UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-12
First Cash Financial Services, Inc.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(1) and 0-11.
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
[ ] 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
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Dear Stockholder:
We cordially invite you to attend our Annual Meeting, which will be
held on Tuesday, June 15, 2004, at 10:00 a.m. CDT at the First Cash
Financial Services, Inc. corporate offices located at 690 East Lamar
Boulevard, Suite 400, Arlington, Texas, 76011. At this meeting you will be
asked to act upon the proposals as contained herein.
Your board of directors recommends that you vote in favor of each of
these proposals. You should read with care the attached Proxy Statement,
which contains detailed information about these proposals.
Your vote is important, and accordingly, we urge you to complete, sign,
date and return your Proxy card promptly in the enclosed postage-paid
envelope. The fact that you have returned your Proxy in advance will in no
way affect your right to vote in person should you attend the meeting.
However, by signing and returning the Proxy, you have assured representation
of your shares.
We hope that you will be able to join us on June 15.
Very truly yours,
/s/ Rick Powell
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Rick Powell
Chairman of the Board and
Chief Executive Officer
First Cash Financial Services, Inc.
690 East Lamar Boulevard, Suite 400
Arlington, Texas 76011
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held June 15, 2004
_______________
Notice is hereby given that the Annual Meeting of Stockholders of First
Cash Financial Services, Inc. (the "Company") will be held at the First Cash
Financial Services, Inc. corporate offices located at 690 East Lamar
Boulevard, Suite 400, Arlington, Texas 76011 at 10:00 a.m. CDT on Tuesday,
June 15, 2004, for the following purposes:
1. To elect one Director;
2. To consider and act upon the adoption of the Amended and Restated
Certificate of Incorporation to increase the number of authorized
shares of common stock from 20,000,000 to 90,000,000;
3. To consider and act upon a proposal to approve the First Cash
Financial Services, Inc. 2004 Long-Term Incentive Plan;
4. To ratify the selection of Hein + Associates LLP as independent
auditors of the Company for the year ending December 31, 2004; and
5. To transact such other business as may properly come before the
meeting.
Common stockholders of record at the close of business on April 30,
2004 will be entitled to notice of and to vote at the meeting.
By Order of the Board of Directors,
/s/ Rick L. Wessel
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Arlington, Texas Rick L. Wessel
May 11, 2004 President, Secretary
and Treasurer
First Cash Financial Services, Inc.
690 East Lamar Boulevard, Suite 400
Arlington, Texas 76011
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PROXY STATEMENT
Annual Meeting of Stockholders
_______________
This Proxy Statement is being furnished to stockholders in connection
with the solicitation of proxies by the board of directors of First Cash
Financial Services, Inc., a Delaware corporation (the "Company"), for use at
the Annual Meeting of Stockholders of the Company to be held at the First
Cash Financial Services, Inc. corporate offices located at 690 East Lamar
Boulevard, Suite 400, Arlington, Texas 76011 at 10:00 a.m. CDT, on Tuesday,
June 15, 2004, and at any adjournments thereof for the purpose of
considering and voting upon the matters set forth in the accompanying
Notice of Annual Meeting of Stockholders. This Proxy Statement and the
accompanying form of proxy are first being mailed to stockholders on or
about May 11, 2004.
The close of business on April 30, 2004 has been fixed as the record
date for the determination of stockholders entitled to notice of and to vote
at the Annual Meeting and any adjournment thereof. As of the record date,
there were 15,749,455 shares of the Company's common stock, par value $.01
per share ("Common Stock"), issued and outstanding. The presence, in person
or by proxy, of a majority of the outstanding shares of Common Stock on the
record date is necessary to constitute a quorum at the Annual Meeting.
Abstentions and broker non-votes will be counted as present for the purposes
of determining the presence of a quorum. Each share of Common Stock is
entitled to one vote on all questions requiring a stockholder vote at the
Annual Meeting. A plurality of the votes of the shares of Common Stock
present in person or represented by proxy at the Annual Meeting is required
for the approval of Item 1 as set forth in the accompanying Notice.
Stockholders may not cumulate their votes in the election of directors.
Abstentions and broker non-votes will not be counted as having been voted on
Item 1 and will have no effect on the vote. The affirmative vote of a
majority of the shares of Common Stock present or represented by proxy and
entitled to vote at the Annual Meeting is required for the approval of Item
2. Broker non-votes and abstentions will have the effect of negative votes
on Item 2. The affirmative vote of a majority of the shares of Common Stock
present or represented by proxy and represented at the Annual Meeting is
required for the approval of Items 3 and 4. Abstentions and broker non-
votes will not be counted as having been voted on Items 3 and 4 and will
have no effect on the vote.
All shares represented by properly executed proxies, unless such
proxies previously have been revoked, will be voted at the Annual Meeting in
accordance with the directions on the proxies. If no direction is
indicated, the shares will be voted (i) TO ELECT ONE DIRECTOR; (ii) TO
CONSIDER AND ACT UPON THE ADOPTION OF THE AMENDED AND RESTATED CERTIFICATE
OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
FROM 20,000,000 TO 90,000,000; (iii) TO CONSIDER AND ACT UPON A PROPOSAL TO
APPROVE THE FIRST CASH FINANCIAL SERVICES, INC. 2004 LONG-TERM INCENTIVE
PLAN; (iv) TO RATIFY THE SELECTION OF HEIN + ASSOCIATES LLP AS INDEPENDENT
AUDITORS OF THE COMPANY FOR THE YEAR ENDING DECEMBER 31, 2004; AND (v) TO
TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING. The
enclosed proxy, even though executed and returned, may be revoked at any
time prior to the voting of the proxy (a) by the execution and submission of
a revised proxy, (b) by written notice to the Secretary of the Company or
(c) by voting in person at the Annual Meeting.
ANNUAL REPORT
The Annual Report to Stockholders, covering the fiscal year of the
Company, dated December 31, 2003, including audited financial statements, is
enclosed herewith. The Annual Report to Stockholders does not form any part
of the material for solicitation of proxies.
The Company will provide, without charge, a copy of its Annual Report
on Form 10-K upon written request to Rick L. Wessel, the President,
Secretary and Treasurer at 690 East Lamar Boulevard, Suite 400, Arlington,
Texas 76011. The Company will provide exhibits to its Annual Report on Form
10-K, upon payment of the reasonable expenses incurred by the Company in
furnishing such exhibits.
STOCK SPLIT
On March 22, 2004, the Company's board of directors approved a three-
for-two stock split in the form of a stock dividend. The stock split was
effective April 6, 2004. All share amounts and prices per share as
presented in this Proxy Statement reflect the retroactive application of the
effect of the stock split.
ITEM 1
TO ELECT ONE DIRECTOR
The Bylaws of the Company provide that the board of directors will
determine the number of directors, but shall consist of at least one
director and no more than 15 directors. The stockholders of the Company
elect the directors. At each annual meeting of stockholders of the Company,
successors of the class of directors whose term expires at the annual
meeting will be elected for a three-year term. Any director elected to fill
a vacancy or newly created directorship resulting from an increase in the
authorized number of directors shall hold office for a term that shall
coincide with the remaining term of that class. In no case will a decrease
in the number of directors shorten the term of any incumbent director. Any
vacancy on the board howsoever resulting may be filled by a majority of the
directors then in office, even if less than a quorum, or by a sole remaining
director. The stockholders will elect one director for the coming year; the
nominee, Ms. Tara Schuchmann, presently serves as a director of the Company
and will be elected for a term of three years.
Unless otherwise instructed or unless authority to vote is withheld,
the enclosed proxy will be voted for the election of the nominee listed
herein. Although the board of directors of the Company does not contemplate
that the nominee will be unable to serve, if such a situation arises prior
to the Annual Meeting, the person named in the enclosed proxy will vote for
the election of such other person as may be nominated by the board of
directors.
The board of directors of the Company consists of five directors
divided into three classes. At each annual meeting of stockholders, one
class is elected to hold office for a term of three years. Directors
serving until the earlier of (i) resignation or (ii) expiration of their
terms at the annual meeting of stockholders in the years indicated are as
follows: 2004 - Ms. Tara Schuchmann; 2005 - Mr. Phillip E. Powell; and 2006
- Messrs. Rick L. Wessel, Richard T. Burke and Joe R. Love. All officers
serve at the discretion of the board of directors. No family relationships
exist between any director and executive officer, except that Mr. John C.
Powell, vice president of information technology, is the brother of Mr.
Phillip E. Powell, the chairman of the board and chief executive officer of
the Company. The Director standing for election at the Annual Meeting of
Stockholders is the following:
Tara Schuchmann, age 46, has served as a director of the Company since
June 2001. Ms. Schuchmann is the founder and managing general partner of
Tara Capital Management LP, an investment management and advisory firm. Ms.
Schuchmann has 23 years experience in the financial services industry. Ms.
Schuchmann holds an MBA from the Harvard University Graduate School of
Business Administration.
Directors Not Standing For Election
Phillip E. Powell, age 53, has served as a director of the Company
since March 1990, served as president from March 1990 until May 1992, and
has served as chief executive officer since May 1992. Mr. Powell has been
engaged in the financial services industry for over 28 years.
Rick L. Wessel, age 45, has served as secretary and treasurer of the
Company since May 1992, as president since May 1998, as a director since
November 1992 and as chief financial officer from May 1992 to December 2002.
Prior to February 1992, Price Waterhouse LLP employed Mr. Wessel for
approximately nine years.
Richard T. Burke, age 60, has served as a director of the Company since
December 1993. Mr. Burke is the founder and, until February 1988, was the
chief executive officer of UnitedHealth Group, a leading company in the
managed health care industry. Mr. Burke remains a director of UnitedHealth
Group and is a board member of several private, nonprofit and charitable
organizations. The securities of UnitedHealth Group are registered pursuant
to the Exchange Act. From 1995 until February 2001, Mr. Burke was the owner
and chief executive officer of the Phoenix Coyotes, a professional sports
franchise of the National Hockey League.
Joe R. Love, age 65, has served as a director of the Company since
December 1991. Mr. Love has served as chairman of CCDC, Inc., a real estate
development firm, since October 1976. Mr. Love is the owner of Surrey, LLC,
a golf and residential community in Oklahoma City, Oklahoma.
Board of Directors, Committees and Meetings
The board of directors held four meetings during the year ended
December 31, 2003. Each director attended, either telephonically or in
person, 100% of the board meetings during the year ended December 31, 2003.
The Audit, Compensation, and Nominating and Corporate Governance Committees
each consist of Richard T. Burke, Joe R. Love and Tara Schuchmann. The
Audit Committee held four meetings during the year ended December 31, 2003
and the Compensation Committee held three meetings during the year ended
December 31, 2003. The Nominating and Corporate Governance Committee was
not formed until April 2004 and accordingly did not meet during the year
ended December 31, 2003. Each member attended 100% of the committee
meetings, either in person or telephonically.
Audit Committee. The Audit Committee is responsible for the oversight
of the Company's accounting and financial reporting processes. This
includes the selection and engagement of the Company's independent auditors
and review of the scope of the annual audit, audit fees and results of the
audit. The Audit Committee reviews and discusses with management and the
board of directors such matters as accounting policies, internal accounting
controls, procedures for preparation of financial statements and other
financial disclosures, scope of the audit, the audit plan and the
independence of such accountants. In addition, the Audit Committee has
oversight over the Company's internal audit function.
Compensation Committee. The Compensation Committee approves the
standards for salary ranges for executive, managerial and technical
personnel of the Company and establishes, subject to existing employment
contracts, the specific compensation and bonus plan of all corporate
officers. In addition, the Compensation Committee oversees the Company's
stock option plans and the incentive plans.
Nominating and Corporate Governance Committee. The Nominating and
Corporate Governance Committee is responsible for making recommendations to
the board of directors concerning the governance structure and practices of
the Company, including the size of the board of directors and the size and
composition of various committees of the board of directors. In addition,
the Nominating and Corporate Governance Committee is responsible for
identifying individuals believed to be qualified to become board members,
and to recommend to the board the nominees to stand for election as
directors at the annual meeting of stockholders.
Directors' Fees
For the year ended December 31, 2003, Ms. Schuchmann and Messrs. Burke
and Love each received $25,000 as compensation for attending the 2003
meetings of the board of directors and committee meetings thereof. In
addition, the directors are reimbursed for their reasonable expenses
incurred for each board and committee meeting attended. See "Compensation -
Stock Options and Warrants" for a discussion of options and warrants issued
to directors.
Corporate Governance
The board of directors has adopted a Code of Ethics to govern the
conduct of all of the officers, directors and employees of the Company. In
addition to the amended and restated Audit Committee Charter attached to
this Proxy Statement as APPENDIX A, the board has adopted charters for the
Compensation Committee and the Nominating and Corporate Governance
Committee. The Code and committee charters can be accessed on the Company's
website at www.firstcash.com.
Director Independence
The board of directors has determined that, with the exception of
Phillip E. Powell, Chairman and CEO of the Company, and Rick L. Wessel,
President of the Company, all of its directors, including all of the members
of the Audit, Compensation, and Nominating and Corporate Governance
Committees, are "independent" as defined by Nasdaq and the Securities and
Exchange Commission ("SEC") and for purposes of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"). No director is
deemed independent unless the board affirmatively determines that the
director has no material relationship with the Company, either directly or
as an officer, stockholder or partner of an organization that has a
relationship with the Company. In making its determination, the board
observes all criteria for independence established by the rules of the SEC
and Nasdaq. In addition, the board considers all commercial, banking,
consulting, legal, accounting, charitable or other business relationships
any director may have with the Company.
Procedure for Contacting Directors
The board of directors has established a procedure for stockholders to
send communications to the board. Stockholders may communicate with the
board generally or with a specific director at any time by writing to the
Company's Corporate Secretary at the Company's address, 690 East Lamar
Blvd., Suite 400, Arlington, Texas 76011. The Secretary will review all
messages received and will forward any message that reasonably appears to be
a communication from a stockholder about a matter of stockholder interest
that is intended for communication to the board. Communications will be sent
as soon as practicable to the director to whom they are addressed, or if
addressed to the board generally, to the Chairman of the Nominating and
Corporate Governance Committee. Because other appropriate avenues of
communication exist for matters that are not of stockholder interest, such
as general business complaints or employee grievances, communications that
do not relate to matters of stockholder interest will not be forwarded to
the board. The Corporate Secretary has the option, but not the obligation,
to forward these other communications to appropriate channels within the
Company.
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely on the reports furnished pursuant to Section 16a-3(e) of
the Exchange Act, all reports as required under Section 16(a) of the
Exchange Act were filed on a timely basis during the year ending December
31, 2003, except in September 2003 Mr. Phillip E. Powell reported one
transaction (a sale of 2,900 shares of common stock) five days late on a
Form 4.
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
The Compensation Committee reviews compensation paid to management and
recommends to the board of directors appropriate executive compensation.
Ms. Schuchmann and Messrs. Burke and Love serve as members of the
Compensation Committee and are not employed by the Company.
BASED UPON THE RECOMMENDATION OF THE NOMINATING AND CORPORATE
GOVERNANCE COMMITTEE, THE BOARD HAS NOMINATED THE ABOVE-REFERENCED DIRECTOR
FOR ELECTION BY THE STOCKHOLDERS AND RECOMMENDS A VOTE "FOR" SUCH ELECTION.
THE ELECTION OF THIS DIRECTOR REQUIRES A PLURALITY OF THE VOTES OF THE
SHARES OF COMMON STOCK PRESENT IN PERSON OR REPRESENTED BY PROXY AT THE
ANNUAL MEETING.
ITEM 2
TO CONSIDER AND ACT UPON THE ADOPTION OF THE AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF
COMMON STOCK FROM 20,000,000 TO 90,000,000
The Company's current Certificate of Incorporation provides for the
authorization to issue up to 20,000,000 shares of its Common Stock. As of
April 30, 2004, the Company had 15,749,455 shares of Common Stock issued and
outstanding and 2,545,950 shares of Common Stock reserved for issuance
pursuant to outstanding warrants and options. As a result, the Company has
issued or reserved 18,295,405 of its currently authorized shares of Common
Stock. Therefore, the Company's board of directors believes that the
increase in authorized shares from 20,000,00 to 90,000,000 is desirable.
The board of directors may find it advisable at some point for the Company
to issue additional shares of Common Stock in connection with any future
stock splits, acquisitions, capital raising transactions, exercise or
conversion of derivative securities, or compensatory plans. The board of
directors has no present plans, commitments or understandings to issue any
additional shares of Common Stock, with exception to the Company's
compensatory plans. Authorized but unissued shares of Common Stock may be
issued at any time upon authorization of the board of directors without
further approval of Company stockholders.
In order to more clearly set forth this amendment to the Company's
Certificate of Incorporation which is being proposed herein, the board of
directors proposes that the Company's Certificate of Incorporation be
amended and restated for filing with the Delaware Secretary of State. A
copy of the proposed Amended and Restated Certificate of Incorporation is
attached hereto as APPENDIX B. The only change in the proposed Amended and
Restated Certificate of Incorporation from the current Certificate of
Incorporation is in Article VI whereby the total number shares of Common
Stock that the Company shall have the authority to issue shall be increased
from 20,000,000 to 90,000,000.
Shares of authorized but unissued Common Stock could be issued in one
or more transactions which could make a takeover of the Company more
difficult and, therefore, less likely. Any such issuance of Common Stock
could have the effect of diluting earnings per share of Common Stock and
reducing the book value per share of Common Stock. The issuance of Common
Stock could be used to dilute the stock ownership of any person or persons
seeking to obtain control of the Company. The board has no present
intention of causing the Company to issue shares of Common Stock for any
purpose which would have an anti-takeover effect.
THE BOARD HAS RECOMMENDED THE AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION FOR APPROVAL BY THE STOCKHOLDERS AND RECOMMENDS A VOTE "FOR"
SUCH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM 20,000,000 TO 90,000,000.
THE ADPOTION OF THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION WILL
REQUIRE FOR APPROVAL THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF
THE OUTSTANDING SHARES OF COMMON STOCK PRESENT OR REPRESENTED BY PROXY AND
ENTITLED TO VOTE AT THE ANNUAL MEETING.
ITEM 3
TO CONSIDER AND ACT UPON A PROPOSAL TO APPROVE THE FIRST CASH
FINANCIAL SERVICES, INC. 2004 LONG-TERM INCENTIVE PLAN
Background Information
The board of directors has adopted, subject to stockholder approval,
the Company's 2004 Long-Term Incentive Plan (the "2004 Plan"). The purpose
of the 2004 Plan is to promote the interests of the Company and its
stockholders and give it a competitive advantage by (i) attracting and
retaining executive personnel and other key employees of outstanding
ability; (ii) motivating executive personnel and other key employees, by
means of performance-related incentives, to achieve longer-range performance
goals; and (iii) enabling such employees to participate in the long-term
growth and financial success of the Company by acquiring a proprietary
interest in the Company.
The following summary of the 2004 Plan is qualified in its entirety by
reference to the full text of the 2004 Plan, which is attached to this Proxy
Statement as APPENDIX C.
General Administration of the Plan
The 2004 Plan will be administered by the Compensation Committee of
the board of directors (the "Committee"). The Committee will be authorized
to grant to key employees of the Company awards in the form of stock
options, performance shares, and restricted stock. In addition, the
Committee will have the authority to grant other stock-based awards in the
form of stock appreciation rights, restricted stock units, and stock unit
awards. The 2004 Plan will become effective upon approval by the
stockholders and will expire ten years from such effective date unless
terminated earlier or extended by the board of directors.
Each member of the Committee must be a "non-employee director" within
the meaning of Rule 16b-3 promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), an "independent director" as defined by Nasdaq rules and an
"outside director" within the meaning of the Code. The Committee will select
persons to receive grants from among the eligible participants, determine
the types of grants and number of shares to be awarded to grantees, and set
the terms, conditions, and provisions of the grants consistent with the 2004
Plan. The Committee has authority to amend awards and to accelerate vesting
and/or exercisability of awards, provided that it cannot amend an
outstanding option to reduce its exercise price or cancel an option and
replace it with an option with a lower exercise price. The Committee may
also establish rules for administration of the 2004 Plan.
Eligibility
The Committee will select grantees from among the key employees,
officers, directors and consultants of the Company and its subsidiaries. The
eligible participants will be those who, in the opinion of the Committee,
have the capacity for contributing in a substantial measure to the
successful performance of the Company. All awards and the terms of any award
to eligible participants who are members of the Committee must also be
approved by the board of directors.
Shares Subject to the Plan
Subject to adjustment as described below, a maximum 900,000 shares of
Company Common Stock may be issued under the 2004 Plan. Any shares of
Company Common Stock subject to awards that are forfeited or withheld in
payment of any exercise price or taxes will again be available for grant.
Also, if an award terminates without shares of Company Common Stock being
issued, then the shares that were subject to the award will again be
available for grant. The shares may be authorized and unissued shares or
treasury shares. In the event of a stock split, stock dividend, spin-off, or
other relevant change affecting the Company's Common Stock, the Committee
shall make appropriate adjustments to the number of shares available for
grants and to the number of shares and price under outstanding grants made
before the event.
Types of Awards Under the 2004 Plan
Stock Options
The Committee may grant awards in the form of options to purchase
shares of the Company's Common Stock. With regard to each such option, the
Committee will determine the number of shares subject to the option, the
manner and time of the exercise of the option, and the exercise price per
share of stock subject to the option; provided, however, that the exercise
price of any "Incentive Stock Option" (as defined in the 2004 Plan) may not
be less than 100% of the fair market value of the shares of Company Common
Stock on the date the option is granted. The exercise price may, at the
discretion of the Committee, be paid by a participant in cash, shares of
Company Common Stock or a combination thereof. The period of any option
shall be determined by the Committee, but no Incentive Stock Option may be
exercised later than 10 years after the date of grant. The aggregate fair
market value, determined at the date of grant of the Incentive Stock Option,
of Company Common Stock for which an Incentive Stock Option is exercisable
for the first time during any calendar year as to any participant shall not
exceed the maximum limitation as provided in Section 422 of the Code. The
effect of a grantee's termination of employment by reason of death,
retirement, disability, or otherwise will be specified in the option
agreement evidencing the grant of the option.
Stock Appreciation Rights
The 2004 Plan also authorizes the Committee to grant stock appreciation
rights ("SARs"). Upon exercising an SAR, the holder receives for each share
with respect to which the SAR is exercised, an amount equal to the
difference between the exercise price (which may not be less than the fair
market value of such share on the date of grant unless otherwise determined
by the Committee) and the fair market value of the Company Common Stock on
the date of exercise. At the Committee's discretion, payment of such amount
may be made in cash, shares of Company Common Stock, or a combination
thereof. Each SAR granted will be evidenced by an agreement specifying the
terms and conditions of the award, including the effect of termination of
employment (by reason of death, disability, retirement or otherwise) on the
exercisability of the SAR. No SAR may have a term of greater than 10 years.
Performance Shares
The 2004 Plan permits the Committee to grant awards of performance
shares to eligible employees from time to time. These awards are contingent
upon the achievement of certain performance goals established by the
Committee. The length of time over which performance will be measured, the
performance goals, and the criteria to be used in determining whether and to
what degree the goals have been attained will be determined by the
Committee. The Committee will also determine the effect of termination of
employment of a grantee (by reason of death, retirement, disability or
otherwise) during the performance period.
Restricted Stock and Restricted Stock Units
Under the 2004 Plan, the Committee may award restricted shares of the
Company's Common Stock and restricted stock units to eligible employees from
time to time and subject to certain restrictions as determined by the
Committee. The nature and extent of restrictions on such shares and units,
the duration of such restrictions, and any circumstance which could cause
the forfeiture of such shares or units shall be determined by the Committee.
The Committee will also determine the effect of the termination of
employment of a recipient of restricted stock or restricted stock units (by
reason of retirement, disability, death or otherwise) prior to the lapse of
any applicable restrictions.
Other Stock Based Awards
In addition, the Committee shall have authority under the 2004 Plan to
grant stock unit awards, which can be in the form of Common Stock or units,
the value of which is based, in whole or in part, on the value of the
Company's Common Stock. Such stock unit awards will be subject to such
terms, restrictions, conditions, vesting requirements and payment rules as
the Committee may determine. Stock unit awards may not be assigned, sold,
transferred, pledged or otherwise encumbered prior to the date shares are
issued or, if later, the date provided by the Committee at the time of grant
of the stock unit award. Stock unit awards may relate in whole or in part to
certain performance criteria established by the Committee at the time of
grant. The Committee will also determine the effect of termination of
employment of a stock unit award recipient (by reason of death, retirement,
disability or otherwise) during any applicable vesting period.
Awards to Covered Employees
The Plan permits the Committee to grant qualified performance-based
awards ("Awards") to the chief executive officer and the four other highest
compensated officers of the Company (the "Covered Employees"). These Awards
are intended to qualify as performance-based pay under Section 162(m) of the
Code to enable the Company to deduct the compensation paid to the Covered
Employees attributable to these Awards. In general, Section 162(m) limits
the deduction for compensation paid to the Covered Employees to a dollar
limitation ($1,000,000), but permits performance-based pay to be deductible
without regard to the dollar limitation.
If the Award is a stock option or SAR grant with an exercise price
equal to the fair market value of the underlying shares of Common Stock on
the date of grant, the Award qualifies as performance-based pay under
Section 162(m).
If performance shares are granted, then the Committee will establish
performance goals based on the attainment of one or more of the following
measures with respect to the Company or an affiliate, or a subsidiary,
division or department of the Company or an affiliate for whom the Covered
Employee performs services: revenue growth; earnings before interest, taxes,
depreciation and amortization; earnings before interest and taxes; operating
income; pre- or after-tax income; earnings per share from continuing
operations; other board or committee approved performance measurements;
earnings per share; cash flow; cash flow per share; return on equity; return
on invested capital; return on assets; economic value added (or an
equivalent metric); share price performance; total stockholder return;
improvement in or attainment of expense levels; or improvement in or
attainment of working capital levels. The preceding goals may be based on
attaining specified levels of Company performance under one or more of the
measures described above relative to the performance of other companies.
The Committee will establish the relevant goals at a time when the
outcome is substantially uncertain, and the Committee will certify whether
the goals have been attained. This process of establishing goals and
confirming their attainment is intended to comply with Section 162(m) and
permit the Award to qualify as deductible performance-based pay.
No more than 100,000 shares of Common Stock may be subject to Awards to
any eligible individual, including a Covered Employee, in any fiscal year.
Change in Control
In order to preserve the rights of participants in the event of a
Change in Control (as defined in the 2004 Plan), the Committee in its
discretion may, at the time a grant is made or at any time thereafter, take
one or more of the following actions: (i) provide for the acceleration of
any time period relating to the exercise of an award, (ii) provide for the
purchase of the award upon the participant's request for an amount of cash
or other property that could have been received upon the exercise or
realization of the award had the award been currently exercisable or
payable, (iii) adjust the terms of the award in a manner determined by the
Committee to reflect the Change in Control, (iv) cause the award to be
assumed, or new rights substituted therefore, by another entity, or (v) make
such other provisions as the Committee may consider equitable and in the
best interests of the Company.
Amendment and Termination of the 2004 Plan
The board of directors may amend, alter, suspend, discontinue or
terminate the 2004 Plan or any portion thereof at any time, provided that no
amendment shall be made without stockholder approval which (a) is required
to be approved by stockholders to comply with applicable laws or rules,
(b) increase the number of shares of Company Common Stock reserved for
issuance under the 2004 Plan or (c) would cause the Company to be unable to
grant Incentive Stock Options.
Federal Income Tax Consequences
Under current U.S. federal tax law, the following are the U.S. federal
income tax consequences generally arising with respect to awards made under
the 2004 Plan.
Exercise of Incentive Stock Option and Subsequent Sale of Shares
A participant who is granted an Incentive Stock Option does not realize
taxable income at the time of the grant or at the time of exercise. If the
participant makes no disposition of shares acquired pursuant to the exercise
of an Incentive Stock Option before the later of two years from the date of
grant or one year from such date of exercise ("statutory holding period"),
any gain (or loss) realized on such disposition will be recognized as a
long-term capital gain (or loss). Under such circumstances, the Company will
not be entitled to any deduction for federal income tax purposes.
However, if the participant disposes of the shares during the statutory
holding period, that will be considered a disqualifying disposition.
Provided the amount realized in the disqualifying disposition exceeds the
exercise price, the ordinary income a participant shall recognize in the
year of a disqualifying disposition will be the lesser of (i) the excess of
the amount realized over the exercise price, or (ii) the excess of the fair
market value of the shares at the time of the exercise over the exercise
price; and the Company generally will be entitled to a deduction for the
amount of ordinary income recognized by such participant. The ordinary
income recognized by the participant is not considered wages and the Company
is not required to withhold, or pay employment taxes, on such ordinary
income. Finally, in addition to the ordinary income described above, the
participant shall recognize capital gain on the disqualifying disposition in
the amount, if any, by which the amount realized in the disqualifying
disposition exceeds the fair market value of the shares at the time of the
exercise, and shall be long-term or short-term capital gain depending on the
participant's post-exercise holding period for such shares.
Special tax rules apply when all or a portion of the exercise price of
an Incentive Stock Option is paid by delivery of already owned shares, but
generally it does not materially change the tax consequences described
above. However, the exercise of an Incentive Stock Option with shares which
are, or have been, subject to an Incentive Stock Option, before such shares
have satisfied the statutory holding period, generally will result in the
disqualifying disposition of the shares surrendered.
Notwithstanding the favorable tax treatment of Incentive Stock Options
for regular tax purposes, as described above, for alternative minimum tax
purposes, an Incentive Stock Option is generally treated in the same manner
as a Nonqualified Stock Option. Accordingly, a participant must generally
include as alternative minimum taxable income for the year in which an
Incentive Stock Option is exercised, the excess of the fair market value of
the shares acquired on the date of exercise over the exercise price of such
shares. However, to the extent a participant disposes of such shares in the
same calendar year as the exercise, only an amount equal to the optionee's
ordinary income for regular tax purposes with respect to such disqualifying
disposition will be recognized for the optionee's calculation of alternative
minimum taxable income in such calendar year.
Exercise of Nonqualified Stock Option and Subsequent Sale of Shares
A participant who is granted a nonqualified stock option does not
realize taxable income at the time of the grant, but does recognize ordinary
income at the time of exercise in an amount equal to the excess of the fair
market value of the shares acquired on the date of exercise over the
exercise price of such shares; and the Company generally will be entitled to
a deduction for the amount of ordinary income recognized by such
participant. The ordinary income recognized by the participant is considered
supplemental wages and the Company is required to withhold, and the Company
and the participant are required to pay applicable employment taxes, on such
ordinary income.
Upon the subsequent disposition of shares acquired through the exercise
of a nonqualified stock option, any gain (or loss) realized on such
disposition will be recognized as a long-term, or short-term, capital gain
(or loss) depending on the participant's post-exercise holding period for
such shares.
Lapse of Restrictions on Restricted Stock and Subsequent Sale of Shares
A participant who has been granted an award of restricted stock or
restricted stock units does not realize taxable income at the time of the
grant. When the restrictions lapse, the participant will recognize ordinary
income in an amount equal to the excess of the fair market value of the
shares at such time over the amount, if any, paid for such shares; and the
Company generally will be entitled to a deduction for the amount of ordinary
income recognized by such participant. The ordinary income recognized by the
participant is considered supplemental wages and the Company is required to
withhold, and the Company and the participant are required to pay applicable
employment taxes, on such ordinary income. Upon the subsequent disposition
of the formerly restricted shares, any gain (or loss) realized on such
disposition will be recognized as a long-term, or short-term, capital gain
(or loss) depending on the participant's holding period for such shares
after their restrictions lapse.
Under Section 83(b) of the Code, a participant who receives an award of
restricted stock may elect to recognize ordinary income for the taxable year
in which the restricted stock was received equal to the excess of the fair
market value of the restricted stock on the date of the grant, determined
without regard to the restrictions, over the amount (if any) paid for the
restricted stock. Any gain (or loss) recognized upon a subsequent
disposition of the shares will be capital gain (or loss) and will be long
term or short term depending on the post-grant holding period of such
shares. If, after making the election, a participant forfeits any shares of
restricted stock, or sells restricted stock at a price below its fair market
value on the date of grant, such participant is only entitled to a tax
deduction with respect to the consideration (if any) paid for the restricted
stock, not the amount elected to be included as income at the time of grant.
SARs, Performance Shares and Stock Unit Awards
A participant who is granted a SAR does not realize taxable income at
the time of the grant, but does recognize ordinary income at the time of
exercise of the SAR in an amount equal to the excess of the fair market
value of the shares (on the date of exercise) with respect to which the SAR
is exercised, over the grant price of such shares; and the Company generally
will be entitled to a deduction for the amount of ordinary income recognized
by the such participant
A participant who has been awarded a performance share or a stock unit
award does not realize taxable income at the time of the grant, but does
recognize ordinary income at the time the award is paid equal to the amount
of cash (if any) paid and the fair market value of shares (if any)
delivered; and the Company generally will be entitled to a deduction for the
amount of ordinary income recognized by the such participant.
The ordinary income recognized by a participant in connection with a
SAR, performance share, or a stock unit award is considered supplemental
wages and the Company is required to withhold, and the Company and the
participant are required to pay applicable employment taxes, on such
ordinary income.
To the extent, if any, that shares are delivered to a participant in
satisfaction of either the exercise of a SAR, or the payment of a
performance share or stock unit award, upon the subsequent disposition of
such shares any gain (or loss) realized will be recognized as a long-term,
or short-term, capital gain (or loss) depending on the participant's post-
delivery holding period for such shares.
New Plan Benefits
Grants and awards under the 2004 Plan, which may be made to Company
executive officers, directors and other employees, are not presently
determinable. If the stockholders approve the Plan, such grants and awards
will be made at the discretion of the Committee or the board of directors in
accordance with the compensation policies of the Committee, which are
discussed in the "Report of the Compensation Committee."
BASED UPON THE RECOMMENDATION OF THE COMPENSATION COMMITTEE, THE BOARD
HAS APPROVED THE ADOPTION OF THE FIRST CASH FINANCIAL SERVICES, INC. 2004
LONG-TERM INCENTIVE PLAN AND RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
PROPOSED PLAN. THE APPROVAL OF SUCH PLAN REQUIRES THE AFFIRMATIVE VOTE OF
THE HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES OF COMMON STOCK PRESENT
OR REPRESENTED BY PROXY AND REPRESENTED AT THE ANNUAL MEETING.
ITEM 4
RATIFY THE SELECTION OF HEIN + ASSOCIATES LLP AS INDEPENDENT AUDITORS OF THE
COMPANY FOR THE YEAR ENDING DECEMBER 31, 2004
On March 12, 2004, the Company, at the direction of the Audit
Committee, notified its independent accountant, Deloitte & Touche LLP, of
its dismissal as independent accountants, except with respect to audit and
audit related services pertaining to the year ended December 31, 2003. The
change was the result of a proposal and competitive bidding process
involving several accounting firms. Effective April 16, 2004, Deloitte &
Touche LLP's engagement was terminated and they no longer provide audit
services nor do they serve as the Company's auditor.
The Audit Committee selected Hein + Associates LLP as independent
accountants to audit the books, records and accounts of the Company for the
year ending December 31, 2004. The board has endorsed this appointment.
Hein + Associates LLP was engaged in March 2004 as the Company's principal
accountant. Deloitte & Touche, LLP previously audited the consolidated
financial statements of the Company and during the two years ended December
31, 2003 provided both audit and non-audit services.
Deloitte & Touche LLP's report on the Company's 2003 financial
statements was issued on March 8, 2004 in conjunction with the filing of the
Company's Annual Report on Form 10-K for the year ended December 31, 2003.
The audit reports of Deloitte & Touche LLP on the consolidated financial
statements of the Company as of and for the years ended December 31, 2003,
2002 and 2001, did not contain any adverse opinion or disclaimer of opinion,
nor were they qualified or modified as to uncertainty, audit scope, or
accounting principles, except that the audit reports for 2002 and 2003 were
modified to reflect a change in the Company's method of accounting for
amortization of goodwill in 2002 in accordance with FASB Statement No. 142,
Goodwill and Other Intangible Assets, and except that the audit report for
2003 was modified to reflect a change in the Company's method of accounting
for its 50% owned joint venture, Cash & Go, Ltd., in 2003 in accordance with
FASB Interpretation 46(R), Consolidation of Variable Interest Entities.
During the Company's three most recent years ended December 31, 2003,
and the subsequent interim period through April 16, 2004, there were no
disagreements between the Company and Deloitte & Touche LLP on any matter of
accounting principles or practices, financial statement disclosure, or
auditing scope or procedure (within the meaning of Item 304(a)(1)(iv) of
Regulation S-K) and there were no reportable events (as defined by Item
304(a)(1)(v) of Regulation S-K).
During the Company's three most recent years ended December 31, 2003,
and the subsequent interim period through March 12, 2004, neither the
Company nor anyone on its behalf consulted with Hein + Associates LLP
regarding any of the matters or events set forth in Item 304(a)(2)(i) and
(ii) of Regulation S-K. Hein + Associates LLP has served as the independent
accountant engaged to audit the First Cash 401(k) Plan for the three most
recent years ended December 31, 2002 and is currently engaged to audit the
First Cash 401(k) Plan for the year ended December 31, 2003.
Principal Accountant Fees and Services
Aggregate fees for professional services rendered for the Company by
Deloitte & Touche, LLP for the years ended December 31, 2003 and 2002, were
as follows:
Services Provided: 2003 2002
------- -------
Audit $140,000 $135,000
Audit Related - -
Tax - 8,800
Financial Information Systems Design & - -
Implementation Fees
All Other - -
------- -------
Total $140,000 $143,800
======= =======
The audit fees for the years ended December 31, 2003 and 2002 were for
the audits of the consolidated financial statements of the Company, issuance
of consents, and assistance with and review of documents filed with the SEC.
Tax fees for the years ended December 31, 2002 were for services
related to tax compliance, including the preparation of tax returns, tax
planning and tax advice.
Audit Committee Pre-Approval Policies and Procedures
The 2003 and 2002 audit and non-audit services provided by Deloitte &
Touche, LLP were approved by the Audit Committee. The non-audit services
which were approved by the Audit Committee were also reviewed to ensure
compatibility with maintaining the auditor's independence.
The Audit Committee implemented pre-approval policies and procedures
related to the provision of audit and non-audit services. Under these
procedures, the Audit Committee pre-approves both the type of services to be
provided by the Company's independent accountants and the estimated fees
related to these services. During the approval process, the Audit Committee
considers the impact of the types of services and the related fees on the
independence of the auditor. The services and fees must be deemed
compatible with the maintenance of the auditor's independence, including
compliance with SEC rules and regulations.
Throughout the year, the Audit Committee reviews any revisions to the
estimates of audit and non-audit fees initially approved.
Ratification of Independent Auditors
In the event the stockholders do not ratify the appointment of Hein +
Associates LLP as independent auditors for the year ending December 31,
2004, the adverse vote will be considered as a direction to the board of
directors to select other auditors for the following year. However, because
of the difficulty in making any substitution of auditors so long after the
beginning of the year ending December 31, 2004, it is contemplated that the
appointment for the year ending December 31, 2004 will be permitted to stand
unless the board finds other good reason for making a change.
Representatives of Hein + Associates LLP are expected to be present at
the meeting, with the opportunity to make a statement if desired to do so.
Such representatives are also expected to be available to respond to
appropriate questions.
BASED UPON THE RECOMMENDATION OF THE AUDIT COMMITTEE, THE BOARD HAS
RECOMMENDED THE RATIFICATION OF HEIN + ASSOCIATES LLP AS INDEPENDENT
AUDITORS. SUCH RATIFICATION REQUIRES THE AFFIRMATIVE VOTE OF THE HOLDERS OF
A MAJORITY OF THE OUTSTANDING SHARES OF COMMON STOCK PRESENT OR REPRESENTED
BY PROXY AND REPRESENTED AT THE ANNUAL MEETING.
EXECUTIVE OFFICERS
The following table lists the executive officers of the Company as of
the date hereof and the capacities in which they serve.
Name Age Position
Phillip E. Powell 53 Chairman of the Board and
Chief Executive Officer
Rick L. Wessel 45 President, Secretary, Treasurer
and Director
J. Alan Barron 43 Chief Operating Officer
R. Douglas Orr 43 Chief Financial Officer
John C. Powell 49 Vice President of Information
Technology
J. Alan Barron joined the Company in January 1994 as its chief
operating officer. Mr. Barron served as the chief operating officer from
January 1994 to May 1998 and from January 2003 to the present. For the
period from May 1998 to January 2003 Mr. Barron served as the president -
pawn operations. Prior to joining the Company, Mr. Barron spent two years
as chief financial officer for a nine-store privately held pawnshop chain.
Prior to his employment as chief financial officer of this privately held
pawnshop chain, Mr. Barron spent five years in the Fort Worth office of
Price Waterhouse LLP.
R. Douglas Orr joined the Company in July 2002 as the vice president of
finance. In January 2003, Mr. Orr was promoted to chief financial officer.
Prior to joining the Company, Mr. Orr spent 14 years at Ray & Berndtson, a
global executive search firm, where he served in a variety of management and
financial roles including vice president of financial planning and analysis,
vice president and controller and vice president of knowledge. Prior to his
employment at Ray & Berndtson, Mr. Orr spent four years in the Fort Worth
office of Price Waterhouse LLP.
John C. Powell served as a systems consultant to the Company from
February 2002 through July 2002 and joined the Company on a full-time basis
in August 2002. In January 2003, Mr. Powell was promoted to vice president
of information technology. Prior to joining the Company, Mr. Powell spent
18 years with AMR/American Airlines as a senior system engineer and software
architect and an additional two years in the same capacity with Sabre/EDS
after its spin-off from AMR in March of 2000.
Biographical information with respect to Messrs. Phillip E. Powell and
Rick L. Wessel was previously provided under Item 1.
Equity Compensation Plan Information
The following table gives information about the Company's common stock
that may be issued upon the exercise of options under its 1990 Stock Option
Plan (approved by the stockholders) and 1999 Stock Option Plan (approved by
the stockholders), together, the "Option Plans", as well as common stock
that may be issued upon the exercise of warrants (not-approved by the
stockholders), as of December 31, 2003.
Number of Weighted Number of
securities to average securities remaining
be issued upon exercise available for
exercise of price of future issuance
outstanding outstanding under equity
options and options and compensation
warrants warrants plans
--------- ---------- ------
Plan Category
-------------
Equity compensation plans
approved by security holders 945,000 $9.13 1,632,000
Equity compensation plans not
approved by security holders 1,826,566 $5.38 -
--------- ---------
Total 2,771,566 $6.65 1,632,000
========= =========
________________
Previously, the board of directors has issued warrants to purchase shares
of common stock in the Company at a predetermined price per share and a
scheduled expiration date. During the year ended December 31, 2003, the
board of directors approved the issuance of warrants to purchase 405,000
shares of common stock in the Company, with a weighted average exercise
price of $7.47.
STOCK OWNERSHIP
The table below sets forth information to the best of the Company's
knowledge with respect to the total number of shares of the Company's Common
Stock beneficially owned by each person known to the Company to beneficially
own more than 5% of its Common Stock, each director, each named executive
officer, and the total number of shares of the Company's Common Stock
beneficially owned by all directors and officers as a group, as reported by
each such person, as of April 30, 2004. On that date, there were 15,749,455
shares of voting Common Stock issued and outstanding.
Shares Beneficially
Officers, Directors Owned (2)
and 5% Stockholders (1) Number Percent
------------------------------- --------- -------
Richard T. Burke (3) 2,269,500 14.13%
Delta Partners LLC 1,109,185 7.04
Phillip E. Powell (4) 892,500 5.39
Rick L. Wessel (5) 797,250 4.91
Joe R. Love (6) 502,609 3.13
J. Alan Barron (7) 355,115 2.23
Tara Schuchmann (8) 15,000 0.10
R. Douglas Orr (9) 15,000 0.10
John C. Powell (10) 3,750 0.02
All officers and directors
as a group (8 persons) 4,850,724 27.20
------------------
(1) The addresses of the persons shown in the table above who are directors
or 5% stockholders are as follows: (i) Delta Partners LLC, One Financial
Center, Suite 1600, Boston, MA 02111 and (ii) all other persons and/or
entities listed, 690 East Lamar Boulevard, Suite 400, Arlington, Texas
76011.
(2) Unless otherwise noted, each person has sole voting and investment
power over the shares listed opposite his name, subject to community
property laws where applicable. Beneficial ownership includes both
outstanding shares of Common Stock and shares of Common Stock such person
has the right to acquire within 60 days of April 26, 2004, upon exercise of
outstanding warrants and options.
(3) Includes a warrant to purchase 150,000 shares at a price of $5.33 per
share to expire in February 2013, a warrant to purchase 37,500 shares at a
price of $5.33 per share to expire in April 2012, a stock option to purchase
75,000 shares at a price of $1.33 per share to expire in December 2010, a
stock option to purchase 15,000 shares at a price of $6.67 per share to
expire in January 2013, and a stock option to purchase 37,500 shares at a
price of $19.33 per share to expire in January 2014. Excludes 15,000 shares
of Common Stock owned by Mr. Burke's wife, which Mr. Burke disclaims
beneficial ownership.
(4) Includes a warrant to purchase 90,000 shares at a price of $5.33 per
share to expire in February 2013, a warrant to purchase 225,000 shares at a
price of $5.33 per share to expire in April 2012, a warrant to purchase
150,000 shares at a price of $6.73 per share to expire in April 2013, a
warrant to purchase 75,000 shares at a price of $7.67 per share to expire in
May 2013, a stock option to purchase 150,000 shares at a price of $13.37 per
share to expire in October 2013, and a stock option to purchase 112,500
shares at a price of $19.33 per share to expire in January 2014.
(5) Includes a warrant to purchase 117,000 shares at a price of $5.33 per
share to expire in April 2012, a warrant to purchase 120,000 shares at a
price of $7.67 per share to expire in May 2013, a stock option to purchase
60,000 shares at a price of $6.67 per share to expire in April 2009, a stock
option to purchase 90,000 shares at a price of $13.37 per share to expire in
October 2013, and a stock option to purchase 90,000 shares at a price of
$19.33 per share to expire in January 2014.
(6) Includes a warrant to purchase 150,000 shares at a price of $5.33 per
share to expire in February 2013, a warrant to purchase 75,000 shares at a
price of $5.33 per share to expire in April 2012, a stock option to purchase
37,500 shares at a price of $6.67 per share to expire in April 2009, a stock
option to purchase 15,000 shares at a price of $6.67 per share to expire in
January 2013, a stock option to purchase 15,000 shares at a price of $19.33
per share to expire in January 2014, and 210,109 shares of common stock all
of which are beneficially owned by an affiliate of Mr. Love.
(7) Includes a warrant to purchase 19,500 shares at a price of $8.67 per
share to expire in June 2013, a stock option to purchase 75,000 shares at a
price of $13.37 per share to expire in October 2013, and a stock option to
purchase 67,500 shares at a price of $19.33 per share to expire in January
2014.
(8) Includes a stock option to purchase 15,000 shares at a price of $19.33
per share to expire in January 2014.
(9) Includes a stock option to purchase 15,000 shares at a price of $13.37
per share to expire in October 2013.
(10) Includes a stock option to purchase 3,750 shares at a price of $13.37
per share to expire in October 2013.
COMPENSATION
Executive Compensation
The following table sets forth compensation with respect to the chief
executive officer and other executive officers of the Company who received
total annual salary and bonus for the year ended December 31, 2003 in excess
of $100,000. Also included in the following table is compensation for the
years ended December 31, 2002 and 2001:
Summary Compensation Table
--------------------------
Long-Term
Annual Compensation Compensation - Awards
------------------- ---------------------
Securities
Underlying
Name and Principal Fiscal Options/ All Other
Position Year Salary Bonus Warrants (1) Compensation (2)
-------- ---- ------ ----- ------------ ------------
Phillip E. Powell 2003 $ 600,000 $ 810,000 375,000 -
Chairman of the 2002 500,000 500,000 225,000 -
Board and Chief 2001 385,234 300,000 187,500 -
Executive Officer
Rick L. Wessel 2003 $ 450,000 $ 610,000 210,000 -
President, 2002 350,000 387,500 150,000 -
Secretary 2001 259,890 150,000 97,500 -
and Treasurer
J. Alan Barron 2003 $ 350,000 $ 400,000 135,000 -
Chief Operating 2002 285,000 250,000 75,000 -
Officer 2001 219,781 50,000 37,500 -
R. Douglas Orr 2003 $ 160,000 $ 100,000 45,000 -
Chief Financial 2002 65,591 25,000 15,000 -
Officer 2001 - - - -
John C. Powell 2003 $ 140,000 $ 40,000 30,000 -
Vice President of 2002 95,010 10,000 15,000 -
Information 2001 - - - -
Technology
--------------------
(1) See "- Employment Agreements" and "- Stock Options and Warrants"
for a discussion of the terms of long-term compensation awards.
(2) The aggregate amount of other compensation is less than the lesser of
$50,000 or 10% of the sum of such executive officer's annual salary and
bonus.
Employment Agreements
Mr. Powell has entered into an employment agreement with the Company
through December 31, 2008 to serve as the chief executive officer of the
Company; at the discretion of the board this agreement may be extended for
additional successive periods of one year each on each January 1
anniversary. The agreement provides for: (i) a 2004 base salary of $660,000
with annual minimum increases of 10% or higher increases at the discretion
of the Compensation Committee; (ii) an annual bonus at the discretion of the
Compensation Committee; (iii) certain stock incentives at the discretion of
the Compensation Committee; (iv) certain fringe benefits including club
membership, car, vacation, a term life insurance policy with a beneficiary
designated by Mr. Powell in the amount of $4 million dollars; (v) a lump-sum
severance payment of $750,000; and (vi) reimbursement of business related
expenses. Mr. Powell has agreed not to compete with the Company, not to
solicit employees of the Company, and not to solicit customers of the
Company for a period of two years following his termination.
Mr. Wessel has entered into an employment agreement with the Company
through December 31, 2008 to serve as the president of the Company; at the
discretion of the board this agreement may be extended for additional
successive periods of one year each on each January 1 anniversary. The
agreement provides for: (i) a 2004 base salary of $495,000 with annual
minimum increases of 10% or higher increases at the discretion of the
Compensation Committee; (ii) an annual bonus at the discretion of the
Compensation Committee; (iii) certain stock incentives at the discretion of
the Compensation Committee; (iv) certain fringe benefits including club
membership, car, vacation, a term life insurance policy with a beneficiary
designated by Mr. Wessel in the amount of $2 million dollars; and (v)
reimbursement of business related expenses. Mr. Wessel has agreed not to
compete with the Company, not to solicit employees of the Company, and not
to solicit customers of the Company for a period of two years following his
termination.
Mr. Barron has entered into an employment agreement with the Company
through December 31, 2006 to serve as the chief operating officer of the
Company; at the discretion of the board this agreement may be extended for
additional successive periods of one year each on each January 1
anniversary. The agreement provides for: (i) a 2004 base salary of $385,000
with annual minimum increases of 10% or higher increases at the discretion
of the Compensation Committee; (ii) an annual bonus at the discretion of the
Compensation Committee; (iii) certain stock incentives at the discretion of
the Compensation Committee; (iv) certain fringe benefits including club
membership, car, vacation; and (v) reimbursement of business related
expenses. Mr. Barron has agreed not to compete with the Company, not to
solicit employees of the Company, and not to solicit customers of the
Company for a period of two years following his termination.
Stock Options and Warrants
The following table shows stock option and warrant grants made to named
executive officers during the year ended December 31, 2003:
Individual Grants of Stock Option/ Warrant Grants Made
During the Year Ended December 31, 2003
---------------------------------------
Potential Realizable
Percentage Value at
of Total Assumed Annual
Options Rates of Stock
Options Granted to Exercise Price Appreciation
Granted Employees in Price Expiration for Option and
Name (Shares) Each Period (Per Share) Date Warrant Terms (1)
----------------- -------- ------------ ----------- ----------------- ----------------------
5% 10%
---------- ----------
Phillip E. Powell 375,000 41.3% $ 9.57 April to Oct. 2013 $2,257,500 $5,721,500
Rick L. Wessel 210,000 23.1 10.11 May to Oct. 2013 1,335,000 3,383,400
J. Alan Barron 135,000 14.9 11.28 June to Oct. 2013 957,700 2,426,300
R. Douglas Orr 45,000 5.0 11.14 Jan. to Oct. 2013 315,100 798,400
John C. Powell 30,000 3.3 10.02 Jan. to Oct. 2013 189,000 478,900
(1) The actual value, if any, will depend upon the excess of the stock
price over the exercise price on the date of exercise, so that there is no
assurance the value realized would be at or near the present value.
December 31, 2003 Stock Option and Warrant Values
-------------------------------------------------
Number of Unexercised Value of Unexercised
Stock Options and Warrants In-The-Money
Shares at December 31, 2003 Stock Options and Warrants
Acquired on Value (Shares) December 31, 2003 (l)
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
----------------- -------- -------- ----------- ------------- ----------- -------------
Phillip E. Powell 618,000 $6,970,000 1,159,500 (2) - $12,485,000 -
Rick L. Wessel 337,500 3,749,000 420,000 (3) - 3,856,000 -
J. Alan Barron 225,000 1,613,000 157,500 (4) - 1,020,000 -
R. Douglas Orr - - - 60,000 (5) - $ 445,000
John C. Powell - - - 45,000 (6) - 389,000
(1) Computed based upon the differences between aggregate fair market value
and aggregate exercise price.
(2) Includes warrants to purchase 837,000 shares at prices ranging from
$3.08 to $7.67 per share and options to purchase 322,500 shares at prices
ranging from $6.67 to $13.37 per share.
(3) Includes warrants to purchase 270,000 shares at prices ranging from
$5.33 to $7.67 per share and options to purchase 150,000 shares at prices
ranging from $6.67 to $13.37 per share.
(4) Includes warrants to purchase 60,000 shares at a price of $8.67 per
share and options to purchase 97,500 shares at prices ranging from $6.67 to
$13.37 per share.
(5) Includes options to purchase 60,000 shares at prices ranging from $5.33
to $13.37 per share.
(6) Includes warrants to purchase 15,000 shares at a price of $5.33 per
share and options to purchase 30,000 shares at prices ranging from $6.67 to
$13.37 per share.
Warrants and options held by other directors: On April 30, 2004, other
directors held warrants to purchase 412,500 shares at a price of $5.33 per
share, expiring between April 2012 and February 2013 and options to purchase
210,000 shares at prices ranging from $1.33 to $19.33 per share, expiring
between April 2009 and January 2014.
Warrants and options held by other employees: On April 30, 2004, other
employees held warrants to purchase 121,200 shares at a price of $5.33 per
share, expiring between April 2005 and April 2012 and options to purchase
214,500 shares at prices ranging from $2.67 to $19.33 per share, expiring
between February 2008 and January 2014.
Options issued to named executive officers and non-employee directors
in 2004: During the period January 1, 2004 through April 30, 2004, the
Company has issued to named executive officers and non-employee directors
options to purchase 382,500 shares at a price of $19.33 per share, expiring
in January 2014.
Except for the stock option plans and the issuance of warrants
described herein, the Company has not established, nor does it provide for,
defined benefit or actuarial plans. The Company has not granted any stock
appreciation rights.
Certain Transactions
As of December 31, 2002, the Company had notes receivable outstanding
from certain of its officers totaling $4,228,000. Repayment of these notes
was completed during Fiscal 2003 and no notes receivable were outstanding as
of December 31, 2003. The notes bore interest at three percent per anum.
In January 2003, Mr. Joe R. Love was issued an option to purchase
15,000 shares of common stock at an exercise price of $6.67 per share
expiring in January 2013. In January 2003, Mr. Richard T. Burke was issued
an option to purchase 15,000 shares of common stock at an exercise price of
$6.67 per share expiring in January 2013. In January 2003, Ms. Tara
Schuchmann was issued an option to purchase 15,000 shares of common stock at
an exercise price of $6.67 per share expiring in January 2013.
In April 1991, the Company adopted a policy prohibiting transactions
with its officers, directors or affiliates, unless approved by a majority of
the disinterested directors and on terms no less favorable to the Company
than could be obtained from an independent third party. The Company
believes that all prior related party transactions were on terms as
favorable as could be obtained from independent third parties.
Report of the Audit Committee
The ultimate responsibility for good corporate governance rests with
the board, whose primary role is oversight, counseling and direction to the
Company's management in the best long-term interests of the Company and its
stockholders. The Audit Committee, in accordance with its charter, has been
established for the purpose of overseeing the accounting and financial
reporting processes of the Company and audits of the Company's annual
financial statements. As described more fully in its charter, the purpose
of the Audit Committee is to assist the board in it general oversight of the
Company's financial reporting, internal controls and audit functions.
Management is responsible for the preparation, presentation and integrity of
the Company's financial statements; accounting and financial reporting
principles; internal controls; and procedures designed to reasonably assure
compliance with accounting standards, applicable laws and regulations.
The Company's independent auditing firm is responsible for performing an
independent audit of the consolidated financial statements in accordance
with generally accepted auditing standards. In accordance with law, the
Audit Committee has ultimate authority and responsibility to select,
compensate, evaluate and, when appropriate, replace the Company's
independent auditors. The Audit Committee has the authority to engage its
own outside advisers, including experts in particular areas of accounting,
as it determines appropriate, apart from counsel or advisers hired by
management. All of the members of the Audit Committee meet the independence
and experience requirements of Nasdaq and the SEC. The board of director's
has determined that two of the Committee's members, Richard T. Burke and
Joe R. Love, qualify as "audit committee financial experts" as defined by
the SEC.
The Audit Committee members are not professional accountants or
auditors, and their functions are not intended to duplicate or to certify
the activities of management and the independent auditors, nor can the Audit
Committee certify that the independent auditors are "independent" under
applicable rules. The Audit Committee serves a board-level oversight role,
in which it provides advice, counsel and direction to management and the
auditors on the basis of the information it receives, discussions with
management and the auditors, and the experience of the Audit Committee's
members in business, financial and accounting matters. Stockholders should
understand that the designation of "an audit committee financial expert" is
an SEC disclosure requirement related to Messrs. Burke's and Love's
experience and understanding with respect to certain accounting and auditing
matters. The designation does not impose on Messrs. Burke or Love any
duties, obligations or liability greater than generally imposed on them as
members of the Audit Committee and the board, and this designation as an
audit committee financial expert pursuant to this SEC requirement does not
affect the duties, obligations or liability of any other member of the Audit
Committee or the board.
In this context, the committee has met and held discussions with
management and Deloitte & Touche LLP ("Deloitte"), the Company's independent
public accountants for the year ended December 31, 2003. Management
represented to the committee that the Company's consolidated financial
statements were prepared in accordance with generally accepted accounting
principles, and the committee has reviewed and discussed the consolidated
financial statements with management and Deloitte. The committee discussed
with Deloitte the matters required to be discussed by Statement of Auditing
Standard No. 61, under which Deloitte must provide us with additional
information regarding the scope and results of its audit of the Company's
financial statements.
In addition, the committee has discussed with Deloitte its independence
from the Company and its management, including matters in the written
disclosures required by the Independence Standards Board Standard No. 1,
(Independence Discussions with Audit Committees).
The committee discussed with the Company's independent public
accountants the overall scope and plans for their respective audits. The
committee met with Deloitte, with and without management present, to
discuss the results of its examinations, the evaluations of the Company's
internal controls, and the overall quality of the Company's financial
reporting
In reliance on the reviews and discussions referred to above, the
committee recommended to the board of directors, and the board has approved,
that the audited financial statements be included in the Company's Annual
Report on Form 10-K for the year ended December 31, 2003 filed with the
Securities and Exchange Commission.
The Audit Committee: Richard T. Burke, Joe R. Love and Tara Schuchmann
Report of the Compensation Committee
Overview
The Compensation Committee of the board of directors supervises the
Company's executive compensation. The Company seeks to provide executive
compensation that will support the achievement of the Company's financial
goals while attracting and retaining talented executives and rewarding
superior performance. In performing this function, the Compensation
Committee reviews executive compensation surveys and other available
information and may from time to time consult with independent compensation
consultants.
The Company seeks to provide an overall level of compensation to the
Company's executives that are competitive within the pawnshop/short-term
advance industry and other companies of comparable size, growth, performance
and complexity. Compensation in any particular case may vary from any
industry average on the basis of annual and long-term Company performance as
well as individual performance. The Compensation Committee will exercise
its discretion to set compensation where in its judgment external, internal
or individual circumstances warrant it. In general, the Company compensates
its executive officers through a combination of base salary, annual
incentive compensation in the form of cash bonuses and long-term incentive
compensation in the form of stock options and warrants.
Base Salary
Base salary levels for the Company's executive officers are set
generally to be competitive in relation to the salary levels of executive
officers in other companies within the pawnshop/short-term advance industry
or other companies of comparable size, growth, performance and complexity,
taking into consideration the executive officer's position, responsibility
and need for special expertise. In reviewing salaries in individual cases
the Compensation Committee also takes into account individual experience and
performance.
Annual Incentive Compensation
The Compensation Committee has historically structured employment
arrangements with incentive compensation. Payment of bonuses has generally
depended upon the Company's achievement of pre-tax income targets
established at the beginning of each fiscal year or other significant
corporate objectives. Individual performance is also considered in
determining bonuses. Certain senior executives receive annual incentive
compensation through the stockholder approved Executive Performance
Incentive Plan that provides for the payment of annual incentive
compensation to participants based upon the achievement of performance goals
established annually by the Compensation Committee based on one or more
specified performance criteria. The Compensation Committee also administers
the calculation of amounts earned under the Executive Performance Incentive
Plan.
Long-Term Incentive Compensation
The Company provides long-term incentive compensation through its stock
option plan and the issuance of warrants, which is described elsewhere in
this proxy statement. The number of shares covered by any grant is
generally determined by the then current stock price, subject in certain
circumstances, to vesting requirements. In special cases, however, grants
may be made to reflect increased responsibilities or reward extraordinary
performance.
Chief Executive Officer Compensation
Mr. Powell was elected to the position of chief executive officer in
May 1992. Mr. Powell's salary was increased from $600,000 to $660,000
effective January 1, 2004. Mr. Powell received a bonus under the Executive
Performance Incentive Plan in the amount of $810,000 during the year ended
December 31, 2003. Mr. Powell received common stock warrant and option
grants based upon the overall performance of the Company during the year
ended December 31, 2003.
The overall goal of the Compensation Committee is to insure that
compensation policies are established that are consistent with the Company's
strategic business objectives and that provide incentives for the attainment
of those objectives. This is affected in the context of a compensation
program that includes base pay, annual incentive compensation and stock
ownership.
The Compensation Committee: Richard T. Burke, Joe R. Love and
Tara Schuchmann
Report of the Nominating and Corporate Governance Committee
Overview
The Nominating and Corporate Governance Committee is responsible for
making recommendations to the board of directors concerning the governance
structure and practices of the Company, including the size of the board of
directors and the size and composition of various committees of the board of
directors. In addition, the Nominating and Corporate Governance Committee
is responsible for identifying individuals believed to be qualified to
become board members, and to recommend to the board the nominees to stand
for election as directors at the annual meeting of stockholders.
Nomination for 2004 Election of Director
The Committee was formed in April 2004. The Committee met and
recommended to board of directors that Ms. Tara Schuchmann be nominated to
stand for reelection to board at the Annual Meeting on June 15, 2004.
The Nominating and Corporate Governance Committee: Richard T. Burke, Joe R.
Love and Tara Schuchmann
Stock Price Performance Graph
The Stock Price Performance Graph set forth below compares the
cumulative total stockholder return on the Common Stock of the Company for
the period from December 31, 1998 through December 31, 2003, with the
cumulative total return on the Nasdaq Composite Index and a peer group index
over the same period (assuming the investment of $100 in the Company's
Common Stock, the Nasdaq Composite Index and the peer group). The peer
group selected by the Company includes the Company, Cash America
International, Inc., EZCORP, Inc., and ACE Cash Express, Inc.
[ PERFORMANCE GRAPH APPEARS HERE ]
12/31/98 12/31/99 12/31/00 12/31/01 12/31/02 12/31/03
First Cash 100 57.64 15.72 47.51 71.34 179.14
Nasdaq Composite 100 185.43 111.83 88.76 61.37 91.75
Peer Group 100 73.42 33.63 46.79 58.91 140.54
OTHER MATTERS
Management is not aware of any other matters to be presented for action
at the meeting. However, if any other matter is properly presented, it is
the intention of the persons named in the enclosed form of proxy to vote in
accordance with their best judgment on such matter.
COST OF SOLICITATION
The Company will bear the costs of the solicitation of proxies from its
stockholders. In addition to the use of mail, directors, officers and
regular employees of the Company in person or may solicit proxies by
telephone or other means of communication. The directors, officers and
employees of the Company will not be compensated additionally for the
solicitation but may be reimbursed for out-of-pocket expenses in connection
with the solicitation. Arrangements are also being made with brokerage
houses and any other custodians, nominees and fiduciaries of the forwarding
of solicitation material to the beneficial owners of the Company, and the
Company will reimburse the brokers, custodians, nominees and fiduciaries for
their reasonable out-of-pocket expenses.
STOCKHOLDER PROPOSALS
Proposals by stockholders intended to be presented at this Annual
Meeting of Stockholders must have been received by the Company for inclusion
in the Company's proxy statement and form of proxy relating to that meeting
no later than February 3, 2004. Moreover, with respect to any proposal by a
stockholder not seeking to have the proposal included in the proxy statement
but seeking to have the proposal considered at the Annual Meeting of
Stockholders to be held in 2005, such stockholder must provide written
notice of such proposal to the Secretary of the Company at the principal
executive offices of the Company by January 12, 2005. In addition,
stockholders must comply in all respects with the rules and regulations of
the Securities and Exchange Commission then in effect and the procedural
requirements of the Company's Bylaws.
By Order of the Board of Directors,
/s/ Rick L. Wessel
--------------------------------
Arlington, Texas Rick L. Wessel
May 11, 2004 President,
Secretary and Treasurer
APPENDIX A
AUDIT COMMITTEE CHARTER
OF
FIRST CASH FINANCIAL SERVICES, INC.
(As amended, restated, and adopted by the Audit Committee
and Board of Directors on April 19, 2004)
I. Composition of the Audit Committee
The Audit Committee of First Cash Financial Services, Inc. (the
"Company") shall be comprised of at least three directors each of whom (i)
is "independent" under the rules of the Nasdaq Stock Market, Inc. (the
"Nasdaq"), (ii) does not accept any consulting, advisory or other
compensatory fee from the Company other than in his or her capacity as a
member of the board or any committee of the board, (iii) is not an
"affiliate" of the Company or any subsidiary of the Company, as such term is
defined in Rule 10A-3 under the Securities Exchange Act of 1934, as amended,
and (iv) must not have participated in the preparation of the financial
statements of the Company or any current subsidiary of the Company at any
time during the past three years. All members of the Audit Committee must
be able to read and understand fundamental financial statements, including a
company's balance sheet, income statement, and cash flow statement, and the
Audit Committee shall have at least one member who has past employment
experience in finance or accounting, requisite professional certification in
accounting, or other comparable experience or background which results in
the member's financial sophistication, including being or having been a
chief executive officer, chief financial officer or other senior officer
with financial oversight responsibilities.
The Audit Committee shall designate one member of the Audit Committee
as its chairperson. In the event of a tie vote on any issue, the
chairperson's vote shall decide the issue.
II. Purposes of the Audit Committee
The purposes of the Audit Committee are to:
1. oversee the accounting and financial reporting processes of the
Company and the audits of the financial statements of the Company;
2. assist board oversight of (i) the integrity of the Company's
financial statements, (ii) the independent auditors' qualifications and
independence, and (iii) the performance of the independent auditors and the
Company's internal audit function; and
3. prepare the report required to be prepared by the Audit Committee
pursuant to the rules of the SEC for inclusion in the Company's annual proxy
statement.
The function of the Audit Committee is oversight. The management of
the Company is responsible for the preparation, presentation, and integrity
of the Company's financial statements. Management and the internal auditing
department are responsible for maintaining appropriate accounting and
financial reporting principles and policies and internal controls and
procedures that provide for compliance with accounting standards and
applicable laws and regulations. The independent auditors are responsible
for planning and carrying out a proper audit of the Company's annual
financial statements, reviews of the Company's quarterly financial
statements prior to the filing of each quarterly report on Form 10-Q, and
other procedures. In fulfilling their responsibilities hereunder, it is
recognized that members of the Audit Committee are not employees of the
Company and are not, and do not represent themselves to be, performing the
functions of auditors or accountants. As such, it is not the duty or
responsibility of the Audit Committee or its members to conduct "field work"
or other types of auditing or accounting reviews or procedures or to set
auditor independence standards.
The independent auditors for the Company are accountable to the Audit
Committee, as representatives of the stockholders. The Audit Committee is
directly responsible for the appointment, retention, compensation and
oversight of the work of the independent auditors (including resolving
disagreements between management and the independent auditors regarding
financial reporting). The independent auditors shall report directly to the
Audit Committee.
The independent auditors shall submit to the Audit Committee annually a
formal written statement of the fees billed in each of the last two fiscal
years for each of the following categories of services rendered by the
independent auditors: (i) the audit of the Company's annual financial
statements and the reviews of the financial statements included in the
Company's Quarterly Reports on Form 10-Q or services that are normally
provided by the independent auditors in connection with statutory and
regulatory filings or engagements; (ii) assurance and related services not
included in clause (i) that are reasonably related to the performance of the
audit or review of the Company's financial statements, in the aggregate and
by each service; (iii) tax compliance, tax advice and tax planning services,
in the aggregate and by each service; and (iv) all other products and
services rendered by the independent auditors, in the aggregate and by each
service.
III. Meetings of the Audit Committee
The Audit Committee shall meet once every fiscal quarter, or more
frequently if circumstances dictate, to discuss with management the annual
audited financial statements and quarterly financial statements, as
applicable. The Audit Committee may meet separately on a periodic basis
with management, the director of the internal auditing department, and the
independent auditors to discuss any matters that the Audit Committee or any
of these persons or firms believes should be discussed privately. The Audit
Committee may request any officer or employee of the Company or the
Company's outside counsel or independent auditors to attend a meeting of the
Audit Committee or to meet with any members of, or consultants to, the Audit
Committee. Members of the Audit Committee may participate in a meeting of
the Audit Committee by means of conference call or similar communications
equipment by means of which all persons participating in the meeting can
hear each other.
IV. Duties and Powers of the Audit Committee
To carry out its purposes, the Audit Committee shall have the following
duties and powers:
1. with respect to the independent auditors,
(i) to directly appoint, retain, compensate, evaluate, and terminate
the independent auditors, including having the sole authority to approve all
audit engagement fees and terms, provided that the auditor appointment shall
be subject to stockholder approval;
(ii) to pre-approve, or to adopt appropriate procedures to pre-approve,
all audit and non-audit services to be provided by the independent auditors;
(iii) to review and discuss the written statement from the
independent auditor delineating all of the independent auditor's
relationships with the Company as required by Independence Standards Board
Standard 1, as may be modified or supplemented, and, based on such review,
assesses the independence of the auditor;
(iv) to discuss with the independent auditors in connection with any
audit all critical accounting policies and practices used, all alternative
treatments of financial information within generally accepted accounting
principles that have been discussed with management, ramifications of the
use of such alternative disclosures and treatments, and the treatment
preferred by the independent auditors, and any material written
communications between the independent auditors and management, such as any
"management" letter or schedule of unadjusted differences;
(v) to discuss with management the timing and process for implementing
the rotation of the lead audit partner, the concurring partner and any other
active audit engagement team partner;
(vi) to instruct the independent auditors that the independent auditors
are ultimately accountable to the Audit Committee, as representatives of the
stockholders;
2. with respect to the internal auditing department, to review the
appointment and replacement of the director of the internal auditing
department;
3. with respect to financial reporting principles and policies and
internal audit controls and procedures,
(i) to advise management, the internal auditing department, and the
independent auditors that they are expected to provide to the Audit
Committee a timely analysis of significant financial reporting issues and
practices;
(ii) to consider any reports or communications (and management's and/or
the internal audit department's responses thereto) submitted to the Audit
Committee by the independent auditors required by or referred to in SAS 61,
as it may be modified or supplemented, including reports and communications
related to:
* deficiencies noted in the audit in the design or operation
of internal controls;
* consideration of fraud in a financial statement audit;
* detection of illegal acts;
* any restriction on audit scope;
* significant accounting policies;
* management judgments and accounting estimates;
* any accounting adjustments arising from the audit that
were noted or proposed by the auditors but were passed (as
immaterial or otherwise);
* disagreements with management;
* difficulties encountered with management in performing the
audit;
* the independent auditors' judgments about the quality of
the entity's accounting principles;
* reviews of interim financial information conducted by the
independent auditors; and
* the responsibilities, budget, and staffing of the Company's
internal audit function;
(iii) to meet with management, the independent auditors and, if
appropriate, the director of the internal auditing department:
* to discuss the annual audited financial statements and
quarterly financial statements, including the Company's
disclosures under "Management's Discussion and Analysis of
Financial Condition and Results of Operations";
* to discuss any significant matters arising from any audit,
including any audit problems or difficulties, whether
raised by management, the internal auditing department or
the independent auditors, relating to the Company's
financial statements;
* to discuss any difficulties the independent auditors
encountered in the course of the audit, including any
restrictions on their activities or access to requested
information and any significant disagreements with
management;
* to review the form of opinion the independent auditors
propose to render to the board of directors and
stockholders;
* to discuss, as appropriate: (a) any major issues regarding
accounting principles and financial statement
presentations, including any significant changes in the
Company's selection or application of accounting
principles, and major issues as to the adequacy of the
Company's internal controls and any special audit steps
adopted in light of material control deficiencies; (b)
analyses prepared by management and/or the independent
auditors setting forth significant financial reporting
issues and judgments made in connection with the
preparation of the financial statements, including
analyses of the effects of alternative GAAP methods on the
financial statements; and (c) the effect of regulatory and
accounting initiatives, as well as off-balance sheet
structures, on the financial statements of the Company;
(iv) to inquire of the Company's chief executive officer and chief
financial officer as to the existence of any significant deficiencies in the
design or operation of internal controls that could adversely affect the
Company's ability to record, process, summarize and report financial data,
any material weaknesses in internal controls, and any fraud, whether or not
material, that involves management or other employees who have a significant
role in the Company's internal controls;
(v) to discuss with the Company's General Counsel (or person or entity
performing such function) any significant legal, compliance or regulatory
matters that may have a material effect on the financial statements or the
Company's business, financial statements or compliance policies, including
material notices to or inquiries received from governmental agencies;
(vi) to discuss and review the type and presentation of information
to be included in earnings press releases;
(vii) to establish procedures for the receipt, retention and
treatment of complaints received by the Company regarding accounting,
internal accounting controls or auditing matters, and for the confidential,
anonymous submission by Company employees of concerns regarding questionable
accounting or auditing matters;
(viii) to review and approve related party transactions of the
Company where appropriate;
4. with respect to reporting and recommendations,
(i) to prepare any report or other disclosures, including any
recommendation of the Audit Committee, required by the rules of the SEC to
be included in the Company's annual proxy statement;
(ii) to review and reassess the adequacy of this Charter at least
annually and recommend any changes to the full board of directors;
(iii) to report its activities to the full board of directors on a
regular basis and to make such recommendations with respect to the above and
other matters as the Audit Committee may deem necessary or appropriate; and
(iv) to advise the board of directors with respect to the Company's
policies and procedures regarding the compliance with the applicable laws
and regulations and with the Company's Code of Ethics.
V. Resources and Authority of the Audit Committee
The Audit Committee shall have the resources (including any needed
funding to be supplied by the Company) and authority appropriate to
discharge its duties and responsibilities, including the authority to
select, retain, terminate, and approve the fees and other retention terms of
special or independent counsel, accountants or other experts and advisors,
as it deems necessary or appropriate, without seeking approval of the board
or management.
APPENDIX B
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
FIRST CASH FINANCIAL SERVICES, INC.
First Cash Financial Services, Inc., a Delaware corporation (the
"Corporation"), which was originally incorporated under the name of First
Cash Acquisition, Inc. on April 24, 1991, hereby adopts the following
Amended and Restated Certificate of Incorporation pursuant to Sections 242
and 245 of the Delaware General Corporation Law:
ARTICLE I
The name of the Corporation shall be First Cash Financial Services,
Inc.
ARTICLE II
The original Restated Certificate of Incorporation was filed in the
office of the Secretary of State of Delaware on November 30, 1992.
ARTICLE III
The address of the Corporation's registered office in the State of
Delaware is 919 Market Street, Suite 1600, Wilmington, New Castle County,
Delaware 19801, and the name of its registered agent at such address is The
Delaware Corporation Agency, Inc.
ARTICLE IV
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the Delaware General
Corporation Law.
ARTICLE V
The period of duration of the Corporation is perpetual.
ARTICLE VI
The total number of shares of stock which the Corporation shall have
authority to issue is 100,000,000 consisting of 90,000,000 shares of common
stock, par value $.01 per share (the "Common Stock"), and 10,000,000 shares
of preferred stock, par value $.01 per share (the "Preferred Stock").
Shares of Preferred Stock of the Corporation may be issued from time to
time in one or more classes or series, each of which class or series shall
have such voting powers, full or limited, or no voting powers, and such
designations, preferences and relative, participating, optional or other
special rights, and qualifications, limitations or restrictions thereof, as
shall be stated in such resolution or resolutions providing for the issue of
such class or series of Preferred Stock as may be adopted from time to time
by the board of directors prior to the issuance of any shares thereof
pursuant to the authority hereby expressly vested in it, all in accordance
with the laws of the State of Delaware.
ARTICLE VII
The business and affairs of the Corporation shall be managed by or
under the direction of the board of directors consisting of not less than
one nor more than 15 directors, the exact number of directors to be
determined from time to time by resolution adopted by the board of
directors. The directors of the Corporation shall be divided into three
classes, designated Class I, Class II and Class III. Each class shall
consist, as nearly as possible, of one-third of the total number of
directors constituting the entire board of directors. The term of office of
the Class III directors will expire at the annual meeting of stockholders
next ensuing; the term of the Class II directors will expire one year
thereafter; and the term of office of the Class I directors will expire two
years thereafter. Beginning with the next annual meeting of stockholders,
successors to the class of directors whose term expires at that annual
meeting shall be elected for a three-year term. If the number of directors
is changed, any increase or decrease shall be apportioned among the classes
so as to maintain the number of directors in each class as nearly equal as
possible, and any additional directors of any class elected to fill a
vacancy resulting from an increase in such class shall hold office for a
term that shall coincide with the remaining term of that class, but in no
case will a decrease in the number of directors shorten the term of any
incumbent director. A director shall hold office until the annual meeting
for the year in which his term expires and until his successor shall be
elected and shall qualify, subject, however, to prior death, resignation,
retirement, disqualification or removal from office. Any vacancy on the
board of directors howsoever resulting, may be filled by a majority of the
directors then in office, even if less than a quorum, or by the sole
remaining director. Any director elected to fill a vacancy shall hold
office for a term that shall coincide with the term of the class to which
such director shall have been elected.
Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of Preferred Stock issued by the Corporation shall have
the right, voting separately by class or series, to elect directors at an
annual or special meeting of stockholders, the election, term of office,
filling vacancies and other features of such directorships shall be governed
by the terms of this Certificate of Incorporation or the resolution or
resolutions adopted by the board of directors pursuant to Article VI hereof,
and such directors so elected shall not be divided into classes pursuant to
this Article VII, unless expressly provided by such terms.
Subject to the rights, if any, of the holders of shares of Preferred
Stock then outstanding, any or all of the directors of the Corporation may
be removed from office at any time, but only for cause and only by the
affirmative vote of the holders of a majority of the outstanding shares of
the Corporation then entitled to vote generally in the election of
directors, considered for purposes of this Article VII as one class.
The foregoing Article may be amended, altered, repealed or rescinded by
the affirmative vote of sixty-six and two-thirds percent (66 2/3%) of the
outstanding stock of the Corporation entitled to vote.
ARTICLE VIII
Any action required or permitted to be taken at any annual or special
meeting of stockholders may be taken only upon the vote of the stockholders
at an annual or special meeting duly noticed and called, as provided in the
Bylaws of the Corporation, and may not be taken by a written consent of the
stockholders pursuant to the Delaware General Corporation Law.
ARTICLE IX
No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for any breach of
fiduciary duty by such director as a director. Notwithstanding the
foregoing sentence, a director shall be liable to the extent provided by
applicable law (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) pursuant to Section 174 of the Delaware General Corporation Law, or
(iv) for any transaction from which such director derived an improper
personal benefit.
ARTICLE X
(a) Each person who was or is made a party or is threatened to be made
a party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she, or a person of whom he or she is the
legal representative, is or was a director or officer of the Corporation or
is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to employee
benefit plans, whether the basis of such proceeding is alleged action in an
official capacity as a director, officer, employee or agent or in any other
capacity while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the Law, as the same exists or may hereafter be amended (but,
in the case of any such amendment, only to the extent that such amendment
permits the Corporation to provide broader indemnification rights than said
law permitted the Corporation to provide prior to such amendment), against
all expense, liability and loss (including attorneys' fees, judgments,
fines, ERISA excise taxes or penalties and amounts paid or to be paid in
settlement) reasonably incurred or suffered by such person in connection
therewith and such indemnification shall continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of his or her heirs, executors and administrators: provided,
however, that, except as provided in paragraph (b) hereof, the Corporation
shall indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by such person only if such
proceeding (or part thereof) was authorized by the board of directors of the
Corporation. The right to indemnification conferred in this Article shall
be a contract right and shall include the right to be paid by the
Corporation the expenses incurred in defending any such proceeding in
advance of its final disposition: provided, however, that, if the Law
requires, the payment of such expenses incurred by a director or officer in
his or her capacity as a director or officer (and not in any other capacity
in which service was or is rendered by such person while a director or
officer, including, without limitation, service to an employee benefit plan)
in advance of the final disposition of a proceeding shall be made only upon
delivery to the Corporation of an undertaking, by or on behalf of such
director or officer, to repay all amounts so advanced if it shall ultimately
be determined that such director or officer is not entitled to be
indemnified under this Article or otherwise. The Corporation may, by
action of its board of directors, provide indemnification to employees and
agents of the Corporation with the same scope and effect as the foregoing
indemnification of directors and officers.
(b) If a claim under paragraph (a) of this Article is not paid in full
by the Corporation within thirty days after a written claim has been
received by the Corporation, the claimant may, at any time thereafter, bring
suit against the Corporation to recover the unpaid amount of the claim and,
if successful in whole or in part, the claimant shall be entitled to be paid
also the expense of prosecuting such claim. It shall be a defense to any
such action (other than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final disposition
where the required undertaking, if any is required, has been tendered to the
Corporation) that the claimant has not met the standards of conduct which
make it permissible under the Law for the Corporation to indemnify the
claimant for the amount claimed, but the burden of proving such defense
shall be on the Corporation. Neither the failure of the Corporation
(including its board of directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in
the Law, nor an actual determination by the Corporation (including its board
of directors, independent legal counsel, or its stockholders) that the
claimant has not met such applicable standard of conduct, shall be a defense
to the action or create a presumption that the claimant has not met the
applicable standard of conduct.
(c) The right to indemnification and the payment of expenses incurred
in defending a proceeding in advance of its final disposition conferred in
this Article shall not be exclusive of any other right which any person may
have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, bylaw, agreement, vote of stockholders or disinterested
directors or otherwise.
(d) The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such expense,
liability or loss under the Law.
ARTICLE XI
Whenever the Corporation shall be authorized to issue only one class of
stock, each outstanding share shall entitle the holder thereof to notice of,
and the right to vote at, any meeting of stockholders. Whenever the
Corporation shall be authorized to issue more than one class of stock, no
outstanding share of any class of stock which is denied voting power under
the provisions of the Certificate of Incorporation shall entitle the holder
thereof to the right to vote at any meeting of stockholders, except as the
provisions of the Law shall otherwise require.
ARTICLE XII
The appraisal rights afforded by Section 262 of the Law, subject to the
duties and limitations therein contained, shall attach to any proposed
amendment of this Certificate of Incorporation which shall attempt to
impose, directly or indirectly, personal liability for the debts of the
Corporation on any stockholder or stockholders.
ARTICLE XIII
Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may, on the application
in a summary way of this Corporation or of any creditor or stockholder
thereof or on the application of any receiver or receivers appointed for
this Corporation under Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers
appointed for this Corporation under Section 279 of Title 8 of the Delaware
Code order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority
in number representing three fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and
to any reorganization of this Corporation as consequence of such compromise
or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said
application has been made, be binding on all the creditors or class or
creditors, and/or on all the stockholders or class of stockholders, of this
Corporation, as the case may be, and also on this Corporation.
ARTICLE XIV
In furtherance of, and not in limitation of the powers conferred by
statute, the board of directors is expressly authorized to adopt, repeal,
alter, amend or rescind the Bylaws of the Corporation.
ARTICLE XV
The Corporation reserves the right to repeal, alter, amend, or rescind
any provision contained in this Certificate of Incorporation, in the manner
now or hereafter prescribed by statute, and all rights conferred on
stockholders herein are granted subject to this reservation.
ARTICLE XVI
The foregoing Amended and Restated Certificate of Incorporation was
proposed by the board of directors and adopted by the stockholders in the
manner and by the vote prescribed by Section 242 of the Delaware General
Corporation Law.
IN WITNESS WHEREOF, the undersigned Delaware corporation has caused
this Amended and Restated Certificate of Amendment to be signed by its
President and Secretary this the 15th day of June 2004.
First Cash Financial Services, Inc.
/s/ Rick L. Wessel
--------------------------------
Rick L. Wessel
President and Secretary
APPENDIX C
FIRST CASH FINANCIAL SERVICES, INC.
2004 LONG-TERM INCENTIVE PLAN
SECTION 1. Purpose
The purpose of the 2004 Long-Term Incentive Plan (the "Plan") is to
promote the interests of First Cash Financial Services, Inc. (the "Company")
and its stockholders by giving the Company a competitive advantage in
attracting, retaining and motivating employees, officers, consultants and
Directors capable of assuring the future success of the Company, to offer
such persons incentives that are directly linked to the profitability of the
Company's business and increases in stockholder value, and to afford such
persons an opportunity to acquire a proprietary interest in the Company.
SECTION 2. Definitions
"Act" shall mean the Securities Act of 1933, as amended from time to
time.
"Affiliate" shall mean any entity that, directly or indirectly through
one or more intermediaries, is controlled by, controlling or under common
control with the Company.
"Applicable Laws" shall mean the legal requirements relating to the
administration of stock incentive plans, if any, under applicable provisions
of federal securities laws, state corporate and securities laws, the Code,
the rules of any applicable stock exchange or national market system, and
the rules of any foreign jurisdiction applicable to Awards granted to
residents therein.
"Award" shall mean a grant or award granted under the Plan, as
evidenced by an Award Agreement.
"Award Agreement" shall mean any written agreement, contract or other
instrument or document evidencing any Award granted under the Plan. Each
Award Agreement shall be subject to the applicable terms and conditions of
the Plan and any other terms and conditions (not inconsistent with the Plan)
determined by the Committee.
"Board of Directors or Board" shall mean the Board of Directors of the
Company.
"Change in Control" shall have the meaning set forth in Section 12 of
the Plan.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and any regulations promulgated thereunder.
"Committee" shall mean a committee of Directors designated by the Board
to administer the Plan, which shall initially be the Compensation Committee
of the Board of Directors. The Committee shall be composed of not less than
such number of Directors as shall be required to permit Awards granted under
the Plan to qualify under Rule 16b-3 and under Section 162(m) of the Code,
and each member of the Committee shall be an Outside Director.
"Common Stock" or "Stock" shall mean the Common Stock of the Company.
"Company" shall mean First Cash Financial Services, Inc., a Delaware
corporation.
"Covered Employee" shall mean a Participant designated prior to the
grant of an Award by the Committee who is or may be a "covered employee"
within the meaning of Section 162(m)(3) of the Code in the year in which any
such Award is granted or in the year in which such Award is expected to be
taxable to such Participant.
"Designated Beneficiary" shall mean the beneficiary designated by the
Participant, in a manner determined by the Committee, to receive amounts due
the Participant in the event of the Participant's death. In the absence of
an effective designation by the Participant, the term "Designated
Beneficiary" shall mean the Participant's estate.
"Director" shall mean a member of the Board, including any Outside
Director.
"Effective Date" shall have the meaning set forth in Section 13 of the
Plan.
"Eligible Individual" shall mean any employee, officer, Director or
consultant providing services to the Company or any Affiliate, and
prospective employees and consultants who have accepted offers of employment
or consultancy from the Company or any Affiliate, whom the Committee
determines to be an Eligible Individual.
"Employee" shall mean any person treated as an employee (including an
officer or a Director who is also treated as an employee) in the records of
the Company or any Affiliate and, with respect to any Incentive Stock Option
granted to such person, who is an employee for purposes of Section 422 of
the Code; provided, however, that neither service as a Director nor payment
of a Director's fee shall be sufficient to constitute employment for
purposes of the Plan. The Company shall determine in good faith and in the
exercise of its discretion whether an individual has become or has ceased to
be an Employee and the effective date of such individual's employment or
termination of employment without regard to any notice period or period of
"garden leave", as the case may be. For purposes of an individual's rights,
if any, under the Plan as of the time of the Company's determination, all
such determinations by the Company shall be final, binding and conclusive,
notwithstanding that the Company or any court of law or governmental agency
subsequently makes a contrary determination.
"Employer" shall mean the Company or any Affiliate.
"Exercise Price" has the meaning set forth in Section 6 of the Plan.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
"Fair Market Value" shall mean the closing price of the Common Stock on
the last day prior to the date in question on which the Stock was traded on
the Nasdaq Stock Exchange or such other national securities market or
exchange as may at the time be the principal market for the Common Stock as
designated by the Committee, or if the Shares were not traded on such
national securities market or exchange on such date, then on the next
preceding date on which the Shares are traded, all as reported by such
source as the Committee may select.
"Fiscal Year" shall mean the fiscal year of the Company beginning on
January 1 and ending on the following December 31.
"Incentive Stock Option" means any Stock Option granted under Section 6
of the Plan that is designated as, and intended to qualify as, an "incentive
stock option" within the meaning of Section 422 of the Code.
"Non-Stock-Based Incentive Compensation" refers to incentive
compensation whose value is not based in whole or in part on the value of
Common Stock.
"Nonqualified Stock Option" means any Option granted under Section 6 of
the Plan that is not an Incentive Stock Option.
"Option" shall mean an Incentive Stock Option or a Nonqualified Stock
Option.
"Outside Director" means any Director who qualifies as an "outside
director" within the meaning of Section 162(m) of the Code, as a "non-
employee director" within the meaning of Rule 16b-3 and as an "independent
director" within the meaning of the listing requirements of the Nasdaq Stock
Exchange or such other national securities market or exchange as may at the
time be the principal market for the Common Stock.
"Participant" means an Eligible Individual designated to be granted an
Award under the Plan.
"Payment Value" shall mean the dollar amount assigned to a Performance
Share, which shall be equal to the Fair Market Value of the Common Stock on
the day of the Committee's determination under Section 8(c) with respect to
the applicable Performance Cycle.
"Performance Cycle" or "Cycle" shall mean the period of years selected
by the Committee during which performance is measured for the purpose of
determining the extent to which an award of Performance Shares has been
earned.
"Performance Goals" means the performance goals established by the
Committee in connection with the grant of an Award. In the case of Qualified
Performance-Based Awards, (i) such goals shall be based on the attainment of
one or more of the following objective measures with respect to the Company
or an Affiliate, or such subsidiary, division or department of the Company
or an Affiliate for or within which the Participant performs services:
revenue growth; earnings before interest, taxes, depreciation, and
amortization; earnings before interest and taxes; operating income; pre- or
after- tax income; earnings per share; earnings per share from continuing
operations; other board or committee approved performance measurements; cash
flow; cash flow per share; return on equity; return on invested capital;
return on assets; economic value added (or an equivalent metric); share
price performance; total stockholder return; improvement in or attainment of
expense levels; improvement in or attainment of working capital levels;
(ii) such Performance Goals shall be set by the Committee in writing within
the time period prescribed by Section 162(m) of the Code so that the outcome
is substantially uncertain at the time the Performance Goals are
established; and (iii) the Committee certifies that such Performance Goals
were met. Such Performance Goals also may be based upon the attaining of
specified levels of Company performance under one or more of the measures
described above relative to the performance of other companies.
"Qualified Performance-Based Award" means an Award of Restricted Stock,
Restricted Stock Units or Performance Shares designated as such by the
Committee at the time of grant, based upon a determination that (i) the
recipient is or may be a Covered Employee in the year in which the Company
would expect to be able to claim a tax deduction with respect to such
Restricted Stock, Restricted Stock Units, Options or Performance Shares and
(ii) the Committee wishes such Award to qualify for the Section 162(m)
Exemption.
"Restricted Period" shall mean the period of years selected by the
Committee during which a grant of Restricted Stock or Restricted Stock Units
may be forfeited to the Company.
"Restricted Stock" shall mean shares of Common Stock contingently
granted to a Participant under Section 9 of the Plan.
"Restricted Stock Unit" shall mean any unit granted under Section 9 of
the Plan evidencing the right to receive a Share (or the cash payment equal
to the Fair Market Value of a Share) at some future date.
"Rule 16b-3" shall mean Rule 16b-3, as promulgated by the Securities
and Exchange Commission under Section 16(b) of the Exchange Act, as amended
from time to time.
"Section 162(m) Exemption" shall mean the exemption from the limitation
on deductibility imposed by Section 162(m) of the Code that is set forth in
Section 162(m)(4)(C) of the Code.
"Share" or "Shares" shall mean a share or shares of Common Stock.
"Stock Appreciation Right" shall mean a right granted under Section 7
of the Plan.
"Stock Exchange" shall mean the Nasdaq Stock Exchange or such other
national securities market or exchange as may at the time be the principal
market for the Shares.
"Stock Unit Award" shall mean an award of Common Stock or units granted
under Section 10 of the Plan.
"Stockholders Meeting" shall mean the annual meeting of stockholders of
the Company in each year.
SECTION 3. Administration
(a) Power and Authority of the Committee. The Plan shall be
administered by the Committee. Subject to the terms of the Plan and to
applicable law, the Committee shall have full power and authority to:
(i) designate Participants;
(ii) determine whether and to what extent any type (or types) of Award
is to be granted hereunder;
(iii) determine the number of Shares to be covered by (or the method by
which payments or other rights are to be determined in connection with)
each Award;
(iv) determine the terms and conditions of any Award or Award
Agreement;
(v) subject to Section 11 hereof, amend the terms and conditions of any
Award or Award Agreement and accelerate the vesting and/or
exercisability of any Option or waive any restrictions relating to any
Award; PROVIDED, HOWEVER, that (A) except for adjustments pursuant to
Section 5(c) of the Plan, in no event may any Option granted under this
Plan be (x) amended to decrease the Exercise Price thereof,
(y) cancelled in conjunction with the grant of any new Option with a
lower Exercise Price, or (z) otherwise subject to any action that would
be treated, for accounting purposes, as a "repricing" of such Option,
unless such amendment, cancellation, or action is approved by the
stockholders of the Company to the extent required by applicable law
and stock exchange rules and (B) the Committee may not adjust upward
the amount payable to a Covered Employee with respect to a Qualified
Performance-Based Award or waive or alter the Performance Goals
associated herewith in a manner that would violate Section 162(m) of
the Code;
(vi) determine whether, to what extent and under what circumstances the
exercise price of Awards may be paid in cash, Shares, other securities,
other Awards or other property, or canceled, forfeited or suspended;
(vii) determine whether, to what extent and under what circumstances
cash, Shares, other securities, other Awards, other property and other
amounts payable with respect to an Award under the Plan shall be
deferred either automatically or at the election of the holder thereof
or the Committee;
(viii) interpret and administer the Plan and any instrument or
agreement, including an Award Agreement, relating to the Plan;
(ix) adopt, alter, suspend, waive or repeal such rules, guidelines and
practices and appoint such agents as it shall deem advisable or
appropriate for the proper administration of the Plan; and
(x) make any other determination and take any other action that the
Committee deems necessary or desirable for the administration of the
Plan. Unless otherwise expressly provided in the Plan, all
designations, determinations, interpretations and other decisions under
or with respect to the Plan or any Award or Award Agreement shall be
within the sole discretion of the Committee, may be made at any time,
and shall be final, conclusive and binding upon all persons, including
without limitation, the Company, its Affiliates, subsidiaries,
stockholders, Eligible Individuals and any holder or beneficiary of any
Award.
(b) Action by the Committee; Delegation. Except to the extent
prohibited by applicable law or the applicable rules of a Stock Exchange,
the Committee may delegate all or any part of its duties and powers under
the Plan to one or more persons, including Directors or a committee of
Directors, subject to such terms, conditions and limitations as the
Committee may establish in its sole discretion; PROVIDED, HOWEVER, that the
Committee shall not delegate its powers and duties under the Plan (i) with
regard to officers or Directors of the Company or any Affiliate who are
subject to Section 16 of the Exchange Act or (ii) in a manner that would
cause an Award designated as a Qualified Performance-Based Award not to
qualify for, or to cease to qualify for, the Section 162(m) Exemption; and
PROVIDED, FURTHER, that any such delegation may be revoked by the Committee
at any time.
(c) Power and Authority of the Board. Notwithstanding anything to the
contrary contained herein, except to the extent that the grant or exercise
of such authority would cause any Award or transaction to become subject to
(or lose an exemption under) the short-swing profit recovery provisions of
Section 16 of the Exchange Act or cause an Award designated as a Qualified
Performance-Based Award not to qualify for, or to cease to qualify for, the
Section 162(m) Exemption, the Board may, at any time and from time to time,
without any further action of the Committee, exercise the powers and duties
of the Committee under the Plan. To the extent that any permitted action
taken by the Board conflicts with action taken by the Committee, the Board
action shall control.
SECTION 4. Eligibility
Any Eligible Individual shall be eligible to be designated a
Participant. In determining which Eligible Individuals shall receive an
Award and the terms of any Award, the Committee may take into account the
nature of the services rendered by the respective Eligible Individuals,
their present and potential contributions to the success of the Company, or
such other factors as the Committee, in its discretion, shall deem relevant.
All Awards and the terms of any Award to Eligible Individuals who are
members of the Committee must also be approved by the Board of Directors.
Notwithstanding the foregoing, Incentive Stock Options may be granted only
to full-time or part-time Employees (which term as used herein includes,
without limitation, officers and Directors who also are Employees), and an
Incentive Stock Option shall not be granted to an Employee of an Affiliate
unless such Affiliate also is a "subsidiary corporation" of the Company
within the meaning of Section 424(f) of the Code or any successor provision.
SECTION 5. Shares Available for Awards
(a) Shares Available. Subject to adjustment as provided in
Section 5(c) of the Plan, the aggregate number of Shares that may be issued
under the Plan shall be 900,000. Shares that may be issued under the Plan
may be authorized but unissued Shares or Shares re-acquired and held in
treasury.
(b) Accounting for Awards. For purposes of this Section 5, if an Award
entitles the holder thereof to receive or purchase Shares, the number of
Shares covered by such Award or to which such Award relates shall be counted
on the date of grant of such Award against the aggregate number of Shares
available for granting Awards under the Plan. Any Shares that are used by a
Participant as full or partial payment to the Company of the purchase price
relating to an Award, including in connection with the satisfaction of tax
obligations relating to an Award, shall again be available for granting
Awards (other than Incentive Stock Options) under the Plan. In addition, if
any Shares covered by an Award or to which an Award relates are not
purchased or are forfeited, or if an Award otherwise terminates without
delivery of any Shares, then the number of Shares counted against the
aggregate number of Shares available under the Plan with respect to such
Award, to the extent of any such forfeiture or termination, shall again be
available for granting Awards under the Plan.
(c) Adjustments. In the event of any change in corporate
capitalization (including, but not limited to, a change in the number of
Shares outstanding), such as a stock split or a corporate transaction, such
as any merger, consolidation, separation, including a spin-off, or other
distribution of stock or property of the Company (including any
extraordinary cash or stock dividend), any reorganization (whether or not
such reorganization comes within the definition of such term in Section 368
of the Code) or any partial or complete liquidation of the Company, the
Committee or Board may make such substitution or adjustments in the
aggregate number and kind of shares reserved for issuance under the Plan,
and the maximum limitation upon Stock Options and Stock Appreciation Rights
and other Awards to be granted to any Participant, in the number, kind and
Exercise Price of shares subject to outstanding Stock Options and Stock
Appreciation Rights, in the number and kind of shares subject to other
outstanding Awards granted under the Plan and/or such other equitable
substitution or adjustments as it may determine to be appropriate in its
sole discretion (including, without limitation, the provision of an amount
in cash in consideration for any such Awards); PROVIDED, HOWEVER, that the
number of shares subject to any Award shall always be a whole number.
Without limiting the generality of the foregoing, in connection with any
Disaffiliation of a subsidiary of the Company, the Committee shall have the
authority to arrange for the assumption or replacement of Awards with new
awards based on shares of the affected subsidiary or by an affiliate of an
entity that controls the subsidiary following the Disaffiliation. For
purposes hereof, "Disaffiliation" of a subsidiary shall mean the
subsidiary's ceasing to be a subsidiary of the Company for any reason
(including, without limitation, as a result of a public offering, spinoff,
sale or other distribution or transfer by the Company of the stock of the
subsidiary).
(d) Award Limitations. No more than 100,000 shares of Common Stock may
be subject to Qualified Performance-Based Awards granted to any Eligible
Individual, including a Covered Employee, in any Fiscal Year.
SECTION 6. Stock Options
(a) Grant. Subject to the provisions of the Plan, the Committee shall
have sole and complete authority to determine the Eligible Individuals to
whom Options shall be granted (which may be Nonqualified Stock Options or
Incentive Stock Options), the number of shares to be covered by each Option,
the exercise price for each Option, and the conditions and limitations
applicable to the exercise of each Option. In the case of Incentive Stock
Options, the terms and conditions of such grants shall be subject to and
comply with such rules as may be prescribed by Section 422 of the Code.
(b) Exercise Price. The Exercise Price per Share purchasable under a
Option shall be determined by the Committee; PROVIDED, HOWEVER, that, unless
otherwise determined by the Committee, such Exercise Price shall not be less
than 100% of the Fair Market Value of a Share on the date of grant of such
Option.
(c) Time and Method of Exercise. The Committee shall determine the
time or times at which an Option may be exercised in whole or in part and
the method or methods by which, and the form or forms (including, without
limitation, cash, Shares, other securities, other Awards or other property,
or any combination thereof, having a Fair Market Value on the exercise date
equal to the applicable Exercise Price) in which, payment of the Exercise
Price with respect thereto may be made or deemed to have been made.
(d) Option Term. The term of each Stock Option shall be fixed by the
Committee at the time of grant, but in no event shall be more than 10 years
from the date of grant.
(e) Incentive Stock Options. The Committee may designate Options as
Nonqualified Stock Options or as Incentive Stock Options. Any Incentive
Stock Option authorized under the Plan shall contain such provisions as the
Committee shall deem advisable, but shall in all events be consistent with
and contain all provisions required in order to qualify the Stock Option as
an Incentive Stock Option. To the extent that any Stock Option is not
designated as an Incentive Stock Option or even if so designated does not
qualify as an Incentive Stock Option on or subsequent to its grant date, it
shall constitute a Nonqualified Stock Option.
SECTION 7. Stock Appreciation Rights
The Committee is hereby authorized to grant Stock Appreciation Rights
to Eligible Individuals subject to the terms of the Plan. Each Stock
Appreciation Right granted under the Plan shall confer on the holder upon
exercise the right to receive, as determined by the Committee, cash or a
number of Shares or a combination of cash and Shares equal to the excess of
(A) the Fair Market Value of one Share on the date of exercise (or, if the
Committee shall so determine, at any time during a specified period before
or after the date of exercise) over (B) the grant price of the Stock
Appreciation Right as determined by the Committee, which grant price shall
not be less than 100% of the Fair Market Value of one Share on the date of
grant of the Stock Appreciation Right, unless otherwise determined by the
Committee. Subject to the terms of the Plan, the grant price, term, methods
of exercise, dates of exercise, methods of settlement, the effect of
termination of employment (by reason of death, disability, retirement or
otherwise) on the exercisability and any other terms and conditions
(including conditions or restrictions on the exercise thereof) of any Stock
Appreciation Right shall be as determined by the Committee, PROVIDED, that
in no event shall the term of a Stock Appreciation Right be longer than ten
years.
SECTION 8. Performance Shares
(a) The Committee shall have sole and complete authority to determine
the Eligible Individuals who shall receive Performance Shares, the number of
such shares for each Performance Cycle, the Performance Goals on which each
Award shall be contingent, the duration of each Performance Cycle, and the
value of each Performance Share. There may be more than one Performance
Cycle in existence at any one time, and the duration of Performance Cycle
may differ from each other. The Committee may, prior to or at the time of
the grant, designate Performance Awards as Qualified Performance-Based
Awards, in which event it shall condition the settlement thereof upon the
Committee's certification of the attainment of the Performance Goals.
(b) The Committee shall establish Performance Goals for each Cycle on
the basis of such criteria and to accomplish such objectives as the
Committee may from time to time select.
(c) As soon as practicable after the end of a Performance Cycle, the
Committee shall determine the number of Performance Shares which have been
earned on the basis of performance in relation to the established
Performance Goals.
(d) Payment Values of earned Performance Shares shall be distributed to
the Participant or, if the Participant has died, to the Participant's
Designated Beneficiary, as soon as practicable after the expiration of the
Performance Cycle and the Committee's determination under paragraph (c),
above. The Committee shall determine whether Payment Values are to be
distributed in the form of cash or shares of Common Stock or a combination
of cash and shares of Common Stock.
SECTION 9. Restricted Stock and Restricted Stock Units
The Committee is hereby authorized to grant Restricted Stock and
Restricted Stock Units to Eligible Individuals with the following terms and
conditions and with such additional terms and conditions not inconsistent
with the provisions of the Plan as the Committee shall determine:
(i) Restrictions. Shares of Restricted Stock and Restricted Stock
Units shall be subject to such restrictions as the Committee may impose
(including, without limitation, limitation on transfer, forfeiture
conditions, limitation on the right to vote a Share of Restricted Stock
or the right to receive any dividend or other right or property with
respect thereto), which restrictions may lapse separately or in
combination at such time or times, in such installments or otherwise as
the Committee may deem appropriate. The grant or vesting of Restricted
Stock and Restricted Stock Units may be performance-based or time-based
or both. Restricted Stock and Restricted Stock Units may be Qualified
Performance-Based Awards, in which event the grant or vesting, as
applicable, of such Restricted Stock or Restricted Stock Units shall be
conditioned upon the attainment of Performance Goals.
(ii) Stock Certificates; Delivery of Shares.
(A) Any Restricted Stock granted under the Plan shall be evidenced
in such manner as the Committee may deem appropriate, including
book-entry registration or issuance of one or more stock
certificates. Any certificate issued in respect of shares of
Restricted Stock shall be registered in the name of such
Participant and shall bear an appropriate legend referring to the
applicable Award Agreement and possible forfeiture of such shares
of Restricted Stock. The Committee may require that the
certificates evidencing such shares be held in custody by the
Company until the restrictions thereon shall have lapsed and that,
as a condition of any Award of Restricted Stock, the Participant
shall have delivered a stock power, endorsed in blank, relating to
the Shares covered by such Award.
(B) In the case of Restricted Stock Units, no Shares or other
property shall be issued at the time such Awards are granted. Upon
the lapse or waiver of restrictions and the restricted period
relating to Restricted Stock Units (or at such later time as may
be determined by the Committee), Shares or other cash or property
shall be issued to the holder of the Restricted Stock Units and
evidenced in such manner as the Committee may deem appropriate,
including book-entry registration or issuance of one or more stock
certificates.
(iii) Forfeiture. Except as otherwise determined by the Committee,
upon a Participant's termination of employment (as determined under
criteria established by the Committee) during the applicable
restriction period, all applicable Shares of Restricted Stock and
Restricted Stock Units at such time subject to restriction shall be
forfeited and reacquired by the Company.
SECTION 10. Other Stock-Based Awards
(a) In addition to granting Options, Stock Appreciation Rights,
Performance Shares, Restricted Stock and Restricted Stock Units, the
Committee shall have authority to grant to Participants Stock Unit Awards
that can be in the form of Common Stock or units, the value of which is
based, in whole or in part, on the value of Common Stock. Subject to the
provisions of the Plan, including Section 10(b) below, Stock Unit Awards
shall be subject to such terms, restrictions, conditions, vesting
requirements and payment rules (all of which are sometimes hereinafter
collectively referred to as "rules") as the Committee may determine in its
sole and complete discretion at the time of grant. The rules need not be
identical for each Stock Unit Award.
(b) In the sole and complete discretion of the Committee, a Stock Unit
Award may be granted subject to the following rules:
(1) Any shares of Common Stock which are part of a Stock Unit
Award may not be assigned, sold, transferred, pledged or otherwise
encumbered prior to the date on which the Shares are issued or, if
later, the date provided by the Committee at the time of grant of the
Stock Unit Award.
(2) Stock Unit Awards may provide for the payment of cash
consideration by the person to whom such Award is granted or provide
that the Award, and any Common Stock to be issued in connection
therewith, if applicable, shall be delivered without the payment of
cash consideration, provided that for any Common Stock to be purchased
in connection with a Stock Unit Award the purchase price shall be at
least 50% of the Fair Market Value of such Common Stock on the date
such Award is granted.
(3) Stock Unit Awards may relate in whole or in part to certain
performance criteria established by the Committee at the time of grant.
(4) Stock Unit Awards may provide for deferred payment schedules
and/or vesting over a specified period of employment.
(5) In such circumstances as the Committee may deem advisable, the
Committee may waive or otherwise remove, in whole or in part, any
restriction or limitation to which a Stock Unit Award was made subject
at the time of grant.
(c) In the sole and complete discretion of the Committee, an Award,
whether made as a Stock Unit Award under this Section 10 or as an Award
granted pursuant to Sections 6 through 9, may provide the Participant with
(i) dividends or dividend equivalents (payable on a current or deferred
basis) and (ii) cash payments in lieu of or in addition to an Award.
SECTION 11. Amendment and Termination
(a) Amendments to the Plan. The Board may amend, alter, suspend,
discontinue or terminate the Plan at any time; PROVIDED, HOWEVER, that,
notwithstanding any other provision of the Plan or any Award Agreement,
without the approval of the stockholders of the Company, no amendment,
alteration, suspension, discontinuation or termination shall be made that,
absent such approval:
(i) requires stockholder approval under the rules or regulations
of the Nasdaq Stock Exchange, any other securities exchange or the
National Association of Securities Dealers, Inc. that are applicable to
the Company;
(ii) increases the number of Shares authorized under the Plan as
specified in Section 5(c) of the Plan; or
(iii) without such stockholder approval, would cause the Company to
be unable, under the Code, to grant Incentive Stock Options under the
Plan.
(b) Amendments to Awards. The Committee may waive any conditions of or
rights of the Company under any outstanding Award, prospectively or
retroactively. Except as otherwise provided herein or in an Award Agreement,
the Committee may not amend, alter, suspend, discontinue or terminate any
outstanding Award, prospectively or retroactively, if such action would
adversely affect the rights of the holder of such Award, without the consent
of the Participant or holder or beneficiary thereof or such amendment would
cause a Qualified Performance-Based Award to cease to qualify for the
Section 162(m) Exemption.
(c) Correction of Defects, Omissions and Inconsistencies. The
Committee may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent it
shall deem desirable to carry the Plan into effect.
SECTION 12. General Provisions
(a) Withholding. No later than the date as of which an amount first
becomes includible in the gross income of a Participant for federal income
tax purposes (or the income tax laws of any other foreign jurisdiction) with
respect to any Award under the Plan, the Participant shall pay to the
Company, or make arrangements satisfactory to the Company regarding the
payment of, any federal, state, local or foreign taxes of any kind required
by law to be withheld with respect to such amount. The obligations of the
Company under the Plan shall be conditional on such payment or arrangements,
and the Company and its Affiliates shall, to the extent permitted by law, be
entitled to take such action and establish such procedures as it deems
appropriate to withhold or collect all applicable payroll, withholding,
income or other taxes from such Participant. In order to assist a
Participant in paying all or a portion of the federal, state, local and
foreign taxes to be withheld or collected upon exercise or receipt of (or
the lapse of restrictions relating to) an Award, the Committee, in its
discretion and subject to such additional terms and conditions as it may
adopt, may permit the Participant to satisfy such tax obligation by
(i) electing to have the Company withhold a portion of the Shares or other
property otherwise to be delivered upon exercise or receipt of (or the lapse
of restrictions relating to) such Award with a Fair Market Value equal to
the amount of such taxes or (ii) delivering to the Company Shares or other
property other than Shares issuable upon exercise or receipt of (or the
lapse of restrictions relating to) such Award with a Fair Market Value equal
to the amount of such taxes, PROVIDED that, in either case, not more than
the legally required minimum withholding may be settled with Shares. Any
such election must be made on or before the date that the amount of tax to
be withheld is determined.
(b) Awards. Each Award hereunder shall be evidenced by an Award
Agreement, delivered to the Participant or Outside Director and shall
specify the terms and conditions thereof and any rules applicable thereto,
including but not limited to the effect on such Award of the death,
retirement or other termination of employment of the Participant or Outside
Director and the effect thereon, if any, of a Change in Control of the
Company.
(c) No Rights to Awards. No Eligible Individual or other person shall
have any claim to be granted any Award under the Plan, and there is no
obligation for uniformity of treatment of Eligible Individuals or holders or
beneficiaries of Awards under the Plan. The terms and conditions of Awards
need not be the same with respect to any Participant or with respect to
different Participants.
(d) No Right to Employment. No person shall have any claim or right to
be granted an Award, and the grant of an Award shall not be construed as
giving a Participant the right to be retained in the employ of the Employer.
Further, the Employer expressly reserves the right at any time to dismiss a
Participant free from any liability, or any claim under the Plan, except as
provided herein or in any agreement entered into with respect to an Award.
(e) No Rights as Stockholder. Subject to the provisions of the
applicable Award, no Participant or Designated Beneficiary shall have any
rights as a stockholder with respect to any shares of Common Stock to be
distributed under the Plan until he or she has become the holder thereof.
Notwithstanding the foregoing, in connection with each grant of Restricted
Stock or Stock Unit Award hereunder, the applicable Award shall specify if
and to what extent the Participant shall not be entitled to the rights of a
stockholder in respect of such Restricted Stock or Stock Unit Award.
(f) Construction of the Plan. The validity, construction,
interpretation, administration and effect of the Plan and of its rules and
regulations, and rights relating to the Plan, shall be determined solely in
accordance with the laws of the State of Texas.
(g) Change in Control. In order to preserve Participant's rights under
an Award in the event of a transaction or occurrence that the Committee
reasonably determines to constitute a change in control of the Company (a
"Change-in-Control"), the Committee in its discretion may, at the time an
Award is made or any time thereafter, take one or more of the following
actions: (i) provide for the acceleration of any time period relating to the
exercise of the Award, (ii) provide for the purchase of the Award upon the
Participant's request for an amount of cash or other property that could
have been received upon the exercise or realization of the Award had the
Award been currently exercisable or payable, (iii) adjust the terms of the
Award in a manner determined by the Committee to reflect the Change in
Control, (iv) cause the Award to be assumed, or new rights substituted
therefore, by another entity, or (v) make such other provision as the
Committee may consider equitable and in the best interests of the Company.
(h) Forms of Payment Under Awards. Subject to the terms of the Plan,
payments or transfers to be made by the Company or an Affiliate upon the
grant, exercise or settlement of an Award may be made in such form or forms
as the Committee shall determine (including, without limitation, cash,
Shares, promissory notes (PROVIDED, HOWEVER, that the acceptance of such
notes does not conflict with Section 402 of the Sarbanes-Oxley Act of 2002),
other securities, other Awards or other property or any combination
thereof), and may be made in a single payment or transfer, in installments
or on a deferred basis, in each case in accordance with rules and procedures
established by the Committee. Such rules and procedures may include, without
limitation, provisions for the payment or crediting of reasonable interest
on installment or deferred payments or the grant or crediting of dividend
equivalents with respect to installment or deferred payments.
(i) Section 16 Compliance; Section 162(m) Administration. The Plan is
intended to comply in all respects with Rule 16b-3 or any successor
provision, as in effect from time to time, and in all events the Plan shall
be construed in accordance with the requirements of Rule 16b-3. If any Plan
provision does not comply with Rule 16b-3 as hereafter amended or
interpreted, the provision shall be deemed inoperative. The Board, in its
absolute discretion, may bifurcate the Plan so as to restrict, limit or
condition the use of any provision of the Plan with respect to persons who
are officers or Directors subject to Section 16 of the Exchange Act without
so restricting, limiting or conditioning the Plan with respect to other
Eligible Individuals. The Company intends that all Stock Options and Stock
Appreciation Rights granted under the Plan to individuals who are or who the
Committee believes will be Covered Employees will constitute "qualified
performance-based compensation" within the meaning of Section 162(m) of the
Code.
(j) Restrictions. Shares shall not be issued pursuant to the exercise
or payment of the Exercise Price or purchase price relating to an Award
unless such exercise or payment and the issuance and delivery of such Shares
pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Act, the Exchange Act, the rules and
regulations promulgated thereunder, the requirements of any applicable stock
exchange and the Texas Business Corporations Act, as amended from time to
time. As a condition to the exercise or payment of the Exercise Price or
purchase price relating to such Award, the Company may require that the
person exercising or paying the Exercise Price or purchase price represent
and warrant that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation and warranty is
required by law. All Shares or other securities delivered under the Plan
pursuant to any Award or the exercise thereof shall be subject to such stop
transfer orders and other restrictions as the Committee may deem advisable,
and the Committee may direct appropriate stop transfer orders and cause
other legends to be placed on the certificates for such Shares or other
securities to reflect such restrictions.
(k) Limits on Transfer of Awards. No Award and no right under any such
Award shall be transferable by a Participant otherwise than by will or by
the laws of descent and distribution and the Company shall not be required
to recognize any attempted assignment of such rights by any Participant;
PROVIDED, HOWEVER, that, if so determined by the Committee, a Participant
may, in the manner established by the Committee, designate a beneficiary or
beneficiaries to exercise the rights of the Participant and receive any
property distributable with respect to any Award upon the death of the
Participant; and PROVIDED, FURTHER, that, if so determined by the Committee,
a Participant may transfer a Nonqualified Stock Option to any Family Member
(as such term is defined in the General Instructions to Form S-8 (or
successor to such Instructions or such Form)) at any time that such
Participant holds such Stock Option, whether directly or indirectly or by
means of a trust or partnership or otherwise, PROVIDED that the Participant
may not receive any consideration for such transfer, the Family Member may
not make any subsequent transfers other than by will or by the laws of
descent and distribution and the Company receives written notice of such
transfer. Except as otherwise determined by the Committee, each Award (other
than an Incentive Stock Option) or right under any such Award shall be
exercisable during the Participant's lifetime only by the Participant or, if
permissible under applicable law, by the Participant's guardian or legal
representative. Except as otherwise determined by the Committee, no Award
(other than an Incentive Stock Option) or right under any such Award may be
pledged, alienated, attached or otherwise encumbered, and any purported
pledge, alienation, attachment or other encumbrance thereof shall be void
and unenforceable against the Company or any Affiliate. Notwithstanding the
above, in the discretion of the Committee, awards may be transferable
pursuant to a Qualified Domestic Relations Order ("QDRO"), as determined by
the Committee or its designee.
(l) Severability. If any provision of the Plan or any Award is or
becomes or is deemed to be invalid, illegal or unenforceable in any
jurisdiction or would disqualify the Plan or any Award under any law deemed
applicable by the Committee, such provision shall be construed or deemed
amended to conform to applicable laws, or if it cannot be so construed or
deemed amended without, in the determination of the Committee, materially
altering the purpose or intent of the Plan or the Award, such provision
shall be stricken as to such jurisdiction or Award, and the remainder of the
Plan or any such Award shall remain in full force and effect.
SECTION 13. Effective Date of Plan
Upon its adoption by the Board, the Plan shall be submitted for
approval by the stockholders of the Company and shall be effective as of the
date of such approval (the "EFFECTIVE DATE").
SECTION 14. Term of the Plan
The Plan will terminate on the tenth anniversary of the Effective Date
or any earlier date of discontinuation or termination established pursuant
to Section 3 of the Plan. However, unless otherwise expressly provided in
the Plan or in an applicable Award Agreement, any Award theretofore granted
may extend beyond such date, and the authority of the Committee provided for
hereunder with respect to the Plan and any Awards, and the authority of the
Board to amend the Plan, shall extend beyond the termination of the Plan.