Incremental Revolving Commitment (as defined in the Credit Agreement), (d) any determination of whether a Domestic Subsidiary qualifies as a “Material Domestic Subsidiary” pursuant to the definition of “Material Domestic Subsidiary” or (e) any payment of a Restricted Payment occurring during such period.

Section 1.3 Times of Day. Unless otherwise specified, all references herein to times of day shall be references to Eastern time (daylight or standard, as applicable).

Section 1.4 Other Definitional Terms.

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

(b) Any “Franchisee Loan”, “Loan”, “Loan Commitment” or “Master Note” existing on the Effective Date shall be deemed to be a Franchisee Loan, US Loan, US Loan Commitment, or US Master Note, as applicable.

 

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(c) Any “Revolving Loan”, “Revolving Commitment” or “Revolving Note” existing on the Effective Date shall be deemed to be a US Revolving Loan, US Revolving Commitment or US Revolving Note, as applicable.

(d) Any “Term Loan”, “Term Loan Commitment” or “Term Note” existing on the Effective Date shall be deemed to be a US Term Loan, US Term Loan Commitment or US Term Note, as applicable.

(e) Any “Line of Credit Loan”, “Line of Credit Commitment” or “Line of Credit Note” existing on the Effective Date shall be deemed to be a US Line of Credit Loan, US Line of Credit Commitment or US Line of Credit Note, as applicable.

Section 1.5 Exhibits and Schedules. All Exhibits and Schedules attached hereto are by reference made a part hereof.

ARTICLE II

LOAN FACILITY

Section 2.1 Establishment of Facility Commitment; Terms of Loans.

(a) Facility Commitment. Subject to and upon the terms and conditions set forth in this Agreement and the other Operative Documents, and in reliance upon the guaranty and other obligations of the Sponsor set forth herein, the Servicer hereby establishes a commitment to the Sponsor to establish Loan Commitments and to make Advances thereunder in US Dollars and Canadian Dollars to such Borrowers as may be designated by the Sponsor in its Funding Approval Notices during a period commencing on the date hereof and ending on November 16, 2021 (as such period may be extended for one or more subsequent 364-day periods pursuant to Section 2.8, the “Facility Commitment Termination Date”) in an aggregate committed amount at any one time outstanding not to exceed the Maximum Commitment Amount (the “Facility Commitment”); provided that, notwithstanding any provision of this Agreement to the contrary, (x) at no time shall the Servicer establish any Loan Commitment for a Borrower if after giving effect to such Loan Commitment, the US Dollar Equivalent of the aggregate committed amounts of all Loan Commitments outstanding pursuant to the Facility Commitment would exceed the Maximum Commitment Amount and (y) at no time shall the Servicer establish any Canadian Loan Commitment for a Canadian Borrower if after giving effect to such Canadian Loan Commitment, the aggregate committed amounts of all Canadian Loan Commitments outstanding pursuant to the Facility Commitment would exceed the Canadian Subfacility Amount.

(b) Authorization of US Line of Credit Commitment; Loan Terms. Within the limits of the Facility Commitment and in accordance with the procedures set forth in this Agreement and the Servicing Agreement, the Sponsor may authorize the Servicer to establish a US Line of Credit Commitment in favor of a US Franchisee who meets the credit criteria established by the Sponsor. The amount of each US Line of Credit Commitment shall be determined by the Sponsor but shall not be less than $100,000. Pursuant to the US Line of Credit Commitment the Servicer shall agree to make Advances to the US Borrower thereunder. Each US Line of Credit Loan shall bear interest at the Borrower Rate designated by Sponsor in the applicable Funding Approval Notice, and interest shall be payable on each Borrower Payment Date and on the Maturity Date of such US Line of Credit Loan when all principal and interest shall be due and payable in full. Each US Line of Credit Loan may be prepaid in full or in part on any Business Day, without premium or penalty. The Loan Term of each US Line of Credit Commitment shall be, initially, one year, but shall automatically renew unless terminated by ninety (90) days’ prior written notice by Servicer to the US Borrower prior to the first anniversary date and may thereafter be terminated at any time by Servicer upon ninety (90) days’ prior written notice by Servicer to the US Borrower; provided

 

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that the amounts outstanding thereunder shall be allowed to term out over the Amortization Period as provided below. The proceeds of each Advance made pursuant to the US Line of Credit Commitments shall be used solely to purchase inventory, and to the extent permitted by Sponsor, to pay state sales and use taxes and freight charges. At the end of each month, the aggregate Advances made to each US Borrower during such month (net of any prepayments during such month) shall be amortized (in accordance with a straight-line amortization schedule) over the Amortization Period. In the event that the US Line of Credit Commitment of any US Borrower is terminated by the Servicer as provided above, such US Borrower shall, notwithstanding the other provisions of this Section 2.1(b), amortize all outstanding Advances over the Amortization Period (in accordance with a straight-line amortization schedule), with all Advances due and payable in full no later than 24 months after termination. In the event that a US Borrower terminates its US Line of Credit Commitment, all amounts advanced to such US Borrower shall be due and payable in full on the termination date, together with all accrued and unpaid interest thereon. Each US Borrower shall agree to pay a commitment fee on its unused US Line of Credit Commitment in an amount to be determined by the Sponsor but in any event not to exceed 1.00% per annum, such commitment fee to be paid quarterly, in arrears.

(c) Authorization of Canadian Line of Credit Commitment; Loan Terms. Within the limits of the Facility Commitment and the Canadian Subfacility Amount, and in accordance with the procedures set forth in this Agreement and the Servicing Agreement, the Sponsor may authorize the Servicer to establish a Canadian Line of Credit Commitment in favor of a Canadian Franchisee who meets the credit criteria established by the Sponsor. The amount of each Canadian Line of Credit Commitment shall be determined by the Sponsor but shall not be less than Cdn$100,000. Pursuant to the Canadian Line of Credit Commitment the Servicer shall agree to make Advances to the Canadian Borrower thereunder. Each Canadian Line of Credit Loan shall bear interest at the Borrower Rate designated by Sponsor in the applicable Funding Approval Notice, and interest shall be payable on each Canadian Borrower Payment Date and on the Maturity Date of such Canadian Line of Credit Loan when all principal and interest shall be due and payable in full. Each Canadian Line of Credit Loan may be prepaid in full or in part only on a Canadian Borrower Payment Date for such Canadian Line of Credit Loan (and not on other days), without premium or penalty. The Loan Term of each Canadian Line of Credit Commitment shall be, initially, 364 days, but shall automatically renew unless terminated by ninety (90) days’ prior written notice by Servicer to the Canadian Borrower prior to the first anniversary date and may thereafter be terminated at any time by Servicer upon ninety (90) days’ prior written notice by Servicer to the Canadian Borrower; provided that the amounts outstanding thereunder shall be allowed to term out over the Amortization Period as provided below. The proceeds of each Advance made pursuant to the Canadian Line of Credit Commitments shall be used solely to purchase inventory, and to the extent permitted by Sponsor, to pay sales and use taxes and freight charges. At the end of each month, the aggregate Advances made to each Canadian Borrower during such month (net of any prepayments during such month) shall be amortized (in accordance with a straight-line amortization schedule) over the Amortization Period. In the event that the Canadian Line of Credit Commitment of any Canadian Borrower is terminated by the Servicer as provided above, such Canadian Borrower shall, notwithstanding the other provisions of this Section 2.1(c), amortize all outstanding Advances over the Amortization Period (in accordance with a straight-line amortization schedule), with all Advances due and payable in full no later than 24 months after termination. In the event that a Canadian Borrower terminates its Canadian Line of Credit Commitment, all amounts advanced to such Canadian Borrower shall be due and payable in full on the termination date, together with all accrued and unpaid interest thereon. Each Canadian Borrower shall agree to pay a commitment fee on its unused Canadian Line of Credit Commitment in an amount to be determined by the Sponsor but in any event not to exceed 1.00% per annum, such commitment fee to be paid quarterly, in arrears

 

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(d) Authorization of US Revolving Commitment and US Term Loan Commitment; Loan Terms.

(i) Within the limits of the Facility Commitment and in accordance with the procedures set forth in this Agreement and the Servicing Agreement, the Sponsor may authorize the Servicer to establish a US Revolving Commitment and/or a US Term Loan Commitment in favor of a US Franchisee who meets the credit criteria established by the Sponsor.

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

(iii) The amount of each US Term Loan Commitment shall be determined by the Sponsor, but shall not be less than $100,000. Pursuant to the US Term Loan Commitment, the Servicer shall agree to make US Term Loans to the US Borrower thereunder. Each US Term Loan shall bear interest at the Borrower Rate designated by Sponsor in the applicable Funding Approval Notice, and interest shall be payable on each Borrower Payment Date and on the Maturity Date of such US Term Loan. Principal on each US Term Loan shall be payable on each Borrower Payment Date and shall be amortized over a period of no more than 7 years with the balance of all outstanding principal due and payable in full on the Maturity Date with respect to such US Term Loan; provided that the Sponsor shall have the option of allowing an interest-only payment schedule for up to the first six (6) months of such Loan’s term. Each US Term Loan may be prepaid in full or in part on any Business Day, without premium or penalty. The Loan Term of each US Term Loan shall not exceed four years. The proceeds of each US Term Loan shall be used for general corporate purposes.

(e) Authorization of Canadian Revolving Commitment and Canadian Term Loan Commitment; Loan Terms

(i) Within the limits of the Facility Commitment and the Canadian Subfacility Amount and in accordance with the procedures set forth in this Agreement and the Servicing Agreement, the Sponsor may authorize the Servicer to establish a Canadian Revolving Commitment and/or a Canadian Term Loan Commitment in favor of a Canadian Franchisee who meets the credit criteria established by the Sponsor.

(ii) The amount of each Canadian Term Loan Commitment shall be determined by the Sponsor, but shall not be less than Cdn$100,000. Pursuant to the Canadian Term Loan Commitment, the Servicer shall agree to make Canadian Term Loans to the Canadian Borrower thereunder. Each Canadian Term Loan shall bear interest at the Borrower Rate designated by Sponsor in the applicable Funding Approval Notice, and interest shall be payable on each Canadian Borrower Payment Date and on the Maturity Date of such Canadian Term Loan. Principal on each

 

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Canadian Term Loan shall be payable on each Canadian Borrower Payment Date and shall be amortized over a period of no more than 7 years with the balance of all outstanding principal due and payable in full on the Maturity Date with respect to such Canadian Term Loan; provided that the Sponsor shall have the option of allowing an interest-only payment schedule for up to the first six (6) months of such Loan’s term. Each Canadian Term Loan may be prepaid in full or in part only on a Canadian Borrower Payment Date for such Canadian Term Loan (and not on other days), without premium or penalty. The Loan Term of each Canadian Term Loan shall not exceed two years.

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

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

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

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

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

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

(v) no Credit Event, Unmatured Credit Event, Change in Control or Wind-Down Event shall have occurred and be continuing; and

 

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(vi) each Participant shall have confirmed in writing to the Servicer that it has (A) received all documentation and other information with respect to the applicable Borrower that any Participant reasonably believes is required by regulatory authorities under applicable “know-your-customer” and anti-money laundering rules and regulations, including without limitation the Patriot Act and (B) completed all applicable internal “know-your-customer” procedures.

(g) In addition to other conditions precedent herein set forth, if any Participant is a Defaulting Participant, the Servicer will not be required to establish any new Loan Commitment or increase any existing Loan Commitments, unless it is satisfied that 100% of the Participant’s Interest of such Defaulting Participant has been fully Cash Collateralized or the risk of such Defaulting Participant is otherwise fully eliminated by any combination satisfactory to the Servicer of the actions required in Section 2.17.

Section 2.2 Conveyance of Participant’s Interest.

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

(b) In consideration of the entry by each Participant into this Agreement and the obligation of each Participant hereunder, the Servicer shall issue to each Participant on the Effective Date, a Participation Certificate. Each Participation Certificate shall be in an amount equal to the relevant Participant’s Participating Commitment Amount, and the Funded Participation outstanding thereunder shall bear interest as hereinafter set forth and shall be payable as hereinafter set forth.

(c) In accordance with the terms and conditions hereof, and in consideration of the sale of the Participant’s Interest to such Participant, each Participant severally agrees from time to time, during the period commencing on the Effective Date and ending on the Final Termination Date, to fund in US Dollars its Participant’s Interest in outstanding US Loans made by the Servicer to the US Borrowers in accordance with the terms hereof and to fund in Canadian Dollars its Participant’s Interest in outstanding Canadian Loans made by the Servicer to the Canadian Borrowers in accordance with the terms hereof, so long as (x) the US Dollar Equivalent of its Funded Participation does not exceed its Participating Commitment and (y) its Funded Participation with respect to Canadian Loans does not exceed its Pro Rata Share of the Canadian Subfacility Amount.

Section 2.3 Funding of Advances; Swing Line; Funding of Participant’s Interest in Loans.

(a) Funding of Advances. The Servicer shall fund Advances requested by the Borrowers in accordance with the terms of the applicable Loan Documents and the Servicing Agreement. All advances to Canadian Borrowers shall be made in Canadian Dollars and all Advances to US Borrowers shall be made in US Dollars. On the date of any such funding, the Servicer shall elect whether or not to require the Participants to fund their respective Pro Rata Share of the Advances to be made on such date.

 

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All fundings by the Participants with respect to Canadian Loans shall be made in Canadian Dollars, and all fundings by the Participants with respect to US Loans shall be made in US Dollars. In the event that the Servicer elects not to require the Participants to fund their Pro Rata Share of the Advances to be made on such date, the Servicer shall make such Advances (each, a “Swing Line Advance”) to the Borrowers for the account of the Servicer; provided that the US Dollar Equivalent of the aggregate amount of Swing Line Advances outstanding on any date shall not exceed $25,000,000. If (i) any Credit Event, Change in Control or Wind-Down Event shall have occurred, (ii) after giving effect to any requested Advance, the US Dollar Equivalent of the aggregate Swing Line Advances outstanding hereunder would exceed $25,000,000, or (iii) the Servicer otherwise determines in its sole discretion to request a Participant Funding hereunder, then the Servicer shall notify the Participants pursuant to Section 2.3(b) requesting a Participant Funding.

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

(c) Each Participant shall make available its Pro Rata Share of the requested Participant Funding in the applicable currency on the proposed date thereof by wire transfer of immediately available funds to the Servicer in Atlanta, Georgia by not later than 2:00 P.M. (Atlanta, Georgia time). Unless the Servicer shall have received notice from a Participant prior to the date of any Participant Funding that such Participant will not make available to the Servicer such Participant’s Pro Rata Share of such Participant Funding, the Servicer may assume that the Participant has made such portion available to the Servicer on the date of such Participant Funding in accordance with this Section 2.3(c) and the Servicer may, in reliance on such assumption, make available to the Borrowers a corresponding amount or credit the same to Swing Line Advances. If and to the extent that such Participant shall not have made such portion available to the Servicer, such Participant and the Sponsor shall severally agree to repay the Servicer forthwith (on demand in the case of the Participant and within three (3) days of such demand in the case of the Sponsor), without duplication, such amount with interest at the Federal Funds Rate plus 2% per annum and, until such time as such Participant has repaid to the Servicer such amount. If such Participant shall repay to the Servicer such amount, then such amount shall constitute part of such Participant’s Funded Participation.

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

 

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

Section 2.4 Participant Commitment Fees.

(a) Each Participant will receive, from amounts paid by the Borrowers under the Loan Documents and the Sponsor under the Operative Documents, a commitment fee (the “Participant Commitment Fee”) equal to the average daily amount of its Participant’s Unused Commitment for the period commencing on the Effective Date and ending on the Final Termination Date, or such earlier date as the Participating Commitment shall expire or terminate, multiplied by the Applicable Percentage per annum, such Participant Commitment Fee to be payable in arrears on each Participant Quarterly Payment Date, commencing on December 31, 2020, for the preceding Payment Period, calculated on the basis of a 360-day year and the actual number of days elapsed.

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

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

(d) Anything herein to the contrary notwithstanding, during such period as a Participant is a Defaulting Participant, such Defaulting Participant will not be entitled to Participant Commitment Fees accruing with respect to its Participating Commitment during such period pursuant to Section 2.4(a) (without prejudice to the rights of the Participants other than Defaulting Participants in respect of such fees).

Section 2.5 Interest on Funded Participations.

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

 

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

(b) Payment of Interest. Interest on each Participant’s US Funded Participation shall be payable by the Servicer to the Participants in US Dollars on each Participant Monthly Payment Date from interest payments received on the US Loans on such Participant Monthly Payment Date for the preceding Payment Period and from other amounts received from the Sponsor. Interest on each Participant’s Canadian Funded Participation shall be payable by the Servicer to the Participants in Canadian Dollars on each Participant Canadian Monthly Payment Date from interest payments received on the Canadian Loans on such Participant Canadian Monthly Payment Date for the preceding Payment Period and from other amounts received from the Sponsor.

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

(d) LIBOR Not Determinable or Illegal.

(i) In the event that US LIBOR is not determinable by the Servicer or it becomes impossible or illegal for the Servicer to calculate interest on the US Funded Participations based upon US LIBOR, the parties agree that in such event that interest on the US Funded Participations shall bear interest at a rate per annum equal to the Prime Rate plus a mutually agreed upon spread based upon current market conditions.

(ii) In the event that Canadian LIBOR is not determinable by the Servicer or it becomes impossible or illegal for the Servicer to calculate interest on the Canadian Funded Participations based upon Canadian LIBOR, the parties agree that in such event that interest on the Canadian Funded Participations shall bear interest at a rate per annum equal to the Canadian Prime Rate plus a mutually agreed upon spread based upon current market conditions.

(iii) Notwithstanding anything to the contrary herein or in any other Operative Document, upon the occurrence of a Benchmark Transition Event or an Early Opt-in Election, in each case, with respect to any applicable then-current Benchmark, as applicable, the Servicer and the Sponsor may amend this Agreement to replace the applicable Benchmark with a Benchmark Replacement. Any such amendment with respect to a Benchmark Transition Event will become

 

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effective at 5:00 p.m. on the fifth (5th) Business Day after the Servicer has posted such proposed amendment to all Participants and the Sponsor so long as the Servicer has not received, by such time, written notice of objection to such amendment from Participants comprising the Required Participants. Any such amendment with respect to an Early Opt-in Election will become effective on the date that Participants comprising the Required Participants have delivered to the Servicer written notice that such Required Participants accept such amendment. No replacement of the applicable Benchmark with a Benchmark Replacement pursuant to these provisions will occur prior to the applicable Benchmark Transition Start Date.

(iv) In connection with the implementation of a Benchmark Replacement, the Servicer will have the right to make Benchmark Replacement Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Operative Document, any amendments implementing such Benchmark Replacement Conforming Changes will become effective without any further action or consent of any other party to this Agreement.

(v) The Servicer will promptly notify the Sponsor and the Participants of (i) any occurrence of a Benchmark Transition Event or an Early Opt-in Election, as applicable, and its related Benchmark Replacement Date and Benchmark Transition Start Date, (ii) the implementation of any Benchmark Replacement, (iii) the effectiveness of any Benchmark Replacement Conforming Changes and (iv) the commencement or conclusion of any Benchmark Unavailability Period. Any determination, decision or election that may be made by the Servicer or Participants pursuant to this Section 2.5(iii)-(vi), including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action, will be conclusive and binding absent manifest error and may be made in its or their sole discretion and without consent from any other party hereto, except, in each case, as expressly required pursuant to this Section 2.5(iii)-(vi).

(vi) Upon the Sponsor’s receipt of notice of the commencement of a Benchmark Unavailability Period, any Funded Participations shall bear interest as set forth in Section 2.5(d)(i) or 2.5(d)(ii), as applicable.

Section 2.6 Default Interest. If a Credit Event has occurred and is continuing, at the option of the Required Participants, or automatically in the case of a Credit Event under Sections 9.1, 9.7 or 9.8, the Sponsor shall pay interest (to the extent permitted by law) at a rate per annum (computed on the basis of the actual number of days elapsed over a year of 360 days) equal to the rate set forth in Section 2.5 plus an additional two percent (2.0%) per annum.

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

 

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Section 2.8 Extension of Commitments.

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

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

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

 

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Section 2.9 Wind-Down Events. In the event a Wind-Down Event occurs, then (x) the Sponsor shall not have the right to request that any further Loan Commitments be established, and (y) the Servicer shall, within a reasonable period of time and in any event no later than thirty (30) days after the Facility Commitment Termination Date, give notice to each of the applicable Borrowers terminating the Line of Credit Commitments as of the date which is ninety (90) days after delivery of such notice, subject, in each case, to the right of the Borrowers to term out the amounts outstanding under their Line of Credit Commitments as set forth in Section 2.1(b) and Section 2.1(c), as applicable; provided, however, that the occurrence of such Wind-Down Event shall not affect the obligation of (i) the Servicer to make Advances pursuant to existing Line of Credit Commitments, except to the extent that the Line of Credit Commitments are terminated pursuant to clause (y) above, (ii) the Servicer to make Advances pursuant to existing Revolving Commitments, (iii) the Participants to fund their Participant’s Interest as provided herein, except to the extent that the Line of Credit Commitments are terminated pursuant to clause (y) above or (iv) the Credit Parties under the Operative Documents.

Section 2.10 Reserve Requirements; Change in Circumstances; Change in Lending Offices.

(a) Notwithstanding any other provision herein, if, by reason of (i) after the date hereof, the introduction of or any change (including any change by way of imposition or increase of reserve requirements) in or in the interpretation of any law or regulation (which, for the avoidance of doubt, shall include, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, regardless of the date enacted, adopted or issued) or (ii) the compliance with any guideline or request from any central bank or other governmental authority or quasi-governmental authority exercising control over banks or financial institutions generally (whether or not having the force of law), any reserve (including any imposed by the Federal Reserve Board), special deposit or similar requirement (including a reserve, special deposit or similar requirement that takes the form of a tax) against assets of, deposits with or for the account of, or credit extended by, any Participant’s office through which it funds its obligations hereunder shall be imposed or deemed applicable or any other condition affecting its obligation to make or maintain its Funded Participation at a rate based upon the Adjusted US LIBO Rate or Adjusted Canadian LIBO Rate shall be imposed on any Participant or its office through which it funds its obligations hereunder or the interbank Eurocurrency market; and as a result thereof there shall be any increase in the cost to such Participant of agreeing to make or making, funding or maintaining funds its obligations hereunder (except to the extent already included in the determination of the applicable Adjusted US LIBO Rate or Adjusted Canadian LIBO Rate), or there shall be a reduction in the amount received or receivable by that Participant or its office through which it funds its obligations hereunder, then the Sponsor shall from time to time, upon written notice from and demand by the Participant (with a copy of such notice and demand to the Servicer), pay to the Servicer for the account of that Participant within five Business Days after the date specified in such notice and demand, additional amounts sufficient to indemnify that Participant against such increased cost. A certificate as to the amount of such increased cost submitted to the Sponsor and the Servicer by that Participant, shall, except for manifest error, be final, conclusive and binding for all purposes.

(b) If while the Facility Commitment or any Loan Commitments are outstanding, any Participant (including any the Servicer) determines that the adoption of any law, rule or regulation regarding capital adequacy or capital maintenance (which, for the avoidance of doubt, shall include, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar

 

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authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, regardless of the date enacted, adopted or issued), or any change in any of the foregoing or in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Participant (or any lending office of such Participant) or any Participant’s holding company with any request or directive regarding capital adequacy or capital maintenance (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such Participant’s capital or on the capital of such Participant’s holding company, if any, as a consequence of this Agreement, the Loan Documents or the purchases made by such Participant pursuant hereto to a level below that which such Participant or such Participant’s holding company could have achieved but for such adoption, change or compliance (taking into consideration such Participant’s policies and the policies of such Participant’s holding company with respect to capital adequacy) by an amount reasonably deemed by such Participant to be material, then from time to time, within 15 days after written demand by such Participant, the Sponsor pay to such Participant such additional amount or amounts as will compensate such Participant or such Participant’s holding company for such reduction. A certificate as to the amount of any such additional amount or amounts, submitted to the Sponsor and the Servicer by such Participant, shall, except for manifest error, be final, conclusive and binding for all purposes. For the avoidance of doubt, Participants may only make claims for compensation pursuant to this Section 2.10, to the extent such claims are a consequence of this Agreement, the Loan Documents or the purchases made by such Participant pursuant hereto.

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

Section 2.11 Pro Rata Treatment. Subject to the application of payments pursuant to Article III and except as specifically provided therein, each payment of principal of any Funded Participation, each payment of interest with respect to the Funded Participation, each payment of the Participant Commitment Fees and each reduction of the Participating Commitments shall be allocated pro rata among the Participants in accordance with their respective applicable Pro Rata Shares. Each Participant agrees that in computing its Pro Rata Share of any Participant Funding hereunder, the Servicer may, in its discretion, round each Participant’s percentage of such Participant Funding Request to the next higher or lower whole dollar amount.

Section 2.12 Payments.

(a) The Sponsor shall make each payment required to be made by Sponsor hereunder and under any other Operative Document to any Participant or the Servicer not later than 1:00 p.m. (Atlanta, Georgia time), on the date when due in the Contractual Currency (as defined below) to the Servicer at its offices in Atlanta, Georgia in immediately available funds, free and clear of any defenses, rights of set-off, counterclaim, or withholding or deduction of taxes.

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

 

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(c) Notwithstanding anything herein to the contrary, any amount paid by any Borrower or the Sponsor for the account of a Defaulting Participant under this Agreement (whether on account of principal, interest, fees, indemnity payments or other amounts) will be retained by the Servicer in a segregated non-interest bearing account until the Facility Commitment Termination Date at which time the funds in such account will be applied by the Servicer, to the fullest extent permitted by law, in the following order of priority: first to the payment of any amounts owing by such Defaulting Participant to the Servicer under this Agreement, including, without limitation, amounts owing to the Servicer in its capacity as lender with respect to Swing Line Advances hereunder, second, to the payment of interest due and payable to the Participants hereunder other than Defaulting Participants, ratably among them in accordance with the amounts of such interest then due and payable to them, third to the payment of fees then due and payable to the Participants hereunder other than Defaulting Participants hereunder, ratably among them in accordance with the amounts of such fees then due and payable to them, fourth to the ratable payment of other amounts then due and payable to the Participants hereunder other than Defaulting Participants, and fifth to pay amounts owing under this Agreement to the Defaulting Participants or as a court of competent jurisdiction may otherwise direct.

Section 2.13 Sharing of Setoffs. Each Participant agrees that if it shall, in accordance with applicable law, through the exercise of a right of banker’s lien, setoff or counterclaim against the Sponsor or any Borrower, or pursuant to a secured claim under Section 506 or Title 11 of the United States Code or other security or interest arising from, or in lieu of, such secured claim, received by the Participant under any applicable bankruptcy, insolvency or other similar law or otherwise, or by any other means, obtain payment (voluntary or involuntary) in respect of any Funded Participation under this Agreement (other than pursuant to Section 2.12(c)) as a result of which the unpaid principal portion of its Funded Participation shall be proportionately less than the unpaid principal portion of the Funded Participation of any other Participant, it shall be deemed simultaneously to have purchased from such other Participant at face value, and shall promptly pay to such other Participant the purchase price for, a participation in the Funded Participation of such other Participant, so that the aggregate unpaid principal amount of the Funded Participation and participations in Funded Participations held by each Participant shall be in the same proportion to the aggregate unpaid principal amount of all Funded Participations then outstanding as the principal amount of its purchases prior to such exercise of banker’s lien, setoff or counterclaim or other event was to the principal amount of all Funded Participations outstanding prior to such exercise of banker’s lien, setoff or counterclaim or other event; provided, however, that, if any such purchase or purchases or adjustments shall be made pursuant to this Section 2.13 and the payment giving rise thereto shall thereafter be recovered, such purchase or purchases or adjustments shall be rescinded to the extent of such recovery and the purchase price or prices or adjustment restored without interest. The Servicer and each Participant hereby further agrees that any set-off amount received with respect to any Borrower, the Sponsor or any Guarantor shall first be applied to amounts outstanding under the Franchisee Loan Program prior to application to any other obligations of any such Person to the Servicer or such Participant. The Sponsor expressly consents to the foregoing arrangements and agrees, to the extent permitted by applicable law, that any Participant holding a Funded Participation or a participation in a Funded Participation deemed to have been so purchased may exercise any and all rights of banker’s lien, setoff or counterclaim with respect to any and all moneys owing by the Sponsor to such Participant by reason thereof.

Section 2.14 Canadian Dollar Provisions.

(a) If any payment due hereunder or under any other Operative Document is not made in the currency due under this Agreement (the “Contractual Currency”) or if any court or tribunal shall render a judgment or order for the payment of amounts due hereunder or under the Operative Documents and such judgment is expressed in a currency other than the Contractual Currency, the Sponsor shall indemnify and hold the Servicer and each Participant harmless against any deficiency incurred by the Servicer or such Participant with respect to the amount received by the Servicer or such Participant to the

 

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extent the rate of exchange at which the Contractual Currency is convertible into the currency actually received or the currency in which the judgment is expressed (the “Received Currency”) is not the reciprocal of the rate of exchange at which the Servicer would be able to purchase the Contractual Currency with the Received Currency, in each case on the Business Day following receipt of the Received Currency in accordance with normal banking procedures. If the court or tribunal has fixed the date on which the rate of exchange is determined for the conversion of the judgment currency into the Contractual Currency (the “Conversion Date”) and if there is a change in the rate of exchange prevailing between the Conversion Date and the date of receipt by the Servicer and the relevant Participant, then the Sponsor will, notwithstanding such judgment or order, pay such additional amount (if any) as may be necessary to ensure that the amount paid in the Received Currency when converted at the rate of exchange prevailing on the date of receipt will produce the amount then due to the Servicer and the relevant Participant from the Sponsor hereunder in the Contractual Currency.

(b) If a Credit Event of the type described in Sections 9.7, 9.8 or 9.9 occurs: (i) any amounts owing to the Servicer and the Participants under the Operative Documents, (ii) any damages owing to the Servicer or the Participants, as the case may be, in respect of a breach of any of the terms of the Operative Documents, or (iii) any judgment or order rendered in respect of such amounts or damages, the Sponsor shall indemnify and hold the Servicer and the Participants harmless against any deficiency with respect to the Contractual Currency in the amounts received by the Servicer and the Participants with respect to any of the amounts described in clause (i), (ii) or (iii) above arising or resulting from any variation as between: (i) the rate of exchange at which the Contractual Currency is converted into another currency (the “Liquidation Currency”) for purposes of such winding-up, liquidation, dissolution or bankruptcy with regard to the amount in the Contractual Currency due or contingently due under the Operative Documents or under any judgment or order to which the relevant obligations under the Operative Documents shall have been merged and (ii) the rate of exchange at which the Servicer would, in accordance with normal banking procedures, be able to purchase the Contractual Currency with the Liquidation Currency at the earlier of (A) the date of payment of such amounts or damages and (B) the final date or dates for the filing of proofs of a claim in a winding-up, liquidation, dissolution or bankruptcy. As used in the preceding sentence, the “final date” or dates for the filing of proofs of a claim in a winding-up, liquidation, dissolution or bankruptcy shall be the date fixed by the liquidator under the applicable law as being the last practicable date as of which the liabilities of the Borrowers or the Sponsor, as the case may be, may be ascertained for such winding-up, liquidation, dissolution or bankruptcy before payment by the liquidator or other appropriate Person in respect thereof.

(c) Exchange Rates. Not later than 2:00 p.m. (Atlanta, Georgia time) on each date of determination (which date of determination shall be at least quarterly and frequently as the Servicer shall require if a Credit Event has occurred and is continuing and after a Wind-Down Event), the Servicer shall (A) determine the Exchange Rate as of such date of determination with respect to Canadian Dollars, and (B) give notice thereof to the Sponsor and Participants. The Exchange Rate as so determined shall become effective on the first Business Day immediately following the relevant date of determination (a “Reset Date”), shall remain effective until the next succeeding Reset Date, and shall for all purposes of this Agreement, be the Exchange Rate employed in determining the US Dollar Equivalent of any amounts in Canadian Dollars.

Section 2.15 Excess Loan Commitments Resulting From Exchange Rate Changes. If on any Reset Date, after giving effect to any changes in Exchange Rate implemented pursuant to Section 2.14, the US Dollar Equivalent of all Loan Commitments exceeds the Maximum Commitment Amount, the Sponsor shall promptly and, in any case, within ten (l0) days thereafter, either (i) purchase Loans and related Loan Commitments from the Servicer in an amount sufficient to cause the US Dollar Equivalent of all outstanding Loan Commitments not to exceed the Maximum Commitment Amount, or (ii) to the extent that the US Dollar Equivalent of all Loan Commitments does not exceed the Maximum Commitment Amount by more than $1,000,000, cause to be issued to the Servicer a letter of credit (from an issuer and in form and substance reasonably satisfactory to the Servicer) in an amount equal to or greater than the amount by which the US Dollar Equivalent of all Loan Commitments exceeds the Maximum Commitment Amount.

 

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Section 2.16 Interest Act. For the purposes of the Interest Act (Canada), any amount of interest or fees calculated on the Facility Commitment or the Canadian Funded Participations using 360, 365 or 366 days per year and expressed as an annual rate is equal to the said rate of interest or fees multiplied by the actual number of days comprised within the calendar year, divided by 360, 365 or 366, as the case may be. The parties agree that all interest with respect to the Facility Commitment or the Canadian Funded Participations accruing under this Agreement will be calculated using the nominal rate method and not the effective rate method, and that the deemed re-investment principle shall not apply to such calculations. In addition, the parties acknowledge that there is a material distinction between the nominal and effective rates of interest and that they are capable of making the calculations necessary to compare such rates.

Section 2.17 Reallocation and Cash Collateralization of Defaulting Participant Exposure.

(a) If a Participant becomes, and during the period it remains, a Defaulting Participant, the following provisions shall apply, notwithstanding anything to the contrary in this Agreement; provided that neither any such reallocation nor any payment by a Non-Defaulting Participant pursuant thereto nor any such Cash Collateralization or reduction will constitute a waiver or release of any claim the Servicer, the Sponsor or any other Participant may have against such Defaulting Participant or cause such Defaulting Participant to be a Non-Defaulting Participant:

(1) the Participant’s Interest of such Defaulting Participant in the unfunded portion of outstanding Loan Commitments will, subject to the limitation in the proviso below, automatically be reallocated (effective no later than one (1) Business Day after the Servicer has actual knowledge that such Participant has become a Defaulting Participant) among the Non-Defaulting Participants pro rata in accordance with their respective Participant’s Interest (calculated as if the Defaulting Participant’s Participant’s Interest was reduced to zero and each Non-Defaulting Participant’s Participant’s Interest had been increased proportionately); provided that each Non-Defaulting Participant’s total Participant’s Interest may not in any event exceed the Participating Commitment of such Non-Defaulting Participant as in effect at the time of such reallocation; and

(2) to the extent that any portion (the “unreallocated portion”) of the Participant’s Interest of such Defaulting Participant in the unfunded portion of outstanding Loan Commitments cannot be reallocated pursuant to clause (1) for any reason, the Sponsor will, not later than two (2) Business Days after demand by the Servicer, (a) Cash Collateralize the obligations of Defaulting Participant to the Servicer in respect of such unfunded portion of outstanding Loan Commitments in full or (b) make other arrangements satisfactory to the Servicer to protect them against the risk of non-payment by such Defaulting Participant.

(b) If the Sponsor and the Servicer agree in writing in their discretion that any Defaulting Participant has ceased to be a Defaulting Participant, the Servicer will so notify the parties hereto, whereupon as of the effective date specified in such notice and subject to any conditions set forth therein, the Participant’s Interest of the other Participants shall be readjusted to reflect the inclusion of such Participant’s Participating Commitment, and such Participant will purchase at par such portion of the Participant’s Interest of such other Participants in Loans outstanding under Loan Commitments and/or make such other adjustments as the Servicer may determine to be necessary to cause all Funded Participations in all outstanding Loans of the Participants to be on a pro rata basis in accordance with their respective Participant’s Interests, whereupon such Participant will cease to be a Defaulting Participant and will be a

 

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Non-Defaulting Participant (and such Funded Participation of each Participant will automatically be adjusted on a prospective basis to reflect the foregoing). If any cash collateral has been posted, the Servicer will promptly return such cash collateral to the Sponsor; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Sponsor while such Participant was a Defaulting Participant; and provided, further, that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Participant to Non-Defaulting Participant will constitute a waiver or release of any claim of any party hereunder arising from such Participant’s having been a Defaulting Participant

ARTICLE III

SERVICER’S SERVICING OBLIGATIONS; DISTRIBUTION OF PAYMENTS

Section 3.1 Servicer’s Obligations with Respect to Loans; Collateral; Non-Recourse.

(a) The Servicer shall, for itself and the benefit of all of the Participants and the Sponsor, (i) document, close, manage, administer and collect the Loans in accordance with the terms of this Agreement and the Servicing Agreement and exercise all discretionary powers involved in such management, administration and collection and (ii) shall distribute the funds received with respect to the Loans and from the Sponsor in accordance with the terms of this Agreement. The Servicer agrees that it will exercise the same care in administering the Loans as it exercises with respect to loans of similar size and type and in accordance with the terms of the Servicing Agreement and Section 10.12 hereto.

(b) The forms of Loan Agreements, Canadian Security Agreement and Notes used by the Servicer as documentation for each Loan on and after the Effective Date shall be substantially in the forms attached hereto with such changes as may be mutually agreed by the Sponsor and the Servicer (it being understood that the Servicer will not unreasonably withhold or delay its agreement to any such changes requested by the Sponsor).

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

(d) In addition, each of the Participants acknowledges and agrees that the obligations of the Servicer with respect to the Collateral shall be expressly limited to the filing of financing statements (but not fixture filings) in the locations indicated in the applicable Funding Approval Notice for each Borrower and filing continuation statements with respect thereto and taking enforcement action in accordance with Section 10.12 hereto.

(e) Each of the Participants acknowledges and agrees that the Servicer shall be relying solely upon the Sponsor for purposes of calculating and ensuring compliance by Borrowers with the Franchisee Borrowing Base for each US Revolving Loan, US Term Loan, Canadian Revolving Loan and Canadian Term Loan.

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

 

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

Section 3.2 Application of Payments.

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

(b) On each Participant Quarterly Payment Date and each Participant Canadian Quarterly Payment Date, all payments of commitment fees received by the Servicer from the Borrowers since the immediately prior Participant Quarterly Payment Date or each Participant Canadian Quarterly Payment Date (as applicable) and from the Sponsor pursuant to the Operative Documents and not previously distributed by the Servicer, shall be applied to pay all accrued but unpaid Participant Commitment Fees in the applicable currency pursuant to this Agreement, such payment to be distributed by the Servicer to the Participants pro rata in accordance with Section 2.4, with any remainder to be applied as set forth in the Servicing Agreement.

(c) On each Participant Monthly Payment Date and each Participant Canadian Monthly Payment Date, all payments of interest received by the Servicer from the Borrowers since the immediately prior Participant Monthly Payment Date or Participant Canadian Monthly Payment Date (as applicable) and from the Sponsor pursuant to its guaranty contained herein with respect to the Loans and not previously distributed by the Servicer, shall be applied to pay all accrued but unpaid interest on the Funded Participation in the applicable currencies pursuant to this Agreement, then to pay all accrued but unpaid Servicing Fees and then to pay the Sponsor’s Fee, in accordance with the terms of the Servicing Agreement and Fee Letter and in the applicable currencies.

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

 

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(e) If during any period when no Credit Event has occurred and is continuing, amounts received by Servicer are not capable of being allocated to any specific Loan or, in the case of amounts allocable to a specific Loan, are not sufficient to repay all obligations then due and owing with respect thereto, such amounts shall be applied by the Servicer as follows: (i) first, to the payment of Participant Commitment Fees owing to the Participants hereunder, (ii) second, to the payment of accrued interest on the Funded Participation hereunder, (iii) third, to the payment of the Servicing Fees owing under the Servicing Agreement, (iv) fourth, to the repayment of the Funded Participations outstanding hereunder, (v) fifth, to the payment of all other amounts owing to the Servicer or any Participant hereunder, and (vi) sixth, if all obligations of the Sponsor pursuant to the Operative Documents have been satisfied in full, to the Sponsor; provided, however, that (i) to the extent such amounts received by the Servicer are in Canadian Dollars, such amounts shall be applied only to the foregoing obligations that are payable in Canadian Dollars, and (ii) to the extent such amounts received by the Servicer are in US Dollars, such amounts shall be applied only to the foregoing obligations that are payable in US Dollars.

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

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

Section 3.3 Monthly Servicing Report. Within three (3) Business Days after the end of each calendar month, the Servicer shall telecopy (or email) to the Sponsor a servicing report in a form substantially similar to Exhibit F or such other form as may be mutually agreed between the Servicer and Sponsor (the “Monthly Servicing Report”) setting forth the following information with respect the Loans:

(a) the aggregate principal balance of the US Loans and the aggregate principal balance of the Canadian Loans as of the close of business on the last day of the preceding Payment Period and on such day;

(b) the aggregate amount of the US Loans and the aggregate principal balance of the Canadian Loans repurchased by the Sponsor, and all amounts collected with respect to the Collateral for the US Loans and the Canadian Loans since the date of the last Monthly Servicing Report;

(c) the aggregate US Loan Commitments and the aggregate Canadian Loan Commitments as of the close of business on the last Business Day of the preceding calendar month and on such day; and

(d) each US Loan and each Canadian Loan which is past due (including the past due amount and the number of days past due).

ARTICLE IV

LOAN DEFAULT; RIGHT TO MAKE GUARANTY DEMAND

Section 4.1 Notice Of Loan Defaults. Within ten (10) days after the occurrence of any Loan Payment Default, the Servicer shall send written notice of such Loan Payment Default to the applicable Borrower and Sponsor. Within ten (10) days after the Servicer obtains actual knowledge of the occurrence of any Loan Default other than a Loan Payment Default, the Servicer shall send written notice of such Loan Default to the applicable Borrower and Sponsor.

 

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Section 4.2 Waiver or Cure By The Sponsor of Covenant Defaults and Loan Payment Defaults.

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

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

Section 4.3 [Reserved].

Section 4.4 Rights during Response Period. Unless a Credit Event or an Unmatured Credit Event has occurred and is continuing, the Servicer shall refrain during any Response Period from taking any legal action against the Defaulted Borrower under the Defaulted Loan which is the subject of such Response Period, and from accelerating payment of the Loan Indebtedness under such Defaulted Loan but the Servicer shall cease funding any further Advances pursuant to the Loan Commitment to such Defaulted Borrower. If the Sponsor waives and cures (or causes the applicable Borrower to cure) any Loan Payment Default prior to the expiration of a Response Period, then as to each Loan Payment Default so waived and cured, the Defaulted Borrower’s and the Servicer’s respective rights and obligations under the Loan Documents shall be restored to the same status as if such waived Loan Payment Default never occurred.

Section 4.5 Rights after Response Period and for Loan Defaults other than Loan Payment Defaults. In the event that (a) any Loan Default (other than a Loan Payment Default) occurs and is continuing or (b) any Loan Payment Default is not cured during the applicable Response Period, (i) the Servicer shall have the right to (A) demand that Sponsor comply with its obligations with respect to such Defaulted Loan set forth in Article X and (B) administer and enforce such Loan as it deems appropriate, without regard to any limitations or restrictions set forth herein (but subject to Article III in all events) or in any other Operative Document, and (ii) notwithstanding anything contained in this Article IV to the contrary, the Sponsor shall, within five (5) Business Days of its receipt of a written demand from the Servicer instructing it to do so, purchase the Loan Indebtedness of the Defaulted Loan and assume the Loan Commitment related thereto.

 

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ARTICLE V

REPRESENTATIONS AND WARRANTIES

Each of Holdings and the Sponsor represents and warrants to the Servicer and each Participant as follows:

Section 5.1 Existence; Power. Holdings, the Sponsor and each of its Restricted Subsidiaries (a) is duly organized, validly existing and in good standing as a corporation, partnership or limited liability company under the laws of the jurisdiction of its organization, (b) has all requisite power and authority to carry on its business as now conducted, and (c) is duly qualified to do business, and is in good standing, in each jurisdiction where such qualification is required, except where a failure to be so qualified could not reasonably be expected to result in a Material Adverse Effect.

Section 5.2 Organizational Power; Authorization. The execution, delivery and performance by each Credit Party of the Transaction Documents to which it is a party are within such Credit Party’s organizational powers and have been duly authorized by all necessary organizational, and if required, partner, member or stockholder, action. This Agreement has been duly executed and delivered by the Sponsor, and constitutes, and each other Transaction Document to which any Credit Party is a party, when executed and delivered by such Credit Party, will constitute, valid and binding obligations of the Sponsor or such Credit Party (as the case may be), enforceable against it in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity.

Section 5.3 Governmental Approvals; No Conflicts. The execution, delivery and performance by Holdings and the Sponsor of this Agreement, and by each Credit Party of the other Transaction Documents to which it is a party (a) do not require any consent or approval of, registration or filing with, or any action by, any Governmental Authority, except those as have been obtained or made and are in full force and effect or where the failure to do so, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect, (b) will not violate any applicable law or regulation or the charter, by-laws or other organizational documents of Holdings, the Sponsor or any of its Restricted Subsidiaries or any judgment or order of any Governmental Authority binding on Holdings, the Sponsor or any of its Restricted Subsidiaries, (c) will not violate or result in a default under any indenture, material agreement or other material instrument binding on Holdings, the Sponsor or any of its Restricted Subsidiaries or any of its assets or give rise to a right thereunder to require any payment to be made by Holdings, the Sponsor or any of its Restricted Subsidiaries and (d) will not result in the creation or imposition of any Lien on any asset of Holdings, the Sponsor or any of its Restricted Subsidiaries, except Liens (if any) created under the Operative Documents.

Section 5.4 Financial Statements. The Sponsor has furnished to each Participant the audited consolidated balance sheet of the Sponsor and its Restricted Subsidiaries as of December 31, 2019, and the related consolidated statements of income, shareholders’ equity and cash flows for the Fiscal Year then ended prepared by Ernst & Young. Such financial statements fairly present the consolidated financial condition of the Sponsor and its Restricted Subsidiaries as of such dates and the consolidated results of operations for such periods in conformity with GAAP consistently applied. Since December 31, 2019, there have been no changes with respect to Holdings, the Sponsor and its Restricted Subsidiaries which have had or could reasonably be expected to have, singly or in the aggregate, a Material Adverse Effect.

Section 5.5 Litigation and Environmental Matters.

(a) No litigation, investigation or proceeding of or before any arbitrators or Governmental Authorities is pending against or, to the knowledge of the Sponsor, threatened against or affecting Holdings, the Sponsor or any of its Restricted Subsidiaries (i) as to which there is a reasonable possibility of an adverse determination that could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect or (ii) which in any manner draws into question the validity or enforceability of this Agreement or any other Transaction Document.

 

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(b) Except as could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect, none of Holdings, the Sponsor or any of its Restricted Subsidiaries (i) has failed to comply in any material respect with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law or (ii) has become subject to any Environmental Liability. None of Holdings, the Sponsor or any of its Restricted Subsidiaries (x) has received notice of any claim with respect to any Environmental Liability or (y) knows of any basis for any Environmental Liability that, in each case, could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.

Section 5.6 Compliance with Laws and Agreements. Holdings, the Sponsor and each Restricted Subsidiary is in compliance with (a) all applicable laws, rules, regulations and orders of any Governmental Authority, and (b) all indentures, agreements or other instruments binding upon it or its properties, except where non-compliance, either singly or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

Section 5.7 Investment Company Act, Etc. None of Holdings, the Sponsor or any of its Restricted Subsidiaries is (a) an “investment company”, or is “controlled” by an “investment company”, as such terms are defined in, or subject to regulation under, the Investment Company Act of 1940, as amended or (b) otherwise subject to any other regulatory scheme limiting its ability to incur debt.

Section 5.8 Taxes. Holdings, the Sponsor and its Restricted Subsidiaries and each other Person for whose taxes Holdings, the Sponsor or any Restricted Subsidiary could become liable have timely filed or caused to be filed all Federal income tax returns and all other tax returns that are required to be filed by them, and have paid all taxes shown to be due and payable on such returns or on any assessments made against it or its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority, except (i) to the extent the failure to do so would not have a Material Adverse Effect or (ii) where the same are currently being contested in good faith by appropriate proceedings and for which Holdings, the Sponsor or such Restricted Subsidiary, as the case may be, has set aside on its books adequate reserves. The charges, accruals and reserves on the books of Holdings, the Sponsor and its Restricted Subsidiaries in respect of such taxes are adequate, and no tax liabilities that could be materially in excess of the amount so provided are anticipated.

Section 5.9 Margin Regulations. None of the proceeds of any of the Loans will be used, directly or indirectly, for “purchasing” or “carrying” any “margin stock” with the respective meanings of each of such terms under Regulation U or for any purpose that violates the provisions of the Regulation T, U or X. None of Holdings, the Sponsor or its Restricted Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying “margin stock.”

Section 5.10 ERISA. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. The present value of all accumulated benefit obligations under each Plan (based on the assumptions used for purposes of Statement of Financial Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $20,000,000 the fair market value of the assets of such Plan, and the present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $20,000,000 the fair market value of the assets of all such underfunded Plans.

Section 5.11 Ownership of Property.

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

 

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

Section 5.12 Disclosure.

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

(b) As of the Effective Date, the information included in the Beneficial Ownership Certification is true and correct in all respects.

Section 5.13 Labor Relations. There are no strikes, lockouts or other material labor disputes or grievances against Holdings, the Sponsor or any of its Restricted Subsidiaries, or, to the Sponsor’s knowledge, threatened against or affecting Holdings, the Sponsor or any of its Restricted Subsidiaries, and no significant unfair labor practice, charges or grievances are pending against Holdings, the Sponsor or any of its Restricted Subsidiaries, or to the Sponsor’s knowledge, threatened against any of them before any Governmental Authority. All payments due from Holdings, the Sponsor or any of its Restricted Subsidiaries pursuant to the provisions of any collective bargaining agreement have been paid or accrued as a liability on the books of Holdings, the Sponsor or any such Restricted Subsidiary, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect.

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

Section 5.15 Representations and Warranties with Respect to Specific Loans. The Sponsor represents and warrants to the Servicer and each Participant with respect to each Loan Commitment established and each Advance made pursuant to the Operative Documents that:

(a) The Franchise Agreement, the Master Note, the Loan Agreement and each other Loan Document executed in connection with such Loan Commitment each constitutes a valid and binding agreement of each Borrower or guarantor party thereto and is enforceable against each such party in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity.

 

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

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

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

(e) The proceeds of each Advance made pursuant to the US Line of Credit Commitments shall be used solely to purchase inventory, and to the extent permitted by Sponsor, to pay state sales and use taxes and freight charges. The proceeds of each Advance made pursuant to the Canadian Line of Credit Commitments shall be used solely to purchase inventory, and to the extent permitted by Sponsor, to pay sales and use taxes and freight charges. The proceeds of each Revolving Loan or Term Loan will be solely for the purpose of financing the acquisition and expansion of stores franchised by the Sponsor and operated by the relevant Borrower and for Sponsor-approved working capital purposes, but excluding in all cases any non-business purposes.

Section 5.16 Solvency. After giving effect to the execution and delivery of this Agreement and the Operative Documents, (a) the Sponsor is Solvent on the Effective Date and (b) Holdings, the Sponsor and its Restricted Subsidiaries on a consolidated basis are Solvent.

Section 5.17 Anti-Corruption Laws and Sanctions. The Sponsor and Holdings have implemented and maintain in effect policies and procedures designed to ensure compliance in all material respects by Holdings, the Sponsor, its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions, and Holdings, the Sponsor, its Subsidiaries and their respective officers (in such capacity), employees (in such capacity) and, to the knowledge of Holdings or the Sponsor, its directors and agents, are in compliance with Anti-Corruption Laws and applicable Sanctions. None of (a) Holdings, the Sponsor, any Subsidiary or any of their respective officers (in such capacity) or employees (in such capacity), or (b) to the knowledge of Holdings or the Sponsor, any director or agent of Holdings or any Subsidiary is a Sanctioned Person. No use by Holdings, the Sponsor or any Subsidiary of the proceeds thereof or other transactions contemplated hereby will violate Anti-Corruption Laws or applicable Sanctions.

Section 5.18 No Affected Financial Institutions. No Credit Party is an Affected Financial Institution.

Section 5.19 Inactive Subsidiaries. The Inactive Subsidiaries do not (a) have assets with an aggregate book value in excess of $1,000,000, (b) have revenue in excess of $1,000,000 in the aggregate and (c) conduct any business activities.

 

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Section 5.20 Collateral Representations. After the execution and delivery of the Collateral Documents following the occurrence of the Trigger Event in accordance with Section 6.12:

(a) The provisions of the Collateral Documents are effective to create in favor of the Servicer, for the benefit of the Participants, a legal, valid and enforceable first priority Lien (subject to Liens permitted by Section 8.2) on all right, title and interest of the respective Credit Parties in the Collateral described therein. Except for filings completed prior to the occurrence of the Trigger Event and as contemplated hereby and by the Collateral Documents, no filing or other action will be necessary to perfect or protect such Liens.

(b) No Mortgage encumbers improved real property that is located in an area that has been identified by the Secretary of Housing and Urban Development as an area having special flood hazards and in which flood insurance has been made available under the National Flood Insurance Act of 1968, except to the extent that the applicable Credit Party maintains flood insurance with respect to such improved real property in compliance with the requirements of Section 5.20(c) and the definition of Real Estate Documents.

(c) Each Credit Party maintains, if available, fully paid flood hazard insurance on all Flood Hazard Properties, with such deductibles as are commercially acceptable for Persons of established reputation engaged in similar business as the Credit Parties and on such terms and in such amounts as required by Flood Insurance Laws or as otherwise reasonably required by the Servicer.

ARTICLE VI

AFFIRMATIVE COVENANTS

Each of Holdings and the Sponsor covenant and agree that it will, as long as the Facility Commitment is in effect or the Servicer is committed to make Advances under any Loan Documents and thereafter so long as any Loans or Loan Commitments remain outstanding under this Agreement or Sponsor has any other unsatisfied obligations under the Operative Documents:

Section 6.1 Financial Statements and Other Information. The Sponsor will deliver to the Servicer and each Participant:

(a) as soon as available and in any event within ninety (90) days after the end of each Fiscal Year of Holdings, a copy of the annual audited report for such Fiscal Year for Holdings, the Sponsor and its Restricted Subsidiaries, containing a consolidated balance sheet of Holdings, the Sponsor and its Restricted Subsidiaries as of the end of such Fiscal Year and the related consolidated statements of income, stockholders’ equity and cash flows (together with all footnotes thereto) of Holdings, the Sponsor and its Restricted Subsidiaries for such Fiscal Year, setting forth in each case in comparative form the figures for the previous Fiscal Year, all in reasonable detail and reported on by Ernst & Young or other independent public accountants of nationally recognized standing (without a “going concern” or like qualification, exception or explanation and without any qualification or exception as to scope of such audit) to the effect that such financial statements present fairly in all material respects the financial condition and the results of operations of Holdings, the Sponsor and its Restricted Subsidiaries for such Fiscal Year on a consolidated basis in accordance with GAAP and that the examination by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards. It is understood and agreed that the requirements of this Section 6.1(a) (x) shall be satisfied by the delivery of the applicable annual report on Form 10-K of Holdings to the Securities and Exchange Commission if delivered within the applicable time period noted herein and is available to the Participants on EDGAR and (y) are effective as of the Effective Date;

 

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(b) as soon as available and in any event within forty-five (45) days after the end of each Fiscal Quarter of each Fiscal Year of Holdings (other than the last Fiscal Quarter), an unaudited consolidated balance sheet of Holdings, the Sponsor and its Restricted Subsidiaries as of the end of such Fiscal Quarter and the related unaudited consolidated statements of income and cash flows of Holdings, the Sponsor and its Restricted Subsidiaries for such Fiscal Quarter and the then elapsed portion of such Fiscal Year, setting forth in each case in comparative form the figures for the corresponding quarter and the corresponding portion of Holdings’ previous Fiscal Year, all certified by the chief financial officer, treasurer or controller of Holdings as presenting fairly in all material respects the financial condition and results of operations of Holdings, the Sponsor and its Restricted Subsidiaries on a consolidated basis in accordance with GAAP, subject to normal year-end audit adjustments and the absence of footnotes. It is understood and agreed that the requirements of this Section 6.1(b) (x) shall be satisfied by the delivery of the applicable quarterly report on Form 10-Q of Holdings to the Securities and Exchange Commission if delivered within the applicable time period noted herein and is available to the Participants on EDGAR and (y) are effective as of the Effective Date;

(c) concurrently with the delivery of the financial statements referred to in Sections 6.1(a) and (b) above, a certificate of a Responsible Officer, (i) certifying as to whether there exists a Credit Event or an Unmatured Credit Event on the date of such certificate, and if a Credit Event or an Unmatured Credit Event then exists, specifying the details thereof and the action which the Sponsor has taken or proposes to take with respect thereto, (ii) setting forth in reasonable detail calculations demonstrating compliance with Article VII and (iii) stating whether any change in GAAP or the application thereof has occurred since the date of Holdings’ audited financial statements referred to in Section 5.4 and, if any change has occurred, specifying the effect of such change on the financial statements accompanying such certificate;

(d) concurrently with the delivery of the financial statements referred to in Section 6.1(a) above, a certificate of the accounting firm that reported on such financial statements stating whether they obtained any knowledge during the course of their examination of such financial statements of any Credit Event or Unmatured Credit Event (which certificate may be limited to the extent required by accounting rules or guidelines);

(e) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed with the Securities and Exchange Commission, or any Governmental Authority succeeding to any or all functions of the Securities and Exchange Commission, or with any national securities exchange, or distributed by Holdings to its shareholders generally, as the case may be, it being agreed that the requirements of this Section 6.1(e) may be satisfied by the delivery of the applicable reports, statements or other materials to the Securities and Exchange Commission to the extent that such reports, statements or other materials are available to the Participants on EDGAR;

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

(g) as soon as available and in any event within 60 days after the end of each Fiscal Year of Holdings, a forecasted income statement, balance sheet, and statement of cash flows for the following Fiscal Year, in each case, on a quarter by quarter basis for such forecasted Fiscal Year information; and

(h) concurrently with the delivery of the financial statements referred to in Sections 6.1(a) and (b), for any period in which there exist any Unrestricted Subsidiaries, unaudited consolidating financial statements reflecting adjustments necessary to eliminate the accounts of Unrestricted Subsidiaries (if any) from such financial statements delivered pursuant to Section 6.1(a) and (b), all in reasonable detail and certified by the chief executive officer, chief financial officer, treasurer or controller of the Sponsor as fairly presenting in all material respects the financial condition, results of operations, shareholders’ equity and cash flows of Holdings, the Sponsor and its Restricted Subsidiaries in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes.

 

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Section 6.2 Notices of Material Events. The Sponsor will furnish to the Servicer and each Participant prompt written notice of the following:

(a) the occurrence of any Credit Event or Unmatured Credit Event;

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

(c) the occurrence of any event or any other development by which Holdings, the Sponsor or any of its Restricted Subsidiaries (i) fails to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) becomes subject to any Environmental Liability in excess of $10,000,000, (iii) receives notice of any claim with respect to any Environmental Liability in excess of $10,000,000, or (iv) becomes aware of any basis for any Environmental Liability in excess of $10,000,000 and in each of the preceding clauses, which individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect;

(d) the occurrence of any ERISA Event that alone, or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of Holdings, the Sponsor and its Restricted Subsidiaries in an aggregate amount exceeding $10,000,000;

(e) any change in the information provided in the Beneficial Ownership Certification that would result in a change to the list of beneficial owners identified in parts (c) or (d) of such certification; and

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

(g) Each notice delivered under this Section 6.2 shall be accompanied by a written statement of a Responsible Officer setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.

Section 6.3 Existence; Conduct of Business. Holdings will, and will cause each of its Restricted Subsidiaries to, do or cause to be done all things necessary to preserve, renew and maintain in full force and effect its legal existence and its respective rights, licenses, permits, privileges, franchises, patents, copyrights, trademarks and trade names material to the conduct of its business and will continue to engage in (a) substantially the same business as presently conducted or such other businesses that are reasonably related thereto, including but not limited to the business of leasing and selling furniture, consumer electronics, computers, appliances and other household goods and accessories inside and outside of the United States of America, through both independently-owned and franchised stores, providing lease-purchase solutions, credit and other financing solutions to customers for the purchase and lease of such products, the manufacture and supply of furniture and bedding for lease and sale in such stores, and the provision of virtual rent-to-own programs inside and outside of the United States of America (including but not limited to point-of-sale lease purchase programs), (b) any other businesses which are ancillary or complementary to the business, or reasonable extensions or expansions of, the business of Holdings, the Sponsor and its Restricted Subsidiaries as conducted as of the Effective Date, as reasonably determined in good faith by the Sponsor and (c) any businesses that are materially different from the business of Holdings, the Sponsor and its Restricted

 

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Subsidiaries as conducted as of the Effective Date provided that any Investments made, funds expended or financial support provided by Holdings, the Sponsor and/or its Restricted Subsidiaries in connection with such alternative lines of business shall not exceed $25,000,000 in the aggregate at any time outstanding; provided, that nothing in this Section 6.3 shall prohibit any merger, consolidation, liquidation or dissolution permitted under Section 8.3.

Section 6.4 Compliance with Laws, Etc. Holdings will, and will cause each of its Restricted Subsidiaries to, comply with all laws, rules, regulations and requirements of any Governmental Authority applicable to its business and properties, including without limitation, all Environmental Laws, ERISA and OSHA, except where the failure to do so, either individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

Section 6.5 Payment of Obligations. Holdings will, and will cause each of its Restricted Subsidiaries to, pay and discharge at or before maturity, all of its obligations and liabilities (including without limitation all tax liabilities and claims that could result in a statutory Lien) before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) Holdings, the Sponsor or such Restricted Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect.

Section 6.6 Books and Records. Holdings will, and will cause each of its Restricted Subsidiaries to, keep proper books of record and account in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities to the extent necessary to prepare the consolidated financial statements of Holdings in conformity with GAAP.

Section 6.7 Visitation, Inspection, Etc. Holdings will, and will cause each of its Restricted Subsidiaries to, permit any representative of the Servicer or any Participant, to visit and inspect its properties, to examine its books and records and to make copies and take extracts therefrom, and to discuss its affairs, finances and accounts with any of its officers and with its independent certified public accountants, all at such reasonable times and as often as the Servicer or any Participant may reasonably request after reasonable prior notice to the Sponsor; provided, however, if a Credit Event or Unmatured Credit Event has occurred and is continuing, no prior notice shall be required. All reasonable expenses incurred by the Servicer and, at any time after the occurrence and during the continuance of a Credit Event, any Participants in connection with any such visit, inspection, audit, examination and discussions shall be borne by the Sponsor.

Section 6.8 Maintenance of Properties; Insurance. Holdings will, and will cause each of its Restricted Subsidiaries to, (a) keep and maintain all property material to the conduct of its business in good working order and condition, ordinary wear and tear excepted, except where the failure to do so, either individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect and (b) maintain with financially sound and reputable insurance companies, insurance with respect to its properties and business, and the properties and business of its Restricted Subsidiaries, against loss or damage of the kinds customarily insured against by companies in the same or similar businesses operating in the same or similar locations (including, after the occurrence of the Trigger Event, flood insurance as described in the definition of Real Estate Documents). In addition, and not in limitation of the foregoing, Holdings shall maintain and keep in force insurance coverage on its inventory, as is consistent with best industry practices. The Credit Parties shall at all times cause the Servicer to be named as additional insured on all of its casualty and liability policies. Promptly after the occurrence of the Trigger Event, the Credit Parties shall cause each issuer of an insurance policy to provide the Servicer with an endorsement (i) showing the Servicer as lender’s loss payee with respect to each policy of property or casualty insurance and naming the Servicer and each Participant as an additional insured with respect to each policy of liability insurance, (ii) providing that 30 days’ notice will be given to the Servicer prior to any cancellation of, material reduction or change in coverage provided by or other material modification to such policy and (iii) reasonably acceptable in all other respects to the Servicer.

 

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Section 6.9 Use of Proceeds. No part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that would violate any rule or regulation of the Board of Governors of the Federal Reserve System, including Regulations T, U or X.

The Sponsor shall ensure that the Borrowers and their respective directors, officers, employees and agents shall not use the proceeds of any Loans (i) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws, (ii) for the purpose of funding, financing or facilitating any activities, business or transaction of or with any Sanctioned Person, or in any Sanctioned Country or (iii) in any manner that would result in the violation of any Sanctions applicable to any party hereto.

Section 6.10 Additional Subsidiaries.

(a) Within ten (10) Business Days (or such later date as the Servicer may agree in its sole discretion) after any Domestic Subsidiary is acquired or formed (including, without limitation, upon the formation of any Subsidiary that is a Delaware Divided LLC) or after any Unrestricted Subsidiary is designated as a Restricted Subsidiary, the Sponsor shall (i) notify the Servicer and the Participants thereof, (ii) if such Domestic Subsidiary is a Material Domestic Subsidiary, cause such Subsidiary to become a Guarantor by (x) executing agreements in the form of Annex 1 to the Guaranty Agreement and (y) if the Trigger Event has occurred, a security agreement or a joinder agreement thereto granting to the Servicer for the benefit of the Participants a first priority security interest and lien in all of its assets pursuant to the Credit Party Collateral Documents, in form reasonably satisfactory to the Servicer and (iii) if such Subsidiary is a Material Domestic Subsidiary, cause such Domestic Subsidiary to deliver simultaneously therewith similar documents applicable to such Domestic Subsidiary described in Section 3.1 as reasonably requested by the Servicer. In the event that any Domestic Subsidiary that is not already a Guarantor becomes a Material Domestic Subsidiary at any time after its formation or acquisition, the Sponsor shall have up to ten (10) Business Days (or such later date as the Servicer may agree in its sole discretion) to cause it to (x) become a Guarantor by executing agreements in the form of Annex 1 to the Guaranty Agreement and (y) deliver simultaneously therewith similar documents applicable to such Domestic Subsidiary described in Section 13.1 as reasonably requested by the Servicer.

(b) Upon any acquisition or formation of additional Foreign Subsidiaries by the Sponsor after the Effective Date (subject to Section 8.4) and to the extent the aggregate EBITDA attributable to all Foreign Subsidiaries that are Restricted Subsidiaries whose stock has not been pledged to secure the Guaranteed Obligations pursuant to this Section 6.10(b) for the most recently ended twelve month period exceeds twenty percent (20%) of Consolidated EBITDA for the most recently ended twelve month period (the “Foreign Pledge Date”), the Sponsor (i) shall notify the Servicer and the Participants thereof, (ii) deliver stock certificates and related pledge agreements, in form satisfactory to a collateral agent acceptable to the Servicer, evidencing the pledge of sixty-six percent (66%) of the issued and outstanding Capital Stock entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) and one hundred percent (100%) of the issued and outstanding Capital Stock not entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) of one or more Foreign Subsidiaries directly owned by a Credit Party to secure the Guaranteed Obligations to the extent necessary such that, after giving effect to such pledge, the EBITDA attributable to all Foreign Subsidiaries that are Restricted Subsidiaries whose stock has not been pledged to secure the Guaranteed Obligations pursuant to this Section 6.10(b) for the most recently ended twelve (12) month period does not exceed twenty percent (20%) of Consolidated EBITDA, and (iii) cause such Foreign Subsidiary whose stock is pledged pursuant to the immediately preceding Section 6.10(b)(ii) to deliver simultaneously therewith similar documents applicable to such

 

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Foreign Subsidiary described in Section 13.1 as reasonably requested by the Servicer; provided that in no event shall any such Foreign Subsidiary be required to join the Guaranty Agreement or otherwise to guarantee any of the Guaranteed Obligations. Upon the occurrence of the Foreign Pledge Date, the Sponsor will be required to comply with the terms of this Section 6.10(b) within thirty (30) days after any new Foreign Subsidiary that is a Restricted Subsidiary is acquired or formed. Upon the occurrence of the Foreign Pledge Date and within a reasonable time thereafter, the Servicer shall enter into an intercreditor agreement, in form and substance satisfactory to the Required Participants, with all other creditors of the Sponsor having a similar covenant with the Sponsor.

(c) Notwithstanding anything to the contrary in this Agreement, (i) none of the Inactive Subsidiaries shall be required to become a Guarantor or to execute the Guaranty Agreement, subject to compliance with Section 8.13 and (ii) the Sponsor shall cause each Inactive Subsidiary to be dissolved as soon practicable without incurring adverse tax consequences unless otherwise permitted by the Servicer with such consent not to be unreasonably withheld, conditioned or delayed.

(d) Holdings will cause any Domestic Subsidiary or any other Domestic Controlled Affiliate that provides a Guarantee or otherwise becomes liable (including as a borrower or co-borrower) in respect of the obligations under any agreement providing for the incurrence of Indebtedness that is pari passu with the Indebtedness under this Agreement to become a Guarantor by executing agreements in the form of Annex 1 to the Guaranty Agreement and deliver simultaneously therewith similar documents applicable to such Domestic Subsidiary described in Section 13.1 as reasonably requested by the Servicer.

Section 6.11 Further Assurances. Promptly upon request by the Servicer, or any Participant through the Servicer, (a) correct any material defect or error that may be discovered in any Operative Document or in the execution or acknowledgment thereof, and (b) do, execute, acknowledge and deliver any and all such further acts, certificates, assurances and other instruments as the Servicer, or any Participant through the Servicer, may reasonably require from time to time in order to carry out more effectively the purposes of the Operative Documents, or, after the occurrence of the Trigger Event, to grant, preserve, protect or perfect the Liens created by the Credit Party Collateral Documents or the validity or priority of any such Lien, all at the expense of the Credit Parties.

Section 6.12 Collateral.

(a) Promptly upon, and in any event within thirty (30) days of, the occurrence of the Trigger Event (or such longer periods as the Servicer shall agree in its sole discretion), Holdings shall, and shall cause the Credit Parties, to (i) grant Liens in favor of the Servicer, for the benefit of the Participants, in substantially all of its personal property (with exceptions as provided in the Security Agreement) by executing and delivering to the Servicer a Security Agreement and such other Credit Party Collateral Documents in form and substance reasonably satisfactory to the Servicer, and authorizing and delivering, at the request of the Servicer, such UCC financing statements or similar instruments required by the Servicer to perfect the Liens in favor of the Servicer, for the benefit of the Servicer and the Participants, and granted under any of the Operative Documents, (ii) grant Liens in favor of the Servicer, for the benefit of the Servicer and the Participants, in all fee ownership interests in Material Real Estate by executing and delivering to the Servicer such Real Estate Documents as the Servicer shall reasonably require and (iii) deliver such other documentation (including, without limitation, certified organizational documents, resolutions, lien searches, title insurance policies, surveys, environmental reports and legal opinions) reasonably requested by the Servicer and to take all such other actions that such Credit Party would be required to deliver pursuant to Section 6.13 with respect to any Material Real Estate. In addition, Holdings shall, or shall cause the applicable Credit Party to (x) pledge all of the Capital Stock of the Sponsor and any such Domestic Subsidiary that is a Restricted Subsidiary to the Servicer as security for the Obligations by executing and delivering a Security Agreement in form and substance reasonably satisfactory to the

 

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Servicer, (y) pledge sixty-six percent (66%) of the issued and outstanding Capital Stock entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) and one hundred percent (100%) of the issued and outstanding Capital Stock not entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) of the Foreign Subsidiaries that are Restricted Subsidiaries directly owned by the Credit Parties and (z) deliver the original certificates evidencing such pledged capital stock to the Servicer, together with appropriate powers executed in blank. In the event of the occurrence of the Trigger Event, the requirements of this Section 6.12(a), and not those of Section 6.10(b), shall govern the pledge of Capital Stock in Foreign Subsidiaries. Concurrently with the grant of Liens in the first sentence of this Section 6.12(a), the Servicer and the Administrative Agent (as defined in the Credit Agreement) shall enter into the Intercreditor Agreement in form and substance reasonably satisfactory to the Servicer, the Required Participants and the Administrative Agent (as defined in the Credit Agreement). Notwithstanding anything to the contrary herein, or otherwise in any Operative Document, the Servicer shall not enter into, accept, or record any mortgage in respect of any Material Real Estate until the Servicer shall have received written confirmation (which confirmation shall, for purposes hereunder, include email) from each Participant that flood insurance compliance has been completed by such Participant with respect to such Material Real Estate (such written confirmation not to be unreasonably conditioned, withheld or delayed); provided, that, the inability of a Credit Party to deliver, enter into, or record a Mortgage with respect to any Material Real Estate within the time period required by this Section 6.12 due to the failure of the Servicer to receive written confirmation from each Participant that flood insurance compliance has been completed by such Participant with respect to such Material Real Estate within such time period shall not be deemed to be a failure by such Credit Party to satisfy the requirements of this Section 6.12.

(b) Holdings and the Sponsor agree that, following the delivery of any Credit Party Collateral Documents required to be executed and delivered by this Section 6.12, the Servicer shall have a valid and enforceable, first priority perfected Lien on the property required to be pledged pursuant to Sections 6.12(a) and 6.12(b) (to the extent that such Lien can be perfected by execution, delivery and/or recording of the Credit Party Collateral Documents or UCC financing statements, or possession of such Collateral), free and clear of all Liens other than Liens expressly permitted by Section 8.2. All actions to be taken pursuant to this Section 6.12 shall be at the expense of the Sponsor or the applicable Credit Party, and shall be taken to the reasonable satisfaction of the Servicer.

Section 6.13 Additional Real Estate. To the extent otherwise permitted hereunder, if any Credit Party proposes to acquire a fee ownership interest in Material Real Estate after the occurrence of the Trigger Event, it shall within ninety (90) days of such acquisition (or such longer period as the Servicer shall agree in its sole discretion) provide to the Servicer Real Estate Documents in regard to such Material Real Estate. Notwithstanding anything to the contrary herein, or otherwise in any Operative Document, the Servicer shall not enter into, accept, or record any mortgage in respect of any Material Real Estate until the Servicer shall have received written confirmation (which confirmation shall, for purposes hereunder, include email) from each Participant that flood insurance compliance has been completed by such Participant with respect to such Material Real Estate (such written confirmation not to be unreasonably conditioned, withheld or delayed); provided, that, the inability of a Credit Party to deliver, enter into, or record a Mortgage with respect to any Material Real Estate within the time period required by this Section 6.13 due to the failure of the Servicer to receive written confirmation from each Participant that flood insurance compliance has been completed by such Participant with respect to such Material Real Estate within such time period shall not be deemed to be a failure by such Credit Party to satisfy the requirements of this Section 6.13.

 

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Section 6.14 Designation of Subsidiaries

(a) The Sponsor may at any time designate any Restricted Subsidiary acquired or formed after the Effective Date as an Unrestricted Subsidiary or any Unrestricted Subsidiary as a Restricted Subsidiary; provided that (a) no Unmatured Credit Event or Credit Event shall exist immediately prior or immediately after giving effect to such designation; (b) the Sponsor shall have delivered to the Servicer a Pro Forma Compliance Certificate demonstrating that after giving effect to such designation on a Pro Forma Basis, the Credit Parties would be in compliance with the financial covenants in Article VII measured as of the last day of the most recently ended Fiscal Quarter for which financial statements are required to have been delivered hereunder; (c) no Restricted Subsidiary may be designated as an Unrestricted Subsidiary if such Restricted Subsidiary or any of its Subsidiaries (i) owns any equity interests or Indebtedness of, or owns or holds any Liens on, any property of Holdings or any Restricted Subsidiary or (ii) Guarantees any Indebtedness of Holdings or any Restricted Subsidiary (after giving effect to the release of the Guarantee of the Guaranteed Obligations by such Subsidiary in connection with the designation of such Subsidiary as an Unrestricted Subsidiary); (d) any Unrestricted Subsidiary that has been re-designated as a Restricted Subsidiary may not subsequently be re-designated as an Unrestricted Subsidiary; and (e) no Restricted Subsidiary may be designated as an Unrestricted Subsidiary unless concurrent with such designation such Restricted Subsidiary is designated as an “unrestricted subsidiary” (or otherwise not be subject to the covenants) under any Indebtedness.

(b) The designation of any Restricted Subsidiary as an Unrestricted Subsidiary shall constitute an Investment (which must be an Investment permitted pursuant to Section 8.4) by its direct parent (whether the Sponsor or a Restricted Subsidiary) in such Subsidiary on the date of such designation in an amount equal to the outstanding amount of all Investments by Holdings, the Sponsor and its Restricted Subsidiaries in such Subsidiary on such date.

(c) The designation of any Unrestricted Subsidiary as a Restricted Subsidiary shall constitute (i) the incurrence on the date of such designation of any Investment, Indebtedness or Liens of such Subsidiary existing on such date and (ii) for purposes of calculating the outstanding amount of Investments by Holdings, the Sponsor and its Restricted Subsidiaries in all Unrestricted Subsidiaries, a return on all Investments by Holdings, the Sponsor and its Restricted Subsidiaries in such Subsidiary in an amount equal to the outstanding amount of all such Investments in such Subsidiary on the date of such designation.

(d) If at any time any Unrestricted Subsidiary (i) owns any equity interests or Indebtedness of, or owns or holds any Liens on, any property of Holdings, the Sponsor or any Restricted Subsidiary, (ii) Guarantees any Indebtedness of Holdings, the Sponsor or any Restricted Subsidiary or (iii) ceases to be an “unrestricted subsidiary” (or otherwise becomes subject to the covenants) under any Indebtedness, then the Servicer shall, concurrent therewith, re-designate such Unrestricted Subsidiary as a Restricted Subsidiary.

Notwithstanding any of the definitions or covenants contained in this Agreement to the contrary, Holdings and the Sponsor will not, and will not permit any Restricted Subsidiary to, consummate any transaction that results in the transfer (whether by way of any Restricted Payment, Investment, or any sale, conveyance, transfer, or other disposition, or a designation of a Subsidiary as an Unrestricted Subsidiary or of an Unrestricted Subsidiary as a Subsidiary, and whether in a single transaction or a series of related transactions) of material intellectual property rights (including patents, trademarks, service marks, tradenames, copyrights, proprietary leasing records and systems and other intellectual property) from Holdings, the Sponsor or any Restricted Subsidiary to any Unrestricted Subsidiary. Except as expressly set forth herein, Unrestricted Subsidiaries will not be subject to any of the covenants set forth in this Agreement.

 

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ARTICLE VII

FINANCIAL COVENANTS

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

Section 7.1 Total Net Debt to EBITDA Ratio. Holdings, the Sponsor and its Restricted Subsidiaries shall maintain, as of the last day of each Fiscal Quarter, a Total Net Debt to EBITDA Ratio of not greater than 2.50:1.00.

Section 7.2 Fixed Charge Coverage Ratio. Holdings, the Sponsor and its Restricted Subsidiaries shall maintain, as of the last day of each Fiscal Quarter, a Fixed Charge Coverage Ratio of not less than 1.75:1.00.

ARTICLE VIII

NEGATIVE COVENANTS

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

Section 8.1 Indebtedness. Holdings will not, and will not permit any of its Restricted Subsidiaries to, create, incur, assume or suffer to exist any Indebtedness, except:

(a) Indebtedness created pursuant to the Operative Documents;

(b) Indebtedness existing on the date hereof and set forth on Schedule 8.1 and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof (immediately prior to giving effect to such extension, renewal or replacement) or shorten the maturity or the weighted average life thereof;

(c) Indebtedness of the Sponsor or any Restricted Subsidiary incurred after the Effective Date to finance the acquisition, construction or improvement of any fixed or capital assets, including Capital Lease Obligations and any Indebtedness assumed in connection with the acquisition of any such assets or secured by a Lien on any such assets prior to the acquisition thereof; provided, that such Indebtedness is incurred prior to or within ninety (90) days after such acquisition or the completion of such construction or improvements or extensions, renewals, and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof (immediately prior to giving effect to such extension, renewal or replacement) or shorten the maturity or the weighted average life thereof; provided further, (x) the aggregate principal amount of such Indebtedness, as of any date of determination, does not at any time exceed three percent (3.0%) of the aggregate book value of the total assets of Holdings, the Sponsor and its Restricted Subsidiaries determined on a consolidated basis as of the last day of the most recently ended Fiscal Quarter for which financial statements have been delivered, and (y) the aggregate principal amount of such Indebtedness incurred by Foreign Subsidiaries under this Section 8.1(c), together with the principal amount of Indebtedness permitted to be incurred under Section 8.1(j) does not exceed twenty percent (20%) of the aggregate book value of the total assets of Holdings, the Sponsor and its Restricted Subsidiaries measured on a consolidated basis in accordance with GAAP as of the end of the immediately preceding Fiscal Quarter for which financial statements have been delivered (giving effect to any Acquisition financed with such Indebtedness on a Pro Forma Basis);

 

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(d) Indebtedness of the Sponsor owing to any Restricted Subsidiary that is a Credit Party and of any Restricted Subsidiary that is a Credit Party owing to the Sponsor or any other Restricted Subsidiary that is a Credit Party;

(e) Guarantees by the Sponsor of Indebtedness of any Restricted Subsidiary of the Borrower that is a Credit Party and by any Restricted Subsidiary of the Borrower that is a Credit Party of Indebtedness of the Sponsor or any other Restricted Subsidiary of the Borrower that is a Credit Party;

(f) Indebtedness under the Credit Agreement;

(g) Guarantees by the Sponsor of Indebtedness of certain franchise operators of the Sponsor; provided such guarantees are given by the Sponsor in connection with (i) loans made pursuant to the terms of this Agreement or (ii) loans made pursuant to terms of any other loan facility agreements and guaranteed on an unsecured basis with terms otherwise reasonably acceptable to the Servicer entered into after the date hereof in an aggregate principal amount at any time outstanding not to exceed, as of any date of determination, three percent (3.0%) of the aggregate book value of the total assets of Holdings, the Sponsor and its Restricted Subsidiaries determined on a consolidated basis as of the last day of the most recently ended Fiscal Quarter for which financial statements have been delivered;

(h) endorsed negotiable instruments for collection in the ordinary course of business;

(i) Guarantees by Sponsor of permitted Indebtedness of Foreign Subsidiaries that are Restricted Subsidiaries;

(j) unsecured Indebtedness of Foreign Subsidiaries that are Restricted Subsidiaries (whether such Indebtedness represents loans made by the Sponsor or any of its Restricted Subsidiaries or by a third party) so long as (i) after giving effect to the incurrence of such Indebtedness on a Pro Forma Basis, (as evidenced by a Pro Forma Compliance Certificate delivered to the Servicer), (A) Holdings, the Sponsor and its Restricted Subsidiaries would be in compliance with the financial covenants in Article VII measured as of the last day of the most recently ended Fiscal Quarter for which financial statements are required to have been delivered hereunder, (B) no Unmatured Credit Event or Credit Event has occurred and is continuing, or would result therefrom and (C) the aggregate principal amount of such Indebtedness, together with the amount of and Indebtedness permitted to be incurred by such Foreign Subsidiaries under Section 8.1(c) does not exceed twenty percent (20%) of the aggregate book value of the total assets of Holdings, the Sponsor and its Restricted Subsidiaries measured on a consolidated basis in accordance with GAAP as of the end of the immediately preceding Fiscal Quarter for which financial statements have been delivered (giving effect to any Acquisition financed with such Indebtedness on a Pro Forma Basis) and (ii) (A) the terms of such Indebtedness do not provide for any scheduled repayment (including payment at maturity), mandatory redemption or sinking fund obligations (other than customary mandatory prepayments upon a change of control, asset sale, event of loss, unpermitted debt issuance and customary acceleration rights after an event of default) prior to the date that is 91 days after the Revolving Commitment Termination Date (as defined in the Credit Agreement) and the latest Maturity Date (as defined in the Credit Agreement) in effect at the time of the incurrence or issuance of such Indebtedness; (B) the covenants, events of default, guarantees and other non-economic terms of such Indebtedness are either (1) customary for similar Indebtedness in light of then-prevailing market conditions (as reasonably determined by the Sponsor) or (2) reasonably satisfactory to the Servicer, (C) any financial maintenance covenants with respect to such Indebtedness are not more restrictive to Holdings and its Restricted Subsidiaries than those set forth in this Agreement; and (D) such Indebtedness shall not be Guaranteed by any Person that is not a Credit Party (or that does not simultaneously become a Credit Party);

 

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(k) secured Indebtedness in an aggregate principal amount not to exceed the greater of (i) $15,000,000 and (ii) ten percent (10%) of Consolidated EBITDA for the period of four (4) Fiscal Quarters most recently ended prior to the date of determination for which financial statements were delivered under Section 5.1(a) or (b); provided, that, (i) no unmatured Credit Event or Credit Event has occurred and is continuing or would result therefrom, (ii) after giving effect to the incurrence thereof on a Pro Forma Basis (as evidenced by delivery of a Pro Forma Compliance Certificate to the Servicer), Holdings, the Sponsor and its Restricted Subsidiaries would be in compliance with the financial covenants in Article VII measured as of the last day of the most recently ended Fiscal Quarter for which financial statements are required to have been delivered hereunder, (iii) the terms of such Indebtedness do not provide for any scheduled repayment (including payment at maturity), mandatory redemption or sinking fund obligations (other than customary mandatory prepayments upon a change of control, asset sale, event of loss, unpermitted debt issuance and customary acceleration rights after an event of default) prior to the date that is 91 days after the Revolving Commitment Termination Date (as defined in the Credit Agreement) and the latest Maturity Date (as defined in the Credit Agreement) in effect at the time of the incurrence or issuance of such Indebtedness; (iv) the covenants, events of default, guarantees and other non-economic terms of such Indebtedness are either (A) customary for similar Indebtedness in light of then-prevailing market conditions (as reasonably determined by the Sponsor) or (B) reasonably satisfactory to the Servicer, (v) any financial maintenance covenants with respect to such Indebtedness are not more restrictive to Holdings and its Restricted Subsidiaries than those set forth in this Agreement; (vi) such Indebtedness shall not be Guaranteed by any Person that is not a Credit Party (or that does not simultaneously become a Credit Party); and (viii) such Indebtedness shall not include any restriction on the ability of Holdings and its Restricted Subsidiaries to grant Liens in favor of the Servicer in accordance with the terms hereof; and

(l) any other unsecured Indebtedness of Holdings, the Sponsor or any Restricted Subsidiary that is a Credit Party so long as after giving effect to the incurrence of such Indebtedness on a Pro Forma Basis (as evidenced by delivery of a Pro Forma Compliance Certificate to the Servicer), (i) Holdings, the Sponsor and its Restricted Subsidiaries would be in compliance with the financial covenants in Article VII measured as of the last day of the most recently ended Fiscal Quarter for which financial statements are required to have been delivered hereunder, (ii) no Unmatured Credit Event or Credit Event has occurred and is continuing, or would result therefrom, (iii) the terms of such Indebtedness do not provide for any scheduled repayment (including payment at maturity), mandatory redemption or sinking fund obligations (other than customary mandatory prepayments upon a change of control, asset sale, event of loss, unpermitted debt issuance and customary acceleration rights after an event of default) prior to the date that is 91 days after the Revolving Commitment Termination Date (as defined in the Credit Agreement) and the latest Maturity Date (as defined in the Credit Agreement) in effect at the time of the incurrence or issuance of such Indebtedness; (iv) the covenants, events of default, guarantees and other non-economic terms of such Indebtedness are either (A) customary for similar Indebtedness in light of then-prevailing market conditions (as reasonably determined by the Borrower) or (B) reasonably satisfactory to the Servicer, (v) any financial maintenance covenants with respect to such Indebtedness are not more restrictive to Holdings and its Restricted Subsidiaries than those set forth in this Agreement; and (vi) such Indebtedness shall not be Guaranteed by any Person that is not a Credit Party (or that does not simultaneously become a Credit Party).

Section 8.2 Negative Pledge. Holdings will not, and will not permit any of its Restricted Subsidiaries to, create, incur, assume or suffer to exist any Lien on any of its assets or property now owned or hereafter acquired (other than any shares of stock of Holdings that are repurchased by the Sponsor and retired or held by Holdings) or, except:

(a) Permitted Encumbrances;

 

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

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

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

(e) extensions, renewals, or replacements of any Lien referred to in Sections 8.2(a) through 8.2(d); provided, that the principal amount of the Indebtedness secured thereby is not increased and that any such extension, renewal or replacement is limited to the assets originally encumbered thereby; and

(f) Liens securing the Obligations (as defined in the Credit Agreement) of the Sponsor under the Credit Agreement;

(g) Liens on shares of stock of any Foreign Subsidiary that is a Restricted Subsidiary to the extent that the Guaranteed Obligations are secured pari passu with any other Indebtedness or obligations secured thereby;

(h) Liens securing Indebtedness permitted by Section 8.1(k); and

(i) Liens securing obligations incurred in the ordinary course of business (other than Indebtedness) in an aggregate principal amount not to exceed at any time $5,000,000.

Section 8.3 Fundamental Changes.

(a) Holdings will not, and will not permit any Restricted Subsidiary to, merge into or consolidate into any other Person, or permit any other Person to merge into or consolidate with it, or sell, lease, transfer or otherwise dispose of (in a single transaction or a series of transactions) all or substantially all of its assets (in each case, whether now owned or hereafter acquired and including, in each case, pursuant to a Delaware LLC Division) or all or substantially all of the stock of any of its Restricted Subsidiaries (in each case, whether now owned or hereafter acquired) or liquidate or dissolve; provided, that (i) any Inactive Subsidiary may (A) liquidate into its immediate parent company or dissolve, (B) merge into any other Inactive Subsidiary or (C) merge into the Sponsor or any other Restricted Subsidiary that is a Credit Party; provided that the Sponsor or such Restricted Subsidiary that is a Credit Party is the survivor of such merger, and (ii) if at the time thereof and immediately after giving effect thereto, no Credit Event shall have occurred and be continuing (A) the Sponsor or any Restricted Subsidiary may merge with a Person (other than

 

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Holdings); provided, that (x) if the Sponsor is a party to such merger, the Sponsor shall be the surviving Person and (y) if the Sponsor is not a party to such merger, such Restricted Subsidiary or, in connection with a Permitted Acquisition, such Person if upon such merger such Person becomes a Restricted Subsidiary, is the surviving Person, (B) any Restricted Subsidiary may merge into another Restricted Subsidiary or the Sponsor; provided, however, that if the Sponsor is a party to such merger, the Sponsor shall be the surviving Person; provided, further, that if any Restricted Subsidiary to such merger is a Guarantor, the Guarantor shall be the surviving Person, (C) any Restricted Subsidiary may sell, transfer, lease or otherwise dispose of all or substantially all of its assets to the Sponsor or to a Guarantor, and (D) any other Restricted Subsidiary may liquidate or dissolve if the Sponsor determines in good faith that such liquidation or dissolution is in the best interests of the Sponsor, is not materially disadvantageous to the Participants, and such Restricted Subsidiary dissolves into another Guarantor or the Sponsor; provided, that any such merger involving a Person that is not a wholly-owned Restricted Subsidiary immediately prior to such merger shall not be permitted unless also permitted by Section 8.4.

(b) Holdings will not, and will not permit any of its Restricted Subsidiaries to, engage in any business other than (i) substantially the same business as presently conducted or such other businesses that are reasonably related thereto, including but not limited to the business of leasing and selling furniture, consumer electronics, computers, appliances and other household goods and accessories inside and outside of the United States of America, through both independently-owned and franchised stores, providing lease-purchase solutions, credit and other financing solutions to customers for the purchase and lease of such products, the manufacture and supply of furniture and bedding for lease and sale in such stores, and the provision of virtual rent-to-own programs inside and outside of the United States of America (including but not limited to point-of-sale lease purchase programs), (ii) any other businesses which are ancillary or complementary to, or reasonable extensions or expansions of, the business of Holdings, the Sponsor and its Restricted Subsidiaries as conducted as of the Effective Date, as reasonably determined in good faith by the Sponsor and (iii) any businesses that are materially different from the business of Holdings, the Sponsor and its Restricted Subsidiaries as conducted as of the Effective Date provided that any Investments made, funds expended or financial support provided by Holdings, the Sponsor and/or its Restricted Subsidiaries in connection with such alternative lines of business shall not exceed $25,000,000 in the aggregate at any time outstanding.

Section 8.4 Investments, Loans, Etc. Holdings will not, and will not permit any of its Restricted Subsidiaries to, purchase, hold or acquire (including pursuant to any merger with any Person that was not a wholly-owned Restricted Subsidiary prior to such merger), any Capital Stock, evidence of indebtedness or other securities (including any option, warrant, or other right to acquire any of the foregoing) of, make or permit to exist any loans or advances to, any obligations of, or make or permit to exist any investment or any other interest in, any other Person (all of the foregoing being collectively called “Investments”), or purchase or otherwise acquire (in one transaction or a series of transactions) any assets of any other Person that constitute a business unit, or create or form any Subsidiary, except:

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

(b) Permitted Investments;

(c) Permitted Acquisitions;

(d) Investments made by the Sponsor in or to any other Credit Party (other than Holdings) and by any other Credit Party (other than Holdings) to the Sponsor or in or to another Credit Party (other than Holdings);

 

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(e) loans or advances to employees, officers, directors or stockholders of the Sponsor or any Restricted Subsidiary in the ordinary course of business; provided, however, that the aggregate amount of all such loans and advances does not exceed $2,000,000 at any time outstanding;

(f) loans to franchise operators and owners of franchises acquired or funded pursuant to this Agreement and the other credit facility agreements referenced in Section 8.1(g);

(g) Guarantees permitted under Section 8.1(g);

(h) the acquisition or ownership of stock, obligations or securities received in settlement of debts (created in the ordinary course of business) owing to any Guarantor or any of their Restricted Subsidiaries;

(i) loans to and other investments in Foreign Subsidiaries that are Restricted Subsidiaries; provided that, the aggregate amount of such outstanding loans to and investments in such Foreign Subsidiaries do not exceed the amount permitted under Section 8.1(j).

(j) Investments in investment grade corporate bonds and variable rate demand notes having a rating of BBB+ (or the equivalent) or higher, at the time of acquisition thereof, from S&P or Moody’s and in either case maturing within two years from the date of acquisition thereof in an aggregate amount not to exceed $100,000,000 at any time;

(k) other Investments (other than Investments in Unrestricted Subsidiaries); provided, that, (i) no Unmatured Credit Event or Credit Event has occurred and is continuing or would result therefrom and (ii) after giving effect to the payment thereof on a Pro Forma Basis, Holdings, the Sponsor and its Restricted Subsidiaries would be in compliance with the financial covenants in Article VII measured as of the last day of the most recently ended Fiscal Quarter for which financial statements are required to have been delivered hereunder;

(l) other Investments (other than Investments in Unrestricted Subsidiaries) not to exceed $50,000,000 at any time; and

(m) other Investments not to exceed, as of any date of determination, an amount equal to three percent (3.0%) of the aggregate book value of the total assets of Holdings, the Sponsor and its Restricted Subsidiaries determined on a consolidated basis as of the last day of the most recently ended Fiscal Quarter for which financial statements have been delivered; provided, that, (i) no unmatured Credit Event or Credit Event has occurred and is continuing or would result therefrom and (ii) after giving effect to the payment thereof on a Pro Forma Basis, Holdings, the Sponsor and its Restricted Subsidiaries would be in compliance with the financial covenants in Article VII measured as of the last day of the most recently ended Fiscal Quarter for which financial statements are required to have been delivered hereunder.

Section 8.5 Restricted Payments. Holdings will not, and will not permit its Restricted Subsidiaries to, declare or make, or agree to pay or make, directly or indirectly, any dividend on any class of its Capital Stock, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, retirement, defeasance or other acquisition of, any shares of Capital Stock or Indebtedness subordinated to the Guaranteed Obligations of the Sponsor or any options, warrants, or other rights to purchase such Capital Stock or such subordinated Indebtedness, whether now or hereafter outstanding (each, a “Restricted Payment”), except for (a) dividends payable by Holdings solely in shares of any class of its common stock, (b) Restricted Payments made by any Restricted Subsidiary to Holdings or to another Credit Party and (c) other Restricted Payments made by Holdings in cash so long as, (x) no Credit Event or Unmatured Credit Event has occurred and is continuing or would result therefrom and (y) after giving effect to the payment thereof on a Pro Forma Basis, Holdings, the Sponsor and its Restricted Subsidiaries would be in compliance with the financial covenants in Article VII measured as of the last day of the most recently ended Fiscal Quarter for which financial statements are required to have been delivered hereunder.

 

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Section 8.6 Sale of Assets. Holdings will not, and will not permit any of its Restricted Subsidiaries to, convey, sell, lease, assign, transfer or otherwise dispose of (including any disposition of property to a Delaware Divided LLC pursuant to a Delaware LLC Division), any of its assets, business or property, whether now owned or hereafter acquired, or, in the case of any Restricted Subsidiary, issue or sell any shares of such Restricted Subsidiary’s Capital Stock to any Person other than the Sponsor or a Guarantor (or to qualify directors if required by applicable law), except (a) the sale or other disposition for fair market value of obsolete or worn out property or other property not necessary for operations disposed of in the ordinary course of business; (b) the sale of inventory and Permitted Investments in the ordinary course of business, (c) sales and dispositions permitted under Section 8.3(a) and sale and leaseback transactions permitted under Section 8.9, (d) sales of assets in connection with the sale of a store owned by Sponsor to a franchisee of the Sponsor, (e) other sales of assets made on or after the Effective Date not to exceed, as of any date of determination, an amount equal to five percent (5.0%) of the aggregate book value of the total assets of Holdings, the Sponsor and its Restricted Subsidiaries determined on a consolidated basis as of the last day of the most recently ended Fiscal Quarter for which financial statements have been delivered and (f) the sale or other disposition of assets in an amount at least equal to the fair market value of such asset (as reasonably determined in good faith by the Sponsor) and at least 75% of the cash consideration of which is paid to the Sponsor or the Restricted Subsidiary in cash or Cash Equivalents.

Section 8.7 Transactions with Affiliates. Holdings will not, and will not permit any of its Restricted Subsidiaries to, sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except (a) in the ordinary course of business at prices and on terms and conditions not less favorable to Holdings or such Restricted Subsidiary than could be obtained on an arm’s-length basis from unrelated third parties, (b) transactions between or among the Sponsor and its wholly-owned Restricted Subsidiaries not involving any other Affiliates, (c) any Restricted Payment permitted by Section 8.5 and (d) transactions permitted under Section 8.4(e).

Section 8.8 Restrictive Agreements. Holdings will not, and will not permit any Restricted Subsidiary to, directly or indirectly, enter into, incur or permit to exist any agreement that prohibits, restricts or imposes any condition upon (a) the ability of Holdings or any Restricted Subsidiary to create, incur or permit any Lien upon any of its assets or properties, whether now owned or hereafter acquired, or (b) the ability of any Restricted Subsidiary to pay dividends or other distributions with respect to its Capital Stock, to make or repay loans or advances to Holdings or any other Restricted Subsidiary, to Guarantee Indebtedness of Holdings or any other Restricted Subsidiary or to transfer any of its property or assets to Holdings or any Restricted Subsidiary of Holdings; provided, that (i) the foregoing shall not apply to restrictions or conditions imposed by law or by this Agreement, any other Transaction Document or any other indenture, note purchase agreement or loan agreement in connection with any permitted refinancing of the debt evidenced by the Credit Documents, so long as the restrictions and conditions in such other indenture, note purchase agreement or loan agreement are no more burdensome in any material respect than those imposed by the Credit Documents), (ii) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Restricted Subsidiary pending such sale; provided such restrictions and conditions apply only to the Restricted Subsidiary that is sold and such sale is permitted hereunder, (iii) Section 8.8(a) shall not apply to restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Agreement if such restrictions and conditions apply only to the property or assets securing such Indebtedness and (iv) Section 8.8(a) shall not apply to customary provisions in leases restricting the assignment thereof.

 

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Section 8.9 Sale and Leaseback Transactions. Holdings will not, and will not permit any of its Restricted Subsidiaries to, enter into any arrangement, directly or indirectly, whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereinafter acquired, and thereafter rent or lease such property or other property that it intends to use for substantially the same purpose or purposes as the property sold or transferred; provided, however, the Sponsor may engage in such sale and leaseback transactions so long as the aggregate fair market value of all assets sold and leased back does not exceed $150,000,000 from and after the date hereof.

Section 8.10 Legal Name, State of Formation and Form of Entity. Holdings will not, and will not permit any Restricted Subsidiary to, without providing ten (10) days prior written notice to the Servicer (or such lesser period as the Servicer may agree), change its name, state of formation or form of organization.

Section 8.11 Accounting Changes. Holdings will not, and will not permit any Restricted Subsidiary to, make any significant change in accounting treatment or reporting practices, except as required by GAAP, or change the Fiscal Year of Holdings or of any Restricted Subsidiary, except to change the Fiscal Year of a Restricted Subsidiary to conform its Fiscal Year to that of Holdings.

Section 8.12 Hedging Transactions. Holdings will not, and will not permit any of its Restricted Subsidiaries to, enter into any Hedging Transaction, other than Hedging Transactions entered into in the ordinary course of business to hedge or mitigate risks to which the Sponsor or any Restricted Subsidiary is exposed in the conduct of its business or the management of its liabilities. Solely for the avoidance of doubt, the Sponsor acknowledges that a Hedging Transaction entered into for speculative purposes or of a speculative nature is not a Hedging Transaction entered into in the ordinary course of business to hedge or mitigate risks.

Section 8.13 Activities of Inactive Subsidiaries. Unless any Inactive Subsidiary has become a Guarantor in accordance with the terms of Section 6.10 of this Agreement, the Sponsor will not permit such Inactive Subsidiary to engage in any business activity other than (a) maintaining its existence and/or winding up its affairs and (b) activities related to the completion of any ongoing tax audits, and (x) no Credit Party shall make any additional Investment in any Inactive Subsidiary other than in connection with the business and activities set forth in Sections 8.13(a) and (b) above and (y) no Inactive Subsidiary shall incur Indebtedness of any type (including, without limitation, any guaranties).

Section 8.14 Government Regulation. Holdings will not, and will not permit any of its Subsidiaries to, (a) be or become subject at any time to any law, regulation, or list of any Governmental Authority of the United States (including, without limitation, the OFAC list) that prohibits or limits the Participants or the Servicer from making any advance or extension of credit to the Sponsor or from otherwise conducting business with Credit Parties, or (b) fail to provide documentary and other evidence of the identity of the Credit Parties as may be reasonably requested by the Participants or the Servicer at any time to enable the Participants or the Servicer to verify the identity of the Credit Parties or to comply with any applicable law or regulation, including, without limitation, Section 326 of the Patriot Act at 31 U.S.C. Section 5318.

Section 8.15 Ownership of Subsidiaries. Notwithstanding any other provisions of this Agreement to the contrary, Holdings will not, and will not permit any of the Restricted Subsidiaries to (a) permit any Person (other than the Sponsor, any other Guarantor or any wholly owned Restricted Subsidiary thereof) to own any Capital Stock of any Restricted Subsidiary, except to qualify directors if required by applicable Requirements of Law, and except for any dispositions of Restricted Subsidiaries otherwise permitted under this Agreement, or (b) permit any Restricted Subsidiary to issue or have outstanding any shares of preferred Capital Stock.

 

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Section 8.16 Amendment of Organizational Documents. Holdings will not, and will not permit any of its Restricted Subsidiaries to, amend, modify or waive any of its rights in a manner materially adverse to the Participants or any Credit Party under its charter, by-laws or other organizational document, except in any manner that would not have an adverse effect on the Participants, the Servicer, Holdings, the Sponsor or any of its Restricted Subsidiaries.

Section 8.17 Activities of Holdings. Holdings will not engage in any operations, business or activity other than (a) owning the Capital Stock in its Subsidiaries, (b) maintaining its corporate existence including the issuance of Capital Stock, holding director and shareholder meetings, and entering into those agreements and arrangements incidental thereto and incurring and paying fees, costs and expenses relating to thereto, (c) participating in tax, accounting, corporate and other administrative activities or other activities incidental thereto as a member of the consolidated group of companies including the Credit Parties, (d) executing, delivering and the performance of rights and obligations under the Operative Documents, (e) the consummation of the Restructuring and the other transactions contemplated by the Operative Documents, (f) making any Restricted Payment permitted by this Agreement, (g) making capital contributions to the other Credit Parties, (h) executing, delivering and the performance of rights and obligations under any employment agreements and any documents related thereto, (i) making Investments permitted under this Agreement, (j) providing indemnification to its officers and directors in the ordinary course of business, (k) the performing of activities in preparation for and consummating any public offering of its Capital Stock or any other issuance or sale of its Capital Stock, (l) the holding of any cash and Cash Equivalents (but not owning or operating any property), (m) the entry into and performance of its obligations with respect to contracts and other arrangements entered into in the ordinary course of business providing for indemnification to officers, managers, directors and employees, (n) any activities incidental to the foregoing or required to comply with applicable law, and (o) any action or transaction permitted hereunder.

ARTICLE IX

CREDIT EVENTS AND REMEDIES

In the event that:

Section 9.1 the Sponsor shall fail to pay any amount due hereunder; or

Section 9.2 any representation or warranty made or deemed made by or on behalf of Holdings, the Sponsor or any other Restricted Subsidiary in or in connection with this Agreement or any other Operative Document (including the Schedules attached thereto) and any amendments or modifications hereof or waivers hereunder, or in any certificate, report, financial statement or other document submitted to the Servicer or the Participants by any Credit Party or any representative of any Credit Party pursuant to or in connection with this Agreement or any other Operative Document shall prove to be incorrect in any material respect when made or deemed made or submitted; or

Section 9.3 the Sponsor or Holdings shall fail to observe or perform any covenant or agreement contained in Sections 6.1, 6.2, 6.3 (solely with respect to the Sponsor’s or Holdings’ existence) or 6.11 or Article VII or VIII; or

Section 9.4 (i) the Sponsor or Holdings shall fail to observe or perform any covenant or agreement contained in Section 6.12, and such failure shall remain unremedied for ten (10) Business Days after the earlier of (A) any officer of the Sponsor becomes aware of such failure or (B) notice thereof shall have been given to the Sponsor by the Servicer or any Participant or (ii) any Credit Party shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those referred to in Sections 9.1, 9.2, 9.3 and 9.4(i) above), and such failure shall remain unremedied for thirty (30) days after the earlier of (A) any officer of the Sponsor becomes aware of such failure or (B) notice thereof shall have been given to the Sponsor by the Servicer or any Participant; or

 

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Section 9.5 any event of default (after giving effect to any grace period) shall have occurred and be continuing under the Credit Documents, or all or any part of the obligations due and owing under the Credit Agreement are accelerated, declared to be due and payable or required to be prepaid or redeemed, in each case prior to the stated maturity thereof;

Section 9.6 Holdings, the Sponsor or any Restricted Subsidiary (whether as primary obligor or as guarantor or other surety) shall fail to pay any principal of or premium or interest on any Material Indebtedness that is outstanding, when and as the same shall become due and payable (whether at scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument evidencing such Indebtedness; or any other event shall occur or condition shall exist under any agreement or instrument relating to such Indebtedness and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or permit the acceleration of, the maturity of such Indebtedness; or any such Indebtedness shall be declared to be due and payable; or required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption), purchased or defeased, or any offer to prepay, redeem, purchase or defease such Indebtedness shall be required to be made, in each case prior to the stated maturity thereof; or

Section 9.7 Holdings, the Sponsor, any Material Subsidiary, or, to the extent such action could reasonably be expected to have a Material Adverse Effect, any other Restricted Subsidiary shall (i) commence a voluntary case or other proceeding or file any petition seeking liquidation, reorganization or other relief under any federal, state or foreign bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a custodian, trustee, receiver, liquidator or other similar official of it or any substantial part of its property, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in Section 9.7(i), (iii) apply for or consent to the appointment of a custodian, trustee, receiver, liquidator or other similar official for Holdings, the Sponsor or any such Material Subsidiary or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, or (vi) take any action for the purpose of effecting any of the foregoing; or

Section 9.8 an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of Holdings, the Sponsor, any Material Subsidiary, or, to the extent such action could reasonably be expected to have a Material Adverse Effect, any other Restricted Subsidiary, or its debts, or any substantial part of its assets, under any federal, state or foreign bankruptcy, insolvency or other similar law now or hereafter in effect or (ii) the appointment of a custodian, trustee, receiver, liquidator or other similar official for Holdings, the Sponsor, any Material Subsidiary, or, to the extent such action could reasonably be expected to have a Material Adverse Effect, any other Restricted Subsidiary, or for a substantial part of its assets, and in any such case, such proceeding or petition shall remain undismissed for a period of sixty (60) days or an order or decree approving or ordering any of the foregoing shall be entered; or

Section 9.9 Holdings, the Sponsor, any Material Subsidiary, or, to the extent such action could reasonably be expected to have a Material Adverse Effect, any other Restricted Subsidiary shall become unable to pay, shall admit in writing its inability to pay, or shall fail to pay, its debts as they become due; or

 

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Section 9.10 an ERISA Event shall have occurred that when taken together with other ERISA Events that have occurred, could reasonably be expected to result in liability to Holdings, the Sponsor and the Restricted Subsidiaries in an aggregate amount exceeding, as of any date of determination, an amount equal to two percent (2.0%) of the aggregate book value of the total assets of Holdings, the Sponsor and its Restricted Subsidiaries determined on a consolidated basis as of the last day of the most recently ended Fiscal Quarter for which financial statements have been delivered or otherwise having a Material Adverse Effect; or

Section 9.11 judgments and orders for the payment of money in excess of in the aggregate, as of any date of determination, an amount equal to two percent (2.0%) of the aggregate book value of the total assets of Holdings, the Sponsor and its Restricted Subsidiaries determined on a consolidated basis as of the last day of the most recently ended Fiscal Quarter for which financial statements have been delivered, to the extent not covered by insurance for which the insurance carrier has acknowledged coverage, shall be rendered against Holdings, the Sponsor, any Material Subsidiary or, to the extent such action could reasonably be expected to have a Material Adverse Effect, any other Restricted Subsidiary, and to the extent such judgments or orders have not been discharged either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be a period of thirty (30) consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or

Section 9.12 any non-monetary judgment or order shall be rendered against Holdings, the Sponsor or any Restricted Subsidiary that could reasonably be expected to have a Material Adverse Effect, and there shall be a period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or

Section 9.13 a Change in Control shall occur or exist; or

Section 9.14 any provision of any Guaranty Agreement shall for any reason cease to be valid and binding on, or enforceable against, any Guarantor, or any Guarantor shall so state in writing, or any Guarantor shall seek to terminate the Guaranty Agreement; or

Section 9.15 there shall exist or occur any default or event of default as provided under the terms of any other Operative Document (after giving effect to any notice and cure periods set forth in such Operative Document), or any Operative Document ceases to be in full force and effect or the validity or enforceability thereof is disaffirmed by or on behalf of the Sponsor or any other Credit Party, or at any time it is or becomes unlawful for Sponsor or any other Credit Party to perform or comply with its obligations under any Operative Document, or the obligations of the Sponsor or any other Credit Party under any Operative Document are not or cease to be legal, valid and binding on Sponsor or any such Credit Party; or

Section 9.16 the Servicer shall not have or shall cease to have a valid and perfected lien in any material portion of the Credit Party Collateral purported to be covered by the Credit Party Collateral Documents for any reason other than the failure of the Servicer to take any action within its control;

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

(a) the Servicer may, with the consent of the Required Participants, and upon the written request of the Required Participants, shall, take any or all of the following actions, without prejudice to the rights of the Servicer or any Participant to enforce its claims against Sponsor, any other Credit Party, any Borrower or other obligor with respect to any Loan: (i) declare the Facility Commitment terminated, whereupon the Facility Commitment shall terminate immediately and any unpaid Participant Commitment

 

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Fee shall forthwith become due and payable without any other notice of any kind (with the express understanding that such termination of the Facility Commitment shall not result in a termination of the Participating Commitments of each Participant or of the obligation of the Servicer to fund any Loan Commitment); (ii) demand that the Sponsor purchase specified or all outstanding Loans and Loan Commitments by paying to the Servicer the Loan Indebtedness of each such Loan and assuming the Servicer’s obligations under each Loan Commitment, whereupon such amount shall become, forthwith due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Sponsor (with the express understanding the limitations on Sponsor’s guaranty obligations set forth in Article X shall not apply); and (iii) take any other action and exercise any other remedy available by contract or at law; provided, that, if a Credit Event specified in Sections 9.7, 9.8 or 9.9 shall occur, the result which would occur upon the giving of notice by the Servicer to any Credit Party, shall occur automatically without the giving of any such notice; and

(b) in addition, the Servicer may, with the consent of the Required Participants and shall, upon the written request of the Required Participants, to the extent authorized to do so pursuant to the Loan Agreements (which authorization is limited to certain specified Credit Events), (x) cease funding further Advances pursuant to the Revolving Commitments and the Line of Credit Commitments and (y) declare all Loan Indebtedness outstanding pursuant to the US Revolving Commitments, the Canadian Revolving Commitments, the Line of Credit Commitments, the US Term Loan Commitments and the Canadian Term Loan Commitments to be immediately due and payable in accordance with the terms of the applicable Operative Documents and exercise all rights and remedies provided under the Operative Documents.

ARTICLE X

GUARANTY

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

Section 10.1 Unconditional Guaranty. The Sponsor hereby unconditionally and irrevocably guarantees to the Servicer, each Participant and any transferee of the Participants, the full and prompt payment of all of the Guaranteed Obligations relating to the Loans and all costs, charges and expenses (including reasonable attorneys’ fees) actually incurred or sustained by the Servicer or any Participant in enforcing the obligations of the Sponsor hereunder or the obligations of the Borrowers under the applicable Operative Documents. If any portion of the Loan Indebtedness with respect to any Defaulted Loan is not paid by the date specified herein, Sponsor hereby agrees to and will immediately pay the same in the applicable currency, without resort by Servicer or any Participant to any other person or party. The obligation of the Sponsor to Servicer and the Participants hereunder is primary, absolute and unconditional, except as may be specifically set forth herein. This is a guaranty of payment and not of collection. The obligations of the Sponsor pursuant to this Article X constitute a guarantee that is continuing in nature.

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

 

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

Section 10.3 Waivers. The Sponsor hereby waives notice of Servicer’s and each Participant’s acceptance of this Agreement and the creation, extension or renewal of any Loans or other Guaranteed Obligations. Sponsor hereby consents and agrees that, at any time or times, without notice to or further approval from Sponsor, and without in any way affecting the obligations of the Sponsor hereunder, Servicer and the Participants may, with or without consideration (i) release, compromise with, or agree not to sue, in whole or in part, any Borrower or any other obligor, guarantor, endorser or surety on any Loans or any other Guaranteed Obligations, (ii) renew, extend, accelerate, or increase or decrease the principal amount of any Loans or other Guaranteed Obligations, either in whole or in part, (iii) amend, waive, or otherwise modify any of the terms of any Loans or other Guaranteed Obligations or of any mortgage, deed of trust, security agreement, or other undertaking of any of the Borrowers or any other obligor, endorser, guarantor or surety in connection with any Loans or other Guaranteed Obligations, and (iv) apply any payment received from Borrowers or from any other obligor, guarantor, endorser or surety on the Loans or other Guaranteed Obligations to any of the liabilities of Borrowers or of such other obligor, guarantor, endorser, or surety which Servicer may choose, subject, however, to the rights of the Sponsor to bring a separate action for any breach of the Operative Documents pursuant to Section 10.10.

Section 10.4 Additional Actions. Subject to Section 10.10, Sponsor hereby consents and agrees that the Servicer may at any time or times, either with or without consideration, surrender, release or receive any property or other Collateral of any kind or nature whatsoever held by it or for its account securing any Loans or other Guaranteed Obligations, or substitute any Collateral so held by Servicer for other Collateral of like or different kind, without notice to or further consent from Sponsor, and such surrender, receipt, release or substitution shall not in any way affect the obligations of the Sponsor hereunder. Subject to Section 10.10, Servicer shall have full authority to adjust, compromise, and receive less than the amount due upon any such Collateral, and may enter into any accord and satisfaction agreement with respect to the same as Servicer may deem advisable without affecting the obligations of the Sponsor hereunder. Servicer shall be under no duty to undertake to collect upon such Collateral or any part thereof, and Sponsor’s obligations hereunder shall not be affected by Servicer’s alleged negligence or mistake in judgment in handling, disposing of, obtaining, or failing to collect upon or perfect a security interest in, any such Collateral.

Section 10.5 Additional Waivers. Sponsor hereby waives presentment, demand, protest, and notice of dishonor of any of the liabilities guaranteed hereby. Neither Servicer nor any Participant shall have any duty or obligation (i) to proceed or exhaust any remedy against any Borrower, any other obligor, guarantor, endorser, or surety on any Loans or other Guaranteed Obligations, or any other security held by Servicer or any Participant for any Loans or other Guaranteed Obligations, or (ii) to give any notice whatsoever to Borrowers, Sponsor, or any other obligor, guarantor, endorser, or surety on any Loans or other Guaranteed Obligations, before bringing suit, exercising rights to any such security or instituting proceedings of any kind against Sponsor, any Borrower, or any of them, and Sponsor hereby waives any requirement for such actions by Servicer or any Participant. Upon default by any Borrower and Servicer’s demand to Sponsor hereunder, Sponsor shall be held and bound to Servicer and each Participant directly as principal debtor in respect of the payment of the amounts hereby guaranteed, such liability of the Sponsor being joint and several with each Borrower and all other obligors, guarantors, endorsers and sureties on the Loans or other Guaranteed Obligations, subject, however, to the rights of the Sponsor to bring a separate action for any breach of the Operative Documents pursuant to Section 10.10.

 

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Section 10.6 Postponement of Obligations. Until the Loan and other Guaranteed Obligations of any Borrower to the Servicer and the Participants have been paid in full (i) all present and future indebtedness of such Borrower to Sponsor (the “Subordinated Debt”) is hereby postponed to the present and future Loan Indebtedness of such Borrower to Servicer and each Participant, and all monies received from such Borrower or for its account by Sponsor with respect to such Subordinated Debt shall be received in trust for Servicer and the Participants, and promptly upon receipt, shall be paid over to Servicer for distribution to the Participants in accordance herewith until such Borrower’s Loan Indebtedness to Servicer and the Participants is fully paid and satisfied, all without prejudice to and without in any way affecting the obligations of the Sponsor hereunder; provided that unless a Loan Default or Loan Payment Default has occurred and is continuing with respect to such Borrower, the Sponsor may accept and retain any payments made by such Borrower to the Sponsor in the ordinary course of business, and (ii) Sponsor shall not have any rights of subrogation or otherwise to participate in any security held by the Servicer for any Loan to such Borrower or any other Guaranteed Obligations arising therefrom, and Sponsor hereby waives such rights until such time as such Loan and other Guaranteed Obligations have been paid in full to the Servicer and each Participant (whether by repurchase by the Sponsor, pursuant to this Article X or otherwise).

Section 10.7 Effect on Additional Guaranties. The obligations of the Sponsor pursuant to this Article X are in addition to, and are not intended to supersede or be a substitute for any other guarantee, suretyship agreement, or instrument which Servicer may hold in connection with any Loans or other Guaranteed Obligations.

Section 10.8 Reliance on Guaranty and Purchase Obligation; Disclaimer of Liability. Sponsor expressly acknowledges and agrees that each of the Servicer and the Participants, in making its credit decision with regard to the funding of the Loans, will rely solely upon the guaranty and purchase obligation of the Sponsor set forth above and that neither the Servicer nor any Participant is under any obligation or duty to perform any credit analysis or investigation with regard to the creditworthiness of any Borrower. In addition, the Servicer expressly disclaims any responsibility or liability for the authenticity of signatures on any of the Loan Documents (other than the Servicer’s), the authority of the Persons executing the Loan Documents (other than the Servicer) or the enforceability or compliance with laws of any of the Loan Documents.

SPONSOR EXPRESSLY ACKNOWLEDGES AND AGREES THAT SPONSOR’S GUARANTY OBLIGATIONS TO PURCHASE LOANS UNDER THIS AGREEMENT ARE ABSOLUTE AND UNCONDITIONAL. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, SPONSOR’S OBLIGATION SHALL NOT BE AFFECTED BY THE EXISTENCE OF ANY DEFAULT BY ANY BORROWER UNDER THE APPLICABLE LOAN DOCUMENTS, ANY EXCHANGE, RELEASE OR NONPERFECTION OF ANY LIEN WITH RESPECT TO ANY COLLATERAL SECURING PAYMENT OF ANY LOAN, THE SUBSTITUTION OR RELEASE OF ANY ENTITY PRIMARILY OR SECONDARILY LIABLE FOR ANY LOAN, ANY LACK OF ENFORCEABILITY OF ANY LOAN DOCUMENT, ANY LAW, REGULATION, OR ORDER OF ANY JURISDICTION AFFECTING ANY LOAN OR LOAN DOCUMENT OR THE RIGHTS OF THE HOLDER THEREOF, ANY CHANGE IN THE CONDITION OR PROSPECTS OF THE SPONSOR, INCLUDING WITHOUT LIMITATION, INSOLVENCY, BANKRUPTCY, REORGANIZATION OR SIMILAR PROCEEDING, OR ANY OTHER CIRCUMSTANCE WHICH MIGHT, BUT FOR THE PROVISIONS OF THIS PARAGRAPH, CONSTITUTE A LEGAL OR EQUITABLE DISCHARGE OF THE SPONSOR’S OBLIGATIONS HEREUNDER. SPONSOR’S OBLIGATIONS HEREUNDER SHALL NOT BE AFFECTED BY ANY SET-OFF OR CLAIM WHICH IT MIGHT HAVE AGAINST THE SERVICER OR ANY PARTICIPANT, WHETHER ARISING OUT OF THIS AGREEMENT OR OTHERWISE, BUT SUBJECT TO SECTION 10.11 BELOW.

 

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Section 10.9 Reinstatement of Obligations. The obligations of the Sponsor pursuant to the Operative Documents shall continue to be effective or be reinstated, as the case may be, if at any time payment or any part thereof, of principal of, interest on or any other amount with respect to any Loan or any obligation of the Sponsor pursuant to the Operative Documents is rescinded or must otherwise be restored by the Servicer or any Participant upon the bankruptcy or reorganization of the Sponsor, any Borrower or any guarantor or otherwise.

Section 10.10 Right to Bring Separate Action. Nothing contained in this Article X shall be construed to affect any other right that Sponsor may otherwise have under this Agreement, or any Operative Document or Loan Documents, at law or in equity to institute an action or assert a claim against the Servicer or any Participant based upon a breach of Servicer’s or such Participant’s obligations set forth in the Operative Documents or Loan Documents or to assert a compulsory counterclaim with respect thereto and any waiver of notice or other matter set forth in this Article X shall not affect Sponsor’s right to seek damages arising from the failure of the Servicer to give such notice otherwise required by the terms of the Operative Documents or Loan Documents.

Section 10.11 Subordination of Liens. The Sponsor hereby subordinates the lien and priority of the Sponsor’s existing and future liens and other interests, if any, in and to the Collateral to the Servicer’s existing and future interest in the Collateral under the Loan Documents notwithstanding the time of attachment of the interests of the Sponsor or the Servicer or the time the Loan Indebtedness or the Subordinated Debt is incurred. Notwithstanding anything to the contrary contained in this Agreement, under applicable law or otherwise, in the event that the liens of the Servicer are at any time unperfected with respect to any or all of the Collateral, the lack of perfection by the Servicer as to any such Collateral shall not affect the validity, enforceability or priority of any lien on the Collateral in favor of the Sponsor. In any such event, the liens of the Sponsor shall have priority over any and all other Liens in favor of any third party with respect to the Collateral (including, but not limited to any trustee under the Bankruptcy Code) and the Sponsor shall be, and is hereby constituted, as the Servicer’s agent and bailee for purposes of perfection of the Liens of the Servicer in the Collateral such that the Lien in favor of the Sponsor shall be held by the Sponsor for the benefit of the Servicer and the proceeds of any disposition of the Collateral of any Borrower shall be and are in all respects subject to the priority of right to payment and satisfaction of first, the Loan Indebtedness of such Borrower and then, the Subordinated Debt with respect to such Borrower. The lien priorities provided in this Section 10.11 shall not be altered or otherwise affected by any amendment, modification, supplement, extension, renewal, restatement or refinancing of either the applicable Loan Indebtedness or the Subordinated Debt, nor by any action or inaction which either the Servicer or the Borrowers may take or fail to take in respect of the Collateral, except as otherwise provided above in this Section 10.11.

Section 10.12 Exercise of Remedies With Respect to Collateral.

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

 

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

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

(d) In exercising its rights pursuant to this Section 10.12, the Servicer agrees that it will not release Liens or Collateral or commence enforcement actions under the Loan Documents without the direction of the Required Participants. The Servicer agrees to administer the Loan Documents and the Collateral and to make such demands and give such notices thereunder as the Required Participants may request and to take such action to enforce the Loan Documents and to realize upon, collect and dispose of the Collateral as the Required Participants may direct. The Servicer shall not be required to take any action that is, in its opinion, contrary to law or the terms of the Loan Documents or the Operative Documents or that would, in the opinion of the Servicer, subject it or any of its officers, employees, agents or directors to liability and the Servicer shall not be required to take any action unless and until it is indemnified to its satisfaction by the Participants for any loss, cost or liability resulting from any required action.

 

  (i)

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

 

  (ii)

Nothing set forth in this Section 10.12 shall modify the rights of the Servicer set forth in Section 3.1.

Section 10.13 Rights Of Sponsor Upon Payment; Cooperation By Servicer. Upon receipt by the Servicer of payment in full of the Loan Indebtedness of a Defaulted Borrower by Sponsor, Sponsor shall be subrogated to the rights of the Servicer with respect to such Loan Indebtedness and the Servicer shall be deemed to have assigned to Sponsor, and Sponsor shall, to the extent permitted by applicable law, automatically, immediately and without further action by any Person, be entitled to, all rights and remedies that the Servicer may have had against the Defaulted Borrower and any other Persons primarily or secondarily liable on such Loan Indebtedness, including without limitation the right to resort to any and all Collateral which secures such Loan Indebtedness, and the Sponsor shall, automatically, immediately and without further action, be deemed to have assumed all obligations of the Servicer under the Loan Commitment and the Operative Documents with respect to such Loan Indebtedness, and the Servicer shall be released from any further obligations with respect thereto. The Servicer agrees that, upon receipt of payment in full of such Loan Indebtedness, the Servicer shall:

 

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

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

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

Sponsor shall reimburse the Servicer for its expenses reasonably and actually incurred in complying with this Section 10.13.

ARTICLE XI

INDEMNIFICATION

Section 11.1 Indemnification.

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

(b) Without limiting the generality of the foregoing, and separate and apart from any obligation of the Sponsor pursuant to Article X, Sponsor agrees to indemnify and hold harmless each Indemnified Party from and against, and on demand will pay or reimburse any Indemnified Party for, any and all (i) liabilities arising from a breach of any representation or warranty made by Sponsor hereunder (whether or not Sponsor’s obligations under Article X have been satisfied), (ii) any breach by Sponsor of its agreements with the Borrowers, (iii) any overadvance to any Borrower caused by the transfer of ACH

 

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transfer instructions from the Aaron’s Proprietary System to the Servicer by Sponsor resulting in aggregate advances to such Borrower in excess of the Loan Commitment to such Borrower, and (iv) any breach by Sponsor of the terms of its MicroACH Service Agreement with the Servicer or any failure by Sponsor to maintain such agreement in full force and effect.

(c) This indemnity shall survive the termination of this Agreement.

Section 11.2 Notice Of Proceedings; Right To Defend

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

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

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

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

 

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Section 11.3 Third Party Beneficiaries. No Persons shall be deemed to be third party beneficiaries of this Agreement. Except as expressly otherwise provided in this Agreement, this Agreement is solely for the benefit of the Sponsor and the Servicer, the Participants and their respective successors and permitted assigns, and no other Person shall have any right, benefit, priority or interest under, or because of the existence of, this Agreement.

ARTICLE XII

SURVIVAL OF LOAN FACILITY

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

ARTICLE XIII

CONDITIONS PRECEDENT TO EFFECTIVENESS

Section 13.1 Conditions to Effectiveness. This Agreement shall not become effective, the Sponsor shall have no rights under this Agreement and neither the Servicer nor the Participants shall be obligated to take, fulfill or perform any action hereunder, until the following conditions have been fulfilled to the satisfaction of the Servicer:

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

(i) Duly executed counterparts of this Agreement.

(ii) Duly executed Servicing Agreement.

(iii) Duly executed counterparts of the Guaranty Agreement and the Fee Letter.

(iv) A duly executed closing certificate of the Sponsor, dated as of the Effective Date and signed by a Responsible Officer certifying that (A) at the time of and immediately after giving effect to this Agreement and the other Operative Documents, no Unmatured Credit Event or Credit Event shall exist, (B) at the time of and immediately after giving effect to this Agreement and the other Operative Documents, all representations and warranties of each Credit Party set forth in the Operative Documents shall be true and correct in all material respects (other than those representations and warranties that are expressly qualified by Material Adverse Effect or other materiality, in which case such representations and warranties shall be true and correct in all respects); provided, that to the extent such representation or warranty relates to a specific prior date, such representation or warranty shall be true and correct in all material respects (other than those representations and warranties that are expressly qualified by Material Adverse Effect or other materiality, in which case such representations and warranties shall be true and correct in all respects) only as of such specific prior date, and (C) since the date of the audited financial statements of the Sponsor described in Section 5.4, there shall have been no change which has had or could reasonably be expected to have a Material Adverse Effect.

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

 

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(vi) Copies of the organizational papers of the Sponsor and each Guarantor, certified as true and correct by the Secretaries of State of their respective states of incorporation, and certificates from the Secretaries of State of such states of incorporation certifying Sponsor’s and each Guarantor’s good standing as a corporation in such State.

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

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

(ix) the Form 10 (including the information statement and other exhibits contemplated thereby, in each case, in the form and to the extent so filed) in the form most recently filed (whether or not publicly) with the U.S. Securities and Exchange Commission prior to the Effective Date;

(x) A copy of the duly executed Credit Agreement and the other Credit Documents in form and substance reasonably acceptable to the Servicer;

(xi) All documentation and other information with respect to the Credit Parties that the Sponsor or any Participant reasonably believes is required by regulatory authorities under applicable “know-your-customer” and anti-money laundering rules and regulations, including without limitation the Patriot Act; and

(xii) Each of the Participants shall have received a duly executed Participation Certificate from the Servicer.

Section 13.2 Conditions to Funding Availability Date. The obligations of the Servicer and the Participants to take, fulfill or perform any action hereunder, on the Funding Availability Date is subject to the satisfaction of the following conditions:

(a) The Effective Date shall have occurred.

(b) The Termination Date shall not have occurred.

(c) The Restructuring shall have occurred (or substantially concurrently with the Funding Availability Date, will occur).

(d) The Servicer (or its counsel) shall have received the following:

(i) each of the Participants shall have received a duly executed Participation Certificate from the Servicer;

(ii) a certificate of the Secretary or Assistant Secretary of each Credit Party certifying that its articles of incorporation or other charter documents, as applicable, bylaws or operating agreement, as applicable, and the resolutions of its board of directors (or equivalent governing body) delivered to the Servicer on the Effective Date, have not been amended or superseded since the Effective Date (or if any of the same have been amended or superseded, attaching such amended or superseded articles of incorporation or other charter documents, bylaws or operating agreement, and/or resolutions of its board of directors);

 

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(iii) a favorable written opinion of King & Spalding LLP, counsel to the Credit Parties, addressed to the Servicer and each of the Participants and covering such matters relating to the Credit Parties, the Operative Documents and the transactions contemplated therein as the Servicer or the Required Participants shall reasonably request;

(iv) all obligations (other than contingent indemnification obligations for which no demand has been made) under the Existing Loan Facility Agreement shall have been repaid in full (or substantially concurrently with the Funding Availability Date, will be repaid in full) and the Existing Loan Facility Agreement shall have been terminated; and

(v) a solvency certificate, dated as of the Funding Availability Date and signed by the chief financial officer of the Sponsor, confirming that the Sponsor is Solvent, and Holdings, the Sponsor and its Restricted Subsidiaries on a consolidated basis, are Solvent before and after giving effect to any extensions of credit on the Funding Availability Date and the consummation of the other transactions contemplated herein; and

(e) The Servicer shall have received all fees and other amounts due and payable on or prior to the Funding Availability Date, including reimbursement or payment of all out-of-pocket expenses (including reasonable fees, charges and disbursements of counsel to the Servicer) required to be reimbursed or paid by the Sponsor hereunder, under any other Operative Document and under any agreement with the Servicer.

ARTICLE XIV

THE SERVICER

Section 14.1 Appointment of Servicer as Agent. To the extent of its ownership interest in the Loans, each Participant hereby designates Servicer as its agent to administer all matters concerning the Loans and to act as herein specified. Each Participant hereby irrevocably authorizes the Servicer to take such actions on its behalf under the provisions of this Agreement, the other Operative Documents, and all other instruments and agreements referred to herein or therein, and to exercise such powers and to perform such duties hereunder and thereunder as are specifically delegated to or required of the Servicer by the terms hereof and thereof and such other powers as are reasonably incidental thereto. The Servicer may perform any of its duties hereunder by or through its agents or employees.

Section 14.2 Nature of Duties of Servicer. The Servicer shall have no duties or responsibilities except those expressly set forth in this Agreement and the other Operative Documents. None of the Servicer nor any of its respective officers, directors, employees or agents shall be liable for any action taken or omitted by it as such hereunder or in connection herewith, unless caused by its or their gross negligence or willful misconduct. The Servicer shall not have by reason of this Agreement a fiduciary relationship in respect of any Participant; and nothing in this Agreement, express or implied, is intended to or shall be so construed as to impose upon the Servicer any obligations in respect of this Agreement or the other Operative Documents except as expressly set forth herein.

 

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Section 14.3 Lack of Reliance on the Servicer.

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

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

Section 14.4 Certain Rights of the Servicer. If the Servicer shall request instructions from the Required Participants with respect to any action or actions (including the failure to act) in connection with this Agreement, the Servicer shall be entitled to refrain from such act or taking such act, unless and until the Servicer shall have received instructions from the Required Participants; and the Servicer shall not incur liability in any Person by reason of so refraining. Without limiting the foregoing, no Participant shall have any right of action whatsoever against the Servicer as a result of the Servicer acting or refraining from acting hereunder in accordance with the instructions of the Required Participants.

Section 14.5 Reliance by Servicer. The Servicer shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, statement, certificate, telex, teletype or telecopier message, cable gram, radiogram, order or other documentary, teletransmission or telephone message believed by it to be genuine and correct and to have been signed, sent or made by the proper Person. The Servicer may consult with legal counsel (including counsel for any Credit Party), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts.

Section 14.6 Indemnification of Servicer. To the extent the Servicer is not reimbursed and indemnified by the Credit Parties, each Participant will reimburse and indemnify the Servicer, ratably according to the respective Pro Rata Shares, in either case, for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including counsel fees and disbursements) or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Servicer in performing its duties hereunder, in any way relating to or arising out of this Agreement or the other Operative Documents; provided that no Participant shall be liable to the Servicer for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Servicer’s gross negligence or willful misconduct.

Section 14.7 The Servicer in its Individual Capacity. With respect to its obligations under this Agreement and the amounts advanced by it, the Servicer shall have the same rights and powers hereunder as any other Participant and may exercise the same as though it were not performing the duties specified herein; and the terms “Participants”, “Required Participants”, or any similar terms shall, unless the context clearly otherwise indicates, include the Servicer in its individual capacity. The Servicer may accept deposits from, lend money to, and generally engage in any kind of banking, trust, financial advisory or other business with the Consolidated Companies or any affiliate of the Consolidated Companies as if it were not performing the duties specified herein, and may accept fees and other consideration from the Consolidated Companies for services in connection with this Agreement and otherwise without having to account for the same to the Participants.

 

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Section 14.8 Holders of Participation Certificates. The Servicer may deem and treat the payee of any Participation Certificate as the owner thereof for all purposes hereof unless and until a written notice of the assignment or transfer thereof shall have been filed with the Servicer. Any request, authority or consent of any Person who, at the time of making such request or giving such authority or consent, is the holder of any Participation Certificate shall be conclusive and binding on any subsequent holder, transferee or assignee of such Participation Certificate or of any Participation Certificate or Participation Certificates issued in exchange therefor.

Section 14.9 Collateral and Guaranty Matters. The Participants irrevocably authorize the Servicer, at its option and in its discretion:

(a) to release any Lien on any property granted to or held by the Servicer under any Operative Document (i) upon the termination of all Facility Commitments, and the payment in full of all Guaranteed Obligations (other than contingent indemnification obligations), (ii) that is sold or to be sold as part of or in connection with any sale permitted hereunder or under any other Operative Document or the designation of any Restricted Subsidiary as an Unrestricted Subsidiary pursuant to Section 6.14, or (iii) if approved, authorized or ratified in writing in accordance with Section 15.2; and

(b) to release any Credit Party from its obligations under the applicable Credit Party Collateral Documents if such Person ceases to be a Credit Party as a result of a transaction permitted hereunder.

Upon request by the Servicer at any time, the Required Participants will confirm in writing the Servicer’s authority to release its interest in particular types or items of property, or to release any Credit Party from its obligations under the applicable Credit Party Collateral Documents pursuant to this Section 14.9. In each case as specified in this Section 14.9, the Servicer is authorized, at the Sponsor’s expense, to execute and deliver to the applicable Credit Party such documents as such Credit Party may reasonably request to evidence the release of such item of Credit Party Collateral from the Liens granted under the applicable Credit Party Collateral Documents, or to release such Credit Party from its obligations under the applicable Credit Party Collateral Documents, in each case in accordance with the terms of the Operative Documents and this Section 14.9.

Section 14.10 Right to Realize on Credit Party Collateral and Enforce Guarantee. Anything contained in any of the Operative Documents to the contrary notwithstanding, Holdings, the Sponsor, the Servicer and each Participant hereby agree that (i) no Participant shall have any right individually to realize upon any of the Credit Party Collateral or to enforce the Credit Party Collateral Documents, it being understood and agreed that all powers, rights and remedies hereunder and under the Credit Party Collateral Documents may be exercised solely by the Servicer, and (ii) in the event of a foreclosure by the Servicer on any of the Credit Party Collateral pursuant to a public or private sale or other disposition, the Servicer or any Participant may be the purchaser or licensor of any or all of such Credit Party Collateral at any such sale or other disposition and the Servicer, as agent for and representative of the Participants (but not any Participant or Participants in its or their respective individual capacities unless the Required Participants shall otherwise agree in writing), shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Credit Party Collateral sold at any such public sale, to use and apply any of the Guaranteed Obligations as a credit on account of the purchase price for any collateral payable by the Servicer at such sale or other disposition.

 

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ARTICLE XV

MISCELLANEOUS

Section 15.1 Notices.

(a) Written Notices.

(i) Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications to any party herein to be effective shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows:

 

To the Sponsor:

   Aaron’s, LLC
   400 Galleria Parkway SE, Suite 300
   Atlanta, GA 30339
   Attn: Chief Financial Officer
   Telecopy Number: (855) 778-8565
   with a copy to:
   Aaron’s, LLC
   400 Galleria Parkway SE, Suite 300
   Atlanta, GA 30339
   Attn: General Counsel
   Telecopy Number: (855) 778-8565

To the Servicer:

   Aaron’s Program Manager
   Truist Bank
   Program Lending
   3333 Peachtree Road, N.E., 3rd Floor
   Mail Code 1802
   Atlanta, Georgia 30326

With a copy to:

   Truist Bank
   Agency Services
   303 Peachtree Street, N.E. / 25th Floor
   Atlanta, Georgia 30308
   Attention: Agency Services
   Telecopy Number: (404) 495-2170

To any other Participant:

   the address set forth on the on such Participant’s signature page hereof, or such other address or applicable teletransmission number as such party may hereafter specify by notice to the Servicer and Sponsor

Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All such notices and other communications shall, when transmitted by overnight delivery, or faxed, be effective when delivered for overnight (next-day) delivery, or transmitted in legible form by facsimile machine, respectively, or if mailed, upon the third Business Day after the date deposited into the mails or if delivered, upon delivery; provided, that notices delivered to the Servicer shall not be effective until actually received by such Person at its address specified in this Section 15.1.

 

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(ii) Any agreement of the Servicer and the Participants herein to receive certain notices by telephone or facsimile is solely for the convenience and at the request of the Sponsor. The Servicer and the Participants shall be entitled to rely on the authority of any Person purporting to be a Person authorized by the Sponsor to give such notice and the Servicer and the Participants shall not have any liability to the Sponsor or other Person on account of any action taken or not taken by the Servicer or the Participants in reliance upon such telephonic or facsimile notice. The obligation of the Sponsor to repurchase the Loans and Loan Commitments and all other obligations and Guarantees hereunder shall not be affected in any way or to any extent by any failure of the Servicer and the Participants to receive written confirmation of any telephonic or facsimile notice or the receipt by the Servicer and the Participants of a confirmation which is at variance with the terms understood by the Servicer and the Participants to be contained in any such telephonic or facsimile notice.

(b) Electronic Communications.

(i) Notices and other communications to the Participants hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by Servicer; provided that the foregoing shall not apply to notices to any Participant pursuant to Article II unless such Participant and Servicer have agreed to receive notices under such Article by electronic communication and have agreed to the procedures governing such communications. Servicer or Sponsor may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications.

(ii) Unless Servicer otherwise prescribes, (A) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement); provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next Business Day for the recipient, and (B) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing Section 15.1(b)(ii)(A) of notification that such notice or communication is available and identifying the website address therefor.

(iii) The Sponsor agrees that the Servicer may, but shall not be obligated to, make Communications (as defined below) available to the Participants by posting the Communications on Debt Domain, Intralinks, Syndtrak, ClearPar or a substantially similar electronic system (each, an “Electronic System”).

(iv) Any Electronic System used by the Servicer is provided “as is” and “as available.” The Agent Parties (as defined below) do not warrant the adequacy of such Electronic Systems and expressly disclaim liability for errors or omissions in the Communications. No warranty of any kind, express, implied or statutory, including, without limitation, any warranty of merchantability, fitness for a particular purpose, non-infringement of third-party rights or freedom from viruses or other code defects, is made by any Agent Party in connection with the Communications or any

 

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Electronic System. In no event shall the Servicer or any of its Related Parties (collectively, the “Agent Parties”) have any liability to any Credit Party, any Participant or any other Person or entity for damages of any kind, including, without limitation, direct or indirect, special, incidental or consequential damages, losses or expenses (whether in tort, contract or otherwise) arising out of any Credit Party’s or the Servicer’s transmission of Communications through an Electronic System. “Communications” means, collectively, any notice, demand, communication, information, document or other material provided by or on behalf of any Credit Party pursuant to any Operative Document or the transactions contemplated therein which is distributed by the Servicer or any Participant by means of electronic communications pursuant to this Section 15.1, including through an Electronic System.

Section 15.2 Amendments, Etc. Except as otherwise provided in this Agreement, including, without limitation, Section 2.5 with respect to the implementation of a Benchmark Replacement or Benchmark Replacement Conforming Changes (as set forth therein), no amendment or waiver of any provision of this Agreement or the other Operative Documents, nor consent to any departure by any Credit Party therefrom, shall in any event be effective unless the same shall be in writing and signed by the Required Participants (and in the case of any amendment, the applicable Credit Party), and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided that no amendment, waiver or consent shall, unless in writing and signed by all the Participants do any of the following: (i) waive any of the conditions specified in Section 2.1 or 13.1, (ii) increase the Participating Commitment Amounts or contractual obligations of the Participants to Servicer or Sponsor under this Agreement, (iii) reduce the principal of, or interest on, the Participation Certificates or any fees hereunder, (iv) postpone any date fixed for the payment in respect of principal of, or interest on, the Participation Certificates or any fees hereunder, (v) agree to release any Guarantor from its obligations under any Guaranty Agreement (other than the release of a Guarantor in connection with its designation as an Unrestricted Subsidiary pursuant to the terms of Section 6.14) or the Sponsor from its obligations pursuant to this Agreement, (vi) modify the definition of “Required Participants,” (vii) modify Section 2.9, Section 2.11, Article IV, Article X or this Section 15.2, (viii) release all or substantially all collateral (if any) securing any of the Guaranteed Obligations or agree to subordinate any Lien in all or substantially all of the collateral securing the Guaranteed Obligations to any other creditor of Holdings, the Sponsor or any Restricted Subsidiary, without the written consent of each Participant, or (ix) change Section 2.7 in a manner that would alter the ratable reduction or termination of the Facility Commitments required thereby, without the written consent of each Participant. Notwithstanding the foregoing, no amendment, waiver or consent shall, unless in writing and signed by the Servicer in addition to the Participants required hereinabove to take such action, affect the rights or duties of the Servicer under this Agreement or under any other Operative Document or Loan Document. In addition, notwithstanding the foregoing, the Servicer and the Sponsor may, without the consent of or notice to the Participants, enter into amendments, modifications or waivers with respect to the Servicing Agreement and the Fee Letter as long as such amendments or modifications do not conflict with the terms of this Agreement. Notwithstanding anything to the contrary herein, no Defaulting Participant shall have any right to approve or disapprove any amendment, waiver or consent hereunder, except that the Participating Commitment of such Defaulting Participant may not be increased or extended, and amounts payable to such Defaulting Participant hereunder may not be permanently reduced without the consent of such Defaulting Participant (other than reductions in fees and interest in which such reduction does not disproportionately affect such Defaulting Participant).

Section 15.3 No Waiver; Remedies Cumulative. No failure or delay on the part of the Servicer or any Participant in exercising any right or remedy hereunder or under any other Operative Document, and no course of dealing between any Credit Party and the Servicer or any Participant shall operate as a waiver thereof, nor shall any single or partial exercise of any right or remedy hereunder or under any other Operative Document preclude any other or further exercise thereof or the exercise of any other right or remedy hereunder or thereunder. The rights and remedies herein expressly provided are cumulative and not

 

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exclusive of any rights or remedies which the Servicer or any Participant would otherwise have. No notice to or demand on any Credit Party not required hereunder or under any other Operative Document in any case shall entitle any Credit Party to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Servicer or the Participants to any other or further action in any circumstances without notice or demand.

Section 15.4 Payment of Expenses, Etc. Sponsor shall:

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

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

Section 15.5 Right of Setoff. In addition to and not in limitation of all rights of offset that any Participant may have under applicable law, each Participant shall, upon the occurrence of any Credit Event and whether or not such Participant has made any demand or any Credit Party’s obligations have matured, have the right to appropriate and apply to the payment of any Credit Party’s obligations hereunder and under the other Operative Documents, all deposits of any Credit Party (general or special, time or demand, provisional or final) then or thereafter held by and other indebtedness or property then or thereafter owing by such Participant or other holder to any Credit Party, whether or not related to this Agreement or any transaction hereunder.

Section 15.6 Benefit of Agreement; Assignments; Participations.

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

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

(c) Each Participant may assign all of its interests, rights and obligations under this Agreement (including all of its Participating Commitments and the Funded Participation at the time owing to it and the Participation Certificates held by it) to any Eligible Assignee; provided, however, that (i) the Sponsor and the Servicer shall each have given its prior written consent to such assignment (which consent shall not be unreasonably withheld or delayed) unless such assignment is to an Affiliate of the assigning

 

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Participant or, in the case of the Sponsor, unless a Credit Event has occurred and is continuing hereunder, (ii) unless the Participant is assigning its entire Participating Commitment, the Participating Commitment Amount of the assigning Participant subject to each assignment (determined as of the date the assignment and acceptance with respect to such assignment is delivered to the Servicer) shall not be less than the lesser of (x) 50% of the amount of its original Participating Commitment or (y) $1,000,000, and (iii) the parties to each such assignment shall execute and deliver to the Servicer an Assignment and Acceptance, together with the Participation Certificate subject to such assignment and, unless such assignment is to an Affiliate of such Participant, a processing and recordation fee of $1,000. Within ten (10) Business Days after receipt of the notice and the Assignment and Acceptance, Servicer shall execute and deliver, in exchange for the surrendered Participation Certificate, a new Participation Certificate to the order of the assignor and such assignee in a principal amount equal to the applicable Participating Commitment Amount retained and assumed by it, respectively, pursuant to such Assignment and Acceptance. Such new Participation Certificate shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Participation Certificate, shall be dated the date of the surrendered Participation Certificate which it replaces, and shall otherwise be in substantially the form attached hereto.

(d) Each Participant may, without the consent of the Sponsor or the Servicer, sell participations to one or more banks or other entities in all or a portion of its rights and obligations under this Agreement (including all or a portion of its Participating Commitment and the Funded Participation owing to it); provided, however, that (i) no Participant may sell a participation in its Participating Commitment (after giving effect to any permitted assignment hereof) unless it retains an aggregate exposure of 25% of its original Participating Commitment Amount; provided, however, sales of participations to an Affiliate of such Participant shall not be included in such calculation; provided, however, no such maximum amount shall be applicable to any such participation sold at any time there exists an Credit Event hereunder, (ii) such Participant’s obligations under this Agreement shall remain unchanged, (iii) such Participant shall remain solely responsible to the other parties hereto for the performance of such obligations, and (iv) the participating bank or other entity shall not be entitled to the benefit (except through its selling Participant) of the cost protection provisions contained in Article II of this Agreement, and (v) Sponsor, Servicer and the other Participants shall continue to deal solely and directly with each Participant in connection with such Participant’s rights and obligations under this Agreement and the other Operative Documents, and such Participant shall retain the sole right to enforce the obligations of the Sponsor relating to the Loans and to approve any amendment, modification or waiver of any provisions of this Agreement (other than an amendment requiring approval of 100% of the Participants). Each Participant shall promptly notify in writing the Servicer and the Sponsor of any sale of a participation hereunder and shall certify to Sponsor and Servicer its compliance with the terms hereof.

(e) Any Participant or participant may, in connection with the assignment or participation or proposed assignment or participation, pursuant to this Section 15.6, disclose to the assignee or participant or proposed assignee or participant any information relating to Sponsor or the other Consolidated Companies furnished to such Participant by or on behalf of the Sponsor or any other Consolidated Company. With respect to any disclosure of confidential, non-public, proprietary information, such proposed assignee or participant shall agree to use the information only for the purpose of making any necessary credit judgments with respect to this credit facility and not to use the information in any manner prohibited by any law, including without limitation, the securities laws of the United States. The proposed participant or assignee shall agree not to disclose any of such information except (i) to directors, employees, auditors or counsel to whom it is necessary to show such information, each of whom shall be informed of and shall acknowledge the confidential nature of the information, (ii) in any statement or testimony pursuant to a subpoena or order by any court, governmental body or other agency asserting jurisdiction over such entity, or as otherwise required by law (provided prior notice is given to Sponsor and the Servicer unless otherwise prohibited by the subpoena, order or law), and (iii) upon the request or demand of any regulatory agency or authority with proper jurisdiction. The proposed participant or assignee shall further agree to return all documents or other written material and copies thereof received from any Participant, the Servicer or Sponsor relating to such confidential information unless otherwise properly disposed of by such entity.

 

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

Section 15.7 Governing Law; Submission to Jurisdiction.

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

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

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

Section 15.8 Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument.

Section 15.9 Severability. In case any provision in or obligation under this Agreement or the other Operative Documents shall be invalid, illegal or unenforceable, in whole or in part, in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.

Section 15.10 Independence of Covenants. All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or be otherwise within the limitation of, another covenant, shall not avoid the occurrence of a Unmatured Credit Event or an Credit Event if such action is taken or condition exists.

Section 15.11 No Joint Venture. Nothing in this Agreement, the Servicing Agreement or any of the Loan Documents shall be construed as constituting Sponsor and the Servicer or any Participant as partners or joint venturers or as creating the relationship of employer and employee, master and servant, principle and agent, or franchisor or franchisee between Sponsor and the Servicer or any Participant. Neither

 

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Sponsor nor Servicer or any Participant shall have any right or authority to bind the other party or to assume or create any obligation or responsibility, express or implied, on behalf of the other party or in the other party’s name. All rights, duties and obligations under this Agreement and the Operative Documents are exclusively for the benefit of the Sponsor and the Servicer and Participants, as the case may be, and shall not be deemed to affect any agreement between either of such parties and any third party (including, without limitation, any Borrower).

Section 15.12 Repurchase Right. Sponsor may at any time (upon thirty (30) days’ prior written notice to Servicer) purchase from Servicer all Loans and Loan Commitments and all rights, titles and interests of the Servicer and the Participants in and to the Loan Documents and the Collateral relating thereto for a purchase price (payable in immediately available funds) equal to the aggregate Loan Indebtedness, plus all amounts otherwise owing by the Sponsor pursuant to the Operative Documents, and the Servicer shall assign, without recourse, representation or warranty (except as to its own title), its right, title and interest therein to Sponsor upon the Servicer’s receipt of such purchase price. Thereafter, Servicers shall have no responsibility with respect to any Loans or Loan Commitments.

Section 15.13 Confidentiality. Each Participant agrees that it will maintain in confidence and will not disclose, publish or disseminate, to any Person, any confidential information which it has or shall acquire during the term of this Agreement relating to the business, operations and condition, financial or otherwise of Holdings, the Sponsor or any Borrower, except that such information may be disclosed by such Participant if and to the extent that:

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

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

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

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

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

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

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

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

 

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

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

Section 15.14 Headings Descriptive; Entire Agreement. The headings of the several sections and subsections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. This Agreement, the other Operative Documents, and the agreements and documents required to be delivered pursuant to the terms of this Agreement constitute the entire agreement among the parties hereto and thereto regarding the subject matters hereof and thereof and supersede all prior agreements, representations and understandings related to such subject matters.

Section 15.15 Patriot Act. The Servicer and each Participant hereby notifies the Sponsor and each of its Subsidiaries that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Patriot Act”), it is required to obtain, verify and record information that identifies each of the Sponsor and its Subsidiaries, which information includes the name and address of the Sponsor or such Subsidiary and other information that will allow such Participant or the Servicer, as applicable, to identify the Sponsor or such Subsidiary in accordance with the Patriot Act.

Section 15.16 Acknowledgment and Consent to Bail-In of Affected Financial Institutions. Notwithstanding anything to the contrary in any Operative Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any Affected Financial Institution arising under any Operative Document, to the extent such liability is unsecured, may be subject to the Write-Down and Conversion Powers of the applicable Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by (a) the application of any Write-Down and Conversion Powers by the applicable Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an Affected Financial Institution; and (b) the effects of any Bail-In Action on any such liability, including, if applicable: (i) a reduction in full or in part or cancellation of any such liability; (ii) a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such Affected Financial Institution, its parent undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Operative Document; or (iii) the variation of the terms of such liability in connection with the exercise of the Write-Down and Conversion Powers of the applicable Resolution Authority.

Section 15.17 Certain ERISA Matters.

(a) Each Participant (x) represents and warrants, as of the date such Person became a Participant party hereto, to, and (y) covenants, from the date such Person became a Participant party hereto to the date such Person ceases being a Participant party hereto, for the benefit of, the Servicer, the Arranger, and their respective Affiliates, and not, for the avoidance of doubt, to or for the benefit of the Sponsor or any other Credit Party, that at least one of the following is and will be true:

(i) such Participant is not using “plan assets” (within the meaning of 29 CFR § 2510.3-101, as modified by Section 3(42) of ERISA) of one or more Benefit Plans in connection with the Loans or the Loan Commitments;

 

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(ii) the transaction exemption set forth in one or more PTEs, such as PTE 84-14 (a class exemption for certain transactions determined by independent qualified professional asset managers), PTE 95-60 (a class exemption for certain transactions involving insurance company general accounts), PTE 90-1 (a class exemption for certain transactions involving insurance company pooled separate accounts), PTE 91-38 (a class exemption for certain transactions involving bank collective investment funds) or PTE 96-23 (a class exemption for certain transactions determined by in-house asset managers), is applicable with respect to such Participant’s entrance into, participation in, administration of and performance of the Loans, the Loan Commitments and this Agreement;

(iii) (A) such Participant is an investment fund managed by a “Qualified Professional Asset Manager” (within the meaning of Part VI of PTE 84-14), (B) such Qualified Professional Asset Manager made the investment decision on behalf of such Participant to enter into, participate in, administer and perform the Loans, the Loan Commitments and this Agreement, (C) the entrance into, participation in, administration of and performance of the Loans, the Loan Commitments and this Agreement satisfies the requirements of sub-sections (b) through (g) of Part I of PTE 84-14 and (D) to the best knowledge of such Participant, the requirements of subsection (a) of Part I of PTE 84-14 are satisfied with respect to such Participant’s entrance into, participation in, administration of and performance of the Loans, the Loan Commitments and this Agreement; or

(iv) such other representation, warranty and covenant as may be agreed in writing between the Servicer, in its sole discretion, and such Participant.

(b) In addition, unless sub-clause (i) in the immediately preceding clause (a) is true with respect to a Participant or such Participant has not provided another representation, warranty and covenant as provided in sub-clause (iv) in the immediately preceding clause (a), such Participant further (x) represents and warrants, as of the date such Person became a Participant party hereto, to, and (y) covenants, from the date such Person became a Participant party hereto to the date such Person ceases being a Participant party hereto, for the benefit of, the Servicer, the Arranger, and their respective Affiliates, and not, for the avoidance of doubt, to or for the benefit of the Sponsor or any other Credit Party, that:

(i) none of the Servicer, the Arranger, or any of their respective Affiliates is a fiduciary with respect to the assets of such Participant (including in connection with the reservation or exercise of any rights by the Servicer under this Agreement, any Loan Document or any documents related to hereto or thereto);

(ii) the Person making the investment decision on behalf of such Participant with respect to the entrance into, participation in, administration of and performance of the Loans, the Loan Commitments and this Agreement is independent (within the meaning of 29 CFR § 2510.3-21) and is a bank, an insurance carrier, an investment adviser, a broker-dealer or other person that holds, or has under management or control, total assets of at least $50,000,000, in each case as described in 29 CFR § 2510.3-21(c)(1)(i)(A)-(E);

(iii) the Person making the investment decision on behalf of such Participant with respect to the entrance into, participation in, administration of and performance of the Loans, the Loan Commitments and this Agreement is capable of evaluating investment risks independently, both in general and with regard to particular transactions and investment strategies (including in respect of the Guaranteed Obligations);

 

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(iv) the Person making the investment decision on behalf of such Participant with respect to the entrance into, participation in, administration of and performance of the Loans, the Loan Commitments and this Agreement is a fiduciary under ERISA or the Code, or both, with respect to the Loans, the Loan Commitments and this Agreement and is responsible for exercising independent judgment in evaluating the transactions hereunder; and

(v) no fee or other compensation is being paid directly to the Servicer, the Arranger or any their respective Affiliates for investment advice (as opposed to other services) in connection with the Loans, the Loan Commitments or this Agreement.

The representations set forth in this Section 15.17(b)(ii)-(v) are intended to comply with the Department of Labor’s regulation Sections 29 C.F.R. 2510.3-21(a) and (c)(1) as promulgated on April 8, 2016 (81 Fed. Reg. 20,997), and if such regulations are no longer in effect, these representations shall be deemed to be no longer in effect.

(c) The Servicer and the Arranger hereby inform the Participants that each such Person is not undertaking to provide impartial investment advice, or to give advice in a fiduciary capacity, in connection with the transactions contemplated hereby, and that such Person has a financial interest in the transactions contemplated hereby in that such Person or an Affiliate thereof (i) may receive interest or other payments with respect to the Loans, the Loan Commitments and this Agreement, (ii) may recognize a gain if it extended the Loans or the Loan Commitments for an amount less than the amount being paid for an interest in the Loans or the Loan Commitments by such Participant or (iii) may receive fees or other payments in connection with the transactions contemplated hereby, the Loan Documents or otherwise, including structuring fees, commitment fees, arrangement fees, facility fees, upfront fees, underwriting fees, ticking fees, utilization fees, minimum usage fees, deal-away or alternate transaction fees, amendment fees, processing fees, term out premiums, breakage or other early termination fees or fees similar to the foregoing.

Section 15.18 Acknowledgement Regarding any Supported QFCs. To the extent that the Operative Documents provide support, through a guarantee or otherwise, for any Hedging Transaction or any other agreement or instrument that is a QFC (such support, “QFC Credit Support” and each such QFC, a “Supported QFC”), the parties acknowledge and agree as follows with respect to the resolution power of the Federal Deposit Insurance Corporation under the Federal Deposit Insurance Act and Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (together with the regulations promulgated thereunder, the “U.S. Special Resolution Regimes”) in respect of such Supported QFC and QFC Credit Support (with the provisions below applicable notwithstanding that the Operative Documents and any Supported QFC may in fact be stated to be governed by the laws of the State of Georgia and/or of the United States or any other state of the United States):

(a) In the event a Covered Entity that is party to a Supported QFC (each, a “Covered Party”) becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer of such Supported QFC and the benefit of such QFC Credit Support (and any interest and obligation in or under such Supported QFC and such QFC Credit Support, and any rights in property securing such Supported QFC or such QFC Credit Support) from such Covered Party will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if the Supported QFC and such QFC Credit Support (and any such interest, obligation and rights in property) were governed by the laws of the United States or a state of the United States. In the event a Covered Party or a BHC Act Affiliate of a Covered Party becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under the Operative Documents that might otherwise apply to such Supported QFC or any QFC Credit Support that may be exercised against such Covered Party are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if the Supported QFC and the Operative Documents were governed by the laws of the United States or a state of the United States. Without limitation of the foregoing, it is understood and agreed that rights and remedies of the parties with respect to a Defaulting Participant shall in no event affect the rights of any Covered Party with respect to a Supported QFC or any QFC Credit Support.

 

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(b) As used in this Section 15.18, the following terms have the following meanings:

BHC Act Affiliate” of a party means an “affiliate” (as such term is defined under, and interpreted in accordance with, 12 U.S.C. 1841(k)) of such party.

Covered Entity” shall mean any of the following:

(i) a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. §252.82(b);

(ii) a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. §47.3(b); or

(iii) a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. §382.2(b).

Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§252.81, 47.2 or 382.1, as applicable.

QFC” has the meaning assigned to the term “qualified financial contract” in, and shall be interpreted in accordance with, 12 U.S.C. 5390(c)(8)(D).

[Signatures Set Forth on Next Page]

 

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

 

Address for Notices:     AARON’S, LLC
Aaron’s, LLC    
400 Galleria Parkway SE, Suite 300     By:  

/s/ C. Kelly Wall

Atlanta, GA 30339     Name: C. Kelly Wall
Attn: Chief Financial Officer     Chief Financial Officer
Telecopy Number: (855) 778-8565    
Address for Notices:     THE AARON’S COMPANY, INC.
The Aaron’s Company, Inc.    
400 Galleria Parkway SE, Suite 300     By:  

/s/ C. Kelly Wall

Atlanta, GA 30339     Name: C. Kelly Wall
Attn: Chief Financial Officer     Chief Financial Officer
Telecopy Number: (855) 778-8565    

 

 

LOAN FACILITY AGREEMENT AND GUARANTY    AARON’S LLC


Address for Notices:     TRUIST BANK, as individually and as Servicer
303 Peachtree Street NE, 3rd Floor    
Atlanta, Georgia 30308     By:  

/s/ Tesha Winslow

Attention: Aaron’s Program Manager     Name: Tesha Winslow
Telecopy No. (404) 724-3716     Title: Director
with a copy to:    
303 Peachtree Street NE, 3rd Floor    
Atlanta, Georgia 30308    
Attention: Don Besch    

 

 

   AARON’S LLC
   LOAN FACILITY AGREEMENT AND GUARANTY


Address for Notices:     BANK OF AMERICA, N.A.
    By:  

/s/ Ryan Maples

      Name: Ryan Maples
      Title:   Sr. Vice President

 

   AARON’S LLC
   LOAN FACILITY AGREEMENT AND GUARANTY


Address for Notices:     JPMORGAN CHASE BANK, N.A.
    By:  

/s/ Alexander Vardaman

      Name: Alexander Vardaman
      Title:   Authorized Officer

 

   AARON’S LLC
   LOAN FACILITY AGREEMENT AND GUARANTY


Schedule 1.1(a)

PRICING GRID

 

Level    Total Net Debt to EBITDA Ratio   

Applicable

Margin

     Applicable
Percentage
 
I    < 0.75:1.00      1.50      0.20
II    ³ 0.75:1.00 but < 1.25:1.00      1.75      0.25
III    ³ 1.25:1.00 but < 1.75:1.00      2.00      0.30
IV    ³ 1.75:1.00 but < 2.25:1.00      2.25      0.35
V    ³ 2.25:1.00      2.50      0.35


EXHIBIT A

TO

LOAN FACILITY AGREEMENT

AND GUARANTY

FORM OF

ASSIGNMENT AND ACCEPTANCE

[date to be supplied]

Reference is made to the Loan Facility Agreement and Guaranty dated as of November 17, 2020 (as amended and in effect on the date hereof, the “Loan Facility Agreement”), among Aaron’s, LLC, a Georgia limited liability company (“Sponsor”), Holdings, the Participants from time to time party thereto and Truist Bank, (“Servicer”). Terms defined in the Loan Facility Agreement are used herein with the same meanings.

The Assignor hereby sells and assigns, without recourse, to the Assignee designated below, and the Assignee hereby purchases and assumes, without recourse, from the Assignor, effective as of the Assignment Date set forth below, the interests set forth below (the “Assigned Interest”) in the Assignor’s rights and obligations under the Loan Facility Agreement, including, without limitation, the interests set forth below in the Funded Participation of the Assignor on the Assignment Date, and the Participating Commitment of the Assignor on the Assignment Date. The Assignee hereby acknowledges receipt of a copy of the Loan Facility Agreement. From and after the Assignment Date (i) the Assignee shall be a party to and be bound by the provisions of the Loan Facility Agreement and, to the extent of the Assigned Interest, have the rights and obligations of a Participant thereunder and (ii) the Assignor shall, to the extent of the Assigned Interest, relinquish its rights and be released from its obligations under the Loan Facility Agreement.

This Assignment and Acceptance is being delivered to the Servicer together with, the Participation Certificate subject to this Assignment and Acceptance and, unless this assignment is to an Affiliate of the Assignor, the Assignee shall pay the fee payable to the Servicer pursuant to Section 15.6(c) of the Loan Facility Agreement.

The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Acceptance and to consummate the transactions contemplated hereby, and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Loan Facility Agreement or any other Operative Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Operative Documents or any collateral thereunder, (iii) the financial condition of the Sponsor, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Operative Document or (iv) the performance or observance by the Sponsor, any of its Subsidiaries or Affiliates or any other Person of any of their respective obligations under any Operative Document.

The Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Acceptance and to consummate the transactions contemplated hereby and to become a Participant under the Loan Facility Agreement, (ii) it meets all requirements of an Eligible Assignee under the Loan Facility Agreement (subject to receipt of such consents as may be required under the Loan Facility Agreement), (iii) from and after the Effective Date, it shall be bound by the provisions of the Loan Facility Agreement as a Participant thereunder and,


to the extent of the Assigned Interest, shall have the obligations of a Participant thereunder, and (iv) it has received a copy of the Loan Facility Agreement, together with copies of the most recent financial statements delivered pursuant to Section 6.1 thereof, as applicable, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance and to purchase the Assigned Interest on the basis of which it has made such analysis and decision independently and without reliance on the Servicer or any other Participant, and (b) agrees that (i) it will, independently and without reliance on the Servicer, the Assignor or any other Participant, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Operative Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Operative Documents are required to be performed by it as a Participant.

Choose in the alternative [Alternative A: From and after the Effective Date, the Servicer shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor for amounts which have accrued to but excluding the Effective Date and to the Assignee for amounts which have accrued from and after the Effective Date.] [Alternative B: From and after the Effective Date, the Servicer shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignee whether such amounts have accrued prior to, on or after the Effective Date. The Assignor and the Assignee shall make all appropriate adjustments in payments by the Servicer for periods prior to the Effective Date or with respect to the making of this assignment directly between themselves.]

This Assignment and Acceptance shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Acceptance may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Acceptance by telecopy shall be effective as delivery of a manually executed counterpart of this Assignment and Acceptance. This Assignment and Acceptance shall be governed by and construed in accordance with the laws of the State of Georgia.

Date of Assignment:

Legal Name of Assignor:

Legal Name of Assignee:

Assignee’s Address for Notices:

Effective Date of Assignment:

(“Assignment Date”):

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

 

[NAME OF ASSIGNOR]      [NAME OF ASSIGNEE]
By:  

         

     By:  

         

  Name:                         Name:
  Title:        Title:

 

3


Assignee’s Share of
Participating Commitment:
$                                                     
Assignee’s Share of
Funded Participation:
$                                                     
Address:
Tel. No:
Fax No:

The undersigned hereby consents to the within assignment:

 

Aaron’s, LLC, as Sponsor      Truist Bank, as Servicer
By:  

         

     By:  

         

  Name:                         Name:
  Title:        Title:

 

4


EXHIBIT B

TO

LOAN FACILITY AGREEMENT

AND GUARANTY

FORM OF CANADIAN LOAN AGREEMENT

THIS LOAN AGREEMENT (this “Agreement”) dated as of _______________, is made between _________________ (“Borrower”), a ______________________________ [incorporated]/[formed]under the laws of     , and TRUIST BANK (“Bank”), a North Carolina banking corporation having its principal office in Charlotte, North Carolina.

W I T N E S S E T H:

WHEREAS, Borrower engages in the business of leasing and selling furniture, electronics, appliances, and other household goods and is a franchisee of Aaron’s, LLC, a Georgia limited liability company formerly known as Aaron’s, Inc. (“Aaron’s”);

WHEREAS, Borrower has requested and Bank has agreed to provide financing to Borrower;

WHEREAS, Borrower and Bank wish to enter into this Agreement to set forth the terms and conditions of Bank’s establishment of a credit facility for Borrower;

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

1. DEFINITIONS AND RULES OF CONSTRUCTION.

1.1 As used in this Agreement, the following terms shall have the meanings set forth below (terms defined in the singular to have the same meaning when used in the plural and vice versa):

Aaron’s Proprietary System” means Aaron’s proprietary point of sale software system, as modified from time to time, used by Aaron’s and its franchisees, such as Borrower.

Account” means any right of Borrower to payment for goods sold or leased or for services rendered which is not evidenced by an Instrument or Chattel Paper, whether or not earned by performance.

Account Debtor” means any Person who is liable on an Account.

Advance” means an advance of funds by Bank on behalf of Borrower pursuant to the Line of Credit Note executed by Borrower.

Agreement” means this Loan Agreement and all exhibits, riders and schedules at any time executed by the parties and made a part hereof by reference, either as originally executed or as hereafter amended, restated, modified or supplemented from time to time.


Anti-Corruption Laws” shall mean all laws, rules, and regulations of any jurisdiction applicable to Borrower and its Subsidiaries from time to time concerning or relating to bribery or corruption.

Applicable Law” means all laws, rules and regulations applicable to the Person, conduct, transaction, covenant or Loan Documents in question, including, without limitation, all applicable law and equitable principles; all provisions of all applicable state, provincial, territorial and federal constitutions, statutes, rules, regulations and orders of governmental bodies; and all orders, judgments and decrees of all courts and arbitrators.

Approved Invoice” means an invoice for the aggregate purchase price of Merchandise purchased by Borrower with a purchase order approved by Aaron’s.

Asset Disposition” means (i) all sales of Merchandise; (ii) all Merchandise which is determined to have been stolen; (iii) all Merchandise that is destroyed, lost or otherwise removed from the premises of Borrower other than pursuant to a Lease Contract or by outright sale or for repair work; and (iv) all “skipped” Merchandise which is Merchandise subject to a Lease Contract.

Asset Disposition Prepayment” shall have the meaning set forth in Section 2.10(b) hereof.

Bank” means Truist Bank and its successors and assigns.

BIA” means the Bankruptcy and Insolvency Act (Canada), as it may be amended from time to time.

Books and Records” means all of Borrower’s books and records evidencing or relating to its business, financial condition or the Collateral, including, but not limited to, all customer lists, ledgers, invoices, purchase orders, financial statements, computer tapes and disks.

Business Day” means any day other than a Saturday, Sunday or a day on which commercial banks in Toronto, Ontario are authorized by law to close.

Business PAD” shall have the meaning set forth in the Pre-Authorized Debt Rules.

CCAA” means the Companies Creditors Arrangement Act (Canada), as it may be amended from time to time.

Chattel Paper” shall have the meaning ascribed to it in the PPSA.

Closing Date” means for (i) the Term Loan, the date set forth in the Term Note on which all Loan Documents have been executed and delivered and the conditions precedent to funding the loan have been satisfied, and (ii) the Line of Credit Commitment, the date set forth in the Line of Credit Note on which all Loan Documents have been executed and delivered and the conditions precedent to funding the loan have been satisfied.

Closing Fee” shall have the meaning given to such term in Section 2.11 hereof.

Collateral” shall have the meaning given to such term in the Security Agreement.

Collateral Agreement” means an agreement executed by Borrower and any other Persons primarily or secondarily liable for all or part of the Loans or granting a security interest to Bank in specified Collateral as security for the Loans, including without limitation, this Agreement and any Guaranties.

 

2


Commitment Fee” shall have the meaning set forth in Section 2.12 hereof.

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

Debt Service” means, for any particular period, the total required payments of principal (excluding any payments of principal required to be made as a result of any Asset Disposition), interest and fees made by Borrower with respect to its Debt (other than Debt of Borrower which is subordinated to the Loan Indebtedness owing to Bank pursuant to a subordination agreement in form and substance satisfactory to Bank) during such period to the extent that such Debt arises pursuant to this Agreement or any other financing arrangement with respect to Merchandise.

Default Condition” means the occurrence of any event which, after satisfaction of any requirement for the giving of notice or the lapse of time, or both, would become an Event of Default.

Default Rate” means the annual percentage interest rate applied to the principal of the Loans not paid when due under the terms of the applicable Loan Documents, which rate shall equal the sum of two percent (2%) per annum plus the Floating Rate.

Delinquent Payment Fee” shall have the meaning set forth in Section 2.13 hereof.

Environment” means the component of the Earth, and includes (i) land, water and air, including all layers of the atmosphere; (ii) all organic and inorganic matter and living organisms; and (iii) the interacting natural systems that include components referred to in paragraphs (i) and (ii).

Environmental Laws” means federal, provincial, local and foreign laws, principles of common law, regulations and codes, as well as orders, decrees, judgments or injunctions issued, promulgated, approved or entered thereunder relating to pollution, protection and presentation of the environment or occupational health and safety, including, but not limited to the release or threatened release of Hazardous Substances into the Environment or otherwise relating to the presence, manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Substances.

Equipment” means all machinery, equipment, furniture, fixtures, motor vehicles and other tangible personal property (other than Inventory) of Borrower, including, but not limited to, all items described on the Equipment Schedule (if attached) and all substitutions and replacements thereof.

Event of Default” shall have the meaning set forth in Section 9 hereof.

FCTA” means Borrower’s Foreign Currency Transaction Account held with Bank into which Bank shall deposit the Advances for the purpose of paying, by means of SWIFT transfer, Approved Invoices arising from purchases of Merchandise from a supplier, including any freight charges to the extent Aaron’s consents thereto.

 

3


Floating Rate” means a rate of interest per annum equal to the Prime Rate plus an additional [four and three-quarters] percent ([4.75%]1) per annum, such rate to change as and when the Prime Rate changes.

Franchise Agreement” means the written agreement between Aaron’s and Borrower whereby Borrower is authorized to establish an “Aaron’s” franchise.

GAAP” means generally accepted accounting principles in Canada, consistently applied.

Guarantor” means each Person who now or hereafter guarantees payment of the whole or any part of the Loan Indebtedness.

Guaranty” means any guaranty agreement executed by each of the partners, shareholders, and where not prohibited by law, the spouses of such persons, of Borrower, or such other Persons as may be required by Bank, in favor of Bank with respect to the obligations of Borrower with respect to the Loans in the form provided by Bank, as the same may be amended, restated or supplemented from time to time.

Hazardous Substances” means any waste, pollutant, hazardous substance, toxic substance, hazardous waste, special waste, industrial substance or waste, petroleum or petroleum-derived substance or waste, or any constituent of any such substance or waste, including without limitation, any such substance regulated under or defined by any Environmental Law.

Instrument” shall have the meaning ascribed to it in the PPSA.

Inventory” means all inventory of Borrower, including, without limitation, all raw materials, work in process, finished goods, goods being leased pursuant to Lease Contracts, and other goods held by Borrower for sale or lease or furnished under contracts of service.

Lease Contract” means a contract between Borrower and a customer to lease Merchandise in the form approved by Aaron’s (and which may include purchase options).

Lien” means any interest in property securing an obligation, whether such interest is based on the common law, statute or contract, including, without limitation, a security interest, lien or security title arising from a security agreement, mortgage, security deed, trust deed, pledge, hypothec or conditional sale, or a lease, consignment or bailment for security purposes.

Line of Credit Commitment” means the committed line of credit facility established by Bank in favor of Borrower in the amount set forth in the Line of Credit Note and upon the terms described in this Agreement.

Line of Credit Loan” means a loan or an advance made by Bank to Borrower under its Line of Credit Commitment.

Line of Credit Note” means a note executed by Borrower in favor of Bank, substantially in the form of Exhibit A-1 attached hereto in the committed principal amount of Bank’s Line of Credit Commitment evidencing the obligation of Borrower to repay its Line of Credit Loans.

Loan Account” means the internal bank loan account established by Bank for Borrower.

 

1 

Note: This interest rate shall be as designated by Aaron’s in the applicable loan Funding Approval Notice.

 

4


Loan Documents” means this Agreement, the Notes, the Collateral Agreements, any other documents relating to the Loans delivered by Borrower or any guarantor or surety thereof to Bank and any amendments thereto.

Loan Indebtedness” means all amounts due and payable by Borrower under the terms of the Loan Documents with respect to the Loans made thereunder, including, without limitation, outstanding principal, accrued interest, any late charges, and all reasonable costs and expenses of any legal proceeding brought by Bank to collect any of the foregoing (including without limitation, reasonable legal or attorneys’ fees).

Loans” means the Line of Credit Loans or Term Loan.

Loan Term” shall have the meaning set forth in Section 2.6(i) hereof.

Material Adverse Effect” means any materially adverse change in (i) the business, results of operations, financial condition, assets or prospects of Borrower, taken as a whole, (ii) the ability of Borrower to perform its obligations under this Agreement, or (iii) the ability of the Guarantors (taken as a whole) to perform their respective obligations under the Guaranty.

Maturity Date” means for (i) the Term Loan, the date set forth in the Term Note and (ii) the Line of Credit Commitment, the date set forth in the Line of Credit Note.

Merchandise” means goods distributed or sold to Borrower through Aaron’s.

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

Note” means the Line of Credit Note or the Term Note, as the case may be.

OFAC” shall mean the U.S. Department of the Treasury’s Office of Foreign Assets Control.

Opening Date” means with respect to each store location, the date determined by Aaron’s to be the opening date of such location in accordance with its standard practice, as notified to Bank.

PAD Authorization” means a pre-authorized debit authorization executed by Borrower authorizing Bank to cause a specified account of Borrower to be debited to pay amounts payable hereunder, such authorization to be in the form attached hereto as Exhibit F or such other form as Bank may require from time to time.

Payment Date” means the last day of each calendar month; provided, however, if such day is not a Business Day, the next succeeding Business Day which is also a US Business Day.

Permitted Liens” means Liens in favor of Bank or Aaron’s; Liens for taxes not yet due or payable; statutory Liens securing the claims of materialmen, mechanics, carriers and landlords for labor, materials, supplies or leases incurred in the ordinary course of Borrower’s business, but only if payment thereof is not at the time required and such Liens are at all times junior in priority to the Liens in favor of Bank; Liens shown on Exhibit B attached hereto (if any); and Liens hereafter consented to by Bank in writing.

 

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Person” means a corporation, an association, partnership, an organization, a business, a business trust, a limited liability company, an individual, a government or political subdivision thereof or a governmental agency.

Personal PAD” shall have the meaning set forth in the Pre-Authorized Debit Rules.

PPSA” means the Personal Property Security Act as in effect from time to time in the Province of Ontario.

Pre-Authorized Debit Rules” means Rule H-1 of the Canadian Payments Association, as the same may be amended, modified, supplemented, restated, re-enacted or replaced from time to time.

Prime Rate” means, on any date of determination, the higher of (a) the reference rate of interest, expressed as an annual rate, publicly announced or posted from time to time by Bloomberg on page BTMM for Canadian Money Market rates or (b) the average one month Bankers’ Acceptance rate quoted on Reuters Service, page CDOR, as at approximately 10:00 a.m. (Toronto, Ontario time) on such day plus 1% per annum.

Quarterly Covenant Compliance Report” means that Quarterly Covenant Compliance Report substantially in the form of Exhibit D attached hereto.

Rental Revenue” means, for any period, the gross revenues of Borrower from leases to the public of Borrower’s furniture inventory, computers, electronics, appliances and lease equipment including, without limitation, all customer deposits, advance lease payments, waiver fees, late fees, delivery fees, nonsufficient fund fees and reinstatement fees, but excluding all retail sales proceeds, goods and services tax, harmonized sales tax or provincial sales taxes.

Sanctioned Country” shall mean, at any time, a country or territory that is, or whose government is, the subject or target of any Sanctions.

Sanctioned Person” shall mean, at any time, (i) any Person listed in any Sanctions-related list of designated Persons maintained by OFAC, the U.S. Department of State, the United Nations Security Council, the European Union or any EU member state, (ii) any Person located, organized or resident in a Sanctioned Country or (iii) any Person controlled by any such Person.

Sanctions” shall mean economic or financial sanctions or trade embargoes administered or enforced from time to time by (i) the U.S. government, including those administered by OFAC or the U.S. Department of State or (ii) the United Nations Security Council, the European Union or Her Majesty’s Treasury of the United Kingdom.

Security Agreement” means a security agreement made by Borrower in favour of Bank substantially in the form attached hereto as Exhibit E attached hereto.

Set Interval” shall have the meaning set forth in the Pre-Authorized Debit Rules.

Solvent” means, as to any Person, such Person (i) is able to pay, and does pay, its debts as they mature and (ii) has a positive tangible net worth determined in accordance with GAAP.

Sporadic” shall have the meaning set forth in the Pre-Authorized Debit Rules.

 

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

Subsidiary” means any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by Borrower.

SWIFT” means Society for Worldwide Interbank Financial Telecommunication.

Term Loan” means a single loan made by Bank to Borrower in an amount not to exceed the Term Loan Commitment.

Term Loan Commitment” means the obligation of Bank to make a Term Loan in favor of Borrower in the amount set forth in the Term Note and upon the terms described in this Agreement.

Term Note” means a note executed by Borrower in favor of Bank, substantially in the form of Exhibit A-2 attached hereto in the committed principal amount of Bank’s Term Loan Commitment evidencing the obligation of Borrower to repay its Term Loan.

US Business Day” means any day other than a Saturday, Sunday or a day on which commercial banks in Charlotte, North Carolina are authorized by law to close.

1.2 Accounting Terms and Determination. Accounting terms used in this Agreement such as “amortization,” “depreciation,” “interest expense,” and “tangible net worth” shall have the meaning normally given them by, and shall be calculated (both as to amounts and classification of items) in accordance with, GAAP. Any pronoun used herein shall be deemed to cover all genders. All references to statutes and related regulations shall include any amendments of same and any successor statutes and regulations, and all references to any instruments or agreements, including, without limitation, references to any of the Loan Documents, shall include any and all modifications or amendments thereto and any and all extensions or renewals thereof.

1.3 Interest Calculation and Payments. Unless otherwise stated, wherever in this Agreement reference is made to a rate of interest “per annum” or a similar expression is used, such interest will be calculated on the basis of a calendar year of 360 days, as the case may be, and using the nominal rate method of calculation and not the effective rate method of calculation or on any other basis that gives effect to the principle of deemed reinvestment of interest. Interest will continue to accrue after maturity and default and/or judgment, if any, until payment thereof, and interest will accrue on overdue interest, if any.

1.4 Interest Act (Canada). For the purposes of this Agreement, whenever interest to be paid hereunder is to be calculated on the basis of 360 days or any other period of time that is less than a calendar year, the yearly rate of interest to which the rate determined pursuant to such calculation is equivalent is the rate so determined multiplied by the actual number of days in the calendar year in which the same is to be ascertained and divided by 360 or such other number of days in such period, as the case may be.

1.5 Currency. All references herein to currency or to $ are to lawful currency of Canada.

 

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2. LOAN; USE OF PROCEEDS.

2.1 Establishment of FCTA; Loan Account.

(i) Prior to the Closing Date, Bank shall (unless the Borrower has only a Term Loan) establish a FCTA for Borrower.

(ii) Prior to the Closing Date, Bank shall also establish on its books an internal loan account in Borrower’s name (the “Loan Account”) in which Bank shall record, in accordance with customary accounting practice, all charges, expenses and other items properly chargeable to Borrower; all payments made by Borrower on account of indebtedness evidenced by the Loan Account; all proceeds of Collateral which are finally paid to Bank at its office in cash or solvent credits; and other appropriate debits and credits. The debit balance of the Loan Account shall reflect the amount of Borrower’s Loan Indebtedness from time to time by reason of the Loans and other appropriate charges hereunder. At least once each month, Bank shall render a statement of account for the Loan Account, which statement shall be considered correct, and accepted by and conclusively binding upon Borrower, unless Borrower notifies Bank to the contrary within thirty (30) days after Bank’s sending of said statement to Borrower.

2.2 Establishment of Line of Credit Loan. Any Line of Credit Commitment now or hereafter committed to by Bank pursuant to which Borrower shall execute and deliver to Bank a Line of Credit Note shall be governed by and issued pursuant to the provisions, terms and conditions set forth herein.

2.3 Line of Credit Advances.

(i) Upon Borrower’s execution of this Agreement and a Line of Credit Note and compliance with the terms of this Agreement, and subject to Bank’s confirmation if requested by Aaron’s that Bank has a first priority security interest in the Collateral, Bank shall notify Borrower that Borrower may request Advances pursuant to the Line of Credit Commitment. Bank shall make such Advances into the FCTA for the sole purposes of (x) honoring requests from Borrower, made through Aaron’s by fax, email or other electronic form of notification to Aaron’s by 12:00 noon (Charlotte, North Carolina time) on the last Business Day immediately prior to the 10th or the 25th day of each month, for SWIFT transfers to suppliers of Merchandise in payment of Approved Invoices and, to the extent permitted by Aaron’s, to pay sales and use taxes and freight charges, for working capital and for other purposes to the extent approved by Aaron’s.

Each Advance shall be made by Servicer for the sole purposes of (i) honoring requests from any US Borrower, made through the Aaron’s Proprietary System, for ACH transfers to suppliers of Merchandise in payment of Approved Invoices, (ii) honoring requests from any US Borrower for Advances made via ACH transfers to an operating account or other location specified by such Borrower (and granted a vendor identification number by Aaron’s) and, to the extent permitted by Aaron’s, for working capital and for other purposes to the extent approved by Aaron’s or (iii) honoring requests from any Canadian Borrower, made through Aaron’s by fax, email or other electronic forms of notification to the Servicer. The maximum principal amount of Advances under the Line of Credit Commitment at any time outstanding shall not exceed the committed amount of the Line of Credit Commitment. Each Advance shall be in the amount of not less than $500.

(ii) Borrower shall submit purchase order requests for Merchandise to Aaron’s from time to time. In the event that the purchase order is authorized pursuant to the Franchise Agreement, Aaron’s will prepare the purchase order and submit the same to the appropriate supplier requested by Borrower. The supplier will be instructed to ship all Merchandise directly to Borrower and Borrower will be responsible for (a) inspecting all Merchandise and resolving all disputes regarding the Merchandise with

 

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such supplier and (b) paying all freight and other shipping and/or insurance charges arising in connection therewith with funds other than the proceeds of Loans, unless otherwise agreed by Aaron’s. The supplier will invoice Borrower for such Merchandise in accordance with normal industry practice. When Borrower wishes to pay such invoice, Borrower, subject to availability of the Line of Credit Commitment and the minimum borrowing threshold, shall pay such invoice by requesting, by way of fax, email or other electronic form of notification by 12:00 noon (Charlotte, North Carolina time) on the last Business Day immediately prior to the 10th or the 25th day of each month, that Aaron’s direct Bank to pay such invoice by initiating a SWIFT transfer from Borrower’s FCTA to the applicable vendor and Bank shall be entitled to rely on such request from Aaron’s as if it had been made directly by the Borrower. Any directions for SWIFT transfers transmitted by Aaron’s to Bank prior to 12:00 noon (Charlotte, North Carolina time) on the Business Day immediately preceding the 10th or the 25th day of a month, shall be paid by Bank no later than the next Business Day thereafter, unless Borrower is otherwise notified by Aaron’s or Bank.

(iii) Upon receipt of the request for an SWIFT transfer (provided, however, that such request relates to an Approved Invoice), Bank shall honor such request by making an Advance pursuant to the Line of Credit Commitment in the amount of such request into Borrower’s FCTA and forwarding such amount to the supplier by means of a SWIFT transfer in accordance with the instructions of Borrower. Upon receipt of any request to deposit funds into an account in the name of Borrower and receipt of Aaron’s approval thereof, Bank shall honor such request by making an Advance pursuant to the Line of Credit Commitment in the amount of such request into Borrower’s FCTA and automatically forwarding such amount to such account of Borrower by means of an SWIFT transfer in accordance with the instructions of Borrower. In the event that a request for a SWIFT transfer is presented for payment and Borrower’s availability pursuant to the Line of Credit Commitment is insufficient to honor such request, Bank may, but shall have no obligation to, make such overadvance, which shall be an Advance for all purposes hereunder, but shall be due and payable upon demand. At the end of each calendar month, Bank shall provide Borrower with a monthly FCTA statement in the form customarily used by Bank for its commercial customers and a loan account statement.

(iv) The aggregate amount of Advances made to Borrower during such month shall be amortized into twenty-four (24) equal payments of principal due and payable on the next succeeding Payment Dates; provided, however, that, in the event that Bank terminates the Line of Credit Commitment as provided in Section 2.6 below, all outstanding amounts shall be due and payable on the 24th Payment Date following such termination.

2.4 Term Loan. Any Term Loan Commitment now or hereafter committed to by Bank pursuant to which Borrower shall execute and deliver to Bank a Term Note shall be governed by and issued pursuant to the provisions, terms and conditions set forth herein. Upon Borrower’s execution of this Agreement and a Term Note and compliance with the terms of this Agreement and subject to Bank’s confirmation if requested by Aaron’s that Bank has a first priority security interest in the Collateral, Bank may make a Term Loan to Borrower in a principal amount not to exceed the Term Loan Commitment; provided, however, that if for any reason the full amount of Bank’s Term Loan Commitment is not fully drawn on the Closing Date, the undrawn portion thereof shall automatically be cancelled.

2.5 Repayment.

(i) Line of Credit Loans. Payments of principal for Line of Credit Loans shall be due and payable by Borrower to Bank on each Payment Date and subject to the provisions of Section 2.6 below, on the Maturity Date for the Line of Credit Commitment, unless sooner accelerated in accordance with the terms hereof.

 

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(ii) Term Loans. Payments of principal for Term Loans shall be due and payable by Borrower to Bank in installments payable on the dates set forth in the Term Note, provided, however, that, to the extent not previously paid, the aggregate unpaid principal balance of the Term Loans shall be due and payable on the Maturity Date for the Term Loan.

(iii) Except as provided below, all payments of principal of, or interest on, the Loans (including Asset Disposition Prepayments) and all other sums due under the terms of the Loan Documents at Set Intervals shall be made by way of pre-authorized debit from an account at a financial institution in Canada specified by Borrower. All voluntary prepayments of the Loan shall be made to Bank at the Lender’s Account by way of SWIFT transfer of immediately available funds or by pre-authorized debit from an account at a financial institution in Canada specified by Borrower.

2.6 Loan Term; Voluntary Termination.

(i) The original term of the Line of Credit Commitment shall be for a period of 364 days from the Closing Date (the “Loan Term”). Thereafter, the Loan Term shall automatically be extended on each anniversary of the Closing Date for an additional 364 day period unless either party terminates the Line of Credit Commitment as set forth hereunder. Upon ninety (90) days prior written notice to Borrower, Bank may, at its option, terminate the Line of Credit Commitment. Upon written notice to Bank, Borrower may, at its option, terminate the Line of Credit Commitment. Bank may also terminate the Line of Credit Commitment pursuant to Section 10 hereof. Upon the effective date of a termination of the Line of Credit Commitment effected by Borrower, the principal of and all accrued but unpaid interest on the Loan Indebtedness in respect of the Line of Credit Loans shall be forthwith due and payable, but all of the duties and covenants of Borrower hereunder, and all rights, remedies and privileges of Bank under this Agreement and Bank’s security interest in the Collateral, shall continue in full force and effect until all of the Loan Indebtedness in respect of the Line of Credit Loans is fully and finally paid. In the event Bank elects to terminate, (a) Bank shall continue to make Advances until the effective date of the termination and (b) Advances outstanding at the effective date of the termination shall be repaid according to the twenty-four (24) month amortization schedule provided above, provided, however, that, notwithstanding the foregoing all outstanding Loan Indebtedness in respect of the Line of Credit Loans shall be due and payable in full on the 24th Payment Date following termination of the Line of Credit Commitment by Bank. Nothing set forth in this Section 2.6(i) shall be deemed to limit the ability of Bank to declare all amounts outstanding under the Line of Credit Note immediately due and payable upon the occurrence of an Event of Default hereunder as provided herein.

(ii) The Term Loan shall terminate on the Maturity Date for the Term Loan set forth in the Term Note, as the case may be, which date shall be no more than two years from the Closing Date, subject to Section 10 hereof. Upon the termination of the Term Loan, the principal of and all accrued but unpaid interest on the Loan Indebtedness in respect of the Term Loan shall be forthwith due and payable, but all of the duties and covenants of Borrower hereunder, and all rights, remedies and privileges of Bank under this Agreement and Bank’s security interest in the Collateral, shall continue in full force and effect until all of such Loan Indebtedness is fully and finally paid.

2.7 Interest.

(i) From and after the date hereof, interest shall accrue on the unpaid principal amount of the Loan Indebtedness at the Floating Rate. Interest shall be calculated daily and shall be computed on the basis of actual days elapsed over the period of a 360 day year. Interest shall be payable in arrears on each Payment Date and on the Maturity Date, whether due to acceleration or otherwise. Any principal balance outstanding pursuant to a Loan not paid when due shall bear interest at a rate of interest per annum equal to the Default Rate, such interest to be payable upon demand. After the occurrence of an Event of Default and during the continuance thereof, the outstanding principal balance of the Loans shall bear interest at the Default Rate, which shall be payable on demand.

 

 

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(ii) In no contingency or event whatsoever shall the amount paid or agreed to be paid to Bank for the use, forbearance or detention of money advanced under this Agreement exceed the highest lawful rate permissible under Applicable Law. It is the intent hereof that Borrower will not pay or contract to pay, and that Bank not receive or contract to receive, directly or indirectly in any manner whatsoever, interest in excess of that which may be charged to and paid by Borrower under Applicable Law. All interest (and charges deemed interest) paid or agreed to be paid to Bank shall, to the extent permitted by Applicable Law, be amortized, pro rated, allocated and spread in equal parts throughout the full term hereof until payment in full of the principal amount of the Loan Indebtedness owing hereunder (including the period of any renewal or extension hereof) so that interest on the principal amount of the Loan Indebtedness outstanding hereunder for such full period will not exceed the maximum amount permitted by Applicable Law.

2.8 Loan Prepayment.

(i) Voluntary Prepayment. Borrower shall have the right to prepay the Loans in whole or in part on any Payment Date, but subject to Borrower having provided at least two (2) Business Days’ prior written notice to Bank. Partial prepayments of any Line of Credit Loan (other than proceeds of Asset Dispositions which shall be applied as set forth in the following Section 2.10(ii)) shall be applied to reduce the current month’s Advance(s) to such Borrower with any excess prepayment applied to unpaid principal payments of the Loan as Aaron’s may request and the Servicer may agree in its sole discretion (which may include, but is not limited to, application of such excess prepayment to unpaid principal payments of the Loan in inverse order of maturity or on a pro rata basis).

(ii) Mandatory Prepayment. For the Line of Credit Loan, mandatory prepayment shall be required for Asset Dispositions.

2.9 Audits. Borrower hereby consents and authorizes Aaron’s or Bank or any agent or representative thereof to conduct periodic field audits of Borrower. Such field audits may include, without limitation, examinations of the payment receipts, tax returns, bank statements, loan statements, Lease Contracts, inventory on hand, computer-generated reports of Asset Dispositions, Rental Revenue and other financial data necessary to determine the accuracy and validity of the reports, compliance certificates, financial reports and other information forwarded to either of Bank or Aaron’s by Borrower in connection with the Loan.

2.10 Tracking of Merchandise; Asset Dispositions.

(i) All Merchandise financed by Bank must be serialized by means of the Aaron’s Proprietary System for appropriate reconciliation of Advances and receipt of Merchandise and for purposes of tracking Asset Dispositions, if applicable. Borrower shall be obligated to furnish serial numbers for all Merchandise purchased directly to Aaron’s on a weekly basis (and, if available, on a daily basis) by transmittal of Borrower’s receiving report (containing Aaron’s Proprietary System numbers) directly to Aaron’s on the Aaron’s Proprietary System. As set forth more fully below, Aaron’s will maintain and track such information as agent for Bank and Bank shall at all times have access to such information.

(ii) If Borrower has a Line of Credit Note and an Asset Disposition occurs, Borrower shall immediately report such Asset Disposition to Aaron’s by means of the Aaron’s Proprietary System, such information to include the Aaron’s Proprietary System numbers, and if assigned, the serial numbers of the Merchandise subject to the Asset Disposition, the Net Book Value of such Merchandise and the

 

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proceeds received by Borrower therefrom. Aaron’s, on a monthly basis, shall transmit all such information to Bank in a summary form. Based solely on such information provided by Aaron’s, Bank will notify Borrower on a monthly basis, of the amount of the required prepayment (the “Asset Disposition Prepayment”) of the aggregate outstanding amount of the Line of Credit Loan due on the next Payment Date which amount shall be equal to the Net Book Value of the Asset Dispositions during the preceding month not applied to Advances made during such month as set forth above, unless otherwise agreed to by Bank. Borrower shall be notified by Bank by the Business Day next following the 25th day of each calendar month of the Asset Disposition Prepayment and payment thereof shall be due on the next succeeding Payment Date.

2.11 Closing Fee. On the Closing Date of each Loan, Borrower shall pay to Bank a closing fee (“Closing Fee”) in the amount of $500 per store location [plus $5,000]2 .

2.12 Commitment Fees.

(i) Borrower shall pay a commitment fee (the “Commitment Fee”) on any unused portion of the Line of Credit Commitment in the amount of _________________% per annum, such Commitment Fee to be paid quarterly in arrears on every third Payment Date, commencing on the third Payment Date after the Closing Date.

(ii) All Commitment Fees shall be paid on the dates due, in immediately available funds, to Bank.

2.13 Delinquent Payment Fees. In the event that any payment due and payable hereunder is not received by Bank on the Payment Date when due (including, without limitation, any payment not received as a result of the dishonour of a pre-authorized debit or a return of a pre-authorized debit initiated by Borrower), Borrower shall, upon request from Bank, pay to Bank a delinquent payment fee (the “Delinquent Payment Fee”) in an amount equal to the greater of (i) one percent (1%) of the amount of the late payment and (ii) $500.00.

3. COLLATERAL AND INSURANCE.

3.1 Granting of Security Interest in Collateral. As security for the payment and performance of all of the Loan Indebtedness, Borrower shall enter into the Security Agreement and grant Bank thereunder a continuing security interest in its Collateral. The Loan Indebtedness shall also be secured by any other property (whether real or personal) in which Borrower may have heretofore or concurrently herewith granted, or may hereafter grant, a Lien in favor of Bank.

3.2 Form of Lease Contracts. All Lease Contracts will be (i) in a form prescribed by Aaron’s for use by its franchisees, (ii) be transferable to Bank and (iii) contain the following provision directly above Borrower’s customer’s signature:

“NOTWITHSTANDING ANYTHING SET FORTH IN THIS AGREEMENT TO THE CONTRARY, THE UNDERSIGNED ACKNOWLEDGES AND CONSENTS TO THE TRANSFER OF, OR GRANT OF A SECURITY INTEREST IN, ANY OR ALL OF THE LESSOR’S RIGHT, TITLE AND INTEREST (RESIDUAL OR OTHERWISE) IN AND UNDER THIS AGREEMENT TO ANY THIRD PARTY. NO SUCH TRANSFER OR GRANT OF SECURITY INTEREST WILL: (A) AFFECT THE UNDERSIGNED’S LOAN

 

 

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Note: in the case of a Borrower with a Term Loan Commitment that has customized financial covenants as specified by Aaron’s in accordance with Section 6 hereof, an additional $5,000 fee will be charged.

 

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INDEBTEDNESS; (B) CHANGE ANY DUTIES OF, OR INCREASE ANY BURDENS OR RISKS IMPOSED ON, THE PARTIES TO THIS AGREEMENT; NO ENFORCEMENT OF ANY SECURITY INTEREST WILL CONSTITUTE A TRANSFER THAT CHANGES ANY DUTIES OF, OR INCREASES ANY BURDENS OR RISK IMPOSED ON, THE PARTIES TO THIS AGREEMENT.”

Immediately upon execution of the same, all Lease Contracts shall be hereby assigned to Bank, and, immediately upon Bank’s request, delivered to Bank together with any and all related documents, and will contain, by way of a stamp or as a part of the preprinted lease contract, the following legend directly below Borrower’s customer’s signature:

“FOR VALUE RECEIVED, THIS AGREEMENT HAS BEEN ASSIGNED TO TRUIST BANK AND THERE ARE NO DEFENSES AGAINST THE ASSIGNEE.”

Borrower will not assign, sell, pledge, convey or by any other means transfer to any person other than Bank any Lease Contracts or Chattel Paper, without Bank’s prior written consent.

3.3 Other Documents. Borrower shall execute and deliver, or shall be caused to be executed and delivered, to Bank such other instruments, agreements, assignments, notifications or other documents relating to the Collateral as Bank may from time to time request in order to evidence, perfect or continue the perfection of Bank’s Liens upon any of the Collateral.

3.4 Insurance. Borrower shall maintain and keep in force insurance of the types and in the amounts customarily carried in lines of business similar to Borrower’s and such other insurance as Bank may require, including, without limitation, theft, fire, public liability, business interruption, casualty, property damage, and worker’s compensation insurance, which insurance shall be carried with companies and in amounts satisfactory to Bank. All casualty and property damage insurance shall name Bank as mortgagee, sole loss payee, or additional insured, as appropriate. Borrower shall deliver to Bank from time to time, at Bank’s request, copies of all such insurance policies and certificates of insurance and schedules setting forth all insurance then in effect. Each policy of insurance shall contain a clause requiring the insurer to give not less than thirty (30) days’ prior written notice to Bank in the event of any lapse, termination or cancellation of the policy for any reason whatsoever and a clause that the interest of Bank shall not be impaired or invalidated by any act or neglect of Borrower or owner of the property nor by the occupation of the premises for purposes more hazardous than are permitted by said policy. All such insurance policies shall contain such other provisions as Bank may require in order to protect Bank’s Lien in the collateral and Bank’s right to receive payments under such policies. Borrower hereby appoints Bank as attorney in fact for Borrower to file claims under any insurance policies, to receive, receipt and give acquittance for any payments that may be payable to Borrower thereunder, and to execute any and all endorsements, receipts, releases, assignments, reassignments, or other documents that may be necessary to effect the collection, compromise or settlement of any claims under any such insurance policies, which power of attorney shall be deemed coupled with an interest and irrevocable so long as Bank shall have a Lien in any of the Collateral pursuant to this Agreement. If Borrower shall fail to procure such insurance or to pay any premium with respect thereto, then Bank may, at its discretion, procure such insurance or pay such premium and any costs so incurred by Bank shall constitute a part of the Loan Indebtedness. Bank may apply the proceeds of any insurance policy received by Bank to the payment of any liabilities, whether or not due, in such order of application as Bank shall determine. Borrower shall promptly furnish Bank with certificates or other evidence satisfactory to Bank indicating compliance with the foregoing insurance requirements.

3.5 Validation and Collection of Accounts. Whether or not a Default Condition or an Event of Default has occurred, Bank shall have the right, at any time or times hereafter, in the name of Bank or any designee of Bank to verify the validity, amount or any other matter relating to any Accounts by mail,

 

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telephone or otherwise, and Borrower shall fully cooperate with Bank in an effort to facilitate and promptly conclude any such verification process. Unless Bank shall at any time following the occurrence of an Event of Default, elect to give notice to Account Debtors to make payments on the Accounts directly to Bank, Borrower shall endeavor in the first instance to make collection of its Accounts for Bank. Borrower shall at the request of Bank notify the Account Debtors of the security interest of Bank in any Account and Bank may itself at any time so notify Account Debtors. Upon or after the occurrence of an Event of Default, Borrower shall (if and to the extent requested to do so by Bank) notify the Account Debtors to make all payments owing to Borrower directly to Bank for application to the Loan Indebtedness.

3.6 Maintenance of Collateral. Borrower shall maintain all Inventory and Equipment in good condition, reasonable wear and tear excepted in the case of Equipment, and shall, as and when requested by Bank, provide Bank with a list of all of the Equipment and evidence of ownership thereof. Borrower shall not permit any of the Equipment to become affixed to any real property so that such Equipment is deemed a fixture under the real estate laws of the applicable jurisdiction.

3.7 Expenses Relating to Collateral. Borrower shall pay Bank on demand an amount equal to any and all expenses, including legal fees, incurred or paid by Bank in connection with Bank’s insuring, maintaining, protecting, storing, safeguarding, or paying Liens with respect to any of the Collateral or otherwise discharging any duty or obligation of Borrower with respect to any of the Collateral.

3.8 Rights to Collateral. Bank shall have no duty to collect, protect or preserve the underlying value of any Collateral or any income thereon or to preserve any rights against prior parties. Bank may exercise its rights and remedies with respect to the Collateral without first resorting (and without regard) to any other security for the Loans or other sources of payment or reimbursement for the Loan Indebtedness.

4. CONDITIONS PRECEDENT.

Borrower shall deliver and Bank shall have received the following documents, each in form and substance satisfactory to Bank, as conditions precedent of the Loans:

(i) a validly executed copy of this Agreement and the Security Agreement;

(ii) the validly executed Notes;

(iii) a validly executed copy of a Guaranty of each partner or majority stockholder of Borrower, and to the extent not prohibited by Applicable Law, the spouse of such Person together, in the case of the spouse, a certificate of independent legal advice with respect to the spouse’s execution of such Guaranty; provided, however, that if such spouse is not providing a Guaranty, a validly executed copy of the Spousal Consent;

(iv) All documentation and other information with respect to the Credit Parties that Aaron’s or any Participant reasonably believes is required by regulatory authorities under applicable “know-your-customer” and anti-money laundering rules and regulations, including without limitation the Patriot Act;

(v) a validly executed PAD Authorization in the form attached hereto as Exhibit F, authorizing Bank to debit Borrower’s bank account at a Canadian financial institution specified therein for payments due hereunder at Set Intervals, including without limitation, Asset Disposition Prepayments and mandatory prepayments of the Loans pursuant to Section 2.8(ii);

(vi) a validly executed subordination agreement, in form and substance satisfactory to Bank, from each other debtholder of Borrower;

 

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(vii) evidence of Borrower’s good standing;

(viii) a validly executed officer’s certificate or such other evidence acceptable to Bank evidencing Borrower’s corporate, partnership or other necessary authorization of the Loans and incumbency;

(ix) a certificate of insurance from an insurer acceptable to Bank evidencing Borrower’s compliance with Section 3.4 hereof and naming Bank as loss payee/additional insured as follows:

Aaron’s Program Manager

Truist Bank

Program Lending

303 Peachtree Street, N.E.

2nd Floor

Mail Code 1802

Atlanta, Georgia 30308

(x) a validly executed authorization in favour of Aaron’s, authorizing Aaron’s to initiate SWIFT transfers from the FCTA to pay vendors in accordance with Section 2.3(ii); and

(xi) valid Personal Property Security Act financing statements suitable for filing to enable Bank to perfect the security interest granted to it under this Agreement.

In addition, Bank shall have satisfied itself that (y) all necessary steps have been taken and all necessary registrations have been made to perfect Bank’s security interest in the Collateral, and (z) there are no Liens on any of the Collateral, and Bank shall be satisfied that all corporate or partnership proceedings necessary for the authorization of the Loan shall have been taken and Bank shall have received any other documents that it deems necessary or advisable.

5. BORROWER’S REPRESENTATIONS AND WARRANTIES.

To induce Bank to enter into this Agreement, Borrower represents and warrants as follows:

5.1 Organization and Qualification of Borrower. Borrower is _________________ under the laws of the province shown on the first page hereof or under the laws of Canada, and is qualified to do business in all jurisdictions where the character of its properties or the nature of its activities make such qualification necessary.

5.2 Trade Names, Subsidiaries and Location of Assets. Exhibit B attached hereto and made a part hereof fully and accurately discloses any legal name, trade name or style ever used by Borrower, any Subsidiaries owned by Borrower, and each office, other place of business or location of assets of Borrower.

5.3 Corporate or Other Authority; No Violation of Other Agreements. The execution, delivery and performance by Borrower of this Agreement and the other Loan Documents have been duly authorized by all necessary action on the part of Borrower and do not and will not (i) violate any provision of Borrower’s articles of incorporation, by laws, or other organizational documents or any Applicable Law, or (ii) be in conflict with, result in a breach of, or constitute (following notice or lapse of time or both) a default under any agreement to which Borrower is a party or by which Borrower or any of its property is bound. Each PAD Authorization has been executed by persons with signing authority in respect of the account at a Canadian financial institution that is the subject of such PAD Authorization and any such PAD Authorization is a Business PAD and not a Personal PAD.

 

 

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5.4 Enforceability. This Agreement and each of the other Loan Documents create legal, valid and binding obligations of Borrower enforceable against Borrower in accordance with their respective terms.

5.5 Entire Agreement. The Notes and accompanying Loan Documents executed in connection with the Loans and delivered to Bank are the only contracts evidencing the transaction described herein and constitute the entire agreement of the parties hereto with respect to the transaction.

5.6 Genuineness of Signatures. The Notes and each accompanying Loan Document executed in connection with the Loans are genuine and all signatures, names, amounts and other facts and statements therein and thereon are true and correct.

5.7 Litigation. There are no actions, suits, proceedings or investigations pending or, to the knowledge of Borrower, threatened before any court, tribunal or administrative or governmental agency that may, individually or collectively, adversely affect the financial condition or business operations of Borrower.

5.8 Financial Condition. Borrower’s financial statement previously delivered to Aaron’s, fairly and accurately presents the financial condition of Borrower as of such date and has been prepared in accordance with GAAP consistently applied, and since the date of that financial statement, there has been no material adverse change in the financial condition of Borrower. Borrower is now and will remain Solvent.

5.9 Taxes. All federal, provincial and local tax returns have been duly filed, and all taxes, assessments and withholdings shown on such returns or billed to Borrower have been paid, and Borrower maintains adequate reserves and accruals in respect of all such federal, provincial and other taxes, assessments and withholdings. There are no unpaid assessments pending against Borrower for any taxes or withholdings, and Borrower knows of no basis therefor.

5.10 Compliance with Laws. Borrower has duly complied with, and its properties and business operations are in compliance in all material respects with, the provisions of all Applicable Laws, including, without limitation, all Environmental Laws. Borrower possesses all permits, franchises, licenses, trademark rights, trade names, patents and other authorizations necessary to enable it to conduct its business operations as now conducted, and no filing with, and no consent, authorization, order or license of, any Person is necessary in connection with the execution or performance of this Agreement or the other Loan Documents.

5.11 No Default. No Default Condition or Event of Default exists.

5.12 Accounts. Each Account arises out of a bona fide lease or sale and delivery of goods or rendition of services by Borrower and, unless otherwise indicated by Borrower to Bank in writing promptly after learning thereof, the facts appearing on the invoice evidencing such Account and Borrower’s books relating thereto are true and accurate and payment thereof is not subject to any known dispute, offset or claim except for discounts granted in the ordinary course of Borrower’s business that are reflected on the face of such invoice.

 

 

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5.13 Use of Proceeds. None of the proceeds of any Advances by Bank or the Term Loan have been or will be used (i) to purchase or carry (or to satisfy or refinance any indebtedness incurred to purchase or carry) any “margin stock” (as defined in Regulation U of the Federal Reserve Board), (ii) for the purpose of funding, financing or facilitating any activities, business or transaction of or with any Sanctioned Person, or in any Sanctioned Country or (iii) in any manner that would result in the violation of any Sanctions applicable to any party hereto. Advances shall be made for the sole purposes of honoring requests for SWIFT transfers to (a) suppliers of Merchandise in payment of Approved Invoices, and (b) other accounts specified by Borrower with respect to Advances made for working capital purposes, subject to the approval of Aaron’s, which requests have been made to Aaron’s as provided in Section 2.3(i) or Section 2.3(ii), or upon the consent of Aaron’s, for the purpose of payment of freight charges (but not for the purpose of paying provincial sales taxes, goods and services tax, harmonized sales tax or customs duty). The proceeds of the Term Loan shall be used solely for the purpose of financing the acquisition and expansion of stores franchised by Aaron’s and operated by the Borrower and for Aaron’s-approved working capital purposes, but excluding in all cases any non-business purposes.

Each submission of an Approved Invoice made by Borrower pursuant to this Agreement or any other Loan Document shall constitute an automatic representation and warranty by Borrower to Bank that there does not then exist any Default Condition or Event of Default and a reaffirmation as of the date of said request that all representations and warranties of Borrower contained in this Agreement and the other Loan Documents are true in all material respects. All representations and warranties contained in this Agreement or in any of the other Loan Documents shall survive the execution, delivery and acceptance hereof by Bank and the closing of the transactions described herein.

5.14 Anti-Corruption Laws and Sanctions. Borrower has implemented and maintains in effect policies and procedures designed to ensure compliance in all material respects by Borrower, its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions, and Borrower, its Subsidiaries and their respective officers (in such capacity), employees (in such capacity) and, to the knowledge of Borrower, its directors and agents, are in compliance with Anti-Corruption Laws and applicable Sanctions. None of (a) Borrower, any Subsidiary or any of their respective officers (in such capacity) or employees (in such capacity), or (b) to the knowledge of the Borrower, any director or agent of Borrower or any Subsidiary is a Sanctioned Person. No Advance nor the Term Loan, use by the Borrower or any Subsidiary of the proceeds thereof or other transactions contemplated hereby will violate Anti-Corruption Laws or applicable Sanctions.

6. FINANCIAL COVENANTS.

Borrower shall comply with the following financial covenant[s]:

(i) [Rental Revenue to Debt Service. Commencing on the first day of the calendar quarter in which the 25th month following the Opening Date of the first store location of Borrower occurs and measured as of the last day of the calendar quarter in which such 25th month occurs and on the last day of each calendar quarter thereafter, the ratio of Borrower’s Rental Revenue to Debt Service for such quarter shall not be less than 2.2:1.0;]3

(ii) Debt to Rental Revenue. [Commencing on the first day of the calendar quarter in which the first day of the 19th month following the Opening Date of the first store location of Borrower occurs and measured as of the last day of the calendar quarter in which such 19th month occurs and on the last day of each calendar quarter thereafter,][On the last day of each calendar quarter] the ratio of Borrower’s Debt to Borrower’s Rental Revenue shall not exceed [__]:1.0.4

 

 

3 

Note: This covenant will not apply in the case of any Borrowers who have only Term Loans.

4 

Note: This covenant will apply and be tested on last day of each calendar quarter and not be tied to any Opening Date of store locations in the case of any Borrowers who have Term Loans. Covenant levels for this covenant will be established by Aaron’s or in the applicable Loan Agreement for each Borrower.

 

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To the extent any of the financial covenants set forth above in this Section 6 are calculated based upon the Opening Date of a store location, the financial information from store locations that have not reached the Opening Date anniversary incorporated into such covenants shall be excluded from such calculations. Debt Service and Debt attributable to such locations and deducted from the final calculations shall be deducted on a pro rata basis calculated by dividing such stores’ aggregate Net Book Value of Merchandise by the Net Book Value of Merchandise for all store locations. The financial covenants shall otherwise be calculated on a consolidated basis as to all store locations.

7. BORROWER’S AFFIRMATIVE COVENANTS.

During the term of this Agreement, and thereafter for so long as there is any outstanding Loan Indebtedness to Bank, Borrower covenants that, unless otherwise consented to by Bank in writing, it shall:

7.1 Financial Reports. Deliver to Aaron’s or cause to be delivered to Aaron’s:

(i) on or before the last Business Day of each month, an unaudited balance sheet and income statement accurately reflecting the financial transactions and status of Borrower as of the end of the prior month and on a year to date basis, on a consolidated and per store basis; prepared in accordance with GAAP in the format recommended by Aaron’s;

(ii) on or before the last Business Day of each month after the end of each calendar quarter (a) an unaudited balance sheet and income statement accurately reflecting the financial transactions and status of Borrower as of the end of the prior month and on a quarterly basis, on a consolidated and per store basis, prepared in accordance with GAAP in the format recommended by Aaron’s, and (b) a compliance certificate as described below in Section 7.2;

(iii) within 90 days after the end of each fiscal year a balance sheet and income statement of Borrower as of the end of such year and for the fiscal year then ended, compiled by such firm of chartered accountants as may be designated by Borrower and be satisfactory to Bank as prepared in accordance with GAAP and, to the extent delivered to Aaron’s, audited financial statements for such period;

(iv) within 120 days after the end of each fiscal year, an annual personal financial statement of each Guarantor; and

(v) with reasonable promptness, all reports by Borrower to its shareholders and such other information as Aaron’s or Bank may reasonably request from time to time.

7.2 Compliance Certificate. Prepare and deliver to Aaron’s, to the extent Borrower has a Line of Credit Loan, in conjunction with the quarterly financial reports required to be delivered pursuant to Section 7.1(iii) above, a quarterly compliance certificate (the form of which is attached hereto as Exhibit C), including a Quarterly Covenant Compliance Report (the form of which is attached hereto as Exhibit D) presenting the calculation of the financial covenants set forth above in Section 6, noting any negative variances with the covenants and explaining any such variances.

 

 

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Borrower acknowledges that Aaron’s will review each compliance certificate and may revise the calculations set forth on such compliance certificate to be consistent with the information shown on quarterly detailed Inventory reconciliation reports and detailed revenue reports prepared by Aaron’s each quarter showing the amount of Inventory at each of Borrower’s stores as of the end of such quarter and the amount of monthly and quarterly revenue at each of Borrower’s stores. Borrower acknowledges that Aaron’s will forward copies of each compliance certificate, with revised calculations as appropriate, to Bank and agrees that Bank shall be entitled to rely each such compliance certificate, as revised by Aaron’s, for purposes of determining whether the covenants set forth in Section 6 above have been met.

7.3 Books and Records. Maintain its Books and Records and accounts in accordance with GAAP and permit any Person designated by Bank or Aaron’s to visit Borrower’s premises, inspect any of the Collateral or any of the Books and Records, and to make copies thereof and take extracts therefrom, and to discuss Borrower’s financial affairs with Borrower’s financial officers and accountants.

7.4 Taxes. Promptly file all tax returns and pay and discharge all taxes, assessments, withholdings and other governmental charges imposed upon it, its income or profits, or upon any property belonging to it, prior to the date on which penalties attach thereto.

7.5 Notices to Bank. Promptly notify Bank in writing of (i) the occurrence of any Default Condition or Event of Default; (ii) any pending or threatened litigation claiming damages in excess of $25,000 or seeking relief that, if granted, would adversely affect the financial condition or business operations of Borrower; (iii) the release or discharge of any Hazardous Substance on any property owned by Borrower; and (iv) any asserted violation by Borrower of or demand for compliance by Borrower with any Applicable Law.

7.6 Compliance with Applicable Laws. Comply in all material respects with all Applicable Laws, including, without limitation, all Environmental Laws.

7.7 Corporate Existence. Maintain its separate corporate existence and all rights, privileges and franchises in connection therewith, and maintain its qualification and good standing in all jurisdictions where the failure to do so could have a Material Adverse Effect upon its financial condition or ability to collect the Accounts.

7.8 Electronic Debit Authorizations. Execute and deliver to Bank and maintain in effect at all times a PAD Authorization authorizing Bank to debit Borrower’s specified account at a Canadian financial institution for all payments required hereunder that are due at Set Intervals, including, without limitation, all payments of interest payable pursuant to Section 2.7, all Asset Disposition Prepayments and other mandatory principal prepayments payable pursuant to Section 2.8 and all Commitment Fees payable pursuant to Section 2.12 and, if requested by Bank in connection with any Sporadic payment required to be made by Borrower hereunder, a PAD Authorization in respect of such Sporadic payment, each such PAD Authorization to be executed and delivered by persons having signing authority over the bank account that is the subject of such PAD Authorization.

8. NEGATIVE COVENANTS.

During the term of this Agreement, and thereafter for so long as there are is Loan Indebtedness outstanding, Borrower covenants that unless Bank has first consented thereto in writing, it will not:

 

 

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8.1 Merger; Disposal or Moving of Collateral. Amalgamate, merge or consolidate with or acquire any substantial portion of the assets or stock of any Person; sell, lease, transfer or otherwise dispose of all or any portion of its properties (including any of the Collateral), except sales or leases of Inventory in the ordinary course of business; or, without having given Bank at least 60 days prior written notice and having executed such instruments and agreements as Bank shall require, change its name, adopt a French form of name, change the location of any Collateral or the location of its chief executive office, principal place of business or the office at which it maintains its Books and Records. Notwithstanding the foregoing, to the extent that Borrower is calculating its compliance with the financial covenants set forth in Section 6 hereof on a consolidated basis, Borrower may move Inventory from one location included in such calculation to another of Borrower’s Aaron’s locations without complying with the notice provisions hereof, as long as such Inventory is properly transferred in the Aaron’s Proprietary System.

8.2 Liens. Grant or suffer to exist any Lien upon any of the Collateral except Permitted Liens.

8.3 Guarantees. Guarantee, assume, endorse or otherwise become contingently liable for any obligation or indebtedness of any Person, either directly or indirectly, exceeding $25,000 not existing as of this date, except by endorsement of items of payment for deposit or collection.

8.4 Loans. Make loans or advances of money to or investments in any Person, or (except in the ordinary course of business and on fair and reasonable terms) engage in any transaction with a Subsidiary or affiliate.

8.5 Stock of Borrower. Repurchase, or pay or declare any dividend on, any of its capital stock; provided, however, that if no Default Condition or Event of Default exists and Borrower remains in compliance with the financial covenants set forth in Section 6 above after giving effect thereto, it may pay dividends and make such repurchases.

9. EVENTS OF DEFAULT.

9.1 List of Events of Default. The occurrence of any one or more of the following conditions or events shall constitute an “Event of Default”:

(i) Borrower shall fail to pay any of the Loan Indebtedness (including any overadvance) or to repay principal as required in connection with any Asset Disposition within ten (10) days of the due date thereof (whether due at stated maturity, on demand, upon acceleration or otherwise and including any failure to pay resulting from a dishonour of a pre-authorized debit or a return of a pre-authorized debit initiated by Borrower);

(ii) any warranty, representation, or other statement by Borrower herein or in any instrument, certificate or financial statement furnished in compliance herewith proves to have been false or misleading in any material respect when made;

(iii) Borrower shall fail or neglect to perform, keep or observe any covenant contained in this Agreement, any of the other Loan Documents or any other agreement now or hereafter entered into with Bank; Borrower shall fail to abide by the financial covenants set forth in Section 6 hereof, provided that Aaron’s may waive any financial covenant;

(iv) Borrower or any Guarantor shall fail to pay when due any amount owed to any creditor (other than Bank) or Borrower or any Guarantor shall fail to pay or perform any liability or obligation in accordance with the terms of any agreement with Bank;

 

 

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(v) Borrower, Aaron’s or any Guarantor shall cease to be Solvent, shall die or become incompetent, shall suffer the appointment of a receiver, trustee, custodian or similar fiduciary, shall make an assignment for the benefit of creditors, or shall make an offer of settlement or composition to their respective unsecured creditors generally;

(vi) any petition for an order for relief shall be filed by or against Borrower or any Guarantor or Aaron’s under the BIA or the CCAA (if against Borrower or any Guarantor, the continuation of such proceeding for more than 30 days);

(vii) any judgment, writ of attachment or similar process is entered or filed against Borrower or any Guarantor or any of Borrower’s or any Guarantor’s property and such judgment, writ of attachment or process is not dismissed, satisfied or vacated within ten (10) days thereafter or (ii) results in the creation or imposition of any Lien upon any Collateral that is not a Permitted Lien;

(viii) any Guarantor shall revoke or attempt to revoke the guaranty signed by such Guarantor or shall repudiate such Guarantor’s liability thereunder or Aaron’s shall default in its obligations to Bank with respect to the Loan Indebtedness or repudiate its liability therefor;

(ix) any Person, or group of Persons (whether or not related), shall have or obtain legal or beneficial ownership of a majority of the outstanding voting securities or rights of Borrower, other than any Person, or group of Persons, that has such majority ownership on the date of execution of this Agreement;

(x) Borrower shall lose its franchise, license or right to lease or to sell the Inventory or Borrower’s Franchise Agreement is terminated or revoked for any reason;

(xi) Borrower shall fail to enter properly any acquisition of Inventory or Equipment or any Asset Disposition on the Aaron’s Proprietary System;

(xii) Borrower shall use its FCTA for any use other than as explicitly authorized pursuant to this Agreement; or

(xiii) Borrower shall not have in effect at all times an effective PAD Authorization in respect of the payment of all amounts payable by it hereunder at Set Intervals or shall fail, if so requested by Lender, to execute and deliver a PAD Authorization in respect of any sporadic payment due hereunder.

9.2 Cure Period. Borrower shall have a five (5) calendar day period after Bank gives it notice of the occurrence of an Event of Default (other than an Event of Default pursuant to Section 9.1(vi)) above, during which it may cure such Event of Default. An Event of Default arising under Section 9.1(i)(i)) above shall only be cured by Bank’s receipt of payment in immediately available funds by wire transfer or pre-authorized debit.

9.3 Advances. In no event shall Bank have any obligation to make any Loan hereunder or an Advance pursuant to a Line of Credit Commitment hereunder if there exists a Default Condition or an Event of Default.

10. REMEDIES.

All of the Loan Indebtedness shall become immediately due and payable and the Line of Credit Commitment shall be deemed immediately terminated (without notice to or demand upon Borrower) upon the occurrence of an Event of Default under Section 9.1(vi) of this Agreement; and upon and after the occurrence of any other Event of Default, subject to the cure period set forth in Section 9.2 hereof, Bank shall have the right to terminate immediately the Line of Credit Commitment and to declare the entire

 

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unpaid principal balance of and accrued interest with respect to the Loan Indebtedness to be, and the same shall thereupon become, immediately due and payable upon receipt by Borrower of written notice and demand. From and after the date on which the Loan Indebtedness becomes automatically due and payable or is declared by Bank to be due and payable as aforesaid, Bank shall have and may exercise from time to time any and all rights and remedies afforded to a secured party under the PPSA or any other Applicable Law. If the Loan Indebtedness is collected by or through legal counsel, Bank shall be entitled to collect reasonable legal fees and court costs from Borrower. In addition to, and without limiting the generality of the foregoing, Bank shall have the rights and remedies set forth in the Security Agreement and the following rights and remedies which it may exercise at any time or times (all of which rights and remedies shall be cumulative and may be exercised singularly or concurrently):

(i) the right to notify any Account Debtor to make all payments owing to Borrower directly to Bank for application to the Loan Indebtedness and to collect all amounts owing from any such Account Debtor;

(ii) the right to sell, lease or otherwise dispose of any or all of the Collateral at public or private sale, for cash, upon credit or upon such other terms as Bank deems advisable in its sole discretion, or otherwise to realize upon the whole or from time to time any part of the Collateral in which Bank may have a security interest. Any requirement of reasonable notice shall be met if such notice is sent to Borrower in accordance with Section 12 hereof at least seven (7) days before the date of sale or other disposition of the Collateral. Bank may bid and be the purchaser at any such sale if permitted by Applicable Law;

(iii) the right to require Borrower, at Borrower’s expense, to assemble the Collateral and make it available to Bank at a place reasonably convenient to both parties (and, for purposes hereof, Borrower stipulates that Bank shall be entitled to the remedy of specific performance). Alternatively, Bank may peaceably by its own means or with judicial assistance enter Borrower’s premises and take possession of the Collateral or dispose of the Collateral on Borrower’s premises without interference by Borrower;

(iv) the right to incur legal fees and expenses in exercising any of the rights, remedies, powers or privileges provided hereunder, and the right (but not the obligation) to pay, satisfy and discharge, or to bond, deposit or indemnify against, any tax or other Lien which in the opinion of Bank may in any manner or to any extent encumber any of the Collateral, all of which fees, payments and expenses shall become part of Bank’s expenses of retaking, holding, preparing for sale and the like, and shall be added to and become a part of the principal amount of the Loan Indebtedness;

(v) the right, in Bank’s sole discretion, to perform any agreement of Borrower hereunder which Borrower shall fail to perform and take any other action which Bank deems necessary for the maintenance or preservation of any of the Collateral or Bank’s interest therein, and Borrower agrees forthwith to reimburse Bank for all expenses incurred in connection with the foregoing, together with interest thereon at the Default Rate from the date incurred until the date of reimbursement;

(vi) the right at any time or times, to the fullest extent permitted by Applicable Law, to set off and apply any and all deposits (general or special, time or demand) held by Bank for Borrower’s account against any of the Loan Indebtedness, irrespective of whether or not Bank has made any demand under the this Agreement;

(vii) the right to apply the proceeds realized from any collection, sale, lease or other disposition of the Collateral first to the costs, expenses and legal fees incurred by Bank for collection and for acquisition, protection, removal, storage, sale and delivery of the Collateral; secondly, to interest due upon the principal amount of the Loan Indebtedness; and thirdly, to the principal amount of the Loan Indebtedness. If any deficiency shall arise, Borrower and Guarantors shall remain bound and liable to Bank therefor; and

 

 

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(viii) the right to act as Borrower’s attorney in fact (and Borrower hereby irrevocably appoints Bank as Borrower’s agent and attorney in-fact), in Borrower’s or Bank’s name, but at Borrower’s cost and expense, to receive, open and dispose of all mail addressed to Borrower pertaining to any of the Collateral, to notify postal authorities to change the address and delivery of mail to Borrower to such address as Bank may designate, to sign Borrower’s name on any bill of lading constituting or relating to any Collateral, to send verifications with respect to the Collateral, to execute in Borrower’s name any affidavits or notices with regard to any and all Lien rights and to do all other acts and things necessary to carry out the terms of this Agreement or to discharge any obligation of Borrower hereunder, this power, being coupled with an interest, is to be irrevocable so long as any Loan Indebtedness is outstanding.

11. WAIVERS.

Borrower waives notice of Bank’s acceptance hereof. Borrower hereby waives any requirement on the part of Bank to post any bond or other security as a condition to Bank’s right to obtain an immediate writ of possession with respect to any Collateral. Bank shall not be deemed to have waived any of its rights upon or remedies hereunder or any Event of Default unless such waiver be in writing and signed by Bank. No delay or omission on the part of Bank in exercising any right shall operate as a waiver of such right or any other right. A waiver on any one occasion shall not be construed as a bar to or waiver of any right on any future occasion.

12. NOTICES.

All notices and demands to or upon a party hereto shall be in writing and shall be sent by certified or registered mail, return receipt requested, personal delivery against receipt or by telecopier or other facsimile transmission and shall be deemed to have been validly served, given or delivered when delivered against receipt or one Business Day after deposit in the mail, postage prepaid, or, in the case of facsimile transmission, when indicated by verification receipt printed by the sending machine as having been received at the office of the noticed party, addressed in each case as follows:

 

If to Borrower:

                                            
   Attn:                                     
                                            
                                            ,                                                  
   Telecopier No.:

If to Bank:

   Truist Bank
   Program Lending
   Attn: Aaron’s Program Manager
   303 Peachtree Street, N.E., 2nd Floor
   Mail Code 1802
   Atlanta, Georgia 30308
   Telecopier No.: (404) 724-3716

or to such other address as each party may designate for itself by like notice given in accordance with this Section 12. Any written notice or demand that is not sent in conformity with the provisions hereof shall nevertheless be effective on the date that such notice is actually received by the individual to whose attention such notice is to be sent as specified above or such individual’s successor in office.

 

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13. INDEMNIFICATION.

Borrower hereby agrees to indemnify Bank and hold Bank harmless from and against any liability, loss, damage, suit, action or proceeding ever suffered or incurred by Bank as the result of Borrower’s failure to observe, perform or discharge Borrower’s duties hereunder. Without limiting the generality of the foregoing, this indemnity shall extend to any claims asserted against Bank by any Person under any environmental laws. If any taxes, fees or other charges shall be payable by Borrower or Bank on account of the execution, delivery or recording of any of the Loan Documents or any loans outstanding hereunder, Borrower will pay (or reimburse Bank’s payment of) all such taxes, fees or other charges, including any applicable interests and penalties, and will indemnify and hold Bank harmless from and against liability in connection therewith. The indemnity obligations of Borrower under this Section 13 shall survive the payment in full of the Loan Indebtedness.

14. ENTIRE AGREEMENT; AMENDMENT.

This Agreement and the other Loan Documents embody the entire understanding and agreement between the parties hereto with respect to the subject matter hereof, and this Agreement may not be modified or amended except by an agreement in writing signed by Borrower and Bank.

15. SUCCESSORS AND ASSIGNS.

This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; but Borrower shall not assign this Agreement or any right or benefit hereunder to any Person. Bank may assign its rights and obligations hereunder at any time and to any Person, including without limitation, to Aaron’s.

16. ARBITRATION.

ANY CONTROVERSY OR CLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE DETERMINED BY ARBITRATION IN ACCORDANCE WITH THE INTERNATIONAL ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION EXCEPT TO THE EXTENT OTHERWISE SET FORTH IN THIS SECTION 16. THE PLACE OF ARBITRATION SHALL BE ATLANTA, GEORGIA AND THE LANGUAGE OF ARBITRATION SHALL BE ENGLISH. THE NUMBER OF ARBITRATORS SHALL BE THREE SELECTED AS FOLLOWS: WITHIN FOURTEEN (14) DAYS AFTER THE COMMENCEMENT OF ARBITRATION, EACH PARTY WILL APPOINT ONE ARBITRATOR. THESE TWO ARBITRATORS WILL THEN NAME A PRESIDING ARBITRATOR WITHIN FOURTEEN (14) DAYS AFTER THE SELECTION OF THE PARTY APPOINTEES. EACH ARBITRATOR SHALL BE AN ATTORNEY ADMITTED BEFORE THE BAR OF ANY STATE OF THE UNITED STATES OR THE BAR OF ANY PROVINCE OF CANADA. IF EITHER PARTY FAILS TO APPOINT AN ARBITRATOR, OR IF THE TWO ARBITRATORS DO NOT NAME A THIRD ARBITRATOR WITHIN THESE TIME PERIODS, THE INTERNATIONAL CENTRE FOR DISPUTE RESOLUTION SHALL AT THE WRITTEN REQUEST OF EITHER PARTY COMPLETE THE APPOINTMENTS THAT HAVE NOT BEEN MADE PURSUANT TO THE INTERNATIONAL ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION. THE ARBITRATORS SHALL AWARD TO THE PREVAILING PARTY, IF ANY, AS DETERMINED BY THE ARBITRATORS, ALL COSTS AND EXPENSES OF THE ARBITRATORS AND THE INTERNATIONAL CENTRE FOR DISPUTE RESOLUTION. ALL WITNESS TESTIMONY AT THE HEARING SHALL BE TRANSCRIBED BY A PUBLIC STENOGRAPHER OR COURT REPORTER. ALL PARTIES AGREE TO BE BOUND BY THE RESULTS OF SUCH ARBITRATIONS; JUDGMENT UPON THE AWARD SO RENDERED MAY BE ENTERED AND ENFORCED IN ANY COURT OF COMPETENT JURISDICTION. TO THE EXTENT REASONABLY PRACTICABLE, BOTH PARTIES AGREE TO CONTINUE PERFORMING THEIR RESPECTIVE OBLIGATIONS UNDER THIS AGREEMENT WHILE THE DISPUTE IS BEING RESOLVED.

 

 

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17. MISCELLANEOUS.

Time is of the essence of this Agreement. Bank reserves the right to participate, sell or assign the Loans made hereunder and provide any participant or assignee all information in Bank’s possession regarding Borrower, its business and the Collateral. Borrower shall reimburse Bank for Bank’s out-of-pocket expenses and for the fees and expenses and disbursements of Bank’s counsel in connection with the negotiation, documentation and closing of the transactions contemplated hereby, and Borrower will pay all expenses incurred by Borrower in connection with the transactions. The Section headings are for convenience only and shall not limit or otherwise affect any of the terms hereof. THIS AGREEMENT AND ALL RIGHTS AND OBLIGATIONS HEREUNDER, INCLUDING MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF GEORGIA (WITHOUT REGARD TO THE LAWS OF CONFLICTS THEREOF) AND IS INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT.

18. RELATIONS WITH AARON’S.

Borrower recognizes and acknowledges that Bank has made the Loans available to Borrower hereunder at the behest of and as an accommodation to Aaron’s. Accordingly, Borrower agrees that from time to time Bank may release to Aaron’s such information about Borrower and the Loans as Aaron’s may request, and Bank may condition its agreement to any waiver, modification or amendment on the prior written consent of Aaron’s. Borrower further agrees that upon the occurrence of an Event of Default hereunder, Bank may notify Aaron’s of such Event of Default prior to notifying Borrower thereof, and Bank shall not be liable to Borrower for failure to give simultaneous notice to Borrower. Borrower further agrees that Bank shall not be liable to Borrower as a result of any information or document obtained by Bank regarding Borrower which is shared by Bank with Aaron’s.

 

25


WITNESS the hand and seal of the parties hereto on the date first above written.

Accepted in Atlanta, Georgia:

 

BORROWER:

         

         

         

BANK:
TRUIST BANK:
By:  

         

Name:
Title:

 

26


EXHIBIT A-1

FORM OF

LINE OF CREDIT NOTE

 

Closing Date: [Closing Date]      

$                                 

Atlanta, Georgia

FOR VALUE RECEIVED, the undersigned, _________________ (the “Borrower”), promises to pay to the order of TRUIST BANK, a North Carolina banking corporation (the “Bank”), at Bank’s principal office in Charlotte, North Carolina, or at such other place as the holder hereof may designate by notice in writing to Borrower, in immediately available funds in lawful money of Canada, on _________________________, (the “Maturity Date”, as such date may be extended from time to time, for an additional 364 day period unless either party terminates the Loan as set forth in Section 2.6 of the Loan Agreement), the lesser of (x) the principal sum of the Line of Credit Commitment: _________________ ($_________________), or (y) so much principal thereof as shall have been from time to time disbursed hereunder in accordance with that certain Loan Agreement, dated as of [___________], by and between Borrower and Bank (as amended, restated, modified or supplemented from time to time, the “Agreement”) and not theretofore repaid, as shown on the records of Bank.

In addition to principal, Borrower agrees to pay interest on the principal amounts disbursed hereunder at a floating rate of interest equal to the Prime Rate plus an additional _________________________, from time to time, upon such dates as provided for in the Agreement. Interest shall accrue on the outstanding principal balance from the date hereof up to and through the date on which all principal and interest hereunder is paid in full, and shall be computed on the basis of the actual number of days elapsed in a year of 360 days. Such interest is to be paid to Bank at its address set forth above or as otherwise provided in the Agreement. For informational purposes, as of the date hereof the Prime Rate in effect is __________% per annum, thus producing an initial interest rate under the Agreement on such date of ___________% per annum and, when adjusted for a year of 365 days, an initial simple interest rate of _____________% per annum. Any principal amount due under this Line of Credit Note (the “Note”) that is not paid on the due date therefor whether on the Maturity Date, or resulting from the acceleration of maturity upon the occurrence of an Event of Default (as defined in the Agreement), shall bear interest from the date due until payment in full at the Default Rate, as such term is defined in the Agreement.

This Note evidences a loan incurred pursuant to the terms and conditions of the Agreement to which reference is hereby made for a full and complete description of such terms and conditions, including, without limitation, provisions for the acceleration of the maturity hereof upon the existence or occurrence of certain conditions or events, and the terms of any permitted prepayments hereof. All capitalized terms used in this Note shall have the same meanings as set forth in the Agreement.

Upon the existence or occurrence of any Event of Default, the principal and all accrued interest hereof shall automatically become, or may be declared, due and payable in the manner and with the effect provided in the Agreement. In addition, this Note is subject to mandatory prepayment upon the terms and conditions of the Agreement.

Bank shall at all times have a right of set off against any deposit balances of Borrower in the possession of Bank and Bank may apply the same against payment of this Note or any other indebtedness of Borrower to Bank. The payment of any indebtedness evidenced by this Note prior to the Maturity Date


shall not affect the enforceability of this Note as to any future, different or other indebtedness incurred hereunder by Borrower. In the event the indebtedness evidenced by this Note is collected by legal action or through legal counsel, Bank shall be entitled to recover from Borrower all costs of collection, including, without limitation, reasonable legal fees if collected by or through legal counsel.

Borrower acknowledges that the actual crediting of the amount of any disbursement under the Agreement to an account of Borrower or recording such amount in the records of Bank shall, in the absence of manifest error, constitute presumptive evidence of such disbursement and that such Advance was made and borrowed under the Agreement. Such account records shall constitute, in the absence of manifest error, presumptive evidence of principal amounts outstanding and the payments made under the Agreement at any time and from time to time, provided, however, that the failure of Bank to record in such account the type or amount of any Advance shall not affect the obligation of the undersigned to repay such amount together with interest thereon in accordance with this Note and the Agreement.

For the purposes of this Note, whenever interest to be paid hereunder is to be calculated on the basis of 360 days or any other period of time that is less than a calendar year, the yearly rate of interest to which the rate determined pursuant to such calculation is equivalent is the rate so determined multiplied by the actual number of days in the calendar year in which the same is to be ascertained and divided by 360 or such other number of days in such period, as the case may be.

Failure or forbearance of Bank to exercise any right hereunder, or otherwise granted by the Agreement or by law, shall not affect or release the liability of Borrower hereunder, and shall not constitute a waiver of such right unless so stated by Bank in writing. THIS NOTE AND THE RIGHTS AND OBLIGATIONS HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF) OF THE STATE OF GEORGIA. TIME IS OF THE ESSENCE OF THIS NOTE.

PRESENTMENT FOR PAYMENT, NOTICE OF DISHONOR AND PROTEST ARE HEREBY WAIVED.

Executed under hand and seal of Borrower as of the day and year first above written.

 

 

 

 

 

 

2


EXHIBIT A-2

FORM OF

TERM NOTE

 

Closing Date: [Closing Date]      

$                                 

Atlanta, Georgia

FOR VALUE RECEIVED, the undersigned, _________________ (the “Borrower”), promises to pay to the order of TRUIST BANK, a North Carolina banking corporation (the “Bank”), at Bank’s principal office in Charlotte, North Carolina, or at such other place as the holder hereof may designate by notice in writing to Borrower, in immediately available funds in lawful money of Canada, _____________________ ($_______________). Repayment will be in _____ consecutive equal monthly installments of principal in the amount of $_____________ based on a ________month amortization plus accrued and unpaid interest and shall be due and payable on each Payment Date, with the first installment being due and payable on ________________, and the remaining outstanding principal balance, together with all accumulated unpaid interest shall be due and payable on _________________________, (the “Maturity Date”).

In addition to principal, Borrower agrees to pay interest on the principal amounts disbursed hereunder at a floating rate of interest equal to the Prime Rate plus an additional _________________________, from time to time, upon such dates as provided for in that certain Loan Agreement dated as of [____________], by and between Borrower and Bank (as amended, restated, modified or supplemented from time to time, the “Agreement”). Interest shall accrue on the outstanding principal balance from the date hereof up to and through the date on which all principal and interest hereunder is paid in full, and shall be computed on the basis of the actual number of days elapsed in a year of 360 days. Such interest is to be paid to Bank at its address set forth above or as otherwise provided in the Agreement. For informational purposes, as of the date hereof the Prime Rate in effect is __________% per annum, thus producing an initial interest rate under the Agreement on such date of ___________ % per annum and, when adjusted for a year of 365 days, an initial simple interest rate of _____________% per annum. Any principal amount due under this Term Note (the “Note”) that is not paid on the due date therefor whether on the due date, or resulting from the acceleration of maturity upon the occurrence of an Event of Default (as defined in the Agreement), shall bear interest from the date due until payment in full at the Default Rate, as such term is defined in the Agreement.

This Note evidences a loan incurred pursuant to the terms and conditions of the Agreement to which reference is hereby made for a full and complete description of such terms and conditions, including, without limitation, provisions for the acceleration of the maturity hereof upon the existence or occurrence of certain conditions or events, and the terms of any permitted prepayments hereof. All capitalized terms used in this Note shall have the same meanings as set forth in the Agreement.

Upon the existence or occurrence of any Event of Default, the principal and all accrued interest hereof shall automatically become, or may be declared, due and payable in the manner and with the effect provided in the Agreement. In addition, this Note is subject to mandatory prepayment upon the terms and conditions of the Agreement.

Bank shall at all times have a right of set off against any deposit balances of Borrower in the possession of Bank and Bank may apply the same against payment of this Note or any other indebtedness of Borrower to Bank, irrespective of whether or not Bank has made any demand under the Agreement. The payment of any indebtedness evidenced by this Note prior to the Maturity Date shall not affect the enforceability of this Note as to any future, different or other indebtedness incurred hereunder by Borrower. In the event the indebtedness evidenced by this Note is collected by legal action or through legal counsel, Bank shall be entitled to recover from Borrower all costs of collection, including, without limitation, reasonable legal fees if collected by or through legal counsel.

 


Borrower acknowledges that the actual crediting of the amount of any disbursement under the Agreement to an account of Borrower or recording such amount in the records of Bank shall, in the absence of manifest error, constitute presumptive evidence of such disbursement. Such account records shall constitute, in the absence of manifest error, presumptive evidence of principal amounts outstanding and the payments made under the Agreement at any time and from time to time, provided, however, that the failure of Bank to record in such account the type or amount of any advance shall not affect the obligation of the undersigned to repay such amount together with interest thereon in accordance with this Note and the Agreement.

For the purposes of this Note, whenever interest to be paid hereunder is to be calculated on the basis of 360 days or any other period of time that is less than a calendar year, the yearly rate of interest to which the rate determined pursuant to such calculation is equivalent is the rate so determined multiplied by the actual number of days in the calendar year in which the same is to be ascertained and divided by 360 or such other number of days in such period, as the case may be.

Failure or forbearance of Bank to exercise any right hereunder, or otherwise granted by the Agreement or by law, shall not affect or release the liability of Borrower hereunder, and shall not constitute a waiver of such right unless so stated by Bank in writing. THIS NOTE AND THE RIGHTS AND OBLIGATIONS HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF) OF THE STATE OF GEORGIA. TIME IS OF THE ESSENCE OF THIS NOTE.

PRESENTMENT FOR PAYMENT, NOTICE OF DISHONOR AND PROTEST ARE HEREBY WAIVED.

Executed under hand and seal of Borrower as of the day and year first above written.

 

 

 

 

 

 

 

2


EXHIBIT B

Permitted Liens

The following described Liens are Permitted Liens (if none, so state):

 

Name of Lien Holder    Date of Recording    Collateral

Trade Names and Styles

The following are the only trade names or trade styles ever used by Borrower (if none, so state):

Subsidiaries

The following are all of the subsidiaries owned by Borrower (if none, so state):

Business Locations

The following are all of the locations where Borrower has an office or other place of business or owns assets:


EXHIBIT C

COMPLIANCE CERTIFICATE OF BORROWER

(Pursuant to Section 7.2 of Loan Agreement dated __________________)

__________________ (the “Borrower”) HEREBY CERTIFIES that:

This Compliance Certificate is furnished pursuant to the Loan Agreement (the “Agreement”) dated __________________ by and between Borrower and TRUIST BANK (“Bank”). Unless otherwise defined herein, the terms used in this Report have the meanings given to them in this Agreement.

The figures and information for determining compliance by Borrower with the financial covenants set forth in the Quarterly Covenant Compliance Report attached hereto have been prepared based upon the financial reports accompanied hereby and both the Quarterly Covenant Compliance Report and such financial reports are true and complete as of the date hereof.

The activities of Borrower during the preceding quarter have been reviewed by the president or other authorized officer or the employees or agents under his immediate supervision. Based on such review, to the best knowledge and belief of the president or other authorized officer, and as of the date of this Certificate, Borrower has performed and observed each and every covenant contained in the Agreement to be performed by it, and no Event of Default or Default Condition exists, except for the following:

Please describe or indicate “None” if none exist:

 

 

 

 

 

 

Borrower has properly and accurately reported all Asset Dispositions pursuant to Section 2.10 of the Agreement.

WITNESS my hand this _______ day of ______________________, _______.


EXHIBIT D

QUARTERLY COVENANT COMPLIANCE REPORT

(Section 6 - Financial Covenants)

Test Borrower                              

For Quarter Ending:                     

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

 

I.    Rental Revenue to Debt Service
A.    Enter amount of quarterly Rental Revenue.                                                         
B.    Enter amount of quarterly Rental Revenue attributable to store locations open less than 25 months.                                                         
C.    Subtract B from A.                                                         
D.    Enter amount of quarter’s Debt Service.                                                         
E.    Enter amount of quarter’s Debt Service attributable to store locations open less than 25 months.                                                         
F.    Subtract E from D.                                                         
  

Ratio of C:F.

                                                            
  

STANDARD --- Ratio not less than ---

   2.2: 1.0
Compliance        Yes        ☐        No         ☐   
II.    Debt to Rental Revenue   
A.    Enter amount of Debt.                                                         
B.   [Enter amount of Debt attributable to store locations open less than 19 months.]                                                         
C.    [Subtract B from A.                                                         ]


D. Enter Amount of last quarter’s Rental Revenue.                                                         
E. [Enter amount of last quarter’s Rental Income attributable to store locations open less than 19 months.                                                         ]

F.

   [Subtract E from D.                                                         5
  

Ratio of C : F.

                                                          
  

STANDARD

   [  ]:1.0                                             

Compliance ?        Yes        ☐        No        ☐

  

Note: All terms are those used in generally accepted accounting practices unless specifically defined in the Agreement.

 

5 

Note: This covenant will apply and be tested on last day of each calendar quarter, and not be tied to any Opening Date of store locations in the case of any Borrowers who have Term Loans. In which case, the bracketed portions of this Debt to Rental Revenue covenant will not be applicable. Covenant levels for this covenant will be established by Aaron’s or in the applicable Loan Agreement for each Borrower.

 

2


EXHIBIT E

FORM OF SECURITY AGREEMENT

THIS AGREEMENT is made as of •, 20•

BETWEEN

•, a [corporation][limited partnership][partnership] [incorporated/formed] under the laws of [the Province of •][Canada] (the “Debtor”),

- and -

TRUIST BANK, a North Carolina banking corporation (the “Secured Party”).

WHEREAS the Debtor has entered into the Loan Agreement with the Secured Party pursuant to which certain credit facilities will be extended to the Debtor;

AND WHEREAS the Debtor has agreed to grant a security interest and assignment, mortgage and charge in the Collateral to the Secured Party in order to secure the performance of its Obligations;

NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

ARTICLE 1 - INTERPRETATION

1.1 Interpretation. In this Agreement, unless something in the subject matter or context is inconsistent therewith, capitalized terms used and not otherwise defined in this Agreement have the meanings given to them in the Loan agreement and:

“Agreement” means this agreement, including its recitals and schedules, as amended from time to time.

“Collateral” has the meaning set out in Section 2.1.

“Loan Agreement” means the loan agreement made as of •, 20• between the Debtor and the Secured Party as amended from time to time.

“Event of Default” means any of the events described as “events of default” in the Loan Agreement.

“Obligations” means all obligations and liabilities of any kind whatsoever of the Debtor to the Secured Party in connection with or relating to the Loan Agreement, including all debts and liabilities, present or future, direct or indirect, absolute or contingent, matured or not, whenever, wherever and however incurred, in any currency at any time owing by the Debtor to the Secured Party or remaining unpaid by the Debtor to the Secured Party and whether the same is from time to time reduced and thereafter increased or entirely extinguished and thereafter incurred again, whether incurred by the Debtor alone or with another or others and whether as principal or surety or otherwise, including all interest, commissions, legal and other costs, charges and expenses.


The terms “accessions”, “accounts”, “chattel paper”, “documents of title”, “goods”, “instruments”, “intangibles”, “inventory”, “money”, “proceeds” and “securities” whenever used herein have the meanings given to those terms in the Personal Property Security Act currently in effect in the province referred to in Section 5.13 below.

 

1.2 Headings. The division of this Agreement into Articles and Sections and the insertion of headings are for convenience of reference only and do not affect the construction or interpretation of this Agreement. The terms “hereof”, “hereunder” and similar expressions refer to this Agreement and not to any particular Article, Section or other portion hereof. Unless something in the subject matter or context is inconsistent therewith, references herein to Articles and Sections are to Articles and Sections of this Agreement.

1.3 Extended Meanings. In this Agreement words importing the singular number only include the plural and vice versa, words importing any gender include all genders and words importing persons include individuals, corporations, limited and unlimited liability companies, general and limited partnerships, associations, trusts, unincorporated organizations, joint ventures and governmental authorities. The term “including” means “including without limiting the generality of the foregoing”. The inclusion of reference to Permitted Liens in the Loan Agreement or herein, by reference or otherwise, is not intended to subordinate, and will not subordinate, the security granted hereunder to any such Permitted Lien.

ARTICLE II - GRANT OF SECURITY INTEREST

2.1 Security Interest. As general and continuing security for the payment and performance of all Obligations, the Debtor hereby grants to the Secured Party a security interest in all of the Debtor’s present and after-acquired undertaking and property, both real and personal including, without limitation, all Lease Contracts (collectively, the “Collateral”), and, as further general and continuing security for the payment and performance of the Obligations, the Debtor hereby also assigns the Collateral (other than trademarks) to the Secured Party and mortgages and charges the Collateral as and by way of a fixed and specific mortgage and charge to the Secured Party.

2.2 Attachment of Security Interest. The Debtor acknowledges that value has been given and agrees that the security interest granted hereby attaches upon the execution of this Agreement by the Debtor (or, in the case of any after-acquired property, at the time of acquisition by the Debtor of any rights therein).

2.3 Real Property. The assignment, mortgage and charge granted hereby will not extend to the last day of the term of any lease or agreement relating to real property, but the Debtor will hold such last day in trust for the Secured Party and, upon the enforcement by the Secured Party of its security, will assign such last day as directed by the Secured Party.

ARTICLE III - DEALING WITH COLLATERAL

3.1 Dealing with Collateral by the Debtor. The Debtor must not sell, lease or otherwise dispose of any of the Collateral without the prior written consent of the Secured Party, except that the Debtor may, until an Event of Default occurs, deal with its money or rent, lease or sell items of Inventory in the ordinary course of its business so that the purchaser thereof takes title thereto free and clear of the security interest, assignment and mortgage and charge granted hereby, but all proceeds of any such sale will continue to be subject to the security granted hereby. Upon the occurrence of an Event of Default and the exercise by the Secured Party of any of its rights and remedies under Section 4.1, all money received by the Debtor will be held by the Debtor in trust for the Secured Party and must be held separate and apart from other money of the Debtor and paid over to the Secured Party on request.

 

2


3.2 Rights and Duties of the Secured Party. The Secured Party may perform any of its rights and duties hereunder by or through agents and is entitled to retain counsel and to act in reliance upon the advice of such counsel concerning all matters pertaining to its rights and duties hereunder.

ARTICLE IV - REMEDIES

4.1 Consequences of a Default. On or after the occurrence of any Event of Default that has not been either cured or waived, at the option of the Secured Party, (a) any or all of the Obligations not yet payable will become immediately payable, without presentment, protest, notice of protest or notice of dishonour, all of which are expressly waived; (b) the obligation, if any, of the Secured Party to extend further credit to the Debtor will cease; and (c) the security granted hereby will become immediately enforceable.

4.2 Remedies. In addition to any right or remedy otherwise provided herein or by law, on or after the occurrence of any Event of Default that has not been either cured or waived, the Secured Party will have the rights and remedies set out in the Loan Agreement and those rights and remedies set forth below, all of which may be enforced successively or concurrently:

(a) the Secured Party may take possession of the Collateral and require the Debtor to assemble the Collateral and deliver or make the Collateral available to the Secured Party at such places as may be specified by the Secured Party, and neither the Secured Party nor any Receiver will be or be deemed to be a mortgagee in possession by virtue of any such actions;

(b) the Secured Party may take such steps as it considers desirable to maintain, preserve or protect the Collateral;

(c) the Secured Party may carry on, or concur in the carrying on of, all or any part of the business of the Debtor;

(d) the Secured Party may have, exercise or enforce any rights of the Debtor in respect of the Collateral;

(e) the Secured Party may sell, lease or otherwise dispose of the Collateral at public auction, by private tender, by private sale or otherwise either for cash or upon credit, upon such terms and conditions as the Secured Party may determine and without notice to the Debtor unless required by law;

(f) the Secured Party may accept all or any part of the Collateral in total or partial satisfaction of the Obligations in the manner provided by law;

(g) the Secured Party may, for any purpose specified herein, including for the maintenance, preservation or protection of any Collateral or for carrying on any of the business or undertaking of the Debtor, borrow money on the security of the Collateral, which security will rank in priority to the security granted hereby;

(h) the Secured Party may occupy and use all or any of the premises, buildings and plants occupied by the Debtor and use all or any of the Equipment and other property of the Debtor for such time as the Secured Party requires to facilitate the realization of the Collateral, free of charge and the Secured Party will not be liable for any rent, charges, depreciation or damages in connection with such actions, nor will the Secured Party or any Receiver be or be deemed to be a mortgagee in possession by virtue of any such actions;

 

3


(i) the Secured Party may appoint a receiver or receiver and manager (each herein referred to as the “Receiver”) of the whole or any part of the Collateral and may remove or replace such Receiver from time to time or may institute proceedings in any court of competent jurisdiction for the appointment of a Receiver of the Collateral;

(j) the Secured Party may discharge any claim, lien, mortgage, charge, security interest, encumbrance or any rights of others that may exist or be threatened against the Collateral, and in every such case the amounts so paid together with costs, charges and expenses incurred in connection therewith will be added to the Obligations.

4.3 Powers of the Receiver. Any Receiver will have all of the rights and powers that the Secured Party is entitled to exercise pursuant to Section 4.3 but the Secured Party will not be in any way responsible for any misconduct or negligence of any such Receiver.

4.4 Liability of Secured Party. The Secured Party will not be liable or responsible for any failure to seize, collect, realize, or obtain payment with respect to the Collateral and is not bound to institute proceedings or to take other steps for the purpose of seizing, collecting, realizing or obtaining possession or payment with respect to the Collateral or for the purpose of preserving any rights of the Secured Party, the Debtor or any other person in respect of the Collateral. In the exercise of its rights and the performance of its obligations, the Secured Party will only be liable for gross negligence or wilful misconduct.

4.5 Proceeds of Realization. The Secured Party may apply any proceeds of realization of the Collateral to payment of costs, fees and expenses, including those related to the realization of the Collateral, and the Secured Party may apply any balance to payment of all other Obligations in such order as the Secured Party sees fit. If there is any surplus remaining, the Secured Party may pay it to any person entitled thereto by law of whom the Secured Party has knowledge and any balance remaining may be paid to the Debtor. If the realization of the Collateral fails to satisfy the Obligations, the Debtor will be liable to pay any deficiency to the Secured Party.

4.6 Waivers by Debtor. The Secured Party may (a) grant extensions of time, (b) take and perfect or abstain from taking and perfecting security, (c) give up any security, (d) accept compositions or compromises, (e) grant releases and discharges, and (f) otherwise waive rights against the Debtor, debtors of the Debtor, guarantors and others and with respect to the Collateral and other security as the Secured Party sees fit. No such action or omission will reduce the Obligations or affect the Secured Party’s rights hereunder.

ARTICLE V - GENERAL

5.1 Appointment of Consultant. The Secured Party will be entitled to an appoint a consultant to provide such services and advice as the Secured Party may determine in its sole discretion, with power to enter the Debtor’s premises, to inspect and evaluate the Collateral, to make copies of the Debtor’s records, to review the Debtor’s business plans and projections, to assess the conduct and viability of the Debtor’s business, to prepare reports on the Debtor’s affairs and to distribute such reports to the Secured Party or to other such persons as the Secured Party may direct. Such consultant will act as an agent for the Secured Party and will owe no duty to the Debtor. The consultant is to have no managerial or advisory capacity and will have no decision making responsibility. The Debtor authorizes the Secured Party to provide confidential information to the consultant. All fees and expenses in connection with the engagement of a consultant are payable by the Debtor to the Secured Party.

 

4


5.2 Waivers of Legal Limitations. To the fullest extent permitted by law, the Debtor waives all of the rights, benefits and protections that is given by the provisions of any law that imposes limitations upon the powers, rights or remedies of a secured party, including any law that limits the rights of a secured party to both seize Collateral and sue for any deficiency following realization of Collateral. Without limitation, the Debtor (if a corporation) agrees that the Limitation of Civil Rights Act and Part IV of the Saskatchewan Farm Securities Act of the Province of Saskatchewan will not apply to this agreement or any of the rights, remedies or powers of the Secured Party or any Receiver hereunder.

5.3 Benefit of the Agreement. This Agreement will enure to the benefit of and be binding upon the respective successors and permitted assigns of the parties.

5.4 Entire Agreement. This Agreement has been entered into pursuant to the provisions of the Loan Agreement and is subject to all the terms and conditions thereof and, if there is any conflict or inconsistency between the provisions of this Agreement and the provisions of the Loan Agreement, the rights and obligations of the parties will be governed by the provisions of the Loan Agreement. This Agreement cancels and supersedes any prior understandings and agreements between the parties with respect thereto. There are no representations, warranties, terms, conditions, undertakings or collateral agreements, express, implied or statutory, between the Secured Party and the Debtor with respect to the subject matter hereof except as expressly set forth herein or in the Loan Agreement.

5.5 Amendments and Waivers. No amendment to this Agreement will be valid or binding unless set forth in writing and duly executed by all of the parties. No waiver of any breach of any provision of this Agreement will be effective or binding unless made in writing and signed by the party purporting to give the same and, unless otherwise provided, will be limited to the specific breach waived.

5.6 Assignment. The rights of the Secured Party under this Agreement may be assigned by the Secured Party without the prior consent of the Debtor. The Debtor may not assign its obligations under this Agreement.

5.7 Severability. If any provision of this Agreement is determined by any court of competent jurisdiction to be illegal or unenforceable, that provision will be severed from this Agreement and the remaining provisions will continue in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to either of the parties.

5.8 Notices. Any demand, notice or other communication to be given in connection with this Agreement must be given in accordance with the Loan Agreement

5.9 Remedies Cumulative; Additional Continuing Security. The rights and remedies of the Secured Party hereunder are cumulative and are in addition to and not in substitution for any other security now or hereafter held by the Secured Party or any other rights or remedies available at law or in equity or otherwise. No single or partial exercise by the Secured Party of any right or remedy precludes or otherwise affects the exercise of any other right or remedy to which the Secured Party may be entitled. This Agreement is a continuing agreement and security that will remain in full force and effect until discharged by the Secured Party.

5.10 Further Assurances. Each of the Debtor and the Secured Party will from time to time execute and deliver all such further documents and instruments, including financing statements and schedules, and do all acts and things as the other party may reasonably require to effectively carry out or better evidence or perfect the security granted hereby and the full intent and meaning of this Agreement.

 

5


5.11 Power of Attorney. The Debtor hereby irrevocably appoints any officer for the time being of the Secured Party the true and lawful attorney of the Debtor upon the occurrence of an Event of Default that is continuing, with full power of substitution, to do all things and execute and deliver all such documents and instruments, including financing statements and schedules, as are referred to in Section 5.9 above, with the right to use the name of the Debtor whenever and wherever the officer may deem necessary or expedient and from time to time to exercise all rights and powers and to perform all acts of ownership in respect to the Collateral in accordance with this Agreement.

5.12 Discharge. The Debtor will be entitled to a discharge of this Agreement and termination of any and all commitments under the Loan Agreement or under any other Loan Document upon written request by the Debtor and full and irrevocable payment, performance and satisfaction of the Obligations. No discharge will be effective unless in writing and executed by the Secured Party.

5.13 Governing Law. This Agreement is governed by and will be construed in accordance with the laws of the Province of • and the laws of Canada applicable therein.

5.14 Copy of Documents and Consent to Filings. The Debtor acknowledges having received a fully executed copy of this Agreement and, to the extent permitted by applicable law, waives all rights to receive from the Secured Party a copy of any financing statement, financing change statement, or verification statement, filed or issued at any time in respect of this Agreement. The Debtor confirms its consent to the filing by the Secured Party or on its behalf of any financing statement or financing change statement filed or issued at any time in respect of this Agreement.

IN WITNESS WHEREOF the parties have executed this Agreement.

 

DEBTOR

     
  

Per:

 

  

 

Date of Execution

     

 

Name:

      Title:
      c/s
     

 

Name:

      Title:

 

6


SECURED PARTY:       TRUIST BANK
  

Per:

 

  

 

Date of Execution

     

 

Name:

      Title:
      c/s
     

 

Name:

      Title:

 

7


EXHIBIT F

FORM OF PAYOR’S PAD AGREEMENT

Business Pre-Authorized Debit Plan* -

Authorization of the Payor to the Payee to Direct Debit an Account

Instructions:

 

1.

Please complete all sections in order to instruct your financial institution to make payments directly from your account.

 

2.

Please sign the Terms and Conditions that are part of this document.

 

3.

Return the completed form with a blank cheque marked “VOID” to the Payee at the address noted below.

 

4.

If you have any questions, please write or call the Payee.

PAYOR INFORMATION (Please type or print clearly)

Payor Name:

 

 

Address:

 

 

Telephone:

 

 

Name(s) of Authorized Signing Officer(s):

 

 

Signature(s) of Authorized Signing Officer(s):

 

  

Date:

 

PAYOR FINANCIAL INSTITUTION/BANKING INFORMATION (Please type or print clearly)

 

Branch Number

 

  

Institution #

 

  

Account Number

 

Name of Financial Institution

 

Branch

 

Branch Address

 

City/Province

 

  

Postal Code

 


PAYEE INFORMATION (Please type or print clearly)

Payee Name:

 

 

Address:

Number, Street/Avenue/Blvd/Crsc/ City/Province/Postal Code

 

 

Telephone:

Fax:

Email:

 

 

PAYMENT INFORMATION (Please type or print clearly)

 

Please specify whether the payment is a:

(Please check one)

  

☐   Fixed Amount: (Please specify)

  

☐   Variable Amount: If variable, please specify whether there is a maximum amount or indicate N/A if there is no maximum amount:             

Occurring at:

(Please check one)

  

☐   Set intervals: Please specify the timing (i.e. weekly, bi-weekly, monthly)

  

Sporadic intervals

 

The Payor must describe the occurrence of an Event or other criteria that will trigger the debit of the account

☐   Mandatory description here: _________________

Are top-ups or adjustments permissible?

(Please check one)

  

☐   Yes

  

☐   No

 

*

This form is for PADs which relate to commercial activities of a Payor who is a corporation, organization, trade, association, government entity, profession, venture or enterprise.

 

2


PAYOR’S PAD AGREEMENT

Business Pre-Authorized Debit Plan

Terms & Conditions

 

 

1.  In this Agreement “we”, “us” and “our” refers to the Payor indicated on page 1.

 

2.  We agree to participate in this Business Pre-Authorized Debit Plan and we authorize the Payee indicated on page 1 and any successor or assign of the Payee to draw a debit in paper, electronic or other form for the purpose of making payment for goods or services related to our commercial activities (a “Business PAD”) on our account indicated on the page 1 (the “Account”) at the financial institution indicated on page 1 (the “Financial Institution”) and we authorize the Financial Institution to honour and pay such debits.

 

This Agreement and our authorization are provided for the benefit of the Payee and our Financial Institution and are provided in consideration of our Financial Institution agreeing to process debits against our Account in accordance with the Rules of the Canadian Payments Association.

 

We agree that any direction we may provide to draw a Business PAD, and any Business PAD drawn in accordance with this Agreement, shall be binding on us as if signed by us, and, in the case of paper debits, as if they were cheques signed by us.

 

3.  We may revoke or cancel this Agreement at any time upon notice being provided by us either in writing or orally. We acknowledge that in order to revoke or cancel the authorization provided in this Agreement, we must provide notice of revocation or cancellation to the Payee.

 

This Agreement applies only to the method of payment and we agree that revocation or cancellation of this Agreement does not terminate or otherwise have any bearing on any contract that exists between us and the Payee.

 

The Payee shall use best efforts to cancel the Business PAD in the next business, billing or processing cycle but shall within not more than 30 days from the notice cease to issue any new Business PADs.

 

We understand that we may obtain a sample cancellation form, or further information on our right to cancel a PAD Agreement, at our financial institution or at www.cdnpay.ca.

 

4.  We agree that our Financial Institution is not required to verify that any Business PAD has been drawn in accordance with this Agreement, including the amount, frequency and fulfillment of any purpose of any Business PAD.

 

5.  We agree that delivery of this Agreement to the Payee constitutes delivery by us to our Financial Institution. We agree that the Payee may deliver this Agreement to the Payee’s financial institution and agree to the disclosure of any information which may be contained in this Agreement to such financial institution.

Delete either 6(a) or 6(b) as applicable  

6.  (a) We understand that with respect to:

 

(i) fixed amount Business PADs occurring at set intervals, we shall receive written notice from the Payee of the amount to be debited and the due date(s) of debiting, at least 10 calendar days before the first Business PAD, and such notice shall be received every time there is a change in the amount or payment date(s), except as provided in clause (iii) below;

 

(ii)  variable amount Business PADs occurring at set intervals, we shall receive written notice from the Payee of the amount to be debited and the due date(s) of debiting, at least 10 calendar days before the due date of every Business PAD, except as provided in clause (iii) below; and

 

(iii)  fixed amount and variable amount Business PADs occurring at set intervals, where the Business PAD Plan provides for a change in the amount of such fixed and variable amount PADs as a result of our direct action (such as, but not limited to, a telephone instruction) requesting the Payee to change the amount of a PAD, no pre-notification of such changes is required.


  - OR -
If Payor agrees to waive pre-notification, Payor must sign where indicated  

(b) We agree to waive the pre-notification requirements in section 6(a) of this Agreement.

 

__________________________             _______________________________

Signature of Payor                                   Signature of Payor                                

 

7.  We agree that with respect to Business PADs, where the payment frequency is sporadic, an authorization given using a password or secret code or other signature equivalent that is issued to us shall constitute a valid authorization for the Payee or its agent to debit our account.

 

8.  We may dispute a Business PAD by providing a signed declaration to our Financial Institution under the following conditions:

 

(a)   the Business PAD was not drawn in accordance with this Agreement;

 

(b)   this Agreement was revoked or cancelled; or

 

(c)   any pre-notification required and not waived by section 6(b) was not received by us.

 

We acknowledge that, in order to obtain reimbursement from our Financial Institution for the amount of a disputed Business PAD, we must sign a declaration to the effect that either (a), (b) or (c) above took place and present it to our Financial Institution up to and including but not later than ten (10) business days after the date on which the disputed Business PAD was posted to our Account.

 

We acknowledge that, after this ten (10) business day period, we shall resolve any dispute regarding a Business PAD solely with the Payee, and that our Financial Institution shall have no liability to us respecting any such Business PAD.

 

9.  We certify that all information provided with respect to the Account is accurate and we agree to inform the Payee, in writing, of any change in the Account information provided in this Agreement at least ten (10) business days prior to the next due date of a Paper and/or Electronic Business PAD. In the event of any such change, this Agreement shall continue in respect of any new account to be used for Business PADs.

 

10.  We have certain recourse/reimbursement rights if any debit does not comply with this Agreement. For example, we have the right to receive reimbursement for any debit that is not authorized or is not consistent with this PAD Agreement. To obtain more information on our recourse/reimbursement rights, we may contact our financial institution or visit the CPA website at www.cdnpay.ca.

 

11.  We warrant and guarantee that all persons whose signatures are required to sign on the Account have signed this Agreement below. In addition we warrant and guarantee, where applicable, that we have the authority to electronically agree to commit to this Agreement by secure electronic signature and that our secure electronic signature conforms with the requirements of Rule H1.

If Payee intends to use a payment provider must include statement  

12.  We agree that a payment service provider will administer the PAD.

 

[INSERT NAME] will be administering the PAD.

 

13   We understand and agree to the foregoing terms and conditions.

 

2


 

14.  We agree to comply with the Rules of the Canadian Payments Association, or any other rules or regulations which may affect the services described herein, as may be introduced in the future or are currently in effect and we agree to execute any further documentation which may be prescribed from time to time by the Canadian Payments Association in respect of the services described herein.

 

15.  Applicable to the Province of Quebec only: It is the express wish of the parties that this Agreement and any related documents be drawn up and executed in English. Les parties conviennent que la présente convention et tous les documents s’y rattachant soient rédigés et signés en anglais.

 

             

   Per:  

             

  

                 

Name of Payor     

Signature of Authorized Signing Officer

Name:

Title:

   Date
   Per:  

                 

  

                 

    

Signature of Authorized Signing Officer

Name:

Title:

   Date

 

3


EXHIBIT C

TO

LOAN FACILITY AGREEMENT

AND GUARANTY

FORM OF LOAN AND SECURITY AGREEMENT

THIS LOAN AND SECURITY AGREEMENT (this “Agreement”) dated as of _______________, is made between _________________ (“Borrower”), and TRUIST BANK (“Bank”), a North Carolina banking corporation having its principal office in Charlotte, North Carolina.

W I T N E S S E T H:

WHEREAS, Borrower engages in the business of leasing and selling furniture, electronics, appliances, and other household goods and is a franchisee of Aaron’s, LLC, a Georgia limited liability company formerly known as Aaron’s, Inc. (“Aaron’s”);

WHEREAS, Borrower has requested and Bank has agreed to provide financing to Borrower;

WHEREAS, Borrower and Bank wish to enter into this Agreement to set forth the terms and conditions of Bank’s establishment of a credit facility for Borrower;

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

1. DEFINITIONS AND RULES OF CONSTRUCTION

1.1. As used in this Agreement, the following terms shall have the meanings set forth below (terms defined in the singular to have the same meaning when used in the plural and vice versa):

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

Account” means any right of Borrower to payment for goods sold or leased or for services rendered which is not evidenced by an Instrument or Chattel Paper, whether or not earned by performance.

Account Debtor” means any Person who is liable on an Account.

Advance” shall mean an advance of funds by Bank on behalf of Borrower pursuant to the Line of Credit Note or Revolving Note executed by Borrower.

Agreement” means this Loan and Security Agreement and all exhibits, riders and schedules at any time executed by the parties and made a part hereof by reference, either as originally executed or as hereafter amended, restated, modified or supplemented from time to time.

Anti-Corruption Laws” shall mean all laws, rules, and regulations of any jurisdiction applicable to Borrower and its Subsidiaries from time to time concerning or relating to bribery or corruption.


Applicable Law” means all laws, rules and regulations applicable to the Person, conduct, transaction, covenant or Loan Documents in question, including, without limitation, all applicable law and equitable principles; all provisions of all applicable state and federal constitutions, statutes, rules, regulations and orders of governmental bodies; and all orders, judgments and decrees of all courts and arbitrators.

Approved Invoice” means an invoice for the aggregate purchase price of Merchandise purchased by Borrower with a purchase order approved by Aaron’s.

Asset Disposition” shall mean (i) all sales of Merchandise; (ii) all Merchandise which is determined to have been stolen; (iii) all Merchandise that is destroyed, lost or otherwise removed from the premises of Borrower other than pursuant to a Lease Contract or by outright sale or for repair work; and (iv) all “skipped” Merchandise which is Merchandise subject to a Lease Contract.

Asset Disposition Prepayment” shall have the meaning set forth in Section 2.12(b) hereof.

Balances” means all monies and funds of Borrower at any time on deposit with Bank.

Bank” shall mean Truist Bank and its successors and assigns.

Bankruptcy Code” means the Bankruptcy Reform Act of 1978, as may be amended from time to time.

Books and Records” means all of Borrower’s books and records evidencing or relating to its business, financial condition or the Collateral, including, but not limited to, all customer lists, ledgers, invoices, purchase orders, financial statements, computer tapes and disks.

Borrowing Base” shall mean, on any date of determination, an amount equal to [____] multiplied by Rental Revenue for the most recently ended three calendar months.

Borrowing Base Report” shall have the meaning set forth in Section 2.5(iv) hereof.

Business Day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in Charlotte, North Carolina are authorized by law to close.

Chattel Paper” shall have the meaning ascribed to it in the Code.

Closing Date” shall mean for (i) the Revolving Commitment, the date set forth in the Revolving Note on which all Loan Documents have been executed and delivered and the conditions precedent to funding the loan have been satisfied, (ii) the Term Loan, the date set forth in the Term Note on which all Loan Documents have been executed and delivered and the conditions precedent to funding the loan have been satisfied and (iii) the Line of Credit Commitment, the date set forth in the Line of Credit Note on which all Loan Documents have been executed and delivered and the conditions precedent to funding the loan have been satisfied.

Closing Fee” shall have the meaning given to such term in Section 2.13 hereof.

Code” means the Uniform Commercial Code as in effect from time to time in the State of Georgia.

Collateral” shall have the meaning given to such term in Section 3.1 hereof.

 

2


Collateral Agreement” means an agreement executed by Borrower and any other Persons primarily or secondarily liable for all or part of the Loans or granting a security interest to Bank in specified Collateral as security for the Loans, including without limitation, this Agreement and any Guaranties.

Commitment Fee” shall have the meaning set forth in Section 2.14 hereof.

DDA Account” shall mean Borrower’s Demand Deposit Account into which Bank shall deposit the Advances for the purpose of (i) paying, by means of ACH transfer, Approved Invoices arising from purchases of Merchandise from a supplier, including any freight charges to the extent Aaron’s consents thereto and (ii) paying, to Borrower’s own account upon the consent of Aaron’s, state use taxes associated therewith.

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

Debt Service” shall mean, for any particular period, the total required payments of principal (excluding any payments of principal required to be made as a result of any Asset Disposition), interest and fees made by Borrower with respect to its Debt (other than Debt of the Borrower which is subordinated to the Loan Indebtedness owing to the Bank pursuant to a subordination agreement in form and substance satisfactory to the Bank) during such period to the extent that such Debt arises pursuant to this Agreement or any other financing arrangement with respect to Merchandise.

Default Condition” means the occurrence of any event which, after satisfaction of any requirement for the giving of notice or the lapse of time, or both, would become an Event of Default.

Default Rate” means the annual percentage interest rate applied to the principal of the Loans not paid when due under the terms of the applicable Loan Documents, which rate shall equal the sum of two percent (2%) per annum plus the Floating Rate.

Delinquent Payment Fee” shall have the meaning given to such term in Section 2.15 hereof.

Documents” shall have the meaning ascribed to it in the Code.

Environment” means navigable waters, waters of the contiguous zone, ocean waters, natural resources, surface waters, ground water, drinking water supply, land surface, subsurface strata, ambient air, both inside and outside of buildings and structures.

Environmental Laws” means federal, state, local and foreign laws, principles of common law, regulations and codes, as well as orders, decrees, judgments or injunctions issued, promulgated, approved or entered thereunder relating to pollution, protection of the environment or public health and safety, including, but not limited to the release or threatened release of Hazardous Substances into the Environment or otherwise relating to the presence, manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Substances.

 

3


Equipment” means all machinery, equipment, furniture, fixtures, motor vehicles and other tangible personal property (other than Inventory) of Borrower, including, but not limited to, all items described on the Equipment Schedule (if attached) and all substitutions and replacements thereof.

ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

Event of Default” shall have the meaning given to such term in Section 9 hereof.

Floating Rate” means a rate of interest per annum equal to the Prime Rate plus an additional [four and three-quarters] percent ([4.75%]5) per annum, such rate to change as and when the Prime Rate changes.

Franchise Agreement” means the written agreement between Aaron’s and Borrower whereby Borrower is authorized to establish an “Aaron’s” franchise.

GAAP” means generally accepted accounting principles in the United States, consistently applied.

General Intangibles” shall have the meaning ascribed to it in the Code and shall include, without limitation, all of Borrower’s tax refund claims, patents, copyrights, licenses, trademarks, trade names, service marks, patent applications and choses in action.

Guarantor” means each Person who now or hereafter guarantees payment of the whole or any part of the Loan Indebtedness.

Guaranty” means any guaranty agreement executed by each of the partners, shareholders, and where not prohibited by law, the spouses of such persons, of Borrower, or such other Persons as may be required by the Bank, in favor of the Bank with respect to the obligations of Borrower with respect to the Loans in the form provided by the Bank, as the same may be amended, restated or supplemented from time to time.

Hazardous Substances” means any waste, pollutant, hazardous substance, toxic substance, hazardous waste, special waste, industrial substance or waste, petroleum or petroleum-derived substance or waste, or any constituent of any such substance or waste, including without limitation, any such substance regulated under or defined by any Environmental Law.

Instrument” shall have the meaning ascribed to it in the Code.

Inventory” means all inventory of Borrower, including, without limitation, all raw materials, work-in-process, finished goods, goods being leased pursuant to Lease Contracts, and other goods held by Borrower for sale or lease or furnished under contracts of service.

Investment Property” shall have the meaning ascribed to it in the Code.

Lease Contract” means a contract between Borrower and a customer to lease Merchandise in the form approved by Aaron’s (and which may include purchase options).

Lien” means any interest in property securing an obligation, whether such interest is based on the common law, statute or contract, including, without limitation, a security interest, lien or security title arising from a security agreement, mortgage, security deed, trust deed, pledge or condition sale, or a lease, consignment or bailment for security purposes.

 

5 

Note: This interest rate shall be as designated by Aaron’s in the applicable loan Funding Approval Notice.

 

4


Line of Credit Commitment” means the committed line of credit facility established by the Bank in favor of Borrower in the amount set forth in the Line of Credit Note and upon the terms described in this Agreement.

Line of Credit Loan” means a loan or an advance made by the Bank to the Borrower under its Line of Credit Commitment.

Line of Credit Note” means a note executed by Borrower in favor of Bank, substantially in the form of Exhibit A-1 attached hereto in the committed principal amount of the Bank’s Line of Credit Commitment evidencing the obligation of the Borrower to repay its Line of Credit Loans.

Loan Account” means the internal bank loan account established by the Bank for Borrower.

Loan Documents” means this Agreement, the Notes, the Collateral Agreements, any other documents relating to the Loans delivered by Borrower or any guarantor or surety thereof to the Bank and any amendments thereto.

Loan Indebtedness” means all amounts due and payable by Borrower under the terms of the Loan Documents with respect to the Loans made thereunder, including, without limitation, outstanding principal, accrued interest, any late charges, and all reasonable costs and expenses of any legal proceeding brought by the Bank to collect any of the foregoing (including without limitation, reasonable attorneys’ fees).

Loans” means the Line of Credit Loans, Revolving Loans or Term Loans.

Loan Term” shall have the meaning set forth in Section 2.8 hereof.

Maturity Date” shall mean for (i) the Revolving Commitment, the date set forth in the Revolving Note, (ii) the Term Loan, the date set forth in the Term Note and (iii) the Line of Credit Commitment, the date set forth in the Line of Credit Note.

Merchandise” means goods distributed or sold to Borrower through Aaron’s.

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

Note” means the Line of Credit Note, the Revolving Note, or the Term Note, as the case may be.

OFAC” shall mean the U.S. Department of the Treasury’s Office of Foreign Assets Control.

Opening Date” shall mean with respect to each store location, the date determined by Aaron’s to be the opening date of such location in accordance with its standard practice, as notified to the Bank.

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

Permitted Liens” means Liens in favor of Bank or Aaron’s; Liens for taxes not yet due or payable; statutory Liens securing the claims of materialmen, mechanics, carriers and landlords for labor, materials, supplies or leases incurred in the ordinary course of Borrower’s business, but only if payment thereof is not at the time required and such Liens are at all times junior in priority to the Liens in favor of Bank; Liens shown on Exhibit B (if any); and Liens hereafter consented to by Bank in writing.

 

5


Person” means a corporation, an association, partnership, an organization, a business, a business trust, a limited liability company, an individual, a government or political subdivision thereof or a governmental agency.

Prime Rate” means the per annum rate of interest designated from time to time by the Bank to be its prime rate, with any change in the rate of interest resulting from a change in the Prime Rate to be effective as of the opening of business of the Bank on the day of such change. The prime rate is one of several reference rates used by the Bank and the Bank makes loans at rates both higher and lower than the Prime Rate.

Quarterly Covenant Compliance Report” shall mean that Quarterly Covenant Compliance Report substantially in the form of Exhibit D attached hereto.

Rental Revenue” means, for any period, the gross revenues of Borrower from leases to the public of Borrower’s furniture inventory, computer, electronics, appliances and lease equipment including, without limitation, all customer deposits, advance lease payments, waiver fees, late fees, delivery fees, nonsufficient fund fees, reinstatement fees, but excluding all retail sales proceeds and sales taxes.

“Revolving Commitment” means the committed revolving facility established by the Bank in favor of Borrower in the amount set forth in the Revolving Note and upon the terms described in this Agreement.

Revolving Loan” means a loan or an advance made by the Bank to the Borrower under its Revolving Commitment.

Revolving Note” means a note executed by Borrower in favor of Bank, substantially in the form of Exhibit A-2 attached hereto, in the committed principal amount of the Bank’s Revolving Commitment evidencing the obligation of the Borrower to repay its Revolving Loans.

Sanctioned Country” shall mean, at any time, a country or territory that is, or whose government is, the subject or target of any Sanctions.

Sanctioned Person” shall mean, at any time, (i) any Person listed in any Sanctions-related list of designated Persons maintained by OFAC, the U.S. Department of State, the United Nations Security Council, the European Union or any EU member state, (ii) any Person located, organized or resident in a Sanctioned Country or (iii) any Person controlled by any such Person.

Sanctions” shall mean economic or financial sanctions or trade embargoes administered or enforced from time to time by (i) the U.S. government, including those administered by OFAC or the U.S. Department of State or (ii) the United Nations Security Council, the European Union or Her Majesty’s Treasury of the United Kingdom.

Solvent” means, as to any Person, such Person (i) is able to pay, and does pay, its debts as they mature and (ii) has a positive tangible net worth determined in accordance with GAAP.

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

 

6


Subsidiary” means any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by Borrower.

Term Loan” shall mean a single loan made by the Bank to the Borrower in an amount not to exceed the Term Loan Commitment.

Term Loan Commitmentshall mean the obligation of the Bank to make a Term Loan in favor of Borrower in the amount set forth in the Term Note and upon the terms described in this Agreement.

Term Note” means a note executed by Borrower in favor of Bank, substantially in the form of Exhibit A-3 attached hereto in the committed principal amount of the Bank’s Term Loan Commitment evidencing the obligation of the Borrower to repay its Term Loan.

1.2. Accounting Terms and Determination. Accounting terms used in this Agreement such as “amortization,” “depreciation,” “interest expense,” and “tangible net worth” shall have the meaning normally given them by, and shall be calculated (both as to amounts and classification of items) in accordance with, GAAP. Any pronoun used herein shall be deemed to cover all genders. All references to statutes and related regulations shall include any amendments of same and any successor statutes and regulations, and all references to any instruments or agreements, including, without limitation, references to any of the Loan Documents, shall include any and all modifications or amendments thereto and any and all extensions or renewals thereof.

2. LOAN; USE OF PROCEEDS.

2.1. Establishment of DDA Account; Loan Account.

(a) Prior to the Closing Date, Bank shall establish a DDA Account for Borrower.

(b) Prior to the Closing Date, Bank shall also establish on its books an internal loan account in Borrower’s name (the “Loan Account”) in which Bank shall record, in accordance with customary accounting practice, all charges, expenses and other items properly chargeable to Borrower; all payments made by Borrower on account of indebtedness evidenced by the Loan Account; all proceeds of Collateral which are finally paid to Bank at its office in cash or solvent credits; and other appropriate debits and credits. The debit balance of the Loan Account shall reflect the amount of Borrower’s Loan Indebtedness from time to time by reason of the Loans and other appropriate charges hereunder. At least once each month, Bank shall render a statement of account for the Loan Account, which statement shall be considered correct, and accepted by and conclusively binding upon Borrower, unless Borrower notifies Bank to the contrary within thirty (30) days after Bank’s sending of said statement to Borrower.

2.2. Establishment of Line of Credit Loan. Any Line of Credit Commitment now or hereafter committed to by Bank pursuant to which Borrower shall execute and deliver to Bank a Line of Credit Note shall be governed by and issued pursuant to the provisions, terms and conditions set forth herein.

2.3. Line of Credit Advances.

(i) Upon Borrower’s execution of this Agreement and a Line of Credit Note and compliance with the terms of this Agreement, and subject to Bank’s confirmation if requested by Aaron’s that Bank has a first priority security interest in the Collateral, Bank shall notify Borrower that Borrower may request Advances pursuant to the Line of Credit Commitment. Bank shall make such Advances into the DDA Account (or, with the written consent of Aaron’s, such other account for which wiring instructions

 

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have been provided to the Bank) for the sole purposes of (x) honoring requests from Borrower, made through the Aaron’s Proprietary System, for ACH transfers (or such other method approved in writing by Aaron’s) to suppliers of Merchandise in payment of Approved Invoices, including any freight charges to the extent Aaron’s consents thereto, or with Aaron’s consent, to Borrower’s own account for the payment of sales use taxes or (y) honoring requests from any Borrower for Advances made via ACH transfers to an operating account or other location specified by such Borrower (and granted a vendor identification number by Aaron’s) and, to the extent permitted by Aaron’s, for working capital and for other purposes to the extent approved by Aaron’s. The maximum principal amount of Advances under the Line of Credit Commitment at any time outstanding shall not exceed the committed amount of the Line of Credit Commitment. Each Advance shall be in the amount of not less than $500.

(ii) Borrower shall submit purchase order requests for Merchandise to Aaron’s from time to time. In the event that the purchase order is authorized pursuant to the Franchise Agreement, Aaron’s will prepare the purchase order and submit the same to the appropriate supplier requested by Borrower. The supplier will be instructed to ship all Merchandise directly to Borrower and Borrower will be responsible for (i) inspecting all Merchandise and resolving all disputes regarding the Merchandise with such supplier and (ii) paying all freight and other shipping and/or insurance charges arising in connection therewith with funds other than Loan proceeds, unless otherwise agreed by Aaron’s. The supplier will invoice Borrower for such Merchandise in accordance with normal industry practice. When Borrower wishes to pay such invoice, Borrower, subject to availability of the Line of Credit Commitment, shall pay such invoice by directing the Bank, through the Aaron’s Proprietary System, to pay such invoice by means of an ACH transfer from its DDA Account (or such other method approved in writing by Aaron’s). Any directions for ACH transfers correctly inputted into the Aaron’s Proprietary System prior to 12:00 Midnight (Charlotte, North Carolina time) on any Business Day, shall be paid by the Bank no later than the third Business Day thereafter, unless Borrower is otherwise notified by Aaron’s or the Bank.

(iii) Upon receipt of the request for an ACH transfer (provided that such request relates to an Approved Invoice), the Bank shall honor such request by making an Advance pursuant to the Line of Credit Commitment in the amount of such request into the Borrower’s DDA Account (or, with the written consent of Aaron’s, such other account for which wiring instructions have been provided to the Bank) and automatically forwarding such amount to the supplier by means of an ACH transfer in accordance with the instructions of Borrower (or such other method approved in writing by Aaron’s). Upon receipt of any request to deposit funds into an account in the name of Borrower and receipt of Aaron’s approval thereof, the Bank shall honor such request by making an Advance pursuant to the Line of Credit Commitment in the amount of such request into the Borrower’s DDA Account or, with the written consent of Aaron’s, such other account for which wiring instructions have been provided to the Bank) and automatically forwarding such amount to such account of the Borrower by means of an ACH transfer in accordance with the instructions of Borrower (or such other method approved in writing by Aaron’s). In the event that a request for an ACH transfer is presented for payment and Borrower’s availability pursuant to the Line of Credit Commitment is insufficient to honor such request, the Bank may, but shall have no obligation to, make such overadvance, which shall be an Advance for all purposes hereunder, but shall be due and payable upon demand. At the end of each calendar month, Bank shall provide Borrower with a monthly DDA Account statement in the form customarily used by Bank for its commercial customers and a loan account statement.

(iv) The aggregate amount of Advances made to the Borrower during such month shall be amortized into eighteen (18) or twenty-four (24) (as designated by Aaron’s in writing from time to time) equal payments of principal due and payable on the next succeeding Payment Dates; provided that, in the event that the Bank terminates the Line of Credit Commitment as provided in Section 2.8 below, all outstanding amounts shall be due and payable on the 24th Payment Date following such termination.

 

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2.4. Establishment of Revolving Loan. Any Revolving Commitment now or hereafter committed to by Bank pursuant to which Borrower shall execute and deliver to Bank a Revolving Note shall be governed by and issued pursuant to the provisions, terms and conditions set forth herein.

2.5. Revolving Advances.

(i) Upon Borrower’s execution of this Agreement and a Revolving Note and compliance with the terms of this Agreement and subject to Bank’s confirmation if requested by Aaron’s that Bank has a first priority security interest in the Collateral, Bank shall notify Borrower that Borrower may request Advances pursuant to the Revolving Commitment. Bank shall make such Advances into the DDA Account (or, with the written consent of Aaron’s, such other account for which wiring instructions have been provided to the Bank) solely for the purposes specified in Section 2.3. The maximum principal amount of Advances under the Revolving Commitment at any time outstanding shall not exceed the lesser of (A) the committed amount of the Revolving Commitment and (B) the sum of the Borrowing Base minus the outstanding principal amount of the Term Loan, as most recently reported by Aaron’s to Bank pursuant to Section 2.5(iv) hereof (such lesser amount herein referred to as the “Revolver Availability”). Each Advance shall be in the amount of not less than $500.

(ii) Borrower shall submit purchase order requests for Merchandise to Aaron’s. In the event that the purchase order is authorized pursuant to the Franchise Agreement, Aaron’s will prepare the purchase order and submit the same to the appropriate supplier requested by Borrower. The supplier will be instructed to ship all Merchandise directly to Borrower and Borrower will be responsible for (i) inspecting all Merchandise and resolving all disputes regarding the Merchandise with such supplier and (ii) paying all freight and other shipping and/or insurance charges arising in connection therewith with funds other than Loan proceeds, unless otherwise agreed by Aaron’s. The supplier will invoice Borrower for such Merchandise in accordance with normal industry practice. When Borrower wishes to pay such invoice, Borrower, subject to the Revolver Availability, shall pay such invoice by directing the Bank, through the Aaron’s Proprietary System, to pay such invoice by means of an ACH transfer from its DDA Account (or such other method approved in writing by Aaron’s). Any directions for ACH transfers correctly inputted into the Aaron’s Proprietary System prior to 12:00 Midnight (Charlotte, North Carolina time) on any Business Day, shall be paid by the Bank no later than the third Business Day thereafter, unless Borrower is otherwise notified by Aaron’s or the Bank.

(iii) Upon receipt of the request for an ACH transfer (provided that such request relates to an Approved Invoice), the Bank shall honor such request by making an Advance pursuant to the Revolving Commitment in the amount of such request into the Borrower’s DDA Account (or, with the written consent of Aaron’s, such other account for which wiring instructions have been provided to the Bank) and automatically forwarding such amount to the supplier by means of an ACH transfer in accordance with the instructions of Borrower (or such other method approved in writing by Aaron’s). Upon receipt of any request to deposit funds into an account in the name of Borrower and receipt of Aaron’s approval thereof, the Bank shall honor such request by making an Advance pursuant to the Revolving Commitment in the amount of such request into the Borrower’s DDA Account (or, with the written consent of Aaron’s, such other account for which wiring instructions have been provided to the Bank) and automatically forwarding such amount to such account of the Borrower by means of an ACH transfer in accordance with the instructions of Borrower (or such other method approved in writing by Aaron’s). In the event that a request for an ACH transfer is presented for payment and Borrower’s availability pursuant to the Revolving Commitment is insufficient to honor such request, the Bank may, but shall have no obligation to, make such overadvance, which shall be an Advance for all purposes hereunder, but shall be due and payable upon demand. At the end of each calendar month, Bank shall provide Borrower with a monthly DDA Account statement in the form customarily used by Bank for its commercial customers and a loan account statement.

 

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(iv) On the fifth Business Day of each month, for Borrowers with a Revolving Loan (as determined on the last day of the preceding calendar month), Aaron’s shall calculate the Borrowing Base and report the same to Bank in writing (the “Borrowing Base Report”), and Bank shall be entitled to rely conclusively upon such information. Upon receipt of the Borrowing Base Report, Bank shall input such information into Bank’s loan records to be effective as of the date which is two Business Days after receipt of such information. On the 15th day of each calendar month, Bank shall mail to Borrower a bill setting forth the total amount of principal (to the extent that the aggregate outstanding principal amount of the Revolving Loans exceeds the lesser of the Revolving Commitment or the Borrowing Base as set forth in the most recent Borrowing Base Report) and interest due on the next Payment Date which bill shall be considered correct, and accepted by and conclusively binding upon Borrower, unless Borrower notifies Bank to the contrary within thirty (30) days after Bank’s sending of said bill to Borrower. In addition, Bank, on the date which is two Business Days after receipt of the Borrowing Base Report from Aaron’s, shall notify Borrower in writing (including facsimile) of the new Borrowing Base for Borrower and shall require that Borrower repay on the next Payment Date any additional Advances made since the date of the preparation of the statement for such Payment Date if necessary to avoid any overadvance as of such date and such amount (in addition to any amounts set forth in the bill to Borrower) shall be due and payable on the next Payment Date.

2.6. Term Loan. Any Term Loan Commitment now or hereafter committed to by Bank pursuant to which Borrower shall execute and deliver to Bank a Term Note shall be governed by and issued pursuant to the provisions, terms and conditions set forth herein. Upon Borrower’s execution of this Agreement and a Term Note and compliance with the terms of this Agreement and subject to Bank’s confirmation if requested by Aaron’s that Bank has a first priority security interest in the Collateral, Bank may make a Term Loan to the Borrower in a principal amount not to exceed the Term Loan Commitment; provided, that if for any reason the full amount of the Bank’s Term Loan Commitment is not fully drawn on the Closing Date, the undrawn portion thereof shall automatically be cancelled.

2.7. Repayment.

(i) Line of Credit Loans. Payments of principal and interest with respect to Line of Credit Loans shall be due and payable by Borrower to Bank on each Payment Date and subject to the provisions of Section 2.8 below, on the Maturity Date for the Line of Credit Commitment, unless sooner accelerated in accordance with the terms hereof.

(ii) Revolving Loans. Payments of principal for Revolving Loans shall be due and payable by Borrower to Bank, subject to the provisions of Section 2.10(b) below, on the Maturity Date for the Revolving Commitment, unless sooner accelerated in accordance with the terms hereof.

(iii) Term Loans. Payments of principal for Term Loans shall be due and payable by Borrower to Bank in installments payable on the dates set forth in the Term Note, provided, that, to the extent not previously paid, the aggregate unpaid principal balance of the Term Loans shall be due and payable on the Maturity Date for the Term Loan.

(iv) Except as provided below, all payments of principal of, or interest on, the Loan Documents (including Asset Disposition Prepayments) and all other sums due under the terms of the Loan shall be made in either (x) immediately available funds (including ACH transfers), or (y) checks or money orders made payable to the Bank at its principal office in Charlotte, North Carolina in accordance with written instructions provided by the Bank. All voluntary prepayments of the Loan shall be made to the Bank at its Program Lending Department in Atlanta, Georgia using preprinted envelopes provided by the Bank for such purpose or, if such envelopes are unavailable, mailed to the following address:

 

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Aaron’s Program Manager

Truist Bank

Program Lending

303 Peachtree Street, N.E., 2nd Floor

Mail Code 1802

Atlanta, Georgia 30308

2.8. Loan Term; Voluntary Termination.

(i) The original term of the Line of Credit Commitment shall be for a period of one year from the Closing Date (the “Loan Term”). Thereafter, the Loan Term shall automatically be extended on each anniversary of the Closing Date for an additional one year period unless either party terminates the Loan as set forth hereunder. Upon ninety (90) days prior written notice to the Borrower, the Bank may, at its option, terminate the Line of Credit Commitment. Upon written notice to the Bank, the Borrower may, at its option, terminate the Line of Credit Commitment. Bank may also terminate the Line of Credit Commitment pursuant to Section 10 hereof. Upon the effective date of a termination of the Line of Credit Commitment effected by Borrower, the principal of and all accrued but unpaid interest on the Loan Indebtedness shall be forthwith due and payable, but all of the duties and covenants of Borrower hereunder, and all rights, remedies and privileges of Bank under this Agreement and Bank’s security interest in the Collateral, shall continue in full force and effect until all of the Loan Indebtedness is fully and finally paid. In the event Bank elects to terminate, (i) Bank shall continue to make Advances until the effective date of the termination and (ii) Advances outstanding at the effective date of the termination shall be repaid according to an eighteen (18) month amortization schedule or a twenty-four (24) month amortization schedule provided above, provided that, notwithstanding the foregoing all outstanding Loan Indebtedness shall be due and payable in full on the 24th Payment Date following termination of the Line of Credit Commitment by the Bank. Nothing set forth in this Section 2.8 shall be deemed to limit the ability of the Bank to declare all amounts outstanding under the Note immediately due and payable upon the occurrence of an Event of Default hereunder as provided herein.

(ii) The Revolving Commitment and the Term Loan shall terminate on the Maturity Date for the Revolving Commitment and the Term Loan set forth in the Revolving Note and the Term Note, as the case may be, which date shall be no more than four years from the Closing Date, subject to Section 10 hereof. Upon the termination of the Revolving Commitment or the Term Loan, the principal of and all accrued but unpaid interest on the Loan Indebtedness shall be forthwith due and payable, but all of the duties and covenants of Borrower hereunder, and all rights, remedies and privileges of Bank under this Agreement and Bank’s security interest in the Collateral, shall continue in full force and effect until all of the Loan Indebtedness is fully and finally paid.

2.9. Interest.

(a) From and after the date hereof, interest shall accrue on the unpaid principal amount of the Loan Indebtedness at the Floating Rate. Interest shall be calculated daily and shall be computed on the basis of actual days elapsed over the period of a 360 day year. Interest shall be payable in arrears on each Payment Date and on the Maturity Date, whether due to acceleration or otherwise. Any principal amount outstanding pursuant to a Loan not paid when due shall bear interest at the Default Rate, which shall be payable upon demand. After the occurrence of an Event of Default and during the continuance thereof, the outstanding principal balance of the Loans shall bear interest at the Default Rate, which shall be payable upon demand.

 

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(b) In no contingency or event whatsoever shall the amount paid or agreed to be paid to Bank for the use, forbearance or detention of money advanced under this Agreement exceed the highest lawful rate permissible under Applicable Law. It is the intent hereof that Borrower will not pay or contract to pay, and that Bank not receive or contract to receive, directly or indirectly in any manner whatsoever, interest in excess of that which may be charged to and paid by Borrower under Applicable Law. All interest (and charges deemed interest) paid or agreed to be paid to Bank shall, to the extent permitted by Applicable Law, be amortized, pro rated, allocated and spread in equal parts throughout the full term hereof until payment in full of the principal amount of the Loan Indebtedness owing hereunder (including the period of any renewal or extension hereof) so that interest on the principal amount of the Loan Indebtedness outstanding hereunder for such full period will not exceed the maximum amount permitted by Applicable Law.

2.10. Loan Prepayment.

(a) Voluntary Prepayment. Borrower shall have the right to prepay the Loans in whole or in part upon at least two (2) Business Days’ prior written notice to Bank. Partial prepayments of any Line of Credit Loan (other than proceeds of Asset Dispositions which shall be applied as set forth in the following Section 2.12(b)) shall be applied to reduce the current month’s Advance(s) to such Borrower with any excess prepayment applied to unpaid principal payments of the Loan as Aaron’s may request and the Servicer may agree in its sole discretion (which may include, but is not limited to, application of such excess prepayment to unpaid principal payments of the Loan in inverse order of maturity or on a pro rata basis).

(b) Mandatory Prepayment. (i) For the Line of Credit Loan, mandatory prepayment shall be required for Asset Dispositions. For the Revolving Loan, on any Payment Date on which the aggregate outstanding principal amount of the Revolving Loan exceeds the lesser of the Revolving Commitment or the Borrowing Base, as most recently reported to Borrower by Bank pursuant to Section 2.5(iv) hereof, Borrower shall prepay the Revolving Loans in the amount of such overadvance, as notified to Borrower by Bank.

2.11. Audits. Borrower hereby consents and authorizes Aaron’s or the Bank or any agent or representative thereof to conduct periodic field audits of Borrower. Such field audits may include, without limitation, examinations of the payment receipts, tax returns, bank statements, loan statements, Lease Contracts, inventory on hand, computer-generated reports of Asset Dispositions, Rental Revenue and other financial data necessary to determine the accuracy and validity of the reports, compliance certificates, financial reports and other information forwarded to either of the Bank or Aaron’s by Borrower in connection with the Loan.

2.12. Tracking of Merchandise; Asset Dispositions.

(a) All Merchandise financed by the Bank must be serialized by means of the Aaron’s Proprietary System for appropriate reconciliation of Advances and receipt of Merchandise and for purposes of tracking Asset Dispositions, if applicable. Borrower shall be obligated to furnish serial numbers for all Merchandise purchased directly to Aaron’s on a weekly basis (and, if available, on a daily basis) by transmittal of Borrower’s receiving report (containing Aaron’s Proprietary System numbers) directly to Aaron’s on the Aaron’s Proprietary System. As set forth more fully below, Aaron’s will maintain and track such information as agent for the Bank and the Bank shall at all times have access to such information.

(b) If Borrower has a Line of Credit Note and an Asset Disposition occurs, Borrower shall immediately report such Asset Disposition to Aaron’s by means of the Aaron’s Proprietary System, such information to include the Aaron’s Proprietary System numbers, and if assigned, the serial numbers of the Merchandise subject to the Asset Disposition, the Net Book Value of such Merchandise and the proceeds received by Borrower therefrom. Aaron’s, on a monthly basis, shall transmit all such information

 

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to the Bank in a summary form. Based solely on such information provided by Aaron’s, the Bank will notify Borrower on a monthly basis, of the amount of the required prepayment (the “Asset Disposition Prepayment”) of the aggregate outstanding amount of the Line of Credit Loan due on the next Payment Date which amount shall be equal to the Net Book Value of the Asset Dispositions during the preceding month not applied to Advances made during such month as set forth above, unless otherwise agreed to by the Bank. The Borrower shall be notified by the Bank by the 15th day of each calendar month of the Asset Disposition Prepayment and payment thereof shall be due on the next succeeding Payment Date.

2.13. Closing Fee. On the Closing Date of each Loan, Borrower shall pay to Bank a closing fee (“Closing Fee”) in the amount of $500 per store location [plus $5,000]7.

2.14. Commitment Fees.

(a) Borrower shall pay a commitment fee (the “Commitment Fee”) on any unused portion of the Line of Credit Commitment and the Revolving Commitment in the amount of _________________% per annum, such Commitment Fee to be paid quarterly in arrears on every third Payment Date, commencing on the third Payment Date after the Closing Date.

(b) All Commitment Fees shall be paid on the dates due, in immediately available funds, to the Bank.

2.15. Delinquent Payment Fees. In the event that any payment due and payable hereunder is not received by the Bank on the Payment Date when due, the Borrower shall, upon request from the Bank, pay to the Bank a delinquent payment fee (the “Delinquent Payment Fee”) in an amount equal to the greater of (i) one percent (1%) of the amount of the late payment and (ii) $500.00.

3. COLLATERAL AND INSURANCE.

3.1. Granting of Security Interest in Collateral. As security for the payment and performance of all of the Loan Indebtedness, Bank shall have and Borrower hereby grants to Bank a continuing security interest in the following described property of Borrower, whether now in existence or hereafter created or acquired and wherever located (collectively, the “Collateral”): all Accounts, Merchandise, Inventory, Investment Property, Equipment, General Intangibles, Documents, Instruments, Chattel Paper (including, but not limited to, the Lease Contracts), Balances, fixtures, and Books and Records, and all products and proceeds of the foregoing (including insurance proceeds). The Loan Indebtedness shall also be secured by any other property (whether real or personal) in which Borrower may have heretofore or concurrently herewith granted, or may hereafter grant, a Lien in favor of Bank.

3.2. Form of Lease Contracts. All Lease Contracts will (a) be in a form prescribed by Aaron’s for use by its franchisees, (b) be transferable to Bank and (c) contain the following provision directly above Borrower’s customer’s signature:

“NOTWITHSTANDING ANYTHING SET FORTH IN THIS AGREEMENT TO THE CONTRARY, THE UNDERSIGNED ACKNOWLEDGES AND CONSENTS TO THE TRANSFER OF, OR GRANT OF A SECURITY INTEREST IN, ANY OR ALL OF THE LESSOR’S RIGHT, TITLE AND INTEREST (RESIDUAL OR OTHERWISE) IN AND UNDER THIS AGREEMENT TO ANY THIRD PARTY. NO SUCH TRANSFER OR GRANT OF

 

 

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Note: in the case of a Borrower with a Revolving Commitment or a Term Loan Commitment that has customized financial covenants as specified by Aaron’s in accordance with Section 6 hereof, an additional $5,000 fee will be charged.

 

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SECURITY INTEREST WILL: (A) AFFECT THE UNDERSIGNED’S LOAN INDEBTEDNESS; (B) CHANGE ANY DUTIES OF, OR INCREASE ANY BURDENS OR RISKS IMPOSED ON, THE PARTIES TO THIS AGREEMENT; OR (C) GIVE RISE TO ANY RIGHTS OR REMEDIES PROVIDED UNDER SECTION 2A-303(1)(b) OF THE UNIFORM COMMERCIAL CODE, AS ADOPTED IN THE APPLICABLE JURISDICTION. NO ENFORCEMENT OF ANY SECURITY INTEREST WILL CONSTITUTE A TRANSFER THAT CHANGES ANY DUTIES OF, OR INCREASES ANY BURDENS OR RISK IMPOSED ON, THE PARTIES TO THIS AGREEMENT. THE UNDERSIGNED WAIVES ALL RIGHTS AND REMEDIES PROVIDED UNDER SECTION 2A-303 OF THE UNIFORM COMMERCIAL CODE, AS ADOPTED IN THE APPLICABLE JURISDICTION.”

Immediately upon execution of the same, all Lease Contracts shall be hereby assigned to Bank, and, immediately upon Bank’s request, delivered to Bank together with any and all related documents, and will contain, by way of a stamp or as a part of the preprinted lease contract, the following legend directly below Borrower’s customer’s signature:

“FOR VALUE RECEIVED, THIS AGREEMENT HAS BEEN ASSIGNED TO TRUIST BANK AND THERE ARE NO DEFENSES AGAINST THE ASSIGNEE.”

Borrower will not assign, sell, pledge, convey or by any other means transfer to any person other than Bank any Lease Contracts or Chattel Paper, without Bank’s prior written consent.

3.3. Other Documents. Borrower shall execute and deliver, or shall be caused to be executed and delivered, to Bank such other instruments, agreements, assignments, notifications or other documents relating to the Collateral as Bank may from time to time request in order to evidence, perfect or continue the perfection of Bank’s Liens upon any of the Collateral.

3.4. Insurance. Borrower shall maintain and keep in force insurance of the types and in the amounts customarily carried in lines of business similar to Borrower’s and such other insurance as Bank may require, including, without limitation, theft, fire, public liability, business interruption, casualty, property damage, and worker’s compensation insurance, which insurance shall be carried with companies and in amounts satisfactory to Bank. All casualty and property damage insurance shall name Bank as mortgagee, sole loss payee or additional insured, as appropriate. Borrower shall deliver to Bank from time to time, at Bank’s request, copies of all such insurance policies and certificates of insurance and schedules setting forth all insurance then in effect. Each policy of insurance shall contain a clause requiring the insurer to give not less than thirty (30) days’ prior written notice to Bank in the event of any lapse, termination or cancellation of the policy for any reason whatsoever and a clause that the interest of Bank shall not be impaired or invalidated by any act or neglect of Borrower or owner of the property nor by the occupation of the premises for purposes more hazardous than are permitted by said policy. All such insurance policies shall contain such other provisions as Bank may require in order to protect Bank’s security interests in the collateral and Bank’s right to receive payments under such policies. Borrower hereby appoints Bank as attorney-in-fact for Borrower to file claims under any insurance policies, to receive, receipt and give acquittance for any payments that may be payable to Borrower thereunder, and to execute any and all endorsements, receipts, releases, assignments, reassignments, or other documents that may be necessary to effect the collection, compromise or settlement of any claims under any such insurance policies, which power of attorney shall be deemed coupled with an interest and irrevocable so long as Bank shall have a security interest in any of the Collateral pursuant to this Agreement. If Borrower shall fail to procure such insurance or to pay any premium with respect thereto, then Bank may, at its discretion, procure such insurance or pay such premium and any costs so incurred by Bank shall constitute a part of the liabilities secured hereby. Bank may apply the proceeds of any insurance policy received by Bank to the payment of any liabilities, whether or not due, in such order of application as Bank shall determine. Borrower shall promptly furnish Bank with certificates or other evidence satisfactory to Bank indicating compliance with the foregoing insurance requirements.

 

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3.5. Validation and Collection of Accounts. Whether or not a Default Condition or an Event of Default has occurred, Bank shall have the right, at any time or times hereafter, in the name of Bank or any designee of Bank to verify the validity, amount or any other matter relating to any Accounts by mail, telephone or otherwise, and Borrower shall fully cooperate with Bank in an effort to facilitate and promptly conclude any such verification process. Unless Bank shall at any time following the occurrence of an Event of Default, elect to give notice to Account Debtors to make payments on the Accounts directly to Bank, Borrower shall endeavor in the first instance to make collection of its Accounts for Bank. Borrower shall at the request of Bank notify the Account Debtors of the security interest of Bank in any Account and Bank may itself at any time so notify Account Debtors. Upon or after the occurrence of an Event of Default, Borrower shall (if and to the extent requested to do so by Bank) notify the Account Debtors to make all payments owing to Borrower directly to Bank for application to the Loan Indebtedness.

3.6. Maintenance of Collateral. Borrower shall maintain all Inventory and Equipment in good condition, reasonable wear and tear excepted in the case of Equipment, and shall, as and when requested by Bank, provide Bank with a list of all of the Equipment and evidence of ownership thereof. Borrower shall not permit any of the Equipment to become affixed to any real property so that such Equipment is deemed a fixture under the real estate laws of the applicable jurisdiction.

3.7. Expenses Relating to Collateral. Borrower shall pay Bank on demand an amount equal to any and all expenses, including legal fees, incurred or paid by Bank in connection with Bank’s insuring, maintaining, protecting, storing, safeguarding, or paying Liens with respect to any of the Collateral or otherwise discharging any duty or obligation of Borrower with respect to any of the Collateral.

3.8. Rights to Collateral. Bank shall have no duty to collect, protect or preserve the underlying value of any Collateral or any income thereon or to preserve any rights against prior parties. Bank may exercise its rights and remedies with respect to the Collateral without first resorting (and without regard) to any other security for the Loan or other sources of payment or reimbursement for the Loan Indebtedness.

4. CONDITIONS PRECEDENT.

Borrower shall deliver and Bank shall have received the following documents, each in form and substance satisfactory to Bank, as conditions precedent of the Loans:

(a) a validly executed copy of this Agreement;

(b) the validly executed Notes;

(c) a validly executed copy of a Guaranty of each partner or majority stockholder of Borrower, and to the extent not prohibited by Applicable Law, the spouse of such Person; provided, however, that if such spouse is not providing a Guaranty, a validly executed copy of the Spousal Consent;

(d) All documentation and other information with respect to the Credit Parties that Aaron’s or any Participant reasonably believes is required by regulatory authorities under applicable “know-your-customer” and anti-money laundering rules and regulations, including without limitation the Patriot Act;

 

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(e) a validly executed subordination agreement, in form and substance satisfactory to the Bank, from each other debtholder of Borrower;

(f) valid Uniform Commercial Code Financing Statements suitable for filing to enable Bank to perfect the security interest granted to it under this Agreement;

(g) evidence of Borrower’s good standing;

(h) a validly executed officer’s certificate or such other evidence acceptable to Bank evidencing Borrower’s corporate, partnership or other necessary authorization of the Loans and incumbency;

(i) a certificate of insurance from an insurer acceptable to Bank evidencing Borrower’s compliance with Section 3.4 hereof and naming the Bank as loss payee/additional insured as follows:

Aaron’s Program Manager

Truist Bank

Program Lending

303 Peachtree Street, N.E., 2nd Floor

Mail Code 1802

Atlanta, Georgia 30308

(j) a validly executed authorization to make the ACH transfers for payments of principal, interest and fees contemplated hereunder, including without limitation, Asset Disposition Prepayments, mandatory prepayments of the Loans pursuant to Section 2.10(b), which authorization shall be in form and substance satisfactory to the Bank; and

(k) an initial Borrowing Base Report from Aaron’s, if applicable.

In addition, Bank shall have satisfied itself that there are no Liens on any of the Collateral, and Bank shall be satisfied that all corporate or partnership proceedings necessary for the authorization of the Loan shall have been taken and the Bank shall have received any other documents that it deems necessary or advisable.

5. BORROWER’S REPRESENTATIONS AND WARRANTIES.

To induce Bank to enter into this Agreement, Borrower represents and warrants as follows:

5.1. Organization and Qualification of Borrower. Borrower is _________________ under the laws of the state shown on the first page hereof, and is qualified to do business in all jurisdictions where the character of its properties or the nature of its activities make such qualification necessary.

5.2. Trade Names, Subsidiaries and Location of Assets. Exhibit B attached hereto and made a part hereof fully and accurately discloses any legal name, trade name or style ever used by Borrower, any Subsidiaries owned by Borrower, and each office, other place of business or location of assets of Borrower.

5.3. Corporate or Other Authority; No Violation of Other Agreements. The execution, delivery and performance by Borrower of this Agreement and the other Loan Documents have been duly authorized by all necessary action on the part of Borrower and do not and will not (i) violate any provision of Borrower’s articles of incorporation, by-laws, or other organizational documents or any Applicable Law, or (ii) be in conflict with, result in a breach of, or constitute (following notice or lapse of time or both) a default under any agreement to which Borrower is a party or by which Borrower or any of its property is bound.

 

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5.4. Enforceability. This Agreement and each of the other Loan Documents create legal, valid and binding obligations of Borrower enforceable against Borrower in accordance with their respective terms.

5.5. Entire Agreement. The Notes and accompanying Loan Documents executed in connection with the Loans and delivered to Bank are the only contracts evidencing the transaction described herein and constitute the entire agreement of the parties hereto with respect to the transaction.

5.6. Genuineness of Signatures. The Notes and each accompanying Loan Document executed in connection with the Loans are is genuine and all signatures, names, amounts and other facts and statements therein and thereon are true and correct.

5.7. Litigation. There are no actions, suits, proceedings or investigations pending or, to the knowledge of Borrower, threatened before any court or administrative or governmental agency that may, individually or collectively, adversely affect the financial condition or business operations of Borrower.

5.8. Financial Condition. Borrower’s financial statement previously delivered to Aaron’s, fairly and accurately presents the financial condition of Borrower as of such date and has been prepared in accordance with GAAP consistently applied, and since the date of that financial statement, there has been no material adverse change in the financial condition of Borrower. Borrower is now and will remain Solvent.

5.9. Taxes. All federal, state and local tax returns have been duly filed, and all taxes, assessments and withholdings shown on such returns or billed to Borrower have been paid, and Borrower maintains adequate reserves and accruals in respect of all such federal, state and other taxes, assessments and withholdings. There are no unpaid assessments pending against Borrower for any taxes or withholdings, and Borrower knows of no basis therefor.

5.10. Compliance with Laws. Borrower has duly complied with, and its properties and business operations are in compliance in all material respects with, the provisions of all Applicable Laws, including, without limitation ERISA, the Fair Labor Standards Act and all Environmental Laws. Borrower possesses all permits, franchises, licenses, trademark rights, trade names, patents and other authorizations necessary to enable it to conduct its business operations as now conducted, and no filing with, and no consent, authorization, order or license of, any Person is necessary in connection with the execution or performance of this Agreement or the other Loan Documents.

5.11. No Default. No Default Condition or Event of Default exists.

5.12. Accounts. Each Account arises out of a bona fide lease or sale and delivery of goods or rendition of services by Borrower and, unless otherwise indicated by Borrower to Bank in writing promptly after learning thereof, the facts appearing on the invoice evidencing such Account and Borrower’s books relating thereto are true and accurate and payment thereof is not subject to any known dispute, offset or claim except for discounts granted in the ordinary course of Borrower’s business that are reflected on the face of such invoice.

 

17


5.13. Use of Proceeds. None of the proceeds of any Advances or the Term Loan by Bank have been or will be used (i) to purchase or carry (or to satisfy or refinance any indebtedness incurred to purchase or carry) any “margin stock” (as defined in Regulation U of the Federal Reserve Board), (ii) for the purpose of funding, financing or facilitating any activities, business or transaction of or with any Sanctioned Person, or in any Sanctioned Country or (iii) in any manner that would result in the violation of any Sanctions applicable to any party hereto. Advances shall be made for the sole purposes of honoring requests for ACH transfers to (a) suppliers of Merchandise in payment of Approved Invoices, and (b) other accounts specified by Borrower with respect to Advances made for working capital purposes, subject to the approval of Aaron’s, which requests have been entered by the Borrower in the Aaron’s Proprietary System as provided above, or upon the consent of Aaron’s, for the purpose of payment of state use taxes and freight charges. The proceeds of the Term Loan shall be used for acquisition financing, general working capital purposes or such other purpose approved by Aaron’s.

5.14 Anti-Corruption Laws and Sanctions. Borrower has implemented and maintains in effect policies and procedures designed to ensure compliance in all material respects by Borrower, its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions, and Borrower, its Subsidiaries and their respective officers (in such capacity), employees (in such capacity) and, to the knowledge of Borrower, its directors and agents, are in compliance with Anti-Corruption Laws and applicable Sanctions. None of (a) Borrower, any Subsidiary or any of their respective officers (in such capacity) or employees (in such capacity), or (b) to the knowledge of the Borrower, any director or agent of Borrower or any Subsidiary is a Sanctioned Person. No Advance nor the Term Loan, use by the Borrower or any Subsidiary of the proceeds thereof or other transactions contemplated hereby will violate Anti-Corruption Laws or applicable Sanctions.

Each submission of an Approved Invoice made by Borrower pursuant to this Agreement or any other Loan Document shall constitute an automatic representation and warranty by Borrower to Bank that there does not then exist any Default Condition or Event of Default and a reaffirmation as of the date of said request that all representations and warranties of Borrower contained in this Agreement and the other Loan Documents are true in all material respects. All representations and warranties contained in this Agreement or in any of the other Loan Documents shall survive the execution, delivery and acceptance hereof by Bank and the closing of the transactions described herein.

6. FINANCIAL COVENANTS.

Borrower shall comply with the following financial covenant[s]:

[(i) Rental Revenue to Debt Service. Commencing on the first day of the calendar quarter in which the 25th month following the Opening Date of the first store location of the Borrower occurs and measured as of the last day of the calendar quarter in which such 25th month occurs and on the last day of each calendar quarter thereafter, the ratio of the Borrower’s Rental Revenue to Debt Service for such quarter shall not be less than 2.2:1.0;]8

(ii) Debt to Rental Revenue. [Commencing on the first day of the calendar quarter in which the first day of the 19th month following the Opening Date of the first store location of Borrower occurs and measured as of the last day of the calendar quarter in which such 19th month occurs and on the last day of each calendar quarter thereafter,][On the last day of each calendar quarter] the ratio of Borrower’s Debt to Borrower’s Rental Revenue, shall not exceed [__]:1.0.9

 

8 

Note: This covenant will not apply in the case of any Borrowers who have Revolving Loans or Term Loans as, in such case, the Borrowing Base in the applicable Loan Agreement will apply in lieu of this covenant.

9 

Note: This covenant will apply and be tested on last day of each calendar quarter and not be tied to any Opening Date of store locations in the case of any Loan Agreement providing for Loans to be made available to a Borrower consisting of Revolving Loans and/or Term Loans. Covenant levels for this covenant will be established by Aaron’s for each Borrower as per the Servicing Agreement.

 

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To the extent any of the financial covenants set forth above in this Section 6 are calculated based upon the Opening Date of a store location, the financial information from store locations that have not reached the Opening Date anniversary incorporated into such covenants shall be excluded from such calculations. Debt Service and Debt attributable to such locations and deducted from the final calculations shall be deducted on a pro rata basis calculated by dividing such stores’ aggregate Net Book Value of Merchandise by the Net Book Value of Merchandise for all store locations. The financial covenants shall otherwise be calculated on a consolidated basis as to all store locations.

7. BORROWER’S AFFIRMATIVE COVENANTS.

During the term of this Agreement, and thereafter for so long as there is any outstanding Loan Indebtedness to Bank, Borrower covenants that, unless otherwise consented to by Bank in writing, it shall:

7.1. Financial Reports. Deliver to Aaron’s or cause to be delivered to Aaron’s:

(i) on or before the last Business Day of each month, an unaudited balance sheet and income statement accurately reflecting the financial transactions and status of the Borrower as of the end of the prior month and on a year to date basis, on a consolidated and per store basis; prepared in accordance with GAAP in the format recommended by Aaron’s;

(ii) on or before the last Business Day of each month after the end of each calendar quarter (a) an unaudited balance sheet and income statement accurately reflecting the financial transactions and status of Borrower as of the end of the prior month and on a quarterly basis, on a consolidated and per store basis, prepared in accordance with GAAP in the format recommended by Aaron’s, and (b) a compliance certificate as described below in Section 7.2;

(iii) within 90 days after the end of each fiscal year a balance sheet and income statement of Borrower as of the end of such year, compiled by such firm of independent public accountants as may be designated by Borrower and be satisfactory to Bank as prepared in accordance with GAAP and, to the extent delivered to Aaron’s, audited financial statements for such period;

(iv) within 120 days after the end of each fiscal year, an annual personal financial statement of each Guarantor; and

(v) with reasonable promptness, all reports by Borrower to its shareholders and such other information as Aaron’s or the Bank may reasonably request from time to time.

7.2. Compliance Certificate. Prepare and deliver to Aaron’s, to the extent that Borrower has a Line of Credit Loan, in conjunction with the quarterly financial reports required to be delivered pursuant to Section 7.1(iii) above, a quarterly Compliance Certificate (the form of which is attached hereto as Exhibit C) including the Quarterly Covenant Compliance Report attached hereto as Exhibit D) presenting the calculation of the financial covenants set forth above in Section 6, noting any negative variances with the covenants and explaining any such variances.

Borrower acknowledges that Aaron’s will review each Compliance Certificate and may revise the calculations set forth on such Compliance Certificate to be consistent with the information shown on quarterly detailed Inventory reconciliation reports and detailed revenue reports prepared by Aaron’s each

 

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quarter showing the amount of Inventory at each of Borrower’s stores as of the end of such quarter and the amount of monthly and quarterly revenue at each of Borrower’s stores. Borrower acknowledges that Aaron’s will forward copies of each Compliance Certificate, with revised calculations as appropriate, to Bank and agrees that Bank shall be entitled to rely each such Compliance Certificate, as revised by Aaron’s, for purposes of determining whether the covenants set forth in Section 6 above have been met.

7.3. Books and Records. Maintain its Books and Records and accounts in accordance with GAAP and permit any Person designated by Bank or Aaron’s to visit Borrower’s premises, inspect any of the Collateral or any of the Books and Records, and to make copies thereof and take extracts therefrom, and to discuss Borrower’s financial affairs with Borrower’s financial officers and accountants.

7.4. Taxes. Promptly file all tax returns and pay and discharge all taxes, assessments, withholdings and other governmental charges imposed upon it, its income or profits, or upon any property belonging to it, prior to the date on which penalties attach thereto.

7.5. Notices to Bank. Promptly notify Bank in writing of (i) the occurrence of any Default Condition or Event of Default; (ii) any pending or threatened litigation claiming damages in excess of $25,000 or seeking relief that, if granted, would adversely affect the financial condition or business operations of Borrower; (iii) the release or discharge of any Hazardous Substance on any property owned by Borrower; and (iii) any asserted violation by Borrower of or demand for compliance by Borrower with any Applicable Law.

7.6. Compliance with Applicable Laws. Comply in all material respects with all Applicable Laws, including, without limitation, ERISA, the Fair Labor Standards Act and all Environmental Laws.

7.7. Corporate Existence. Maintain its separate corporate existence and all rights, privileges and franchises in connection therewith, and maintain its qualification and good standing in all jurisdictions where the failure to do so could have a material adverse effect upon its financial condition or ability to collect the Accounts.

8. NEGATIVE COVENANTS.

During the term of this Agreement, and thereafter for so long as there are is Loan Indebtedness outstanding, Borrower covenants that unless Bank has first consented thereto in writing, it will not:

8.1. Merger; Disposal or Moving of Collateral. Merge or consolidate with or acquire any substantial portion of the assets or stock of any Person; sell, lease, transfer or otherwise dispose of all or any portion of its properties (including any of the Collateral), except sales or leases of Inventory in the ordinary course of business; or, without having given Bank at least 60 days prior written notice and having executed such instruments and agreements as Bank shall require, change its name, the location of any Collateral or the location of its chief executive office, principal place of business or the office at which it maintains its Books and Records. Notwithstanding the foregoing, to the extent that Borrower is calculating its compliance with the financial covenants set forth in Section 6 hereof on a consolidated basis, Borrower may move Inventory from one location included in such calculation to another of Borrower’s Aaron’s locations without complying with the notice provisions hereof, as long as such Inventory is properly transferred in the Aaron’s Proprietary System.

8.2. Liens. Grant or suffer to exist any Lien upon any of the Collateral except Permitted Liens.

 

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8.3. Guarantees. Guarantee, assume, endorse or otherwise become contingently liable for any obligation or indebtedness of any Person, either directly or indirectly, exceeding $25,000 not existing as of this date, except by endorsement of items of payment for deposit or collection.

8.4. Loans. Make loans or advances of money to or investments in any Person, or (except in the ordinary course of business and on fair and reasonable terms) engage in any transaction with a Subsidiary or affiliate.

8.5. Stock of Borrower. Repurchase, or pay or declare any dividend on, any of its capital stock; provided, however, that if no Default Condition or Event of Default exists and Borrower remains in compliance with the financial covenants set forth in Section 6 above after giving effect thereto, it may pay dividends and make such repurchases.

9. EVENTS OF DEFAULT.

9.1. List of Events of Default. The occurrence of any one or more of the following conditions or events shall constitute an “Event of Default”:

(a) Borrower shall fail to pay any of the Loan Indebtedness (including any overadvance) or to pay for any Asset Disposition within ten (10) days of the due date thereof (whether due at stated maturity, on demand, upon acceleration or otherwise);

(b) any warranty, representation, or other statement by Borrower herein or in any instrument, certificate or financial statement furnished in compliance herewith proves to have been false or misleading in any material respect when made;

(c) Borrower shall fail or neglect to perform, keep or observe any covenant contained in this Agreement, any of the other Loan Documents or any other agreement now or hereafter entered into with Bank; Borrower shall fail to abide by the financial covenants set forth in Section 6 hereof, provided that Aaron’s may waive any financial covenant;

(d) Borrower or any Guarantor shall fail to pay when due any amount owed to any creditor (other than Bank) or any Guarantor shall fail to pay or perform any liability or obligation in accordance with the terms of any agreement with Bank;

(e) Borrower, Aaron’s or any Guarantor shall cease to be Solvent, shall die or become incompetent, shall suffer the appointment of a receiver, trustee, custodian or similar fiduciary, shall make an assignment for the benefit of creditors, or shall make an offer of settlement or composition to their respective unsecured creditors generally;

(f) any petition for an order for relief shall be filed by or against Borrower or any Guarantor or Aaron’s under the Bankruptcy Code (if against Borrower or any Guarantor, the continuation of such proceeding for more than 30 days);

(g) any judgment, writ of attachment or similar process is entered or filed against Borrower or any Guarantor or any of Borrower’s or any Guarantor’s property and such judgment, writ of attachment or process is not dismissed, satisfied or vacated within ten (10) days thereafter or results in the creation or imposition of any Lien upon any Collateral that is not a Permitted Lien;

 

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(h) Any Guarantor shall revoke or attempt to revoke the guaranty signed by such Guarantor or shall repudiate such Guarantor’s liability thereunder or Aaron’s shall default in its obligations to Bank with respect to the Loan Indebtedness or repudiate its liability therefor;

(i) any Person, or group of Persons (whether or not related), shall have or obtain legal or beneficial ownership of a majority of the outstanding voting securities or rights of Borrower, other than any Person, or group of Persons, that has such majority ownership on the date of execution of this Agreement;

(j) Borrower shall lose its franchise, license or right to lease or to sell the Inventory or Borrower’s Franchise Agreement is terminated or revoked for any reason;

(k) Borrower shall fail to enter properly any acquisition of Inventory or Equipment or any Asset Disposition on the Aaron’s Proprietary System; or

(l) Borrower shall use its DDA Account for any use other than as explicitly authorized pursuant to this Agreement.

9.2. Cure Period. Borrower shall have a five (5) calendar day period after the Bank gives it notice of the occurrence of an Event of Default (other than an Event of Default pursuant to Section 9.1(f)) above, during which it may cure such Event of Default. An Event of Default arising under Section 9.1(a) above shall only be cured by the Bank’s receipt of payment in immediately available funds by wire transfer, money order or cashier’s check.

9.3. Advances. In no event shall the Bank have any obligation to make any Loan hereunder or an Advance pursuant to a Line of Credit Commitment or Revolving Commitment hereunder if there exists a Default Condition or an Event of Default.

10. REMEDIES.

All of the Loan Indebtedness shall become immediately due and payable and the Line of Credit Commitment and Revolving Commitment shall be deemed immediately terminated (without notice to or demand upon Borrower) upon the occurrence of an Event of Default under Section 9.1(f) of this Agreement; and upon and after the occurrence of any other Event of Default, subject to the cure period set forth in Section 9.2 hereof, Bank shall have the right to terminate immediately the Line of Credit Commitment and Revolving Commitment and to declare the entire unpaid principal balance of and accrued interest with respect to the Loan Indebtedness to be, and the same shall thereupon become, immediately due and payable upon receipt by Borrower of written notice and demand. From and after the date on which the Loan Indebtedness becomes automatically due and payable or is declared by Bank to be due and payable as aforesaid, Bank shall have and may exercise from time to time any and all rights and remedies afforded to a secured party under the Code or any other Applicable Law. If the Loan Indebtedness is collected by or through an attorney at law, Bank shall be entitled to collect reasonable attorneys’ fees and court costs from Borrower. In addition to, and without limiting the generality of the foregoing, Bank shall have the following rights and remedies which it may exercise at any time or times (all of which rights and remedies shall be cumulative and may be exercised singularly or concurrently):

(a) The right to notify any Account Debtor to make all payments owing to Borrower directly to Bank for application to the Loan Indebtedness and to collect all amounts owing from any such Account Debtor;

 

22


(b) The right to sell, lease or otherwise dispose of any or all of the Collateral at public or private sale, for cash, upon credit or upon such other terms as Bank deems advisable in its sole discretion, or otherwise to realize upon the whole or from time to time any part of the Collateral in which Bank may have a security interest. Any requirement of reasonable notice shall be met if such notice is sent to Borrower in accordance with Section 12 hereof at least seven (7) days before the date of sale or other disposition of the Collateral. Bank may bid and be the purchaser at any such sale if permitted by Applicable Law;

(c) The right to require Borrower, at Borrower’s expense, to assemble the Collateral and make it available to Bank at a place reasonably convenient to both parties (and, for purposes hereof, Borrower stipulates that Bank shall be entitled to the remedy of specific performance). Alternatively, Bank may peaceably by its own means or with judicial assistance enter Borrower’s premises and take possession of the Collateral or dispose of the Collateral on Borrower’s premises without interference by Borrower;

(d) The right to incur attorneys’ fees and expenses in exercising any of the rights, remedies, powers or privileges provided hereunder, and the right (but not the obligation) to pay, satisfy and discharge, or to bond, deposit or indemnify against, any tax or other Lien which in the opinion of Bank may in any manner or to any extent encumber any of the Collateral, all of which fees, payments and expenses shall become part of Bank’s expenses of retaking, holding, preparing for sale and the like, and shall be added to and become a part of the principal amount of the Loan Indebtedness;

(e) The right, in Bank’s sole discretion, to perform any agreement of Borrower hereunder which Borrower shall fail to perform and take any other action which Bank deems necessary for the maintenance or preservation of any of the Collateral or Bank’s interest therein, and Borrower agrees forthwith to reimburse Bank for all expenses incurred in connection with the foregoing, together with interest thereon at the Default Rate from the date incurred until the date of reimbursement;

(f) The right at any time or times, to the fullest extent permitted by Applicable Law, to set off and apply any and all deposits (general or special, time or demand) held by Bank for Borrower’s account against any of the Loan Indebtedness, irrespective of whether or not Bank has made any demand under the this Agreement;

(g) The right to apply the proceeds realized from any collection, sale, lease or other disposition of the Collateral first to the costs, expenses and attorneys’ fees incurred by Bank for collection and for acquisition, protection, removal, storage, sale and delivery of the Collateral; secondly, to interest due upon the principal amount of the Loan Indebtedness; and thirdly, to the principal amount of the Loan Indebtedness. If any deficiency shall arise, Borrower and Guarantors shall remain bound and liable to Bank therefor;

(h) The right to act as Borrower’s attorney-in-fact (and Borrower hereby irrevocably appoints Bank as Borrower’s agent and attorney-in-fact), in Borrower’s or Bank’s name, but at Borrower’s cost and expense, to receive, open and dispose of all mail addressed to Borrower pertaining to any of the Collateral, to notify postal authorities to change the address and delivery of mail to Borrower to such address as Bank may designate, to sign Borrower’s name on any bill of lading constituting or relating to any Collateral, to send verifications with respect to the Collateral, to execute in Borrower’s name any affidavits or notices with regard to any and all Lien rights and to do all other acts and things necessary to carry out the terms of this Agreement or to discharge any obligation of Borrower hereunder, this power, being coupled with an interest, is to be irrevocable so long as any Loan Indebtedness is outstanding.

 

23


11. WAIVERS.

Borrower waives notice of Bank’s acceptance hereof. Borrower hereby waives any requirement on the part of Bank to post any bond or other security as a condition to Bank’s right to obtain an immediate writ of possession with respect to any Collateral. Bank shall not be deemed to have waived any of its rights upon or remedies hereunder or any Event of Default unless such waiver be in writing and signed by Bank. No delay or omission on the part of Bank in exercising any right shall operate as a waiver of such right or any other right. A waiver on any one occasion shall not be construed as a bar to or waiver of any right on any future occasion.

12. NOTICES.

All notices and demands to or upon a party hereto shall be in writing and shall be sent by certified mail, return receipt requested, personal delivery against receipt or by telecopier or other facsimile transmission and shall be deemed to have been validly served, given or delivered when delivered against receipt or one Business Day after deposit in the mail, postage prepaid, or, in the case of facsimile transmission, when indicated by verification receipt printed by the sending machine as having been received at the office of the noticed party, addressed in each case as follows:

 

                If to Borrower:   

__________________

Attn: _________________

_________________,

_________________

_________________

Telecopier No.: _________________

   _________________
   If to Bank:   

 

Truist Bank

Program Lending

Attn: Aaron’s Program Manager

303 Peachtree Street, N.E., 2nd Floor

Mail Code 1802

Atlanta, Georgia 30308

Telecopier No.: (404)724-3716

  

or to such other address as each party may designate for itself by like notice given in accordance with this Section. Any written notice or demand that is not sent in conformity with the provisions hereof shall nevertheless be effective on the date that such notice is actually received by the individual to whose attention such notice is to be sent as specified above or such individual’s successor in office.

13. INDEMNIFICATION.

Borrower hereby agrees to indemnify Bank and hold Bank harmless from and against any liability, loss, damage, suit, action or proceeding ever suffered or incurred by Bank as the result of Borrower’s failure to observe, perform or discharge Borrower’s duties hereunder. Without limiting the generality of the foregoing, this indemnity shall extend to any claims asserted against Bank by any Person under any environmental laws. If any taxes, fees or other charges shall be payable by Borrower or Bank on account of the execution, delivery or recording of any of the Loan Documents or any loans outstanding hereunder, Borrower will pay (or reimburse Bank’s payment of) all such taxes, fees or other charges, including any applicable interests and penalties, and will indemnify and hold Bank harmless from and against liability in connection therewith. The indemnity obligations of Borrower under this Section shall survive the payment in full of the Loan Indebtedness.

 

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14. ENTIRE AGREEMENT; AMENDMENT.

This Agreement and the other Loan Documents embody the entire understanding and agreement between the parties hereto with respect to the subject matter hereof, and this Agreement may not be modified or amended except by an agreement in writing signed by Borrower and Bank.

15. SUCCESSORS AND ASSIGNS.

This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; but Borrower shall not assign this Agreement or any right or benefit hereunder to any Person. The Bank may assign its rights and obligations hereunder at any time and to any Person, including without limitation, to Aaron’s.

16. ARBITRATION.

ANY CONTROVERSY ARISING WITH RESPECT TO THIS AGREEMENT SHALL BE DETERMINED BY ARBITRATION IN THE CITY AGREED UPON BY BORROWER AND BANK. IF BORROWER AND BANK FAIL TO SO AGREE, THEN SUCH ARBITRATION SHALL TAKE PLACE IN ATLANTA, GEORGIA. ARBITRATION SHALL BE IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION EXCEPT TO THE EXTENT OTHERWISE SET FORTH IN THIS SECTION. THE DISPUTE SHALL BE DETERMINED BY AN ARBITRATOR ACCEPTABLE TO BOTH PARTIES WHO SHALL BE SELECTED WITHIN SEVEN (7) DAYS OF FILING OF NOTICE OF INTENTION TO ARBITRATE. OTHERWISE, THE DISPUTE SHALL BE DETERMINED BY A PANEL OF THREE ARBITRATORS SELECTED AS FOLLOWS: WITHIN SEVEN (7) DAYS OF FILING NOTICE OF INTENTION TO ARBITRATE, EACH PARTY WILL APPOINT ONE ARBITRATOR, WHO SHALL BE AN ATTORNEY ADMITTED BEFORE THE BAR OF ANY STATE OF THE UNITED STATES (BUT NEITHER SUCH ATTORNEY NOR ANY FIRM WITH WHICH SUCH ATTORNEY HAS BEEN ASSOCIATED IN THE IMMEDIATELY PRECEDING FIVE YEARS SHALL HAVE BEEN RETAINED BY SUCH PARTY DURING THE IMMEDIATELY PRECEDING FIVE YEARS). THESE TWO ARBITRATORS WILL THEN NAME A THIRD ARBITRATOR, WHO SHALL ALSO BE AN ATTORNEY ADMITTED BEFORE THE BAR OF ANY STATE OF THE UNITED STATES (BUT NEITHER SUCH ATTORNEY NOR ANY FIRM WITH WHICH SUCH ATTORNEY HAD BEEN ASSOCIATED FOR THE IMMEDIATELY PRECEDING FIVE YEARS SHALL HAVE BEEN RETAINED BY EITHER PARTY DURING THE IMMEDIATELY PRECEDING FIVE YEARS) AND WHO SHALL PRESIDE OVER THE PANEL. IF EITHER PARTY FAILS TO APPOINT AN ARBITRATOR, OR IF THE TWO ARBITRATORS DO NOT NAME A THIRD ARBITRATOR WITHIN SEVEN (7) DAYS, EITHER PARTY MAY REQUEST THE AMERICAN ARBITRATION ASSOCIATION TO APPOINT THE NECESSARY ARBITRATOR(S) PURSUANT TO THE COMMERCIAL ARBITRATION RULES. ARBITRATORS SHALL BE COMPENSATED FOR THEIR SERVICES BY THE NON-PREVAILING PARTY AT THE STANDARD HOURLY RATE CHARGED BY SUCH ARBITRATORS IN THEIR PRIVATE PROFESSIONAL ACTIVITIES. ALL TESTIMONY SHALL BE TRANSCRIBED BY A PUBLIC STENOGRAPHER OR COURT REPORTER. THE AWARD OF THE PANEL SHALL BE ACCOMPANIED BY FINDINGS OF FACT AND A STATEMENT OF REASONS FOR THE DECISION. ALL PARTIES AGREE TO BE BOUND BY THE RESULTS OF SUCH ARBITRATIONS; JUDGMENT UPON THE AWARD SO RENDERED MAY BE ENTERED AND ENFORCED IN ANY COURT OF COMPETENT JURISDICTION. TO THE EXTENT REASONABLY PRACTICABLE, BOTH PARTIES AGREE TO CONTINUE PERFORMING THEIR RESPECTIVE OBLIGATIONS UNDER THIS AGREEMENT WHILE THE DISPUTE IS BEING RESOLVED.

 

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17. MISCELLANEOUS.

Time is of the essence of this Agreement. Bank reserves the right to participate, sell or assign the Loans made hereunder and provide any participant or assignee all information in Bank’s possession regarding Borrower, its business and the Collateral. Borrower shall reimburse Bank for Bank’s out-of-pocket expenses and for the fees and expenses and disbursements of Bank’s counsel in connection with the negotiation, documentation and closing of the transactions contemplated hereby, and Borrower will pay all expenses incurred by Borrower in connection with the transactions. The Section headings are for convenience only and shall not limit or otherwise affect any of the terms hereof. THIS AGREEMENT AND ALL RIGHTS AND OBLIGATIONS HEREUNDER, INCLUDING MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF GEORGIA (WITHOUT REGARD TO THE LAWS OF CONFLICTS THEREOF) AND IS INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT.

18. RELATIONS WITH AARON’S.

Borrower recognizes and acknowledges that the Bank has made the Loans available to Borrower hereunder at the behest of and as an accommodation to Aaron’s. Accordingly, Borrower agrees that from time to time the Bank may release to Aaron’s such information about Borrower and the Loans as Aaron’s may request, and the Bank may condition its agreement to any waiver, modification or amendment on the prior written consent of Aaron’s. Borrower further agrees that upon the occurrence of an Event of Default hereunder, the Bank may notify Aaron’s of such Event of Default prior to notifying Borrower thereof, and the Bank shall not be liable to Borrower for failure to give simultaneous notice to Borrower. Borrower further agrees that the Bank shall not be liable to Borrower as a result of any information or document obtained by Bank regarding Borrower which is shared by Bank with Aaron’s.

 

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WITNESS the hand and seal of the parties hereto on the date first above written.

 

Accepted in Atlanta, Georgia:    
    BORROWER:
                            
                            
                            
    BANK:
    TRUIST BANK:
    By:  

                 

    Name:  

                     

    Title:  

                 

 

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EXHIBIT A-1

FORM OF

LINE OF CREDIT NOTE

 

Closing Date: [Closing Date]    $_________________
   Atlanta, Georgia

FOR VALUE RECEIVED, the undersigned, _________________ (the “Borrower”), promises to pay to the order of TRUIST BANK, a North Carolina banking corporation (the “Bank”), at Bank’s principal office in Charlotte, North Carolina, or at such other place as the holder hereof may designate by notice in writing to Borrower, in immediately available funds in lawful money of the United States of America, on _________________________, (the “Maturity Date”, as such date may be extended from time to time, for an additional 364 day period unless either party terminates the Loan as set forth in Section 2.8 of the Loan and Security Agreement) the lesser of (x) the principal sum of the Line of Credit Commitment: _________________ ($_________________), or (y) so much principal thereof as shall have been from time to time disbursed hereunder in accordance with that certain Loan and Security Agreement, dated as of [___________], by and between the Borrower and Bank (as amended, restated, modified or supplemented from time to time, the “Agreement”) and not theretofore repaid, as shown on the records of the Bank.

In addition to principal, Borrower agrees to pay interest on the principal amounts disbursed hereunder at a floating rate of interest equal to the Prime Rate plus an additional _________________________, from time to time, from the date of each disbursement until paid at such rates of interest per annum and upon such dates as provided for in the Agreement. Interest shall accrue on the outstanding principal balance from the date hereof up to and through the date on which all principal and interest hereunder is paid in full, and shall be computed on the basis of the actual number of days elapsed in a 360-day year. Such interest is to be paid to Bank at its address set forth above or as otherwise provided in the Agreement. For informational purposes, as of the date hereof the Prime Rate in effect is __________% per annum, thus producing an initial interest rate under the Agreement on such date of ___________ %per annum and, when adjusted for a year of 365 days, an initial simple interest rate of _____________% per annum. Any principal amount due under this Line of Credit Note (the “Note”) that is not paid on the due date therefor whether on the Maturity Date, or resulting from the acceleration of maturity upon the occurrence of an Event of Default (as defined in the Agreement), shall bear interest from the date due until payment in full at the Default Rate, as such term is defined in the Agreement.

This Note evidences a loan incurred pursuant to the terms and conditions of the Agreement to which reference is hereby made for a full and complete description of such terms and conditions, including, without limitation, provisions for the acceleration of the maturity hereof upon the existence or occurrence of certain conditions or events, and the terms of any permitted prepayments hereof. All capitalized terms used in this Note shall have the same meanings as set forth in the Agreement.

Upon the existence or occurrence of any Event of Default, the principal and all accrued interest hereof shall automatically become, or may be declared, due and payable in the manner and with the effect provided in the Agreement. In addition, this Note is subject to mandatory prepayment upon the terms and conditions of the Agreement.

Bank shall at all times have a right of set-off against any deposit balances of Borrower in the possession of the Bank and the Bank may apply the same against payment of this Note or any other indebtedness of Borrower to the Bank. The payment of any indebtedness evidenced by this Note prior to the Maturity Date shall not affect the enforceability of this Note as to any future, different or other


indebtedness incurred hereunder by the Borrower. In the event the indebtedness evidenced by this Note is collected by legal action or through an attorney-at-law, the Bank shall be entitled to recover from Borrower all costs of collection, including, without limitation, reasonable attorneys’ fees if collected by or through an attorney-at-law.

Borrower acknowledges that the actual crediting of the amount of any disbursement under the Agreement to an account of Borrower or recording such amount in the records of the Bank shall, in the absence of manifest error, constitute presumptive evidence of such disbursement and that such Advance was made and borrowed under the Agreement. Such account records shall constitute, in the absence of manifest error, presumptive evidence of principal amounts outstanding and the payments made under the Agreement at any time and from time to time, provided that the failure of Bank to record in such account the type or amount of any Advance shall not affect the obligation of the undersigned to repay such amount together with interest thereon in accordance with this Note and the Agreement.

Failure or forbearance of Bank to exercise any right hereunder, or otherwise granted by the Loan Agreement or by law, shall not affect or release the liability of Borrower hereunder, and shall not constitute a waiver of such right unless so stated by Bank in writing. THIS NOTE AND THE RIGHTS AND OBLIGATIONS HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF) OF THE STATE OF GEORGIA. TIME IS OF THE ESSENCE OF THIS NOTE.

PRESENTMENT FOR PAYMENT, NOTICE OF DISHONOR AND PROTEST ARE HEREBY WAIVED.

Executed under hand and seal of the Borrower as of the day and year first above written.

 

 

 

 

 

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EXHIBIT A-2

FORM OF

REVOLVING NOTE

 

Closing Date: [Closing Date]    $_________________
   Atlanta, Georgia

FOR VALUE RECEIVED, the undersigned, _________________ (the “Borrower”), promises to pay to the order of TRUIST BANK, a North Carolina banking corporation (the “Bank”), at Bank’s principal office in Charlotte, North Carolina, or at such other place as the holder hereof may designate by notice in writing to Borrower, in immediately available funds in lawful money of the United States of America, on _________________________, (the “Maturity Date”, as such date may be extended from time to time, for an additional 364 day period unless either party terminates the Loan as set forth in Section 2.8 of the Loan and Security Agreement), the lesser of (i) principal sum of the Revolving Commitment: _________________ ($_________________), or (ii) so much thereof as shall have been from time to time disbursed hereunder in accordance with certain Loan and Security Agreement, dated as of [___________], by and between the Borrower and Bank (as amended, restated, modified or supplemented from time to time, the “Agreement”) and not theretofore repaid, as shown on the records of the Bank.

In addition to principal, Borrower agrees to pay interest on the principal amounts disbursed hereunder at a floating rate of interest equal to the Prime Rate plus an additional _________________________, from time to time, from the date of each disbursement until paid at such rates of interest per annum and upon such dates as provided for in the Agreement. Interest shall accrue on the outstanding principal balance from the date hereof up to and through the date on which all principal and interest hereunder is paid in full, and shall be computed on the basis of the actual number of days elapsed in a 360-day year. Such interest is to be paid to Bank at its address set forth above or as otherwise provided in the Agreement. For informational purposes, as of the date hereof the Prime Rate in effect is __________% per annum, thus producing an initial interest rate under the Agreement on such date of ___________% per annum and, when adjusted for a year of 365 days, an initial simple interest rate of _____________% per annum. Any principal amount due under this Revolving Note (the “Note”) that is not paid on the due date therefor whether on the Maturity Date, or resulting from the acceleration of maturity upon the occurrence of an Event of Default (as defined in the Agreement), shall bear interest from the date due until payment in full at the Default Rate, as such term is defined in the Agreement.

This Note evidences loans incurred pursuant to the terms and conditions of the Agreement to which reference is hereby made for a full and complete description of such terms and conditions, including, without limitation, provisions for the acceleration of the maturity hereof upon the existence or occurrence of certain conditions or events, and the terms of any permitted prepayments hereof. All capitalized terms used in this Note shall have the same meanings as set forth in the Agreement.

Upon the existence or occurrence of any Event of Default, the principal and all accrued interest hereof shall automatically become, or may be declared, due and payable in the manner and with the effect provided in the Agreement. In addition, this Note is subject to mandatory prepayment upon the terms and conditions of the Agreement.

Bank shall at all times have a right of set-off against any deposit balances of Borrower in the possession of the Bank and the Bank may apply the same against payment of this Note or any other indebtedness of Borrower to the Bank, irrespective of whether or not Bank has made any demand under the


Loan Agreement. The payment of any indebtedness evidenced by this Note prior to the Maturity Date shall not affect the enforceability of this Note as to any future, different or other indebtedness incurred hereunder by the Borrower. In the event the indebtedness evidenced by this Note is collected by legal action or through an attorney-at-law, the Bank shall be entitled to recover from Borrower all costs of collection, including, without limitation, reasonable attorneys’ fees if collected by or through an attorney-at-law.

Borrower acknowledges that the actual crediting of the amount of any disbursement under the Agreement to an account of Borrower or recording such amount in the records of the Bank shall, in the absence of manifest error, constitute presumptive evidence of such disbursement and that such Advance was made and borrowed under the Agreement. Such account records shall constitute, in the absence of manifest error, presumptive evidence of principal amounts outstanding and the payments made under the Agreement at any time and from time to time, provided that the failure of Bank to record in such account the type or amount of any Advance shall not affect the obligation of the undersigned to repay such amount together with interest thereon in accordance with this Note and the Agreement.

Failure or forbearance of Bank to exercise any right hereunder, or otherwise granted by the Agreement or by law, shall not affect or release the liability of Borrower hereunder, and shall not constitute a waiver of such right unless so stated by Bank in writing. THIS NOTE AND THE RIGHTS AND OBLIGATIONS HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF) OF THE STATE OF GEORGIA. TIME IS OF THE ESSENCE OF THIS NOTE.

PRESENTMENT FOR PAYMENT, NOTICE OF DISHONOR AND PROTEST ARE HEREBY WAIVED.

Executed under hand and seal of the Borrower as of the day and year first above written.

 

 

 

 

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EXHIBIT A-3

FORM OF

TERM NOTE

 

Closing Date: [Closing Date]    $_________________
   Atlanta, Georgia

FOR VALUE RECEIVED, the undersigned, _________________ (the “Borrower”), promises to pay to the order of TRUIST BANK, a North Carolina banking corporation (the “Bank”), at Bank’s principal office in Charlotte, North Carolina, or at such other place as the holder hereof may designate by notice in writing to Borrower, in immediately available funds in lawful money of the United States of America, _____________________ ($_______________). Repayment will be in _____ consecutive equal monthly installments of principal in the amount of $_____________ based on a ________month amortization plus accrued and unpaid interest and shall be due and payable on each Payment Date, with the first installment being due and payable on ________________, and the remaining outstanding principal balance, together with all accumulated unpaid interest shall be due and payable on __________________ (the “Maturity Date”).

In addition to principal, Borrower agrees to pay interest on the principal amounts disbursed hereunder at a floating rate of interest equal to the Prime Rate plus an additional _________________________, from time to time, upon such dates as provided for in that certain Loan Agreement dated as of [____________], by and between Borrower and Bank (as amended, restated, modified or supplemented from time to time, the “Agreement”). Interest shall accrue on the outstanding principal balance from the date hereof up to and through the date on which all principal and interest hereunder is paid in full, and shall be computed on the basis of the actual number of days elapsed in a 360-day year. Such interest is to be paid to Bank at its address set forth above or as otherwise provided in the Agreement. For informational purposes, as of the date hereof the Prime Rate in effect is __________% per annum, thus producing an initial interest rate under the Agreement on such date of ___________% per annum and, when adjusted for a year of 365 days, an initial simple interest rate of _____________% per annum. Any principal amount due under this Term Note (the “Note”) that is not paid on the due date therefor whether on the due date, or resulting from the acceleration of maturity upon the occurrence of an Event of Default (as defined in the Agreement), shall bear interest from the date due until payment in full at the Default Rate, as such term is defined in the Agreement.

This Note evidences a loan incurred pursuant to the terms and conditions of the Agreement to which reference is hereby made for a full and complete description of such terms and conditions, including, without limitation, provisions for the acceleration of the maturity hereof upon the existence or occurrence of certain conditions or events, and the terms of any permitted prepayments hereof. All capitalized terms used in this Note shall have the same meanings as set forth in the Agreement.

Upon the existence or occurrence of any Event of Default, the principal and all accrued interest hereof shall automatically become, or may be declared, due and payable in the manner and with the effect provided in the Agreement. In addition, this Note is subject to mandatory prepayment upon the terms and conditions of the Agreement.

Bank shall at all times have a right of set-off against any deposit balances of Borrower in the possession of the Bank and the Bank may apply the same against payment of this Note or any other indebtedness of Borrower to the Bank, irrespective of whether or not Bank has made any demand under the Agreement. The payment of any indebtedness evidenced by this Note prior to the Maturity Date shall not


affect the enforceability of this Note as to any future, different or other indebtedness incurred hereunder by the Borrower. In the event the indebtedness evidenced by this Note is collected by legal action or through an attorney-at-law, the Bank shall be entitled to recover from Borrower all costs of collection, including, without limitation, reasonable attorneys’ fees if collected by or through an attorney-at-law.

Borrower acknowledges that the actual crediting of the amount of any disbursement under the Agreement to an account of Borrower or recording such amount in the records of the Bank shall, in the absence of manifest error, constitute presumptive evidence of such disbursement. Such account records shall constitute, in the absence of manifest error, presumptive evidence of principal amounts outstanding and the payments made under the Agreement at any time and from time to time, provided that the failure of Bank to record in such account the type or amount of any advance shall not affect the obligation of the undersigned to repay such amount together with interest thereon in accordance with this Note and the Agreement.

Failure or forbearance of Bank to exercise any right hereunder, or otherwise granted by the Loan Agreement or by law, shall not affect or release the liability of Borrower hereunder, and shall not constitute a waiver of such right unless so stated by Bank in writing. THIS NOTE AND THE RIGHTS AND OBLIGATIONS HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF) OF THE STATE OF GEORGIA. TIME IS OF THE ESSENCE OF THIS NOTE.

PRESENTMENT FOR PAYMENT, NOTICE OF DISHONOR AND PROTEST ARE HEREBY WAIVED.

Executed under hand and seal of the Borrower as of the day and year first above written.

 

 

 

 

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EXHIBIT B

 

A.

Permitted Liens

The following described Liens are Permitted Liens (if none, so state):

 

Name of Lien Holder

  

Date of Recording

  

Collateral

 

 

B.

Trade Names and Styles

The following are the only trade names or trade styles ever used by Borrower (if none, so state):

 

C.

Subsidiaries

The following are all of the subsidiaries owned by Borrower (if none, so state):

 

D.

Business Locations

The following are all of the locations where Borrower has an office or other place of business or owns assets:


EXHIBIT C

COMPLIANCE CERTIFICATE OF BORROWER

(Pursuant to Section 7.2 of Loan and Security Agreement dated __________________)

__________________ (the “Borrower”) HEREBY CERTIFIES that:

This Compliance Certificate is furnished pursuant to the Loan and Security Agreement (the “Agreement”) dated __________________ by and between the Borrower and TRUIST BANK (the “Bank”). Unless otherwise defined herein, the terms used in this Report have the meanings given to them in this Agreement.

1. The figures and information for determining compliance by the Borrower with the financial covenants set forth in the Quarterly Covenant Compliance Report attached hereto have been prepared based upon the financial reports accompanied hereby and both the Quarterly Covenant Compliance Report and such financial reports are true and complete as of the date hereof.

2. The activities of the Borrower during the preceding quarter have been reviewed by the president or other authorized officer or the employees or agents under his immediate supervision. Based on such review, to the best knowledge and belief of the president or other authorized officer, and as of the date of this Certificate, the Borrower has performed and observed each and every covenant contained in the Agreement to be performed by it, and no Event of Default or Default Condition exists, except for the following:

Please describe or indicate “None” if none exist:

 

 

 

 

 

 

3. The Borrower has properly and accurately reported all Asset Dispositions pursuant to Section 2.12 of the Agreement.

WITNESS my hand this _______ day of ______________________, _______.


EXHIBIT D

QUARTERLY COVENANT COMPLIANCE REPORT

(Section 6—Financial Covenants)

Test Borrower                                                 

For Quarter Ending:                                       

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

 

I.

Rental Revenue to Debt Service

 

A.    Enter amount of quarterly Rental Revenue.      $                                                                            
B.    Enter amount of quarterly Rental Revenue attributable to store locations open less than 25 months.      $                                                           
C.    Subtract B from A.      $                                                           
D.    Enter amount of quarter’s Debt Service.    $                        
E.    Enter amount of quarter’s Debt Service attributable to store locations open less than 25 months.      $                                                           
F.    Subtract E from D.      $                                                           
  

Ratio of C:F.

                                                                  
  

STANDARD — Ratio not less than —   2.2: 1.0

   
  

Compliance?     ☐    Yes     ☐    No

      

 

II.

Debt to Rental Revenue

 

A.    Enter amount of Debt.      $                                                                            
B.    [Enter amount of Debt attributable to store locations open less than 19 months.                             $                                                          ]  
C.    [Subtract B from A.      $                                                          ]  


D.    Enter Amount of last quarter’s Rental Revenue.      $                                                                                
E.    [Enter amount of last quarter’s Rental Income attributable to store locations open less than 19 months.                           $                                                         ]  
F.    [Subtract E from D.      $                                                         ]10  
  

Ratio of C : F.

                                                             
  

STANDARD...   [__] : 1.0        

   
   Compliance?     ☐    Yes     ☐    No    

Note: All terms are those used in generally accepted accounting practices unless specifically defined in the Agreement.

 

10 

Note: This covenant will apply and be tested on last day of each calendar quarter and not be tied to any Opening Date of store locations in the case of any Loan Agreement providing for Loans to make available to a Borrower consisting solely of Revolving Loans. In which case, the bracketed portions of this Debt to Rental Revenue covenant will not be applicable. Covenant levels for this covenant will be established by Aaron’s for each Borrower as per the Servicing Agreement.

 

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EXHIBIT D

TO

LOAN FACILITY AGREEMENT AND GUARANTY

FORM OF GUARANTY AGREEMENT

This Guaranty Agreement (this “Agreement”), dated as of November 17, 2020, is by and among AARON’S, LLC, a Georgia limited liability company (the “Sponsor”), THE AARON’S COMPANY, INC. (f/k/a AARON’S SPINCO, INC.), a Georgia corporation (“Holdings”), certain Subsidiaries of Holdings listed on Schedule I hereto (together with Holdings, each, individually, a “Guarantor” and collectively, the “Guarantors”) and TRUIST BANK, a North Carolina banking corporation, as servicer (the “Servicer”).

Reference is made to that certain Loan Facility Agreement and Guaranty dated as of the date hereof (as amended, restated, supplemented or otherwise modified from time to time, the “Loan Facility Agreement”) by and among the Sponsor, Holdings, the Participants and Truist Bank, as Servicer (the Servicer and the Participants shall be referred to collectively as the “Guaranteed Parties”). Capitalized terms used herein and not defined herein shall have the meanings assigned to such terms in the Loan Facility Agreement.

The Participants have agreed to provide lines of credit to Franchisees of the Sponsor pursuant to, and upon the terms and subject to the conditions specified in, the Loan Facility Agreement. Holdings is the direct parent of the Sponsor and acknowledges that it will derive substantial benefit from the Loan Facility Agreement. Each Guarantor (other than Holdings) is a direct or indirect Restricted Subsidiary of the Sponsor and acknowledges that it will derive substantial benefit from the Loan Facility Agreement. It is a condition precedent to the effectiveness of the Loan Facility Agreement and the obligations of the Participants to continue to make Loans are conditioned on, among other things, the execution and delivery by the Guarantors of this Agreement. As consideration therefor and in order to induce the Participants to make Loans, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, each Guarantor is willing to execute this Agreement.

Accordingly, the parties hereto agree as follows:

SECTION 1. Guarantee. Each Guarantor unconditionally guarantees, jointly with the other Guarantors and severally, as a primary obligor and not merely as a surety, (a) the due and punctual payment of all obligations owing by the Sponsor to the Guaranteed Parties, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), under the Loan Facility Agreement and the other Operative Documents and (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of the Sponsor under or pursuant to the Loan Facility Agreement and the other Operative Documents (all the monetary and other obligations referred to in the preceding clauses (a) and (b) being collectively called the “Obligations”). Each Guarantor further agrees that the Obligations may be extended or renewed, in whole or in part, without notice to or further assent from it, and that it will remain bound upon its guarantee notwithstanding any extension or renewal of any Obligation.

SECTION 2. Obligations Not Waived. To the fullest extent permitted by applicable law, each Guarantor waives presentment to, demand of payment from and protest to the Sponsor of any of the Obligations, and also waives notice of acceptance of its guarantee and notice of protest for nonpayment. To the fullest extent permitted by applicable law, the obligations of each Guarantor hereunder shall not be affected by (a) the failure of any Guaranteed Party to assert any claim or demand or to enforce or exercise


any right or remedy against the Sponsor or any other Guarantor under the provisions of the Loan Facility Agreement, any other Operative Document or otherwise, (b) any rescission, waiver, amendment or modification of, or any release from any of the terms or provisions of, this Agreement, any other Operative Document, any Guarantee or any other agreement, including with respect to any other Guarantor under this Agreement or (c) the failure to perfect any security interest in, or the release of, any of the security held by or on behalf of any Guaranteed Parties.

SECTION 3. Guarantee of Payment. Each Guarantor further agrees that its guarantee constitutes a guarantee of payment when due and not of collection, and waives any right to require that any resort be had by any Guaranteed Party to any of the security held for payment of the Obligations or to any balance of any deposit account or credit on the books of any Guaranteed Party in favor of the Sponsor or any other person.

SECTION 4. No Discharge or Diminishment of Guarantee. The obligations of each Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason (other than the indefeasible payment in full in cash of the Obligations), including any claim of waiver, release, surrender, alteration or compromise of any of the Obligations, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Guarantor hereunder shall not be discharged or impaired or otherwise affected by the failure of any Guaranteed Party to assert any claim or demand or to enforce any remedy under the Loan Facility Agreement, any other Operative Document or any other agreement, by any waiver or modification of any provision of any thereof, by any default, failure or delay, willful or otherwise, in the performance of the Obligations, or by any other act or omission that may or might in any manner or to the extent vary the risk of any Guarantor or that would otherwise operate as a discharge of each Guarantor as a matter of law or equity (other than the indefeasible payment in full in cash of all the Obligations).

SECTION 5. Defenses of Borrower Waived. To the fullest extent permitted by applicable law, each Guarantor waives any defense based on or arising out of any defense of the Sponsor or the unenforceability of the Obligations or any part thereof from any cause, or the cessation from any cause of the liability of the Sponsor, other than the final and indefeasible payment in full in cash of the Obligations. The Guaranteed Parties may, at their election, foreclose on any security held by one or more of them by one or more judicial or nonjudicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the Obligations, make any other accommodation with the Sponsor or any other guarantor, without affecting or impairing in any way the liability of any Guarantor hereunder except to the extent the Obligations have been fully, finally and indefeasibly paid in cash. Pursuant to applicable law, each Guarantor waives any defense arising out of any such election even though such election operates, pursuant to applicable law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of each Guarantor against the Sponsor or any other Guarantor or guarantor, as the case may be, or any security.

SECTION 6. Agreement to Pay; Subordination. In furtherance of the foregoing and not in limitation of any other right that any Guaranteed Party has at law or in equity against any Guarantor by virtue hereof, upon the failure of any Credit Party to pay any Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, each Guarantor hereby promises to and will forthwith pay, or cause to be paid, to the Servicer for the benefit of the Participants in cash the amount of such unpaid Obligations. Upon payment by any Guarantor of any sums to the Servicer, all rights of such Guarantor against the Sponsor arising as a result thereof by way of right of subrogation, contribution, reimbursement, indemnity or otherwise shall in all respects be subordinate and junior in right of payment to the prior indefeasible payment in full in cash of all the Obligations. In addition, any indebtedness of the Sponsor now or hereafter held by any Guarantor is hereby subordinated in right of

 

4


payment to the prior payment in full in cash of the Obligations. If any amount shall erroneously be paid to any Guarantor on account of (i) such subrogation, contribution, reimbursement, indemnity or similar right or (ii) any such indebtedness of the Sponsor, such amount shall be held in trust for the benefit of the Guaranteed Parties and shall forthwith be paid to the Servicer to be credited against the payment of the Obligations, whether matured or unmatured, in accordance with the terms of the Operative Documents.

SECTION 7. Information. Each Guarantor assumes all responsibility for being and keeping itself informed of the Sponsor’s financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Obligations and the nature, scope and extent of the risks that such Guarantor assumes and incurs hereunder, and agrees that none of the Guaranteed Parties will have any duty to advise any of the Guarantors of information known to it or any of them regarding such circumstances or risks.

SECTION 8. Representations and Warranties. Holdings represents and warrants as to itself that all representations and warranties relating to it contained in the Loan Facility Agreement are true and correct. Each Guarantor (other than Holdings) represents and warrants as to itself that all representations and warranties relating to it (as a Restricted Subsidiary of the Sponsor) contained in the Loan Facility Agreement are true and correct

SECTION 9. Termination. The guarantees made hereunder (a) shall terminate when all the Obligations have been paid in full in cash and the Participants have no further commitment to lend under the Loan Facility Agreement and (b) shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Obligation is rescinded or must otherwise be restored by any Participant or any Guarantor upon the bankruptcy or reorganization of any Credit Party or otherwise. In connection with the foregoing, the Servicer shall execute and deliver to such Guarantor or such Guarantor’s designee, at such Guarantor’s expense, any documents or instruments which such Guarantor shall reasonably request from time to time to evidence such termination and release.

SECTION 10. Binding Effect; Several Agreement; Assignments. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants, promises and agreements by or on behalf of the Guarantors that are contained in this Agreement shall bind and inure to the benefit of each party hereto and their respective successors and assigns. This Agreement shall become effective as to any Guarantor when a counterpart hereof executed on behalf of such Guarantor shall have been delivered to the Servicer, and a counterpart hereof shall have been executed on behalf of the Servicer, and thereafter shall be binding upon such Guarantor and the Servicer and their respective successors and assigns, and shall inure to the benefit of such Guarantor, the Guaranteed Parties, and their respective successors and assigns, except that no Guarantor shall have the right to assign its rights or obligations hereunder or any interest herein (and any such attempted assignment shall be void). If (a) all of the Capital Stock of a Guarantor (other than Holdings) is sold, transferred or otherwise disposed of pursuant to a transaction permitted by the Loan Facility Agreement or (b) a Guarantor (other than Holdings) ceases to be a Restricted Subsidiary as a result of a transaction permitted by the Loan Facility Agreement, such Guarantor shall be released from its obligations under this Agreement without further action. This Agreement shall be construed as a separate agreement with respect to each Guarantor and may be amended, modified, supplemented, waived or released with respect to any Guarantor without the approval of any other Guarantor and without affecting the obligations of any other Guarantor hereunder.

 

5


SECTION 11. Waivers; Amendment.

(a) No failure or delay of the Servicer if any in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Servicer hereunder and of the Participants under the other Operative Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by any Guarantor therefrom shall in any event be effective unless the same shall be permitted by Section 11(b), and then such waiver and consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on any Guarantor in any case shall entitle such Guarantor to any other or further notice in similar or other circumstances.

(b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to a written agreement entered into between the Guarantors with respect to which such waiver, amendment or modification relates and the Servicer, with the prior written consent of the Required Participants (except as otherwise provided in the Loan Facility Agreement).

SECTION 12. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAW PRINCIPLES THEREOF).

SECTION 13. Notices. All communications and notices hereunder shall be in writing and given as provided in Section 15.1 of the Loan Facility Agreement. All communications and notices hereunder to each Guarantor shall be given to it at its address set forth on Schedule I attached hereto.

SECTION 14. Survival of Agreement; Severability.

(a) All covenants, agreements representations and warranties made by the Guarantors herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or the other Operative Documents shall be considered to have been relied upon by the Guaranteed Parties and shall survive the making by the Participants of the Loans regardless of any investigation made by any of them or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any other fee or amount payable under this Agreement or any other Operative Document is outstanding and unpaid and as long as the Facility Commitments have not been terminated.

(b) In the event one or more of the provisions contained in this Agreement or in any other Operative Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

SECTION 15. Counterparts. This Agreement may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually executed counterpart of this Agreement.

SECTION 16. Rules of Interpretation. The rules of interpretation specified in Section 1.3 of the Loan Facility Agreement shall be applicable to this Agreement.

 

6


SECTION 17. Jurisdiction; Consent to Service of Process.

(a) Each Guarantor hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the United States District Court for the Southern District of New York, and of the Supreme Court of the State of New York sitting in New York County, Borough of Manhattan and any appellate court from any thereof,, in any action or proceeding arising out of or relating to this Agreement or the other Operative Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State court or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that any Guaranteed Party may otherwise have to bring any action or proceeding relating to this Agreement or the other Operative Documents against any Guarantor or its properties in the courts of any jurisdiction.

(b) Each Guarantor hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Operative Documents in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

(c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 13. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law.

SECTION 18. Waiver of Jury Trial. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE OTHER OPERATIVE DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER OPERATIVE DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 18.

SECTION 19. Additional Guarantors. Pursuant to Section 6.10 of the Loan Facility Agreement, each Restricted Subsidiary that is a Material Domestic Subsidiary that was not in existence on the date of the Loan Facility Agreement is required to enter into this Agreement as a Guarantor upon becoming a Restricted Subsidiary. Upon execution and delivery after the date hereof by the Servicer and such Restricted Subsidiary of an instrument in the form of Annex 1, such Restricted Subsidiary shall become a Guarantor hereunder with the same force and effect as if originally named as a Guarantor herein. The execution and delivery of any instrument adding an additional Guarantor as a party to this Agreement shall not require the consent of any other Guarantor hereunder. The rights and obligations of each Guarantor hereunder shall remain in full force and effect notwithstanding the addition of any new Guarantor as a party to this Agreement.

 

7


SECTION 20. Right of Setoff. If a Credit Event shall have occurred and be continuing, each Participant is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other Indebtedness at any time owing by such Participant to or for the credit or the account of any Guarantor against any or all the obligations of such Guarantor now or hereafter existing under this Agreement and the other Operative Documents held by such Participant, irrespective of whether or not such Person shall have made any demand under this Agreement or any other Operative Document and although such obligations may be unmatured. The rights of each Participant under this Section 20 are in addition to other rights and remedies (including other rights of setoff) which such Participant may have.

SECTION 21. Indemnity, Contribution, and Subrogation.

(a) In addition to all such rights of indemnity and subrogation as each Guarantor may have under applicable law, the Servicer agrees that (i) in the event a payment shall be made on behalf of the Sponsor by any Guarantor hereunder, the Sponsor shall indemnify such Guarantor for the full amount of such payment and such Guarantor shall be subrogated to the rights of the person to whom such payment shall have been made to the extent of such payment, and (ii) in the event any assets of any Guarantor shall be sold to satisfy a claim of any Guaranteed Party hereunder, the Sponsor shall indemnify such Guarantor in an amount equal to the greater of the book value or the fair market value of the assets so sold.

(b) Each Guarantor (a “Contributing Guarantor”) agrees that, in the event a payment shall be made by any other Guarantor hereunder, or assets of any other Guarantor shall be sold to satisfy a claim of any Guaranteed Party hereunder, and such other Guarantor (the “Claiming Guarantor”) shall not have been fully indemnified by the Sponsor as provided in Section 21(a), each Contributing Guarantor shall indemnify each Claiming Guarantor in an amount equal to the amount of such payment or the greater of the book value or the fair market value of such assets, as the case may be, in each case multiplied by a fraction of which the numerator shall be the net worth of such Contributing Guarantor on the date hereof and the denominator shall be the aggregate net worth of the Sponsor and all of the Guarantors on the date hereof (or, in the case of any Guarantor becoming a party hereto pursuant to Section 19, the date of the Supplement hereto executed and delivered by such Guarantor). Any Contributing Guarantor making any payment to a Claiming Guarantor pursuant to this Section 21(b) shall be subrogated to the rights of such Claiming Guarantor under Section 21(a) to the extent of such payment. As used herein, the term “net worth” shall mean, as at any date of determination, the consolidated shareholders’ equity of the Sponsor and the Guarantors, as determined in each case on a consolidated basis in accordance with GAAP.

[remainder of page intentionally left blank]

 

8


Each Guarantor has read, understands, and agrees to the provisions of this Agreement and has executed the same voluntarily, under seal, with full authority and with the intent to be legally bound by its terms, conditions, and obligations.

 

THE AARON’S COMPANY, INC.,

as Holdings

By:  

             

Name:
Title:

[TBD],

as Guarantor11

By:  

             

Name:
Title:

 

  

 

11 

NTD: Other Guarantors to be determined.

 

AARON’S, LLC

GUARANTY AGREEMENT (LFA)


TRUIST BANK, as Servicer
By:  

                 

Name:
Title:

 

 

AARON’S, LLC

GUARANTY AGREEMENT (LFA)


SCHEDULE I TO THE

GUARANTY AGREEMENT

 

Guarantors                                                                     Address                                                                              
Aaron Investment Company, LLC    400 Galleria Parkway SE, Suite 300
Aaron’s Business Real Estate Holdings, LLC    Atlanta, GA 30339
Aaron’s Logistics, LLC    Attn: Chief Financial Officer
Aaron’s US HoldCo, Inc.   
Envizzo, LLC   
Woodhaven Furniture Industries, LLC   


ANNEX 1 TO THE

GUARANTY AGREEMENT

This SUPPLEMENT NO. [    ] (this “Supplement”), dated as of [                 ], to the Guaranty Agreement (the “Guaranty Agreement”) dated as of November 17, 2020, among THE AARON’S COMPANY, INC. (f/k/a AARON’S SPINCO, INC.), a Georgia corporation (“Holdings”), certain Subsidiaries of Holdings listed on Schedule I thereto (together with Holdings, each, individually, a “Guarantor” and collectively, the “Guarantors”) and TRUIST BANK, a North Carolina banking corporation, as Servicer (the “Servicer”) for the Participants (as defined in the Loan Facility Agreement referred to below) (the Servicer and the Participants shall hereafter be referred to collectively as the Guaranteed Parties).

A. Reference is made to the Loan Facility Agreement and Guaranty, dated as of November 17, 2020 (as amended, supplemented or otherwise modified from time to time, the “Loan Facility Agreement”), among the Sponsor, Holdings, the lending institutions listed on the signature pages thereto (the “Participants”) and the Servicer.

B. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Guaranty Agreement and the Loan Facility Agreement.

C. The Guarantors have entered into the Guaranty Agreement in order to induce the Participants to extend credit to Franchisees of the Sponsor. Pursuant to Section 6.10 of the Loan Facility Agreement, each Restricted Subsidiary that is a Material Domestic Subsidiary that was not in existence or not a Credit Party on the date of the Loan Facility Agreement is required to enter into the Guaranty Agreement as a Guarantor upon becoming a Restricted Subsidiary. Section 19 of the Guaranty Agreement provides that additional Restricted Subsidiaries of the Sponsor may become Guarantors under the Guaranty Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned Restricted Subsidiary of the Sponsor (the “New Guarantor”) is executing this Supplement in accordance with the requirements of the Loan Facility Agreement to become a Guarantor under the Guaranty Agreement in order to induce the Participants to make additional Loans and as consideration for Loans previously made.

Accordingly, the Servicer and the New Guarantor agree as follows:

SECTION 1. In accordance with Section 19 of the Guaranty Agreement, the New Guarantor by its signature below becomes a Guarantor under the Guaranty Agreement with the same force and effect as if originally named therein as a Guarantor and the New Guarantor hereby (a) agrees to all the terms and provisions of the Guaranty Agreement applicable to it as Guarantor thereunder and (b) represents and warrants that the representations and warranties made by it as a Guarantor thereunder are true and correct on and as of the date hereof. Each reference to a Guarantor in the Guaranty Agreement shall be deemed to include the New Guarantor. The Guaranty Agreement is hereby incorporated herein by reference.

SECTION 2. The New Guarantor represents and warrants to the Guaranteed Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity.


SECTION 3. This Supplement may be executed in counterparts each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Supplement shall become effective when the Servicer shall have received counterparts of this Supplement that, when taken together, bear the signatures of the New Guarantor and the Servicer. Delivery of an executed signature page to this Supplement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Supplement.

SECTION 4. Except as expressly supplemented hereby, the Guaranty Agreement shall remain in full force and effect.

SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO CONFLICTS OF LAW PRINCIPLES THEREOF).

SECTION 6. In case any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and in the Guaranty Agreement shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision hereof in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

SECTION 7. All communications and notices hereunder shall be in writing and given as provided in Section 13 of the Guarantee Agreement.


IN WITNESS WHEREOF, the New Guarantor and the Servicer have duly executed this Supplement to the Guaranty Agreement as of the day and year first above written.

 

[Name of New Guarantor]
By:  

             

Name:
Title:
Address:
TRUIST BANK, as Servicer
By:  

                     

Name:
Title:


EXHIBIT E

TO

LOAN FACILITY AGREEMENT AND GUARANTY

 

FORM OF PARTICIPATION CERTIFICATE

 

SERVICER:   

Truist Bank    

Aaron’s Program Manager    

Program Lending    

303 Peachtree Street, N.E.    

2nd Floor    

Mail Code 1802    

Atlanta, Georgia 30308    

   CERTIFICATE NO. __

DATE:                          ,     

This is to certify that Truist Bank (“Servicer”), has sold to _____________ (“Participant”) and Participant has purchased from Servicer an undivided ____% ownership interest in (i) the Facility Commitment, (ii) the Loan Commitments, (iii) the Loans, (iv) the Collateral, (v) all rights against any guarantor of any Loan, including the Sponsor, (vi) all rights pursuant to the Guaranty Agreement, (vii) the Loan Documents and (viii) all right, title and interest to any payment or right to receive payment with respect to the foregoing (collectively, the “Participant’s Interest”). Notwithstanding the foregoing, each Participant’s right to receive payments of interest, commitment fees or other fees with respect to the Commitment, the Loan Commitments and the Loans shall not exceed the amounts which such Participant is entitled to receive pursuant to the terms of the Loan Facility Agreement referenced below.

This Certificate is issued pursuant to the terms and conditions of that certain Loan Facility Agreement and Guaranty dated as of November 17, 2020, by and among Servicer, Participant, Aaron’s, LLC, Holdings and certain other financial institutions named therein and from time to time a party thereto (as amended, restated, modified or supplemented from time to time, the “Loan Facility Agreement”). Reference is made to said Loan Facility Agreement for the terms and conditions of the participation evidenced hereby. All terms used in this Certificate shall have the same meanings as set forth in said Loan Facility Agreement.

This Certificate is neither transferable nor negotiable.

 

TRUIST BANK, as Servicer
By:  

 

  Name:  

 

  Title:  

 


EXHIBIT F

TO

LOAN FACILITY AGREEMENT AND GUARANTY

FORM OF MONTHLY SERVICING REPORT

Aaron’s, LLC Loan Program

 

 

Aaron’s, LLC Loan Program

Monthly Servicing Report

Payment Date:                                                                           Payment Period:                         thru                                     

 

 

Program Summary

 

     

Borrowers with Line of

Credit Commitments

  

Borrowers with Revolving

Commitments or Term

Loan Commitments

US Loans Outstanding as of Last Day of Payment Period          
Canadian Loans Outstanding as of Last Day of Payment Period          
US Loans Outstanding as of Payment Date          
Canadian Loans Outstanding as of Payment Date          
Amount of US Loans Repurchased by Sponsor Since Last Payment Date          
Amounts collected with respect to Collateral for US Loans since Last Payment Date          
Amount of Canadian Loans Repurchased by Sponsor since Last Payment Date          
Amounts collected with respect to Collateral for Canadian Loans since Last Payment Date          
Aggregate Loan Commitments as of Preceding Payment Date          
Aggregate US Loan Commitments as of Payment Date          
Aggregate Canadian Loan Commitments as of Payment Date          

Past Due US Loans

 

    

None for this period

 

    

See Attached Past Due Report

Past Due Canadian Loans

 

    

None for this period

 

    

See Attached Past Due Report

 

 


EXHIBIT G

TO

LOAN FACILITY AGREEMENT AND GUARANTY

FORM OF SECURITY AND PLEDGE AGREEMENT

THIS SECURITY AND PLEDGE AGREEMENT (as amended, restated, amended and restated, modified and supplemented from time to time, this “Agreement”) is entered into as of [ ] among the parties identified as “Obligors” on the signature pages hereto and such other parties that may become Obligors hereunder after the date hereof (each individually an “Obligor” and collectively the “Obligors”), and TRUIST BANK, in its capacity as Servicer (in such capacity, the “Servicer”) for the holders of the Secured Obligations (defined below).

RECITALS

WHEREAS, reference is made to that certain Loan Facility Agreement and Guaranty (as amended, modified, supplemented, increased, extended, restated, refinanced and replaced from time to time, the “Loan Facility Agreement”) dated as of November 17, 2020 among Aaron’s, LLC, a Georgia limited liability company (the “Sponsor”), The Aaron’s Company, Inc. (f/k/a Aaron’s Spinco, Inc.), a Georgia corporation (“Holdings”), the Participants from time to time party thereto, and Truist Bank, in its capacity as Servicer; and

WHEREAS, this Agreement is required by the terms of the Loan Facility Agreement.

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

1. Definitions.

(a) Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to such terms in the Loan Facility Agreement, and the following terms which are defined in the Uniform Commercial Code in effect from time to time in the State of New York except as such terms may be used in connection with the perfection of the Collateral and then the applicable jurisdiction with respect to such affected Collateral shall apply (the “UCC”): Accession, Account, Adverse Claim, As-Extracted Collateral, Chattel Paper, Commercial Tort Claim, Consumer Goods, Deposit Account, Document, Electronic Chattel Paper, Equipment, Farm Products, Financial Asset, Fixtures, General Intangible, Goods, Instrument, Inventory, Investment Company Security, Investment Property, Letter-of-Credit Right, Manufactured Home, Money, Proceeds, Securities Account, Securities Intermediary, Security, Security Entitlement, Software, Supporting Obligation and Tangible Chattel Paper.

(b) In addition, the following terms shall have the meanings set forth below:

Agreement” has the meaning provided in the introductory paragraph hereof.

Collateral” has the meaning provided in Section 2 hereof.

Copyright License” shall mean any written agreement, naming any Obligor as licensor, granting any right under any Copyright.

Copyrights” shall mean (a) all registered United States copyrights in all Works, now existing or hereafter created or acquired, all registrations and recordings thereof, and all applications in connection therewith, including, without limitation, registrations, recordings and applications in the United States Copyright Office, and (b) all renewals thereof.


Excluded Accounts” shall mean (a) deposit and/or securities accounts the balance of which consists exclusively of (i) withheld income taxes and federal, state or local employment taxes in such amounts as are required in the reasonable judgment of the Sponsor to be paid to the IRS or state or local government agencies within the following two (2) months with respect to employees of any of the Credit Parties or (ii) amounts required to be paid over to an employee benefit plan pursuant to DOL Reg. Sec. 2510.3-102 on behalf of or for the benefit of employees of one or more Credit Parties, (b) all tax accounts (including, without limitation, sales tax accounts), accounts used solely for payroll, accounts maintained solely in trust for the benefit of third parties and fiduciary purposes, escrow accounts, zero balance or swept accounts and employee benefit accounts (including 401(k) accounts and pension fund accounts), in each case, so long as such account is used solely for such purpose, (c) any deposit and/or securities account maintained in a jurisdiction outside of the United States and (d) accounts the balance of which consists exclusively of amounts to be paid to employees in the ordinary course of business.

Excluded Property” shall mean, with respect to any Obligor, (a) any owned real property located outside the United States, (b) any owned real property located in the United States that is owned in fee by an Obligor which is not Material Real Estate, (c) any leased real property, (d) any copyrights, copyright licenses, patents, patent licenses, trademarks or trademark licenses for which a perfected Lien thereon is not effected either by filing of a Uniform Commercial Code financing statement or by appropriate evidence of such Lien being filed in either the United States Copyright Office or the United States Patent and Trademark Office, (e) any personal property for which the attachment or perfection of a Lien thereon is not governed by the Uniform Commercial Code (including motor vehicles and other assets subject to certificates of title), (f) the Capital Stock in any Unrestricted Subsidiary, (g) the Capital Stock in any Foreign Subsidiary that is a Restricted Subsidiary to the extent not required to be pledged to secure the Guaranteed Obligations pursuant to Section 6.10(b) of the Loan Facility Agreement, (h) any property which, subject to the terms of Section 8.8 of the Loan Facility Agreement, is subject to a Lien of the type described in Section 8.2(c) of the Loan Facility Agreement pursuant to documents which prohibit such Credit Party from granting any other Liens in such property, (i) Excluded Accounts, (j) those assets over which the granting of a Lien in such assets in favor of the Servicer would be prohibited by applicable law, regulation or contract (including any requirement under or in accordance with such law, rule or regulation to obtain consent from a third party, including any governmental or regulatory authority), so long as (i) any contractual restriction is not incurred in contemplation of the owning entity’s becoming a Restricted Subsidiary or the entry of such owning entity into the Credit Documents and (ii) such contract is permitted under this Agreement, in each case, after giving effect to Sections 9-406, 9-407, 9-408 and 9-409 of the Uniform Commercial Code or any other applicable law or principle of equity, other than any receivables and proceeds thereof (the assignment of which is expressly deemed effective under the Uniform Commercial Code notwithstanding such prohibition), (k) any intent-to-use trademark application prior to the filing of a “Statement of Use” or “Amendment to Allege Use” with respect thereto, to the extent, if any, that, and solely during the period, if any, in which the grant or enforcement of a security interest therein would impair the validity or enforceability of such intent-to-use trademark application under applicable federal law, (l) assets to the extent a security interest in such assets would result in material adverse tax consequences (including, without limitation, as a result of the operation of Section 956 of the United States Code or any similar law or regulation in any applicable jurisdiction), as reasonably determined by the Sponsor in good faith, (m) at any time before the date that is 1 year after the Funding Availability Date, the Specified Asset and (n) other assets to the extent the Sponsor and the Servicer agree in writing that the cost of obtaining or perfecting a security interest in such assets is excessive in relation to the value of the security afforded thereby; provided, however, that the security interest granted to the Servicer under this Agreement or any other Credit Document shall attach immediately to any asset of any Credit Party at such time as such asset ceases to meet any of the criteria for “Excluded Property” described in any of the foregoing clauses (a) through (n) above.

 

2


Loan Facility Agreement” has the meaning provided in the recitals hereof.

Material Agreements” shall mean (a) all agreements, indentures or notes governing the terms of any Material Indebtedness and (b) all other agreements, documents, contracts, indentures and instruments pursuant to which a default, breach or termination thereof would reasonably be expected to result in a Material Adverse Effect.

Obligor” and “Obligors” have the meanings provided in the introductory paragraph hereof.

Patent License” shall mean any agreement, whether written or oral, providing for the grant by or to an Obligor of any right to manufacture, use or sell any invention covered by a Patent.

Patents” shall mean (a) all letters patent of the United States or any other country and all reissues and extensions thereof, and (b) all applications for letters patent of the United States or any other country and all divisions, continuations and continuations-in-part thereof.

Pledged Equity” shall mean, with respect to each Obligor, (a) one hundred percent (100%) of the issued and outstanding Capital Stock of each Domestic Subsidiary that is a Restricted Subsidiary and (b) sixty-six percent (66%) of the issued and outstanding Capital Stock entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) and one hundred percent (100%) of the issued and outstanding Capital Stock not entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) in each Foreign Subsidiary that is a Restricted Subsidiary, directly owned by any Obligor, including without limitation the Capital Stock of the Subsidiaries owned by such Obligor as set forth on Schedule 1 hereto, in each case together with the certificates (or other agreements or instruments), if any, representing such Capital Stock, and all options and other rights, contractual or otherwise, with respect thereto, including, but not limited to, the following:

(1) all Capital Stock representing a dividend thereon, or representing a distribution or return of capital upon or in respect thereof, or resulting from a stock split, revision, reclassification or other exchange therefor, and any subscriptions, warrants, rights or options issued to the holder thereof, or otherwise in respect thereof; and

(2) in the event of any consolidation or merger involving the issuer thereof and in which such issuer is not the surviving Person, all shares of each class of the Capital Stock of the successor Person formed by or resulting from such consolidation or merger, to the extent that such successor Person is a direct Subsidiary of an Obligor; provided that if such successor Person is a Foreign Subsidiary or a Domestic Subsidiary that is an Excluded Subsidiary, such Capital Stock shall be limited to the amount described in clause (b) hereof.

Secured Obligations” shall mean, without duplication, (a) all Guaranteed Obligations and (b) subject to the limitations set forth in Section 15.4 of the Loan Facility Agreement, all out-of-pocket costs and expenses (including, without limitation, the reasonable and documented fees, disbursements and other charges of one outside counsel) incurred in connection with enforcement and collection of the Guaranteed Obligations.

Sponsor” has the meaning provided in the recitals hereof.

Trademark License” shall mean any agreement, written or oral, providing for the grant by or to an Obligor of any right to use any Trademark.

 

3


Trademarks” shall mean (a) all trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, logos and other source or business identifiers, and the goodwill associated therewith, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all applications in connection therewith, whether in the United States Patent and Trademark Office or in any similar office or agency of the United States, any state thereof or any other country or any political subdivision thereof, or otherwise and (b) all renewals thereof.

UCC” has the meaning provided in Section 1(a) hereof.

Work” shall mean any work that is subject to copyright protection pursuant to Title 17 of the United States Code.

2. Grant of Security Interest in the Collateral. To secure the prompt payment and performance in full when due, whether by lapse of time, acceleration, mandatory prepayment or otherwise, of the Secured Obligations, each Obligor hereby grants to the Servicer, for the benefit of the holders of the Secured Obligations, a continuing security interest in, and a right to set off against, any and all right, title and interest of such Obligor in and to all of the following, whether now owned or existing or owned, acquired, or arising hereafter (collectively, the “Collateral”): (a) all Accounts; (b) all Money; (c) all Chattel Paper; (d) those certain Commercial Tort Claims set forth on Schedule 2 hereto; (e) all Copyrights; (f) all Copyright Licenses; (g) all Deposit Accounts; (h) all Documents; (i) all Equipment; (j) all Fixtures; (k) all General Intangibles; (l) all Goods; (m) all Instruments; (n) all Inventory; (o) all Investment Property; (p) all Letter-of-Credit Rights; (q) all Patents; (r) all Patent Licenses; (s) all Pledged Equity; (t) all Software; (u) all Supporting Obligations; (v) all Trademarks; (w) all Trademark Licenses; (x) all books and records related to the Collateral; and (y) all Accessions and all Proceeds of any and all of the foregoing.

Notwithstanding anything to the contrary contained herein, the security interests granted under this Agreement shall not extend to any Excluded Property; provided that upon the occurrence of an event that renders property to no longer constitute Excluded Property, a security interest in such property shall be automatically and simultaneously granted hereunder and shall be included as Collateral hereunder.

The Obligors and the Servicer, on behalf of the holders of the Secured Obligations, hereby acknowledge and agree that the security interest created hereby in the Collateral (i) constitutes continuing collateral security for all of the Secured Obligations, whether now existing or hereafter arising and (ii) is not to be construed as an assignment of any Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks or Trademark Licenses.

3. Representations and Warranties. Each of the Obligors hereby represents and warrants to the Servicer, for the benefit of the holders of the Secured Obligations, that:

(a) Ownership. Such Obligor is the legal and beneficial owner of its Collateral and has the right to pledge, sell, assign or transfer the same. There exists no Adverse Claim with respect to the Pledged Equity of such Obligor other than non-consensual Liens permitted by Section 8.2 of the Loan Facility Agreement.

(b) Security Interest/Priority. This Agreement creates a valid security interest in favor of the Servicer, for the benefit of the holders of the Secured Obligations, in the Collateral of such Obligor and, when properly perfected by filing a UCC-1 financing statement in the appropriate jurisdiction, shall constitute a valid and perfected security interest in such Collateral (including all uncertificated Pledged Equity consisting of partnership or limited liability company interests that do not constitute Securities), to the extent such security interest can be perfected by filing under the UCC, free and clear

 

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of all Liens except for Liens permitted by Section 8.2 of the Loan Facility Agreement. The taking of possession by the Servicer of the certificated securities (if any) evidencing the Pledged Equity and all other Instruments constituting Collateral (and any necessary endorsements) will perfect the Servicer’s security interest in all the Pledged Equity evidenced by such certificated securities and such Instruments (subject to Permitted Liens). With respect to any Collateral consisting of a Deposit Account, Security Entitlement or assets held in a Securities Account (in each case, other than Excluded Accounts), upon execution and delivery by the applicable Obligor, the bank or Securities Intermediary, as applicable, and the Servicer of an agreement granting control to the Servicer over such Collateral, the Servicer shall have a valid and perfected security interest in such Collateral, subject to Permitted Liens. Notwithstanding anything to the contrary in the foregoing, the Obligors and the Servicer acknowledge and agree that no account control agreement shall be required with respect to any Deposit Account or Securities Account that has a balance (or which holds assets with a fair market value) less than $5,000,000.

(c) Types of Collateral. None of the Collateral consists of, or is the Proceeds of, As-Extracted Collateral, Consumer Goods, Farm Products, Manufactured Homes or standing timber.

(d) Equipment and Inventory. With respect to any Equipment and/or Inventory of such Obligor, such Obligor has exclusive possession and control of such Equipment and Inventory of such Obligor except for (i) Equipment leased by such Obligor as a lessee, (ii) Equipment or Inventory in transit with common carriers, (iii) mobile goods, (iv) Equipment or Inventory out for repair or refurbishment, (v) Equipment or Inventory kept with third parties in the ordinary course of business, and/or (vi) Equipment or Inventory in possession of employees in the ordinary course of business. Subject to the foregoing, no Inventory of such Obligor is held by a Person other than such Obligor pursuant to consignment, sale or return, sale on approval or similar agreement.

(e) Authorization of Pledged Equity. All Pledged Equity is duly authorized and validly issued, is fully paid and, to the extent applicable, non-assessable and is not subject to the preemptive rights, warrants, options or other rights to purchase of any Person, or equityholder, voting trust or similar agreements outstanding with respect to, or property that is convertible, into, or that requires the issuance and sale of, any of the Pledged Equity, except to the extent expressly permitted under the Credit Documents.

(f) No Other Capital Stock, Instruments, Etc. As of the Closing Date, such Obligor owns all certificated Capital Stock in any Subsidiary that is required to be pledged and delivered to the Servicer hereunder, other than as set forth on Schedule 1 hereto, and all such certificated Capital Stock has been delivered to the Servicer.

(g) Partnership and Limited Liability Company Interests. Except as previously disclosed to the Servicer in writing, none of the Collateral consisting of an interest in a partnership or a limited liability company (i) is dealt in or traded on a securities exchange or in a securities market, (ii) by its terms expressly provides that it is a Security governed by Article 8 of the UCC, (iii) is an Investment Company Security, (iv) is held in a Securities Account or (v) constitutes a Security or a Financial Asset.

(h) Contracts; Agreements; Licenses. Such Obligor has no Material Agreements which are non-assignable by their terms, or as a matter of law, or which prevent the granting of a security interest therein for which consent has not been obtained.

 

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(i) Consents; Etc. There are no restrictions in any articles of incorporation, articles of formation, articles of organization, bylaws, operating agreement or other applicable agreement of formation or organization governing any Pledged Equity or any other document related thereto which would limit or restrict (i) the grant of a Lien pursuant to this Agreement on such Pledged Equity, (ii) the perfection of such Lien or (iii) the exercise of remedies in respect of such perfected Lien in the Pledged Equity as contemplated by this Agreement. Except for (i) the filing or recording of UCC financing statements, (ii) the filing of appropriate notices with the United States Patent and Trademark Office and the United States Copyright Office, (iii) obtaining control to perfect the Liens created by this Agreement (to the extent required under Section 4(a) hereof), (iv) such actions as may be required by laws affecting the offering and sale of securities, (v) such actions as may be required by applicable foreign laws affecting the pledge of the Pledged Equity of Foreign Subsidiaries, (vi) any approvals that may be required to be obtained from any bailee or landlord to collect the Collateral, and (vii) consents, authorizations, filings or other actions which have been obtained or made, no material consent or material authorization of, filing with, or other act by or in respect of, any arbitrator or Governmental Authority and no consent of any other Person (including, without limitation, any stockholder, member or creditor of such Obligor), is required for (A) the grant by such Obligor of the security interest in the Collateral granted hereby or for the execution, delivery or performance of this Agreement by such Obligor, (B) the perfection of such security interest (to the extent such security interest can be perfected by filing under the UCC, the granting of control (to the extent required under Section 4(a) hereof) or by filing an appropriate notice with the United States Patent and Trademark Office or the United States Copyright Office) or (C) the exercise by the Servicer or the holders of the Secured Obligations of the rights and remedies provided for in this Agreement.

(j) Commercial Tort Claims. As of the Closing Date, such Obligor has no Commercial Tort Claims seeking damages in excess of $2,000,000 in any individual instance or $5,000,000 in the aggregate when taken together with all Commercial Tort Claims of all of the other Obligors, other than as set forth on Schedule 2 hereto.

(k) Copyrights, Patents and Trademarks.

(i) Schedule 3 hereto includes all registrations or applications for Copyrights, Patents and Trademarks and all material Copyright Licenses, Patent Licenses and Trademark Licenses (excluding “off-the-shelf” licenses pursuant to standard licensing terms which have not been modified or customized by a third party for the Obligor) owned by such Obligor in its own name, or to which any Obligor is a party, as of the date hereof.

(ii) All registrations or applications pertaining to such Copyrights, Patents and Trademarks as have been set forth on Schedule 3 hereto have been duly and properly filed, and to any Obligor’s knowledge, each Copyright, Patent and Trademark of such Obligor is valid, subsisting, unexpired, enforceable and has not been abandoned.

(iii) Except as set forth on Schedule 3 hereto, none of such Copyrights, Patents and Trademarks is the subject of any exclusive licensing or franchise agreement as of the date hereof.

(iv) Except as could not reasonably be expected to have a Material Adverse Effect, to such Obligor’s knowledge, no holding, decision or judgment has been rendered by any Governmental Authority that would limit, cancel or question the validity of any such Copyright, Patent or Trademark.

(v) No action or proceeding is pending, seeking to limit, cancel or question the validity of any Copyright, Patent or Trademark of any Obligor or Subsidiary of any Obligor that could reasonably be expected to have a Material Adverse Effect.

 

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4. Covenants. Each Obligor covenants that until such time as the Secured Obligations arising under the Credit Documents have been paid in full and the Participating Commitments have expired or been terminated, such Obligor shall:

(a) Instruments/Chattel Paper/Pledged Equity/Control.

(i) If any amount in excess of $2,000,000 in any individual instance or $5,000,000 in the aggregate payable under or in connection with any of the Collateral shall be or become evidenced by any Instrument or Tangible Chattel Paper, or if any property constituting Collateral shall be stored or shipped subject to a Document, ensure that such Instrument, Tangible Chattel Paper or Document is either in the possession of such Obligor at all times or, if requested by the Servicer to perfect its security interest in such Collateral, is delivered to the Servicer duly endorsed in a manner reasonably satisfactory to the Servicer. Such Obligor shall ensure that any Collateral consisting of Tangible Chattel Paper is marked with a legend reasonably acceptable to the Servicer indicating the Servicer’s security interest in such Tangible Chattel Paper.

(ii) Deliver to the Servicer promptly upon the receipt thereof by or on behalf of such Obligor, all certificates and instruments constituting Pledged Equity. Prior to delivery to the Servicer, all such certificates constituting Pledged Equity shall be held in trust by such Obligor for the benefit of the Servicer pursuant hereto. All such certificates representing Pledged Equity shall be delivered in suitable form for transfer by delivery or shall be accompanied by duly executed instruments of transfer or assignment in blank, substantially in the form provided in Exhibit 4(a) hereto (or other form acceptable to the Servicer in its reasonable discretion).

(iii) Execute and deliver all agreements, assignments, instruments or other documents as reasonably requested by the Servicer for the purpose of obtaining and maintaining control with respect to any Collateral consisting of (A) Deposit Accounts, (B) Investment Property, (C) Letter-of-Credit Rights and (D) Electronic Chattel Paper.

(b) Filing of Financing Statements, Notices, Etc. Such Obligor shall execute and deliver to the Servicer such agreements, assignments or instruments (including affidavits, notices, reaffirmations and amendments and restatements of existing documents, as the Servicer may reasonably request) and do all such other things as the Servicer may reasonably deem necessary or appropriate (i) to assure to the Servicer its security interests hereunder, including (A) such instruments as the Servicer may from time to time reasonably request in order to perfect and maintain the security interests granted hereunder in accordance with the UCC, (B) with regard to Copyrights, a Notice of Grant of Security Interest in Copyrights in the form of Exhibit 4(b)(i) hereto, (C) with regard to Patents, a Notice of Grant of Security Interest in Patents for filing with the United States Patent and Trademark Office in the form of Exhibit 4(b)(ii) hereto and (D) with regard to Trademarks, a Notice of Grant of Security Interest in Trademarks for filing with the United States Patent and Trademark Office in the form of Exhibit 4(b)(iii) hereto, (ii) to consummate the transactions contemplated hereby and (iii) to otherwise protect and assure the Servicer of its rights and interests hereunder. Furthermore, such Obligor also hereby irrevocably makes, constitutes and appoints the Servicer, its nominee or any other person whom the Servicer may designate, as such Obligor’s attorney in fact with full power and for the limited purpose to prepare and file (and, to the extent applicable, sign) in the name of such Obligor any financing statements, or amendments and supplements to financing statements, renewal financing statements, notices or any similar documents which in the Servicer’s reasonable discretion would be necessary or appropriate in order to perfect and maintain perfection of the security interests granted hereunder, such power, being coupled with an interest, being and remaining irrevocable until such time

 

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as the Secured Obligations arising under the Credit Documents have been paid in full and the Participating Commitments have expired or been terminated. Such Obligor hereby agrees that a carbon, photographic or other reproduction of this Agreement or any such financing statement is sufficient for filing as a financing statement by the Servicer without notice thereof to such Obligor wherever the Servicer may in its sole discretion desire to file the same.

(c) Collateral Held by Warehouseman, Bailee, Etc. If any Collateral with a book value in excess of $5,000,000 is at any time in the possession or control of a warehouseman, bailee or any agent or processor of such Obligor and the Servicer so reasonably requests (i) notify such Person in writing of the Servicer’s security interest therein, (ii) instruct such Person to hold all such Collateral for the Servicer’s account and subject to the Servicer’s instructions and (iii) use commercially reasonable efforts to obtain a written acknowledgment from such Person that it is holding such Collateral for the benefit of the Servicer.

(d) Commercial Tort Claims. (i) Promptly forward to the Servicer an updated Schedule 2 listing any and all Commercial Tort Claims by or in favor of such Obligor seeking damages in excess of $2,000,000 in any individual instance or $5,000,000 in the aggregate for all Commercial Tort Claims of the Obligors not subject to a Lien in favor of the Servicer for the benefit of itself and the other holders of the Secured Obligations and (ii) execute and deliver such statements, documents and notices and do and cause to be done all such things as may be reasonably required by the Servicer, or required by law to create, preserve, perfect and maintain the Servicer’s security interest in any Commercial Tort Claims initiated by or in favor of any Obligor.

(e) Books and Records. Each Obligor shall mark its books and records (and shall cause the issuer of the Pledged Equity of such Obligor to mark its books and records) to reflect the security interest granted pursuant to this Agreement.

(f) Nature of Collateral. At all times maintain the Collateral as personal property and not affix any of the Collateral to any real property in a manner which would change its nature from personal property to real property or a Fixture to real property, unless the Servicer shall have a perfected Lien on such Fixture or real property.

(g) Issuance or Acquisition of Capital Stock in Partnership or Limited Liability Company. Not without executing and delivering, or causing to be executed and delivered, to the Servicer such agreements, documents and instruments as the Servicer may reasonably require, issue or acquire any Pledged Equity consisting of an interest in a partnership or a limited liability company that (i) is dealt in or traded on a securities exchange or in a securities market, (ii) by its terms expressly provides that it is a Security governed by Article 8 of the UCC, (iii) is an Investment Company Security, (iv) is held in a Securities Account or (v) constitutes a Security or a Financial Asset.

5. Authorization to File Financing Statements. Each Obligor hereby authorizes the Servicer to prepare and file such financing statements (including continuation statements) or amendments thereof or supplements thereto or other instruments as the Servicer may from time to time deem necessary or appropriate in order to perfect and maintain the security interests granted hereunder in accordance with the UCC (including authorization to describe the Collateral as “all personal property”, “all assets” or words of similar meaning).

 

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6. Advances.

(a) Upon the occurrence of a Credit Event and during the continuation thereof, or (b) upon the failure of any Obligor to perform any of the covenants and agreements contained herein or in any other Credit Document if, with respect to this clause (b), the Servicer reasonably determines that the taking of a particular action is required prior to the expiration of any applicable cure period(s) in order to prevent an impairment of its rights in and to any Collateral, then in either case, the Servicer may, at its sole option and in its sole discretion upon notice to the applicable Obligors, perform the same and in so doing may expend such sums as the Servicer may reasonably deem advisable in the performance thereof, including, without limitation, the payment of any insurance premiums, the payment of any taxes, a payment to obtain a release of a Lien or potential Lien, expenditures made in defending against any adverse claim and all other expenditures which the Servicer may make for the protection of the security hereof or may be compelled to make by operation of law. All such sums and amounts so expended shall be repayable by the Obligors on a joint and several basis promptly upon timely notice thereof and demand therefor, shall constitute additional Secured Obligations and shall bear interest from the date said amounts are expended at 2% per annum. No such performance of any covenant or agreement by the Servicer on behalf of any Obligor, and no such advance or expenditure therefor, shall relieve the Obligors of any Unmatured Credit Event or Credit Event. The Servicer may make any payment hereby authorized in accordance with any bill, statement or estimate procured from the appropriate public office or holder of the claim to be discharged without inquiry into the accuracy of such bill, statement or estimate or into the validity of any tax assessment, sale, forfeiture, tax lien, title or claim except to the extent such payment is being contested in good faith by an Obligor in appropriate proceedings and against which adequate reserves are being maintained in accordance with GAAP.

7. Remedies.

(a) General Remedies. During the continuance of a Credit Event, the Servicer shall have, in addition to the rights and remedies provided herein, in the Credit Documents, in any other documents relating to the Secured Obligations, or by law (including, but not limited to, levy of attachment, garnishment and the rights and remedies set forth in the UCC of the jurisdiction applicable to the affected Collateral), the rights and remedies of a secured party under the UCC (regardless of whether the UCC is the law of the jurisdiction where the rights and remedies are asserted and regardless of whether the UCC applies to the affected Collateral), and further, the Servicer may, with or without judicial process or the aid and assistance of others, (i) enter on any premises on which any of the Collateral may be located and, without resistance or interference by the Obligors, take possession of the Collateral, (ii) dispose of any Collateral on any such premises, (iii) require the Obligors to assemble and make available to the Servicer at the expense of the Obligors any Collateral at any place and time designated by the Servicer which is reasonably convenient to both parties, (iv) remove any Collateral from any such premises for the purpose of effecting sale or other disposition thereof, and/or (v) without demand and without advertisement, notice, hearing or process of law, all of which each of the Obligors hereby waives to the fullest extent permitted by law, at any place and time or times, sell and deliver any or all of the Collateral held by or for it at a public or private sale (which in the case of a private sale of Pledged Equity, may be to a restricted group of purchasers who will be obligated to agree, among other things, to acquire such securities for their own account, for investment and not with a view to the distribution or resale thereof), at any exchange or broker’s board or elsewhere, by one or more contracts, in one or more parcels, for cash, upon credit or otherwise, at such prices and upon such terms as the Servicer deems advisable, in its sole discretion (subject to any and all mandatory legal requirements). Each Obligor acknowledges that any such private sale may be at prices and on terms less favorable to the seller than the prices and other terms which might have been obtained at a public sale and, notwithstanding the foregoing, agrees that such private sale shall be deemed to have been made in a commercially reasonable manner and, in the case of a sale of Pledged Equity, that the Servicer shall have no obligation to delay sale of any such securities for the period of time necessary to permit the issuer of such securities to register such securities for public sale under the Securities Act of 1933. Neither the Servicer’s compliance with applicable law nor its disclaimer of warranties relating to the Collateral shall be deemed to adversely affect the commercial reasonableness of any sale. To the extent the rights of notice cannot be legally waived hereunder, each Obligor agrees that any requirement of reasonable notice shall be met if such notice, specifying the place of any public sale or the time after which any private sale is to be made, is personally served on or mailed, postage prepaid, to the Obligors in accordance with the

 

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notice provisions of Section 15.1 of the Loan Facility Agreement at least ten (10) days before the time of sale or other event giving rise to the requirement of such notice. The Servicer may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Each Obligor further acknowledges and agrees that any offer to sell any Pledged Equity which has been (i) publicly advertised on a bona fide basis in a newspaper or other publication of general circulation in the financial community of New York, New York (to the extent that such offer may be advertised without prior registration under the Securities Act of 1933), or (ii) made privately in the manner described above shall be deemed to involve a “public sale” under the UCC, notwithstanding that such sale may not constitute a “public offering” under the Securities Act of 1933, and the Servicer may, in such event, bid for the purchase of such securities. The Servicer shall not be obligated to make any sale or other disposition of the Collateral regardless of notice having been given. To the extent permitted by applicable law, any holder of Secured Obligations may be a purchaser at any such sale. To the extent permitted by applicable law, each of the Obligors hereby waives all of its rights of redemption with respect to any such sale. Subject to the provisions of applicable law, the Servicer may postpone or cause the postponement of the sale of all or any portion of the Collateral by announcement at the time and place of such sale, and such sale may, without further notice, to the extent permitted by law, be made at the time and place to which the sale was postponed, or the Servicer may further postpone such sale by announcement made at such time and place.

(b) Remedies Relating to Accounts. During the continuance of a Credit Event, whether or not the Servicer has exercised any or all of its rights and remedies hereunder, (i) each Obligor will promptly upon the request of the Servicer instruct all of its account debtors to remit all payments in respect of Accounts to a mailing location selected by the Servicer and (ii) the Servicer shall have the right to enforce any Obligor’s rights against its customers and account debtors, and the Servicer or its designee may notify any Obligor’s customers and account debtors that the Accounts of such Obligor have been assigned to the Servicer or of the Servicer’s security interest therein, and may (either in its own name or in the name of an Obligor or both) demand, collect (including without limitation by way of a lockbox arrangement), receive, take receipt for, sell, sue for, compound, settle, compromise and give acquittance for any and all amounts due or to become due on any Account, and, in the Servicer’s discretion, file any claim or take any other action or proceeding to protect and realize upon the security interest of the holders of the Secured Obligations in the Accounts. Each Obligor acknowledges and agrees that the Proceeds of its Accounts remitted to or on behalf of the Servicer in accordance with the provisions hereof shall be solely for the Servicer’s own convenience and that such Obligor shall not have any right, title or interest in such Accounts or in any such other amounts except as expressly provided herein. Neither the Servicer nor the holders of the Secured Obligations shall have any liability or responsibility to any Obligor for acceptance of a check, draft or other order for payment of money bearing the legend “payment in full” or words of similar import or any other restrictive legend or endorsement or be responsible for determining the correctness of any remittance. Furthermore, during the continuance of a Credit Event, (i) the Servicer shall have the right, but not the obligation, to make test verifications of the Accounts in any manner and through any medium that it reasonably considers advisable, and the Obligors shall furnish all such assistance and information as the Servicer may require in connection with such test verifications, (ii) upon the Servicer’s request and at the expense of the Obligors, the Obligors shall use commercially reasonable efforts to cause independent public accountants or others satisfactory to the Servicer to furnish to the Servicer reports showing reconciliations, aging and test verifications of, and trial balances for, the Accounts and (iii) upon three (3) Business Days’ prior written notice to the Obligors, the Servicer in its own name or in the name of others may communicate with account debtors on the Accounts to verify with them to the Servicer’s satisfaction the existence, amount and terms of any Accounts.

(c) Deposit Accounts. Upon the occurrence of a Credit Event and during the continuation thereof, the Servicer may (i) prevent withdrawals or other dispositions of funds in Deposit Accounts (other than Excluded Accounts) maintained with the Servicer and (ii) exercise control pursuant to any control agreement governing a Deposit Account (other than Excluded Accounts) not maintained with the Servicer.

 

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(d) Access. In addition to the rights and remedies hereunder, during the continuance of a Credit Event, the Servicer shall have the right to peaceably enter and remain upon the various premises of the Obligors without cost or charge to the Servicer, and use the same, together with materials, supplies, books and records of the Obligors for the purpose of collecting and liquidating the Collateral, or for preparing for sale and conducting the sale of the Collateral, whether by foreclosure, auction or otherwise. In addition, the Servicer may remove Collateral, or any part thereof, from such premises and/or any records with respect thereto, in order to effectively collect or liquidate such Collateral.

(e) Nonexclusive Nature of Remedies. Failure by the Servicer or the holders of the Secured Obligations to exercise any right, remedy or option under this Agreement, any other Credit Document, any other document relating to the Secured Obligations, or as provided by law, or any delay by the Servicer or the holders of the Secured Obligations in exercising the same, shall not operate as a waiver of any such right, remedy or option. No waiver hereunder shall be effective unless it is in writing, signed by the party against whom such waiver is sought to be enforced and then only to the extent specifically stated, which in the case of the Servicer or the holders of the Secured Obligations shall only be granted as provided herein. To the extent permitted by law, neither the Servicer, the holders of the Secured Obligations, nor any party acting as attorney for the Servicer or the holders of the Secured Obligations, shall be liable hereunder for any acts or omissions or for any error of judgment or mistake of fact or law other than their bad faith, gross negligence, willful misconduct or a material breach of the Servicer’s or such holder’s obligations hereunder. The rights and remedies of the Servicer and the holders of the Secured Obligations under this Agreement shall be cumulative and not exclusive of any other right or remedy which the Servicer or the holders of the Secured Obligations may have.

(f) Retention of Collateral. In addition to the rights and remedies hereunder, the Servicer may, in compliance with Sections 9-620 and 9-621 of the UCC or otherwise complying with the requirements of applicable law of the relevant jurisdiction, accept or retain the Collateral in satisfaction of the Secured Obligations. Unless and until the Servicer shall have provided such notices, however, the Servicer shall not be deemed to have retained any Collateral in satisfaction of any Secured Obligations for any reason.

(g) Deficiency. In the event that the proceeds of any sale, collection or realization are insufficient to pay all amounts to which the Servicer or the holders of the Secured Obligations are legally entitled, the Obligors shall be jointly and severally liable for the deficiency, together with interest thereon at the rate provided for in Section 2.3(c) of the Loan Facility Agreement, together with, subject to the limitations set forth in Section 15.4 of the Loan Facility Agreement, the costs of collection and the fees, charges and disbursements of counsel. Any surplus remaining after the full payment and satisfaction of the Secured Obligations shall be returned to the Obligors or to whomsoever a court of competent jurisdiction shall determine to be entitled thereto. Notwithstanding any provision to the contrary contained herein, in any of the other Credit Documents or in any other documents relating to the Secured Obligations, the obligations of each Obligor under the Loan Facility Agreement and the other Credit Documents shall be limited to an aggregate amount equal to the largest amount that would not render such obligations subject to avoidance under Section 548 of the Bankruptcy Code of the United States or any other applicable Debtor Relief Law (including any comparable provisions of any applicable state law).

8. Rights of the Servicer.

(a) Power of Attorney. In addition to other powers of attorney contained herein, each Obligor hereby designates and appoints the Servicer, on behalf of the holders of the Secured Obligations, and each of its designees or agents, as attorney-in-fact of such Obligor, irrevocably and with power of substitution, with authority to take any or all of the following actions during the continuance of a Credit Event:

 

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(i) to demand, collect, settle, compromise, adjust, give discharges and releases, all as the Servicer may reasonably determine;

(ii) to commence and prosecute any actions at any court for the purposes of collecting any Collateral and enforcing any other right in respect thereof;

(iii) to defend, settle or compromise any action brought and, in connection therewith, give such discharge or release as the Servicer may deem reasonably appropriate;

(iv) to receive, open and dispose of mail addressed to an Obligor and endorse checks, notes, drafts, acceptances, money orders, bills of lading, warehouse receipts or other instruments or documents evidencing payment, shipment or storage of the Goods giving rise to the Collateral of such Obligor on behalf of and in the name of such Obligor, or securing, or relating to such Collateral;

(v) to sell, assign, transfer, make any agreement in respect of, or otherwise deal with or exercise rights in respect of, any Collateral or the Goods or services which have given rise thereto, as fully and completely as though the Servicer were the absolute owner thereof for all purposes;

(vi) to adjust and settle claims under any insurance policy relating thereto;

(vii) to execute and deliver all assignments, conveyances, statements, financing statements, renewal financing statements, security agreements, affidavits, notices and other agreements, instruments and documents that the Servicer may reasonably determine necessary in order to perfect and maintain the security interests and liens granted in this Agreement and in order to fully consummate all of the transactions contemplated herein;

(viii) to institute any foreclosure proceedings that the Servicer may deem appropriate;

(ix) to sign and endorse any drafts, assignments, proxies, stock powers, verifications, notices and other documents relating to the Collateral;

(x) to exchange any of the Pledged Equity or other property upon any merger, consolidation, reorganization, recapitalization or other readjustment of the issuer thereof and, in connection therewith, deposit any of the Pledged Equity with any committee, depository, transfer agent, registrar or other designated agency upon such terms as the Servicer may reasonably deem appropriate;

(xi) upon prior written notice to the Obligors, to vote for a shareholder resolution, or to sign an instrument in writing, sanctioning the transfer of any or all of the Pledged Equity into the name of the Servicer or one or more of the holders of the Secured Obligations or into the name of any transferee to whom the Pledged Equity or any part thereof may be sold pursuant and subject to Section 7 hereof;

(xii) to pay or discharge taxes, liens, security interests or other encumbrances levied or placed on or threatened against the Collateral;

(xiii) to direct any parties liable for any payment in connection with any of the Collateral to make payment of any and all monies due and to become due thereunder directly to the Servicer or as the Servicer shall direct;

 

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(xiv) to receive payment of and receipt for any and all monies, claims, and other amounts due and to become due at any time in respect of or arising out of any Collateral; and

(xv) to do and perform all such other acts and things as the Servicer may reasonably deem to be necessary, proper or convenient to accomplish the purposes of the Credit Documents.

This power of attorney is a power coupled with an interest and shall be irrevocable until such time as the Secured Obligations arising under the Credit Documents have been paid in full and the Participating Commitments have expired or been terminated. The Servicer shall be under no duty to exercise or withhold the exercise of any of the rights, powers, privileges and options expressly or implicitly granted to the Servicer in this Agreement, and shall not be liable for any failure to do so or any delay in doing so. The Servicer shall not be liable for any act or omission or for any error of judgment or any mistake of fact or law in its individual capacity or its capacity as attorney-in-fact except acts or omissions resulting from its bad faith, gross negligence, willful misconduct or a material breach of its obligations hereunder. This power of attorney is conferred on the Servicer solely to protect, preserve and realize upon its security interest in the Collateral.

(b) Assignment by the Servicer. The Servicer may from time to time assign the Secured Obligations to a successor Servicer appointed in accordance with the Loan Facility Agreement, and such successor shall be entitled to all of the rights and remedies of the Servicer under this Agreement in relation thereto.

(c) The Servicer’s Duty of Care. Other than the exercise of reasonable care to assure the safe custody of the Collateral while being held by the Servicer hereunder, the Servicer shall have no duty or liability to preserve rights pertaining thereto, it being understood and agreed that the Obligors shall be responsible for preservation of all rights in the Collateral, and the Servicer shall be relieved of all responsibility for the Collateral upon surrendering it or tendering the surrender of it to the Obligors. The Servicer shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which the Servicer accords its own property, which shall be no less than the treatment employed by a reasonable and prudent agent in the industry, it being understood that the Servicer shall not have responsibility for taking any necessary steps to preserve rights against any parties with respect to any of the Collateral. In the event of a public or private sale of Collateral pursuant to Section 7 hereof, the Servicer shall have no responsibility for (i) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relating to any Collateral, whether or not the Servicer has or is deemed to have knowledge of such matters, or (ii) taking any steps to clean, repair or otherwise prepare the Collateral for sale.

(d) Liability with Respect to Accounts. Anything herein to the contrary notwithstanding, each of the Obligors shall remain liable under each of the Accounts to observe and perform all the conditions and obligations to be observed and performed by it thereunder, all in accordance with the terms of any agreement giving rise to each such Account. Neither the Servicer nor any holder of Secured Obligations shall have any obligation or liability under any Account (or any agreement giving rise thereto) by reason of or arising out of this Agreement or the receipt by the Servicer or any holder of Secured Obligations of any payment relating to such Account pursuant hereto, nor shall the Servicer or any holder of Secured Obligations be obligated in any manner to perform any of the obligations of an Obligor under or pursuant to any Account (or any agreement giving rise thereto), to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or as to the sufficiency of any performance by any party under any Account (or any agreement giving rise thereto), to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times.

(e) Voting and Payment Rights in Respect of the Pledged Equity.

 

13


(i) So long as no Credit Event shall exist, each Obligor may (A) exercise any and all voting and other consensual rights pertaining to the Pledged Equity of such Obligor or any part thereof for any purpose not inconsistent with the terms of this Agreement or the Loan Facility Agreement and (B) receive and retain any and all dividends (other than stock dividends and other dividends constituting Collateral which are addressed hereinabove), principal or interest paid in respect of the Pledged Equity to the extent they are allowed under the Loan Facility Agreement; and

(ii) During the continuance of a Credit Event and upon one (1) Business Day’s prior written notice to the Obligors, (A) all rights of an Obligor to exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant to clause (i)(A) above shall cease and all such rights shall thereupon become vested in the Servicer which shall then have the sole right to exercise such voting and other consensual rights, (B) all rights of an Obligor to receive the dividends, principal and interest payments which it would otherwise be authorized to receive and retain pursuant to clause (i)(B) above shall cease and all such rights shall thereupon be vested in the Servicer which shall then have the sole right to receive and hold as Collateral such dividends, principal and interest payments, and (C) all dividends, principal and interest payments which are received by an Obligor contrary to the provisions of clause (ii)(B) above shall be received in trust for the benefit of the Servicer, shall be segregated from other property or funds of such Obligor, and shall be forthwith paid over to the Servicer as Collateral in the exact form received, to be held by the Servicer as Collateral and as further collateral security for the Secured Obligations. Upon the cure or waiver of such Credit Event in accordance with the terms of the Loan Facility Agreement, the Servicer shall as soon reasonably practicable repay to each Obligor all dividends, interest, principal or other distributions received by the Servicer pursuant to this clause (ii) that such Obligor would otherwise have been permitted to retain pursuant to the terms of clause (i) above that (x) were not applied to repay the Guaranteed Obligations in accordance with the Loan Facility Agreement and other Credit Documents and (y) that the Servicer is not otherwise required to hold for the repayment of the Guaranteed Obligations in accordance with the Loan Facility Agreement and other Credit Documents.

(f) Releases of Collateral. (i) If any Collateral shall be sold, transferred or otherwise disposed of by any Obligor in a transaction permitted by the Loan Facility Agreement, the Servicer, at the request and sole expense of such Obligor, shall promptly execute and deliver to such Obligor all releases and other documents, and take such other action, reasonably necessary to evidence such release of the Liens created hereby or by any other Collateral Agreement on such Collateral. (ii) The Servicer may release any of the Pledged Equity from this Agreement or may substitute any of the Pledged Equity for other Pledged Equity without altering, varying or diminishing in any way the force, effect, lien, pledge or security interest of this Agreement as to any Pledged Equity not expressly released or substituted, and this Agreement shall continue as a lien on all Pledged Equity not expressly released or substituted.

9. Application of Proceeds. Upon the acceleration of the Guaranteed Obligations under the Credit Documents pursuant to Article IX of the Loan Facility Agreement, any payments in respect of the Secured Obligations and any proceeds of the Collateral, when received by the Servicer or any holder of the Secured Obligations in Money or its equivalent, will be applied in reduction of the Secured Obligations in the order set forth in Article IX of the Loan Facility Agreement.

10. Continuing Agreement.

(a) This Agreement shall remain in full force and effect until such time as the Secured Obligations arising under the Credit Documents have been paid in full and the Participating Commitments have expired or been terminated, at which time this Agreement and the liens and security interests of the Servicer hereunder shall be automatically terminated and the Servicer shall, upon the request and at the expense of the Obligors, forthwith execute and deliver all UCC termination statements and/or other documents reasonably requested by the Obligors evidencing such termination and/or release.

 

14


(b) This Agreement shall continue to be effective or be automatically reinstated, as the case may be, if at any time payment, in whole or in part, of any of the Secured Obligations is rescinded or must otherwise be restored or returned by the Servicer or any holder of the Secured Obligations as a preference, fraudulent conveyance or otherwise under any Debtor Relief Law, all as though such payment had not been made; provided that in the event payment of all or any part of the Secured Obligations is rescinded or must be restored or returned, but subject to the limitations of Section 15.4 of the Loan Facility Agreement, all reasonable costs and expenses (including without limitation any reasonable legal fees and disbursements) incurred by the Servicer or any holder of the Secured Obligations in defending and enforcing such reinstatement shall be deemed to be included as a part of the Secured Obligations.

11. Amendments; Waivers; Modifications, Etc. This Agreement and the provisions hereof may not be amended, waived, modified, changed, discharged or terminated except as set forth in Section 15.2 of the Loan Facility Agreement; provided that any update or revision to Schedule 2 hereof delivered by any Obligor shall not constitute an amendment for purposes of this Section 11 or Section 15.2 of the Loan Facility Agreement.

12. Successors in Interest. This Agreement shall be binding upon each Obligor, its successors and assigns and shall inure, together with the rights and remedies of the Servicer and the holders of the Secured Obligations hereunder, to the benefit of the Servicer and the holders of the Secured Obligations and their successors and permitted assigns.

13. Notices. All notices required or permitted to be given under this Agreement shall be in conformance with Section 15.1 of the Loan Facility Agreement.

14. Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by telecopy), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. It shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart. Delivery of an executed counterpart of a signature page of this Agreement by facsimile transmission or by any other electronic imaging means (including .pdf), shall be effective as delivery of a manually executed counterpart of this Agreement.

15. Headings. The headings of the sections hereof are provided for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement.

16. Governing Law; Submission to Jurisdiction; Venue; WAIVER OF JURY TRIAL. The terms of Section 15.7 of the Loan Facility Agreement with respect to governing law, submission to jurisdiction, venue, consent to service of process and waiver of jury trial are incorporated herein by reference, mutatis mutandis, and the parties hereto agree to such terms.

17. Severability. If any provision of this Agreement is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Agreement shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

 

15


18. Entirety. This Agreement, the other Credit Documents, and any separate letter agreements with respect to fees payable to the Servicer, constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof.

19. Other Security. To the extent that any of the Secured Obligations are now or hereafter secured by property other than the Collateral (including, without limitation, real property and securities owned by an Obligor), or by a guarantee, endorsement or property of any other Person, then the Servicer shall have the right to proceed against such other property, guarantee or endorsement during the continuance of any Credit Event, and the Servicer shall have the right, in its sole discretion, to determine which rights, security, liens, security interests or remedies the Servicer shall at any time pursue, relinquish, subordinate, modify or take with respect thereto, without in any way modifying or affecting any of them or the Secured Obligations or any of the rights of the Servicer or the holders of the Secured Obligations under this Agreement, under any other of the Credit Documents or under any other document relating to the Secured Obligations.

20. Joinder. At any time after the date of this Agreement, one or more additional Persons may become party hereto by executing and delivering to the Servicer a joinder agreement to this Agreement. Immediately upon such execution and delivery of such joinder agreement (and without any further action), each such additional Person will become a party to this Agreement as an “Obligor” and have all of the rights and obligations of an Obligor hereunder and this Agreement and the schedules hereto shall be deemed amended by such joinder agreement.

21. Joint and Several Obligations of Obligors.

(a) Subject to Section 21(c), each of the Obligors is accepting joint and several liability hereunder, in consideration of the financial accommodation to be provided by the holders of the Guaranteed Obligations, of each of the Obligors and in consideration of the undertakings of each of the Obligors to accept joint and several liability for the obligations of each of them.

(b) Subject to Section 21(c), each of the Obligors jointly and severally hereby irrevocably and unconditionally accepts, not merely as a surety but also as a co-debtor, joint and several liability with the other Obligors with respect to the payment and performance of all of the Secured Obligations arising under this Agreement, the other Credit Documents and any other documents relating to the Secured Obligations, it being the intention of the parties hereto that all the Secured Obligations shall be the joint and several obligations of each of the Obligors without preferences or distinction among them.

(c) Notwithstanding any provision to the contrary contained herein, in any other of the Credit Documents or in any other documents relating to the Secured Obligations, the obligations of each Guarantor under the Loan Facility Agreement, the other Credit Documents and the other documents relating to the Secured Obligations shall be limited to an aggregate amount equal to the largest amount that would not render such obligations subject to avoidance under Section 548 of the United States Bankruptcy Code or any comparable provisions of any other Debtor Relief Law.

22. Consent of Issuers of Pledged Equity. Each issuer of Pledged Equity party to this Agreement hereby acknowledges, consents and agrees to the grant of the security interests in such Pledged Equity by the applicable Obligors pursuant to this Agreement, together with all rights accompanying such security interests as provided by this Agreement and applicable law, notwithstanding any anti-assignment provisions in any operating agreement, limited partnership agreement or similar organizational or governance documents of such issuer.

 

16


[SIGNATURE PAGES FOLLOW]

 

17


Each of the parties hereto has caused a counterpart of this Agreement to be duly executed and delivered as of the date first above written.

OBLIGORS:

 

AARON’S, LLC,
a Georgia limited liability company
By:  

 

Name:  
Title:  

THE AARON’S COMPANY, INC.,

a Georgia corporation

By:  

 

Name:  
Title:  
[TBD],12  
By:  

 

Name:  
Title:  

 

 

12 

To include all Guarantors at the time of entry into the Agreement.

AARON’S, LLC

SECURITY AND PLEDGE AGREEMENT


Accepted and agreed to as of the date first written above.

 

TRUIST BANK, as Servicer
By:  

 

Name:
Title:

 

 

AARON’S, LLC

SECURITY AND PLEDGE AGREEMENT


SCHEDULE 1

PLEDGED EQUITY

 

Obligor   Name of Subsidiary  

Number

of

Shares/

Units

  

Certificate

Number

  

Percentage

Ownership

                        


SCHEDULE 2

COMMERCIAL TORT CLAIMS


SCHEDULE 3

COPYRIGHTS, PATENTS AND TRADEMARKS

Patents:.

Copyrights:.

Trademarks:


EXHIBIT 4(a)

IRREVOCABLE [STOCK][UNIT] POWER

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers to:

 

 

the following equity interests of ____________________, a _________ [corporation][limited liability company]:

No. of Shares ____________ Certificate No. ______________

and irrevocably appoints ______________ its agent and attorney-in-fact to transfer all or any part of such equity interests and to take all necessary and appropriate action to effect any such transfer. The agent and attorney-in-fact may substitute and appoint one or more persons to act for him.

Dated: ____________, 20___

 

 

By:  

 

Name:  

 

Title:  

 


EXHIBIT 4(b)(i)

NOTICE

OF

GRANT OF SECURITY INTEREST

IN

COPYRIGHTS

United States Copyright Office

Ladies and Gentlemen:

Please be advised that pursuant to the Security and Pledge Agreement dated as of November 17, 2020 (as the same may be amended, modified, extended or restated from time to time, the “Agreement”) by and among the Obligors party thereto (each an “Obligor” and collectively, the “Obligors”) and Truist Bank, as Servicer (the “Servicer”) for the holders of the Secured Obligations referenced therein, the undersigned Obligor has granted a continuing security interest in and continuing lien upon the copyrights and copyright applications set forth on Schedule 1 hereto to the Servicer for the ratable benefit of the holders of the Secured Obligations.

The undersigned Obligor and the Servicer, on behalf of the holders of the Secured Obligations, hereby acknowledge and agree that the security interest in the foregoing copyrights and copyright applications (i) may only be terminated in accordance with the terms of the Agreement and (ii) is not to be construed as an assignment of any copyright or copyright application.

 

Very truly yours,

 

[Obligor]
By:  

 

Name:
Title:
[Address]

 

Acknowledged and Accepted:

 

TRUIST BANK, as Servicer
By:  

 

Name:
Title:
[Address]


EXHIBIT 4(b)(ii)

NOTICE

OF

GRANT OF SECURITY INTEREST

IN

PATENTS

United States Patent and Trademark Office

Ladies and Gentlemen:

Please be advised that pursuant to the Security and Pledge Agreement dated as of November 17, 2020 (as the same may be amended, modified, extended or restated from time to time, the “Agreement”) by and among the Obligors party thereto (each an “Obligor” and collectively, the “Obligors”) and Truist Bank, as Servicer (the “Servicer”) for the holders of the Secured Obligations referenced therein, the undersigned Obligor has granted a continuing security interest in and continuing lien upon the patents and patent applications set forth on Schedule 1 hereto to the Servicer for the ratable benefit of the holders of the Secured Obligations.

The undersigned Obligor and the Servicer, on behalf of the holders of the Secured Obligations, hereby acknowledge and agree that the security interest in the foregoing patents and patent applications (i) may only be terminated in accordance with the terms of the Agreement and (ii) is not to be construed as an assignment of any patent or patent application.

 

Very truly yours,

 

[Obligor]
By:  

 

Name:
Title:
[Address]

 

Acknowledged and Accepted:
TRUIST BANK, as Servicer
By:  

 

Name:
Title:
[Address]


EXHIBIT 4(b)(iii)

NOTICE

OF

GRANT OF SECURITY INTEREST

IN

TRADEMARKS

United States Patent and Trademark Office

Ladies and Gentlemen:

Please be advised that pursuant to the Security and Pledge Agreement dated as of November 17, 2020 (as the same may be amended, modified, extended or restated from time to time, the “Agreement”) by and among the Obligors party thereto (each an “Obligor” and collectively, the “Obligors”) and Truist Bank, as Servicer (the “Servicer”) for the holders of the Secured Obligations referenced therein, the undersigned Obligor has granted a continuing security interest in and continuing lien upon the trademarks and trademark applications set forth on Schedule 1 hereto to the Servicer for the ratable benefit of the holders of the Secured Obligations.

The undersigned Obligor and the Servicer, on behalf of the holders of the Secured Obligations, hereby acknowledge and agree that the security interest in the foregoing trademarks and trademark applications (i) may only be terminated in accordance with the terms of the Agreement and (ii) is not to be construed as an assignment of any trademark or trademark application.

 

Very truly yours,

 

[Obligor]
By:  

 

Name:
Title:
[Address]

 

Acknowledged and Accepted:
TRUIST BANK, as Servicer
By:  

 

Name:
Title:
[Address]

Exhibit 10.7

THE AARON’S COMPANY, INC.

COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS

Effective November 30, 2020

1. Purpose and General Provisions.

1.1 Establishment of Plan. The Aaron’s Company, Inc., a Georgia corporation hereby establishes this Compensation Plan for Non-Employee Directors.

1.2 Purpose. The purpose of the Plan is to attract and retain highly-qualified individuals who are not employed by the Company or any of its subsidiaries or affiliates to serve on the Company’s Board of Directors and to provide such directors with rewards that motivate superior oversight and protection of the Company’s business. This Plan aligns the interests of the non-employee directors with the long-term interests of the Company’s shareholders by providing that a significant part of such directors’ compensation is directly linked to the value of the Company’s common stock.

2. Definitions.

“Affiliate” means a corporation or other entity that, directly or through one or more intermediaries, controls, is controlled by or is under common control with, the Company.

“Annual Retainer” means the annual fee payable by the Company to a Non-Employee Director with respect to his or her service as a member of the Board as in effect from time to time and as indicated in the attached Appendix I.

“Audit Committee” means the Audit Committee of the Board.

“Board” means the Board of Directors of the Company, as constituted from time to time.

“Chair” means a Non-Employee Director occupying the seat of authority with respect to the Board or a Committee.

“Chair Annual Retainer” or “Chair Quarterly Retainer” means the annual or quarterly fee payable by the Company to a Chair with respect to his or her service as a Chair as in effect from time to time and as indicated in the attached Appendix I.

“Code” means the Internal Revenue Code of 1986, as it may be amended from time to time. Any reference to a section of the Code shall be deemed to include a reference to any regulations promulgated thereunder.

“Committee” means a standing committee of the Board.

“Committee Chair” means the Non-Employee Director serving as the Chair of a Committee.


“Common Stock” means the “common stock” of the Company as defined in the Equity and Incentive Plan.

“Company” means The Aaron’s Company, Inc., a Georgia corporation, including its successors and assigns.

“Compensation Committee” means the Compensation Committee of the Board.

“Effective Date” shall mean November 30, 2020.

“Equity and Incentive Plan” means The Aaron’s Company, Inc. 2020 Equity and Incentive Plan, as it may be amended from time to time.

“Fair Market Value” means “fair market value” as defined in the Equity and Incentive Plan.

“Lead Director” means a Non-Employee Director occupying the seat of authority with respect to the Board.

“Lead Director Annual Retainer” or “Lead Director Quarterly Retainer” means the annual or quarterly fee payable by the Company to a Lead Director with respect to his or her service as a Lead Director as in effect from time to time and as indicated in the attached Appendix I.

“Nominating and Corporate Governance Committee” means the Nominating and Corporate Governance Committee of the Board.

“Non-Employee Director” means a member of the Board who is not an officer or employee of the Company or any of its subsidiaries or Affiliates.

“Plan” means The Aaron’s Company, Inc. Compensation Plan for Non-Employee Directors, as set forth herein, as it may be amended from time to time.

“Quarterly Payment Dates” has the meaning set forth in Section 5.2 of this Plan.

“Quarterly Retainer” means the quarterly fee payable by the Company to a Non-Employee Director with respect to his or her service as a member of the Board as in effect from time to time and as indicated in the attached Appendix I.

“RSU” has the meaning set forth in the Equity and Incentive Plan.

“Section 409A” means Section 409A of the Code and all authoritative interpretive guidance issued thereunder.

3. Administration. This Plan shall be administered by the Compensation Committee which shall have the authority to construe and interpret this Plan, prescribe, amend and rescind rules relating to this Plan’s administration and take any other actions necessary or desirable for the administration of this Plan. The Compensation Committee may correct any defect or supply any omission or reconcile any inconsistency or ambiguity in this Plan. The decisions of the Compensation Committee shall be final and binding on all persons. All expenses of administering this Plan shall be borne by the Company.


4. Eligibility. Each Non-Employee Director shall be eligible to receive the compensation provided hereunder. For the avoidance of doubt, Directors who are also employees of the Company or any of its subsidiaries or affiliates do not receive additional compensation for service as a director and shall not be eligible to participate in this Plan.

5. Non-Employee Director Compensation.

5.1 Annual Retainers.

(a) Each Non-Employee Director who is elected or appointed to the Board shall receive an Annual Retainer (or Chair Annual Retainer, or Lead Director Annual Retainer, if any) for the Board term that commences on election or appointment at such meeting. The amount of the Annual Retainer shall be determined by the Board from time to time and be set forth in the attached Appendix I. The amount of a Chair Annual Retainer or Lead Director Annual Retainer (if any) may be different from the Annual Retainers for other Non-Employee Directors, as determined by the Board from time to time.

(b) Annual Retainers (including, for purposes of this Section 5.1, Chair Annual Retainers, or Lead Director Annual Retainers, if any) shall be paid as set forth in the attached Appendix I. To the extent any Annual Retainers are payable in shares of Common Stock of the Company, the number of shares of Common Stock paid shall be determined by dividing the dollar amount of the Annual Retainer(s) by the Fair Market Value of a share of the Common Stock on the business day immediately preceding the payment date, rounded down to the nearest whole share. The vesting schedule(s) for such Annual Retainer(s) shall also be set forth in the attached Appendix I.

5.2 Quarterly Retainers.

(a) Each Non-Employee Director who is elected or appointed to the Board at an annual meeting of shareholders shall receive a Quarterly Retainer for the quarter in which such Non-Employee Director is elected or appointed. The amount of the Quarterly Retainer shall be determined by the Board from time to time as set forth in the attached Appendix I.

(b) Each Non-Employee Director who is appointed as a Chair or a Lead Director shall receive a Chair Quarterly Retainer or Lead Director Quarterly Retainer, as applicable, for the quarter in which such Non-Employee Director begins service in such capacity. The amount of a Chair Quarterly Retainer or Lead Director Quarterly Retainer, as applicable, may be different from the Quarterly Retainers for other Non-Employee Directors, as determined by the Board from time to time.

(c) Except as otherwise provided herein, each Quarterly Retainer (including each Chair Quarterly Retainer or Lead Director Quarterly Retainer, as applicable) shall be paid in cash, in arrears, on the 10th business day after the end of each calendar quarter (“Quarterly Payment Dates”).


(d) Each Non-Employee Director may elect to have the Company pay all or a portion of his or her Quarterly Retainer(s) (and any Chair Quarterly Retainer or Lead Director Quarterly Retainer, as applicable), in Common Stock, in lieu of cash by submitting the form of election as set forth in the attached Appendix II. The number of shares of Common Stock paid to each electing Non-Employee Director shall be determined by dividing the dollar amount of the Quarterly Retainer(s) (and/or any Chair Quarterly Retainer or Lead Director Quarterly Retainer, as applicable) by the Fair Market Value of a share of Common Stock on the business day immediately preceding the Quarterly Payment Date, rounded down to the nearest whole share, and shall be paid/issued on the same schedule as Quarterly Retainers (and any Chair Quarterly Retainer or Lead Director Quarterly Retainer, as applicable) paid in cash. Any election by a Non-Employee Director to receive or not receive his or her Quarterly Retainer(s) in Common Stock must be made prior to the quarter for which cash payment or Common Stock issuance is desired, or as may be determined by the Compensation Committee from time to time. Any election must comply with all rules established from time to time by the Board, including any insider trading policy or other similar policy.

6. Equity Compensation. Grants of equity awards made under this Plan shall be made under the Equity and Incentive Plan as in effect from time to time, subject to all of the applicable terms and conditions thereof, and only to the extent that shares of Common Stock remain available for issuance under the Equity and Incentive Plan. This Plan does not constitute a separate source of Common Stock for the payment of equity compensation hereunder. The terms of the Equity and Incentive Plan are fully incorporated into this Plan with respect to any equity compensation paid hereunder. In the event of any inconsistency between the Equity and Incentive Plan and this Plan with respect to equity compensation, the terms of the Equity and Incentive Plan shall control. Common stock issued pursuant to this Plan shall be fully vested and unrestricted Common stock.

7. Total Compensation Limit. Notwithstanding any other provisions of this Plan, in no event shall the aggregate dollar value of: (i) the Annual Retainer, as measured by its Fair Market Value; (ii) all Quarterly Retainers; (iii) all Chair Quarterly Retainers; and (iv) any other form of cash compensation, and/or other grants of RSUs or other types of equity made under the Equity and Incentive Plan or otherwise, earned by any Non-Employee Director in any fiscal year of the Company exceed Seven Hundred Fifty Thousand Dollars ($750,000). Reimbursement of expenses incurred by Non-Employee Directors in connection with carrying out their duties as a Non-Employee Director of the Company shall not be included in the determination of whether the compensation earned by any Non-Employee Director exceeds the aforementioned limit on Non-Employee Director compensation.

8. General Provisions.

8.1 Pro-Rata Payments. A Non-Employee Director who is appointed or elected to the Board after the annual meeting of shareholders shall receive a pro-rated portion of the Annual Retainer and Quarterly Retainer for the Board term based on the number of complete days of the calendar year and calendar quarter during which the Non-Employee Director serves as a member of the Board, unless otherwise determined by the Board.

8.2 No Fractional Shares of Common Stock. Notwithstanding any provision herein to the contrary, in no case shall any fractional shares of Common Stock be issued pursuant to this Plan. To the extent any fractional share of Common Stock would otherwise be issued pursuant to this Plan, such fractional share shall be rounded down to the nearest whole share.


8.3 Unfunded Obligations. The amounts to be paid to Non-Employee Directors under this Plan are unfunded obligations of the Company. The Company is not required to segregate any monies or other assets from its general funds with respect to these obligations. Non-Employee Directors shall not have any preference or security interest in any assets of the Company other than as a general unsecured creditor.

8.4 No Right to Continued Board Membership. Neither this Plan nor any compensation paid hereunder will confer on any Non-Employee Director the right to continue to serve as a member of the Board or in any other capacity.

8.5 Non-Assignment. Any and all rights of a Non-Employee Director respecting payments under this Plan may not be assigned, transferred, pledged or encumbered in any manner, other than by will or the laws of descent and distribution, and any attempt to do so shall be void.

8.6 Successors and Assigns. This Plan shall be binding on the Company and its successors and assigns.

8.7 Entire Plan. This Plan, together with the Equity and Incentive Plan, constitutes the entire plan with respect to the subject matter hereof and supersedes all prior plans with respect to the subject matter hereof.

8.8 Compliance with Law. The obligations of the Company with respect to payments under this Plan are subject to compliance with all applicable laws and regulations.

8.9 Term of Plan. This Plan shall become effective on the Effective Date and will remain in effect until it is revised or terminated by further action of the Board.

8.10 Termination and Amendment. The Board may at any time amend or modify this Plan in whole or in part. Notwithstanding the foregoing, no amendment or termination of this Plan may impair the right of a Non-Employee Director to receive any amounts accrued hereunder prior to the effective date of such amendment or termination.

8.11 Applicable Law. The law of the State of Georgia shall govern all questions concerning the construction, validity and interpretation of this Plan, without regard to such state’s conflict of law rules.

8.12 Section 409A. This Plan is intended to comply with the requirements of Section 409A, to the extent applicable, and shall be interpreted accordingly. Notwithstanding the foregoing, the Company makes no representations or covenants that any compensation paid or awarded under this Plan will comply with Section 409A.

8.13 Withholding. To the extent required by applicable Federal, state or local law, a Non-Employee Director must make arrangements satisfactory to the Company for the payment of any withholding or similar tax obligations that arise in connection with this Plan.


8.14 Severability. If any provision of this Plan shall for any reason be held to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereof, and this Plan shall be construed as if such invalid or unenforceable provision were omitted.

8.15 Headings. The headings of sections herein are included solely for convenience and shall not affect the meaning of any of the provisions of this Plan.

[Signature page follows]


WITNESS WHEREOF, this Plan is executed as of November 11, 2020, the date the Board approved this Plan, to be effective as of November 30, 2020.

 

THE AARON’S COMPANY, INC.
By:  

/s/ C. Kelly Wall

  Name: C. Kelly Wall
  Title:   Chief Financial Officer


Appendix I

The Aaron’s Company, Inc. Compensation Plan

for Non-Employee Directors

 

Description    Amount      Comment

Annual Retainer - RSU

   $ 125,000      Granted on the date of the annual meeting of shareholders and vests on one-year anniversary of date of grant; provided, that, where the annual meeting of shareholders for the then-current year is held later than the date on which that meeting was held in the prior year, the Board shall have the discretion to make the vesting date for the RSUs granted to Non-Employee Directors on the date of the annual meeting of shareholders held in the then-current year be the two-year anniversary of the date on which the annual meeting of shareholders was held in the prior year.1
     

Quarterly Retainer - Cash

   $ 18,750      Can make election to receive shares of fully vested Common Stock as set forth in Section 5.2(d) of the Plan. With respect to any Non-Employee Director who begins or ends her or his service on the Board after the beginning but prior to the end of a calendar quarter, the amount of the Quarterly Retainer paid to that Non-Employee Director for that calendar quarter shall be the product of: (1) the full amount of the Quarterly Retainer in effect at that time; multiplied by: (2) a fraction, the numerator of which shall be the number of days during that calendar quarter that she or he served as a Non-Employee Director, and the denominator of which shall be the total number of days in that calendar quarter.

 

1 

Pro rata accelerated vesting upon termination of Board service. New directors who join the Board on a date other than the date of the annual meeting of shareholders will receive a full equity award if they join the Board on a date that is less than seven months after the date of the most recent annual meeting of shareholders. The amount of equity granted to any new director who joins the Board on a date that is seven months or more after the date of the most recent annual meeting of shareholders will be determined by the Board in its discretion.


Compensation for Chairs

 

Description    Amount2      Comment

Board Chair-

Quarterly Cash Retainer

   $ 25,000      Amount is in addition to the quarterly cash retainer received by non-employee directors of $18,750 set forth above. Can make election to receive shares of fully vested Common Stock as set forth in Section 5.2(d) of the Plan.
     

Audit Committee Chair - Quarterly Cash Retainer

   $ 5,000      Amount is in addition to the quarterly cash retainer received by non-employee directors of $18,750 set forth above. Can make election to receive shares of fully vested Common Stock as set forth in Section 5.2(d) of the Plan.
     

Compensation Committee Chair - Quarterly Cash Retainer

   $ 3,750      Amount is in addition to the quarterly cash retainer received by non-employee directors of $18,750 set forth above. Can make election to receive shares of fully vested Common Stock as set forth in Section 5.2(d) of the Plan.
     

Nominating and Corporate Governance Committee Chair - Quarterly Cash Retainer

   $ 2,500      Amount is in addition to the quarterly cash retainer received by non-employee directors of $18,750 set forth above. Can make election to receive shares of fully vested Common Stock as set forth in Section 5.2(d) of the Plan.

 

2 

Where a Non-Employee Director becomes the Chair of the Board or any Board Committee after the beginning but prior to the end of a calendar quarter, the amount of the Chair Quarterly Retainer paid to that Non-Employee Director for that calendar quarter shall be the product of: (1) the full amount of the Chair Quarterly Retainer in effect at that time; multiplied by: (2) a fraction, the numerator of which shall be the number of days during that calendar quarter that the Non-Employee Director served as the Chair of the Board or the Board Committee to which the Non-Employee Director has been appointed, and the denominator of which shall be the total number of days in that calendar quarter.


Appendix II

THE AARON’S COMPANY, INC. COMPENSATION PLAN

FOR NON-EMPLOYEE DIRECTORS

Election to Receive Shares in Lieu of Cash

for quarterly retainers

To be effective for the [_____] term of the Board (“Board Term”), commencing January 1, [_____] and any future Board Term as provided below.

Election to Receive Shares

Pursuant to Section 5.2(d) of The Aaron’s Company, Inc. Compensation Plan for Non-Employee Directors (the “Plan”), I hereby elect to receive all or a portion of my Quarterly Retainers (and all or a portion of my Chair Quarterly Retainer or Lead Director Quarterly Retainer, as applicable) (collectively, “Cash Fees”) as further set forth below in shares of the Company’s common stock (“Shares”) in lieu of cash in accordance with this election and the Plan. Capitalized terms used but not defined herein shall have the meanings set forth in the Plan.

Quarterly Retainer Election

I hereby elect to receive _____% of the Quarterly Retainer(s) (and any Chair Quarterly Retainer or Lead Director Quarterly Retainer, as applicable) due to me on each Quarterly Payment Date in Shares having an equivalent value.

Type of Shares Issued

Shares issued in lieu of Cash Fees shall be fully vested and unrestricted shares of the Company’s common stock issued pursuant to this Plan and The Aaron’s Company, Inc. 2020 Equity Incentive Plan (“Equity and Incentive Plan”), as in effect from time to time. Notwithstanding the foregoing, if there are not sufficient Shares available under the Equity and Incentive Plan for any reason, the Cash Fees will be paid in cash.

Number of Shares

The number of Shares paid shall be determined by dividing the dollar amount of the Cash Fees subject to the election by the Fair Market Value of a Share on the business day immediately preceding the payment date, rounded down to the nearest whole Share. Pursuant to Sections 5.2(d) and 8.2 of the Plan, the Company shall not issue any fractional Shares.

Duration of Election

I understand that this election will continue in effect (including future Board terms) until I timely submit a new election form modifying or revoking this election.


Withholding

I understand and agree that the Company may take such action as it deems necessary or appropriate to satisfy any obligations it may have to withhold federal, state or local income or other taxes incurred by reason of payments made pursuant to this Plan.

Acknowledgement

I acknowledge receipt of a copy of the Plan and acknowledge and agree that this election is made pursuant to the Plan and is subject to all of the terms and conditions thereof.

I acknowledge that the Shares issued to me are also subject to the applicable terms and conditions of the Equity and Incentive Plan as in effect from time to time and acknowledge receipt of a copy of the Equity and Incentive Plan.

 

Signature of Non-Employee Director:  

             

 

Printed Name:  

             

 

Date:  

                 

RETURN COMPLETED FORM TO:

 

Accepted by Plan Administrator:  

             

 

Printed Name:  

             

 

Date:  

             

Exhibit 10.8

EXECUTIVE SEVERANCE PAY PLAN

OF

THE AARON’S COMPANY, INC.

Effective February 1, 2014,

as Amended and Restated Effective as of November 30, 2020

SECTION I

Establishment and Purpose of Plan

1.1 The Executive Severance Pay Plan of The Aaron’s Company, Inc. (the “Plan”) was originally established by Aaron’s, Inc., effective February 1, 2014. The Aaron’s Company, Inc. (the “Company”) hereby amends and restates the Plan effective as of November 30, 2020 (the “Effective Date”) in connection with the spin-off of the Company from its former parent, Aaron’s Holdings Company, Inc., on November 30, 2020. The Plan shall continue in effect until terminated by the Company, subject to the provisions of Section X below.

1.2 The purposes of the Plan include (i) providing certain executives of the Company and/or any affiliate or subsidiary with severance pay benefits in the event of the termination of their employment, (ii) better enabling the Company and its affiliates and subsidiaries to attract and retain highly qualified executives, (iii) providing executives protection in the event of a change in control of the Company so that the executives are focused on pursuing transaction opportunities that are beneficial to shareholders, and (iv) retaining critical talent in the event of a potential change in control transaction.

SECTION II

Definitions

The following words and phrases shall have the meanings set forth below where used in the Plan, unless the context clearly indicates otherwise.

2.1 “Administrator” means the Company in its capacity as Plan “administrator” and “named fiduciary” within the meaning of ERISA. The Committee shall act as the Administrator unless and until it delegates such authority and responsibility to one or more officers or a committee.

2.2 “Annual Salary” means, with respect to a Participant, the Participant’s annual base salary, exclusive of any bonus pay, commissions, overtime pay or other additional compensation, in effect at the time of his or her Separation from Service.

2.3 “Board” means the Board of Directors of the Company.

2.4 “Cause” means, unless provided otherwise in an individual agreement between the Executive and his or her Employer, with respect to an Executive:


(a) the commission by the Executive of an act of fraud, embezzlement, theft or proven dishonesty, or any other illegal act or practice (whether or not resulting in criminal prosecution or conviction);

(b) the willful engaging by the Executive in misconduct which is deemed by the Committee, in good faith, to be materially injurious to the Company or an affiliate or subsidiary of the Company, monetarily or otherwise;

(c) the willful and continued failure or habitual neglect by the Executive to perform his or her duties with the Company or an affiliate or subsidiary of the Company substantially in accordance with the operating and personnel policies and procedures of the Company, affiliate or subsidiary generally applicable to all of their employees.

For purposes of this Plan, no act or failure to act by the Executive shall be deemed to be “willful” unless done or omitted to be done by the Executive not in good faith and without reasonable belief that the Executive’s action or omission was in the best interest of the Company and/or an affiliate or subsidiary of the Company. “Cause” under either (a), (b) or (c) shall be determined by the Committee in its sole discretion.

2.5 A “Change in Control” means:

(a) The acquisition (other than from the Company) by any person of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended (but without regard to any time period specified in Rule 13d-3(d)(1)(i))), of thirty-five percent (35%) or more of the combined voting power of then outstanding securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); excluding, however, (1) any acquisition by the Company or (2) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company;

(b) A majority of the members of the Board is replaced during any twelve (12)-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board before the date of the appointment or election; or

(c) Consummation by the Company of a reorganization, merger, or consolidation or sale of all or substantially all of the assets of the Company (a “Transaction”); excluding, however, a Transaction pursuant to which all or substantially all of the individuals or entities who are the beneficial owners, respectively, of the Outstanding Company Voting Securities immediately prior to such Transaction will beneficially own, directly or indirectly, more than fifty percent (50%) of the combined voting power of the outstanding securities of such corporation entitled to vote generally in the election of directors of the corporation resulting from such Transaction (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or indirectly) in substantially the same proportions relative to each other as their ownership, immediately prior to such Transaction, of the Outstanding Company Voting Securities.

 

2


Provided, however, a Change in Control shall not be deemed to occur unless the transaction also constitutes a change in the ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company, each as defined in Code Section 409A(a)(2)(A)(v) and the regulations promulgated thereunder.

2.6 “COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.

2.7 “COBRA Charge” means the dollar amount of the Company’s monthly premium in effect for continued coverage under the Company’s group health insurance plan in which the Participant participates on the Executive’s Termination Date, pursuant to the requirements of COBRA, less the administrative charge imposed by the Company for such coverage, less the portion of the premium paid by an active employee for the type of coverage in effect for the Participant under such health plan on the Participant’s Termination Date.

2.8 “Code” means the Internal Revenue Code of 1986, as amended from time to time, and any regulations promulgated thereunder.

2.9 “Committee” means the Compensation Committee of the Board.

2.10 “Company” means The Aaron’s Company, Inc., its successors and assigns, or, following a Change in Control, the surviving entity resulting from such event.

2.11 “Employer” means the Company, or any affiliate or subsidiary of the Company that has adopted the Plan with the consent of the Company.

2.12 “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

2.13 “Executive” means each executive of the Company who has a salary grade of 18, 19, 20 or 21 (or such other classification determined by the Committee from time to time) unless excluded from participation by the Committee, and any other key employee of an Employer who is specifically designated on Exhibit A attached hereto as eligible to participate in the Plan by the Committee from time to time.

2.14 “Good Reason” shall mean, without an Executive’s express written consent, the occurrence of any of the following circumstances within the two (2)-year period following the date of a Change in Control of the Company:

(a) A material diminution in the Executive’s annual base salary other than as a result of an across-the-board base salary reduction similarly affecting other Executives;

(b) A material diminution in the Executive’s authority, duties, or responsibilities;

(c) A material change in the geographic location at which the Executive must perform services for his or her Employer (for this purpose, the relocation of the Executive’s principal office location to a location more than fifty (50) miles from its current location will be deemed to be material); or

 

3


(d) A material breach of this Plan by the Company;

provided that any of the events described above shall constitute Good Reason only if (i) Executive provides the Company written notice of the existence of the event or circumstances constituting Good Reason (with sufficient specificity for the Company to respond to such claim) within sixty (60) days of the initial existence of such event or circumstances, (ii) Executive cooperates in good faith with the Company’s efforts to cure such event or circumstance for a period not less than thirty (30) days following Executive’s notice to the Company (the “Cure Period”), (iii) notwithstanding such efforts, the Company fails to cure such event or circumstances prior to the end of the Cure Period, and (iv) Executive terminates employment with the Company and all affiliates and subsidiaries of the Company within sixty (60) days after the end of the Cure Period.

2.15 “Involuntary Termination” means the termination of an Executive’s employment by his or her Employer without Cause; provided that for purposes of determining eligibility for Severance Pay Benefits under Section 5.1 of the Plan, in no event shall Executive be deemed to have been subject to an Involuntary Termination if he or she is offered employment in a different role or position with the Company, or any affiliate or subsidiary of the Company, which the Committee in its sole discretion determines is a comparable position (taking into account total compensation, benefits and location), and the Executive refuses to accept such new role or position.

2.16 “Participant” means each Executive who is currently entitled to severance pay benefits under the Plan in the event of his or her Separation from Service.

2.17 “Plan” means this Executive Severance Pay Plan of The Aaron’s Company, Inc. and its successors as set forth in this document, as it may be amended from time to time.

2.18 “Section 409A” means Section 409A of the Code.

2.19 “Separation from Service” means an Executive’s Involuntary Termination or, within two (2) years following the date of a Change in Control, the Executive’s resignation of his or her employment with the Company and all affiliates and subsidiaries of the Company for Good Reason.

2.20 “Severance Pay Benefits” means the aggregate benefits payable to a Participant upon his or her Separation from Service, as determined pursuant to the provisions of Section V or VI below.

2.21 “Target Bonus” means (a) with respect to a Participant whose annual target bonus is expressed as a percentage of Annual Salary, the Participant’s target annual bonus under his or her Employer’s annual bonus program in which the Participant is covered at the time of his or her Separation from Service, and (b) with respect to all other Participants, the average of the Participant’s actual annual bonus payouts for each of the two (2) years prior to the year of the Participant’s Separation from Service.

2.22 “Termination Date” means the date of the Participant’s Separation from Service.

 

4


2.23 “Waiver and Release Agreement” means an agreement prepared by the Company, with terms satisfactory to the Company in its sole discretion, which will include, among other provisions, a legally-binding general waiver of claims against the Company and its affiliates and subsidiaries, a deadline for the Executive’s delivery of the Waiver and Release Agreement to the Company, a deadline for the Executive’s revocation of the Waiver and Release Agreement (if applicable), and affirmative and negative covenants (which may include, but which are not limited to, covenants regarding confidentiality, non-solicitation, non-disparagement and non-competition). Different forms of the Waiver and Release Agreement may be used from one business unit to another, from one state to another, and from one Executive to another, as determined by the Company in its sole discretion.

SECTION III

Participation; Contributions; General Provisions

3.1 An Executive who has not entered into an individual employment or severance agreement with his or her Employer that provides for severance benefits will become a Participant in the Plan upon his or her Separation from Service. An Executive who has entered into an individual employment or severance agreement with his or her Employer that provides for severance benefits will not participate in the Plan; the severance benefits, if any, to which such an Executive is entitled from his or her Employer will be determined solely in accordance with the terms of such individual employment or severance agreement.

3.2 If an Executive is rehired by the Company or an affiliate or subsidiary of the Company while receiving benefits under this Plan, any remaining, unpaid Severance Pay Benefits shall be forfeited upon rehire, and no additional benefits shall be paid.

3.3 The Employer will pay the entire cost of all benefits provided under the Plan, solely from its general assets. The Plan is “unfunded,” and no Executive is required to make any contribution to the Plan.

3.4 This Plan is not intended to constitute an “employee pension benefit plan” within the meaning of Section 3 of ERISA and the corresponding Department of Labor regulations and other guidance.

SECTION IV

Waiver and Release Agreement

A Participant’s entitlement to Severance Pay Benefits is conditioned upon the Participant’s execution and submission to the Administrator of, and failure to revoke, a Waiver and Release Agreement. The Administrator will present the Waiver and Release Agreement to a Participant at the time of the Participant’s Separation from Service. Failure to submit the signed Waiver and Release Agreement to the Administrator by the deadline, or revocation of a signed Waiver and Release Agreement, will render the Participant ineligible for Severance Pay Benefits. In addition, if a Participant breaches the terms of a Waiver and Release Agreement, the Participant shall not be eligible for any further Severance Pay Benefits and may be required to repay any Severance Pay Benefits already paid to the Participant.

 

5


SECTION V

Severance Pay Benefits

A Participant shall be entitled to Severance Pay Benefits in accordance with the terms of either Section 5.1 or 5.2 below. A Participant’s Severance Pay Benefits may be reduced or subject to forfeiture or recoupment upon the breach of any agreement with the Company or Employer, as determined by the Administrator.

5.1 Termination other than in Connection with a Change in Control. A Participant shall be entitled to the following benefits in the event of his or her Separation from Service if Section 5.2 does not apply to the Participant and if the Participant timely signs, submits to the Company and, if applicable, does not revoke a Waiver and Release Agreement as described in Section 4 above:

(a) Salary Benefits. The Participant’s Employer shall pay the Participant a lump sum payment equal to his Annual Salary in effect immediately prior to his Termination Date, subject to Section 5.3(a).

(b) COBRA Premiums. The Participant’s Employer will pay the Participant a lump sum payment equal to the monthly COBRA Charge, multiplied by twelve (12) (the number of months during which the Participant is entitled to salary continuation payments), grossed up for the estimated taxes payable on such payment (as determined by the Company).

(c) Annual Bonus. In addition to the amounts set forth in Sections 5.1(a) and (b) above, the Participant’s Employer will pay the Participant a lump sum amount equal to the Participant’s Target Bonus under the Employer’s annual bonus plan for the fiscal year of the Participant’s Separation from Service. Notwithstanding the above, this Section 5.1(c) is not intended to provide the Participant with duplicative benefits and shall not apply to the extent that pursuant to the terms of the annual bonus plan, the Participant has received or is already entitled to receive a payment under or with respect to such annual bonus plan for the fiscal year of the Participant’s Separation from Service.

5.2 Termination in Connection with a Change in Control. A Participant shall be entitled to the following benefits in the event of his or her Separation from Service within the two (2)-year period following the effective date of a Change in Control if the Participant timely signs, submits to the Company and, if applicable, does not revoke a Waiver and Release Agreement as described in Section 4 above:

 

6


(a) Salary Benefits. A Participant who is employed by the Company shall be entitled to receive the amount of severance pay based on the Participant’s salary grade as indicated in the chart below. Any other Participant who is specifically designated by the Committee as eligible to participate in the Plan from time to time shall be entitled to receive the amount of severance pay indicated on Exhibit A.

 

Salary Grade    Amount of Severance Pay
21   

24 months of Annual Salary

+ 24 months of Target Bonus

18,19 or 20   

18 months of Annual Salary

+ 18 months of Target Bonus

(b) COBRA Premiums. The Participant’s Employer will pay the Participant a lump sum amount equal to the monthly COBRA Charge, multiplied by the number of months during which the Participant is entitled to salary continuation payments as provided in the table in Section 5.2(a) above, grossed up for the estimated taxes payable on such payment (as determined by the Company).

(c) Annual Bonus. In addition to the amounts set forth in Sections 5.2(a) and (b) above, the Participant’s Employer will pay the Participant a lump sum amount equal to the Participant’s Target Bonus under the Employer’s annual bonus plan for the fiscal year of the Participant’s Separation from Service, prorated based on the number of days completed in the year as of the Termination Date. Notwithstanding the above, this Section 5.2(c) is not intended to provide the Participant with duplicative benefits and shall not apply to the extent that in connection with the Change in Control or pursuant to the terms of the annual bonus plan, the Participant has received or is already entitled to receive a payment under or with respect to such annual bonus plan for the fiscal year of the Participant’s Separation from Service.

5.3 Payment of Severance Pay Benefits

(a) The salary benefits payable to a Participant under Section 5.1(a) or Section 5.2(a) above shall be paid to the a lump sum in cash on the sixtieth (60th) day following the date of the Participant’s Termination Date, with a lump sum catch-up payment made at that time in an amount equal to the aggregate amount of payments that would have been paid through such date had payments commenced on the Participant’s Termination Date. Notwithstanding the foregoing, to the extent that the salary benefits payable to a Participant under Section 5.1(a) or Section 5.2(a) above are not exempt as a short-term deferral (within the meaning of Section 409A of the Code) or qualify for the two-times compensation exemption of Treasury Reg. § 1.409A-1(b)(9)(iii), then such salary benefits shall be paid in accordance with the Employer’s standard payroll schedule for the payment of base salary to executives, in substantially equal installments over the specified number of months (e.g., 12 months under Section 5.1(a)). Payment of such installments will begin on the sixtieth (60th) day following the Participant’s Termination Date, with a lump sum catch-up payment made at that time in an amount equal to the aggregate amount of payments that would have been paid through such date had payments commenced on the Participant’s Termination Date.

 

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(b) The lump sum payment for COBRA Premiums payable under Section 5.1(b) or Section 5.2(b) and the lump sum payment of bonuses payable under Section 5.1(c) or 5.2(c) will be paid to the Participant in a lump sum in cash on the sixtieth (60th) day following the date of the Participant’s Termination Date.

(c) The amount of the Severance Pay Benefits payable to a Participant that are exempt from Section 409A may be reduced, in the sole discretion of the Administrator, by any debt of the Participant to the Employer arising out of the employment relationship between the Participant and the Employer.

(d) The Employer shall deduct from the Severance Pay Benefits to be paid to a Participant or any beneficiary all federal, state and local withholding and other taxes and charges required to be deducted under applicable law.

5.4 Restrictive Covenants. In consideration of the Severance Pay Benefits payable to a Participant under Section 5.1 or Section 5.2 above, the Participant shall be required to agree to certain covenants including, without limitation, covenants regarding maintaining the Employer’s confidential information, refraining from soliciting the Employer’s employees, suppliers, and customers, refraining from competing with the Employer, and refraining from making disparaging remarks, all of which shall be set forth in the Waiver and Release Agreement. If a Participant violates any of the provisions in the Waiver and Release Agreement, such Participant shall immediately forfeit his right to receive any Severance Pay Benefits, the Employer shall have no further obligation to make any payment of Severance Pay Benefits to such Participant, and such Participant shall be obligated to repay any Severance Pay Benefits already paid pursuant to the Plan.

5.5 Section 280G Limitation. Notwithstanding any provision of this Plan to the contrary, if any payment or benefit to be paid or provided hereunder would be a “Parachute Payment,” within the meaning of Section 280G of the Code, or any successor provision thereto, but for the application of this sentence, then the payments and benefits to be paid or provided hereunder shall be reduced to the minimum extent necessary (but in no event to less than zero) so that no portion of any such payment or benefit, as so reduced, constitutes a Parachute Payment; provided, however, that the foregoing reduction shall not be made if the total of the unreduced aggregate payments and benefits to be provided to Executive, determined on an after-tax basis (taking into account the excise tax imposed pursuant to Section 4999 of the Code, or any successor provision thereto, any tax imposed by any comparable provision of state law, and any applicable federal, state and local income taxes), exceeds by at least ten percent (10%) the total after-tax amount of such aggregate payments and benefits after application of the foregoing reduction. The determination of whether any reduction in such payments or benefits to be provided hereunder is required pursuant to the preceding sentence shall be made at the expense of the Company, if requested by Executive or the Company, by the Company’s independent accountants. The fact that Executive’s right to payments or benefits may be reduced by reason of the limitations contained in this Section shall not of itself limit or otherwise affect any other rights of Executive under this Agreement. In the event that any payment or benefit intended to be provided hereunder is required to be reduced pursuant to this Section and no such payment or

 

8


benefit qualifies as a “deferral of compensation” within the meaning of and subject to Section 409A (“Nonqualified Deferred Compensation”), Executive shall be entitled to designate the payments and/or benefits to be so reduced in order to give effect to this Section. The Company shall provide Executive with all information reasonably requested by Executive to permit Executive to make such designation. In the event that any payment or benefit intended to be provided hereunder is required to be reduced pursuant to this Section and any such payment or benefit constitutes Nonqualified Deferred Compensation or Executive fails to elect an order in which payments or benefits will be reduced pursuant to this Section, then the reduction shall occur in the following order: (a) reduction of cash payments described in Sections 5.1 or 5.2 (with such reduction being applied to the payments in the reverse order in which they would otherwise be made, that is, later payments shall be reduced before earlier payments); (b) cancellation of acceleration of vesting on any equity awards for which the exercise price exceeds the then fair market value of the underlying equity; and (c) cancellation of acceleration of vesting of equity awards not covered under (c) above. Within any category of payments and benefits (that is, (a), (b) or (c)), a reduction shall occur first with respect to amounts that are not Nonqualified Deferred Compensation within the meaning of Internal Revenue Code Section 409A and then with respect to amounts that are. In the event that acceleration of vesting of equity awards is to be cancelled, such acceleration of vesting shall be cancelled in the reverse order of the date of grant of such equity awards, that is, later equity awards shall be canceled before earlier equity awards.

SECTION VI

Special Severance Arrangements

The Administrator may in its sole discretion make exceptions to the severance pay guidelines set forth in this document at any time in its sole discretion. As a result, it is possible that an Executive will not receive severance benefits in a circumstance otherwise covered by this document; it is possible that the severance benefits of a Participant may be different than the terms set forth in this document; and it is possible that an employee of the Company or its affiliates or subsidiaries who is not otherwise eligible for severance benefits may be designated as a Participant and awarded severance benefits under this Plan.

SECTION VII

Death Benefits

Upon the death of any Participant after his Termination Date and prior to his or her having received all of his or her Severance Pay Benefits, any unpaid amount of the Severance Pay Benefits shall be paid in a single lump sum to the Participant’s spouse, or if the Participant has no surviving spouse at the time such payment is to be made, to the Participant’s estate, within ninety (90) days after the date of the Participant’s death.

SECTION VIII

Rights and Duties of Participants

8.1 No Participant or any other person shall have any interest in any fund or in any specific asset or assets of the Employers by reason of any amounts or benefits payable under the Plan. Any Executive, former Executive, Participant, former Participant, or other individual, person, entity, representative, or group of one or more of the foregoing (collectively, a “Claimant”) under this Plan shall have the status of a general unsecured creditor of the Employer.

 

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8.2 Every person receiving or claiming payments under the Plan shall be conclusively presumed to be mentally competent until the date on which the Administrator receives a written notice in a form and manner acceptable to the Administrator that such person is incompetent and that a guardian, conservator or other person legally vested with the interest of his or her estate has been appointed. In the event a guardian or conservator of the estate or any person receiving or claiming payments under the Plan shall be appointed by a court of competent jurisdiction, payments under this Plan may be made to such guardian or conservator provided that the proper proof of appointment and continuing qualification is furnished in a form and manner acceptable to the Administrator. Any such payments so made shall be a complete discharge of any liability or obligation of the Employer or Administrator regarding such payments.

8.3 Each person entitled to receive a payment under this Plan, whether a Participant, a duly designated beneficiary, a guardian or otherwise, shall provide the Administrator with such information as it may from time to time deem necessary or in its best interest in administering the Plan. Any such person shall also furnish the Administrator with such documents, evidence, data or other information as the Administrator may from time to time deem necessary or advisable.

SECTION IX

Administrator

9.1 The Plan shall be administered by the Administrator. The Administrator may designate a committee or individual to carry out one or more of the Administrator’s responsibilities as Administrator. Any reference in this document to the “Administrator” shall be deemed to include any such committee or individual. An Executive who is such an individual or a member of such committee shall not participate in any decision involving an election made by him or relating in any way to his individual rights, duties and obligations as a Participant under the Plan.

9.2 The Administrator shall have absolute and exclusive discretionary authority to decide all questions of eligibility for benefits and to determine the amount of such benefits, to establish rules, forms and procedures for the administration of the Plan, to construe and interpret any and all provisions of the Plan, including but not limited to the discretion to resolve ambiguities, inconsistencies, or omissions conclusively and to decide any and all questions of fact, interpretation, definition, computation or administration arising in connection with the operation of this Plan. As a result, benefits under the Plan will be paid only if the Administrator determines in its discretion that the Participant (or other Claimant) is entitled to them. All determinations of the Administrator in matters within its jurisdiction, irrespective of their character or nature, including, but not limited to, all questions of equity, construction and interpretation, including resolution of any ambiguity in the Plan, shall be final, binding and conclusive on all parties. In construing or applying the provisions of the Plan, the Administrator shall have the right to rely upon a written opinion of legal counsel, which may be independent legal counsel or legal counsel regularly employed by the Company, whether or not any question or dispute has arisen as to any distribution from the Plan. Any interpretation or determination made pursuant to such discretionary authority shall be upheld on judicial review, unless it is shown that the interpretation or determination was arbitrary and capricious or an abuse of discretion.

 

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9.3 The Administrator shall be responsible for maintaining books and records for the Plan.

SECTION X

Amendment or Termination

The Company hereby reserves the right to (and may, at any time, through action of the Board, the Committee or either entity’s delegate) amend, modify, terminate or discontinue the Plan at any time, provided, however, that no amendment or termination of, or discontinuance of participation in, the Plan will decrease the amount of any Severance Pay Benefits awarded but not yet fully paid to a Participant prior to the date of such amendment or termination without the written consent of the Participant and no such amendment that would have a material adverse effect on an Executive shall be effective until the one (1)-year anniversary of the date such amendment is adopted, unless the Executive provides written consent to such amendment. In addition, for the two (2)-year period following the date of a Change in Control, the Company may not amend, modify, terminate or discontinue the Plan in any manner that is materially adverse to an Executive, unless the Executive provides written consent to such amendment.

SECTION XI

Not a Contract of Employment

This Plan shall not be deemed to constitute a contract of employment between an Executive and the Employer, nor shall any provision hereof restrict the right of the Employer to discharge an Executive or to restrict the right of an Executive to terminate his or her employment.

SECTION XII

Claims Procedure

12.1 A Claimant may make a claim for benefits under the Plan by filing a written claim with the Administrator. Determinations of each such claim shall be made as described below; provided, however, that the Claimant and the Administrator may agree to extended periods of time for making determinations beyond those periods described below.

12.2 The Administrator will notify a Claimant of its decision regarding his claim within a reasonable period of time, but not later than ninety (90) days following the date on which the claim is filed, unless special circumstances require a longer period for processing of the claim and the Claimant is notified in writing of the reasons for an extension of time prior to the end of the initial ninety (90) day period and the date by which the Administrator expects to make the final decision. In no event will the Administrator be given an extension for processing the claim beyond one hundred eighty (180) days after the date on which the claim is first filed with the Administrator unless otherwise agreed in writing by the Claimant and the Administrator.

 

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12.3 If a claim is denied, the Administrator will notify the Claimant of its decision in writing. Such notification will be written in a manner calculated to be understood by the Claimant and will contain the following information: the specific reason(s) for the denial; a specific reference to the Plan provision(s) on which the denial is based; a description of additional information necessary for the Claimant to perfect his claim, if any, and an explanation of why such material is necessary; and an explanation of the Plan’s claim review procedure and the applicable time limits under such procedure and a statement as to the Claimant’s right to bring a civil action under ERISA after all of the Plan’s review procedures have been satisfied.

12.4 The Claimant shall have sixty (60) days following receipt of the notice of denial to file a written request with the Administrator for a review of the denied claim. The decision by the Administrator with respect to the review must be given within sixty (60) days after receipt of the request, unless special circumstances require an extension and the Claimant is notified in writing of the reasons for an extension of time prior to the end of the initial sixty (60) day period and the date by which the Administrator expects to make the final decision. In no event will the decision be delayed beyond one hundred twenty (120) days after receipt of the request for review unless otherwise agreed in writing by the Claimant and the Administrator.

12.5 Every Claimant will be provided a reasonable opportunity for a full and fair review of an adverse determination. A full and fair review means the following: the Claimant will be given the opportunity to submit written comments, documents, records, etc. with regard to the claim, and the review will take into account all information submitted by the Claimant, regardless of whether it was reviewed as part of the initial determination; and the Claimant will be provided, upon request and free of charge, with copies of all documents and information relevant to the claim for benefits.

12.6 The Administrator will notify the Claimant of its decision regarding an appeal of a denied claim in writing. The decision will be written in a manner calculated to be understood by the Claimant, and will include: the specific reason(s) for the denial and adverse determination; a reference to the specific Plan provisions on which the denial is based; a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to and copies of all information relevant to the Claimant’s claim for benefits; and a statement regarding the Claimant’s right to bring a civil action under ERISA.

12.7 If the Administrator fails to follow these procedures consistent with the requirements of ERISA with respect to any claim, the Claimant will be deemed to have exhausted all administrative remedies under the Plan and will have the right to bring a civil action under Section 502(a) of ERISA. This Article XII shall be interpreted such that the claims procedures applicable under the Plan conform to the claims review requirements of Part 5, Title I, of ERISA, and the applicable provisions set forth in Department of Labor Regulation Section 2560.503-1.

12.8 Before filing any claim or action, the Claimant must first fully exhaust all of the Claimant’s actual or potential rights under the claims procedures of Article XII, including such rights as the Administrator may choose to provide in connection with novel claims or issues or in particular situations. For purposes of the prior sentence, any Claimant that has any claim, issue or matter that implicates in whole or in part –

(a) The interpretation of the Plan,

 

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(b) The interpretation of any term or condition of the Plan,

(c) The interpretation of the Plan (or any of its terms or conditions) in light of applicable law,

(d) Whether the Plan or any term or condition under the Plan has been validly adopted or put into effect, or

(e) Any claim, issue or matter deemed similar to any of the foregoing by the Administrator,

(or two or more of these) shall not be considered to have satisfied the exhaustion requirement of this Section 12.8 unless the Claimant first submits the claim, issue or matter to the Administrator to be processed pursuant to the claims procedures of Section 12.1 or to be otherwise considered by the Administrator, and regardless of whether claims, issues or matters that are not listed above are of greater significance or relevance. The exhaustion requirement of this Section 12.8 shall apply even if the Administrator has not previously defined or established specific claims procedures that directly apply to the submission and consideration of such claim, issue or matter, and in which case the Administrator (upon notice of the claim, issue or matter) shall either promptly establish such claims procedures or shall apply (or act by analogy to) the claims procedures of Section XII that apply to claims for benefits. Upon review by any court or other tribunal, this exhaustion requirement is intended to be interpreted to require exhaustion in as many circumstances as possible (and any steps necessary to effect this intent should be taken).

12.9 Any claim or action that is filed in court against or with respect to the Plan, Administrator, or Employer must be filed within the applicable time frame that relates to the claim or action, as follows:

(a) Claims or actions for Severance Pay Benefits must be filed within two (2) years of the later of the date the Participant received the Severance Pay Benefits or the date of the Claimant’s Separation from Service.

(b) For all other claims or actions, the claim or action must be filed within two (2) years of the date when the Claimant knew or should have known of the actions or events that gave rise to the claim or action.

Any claim or action filed after the applicable time frame stated above will be void.

12.10 Any claim or action in connection with the Plan must be filed in the United States District Court of the Northern District of Georgia.

12.11 If a claim for benefits arises during the twenty-four (24)-month period following the date of a Change in Control, the Company shall pay or reimburse Executive for all reasonable costs (including reasonable legal fees) incurred by the Executive to enforce his rights under this Plan if the Executive prevails on at least one material issue with respect to such claims.

 

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SECTION XIII

Construction and Expense

13.1 Whenever the context so requires, words in the masculine include the feminine and words in the feminine include the masculine and the definition of any term in the singular may include the plural.

13.2 All expenses of administering the Plan shall be paid by the Company unless provided herein to the contrary.

13.3 The Plan shall be construed, administered and governed in all respects under and by the applicable laws of the State of Georgia, except to the extent preempted by ERISA.

13.4 An Executive may not rely upon any oral statement regarding the Plan.

13.5 This Plan and any properly adopted amendments shall be binding on the parties hereto and their respective heirs, administrators, trustees, successors, and assignees and on all Beneficiaries of the Participant.

13.6 Service of legal process may be made upon the Administrator at the Company headquarters or upon such other person as may be designated by the Company for this purpose.

13.7 The records of the Plan will be maintained on the basis of a year that begins each January 1 and ends the next following December 31.

13.8 The Company intends that all benefits provided under this Plan shall either be exempt from or comply with Section 409A. However, the Administrator shall operate this Plan in accordance with the requirements of Section 409A and the corresponding Department of Treasury guidance with respect to those benefits provided under this Plan that are, in fact, subject to Section 409A. In order to ensure compliance with Section 409A, the provisions of this Section 13.8 shall govern in all cases over any contrary or conflicting provision in the Plan.

(a) It is the intent of this Plan to comply with the requirements of Section 409A and the corresponding Department of Treasury guidance with respect to any nonqualified deferred compensation subject to Section 409A, and any ambiguities in the Plan will be interpreted and this Plan will be applied to comply with these requirements with respect to such compensation.

(b) To the extent necessary to comply with Section 409A, references in this Plan to “termination of employment” or “terminates employment” (and similar references) shall have the same meaning as “separation from service” under Section 409A(a)(2)(A)(i), and no payment subject to Section 409A that is payable upon a termination of employment shall be paid unless and until the Participant incurs a “separation from service” under Section 409A(a)(2)(A)(i) (a “409A Separation from Service”). In addition, if the Participant is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) at the time of his or her 409A Separation from Service, any nonqualified deferred compensation subject to Section 409A that would otherwise have been payable on account of, and within the first six (6) months following, the Participant’s 409A Separation from Service, and not by reason of another event under Section 409A(a)(2)(A), will become payable on the first business day after six (6) months following the date of the Participant’s 409A Separation from Service or, if earlier, the date of the Participant’s death.

 

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(c) Each installment payment of the salary continuation benefits payable pursuant to Section 5.3 and each other payment payable under Section 5.1 or 5.2 above is a separate payment within the meaning of the final regulations under Section 409A. Each such payment that is made within two and one-half (2-1/2) months following the end of the year that contains the date of the Participant’s Separation from Service is intended to be exempt from Section 409A as a short-term deferral within the meaning of the final regulations under Section 409A; each other payment is intended to be exempt under the two-times compensation exemption of Treasury Reg. § 1.409A-1(b)(9)(iii) up to the limitation on the availability of that exemption specified in the regulation; and each payment that is not exempt from Section 409A shall be subject to delay (if necessary) in accordance with subsection (b) above.

[The remainder of this page intentionally left blank]

 

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IN WITNESS WHEREOF, this Plan has been executed by a duly authorized officer of the Company to be effective as of the Effective Date.

 

THE AARON’S COMPANY, INC.
By:  

/s/ C. Kelly Wall

  Name: Name: C. Kelly Wall
  Title: Chief Financial Officer

 

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EXHIBIT A

Specifically Designated

Executives

None.

 

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Exhibit 10.9

FORM OF INDEMNIFICATION AGREEMENT

This INDEMNIFICATION AGREEMENT is made and executed effective as of the ____ day of _____________, 2020 by and between The Aaron’s Company, Inc., a Georgia corporation (the “Company”), and ______________, an individual resident of the State of ______________ (“Indemnitee”).

WHEREAS, the Company is aware that, in order to induce highly competent persons to serve the Company as directors or in other capacities, the Company must provide such persons with adequate protection through exculpation of directors from personal liability (as set forth in the Company’s Amended and Restated Articles of Incorporation (“Articles”)), the Company’s Amended and Restated By-Laws (“Bylaws”), directors and officers liability insurance, advancement of expenses and indemnification against risks of claims and actions against them, and against damage to their professional or personal reputations resulting from allegations, claims, actions and investigations, arising out of or relating to their service to and activities on behalf of the Company;

WHEREAS, the Board of Directors of the Company has determined that it is in the best interests of the Company’s shareholders that the Company act to assure such persons that there will be increased certainty of such protection in the future;

WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify and advance the expenses of such persons to the fullest extent permitted by applicable law and to guarantee such persons would realize the benefit of any subsequent changes in applicable law relating to indemnification or advancement of expenses so that they will continue to serve the Company free from undue concern that they will not be so indemnified, thereby ensuring that the decisions of such persons for or on behalf of the Company will be independent, objective and in the best interests of the Company’s shareholders;

WHEREAS, it is reasonable, prudent and necessary for the Company to provide such persons with the specific contractual assurance that the exculpation from personal liability for directors, the right to directors and officers liability insurance and the rights to indemnification and advancement of expenses provided to them remain available regardless of, among other things, any amendment to or revocation of the indemnification or advancement of expenses provisions in the Articles or the Bylaws or any change in composition or philosophy of the Company’s Board of Directors such as might occur following an acquisition or Change in Control of the Company; and

WHEREAS, to the extent requested, Indemnitee is willing to serve, continue to serve, and take on additional service for or on behalf of the Company on the condition that he or she be so indemnified.

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

1. Indemnification. The Company hereby agrees to hold harmless and indemnify Indemnitee if Indemnitee is or was a party to, or is threatened to be made a party to, a Proceeding by reason of Indemnitee’s Corporate Status to the fullest extent permitted by the Georgia Business Corporation Code, as amended (“GBCC”), as the same now exists or may hereafter be amended (but only to the extent any such amendment permits the Company to provide broader Indemnification rights than the GBCC permitted the Company to provide prior to such amendment), whether the actions or omissions (or alleged actions or omissions) of Indemnitee giving rise to such Indemnification (including the advancing of Expenses) occurs or occurred before or after the Effective Date; provided, however, that, except as provided in Sections 6, 8 and 10 of this Agreement, Indemnitee shall not be entitled to Indemnification or advancement of Expenses in connection with a Proceeding initiated by Indemnitee (other than in a Corporate Status capacity) against the Company or any director or officer of the Company unless the Company has joined in or consented in writing to the initiation of such Proceeding.

2. Indemnification for Expenses When Acting as a Witness, Etc. To the extent that Indemnitee acts as a witness or other participant in any Proceeding, Indemnitee shall be indemnified by the Company against all Expenses imposed upon or incurred by Indemnitee in connection therewith, without any further authorization, determination or action under the GBCC, the Articles, the Bylaws, this Agreement or otherwise.

 


3. Indemnification for Expenses of a Party Who is Wholly or Partly Successful. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is or was, by reason of Indemnitee’s Corporate Status, a party to and is successful on the merits or otherwise in any Proceeding, Indemnitee shall be indemnified against Expenses imposed upon or incurred by Indemnitee in connection with the Proceeding, regardless of whether Indemnitee has met the standards set forth in the GBCC and without any further authorization, determination or action under the GBCC, the Articles, the Bylaws, this Agreement or otherwise. If Indemnitee is not wholly successful in such Proceeding but is successful on the merits or otherwise as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses imposed upon or incurred by or on behalf of Indemnitee in connection with each claim, issue or matter with respect to which Indemnitee was successful. For the purposes of this Section 3 and without limiting the foregoing, (a) the termination of any claim, issue or matter in any such Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter, and (b) a decision by any government, regulatory or self-regulatory authority, agency or body not to commence or pursue any investigation, civil or criminal enforcement matter or case or in any civil suit, shall be deemed to be a successful result as to such claim, issue or matter.

4. Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to Indemnification by the Company for some or a portion of the Expenses, judgments, fines, claims, losses, liabilities and amounts paid in settlement imposed upon or incurred by Indemnitee in connection with the investigation, defense, appeal or settlement of a Proceeding covered by Section 1 of this Agreement, but is not entitled to Indemnification for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion of such Expenses, judgments, fines, claims, losses, liabilities and amounts paid in settlement imposed upon or incurred by Indemnitee to which Indemnitee is entitled.

5. Notification of Proceeding and Defense of Claims Against Indemnitee.

(a) To obtain Indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to Indemnification; provided that the failure to so notify the Company will not relieve the Company from any liability that it may have to Indemnitee under this Agreement or otherwise to the extent the failure or delay does not materially prejudice the Company. Any Expenses incurred by Indemnitee in connection with Indemnitee’s request for Indemnification shall be borne by the Company. Notwithstanding Section 10(e) of this Agreement, the Company hereby indemnifies and agrees to hold Indemnitee harmless for any Expenses incurred by Indemnitee under the immediately preceding sentence irrespective of the outcome of the determination of Indemnitee’s entitlement to Indemnification.

(b) The Company shall be entitled to participate in the defense of any Proceeding to which Indemnitee is or was a party by reason of Indemnitee’s Corporate Status or to assume the defense thereof, with counsel reasonably satisfactory to Indemnitee, provided, however, if Indemnitee concludes in good faith that (a) the use of counsel chosen by the Company to represent Indemnitee would present such counsel with an actual or potential conflict, (b) the named parties in the Proceeding include both Indemnitee and the Company and Indemnitee concludes that there may be one or more legal defenses available to Indemnitee that are different from or in addition to those available to the Company, (c) any representation by such counsel would be precluded under the applicable standards of professional conduct then prevailing, or (d) following a Change in Control, the Company fails to engage counsel reasonably satisfactory to Indemnitee, then Indemnitee shall be entitled to retain separate counsel (but not more than one law firm plus, if applicable, local counsel) at the Company’s expense.

(c) The Company shall not be liable to Indemnitee under this Agreement for any amounts paid in settlement of any Proceeding effected without the Company’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed, provided, however, that the Company shall be deemed to have consented to any settlement if the Company does not object to such settlement within 30 days after receipt by the Company of a written request for consent to such settlement. The Company shall be required to obtain the consent of Indemnitee to settle any Proceeding in which Indemnitee is named as a party or has potential liability exposure, unless such settlement solely involves the payment of money and includes a complete and unconditional release of Indemnitee from all liability on any claims that are the subject matter of the Proceeding.

 

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(d) The Company will promptly notify its relevant insurers as soon as practicable after the receipt of a notice of a claim for Indemnification in accordance with the procedures and requirements of such policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such policies.

6. Procedures for Determination of Entitlement to Indemnification. The parties agree that the following procedures shall apply in the event of any question as to whether Indemnitee is entitled to Indemnification under this Agreement (provided; however, in the event the procedures for determination of entitlement to Indemnification as currently set forth in the GBCC are amended to create any material inconsistency between such procedures in the GBCC and the procedures set forth below, the procedures set forth below shall also be deemed to be amended in the same manner to the extent necessary to remove the inconsistency without any further action on the part of the Company or Indemnitee):

(a) The Corporate Secretary of the Company (or in the absence of the Corporate Secretary, the Chief Financial Officer of the Company) shall, promptly upon receipt of a claim for Indemnification from Indemnitee as set forth in Section 5 of this Agreement, advise the Board of Directors in writing that Indemnitee has requested Indemnification.

(b) Sections 1, 2, 3, 4 and 8 of this Agreement are intended to, and shall be deemed to, satisfy the requirements for authorization referred to in Section 14-2-859(a) of the GBCC or any successor provision and any other requirements of applicable law such that the Company shall be obligated to the maximum extent possible to provide such indemnification and advancement of Expenses without any further requirements for authorization or action referred to in Sections 14-2-853(c) or 14-2-855(c) of the Code or any successor provision, the Articles, the Bylaws, this Agreement, or otherwise. The Company shall act in good faith and expeditiously take all actions necessary or appropriate to make available the Indemnification, advancement of Expenses and other rights provided for Indemnitee in this Agreement, and shall expeditiously take all actions necessary or appropriate to remove any impediments or obstacles to such Indemnification, advancement of Expenses and other rights. If, notwithstanding the foregoing, a court of competent jurisdiction determines that any further determination or action is required, then, at the request of Indemnitee, such determination or action shall be made by Independent Counsel proposed by the Indemnitee and reasonably acceptable to the Company. Independent Counsel shall determine as promptly as practicable whether and to what extent Indemnitee is entitled to Indemnification under this Agreement and applicable law and shall render a written opinion to the Company and to Indemnitee to such effect. The Company agrees to be bound by, and not contest, appeal or seek reconsideration of, such opinion of Independent Counsel. The Company further agrees to pay the reasonable fees and expenses of Independent Counsel within 20 days after Independent Counsel’s statement for professional services rendered is submitted to the Company, and to fully indemnify Independent Counsel against any and all expenses, claims, liabilities and damages arising out of or relating to this Section 6 or its engagement pursuant hereto.

(c) Indemnitee shall reasonably cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to Indemnification, including providing to such person, persons or entity upon reasonable advance request such documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any Independent Counsel, members of the Board of Directors, or shareholders of the Company shall act reasonably and in good faith in making a determination under the Agreement of Indemnitee’s entitlement to Indemnification. Any Expenses incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to Indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.

7. Presumptions and Effects of Certain Proceedings.

(a) In making a determination with respect to entitlement to Indemnification or other rights under this Agreement, the person, persons or entity making such determination shall presume that Indemnitee is entitled to Indemnification or such other rights under this Agreement and the Company shall have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to the presumption. Neither the failure of the Company (including by its Board of Directors or Independent Counsel) to have made a determination prior to the commencement of any action pursuant to this

 

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Agreement that Indemnification is proper, or other rights are available, in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Company (including by its Board of Directors or Independent Counsel) that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.

(b) To the extent such determination is required, if the person, persons or entity empowered or selected under Section 6(b) of this Agreement to determine whether Indemnitee is entitled to Indemnification or other rights are available shall not have made a determination within 30 days after receipt by the Company of the request therefor, the requisite determination shall be deemed to have been made and Indemnitee shall be entitled to such Indemnification or other rights, absent (i) actual fraud in the request for Indemnification or such other rights, or (ii) prohibition of such Indemnification or other rights under applicable law; provided, however, that such 30-day period may be extended for a reasonable time, not to exceed an additional 20 days, if the person, persons or entity making the determination with respect to entitlement to Indemnification in good faith require(s) such additional time for the obtaining or evaluating of documentation and/or information relating thereto.

(c) The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not of itself adversely affect the right of Indemnitee to Indemnification or create a presumption that Indemnitee did not act in good faith and in a manner that he or she reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his or her conduct was unlawful.

(d) For purposes of any determination of good faith, Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on the records or books of account of the Enterprise, including financial statements, or on information supplied to Indemnitee by the officers of the Enterprise in the course of their duties, or on the advice of legal counsel for the Enterprise or on information or records given or reports made to the Enterprise by an independent certified public accountant or by an appraiser or other expert selected by the Enterprise. The provisions of this Section 7(d) shall not be deemed to be exclusive or to limit in any way the other circumstances in which Indemnitee may be deemed or found to have met the applicable standard of conduct set forth in this Agreement.

(e) The knowledge and/or actions, or failure to act, of any other director, officer, trustee, partner, managing member, fiduciary, agent or employee of the Enterprise shall not be imputed to Indemnitee for purposes of determining the right to Indemnification under this Agreement.

8. Advancement of Expenses.

(a) All Expenses actually incurred by Indemnitee as a party, witness or other participant by reason of Indemnitee’s Corporate Status in connection with any Proceeding (including a Proceeding by or on behalf of the Company) shall be paid by the Company in advance of the final disposition of such Proceeding, if so requested by Indemnitee, within 30 days after the receipt by the Company of a statement or statements from Indemnitee requesting such advance or advances. Indemnitee may submit such statements from time to time.

(b) Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee in connection therewith; provided, however, that, following a Change in Control or in the event of a Proceeding brought by or in the name of the Company, the Company agrees that Indemnitee shall be required to submit to the Company only summary statements and invoices, and that, in connection with such submissions, Indemnitee shall have the right to withhold or redact any documents or information that are protected by the attorney-client privilege or the attorney work product doctrine.

(c) Indemnitee’s submission of statements and requests for payment of Expenses pursuant to this Section 8 shall include or be accompanied by: (i) a written affirmation by Indemnitee of Indemnitee’s good faith belief that Indemnitee has met the standard of conduct necessary for Indemnification under the GBCC or that the Proceeding involves conduct for which liability has been eliminated under a provision of the Articles as authorized by Section 14-2-202(b)(4) of the GBCC, and (ii) a written undertaking, executed personally or on behalf of Indemnitee, to repay any such amounts if it is ultimately determined that Indemnitee is not entitled to be indemnified by the Company pursuant to this Agreement or otherwise. Such undertaking must be an unlimited general obligation of Indemnitee, but need not be secured and shall be accepted without reference to the financial ability of Indemnitee to make repayment.

 

 

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(d) The Company shall make advance payment of Expenses to Indemnitee, without regard to Indemnitee’s ability to repay the Expenses and without regard to Indemnitee’s ultimate entitlement to Indemnification under the other provisions of this Agreement.

(e) Indemnitee’s entitlement to advancement of Expenses under this Section 8 shall continue until such time as a final determination of the Proceeding for which advancement or Indemnification is sought hereunder.

(f) Indemnitee’s entitlement to the advancement of Expenses under this Agreement shall include those incurred in connection with any Proceeding by Indemnitee, including any Proceeding, or court application or arbitration to enforce this Agreement pursuant to Section 10 of this Agreement.

(g) Any advances or undertakings to repay pursuant to this Section 8 shall be unsecured and interest free.

9. The Company’s Obligation to Pay Indemnification Amounts. The Company agrees to pay to or for the benefit of Indemnitee all amounts due and owing under its Indemnification obligations as determined pursuant to Section 6 of this Agreement within 10 days after such determination has been made and delivered to the Company. All written opinions of Independent Counsel and all statements, invoices, judgments and/or settlement agreements subject to the Company’s Indemnification obligations under this Agreement shall be submitted to the Company at the address provided pursuant to Section 26 of this Agreement, and shall be deemed received by the Company on the date of mailing or overnight delivery, the date of transmission by electronic means, or the date of delivery by hand (as the case may be).

10. Remedies of Indemnitee in Cases of Determination not to Indemnify or to Advance Expenses or Refusal of the Company to Pay Indemnification Amounts.

(a) In the event that a determination is made that Indemnitee is not entitled to Indemnification hereunder or if the payment has not been timely made following a determination of entitlement to Indemnification pursuant to Section 6, or if Expenses are not advanced pursuant to Section 8, Indemnitee shall be entitled to an expeditious and final adjudication in the Georgia State-wide Business Court, which shall be the exclusive venue for any court action to determine whether Indemnitee is entitled to such Indemnification or advance. The parties shall seek expedited resolution of the matter and agree that the Georgia State-wide Business Court may summarily determine the Company’s obligation to advance expenses (including attorneys’ fees). The parties further agree to waive trial by jury with respect to the determination whether Indemnitee is entitled to advancement or Indemnification. Alternatively, Indemnitee may, at Indemnitee’s option, seek an award in arbitration to be conducted by a single arbitrator pursuant to the rules of the American Arbitration Association, such award to be made within 60 days following the filing of the demand for arbitration. The Company shall not oppose Indemnitee’s right to seek any such adjudication or award in arbitration. Any such adjudication or arbitration shall be limited to the Company’s obligations to Indemnitee under this Agreement, and the Company, therefore, shall not assert in such adjudication or arbitration any counterclaim against Indemnitee whatsoever, and shall not assert in such adjudication or arbitration, by counterclaim, defense, avoidance or otherwise, any contractual, legal or equitable right of recoupment, setoff, contribution, indemnification, release, waiver, estoppel, repudiation or breach of any express or implied covenant of Indemnitee; provided, however, that this sentence shall not prohibit the Company from asserting in such adjudication or arbitration that Indemnitee did not meet any relevant standard of conduct required by applicable law for Indemnification. In the event that a determination has been made in a final adjudication or arbitration pursuant to this Section 10(a) that Indemnitee is entitled to any such Indemnification or advancement of Expenses, the Company shall pay interest on the amount awarded to Indemnitee. Interest shall accrue on such amount from the date such amount was required to be paid pursuant to this Agreement until the date of payment at a rate per annum equal to three (3) percent plus the prime interest rate published in The Wall Street Journal on the date such interest begins accruing.

 

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(b) In the event that a determination has been made pursuant to Section 6 that Indemnitee is not entitled to Indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 10 shall be conducted in all respects as a de novo trial on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination. In any judicial proceeding or arbitration commenced pursuant to this Section, the Company shall have the burden of proving that Indemnitee is not entitled to Indemnification or advancement of Expenses, as the case may be.

(c) If a determination has been made or deemed to have been made pursuant to Section 6 that Indemnitee is entitled to Indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 10, and shall be precluded from asserting that such determination has not been made or that the procedure for which such determination was made is not valid, binding and enforceable, absent (i) actual fraud in the request for Indemnification, or (ii) prohibition of such Indemnification under applicable law.

(d) The Company shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 10 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement.

(e) In the event that Indemnitee, pursuant to this Section 10, seeks a judicial adjudication or arbitration of his or her rights under, or to recover damages for breach of, this Agreement, Indemnitee shall be entitled to recover from the Company, and shall be indemnified by the Company against, any and all expenses (of the kinds described in the definition of Expenses) actually and reasonably incurred by him of her in such judicial adjudication or arbitration, but only if he or she prevails therein. If it shall be determined in such judicial adjudication or arbitration that Indemnitee is entitled to receive part but not all of the Indemnification or advancement of expenses sought, the expenses incurred by Indemnitee in connection with such judicial adjudication or arbitration shall be appropriately prorated.

11. Other Rights to Indemnification and Advancement of Expenses. The rights to Indemnification and advancement of Expenses provided by this Agreement are cumulative, and not exclusive, and are in addition to any other rights to which Indemnitee may now or in the future be entitled under any provision of the Bylaws or Articles, any vote of shareholders or Disinterested Directors, any provision of law or otherwise. Except as required by applicable law, the Company shall not adopt any amendment to its Bylaws or Articles, the effect of which would be to deny, diminish or encumber Indemnitee’s rights to Indemnification and advancement of Expenses under this Agreement.

12. Director and Officer Liability Insurance.

(a) The Company shall use commercially reasonable efforts to obtain and maintain a policy or policies of liability insurance, including broad form individual non-indemnifiable loss coverage (with difference-in-condition feature), with reputable insurance companies providing Indemnitee with coverage for losses from wrongful acts, including Expenses, and to ensure the Company’s performance of its Indemnification and advancement of Expenses obligations under this Agreement. Such coverage shall not be on terms of coverage or amounts less favorable to Indemnitee than those of the policies in effect on the date of this Agreement.

(b) The Company further agrees that all of the provisions of this Agreement shall remain in effect regardless of whether liability or other insurance coverage is at any time obtained or retained by the Company; except that any payments made to, or on behalf of, Indemnitee under an insurance policy shall reduce the obligations of the Company hereunder.

13. Subrogation. In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee. Following receipt of Indemnification payments pursuant to this Agreement, as further assurance, Indemnitee shall execute all papers required and take all action reasonably necessary to secure such rights, including execution of such documents as are reasonably necessary to enable the Company to bring suit to enforce such rights.

 

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14. Spousal Indemnification and Advancement of Expenses. The Company shall provide Indemnitee’s spouse to whom Indemnitee is legally married at any time Indemnitee is covered under the Indemnification provided in this Agreement (even if Indemnitee did not remain married to him or her during the entire period of coverage) against any Proceeding for the same period, to the same extent and subject to the same standards, limitations, obligations and conditions under which Indemnitee is provided Indemnification herein, if Indemnitee’s spouse (or former spouse) becomes involved in a Proceeding solely by reason of his or her status as Indemnitee’s spouse, including, without limitation, any Proceeding that seeks damages recoverable from marital community property, jointly-owned property or property purported to have been transferred from Indemnitee to his/her spouse (or former spouse). Indemnitee’s spouse or former spouse also shall be entitled to advancement of Expenses to the same extent that Indemnitee is entitled to advancement of Expenses provided under Section 8 of this Agreement. The Company may maintain insurance to cover its obligations hereunder with respect to Indemnitee’s spouse (or former spouse) or set aside assets in a trust or escrow fund for that purpose; provided, however, that the Company agrees that the provisions of this Agreement shall remain in effect regardless of whether such liability or other insurance coverage is at any time obtained or retained by the Company; except that any payments made to, or on behalf of, Indemnitee’s spouse under such an insurance policy shall reduce the obligations of the Company hereunder.

15. Intent. This Agreement shall be in addition to any other rights Indemnitee may have under the Articles, Bylaws, applicable law or otherwise. To the extent that a change in applicable law (whether by statute or judicial decision) permits greater indemnification by agreement than would be afforded currently under the Company’s Articles, Bylaws, applicable law or this Agreement, it is the intent of the parties that Indemnitee enjoy by this Agreement the greater benefits so afforded by such change.

16. Effective Date. The provisions of this Agreement shall cover claims, actions, suits or proceedings whether now pending or hereafter commenced and shall be retroactive to cover acts or omissions or alleged acts or omissions which heretofore have taken place. The Company shall be liable under this Agreement, to the extent specified in Sections 1, 2, 3, 4, 8 and 14 of this Agreement, for all acts and omissions of Indemnitee while serving as a director, notwithstanding the termination of Indemnitee’s service, if such act was performed or omitted to be performed during the term of Indemnitee’s service to the Company.

17. Duration of Agreement. This Agreement shall survive and continue even though Indemnitee may have terminated his or her service as a director, agent or fiduciary of the Company or as a director, officer, partner, employee, agent or fiduciary of any other entity, including, but not limited to another corporation, partnership, limited liability company, employee benefit plan, joint venture, trust or other enterprise or by reason of any act or omission by Indemnitee in any such capacity. This Agreement shall be binding upon the corporation and its successors and assigns, including, without limitation, any Company or other entity which may have acquired all or substantially all of the Company’s assets or business or into which the Company may be consolidated or merged, and shall inure to the benefit of Indemnitee and his/her spouse, successors, assigns, heirs, devisees, executors, administrators or other legal representatives. The Company shall require any successor or assignee (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by written agreement in form and substance reasonably satisfactory to the Company and Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession or assignment had taken place.

18. Disclosure of Payments. Except as required by any federal or state securities laws or other federal or state law, neither party shall disclose any payments under this Agreement unless prior approval of the other party is obtained.

19. Time of the Essence. The parties expressly agree time is of the essence with respect to all provisions of this Agreement.

20. Severability. If any provision or provisions of this Agreement shall be held invalid, illegal or unenforceable for any reason whatsoever, (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including, but not limited to, all portions of any Sections of this Agreement containing any such provision held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and (b) to the fullest extent possible, the provisions of this Agreement (including, but not limited to, all portions of any Section

 

7


of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifest by the provision held invalid, illegal or unenforceable. If any section, clause or part of this Agreement is determined to be invalid or unenforceable, the Company in good faith shall expeditiously take all necessary or appropriate action to provide the Indemnitee with rights under this Agreement (including with respect to Indemnification, advancement of Expenses and other rights) that effect the original intent of this Agreement as closely as possible.

21. Counterparts. This Agreement may be executed by one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement.

22. Captions. The captions and headings used in this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

23. Security. To the extent requested by Indemnitee and approved by the Company’s Board of Directors, the Company may at any time and from time to time provide security to Indemnitee for the Company’s obligations hereunder through an irrevocable bank line of credit, funded trust or other collateral. Any such security, once provided to Indemnitee, may not be revoked or released without the prior written consent of Indemnitee.

24. Definitions. For purposes of this Agreement:

(a) “Change in Control” shall mean shall mean (1) an acquisition by a person of beneficial ownership of 25% or more of the combined voting power of the Company’s then outstanding voting securities, provided that any such securities acquired directly from the Company shall be excluded from the determination of such person’s beneficial ownership (but shall be included in calculating total outstanding securities); or (2) the individuals who are members of the Incumbent Board cease for any reason to constitute two-thirds of the Board of Directors; or (3) (i) a merger or consolidation involving the Company if the shareholders of the Company, immediately before such merger or consolidation, do not own, immediately following such merger or consolidation, more than 80% of the combined voting power of the outstanding voting securities of the resulting corporation in substantially the same proportion as their ownership of voting securities immediately before such merger or consolidation or (ii) a complete liquidation or dissolution of the Company or sale or other disposition of more than 50% of the assets of the Company and its subsidiaries.

(b) “Corporate Status” describes the status of a person who is or was a director of the Company or an individual who, while a director of the Company, is or was serving at the Company’s request as a director, officer, partner, trustee, employee, administrator or agent of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan, entity, or other enterprise. Corporate Status also describes a person’s service in connection with an employee benefit plan at the Company’s request if such person’s duties to the Company also impose duties on, or otherwise involve services by, such person to the plan or to participants in or beneficiaries of the plan. Corporate Status includes, in reference to a particular person unless the context requires otherwise, the estate or personal representative of such person.

(c) “Disinterested Director” shall mean a director of the Company who is not and was not a party to the Proceeding in respect of which Indemnification is being sought by Indemnitee.

(d) “Effective Date” means as of [•].

(e) “Enterprise” shall mean the Company and any other corporation, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise of which Indemnitee is or was serving at the request of the Company as a director, trustee, general partner, managing member, agent or fiduciary.

(f) “Expenses” shall include, without limitation, all attorneys’ fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating or being or preparing to be a witness in any Proceeding, in each case to the extent reasonable.

 

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(g) “Incumbent Board” includes the individuals who as of [•], 2020 are members of the Board of Directors and any individual becoming a director subsequent to [•], 2020 whose election, or nomination for election by the corporation’s shareholders was approved by a vote of at least two-thirds of the directors then comprising the Incumbent Board; provided, however, that notwithstanding the foregoing, no individual shall be considered a member of the Incumbent Board if such individual initially assumed office (1) as a result of either an actual or threatened “election contest” (within the meaning of Rule 14a-11 promulgated under the 1934 Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board of Directors (a “Proxy Contest”) or (2) with the approval of the other members of the Board of Directors, but by reason of any agreement intended to avoid or settle an actual or threatened Proxy Contest.

(h) “Indemnification” shall mean the indemnification obligation provided under Sections 1, 2, 3, 4 and 14 of this Agreement.

(i) “Independent Counsel” shall mean an attorney with an active membership in good standing in the State Bar of Georgia who is experienced in matters of corporate law and neither he or she, nor his or her law firm, presently is, nor in the past five years has been, retained to represent: (i) the Company or Indemnitee in any other matter material to either such party; or (ii) any other party to the Proceeding giving rise to a claim for Indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.

(j) “Proceeding” shall include, without limitation, any actual, threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened, pending or completed proceeding, whether brought by or in the right of the Company or otherwise and whether civil (including intentional or unintentional tort claims), criminal, administrative or investigative in nature, and whether formal or informal, in which Indemnitee was, is, may be or will be involved as a party, witness or otherwise, by reason of Indemnitee’s status as a director of the Company, by reason of any action taken by Indemnitee or of any inaction on Indemnitee’s part while acting as a director of the Company, or by reason of Indemnitee’s service at the request of the Company as a director, officer, general partner, managing member, fiduciary, employee or agent of any other Enterprise (in each case whether or not he or she is acting or serving in any such capacity or has such status at the time any liability or expense is incurred for which Indemnification or advancement of Expenses can be provided under this Agreement), or any foreign equivalent of the foregoing, except one initiated by an Indemnitee pursuant to Section 10 of this Agreement to enforce his rights under this Agreement.

25. Entire Agreement, Modification and Waiver. This Agreement constitutes the entire agreement and understanding of the parties hereto regarding the subject matter hereof, and no supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver. No supplement, modification or amendment of this Agreement shall limit or restrict any right of Indemnitee under this Agreement in respect of any act or omission of Indemnitee prior to the effective date of such supplement, modification or amendment unless expressly provided therein.

26. Notices. All notices, requests, demands or other communications hereunder shall be in writing and shall be deemed to have been duly given if (i) delivered by hand with receipt acknowledged by the party to whom said notice or other communication shall have been directed or if (ii) mailed by certified or registered mail, return receipt requested with postage prepaid, on the date shown on the return receipt:

(a) If to Indemnitee to:

 

                                           

 

                                           

 

                                           

 

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(b)     If to the Company, to:

The Aaron’s Company, Inc.

400 Galleria Parkway S.E.

Suite 300

Atlanta, Georgia 30339-3182

Attention: General Counsel

with a copy to:

King & Spalding LLP

1180 Peachtree Street, N.E.

Atlanta, Georgia 30309-3521

Attn: Cal Smith

or to such other address as may be furnished to Indemnitee by the Company or to the Company by Indemnitee, as the case may be.

27. Governing Law. The parties hereto agree that this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Georgia, applied without giving effect to any conflicts-of-law principles. Notwithstanding the above, the parties agree that decisions of Delaware courts interpreting and applying the similar indemnification and advancement provisions of Section 145 of the Delaware General Corporation law shall be persuasive authority in the absence of Georgia appellate decisions interpreting the indemnification and advancement provisions of the GBCC.

 

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IN WITNESS WHEREOF, the parties hereto have executed this Indemnification Agreement on the day and year first above written.

 

THE AARON’S COMPANY, INC.
By  

         

Name:
Title:
INDEMNITEE
By  

         

Name:

Exhibit 10.10

EXECUTION VERSION

AMENDED AND RESTATED SEVERANCE AND

CHANGE-IN-CONTROL AGREEMENT

THIS AMENDED AND RESTATED SEVERANCE AND CHANGE-IN-CONTROL AGREEMENT (this “Agreement”), dated as of November 30, 2020 (the “Effective Date”), is made by and between The Aaron’s Company, Inc., a corporation organized under the laws of the State of Georgia (the “Company”) and Douglas A. Lindsay (“Executive”).

WHEREAS, the Executive previously entered into a Severance and Change-in-Control Agreement (“Prior Agreement”) with Aaron’s, Inc., dated February 27, 2019 (“Original Effective Date”);

WHEREAS, in connection with the spin-off of the Company from Aaron’s Holdings Company, Inc. (“Holdings”), effective November 30, 2020 (the “Spin-Off”), the Company assumed the Prior Agreement pursuant to the terms of the Employee Matters Agreement entered into between the Company and Holdings in connection with the Spin-Off; and

WHEREAS, the Company and the Executive desire to amend and restate the Prior Agreement to reflect the Spin-Off.

NOW, THEREFORE, in consideration of the promises, agreements and conditions contained in this Agreement, the Company and Executive agree as follows:

SECTION I

DEFINITIONS

For the purposes of this Agreement the following definitions shall apply:

1.1 “Accrued Obligations” means the sum of (a) Executive’s Annual Salary through the Date of Termination to the extent not already paid, and (b) Executive’s business expenses that are reimbursable in accordance with the Company’s policies and for which Executive submits for reimbursement within thirty (30) calendar days following the Date of Termination, but have not been reimbursed by the Company as of the Date of Termination.

1.2 “Affiliate” means any entity controlled by, controlling, or under common control with, the Company.

1.3 “Annual Bonus” means Executive’s annual bonus under the Company’s or Affiliate’s annual bonus program, as in effect from time to time, in which Executive is covered, if any.

1.4 “Annual Salary” means Executive’s annual base salary, exclusive of any bonus pay, commissions or other additional compensation, in effect on the Date of Termination.

1.5 “Board” means the Board of Directors of the Company.

1.6 “Cause” means:


(a) the commission by Executive of an act of fraud, embezzlement, theft or proven dishonesty, or any other illegal act or practice (whether or not resulting in criminal prosecution or conviction);

(b) the willful engaging by Executive in misconduct which is deemed by the Board, in good faith, to be materially injurious to the Company or an Affiliate, monetarily or otherwise; or

(c) the willful and continued failure or habitual neglect by Executive to perform Executive’s duties with the Company or an Affiliate substantially in accordance with the operating and personnel policies and procedures of the Company or Affiliate generally applicable to all of their respective employees.

No act or failure to act by Executive shall be deemed to be “willful” unless done or omitted to be done by Executive not in good faith and without reasonable belief that Executive’s action or omission was in the best interest of the Company and/or an Affiliate. “Cause” under (a), (b) or (c) shall be determined by the Board in its sole discretion.

1.7 “Change in Control” means:

(a) The acquisition (other than from the Company) by any person of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended (but without regard to any time period specified in Rule 13d-3(d)(l)(i))), of thirty-five percent (35%) or more of the combined voting power of then outstanding securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); excluding, however, (i) any acquisition by the Company or (ii) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliate;

(b) A majority of the members of the Board is replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the members of the Board before the date of the appointment or election; or

(c) Consummation by the Company of a reorganization, merger, or consolidation or sale of all or substantially all of the assets of the Company (“Transaction”); excluding, however, a Transaction pursuant to which all or substantially all of the individuals or entities who are the beneficial owners, respectively, of the Outstanding Company Voting Securities immediately prior to such Transaction will beneficially own, directly or indirectly, more than fifty percent (50%) of the combined voting power of the outstanding securities of such corporation entitled to vote generally in the election of directors of the corporation resulting from such Transaction (including, without limitation, a corporation which as a result of such Transaction owns the Company or all or substantially all of the Company’s assets either directly or indirectly) in substantially the same proportions relative to each other as their ownership, immediately prior to such Transaction, of the Outstanding Company Voting Securities.

Provided, however, a Change in Control shall not be deemed to occur unless the Transaction also constitutes a change in the ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company, each as defined in Section 409A(a)(2)(A)(v) of the Code and the regulations promulgated thereunder.

 

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1.8 “Change in Control Protection Period” means the period commencing on a Change in Control and ending on the second anniversary thereof.

1.9 “COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended from time to time.

1.10 “Code” means the Internal Revenue Code of 1986, as amended from time to time.

1.11 “Company” means The Aaron’s Company, Inc., its successors and assigns, or, following a Change in Control, the surviving entity resulting from such event.

1.12 “Date of Termination” means the effective date of Executive’s termination of employment with the Company or its Affiliates.

1.13 “Disability” shall be deemed the reason for the termination by the Company of Executive’s employment if Executive, due to physical or mental injury or illness, is unable to perform the essential functions of Executive’s position with or without reasonable accommodation for a period of one hundred eighty (180) days, whether or not consecutive, occurring within any period of twelve (12) consecutive months, subject to any limitation imposed by federal, state or local laws, including, without limitation, the Americans with Disabilities Act. Eligibility for disability benefits under any policy for long-term disability benefits provided to Executive by the Company, or a determination of total disability by the Social Security Administration, shall conclusively establish Executive’s Disability. Any purported termination for Disability that does not follow the notice provisions set forth in Section 1.15 shall be deemed not to be a termination for Disability.

1.14 “Good Reason” means, without Executive’s express written consent, the occurrence of any of the following circumstances:

(a) A material diminution in Executive’s Annual Salary other than as a result of an across-the-board base salary reduction similarly affecting other executives of the Company;

(b) A material diminution in Executive’s authority, duties, or responsibilities;

(c) A material change in the geographic location at which Executive must perform services for the Company or its Affiliates (for this purpose, the relocation of Executive’s principal office location to a location more than fifty (50) miles from its current location will be deemed to be material); or

(d) A material breach of this Agreement by the Company;

provided that any of the events described above shall constitute Good Reason only if (i) Executive provides the Company written notice of the existence of the event or circumstances constituting Good Reason (with sufficient specificity for the Company to respond to such claim) within sixty (60) days of the initial existence of such event or circumstances, (ii) Executive

 

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cooperates in good faith with the Company’s efforts to cure such event or circumstance for a period not less than thirty (30) days following Executive’s notice to the Company (the “Cure Period”), (iii) notwithstanding such efforts, the Company fails to cure such event or circumstances prior to the end of the Cure Period, and (iv) Executive terminates employment with the Company and all Affiliates of the Company within sixty (60) days after the end of the Cure Period.

1.15 “Notice of Termination” means the written notice of termination of Executive’s employment that is communicated in accordance with Section VIII of the Agreement. If the Company terminates Executive for Cause or Disability, the Notice of Termination shall specify in reasonable detail the grounds for the termination for Cause or Disability; provided that Executive’s employment shall terminate immediately upon Executive’s death and a Notice of Termination shall not be required.

1.16 “Section 409A” shall mean Section 409A of the Code and any proposed, temporary or final regulations, or any other guidance, promulgated with respect to such Section 409A by the U.S. Department of Treasury.

1.17 “Target Bonus” means Executive’s annual target bonus under the Company’s or Affiliate’s annual bonus program, as in effect from time to time, in which Executive is covered, if any.

SECTION II

TERM OF AGREEMENT

2.1 This Agreement became effective on the Original Effective Date and shall continue in effect for a three (3) year term (the “Term”). To the extent not previously terminated, the Term shall be automatically renewed for successive one (1) year periods upon the terms and conditions set forth herein, commencing at the end of the initial Term, and on each annual anniversary thereafter, unless either party gives the other party notice at least ninety (90) calendar days prior to the end of such initial or applicable renewal Term that the Term shall not be so extended. For purposes of this Agreement, any reference to the “Term” of this Agreement shall include the original term and any renewal thereof. Notwithstanding the foregoing, upon the execution of a definitive agreement for a Change in Control or the consummation of a Change in Control, the Term shall be automatically extended so that the Term shall continue in full force and effect until the second anniversary of the consummation of the Change in Control. If the definitive agreement for the Change in Control is terminated prior to consummation, the automatic extension described in the previous sentence shall not apply. Executive’s employment with the Company is “at will” and may be terminated by the Company for any reason in its sole and absolute discretion in accordance with any applicable provision of Section III and the payment or provision of such benefits as may be required under this Agreement.

 

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SECTION III

SEVERANCE PAYMENTS AND BENEFITS

3.1 Change in Control Protection Period.

(a) During the Term, if, during a Change in Control Protection Period, (1) the Company shall terminate Executive’s employment other than for Cause, Disability or death, or (2) Executive shall terminate employment for Good Reason, then the Company shall pay or provide the following amounts and benefits to Executive, in addition to the Accrued Obligations:

(i) Severance Payments. On the sixtieth (60th) day following the Date of Termination, Executive will be paid a lump sum payment in an amount equal to two (2) times the sum of (x) Executive’s Annual Salary in effect immediately prior to the Date of Termination or, if higher, immediately prior to the Change in Control, plus (y) Executive’s Target Bonus in effect immediately prior to the Date of Termination or, if higher, immediately prior to the Change in Control.

(ii) Bonus for Year of Termination. On the sixtieth (60th) day following the Date of Termination, Executive will be paid a lump sum cash payment in an amount equal to the product of (x) the average Annual Bonus earned by Executive for the two (2) calendar years immediately preceding the year in which the Date of Termination occurs, and (y) a fraction, the numerator of which is the number of days from January 1 of the year during which the Date of Termination occurs to the Date of Termination and the denominator of which is three hundred and sixty five (365).

(iii) Vacation. On the sixtieth (60th) day following the Date of Termination, Executive will be paid a lump sum cash payment in an amount equal to Executive’s accrued, unused vacation time (if any), to the extent not previously paid.

(iv) COBRA Payments. On the sixtieth (60th) day following the Date of Termination, Executive will be paid a lump sum payment in an amount equal to the product of (x) Executive’s monthly premium amount for health insurance continuation coverage for Executive and Executive’s eligible dependents under COBRA (based on the monthly premium rate for such coverage in effect on the Date of Termination) and (y) twenty four (24).

(v) Stock Options and Other Equity Awards. As of the Date of Termination, any and all outstanding stock options, stock appreciation rights, restricted stock units and other equity based awards granted to Executive under any Company stock plan (including any outstanding equity based award with respect to Company stock that was adjusted or substituted pursuant to the terms of the Employee Matters Agreement) shall become fully vested (to the extent not already then vested) and exercisable or settled, as applicable, to the extent provided under the terms of the applicable Company stock plan and award agreements.

In the event of Executive’s death following the Date of Termination and before all payments or benefits Executive is entitled to receive under this Section 3.1 have been paid, such unpaid amounts will be paid to Executive’s estate in a lump-sum payment within thirty (30) days following Executive’s death.

 

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(b) If (i) Executive is terminated by the Company without Cause, or an event constituting Good Reason occurs, following the public announcement of a definitive agreement that, when consummated, would constitute a Change in Control, and (ii) such Change in Control is consummated, then the termination or event constituting Good Reason will be deemed to occur within the Change in Control Protection Period, and Executive may exercise Executive’s rights under Section 3.1 following the consummation of such Change in Control.

3.2 Outside of Change in Control Protection Period.

(a) If, during the Term, (1) the Company shall terminate Executive’s employment other than for Cause, Disability or death, or (2) Executive shall terminate employment for Good Reason, in either case other than during a Change in Control Protection Period, then the Company shall pay or provide the following amounts and benefits to Executive, in addition to the Accrued Obligations:

(i) Annual Salary and Target Bonus Continuation Payments. Commencing on the Company’s first normal payroll date which is on or immediately follows the sixtieth (60th) day following the Date of Termination, Executive will (x) continue to receive Executive’s Annual Salary in effect immediately prior to the Date of Termination for a period of twenty four (24) months following the Date of Termination, and (y) be paid an amount equal to one-twelfth (1/12th) of the Executive’s Target Bonus in effect on the Date of Termination in each of the twenty four (24) months following the Date of Termination, payable in normal payroll periods, in the same manner as it was paid as of the Date of Termination, and no less frequently than monthly; provided, however, any payments that would otherwise be payable during the period following the Date of Termination until the payment commencement date shall be accumulated without interest and paid on such commencement date.

(ii) Vacation. On the sixtieth (60th) day following the Date of Termination, Executive will be paid a lump sum cash payment in an amount equal to Executive’s accrued, unused vacation time (if any), to the extent not previously paid.

In the event of Executive’s death following the Date of Termination and before all payments or benefits Executive is entitled to receive under this Section 3.2 have been paid, such unpaid amounts will be paid to Executive’s estate in a lump-sum payment within thirty (30) days following Executive’s death.

3.3 Voluntary Resignation without Good Reason. If, during the Term, Executive voluntarily resigns Executive’s employment without Good Reason, Executive will be paid the Accrued Obligations. No additional amounts or benefits shall be payable or provided under this Agreement.

3.4 Termination Due to Disability or Death. If Executive’s employment with the Company is terminated due to Executive’s Disability or death, Executive (or the Executive’s estate, if applicable) will be paid the Accrued Obligations and an additional amount equal to the product of (x) Executive’s Annual Bonus for the year in which the Date of Termination occurs based on actual results, and (y) a fraction, the numerator of which is the number of days from January 1 of the year during which the Date of Termination occurs to the Date of Termination and the denominator of which is three hundred and sixty five (365). The pro rata Annual Bonus, if any, will be paid at the same time such amount would otherwise have been paid to Executive. No additional amounts or benefits shall be payable or provided under this Agreement.

 

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3.5 Release. Notwithstanding anything contained in this Agreement to the contrary, the Company shall not be obligated to provide any benefits to Executive under Section 3.1, 3.2, 3.3 or 3.4 hereof unless: (a) Executive first executes no later than forty-five (45) calendar days after the Date of Termination a general release of the Company and Affiliates and their respective employees, officers and directors in such form as is requested by the Company; (b) Executive does not revoke such general release within seven (7) days after signature; and (c) the release becomes effective and irrevocable in accordance with its terms.

3.6 Exclusive Severance Benefit. Notwithstanding anything contained in this Agreement to the contrary, and except as specifically provided below, any severance payments or benefits received by Executive pursuant to this Agreement shall be in lieu of any benefits under the Executive Severance Pay Plan of The Aaron’s Company, Inc. (as may be in effect from time to time) or any other severance or reduction-in-force plan, program, policy, agreement or other similar arrangement maintained by the Company or an Affiliate from time to time and in lieu of any severance or separation pay benefit that may be required under applicable law; provided, however, the exclusion provided in this Section 3.6 shall not include any equity award agreement, retirement or deferred compensation plan or similar plan or agreement which may provide benefits upon the termination of Executive’s employment. Executive shall not be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under this Agreement.

3.7 Tax Withholding. The Company shall deduct from payments to be paid to Executive or any beneficiary all federal, state and local withholding and other taxes and charges required to be deducted under applicable law.

3.8 Coordination with WARN Act. To the extent that the Company determines that Executive’s termination may be subject to the Worker Adjustment and Retraining Notification Act or any other similar federal, state or local law regarding mass employment separations (collectively, “WARN Act”), notwithstanding any other provision of this Agreement, the Company shall endeavor to comply with the WARN Act, to the extent applicable, by giving notice of the termination (“WARN Act Notice”) at least sixty (60) days in advance of the termination date. The period between the WARN Act Notice date and the termination date is hereinafter referred to as “WARN Act Notice Period”. The Company’s determination that Executive may be subject to the WARN Act and/or any corresponding actions taken or statements made are not an admission or indication that any WARN Act or WARN Act obligations are applicable, triggered, invoked or owed and do not waive or otherwise hinder the Company’s ability to argue the WARN Act does not apply or to take other similar positions.

The Company may excuse Executive from work during all or part of the WARN Act Notice Period and provide Executive with a payment or payments intended to satisfy all or part of any potential WARN Act obligations, including those during the WARN Act Notice Period. If this occurs, any payments or benefits under this Agreement shall be reduced and offset by and may be coordinated with any payment(s) Executive receives during the WARN Act Notice Period. After any reduction and offset, the Company will provide the remaining benefits (subject to the release requirement described in Section 3.5) to Executive.

 

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If Executive is not excused from work following the WARN Act Notice date, the regular salary or wages paid to Executive during the WARN Act Notice Period will constitute Executive’s usual compensation and not a benefit under this Agreement.

3.9 No Duplication. In no event shall payments and benefits provided in accordance with this Agreement be made in respect of more than one of Section 3.1, 3.2, 3.3 or 3.4.

SECTION IV

TAX INFORMATION

4.1 Section 280G Parachute Payments. Notwithstanding any provision of this Agreement to the contrary, if any payment or benefit to be paid or provided hereunder would be a “Parachute Payment,” within the meaning of Section 280G of the Code, or any successor provision thereto, but for the application of this sentence, then the payments and benefits to be paid or provided hereunder shall be reduced to the minimum extent necessary (but in no event to less than zero) so that no portion of any such payment or benefit, as so reduced, constitutes a Parachute Payment; provided, however, that the foregoing reduction shall not be made if the total of the unreduced aggregate payments and benefits to be provided to Executive, determined on an after-tax basis (taking into account the excise tax imposed pursuant to Section 4999 of the Code, or any successor provision thereto, any tax imposed by any comparable provision of state law, and any applicable federal, state and local income taxes), exceeds by at least ten percent (10%) the total after-tax amount of such aggregate payments and benefits after application of the foregoing reduction. The determination of whether any reduction in such payments or benefits to be provided hereunder is required pursuant to the preceding sentence shall be made at the expense of the Company, if requested by Executive or the Company, by the Company’s independent accountants. The fact that Executive’s right to payments or benefits may be reduced by reason of the limitations contained in this Section 4.1 shall not of itself limit or otherwise affect any other rights of Executive under this Agreement. In the event that any payment or benefit intended to be provided hereunder is required to be reduced pursuant to this Section 4.1 and no such payment or benefit qualifies as a “deferral of compensation” within the meaning of and subject to Section 409A (“Nonqualified Deferred Compensation”), Executive shall be entitled to designate the payments and/or benefits to be so reduced in order to give effect to this Section 4.1. The Company shall provide Executive with all information reasonably requested by Executive to permit Executive to make such designation. In the event that any payment or benefit intended to be provided hereunder is required to be reduced pursuant to this Section 4.1 and any such payment or benefit constitutes Nonqualified Deferred Compensation or Executive fails to elect an order in which payments or benefits will be reduced pursuant to this Section 4.1, then the reduction shall occur in the following order: (a) reduction of cash payments described in Sections 3.1 and 3.2 (with such reduction being applied to the payments in the reverse order in which they would otherwise be made, that is, later payments shall be reduced before earlier payments); (b) cancellation of acceleration of vesting on any equity awards for which the exercise price exceeds the then fair market value of the underlying equity; and (c) cancellation of acceleration of vesting of equity awards not covered under (b) above. Within any category of payments and benefits (that is, (a), (b) or (c)), a reduction shall occur first with respect to amounts that are not Nonqualified Deferred Compensation within the meaning of Section 409A and then with respect to amounts that are. In the event that acceleration of vesting of equity awards is to be cancelled, such acceleration of vesting shall be cancelled in the reverse order of the date of grant of such equity awards, that is, later equity awards shall be canceled before earlier equity awards.

 

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4.2 Section 409A.

(a) Section 409A imposes payment restrictions on Nonqualified Deferred Compensation (potentially including payments owed to Executive upon termination of employment). Failure to comply with these restrictions could result in negative tax consequences to Executive. It is the Company’s intent that this Agreement be exempt from the application of, or otherwise comply with, the requirements of Section 409A. Specifically, any taxable benefits or payments provided under this Agreement are intended to be separate payments that qualify for the “short-term deferral” exception to Section 409A to the maximum extent possible and, to the extent they do not so qualify, are intended to qualify for the separation pay exceptions to Section 409A to the maximum extent possible. To the extent that none of these exceptions applies, and to the extent that the Company determines it is necessary to comply with Section 409A (e.g., if Executive is a “specified employee” within the meaning of Section 409A), then notwithstanding any provision in this Agreement to the contrary, all amounts that would otherwise be paid or provided to Executive during the first six months following the Date of Termination shall instead be accumulated through and paid or provided (without interest) on the first business day that is more than six (6) months after Executive’s separation from service.

(b) A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits subject to Section 409A upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Section 409A and Executive is no longer providing services (at a level that would preclude the occurrence of a “separation from service” within the meaning of Section 409A) to the Company or its Affiliates as an employee or consultant, and for purposes of any such provision of this Agreement, references to the “Date of Termination,” a “termination,” “termination of employment” or like terms shall mean “separation from service” within the meaning of Section 409A.

(c) Whenever a payment under this Agreement specifies a payment period with reference to a number of days, the actual date of payment within the specified period shall be within the sole discretion of the Company. In the event the payment period under this Agreement for any nonqualified deferred compensation commences in one calendar year and ends in a second calendar year, the payments shall not be paid (or installments commenced) until the later of the first payroll date of the second calendar year, or the date that the release described in Section 3.5 becomes effective and irrevocable, to the extent necessary to comply with Section 409A. For purposes of Section 409A, Executive’s right to receive installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments.

(d) Although the Company will use its best efforts to avoid the imposition of taxation, interest and penalties under Section 409A, the tax treatment of the benefits provided under this Agreement is not warranted or guaranteed. Neither the Company, its Affiliates nor their respective directors, officers, employees or advisers shall be held liable for any taxes, interest, penalties or other monetary amounts owed by Executive (or any other individual claiming a benefit through Executive) as a result of this Agreement.

 

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SECTION V

RESTRICTIVE COVENANTS

5.1 Executive acknowledges and agrees that the restrictions set forth in this Section V are reasonable and necessary to protect the legitimate business interests of the Company, and they will not impair or infringe upon Executive’s right to work or earn a living when Executive’s employment with the Company ends for any reason, and (i) Executive (1) served the Company as a Key Employee; and/or (2) served the Company as a Professional; and/or (3) customarily and regularly solicited Customers and/or Prospective Customers for the Company; and/or (4) customarily and regularly engaged in making sales or obtaining orders or contracts for products or services to be provided or performed by others in the Company; and/or (5) (A) had a primary duty of managing a department or subdivision of the Company, (B) customarily and regularly directed the work of two or more other employees, and (C) had the authority to hire or fire other employees; and/or (ii) Executive’s position was a position of trust and responsibility with access to (1) Confidential Information, (2) Trade Secrets, (3) information concerning Employees of the Company, (4) information concerning Customers of the Company, and/or (5) information concerning Prospective Customers of the Company.

(a) Trade Secrets and Confidential Information. Executive shall not: (i) use, disclose, reverse engineer, divulge, sell, exchange, furnish, give away, or transfer in any way the Trade Secrets or the Confidential Information for any purpose other than the Company’s Business, except as authorized in writing by the Company; (ii) retain any Trade Secrets or Confidential Information, including any copies existing in any form (including electronic form) that are in Executive’s possession or control; or (iii) destroy, delete, or alter the Trade Secrets or Confidential Information without the Company’s prior written consent. The obligations under this subsection shall: (1) with regard to the Trade Secrets, remain in effect as long as the information constitutes a trade secret under applicable law; and (2) with regard to the Confidential Information, remain in effect for so long as such information constitutes Confidential Information as defined in this Agreement. The confidentiality, property, and proprietary rights protections set forth in this Agreement are in addition to, and not exclusive of, any and all other rights to which the Company is entitled under federal and state law, including, but not limited to, rights provided under copyright laws, trade secret and confidential information laws, and laws concerning fiduciary duties.

(b) Defend Trade Secrets Act. Notwithstanding anything to the contrary set forth in this Agreement, pursuant to the Defend Trade Secrets Act of 2016 (18 U.S.C. § 1833(b)(1)), no individual shall be held criminally or civilly liable under federal or state law for the disclosure of a trade secret that: (1) is made (x) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (y) solely for the purpose of reporting or investigating a suspected violation of law; or (2) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

 

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(c) Non-Solicitation of Customers. During the Restricted Period, Executive shall not, directly or indirectly, solicit any Customer of the Company for the purpose of selling or providing any products or services competitive with the Business. The restrictions set forth in this subsection shall apply only to those Customers (a) with whom or which Executive dealt on behalf of the Company, (b) whose dealings with the Company were coordinated or supervised by Executive, (c) about whom Executive obtained Confidential Information in the ordinary course of business as a result of Executive’s association with the Company, or (d) who received products or services authorized by the Company, the sale or provision of which resulted in compensation, commissions, or earnings for Executive within two (2) years prior to the Date of Termination.

(d) Non-Solicitation of Prospective Customers. During the Restricted Period, Executive shall not, directly or indirectly, solicit any Prospective Customer of the Company for the purpose of selling or providing any products or services competitive with the Business. The restrictions set forth in this subsection shall apply only to those Prospective Customers (i) with whom or which Executive dealt on behalf of the Company, (ii) whose dealings with the Company were coordinated or supervised by Executive, or (iii) about whom Executive obtained Confidential Information in the ordinary course of business as a result of Executive’s association with the Company.

(e) Non-Recruit of Employees. During the Restricted Period, Executive shall not, directly or indirectly, solicit, recruit, or induce any Employee to (i) terminate his or her employment relationship with the Company, or (ii) work for any other person or entity engaged in the Business. For the avoidance of doubt, the foregoing restriction shall prohibit Executive from disclosing to any third party the names, background information, or qualifications of any Employee, or otherwise identifying any Employee as a potential candidate for employment. The restrictions set forth in this subsection shall apply only to Employees (1) with whom Executive had Material Interaction, or (2) Executive, directly or indirectly, supervised.

(f) Non-Competition. During the Restricted Period, Executive shall not, on Executive’s own behalf or on behalf of any person or entity, engage in the Business within the Territory; provided, however, that Executive may work for a competitor within the Territory and during the Restricted Period if Executive first obtains express written permission from the Company’s Chief Executive Officer or the Board. For purposes of this subsection, the term “engage in the Business” shall include: (i) performing or participating in any activities which are the same as, or substantially similar to, activities which Executive performed or in which Executive participated, in whole or in part, for or on behalf of the Company; (ii) performing activities or services about which Executive obtained Confidential Information or Trade Secrets as a result of Executive’s association with the Company; and/or (iii) interfering with or negatively impacting the business relationship between the Company and a Customer, Prospective Customer, or any other third party about whom Executive obtained Confidential Information or Trade Secrets as a result of Executive’s association with the Company.

(g) Definitions. For purposes of this Section V only, the capitalized terms shall be defined as follows:

 

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(i) “Business” means (x) those activities, products, and services that are the same as or similar to the activities conducted and products and services offered and/or provided by the Company or its affiliates within two (2) years prior to the Date of Termination, and (y) (1) renting, leasing, and/or selling new or reconditioned residential furniture, consumer electronics, computers (including hardware, software, and accessories), appliances, household goods, and home furnishings; provided, however, that for the purposes of this Agreement the Business shall not include selling new goods or merchandise by Executive or on behalf of or as an employee of any entity or individual that has no involvement in rental, leasing, rent-to-own, or similar activity related to such goods or merchandise either on its own, through a subsidiary or affiliated entity or person, or in partnership with any other entity or person, (2) designing, manufacturing, and/or reconditioning of residential furniture of a type especially suited to the leasing, rental, and sales business, and (3) providing any other activities, products, or services of the type conducted, authorized, offered, or provided by the Company or its affiliates as of the Date of Termination, or during the two (2) year period immediately prior to the Date of Termination.

Companies engaged in the Business include, but are not limited to the following entities and each of their parents, owners, subsidiaries, affiliates, franchisees, assigns, or successors in interest or persons with any of the listed Companies or trade names below, which Executive acknowledges and agrees directly compete with the Company: AcceptanceNow; American First Finance, Inc.; American Rental; Bi-Rite Co., d/b/a Buddy’s Home Furnishings; Bestway Rental, Inc.; Better Finance, Inc.; billfloat; Bluestem Brands, Inc.; Conn’s, Inc.; Crest Financial; Curacao Finance; Discovery Rentals; Easyhome, Inc.; Flexi Compras Corp.; FlexShopper LLC; Fortiva Financial, LLC; Genesis Financial Solutions, Inc.; Lendmark Financial Services, Inc.; Mariner Finance, LLC; Merchants Preferred Lease-Purchase Services; New Avenues, LLC; Okinus; Premier Rental-Purchase, Inc.; Progressive Leasing, LLC (including but not limited to any of its subsidiaries or parent companies); OneMain Financial Holdings, Inc.; Purchasing Power, LLC; Regional Management Corp.; Rent-A-Center, Inc. (including, but not limited to, Colortyme); Santander Consumer USA Inc.; SmartPay Leasing, Inc.; Springleaf Financial and the franchisees of Springleaf Financial; TEMPOE; Tidewater Finance Company; and WhyNotLeaseIt, and/or (ii) the franchisees of the Company.

(ii) “Confidential Information” means: (1) information of the Company or its affiliates, to the extent not considered a Trade Secret under applicable law, that: (A) relates to the business of the Company, (B) was disclosed to Executive or of which Executive became aware of as a consequence of Executive’s relationship with the Company, (C) possesses an element of value to the Company, and (D) is not generally known to the Company’s competitors, and (2) information of any third party provided to the Company which the Company is obligated to treat as confidential, including, but not limited to, information provided to the Company by its licensors, suppliers or customers. Confidential Information includes, but is not limited to: (I) methods of operation; (II) price lists; (III) financial information and projections; (IV) personnel data; (V) future business plans; (VI) the composition, description, schematic or design of products, future products or equipment of the Company or any third party; (VII) advertising or marketing plans; (VIII) information regarding independent contractors, employees, clients, licensors, suppliers, Customers, Prospective Customers or any third party, including, but not limited to, the names of Customers and Prospective Customers, Customer and Prospective Customer lists compiled by the Company, and Customer and

 

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Prospective Customer information compiled by the Company; and (IX) personal information concerning owners and members of the Company. Confidential Information shall not include any information that: (x) is or becomes generally available to the public other than as a result of an unauthorized disclosure, (y) has been independently developed and disclosed by others without violating this Agreement or the legal rights of any party, or (z) otherwise enters the public domain through lawful means.

(iii) “Customer” means any person or entity to which the Company has sold its products or services.

(iv) “Employee” means any person who (1) is employed by the Company on the Date of Termination, or (2) was employed by the Company during the last year of Executive’s employment with the Company.

(v) “Key Employee” means that, by reason of the Company’s investment of time, training, money, trust, exposure to the public, or exposure to Customers, vendors, or other business relationships during the course of Executive’s employment with the Company, Executive will gain a high level of notoriety, fame, reputation, or public persona as the Company’s representative or spokesperson, or will gain a high level of influence or credibility with the Company’s Customers, vendors, or other business relationships, or will be intimately involved in the planning for or direction of the business of the Company or a defined unit of the business of the Company. Such term also means that Executive will possess selective or specialized skills, learning, or abilities or customer contacts or customer information by reason of having worked for the Company.

(vi) “Material Interaction” means any interaction with an Employee which related, directly or indirectly, to the performance of Executive’s duties or the Employee’s duties for the Company.

(vii) “Professional” means an employee who has a primary duty the performance of work requiring knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction or requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor. Such term shall not include employees performing technician work using knowledge acquired through on-the-job and classroom training, rather than by acquiring the knowledge through prolonged academic study, such as might be performed, without limitation, by a mechanic, a manual laborer, or a ministerial employee.

(viii) “Prospective Customer” means any person or entity to which the Company has solicited to purchase the Company’s products or services.

(ix) “Restricted Period” means twenty-four (24) months after the Date of Termination.

(x) “Territory” means within each of the following discrete, severable, geographic areas:

 

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(A) any state or province in which Executive performed services for or on behalf of the Company during the last two (2) years of Executive’s employment with the Company (or during Executive’s employment if employed less than two (2) years); and/or if this subclause or any portion thereof is found to be unenforceable;

(B) the United States of America (including the following states: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming, as well as the District of Columbia) and Canada (including the following provinces: Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island, Quebec, and Saskatchewan; and/or if this subclause or any portion thereof is found to be unenforceable;

(C) Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wyoming, the District of Columbia, Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island, Quebec, and Saskatchewan; and/or if this subclause or any portion thereof is found to be unenforceable;

(D) the state of Georgia; and/or if this subclause or any portion thereof is found to be unenforceable;

(E) the Metropolitan Statistical Area of Atlanta-Sandy Springs-Roswell, Georgia as designated by the Office of Management and Budget and used by the U.S. Census Bureau in its most recent census as of the Date of Termination; and/or if this clause of any portion thereof is found to be unenforceable;

(F) the counties of Fulton, Gwinnett, Cobb, Dekalb, Clayton, Cherokee, Henry, Forsyth, Paulding, Douglas, Coweta, Carroll, Fayette, Newton, Barton, Rockdale, Walton, Barrow, Spalding, Pickens, Haralson, Butts, Dawson, Meriwether, Lamar, Morgan, Pile, Jasper, and Heard, Georgia; and/or if this subclause or any portion thereof is found to be unenforceable;

(G) the city of Atlanta, Georgia; and/or if this subclause or any portion thereof is found to be unenforceable; then

(H) a fifteen (15) air mile radius of 400 Galleria Parkway SE, Suite 300, Atlanta, Georgia 30339.

 

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The Company and Executive acknowledge and agree that the Territory described above (x) represents a good faith estimate of the geographic areas that are applicable at the time of termination of Executive’s employment; (y) shall be construed ultimately to cover only so much of such estimate as relates to the geographic areas actually involved within a reasonable period of time prior to Executive’s termination; and (z) is drafted in such a way that a court may modify the definition and grant only the relief reasonably necessary to protect such legitimate business interests.

(xi) “Trade Secrets” means information of the Company, and its licensors, suppliers, clients, and customers, without regard to form, including, but not limited to, technical or nontechnical data, a formula, a pattern, a compilation, a program, a device, a method, a technique, a drawing, a process, financial data, financial plans, product plans, a list of actual customers, clients, licensors, or suppliers, or a list of potential customers, clients, licensors, or suppliers which is not commonly known by or available to the public and which information (i) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

5.2 Injunctive Relief. If Executive breaches or threatens to breach any portion of this Agreement, Executive agrees that: (a) the Company would suffer irreparable harm; (b) it would be difficult to determine damages, and money damages alone would be an inadequate remedy for the injuries suffered by the Company; and (c) if the Company seeks injunctive relief to enforce this Agreement, Executive shall waive and shall not (i) assert any defense that the Company has an adequate remedy at law with respect to the breach, (ii) require that the Company submit proof of the economic value of any Trade Secret or Confidential Information, or (iii) require the Company to post a bond or any other security. Nothing contained in this Agreement shall limit the Company’s right to any other remedies at law or in equity.

5.3 Independent Enforcement. Each of the covenants set forth in Section 5.1 above shall be construed as an agreement independent of (a) each of the other covenants set forth in Section 5.1, (b) any other agreements, or (c) any other provision in this Agreement, and the existence of any claim or cause of action by Executive against the Company, whether predicated on this Agreement or otherwise, regardless of who was at fault and regardless of any claims that either Executive or the Company may have against the other, shall not constitute a defense to the enforcement by the Company of any of the covenants set forth in Section 5.1 above. The Company shall not be barred from enforcing any of the covenants set forth in Section 5.1 above by reason of any breach of (i) any other part of this Agreement, or (ii) any other agreement with Executive.

5.4 Protected Rights. Nothing contained in this Agreement limits Executive’s ability to file a charge or complaint with the Equal Employment Opportunity Commission or any other federal, state or local governmental agency or commission (collectively, “Government Agencies”), or prevents Executive from providing truthful testimony in response to a lawfully issued subpoena or court order. Further, this Agreement does not limit Executive’s ability to communicate with any Government Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information, without notice to the Company.

 

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5.5 Survival of Restrictive Covenants. Upon termination of Executive’s employment for any reason whatsoever (whether voluntary on the part of Executive, for Cause, or other reasons), the obligations of Executive pursuant to Section V shall survive and remain in effect for the periods described herein.

SECTION VI

DISPUTES

6.1 Arbitration.

(a) Rules; Jurisdiction. Any controversy, dispute or claim between the parties, including any controversy, dispute or claim arising out of, relating to or concerning this Agreement, the breach of this Agreement, the employment of Executive, or the termination of Executive’s employment (a “Disputed Matter”) will be resolved pursuant to this Section VI. Any such controversy, dispute or claim will be settled in Atlanta, Georgia, in accordance with the applicable rules of the American Arbitration Association (the “AAA”) then in effect; provided, however, that a breach of the obligations under Section V may be enforced by an action for injunctive relief and damages in a court of competent jurisdiction. If the rules of the AAA differ from any provisions of this Agreement, the provisions of this Agreement will control.

(b) Terms of Arbitration. The arbitrator chosen in accordance with these provisions shall not have the power to alter, amend or otherwise affect the terms of these arbitration provisions or the provisions of this Agreement except as otherwise expressly provided herein.

(c) Binding Effect. The arbitrator will have the authority to grant only such equitable and legal remedies that would be available in any judicial proceeding instituted to resolve a Disputed Matter, and the decision of the arbitrator within the scope of the submission will be final and conclusive upon the parties. Judgment upon any award rendered by the arbitrator may be entered in any court having subject matter jurisdiction to render such judgment. In the event any provision of this Section VI is found to be unenforceable for any reason by a court or an arbitrator, the court or arbitrator, as the case may be, shall reform this Section VI to the extent necessary to render it enforceable.

(d) Time for Arbitration. Any demand for arbitration involving an alleged breach of this Agreement shall be filed within one (1) year of the date the claim became known or should have become known; provided, however, any claim involving an alleged statutory obligation may be filed with the AAA and served on the other party at any time within the period covered by the applicable statute of limitations.

(e) Payment of Costs. To the extent permitted by applicable law, each party hereby agrees to pay one half the arbitrator’s fees, the costs of transcripts and all other expenses of the arbitration proceedings; provided, however, that the arbitrator shall have the authority to determine payment of costs as part of the award or to allocate costs in accordance with the AAA rules.

 

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(f) Burden of Proof; Basis of Decision. For any claim submitted to arbitration, the burden of proof shall be as it would be if the claim were litigated in a judicial proceeding except where otherwise specifically provided in this Agreement, and the decision shall be based on the application of the law of the State of Georgia (as determined from statutes, court decisions and other recognized authorities) to the facts found by the arbitrator.

SECTION VII

SUCCESSORS

7.1 In addition to any obligations imposed by law upon any successor to the Company, the Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. The provisions of this Section VII shall continue to apply to each subsequent employer of Executive bound by this Agreement in the event of any merger, consolidation or transfer of all or substantially all of the business or assets of that subsequent employer.

7.2 This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

SECTION VIII

NOTICES

8.1 For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by (a) United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon actual receipt; or (b) personal delivery to the Chief Executive Officer:

To the Company:

The Aaron’s Company, Inc.

400 Galleria Parkway SE, Suite 300

Atlanta, Georgia 30339

Attention: Chief Executive Officer

Copy to (which shall not constitute notice):

The Aaron’s Company, Inc.

400 Galleria Parkway SE, Suite 300

Atlanta, Georgia 30339

Attention: General Counsel

 

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To Executive: At Executive’s most recent mailing address in the records of the Company, or at Executive’s employee email address (during employment)

SECTION IX

MISCELLANEOUS

9.1 Any compensation paid or payable to Executive pursuant to this Agreement which is subject to recovery under any law, government regulation, order or stock exchange listing requirement, will be subject to such deductions and clawback (recovery) as may be required to be made pursuant to law, government regulation, order, stock exchange listing requirement (or any policy of the Company adopted from time to time). Executive specifically authorizes the Company to withhold from future salary or wages any amounts that may become due under this provision. This Section 9.1 shall survive the termination of this Agreement for a period of three (3) years.

9.2 This Agreement embodies the entire agreement of the Company and Executive relating to separation or severance pay and, except as specifically provided herein, no provisions of any employee manual, personnel policies, corporate directives or other agreement or document shall be deemed to modify the terms of this Agreement. Except as otherwise provided in Section 5.1, no amendment or modification of this Agreement shall be valid or binding upon Executive or the Company unless made in writing and signed by the Company and Executive. This Agreement supersedes all prior understandings and agreements addressing severance or separation pay to which Executive and the Company or an Affiliate are or were parties, including any previous change in control agreement, severance plan, offer letter provisions, or other employment agreements.

9.3 No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.

9.4 No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement.

9.5 The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

9.6 The Agreement shall be construed, administered and governed in all respects under and by the applicable laws of the State of Georgia.

9.7 This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

[Signature page follows. Remainder of page left intentionally blank.]

 

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IN WITNESS WHEREOF, the parties have signed this Agreement to be effective as of the Effective Date.

 

THE AARON’S COMPANY, INC.
By:  

/s/ C. Kelly Wall

  Name: C. Kelly Wall
  Title: Chief Financial Officer
EXECUTIVE

/s/ Douglas A. Lindsay

Douglas A. Lindsay

 

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Exhibit 10.11

EXECUTION VERSION

AMENDED AND RESTATED SEVERANCE AND

CHANGE-IN-CONTROL AGREEMENT

THIS AMENDED AND RESTATED SEVERANCE AND CHANGE-IN-CONTROL AGREEMENT (this “Agreement”), dated as of November 30, 2020 (the “Effective Date”), is made by and between The Aaron’s Company, Inc., a corporation organized under the laws of the State of Georgia (the “Company”) and Kelly Wall (“Executive”).

WHEREAS, the Executive previously entered into a Severance and Change-in-Control Agreement (“Prior Agreement”) with Aaron’s, Inc., dated August 3, 2020 (“Original Effective Date”);

WHEREAS, in connection with the spin-off of the Company from Aaron’s Holdings Company, Inc. (“Holdings”), effective November 30, 2020 (the “Spin-Off”), the Company assumed the Prior Agreement pursuant to the terms of the Employee Matters Agreement entered into between the Company and Holdings in connection with the Spin-Off; and

WHEREAS, the Company and the Executive desire to amend and restate the Prior Agreement to reflect the Spin-Off.

NOW, THEREFORE, in consideration of the promises, agreements and conditions contained in this Agreement, the Company and Executive agree as follows:

SECTION I

DEFINITIONS

For the purposes of this Agreement the following definitions shall apply:

1.1 “Accrued Obligations” means the sum of (a) Executive’s Annual Salary through the Date of Termination to the extent not already paid, and (b) Executive’s business expenses that are reimbursable in accordance with the Company’s policies and for which Executive submits for reimbursement within thirty (30) calendar days following the Date of Termination, but have not been reimbursed by the Company as of the Date of Termination.

1.2 “Affiliate” means any entity controlled by, controlling, or under common control with, the Company.

1.3 “Annual Bonus” means Executive’s annual bonus under the Company’s or Affiliate’s annual bonus program, as in effect from time to time, in which Executive is covered, if any.

1.4 “Annual Salary” means Executive’s annual base salary, exclusive of any bonus pay, commissions or other additional compensation, in effect on the Date of Termination.

1.5 “Board” means the Board of Directors of the Company.

1.6 “Cause” means:

 


(a) the commission by Executive of an act of fraud, embezzlement, theft or proven dishonesty, or any other illegal act or practice (whether or not resulting in criminal prosecution or conviction);

(b) the willful engaging by Executive in misconduct which is deemed by the Board, in good faith, to be materially injurious to the Company or an Affiliate, monetarily or otherwise; or

(c) the willful and continued failure or habitual neglect by Executive to perform Executive’s duties with the Company or an Affiliate substantially in accordance with the operating and personnel policies and procedures of the Company or Affiliate generally applicable to all of their respective employees.

No act or failure to act by Executive shall be deemed to be “willful” unless done or omitted to be done by Executive not in good faith and without reasonable belief that Executive’s action or omission was in the best interest of the Company and/or an Affiliate. “Cause” under (a), (b) or (c) shall be determined by the Board in its sole discretion.

1.7 “Change in Control” means:

(a) The acquisition (other than from the Company) by any person of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended (but without regard to any time period specified in Rule 13d-3(d)(l)(i))), of thirty-five percent (35%) or more of the combined voting power of then outstanding securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); excluding, however, (i) any acquisition by the Company or (ii) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliate;

(b) A majority of the members of the Board is replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the members of the Board before the date of the appointment or election; or

(c) Consummation by the Company of a reorganization, merger, or consolidation or sale of all or substantially all of the assets of the Company (“Transaction”); excluding, however, a Transaction pursuant to which all or substantially all of the individuals or entities who are the beneficial owners, respectively, of the Outstanding Company Voting Securities immediately prior to such Transaction will beneficially own, directly or indirectly, more than fifty percent (50%) of the combined voting power of the outstanding securities of such corporation entitled to vote generally in the election of directors of the corporation resulting from such Transaction (including, without limitation, a corporation which as a result of such Transaction owns the Company or all or substantially all of the Company’s assets either directly or indirectly) in substantially the same proportions relative to each other as their ownership, immediately prior to such Transaction, of the Outstanding Company Voting Securities.

 

 

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Provided, however, a Change in Control shall not be deemed to occur unless the Transaction also constitutes a change in the ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company, each as defined in Section 409A(a)(2)(A)(v) of the Code and the regulations promulgated thereunder.

1.8 “Change in Control Protection Period” means the period commencing on a Change in Control and ending on the second anniversary thereof.

1.9 “COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended from time to time.

1.10 “Code” means the Internal Revenue Code of 1986, as amended from time to time.

1.11 “Company” means The Aaron’s Company, Inc., its successors and assigns, or, following a Change in Control, the surviving entity resulting from such event.

1.12 “Date of Termination” means the effective date of Executive’s termination of employment with the Company or its Affiliates.

1.13 “Disability” shall be deemed the reason for the termination by the Company of Executive’s employment if Executive, due to physical or mental injury or illness, is unable to perform the essential functions of Executive’s position with or without reasonable accommodation for a period of one hundred eighty (180) days, whether or not consecutive, occurring within any period of twelve (12) consecutive months, subject to any limitation imposed by federal, state or local laws, including, without limitation, the Americans with Disabilities Act. Eligibility for disability benefits under any policy for long-term disability benefits provided to Executive by the Company, or a determination of total disability by the Social Security Administration, shall conclusively establish Executive’s Disability. Any purported termination for Disability that does not follow the notice provisions set forth in Section 1.15 shall be deemed not to be a termination for Disability.

1.14 “Good Reason” means, without Executive’s express written consent, the occurrence of any of the following circumstances:

(a) A material diminution in Executive’s Annual Salary other than as a result of an across-the-board base salary reduction similarly affecting other executives of the Company;

(b) A material diminution in Executive’s authority, duties, or responsibilities;

(c) A material change in the geographic location at which Executive must perform services for the Company or its Affiliates (for this purpose, the relocation of Executive’s principal office location to a location more than fifty (50) miles from its current location will be deemed to be material); or

(d) A material breach of this Agreement by the Company;

provided that any of the events described above shall constitute Good Reason only if (i) Executive provides the Company written notice of the existence of the event or circumstances constituting Good Reason (with sufficient specificity for the Company to respond to such claim) within sixty (60) days of the initial existence of such event or circumstances, (ii) Executive

 

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cooperates in good faith with the Company’s efforts to cure such event or circumstance for a period not less than thirty (30) days following Executive’s notice to the Company (the “Cure Period”), (iii) notwithstanding such efforts, the Company fails to cure such event or circumstances prior to the end of the Cure Period, and (iv) Executive terminates employment with the Company and all Affiliates of the Company within sixty (60) days after the end of the Cure Period.

1.15 “Notice of Termination” means the written notice of termination of Executive’s employment that is communicated in accordance with Section VIII of the Agreement. If the Company terminates Executive for Cause or Disability, the Notice of Termination shall specify in reasonable detail the grounds for the termination for Cause or Disability; provided that Executive’s employment shall terminate immediately upon Executive’s death and a Notice of Termination shall not be required.

1.16 “Section 409A” shall mean Section 409A of the Code and any proposed, temporary or final regulations, or any other guidance, promulgated with respect to such Section 409A by the U.S. Department of Treasury.

1.17 “Target Bonus” means Executive’s annual target bonus under the Company’s or Affiliate’s annual bonus program, as in effect from time to time, in which Executive is covered, if any.

SECTION II

TERM OF AGREEMENT

2.1 This Agreement became effective on the Original Effective Date and shall continue in effect for a three (3) year term (the “Term”). To the extent not previously terminated, the Term shall be automatically renewed for successive one (1) year periods upon the terms and conditions set forth herein, commencing at the end of the initial Term, and on each annual anniversary thereafter, unless either party gives the other party notice at least ninety (90) calendar days prior to the end of such initial or applicable renewal Term that the Term shall not be so extended. For purposes of this Agreement, any reference to the “Term” of this Agreement shall include the original term and any renewal thereof. Notwithstanding the foregoing, upon the execution of a definitive agreement for a Change in Control or the consummation of a Change in Control, the Term shall be automatically extended so that the Term shall continue in full force and effect until the second anniversary of the consummation of the Change in Control. If the definitive agreement for the Change in Control is terminated prior to consummation, the automatic extension described in the previous sentence shall not apply. Executive’s employment with the Company is “at will” and may be terminated by the Company for any reason in its sole and absolute discretion in accordance with any applicable provision of Section III and the payment or provision of such benefits as may be required under this Agreement.

 

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SECTION III

SEVERANCE PAYMENTS AND BENEFITS

3.1 Change in Control Protection Period.

(a) During the Term, if, during a Change in Control Protection Period, (1) the Company shall terminate Executive’s employment other than for Cause, Disability or death, or (2) Executive shall terminate employment for Good Reason, then the Company shall pay or provide the following amounts and benefits to Executive, in addition to the Accrued Obligations:

(i) Severance Payments. On the sixtieth (60th) day following the Date of Termination, Executive will be paid a lump sum payment in an amount equal to two (2) times the sum of (x) Executive’s Annual Salary in effect immediately prior to the Date of Termination or, if higher, immediately prior to the Change in Control, plus (y) Executive’s Target Bonus in effect immediately prior to the Date of Termination or, if higher, immediately prior to the Change in Control.

(ii) Bonus for Year of Termination. On the sixtieth (60th) day following the Date of Termination, Executive will be paid a lump sum cash payment in an amount equal to the product of (x) the average Annual Bonus earned by Executive for the two (2) calendar years immediately preceding the year in which the Date of Termination occurs, and (y) a fraction, the numerator of which is the number of days from January 1 of the year during which the Date of Termination occurs to the Date of Termination and the denominator of which is three hundred and sixty five (365).

(iii) Vacation. On the sixtieth (60th) day following the Date of Termination, Executive will be paid a lump sum cash payment in an amount equal to Executive’s accrued, unused vacation time (if any), to the extent not previously paid.

(iv) COBRA Payments. On the sixtieth (60th) day following the Date of Termination, Executive will be paid a lump sum payment in an amount equal to the product of (x) Executive’s monthly premium amount for health insurance continuation coverage for Executive and Executive’s eligible dependents under COBRA (based on the monthly premium rate for such coverage in effect on the Date of Termination) and (y) twenty four (24).

(v) Stock Options and Other Equity Awards. As of the Date of Termination, any and all outstanding stock options, stock appreciation rights, restricted stock units and other equity based awards granted to Executive under any Company stock plan (including any outstanding equity based award with respect to Company stock that was adjusted or substituted pursuant to the terms of the Employee Matters Agreement) shall become fully vested (to the extent not already then vested) and exercisable or settled, as applicable, to the extent provided under the terms of the applicable Company stock plan and award agreements.

In the event of Executive’s death following the Date of Termination and before all payments or benefits Executive is entitled to receive under this Section 3.1 have been paid, such unpaid amounts will be paid to Executive’s estate in a lump-sum payment within thirty (30) days following Executive’s death.

 

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(b) If (i) Executive is terminated by the Company without Cause, or an event constituting Good Reason occurs, following the public announcement of a definitive agreement that, when consummated, would constitute a Change in Control, and (ii) such Change in Control is consummated, then the termination or event constituting Good Reason will be deemed to occur within the Change in Control Protection Period, and Executive may exercise Executive’s rights under Section 3.1 following the consummation of such Change in Control.

3.2 Outside of Change in Control Protection Period.

(a) If, during the Term, (1) the Company shall terminate Executive’s employment other than for Cause, Disability or death, or (2) Executive shall terminate employment for Good Reason, in either case other than during a Change in Control Protection Period, then the Company shall pay or provide the following amounts and benefits to Executive, in addition to the Accrued Obligations:

(i) Annual Salary and Target Bonus Continuation Payments. Commencing on the Company’s first normal payroll date which is on or immediately follows the sixtieth (60th) day following the Date of Termination, Executive will (x) continue to receive Executive’s Annual Salary in effect immediately prior to the Date of Termination for a period of eighteen (18) months following the Date of Termination, and (y) be paid an amount equal to one-twelfth (1/12th) of the Executive’s Target Bonus in effect on the Date of Termination in each of the eighteen (18) months following the Date of Termination, payable in normal payroll periods, in the same manner as it was paid as of the Date of Termination, and no less frequently than monthly; provided, however, any payments that would otherwise be payable during the period following the Date of Termination until the payment commencement date shall be accumulated without interest and paid on such commencement date.

(ii) Vacation. On the sixtieth (60th) day following the Date of Termination, Executive will be paid a lump sum cash payment in an amount equal to Executive’s accrued, unused vacation time (if any), to the extent not previously paid.

In the event of Executive’s death following the Date of Termination and before all payments or benefits Executive is entitled to receive under this Section 3.2 have been paid, such unpaid amounts will be paid to Executive’s estate in a lump-sum payment within thirty (30) days following Executive’s death.

3.3 Voluntary Resignation without Good Reason. If, during the Term, Executive voluntarily resigns Executive’s employment without Good Reason, Executive will be paid the Accrued Obligations. No additional amounts or benefits shall be payable or provided under this Agreement.

3.4 Termination Due to Disability or Death. If Executive’s employment with the Company is terminated due to Executive’s Disability or death, Executive (or the Executive’s estate, if applicable) will be paid the Accrued Obligations and an additional amount equal to the product of (x) Executive’s Annual Bonus for the year in which the Date of Termination occurs based on actual results, and (y) a fraction, the numerator of which is the number of days from January 1 of the year during which the Date of Termination occurs to the Date of Termination and the denominator of which is three hundred and sixty five (365). The pro rata Annual Bonus, if any, will be paid at the same time such amount would otherwise have been paid to Executive. No additional amounts or benefits shall be payable or provided under this Agreement.

 

 

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3.5 Release. Notwithstanding anything contained in this Agreement to the contrary, the Company shall not be obligated to provide any benefits to Executive under Section 3.1, 3.2, 3.3 or 3.4 hereof unless: (a) Executive first executes no later than forty-five (45) calendar days after the Date of Termination a general release of the Company and Affiliates and their respective employees, officers and directors in such form as is requested by the Company; (b) Executive does not revoke such general release within seven (7) days after signature; and (c) the release becomes effective and irrevocable in accordance with its terms.

3.6 Exclusive Severance Benefit. Notwithstanding anything contained in this Agreement to the contrary, and except as specifically provided below, any severance payments or benefits received by Executive pursuant to this Agreement shall be in lieu of any benefits under the Executive Severance Pay Plan of The Aaron’s Company, Inc. (as may be in effect from time to time) or any other severance or reduction-in-force plan, program, policy, agreement or other similar arrangement maintained by the Company or an Affiliate from time to time and in lieu of any severance or separation pay benefit that may be required under applicable law; provided, however, the exclusion provided in this Section 3.6 shall not include any equity award agreement, retirement or deferred compensation plan or similar plan or agreement which may provide benefits upon the termination of Executive’s employment. Executive shall not be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under this Agreement.

3.7 Tax Withholding. The Company shall deduct from payments to be paid to Executive or any beneficiary all federal, state and local withholding and other taxes and charges required to be deducted under applicable law.

3.8 Coordination with WARN Act. To the extent that the Company determines that Executive’s termination may be subject to the Worker Adjustment and Retraining Notification Act or any other similar federal, state or local law regarding mass employment separations (collectively, “WARN Act”), notwithstanding any other provision of this Agreement, the Company shall endeavor to comply with the WARN Act, to the extent applicable, by giving notice of the termination (“WARN Act Notice”) at least sixty (60) days in advance of the termination date. The period between the WARN Act Notice date and the termination date is hereinafter referred to as “WARN Act Notice Period”. The Company’s determination that Executive may be subject to the WARN Act and/or any corresponding actions taken or statements made are not an admission or indication that any WARN Act or WARN Act obligations are applicable, triggered, invoked or owed and do not waive or otherwise hinder the Company’s ability to argue the WARN Act does not apply or to take other similar positions.

The Company may excuse Executive from work during all or part of the WARN Act Notice Period and provide Executive with a payment or payments intended to satisfy all or part of any potential WARN Act obligations, including those during the WARN Act Notice Period. If this occurs, any payments or benefits under this Agreement shall be reduced and offset by and may be coordinated with any payment(s) Executive receives during the WARN Act Notice Period. After any reduction and offset, the Company will provide the remaining benefits (subject to the release requirement described in Section 3.5) to Executive.

 

 

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If Executive is not excused from work following the WARN Act Notice date, the regular salary or wages paid to Executive during the WARN Act Notice Period will constitute Executive’s usual compensation and not a benefit under this Agreement.

3.9 No Duplication. In no event shall payments and benefits provided in accordance with this Agreement be made in respect of more than one of Section 3.1, 3.2, 3.3 or 3.4.

SECTION IV

TAX INFORMATION

4.1 Section 280G Parachute Payments. Notwithstanding any provision of this Agreement to the contrary, if any payment or benefit to be paid or provided hereunder would be a “Parachute Payment,” within the meaning of Section 280G of the Code, or any successor provision thereto, but for the application of this sentence, then the payments and benefits to be paid or provided hereunder shall be reduced to the minimum extent necessary (but in no event to less than zero) so that no portion of any such payment or benefit, as so reduced, constitutes a Parachute Payment; provided, however, that the foregoing reduction shall not be made if the total of the unreduced aggregate payments and benefits to be provided to Executive, determined on an after-tax basis (taking into account the excise tax imposed pursuant to Section 4999 of the Code, or any successor provision thereto, any tax imposed by any comparable provision of state law, and any applicable federal, state and local income taxes), exceeds by at least ten percent (10%) the total after-tax amount of such aggregate payments and benefits after application of the foregoing reduction. The determination of whether any reduction in such payments or benefits to be provided hereunder is required pursuant to the preceding sentence shall be made at the expense of the Company, if requested by Executive or the Company, by the Company’s independent accountants. The fact that Executive’s right to payments or benefits may be reduced by reason of the limitations contained in this Section 4.1 shall not of itself limit or otherwise affect any other rights of Executive under this Agreement. In the event that any payment or benefit intended to be provided hereunder is required to be reduced pursuant to this Section 4.1 and no such payment or benefit qualifies as a “deferral of compensation” within the meaning of and subject to Section 409A (“Nonqualified Deferred Compensation”), Executive shall be entitled to designate the payments and/or benefits to be so reduced in order to give effect to this Section 4.1. The Company shall provide Executive with all information reasonably requested by Executive to permit Executive to make such designation. In the event that any payment or benefit intended to be provided hereunder is required to be reduced pursuant to this Section 4.1 and any such payment or benefit constitutes Nonqualified Deferred Compensation or Executive fails to elect an order in which payments or benefits will be reduced pursuant to this Section 4.1, then the reduction shall occur in the following order: (a) reduction of cash payments described in Sections 3.1 and 3.2 (with such reduction being applied to the payments in the reverse order in which they would otherwise be made, that is, later payments shall be reduced before earlier payments); (b) cancellation of acceleration of vesting on any equity awards for which the exercise price exceeds the then fair market value of the underlying equity; and (c) cancellation of acceleration of vesting of equity awards not covered under (b) above. Within any category of payments and benefits (that is, (a), (b) or (c)), a reduction shall occur first with respect to

 

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amounts that are not Nonqualified Deferred Compensation within the meaning of Section 409A and then with respect to amounts that are. In the event that acceleration of vesting of equity awards is to be cancelled, such acceleration of vesting shall be cancelled in the reverse order of the date of grant of such equity awards, that is, later equity awards shall be canceled before earlier equity awards.

4.2 Section 409A.

(a) Section 409A imposes payment restrictions on Nonqualified Deferred Compensation (potentially including payments owed to Executive upon termination of employment). Failure to comply with these restrictions could result in negative tax consequences to Executive. It is the Company’s intent that this Agreement be exempt from the application of, or otherwise comply with, the requirements of Section 409A. Specifically, any taxable benefits or payments provided under this Agreement are intended to be separate payments that qualify for the “short-term deferral” exception to Section 409A to the maximum extent possible and, to the extent they do not so qualify, are intended to qualify for the separation pay exceptions to Section 409A to the maximum extent possible. To the extent that none of these exceptions applies, and to the extent that the Company determines it is necessary to comply with Section 409A (e.g., if Executive is a “specified employee” within the meaning of Section 409A), then notwithstanding any provision in this Agreement to the contrary, all amounts that would otherwise be paid or provided to Executive during the first six months following the Date of Termination shall instead be accumulated through and paid or provided (without interest) on the first business day that is more than six (6) months after Executive’s separation from service.

(b) A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits subject to Section 409A upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Section 409A and Executive is no longer providing services (at a level that would preclude the occurrence of a “separation from service” within the meaning of Section 409A) to the Company or its Affiliates as an employee or consultant, and for purposes of any such provision of this Agreement, references to the “Date of Termination,” a “termination,” “termination of employment” or like terms shall mean “separation from service” within the meaning of Section 409A.

(c) Whenever a payment under this Agreement specifies a payment period with reference to a number of days, the actual date of payment within the specified period shall be within the sole discretion of the Company. In the event the payment period under this Agreement for any nonqualified deferred compensation commences in one calendar year and ends in a second calendar year, the payments shall not be paid (or installments commenced) until the later of the first payroll date of the second calendar year, or the date that the release described in Section 3.5 becomes effective and irrevocable, to the extent necessary to comply with Section 409A. For purposes of Section 409A, Executive’s right to receive installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments.

 

 

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(d) Although the Company will use its best efforts to avoid the imposition of taxation, interest and penalties under Section 409A, the tax treatment of the benefits provided under this Agreement is not warranted or guaranteed. Neither the Company, its Affiliates nor their respective directors, officers, employees or advisers shall be held liable for any taxes, interest, penalties or other monetary amounts owed by Executive (or any other individual claiming a benefit through Executive) as a result of this Agreement.

SECTION V

RESTRICTIVE COVENANTS

5.1 Executive acknowledges and agrees that the restrictions set forth in this Section V are reasonable and necessary to protect the legitimate business interests of the Company, and they will not impair or infringe upon Executive’s right to work or earn a living when Executive’s employment with the Company ends for any reason, and (i) Executive (1) served the Company as a Key Employee; and/or (2) served the Company as a Professional; and/or (3) customarily and regularly solicited Customers and/or Prospective Customers for the Company; and/or (4) customarily and regularly engaged in making sales or obtaining orders or contracts for products or services to be provided or performed by others in the Company; and/or (5) (A) had a primary duty of managing a department or subdivision of the Company, (B) customarily and regularly directed the work of two or more other employees, and (C) had the authority to hire or fire other employees; and/or (ii) Executive’s position was a position of trust and responsibility with access to (1) Confidential Information, (2) Trade Secrets, (3) information concerning Employees of the Company, (4) information concerning Customers of the Company, and/or (5) information concerning Prospective Customers of the Company.

(a) Trade Secrets and Confidential Information. Executive shall not: (i) use, disclose, reverse engineer, divulge, sell, exchange, furnish, give away, or transfer in any way the Trade Secrets or the Confidential Information for any purpose other than the Company’s Business, except as authorized in writing by the Company; (ii) retain any Trade Secrets or Confidential Information, including any copies existing in any form (including electronic form) that are in Executive’s possession or control; or (iii) destroy, delete, or alter the Trade Secrets or Confidential Information without the Company’s prior written consent. The obligations under this subsection shall: (1) with regard to the Trade Secrets, remain in effect as long as the information constitutes a trade secret under applicable law; and (2) with regard to the Confidential Information, remain in effect for so long as such information constitutes Confidential Information as defined in this Agreement. The confidentiality, property, and proprietary rights protections set forth in this Agreement are in addition to, and not exclusive of, any and all other rights to which the Company is entitled under federal and state law, including, but not limited to, rights provided under copyright laws, trade secret and confidential information laws, and laws concerning fiduciary duties.

(b) Defend Trade Secrets Act. Notwithstanding anything to the contrary set forth in this Agreement, pursuant to the Defend Trade Secrets Act of 2016 (18 U.S.C. § 1833(b)(1)), no individual shall be held criminally or civilly liable under federal or state law for the disclosure of a trade secret that: (1) is made (x) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (y) solely for the purpose of reporting or investigating a suspected violation of law; or (2) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

 

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(c) Non-Solicitation of Customers. During the Restricted Period, Executive shall not, directly or indirectly, solicit any Customer of the Company for the purpose of selling or providing any products or services competitive with the Business. The restrictions set forth in this subsection shall apply only to those Customers (a) with whom or which Executive dealt on behalf of the Company, (b) whose dealings with the Company were coordinated or supervised by Executive, (c) about whom Executive obtained Confidential Information in the ordinary course of business as a result of Executive’s association with the Company, or (d) who received products or services authorized by the Company, the sale or provision of which resulted in compensation, commissions, or earnings for Executive within two (2) years prior to the Date of Termination.

(d) Non-Solicitation of Prospective Customers. During the Restricted Period, Executive shall not, directly or indirectly, solicit any Prospective Customer of the Company for the purpose of selling or providing any products or services competitive with the Business. The restrictions set forth in this subsection shall apply only to those Prospective Customers (i) with whom or which Executive dealt on behalf of the Company, (ii) whose dealings with the Company were coordinated or supervised by Executive, or (iii) about whom Executive obtained Confidential Information in the ordinary course of business as a result of Executive’s association with the Company.

(e) Non-Recruit of Employees. During the Restricted Period, Executive shall not, directly or indirectly, solicit, recruit, or induce any Employee to (i) terminate his or her employment relationship with the Company, or (ii) work for any other person or entity engaged in the Business. For the avoidance of doubt, the foregoing restriction shall prohibit Executive from disclosing to any third party the names, background information, or qualifications of any Employee, or otherwise identifying any Employee as a potential candidate for employment. The restrictions set forth in this subsection shall apply only to Employees (1) with whom Executive had Material Interaction, or (2) Executive, directly or indirectly, supervised.

(f) Non-Competition. During the Restricted Period, Executive shall not, on Executive’s own behalf or on behalf of any person or entity, engage in the Business within the Territory; provided, however, that Executive may work for a competitor within the Territory and during the Restricted Period if Executive first obtains express written permission from the Company’s Chief Executive Officer or the Board. For purposes of this subsection, the term “engage in the Business” shall include: (i) performing or participating in any activities which are the same as, or substantially similar to, activities which Executive performed or in which Executive participated, in whole or in part, for or on behalf of the Company; (ii) performing activities or services about which Executive obtained Confidential Information or Trade Secrets as a result of Executive’s association with the Company; and/or (iii) interfering with or negatively impacting the business relationship between the Company and a Customer, Prospective Customer, or any other third party about whom Executive obtained Confidential Information or Trade Secrets as a result of Executive’s association with the Company.

(g) Definitions. For purposes of this Section V only, the capitalized terms shall be defined as follows:

 

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(i) “Business” means (x) those activities, products, and services that are the same as or similar to the activities conducted and products and services offered and/or provided by the Company or its affiliates within two (2) years prior to the Date of Termination, and (y) (1) renting, leasing, and/or selling new or reconditioned residential furniture, consumer electronics, computers (including hardware, software, and accessories), appliances, household goods, and home furnishings; provided, however, that for the purposes of this Agreement the Business shall not include selling new goods or merchandise by Executive or on behalf of or as an employee of any entity or individual that has no involvement in rental, leasing, rent-to-own, or similar activity related to such goods or merchandise either on its own, through a subsidiary or affiliated entity or person, or in partnership with any other entity or person, (2) designing, manufacturing, and/or reconditioning of residential furniture of a type especially suited to the leasing, rental, and sales business, and (3) providing any other activities, products, or services of the type conducted, authorized, offered, or provided by the Company or its affiliates as of the Date of Termination, or during the two (2) year period immediately prior to the Date of Termination.

Companies engaged in the Business include, but are not limited to the following entities and each of their parents, owners, subsidiaries, affiliates, franchisees, assigns, or successors in interest or persons with any of the listed Companies or trade names below, which Executive acknowledges and agrees directly compete with the Company: AcceptanceNow; American First Finance, Inc.; American Rental; Bi-Rite Co., d/b/a Buddy’s Home Furnishings; Bestway Rental, Inc.; Better Finance, Inc.; billfloat; Bluestem Brands, Inc.; Conn’s, Inc.; Crest Financial; Curacao Finance; Discovery Rentals; Easyhome, Inc.; Flexi Compras Corp.; FlexShopper LLC; Fortiva Financial, LLC; Genesis Financial Solutions, Inc.; Lendmark Financial Services, Inc.; Mariner Finance, LLC; Merchants Preferred Lease-Purchase Services; New Avenues, LLC; Okinus; Premier Rental-Purchase, Inc.; Progressive Leasing, LLC (including but not limited to any of its subsidiaries or parent companies); OneMain Financial Holdings, Inc.; Purchasing Power, LLC; Regional Management Corp.; Rent-A-Center, Inc. (including, but not limited to, Colortyme); Santander Consumer USA Inc.; SmartPay Leasing, Inc.; Springleaf Financial and the franchisees of Springleaf Financial; TEMPOE; Tidewater Finance Company; and WhyNotLeaseIt, and/or (ii) the franchisees of the Company.

(ii) “Confidential Information” means: (1) information of the Company or its affiliates, to the extent not considered a Trade Secret under applicable law, that: (A) relates to the business of the Company, (B) was disclosed to Executive or of which Executive became aware of as a consequence of Executive’s relationship with the Company, (C) possesses an element of value to the Company, and (D) is not generally known to the Company’s competitors, and (2) information of any third party provided to the Company which the Company is obligated to treat as confidential, including, but not limited to, information provided to the Company by its licensors, suppliers or customers. Confidential Information includes, but is not limited to: (I) methods of operation; (II) price lists; (III) financial information and projections; (IV) personnel data; (V) future business plans; (VI) the composition, description, schematic or design of products, future products or equipment of the Company or any third party; (VII) advertising or marketing plans; (VIII) information regarding independent contractors, employees, clients, licensors, suppliers, Customers, Prospective Customers or any third party, including, but not limited to, the names of Customers and Prospective Customers, Customer and Prospective Customer lists compiled by the Company, and Customer and

 

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Prospective Customer information compiled by the Company; and (IX) personal information concerning owners and members of the Company. Confidential Information shall not include any information that: (x) is or becomes generally available to the public other than as a result of an unauthorized disclosure, (y) has been independently developed and disclosed by others without violating this Agreement or the legal rights of any party, or (z) otherwise enters the public domain through lawful means.

(iii) “Customer” means any person or entity to which the Company has sold its products or services.

(iv) “Employee” means any person who (1) is employed by the Company on the Date of Termination, or (2) was employed by the Company during the last year of Executive’s employment with the Company.

(v) “Key Employee” means that, by reason of the Company’s investment of time, training, money, trust, exposure to the public, or exposure to Customers, vendors, or other business relationships during the course of Executive’s employment with the Company, Executive will gain a high level of notoriety, fame, reputation, or public persona as the Company’s representative or spokesperson, or will gain a high level of influence or credibility with the Company’s Customers, vendors, or other business relationships, or will be intimately involved in the planning for or direction of the business of the Company or a defined unit of the business of the Company. Such term also means that Executive will possess selective or specialized skills, learning, or abilities or customer contacts or customer information by reason of having worked for the Company.

(vi) “Material Interaction” means any interaction with an Employee which related, directly or indirectly, to the performance of Executive’s duties or the Employee’s duties for the Company.

(vii) “Professional” means an employee who has a primary duty the performance of work requiring knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction or requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor. Such term shall not include employees performing technician work using knowledge acquired through on-the-job and classroom training, rather than by acquiring the knowledge through prolonged academic study, such as might be performed, without limitation, by a mechanic, a manual laborer, or a ministerial employee.

(viii) “Prospective Customer” means any person or entity to which the Company has solicited to purchase the Company’s products or services.

(ix) “Restricted Period” means twenty-four (24) months after the Date of Termination.

(x) “Territory” means within each of the following discrete, severable, geographic areas:

 

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(A) any state or province in which Executive performed services for or on behalf of the Company during the last two (2) years of Executive’s employment with the Company (or during Executive’s employment if employed less than two (2) years); and/or if this subclause or any portion thereof is found to be unenforceable;

(B) the United States of America (including the following states: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming, as well as the District of Columbia) and Canada (including the following provinces: Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island, Quebec, and Saskatchewan; and/or if this subclause or any portion thereof is found to be unenforceable;

(C) Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wyoming, the District of Columbia, Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island, Quebec, and Saskatchewan; and/or if this subclause or any portion thereof is found to be unenforceable;

(D) the state of Georgia; and/or if this subclause or any portion thereof is found to be unenforceable;

(E) the Metropolitan Statistical Area of Atlanta-Sandy Springs-Roswell, Georgia as designated by the Office of Management and Budget and used by the U.S. Census Bureau in its most recent census as of the Date of Termination; and/or if this clause of any portion thereof is found to be unenforceable;

(F) the counties of Fulton, Gwinnett, Cobb, Dekalb, Clayton, Cherokee, Henry, Forsyth, Paulding, Douglas, Coweta, Carroll, Fayette, Newton, Barton, Rockdale, Walton, Barrow, Spalding, Pickens, Haralson, Butts, Dawson, Meriwether, Lamar, Morgan, Pile, Jasper, and Heard, Georgia; and/or if this subclause or any portion thereof is found to be unenforceable;

(G) the city of Atlanta, Georgia; and/or if this subclause or any portion thereof is found to be unenforceable; then

(H) a fifteen (15) air mile radius of 400 Galleria Parkway SE, Suite 300, Atlanta, Georgia 30339.

 

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The Company and Executive acknowledge and agree that the Territory described above (x) represents a good faith estimate of the geographic areas that are applicable at the time of termination of Executive’s employment; (y) shall be construed ultimately to cover only so much of such estimate as relates to the geographic areas actually involved within a reasonable period of time prior to Executive’s termination; and (z) is drafted in such a way that a court may modify the definition and grant only the relief reasonably necessary to protect such legitimate business interests.

(xi) “Trade Secrets” means information of the Company, and its licensors, suppliers, clients, and customers, without regard to form, including, but not limited to, technical or nontechnical data, a formula, a pattern, a compilation, a program, a device, a method, a technique, a drawing, a process, financial data, financial plans, product plans, a list of actual customers, clients, licensors, or suppliers, or a list of potential customers, clients, licensors, or suppliers which is not commonly known by or available to the public and which information (i) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

5.2 Injunctive Relief. If Executive breaches or threatens to breach any portion of this Agreement, Executive agrees that: (a) the Company would suffer irreparable harm; (b) it would be difficult to determine damages, and money damages alone would be an inadequate remedy for the injuries suffered by the Company; and (c) if the Company seeks injunctive relief to enforce this Agreement, Executive shall waive and shall not (i) assert any defense that the Company has an adequate remedy at law with respect to the breach, (ii) require that the Company submit proof of the economic value of any Trade Secret or Confidential Information, or (iii) require the Company to post a bond or any other security. Nothing contained in this Agreement shall limit the Company’s right to any other remedies at law or in equity.

5.3 Independent Enforcement. Each of the covenants set forth in Section 5.1 above shall be construed as an agreement independent of (a) each of the other covenants set forth in Section 5.1, (b) any other agreements, or (c) any other provision in this Agreement, and the existence of any claim or cause of action by Executive against the Company, whether predicated on this Agreement or otherwise, regardless of who was at fault and regardless of any claims that either Executive or the Company may have against the other, shall not constitute a defense to the enforcement by the Company of any of the covenants set forth in Section 5.1 above. The Company shall not be barred from enforcing any of the covenants set forth in Section 5.1 above by reason of any breach of (i) any other part of this Agreement, or (ii) any other agreement with Executive.

5.4 Protected Rights. Nothing contained in this Agreement limits Executive’s ability to file a charge or complaint with the Equal Employment Opportunity Commission or any other federal, state or local governmental agency or commission (collectively, “Government Agencies”), or prevents Executive from providing truthful testimony in response to a lawfully issued subpoena or court order. Further, this Agreement does not limit Executive’s ability to communicate with any Government Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information, without notice to the Company.

 

 

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5.5 Survival of Restrictive Covenants. Upon termination of Executive’s employment for any reason whatsoever (whether voluntary on the part of Executive, for Cause, or other reasons), the obligations of Executive pursuant to Section V shall survive and remain in effect for the periods described herein.

SECTION VI

DISPUTES

6.1 Arbitration.

(a) Rules; Jurisdiction. Any controversy, dispute or claim between the parties, including any controversy, dispute or claim arising out of, relating to or concerning this Agreement, the breach of this Agreement, the employment of Executive, or the termination of Executive’s employment (a “Disputed Matter”) will be resolved pursuant to this Section VI. Any such controversy, dispute or claim will be settled in Atlanta, Georgia, in accordance with the applicable rules of the American Arbitration Association (the “AAA”) then in effect; provided, however, that a breach of the obligations under Section V may be enforced by an action for injunctive relief and damages in a court of competent jurisdiction. If the rules of the AAA differ from any provisions of this Agreement, the provisions of this Agreement will control.

(b) Terms of Arbitration. The arbitrator chosen in accordance with these provisions shall not have the power to alter, amend or otherwise affect the terms of these arbitration provisions or the provisions of this Agreement except as otherwise expressly provided herein.

(c) Binding Effect. The arbitrator will have the authority to grant only such equitable and legal remedies that would be available in any judicial proceeding instituted to resolve a Disputed Matter, and the decision of the arbitrator within the scope of the submission will be final and conclusive upon the parties. Judgment upon any award rendered by the arbitrator may be entered in any court having subject matter jurisdiction to render such judgment. In the event any provision of this Section VI is found to be unenforceable for any reason by a court or an arbitrator, the court or arbitrator, as the case may be, shall reform this Section VI to the extent necessary to render it enforceable.

(d) Time for Arbitration. Any demand for arbitration involving an alleged breach of this Agreement shall be filed within one (1) year of the date the claim became known or should have become known; provided, however, any claim involving an alleged statutory obligation may be filed with the AAA and served on the other party at any time within the period covered by the applicable statute of limitations.

(e) Payment of Costs. To the extent permitted by applicable law, each party hereby agrees to pay one half the arbitrator’s fees, the costs of transcripts and all other expenses of the arbitration proceedings; provided, however, that the arbitrator shall have the authority to determine payment of costs as part of the award or to allocate costs in accordance with the AAA rules.

 

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(f) Burden of Proof; Basis of Decision. For any claim submitted to arbitration, the burden of proof shall be as it would be if the claim were litigated in a judicial proceeding except where otherwise specifically provided in this Agreement, and the decision shall be based on the application of the law of the State of Georgia (as determined from statutes, court decisions and other recognized authorities) to the facts found by the arbitrator.

SECTION VII

SUCCESSORS

7.1 In addition to any obligations imposed by law upon any successor to the Company, the Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. The provisions of this Section VII shall continue to apply to each subsequent employer of Executive bound by this Agreement in the event of any merger, consolidation or transfer of all or substantially all of the business or assets of that subsequent employer.

7.2 This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

SECTION VIII

NOTICES

8.1 For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by (a) United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon actual receipt; or (b) personal delivery to the Chief Executive Officer:

To the Company:

The Aaron’s Company, Inc.

400 Galleria Parkway SE, Suite 300

Atlanta, Georgia 30339

Attention: Chief Executive Officer

Copy to (which shall not constitute notice):

The Aaron’s Company, Inc.

400 Galleria Parkway SE, Suite 300

Atlanta, Georgia 30339

Attention: General Counsel

 

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To Executive: At Executive’s most recent mailing address in the records of the Company, or at Executive’s employee email address (during employment)

SECTION IX

MISCELLANEOUS

9.1 Any compensation paid or payable to Executive pursuant to this Agreement which is subject to recovery under any law, government regulation, order or stock exchange listing requirement, will be subject to such deductions and clawback (recovery) as may be required to be made pursuant to law, government regulation, order, stock exchange listing requirement (or any policy of the Company adopted from time to time). Executive specifically authorizes the Company to withhold from future salary or wages any amounts that may become due under this provision. This Section 9.1 shall survive the termination of this Agreement for a period of three (3) years.

9.2 This Agreement embodies the entire agreement of the Company and Executive relating to separation or severance pay and, except as specifically provided herein, no provisions of any employee manual, personnel policies, corporate directives or other agreement or document shall be deemed to modify the terms of this Agreement. Except as otherwise provided in Section 5.1, no amendment or modification of this Agreement shall be valid or binding upon Executive or the Company unless made in writing and signed by the Company and Executive. This Agreement supersedes all prior understandings and agreements addressing severance or separation pay to which Executive and the Company or an Affiliate are or were parties, including any previous change in control agreement, severance plan, offer letter provisions, or other employment agreements.

9.3 No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.

9.4 No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement.

9.5 The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

9.6 The Agreement shall be construed, administered and governed in all respects under and by the applicable laws of the State of Georgia.

9.7 This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

[Signature page follows. Remainder of page left intentionally blank.]

 

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IN WITNESS WHEREOF, the parties have signed this Agreement to be effective as of the Effective Date.

 

THE AARON’S COMPANY, INC.
By:  

/s/ Rachel G. George

  Name: Rachel G. George
  Title: General Counsel, Corporate Secretary
  and Chief Corporate Affairs Officer

 

EXECUTIVE

 

/s/ C. Kelly Wall

C. Kelly Wall

 

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Exhibit 10.12

Execution Copy

TRANSITION AGREEMENT

This Transition Agreement (this “Agreement”) by and among Aaron’s Holdings Company, Inc. (the “Company”), Aaron’s, LLC (“Aarons”), The Aaron’s Company, Inc. (“TAC,” and, together with Aaron’s, the “Aarons Business Parties”), John W. Robinson III (“Executive”), and Progressive Finance Holdings, LLC (“Progressive”) (solely for purposes of Sections 1(a), 15, and 18), is entered into and dated as of November 30, 2020. The Company, the Aaron’s Business Parties, and Executive are each a “Party” and are collectively referred to as the “Parties”.

1. Effective Time; Termination of Employment Agreement; Appointment as Director.

(a) Effective as of the Effective Time (as defined below), (i) Executive voluntarily resigns from any and all positions Executive holds at the Company and Aaron’s and their respective subsidiaries, including Executive’s position as Chief Executive Officer of the Company, and (ii) that certain Employment Agreement by and among Executive, Aaron’s, Inc. (as predecessor to Aaron’s), and Progressive, dated as of November 10, 2014 and amended as of October 16, 2020 (the “Employment Agreement”), is terminated by mutual agreement of each party thereto and will have no further force or effect as of the Effective Time. For purposes of this Agreement, “Effective Time” means the time that is immediately prior to the Distribution (as defined in that certain Separation and Distribution Agreement, dated November 29, 2020 by and between the Company and TAC).

(b) As promptly as practicable following the Effective Time, Executive will receive from the Company an amount (less applicable taxes and withholdings) as follows: (i) a lump sum payment of all then-outstanding final compensation for services performed through and including the Effective Time and (ii) Executive’s annual cash incentive award for 2020 that he would have received had he remained employed following the Effective Time, which, for the avoidance of doubt, shall equal 182.5% of Target. All amounts payable to Executive under this Section 1(b) shall be paid in accordance with that certain Employee Matters Agreement, dated November 29, 2020, by and between the Company and TAC (the “EMA”)

(c) The Company shall indemnify Executive and hold Executive harmless from and against any claim, loss or cause of action arising from or out of Executive’s performance as an officer, director or employee of the Company or any of its subsidiaries or other affiliates or in any other capacity, including any fiduciary capacity, in which Executive served at the Company’s request, in each case to the maximum extent permitted by law and under the Company’s Articles of Incorporation and By-Laws. Following the Effective Time, Executive shall be covered by any policy of directors’ and officers’ liability insurance maintained by the Company for the benefit of its former officers and directors.

(d) Executive hereby agrees to serve as Non-Executive Chairman of the Board of Directors of TAC (the “TAC Board”), effective as of the Effective Time. Executive will serve in such capacity until Executive’s successor has been duly elected and qualified or until Executive’s earlier resignation or removal. In consideration of Executive’s service as a member of the TAC Board, Executive will receive annual cash and equity compensation as determined by the TAC Board promptly following the Effective Time. Business expenses actually incurred by Executive in performing Executive’s duties on the TAC Board shall be reimbursed to Executive pursuant to policies established by TAC promptly following the Effective Time.


2. Separation Benefits.

(a) So long as Executive signs and does not revoke the releases set forth in Section 4 of this Agreement, all of the Stock Options, Restricted Stock Awards and Performance Share Awards granted to Executive by Aaron’s, Inc. (as predecessor to Aaron’s) in 2018, 2019, and 2020 (the “Stock Awards”) will automatically and fully vest as promptly as practicable following the Effective Time. For the avoidance of doubt, Exhibit A hereto identifies: (i) all such Stock Options, Restricted Stock Awards and Performance Share Awards granted to Executive in 2018, 2019 and 2020, (ii) the number of such Stock Options, Restricted Stock Awards and Performance Share Awards that will be vested as of immediately prior to the Effective Time, and (iii) the number of such Stock Options, Restricted Stock Awards and Performance Share Awards that will vest as promptly as practicable following the Effective Time pursuant to this Section 2.

(b) The conversion and/or adjustment of Executive’s Stock Awards in the Distribution will be subject to and governed by the terms of the EMA and, solely for the purposes thereof, Executive will be treated as though he will be an employee of TAC following the Effective Time.

3. Benefits Following the Effective Time.

(a) Because Executive will no longer be an employee of the Company, TAC, or any of their respective affiliates following the Effective Time, Executive’s rights to any particular employee benefit will be governed by applicable law and the terms and provisions of the employee benefit plans and arrangements of the Company in which Executive was enrolled immediately prior to the Effective Time. Executive acknowledges that the date of this Agreement shall be the date used in determining benefits under all such employee benefit plans and arrangements.

(b) On the 60th day following the date of this Agreement, the Company will pay to Executive a lump sum amount equal to the amount of the applicable monthly COBRA premium for Executive’s and Executive’s eligible dependents coverage on a COBRA basis in Aaron’s sponsored health and welfare benefit plans multiplied by twenty-four (24), less applicable taxes and withholdings.

4. Releases.

(a) In exchange for the consideration set forth above, and subject to Section 16 below, Executive releases and discharges the Company and the Aaron’s Business Parties, together with their respective subsidiaries, parents, affiliates, owners and shareholders, and each of such entities’ past and present direct and indirect shareholders, directors, officers, employees, attorneys, agents and representatives, and their respective successors and assigns (collectively, the “Released Parties”), from any and all claims or liability, whether known or unknown, arising out of any event, act, or omission occurring on or before the Effective Time, including, but not limited to, claims arising out of Executive’s employment, claims arising out of any separation or severance pay or benefits agreement with any Released Party (including the Employment Agreement), claims arising out of the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001-1461, claims

 

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arising under the Age Discrimination in Employment Act (“ADEA”), claims for breach of contract, tort, negligent hiring, negligent retention, negligent supervision, negligent training, employment discrimination, retaliation, or harassment, as well as any other statutory or common law claims, at law or in equity, recognized under any federal, state, or local law. Executive agrees that he is not entitled to any additional payment or benefits, including, but not limited to, any severance payments under the Employment Agreement, from any of the Released Parties, except as set forth in this Agreement. Executive further agrees that he has suffered no harassment, retaliation, employment discrimination, or work-related injury or illness and that Executive does not believe that this Agreement is a subterfuge to avoid disclosure of sexual harassment or gender discrimination or to waive such claims. Executive acknowledges and represents that he: (i) has been fully paid (including, but not limited to, any overtime to which Executive is entitled, if any) for hours Executive worked for the Released Parties through the Effective Time, and (ii) does not claim that any of the Released Parties violated or denied Executive’s rights under the Fair Labor Standards Act. Notwithstanding the foregoing, the release of claims set forth above does not waive (1) Executive’s rights under this Agreement, (2) Executive’s right to receive benefits under any of the Released Parties’ 401(k) or pension plans, if any, that either (I) have accrued or vested prior to the Effective Time, or (II) are intended, under the terms of such plans, to survive Executive’s separation from such Released Party, (3) Executive’s rights with respect to workers compensation or unemployment benefits or (4) Executive’s rights with respect to indemnification pursuant to this Agreement and/or any other agreement with the Company and/or the Aaron’s Business Parties, and to the maximum extent permitted by law and/or under the Company’s Articles of Incorporation and By-Laws. Executive acknowledges and agrees that he is otherwise waiving all rights to sue or obtain equitable, remedial or punitive relief of any kind whatsoever from any of the Released Parties concerning any claims subject to the release of claims set forth in this Section 4, including, without limitation, reinstatement, back pay, front pay, attorneys’ fees and any form of injunctive relief. Executive expressly waives all rights afforded by any statute which limits the effect of a releases with respect to unknown claims. Executive understands the significance of his releases of unknown claims and his waiver of statutory protection against a release of unknown claims. Notwithstanding the foregoing, Executive further acknowledges that he is not waiving and is not being required to waive any right that cannot be waived by law, including the right to file a charge or participate in an administrative investigation or proceeding of the Equal Employment Opportunity Commission or any other government agency prohibiting waiver of such right; provided, however, that Executive hereby disclaims and waives any right to share or participate in any monetary award resulting from the prosecution of such charge or investigation (other than any governmental whistleblower awards).

(b) Executive further acknowledges and agrees that, as of the Effective Time, he has fully disclosed to the Company and the Aaron’s Business Parties any and all information that could give rise to claims against any of the Released Parties, which information is listed on the attached Exhibit B, and other than such conduct or actions Executive has disclosed to the Company and the Aaron’s Business Parties on Exhibit B, he is not aware of any conduct or action by any of the Released Parties which would be in violation of any federal, state, or local law.

5. No Admission of Liability. This Agreement is not an admission of liability by Executive, the Company or any of the Aaron’s Business Parties. Executive, the Company, and the Aaron’s Business Parties are entering into this Agreement to reach a mutual agreement concerning the matters addressed herein.

 

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6. Restrictive Covenants.

(a) Acknowledgements. Executive acknowledges and agrees that the restrictions set forth below are reasonable and necessary to protect the legitimate business interests of the Company and its affiliates and of the Aaron’s Business Parties and their affiliates, and will not impair or infringe upon Executive’s right to work or earn a living following the Effective Time. Furthermore, Executive acknowledges and agrees that (i) Executive (1) served the Company and the Aaron’s Business Parties as a Key Employee; and/or (2) served the Company and the Aaron’s Business Parties as a Professional; and/or (3) customarily and regularly solicited Customers and/or Prospective Customers for the Company and the Aaron’s Business Parties; and/or (4) customarily and regularly engaged in making sales or obtaining orders or contracts for products or services to be provided or performed by others in the Company and the Aaron’s Business Parties; and/or (5) (A) had a primary duty of managing a department or subdivision of the Company and the Aaron’s Business Parties, (B) customarily and regularly directed the work of two or more other employees, and (C) had the authority to hire or fire other employees; and/or (ii) Executive’s position was a position of trust and responsibility with access to (1) Confidential Information, (2) Trade Secrets, (3) information concerning Employees of the Company and Aaron’s, (4) information concerning Customers of the Company and Aaron’s, and/or (5) information concerning Prospective Customers of the Company and Aaron’s.

(b) Trade Secrets and Confidential Information. Executive shall not: (i) use, disclose, reverse engineer, divulge, sell, exchange, furnish, give away, or transfer in any way the Trade Secrets or the Confidential Information for any purpose other than the Company’s and/or the Aaron’s Business Parties’ Business, except as authorized in writing by the Company and/or an Aaron’s Business Party (as applicable); (ii) retain any Trade Secrets or Confidential Information, including any copies existing in any form (including electronic form) that is in Executive’s possession or control, or (iii) destroy, delete, or alter the Trade Secrets or Confidential Information without the Company’s or an Aaron’s Business Party (as applicable), as applicable, prior written consent. The obligations under this Section 6(b) shall: (1) with regard to the Trade Secrets, remain in effect as long as the information constitutes a trade secret under applicable law; and (2) with regard to the Confidential Information, remain in effect for so long as such information constitutes Confidential Information as defined in this Agreement. The confidentiality, property, and proprietary rights protections set forth in this Agreement is in addition to, and not exclusive of, any and all other rights to which the Company and/or the Aaron’s Business Parties are entitled under federal and state law, including, but not limited to, rights provided under copyright laws, trade secret and confidential information laws, and laws concerning fiduciary duties. Notwithstanding anything to the contrary set forth in this Agreement, pursuant to the Defend Trade Secrets Act of 2016 (18 U.S.C. § 1833(b)(1)), no individual shall be held criminally or civilly liable under federal or state law for the disclosure of a trade secret that: (I) is made (x) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (y) solely for the purpose of reporting or investigating a suspected violation of law; or (II) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Nothing in this Agreement shall restrict Executive’s right to communicate, cooperate or file a complaint with any U.S. federal, state or local governmental or law enforcement branch, agency or entity (collectively, a “Governmental Entity”) with respect to possible violations of any U.S. federal, state or local law or regulation, or otherwise make disclosures to any Governmental Entity, in each case, that is protected under the whistleblower or similar provisions of any such law or regulation; provided that in each case such communications and disclosures is consistent with applicable law.

 

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(c) Non-Solicitation of Customers. During the Restricted Period, Executive shall not, directly or indirectly, solicit any Customer of the Company or of any of the Aaron’s Business Parties for the purpose of selling or providing any products or services competitive with the Business. The restrictions set forth in this Section 6(c) shall apply only to those Customers (i) with whom or which Executive dealt on behalf of the Company and/or an Aaron’s Business Party, (ii) whose dealings with the Company and/or an Aaron’s Business Party was coordinated or supervised by Executive, (iii) about whom Executive obtained Confidential Information in the ordinary course of business as a result of Executive’s association with the Company and/or an Aaron’s Business Party, or (iv) who received products or services authorized by the Company or an Aaron’s Business Party, the sale or provision of which resulted in compensation, commissions, or earnings for Executive within two (2) years prior to the date of this Agreement.

(d) Non-Solicitation of Prospective Customers. During the Restricted Period, Executive shall not, directly or indirectly, solicit any Prospective Customer of the Company or of any of the Aaron’s Business Parties for the purpose of selling or providing any products or services competitive with the Business. The restrictions set forth in this Section 6(d) shall apply only to (i) those Prospective Customers with whom or which Executive dealt on behalf of the Company and/or an Aaron’s Business Party, (ii) whose dealings with the Company and/or an Aaron’s Business Party was coordinated or supervised by Executive, or (iii) about whom Executive obtained Confidential Information in the ordinary course of business as a result of Executive’s association with the Company and/or an Aaron’s Business Party.

(e) Non-Recruit of Employees. During the Restricted Period, Executive shall not, directly or indirectly, solicit, recruit, or induce any Employee to (i) terminate his or her employment relationship with the Company or any Aaron’s Business party, as applicable, or (ii) work for any other person or entity engaged in the Business. For the avoidance of doubt, the foregoing restriction shall prohibit Executive from disclosing to any third party the names, background information, or qualifications of any Employee, or otherwise identifying any Employee as a potential candidate for employment. The restrictions set forth in this Section 6(e) shall apply only to Employees (1) with whom Executive had Material Interaction, or (2) Executive, directly or indirectly, supervised.

(f) Non-Competition. During the Restricted Period, Executive shall not, on Executive’s own behalf or on behalf of any person or entity, engage in the Business within the Territory; provided, however, that Executive may work for a competitor within the Territory and during the Restricted Period if Executive first obtains express written permission from the Company’s Chief Executive Officer and/or TAC’s Chief Executive Officer, as applicable. For purposes of this Section 6(f), the term “engage in” shall include: (i) performing or participating in any activities which is the same as, or substantially similar to, activities which Executive performed or in which Executive participated, in whole or in part, for or on behalf of the Company and/or an Aaron’s Business Party; (ii) performing activities or services about which Executive obtained Confidential Information or Trade Secrets as a result of Executive’s association with the Company and/or an Aaron’s Business Party; and/or (iii) interfering with or negatively impacting the business relationship between the Company or an Aaron’s Business Party and a Customer, Prospective Customer, or any other third party about whom Executive obtained Confidential Information or Trade Secrets as a result of Executive’s association with the Company and/or an Aaron’s Business Party; provided, that, for the avoidance of doubt, “engage in” shall not include ownership in and of itself of less than five percent (5%) of a publicly traded company.

 

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(g) Definitions. For purposes of this Section 6 only, the capitalized terms shall be defined as follows:

(i) “Business” means (1) those activities, products, and services that is the same as or similar to the activities conducted and products and services offered and/or provided by the Company and/or by Aaron’s within two (2) years prior to termination of Executive’s employment with the Company and/or the Aaron’s Business Parties, and (2) (I) renting, leasing, and/or selling new or reconditioned residential furniture, consumer electronics, computers (including hardware, software, and accessories), appliances, household goods, and home furnishings; provided, however, that for the purposes of this Agreement the Business shall not include selling new goods or merchandise by Executive or on behalf of or as an employee of any entity or individual that has no involvement in rental, leasing, rent-to-own, or similar activity related to such goods or merchandise either on its own, through a subsidiary or affiliated entity or person, or in partnership with any other entity or person; (II) designing, manufacturing, and/or reconditioning of residential furniture of a type especially suited to the rental, leasing, rent-to-own, or similar business; (III) providing web-based, virtual or remote lease-to-own programs or financing; and/or (IV) issuing consumer credit cards and other consumer credit accounts, making consumer loans, cash advances and other extensions of credit and engaging in any other programs or activities for the origination or acquisition of loans, receivables or other payment obligations of consumers.

Companies engaged in the Business include, but are not limited to, (x) the following entities and each of their parents, owners, subsidiaries, affiliates, franchisees, assigns, or successors in interest or persons with any of the listed companies or trade names below, which Executive acknowledges and agrees directly compete with the Company and/or the Aaron’s Business Parties: AcceptanceNow; American First Finance, Inc.; American Rental; Bi-Rite Co., d/b/a Buddy’s Home Furnishings; Bestway Rental, Inc.; Better Finance, Inc.; billfloat; Bluestem Brands, Inc.; Conn’s, Inc.; Crest Financial; Curacao Finance; Discovery Rentals; Easyhome, Inc.; Flexi Compras Corp.; FlexShopper LLC; Fortiva Financial, LLC; Genesis Financial Solutions, Inc.; Lendmark Financial Services, Inc.; Mariner Finance, LLC; Merchants Preferred Lease-Purchase Services; New Avenues, LLC; Okinus; Premier Rental-Purchase, Inc.; OneMain Financial Holdings, Inc.; Purchasing Power, LLC; Regional Management Corp.; Rent-A-Center, Inc. (including, but not limited to, Colortyme); Santander Consumer USA Inc.; SmartPay Leasing, Inc.; Springleaf Financial and the franchisees of Springleaf Financial; TEMPOE; Tidewater Finance Company; and WhyNotLeaseIt; Snap Finance; Acima; and West Creek Financial; and/or (y) the franchisees of the Company.

 

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(ii) “Confidential Information” means: (1) information of the Company and/or of the Aaron’s Business Parties, to the extent not considered a Trade Secret under applicable law, that: (I) relates to the business of the Company and/or any Aaron’s Business Party, (II) was disclosed to Executive or of which Executive became aware of as a consequence of Executive’s relationship with the Company or with any Aaron’s Business Party, (III) possesses an element of value to the Company and/or an Aaron’s Business Party, and (IV) is not generally known to the Company’s or any Aaron’s Business Party’s competitors; and (2) information of any third party provided to the Company or to an Aaron’s Business Party which the Company or such Aaron’s Business Party is obligated to treat as confidential, including, but not limited to, information provided to the Company or such Aaron’s Business Party by its licensors, suppliers or customers. Confidential Information includes, but is not limited to: (I) methods of operation, (II) price lists, (III) financial information and projections, (IV) personnel data, (V) future business plans, (VI) the composition, description, schematic or design of products, future products or equipment of the Company, any Aaron’s Business Party, or any third party, (VII) advertising or marketing plans, (VIII) information regarding independent contractors, employees, clients, licensors, suppliers, Customers, Prospective Customers or any third party, including, but not limited to, the names of Customers and Prospective Customers, Customer and Prospective Customer lists compiled by the Company or by an Aaron’s Business Party, and Customer and Prospective Customer information compiled by the Company or by an Aaron’s Business Party, and (IX) personal information concerning owners and members of the Company or of an Aaron’s Business Party. Confidential Information shall not include any information that: (x) is or becomes generally available to the public other than as a result of an unauthorized disclosure, (y) has been independently developed and disclosed by others without violating this Agreement or the legal rights of any party, or (z) otherwise enters the public domain through lawful means.

(iii) “Customer” means any person or entity to which the Company or any Aaron’s Business Party has sold its products or services.

(iv) “Employee” means any person who (1) is employed by the Company or by an Aaron’s Business Party as of the Effective Time, or (2) was employed by the Company during the calendar year immediately preceding the Effective Time.

(v) “Key Employee” means that, by reason of the Company’s or Aaron’s investment of time, training, money, trust, exposure to the public, or exposure to Customers, vendors, or other business relationships during the course of Executive’s employment with the Company or an Aaron’s Business Party, Executive gained a high level of notoriety, fame, reputation, or public persona as the Company’s and/or such Aaron’s Business Party’s representative or spokesperson, or gained a high level of influence or credibility with the Customers, vendors, or other business relationships of the Company and/or the Aaron’s Business Parties, or was intimately involved in the planning for or direction of the business of the Company and the Aaron’s Business Parties or a defined unit of the business of the Company or such Aaron’s Business Party. Such term also means that Executive possesses selective or specialized skills, learning, or abilities or customer contacts or customer information by reason of having worked for the Company and/or the Aaron’s Business Parties.

 

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(vi) “Material Interaction” means any interaction with an Employee which related, directly or indirectly, to the performance of Executive’s duties or the Employee’s duties for the Company or for any Aaron’s Business Party.

(vii) “Professional” means an employee who has a primary duty the performance of work requiring knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction or requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor. Such term shall not include employees performing technician work using knowledge acquired through on- the- job and classroom training, rather than by acquiring the knowledge through prolonged academic study, such as might be performed, without limitation, by a mechanic, a manual laborer, or a ministerial employee.

(viii) “Prospective Customer” means any person or entity to which the Company or an Aaron’s Business Party has solicited to purchase such Party’s products or services.

(ix) “Restricted Period” means the twenty (24) month period immediately following the date of this Agreement.

(x) “Territory” means within each of the following discrete, severable, geographic areas:

(1) any state or province in which Executive performed services for or on behalf of the Company or for or on behalf of any Aaron’s Business Party during the last two (2) years of Executive’s employment with the Company and Aaron’s; and/or if this subclause or any portion thereof is found to be unenforceable;

(2) the United States of America (including the following states: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming, as well as the District of Columbia) and Canada (including the following provinces: Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island, Quebec, and Saskatchewan; and/or if this subclause or any portion thereof is found to be unenforceable;

 

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(3) Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wyoming, the District of Columbia, Alberta, British Columbia, Manitoba, New Brunswick, Nova Scotia, and Ontario, and Saskatchewan.

The Parties acknowledge and agree that the Territory described above (I) represents a good faith estimate of the geographic area that is applicable at the time of termination of Executive’s employment; (II) shall be construed ultimately to cover only so much of such estimate as relates to the geographic area actually involved within a reasonable period of time prior to Executive’s termination; and (III) is drafted in such a way that a court may modify the definition and grant only the relief reasonably necessary to protect such legitimate business interests.

(xi) “Trade Secrets” means information of the Company and/or any Aaron’s Business Party, and its licensors, suppliers, clients, and customers, without regard to form, including, but not limited to, technical or nontechnical data, a formula, a pattern, a compilation, a program, a device, a method, a technique, a drawing, a process, financial data, financial plans, product plans, a list of actual customers, clients, licensors, or suppliers, or a list of potential customers, clients, licensors, or suppliers which is not commonly known by or available to the public and which information (1) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (2) is the subject of efforts that is reasonable under the circumstances to maintain its secrecy.

7. Injunctive Relief. If Executive breaches or threatens to breach any portion of this Agreement, Executive agrees that: (a) the Company and/or the Aaron’s Business Parties would suffer irreparable harm; (b) it would be difficult to determine damages, and money damages alone would be an inadequate remedy for the injuries suffered by the Company and/or the applicable Aaron’s Business Party; and (c) if the Company or an Aaron’s Business Party seeks injunctive relief to enforce this Agreement, Executive shall waive and shall not (i) assert any defense that the Company or such Aaron’s Business Party has an adequate remedy at law with respect to the breach, (ii) require the Company or such Aaron’s Business Party submit proof of the economic value of any Trade Secret or Confidential Information, or (iii) require the Company or such Aaron’s Business Party to post a bond or any other security. Nothing contained in this Agreement shall limit the Company’s or any Aaron’s Business Party’s right to any other remedies at law or in equity.

 

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8. Independent Enforcement. Each of the covenants set forth in Section 6 above shall be construed as an agreement independent of (a) each of the other covenants set forth in Section 6, (b) any other agreements, or (c) any other provision in this Agreement, and the existence of any claim or cause of action by Executive against the Company or any Aaron’s Business Party, whether predicated on this Agreement or otherwise, regardless of who was at fault and regardless of any claims that either Executive, the Company, or any of the Aaron’s Business Parties may have against the other, shall not constitute a defense to the enforcement by the Company or any Aaron’s Business Party of any of the covenants set forth in Section 6 above. Neither the Company nor any Aaron’s Business Party shall be barred from enforcing any of the covenants set forth in Section 6 above by reason of any breach of (i) any other part of this Agreement, or (ii) any other agreement with Executive. For the avoidance of doubt, Executive’s covenants set forth in Section 6 above are made separately to the Company and to the Aaron’s Business Parties as they relate to such aspects of the Business as conducted by such Party; accordingly, each of the Company and the Aaron’s Business Parties shall be entitled to enforce the covenants set forth in Section 6 inasmuch as it pertains to those aspects of the Business as conducted by such Party.

9. Cooperation.

(a) Executive agrees that, during the Restricted Period, he shall cooperate with and assist the Company, the Aaron’s Business Parties, and their respective legal counsel in connection with any compliance or other matters related to the Company or such Aaron’s Business Party about which he may have knowledge, including, but not limited to, any internal investigation or audit, any administrative, regulatory, or judicial investigation, or any proceeding, litigation, or dispute with a third party. Such cooperation shall include, but shall not be limited to, meeting and/or conferring with Company and/or Aaron’s Business Party representatives and counsel at reasonable times to respond to such matters, being available to the Company and/or the Aaron’s Business Parties upon reasonable notice and at reasonable times and places for interviews and factual investigations, and appearing at the Company’s and/or at an Aaron’s Business Party’s request to give testimony without requiring service of a subpoena or other legal process. Executive further agrees that Executive shall not voluntarily appear in any proceeding brought by another private party, which party is adverse to the Company or an Aaron’s Business Party unless required by law, and if so required, Executive must promptly notify such Party’s General Counsel.

(b) To the extent Executive provides the cooperation and assistance set forth above in this Section 9, he shall be indemnified against all expenses reasonable incurred by him in connection therewith, including reasonable attorney’s fees.

10. Section 409A. The Parties intend that all benefits provided under this Agreement shall either be exempt from or comply with Section 409A.

11. Attorneys’ Fees. In the event of litigation relating to this Agreement other than a challenge to the releases set forth in Section 4, the prevailing party shall be entitled to recover attorneys’ fees and costs of litigation, in addition to all other remedies available at law or in equity.

12. Waiver. Neither the Company’s nor any Aaron’s Business Party’s failure to enforce any provision of this Agreement shall act as a waiver of that or any other provision. Neither the Company’s nor any Aaron’s Business Party’s waiver of any breach of this Agreement shall act as a waiver of any other breach.

 

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13. Severability. The provisions of this Agreement are severable. If any provision of this Agreement is determined to be unenforceable, in whole or in part, then such provision shall be modified so as to be enforceable to the maximum extent permitted by law. If such provision cannot be modified to be enforceable, the provision shall be severed from this Agreement to the extent unenforceable. The remaining provisions and any partially enforceable provisions shall remain in full force and effect.

14. Successors and Assigns. This Agreement shall be assignable to, and shall inure to the benefit of, the Company’s and the Aaron’s Business Parties’ respective successors and assigns, including, without limitation, successors through merger, name change, consolidation, or sale of a majority of the Company’s or such Aaron’s Business Party’s stock or assets, and shall be binding upon Executive and his heirs and assigns.

15. Entire Agreement. This Agreement, including Exhibit A and Exhibit B which are incorporated by reference, constitutes the entire agreement between the Parties and Progressive. This Agreement supersedes any prior communications, agreements, or understandings, whether oral or written, between the Parties and Progressive arising out of or relating to Executive’s employment and the termination of such employment. Other than the terms of this Agreement, no other representation, promise, or agreement has been made with Executive to cause Executive to sign this Agreement.

16. Non-Interference. Notwithstanding anything to the contrary set forth in this Agreement or in any other Agreement between Executive and the Company or between Executive an any of the Aaron’s Business Parties, nothing in this Agreement or in any other Agreement shall limit Executive’s ability, or otherwise interfere with Executive’s rights, to (a) file a charge or complaint with the Equal Employment Opportunity Commission, the National Labor Relations Board, the Occupational Safety and Health Administration, the Securities and Exchange Commission, or any other federal, state, or local governmental agency or commission (each a “Government Agency”), (b) communicate with any Government Agency or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information, without notice to the Company or any Aaron’s Business Party, (c) receive an award for information provided to any Government Agency, or (d) engage in activity specifically protected by Section 7 of the National Labor Relations Act, or any other federal or state statute or regulation.

17. Governing Law/Consent to Jurisdiction and Venue. The laws of the State of Georgia shall govern this Agreement. If Georgia’s conflict of law rules would apply another state’s laws, the Parties agree that Georgia law shall still govern. Executive consents to the personal jurisdiction of the courts in Georgia. Executive waives (a) any objection to jurisdiction or venue, or (b) any defense claiming lack of jurisdiction or venue, in any action brought in such courts.

18. Counterparts. The Parties and Progressive acknowledge and agree that this Agreement may be executed in one or more counterparts, including facsimiles and scanned images, and it shall not be necessary that the signatures of all Parties hereto be contained on any one counterpart, and each counterpart shall constitute one and the same agreement.

 

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Executive acknowledges that he has entered into this Agreement freely and without coercion, that he has been advised by the Company and by the Aaron’s Business Parties to consult with counsel of Executive’s choice, that he has had adequate opportunity to so consult, and that he has been given all time periods required by law to consider this Agreement, including but not limited to the 21-day period required by the ADEA (the “Consideration Period”). Executive understands that he may execute this Agreement fewer than 21 days from the day he receives it, but agrees that such execution will represent his knowing waiver of such Consideration Period. Executive further acknowledges that within the 7-day period following his execution of this Agreement (the “Revocation Period”), he will have the unilateral right to revoke this Agreement, and that the Company’s and the Aaron’s Business Parties’ obligations hereunder will become effective only upon the expiration of the Revocation Period without his revocation hereof. In order to be effective, notice of Executive’s revocation of this Agreement must be received by the Company and the Aaron’s Business Parties in writing on or before the last day of the Revocation Period. Such revocation must be sent to such Parties’ respective Chief Executive Officers.

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date first written above.

 

AARON’S HOLDINGS COMPANY, INC.

By:

 

/s/ C. Kelly Wall

Name: C. Kelly Wall

Title: Interim Chief Financial Officer

AARON’S, LLC

By:

 

/s/ C. Kelly Wall

Name: C. Kelly Wall

Title: Chief Financial Officer

THE AARON’S COMPANY, INC.

By:

 

/s/ C. Kelly Wall

Name: C. Kelly Wall

Title: Chief Financial Officer

PROGRESSIVE FINANCE HOLDINGS, LLC

(solely for purposes of Sections 1(a), 15 and 18)

By:

 

/s/ Marvin A. Fentress

Name: Marvin A. Fentress

Title: General Counsel

EXECUTIVE

/s/ John W. Robinson III

John W. Robinson III

Exhibit 99.1

The Aaron’s Company, Inc. Completes Spin-off; Begins Trading as Independent,

Publicly Traded Company

ATLANTA, December 1, 2020 -- The Aaron’s Company, Inc. (NYSE: AAN) ( “Aaron’s”), a leading omni-channel provider of lease-purchase solutions, today announced that it has completed its spin-off from its former parent (“Parent”), and will operate as an independent, publicly-traded company, listed on the New York Stock Exchange under the ticker symbol “AAN.”

Aaron’s remains a mission-driven company focused on enhancing people’s lives by providing convenient access to high-quality furniture, appliances and electronics through affordable lease and purchase options. Aaron’s operates approximately 1,400 company-owned and franchised stores in 47 U.S. states and Canada, as well as its industry leading e-commerce platform, Aarons.com.

“Today marks the beginning of an exciting new chapter in Aaron’s 65-year history” said Douglas Lindsay, Chief Executive Officer of The Aaron’s Company. “With low monthly payments, high lease approval rates, and exceptional customer service, we believe our value proposition is best in the lease-to-own industry. Aaron’s serves a large and expanding market with a unique set of physical and digital assets, and we expect that our well-defined market strategy will drive significant long-term value for our customers, team members and shareholders.”

As previously announced, under the terms of the spin-off and distribution transaction, shareholders of record as of the close of business on the record date, November 27, 2020, received one share of common stock of The Aaron’s Company for every two shares of Parent common stock held on the record date. Shareholders received cash in lieu of any fractional shares.

About The Aaron’s Company

Headquartered in Atlanta, The Aaron’s Company, Inc. (NYSE: AAN), is a leading omnichannel provider of lease-purchase solutions. Aaron’s engages in direct-to-consumer sales and lease ownership of furniture, home appliances, consumer electronics and accessories through its approximately 1,400 Company-operated and franchised stores in 47 states and Canada, as well as its e-commerce platform, Aarons.com. For more information, visit Aarons.com or investor.aarons.com.

Forward-Looking Statements

Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: Statements in this news release regarding our business that are not historical facts are “forward-looking statements” that involve risks and uncertainties which could cause actual results to differ materially from those contained in the forward-looking statements. Such forward-looking statements generally can be identified by the use of forward-looking terminology, such as “believe,” “expect,” and similar forward-looking terms. These risks and uncertainties include factors such as (i) the impact of the COVID-19 pandemic and related measures taken by governmental or regulatory authorities to combat the pandemic, and whether additional government stimulus payments or supplemental unemployment benefits will be approved, and the nature, amount and timing of any such payments or benefits, including the impact of the pandemic and such measures on: (a) demand for the lease-to-own products we offer, (b) our


customers, including their ability and willingness to satisfy their obligations under their lease agreements, (c) our suppliers’ ability to provide us with the merchandise we need to obtain from them, (d) our employees and labor needs, including our ability to adequately staff our operations, (e) our financial and operational performance, and (f) our liquidity; (ii) failure of our separation from Parent to qualify for the expected tax treatment; (iii) the possibility that the operational, strategic and shareholder value creation opportunities from our separation from Parent may not be achieved; (iv) changes in the enforcement of existing laws and regulations and the adoption of new laws and regulations that may unfavorably impact our businesses; (v) legal and regulatory proceedings and investigations, including those related to customer privacy, third party and employee fraud and information security; (vi) the risks associated with our business transformation strategy not being successful, including our e-commerce and real estate repositioning and optimization initiatives (including the risk that the costs associated with these initiatives exceeds our expectations); (vii) risks associated with the challenges faced by our business, including the commoditization of consumer electronics and our high fixed-cost operating model; (viii) increased competition from traditional and virtual lease-to-own competitors, as well as from traditional and on-line retailers and other competitors; (ix) financial challenges faced by our franchisees, which we believe may be exacerbated by the COVID-19 pandemic and related governmental or regulatory measures to combat the pandemic; (x) increases in lease merchandise write-offs, especially in light of the COVID-19 pandemic; and the other risks and uncertainties discussed under “Risk Factors” in The Aaron’s Company, Inc.’s Registration Statement on Form 10, as amended, initially filed with the U.S. Securities and Exchange Commission on November 2, 2020. Statements in this press release that are “forward-looking” include, without limitation, statements about (i) our value proposition in the lease-to-own industry; (ii) the benefits expected from our market strategy; and (iii) our ability to create long-term value for our customers, team members and shareholders. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Except as required by law, the Company undertakes no obligation to update these forward-looking statements to reflect subsequent events or circumstances after the date of this press release.

Michael P. Dickerson

The Aaron’s Company, Inc.

Vice President, Corporate Communications & Investor Relations

678-402-3590

mike.dickerson@aarons.com