COMPENSATION COMMITTEE REPORT
The Compensation Committee operates pursuant to a written charter adopted by the Board of Directors and available through the Company’s website, http://www.aarons.com. The Compensation Committee is composed of four independent members of the board as defined under the listing standards of the New York Stock Exchange and under the committee’s charter. The Compensation Committee is responsible for assisting the Board of Directors in fulfilling its oversight responsibilities with respect to executive and director compensation.
In keeping
with its responsibilities, the Compensation Committee has reviewed and discussed with management the Compensation Discussion and
Analysis section contained in the joint proxy statement/prospectus related to the Company’s 2020 Annual Meeting of Shareholders
and incorporated in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. Based on such review
and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis
section be included in the joint proxy statement/prospectus and incorporated into the Annual Report on Form 10-K.
This report is respectfully submitted by the Compensation Committee of the Board of Directors.
Douglas C. Curling (Chair)
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Kathy T. Betty
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Cynthia N. Day
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Ray M. Robinson
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Table of Contents
EXECUTIVE COMPENSATION
The following Summary Compensation Table summarizes the total compensation earned by, or awarded to, our named executive officers in 2019, 2018 and 2017, as applicable.
Summary Compensation Table
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Non-Equity
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Stock
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Option
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Incentive
Plan
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All
Other
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Salary
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Awards(1)
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Awards(2)
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Compensation(3)
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Compensation(4)
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Total
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Name
and Principal Position
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Year
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($)
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($)
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($)
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($)
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($)
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($)
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John W. Robinson III
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2019
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800,000
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3,900,960
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1,311,159
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967,900
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1,171
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6,981,190
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Chief Executive Officer
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2018
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784,615
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3,900,368
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1,444,438
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1,016,300
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6,317
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7,152,038
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2017
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700,000
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3,900,874
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1,258,389
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1,156,100
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3,846
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7,019,209
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Steven A. Michaels
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2019
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625,000
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1,056,510
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354,971
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604,900
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26,031
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(5),(6)
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2,667,412
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Chief Financial Officer &
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2018
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613,462
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1,054,843
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391,006
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635,700
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34,784
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2,729,795
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President of Strategic
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2017
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550,000
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826,000
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266,247
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789,900
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19,452
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2,451,599
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Operations
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Ryan K. Woodley
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2019
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600,000
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1,802,569
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605,331
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585,300
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11,740
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(5)
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3,604,940
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Chief Executive Officer
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2018
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574,616
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1,802,024
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666,893
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602,900
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11,540
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3,657,973
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Progressive
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2017
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435,000
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1,305,455
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421,173
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603,200
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11,340
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2,776,168
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Douglas A. Lindsay
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2019
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600,000
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1,014,250
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340,866
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542,800
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12,010
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(5)
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2,509,926
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President,
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2018
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584,615
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1,015,145
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375,127
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610,100
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25,418
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2,610,405
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Aaron’s Business
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2017
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500,000
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375,899
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121,068
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744,600
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17,480
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1,759,047
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Curtis L. Doman
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2019
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475,000
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1,071,139
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359,672
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463,300
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12,010
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(5)
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2,381,121
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Chief Innovation Officer
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2018
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463,462
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1,070,439
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395,968
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486,200
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11,810
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2,427,879
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Progressive
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2017
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400,000
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900,202
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290,615
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554,600
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11,610
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2,157,027
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____________________
(1)
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Represents the aggregate grant date fair value of awards of time-based RSUs, RSAs, and performance shares recognized by the Company as required by Financial Accounting Standards Board Codification Topic 718. See Note 13 to the Company’s consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, for a discussion of the assumptions used in calculating these amounts. For the time-based RSUs and RSAs, the fair value is calculated using the closing stock price on the date of grant. For the performance shares, the fair value is also the closing stock price on the date of grant, multiplied by a number of shares that is based on the targeted attainment level, which represents the probable outcome of the performance condition on the date of grant. The amounts do not reflect the value actually realized or that may ultimately be realized by our named executive officers. Assuming the highest performance conditions for the performance share awards granted in 2019, the grant date fair value would be: Mr. Robinson $5,201,280; Mr. Michaels $1,407,596; Mr. Woodley $2,402,341; Mr. Doman $1,427,101; and Mr. Lindsay $1,352,333.
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(2)
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Represents the grant date fair value of awards of stock options recognized by the Company as required by the Financial Accounting Standards Board Codification Topic 718. The Company determines the fair value of stock options on the grant date using a Black-Scholes-Merton option pricing model that incorporates expected volatility, expected option life, risk-free interest rates, and expected dividend yields. See Note 13 to the Company’s consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, for a discussion of the assumptions used in calculating these amounts.
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(3)
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Reflects the value of the cash bonus earned under our annual cash incentive award program.
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(4)
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We provide a limited number of perquisites to our named executive officers and value those perquisites based on their aggregate incremental cost to the Company. We calculated the incremental cost of Company aircraft use based on the average variable operating costs to the Company. Variable operating costs include fuel costs, maintenance fees, positioning costs, catering costs, landing/ramp fees, and the amount, if any, of disallowed tax deductions associated with the personal use of Company aircraft. The total annual variable operating costs are divided by the annual number of flight hours flown by the aircraft to derive an average variable cost per flight hour. This average variable cost per flight hour is then multiplied by the flight hours flown for personal use to
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derive the incremental cost to the Company. This method excludes fixed costs that do not change based on usage, such as pilots’ and other employees’ salaries and benefits and hangar expenses. Aggregate incremental cost, if any, of travel by the executive’s family or other guests when accompanying the executive is also included.
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(5)
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Includes matching contributions in the amount of $11,200 made by the Company to Messr. Michaels’, Woodley’s, Doman’s, or Lindsay’s account, as applicable, in the Company’s 401(k) plan.
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(6)
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Includes matching contributions in the amount of $11,200 made by the Company to Messr. Michaels’ account as part of the Nonqualified Deferred Compensation plan. These amounts are also included in the Nonqualified Deferred Compensation section below.
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Grants of Plan-Based Awards in Fiscal Year 2019
Our Compensation Committee granted restricted stock, stock options and performance shares to our named executive officers during 2019. Set forth below is information regarding awards granted in 2019.
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Potential Payouts Under Non-
Equity Incentive Plan
Awards(1)
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Estimated Future
Payouts Under Equity
Incentive Plan Awards(2)
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All
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All
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Other
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Other
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Grant
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Stock
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Option
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Exercise
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Date Fair
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Awards:
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Awards:
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or Base
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Value of
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Number
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Number of
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Price of
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Stock and
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of Shares
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Securities
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Option
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Option
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Grant
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Threshold
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Target
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Maximum
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Threshold
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Target
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Maximum
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of Stock
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Underlying
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Awards
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Awards(5)
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Name
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Date
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($)
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($)
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($)
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(#)
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(#)
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(#)
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or Units(3)
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Options(4)
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($/Sh)
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($)
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John W. Robinson III
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250,000
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1,000,000
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1,850,000
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2/21/2019
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12,000
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48,000
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96,000
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2,600,640
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2/21/2019
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24,000
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1,300,320
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2/21/2019
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66,930
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54.18
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1,311,159
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Steven A. Michaels
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156,250
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625,000
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1,156,250
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2/21/2019
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3,248
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12,990
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25,980
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703,798
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2/21/2019
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6,510
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352,712
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2/21/2019
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18,120
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54.18
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354,971
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Ryan K. Woodley
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150,000
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600,000
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1,110,000
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2/21/2019
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5,543
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22,170
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44,340
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1,201,171
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2/21/2019
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11,100
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601,398
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2/21/2019
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30,900
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54.18
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605,331
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Douglas A. Lindsay
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150,000
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600,000
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1,110,000
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2/21/2019
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3,120
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12,480
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24,960
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676,166
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2/21/2019
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6,240
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338,083
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2/21/2019
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17,400
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54.18
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340,866
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Curtis L. Doman
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118,750
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475,000
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878,750
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2/21/2019
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3,293
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13,170
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26,340
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713,551
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2/21/2019
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6,600
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357,588
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2/21/2019
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18,360
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54.18
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359,672
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____________________
(1)
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For the named executive officers, represents the amounts that could be earned under the annual cash incentive award program based on performance against pre-determined goals for revenue and Adjusted EBITDA, measured on a Company-wide basis or for Aaron’s Business or Progressive, based on each executive’s organizational level. The amounts actually earned are included in the non-equity incentive plan compensation column of the Summary Compensation Table.
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(2)
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Represents the performance shares granted under our 2019 long-term equity incentive award program. Performance metrics for Messrs. Robinson and Michaels included consolidated Company revenues, consolidated Company Adjusted EBITDA and consolidated adjusted return on capital. Performance metrics for Messrs. Woodley and Doman included Progressive Adjusted EBITDA, Progressive revenues and consolidated Company total revenues. Performance metrics for Mr. Lindsay included consolidated Company revenues, revenues for the Aaron’s Business and Adjusted EBITDA for the Aaron’s Business. For all named executive officers who received awards, the threshold number of shares represents 25% of target, and the maximum number of shares represents 200% of target. Any awards earned vest in three approximately equal increments over a three-year period on March 7, 2020, 2021 and 2022. Based on our performance for the year, performance shares were earned under the 2019 program at 89.1% of target for Messrs. Robinson and Michaels, at 87.9% of target for Messrs. Woodley and Doman, and at 78.1% of target for Mr. Lindsay.
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Table of Contents
(3)
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Includes the time-based RSAs granted to each of our named executive officers under our 2019 long-term equity incentive award program, that are expected to vest in three approximately equal increments over a three-year period on each of March 7, 2020, 2021 and 2022.
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(4)
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Includes stock options granted under our 2019 long-term equity incentive award program that are expected to vest in three approximately equal increments over a three-year period on each of March 7, 2020, 2021 and 2022.
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(5)
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Represents the aggregate grant date fair value of awards recognized by the Company as required by Financial Accounting Standards Board Codification Topic 718. See Note 13 to the Company’s consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 for a discussion of the assumptions used in calculating these amounts.
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Employment Agreements with Named Executive Officers
Employment Agreement with Mr. Robinson. In connection with his appointment as Chief Executive Officer, effective November 10, 2014, we entered into a new employment agreement with Mr. Robinson that superseded our prior agreement with him that was entered into when we acquired the Progressive segment.
Mr. Robinson’s compensation as Chief Executive Officer was established by the Compensation Committee after considering the following: his compensation as Chief Executive Officer of Progressive, the significant increase in his responsibilities as a result of his appointment as Chief Executive Officer of the Company, market compensation levels generally for chief executive officers across the Company’s historical retail-oriented peer group, and the need to provide compensation opportunities to Mr. Robinson commensurate with his experience in and knowledge of the industry.
Mr. Robinson’s current agreement contains a rolling, three-year term although the Company may, upon proper notice, cease the automatic extension. The agreement provides for an initial annual base salary of $700,000, which was increased to $800,000 in 2019, for Mr. Robinson, a target annual cash incentive award of 100% of base salary, and for 2015 an annual target long-term incentive award with a value of $5,200,000. The agreement also provided for an initial equity grant of 5,000 time-based RSUs that vest on the first anniversary of the grant date.
Pursuant to this agreement, Mr. Robinson is entitled to participate in any of the Company’s present and future stock or cash bonus plans that are generally available to the Company’s executive officers. Mr. Robinson is also entitled to paid vacation, life insurance, health insurance, fringe benefits and such other employee benefits generally made available by the Company to its executive officers. Specific benefits will be provided in the event Mr. Robinson’s employment is terminated without cause by the Company or by him for good reason which are discussed in greater detail in “—Potential Payments Upon Termination or Change in Control.” Mr. Robinson’s employment agreement also contains customary confidentiality, non-competition, non-solicitation and release provisions in favor of the Company.
Employment Arrangement with Mr. Woodley. In connection with our acquisition of Progressive in 2014, we entered into an employment agreement with Mr. Woodley to serve as the Chief Operating Officer / Chief Financial Officer of Progressive at an initial annual base salary of $350,000 and a four-year term. Under the terms of his employment agreement, Mr. Woodley was eligible to participate in the Company’s annual cash and long-term incentive programs. Mr. Woodley would have received benefits under his agreement in the event of death or disability. Mr. Woodley also agreed to customary confidentiality, non-competition, non-solicitation and release provisions in favor of the Company. The Company subsequently appointed Mr. Woodley as Chief Executive Officer of Progressive in January 2015. The Company did not enter into an amended or new employment agreement with Mr. Woodley upon his appointment as CEO of Progressive. Mr. Woodley’s employment agreement expired in April 2018 and no new employment agreement is in place.
Employment Arrangement with Mr. Doman. In connection with our acquisition of Progressive in 2014, we entered into an employment agreement with Mr. Doman to serve as the Chief Technology Officer of Progressive at an initial annual base salary of $350,000 and a four-year term. Under the terms of his employment agreement, Mr. Doman was eligible to participate in the Company’s annual cash and long-term incentive programs. Mr. Doman would have received benefits under his agreement in the event of death or disability. Under his employment agreement, Mr. Doman also agreed to customary confidentiality, non-competition, non-solicitation and release provisions in favor of the Company. Mr. Doman’s employment agreement expired in April 2018 and no new employment agreement is in place.
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Aaron’s, Inc. Amended and Restated 2015 Equity and Incentive Plan
General. The purpose of the Aaron’s, Inc. Amended and Restated 2015 Equity and Incentive Plan, which was approved by our shareholders at an annual meeting on May 8, 2019, is to promote the long-term growth and profitability of Aaron’s and our subsidiaries by providing employees, directors, consultants, advisors and other persons who work for us and our subsidiaries with incentives to maximize shareholder value and otherwise contribute to our continued success. In addition, we believe the A&R 2015 Plan is a critical component to help us attract, retain and reward the best talent and align their interests with our shareholders. The A&R 2015 Plan amended our previous 2015 Equity and Incentive Plan to among other things:
●
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Increase the remaining number of shares of common stock available for issuance by 3,000,000 shares; and
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●
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Revise the 2015 Equity and Incentive Plan in light of amendments to Internal Revenue Code Section 162(m) in the Tax Act to remove references to and provisions implemented in order to comply with Internal Revenue Code Section 162(m), including the individual limits on the number of awards that may be granted in any one fiscal year to any participant (other than the limitation on the number of options and SARs (as defined below) that can be granted in any one fiscal year).
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Administration of the A&R 2015
Plan. The Board of Directors may appoint the Compensation Committee or such
other committee consisting of two or more members (in each case, the “Committee”) to administer the A&R 2015
Plan, and the Board of Directors has currently designated the Compensation Committee to serve this function. The Committee
has the right to select the persons who receive awards under the A&R 2015 Plan, to set the terms and conditions of such awards (including the term, exercise price, vesting conditions, and the consequences of termination of employment), and to interpret and administer the A&R 2015 Plan. Subject to the express provisions of the A&R 2015 Plan, the Committee is authorized and empowered to do all things that the Committee in its discretion determines to be necessary or appropriate in connection with the administration and operation of the A&R 2015 Plan.
Eligible
Participants. Employees of the Company or certain affiliates, non-employee members of the Board of Directors, and any other
individual who provides bona fide services to the Company or certain affiliates not in connection with the offer or sale of securities
in a capital raising transaction (subject to certain limitations) will be eligible for selection by the Committee for the grant
of awards under the A&R 2015 Plan.
Types of Awards. The A&R 2015 Plan provides for the grant of non-qualified stock options (“NQSOs”), incentive stock options (“ISOs”), stock appreciation rights (“SARs”), restricted stock, RSUs, performance shares, performance units, annual incentive awards and other stock-based awards to eligible participants. ISOs may only be granted to employees of the Company or its subsidiaries.
Shares
Available for Issuance. The aggregate number of shares that will be available for issuance pursuant to awards granted under
the A&R 2015 Plan is 8,566,816 shares (the “Share Pool”), subject to adjustment as described in the A&R 2015
Plan, of which 2,872,589 shares remain available for issuance as of May 4, 2020. All of the Share Pool may, but is not required
to, be issued pursuant to ISOs. Subject to adjustment as described in the A&R 2015 Plan, the maximum number of options and
SARs that, in the aggregate, may be granted in any one fiscal year to any participant is 1,000,000. The shares issued by the Company
under the A&R 2015 Plan will be authorized but unissued shares or shares currently held (or subsequently acquired) as treasury
shares, including shares purchased on the open market or in private transactions.
If shares awarded under the A&R 2015 Plan are not issued, or are reacquired by the Company, as a result of a forfeiture of restricted stock or an RSU, or the termination, expiration or cancellation of an NQSO, ISO, SAR, performance share or performance unit, or the settlement of an award in cash in lieu of shares, that number of shares will be added back to the Share Pool. If the exercise price of an option, or the purchase price and/or tax withholding obligation under any award is satisfied by the Company retaining shares or by the participant tendering shares (either by actual delivery or attestation), the number of shares so retained or tendered shall be deemed delivered for purposes of determining the Share Pool and shall not be available for further awards under the A&R 2015 Plan. To the extent a SAR is settled in shares of common stock, the gross number of shares subject to such SAR shall be deemed delivered for purposes of determining the Share Pool and shall not be available for further awards under the A&R 2015 Plan. Shares reacquired by the Company on the open market or otherwise using cash proceeds from the exercise of options shall not be added back to the Share Pool.
Amendment and Termination. The Board of Directors or the Committee may amend or terminate the A&R 2015 Plan in whole or in part at any time, but the amendment or termination cannot adversely affect any rights or obligations with respect to an award previously granted without the affected participant’s written consent. The Company must obtain the approval of the shareholders before amending the A&R 2015 Plan to the extent required by Section 422 of the Code or the rules of the NYSE or other applicable law.
The Committee may amend an outstanding award agreement in a manner not inconsistent with the terms of the A&R 2015 Plan, but the amendment will not be effective without the participant’s written consent if the amendment is materially adverse to the participant. The Committee cannot amend outstanding awards, without shareholder
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approval, to reduce the exercise price of outstanding awards, or cancel outstanding options or SARs in exchange for cash, another award or stock option or SAR with an option exercise price or SAR price that is less than the option exercise price or SAR price of the original stock option or SAR.
Amended and Restated 2001 Stock Option and Incentive Award Plan
The Aaron Rents, Inc. 2001 Stock Option and Incentive Award Plan, as amended, or the “2001 Incentive Plan,” was terminated and replaced by the 2015 Equity and Incentive Plan which was subsequently amended by the A&R 2015 Plan. The 2001 Incentive Plan is no longer open to participation by any of our employees, officers or directors, and no further awards may be granted under the 2001 Incentive Plan. While the plan remained in effect, the Compensation Committee administered the 2001 Incentive Plan and had the exclusive right to set the terms and conditions of grants and awards, including the term, exercise price, vesting conditions (including vesting based on the Company’s performance or upon share price performance), and consequences of termination of employment. The Compensation Committee also selected the persons who receive such grants and awards and interpreted and administered the 2001 Incentive Plan. The last awards granted under the 2001 Incentive Plan vested in 2018, and the last stock options granted under that plan will expire in 2025.
Aaron’s, Inc. Employee Stock Purchase Plan
General. The purpose of the Aaron’s, Inc. Employee Stock Purchase Plan, which we refer to as the “ESPP”, which was approved by our shareholders at an annual meeting on May 9, 2018, is to encourage ownership of our common stock by eligible employees of Aaron’s and certain Aaron’s subsidiaries which have been designated as eligible to participate in the ESPP. Specifically, the ESPP provides eligible employees of Aaron’s and certain Aaron’s subsidiaries an opportunity to use payroll deductions to purchase shares of our common stock on periodic purchase dates at a discount. The Compensation Committee believes that the ESPP is a valued benefit for our eligible employee base. We believe that allowing employees to purchase shares of our common stock through the ESPP motivates high levels of performance and provides an effective means of encouraging employee commitment to our success and recruiting new employees. We expect that employee participation in the ownership of the business through the ESPP will be to the mutual benefit of both our employees and Aaron’s. Our Board of Directors or the Compensation Committee may amend, suspend or terminate the ESPP at any time. However, no amendment may increase the number of shares of common stock available under the ESPP, change the employees eligible to participate, or cause the ESPP to cease to be an “employee stock purchase plan” within the meaning of Section 423 of the Code, without obtaining shareholder approval within 12 months before or after such amendment.
Administration. The ESPP is administered by the Compensation Committee, although the Compensation Committee may, where permitted by the terms of the ESPP and applicable law, delegate administrative tasks under the ESPP to the services of an agent and/or Aaron’s employees to assist with the administration of the ESPP. Subject to the provisions of the ESPP and applicable law, the Compensation Committee or its delegate will have full and exclusive authority to interpret the terms of the ESPP and determine eligibility to participate in the ESPP. In all cases, the ESPP is required to be administered in such a manner so as to comply with applicable requirements of Section 423 of the Code. All determinations of the Compensation Committee are final and binding on all persons having an interest in the ESPP.
Eligibility.
Employees eligible to participate in the ESPP for a given offering period generally include employees who are employed on
the first day of the offering period, or the enrollment date. Employees who have not been employed for at least six months or
that customarily work 20 hours per week or less are not eligible to participate in the ESPP. Highly compensated employees (as
defined in Section 414(q) of the Code) who are subject to the disclosure requirements of Section 16(a) of the Exchange Act are
not eligible to participate in the ESPP. Finally, employees who own (or are deemed to own through attribution) 5% or more of the
combined voting power or value of all our classes of stock or of one of our subsidiaries are not allowed to participate in the
ESPP.
Offering Period, Purchase of Shares. Under the ESPP, participants have the ability to purchase shares of our common stock at a discount during a series of successive offering periods, which will commence and end on such dates as determined by the Compensation Committee or its delegate. Unless otherwise determined by the Compensation Committee or its delegate, each offering period will be six months in length. However, in no event may an offering period be longer than 27 months in length.
Shares
Available for Issuance. The maximum number of shares of our common stock authorized for sale under the ESPP is 200,000. However,
a participant may not purchase more than 500 shares in each offering period and may not subscribe for more than $25,000 in fair
market value of shares of our common stock (determined at the time the ability to purchase shares of our common stock is granted)
during any calendar year. The shares made available for sale under the ESPP may be authorized but unissued shares, treasury shares,
reacquired shares reserved for issuance under the ESPP, or shares acquired on the open market. As of December 31, 2019, the aggregate
number of shares of common stock that may be issued under the ESPP was 128,134.
62
Table of Contents
Outstanding Equity Awards at 2019 Fiscal Year-End
The following table provides information on outstanding stock option and stock awards held by the named executive officers, including both unexercised and unvested awards, as of December 31, 2019. The market value of the stock awards is based upon the closing market price for the Company’s common stock as of December 31, 2019, which was $57.11.
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
Plan Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
Market or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Awards:
|
|
Payout Value of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market Value
|
|
Number of
|
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Unearned
|
|
|
Number of
|
|
Number of
|
|
|
|
|
|
|
|
|
of Shares
|
|
Unearned
|
|
Shares,
|
|
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Securities
|
|
Securities
|
|
|
|
|
|
Number of
|
|
or Units
|
|
Shares,
|
|
Units or
|
|
|
Underlying
|
|
Underlying
|
|
Option
|
|
|
|
Shares of
|
|
of Stock
|
|
Units or
|
|
Other Rights
|
|
|
Unexercised
|
|
Unexercised
|
|
Exercise
|
|
Option
|
|
Stock That
|
|
That Have
|
|
Other Rights
|
|
That Have Not
|
Name of
|
|
Options
|
|
Options
|
|
Price
|
|
Expiration
|
|
Have Not
|
|
Not Vested
|
|
That Have Not
|
|
Vested
|
Executive
|
|
Exercisable
|
|
Unexercisable
|
|
($)
|
|
Date
|
|
Vested
|
|
($)(1)
|
|
Vested
|
|
($)(1)
|
John W. Robinson III
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
160,919
|
|
|
—
|
|
|
27.80
|
|
12/5/2024
|
|
|
|
|
|
|
|
|
|
|
|
|
182,250
|
|
|
—
|
|
|
22.64
|
|
2/26/2026
|
|
|
|
|
|
|
|
|
|
|
|
|
98,120
|
(2)
|
|
49,060
|
(2)
|
|
27.18
|
|
2/24/2027
|
|
|
|
|
|
|
|
|
|
|
|
|
29,110
|
(3)
|
|
58,220
|
(3)
|
|
47.26
|
|
3/2/2028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66,930
|
(4)
|
|
54.18
|
|
2/21/2029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,950
|
(5)
|
|
910,905
|
|
44,774
|
|
|
2,557,043
|
|
|
|
|
|
|
|
|
|
|
|
|
18,340
|
(6)
|
|
1,047,397
|
|
36,314
|
|
|
2,073,893
|
|
|
|
|
|
|
|
|
|
|
|
|
24,000
|
(7)
|
|
1,370,640
|
|
48,000
|
(8)
|
|
2,741,280
|
Steven A. Michaels
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,735
|
|
|
—
|
|
|
29.77
|
|
2/18/2024
|
|
|
|
|
|
|
|
|
|
|
|
|
7,597
|
|
|
—
|
|
|
29.25
|
|
4/15/2024
|
|
|
|
|
|
|
|
|
|
|
|
|
25,200
|
|
|
—
|
|
|
28.04
|
|
3/10/2025
|
|
|
|
|
|
|
|
|
|
|
|
|
38,550
|
|
|
—
|
|
|
22.64
|
|
2/26/2026
|
|
|
|
|
|
|
|
|
|
|
|
|
20,760
|
(2)
|
|
10,380
|
(2)
|
|
27.18
|
|
2/24/2027
|
|
|
|
|
|
|
|
|
|
|
|
|
7,880
|
(3)
|
|
15,760
|
(3)
|
|
47.26
|
|
3/2/2028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,120
|
(4)
|
|
54.18
|
|
2/21/2029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,380
|
(5)
|
|
193,032
|
|
9,477
|
|
|
541,231
|
|
|
|
|
|
|
|
|
|
|
|
|
4,960
|
(6)
|
|
283,266
|
|
9,820
|
|
|
560,820
|
|
|
|
|
|
|
|
|
|
|
|
|
6,510
|
(7)
|
|
371,786
|
|
12,990
|
(8)
|
|
741,859
|
Ryan K. Woodley
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,600
|
|
|
—
|
|
|
32.20
|
|
2/6/2025
|
|
|
|
|
|
|
|
|
|
|
|
|
61,050
|
|
|
—
|
|
|
22.64
|
|
2/26/2026
|
|
|
|
|
|
|
|
|
|
|
|
|
32,840
|
(2)
|
|
16,420
|
(2)
|
|
27.18
|
|
2/24/2027
|
|
|
|
|
|
|
|
|
|
|
|
|
13,440
|
(3)
|
|
26,880
|
(3)
|
|
47.26
|
|
3/2/2028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,900
|
(4)
|
|
54.18
|
|
2/21/2029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,340
|
(5)
|
|
304,967
|
|
17,691
|
|
|
1,010,333
|
|
|
|
|
|
|
|
|
|
|
|
|
8,480
|
(6)
|
|
484,293
|
|
16,924
|
|
|
966,530
|
|
|
|
|
|
|
|
|
|
|
|
|
11,100
|
(7)
|
|
633,921
|
|
22,170
|
(8)
|
|
1,266,129
|
63
Table of Contents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
Plan Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
Market or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Awards:
|
|
Payout Value of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market Value
|
|
Number of
|
|
Unearned
|
|
|
Number of
|
|
Number of
|
|
|
|
|
|
|
|
|
of Shares
|
|
Unearned
|
|
Shares,
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
Number of
|
|
or Units
|
|
Shares,
|
|
Units or
|
|
|
Underlying
|
|
Underlying
|
|
Option
|
|
|
|
Shares of
|
|
of Stock
|
|
Units or
|
|
Other Rights
|
|
|
Unexercised
|
|
Unexercised
|
|
Exercise
|
|
Option
|
|
Stock That
|
|
That Have
|
|
Other Rights
|
|
That Have Not
|
Name of
|
|
Options
|
|
Options
|
|
Price
|
|
Expiration
|
|
Have Not
|
|
Not Vested
|
|
That Have Not
|
|
Vested
|
Executive
|
|
Exercisable
|
|
Unexercisable
|
|
($)
|
|
Date
|
|
Vested
|
|
($)(1)
|
|
Vested
|
|
($)(1)
|
Douglas A. Lindsay
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,390
|
|
|
—
|
|
|
22.65
|
|
2/1/2026
|
|
|
|
|
|
|
|
|
|
|
|
|
9,440
|
(2)
|
|
4,720
|
(2)
|
|
27.18
|
|
2/24/2027
|
|
|
|
|
|
|
|
|
|
|
|
|
7,560
|
(3)
|
|
15,120
|
(3)
|
|
47.26
|
|
3/2/2028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,400
|
(4)
|
|
54.18
|
|
2/21/2029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,540
|
(5)
|
|
87,949
|
|
4,516
|
|
|
257,909
|
|
|
|
|
|
|
|
|
|
|
|
|
4,780
|
(6)
|
|
272,986
|
|
9,636
|
|
|
550,312
|
|
|
|
|
|
|
|
|
|
|
|
|
6,240
|
(7)
|
|
356,366
|
|
12,480
|
(8)
|
|
712,733
|
Curtis L. Doman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
—
|
|
|
32.20
|
|
2/6/2025
|
|
|
|
|
|
|
|
|
|
|
|
|
42,000
|
|
|
—
|
|
|
22.64
|
|
2/26/2026
|
|
|
|
|
|
|
|
|
|
|
|
|
22,660
|
(2)
|
|
11,330
|
(2)
|
|
27.18
|
|
2/24/2027
|
|
|
|
|
|
|
|
|
|
|
|
|
7,980
|
(3)
|
|
15,960
|
(3)
|
|
47.26
|
|
3/2/2028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,360
|
(4)
|
|
54.18
|
|
2/21/2029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,680
|
(5)
|
|
210,165
|
|
12,203
|
|
|
696,913
|
|
|
|
|
|
|
|
|
|
|
|
|
5,040
|
(6)
|
|
287,834
|
|
10,050
|
|
|
573,956
|
|
|
|
|
|
|
|
|
|
|
|
|
6,600
|
(7)
|
|
376,926
|
|
13,170
|
(8)
|
|
752,139
|
____________________
(1)
|
Reflects award value based on a share price of $57.11, the closing price of our common stock on December 31, 2019.
|
(2)
|
These options vest in three equal increments on each of March 15, 2018, 2019 and 2020.
|
(3)
|
These options vest in three equal increments on each of March 7, 2019, 2020 and 2021.
|
(4)
|
These options vest in three equal increments on each of March 7, 2020, 2021 and 2022.
|
(5)
|
These RSAs vested on March 15, 2020.
|
(6)
|
One half of these RSAs vested on March 7, 2020 and the remaining one-half are expected to vest on March 7, 2021.
|
(7)
|
These RSAs vest in three equal increments on each of March 7, 2020, 2021 and 2022.
|
(8)
|
Amounts shown reflect performance shares subject to meeting specific performance goals and service periods, which, based on Company performance, are reflected at the target award level. Performance shares earned vest in three equal increments on each of March 7, 2020, 2021 and 2022.
|
64
Table of Contents
Options Exercised and Stock Vested in Fiscal Year 2019
The following table provides information for the named executive officers on (i) stock option exercises during 2019, including the number of shares acquired upon exercise and the value realized and (ii) the number of shares acquired upon the vesting of stock awards, each before payment of any applicable withholding tax and broker commissions.
|
|
Option Awards
|
|
Stock Awards
|
|
|
Number of Shares
|
|
Value Realized on
|
|
Number of Shares
|
|
Value Realized
|
|
|
Acquired on Exercise
|
|
Exercise (1)
|
|
Acquired on Vesting
|
|
on Vesting (2)
|
Name
|
|
(#)
|
|
($)
|
|
(#)
|
|
($)
|
John W. Robinson III
|
|
|
—
|
|
|
|
—
|
|
|
|
144,735
|
|
|
|
7,535,298
|
|
Steven A. Michaels
|
|
|
11,250
|
|
|
|
350,205
|
|
|
|
32,235
|
|
|
|
1,680,954
|
|
Ryan K. Woodley
|
|
|
—
|
|
|
|
—
|
|
|
|
58,696
|
|
|
|
3,059,242
|
|
Douglas A. Lindsay
|
|
|
—
|
|
|
|
—
|
|
|
|
36,614
|
|
|
|
1,871,747
|
|
Curtis L. Doman
|
|
|
—
|
|
|
|
—
|
|
|
|
39,280
|
|
|
|
2,045,291
|
|
____________________
(1)
|
Reflects the value of options exercised based on the difference between the closing price of our common stock on the day of exercise and the applicable exercise price.
|
(2)
|
Reflects the value of shares that vested based on the closing price of our common stock on the applicable vesting date.
|
Pension Benefits
We do not provide defined benefit pension plans for our named executive officers.
Nonqualified Deferred Compensation as of December 31, 2019
Effective July 1, 2009, the Company implemented the Deferred Compensation Plan, an unfunded, nonqualified deferred compensation plan open to a select group of management, highly compensated employees and non-employee directors. On a pre-tax basis, eligible employees can defer receipt of up to 75% of their base salary and up to 75% of their incentive pay compensation, and eligible non-employee directors can defer receipt of up to 100% of their cash director fees. In addition, the Company elected to make restoration matching contributions on behalf of eligible employees to compensate for certain limitations on the amount of matching contributions an employee can receive under the Company’s tax-qualified 401(k) plan.
Compensation deferred under the plan is recorded as a deferred compensation liability, which is recorded in accounts payable and accrued expenses in the consolidated balance sheets. The deferred compensation plan liability was $11.2 million and $10.4 million as of December 31, 2019 and 2018, respectively. Liabilities under the plan are recorded at amounts due to participants, based on the fair value of participants’ selected investments, which consist of equity and debt “mirror” funds. The obligations are unsecured general obligations of the Company and the participants have no right, interest or claim in the assets of the Company, except as unsecured general creditors. The Company has established a rabbi trust to fund obligations under the plan primarily with Company-owned life insurance policies. The value of the assets within the rabbi trust, which is primarily the cash surrender value of the Company-owned life insurance, was $14.4 million and $13.5 million as of December 31, 2019 and 2018, respectively, and is included in prepaid expenses and other assets in the consolidated balance sheets. The Company recorded gains related primarily to changes in the cash surrender value of the Company-owned life insurance plans of $2.1 million and $1.5 million during the years ended December 31, 2019 and 2017, respectively, and recorded losses of $1.2 million during the year ended December 31, 2018, which were recorded within other non-operating income (expense), net in the consolidated statements of earnings.
Benefits of $3.0 million, $2.7 million and $2.3 million were paid during the years ended December 31, 2019, 2018 and 2017, respectively. Effective January 1, 2018 the Company implemented a discretionary match within the nonqualified Deferred Compensation Plan. The match allows eligible employees to receive 100% matching by the Company on the first 3% of contributions and 50% on the next 2% of contributions for a total of a 4% match. The annual match is not to exceed $11,000 for an individual employee and is subject to a three-year cliff vesting schedule. Deferred compensation expense charged to operations for the Company’s matching contributions was $0.4 million during the year ended December 31, 2019 and was not significant during the year ended December 31, 2018.
65
Table of Contents
The following table provides information on accounts of and compensation deferred by our named executive officers pursuant to the Deferred Compensation Plan.
|
|
Named Executive
|
|
|
|
Aggregate
|
|
|
|
|
|
|
Officer
|
|
Company
|
|
Earnings (Loss)
|
|
Aggregate
|
|
Aggregate
|
|
|
Contributions
|
|
Contributions
|
|
in Last
|
|
Withdrawals/
|
|
Balance at
|
Name of Executive
|
|
in 2019
|
|
in 2019(2)
|
|
Fiscal Year
|
|
Distributions
|
|
December31,2019
|
John W. Robinson III(1)
|
|
|
$
|
—
|
|
|
|
$
|
—
|
|
|
|
$
|
—
|
|
|
|
$
|
—
|
|
|
|
$
|
—
|
|
Steven A. Michaels
|
|
|
|
44,285
|
|
|
|
|
11,200
|
|
|
|
|
156,879
|
|
|
|
|
—
|
|
|
|
|
747,339
|
|
Ryan K. Woodley(1)
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
Douglas A. Lindsay(2)
|
|
|
|
30,505
|
|
|
|
|
—
|
|
|
|
|
13,100
|
|
|
|
|
—
|
|
|
|
|
81,366
|
|
Curtis L. Doman(1)
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
____________________
(1)
|
Messrs. Robinson, Woodley, and Doman do not participate in the Deferred Compensation Plan.
|
(2)
|
Messr. Lindsay was a participant in the Deferred Compensation Plan in prior periods but did not participate in 2019. Mr. Lindsay had contributions from 2018 bonus earnings paid into the plan during the first quarter of 2019.
|
(3)
|
Company discretionary match is calculated and allocated in Q1 of 2020 based on contributions made in 2019. Also included in the Other Compensation column of the Summary Compensation Table.
|
Potential Payments Upon Termination or Change in Control
Severance Plan. The Compensation Committee has adopted an Executive Severance Pay Plan, which we refer to as the “Severance Plan,” intended to provide senior managers certain benefits in the event their employment is terminated by us without cause or after a change in control. Mr. Doman is eligible for benefits under this plan which was adopted to assist us in hiring executives, in retaining key leaders who are critical to the ongoing stability of our business, and to foster objectivity across the participants should they be asked to evaluate proposals that may result in the loss of their employment. The Severance Plan also provides important protections to us in terms of confidential information and competitive matters that could arise after their employment is terminated.
In February 2019, we entered into severance and change-in-control agreements with each of Messrs. Michaels, Woodley and Lindsay. Each of those agreements will continue for a term of three years, automatically renewing for one-year periods after the initial term unless either party gives notice not to extend the term. Under each of these agreements, if the executive’s employment is terminated by the Company during the two-year period from the commencement of a change in control (as defined in the agreement) other than for cause (as defined in the agreement), disability or death, or if employment is terminated by the executive for good reason (as defined in the agreement), the executive shall receive (i) severance payments in a lump sum amount equal to two times the sum of (x) the executive’s annual salary plus (y) the executive’s target bonus; (ii) a lump sum cash bonus payment based on the average annual bonus earned by the executive over the two years prior to the year in which the termination occurs, pro-rated based on the number of days in the year in which termination occurs that lapse prior to termination; (iii) a lump sum cash payment equal to the executive’s accrued, unused vacation time; and (iv) a lump sum payment in an amount equal to two years’ worth of the executive’s monthly COBRA premiums for continued coverage under the Company’s group health insurance plan, in each case, payable on the sixtieth day following termination. In the event of termination by the Company other than for cause, disability or death, or termination by the executive for good reason, in the absence of a change in control, or more than two years following a change in control, the executive would be entitled to (i) continued salary for twenty-four months following termination plus bonus payments in an amount equal to one-twelfth of the executive’s target bonus in each of the twenty-four months following termination, payable no less frequently than on a monthly basis beginning on the sixtieth day following termination; and (ii) a lump sum cash payment in an amount equal to the executive’s accrued, unused vacation time, payable on the sixtieth day following termination.
John W. Robinson III. The employment agreement with Mr. Robinson specifies the payments to be provided if Mr. Robinson’s employment is terminated under various scenarios described in the agreement, including death, disability, termination with or without cause, and termination by him with or without good reason.
66
Table of Contents
Other than during the two years following a change in control, if Mr. Robinson is (i) involuntarily terminated by the Company without cause (and other than due to death or disability) or (ii) he voluntarily terminates his employment for good reason, Mr. Robinson would be entitled to receive (v) continued payment of salary for a period of twenty-four months and additional cash payments during each of the twenty-four months equal to one-twelfth of his target annual incentive for the year in which his termination occurs, (w) cash in an amount equal to the pro rata portion (based on the number of days in the year occurring prior to his termination) of the average of his bonuses earned during each of the two calendar years immediately preceding the year in which his termination occurs, or, if termination occurs prior to two full years of employment, the average of the earned bonus for any completed year and his target bonus for the year of termination, (x) cash in an amount after taxes equal to twenty-four multiplied by the difference between the monthly cost of participating in the Company’s medical programs under COBRA and the monthly premium that an active employee would pay for the same coverage, as of the date of termination, (y) vesting of all outstanding equity awards that have been granted to him to the extent provided under the terms of such awards and (z) payment for all accrued paid time off through his date of termination.
During the two years following any change in control, if Mr. Robinson is (i) involuntarily terminated by the Company without cause (and other than due to death or disability) or (ii) voluntarily terminates his employment for good reason, Mr. Robinson would be entitled to receive (v) cash in an amount equal to two times his base salary plus two times his target annual incentive for the year in which his termination occurs, (w) cash in an amount equal to the pro rata portion (based on the number of days in the year occurring prior to his termination) of the average of his bonuses earned during each of the two calendar years immediately preceding the year in which his termination occurs, or, if termination occurs prior to two full years of employment, the average of the earned bonus for any completed year and his target bonus for the year of termination, (x) cash in an amount after taxes equal to twenty-four times the applicable COBRA premium to participate in the Company’s medical programs, as of the date of termination, (y) full vesting of all outstanding equity awards that have been granted to him and (z) payment for all accrued paid time off through his date of termination.
If Mr. Robinson voluntarily terminates his employment (other than for good reason or due to death or disability) or is involuntarily terminated by the Company for cause, Mr. Robinson would be entitled only to accrued but unpaid salary and earned bonus through the last day of his employment.
In the event of Mr. Robinson’s termination due to death or disability, Mr. Robinson (or his estate or beneficiary, as the case may be) would be entitled to receive any amounts accrued through his termination, including base salary and earned bonus. In addition, he would also be entitled to receive a pro rata bonus for the fiscal year in which the termination occurs equal to the bonus that would be payable under any annual bonus plan based on the Company’s performance at the end of the last completed fiscal quarter, prorated based on the number of days he worked in such year.
If any payments to be made or benefits to be provided under our employment agreement with Mr. Robinson would result in a “parachute payment” as defined in Section 280G of the Internal Revenue Code, then such payments or benefits will be reduced to the minimum extent necessary so that no such payment or benefit, as so reduced, would constitute a parachute payment, unless the net after-tax amount Mr. Robinson would receive without this reduction exceeds by at least 10% the net after-tax amount he would receive with this reduction.
67
Table of Contents
Assuming Mr. Robinson’s employment terminated or there was a change in control on December 31, 2019, such payments and benefits have an estimated value of:
John W. Robinson III
|
|
Cash
|
|
Equity
|
|
|
|
|
Termination Event
|
|
Severance
|
|
Acceleration
|
|
Cash Bonus
|
|
Total Value
|
Voluntary Resignation by Executive
|
|
$
|
—
|
|
$
|
—
|
|
$
|
967,900
|
|
$
|
967,900
|
Termination by Company for Cause
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
Termination due to Death
|
|
$
|
—
|
|
$
|
12,656,744
|
|
$
|
967,900
|
|
$
|
13,624,644
|
Termination due to Disability
|
|
$
|
—
|
|
$
|
12,656,744
|
|
$
|
967,900
|
|
$
|
13,624,644
|
Termination by Company without Cause
|
|
$
|
3,640,039
|
|
$
|
—
|
|
$
|
1,086,200
|
|
$
|
4,726,239
|
Termination by Executive for Good Reason
|
|
$
|
3,640,039
|
|
$
|
—
|
|
$
|
1,086,200
|
|
$
|
4,726,239
|
Termination by Company without Cause (following CIC)
|
|
$
|
3,660,116
|
|
$
|
12,640,296
|
|
$
|
1,086,200
|
|
$
|
17,386,612
|
Termination by Executive for Good Reason (following CIC)
|
|
$
|
3,660,116
|
|
$
|
12,939,096
|
|
$
|
1,086,200
|
|
$
|
17,685,412
|
Change in Control (CIC)
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
Steven A. Michaels, Ryan K. Woodley, Douglas A. Lindsay and Curtis L. Doman. Each of Messrs. Michaels, Woodley and Lindsay would receive awards under our severance and change-in-control agreements upon termination of employment during the two-year period from the commencement of a change in control, other than for cause, death or disability or if employment is terminated for good reason. Mr. Doman would receive awards under our Severance Plan upon termination of employment without cause or following a change in control. Under the terms of our Executive Severance Pay Plan that applied to Mr. Doman in 2019, non-equity awards would also be granted in certain instances upon termination of employment or in the event of a change in control. Under the 2015 A&R Plan, vesting is accelerated with respect to outstanding equity awards in certain instances but only upon termination of employment.
Assuming Mr. Michaels’ employment terminated or there was a change in control on December 31, 2019, such payments and benefits have an estimated value of:
Steven A. Michaels
|
|
Cash
|
|
Equity
|
|
Cash
|
|
|
|
Termination Event
|
|
Severance
|
|
Acceleration
|
|
Bonus
|
|
Total Value
|
Voluntary Resignation by Executive
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
Termination by Company for Cause
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
Termination due to Death
|
|
$
|
—
|
|
$
|
3,134,582
|
|
$
|
604,900
|
|
$
|
3,739,482
|
Termination due to Disability
|
|
$
|
—
|
|
$
|
3,134,582
|
|
$
|
604,900
|
|
$
|
3,739,482
|
Termination by Company without Cause
|
|
$
|
2,520,744
|
|
$
|
—
|
|
$
|
—
|
|
$
|
2,520,744
|
Termination by Executive for Good Reason
|
|
$
|
2,500,000
|
|
$
|
—
|
|
$
|
—
|
|
$
|
2,500,000
|
Termination by Company without Cause (following CIC)
|
|
$
|
2,541,489
|
|
$
|
3,130,127
|
|
$
|
712,800
|
|
$
|
6,384,416
|
Termination by Executive for Good Reason (following CIC)
|
|
$
|
2,541,489
|
|
$
|
3,130,127
|
|
$
|
712,800
|
|
$
|
6,384,416
|
Change in Control (CIC)
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
68
Table of Contents
Assuming Mr. Woodley’s employment terminated or there was a change in control on December 31, 2019, such payments and benefits have an estimated value of:
Ryan K. Woodley
|
|
Cash
|
|
Equity
|
|
Cash
|
|
|
|
Termination Event
|
|
Severance
|
|
Acceleration
|
|
Bonus
|
|
Total Value
|
Voluntary Resignation by Executive
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
Termination by Company for Cause
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
Termination due to Death
|
|
$
|
—
|
|
$
|
5,311,616
|
|
$
|
585,300
|
|
$
|
5,896,916
|
Termination due to Disability
|
|
$
|
—
|
|
$
|
5,311,616
|
|
$
|
585,300
|
|
$
|
5,896,916
|
Termination by Company without Cause
|
|
$
|
2,425,392
|
|
$
|
—
|
|
$
|
—
|
|
$
|
2,425,392
|
Termination by Executive for Good Reason
|
|
$
|
2,400,000
|
|
$
|
—
|
|
$
|
—
|
|
$
|
2,400,000
|
Termination by Company without Cause (following CIC)
|
|
$
|
2,450,785
|
|
$
|
5,359,759
|
|
$
|
603,050
|
|
$
|
8,413,594
|
Termination by Executive for Good Reason (following CIC)
|
|
$
|
2,450,785
|
|
$
|
5,359,759
|
|
$
|
603,050
|
|
$
|
8,413,594
|
Change in Control (CIC)
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
Assuming Mr. Lindsay’s employment terminated or there was a change in control on December 31, 2019, such payments and benefits have an estimated value of:
Douglas A. Lindsay
|
|
Cash
|
|
Equity
|
|
Cash
|
|
|
|
Termination Event
|
|
Severance
|
|
Acceleration
|
|
Bonus
|
|
Total Value
|
Voluntary Resignation by Executive
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
Termination by Company for Cause
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
Termination due to Death
|
|
$
|
—
|
|
$
|
2,431,239
|
|
$
|
542,800
|
|
$
|
2,974,039
|
Termination due to Disability
|
|
$
|
—
|
|
$
|
2,431,239
|
|
$
|
542,800
|
|
$
|
2,974,039
|
Termination by Company without Cause
|
|
$
|
2,420,837
|
|
$
|
—
|
|
$
|
—
|
|
$
|
2,420,837
|
Termination by Executive for Good Reason
|
|
$
|
2,400,000
|
|
$
|
—
|
|
$
|
—
|
|
$
|
2,400,000
|
Termination by Company without Cause (following CIC)
|
|
$
|
2,441,673
|
|
$
|
2,465,031
|
|
$
|
677,350
|
|
$
|
5,584,054
|
Termination by Executive for Good Reason (following CIC)
|
|
$
|
2,441,673
|
|
$
|
2,465,031
|
|
$
|
677,350
|
|
$
|
5,584,054
|
Change in Control (CIC)
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
69
Table of Contents
Assuming Mr. Doman’s employment terminated or there was a change in control on December 31, 2019, such payments and benefits have an estimated value of:
Curtis H. Doman
|
|
Cash
|
|
Equity
|
|
Cash
|
|
|
|
Termination Event
|
|
Severance
|
|
Acceleration
|
|
Bonus
|
|
Total Value
|
Voluntary Resignation by Executive
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
Termination by Company for Cause
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
Termination due to Death
|
|
$
|
—
|
|
$
|
3,328,452
|
|
$
|
—
|
|
$
|
3,328,452
|
Termination due to Disability
|
|
$
|
—
|
|
$
|
3,328,452
|
|
$
|
—
|
|
$
|
3,328,452
|
Termination by Company without Cause
|
|
$
|
497,879
|
|
$
|
—
|
|
$
|
—
|
|
$
|
497,879
|
Termination by Executive for Good Reason
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
Termination by Company without Cause (following CIC)
|
|
$
|
1,459,319
|
|
$
|
3,391,383
|
|
$
|
485,800
|
|
$
|
5,336,502
|
Termination by Executive for Good Reason (following CIC)
|
|
$
|
1,459,319
|
|
$
|
3,391,383
|
|
$
|
485,800
|
|
$
|
5,336,502
|
Change in Control (CIC)
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
Employment Agreement Definitions. For purposes of our employment agreement with Mr. Robinson, “Cause” generally means such person’s (i) material fraud, malfeasance, gross negligence, or willful misconduct with respect to business affairs of the Company which is, or is reasonably likely to be if such action were to become known by others, directly or materially harmful to the business or reputation of the Company or any subsidiary of the Company; (ii) conviction of or failure to contest prosecution for a felony or a crime involving moral turpitude; or (iii) material breach of his employment agreement. A termination of Mr. Robinson for Cause based on clause (i) or (iii) of the preceding sentence would take effect 30 days after Mr. Robinson receives from the Company written notice of intent to terminate and the Company’s description of the alleged Cause, unless Mr. Robinson shall, during such 30-day period, remedy the events or circumstances constituting Cause; provided, however, that such termination shall take effect immediately upon the giving of written notice of termination of Cause under any clause if the Company shall have determined in good faith that such events or circumstances are not remediable (which determination shall be stated in such notice).
For purposes of our employment agreement with Mr. Robinson, “Change in Control” generally means: (i) the acquisition (other than from the Company) by any person of beneficial ownership, 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, which we refer to as 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; (ii) a majority of the members of our Board of Directors is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of our Board of Directors before the date of the appointment or election; or (iii) consummation by the Company of a reorganization, merger, or consolidation or sale of all or substantially all of the assets of the Company; 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 50 percent 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.
For purposes of the employment agreement with Mr. Robinson described herein, “Good Reason” generally means: (i) any material reduction in the named executive officer’s base salary; (ii) any material reduction in the named executive officer’s authority, duties or responsibilities; (iii) any significant change in the geographic location at which the named executive officer must perform his duties; or (iv) any material breach of the named executive officer’s employment agreement by the Company.
For purposes of the employment agreement with Mr. Robinson described herein, “Disability” shall mean the named executive officer’s inability, due to physical or mental injury or illness, to perform the essential functions of his position with or without reasonable accommodation for a period of 180 days, whether or not consecutive, occurring within any period of 12 consecutive months.
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Severance Plan Definitions. Our Severance Plan contains definitions for the terms “Cause,” “Change in Control,” “Good Reason” and “Disability” which are substantially similar to those contained in “—Potential Payments Upon Termination or Change in Control—Employment Agreement Definitions” above.
Severance and Change-In-Control Agreement Definitions. For purposes of the Severance and Change-In-Control Agreement, “Cause” generally means (i) the commission by the executive of fraud, embezzlement, theft or proven dishonesty, or any other illegal act or practice; (ii) the willful engaging by the executive in misconduct which is deemed by the Board, in good faith, to be materially injurious to the Company or an affiliate of the Company; or (iii) the willful and continued failure or habitual neglect by the executive to perform the executive’s duties with the Company or an affiliate of the Company substantially in accordance with the operating and personnel policies and procedures of the Company or an affiliate of the Company generally applicable to all of their employees.
Our Severance and Change-In-Control Agreement contains definitions for the terms “Change in Control,” “Good Reason” and “Disability” which are substantially similar to those contained in “—Potential Payments Upon Termination or Change in Control—Employment Agreement Definitions” above.
Incentive Plans. Generally, under the terms of our Executive Severance Pay Plan, in the event of a change in control, the named executive officer would receive an automatic payment of target-level cash bonuses, prorated to the extent the change in control occurs during the annual performance period. The Executive Severance Pay Plan does not contain a provision accelerating or awarding payments in the event of termination.
Under the terms of the A&R 2015 Plan and the related award agreements that apply to our executive officers, all outstanding unvested stock options, RSUs and earned performance shares immediately vest in the event of termination of employment due to death or disability. With respect to performance shares that have not been earned at the time of a termination of employment due to death or disability, those performance shares will not vest immediately, but rather, will vest at the earned amount that is determined at the end of the performance period applicable to those performance shares. In the event of termination for any other reason not in connection with a change in control, all unvested equity awards are forfeited. In the event of a change in control, all outstanding unvested stock options, RSUs and performance shares would vest upon a termination by the employer without Cause or by the executive officer for Good Reason during the following two years.
Securities Authorized for Issuance under Equity Compensation Plans
The following table sets forth aggregate information as of December 31, 2019 about the Company’s compensation plans under which our equity securities are authorized for issuance.
|
|
|
|
|
|
Weighted-Average
|
|
Number of Securities
|
|
|
Number of Securities to
|
|
Exercise Price
|
|
Remaining Available
|
|
|
be Issued Upon Exercise
|
|
of Outstanding
|
|
for Future Issuance
|
|
|
of Outstanding Options,
|
|
Options, Warrants
|
|
Under Equity
|
Plan Category
|
|
Warrants and Rights(1),(2)
|
|
and Rights(1),(2)
|
|
Compensation Plans(3)
|
Equity Compensation Plans Approved by Shareholders
|
|
|
2,806,166
|
|
|
|
$
|
34.71
|
|
|
|
3,772,517
|
|
Equity Compensation Plans Not Approved by Shareholders
|
|
|
N/A
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Total
|
|
|
2,806,166
|
|
|
|
$
|
34.71
|
|
|
|
3,772,517
|
|
____________________
(1)
|
Of the 2,806,166 securities to be issued upon exercise of the outstanding options, warrants and rights, 1,729,814 are options with a weighted average exercise price of $34.71 and the remaining 1,076,352 are RSUs, RSAs and performance shares that do not have an exercise price.
|
(2)
|
As
of May 4, 2020, there were 3,148,270 securities to be issued upon exercise of outstanding options, warrants and rights, assuming
target level performance is achieved for performance shares. Of this amount, 2,084,753 are options with a weighted average
exercise price of $35.38 and a weighted average remaining life of 7.20 years. The remaining 1,063,517 are RSUs, RSAs and performance
shares that do not have an exercise price.
|
(3)
|
As
of May 4, 2020, the aggregate number of common shares authorized and available for future issuance under the 2015 Plan is 2,872,589.
Between May 7, 2020 and June 18, 2020, we expect to grant approximately 20,000 to 30,000 common shares under the 2015 Plan.
|
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Table of Contents
CEO Pay Ratio Disclosure
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of the individual identified as our “median” paid employee and the annual total compensation of John W. Robinson, III, our President and Chief Executive Officer (“CEO”).
For 2019, our last completed fiscal year:
●
|
the annual total compensation of the employee identified as the median paid employee of our company (other than our CEO), was $31,325;
|
|
|
●
|
the annual total compensation of our CEO was $6,981,190; and
|
|
|
●
|
the ratio between the annual total compensation of our CEO to the annual total compensation of the individual identified at median was estimated to be 223 to 1. The methodology and material assumptions, adjustments, and estimates used to identify our median employee for this purpose were as follows:
|
2019 Median Employee
In 2017, we used the methodology outlined below to identify our median employee.
In 2018, there was no significant change in our employee population or compensation arrangements since 2017 that we believed would have significantly impacted the pay ratio disclosure. Under SEC rules, we were therefore permitted to use the same employee identified in 2017. However, since this employee had since left the company, the SEC rules permitted us to use as our 2018 median employee someone who had substantially similar compensation to the employee identified as our median employee in 2017 based on our analysis conducted in 2017.
In 2019, there was no significant change in our employee population or compensation arrangements since 2018 that we believed would have significantly impacted the pay ratio disclosure. Therefore, we are now using the same median employee that was used in 2018.
Methodology to Identify Median Employee
Population Included
●
|
We determined that, as of December 31, 2017, our employee population consisted of approximately 12,208 individuals globally.
|
|
|
●
|
Pursuant to SEC rules, we employed the 5% “De Minimis Exemption” adjustment. The De Minimis Exemption allowed us to exclude our Canadian population of 294 employees as this population was less than 5% of our total population. After applying this exemption, the employee population used for purposes of identifying the median employee consisted of 11,914 employees, of whom all were located in the United States.
|
Sampling Methodology
Given the availability of payroll data we employed statistical sampling to identify the “median employee.” To identify the sample population, we used the annual rate of pay for 2017, with salaries annualized for those permanent employees who did not work for the full year. We combined each of Aaron’s, Inc.’s operating subsidiaries (Aaron’s, Progressive Finance Holdings, LLC and Vive) into a singular population given the similarity of operating subsidiary population median pay. From this combined population we took the natural log of the annual rate of pay and calculated the median, standard deviation and variance of this population to determine the December 31, 2017 sample size of 400 employees. A computer-generated random sampling method was employed to determine the individuals in the 400 person sample. We then obtained 2017 W-2 earnings for each of the 400 employees in the sample. From this sample, we identified the median employee in 2017. As this individual is no longer with the company, we selected the employee closest to this employee’s W-2 compensation in 2017, and then calculated this new median’s annual total compensation for 2018 and 2019 as reported above.
This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records and the methodology described above.
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Table of Contents
Shareholder Proposals for 2021 Annual Meeting of Shareholders
We currently
anticipate that the 2021 Annual Meeting of Shareholders will be held on or around May 5, 2021. In accordance with the provisions
of Rule 14a-8(e) of the Exchange Act, if the date of the 2021 Annual Meeting of Shareholders is changed by more than thirty days
from the date of the 2020 Annual Meeting of Shareholders, the deadline for submitting proposals to be presented at the 2021 Annual
Meeting of Shareholders will be a reasonable time before the Company begins to print and mail its proxy materials for the 2021
Annual Meeting of Shareholders. As such, proposals of shareholders intended to be presented at the 2021 Annual Meeting of Shareholders
and to be included in our proxy statement in accordance with the provisions of Rule 14a-8 must be received by November 26, 2020
to be eligible for inclusion in the Company’s Proxy Statement and form of proxy for that meeting.
Other shareholder
proposals not made in accordance with the provisions of Rule 14a-8 must be submitted to our Board of Directors in compliance with
the Company’s bylaws between 90 to 120 days prior to the date of the 2021 Annual Meeting of Shareholders in order to be
considered timely, which we currently anticipate will be held on or around May 5, 2021. Any such shareholder proposals must also
be accompanied by the following information: (i) the full text in writing of the shareholder proposal as it will be proposed;
(ii) the purpose or purposes for which the shareholder proposal is desired and a statement that the shareholder proposal is to
be considered at the 2021 Annual Meeting of Shareholders; (iii) the names, addresses and number of shares of the Company held
of record by the shareholder or shareholders making the proposal (or the number of shares of the Company beneficially owned and
represented by a nominee certificate on file with the Company); (iv) the number of shares of the Company that have been solicited
with regard to the proposal and the number of shares of the Company whose holders have agreed (in writing or otherwise) to vote
in any specific fashion on the proposal; and (v) a written statement by the proponent that it intends to continue ownership of
such voting shares through the date of the 2021 Annual Meeting of Shareholders.
Any shareholder
desiring to nominate a candidate for election as a director at the 2021 Annual Meeting of Shareholders must submit the nomination
in writing by first class registered mail to our President no earlier than the close of business on February 18, 2021, and no
later than the close of business on April 19, 2021, unless the date of the 2021 Annual Meeting of Shareholders is not scheduled
to be held between May 19, 2021 and August 27, 2021 (in which case any such nomination must be submitted to our President not
earlier than the close of business on the one hundred twentieth (120th) day prior to the 2021 Annual Meeting of Shareholders and
not later than the close of business on the later of the sixtieth (60th) day prior to the 2021 Annual Meeting of Shareholders
or the tenth (10th) day following the day when the date of the 2021 Annual Meeting of Shareholders is first publicly announced
by us). Any nomination must also contain the following information about the nominee, to the extent known by the shareholder submitting
the nomination: (i) the nominee’s name, address and principal present occupation; (ii) to the shareholder’s knowledge,
the total number of shares of our common stock that may be voted for the nominee; (iii) the names and addresses of the shareholders
proposing to make the nomination, and the number of shares of our common stock owned by each such shareholder; (iv) the nominee’s
age, past employment, education, beneficial ownership of shares of our common stock, 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 shareholders
(and their relatives, subsidiaries and affiliates) intending to make the nomination, past and present relationships or dealings
80
Table of Contents
with us or any of our subsidiaries,
affiliates, directors, officers or agents, plans or ideas for managing our affairs (including any termination of employees, any
sales of corporate assets, any proposed merger, business combination or recapitalization, and any proposed dissolution or liquidation);
(v) the nominee’s written consent to being named in a proxy statement as a nominee and to serving as director if elected;
and (vi) all additional information relating to the nominee that would be required to be disclosed, or otherwise required, pursuant
to Sections 13 or 14 of the Exchange Act, and the rules and regulations promulgated there under, in connection with any acquisition
of shares by the nominee or in connection with the solicitation of proxies by the nominee for his or her election as a director,
regardless of the applicability of such provisions of the Exchange Act.
The Company retains discretion to vote proxies it receives with respect to director nominations or any other business proposals received after their respective deadlines for submission as described above. The Company retains discretion to vote proxies it receives with respect to such proposals received prior to such deadlines provided (i) the Company includes in its Proxy Statement advice on the nature of the proposal and how it intends to exercise its voting discretion and (ii) the proponent does not issue its own proxy statement.
Householding of Annual Meeting Materials
As permitted
by the Securities and Exchange Commission, we will only deliver one copy of our proxy materials, along with separate proxy cards
to multiple shareholders who reside at the same address, unless such shareholders have notified us of their desire to receive
multiple copies. We will promptly deliver, upon oral or written request, a separate copy of our proxy materials to any shareholder
residing at an address to which only one copy was mailed. Shareholders residing at the same address and currently receiving only
one copy of our proxy materials may contact us to request multiple copies in the future. Alternatively, shareholders residing
at the same address and currently receiving multiple copies of our proxy materials may request that only a single copy be mailed
in the future. The Company will promptly deliver additional copies of this joint proxy statement/prospectus and other proxy materials
to any shareholder who contacts the Company’s principal corporate office at 400 Galleria Parkway, S.E., Suite 300, Atlanta,
Georgia 30339 requesting such additional copies; alternatively, you may contact the Company’s proxy solicitor, Innisfree
at 1-888-750-5834 or info@innisfreema.com.
Communicating with the Board of Directors and Corporate Governance Documents
The Company’s security holders and other interested parties may communicate with our Board of Directors, the non-management or independent directors as a group, or individual directors by writing to them in care of the Corporate Secretary, Aaron’s, Inc., 400 Galleria Parkway, S.E., Suite 300, Atlanta, Georgia 30339. Correspondence will be forwarded as directed by the writer. The Company may first review, sort, and summarize such communications, and screen out solicitations for goods or services and similar inappropriate communications unrelated to the Company or its business. All concerns related to audit or accounting matters will be referred to the Audit Committee.
The charters of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee, the Company’s Code of Business Conduct and Ethics, its Code of Ethics for the Chief Executive Officer and the Senior Financial Officers and Employees and its Corporate Governance Guidelines can each be viewed by clicking the “Corporate Governance” tab on the Investor Relations area of the Company’s website at http://www.aarons.com. You may also obtain a copy of any of these documents without charge by writing to the Corporate Secretary, Aaron’s, Inc., 400 Galleria Parkway, S.E., Suite 300, Atlanta, Georgia 30339.
Where You Can Find Additional Information
Aaron’s files annual, quarterly and current reports, proxy statements and other information with the SEC. Aaron’s SEC file number is 1-13941. The SEC maintains a web site that contains reports, proxy and information statements and other information about issuers, like Aaron’s, who file electronically with the SEC. The address of that site is http://www.sec.gov. You can also obtain copies of the reports, proxy statements and other information Aaron’s files with the SEC, as well as copies of Aaron’s governing documents, on our website at www.aarons.com. We are “incorporating by reference” into this joint proxy statement/prospectus certain information Aaron’s files with the SEC, which means that we are disclosing important information to you by referring you to those documents. The documents incorporated by reference include important information about Aaron’s, including our financial
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Table of Contents
condition, results of operations and description of Aaron’s business. The information incorporated by reference is an important part of this joint proxy statement/prospectus. The following documents that Aaron’s filed with the SEC are incorporated into this joint proxy statement/prospectus by reference:
●
|
our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the SEC on February 20, 2020, and the amendment thereto filed on April 27, 2020;
|
|
|
●
|
our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2020, filed on May 7, 2020;
|
|
|
●
|
our Current Reports on Form 8-K filed on February 25, 2020, March 19, 2020, April 24, 2020 and May 7, 2020 (other than any portion of such filings not deemed to be filed).
|
Any future filings made by Aaron’s or HoldCo with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, after the date of this joint proxy statement/prospectus and up to the date of the Annual Meeting, are also incorporated by reference into this joint proxy statement/prospectus. Information incorporated by reference is considered to be a part of this joint proxy statement/prospectus, and later information filed with the SEC prior to the date of the Annual Meeting will automatically update and supersede information in this joint proxy statement/prospectus and in our other filings with the SEC. Information we elect to furnish to but not file with the SEC in accordance with SEC rules and regulations is not incorporated into this joint proxy statement/prospectus and does not constitute part of this joint proxy statement/prospectus.
You may request a copy of any filing referred to above (including any exhibits that are specifically incorporated by reference), at no cost, by contacting Aaron’s at the following address or telephone number:
Aaron’s, Inc.
Attn: Corporate Secretary
400 Galleria Parkway SE, Suite 300
Atlanta, Georgia 30339
Telephone: (678) 402-3000
THIS PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE THE SOLICITATION OF A PROXY IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM
WHOM IT IS UNLAWFUL TO MAKE SUCH PROXY SOLICITATION IN THAT JURISDICTION. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS TO VOTE YOUR SHARES AT THE ANNUAL MEETING. AARON’S HAS NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS.
THIS PROXY STATEMENT/PROSPECTUS IS DATED MAY 7, 2020. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS
IS ACCURATE AS OF ANY DATE OTHER THAN THAT DATE, AND THE MAILING OF THIS PROXY STATEMENT/PROSPECTUS TO SHAREHOLDERS DOES NOT CREATE
ANY IMPLICATION TO THE CONTRARY.
Other Action at the Meeting
As of the date of this joint proxy statement/prospectus, we have no knowledge of any business, other than described herein, and customary procedural matters that will be presented for consideration at the Annual Meeting. In the event any other business is properly presented at the Annual Meeting, it is intended that proxies will be voted in accordance with the discretion of the proxy holders.
Moreover, our Board of Directors reserves the right to adjourn or postpone the Annual Meeting for failure to obtain a quorum, for legitimate scheduling purposes, or based on other circumstances that our Board of Directors believes would cause such adjournments or postponements to be in the best interests of our shareholders.
* * * * * *
BY ORDER OF THE BOARD OF DIRECTORS
|
|
Robert W. Kamerschen
Executive Vice President, General Counsel,
Chief Corporate Affairs Officer & Corporate Secretary
|
May 7, 2020
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Table of Contents
Appendix A
USE OF NON-GAAP FINANCIAL INFORMATION
We use various non-GAAP financial measures to evaluate the performance of our management team, including the named executive officers. For the assessment of the performance of management, the Compensation Committee of our Board of Directors believes certain non-GAAP measures better reflect the operational performance of the business. Adjusted Revenues, Adjusted EBITDA and Return on Capital are supplemental measures of the Company’s performance that are not calculated in accordance with generally accepted accounting principles in the United States (“GAAP”) and are used to evaluate the performance of our management team. Adjusted Revenues, Adjusted EBITDA and Return on Capital provide the Compensation Committee, management, and investors with an understanding of the results from the primary operations of our business by excluding the effects of certain items that generally arose from one-time transactions that are not reflective of the ordinary earnings activity of our operations or transactions that have variability and volatility of the amount and typically are not budgeted for in setting management performance targets.
Certain incentive metrics have also been adjusted for the change in allowance for loan losses at Vive, as shown in the tables below. Management believes this adjustment is useful to arrive at a pre-provision metric that gives management and investors an additional, supplemental metric to assess Vive’s underlying operational performance for the period. Management also uses pre-provision measures as its bases for strategic planning and forecasting for Vive.
Non-GAAP financial measures, however, should not be used as a substitute for, or considered superior to, measures of financial performance prepared in accordance with GAAP, such as the Company’s GAAP basis net earnings and diluted earnings per share and the GAAP revenues and earnings before income taxes of the Company’s segments. Further, we caution investors that amounts presented in accordance with our definitions of non-GAAP measures may not be comparable to similar measures disclosed by other companies, because not all companies and analysts calculate these measures in the same manner.
The Adjusted EBITDA metrics discussed in this joint proxy statement/prospectus are calculated as the Company and segment earnings before interest expense, depreciation on property, plant and equipment, amortization of intangible assets and income taxes. Adjusted EBITDA also excludes restructuring charges, the regulatory charge related to Progressive Leasing’s tentative settlement of the FTC matter discussed in the Company’s Form 10-K filed with the SEC on February 20, 2020, regulatory legal expenses incurred related to the FTC matter and acquisition transaction and transition costs. Further adjustments were made to calculate Adjusted EBITDA used to evaluate the performance of our management team such as excluding insurance recoveries for the 2017 Hurricanes Harvey and Irma from the Aaron’s Business and Consolidated results, to remove certain legal and due diligence costs from the Aaron’s Business and Consolidated results, to adjust for certain regulatory legal expenses at Progressive Leasing and to remove the effect of the change in allowance for loan losses at Vive. The amounts for these after-tax non-GAAP adjustments can be found in the Adjusted EBITDA table below.
A-1
Table of Contents
Appendix A
|
|
Year Ended December 31, 2019
|
Adjusted EBITDA
|
|
Progressive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Thousands)
|
|
Leasing(1)
|
|
Aaron’s Business
|
|
Vive
|
|
Consolidated
|
Net Earnings - GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
31,472
|
|
Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61,316
|
|
Earnings (Loss) Before Income Taxes
|
|
$
|
55,711
|
|
|
|
$
|
46,731
|
|
|
|
$
|
(9,654
|
)
|
|
|
92,788
|
|
Interest Expense
|
|
|
8,572
|
|
|
|
|
4,868
|
|
|
|
|
3,527
|
|
|
|
16,967
|
|
Depreciation
|
|
|
8,284
|
|
|
|
|
60,415
|
|
|
|
|
805
|
|
|
|
69,504
|
|
Amortization
|
|
|
21,683
|
|
|
|
|
13,294
|
|
|
|
|
580
|
|
|
|
35,557
|
|
EBITDA
|
|
|
94,250
|
|
|
|
|
125,308
|
|
|
|
|
(4,742
|
)
|
|
|
214,816
|
|
Restructuring Expenses
|
|
|
—
|
|
|
|
|
39,990
|
|
|
|
|
—
|
|
|
|
39,990
|
|
Acquisition Transaction and Transition Costs
|
|
|
—
|
|
|
|
|
735
|
|
|
|
|
—
|
|
|
|
735
|
|
Legal and Regulatory Expenses
|
|
|
179,261
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
179,261
|
|
Adjusted EBITDA
|
|
|
273,511
|
|
|
|
|
166,033
|
|
|
|
|
(4,742
|
)
|
|
|
434,802
|
|
Insurance Recoveries for Hurricanes and certain
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Legal and Due Diligence Costs, net
|
|
|
—
|
|
|
|
|
(1,257
|
)
|
|
|
|
—
|
|
|
|
(1,257
|
)
|
Certain Regulatory Legal Expenses(2)
|
|
|
(4,261
|
)
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
Vive Change in Allowance
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
1,941
|
|
|
|
1,941
|
|
Adjusted EBITDA- used for Management incentive purposes
|
|
$
|
269,250
|
|
|
|
$
|
164,776
|
|
|
|
$
|
(2,801
|
)
|
|
$
|
435,486
|
|
____________________
(1)
|
The Adjusted EBITDA metric used to evaluate Progressive Leasing for incentive purposes includes the consolidation of Progressive and Vive.
|
(2)
|
Certain regulatory legal expenses related to the FTC tentative settlement were adjusted in the calculation of Progressive Leasing’s Adjusted EBITDA used for management incentive purposes. This adjustment did not impact the Consolidated incentive metrics.
|
The Adjusted Revenues figures presented in this joint proxy statement/prospectus have been reduced for the amount of provision expense at Vive, the amounts for which can be found in the Adjusted Revenues table below.
|
|
Year Ended December 31, 2019
|
Adjusted Revenues
|
|
Progressive
|
|
|
|
|
|
|
|
|
|
|
|
(In Thousands)
|
|
Leasing1
|
|
Aaron’s Business
|
|
Vive
|
|
Consolidated
|
Revenues - GAAP
|
|
$
|
2,128,133
|
|
|
$
|
1,784,477
|
|
|
$
|
35,046
|
|
$
|
3,947,656
|
Less Vive Bad Debt Expense from Credit Losses(2)
|
|
|
—
|
|
|
|
—
|
|
|
|
21,666
|
|
|
21,666
|
Adjusted Revenues
|
|
$
|
2,128,133
|
|
|
$
|
1,784,477
|
|
|
$
|
13,380
|
|
$
|
3,925,990
|
____________________
(1)
|
The adjusted revenue metric used to evaluate Progressive Leasing for incentive purposes includes the consolidation of Progressive and Vive, further adjusted to remove the effect of provision expense at Vive.
|
(2)
|
The adjustment removes the effect of Vive’s Provision for Credit Losses.
|
Consolidated Return on Capital is calculated as adjusted net operating profit after tax (which is defined as operating profit adjusted for certain non-recurring items as shown in the Return on Capital table below) divided by the sum of average net debt (which is defined as total debt less cash and cash equivalents) and average total shareholders’ equity, with the final result being an average of quarterly calculations.
A-2
Table of Contents
Appendix A
Return on Capital
|
|
Three Months Ended
|
(In Thousands)
|
|
March 31, 2019
|
|
June 30, 2019
|
|
September 30, 2019
|
|
December 31, 2019
|
Operating Profit - GAAP
|
|
$
|
73,855
|
|
|
$
|
59,846
|
|
|
|
$
|
55,503
|
|
|
|
$
|
(83,330
|
)
|
Add Restructuring Expense
|
|
|
13,281
|
|
|
|
18,738
|
|
|
|
|
5,516
|
|
|
|
|
2,455
|
|
Add FTC Tentative Settlement
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
175,000
|
|
Add FTC Legal Expenses
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
4,261
|
|
(Less) Add Insurance Recoveries, Acquisition Transaction Costs, and Certain Legal and Due Diligence Costs, net
|
|
|
(892
|
)
|
|
|
(3,635
|
)
|
|
|
|
—
|
|
|
|
|
3,998
|
|
(Less) Add Vive Change in Allowance for Loan Losses
|
|
|
(607
|
)
|
|
|
421
|
|
|
|
|
1,271
|
|
|
|
|
857
|
|
Adjusted Operating Profit Before Tax
|
|
|
85,637
|
|
|
|
75,370
|
|
|
|
|
62,290
|
|
|
|
|
103,241
|
|
Less Income Taxes(1)
|
|
|
(17,333
|
)
|
|
|
(18,797
|
)
|
|
|
|
(14,302
|
)
|
|
|
|
(24,427
|
)
|
Adjusted Operating Profit After Tax (a)
|
|
$
|
68,304
|
|
|
$
|
56,573
|
|
|
|
$
|
47,988
|
|
|
|
$
|
78,814
|
|
Average Capital(2) (b)
|
|
$
|
2,138,609
|
|
|
$
|
2,107,887
|
|
|
|
$
|
2,089,233
|
|
|
|
$
|
2,137,552
|
|
Return on Capital (c) = (a)/(b)
|
|
|
3.2
|
%
|
|
|
2.7
|
%
|
|
|
|
2.3
|
%
|
|
|
|
3.7
|
%
|
Annual Return on Capital [sum (c)]
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11.9
|
%
|
____________________
(1)
|
Income taxes calculated as the quarterly effective tax rate multiplied by Adjusted Operating Profit Before Tax.
|
(2)
|
Average Capital is defined as the sum of the average net debt (debt less cash and cash equivalents) and the average total shareholders’ equity for each three month period. Average total shareholders’ equity has been adjusted by the tax-effected amounts of the adjustments identified in the table above.
|
The Questions
and Answers about Voting and the Annual Meeting section of this joint proxy statement/prospectus also references an increase to
Progressive Leasing revenues by comparing reported revenues for the year ended December 31, 2019 to non-GAAP revenues for periods
prior to January 1, 2019 for Progressive Leasing as if the lessor accounting impacts of ASC 842 were in effect during the year
ended December 31, 2018. “Progressive Leasing Revenues, net of Progressive Bad Debt Expense” for the prior year period
shown in the respective table below is a supplemental measure of our performance that is not calculated in accordance with GAAP
in place during 2018. This non-GAAP measure assumes that Progressive bad debt expense is recorded as a reduction to lease revenues
and fees instead of within operating expenses in 2018. Management believes this non-GAAP measure for 2018 provides relevant and
useful information for users of our financial statements, as they provide comparability with the financial results we are reporting
beginning in 2019 when ASC 842 became effective and we began reporting Progressive's bad debt expense as a reduction to lease
revenues and fees. We believe this non-GAAP measure provides management and investors the ability to better understand the results
from the primary operations of our business in 2019 compared with 2018 by classifying Progressive's bad debt expense consistently
between the periods. Please see Note 1 to the consolidated financial statements and the “Results of Operations” section
of our Form 10-K for the year ended December 31, 2019 for a more comprehensive disclosure of bad debt expense and the impact of
the adoption of ASC 842 related to accounting for leases for the prospective periods beginning with the first quarter of 2019.
Progressive Leasing Revenues, net of Progressive Bad Debt Expense1
|
|
Year Ended
|
(In Thousands)
|
|
December 31, 2018
|
Progressive Leasing Revenues - GAAP
|
|
|
$
|
1,998,981
|
|
Less Progressive Leasing Bad Debt Expense
|
|
|
|
227,813
|
|
Progressive Leasing Revenues, net of Progressive Bad Debt Expense
|
|
|
$
|
1,771,168
|
|
____________________
(1)
|
The metric is for Progressive Leasing revenues and excludes Vive.
|
A-3
Table of Contents
Appendix B
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER
(this “Agreement”), dated as of May 1, 2020, is among Aaron’s, Inc., a Georgia corporation (“Aaron’s”),
Aaron’s Holdings Company, Inc., a Georgia corporation and a wholly owned subsidiary of Aaron’s (“HoldCo”),
and Aaron’s Merger Sub, Inc., a Georgia corporation and a wholly owned subsidiary of HoldCo (“Merger Sub”).
RECITALS
WHEREAS, the purpose of this Agreement and the transactions contemplated by this Agreement is to create a new holding company structure, and HoldCo and Merger Sub have been formed for the purpose of effecting this new holding company structure; and
WHEREAS, the respective Boards of Directors of Aaron’s, HoldCo and Merger Sub have each approved and adopted this Agreement and the transactions contemplated by this Agreement, in each case after making a determination that this Agreement and such transactions are advisable and in the best interests of such company and its shareholders; and
WHEREAS, at the Effective Time (as defined herein), pursuant to the transactions contemplated by this Agreement and on the terms and subject to the conditions set forth herein, (a) Merger Sub will merge with and into Aaron’s in accordance with the Georgia Business Corporation Code, as amended (the “GBCC”), with Aaron’s continuing as the surviving corporation (the “Merger”), (b) each outstanding share of common stock of Aaron’s (“Aaron’s Common Stock”) will be converted into one share of common stock of HoldCo (“HoldCo Common Stock”), and (c) each share of HoldCo Common Stock held by Aaron’s will be canceled; and
WHEREAS, on the first business day after the Effective Time, Aaron’s will convert to a Georgia limited liability company (the “Conversion”) in accordance with Sections 14-2-1109.1 and 14-11-212 of the Official Code of Georgia Annotated (the “O.C.G.A.”).
WHEREAS, HoldCo, in its capacity as the sole shareholder of Merger Sub, has adopted and approved this Agreement; and
WHEREAS, the completion of the Merger requires, among other things, the approval of this Agreement by the affirmative vote of a majority of the outstanding shares of Aaron’s Common Stock (the “Aaron’s Shareholder Approval”); and
WHEREAS, it is the intention of the parties hereto that the Merger, together with the Conversion, shall be a tax-free reorganization under the Internal Revenue Code of 1986, as amended (the “Code”), and the rules and regulations promulgated thereunder.
NOW, THEREFORE, in consideration of the premises and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
MERGER
SECTION 1.1 Merger. Subject to the terms and conditions of this Agreement and in accordance with the GBCC, Merger Sub shall be merged with and into Aaron’s at the Effective Time. Following the Effective Time, the separate corporate existence of Merger Sub shall cease, and Aaron’s shall continue as the surviving corporation (the “Surviving Corporation”), becoming a direct wholly owned subsidiary of HoldCo. On the first business day after the Effective Time, HoldCo shall cause the Conversion to be consummated in accordance with Sections 14-2-1109.1 and 14-11-212 of the O.C.G.A.
B-1
Table of Contents
Appendix B
SECTION 1.2 Effective Time.
(a) Subject to the provisions of this Agreement, as soon as practicable following the satisfaction or waiver of the conditions set forth under Section 4.1, Aaron’s and Merger Sub shall duly execute and file a Certificate of Merger (the “Certificate of Merger”) with the Georgia Secretary of State pursuant to Section 14-2-1105 of the GBCC. The Merger shall become effective upon such filing (or at such later time as provided in the Certificate of Merger) in accordance with Section 14-2-1105 of the GBCC (the “Effective Time”).
(b) The Merger shall have the effects set forth in this Agreement and in the applicable provisions of the GBCC, including Section 14-2-1106. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, (i) right and title to all assets (including real estate and other property) owned by, and every contract right possessed by, Aaron’s and Merger Sub shall vest in the Surviving Corporation, and (ii) all liabilities of Aaron’s and Merger Sub shall become the liabilities of the Surviving Corporation.
SECTION 1.3 Organizational Documents.
(a) Prior to or at the Effective Time, HoldCo shall cause to be filed with the Georgia Secretary of State the Articles of Incorporation of HoldCo in the form substantially set forth as Exhibit A hereto, and shall adopt the Bylaws of HoldCo in the form substantially set forth as Exhibit B hereto. The Articles of Incorporation and Bylaws of HoldCo shall be the Articles of Incorporation and Bylaws of HoldCo until thereafter amended either as provided therein or by the GBCC.
(b) At the Effective Time, the Articles of Incorporation and Bylaws of Aaron’s in effect immediately prior to the Effective Time shall be and remain the Articles of Incorporation and Bylaws of the Surviving Corporation until thereafter amended as provided therein or by the GBCC.
SECTION 1.4 Directors and
Officers of the Surviving Corporation. From and after the Effective Time, (i) the directors of the Surviving Corporation shall
be John W. Robinson III, Steven A. Michaels and Robert W. Kamerschen and (ii) the officers of Aaron’s immediately prior
to the Effective Time shall be the officers of the Surviving Corporation and shall, until further action, continue to hold office
as provided in the Articles of Incorporation and Bylaws of the Surviving Corporation.
SECTION 1.5 Directors and Officers of HoldCo. The directors and officers of HoldCo immediately prior to the Effective Time shall continue as directors and officers of HoldCo from and after the Effective Time and shall, until further action, continue to hold office as provided in the Articles of Incorporation and Bylaws of HoldCo.
ARTICLE II
CONVERSION OF SECURITIES; STOCK CERTIFICATES
SECTION 2.1 Conversion of Securities. At the Effective Time, by virtue of the Merger and without any action on the part of the holders of shares of Aaron’s Common Stock, HoldCo Common Stock or the common stock of Merger Sub (“Merger Sub Common Stock”):
(a) Each share of Aaron’s Common Stock issued and outstanding immediately prior to the Effective Time shall be automatically converted into one validly issued, fully paid and nonassessable share of HoldCo Common Stock;
(b) Each share of HoldCo Common Stock issued, outstanding and held by Aaron’s immediately prior to the Effective Time shall be canceled and extinguished without any conversion thereof and no payment shall be made with respect thereto; and
(c) Each share of Merger Sub Common Stock issued and outstanding immediately prior to the Effective Time shall automatically convert into one validly issued, fully paid and nonassessable share of the Surviving Corporation.
B-2
Table of Contents
Appendix B
SECTION 2.2 Stock Certificates. Subject to Section 2.1, from and after the Effective Time, all of the outstanding certificates which immediately prior to the Effective Time represented shares of Aaron’s Common Stock shall be deemed for all purposes to evidence ownership of, and to represent, shares of HoldCo Common Stock into which the shares of Aaron’s Common Stock formerly represented by such certificates have been converted as provided in this Agreement. The registered owner on the books and records of HoldCo or its transfer agent of any outstanding stock certificate shall, until such certificate shall have been surrendered for transfer or otherwise accounted for to HoldCo or its transfer agent, be entitled to exercise any voting and other rights with respect to the shares of HoldCo Common Stock evidenced by such outstanding certificates which prior to the Merger represented shares of Aaron’s Common Stock.
SECTION 2.3 Equity Awards; ESPP; Retirement Plan
(a) Each option to purchase or right to acquire or vest in Aaron’s Common Stock (each a “Aaron’s Stock Award”) issued under the Aaron’s, Inc. 2001 Stock Option and Incentive Award Plan and the Aaron’s Inc. Amended and Restated 2015 Equity and Incentive Award Plan, (collectively, the “Aaron’s Stock Plans”) or granted by Aaron’s outside of the Aaron’s Stock Plans that is outstanding and unexercised, unvested, unsettled, and/or not yet payable immediately prior to the Effective Time shall, as of such time, be assumed by HoldCo in such a manner that it is converted into an option to purchase or right to acquire or vest or be settled in, on otherwise the same terms and conditions as were applicable under the respective Aaron’s Stock Plans or the underlying equity award agreement (as expressly modified by this Section 2.3), that number of shares of HoldCo Common Stock equal to the number of shares of Aaron’s Common Stock subject to such Aaron’s Stock Award and, for stock options, an exercise price per share equal to the exercise price per share for such Aaron’s stock option immediately prior to the Effective Time. Any shares of Aaron’s Common Stock that remain available for issuance pursuant to the Aaron’s Stock Plans immediately prior to the Effective Time shall be assumed by HoldCo in such a manner that such shares are converted into that number of shares of HoldCo Common Stock equal to the number of such shares of Aaron’s Common Stock.
(b) From and after the Effective Time, each participant eligible to purchase a share of Aaron’s Common Stock under Aaron’s, Inc. Employee Stock Purchase Plan (the “ESPP”) shall be eligible to purchase one share of HoldCo Common Stock, and otherwise on the same terms and conditions as were applicable, under the ESPP immediately prior to the Effective Time. Any shares of Aaron’s Common Stock that remain available for issuance pursuant to the ESPP immediately prior to the Effective Time shall be assumed by HoldCo in such a manner that such shares are converted into that number of shares of HoldCo Common Stock equal to the number of such shares of Aaron’s Common Stock.
(c) From and after the Effective Time, each share of Aaron’s Common Stock held under the Aaron’s, Inc. Employees Retirement Plan (the “Retirement Plan”) shall be assumed by HoldCo in such a manner that it is converted into a share of HoldCo Common Stock.
(d) Notwithstanding anything to the contrary in this Agreement, the assumption and conversion of Aaron’s Common Stock set forth in this Section 2.3 shall in all events occur in a manner satisfying the requirements of Sections 409A, 422 and 424 of the Code and the regulations issued thereunder and the provisions of the applicable plan.
ARTICLE III
ACTIONS TO BE TAKEN IN CONNECTION WITH THE MERGER
SECTION 3.1 Assumption of Certain Plans. HoldCo and Aaron’s hereby agree that they will, at the Effective Time, execute, acknowledge and deliver an assignment and assumption agreement pursuant to which Aaron’s will assign to HoldCo as of the Effective Time, and HoldCo will, from and after the Effective Time, assume and agree to perform all obligations of Aaron’s pursuant to the Aaron’s Stock Plans, the ESPP, and the Retirement Plan (collectively, the “Registered Stock Plans”) and pursuant to the Aaron’s Inc. Deferred Compensation Plan.
B-3
Table of Contents
Appendix B
SECTION 3.2 Post-Effective Amendments. It is the intent of the parties that HoldCo, as of the Effective Time, be deemed a “successor issuer” for purposes of continuing offerings under the Securities Act of 1933, as amended (the “Securities Act”). As soon as practicable following the Merger, HoldCo will file post-effective amendments to Aaron’s currently effective registration statements, adopting such statements as its own registration statements for all purposes of the Securities Act and the Securities Exchange Act of 1934, as amended, and setting forth any additional information necessary to reflect any material changes made in connection with or resulting from the succession, or necessary to keep the registration statements from being misleading.
SECTION 3.3 Reservation of Shares. On or prior to the Effective Time, HoldCo will reserve sufficient shares of HoldCo Common Stock to provide for the issuance of HoldCo Common Stock to satisfy HoldCo’s obligations under Section 3.1.
ARTICLE IV
CONDITIONS TO MERGER
SECTION 4.1 Conditions Precedent. The respective obligation of each party to effect the Merger is subject to the satisfaction or waiver of each of the following conditions:
(a) The Aaron’s Shareholder Approval shall have been obtained at the annual meeting of the shareholders of Aaron’s.
(b) The shares of HoldCo Common Stock issuable in the Merger pursuant to Section 2.1 and such other shares to be reserved for issuance in connection with the Merger (including the assumption of the Registered Stock Plans) shall have been authorized for listing on The New York Stock Exchange.
(c) The registration statement on Form S-4 filed with the Securities and Exchange Commission by HoldCo in connection with the issuance of shares of HoldCo Common Stock in the Merger shall have become effective under the Securities Act and shall not be the subject of any stop order or proceeding seeking a stop order.
(d) Aaron’s shall have received an opinion from its legal counsel to the effect that (i) holders of Aaron’s Common Stock will not recognize any gain or loss on the exchange of such Aaron’s Common Stock for HoldCo Common Stock and (ii) the Merger, together with the Conversion, will qualify as a tax-free reorganization under the Code.
(e) No court or governmental entity of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any law or order (whether temporary, preliminary or permanent) that is in effect and has a material adverse effect on Aaron’s or enjoins or otherwise prohibits consummation of the transactions contemplated by this Agreement and no judicial or administrative proceeding that seeks any such result shall continue to be pending.
(f) All required approvals, licenses and certifications from, and notifications and filings to, governmental entities and third parties shall have been obtained or made, as applicable.
ARTICLE V
TERMINATION AND AMENDMENT
SECTION 5.1 Termination. This Agreement may be terminated or the completion of the transactions contemplated herein may be deferred at any time prior to the Effective Time, whether before or after the Aaron’s Shareholder Approval, by either Aaron’s or HoldCo. In the event of such termination, this Agreement shall become null and void and have no effect, without any liability or obligation on the part of Aaron’s, HoldCo or Merger Sub by reason of this Agreement.
B-4
Table of Contents
Appendix B
SECTION 5.2 Amendment. This Agreement may be amended, modified or supplemented at any time before or after the Aaron’s Shareholder Approval; provided, however, that after any such approval and prior to the Effective Time, there shall be made no amendment that (a) alters or changes the amount or kind of shares to be received by shareholders of Aaron’s in the Merger; (b) alters or changes any term of the Articles of Incorporation or Bylaws of HoldCo; or (c) alters or changes any other terms and conditions of this Agreement if any of the alterations or changes, individually or in the aggregate, would materially adversely affect the shareholders of Aaron’s. This Agreement may not be amended except after approval by the board of directors of Aaron’s and evidenced by an instrument in writing signed on behalf of each of the parties.
ARTICLE VI
GENERAL PROVISIONS
SECTION 6.1 Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of Georgia applicable to contracts to be made and performed entirely therein without giving effect to the principles of conflicts of law thereof or of any other jurisdiction.
SECTION 6.2 Entire Agreement. This Agreement (including the documents and the instruments referred to herein), together with all exhibits, schedules, appendices, certificates, instruments and agreements delivered pursuant hereto and thereto (a) constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof, and (b) is not intended to confer upon any person other than the parties hereto any rights or remedies hereunder.
SECTION 6.3 Further Assurances. From time to time, and when required by HoldCo, Aaron’s shall execute and deliver, or cause to be executed and delivered, such deeds and other instruments, and Aaron’s shall take or cause to be taken such further and other action, as shall be appropriate or necessary in order to vest or perfect in or to conform of record or otherwise in the Surviving Corporation the title to and possession of all the property, interests, assets, rights, privileges, immunities, powers, franchises and authority of Aaron’s and otherwise to carry out the purposes of this Agreement, and the officers and directors of the Aaron’s are authorized fully in the name and on behalf of Aaron’s or otherwise to take any and all such action and to execute and deliver any and all such deeds and other instruments.
SECTION 6.4 Counterparts. This Agreement may be executed in two or more counterparts, each of which when executed and delivered shall be deemed to be an original and all of which shall together be considered one and the same agreement.
SECTION 6.5 Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void, unenforceable or against its regulatory policy, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated.
[Signature page follows]
B-5
Table of Contents
Appendix B
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first written above.
AARON’S, INC.,
|
a Georgia corporation
|
|
By:
|
/s/
STEVEN A. MICHAELS
|
Name:
|
Steven
A. Michaels
|
Title:
|
Chief
Financial Officer and President of Strategic Operations
|
|
AARON’S HOLDINGS COMPANY, INC.
|
a Georgia corporation
|
|
By:
|
/s/
TODD KING
|
Name:
|
Todd
King
|
Title:
|
Vice
President and Assistant Secretary
|
|
AARON’S MERGER SUB, INC.,
|
a Georgia corporation
|
|
By:
|
/s/
TODD KING
|
Name:
|
Todd
King
|
Title:
|
Vice
President and Assistant Secretary
|
B-6
Table of Contents
Appendix B
Exhibit A
HoldCo Articles of Incorporation
See Annex C to this joint proxy statement/prospectus.
B-7
Table of Contents
Appendix B
Exhibit B
HoldCo Bylaws
See Annex D to this joint proxy statement/prospectus.
B-8
Table of Contents
Appendix C
SECOND AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
AARON’S HOLDINGS COMPANY, INC.
I.
The name of the corporation is:
AARON’S HOLDINGS COMPANY, INC.
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 Second Amended and Restated Articles of Incorporation.
C-1
Table of Contents
Appendix C
V.
The Corporation shall have authority to issue shares of capital stock consisting of Two Hundred Twenty-Five Million (225,000,000) shares of Common Stock, par value $0.50 per share (“Common Stock”), and One Million (1,000,000) 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 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 stockholders, 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 stockholders.
|
|
|
|
|
(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)
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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.
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(d)
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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.
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(e)
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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.
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(f)
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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 Second 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:
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(1)
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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;
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(2)
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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;
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(3)
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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;
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(4)
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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;
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(5)
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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;
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(6)
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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;
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(7)
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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.
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(8)
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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
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(9)
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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.
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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.
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.
VIII.
These Second 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 Georgia Business Corporation Code by the Board of Directors of the Corporation on [●] and by the shareholders of the Corporation on [●].
IN WITNESS WHEREOF, AARON’S HOLDINGS COMPANY, INC., has caused these Second Amended and Restated Articles of Incorporation to be executed by its duly authorized officer on this [●]th day of [●], 2020.
AARON’S HOLDINGS COMPANY, INC.
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By:
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Name:
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Title:
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Appendix D
AMENDED AND RESTATED BYLAWS OF
AARON’S HOLDINGS COMPANY, INC.
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office shall be in the State of Georgia, County of Fulton.
Section 2. Other Offices. The corporation may also have offices at such other places both within and without the State of Georgia as the board of directors may from time to time determine and the business of the corporation may require or make desirable.
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
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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.
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
(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.
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(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 (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.
(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.
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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, Election and Term. The number of directors which shall constitute the whole board shall be at least 3; the exact number to be fixed from time to time by resolution of the board of directors, but no decrease shall have the effect of shortening the term of an incumbent director. Commencing at the annual meeting of shareholders to be held during the fiscal year ending December 31, 2014, and at each annual meeting of shareholders thereafter, directors will be elected for a term of office to expire at the next succeeding annual meeting of shareholders. Each director whose term does not expire at the annual meeting of shareholders to be held during the fiscal year ending December 31, 2014, will hold office until the annual meeting of shareholders for the fiscal year in which such director’s term expires. Each director shall hold office until the expiration of his or her respective term of office and until his or her successor is duly elected and qualified or until his or her earlier resignation, removal from office or death. 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.” 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 the date of the annual meeting is more than thirty (30) days before or more than seventy (70) days after such anniversary date, 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
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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
(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, and the rules and regulations promulgated there under (the “Exchange Act”), 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, 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.
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.
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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.
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.
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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.
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.
(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,
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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.
ARTICLE V
CERTIFICATE
Section 1. Certificates for Shares. Shares of the corporation’s stock may be issued by certificate or issued without certificate 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. Certificates, if issued, shall be in such form as the board of directors may from time to time prescribe.
Section 2. Lost Certificates. The corporation may issue a new certificate or certificates of stock or “Book Entry” shares in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or “Book Entry” shares, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate, or his or her legal representative, to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed.
Section 3. 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 5 of this Article, and, if such shares are represented by a certificate or certificates, on surrender of the certificate or certificates for such shares properly endorsed, or for “Book Entry” shares, 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 by (i) delivery of the certificates therefor, accompanied either by an assignment in writing on the back of the certificates or by separate written power of attorney to sell, assign and transfer the same, signed by the record holder, thereof, or by his or her duly authorized attorney-in- fact, or (ii) in the case of Book Entry shares, 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
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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 4. 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 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 stockholders 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 5. 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, and may require all certificates of stock to bear the signature or signatures of any of them.
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.
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.
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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 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
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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.
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 Business Case Division of the Fulton County Superior Court, State of Georgia (the “Fulton County 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 Fulton County 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.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
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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 of the corporation, 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.
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.
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.
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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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AARON'S, INC.
ATTN: STEPHANIE MIDDLETON
400 GALLERIA PARKWAY, SE
SUITE 300
ATLANTA, GA 30339
VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time on June 17, 2020. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time on June 17, 2020. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
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D17002-P41095
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KEEP THIS PORTION FOR YOUR RECORDS
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DETACH AND RETURN THIS PORTION ONLY
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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AARON'S, INC.
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The Board of Directors recommends you vote FOR the following:
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Election of Directors
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Nominees:
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Kelly H. Barrett
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Kathy T. Betty
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Douglas C. Curling
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Cynthia N. Day
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Curtis L. Doman
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Walter G. Ehmer
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Hubert L. Harris, Jr.
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John W. Robinson III
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Ray M. Robinson
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For address changes and/or comments, please check this box and write them on the back where indicated.
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The Board of Directors recommends you vote FOR proposals 2, 3 and 4.
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Approval of a non-binding advisory resolution to approve the Company's executive compensation.
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Ratification of the appointment of Ernst & Young LLP as the Company's independent registered public accounting firm for 2020.
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Effecting a Holding Company Formation and, in connection therewith, Approval of the Agreement and Plan of Merger, by and among Aaron's, Inc., Aaron's Holdings Company, Inc. and Aaron's Merger Sub, Inc.
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Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.
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Signature [PLEASE SIGN WITHIN BOX]
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IMPORTANT NOTE: Although it is our current intention to allow shareholders to participate in the Annual Meeting in-person, we are monitoring developments relating to the novel coronavirus, or COVID-19, outbreak. We are sensitive to the in-person meeting and travel concerns of our shareholders in these uncertain times. As a result, we may decide to allow shareholders to participate in the Annual Meeting by remote communication, or we may decide to hold the Annual Meeting entirely via remote communication. If we decide that either of these options is necessary or advisable, we will communicate this decision and related instructions in a press release and in the investor relations section of our website, www.aarons.com.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.
AARON'S INC.
Annual Meeting of Shareholders
June 18, 2020 9:00 AM EDT
This proxy is solicited by the Board of Directors
The shareholder(s) hereby appoint(s) John W. Robinson III, Steven A. Michaels and Robert W. Kamerschen, or any of them, as proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of Common Stock of AARON'S, INC. that the shareholder(s) is/are entitled to vote at the Annual Meeting of Shareholder(s) to be held at 9:00 AM, EDT on June 18, 2020, at the law offices of King & Spalding LLP, 17th Floor, 1180 Peachtree Street NE, Atlanta, Georgia 30309, and any adjournment or postponement thereof.
This proxy, when properly executed, will be voted in the manner directed herein. If this card is signed and returned without voting instructions, you will be deemed to have instructed the proxies to vote your shares in accordance with the recommendations of the Company’s Board of Directors.
Participants in any retirement plan of Aaron’s, Inc. may vote their proportionate share of Company common stock held in the plan by signing and returning this card, or by voting electronically or by telephone. By doing so, you are instructing the trustee to vote all of your shares at the meeting, and at any and all adjournments or postponements thereof, as you have indicated with respect to the matters referred to on the reverse side of this proxy. If this card is signed and returned without voting instructions, you will be deemed to have instructed the plan trustee to vote your shares in accordance with the recommendations of the Company’s Board of Directors listed above. If this card is not returned (and your shares are not otherwise voted electronically or by telephone) or if this card is returned unsigned, your shares will be voted by the plan trustee in the same proportion as the shares for which voting instructions are received from other participants in the plan.
Address Changes/Comments:
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(If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.)
Continued and to be signed on reverse side