Item 1.01
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Entry into a Material Definitive Agreement.
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On June 17, 2018,
Rent-A-Center,
Inc., a Delaware corporation (the
Company
), entered into an Agreement and Plan of Merger (the
Merger Agreement
), by and
among the Company, Vintage Rodeo Parent, LLC, a Delaware limited liability company (
Parent
), and Vintage Rodeo Acquisition, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (
Merger Sub
),
pursuant to which, upon the terms and subject to the conditions set forth therein, Merger Sub will merge with and into the Company (the
Merger
), with the Company continuing as the surviving corporation (the
Surviving
Company
). Once the Merger is completed, the Company will become a wholly owned subsidiary of Parent, the Companys shares of Common Stock (as defined below) will be delisted from NASDAQ and its Common Stock will be
de-registered.
The Board of Directors of the Company (the
Company Board
) adopted
resolutions recommending that the Companys stockholders approve the Merger and adopt the Merger Agreement. Parent and Merger Sub are affiliated with certain funds managed by affiliates of Vintage Capital Management, LLC, a Delaware limited
liability company.
Merger Consideration
. Pursuant to the Merger Agreement, at the effective time of the Merger (the
Effective Time
), each share of common stock, par value $0.01 per share, of the Company (
Common Stock
) issued and outstanding immediately prior to the Effective Time (other than (i) shares of Common Stock
held by Parent, Merger Sub or the Company (or held in the Companys treasury), or by any subsidiary of Parent or Merger Sub immediately prior to the Effective Time and (ii) shares of Common Stock held by stockholders who have properly
demanded appraisal of such shares in accordance with the General Corporation Law of the State of Delaware) will be converted into the right to receive $15.00 in cash (the
Merger Consideration
), without interest and reduced by the
amount of any withholding that is required under applicable law.
Treatment of Outstanding Equity Awards
. The Merger Agreement
provides that, with respect to all options to purchase shares of Common Stock (
Options
), restrictive stock units (
RSUs
), and performance stock units (
PSUs
), in each case issued under the
Companys equity incentive plans, except as otherwise agreed upon in writing between the holder and Parent, immediately prior to the Effective Time:
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each then-outstanding and unexercised Option shall automatically be canceled and converted into the right to receive from the Surviving Company an amount in cash equal to the product of (i) the total number of
shares of Common Stock then underlying such Option immediately prior to the Effective Time multiplied by (ii) the excess, if any, of the Merger Consideration over the exercise price per share of such Option, without interest and subject to
applicable withholding;
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each then-outstanding RSU shall automatically be canceled and converted into the right to receive from the Surviving Company an amount in cash equal to the product of (i) the total number of shares of Common Stock
then underlying such RSU multiplied by (ii) the Merger Consideration, without interest and subject to applicable withholding; and
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each then-outstanding PSU shall automatically be canceled and converted into the right to receive from the Surviving Company an amount in cash equal to the product of (i) the total number of shares of Common Stock
then underlying such PSU multiplied by (ii) the Merger Consideration, without interest and subject to applicable withholding.
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Closing Conditions
. The consummation of the Merger is subject to the satisfaction or waiver of specified closing conditions, including
(i) the approval of the Merger by the holders of a majority of the outstanding shares of Common Stock entitled to vote thereon, (ii) the absence of any law, statute, rule, regulation, executive order, decree, ruling, injunction or other
order that prohibits the consummation of the Merger, (iii) the expiration or termination of the applicable waiting period (and any extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and all other required
consents under any applicable antitrust laws (
Antitrust Approval
), (iv) the accuracy of each partys representations and warranties (subject to customary materiality qualifiers), (v) each partys performance in all
material respects of its obligations under the Merger Agreement, and (vi) the absence of the occurrence of a Company Material Adverse Effect (as such term is defined in the Merger Agreement) since the date of the Merger Agreement.
Representations, Warranties and Covenants
. The Merger Agreement includes customary
representations, warranties and covenants of the Company, Parent and Merger Sub. These covenants include an obligation of the Company to, subject to certain exceptions, and to cause its subsidiaries to, conduct its and their respective businesses in
the ordinary course of business consistent with past practice from the date of the Merger Agreement through the Effective Time. The Merger Agreement also contains covenants that require, subject to certain limited exceptions, (i) the Company to
file a proxy statement with the United States Securities and Exchange Commission (the
SEC
) and call and hold a stockholder meeting and (ii) the Company Board to recommend that the Companys stockholders approve the
Merger and adopt the Merger Agreement. The Merger Agreement also requires Parent and Merger Sub to promptly undertake any and all actions required to complete lawfully the Merger and the other transactions contemplated by the Merger Agreement and
any and all actions necessary or advisable to avoid or remove commencement of any action by or on behalf of any governmental entity that would prohibit the consummation of the Merger.
Non-Solicitation
. The Merger Agreement prohibits the Company, its subsidiaries and their
respective representatives from soliciting third-party proposals relating to any direct or indirect acquisition or purchase of a business that constitutes an Alternative Proposal (as such term is defined in the Merger Agreement), and restricts the
Companys ability to furnish
non-public
information to, or participate in any discussions or negotiations with, any third party with respect to any Alternative Proposal, or approve or recommend an
Alternative Proposal, subject to certain limited exceptions. Prior to the receipt of the approval of the Merger from the Companys stockholders, however, the Company may, under certain circumstances, provide information relating to the Company
and its subsidiaries to, and participate or engage in discussions with, third parties that have made an acquisition proposal that was not solicited in breach, in any material respect, of the solicitation restrictions if the Company Board determines
in good faith (after consultation with its outside legal counsel and financial advisors) that such acquisition proposal constitutes, or would reasonably be expected to result in, a Superior Proposal (as such term is defined in the Merger Agreement)
and the Company Board determines in good faith (after consultation with its outside legal counsel and financial advisors) that the failure to do so would reasonably be expected to be inconsistent with the Company Boards fiduciary duties
under applicable law. The Company must notify Parent of any Alternative Proposal or Inquiry (as such term is defined in the Merger Agreement) within two business days and must provide Parent information regarding the Alternative Proposal or Inquiry,
including the identity of the party making the Alternative Proposal or Inquiry. In response to a Superior Proposal, the Company Board may terminate the Merger Agreement to enter into an alternative acquisition agreement with respect to such Superior
Proposal and pay a termination fee (as discussed below). Prior to terminating the Merger Agreement, the Company Board must provide Parent at least three business days notice of the Superior Proposal and, if requested by Parent, engage in good
faith negotiations with Parent to make such adjustments in the terms and conditions of the Merger Agreement so that such acquisition proposal would cease to constitute a Superior Proposal. The Company Board may also change its recommendation with
respect to the Merger (but not terminate the Merger Agreement) in response to certain events that materially affect the Company if the Company Board determines in good faith, after notifying and negotiating with Parent to revise the terms of the
Merger Agreement, that its fiduciary duties require such a change.
Termination; Termination Fees.
The Merger Agreement also
provides for certain termination rights for both the Company and Parent. The Company is obligated to pay Parent a termination fee in certain circumstances, including (i) if the Company Board changes its recommendation and Parent terminates the
Merger Agreement or (ii) if the Company terminates the Merger Agreement in accordance with certain procedures set forth in the Merger Agreement in order to enter into a definitive agreement with a third party with respect to a Superior
Proposal. In addition, the Company is obligated to pay Parent a termination fee (a) if an Alternative Proposal has been publicly made or proposed (and not withdrawn or abandoned) after the date of the Merger Agreement and prior to the
termination of the Merger Agreement, (b) the Merger Agreement is terminated (1) by either party at the End Date (as such term is defined in the Merger Agreement) and certain closing conditions have been satisfied, but the Merger has not
been consummated or (2) by Parent due to a breach of the Companys representations and warranties or covenants, and (c) within 12 months after such termination the Company enters into a written agreement to consummate a transaction
that involves more than 50% of the outstanding voting securities or more than 50% of the consolidated revenues, net income or assets of the Company and its subsidiaries, taken as a whole, and such transaction is consummated.
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Parent is obligated to pay the Company a termination fee in certain circumstances, including if
the Merger Agreement is terminated (i) by the Company due to Parent and Merger Sub failing to consummate the Merger after all closing conditions are satisfied, (ii) by either party at the End Date and any Antitrust Approval has not been
received, (iii) by either party due to a legal restraint that relates to an antitrust law as a result of a proceeding brought by a governmental entity, or (iv) by the Company due to Parent or Merger Sub breaching their representations,
warranties or covenants in a manner that would cause the related closing conditions to not be satisfied.
Specific Enforcement
. The
Merger Agreement also provides that either party may specifically enforce the other partys obligations under the Merger Agreement, provided that the Company may only cause Parent to fund the equity financing if certain conditions are
satisfied, including the funding or availability of the debt financing.
Funding
. Parent and Merger Sub have obtained equity and
debt financing commitments to finance the transactions contemplated by the Merger Agreement. Vintage RTO, L.P., a Delaware limited partnership (
Vintage RTO
), an entity affiliated with Parent, and B. Riley Financial, Inc., a
Delaware corporation (
B. Riley
and, when used collectively with Vintage RTO, the
Guarantors
), a material investor in both common and preferred equity interests of Vintage Rodeo, L.P., a Delaware limited
partnership, the sole member of Parent, have executed a limited guarantee in favor of the Company (the
Limited Guarantee
). In the aggregate, under the Limited Guarantee, the Guarantors jointly and severally guarantee the payment
of the termination fee if payable by Parent to the Company and certain reimbursement obligations that may be owed by Parent to the Company pursuant to the Merger Agreement.
The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the full
text of the Merger Agreement.
The Merger Agreement and the above description of the Merger Agreement have been included to provide
investors and security holders with information regarding the terms of the Merger Agreement and are not intended to provide any other factual information about the Company, Parent, Merger Sub or their respective subsidiaries or affiliates. The
representations and warranties contained in the Merger Agreement were made only for purposes of that agreement and as of specific dates, were solely for the benefit of the parties to the Merger Agreement, may be subject to a contractual standard of
materiality different from what might be viewed as material to stockholders, and may be subject to limitations agreed upon by the parties, including being qualified by confidential disclosures made by the parties to each other. Investors should not
rely on the representations and warranties contained in the Merger Agreement as characterizations of the actual state of facts or condition of the Company, Parent, Merger Sub or any of their respective subsidiaries, affiliates or businesses.