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EXHIBIT 10.21
DRAFT: AUGUST 5, 1998
STOCKHOLDERS AGREEMENT
OF RENTERS CHOICE, INC.
STOCKHOLDERS AGREEMENT (the "Agreement"), dated as of August
5 1998, by and among (i) each of Apollo Investment Fund IV, L.P., a Delaware
limited partnership, and Apollo Overseas Partners IV, L.P., an exempted limited
partnership registered in the Cayman Islands acting through its general partner
(individually and collectively with their Permitted Transferees (defined
below), the "Purchaser"), (ii) J. Xxxxxx Xxxxxx, an individual ("Xxxxxx"),
(iii) Xxxx X. Xxxxxx, an individual ("Xxxxxx"), (iv) Renters Choice, Inc., a
Delaware corporation (the "Company"), and (v) each other Person (defined below)
who becomes a party to this Agreement in accordance with the terms hereof.
W I T N E S S E T H:
WHEREAS, this Agreement shall become effective (the "Effective
Date") on the date of, and simultaneously with, the closing under the Stock
Purchase Agreement, dated as of August 5, 1998, between the Company and the
Purchaser (the "Stock Purchase Agreement");
WHEREAS, on the Effective Date, (i) the authorized capital
stock of the Company will consist of 50,000,000 shares of common stock, $.01
par value (the "Common Stock"), and 5,000,000 shares of preferred stock, $.01
par value (the "Preferred Stock") of which ______ shares will be designated
Series A Preferred Stock, $.01 par value (the "Series A Preferred Stock"), and
_________ shares will be designated Series B Preferred Stock, $.01 par value
(the "Series B Preferred Stock" and together with the Series A Preferred Stock,
the "Series A and B Preferred Stock") and (ii) the issued and outstanding
capital stock of the Company will consist of _____________ shares of Common
Stock, 134,414 shares of Series A Preferred Stock and 115,586 shares of Series
B Preferred Stock, with ___________ shares of Common Stock reserved for
issuance upon the exercise of certain stock options and upon conversion of the
Series A and B Preferred Stock;
WHEREAS, on the Effective Date (i) the Purchaser shall
beneficially own 250,000 shares of Preferred Stock, and (ii) the Management
Stockholders shall beneficially own 8,421,697 shares of Common Stock.
WHEREAS, the parties hereto desire to restrict the sale,
assignment, transfer, encumbrance or other disposition of the Shares (as
defined below), including both issued and outstanding Shares as well as Shares
that may be issued or otherwise acquired hereafter, to provide for certain
rights and obligations in respect to the Shares and the Company as hereinafter
provided.
NOW THEREFORE, the parties hereto agree as follows:
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ARTICLE I
DEFINITIONS
Section 1. Definitions. As used in
this Agreement, the following terms
have the following meanings:
"Affiliate" as applied to any specified Person, shall mean any
other Person directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified Person and, in the case
of a Person who is an individual, shall include (i) members of such specified
Person's immediate family (as defined in Instruction 2 of Item 404(a) of
Regulation S-K under the Securities Act) and (ii) trusts, the trustee and all
beneficiaries of which are such specified Person or members of such Person's
immediate family as determined in accordance with the foregoing clause (i). For
the purposes of this definition, control when used with respect to any Person
means the power to direct the management and policies of such person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "affiliated," "controlling" and "controlled" have
meanings correlative to the foregoing. Notwithstanding the foregoing, the
Purchaser and its Affiliates shall not be deemed Affiliates of the Company for
purposes of this Agreement.
"Apollo Nominees" shall have the meaning set forth in Section
4. l(a).
"beneficial owner" of a security shall mean any person who,
directly or indirectly, through any contract, arrangement, understanding,
relationship, or otherwise has (i) the power to vote, or to direct the voting
of, such security or (ii) the power to dispose, or to direct the disposition
of, such security.
"Board of Directors" shall mean the Board of Directors of the
Company.
"Business Day" shall mean each day other than Saturdays,
Sundays and days when commercial banks are authorized to be closed for business
in New York, New York.
"Certificates of Designations" shall mean the Certificates of
Designations of the Series A and B Preferred Stock in the forms attached as
exhibits to the Stock Purchase Agreement.
"Charter Documents" shall mean the Amended and Restated
Certificate of Incorporation and Amended and Restated By-Laws of the Company,
each as amended to date, attached hereto as Exhibits A and B, respectively.
"Commission" shall mean the United States Securities and
Exchange Commission.
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"Common Stock" shall have the meaning set forth in the
recitals.
"Company" shall have the meaning set forth in the preamble.
"Company Nominees" shall have the meaning set forth in Section
4.1(a).
"Credit Agreements" shall mean (i) that certain Credit
Agreement dated August 5, 1998 by and among the Company, Comerica Bank,
NationsBank and The Chase Manhattan Bank and (ii) that certain Senior
Subordinated Credit Agreement dated August 5, 1998 by and among the Company,
The Chase Manhattan Bank and Chase Securities Inc., as such may be amended from
time to time.
"Effective Date" shall have the meaning set forth in the
recitals.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder.
"Indebtedness" shall mean with respect to any person, without
duplication, all liabilities of such person (a) for borrowed money (whether or
not the recourse of the lender is to the whole of the assets of such person or
only to a portion thereof), (b) evidenced by bonds, notes, debentures or
similar instruments or representing the balance deferred and unpaid of the
purchase price of any property (other than any such balance that represents an
account payable or any other monetary obligation to a trade creditor (whether
or not an Affiliate)), or (c) for the payment of money relating to a
capitalized lease obligation.
"IRR" shall have the meaning set forth in Section 4.2(b).
"Management Stockholders" shall mean Xxxxxx and Xxxxxx and any
of their respective Permitted Transferees.
"MD&A" shall mean a management's discussion and analysis of
the Company's financial condition and results of operation comparable to the
discussion that is required to be included in periodic reports filed under the
Exchange Act.
"Notices" shall have the meaning set forth in Section 6.5.
"pecuniary interest" in any security shall mean the
opportunity, directly or indirectly, to profit or share in any profit derived
from a transaction in such security, and shall include securities owned by an
individual's spouse or issue or any trust solely for the benefit of such
individual, spouse or issue.
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"Permitted Transferee" shall mean:
(a) in the case of the Purchaser (i) any officer,
director or partner of, or Person controlling, the Purchaser, (ii) any other
Person that is (x) an Affiliate of the general partners, investment managers or
investment advisors of the Purchaser, (y) an Affiliate of the Purchaser or a
Permitted Transferee of an Affiliate or (z) an investment fund, investment
account or investment entity whose investment manager, investment advisor or
general partner thereof is the Purchaser or a Permitted Transferee of the
Purchaser or (iii) if a Permitted Transferee of a Person set forth in the
foregoing clauses (i) and (ii) is an individual, (x) any spouse or issue of
such individual, or any trust solely for the benefit of such individual, spouse
or issue, and (y) upon such individual's death, any Person to whom Shares are
transferred in accordance with the laws of descent and/or testamentary
distribution, in each case in a bona fide distribution or other transaction not
intended to avoid the provisions of this Agreement;
(b) in the case of any Management Stockholder,
(i) any Person that is solely controlled by such Management Stockholder, (ii)
upon a bona fide liquidation of, or a bona fide withdrawal from, such
Management Stockholder, in each case, not intended to avoid the provisions of
this Agreement, the shareholders, partners or principals, as the case may be,
of such Management Stockholder, or (iii) if such Management Stockholder is an
individual, (x) any spouse or issue of such individual, or any trust solely for
the benefit of such individual, spouse or issue, and (y) upon such individual's
death, any Person to whom Shares are transferred in accordance with the laws of
descent and/or testamentary distribution; and
(c) any Person who is a party to this Agreement.
"Person" shall mean an individual or a corporation, limited
liability company, partnership, trust, or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Preferred Stock" shall have the meaning set forth in the
recitals.
"Purchaser" shall have the meaning set forth in the preamble.
"Registration Rights Agreements" shall mean the Series A
Registration Rights Agreement and the Series B Registration Rights Agreement,
each dated as of the date hereof, by and between the Company and the Purchaser,
attached hereto as Exhibits C and D, respectively.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations thereunder.
"Series A and B Preferred Stock" shall have the meaning set
forth in the recitals.
"Series A Preferred Stock" shall have the meaning set forth in
the recitals.
"Series B Preferred Stock" shall have the meaning set forth in
the recitals.
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"Shares" shall mean, collectively, the Common Stock and the
Preferred Stock, whether now owned or acquired after the date hereof. Whenever
this Agreement refers to a number or percentage of Shares, such number or
percentage shall be calculated as if each of the Shares had been exchanged or
converted into shares of Common Stock immediately prior to such calculation
regardless of the existence of any restrictions on such exchange or conversion.
"Xxxxxx Included Shares" shall mean those 2,528,432 shares of
Common Stock beneficially owned by Xxxxxx as of the Effective Date.
"Stock Purchase Agreement" shall have the meaning set forth in
the recitals.
"Subsidiary" shall mean, with respect to any Person, (a) a
corporation a majority of whose capital stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly, owned
by such Person, by a Subsidiary of such Person, or by such Person and one or
more Subsidiaries of such Person, (b) a partnership in which such Person or a
Subsidiary of such Person is, at the date of determination, a general partner
of such partnership, or (c) any other Person (other than a corporation) in
which such Person, a Subsidiary of such Person or such Person and one or more
Subsidiaries of such Person, directly or indirectly, at the date of
determination thereof, has (i) at least a majority ownership interest or (ii)
the power to elect or direct the election of the directors or other governing
body of such Person.
"Xxxxxx Included Shares" shall mean those 5,893,265 shares of
Common Stock beneficially owned by Xxxxxx as of the Effective Date.
"Transfer" shall mean (i) when used as a noun: any direct or
indirect transfer, sale, assignment, pledge, hypothecation, encumbrance or
other disposition and (ii) when used as a verb: to directly or indirectly
transfer, sell, assign, pledge, hypothecate, encumber, or otherwise dispose of;
provided, however, Transfer shall not include a pledge in connection with a
recourse, bona fide loan transaction that is not intended to avoid the
provisions of this Agreement.
"Transferee" shall mean any Person to whom Shares have been
Transferred in compliance with the terms of this Agreement.
ARTICLE II
RESTRICTIONS ON TRANSFERS
Section 1. Transfers in Accordance with
this Agreement. Any attempt to
Transfer, or purported Transfer of,
any of the Xxxxxx Included Shares or
the Xxxxxx Included Shares in
violation of the terms of this
Agreement shall be null and void and
the Company shall not register upon
its books, and shall direct its
transfer agent not to register on
its books any such Transfer. A copy
of this Agreement shall be filed
with the
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Secretary of the Company and the
Company's transfer agent and kept
with the records of the Company.
Section 2. Agreement to be Bound.
(a) No party hereto (other than the Company, the
Purchaser and their Permitted Transferees) shall
Transfer any Shares except (i) to a Permitted
Transferee or (ii) as specifically provided herein.
(b) None of Xxxxxx or his Permitted Transferees
shall Transfer their respective pecuniary interests
in any of the Xxxxxx Included Shares to any party
other than a Permitted Transferee of Xxxxxx, except
that (i) commencing upon the date that is one year
from the date of this Agreement, Xxxxxx and his
Permitted Transferees shall be entitled to Transfer
up to 500,000 Shares in aggregate during any
subsequent twelve-month period and (ii) the Company
shall be entitled to repurchase up to $25,000,000 of
the Xxxxxx Included Shares. Notwithstanding the
forgoing, in no case shall Xxxxxx or his Permitted
Transferees Transfer any Shares if such Transfer
would trigger default or change-in-control provisions
under the Certificates of Designations, the Credit
Agreements or any other material debt instrument of
the Company.
(c) None of Xxxxxx or his Permitted Transferees
shall Transfer their respective pecuniary interests
in any of the Xxxxxx Included Shares to any party
other than a Permitted Transferee of Xxxxxx, except
that during any twelve-month period Xxxxxx and his
Permitted Transferees shall be entitled to Transfer
up to 300,000 Shares in aggregate through sales
pursuant to Rule 144 under the Securities Act.
Notwithstanding the forgoing, in no case shall Xxxxxx
or his Permitted Transferees (i) Transfer more than
50% of the Xxxxxx Included Shares during the five-
year period commencing on the Effective Date or (ii)
Transfer any Shares if such Transfer would trigger
default or change-in-control provisions under the
Certificates of Designations, the Credit Agreements
or any other material debt instrument of the Company.
(d) No Transfer to a Permitted Transferee of
Purchaser or of any party as provided in the
foregoing clauses (a), (b) and (c) of this Section
2.2 shall be permitted unless (i) the certificates
representing such Shares issued to the Transferee
bear the legend provided in Section 2.3 and (ii) the
Transferee (if not already a party hereto) has
executed and delivered to each other party hereto, as
a condition precedent to such Transfer, an instrument
or instruments, reasonably satisfactory to the
Company, confirming that the Transferee agrees to be
bound by the terms of this Agreement in the same
manner as such Transferee's transferor, except as
otherwise specifically provided in this Agreement.
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Section 3. Legend. The Purchaser and
each Management Stockholder hereby
agrees that each outstanding
certificate representing Shares
issued to any of them, or any
certificate issued in exchange for
or upon conversion of any similarly
legended certificate, shall bear a
legend reading substantially as
follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE
SECURITIES LAWS, AND MAY BE OFFERED AND SOLD ONLY IF SO REGISTERED OR AN
EXEMPTION FROM REGISTRATION IS AVAILABLE. THE HOLDER OF THESE SHARES MAY BE
REQUIRED TO DELIVER TO THE COMPANY, IF THE COMPANY SO REQUESTS, AN OPINION OF
COUNSEL (REASONABLY SATISFACTORY IN FORM AND SUBSTANCE TO THE COMPANY) TO THE
EFFECT THAT AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT (OR FROM
REGISTRATION OR QUALIFICATION UNDER STATE SECURITIES LAWS) IS AVAILABLE WITH
RESPECT TO ANY TRANSFER OF THESE SHARES THAT HAS NOT BEEN SO REGISTERED (OR
QUALIFIED).
THE SHARES REPRESENTED BY THIS CERTIFICATE ALSO ARE SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AND OBLIGATIONS, TO WHICH ANY TRANSFEREE
AGREES BY HIS ACCEPTANCE HEREOF, AS SET FORTH IN THE STOCKHOLDERS AGREEMENT,
DATED AS OF AUGUST 5, 1998, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY.
NO TRANSFER OF SUCH SHARES WILL BE MADE ON THE BOOKS OF THE COMPANY UNLESS
ACCOMPANIED BY EVIDENCE OF COMPLIANCE WITH THE TERMS OF SUCH AGREEMENT AND BY
AN AGREEMENT OF THE TRANSFEREE TO BE BOUND BY THE RESTRICTIONS SET FORTH IN THE
STOCKHOLDERS AGREEMENT.
ARTICLE III
ADDITIONAL RIGHTS AND OBLIGATIONS OF
THE PURCHASER AND THE COMPANY
Section 1. Access to Information;
Confidentiality. Upon the request
of the Purchaser, the Company shall
afford the Purchaser and its
accountants, counsel and other
representatives reasonable access to
all of the properties, books,
contracts, commitments and records
(including, but not limited to, tax
returns) of the Company and its
Subsidiaries that are reasonably
requested. The Purchaser will, and
will cause its agents to, conduct
any such
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investigations on reasonable advance
notice, during normal business
hours, with reasonable numbers of
persons and in such a manner as not
to interfere unreasonably with the
normal operations of the Company and
its Subsidiaries.
Except as otherwise required by applicable law, neither the
Company nor any of its Subsidiaries shall be required to provide access to or
to disclose information where such access or disclosure would violate or
prejudice the rights of any customer or other Person, would jeopardize the
attorney-client privilege of the Person in possession or control of such
information, or would contravene any law, rule, regulation, order, judgment,
decree, fiduciary duty or binding agreement entered into prior to the date
hereof. The parties hereto will make appropriate substitute disclosure
arrangements under circumstances in which the restrictions of the preceding
sentence apply.
The Purchaser shall, and shall use its best efforts to cause
their representatives to, keep confidential all such information to the same
extent such information is treated as confidential by the Company, and shall
not directly or indirectly use such information for any competitive or other
commercial purpose. The obligation to keep such information confidential shall
not apply to (i) any information that (x) was already in the Purchaser's
possession prior to the disclosure thereof by the Company (other than through
disclosure by any other Person known by the Purchaser to be subject to a duty
of confidentiality), (y) was then generally known to the public, or (z) was
disclosed to the Purchaser by a third party not known by the Purchaser to be
bound by an obligation of confidentiality or (ii) disclosures made as required
by law or legal process or to any person exercising regulatory authority over
such the Purchaser or its Affiliates. If in the absence of a protective order
or the receipt of a waiver hereunder, the Purchaser is nonetheless, in the
opinion of their counsel, compelled to disclose information concerning the
Company to any tribunal or governmental body or agency or else stand liable for
contempt or suffer other censure or penalty, the Purchaser may disclose such
information to such tribunal or governmental body or agency without liability
hereunder. In addition, in the event that any information disclosed by the
Company to Purchaser is material nonpublic information, the Purchaser agrees to
comply with its obligations under the applicable Federal and state securities
laws with respect thereto, including but not limited to, the laws pertaining to
the possession, dissemination and utilization of such material nonpublic
information.
Section 2. Furnishing of Information.
(a) The Company shall deliver to
the Purchaser, as long as the
Purchaser shall own any Shares:
(i) As promptly as practical, but in no event
later than 30 days after the end of each calendar month, a copy of the
monthly financial reporting package for such month customarily
prepared for the Company's Chief Executive Officer.
(ii) As promptly as practical, but in no event
later than 60 days after the close of each of its first three
quarterly accounting periods during any fiscal year of the Company,
the consolidated balance sheet of the Company as at the end of such
quarterly period, and the related consolidated statements of
operations, stockholders' equity and cash flows for such quarterly
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period, and for the elapsed portion of the fiscal year ended with the
last day of such quarterly period, and in each case setting forth
comparative figures for the related periods in the prior fiscal year
(if such comparative figures are available without unreasonable
expense), all of which shall be certified by the chief financial
officer of the Company, to have been prepared in accordance with
generally accepted accounting principles, subject to year-end audit
adjustments, together with an MD&A;
(iii) As promptly as practical, but in no event
later than 105 days after the close of each fiscal year of the
Company, the consolidated balance sheet of the Company as of the end
of such fiscal year and the related consolidated statements of
operations, stockholders' equity and cash flows for such fiscal year,
in each case setting forth comparative figures for the preceding
fiscal year, and certified by independent certified public accountants
of recognized national standing, together with an MD&A; and
(iv) All reports, if any, filed by the Company or
any Subsidiary of the Company with the Commission under the Exchange
Act, as promptly as practical, but in no event later than 15 days
after filing any such reports with the Commission.
(b) The provisions of Sections 3.2(a)(ii) and
(iii) above shall be deemed to have been satisfied if the Company delivers the
reports timely filed by the Company with the Commission on Form 10-Q or 10-K,
as applicable, for such periods promptly, but in no event later than 15 days
after filing any such Form with the Commission.
ARTICLE IV
CORPORATE GOVERNANCE AND VOTING
Section 1. Board of Directors of the
Company.
(a) On or immediately following the Effective
Date, the Company and the Management Stockholders shall take appropriate
actions to cause the amendment of the Amended and Restated Bylaws of the
Company to provide that the Board of Directors of the Company shall be composed
of seven (7) members (or such lesser number of members as actually shall have
been designated and agreed to by the parties hereto in accordance with the
provisions of this Section 4.1). Thereupon the Company shall be entitled, but
not required, to nominate five members to the Board of Directors (collectively,
the "Company Nominees"), and the Purchaser (or any representative thereof
designated by the Purchaser) shall be entitled, but not required, to nominate
two members to the Board of Directors (collectively, the "Apollo Nominees").
One Apollo Nominee shall be classified as a Class I Director of the Company,
and the other Apollo Nominee shall be classified as a Class II Director of the
Company.
(b) The Management Stockholders and the Company
shall take appropriate actions to cause the appointment of the Apollo Nominees
to become effective upon the
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amendment of the Amended and Restated Bylaws of the Company as provided in
Section 4.1(a) above. The Management Stockholders and the Purchaser shall vote
all of the Shares owned or held of record by them at all regular and special
meetings of the stockholders of the Company called or held for the purpose of
filling positions on the Board of Directors, and in each written consent
executed in lieu of such a meeting of stockholders, and, to the extent entitled
to vote thereon, each party hereto shall take all actions otherwise necessary
to ensure (to the extent within the parties' collective control) that the
Company Nominees and the Apollo Nominees are elected to the Board of Directors.
(c) The Company, the Management Stockholders and
the Purchaser shall use their respective best efforts to call, or cause the
appropriate officers and directors of the Company, to call, a special meeting
of stockholders of the Company, as applicable, and to vote all of the Shares
owned or held of record by them for, or to take all actions by written consent
in lieu of any such meeting necessary to cause, the removal (with or without
cause) of (A) any Company Nominee if the Management Stockholders request such
director's removal in writing for any reason, and (B) any Apollo Nominee if the
Purchaser requests such director's removal in writing for any reason. The
Company and the Purchaser, respectively, shall have the right to designate a
new nominee in the event any Company Nominee or Apollo Nominee, respectively,
shall be so removed under this Section 4.1(c) or shall vacate his directorship
for any reason.
Except as provided in this Section 4. l(c), each party hereto
agrees that, at any time that it is then entitled to vote for the election or
removal of directors, it will not vote in favor of the removal of any Company
Nominee or Apollo Nominee unless (i) such removal shall be at the request of
the party who nominated such director pursuant to the provisions of Section 4.
l(a) or (ii) the right of the party who nominated such director to do so has
terminated in accordance with clause (f) below.
(d) The Company shall not, and shall not permit
any of its Subsidiaries to, without the consent of holders of a majority of the
Shares held by the Management Stockholders or the Purchaser, as the case may
be, take any action under Section 4.2(b) of this Agreement that requires the
approval of the Apollo Nominees, if any of the Company Nominees or Apollo
Nominees are Persons whose removal from the Board of Directors has been
requested at or prior to the time of such action by the party who nominated
such director pursuant to Section 4. l(a). Each party hereto shall use
reasonable efforts to prevent any action from being taken by the Board of
Directors, during the pendency of any vacancy due to death, resignation or
removal of a director, unless the Person entitled to have a person nominated by
it elected to fill such vacancy shall have failed, for a period of ten (10)
days after notice of such vacancy, to nominate a replacement.
(e) The initial Company Nominees shall be J.
Xxxxxx Xxxxxx, Xxxx X. Xxxxxx, X. X. Xxxxxxx, Xxxxxx X. Xxxxxxx, Xx. and Xxx X.
Xxxxxxxx. Any other person designated by the Company as a Company Nominee
shall be reasonably acceptable to the Purchaser. The initial Apollo Nominees
shall be Xxxxx X. Xxxxxx and Xxxxxxxx X. Xxxx. Any other person designated by
the Purchaser as an Apollo Nominee shall either be (x) a partner, employee or
Affiliate of the Purchaser or its Affiliates or (y) a person who is reasonably
acceptable to the Management Stockholders.
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(f) The obligations of the Purchaser pursuant to
this Section 4.1 shall terminate if the Management Stockholders cease to
beneficially own 50% of the number of Shares owned by the Management
Stockholders on the Effective Date; provided, however, that so long as Xxxxxx
remains Chairman and Chief Executive Officer of the Company, the Purchaser
shall continue to vote for Xxxxxx as a Company Nominee in accordance with this
Section 4, and so long as Xxxxxx remains President of the Company, the
Purchaser shall continue to vote for Xxxxxx as a Company Nominee in accordance
with this Section 4.
(g) At such time as the Purchaser, together with
any and all of its Permitted Transferees, cease to hold in aggregate 50% or
more of the Shares owned by the Purchaser on the Effective Date, Purchaser
shall be entitled, but not required, to nominate only one Apollo Nominee in
accordance with this Section 4. At such time as the Purchaser, together with
any and all of its Permitted Transferees, cease to hold in aggregate 10% or
more of the Shares owned by the Purchaser on the Effective Date, the Purchaser
shall no longer be entitled to nominate any Apollo Nominees in accordance with
this Section 4.
(h) In the event the Company establishes an
Executive Committee of the Board of Directors, it shall be comprised of such
persons as a majority of the Board of Directors shall approve, provided,
however, such committee shall also include at least one Apollo Nominee. The
Executive Committee shall have authority, subject to applicable law, to take
all actions that (A) are ancillary to or arise in the normal course of the
businesses of the Company, or (B) implement and are consistent with
resolutions of the Board of Directors provided, however, that such Executive
Committee shall not be authorized to take any action which, if proposed to be
taken by the full Board of Directors would require the affirmative vote of the
Apollo Nominees in accordance with Section 4.2.
(i) The Finance Committee of the Board of
Directors shall be comprised of one of the Apollo Nominees, one of the Company
Nominees and one other director designated by the Board of Directors who is not
also a member of management of the Company.
(j) Each of the Audit Committee and the
Compensation Committee of the Board of Directors shall be comprised of at least
one of the Apollo Nominees and at least one other director designated by the
Board of Directors who is not also a member of management of the Company.
(k) Each committee of the Board of Directors, to
which authority has been delegated, shall keep complete and accurate minutes
and records of all actions taken by such committee, prepare such minutes and
records in a timely fashion and promptly distribute such minutes and records to
each member of the Board of Directors.
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(l) The parties agree that upon the request of
Purchaser, the Company shall cause the Board of Directors of any wholly-owned
subsidiary of the Company to include such number of individuals designated by
the Purchaser (or any representative thereof designated by the Purchaser) in
the same proportion of the total number of members of the Board of Directors of
such subsidiary as the proportion of the Company's Board of Directors to which
the Purchaser is entitled pursuant to Section 4.1(a).
Section 2. Action by the Board of
Directors.
(a) Except as provided below, all decisions of
the Board of Directors shall require the affirmative
vote of a majority of the directors of the Company
then in office, or a majority of the members of an
Executive Committee of the Board of Directors, to the
extent such decisions may be lawfully delegated to an
Executive Committee pursuant to Section 4.1(g).
(b) The Company shall not, and it shall cause
each of its Subsidiaries not to, take (or agree to
take) any action regarding the following matters,
directly or indirectly, including through a merger or
consolidation with any other corporation or
otherwise, without the affirmative vote of the Apollo
Nominees: (i) increase the number of authorized
shares of Preferred Stock or authorize the issuance
or issue of any shares of Preferred Stock other than
to existing holders of Preferred Stock, (ii) issue
any new class or series of equity security, (iii)
amend, alter or repeal, in any manner whatsoever, the
designations, preferences and relative rights and
limitations and restrictions of the Series A and B
Preferred Stock; (iv) amend, alter or repeal any of
the provisions of the Charter Documents or the
Certificates of Designations in a manner that would
negatively impact the holders of the Series A and B
Preferred Stock, including (but not limited to) any
amendment that is in conflict with the approval
rights set forth in this Section 4.2; (v) directly or
indirectly, redeem, purchase or otherwise acquire for
value (including through an exchange), or set apart
money or other property for any mandatory purchase or
other analogous fund for the redemption, purchase or
acquisition of any shares of Common Stock or Junior
Stock (as defined in the Certificates of
Designations), except for the repurchase by the
Company of up to $25,000,000 in Common Stock from
Xxxxxx, or declare or pay any dividend or make any
distribution (whether in cash, shares of capital
stock of the Company, or other property) on shares of
Common Stock or Junior Stock; (vi) cause the number
of directors of the
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Company to be greater than seven (7); (vii) enter
into any agreement or arrangement with or for the
benefit of any Person who is an Affiliate of the
Company with a value in excess of $5 million in a
single transaction or series of related transactions;
(viii) effect a voluntary liquidation, dissolution or
winding up of the Company; (ix) sell or agree to sell
all or substantially all of the assets of the
Company, unless such transaction (1) occurs after the
fourth anniversary of the Effective Date, (2) is a
sale for cash and (3) results in an internal rate of
return ("IRR") to the Purchaser of 30% compounded
quarterly or greater with respect to each Share
issued to the Purchaser on the Effective Date; or (x)
enter into any merger or consolidation or other
business combination involving the Company (except a
merger of a wholly- owned subsidiary of the Company
into the Company in which the Company's
capitalization is unchanged as a result of such
merger) unless such transaction (1) occurs after the
fourth anniversary of the Effective Date, (2) is for
cash and (3) results in an IRR to the Purchaser of
30% compounded quarterly or greater with respect to
each Share issued to the Purchaser on the Effective
Date.
(c) Notwithstanding the foregoing Section 4(b),
if the Purchaser owns less than 33 1/3% of the Shares
owned by them on the Effective Date, the provisions
of Section 4(b) shall cease to exist and shall be of
no further force or effect.
(d) While any shares of Series and B Preferred
Stock are outstanding, the Company shall not and it
shall cause each of its Subsidiaries not to, issue
any debt securities of the Company with a value in
excess of $10 million (including any refinancing of
existing indebtedness) without the majority
affirmative vote of the Finance Committee
(e) While any shares of Series A and B Preferred Stock
are outstanding, the Company shall not, and it shall cause each of its
Subsidiaries not to, issue any equity securities of the Company with a value in
excess of $10 million (including any refinancing of existing indebtedness)
without the unanimous affirmative vote of the Finance Committee; provided,
however, that the following equity issuances shall require only a majority
affirmative vote of the Finance Committee: (A) an offering of Common Stock
within 24 months of the Effective Date that is equal to or less than $75
million of gross proceeds to the Company and the selling price is equal to or
greater than the Conversion Price (as defined in the Series A Preferred Stock
Certificate of Designations), (B) an offering of Common Stock in which the
selling price (1) at any time prior to the third anniversary of the Effective
Date is equal to or greater
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than two times the Conversion Price (as defined in the Series A Preferred Stock
Certificate of Designations) and (2) thereafter, equal to or greater than the
price that would imply 25% or greater IRR compounded quarterly on the
Conversion Price (as defined below) and (C) an issuance of equity in connection
with an acquisition if the issuance is equal to or less than 10% of the
outstanding Common Stock (calculated post-issuance of such shares of Common
Stock).
Section 3. Charter Documents. (a)
Exhibits A and B set forth copies of
the Charter Documents, each in the
form in which it is to be in effect
on the Effective Date, except that
the Company's Amended and Restated
Certificate of Incorporation shall
also include, in addition to the
terms of Exhibit A hereto, the
Certificates of Designations, which
shall have been filed with the
Secretary of State of Delaware as
part of the Company's Amended and
Restated Certificate of
Incorporation on or prior to the
Effective Date.
(b) The Company covenants that it will act, and
each Management Stockholder and the Purchaser agrees to use its best efforts to
cause the Company to act, in accordance with its Charter Documents and
Certificates of Designations in all material respects and to cause compliance
with all provisions contained herein. Each Management Stockholder and the
Purchaser shall vote all the Shares owned or held of record by it at any
regular or special meeting of stockholders of the Company or in any written
consent executed in lieu of such a meeting of stockholders, and shall take all
action necessary, to ensure (to the extent within the parties' collective
control) that (i) the Charter Documents and Certificates of Designations of the
Company do not, at any time, conflict with the provisions of this Agreement,
and (ii) unless an amendment is approved by the Board of Directors in
accordance with Section 4.2, the Charter Documents of the Company continue to
be in effect in the forms attached hereto as Exhibits A and B and the
Certificates of Designations continue to be in effect in the form attached as
exhibits to the Stock Purchase Agreement.
ARTICLE V
TERMINATION
Section 1. Termination. Except as
otherwise provided herein with
respect to certain specific
provisions, this Agreement shall
terminate upon the earlier to occur
of:
(i) the mutual agreement of the parties
hereto,
(ii) with respect to any party hereto
other than the Company, such party ceasing to
own any Shares,
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(iii) such time as less than 10% of the
Shares continue to be subject to the
provisions of this Agreement, or
(iv) on the eleventh anniversary of the
Effective Date.
ARTICLE VI
MISCELLANEOUS
Section 1. No Inconsistent Agreements.
Each party hereto hereby consents to
the termination of any prior written
or oral agreement or understanding
restricting, conditioning or
limiting the ability of any party to
transfer or vote Shares.
Each of the Company and the Management Stockholders represents
and agrees that, as of the Effective Date, there is no (and from and after the
Effective Date they will not, and will cause their respective Subsidiaries and
Affiliates not to, enter into any) agreement with respect to any securities of
the Company or any of its Subsidiaries (and from and after the Effective Date
neither the Company nor any Management Stockholder shall take, or permit any of
their Subsidiaries or Affiliates to take, any action) that is inconsistent in
any material respect with the rights granted to the Purchaser in this
Agreement.
Without limiting the foregoing, the Company represents that
there are no existing agreements relating to the voting or registration of any
equity securities of the Company or any of its Subsidiaries other than the
agreements of (i)[Xxxxxx and Xxxxxx dated as of July 8, 1998, as amended by
their respective agreements dated as of August 5, 1998] (ii) Xxxx Xxxxxx dated
as of August 5, 1998, (iii) Xxxxxxx X. Xxxxxx dated as of August 5, 1998 and
(iv) Xxxxxxxx Xxxxx dated as of August 5, 1998 to vote in favor of the
transactions contemplated in the Stock Purchase Agreement at a stockholders
meeting held for such purpose, and there are no other existing agreements
between the Company and any other holder of Shares relating to the transfer of
any equity securities of the Company or any of its Subsidiaries.
Section 2. Recapitalization. Exchanges,
etc. If any capital stock or other
securities are issued in respect of,
in exchange for, or in substitution
of, any Shares by reason of any
reorganization, recapitalization,
reclassification, merger,
consolidation, spin-off, partial or
complete liquidation, stock
dividend, split-up, sale of assets,
distribution to stockholders or
combination of the Shares or any
other change in capital structure of
the Company, appropriate adjustments
shall be made with respect to the
relevant provisions of this
Agreement so as to fairly and
equitably preserve, as far as
practicable, the original rights and
obligations of the parties hereto
under this Agreement and
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the terms "Common Stock," "Preferred
Stock" and "Shares," each as used
herein, shall be deemed to include
shares of such capital stock or
other securities, as appropriate.
Without limiting the foregoing,
whenever a particular number of
Shares is specified herein, such
number shall be adjusted to reflect
stock dividends, stock-splits,
combinations or other
reclassifications of stock or any
similar transactions.
Section 3. Successors and Assigns.
This Agreement shall be binding upon
and shall inure to the benefit of
the parties hereto, and their
respective successors and permitted
assigns; provided that (i) neither
this Agreement nor any rights or
obligations hereunder may be
transferred or assigned by the
Company (except by operation of law
in any merger); (ii) neither this
Agreement nor any rights or
obligations hereunder may be
transferred or assigned by the
Management Stockholders or the
Purchaser except to any Person to
whom it has Transferred Shares in
compliance with this Agreement and
who has become bound by this
Agreement pursuant to Section 2.2
hereof; and (iii) the rights of the
parties under Article IV hereof may
not be assigned to any Person except
as explicitly provided therein.
Section 4. No Waivers; Amendments. (a)
No failure or delay by any party in
exercising any right, power or
privilege hereunder shall operate as
a waiver thereof, nor shall any
single or partial exercise thereof
preclude any other or further
exercise thereof or the exercise of
any other right, power or privilege.
The rights and remedies herein
provided shall be cumulative and not
exclusive of any rights or remedies
provided by law.
(b) This Agreement may not be amended or
modified, nor may any provision hereof be waived, other than by a written
instrument signed by the parties hereto.
Section 5. Notices. All notices,
demands, requests, consents or
approvals (collectively, "Notices")
required or permitted to be given
hereunder or which are given with
respect to this Agreement shall be
in writing and shall be personally
delivered or mailed, registered or
certified, return receipt requested,
postage prepaid (or by a
substantially similar method), or
delivered by a reputable overnight
courier service with charges
prepaid, or transmitted by hand
delivery or facsimile, addressed as
set forth below, or such other
address
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(and with such other copy) as such
party shall have specified most
recently by written notice. Notice
shall be deemed given or delivered
on the date of service or
transmission if personally served or
transmitted by facsimile. Notice
otherwise sent as provided herein
shall be deemed given or delivered
on the third business day following
the date mailed or on the next
business day following delivery of
such notice to a reputable overnight
courier service.
To the Company or the Management Stockholders:
Renters Choice, Inc.
00000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: J. Xxxxxx Xxxxxx, Chief Executive Officer
Fax: (000)000-0000
with a copy (which shall not constitute notice) to:
Xxxxxxxx Xxxxxxxx & Xxxxxx P.C.
5400 Renaissance Tower
0000 Xxx Xxxxxx
Attn: Xxxxxx X. Xxxxxx, Esq.
Fax: (000)000-0000
To the Purchaser:
Apollo Investment Fund IV, L.P. and/or
Apollo Overseas Partners IV, L.P.
c/o Apollo Management IV, L.P.
1999 Avenue of the Stars, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxx
Facsimile: (000)000-0000
with a copy (which shall not constitute notice) to:
Xxxxxx, Xxxxx & Bockius LLP
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx X. Xxxxxxxx, Esq.
Fax: (000)000-0000
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Section 6. Inspection. So long as this
Agreement shall be in effect, this
Agreement and any amendments hereto
and waivers hereof shall be
distributed to all parties hereto
after becoming effective and shall
be made available for inspection at
the principal office of the Company
by the Purchaser.
SECTION 7. GOVERNING LAW. THIS
AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, AS
APPLIED TO CONTRACTS MADE AND
PERFORMED WITHIN THE STATE OF NEW
YORK, WITHOUT REGARD TO PRINCIPLES
OF CONFLICT OF LAWS,
EXCEPT AS TO MATTERS OF CORPORATE GOVERNANCE, WHICH SHALL BE INTERPRETED IN
ACCORDANCE WITH THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE. EACH
PARTY HERETO CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF THE FEDERAL AND
STATE COURTS WITHIN THE STATE OF NEW YORK.
Section 8. Section Headings. The
section headings contained in this
Agreement are for reference purposes
only and shall not affect the
meaning or interpretation of this
Agreement.
Section 9. Entire Agreement. This
Agreement, together with the Stock
Purchase Agreement, the Certificate
of Designations and the Registration
Rights Agreements, constitutes the
entire agreement and understanding
among the parties hereto with
respect to the subject matter hereof
and thereof and supersedes any and
all prior agreements and
understandings, written or oral,
relating to the subject matter
hereof.
Section 10. Severability. Any term or
provision of this Agreement which is
invalid or unenforceable in any
jurisdiction shall, as to such
jurisdiction, be ineffective to the
extent of such invalidity or
unenforceability without rendering
invalid or unenforceable the
remaining terms and provisions of
this Agreement or affecting the
validity or enforceability of any of
the terms or provisions of this
Agreement in any other
jurisdictions, it being intended
that all rights and obligations of
the parties hereunder shall be
enforceable to the fullest extent
permitted by law.
Section 11. Counterparts. This
Agreement may be signed in
counterparts, each of which shall
constitute an original and which
together shall constitute one and
the same agreement.
Section 12. Required Approvals. If
approval of this Agreement or any of
the transactions contemplated hereby
shall be required
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by any governmental or
supra-governmental agency or
instrumentality or is considered to
be necessary or advisable to all the
parties hereto, all parties hereto
shall use their best efforts to
obtain such approval.
Section 13. Public Disclosure. The
Company shall not, and shall not
permit any of its Subsidiaries to,
make any public announcements or
disclosures relating or referring to
the Purchaser, any of its
affiliates, or any of their
respective directors, officers,
partners, employees or agents
(including, without limitation, any
Person designated as a director of
the Company pursuant to the terms
hereof) unless the Purchaser has
consented to the form and substance
thereof, which consent shall not be
unreasonably withheld except to the
extent such disclosure is, in the
opinion of counsel, required by law
or by stock exchange regulation,
provided that (i) any such required
disclosure shall only be made, to
the extent consistent with the law,
after consultation with the
Purchaser and (ii) no such
announcement or disclosure (except
as required by law or by stock
exchange regulation) shall identify
any such Person without the
Purchaser's prior consent.
* * *
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
RENTERS CHOICE, INC.
By:
----------------------------------------------
Name:
--------------------------------------------
Title:
-------------------------------------------
APOLLO INVESTMENT FUND IV., L.P.
a Delaware limited partnership
By: Apollo Advisors IV, L.P.
its General Partner
By: Apollo Capital Management IV, Inc.
its General Partner
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
APOLLO OVERSEAS PARTNERS IV, L.P.
an exempted limited partnership registered
in the Cayman Islands
By: Apollo Advisors IV, L.P.
its General Partner
By: Apollo Capital Management IV, Inc.
its Managing General Partner
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
-------------------------------------------------
J. Xxxxxx Xxxxxx
-------------------------------------------------
Xxxx X. Xxxxxx
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SPOUSAL RIGHTS
The undersigned spouse of a party hereto acknowledges that
such spouse has read this Stockholders Agreement. Such spouse specifically
agrees that the provisions of this Agreement shall apply to any ownership
interest in Common Stock of Renters Choice that she now has or hereafter
acquires and to any such Common Stock that she may acquire in her own right as
a result of any marital separation, marital dissolution, separate maintenance
proceedings or any similar action. Such spouse hereby agrees that her spouse
may join in any future amendment or modification of this Stockholders Agreement
without any further signature, acknowledgment, agreement or consent on her
part, and hereby further agrees that any interest which she may have in such
Common Stock shall be subject to the provisions of this Stockholders Agreement.
-------------------------------------
Xxxxxxxx Xxxxxx
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SPOUSAL RIGHTS
The undersigned spouse of a party hereto acknowledges that
such spouse has read this Stockholders Agreement. Such spouse specifically
agrees that the provisions of this Agreement shall apply to any ownership
interest in Common Stock of Renters Choice that she now has or hereafter
acquires and to any such Common Stock that she may acquire in her own right as
a result of any marital separation, marital dissolution, separate maintenance
proceedings or any similar action. Such spouse hereby agrees that her spouse
may join in any future amendment or modification of this Stockholders Agreement
without any further signature, acknowledgment, agreement or consent on her
part, and hereby further agrees that any interest which she may have in such
Common Stock shall be subject to the provisions of this Stockholders Agreement.
-------------------------------------
Xxxxxxx Xxxxxx
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