Item 1.01.
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Entry into a Material Definitive Agreement.
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Amended and Restated Credit Facility
On September 18, 2017, Aarons, Inc. (the
Company
) entered into a Second Amended and Restated Revolving Credit and Term Loan
Agreement with SunTrust Bank, as administrative agent, and certain other financial institutions as lenders (the
Second Amended and Restated Credit Agreement
). The Second Amended and Restated Credit Agreement amends and restates
the Companys existing Amended and Restated Revolving Credit and Term Loan Agreement dated as of April 14, 2014, as previously amended (the
Prior Credit Agreement
), to, among other things, (i) extend the maturity
date from December 9, 2019 to September 18, 2022, (ii) release certain inactive subsidiaries of the Company from their guarantee obligations, (iii) provide for a new $100 million term loan, in order to refinance existing
indebtedness under the Prior Credit Agreements term loan facility, (iv) increase the revolving credit commitments of the lenders from $225 million to $400 million (the
Revolving Credit Facility
) and (v) add and
modify certain other terms, covenants and representations and warranties set forth therein. The Revolving Credit Facility permits the Company to borrow, subject to certain terms and conditions, on an unsecured basis up to $400 million in revolving
loans (including an increase to the existing letter of credit subfacility to $35 million), and also provides for an uncommitted incremental facility increase option which, subject to certain terms and conditions, permits the Company at any time
prior to the maturity date to request an increase in extensions of credit available thereunder (whether through additional term loans and/or revolving credit commitments or any combination thereof) by an aggregate additional principal amount of up
to $250 million, with such additional credit extensions provided by one or more lenders thereunder in their sole discretion. There were no borrowings under the Revolving Credit Facility at closing.
The Second Amended and Restated Credit Agreement also amended the terms of the Prior Credit Agreement to, among other things, provide for interest on the
loans at a rate per annum equal to (i) LIBOR plus a margin ranging from 1.25% to 2.25%, with the amount of such margin determined based upon the ratio of the Companys total net debt to Consolidated EBITDA, for loans based on LIBOR or
(ii) the administrative agents prime rate plus a margin ranging from 0.25% to 1.25%, with the amount of such margin determined based upon the ratio of the Companys total net debt to Consolidated EBITDA, for loans based on the base
rate. The interest rates on loans under the Second Amended and Restated Credit Agreement provide for more favorable margins on loans than the Prior Credit Agreement as certain margins on LIBOR based loans have been reduced and the debt component of
the ratio on which such margin is calculated, subject to certain limitations, is reduced by unrestricted cash on hand of the Company and its subsidiaries.
The foregoing description of the Second Amended and Restated Credit Agreement is qualified in its entirety by reference to the full text of such document,
which is attached hereto as Exhibit 10.1 and is incorporated herein by reference.
Payoff and Termination of DAMI Credit Facility
On September 18, 2017, the Company used a portion of the proceeds from the Second Amended and Restated Credit Facility together with cash on hand to pay
the full principal balance of the loan and security agreement, dated as of May 18, 2011 (as amended), that was assumed by the Company in connection with the October 15, 2015 acquisition of Dent-A-Med, Inc., d/b/a the HELPcard
®
(the
DAMI credit facility
), and the Company paid all remaining balances related to and terminated the DAMI credit facility on September 19, 2017.
Amendment to Franchisee Loan Facility
On
September 18, 2017, the Company entered into the Sixth Amendment to the Loan Facility Agreement with SunTrust Bank, as servicer, and certain other financial institutions as participants (the
Franchisee Loan Facility
Amendment
). The Franchisee Loan Facility Amendment amends the Third Amended and Restated Loan Facility Agreement and Guaranty, dated as of April 14, 2014, (as previously amended and as amended by the Franchisee Loan Facility
Amendment, the
Franchisee Loan Facility
). Pursuant to this facility, subject to certain terms and conditions, the Companys franchisees can borrow funds guaranteed by the Company. The Franchisee Loan Facility Amendment amends
the Franchisee Loan Facility to, among other changes: (i) reduce the maximum facility commitment amount under the franchisee loan program from $125 million to $85 million and (ii) release certain inactive subsidiaries of the Company from
their guarantee obligations. The reduction in the maximum commitment under the Franchisee Loan Facility was made at the Companys request, primarily to reduce the amount of fees paid by the Company on the unused portion of the commitment.
The foregoing description of the Franchisee Loan Facility Amendment is qualified in its entirety by reference to the full text of such document, which is
attached hereto as Exhibit 10.2 and is incorporated herein by reference.
Modifications to Existing Note Purchase Agreements
On September 18, 2017, the Company entered into Amendment No. 7 to the Note Purchase Agreement with Prudential Insurance Company of America
(
Prudential
) and certain other purchasers, as set forth on the signature pages thereof (the
2011 Prudential Notes Amendment
). The 2011 Prudential Notes Amendment amends the Note Purchase Agreement dated as of
July 5, 2011, as previously amended (the
2011 Prudential NPA
), pursuant to which the Company and certain subsidiaries as co-obligors, issued $125 million in senior unsecured notes to the purchasers in a private placement.
On September 18, 2017, the Company entered into Amendment No. 4 to the Note Purchase Agreement with Prudential and certain other purchasers, as
set forth on the signature pages thereof (the
2014 Prudential Notes Amendment
). The 2014 Prudential Notes Amendment amends the Note Purchase Agreement dated as of April 14, 2014, as previously amended (the
2014
Prudential NPA
), pursuant to which the Company and Aaron Investment Company, as obligors, issued $225 million in senior unsecured notes to the purchasers in a private placement.
Also on September 18, 2017, the Company entered into Amendment No. 4 to the Note Purchase Agreement
with Metropolitan Life Insurance Company and certain other purchasers, as set forth on the signature pages thereof (the
MetLife Notes Amendment
, together with the 2011 Prudential Notes Amendment and the 2014 Prudential Notes
Amendment, the
Notes Amendments
). The MetLife Notes Amendment amends the Note Purchase Agreement dated as of April 14, 2014, as previously amended (the
MetLife NPA
; together with the 2011 Prudential NPA and
the 2014 Prudential NPA, collectively the
Existing NPAs
), pursuant to which the Company and Aarons Investment Company, as obligors, issued $75 million in senior unsecured notes in a private placement.
The Notes Amendments amend the Existing NPAs to, among other things, conform the financial covenants and certain other covenants, terms and provisions,
including events of default, to substantially reflect the same changes made to the comparable covenants, terms and provisions in the Second Amended and Restated Credit Agreement.
The foregoing description of the Notes Amendments is qualified in its entirety by reference to the full text of such documents, which are attached hereto as
Exhibits 10.3, 10.4 and 10.5, and are incorporated herein by reference.