<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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:
<TABLE>
<S> <C>
[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 Rule 14a-11(c) or Rule 14a-12
</TABLE>
ALRENCO, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] 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 date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
ALRENCO, INC.
, 1998
Dear Shareholder:
We invite you to attend the 1998 Annual Meeting of Shareholders of Alrenco,
Inc. to be held at 11:00 a.m., Central Daylight Time, on Tuesday, June 23, 1998
at the offices of Gardere & Wynne LLP, Suite 3000, 1601 Elm Street, Dallas,
Texas 75201. The matters to be considered at the meeting are described in the
formal Notice and Proxy Statement on the following pages.
In addition to the specific matters to be acted upon, there will be a
report on the progress of Alrenco, Inc. and an opportunity to ask questions of
general interest to Shareholders.
Whether or not you plan to attend in person, it is important that your
shares be represented at the Annual Meeting. The Board of Directors recommends
that shareholders vote FOR each of the matters described in the Proxy Statement
to be presented at the Annual Meeting. PLEASE DATE AND SIGN YOUR PROXY CARD AND
RETURN IT IN THE ENCLOSED ENVELOPE AS SOON AS POSSIBLE. Thank you.
Sincerely,
George D. Johnson, Jr.
Chairman of the Board
<PAGE> 3
ALRENCO, INC.
714 E. KIMBROUGH STREET
MESQUITE, TEXAS 75149
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS OF ALRENCO, INC.:
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Shareholders or any
adjournment or postponement thereof (the "Annual Meeting") of Alrenco, Inc., an
Indiana corporation (the "Company"), will be held at 11:00 a.m., Central
Daylight Time, on June 23, 1998, at the offices of Gardere & Wynne LLP, Suite
3000, 1601 Elm Street, Dallas, Texas 75201 for the following purposes, all of
which are set forth more completely in the accompanying proxy statement:
(1) To elect two directors to a term of office expiring at the
Company's 2001 Annual Meeting of Shareholders or until a successor of each
is duly elected and qualified;
(2) To consider and vote upon a proposal to ratify the Alrenco, Inc.
1998 Stock Incentive Plan;
(3) To consider and vote upon a proposal to approve the
reincorporation of the Company in the State of Delaware; and
(4) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on April 28, 1998 as
the record date for determining those shareholders entitled to notice of, and to
vote at, the Annual Meeting.
You are cordially invited to attend the Annual Meeting in person. EVEN IF
YOU PLAN TO ATTEND IN PERSON, YOU ARE REQUESTED TO DATE, SIGN AND RETURN THE
ENCLOSED PROXY AT YOUR EARLIEST CONVENIENCE. You may revoke your proxy at any
time prior to its use.
By Order of the Board of Directors
George D. Johnson, Jr.
Chairman of the Board
Mesquite, Texas
, 1998
PLEASE DATE AND SIGN THE ENCLOSED PROXY AND RETURN
IT PROMPTLY IN THE ENVELOPE PROVIDED FOR THAT PURPOSE.
<PAGE> 4
ALRENCO, INC.
714 E. KIMBROUGH STREET
MESQUITE, TEXAS 75149
---------------------
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board") of Alrenco, Inc., an Indiana
corporation (the "Company"), for use at the 1998 Annual Meeting of Shareholders
of the Company or any adjournment or postponement thereof (the "Annual
Meeting"). The Annual Meeting will be held at 11:00 a.m., Central Daylight Time,
on June 23, 1998 at the offices of Gardere & Wynne, Suite 3000, 1601 Elm Street,
Dallas, Texas 75201.
This Proxy Statement, the Notice of Annual Meeting, the proxy card and the
Company's Annual Report to Shareholders were mailed to shareholders of the
Company on or about , 1998.
RECORD DATE
Only shareholders of record at the close of business on April 28, 1998 (the
"Record Date") are entitled to vote at the Annual Meeting.
SHARES OUTSTANDING AND VOTING RIGHTS
As of the Record Date, there were shares of the common stock of
the Company, no par value (the "Common Stock"), outstanding and entitled to
vote. Each share of Common Stock entitles the holder to one vote on each matter
presented at the Annual Meeting.
PROXY PROCEDURE
Proxies properly executed and returned in a timely manner will be voted at
the Annual Meeting in accordance with the directions noted thereon. If no
direction is indicated, proxies will be voted FOR the election of the nominees
named herein as directors, FOR the other proposals set forth herein, and in
accordance with the judgment of the persons acting under the proxies on any
other matters presented for a vote. Any shareholder giving a proxy has the power
to revoke it at any time before it is voted, either in person at the Annual
Meeting, by written notice to the Secretary of the Company or by delivery of a
later-dated proxy.
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the inspector(s) of elections appointed for the meeting and will be counted in
determining whether or not a quorum is present. A proxy submitted by a
shareholder may indicate that all or a portion of the shares represented by such
proxy are not being voted by such shareholder with respect to a particular
matter ("non-voted shares"). This could occur, for example, when a broker is not
permitted to vote shares held in "street name" on certain matters in the absence
of instructions from the beneficial owner of the shares. Non-voted shares with
respect to a particular matter will not be considered shares present and
entitled to vote on such matter, although such shares will be counted for
purposes of determining the presence of a quorum. Shares voting to abstain as to
a particular matter, and directions to "withhold authority" to vote for
directors, will not be considered non-voted shares and will be considered
present and entitled to vote with respect to such matter.
VOTING REQUIREMENTS
Provided that a quorum is present at the Annual Meeting, the affirmative
vote of a plurality of the votes cast by the shares present in person or by
proxy will be required to elect each director. The proposal to ratify the
adoption of the Alrenco, Inc. 1998 Stock Incentive Plan (the "1998 Stock
Incentive Plan") requires the affirmative vote of the majority of the shares
represented and entitled to vote at the meeting. The affirmative vote of the
holders of a majority of the votes represented by the outstanding shares of the
Common Stock, whether or not present at the Annual Meeting, who are entitled to
vote at the Annual Meeting, is required for the approval and adoption of the
proposal to reincorporate the Company in the State of Delaware (the
<PAGE> 5
"Reincorporation Proposal"). Non-voted shares (i) will have the effect of a vote
"Against" the Reincorporation Proposal and (ii) will have no effect on the
proposal to elect directors or the proposal to ratify the adoption of the 1998
Stock Incentive Plan. Abstentions with respect to a proposal are counted for
purposes of establishing a quorum. If a quorum is present, abstentions (i) will
have the effect of a vote "Against" the proposal to ratify the adoption of the
1998 Stock Incentive Plan and the Reincorporation Proposal and (ii) will have no
effect on the election of directors.
COSTS OF SOLICITATION
Proxies will be solicited by the Board through use of the mails. Proxies
may also be solicited by directors, officers and other employees of the Company,
either personally, by mail, by telephone or otherwise, but such persons will not
be compensated for such services. Brokerage firms, banks, fiduciaries, voting
trustees or other nominees will be requested to forward the soliciting material
to each beneficial owner of stock held of record by them. The entire cost of the
solicitation will be borne by the Company.
BIOGRAPHICAL INFORMATION REGARDING
DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS
The Company's current directors and director nominees are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION CLASS
- ---- --- -------- -----
<S> <C> <C> <C>
George D. Johnson, Jr. .......................... 55 Chairman of the Board I
Michael D. Walts................................. 57 Director III
Billy W. White, Sr. ............................. 64 President, Chief Executive I
Officer and Director
Edward W. Phifer, III............................ 56 Director II
John S. Rainey................................... 56 Director II
Thomas E. Hannah................................. 59 Director III
</TABLE>
George D. Johnson, Jr. Mr. Johnson has been Chairman of the Board and a
director of the Company since February 1998. Mr. Johnson was Chairman of the
Board of RTO, Inc. ("RTO") from June 1996 to February 1998. Mr. Johnson has been
President and Chief Executive Officer of Extended Stay America, Inc. since
January 1995. Mr. Johnson was formerly President of the Consumer Products
Division of Blockbuster Entertainment Corp., a division of Viacom. He was
Managing General Partner of WJB Video, the largest Blockbuster franchisee which
developed over 200 video stores prior to a merger with Blockbuster in 1993 and
is the Managing General Partner of American Storage Limited Partnership, a chain
of 27 self-storage facilities located in the Carolinas and Georgia. He currently
serves on the Board of Directors of Republic Industries, Inc., Duke Energy
Corporation, Extended Stay America, Inc. and Florida Panthers Holding Company,
Inc., and has been the Chairman of the Board of Directors of Johnson Development
Associates, Inc. since its founding in 1986. Mr. Johnson practiced law in
Spartanburg, South Carolina from 1967 until 1986 and served three terms in the
South Carolina House of Representatives. Mr. Johnson is the brother-in-law of
Edward W. Phifer, III, a director of the Company.
Michael D. Walts. Mr. Walts has been a director of the Company since 1980.
Mr. Walts served as Chairman of the Board of Directors and President of the
Company from 1980 to February 1998. Prior to 1980, Mr. Walts owned and operated
Kentuckiana Outfitting Company ("Kentuckiana"), a door-to-door weekly
installment sales retailer which he acquired in 1964. Kentuckiana is currently a
real estate holding company which, among other things, leases certain properties
to the Company. See "-- Certain Transactions."
Billy W. White, Sr. Mr. White has been President, Chief Executive Officer
and a director of the Company since February 1998. Mr. White was President,
Chief Executive Officer and a director of RTO from
2
<PAGE> 6
August 1996 to February 1998. Prior to August 1996, Mr. White was President and
Chief Executive Officer of Action TV & Appliance Rental, Inc. ("Action"), which
he founded in 1975. Since August 1986, Mr. White has been on the Board of
Directors of the Association of Progressive Rental Organizations ("APRO"), and
served as President of APRO's board from August 1995 to August 1997. He is also
a former member of the Board of Directors and past president of the Texas
Association of Rental Agents and serves on the Mesquite (Texas) Economic
Development Foundation Board of Directors. Mr. White is the father-in-law of K.
David Belt, Chief Financial Officer of the Company. See "-- Certain
Transactions."
Edward W. Phifer, III. Mr. Phifer has been a director of the Company since
February 1998. Mr. Phifer was a director of RTO from December 1996 to February
1998. Mr. Phifer is a founding shareholder, director and Senior Vice President
of E.J. Victor, Inc., a furniture manufacturer located in Morganton, North
Carolina. Mr. Phifer's prior experience includes nine years in sales at Henredon
Furniture Company and 16 years as Vice President, director and partner at
Hardwoods of Morganton, Inc., a lumber brokerage firm. Mr. Phifer is the
brother-in-law of George D. Johnson, Jr., Chairman of the Board of the Company.
John S. Rainey. Mr. Rainey has been a director of the Company since
February 1998. Mr. Rainey was a director of RTO from December 1996 to February
1998. Mr. Rainey is a partner in the law firm of Demo & Rainey, L.L.P., in
Lexington, South Carolina. Mr. Rainey has served as Chairman of South Carolina
Public Service Authority (Santee Cooper), a publicly-owned electric and water
utility, since 1990; Chairman of Easlan Capital, Inc., a real estate development
company, since 1982; a director of National Bank of South Carolina since July
1997; a director of Prym-Dritz Corporation, a major sewing notions distributor,
since 1985; a director of Texfi Industries, Inc., a diversified textile company
from 1985 to March 1997; and a director of NationsBank, National Association and
predecessor corporations from 1977 to June 1997.
Thomas E. Hannah. Mr. Hannah has been a director of the Company since
March 1998. Mr. Hannah has been a director and the Chief Executive Officer of
Collins & Aikman Corporation ("Collins & Aikman"), a supplier of automotive
interior systems, since July 1994. Mr. Hannah was President and Chief Executive
Officer of Collins & Aikman Textile and Wallcoverings Group, a division of a
wholly-owned subsidiary of Collins & Aikman, from November 1991 until July 1994,
and was named an executive officer of Collins and Aikman in 1993. Mr. Hannah was
President and Chief Executive Officer of the Collins & Aikman Textile Group from
February 1989 to November 1991. Mr. Hannah serves as a director of the American
Textile Manufacturers Institute and of Precision Cutting Services, as trustee of
the Institute of Textile Technology and Converse College and as trustee of the
Business Partnership Foundation of the University of South Carolina and Brevard
Music Center.
EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Billy W. White, Sr................................... 64 President and Chief Executive
Officer
James G. Steckart.................................... 50 Chief Operating Officer
K. David Belt........................................ 43 Chief Financial Officer, Treasurer
and Assistant Secretary
Tracy A. Schrader.................................... 31 General Counsel, Vice President
and Secretary
</TABLE>
James G. Steckart. Mr. Steckart has been Chief Operating Officer of the
Company since February 1998. Mr. Steckart was Chief Operating Officer of RTO
from October 1997 to February 1998. From 1996 to October 1997, he was the
President of Alameda Management Company, a company engaged in the development,
management and ownership of inn-type motels. From 1991 to 1996, he was employed
by Advantage Companies, Inc., a publicly traded franchisee of Rent-a-Center,
first as Vice President of Operations from 1991 to 1993 and as President from
1993 to 1996.
3
<PAGE> 7
K. David Belt. Mr. Belt has been Chief Financial Officer, Treasurer and
Assistant Secretary of the Company since February 1998. Mr. Belt was Chief
Financial Officer of RTO from August 1996 to February 1998. From July 1983 to
August 1996, Mr. Belt was Vice President and Chief Financial Officer of Action.
From August 1977 to July 1983, Mr. Belt was an accounting manager for Texas
Utilities Company, where he worked in the financing and Securities and Exchange
Commission regulation area. Mr. Belt is a certified public accountant and a
member of APRO's Tax and Accounting Committee. He is the son-in-law of Billy W.
White, Sr., the President, Chief Executive Officer and a director of the
Company.
Tracy A. Schrader. Mr. Schrader has been Secretary of the Company since
March 1998. Mr. Schrader has been General Counsel and Vice President of the
Company since February 1998. Mr. Schrader was General Counsel of RTO from
October 1997 to February 1998. From June 1996 to October 1997, he was Corporate
Counsel to UniSite, Inc., a company engaged in providing infrastructure services
to the wireless telecommunications industry, and from September 1992 to June
1996, he was an attorney at the law firm of Gardere & Wynne, L.L.P., Dallas,
Texas.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended December 31, 1997, the Board consisted of six
directors. Five directors (Donald E. Groot, Robert V. Lanum, Raymond C.
Holladay, Theodore H. Wilson and W. Barrett Nichols) (the "Former Alrenco
Directors") resigned as members of the Board effective as of the consummation of
the merger between the Company and RTO (the "RTO Merger") in February 1998, and
upon consummation of the RTO Merger elected Messrs. Johnson, White, Phifer and
Rainey (the "New Directors") to fill the vacancies created by their
resignations. The resignations of the Former Alrenco Directors became effective
upon consummation of the RTO Merger on February 26, 1998 and the election of the
New Directors also became effective at such time.
During the fiscal year ended December 31, 1997, the Board held six
meetings. During the fiscal year ended December 31, 1997, no director attended
fewer than 75% of the aggregate number of meetings of the Board of Directors
held during the period he served on the Board .
The Board has standing Executive, Compensation and Audit Committees. The
Board has no nominating committees, or committee performing a similar function.
During the fiscal year ended December 31, 1997, the Executive Committee
consisted of Messrs. Walts, Holladay and Wilson; the Compensation Committee
consisted of Messrs. Lanum, Groot and Nichols; and the Audit Committee consisted
of Messrs. Lanum and Nichols.
The Executive Committee may exercise all of the authority of the full Board
in the management of the Company except for matters expressly reserved by law
for Board action. The Executive Committee generally met on a weekly basis during
fiscal 1997.
The Audit Committee is responsible for establishing and monitoring
compliance with the Company's audit policies. The Audit Committee also reviews
the scope of the Company's annual audit performed by the Company's independent
accountants and monitors the implementation of recommendations or corrective
measures disclosed in the independent accountants' audit report. The Audit
Committee is responsible for reviewing all related party transactions on a
continuing basis and potential conflict of interest situations where
appropriate. The Audit Committee met once in fiscal 1997.
The Compensation Committee reviews and recommends compensation arrangements
for all officers of the Company. The Compensation Committee is also responsible
for the design, implementation and administration of the Company's incentive
compensation plans. The Compensation Committee met once in fiscal 1997.
COMPENSATION OF DIRECTORS
During the year ended December 31, 1997, directors who were not employees
of the Company ("Non-employee Directors") received $2,000 for each meeting of
the Board that they attended and $500 for attending a meeting of a committee of
the Board. In addition, all directors were reimbursed for travel and
4
<PAGE> 8
lodging expenses incurred in connection with their attendance at Board,
shareholder and committee meetings. Outside Directors were entitled to receive
certain nondiscretionary grants of stock options under the 1998 Stock Incentive
Plan. The Company has entered into agreements with the Former Directors and one
current director, Michael D. Walts, pursuant to which the Company agreed to
indemnify them against certain claims arising out of their service as directors.
Directors were also entitled to the protection of certain indemnification
provisions in the Articles of Incorporation and Bylaws.
Since the consummation of the RTO Merger, directors of the Company no
longer receive any fee for attending meetings of the Board or any of its
committees. However, all directors are reimbursed for travel and lodging
expenses incurred in connection with their attendance at the Alrenco Board,
shareholder and committee meetings. Non-employee Directors are entitled to
receive nondiscretionary awards of stock options under the 1996 RTO Director
Plan (for those Non-employee Directors of the Company, other than Mr. Johnson,
who became directors in connection with the RTO Merger) and the 1998 Stock
Incentive Plan (as defined below).
On February 26, 1998, the Company entered into a noncompetition and
consulting agreement with Mr. Walts. Under the terms of the agreement, the
Company agreed to pay Mr. Walts $400,000 for each of the five twelve-month
periods following the date the agreement was signed. In exchange, Mr. Walts
agreed, among other things, that during the period of the agreement, he will
provide consulting services to the Company and he will not (i) directly or
indirectly engage in or have an interest in any business that competes with the
Company's rent-to-own business or (ii) disclose material and confidential
information concerning the Company's business.
5
<PAGE> 9
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following tables show remuneration paid or accrued by the Company and
its subsidiaries during the fiscal years ended December 31, 1995, 1996 and 1997
to the Chief Executive Officer and to each of the officers of the Company and
its subsidiaries, other than the Chief Executive Officer, who received salary
and bonus which combined exceeded $100,000 (together, the "Named Executive
Officers") for services in all capacities as an employee of the Company or its
subsidiaries, and the capacities in which the services were rendered. In
connection with the RTO Merger, Messrs. Walts, Holladay and Wilson resigned as
executive officers of the Company, effective February 26, 1998. Mr. White
succeeded Mr. Walts as President of the Company. Mr. Steckart succeeded Mr.
Holladay as Chief Operating Officer of the Company, and Mr. Belt succeeded Mr.
Wilson as Chief Financial Officer of the Company.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
---------------------------
ANNUAL COMPENSATION SECURITIES
--------------------------------------- UNDERLYING
OTHER RESTRICTED STOCK OPTION
ANNUAL STOCK AWARDS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) AWARDS (# SHARES) COMPENSATION
- --------------------------- ---- -------- -------- --------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Michael D. Walts......... 1997 $240,000 $101,171 $ -- -- -- $ --
Chairman of the Board 1996 265,000 263,000 57,651 -- -- --
and President 1995 473,600 205,000(2) -- -- -- 38,790(4)
Raymond C. Holladay...... 1997 $190,000 $ 50,536 $ -- -- -- $ --
Executive Vice President 1996 182,000 47,000 -- 840,000(3) 10,000 --
and Chief Operating 1995 110,000 52,566 -- -- -- 28,150(5)
Officer
Theodore H. Wilson....... 1997 $135,000 $ 25,268 $ -- -- -- $36,736(6)
Executive Vice President 1996 129,000 17,000 -- 630,000(3) 12,624 --
and Chief Financial
Officer
</TABLE>
- ---------------
(1) In addition to salary and bonus amounts, the Named Executive Officers
received certain personal benefits from the Company during each of the years
presented. The amount disclosed for Mr. Walts in 1996 includes approximately
$15,245 for personal use of Company-owned automobiles and the Company's cost
(approximately $42,406) of purchasing certain automobiles for Mr. Walts. The
aggregate amount of such benefits received by each of the Named Executive
Officers in each of the other years included in the summary compensation
table did not exceed the lesser of $50,000 or 10% of the total of annual
salary and bonus reported for such officer for that year.
(2) Represents bonus compensation accrued by the Company in 1995. This amount
was paid in January 1996.
(3) Represents the dollar value of restricted stock awarded under the 1995
Alrenco Stock Incentive Plan. A total of 60,000 and 45,000 shares were
awarded to Messrs. Holladay and Wilson, respectively, effective upon
completion of the Company's initial public offering. The shares are valued
at the initial public offering price of $14.00 per share. All of these
restricted shares vested on February 26, 1998, following the change in
control precipitated by consummation of the RTO Merger. The holders of the
restricted shares will be entitled to receive dividends, if any, at the same
rate as paid to all shareholders. As of December 31, 1996, based upon the
closing price for the Common Stock of $16.375 per share on that date, Mr.
Holladay held a total of 60,000 restricted shares having a then market value
of $982,500, and Mr. Wilson held a total of 45,000 restricted shares having
a then market value of $736,875.
(4) Includes the Company's expense under an executive deferred compensation
arrangement with Mr. Walts. This arrangement was terminated effective
September 30, 1995. Mr. Walts received a lump sum distribution of $305,729
from his deferred compensation account in 1995. Also includes a premium
payment by the Company of $2,534 in 1995 on a life insurance policy
maintained for the benefit of Mr. Walts.
6
<PAGE> 10
(5) Represents the Company's expense under an executive deferred compensation
arrangement with Mr. Holladay. This arrangement was terminated effective
September 30, 1995. Mr. Holladay received a lump sum distribution of
$147,906 from his deferred compensation account in 1995.
(6) Represents the Company's expense under an executive deferred compensation
agreement with Mr. Wilson. This arrangement was terminated effective
September 30, 1995. Mr. Wilson received a lump sum distribution of $36,736
from his deferred compensation account in 1997.
OPTION GRANTS
The Company did not award any stock options to the Named Executive Officers
during the fiscal year ended December 31, 1997.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") of the Board is responsible
for administering the Company's executive compensation program. Until November
1995, the Company had no compensation committee or other committee of the Board
of Directors performing similar functions. Decisions regarding the compensation
of executive officers prior to the formation of the Committee in November 1995
were made by Mr. Walts, the Company's Chairman of the Board and President at
that time. In preparation for the Company's initial public stock offering, the
Board established the Committee in November 1995. During 1997, the members of
the Committee were Messrs. Lanum, Groot and Nichols. None of the members of the
Committee during 1997 were officers or employees of the Company.
COMPENSATION POLICY
As a relatively new public company, the Committee recognizes that some
period of time will be necessary to establish fully its long-range compensation
philosophy and objectives. Nevertheless, the Committee adopted the following
general principles and objectives which it considered in establishing executive
compensation levels for 1996 and 1997:
- The Company's compensation programs should be designed to attract and
retain highly qualified executives who will be critical to the Company's
long-term success;
- A meaningful portion of the executive's total compensation should bear a
direct relationship to the operating performance and profitability of the
Company;
- Executives should be recognized and rewarded for high performance and
extraordinary results; and
- Incentive compensation arrangements should provide executives with an
opportunity to acquire a direct ownership interest in the Company and
motivate them to build shareholder value by aligning their personal
interests with shareholder interests.
EXECUTIVE COMPENSATION PROGRAM
During 1997, the executive officers' compensation program was composed of
base salary, bonus and long term incentive compensation.
Base Salary and Bonus. Base salaries for 1997 were adjusted from prior
years to reflect salaries that, in the Committee's judgment, were appropriate
for executive officers. The Committee considered a number of subjective factors
in determining appropriate base salaries for 1997, including historical
compensation levels, the range of compensation paid to executive officers of
other publicly-traded rental-purchase companies as well as companies of similar
size and market capitalization outside the rental-purchase industry, and the
general level of compensation paid to executive officers of other area public
companies. None of these criteria were assigned any specific numerical weighting
or otherwise considered to be any more or less important than other factors. The
group of industry companies considered by the Committee included companies
within the peer group used for stock performance comparisons under the caption
"Performance Graph" appearing elsewhere in this Proxy Statement.
7
<PAGE> 11
Each of the Company's three executive officers (including the Chairman of
the Board and President) participated in annual cash bonus arrangements based
upon a specified percentage of net income. The individual bonus percentages for
1997 were established by the Committee based upon each officer's level of
responsibility within the Company and his contributions toward improving
operating performance and profitability.
Long-Term Incentives. The Committee did not award stock options or
restricted stock to the executive officers under the 1995 Alrenco Stock
Incentive Plan during 1997.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Compensation arrangements for Mr. Walts, former Chairman of the Board and
President, were also adjusted in 1997 from prior years to make his total cash
compensation more performance-based. The Committee considered the same
comparative factors described above in determining Mr. Walts' annual
compensation for 1997. The Committee also noted gains in the Company's operating
performance from 1996 to 1997, including the growth in revenues and number of
stores generated from the Company's 1996 acquisitions.
SECTION 162(M) OF THE INTERNAL REVENUE CODE
Section 162(m) of the Internal Revenue Code (the "Code"), added as part of
the Omnibus Budget Reconciliation Act of 1993, imposes a limitation on
deductions that can be taken by a publicly held corporation for compensation
paid to certain of its executives. Under Section 162(m), a deduction is denied
for compensation paid in a tax year beginning on or after January 1, 1994, to a
corporation's chief executive officer or any of its other four most highly
compensated officers to the extent that such compensation exceeds $1 million.
Certain performance-based compensation, however, is specifically exempt from the
deduction limit.
The Committee's policy with respect to the Section 162(m) limitations was
to preserve the federal income tax deductibility of executive compensation
payments when it is appropriate and in the best interests of the Company and its
shareholders. For the foreseeable future, the Committee does not expect Section
162(m) to have any practical effect on the Company's compensation program.
However, the Committee reserves the right to approve the payment of
nondeductible compensation in the future if it deems such payment to be
appropriate.
COMPENSATION COMMITTEE
Robert W. Lanum, Chairman
Donald E. Groot
W. Barrett Nichols
THE FOREGOING REPORT SHOULD NOT BE DEEMED INCORPORATED BY REFERENCE BY ANY
GENERAL STATEMENT INCORPORATING BY REFERENCE THIS PROXY STATEMENT INTO ANY
FILING UNDER THE SECURITIES ACT OF 1933 OR UNDER THE SECURITIES EXCHANGE ACT OF
1934 (TOGETHER THE "ACTS"), EXCEPT TO THE EXTENT THAT THE COMPANY SPECIFICALLY
INCORPORATES THIS INFORMATION BY REFERENCE, AND SHALL NOT OTHERWISE BE DEEMED
FILED UNDER SUCH ACTS.
8
<PAGE> 12
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the Committee at any time during 1997 served as an
officer of, or was employed by, the Company. Furthermore, none of the executive
officers of the Company currently serves as a director or member of the
compensation committee of another entity or of any other committee of the board
of directors of another entity performing similar functions. Mr. Lanum, who
served on the Committee during 1997, is a partner in the law firm of Stites &
Harbison, which served as the Company's primary counsel during 1997.
PERFORMANCE GRAPH
The following performance graph compares the performance of the Common
Stock to the Nasdaq Stock Market Index and to a peer group at the end of each
calendar quarter in the period commencing January 23, 1996 (the date of the
Company's initial public offering) and ending December 31, 1997. Since there is
no nationally recognized industry index consisting of rental-purchase companies
to be used as a peer group index, the Company constructed its own peer group.
This peer group is comprised of four companies which represent the other public
companies in the industry -- Aaron Rents, Inc. (includes Common Stock and Class
A Common Stock), Bestway, Inc., Renters Choice, Inc. and Rent-Way, Inc. The
returns of each member of the peer group are weighted according to each member's
stock market capitalization as of the beginning of the period measured. The
graph assumes that the value of the investment in the Common Stock and each
index was $100 at January 23, 1996 and that all dividends were reinvested.
<TABLE>
<CAPTION>
Measurement Period Nasdaq U.S.
(Fiscal Year Covered) Alrenco, Inc. Market Index Peer Group
<S> <C> <C> <C>
1/23/96 100 100 100
3/96 107 107 112
6/96 124 116 156
9/96 145 120 128
12/96 73 126 107
3/97 76 119 103
6/97 91 141 133
9/97 123 165 164
12/97 113 155 157
</TABLE>
THE FOREGOING PERFORMANCE GRAPH SHOULD NOT BE DEEMED INCORPORATED BY
REFERENCE BY ANY GENERAL STATEMENT INCORPORATING BY REFERENCE THIS PROXY
STATEMENT INTO ANY FILING UNDER THE ACTS, EXCEPT TO THE EXTENT THAT THE COMPANY
SPECIFICALLY INCORPORATES THIS INFORMATION BY REFERENCE, AND SHALL NOT OTHERWISE
BE DEEMED FILED UNDER SUCH ACT.
9
<PAGE> 13
CERTAIN TRANSACTIONS
The following is a summary of certain agreements and transactions between
or among the Company, or its predecessors, and certain related parties. It is
the Company's policy to enter into transactions with related parties on terms
that, on the whole, are no less favorable than those that would be available
from unaffiliated parties. Based on the Company's experience in the business
segments in which it operates and the terms of its transactions with
unaffiliated parties, it is the Company's belief that all of the transactions
described below involving the Company met that standard at the time such
transactions were effected.
The Company leases a corporate office building, located in New Albany,
Indiana, and a store location in Louisville, Kentucky, from Kentuckiana, a
corporation owned by Michael D. Walts, a director of the Company. The rent paid
in 1997 under the two leases for these properties totaled $122,040.
In connection with a life insurance policy insuring the life of Michael D.
Walts, a director of the Company, the Company has made a loan to Mr. Walts each
year beginning in 1988. Mr. Walts has used the proceeds of these loans to pay
his portion of the annual premium due under such policy. Interest on each such
loan has been calculated at the prevailing applicable federal rate. Mr. Walts
purchased the remainder of the policy in connection with the consummation of the
RTO Merger in February 1998.
During fiscal year 1997, RTO paid $207,000 to White Property Company No. 2,
Ltd., a limited partnership, for lease payments related to RTO's corporate
office building and regional service center in Mesquite, Texas and a store in
Greenville, Texas. White Property Company No. 2, Ltd.'s general partner, White
Properties, Inc., is a corporation controlled by Billy W. White, Sr., a director
and executive officer of the Company.
During fiscal year 1997, RTO paid $120,870 to Wyoming Associates, Inc. for
aircraft rental charges. Wyoming Associates, Inc. is wholly-owned by George D.
Johnson, Jr., Chairman of the Board of Directors of the Company.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than ten percent of the Common
Stock, to file with the Securities and Exchange Commission (the "SEC") initial
reports of ownership and reports of change in ownership of the Common Stock.
Such persons are required by regulations of the SEC to furnish the Company with
copies of all such reports they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company, all Section 16(a) filings with respect to the
Company's fiscal year ended December 31, 1997 were timely made.
10
<PAGE> 14
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the beneficial
ownership of Common Stock by (i) each current director and executive officer of
the Company, (ii) each person known to management of the Company to own of
record or beneficially more than 5% of the outstanding shares of Common Stock,
and (iii) all current directors and executive officers of the Company as a
group. The table reflects share ownership and the percentage of such ownership
as of April 7, 1998. Except as otherwise indicated, each person or entity shown
has sole voting and investment power with respect to the shares of Common Stock
owned by him or it. In connection with the RTO Merger, all of the persons who
served as executive officers and directors of the Company as of the end of the
fiscal year ended December 31, 1997 resigned as of February 26, 1998, with the
exception of Mr. Walts who did not resign as a director of the Company.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME(1) SHARES CLASS(2)
- ------- --------- ----------
<S> <C> <C>
George D. Johnson, Jr.(3)................................... 2,374,898(4) 14.0%
Michael D. Walts(5)......................................... 2,230,000 13.1%
Billy W. White, Sr. ........................................ 38,522(6) *
John S. Rainey.............................................. 106,575(7) *
Edward W. Phifer, III....................................... 22,481(8) *
James G. Steckart........................................... -- *
Thomas E. Hannah............................................ 2,000 *
K. David Belt............................................... 312,844(9) 1.8%
Tracy A. Schrader........................................... -- *
All directors and officers as a group(8 persons)............ 5,087,320 29.8%(10)
</TABLE>
- ---------------
* Less than 1%.
(1) Unless specifically noted, the address for the above shareholders is 714 E.
Kimbrough Street, Mesquite, Texas 75149.
(2) Based on 16,978,771 shares of Common Stock outstanding as of April 7, 1998
plus, for each individual, the number of shares of Common Stock that may be
acquired upon the exercise of stock options exercisable within 60 days.
(3) George D. Johnson, Jr. is the Chairman of the Board of Directors of the
Company. His address is 450 E. Las Olas Boulevard, Ft. Lauderdale, Florida
33301.
(4) Represents shares owned by GDJ, Jr. Investments Limited Partnership.
(5) Michael D. Walts' address is 1736 East Main Street, New Albany, Indiana
47150.
(6) Represents shares of Common Stock issuable upon exercise of outstanding
stock options.
(7) Includes 16,881 shares of Common Stock issuable upon exercise of
outstanding stock options. Includes 44,897 shares owned by C&J Investing
Partners. Mr. Rainey is co-trustee of the two trusts that are the partners
of C&J Investing Partners, and he is a general partner in the partnership
(as to which he shares voting and investment authority with the other
general partner). Mr. Rainey disclaims beneficial ownership of the shares
owned by C&J Investing Partners.
(8) Includes 16,881 shares of Common Stock issuable upon exercise of
outstanding stock options.
(9) Includes 112,243 shares of Common Stock owned by the Billy W. White, Sr.
Annuity Trust and 112,243 shares of Common Stock held by the Lillie B.
White Annuity Trust, for which Mr. Belt's wife, Debra Belt, shares voting
and investment power. Includes 21,012 shares of Common Stock issuable upon
exercise of outstanding stock options.
(10) The percentage of shares owned by all directors and officers as a group is
based on the applicable number of shares of Common Stock outstanding plus
93,296 shares of Common Stock that may be acquired by such officers and
directors upon the exercise of stock options exercisable within 60 days.
11
<PAGE> 15
PROPOSAL ONE
ELECTION OF DIRECTORS
The Company's Articles of Incorporation and Bylaws provide that the Board
shall consist of between three and 18 members, the exact number of which may be
determined from time to time by the Board, divided into three evenly numbered
classes with each class of directors serving a term of three years. The Board
currently consists of six members, with two members being Class I, two members
being Class II and two members being Class III directors. Class I directors'
terms will expire at the annual meeting of shareholders of the Company held in
1999. Class II directors' terms will expire at the annual meeting of
shareholders of the Company held in 2000. The terms of the Class III directors
expire at the Annual Meeting. Class III directors' terms, if elected at the
Annual Meeting, will expire at the annual meeting of shareholders of the Company
held in 2001.
Only the Class III directors are standing for election at the Annual
Meeting. However, if the Reincorporation Proposal is approved and adopted by the
shareholders at the Annual Meeting, the Company will no longer have a classified
board, and each of the six current members of the Board will serve a one-year
term of office expiring at the annual meeting of shareholders of the Company
held in 1999. See "Proposal Three -- Reincorporation of the Company in the State
of Delaware."
The following Class III directors, whose current terms expire at the Annual
Meeting, have indicated their willingness to serve and, unless otherwise
specified on the proxy, it is the intention of the proxy holders to vote for the
nominees listed below.
Michael D. Walts
Thomas E. Hannah
Biographical information relating to each of these nominees for director
appears starting on page 2 of this Proxy Statement under the heading
"BIOGRAPHICAL INFORMATION REGARDING DIRECTORS AND EXECUTIVE OFFICERS."
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE
NOMINEES FOR DIRECTOR NAMED ABOVE. PROXY CARDS EXECUTED AND RETURNED WILL BE SO
VOTED UNLESS CONTRARY INSTRUCTIONS ARE INDICATED THEREON.
PROPOSAL TWO
RATIFICATION OF ALRENCO'S 1998 STOCK INCENTIVE PLAN
On February 26, 1998, the Board unanimously approved the 1998 Stock
Incentive Plan, and subject to shareholder approval, the 1998 Stock Incentive
Plan will become effective as of February 26, 1998. A copy of the 1998 Stock
Incentive Plan is attached hereto as Exhibit A. The Board unanimously recommends
that the shareholders vote "FOR" approval of the adoption of the 1998 Stock
Incentive Plan.
The primary purpose of the 1998 Stock Incentive Plan is to attract, retain
and motivate selected employees and directors of the Company. The following
discussion summarizes the principal features of the 1998 Stock Incentive Plan.
This discussion does not purport to be complete and is qualified in its entirety
by reference to the 1998 Stock Incentive Plan.
Administration. The 1998 Stock Incentive Plan will be administered by
Compensation Committee or such other committee of two or more directors
designated by the Board (the "Stock Committee"). Each director, while a member
of the Stock Committee, will satisfy the requirements for Stock Committee
membership, if any, under Rule 16b-3 of the Securities and Exchange Act of 1934
(the "Exchange Act") and Section 162(m) of the Code. All grants under the 1998
Stock Incentive Plan will be evidenced by a certificate that will incorporate
such terms and conditions as the Stock Committee deems necessary or appropriate.
12
<PAGE> 16
Coverage and Participants. The 1998 Stock Incentive Plan will provide for
the issuance of stock options ("Stock Options") to certain of the Company's key
employees and outside directors and for the issuance of stock appreciation
rights ("SARs") and restricted stock ("Restricted Stock") to certain of the
Company's key employees. A key employee shall be any employee of the Company (or
any subsidiary, parent, or affiliate of the Company) designated by the Committee
who, in the judgment of the Stock Committee acting in its absolute discretion,
is a key to the success of the Company.
There will be 1,000,000 shares of Common Stock available for use under the
1998 Stock Incentive Plan. However, no key employee in any calendar year may be
granted a Stock Option to purchase more than 250,000 shares of Common Stock.
Stock Options. Under the 1998 Stock Incentive Plan, either incentive stock
options ("ISOs"), which are intended to qualify under Code Section 422, or
non-incentive stock options ("Non-ISOs") may be granted to key employees by the
Stock Committee. Each Stock Option granted under the 1998 Stock Incentive Plan
entitles the holder thereof to purchase the number of shares of Common Stock
specified in the grant at the purchase price specified therein. The terms and
conditions of each Stock Option granted under the 1998 Stock Incentive Plan will
be determined by the Stock Committee, but no Stock Option will be granted at an
exercise price which is less than the fair market value of the Common Stock
determined on the grant date in accordance with the 1998 Stock Incentive Plan.
Outside directors are entitled to receive certain non-discretionary grants
of Non-ISOs to purchase shares of Common Stock at an option price equal to the
fair market value of the Company's Common Stock determined on the grant date in
accordance with the 1998 Stock Incentive Plan.
Stock Appreciation Rights. SARs may be granted by the Stock Committee to
key employees under the 1998 Stock Incentive Plan. SARs entitle the holder to
receive an amount equal to the excess of the fair market value of one share of
Common Stock as of the date such right is exercised over the exercise or base
price specified in the SAR (the "SAR Value"), multiplied by the number of shares
of Common Stock in respect of which the SAR is being exercised. SARs may be
granted as part of a Stock Option or as stand alone SARs.
Restricted Stock. Restricted Stock may be granted by the Stock Committee
to key employees subject to such terms and conditions, if any, as the Stock
Committee acting in its absolute discretion deems appropriate. Restricted Stock
may not be sold, assigned, transferred, pledged or otherwise encumbered during
the restricted period. Each grant of Restricted Stock shall be evidenced by a
certificate which will specify what rights, if any, a key employee has with
respect to such Restricted Stock as well as any condition applicable to the
Restricted Stock.
Non-transferability. No Stock Option, SAR or Restricted Stock will be
transferable by a key employee or an outside director other than by will or by
the laws of descent and distribution, and any Stock Option or SAR will be
exercisable during a key employee's or outside director's lifetime only by the
key employee or outside director.
Amendments to the 1998 Stock Incentive Plan. The 1998 Stock Incentive Plan
may be amended by the Board to the extent it deems necessary or appropriate, and
the 1998 Stock Incentive Plan may be terminated by the Board at any time. The
Company may not modify, amend or cancel any Stock Option, SAR or Restricted
Stock previously granted without the consent of the holder of such Stock Option,
SAR or Restricted Stock or unless there is a dissolution or liquidation of the
Company or a similar transaction.
Adjustment of Shares. The number, kind or class of shares of Common Stock
reserved for issuance under the 1998 Stock Incentive Plan, the number, kind or
class of shares of Common Stock subject to Stock Options or SARs granted under
the 1998 Stock Incentive Plan, and the option price of the Stock Options and the
SAR Value of the SARs, as well as the number, kind or class of shares of
Restricted Stock granted under the 1998 Stock Incentive Plan, shall be adjusted
by the Stock Committee in an equitable manner to reflect any change in the
capitalization of the Company.
Sale or Merger of the Company. If the Board determines that there has been
a contract or tender offer or other transaction or event which seems likely to
lead to a change in control (other than a tender offer by the Company or an
employee benefit plan established and maintained by the Company), the Board will
have the right to take such action, if any, with respect to any or all then
outstanding Stock Options, SARs and
13
<PAGE> 17
Restricted Stock grants under the 1998 Stock Incentive Plan as it deems
appropriate under the circumstances to protect the interests of the Company in
maintaining the integrity of such grants under the 1998 Stock Incentive Plan,
including waiving any conditions to the exercise of such Stock Options, or SARs
and any issuance and forfeiture conditions on any Restricted Stock and
thereafter canceling such Stock Options, SARs and Restricted Stock grants. The
Board will have the right to take different action with respect to different key
employees or outside directors or different groups of key employees or outside
directors as it deems appropriate under the circumstances.
Term of the 1998 Stock Incentive Plan. No Stock Option, SAR or Restricted
Stock shall be granted under the 1998 Stock Incentive Plan after February 26,
2008 or, if earlier, on the date on which all of the Common Stock reserved under
the 1998 Stock Incentive Plan has been issued or no longer is available for use
under the 1998 Stock Incentive Plan.
FEDERAL INCOME TAX CONSEQUENCES
The rules concerning the federal income tax consequences with respect to
grants made pursuant to the 1998 Stock Incentive Plan are technical, and
reasonable persons may differ on the proper interpretation of such rules.
Moreover, the applicable statutory and regulatory provisions are subject to
change, as are their interpretations and applications, which may vary in
individual circumstances. Therefore, the following discussion is designed to
provide only a brief, general summary description of the federal income tax
consequences associated with such grants, based on a good faith interpretation
of the current federal income tax laws, regulations (including certain proposed
regulations) and judicial and administrative interpretations. The following
discussion does not set forth (i) any federal tax consequences other than income
tax consequences or (ii) any state, local or foreign tax consequences that may
apply.
ISOs. In general, a key employee will not recognize taxable income upon
the grant or the exercise of an ISO. For purposes of the alternative minimum
tax, however, the key employee will be required to treat an amount equal to the
difference between the fair market value of the Common Stock on the date of
exercise over the exercise price as an item of adjustment in computing the key
employee's alternative minimum taxable income. If the key employee does not
dispose of the Common Stock received pursuant to the exercise of the ISO within
either (i) two years after the date of the grant of the ISO or (ii) one year
after the date of exercise of the ISO, a subsequent disposition of the Common
Stock will generally result in long-term capital gain or loss to such individual
with respect to the difference between the amount realized on the disposition
and the exercise price. The Company will not be entitled to any income tax
deduction as a result of such disposition. The Company normally will not be
entitled to take an income tax deduction at either the grant or the exercise of
an ISO.
If the key employee disposes of the Common Stock acquired upon exercise of
the ISO within either of the above-mentioned time periods, then in the year of
such disposition, such individual generally will recognize ordinary income, and
the Company will be entitled to an income tax deduction (provided the Company
satisfies applicable federal income tax reporting requirements), in an amount
equal to the lesser of (i) the excess of the fair market value of the Common
Stock on the date of exercise over the exercise price or (ii) the amount
realized upon disposition over the exercise price. Any gain in excess of such
amount recognized by the key employee or ordinary income would be taxed to such
individual as short-term or long-term capital gain (depending on the applicable
holding period).
Non-ISOs. A key employee or an outside director will not recognize any
taxable income upon the grant of a Non-ISO, and the Company will not be entitled
to take an income tax deduction at the time of such grant. Upon the exercise of
a Non-ISO, the key employee or outside director generally will recognize
ordinary income and the Company will be entitled to take an income tax deduction
(provided the Company satisfies applicable federal income tax reporting
requirements) in an amount equal to the excess of the fair market value of the
Common Stock on the date of exercise over the exercise price. Upon a subsequent
sale of the Common Stock by the key employee or outside director, such
individual will recognize short-term or long-term capital gain or loss
(depending on the applicable holding period).
SARs. A key employee will recognize ordinary income for federal income tax
purposes upon the exercise of an SAR under the 1998 Stock Incentive Plan for
cash, Common Stock or a combination of cash
14
<PAGE> 18
and Common Stock, and the amount of income that the key employee will recognize
will depend on the amount of cash, if any, and the fair market value of the
Common Stock, if any, that the key employee receives as a result of such
exercise. The Company generally will be entitled to a federal income tax
deduction in an amount equal to the ordinary income recognized by the key
employee in the same taxable year in which the key employee recognizes such
income, if the Company satisfies applicable federal income tax reporting
requirements.
Restricted Stock. A key employee is not subject to any federal income tax
upon the grant of Restricted Stock, nor does the grant of Restricted Stock
result in an income tax deduction for the Company, unless the restrictions on
the stock do not present a substantial risk of forfeiture as defined under
Section 83 of the Code. In the year that the Restricted Stock is no longer
subject to a substantial risk of forfeiture, the key employee will recognize
ordinary income in an amount equal to the fair market value of the shares of
Common Stock transferred to the key employee, generally determined on the date
the Restricted Stock is no longer subject to a substantial risk of forfeiture.
If a key employee is subject to Section 16(b) of the Exchange Act and cannot
sell the Common Stock without being subject to liability under such section, the
stock will be treated as subject to a substantial risk of forfeiture. If the
Restricted Stock is forfeited, the key employee will recognize no gain.
A key employee may make an election under Section 83(b) of the Code to
recognize the fair market value of the Common Stock as taxable income at the
time of grant of the Restricted Stock. If such an election is made, (i) the key
employee will not otherwise be taxed in the year that the Restricted Stock is no
longer subject to a substantial risk of forfeiture and (ii) if the Restricted
Stock is subsequently forfeited, the key employee will be allowed no deduction
with respect to such forfeiture. Cash dividends paid to a key employee on shares
of Restricted Stock prior to the date the Restricted Stock is no longer subject
to a substantial risk of forfeiture or is forfeited are treated as ordinary
income of the key employee in the year received. The Company generally will be
entitled to a federal income tax deduction equal to the amount of ordinary
income recognized by the key employee when such ordinary income is recognized by
the key employee, provided the Company satisfies applicable federal income tax
reporting requirements. Depending on the period shares of Common Stock are held
after receipt by the key employee, the sale or other taxable disposition of such
shares will result in short-term or long-term capital gain or loss equal to the
difference between the amount realized on such disposition and the fair market
value of such shares generally when the Restricted Stock is no longer subject to
a substantial risk of forfeiture.
If approved by the Committee, the Company may lend money to, or guarantee
loans by a third party to, any key employee or outside director to finance the
exercise of any Stock Option granted under the 1998 Stock Incentive Plan.
The following table sets forth certain information concerning the grant of
options the Board of Directors has previously approved under the 1998 Stock
Incentive Plan. Such grants are contingent upon approval of the 1998 Stock
Incentive Plan by the shareholders.
<TABLE>
<CAPTION>
NUMBER OF
STOCK
NAME AND POSITION OPTIONS GRANTED
- ----------------- ---------------
<S> <C>
Michael D. Walts............................................ --
Director (former Chairman of the Board and Chief Executive
Officer)
Other Named Executive Officers.............................. --
Executive Group (four persons).............................. 89,500
Non-Executive Director Group................................ --
Non-Executive Officer Employee Group (97 persons)........... 327,503
</TABLE>
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE 1998
STOCK OPTION PLAN. PROXY CARDS EXECUTED AND RETURNED WILL BE SO VOTED UNLESS
CONTRARY INSTRUCTIONS ARE INDICATED THEREON.
15
<PAGE> 19
PROPOSAL THREE
REINCORPORATION OF THE COMPANY IN THE STATE OF DELAWARE
INTRODUCTION
The Board has unanimously approved the Reincorporation Proposal and
recommends that the shareholders approve and adopt the Reincorporation Proposal.
The Reincorporation Proposal will be effected by merging (the "Merger") the
Company with and into Home Choice Holdings, Inc., a Delaware corporation ("Home
Choice"), pursuant to an Agreement and Plan of Merger to be entered into between
the Company and Home Choice (the "Merger Agreement") (collectively, the
"Reincorporation"). A copy of the Merger Agreement is included as Exhibit B to
this Proxy Statement. Home Choice is a wholly-owned subsidiary of the Company
recently incorporated in Delaware solely for the purpose of effecting the
Reincorporation. Home Choice currently has no material assets and no business
operations. Upon consummation of the Reincorporation, the Company will merge
with and into Home Choice and Home Choice will be the surviving corporation in
the Merger.
REASONS FOR THE REINCORPORATION
The Board believes that the Reincorporation will provide flexibility for
both the management and business of the Company. Delaware is recognized both
domestically and internationally as a favorable legal and regulatory environment
within which to operate. Such an environment will enhance the Company's
operations and its ability to effect acquisitions and other transactions. For
many years, Delaware has followed a policy of encouraging incorporation in that
state and, in furtherance of that policy, has adopted comprehensive, modern and
flexible corporate laws which are periodically updated and revised to meet
changing business needs. In addition, the Delaware courts have developed
considerable expertise in dealing with corporate issues, and a substantial body
of case law has developed in the construction of Delaware law, resulting in
greater predictability with respect to corporate legal affairs. As such, various
major companies have either incorporated or have subsequently reincorporated in
Delaware.
In addition, the management of the Company and the Board have previously
determined that the Company should change its corporate name to "Home Choice" to
reflect (i) the fact that a substantial majority of the Company's stores operate
under the Home Choice name and (ii) the change in management and strategic
vision that occurred as a result of the RTO Merger. RTO had already begun to
implement a change in store names to "Home Choice" prior the RTO Merger and the
Reincorporation will allow the Company to continue that process.
THE MERGER
The Reincorporation will be effected by the Merger, with Home Choice being
the surviving corporation in the Merger. The terms and conditions of the Merger
are set forth in the Merger Agreement and the summary of the terms and
conditions of the Merger set forth below is qualified by reference to the full
text of the Merger Agreement. Upon consummation of the Merger, Home Choice will
continue to exist in its present form and the Company will cease to exist. The
Reincorporation will change the legal domicile of the Company but will not
result in a change in the principal offices, business, management,
capitalization, assets or liabilities of the Company. By operation of law, Home
Choice will succeed to all of the assets and assume all of the liabilities of
the Company. If the Reincorporation Proposal is approved, the Board of Directors
of Home Choice will be comprised of the current members of the Board, including
the Class III directors who are standing for election at the Annual Meeting.
After the Merger, the rights of shareholders and the Company's corporate
affairs will be governed by the Delaware General Corporation Law (the "DGCL")
and by the certificate of incorporation and bylaws of Home Choice, instead of
the Indiana Business Corporation Law (the "IBCL") and the articles of
incorporation and bylaws of the Company (the "Company Articles" and the "Company
Bylaws, respectively"). Certain material differences are discussed below under
"Material Differences between Indiana and Delaware Corporate Laws." A copy of
the certificate of incorporation (the "Delaware Certificate") and the
16
<PAGE> 20
bylaws (the "Delaware Bylaws") of Home Choice are included as Exhibit C and
Exhibit D to this Proxy Statement, respectively. The Company Articles and
Company Bylaws and the Delaware Certificate and the Delaware Bylaws are
available for inspection by shareholders of the Company at the principal offices
of the Company located at 714 E. Kimbrough Street, Mesquite, Texas 75149.
Upon the effectiveness of the Merger, each outstanding share of Common
Stock will be automatically converted into one share of common stock, par value
$.01 per share of Home Choice (the "Delaware Common Stock"). Each outstanding
certificate representing shares of Common Stock will continue to represent the
same number of shares of Delaware Common Stock, and such certificates will be
deemed for all corporate purposes to evidence ownership of shares of Delaware
Common Stock. IT WILL NOT BE NECESSARY FOR THE COMPANY'S SHAREHOLDERS TO
EXCHANGE THEIR EXISTING STOCK CERTIFICATES FOR STOCK CERTIFICATES OF HOME
CHOICE. The Delaware Common Stock will continue to be listed on the Nasdaq
National Market, without interruption, and NASDAQ will consider the delivery of
existing stock certificates of the Company as constituting "good delivery" of
stock certificates representing shares of Delaware Common Stock in stock
transactions effected after the Merger.
Following the Merger, the 1998 Stock Incentive Plan, if approved by the
shareholders at the Annual Meeting, and the other stock option and stock
incentive plans under which the Company (or RTO) has granted options will be
continued by Home Choice, and the options granted pursuant to such plans will
automatically be converted into options to purchase the same number of shares of
Delaware Common Stock at the same exercise price and upon the same terms and
conditions as set forth in the options. The Company's other employee benefit
plans and arrangements will also be continued by Home Choice upon the same terms
and conditions existing before the Merger.
Consummation of the Merger is subject to the approval of the Company's
shareholders. The affirmative vote of the holders of a majority of the votes
represented by the outstanding shares of Common Stock, whether or not present at
the Annual Meeting, who are entitled to vote at the Annual Meeting is required
for the approval and adoption of the Reincorporation Proposal. The Merger is
expected to become effective as soon as practicable after shareholder approval
is obtained and all other conditions to the Merger have been satisfied,
including the receipt of all consents, orders and approvals necessary for
consummation of the Merger and the listing of the shares of the Delaware Common
Stock on the Nasdaq National Market. Prior to its effectiveness, however, the
Merger may be abandoned by the Board if, for any reason, the Board determines
that consummation of the Merger is no longer advisable.
Dissenters' rights are not available to shareholders of the Company with
respect to the proposed Merger.
ACCOUNTING TREATMENT OF THE REORGANIZATION
The Reincorporation will be accounted for as a reorganization of companies
under common control in a manner similar to pooling of interests accounting.
Therefore, the historical financial statements will be carried forward as if the
merging company had been one company.
FEDERAL INCOME TAX CONSEQUENCES OF THE REINCORPORATION
A holder of the Common Stock will not recognize gain or loss in respect of
his Common Stock as a result of the Reincorporation. The basis in a share of
Home Choice will be the same as the basis in the corresponding share of the
Company held immediately prior to the Reincorporation. A shareholder's holding
period in a share of Home Choice will include the period during which such
shareholder held the corresponding share of the Company, provided such
shareholder held the corresponding share as a capital asset at the time of the
Reincorporation. In addition, neither the Company nor Home Choice will recognize
gain or loss as a result of the Reincorporation, and Home Choice will generally
succeed, without adjustment, to the tax attributes of the Company.
The foregoing summary of federal income tax consequences is included for
general information only and does not address all income tax consequences to all
of the Company's shareholders. The Company's
17
<PAGE> 21
shareholders are urged to consult their own tax advisors as to the specific tax
consequences of the Reincorporation, including the application and effect of
state, local and foreign income and other tax laws.
MATERIAL DIFFERENCES BETWEEN DELAWARE AND INDIANA CORPORATE LAWS
The following discussion is a brief summary of the material differences
between the current rights of the Company's shareholders and the rights of
stockholders of Home Choice ("Home Choice Stockholders"). The purpose of this
summary is to indicate briefly the differences between holding Common Stock and
Delaware Common Stock to the extent such differences are created by state
corporation laws applicable to the Company and Home Choice or arise because of
differences between the Company Articles and the Company Bylaws and the Delaware
Certificate and the Delaware Bylaws.
BOARD OF DIRECTORS
Alrenco. Article VI of the Company Articles provides that the number of
directors (never less than three) shall be fixed from time to time or in the
manner provided in the Company Bylaws. The Company Bylaws state that the number
of directors shall not be less than three nor more than 18 and may be set by the
Board. The Company Articles provide for a classified board of directors with
directors divided into three classes with three-year terms of office which
expire at different times. Each director is entitled to serve for the longer of
the term for which he was elected or until his successor is elected and
qualified. Directors may be removed for cause by a majority vote of the
shareholders entitled to vote at a shareholder meeting called for that purpose.
In addition, Section 6.5 of the Company Articles mandates that an affirmative
vote of 80% of the voting power of all the then outstanding capital stock of the
Company entitled to vote is required to alter, amend or repeal any provision of
Article VI.
Home Choice. Section 2.1 of the Delaware Bylaws provides that directors
shall be elected annually and shall hold office until their successors are duly
elected. In addition, the Delaware Bylaws state that the Board of Directors of
Home Choice (the "Home Choice Board") or the Home Choice Stockholders may fix
the number of directors; however, that number may never be less than three nor
more than 15. Section 141 of the DGCL provides that, unless the corporation has
either classes of directors under Section 141(d) or cumulative voting, any
director or the entire board of directors may be removed, with or without cause,
by the holders of a majority of shares then entitled to vote at an election of
directors. Section 2.3 of the Delaware Certificate provides that directors may
be removed with or without cause by an affirmative vote of a majority of the
shareholders entitled to vote at a shareholder meeting called for that purpose.
IF THE SHAREHOLDERS APPROVE AND ADOPT THE REINCORPORATION PROPOSAL, ALL MEMBERS
OF THE BOARD WILL BECOME MEMBERS OF THE BOARD OF DIRECTORS OF THE HOME CHOICE
BOARD AND EACH MEMBER'S TERM WILL EXPIRE AT THE 1999 ANNUAL MEETING OF
SHAREHOLDERS.
LIMITATION OF DIRECTOR LIABILITY
Alrenco. The Company Articles and the Company Bylaws do not contain a
specific exculpatory provision regarding director liability. Under Section
23-1-35-1 of the IBCL, directors are required to discharge their duties: (i) in
good faith; (ii) with the care an ordinarily prudent person in a like position
would exercise under similar circumstances; and (iii) in a manner the directors
reasonably believe to be in the best interests of the corporation. However, this
section also provides that a director is not liable for any action taken as a
director, or any failure to act, unless the director has breached or failed to
perform the duties of the director's office in compliance with that section and
the breach or failure to perform constitutes willful misconduct or recklessness.
Section 23-1-35-1 does not apply to officers of the Company who are not
directors of the Company.
Home Choice. As permitted by the DGCL, Article 9.1 of the Delaware
Certificate provides that directors of Home Choice shall not be liable
personally to Home Choice or the Home Choice Stockholders for monetary damages
for breach of fiduciary duty as a director except for liability arising out of
(a) any breach of the director's duty of loyalty to Home Choice or the Home
Choice Stockholders, (b) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (c) payment of a dividend
or
18
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approval of a stock redemption or repurchase in violation of Section 174 of the
DGCL, or (d) any transaction from which the director derived an improper
personal benefit. This provision protects Home Choice directors against personal
liability for monetary damages from breaches of their duty of care. Under
Delaware law, absent adoption of Article 9.1, directors can be held liable for
gross negligence in connection with decisions made on behalf of the corporation
in the performance of their duty of care, but may not be liable for simple
negligence. Although Article 9.1 provides Home Choice directors with protection
from certain awards of monetary damages for breaches of their duty of care, it
does not eliminate the director's duty of care. Accordingly, Article 9.1 has no
effect on the availability of certain equitable remedies, such as an injunction,
based upon a director's breach of his duty of care. Article 9.1 does not apply
to officers of Home Choice who are not directors of Home Choice.
INDEMNIFICATION
Alrenco. Under Sections 23-1-37-1, et seq., of the IBCL and as mandated by
Section 7.1 of the Company Articles and Article VI of the Company Bylaws,
directors, officers and other employees and individuals may be indemnified
against expenses, judgments, fines and actions, suits or proceedings, whether
civil, criminal, administrative or investigative, if they (i) acted in good
faith and (ii) in the case of conduct in their official capacity with the
Company, they reasonably believed their conduct was in the best interests of the
Company or, in the other cases, if they reasonably believed their conduct was at
least not opposed to the best interest of the Company, and (iii) regarding any
criminal action or proceeding, if they had no reasonable cause to believe their
conduct was unlawful or if they had reasonable cause to believe their conduct
was lawful. To the extent that an officer or director otherwise eligible to be
indemnified is wholly successful, on the merits of any claim or otherwise, in
the defense of any proceeding, indemnification for expenses actually and
reasonably incurred is mandated by the IBCL, unless limited by articles of
incorporation.
A claim, action, suit or proceeding includes any claim, action, suit or
proceeding that a person is threatened to be made a party to, or is involved in,
because he is or was a director, officer or employee of the Company or of any
subsidiary of the Company (or was serving at the request of the Company as a
director, officer, trustee, employee or agent of another entity) while serving
in such capacity.
The right to indemnification is not exclusive of any other right which any
person may have or acquire by contract or as a matter of law. The Company may
execute indemnification agreements which are broader or different than the
rights authorized by the Company Articles.
Home Choice. Under Section 145 of the DGCL, directors, officers, employees
and other individuals may be indemnified against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement in connection with
specified actions, suits or proceedings, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation,
including derivative actions -- a "Corporation Action") if they acted in good
faith and in a manner they reasonably believed to be in, or not opposed to, the
best interests of the corporation, and, regarding any criminal action or
proceeding, had no reasonable cause to believe their conduct was unlawful. A
similar standard is applicable in the case of Corporation Actions, except that
indemnification only extends to expenses (including attorneys' fees) incurred in
connection with the defense or settlement of such actions. The DGCL further
requires court approval before there can be any indemnification where the person
seeking indemnification has been found liable to the corporation. To the extent
that a director or officer is otherwise eligible to be indemnified is successful
on the merits of any claim or defense described above, indemnification for
expenses (including attorneys' fees) actually and reasonably incurred is
mandated by the DGCL.
Article V of the Delaware Bylaws provides that Home Choice shall indemnify,
to the fullest extent authorized by the DGCL, each person who was or is made
party to, is threatened to be made a party to, or is involved in, any action,
suit or proceeding because he is or was a director or officer of Home Choice, or
of any subsidiary of Home Choice, while serving in such capacity, against all
expenses, liabilities or loss incurred by such person in connection therewith.
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The right to indemnification is not exclusive of any other right which any
person may have or acquire under any statute, any provision of the Delaware
Certificate or the Delaware Bylaws, or otherwise. Home Choice is authorized to
enter into contracts of indemnification.
ANTITAKEOVER STATUTES
Alrenco. Chapter 43 of the IBCL prohibits any business combination, such
as a merger or consolidation, between an Indiana corporation with 100 or more
shareholders with shares of its stock registered under the federal securities
laws or which makes an election under the IBCL, and an "interested shareholder"
(which is defined generally as any owner of 10% or more of the corporation's
outstanding voting stock) for five years after the date on which such
shareholder became an interested shareholder unless the business combination or
the stock acquisition which caused the person to become an interested
shareholder was approved in advance by the corporation's board of directors.
This provision of the IBCL is effective even if all parties should subsequently
decide that they wish to engage in the business combination. Following the five-
year moratorium period, the Indiana corporation may engage in certain business
combinations with an interested shareholder only if, among other things, (a) the
business combination is approved by the affirmative vote of the holders of a
majority of the outstanding voting shares not beneficially owned by the
interested shareholder proposing the business combination or (b) the business
combination meets certain criteria designed to ensure that the remaining
shareholders receive fair consideration for their shares.
Chapter 42 of the IBCL contains a "control share acquisition" provision
which effectively denies voting rights to shares of an "issuing public
corporation" acquired in control share acquisitions unless the grant of such
voting rights is approved by a majority vote of disinterested shareholders. An
issuing public corporation is a corporation that (i) has 100 or more
shareholders; (ii) has its principal place of business, its principal office or
substantial assets within Indiana; and (iii) either (a) more than 10% of its
shareholders are Indiana residents, (b) more than 10% of its shares are owned by
Indiana residents, or (c) 10,000 of its shareholders are resident in Indiana. A
control share acquisition is one by which a purchasing shareholder acquires more
than one-fifth, one-third, or a majority of the voting power of the stock of an
issuing public corporation. In addition, if any person proposing to make or who
has made "control share acquisitions" does not file an "acquiring person
statement" with the issuing public corporation or if the control shares are not
accorded full voting rights by other shareholders, and if the articles of
incorporation or by-laws of the corporation whose shares are acquired authorize
such redemption, the acquired control shares are subject to redemption by the
corporation. Finally, if a control share acquisition is made of a majority or
more of the corporation's voting stock, and those shares are granted full voting
rights, shareholders are granted dissenters' rights.
Chapter 42 of the IBCL does not apply to the acquisition of shares of an
issuing public corporation if the acquisition is consummated (a) before January
8, 1986; (b) pursuant to a contract existing before January 8, 1986; (c)
pursuant to the laws of descent and distribution; (d) pursuant to a satisfaction
of a pledge or other security interest created in good faith and not for the
purposes of circumventing the statute; or (e) pursuant to a merger or plan of
share exchange effected in compliance with IBCL 23-1-40 if the issuing public
corporation is a party to the agreement of merger or plan of share exchange.
Home Choice. Section 203 of the DGCL ("Section 203") is similar, but not
identical, to Chapter 43 of the IBCL. Section 203, which applies to Home Choice,
regulates transactions with major stockholders after they become major
stockholders. Section 203 prohibits a Delaware corporation from engaging in
mergers, dispositions of 10% or more of its assets, certain issuances of stock
and other transactions ("business combinations") with a person or group that
owns 15% or more of the voting stock of the corporation (an "interested
stockholder") for a period of three years after the interested stockholder
crosses the 15% threshold. These restrictions on transactions involving an
interested stockholder do not apply if (a) before the interested stockholder
owned 15% or more of the voting stock, the board of directors approved the
business combination or the transaction that resulted in the person or group
becoming an interested stockholder, (b) in the transaction that resulted in the
person or group becoming an interested stockholder, the person or group acquired
at least 85% of the voting stock other than stock owned by directors who are
also officers and certain employee stock plans, or (c) after the person or group
became an interested stockholder, the board of directors and at least two-thirds
of the voting stock other than stock owned by the interested stockholder
approves the
20
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business combination at a meeting. The restrictions contained in Section 203 do
not apply to Home Choice in connection with the Merger because, under Section
203(b)(4), such restrictions generally do not apply where a corporation does not
have a class of voting stock that is (i) listed on a national securities
exchange; (ii) authorized for quotation on The Nasdaq Stock Market; or (iii)
held of record by more than 2,000 stockholders. The DGCL does not have a statute
that is similar to the Indiana control share acquisitions statute.
PREFERRED STOCK
Alrenco. The Company Articles authorize the Board to determine the
preferences, limitations and relative rights of any class or series of Company
preferred stock prior to issuance. Each class or series must be designated with
a distinguishing designation prior to issuance. The preferred shares shall have
preferences, limitations and relative rights identical with those of other
shares of the same series.
Home Choice. The Delaware Certificate authorizes the Home Choice Board to
issue shares of its preferred stock (the "Delaware Preferred Stock"), from time
to time, in one or more series as the Home Choice Board may determine, and to
fix the powers, number of shares, and preferences and rights (including, but not
limited to, voting rights, dividend rights, liquidation rights, conversion
rights and redemption rights) of each such series of Delaware Preferred Stock.
The power of the Home Choice Board to issue Delaware Preferred Stock with voting
or other powers, preferences and rights may be used to impede or discourage a
takeover attempt.
Generally, the issuance of Delaware Preferred Stock could (a) result in a
class of securities outstanding which will have certain preferences regarding
distributions in a liquidation over Delaware Common Stock and might provide for
certain rights (whether general, special, conditional or limited) that could
dilute the voting rights of Delaware Common Stock and (b) result in dilution of
the net income per share and net book value per share relating to Delaware
Common Stock. Further, the issuance of any additional shares of Delaware Common
Stock, pursuant to any conversion rights granted holders of any Delaware
Preferred Stock, may also result in dilution of the voting rights, net income
per share and net book value of Delaware Common Stock.
CUMULATIVE VOTING
Alrenco. Section 23-1-30-9 of the IBCL provides that shareholders do not
have the right to cumulate their votes for directors unless a corporation's
articles of incorporation so provide. The Company Articles do not provide for
cumulative voting in election of directors.
Home Choice. Section 214 of the DGCL provides that cumulative voting
rights, in respect of elections of directors, exist if provided for in a
corporation's certificate of incorporation. The Delaware Certificate does not
provide for cumulative voting in elections of directors.
ACTION WITHOUT A MEETING
Alrenco. Under Section 23-1-29-4 of the IBCL, any action required or
permitted to be taken at a shareholders' meeting may be taken without a meeting
by written consent signed by all of the shareholders entitled to vote on such
action.
Home Choice. Section 228 of the DGCL permits any action required or
permitted to be taken at a Home Choice Stockholders' meeting to be taken by
written consent signed by the holders of the number of shares that would have
been required to effect the action at an actual meeting of the shareholders at
which all shares were present and voted. The DGCL also provides that a
corporation's certificate of incorporation may restrict or prohibit
stockholders' action without a meeting. Section 10 of the Delaware Certificate
provides that Home Choice Stockholders may not consent in writing to action
without a meeting.
SPECIAL MEETINGS
Alrenco. Section 23-1-29-2 of the IBCL requires a corporation with more
than 50 shareholders to hold a special meeting on call of its board of directors
or the person or persons (including, but not limited to,
21
<PAGE> 25
shareholders or officers) specifically authorized to do so by the articles of
incorporation or bylaws. The Company Bylaws provide that a special meeting may
be called by the Board or by the Chairman of the Board.
Home Choice. Section 211(d) of the DGCL authorizes the board of directors
or those persons authorized by the corporation's certificate of incorporation or
by-laws to call a special meeting of the corporation's stockholders. Section 1.2
of the Delaware Bylaws provides that a special meeting may be called by the
Chairman of the Board and must be called by the Chairman of the Board at the
written request of either the entire Home Choice Board or the executive
committee of the Home Choice Board.
VOTING, APPRAISAL RIGHTS AND CORPORATE REORGANIZATIONS
Alrenco. The IBCL requires a majority vote of shareholders to approve a
plan of merger or share exchange. Section 23-1-44-8 of the IBCL does not provide
for dissenters' rights for a merger or plan of share exchange by a corporation
the shares of which are (a) registered on a United States securities exchange
registered under the Exchange Act, or (b) traded on NASDAQ or a similar market.
Home Choice. The DGCL generally requires a majority vote of stockholders
to approve a merger, sale of assets or similar reorganization transaction.
Section 262 of the DGCL does not provide for dissenters' rights of appraisal for
(a) the sale, lease or exchange of all or substantially all of the assets of a
corporation, (b) a merger by a corporation, the shares of which are either
listed on a national securities exchange or held by more than 2,000 stockholders
if such stockholders receive shares of the surviving corporation or of a listed
or widely held corporation, or (c) certain mergers not requiring stockholder
approval.
AMENDMENT TO BYLAWS
Alrenco. Article VII of the Company Articles and Article VII of the
Company Bylaws provide that the Board may make, alter, amend or repeal the
Company Bylaws by a majority vote. IBCL Section 23-1-39-1 provides that only the
Board may amend or repeal bylaws unless a corporation's articles of
incorporation provide otherwise.
Home Choice. Section 109 of the DGCL places the power to adopt, amend or
repeal bylaws in the corporation's stockholders, but permits the corporation, in
its certificate of incorporation, also to vest such power with the board of
directors. Although the Home Choice Board has been vested with such authority
pursuant to Section 6.7 of the Delaware Certificate, Home Choice Stockholders'
power to adopt, amend or repeal by-laws remains unrestricted.
PREEMPTIVE RIGHTS
Alrenco. IBCL Section 23-1-27-1 provides that the shareholders of a
corporation do not have a preemptive right to acquire a corporation's unissued
shares except to the extent the articles of incorporation so provide. Article V
of the Company Articles provides that the Company's shareholders shall have no
preemptive rights.
Home Choice. Under Section 102 of the DGCL, no statutory preemptive rights
will exist, unless a corporation's certificate of incorporation specifies
otherwise. The Delaware Certificate does not provide for any such preemptive
rights.
DIVIDEND RIGHTS
Alrenco. The IBCL does not permit dividend distributions if, after giving
effect to the proposed dividend, (a) the corporation would be unable to pay its
debts as they become due in the usual course of business, or (b) the
corporation's total assets would be less than the sum of its total liabilities
plus (unless the articles of incorporation permit otherwise) the amount that
would be needed, if the corporation were to be dissolved at the time of
distribution, to satisfy the preferential rights (if any) of shareholders whose
preferential rights are superior to those of shareholders receiving the
distribution.
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<PAGE> 26
Home Choice. Delaware corporations may pay dividends out of surplus or, if
there is no surplus, out of net profits for the fiscal year in which declared
and/or the preceding fiscal year. Section 170 of the DGCL also provides that
dividends may not be paid out of net profits if, after the payment of the
dividend, capital is less than the capital represented by the outstanding stock
of all classes having a preference upon the distribution of assets.
THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
REINCORPORATION PROPOSAL. PROXY CARDS EXECUTED AND RETURNED WILL BE SO VOTED
UNLESS CONTRARY INSTRUCTIONS ARE INDICATED THEREON.
SHAREHOLDER PROPOSALS
Any proposals of shareholders intended to be presented at the Company's
1999 Annual Meeting of Shareholders must be received by the Company for
inclusion in the proxy statement and form of proxy relating to such meeting not
later than February 1, 1999. It is suggested that proponents submit their
proposals by certified mail, return receipt requested. Detailed information for
submitting resolutions will be provided upon written request to the Secretary of
the Company, Alrenco, Inc., 714 E. Kimbrough Street, Mesquite, Texas 75149.
OTHER MATTERS
Management does not intend to present any other items of business and knows
of no other matters that will be brought before the Annual Meeting. However, if
any additional matters are properly brought before the Annual Meeting, the
persons named in the enclosed proxy shall vote the proxies in their discretion
in the manner they believe to be in the best interests of the Company. The
accompanying form of proxy has been prepared at the direction of the Board and
is sent to you at the request of the Board. The proxies named therein have been
designated by your Board.
Grant Thornton LLP has audited the accounts of the Company for fiscal year
1997. On February 26, 1998, immediately following the RTO Merger, the Board
replaced Grant Thornton LLP as the principal independent auditor of the Company
and appointed Coopers & Lybrand L.L.P. to continue in that capacity for the
Company's fiscal year ending December 31, 1998. Grant Thornton LLP will continue
to serve as the independent auditor with respect to the Company's financial
statements for the fiscal year ended December 31, 1997.
Neither of the reports of Grant Thornton LLP on the financial statements of
the Company for the fiscal years ended December 31, 1995, 1996 and 1997
contained an adverse opinion or a disclaimer of an opinion or was qualified or
modified as to uncertainty, audit scope or accounting principles. During the two
fiscal years ended December 31, 1997, and during the interim period preceding
February 26, 1998, (i) there were no disagreements with Grant Thornton LLP on
any matter of accounting principles or practices, financial statement disclosure
or auditing scope or procedure and (ii) there were no "reportable events" (as
defined in Item 304(a)(1)(v) of Regulation S-K).
A representative of Coopers & Lybrand L.L.P. will be present at the Annual
Meeting, will have the opportunity to make a statement and will be available to
respond to appropriate questions.
23
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EXHIBIT A
ALRENCO, INC.
1998 STOCK INCENTIVE PLAN
A-1
<PAGE> 28
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C> <C>
sec. 1 PURPOSE................................................................ A-4
sec. 2 DEFINITIONS............................................................ A-4
2.1 Affiliate................................................... A-4
2.2 Alrenco..................................................... A-4
2.3 Board....................................................... A-4
2.4 Change in Control........................................... A-4
2.5 Code........................................................ A-4
2.6 Committee................................................... A-4
2.7 Effective Date of this Plan................................. A-4
2.8 Fair Market Value........................................... A-4
2.9 ISO......................................................... A-5
2.10 Key Employee................................................ A-5
2.11 1933 Act.................................................... A-5
2.12 1934 Act.................................................... A-5
2.13 Non-ISO..................................................... A-5
2.14 Option...................................................... A-5
2.15 Option Certificate.......................................... A-5
2.16 Option Price................................................ A-5
2.17 Outside Director............................................ A-5
2.18 Parent...................................................... A-5
2.19 Plan........................................................ A-5
2.20 Restricted Stock............................................ A-5
2.21 Restricted Stock Certificate................................ A-5
2.22 Rule 16b-3.................................................. A-5
2.23 Stock....................................................... A-5
2.24 SAR Value................................................... A-5
2.25 Stock Appreciation Right.................................... A-5
2.26 Stock Appreciation Right Certificate........................ A-5
2.27 Subsidiary.................................................. A-6
2.28 Ten Percent Shareholder..................................... A-6
sec. 3 SHARES SUBJECT TO OPTIONS, RESTRICTED STOCK GRANTS OR STOCK
APPRECIATION RIGHTS.................................................... A-6
sec. 4 EFFECTIVE DATE......................................................... A-6
sec. 5 COMMITTEE.............................................................. A-6
sec. 6 ELIGIBILITY AND ANNUAL CAPS............................................ A-6
sec. 7 GRANT OF OPTIONS TO KEY EMPLOYEES...................................... A-7
7.1 Committee Action............................................ A-7
7.2 $100,000 Limit.............................................. A-7
7.3 Option Price................................................ A-7
7.4 Exercise Period............................................. A-7
sec. 8 GRANT OF OPTIONS TO OUTSIDE DIRECTORS.................................. A-8
8.1 Newly-Elected Outside Directors............................. A-8
8.2 Ongoing Outside Directors................................... A-8
8.3 Exercise Period............................................. A-8
8.4 Option Certificate.......................................... A-8
</TABLE>
A-2
<PAGE> 29
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C> <C>
sec. 9 RESTRICTED STOCK...................................................... A-8
9.1 Committee Action............................................ A-8
9.2 Conditions.................................................. A-8
(a) Stock Issuance Conditions............................... A-8
(b) Grants Subject to Forfeiture............................ A-9
9.3 Dividends and Voting Rights................................. A-9
9.4 Satisfaction of All Conditions.............................. A-9
9.5 Section 162(m).............................................. A-9
sec. 10 STOCK APPRECIATION RIGHTS............................................. A-9
10.1 Committee Action............................................ A-9
10.2 Terms and Conditions........................................ A-9
(a) Stock Appreciation Right Certificate.................... A-9
(b) Option Certificate...................................... A-9
10.3 Exercise.................................................... A-10
sec. 11 NONTRANSFERABILITY.................................................... A-10
sec. 12 SECURITIES REGISTRATION AND RESTRICTIONS.............................. A-10
sec. 13 LIFE OF PLAN.......................................................... A-11
sec. 14 ADJUSTMENT............................................................ A-11
14.1 Capital Structure........................................... A-11
14.2 Mergers..................................................... A-11
14.3 Fractional Shares........................................... A-11
sec. 15 CHANGE IN CONTROL..................................................... A-11
sec. 16 AMENDMENT OR TERMINATION.............................................. A-12
sec. 17 MISCELLANEOUS......................................................... A-12
17.1 No Shareholder Rights....................................... A-12
17.2 No Contract of Employment or Right to Continue Service...... A-12
17.3 Withholding................................................. A-12
17.4 Loans....................................................... A-13
17.5 Rule 16b-3.................................................. A-13
17.6 Construction................................................ A-13
</TABLE>
A-3
<PAGE> 30
sec. 1
PURPOSE
The purpose of this Plan is to promote the interests of Alrenco by
authorizing the Committee to grant Options to Key Employees and Outside
Directors and to grant Restricted Stock and Stock Appreciation Rights to Key
Employees in order (1) to attract and retain Key Employees and Outside
Directors, (2) to provide an additional incentive to each Key Employee and
Outside Director to work to increase the value of Stock and (3) to provide each
Key Employee and Outside Director with a stake in the future of Alrenco which
corresponds to the stake of each of Alrenco's shareholders.
sec. 2
DEFINITIONS
2.1 Affiliate -- means any organization (other than a Subsidiary) that
would be treated as under common control with Alrenco under sec. 414(c) of the
Code if "50 Percent" were substituted for "80 Percent" in the income tax
regulations under sec. 414(c) of the Code.
2.2 Alrenco -- means Alrenco, Inc. and any successor to Alrenco, Inc.
2.3 Board -- means the Board of Directors of Alrenco, Inc.
2.4 Change in Control -- means a change in control of Alrenco of a nature
that would be required to be reported in response to Item 6(e) of Schedule 14A
of Regulation 14A promulgated under the 1934 Act as in effect on the effective
date of this Plan, provided that such a change in control shall be deemed to
have occurred at such time after the Effective Date of this Plan as (i) any
"person" (as that term is used in Sections 12(d) and 14(d)(2) of the 1934 Act),
becomes after the Effective Date of this Plan the beneficial owner (as defined
in Rule 13d-3 under the 1934 Act) directly or indirectly, of securities
representing 20% of more of the combined voting power for election of directors
of the then outstanding securities of Alrenco or any successor of Alrenco; (ii)
during any period of two consecutive years or less commencing after the
Effective Date of this Plan, individuals who at the beginning of such period
constitute the Board cease, for any reason, to constitute at least a majority of
the Board, unless the election or nomination for election of each new director
was approved by a vote of at least two-thirds of the directors then still in
office who were directors at the beginning of the period; (iii) the shareholders
of Alrenco approve after the Effective Date of this Plan any merger,
consolidation or share exchange as a result of which the common stock of Alrenco
shall be changed, converted or exchanged (other than through a merger with a
wholly-owned subsidiary of Alrenco or a reincorporation for the purpose of
re-domesticating in another state), or any dissolution or liquidation of Alrenco
or any sale or disposition of 50% or more of the assets or business of Alrenco;
or (iv) the shareholders of Alrenco approve after the Effective Date of this
Plan any merger or consolidation to which Alrenco is a party or a share exchange
in which Alrenco shall exchange its shares for shares of another corporation as
a result of which the persons who were shareholders of Alrenco immediately prior
to the effective date of the merger, consolidation or share exchange shall have
beneficial ownership of less than 50% of the combined voting power for election
of directors of the surviving corporation following the effective date of such
merger, consolidation or share exchange.
2.5 Code -- means the Internal Revenue Code of 1986, as amended.
2.6 Committee -- means the Compensation Committee of the Board or such
other committee determined by the Board which in each case shall have at least 2
members, each of whom shall be appointed by and shall serve at the pleasure of
the Board and shall come within the definition of a "non-employee director"
under Rule 16b-3 and an "outside director" under sec. 162(m) of the Code.
2.7 Effective Date of this Plan -- shall be as defined in sec. 4 hereof.
2.8 Fair Market Value -- means with respect to the Fair Market Value of
Stock on any day (1) the closing price at the end of the immediately preceding
business day for a share of Stock as reported by The Wall Street Journal (a)
under the New York Stock Exchange Composite Transactions if Stock is traded on
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the New York Stock Exchange or, if Stock is otherwise publicly traded, (b) under
the quotation system under which such closing price is reported or, if The Wall
Street Journal no longer reports such closing price, such closing price as
reported by a newspaper or trade journal selected by the Committee or, if no
such closing price is available for such date (2) such closing price as so
reported in accordance with sec. 2.8(1) for the business day immediately
preceding such date or, if no newspaper or trade journal reports such closing
price or if no such price quotation is available or if Stock is not publicly
traded or if the Committee determines that the price determined under sec.
2.8(1) or sec. 2.8(2) does not fairly reflect fair market value, (3) the price
which the Committee acting in good faith determines through any reasonable
valuation method that a share of Stock might change hands between a willing
buyer and a willing seller, neither being under any compulsion to buy or to sell
and both having reasonable knowledge of the relevant facts.
2.9 ISO -- means an option granted under this Plan to purchase Stock which
is intended to satisfy the requirements of sec. 422 of the Code.
2.10 Key Employee -- means an employee of Alrenco or any Subsidiary or
Parent or Affiliate who, in the judgment of the Committee acting in its absolute
discretion, is a key to the success of Alrenco.
2.11 1933 Act -- means the Securities Act of 1933, as amended.
2.12 1934 Act -- means the Securities Exchange Act of 1934, as amended.
2.13 Non-ISO -- means an option granted under this Plan to purchase Stock
which is intended to fail to satisfy the requirements of sec. 422 of the Code.
2.14 Option -- means an ISO or a Non-ISO which is granted under sec. 7 or
sec. 8 of this Plan.
2.15 Option Certificate -- means the written agreement or instrument which
sets forth the terms and conditions of an Option granted to a Key Employee or
Outside Director under this Plan.
2.16 Option Price -- means the price which shall be paid to purchase one
share of Stock upon the exercise of an Option granted under this Plan.
2.17 Outside Director -- means a director who is not an employee of Alrenco
or a Parent or Subsidiary or Affiliate of Alrenco.
2.18 Parent -- means any corporation which is a parent of Alrenco within
the meaning of sec. 424(e) of the Code.
2.19 Plan -- means this Alrenco, Inc. 1998 Stock Incentive Plan as
effective as of the date adopted by the Board in 1998 and as amended from time
to time thereafter.
2.20 Restricted Stock -- means Stock granted to a Key Employee under sec. 9
of this Plan.
2.21 Restricted Stock Certificate -- means the written agreement or
instrument which sets forth the terms and conditions of a Restricted Stock grant
to a Key Employee.
2.22 Rule 16b-3 -- means the exemption under Rule 16b-3 to Section 16b of
the 1934 Act or any successor to such rule.
2.23 Stock -- means the no par value common stock of Alrenco.
2.24 SAR Value -- means the value assigned by the Committee to a share of
Stock in connection with the grant of a Stock Appreciation Right under sec. 10.
2.25 Stock Appreciation Right -- means a right to receive the appreciation
in a share of Stock which is granted under sec. 10 of this Plan either as part
of an Option or independent of any Option.
2.26 Stock Appreciation Right Certificate -- means the written agreement or
instrument which sets forth the terms and conditions of a Stock Appreciation
Right which is granted to a Key Employee independent of an Option.
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2.27 Subsidiary -- means any corporation which is a subsidiary corporation
(within the meaning of sec. 424(f) of the Code) of Alrenco.
2.28 Ten Percent Shareholder -- means a person who owns (after taking into
account the attribution rules of sec. 424(d) of the Code) more than ten percent
(10%) of the total combined voting power of all classes of stock of either
Alrenco, a Subsidiary or Parent.
sec. 3
SHARES SUBJECT TO OPTIONS, RESTRICTED STOCK GRANTS OR STOCK APPRECIATION RIGHTS
Subject to adjustment made pursuant to sec. 14, there shall be 1,000,000
shares of Stock reserved for use under this Plan. Such shares of Stock shall be
reserved to the extent that Alrenco deems appropriate from authorized but
unissued shares of Stock and from shares of Stock which have been reacquired by
Alrenco. Any shares of Stock subject to an Option which remain unissued after
the cancellation or expiration of such Option, any shares of Restricted Stock
which are forfeited or canceled and any shares of Stock subject to a Stock
Appreciation Right with respect to which no exercise has been made under sec. 10
before the cancellation or expiration of such Stock Appreciation Right
thereafter shall again become available for use under this Plan, but any shares
of Stock used to exercise an Option or to satisfy a withholding obligation shall
not again be available for use under this Plan.
sec. 4
EFFECTIVE DATE
The Effective Date of this Plan shall be February 27, 1998, provided
Alrenco's shareholders (acting at a duly called meeting of such shareholders)
approve this Plan within twelve (12) months after the Effective Date of this
Plan. Any Option or Restricted Stock or Stock Appreciation Right granted before
such shareholder approval automatically shall be granted subject to such
approval.
sec. 5
COMMITTEE
This Plan shall be administered by the Committee. Subject to the right of
the Board to take the actions contemplated by sec. 8, the Committee acting in
its absolute discretion shall exercise such powers and take such action as
expressly called for under this Plan and, further, the Committee shall have the
power to interpret this Plan and to take such other action in the administration
and operation of this Plan as the Committee deems equitable under the
circumstances, which action shall be binding on Alrenco, on each affected Key
Employee and Outside Director and on each other person directly or indirectly
affected by such action.
sec. 6
ELIGIBILITY AND ANNUAL CAPS
Only Key Employees who are employed by Alrenco or a Subsidiary or a Parent
shall be eligible for the grant of ISOs under this Plan, and Key Employees and
Outside Directors shall be eligible for the grant of Non-ISOs under this Plan.
Only Key Employees shall be eligible for the grant of Restricted Stock or Stock
Appreciation Rights under this Plan. Subject to adjustments made pursuant to
sec. 14, no Key Employee in any calendar year shall be granted an Option to
purchase more than 250,000 shares of Stock or a Stock Appreciation Right with
respect to more than 250,000 shares of Stock.
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sec. 7
GRANT OF OPTIONS TO KEY EMPLOYEES
7.1 Committee Action. The Committee acting in its absolute discretion
shall have the right to grant an Option to a Key Employee under this Plan from
time to time to purchase shares of Stock and, further, shall have the right to
grant a new Option to a Key Employee in exchange for the cancellation of an
outstanding Option granted to such Key Employee which has a higher or lower
Option Price. Each grant of an Option shall be evidenced by an Option
Certificate, and each Option Certificate shall
(a) specify whether the Option is an ISO or Non-ISO, and
(b) incorporate such other terms and conditions as the Committee
acting in its absolute discretion deems consistent with the terms of this
Plan, including (without limitation) a limitation on the number of shares
subject to the Option which first become exercisable on any date or a Stock
Appreciation Right which is a part of such Option.
If the Committee grants an ISO and a Non-ISO to a Key Employee on the same date,
the right of the Key Employee to exercise the ISO shall not be conditioned on
his or her failure to exercise the Non-ISO.
7.2 $100,000 Limit. The aggregate Fair Market Value of the shares of Stock
subject to ISOs and other incentive stock options (which satisfy the
requirements under sec. 422 of the Code) granted to a Key Employee under this
Plan and under any other stock option plan adopted by Alrenco, a Subsidiary or
Parent which first become exercisable in any calendar year shall not exceed
$100,000. Such Fair Market Value figure shall be determined by the Committee on
the date the ISO or other incentive stock option is granted. The Committee shall
interpret and administer the limitation set forth in this sec. 7.2 in accordance
with sec. 422(d) of the Code, and the Committee shall treat this sec. 7.2 as in
effect only for those periods for which sec. 422(d) of the Code is in effect.
7.3 Option Price. The Option Price for each share of Stock subject to an
ISO or Non-ISO granted to a Key Employee shall be no less than the Fair Market
Value of a share of Stock determined on the date the ISO or Non-ISO is granted
unless the Option is an ISO and the Option is granted to a Key Employee who is a
Ten Percent Shareholder, in which event the Option Price for each share of Stock
subject to such ISO shall be no less than 110% of the Fair Market Value of a
share of Stock determined on the date the ISO is granted. The Option Price shall
be payable in full upon the exercise of any Option, and an Option Certificate at
the discretion of the Committee may provide for the payment of the Option Price
either in cash (which may in the discretion of the Committee be provided through
a loan or other extension of credit) or in Stock which has been held by the Key
Employee for at least 6 months or in any combination of cash and such Stock. If
an Option Certificate allows the payment of the Option Price in whole or in part
in Stock, such payment shall be made in Stock acceptable to the Committee. Any
payment made in Stock shall be treated as equal to the Fair Market Value of such
Stock on the date the properly endorsed certificate for such Stock is delivered
to the Committee.
7.4 Exercise Period. Each Option granted to a Key Employee under this Plan
shall be exercisable in whole or in part at such time or times as set forth in
the related Option Certificate, but no Option Certificate shall
(a) make an Option exercisable before the end of the six month period
which starts on the date such Option is granted, or
(b) make an Option exercisable on or after the earliest of the
(1) the date which is the fifth anniversary of the date the Option
is granted, if the Option is an ISO and the Key Employee is a Ten
Percent Shareholder on the date the Option is granted, or
(2) the date which is the tenth anniversary of the date such Option
is granted, if such Option is granted to a Key Employee who is not a Ten
Percent Shareholder on the date the Option is granted or if such Option
is a Non-ISO.
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An Option Certificate may provide for the exercise of an Option after the
employment of a Key Employee has terminated for any reason whatsoever, including
death, disability or retirement.
sec. 8
GRANT OF OPTIONS TO OUTSIDE DIRECTORS
8.1 Newly-Elected Outside Directors. Each person who is first elected to
serve as an Outside Director by the Board of Directors or at any annual or
special meeting of Alrenco's shareholders held after the Effective Date of this
Plan shall as of the date of his or her election automatically be granted a
Non-ISO under this Plan to purchase 16,881 shares of Stock at an Option Price
equal to the Fair Market Value of a share of Stock on the date of such grant;
provided, however, that the Board may postpone the date of the grant of such
Non-ISO if the Board determines that such postponement is in the best interest
of Alrenco.
8.2 Ongoing Outside Directors. Each person who is granted a Non-ISO under
sec. 8.1 and who is an Outside Director on an anniversary of the date of such
grant shall automatically be granted on such anniversary date a Non-ISO to
purchase 4,220 shares of Stock at an Option Price equal to the Fair Market Value
of a share of Stock on the date of such grant; provided, however, that no
Non-ISO shall be granted to an Outside Director under this sec. 8.2 after the
fourth anniversary of the date the Outside Director was granted a Non-ISO under
sec. 8.1.
8.3 Exercise Period. Subject to any special exercise rules set forth in an
Option Certificate evidencing the grant of a Non-ISO to an Outside Director
under this sec. 8, an Outside Director's right to exercise a Non-ISO granted to
him or her under this sec. 8 shall start at the end of the six month period
which starts on the date he or she is granted such Non-ISO under this sec. 8.
Thereafter, the Outside Director may exercise the Non-ISO as to 100% of the
shares of Stock covered by the Non-ISO on such grant date until the end of the
exercise period set forth in the Option Certificate; provided, however, that no
Option Certificate shall make a Non-ISO exercisable after the date which is the
tenth anniversary of the date the Non-ISO is granted.
8.4 Option Certificate. Each Non-ISO granted to an Outside Director shall
be evidenced by an Option Certificate. Each Option Certificate shall incorporate
such terms and conditions as the Committee deems necessary or appropriate. An
Option Certificate may provide for the exercise of a Non-ISO after an Outside
Director ceases to serve as an Outside Director for any reason whatsoever,
including death, disability or retirement.
sec. 9
RESTRICTED STOCK
9.1 Committee Action. The Committee acting in its absolute discretion
shall have the right to grant Restricted Stock to a Key Employee under this Plan
from time to time and, further, shall have the right to make a new Restricted
Stock grant to a Key Employee in exchange for the cancellation of an outstanding
Restricted Stock grant to such Key Employee. Each Restricted Stock grant shall
be evidenced by a Restricted Stock Certificate, and each Restricted Stock
Certificate shall set forth the conditions, if any, under which Stock will be
issued in the name of the Key Employee and the conditions, if any, under which
the Key Employee's interest in such Stock will become nonforfeitable.
9.2 Conditions.
(a) Stock Issuance Conditions. The Committee acting in its absolute
discretion may make the issuance of Restricted Stock in the name of a Key
Employee subject to the satisfaction of one, or more than one, condition which
the Committee deems appropriate under the circumstances, and the related
Restricted Stock Certificate shall set forth each such condition, if any, and
the deadline, if any, for satisfying each such condition or the expiration date,
if any, for each such condition. Stock shall be issued in the name of a Key
Employee only after each such condition, if any, has been satisfied or has
expired in accordance with the terms of the related Restricted Stock
Certificate, and upon issuance such Stock shall be held by Alrenco (or
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Alrenco's delegate) pending the satisfaction or expiration of the forfeiture
conditions, if any, set forth in the related Restricted Stock Certificate.
(b) Grants Subject to Forfeiture. The Committee acting in its absolute
discretion may make Restricted Stock issued in the name of a Key Employee
subject to forfeiture upon a failure to satisfy one, or more than one, condition
which the Committee acting in its absolute discretion deems appropriate under
the circumstances, and the related Restricted Stock Certificate shall set forth
each such forfeiture condition, if any, and the related deadline, if any, for
satisfying each such forfeiture condition or the expiration date, if any, for
each such condition. Stock issued in the name of a Key Employee shall be
forfeited unless each such forfeiture condition, if any, has been satisfied or
has expired in accordance with the terms of the related Restricted Stock
Certificate.
9.3 Dividends and Voting Rights. Each Restricted Stock Certificate shall
specify what rights, if any, a Key Employee shall have with respect to the Stock
issued in the name of a Key Employee, including rights to receive dividends and
to vote, pending the forfeiture of such Stock or the satisfaction or expiration
of each forfeiture condition, if any, with respect to such Stock. Furthermore,
the Committee may grant dividend equivalent rights on Restricted Stock while
such Stock remains subject to an issuance condition under sec. 9.2(a) under
which cash equivalent to a dividend shall be paid to the Key Employee by Alrenco
when a dividend is paid, and any such dividend equivalent right shall be set
forth in the related Restricted Stock Certificate.
9.4 Satisfaction of All Conditions. A share of Stock issued in the name of
a Key Employee shall cease to be Restricted Stock at such time as a Key
Employee's interest in such Stock becomes nonforfeitable, and the certificate
representing such share shall be released by Alrenco (or Alrenco's delegate) and
transferred to the Key Employee as soon as practicable thereafter.
9.5 Section 162(m). Except where the Committee deems it in the best
interests of Alrenco, the Committee shall use its best efforts to grant
Restricted Stock either (1) subject to at least one condition which can result
in the Restricted Stock qualifying as "performance-based compensation" under
sec. 162(m) of the Code if the shareholders of Alrenco approve such condition
and the Committee takes such other action as the Committee deems necessary or
appropriate for such grant to qualify under sec. 162(m) of the Code or (2) under
such other circumstances as the Committee deems likely to result in an income
tax deduction for the grant.
sec. 10
STOCK APPRECIATION RIGHTS
10.1 Committee Action. The Committee acting in its absolute discretion
shall have the right to grant a Stock Appreciation Right to a Key Employee under
this Plan from time to time, and each Stock Appreciation Right grant shall be
evidenced by a Stock Appreciation Right Certificate or, if such Stock
Appreciation Right is granted as part of an Option, shall be evidenced by the
Option Certificate for the related Option.
10.2 Terms and Conditions.
(a) Stock Appreciation Right Certificate. If a Stock Appreciation Right is
evidenced by a Stock Appreciation Right Certificate, such certificate shall set
forth the number of shares of Stock to which the Key Employee has the right to
appreciation and the SAR Value of each share of Stock. Such SAR Value shall be
no less than the Fair Market Value of a share of Stock determined on the date
that the Stock Appreciation Right is granted. The Stock Appreciation Right
Certificate shall set forth such other terms and conditions for the exercise of
the Stock Appreciation Right as the Committee deems appropriate under the
circumstances, but no Stock Appreciation Right Certificate shall make a Stock
Appreciation Right exercisable on or after the date which is the tenth
anniversary of the date such Stock Appreciation Right is granted.
(b) Option Certificate. If a Stock Appreciation Right is evidenced by an
Option Certificate, the SAR Value for each share of Stock subject to the Stock
Appreciation Right shall be the Option Price for the related Option. Each such
Option Certificate shall provide that the exercise of the Stock Appreciation
Right with respect to any share of Stock shall cancel the Key Employee's right
to exercise his or her Option with respect
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to such share and, conversely, that the exercise of the Option with respect to
any share of Stock shall cancel the Key Employee's right to exercise his or her
Stock Appreciation Right with respect to such share. A Stock Appreciation Right
which is granted as part of an Option shall be exercisable only while the
related Option is exercisable. The Option Certificate shall set forth such other
terms and conditions for the exercise of the Stock Appreciation Right as the
Committee deems appropriate under the circumstances.
10.3 Exercise. A Stock Appreciation Right shall be exercisable only when
the Fair Market Value of a share of Stock subject to such Stock Appreciation
Right exceeds the SAR Value for such share, and the payment due on exercise
shall be based on such excess with respect to the number of shares of Stock to
which the exercise relates. A Key Employee upon the exercise of his or her Stock
Appreciation Right shall receive a payment from Alrenco in cash or in Stock, or
in a combination of cash and Stock, and any payment in Stock shall be based on
the Fair Market Value of a share of Stock determined on the date the Stock
Appreciation Right is exercised. The Committee acting in its absolute discretion
shall have the right to determine the form and time of any payment under this
sec. 10.3.
sec. 11
NONTRANSFERABILITY
No Option, Restricted Stock or Stock Appreciation Right shall be
transferable by a Key Employee or an Outside Director other than by will or by
the laws of descent and distribution, and any Option or Stock Appreciation Right
shall be exercisable during a Key Employee's or Outside Director's lifetime only
by the Key Employee or Outside Director. The person or persons to whom an Option
or Restricted Stock or Stock Appreciation Right is transferred by will or by the
laws of descent and distribution thereafter shall be treated as the Key Employee
or Outside Director.
sec. 12
SECURITIES REGISTRATION AND RESTRICTIONS
Each Option Certificate, Restricted Stock Certificate and Stock
Appreciation Right Certificate shall provide that, upon the receipt of shares of
Stock as a result of the exercise of an Option or a Stock Appreciation Right or
the satisfaction or expiration of the forfeiture conditions, if any, on any
Restricted Stock, the Key Employee or Outside Director shall, if so requested by
Alrenco, agree to hold such shares of Stock for investment and not with a view
of resale or distribution to the public and, if so requested by Alrenco, shall
deliver to Alrenco a written statement satisfactory to Alrenco to that effect.
Each Option Certificate, Restricted Stock Certificate and Stock Appreciation
Right Certificate also shall provide that, if so requested by Alrenco, the Key
Employee or Outside Director shall make a written representation to Alrenco that
he or she will not sell or offer for sale any of such Stock unless a
registration statement shall be in effect with respect to such Stock under the
1933 Act and any applicable state securities law or he or she shall have
furnished to Alrenco an opinion in form and substance satisfactory to Alrenco of
legal counsel satisfactory to Alrenco that such registration is not required.
Certificates representing the Stock transferred upon the exercise of an Option
or Stock Appreciation Right or upon the lapse of the forfeiture conditions, if
any, on any Restricted Stock may at the discretion of Alrenco bear a legend to
the effect that such Stock has not been registered under the 1933 Act or any
applicable state securities law and that such Stock cannot be sold or offered
for sale in the absence of an effective registration statement as to such Stock
under the 1933 Act and any applicable state securities law or an opinion in form
and substance satisfactory to Alrenco of legal counsel satisfactory to Alrenco
that such registration is not required.
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sec. 13
LIFE OF PLAN
No Option, Restricted Stock or Stock Appreciation Right shall be granted
under this Plan on or after the earlier of
(a) the tenth anniversary of the Effective Date of this Plan, at which
point this Plan shall continue in effect only until all then outstanding
Options and Stock Appreciation Rights have been exercised in full or no
longer are exercisable and all then outstanding Restricted Stock grants
have been forfeited or the forfeiture conditions, if any, with respect to
such grants have been satisfied or expired, or
(b) the date on which all of the Stock reserved under sec. 3 of this
Plan has (as a result of the exercise of Options or Stock Appreciation
Rights or the satisfaction or expiration of the forfeiture conditions, if
any, on all Restricted Stock) been issued or no longer is available for use
under this Plan, in which event this Plan also shall terminate on such
date.
sec. 14
ADJUSTMENT
14.1 Capital Structure. The number, kind or class of shares of Stock
reserved under sec. 3 of this Plan and the number, kind or class of shares of
Stock subject to Options or Stock Appreciation Rights granted under this Plan
and the Option Price of such Options and the SAR Value of such Stock
Appreciation Rights as well as the number, kind or class of shares of Restricted
Stock granted under this Plan shall be adjusted by the Committee in an equitable
manner to reflect any change in the capitalization of Alrenco, including, but
not limited to, such changes as stock dividends or stock splits.
14.2 Mergers. The Committee as part of any corporate transaction described
in sec. 424(a) of the Code shall have the right to adjust (in any manner which
the Committee in its discretion deems consistent with sec. 424(a) of the Code)
the number, kind or class (or any combination thereof) of shares of Stock
reserved under sec. 3 of this Plan. Furthermore, the Committee as part of any
corporate transaction described in sec. 424(a) of the Code shall have the right
to adjust (in any manner which the Committee in its discretion deems consistent
with sec. 424(a) of the Code) the number, kind or class (or any combination
thereof) of shares of Stock underlying any Restricted Stock grants previously
made under this Plan and any related grant conditions and forfeiture conditions,
and the number, kind or class (or any combination thereof) of shares subject to
Option and Stock Appreciation Right grants previously made under this Plan and
the related Option Price and SAR Value for each such Option and Stock
Appreciation Right, and, further, shall have the right (in any manner which the
Committee in its discretion deems consistent with sec. 424(a) of the Code) to
make Restricted Stock, Option and Stock Appreciation Right grants to effect the
assumption of, or the substitution for, restricted stock, option and stock
appreciation right grants previously made by any other corporation to the extent
that such corporate transaction calls for such substitution or assumption of
such restricted stock, option or appreciation right grants.
14.3 Fractional Shares. If any adjustment under this sec. 14 would create
a fractional share of Stock or a right to acquire a fractional share of Stock,
such fractional share shall be disregarded and the number of shares of Stock
reserved under this Plan and the number subject to any Option or Stock
Appreciation Right grants and Restricted Stock grants shall be the next lower
number of shares of Stock, rounding all fractions downward. An adjustment made
under this sec. 14 by the Committee shall be conclusive and binding on all
affected persons.
sec. 15
CHANGE IN CONTROL
If the Board determines that there has been a contract or tender offer or
other transaction or event which seems likely to lead to a Change in Control
(other than a tender offer by Alrenco or an employee benefit plan
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established and maintained by Alrenco), the Board thereafter shall have the
right to take such action, if any, with respect to any or all then outstanding
Options, Stock Appreciation Rights and Restricted Stock grants under this Plan
as the Board deems appropriate under the circumstances to protect the interests
of Alrenco in maintaining the integrity of such grants under this Plan,
including waiving any conditions to the exercise of such Options and Stock
Appreciation Rights and any issuance and forfeiture conditions on any Restricted
Stock and thereafter canceling such Options, Stock Appreciation Rights and
Restricted Stock grants. The Board shall have the right to take different action
under this sec. 15 with respect to different Key Employees or Outside Directors
or different groups of Key Employees or Outside Directors, as the Board deems
appropriate under the circumstances.
sec. 16
AMENDMENT OR TERMINATION
This Plan may be amended by the Board from time to time to the extent that
the Board deems necessary or appropriate. The Board also may suspend the
granting of Options or Stock Appreciation Rights or Restricted Stock under this
Plan at any time and may terminate this Plan at any time; provided, however,
Alrenco shall not have the right unilaterally to modify, amend or cancel any
Option, Stock Appreciation Right or Restricted Stock granted before such
suspension or termination except (1) with the written consent of the Key
Employee or Outside Director to such modification, amendment or cancellation,
(2) in the event of a change in the capitalization of Alrenco or other
transaction described in sec. 14 of this Plan or upon the occurrence of an event
described in sec. 15 of this Plan or (3) in the event of a dissolution or
liquidation of Alrenco.
sec. 17
MISCELLANEOUS
17.1 No Shareholder Rights. No Key Employee or Outside Director shall have
any rights as a shareholder of Alrenco as a result of the grant of an Option or
a Stock Appreciation Right to him or to her under this Plan or his or her
exercise of such Option or a Stock Appreciation Right pending the actual
delivery of Stock subject to such Option or Stock Appreciation Right to such Key
Employee or Outside Director, and no Key Employee shall have any rights as a
shareholder with respect to any Restricted Stock except those rights, if any,
set forth in the related Restricted Stock Certificate.
17.2 No Contract of Employment or Right to Continue Service. The grant of
an Option or a Stock Appreciation Right or Restricted Stock to a Key Employee
under this Plan shall not constitute a contract of employment and shall not
confer on a Key Employee any rights upon his or her termination of employment in
addition to those rights, if any, expressly set forth in the related Option
Certificate, Stock Appreciation Right Certificate or Restricted Stock
Certificate. The grant of an Option to an Outside Director under this Plan shall
not give an Outside Director any right to continue in service as an Outside
Director and shall not confer on an Outside Director any rights upon his or her
termination of service as an Outside Director in addition to those rights, if
any, expressly set forth in the related Option Certificate.
17.3 Withholding. Each Option, Stock Appreciation Right and Restricted
Stock grant shall be made subject to the condition that the Key Employee or
Outside Director consents to whatever action the Committee directs to satisfy
the federal and state tax withholding requirements, if any, which the Committee
in its discretion deems applicable to the exercise of such Option or Stock
Appreciation Right or the satisfaction or expiration of any forfeiture
conditions with respect to Restricted Stock issued in the name of the Key
Employee. The Committee also shall have the right to provide in an Option
Certificate, Stock Appreciation Right Certificate or a Restricted Stock
Certificate that a Key Employee or Outside Director may elect to satisfy federal
and state tax withholding requirements through a reduction in the cash or the
number of shares of Stock actually transferred to him or to her under this Plan.
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17.4 Loans. If approved by the Committee, Alrenco may lend money to, or
guarantee loans by a third party to, any Key Employee or Outside Director to
finance the exercise of any Option granted under this Plan, and the exercise of
an Option with the proceeds of any such loan shall be treated as an exercise for
cash under this Plan. If approved by the Committee, Alrenco also may, in
accordance with a Key Employee's or Outside Director's instructions, transfer
Stock upon the exercise of an Option directly to a third party in connection
with any arrangement made by the Key Employee or Outside Director for financing
the exercise of such Option.
17.5 Rule 16b-3. The Committee shall have the right to amend any Option,
Restricted Stock or Stock Appreciation Right grant or to withhold or otherwise
restrict the transfer of any Stock or cash under this Plan to a Key Employee or
Outside Director as the Committee deems appropriate in order to satisfy any
condition or requirement under Rule 16b-3 to the extent Rule 16 of the 1934 Act
might be applicable to such grant or transfer.
17.6 Construction. All of the defined terms under this Plan are set forth
in sec. 2 of this Plan. All references to sections (sec.) are to sections (sec.)
of this Plan unless otherwise indicated. All references to the singular shall
include the plural, and all references to the plural shall include the singular.
This Plan shall be construed under the laws of the State of Delaware.
A-13
<PAGE> 40
EXHIBIT B
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of April , 1997 (this
"Agreement"), is entered into between ALRENCO, INC., an Indiana corporation
("INDIANA"), and HOME CHOICE HOLDINGS, INC., a Delaware corporation
("DELAWARE").
RECITALS
A. INDIANA has an aggregate authorized capital of 85,000,000 shares of
capital stock, consisting of (i) 75,000,000 shares of common stock, no par value
(the "Indiana Common Stock"), and (ii) 10,000,000 shares of preferred stock, no
par value (the "Indiana Preferred Stock").
B. DELAWARE has an aggregate authorized capital of 125,000,000 shares of
capital stock, consisting of (i) 100,000,000 shares of common stock, $.01 par
value per share (the "Delaware Common Stock"), and (ii) 25,000,000 shares of
preferred stock, $.01 par value per share (the "Delaware Preferred Stock").
C. The respective Boards of Directors of INDIANA and DELAWARE believe that
it is in the best interests of INDIANA and DELAWARE and their respective
shareholders to merge INDIANA with and into DELAWARE under and pursuant to the
provisions of this Agreement, the Indiana Business Corporation Law (the "Indiana
Act") and the Delaware General Corporation Law (the "Delaware Act").
AGREEMENT
In consideration of the Recitals and of the mutual agreements contained in
this Agreement, the parties hereto agree as set forth below.
1. Merger. INDIANA shall be merged with and into DELAWARE (the "Merger").
2. Effective Date. The Merger shall become effective immediately upon the
later of (a) the filing of articles of merger with the Secretary of State of
Indiana in accordance with the Indiana Act and the filing of a certificate of
merger with the Secretary of State of Delaware in accordance with the Delaware
Act or (b) such later time as may be set forth in such articles and certificate.
The time of such effectiveness is hereinafter called the "Effective Date."
3. Surviving Corporation. DELAWARE shall be the surviving corporation of
the Merger and shall continue to be governed by the laws of the State of
Delaware. On the Effective Date, the separate corporate existence of INDIANA
shall cease.
4. Certificate of Incorporation. The Certificate of Incorporation of
DELAWARE as it exists on the Effective Date shall be the Certificate of
Incorporation of DELAWARE following the Effective Date, unless and until the
same shall thereafter be amended or repealed in accordance with the laws of the
State of Delaware.
5. Bylaws. The Bylaws of DELAWARE as they exist on the Effective Date
shall be the Bylaws of DELAWARE following the Effective Date, unless and until
the same shall be amended or repealed in accordance with the provisions thereof
and the laws of the State of Delaware.
6. Board of Directors and Officers. The members of the Board of Directors
and the officers of INDIANA immediately prior to the Effective Date shall be the
members of the Board of Directors and the officers of DELAWARE following the
Effective Date, and such persons shall serve in such offices for the terms
provided by law or in the Bylaws of DELAWARE, or until their respective
successors are elected and qualified.
7. Conversion of Outstanding Delaware Stock. Upon the Effective Date, each
issued and outstanding share of Indiana Common Stock and all rights in respect
thereof shall be converted into one fully-paid and
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<PAGE> 41
nonassessable share of Delaware Common Stock and each certificate representing
shares of Indiana Common Stock shall for all purposes be deemed to evidence the
ownership of the same number of shares of Delaware Common Stock as are set forth
in such certificate. After the Effective Date, each holder of an outstanding
certificate representing shares of Indiana Common Stock may, at such
shareholder's option, surrender the same to DELAWARE's registrar and transfer
agent for cancellation, and each such holder shall be entitled to receive in
exchange therefor a certificate(s) evidencing the ownership of the same number
of shares of Delaware Common Stock as are represented by the INDIANA
certificate(s) surrendered to DELAWARE's registrar and transfer agent. Any
shares of Delaware Common Stock held by INDIANA shall be canceled at the
Effective Time and be retired and shall thereafter constitute authorized, but
unissued shares of Delaware Common Stock.
8. Conditions to Consummation of the Merger. Consummation of the Merger is
subject to the satisfaction prior to the Effective Date of the following
conditions: (a) this Agreement and the Merger shall have been adopted and
approved by the affirmative vote of the holders of a majority of the votes
represented by the shares of Indiana Common Stock outstanding on the record date
fixed for determining the shareholders of INDIANA entitled to vote thereon; (b)
INDIANA and DELAWARE shall have received all consents, orders and approvals and
satisfaction of all other requirements prescribed by law that are necessary for
the consummation of the Merger; and (c) the NASDAQ National Market shall have
authorized the listing, upon official notice of issuance, of the shares of
Delaware Common Stock to be issued or delivered in connection with the Merger
and such authorization shall be in full force and effect on such date.
9. Stock Options, Warrants and Convertible Debt. Upon the Effective Date,
each stock option, stock warrant, convertible debt instrument and other right to
subscribe for or purchase shares of Indiana Common Stock shall be converted into
a stock option, stock warrant, convertible debt instrument or other right to
subscribe for or purchase the same number of shares of Delaware Common Stock and
each certificate, agreement, note or other document representing such stock
option, stock warrant, convertible debt instrument or other right to subscribe
for or purchase shares of Indiana Common Stock shall for all purposes be deemed
to evidence the ownership of a stock option, stock warrant, convertible debt
instrument or other right to subscribe for or purchase shares of Delaware Common
Stock.
10. Rights and Liabilities of INDIANA. At and after the Effective Date,
and all in the manner of and as more fully set forth in Section 259 of the
Delaware Act and Section 23-1-40-6 of the Indiana Act, the title to all real
estate and other property, or any interest therein, owned by each of INDIANA and
DELAWARE shall be vested in DELAWARE without reversion or impairment; DELAWARE
shall succeed to and possess, without further act or deed, all estates, rights,
privileges, powers and franchises, both public and private, and all of the
property, real, personal and mixed, of each of INDIANA and DELAWARE without
reversion or impairment; DELAWARE shall thenceforth be responsible and liable
for all the liabilities and obligations of each of INDIANA and DELAWARE; any
claim existing or action or proceeding pending by or against INDIANA or DELAWARE
may be continued as if the Merger did not occur or DELAWARE may be substituted
for INDIANA in the proceeding; neither the rights of creditors nor any liens
upon the property of INDIANA or DELAWARE shall be impaired by the Merger; and
DELAWARE shall indemnify and hold harmless the officers and directors of each of
the parties hereto against all such debts, liabilities and duties and against
all claims and demands arising out of the Merger.
11. Termination. This Agreement may be terminated and abandoned by action
of the respective Board of Directors of INDIANA and DELAWARE at any time prior
to the filing of articles of merger with the Secretary of State of Indiana or
the filing of a certificate of merger with the Secretary of State of Delaware,
whether before or after approval by the shareholders of either or both of the
parties hereto.
12. Amendment. The Boards of Directors of the parties hereto may amend
this Agreement at any time prior to approval of this Agreement by the
shareholders of either of the parties hereto.
13. Inspection of Agreement. Executed copies of this Agreement will be on
file at the principal place of business of DELAWARE at 714 E. Kimbrough Street,
Mesquite, Texas 75149. A copy of this Agreement shall be furnished by DELAWARE,
on request and without cost, to any shareholder of either INDIANA or DELAWARE.
B-2
<PAGE> 42
14. Governing Law. This Agreement shall in all respects be construed,
interpreted and enforced in accordance with and governed by the laws of the
State of Delaware.
15. Service of Process. On and after the Effective Date, DELAWARE agrees
that it may be served with process in INDIANA in any proceeding for enforcement
of any obligation of DELAWARE or INDIANA arising from the Merger.
16. Remedies. Any right and remedy belonging to DELAWARE or INDIANA and
arising in connection with the actions contemplated by this Agreement shall be
pursued solely against DELAWARE or INDIANA, and not against their respective
officers, directors or employees. In the event that any officer, director or
employee of DELAWARE or INDIANA becomes involved in any capacity in any action,
proceeding or investigation in connection with the Merger, DELAWARE and/or
INDIANA shall advance to such person(s) all reasonable legal and other expenses
incurred in connection therewith and shall also indemnify such person(s) against
any losses, claims, damages or liabilities to which such person(s) may become
subject in connection with this Agreement, except to the extent that such
indemnification is prohibited by law.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
and Plan of Merger to be executed on its behalf by its officers duly authorized,
all as of the date first above written.
ALRENCO, INC.
an Indiana corporation
By:
------------------------------------
Name:
-----------------------------
Title:
----------------------------
HOME CHOICE HOLDINGS, INC.
a Delaware corporation
By:
------------------------------------
Name:
-----------------------------
Title:
----------------------------
B-3
<PAGE> 43
EXHIBIT C
CERTIFICATE OF INCORPORATION
OF
HOME CHOICE HOLDINGS, INC.
I, the undersigned, for the purposes of incorporating and organizing a
corporation under the General Corporation Law of the State of Delaware, do
execute this Certificate of Incorporation and do hereby certify as follows:
FIRST. The name of the corporation is Home Choice Holdings, Inc. (the
"Corporation")
SECOND. The address of the Corporation's registered office in the State of
Delaware is c/o The Corporation Trust Company, Corporative Trust Center, 1209
Orange Street, in the City of Wilmington, County of New Castle, 19801. The name
of its registered agent at such address is The Corporation Trust Company.
THIRD. The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH. (A) The total number of shares of stock that the Corporation is
authorized to issue is One Hundred Twenty-Five Million (125,000,000), consisting
of One Hundred Million (100,000,000) shares of common stock, par value $.01 per
share (the "Common Stock"), and Twenty-Five Million (25,000,000) shares of
preferred stock, par value $.01 per share (the "Preferred Stock").
Common Stock Provisions. Subject to the provisions of the Delaware General
Corporation Law ("DGCL") and the preferences of any Preferred Stock then
outstanding, the holders of the Common Stock shall be entitled to receive
dividends at such times and in such amounts as may be determined by the Board of
Directors of the Corporation. The holders of the Common Stock shall have one
vote for each share on each matter submitted to a vote of the stockholders of
the Corporation. In the event of any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, after payment or provision
for payment of the debts and other liabilities of the Corporation and the
preferential amounts to which the holders of any Preferred Stock may be
entitled, the holders of the Common Stock shall be entitled to share ratably in
the remaining assets of the Corporation.
(B) The board of directors is authorized, subject to any limitations
prescribed by law, to provide for the issuance of the shares of preferred Stock
in series, and by filing a certificate pursuant to the applicable law of the
State of Delaware, to establish from time to time the number of shares to be
included in each such series, and to fix the designation, powers preferences,
and rights of the shares of each such series and any qualifications, limitations
or restrictions thereof. The number of authorized shares of Preferred Stock may
be increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority of the Common
Stock, without a vote of the holders of the Preferred Stock, or any series
thereof, unless a vote of any such holders is required pursuant to the
certificate or certificates establishing the series of Preferred Stock.
FIFTH. The incorporator of the corporation is John J. UyHam, whose mailing
address is c/o King & Spalding, 191 Peachtree Street, Atlanta, Georgia
30303-1763.
SIXTH. In furtherance and not in limitation of the powers conferred by the
laws of the State of Delaware, the Board of Directors of the Corporation is
expressly authorized to make, alter and repeal the bylaws of the Corporation,
subject to the DGCL.
SEVENTH. A director of the Corporation shall not be liable to the
Corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except to the extent such exemption from liability or
limitation thereof is not permitted under the DGCL as the same exists or may
hereafter be amended. Any amendment, modification or repeal of the foregoing
sentence shall not adversely affect any right or protection
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<PAGE> 44
of a director of the Corporation hereunder in respect of any act or omission
occurring prior to the time of such amendment, modification or repeal.
EIGHTH. The Corporation reserves the right at any time, and from time to
time, to amend, alter, change or repeal any provision contained in this
Certificate of Incorporation, and other provisions authorized by the laws of the
State of Delaware at the time in force may be added or inserted, in the manner
now or hereafter prescribed by law; and all rights, preferences and privileges
of whatsoever nature conferred upon shareholders, directors or any other persons
whomsoever by and pursuant to this Certificate of Incorporation in its present
form or as hereafter amended are granted subject to the rights reserved in this
article.
NINTH. The business of the Corporation shall be managed by or under the
direction of its board of directors which may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by statute or by
the Certificate of Incorporation directed or required to be exercised or done by
the stockholders.
TENTH. Any action required or permitted to be taken by the stockholders of
the Corporation must be effected at a duly called annual or special meeting of
stockholders of the Corporation and may not be effected by any consent in
writing by such stockholders. Special meetings of stockholders of the
Corporation may be called only by the Chairman of the Board or the President or
by the board of directors acting pursuant to a resolution adopted by a majority
of the Whole Board. For purposes of this Certificate of Incorporation, the term
"Whole Board" shall mean the total number of authorized directors whether or not
there exist any vacancies in previously authorized directorships.
ELEVENTH. The powers of the incorporator are to terminate upon the filing
of this Certificate of Incorporation with the Secretary of State of the State of
Delaware. The name and mailing address of the person who is to serve as the sole
initial director of the Corporation until the first annual meeting of
shareholders of the Corporation, or until his successor is duly elected and
qualified, is:
Billy W. White, Sr.
Home Choice Holdings, Inc.
714 E. Kimbrough Street
Mesquite, Texas 75149
TWELFTH. The Corporation shall not be governed by Section 203 of the DGCL.
The undersigned incorporator hereby acknowledges that the foregoing
Certificate of Incorporation is his act and deed on this the day of April,
1998.
--------------------------------------
John J. UyHam
Incorporator
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<PAGE> 45
EXHIBIT D
BYLAWS
OF
HOME CHOICE HOLDINGS, INC.
D-1
<PAGE> 46
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I -- STOCKHOLDERS................................................... D-4
Section 1.1 Annual Meeting.............................................. D-4
Section 1.2 Special Meetings............................................ D-4
Section 1.3 Notice of Meetings.......................................... D-4
Section 1.4 Adjournment of Meetings..................................... D-4
Section 1.5 Quorum at Meetings.......................................... D-4
Section 1.6 Nominations and Business at Meetings........................ D-5
Section 1.7 Organization and Conduct of Meetings........................ D-6
Section 1.8 Voting; Proxies............................................. D-6
Section 1.9 No Action by Written Consent................................ D-6
Section 1.10 Record Dates for Meetings and Other Purposes................ D-7
Section 1.11 List of Stockholders Entitled to Vote....................... D-7
Section 1.12 Inspectors of Election...................................... D-7
Section 1.13 Stockholders of Record...................................... D-7
ARTICLE II -- BOARD OF DIRECTORS............................................ D-8
Section 2.1 Number; Election............................................ D-8
Section 2.2 Resignation; Vacancies...................................... D-8
Section 2.3 Management of Corporation................................... D-8
Section 2.4 Removal of Directors........................................ D-8
Section 2.5 Regular Meetings............................................ D-8
Section 2.6 Special Meetings............................................ D-8
Section 2.7 Telephonic Meetings Permitted............................... D-9
Section 2.8 Quorum; Vote Required for Action............................ D-9
Section 2.9 Organization of Meetings.................................... D-9
Section 2.10 Informal Action by Directors................................ D-9
Section 2.11 Committees of the Board..................................... D-9
Section 2.12 Notices to Directors........................................ D-10
Section 2.13 Waiver of Notice............................................ D-10
Section 2.14 Compensation of Directors................................... D-10
Section 2.15 Interested Directors or Officers; Quorum in Such Cases...... D-10
ARTICLE III -- OFFICERS..................................................... D-11
Section 3.1 ............................................................ D-11
Section 3.2 Term of Office; Resignation; Removal; Vacancies............. D-11
Section 3.3 Compensation of Officers.................................... D-11
Section 3.4 Powers and Duties of Officers............................... D-11
Section 3.5 Chief Executive Officer..................................... D-11
Section 3.6 Chief Operating Officer..................................... D-12
Section 3.7 Chief Financial Officer..................................... D-12
Section 3.8 Chairman of the Board....................................... D-12
Section 3.9 President................................................... D-12
Section 3.10 Vice Presidents............................................. D-12
Section 3.11 Treasurer................................................... D-13
Section 3.12 Controller.................................................. D-13
Section 3.13 Corporate Secretary......................................... D-13
Section 3.14 Assistant Corporate Secretaries and Assistant Treasurers.... D-14
ARTICLE IV -- STOCK......................................................... D-14
Section 4.1 Definitions................................................. D-14
Section 4.2 In General.................................................. D-14
Section 4.3 Certificated Shares......................................... D-14
Section 4.4 Uncertificated Shares....................................... D-15
</TABLE>
D-2
<PAGE> 47
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Section 4.5 Lost, Stolen or Destroyed Certificates; Issuance of New D-15
Certificates or Uncertificated Shares.......................
Section 4.6 Registration of Transfers................................... D-15
Section 4.7 The Stock Ledger............................................ D-15
ARTICLE V -- INDEMNIFICATION AND ADVANCEMENT OF EXPENSES.................... D-15
Section 5.1 Right to Indemnification.................................... D-15
Section 5.2 Determination Required in Connection with Certain D-16
Indemnification.............................................
Section 5.3 Advancement of Expenses..................................... D-16
Section 5.4 Claims...................................................... D-16
Section 5.5 Nonexclusivity of Rights.................................... D-17
Section 5.6 Other Indemnification....................................... D-17
ARTICLE VI -- MISCELLANEOUS PROVISIONS...................................... D-17
Section 6.1 Offices and Books and Records............................... D-17
Section 6.2 Fiscal Year................................................. D-17
Section 6.3 Seal........................................................ D-17
Section 6.4 Form of Records............................................. D-17
Section 6.5 Signing of Checks, Notes, etc............................... D-17
Section 6.6 Voting of Shares in Other Companies......................... D-17
Section 6.7 Amendment of Bylaws......................................... D-18
</TABLE>
D-3
<PAGE> 48
BYLAWS
OF
HOME CHOICE HOLDINGS, INC.
, 1998
ARTICLE I
STOCKHOLDERS
SECTION 1.1 ANNUAL MEETING. An annual meeting of the stockholders shall
be held at the Corporation's headquarters in Mesquite, Texas, or at such other
place, and at such date and time, as may be designated by resolution of the
board of directors from time to time. At the annual meeting, the stockholders
shall elect directors and transact such other business as may properly come
before the meeting in accordance with Section 1.6 of these Bylaws.
SECTION 1.2 SPECIAL MEETINGS. Special meetings of stockholders for any
purpose or purposes may be called at any time by the chairman of the board and
shall be called by the chairman of the board at the request in writing of a
majority of the members of either the whole board of directors or the executive
committee of the board of directors. Such request shall state the purpose or
purposes of the proposed special meeting. Except as otherwise required by the
Delaware General Corporation Law or the Certificate of Incorporation, special
meetings of stockholders may not be called by any other person or persons. The
date, time and place of any properly called special meeting shall be determined
by the chairman of the board. At any special meeting, the stockholders shall
transact such business as may properly come before the meeting in accordance
with Section 1.6 of these Bylaws.
SECTION 1.3 NOTICE OF MEETINGS. Whenever stockholders are required or
permitted to take any action at a meeting, a written notice of the meeting shall
be given that shall state the place, date and hour of the meeting and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called. Unless otherwise provided by the Delaware General Corporation Law, the
Certificate of Incorporation or these Bylaws, the written notice of any meeting
shall be given not less than 10 nor more than 60 days before the date of the
meeting to each stockholder entitled to vote at such meeting. If mailed, such
notice shall be deemed to be given when deposited in the United States mail,
postage prepaid, directed to the stockholder at his, her or its address as it
appears on the records of the Corporation. Any previously scheduled meeting of
stockholders may at any time prior to its commencement be postponed or cancel
led by resolution of the board of directors upon public notice given prior to
the time scheduled for such meeting.
SECTION 1.4 ADJOURNMENT OF MEETINGS. Any meeting of stockholders, annual
or special, may adjourn from time to time to reconvene at the same or some other
place, and notice need not be given of any such adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the Corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than 30 days, or if after the adjournment a new record date is fixed for
the adjourned meeting, notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
SECTION 1.5 QUORUM AT MEETINGS. Except as otherwise provided by the
Delaware General Corporation Law, the Certificate of Incorporation or these
Bylaws, at each meeting of stockholders the presence in person or by proxy of
the holders of a majority in voting power of the outstanding shares of stock
entitled to vote at the meeting shall be necessary and sufficient to constitute
a quorum. In the absence of a quorum, the stockholders so present may, by
majority vote, adjourn the meeting from time to time in the manner provided in
Section 1.4 of these Bylaws until a quorum shall attend. Shares of its own stock
belonging to the Corporation or to another Corporation, if a majority of the
shares entitled to vote in the election of directors of such other Corporation
is held, directly or indirectly, by the Corporation, shall neither be entitled
to vote nor be counted for quorum purposes; provided however, that the foregoing
shall not limit the right of the Corporation or any subsidiary of the
Corporation to vote stock, including but not limited to its own stock, held by
it in a fiduciary capacity. The stockholders of the Corporation present at a
duly organized meeting may
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<PAGE> 49
continue to transact business until its adjournment in the manner provided in
Section 1.4 of these Bylaws, notwithstanding the withdrawal from the meeting of
enough stockholders to leave less than a quorum.
SECTION 1.6 NOMINATIONS AND BUSINESS AT MEETINGS. (a) Nominations of
persons for election as directors of the Corporation and the proposal of
business to be considered by stockholders may be made at any meeting of
stockholders (i) pursuant to and to the extent specified in the Corporation's
notice of the meeting (or any supplement thereto) delivered pursuant to Section
1.3 of these Bylaws, (ii) by or at the direction of the board of directors (or
with respect to any such nomination, on behalf of the board by any nominating
committee appointed by the board) or (iii) by any stockholder of the Corporation
who is entitled to vote at such meeting, who complied with the notice procedures
set forth in paragraph (b) of this Section 1.6 and who was a stockholder of
record of the Corporation at the time of delivery by him, her or it of such
notice to the corporate secretary. Business transacted at any special meeting of
stockholders shall be limited to the purpose or purposes for which the meeting
is called stated in the Corporation's notice of the meeting pursuant to Section
1.3 of these Bylaws.
(b) For nominations or other business to be properly brought before any
meeting by a stockholder pursuant to clause (iii) of paragraph (a) of this
Section 1.6, the stockholder must have given timely notice thereof in writing to
the corporate secretary of the Corporation. To be timely, a stockholder's notice
must be received by the corporate secretary at the Corporation's headquarters
not less than 120 days nor more than 160 days prior to any meeting of
stockholders called for the election of directors or to consider such other
business, as the case may be; provided, however, that if less than 130 days'
prior public disclosure of the date of the meeting is given to stockholders, the
nomination or other proposal must be received by the corporate secretary not
later than the close of business on the tenth day following the day on which
public disclosure of the meeting was made. The notice shall set forth: (i) the
name and address of the stockholder who intends to make the nomination, as they
appear on the Corporation's stock ledger, and of the beneficial owner, if any,
on whose behalf the nomination or proposal is made; (ii) the name, age, business
address and, if known, residence address of each nominee; (iii) the principal
occupation or employment of each nominee; (iv) the class and number of shares of
stock of the Corporation which are beneficially owned by each nominee and by the
nominating stockholder and any such beneficial owner on whose behalf the
nomination or proposal is made; (v) any other information concerning the nominee
that must be disclosed with respect to nominees in a proxy statement pursuant to
Regulation 14A of the Securities Exchange Act of 1934, as amended, (the
"Exchange Act"); (vi) the executed consent of each nominee to serve as a
director of the Corporation, if elected; and (vii) as to any other business that
the stockholder proposes to bring before the meeting, a brief description of the
business desired to be brought before the meeting, the reasons for conducting
such business at the meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the proposal is
made. For purposes of this Section 1.6, "public disclosure" shall mean
disclosure by the Corporation in a press release reported by the Dow Jones News
Service or comparable national news service or in a document publicly filed by
the Corporation with the Securities and Exchange Commission pursuant to Section
13, 14 or 15(d) of the Exchange Act.
(c) Only persons who are nominated in accordance with the procedures set
forth in this Section 1.6 shall be eligible to serve as directors of the
Corporation. Only such other business shall be conducted at a meeting of
stockholders of the Corporation as shall have been brought before the meeting in
accordance with the procedures set forth in this Section 1.6. The chairman of
the meeting shall have the power and duty to determine whether a nomination or
any other business proposed to be brought before the meeting was made in
accordance with the procedures set forth in this Section 1.6 and, if any
proposed nomination or other business is not in such compliance, to declare that
such defective nomination or proposal shall be disregarded.
(d) Notwithstanding the foregoing provisions of this Section 1.6, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this Section 1.6. Nothing in this Section 1.6 shall be deemed to affect
any rights of stockholders to request inclusion of proposals in the
Corporation's proxy statements pursuant to the applicable provisions of
Regulation 14A under the Exchange Act.
D-5
<PAGE> 50
SECTION 1.7 ORGANIZATION AND CONDUCT OF MEETINGS. (a) The chairman of the
board of directors of the Corporation shall be the chairman of, and shall
preside at, all annual and special meetings of stockholders. In the event of the
absence of the chairman of the board of directors from any meeting of
stockholders, the meeting will be presided over by whichever of the chief
executive officer or the president is not then the chairman of the board of
directors or, in his or her absence, by a chairman designated by the board of
directors, or in the absence of such designation by a chairman chosen by the
meeting. The corporate secretary shall act as secretary of the meeting, but in
his or her absence the chairman of the meeting may appoint any person to act as
secretary of the meeting.
(b) The date and time of the opening and the closing of the polls for each
matter upon which the stockholders will vote at a meeting shall be announced at
the meeting by the chairman of the meeting. The board of directors of the
Corporation may adopt by resolution such rules and regulations for the conduct
of any or all meetings of stockholders as it shall deem appropriate. Except to
the extent inconsistent with such rules and regulations, if any, as adopted by
the board of directors, the chairman of any meeting of stockholders shall have
the right and authority to prescribe such rules, regulations and procedures and
to do all such acts, including adjournment of the meeting, as, in the judgment
of such chairman, are appropriate for the proper conduct of the meeting. Such
rules, regulations or procedures, whether adopted by the board of directors or
prescribed by the chairman of the meeting, may include, without limitation, the
following: (i) the establishment of an agenda or order of business for the
meeting; (ii) rules and procedures for maintaining order at the meeting and the
safety of those present; (iii) limitations on attendance at or participation in
the meeting to stockholders of record of the Corporation, their duly authorized
and constituted proxies or such other persons as the chairman of the meeting
shall determine; (iv) restrictions on entry to the meeting after the time fixed
for the commencement thereof; and (v) limitations on the time allotted to
questions or comments by participants. Unless and to the extent determined by
the board of directors or the chairman of the meeting, meetings of stockholders
shall not be required to be held in accordance with the rules of parliamentary
procedure.
SECTION 1.8 VOTING; PROXIES. (a) Except as otherwise provided by the
Certificate of Incorporation, each stockholder entitled to vote at any meeting
of stockholders shall be entitled to one vote for each share of stock held by
him, her or it which has voting power upon the matter in question. Each
stockholder entitled to vote at a meeting of stockholders may authorize another
person or persons to act for him, her or it by proxy, but no such proxy shall be
voted or acted upon after three years from its date, unless the proxy provides
for a longer period. To be valid, a proxy must be filed with the corporate
secretary of the Corporation or his or her representative at or before the time
of the meeting at which it is intended that it be voted or acted upon. A proxy
shall be irrevocable if it states that it is irrevocable and if, and only as
long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A stockholder may revoke any proxy which is not irrevocable
by attending the meeting and voting in person or by filing an instrument in
writing revoking the proxy or by delivering a proxy in accordance with
applicable law bearing a later date to the corporate secretary of the
Corporation. Except as otherwise provided in the Certificate of Incorporation or
as determined by the chairman of the meeting, voting at any meeting of
stockholders need not be by written ballot.
(b) Except as otherwise provided by or pursuant to the Certificate of
Incorporation with respect to the right of the holders of Preferred Stock, if
any, to elect additional directors under specified circumstances, a plurality of
the votes cast at any meeting for the election of directors shall be sufficient
to elect. Except as otherwise provided by the Delaware General Corporation Law,
the Certificate of Incorporation or these Bylaws, all matters other than the
election of directors submitted to the stockholders at any meeting shall be
decided by the affirmative vote of the holders of a majority in voting power of
the shares of stock which are present in person or by proxy and entitled to vote
thereon.
SECTION 1.9 NO ACTION BY WRITTEN CONSENT. Any action required or
permitted to be taken at any annual or special meeting of stockholders must be
taken at such a meeting duly called, upon proper notice to all stockholders
entitled to vote. No action required to be taken or which may be taken at any
annual or special meeting of stockholders may be taken without a meeting,
without prior notice and without a vote.
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SECTION 1.10 RECORD DATES FOR MEETINGS AND OTHER PURPOSES. In order that
the Corporation may determine the stockholders entitled to notice of or to vote
at any meeting of stockholders or any adjournment thereof, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock or for the purpose of any other lawful action, the board of
directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the board of
directors, and which record date: (a) in the case of a determination of
stockholders entitled to vote at any meeting of stockholders or adjournment
thereof, shall, unless otherwise required by the Delaware General Corporation
Law, not be more than 60 nor less than 10 days before the date of such meeting;
and (b) in the case of any other action, shall not be more than 60 days prior to
such other action. If no record date is fixed: (x) the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held; and (y) the record
date for determining stockholders for any other purpose shall be at the close of
business on the day on which the board of directors adopts the resolution
relating thereto. A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the board of directors may fix a new record
date for the adjourned meeting.
SECTION 1.11 LIST OF STOCKHOLDERS ENTITLED TO VOTE. The corporate
secretary shall prepare and make, at least 10 days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
10 days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof and may be inspected by any stockholder who is
present.
SECTION 1.12 INSPECTORS OF ELECTION. By action of its chairman of the
board, chief executive officer or corporate secretary, the Corporation may, and
shall if required by law, in advance of any meeting of stockholders, appoint one
or more inspectors of election, who may be employees of the Corporation, to act
at the meeting or any adjournment thereof and to make a written report thereof.
In the same manner, the Corporation may designate one or more persons as
alternate inspectors to replace any inspector who fails to act. In the event
that no inspector so appointed or designated is able to act at a meeting of
stockholders, the person presiding at the meeting shall appoint one or more
inspectors to act at the meeting. Each inspector, before entering upon the
discharge of his or her duties, shall take and sign an oath to execute
faithfully the duties of inspector with strict impartiality and according to the
best of his or her ability. The inspector or inspectors so appointed or
designated shall: (i) ascertain the number of shares of capital stock of the
Corporation outstanding at the record date for the meeting and the voting power
of each such share; (ii) determine the shares of capital stock of the
Corporation represented at the meeting and the validity of proxies and ballots;
(iii) count all votes and ballots; (iv) determine and retain for a reasonable
period a record of the disposition of any challenges made to any determination
by the inspectors; and (v) certify their determination of the number of shares
of capital stock of the Corporation represented at the meeting and such
inspectors' count of all votes and ballots. Such certification and report shall
specify such other information as may be required by law or specified by the
chairman of the meeting. In determining the validity and counting of proxies and
ballots cast at any meeting of stockholders of the Corporation, the inspectors
may consider such information as is permitted by applicable law. No person who
is a candidate for an office at an election may serve as an inspector at such
election.
SECTION 1.13 STOCKHOLDERS OF RECORD. Except as otherwise provided by law,
the stock ledger of the Corporation provided for by Section 4.7 of these Bylaws
shall be the only evidence as to who are the stockholders of the Corporation
entitled, upon compliance with any applicable provisions of the Delaware General
Corporation Law: (i) to examine the stock ledger, any list of stockholders
(including the list of stockholders referred to in Section 1.11 of these Bylaws)
or the other books and records of the Corporation; and (ii) to vote in person or
by proxy at any meeting of stockholders. The Corporation shall be entitled to
treat
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the holder of record of any certificated shares or uncertificated shares (as
those terms are defined in Section 4.1 of these Bylaws) as the holder in fact
thereof and, accordingly, shall not be bound to recognize any equitable or other
claim to or interest in such shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by law. All references in the Delaware General Corporation Law, the Certificate
of Incorporation or these Bylaws, unless the context or the law otherwise
requires, to "stockholders," "stockholders of record" "registered owners" and
similar terms shall refer in each case, at a given date, only to the
stockholders and the stock of the Corporation held by them as such information
is set forth on the stock ledger of the Corporation as of such date.
ARTICLE II
BOARD OF DIRECTORS
SECTION 2.1 NUMBER; ELECTION. The board of directors of the Corporation
shall consist of not less than three (3) nor more than fifteen (5) members. The
number of directors may be fixed or changed from time to time, within the
aforesaid minimum and maximum, by the directors or stockholders. Directors shall
be elected at the annual meeting of the stockholders, except as provided in
Section 2.2 of these Bylaws, and each director elected shall hold office until
his successor is elected and qualified. Directors need not be stockholders.
SECTION 2.2. RESIGNATION; VACANCIES. Any director may resign at any time
upon written notice to the Corporation. Vacancies and newly created
directorships resulting from any increase in the authorized number of directors
may be filled by a majority of the directors then in office, though less than a
quorum, or by a sole remaining director, and the directors so chosen shall hold
office until the next annual election and until their successors are duly
elected and shall qualify, unless sooner displaced. If there are no directors in
office, then an election of directors may he held in the manner provided by
statute. If, at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office.
SECTION 2.3 MANAGEMENT OF CORPORATION. The business of the Corporation
shall be managed by or under the direction of its board of directors which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute or by the Certificate of Incorporation or by these
Bylaws directed or required to be exercised or done by the stockholders.
SECTION 2.4 REMOVAL OF DIRECTORS. Unless otherwise restricted by the
Certificate of Incorporation or by law, any director or the entire board of
directors may be removed, with or without cause, by the holders of a majority of
the outstanding shares entitled to vote at an election of directors, whether at
an annual or special meeting of the shareholders.
SECTION 2.5 REGULAR MEETINGS. (a) Regular meetings of the board of
directors, or of any committee thereof, may be held at such places within or
without the State of Delaware and at such times as the board of directors or
such committee may from time to time determine, and if so determined notices
thereof need not be given.
(b) The first meeting of the board of directors following each annual
meeting of stockholders shall be held without other notice than this Bylaw,
immediately after, and at the same place as, such annual meeting of
stockholders. In the event of the failure to hold such meeting of the board of
directors at such time and place, the meeting may be held at such time and place
as shall be specified in a notice given as hereinafter provided for special
meetings of the board of directors, or as shall be specified in a written waiver
of notice signed by those directors who did not attend such meeting.
SECTION 2.6 SPECIAL MEETINGS. (a) Special meetings of the board of
directors may be held at any time or place within or without the State of
Delaware whenever called by the chairman of the board, the chief executive
officer or any two members of the board of directors. Notice of a special
meeting of the board of
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directors shall be given by the person or persons calling the meeting, in the
manner specified in Section 2.10 of these Bylaws, at least 24 hours before the
special meeting.
(b) Special meetings of any committee of the board of directors may be held
at any time or place within or without the State of Delaware whenever called by
the chairman of the board, the chief executive officer or the chairman of the
committee. Notice of a special meeting of any committee of the board of
directors shall be given by the person calling the meeting, in the manner
specified in Section 2.12 of these Bylaws, at least 24 hours before the special
meeting.
SECTION 2.7 TELEPHONIC MEETINGS PERMITTED. Members of the board of
directors, or of any committee thereof, may participate in a meeting thereof by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this Section 2.7 shall constitute
presence in person at such meeting.
SECTION 2.8 QUORUM; VOTE REQUIRED FOR ACTION. At all meetings of the
board of directors a majority of the whole board of directors shall constitute a
quorum for the transaction of business. Except in cases in which the Certificate
of Incorporation, these Bylaws or applicable law otherwise provides, the vote of
a majority of the directors present at a meeting at which a quorum is present
shall be the act of the board of directors. If a quorum shall not be present at
any meeting of the board of directors, the directors present thereat may adjourn
the meeting from time to time, without notice other than announcement at a
meeting until a quorum shall be present.
SECTION 2.9 ORGANIZATION OF MEETINGS. Meetings of the board of directors
shall be presided over by the chairman of the board, or in his or her absence by
the vice chairman of the board, if any, or in his or her absence by the
president, or in their absence by a chairman chosen at the meeting. The
corporate secretary shall act as secretary of the meeting, but in his or her
absence the chairman of the meeting may appoint any person to act as secretary
of the meeting.
SECTION 2.10 INFORMAL ACTION BY DIRECTORS. Unless otherwise restricted by
the Certificate of Incorporation or these Bylaws, any action required or
permitted to be taken at any meeting of the board of directors, or of any
committee thereof, may be taken without a meeting if all members of the board of
directors or such committee, as the case may be, consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the board
of directors or such committee.
SECTION 2.11 COMMITTEES OF THE BOARD. (a) The board of directors, by a
resolution passed by a majority of the whole board of directors, shall appoint
from among its members an executive committee, such members to serve at the
pleasure of the board. The number of directors to be appointed as members of the
executive committee shall be fixed from time to time by resolution of the board
but shall not be less than two. The board of directors shall designate one of
the members of the executive committee as chairman of the executive committee.
To the maximum extent permitted by law, the executive committee shall have and
may exercise, when the whole board of directors is not in session, all the
powers of the board of directors in the management and affairs of the
Corporation.
(b) The board of directors shall have such other committees, if any, as the
board of directors may, by resolution passed by a majority of the whole board of
directors, designate, each such committee to consist of one or more of the
directors of the Corporation as determined by the board of directors. The board
of directors shall appoint the members of each such committee, who shall serve
at the pleasure of the board, and shall designate one of the members to be its
chairman. Each such committee, to the extent permitted by law and provided in
the resolution of the board of directors designating it, shall have and may
exercise all the powers and authority of the board of directors in the
management of the business and affairs of the Corporation. Each such committee
may authorize the seal of the Corporation to be affixed to all papers which may
require it.
(c) In the absence or disqualification of a member of any committee of the
board of directors, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he, she or they constitute a quorum,
may unanimously appoint another member of the board of directors to act at the
meeting in place of any such absent or disqualified member.
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(d) Unless the board of directors otherwise provides, the executive
committee and each other committee, if any, designated by the board of directors
may make, alter and repeal rules for the conduct of its business. In the absence
of such rules each committee shall conduct its business in the same manner as
the board of directors conducts its business pursuant to this Article II. Each
of the committees shall keep minutes of all of its meetings which shall be open
to the inspection of any director at any time.
SECTION 2.12 NOTICES TO DIRECTORS. All notices to directors shall be in
writing and shall be delivered by hand or sent by facsimile transmission ("fax")
or mail to the directors at their respective addresses or fax numbers most
recently furnished by each of them in writing to the corporate secretary of the
Corporation. Any notice delivered by hand to such address of a director shall be
deemed to have been given on the day it is so delivered at such address,
provided that if such day is not a business day then the notice shall be deemed
to have been given on the business day next following such day. Any notice sent
by fax to such fax number of a director shall be deemed to have been given on
the date and time the fax is sent if transmitted during normal business hours on
a business day or otherwise shall he deemed to have been given at the normal
opening of business on the business day next following the date of its
transmission. Any notice sent by mail to such address of a director shall be
deemed to have been given when the notice is mailed. Notice to members of any
committee of the board of directors, in their capacities as committee members,
may be given in the same manner as that specified above for notices to directors
as such. Notice to committee members may also be given orally, in person or by
telephone, and in any such case shall be deemed to be given when actually
received by the committee member. For purposes of this Bylaw, the term "business
day" means any day other than a Saturday, Sunday or official national holiday in
the United States.
SECTION 2.13 WAIVER OF NOTICE. Whenever any notice is required to be
given to a director under the provisions of any statute, the Certificate of
Incorporation or these Bylaws, a waiver thereof in writing signed by the
director entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent to notice. Attendance of a director at a
meeting of the board of directors or any committee thereof shall constitute a
waiver of notice of such meeting, except when the director attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
SECTION 2.14 COMPENSATION OF DIRECTORS. Each director of the Corporation
who is not an employee of the Corporation shall be entitled to receive such
compensation for his or her services as a director and as a member of any
standing or special committee of the board of directors as the board of
directors by resolution may from time to time determine. Each director, whether
or not an employee of the Corporation, shall be entitled to reimbursement for
all expenses reasonably incurred by him or her in connection with attending any
meeting of the board of directors or of any committee thereof.
SECTION 2.15 INTERESTED DIRECTORS OR OFFICERS; QUORUM IN SUCH CASES. No
contract or transaction between the Corporation and one or more of its directors
or officers, or between the Corporation and any other corporation, partnership,
association, or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the board of directors or committee
thereof which authorizes the contract or transaction, or solely because his, her
or their votes are counted for such purpose, if: (i) the material facts as to
his or her relationship or interest and as to the contract or transaction are
disclosed or are known to the board of directors or the committee, and the board
of directors or committee in good faith authorizes the contract or transaction
by the affirmative votes of a majority of the disinterested directors, even
though the disinterested directors be less than a quorum; or (ii) the material
facts as to his or her relationship or interest and as to the contract or
transaction are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by vote of the stockholders; or (iii) the contract or transaction is fair as to
the Corporation as of the time it is authorized, approved or ratified by the
board of directors, a committee thereof, or the stockholders. Common or
interested directors may be counted in determining the presence of a quorum at a
meeting of the board of directors or of a committee which authorizes the
contract or transaction.
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ARTICLE III
OFFICERS
SECTION 3.1 The officers of the Corporation shall be a chairman of the
board, a president, one or more vice presidents (the number and designation
thereof to be determined by the board of directors), a treasurer and a corporate
secretary. The board of directors shall designate either the chairman of the
board or the president as the chief executive officer of the Corporation, and it
may designate the same or one or more other officers as the chief operating
officer, the chief financial officer and the controller of the Corporation. The
officers of the Corporation shall be elected by the board of directors;
provided, however, that in its discretion, the board of directors may leave any
such office unfilled. The board of directors may also from time-to-time elect or
appoint such other officers of the Corporation, including without limitation one
or more vice chairmen of the board, assistant treasurers, assistant controllers
and assistant secretaries, as it shall deem advisable. Any two or more executive
or other offices may be held by the same person. No executive officer or other
officer other than the chairman of the board and any vice chairman of the board
need be a director of the Corporation.
SECTION 3.2 TERM OF OFFICE; RESIGNATION; REMOVAL; VACANCIES. Each officer
of the Corporation shall hold office until his or her successor is elected or
until his or her earlier death, resignation or removal. Any officer may resign
at any time upon written notice to the Corporation, but such resignation shall
be without prejudice to the contractual rights of the Corporation, if any, with
such officer. The board of directors may remove any officer with or without
cause at any time, but such removal shall be without prejudice to the
contractual rights of such officer, if any, with the Corporation. Any vacancy
occurring in any office of the Corporation by death, resignation, removal or
otherwise may be filled by the board of directors or the executive committee at
any regular or special meeting thereof.
SECTION 3.3 COMPENSATION OF OFFICERS. The salaries and other compensation
(including, without limitation, bonuses and similar supplemental payments) of
the officers of the Corporation shall be approved from time to time by the board
of directors or by any committee of directors to whom such authority shall be
delegated by the board of directors.
SECTION 3.4 POWERS AND DUTIES OF OFFICERS. Each of the officers of the
Corporation shall have such powers and perform such duties in the management of
the Corporation as are prescribed or assigned in these Bylaws or as may be
prescribed or assigned from time to time by the board of directors or by the
officer of the Corporation to whom he or she reports and, to the extent not so
prescribed or assigned, as generally pertain to his or her office, subject to
the control of the board of directors. The board of directors may require any
officer, agent or employee to give security for the faithful performance of his
or her duties in such form and amount as the board of directors shall determine.
Nothing in any other provision of this Article III is intended to limit the
generality of this Section 3.4.
SECTION 3.5 CHIEF EXECUTIVE OFFICER. (a) The chief executive officer of
the Corporation, who shall be designated by the board of directors and who shall
be either the chairman of the board or the president of the Corporation, shall
have general and active authority, control and supervision over the business,
property and affairs of the Corporation, subject to the board of directors. The
chief executive officer shall report to the board of directors. He or she shall
keep the board of directors fully informed, and shall freely consult it,
concerning the business and affairs of the Corporation, and he or she shall see
that all orders and resolutions of the board of directors are carried out.
(b) In the absence or disability of the chief executive officer, or in case
of an unfilled vacancy in that position, until such time as the board of
directors shall designate his or her successor, his or her duties shall be
performed and his or her powers shall be exercised by (i) whichever officer,
either the chairman of the board or the president, who is not then the
designated chief executive officer of the Corporation or (ii) in the absence or
disability of such officer or in the case of an unfilled vacancy in that office,
by other elected or appointed officers of the Corporation who are also directors
of the Corporation, if any, in the order of their election or appointment.
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SECTION 3.6 CHIEF OPERATING OFFICER. The chief operating officer of the
Corporation, if designated by the board of directors, shall be in general and
active charge of the day-to-day operations and business of the Corporation.
Unless otherwise expressly provided by the board of directors, he or she shall
report to the chief executive officer. He or she shall keep the chief executive
officer and, when and as requested by it, the board of directors fully informed
concerning the day-to-day operations and business of the Corporation.
SECTION 3.7 CHIEF FINANCIAL OFFICER. The chief financial officer of the
Corporation, if one is designated by the board of directors, shall be the
principal financial officer of the Corporation and have responsibility for all
of its financial affairs. In that capacity, he or she shall: (i) protect the
cash, securities, receivables and other financial resources of the Corporation,
have responsibility for investment, receipt, custody and disbursement of such
resources, and establish policies for granting credit to customers; (ii)
maintain the creditworthiness of the Corporation; (iii) procure capital as
required by the Corporation from such sources as he or she deems appropriate,
including without limitation long-term bank borrowings or the public or private
sale of debt or equity securities of the Corporation, and maintain adequate
sources for the Corporation's short-term financing requirements; (iv) maintain
the Corporation's banking relationships; (v) administer the accounting policies
of the Corporation and the internal controls with respect to its financial
affairs; (vi) supervise the preparation and maintenance of the Corporation's
books of account, and have access to all records of the Corporation. Unless
otherwise expressly provided by the board of directors, he or she shall report
to the chief executive officer. He or she shall keep the chief executive officer
and, when and as requested by it, the board of directors fully informed
concerning the financial affairs of the Corporation; and (vii) fulfil the duties
of the controller of the Corporation if the board of directors does not
designate a controller.
SECTION 3.8 CHAIRMAN OF THE BOARD. The chairman of the board shall act as
chairman of and preside at, all meetings of the board of directors of the
Corporation and shall consult with the other directors and officers of the
Corporation. If he or she has been so designated by the board of directors, the
chairman of the board shall have those powers and duties conferred by these
Bylaws upon the chief executive officer of the Corporation. He or she may sign
with the corporate secretary or any other officer of the Corporation thereunto
authorized, certificates for shares or other securities of the Corporation, the
issuance of which shall have been duly authorized by the board of directors. He
or she shall have the authority to execute, by and on behalf of the Corporation,
deeds, mortgages, bonds, contracts or other agreements and instruments, except
in cases where the signing and execution thereof shall be expressly delegated by
the board of directors or by these Bylaws to some other officer or agent of the
Corporation or shall be required by law to be otherwise signed or executed.
SECTION 3.9 PRESIDENT. If he or she is a director, the president shall,
in the absence of the chairman of the board, preside at all meetings of the
board of directors. If the chairman of the board has been designated the chief
executive officer of the Corporation, then unless otherwise expressly provided
by the board of directors, the president shall report to him or her. If he or
she has been so designated by the board of directors, the president shall have
those powers and duties conferred by these Bylaws upon the chief executive
officer of the Corporation. If no chief operating officer has been designated by
the board of directors, the president shall have those powers and duties
conferred on the chief operating officer of the Corporation by these Bylaws.
In the absence of the chairman of the board, or in the event of his or her
inability or refusal to act, the president shall perform the duties of the
chairman of the board and when so acting shall have all the powers of, and be
subject to all the restrictions upon, the chairman of the board. The president
may sign with the corporate secretary or any other officer of the Corporation
thereunto authorized, certificates for shares or other securities of the
Corporation the issuance of which shall have been duly authorized by the board
of directors. He or she shall have the power to execute, by and on behalf of the
Corporation, deeds, mortgages, bonds, contracts or other agreements and
instruments, except in cases where the signing and execution thereof shall be
expressly delegated by the board of directors or by these Bylaws to some other
officer or agent of the Corporation or shall be required by law to be otherwise
signed or executed.
SECTION 3.10 VICE PRESIDENTS. In the absence of the president, or in the
event of his or her inability or refusal to act, the vice president (or if there
be more than one, first the executive vice presidents, then the senior vice
presidents and then the vice presidents in the order designated by the board of
directors, or in the
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absence of such designation, then in the order of their election or in the order
named for election) shall perform the duties of the president, and when so
acting, shall have all the powers of and be subject to all the restrictions upon
the president. Each vice president who is elected as such with respect to a
particular area of responsibility or function of the Corporation shall, subject
to the authority of the chief executive officer and any chief operating officer,
perform all duties and have all authority pertaining to the general and active
management of such area or function and shall see that all orders and
resolutions of the board of directors, the chief executive officer or any chief
operating officer pertaining to such area or function are carried into effect.
Unless otherwise expressly provided by these Bylaws, by the board of directors
or by the chief executive officer, each vice president shall report to the
president of the Corporation. Each vice president shall have the power to
execute, by and on behalf of the Corporation, deeds, mortgages, bonds, contracts
or other agreements and instruments, except in cases where the signing and
execution thereof shall be expressly delegated by the board of directors or by
these Bylaws to some other officer or agent of the Corporation or shall be
required by law to be otherwise signed or executed.
SECTION 3.11 TREASURER. The treasurer shall have charge and custody of
and be responsible for all funds and securities of the Corporation, and the
deposit of all moneys and other valuable effects in the name and to the credit
of the Corporation in such banks, trust companies or other depositories as shall
be selected or approved by or in accordance with resolutions of the board of
directors. He or she shall be responsible for the disbursement of the funds of
the Corporation only upon vouchers duly processed and under such rules and
regulations as the board of directors may from time to time adopt. Unless
otherwise expressly provided by the board of directors or the chief executive
officer, the treasurer shall report to the chief financial officer of the
Corporation, if one has been designated by the board of directors. He or she may
sign, with the chairman of the board, the president or any vice president,
certificates for shares or other securities of the Corporation, the issuance of
which shall have been duly authorized by the board of directors.
SECTION 3.12 CONTROLLER. If designated by the board of directors, the
Controller shall be the principal accounting officer of the Corporation. He or
she shall supervise the preparation and maintenance, on a current basis, of such
accounting books, records and reports as may be necessary for the directors,
officers and employees of the Corporation to discharge their respective duties
or as may be required by applicable law or regulation. He or she shall be
responsible for implementing the internal controls established by or under the
direction of the board of directors with respect to the financial affairs of the
Corporation. Unless otherwise expressly provided by the board of directors or
the chief executive officer, the controller shall report to the chief financial
officer of the Corporation, if one has been designated by the board of
directors.
SECTION 3.13 CORPORATE SECRETARY. The corporate secretary shall: (i)
attend and keep the minutes of all meetings of the stockholders, the board of
directors and such committees of the board of directors as the board of
directors may specify; (ii) be custodian and have general charge of all
corporate records (including, without limitation, the stock ledger and all stock
transfer books and other stockholder records), contracts, papers,
correspondence, instruments, documents and books of the Corporation except those
required by these Bylaws or the board of directors to be kept and maintained by
other officers of the Corporation; (iii) see that all notices are duly given by
the Corporation in accordance with the provisions of these Bylaws or as required
by law; (iv) be custodian of the seal of the Corporation and see that the seal
of the Corporation is affixed to all securities and documents of the
Corporation, the execution of which on behalf of the Corporation under its seal
is necessary or desirable; (v) have authority to sign, with the chairman of the
board, the president or any vice president certificates for shares or other
securities of the Corporation, the issuance of which shall have been duly
authorized by the board of directors; (vi) attest to the genuineness of the
signature on behalf of the Corporation of any officer or agent of the
Corporation on any deeds, mortgages, bonds, contracts or other instruments; and
(vii) certify the authenticity of any instrument or record of the Corporation or
of any resolution of the stockholders, the board of directors or any committee
of the board of directors of the Corporation. Unless otherwise expressly
provided by the board of directors or the chief executive officer, the corporate
secretary shall report to the chief executive officer of the Corporation.
SECTION 3.14 ASSISTANT CORPORATE SECRETARIES AND ASSISTANT
TREASURERS. The assistant corporate secretary and assistant treasurer (or if in
either case there be more than one, in each case in the order determined by the
board of directors, or if there be no such determination, then in each case in
the order of their election
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or appointment) shall, in the absence of the corporate secretary or the
treasurer, as the case may be, or the inability or refusal of the corporate
secretary or the treasurer, as the case may be, to act, perform the duties and
exercise the powers of the corporate secretary or the treasurer, as the case may
be. Each assistant corporate secretary may sign with the chairman of the board,
the president, or a vice president certificates for shares or other securities
of the Corporation, the issuance of which shall have been duly authorized by the
board of directors, may attest to the genuineness of the signature on behalf of
the Corporation of any officer or agent of the Corporation on any deeds,
mortgages, bonds, contracts or other instruments and may certify the
authenticity of any bent or record of the Corporation. Each assistant treasurer
may sign with the chairman of the board, the president or a vice president,
certificates for shares or other securities of the Corporation, the issuance of
which shall have been duly authorized by the board of directors. Each assistant
corporate secretary shall report to the corporate secretary and each assistant
treasurer shall report to the treasurer.
ARTICLE IV
STOCK
SECTION 4.1 DEFINITIONS. As used in these Bylaws, (i) the terms
"certificated share" and "certificated shares" mean one or more shares of stock
of any class or series of this Corporation which are represented by a
certificate, and (ii) the terms "uncertificated share" and "uncertificated
shares" mean one or more shares of stock of any class or series of this
Corporation which are not represented by a certificate.
SECTION 4.2 IN GENERAL. The shares of all classes and series of stock of
the Corporation shall be certificated shares; provided, however, that the board
of directors of the Corporation may provide by resolution that some or all
shares of any or all classes or series of stock of the Corporation shall be
uncertificated shares. Any such resolution shall not apply to any certificated
shares until the certificate representing such shares is surrendered to the
Corporation. Notwithstanding the adoption of such a resolution by the board of
directors; every holder of certificated shares and upon request every holder of
uncertificated shares shall be entitled to have a certificate representing such
shares in the form specified in Section 4.3 of these Bylaws. Except as otherwise
expressly provided by law, the rights and obligations of the holders of
certificated shares and the rights and obligations of the holders of
uncertificated shares of the same class and series shall be identical.
SECTION 4.3 CERTIFICATED SHARES. Every certificate representing
certificated shares of all classes and series of stock of the Corporation shall
be signed by, or in the name of the Corporation by, the chairman of the board, a
vice chairman of the board or the president and the corporate secretary or an
assistant corporate secretary or treasurer or an assistant treasurer of the
Corporation, certifying the number of certificated shares owned by the holder in
the Corporation which are represented by such certificate. If the Corporation
shall be authorized to issue more than one class of stock or more than one
series of any class, the powers, designations, preferences and relative,
participating, optional, or other special rights of each class of stock or
series thereof and the qualifications, limitations, or restrictions of such
preferences and/or rights shall be set forth in full or summarized on the face
or back of the certificate which the Corporation shall issue to represent such
class or series of stock provided that, except as otherwise provided in Section
202 of the General Corporation Law of Delaware, in lieu of the foregoing
requirements, there may be set forth on the face or back of the certificate a
statement that the Corporation will furnish, without charge to each stockholder
who so requests, the powers, designations, preferences and relative,
participating, optional, or other special rights of each class of stock or
series thereof and the qualifications, limitations, or restrictions of such
preferences and/or rights. Any or all of the signatures on the certificate may
be a facsimile. In case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before such certificate
is issued, the certificate may nevertheless be issued by the Corporation with
the same effect as if he, she or it was such officer, transfer agent or
registrar at the date of issue.
SECTION 4.4 UNCERTIFICATED SHARES. The board of directors of the
Corporation may provide by resolution that some or all shares of any or all
classes and series of the stock of the Corporation shall be uncertificated
shares, and may provide an election by individual stockholders of any class or
series to have their shares of stock of such class or series be certificated
shares or uncertificated shares and the conditions of
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such election, provided that such resolution shall not apply to any certificated
shares until the certificate representing such shares is surrendered to the
Corporation. Notwithstanding the adoption of such a resolution by the board of
directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the Corporation by the chairman or vice chairman of
the board of directors, or the president, and by the treasurer or an assistant
treasurer, or the secretary or an assistant secretary of the Corporation
representing the number of shares registered in certificate form. Within a
reasonable time after the registration of issuance or transfer of uncertificated
shares, the Corporation shall send to the registered owner thereof a written
notice containing the information required to be set forth or stated on
certificated shares of the same class or series pursuant to Section 151(f) or
Section 202 of the General Corporation Law of Delaware or these Bylaws.
SECTION 4.5 LOST, STOLEN OR DESTROYED CERTIFICATES; ISSUANCE OF NEW
CERTIFICATES OR UNCERTIFICATED SHARES. The Corporation, when authorized to do
so by the board of directors, which authorization may be general or confined to
specific instances, may issue a new certificate of stock or uncertificated
shares in place of any certificate representing certificated shares theretofore
issued by the Corporation and alleged to have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming the
certificate for such certificated shares to be lost, stolen or destroyed. When
authorizing such issuance of a new certificate or certificates, the Corporation
may, in its discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed certificate or certificates,
or the legal representative of the owner, to give the Corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against the
Corporation in connection with the certificate alleged to have been lost,
stolen, or destroyed.
SECTION 4.6 REGISTRATION OF TRANSFERS. (a) Upon surrender to the
Corporation or the transfer agent of the Corporation of a certificate
representing certificated shares duly endorsed or accompanied by proper evidence
of succession, assignation or authority to transfer, the Corporation or its
transfer agent shall cancel the old certificate, record the transaction upon the
stock records of the Corporation and either issue a new certificate to the
person entitled thereto (if the shares in question are to remain certificated
shares) or credit the proper number of shares to an account of the person
entitled thereto maintained on the stock ledger of the Corporation (if the
shares in question are to become uncertificated shares).
(b) Upon receipt by the Corporation or the transfer agent of the
Corporation of satisfactory documentation evidencing the transfer of
uncertificated shares, including proper evidence of succession, assignation or
authority to transfer, the Corporation or its transfer agent shall record the
transaction on the stock records of the Corporation and either credit the proper
number of shares to an account of the person entitled thereto maintained on the
stock ledger of the Corporation (if the shares in question are to remain
uncertificated shares) or issue a certificate to the person entitled thereto (if
the shares in question are to become certificated shares).
SECTION 4.7 THE STOCK LEDGER. The name and address of each holder of
certificated shares and each holder of uncertificated shares and the number of
shares of each class or series so held by such holder shall be recorded on the
Corporation's stock ledger. Each such holder shall be the holder of record of
such shares of the Corporation for all purposes.
ARTICLE V
INDEMNIFICATION AND ADVANCEMENT OF EXPENSES
SECTION 5.1 RIGHT TO INDEMNIFICATION. Subject to Section 5.2 of these
Bylaws, each person who was or is made a party to or is threatened to be made a
party to or is otherwise involved in any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter in this Article V, 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 or officer of any other Corporation or
of a partnership, joint venture, limited liability company, trust or other
enterprise (hereinafter in this Article V an "entity"), including without
limitation service with respect to any employee benefit plan or charitable
foundation, whether the basis of such
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proceeding is alleged action in an official capacity or in any other capacity,
shall be indemnified and held harmless by the Corporation to the fullest extent
authorized by the General Corporation Law of the State of Delaware 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 expenses, judgments, fines and amounts paid in
settlement (including, without limitation, attorneys fees, ERISA excise taxes,
penalties or interest related to any such obligations actually and reasonably
incurred by such person in connection therewith), and such indemnification shall
continue as to a person who has ceased to be a director or officer and shall
inure to the benefit of his or her heirs, executors and administrators;
provided, however, that except as expressly provided to the contrary in any
indemnification agreement between the Corporation and such person 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 a majority of the entire
board of directors of the Corporation.
SECTION 5.2 DETERMINATION REQUIRED IN CONNECTION WITH CERTAIN
INDEMNIFICATION. Any indemnification pursuant to either the Certificate of
Incorporation or Section 5.1 of these Bylaws (unless ordered by a court) shall
be made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the person is proper in the circumstances
because he or she (or the person of whom he or she is the legal representative)
has met the applicable standard of conduct for indemnification under subsection
(a) or subsection (b) of Section 145 of the Delaware General Corporation Law
("Section 145") as the same exists or may hereafter be amended. Such
determination shall be made (1) by a majority vote of the directors who are not
parties to the action, suit or proceeding in question, even though less than a
quorum, (2) by a committee of such directors designated by majority vote of such
directors, even though less than a quorum, (3) if there are no such directors of
the Corporation, by independent legal counsel in a written opinion, such counsel
to be selected by the board of directors and paid by the Corporation or (4) by
the stockholders. No such determination shall be required or made a prerequisite
for indemnification under subsection (c) of Section 145 of the Delaware General
Corporation Law as the same exist or may hereafter be amended.
SECTION 5.3 ADVANCEMENT OF EXPENSES. The expenses (including attorneys'
fees) incurred by a person who is or was an officer or director of the
Corporation (or a person who is the legal representative of a person who was an
officer or director of the Corporation) in defending any proceeding to which
such person is a party or is threatened to be made a party or is otherwise
involved in by reason of the fact that he or she (or a person of whom he or she
is the legal representative) is or was an officer or a director of the
Corporation shall be paid by the Corporation, as those expenses become due, in
advance of the final disposition of such proceeding, upon receipt of an
undertaking by or on behalf of such person, in form and substance satisfactory
to the Corporation, to repay such amounts so advanced if it shall ultimately be
determined that he or she is not entitled to be indemnified by the Corporation
for such expenses under the Certificate of Incorporation, Article V of these
Bylaws or otherwise: provided, however, that except as expressly provided to the
contrary in any indemnification agreement between the Corporation and such
person, the Corporation shall pay the expenses of any such person in advance, as
provided in this Section 5.3 which are incurred in connection with a proceeding
(or part thereof) initiated by such person only if such proceeding (or part
thereof) was authorized by a majority of the entire board of directors of the
Corporation.
SECTION 5.4 CLAIMS. If a claim for indemnification or payment of expenses
under this Article V is not paid in full within 60 days after a written claim
therefor by the indemnitee has been received by the Corporation, the indemnitee
may file suit to recover the unpaid amount of such claim and, if successful in
whole or in part, shall be entitled to be paid by the Corporation an additional
amount equal to the expense of prosecuting such claim. In any such action the
Corporation shall have the burden of proving that the indemnitee was not
entitled to the requested indemnification or payment of expenses under
applicable law.
SECTION 5.5 NONEXCLUSIVITY OF RIGHTS. The rights conferred on any person
by this Article V shall not be exclusive of any other rights which such person
may have or hereafter acquire under any statute, provision of the Certificate of
Incorporation or these Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise. Any amendment or repeal of any provision of this Article
V shall not limit the right of any person
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to indemnity or advancement of expenses with respect to actions taken or omitted
to be taken by such person prior to such amendment or repeal.
SECTION 5.6 OTHER INDEMNIFICATION. The Corporation's obligation, if any,
to indemnify or to advance expenses to any person who was or is serving at its
request as a director or officer of another entity shall be reduced by any
amount such person may collect as indemnification or advancement of expenses
from such other entity.
ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 6.1 OFFICES AND BOOKS AND RECORDS.
(a) The Corporation may have offices at such other places, both within and
outside the State of Delaware, as the board of directors may from time to time
designate or as the business of the Corporation may require.
(b) The books and records of the Corporation may be kept at the
Corporation's headquarters at Mesquite, Texas and at such other locations
outside the State of Delaware as may be from time to time designated by the
board of directors.
SECTION 6.2 FISCAL YEAR. The fiscal year of the Corporation shall begin
on the first day of January in each year.
SECTION 6.3 SEAL. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its organization and the words "Corporate
Seal, Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
SECTION 6.4 FORM OF RECORDS. Any records maintained by the Corporation in
the regular course of its business, including its stock ledger, books of
account, and minute books, may be kept on, or be in the form of, punch cards,
magnetic tape, computer entry, photographs, microphotographs, or any other
information storage device, provided that the records so kept can be converted
into clearly legible form within a reasonable time.
SECTION 6.5 SIGNING OF CHECKS, NOTES, ETC. All checks, drafts, bills of
exchange, notes or other obligations or orders for the payment of money shall be
signed by such officer or officers or employee or employees of the Corporation
and in such manner as shall from time to time be determined by resolution of the
board of directors or by any officer of the Corporation authorized by resolution
of the board of directors to make such determinations.
SECTION 6.6 VOTING OF SHARES IN OTHER COMPANIES. Unless otherwise
expressly ordered by the board of directors, any one of the chairman of the
board, the president, any vice president, the treasurer or the corporate
secretary of the Corporation shall have full power and authority, on behalf of
the Corporation, to consent to or approve of any action by, and to attend, act
and vote at any meeting of stockholders or similar equity owners of, any company
in which the Corporation may hold shares of stock or similar equity interests
and in giving such consent or approval or at any such meeting shall possess and
may exercise any and all rights and powers incident to the ownership of such
shares or similar equity interests and which, as the holder thereof, the
Corporation might possess and exercise if personally present, and may exercise
such power and authority through the execution of proxies or may delegate such
power and authority to any other officer, agent or employee of the Corporation.
Provided that the transfer thereof has been authorized by the board of directors
or the chief executive officer, certificates or similar instruments representing
shares or similar equity interests owned by the Corporation in other companies
may be endorsed for transfer on behalf of the Corporation by any one of the
officers of the Corporation referred to in the preceding sentence.
SECTION 6.7 AMENDMENT OF BYLAWS. These Bylaws may be altered, amended or
repealed, or new Bylaws may be adopted by the board of directors. Any Bylaws
adopted by the board of directors may be altered, amended or repealed by the
stockholders, and the stockholders may make additional Bylaws, at any annual
meeting or at any special meeting, provided that notice of such proposed
alteration, amendment or repeal or new Bylaw shall have been given in the notice
of the meeting. No such altered or amended or new Bylaw shall be inconsistent
with any provision of the Certificate of Incorporation.
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APPENDIX
PROXY ALRENCO, INC.
714 E. KIMBROUGH STREET/MESQUITE, TEXAS 75149
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
JUNE 23, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned shareholder of ALRENCO, INC., an Indiana corporation (the
"Company"), hereby appoints GEORGE D. JOHNSON, JR. and BILLY W. WHITE, SR. or
either of them, the proxy or proxies of the undersigned, each with full power of
substitution, to vote all shares of Common Stock of the Company which the
undersigned is entitled to vote at the Annual Meeting of Shareholders of the
Company to be held at 11:00 a.m., Central Daylight Time, local time, on June 23,
1998, at the offices of Gardere & Wynne LLP, Suite 3000, 1601 Elm Street,
Dallas, Texas 75201, and at all adjournments or postponements thereof, with
authority to vote said Common Stock on the matters set forth on the reverse
side:
The shares of Common Stock represented by this Proxy will be voted in the
manner directed herein by the undersigned shareholder, who shall be entitled to
the vote corresponding to each share of Common Stock held by such shareholder.
The Board of Directors recommends a vote FOR each of the following:
1. To elect two (2) directors to serve until the 2001 Annual Meeting of
Shareholders:
<TABLE>
<S> <C> <C> <C>
[ ] FOR all nominees listed [ ] WITHHELD FOR ALL
(except as marked below to the contrary)
</TABLE>
Michael D. Walts Thomas E. Hannah
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
A LINE THROUGH THE NOMINEE'S NAME IN THE LIST ABOVE.)
2. To approve the Alrenco, Inc. 1998 Stock Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued and to be dated and signed on reverse side)
3. To approve the Reincorporation Proposal.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their judgment, the proxies are authorized to vote upon such other
business as may be properly brought before the meeting and each adjournment
or postponement thereof.
THIS PROXY WILL BE VOTED AS SPECIFIED, IF NO SPECIFICATION IS MADE, THIS
PROXY WILL BE VOTED "FOR" THE FIRST THREE PROPOSALS AND IN THE DISCRETION OF THE
PROXIES ON ANY OTHER BUSINESS PROPERLY BROUGHT BEFORE THE MEETING.
Please sign your name exactly as it appears on the left. Executors,
Administrators, Trustees, Guardians, Attorneys and Agents should give their full
titles and submit evidence of appointment unless previously furnished to the
company or its Transfer Agent. All Joint Owners should sign.
PLEASE MARK, DATE, SIGN AND RETURN USING THE ENCLOSED ENVELOPE.
YOUR PROMPT ATTENTION WILL BE APPRECIATED.
Dated:__________________, 1998
______________________________
(Signature)
______________________________
(Signature)
