def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A
(RULE 14A-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material under Rule 14a-12 |
Aarons, Inc.
(Name of the Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required. |
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and
identify the filing for which the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule and the date of its filing. |
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Aarons,
Inc.
309 E. Paces Ferry Road, N.E.
Atlanta, Georgia
30305-2377
NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS
To Be Held December 7,
2010
A Special Meeting of Shareholders of Aarons, Inc. (the
Company), will be held on December 7,
2010, at 2:00 p.m., Eastern Time, at the Companys
headquarters at 309 E. Paces Ferry Road, N.E.,
Atlanta, Georgia
30305-2377.
Shareholders will consider and take action on the following
matters:
(1) The amendment and restatement of our Amended and
Restated Articles of Incorporation to convert all shares of
Common Stock into Class A Common Stock, remove the current
class of Common Stock, rename the current class of Class A
Common Stock as Common Stock, eliminate certain obsolete
provisions of our existing Amended and Restated Articles of
Incorporation relating to our dual-class common stock structure
and amend the number of authorized shares to be 225,000,000
total shares;
(2) The amendment of our bylaws to establish a classified
Board of Directors with three classes of directors each to serve
a three-year term;
(3) The amendment of our bylaws to provide that vacancies
on our Board of Directors shall only be filled by our Board of
Directors;
(4) The amendment of our bylaws to reduce the default
approval threshold required for matters submitted to
shareholders for a vote; and
(5) Such other matters as may properly come before the
meeting or any adjournment thereof.
Information relating to the above items is set forth in the
Proxy Statement attached to this notice.
Only shareholders of record of the Class A Common Stock at
the close of business on October 28, 2010 (the
Record Date) and, with respect to the first
proposal only, shareholders of record of the Common Stock at the
close of business on the Record Date, are entitled to vote at
the meeting.
BY ORDER OF THE BOARD OF
DIRECTORS
JAMES L. CATES
Senior Group Vice President
and Corporate Secretary
Atlanta, Georgia
November 3, 2010
PLEASE COMPLETE AND
RETURN THE ENCLOSED PROXY CARD PROMPTLY,
OR SUBMIT YOUR PROXY BY INTERNET OR
TELEPHONE AS DESCRIBED ON YOUR PROXY CARD,
SO THAT YOUR VOTE MAY BE RECORDED AT THE MEETING
IF YOU DO NOT ATTEND PERSONALLY.
No postage is required if mailed
in the United States in the accompanying envelope.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY
MATERIALS FOR THE SHAREHOLDER MEETING
TO BE HELD ON DECEMBER 7, 2010.
The proxy statement is available at:
www.aaronsinc.com/proxy.
TABLE OF
CONTENTS
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5
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6
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A-1
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B-1
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C-1
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Aarons,
Inc.
309 E. Paces Ferry Road,
N.E.
Atlanta, Georgia
30305-2377
PROXY
STATEMENT
SPECIAL MEETING OF
SHAREHOLDERS
To Be Held December 7,
2010
QUESTIONS
AND ANSWERS
What does
this proxy statement and the enclosed proxy relate to?
The enclosed proxy is being solicited by the Board of Directors
of Aarons, Inc. (the Company) for
use at a Special Meeting of Shareholders to be held on
December 7, 2010 (the Special
Meeting), and any adjournment or postponement of the
Special Meeting.
References to we, our, us,
the Company or Aarons refer to
Aarons, Inc.
On what
matters am I voting?
If you were a shareholder of record of our Class A Common
Stock or our Common Stock on the Record Date, you will be asked
to vote on the proposal to:
(1) amend and restate our Amended and Restated Articles of
Incorporation to effect a reclassification of each outstanding
share of Common Stock into one share of Class A Common
Stock and to rename the Class A Common Stock as
Common Stock, to eliminate certain obsolete
provisions relating to our prior dual-class common stock
structure, and to amend the number of authorized shares to be
225,000,000 total shares (the aggregate of the current number of
authorized shares of Common Stock and Class A Common Stock)
(the Capital Simplification proposal). The
text of the proposed Amended and Restated Articles of
Incorporation that we are asking you to approve, marked to show
changes to our current Amended and Restated Articles of
Incorporation, is included as Appendix A to this
document.
If you were a shareholder of record of our Class A Common
Stock on the Record Date, you will also be asked to vote on the
proposals to:
(2) amend our bylaws to provide for a classified Board of
Directors consisting of three classes, with terms of three years
each (the Board Classification proposal);
(3) amend our bylaws to provide that vacancies on our Board
of Directors shall only be filled by the directors (the
Vacancy proposal); and
(4) amend our bylaws to reduce the default approval
threshold required for matters submitted to shareholders for a
vote (the Voting proposal).
Our Board of Directors is not aware of any other matters to be
presented for action at the Special Meeting.
Who is
entitled to vote and how many votes do I have?
If you were a shareholder of record of our Class A Common
Stock or our Common Stock on the Record Date, you are entitled
to vote at the Special Meeting, or at any postponement or
adjournment of the meeting. On each matter to be voted on,
holders of our Class A Common Stock may cast one vote for
each share of Class A Common Stock they hold. On the
Capital Simplification proposal, holders of our Common Stock may
cast one vote for each share of Common Stock they hold. Holders
of Common Stock are not entitled to vote on the Board
Classification, Vacancy or Voting proposals. As of the Record
Date there were 11,635,056 shares of Class A Common
Stock and 69,427,694 shares of Common Stock outstanding and
entitled to vote. A list of all shareholders entitled to vote
will be available for inspection at the Special Meeting.
If the Capital Simplification proposal is approved at the
Special Meeting, both classes of common stock will be unified,
and all of our shareholders will thereafter have the same voting
rights.
What is
the effect of each of the proposals, if they are
approved?
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Capital Simplification Proposal If the
Capital Simplification proposal is approved, it will unify the
two classes of common stock. The Common Stock will no longer
exist with its current rights, powers, privileges, preferences,
or qualifications, limitations or restrictions. Instead, the
resulting unified Class A Common Stock, renamed as the
Common Stock, will generally have the same rights, powers,
privileges, preferences, qualifications, limitations and
restrictions as the currently existing Class A Common Stock.
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Board Classification Proposal If the Board
Classification proposal is approved, the members of our Board of
Directors will no longer be elected annually as a single class.
Instead, the members of our Board of Directors will be divided
into three classes as nearly equal in number as possible, with
terms of office of three years each, and the term of office of
one class of directors expiring each year. To implement the
proposal, immediately following the Special Meeting each of our
current directors will be placed in one of the three classes, as
follows:
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Class I R. Charles
Loudermilk, Sr., Ronald W. Allen, John C.
Portman, Jr., and Ray M. Robinson will be placed in
Class I. The initial term for each of the Class I
directors would expire at the annual meeting of shareholders
expected to be held in May 2011. At the May 2011 annual meeting,
the shareholders will elect four Class I directors for a
term of three years.
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Class II William K.
Butler, Jr., Leo Benatar, and John B. Schuerholz will be
placed in Class II. The initial term for each of the
Class II directors would expire at the annual meeting of
shareholders expected to be held in May 2012. At the May 2012
annual meeting, the shareholders will elect three Class II
directors for a term of three years.
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Class III Robert C.
Loudermilk, Jr., Gilbert L. Danielson, and David L. Kolb
will be placed in Class III. The initial term for each of
the Class III directors would expire at the annual meeting
of shareholders expected to be held in May 2013. At the May 2013
annual meeting, the shareholders will elect three Class III
directors for a term of three years.
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At each annual shareholders meeting at which a specific
class term expires, nominees elected or reelected as a
director for that class will serve for a term of three years to
succeed those of the class whose terms are expiring. Also, as a
result of the Board Classification proposal, shareholders will
no longer be able to remove directors from office without cause.
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Vacancy Proposal If the Vacancy proposal is
approved, only members of our Board of Directors will have the
ability to fill any vacancies that may occur on our Board of
Directors. Currently, our Board of Directors may fill any Board
vacancy resulting from an increase in the number of directors,
but not resulting from the removal of a director from office by
the shareholders, unless the shareholders fail to timely fill
the vacancy. With the approval of this amendment to our bylaws,
only our Board of Directors shall have the right to fill any
vacancy that may occur on our Board of Directors. In the event
there are no directors in office, the vacancies would continue
to be filled through election by our shareholders.
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Voting Proposal If the Voting proposal is
approved, the default approval threshold required to approve
actions submitted to a shareholder vote will be reduced.
Currently, in order for an action to be approved by
shareholders, a majority of the outstanding voting shares
entitled to vote must be cast in favor of the action. With the
approval of the Voting proposal, our bylaws will be amended to
provide that an action submitted to a shareholder vote will be
approved by shareholders if the votes cast in favor of the
action exceed the votes cast opposing the action. This amendment
will not affect the election of directors or other matters for
which law, our bylaws or our Amended and Restated Articles of
Incorporation prescribe a different vote.
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What
constitutes a quorum?
A quorum for each proposal is necessary to conduct business at
the Special Meeting. The presence, in person or by proxy, of
holders of a majority of the outstanding shares of our
Class A Common Stock and, separately, of holders of a
majority of the outstanding shares of our Common Stock at the
Special Meeting is necessary to constitute a quorum with respect
to the Capital Simplification proposal. The presence, in person
or by proxy, of holders of a majority of the outstanding shares
of our Class A Common Stock is necessary to constitute a
quorum with respect to the Board Classification, Vacancy and
Voting proposals. You are part of the quorum if you have
2
voted, or registered an abstention, by proxy. Abstentions and
broker non-votes count as shares present
at the meeting for purposes of determining whether a quorum
exists.
Broker non-votes occur on a matter up for vote when a broker,
bank or other holder of shares you own in street
name is not permitted to vote on that particular matter
without instructions from you, you do not give such instructions
and the broker or other nominee indicates on its proxy card, or
otherwise notifies us, that it does not have authority to vote
its shares on that matter. Whether a broker has authority to
vote its shares on uninstructed matters is determined by stock
exchange rules.
What vote
is required to approve the proposals?
The Capital Simplification proposal must be approved by the
affirmative vote of the holders of (1) a majority of the
outstanding shares of Class A Common Stock, and (2) a
majority of the outstanding shares of Common Stock. The Board
Classification, Vacancy and Voting proposals, as well as any
other proposal that may be properly brought before the Special
Meeting, must each be approved by the affirmative vote of the
holders of a majority of the outstanding shares of Class A
Common Stock. Abstentions and broker non-votes will have the
effect of votes against all of these proposals.
The approval of the Board Classification, Vacancy and Voting
proposals is conditioned upon the approval of the Capital
Simplification proposal.
How does
the Board of Directors recommend I vote on the
proposals?
Our Board of Directors recommends that you vote FOR each
proposal described above for which you are entitled to vote.
How do I
vote?
If you
hold your shares through a broker, bank or other nominee in
street name:
You need to submit voting instructions to your broker, bank or
other nominee in order to cast your vote. In most instances, you
can do this over the Internet or you may mark, sign, date and
mail your voting instruction form (which may resemble a proxy)
in the postage-paid envelope provided. Your vote is revocable by
the procedures outlined by your nominee. However, because you
are not a shareholder of record you may not vote your shares in
person at the meeting without obtaining authorization from your
broker, bank or other nominee.
If you
are a shareholder of record:
You can vote your shares over the Internet or you may vote by
telephone, each as described on the proxy card, or by mail by
marking, signing, dating and mailing your proxy card in the
postage-paid envelope provided. If no direction is specified on
the proxy as to any matter being acted upon, the shares
represented by the proxy will be voted in favor of such matter.
Your designation of a proxy is revocable by following the
procedures outlined in this proxy statement. The method by which
you vote will not limit your right to revoke your prior vote,
and instead vote in person at the Special Meeting.
Different
Proxies or Voting Instruction Forms
A holder of our Class A Common Stock will receive a
different form of proxy than that received by a holder of our
Common Stock, and similarly a street name holder of
our Class A Common Stock may receive a different voting
instruction form to instruct their nominees than a street
name holder of our Common Stock. We will use different
forms of proxy and different voting instruction forms for the
different classes because holders of our Class A Common
Stock are voting on all four proposals, while holders of our
Common Stock are voting only on the Capital Simplification
proposal. Record holders of Class A Common Stock will
receive a blue-colored proxy and record holders of Common Stock
will receive a white-colored proxy.
If you hold shares of both classes, you will receive both kinds
of proxies (or voting instruction forms), and must vote both, in
any of the ways described above, in order to register your vote
with respect to your holdings of both classes.
3
Will my
shares held in street name be voted if I do not provide
instructions to my nominee?
If you hold your shares through a broker, bank or other nominee,
your shares must be voted by the nominee, as described above.
Your vote will be tabulated and voted as per your instructions.
If you do not provide voting instructions, under the rules of
the New York Stock Exchange, the nominees discretionary
authority to vote your shares will be limited to
routine matters. The proposed items to be voted on
at the Special Meeting are not routine matters for this purpose,
so your shares will not be voted at the meeting if you do not
return your voting instructions.
Can I
change my vote?
You can change your vote or revoke your proxy at any time before
it is voted at the Special Meeting by: (1) re-submitting
your vote on the Internet or by telephone; (2) if you are a
shareholder of record, sending a written notice of revocation to
our Corporate Secretary at our principal offices at 309 East
Paces Ferry Road, NE, Atlanta, Georgia
30305-2377;
or (3) attending the Special Meeting and voting in person.
Attendance at the Special Meeting will not by itself revoke your
proxy. If you hold shares in street name and wish to cast your
vote in person at the meeting, you must contact your broker,
bank or other nominee to obtain authorization to vote.
Who is
bearing the cost of this proxy solicitation?
We will bear the cost of preparing, assembling and mailing the
proxy materials to shareholders, and of reimbursing brokers,
nominees, fiduciaries, and other custodians for the
out-of-pocket
and clerical expenses of transmitting the proxy materials to the
beneficial owners of the shares. Our officers and employees may
participate in the solicitation of proxies, without additional
compensation, by telephone,
e-mail or
other electronic means, or in person.
What if I
have additional questions?
If you have additional questions about the Special Meeting or
any of the information presented in this proxy statement, you
may direct your questions to Gilbert L. Danielson, Executive
Vice President and Chief Financial Officer, Aarons, Inc.,
309 East Paces Ferry Road, NE, Atlanta, Georgia
30305-2377,
telephone number
(404) 231-0011.
4
BENEFICIAL
OWNERSHIP OF COMMON STOCK
The following table sets forth, as of October 28, 2010
(except as otherwise noted), the beneficial ownership of our
Class A Common Stock and Common Stock by (1) each
person who owns of record or is known by management to own
beneficially 5% or more of the outstanding shares of our
Class A Common Stock; (2) each of our directors;
(3) our Chief Executive Officer, Chief Financial Officer,
and the other three most highly compensated executive officers;
and (4) all of our executive officers and directors as a
group.
Except as otherwise indicated, all shares shown in the table
below are held with sole voting and investment power. The
Combined Stock Ownership column represents the aggregate number
of shares and pro rata percentage that the named person or group
would beneficially own if the classes of shares were unified as
of October 28, 2010, and if such person or group, and only
such person or group, exercised all options to purchase shares
that were exercisable within sixty (60) days of
October 28, 2010 by him, her, or it.
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Class A Common Stock
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Common Stock
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Ownership(1)
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Ownership(1)
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Combined Stock Ownership(1)
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Number of
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% of
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Number of
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% of
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Number of
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% of
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Beneficial Owner
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Shares
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Shares
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Shares
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Shares
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Shares
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Shares
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R. Charles Loudermilk, Sr.
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7,151,042
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(2)
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61.46
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%
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242,147
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(3)
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*
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7,393,189
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9.12
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%
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309 E. Paces Ferry Road NE,
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Atlanta, GA 30305
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T. Rowe Price Associates, Inc.
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1,240,200
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(4)
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10.66
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%
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5,707,435
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(4)
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8.22
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%
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6,947,635
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8.57
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100 E. Pratt Street, Baltimore,
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MD 21202
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T. Rowe Price Associates, Inc. Small Cap Value Fund
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1,103,550
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(5)
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9.48
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%
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1,103,550
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1.36
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100 E. Pratt Street, Baltimore, MD 21202
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GAMCO Investors, Inc.
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903,635
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(6)
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7.77
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%
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903,635
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1.11
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One Corporate Center,
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Rye, New York 10580
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Perkins Investment Management LLC
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4,932,750
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(7)
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7.10
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%
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4,932,750
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6.09
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%
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151 Detroit Street,
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Denver, CO 80206
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NFJ Investment Group LLC
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4,123,500
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(8)
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5.94
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%
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4,123,500
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5.09
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%
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680 Newport Center Drive, Suite 250,
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Newport Beach, CA 92101
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Allianz NFJ Small-Cap Value Fund
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3,500,300
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(9)
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5.04
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%
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3,500,300
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4.32
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%
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680 Newport Center Drive, Suite 250,
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Newport Beach, CA 92101
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Robert C. Loudermilk, Jr.
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169,656
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(10)
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1.46
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%
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825,309
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(11)
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|
|
1.19
|
%
|
|
|
994,965
|
|
|
|
1.23
|
%
|
Gilbert L. Danielson
|
|
|
81,750
|
(2)
|
|
|
|
*
|
|
|
309,482
|
(12)
|
|
|
|
*
|
|
|
391,232
|
|
|
|
|
*
|
William K. Butler, Jr.
|
|
|
75,000
|
(2)
|
|
|
|
*
|
|
|
257,946
|
(13)
|
|
|
|
*
|
|
|
332,946
|
|
|
|
|
*
|
Ronald W. Allen
|
|
|
16,875
|
|
|
|
|
*
|
|
|
12,750
|
(14)
|
|
|
|
*
|
|
|
29,625
|
|
|
|
|
*
|
Leo Benatar
|
|
|
4,672
|
|
|
|
|
*
|
|
|
16,785
|
(14)
|
|
|
|
*
|
|
|
21,457
|
|
|
|
|
*
|
David L. Kolb
|
|
|
|
|
|
|
|
|
|
|
67,925
|
(14)
|
|
|
|
*
|
|
|
67,925
|
|
|
|
|
*
|
John C. Portman, Jr.
|
|
|
|
|
|
|
|
|
|
|
46,500
|
(15)
|
|
|
|
*
|
|
|
46,500
|
|
|
|
|
*
|
John B. Schuerholz
|
|
|
|
|
|
|
|
|
|
|
6,419
|
(15)
|
|
|
|
*
|
|
|
6,419
|
|
|
|
|
*
|
Ray M. Robinson
|
|
|
|
|
|
|
|
|
|
|
12,750
|
(14)
|
|
|
|
*
|
|
|
12,750
|
|
|
|
|
*
|
K. Todd Evans
|
|
|
|
|
|
|
|
|
|
|
33,179
|
(16)
|
|
|
|
*
|
|
|
33,179
|
|
|
|
|
*
|
All executive officers and directors as a group
|
|
|
7,500,727
|
(17)
|
|
|
64.47
|
%
|
|
|
2,028,905
|
(18)
|
|
|
2.92
|
%
|
|
|
9,529,632
|
|
|
|
11.76
|
%
|
(a total of 15 persons)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Less than 1%. |
|
(1) |
|
Amounts shown do not reflect that the Common Stock is
convertible, on a share for share basis, into shares of
Class A Common Stock (1) by resolution of our Board of
Directors if, as a result of the existence of the Class A
Common Stock, either class is excluded from listing on The New
York Stock Exchange or any national securities exchange on which
the Common Stock is then listed and (2) automatically
should the outstanding shares of Class A Common Stock fall
below 10% of the aggregate outstanding shares of both classes. |
5
|
|
|
|
|
Beneficial ownership is determined under the rules of the
Securities and Exchange Commission. These rules deem common
stock subject to options currently exercisable, or exercisable
within 60 days, to be outstanding for purposes of computing
the percentage ownership of the person holding the options or of
a group of which the person is a member, but they do not deem
such stock to be outstanding for purposes of computing the
percentage ownership of any other person or group. Percentages
are based on 11,635,056 shares of Class A Common Stock
and 69,427,694 shares of Common Stock outstanding at
October 28, 2010. |
|
|
|
(2) |
|
Includes 75,000 shares of Class A unvested restricted
stock. |
|
(3) |
|
Includes options to purchase 233,925 shares of Common Stock
and 7,500 shares of unvested restricted stock. |
|
(4) |
|
As reported on Schedule 13F filed with the Securities and
Exchange Commission on August 7, 2010 by T. Rowe Price
Associates, Inc. |
|
(5) |
|
As reported on
Form N-CSR
Semiannual Report filed with the Securities and Exchange
Commission on August 17, 2010 by T. Rowe Price Associates,
Inc. and T. Rowe Price Small-Cap Value Fund, Inc. |
|
(6) |
|
As reported on Schedule 13F filed with the Securities and
Exchange Commission on August 13, 2010 by GAMCO Investors,
Inc. |
|
(7) |
|
As reported on Schedule 13F filed with the Securities and
Exchange Commission on August 8, 2010 by Perkins Investment
Management. |
|
(8) |
|
As reported on Schedule 13F filed with the Securities and
Exchange Commission on August 8, 2010 by Allianz Global
Investors of America, L.P. |
|
(9) |
|
As reported in the June 30, 2010 Allianz Domestic Stock
Funds Annual Report by Allianz Global Investors of America, L.P. |
|
(10) |
|
Includes 78,270 shares of Class A Common Stock held by
certain trusts for the benefit of Mr. Loudermilk,
Jr.s children, of which Mr. Loudermilk, Jr. serves as
trustee, and 75,000 shares of Class A unvested
restricted stock. |
|
(11) |
|
Includes options to purchase 267,675 shares of Common
Stock, 197,409 shares of Common Stock held by certain
trusts for the benefit of Mr. Loudermilk, Jr.s
children, of which Mr. Loudermilk, Jr. serves as trustee,
39,157 shares of Common Stock held by Mr. Loudermilk,
Jr.s spouse, and 7,500 shares of unvested restricted
stock. Mr. Loudermilk, Jr. has pledged 300,000 shares
of Common Stock as security for indebtedness. |
|
(12) |
|
Includes options to purchase 267,675 shares of Common
Stock, 2,362 shares of Common Stock held by
Mr. Danielsons spouse and 7,500 shares of
unvested restricted stock. |
|
(13) |
|
Includes options to purchase 182,850 shares of Common
Stock, 7,500 shares of unvested restricted stock. |
|
(14) |
|
Includes options to purchase 5,625 shares of Common Stock
and 750 shares of unvested restricted stock. |
|
(15) |
|
Includes options to purchase 750 shares of unvested
restricted stock. |
|
(16) |
|
Includes options to purchase 29,310 shares of Common Stock
and 1,500 shares of unvested restricted stock. |
|
(17) |
|
Includes 300,000 shares of unvested Class A restricted
stock. |
|
(18) |
|
Includes options to purchase 1,121,715 shares of Common
Stock and 42,000 shares of unvested restricted stock. |
PROPOSAL TO
AMEND AND RESTATE OUR ARTICLES OF INCORPORATION
TO RECLASSIFY OUR CLASSES OF COMMON STOCK
(Item 1)
Our Board of Directors, based on the recommendation and approval
of a special committee of the Board, as discussed below, has
authorized, and recommends for shareholder approval, a proposal
to amend and restate our Amended and Restated Articles of
Incorporation to convert each outstanding share of Common Stock
into one share of Class A Common Stock, rename the
Class A Common Stock as the Common Stock, eliminate certain
obsolete provisions of our existing Amended and Restated
Articles of Incorporation relating to our dual-class common
stock structure and amend the number of authorized common shares
to 225,000,000 total shares (the aggregate of the current number
of authorized shares of Common Stock and Class A Common
Stock). In accordance with the Georgia Business Corporation Code
and the terms of our Amended and Restated Articles of
Incorporation, our Board is submitting the proposed Amended and
Restated Articles of Incorporation for the approval of our
shareholders, as described in more detail below. Both classes of
our common shares will be entitled to vote on this
6
proposal, including our Common Stock which generally does not
otherwise have voting rights. Whether you are a holder of our
Class A Common Stock or our Common Stock, you are
encouraged to read this section carefully.
The primary purpose of this proposal is to eliminate our current
dual-class common stock structure by converting our Common Stock
into Class A Common Stock, which will result in only a
single class of common shares outstanding which
means all shares of our common stock thereafter will have
identical rights and preferences and, specifically, that each
share of our common stock will have one vote per share. We will
then rename the single class Common Stock and amend
the number of authorized shares to reflect the aggregate number
of current Common Stock and Class A Common Stock shares
authorized. We refer to this course of action throughout this
proxy statement as the Capital Simplification.
The text of the proposed Amended and Restated Articles of
Incorporation, marked to show changes to our current Amended and
Restated Articles of Incorporation, is included as
Appendix A to this proxy statement.
Background
of our Dual-Class Structure
We currently have two classes of common stock
outstanding Common Stock and Class A Common
Stock. The powers, privileges, preferences and relative
participating, optional or other special rights and the
qualifications, limitations or restrictions of both classes, are
identical in nearly all respects except for voting rights. The
holders of the Class A Common Stock currently have one vote
per share, and the holders of our Common Stock are not entitled
to vote on any matters except where otherwise required by
Georgia law or where an amendment to the Amended and Restated
Articles of Incorporation would adversely affect the rights of
the Common Stock.
As of the Record Date, there were 11,635,056 shares of
Class A Common Stock outstanding held by 110 holders of
record and 69,427,694 shares of Common Stock outstanding
held by 259 holders of record. As of the Record Date, the
outstanding Class A Common Stock represented approximately
14.35% of our outstanding common shares, and 100% of the total
voting power. As of the Record Date, R. Charles
Loudermilk, Sr., our founder, former CEO and the Chairman
of our Board of Directors, held 7,151,042 shares of
Class A Common Stock, representing 61.46% of the
outstanding Class A Common Stock, and thus currently holds
more than a majority of the outstanding voting shares.
Mr. Loudermilk, Sr. also owns 242,147 shares of
Common Stock representing less than 0.5% of the outstanding
Common Stock.
Our existing dual-class structure was approved by our Board of
Directors and shareholders and implemented in November 1992. At
that time, each share of our then Common Stock was renamed
Class A Common Stock, and a new class of common
stock, then named Class B Common Stock but
later renamed Common Stock, was created. This new
Class B Common Stock was then distributed to the
shareholders as a stock dividend, with holders of Class A
Common Stock receiving one share of new Class B Common
Stock for each share of Class A Common Stock held. With
approximately 50% of our outstanding shares at that time held by
Mr. Loudermilk, Sr. and other directors and executive
officers, the creation of the dual-class structure was primarily
intended to increase the liquidity of the common stock overall,
provide flexibility to allow us to issue shares in capital
raising transactions and allow our shareholders the flexibility
to sell a portion of their shares without affecting their voting
rights. Based on the information available at that time, our
Board of Directors believed that the dual-class structure would
be in the best interests of our Company and our shareholders.
Before adopting the dual-class structure in 1992, our Board of
Directors and a special committee of our Board carefully
considered information about similar dual-class structures
adopted by other public companies, including information about
the impact of these structures on the total market value of the
outstanding common equity of these companies, market price
differentials between the voting and nonvoting shares, the
impact on liquidity and the reaction of institutional investors.
Although our Board of Directors recognized that there might be
disadvantages to the dual-class structure as well as advantages,
our Board believed that the advantages would outweigh the
disadvantages.
At the time of the 1992 reclassification, our Board of Directors
was concerned that the lack of voting rights in the nonvoting
common stock would cause those shares to trade in the public
markets at a significant discount to the voting stock. The 1992
reclassification included several provisions that were intended
to address this perceived risk:
|
|
|
|
|
A common stock protection feature was included in
the Amended and Restated Articles of Incorporation to require
that any person who acquired more than 20% of the voting
Class A Common Stock would be required to make a tender
offer for the same percentage of the nonvoting Common Stock;
|
7
|
|
|
|
|
Our Board of Directors was specifically permitted to pay a
higher dividend on the Common Stock than on the Class A
Common Stock;
|
|
|
|
A provision was included in the Amended and Restated Articles of
Incorporation providing that in the event of a merger or similar
transaction, the holders of our Common Stock would be entitled
to receive the same amount and form of consideration per share
as the per share consideration received by any holder of our
Class A Common Stock in the transaction; and
|
|
|
|
A sunset provision was included in the Amended and Restated
Articles of Incorporation providing that each share of our
Common Stock would be automatically converted, on a
one-for-one
basis, into our Class A Common Stock if the total amount of
shares of Class A Common Stock outstanding were ever to
constitute less than 10% of the total number of shares of both
classes of common stock then outstanding.
|
Immediately following the 1992 reclassification, our outstanding
common shares were split evenly between Class A Common
Stock and Common Stock. Since the 1992 reclassification, we have
conducted four registered public offerings solely of our Common
Stock, distributed a stock dividend payable only in Common
Stock, and engaged in several transactions where our
Class A Common Stock was repurchased or exchanged for
Common Stock. As a result of these various issuances of Common
Stock, there are, today, substantially more shares of Common
Stock outstanding than Class A Common Stock, and the
outstanding Class A Common Stock now represents
approximately 14.35% of the aggregate number of outstanding
shares of both classes.
Trading
History and Disadvantages of the
Dual-Class Structure
During the first approximately eight years after the adoption of
our dual-class structure, the Class A Common Stock
generally traded on the Nasdaq Stock Market, and then on the New
York Stock Exchange, in parity with, or at a slight premium to,
the Common Stock. For most of the last ten years, however, the
Common Stock has traded at a significant premium to the
Class A Common Stock, despite the absence of voting rights
for the Common Stock, averaging a mean premium of approximately
10% over that time. In more recent periods, this discount has
been even more pronounced, with the Class A Common Stock
trading on the New York Stock Exchange at an average discount to
the Common Stock of approximately 16% over the past three years,
and approximately 20% over the past twelve months, prior to the
announcement of our Capital Simplification proposal. On
September 10, 2010, the last trading day before we
announced our Capital Simplification proposal, the Class A
Common Stock closed at $14.00 per share on the New York Stock
Exchange, and the Common Stock closed at $16.60 per share,
representing a discount on the Class A Common Stock of 16%.
Since the announcement, the two classes have traded very
closely, though the Class A Common Stock has generally
continued to trade at a slight discount to the Common Stock,
with the discount averaging less than 1%.
Since the 1992 reclassification, the average daily trading
volume of both the Class A Common Stock and the Common
Stock has changed significantly. Over that time period, the
average daily trading volume of the Class A Common Stock
has been approximately 6,500 shares per day, while the
Common Stock averaged approximately 334,000 shares per day.
Similar to the differences in trading prices, the differences in
trading volume have been more pronounced in recent years. For
the last three years, the average daily trading volume for the
Class A Common Stock has been approximately
1,800 shares per day, while the average for the Common
Stock has been nearly 995,000 shares per day. We believe,
based in part on advice from an independent, outside financial
advisor, VRA Partners, LLC (VRA), that the
resulting lower liquidity of the Class A Common Stock is
primarily responsible for the price disparity between the two
classes. This lack of liquidity and the persistent discount have
generated frustration for holders of our Class A Common
Stock.
In addition, since the 1992 reclassification, we believe that a
significant amount of confusion has arisen among shareholders,
analysts, the financial media and other members of the financial
community with respect to our dual-class capital structure. The
use of different trading symbols by the New York Stock Exchange
(AAN and AAN.A) for the two classes has
contributed to the confusion, given that these trading symbols
have been reproduced, recorded or described in different ways by
various sources. Some shareholders have reported an inability to
use certain reporting services to find trading prices for the
Class A Common Stock. As a result, the public may have
obtained conflicting and confusing financial information from
various third-party sources. We have been required to spend time
and resources correcting flawed information and educating
existing and potential investors.
8
We believe that the creation of the dual-class structure in 1992
achieved many of its original goals, allowing our Company to
conduct four public equity offerings with the nonvoting Common
Stock and contributing to a very significant increase in the
liquidity of that class of our common stock; however, we now
believe that our dual-class structure is no longer necessary,
and that the disadvantages of maintaining the two classes now
outweigh the advantages.
In summary, we believe that the unwinding of our dual-class
common stock structure into a single class of common stock is in
the best interests of our Company and the holders of both our
Class A Common Stock and our Common Stock. The Capital
Simplification will eliminate the disparity in trading prices
and liquidity profiles between our two classes of common stock,
and we expect that it will also improve the liquidity profile of
our common stock overall, allow for easier analysis and
valuation of the new single class of common stock and eliminate
confusion within the financial community regarding the current
dual-class structure. However, we cannot guarantee that the
benefits of a simplified capital structure will be accomplished
to the extent and in the manner we currently expect, if at all.
Considerations
Involving the Proposed Capital Simplification
This persistent, long-term trading volume disparity and price
differential led our management at various times over a period
of more than ten years to explore with outside legal counsel and
financial advisors ways to improve the liquidity of the
Class A Common Stock or to make other changes to our
capital structure that would eliminate the differences in the
two classes over time. During this time, our management and our
Board of Directors have, from time to time, reviewed the
dual-class structure, considered whether the anticipated
benefits were being realized and assessed the disadvantages. It
was recognized, however, that because of the significant
difference between the number of outstanding shares of Common
Stock and Class A Common Stock, any recombination of the
two classes on a
one-for-one
basis would likely cause a dramatic reduction in the voting
power of Mr. Loudermilk, Sr., the holder of
approximately 61.46% of the Class A Common Stock, and that
any such change would thus require the approval of
Mr. Loudermilk, Sr. to voluntarily give up voting
control. As a result, no recombination was ever implemented. Our
management and our Board of Directors have also from time to
time considered the impact of the dual-class structure on the
liquidity of our shares, and, recently,
Mr. Loudermilk, Sr. and, occasionally, some of our
other investors have expressed concerns about the liquidity of
our Class A Common Stock under our dual-class structure. As
the trading volume disparity and price differential became more
pronounced in recent periods, Mr. Loudermilk, Sr.
became more willing to consider a recombination of the two
classes if our Board were to determine that the recombination
was in the best interests of all of our shareholders.
At a July 12, 2010 special Board meeting held for this
purpose, our management and our outside legal counsel,
Kilpatrick Stockton LLP, discussed with our Board of Directors
the possibility of combining our two classes of common stock
into a single class. Kilpatrick Stockton summarized the
corporate procedures and approvals that would be required to
eliminate the dual-class structure, discussed other means of
addressing the liquidity of the Class A Common Stock and
advised our Board on its fiduciary duties in considering any
action. Our Board was also mindful of the sunset provision in
the Amended and Restated Articles of Incorporation that would
automatically unwind the dual-class structure on a
one-for-one
basis if the outstanding Class A Common Stock were to
constitute less than 10% of the aggregate number of outstanding
shares of both classes. It was discussed that it was likely
inevitable that this 10% sunset provision would eventually be
triggered at some point in time, perhaps in the near future,
whether caused by additional issuances of Common Stock in
capital raising transactions and employee equity incentive
grants, by stock splits or by acquisitions of Class A
Common Stock from time to time by our Company. Our Board
considered, for instance, that a stock dividend of sufficient
size approximately
three-for-two
distributed with respect to both classes, but only
in shares of Common Stock, would alone likely be sufficient to
trigger the sunset provision and automatically combine the two
classes into a single voting class on a
one-for-one
basis without any further Board action or vote of either class
of shareholders. Our Board took no action at the meeting, but
determined to consider the matter again at its regularly
scheduled meeting the following month.
At its August 3, 2010 regular meeting, our Board of
Directors revisited the possible elimination of the dual-class
structure. Our Board was mindful that the Class A Common
Stock had consistently traded at a significant discount to the
trading price of the Common Stock, averaging approximately 20%
over the prior twelve months, and recognized that upon the
public announcement of any combination of the two classes that
the trading price of the Class A Common Stock was likely to
increase significantly to a price much closer to the trading
price of the
9
Common Stock. Because of the significant share holdings of
Mr. Loudermilk, Sr. and the impact that a
reclassification would have on his voting power and the likely
value of his share holdings, and because
Mr. Loudermilk, Sr.s son, Robert C.
Loudermilk, Jr., is our President, Chief Executive Officer
and a member of our Board, our Board considered that
Mr. Loudermilk, Sr. and Mr. Loudermilk, Jr.
may be deemed to have an interest in the Capital Simplification
that is different from the interests of certain classes of our
shareholders or our shareholders as a whole. For these reasons,
our Board of Directors determined to delegate consideration of
the proposal to a special committee of independent directors to
review, consider and, if it deemed appropriate in the exercise
of its independent business judgment, recommend to the full
Board the Capital Simplification and the terms thereof,
including the manner and basis for combining the two classes. At
this meeting, our Board appointed directors Leo Benatar, David
L. Kolb and Ronald W. Allen, whom our Board considered to be
independent and disinterested with respect to the Capital
Simplification, to serve as the special committee (the
Special Committee), and delegated authority
to the Special Committee to engage professional advisors
(including attorneys, investment advisers and other such
advisers as the Special Committee deemed prudent) for the
purpose of assisting in the review and evaluation process and to
provide such opinions, reports and other advice and information
as the Special Committee deemed prudent. The Special Committee
then interviewed and hired the law firm of Rogers &
Hardin LLP as its independent counsel, and VRA Partners as its
independent financial advisor. Neither Rogers & Hardin
nor VRA had been, in the past, engaged to provide services to
us, and neither firm is currently providing us with any other
services. The engagement of Rogers & Hardin and VRA by
the Special Committee was the result of arms-length
negotiations.
Over the next four weeks, the Special Committee held four
meetings with its legal and financial advisors and with Company
counsel Kilpatrick Stockton.
On August 20, 2010, the Special Committee met to consider
the dual-class structure, including the reasons for its
implementation, the market prices and trading dynamics of our
Class A Common Stock and our Common Stock since the
inception of the dual-class structure, the express terms of the
shares and information regarding similar reclassification
transactions at other companies. At the meeting, VRA presented
information about other public companies with two classes of
publicly traded common shares and information about certain
transactions in which two classes of publicly traded common
stock were combined into one. The transaction information
included preliminary information about the exchange ratios used
in combining the shares, liquidity and market price
differentials before the combination and liquidity and market
prices after the combination. At the meeting, Rogers &
Hardin advised the members of the Special Committee on their
fiduciary duties and discussed the corporate approvals and
procedures that would be required to implement a combination of
the two classes. Certain potential benefits to be derived from
combining the two classes of shares were articulated, including
increased liquidity, improved access to capital markets, closer
alignment of voting rights with economic ownership and increased
acceptance by investors. The Special Committee also discussed
the various means by which the combination could be implemented,
including the possibility of intentionally triggering the 10%
sunset provision in the Amended and Restated Articles of
Incorporation, which would automatically convert all outstanding
Common Stock into Class A Common Stock on a
one-for-one
basis without any shareholder action, by declaring a stock
dividend payable only in Common Stock.
On August 27, 2010, the Special Committee met again and
considered updated information about our Companys
dual-class structure and about other companies with two classes
of publicly traded common shares. VRA identified 261 public
companies traded on the New York Stock Exchange
(NYSE), American Stock Exchange
(AMEX) and Nasdaq Stock Market
(Nasdaq) that currently maintain dual-class
capital structures, and provided detailed analysis on a subgroup
of 18 companies that had similar market capitalizations to
our Company. At the request of the Special Committee, VRA also
presented more detailed information about the potential benefits
of a combination of the two classes, including information
showing improvements in liquidity experienced by other public
companies that had combined their shares. VRA noted that they
examined 22 comparable reclassification transactions at other
public companies where dual-class capital structures were
combined, and provided information on the effects of these other
transactions on liquidity, trading prices and relative discounts
before and after the reclassification proposals were announced
and implemented. The Special Committee closely examined the
exchange ratios used in these similar dual-class combinations,
and discussed whether the combination of our Class A Common
Stock and Common Stock should be effected at other than a
one-for-one
basis, including consideration of both a higher ratio and a
lower ratio. VRA reported that in the 22
10
comparable reclassification transactions they examined, a
one-for-one
exchange ratio was used in 19 of the transactions, and that in
the remaining three transactions the exchange ratios were
1.09:1, 1.15:1 and 1.22:1, meaning that in those three
transactions the holders of the higher voting stock received
more than one share for each voting share when combined with the
lower or nonvoting stock. As it considered the appropriate
exchange ratio, the Special Committee also took into account
that the Class A Common Stock had consistently traded at a
discount to the Common Stock, but was also mindful that the
holders of the Class A Common Stock would be giving up
voting control if the Capital Simplification were approved. The
Special Committee noted that Mr. Loudermilk, Sr. would
experience a dramatic change in his voting control, with his
voting shares falling from 61.46% today to approximately 9.15%
if the Capital Simplification were effected at a
one-for-one
exchange ratio. The Special Committee instructed VRA to consider
the fairness of the proposed Capital Simplification to the
holders of both classes, and notified VRA that the Special
Committee would request an opinion that the exchange ratio used
in the Capital Simplification would be fair from a financial
point of view to the holders of both classes.
On August 31, 2010, the Special Committee met again to
consider and act upon the proposal to combine the two classes of
shares. At this meeting, VRA presented updated information about
our Companys dual-class structure and instances in which
other companies had combined two classes of publicly traded
shares, including the exchange ratios used in combining the
shares, the anticipated benefits of the reclassification and the
likely effects on the trading prices of both classes. The
Special Committee examined in detail the trading prices of
higher and lower voting/nonvoting classes in similar
reclassification transactions at various intervals immediately
before, immediately after and 30 or more days after these other
transactions were announced and implemented. Mr. Benatar,
as chairman of the Special Committee, reported that he had
briefed Mr. Loudermilk, Sr. on the work of the Special
Committee, and had asked Mr. Loudermilk, Sr. for his
views of the proposed reclassification. Mr. Benatar
reported that Mr. Loudermilk, Sr. had indicated he was
generally supportive of the Capital Simplification if
implemented at a
one-for-one
exchange ratio, notwithstanding the substantial and immediate
reduction in his voting power. After considering all of the
information presented to them and discussing the merits of the
proposed reclassification in detail, the Special Committee
preliminarily determined that it would recommend to the full
Board approval of the Capital Simplification at an exchange
ratio of
one-to-one,
conditioned upon receiving a fairness opinion from VRA as to
that exchange ratio. VRA indicated that, based on its analysis,
it expected to be able to deliver the requested fairness
opinion. The Special Committee also discussed the means by which
the combination should be implemented, and concluded that the
combination should be structured as an amendment to the Amended
and Restated Articles of Incorporation and be submitted to a
majority vote of each class of common stock, voting separately
as a class, so that our Board could be assured that the Capital
Simplification was favored by holders of a majority of both
classes. The Special Committee was particularly mindful that
though Mr. Loudermilk, Sr. could alone cast sufficient
votes to cause the Capital Simplification to be approved by the
Class A Common Stock, Mr. Loudermilk, Sr. owns
less than one-half of one percent of the Common Stock.
On September 10, 2010, the Special Committee held its final
meeting to consider the Capital Simplification. At this meeting,
VRA presented its financial analysis of the Capital
Simplification and delivered its oral opinion and written
opinion to the Special Committee that, as of that date, from a
financial point of view, the
one-for-one
exchange ratio was fair to the holders of the Common Stock and
the holders of the Class A Common Stock. VRA also indicated
it would deliver its written opinion to the full Board of
Directors. After a review of all the factors, and receipt of the
presentation and opinion of VRA, the Special Committee
determined to recommend to the full Board that the Capital
Simplification be approved and submitted to both classes of our
shareholders for approval.
Factors
Considered by the Special Committee
In determining to approve and recommend the Capital
Simplification proposal, the Special Committee considered a
number of factors, including the possible benefits that our
Company and our shareholders may derive from each of the
following:
|
|
|
|
|
Increased Liquidity. The Special Committee
believes that the Capital Simplification will provide investors
with greater liquidity and an enhanced quality of trade
execution. Prior to the public announcement of the Capital
Simplification proposal, the Class A Common Stock generally
traded at a significant discount to the Common Stock, despite
the fact that the Class A Common Stock has superior voting
rights and that the rights and preferences of the two classes
are otherwise identical in all material respects. The Special
Committee believes that the trading discount, to a significant
degree, results from the substantially higher liquidity, or
|
11
|
|
|
|
|
trading volume, of the Common Stock, and the substantially
larger number of shares of Common Stock outstanding. The greater
liquidity in the Class A Common Stock following the Capital
Simplification may also allow investors to buy and sell larger
positions in that class with less impact on the stock price. By
combining the Class A Common Stock and the Common Stock,
the Special Committee hopes to facilitate enhanced liquidity for
all of our shareholders by aggregating the volume of our common
shares that are traded and thereby removing a possible
impairment to efficient trading of our common shares.
|
|
|
|
|
|
Align Voting Rights with Economic
Ownership. The Special Committee believes that
our shareholders may benefit from aligning their voting
interests with their economic interests. Converting the Common
Stock into Class A Common Stock would eliminate the
disparity between voting interests and economic interests and
may make our common shares a more attractive investment.
|
|
|
|
Increased Acceptance by Institutional
Investors. The Special Committee believes that
simplifying our capital structure and increasing liquidity by
combining the two existing classes into a single class will
address the concerns that have been expressed by institutional
investors about the liquidity of our shares and the complexity
of the dual-class structure, and will allow our common shares to
be held by certain institutional investors whose investment
policies do not permit them to invest in nonvoting shares or in
companies that have disparate voting rights in their capital
structure.
|
|
|
|
Elimination of Investor Confusion. The Special
Committee believes that some investors may not understand the
differences between our two classes of common stock. Converting
the Common Stock into Class A Common Stock and renaming the
class Common Stock would simplify our capital
structure and eliminate this potential confusion, including
confusion as to the calculation of our total market
capitalization, shares outstanding and earnings per share.
|
|
|
|
Improved Ability to Use Equity as
Consideration. The Special Committee believes
that the use of a single class of common shares could provide
increased flexibility to use equity as acquisition currency and
for possible future offerings of our capital stock to potential
investors.
|
The Special Committee also considered the following factors in
connection with its approval and recommendation of the Capital
Simplification proposal:
|
|
|
|
|
The holders of the Class A Common Stock and the holders of
the Common Stock currently have the same economic rights, with
voting rights representing the only material difference in the
rights of the holders of the two classes;
|
|
|
|
The historical trading price and trading volume differentials of
the Class A Common Stock and the Common Stock;
|
|
|
|
The historical trading price and trading volume differentials
between the two classes of publicly traded stock of other
companies with dual-class capital structures;
|
|
|
|
The trend of publicly traded companies away from dual-class
capital structures, consistent with the policies of the NYSE and
the other major stock exchanges in favor of one vote per share
of common stock;
|
|
|
|
The exchange ratios adopted by other companies that have
eliminated their dual-class structures;
|
|
|
|
The opinion of VRA that, as of September 10, 2010 and
subject to and based on the considerations described in such
opinion, the
one-to-one
exchange ratio was fair, from a financial point of view, to the
holders of our Class A Common Stock and the holders of our
Common Stock;
|
|
|
|
The holders of both our Class A Common Stock and the Common
Stock will have a right to vote on the Capital Simplification
proposal, with each class voting as a separate class, and
therefore each class will have the opportunity to decide for
itself whether the Capital Simplification should be implemented,
which can occur only if holders of a majority of the outstanding
shares of both classes vote in favor of the proposal; and
|
|
|
|
The Capital Simplification, if implemented, is not expected to
result in taxable income to our Company or to the holders of the
Class A Common Stock or the Common Stock.
|
This discussion of information and factors considered by the
Special Committee is not intended to be exhaustive, but includes
the material factors considered by the Special Committee in
making its decision. In view of the wide variety of factors
considered by the Special Committee in connection with its
evaluation of the Capital
12
Simplification proposal and the complexity of these matters, the
Special Committee did not consider it practicable to, nor did it
attempt to, quantify, rank or otherwise assign relative weights
to the specific factors it considered in reaching its decision.
In considering the factors described above, individual members
of the Special Committee may have given different weight to
different factors. We cannot assure you when or if any specific
potential benefits considered by the Special Committee will be
realized.
Factors
Considered by the Board of Directors
At a special Board meeting held on September 10, 2010 for
this purpose, the full Board of Directors reviewed and discussed
the recommendation of the Special Committee with the Special
Committee, Rogers & Hardin and VRA, and with
Kilpatrick Stockton. At this meeting, VRA presented its
financial analysis of the Capital Simplification and delivered
its written opinion to the full Board as to the fairness, from a
financial point of view, of the
one-for-one
exchange ratio to the holders of the Common Stock and the
holders of the Class A Common Stock. Based on all of the
information considered by it, our Board of Directors unanimously
determined to adopt the recommendation of the Special Committee
and approved the Capital Simplification proposal and recommended
that it be submitted to the shareholders for their approval at a
special meeting. At this meeting, Mr. Loudermilk, Sr.
indicated that he supported the Capital Simplification proposal
as presented.
In determining the Capital Simplification proposal to be
advisable and fair to, and in the best interests of, our Company
and our Class A Common Stock and the Common Stock holders,
our Board of Directors carefully considered (1) the
conclusions and recommendations of the Special Committee,
(2) each of the factors referred to above as having been
taken into account by the Special Committee, and (3) the
opinion of VRA, dated September 10, 2010, to the Special
Committee and our Board of Directors as to the fairness, from a
financial point of view, and as of the date of the opinion, of
the exchange ratio provided for in the Capital Simplification to
the holders of the Class A Common Stock and the Common
Stock as more fully described below in the section entitled
Opinion of the Financial Advisor. Our Board of
Directors considered these factors and other factors as a whole
and did not quantify or otherwise assign relative weights to the
different factors. Individual directors may have assigned in
their own view varying weights to different factors. We cannot
assure you when or if any specific potential benefits considered
by our Board will be realized.
Opinion
of the Financial Advisor
We retained VRA on August 18, 2010 to act as financial
advisor to the Special Committee in connection with the proposed
Capital Simplification. On September 10, 2010, at a meeting
of the Special Committee held to consider and evaluate the
Capital Simplification, VRA delivered to the Special Committee
an oral presentation, which was confirmed by delivery of a
written opinion dated September 10, 2010 to the Special
Committee and our Board of Directors, to the effect that, as of
the date of the opinion and based on and subject to various
assumptions and limitations described in its opinion, the
exchange ratio provided for in the Capital Simplification was
fair, from a financial point of view, to the holders of
Class A Common Stock and the holders of Common Stock.
The full text of VRAs written opinion to the Special
Committee and our Board of Directors, which describes, among
other things, the assumptions made, procedures followed, matters
considered and limitations on the review undertaken, is attached
as Appendix B to this proxy statement and is
incorporated by reference herein in its entirety. The
description of the VRA opinion set forth herein is qualified in
its entirety by reference to the full text of the VRA opinion.
Holders of the Common Stock and Class A Common Stock are
encouraged to read VRAs opinion in its entirety.
VRAs opinion is directed to our Board of Directors and
relates only to the fairness, from a financial point of view, of
the exchange ratio to the holders of shares of Common Stock and
to the holders of shares of Class A Common Stock.
VRAs opinion does not constitute advice or a
recommendation to any shareholder as to how such shareholder
should vote or act with respect to any matters relating to the
Capital Simplification. VRA has consented to the inclusion of
its opinion and the disclosures under the heading Opinion
of the Financial Advisor in this proxy statement.
In arriving at its opinion, VRA, among other things:
(1) reviewed certain publicly available business and
financial information relating to our Company;
(2) reviewed our internal financial forecast for the fiscal
year ending December 31, 2010;
13
(3) discussed with management and the Special Committee the
rationale for the Capital Simplification and for the original
creation of a dual-class structure and certain information
related thereto;
(4) reviewed the reported prices and trading activity for
the Common Stock and the Class A Common Stock from
November 6, 1992 to September 8, 2010 and a comparison
of such reported prices and trading activity with each other,
and with the reported prices and trading activity of other
companies which VRA deemed relevant;
(5) reviewed the reported prices and trading activity for
the common stock of certain other companies with two classes of
publicly traded stock which VRA deemed relevant;
(6) reviewed the financial terms, to the extent publicly
available, and the reported prices, trading activity and
post-announcement stock price performance for the common stock
in certain comparable transactions which VRA deemed relevant;
(7) reviewed the current ownership structure of our Company;
(8) reviewed our Amended and Restated Articles of
Incorporation and documents related thereto; and
(9) performed such other analyses and considered such other
factors as VRA deemed appropriate.
In arriving at its opinion, VRA assumed and relied upon, without
independent verification, the accuracy and completeness of the
financial and other information discussed with or reviewed by
VRA in arriving at its opinion. With respect to our financial
forecasts, VRA assumed that such forecasts have been reasonably
prepared on bases reflecting currently available information,
estimates and judgments of the management of our Company as to
our future financial performance and, accordingly, VRA expressed
no opinion with respect to such forecasts or the assumptions on
which they are based. VRA has not conducted a physical
inspection of our properties and facilities and has not made nor
obtained any evaluations or appraisals of our assets or
liabilities (including, without limitation, any potential tax or
environmental liabilities), contingent or otherwise. VRA also
assumed that the Capital Simplification will be treated as a
tax-free exchange and recapitalization for federal income tax
purposes. VRA notes that it is not a legal or tax expert and
relied upon, without assuming any liability therefor, the
assessment of our legal and tax advisors with respect to the
legal and tax matters related to the Capital Simplification.
VRAs opinion is limited to the fairness, from a financial
point of view, of the exchange ratio to the holders of our
Common Stock and the holders of our Class A Common Stock.
No opinion or view is expressed with respect to the relative
fairness of the exchange ratio to the holders of Common Stock as
compared to the holders of Class A Common Stock.
Additionally, VRA expressed no view or opinion as to any terms
or other aspects of the Capital Simplification (other than the
exchange ratio to the extent specified herein), including,
without limitation, the form or structure of the Capital
Simplification.
VRAs opinion does not address the merits of the Capital
Simplification as compared to other alternative transactions or
strategies that may be available to us nor does it address our
underlying decision to effect the Capital Simplification.
VRAs opinion is necessarily based upon market, economic
and other conditions as they existed on, and could be evaluated
as of September 10, 2010. VRA expressed no opinion as to
the underlying valuation, future performance or long-term
viability of our Company or the value or prices at which the
Common Stock or Class A Common Stock will trade at any
time. It should be understood that, although subsequent
developments may affect the opinion, VRA does not have any
obligation to update or revise its opinion.
In preparing its opinion, VRA performed a variety of financial
and comparative analyses, a summary of which are described
below. The summary is not a comprehensive description of the
analyses underlying VRAs opinion. The preparation of a
fairness opinion is a complex analytical process that involves
various determinations as to the most appropriate and relevant
methods of financial analysis and the application of those
methods to the particular circumstances and, therefore, a
fairness opinion is not readily susceptible to summary
description. Accordingly, VRA believes that its analyses must be
considered as an integrated whole and that selecting portions of
its analyses and factors, without considering all analyses and
factors or the narrative description of the analyses, could
create a misleading or incomplete view of the processes
underlying its analyses and opinion.
In performing its analyses, VRA made numerous assumptions with
respect to our Company, industry performance and general
business, economic, market and financial conditions, many of
which are beyond our control. No company, transaction or
business used in VRAs analyses is identical to our
Company, the Capital
14
Simplification or our business, and an evaluation of these
analyses is not entirely mathematical. Rather, the analyses
involve complex considerations and judgments concerning
financial and operating characteristics and other factors that
could affect the recapitalization, public trading or other
values of the companies, business segments or transactions
analyzed. Accordingly, these analyses and estimates are
inherently subject to substantial uncertainty.
The following is a summary of the material analyses performed by
VRA in connection with the rendering of its opinion on
September 10, 2010 to the Special Committee and Board of
Directors.
Analysis
of Current Ownership of the Common Stock and Class A Common
Stock
VRA noted that the ownership of our common shares was
concentrated among several large shareholders. Our top
20 shareholders represented 73.5% of the economic interest,
defined as the sum of (1) the number of shares of Common
Stock outstanding multiplied by its share price plus
(2) the number of shares of Class A Common Stock
outstanding multiplied by its share price, and approximately
76.9% of the voting interest. In particular,
Mr. Loudermilk, Sr.s holdings represented
approximately 9.15% of the total shares outstanding and 7.5% of
the economic value of our Company but approximately 61.46% of
its voting interests.
Analysis
of Historical Stock Price Performance and Trading Activity for
the Common Stock and Class A Common Stock
VRA analyzed the historical trading activity of shares of our
Common Stock, which generally do not have voting rights other
than as required by law, and shares of our Class A Common
Stock, which are entitled to one vote per share. This analysis
included an examination of the price and trading volume of each
class of publicly traded stock as well as the average percentage
by which the price per share of Common Stock exceeded the price
per share of Class A Common Stock over various periods of
time, including a one year period ended September 8, 2010,
a three year period ended September 8, 2010, a five year
period ended September 8, 2010, a ten year period ended
September 8, 2010, and an 18 year period ended
September 8, 2010 from the creation of the dual-class
structure on November 6, 1992.
VRA noted that the shares of the Class A Common Stock have
traded at an average discount to the shares of Common Stock of
approximately 20% over the last year, 16% over the last three
years, 13% over the last five years, 11% over the last
10 years, and 10% since 1992. VRA also noted that the
average daily trading volume of Common Stock shares was
approximately 790 times that of Class A Common Stock shares
over a one year period, 550 times that of Class A Common
Stock over a three year period, 340 times that of Class A
Common Stock over a five year period, 150 times that of
Class A Common Stock over a ten year period, and 50 times
that of Class A Common Stock since November 6, 1992.
Since 2000, VRA observed a significant divergence in the trading
volume of the two classes. When considering a volume weighted
average price, the difference expanded dramatically over time
due to the fact that the volume of Class A Common Stock
shares traded was dramatically higher relative to the Common
Stock shares for a period of time immediately after the creation
of the dual-class structure in November 1992.
Class A
Common Stock (Discount) or Premium to Common Stock
Absolute Values
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Closing Price:
|
|
Average Daily Volume:
|
|
Volume Weighted Average Price:
|
|
1 Year
|
|
$
|
(3.80
|
)
|
|
|
1 Year
|
|
|
|
(843,750
|
)
|
|
|
1 Year
|
|
|
$
|
(3.48
|
)
|
3 Year
|
|
$
|
(2.79
|
)
|
|
|
3 Year
|
|
|
|
(993,212
|
)
|
|
|
3 Year
|
|
|
$
|
(3.18
|
)
|
5 Year
|
|
$
|
(2.30
|
)
|
|
|
5 Year
|
|
|
|
(778,492
|
)
|
|
|
5 Year
|
|
|
$
|
(2.76
|
)
|
10 Year
|
|
$
|
(1.48
|
)
|
|
|
10 Year
|
|
|
|
(498,291
|
)
|
|
|
10 Year
|
|
|
$
|
(5.63
|
)
|
Since 1992
|
|
$
|
(0.87
|
)
|
|
|
Since 1992
|
|
|
|
(327,591
|
)
|
|
|
Since 1992
|
|
|
$
|
(8.87
|
)
|
15
Class A
Common Stock (Discount) or Premium to Common Stock
Relative Values
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Closing Price:
|
|
Average Daily Volume:
|
|
Volume Weighted Average Price:
|
|
1 Year
|
|
|
(20.0
|
)%
|
|
|
1 Year
|
|
|
|
(78,733
|
)%
|
|
|
1 Year
|
|
|
|
(18.3
|
)%
|
3 Year
|
|
|
(16.2
|
)%
|
|
|
3 Year
|
|
|
|
(54,205
|
)%
|
|
|
3 Year
|
|
|
|
(18.2
|
)%
|
5 Year
|
|
|
(13.4
|
)%
|
|
|
5 Year
|
|
|
|
(33,928
|
)%
|
|
|
5 Year
|
|
|
|
(15.9
|
)%
|
10 Year
|
|
|
(11.4
|
)%
|
|
|
10 Year
|
|
|
|
(15,163
|
)%
|
|
|
10 Year
|
|
|
|
(35.5
|
)%
|
Since 1992
|
|
|
(9.6
|
)%
|
|
|
Since 1992
|
|
|
|
(5,070
|
)%
|
|
|
Since 1992
|
|
|
|
(62.5
|
)%
|
Analysis
of Price and Volume of Reference Dual-class Publicly Traded
Companies
VRA initially identified 261 companies on the NYSE, AMEX
and Nasdaq stock exchanges that currently maintain dual-class
stock structures. This population of reference companies
included publicly traded companies that possess a non-publicly
traded class of stock. From the population of
261 companies, VRA selected 18 public companies with market
capitalizations between $140 million and $2.9 billion
that it deemed relevant as reference companies. For each of
these reference companies, VRA reviewed and analyzed the
following information: (1) the economic interest of the
lower vote or no vote shares versus the higher vote shares,
(2) the voting interest of the lower vote or no vote shares
versus the higher vote shares, (3) the average price
premium or discount for the higher vote shares relative to the
lower vote or no vote shares over one year and three year
periods, (4) the trading volume of the higher vote shares
relative to the lower vote or no vote shares over a one year
period, and (5) the relative liquidity of the higher vote
shares versus the lower vote or no vote shares over a one year
period.
After examining the selected reference companies, VRA found the
following:
(1) The economic interest of the lower vote or no vote
shares ranged from 47.1% to 90.8%. For 17 of the 18 selected
companies, the lower vote or no vote shares comprised a majority
of the economic value of the company, despite having limited
voting rights. As of September 8, 2010, our Common Stock
comprised 87.8% of the economic interest of our Company, while
the Class A Common Stock comprised 12.2% of the economic
interest;
(2) The voting interest of the lower vote or no vote shares
of the selected reference companies ranged from 0.0% to 9.1%.
Seven of the 18 selected reference companies had 0.0% voting
interest. As of September 8, 2010, the Common Stock had
0.0% voting interest, and the Class A Common Stock
controlled 100% of the voting interest;
(3) The average price premium for the higher vote shares
relative to the lower vote or no vote shares of the selected
reference companies over one year and three years was 1.9% and
2.8%, respectively. The table below outlines the selected
companies range, mean and median of the higher vote share
price premium / (discount) relative to the lower vote
or no vote share price over the time periods analyzed;
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|
|
|
|
|
|
|
|
Higher Vote/Lower Vote
|
|
One Year
|
|
Three Years
|
|
High Premium/(Discount)
|
|
|
31.7
|
%
|
|
|
36.6
|
%
|
Mean Premium/(Discount)
|
|
|
1.9
|
%
|
|
|
2.8
|
%
|
Median Premium/(Discount)
|
|
|
(0.1
|
)%
|
|
|
0.1
|
%
|
Low Premium/(Discount)
|
|
|
(20.5
|
)%
|
|
|
(17.7
|
)%
|
Aarons Premium/(Discount)
|
|
|
(19.9
|
)%
|
|
|
(15.5
|
)%
|
(4) The trading volume of lower vote shares relative to the
total number of lower vote or no vote shares outstanding was
slightly better than the trading volume of higher vote shares
relative to the total number of higher vote shares outstanding
for the selected reference companies. The table below outlines
the selected companies range, mean and median of trading
volume for the higher vote shares and lower vote or no vote
shares. Our higher voting shares trading volume ratio is lower
than any of the selected companies, while our
16
lower voting or nonvoting shares trading volume ratio is
dramatically higher than any of the selected reference companies.
|
|
|
|
|
|
|
|
|
Trading Volume/Shares Outstanding
|
|
Higher Vote
|
|
Lower Vote
|
|
High Ratio
|
|
|
437.6
|
%
|
|
|
999.6
|
%
|
Mean Ratio
|
|
|
57.9
|
%
|
|
|
220.3
|
%
|
Median Ratio
|
|
|
7.1
|
%
|
|
|
116.7
|
%
|
Low Ratio
|
|
|
0.7
|
%
|
|
|
22.3
|
%
|
Aarons Ratio
|
|
|
0.4
|
%
|
|
|
1,837.0
|
%
|
(5) Based on the table above, the lower voting or nonvoting
shares for the reference companies are approximately 160% (on
average) more liquid than higher voting shares; however, at our
Company, the Common Stock is over 1,800% more liquid than the
Class A Common Stock.
The tables below outline the information discussed for each
selected reference company.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Economic Interest
|
|
Voting Interest
|
|
|
|
|
Market
|
|
Low Vote
|
|
High Vote
|
|
Low Vote
|
|
High Vote
|
Company
|
|
Classification
|
|
Capitalization(1)
|
|
Shares
|
|
Shares
|
|
Shares
|
|
Shares
|
|
Bel Fuse Inc.
|
|
Communications equipment
|
|
$
|
218.6
|
|
|
|
80.9
|
%
|
|
|
19.1
|
%
|
|
|
0.0
|
%
|
|
|
100.0
|
%
|
Central Garden & Pet Co.
|
|
Household Products
|
|
$
|
612.1
|
|
|
|
70.9
|
%
|
|
|
29.1
|
%
|
|
|
0.0
|
%
|
|
|
100.0
|
%
|
Crawford & Co.
|
|
Insurance
|
|
$
|
139.6
|
|
|
|
47.1
|
%
|
|
|
52.9
|
%
|
|
|
0.0
|
%
|
|
|
100.0
|
%
|
Forest City Enterprises Inc.
|
|
Real estate manager
|
|
$
|
1,907.4
|
|
|
|
86.3
|
%
|
|
|
13.7
|
%
|
|
|
9.1
|
%
|
|
|
90.9
|
%
|
Greif, Inc.
|
|
Industrial Packaging
|
|
$
|
2,681.3
|
|
|
|
53.5
|
%
|
|
|
46.5
|
%
|
|
|
0.0
|
%
|
|
|
100.0
|
%
|
Haverty Furniture Companies, Inc.
|
|
Home Furnishing Retail
|
|
$
|
220.4
|
|
|
|
84.5
|
%
|
|
|
15.5
|
%
|
|
|
9.1
|
%
|
|
|
90.9
|
%
|
HEICO Corp.
|
|
Aerospace, defense manufacturer
|
|
$
|
1,165.2
|
|
|
|
52.7
|
%
|
|
|
47.3
|
%
|
|
|
9.1
|
%
|
|
|
90.9
|
%
|
Hubbell Inc.
|
|
Electronic products
|
|
$
|
2,805.1
|
|
|
|
88.5
|
%
|
|
|
11.5
|
%
|
|
|
4.8
|
%
|
|
|
95.2
|
%
|
International Speedway Corporation
|
|
Entertainment
|
|
$
|
1,141.9
|
|
|
|
56.8
|
%
|
|
|
43.2
|
%
|
|
|
4.8
|
%
|
|
|
95.2
|
%
|
John Wiley & Sons, Inc.
|
|
Publishing company
|
|
$
|
2,285.3
|
|
|
|
84.0
|
%
|
|
|
16.0
|
%
|
|
|
9.1
|
%
|
|
|
90.9
|
%
|
Kelly Services, Inc.
|
|
HR and Employment Services
|
|
$
|
432.3
|
|
|
|
90.4
|
%
|
|
|
9.6
|
%
|
|
|
0.0
|
%
|
|
|
100.0
|
%
|
Lennar Corp.
|
|
Home builder
|
|
$
|
2,572.0
|
|
|
|
86.3
|
%
|
|
|
13.7
|
%
|
|
|
9.1
|
%
|
|
|
90.9
|
%
|
Molex Inc.
|
|
Electronics manufacturer
|
|
$
|
2,901.2
|
|
|
|
50.6
|
%
|
|
|
49.4
|
%
|
|
|
0.0
|
%
|
|
|
100.0
|
%
|
Moog Inc.
|
|
Aerospace, defense manufacturer
|
|
$
|
1,570.0
|
|
|
|
90.8
|
%
|
|
|
9.2
|
%
|
|
|
9.1
|
%
|
|
|
90.9
|
%
|
Rush Enterprises, Inc.
|
|
Industrial equipment
|
|
$
|
496.7
|
|
|
|
73.7
|
%
|
|
|
26.3
|
%
|
|
|
4.8
|
%
|
|
|
95.2
|
%
|
Seneca Foods Corporation
|
|
Packaged foods
|
|
$
|
284.1
|
|
|
|
81.0
|
%
|
|
|
19.0
|
%
|
|
|
4.8
|
%
|
|
|
95.2
|
%
|
Tecumseh Products, Inc.
|
|
Manufactures compressors
|
|
$
|
216.3
|
|
|
|
73.7
|
%
|
|
|
26.3
|
%
|
|
|
0.0
|
%
|
|
|
100.0
|
%
|
Watsco, Inc.
|
|
HVAC Distributor
|
|
$
|
1,806.5
|
|
|
|
81.5
|
%
|
|
|
18.5
|
%
|
|
|
9.1
|
%
|
|
|
90.9
|
%
|
|
|
High
|
|
$
|
2,901.2
|
|
|
|
90.8
|
%
|
|
|
52.9
|
%
|
|
|
9.1
|
%
|
|
|
100.0
|
%
|
|
|
Mean
|
|
$
|
1,303.1
|
|
|
|
74.1
|
%
|
|
|
25.9
|
%
|
|
|
4.6
|
%
|
|
|
95.4
|
%
|
|
|
Median
|
|
$
|
1,153.5
|
|
|
|
80.9
|
%
|
|
|
19.1
|
%
|
|
|
4.8
|
%
|
|
|
95.2
|
%
|
|
|
Low
|
|
$
|
139.6
|
|
|
|
47.1
|
%
|
|
|
9.2
|
%
|
|
|
0.0
|
%
|
|
|
90.9
|
%
|
Aarons, Inc.
|
|
Rent-to-Own Household Products
|
|
$
|
1,317.3
|
|
|
|
87.8
|
%
|
|
|
12.2
|
%
|
|
|
0.0
|
%
|
|
|
100.0
|
%
|
|
|
|
(1) |
|
As of September 8, 2010 |
Source: CapitalIQ and relevant filings.
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
Premium/(Discount) for High Vote Shares
|
|
LTM Trading Volume/Shares Outstanding
|
|
Relative Liquidity
|
Company
|
|
Classification
|
|
Capitalization(1)
|
|
1 Year
|
|
3 Years
|
|
High Vote
|
|
Low Vote
|
|
of LV/HV Shares
|
|
Bel Fuse Inc.
|
|
Communications equipment
|
|
$
|
218.6
|
|
|
|
(5.9
|
)%
|
|
|
(1.7
|
)%
|
|
|
7.6
|
%
|
|
|
349.4
|
%
|
|
|
341.7
|
%
|
Central Garden & Pet Co.
|
|
Household Products
|
|
$
|
612.1
|
|
|
|
6.3
|
%
|
|
|
5.6
|
%
|
|
|
225.0
|
%
|
|
|
155.3
|
%
|
|
|
(69.7
|
)%
|
Crawford & Co.
|
|
Insurance
|
|
$
|
139.6
|
|
|
|
31.7
|
%
|
|
|
36.6
|
%
|
|
|
43.0
|
%
|
|
|
22.3
|
%
|
|
|
(20.7
|
)%
|
Forest City Enterprises Inc.
|
|
Real estate manager
|
|
$
|
1,907.4
|
|
|
|
(0.0
|
)%
|
|
|
(0.1
|
)%
|
|
|
7.4
|
%
|
|
|
226.8
|
%
|
|
|
219.4
|
%
|
Greif, Inc.
|
|
Industrial Packaging
|
|
$
|
2,681.3
|
|
|
|
(5.5
|
)%
|
|
|
(7.7
|
)%
|
|
|
6.3
|
%
|
|
|
182.0
|
%
|
|
|
175.7
|
%
|
Haverty Furniture Companies, Inc.
|
|
Home Furnishing Retail
|
|
$
|
220.4
|
|
|
|
(0.1
|
)%
|
|
|
0.1
|
%
|
|
|
2.6
|
%
|
|
|
106.7
|
%
|
|
|
104.1
|
%
|
HEICO Corp.
|
|
Aerospace, defense manufacturer
|
|
$
|
1,165.2
|
|
|
|
29.2
|
%
|
|
|
27.1
|
%
|
|
|
200.6
|
%
|
|
|
49.7
|
%
|
|
|
(150.9
|
)%
|
Hubbell Inc.
|
|
Electronic products
|
|
$
|
2,805.1
|
|
|
|
(4.5
|
)%
|
|
|
1.6
|
%
|
|
|
0.8
|
%
|
|
|
845.4
|
%
|
|
|
844.6
|
%
|
International Speedway Corporation
|
|
Entertainment
|
|
$
|
1,141.9
|
|
|
|
(1.1
|
)%
|
|
|
(0.8
|
)%
|
|
|
1.0
|
%
|
|
|
144.3
|
%
|
|
|
143.3
|
%
|
John Wiley & Sons, Inc.
|
|
Publishing company
|
|
$
|
2,285.3
|
|
|
|
(0.0
|
)%
|
|
|
0.1
|
%
|
|
|
4.3
|
%
|
|
|
72.4
|
%
|
|
|
68.1
|
%
|
Kelly Services, Inc.
|
|
HR and Employment Services
|
|
$
|
432.3
|
|
|
|
4.8
|
%
|
|
|
6.9
|
%
|
|
|
1.0
|
%
|
|
|
126.7
|
%
|
|
|
125.7
|
%
|
Lennar Corp.
|
|
Home builder
|
|
$
|
2,572.0
|
|
|
|
(20.5
|
)%
|
|
|
(17.7
|
)%
|
|
|
36.5
|
%
|
|
|
999.6
|
%
|
|
|
963.1
|
%
|
Molex Inc.
|
|
Electronics manufacturer
|
|
$
|
2,901.2
|
|
|
|
15.9
|
%
|
|
|
10.1
|
%
|
|
|
437.6
|
%
|
|
|
52.3
|
%
|
|
|
(385.3
|
)%
|
Moog Inc.
|
|
Aerospace, defense manufacturer
|
|
$
|
1,570.0
|
|
|
|
0.3
|
%
|
|
|
0.3
|
%
|
|
|
3.2
|
%
|
|
|
98.1
|
%
|
|
|
94.8
|
%
|
Rush Enterprises, Inc.
|
|
Industrial equipment
|
|
$
|
496.7
|
|
|
|
(13.9
|
)%
|
|
|
(8.7
|
)%
|
|
|
26.2
|
%
|
|
|
96.9
|
%
|
|
|
70.8
|
%
|
Seneca Foods Corporation
|
|
Packaged foods
|
|
$
|
284.1
|
|
|
|
0.3
|
%
|
|
|
2.2
|
%
|
|
|
6.8
|
%
|
|
|
94.9
|
%
|
|
|
88.1
|
%
|
Tecumseh Products, Inc.
|
|
Manufactures compressors
|
|
$
|
216.3
|
|
|
|
(3.2
|
)%
|
|
|
(4.0
|
)%
|
|
|
31.7
|
%
|
|
|
98.3
|
%
|
|
|
66.5
|
%
|
Watsco, Inc.
|
|
HVAC Distributor
|
|
$
|
1,806.5
|
|
|
|
(0.1
|
)%
|
|
|
0.0
|
%
|
|
|
0.7
|
%
|
|
|
243.9
|
%
|
|
|
243.2
|
%
|
|
|
High
|
|
$
|
2,901.2
|
|
|
|
31.7
|
%
|
|
|
36.6
|
%
|
|
|
437.6
|
%
|
|
|
999.6
|
%
|
|
|
963.1
|
%
|
|
|
Mean
|
|
$
|
1,303.1
|
|
|
|
1.9
|
%
|
|
|
2.8
|
%
|
|
|
57.9
|
%
|
|
|
220.3
|
%
|
|
|
162.4
|
%
|
|
|
Median
|
|
$
|
1,153.5
|
|
|
|
(0.1
|
)%
|
|
|
0.1
|
%
|
|
|
7.1
|
%
|
|
|
116.7
|
%
|
|
|
99.4
|
%
|
|
|
Low
|
|
$
|
139.6
|
|
|
|
(20.5
|
)%
|
|
|
(17.7
|
)%
|
|
|
0.7
|
%
|
|
|
22.3
|
%
|
|
|
(385.3
|
)%
|
Aarons, Inc.
|
|
Rent-to-Own Household Products
|
|
$
|
1,317.3
|
|
|
|
(19.9
|
)%
|
|
|
(15.5
|
)%
|
|
|
0.4
|
%
|
|
|
1837.0
|
%
|
|
|
1836.6
|
%
|
|
|
|
(1) |
|
As of September 8, 2010 |
Source: CapitalIQ and relevant filings.
Note: Trading Volume/Shares Outstanding defined as the
sum of the daily shares traded over the last twelve months
divided by the total shares outstanding for each class of stock.
Analysis
of Historical Capital Simplification Transactions
VRA identified and analyzed 22 capital simplification
transactions that occurred from 1999 to September 8, 2010.
In selecting its sample, VRA focused on selected transactions
with situations similar to the Capital Simplification. In each
capital simplification transaction, two publicly traded classes
of stock of a single company with different voting rights were
reclassified or combined into a single class of publicly traded
common stock. Of the 22 capital simplification transactions, 19
had exchange ratios of
one-for-one,
with the remaining three transactions having exchange ratios
ranging from 1.08 to 1.22 to one for shares with higher voting
rights to shares with lower or no voting rights. In five of the
selected capital simplification transactions, the lower voting
or nonvoting shares had 0.0% voting interest.
Relative to the reference transactions, the economic value and
economic interest split between our two classes of stock is at
the upper end of the range. The average economic value breakdown
between lower or no vote shares and higher vote shares for the
reference transactions is 54.8% to 45.2%, while the breakdown
between our Common Stock and our Class A Common Stock is
87.8% to 12.2%. The voting interest breakdown between our Common
Stock and our Class A Common Stock is 0% to 100%, while the
population of reference transactions have an average of 12.7% to
87.3% voting interest between lower or no vote shares and higher
vote shares. The effective premium for our Class A Common
Stock at a
one-for-one
exchange ratio is 17.0%, as of September 8, 2010, which is
within the range. For the population of selected reference
transactions, the effective premium / (discount) on
one-for-one
exchanges ranged from (3.2)% to 32.5%, with an average of 3.4%.
18
Please see the tables below for more information on the
precedent transactions reviewed by VRA and the effective
premiums paid in historical capital simplification transactions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market Capitalization
|
|
Economic Value
|
|
Economic Interest
|
|
Voting Interest
|
Date of
|
|
|
|
at Re-Classification
|
|
Low Vote
|
|
High Vote
|
|
Low Vote
|
|
High Vote
|
|
Low Vote
|
|
High Vote
|
Announcement
|
|
Re-Classification
|
|
Company
|
|
($ in millions)
|
|
Shares
|
|
Shares
|
|
Shares
|
|
Shares
|
|
Shares
|
|
Shares
|
|
|
12/21/2009
|
|
|
|
12/21/2009
|
|
|
Chipotle Mexican Grill, Inc.
|
|
$
|
1,354
|
|
|
|
47.7
|
%
|
|
|
52.3
|
%
|
|
|
47.6
|
%
|
|
|
52.4
|
%
|
|
|
8.3
|
%
|
|
|
91.7
|
%
|
|
12/5/2008
|
|
|
|
1/27/2009
|
|
|
Mueller Water Products, Inc.
|
|
$
|
619
|
|
|
|
25.8
|
%
|
|
|
74.2
|
%
|
|
|
25.6
|
%
|
|
|
74.4
|
%
|
|
|
4.1
|
%
|
|
|
95.9
|
%
|
|
2/7/2007
|
|
|
|
2/7/2007
|
|
|
Gamestop Corporation
|
|
$
|
2,467
|
|
|
|
43.5
|
%
|
|
|
56.5
|
%
|
|
|
60.6
|
%
|
|
|
39.4
|
%
|
|
|
13.3
|
%
|
|
|
86.7
|
%
|
|
4/11/2006
|
|
|
|
4/11/2006
|
|
|
Eagle Materials Corporation
|
|
$
|
1,765
|
|
|
|
51.7
|
%
|
|
|
48.3
|
%
|
|
|
51.6
|
%
|
|
|
48.4
|
%
|
|
|
15.0
|
%
|
|
|
85.0
|
%(1)
|
|
4/19/2005
|
|
|
|
7/6/2005
|
|
|
Gartner, Inc.
|
|
$
|
234
|
|
|
|
79.9
|
%
|
|
|
20.1
|
%
|
|
|
79.8
|
%
|
|
|
20.2
|
%
|
|
|
20.0
|
%
|
|
|
80.0
|
%(2)
|
|
4/26/2005
|
|
|
|
5/27/2005
|
|
|
Agere Systems, Inc.
|
|
$
|
2,187
|
|
|
|
47.6
|
%
|
|
|
52.4
|
%
|
|
|
47.6
|
%
|
|
|
52.4
|
%
|
|
|
20.0
|
%
|
|
|
80.0
|
%(2)
|
|
11/16/2004
|
|
|
|
5/24/2005
|
|
|
Curtiss-Wright Corporation
|
|
$
|
1,209
|
|
|
|
61.0
|
%
|
|
|
39.0
|
%
|
|
|
59.1
|
%
|
|
|
40.9
|
%
|
|
|
20.0
|
%
|
|
|
80.0
|
%(2)
|
|
8/26/2003
|
|
|
|
11/14/2003
|
|
|
MIPS Technologies, Inc.
|
|
$
|
237
|
|
|
|
38.2
|
%
|
|
|
61.8
|
%
|
|
|
38.2
|
%
|
|
|
61.8
|
%
|
|
|
20.0
|
%
|
|
|
80.0
|
%(2)
|
|
10/22/2003
|
|
|
|
11/6/2003
|
|
|
Alberto-Culver Company
|
|
$
|
2,041
|
|
|
|
55.3
|
%
|
|
|
44.7
|
%
|
|
|
44.9
|
%
|
|
|
55.1
|
%
|
|
|
7.6
|
%
|
|
|
92.4
|
%
|
|
5/19/2003
|
|
|
|
11/5/2003
|
|
|
Jo-Ann Stores, Inc.
|
|
$
|
558
|
|
|
|
47.8
|
%
|
|
|
52.2
|
%
|
|
|
47.5
|
%
|
|
|
52.5
|
%
|
|
|
0.0
|
%
|
|
|
100.0
|
%
|
|
4/28/2003
|
|
|
|
9/22/2003
|
|
|
Florida East Coast Industries, Inc.
|
|
$
|
1,116
|
|
|
|
46.5
|
%
|
|
|
53.5
|
%
|
|
|
46.5
|
%
|
|
|
53.5
|
%
|
|
|
20.0
|
%
|
|
|
80.0
|
%(2)
|
|
4/25/2003
|
|
|
|
9/3/2003
|
|
|
Commonwealth Telephone Enterprises
|
|
$
|
894
|
|
|
|
91.5
|
%
|
|
|
8.5
|
%
|
|
|
91.4
|
%
|
|
|
8.6
|
%
|
|
|
41.7
|
%
|
|
|
58.3
|
%
|
|
4/12/2002
|
|
|
|
12/13/2002
|
|
|
The Readers Digest Association, Inc.
|
|
$
|
1,609
|
|
|
|
87.7
|
%
|
|
|
12.3
|
%
|
|
|
87.7
|
%
|
|
|
12.3
|
%
|
|
|
0.0
|
%
|
|
|
100.0
|
%
|
|
7/9/2002
|
|
|
|
10/22/2002
|
|
|
E-Z-EM,
Inc.
|
|
$
|
79
|
|
|
|
60.0
|
%
|
|
|
40.0
|
%
|
|
|
59.4
|
%
|
|
|
40.6
|
%
|
|
|
0.0
|
%
|
|
|
100.0
|
%
|
|
2/28/2002
|
|
|
|
5/3/2002
|
|
|
Freeport-McMoRan Copper & Gold, Inc.
|
|
$
|
1,584
|
|
|
|
38.5
|
%
|
|
|
61.5
|
%
|
|
|
38.5
|
%
|
|
|
61.5
|
%
|
|
|
19.5
|
%(3)
|
|
|
80.0
|
%(2)
|
|
7/17/2001
|
|
|
|
10/8/2001
|
|
|
Conoco, Inc.
|
|
$
|
16,534
|
|
|
|
29.6
|
%
|
|
|
70.4
|
%
|
|
|
30.0
|
%
|
|
|
70.0
|
%
|
|
|
7.9
|
%
|
|
|
92.1
|
%
|
|
3/28/2001
|
|
|
|
7/13/2001
|
|
|
AmSurg Corporation
|
|
$
|
251
|
|
|
|
68.4
|
%
|
|
|
31.6
|
%
|
|
|
67.6
|
%
|
|
|
32.4
|
%
|
|
|
17.2
|
%
|
|
|
82.8
|
%
|
|
2/1/2001
|
|
|
|
5/15/2001
|
|
|
Raytheon Company
|
|
$
|
10,048
|
|
|
|
70.5
|
%
|
|
|
29.5
|
%
|
|
|
70.3
|
%
|
|
|
29.7
|
%
|
|
|
19.9
|
%
|
|
|
80.1
|
%
|
|
12/8/2000
|
|
|
|
4/30/2001
|
|
|
Waddell & Reed Financial, Inc.
|
|
$
|
1,322
|
|
|
|
51.9
|
%
|
|
|
48.1
|
%
|
|
|
51.9
|
%
|
|
|
48.1
|
%
|
|
|
17.5
|
%
|
|
|
82.5
|
%
|
|
7/3/2000
|
|
|
|
8/28/2000
|
|
|
The J. M. Smucker Company
|
|
$
|
524
|
|
|
|
49.1
|
%
|
|
|
50.9
|
%
|
|
|
50.3
|
%
|
|
|
49.7
|
%
|
|
|
0.0
|
%
|
|
|
100.0
|
%
|
|
2/2/2000
|
|
|
|
4/24/2000
|
|
|
PMA Capital Corporation
|
|
$
|
166
|
|
|
|
43.4
|
%
|
|
|
56.6
|
%
|
|
|
NA
|
|
|
|
NA
|
|
|
|
7.1
|
%
|
|
|
92.9
|
%
|
|
5/4/1999
|
|
|
|
6/24/1999
|
|
|
Pacificare Health Systems, Inc.
|
|
$
|
4,920
|
|
|
|
69.8
|
%
|
|
|
30.2
|
%
|
|
|
67.5
|
%
|
|
|
32.5
|
%
|
|
|
0.0
|
%
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
Aarons
|
|
$
|
1,317
|
|
|
|
87.8
|
%
|
|
|
12.2
|
%
|
|
|
85.6
|
%
|
|
|
14.4
|
%
|
|
|
0.0
|
%
|
|
|
100.0
|
%(4)
|
|
1:1
|
|
|
|
High
|
|
|
|
|
|
|
|
|
|
79.9
|
%
|
|
|
74.2
|
%
|
|
|
79.8
|
%
|
|
|
74.4
|
%
|
|
|
20.0
|
%
|
|
|
100.0
|
%
|
|
Transactions
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
51.5
|
%
|
|
|
48.5
|
%
|
|
|
52.1
|
%
|
|
|
47.9
|
%
|
|
|
12.5
|
%
|
|
|
87.5
|
%
|
|
|
|
|
|
Median
|
|
|
|
|
|
|
|
|
|
49.1
|
%
|
|
|
50.9
|
%
|
|
|
51.0
|
%
|
|
|
49.0
|
%
|
|
|
15.0
|
%
|
|
|
85.0
|
%
|
|
|
|
|
|
Low
|
|
|
|
|
|
|
|
|
|
25.8
|
%
|
|
|
20.1
|
%
|
|
|
25.6
|
%
|
|
|
20.2
|
%
|
|
|
0.0
|
%
|
|
|
80.0
|
%
|
|
Premium
|
|
|
|
High
|
|
|
|
|
|
|
|
|
|
91.5
|
%
|
|
|
52.2
|
%
|
|
|
91.4
|
%
|
|
|
52.5
|
%
|
|
|
41.7
|
%
|
|
|
100.0
|
%
|
|
Transactions
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
75.7
|
%
|
|
|
24.3
|
%
|
|
|
75.5
|
%
|
|
|
24.5
|
%
|
|
|
13.9
|
%
|
|
|
86.1
|
%
|
|
|
|
|
|
Median
|
|
|
|
|
|
|
|
|
|
87.7
|
%
|
|
|
12.3
|
%
|
|
|
87.7
|
%
|
|
|
12.3
|
%
|
|
|
0.0
|
%
|
|
|
100.0
|
%
|
|
|
|
|
|
Low
|
|
|
|
|
|
|
|
|
|
47.8
|
%
|
|
|
8.5
|
%
|
|
|
47.5
|
%
|
|
|
8.6
|
%
|
|
|
0.0
|
%
|
|
|
58.3
|
%
|
|
All
|
|
|
|
High
|
|
|
|
|
|
|
|
|
|
91.5
|
%
|
|
|
74.2
|
%
|
|
|
91.4
|
%
|
|
|
74.4
|
%
|
|
|
41.7
|
%
|
|
|
100.0
|
%
|
|
Transactions
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
54.8
|
%
|
|
|
45.2
|
%
|
|
|
55.4
|
%
|
|
|
44.6
|
%
|
|
|
12.7
|
%
|
|
|
87.3
|
%
|
|
|
|
|
|
Median
|
|
|
|
|
|
|
|
|
|
50.4
|
%
|
|
|
49.6
|
%
|
|
|
51.6
|
%
|
|
|
48.4
|
%
|
|
|
14.2
|
%
|
|
|
85.8
|
%
|
|
|
|
|
|
Low
|
|
|
|
|
|
|
|
|
|
25.8
|
%
|
|
|
8.5
|
%
|
|
|
25.6
|
%
|
|
|
8.6
|
%
|
|
|
0.0
|
%
|
|
|
58.3
|
%
|
|
|
|
(1) |
|
High vote shares entitled to elect at least 85% of the board. |
|
(2) |
|
High vote shares entitled to elect at least 80% of the board. |
|
(3) |
|
The remaining votes come from preferred stock holders entitled
to cast 2.3% of the 20% voting rights reserved for
non-class B
shareholders. |
|
(4) |
|
As of September 8, 2010 |
Source: CapitalIQ, SEC filings, press releases.
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market Capitalization
|
|
Premium or (Discount) for
|
|
Absolute Trading Volume of
|
|
|
|
|
Date of
|
|
|
|
at Re-Classification
|
|
High Vote Shares(1)
|
|
High Vote/Low Vote Shares(1)
|
|
Exchange Ratio
|
|
Effective
|
Announcement
|
|
Re-Classification
|
|
Company
|
|
($ in millions)
|
|
1 Day
|
|
1 Year
|
|
3 Years
|
|
1 Year
|
|
3 Years
|
|
High Vote: Low Vote
|
|
Premium
|
|
|
12/21/2009
|
|
|
|
12/21/2009
|
|
|
Chipotle Mexican Grill, Inc.
|
|
$
|
1,354
|
|
|
|
(0.3
|
)%
|
|
|
(5.9
|
)%
|
|
|
(4.8
|
)%
|
|
|
0.2
|
%
|
|
|
0.1
|
%
|
|
|
1:1
|
|
|
|
0.3
|
%
|
|
12/5/2008
|
|
|
|
1/27/2009
|
|
|
Mueller Water Products, Inc.
|
|
$
|
619
|
|
|
|
(1.4
|
)%
|
|
|
(6.3
|
)%
|
|
|
(2.4
|
)%(2)
|
|
|
62.0
|
%
|
|
|
78.3
|
%(2)
|
|
|
1:1
|
|
|
|
1.4
|
%
|
|
2/7/2007
|
|
|
|
2/7/2007
|
|
|
Gamestop Corporation
|
|
$
|
2,467
|
|
|
|
(0.3
|
)%
|
|
|
(7.7
|
)%
|
|
|
1.5
|
%(2)
|
|
|
7.0
|
%
|
|
|
8.2
|
%(2)
|
|
|
1:1
|
|
|
|
0.3
|
%
|
|
4/11/2006
|
|
|
|
4/11/2006
|
|
|
Eagle Materials Corporation
|
|
$
|
1,765
|
|
|
|
(0.3
|
)%
|
|
|
(2.6
|
)%
|
|
|
(3.1
|
)%(2)
|
|
|
11.7
|
%
|
|
|
24.8
|
%(2)
|
|
|
1:1
|
|
|
|
0.3
|
%
|
|
4/19/2005
|
|
|
|
7/6/2005
|
|
|
Gartner, Inc.
|
|
$
|
234
|
|
|
|
(1.2
|
)%
|
|
|
(1.3
|
)%
|
|
|
(3.0
|
)%
|
|
|
20.4
|
%
|
|
|
31.2
|
%
|
|
|
1:1
|
|
|
|
1.2
|
%
|
|
4/26/2005
|
|
|
|
5/27/2005
|
|
|
Agere Systems, Inc.
|
|
$
|
2,187
|
|
|
|
NA
|
|
|
|
NA
|
|
|
|
NA
|
|
|
|
NA
|
|
|
|
NA
|
|
|
|
1:1
|
|
|
|
NA
|
|
|
11/16/2004
|
|
|
|
5/24/2005
|
|
|
Curtiss-Wright Corporation
|
|
$
|
1,209
|
|
|
|
(7.5
|
)%
|
|
|
(0.5
|
)%
|
|
|
(1.6
|
)%
|
|
|
5.1
|
%
|
|
|
8.2
|
%
|
|
|
1:1
|
|
|
|
7.5
|
%
|
|
8/26/2003
|
|
|
|
11/14/2003
|
|
|
MIPS Technologies, Inc.
|
|
$
|
237
|
|
|
|
(4.0
|
)%
|
|
|
(13.0
|
)%
|
|
|
(8.3
|
)%
|
|
|
66.3
|
%
|
|
|
61.4
|
%
|
|
|
1:1
|
|
|
|
4.0
|
%
|
|
10/22/2003
|
|
|
|
11/6/2003
|
|
|
Alberto-Culver Company
|
|
$
|
2,041
|
|
|
|
(32.5
|
)%
|
|
|
(29.3
|
)%
|
|
|
(20.4
|
)%
|
|
|
672.0
|
%
|
|
|
440.6
|
%
|
|
|
1:1
|
|
|
|
32.5
|
%
|
|
5/19/2003
|
|
|
|
11/5/2003
|
|
|
Jo-Ann Stores, Inc.
|
|
$
|
558
|
|
|
|
13.2
|
%
|
|
|
17.0
|
%
|
|
|
13.4
|
%
|
|
|
400.6
|
%
|
|
|
298.1
|
%
|
|
|
1.15:1
|
|
|
|
1.8
|
%
|
|
4/28/2003
|
|
|
|
9/22/2003
|
|
|
Florida East Coast Industries, Inc.
|
|
$
|
1,116
|
|
|
|
(0.4
|
)%
|
|
|
(8.1
|
)%
|
|
|
(11.5
|
)%
|
|
|
37.5
|
%
|
|
|
251.9
|
%
|
|
|
1:1
|
|
|
|
0.4
|
%
|
|
4/25/2003
|
|
|
|
9/3/2003
|
|
|
Commonwealth Telephone Enterprises
|
|
$
|
894
|
|
|
|
0.0
|
%
|
|
|
9.2
|
%
|
|
|
(3.8
|
)%
|
|
|
1.0
|
%
|
|
|
70.0
|
%
|
|
|
1.09:1
|
|
|
|
9.0
|
%
|
|
4/12/2002
|
|
|
|
12/13/2002
|
|
|
The Readers Digest Association, Inc.
|
|
$
|
1,609
|
|
|
|
2.8
|
%
|
|
|
(11.5
|
)%
|
|
|
(9.8
|
)%
|
|
|
5.5
|
%
|
|
|
4.0
|
%
|
|
|
1.22:1
|
|
|
|
19.2
|
%
|
|
7/9/2002
|
|
|
|
10/22/2002
|
|
|
E-Z-EM,
Inc.
|
|
$
|
79
|
|
|
|
3.2
|
%
|
|
|
2.8
|
%
|
|
|
3.4
|
%
|
|
|
73.9
|
%
|
|
|
51.2
|
%
|
|
|
1:1
|
|
|
|
(3.2
|
)%
|
|
2/28/2002
|
|
|
|
5/3/2002
|
|
|
Freeport-McMoRan Copper & Gold, Inc.
|
|
$
|
1,584
|
|
|
|
3.2
|
%
|
|
|
11.1
|
%
|
|
|
0.7
|
%
|
|
|
785.9
|
%
|
|
|
558.1
|
%
|
|
|
1:1
|
|
|
|
(3.2
|
)%
|
|
7/17/2001
|
|
|
|
10/8/2001
|
|
|
Conoco, Inc.
|
|
$
|
16,534
|
|
|
|
1.6
|
%
|
|
|
8.6
|
%
|
|
|
0.2
|
%(2)
|
|
|
169.5
|
%
|
|
|
181.3
|
%(2)
|
|
|
1:1
|
|
|
|
(1.6
|
)%
|
|
3/28/2001
|
|
|
|
7/13/2001
|
|
|
AmSurg Corporation
|
|
$
|
251
|
|
|
|
(3.9
|
)%
|
|
|
0.0
|
%
|
|
|
1.5
|
%
|
|
|
19.6
|
%
|
|
|
26.5
|
%
|
|
|
1:1
|
|
|
|
3.9
|
%
|
|
2/1/2001
|
|
|
|
5/15/2001
|
|
|
Raytheon Company
|
|
$
|
10,048
|
|
|
|
(4.4
|
)%
|
|
|
(1.1
|
)%
|
|
|
(2.1
|
)%
|
|
|
37.5
|
%
|
|
|
49.5
|
%
|
|
|
1:1
|
|
|
|
4.4
|
%
|
|
12/8/2000
|
|
|
|
4/30/2001
|
|
|
Waddell & Reed Financial, Inc.
|
|
$
|
1,322
|
|
|
|
(2.6
|
)%
|
|
|
(5.3
|
)%
|
|
|
(4.0
|
)%
|
|
|
22.3
|
%
|
|
|
52.0
|
%
|
|
|
1:1
|
|
|
|
2.6
|
%
|
|
7/3/2000
|
|
|
|
8/28/2000
|
|
|
The J. M. Smucker Company
|
|
$
|
524
|
|
|
|
2.7
|
%
|
|
|
18.4
|
%
|
|
|
2.8
|
%
|
|
|
97.8
|
%
|
|
|
121.5
|
%
|
|
|
1:1
|
|
|
|
(2.7
|
)%
|
|
2/2/2000
|
|
|
|
4/24/2000
|
|
|
PMA Capital Corporation
|
|
$
|
166
|
|
|
|
NA
|
|
|
|
NA
|
|
|
|
NA
|
|
|
|
NA
|
|
|
|
NA
|
|
|
|
1:1
|
|
|
|
NA
|
|
|
5/4/1999
|
|
|
|
6/24/1999
|
|
|
Pacificare Health Systems, Inc.
|
|
$
|
4,920
|
|
|
|
(9.4
|
)%
|
|
|
(1.3
|
)%
|
|
|
(1.5
|
)%
|
|
|
633.8
|
%
|
|
|
386.6
|
%
|
|
|
1:1
|
|
|
|
9.4
|
%
|
|
|
|
|
|
|
|
|
Aarons Inc.
|
|
$
|
1,317
|
|
|
|
(17.0
|
)%
|
|
|
(22.9
|
)%
|
|
|
(8.8
|
)%
|
|
|
0.1
|
%
|
|
|
0.2
|
%
|
|
|
1:1
|
|
|
|
17.0
|
%(3)
|
|
1:1
|
|
|
|
High
|
|
|
|
|
|
|
|
|
|
3.2
|
%
|
|
|
18.4
|
%
|
|
|
3.4
|
%
|
|
|
785.9
|
%
|
|
|
558.1
|
%
|
|
|
1:1
|
|
|
|
32.5
|
%
|
|
Transactions
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
(3.4
|
)%
|
|
|
(2.4
|
)%
|
|
|
(3.1
|
)%
|
|
|
160.1
|
%
|
|
|
137.1
|
%
|
|
|
1:1
|
|
|
|
3.4
|
%
|
|
|
|
|
|
Median
|
|
|
|
|
|
|
|
|
|
(1.2
|
)%
|
|
|
(1.3
|
)%
|
|
|
(2.1
|
)%
|
|
|
37.5
|
%
|
|
|
52.0
|
%
|
|
|
1:1
|
|
|
|
1.2
|
%
|
|
|
|
|
|
Low
|
|
|
|
|
|
|
|
|
|
(32.5
|
)%
|
|
|
(29.3
|
)%
|
|
|
(20.4
|
)%
|
|
|
0.2
|
%
|
|
|
0.1
|
%
|
|
|
1:1
|
|
|
|
(3.2
|
)%
|
|
Premium
|
|
|
|
High
|
|
|
|
|
|
|
|
|
|
13.2
|
%
|
|
|
17.0
|
%
|
|
|
13.4
|
%
|
|
|
400.6
|
%
|
|
|
298.1
|
%
|
|
|
1.22:1
|
|
|
|
19.2
|
%
|
|
Transactions
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
5.3
|
%
|
|
|
4.9
|
%
|
|
|
(0.1
|
)%
|
|
|
135.7
|
%
|
|
|
124.0
|
%
|
|
|
1.15:1
|
|
|
|
10.0
|
%
|
|
|
|
|
|
Median
|
|
|
|
|
|
|
|
|
|
2.8
|
%
|
|
|
9.2
|
%
|
|
|
(3.8
|
)%
|
|
|
5.5
|
%
|
|
|
70.0
|
%
|
|
|
1.15:1
|
|
|
|
9.0
|
%
|
|
|
|
|
|
Low
|
|
|
|
|
|
|
|
|
|
0.0
|
%
|
|
|
(11.5
|
)%
|
|
|
(9.8
|
)%
|
|
|
1.0
|
%
|
|
|
4.0
|
%
|
|
|
1.09:1
|
|
|
|
1.8
|
%
|
|
All
|
|
|
|
High
|
|
|
|
|
|
|
|
|
|
13.2
|
%
|
|
|
18.4
|
%
|
|
|
13.4
|
%
|
|
|
785.9
|
%
|
|
|
558.1
|
%
|
|
|
1.22:1
|
|
|
|
32.5
|
%
|
|
Transactions
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
(2.1
|
)%
|
|
|
(1.3
|
)%
|
|
|
(2.6
|
)%
|
|
|
156.5
|
%
|
|
|
135.2
|
%
|
|
|
1.02:1
|
|
|
|
4.4
|
%
|
|
|
|
|
|
Median
|
|
|
|
|
|
|
|
|
|
(0.3
|
)%
|
|
|
(1.3
|
)%
|
|
|
(2.3
|
)%
|
|
|
37.5
|
%
|
|
|
56.7
|
%
|
|
|
1:1
|
|
|
|
1.6
|
%
|
|
|
|
|
|
Low
|
|
|
|
|
|
|
|
|
|
(32.5
|
)%
|
|
|
(29.3
|
)%
|
|
|
(20.4
|
)%
|
|
|
0.2
|
%
|
|
|
0.1
|
%
|
|
|
1.09:1
|
|
|
|
(3.2
|
)%
|
|
|
|
(1) |
|
Represents 1 day, 1 year and 3 years prior to
respective announcement dates. |
|
(2) |
|
Represents 2 years instead of 3 years prior to
respective announcement dates. |
|
(3) |
|
As of September 8, 2010 |
Source: CapitalIQ SEC filings, press releases. NA: insufficient
data for comparison
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Performance after Announcement
|
|
Stock Performance after Announcement
|
|
Trading Performance
|
Date of
|
|
|
|
Low Vote Shares
|
|
High Vote Shares
|
|
After Re-Classification
|
Announcement
|
|
Re-Classification
|
|
Company
|
|
1 Day
|
|
5 Days
|
|
30 Days
|
|
1 Day
|
|
5 Days
|
|
30 Days
|
|
1 Day
|
|
5 Days
|
|
30 Days
|
|
|
12/21/2009
|
|
|
|
12/21/2009
|
|
|
Chipotle Mexican Grill, Inc.
|
|
|
1.3
|
%
|
|
|
1.5
|
%
|
|
|
9.1
|
%
|
|
|
NM
|
|
|
|
NM
|
|
|
|
NM
|
|
|
|
1.3
|
%
|
|
|
1.8
|
%
|
|
|
11.5
|
%
|
|
12/5/2008
|
|
|
|
1/27/2009
|
|
|
Mueller Water Products, Inc.
|
|
|
19.5
|
%
|
|
|
14.2
|
%
|
|
|
48.7
|
%
|
|
|
17.4
|
%
|
|
|
12.6
|
%
|
|
|
51.2
|
%
|
|
|
19.5
|
%
|
|
|
6.6
|
%
|
|
|
38.2
|
%
|
|
2/7/2007
|
|
|
|
2/7/2007
|
|
|
Gamestop Corporation
|
|
|
(0.9
|
)%
|
|
|
(1.2
|
)%
|
|
|
0.9
|
%
|
|
|
NM
|
|
|
|
NM
|
|
|
|
NM
|
|
|
|
(0.9
|
)%
|
|
|
0.0
|
%
|
|
|
2.1
|
%
|
|
4/19/2005
|
|
|
|
7/6/2005
|
|
|
Gartner, Inc.
|
|
|
(4.6
|
)%
|
|
|
(0.4
|
)%
|
|
|
13.7
|
%
|
|
|
(4.6
|
)%
|
|
|
0.2
|
%
|
|
|
13.9
|
%
|
|
|
0.2
|
%
|
|
|
6.0
|
%
|
|
|
0.1
|
%
|
|
4/11/2006
|
|
|
|
4/11/2006
|
|
|
Eagle Materials Corporation
|
|
|
(0.6
|
)%
|
|
|
9.2
|
%
|
|
|
(13.2
|
)%
|
|
|
NM
|
|
|
|
NM
|
|
|
|
NM
|
|
|
|
(0.6
|
)%
|
|
|
9.2
|
%
|
|
|
(13.2
|
)%
|
|
4/26/2005
|
|
|
|
5/27/2005
|
|
|
Agere Systems, Inc.
|
|
|
(3.3
|
)%
|
|
|
(4.1
|
)%
|
|
|
(0.8
|
)%
|
|
|
(4.1
|
)%
|
|
|
(3.3
|
)%
|
|
|
(0.8
|
)%
|
|
|
12.4
|
%
|
|
|
(6.6
|
)%
|
|
|
2.1
|
%
|
|
11/16/2004
|
|
|
|
5/24/2005
|
|
|
Curtiss-Wright Corporation
|
|
|
0.7
|
%
|
|
|
4.9
|
%
|
|
|
2.7
|
%
|
|
|
1.3
|
%
|
|
|
4.9
|
%
|
|
|
3.0
|
%
|
|
|
(1.7
|
)%
|
|
|
(1.7
|
)%
|
|
|
(8.1
|
)%
|
|
8/26/2003
|
|
|
|
11/14/2003
|
|
|
MIPS Technologies, Inc.
|
|
|
2.3
|
%
|
|
|
19.7
|
%
|
|
|
27.4
|
%
|
|
|
0.9
|
%
|
|
|
21.4
|
%
|
|
|
30.9
|
%
|
|
|
(7.4
|
)%
|
|
|
(7.9
|
)%
|
|
|
(4.6
|
)%
|
|
10/22/2003
|
|
|
|
11/6/2003
|
|
|
Alberto-Culver Company
|
|
|
3.1
|
%
|
|
|
1.7
|
%
|
|
|
NM
|
|
|
|
2.0
|
%
|
|
|
0.6
|
%
|
|
|
(0.2
|
)%
|
|
|
(0.9
|
)%
|
|
|
(1.9
|
)%
|
|
|
(2.2
|
)%
|
|
5/19/2003
|
|
|
|
11/5/2003
|
|
|
Jo-Ann Stores, Inc.
|
|
|
(7.4
|
)%
|
|
|
(1.7
|
)%
|
|
|
13.5
|
%
|
|
|
(6.9
|
)%
|
|
|
(0.3
|
)%
|
|
|
14.5
|
%
|
|
|
0.3
|
%
|
|
|
(1.4
|
)%
|
|
|
(24.0
|
)%
|
|
4/28/2003
|
|
|
|
9/22/2003
|
|
|
Florida East Coast Industries, Inc.
|
|
|
(1.2
|
)%
|
|
|
1.8
|
%
|
|
|
9.7
|
%
|
|
|
(0.8
|
)%
|
|
|
2.7
|
%
|
|
|
9.6
|
%
|
|
|
(0.3
|
)%
|
|
|
(5.5
|
)%
|
|
|
(7.1
|
)%
|
|
4/25/2003
|
|
|
|
9/3/2003
|
|
|
Commonwealth Telephone Enterprises
|
|
|
0.4
|
%
|
|
|
6.8
|
%
|
|
|
9.0
|
%
|
|
|
1.3
|
%
|
|
|
7.5
|
%
|
|
|
11.7
|
%
|
|
|
3.1
|
%
|
|
|
0.1
|
%
|
|
|
1.3
|
%
|
|
4/12/2002
|
|
|
|
12/13/2002
|
|
|
The Readers Digest Association, Inc.
|
|
|
0.4
|
%
|
|
|
(3.8
|
)%
|
|
|
6.8
|
%
|
|
|
20.6
|
%
|
|
|
14.9
|
%
|
|
|
27.8
|
%
|
|
|
1.1
|
%
|
|
|
(0.9
|
)%
|
|
|
(8.6
|
)%
|
|
7/9/2002
|
|
|
|
10/22/2002
|
|
|
E-Z-EM, Inc.
|
|
|
3.3
|
%
|
|
|
3.3
|
%
|
|
|
(3.3
|
)%
|
|
|
2.4
|
%
|
|
|
(6.9
|
)%
|
|
|
(6.9
|
)%
|
|
|
0.0
|
%
|
|
|
(1.3
|
)%
|
|
|
17.1
|
%
|
|
2/28/2002
|
|
|
|
5/3/2002
|
|
|
Freeport-McMoRan Copper & Gold, Inc.
|
|
|
5.2
|
%
|
|
|
3.9
|
%
|
|
|
23.5
|
%
|
|
|
5.3
|
%
|
|
|
3.7
|
%
|
|
|
22.5
|
%
|
|
|
(1.1
|
)%
|
|
|
2.5
|
%
|
|
|
11.0
|
%
|
|
7/17/2001
|
|
|
|
10/8/2001
|
|
|
Conoco, Inc.
|
|
|
0.4
|
%
|
|
|
6.2
|
%
|
|
|
9.8
|
%
|
|
|
(0.9
|
)%
|
|
|
4.5
|
%
|
|
|
8.3
|
%
|
|
|
3.0
|
%
|
|
|
3.4
|
%
|
|
|
(6.0
|
)%
|
|
3/28/2001
|
|
|
|
7/13/2001
|
|
|
AmSurg Corporation
|
|
|
1.0
|
%
|
|
|
2.4
|
%
|
|
|
2.8
|
%
|
|
|
0.7
|
%
|
|
|
3.4
|
%
|
|
|
2.6
|
%
|
|
|
2.9
|
%
|
|
|
(1.9
|
)%
|
|
|
3.7
|
%
|
|
2/1/2001
|
|
|
|
5/15/2001
|
|
|
Raytheon Company
|
|
|
(3.0
|
)%
|
|
|
(3.3
|
)%
|
|
|
(14.0
|
)%
|
|
|
2.0
|
%
|
|
|
1.6
|
%
|
|
|
(9.5
|
)%
|
|
|
(1.0
|
)%
|
|
|
1.2
|
%
|
|
|
5.7
|
%
|
|
12/8/2000
|
|
|
|
4/30/2001
|
|
|
Waddell & Reed Financial, Inc.
|
|
|
5.1
|
%
|
|
|
(10.0
|
)%
|
|
|
(13.7
|
)%
|
|
|
6.0
|
%
|
|
|
(7.4
|
)%
|
|
|
(10.4
|
)%
|
|
|
(0.6
|
)%
|
|
|
0.3
|
%
|
|
|
1.3
|
%
|
|
7/3/2000
|
|
|
|
8/28/2000
|
|
|
The J. M. Smucker Company
|
|
|
(4.6
|
)%
|
|
|
(3.6
|
)%
|
|
|
(3.3
|
)%
|
|
|
(5.2
|
)%
|
|
|
(2.9
|
)%
|
|
|
(4.5
|
)%
|
|
|
0.7
|
%
|
|
|
10.1
|
%
|
|
|
31.4
|
%
|
|
2/2/2000
|
|
|
|
4/24/2000
|
|
|
PMA Capital Corporation
|
|
|
NA
|
|
|
|
NA
|
|
|
|
NA
|
|
|
|
NA
|
|
|
|
NA
|
|
|
|
NA
|
|
|
|
5.9
|
%
|
|
|
8.1
|
%
|
|
|
11.1
|
%
|
|
5/4/1999
|
|
|
|
6/24/1999
|
|
|
Pacificare Health Systems, Inc.
|
|
|
10.3
|
%
|
|
|
12.3
|
%
|
|
|
13.9
|
%
|
|
|
18.2
|
%
|
|
|
18.6
|
%
|
|
|
21.7
|
%
|
|
|
24.3
|
%
|
|
|
14.4
|
%
|
|
|
21.3
|
%
|
|
1:1
|
|
|
|
High
|
|
|
|
|
|
19.5
|
%
|
|
|
19.7
|
%
|
|
|
48.7
|
%
|
|
|
18.2
|
%
|
|
|
21.4
|
%
|
|
|
51.2
|
%
|
|
|
24.3
|
%
|
|
|
14.4
|
%
|
|
|
38.2
|
%
|
|
Transactions
|
|
|
|
Average
|
|
|
|
|
|
1.9
|
%
|
|
|
3.3
|
%
|
|
|
6.7
|
%
|
|
|
2.7
|
%
|
|
|
3.6
|
%
|
|
|
8.8
|
%
|
|
|
2.9
|
%
|
|
|
1.9
|
%
|
|
|
6.1
|
%
|
|
|
|
|
|
Median
|
|
|
|
|
|
0.9
|
%
|
|
|
2.1
|
%
|
|
|
2.8
|
%
|
|
|
1.3
|
%
|
|
|
2.7
|
%
|
|
|
3.0
|
%
|
|
|
0.0
|
%
|
|
|
1.2
|
%
|
|
|
2.1
|
%
|
|
|
|
|
|
Low
|
|
|
|
|
|
(4.6
|
)%
|
|
|
(10.0
|
)%
|
|
|
(14.0
|
)%
|
|
|
(5.2
|
)%
|
|
|
(7.4
|
)%
|
|
|
(10.4
|
)%
|
|
|
(7.4
|
)%
|
|
|
(7.9
|
)%
|
|
|
(13.2
|
)%
|
|
Premium
|
|
|
|
High
|
|
|
|
|
|
0.4
|
%
|
|
|
6.8
|
%
|
|
|
13.5
|
%
|
|
|
20.6
|
%
|
|
|
14.9
|
%
|
|
|
27.8
|
%
|
|
|
3.1
|
%
|
|
|
0.1
|
%
|
|
|
1.3
|
%
|
|
Transactions
|
|
|
|
Average
|
|
|
|
|
|
(2.2
|
)%
|
|
|
0.4
|
%
|
|
|
9.8
|
%
|
|
|
5.0
|
%
|
|
|
7.3
|
%
|
|
|
18.0
|
%
|
|
|
1.5
|
%
|
|
|
(0.7
|
)%
|
|
|
(10.4
|
)%
|
|
|
|
|
|
Median
|
|
|
|
|
|
0.4
|
%
|
|
|
(1.7
|
)%
|
|
|
9.0
|
%
|
|
|
1.3
|
%
|
|
|
7.5
|
%
|
|
|
14.5
|
%
|
|
|
1.1
|
%
|
|
|
(0.9
|
)%
|
|
|
(8.6
|
)%
|
|
|
|
|
|
Low
|
|
|
|
|
|
(7.4
|
)%
|
|
|
(3.8
|
)%
|
|
|
6.8
|
%
|
|
|
(6.9
|
)%
|
|
|
(0.3
|
)%
|
|
|
11.7
|
%
|
|
|
0.3
|
%
|
|
|
(1.4
|
)%
|
|
|
(24.0
|
)%
|
|
All
|
|
|
|
High
|
|
|
|
|
|
19.5
|
%
|
|
|
19.7
|
%
|
|
|
48.7
|
%
|
|
|
20.6
|
%
|
|
|
21.4
|
%
|
|
|
51.2
|
%
|
|
|
24.3
|
%
|
|
|
14.4
|
%
|
|
|
38.2
|
%
|
|
Transactions
|
|
|
|
Average
|
|
|
|
|
|
1.3
|
%
|
|
|
2.9
|
%
|
|
|
7.2
|
%
|
|
|
3.1
|
%
|
|
|
4.2
|
%
|
|
|
10.3
|
%
|
|
|
2.7
|
%
|
|
|
1.6
|
%
|
|
|
3.8
|
%
|
|
|
|
|
|
Median
|
|
|
|
|
|
0.4
|
%
|
|
|
1.8
|
%
|
|
|
7.9
|
%
|
|
|
1.3
|
%
|
|
|
3.1
|
%
|
|
|
9.0
|
%
|
|
|
0.3
|
%
|
|
|
0.2
|
%
|
|
|
1.7
|
%
|
|
|
|
|
|
Low
|
|
|
|
|
|
(7.4
|
)%
|
|
|
(10.0
|
)%
|
|
|
(14.0
|
)%
|
|
|
(6.9
|
)%
|
|
|
(7.4
|
)%
|
|
|
(10.4
|
)%
|
|
|
(7.4
|
)%
|
|
|
(7.9
|
)%
|
|
|
(24.0
|
)%
|
Source: CapitalIQ SEC filings, press releases.
NA: insufficient data for comparison. NM: Not meaningful
for comparison.
The precedent transactions suggest that lower vote or no vote
shares in
one-for-one
exchanges on average increase in price by 1.9%, 3.3% and 6.7%
over 1 day, 5 days and 30 days, respectively,
following the announcement, while higher vote shares increase in
price by 2.7%, 3.6% and 8.8%, respectively, over the same time
periods.
Additional
Considerations
In addition to the foregoing, VRA considered several qualitative
factors in rendering its fairness opinion. VRA considered the
potential effects of the Capital Simplification on the liquidity
of the Common Stock and Class A Common Stock, on our
corporate governance and the perspective of institutional
investors regarding an investment in our Common Stock.
Information
Regarding VRA
The Special Committee selected VRA to act as its financial
advisor and to render a fairness opinion regarding the Capital
Simplification due to VRAs reputation as a nationally
recognized investment banking firm with experience in
transactions similar to the Capital Simplification and because
it is familiar with our Company, our business and our industry.
VRA is continually engaged in the valuation of businesses and
their securities in
21
connection with mergers and acquisitions, leveraged buyouts and
private placements. Under the terms of our engagement letter
with VRA, we agreed to pay VRA a fixed financial advisory
services fee of $55,000 and an opinion fee of $30,000 that is
not contingent on approval by the shareholders of the Capital
Simplification proposal. We also agreed to reimburse VRA for
reasonable expenses incurred by VRA in performing its services
and to indemnify VRA and its related parties against certain
liabilities, including liabilities under the federal securities
laws, arising out of its engagement. The terms of VRAs fee
arrangements were negotiated at arms length between the
Special Committee and VRA.
VRA has not provided financial advisory services to our Company
in the past and is not currently engaged on any other advisory
assignments with us. In the future, VRA may provide financial
advisory services to our Company and may receive fees for such
services.
Other
Proposed Amendments to the Amended and Restated Articles of
Incorporation
As part of the Capital Simplification, we also propose to
eliminate from our Amended and Restated Articles of
Incorporation certain provisions that would be obsolete upon
combination of the two classes and which our Board believes
would be confusing if they remained. If the Capital
Simplification proposal is approved, the following provisions
would be eliminated from our Amended and Restated Articles of
Incorporation:
|
|
|
|
|
references to authorization of Class A Common Stock and
Common Stock;
|
|
|
|
provisions defining the rights of holders of shares of
Class A Common Stock and Common Stock, including obsolete
provisions regarding the convertibility of shares of Common
Stock into shares of Class A Common Stock and the lack of
voting rights for the Common Stock;
|
|
|
|
obsolete provisions allowing our Board to pay higher dividends
on the Common Stock;
|
|
|
|
obsolete provisions requiring an acquirer of 20% or more of the
Class A Common Stock to make a tender offer to acquire a
like percentage of the Common Stock; and
|
|
|
|
obsolete provisions requiring a two-thirds supermajority vote of
the holders of the Common Stock to approve amendments to our
Amended and Restated Articles of Incorporation that adversely
effect the nonvoting Common Stock.
|
These changes are reflected in the text of the proposed Amended
and Restated Articles of Incorporation, marked to show changes
to our current Amended and Restated Articles of Incorporation,
included as Appendix A to this proxy statement.
Except as specifically provided above, we do not intend this
proposal to make any substantive change to our Amended and
Restated Articles of Incorporation. Adoption of this proposal
will have no effect upon our capital structure or on the
substantive rights of holders of shares of Class A Common
Stock or Common Stock, except for the elimination of the
different voting rights of the two classes.
Certain
Effects of the Capital Simplification Amendment
If the Capital Simplification proposal becomes effective, each
share of our outstanding Common Stock will automatically be
converted into one share of Class A Common Stock and the
Class A Common Stock will be renamed, creating a single
class of outstanding shares named simply Common
Stock. Such conversion will have the following effects,
among others, on the holders of our Class A Common Stock
and our Common Stock:
Voting
Rights
The most significant effect of the Capital Simplification will
be on the relative voting rights of the two classes. The holders
of the Class A Common Stock currently have one vote per
share. The holders of the Common Stock currently are not
entitled to vote, except as otherwise provided in the Amended
and Restated Articles of Incorporation or by Georgia law,
including the right to vote for the Capital Simplification
proposal itself (but not any of the other proposals being
considered at the Special Meeting). The outstanding Class A
Common Stock currently is entitled to cast 100% of the votes
cast by shareholders on most matters, but constitute only 14.35%
of the aggregate number of outstanding shares of both classes.
After the Capital Simplification, all holders of our outstanding
Class A Common Stock, including the shares of Common Stock
which are converted into Class A Common Stock, will have
one vote per share. As a result, the total voting power of the
current holders of Class A Common Stock will decrease from
100% to 14.35%. Mr. Loudermilk, Sr., who currently
holds 61.46% of the outstanding Class A Common Stock and
thus has 61.46% of the total voting power, will own (and have
the right to
22
vote) slightly more than 9% of the overall voting common shares
if the Capital Simplification is approved. In addition, our
Amended and Restated Articles of Incorporation and Georgia law
require a separate class voting right if an amendment to our
Amended and Restated Articles of Incorporation would alter the
aggregate number of authorized shares of either such class or
alter the powers, preferences or special rights of either such
class so as to affect these rights adversely. Upon the
conversion of the Common Stock into Class A Common Stock,
these provisions will no longer have any effect because we would
only have a single class of common shares outstanding.
Economic
Equity Interests
The proposed Capital Simplification will have no impact on the
economic equity interests of holders of our Class A Common
Stock and our Common Stock, including with regard to dividends,
liquidation rights or redemption. As of October 28, 2010,
the shares held by the holders of our Class A Common Stock
represented 14.35% of the aggregate number of outstanding shares
of both classes, and the shares held by the holders of our
Common Stock represented 85.65%. After the conversion of the
Common Stock into Class A Common Stock, the common shares
held by current holders of our Class A Common Stock and our
Common Stock would represent the same proportions of our total
outstanding shares.
Capitalization
The proposed Capital Simplification will have no impact on the
total issued and outstanding shares of our common stock or on
our total authorized common shares. As of October 28, 2010,
there were 81,062,750 aggregate shares of common stock issued
and outstanding, consisting of 11,635,056 shares of
Class A Common Stock and 69,427,694 shares of Common
Stock. After the conversion of the Common Stock into
Class A Common Stock, there would be 81,062,750 shares
of common stock outstanding as of such date. In addition, the
proposal will not increase our total number of authorized shares
of capital stock. We are currently authorized to issue
200,000,000 shares of Common Stock, 25,000,000 shares
of Class A Common Stock and 1,000,000 shares of
preferred stock. After the conversion, our authorized capital
stock will consist of 225,000,000 shares of common stock
and 1,000,000 shares of preferred stock. No shares of
preferred stock are currently outstanding or will be outstanding
immediately following the conversion.
Market
Price of Our Common Stock
After the Capital Simplification, the market price of shares of
our Common Stock will depend on many factors, including our
future performance, general market conditions and conditions in
the industry in which we operate. Accordingly, we cannot predict
the price at which our common shares will trade following the
Capital Simplification, just as we could not predict the prices
at which our Class A Common Stock or Common Stock would
trade absent the Capital Simplification. On November 1,
2010, the per share closing prices of our Class A Common
Stock and Common Stock on the New York Stock Exchange were
$18.59 and $18.65, respectively.
NYSE
Listing of Our Common Stock
After the Capital Simplification, the shares of our Class A
Common Stock, renamed Common Stock, will continue to
be listed on the New York Stock Exchange and its ticker symbol
will be renamed AAN. We will cause our current
Common Stock to be delisted from the New York Stock Exchange
after the effective date of the Capital Simplification.
Stock
Options and Restricted Stock Awards
In order to appropriately account for reclassifying the Common
Stock into Class A Common Stock and then renaming the
class, each option to purchase shares of our current Common
Stock will become an option to purchase an equal number of
shares of our renamed Class A Common Stock. Restricted
shares of Common Stock awarded under our stock compensation
plans will similarly become restricted shares of Class A
Common Stock on a
one-for-one
basis.
Resales
Our combined common shares may be sold in the same manner as our
Class A Common Stock and our Common Stock may currently be
sold. Our affiliates and holders of any shares that constitute
restricted securities will continue to be subject to the
restrictions specified in Rule 144 under the Securities Act
of 1933, as amended.
23
Interests
of Certain Persons in the Capital Simplification
Proposal
In considering the recommendation of our Board, you should be
aware that some of our officers and directors may have interests
in the conversion that are or may be different from, or in
addition to, the interests of some or all of our public
shareholders. For instance, certain of our officers and
directors hold shares of Class A Common Stock and Common
Stock as described under Beneficial Ownership of Common
Stock above.
In addition, our founder, former Chief Executive Officer and
current Chairman of our Board of Directors,
Mr. Loudermilk, Sr., currently owns 61.46% of our
outstanding Class A Common Stock, and less than 0.5% of our
Common Stock. Mr. Loudermilk, Sr.s son, Robert
C. Loudermilk, Jr., is our current President, Chief
Executive Officer and a member of our Board of Directors. As
described above, prior to the public announcement of the
proposed Capital Simplification, the Class A Common Stock
consistently traded at a significant discount to the trading
price of the Common Stock, averaging approximately 20% over the
twelve months prior to the announcement. Our Board of Directors
recognized that, upon the public announcement of the proposed
Capital Simplification, the trading price of the Class A
Common Stock was likely to increase significantly to a price
much closer to the trading price of the Common Stock, and the
price of the Class A Common Stock did in fact increase to
that level almost immediately following the announcement.
Because of the significant share holdings of
Mr. Loudermilk, Sr. and the impact that the
reclassification will have on his voting power and the value of
his share holdings, and because of this family relationship,
Mr. Loudermilk, Sr. and Mr. Loudermilk, Jr.
may be deemed to have an interest in the Capital Simplification
that is different from the interests of certain classes of our
shareholders or our shareholders as a whole. For these reasons,
our Board of Directors delegated the consideration of the
proposal to a Special Committee of our Board of Directors, as
described above. The Special Committee consisted of Leo Benatar,
Ronald W. Allen and David L. Kolb, who our Board considers to be
independent and disinterested with respect to the proposal. Our
Board of Directors directed the Special Committee to conduct an
independent review and consideration of the potential terms of
the combination of our two classes and, if appropriate,
recommend a proposal to the full Board of Directors. The Special
Committee was given the discretion to engage its own independent
professional advisors. The Special Committee considered the
interests of our Company and the holders of our Class A
Common Stock and our Common Stock in reviewing the proposal, and
determined that the proposal is in the best interests of our
Company and fair to and in the best interests of the holders of
our Class A Common Stock and the holders of our Common
Stock. The fairness opinion delivered by VRA to the Special
Committee concluded that, as of the date of the opinion, based
upon and subject to the factors and assumptions set forth
therein, the exchange ratio used to effect the Capital
Simplification is fair from a financial point of view to the
holders of our Class A Common Stock and the holders of our
Common Stock. Based on the recommendation of the Special
Committee and its own independent consideration of the proposal,
our Board of Directors has unanimously approved the proposal and
has recommended that our shareholders vote to approve the
Capital Simplification. Mr. Loudermilk, Sr. has
indicated that he intends to vote in favor of the Capital
Simplification proposal and each of the other proposals
described in this proxy statement.
Material
Tax Consequences of the Capital Simplification
Proposal
We have summarized below material federal income tax
consequences of the conversion. We have based this summary on
the Internal Revenue Code (Code), Treasury
Regulations, judicial authorities, published positions of the
Internal Revenue Service (Service) and other
applicable authorities, all as in effect on the date of this
proxy statement-prospectus and all of which are subject to
change or differing interpretations (possibly with retroactive
effect). This discussion is limited to U.S. persons that
hold their shares of Common Stock or Class A Common Stock
as capital assets for U.S. federal income tax purposes and
does not address the tax treatment to shareholders who hold
their shares through a partnership or other pass-through entity.
Shareholders should be aware that this discussion does not
address any issues that may be relevant to our shareholders who
acquired their shares in compensatory transactions or other
holders who are subject to special circumstances or tax rules
(such as dealers in securities or foreign persons). This
discussion does not address all aspects of U.S. federal
income taxation that may be relevant to our shareholders in
light of their particular circumstances or those of our
shareholders that are subject to special treatment under
U.S. federal income tax laws. Furthermore, this summary
does not address any aspect of state, local or foreign tax
consequences of the Capital Simplification proposal. No
assurance can be given that the Service would not assert, or
that a court would not sustain, a position contrary to any of
the tax aspects set forth below. Because the tax consequences to
you will depend on your particular facts and circumstances, you
are urged
24
to consult your own tax advisor with respect to the tax
consequences of the implementation of the Capital
Simplification, including tax reporting requirements.
We believe that as a result of the implementation of the Capital
Simplification:
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holders of our Class A Common Stock and holders of our
Common Stock will not recognize gain or loss upon the conversion
of Common Stock into Class A Common Stock and the renaming
of the Class A Common Stock as Common Stock;
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a shareholders aggregate basis in its shares of new Common
Stock received upon completion of the Capital Simplification
will be the same as the shareholders aggregate basis in
the old Common Stock that was converted pursuant to the Capital
Simplification;
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a shareholders holding period for shares of new Common
Stock received upon completion of the Capital Simplification
will include such shareholders holding period for the old
Common Stock converted pursuant to the Capital Simplification,
provided that each share of old Common Stock was held by such
shareholder as a capital asset as defined in Section 1221
of the Code on the effective date of the conversion; and
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we will not recognize gain or loss for federal income tax
purposes upon the conversion of our Common Stock into
Class A Common Stock and the renaming of the Class A Common
Stock as Common Stock.
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Conditions
Precedent to Effectiveness of the Capital
Simplification
The effectiveness of the conversion of the Common Stock into
Class A Common Stock and the related amendments to our
Amended and Restated Articles of Incorporation as described
above are conditioned upon each of the following:
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Approval by holders of a majority of the outstanding shares of
Class A Common Stock; and
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Approval by holders of a majority of the outstanding shares of
Common Stock.
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If approved, the conversion of the Common Stock into
Class A Common Stock and the amendment of our Amended and
Restated Articles of Incorporation will become effective upon
filing with the Secretary of State of the State of Georgia,
which we expect to occur on the day following the Special
Meeting.
Shareholder
Action if Proposal is Approved
If the proposed Capital Simplification is approved and filed
with the Secretary of State of the State of Georgia, the
conversion will be automatically effective and no shareholder
action will be required. Upon effectiveness of the conversion,
physical stock certificates representing currently outstanding
shares of Class A Common Stock or Common Stock will
automatically become certificates for an equal number of shares
of the new single class of Common Stock, and shareholders will
not be required to exchange their certificates for new
certificates. Holders of physical certificates who wish to
exchange their certificates for new physical certificates for
new Common Stock may surrender their old certificates to our
transfer agent, Computershare Trust Company. Computershare
may be reached at 1-781-575-2879 or online at
www-us.computershare.com (click on Investor Centre
under Investors).
Reservation
of Rights by our Board of Directors
Our Board of Directors reserves the right to abandon the
adoption of the Capital Simplification proposal at the Special
Meeting without further action by our shareholders at any time
before its effectiveness (as described above), even if the
proposal has been approved by the shareholders and all other
conditions to such adoption have been satisfied. Although our
Board of Directors does not anticipate exercising its rights to
abandon the amendments or contemplate specific events that would
trigger abandonment, our Board will defer or abandon the
amendments if, in its business judgment, the Capital
Simplification is no longer in the best interests of our Company
or our shareholders. By voting in favor of the amendments, you
will also be expressly authorizing our Board of Directors to
determine not to proceed with, and abandon, the amendments
(including the conversion) if it should decide to do so.
25
No
Appraisal Rights
No appraisal rights are available under the Georgia Business
Corporation Code, our Amended and Restated Articles of
Incorporation or our bylaws to any shareholder who does not vote
in favor of the adoption and approval of the Capital
Simplification proposal.
Recommendation
of Board of Directors
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
FOR THE APPROVAL OF THE CAPITAL
SIMPLIFICATION PROPOSAL.
PROPOSAL TO
AMEND THE BYLAWS TO ESTABLISH A CLASSIFIED BOARD OF DIRECTORS
(Item 2)
In order to provide increased leadership stability in the
management of our Company and consistent with the practices of
many organizations like our Company, our Board of Directors is
recommending a proposed amendment to Section 2 of
Article III of our bylaws to divide our Board of Directors
into three classes, as nearly equal in number as possible, with
staggered terms of office of three years each, thereby
establishing a classified Board of Directors. The bylaws
currently provide for a Board of Directors consisting of a
single class of eleven directors who are elected at each annual
meeting of shareholders.
If the Board Classification proposal is approved, the members of
our Board of Directors will no longer be elected annually as a
single class. Instead, the members of our Board of Directors
will be divided into three classes as nearly equal in number as
possible, with terms of office of three years each, and the term
of office of one class of directors expiring each year. To
implement the proposal, immediately following the Special
Meeting each of our current directors will be placed in one of
the three classes, as follows:
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Class I R. Charles
Loudermilk, Sr., Ronald W. Allen, John C.
Portman, Jr., and Ray M. Robinson will be placed in
Class I. The initial term for each of the Class I
directors would expire at the annual meeting of shareholders
expected to be held in May 2011. At the May 2011 annual meeting,
the shareholders will elect four Class I directors for a
term of three years.
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Class II William K.
Butler, Jr., Leo Benatar, and John B. Schuerholz will be
placed in Class II. The initial term for each of the
Class II directors would expire at the annual meeting of
shareholders expected to be held in May 2012. At the May 2012
annual meeting, the shareholders will elect three Class II
directors for a term of three years.
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Class III Robert C.
Loudermilk, Jr., Gilbert L. Danielson, and David L. Kolb
will be placed in Class III. The initial term for each of
the Class III directors would expire at the annual meeting
of shareholders expected to be held in May 2013. At the May 2013
annual meeting, the shareholders will elect three Class III
directors for a term of three years.
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At each annual shareholders meeting at which a specific
class term expires, nominees elected or reelected as a
director for that class will serve a three-year term for a term
of three years to succeed those whose terms are expiring.
To preserve the classified board structure, the Board
Classification proposal also provides that a director elected by
our Board of Directors to fill a vacancy resulting from the
resignation, retirement, death, disqualification or removal of a
director will be a member of the same class as the director he
or she succeeds, unless by reason of any previous changes in the
authorized number of directors, our Board of Directors
designates the vacant directorship as a directorship of another
class in order more nearly to achieve equality in the number of
directors among the classes.
Under the Georgia Business Corporation Code, if the directors of
a corporation have staggered terms, the directors may be removed
only for cause, unless the corporations articles of
incorporation or bylaws provide otherwise. Presently, our bylaws
allow that any director may be removed from office by the vote
of shareholders representing a majority of the issued and
outstanding capital stock entitled to vote for the election of
directors, with or without cause. If the shareholders approve
the Board Classification proposal, shareholders would only be
permitted to remove directors for cause, but not in other
circumstances.
26
If the Board Classification proposal is approved, unless a
director is removed for cause or resigns, three annual elections
will be needed to replace all of the directors on the classified
Board of Directors. This amendment to our bylaws may, therefore,
discourage an individual or entity from acquiring a significant
position in our Companys stock with the intention of
obtaining a seat on our Board of Directors. If this proposal is
adopted, these provisions will be applicable to each annual
election of directors, including the elections following any
change of control of our Company.
We are not aware of any present third-party plans to gain
control of our Company, and the amendment of our bylaws to
establish a classified board is not being recommended in
response to any such plan. Rather, our Board of Directors is
recommending the amendment of our bylaws to establish a
classified board as part of its review of our Companys
corporate governance structure in connection with the Capital
Simplification proposal, which, if it is approved, would result
in our Chairman, R. Charles Loudermilk, Sr., losing
majority voting control of our Company, and consequently could
potentially expose our Company to unsolicited takeover bids that
our Board of Directors might not believe are in the best
interests of the Company and our shareholders. The Board
Classification proposal should assist all of our shareholders in
seeking fair and equitable treatment in the event of an
unsolicited takeover bid situation.
Advantages
of the Classified Board Amendment
The Board Classification proposal is designed to promote
continuity and stability in our Board of Directors
leadership and policies by providing that at any given time a
majority of the directors will have prior experience with our
Company and, therefore, will be familiar with its business and
operations. We have not experienced continuity problems in the
past, and our Board of Directors desires that this experience
continue.
Our Board of Directors believes that the stability in its
leadership and policies in the past has helped to promote the
creation of long-term shareholder value. Our Board of Directors
also believes that a classified board will assist our Board of
Directors in protecting the interests of our shareholders in the
event of an unsolicited offer for our Company by encouraging any
potential acquirer to negotiate directly with our Board of
Directors.
Disadvantages
of the Classified Board Amendment
The amendment to establish a classified Board of Directors may
increase the amount of time required for a takeover bidder to
obtain control of our Company without the cooperation of our
Board of Directors, even if the takeover bidder were to acquire
a majority of the voting power of our outstanding Common Stock.
Without the ability to obtain immediate control of our Board of
Directors, a takeover bidder will not be able to take action to
remove other impediments to its acquisition of our Company.
Thus, this amendment could discourage certain takeover attempts,
perhaps including some takeovers that shareholders may feel
would be in their best interests. By potentially discouraging
accumulations of large blocks of our stock and fluctuations in
the market price of our stock caused by accumulations, this
amendment could cause shareholders to lose opportunities to sell
their shares at temporarily higher prices. Further, the Board
Classification proposal will make it more difficult for our
shareholders to change the majority composition of our Board of
Directors, even if the shareholders believe such a change would
be desirable. Because of the additional time required to change
the control of our Board of Directors, the Board Classification
proposal could be viewed as tending to perpetuate present
management.
The complete text of the proposed amendments to our bylaws are
attached as Appendix C to this proxy statement.
Vote
Required; Implementation
The affirmative vote of the holders of a majority of the
outstanding shares of our Class A Common Stock will be
required for the adoption and approval of the amendment to our
bylaws providing for a classified board of directors. If this
proposal is approved by the shareholders, our directors will
immediately be placed in Classes I, II, and III
as described above, and each will serve for the initial term of
office that relates to their class. Only nominees for
Class I will be up for election or reelection at the 2011
annual meeting, for a three-year term. Initial elections for
Classes II and III will follow in 2012 and 2013,
respectively. If the holders of our Class A Common Stock do
not approve this proposal, shareholders will continue to vote
for a full slate of a single class of director nominees at every
annual shareholders meeting.
The approval of this proposal is conditioned upon the approval
of the Capital Simplification proposal.
27
No
Appraisal Rights
No appraisal rights are available under the Georgia Business
Corporation Code, our Amended and Restated Articles of
Incorporation or our bylaws to any shareholder who does not vote
in favor of the adoption and approval of this amendment of the
bylaws.
Recommendation
of the Board of Directors
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE
FOR THE ADOPTION AND APPROVAL OF THE BOARD
CLASSIFICATION PROPOSAL.
PROPOSAL TO
AMEND THE BYLAWS REGARDING THE FILLING OF BOARD VACANCIES
(Item 3)
Our bylaws currently provide that all vacancies on our Board of
Directors, except those resulting from a directors removal
from office by the shareholders, may be filled by a majority of
the directors then in office or by a sole remaining director. If
there are no directors in office, then vacancies are filled
through election by the shareholders. In order to provide
additional stability in management of our Company, our Board of
Directors is recommending a proposed amendment to
Sections 4 and 10 of Article III of our bylaws to
provide that all vacancies on our Board of Directors, including
those resulting from removal by the shareholders, will be filled
by a majority of the directors then in office or by a sole
remaining director. In the event there are no directors in
office, vacancies shall continue to be filled through election
by the shareholders.
Advantages
of the Vacancy Proposal
The Vacancy proposal, if approved, will result in an amendment
to our bylaws to provide that all vacancies on our Board of
Directors shall only be filled by the remaining members of our
Board of Directors. This amendment will allow for more
continuity of management and for the addition of directors who
meet specific needs of our Board of Directors as understood by
the other members of our Board of Directors. Additionally, with
our Board of Directors being solely responsible for filling
vacancies on our Board, we will not have to incur the time and
expense of holding a special shareholder meeting to elect a
director to fill a vacancy on our Board of Directors. This
amendment to our bylaws also may serve to discourage an
individual or entity from acquiring a significant position in
our stock with the intention of obtaining a seat on our Board of
Directors.
We are not aware of any present third-party plans to gain
control of our Company, and the amendment of our bylaws to
provide that vacancies shall only be filled by our Board of
Directors is not being recommended in response to any such plan.
Rather, our Board of Directors is recommending the amendment of
our bylaws to allow for the filling of vacancies only by our
Board of Directors as part of its review of our Companys
corporate governance structure in connection with the Capital
Simplification proposal, which, if it is approved, would result
in Mr. Loudermilk, Sr., losing majority voting control
of our Company, and consequently could potentially expose us to
unsolicited takeover bids. The Vacancy proposal should assist
all of our shareholders in seeking fair and equitable treatment
in the event of an unsolicited takeover bid situation.
Disadvantages
of the Vacancy Proposal
The Vacancy proposal, if approved, will make it more difficult
for shareholders to change the composition of our Board of
Directors, even if the shareholders believe such a change would
be desirable. The Vacancy proposal also could be viewed as a
tool to perpetuate present Board leadership.
The complete text of the proposed amendments to our bylaws are
attached as Appendix C to this proxy statement.
Vote
Required
The affirmative vote of the holders of a majority of the
outstanding shares of our Class A Common Stock will be
required for the adoption and approval of this amendment to our
bylaws. If the holders of our Class A Common Stock approve
this proposal, our bylaws will be amended to provide that
vacancies on our Board of Directors may only be filled by our
Board of Directors, except in the event that there are no
directors in office, in which case the vacancies shall be filled
through election by our shareholders. If the holders of our
Class A Common Stock do not
28
approve this proposal, shareholders will continue to have the
right, under certain circumstances, to replace a former director
who has been removed by a vote of the shareholders.
The approval of this proposal is conditioned upon the approval
of the Capital Simplification proposal.
No
Appraisal Rights
No appraisal rights are available under the Georgia Business
Corporation Code, our Amended and Restated Articles of
Incorporation or our bylaws to any shareholder who does not vote
in favor of the adoption and approval of the amendment of the
bylaws.
Recommendation
of the Board of Directors
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE
FOR THE ADOPTION AND APPROVAL OF THE VACANCY
PROPOSAL.
PROPOSAL TO
AMEND THE BYLAWS TO
REDUCE THE DEFAULT SHAREHOLDER APPROVAL THRESHOLD
(Item 4)
Our bylaws currently provide that when a matter is submitted to
our shareholders for approval, a majority of the outstanding
shares entitled to vote and present, in person or by proxy, is
required for approval. In order to make our default shareholder
approval vote requirement less stringent, which is consistent
with the Georgia Business Corporation Code, our Board of
Directors is recommending a proposed amendment to Section 6
of Article II of our bylaws to provide that when a quorum
is present at any meeting, action on a matter is approved if the
votes cast in favor of the action exceed the votes cast opposing
the action.
Advantages
of the Voting Proposal
The Voting proposal is designed to reduce the default approval
threshold required for matters submitted to shareholders for a
vote. Currently, in order for an action to be approved by
shareholders, a majority of the outstanding voting shares
entitled to vote must be cast in favor of the action. With the
approval of the Voting proposal, an action will be approved by
shareholders if the votes cast in favor of the action exceed the
votes cast opposing the action (other than the election of
directors or other matters for which law, our bylaws or our
Amended and Restated Articles of Incorporation prescribe a
different vote). This lower voting threshold is consistent with
the default voting threshold under the Georgia Business
Corporation Code and, we believe, is more customary than the
current majority voting power standard.
If the Capital Simplification proposal is adopted, the voting
power of our shareholders will be more widely dispersed than it
is currently, potentially making it more difficult to obtain
shareholder approval of matters submitted to the shareholders
for a vote. The Voting proposal will allow our shareholders to
more easily approve matters that are submitted to a vote of the
shareholders (unless a higher voting threshold is otherwise
required). Abstentions and broker non-votes, which currently
have the same effect as no votes under the default
voting provision of our current bylaws, will not be considered
votes cast if the Voting proposal is approved and,
consequently, will have no effect on the approval of matters
that are subject to the default voting threshold. The Voting
proposal also permits action to be taken or rejected by
shareholders that affirmatively elect to vote for or against a
proposal, whereas the current standard could allow proposals to
fail merely due to the inaction of shareholders.
Disadvantages
of the Voting Proposal
The amendment to reduce the default shareholder vote may make it
easier for one or a few large shareholders to take actions
without negotiating with our Board of Directors, including in
the event of an unsolicited bid to take over or restructure our
Company. We are not aware of any present third-party plans to
gain control of our Company, and the amendment of our bylaws to
reduce the default vote requirement is not being recommended in
response to any such plan. Rather, our Board of Directors is
recommending this amendment of our bylaws as part of its review
of our Companys corporate governance in connection with
the Capital Simplification proposal, which, if it is approved,
would result in Mr. Loudermilk, Sr., losing majority
voting control of our Company, and consequently could
potentially make it more difficult to obtain shareholder
approval of matters submitted to a shareholder vote.
The complete text of the proposed amendments to our bylaws are
attached as Appendix C to this proxy statement.
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Vote
Required
The affirmative vote of the holders of a majority of the
outstanding shares of our Class A Common Stock will be
required for the adoption and approval of the amendment to our
bylaws providing for a reduction in the default approval
threshold required for matters submitted to shareholders for a
vote. If the holders of our Class A Common Stock approve
this proposal, then matters submitted to shareholders for a vote
will be approved if the votes cast in favor of the matter exceed
the votes cast opposing the matter, unless a different vote is
required. If the holders of our Class A Common Stock do not
approve this proposal, matters submitted to shareholders will
continue to require the affirmative vote of the holders of a
majority of the outstanding shares in order to be approved.
The approval of this proposal is conditioned upon the approval
of the Capital Simplification proposal.
No
Appraisal Rights
No appraisal rights are available under the Georgia Business
Corporation Code, our Amended and Restated Articles of
Incorporation or our bylaws to any shareholder who does not vote
in favor of the adoption and approval of this amendment of the
bylaws.
Recommendation
of the Board of Directors
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE
FOR THE ADOPTION AND APPROVAL OF THE VOTING
PROPOSAL.
DOCUMENTS
INCORPORATED BY REFERENCE
The Securities and Exchange Commission (SEC)
allows us to incorporate by reference information into this
proxy statement. This means that we may refer you to important
information about us provided in other documents on file with
the SEC. The information incorporated by reference is considered
to be a part of this proxy statement, unless that information
has been updated in this proxy statement. In addition, we may,
from time to time, update information in this proxy statement or
in another document that is incorporated by reference. Whenever
we file a document with the SEC that updates information in this
proxy statement or in any other document incorporated by
reference, the new information will be considered to replace the
old information. Any statement in this document that is
subsequently updated will no longer be considered a part of this
proxy statement.
The following documents are incorporated by reference into this
proxy statement:
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the financial statements, selected quarterly financial data,
managements discussion and analysis of financial condition
and results of operations, changes in and disagreements with our
accountants on accounting and financial disclosure and market
risk disclosures, if any, contained in our annual report on
Form 10-K
filed with the SEC pursuant to the Securities Exchange Act of
1934, as amended (the Exchange Act), for the
fiscal year ended December 31, 2009.
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the financial statements, selected quarterly financial data,
managements discussion and analysis of financial condition
and results of operations, changes in and disagreements with our
accountants on accounting and financial disclosure and market
risk disclosures, if any, contained in our quarterly reports on
Form 10-Q
filed with the SEC on May 4, August 4 and November 3,
2010; and
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any financial statements, selected quarterly financial data,
managements discussion and analysis of financial condition
and results of operations, changes in and disagreements with our
accountants on accounting and financial disclosure and market
risk disclosures contained in documents we may subsequently file
pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act after the date of this proxy statement and prior to
the date of the Special Meeting.
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We will provide, without charge, upon the written or oral
request of any person to whom this proxy statement is delivered,
a copy of any and all information that has been incorporated by
reference into this proxy statement. We will not provide
exhibits to any of these documents, however, unless the exhibits
are specifically incorporated by reference in this proxy
statement. Requests for copies should be addressed to: Corporate
Secretary, Aarons, Inc., 309 East Paces Ferry Road, NE,
Atlanta, Georgia
30305-2377,
telephone number
(404) 231-0011.
These documents are also included in our SEC filings, which you
can access electronically at the SEC website located at
http://www.sec.gov.
30
SHAREHOLDER
PROPOSALS AT 2011 ANNUAL MEETING
In accordance with the provisions of
Rule 14a-8(e)
of the SEC, proposals of shareholders intended to be presented
at our 2011 annual meeting must be received by December 7,
2010 to be eligible for inclusion in our proxy statement and
form of proxy for that meeting. If a shareholder desires the
Board to consider including in its slate of director nominees
for the 2011 annual meeting a nominee submitted to our Company
by such shareholder, the shareholder must submit such nomination
in compliance with the procedures described under
Article III, Section 3 of our bylaws by
December 7, 2010 to be eligible for inclusion in the Board
of Directors nominee slate. If a shareholder otherwise
desires to nominate a candidate for election to the Board of
Directors, such shareholder must submit the nomination in
compliance with our bylaws not less that 14 nor more than
50 days prior to the 2011 annual meeting, which we
currently anticipate will be held on May 3, 2011. Other
shareholder proposals not made in accordance with the provisions
of
Rule 14a-8(e)(3)
must be submitted to our Board of Directors in compliance with
our bylaws between 90 to 120 days prior to the 2011 annual
meeting in order to be considered timely. We retain discretion
to vote proxies we receive with respect to director nominations
or any other business proposals received after their respective
deadlines for submission as described above. We retain
discretion to vote proxies we receive with respect to such
proposals received prior to such deadlines provided (a) we
include in our proxy statement advice on the nature of the
proposal and how we intend to exercise our voting discretion,
and (b) the proponent does not issue its own proxy
statement.
OTHER
MATTERS
The Board of Directors of our Company knows of no other matters
to be brought before the Special Meeting. However, if other
matters should properly come before the Special Meeting, it is
the intention of each person named in the proxy to vote such
proxy in accordance with his judgment of what is in the best
interest of our Company.
BY ORDER OF THE BOARD OF DIRECTORS
JAMES L. CATES
Senior Group Vice President
and Corporate Secretary
November 3, 2010
31
APPENDIX A
PROPOSED
AMENDED AND RESTATED ARTICLES OF INCORPORATION
AMENDED
AND RESTATED
ARTICLES OF INCORPORATION
OF
AARONS,
INC.
I.
The name of the corporation is:
AARONS,
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
oor
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
Amended and Restated Articles of Incorporation.
V.
The Corporation shall have authority to issue shares of capital
stock consisting of Two Hundred
Twenty-Five
Million
(2
0025
,000,000)
shares of Common Stock, par value $0.50 per share (Common
Stock),
Twenty-Five
A-1
Million (25,000,000) shares of Class A Common
Stock, par value $0.50 per share (Class A Common
Stock) (collectively, the 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. 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
Class A Common Stock and Common
Stock. The powers, preferences and rights of
the Class A Common Stock and 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
Class A Common Stock shall be entitled to one
(1) vote in person or by proxy for each share of
Class A Common Stock standing in such
persons 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;
holders of Common Stock shall not be entitled to vote on any
matters except as otherwise expressly provided by these Amended
and Restated Articles of Incorporation or the Code.
(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.
Each share of
Class A Common Stock and each share of Common Stock shall
have identical rights with respect to dividends and
distributions (including distributions in connection with any
recapitalization, and upon liquidation, dissolution or winding
up, either partial or complete, of the Corporation); provided,
that in the case of regular cash dividends, the Corporation may
pay a dividend on the Common Stock without paying any dividend
on the Class A Common Stock, and the payment per share of
Common Stock may be higher (but in no event lower) than the
payment per share of Class A Common Stock; and provided
further, that dividends or other distributions payable on the
Stock in shares of Stock shall be made to all holders of Stock
and may be made only as follows: (i) in shares of Common
Stock to the record holders of Class A Common Stock and to
the record holders of Common Stock, (ii) in shares of
Class A Common Stock to the record holders of Class A
Common Stock and in shares of Common Stock to the record holders
of Common Stock, or (iii) in any other authorized class or
series of capital stock to the holders of both classes of
Stock.
(c) Convertibility. Except as
provided below, neither the Class A Common Stock nor the
Common Stock shall be convertible into another class of Stock or
any other security of the Corporation.
(1) All outstanding shares of Common Stock may be
converted into shares of Class A Common Stock on a
share-for-share
basis by resolution of the Board of Directors if, as a result of
the existence of the Common Stock, either the Class A
Common Stock or Common Stock is, or both are, excluded from
quotation on the National Association of Securities Dealers,
Inc. Automated Quotation System (NASDAQ) or, if such
shares are listed on a national securities exchange, from
trading on the principal national securities exchange on which
such securities are traded.
(2) All outstanding shares of Common Stock shall be
immediately converted into shares of Class A Common Stock
on a
share-for-share
basis if at any time the number of outstanding shares of
Class A Common Stock as reflected on the stock transfer
records of the Corporation falls below 10% of the aggregate
number of outstanding shares of Class A Common Stock and
Common Stock. For purposes of the immediately preceding
sentence, any shares of Class A Common Stock and Common
Stock repurchased or otherwise acquired by the Corporation shall
no longer be deemed outstanding from and after the
date of repurchase.
(3) If the Common Stock is converted pursuant to
subsection (c)(1) or (c)(2), certificates which formerly
represented outstanding shares of Common Stock will thereafter
be deemed to represent a like number of shares of Class A
Common Stock and all shares of Stock authorized by these Amended
and Restated Articles of Incorporation shall be deemed to be
shares of Class A Common Stock.
(d) Common Stock Protection.
(1) If, after October 30, 1992 (the
Effective Date), any person or group acquires (other
than upon issuance or sale by the Corporation, by operation of
law, by will or the laws of descent and distribution, by
charitable contribution or gift, or by foreclosure of a bona
fide loan) beneficial ownership of shares of
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Class A Common Stock constituting 20% or more of
the then issued and outstanding shares of Class A Common
Stock (such acquisition making such person or group a
Significant Shareholder), and such person or group
does not then beneficially own shares of Common Stock
constituting an equal or greater percentage of all then issued
and outstanding shares of Common Stock, such Significant
Shareholder must, within a
90-day
period beginning the day after becoming a Significant
Shareholder, commence a public tender offer in compliance with
all applicable laws and regulations to acquire additional shares
of Common Stock (a Common Stock Protection
Transaction) as provided in this subsection (d) of
Section 1 of this Article V.
(2) In a Common Stock Protection Transaction, the
Significant Shareholder must offer to acquire from the holders
of the Common Stock that number of shares of Common Stock (the
Additional Shares) determined by
(i) multiplying the percentage of issued and outstanding
shares of Class A Common Stock beneficially owned by such
Significant Shareholder which were acquired after the Effective
Date by the total number of shares of Common Stock issued and
outstanding on the date such person or group became a
Significant Shareholder, and (ii) subtracting therefrom the
total number of shares of Common Stock beneficially owned by
such Significant Shareholder on such date (including shares
acquired on such date or prior to the time such person or group
became a Significant Shareholder). The Significant Shareholder
must acquire all shares validly tendered; provided, however,
that if the number of shares of Common Stock tendered to the
Significant Shareholder exceeds the number of shares required to
be acquired pursuant to this paragraph (2), the number of shares
of Common Stock acquired from each tendering holder shall be pro
rata in proportion to the total number of shares of Common Stock
tendered by all tendering holders.
(3) The offer price for any shares of Common Stock
required to be purchased by a Significant Shareholder pursuant
to a Common Stock Protection Transaction shall be the greater of
(i) the highest price per share paid by the Significant
Shareholder for any share of Class A Common Stock or Common
Stock (whichever is higher) in the six-month period ending on
the date such person or group became a Significant Shareholder
and (ii) the highest closing price of a share of
Class A Common Stock or Common Stock (whichever is higher)
on the NASDAQ National Market System (or such other quotation
system or securities exchange constituting the principal trading
market for either class of Stock) during the thirty calendar
days preceding the date such person or group became a
Significant Shareholder. For purposes of paragraph
(4) below, the applicable date for the calculations
required by the preceding sentence shall be the date on which
the Significant Shareholder acquires beneficial ownership of an
additional 5% of the then issued and outstanding shares of
Class A Common Stock. If the Significant Shareholder has
acquired Class A Common Stock or Common Stock in the
six-month period ending on the date such person or group becomes
a Significant Shareholder for consideration other than cash, the
value of such consideration per share of Class A Common
Stock or Common Stock shall be as determined in good faith by
the Board of Directors.
(4) A Common Stock Protection Transaction shall
also be required to be effected each time a Significant
Shareholder acquires beneficial ownership of shares of
Class A Common Stock constituting an additional 5% or more
of the then issued and outstanding Class A Common Stock
(other than upon issuance or sale by the Corporation, by
operation of law, by will or the laws of descent and
distribution, by charitable contribution or gift, or by
foreclosure of a bona fide loan) subsequent to the last
acquisition of Class A Common Stock which triggered the
requirement for a Common Stock Protection Transaction, if such
Significant Shareholder does not then beneficially own shares of
Common Stock constituting an equal or greater percentage of all
issued and outstanding shares of Common Stock. Such Significant
Shareholder shall be required to offer to buy through a public
tender offer that number of Additional Shares prescribed in
paragraph (2) above, and must acquire all shares validly
tendered or a pro rata portion thereof, as specified in such
paragraph (2) above, at the price determined pursuant to
paragraph (3) above, even if a previous Common Stock
Protection Transaction resulted in fewer shares of Common Stock
being tendered than such previous offer included.
(5) The requirement to engage in a Common Stock
Protection Transaction is satisfied by making the requisite
offer and purchasing validly tendered shares, even if the number
of shares tendered is less than the number of shares included in
the required offer.
(6) If any Significant Shareholder fails to make an
offer required by this subsection (d) of Section 1 of
this Article V, or to purchase shares validly tendered and
not withdrawn (after proration, if any), such
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Significant Shareholder shall not be entitled to vote
any shares of Class A Common Stock beneficially owned by
such Significant Shareholder and acquired by such Significant
Shareholder after the Effective Date unless and until such
requirements are complied with or unless and until all shares of
Class A Common Stock causing such offer requirement to be
effective are no longer beneficially owned by such Significant
Shareholder. To the extent that the voting power of any shares
of Class A Common Stock is so suspended, such shares will
not be included in the determination of aggregate voting shares
for any purpose under these Amended and Restated Articles of
Incorporation or the Code.
(7) The Common Stock Protection Transaction
requirement shall not apply to any increase in percentage
ownership of Class A Common Stock resulting solely from a
change in the total amount of Class A Common Stock
outstanding; provided, that any acquisition after such change
which results in any person or group beneficially owning 20% or
more of the Class A Common Stock (or an additional 5% or
more of the Class A Common Stock subsequent to the last
acquisition which triggered the requirement for a Common Stock
Protection Transaction) excluding, with respect to the numerator
but not the denominator for the calculation of such percentage,
shares of Class A Common Stock held by such Significant
Shareholder immediately after the Effective Date (or immediately
after the last acquisition which triggered the requirement for a
Common Stock Protection Transaction, as the case may be), shall
be subject to any Common Stock Protection Transaction
requirement that would be imposed with respect to a Significant
Shareholder pursuant to this subsection (d) of
Section 1 of this Article V.
(8) All calculations with respect to percentage
ownership of issued and outstanding shares of either class of
Stock will be based upon the numbers of issued and outstanding
shares reported by the Corporation on the last filed of
(i) the Corporations most recent Annual Report on
Form 10-K,
(ii) its most recent definitive proxy statement,
(iii) its most recent Quarterly Report on
Form 10-Q,
or (iv) if any, its most recent Current Report on
Form 8-K.
(9) For purposes of this subsection (d) of
Section 1 of Article V, the term person
means a natural person, company, government, or political
subdivision agency or instrumentality of a government, or other
entity. The terms beneficial ownership and
group have the same meanings as used in
Regulation 13D promulgated under the Exchange Act, subject
to the following qualifications: (i) relationships by blood
or marriage between or among any persons will not constitute any
of such persons a member of a group with any other such persons,
absent affirmative attributes of concerted action; (ii) any
person acting in his official capacity as a director or officer
of the Corporation shall not be deemed to beneficially own
shares of Stock where such beneficial ownership exists solely by
virtue of such persons status as a trustee (or similar
position) with respect to shares of Stock held by plans or
trusts for the general benefit of employees or retirees of the
Corporation, and actions taken or agreed to be taken by him in
such official capacity or in any other official capacity will
not be deemed to constitute such a person a member of a group
with any other person; and (iii) formation of a group will
not be deemed to be an acquisition by the group (or any member
thereof) of beneficial ownership of any shares of Class A
Common Stock then owned by a group member and acquired by such
member from the Corporation, by operation of law, by will or the
laws of descent or distribution, by charitable contribution or
gift, or by foreclosure of a bona fide loan. Furthermore, for
the purposes of calculating the number of shares of Common Stock
beneficially owned by such shareholder or group: (a) shares
of Common Stock acquired by gift shall be deemed to be
beneficially owned by such shareholder or member of such group
only if such gift is made in good faith and not for the purposes
of circumventing the Common Stock Protection Transaction
feature; (b) only shares of Common Stock owned of record by
such shareholder or member of such group, or held by others as
nominees of such shareholder or member and identified as such to
the Corporation, shall be deemed to be beneficially owned by
such shareholder or group (provided that shares with respect to
which such shareholder or member has sole investment and voting
power shall be deemed to be beneficially owned thereby); and
(c) only shares of Common Stock acquired by such
shareholder or member of such group for an equitable
price shall be treated as being beneficially owned by such
shareholder or group. An equitable price will be
deemed to have been paid only when shares of Common Stock have
been acquired at a price at least equal to the greater of
(1) the highest per share price paid by the acquiring
person, in cash or in non-cash consideration, for any shares of
Class A Common Stock or Common Stock (whichever is higher)
in the six-month period ending on the date such person or
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group became a Significant Shareholder and (ii) the
highest closing price of a share of Class A Common Stock or
Common Stock (whichever is higher) on the NASDAQ National Market
System (or such other quotation system or securities exchange
constituting the principal trading market for either class of
Stock) during the thirty calendar days preceding the date such
person or group became a Significant Shareholder, with the value
of any non-cash consideration in either case being determined by
the Board of Directors acting in good faith.
(e) Merger and Consolidation. In
the event of a merger or consolidation of the Corporation with
or into another entity (whether or not the Corporation is the
surviving entity), or a statutory share exchange involving the
Stock, the holders of Common Stock shall be entitled to receive
the same amount and form of consideration per share as the per
share consideration, if any, received by any holder of the
Class A Common Stock in such merger or
consolidation.
(f) Subdivision of Shares. If the
Corporation shall in any manner split, subdivide or combine the
outstanding shares of Class A Common Stock or Common Stock,
the outstanding shares of the other such class of Stock shall be
proportionally split, subdivided or combined in the same manner
and on the same basis as the outstanding shares of the other
class of Stock have been split, subdivided or combined.
(g) Power to Sell and Purchase
Shares. The Board of Directors shall have the
power to cause the Corporation to issue and sell all or any part
of any class of stock herein or hereafter authorized to such
persons, firms, associations or corporations, and for such
consideration, as the Board of Directors shall from time to
time, in its discretion, determine, whether or not greater
consideration could be received upon the issue or sale of the
same number of shares of another class, and as otherwise
permitted by law. The Board of Directors shall have the power to
cause the Corporation to purchase any class of stock herein or
hereafter authorized from such persons, firms, associations or
corporations, and for such consideration, as the Board of
Directors shall from time to time, in its discretion, determine,
whether or not less consideration could be paid upon the
purchase of the same number of shares of another class, and as
otherwise permitted by law.
(h) Increase or Decrease in Number of
Shares. The number of authorized shares of Common
Stock may be increased or decreased (but not below the number of
shares then outstanding) by the affirmative vote of a majority
of the votes which may be collectively cast by holders of the
Class A Common Stock.
(i) Amendments. In addition to
any other vote provided for by law, by these Articles or the
By-Laws of the Corporation or by the Board of Directors, the
affirmative vote of at least two-thirds of the votes cast by the
holders of shares of Common Stock, voting as a separate group,
at any meeting of shareholders shall be required to amend, alter
or repeal any provision of Section 1 of this Article V
that adversely affects the rights of the holders of the Common
Stock. Where the Common Stock is entitled to vote upon a
proposal, each holder of Common Stock shall be entitled to one
vote for each share of Common Stock held on the record date for
such meeting.
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) 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
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may be declared by the Board of Directors from time to time.
(d) 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.
(e) 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.
(f) 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 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:
(1) 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;
(2) 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;
(3) 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;
(4) 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;
(5) 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;
(6) 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;
(7) 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.
(8) 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
A-6
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
(9) 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.
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.
IN WITNESS WHEREOF, AARONS, INC., has caused these Amended
and Restated Articles of Incorporation to be executed and its
corporate seal to be affixed hereto by its duly authorized
officers this
7th
day
of
May
,
20
1
9960
.
AARONS, INC.
Name:
Title:
(CORPORATE SEAL)
A-7
FAIRNESS
OPINION OF VRA PARTNERS
September 10,
2010
The Special Committee of the Board of Directors
The Board of Directors
Aarons, Inc.
309 E. Paces Ferry Road, N.E.
Atlanta, Georgia
30305-2377
Members of the Special Committee of the Board of Directors and
the Board of Directors:
We understand that Aarons, Inc. (Aarons
or the Company) proposes to effect a
recapitalization (the Recapitalization) pursuant to
which each outstanding share of the Companys Common Stock
(the Common Stock) will be exchanged for one share
(the Exchange Ratio) of the Companys
Class A Common Stock (the Class A Common
Stock). Subsequent to the Recapitalization, the resulting
single class of stock will be renamed Aarons New Common
Stock (the New Common Stock).
You have requested that we render our opinion to the Special
Committee of the Board of Directors (the Special
Committee) and to the Board of Directors (the
Board) with respect to the fairness, from a
financial point of view, of the Exchange Ratio to the holders of
shares of Common Stock and to the holders of shares of
Class A Common Stock.
In arriving at our opinion we have:
(1) reviewed certain publicly available business and
financial information relating to Aarons;
(2) reviewed the Companys internal financial forecast
for the fiscal year ending December 31, 2010;
(3) discussed with management and the Special Committee the
rationale for the Recapitalization and for the original creation
of a dual-class structure and certain information related
thereto;
(4) reviewed the reported prices and trading activity for
the Common Stock and the Class A Common Stock and a
comparison of such reported prices and trading activity with
each other, and with the reported prices and trading activity of
other companies which we deemed relevant;
(5) reviewed the reported prices and trading activity for
the common stock of certain other companies with two classes of
publicly traded stock which are deemed relevant;
(6) reviewed the financial terms, to the extent publicly
available, and the reported prices, trading activity and
post-announcement stock price performance for the common stock
in certain comparable transactions which we deemed relevant;
(7) reviewed the current ownership structure of
Aarons;
(8) reviewed the Companys Amended and Restated
Articles of Incorporation and documents related thereto; and
(9) performed such other analyses and considered such other
factors as we deemed appropriate.
We have assumed and relied upon, without independent
verification, the accuracy and completeness of the financial and
other information discussed with or reviewed by us in arriving
at our opinion. With respect to the financial forecasts of the
Company provided to us, we have assumed that such forecasts have
been reasonably prepared on bases reflecting the best currently
available information, estimates and judgments of the management
of the Company as to the future financial performance of the
Company, and accordingly we express no opinion with respect to
such forecasts or the assumptions on which they are based. We
have not conducted a physical inspection of the properties and
facilities of the Company and have not made nor obtained any
evaluations or appraisals of the assets or liabilities
(including, without limitation, any potential tax or
environmental liabilities), contingent or otherwise, of the
Company. We have also assumed that the Recapitalization will be
treated as a tax-free exchange and recapitalization for federal
income tax purposes. We note that we are not legal or tax
experts and have relied upon, without assuming any liability
therefore, the assessment of the Companys legal and tax
advisors with respect to the legal and tax matters related to
the Recapitalization.
B-1
Our opinion only addresses the fairness, from a financial point
of view, of the Exchange Ratio to the holders of the
Companys Common Stock and the holders of the
Companys Class A Common Stock. No opinion or view is
expressed with respect to the relative fairness of the Exchange
Ratio to the holders of Common Stock as compared to the holders
of Class A Common Stock.
We express no view or opinion as to any terms or other aspects
of the Recapitalization (other than the Exchange Ratio to the
extent specified herein), including, without limitation, the
form or structure of the Recapitalization. Our opinion does not
address the merits of the Recapitalization as compared to other
alternative transactions or strategies that may be available to
the Company nor does it address the Companys underlying
decision to effect the Recapitalization. Our opinion is
necessarily based upon market, economic and other conditions as
they exist on, and can be evaluated as of, the date of this
letter. We express no opinion as to the underlying valuation,
future performance or long-term viability of the Company or the
value or prices at which the Common Stock, Class A Common
Stock or New Common Stock will trade at any time. It should be
understood that, although subsequent developments may affect
this opinion, we do not have any obligation to update or revise
the opinion.
We have acted as financial advisor to the Special Committee in
connection with the Recapitalization and will receive a fee for
our services. In addition, the Company has agreed to reimburse
us for our expenses and to indemnify us against certain
liabilities arising out of our engagement.
Based upon and subject to the foregoing, and such other factors
as we deemed relevant, we are of the opinion as of the date
hereof that, from a financial point of view, the Exchange Ratio
is fair to the holders of the Common Stock and the holders of
the Class A Common Stock.
This opinion is furnished solely for the use and benefit of the
Special Committee and the Board in connection with their
consideration of the Recapitalization and is not intended to,
and does not, confer any rights or remedies upon any other
person, and is not intended to be used, and may not be used, for
any other purpose, without our express, prior written consent.
This opinion is not intended to be, and does not constitute, a
recommendation to any security holder as to how such security
holder should vote with respect to the Recapitalization. This
opinion may not be disclosed, reproduced, disseminated, quoted,
summarized or referred to at any time, in any manner or for any
purpose, nor shall any references to us or any of our affiliates
be made by any recipient of this opinion, without our prior
written consent, except that (i) a copy of this opinion
letter may be included in its entirety, if required, in any
filing made by Aarons with the Securities and Exchange
Commission in connection with the Recapitalization and
(ii) Aarons may also include references to this
opinion, to us and to our relationship with Aarons in any
such filing (in each case in such form as shall be reasonably
acceptable to us).
VRA PARTNERS, LLC
B-2
PROPOSED
BYLAWS AMENDMENTS
We proposed to make the following amendments to the specified
sections of our Amended and Restated Bylaws in connection with
Items 2, 3 and 4 described in the Proxy Statement:
Board
Classification Proposal
The following change is proposed to Section 2 of
Article III of our Amended and Restated Bylaws, in
connection with the Board Classification proposal:
Section 2. Number, Election and Term. The number
of directors which shall constitute the whole board shall be
eleven; provided, however, the number of directors may be
increased or decreased from time to time by the board of
directors by amendment of this by-law, but no decrease shall
have the effect of shortening the term of an incumbent director.
The
board shall be divided into three classes, as nearly equal in
number of directors as possible, with the term of office of one
class expiring each year. Directors shall be elected for terms
of three years, and until their successors have been duly
elected and qualified or until there is a decrease in the number
of directors. The foregoing notwithstanding, each director shall
serve until his successor shall have been duly elected and
qualified, unless he shall resign, die, become disqualified or
disabled, or shall otherwise be removed. Immediately following
the special shareholders meeting at which this bylaw is adopted,
the then-current members of the board shall be divided as
follows: four directors shall be placed in Class I, with an
initial term of office expiring at the 2011 annual meeting of
shareholders; three directors shall be placed in Class II,
with an initial term of office expiring at the 2012 annual
meeting of shareholders; and three directors shall be placed in
Class III, with an initial term of office expiring at the
2013 annual meeting of shareholders. At each annual meeting,
directors of the class whose terms are expiring will be elected
for terms of three years, or until their successors have been
duly elected and qualified or until there is a decrease in the
number of directors.
The directors shall be elected by
plurality vote at the annual meeting of shareholders
,
except as hereinafter provided, and each director elected shall
hold office until his or her successor is elected and qualified
or until his or her earlier resignation, removal from office or
death. Directors shall be natural
person
s
who
have attained the age of 18 years, but need not be
residents of the State of Georgia or shareholders of the
corporation.
In addition to the preceding, Section 10 of
Article III of our Amended and Restated Bylaws will
be revised to remove the ability of shareholders to remove
directors without cause. The changes to that section are
reflected below under Vacancy Proposal.
Vacancy
Proposal
The following change is proposed to Sections 4 and
10 of Article III of our Amended and Restated
Bylaws, in connection with the Vacancy proposal:
Section 4. Vacancies.
VacanciesAll
vacancies
, including vacancies resulting from any increase
in the number of directors,
but not including vacancies
resulting from removal from office by the shareholders,
mayshall
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
election
meeting
and until his or her successor is duly elected and
qualified unless sooner displaced. If there are no directors in
office, then vacancies shall be filled through election by the
shareholders.
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
or without 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
his or her successor may be elected at
the sameor any subsequent meeting of shareholders; provided that
to the extent any vacancy created by such removal
is not filled by such an election within 60 days
after such removal, the remaining directors shall, by majority
vote, be entitled to fill any such vacancy
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
.
C-1
Voting
Proposal
The following change is proposed to Section 6 of
Article II of our Amended and Restated Bylaws, in
connection with the Voting proposal:
Section 6. Voting. When a quorum is present at
any meeting,
the vote of the holders of a majority of
the stock having voting power, present in person or represented
by proxy, shall decide any question
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
question
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 the 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.
C-2
Electronic Voting Instructions You can vote by Internet or telephone! Available 24 hours a
day, 7 days a week! Instead of mailing your proxy, you may choose one of the two voting methods
outlined below to vote your proxy. VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR. Proxies
submitted by the Internet or telephone must be received by 1:00 a.m., Central Time, on December 7,
2010. Vote by Internet Log on to the Internet and go to www.investorvote.com/AANA Follow the
steps outlined on the secured website. Vote by telephone Call toll free 1-800-652-VOTE (8683)
within the USA, US territories & Canada any time on a touch tone telephone. There is NO CHARGE to
you for the call. Follow the instructions provided by the recorded message. Using a black ink
pen, mark your votes with an X as shown in this example. Please do not write outside the
designated areas. Special Meeting Proxy Card 3 IF YOU HAVE NOT VOTED VIA THE INTERNET OR
TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED
ENVELOPE. 3 A Proposals The Board of Directors recommends a vote FOR Proposals 1, 2, 3 and 4.
For Against Abstain 1. FOR approval of an amendment to the Companys Articles of Incorporation to
convert all shares of Common Stock into Class A Common Stock, remove the current class of Common
Stock, rename the current class of Class A Common Stock as Common Stock, eliminate certain obsolete
provisions of the existing Articles of Incorporation relating to the dual-class common stock
structure and amend the number of authorized shares to be 225,000,000 total shares. 2. FOR approval
of an amendment to the Companys bylaws to establish a classified Board of Directors with three
classes of directors each to serve a three-year term. 3. FOR approval of an amendment to the
Companys bylaws to provide that vacancies on our Board of Directors shall only be filled by our
Board of Directors. 4. FOR approval of an amendment to the Companys bylaws to reduce the default
approval threshold required for matters submitted to shareholders for a vote. 5. FOR the
transaction of such other business as may lawfully come before the meeting, hereby revoking any
proxies as to said shares heretofore given by the undersigned and ratifying and confirming all that
said attorneys and proxies may lawfully do by virtue thereof. B Non-Voting Items Change of Address
Please print new address below. C Authorized Signatures This section must be completed for
your vote to be counted. Date and Sign Below Signature should agree with the name(s) hereon.
Executors, administrators, trustees, guardians and attorneys should so indicate when signing. For
joint accounts each owner should sign. The full name of a corporation should be signed by a duly
authorized officer. Date (mm/dd/yyyy) Please print date below. Signature 1 Please keep
signature within the box. Signature 2 Please keep signature within the box. |
IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND
RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. CLASS A COMMON STOCK Aarons, Inc. This
Proxy is Solicited by the Board of Directors for the Special Meeting of Shareholders to be Held on
December 7, 2010. The undersigned shareholder of Aarons, Inc. hereby constitutes and appoints R.
Charles Loudermilk, Sr. and James L. Cates, or either of them, the true and lawful attorneys and
proxies of the undersigned with full power of substitution and appointment, for and in the name,
place and stead of the undersigned, to vote all of the undersigneds shares of Class A Common Stock
of Aarons, Inc., at the Special Meeting of Shareholders to be held in Atlanta, Georgia on Tuesday,
the 7th day of December 2010, at 2:00 p.m., Eastern Time, and at any and all adjournments thereof
as specified on the reverse. THE BOARD OF DIRECTORS FAVORS A VOTE FOR THE AMENDMENTS TO THE
COMPANYS ARTICLES OF INCORPORATION AND BYLAWS AS OUTLINED ON THE REVERSE AND UNLESS INSTRUCTIONS
TO THE CONTRARY ARE INDICATED IN THE SPACE PROVIDED, THE PROXY WILL BE SO VOTED. It is understood
that this proxy confers discretionary authority in respect to matters not known or determined at
the time of the mailing of the notice of the meeting to the undersigned. The undersigned hereby
acknowledges receipt of the Notice of Special Meeting of Shareholders dated November 3, 2010 and
the Proxy Statement furnished therewith. This proxy is revocable at or at any time prior to the
meeting. Please sign and return this proxy to: Proxy Services, C/O Computershare Investor Services,
P.O. Box 43101, Providence, RI 02940-0567. (Continued and to be dated and signed on reverse side) |
Using a black ink pen, mark your votes with an X as shown in this example. Please do not
write outside the designated areas. X 018XAG 1 U PX + Special Meeting Proxy Card . C Authorized
Signatures This section must be completed for your vote to be counted. Date and Sign Below
Signature should agree with the name(s) hereon. Executors, administrators, trustees, guardians and
attorneys should so indicate when signing. For joint accounts each owner should sign. The full name
of a corporation should be signed by a duly authorized officer. Date (mm/dd/yyyy) Please print
date below. Signature 1 Please keep signature within the box. Signature 2 Please keep signature
within the box. + B Non-Voting Items A Proposals The Board of Directors recommends a vote FOR
Proposals 1 and 2. For Against Abstain 1. FOR approval of an amendment to the Companys Articles of
Incorporation to convert all shares of Common Stock into Class A Common Stock, remove the current
class of Common Stock, rename the current class of Class A Common Stock as Common Stock, eliminate
certain obsolete provisions of the existing Articles of Incorporation relating to the dual-class
common stock structure and amend the number of authorized shares to be 225,000,000 total shares. 2.
FOR the transaction of such other business as may lawfully come before the meeting, hereby revoking
any proxies as to said shares heretofore given by the undersigned and ratifying and confirming all
that said attorneys and proxies may lawfully do by virtue thereof. Change of Address Please print
new address below. IMPORTANT SPECIAL MEETING INFORMATION MMMMMMMMMMMM 1234 5678 9012 345 MMMMMMM 1
0 2 8 3 9 1 MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND MR A
SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A
SAMPLE AND MMMMMMMMM C 1234567890 J N T MMMMMMMMMMMMMMM 000000000.000000 ext 000000000.000000 ext
000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000004 MR A
SAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 ADD 5 ADD 6 ENDORSEMENT_LINE SACKPACK
C123456789 |
IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND
RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE._ Electronic Voting Instructions You can vote by
Internet or telephone! Available 24 hours a day, 7 days a week! Instead of mailing your proxy, you
may choose one of the two voting methods outlined below to vote your proxy. VALIDATION DETAILS ARE
LOCATED BELOW IN THE TITLE BAR. Proxies submitted by the Internet or telephone must be received by
1:00 a.m., Central Time, on December 7, 2010. Vote by Internet Log on to the Internet and go to
www.investorvote.com/AAN Follow the steps outlined on the secured website. Vote by telephone
Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada any time on a touch
tone telephone. There is NO CHARGE to you for the call. Follow the instructions provided by the
recorded message. 018XAG RNTproxy11-03-10.pdf . This Proxy is Solicited by the Board of Directors
for the Special Meeting of Shareholders to be Held on December 7, 2010. The undersigned shareholder
of Aarons, Inc. hereby constitutes and appoints R. Charles Loudermilk, Sr. and James L. Cates, or
either of them, the true and lawful attorneys and proxies of the undersigned with full power of
substitution and appointment, for and in the name, place and stead of the undersigned, to vote all
of the undersigneds shares of Common Stock of Aarons, Inc., at the Special Meeting of
Shareholders to be held in Atlanta, Georgia on Tuesday, the 7th day of December 2010, at 2:00 p.m.,
Eastern Time, and at any and all adjournments thereof as specified on the reverse. THE BOARD OF
DIRECTORS FAVORS A VOTE FOR THE AMENDMENT TO THE COMPANYS ARTICLES OF INCORPORATION AS OUTLINED
ON THE REVERSE AND UNLESS INSTRUCTIONS TO THE CONTRARY ARE INDICATED IN THE SPACE PROVIDED, THE
PROXY WILL BE SO VOTED. It is understood that this proxy confers discretionary authority in respect
to matters not known or determined at the time of the mailing of the notice of the meeting to the
undersigned. The undersigned hereby acknowledges receipt of the Notice of Special Meeting of
Shareholders dated November 3, 2010 and the Proxy Statement furnished therewith. This proxy is
revocable at or at any time prior to the meeting. Please sign and return this proxy to: Proxy
Services, C/O Computershare Investor Services, P.O. Box 43101, Providence, RI 02940-0567.
(Continued and to be dated and signed on reverse side) COMMON STOCK PROXY Aarons, Inc. _IF YOU
HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE
BOTTOM PORTION IN THE ENCLOSED ENVELOPE._ |
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of Aarons, Inc.
We have audited the accompanying consolidated balance sheets of Aarons, Inc. and subsidiaries as
of December 31, 2009 and 2008, and the related consolidated statements of earnings, shareholders
equity, and cash flows for each of the three years in the period ended December 31, 2009. These
financial statements are the responsibility of the Companys management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Aarons, Inc. and subsidiaries at December 31,
2009 and 2008, and the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 2009, in conformity with U.S. generally accepted
accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), Aarons, Inc.s internal control over financial reporting as of December 31,
2009, based on criteria established in Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 26,
2010 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Atlanta, Georgia
February 26, 2010