THIS MERGER
AGREEMENT (this “ Agreement ”), dated
September 16, 2008, is made by and between EZCORP, Inc., a
Delaware corporation (“ EZCORP ”), Value Merger
Sub, Inc., a Florida corporation (the “ Merger Sub
”), and Value Financial Services, Inc., a Florida
corporation, (the “ Company ”) (together, the
“ Constituent Corporations ”).
A. The boards
of directors of each of the Company, EZCORP and the Merger Sub have
each approved, adopted and declared advisable and in the best
interests of the holders of capital stock of each of the Company,
EZCORP and the Merger Sub, respectively, this Agreement, the merger
of the Merger Sub with and into the Company (the “
Merger ”) in accordance with the terms of this
Agreement and the applicable provisions of the Florida Business
Corporation Act (“ FBCA ”).
B. This
Merger is authorized by Section 1101 of the FBCA.
C. Concurrently
with the execution and delivery of this Agreement and as a
condition to the willingness of EZCORP and the Merger Sub to enter
into this Agreement, each director of the Company who holds shares
of capital stock of the Company is entering the voting agreement
with EZCORP and the Merger Sub in the form attached hereto as
Exhibit B (the “ Voting Agreement
”), pursuant to which, among other things, such shareholders
will agree to vote all of their shares of capital stock of the
Company in favor of adopting and approving this Agreement and the
conversion of all shares of capital stock or convertible securities
of the Company into shares of common stock of the
Company.
NOW,
THEREFORE , in consideration of the mutual promises herein
made, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Merger Sub,
EZCORP and the Company agree as follows:
For purposes of
this Agreement, the following terms shall have the meanings set
forth below and any derivatives of the terms shall have correlative
meanings:
“ Company
Common Stock ” shall mean shares of common stock of the
Company (assuming for all purposes the exercise or conversion of
all then outstanding participating stock or other capital stock of
the Company, options, warrants, conversion rights, commitments or
other rights to acquire the Company’s common stock, whether
vested or unvested).
“ Credit
Facility ” shall mean the $37 million financing
arrangement between the Company and Fifth Third Bank, dated
June 15, 2007.
“
Contracts ” shall mean, collectively, all oral and
written contracts, agreements, instruments, documents, leases,
indentures, insurance policies, undertakings or other
obligations.
“
Disclosure Schedule ” shall mean the disclosure
schedule attached hereto and incorporated herein.
“ EZCORP
Shares ” shall have the meaning contained in
Section 3.1(a)(1)(A).
“
Financial Statements ” shall mean, collectively, the
audited financial statements (including balance sheets and
statement of earnings, stockholders’ equity and cash flow) of
the Company for each of its fiscal years ending December 31,
2004, through and including December 31, 2007.
“
Governmental Authority ” shall mean the government of
the United States or any foreign jurisdiction, any state, county,
municipality or other governmental or quasi governmental unit, or
any agency, board, bureau, instrumentality, department or
commission (including any court or other tribunal) of any of the
foregoing and any body exercising or entitled to exercise any
administrative, executive, judicial, legislative, police,
regulatory or taxing authority of any nature whatsoever.
“
Hart-Scott-Rodino Act ” shall mean the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
“
Knowledge ” shall mean that an individual:
(1) is
actually aware of such fact or other matter, or
(2) a
prudent individual in the position of the Company could be expected
to discover or otherwise become aware of such fact or other matter
in the course of conducting a reasonable investigation concerning
the existence of such fact or other matter.
A Person other
than an individual will be deemed to have “Knowledge”
of a particular fact or matter if any individual who is serving as
a director, officer, partner, executor, or trustee of such Person
(or in any similar capacity) has, or at any time had, Knowledge of
such fact or matter.
“
Laws ” shall mean, collectively, all federal, state,
local, municipal, foreign or international constitutions, laws,
statutes, ordinances, rules, regulations, codes, or principles of
common law.
“
Leases ” shall mean, collectively, leases, contracts,
agreements and other documents providing the Company with a right
to use specified real and/or personal property.
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“
Licenses ” shall mean, collectively, governmental,
regulatory, administrative and non governmental licenses, permits,
approvals, certifications, accreditations, notices and other
authorizations.
“
Material Adverse Change” or “Material Adverse
Effect ” shall mean any materially adverse change in or
effect on the financial condition, business, operations, assets,
properties or results of operations of the affected party;
provided, however , that none of the following shall be
deemed to have caused, constitute, or be taken into account in
determining whether there has been a Material Adverse Change or
Material Adverse Effect: (1) any change or effect arising from
or relating to: (a) financial, banking or securities markets
(including any disruption thereof and any decline in the price of
any security or any market index); (b) changes in United
States generally accepted accounting principles; (c) changes
in the affected party’s general industry or the economy of
the U.S. as a whole; and (d) adverse changes or effects
arising from the announcement or consummation of the transactions
contemplated hereby; (2) any change or effect in the Ordinary
Course; and (3) any change or effect that is cured before the
earlier of (a) the Closing Date and/or (b) the date on
which this Agreement is terminated pursuant to
Section 10.
“
Orders ” shall mean all decisions, injunctions, writs,
guidelines, orders, arbitrations, awards, judgments, subpoenas,
verdicts or decrees entered, issued, made or rendered by any
Governmental Authority.
“
Ordinary Course ” shall mean the ordinary course of
the Company’s business, consistent with the past practices of
the Company. The Ordinary Course does not include any transaction
with an officer, director, shareholder or investor of the
Company.
“
Person ” shall mean any individual, corporation
(including any non-profit corporation), general or limited
partnership, limited liability company, joint venture, estate,
trust, association, organization, labor union, or other entity or
Governmental Authority.
“ SEC
” shall mean the United States Securities and Exchange
Commission.
2.1
Merger . Upon the terms and conditions set forth in this
Agreement, and in accordance with the applicable provisions of the
FBCA, at the Effective Date (defined in Section 2.3), the Merger
Sub shall be merged with and into the Company, which latter shall
be the surviving corporation (the Company is also sometimes called
the “ Surviving Corporation ”
herein).
2.2
Continuing Corporate Existence . Except as may otherwise be
set forth herein, the corporate existence of the Company, with all
its purposes, powers, franchises, privileges, rights and
immunities, shall continue unaffected and unimpaired by the Merger,
and the corporate existence and identity of the Merger Sub, with
all its purposes, powers, franchises, privileges, rights and
immunities, at the Effective Date shall be merged with and into
that of the Company, and the separate corporate existence and
identity of the Merger Sub shall thereafter cease except to the
extent continued by statute.
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2.3
Effective Date . The Merger shall become effective at the
date and time when the articles of merger are filed with the
Secretary of State of Florida (the “ Effective Date
”).
2.4
Corporate Governance .
(a)
The Articles of Incorporation of the Company, as amended in the
articles of merger on the Effective Date, shall become the Articles
of Incorporation of the Company as the Surviving
Corporation.
(b)
The Bylaws of the Company, as amended on the Effective Date, shall
become the Bylaws of the Company as the Surviving
Corporation.
(c)
Those persons serving as directors and officers of the Merger Sub
on the Effective Date of the Merger shall become the directors and
officers of the Company as of the Effective Date.
(d)
Those persons serving as directors and officers of the Company on
the Effective Date of the Merger shall cease holding their
respective offices in the Company as of the Effective
Date.
2.5
Rights and Obligations of the Company . At the Effective
Date, the Company as the Surviving Corporation shall have the
following rights and obligations.
(a)
The Company shall have all the rights, privileges, immunities and
powers and shall be subject to all the duties and liabilities of a
corporation organized under the laws of the State of
Florida.
(b)
The Company shall possess all of the rights, privileges, immunities
and franchises, of either a public or private nature, of the
Company and the Merger Sub, and all property, real, personal and
mixed, and all debts due on whatever account, and all other choses
in action, and every other interest of or belonging or due to the
Merger Sub and the Company shall be taken and deemed to be
transferred to or invested in the Company without further act or
deed.
(c)
At the Effective Date, the Company shall thenceforth be responsible
and liable for all contracts, liabilities and obligations of the
Company and the Merger Sub, and any claim existing or action or
proceeding pending by or against the Company or the Merger Sub may
be prosecuted against the Company as if the Merger had not
occurred, or the Company may be substituted in its place. Neither
the rights of creditors nor any liens upon the property of the
Company shall be impaired by the Merger.
2.6
Closing . Consummation of the transactions contemplated by
this Agreement (the “ Closing ”) shall take
place at the offices of Strasburger & Price, L.L.P., in Austin,
Texas, as soon as possible when each of the other conditions of
this Agreement have been satisfied or waived, and shall proceed
promptly to conclusion, at such place, time and date as shall be
determined by the parties hereto. The day on which the Closing
shall occur is herein called the “ Closing Date
.” Each of the Constituent Corporations will cause to be
prepared,
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executed, and
delivered the Articles of Merger to be filed with the Secretary of
State of Florida and all other appropriate and customary documents
as any party or its counsel may reasonably request for the purpose
of consummating the transactions contemplated by this Agreement.
All actions taken at the Closing shall be deemed to have been taken
simultaneously at the time the last of any such actions is taken or
completed.
3
Conversion of Securities .
3.1
On the Effective Date, by virtue of the Merger and without any
action on the part of EZCORP, Merger Sub, the Company or the
holders of the Company Common Stock:
(a)
except as set forth in subsection 3.1(d):
(1)
each share of Company Common Stock issued and outstanding
immediately prior to the Effective Date shall be canceled and
automatically converted, subject to Section 3.2(d), into the
right to receive either the EZCORP Shares or the Cash
Consideration, as applicable (the EZCORP Shares or the Cash
Consideration, as applicable, the “ Merger
Consideration ”), with the form of Merger Consideration
determined as follows:
(A)
as to shares with respect to which an Election has been validly
made and not revoked, $11.00 per share (the “ Cash
Consideration ”); and
(B)
as to all other shares, 0.75 shares of EZCORP Class A
Non-voting Common Stock (the “ EZCORP Shares
”);
(2)
each share of Company Common Stock held in treasury by the Company
or any Subsidiary of the Company immediately prior to the Effective
Date shall be canceled and extinguished without any conversion
thereof and no payment or distribution shall be made with respect
thereto; and
(3)
each share of common stock of Merger Sub issued and outstanding
immediately prior to the Effective Date shall be converted into and
exchanged for one validly issued, fully paid and nonassessable
share of common stock of the Company.
(b)
Each Person who on or prior to the date of the Company
shareholders’ meeting called to vote upon the merger as
described in Section 7.4 (the “ Election Deadline
”) is a holder of record of shares of Company Common Stock
shall be entitled, with respect to all or a portion of such shares
of Company Common Stock, to make an “ Election ”
on or prior to the Election Deadline, to receive the Cash
Consideration on the basis set forth in this Agreement.
(1)
EZCORP and the Merger Sub shall prepare a form, in form and
substance reasonably acceptable to the Company (an “
Election Form ”) pursuant to which a holder of record
of shares of Company Common Stock may make an Election with respect
to all or a portion of the shares of Company
Page 5
Common Stock
held by such holder. The Election Form shall provide that the
Election is being made as of the date the Election Form is
submitted and as of the Effective Time. The Company shall mail the
Election Form, together with the Disclosure Statement, to each
holder of record of shares of Company Common Stock on the record
date for the Company shareholders’ meeting described in
Section 7.4 and shall use its reasonable best efforts to make
the Election Form available to any person who becomes a record
holder of shares of Company Common Stock during the period between
the record date and the Election Deadline.
(2)
An Election shall be effective only if the Company shall have
received an Election Form covering the shares of Company Common
Stock to which such Election applies, executed and completed in
accordance with the instructions set forth in such Election Form on
or prior to the Election Deadline and may not be withdrawn. An
Election may be revoked or changed only by delivering to the
Company, on or prior to the Election Deadline, a written notice of
revocation or, in the case of a change, a properly completed
revised Election Form that identifies the shares of Company Common
Stock to which the revised Election Form applies. Delivery to the
Company prior to the Election Deadline of a revised Election Form
with respect to any shares of Company Common Stock shall result in
the revocation of all prior Election Forms with respect to all such
shares of Company Common Stock.
(1)
The number of shares of Company Common Stock eligible to be
converted into the right to receive the Cash Consideration shall
not exceed twenty percent (20%) of the shares of Company Common
Stock issued and outstanding on the Election Deadline (the “
Cash Consideration Number ”).
(2)
If the number of shares of Company Common Stock with respect to
which a valid Election is made does not exceed the Cash
Consideration Number, each share for which an Election is made
shall be converted into the Cash Consideration. If the number of
shares of Company Common Stock with respect to which a valid
Election is made exceeds the Cash Consideration Number, the number
of shares of Company Common Stock with respect to which a valid
Election is made that shall be converted into Cash Consideration
shall be determined as follows:
(A)
First, a unit proration factor (the “ Unit Proration
Factor ”) shall be determined by dividing the Cash
Consideration Number by the number of shares with respect to which
a valid Election was made;
(B)
Second, only those shares equal to the number of shares of each
electing Company shareholder with respect to which a valid Election
is made multiplied by the Unit Proration Factor shall be paid the
Cash Consideration; and
Page 6
(C)
Third, all remaining shares of Company Common Stock with respect to
which a valid Election is made shall receive EZCORP Shares in the
Merger.
(d) Notwithstanding
any provisions of this Agreement to the contrary, shares of the
Company Common Stock which are issued and outstanding immediately
prior to the Effective Date and which are held by any Person who
has properly exercised their appraisal rights under the FBCA (the
“ Appraisal Shares ”) will not be converted into
or represent a right to receive the applicable Merger Consideration
pursuant to this Section 3.1. The holders thereof will be
entitled only to such rights as are granted by Section 1302 of
the FBCA. Each holder of Appraisal Shares who becomes entitled to
payment for such shares of Company Common Stock pursuant to
Section 1302 of the FBCA will receive payment therefor from
the Company in accordance with the FBCA; provided ,
however , that (1) if any such holder of Appraisal
Shares fails to establish its entitlement to appraisal rights as
provided in Section 1323 of the FBCA, or (2) if any such
holder of Appraisal Shares effectively withdraws its demand for
appraisal of such shares of the Company Common Stock or loses its
right to appraisal and payment for its shares of the Company Common
Stock under Section 1323 or 1326 of the FBCA, such holder will
forfeit the right to appraisal of such shares of the Company Common
Stock and each such share of the Company’s common stock will
be treated as if such share had been converted, as of the Effective
Date, into a right to receive the applicable Merger Consideration,
without interest thereon, as provided in subsection
3.1(a)(1).
3.2
Exchange of Certificates .
(a)
Exchange Agent . EZCORP shall deposit, or shall cause to be
deposited, with American Stock Transfer and Trust Company or such
other bank or trust company that may be designated by EZCORP and is
reasonably satisfactory to the Company (the “ Exchange
Agent ”), for the benefit of the holders of shares of the
Company Common Stock, for exchange in accordance with this
Section 3 through the Exchange Agent, cash representing the
Cash Consideration and certificates representing the EZCORP Shares
issuable pursuant to Section 3.1 as of the Effective Date (the
“ Exchange Fund ”). If requested by the Exchange
Agent, the Company and EZCORP will enter into a mutually acceptable
exchange agent agreement which will set forth the duties,
responsibilities and obligations of the Exchange Agent. The
Exchange Agent shall, pursuant to irrevocable instructions, deliver
the EZCORP Shares contemplated to be issued pursuant to
Section 3.1, out of the Exchange Fund. Except as contemplated
by Section 3.2(f) hereof, the Exchange Fund shall not be used
for any other purpose.
(b)
Exchange Procedures . As promptly as practicable after the
Effective Date (but in any event within five business days after
the Effective Date), EZCORP shall cause the Exchange Agent to mail
to each holder of record of a certificate or certificates which
immediately prior to the Effective Date represented outstanding
shares of Company Common Stock (or other certificate or agreement
representing shares of capital stock of the Company which has been
converted into Company Common Stock) (the “
Certificates ”) (1) a letter of transmittal
(which shall be in customary form
Page 7
and shall
specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent) and (2) instructions for
use in effecting the surrender of the Certificates in exchange for
certificates representing EZCORP Shares. Upon surrender to the
Exchange Agent of a Certificate for cancellation, together with
such letter of transmittal, duly executed and completed in
accordance with the instructions thereto, and such other documents
as may be reasonably required pursuant to such instructions, the
holder of such Certificate shall be entitled to receive in exchange
therefor either the Cash Consideration or a certificate
representing that number of EZCORP Shares which such holder has the
right to receive in respect of the shares of Company Common Stock
formerly represented by such Certificate (after taking into account
all shares of the Company Common Stock then held by such holder) to
which such holder is entitled pursuant to Section 3.1, and the
Certificate so surrendered shall forthwith be canceled. In the
event of a transfer of ownership of shares of Company Common Stock
which is not registered in the transfer records of the Company, the
applicable Merger Consideration may be issued to a transferee if
the Certificate representing such shares of Company Common Stock is
properly endorsed and presented to the Exchange Agent, accompanied
by all documents required to evidence and effect such transfer and
by evidence satisfactory to EZCORP that any applicable share
transfer taxes have been paid. Until surrendered as contemplated by
this Section, each Certificate shall be deemed at all times after
the Effective Date to represent only the right to receive upon such
surrender the applicable Merger Consideration.
(c)
No Further Rights in Company Common Stock . The Merger
Consideration paid and issued (and represented by certificates
delivered) upon conversion of the shares of the Company Common
Stock in accordance with the terms hereof shall be deemed to have
been issued in full satisfaction of all rights pertaining to such
shares of the Company Common Stock.
(d)
No Fractional Shares . No certificates or scrip representing
fractional EZCORP Class A Non-voting Common Stock shall be
issued upon the surrender for exchange of Certificates. In lieu of
any such fractional share, each holder of Company Common Stock who
would otherwise have been entitled to a fraction of a share of
EZCORP Class A Non-voting Common Stock upon surrender of
Certificates for exchange shall be entitled to have the number of
shares such holder is to receive rounded up to the next whole
number of shares.
(e)
Termination of Exchange Fund . Any portion of the Exchange
Fund which remains undistributed to the holders of shares of
Company Common Stock for twelve months after the Effective Date
shall be delivered to EZCORP, upon demand, and any holders of
shares of Company Common Stock who have not theretofore complied
with this Section 3 shall thereafter look only to EZCORP for
the applicable Merger Consideration. Any portion of the Exchange
Fund remaining unclaimed by holders of shares of Company Common
Stock as of a date which is immediately prior to such time as such
amounts would otherwise escheat to or become property of any
government entity shall, to the extent permitted by applicable Law,
become the property
Page 8
of EZCORP free
and clear of any claims or interest of any person previously
entitled thereto.
(f)
No Liability . None of EZCORP, Merger Sub, or the Company
shall be liable to any holder of shares of Company Common Stock for
any such Merger Consideration delivered to a public official
pursuant to any abandoned property, escheat or similar
Laws.
(g)
Lost Certificates . If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact
by the person claiming such Certificate to be lost, stolen or
destroyed and, if required by the Company, the posting by such
person of a bond, in such reasonable amount as the Company may
direct, as indemnity against any claim that may be made against it
with respect to such Certificate, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed Certificate, the
applicable Merger Consideration.
3.3 Deficiency
Guaranty .
(a) The
parties contemplate that some or all of the EZCORP Shares received
by Company shareholders pursuant to Section 3.1(a)(1)(B) will
be offered for sale (the “ Selling EZCORP Shareholders
”) for a period beginning five (5) days after the
Closing Date and ending one hundred twenty-five (125) days
after the Closing Date (the “ Guaranty Period
”). If a Selling EZCORP Shareholder sells any of the EZCORP
Shares issued as part of the Merger Consideration during the
Guaranty Period, in sales that comply with the manner of sale
provisions contained in SEC Rule 144(f) (17 C.F.R.
Section 230.144(f), hereafter, “ Rule 144(f)
”), for a gross sales price of less than Fourteen Dollars and
Sixty-Seven Cents ($14.67) per EZCORP Share, EZCORP will pay the
Selling EZCORP Shareholder the difference between the gross sales
price per EZCORP Share and $14.67, up to a maximum of $4.01 per
EZCORP Share, up to a maximum of all payments to all Selling EZCORP
Shareholders of Twenty Million Dollars ($20,000,000.00) (the
“ Deficiency Guaranty Amount ”).
(b) Payments
to Selling EZCORP Shareholders up to the Deficiency Guaranty Amount
will be made on a first come, first served basis until the amount
of the balance of the Deficiency Guaranty Amount is exhausted, in
the date and time order that Selling EZCORP Shareholders present
proof of sale of EZCORP Shares issued as part of the Merger
Consideration to EZCORP or its designated agent.
(c) EZCORP
will cause the payment in respect of the Deficiency Guaranty Amount
to be made within five business days of receipt by EZCORP or its
designated agent of proof of sales of EZCORP Shares by EZCORP
Selling Shareholders in form satisfactory to EZCORP.
(d) EZCORP
will cause the Exchange Agent to transmit instructions for claiming
and receiving payment from the Deficiency Guaranty Amount with the
letter of transmittal described in Section 3.2(b).
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(a)
EZCORP will pay the Selling EZCORP Shareholders a “
Premium Reserve Amount ” of up to Six Million Six
Hundred Forty-Six Thousand Five Hundred Twenty-Seven Dollars
($6,646,527.00), if a Selling EZCORP Shareholder sells any of the
EZCORP Shares issued as part of the Merger Consideration during the
Guaranty Period, in sales that comply with the manner of sale
provisions contained in Rule 144(f), for a gross sales price
of more than Fourteen Dollars and Sixty-Seven Cents ($14.67) per
EZCORP Share, according to the following schedule:
(1)
For the first thirty (30) days of the Guaranty Period, $1.33
per EZCORP Share;
(2)
For the second thirty (30) days of the Guaranty Period, $1.00
per EZCORP Share;
(3)
For the third thirty (30) days of the Guaranty Period, $0.67
per EZCORP Share;
(4)
For the fourth thirty (30) days of the Guaranty Period, $0.33
per EZCORP Share;
(b)
EZCORP will cause the Exchange Agent to transmit instructions for
claiming and receiving payment of the Premium Reserve Amount with
the letter of transmittal described in
Section 3.2(b).
(c)
EZCORP will cause the payment in respect of the Premium Reserve
Fund to be made within five business days of receipt by EZCORP or
its designated agent of proof of sales of EZCORP Shares by EZCORP
Selling Shareholders in form satisfactory to EZCORP.
3.5
Stock Transfer Books . At the Closing Date, the stock
transfer books of the Company shall be closed and there shall be no
further registration of transfers of shares of Company Common Stock
thereafter on the records of the Company. From and after the
Effective Date, the holders of Certificates representing shares of
Company Common Stock outstanding immediately prior to the Effective
Date shall cease to have any rights with respect to such shares of
Company Common Stock, except as otherwise provided in this
Agreement or by Law. On or after the Effective Date, any
Certificates presented to the Exchange Agent or EZCORP for any
reason shall be converted into the applicable Merger
Consideration.
3.6
Closing Certificates . At the Closing, (a) EZCORP shall
deliver to the Company a certificate, in form and substance
satisfactory to the Company and signed by its Chief Executive
Officer and Chief Financial Officer, certifying in reasonable
detail the calculation of the number of issued and outstanding
shares of EZCORP Class A Non-voting Common Stock on the
Closing Date, including all shares issuable on the conversion of
other classes of securities and all shares issuable on the exercise
of outstanding stock options and warrants, together with all
supporting materials used in such calculation, and (b) the
Company shall deliver to EZCORP a certificate, signed by its Chief
Executive Officer and Chief Financial
Page 10
Officer,
certifying in reasonable detail the calculation of the aggregate
number of Company Common Stock, including common stock issued and
outstanding im
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