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EXHIBIT 10(ee)
EXECUTION VERSION
AARON RENTS, INC. and certain other Obligors
NOTE PURCHASE AGREEMENT
DATED AS OF JULY 27, 2005
$60,000,000 5.03% SENIOR NOTES DUE JULY 27, 2012
TABLE OF CONTENTS
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Schedules and Exhibits
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AARON RENTS, INC. and certain other Obligors 1100 Aaron Building 309 East Paces Ferry Road, NE Atlanta, GA 30305-2377
Dated as of July 27, 2005
To Each of the Purchasers named on the attached Purchaser Schedule
Ladies and Gentlemen:
Each of AARON RENTS, INC. , a Georgia corporation (together with its successors and assigns, the “ Company ”), AARON RENTS, INC. PUERTO RICO , a Puerto Rico corporation (together with its successors and assigns, “ ARPR ”) and AARON INVESTMENT COMPANY , a Delaware corporation (together with its successors and assigns, “ AIC ”, and, together with the Company and ARPR, the “ Obligors ”) hereby agrees with each Purchaser as follows:
1. AUTHORIZATION OF ISSUE OF NOTES.
The Obligors will authorize the issue of their senior promissory notes in the aggregate principal amount of $60,000,000, to be dated the date of issue thereof, to mature July 27, 2012, to bear interest on the unpaid balance thereof from the date thereof until the principal thereof shall have become due and payable at the rate of 5.03% per annum and on overdue payments at the rate specified therein, and to be substantially in the form of Exhibit A attached hereto. The term “ Notes ” as used herein shall include each such senior promissory note delivered pursuant to any provision of this Agreement and each such senior promissory note delivered in substitution or exchange for any other Note pursuant to any such provision.
2. PURCHASE AND SALE OF NOTES.
The Obligors hereby agree to sell to each Purchaser and, subject to the terms and conditions herein set forth, each Purchaser agrees to purchase from the Obligors Notes in the aggregate principal amount set forth opposite such Purchaser’s name on the Purchaser Schedule hereto at 100% of such aggregate principal amount. The Obligors will deliver to each Purchaser, at the offices of Bingham McCutchen LLP at 399 Park Avenue, New York, NY 10022, one or more Notes registered in its name, evidencing the aggregate principal amount of Notes to be purchased by such Purchaser and in the denomination or denominations specified in the Purchaser Schedule attached hereto, against payment of the purchase price thereof by transfer of immediately available funds for credit to the Obligors’ accounts held at such bank as shall be identified in a written instruction of the Obligors in the form of Exhibit B attached hereto, delivered to each Purchaser on or before the date of closing, which shall be July 27, 2005 or any other date on or before August 3, 2005 upon which the parties hereto may mutually agree (herein called the “ Closing ” or the “ Date of Closing ”).
3. CONDITIONS OF CLOSING. The obligation of each Purchaser to purchase and pay for the Notes to be purchased by it hereunder is subject to the satisfaction, on or before the Date of Closing, of the following conditions:
3A. Execution and Delivery of Documents. Such Purchaser shall have received the following, each to be dated the Date of Closing unless otherwise indicated:
(i) the Note(s) to be purchased by such Purchaser;
(ii) a favorable opinion of Kilpatrick Stockton LLP, special counsel for the Obligors (or such other counsel designated by the Obligors and acceptable to each Purchaser) satisfactory to each Purchaser and substantially in the form of Exhibit C attached hereto and as to such other matters as a Purchaser may reasonably request. The Obligors hereby direct each such counsel to deliver such opinion, agree that the issuance and sale of any Notes will constitute a reconfirmation of such direction, and understand and agree that each Purchaser will and hereby is authorized to rely on such opinion;
(iii) the Articles/Certificate of Incorporation of each of the Obligors, each certified as of a recent date by the Secretary of State of their respective jurisdictions of incorporation;
(iv) the Bylaws of each of the Obligors, certified by each of their respective Secretaries;
(v) an incumbency certificate from each Obligor signed by the Secretary or an Assistant Secretary and one other officer (who is not signing any other document or agreement in connection herewith) of each of the Obligors, certifying as to the names, titles and true signatures of the officers of the Obligors authorized to sign this Agreement and the Notes and the other documents to be delivered hereunder;
(vi) a certificate of the Secretary of each of the Obligors (A) attaching resolutions of the board of directors of the Obligors evidencing approval of the transactions contemplated by this Agreement and the issuance of the Notes and the execution, delivery and performance thereof, and authorizing certain officers to execute and deliver the same, and certifying that such resolutions were duly and validly adopted and have not since been amended, revoked or rescinded, and (B) certifying that no dissolution or liquidation proceedings as to the Obligors have been commenced or are contemplated;
(vii) an Officer’s Certificate from the Company certifying that the conditions specified in paragraphs 3F, 3H and 3I have been satisfied;
(viii) corporate and tax good standing certificates as to each Obligor from their respective jurisdictions of incorporation; and
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(ix) such additional documents or certificates with respect to such legal matters or corporate or other proceedings related to the transactions contemplated hereby as may be reasonably requested by such Purchaser.
3B. Opinion of Purchaser’s Special Counsel. Such Purchaser shall have received from Bingham McCutchen LLP a favorable opinion satisfactory to such Purchaser as to such matters incident to the matters herein contemplated as it may reasonably request.
3C. Purchase Permitted By Applicable Laws. The purchase of and payment for the Notes to be purchased by such Purchaser on the Date of Closing on the terms and conditions herein provided (including the use of the proceeds of such Notes by the Obligors) shall not violate any applicable law or governmental regulation (including, without limitation, section 5 of the Securities Act or Regulation T, U or X of the Board of Governors of the Federal Reserve System) and shall not subject such Purchaser to any tax, penalty, liability or other onerous condition under or pursuant to any applicable law or governmental regulation, and such Purchaser shall have received such certificates or other evidence as such Purchaser may request to establish compliance with this condition.
3D. Payment of Fees. The Obligors shall have paid the reasonable fees and expenses of Bingham McCutchen LLP, as set forth in a statement to be delivered to the Company no later than two Business Days prior to the Date of Closing.
3E. Sale to Other Purchasers. The Obligors shall have sold to the other Purchasers the Notes to be purchased by them at the closing and shall have received payment in full therefor.
3F. Changes in Corporate Structure.
Except as set forth on Schedule 3F hereto, no Obligor shall have changed its jurisdiction of incorporation or been a party to any merger or consolidation, nor shall any Obligor have succeeded to all or any substantial part of the liabilities of any other entity, at any time following the date of the most recent financial statements. There shall have been no Material Adverse Effect since December 31, 2004.
3G. Private Placement Number. A Private Placement number issued by Standard & Poor’s CUSIP Service Bureau (in cooperation with the Securities Valuation Office of the National Association of Insurance Commissioners) shall have been obtained for the Notes.
3H. Performance; No Default. The Obligors shall have performed and complied with all agreements and conditions contained in this Agreement required to be performed or complied with by them prior to or at the Closing and after giving effect to the issue and sale of the Notes (and the application of the proceeds thereof as contemplated by paragraph 8I) no Default or Event of Default shall have occurred and be continuing.
3I. Representations and Warranties. The representations and warranties of the Obligors in this Agreement shall be correct when made and at the time of Closing.
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3J. Waivers. The Company shall have delivered a true and correct copy, attached hereto as Exhibit E, of any waivers to permit the Company to enter into the transactions contemplated by this Agreement and the Notes that shall be necessary under [the SunTrust Agreement, including, without limitation, waivers of Section 7.1 and Section 7.8 thereof.]
3K. Amendment to Existing Note Purchase Agreement.
The Obligors and the Existing Noteholders shall have entered into an amendment to the Existing Note Purchase Agreement and a true and correct copy, attached hereto as Exhibit F, shall have been delivered to each Purchaser.
4. PREPAYMENTS. The Notes shall be subject to prepayment with respect to the required prepayments specified in paragraph 4A and the optional prepayments permitted by paragraph 4B.
4A. Required Prepayments. Until the Notes shall be paid in full, the Obligors shall apply to the prepayment of the Notes, without Yield-Maintenance Amount, the sum of $12,000,000 on July 27 in each of the years 2008 to 2012, inclusive, and such principal amounts of the Notes, together with interest thereon to the prepayment dates, shall become due on such prepayment dates; provided that upon any partial prepayment of the Notes pursuant to paragraph 4B or purchase of the Notes pursuant to paragraph 4E the principal amount of each required prepayment of the Notes becoming due under this paragraph 4A on and after the date of such prepayment or purchase shall be reduced in the same proportion as the aggregate unpaid principal amount of the Notes is reduced as a result of such prepayment or purchase. The remaining principal amount of the Notes, together with interest accrued thereon, shall become due on the maturity date of the Notes.
4B. Optional Prepayment With Yield-Maintenance Amount. The Notes shall be subject to prepayment, in whole at any time or from time to time in part (in a minimum amount of $5,000,000 and in integral multiples of $100,000) at the option of the Obligors, at 100% of the principal amount so prepaid plus interest thereon to the prepayment date and the Yield-Maintenance Amount, if any, with respect to each Note. Any partial prepayment of the Notes pursuant to this paragraph 4B shall be applied in satisfaction of required payments of principal on a pro rata basis.
4C. Notice of Optional Prepayment. The Obligors shall give the holder of each Note irrevocable written notice of any prepayment pursuant to paragraph 4B not less than 10 Business Days prior to the prepayment date, specifying such prepayment date and the principal amount of the Notes, and of the Notes held by such holder, to be prepaid on such date and stating that such prepayment is to be made pursuant to paragraph 4B. Notice of prepayment having been given as aforesaid, the principal amount of the Notes specified in such notice, together with interest thereon to the prepayment date and together with the Yield-Maintenance Amount, if any, with respect thereto, shall become due and payable on such prepayment date. The Obligors shall, on or before the day on which it gives written notice of any prepayment pursuant to paragraph 4B, give telephonic notice of the principal amount of the Notes to be prepaid and the prepayment date to each Significant Holder which shall have designated a recipient of such notices in the Purchaser Schedule attached hereto or by notice in writing to the Obligors.
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4D. Partial Payments Pro Rata. Upon any partial prepayment of the Notes pursuant to paragraph 4A or 4B, the principal amount so prepaid shall be allocated to all Notes at the time outstanding in proportion to the respective outstanding principal amounts thereof.
4E. Retirement of Notes. The Obligors shall not, and shall not permit any of their Subsidiaries or Affiliates to, prepay or otherwise retire in whole or in part prior to their stated final maturity (other than by prepayment pursuant to paragraph 4A or 4B or upon acceleration of such final maturity pursuant to paragraph 7A), or purchase or otherwise acquire, directly or indirectly, Notes held by any holder unless such Obligor or such Subsidiary or Affiliate shall have offered to prepay or otherwise retire or purchase or otherwise acquire, as the case may be, the same proportion of the aggregate principal amount of Notes held by each other holder of Notes at the time outstanding upon the same terms and conditions. Any Notes so prepaid or otherwise retired or purchased or otherwise acquired by the Obligors or any of their Subsidiaries or Affiliates shall not be deemed to be outstanding for any purpose under this Agreement.
5A. Financial Statements. The Company covenants that it will deliver to each Significant Holder in duplicate:
(i) as soon as practicable and in any event within 45 days after the end of each quarterly period (other than the last quarterly period) in each fiscal year, consolidated statements of income, cash flows and changes in financial position of the Company and its Subsidiaries for the period from the beginning of the current fiscal year to the end of such quarterly period, and a consolidated balance sheet of the Company and its Subsidiaries as at the end of such quarterly period, setting forth in each case in comparative form figures for the corresponding period in the preceding fiscal year, all in reasonable detail and satisfactory in form to the Required Holder(s) and certified by an authorized financial officer of the Company, subject to changes resulting from year-end adjustments; provided , however , that delivery pursuant to clause (iii) below of copies of the Quarterly Report on Form 10-Q of the Company for such quarterly period filed with the Securities and Exchange Commission shall be deemed to satisfy the requirements of this clause (i) with respect to consolidated statements;
(ii) as soon as practicable and in any event within 90 days after the end of each fiscal year, consolidated statements of income, cash flows and changes in financial position for the Company and its Subsidiaries for such year, and a consolidated balance sheet of the Company and its Subsidiaries as at the end of such year, setting forth in each case in comparative form corresponding consolidated figures from the preceding annual audit, all in reasonable detail and satisfactory in form to the Required Holder(s) and, as to the consolidated statements, reported on by independent public accountants of recognized national standing selected by the Company whose report shall be without limitation as to the scope of the audit and satisfactory in substance to the Required Holder(s); provided , however , that delivery pursuant to clause (iii) below of copies of the Annual Report on Form 10-K of the Company for such fiscal year filed with the Securities and Exchange
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Commission shall be deemed to satisfy the requirements of this clause (ii) with respect to consolidated statements;
(iii) promptly upon transmission thereof, copies of all such financial statements, proxy statements, notices and reports as it shall send to its public stockholders and copies of all registration statements (without exhibits) and all reports which it files with the Securities and Exchange Commission (or any governmental body or agency succeeding to the functions of the Securities and Exchange Commission);
(iv) promptly upon receipt thereof, a copy of each other report submitted to the Company or any Subsidiary by independent accountants in connection with any annual, interim or special audit made by them of the books of the Company or any Subsidiary;
(v) as soon as available and in any event within 30 days after the end of each fiscal year of the Company, a forecasted income statement, balance sheet, and statement of cash flows for the following fiscal year, provided that , the Company shall not be required to deliver such financial statements so long as the Company is not required to provide such information to any other lender, whether pursuant to the SunTrust Agreement or otherwise;
(vi) with reasonable promptness, such other information and documents as such Significant Holder may reasonably request.
Together with each delivery of financial statements required by clauses (i) and (ii) above, the Company will deliver to each Significant Holder an Officer’s Certificate demonstrating (with computations in reasonable detail) compliance by the Company and its Subsidiaries with the provisions of paragraphs 6A through 6D, inclusive and stating that there exists no Event of Default or Default, or, if any Event of Default or Default exists, specifying the nature and period of existence thereof and what action the Company proposes to take with respect thereto. Together with each delivery of financial statements required by clause (ii) above, the Company will deliver to each Significant Holder a certificate of such accountants stating that, in making the audit necessary for their report on such financial statements, they have obtained no knowledge of any Event of Default or Default, or, if they have obtained knowledge of any Event of Default or Default, specifying the nature and period of existence thereof. Such accountants, however, shall not be liable to anyone by reason of their failure to obtain knowledge of any Event of Default or Default which would not be disclosed in the course of an audit conducted in accordance with generally accepted auditing standards.
5B. Information Required by Rule 144A. The Obligors covenant that they will, upon the request of the holder of any Note, provide such holder, and any qualified institutional buyer designated by such holder, such financial and other information as such holder may reasonably determine to be necessary in order to permit compliance with the information requirements of Rule 144A under the Securities Act in connection with the resale of Notes, except at such times as the Obligors are subject to the reporting requirements of section 13 or 15(d)
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of the Exchange Act. For the purpose of this paragraph 5B, the term “qualified institutional buyer” shall have the meaning specified in Rule 144A under the Securities Act.
5C. Inspection of Property. The Company shall permit the representatives of each Significant Holder that is an Institutional Investor:
(a) No Default — if no Default or Event of Default then exists, at the expense of such Significant Holder and upon reasonable prior notice to the Company, to visit the principal executive office of the Company, to discuss the affairs, finances and accounts of the Company and its Subsidiaries with the Company’s officers, and (with the consent of the Company, which consent will not be unreasonably withheld) its independent public accountants, and (with the consent of the Company, which consent will not be unreasonably withheld) to visit the other offices and properties of the Company and each Subsidiary, all at such reasonable times and as often as may be reasonably requested in writing; and
(b) Default — if a Default or Event of Default then exists, at the expense of the Company to visit and inspect any of the offices or properties of the Company or any Subsidiary, to examine all their respective books of account, records, reports and other papers, to make copies and extracts therefrom, and to discuss their respective affairs, finances and accounts with their respective officers and independent public accountants (and by this provision the Company authorizes said accountants to discuss the affairs, finances and accounts of the Company and its Subsidiaries), all at such times and as often as may be requested.
5D. Corporate Existence, Etc. Each Obligor will at all times preserve and keep in full force and effect its corporate existence. Subject to paragraphs 6G and 6M, the Company will at all times preserve and keep in full force and effect the corporate existence of each of its Subsidiaries and all rights and franchises of the Company and its Subsidiaries unless, in the good faith judgment of the Company, the termination of or failure to preserve and keep in full force and effect such corporate existence, right or franchise would not, individually or in the aggregate, have a Material Adverse Effect.
5E. Payment of Taxes and Claims. The Company will and will cause each of its Subsidiaries to file all tax returns required to be filed in any jurisdiction and to pay and discharge all taxes shown to be due and payable on such returns and all other taxes, assessments, governmental charges, or levies imposed on them or any of their properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent and all claims for which sums have become due and payable that have or might become a Lien on properties or assets of the Company or any Subsidiary, provided that neither the Company nor any Subsidiary need pay any such tax or assessment or claims if (i) the amount, applicability or validity thereof is contested by the Company or such Subsidiary on a timely basis in good faith and in appropriate proceedings, and the Company or a Subsidiary has established adequate reserves therefor in accordance with GAAP on the books of the Company or such Subsidiary or (ii) the nonpayment of all such taxes and assessments in the aggregate could not reasonably be expected to have a Material Adverse Effect.
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5F. Line of Business. The Company will not, and will not permit any of its Subsidiaries to, engage in any business if, as a result, the general nature of the business in which the Company and its Subsidiaries, taken as a whole, would then be engaged would be substantially changed from the general nature of the business in which the Company and its Subsidiaries, taken as a whole, are engaged on the date of this Agreement.
5G. Maintenance of Most Favored Lender Status. The Obligors hereby covenant that if the Obligors shall enter into any credit facility or loan agreement or any amendment thereof (including, without limitation, any amendment to the SunTrust Agreement, the SouthTrust Agreement, or the Existing Note Purchase Agreement) pursuant to which the credit commitments available to the Obligors, individually or in the aggregate to one or more of the Obligors under such credit facility or loan agreement, and/or outstanding principal indebtedness incurred equals or exceeds $25,000,000 and which provides for the benefit of the lenders thereunder any covenants which are more favorable to such lenders than the covenants provided for in paragraphs 5 or 6 hereof for the benefit of the holders of the Notes then, and in each and any such event, the covenants in this Agreement shall be and shall be deemed to be, notwithstanding paragraph 11C and without any further action on the part of the Obligors or any other Person being necessary or required, amended to afford the holders of the Notes the same benefits and rights as such amendments, or other agreements, provide the lenders thereof. The Obligors will promptly deliver to each holder of Notes a copy of each such agreement or amendment, or any waiver or modification thereof. Notwithstanding the foregoing, the Obligors agree to enter into such documentation as the Required Holders may reasonably request to evidence the amendments provided for in this paragraph 5G.
5H. Covenant Relating to Domestic Subsidiaries. The Company shall not permit any Domestic Subsidiary to enter into any Guarantee of the obligations under the SunTrust Agreement, the SunTrust Loan Facility Agreement or the SouthTrust Agreement unless at the time of entering into such Guarantee, such Domestic Subsidiary (an “ Additional Obligor ”) contemporaneously therewith executes and delivers, to each of the holders of the Notes (i) a duly authorized Joinder Agreement substantially in the form of Exhibit D hereto pursuant to which such Additional Obligor shall jointly and severally assume all obligations under this Agreement and the Notes, and (ii) a certificate of such Domestic Subsidiary’s secretary or another responsible officer certifying attached copies of such Domestic Subsidiary’s constitutive documents and relevant resolutions, and an opinion of counsel to such Person regarding the authorization, execution and delivery of such Joinder Agreement and its enforceability, which opinion shall be satisfactory in all respects to the Required Holders. Upon execution and delivery of any such Joinder Agreement by an Additional Obligor, this Agreement and the Notes shall be deemed to be amended so that such Additional Obligor shall be an Obligor hereunder and under the Notes without any further action on the part of the Additional Obligor, the Obligors, or any other Person being necessary or required (notwithstanding paragraph 11C).
5I. Compliance with Laws. The Company will, and will cause each of its Subsidiaries to, comply with all laws, ordinances or governmental rules or regulations to which each of them is subject, including, without limitation, Environmental Laws, and will obtain and maintain in effect all licenses, certificates, permits, franchises and other governmental authorizations necessary to the ownership of their respective properties or to the conduct of their
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respective businesses, in each case to the extent necessary to ensure that non-compliance with such laws, ordinances or governmental rules or regulations or failures to obtain or maintain in effect such licenses, certificates, permits, franchises and other governmental authorizations would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. Without limitation of the foregoing, the Company will, and will cause each of its Subsidiaries to, not be a Person described in section 1 of the Anti-Terrorism Order, and not knowingly engage in any dealings or transactions, or otherwise knowingly be associated, with any such Person.
5J. Notices of Material Events. The Company will furnish to each Significant Holder prompt written notice of the following:
(a) the occurrence of any Default or Event of Default;
(b) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against the Company or any Subsidiary which, if adversely determined, could reasonably be expected to result in a Material Adverse Effect;
(c) the occurrence of any event or any other development by which the Company or any of its Subsidiaries (i) fails to comply in any material respect with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) becomes subject to any Environmental Liability in excess of $500,000, (iii) receives notice of any claim with respect to any Environmental Liability in excess of $500,000, or (iv) becomes aware of any basis for any Environmental Liability in excess of $500,000 and in each of the preceding clauses, which individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect, provided that , the Company shall not be required to deliver such information set forth in this clause (c) so long as the Company is not required to provide such information to any other lenders, whether pursuant to the SunTrust Agreement or otherwise;
(d) the occurrence of any ERISA Event that alone, or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of the Company and its Subsidiaries in an aggregate amount exceeding $1,000,000; and
(e) any other development known to the Company that results in, or could reasonably be expected to result in, a Material Adverse Effect.
Each notice delivered under this Paragraph 5J shall be accompanied by a written statement of a Responsible Officer setting forth in reasonable details a description of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.
5K. Payment of Obligations. The Company will, and will cause each of its Subsidiaries to, pay and discharge at or before maturity, all of its obligations and liabilities before the same shall become delinquent or in default, except where (a) the validity or amount thereof is
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being contested in good faith by appropriate proceedings, (b) the Company or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect.
5L. Books and Records. The Company will, and will cause each of its Subsidiaries to, keep proper books of record and account in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities to the extent necessary to prepare the consolidated financial statements of the Company in conformity with GAAP.
5M. Maintenance of Properties; Insurance. The Company will, and will cause each of its Subsidiaries to, (a) keep and maintain all property material to the conduct of its business in good working order and condition, ordinary wear and tear excepted, except where the failure to do so, either individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect and (b) maintain with financially sound and reputable insurance companies, insurance (including self-insurance in amounts not exceeding the customary amounts maintained by similarly situated companies and for which adequate reserves are maintained) with respect to its properties and business, and the properties and business of its Subsidiaries, against loss or damage of the kinds customarily insured against by companies in the same or similar businesses operating in the same or similar locations. In addition, and not in limitation of the foregoing, the Company shall maintain and keep in force insurance coverage on its inventory, as is consistent with best industry practices.
5N. Covenant Relating to Foreign Subsidiaries.
The Company shall not acquire or form any additional Foreign Subsidiaries; provided, however, that the Company may acquire or form additional Subsidiaries incorporated under the laws of Canada so long as the Company, within ten (10) business days after any such Foreign Subsidiary is acquired or formed (i) notifies each Significant Holder thereof (ii) delivers stock certificates and related pledge agreements, in form satisfactory to a collateral agent acceptable to the Required Holders, evidencing the pledge of 66% (or such greater percentage which would not result in material adverse tax consequences) of the issued and outstanding capital stock entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) and 100% of the issued and outstanding capital stock not entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) of each such Subsidiary directly owned by the Company or any Domestic Subsidiary to secure the obligations under this Agreement and the Notes, (iii) causes such Subsidiary to deliver simultaneously therewith similar documents applicable to such Foreign Subsidiary described in Paragraph 3 hereof as reasonably requested by the Required Holders, and (iv) the holders of the Notes enter into an intercreditor agreement, in form and substance satisfactory to the Required Holders, with all other creditors of the Company having a similar covenant with the Company. Notwithstanding the foregoing, the Company shall not be required to comply with the provisions of this paragraph 5N so long as the Company is not required to comply with similar provisions with regard to Foreign Subsidiaries pursuant to any credit facility or loan agreement to which the Company or any of its Subsidiaries is a party, including, without limitation, the provisions of section 5.10(b) of the SunTrust Agreement.
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So long as any Note or amount owing under this Agreement shall remain unpaid, each Obligor covenants as follows that:
6A. Fixed Charges Coverage Ratio.
The Company will not permit the Consolidated Fixed Charge Coverage Ratio to be less than 2.00 to 1.00.
6B. Total Debt to EBITDA Ratio.
The Company will not, at any time, permit the Total Debt to EBITDA Ratio to be greater than 3.00 to 1.00.
6C. Total Adjusted Debt to Total Adjusted Capitalization Ratio.
The Company will not, at any time, permit the Total Adjusted Debt to Total Adjusted Capital Ratio to be greater than 0.60 to 1.00.
6D. Minimum Consolidated Net Worth.
The Company will not permit Consolidated Net Worth to be less than the sum of (i) $338,340,000, plus (ii) 50% of cumulative positive Consolidated Net Income accrued during each fiscal quarter plus (iii) 100% of the net proceeds from any public or private offering of common stock of the Company after the Date of Closing, calculated quarterly on the last day of each fiscal quarter; provided, that if Consolidated Net Income is negative in any fiscal quarter the amount added for such fiscal quarter shall be zero and such negative Consolidated Net Income shall not reduce the amount of Consolidated Net Income added from any previous fiscal quarter. Promptly upon the consummation of any offering of common stock of the Company, the Company shall notify each holder of the Notes in writing of the amount of the net proceeds thereof.
The Company will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Indebtedness, except :
(a) Indebtedness created pursuant to this Agreement and the Notes;(b) Indebtedness of any Subsidiary owing to any Obligor or any Wholly Owned Subsidiary of any Obligor;(c) Indebtedness of the Company or any Subsidiary incurred after the Date of Closing to finance the acquisition, construction or improvement of any fixed or capital assets, including Capitalized Lease Obligations and any Indebtedness
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assumed in connection with the acquisition of any such assets or secured by a Lien on any such assets prior to the acquisition thereof; provided, that such Indebtedness is incurred prior to or within 90 days after such acquisition or the completion of such construction or improvements or extensions, renewals, and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof (immediately prior to giving effect to such extension, renewal or replacement) or shorten the maturity or the weighted average life thereof; provided further , that the aggregate principal amount of such Indebtedness does not exceed $20,000,000 at any time outstanding;(d) Guarantees by the Company of Indebtedness of any other Obligor and Guarantees by any Obligor of Indebtedness of the Company;(e) Indebtedness or contingent liability under the Synthetic Lease Documents, provided that the aggregate outstanding principal amount of all such Indebtedness does not exceed $25,000,000 at any one time;(f) Guarantees by the Company of Indebtedness of certain franchise operators of the Company, provided such guarantees are given by the Company in connection with (1) loans made pursuant to the terms of the SunTrust Loan Facility Agreement, (2) loans made pursuant to the SouthTrust Agreement in an aggregate principal amount not to exceed $250,000, (3) loans made by SunTrust to finance the purchase of equity interests in certain franchises of the Company in an aggregate principal amount not to exceed $10,000,000, (4) loans made pursuant to terms of the loan agreement relating to the Rosey Rentals Guarantee in an aggregate principal amount not to exceed Twenty Five Million Dollars ($25,000,000), and (5) loans made pursuant to the terms of the RBC Agreement in an aggregate principal amount not to exceed Fifteen Million Canadian Dollars (Cdn. $15,000,000);(g) Endorsed negotiable instruments for collection in the ordinary course of business;(h) Guarantees by the Company of Indebtedness of Foreign Subsidiaries, provided that the sum of the aggregate principal amount of such Guarantees, together with the principal amount of any loans from the Company to Foreign Subsidiaries permitted pursuant to paragraph 6I(f) hereof does not exceed $10,000,000 in the aggregate at any time;(i) Indebtedness existing on the Date of Closing and set forth on Schedule 6E and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof (immediately prior to giving effect to such extension, renewal or replacement) or shorten the maturity or the weighted average life thereof;(j) Indebtedness under the SunTrust Agreement;
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(k) Indebtedness under the Existing Note Purchase Agreement;(l) Indebtedness in respect of Private Placement Debt (other than Private Placement Debt incurred in respect of the Existing Note Purchase Agreement and this Agreement) in an aggregate principal amount not to exceed $100,000,000; and(m) Other unsecured Indebtedness in an aggregate principal amount not to exceed $30,000,000 at any time outstanding, provided that no Default or Event of Default shall exist as a result of the incurrence, assumption or maintenance of such Indebtedness.
The Company will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien on any of its assets or property now owned or hereafter acquired, except :
(a) Liens on any property or asset of the Company or any Subsidiary existing on the Date of Closing set forth on Schedule 6F; provided, that such Lien shall not apply to any property or asset of the Company or any Subsidiary not encumbered thereby, on the date hereof;(b) Liens for taxes, assessments, governmental charges or levies, statutory Liens of landlords and Liens of carriers, warehousemen, mechanics and materialmen and other similar Liens, in each case, incurred in the ordinary course of business for sums not yet due or the payment of which is not at the time required by paragraph 5E;(c) Liens (other than any Lien imposed by ERISA) incurred or deposits made in the ordinary course of business (i) in connection with workers’ compensation, unemployment insurance and other types of social security or retirement benefits, or (ii) to secure (or to obtain letters of credit that secure) the performance of tenders, statutory obligations, surety bonds, appeal bonds, bids, leases (other than leases providing for Capitalized Lease Obligations), performance bonds, purchase, construction or sales contracts or other similar obligations, in each case not incurred or made in connection with the borrowing of money, the obtaining of advances or credit or the payment of a deferred purchase price, and which do not, in the aggregate, materially detract from the value of the Company’s property or assets or impair the use thereof or operation of its business;(d) Liens on property or assets of the Company or any Subsidiary securing obligations of such Obligor or Subsidiary to the Company or a Wholly Owned Subsidiary of the Company;(e) Liens on insurance policies owned by the Company on the lives of its officers securing policy loans obtained from the insurers under such policies, provided
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that (i) the aggregate amount borrowed on each policy shall not exceed the loan value thereof, and (ii) the Company shall not incur any liability to repay any such loans;(f) Subject to compliance with paragraph 6E(e), Liens granted under the Synthetic Lease Documents in the real or personal property financed thereunder, and in certain related rights of the Company to secure the Company’s indebtedness and liabilities under the Synthetic Lease Documents;(g) Liens in respect of purchase money obligations in any fixed or capital assets to secure the purchase price or the cost of construction or improvement of such fixed or capital assets or to secure Indebtedness incurred solely for the purpose of financing the acquisition, construction or improvement of such fixed or capital assets (including Liens securing any Capitalized Lease Obligations); provided, that (i) such Lien secures Indebtedness permitted by paragraph 6E(c), (ii) such Lien attaches to such asset concurrently or within 90 days after the acquisition, improvement or completion of the construction thereof; (iii) such Lien does not extend to any other asset; and (iv) the Indebtedness secured thereby does not exceed the cost of acquiring, constructing or improving such fixed or capital assets together with all interest, fees and costs incurred in connection therewith;(h) Liens (i) existing on any asset of any Person at the time such Person becomes a Subsidiary of the Company, (ii) existing on any asset of any Person at the time such Person is merged with or into the Company or any Subsidiary of the Company or (iii) existing on any asset prior to the acquisition thereof by the Company or any Subsidiary of the Company; provided, that any such Lien was not created in contemplation of any of the foregoing and any such Lien secures only those obligations which it secures on the date that such Person becomes a Subsidiary or the date of such merger or the date of such acquisition;(i) Liens on shares of stock of any Foreign Subsidiary, only to the extent that the Notes and the obligations relating thereto are secured pari passu with any other Indebtedness or obligations secured thereby;(j) judgment Liens not giving rise to an Event of Default or Liens created by or existing from any litigation or legal proceedings that are currently being contested in good faith for which adequate reserves have been established; and(k) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or materially interfere with the ordinary conduct of business of any Obligor or any Subsidiary.
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The Company will not, and will not permit any of its Subsidiaries to, convey, sell, lease, assign, transfer or otherwise dispose of, any of its assets, business or property, whether now owned or hereafter acquired, or, in the case of any Subsidiary, issue or sell any shares of such Subsidiary’s common stock to any Person other than an Obligor (or to qualify directors if required by applicable law), except (a) the sale or other disposition for fair market value of obsolete or worn out property or other property not necessary for operations, disposed of in the ordinary course of business; (b) the sale, lease or other disposition of inventory and Permitted Investments in the ordinary course of business, (c) sales and dispositions permitted under paragraph 6M and sale and leaseback transactions permitted under paragraph 6O and (d) other sales of assets not to exceed $10,000,000 in book value in the aggregate for all such sales.
The Company will not, and will not permit its Subsidiaries to, declare or make, or agree to pay or make, directly or indirectly, any dividend on any class of its stock, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, retirement, defeasance or other acquisition of, any shares of common stock or Indebtedness subordinated to the obligations of the Obligors under the Notes or any options, warrants, or other rights to purchase such common stock or such subordinated Indebtedness, whether now or hereafter outstanding (each, a “ Restricted Payment ”), except for (i) dividends payable by the Company solely in shares of any class of its common stock, (ii) Restricted Payments made by any Subsidiary to any Obligor, and (iii) so long as no Default or Event of Default has occurred and is continuing, or results from such dividend, at the time such dividend is paid or redemption or stock repurchase is made, dividends, distributions, redemptions and stock repurchases paid in cash which do not exceed fifty percent (50%) of Consolidated Net Income (if greater than $0) for the immediately preceding fiscal year of the Company; provided, that if the aggregate amount of all such dividends and distributions paid in cash in such fiscal year are less than the amount permitted by clause (iii) above, the excess permitted amount for such year may be carried forward once to the next succeeding fiscal year of the Company.
The Company will not, and will not permit any of its Subsidiaries to, purchase, hold or acquire (including pursuant to any merger with any Person that was not a Wholly Owned Subsidiary prior to such merger), any common stock, evidence of Indebtedness or other securities (including any option, warrant, or other right to acquire any of the foregoing) of, make or permit to exist any loans or advances to, or make or permit to exist any investment or any other interest in, any other Person (all of the foregoing being collectively called “ Investments ”), or purchase or otherwise acquire (in one transaction or a series of transactions) any assets of any other Person that constitute a business unit, or create or form any Subsidiary, except :
(a) Permitted Investments;(b) Permitted Acquisitions;(c) Investments made by any Obligor in any other Obligor;
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(d) loans in the ordinary course of business to officers, stockholders and directors provided that the aggregate amount of all such loans does not exceed $1,000,000 at any time;(e) (i) loans to franchise operators and owners of franchises acquired or funded pursuant to the SunTrust Loan Facility Agreement, the loan agreement relating to the Rosey Rentals Guarantee, the RBC Agreement and the SouthTrust Agreement and (ii) other adequately secured and properly monitored loans to franchise operators and owners of franchises in an aggregate principal amount outstanding, together with loans outstanding under clause (i) of this paragraph 6I(e), not to exceed the aggregate facility amounts available for borrowing by franchise operators that the Company is permitted to guarantee pursuant to paragraph 6E(f);(f) loans by the Company to Foreign Subsidiaries, provided that the amount of such loans together with the aggregate principal amount of Guarantees permitted pursuant to paragraph 6E(h) hereof does not exceed $10,000,000 in the aggregate at any time;(g) Investments (other than Permitted Investments) existing on the date hereof and set forth on Schedule 6I (including Investments in Subsidiaries); and(h) Other Investments not to exceed $10,000,000 in the aggregate at any time.6J. Restrictive Agreements. The Company will not, and will not permit any Subsidiary to, directly or indirectly, enter into, incur or permit to exist any agreement that prohibits, restricts or imposes any condition upon (a) the ability of the Company or any Subsidiary to create, incur or permit any Lien upon any of its assets or properties, whether now owned or hereafter acquired, or (b) the ability of any Subsidiary to pay dividends or other distributions with respect to its common stock, to make or repay loans or advances to the Company or any other Subsidiary, to Guarantee Indebtedness of the Company or any other Subsidiary or to transfer any of its property or assets to the Company or any Subsidiary of the Company; provided, that (i) the foregoing shall not apply to restrictions or conditions imposed by law or by this Agreement, the SunTrust Agreement, the SunTrust Loan Facility Agreement, the Synthetic Lease Documents, the Industrial Revenue Bonds, the RBC Agreement or the Existing Note Purchase Agreement, (ii) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary pending such sale, provided such restrictions and conditions apply only to the Subsidiary that is sold and such sale is permitted hereunder, (iii) clause (a) shall not apply to restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Agreement if such restrictions and conditions apply only to the property or assets securing such Indebtedness, and (iv) clause (a) shall not apply to customary provisions in leases restricting the assignment thereof.
6K. Amendments to Material Documents. The Company will not, and will not permit any Subsidiary to, amend, modify or waive any of its rights in a manner that would have a Material Adverse Effect under their respective certificates of incorporation, bylaws or other organizational documents.
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The Company will not, and will not permit any Subsidiary to, (a) make any significant change in accounting treatment or reporting practices other than those permitted by GAAP (each a “ Permitted Change ”), provided that Permitted Changes shall only be permitted to the extent that (i) if such Permitted Change had not occurred, no Event of Default would have existed as at the last day of the next succeeding fiscal quarter of the Company, and (ii) if such Permitted Change had already occurred, no Event of Default would have existed as at the last day of the immediately preceding fiscal quarter of the Company, or, or (b) change the fiscal year of the Company or of any Subsidiary, except to change the fiscal year of a Subsidiary to conform its fiscal year to that of the Company.
(a) The Company will not, and will not permit any Subsidiary to, merge into or consolidate into any other Person, or permit any other Person to merge into or consolidate with it, or sell, lease, transfer or otherwise dispose of (in a single transaction or a series of transactions) all or substantially all of its assets (in each case, whether now owned or hereafter acquired) or all or substantially all of the stock of any of its Subsidiaries (in each case, whether now owned or hereafter acquired) or liquidate or dissolve; provided , that if at the time thereof and immediately after giving effect thereto, no Default or Event of Default shall have occurred and be continuing (i) the Company or any Subsidiary may merge with a Person if the Company (or such Subsidiary if the Company is not a party to such merger) is the surviving Person, (ii) any Subsidiary may merge into another Subsidiary or the Company; provided, however , that if the Company is a party to such merger, the Company shall be the surviving Person, provided, further , that if any Subsidiary to such merger is an Obligor, the Obligor shall be the surviving Person, (iii) any Subsidiary may sell, transfer, lease or otherwise dispose of all or substantially all of its assets to the Company or to an Obligor, (iv) ARPR, AIC or any Additional Obligor may liquidate or dissolve into the Company if such liquidation or dissolution does not have a Material Adverse Effect, (v) any other Subsidiary may liquidate or dissolve if the Company determines in good faith that such liquidation or dissolution does not have a Material Adverse Effect and such Subsidiary liquidates or dissolves into another Obligor or the Company; provided , that any such merger involving a Person that is not a wholly-owned Subsidiary immediately prior to such merger shall not be permitted unless also permitted by paragraph 6I.
(b) The Company will not, and will not permit any Subsidiary to, engage in any business other than businesses of the type conducted by the Company and its Subsidiaries on the date hereof and businesses reasonably related thereto.6N. Transactions with Affiliates. The Company will not, and will not permit any of its Subsidiaries to, sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except (a) in the ordinary course of business at prices and on terms and conditions not less favorable to the Company or such Subsidiary than could be obtained on an
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arm’s-length basis from unrelated third parties, (b) transactions between or among the Company and its wholly-owned Subsidiaries not involving any other Affiliates, (c) any Restricted Payment permitted by paragraph 6H and (d) transactions permitted under paragraph 6I(d).
6O. Sale and Leaseback Transactions. The Company will not, and will not permit any of its Subsidiaries to, enter into any arrangement, directly or indirectly, whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereinafter acquired, and thereafter rent or lease such property or other property that it intends to use for substantially the same purpose or purposes as the property sold or transferred; provided, however, the Company may engage in such sale and leaseback transactions so long as the aggregate fair market value of all assets sold and leased back does not exceed $100,000,000 during the term of this Agreement.
7A. Acceleration. If any of the following events shall occur and be continuing for any reason whatsoever (and whether such occurrence shall be voluntary or involuntary or come about or be effected by operation of law or otherwise):
(i) the Obligors default in the payment of any principal of or Yield-Maintenance Amount payable with respect to any Note or any fee that may be due in connection with any of the matters specified in paragraph 11B(ii)(C) when the same shall become due, either by the terms thereof or otherwise as herein provided; or
(ii) the Obligors default in the payment of any interest on any Note for more than 3 Business Days after the date due; or
(iii) (A) any Obligor or any Subsidiary defaults (whether as primary obligor or as guarantor or other surety) in any payment of principal of or interest on the SunTrust Agreement, the SunTrust Loan Facility Agreement and the Existing Note Purchase Agreement beyond any period of grace provided with respect thereto, or the Obligors or any Subsidiary fail to perform or observe any other agreement, term or condition contained in such agreements (or if any other event thereunder or under any such agreement shall occur and be continuing) and the effect of such failure or other event is to cause, or to permit the holder or holders of such obligation (or a trustee on behalf of such holder or holders) to cause, such obligation to become due prior to any stated maturity, or any such obligation shall be declared to be due and payable; or required to be prepaid or redeemed (other than a regularly scheduled required prepayment or redemption), purchased or defeased, or any offer to prepay, redeem, purchase, repurchase or defease such obligation shall be required to be made, in each case prior to the stated maturity thereof; or (B) any Obligor or any Subsidiary defaults (whether as primary obligor or as guarantor or other surety) in any payment of principal of or interest on Indebtedness (or any Capitalized Lease Obligation, any obligation under a conditional sale or other title retention agreement, any obligation issued or assumed as full or partial payment for property whether or not secured by a purchase money mortgage or any obligation under notes payable or drafts accepted representing extensions of credit (other than, in each case
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in this Paragraph 7A(iii)(B), (x) the SunTrust Agreement, the SunTrust Loan Facility Agreement and the Existing Note Purchase Agreement, which are addressed in Paragraph 7A(iii)(A), and (y) any Indebtedness, Capitalized Lease Obligations or other obligation in an aggregate principal amount that does not exceed $1,000,000) beyond any period of grace provided with respect thereto, or the Obligors or any Subsidiary fail to perform or observe any other agreement, term or condition contained in any agreement under which any such obligation is created (or if any other event thereunder or under any such agreement shall occur and be continuing) and the effect of such failure or other event is to cause, or to permit the holder or holders of such obligation (or a trustee on behalf of such holder or holders) to cause, such obligation to become due prior to any stated maturity, or any such obligation shall be declared to be due and payable; or required to be prepaid or redeemed (other than a regularly scheduled required prepayment or redemption), purchased or defeased, or any offer to prepay, redeem, purchase, repurchase or defease such obligation shall be required to be made, in each case prior to the stated maturity thereof; or
(iv) any representation or warranty made by or on behalf of any Obligor or by any officer of any Obligor herein or in any other writing furnished in connection with or pursuant to this Agreement or the transactions contemplated hereby shall be false in any materia | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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