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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-9733
CASH AMERICA INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
TEXAS 75-2018239
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1600 WEST 7TH STREET
FORT WORTH, TEXAS 76102-2599
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (817) 335-1100
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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<S> <C>
Common Stock, $.10 par value per share New York Stock Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
Common Stock Purchase Rights
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ].
The aggregate market value of 23,755,626 shares of the registrant's common
stock held by non-affiliates on March 3, 1998 was approximately $293,975,870.
At March 3, 1998 there were 24,445,218 shares of the registrant's Common
Stock, $.10 par value, issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant's Annual Report to Shareholders for the year ended December 31,
1997 and the definitive Proxy Statement pertaining to the 1998 Annual Meeting of
Shareholders are incorporated herein by reference into Parts II and IV, and Part
III, respectively.
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CASH AMERICA INTERNATIONAL, INC.
YEAR ENDED DECEMBER 31, 1997
INDEX TO FORM 10-K
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<S> <C> <C> <C>
PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . 15
PART II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters . . . . . . . . . . . . . . . 16
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Item 7. Management's Discussion and Analysis of Results of Operations and Financial Condition . . . . . . . 16
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . 16
PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . 16
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . . . . . . 17
Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . 17
PART IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K . . . . . . . . . . . . . . . . . 17
</TABLE>
SIGNATURES
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INTRODUCTION
Cash America International, Inc. (the "Company") was incorporated in
Texas on October 4, 1984, to succeed to the business, assets and liabilities of
a predecessor corporation formed one year earlier to engage in the pawnshop
business. As of December 31, 1997, the Company owns pawnshops through
wholly-owned subsidiaries in fifteen states and the United Kingdom and Sweden.
The Company also provides check cashing services in twenty-one states through
its wholly-owned subsidiary Mr. Payroll Corporation. The Company's principal
executive offices are located at 1600 West Seventh Street, Fort Worth, Texas
76102, and its telephone number is (817) 335-1100. As used herein, the
"Company" includes Cash America International, Inc. and its subsidiaries.
PART I
ITEM 1. BUSINESS
GENERAL
The Company is a specialty financial services enterprise principally
engaged in acquiring, establishing and operating pawnshops which advance money
on the security of pledged tangible personal property. Pawnshops function as
convenient sources of consumer loans and as sellers primarily of
previously-owned merchandise acquired when customers do not redeem their pawned
goods. One convenient aspect of a pawn transaction is that the customer has no
legal obligation to repay the amount advanced. Instead, the Company relies on
the value of the pawned property as security. As a result, the
creditworthiness of the customer is not a factor, and a decision not to redeem
pawned property has no effect on the customer's personal credit status.
(Although pawn transactions can take the form of an advance of funds secured by
the pledge of property or a "buy-sell agreement" involving the actual sale of
the property with an option to repurchase it, the transactions are referred to
throughout this report as "loans" for convenience.)
The Company contracts for a pawn service charge to compensate it for
the use of the funds advanced. The pawn service charge is typically calculated
as a percentage of the loan amount based on the size and duration of the
transaction, in a manner similar to which interest is charged on a loan, and
has generally ranged from 12% to 300% annually, as permitted by applicable
state pawnshop laws. The pledged property is held through the term of the
transaction, which, in the Company's domestic operations, is generally one
month with an automatic sixty-day redemption period unless otherwise earlier
repaid, renewed or extended. (For pawn service charges and transaction periods
applicable to the Company's foreign operations, see "Business--Regulation." ).
A majority of the amounts advanced by the Company are paid in full, together
with accrued service charges, or are renewed or extended through payment of
accrued service charges. For the years 1995, 1996, and 1997, loans repaid or
renewed as a percentage of loans made were 71.0%, 68.5%, and 67.2%
respectively. In the event that the borrower does not redeem his pawned goods,
the unredeemed collateral is forfeited and becomes merchandise available for
disposition by the Company.
The Company's growth has been the result of its business strategy of
acquiring existing pawnshops and establishing new pawnshops that can benefit
from the Company's centralized management and standardized operations. The
Company intends to continue its business strategy of acquiring and establishing
pawnshops, increasing its share of consumer loan business, and concentrating
multiple pawnshops in regional and local markets in order to expand market
penetration, enhance name recognition and reinforce marketing programs. Studies
indicate to the Company that a large portion of its customers consists of
individuals who do not regularly transact loan business with banks. (See, for
example, John P. Caskey, Fringe Banking - Check
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Cashing Outlets, Pawnshops and the Poor, 1994.) These generally are persons
who may not have checking accounts and conduct as many of their transactions as
possible on a cash basis.
Pursuant to the Company's business expansion strategy, the Company
added a net 33 locations in 1995, 9 locations in 1996, and 19 locations in
1997. Of these net 61 locations added, 20 were acquisitions in individual
purchase transactions and 53 were start-ups, while 12 locations were either
closed or combined. As of December 31, 1997, the Company had 352 domestic and
49 foreign operating locations. The Company plans to continue to expand its
operating locations through new start-ups and acquisitions.
While the Company's primary business involves the acquisition,
establishment and operation of pawnshops, it also provides check cashing
services through its wholly-owned subsidiary Mr. Payroll Corporation ("Mr.
Payroll"). At December 31, 1997, Mr. Payroll's system of manned check cashing
centers consists of 145 units operated by independent franchisees in twenty-one
states. Mr. Payroll earns franchise fees from the sale of check cashing
franchises and royalties from franchisees based on a percentage of the gross
revenue from a franchisee's check cashing business. In addition, Mr. Payroll
has recently developed an automated check cashing system, and it deployed its
first check cashing machine ("CCM") in June 1997. At December 31, 1997, it had
deployed twenty-one CCM's. Mr. Payroll markets and sells CCM's to a variety of
end users, including financial institutions and retailers. It contracts with
the end user to provide check cashing services and in consideration receives
payments from the end user equal to a portion of the fees associated with such
activities. Mr. Payroll employs 47 employees as of December 31, 1997. For
additional information concerning Mr. Payroll and the relation of its financial
condition and results of operations to that of the Company, see Note 4 and Note
14 of Notes to Consolidated Financial Statements in the Annual Report which is
incorporated herein by reference.
LENDING FUNCTION
The Company is engaged primarily in the business of lending money on
the security of pledged goods. The pledged goods are generally tangible
personal property other than securities or printed evidences of indebtedness
and generally consist of jewelry, tools, televisions and stereos, musical
instruments, firearms, and other miscellaneous items. (In the Company's
foreign operations, the pledged goods predominately consist of jewelry.) The
pledged tangible personal property is intended to provide security to the
Company for the repayment of the amount advanced plus accrued pawn service
charges. Pawn loans are made without personal liability to the borrower.
Because the loan is made without the borrower's personal liability, the Company
does not investigate the creditworthiness of the borrower, but relies on the
pledged personal property, and the possibility of its forfeiture, as a basis
for its lending decision. The Company contracts for a pawn service charge as
compensation for the use of the funds advanced. Pawn service charges
contributed approximately 52% of the Company's net revenues (total revenues
less cost of disposed merchandise) in 1995, 57% in 1996 and 59% in 1997.
At the time a pawn transaction is entered into, a pawn transaction
agreement, commonly referred to as a pawn ticket, is delivered to the borrower
(pledgor) that sets forth, among other items, the name and address of the
pawnshop and the pledgor, the pledgor's identification number from his or her
driver's license or other approved identification, the date, the identification
and description of the pledged goods, including applicable serial numbers, the
amount financed, the pawn service charge, the maturity date, the total amount
that must be paid to redeem the pledged goods on the maturity date and the
annual percentage rate.
With regard to domestic operations, the amount that the Company is
willing to finance is typically based on a percentage of the pledged personal
property's estimated disposition value. The sources for the Company's
determination of the estimated disposition value are numerous and include
catalogues, blue books, newspapers and previous similar pawn loan transactions.
These sources, together with the employees'
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experience in disposing of similar items of merchandise in particular
pawnshops, influence the determination of the estimated disposition value of
such items. The Company does not utilize a standard or mandated percentage of
estimated disposition value in determining the amount to be financed. Rather,
the employees have the authority to set the percentage for a particular item
and determine the ratio of loan amount to estimated disposition value with the
expectation that, if the item is forfeited to the pawnshop, its subsequent
disposition would yield a gross profit margin consistent with the Company's
historical experience. The pledged property is held through the term of the
transaction, which generally is one month with an automatic sixty-day
redemption period (see "Regulation" for exceptions in certain states), unless
earlier repaid, renewed or extended. A majority of the amounts advanced by the
Company are paid in full with accrued service charges or are renewed or
extended through payment of accrued service charges. In the event the pledgor
does not repay, renew or extend his loan, the unredeemed collateral is
forfeited to the Company and then becomes merchandise available for
disposition. The Company does not record loan losses or charge-offs inasmuch
as, if the pledged goods are not redeemed, the amount advanced becomes the
carrying cost of the forfeited collateral that is to be recovered through the
merchandise disposition function described below.
With regard to the Company's foreign operations, the amount that the
pawnshop is willing to finance in a pledge of jewelry is typically based on a
fixed amount per gram of the gold or silver content of the pledged property
plus additional amounts for diamonds and other features which, in the unit
management's assessment, enhance the market value of the pledged property.
Declines in gold and silver prices historically have resulted in a reduction of
the amount that the pawnshop is willing to lend against an item, which reduces
the amount of the pawnshop's loan portfolio and related pawn service charge
revenue. The pawn loans are made for a term of six months with an approximate
annual yield in 1997 of 52%. The collateral is held through the term of the
loan, and, in the event that the loan is not repaid or renewed on or before
maturity, the unredeemed collateral is disposed of at auction or privately.
The recovery of the amount advanced, as well as realization of a
profit on disposition of merchandise, is dependent on the Company's initial
assessment of the property's estimated disposition value. Improper assessment
of the disposition value of the collateral in the lending function can result
in reduced marketability of the property and disposition of the merchandise for
an amount less than the amount advanced. However, the Company historically has
experienced profits from the disposition of such merchandise. Declines in gold
and silver prices generally will also reduce the disposition value of jewelry
items acquired in pawn transactions and could adversely affect the Company's
ability to recover the carrying cost of the acquired collateral. For 1995,
1996 and 1997, the Company experienced gross profit margins on dispositions of
such merchandise of 42%, 38%, and 36% respectively.
At December 31, 1997, the Company had approximately 1,137,000
outstanding loans totaling $112,240,000, for an average of $99 per loan.
Presented below is information with respect to pawn loans made,
acquired, repaid and forfeited for the years ended December 31, 1995, 1996 and
1997:
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<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1995 1996 1997
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($ in thousands)
<S> <C> <C> <C>
Loans made . . . . . . . . . . . . . . . . . . . . . $319,733 $365,852 $391,216
Loans acquired . . . . . . . . . . . . . . . . . . . 362 1,020 1,520
Loans repaid . . . . . . . . . . . . . . . . . . . . (180,726) (207,297) (227,114)
Loans renewed. . . . . . . . . . . . . . . . . . . . (46,130) (43,141) (38,548)
Loans forfeited:
Available for disposition . . . . . . . . . . . (79,542) (91,501) (109,318)
Disposed of at auction . . . . . . . . . . . . . (5,966) (6,402) (8,945)
Effect of exchange rate translation . . . . . . . . . 1,956 1,366 (4,250)
-------- -------- --------
Net increase in pawn loans outstanding at end of $9,687 $19,897 $4,561
======== ======= ========
Loans repaid or renewed as a percent of loans made . 71.0% 68.5% 67.2%
======== ======= ========
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MERCHANDISE DISPOSITION FUNCTION
The Company engages in the disposition of merchandise acquired when a
pawn loan is not repaid, when used goods are purchased from the general public
and when new merchandise is acquired from vendors. New goods consist primarily
of accessory merchandise which enhances the marketability of existing
merchandise, such as tools, consumer electronics and new jewelry items
purchased during the Christmas selling season. For the year ended December 31,
1997, $129,975,000 of merchandise was added to merchandise held for
disposition, of which $109,318,000 was from loans not repaid and $17,870,000
was purchased from vendors, customers and through acquisitions of pawnshops.
The Company does not provide its customers with warranties on used
merchandise purchased from the Company. The Company permits its customers to
purchase merchandise on a layaway plan whereby the customer agrees to purchase
an item by making an initial cash deposit representing a small part of the
disposition price and making additional, non-interest bearing payments of the
balance of the disposition price in accordance with a specified schedule. The
Company then segregates the item and holds it until the disposition price is
paid in full. Should the customer fail to make a required payment, the item is
placed with the other merchandise held for disposition. At December 31, 1997,
the Company held approximately $3,740,000 in customer layaway deposits.
The Company provides an allowance for shrinkage and valuation of its
merchandise based on management's evaluation. Management's evaluation takes
into consideration historical shrinkage, the quantity and age of slow-moving
merchandise on hand and markdowns necessary to liquidate slow-moving
merchandise. At December 31, 1997, total merchandise on hand was $53,468,000,
after deducting an allowance for shrinkage and valuation of merchandise of
$2,158,000.
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OPERATIONS
Unit Management
Each location has a unit manager who is responsible for supervising
its personnel and assuring that it is managed in accordance with Company
guidelines and established policies and procedures. Each unit manager reports
to a Market Manager who typically oversees approximately ten unit managers.
As of December 31, 1997, the Company has three geographic operating divisions
in the United States, each of which is managed by a Division Senior Vice
President. Each Market Manager reports to a Division Vice President. The
Harvey & Thompson and Svensk Pantbelaning chains follow a similar management
organization, with a Managing Director overseeing each of these operations.
Trade Name
The Company operates its pawnshops under the trade name "Cash America
Pawn" in the U.S., "Harvey & Thompson Pawnbrokers" in the U.K., and "Svensk
Pantbelaning" in Sweden. The Company has registered the "Cash America" mark
and descriptive logos and phrases with the United States Patent and Trademark
Office.
Personnel
The Company employs approximately 2,787 employees as of December 31,
1997. Of the total employees, approximately 233 were in executive,
administrative, clerical and accounting functions.
The Company has an established training program that provides a
combination of classroom instruction, video presentation and on-the-job loan
and merchandise disposition experience. The new employee is introduced to the
business through an orientation program and through a three-month training
program that includes classroom and on-the-job training in loans, layaways,
merchandise and general administration of unit operations.
The experienced employee receives training and an introduction to the
fundamentals of management to acquire the skills necessary to move into
management positions within the organization. Manager training involves a
twelve month program and includes additional management principles and more
extensive training in income maximization, recruitment, merchandise control and
cost efficiency.
FUTURE EXPANSION
The Company's objective is to continue to expand the number of
pawnshops it owns and operates through acquisitions and by establishing new
units. Management believes that such anticipated expansion will continue to
provide economies of scale in supervision, purchasing, administration and
marketing by decreasing the overall average cost of such functions per unit
owned. The primary pawnshop acquisition criteria include evaluation of the
volume of annual loan transactions, outstanding loan balances, merchandise on
hand, disposition history, and location and condition of the facility,
including lease terms or fair market value of the facility if it is to be
purchased. The primary pawnshop start-up criteria include the facility-related
items noted above and conditions in the surrounding community indicating a
sufficient level of potential customers.
The Company's business strategy is to continue expanding its pawnshop
business within its existing geographic markets and into other markets which
meet the risk/reward considerations of the Company.
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The Company's expansion has not only been in acquiring previously
owned pawnshops, but also in establishing new locations. After a suitable
location has been found and a lease and license are obtained, the new location
can be ready for business within four to six weeks, with completion of
counters, vaults and security system and transfer of merchandise from other
locations. The approximate start-up costs, defined as the investment in
property and equipment, for recently established pawnshops have ranged from
$130,000 to $250,000, with an average cost per location of approximately
$180,000 in 1997. This amount does not include merchandise transferred from
other locations, funds to advance on pawn loans and operating expenses.
The Company's expansion program is subject to numerous factors which
cannot be predicted, such as the availability of attractive acquisition
candidates or sites on suitable terms and general economic conditions.
Further, there can be no assurance that future expansion can be continued on a
profitable basis. Among other factors, the following factors will impact the
Company's future planned expansion.
Statutory Requirements. The Company's ability to add
newly-established locations in Texas counties having a population of more than
250,000 is limited by a law that became effective September 1, 1991, which
requires a finding of public need and probable profitability by the Texas
Consumer Credit Commissioner as a condition to the issuance of any new pawnshop
license. In addition, the present statutory and regulatory environment of some
states renders expansion into those states impractical. See "Business --
Regulation."
Competition. The Company faces competition in its expansion program.
Several competing pawnshop companies have completed public securities offerings
and have announced active expansion and acquisition programs. A number of
smaller companies have also entered the market. While the Company believes
that it is the largest pawnshop operator in the United States, there can be no
assurance that the Company will be more successful than its competitors in
pursuing acquisition opportunities and leases for attractive start-up
locations. Increased competition could also increase prices for attractive
acquisition candidates.
Access to Capital. In some states, the Company is required by law to
maintain a minimum amount of certain unencumbered net assets (currently
$150,000 in Texas) for each pawnshop location. The Company's expansion plans
will therefore be limited in these states to the extent the Company is unable
to maintain these required levels of unencumbered net assets. These
requirements also make it difficult for the Company to rely on secured
financing for expansion purposes due to the requirement that expansion capital
be unencumbered, which would reduce the availability of capital for expansion
purposes.
Availability of Qualified Unit Management Personnel. The Company's
ability to expand may also be limited by the availability of qualified unit
management personnel. While the Company seeks to train its existing personnel
to enable those capable of doing so to assume management positions and to
create attractive compensation packages to retain existing management
personnel, there can be no assurance that sufficient qualified personnel will
be available to satisfy the Company's needs with respect to its planned
expansion.
COMPETITION
The Company encounters significant competition in connection with its
lending and merchandise disposition operations. Some competitors may have
greater financial resources than the Company. Several competing pawnshop
companies have completed securities offerings in recent years. See "Business
- -- Future Expansion." These competitive conditions may adversely affect the
Company's revenues and profitability.
The Company, in connection with the lending of money, competes with
other pawnshops and other forms of financial institutions such as consumer
finance companies, which generally lend on an unsecured as
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well as a secured basis. Other lenders may lend money on terms more favorable
than the Company. The pawnshop industry is characterized by a large number of
independent owner-operators, some of whom own and operate multiple pawnshops.
REGULATION
The Company's pawnshop operations are subject to extensive regulation,
supervision and licensing under various federal, state and local statutes,
ordinances and regulations in the sixteen states and two foreign countries in
which it operates. (For a geographic breakdown of operating locations, see
"Properties.") Set forth below is a summary of the state pawnshop regulations
in those states containing a preponderance of the Company's domestic operating
locations.
Texas Pawnshop Regulations. Pursuant to the terms of the Texas
Pawnshop Act, the Texas Consumer Credit Commissioner has primary responsibility
for the regulation of pawnshops and enforcement of laws relating to pawnshops
in Texas. The Company is required to furnish the Texas Consumer Credit
Commissioner with copies of information, documents and reports which are
required to be filed by it with the Securities and Exchange Commission.
The Texas Pawnshop Act prescribes the stratified loan amounts and the
maximum allowable rates of service charge that pawnbrokers in Texas may charge
for the lending of money within each stratified range of loan amounts. That
is, the Texas law establishes the maximum allowable service charge rates based
on the amount financed per pawn loan. The maximum allowable pawn service
charges under the Texas Pawnshop Act for the various stratified loan amounts
for the fiscal years ended June 30, 1996, 1997 and 1998 are as follows:
<TABLE>
<CAPTION>
Year Ended June 30, 1996 Year Ended June 30, 1997 Year Ended June 30, 1998
- ------------------------------------ ------------------------------------ ----------------------------------------
Maximum Maximum Maximum
Amount Allowable Amount Allowable Amount Allowable
Financed Annual Financed Annual Financed Annual
Per Pawn Percentage Per Pawn Percentage Per Pawn Percentage
Loan Rate Loan Rate Loan Rate
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
$ 1 to $ 129 . . . . . 240% $1 to $ 132 . . . . . . 240% $1 to $ 135 . . . . . . 240%
130 to 430 . . . . . 180 133 to 440 . . . . . . 180 136 to 450 . . . . . . 180
431 to 1,290 . . . . . 30 441 to 1,320 . . . . . . 30 451 to 1,350 . . . . . . 30
1,291 to 10,750 . . . . . 12 1,321 to 11,000 . . . . . . 12 1,351 to 11,250 . . . . . . 12
</TABLE>
These rates are reviewed and established annually. The maximum allowable
service charge rates were established and have not been revised since 1971 when
the Texas Pawnshop Act was enacted. Since 1981, the ceiling amounts for
stratification of the loan amounts to which these rates apply have been revised
each July 1 in relation to the Consumer Price Index. The Texas Pawnshop Act
also prescribes the maximum allowable pawn loan. Under current Texas law, a
pawn loan may not exceed $11,250. In addition to establishing maximum
allowable service charge rates and loan ceilings, the Texas Pawnshop Act also
provides for the licensing of pawnshops and pawnshop employees. To be eligible
for a pawnshop license in Texas, an applicant must (i) be of good moral
character, (ii) have net assets of at least $150,000 readily available for use
in conducting the business of each licensed pawnshop, (iii) show that the
pawnshop will be operated lawfully and fairly in accordance with the Texas
Pawnshop Act, (iv) show that the applicant has the financial responsibility,
experience, character, and general fitness to command the confidence of the
public in its operations, and (v)
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in the case of a business entity, the good moral character requirement shall
apply to each officer, director and holder of 5% or more of the entity's
outstanding shares.
As part of the license application process, any existing pawnshop
licensee who would be affected by the granting of the proposed application may
request a public hearing at which to appear and present evidence for or against
the application. For an application for a new license in a county with a
population of 250,000 or more, the Consumer Credit Commissioner must find not
only that the applicant meets the other requirements for a license, but also
that (i) there is a public need for the proposed pawnshop and (ii) the volume
of business in the community in which the pawnshop will conduct business
indicates a profitable operation is probable.
The Texas Consumer Credit Commissioner may, after notice and hearing,
suspend or revoke any license for a Texas pawnshop upon finding, among other
things, that (i) any fees or charges have not been paid; (ii) the licensee
violates (whether knowingly or unknowingly without due care) any provisions of
the Texas Pawnshop Act or any regulation or order thereunder; or (iii) any fact
or condition exists which, if it had existed at the time the original
application was filed for a license, would have justified the Commissioner in
refusing such license.
Under the Texas Pawnshop Act, a pawnbroker may not accept a pledge
from a person under the age of 18 years; make any agreement requiring the
personal liability of the borrower; accept any waiver of any right or
protection accorded to a pledgor under the Texas Pawnshop Act; fail to exercise
reasonable care to protect pledged goods from loss or damage; fail to return
pledged goods to a pledgor upon payment of the full amount due; make any charge
for insurance in connection with a pawn transaction; enter into any pawn
transaction that has a maturity date of more than one month; display for
disposition in storefront windows or sidewalk display cases, pistols, swords,
canes, blackjacks and similar weapons; operate a pawnshop between the hours of
9:00 p.m. and 7:00 a.m.; or purchase used or secondhand personal property or
certain building construction materials unless a record is established
containing the name, address and identification of the seller, a complete
description of the property, including serial number, and a signed statement
that the seller has the right to sell the property.
Florida Pawnshop Regulations. The Florida Pawnbroking Act, adopted in
1996, provides for the licensing and bonding of pawnbrokers in Florida and for
the Department of Agriculture and Consumer Services' Division of Consumer
Services to investigate the general fitness of applicants and generally to
regulate pawnshops in the state. The statute limits the pawn service charge
that a pawnbroker may collect to a maximum of 25% of the amount advanced in the
pawn for each 30 day period of the transaction. The law also requires
pawnbrokers to maintain detailed records of all transactions and to deliver
such records to the appropriate local law enforcement officials. Among other
things, the statute prohibits pawnbrokers from falsifying or failing to make
entries in pawn transaction forms, refusing to allow appropriate law
enforcement officials to inspect their records, failing to maintain records of
pawn transactions for at least two years, making any agreement requiring the
personal liability of a pledgor, failing to return pledged goods upon payment
in full of the amount due (unless the pledged goods had been taken into custody
by a court or law enforcement officer or otherwise lost or damaged), or
engaging in title loan transactions at licensed pawnshop locations. It also
prohibits pawnbrokers from entering into pawn transactions with a person who is
under the influence of alcohol or controlled substances, a person who is under
the age of eighteen, or a person using a name other than his own name or the
registered name of his business.
Georgia Pawnshop Regulations. Georgia state law requires pawnbrokers
to maintain detailed permanent records concerning pawn transactions and to keep
them available for inspection by duly authorized law enforcement authorities.
The Georgia statute prohibits pawnbrokers from failing to make entries of
8
<PAGE> 11
material matters in the their permanent records; making false entries in their
records; falsifying, obliterating, destroying, or removing permanent records
from their places of business; refusing to allow duly authorized law
enforcement officers to inspect their records; failing to maintain records of
each pawn transaction for at least four years; accepting a pledge or purchase
from a person under the age of eighteen or who the pawnbroker knows is not the
true owner of the property; making any agreement requiring the personal
liability of the pledgor or seller or waiving any of the provisions of the
Georgia statute; or failing to return or replace pledged goods upon payment of
the full amount due (unless the pledged goods have been taken into custody by a
court or a law enforcement officer). In the event pledged goods are lost or
damaged while in the possession of the pawnbroker, the pawnbroker must replace
the lost or damaged goods with like kinds of merchandise. Under Georgia law,
total interest and service charges may not, during each thirty-day period of
the loan, exceed 25% of the principal amount advanced in the pawn transaction
(except that after ninety days from the original date of the loan, the maximum
rate declines to 12.5% for each subsequent thirty-day period). The statute
provides that municipal authorities may license pawnbrokers, define their
powers and privileges by ordinance, impose taxes upon them, revoke their
licenses, and exercise such general supervision as will ensure fair dealing
between the pawnbroker and his customers.
Tennessee Pawnshop Regulations. Tennessee state law provides for the
licensing of pawnbrokers in that state. It also (i) requires that pawn
transactions be reported to local law enforcement agencies, (ii) requires
pawnbrokers to maintain insurance coverage on the property held on pledge for
the benefit of the pledgor, (iii) establishes certain hours during which
pawnshops may be open for business and (iv) requires that certain bookkeeping
records be maintained. Tennessee law prohibits pawnbrokers from selling,
redeeming or disposing of any goods pledged or pawned to or with them within 48
hours after making their report to local law enforcement agencies. The
Tennessee statute establishes a maximum allowable interest rate of 24% per
annum; however, the pawnshop operator may charge an additional fee of up to
one-fifth of the amount of the loan per month for investigating the title,
storing and insuring the security and various other expenses.
Oklahoma Pawnshop Regulations. The Company's Oklahoma operations are
subject to the Oklahoma Pawnshop Act. Following substantially the same
statutory scheme as the Texas Pawnshop Act, the Oklahoma Pawnshop Act provides
for the licensing and bonding of pawnbrokers in Oklahoma and provides for the
Oklahoma Administrator of Consumer Credit to investigate the general fitness of
the applicant and generally regulate pawnshops in that state. The
Administrator has broad rule-making authority with respect to Oklahoma
pawnshops.
In general, the Oklahoma Pawnshop Act prescribes the stratified loan
amounts and the maximum rates of service charges which pawnbrokers in Oklahoma
may charge for lending money in Oklahoma within each stratified range of loan
amounts. The regulations provide for a graduated rate structure similar to
that utilized in federal income tax computations. For example, under this
method of calculation a $500 pawn loan earns interest as follows: (a) the first
$150 at 240%, annually, (b) the next $100 at 180%, annually and (c) the
remaining $250 at 120%, annually. The maximum allowable pawn service charges
for the various stratified loan amounts under the Oklahoma statute are as
follows:
9
<PAGE> 12
<TABLE>
<CAPTION>
Maximum
Amount Allowable
Financed Annual
Per Pawn Percentage
Loan Rate
--------------- -------------
<S> <C> <C>
$ 1 to $ 150 ............... 240%
151 to 250 ............... 180
251 to 500 ............... 120
501 to 1,000 ............... 60
1,001 to 25,000 ............... 36
</TABLE>
A pawn loan in Oklahoma may not exceed $25,000.
Louisiana Pawnshop Regulations. Louisiana law provides for the
licensing and bonding of pawnbrokers in that state. In addition, the act
requires that pawn transactions be reported to local law enforcement agencies,
establishes hours during which pawnbrokers may be open for business and
requires certain bookkeeping practices. Under the Louisiana statute, no
pawnbroker may sell any jewelry pledged as collateral until the lapse of six
months from the time the loan was made or extended by payment of accrued
interest. All other unredeemed collateral from loans can be sold after the
lapse of three months. Louisiana state law establishes maximum allowable rates
of interest on pawn loans of 10% per month. In addition, Louisiana law
provides that the pawnbroker may also charge a one-time fee not to exceed 10%
for all other services. Various municipalities and parishes in the state of
Louisiana have promulgated additional ordinances and regulations pertaining to
pawnshops.
Although pawnshop regulations vary from state to state to a
considerable degree, the regulations summarized above are representative of the
regulatory frameworks affecting the Company in the various states in which its
operating units are located.
United Kingdom Regulations. Pawnshops in the United Kingdom conduct
pawn operations in a manner that is similar to the Company's domestic
operations, except that pawnshops generally lend money only on the security of
jewelry and gold and silver items. The Consumer Credit Act 1974 in the United
Kingdom requires that the pawnbroker notify the customer following the
expiration of the six month loan term and before the pledged items are sold by
the pawnbroker. Unredeemed items are generally sold at auction nine months
after the initial pledge date. For loans exceeding L.25, any amounts received
on the auction sale in excess of the principal amount of the loan, accrued pawn
service charge and disposition expenses must be held by the pawnbroker to be
reclaimed by the customer. If the pawnbroker is the highest bidder at the
auction, it reclaims the merchandise for later disposition from its pawnshop
premises and may realize gross profit on resale. For loans of L.25 or less,
unredeemed merchandise is automatically forfeited to the pawnbroker, and the
pawnbroker may dispose of such merchandise to the public from the pawnshop
premises.
Pawnbrokers in the United Kingdom are licensed and regulated by the
Office of Fair Trading (the "OFT") pursuant to the Consumer Credit Act 1974.
Licenses are valid for five years, subject to possible revocation, suspension,
or variance by the OFT. Unlike most state statutes in the United States
governing pawnbrokers, the Consumer Credit Act 1974 and the regulations
promulgated thereunder do not specify a maximum allowable interest rate
chargeable by pawnbrokers in the United Kingdom. Rather, the statute prohibits
pawnbrokers from entering into "extortionate credit bargains" with customers.
Currently, the Company typically charges a rate of six percent (6%) per month.
Sweden Regulations. The regulatory environment for pawnshops in
Sweden is very similar to that in the United Kingdom. Sweden's 1949 statute
governing pawnbroking was repealed and replaced with a new
10
<PAGE> 13
pawnbroking act effective January 1, 1996. The new act provides that the loan
term may not exceed one year, that the pawnbroker is entitled to default
interest on arrears for a maximum of four months from the due date, and that
the pawnbroker may not dispose of unredeemed merchandise less than two months
after the due date. The disposition must take place at a public auction, and
the original customer is entitled to any excess disposition proceeds.
Like Sweden's previous pawnbroking statute, the new act provides for
licensing and supervision of pawnshops by the local County Administrative
Boards. The act does not specify a maximum allowable interest rate for pawn
loans, and, unlike the previous statute, it does not authorize the local County
Administrative Boards to regulate the rates that pawnbrokers may charge. Also,
the act grants Swedish pawnbrokers the new authority to purchase unredeemed
merchandise at the public auction and then dispose of the merchandise to the
public from the pawnshop premises.
Other Regulatory Matters, Etc. With respect to firearm sales, each of
the pawnshops must comply with the Brady Handgun Violence Prevention Act (the
"Brady Act"), which took effect on February 28, 1994. The Brady Act imposes a
waiting period/background check requirement in connection with the disposition
of handguns by federally licensed firearms dealers. In addition, the Company
must continue to comply with the longstanding regulations promulgated by the
Department of the Treasury, Bureau of Alcohol, Tobacco and Firearms which
require each pawnshop dealing in guns to maintain a permanent written record of
all receipts and dispositions of firearms.
In addition to the state statutes and regulations described above,
many of the Company's pawnshops are subject to municipal ordinances, which may
require, for example, local licenses or permits and specified recordkeeping
procedures, among other things. Each of the Company's pawnshops voluntarily or
pursuant to municipal ordinance provides to the police department having
jurisdiction copies of all daily transactions involving pawn loans and
over-the-counter purchases. These daily transaction reports are designed to
provide the local police with a detailed description of the goods involved
including serial numbers, if any, and the name and address of the owner
obtained from a valid identification card.
A copy of the transaction ticket is provided to local law enforcement
agencies for processing by the National Crime Investigative Computer to
determine rightful ownership. Goods held to secure pawn loans or goods
purchased which are determined to belong to an owner other than the borrower or
seller are subject to recovery by the rightful owner. However, the Company
historically has not experienced a material number of claims of this sort, and
the claims experienced have not had a material adverse effect on the Company's
results of operations.
Casualty insurance, including burglary coverage, is maintained for
each of the Company's pawnshops, and fidelity coverage is maintained on each of
the Company's employees.
Management of the Company believes its operations are conducted in
material compliance with all federal, state and local laws and ordinances
applicable to its business.
11
<PAGE> 14
EXECUTIVE OFFICERS
The following sets forth, as of February 23, 1998, certain data
concerning the executive officers of the Company, all of whom are elected on an
annual basis. There is no family relationship between any of the executive
officers.
<TABLE>
<CAPTION>
Name Age Position
----------------------- --- -----------------------------------------------------------
<S> <C> <C>
Jack R. Daugherty 50 Chairman of the Board and Chief Executive Officer
Daniel R. Feehan 47 President, Chief Operating Officer and Director
James H. Kauffman 53 President - Cash America Pawn
Michael C. Stinson 51 President - Mr. Payroll Corporation
Robert D. Brockman 43 Executive Vice President - Administration
Michael D. Gaston 53 Executive Vice President - Business Development
Thomas A. Bessant, Jr. 39 Senior Vice President - Chief Financial Officer and Treasurer
William R. Horne 54 Senior Vice President - Information Technology
Hugh A. Simpson 38 Senior Vice President - General Counsel and Secretary
William J. White 57 Senior Vice President - Public and Governmental Relations
</TABLE>
Jack R. Daugherty has been Chairman of the Board and Chief Executive
Officer of the Company since its founding in 1984. Mr. Daugherty has owned and
operated pawnshops since 1971.
Daniel R. Feehan has been President and Chief Operating Officer since
January 1990.
James H. Kauffman joined the Company in July 1996 as Executive Vice
President - Chief Financial Officer and has served as President-Cash America
Pawn since July 1997. Prior to that, he served as President of Keystone Steel
& Wire Company, a wire products manufacturer, from July 1991 to June 1996.
Michael C. Stinson has served as President of Mr. Payroll Corporation
since 1990. Mr. Payroll Corporation became a wholly-owned subsidiary of the
Company effective December 31, 1996, and Mr. Stinson became an executive
officer of the Company in July 1997.
Robert D. Brockman joined the Company in July 1995 as Executive Vice
President-Administration. Prior to that, he served as Vice President - Human
Resources of THORN Americas, Inc., the operator of the Rent-A-Center chain of
rent- to-own stores, from December 1986 to June 1995.
Michael D. Gaston joined the Company in April 1997 as Executive Vice
President-Business Development. Prior to joining the Company, Mr. Gaston
served as President of the Gaston Corporation, a private consulting firm, from
1984 to April 1997, and Executive Vice President of Barclay & Evergreen, an
advertising and consulting agency, from 1991 to April 1997.
Thomas A. Bessant, Jr. joined the Company in May 1993 as Vice
President-Finance and Treasurer and has served as Senior Vice President, Chief
Financial Officer and Treasurer since July 1997. Prior to joining the Company,
Mr. Bessant was a Senior Manager in the Corporate Finance Consulting Services
Group of Arthur Andersen & Co., S. C. in Dallas, Texas from June 1989. Prior
to that time, Mr. Bessant was Vice President in the Corporate Banking Division
of NCNB Texas, N.A., and its predecessor banking corporations, beginning in
1981.
William R. Horne joined the Company in February 1991 as Vice
President-MIS and has served as Senior Vice President-Information Technology
since July 1997.
12
<PAGE> 15
Hugh A. Simpson joined the Company in December 1990 as Vice President
and General Counsel. In April 1991, Mr. Simpson was elected Vice President -
General Counsel and Secretary, and he has served as Senior Vice President,
General Counsel and Secretary since July 1997.
William J. White joined the Company in March 1988. In April 1993, Mr.
White was elected Vice President-Public and Governmental Relations and he has
served as Senior Vice President, Public and Governmental Relations since July
1997.
ITEM 2. PROPERTIES
As of March 10, 1998 the Company owns the real estate and buildings
for 16 of its pawnshop locations. Since May 1992, the Company's headquarters
have been located in a nine-story building adjacent to downtown Fort Worth,
Texas. The Company purchased the building in January 1992. All of the
Company's other locations are leased from unaffiliated parties under
non-cancelable operating leases.
The following table sets forth, as of March 10, 1998, the geographic
markets served by the Company and the number of locations in such markets in
which it presently operates.
<TABLE>
<CAPTION>
Number of Locations
in Area
------------------------------
<S> <C> <C>
TEXAS:
Houston . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Central/South Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Dallas/Fort Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
West Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Rio Grande Valley . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
----
Total Texas . . . . . . . . . . . . . . . . . . . . . . . . . . 146
---
FLORIDA:
Tampa/St. Petersburg . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Orlando . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Jacksonville . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
---
Total Florida . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
---
GEORGIA:
Atlanta . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Savannah . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
---
Total Georgia . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
---
TENNESSEE:
Memphis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Nashville . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
---
Total Tennessee . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
--
</TABLE>
13
<PAGE> 16
<TABLE>
<S> <C>
OKLAHOMA:
Oklahoma City . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Tulsa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
---
Total Oklahoma . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
---
LOUISIANA:
New Orleans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Baton Rouge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
---
Total Louisiana . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
---
INDIANA:
Indianapolis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Fort Wayne . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
---
Total Indiana . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
---
MISSOURI:
Kansas City . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
St. Louis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
---
Total Missouri . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
---
KENTUCKY:
Louisville . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
---
ALABAMA:
Mobile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Birmingham . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
---
Total Alabama . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
---
NORTH CAROLINA:
Charlotte . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Greensboro/Winston Salem . . . . . . . . . . . . . . . . . . . . . . . . . 4
---
Total North Carolina . . . . . . . . . . . . . . . . . . . . . . . . 10
----
SOUTH CAROLINA:
Charleston . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Greenville . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
---
Total South Carolina . . . . . . . . . . . . . . . . . . . . . . . . 7
---
COLORADO:
Denver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
---
OHIO:
Cincinnati . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
---
</TABLE>
14
<PAGE> 17
<TABLE>
<S> <C>
UTAH:
Salt Lake City . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
---
ILLINOIS:
Chicago . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
---
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
---
Total United States . . . . . . . . . . . . . . . . . . . . . . . . . 365
---
UNITED KINGDOM:
London . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
---
Total United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . 40
---
SWEDEN:
Stockholm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
---
Total Sweden . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
---
GRAND TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 416
===
</TABLE>
The Company considers its equipment, furniture and fixtures and owned
buildings to be in good condition. The Company has its own construction
supervisors who engage local contractors to selectively remodel and upgrade its
domestic pawnshop facilities throughout the year.
The Company's leases typically require the Company to pay all
maintenance costs, insurance costs and property taxes. For additional
information concerning the Company's leases see Note 15 of Notes to
Consolidated Financial Statements in the Annual Report which is incorporated
herein by reference.
ITEM 3. LEGAL PROCEEDINGS
The Company is a defendant in certain lawsuits encountered in the
ordinary course of its business. Certain of these matters are covered to an
extent by insurance. In the opinion of management, the resolution of these
matters will not have a material adverse effect on the Company's financial
position, results of operations or liquidity.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to the Company's security holders
during the fourth quarter ended December 31, 1997.
15
<PAGE> 18
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Information contained under the caption "Common Stock Data" in the
Annual Report is incorporated herein by reference in response to this Item 5.
ITEM 6. SELECTED FINANCIAL DATA
Information contained under the caption "Six Year Summary of Selected
Financial Data" in the Annual Report is incorporated herein by reference in
response to this Item 6.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Information contained under the caption "Management's Discussion and
Analysis of Results of Operations and Financial Condition" in the Annual Report
is incorporated herein by reference in response to this Item 7.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements including Notes To Consolidated Financial
Statements and Income Statement Quarterly Data for the Company are contained in
the Annual Report and are incorporated herein by reference in response to this
Item 8.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Company had no disagreements on accounting or financial disclosure
matters with its independent public accountants to report under this Item 9.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information contained under the caption "Election of Directors" in the
Company's Proxy Statement is incorporated herein by reference in response to
this Item 10. See Item 1, "Executive Officers" for information concerning
executive officers.
ITEM 11. EXECUTIVE COMPENSATION
Information contained under the caption "Executive Compensation" in
the Company's Proxy Statement is incorporated herein by reference in response
to this Item 11.
16
<PAGE> 19
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information contained under the caption "Security Ownership of Certain
Beneficial Owners and Management" in the Company's Proxy Statement is
incorporated herein by reference in response to this Item 12.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information contained under the caption "Executive Compensation" in
the Company's Proxy Statement is incorporated herein by reference in response
to this Item 13.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(1) The following financial statements of the Company and Report of
Independent Accountants are contained in the Annual Report and are
incorporated herein by reference.
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets as of December 31, 1997 and 1996.
Consolidated Statements of Income for the years ended December
31, 1997, 1996 and 1995.
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1997, 1996 and 1995.
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT ACCOUNTANTS
(2) The following financial statement schedule of the Company, as
listed below, is included herein.
Schedule II -- Allowance for Valuation of Inventory.
Report of Independent Accountants on Financial Statement Schedule.
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission
are not required under the related instructions, are inapplicable,
or the required information is included elsewhere in the financial
statements.
(3) The exhibits filed in response to Item 601 of Regulation S-K are
listed in the Exhibit Index on pages 22 through 24.
(4) During the fourth quarter ended December 31, 1997, the Company did
not file any reports on Form 8-K.
17
<PAGE> 20
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on March 27, 1998.
CASH AMERICA INTERNATIONAL, INC.
<TABLE>
<S> <C>
By: /s/ JACK R. DAUGHERTY
------------------------------------------
Jack R. Daugherty
Chairman of the Board and
Chief Executive Officer
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on March 27, 1998 on
behalf of the registrant and in the capacities indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ JACK R. DAUGHERTY Chairman of the Board and March 27, 1998
- -------------------------------------------
Jack R. Daugherty Chief Executive Officer
(Principal Executive Officer)
/s/ DANIEL R. FEEHAN President, Chief Operating March 27, 1998
- ---------------------------------------------
Daniel R. Feehan Officer and Director
/s/ THOMAS A. BESSANT, JR. Senior Vice President - March 27, 1998
- -------------------------------------------
Thomas A. Bessant, Jr. Chief Financial Officer
and Treasurer
(Principal Financial and
Accounting Officer)
/s/ A. R. DIKE Director March 27, 1998
- --------------------------------------------
A. R. Dike
</TABLE>
18
<PAGE> 21
<TABLE>
<S> <C> <C>
/s/ JAMES H. GRAVES Director March 27, 1998
- --------------------------------------------
James H. Graves
/s/ B. D. HUNTER Director March 27, 1998
- ---------------------------------------------------
B. D. Hunter
/s/TIMOTHY J. McKIBBEN Director March 27, 1998
- ----------------------------------------
Timothy J. McKibben
/s/ ALFRED M. MICALLEF Director March 27, 1998
- -------------------------------------
Alfred M. Micallef
/s/ CARL P. MOTHERAL Director March 27, 1998
- -------------------------------------------
Carl P. Motheral
/s/ SAMUEL W. RIZZO Director March 27, 1998
- ---------------------------------------------
Samuel W. Rizzo
/s/ ROSALIN ROGERS Director March 27, 1998
- --------------------------------------------
Rosalin Rogers
</TABLE>
19
<PAGE> 22
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Cash America International, Inc.
Our report on the consolidated financial statements of Cash America
International, Inc. and Subsidiaries, which includes an explanatory paragraph
related to a change in accounting principle, has been incorporated by reference
in this Form 10-K from page 30 of the 1997 Annual Report to Stockholders of
Cash America International, Inc. In connection with our audits of such
financial statements, we have also audited the related financial statement
schedule listed in Item 14 of this Form 10-K.
In our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Fort Worth, Texas
January 20, 1998
20
<PAGE> 23
CASH AMERICA INTERNATIONAL, INC.
SCHEDULE II--ALLOWANCE FOR VALUATION OF INVENTORY
For the Three Years Ended December 31, 1997
<TABLE>
<CAPTION>
Additions
------------------------------
Balance Balance
at Charged Charged at End
Beginning to to of
Description of Period Expense Other Deductions(a) Period
----------- --------- ------- ----- ------------- ------
($ in
thousands)
Year Ended:
<S> <C> <C> <C> <C> <C>
December 31, 1997........................ $2,078 $1,359 $ -0- $1,279 $ 2,158
====== ====== ===== ====== =======
December 31, 1996........................ $2,372 $1,701 $ -0- $1,995 $ 2,078
====== ====== ===== ====== =======
December 31, 1995........................ $2,514 $1,394 $ -0- $1,536 $ 2,372
====== ====== ===== ====== =======
</TABLE>
_______________________________
(a) Deducted from allowance for write-off or other disposition of inventory.
21
<PAGE> 24
EXHIBIT INDEX
The following documents are filed as a part of this report. Those
exhibits previously filed and incorporated herein by reference are identified
below. Exhibits not required for this report have been omitted.
<TABLE>
<CAPTION>
EXHIBIT
- -------
DESCRIPTION
-----------
<S> <C>
3.1 --Articles of Incorporation of Cash America Investments, Inc. filed in the office of the Secretary of State of
Texas on October 4, 1984.(a) (Exhibit 3.1)
3.2 --Articles of Amendment to the Articles of Incorporation of Cash America Investments, Inc. filed in the office
of the Secretary of State of Texas on October 26, 1984.(a) (Exhibits 3.2)
3.3 --Articles of Amendment to the Articles of Incorporation of Cash America Investments, Inc. filed in the office
of the Secretary of State of Texas on September 24, 1986.(a) (Exhibit 3.3)
3.4 --Articles of Amendment to the Articles of Incorporation of Cash America Investments, Inc. filed in the office
of the Secretary of State of Texas on September 30, 1987.(b) (Exhibit 3.4)
3.5 --Articles of Amendment to the Articles of Incorporation of Cash America Investments, Inc. filed in the office
of the Secretary of State of Texas on April 23, 1992 to change the Company's name to "Cash America
International, Inc." (c) (Exhibit 3.5)
3.6 --Articles of Amendment to the Articles of Incorporation of Cash America International, Inc. filed in Office
of the Secretary of State of Texas on May 21, 1993. (d) (Exhibit 3.6)
3.7 --Bylaws of Cash America International, Inc.(e) (Exhibit 3.5)
3.8 --Amendment to Bylaws of Cash America International, Inc. dated effective September 26, 1990.(f) (Exhibit 3.6)
3.9 --Amendment to Bylaws of Cash America International, Inc. dated effective April 22, 1992.(c) (Exhibit 3.8)
4.1 --Form of Stock Certificate.(a) (Exhibit 4.1)
4.1a --Form of Stock Certificate.(f) (Exhibit 4.1a)
4.1b --Form of Stock Certificate.(c) (Exhibit 4.1b)
10.1 --1987 Stock Option Plan (with Stock Appreciation Rights) for Cash America International, Inc.(g) (Exhibit
4.1)
10.2 --Amendment to 1987 Stock Option Plan (with Stock Appreciation Rights) dated February 27, 1997.(h) (Exhibit
10.2)
10.3 --Amendment to 1987 Stock Option Plan (with Stock Appreciation Rights) dated April 22, 1997. (i) (Exhibit
10.1)
10.4 --1989 Non-Employee Director Stock Option Plan.(j) (Exhibit 10.47)
</TABLE>
22
<PAGE> 25
<TABLE>
<S> <C>
10.5 --Amendment to 1989 Non-Employee Director Stock Option Plan dated April 24, 1996. (h) (Exhibit 10.4)
10.6 --1989 Key Employee Stock Option Plan.(j) (Exhibit 10.48)
10.7 --Amendment to 1989 Key Employee Stock Option Plan dated January 21, 1997. (h) (Exhibit 10.6)
10.8 --1994 Long-Term Incentive Plan.(k) (Exhibit 10.5)
10.9 --Amendment to 1994 Long-Term Incentive Plan dated July 22, 1997. (l) (Exhibit 10.1)
10.10 --Amended and Restated Executive Employment Agreements between the Company and Messrs. Daugherty and Feehan,
each dated as of August 1, 1997. (l) (Exhibit 10.2)
10.11 --Consultation Agreements between the Company and Messrs. Dike, Hunter, Motheral, and Rizzo, each dated April
25, 1990.(m) (Exhibit 10.49)
10.12 --Note Agreement between the Company and Teachers Insurance and Annuity Association of America dated as of May
6, 1993.(n) (Exhibit 10.1)
10.13 --First Supplement to Note Agreement between the Company and Teachers Insurance and Annuity Association of
America dated as of September 20, 1994.(k) (Exhibit 10.11)
10.14 --Second Supplement (May 12, 1995), Third Supplement (July 7, 1995), and Fourth Supplement (November 10, 1995)
to 1993 Note Agreement between the Company and Teachers Insurance and Annuity Association of America.(o)
(Exhibit 10.1)
10.15 --Fifth Supplement (December 30, 1996) to 1993 Note Agreement between the Company and Teachers Insurance and
Annuity Association of America. (h) (Exhibit 10.13)
10.16 --Sixth Supplement (December 30, 1997) to 1993 Note Agreement between the Company and Teachers Insurance and
Annuity Association of America.
10.17 --Note Agreement between the Company and Teachers Insurance and Annuity Association of America dated as of
July 7, 1995.(p) (Exhibit 10.1)
10.18 --First Supplement (November 10, 1995) to 1995 Note Agreement between the Company and Teachers Insurance and
Annuity Association of America.(o) (Exhibit 10.2)
10.19 --Second Supplement (December 30, 1996) to 1995 Note Agreement between the Company and Teachers Insurance and
Annuity Association of America. (h) (Exhibit 10.16)
10.20 --Third Supplement (December 30, 1997) to 1995 Note Agreement between the Company and Teachers Insurance and
Annuity Association of America.
10.21 --Amended and Restated Senior Revolving Credit Facility Agreement among the Company, certain lenders named
therein, and NationsBank of Texas, N.A., as Administrative Agent dated as of June 19, 1996 (q) (Exhibit 10.1)
10.22 First Amendment (December 11, 1997) to Amended and Restated Senior Revolving Credit Facility Agreement dated
as of June 19, 1996.
</TABLE>
23
<PAGE> 26
<TABLE>
<S> <C>
10.23 Note Agreement dated as of December 1, 1997 among the Company and the Purchasers named therein for the
issuance of the Company's 7.10% Senior Notes due January 2, 2008 in the aggregate principal amount of
$30,000,000.
13 --1997 Annual Report to Stockholders of the Company and 1998 Proxy Statement.
21 --Subsidiaries of Cash America International, Inc.
23 --Consent of Coopers & Lybrand L.L.P.
27 --Financial Data Schedule.
</TABLE>
________________________
Certain Exhibits are incorporated by reference to the Exhibits shown in
parenthesis contained in the Company's following filings with the Securities
and Exchange Commission:
(a) Registration Statement Form S-1, File No. 33-10752.
(b) Amendment No. 1 to its Registration Statement on Form S-4, File No.
33-17275.
(c) Annual Report on Form 10-K for the year ended December 31, 1992.
(d) Annual Report on Form 10-K for the year ended December 31, 1993.
(e) Post-Effective Amendment No. 1 to its Registration Statement on Form S-4,
File No. 33-17275.
(f) Annual Report on Form 10-K for the year ended December 31, 1990.
(g) Registration Statement on Form S-8, File No. 33-29658.
(h) Annual Report on Form 10-K for the year ended December 31, 1996.
(i) Quarterly Report on Form 10-K for the quarter ended June 30, 1997.
(j) Annual Report on Form 10-K for the year ended December 31, 1989.
(k) Annual Report on Form 10-K for the year ended December 31, 1994.
(l) Quarterly Report on Form 10-Q for the quarter ended September 30, 1997.
(m) Post-Effective Amendment No. 4 to its Registration Statement on Form S-4,
File No. 33-17275.
(n) Quarterly Report on Form 10-Q for the quarter ended March 31, 1993.
(o) Quarterly Report on Form 10-Q for the quarter ended September 30,1995.
(p) Quarterly Report on Form 10-Q for the quarter ended June 30, 1995.
(q) Quarterly Report on Form 10-Q for the quarter ended June 30, 1996.
24
<PAGE> 1
EXHIBIT 10.16
SIXTH SUPPLEMENT TO 1993 NOTE AGREEMENT
This Sixth Supplement to 1993 Note Agreement (the "Sixth Supplement")
is made and entered into as of the 30th day of December, 1997, by and between
Cash America International, Inc. (the "Company") and Teachers Insurance and
Annuity Association of America ("Teachers").
RECITALS
WHEREAS, the parties hereto have entered into a Note Agreement dated as
of May 6, 1993, pursuant to which the Company issued and Teachers purchased
$30,000,000 aggregate principal amount of the Company's 8.33% Senior Notes Due
May 1, 2003, and the parties have amended said Note Agreement by entering into a
First Supplement to Note Agreement dated as of September 20, 1994, a Second
Supplement to Note Agreement dated as of May 12, 1995, a Third Supplement to
Note Agreement dated as of July 7, 1995, a Fourth Supplement to 1993 Note
Agreement dated as of November 10, 1995, and a Fifth Supplement to 1993 Note
Agreement dated as of December 30, 1996 (said Note Agreement, as amended, being
referred to hereafter as the "Note Agreement"); and
WHEREAS, the Company and Teachers desire to amend certain provisions of
the Note Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and Teachers hereby agree as follows:
1. Amendment to Section 2.01 of the Note Agreement. Section 2.01 of the
Note Agreement is hereby amended to add the following defined term used in the
Note Agreement:
"Harvey & Thompson Indebtedness" means the indebtedness of Harvey &
Thompson Limited for borrowed money in an aggregate amount not to
exceed 5,000,000 pounds sterling incurred under and pursuant to that
certain Loan Agreement dated August 26, 1993 between Harvey &
Thompson Limited and Barclays Bank PLC as extended by the renewal
agreement dated February 10, 1995.
2. Amendment to Section 9.08 of the Note Agreement. Paragraph (b)(10)
of Section 9.08 of the Note Agreement is hereby amended to read in its entirety
as follows:
(10) (A) in the case of Pantbelaning, the Pantbelaning Indebtedness,
(B) in the case of Pantbelaning, Thomas Hjelm, and the Thomas Hjelm
Affiliates, Indebtedness for Money Borrowed (not to exceed SEK
55,000,000 in the aggregate at any time outstanding) incurred after
the date hereof pursuant to a credit facility to be extended by one
or more banks, but only if no Default shall be in existence at the
time of the incurrence of such indebtedness, and (C) in the case of
Harvey & Thompson Limited, the Harvey & Thompson Indebtedness plus
additional Indebtedness for Money Borrowed (not to exceed 5,000,000
pounds sterling in the aggregate at any time outstanding) incurred
after the date hereof pursuant to a credit facility
<PAGE> 2
to be extended by one or more banks, but only if no Default shall be
in existence at the time of the incurrence of such indebtedness;
provided that the Indebtedness for Money Borrowed described in
clauses (A), (B) and (C) described above may be extended, renewed or
refinanced so long as there is no increase in principal amount of
such Indebtedness for Money Borrowed and so long as no Default shall
be in existence or shall occur upon such extension, renewal or
refinancing; and
3. Amendment to Section 9.18 of the Note Agreement. Section 9.18 of the
Note Agreement is hereby amended to read in its entirety as follows:
SECTION 9.18. Lines of Business. The Company will not, and will
not permit any Subsidiary to, engage in any business other than (i)
the pawnshop business, (ii) the business of cashing checks and
conducting related cash dispensing transactions, (iii) the business
of offering tires and wheels on a rent-to-own or comparable basis
and performing ancillary automobile-related services, and (iv)
activities related to the above.
4. Definitions. All capitalized terms used herein and not otherwise
specifically defined shall have the respective meanings set forth in the Note
Agreement.
5. Ratification of Note Agreement. Except as specified hereinabove, all
other terms of the Note Agreement shall remain unchanged and are hereby ratified
and confirmed. All references to "this Agreement" or "the Agreement" appearing
in the Note Agreement, and all references to the Note Agreement appearing in any
other instrument or document, shall be deemed to refer to the Note Agreement as
supplemented and amended by this Sixth Supplement.
6. Counterparts. This Sixth Supplement may be executed in any number of
counterparts and by the parties hereto on separate counterparts, each of which
when so executed and delivered shall be an original, but all the counterparts
shall together constitute one and the same instrument.
By signing below where indicated, the undersigned, CASH AMERICA, INC.
OF SOUTH CAROLINA, FLORIDA CASH AMERICA, INC., GEORGIA CASH AMERICA, INC., CASH
AMERICA, INC. OF LOUISIANA, CASH AMERICA, INC. OF NORTH CAROLINA, CASH AMERICA,
INC. OF TENNESSEE, CASH AMERICA, INC. OF OKLAHOMA, CASH AMERICA, INC. OF
KENTUCKY, CASH AMERICA PAWN, INC. OF OHIO, CASH AMERICA MANAGEMENT L.P., CASH
AMERICA PAWN L.P., CASH AMERICA HOLDING, INC., EXPRESS CASH INTERNATIONAL
CORPORATION, CASH AMERICA, INC. OF ALABAMA, CASH AMERICA, INC. OF COLORADO, CASH
AMERICA, INC. OF INDIANA, CASH AMERICA, INC., CASH AMERICA OF MISSOURI, INC.,
VINCENT'S JEWELERS AND LOAN, INC., MR. PAYROLL CORPORATION, CASH AMERICA, INC.
OF UTAH and CASH AMERICA FRANCHISING, INC. as Guarantors, do each acknowledge
and approve the Note Agreement, as amended by this Sixth Supplement, and the
other Loan Documents, and the terms thereof, and specifically agree to comply
with all provisions therein and herein which refer to or affect such Guarantors.
2
<PAGE> 3
IN WITNESS WHEREOF, the undersigned have executed this Sixth Supplement
to 1993 Note Agreement as of the date first written above.
CASH AMERICA INTERNATIONAL, INC.
By: /s/ THOMAS A. BESSANT, JR.
-------------------------------------
Thomas A. Bessant, Jr., Senior Vice President
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
By: /s/ DIANE HOM
------------------------------------
Name: Diane Hom
---------------------------------
Title: Director-Private Placements
---------------------------------
3
<PAGE> 4
GUARANTORS
CASH AMERICA, INC. OF SOUTH CAROLINA
FLORIDA CASH AMERICA, INC.
GEORGIA CASH AMERICA, INC.
CASH AMERICA, INC. OF LOUISIANA
CASH AMERICA, INC. OF NORTH CAROLINA
CASH AMERICA, INC. OF TENNESSEE
CASH AMERICA, INC. OF OKLAHOMA
CASH AMERICA, INC. OF KENTUCKY
CASH AMERICA PAWN, INC. OF OHIO
CASH AMERICA MANAGEMENT L.P., a Delaware limited partnership,
by its general partner, Cash America Holding, Inc.
CASH AMERICA PAWN L.P., a Delaware limited partnership, by its
general partner, Cash America Holding, Inc.
CASH AMERICA HOLDING, INC.
EXPRESS CASH INTERNATIONAL CORPORATION
CASH AMERICA, INC. OF ALABAMA
CASH AMERICA, INC. OF COLORADO
CASH AMERICA, INC. OF INDIANA
CASH AMERICA, INC.
CASH AMERICA OF MISSOURI, INC.
VINCENT'S JEWELERS AND LOAN, INC.
MR. PAYROLL CORPORATION
CASH AMERICA, INC. OF UTAH
CASH AMERICA FRANCHISING, INC.
By: /s/ THOMAS A. BESSANT, JR.
---------------------------------------
Thomas A. Bessant, Jr., Vice President for All
4
<PAGE> 1
EXHIBIT 10.20
THIRD SUPPLEMENT TO 1995 NOTE AGREEMENT
This Third Supplement to 1995 Note Agreement (the "Third Supplement") is
made and entered into as of the 30th day of December, 1997, by and between Cash
America International, Inc. (the "Company") and Teachers Insurance and Annuity
Association of America ("Teachers").
RECITALS
WHEREAS, the parties hereto have entered into a Note Agreement dated as of
July 7, 1995, pursuant to which the Company issued and Teachers purchased
$20,000,000 aggregate principal amount of the Company's 8.14% Senior Notes Due
July 7, 2007, and the parties have amended said Note Agreement by entering into
a First Supplement to 1995 Note Agreement dated as of November 10, 1995 and a
Second Supplement to 1995 Note Agreement dated as of December 30, 1996 (said
Note Agreement, as amended, being referred to hereafter as the "Note
Agreement"); and
WHEREAS, the Company and Teachers desire to amend certain provisions of the
Note Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and Teachers hereby agree as follows:
1. Amendment to Section 9.08 of the Note Agreement. Paragraph (b)(10) of
Section 9.08 of the Note Agreement is hereby amended to read in its entirety as
follows:
(10) (A) in the case of Pantbelaning, the Pantbelaning Indebtedness,
(B) in the case of Pantbelaning, Thomas Hjelm, and the Thomas Hjelm
Affiliates, Indebtedness for Money Borrowed (not to exceed SEK
55,000,000 in the aggregate at any time outstanding) incurred after the
date hereof pursuant to a credit facility to be extended by one or more
banks, but only if no Default shall be in existence at the time of the
incurrence of such indebtedness, and (C) in the case of Harvey &
Thompson Limited, the Harvey & Thompson Indebtedness plus additional
Indebtedness for Money Borrowed (not to exceed 5,000,000 pounds
sterling in the aggregate at any time outstanding) incurred after the
date hereof pursuant to a credit facility to be extended by one or more
banks, but only if no Default shall be in existence at the time of the
incurrence of such indebtedness; provided that the Indebtedness for
Money Borrowed described in clauses (A), (B) and (C) described above
may be extended, renewed or refinanced so long as there is no increase
in principal amount of such Indebtedness for Money Borrowed and so long
as no Default shall be in existence or shall occur upon such extension,
renewal or refinancing; and
2. Amendment to Section 9.18 of the Note Agreement. Section 9.18 of the
Note Agreement is hereby amended to read in its entirety as follows:
SECTION 9.18. Lines of Business. The Company will not, and will
not permit any Subsidiary to, engage in any business other than (i) the
pawnshop business, (ii) the business
1
<PAGE> 2
of cashing checks and conducting related cash dispensing transactions,
(iii) the business of offering tires and wheels on a rent-to-own or
comparable basis and performing ancillary automobile-related services,
and (iv) activities related to the above.
3. Definitions. All capitalized terms used herein and not otherwise
specifically defined shall have the respective meanings set forth in the Note
Agreement.
4. Ratification of Note Agreement. Except as specified hereinabove, all
other terms of the Note Agreement shall remain unchanged and are hereby ratified
and confirmed. All references to "this Agreement" or "the Agreement" appearing
in the Note Agreement, and all references to the Note Agreement appearing in any
other instrument or document, shall be deemed to refer to the Note Agreement as
supplemented and amended by this Third Supplement.
5. Counterparts. This Third Supplement may be executed in any number of
counterparts and by the parties hereto on separate counterparts, each of which
when so executed and delivered shall be an original, but all the counterparts
shall together constitute one and the same instrument.
By signing below where indicated, the undersigned, CASH AMERICA, INC. OF
SOUTH CAROLINA, FLORIDA CASH AMERICA, INC., GEORGIA CASH AMERICA, INC., CASH
AMERICA, INC. OF LOUISIANA, CASH AMERICA, INC. OF NORTH CAROLINA, CASH AMERICA,
INC. OF TENNESSEE, CASH AMERICA, INC. OF OKLAHOMA, CASH AMERICA, INC. OF
KENTUCKY, CASH AMERICA PAWN, INC. OF OHIO, CASH AMERICA MANAGEMENT L.P., CASH
AMERICA PAWN L.P., CASH AMERICA HOLDING, INC., EXPRESS CASH INTERNATIONAL
CORPORATION, CASH AMERICA, INC. OF ALABAMA, CASH AMERICA, INC. OF COLORADO, CASH
AMERICA, INC. OF INDIANA, CASH AMERICA, INC., CASH AMERICA OF MISSOURI, INC.,
VINCENT'S JEWELERS AND LOAN, INC., MR. PAYROLL CORPORATION, CASH AMERICA, INC.
OF UTAH, and CASH AMERICA FRANCHISING, INC., as Guarantors, do each acknowledge
and approve the Note Agreement, as amended by this Third Supplement, and the
other Loan Documents, and the terms thereof, and specifically agree to comply
with all provisions therein and herein which refer to or affect such Guarantors.
IN WITNESS WHEREOF, the undersigned have executed this Third Supplement to
1995 Note Agreement as of the date first written above.
CASH AMERICA INTERNATIONAL, INC.
By: /s/ Thomas A. Bessant, Jr.
----------------------------------------------
Thomas A. Bessant, Jr., Senior Vice President
and Chief Financial Officer
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
By: /s/ Diane Hom
----------------------------------------------
Name: Diane Hom
--------------------------------------------
Title: Director-Private Placements
-------------------------------------------
2
<PAGE> 3
GUARANTORS
CASH AMERICA, INC. OF SOUTH CAROLINA
FLORIDA CASH AMERICA, INC.
GEORGIA CASH AMERICA, INC.
CASH AMERICA, INC. OF LOUISIANA
CASH AMERICA, INC. OF NORTH CAROLINA
CASH AMERICA, INC. OF TENNESSEE
CASH AMERICA, INC. OF OKLAHOMA
CASH AMERICA, INC. OF KENTUCKY
CASH AMERICA PAWN, INC. OF OHIO
CASH AMERICA MANAGEMENT L.P., a Delaware limited partnership,
by its general partner, Cash America Holding, Inc.
CASH AMERICA PAWN L.P., a Delaware limited partnership, by its
general partner, Cash America Holding, Inc.
CASH AMERICA HOLDING, INC.
EXPRESS CASH INTERNATIONAL CORPORATION
CASH AMERICA, INC. OF ALABAMA
CASH AMERICA, INC. OF COLORADO
CASH AMERICA, INC. OF INDIANA
CASH AMERICA, INC.
CASH AMERICA OF MISSOURI, INC.
VINCENT'S JEWELERS AND LOAN, INC.
MR. PAYROLL CORPORATION
CASH AMERICA, INC. OF UTAH
CASH AMERICA FRANCHISING, INC.
By: /s/ Thomas A. Bessant, Jr.
----------------------------------------------
Thomas A. Bessant, Jr., Treasurer for All
3
<PAGE> 1
EXHIBIT 10.22
FIRST AMENDMENT TO AMENDED AND RESTATED
SENIOR REVOLVING CREDIT FACILITY AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED SENIOR REVOLVING CREDIT
FACILITY AGREEMENT (this "First Amendment"), dated as of December 11, 1997, is
entered into among CASH AMERICA INTERNATIONAL, INC., a Texas corporation (the
"Borrower"), the lenders listed on the signature pages hereof (the "Lenders"),
NATIONSBANK OF TEXAS, N.A., as Administrative Agent (in said capacity, the
"Administrative Agent").
BACKGROUND
A. The Borrower, the Lenders, and the Administrative Agent are parties to
that certain Amended and Restated Senior Revolving Credit Facility Agreement,
dated as of June 26, 1996 (the "Credit Agreement"; the terms defined in the
Credit Agreement and not otherwise defined herein shall be used herein as
defined in the Credit Agreement).
B. The Borrower, the Lenders, and the Administrative Agent desire to amend
the Credit Agreement.
NOW, THEREFORE, in consideration of the covenants, conditions and
agreements hereafter set forth, and for other good and valuable consideration,
the receipt and adequacy of which are all hereby acknowledged, the Borrower, the
Lenders, and the Administrative Agent covenant and agree as follows:
1. AMENDMENT TO CREDIT AGREEMENT. Section 6.1 of the Credit Agreement is
hereby amended by deleting "$75,000,000" in clause (xvi) thereof and inserting
"$105,000,000" in lieu thereof.
2. REPRESENTATIONS AND WARRANTIES TRUE; NO EVENT OF DEFAULT. By its
execution and delivery hereof, the Borrower represents and warrants that, as of
the date hereof and after giving effect to the amendment contemplated by the
foregoing Section 1:
(a) the representations and warranties contained in the Credit
Agreement are true and correct on and as of the date hereof as if made on
and as of such date;
(b) no event has occurred and is continuing which constitutes a
Default or an Event of Default;
(c) the Borrower has full power and authority to execute and deliver
this First Amendment, and this First Amendment and the Credit Agreement, as
amended hereby,
<PAGE> 2
constitute the legal, valid and binding obligations of the Borrower,
enforceable in accordance with their respective terms, except as
enforceability may be limited by applicable debtor relief laws and by
general principles of equity (regardless of whether enforcement is sought
in a proceeding in equity or at law) and except as rights to indemnity may
be limited by federal or state securities law;
(d) neither the execution, delivery and performance of this First
Amendment or the Credit Agreement, as amended hereby, nor the consummation
of any transactions contemplated herein or therein, will conflict with any
Law to which the Borrower or any Subsidiary is subject, or any indenture,
agreement or other instrument to which the Borrower or any Subsidiary or
any of their respective property is subject; and
(e) no authorization, approval, consent, or other action by, notice
to, or filing with, any governmental authority or other Person (including
the Board of Directors of the Borrower), is required for the execution,
delivery or performance by the Borrower of this First Amendment or the
acknowledgement of this First Amendment by each Guarantor.
3. CONDITIONS OF EFFECTIVENESS. This First Amendment shall be effective as
of December 11, 1997, subject to the following:
(a) the Administrative Agent shall have received counterparts of this
First Amendment executed by the Lenders comprising the Determining Lenders;
(b) the Administrative Agent shall have received counterparts of this
First Amendment executed by the Borrower and acknowledged by each
Guarantor;
(c) the representations and warranties set forth in Section 2 of this
First Amendment shall be true and correct; and
(d) the Administrative Agent shall have received, in form and
substance satisfactory to the Administrative Agent and its counsel, such
other documents, certificates and instruments as the Administrative Agent
shall require.
4. GUARANTORS ACKNOWLEDGEMENT. By signing below, each of the Guarantors (i)
acknowledges and consents to the execution, delivery and performance by the
Borrower of this First Amendment, (ii) agrees that its obligations in respect of
its Guaranty Agreement are not released, modified, impaired or affected in any
manner by this First Amendment or any of the provisions contemplated herein, and
(iii) acknowledges that it has no claims or offsets against, or defenses or
counterclaims to, its Guaranty Agreement.
-2-
<PAGE> 3
5. REFERENCE TO THE CREDIT AGREEMENT.
(a) Upon the effectiveness of this First Amendment, each reference in
the Credit Agreement to "this Agreement", "hereunder", or words of like
import shall mean and be a reference to the Credit Agreement, as affected
and amended by this First Amendment.
(b) The Credit Agreement, as amended by this First Amendment, and all
other Loan Papers shall remain in full force and effect and are hereby
ratified and confirmed.
6. COSTS, EXPENSES AND TAXES. The Borrower agrees to pay on demand all
costs and expenses of the Administrative Agent in connection with the
preparation, reproduction, execution and delivery of this First Amendment and
the other instruments and documents to be delivered hereunder (including the
reasonable fees and out of pocket expenses of counsel for the Administrative
Agent with respect thereto and with respect to advising the Administrative Agent
as to its rights and responsibilities under the Credit Agreement, as amended by
this First Amendment).
7. EXECUTION IN COUNTERPARTS. This First Amendment may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which taken together shall constitute but one and the same
instrument.
8. GOVERNING LAW; BINDING EFFECT. This First Amendment shall be governed by
and construed in accordance with the laws of the State of Texas and shall be
binding upon the Borrower, each Lender, and the Administrative Agent and their
respective successors and assigns.
9. HEADINGS. Section headings in this First Amendment are included herein
for convenience of reference only and shall not constitute a part of this First
Amendment for any other purpose.
10. ENTIRE AGREEMENT. THE CREDIT AGREEMENT, AS AMENDED BY THIS FIRST
AMENDMENT, AND THE OTHER LOAN PAPERS REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AS TO THE SUBJECT MATTER THEREIN AND HEREIN AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
-3-
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment as of the date first above written.
CASH AMERICA INTERNATIONAL,
INC.
By: /s/ Thomas A. Bessant, Jr.
-------------------------------
Thomas A. Bessant, Jr.
Senior Vice President and Chief
Financial Officer
NATIONSBANK OF TEXAS, N.A., as
Administrative Agent and as a Lender
By: /s/ Todd Shipley
-------------------------------
Todd Shipley
Senior Vice President
WELLS FARGO BANK (TEXAS),
NATIONAL ASSOCIATION
By: /s/ Susan B. Sheffield
-------------------------------
Name: Susan B. Sheffield
-------------------------------
Title: Vice President
-------------------------------
BANK ONE, TEXAS, N.A.
By: /s/ Barry B. Kromann
-------------------------------
Name: Barry B. Kromann
-------------------------------
Title: Vice President
-------------------------------
-4-
<PAGE> 5
THE SUMITOMO BANK, LIMITED
By: /s/ Michael R. Pavell
---------------------------------
Name: Michael R. Pavell
---------------------------------
Title: Assistant Vice President
---------------------------------
By: /s/ Julie A. Schell
---------------------------------
Name: Vice President
---------------------------------
Title:
---------------------------------
THE BANK OF TOKYO-MITSUBISHI,
LTD.
By: /s/ John M. Mearns
---------------------------------
Name: John M. Mearns
---------------------------------
Title: Vice President and Manager
---------------------------------
-5-
<PAGE> 6
ACKNOWLEDGED AND AGREED:
CASH AMERICA, INC. OF SOUTH CAROLINA
FLORIDA CASH AMERICA, INC.
GEORGIA CASH AMERICA, INC.
CASH AMERICA, INC. OF LOUISIANA
CASH AMERICA, INC. OF NORTH CAROLINA
CASH AMERICA, INC. OF TENNESSEE
CASH AMERICA, INC. OF OKLAHOMA
CASH AMERICA, INC. OF KENTUCKY
CASH AMERICA PAWN, INC. OF OHIO
CASH AMERICA MANAGEMENT L.P., a Delaware
limited partnership, by its general
partner, Cash America Holding, Inc.
CASH AMERICA PAWN L.P., a Delaware limited
partnership, by its general partner,
Cash America Holding, Inc.
CASH AMERICA HOLDING, INC.
EXPRESS CASH INTERNATIONAL CORPORATION
CASH AMERICA, INC. OF ALABAMA
CASH AMERICA, INC. OF COLORADO
CASH AMERICA, INC. OF INDIANA
CASH AMERICA, INC.
CASH AMERICA OF MISSOURI, INC.
VINCENT'S JEWELERS AND LOAN, INC.
MR. PAYROLL CORPORATION
CASH AMERICA, INC. OF UTAH
CASH AMERICA FRANCHISING, INC.
By: /s/ Thomas A. Bessant, Jr.
--------------------------------
Thomas A. Bessant, Jr.
Treasurer
-6-
<PAGE> 1
EXHIBIT 10.23
[EXECUTION COPY]
================================================================================
NOTE AGREEMENT
Between
THE TRAVELERS INSURANCE COMPANY,
THE TRAVELERS LIFE AND ANNUITY COMPANY,
PRIMERICA LIFE INSURANCE COMPANY,
NATIONWIDE LIFE INSURANCE COMPANY,
EMPLOYERS LIFE INSURANCE COMPANY OF WAUSAU,
OHIO NATIONAL LIFE ASSURANCE CORPORATION
AND
THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY
("Purchasers")
and
CASH AMERICA INTERNATIONAL, INC.
("Company")
Dated as of December 1, 1997
RE: $30,000,000 7.10% SENIOR NOTES DUE 2008
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION HEADING PAGE
<S> <C>
ARTICLE I PURCHASE AND SALE OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.01. Authorization of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02. Sale and Purchase of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.03. The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II DEFINITIONS AND INTERPRETATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.02. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE III CONDITIONS OF CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.01. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.02. Performance; No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.03. Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.04. Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.05. Resolutions, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.06. Purchase Permitted by Applicable Laws, Etc . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.07. Payment of Closing Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.08. Private Placement Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.09. Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.10. Guaranty; Subrogation and Contribution Agreement . . . . . . . . . . . . . . . . . . . 19
Section 3.11. Other Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.12. Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE IV USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 4.01. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 4.02. Margin Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE V PREPAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 5.01. Required Prepayments of the Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 5.02. Optional Prepayments of the Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 5.03. Notice of Optional Prepayments; Officers' Certificate . . . . . . . . . . . . . . . . . 20
Section 5.04. Allocation of Partial Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 5.05. Maturity; Surrender, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 5.06. Retirement of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 6.01. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 6.02. Organization, Qualification, Authorization, Etc . . . . . . . . . . . . . . . . . . . . 22
Section 6.03. Disclosure Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
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<TABLE>
<S> <C>
Section 6.04. Changes, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 6.05. Tax Returns and Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 6.06. Indebtedness; Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 6.07. Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 6.08. Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 6.09. Title to Property, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 6.10. Condition of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 6.11. Compliance with Applicable Laws, Permits and Contracts . . . . . . . . . . . . . . . . 25
Section 6.12. Litigation, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 6.13. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 6.14. No Governmental Consents Required for Overall Transaction . . . . . . . . . . . . . . . 26
Section 6.15. Offering of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 6.16. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 6.17. Foreign Assets Control Regulations, Etc. . . . . . . . . . . . . . . . . . . . . . . . 27
Section 6.18. Status Under Certain Federal Statutes . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 6.19. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 6.20. Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 6.21. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 6.22. Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 6.23. Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 6.24. Patents, Trademarks, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 6.25. Chief Executive Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 6.26. Permitted Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 6.27. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 6.28. Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE VII PURCHASE FOR INVESTMENT; SOURCE OF FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 7.01. Representations of the Purchasers . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE VIII AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 8.01. Financial Statements, Reports and Documents . . . . . . . . . . . . . . . . . . . . . . 33
Section 8.02. Payment of Principal, Interest and Premium . . . . . . . . . . . . . . . . . . . . . . 35
Section 8.03. Payment of Taxes, Claims and Indebtedness . . . . . . . . . . . . . . . . . . . . . . . 36
Section 8.04. Maintenance of Existence and Rights; Conduct of Business . . . . . . . . . . . . . . . 36
Section 8.05. Compliance with Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 8.06. Compliance with Contracts and Permits . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 8.07. Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 8.08. Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 8.09. Compliance with Legal Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 8.10. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 8.11. Authorizations and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 8.12. Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 8.13. Ownership of Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 8.14. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
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<TABLE>
<S> <C>
ARTICLE IX NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 9.01. Consolidated Indebtedness for Money Borrowed . . . . . . . . . . . . . . . . . . . . . 38
Section 9.02. Consolidated Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 9.03. Current Assets to Current Liabilities Ratio . . . . . . . . . . . . . . . . . . . . . . 39
Section 9.04. Current Assets to Total Indebtedness Ratio . . . . . . . . . . . . . . . . . . . . . . 39
Section 9.05. Inventory Turnover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 9.06. Fixed Charge Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 9.07. Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 9.08. Limitation on Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 9.09. Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 9.10. Negative Pledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 9.11. Limitation on Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 9.12. Alteration of Contracts, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 9.13. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 9.14. Limitation on Sale or Issuance of Subsidiary Stock . . . . . . . . . . . . . . . . . . 44
Section 9.15. Limitation on Sale of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 9.16. Dissolution; Liquidation; Merger; Consolidation . . . . . . . . . . . . . . . . . . . . 45
Section 9.17. Change of Name, Fiscal Year and Method of Accounting . . . . . . . . . . . . . . . . . 46
Section 9.18. Lines of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 9.19. Amendment of Organizational Documents . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 9.20. Limitation on Acquisition of New Subsidiaries . . . . . . . . . . . . . . . . . . . . . 46
Section 9.21. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 9.22. No Inconsistent Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 9.23. Incorporation of More Restrictive Covenants . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE X EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 10.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 10.02. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE XI MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 11.01. Note Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 11.02. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 11.03. Consent to Waivers and Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 11.04. Solicitation of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 11.05. Form, Registration, Transfer and Exchange of Notes; Lost Notes . . . . . . . . . . . . 55
Section 11.06. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 11.07. Reliance on and Survival of Representations and Warranties . . . . . . . . . . . . . . 56
Section 11.08. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 11.09. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 11.10. Substitution of Purchasers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 11.11. Satisfaction Requirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 11.12. Independence of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
</TABLE>
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<TABLE>
<S> <C> <C>
Section 11.13. Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 11.14. Reproduction of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 11.15. Notes as Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 11.16. Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 11.17. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 11.18. Representations, Etc. Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 11.19. Submission to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 11.20. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 11.21. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 11.22. Survival of Indemnities, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 11.23. Judgment Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 11.24. Liabilities of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 11.25. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 11.26. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 11.27. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Signature Page . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
</TABLE>
<TABLE>
<S> <C> <C>
EXHIBIT A -- Form of Note
EXHIBIT B -- Form of Company Counsel Opinion
EXHIBIT C -- Form of General Counsel Opinion
EXHIBIT D -- Form of Purchasers Counsel Opinion
EXHIBIT E -- Form of Guaranty
EXHIBIT F -- Form of Subrogation and Contribution Agreement
SCHEDULE I -- Purchasers Information
SCHEDULE II -- List of Subsidiaries
SCHEDULE III -- List of Jurisdictions Where Company is Qualified to Do Business as Foreign Corporation
SCHEDULE IV -- Permitted Liens
SCHEDULE V -- Material Contracts
SCHEDULE VI -- Description of Company Financials
SCHEDULE VII -- Description of Projections
SCHEDULE VIII -- Indebtedness
SCHEDULE IX -- Labor Contracts
SCHEDULE X -- Tradenames
SCHEDULE XI -- Investments
SCHEDULE XII -- Transferee Representations
SCHEDULE XIII -- Outstanding Indebtedness for Money Borrowed
</TABLE>
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<PAGE> 6
NOTE AGREEMENT
CASH AMERICA INTERNATIONAL, INC.
As of December 1, 1997
To Each of the Purchasers Listed in
the Attached Schedule I
Ladies and Gentlemen:
Cash America International, Inc. (the "Company"), a Texas corporation,
hereby agrees with you as follows:
ARTICLE I
PURCHASE AND SALE OF NOTES
Section 1.01. Authorization of Notes. The Company will duly
authorize the issue and sale of a series of its senior notes designated "7.10%
Senior Notes Due January 2, 2008" and limited in aggregate original principal
amount to $30,000,000 (the "Notes"). The Notes will (a) be issuable as
registered notes, without coupons, in denominations permitted by Section 11.05,
(b) be dated the date of issue thereof, (c) mature January 2, 2008, (d) bear
interest on the unpaid balance thereof from the date thereof to, but excluding,
the date the principal thereof shall have become due and payable at the rate of
7.10% per annum, (e) bear interest on overdue principal, premium and (to the
extent permitted by law) interest at the Default Rate, (f) be entitled to the
benefits of the Guaranty and (g) be in the form of Exhibit A.
Section 1.02. Sale and Purchase of Notes. Subject to the terms
and conditions of this Agreement, the Company agrees to sell to the Purchasers,
and the Purchasers agree to purchase from the Company, the Notes at 100% of the
principal amount thereof. Such sale and purchase is sometimes herein referred
to as the "Private Placement."
Section 1.03. The Closing. The closing of the Private Placement
(the "Closing") shall take place at the offices of the Chapman and Cutler, at
10:00 a.m., Chicago, Illinois time, on December 17, 1997 or on such other
Business Day as may be agreed upon by the Company and the Purchasers (the
"Closing Date"). At the Closing, the Company will deliver the Notes in the
form of a single Note (or such greater number of Notes as the Purchasers may
request in denominations permitted by Section 11.05) payable to the Purchasers
or their registered assigns against payment of the purchase price therefor by
electronic funds transfer to NationsBank of Texas, N.A. for credit to such
account as the Company may designate in writing delivered to the Purchasers at
least three Business Days prior to the Closing Date for use in accordance with
Section 4.01. By delivering payment on the Closing Date for the Notes, the
Purchasers shall be deemed to have confirmed as of the Closing Date that the
representations and warranties made by the Purchasers in Article VII remain
accurate as of
<PAGE> 7
the Closing Date. If, at the Closing, the Company shall fail to tender the
Notes to the Purchasers as provided above, or any of the conditions specified
in Article III shall not have been fulfilled to the satisfaction of the
Purchasers, the Purchasers shall, at their election, be relieved of all further
obligations under this Agreement, without thereby waiving any other rights it
may have by reason of such failure or such nonfulfillment.
ARTICLE II
DEFINITIONS AND INTERPRETATIONS
Section 2.01. Definitions. For purposes of this Agreement,
except as otherwise expressly provided or unless the context otherwise
requires, the following terms shall have the following respective meanings:
"Affiliate" means (a) when used with reference to any
corporation, any Person that, directly or indirectly, owns or controls
5% or more of any class of Voting Stock of such corporation or is a
director or officer of such corporation or is a Person in which such
corporation has a 5% or greater direct or indirect equity interest,
(b) when used with reference to any partnership, any Person that,
directly or indirectly, owns or controls 5% or more of either the
capital or profit interests of such partnership or is a partner or
employee of such partnership or is Person in which such partnership
has 5% or greater direct or indirect equity interest, (c) when used
with reference to any individual, any Person that is related to such
individual by blood or marriage or is a present or former ward,
guardian, employer or employee of such individual or is a trust or
estate in which such individual owns a 5% or greater beneficial
interest or of which such individual serves as trustee, executor or in
any similar capacity and (d) when used with reference to a trust or an
estate, any Person that is a trustee, executor, administrator or
beneficiary thereof. Moreover, the term "Affiliate", when used with
reference to any Person, shall also mean any other Person that,
directly or indirectly, controls or is controlled by or is under
common control with such Person. As used in the preceding sentence,
the term "control" means the possession, directly or indirectly, of
the power to direct or to cause the direction of the management and
policies of the entity referred to, whether through ownership of
voting securities, by contract or otherwise, and the terms
"controlling" and "controls" shall have meanings correlative to the
foregoing.
"Agreement" means this Note Agreement, as amended,
supplemented or modified from time to time.
"Applicable Contract" means any contract or agreement to which
the Company or any Subsidiary is a party or by which it or any of its
Properties is bound or under or pursuant to which it owns, maintains
or operates any of its Properties or conducts business.
"Applicable Permit" means any Permit to which the Company or
any Subsidiary is a party or by which it or any of its Properties is
bound or under or pursuant to which it owns, maintains or operates any
of its Properties or conducts business.
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"Assurance" means, as to any Person, any contract, agreement
or understanding to guarantee, or in effect guarantee, any
indebtedness (the "Primary Obligation") of any other Person (the
"Primary Obligor") in any manner, whether directly or indirectly,
including agreements:
(a) to purchase the Primary Obligation or any
Property constituting security therefor;
(b) to advance or supply funds (i) for the
purchase or payment of the Primary Obligation or (ii) to
maintain working capital or other balance sheet conditions, or
otherwise to advance or make available funds for the purchase
or payment of the Primary Obligation; or
(c) to purchase Property, securities or services
primarily for the purpose of assuring the holder of the
Primary Obligation of the ability of the Primary Obligor to
make payment of the Primary Obligation;
provided, however, that "Assurance" shall not include the endorsement
by any Person, in the ordinary course of business, of negotiable
instruments or documents for deposit or collection. The amount of any
Assurance shall be deemed to be an amount equal to the stated or
determinable amount of the Primary Obligation in respect of which such
Assurance is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming the
Person giving such Assurance is required to perform in respect
thereof) as determined by such Person in good faith.
"Bank Loan Agreement" means the Amended and Restated Senior
Revolving Credit Facility Agreement dated as of June 19, 1996, among
the Company, the banks party thereto and NationsBank of Texas, N.A.,
as Agent.
"Bankruptcy Law" has the meaning specified in Section
10.01(j).
"Benefit Arrangement" means an employee benefit plan (within
the meaning of Section 3(3) of ERISA) which is not a Plan and with
respect to which the Company or a member of the ERISA Group has an
obligation or liability, whether or not current or contingent, to make
contributions or pay benefits.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banking institutions in New York, New
York or Fort Worth, Texas are authorized or required by law,
regulation or executive order to be closed.
"Called Principal" means, with respect to any Note, the
principal of such Note that is to be prepaid pursuant to Section 5.02
(any partial prepayment being applied in satisfaction of required
payments of principal in inverse order of their scheduled due dates)
or is declared to be or becomes immediately due and payable pursuant
to Section 10.01, as the context requires.
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"CERCLA" means the Federal Comprehensive Environmental
Response, Compensation and Liability Act, as amended from time to
time, together with all regulations and rulings thereunder and all
interpretations thereof by the Environmental Protection Agency.
"Closing" has the meaning specified in Section 1.03.
"Closing Date" has the meaning specified in Section 1.03.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, together with all regulations and rulings
thereunder and all interpretations thereof by the Internal Revenue
Service.
"Company" has the meaning specified in the opening paragraph
of this Agreement.
"Company Financials" has the meaning specified in Section
6.03(a)(8).
"Consolidated Adjusted Net Income" means, with respect to any
period, consolidated net earnings (after income taxes) of the Company
and the Consolidated Subsidiaries for such period, determined in
accordance with GAAP, but excluding (a) any gain or loss in excess of
$1,000,000 (before income taxes) arising from the sale of capital
assets and (b) any other items which would be considered extraordinary
items in accordance with GAAP.
"Consolidated Current Assets" means, as of any date, the
current assets which would be reflected on a consolidated balance
sheet of the Company and the Consolidated Subsidiaries prepared as of
such date in accordance with GAAP.
"Consolidated Current Liabilities" means, as of any date, the
current liabilities which would be reflected on a consolidated balance
sheet of the Company and the Consolidated Subsidiaries prepared as of
such date in accordance with GAAP.
"Consolidated Indebtedness for Money Borrowed" means, at any
date, the Indebtedness for Money Borrowed of the Company and the
Consolidated Subsidiaries consolidated as of such date in accordance
with GAAP.
"Consolidated Subsidiary" means, at any date, any Subsidiary
the accounts of which would, in accordance with GAAP, be consolidated
with those of the Company in its consolidated financial statements as
of such date.
"Consolidated Tangible Net Worth" means, as of any date, the
total shareholders' equity which would appear on a consolidated
balance sheet of the Company and the Consolidated Subsidiaries
prepared as of such date in accordance with GAAP less the sum of (i)
the aggregate amount of all currency translation adjustments (gains
and losses) shown on such balance sheet and (ii) the net book value
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of all Intangible Assets shown on such balance sheet. As used in this
definition, "Intangible Assets" means those assets (including
licenses, patents, copyrights, trademarks, tradenames, franchises,
goodwill, experimental expenses and other similar assets) which would
be classified as intangible assets for purposes of a balance sheet
prepared in accordance with GAAP.
"Default" means, with respect to any Loan Document, any event
or condition that constitutes, or with the giving of notice or the
lapse of time or both would constitute, a default thereunder or breach
thereof. Without limitation of the foregoing, "Default" shall include
any Event of Default as well as any event, act or condition which with
notice or lapse of time, or both, would constitute an Event of
Default.
"Default Rate" means, at any time, a rate of interest per
annum equal to the lesser of (a) 2% above the interest rate then
payable on the Notes and (b) the Highest Lawful Rate.
"Discounted Value" means, with respect to the Called Principal
of any Note, the amount obtained by discounting all Remaining
Scheduled Payments with respect to such Called Principal from their
respective scheduled due dates to the Settlement Date with respect to
such Called Principal, in accordance with accepted financial practice
and at a discount factor (applied on a semiannual basis) equal to the
Reinvestment Yield with respect to such Called Principal.
"Dollars" and the sign "$" means lawful currency of the United
States of America.
"Environmental Claim" shall mean any investigation, notice,
violation, demand, allegation, action, suit, injunction, judgment,
order, consent decree, penalty, fine, lien, proceeding or claim
(whether administrative, judicial or private in nature) arising (a)
pursuant to, or in connection with an actual or alleged violation of,
any Environmental Law, (b) in connection with any Hazardous Material,
(c) from any abatement, removal, remedial, corrective or other
response action in connection with a Hazardous Material, Environmental
Law or other order of a Governmental Authority or (d) from any actual
or alleged damage, injury, threat or harm to health, safety, natural
resources or the environment.
"Environmental Laws" means applicable laws (including the
common law), regulations or rules, and any applicable judicial or
administrative interpretations thereof, as well as any applicable
judicial or administrative orders, decrees or judgments, relating to
pollution, environmental, health, safety, industrial hygiene or
similar matters.
"Environmental Permit" means any Permit required under
applicable Environmental Laws.
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"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and all rules, regulations,
rulings and interpretations adopted by the Internal Revenue Service or
the Department of Labor thereunder.
"ERISA Group" means all corporations, trades or businesses
(whether or not incorporated) and other persons or entities which,
together with the Company, are treated as a single employer under
Section 414(b), (c), (m) or (o) of the Code.
"Event of Default" has the meaning specified in Section 10.01.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Executive Officer" means (a) the chairman of the board, the
chief executive officer, the chief operating officer, the chief
financial officer, the chief accounting officer or the chief legal
officer of the Company or (b) any other officer of the Company who has
been elected by the Board of Directors of the Company and designated
as an executive officer in any Form 10-K or successor Form filed by
the Company with the SEC.
"Fiscal Quarter" means a fiscal quarter of the Company.
"Fiscal Year" means the fiscal year of the Company.
"GAAP" means generally accepted accounting principles as in
effect from time to time as set forth in the opinions, statements and
pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants, the Financial Accounting
Standards Board and such other Persons who shall be approved by a
significant segment of the accounting profession and concurred in by
the Independent Accountants.
"Governmental Authority" means any foreign governmental
authority, the United States of America, any State of the United
States or any political subdivision, agency or instrumentality of any
of the foregoing, and any agency, department, commission, board,
bureau, court or other tribunal having jurisdiction over any Loan
Party, the Purchasers or any other Holder or their respective
Property, including the Texas Consumer Credit Commissioner, the United
States Department of the Treasury, Bureau of Alcohol, Tobacco and
Firearms and the Office of Fair Trading of the United Kingdom and any
other governmental authority charged with the enforcement of the
Regulatory Acts or otherwise having authority with respect to the
regulation, supervision and licensing of pawnshop activities in any
jurisdiction in which the Company or any of the Subsidiaries conducts
business.
"Guarantors" means the Subsidiaries listed in Schedule II
(other than Harvey & Thompson Limited, Pantbelaning, Murtrum and the
Murtrum Affiliate) and each other Person that becomes bound by the
Guaranty as contemplated by Section 9.20(a).
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"Guaranty" has the meaning specified in Section 3.10.
"Harvey & Thompson Indebtedness" means the indebtedness of
Harvey & Thompson Limited for borrowed money in an aggregate amount
not to exceed 5,000,000 pounds sterling incurred under and pursuant to
that certain Loan Agreement, dated August 26, 1993 between Harvey &
Thompson Limited and Barclays Bank PLC as extended by the respective
renewal agreements dated February 10, 1995, February 26, 1996 and
April 12, 1997.
"Hazardous Materials" means any hazardous substance, hazardous
or toxic waste, pollutant, contaminant, oil, petroleum product or
other substance (a) which is listed, regulated or designated as toxic
or hazardous (or words of similar meaning and regulatory effect), or
with respect to which remedial obligations may be imposed, under any
Environmental Laws or (b) exposure to which may pose a health or
safety hazard.
"Highest Lawful Rate" means the maximum nonusurious rate of
interest permitted to be charged by applicable federal or state law
(whichever shall permit the higher lawful rate) from time to time in
effect. The parties agree that, insofar as the provisions of Chapter
One of the Texas Credit Code are at any time applicable to the
determination of the Highest Lawful Rate, the Highest Lawful Rate
shall be the "interest rate ceiling" (as defined in such Chapter One)
from time to time in effect, provided that, to the extent permitted by
such Chapter One, each Holder may from time to time by notice to the
Company revise the election of such interest rate ceiling as such
ceiling affects the then current or future amounts outstanding under
the Notes held by such Holder.
"Holder" means (a) the Purchasers so long as any such
Purchaser is obligated to purchase the Notes hereunder or holds any
outstanding Note and (b) any other holder from time to time of any
outstanding Note.
"Indebtedness for Money Borrowed" means, with respect to any
Person and without duplication:
(a) the principal amount of all indebtedness of
such Person, current or funded, secured or unsecured, incurred
in connection with borrowings (including the sale of debt
securities),
(b) all indebtedness of such Person created or
arising under any conditional sale or other title retention
agreement with respect to any Property acquired by such
Person,
(c) all indebtedness of such Person issued,
incurred or assumed in respect of the purchase price of
Property or services except for accounts payable incurred in
the ordinary course of business,
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(d) all obligations of such Person evidenced by a
note, bond, debenture or similar instrument,
(e) the present value (determined in accordance
with GAAP) of all obligations of such Person under leases
which shall have been or should be recorded as capitalized
leases in accordance with GAAP,
(f) all Assurances of such Person in respect of
indebtedness of any other Person of any of the types described
in the preceding clauses (a) through (e), provided that, when
calculating the amount of any Person's Indebtedness for Money
Borrowed, no Assurance of such Person of the type described in
this clause (f) shall be included in such calculation unless,
and then only to the extent that, the indebtedness relating to
such Assurance, when aggregated with the total indebtedness
relating to all other outstanding Assurances of the Loan
Parties of the type described in this clause (f), exceeds
$500,000,
(g) the amount of all sinking fund payments or
other mandatory redemption or payments on any class of capital
stock of such Person,
(h) the maximum stated amount from time to time
available for drawing under any letters of credit issued at
the request of such Person, and
(i) the amount of any reimbursed drawings under
letters of credit issued at the request of such Person.
"Indemnitees" means, collectively, the Purchasers, each
Transferee and each Holder and their respective successors and
assigns, and the officers, trustees, directors and employees of each
of the foregoing.
"Independent Accountants" means Coopers & Lybrand L.L.P. or
another firm of independent public accountants of recognized national
standing selected by the Company.
"Investment" means, as applied to any Person, (i) any direct
or indirect purchase or other acquisition by such Person of stocks,
bonds, notes, debentures or other securities of any other Person, (ii)
any direct or indirect loan, advance, extension of credit or capital
contribution by such Person to any other Person, (iii) any Assurance
by such Person of any indebtedness of any other Person, (iv) the
subordination by such Person of any claim against any other Person to
other indebtedness of such other Person and (v) any other item which
would be classified as an "investment" on a balance sheet of such
Person prepared in accordance with GAAP, including any direct or
indirect contribution by such Person of Property to a joint venture,
partnership or other business entity in which such Person retains an
interest.
"Legal Requirements" means any and all (a) applicable
constitutional provisions, laws (statutory, administrative, judicial
or otherwise, including those established
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pursuant to common law or equity), ordinances, treaties, rules, codes,
standards and regulations (or any interpretation of any of the
foregoing), whether foreign or domestic, (b) judgments, orders,
injunctions and decrees, (c) Permits and (d) contracts with
Governmental Authorities relating to compliance with the items
described in (a), (b) or (c) above.
"Lien" means any mortgage, pledge, charge, encumbrance,
security interest, collateral assignment, conditional sale or title
retention arrangement or other lien or restriction of any kind,
whether based on common law, constitutional provision, statute or
contract.
"Loan Documents" means, collectively, this Agreement, the
Notes, the Guaranty, the Subrogation and Contribution Agreement and
all other instruments and documents executed and delivered to the
Purchasers by the Loan Parties, or any of them, pursuant to this
Agreement.
"Loan Parties" means, collectively, the Company and the
Guarantors.
"Make-Whole Premium" means, with respect to the Called
Principal of any Note, a premium equal to the excess, if any, of the
Discounted Value of such Called Principal over the sum of (a) such
Called Principal plus (b) interest accrued thereon to the Settlement
Date with respect to such Called Principal. The Make-Whole Premium
shall in no event be less than zero.
"Material Adverse Effect" means any circumstance or event of
whatever nature (including any adverse determination in any
litigation, arbitration or governmental investigation or proceeding)
which (a) could reasonably be expected to have a material adverse
effect on the financial condition, business, operations or Properties
of the Company and the Subsidiaries, taken as a whole, (b) could
reasonably be expected to diminish or impair in any material respect
the ability of the Company to perform any of its obligations under the
Loan Documents to which it is a party, (c) could reasonably be
expected to diminish or impair in any material respect the ability of
the Purchasers or any other Holder to enforce any of the Obligations
or to exercise or enforce any of their rights and remedies under the
Loan Documents, (d) causes an Event of Default, (e) causes a Default
which could reasonably be expected to become an Event of Default or
(f) could reasonably be expected to subject the Purchasers or any
other Holder to civil or criminal liability.
"Material Contract" means any contract, agreement or
instrument to which the Company or any Subsidiary is a party (a) which
calls for payments to or from the Company or such Subsidiary of more
than $1,000,000 during any 12-month period or (b) pursuant to which
the Company or such Subsidiary acquires any right to an interest in
Property or a right to obtain services if the Company's or such
Subsidiary's inability to obtain such interest or services, as the
case may be, could be reasonably be expected to have a Material
Adverse Effect, provided that "Material Contract" shall not include
any Loan Document.
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"Murtrum" means Murtrum AB, formerly known as Thomas Hjelm AB,
a corporation organized under the laws of Sweden and a Wholly-Owned
Subsidiary.
"Murtrum Affiliate" means the following corporation which (i)
is organized under the laws of Sweden and (ii) is a Wholly-Owned
Subsidiary: AB Svensk Pantbelaning.
"1993 Guaranty" means that certain Joint and Several Guaranty
dated as of May 6, 1993 delivered by the Company and certain of its
Subsidiaries in connection with the issuance and sale of the 1993
Notes.
"1993 Loan Documents" means the "Loan Documents" as defined in
the 1993 Note Agreement.
"1993 Note Agreement" means that certain Note Agreement dated
as of May 6, 1993 between the Company and Teachers Insurance and
Annuity Association of America, as amended.
"1993 Notes" means those certain 8.33% Senior Notes due May 1,
2003 issued by the Company under and pursuant to the 1993 Note
Agreement.
"1995 Guaranty" means that certain Joint and Several Guaranty
dated as of July 7, 1995 delivered by the Company and certain of its
Subsidiaries in connection with the issuance and sale of the 1995
Notes.
"1995 Loan Documents" means the "Loan Documents" as defined in
the 1995 Note Agreement.
"1995" Note Agreement" means that certain Note Agreement dated
as of July 7, 1995 between the Company and Teachers Insurance and
Annuity Association of America, as amended.
"1995 Notes" means those certain 8.14% Senior Notes due July
7, 2007 issued by the Company under and pursuant to the 1995 Note
Agreement.
"Notes" has the meaning specified in Section 1.01.
"Obligations" means all obligations, liabilities and
indebtedness of every nature of the Loan Parties from time to time
owing to the Purchasers and the other Holders under the Loan
Documents, including, without limitation, (a) all obligations of the
Company under the Loan Documents to pay principal, premium and
interest in respect of the Notes, (b) all obligations of the
Guarantors in respect of the Guaranty, (c) all obligations of the Loan
Parties under the Loan Documents to reimburse or indemnify the
Purchasers or any other Indemnitee and (d) all obligations of the Loan
Parties to pay fees and expenses pursuant to Section 11.02 and similar
sections of the other Loan Documents.
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"Officers' Certificate" means a certificate executed on behalf
of the Company by at least two of its Responsible Officers (in their
representative capacities and not in their individual capacities).
"Organizational Documents" means (i) with reference to any
Person that is a corporation, its articles or certificate of
incorporation and its bylaws and (ii) with reference to any Person
that is a partnership, its partnership agreement and all other
instruments relating to its formation, existence or governance.
"Overall Transaction" means the Private Placement and the
guarantees and other transactions and activities contemplated by the
Loan Documents.
"Pantbelaning" means CAII Pantbelaning AB, a corporation
organized under the laws of Sweden and a Wholly-Owned Subsidiary.
"Pantbelaning Indebtedness" means indebtedness of Pantbelaning
for borrowed money in the approximate amount of SEK 185,000,000
pursuant to that certain Amended and Restated Loan Agreement, dated as
of October 29, 1997, between Pantbelaning and Skandinaviska Enskilda
Banken AB (Publ.), New York Branch.
"Permits" means any and all permits, authorizations,
certificates, approvals, registrations, variances, licenses,
franchises, exemptions or orders (a) under any Legal Requirement or
(b) granted by any Governmental Authority.
"Permitted Liens" means:
(a) Liens (if any) granted to the Holders to
secure the Obligations;
(b) Liens in existence on the date hereof and
described in Schedule IV;
(c) pledges or deposits made to secure payment of
worker's compensation (or to participate in any fund in
connection with worker's compensation), unemployment
insurance, pensions or social security programs;
(d) Liens imposed by mandatory provisions of law
such as for materialmen's, mechanics, warehousemen's and other
like Liens arising in the ordinary course of business,
securing indebtedness whose payment is not yet due, and
landlords liens, whether arising through contract or by
operation by law, but only if the same are not yet due and
payable or if the same are being contested in good faith and
the payment of which is not at the time required by Section
8.03,
(e) Liens for taxes, assessments and governmental
charges or levies imposed upon a Person or upon such Person's
income or profits or property, but only if the same are not
yet due and payable or if the same are being
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contested in good faith and the payment of which is not at the
time required by Section 8.03;
(f) good faith deposits in connection with
tenders, leases, real estate bids or contracts (other than
contracts involving the borrowing of money), pledges or
deposits to secure public or statutory obligations, deposits
to secure (or in lieu of) surety, stay, appeal or customs
bonds and deposits to secure the payment of taxes,
assessments, customs duties or other similar charges;
(g) encumbrances consisting of zoning
restrictions, easements, or other restrictions on the use of
real property, provided that such do not materially impair the
use of such property for the uses intended, and none of which
is violated by existing or proposed structures or land use;
(h) Liens on Property of any Consolidated
Subsidiary securing obligations of such Consolidated
Subsidiary owing to the Company or to any Wholly-Owned
Subsidiary;
(i) Liens created to secure (A) purchase money
indebtedness incurred to finance the purchase price of the
Property acquired in the ordinary course of business, but only
if each such Lien shall secure only the purchase money
indebtedness incurred to purchase the Property so acquired and
shall be confined solely to such Property and (B) the
indebtedness permitted by Section 9.08(b)(11); provided,
however, that the aggregate amount of all indebtedness at any
time secured by all Liens referred to in this clause (i) shall
not exceed $10,000,000; and
(j) Liens on Temporary Cash Investments, but only
if (A) such Liens secure short-term indebtedness owed by the
Company or a Consolidated Subsidiary to the broker or
investment banking firm which is holding such Temporary Cash
Investments for the account of the Company or a Consolidated
Subsidiary and (B) such indebtedness is to be repaid, in the
ordinary course of business, by the collection or liquidation
of such Temporary Cash Investments at the maturity of such
Temporary Cash Investments.
"Person" means and includes an individual, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization
and a Governmental Authority.
"Plan" means an employee pension benefit plan (within the
meaning of Section 3(3) of ERISA) which is or has been established or
maintained, or to which contributions are or have been made, by the
Company, any Subsidiary or any Related Person or as to which the
Company, any Subsidiary or any Related Person would be treated as a
contributing sponsor under Section 4069 of ERISA if such plan were to
be terminated.
"Private Placement" has the meaning specified in Section 1.02.
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"Projections" has the meaning specified in Section 6.03(a)(9).
"Property" means any interest in any kind of property or
asset, whether real, personal or mixed, tangible or intangible.
"Purchasers" has the meaning specified in the opening
paragraph of this Agreement.
"Regulatory Acts" means (a) the Texas Pawnshop Act, (b) the
Consumer Credit Act 1974 enacted in the United Kingdom and (c) all
other foreign, Federal or state laws (statutory, administrative,
judicial or other otherwise) relating to pawn shops and activities
incidental thereto.
"Reinvestment Yield" means with respect to the Called
Principal of any Note, the sum of 50 basis points plus the yield to
maturity implied by (a) the yields reported, as of 10:00 A.M. (New
York City time) two Business Days next preceding the Settlement Date
with respect to such Called Principal, on the display designated as
"Page USD" on the Bloomberg Financial Markets Service (or such other
display as may replace Page USD on the Bloomberg Financial Markets
Service) for actively traded U.S. Treasury securities having a
maturity equal to the Remaining Average Life of such Called Principal
as of such Settlement Date, or, if such yields shall not be reported
as of such time or the yields reported as of such time shall not be
ascertainable, (b) the Treasury Constant Maturity Series yields
reported, for the latest day for which such yields shall have been so
reported as of the Business Day next preceding the Settlement Date
with respect to such Called Principal, in Federal Reserve Statistical
Release H.15 (519) (or any comparable successor publication) for
actively traded U.S. Treasury securities having a constant maturity
equal to the Remaining Average Life of such Called Principal as of
such Settlement Date. Such implied yield shall be determined, if
necessary, by (i) converting U.S. Treasury bill quotations to bond
equivalent yields in accordance with accepted financial practice and
(ii) interpolating linearly between reported yields.
"Related Person" means any trade or business, whether or not
incorporated, which, together with the Company, would be treated as a
single employer under Section 414 of the Code.
"Release" has the meaning specified in CERCLA Sections
101(22) (42 U.S.A. Sections 9601(22)).
"Remaining Average Life" means, with respect to the Called
Principal of any Note, the number of years (calculated to the nearest
one-twelfth year) obtained by dividing (a) such Called Principal into
(b) the sum of the products obtained by multiplying (i) each Remaining
Scheduled Payment of such Called Principal (but not of interest
thereon) by (ii) the number of years (calculated to the nearest
one-twelfth year) which will elapse between the Settlement Date with
respect to such Called Principal and the scheduled due date of such
Remaining Scheduled Payment.
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"Remaining Scheduled Payments" means, with respect to the
Called Principal of any Note, all payments of such Called Principal
and interest thereon that would be due on or after the Settlement Date
with respect to such Called Principal if no payment of such Called
Principal were made prior to its scheduled due date.
"Required Holders" means, at any time, the Holder or Holders
of at least 51% of the aggregate principal amount of the Notes then
outstanding.
"Responsible Officer" means, as to any Loan Party, the
chairman of the board, the chief executive officer, the president, the
chief financial officer, the principal accounting officer, the chief
legal officer or the treasurer of such Loan Party.
"Restricted Payment" means as specified in Section 9.07(a).
"SEC" means the Securities and Exchange Commission.
"SEK" means the legal currency of Sweden.
"Securities Act" means the Securities Act of 1933, as amended.
"Settlement Date" means, with respect to the Called Principal
of any Note, the date on which such Called Principal is to be prepaid
pursuant to Section 5.02 or is declared to be or becomes immediately
due and payable pursuant to Article X, as the context requires.
"Stock" means (i) in the case of any corporation, capital
stock of any class of such corporation (however designated) and
warrants or options to purchase such capital stock, (ii) in the case
of any partnership, partnership interests of such partnership (however
designated) and warrants or options to purchase such partnership
interests and (iii) in the case of any other entity, equity interests
of such entity (however designated) and warrants or options to
purchase such equity interests.
"Subrogation and Contribution Agreement" means the Subrogation
and Contribution Agreement dated as of December 1, 1997 among the
Company and the Guarantors substantially in the form of Exhibit F.
"Subsidiary" means, at any time, (a) any corporation 50% or
more of the outstanding Voting Stock of which is owned, directly or
indirectly, by the Company at such time and (b) any partnership,
association, joint venture or other entity in which the Company owns,
directly or indirectly, a 50% or greater equity interest (however
designated) at such time.
"Temporary Cash Investment" mean any of the following
investments: (a) Investments in open market commercial paper maturing
within 180 days after acquisition thereof and rated at least A-1 (or
the equivalent thereof) by Standard & Poor's Ratings Group (or any
successor thereto which is a nationally recognized rating
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agency) or at least P-1 (or the equivalent thereof) by Moody's
Investors Service, Inc. (or any successor thereto which is a
nationally recognized rating agency), (b) Investments in marketable
obligations, maturing within 180 days after acquisition thereof,
issued or unconditionally guaranteed by the United States of America
or an instrumentality or agency thereof and entitled to the full faith
and credit of the United States of America, (c) Investments in money
market funds that invest solely in the types of Investments permitted
under clauses (a) and (b) above, (d) Investments in repurchase
agreements of any financial institution or brokerage firm acceptable
to the Required Holders which are fully secured by securities
described in clause (b) above, (e) certificates of deposit and time
deposits (including Eurodollar deposits), maturing within 180 days
from the date of deposit thereof, with a domestic office of (i) any
national or state bank or trust company organized under the laws of
the United States of America or any state therein and having capital,
surplus and undivided profits of at least $100,000,000 or (ii) any
other national or state bank so long as all such deposits are
federally insured, (f) in the case of Harvey & Thompson Limited,
certificates of deposit and other instruments substantially equivalent
to a certificate of deposit maturing within 180 days from the date of
acquisition and issued by a bank or trust company organized and
located in the United Kingdom having capital, surplus and undivided
profits of at least 65,000,000 pounds sterling and (g) in the case of
Pantbelaning, Murtrum and Murtrum Affiliate, certificates of deposit
and other instruments substantially equivalent to a certificate of
deposit maturing within 180 days from the date of acquisition and
issued by a bank or trust company organized and located in Sweden
having capital, surplus and undivided profits of at least SEK
750,000,000.
"Transferee" means any direct or indirect transferee of all or
any part of any Note purchased by the Purchasers under this Agreement.
"Voting Stock" means, when used with respect to any Person,
any Stock of such Person having general voting power under ordinary
circumstances to elect a majority of the board of directors (or other
governing body) of such Person (irrespective of whether at the time
any Stock of such Person shall have or might have voting power by
reason of the happening of any contingency).
"Wholly-Owned Subsidiary" means a Consolidated Subsidiary, all
of the outstanding Stock (other than directors' qualifying shares, if
required by law) of which are at the time owned directly by the
Company or by one or more Wholly-Owned Subsidiaries or by the Company
and one or more Wholly-Owned Subsidiaries.
Section 2.02. Interpretation. (a) In this Agreement, unless a
clear contrary intention appears:
(1) the singular number includes the plural number and
vice versa;
(2) reference to any gender includes each other gender;
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(3) the words "herein," "hereof" and "hereunder" and
other words of similar import refer to this Agreement as a whole and
not to any particular Article, Section or other subdivision;
(4) reference to any Person includes such Person's
successors and assigns but, if applicable, only if such successors and
assigns are permitted by this Agreement, and reference to a Person in
a particular capacity excludes such Person in any other capacity or
individually, provided that nothing in this clause (4) is intended to
authorize any assignment not otherwise permitted by this Agreement;
(5) reference to any agreement, document, instrument or
report means, unless the context otherwise requires, such agreement,
document, instrument or report as in effect when delivered to the
Purchasers pursuant to this Agreement and as the same may thereafter
be amended, supplemented or modified in accordance with the terms
thereof and hereof, and reference to any Note includes any note issued
pursuant hereto in renewal, rearrangement, reinstatement, enlargement,
amendment, modification, extension, substitution or replacement
therefor;
(6) reference to any Article, Section, Schedule or
Exhibit means such Article or Section hereof or such Schedule or
Exhibit hereto;
(7) the words "including" (and with correlative meaning
"include") means including, without limiting the generality of any
description preceding such term;
(8) with respect to the determination of any period of
time, the word "from" means "from and including" and the word "to"
means "to but excluding";
(9) reference to any Legal Requirement means such Legal
Requirement as amended, modified, codified or reenacted, in whole or
in part, and in effect from time to time;
(10) accounting terms used but not defined herein shall be
construed in accordance with GAAP, and whenever the character or
amount of any asset or liability or item of income or expense is
required to be determined, or any consolidation or accounting
computation is required to be made, for purposes hereof, such
determination or computation shall be made in accordance with GAAP;
(11) the word "knowledge", when used in any representation
or warranty of the Company contained herein, means the actual
knowledge of any Executive Officer or director of the Company;
(12) where any provision of this Agreement refers to
action to be taken by any Person, or which such Person is prohibited
from taking, such provision shall be applicable whether such action is
taken directly or indirectly by such Person; and
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(13) if any action or failure to act by the Company
violates any covenant or obligation of the Company contained herein,
such violation shall not be excused by the fact that such action or
failure to act is required or permitted by any other covenant or
obligation of the Company contained herein.
(b) Should there be a change in GAAP following the date of this
Agreement and should either (i) the Company determine (in good faith) that the
requirements of one or more of the covenants contained in Article IX are
materially increased or made more severe as a result thereof or (ii) the
Required Holders determine (in good faith) that the requirements of one or more
of the covenants contained in Article IX are materially reduced or relaxed as a
result thereof, then the Company and such Required Holders shall enter into
good faith negotiations with the desired result being that such covenant(s)
shall be amended in such a way that the criteria therein set forth for
evaluating the financial condition of the Company and/or the Subsidiaries shall
be the same after such amendment as if such change in GAAP had not been made.
(c) The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the construction hereof.
(d) No provision of this Agreement shall be interpreted or
construed against any Person solely because that Person or its legal
representative drafted such provision.
ARTICLE III
CONDITIONS OF CLOSING
The obligation of the Purchasers to purchase and pay for the Notes
hereunder is subject to the satisfaction of the following conditions:
Section 3.01. Representations and Warranties. The
representations and warranties of the Loan Parties contained in the following
instruments shall be true and correct at the time of Closing: (i) this
Agreement, (ii) the other Loan Documents and (iii) the instruments delivered by
one or more of the Loan Parties pursuant to this Article III.
Section 3.02. Performance; No Default. The Loan Parties shall
have performed and complied with all agreements and conditions contained in
this Agreement or in the other Loan Documents required to be performed or
complied with by them prior to or at the Closing. At the time of Closing, no
Default shall have occurred and be continuing or would result from the
consummation of the Overall Transaction.
Section 3.03. Compliance Certificate. The Purchasers shall have
received an Officers' Certificate, dated the Closing Date and satisfactory in
form and substance to the Purchasers, certifying that the conditions specified
in Sections 3.01 and 3.02 have been fulfilled. If required by the Purchasers,
such Officers' Certificate will also certify as to such matters of fact as the
Purchasers may reasonably request to enable the Purchasers to determine
compliance with such conditions.
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Section 3.04. Opinions of Counsel. The Purchasers shall have
received (a) a favorable opinion from Jenkens & Gilchrist, a Professional
Corporation, counsel for the Company and the Guarantors, in the form of Exhibit
B, (b) a favorable opinion of Hugh A. Simpson, General Counsel to the Company
and the Guarantors, in the form of Exhibit C and (c) a favorable opinion from
Chapman and Cutler, special counsel for the Purchasers, in the form of Exhibit
D. Each such opinion shall (i) be addressed to the Purchasers, (ii) be dated
the Closing Date and (iii) state that all Transferees are entitled to rely
thereon as though it were addressed to them.
Section 3.05. Resolutions, Etc. The Purchasers shall have
received (a) copies of resolutions of the Board of Directors of each Loan
Party, certified as of the Closing Date by the Secretary or an Assistant
Secretary of such Loan Party, duly authorizing the Overall Transaction, (b) a
certificate as to the incumbency and authority of the Person or Persons
executing and delivering Loan Documents on behalf of such Loan Party and (c)
such other documents and evidence as the Purchasers or its special counsel may
request with respect to any Loan Party or the Overall Transaction, including
the taking of all corporate proceedings in connection therewith and compliance
with the conditions set forth herein, in each case in form and substance
satisfactory to the Purchasers.
Section 3.06. Purchase Permitted by Applicable Laws, Etc. The
consummation of the Private Placement on the terms and conditions herein
provided (including the use of the proceeds of such Notes by the Company) shall
(i) not violate any Legal Requirement (including, without limitation, section 5
of the Securities Act or Regulation G, T or X of the Board of Governors of the
Federal Reserve System), (ii) not subject the Purchasers to any tax (other than
routine income taxes), penalty, liability or other onerous condition under or
pursuant to any Legal Requirement and (iii) constitute a legal investment under
the laws and regulations of each jurisdiction to which the Purchasers are
subject, but without resort to provisions (such as Section 1405(a)(8) of the
New York Insurance Law) which permit the making of an investment without
restriction as to the character of the particular investment being made. If
required by the Purchasers, the Purchasers shall have received an Officers'
Certificate, dated the Closing Date, certifying as to such matters of fact as
the Purchasers may reasonably specify to enable the Purchasers to determine
compliance with the conditions set forth in the preceding sentence.
Section 3.07. Payment of Closing Fees. The Company shall have
paid the fees and disbursements which it is obligated to pay pursuant to
Section 11.02 and which have been invoiced to the Company prior to the time of
Closing.
Section 3.08. Private Placement Number. The CUSIP Service Bureau
of Standard & Poor's Information Group shall have issued to the Purchasers a
private placement number with respect to the Notes.
Section 3.09. Notes. The Purchasers shall have received the
Notes complying with the requirements of Section 1.03.
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Section 3.10. Guaranty; Subrogation and Contribution Agreement.
Each Guarantor and the Company shall have duly authorized, executed and
delivered to the Purchasers a Joint and Several Guaranty, dated the Closing
Date, in the form of Exhibit E (the "Guaranty") and a Subrogation and
Contribution Agreement.
Section 3.11. Other Loan Documents. Each of the other Loan
Documents shall (a) have been duly authorized, executed, acknowledged (if
appropriate) and delivered by the respective Loan Parties thereto, (b) be dated
as of the Closing Date, (c) be in form and substance satisfactory to the
Purchasers and (d) be in full force and effect on the Closing Date without any
default existing thereunder. A counterpart of each Loan Document executed by
the Loan Parties thereto shall have been delivered to the Purchasers or its
special counsel. Each Loan Document shall constitute the valid and binding
obligation of each Loan Party thereto, enforceable against such Loan Party in
accordance with the terms thereof.
Section 3.12. Proceedings. All proceedings taken or to be taken
in connection with the Overall Transaction prior to or on the Closing Date (and
all documents incident thereto) shall be satisfactory in substance and form to
the Purchasers, and the Purchasers and its special counsel shall have received
all such counterpart originals or certified or other copies of such documents
as the Purchasers may reasonably request.
ARTICLE IV
USE OF PROCEEDS
Section 4.01. Use of Proceeds. The Company will apply the
proceeds of the Private Placement solely to pay the costs and expenses
described in Section 11.02 and to repay indebtedness of the Company outstanding
under the Bank Loan Agreement and for no other purpose. Nothing in this
Section 4.01 is intended to prohibit the Company from effecting re-borrowings
under the Bank Loan Agreement.
Section 4.02. Margin Regulations. The Company will not, directly
or indirectly, use any of the proceeds of the Private Placement for the
purpose, whether immediate, incidental or ultimate, of buying a "margin stock"
or of maintaining, reducing or retiring any indebtedness originally incurred to
purchase a stock that is currently a "margin stock", or for any other purpose
which might constitute the private placement of a "purpose credit," in each
case within the meaning of Regulation G (12 C.F.R. 207, as amended) or
Regulation T (12 C.F.R. 220, as amended) of the Board of Governors of the
Federal Reserve System, or otherwise take or permit to be taken any action
which would involve a violation of such Regulation G or T or of Regulation X
(12 C.F.R. 224, as amended) of the Board of Governors of the Federal Reserve
System or any other regulation of such Board.
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ARTICLE V
PREPAYMENTS
Section 5.01. Required Prepayments of the Notes. (a) Unless the
aggregate principal amount of the then outstanding Notes shall have become due
and payable pursuant to Section 10.01, the Company shall apply to the
prepayment of the Notes, without premium, and there shall become due and
payable, the sum of $4,285,714.28 on January 2 in each of the years 2002
through 2007 (or, in the case of any such prepayment, such lesser principal
amount of the Notes as shall then be outstanding), leaving $4,285,714.32
principal amount (or such other principal amount thereof as then remains
unpaid) of the Notes for payment at their stated maturity on January 2, 2008.
Each such prepayment shall be at 100% of the principal amount of the Notes so
prepaid, together with all accrued and unpaid interest thereon to the date of
prepayment. No partial prepayment of the Notes pursuant to Section 5.02 shall
relieve the Company from its obligation to make the required prepayments
provided for in this Section 5.01.
(b) Whenever any prepayment to be made under this Section 5.01
shall be stated to be due on a day which is not a Business Day, the due date
thereof shall be extended to the next succeeding Business Day and the amount of
such prepayment shall bear interest at the applicable rate during such
extension.
Section 5.02. Optional Prepayments of the Notes. The Company
may, at its option, upon notice as provided in Section 5.03, at any time or
from time to time, prepay any part (in a principal amount of at least
$1,000,000 or an integral multiple of $100,000 in excess thereof) or all of the
Notes at 100% of the principal amount so prepaid, together with all accrued and
unpaid interest thereon to the date of prepayment, plus a premium equal to the
Make-Whole Premium, if any, on the amount so prepaid, determined as of two
Business Days prior to the date of such prepayment pursuant to this Section
5.02.
Section 5.03. Notice of Optional Prepayments; Officers'
Certificate. The Company shall give each Holder irrevocable written notice of
each optional prepayment of Notes made under Section 5.02 not less than 30 nor
more than 60 days prior to the date fixed for such prepayment (which shall be a
Business Day), in each case specifying (a) such prepayment date, (b) the
aggregate principal amount of the Notes to be prepaid, (c) the aggregate
principal amount of the Notes held by such Holder to be prepaid, (d) that a
Make-Whole Premium may be payable, (e) the date when such Make- Whole Premium
will be calculated, (f) the estimated Make-Whole Premium together with a
reasonably detailed calculation of such Make-Whole Premium and (g) the accrued
interest applicable to the prepayment. The Company will give each Holder, one
Business Day prior to the date scheduled for any such prepayment, an Officers'
Certificate certifying that the conditions of Section 5.02 have been fulfilled
and specifying the particulars of such fulfillment, and, whether or not a
Make-Whole Premium is payable in connection with such prepayment, setting forth
the calculations used in computing such Make-Whole Premium.
Section 5.04. Allocation of Partial Prepayments. Any partial
prepayment of the Notes shall be allocated among all Notes at the time
outstanding in proportion, as nearly as
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practicable, to the respective unpaid principal amounts of the Notes so
outstanding, with adjustments, to the extent practicable, to compensate for any
prior payments not made exactly in such proportion. All partial prepayments
shall be applied to the Notes in anticipation and satisfaction of the
prepayments required to be made by the provisions of Section 5.01, in inverse
order of the maturity thereof.
Section 5.05. Maturity; Surrender, Etc. In the case of any
prepayment of the Notes pursuant to this Article V, the principal amount of
each Note to be prepaid shall mature and become due and payable on the date
fixed for such prepayment, together with interest on such principal amount
accrued to such date and the applicable Make-Whole Premium, if any. From and
after such date, unless the Company shall fail to pay such principal amount
when so due and payable, together with the interest and Make-Whole Premium, if
any, as aforesaid, interest on such principal amount shall cease to accrue.
Any Note paid or prepaid in full shall, after such payment or prepayment in
full, be surrendered to the Company and be cancelled and shall not be reissued,
and no Note shall be issued in lieu of any prepaid principal amount of any
Note.
Section 5.06. Retirement of Notes. The Company shall not, and
shall not permit any of its Affiliates to, prepay or otherwise retire, in whole
or in part, prior to their stated final maturity (other than by prepayment
pursuant to this Article V or upon acceleration of such final maturity pursuant
to Section 10.01), or purchase or otherwise acquire, directly or indirectly,
Notes held by any Holder unless the Company or such Affiliate shall have
offered to prepay or otherwise retire or purchase or otherwise acquire, as the
case may be, the same proportion of the aggregate principal amount of Notes
held by each other Holder at the time outstanding upon the same terms and
conditions. Any Notes prepaid pursuant to this Article V or Section 10.01 or
otherwise retired or purchased or otherwise acquired by the Company or any of
its Affiliates shall not be deemed to be outstanding for any purpose under this
Agreement, provided that, with respect to each prepayment pursuant to this
Article V, all Notes then held by the Company and its Affiliates shall
nonetheless be entitled to participate in such prepayment the same as if such
Notes were deemed outstanding.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants that:
Section 6.01. Subsidiaries. (a) The Company has no Subsidiaries
on the date hereof except those listed in Schedule II, each of which is a
Consolidated Subsidiary and a Wholly-Owned Subsidiary.
(b) Schedule II sets forth, with respect to each of the
Subsidiaries listed therein, (i) whether such Subsidiary is a corporation or
partnership, (ii) the jurisdiction of its incorporation or formation (as the
case may be) and (iii) each jurisdiction in which it is qualified to do
business as a foreign Person.
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(c) All of the issued and outstanding Stock of each Subsidiary is
validly issued, fully-paid and is nonassessable and, except for directors'
qualifying shares (if any), is owned (beneficially and of record) by the
Company, free and clear of any Lien.
(d) No Subsidiary owns any Stock of the Company.
Section 6.02. Organization, Qualification, Authorization, Etc.
(a) The Company and each Subsidiary (i) is a corporation or partnership (as the
case may be) duly organized or formed (as the case may be) and existing in good
standing under the laws of the jurisdiction of its organization or formation
(as the case may be), (ii) is duly qualified or registered and in good standing
as a foreign Person in each jurisdiction in which the nature of such
qualification or registration is necessary and in which the failure to so
qualify or register could have a Material Adverse Effect and (iii) has the
corporate or partnership (as the case may be) power (A) to own its Properties,
(B) to carry on its business as now being conducted and (C) to consummate the
Overall Transaction. Schedule III sets forth each jurisdiction in which the
Company is qualified or registered to do business as a foreign corporation.
(b) The execution, delivery and performance by each Loan Party of
the Loan Documents to which it is a party have been duly authorized by all
necessary corporate or partnership (as the case may be) action on the part of
such Loan Party. This Agreement constitutes, and the Notes and such other Loan
Documents (when executed and delivered as contemplated hereby) will each
constitute, a legal, valid and binding obligation of each Loan Party thereto,
enforceable in accordance with its terms, except as the enforceability thereof
may be limited by bankruptcy, insolvency or other laws of general application
relating to the enforcement of creditors' rights.
Section 6.03. Disclosure Documents. (a) The Company has
heretofore furnished the Purchasers with true, correct and complete copies of
the following documents:
(1) the Organizational Documents of the Company and each
Subsidiary as in effect on the date hereof;
(2) the Bank Loan Agreement;
(3) each Material Contract described in Schedule V;
(4) the Company's Annual Reports to Stockholders for the
Fiscal Years ended December 31, 1994 through 1996 (inclusive);
(5) the Company's Annual Reports on Form 10-K for the
Fiscal Years ended December 31, 1994 through 1996 (inclusive), as
filed with the SEC;
(6) the Company's Quarterly Reports on Form 10-Q for the
Fiscal Quarters ended June 30, 1995 September 30, 1995, March 31,
1996, June 30, 1996,
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September 30, 1996, March 31, 1997, June 30, 1997 and September 30,
1997 as filed with the SEC;
(7) all proxy statements relating to all meetings of the
Company's stockholders (whether annual or special) since December 31,
1994;
(8) the consolidated financial statements of the Company
and the Consolidated Subsidiaries described in Schedule VI (the
"Company Financials"); and
(9) the projections described in Schedule VII (the
"Projections").
(b) The Company Financials (including any related schedules and/or
notes) (i) were true and correct in all material respects as at the dates
thereof, (ii) were prepared in accordance with GAAP consistently followed
throughout the periods involved and (iii) show all liabilities, direct and
contingent, of the Company and the Consolidated Subsidiaries required to be
shown in accordance with GAAP. The balance sheets included in the Company
Financials fairly present the consolidated financial condition of the Company
and the Consolidated Subsidiaries as at the dates thereof, and the statements
of operations and statements of cash flows included in the Company Financials
fairly present the consolidated results of operations and cash flows of the
Company and the Consolidated Subsidiaries for the periods indicated.
(c) The Projections are based on good faith estimates and
assumptions believed by the Company to be reasonable at the time made, it being
recognized by the Purchasers that the Projections, insofar as they relate to
future events, are not to be viewed as facts and that actual results during the
period or periods covered by the Projections may differ materially from the
projected results. Since the preparation of the Projections, nothing has
occurred to cause the Company to believe that the estimates and assumptions on
which the Projections are based are no longer reasonable.
Section 6.04. Changes, Etc. (a) Since December 31, 1996, (i)
neither the Company nor any Subsidiary has entered into any materially adverse
transactions not in the ordinary course of business, nor incurred any material
liabilities or obligations, direct or contingent, except for the Loan Documents
and (ii) no events have occurred which, individually or in the aggregate, have
had, or in the future could reasonably be expected to have, a Material Adverse
Effect.
(b) Neither the business nor the Properties of the Company or any
of the Subsidiaries are presently affected by any fire, explosion, accident,
labor controversy, strike, lockout or other labor dispute, drought, storm,
hail, earthquake, embargo, act of God or of the public enemy or other casualty
which could reasonably be expected to have a Material Adverse Effect.
Section 6.05. Tax Returns and Payments. (a) The Company and each
Subsidiary has filed all tax returns required by law to be filed by it (or
obtained extensions with respect thereto) and has paid all taxes, assessments
and other governmental charges levied upon it or
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any of its Properties, income or franchises which are shown to be due and
payable on such returns and all other taxes and assessments payable by it,
other than (i) those which are not past due, (ii) those which are presently
being contested in good faith by appropriate proceedings diligently conducted
for which such reserves or other appropriate provisions, if any, as shall be
required by GAAP have been made and (iii) those not reflected on such returns
the non- payment of which could not reasonably be expected to have a Material
Adverse Effect. No contest referred to in the foregoing clause (ii) could
reasonably be expected to have a Material Adverse Effect.
(b) After due inquiry, the Company knows of no proposed tax
assessment against the Company or any Subsidiary which could reasonably be
expected to have a Material Adverse Effect. In the opinion of the Company, all
tax liabilities of the Company and the Subsidiaries are adequately provided for
on their respective books. The Federal income tax returns of the Company and
the Subsidiaries have been audited by the Internal Revenue Service for all
Fiscal Years up to and including the Fiscal Year ended December 31, 1992.
Section 6.06. Indebtedness; Solvency. (a) The Company and the
Subsidiaries have no outstanding Indebtedness for Money Borrowed other than (i)
the indebtedness evidenced by the Notes and the Guaranty, (ii) the indebtedness
evidenced by the 1993 Notes and the 1993 Guaranty, (iii) the indebtedness
evidenced by the 1995 Notes and the 1995 Guaranty, (iv) the indebtedness
outstanding under the Bank Loan Agreement, (v) the indebtedness described in
Schedule XIII and (vi) other indebtedness permitted under Section 9.08 which
indebtedness does not exceed $500,000 in the aggregate.
(b) Each of the Loan Parties (i) has, and after giving effect to
the Overall Transaction will have, capital sufficient to carry on its business
and transactions and all the business and transactions in which it is about to
engage, (ii) is, and after giving effect to the Overall Transaction will be,
solvent and able to pay its debts as they mature and (iii) owns, and after
giving effect to the Overall Transaction will own, Property having a value,
both at fair valuation and present fair salable value, greater than the amount
required to pay the probable liability on its debts.
Section 6.07. Permits. The Company and each Subsidiary possess
all Permits that are necessary or desirable in connection with the ownership,
use or operation by it of its Properties and the conduct by it, in the ordinary
course, of its business as now conducted and as currently proposed to be
conducted, except those Permits the absence of which would not have a Material
Adverse Effect. None of such Permits impose any material burden or restriction
on the Company or any Subsidiary. The Company and the Subsidiaries are in
compliance with all terms of such Permits. All such Permits are valid and in
full force and effect and, to the Company's knowledge (after due inquiry), none
are threatened to be revoked, cancelled, suspended or modified for any reason.
Section 6.08. Material Contracts. Schedule V describes all
Material Contracts existing on the date hereof. Each of such Material
Contracts (a) has been duly executed and delivered by, and constitutes the
legal, valid and binding obligation of, each Loan Party thereto, enforceable
against each such Loan Party in accordance with its terms, (b) is in full
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force and effect and (c) except as reflected in Schedule V, has not been
amended or modified, nor any provision thereof waived, in any respect. The
Company and each Subsidiary has, and, to the Company's knowledge, all other
parties to such Material Contracts have, performed and complied in all material
respects with all of the terms and conditions set forth therein. No default by
the Company any Subsidiary or, to the Company's knowledge, any such other party
exists under any such Material Contract.
Section 6.09. Title to Property, Etc. (a) The Company and each
Subsidiary has good and indefeasible fee simple title to its real property and
good and defensible title to all of its other Property, including the Property
reflected in the balance sheets included in the Company Financials (other than
Properties disposed of in the ordinary course of business), subject to no Lien
of any kind except Permitted Liens which do not, individually or in the
aggregate, materially affect or interfere with, or if used or availed of will
not materially affect or interfere with, the occupancy, use or operation of
such item of Property for its intended purpose or the peaceful and quiet use
and enjoyment thereof by the Company or such Subsidiary, as the case may be.
(b) No lease under which the Company or any Subsidiary is the
lessee or is operating contains any provision which individually or in the
aggregate interferes with the ordinary conduct of the business of the Company
or such Subsidiary or otherwise could reasonably be expected to have a Material
Adverse Effect. The Company and each Subsidiary enjoys peaceful and
undisturbed possession under all leases under which it is the lessee or is
operating, except where the absence of such possession would not have a
Material Adverse Effect. All of such leases are valid and subsisting and no
default by the Company, such Subsidiary or, to the Company's knowledge, any
such other party exists thereunder.
Section 6.10. Condition of Property. The facilities of the
Company and the Subsidiaries, taken as a whole, are in a condition and state of
repair which are sufficient and adequate to operate their respective businesses
in a proper and efficient manner.
Section 6.11. Compliance with Applicable Laws, Permits and
Contracts. (a) Neither the Company nor any Subsidiary is in violation of (i)
any provision of its Organizational Documents, (ii) any Applicable Permit or
Applicable Contract (including the Bank Loan Agreement and the 1993 Note
Agreement and the 1995 Note Agreement) or (iii) any instrument evidencing or
otherwise relating to Indebtedness for Money Borrowed (other than, in the case
of the foregoing clauses (ii) and (iii), violations which, individually or
collectively, could not reasonably be expected to have a Material Adverse
Effect), and the execution, delivery and performance of the Loan Documents and
the consummation of the Overall Transaction will not result in any violation of
or constitute a default under any of the foregoing or result in the creation of
(or impose any obligation on the Company or any Subsidiary to create) any Lien
upon any Property of the Company or any Subsidiary.
(b) Neither the Company nor any Subsidiary is in violation of any
Legal Requirement other than violations which, individually or collectively,
will not have a Material Adverse Effect, and the execution, delivery and
performance of the Loan
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Documents and the consummation of the Overall Transaction will not result in a
violation of any Legal Requirement.
(c) Except for this Agreement, the Bank Loan Agreement, the 1993
Note Agreement, the 1995 Note Agreement, the agreement evidencing the
Pantbelaning Indebtedness and the agreement evidencing the Harvey & Thompson
Indebtedness, neither the Company nor any Subsidiary is a party to or bound by
any Permit, agreement or instrument (including its Organizational Documents)
which contains any restrictions or limitations on the incurrence by the Company
or such Subsidiary of any Indebtedness for Money Borrowed.
(d) Neither the Company nor any Subsidiary is in default and no
waiver of default is currently in effect, in the payment of any principal or
interest on any Indebtedness for Money Borrowed of the Company or such
Subsidiary.
Section 6.12. Litigation, Etc. No action, suit, investigation or
proceeding is pending or, to the knowledge of the Company (after due inquiry),
threatened against or affecting the Company or any Subsidiary or any Property
of the Company or any Subsidiary which (a) individually or collectively, could
reasonably be expected to have a Material Adverse Effect or (b) questions the
validity of any Loan Document or any action taken or to be taken pursuant
thereto.
Section 6.13. ERISA. Neither the Company nor any member of its
ERISA Group has ever maintained or contributed to, or had an obligation or
liability to contribute to, any Plan. Each Benefit Arrangement is (and has
been) maintained and operated in compliance in all material respects with the
applicable provisions of ERISA, the Code and other Legal Requirements. Neither
the Company nor any member of the ERISA Group has failed to timely make any
required contribution or payment to or in respect of any Benefit Arrangement.
No Benefit Arrangement provides post employment health benefits except as
required by Part 6 of Subtitle B of ERISA. No litigation, investigation or
claim (other than a routine, undisputed claim for benefits) is pending or, to
the knowledge of the Company (after due inquiry), threatened or anticipated
concerning any Benefit Arrangement. The Company and/or the members of its
ERISA Group may at any time unilaterally, without the consent of any Person,
terminate any and/or all Benefit Arrangement(s) without incurring any material
liability. The execution and delivery of this Agreement and the other Loan
Documents and the issue and sale of the Notes will not involve any transaction
which is subject to the prohibitions of section 406 of ERISA or in connection
with which a tax could be imposed pursuant to section 4975 of the Code. The
representation by the Company in the next preceding sentence is made in
reliance upon and subject to the accuracy of the representation of the
Purchasers in Article VII as to the source of the funds to be used to pay the
purchase price of the Notes.
Section 6.14. No Governmental Consents Required for Overall
Transaction. Neither the nature of the Company nor any Subsidiary, nor the
business or Properties of the Company or any Subsidiary, nor any relationship
between the Company or any Subsidiary and any other Person, nor any
circumstance in connection with the offering, issuance, sale or
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delivery of the Notes is such as to require any authorization, consent,
approval, exemption or other action by or notice to or filing with any
Governmental Authority in connection with the execution and delivery of this
Agreement, the other Loan Documents or the consummation of the Overall
Transaction other than routine SEC filings by the Company under the Exchange
Act.
Section 6.15. Offering of Notes. Neither the Company nor its
Affiliates nor anyone acting on its or their behalf has, directly or
indirectly, (a) offered the Notes or any similar security of the Company for
sale to, or solicited any offers to buy the Notes or any similar security of
the Company from, or otherwise approached or negotiated with respect thereto
with, any Person other than the Purchasers and not more than 45 other
institutional investors, each of which has been offered the Notes at a private
sale for investment or (b) taken or will take any action which would require
the issuance or sale of the Notes to be registered pursuant to the provisions
of section 5 of the Securities Act or pursuant to the provisions of any
securities or Blue Sky law of any jurisdiction.
Section 6.16. Use of Proceeds. The Company will apply the
proceeds of the sale of the Notes in accordance with Article IV. No
indebtedness being reduced or retired, directly or indirectly, out of the
proceeds of the sale of the Notes was incurred for the purpose of purchasing or
carrying any stock which is currently a "margin stock" (as defined in Section
4.02), and the Company neither owns nor has any present intention of acquiring
any amount of "margin stock." None of the proceeds of the sale of the Notes
will be used to acquire any security in any transaction which is subject to
section 13 or 14 of the Exchange Act, including particularly sections 13(d) and
14(d) thereof.
Section 6.17. Foreign Assets Control Regulations, Etc. Neither
the issue and sale of the Notes by the Company nor its use of the proceeds
thereof as contemplated by this Agreement will violate the Trading with the
Enemy Act, as amended, or any of the foreign assets control regulations of the
United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended)
or any enabling legislation or executive order relating thereto.
Section 6.18. Status Under Certain Federal Statutes. No Loan
Party is (a) an "investment company" or a Person "controlled" by or acting on
behalf of an "investment company," in each case within the meaning of the
Investment Company Act of 1940, as amended, (b) a "holding company" or a
"subsidiary company" of a "holding company" or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company," as such terms are
defined in the Public Utility Holding Company Act of 1935, as amended, (c) a
"public utility" as such term is defined in the Federal Power Act, as amended,
(d) a "rail carrier or a person controlled by or affiliated with a rail
carrier", within the meaning of Title 49, U.S.C., or (e) a "carrier" to which
49 U.S.C. Section 11301(b)(1) is applicable.
Section 6.19. Environmental Matters. (a) The Company and each
Subsidiary has all Environmental Permits necessary for the conduct of its
business and for the ownership, use, maintenance and operation of its assets,
and is in compliance with all material terms thereof. All such Environmental
Permits are valid and in full force and effect and, to the Company's knowledge,
none are threatened to be revoked, cancelled, suspended or modified adversely
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for any reason. As to any such Environmental Permit that is about to expire or
is needed for the proposed conduct of its business, the Company or such
Subsidiary, as the case may be, has timely and properly applied for renewal or
receipt of the same or, if such Permit is not reasonably expected to be
renewed, such nonrenewal will not have a Material Adverse Effect.
(b) Without in any manner limiting any other representations and
warranties set forth in this Agreement:
(i) neither the Company nor any Subsidiary, nor any real
property or facility presently owned, used, maintained or operated by
the Company or any Subsidiary, nor any of the other assets of the
Company or any Subsidiary is in violation of or is in noncompliance
with, any Environmental Laws, except for violations or noncompliances
which, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect; and
(ii) without in any manner limiting the generality of
clause (i) above:
(A) no Hazardous Materials have been used,
generated, manufactured, transported, stored or treated, or
disposed of, landfilled or in any other way Released by or on
behalf of the Company or any Subsidiary, except for those of
the foregoing activities which, individually or in the
aggregate, could not have a Material Adverse Effect, and
(B) to the Company's knowledge, no Hazardous
Materials have been used, generated, manufactured, stored or
treated, or disposed of, landfilled or in any other way
Released (and no Release is threatened), by any Person other
than the Company or any Subsidiary on, under, about or from
any Property now or previously owned, used, maintained or
operated by the Company or any Subsidiary or any Property
adjacent to any such Property except for those of the
foregoing activities (including Releases and threatened
Releases) which, individually or in the aggregate, could not
have a Material Adverse Effect;
(C) neither the Company nor any Subsidiary is
subject, as a result of the operation or condition of its
business or assets prior to or at Closing, to any (1)
contingent liability in connection with any Release or
threatened Release of any Hazardous Materials into the
environment whether on or off any Property owned, used,
maintained or operated by the Company or such Subsidiary or
(2) reclamation or remediation requirements under
Environmental Laws, or any reporting requirements related
thereto, except for liabilities or requirements which,
individually or in the aggregate, could not have a Material
Adverse Effect;
(D) neither the Company nor any Subsidiary has
been named as a potentially responsible party under, and none
of its Property has been nominated or identified as a facility
which is subject to an existing or potential
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claim under, CERCLA or comparable Environmental Laws, and no
such Property is subject to any Lien arising under
Environmental Laws;
(E) the Company and each Subsidiary has all
environmental and pollution control equipment necessary for
(1) compliance in all material respects with all Environmental
Laws (including all applicable Permits) and (2) operation of
the business of the Company or such Subsidiary as it is
presently conducted;
(F) no Hazardous Materials have been incorporated
into or contained in any of the personal property or
improvements to real property owned, used, maintained or
operated by the Company or any Subsidiary such that such
Hazardous Materials could reasonably be expected to have a
Material Adverse Effect;
(G) none of the locations where Hazardous
Materials have been used, generated, manufactured, stored,
treated, recycled, disposed of or Released by or on behalf of
the Company or any Subsidiary has been nominated or identified
as a facility which may be subject to an existing or potential
claim under CERCLA or comparable Environmental Laws;
(H) to the knowledge of the Company, none of the
offsite locations where Hazardous Materials from any of the
assets of the Company or any Subsidiary have been stored,
treated, recycled, disposed of or Released has been nominated
or identified as a facility which may be subject to an
existing or potential claim under CERCLA or comparable
Environmental Laws;
(I) neither the Company nor any Subsidiary has
received any written notices of (1) any violation of,
noncompliance with or remedial obligation under Environmental
Laws relating to the ownership, use, maintenance, operation
of, or conduct of business related to, any Property of the
Company or such Subsidiary or (2) any Release or threatened
Release of Hazardous Materials, except for violations,
noncompliances, obligations, Releases or threatened Releases
which, individually or in the aggregate, could not have a
Material Adverse Effect;
(J) there are no writs, injunctions, decrees,
orders or judgments outstanding, or lawsuits, claims,
proceedings or investigations pending or, to the knowledge of
the Company, threatened relating to the ownership, use,
maintenance, operation of, or conduct of business related to,
any Property of the Company or any Subsidiary arising out of
or relating to Environmental Laws, nor does the Company or any
Subsidiary have knowledge (after due inquiry) of any basis for
any of the foregoing, except for writs, injunctions, decrees,
orders, judgments, lawsuits, claims, proceedings or
investigations which, individually or in the aggregate, could
not have a Material Adverse Effect;
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(K) no underground or aboveground storage tanks
or surface impoundments are located at any Property owned,
used, maintained or operated by the Company or any Subsidiary
other than those which, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse
Effect; and
(L) there are no material obligations,
undertakings or liabilities arising out of or relating to
Environmental Laws which the Company or any Subsidiary has
agreed to, assumed or retained, by contract or otherwise.
Section 6.20. Books and Records. The Company maintains books,
records and accounts with respect to itself and the Subsidiaries which, in
reasonable detail, accurately and fairly reflect their transactions and
dispositions of their assets, and maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (a) transactions are
executed in accordance with management's general or specific authorization, (b)
transactions are recorded as necessary (i) to permit preparation of financial
statements in accordance with GAAP, and (ii) to maintain accountability for
assets, (c) access to assets is permitted only in accordance with management's
general or specific authorization and (d) the recorded accountability for
assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
Section 6.21. Fiscal Year. The fiscal year of the Company and
each Subsidiary coincides with the calendar year.
Section 6.22. Brokerage. All negotiations relative to this
Agreement, the other Loan Documents and the transactions contemplated hereby
have been carried on by the Company and the other Loan Parties without the
intervention of any Person which might give rise to a valid claim against the
Purchasers for a brokerage commission or other like payment.
Section 6.23. Labor Matters. Schedule IX lists each employment,
consultant or similar agreement and all labor contracts and collective
bargaining agreements to which the Company or any Subsidiary is a party or by
which it is bound. Except as otherwise listed on Schedule IX, no strikes or
other labor disputes are pending or threatened against the Company or any
Subsidiary. All payments due from the Company or any Subsidiary on account of
employee health and welfare insurance have been paid or, if not due, have been
accrued as liabilities on the books of the Company or such Subsidiary.
Section 6.24. Patents, Trademarks, Etc. The Company and each
Subsidiary owns, or is licensed or otherwise has the lawful right to use, all
patents, trademarks, tradenames, copyrights, technology, know-how and processes
necessary for the conduct of its business as now conducted and as proposed to
be conducted. All tradenames used by the Company or any Subsidiary are listed
on Schedule X. Assumed name certificates have been duly filed of record with
appropriate Governmental Authorities for each of such tradenames.
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Section 6.25. Chief Executive Office. The chief executive office
of the Company and the office where it maintains its records is located at 1600
West 7th Street, Fort Worth, Texas 76102-2599.
Section 6.26. Permitted Investments. Schedule XI specifies the
aggregate amount of each investment held by the Company and any of its
Subsidiaries on the date hereof other than those permitted by clauses (a)
through (j) of Section 9.11.
Section 6.27. Liens. None of the Properties of the Company or
any Subsidiary is subject to any Lien other than Permitted Liens.
Section 6.28. Full Disclosure. (a) Neither this Agreement
(including the Schedules and Exhibits hereto), the other Loan Documents, the
Company Financials, the instruments described in Section 6.03(a) nor any
document delivered by the Company or any of its Affiliates pursuant to Article
III contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein or
therein not misleading in light of the circumstances under which the same were
made.
(b) There is no fact (excluding general economic conditions not
peculiar to the Company or any Subsidiary) which (i) has had a Material Adverse
Effect or, in the opinion of any Responsible Officer of the Company, could
reasonably be expected in the future to have a Material Adverse Effect and (ii)
has not been set forth in this Agreement (including the Schedules and Exhibits
hereto) or in the Company Financials.
ARTICLE VII
PURCHASE FOR INVESTMENT; SOURCE OF FUNDS
Section 7.01. Representations of the Purchasers. (a) Each of the
Purchasers hereby represent to the Company that it (i) is purchasing the Notes
for its own account for investment and not with a view to, or for sale in
connection with, the distribution thereof or with any present intention of
distributing or selling any of the Notes, provided that the disposition of the
Purchaser's property shall at all times be within its control, (ii) is an
"accredited investor", as defined in Regulation D under the Securities Act, and
(iii) (x) has knowledge and experience in financial and business matters such
that it is capable of evaluating the merits and risks of the investment in the
Notes and (y) is able to bear the economic risk of such investment. Each of the
Purchasers understands that the Notes have not been registered under the
Securities Act and may not be sold or otherwise transferred by the Purchasers
except pursuant to an effective registration statement under such Act or
pursuant to an available exemption therefrom under such Act.
(b) Each of the Purchasers further represents to the
Company that at least one of the following statements is an accurate
representation as to each source of funds (a "Source") to be used by it to pay
the purchase price of the Notes to be purchased by it hereunder:
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(i) the Source is an "insurance company general account"
within the meaning of Department of Labor Prohibited Transaction
Exemption ("PTE") 95-60 (issued July 12, 1995) and there is no
employee benefit plan, treating as a single plan, all plans maintained
by the same employer or employee organization, with respect to which
the amount of the general account reserves and liabilities for all
contracts held by or on behalf of such plan, exceeds ten percent (10%)
of the total reserves and liabilities of such general account
(exclusive of separate account liabilities) plus surplus, as set forth
in the NAIC Annual Statement filed with your state of domicile; or
(ii) the Source is either (1) an insurance company pooled
separate account, within the meaning of PTE 90-1 (issued January 29,
1990), or (2) a bank collective investment fund, within the meaning of
the PTE 91-38 (issued July 12, 1991) and, except as you have disclosed
to the Company in writing pursuant to this paragraph (ii), no employee
benefit plan or group of plans maintained by the same employer or
employee organization beneficially owns more than 10% of all assets
allocated to such pooled separate account or collective investment
fund; or
(iii) (1) the Source constitutes assets of an "investment
fund" (within the meaning of Part V of the QPAM Exemption) managed by
a "qualified professional asset manager" or "QPAM" (within the meaning
of Part V of the QPAM Exemption), (2) no employee benefit plan's
assets that are included in such investment fund, when combined with
the assets of all other employee benefit plans established or
maintained by the same employer or by an affiliate (within the meaning
of Section V(c)(1) of the QPAM Exemption) of such employer or by the
same employee organization and managed by such QPAM, exceed 20% of the
total client assets managed by such QPAM, (3) the conditions of Part
1((c)and (g) of the QPAM Exemption are satisfied, (4) neither the QPAM
nor a person controlling or controlled by the QPAM (applying the
definition of "control" in Section V(e) of the QPAM Exemption) owns a
5% or more interest in the Company and (5) the identity of such QPAM
and the names of all employee benefit plans whose assets are included
in such investment fund have been disclosed to the Company in writing
pursuant to this paragraph (iii); or
(iv) the Source is a governmental plan; or
(v) the Source is one or more employee benefit plans, or
a separate account or trust fund comprised of one or more employee
benefit plans, each of which has been identified to the Company in
writing pursuant to this paragraph (v); or
(vi) the Source does not include assets of any employee
benefit plan, other than a plan exempt from the coverage of ERISA.
If you or any prospective transferee of a Note identifies a plan
pursuant to paragraphs (ii), (iii) or (v) above, the Company shall deliver a
certificate on the appropriate date of Closing, with respect to you and on or
prior to the date of any transfer of any Note, with respect to any prospective
transferee, which certificate shall state (x) whether it is a
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party in interest or a "disqualified, person" (as defined in Section 4975(e)(2)
of the Code), with respect to any plan identified pursuant to paragraphs (ii)
or (v) above, or (y) with respect to any plan, identified pursuant to paragraph
(iii) above, whether it or any "affiliate" (as defined in Section V(c) of the
QPAM Exemption) has, at such time or during the immediately preceding one year,
exercised the authority to appoint or terminate said QPAM as manager of the
assets of any plan identified in writing pursuant to paragraph (c) above or to
negotiate the terms of said QPAM's management agreement on behalf of any such
identified plans.
As used in this Section 7.01(b), the terms "employee benefit plan",
"governmental plan", "party in interest" and "separate account" shall have the
respective meanings assigned to such terms in Section 3 of ERISA.
ARTICLE VIII
AFFIRMATIVE COVENANTS
Section 8.01. Financial Statements, Reports and Documents. The
Company shall deliver to each Holder (in duplicate):
(a) as soon as available, and in any event within 45
days, after the end of each Fiscal Quarter (other than the last Fiscal
Quarter in any Fiscal Year), a consolidated balance sheet of the
Company and the Consolidated Subsidiaries (in reasonable detail) as of
the end of such Fiscal Quarter and the related consolidated statements
of income, stockholders' equity and cash flows of the Company and the
Consolidated Subsidiaries (in reasonable detail) for such Fiscal
Quarter and for the portion of the current Fiscal Year ending on the
last day of such Fiscal Quarter, in each case (i) prepared in
accordance with GAAP and (ii) setting forth in comparative form the
figures for the corresponding period of the preceding Fiscal Year,
which financial statements shall be certified (subject to normal
year-end audit adjustments) as to fairness of presentation, compliance
with GAAP and consistency with prior periods by a Responsible Officer
of the Company, it being understood that no such statement need be
accompanied by complete footnotes;
(b) as soon as available, and in any event within 90
days, after the end of each Fiscal Year, a consolidated balance sheet
of the Company and the Consolidated Subsidiaries (in reasonable
detail) as of the end of such Fiscal Year and the related consolidated
statements of income, stockholders' equity and cash flows of the
Company and the Consolidated Subsidiaries (in reasonable detail) for
such Fiscal Year, in each case (i) prepared in conformity with GAAP
and (ii) setting forth in comparative form the figures for the
preceding Fiscal Year, which financial statements shall be accompanied
by an opinion thereon (which shall not be qualified by reason of any
limitation imposed by the Company) of the Independent Accountants
stating that such financial statements, in the opinion of the
Independent Accountants, present fairly the consolidated financial
position of the Company and the Consolidated Subsidiaries as of the
date thereof and the consolidated results of their operations and cash
flows for the period covered thereby in conformity with GAAP
consistently
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applied (except for noted changes in which the Independent Accountants
concur) and that the examination of the Independent Accountants in
connection with such financial statements has been made in accordance
with generally accepted auditing standards and, accordingly, includes
such tests of the accounting records and such other auditing
procedures as were considered necessary in the circumstances;
(c) simultaneously with the delivery of each set of
financial statements referred to in clauses (a) and (b) above, an
Officers' Certificate (i) setting forth in reasonable detail the
calculations required to establish whether the Company was in
compliance with the requirements of Sections 9.01, 9.02, 9.03, 9.04,
9.05, 9.06 and 9.07 on the date of such financial statements, (ii)
stating that the signers have reviewed this Agreement and the other
Loan Documents and have made, or caused to be made under their
supervision, a review of the transactions and condition of the Company
during the accounting period covered by such financial statements and
(iii) stating that such review did not disclose the existence during
or at the end of such accounting period of any Default or, if any
Default exists, specifying the nature and period of existence thereof
and what action the Company has taken, is taking or proposes to take
with respect thereto;
(d) simultaneously with the delivery of each set of
financial statements referred to in clause (b) above, a written
statement by the Independent Accountants giving the opinion thereon
stating (i) that their audit has included a review of the terms of
this Agreement and that such review is sufficient to enable them to
make the statement referred to in clause (iv) of this paragraph (d)
(it being understood that such Independent Accountants shall not be
required to conduct or make any special or additional audit procedures
or examinations for purposes of such written statement, other than
those required by generally accepted auditing standards, and that
their audit will not have been directed primarily toward obtaining
knowledge of any Default), (ii) whether, in the course of their audit,
they obtained knowledge (and whether, as of the date of such written
statement, they have knowledge) of the existence and continuance of
any Default and, if so, specifying the nature and period of existence
thereof, (iii) that they have examined the Officers' Certificate
delivered in connection therewith pursuant to clause (c) above and
(iv) that the matters set forth in such Officers' Certificate pursuant
to subclause (i) of clause (c) above have been properly stated in
accordance with this Agreement;
(e) promptly upon receipt thereof, a copy of each
management letter submitted to the Company by the Independent
Accountants (and each response of the Company thereto), it being
understood and agreed that all material items which are furnished to
the Holders pursuant to this clause (e) shall be treated as
confidential if such items are not previously known to any Holder and
if, and so long as, such items are not generally available to the
public, but nothing herein contained shall limit or impair the right
of any Holder to (i) disclose such items to any other Holder, any
prospective Transferee, the National Association of Insurance
Commissioners or any Governmental Authority, (ii) disclose such items
in connection with any litigation, investigation or similar
proceeding, (iii) use such information to the extent pertinent
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to an evaluation of the Obligations or to enforce compliance with the
terms and conditions of this Agreement, (iv) take any action required
by law or (v) take any lawful action which such Holder deems necessary
to protect its interests under this Agreement or any other Loan
Document;
(f) promptly upon becoming available, a copy of each
consolidating balance sheet and income statement of the Company and
the Consolidated Subsidiaries prepared by or on behalf of the Company
after the date hereof, including those prepared in connection with any
federal income tax return for the Company or any Subsidiary;
(g) promptly upon transmission thereof, a copy of each
(i) financial statement, proxy statement, notice and report sent or
made available by the Company to its security holders in compliance
with the Exchange Act or any comparable federal or state laws relating
to the disclosure by any Person of information to its security
holders, (ii) regular and periodic report, registration statement
(excluding exhibits) and prospectus filed by the Company with any
securities exchange or with the SEC or any Governmental Authority
succeeding to any of its functions and (iii) press release or other
statement made available by the Company to the public concerning
material developments in the business of the Company;
(h) as soon as practicable, and in any event within two
Business Days, after the Company obtains knowledge of any Default, an
Officers' Certificate specifying the nature and period of existence
thereof and what action the Company has taken, is taking or proposes
to take with respect thereto;
(i) as soon as practicable, and in any event within ten
Business Days, after the Company obtains knowledge of any condition
(excluding general economic conditions not peculiar to the Company or
any Subsidiary), happening or event which, in the opinion of the Board
of Directors or any Responsible Officer of the Company, could
reasonably be expected to have a Material Adverse Effect, an Officers'
Certificate specifying the nature and period of existence thereof and
what action the Company has taken, is taking or proposes to take with
respect thereto;
(j) promptly, a copy of each Material Contract entered
into or assumed by the Company after the date hereof and each
amendment, supplement or modification entered into after the date
hereof in respect of any Material Contract; and
(k) such other information concerning the business,
financial condition, results of operation, prospects or Properties of
the Company or any of any Subsidiary as any Holder shall reasonably
request.
Section 8.02. Payment of Principal, Interest and Premium. The
Company will duly and punctually pay the principal of, and interest and premium
(if any) on, the Notes in accordance with the terms of the Notes and this
Agreement.
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Section 8.03. Payment of Taxes, Claims and Indebtedness. The
Company will, and will cause each Subsidiary to, pay and discharge, as and when
due and payable, (a) all taxes, assessments and governmental charges or levies
imposed upon it or any of its Properties or in respect of any of its
franchises, business, income or profits, (b) all claims (including claims for
labor, services, materials and supplies) for sums which, if unpaid, might
become a Lien upon any of its Property and (c) all of its other indebtedness in
excess of $500,000; provided, however, that no such tax, assessment, charge or
levy, claim or indebtedness (other than the Obligations) need be paid if and so
long as (i) no Default shall be in existence, (ii) the amount, applicability or
validity thereof is being contested in good faith by appropriate proceedings
promptly initiated and diligently conducted and (iii) such reserves or other
appropriate provision (if any) as shall be required by GAAP shall have been
made therefor.
Section 8.04. Maintenance of Existence and Rights; Conduct of
Business. The Company will, and will cause each Subsidiary to, (a) preserve
and keep in full force and effect (except as permitted by Section 9.16) its
corporate or partnership, as the case may be, existence and all of its rights,
privileges and franchises necessary or desirable in the normal conduct of its
business, (b) qualify and remain qualified as a foreign Person authorized to do
business in each jurisdiction in which such qualification is required and (c)
carry on and conduct its business (i) in the ordinary course, (ii) in an
orderly and efficient manner consistent with good business practices and (iii)
in accordance, in all material respects, with all Legal Requirements.
Section 8.05. Compliance with Loan Documents. The Company will,
and will cause each Subsidiary to, promptly comply with any and all covenants
and provisions of each Loan Document to which it is a party.
Section 8.06. Compliance with Contracts and Permits. The Company
will, and will cause each Subsidiary to, comply with all of its Applicable
Contracts and Applicable Permits except for noncompliances which, individually
or in the aggregate, could not reasonably be expected to have a Material
Adverse Effect.
Section 8.07. Inspection. (a) The Company will, and will cause
each Subsidiary to, permit any Person designated by any Holder, at all
reasonable times, to (i) visit and inspect any of its Properties, (ii) examine,
copy or make excerpts from, any and all books, records, software, documents and
other information in the possession of the Company or such Subsidiary and
relating to its affairs and (iii) discuss its affairs, finances and accounts
with its directors, officers and independent public accountants; and, by this
provision, the Company (on behalf of itself and each Subsidiary) irrevocably
authorizes such accountants to discuss with such Person the affairs, finances
and accounts of the Company and such Subsidiary. All such visits and
inspections shall be at the expense of such Holder unless a Default shall
exist, in which event the reasonable costs and expenses associated with all
such events and inspections shall be at the expense of the Company.
(b) The Company will keep at its principal executive office a true
copy of this Agreement and each other Loan Document and cause the same to be
available for inspection
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at said office during normal business hours by any Holder or any Transferee or
prospective Transferee designated by any Holder.
Section 8.08. Books and Records. The Company will, and will
cause each Subsidiary to, (a) maintain (in accordance with good accounting
practices and all Legal Requirements) complete and accurate books, records and
accounts accurately and fairly reflecting its transactions in reasonable detail
and (b) maintain a system of internal accounting controls sufficient to provide
reasonable assurances that:
(i) its transactions are executed in accordance with
management's general or specific authorization;
(ii) its transactions are recorded as necessary (A) to
permit preparation of financial statements in accordance with GAAP and
(B) to maintain accountability for its assets;
(iii) access to its assets is permitted only in accordance
with management's general or specific authorization; and
(iv) the recorded accountability for its assets is
compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
Section 8.09. Compliance with Legal Requirements. (a) The
Company will, and will cause each Subsidiary to, will comply with all Legal
Requirements applicable to it or any of its Properties, business, operations or
transactions except for noncompliances which, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect.
(b) Without limiting the foregoing, the Company will, and will
cause each Subsidiary to, (i) comply in a timely fashion with, or operate
pursuant to valid waiver of the provisions of, all Environmental Laws,
including any such Laws relating to contamination from any Hazardous Materials
except for noncompliances which, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect, (ii) notify each
Holder promptly in the event of any material violation of any Environmental Law
and (iii) promptly forward to each Holder a copy of any Permit, order, notice,
application or other communication or report in connection with any material
matter relating to the Environmental Laws as they may affect it or any of its
Properties.
Section 8.10. Insurance. The Company will, and will cause each
Subsidiary to, maintain in full force and effect, with sound and reputable
insurers, such insurance on its Properties and business against such
casualties, risks, liabilities and contingencies, and in such types and
amounts, as are consistent with customary practices and standards of companies
engaged in similar businesses; provided, however, except as may be required by
any Legal Requirement, neither the Company nor any Subsidiary shall be required
to maintain (i) business interruption insurance or (ii) insurance on its
inventories.
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Section 8.11. Authorizations and Approvals. The Company will,
and will cause each Subsidiary to, promptly obtain, from time to time at its
own expense, all such Permits as may be required to enable it to comply with
its obligations hereunder and under the other Loan Documents.
Section 8.12. Maintenance of Properties. (a) The Company will,
and will cause each Subsidiary to, protect and maintain (or cause to be
protected or maintained), in good repair, working order and condition (ordinary
wear and tear excepted), all Properties used or intended for use in its
business.
(b) From time to time, the Company will, and will cause each
Subsidiary to, make (or cause to be made) all appropriate repairs, renewals and
replacements thereof so that, at all times, it may conduct its business
properly and efficiently and in accordance with all Legal Requirements;
provided that failure to perform this paragraph (b) in accordance with its
terms will not constitute an Event of Default unless such failure could have a
Material Adverse Effect.
(c) The Company will, and will cause each Subsidiary to, comply at
all times with the provisions of all leases to which it is a party as lessee or
under which it occupies Property; provided that nothing in this paragraph (c)
shall require the Company or any Subsidiary to comply with any such provision
unless the noncompliance with such provision could reasonably be expected to
have a Material Adverse Effect.
Section 8.13. Ownership of Subsidiaries. The Company will, at
all times, directly or indirectly own and hold the entire legal title to and
beneficial interest in all outstanding Stock (other than directors' qualifying
shares, if any, to the extent required by applicable law) of each Subsidiary,
in each case free and clear of all Liens.
Section 8.14. Further Assurances. The Company will, and will
cause each Subsidiary to, promptly take all such actions as the Required
Holders may, at any time or from time to time, reasonably request in order to
(i) further carry out and consummate the Overall Transaction or (ii) comply
with or accomplish the covenants and agreements of the Loan Parties in any of
the Loan Documents.
ARTICLE IX
NEGATIVE COVENANTS
Until payment in full of the Notes and all other Obligations,
the Company covenants and agrees as follows:
Section 9.01. Consolidated Indebtedness for Money Borrowed. The
Company will not permit Consolidated Indebtedness for Money Borrowed, as of the
last day of any Fiscal Quarter commencing on or after September 30, 1996, to be
greater than the amount determined by multiplying the Applicable Percentage
times the sum of (a) Consolidated Indebtedness for Money Borrowed as of such
date and (b) Consolidated Tangible Net Worth as of such date. As used in this
Section 9.01, "Applicable Percentage" means 75%.
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Section 9.02. Consolidated Tangible Net Worth. The Company will
not permit Consolidated Tangible Net Worth at any time to be less than the sum
of (a) $30,625,000 plus (b) 50% of Consolidated Adjusted Net Income (but only
if positive) for each Fiscal Quarter ending after December 31, 1992.
Section 9.03. Current Assets to Current Liabilities Ratio. The
Company will not permit the ratio of (a) Consolidated Current Assets to (b)
Consolidated Current Liabilities to be less than 3.5 to 1 as of the last day of
any Fiscal Quarter commencing on or after January 1, 1995.
Section 9.04. Current Assets to Total Indebtedness Ratio. The
Company will not permit the ratio of (a) Consolidated Current Assets to (b)
Consolidated Current Liabilities plus Consolidated Funded Debt to be less than
.8 to 1 as of the last day of any Fiscal Quarter commencing on or after
September 30, 1996. As used in this Section 9.04, "Consolidated Funded Debt"
means, at any time, Consolidated Indebtedness for Money Borrowed at such time,
provided that in no event shall Consolidated Funded Debt include any obligation
included in Consolidated Current Liabilities.
Section 9.05. Inventory Turnover. The Company will not at any
time permit the ratio of (a) cost of goods sold by the Company and the
Consolidated Subsidiaries for the Computation Period (as shown on the
consolidated statements of income delivered by the Company pursuant to clause
(a) or (b) of Section 8.01 with respect to the Computation Period) to (b) the
Average Monthly Inventory for the Computation Period to be less than 1.65 to 1.
As used in this Section 9.05, (i) "Computation Period" means, at any time, the
12-month period ended on the date of the most recent balance sheet delivered
(or required to be delivered) by the Company pursuant to clause (a) or (b) of
Section 8.01 and (ii) "Average Monthly Inventory" means, when used with
reference to any Computation Period, the amount determined by dividing (A) the
aggregate amounts of inventory appearing on the books of the Company and the
Consolidated Subsidiaries as of the last day of each calendar month within such
Computation Period by (B) twelve.
Section 9.06. Fixed Charge Coverage. The Company will not at any
time permit the ratio of (a) the sum of Consolidated Adjusted Net Income for
the Computation Period plus the aggregate amount of all taxes, rents, leases
and interest expenses deducted from gross income to obtain such Consolidated
Adjusted Net Income to (b) the aggregate amount of all such rents, leases and
interest expenses so deducted to be less than 1.5 to 1. As used in this
Section 9.06, "Computation Period" means, at any time, the period of four
consecutive Fiscal Quarters ended on the date of the most recent balance sheet
delivered (or required to be delivered) by the Company pursuant to clause (a)
or (b) of Section 8.01.
Section 9.07. Restricted Payments. (a) The Company will not, and
will not permit any Subsidiary to, (i) declare or make any dividends or
distributions on any of its Stock (other than dividends payable in shares of
its Stock), (ii) purchase, redeem or acquire for value any of the Company's or
any Subsidiary's Stock, (iii) make any principal payment on (or make any
payment, transfer or deposit for the purpose of canceling, extinguishing,
satisfying or defeasing) any indebtedness of the Company which is subordinate
in right of
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payment to the Notes or any other Obligation, (iv) set aside funds for any such
purposes or (v) become liable to do any of the foregoing (in each case, a
"Restricted Payment") unless, immediately after giving effect thereto, (A) no
Default shall exist and (B) the aggregate amount of all Restricted Payments
made by the Company and all Subsidiaries on or after January 1, 1996 does not
exceed the sum of $15,000,000 plus 50% of Consolidated Adjusted Net Income from
and after January 1, 1996. For purposes of this Section 9.07, the Company's
repurchase of shares of its common stock in the aggregate amount of $38,250,000
under its issuer tender offer commenced November 18, 1996 in accordance with
Rule 13E-4 promulgated by the SEC shall not be considered a Restricted Payment.
(b) Notwithstanding the foregoing provisions of this Section 9.07,
the Company may, so long as no Default shall be in existence or shall result
therefrom, purchase, redeem or acquire shares of the Company's capital stock
with the net cash proceeds received by the Company during the immediately
preceding 18-month period from the sale of other shares of the Company's
capital stock, in which event both the receipt and expenditure of such proceeds
shall be excluded from any calculation under paragraph (a) above.
(c) Nothing in this Section 9.07 shall prohibit any Subsidiary
from making any Restricted Payment to the Company or any Wholly-Owned
Subsidiary, and no such Restricted Payment shall be taken into account in any
calculation under paragraph (a) above.
Section 9.08. Limitation on Indebtedness. (a) The Company will
not incur, create, assume or have outstanding any indebtedness, except:
(1) (A) indebtedness of the Company arising out of this
Agreement and the other Loan Documents, (B) indebtedness of the
Company arising out of the 1993 Note Agreement and the other 1993 Loan
Documents and (C) indebtedness of the Company arising out of the 1995
Note Agreement and the other 1995 Loan Documents;
(2) indebtedness of the Company arising out of the Bank
Loan Agreement;
(3) purchase money indebtedness (not to exceed
$10,000,000 in the aggregate for the Company and all Subsidiaries at
any time outstanding);
(4) current liabilities for taxes and assessments
incurred in the ordinary course of business and not yet due, and other
liabilities for unpaid taxes being contested in good faith by the
obligor the payment of which is not at the time required by Section
8.03;
(5) current indebtedness (other than indebtedness for
borrowed money or purchase money indebtedness) for accounts payable or
other claims (including claims for labor, services, materials and
supplies) incurred in the ordinary course of business, provided that
all such accounts and claims shall be promptly paid and discharged
when due or in conformity with customary trade terms, except for those
being contested in good faith by the obligor and the payment of which
is not at the time required by Section 8.03;
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(6) contingent liabilities resulting from the endorsement
of negotiable instruments in the ordinary course of business;
(7) indebtedness constituting Assurances of the Company
permitted by Section 9.09;
(8) indebtedness for borrowed money of the Company owing
to any Subsidiary, but only if permitted by Section 9.11;
(9) indebtedness secured by Liens described in clause (j)
of the definition of "Permitted Liens" in Section 2.01; and
(10) indebtedness for borrowed money of the Company not
otherwise permitted by the foregoing provisions of this Section
9.08(a) if (A) immediately after giving effect the incurrence or
assumption thereof by the Company, the Company is in compliance with
Sections 9.01, 9.02, 9.03, 9.04, 9.05 and 9.06 and (B) at the time of
the incurrence or assumption thereof by the Company and immediately
thereafter, no Default shall exist.
(b) The Company will not permit any Subsidiary to incur, create,
assume or have outstanding any indebtedness, except:
(1) (A) indebtedness of Subsidiaries arising out of this
Agreement and the other Loan Documents, (B) indebtedness of
Subsidiaries arising out of the 1993 Guaranty and (C) indebtedness of
Subsidiaries arising out of the 1995 Guaranty;
(2) purchase money indebtedness (not to exceed
$10,000,000 in the aggregate for the Company and all Subsidiaries at
any time outstanding);
(3) current liabilities for taxes and assessments
incurred in the ordinary course of business and not yet due, and other
liabilities for unpaid taxes being contested in good faith by the
obligor the payment of which is not at the time required by Section
8.03;
(4) current indebtedness (other than indebtedness for
borrowed money or purchase money indebtedness) for accounts payable or
other claims (including claims for labor, services, materials and
supplies) incurred in the ordinary course of business, provided that
all such accounts and claims shall be promptly paid and discharged
when due or in conformity with customary trade terms, except for those
being contested in good faith by the obligor and the payment of which
is not at the time required by Section 8.03;
(5) contingent liabilities resulting from the endorsement
of negotiable instruments in the ordinary course of business;
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(6) indebtedness constituting Assurances of Subsidiaries
permitted by Section 9.09;
(7) indebtedness for borrowed money of any Subsidiary
owing to the Company or to any other Subsidiary, but only if permitted
by Section 9.11;
(8) indebtedness secured by Liens described in clause (j)
of the definition of "Permitted Liens" in Section 2.01;
(9) other indebtedness of any Subsidiary not otherwise
permitted by the foregoing provisions of this Section 9.08(b), but (A)
only if such indebtedness is outstanding on the date hereof and
described in Schedule VIII and (B) excluding any extensions, renewals
and rearrangements of such indebtedness;
(10) (A) in the case of Pantbelaning, the Pantbelaning
Indebtedness, (B) in the case of Pantbelaning, Murtrum, and the
Murtrum Affiliate, Indebtedness for Money Borrowed (not to exceed SEK
55,000,000 in the aggregate at any time outstanding) incurred after
the date hereof pursuant to a credit facility to be extended by one or
more banks, but only if no Default shall be in existence at the time
of the incurrence of such indebtedness, and (C) in the case of Harvey
& Thompson Limited, the Harvey & Thompson Indebtedness and, to the
extent permitted under the 1993 Note Agreement and the 1995 Note
Agreement, additional Indebtedness for Money Borrowed in an amount not
to exceed 5,000,000 pounds sterling in the aggregate at any time
outstanding incurred after the date hereof pursuant to a credit
facility to be extended by one or more banks, but only if no Default
or Event of Default shall be in existence at the time of the
incurrence of such Indebtedness for Money Borrowed; provided that the
Indebtedness for Money Borrowed described in clauses (A), (B) and (C)
described above may be extended, renewed or refinanced so long as
there is no increase in principal amount of such Indebtedness for
Money Borrowed and so long as no Default shall be in existence or
shall occur upon such extension, renewal or refinancing; and
(11) in the case of any Wholly-Owned Subsidiary acquired
by the Company after the date hereof in accordance with Section
9.20(a)(1), all indebtedness of such Subsidiary outstanding on the
date of its acquisition by the Company, but (i) only if the amount of
such indebtedness, when aggregated with the total amount of all other
indebtedness of all Persons (including such Wholly-Owned Subsidiary)
outstanding pursuant to this clause (11), does not exceed $750,000,
(ii) only if such indebtedness was incurred, created or assumed by
such Subsidiary prior to its acquisition by the Company and not in
anticipation of, or in connection with, such acquisition and (iii)
excluding any extensions, renewals and rearrangements of such
indebtedness.
Section 9.09. Assurances. The Company will not, and will not
permit any Subsidiary to, enter into, assume or become or be liable in respect
of any Assurance, except for (i) Assurances by the Company of indebtedness of
Subsidiaries permitted by Section 9.08(b), (ii) Assurances by one or more
Guarantors of indebtedness (other than the Obligations) of
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the Company permitted by Section 9.08(a) but only if and so long as the
Guaranty is in full force and effect, (iii) Assurances of the Guarantors
evidenced by the Guaranty, (iv) Assurances by the Company and the Guarantors of
the Pantbelaning Indebtedness, and (v) other Assurances not otherwise permitted
by this Section 9.09 but only to the extent that the aggregate amount of all
indebtedness relating to such Assurances does not exceed $500,000.
Section 9.10. Negative Pledge. The Company will not, and will
not permit any Subsidiary to, assume, create or suffer to exist any Lien upon
any of its Properties (whether now owned hereafter acquired) except Permitted
Liens.
Section 9.11. Limitation on Investments. The Company will not,
and will not permit any Subsidiary to, make or have outstanding any Investments
in any Person, except for:
(a) pawn transactions and pawn loans made in the ordinary
course of business;
(b) travel advances and other similar advances made to
employees in the ordinary course of business;
(c) advances and extensions of credit (in the form of
accounts receivable) made to customers in the ordinary course of
business;
(d) advances and deposits made by the Company or any
Subsidiary in the ordinary course of business to contractors
performing services for the Company or such Subsidiary, as the case
may be;
(e) in the case of the Company, Investments in
Wholly-Owned Subsidiaries (including Wholly-Owned Subsidiaries
acquired after the date hereof in accordance with Section 9.20(a)(1))
resulting from its acquisition or ownership of Stock of, or capital
contributions to, such Subsidiaries but, in each case, only to the
extent not prohibited by Section 9.20;
(f) in the case of any Subsidiary, Investments in the
Company;
(g) in the case of any Subsidiary, Investments in
Wholly-Owned Subsidiaries (including Wholly-Owned Subsidiaries
acquired after the date hereof in accordance with Section 9.20(a)(1))
resulting from its acquisition or ownership of Stock of, or capital
contributions to, such Wholly-Owned Subsidiaries but, in each case,
only to the extent not prohibited by Section 9.20;
(h) loans and advances by the Company to any Wholly-Owned
Subsidiary, provided that, in the case of any such loan or advance
made after the date hereof, no Default shall exist either immediately
before or after giving effect thereto;
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(i) loans and advances made by any Subsidiary to the
Company or to any Wholly-Owned Subsidiary;
(j) Temporary Cash Investments;
(k) other Investments not otherwise permitted by this
Section 9.11, but only if owned by the Company and/or any Subsidiary
on the date hereof and described in Schedule XI; and
(l) other Investments made after the date hereof and not
otherwise permitted by this Section 9.11, provided that neither the
Company nor any Subsidiary shall make any Investment under this clause
(l) if a Default shall be in existence immediately before or after
such Investment or if the amount of such Investment, when aggregated
with the total amount of all other Investments then outstanding under
this clause (l), exceeds 7.5% of Consolidated Tangible Net Worth as of
the date of such Investment.
Section 9.12. Alteration of Contracts, Etc. The Company will
not, and will not permit any Subsidiary to, (a) cancel, terminate, surrender,
release, alter, amend, modify or supplement any Applicable Contract or
Applicable Permit, (b) waive timely performance of any of the provisions of any
Applicable Contract or Applicable Permit or (c) consent or agree to, or permit,
any of the foregoing, provided that any such action may be taken if the Company
shall determine in good faith that such action could not reasonably be expected
to have a Material Adverse Effect.
Section 9.13. Transactions with Affiliates. The Company will
not, and will not permit any Subsidiary to, enter into any transaction with, or
pay any management fees to, any of its Affiliates except in the ordinary course
of business and then only upon terms that are no less favorable to Company or
such Subsidiary, as the case may be, than would be obtainable at the time in
arms'-length transactions with Persons which are not Affiliates of the Company
or such Subsidiary, as the case may be, provided that this Section 9.13 shall
not apply to transactions between the Company and any Wholly-Owned Subsidiary
or to any management fees payable by any Subsidiary to the Company or any
Wholly-Owned Subsidiary.
Section 9.14. Limitation on Sale or Issuance of Subsidiary Stock.
(a) The Company will not permit any Subsidiary to issue or sell any shares of
Stock (or any securities convertible into or exchangeable for or carrying
rights to subscribe for shares of Stock) of such Subsidiary to any Person other
than the Company or a Wholly-Owned Subsidiary.
(b) The Company will not (i) sell, transfer or otherwise dispose
of any shares of Stock (or any securities convertible into or exchangeable for
or carrying rights to subscribe for shares of Stock) of any Subsidiary or (ii)
permit any Subsidiary to sell, transfer or otherwise dispose of any shares of
Stock (or any securities, convertible into or exchangeable for or carrying
rights to subscribe for shares of Stock) of any other Subsidiary.
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Section 9.15. Limitation on Sale of Properties. (a) The Company
will not, and will not permit any Subsidiary to, sell, assign, convey,
exchange, lease or otherwise dispose of any of its Properties (including
accounts receivable and pawn loans), whether now owned or hereafter acquired,
except in the ordinary course of its business; provided, however, that the
Company and the Subsidiaries may sell Properties having an aggregate net book
value (at the time of the disposition thereof) not in excess of $5,000,000
during any Fiscal Year and, provided further, that this Section 9.15 shall not
operate to prevent the transactions permitted by Section 9.14 or Section 9.16
or any sale, transfer or lease of Property by a Wholly-Owned Subsidiary to the
Company or to another Wholly-Owned Subsidiary and, provided further, that the
Company will not, and will not permit any Subsidiary to, sell, assign, discount
or otherwise dispose of any accounts receivable, except in the ordinary course
of business consistent with the Company's collection practices as in effect
from time to time and not a part of a financing.
(b) Nothing in this Section 9.15 shall prohibit the Company, so
long as no Default shall have occurred and be continuing, from selling the real
estate (including improvements thereon) currently owned by the Company at 500
Franklin Avenue, 209 South Fifth Street and 225 South Fifth Street, Waco,
Texas, and in no event shall the net book value of such Property be taken into
account in any computation under this Section 9.15.
Section 9.16. Dissolution; Liquidation; Merger; Consolidation.
The Company will not, and will not permit any Subsidiary to, dissolve or
liquidate or consolidate or merge with, or sell, assign, convey, exchange,
lease or otherwise dispose of its Properties as an entirety or substantially as
an entirety to, any other Person except that:
(a) any corporation may consolidate with or merge into
the Company if (i) the Company shall be the surviving corporation,
(ii) immediately after giving effect to such transaction, (A) no
Default or Event of Default shall have occurred and be continuing, (B)
the Company is solvent and no less creditworthy than immediately prior
to the consummation of such transaction and (C) the consummation of
such transaction did not have, and could not reasonably be expected to
have, a Material Adverse Effect and (iii) each Holder shall have
received an Officers' Certificate, dated not more than 10 days prior
to the effective date of such transaction, describing such transaction
and stating that such transaction is permitted by this Section 9.16;
(b) the Company may consolidate with or merge into, or
sell, assign, convey, exchange, lease or otherwise dispose of its
Properties as an entirety or substantially as an entirety to, any
Person if (i) such Person shall be a solvent corporation organized
under the laws of any state of the United States of America, (ii) such
Person shall, by written instrument in form and substance acceptable
to the Required Holders, expressly and unconditionally assume, agree
to pay and perform all the Obligations and to be bound by this
Agreement and the other Loan Documents the same as if such Person had
originally executed this Agreement in place of the Company and had
been the original maker of the Notes, (iii) immediately after giving
effect to such transaction, (A) no Default or Event of Default shall
have occurred and be continuing, (B) such Person is no less
creditworthy than was the Company
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immediately prior to the consummation of such transaction and (C) the
consummation of such transaction did not have, and could not be
reasonably expected to have, a Material Adverse Effect and (iv) each
Holder shall have received an Officers' Certificate, dated not more
than ten days prior to the effective date of such transaction,
describing such transaction and stating that such transaction is
permitted by this Section 9.16;
(c) any Wholly-Owned Subsidiary may consolidate with or
merge into, or sell, assign, convey, exchange, lease or otherwise
dispose of its Properties as an entirety or substantially as an
entirety to, the Company or any other Wholly-Owned Subsidiary; and
(d) any Wholly-Owned Subsidiary may consolidate or merge
with any Person solely for the purpose of the Company's acquisition of
such Person in accordance with Section 9.20(a)(1).
Section 9.17. Change of Name, Fiscal Year and Method of
Accounting. The Company will not, and will not permit any Subsidiary to, (i)
change its name, (ii) change its fiscal year, (iii) change its principal
accounting firm to an accounting firm other than the Independent Accountants or
(iv) change its method of accounting unless required under GAAP.
Section 9.18. Lines of Business. The Company will not, and will
not permit any Subsidiary to, engage in any business other than (i) the
pawnshop business, (ii) the business of cashing checks and conducting related
cash dispensing transactions, (iii) the business of offering tires and wheels
on a rent-to-own or comparable basis and performing ancillary
automobile-related services, and (iv) activities related to the above.
Section 9.19. Amendment of Organizational Documents. The Company
will not, and will not permit any Subsidiary to, amend its Organizational
Documents if such action could reasonably be expected to have a Material
Adverse Effect.
Section 9.20. Limitation on Acquisition of New Subsidiaries. (a)
The Company will not, and will not permit any Subsidiary to, (i) acquire any
Stock of any Person, (ii) enter into any partnership or joint venture or (iii)
take any action which would result in the Company having any Subsidiary other
than those listed in Schedule II except that, from time to time, the Company
may:
(1) acquire (whether by purchase, merger or other similar
transaction) any Person, but only if:
(A) immediately after giving effect to such acquisition,
such Person shall constitute a Wholly- Owned
Subsidiary;
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(B) immediately after giving effect to such acquisition,
no Default shall be in existence, and the
consummation of such acquisition did not have, and
could not be reasonably expected to have, a Material
Adverse Effect;
(C) each Holder shall have received an Officers'
Certificate, dated not more than ten days prior to
the effective date of such acquisition, describing
such acquisition (including the name of such Person
and the business conducted by it) and stating that
such acquisition is permitted by this Section 9.20,
which Officers' Certificate shall be accompanied by
complete and accurate copies of the Organizational
Documents of such Person; and
(D) promptly (and in any event within 15 days) after the
consummation of such acquisition, such Person shall
duly authorize, execute and deliver to each Holder an
instrument in writing pursuant to which such Person
agrees to become a Guarantor under, and to be bound
as a Guarantor by the terms of, the Guaranty and the
Subrogation and Contribution Agreement; and
(2) create or form a new corporation or limited
partnership (the "New Entity") and thereupon cause the New Entity to
become a Wholly-Owned Subsidiary, but only if:
(A) no Default shall exist immediately after the New
Entity becomes a Subsidiary;
(B) subject to paragraph (b) below, promptly (and in any
event within 15 days) after its creation or
formation, the New Entity shall duly authorize,
execute and deliver to each Holder an instrument in
writing pursuant to which the New Entity agrees to
become a Guarantor under, and to be bound as a
Guarantor by the terms of, the Guaranty and the
Subrogation and Contribution Agreement;
(C) except as required by clause (B) above, the New
Entity shall not conduct any business prior to
becoming a Subsidiary; and
(D) subject to paragraph (b) below, promptly (and in any
event within 15 days) after the creation or formation
of the New Entity, the Company shall deliver to each
Holder an Officers' Certificate notifying the Holders
of the formation or creation of the New Entity, which
Officers' Certificate shall (i) specify the name of
the New Entity and the jurisdiction of its
incorporation or formation, (ii) describe, in
reasonable detail, the business proposed to be
conducted by the New Entity, (iii) state that the
Company is authorized to form or create the New
Entity and to cause it to become a Subsidiary in
accordance with this Section 9.20 and (iv) be
accompanied by complete and accurate copies of the
Organizational Documents of the New Entity.
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(b) In no event shall any New Entity created or formed pursuant to
paragraph (a)(2) above be required to execute and deliver a written instrument
with respect to the Guaranty as contemplated by clause (B) thereof nor shall
the Company be required to deliver the documents described with respect to such
New Entity in clause (D) thereof until the earlier of (i) the date on which the
Company makes an Investment in such New Entity (other than the incurrence of
routine organizational expenses and other than capital contributions totalling
less than $5,000) and (ii) the date on which such New Entity first conducts
business.
(c) Nothing in this Section 9.20 shall operate to prevent any
transaction permitted by Section 9.11 or Section 9.16.
(d) If any Person becomes a Subsidiary at any time after the date
hereof, such Person shall be deemed to have incurred or made, as the case may
be, at the time it becomes a Subsidiary (i) all Assurances, indebtedness,
loans, advances and Investments of such Person which are outstanding at such
time and (ii) all Liens then in effect with respect to any of its Properties.
Section 9.21. ERISA. The Company will not, and will not permit
any Subsidiary or Related Person to,
(a) engage in any transaction in connection with which
the Company or any Subsidiary could be subject to either a civil
penalty assessed pursuant to section 502(i) of ERISA or a tax imposed
by section 4975 of the Code, terminate any Plan (other than a
multiemployer plan) in a manner, or take any other action with respect
to any such Plan, which could result in any liability of the Company
or any Subsidiary to the Pension Benefit Guaranty Corporation, fail to
make full payment when due of all amounts which, under the provisions
of applicable law, or the terms of any Plan or collective bargaining
agreement, the Company or any Subsidiary is required to pay as
contributions thereto, or permit to exist any accumulated funding
deficiency, whether or not waived, with respect to any Plan (other
than a multiemployer plan), if, in any such case, such penalty or tax
or such liability, or the failure to make such payment, or the
existence of such deficiency, as the case may be, could reasonably be
expected to have a Material Adverse Effect;
(b) permit the aggregate present value of all benefit
liabilities under all Plans maintained at such time by the Company,
any Subsidiary and any Related Persons (other than multiemployer
plans) that are subject to Title IV of ERISA to exceed the aggregate
current value of the assets of such Plans allocable to such benefit
liabilities by more than $500,000; or
(c) permit the aggregate complete or partial withdrawal
liability under Title IV of ERISA with respect to multiemployer plans
incurred by the Company, the Subsidiaries and Related Persons to
exceed $250,000.
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As used in this Section 9.21, (i) the term "accumulated funding deficiency" has
the meaning specified in section 302 of ERISA and section 412 of the Code, (ii)
the terms "present value," "benefit liabilities" and "current value" have the
respective meanings specified in sections 3 and 4001 of ERISA and (iii)
"multiemployer plan" means a Plan which is a "multiemployer plan" as defined in
section 4001(a)(3) of ERISA.
Section 9.22. No Inconsistent Agreements. The Company will not
enter into, assume or otherwise become obligated under any agreement or
instrument which restricts the ability of the Company to consummate the Private
Placement or perform its obligations under any Loan Document.
Section 9.23. Incorporation of More Restrictive Covenants. In
the event the Bank Loan Agreement or any renewal, modification, or replacement
thereof at any time includes a financial covenant or restriction similar to the
covenants and restrictions set forth in Section 9.01, 9.05 or 9.06 that is more
restrictive than the levels set forth in said Section 9.01, 9.05 and 9.06 (the
"More Restrictive Covenant"), the Company shall, immediately upon such
inclusion of the More Restrictive Covenant, notify the Purchasers and furnish a
verbatim statement of the More Restrictive Covenant. Such notification shall
also inform the Purchasers of the Required Holders' right to elect in writing
to substitute such More Restrictive Covenant as described below and shall state
the date by which such election must be made in accordance with this Section
9.23. The Required Holders may elect to substitute the More Restrictive
Covenant for the corresponding Section 9.01, 9.05 or 9.06 by notifying the
Company in writing within sixty (60) days after receipt of the notice referred
to in the preceding sentence.
ARTICLE X
EVENTS OF DEFAULT
Section 10.01. Events of Default. If any of the following events
(each such event being an "Event of Default") shall occur and be continuing for
any reason whatsoever (and whether such occurrence shall be voluntary or
involuntary or come about or be effected by operation of law or otherwise):
(a) the Company shall fail to pay when due under this
Agreement any principal of or premium, if any, on any Note;
(b) any Loan Party shall fail to pay any interest,
premium or other Obligation when due under any Loan Document, and such
failure shall have continued for five days; or
(c) any representation or warranty made by or on behalf
of any Loan Party in any Loan Document shall prove to be untrue or
inaccurate as of the date hereof or as of the Closing Date; or
(d) any representation or warranty made by or on behalf
of any Loan Party in any certificate, statement or other writing
furnished to any Holder after the date
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hereof in connection with or pursuant to any Loan Document shall prove
to be untrue or inaccurate in any material respect as of the date on
which such representation or warranty is made; or
(e) the Company shall fail to perform or observe any
covenant or agreement contained in Section 8.01(h), Sections 9.01
through 9.07 or Section 9.14; or
(f) the Company shall fail to perform or observe any
other covenant, agreement, term or condition contained in any Loan
Document and such failure shall not be remedied within 30 consecutive
days after the earlier of (i) the date on which such failure became
known to any Responsible Officer of the Company and (ii) the date on
which written notice thereof shall have been received by the Company
from any Holder; or
(g) any Guarantor shall fail to perform or observe any
agreement contained in its Guaranty; or
(h) any Loan Party, Harvey & Thompson Limited,
Pantbelaning, Murtrum or any Murtrum Affiliate shall (i) default in
any payment of principal of or interest on any other indebtedness in
excess of $500,000 beyond any period of grace provided with respect
thereto or (ii) fail to perform or observe any other covenant or
agreement contained in any agreement under which any such indebtedness
is created or outstanding within any applicable grace period provided
therein (or if any other event thereunder or under any such agreement
shall occur and be continuing) and the effect of such failure or other
event is (A) to cause such indebtedness to become due prior to its
stated maturity or (B) to permit the holder or holders of such
indebtedness (or any Person acting on behalf of such holder or
holders) to cause such indebtedness to become due prior to its stated
maturity; or
(i) the Company or any Subsidiary shall make an
assignment for the benefit of creditors or shall fail to generally pay
its debts as such debts become due; or
(j) any decree or order for relief in respect of the
Company or any Subsidiary shall be entered under any bankruptcy,
reorganization, compromise, arrangement, insolvency, readjustment of
debt, dissolution or liquidation or similar law, whether now or
hereafter in effect, of any jurisdiction (herein called the
"Bankruptcy Law") and such decree or order remains unstayed and in
effect for more than 60 days; or
(k) the Company or any Subsidiary petitions or applies to
any tribunal for, or consents to, the appointment of, or taking
possession by, a trustee, receiver, custodian, liquidator or similar
official of such Person, or of any substantial part of the assets of
such Person, or commences a voluntary case under the federal
Bankruptcy Law or any proceedings relating to such Person under the
Bankruptcy Law of any other jurisdiction; or
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(l) any such petition or application is filed, or any
such proceedings as described in clause (k) above are commenced,
against the Company or any Subsidiary and such Person by any act
indicates its approval thereof, consent thereto or acquiescence
therein; or
(m) an order, judgment or decree is entered appointing
any such trustee, receiver, custodian, liquidator or similar official,
or approving the petition in any such proceedings, and such order,
judgment or decree remains unstayed and in effect for more than 60
consecutive days; or
(n) any order, judgment or decree is entered in any
proceedings against the Company or any Subsidiary decreeing the
dissolution, winding-up or liquidation of such Person and such order,
judgment or decree remains unstayed and in effect for more than 60
consecutive days; or
(o) any order, judgment or decree is entered in any
proceedings against the Company or any Subsidiary decreeing a split-up
of such Person which requires the divestiture of assets and such
order, judgment or decree remains unstayed and in effect for more than
60 consecutive days; or
(p) any final judgment or final judgments for the payment
of money in excess of the sum of $500,000 in the aggregate shall be
rendered against the Company or any Subsidiary and such judgment or
judgments shall not be satisfied, discharged or stayed (with
sufficient reserves having been set aside by the Company or such
Subsidiary to pay such judgment or judgments) at least ten days prior
to the date on which any of its assets could be lawfully sold to
satisfy such judgment; or
(q) this Agreement or any other Loan Document shall at
any time, for any reason, cease to be in full force and effect or
shall be declared to be null and void in whole or in any material part
by the final judgment of any court or other Governmental Authority
having jurisdiction in respect thereof, or the validity or the
enforceability of this Agreement or any other Loan Document shall be
contested by or on behalf of any Loan Party, or any Loan Party shall
renounce this Agreement or any other Loan Document, or deny that it is
bound by the terms hereof or thereof or has any further liability
hereunder or thereunder; or
(r) the Company or any Subsidiary shall have (i)
concealed or removed, or permitted to be concealed or removed, any
part of its Property with the intent to hinder, delay or defraud its
creditors or any of them or (ii) made or suffered a transfer under any
bankruptcy, fraudulent conveyance or similar law;
then (i) if such event is an Event of Default specified in clauses (i), (j),
(k) (1) or (m) of this Section 10.01, all of the Notes shall thereupon be and
become automatically due and payable together with interest accrued thereon and
together with the Make-Whole Premium, if any, with respect to each Note,
without presentment, demand, protest, notice of intent to accelerate, notice of
acceleration or other notice of any kind, all of which are hereby waived
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by the Company, (ii) if such event is an Event of Default specified in clause
(a) or clause (b) (but only with respect to the failure of any Loan Party to
pay interest) of this Section 10.01, any Holder may at its option, by notice in
writing to the Company, declare all of the Notes held by such Holder to be, and
all of such Notes shall thereupon be and become, immediately due and payable
together with interest accrued thereon and together with the Make-Whole
Premium, if any, with respect to each such Note, without presentment, demand,
protest, notice of intent to accelerate or other notice of any kind, all of
which are hereby waived by the Company, and (iii) if such event is any other
continuing Event of Default, the Holders of at least 66-2/3% of the aggregate
principal amount of the Notes at the time outstanding may at their option, by
notice in writing to the Company, declare all of the Notes to be, and all of
the Notes shall thereupon be and become, immediately due and payable together
with interest accrued thereon and together with the Make- Whole Premium, if
any, with respect to each Note, without presentment, demand, protest, notice of
intent to accelerate or other notice of any kind, all of which are hereby
waived by the Company; provided that in the case of each acceleration of the
Notes solely on account of any Default (other than a payment default) described
in clause (c), (d), (e), (f), (g), (h) or (p) of this Section 10.01, the
Make-Whole Premium, if any, with respect to each Note shall be due and payable
upon such acceleration only if such Default is the result of an intentional or
willful act of the Company or any Affiliate of the Company.
At any time after the principal of, and interest accrued on, any or
all of the Notes are declared due and payable, the Holders of at least 66-2/3%
of the aggregate principal amount of the Notes at the time outstanding may at
their option, by written notice to the Company, rescind and annul any such
declaration and its consequences if (a) the Company has paid all overdue
interest on the Notes, the principal of and premium, if any, on any Notes which
have become due otherwise than by reason of such declaration, and interest on
such overdue principal and premium and (to the extent permitted by applicable
law) any overdue interest in respect of such Notes at a rate per annum from
time to time equal to the Default Rate, (b) the Company has paid all sums paid
or advanced by any Holder under any Loan Document (other than the loans
evidenced by the Notes), (c) all Defaults, other than nonpayment of amounts
which have become due solely by reason of such declaration, have been cured or
waived pursuant to Section 11.03, and (d) no judgment or decree has been
entered for the payment of any monies due pursuant to the Notes or any other
Loan Document; but no such rescission and annulment shall extend to or affect
any subsequent Default or impair any right consequent thereon.
Section 10.02. Other Remedies. If any Event of Default shall
occur and be continuing, any Holder may proceed to protect and enforce its
rights under this Agreement and the other Loan Documents by exercising such
remedies as are available to such Holder in respect thereof under applicable
law, either by suit in equity or by action at law, or both, whether for
specific performance of any covenant or other agreement contained in this
Agreement or any other Loan Document or in aid of the exercise of any power
granted in this Agreement or in any other Loan Document, or such Holder may
proceed to enforce the payment of all Obligations or to enforce any other legal
or equitable right of such Holder.
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ARTICLE XI
MISCELLANEOUS
Section 11.01. Note Payments. (a) The Company agrees that, so
long as the Purchasers or their respective nominees shall hold any Note, it
will make payments of principal thereof (and premium if any, and interest
thereon) which comply with the terms of this Agreement, by electronic funds
transfer to the account or accounts of the Purchasers as specified in Schedule
I or such other account or accounts in the United States of America as the
Purchasers may designate in writing, notwithstanding any contrary provision
herein or in any Note with respect to the place of payment.
(b) The Purchasers agree that, before disposing of any Note, they
will make a notation thereon (or on a schedule attached thereto) of all
principal payments previously made thereon and of the date to which interest
thereon has been paid, provided that the failure to so endorse or any error in
so endorsing any such amount on such schedule (or on a continuation thereof)
shall not limit or otherwise affect the obligation of the Company or any other
Loan Party to pay the Obligations.
(c) The Company agrees to afford the benefits of paragraph (a) of
this Section 11.01 to any Transferee which shall have made the same agreement
as the Purchasers have made in paragraph (b) of this Section 11.01.
Section 11.02. Expenses. (a) Whether or not the transactions
contemplated by this Agreement shall be consummated, the Company will pay and
will indemnify and hold harmless the Purchasers and each other Indemnitee in
respect of all reasonable expenses in connection with such transactions and in
connection with any amendments or waivers (whether or not the same become
effective) under or in respect of this Agreement, the Notes or any other Loan
Document, including: (i) the reasonable costs and expenses of preparing and
reproducing this Agreement, the Notes and the other Loan Documents, of
furnishing all opinions of counsel referred to herein and all certificates on
behalf of the Company and the Subsidiaries, and of the performance of and
compliance with all agreements and conditions contained herein and in the other
Loan Documents on the part of the Company and the Subsidiaries to be performed
or complied with, (ii) the cost of delivering to the principal office of the
Purchasers, insured to the satisfaction of the Purchasers, the Notes originally
issued to the Purchasers hereunder and any Notes delivered to the Purchasers
upon any substitution of such Notes and of the Purchasers delivering any Notes,
insured to the satisfaction of the Purchasers, upon any such substitution,
(iii) the reasonable fees, expenses and disbursements of special counsel to the
Purchasers in connection with such transactions (including the costs and
expenses incurred in connection with obtaining a private placement number) and
any such amendments or waivers (whether or not such amendments or waivers
become effective) and (iv) the reasonable costs and expenses, including
attorneys' fees, incurred by the Purchasers or any Transferee in enforcing any
rights under this Agreement or the other Loan Documents or in responding to any
subpoena or any other legal process issued in connection with this Agreement,
the other Loan Documents or the Overall Transaction or by reason of the
Purchasers' or any Transferee's having acquired any Note, including reasonable
costs and expenses incurred in any bankruptcy case.
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(b) The Company also will pay, and will indemnify, and hold the
Purchasers and each other Indemnitee harmless from, all claims in respect of
the fees, if any, of brokers and finders engaged by or on behalf of the
Company.
(c) In furtherance of the foregoing, at the Closing the Company
will pay the reasonable fees and disbursements of Chapman and Cutler, special
counsel to the Purchasers, which are reflected as unpaid in the statement of
special counsel to the Purchasers delivered to the Company at or prior to the
time of Closing.
(d) The obligations of the Company under this Section 11.02 shall
survive the transfer of any Note or portion thereof or interest therein by the
Purchasers or any Transferee and the payment of the Notes.
(e) In the event any Holder or Holders propose to engage special
counsel in connection with any amendments or waivers requested by the Company
under or in respect of this Agreement or any other Loan Document, such Holder
or Holders agree to engage only one special counsel for each such matter and to
use reasonable efforts to cause such special counsel to furnish the Company
with an estimate of the total fees, expenses and disbursements to be incurred
by such special counsel in connection with such engagement, provided that the
failure (for any reason) of such special counsel to provide such an estimate
(nor any error therein or deviation therefrom) shall not relieve the Company of
any of its obligations under this Section 11.02.
Section 11.03. Consent to Waivers and Amendments. (a) This
Agreement and the other Loan Documents may be amended, and the Company may take
any action herein or therein prohibited, or omit to perform any act herein or
therein required to be performed by it, if the Company shall obtain the written
consent to such amendment, action or omission to act, of the Required Holders
except that, without the written consent of the holder or holders of all Notes
at the time outstanding, no amendment to this Agreement or any other Loan
Document shall change the maturity of any Note, or change the principal of, or
the rate or time of payment of interest or any premium payable with respect to
any Note, or affect the time, amount or allocation of any required prepayments,
or alter or amend the right of any Holder to declare all of the Notes held by
such Holder to be due and payable in accordance with the provisions of Section
10.01 or change or modify any of the provisions of this Section 11.03. Each
Holder of any Note at the time or thereafter outstanding shall be bound by any
consent authorized by this Section 11.03, whether or not such Note shall have
been marked to indicate such consent, but any Notes issued thereafter may bear
a notation referring to any such consent.
(b) Executed or true and correct copies of any consent, waiver and
amendment effected pursuant to the provisions of this Section 11.03 shall be
delivered by the Company to each Holder forthwith following the date on which
the same shall have been executed and delivered by the Required Holders.
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(c) No course of dealing between the Company and the Holder of any
Note nor any delay in exercising any rights hereunder or under any Note shall
operate as a waiver of any rights of any Holder of such Note.
Section 11.04. Solicitation of Holders. The Company will not
solicit, request or negotiate for or with respect to any proposed consent,
waiver or amendment of any of the provisions of this Agreement or any other
Loan Document unless each Holder shall concurrently be informed thereof in
writing by the Company and shall be afforded the opportunity to consider the
same and shall be supplied by the Company with sufficient information to enable
it to make an informed decision with respect thereto. The Company will not pay
or cause to be paid any remuneration, whether by way of supplemental or
additional interest, fee or otherwise, to any Holder as consideration for or as
an inducement to the entering into by any such Holder of any waiver or
amendment of any of the terms and provisions of this Agreement or any other
Loan Document unless such remuneration is concurrently paid, on the same terms,
ratably to each Holder.
Section 11.05. Form, Registration, Transfer and Exchange of Notes;
Lost Notes. (a) The Notes are issuable as registered notes without coupons in
minimum denominations equal to $1,000,000 (except as may be necessary to
reflect any principal amount not evenly divisible by $1,000,000). The Company
shall keep at its principal executive office a register in which the Company
shall provide for the registration of Notes and of transfers of Notes. Subject
to paragraph (d) below, upon surrender for registration of transfer of any Note
at the principal executive office of the Company, the Company shall, at its
expense, execute and deliver one or more new Notes of like tenor and of a like
aggregate principal amount, registered in the name of the designated Transferee
or Transferees. Every Note surrendered for registration of transfer shall be
duly endorsed, or be accompanied by a written instrument of transfer duly
executed, by the Holder of such Note, or such Holder's attorney, duly
authorized in writing.
(b) At the option of any Holder, any Note held by such Holder may
be exchanged for other Notes of like tenor and of any authorized denominations,
of a like aggregate principal amount, upon surrender of the Note to be
exchanged at the principal office of the Company. Whenever any Notes are so
surrendered for exchange, the Company shall, at its expense, execute and
deliver the Notes which the Holder making the exchange is entitled to receive.
(c) Any Note or Notes issued in exchange for any Note or upon
transfer thereof shall carry the rights to unpaid interest and interest to
accrue which were called by the Note so exchanged or transferred, so that
neither gain nor loss of interest shall result from any such transfer or
exchange. Upon receipt of written notice from the Holder of any Note of the
loss, theft, destruction or mutilation of such Note and, in the case of any
such loss, theft or destruction, upon receipt of such Holder's unsecured
indemnity agreement, or in the case of any such mutilation upon surrender and
cancellation of such Note, the Company will make and deliver a new Note, of
like tenor, in lieu of the lost, stolen, destroyed or mutilated Note.
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(d) Each Purchaser agrees, to the extent permitted by applicable
law, that it will not transfer any Notes except as follows:
(i) it may transfer some (but not all) of the Notes to
not more than two Transferees,
(ii) it may at any time transfer all of the Notes then
held by it to any single Transferee, and
(iii) it may at any time transfer all or a part of the
Notes then held by it to one or more Affiliates of the Purchasers;
provided, however, that it shall be a condition to any transfer pursuant to
clause (i) or (ii) above, as well as any subsequent transfer of a Note by a
Transferee, that each Transferee executes and delivers to the Company an
instrument in writing whereby such Transferee agrees that it will not transfer
to any Person (other than an Affiliate of such Transferee) less than all of the
Notes held by such Transferee and, provided further, that it shall be a
condition to any transfer to an Affiliate of the Purchasers pursuant to clause
(iii) above that such Affiliate executes and delivers to the Company an
instrument in writing whereby such Affiliate agrees that the transfer
restrictions contained in this paragraph (d) shall be applicable to such
Affiliate the same as if such Affiliate were the Purchasers.
Section 11.06. Persons Deemed Owners. Prior to due presentment
for registration of transfer, the Company may treat the Person in whose name
any Note is registered in accordance with Section 11.05 as the owner and Holder
of such Note for the purpose of receiving payment of principal of and premium,
if any, and interest on such Note and for all other purposes whatsoever,
whether or not such Note shall be overdue, and the Company shall not be
affected by notice to the contrary.
Section 11.07. Reliance on and Survival of Representations and
Warranties. (a) All of the representations and warranties of the Loan Parties
contained in the Loan Documents or in any certificates or other instruments
delivered by any Loan Party at or after the Closing pursuant to any Loan
Document shall (i) survive the execution and delivery of this Agreement, the
Notes and the other Loan Documents, the transfer by the Purchasers of any Note
or portion thereof or interest therein and the payment of any Note, and may be
relied upon by the Purchasers or any Transferee, regardless of any
investigation made at any time by or on behalf of the Purchasers, any
Transferee or any other Person and (ii) be deemed to be material and to have
been relied upon by each Holder, notwithstanding any investigation heretofore
or hereafter made by or on behalf of any Holder.
(b) All representations, warranties and covenants contained herein
made by the Purchasers or any Holder shall survive the execution and delivery
of this Agreement, the Notes and the other Loan Documents, and may be relied
upon by the Company and its successors and assigns. No Holder (including the
Purchasers) shall be responsible for the truth, correctness or performance of
the representations or warranties of the Company, the Guarantors or any other
Holder (including any Transferee).
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Section 11.08. Successors and Assigns. All covenants and other
agreements in this Agreement contained by or on behalf of either of the parties
hereto shall bind and inure to the benefit of the respective successors and
assigns of the parties hereto (including, without limitation, any Transferee)
whether so expressed or not. Each Transferee, by taking any Note, shall be
deemed to have made the representation contained in Part 1 of Schedule XII and
at least one of the representations contained in Part 2 of Schedule XII and to
have agreed to be bound by the terms and conditions of this Agreement.
Section 11.09. Notices. All written communications provided for
hereunder shall be sent by first class mail or nationwide overnight delivery
service (with charges prepaid) and (a) if to the Purchasers, addressed to it at
the address specified for such communications in Schedule I, or at such other
address as the Purchasers shall have specified to the Company in writing, (b)
if to any other Holder, addressed to such other Holder at such address as such
other Holder shall have specified to the Company in writing or, if any such
other Holder shall not have so specified an address to the Company, then
addressed to such other Holder in care of the last holder of such Note which
shall have so specified an address to the Company and (c) if to the Company,
addressed to it at 1600 West 7th Street, Fort Worth, Texas 76102-2599,
Attention: President, or at such other address as the Company shall have
specified to each Holder in writing.
Section 11.10. Substitution of Purchasers. The Purchasers shall
have the right, by written notice to the Company, to substitute any one of its
Affiliates as the purchaser of the Notes, which notice shall be signed by both
the Purchasers and such Affiliate and shall contain such Affiliate's agreement
to be bound by this Agreement and shall contain a confirmation by such
Affiliate of the accuracy with respect to it of the representation contained in
Part 1 of Schedule XII and of at least one of the representations set forth in
Part 2 of Schedule XII. Upon receipt of such notice, wherever the word
"Purchaser" is used in this Agreement (other than in this Section 11.10) or any
other Loan Document or certificate, opinion or other instrument delivered or to
be delivered pursuant hereto or thereto, such word shall be deemed to refer to
such Affiliate in lieu of the Purchaser. In the event such Affiliate is so
substituted as a purchaser hereunder and such Affiliate thereafter transfers to
the Purchaser all of the Notes then held by such Affiliate, upon receipt by the
Company of notice of such transfer, wherever the word "Purchaser" is used in
this Agreement or any other Loan Document or certificate, opinion or other
instrument delivered or to be delivered pursuant hereto or thereto, such word
shall no longer be deemed to refer to such Affiliate, but shall refer to the
Purchaser, and the Purchaser shall have all the rights of an original Holder of
the Notes under this Agreement.
Section 11.11. Satisfaction Requirement. If any agreement,
certificate or other writing, or any action taken or to be taken, is by the
terms of this Agreement required to be satisfactory to the Purchasers or to the
Required Holders, the determination of such satisfaction shall be made by the
Purchasers or the Required Holders, as the case may be, in the sole and
exclusive judgment of the Person or Persons making such determination unless,
by the terms of this Agreement, such matter is required to be reasonably
satisfactory to the Purchasers or to the Required Holders, as the case may be,
in which event the determination
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of such satisfaction shall be made by the Purchasers or the Required Holders,
as the case may be, in the reasonable judgment of the Person or Persons making
such determination.
Section 11.12. Independence of Covenants. All covenants contained
in this Agreement shall be given independent effect so that if a particular
action or condition is not permitted by any of such covenants, the fact that
such action or condition would be permitted by an exception to, or otherwise be
within the limitations of, another covenant shall not avoid the occurrence of a
Default or an Event of Default if such action is taken or condition exists.
Section 11.13. Remedies Cumulative. No right, power or remedy
granted under any Loan Document is intended to be exclusive, but each shall be
cumulative and in addition to any other rights, powers or remedies referred to
in such Loan Document or otherwise available at law or in equity and the
exercise or beginning of exercise by any party hereto of any one or more of
such rights, powers or remedies shall not preclude the simultaneous or later
exercise by such party of any or all such other rights, powers or remedies.
Section 11.14. Reproduction of Documents. This Agreement, the
Notes, the other Loan Documents and all documents relating hereto and thereto,
including (a) consents, waivers and notifications which may hereafter be
executed, (b) documents received by the Purchasers at the Closing and (c)
financial statements, certificates and other information previously or
hereafter furnished to any Holder of a Note, may be reproduced by such Holder
or the Company by any photographic, photostatic, microfilm, microcard,
miniature photographic or other similar process and any original document so
reproduced may be destroyed. The Company and the Purchasers agree and
stipulate that, to the extent permitted by applicable law, any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made in the regular course
of business) and any enlargement, facsimile or further reproduction of such
reproduction shall likewise be admissible in evidence.
Section 11.15. Notes as Securities. The Company and the
Purchasers agree that the Notes are securities as defined in each of the
Securities Act and the Exchange Act.
Section 11.16. Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
Section 11.17. Interest. (a) Each provision in this Agreement,
the Notes and the other Loan Documents is expressly limited so that in no event
whatsoever shall the amount paid, or otherwise agreed to be paid, to any Holder
for the use, forbearance or detention of the indebtedness evidenced by the
Notes or any other Loan Document or otherwise (including any sums paid as
required by any covenant or obligation contained herein or in any other Loan
Document which is for the use, forbearance or detention of such money), exceed
that amount of money which would cause the effective rate of interest to exceed
the Highest
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<PAGE> 64
Lawful Rate, and all amounts owed under this Agreement, the Notes and each
other Loan Document shall be held to be subject to reduction to the effect that
such amounts so paid or agreed to be paid which are for the use, forbearance or
detention of money under this Agreement, the Notes or any other Loan Documents
shall in no event exceed that amount of money which would cause the effective
rate of interest to exceed the Highest Lawful Rate.
(b) Anything in this Agreement, any Note or any other Loan
Document to the contrary notwithstanding, the Company shall never be required
to pay unearned interest on any Note or ever be required to pay interest on
such Note at a rate in excess of the Highest Lawful Rate, and if the effective
rate of interest which would otherwise be payable under this Agreement, such
Note or any other Loan Document would exceed the Highest Lawful Rate, or if the
Holder of such Note shall receive any unearned interest or shall receive monies
that are deemed to constitute interest which would increase the effective rate
of interest payable by the Company under this Agreement, such Note and the
other Loan Documents to a rate in excess of the Highest Lawful Rate, then (i)
the amount of interest which would otherwise be payable by the Company under
this Agreement, such Note and the other Loan Documents shall be reduced to the
amount allowed under applicable law and (ii) any unearned interest paid by the
Company or any interest paid by the Company in excess of the Highest Lawful
Rate shall be in the first instance credited on the principal of such Note with
the excess thereof, if any, refunded to the Company.
(c) It is further agreed that, without limitation of the
foregoing, all calculations of the rate of interest contracted for, charged or
received by any Holder under the Notes held by it, or under this Agreement or
the other Loan Documents, which are made for the purpose of determining whether
such rate exceeds the Highest Lawful Rate shall be made, to the extent
permitted by usury laws applicable to such Notes (now or hereafter enacted), by
amortizing, prorating and spreading in equal parts during the period of the
full stated term of the loans evidenced by said Notes all interest at any time
contracted for, charged or received by such Holder in connection therewith.
(d) If, at any time and from time to time, (i) the amount of
interest payable to any Holder on any date shall be computed at the Highest
Lawful Rate and (ii) in respect of any subsequent interest computation period
the amount of interest otherwise payable to such holder would be less than the
Highest Lawful Rate, then the amount of interest payable to such Holder in
respect of such subsequent interest computation period shall continue to be
computed at the Highest Lawful Rate until the total amount of interest payable
to such Holder shall equal the total amount of interest which would have been
payable to such Holder if the total amount of interest had been computed
without giving effect to this Section 11.17.
Section 11.18. Representations, Etc. Cumulative. All
representations, covenants, agreements and indemnities contained in this
Agreement shall be in addition to and cumulative of the representations,
covenants, agreements and indemnities contained in the other Loan Documents.
Section 11.19. Submission to Jurisdiction. THE COMPANY HEREBY
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL
COURT
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LOCATED IN NEW YORK, NEW YORK OVER ANY ACTION OR PROCEEDING (A) TO ENFORCE OR
DEFEND ANY RIGHT UNDER THIS AGREEMENT OR UNDER ANY OTHER LOAN DOCUMENT OR (B)
ARISING FROM OR RELATING TO ANY FINANCING RELATIONSHIP EXISTING IN CONNECTION
WITH THIS AGREEMENT AND THE LOAN DOCUMENTS, AND THE COMPANY HEREBY IRREVOCABLY
AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD
AND DETERMINED IN SUCH STATE OR FEDERAL COURT. THE COMPANY HEREBY IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN
ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL POSTAGE PREPAID, TO THE COMPANY AT ITS ADDRESS FOR NOTICES
PURSUANT TO SECTION 11.09, SUCH SERVICE TO BECOME EFFECTIVE 10 DAYS AFTER SUCH
MAILING. EACH SUCH SERVICE IS HEREBY ACKNOWLEDGED BY THE COMPANY TO BE
SUFFICIENT, EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. IF ANY AGENT
APPOINTED BY THE COMPANY REFUSES TO ACCEPT SERVICE, THE COMPANY HEREBY AGREES
THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. THE COMPANY
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT THAT IT MAY EFFECTIVELY DO SO,
THE DEFENSE OF AN INCONVENIENT FORUM OR VENUE TO THE MAINTENANCE OF ANY SUCH
ACTION OR PROCEEDING. THE COMPANY HEREBY AGREES THAT A FINAL JUDGMENT IN ANY
SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
NOTHING IN THIS SECTION 11.19 SHALL AFFECT THE RIGHT OF ANY HOLDER OR ANY OTHER
PERSON TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW
OR TO BRING ANY ACTION OR PROCEEDING AGAINST THE COMPANY OR THE PROPERTY OF THE
COMPANY IN THE COURTS OF ANY OTHER JURISDICTION.
Section 11.20. Governing Law. This Agreement shall be construed
and enforced in accordance with, and the rights of the parties shall be
governed by, the Internal Laws of the State of New York, without reference to
principles of conflicts of law.
Section 11.21. Indemnification. The Company hereby waives any
claim for contribution against any Indemnitee and agrees to indemnify,
exonerate and hold each Indemnitee free and harmless from and against any and
all actions, causes of action, suits, citations, directives, demands,
assessments, losses, liabilities, damages and expenses, including (without
limitation) reasonable attorneys' fees and disbursements and, in the case of
clause (e) below, fees and disbursements of environmental consultants
(collectively, the "Indemnified Liabilities"), incurred, suffered, sustained or
required to be paid by the Indemnitees or any of them as a result of, or
arising out of, or relating to (a) any transaction financed in whole or in part
directly or indirectly with the proceeds of any of the Notes, (b) the exercise,
protection or enforcement of any Holder's rights, remedies, powers or
privileges under this Agreement or any other Loan Document, (c) the breach of
any representation or warranty of any Loan Party contained herein or in any
other Loan Document, (d) the nonfulfillment by any Loan Party of, or its
failure to perform, any of its covenants or agreements contained in this
Agreement or any of the other Loan Documents or (e) the presence of Hazardous
Materials on, or the escape, seepage, leakage, spillage, discharge, emission or
release of Hazardous Materials from, any of the real Properties of the
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<PAGE> 66
Company or any Subsidiary or any site, facility or location to which any
material, products, waste or other substances from or attributable to the
business or operations of the Company or any Subsidiary have been transported
for treatment, disposal, storage or deposit, the operation or violation of any
Environmental Law at any such Property, site, facility or location, any
Environmental Claim in connection with the Company or any Property of the
Company, except, in each case, for any of such Indemnified Liabilities arising
on account of such Indemnitee's gross negligence or willful misconduct, and if
and to the extent that the foregoing undertaking may be unenforceable for any
reason, the Company hereby agrees to make the maximum contribution to the
payment and satisfaction of the Indemnified Liabilities that is permissible
under applicable law. The obligations of the Company under this Section 11.21
shall survive the transfer and payment of the Notes.
Section 11.22. Survival of Indemnities, Etc. (a) The indemnities
contained in this Agreement are cumulative and in addition to the indemnities
contained in the other Loan Documents and shall survive the termination of this
Agreement and the transfer and payment of the Notes.
(b) THE INDEMNITIES CONTAINED IN THIS AGREEMENT SHALL COVER AND
INCLUDE LOSSES, COSTS, EXPENSES, CLAIMS, DAMAGES, PENALTIES AND OBLIGATIONS
ARISING OUT OF OR RESULTING FROM THE NEGLIGENCE OF ANY INDEMNITEE, REGARDLESS
OF WHETHER SUCH NEGLIGENCE BE ORDINARY OR SOLE.
Section 11.23. Judgment Currency. (a) The obligation of the
Company hereunder and under the other Loan Documents to make payments in
Dollars shall not be discharged or satisfied by any tender or recovery pursuant
to any judgment expressed in or converted into any currency other than Dollars,
except to the extent that such tender or recovery results in the effective
receipt by each Holder of the full amount of Dollars expressed to be payable to
such Holder under this Agreement or any other Loan Documents. If for the
purpose of obtaining or enforcing judgment against the Company in any court or
in any jurisdiction, it becomes necessary to convert into or from any currency
other than Dollars (such other currency being referred to in this Section 11.23
as the "Judgment Currency") an amount due in Dollars, the conversion shall be
made, at the Dollar Equivalent, as of the Business Day immediately preceding
the day on which the judgment is given (such Business Day being referred to in
this Section 11.23 as the "Judgment Currency Conversion Date"). For purposes
of this Section 11.23, the term "Dollar Equivalent" shall mean, with respect to
any monetary amount in a currency other than Dollars, at any time for the
determination thereof, the amount of Dollars obtained by converting such
foreign currency involved in such computation into Dollars at the spot rate for
the purchase of Dollars with the applicable foreign currency as quoted to such
Holder at approximately 10:00 A.M. (New York City time) on the date of
determination thereof specified herein.
(b) If there is a change in the rate of exchange prevailing
between the Judgment Currency Conversion Date and the date of actual payment of
the amount due, the Company covenants and agrees to pay, or cause to be paid,
such additional amounts, if any (but in any event not a lesser amount), as may
be necessary to ensure that the amount paid in the Judgment Currency, when
converted at the rate of exchange prevailing on the date of
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<PAGE> 67
payment, will produce the amount of Dollars which could have been purchased
with the amount of Judgment Currency stipulated in the judgment or judicial
award at the rate of exchange prevailing on the Judgment Currency Conversion
Date.
(c) For purposes of determining the Dollar Equivalent for this
Section 11.23, such amounts shall include any premium and costs payable in
connection with the purchase of the Dollars.
Section 11.24. Liabilities of Holders. Neither this Agreement nor
any other Loan Documents nor any disposition of the Notes shall be deemed to
create any liability or obligation of any Holder to enforce any provision
hereof or of any other Loan Document for the benefit or on behalf of any other
Person who may be the holder of any Note.
Section 11.25. Taxes. The Company will (a) pay all taxes
(including interest and penalties) that may be payable in connection with the
execution and delivery of this Agreement or any other Loan Document or any
amendment of, or waiver or consent under or with respect to, this Agreement or
any other Loan Document and (b) indemnify and hold the Purchasers and each
other Holder harmless from and against any loss or liability resulting from
nonpayment or delay in payment of any such tax. The obligations of the Company
under this Section 11.25 shall survive the transfer and payment of the Notes.
Section 11.26. Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one such counterpart.
Section 11.27. Entire Agreement. This Agreement and the other
Loan Documents to which the Company is a party constitute the entire contract
between the parties relative to the subject matter hereof. Any previous
agreement among the parties with respect to the subject matter hereof is
superseded by this Agreement and the other Loan Documents. Subject to Section
11.08, nothing in this Agreement or in the other Loan Documents, expressed or
implied, is intended to confer upon any Person other than the parties hereto
and thereto any rights, remedies, obligations or liabilities under or by reason
of this Agreement or the other Loan Documents.
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The Purchasers should indicate its agreement with the foregoing by
signing the form of acceptance on the enclosed counterpart of this letter and
return the same to the Company, whereupon this letter shall become a binding
agreement between the Purchasers and the Company.
Very truly yours,
CASH AMERICA INTERNATIONAL, INC.
By /s/ THOMAS A. BESSANT, JR.
--------------------------------
Thomas A. Bessant, Jr.,
Senior Vice President and
Chief Financial Officer
<PAGE> 69
The foregoing Agreement is
hereby accepted as of the date
first above written.
THE TRAVELERS INSURANCE COMPANY
By /s/ A. WILLIAM CARNDUFF
--------------------------------
2nd Vice President
THE TRAVELERS LIFE AND ANNUITY COMPANY
By /s/ A. WILLIAM CARNDUFF
--------------------------------
2nd Vice President
PRIMERICA LIFE INSURANCE COMPANY
By /s/ A. WILLIAM CARNDUFF
--------------------------------
2nd Vice President
NATIONWIDE LIFE INSURANCE COMPANY
By /s/ EDWIN P. MCCAUSLAND, JR.
--------------------------------
Vice President
Fixed-Income Securities
EMPLOYERS LIFE INSURANCE COMPANY OF WAUSAU
By /s/ EDWIN P. MCCAUSLAND, JR.
--------------------------------
Vice President
Fixed-Income Securities
<PAGE> 70
OHIO NATIONAL LIFE ASSURANCE CORPORATION
By /s/ MICHAEL A. BOEDEKER
--------------------------------
Michael A. Boedeker
Vice President, Fixed-Income Securities
THE MINNESOTA MUTUAL LIFE
INSURANCE COMPANY
By: MIMLIC Asset Management Company
By /s/ GREG A. LAMBERT
--------------------------------
Vice President
<PAGE> 1
EXHIBIT 13
14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
================================================================================
GENERAL
The Company is a diversified provider of specialty financial services to
individuals in the United States, United Kingdom, and Sweden. The Company offers
secured non-recourse loans to individuals, commonly referred to as pawn loans,
and provides check cashing services through its wholly owned subsidiary, Mr.
Payroll Corporation ("Mr. Payroll"). The revenue received from pawn loans is
finance and service charges. The disposition of merchandise, primarily
collateral from unredeemed pawn loans, is a related but secondary source of net
revenue from the Company's lending function. Royalties and franchise fees are
generated by the check cashing services provided by Mr. Payroll.
The Company expanded its check cashing operations when it acquired the
remaining 51% interest in Mr. Payroll in a purchase transaction effective after
the close of business on December 31, 1996. Mr. Payroll is a franchiser of check
cashing kiosks and service centers and a seller of automated check cashing
machines. The 1997 financial statements include the revenues and expenses of Mr.
Payroll. Previously, the Company recorded its 49% share of Mr. Payroll's losses
in its consolidated financial statements under the equity method of accounting.
YEAR ENDED 1997 COMPARED TO YEAR ENDED 1996
Net revenues increased 9.0% to $178.1 million in 1997 from $163.4 million
in 1996. Of the 9% increase in net revenues, 4.3% was attributable to gains from
same unit pawn operations (those in operation more than one year), 3.2% was
attributable to the net addition of 19 pawn units in 1997 and 1.5% was
attributable to royalties and franchise fees from Mr. Payroll's check cashing
services.
Finance and service charges are impacted by changes in the average
outstanding amount of pawn loans and average loan yields. Finance and service
charge revenues increased 12.5% to $104.1 million in 1997 from $92.6 million in
1996, primarily due to a 13.7% increase in the average outstanding loan balance
in 1997 which was partially offset by a slight decrease in the annual loan
yield. The consolidated annual loan yield, which represents a weighted average
of the distinctive yields realized in the three countries in which the Company
operates, declined to 95% in 1997, from 96% in 1996. The average loan balance
per average location in operation increased in all three countries in which the
Company operates. A 4.4% increase in the number of outstanding loans as of
December 31, 1997, compared to December 31, 1996, indicates a higher customer
demand for pawn loans in both domestic and foreign markets. While the
consolidated average pawn loan amount remained constant at $99, the domestic
pawn loan amount increased 5% to $78. The foreign average pawn loan decreased 8%
to $174, primarily due to the strengthening of the U.S. dollar against the
Swedish kronor.
Proceeds from the disposition of merchandise increased 4.4% to $196.7
million in 1997 from $188.4 million in 1996. The rise in merchandise
dispositions was impacted by a 4% increase in same unit dispositions, a $3.7
million decrease in proceeds from the disposition of scrap jewelry, an increase
in units in operation and a 9% increase in the merchandise turnover rate to 2.5
times in 1997, from 2.3 times in 1996. The margin on disposition of merchandise
increased .9% to $71.4 million in 1997 from $70.8 million in 1996. The Company
believes that its continued emphasis on maximizing cash returns on capital
employed resulted in increased revenues, increased merchandise turns, a
reduction in the average level of merchandise held for disposition, and the
achievement of increased net revenues. As a result of this focus and lower
prices realized on the sale of pure gold in the open market, gross margin as a
percentage of dispositions decreased to 36.4% in 1997, from 37.6% in 1996.
Royalties and franchise fees of $2.5 million were generated from the
Company's check cashing operations, and consisted of franchise fees for new
check cashing franchises, royalties based on a percentage of check cashing fees
from existing franchise operations and check verification fees in connection
with automated check cashing machines.
Operations and administration expense, as a percentage of net revenues,
increased to 69.6% in 1997, compared to 68.5% in 1996. Total operations and
administration expense increased $12.0 million in 1997, to $123.9 million,
representing a 10.7% increase from $111.9 million in 1996. Domestic pawn
operations contributed $7.8 million of the increase, due to the net addition of
18 new units, higher personnel costs, higher occupancy costs, and the
development of a franchise program, while foreign pawn operations contributed
$.5 million. The consolidation of Mr. Payroll into operations and administration
expenses for the first time in 1997 contributed $3.7 million of the increase.
Depreciation and amortization, as a percentage of net revenues, decreased
to 9.0% in 1997, from 9.9% in 1996, due primarily to a moderation in the
Company's unit expansion during the past twenty-four months.
Interest expense, net of interest income, increased as a percentage of net
revenues, to 6.5% in 1997 from 5.8% in 1996. The amount of net interest expense
increased $2.2 million, or 23.5%, to $11.6 million in 1997 from $9.4 million in
1996, due to additional debt incurred in the fourth quarter of 1996 to
repurchase 4.5 million shares of the Company's common stock and additional
investments in subsidiary and affiliate businesses during 1997. Weighted average
debt outstanding increased 27.4% to $154.0 million in 1997 from $120.9 million
in 1996. The effective rate of interest decreased to 7.6% in 1997 from 8.0% in
1996.
Other expense represents the net effect of various items including
operating losses from the Company's equity interest in affiliates, rental
income, gains and losses on disposition of certain non-operating assets and
other miscellaneous items. Other expense decreased by $.4 million in 1997 from
1996. In 1997, the Company recorded a $.5 million loss from its affiliate
Express Rent-A-Tire, Ltd. ("Express"), compared to combined losses totalling$1.0
million in 1996 from Express and Mr. Payroll. As set forth above, the Company
attained 100% ownership of Mr. Payroll on December 31, 1996, therefore Mr.
Payroll's 1997 results of operations are included in the Company's consolidated
results of operations.
The Company's combined effective federal, state and foreign income tax
rate decreased to 36.6% for 1997 from 37.5% for 1996, due to a reduced foreign
tax rate.
Net income as a percentage of net revenues was 9.3% in 1997, compared to
9.6% in 1996. Diluted net income per share was $.66 for 1997 compared to $.54
for 1996.
YEAR ENDED 1996 COMPARED TO YEAR ENDED 1995
Net revenues increased 7.6% to $163.4 million in 1996 from $151.9 million
in 1995, primarily from a 6.6% gain from same units (those in operation more
than one year). The Company's net unit expansion activity of nine units in 1996
accounts for the remaining increase.
Finance and service charges are impacted by changes in the average
outstanding amount of pawn loans and average loan yields. Finance and service
charge revenues increased 17.4% to $92.6 million in 1996 from $78.9 million in
1995 because of a 16.5% increase in the average outstanding loan balance in
1996. The consolidated annual loan yield, which represents a weighted average of
the distinctive yields realized in the three countries in which the Company
operates, remained constant at 96% for both years. The increase in average loan
balance per average location in operation is primarily a reflection of an
increased customer base in all three countries. The 6% increase in the average
pawn loan amount at the end of the year is the result of a 12% increase for
foreign operations and a 4% increase domestically. The 12% increase in the
average foreign loan is due to a slight increase in the loan advance rate
(loan-to-value ratio). Changes in the loan advance rate occur in the ordinary
course of business. The domestic increase is a reflection of the increase in the
number of loans in the portfolio that have been extended or renewed.
Historically, these are higher average loans.
Proceeds from the disposition of merchandise increased 8% to $188.4
million in 1996 from $174.7 million in 1995. The rise in merchandise
dispositions was impacted by a 2% increase in same unit dispositions, a $6.2
million increase in proceeds from dispositions of
<PAGE> 2
15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
================================================================================
scrap gold and other precious metals at wholesale and an increase in units in
operation. The margin on disposition of merchandise decreased 3% to $70.8
million in 1996 from $73.0 million in 1995. While gross margin as a percentage
of dispositions decreased to 37.6% in 1996 from 41.8% in 1995, the merchandise
turnover rate increased 35% to 2.3 times in 1996 from 1.7 times in 1995. The
Company believes that the introduction of an incentive compensation program for
its field operations personnel, with a focus of rewarding the maximization of
cash returns on capital employed, led to increased revenues, increased
merchandise turns and decreased levels of merchandise held for disposition,
while contributing to lower gross margins on the disposition of merchandise.
Operations and administration expenses, as a percentage of net revenues,
decreased to 68.5% in 1996, compared to 69.2% for 1995. An emphasis on cost
containment, coupled with a new incentive pay plan for unit employees and a
moderation in the number of unit openings, contributed to the reduction in
expenses as a percentage of net revenues.
Depreciation and amortization, as a percentage of net revenues, decreased
to 9.9% in 1996 from 10.1% in 1995. This decrease is due primarily to the
reduction in the number of units acquired or opened in 1996.
Interest expense, net of interest income, decreased, as a percentage of
net revenues, to 5.8% in 1996 from 6.9% in 1995. The amount of net interest
expense decreased by 9.7% to $9.4 million in 1996 from $10.4 million in 1995,
primarily due to a 9% reduction in weighted average debt outstanding. This
reduction was the result of increased cash flows from operating activities and
lower capital expenditures.
Other expense represents the net effect of various items including
operating losses from the Company's equity interest in affiliates, rental
income, gains and losses on disposition of certain non-operating assets and
other miscellaneous items. Other expense increased by $.3 million in 1996 over
1995, primarily due to a $.5 million increase in losses from the Company's
equity interest in affiliates.
The Company's combined effective federal, state and foreign income tax
rate remained relatively unchanged at 37.5% for 1996, compared to 37.7% in 1995
before the cumulative effect of the change in accounting principle.
Net income, as a percentage of net revenues, was 9.6% in 1996, compared to
8.5% in 1995 before the cumulative effect of the change in accounting principle.
Diluted net income per share was $.54 for 1996 compared to $.45 for 1995 before
the cumulative effect of the change in accounting principle.
LIQUIDITY AND CAPITAL RESOURCES
In management's opinion, the Company's cash flow and liquidity remain
strong. Net cash provided by operating activities was $26.7 million, $41.9
million and $24.0 million for 1997, 1996 and 1995, respectively.
In 1997, the Company invested $7.3 million to increase its pawn loan
portfolio, $5.3 million to acquire ten pawn units and $1.2 million in advances
to Express. The Company also invested $16.4 million in purchases of property and
equipment. Of this amount $10.7 million was for property improvements, equipment
for startup locations, remodeling selected operating units and additions to
computer systems. Approximately $5.7 million was for the development of an
automated check cashing system. During 1997, the Company paid $4.3 million on
current maturities of long-term debt, purchased $1.4 million of treasury shares,
paid $1.2 million in dividends and received $1.8 million from the reissuance of
treasury shares under the Company's stock option plans.
The funding of these activities came primarily from the internally
generated cash flow from operations and the issuance of $30.0 million of
unsecured notes payable due in 2008. At December 31, 1997, $51.0 million was
outstanding on the Company's $125 million revolving line of credit. The
Company's (pound)5 million line of credit in the United Kingdom had a balance
outstanding of (pound)1.3 million (approximately $2.1 million) at December 31,
1997. The Company's SEK 215 million lines of credit in Sweden had a balance
outstanding of SEK 171 million (approximately $21.6 million) at December 31,
1997. The Company plans to open approximately 25 to 40 new pawn units in 1998 at
an estimated cost of $220,000 per unit. The Company intends to continue to
develop Mr. Payroll's automated check cashing system and anticipates that Mr.
Payroll will incur future losses until sufficient revenues are generated from
the sale and operation of automated check cashing machines.
On January 22, 1997, the Company's Board of Directors authorized
management to purchase up to one million shares of its common stock. During
1997, the Company purchased 119,900 shares under the program for $1.1 million.
Purchases may be made from time to time in the open market and it is expected
that funding of the program will come from operating cash flow and existing bank
facilities.
Management believes that borrowings available under its revolving credit
facilities, cash generated from operations and current working capital of $175
million should be sufficient to meet the Company's anticipated future capital
requirements.
IMPACT OF FOREIGN CURRENCY EXCHANGE RATES
The Company is subject to the risk of unexpected changes in foreign
currency exchange rates by virtue of its operations in the United Kingdom and
Sweden. In accordance with generally accepted accounting principles, the
Company's foreign assets, liabilities, and earnings are converted into U.S.
dollars for consolidation into the Company's financial statements. At December
31, 1997, the Company had recorded a cumulative reduction to stockholders'
equity of $2.5 million as a result of fluctuations in foreign currency exchange
rates.
Net income from foreign operations during 1997, 1996 and 1995 translated
to $6.0 million, $5.9 million and $4.4 million, respectively. Future earnings
and comparisons with prior periods reported by the Company may fluctuate
depending on applicable currency exchange rates in effect during the periods.
COMPUTER SYSTEMS - THE YEAR 2000 ISSUE
The Company has taken actions to understand the nature and extent of the
work required to make its systems Year 2000 compliant. The Company is utilizing
both internal and external resources to identify, correct or reprogram and test
systems for Year 2000 compliance, but it has not yet completed that process. As
a result, the Company has not yet determined the Year 2000 compliance expense
and related potential effect on earnings. While this is an ongoing process and
these efforts will involve additional costs, the Company believes, based on
currently available information, that it will be able to manage its total Year
2000 transition without any material adverse effect on its business operations.
CAUTIONARY STATEMENT REGARDING RISKS AND UNCERTAINTIES
THAT MAY AFFECT FUTURE RESULTS
This Annual Report to Shareholders contains forward-looking statements
about the business, financial condition and prospects of the Company. The actual
results of the Company could differ materially from those indicated by the
forward-looking statements because of various risks and uncertainties including,
without limitation, changes in demand for the Company's services, changes in
competition, the ability of the Company to open new operating units in
accordance with its plans, economic conditions, real estate market fluctuations,
interest rate fluctuations, changes in the capital markets, changes in tax and
other laws and governmental rules and regulations applicable to the Company's
business, and other risks indicated in the Company's filings with the Securities
and Exchange Commission. These risks and uncertainties are beyond the ability of
the Company to control, and, in many cases, the Company cannot predict all of
the risks and uncertainties that could cause its actual results to differ
materially from those indicated by the forward-looking statements. When used in
this Annual Report to Shareholders, the words "believes," "estimates," "plans,"
"expects," "anticipates" and similar expressions as they relate to the Company
or its management are intended to identify forward-looking statements.
<PAGE> 3
16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
================================================================================
(Dollars in thousands - December 31)
SUMMARY
The Company has expanded its lending operations over the past three years by
increasing from 340 operating locations at December 31, 1994, to 401 operating
locations at December 31, 1997. The growth in locations is attributable to
acquisitions and the establishment of new units. Effective upon the close of
business on December 31, 1996, the Company purchased the remaining 51% interest
in Mr. Payroll Corporation, a franchiser of check cashing kiosks and service
centers. Mr. Payroll has expanded its check cashing and servicing operations in
1997 from 152 units at December 31, 1996, to 166 units at December 31, 1997.
Selected consolidated and operations data for the three years ended December 31,
1997 are presented below.
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
REVENUES
Finance and service charge revenues $ 104,138 $ 92,591 $ 78,857
Proceeds from disposition of merchandise 196,728 188,377 174,722
Royalties and franchise fees 2,500 -- --
--------- --------- ---------
TOTAL REVENUES 303,366 280,968 253,579
========= ========= =========
Cost of disposed merchandise 125,284 117,585 101,707
--------- --------- ---------
NET REVENUES $ 178,082 $ 163,383 $ 151,872
========= ========= =========
OTHER DATA
CONSOLIDATED OPERATIONS:
Net revenues by source -
Finance and service charge revenues 58.5% 56.7% 51.9%
Margin on disposition of merchandise 40.1% 43.3% 48.1%
Royalties and franchise fees 1.4% -- --
Expenses as a percentage of net revenues -
Operations and administration 69.6% 68.5% 69.2%
Depreciation and amortization 9.0% 9.9% 10.1%
Interest, net 6.5% 5.8% 6.9%
Income from operations before depreciation
and amortization as a percentage of total revenues 17.9% 18.3% 18.5%
Income before income taxes as a percentage
of total revenues 8.6% 8.9% 8.1%
========= ========= =========
LENDING OPERATIONS:
Annualized yield on loans 95% 96% 96%
Average loan balance per average location in operation $ 279 $ 255 $ 227
Average loan amount at year-end (not in thousands) $ 99 $ 99 $ 93
Margin on disposition of merchandise as a percentage
of proceeds from disposition of merchandise 36.4% 37.6% 41.8%
Average annualized merchandise turnover 2.5X 2.3x 1.7x
Average merchandise held for disposition
per average location $ 129 $ 138 $ 160
Locations in operation -
Beginning of year 382 373 340
Acquired 10 6 4
Start-ups 13 8 32
Combined or closed (4) (5) (3)
End of year 401 382 373
Average number of locations in operation 392 377 363
========= ========= =========
CHECK CASHING OPERATIONS:
Franchised check cashing units -
Checks cashed per average unit $ 5,017 -- --
Royalties and franchise fees per average unit $ 15 -- --
Units in operation at end of year 145 -- --
Average units in operation for the year 150 -- --
Automated check cashing machines in service -
Checks cashed per average machine $ 1,733 -- --
Verification and check cashing fees per average machine $ 11 -- --
Machines at end of year 21 -- --
Average number of machines for the year 5 -- --
</TABLE>
<PAGE> 4
17
SIX YEAR SUMMARY OF SELECTED FINANCIAL DATA
================================================================================
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS - years ended December 31
Total revenues $ 303,366 $ 280,968 $ 253,579 $ 262,105 $ 224,700 $ 185,410
Income from operations 38,214 35,313 31,493 31,370 25,262 21,694
--------- --------- --------- --------- --------- ---------
Income before income taxes and
cumulative effect of change
in accounting principle 26,157 25,108 20,616 24,958 21,766 20,348
--------- --------- --------- --------- --------- ---------
Income before cumulative effect of
change in accounting principle 16,579 15,684 12,849 15,498 13,839 13,006
Cumulative effect on prior years of
change in accounting principle -- -- (19,772) -- -- --
--------- --------- --------- --------- --------- ---------
Net income (loss) $ 16,579 $ 15,684 $ (6,923) $ 15,498 $ 13,839 $ 13,006
========= ========= ========= ========= ========= =========
Net income (loss) per share:
Basic -
Income before cumulative effect of
change in accounting principle $ .68 $ .55 $ (.45 $ .55 $ .49 $ .47
Cumulative effect of change
in accounting principle -- -- (.69) -- -- --
--------- --------- --------- --------- --------- ---------
Net income (loss) $ .68 $ .55 $ (.24) $ .55 $ .49 $ .47
--------- --------- --------- --------- --------- ---------
Diluted -
Income before cumulative effect of
change in accounting principle $ .66 $ .54 $ (.45 $ .54 $ .48 $ .45
Cumulative effect of change
in accounting principle -- -- (.69) -- -- --
--------- --------- --------- --------- --------- ---------
Net income (loss) $ .66 $ .54 $ (.24) $ .54 $ .48 $ .45
--------- --------- --------- --------- --------- ---------
Dividends per share $ .05 $ .05 $ .05 $ .05 $ .05 $ .04 3/4
--------- --------- --------- --------- --------- ---------
Weighted average shares:
Basic 24,281 28,703 28,633 28,410 28,289 27,701
Diluted 25,158 28,806 28,863 28,930 28,938 28,698
--------- --------- --------- --------- --------- ---------
Pro forma amounts: (a) (a) (a) (a)
Total revenues $ 303,366 $ 280,968 $ 253,579 $ 221,950 $ 191,851 $ 157,302
Income from operations 38,214 35,313 31,493 25,181 21,275 17,609
Net income 16,579 15,684 12,849 11,599 11,327 10,432
Net income per share - Basic $ .68 $ .55 $ .45 $ .41 $ .40 $ .38
Net income per share - Diluted $ .66 $ .54 $ .45 $ .40 $ .39 $ .36
========= ========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
1997 1996 1995 1994(a) 1993(a) 1992(a)
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL POSITION - at December 31
Loans $ 112,240 $ 107,679 $ 87,782 $ 78,095 $ 49,089 $ 46,926
Merchandise held for disposition, net 53,468 48,777 56,647 58,079 43,865 40,110
Working capital 175,477 164,998 161,533 148,347 101,854 96,541
Total assets 341,279 325,082 314,107 304,485 229,220 203,088
Total debt 150,428 150,365 123,462 119,796 64,000 50,000
Stockholders' equity 168,321 154,027 174,952 163,662 150,849 140,585
Current ratio 7.5x 7.6x 11.3x 8.1x 8.2x 8.7x
Debt to equity ratio 89.4% 97.6% 70.6% 73.2% 42.4% 35.6%
========= ========= ========= ========= ========= =========
LOCATIONS - at year-end
Lending operations 401 382 373 340 280 249
Check cashing operations 166 152 -- -- -- --
========= ========= ========= ========= ========= =========
</TABLE>
(a) Unaudited pro forma amounts assuming retroactive application of change in
accounting principle.
<PAGE> 5
18
CONSOLIDATED BALANCE SHEETS - December 31
================================================================================
(In thousands, except share data)
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,119 $ 1,334
Loans 112,240 107,679
Merchandise held for disposition, net 53,468 48,777
Finance and service charges receivable 17,414 15,248
Prepaid expenses and other 5,523 5,293
Deferred tax assets 12,529 11,643
--------- ---------
Total current assets 202,293 189,974
Property and equipment, net 66,388 62,818
Intangible assets, net 64,977 66,065
Other assets 7,621 6,225
--------- ---------
Total assets $ 341,279 $ 325,082
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 14,971 $ 13,959
Customer deposits 3,740 2,955
Income taxes currently payable 3,819 3,776
Current portion of long-term debt 4,286 4,286
--------- ---------
Total current liabilities 26,816 24,976
Long-term debt 146,142 146,079
--------- ---------
Commitments and contingencies (Note 15)
Stockholders' equity:
Common stock, $.10 par value per share, 80,000,000 shares
authorized; shares issued, 30,235,164 in 1997 and 1996 3,024 3,024
Paid in surplus 122,155 121,878
Retained earnings 91,337 75,973
Notes receivable - stockholders (1,337) (1,065)
Foreign currency translation adjustment (2,458) (386)
--------- ---------
212,721 199,424
Less - shares held in treasury, at cost (5,812,519 in 1997
and 5,975,670 in 1996) (44,400) (45,397)
--------- ---------
Total stockholders' equity 168,321 154,027
--------- ---------
Total liabilities and stockholders' equity $ 341,279 $ 325,082
========= =========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 6
19
CONSOLIDATED STATEMENTS OF INCOME - Years Ended December 31
================================================================================
(In thousands, except per share data)
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
REVENUES
Finance and service charge revenues $ 104,138 $ 92,591 $ 78,857
Proceeds from disposition of merchandise 196,728 188,377 174,722
Royalties and franchise fees 2,500 -- --
--------- --------- ---------
TOTAL REVENUES 303,366 280,968 253,579
--------- --------- ---------
Cost of disposed merchandise 125,284 117,585 101,707
--------- --------- ---------
NET REVENUES 178,082 163,383 151,872
========= ========= =========
OPERATING EXPENSES
Operations 101,218 92,270 88,147
Administration 22,703 19,680 16,937
Amortization 3,288 3,547 3,607
Depreciation 12,659 12,573 11,688
--------- --------- ---------
Total operating expenses 139,868 128,070 120,379
--------- --------- ---------
INCOME FROM OPERATIONS 38,214 35,313 31,493
Interest expense, net 11,644 9,429 10,437
Other expense 413 776 440
--------- --------- ---------
Income before income taxes 26,157 25,108 20,616
Provision for income taxes 9,578 9,424 7,767
--------- --------- ---------
Income before cumulative effect of change in accounting principle 16,579 15,684 12,849
Cumulative effect on prior years of change in accounting principle -- -- (19,772)
--------- --------- ---------
NET INCOME (LOSS) $ 16,579 $ 15,684 $ (6,923)
========= ========= =========
Net income (loss) per share:
Basic -
Income before cumulative effect of change in accounting principle $ .68 $ .55 $ .45
Cumulative effect of change in accounting principle -- -- (.69)
--------- --------- ---------
Net income (loss) $ .68 $ .55 $ (.24)
--------- --------- ---------
Diluted -
Income before cumulative effect of change in accounting principle $ .66 $ .54 $ .45
Cumulative effect of change in accounting principle -- -- (.69)
--------- --------- ---------
Net income (loss) $ .66 $ .54 $ (.24)
--------- --------- ---------
Weighted average shares:
Basic 24,281 28,703 28,633
Diluted 25,158 28,806 28,863
========= ========= =========
Unaudited pro forma amounts assuming retroactive application of
change in accounting principle:
Net income $ 16,579 $ 15,684 $ 12,849
Net income per share - Basic $ .68 $ .55 $ .45
Net income per share - Diluted $ .66 $ .54 $ .45
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 7
20
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - Years Ended December 31
================================================================================
(In thousands, except share data)
<TABLE>
<CAPTION>
Notes Foreign
Common Stock Receivable Currency Treasury Stock
----------------------- Paid In Retained Stock- Translation ---------------------
Shares Amount Surplus Earnings holders Adjustment Shares Amount
---------- ----------- ----------- ----------- ----------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1994 30,235,164 $ 3,024 $ 121,481 $ 70,081 $ -- $ (3,692) 1,666,099 $ (7,460)
Net loss (6,923)
Dividends declared -
$.05 per share (1,431)
Treasury shares reissued 297 (170,814) 726
Tax benefit from exercise
of option shares 62
Increase in notes
receivable - stockholders (1,071)
Foreign currency
translation adjustment (142)
---------- ----------- ----------- ----------- ----------- ----------- --------- ----------
Balance at
December 31, 1995 30,235,164 3,024 121,840 61,727 (1,071) (3,834) 1,495,285 (6,734)
Net income 15,684
Dividends declared -
$.05 per share (1,438)
Treasury shares purchased 4,500,000 (38,750)
Treasury shares reissued 27 (19,615) 87
Tax benefit from exercise
of option shares 11
Reduction in notes
receivable - stockholders 6
Foreign currency
translation adjustment 3,448
---------- ----------- ----------- ----------- ----------- ----------- --------- ----------
Balance at
December 31, 1996 30,235,164 3,024 121,878 75,973 (1,065) (386) 5,975,670 (45,397)
Net income 16,579
Dividends declared -
$.05 per share (1,215)
Treasury shares purchased 147,811 (1,375)
Treasury shares reissued (71) (310,962) 2,372
Tax benefit from exercise
of option shares 348
Increase in notes
receivable - stockholders (272)
Foreign currency
translation adjustment (2,072)
========== =========== =========== =========== =========== =========== ========= ==========
BALANCE AT
DECEMBER 31, 1997 30,235,164 $ 3,024 $ 122,155 $ 91,337 $ (1,337) $ (2,458) 5,812,519 $ (44,400)
========== =========== =========== =========== =========== =========== ========= ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 8
21
CONSOLIDATED STATEMENTS OF CASH FLOWS - Years Ended December 31
================================================================================
(In thousands)
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Finance and service charge revenues $ 101,562 $ 89,694 $ 77,343
Proceeds from disposition of merchandise 197,470 187,766 174,668
Royalties and franchise fees 2,500 -- --
Additions to merchandise held for disposition, including loans forfeited (129,191) (109,065) (100,024)
Operations and administration expenses (122,926) (109,486) (108,863)
Interest paid (12,005) (9,500) (9,766)
Other expense (413) (776) (440)
Income taxes paid (10,322) (6,761) (8,910)
--------- --------- ---------
Net cash provided by operating activities 26,675 41,872 24,008
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Loans forfeited and transferred to merchandise held for disposition 118,263 97,903 85,508
Loans repaid or renewed 265,662 250,438 226,856
Loans made, including loans renewed (391,216) (365,852) (319,733)
--------- --------- ---------
Net increase in loans (7,291) (17,511) (7,369)
--------- --------- ---------
Acquisitions (5,324) (3,401) (1,612)
Investments in and advances to affiliates (1,195) (3,250) (2,200)
Purchases of property and equipment (16,392) (7,206) (13,467)
Proceeds from sales of property and equipment 22 145 124
--------- --------- ---------
Net cash used by investing activities (30,180) (31,223) (24,524)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (payments) borrowings under bank lines of credit (21,751) 27,347 (19,347)
Proceeds from issuance of long-term debt 30,000 -- 20,000
Payment on notes payable (4,286) -- --
Net reduction (increase) in notes receivable - stockholders 243 6 (1,071)
Net proceeds from reissuance of treasury shares 1,786 114 581
Treasury shares purchased (1,375) (38,750) --
Dividends paid (1,215) (1,438) (1,431)
--------- --------- ---------
Net cash provided (used) by financing activities 3,402 (12,721) (1,268)
--------- --------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (112) (29) 392
--------- --------- ---------
DECREASE IN CASH AND CASH EQUIVALENTS (215) (2,101) (1,392)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,334 3,435 4,827
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,119 $ 1,334 $ 3,435
--------- --------- ---------
RECONCILIATION OF NET INCOME (LOSS) TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
Net income (loss) $ 16,579 $ 15,684 $ (6,923)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Cumulative effect of change in accounting principle -- -- 19,772
Amortization 3,288 3,547 3,607
Depreciation 12,659 12,573 11,688
(Increase) decrease in merchandise held for disposition, net (3,907) 8,520 1,683
Increase in finance and service charges receivable (2,576) (2,897) (1,514)
(Increase) decrease in prepaid expenses and other (265) 246 1,191
Increase (decrease) in accounts payable and accrued expenses 899 2,147 (4,299)
Increase (decrease) in customer deposits, net 742 (611) (54)
Increase (decrease) in income taxes payable 479 1,038 (1,014)
(Decrease) increase in deferred taxes, net (1,223) 1,625 (129)
--------- --------- ---------
Net cash provided by operating activities $ 26,675 $ 41,872 $ 24,008
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 9
22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 1 NATURE OF THE COMPANY
History and Operations - Cash America International, Inc. ("the Company") is a
diversified provider of specialty financial services to individuals in the
United States, United Kingdom, and Sweden. The Company offers secured
non-recourse loans to individuals, commonly referred to as pawn loans. Disposing
of merchandise, primarily collateral from unredeemed pawn loans, is a related
but secondary activity of the Company's lending function. In addition, the
Company provides check cashing services through its wholly owned subsidiary, Mr.
Payroll Corporation ("Mr. Payroll"). As of December 31, 1997, the Company
operated 401 lending units, 145 franchised check cashing units, and 21 automated
check cashing machines.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation - The consolidated financial statements include the
accounts of the Company's wholly owned subsidiaries and the Company's 49%
investment in and share of net earnings or losses of its unconsolidated
affiliate Express Rent-A-Tire, Ltd. ("Express") treated as an equity investment.
All significant intercompany accounts and transactions have been eliminated in
consolidation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions which affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Foreign Currency Translation - The assets and liabilities of international
subsidiaries are translated into United States dollars at the rates of exchange
in effect at the balance sheet date, and resulting adjustments are accumulated
as a separate component of stockholders' equity. Revenues and expenses are
translated at the monthly average exchange rates occurring during the year.
Cash and Cash Equivalents - The Company considers cash on hand in units,
deposits in banks and short-term marketable securities with original maturities
of 90 days or less as cash and cash equivalents.
Loans and Revenue Recognition - Pawn loans ("loans") are made on the pledge of
tangible personal property. The Company accrues finance and service charge
revenue on all loans that the Company deems collection is probable based on
historical loan redemption statistics. For loans not repaid, the carrying value
of the forfeited collateral ("merchandise held for disposition") is stated at
the lower of cost (cash amount loaned) or market.
Merchandise Held for Disposition, Proceeds from Disposition of Merchandise and
Cost of Disposed Merchandise - Merchandise held for disposition includes
merchandise acquired from unredeemed loans, merchandise purchased directly from
the public and merchandise purchased from vendors.
Merchandise held for disposition is stated at the lower of cost (specific
identification) or market. The Company provides an allowance for shrinkage and
valuation based on management's evaluation of the merchandise. The allowance
deducted from the carrying value of merchandise held for disposition amounted to
$2,158,000 and $2,078,000 at December 31, 1997 and 1996, respectively.
Revenue is recognized, and merchandise held for disposition is reduced, at
the time of disposition. Interim customer payments for layaway sales are
recorded as deferred revenue and subsequently recognized as revenue during the
period in which final payment is received. Cost of disposed merchandise and the
merchandise held for disposition reduction are computed on a specific
identification basis.
Property and Equipment - Property and equipment are recorded at cost.
Depreciation expense is generally provided on a straight-line basis, using
estimated useful lives of 15 to 30 years for buildings and 3 to 10 years for
equipment and leasehold improvements.
The cost of property retired or sold and the related accumulated
depreciation is removed from the accounts and any resulting gain or loss is
recognized in the income statement.
Intangible Assets - Intangible assets, consisting primarily of excess purchase
price over net assets acquired, are being amortized on a straight-line basis
over their expected periods of benefit, generally 25 to 40 years. Management
assesses the recoverability of intangible assets by comparing the intangible
assets to the undiscounted cash flows expected to be generated by the acquired
units during the anticipated period of benefit.
Pre-opening costs associated with the establishment of new units are
capitalized and expensed over twelve months from the date of opening.
Pre-opening costs remaining to be amortized totaled $104,000 and $88,000 at
December 31, 1997 and 1996, respectively,
Accumulated amortization of intangible assets was $19,216,000 and
$17,042,000 at December 31, 1997 and 1996, respectively.
<PAGE> 10
23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
================================================================================
Income Taxes - The provision for income taxes is based on pretax income as
reported for financial statement purposes. Deferred income taxes are provided in
accordance with the assets and liability method of accounting for income taxes
to recognize the tax effects of temporary differences between financial
statement and income tax accounting.
Deferred federal income taxes are not provided on the undistributed
earnings of foreign subsidiaries to the extent the Company intends to reinvest
such earnings overseas indefinitely.
Fair Values of Financial Instruments - Pawn loans are outstanding for a
relatively short period, generally 90 days or less for domestic loans and 180
days or less for foreign loans, depending on local regulations. The rate of
finance and service charge is determined by regulatory guidelines and bears no
valuation relationship to interest rate market movements. Generally, pawn loans
may not be resold to anyone but a licensed pawnbroker. For these reasons,
management believes that the fair value of pawn loans approximates their
carrying value. The Company's bank credit facilities bear interest at rates
which are adjusted frequently based on market rate changes. Accordingly,
management believes that the fair value of the debt approximates its carrying
value. The fair value of the 8.33%, 8.14% and 7.10% senior unsecured notes
payable is estimated based on market values for debt issues with similar
characteristics or rates currently available for debt with similar terms.
Management believes that the fair value of the senior unsecured notes
approximates the carrying value.
The Company's interest rate exchange agreement is repriced every three
months. Due to its short-term nature, the fair value of the interest rate
agreement approximates the carrying value.
Hedging and Derivatives Activity - The Company uses derivative financial
instruments for the purpose of hedging currency, on a short-term basis, and
interest rate exposures which exist as part of ongoing business operations. In
the event the Company transfers funds between currencies, it may enter into a
short-term currency swap at the time of the transaction to eliminate the risk of
currency fluctuations. The Company may utilize interest rate exchange and
interest rate cap agreements to control interest rate exposure. Amounts expected
to be paid or received on interest rate exchange and interest rate cap
agreements are recognized as adjustments to interest expense over the term of
the agreements. The Company may, from time to time, enter into forward sale
contracts with a major bullion bank to sell fine gold which is produced from the
Company's liquidation of forfeited gold merchandise in the normal course of
business. As a policy, the Company does not engage in speculative or leveraged
transactions, nor does the Company hold or issue financial instruments for
trading purposes.
Advertising Costs - Costs of advertising are expensed at the time of first
occurrence. Advertising expense was $3,444,000, $3,395,000 and $3,867,000 for
the years ended December 31, 1997, 1996 and 1995, respectively.
Stock Based Compensation - Effective January 1, 1996, the Company adopted
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("FAS 123") which establishes financial accounting and reporting
standards for stock-based employee compensation plans. The pronouncement defines
a fair value-based method of accounting for an employee stock option or similar
equity instrument. FAS 123 allows an entity to continue to measure compensation
cost for those plans using the intrinsic value-based method of accounting as
prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB 25"). The Company elected to remain with the
accounting in APB 25 and has made the pro forma disclosures of net income and
net income per share as if the fair value-based method of accounting defined in
FAS 123 had been applied.
Net Income (Loss) Per Share - Net income (loss) per share is calculated as
required by the Financial Accounting Standards Board ("FASB"), Statement of
Financial Accounting Standards No. 128 "Earnings per Share" ("FAS 128"), which
is effective for financial statements issued for periods ending after December
15, 1997. This standard requires dual presentation of basic and diluted earnings
per share and a reconciliation between the two amounts. Basic earnings per share
excludes dilution, and diluted earnings per share reflects the potential
dilution that would occur if securities or other contracts to issue common stock
were exercised and converted into common stock. The Company has implemented FAS
128 and all prior periods' net income (loss) per share have been restated to
comply with the standard.
The reconciliation between basic and diluted weighted average common
shares outstanding, follows:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
(In thousands)
<S> <C> <C> <C>
Weighted average
shares - Basic 24,281 28,703 28,633
Plus shares
applicable to stock option plans 877 103 230
------ ------ ------
Weighted average
shares - Diluted 25,158 28,806 28,863
====== ====== ======
</TABLE>
<PAGE> 11
24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
================================================================================
New Accounting Standards - In February 1997, the FASB issued Statement of
Financial Accounting Standards No. 129 "Disclosure of Information about Capital
Structure" ("FAS 129"). FAS 129 is effective for periods ending after December
15, 1997. The Company has provided the required additional footnote disclosures
concerning securities and participation rights, dividend and liquidation
preferences, and unusual voting rights.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130 "Reporting Comprehensive Income" ("FAS 130"). FAS 130 establishes
standards for reporting comprehensive income and its components in a full set of
financial statements. The new standard requires that all items that are to be
recognized under accounting standards as components of comprehensive income,
including an amount representing total comprehensive income, be reported in a
financial statement that is displayed with the same prominence as other
financial statements. Pursuant to FAS 130, the Company will be required to
display comprehensive income, including net income and foreign currency
translation adjustments, in its consolidated financial statements issued for
periods beginning January 1, 1998, and thereafter.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131 "Disclosures about Segments of an Enterprise and Related Information"
("FAS 131"). FAS 131 establishes reporting standards for a company's operating
segments in annual financial statements and the reporting of selected
information about operating segments in interim financial reports. The new
pronouncement also establishes standards for related disclosures about products
and services, geographic areas and major customers. The statement is effective
for financial statements for periods beginning after December 15, 1997. The
Company believes it will not be required to report segment information for the
year ending December 31, 1998.
Reclassifications - Certain amounts in the consolidated financial statements for
1996 and 1995 have been reclassified to conform with the presentation format
adopted in 1997. These reclassifications have no effect on the net income
previously reported.
NOTE 3 CHANGE IN ACCOUNTING PRINCIPLE
Effective January 1, 1995, the Company changed its method of revenue recognition
on pawn loans. The Company accrues finance and service charge revenue on all
loans that the Company deems collection is probable based on historical loan
redemption statistics. For loans not repaid, the carrying value of the forfeited
collateral ("merchandise held for disposition") is stated at the lower of cost
(cash amount loaned) or market.
Prior to 1995, finance and service charge revenue was accrued on all loans. For
loans not repaid, the carrying value of the merchandise held for disposition was
stated at the lower of cost (cash amount loaned plus accrued finance and service
charge revenue) or market. The Company believes the accounting change provides a
more timely matching of revenues and expenses with which to measure results of
operations. The cumulative effect of the accounting change on years prior to
January 1, 1995, of $19,772,000 (net of a tax benefit of $11,611,000) is
included as a reduction of 1995 net income.
The effect for 1995 of adopting the change in revenue recognition on pawn
loans was to decrease income before cumulative effect of change in accounting
principle $2,358,000 ($.08 per share) and net income $22,130,000 ($.77 per
share). The unaudited pro forma amounts shown in the statements of income
reflect the effect of retroactive application on finance and service charge
revenues, cost of disposed merchandise and related income taxes.
NOTE 4 ACQUISITIONS
The Company acquired a total of ten pawnshops for an aggregate cash
consideration of $5,324,000 and a total of six pawnshops for an aggregate cash
consideration of $3,401,000 in purchase transactions during 1997 and 1996,
respectively. The related assets and results of operations have been included in
the Company's financial statements from the dates of acquisition.
In 1994, the Company paid $2 million to acquire a 49% interest in Mr.
Payroll Corporation ("Mr. Payroll"), a franchiser of check-cashing kiosks and
service centers. Effective at the close of business on December 31, 1996, the
Company acquired, in a purchase transaction, the remaining 51% interest in Mr.
Payroll. The aggregate purchase price of the 51% interest is to be paid in three
annual installments in an amount equal to .9775 times the defined after-tax net
income of Mr. Payroll for the 1996, 1997 and 1998 fiscal years, respectively. No
consideration is payable based on Mr. Payroll's results of operations in 1997
and 1996, respectively. The assets and liabilities of Mr. Payroll are included
in the Company's Consolidated Balance Sheets at December 31, 1997 and 1996. Mr.
Payroll's results of operations have been included in the Company's financial
statements since January 1, 1997.
<PAGE> 12
25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
================================================================================
NOTE 5 PROPERTY AND EQUIPMENT
Major classifications of property and equipment at December 31, 1997 and 1996
were as follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
(In thousands)
<S> <C> <C>
Land $ 4,715 $ 4,724
Buildings and leasehold improvements 60,076 56,498
Furniture, fixtures and equipment 57,106 47,199
-------- --------
Total 121,897 108,421
Less - accumulated depreciation 55,509 45,603
-------- --------
Property and equipment - net $ 66,388 $ 62,818
======== ========
</TABLE>
NOTE 6 INVESTMENT IN AFFILIATE
On September 20, 1995, the Company acquired, for a nominal amount, a 49%
interest in Express, a private entity, which offers automobile and truck tires
and wheels on a rent-to-own basis. The Company also acquired an option for $1
million to purchase an additional 41% interest. In conjunction with its
investment, the Company entered into a revolving credit agreement which provides
for maximum borrowings of $4 million from the Company. Interest is payable
quarterly at a rate reset monthly that is equivalent to LIBOR plus 4%. As of
December 31, 1997, Express had borrowings outstanding of $3,595,000 at an
effective interest rate of 9.97%. Express granted the Company a security
interest in all of its assets. The entire unpaid principal is due and payable on
December 31, 1998. The investment in and advances to Express are included in
other assets.
NOTE 7 ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses at December 31, 1997 and 1996 were as
follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
(In thousands)
<S> <C> <C>
Trade accounts payable $ 2,920 $ 2,864
Accrued taxes, other than income 3,485 3,338
Accrued payroll and fringe benefits 5,278 3,917
Accrued interest payable 1,090 1,451
Other accrued liabilities 2,198 2,389
------- -------
Total $14,971 $13,959
======= =======
</TABLE>
NOTE 8 LONG-TERM DEBT
The Company's long-term debt at December 31, 1997 and 1996 consisted of:
<TABLE>
<CAPTION>
1997 1996
-------- --------
(In thousands)
<S> <C> <C>
U.S. Line of Credit up to $125 million due
June 30, 2001 $ 51,000 $ 71,750
U.K. Line of Credit up to (pound)5 million due
April 30, 1999 2,146 1,457
Swedish Lines of Credit up to SEK 215 million 21,567 27,158
8.33% senior unsecured notes due 2003 25,715 30,000
8.14% senior unsecured notes due 2007 20,000 20,000
7.10% senior unsecured notes due 2008 30,000 --
-------- --------
150,428 150,365
Less current portion 4,286 4,286
-------- --------
Total long-term debt $146,142 $146,079
======== ========
</TABLE>
Interest on the U.S. Line of Credit is charged, at the Company's option,
at either a margin over LIBOR (1.0% at December 31, 1997) or at the Agent's base
rate. The Company pays a fee of .25% per annum on the unused portion. During the
year ended December 31, 1997, the weighted average amount outstanding was
$79,571,000, and the effective interest rate was 6.87% after taking into account
the interest rate cap agreements. As of December 31, 1997, the Company held
interest rate cap agreements totalling $40,000,000 which limit the maximum LIBOR
rate to 6%. $20,000,000 will expire on December 10, 1999, and $20,000,000 will
expire on September 18, 2000.
Interest on the U.K. Line of Credit is charged at the Bank's cost of funds
plus a margin of 60 basis points for borrowings less than 14 days, and a margin
of 55 basis points for borrowings of 14 days or more. The Company pays a fee of
.15% per annum on the unused portion. During the year ended December 31, 1997,
the weighted average amount outstanding was (pound)1,284,000 (approximately
$2,105,000), and the effective interest rate was 7.31%.
During 1997, the company converted its Swedish term loan to an SEK
185,000,000 ($23,300,000 as of December 31, 1997) line of credit maturing
September 30, 2002 (the "1997 Swedish Line of Credit"). Interest is charged at
the Stockholm InterBank Offered Rate ("STIBOR") plus a margin of 1.0%. Interest
on SEK 118,750,000 ($14,956,000 as of December 31, 1997) of the 1997 Swedish
Line of Credit is payable at a fixed rate of 10.93% pursuant to a floating to
fixed interest rate exchange agreement that will expire on August 17, 1998. The
Company pays a fee of .25% per annum on the unused portion. The Company also has
an SEK 30,000,000 ($3,778,000 as of December 31, 1997) line of credit with a
commercial bank
<PAGE> 13
26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
================================================================================
maturing January 1, 2000 (the "1995 Swedish Line of Credit"). Interest is
charged at the Bank's base funding rate plus 1.0%. The Company pays a fee of
.375% per annum on the unused portion. As of December 31, 1997, amounts
outstanding under the 1997 and 1995 Swedish Lines of Credit were SEK 165,000,000
($20,781,000), and SEK 6,305,000 ($786,000), respectively. During the year ended
December 31, 1997, the weighted average amount outstanding under both lines of
credit and the term loan was SEK 184,836,000 (approximately $24,197,000) and the
effective interest rate, including the impact of the floating to fixed interest
rate exchange agreement, was 8.92%.
In December 1997, the Company issued $30,000,000 of Senior Unsecured Notes
with a final maturity of January 2, 2008. The 7.10% notes are payable in seven
equal annual payments beginning January 2, 2002.
All debt instruments are unsecured and governed by agreements that have
provisions that require the Company to maintain certain financial ratios and
limit specific payments and equity distributions.
The annual maturities of long-term debt through 2002 are: 1998 - $4.3
million; 1999 - $6.4 million; 2000 - $4.3 million; 2001 - $55.3 million; 2002 -
$30.1 million.
NOTE 9 INCOME TAXES
The components of the Company's deferred tax assets and liabilities as of
December 31 are as follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
(In thousands)
<S> <C> <C>
Deferred tax assets:
Provision for valuation of merchandise
held for disposition $ 527 $ 499
Tax over book accrual of finance and
service charge revenues 12,125 11,003
Book over tax depreciation 911 461
Net operating loss carryforwards 1,210 1,335
Other 833 651
-------- --------
Total deferred tax assets 15,606 13,949
Valuation allowance for deferred tax assets (405) (547)
-------- --------
Net deferred tax assets $ 15,201 $ 13,402
======== ========
Deferred tax liabilities:
Deferred acquisition and start-up costs $ 207 $ 200
Amortization of acquired intangibles 763 589
Foreign tax reserves 681 543
Other 398 242
-------- --------
Total deferred tax liabilities $ 2,049 $ 1,574
-------- --------
Net deferred tax assets $ 13,152 $ 11,828
-------- --------
Balance sheet classification:
Current deferred tax assets $ 12,529 $ 11,643
Included in non-current assets 623 185
-------- --------
Net deferred tax assets $ 13,152 $ 11,828
======== ========
</TABLE>
The components of the provision for income taxes and the income to which
it relates for the years ended December 31 are shown below:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(In thousands)
<S> <C> <C> <C>
Income before income taxes:
Domestic $17,362 $16,427 $13,961
Foreign 8,795 8,681 6,655
------- ------- -------
$26,157 $25,108 $20,616
======= ======= =======
</TABLE>
Provision for income taxes:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Current portion of provision:
Federal $ 7,717 $ 4,906 $ 6,127
Foreign 2,380 2,572 1,536
State and local 704 440 437
-------- -------- --------
$ 10,801 $ 7,918 $ 8,100
======== ======== ========
Deferred portion of provision (benefit):
Federal $ (1,463) $ 1,376 $ (624)
Foreign 409 249 351
State and local (169) (119) (60)
-------- -------- --------
$ (1,223) $ 1,506 $ (333)
-------- -------- --------
Total provision $ 9,578 $ 9,424 $ 7,767
======== ======== ========
</TABLE>
The effective tax rate differs from the federal statutory rate for the
following reasons:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(In thousands)
<S> <C> <C> <C>
Tax provision computed at the
statutory federal income tax rate $ 9,155 $ 8,788 $ 7,216
Non-deductible amortization of
intangible assets 517 465 465
Foreign tax rate difference (530) (240) (547)
Other 436 411 633
------- ------- -------
Total provision $ 9,578 $ 9,424 $ 7,767
======= ======= =======
Effective tax rate 36.6% 37.5% 37.7%
======= ======= =======
</TABLE>
As of December 31, 1997, the Company has net operating loss carryforwards
of $3,457,000 for U.S. income tax purposes. This amount consists of $287,000
from the 1993 acquisition of Express Cash International Corporation ("Express
Cash") and $3,170,000 from the 1996 acquisition of Mr. Payroll Corporation. The
loss carryforward attributable to Express Cash expires in 2007, while the loss
carryforwards for Mr. Payroll expire from 2009 through 2011. The losses can be
used to offset future taxable income of the companies that incurred such
<PAGE> 14
27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
================================================================================
losses. The amount of the Express Cash loss carryforwards which the Company can
utilize each year is limited to approximately $342,000. The valuation allowance
remaining at December 31, 1997 and 1996 relates to net operating loss
carryforwards of Mr. Payroll. When realized, the tax benefits from these
carryforwards will be applied to reduce goodwill from the acquisition of Mr.
Payroll.
Domestic income taxes have not been provided on undistributed earnings of
foreign subsidiaries to the extent that it is the Company's intent to reinvest
these earnings overseas indefinitely. Upon distribution of accumulated earnings
of all foreign subsidiaries, the Company would be subject to U.S. income taxes
(net of foreign tax credits) of approximately $300,000.
NOTE 10 EMPLOYEE BENEFIT PLANS
The Cash America International, Inc. 401(k) Savings Plan was amended July 1,
1996, to expand eligibility and increase benefit levels. The 401(k) Savings Plan
is open to substantially all domestic employees after six months of employment.
The Cash America International, Inc. Nonqualified Savings Plan, which commenced
on July 1, 1996, is available to certain members of management. Participants may
contribute up to 15% of their earnings to these plans. The Company makes
matching contributions of 50% of each participant's contributions, based on
participant contributions of up to 5% of compensation. Company contributions
vest at the rate of 20% each year after one year of service; thus a participant
is 100% vested after five years of service. The Company provides benefits under
separate retirement plans for eligible employees in foreign countries.
Total Company contributions to retirement plans were $575,000, $367,000
and $207,000 in 1997, 1996 and 1995, respectively.
NOTE 11 STOCKHOLDERS' EQUITY
In December 1996, the Company purchased 4,500,000 treasury shares of its common
stock in a "Dutch Auction" tender offer for $38,250,000 plus $500,000 in
expenses related to the offer.
In January 1997, the Board of Directors authorized the purchase of up to
1,000,000 shares of the Company's common stock. During 1997, 119,900 shares were
purchased for an aggregate amount of $1,081,000.
NOTE 12 STOCK PURCHASE RIGHTS
On August 5, 1997, the Board of Directors of the Company declared a dividend
distribution of one Common Stock Purchase Right (the "Right") for each
outstanding share of its common stock. The Rights become exercisable in the
event a person or group acquires 15% or more of the Company's common stock or
announces a tender offer, the consummation of which would result in ownership by
a person or group of 15% or more of the common stock. If any person becomes a
15% or more shareholder of the Company, each Right (subject to certain limits)
will entitle its holder (other than such person or members of such group) to
purchase, for $37.00, the number of shares of the Company's common stock
determined by dividing $74.00 by the then current market price of the common
stock. The rights will expire on August 5, 2007.
NOTE 13 STOCK OPTIONS
During 1997, 1996, and 1995, the Company granted stock options under various
plans (the "Plans") it sponsored. The Company applies APB Opinion 25 and related
Interpretations in accounting for the Plans. In 1995, the FASB issued FAS 123
which, if fully adopted by the Company, would change the methods the Company
applies in recognizing the cost of the Plan. Adoption of the cost recognition
provisions of FAS 123 is optional and the Company has decided not to elect these
provisions of FAS 123. However, pro forma disclosures as if the Company adopted
the fair value-based cost recognition provisions of FAS 123 are presented below:
<TABLE>
<CAPTION>
Year Ended December 31
1997 1996 1995
---------- ---------- ----------
(In thousands)
<S> <C> <C> <C>
Net Income (loss)
As reported $ 16,579 $ 15,684 $ (6,923)
Pro forma $ 16,299 $ 15,675 $ (6,974)
---------- ---------- ----------
Earnings (loss) per share
Basic:
As reported $ .68 $ .55 $ (.24)
Pro forma $ .67 $ .55 $ (.24)
---------- ---------- ----------
Diluted:
As reported $ .66 $ .54 $ (.24)
Pro forma $ .65 $ .54 $ (.24)
---------- ---------- ----------
</TABLE>
The effects of applying FAS 123 in the pro forma amounts above are not
indicative of future effects. FAS 123 does not apply to awards granted prior to
the 1995 fiscal year.
<PAGE> 15
28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
================================================================================
Under the Plans, the Company is authorized to issue 5,900,000 shares of
Common Stock pursuant to "Awards" granted as incentive stock options (intended
to qualify under Section 422 of the Internal Revenue Code of 1986, as amended)
and nonqualified stock options.
The Company granted nonqualified stock options in 1997, 1996, and 1995 to
employees and directors. The stock options granted have contractual terms of 5
to 15 years. All of the options granted to the employees and directors have an
exercise price equal to or greater than the fair market value of the stock at
grant date. Most of the options granted in 1996 and 1995 vest ratably over a
four-year period beginning on the first anniversary of the date of grant. Some
options granted during 1997 become fully vested on the seventh anniversary of
the date of grant, but vesting will accelerate if specified share price
appreciation criteria are met. Other 1997 options vest on the third anniversary
of the date of grant.
A summary of the Company's stock option activity during the three-year
period ending December 31, 1997 is as follows (shares in thousands):
<TABLE>
<CAPTION>
Year Ended December 31, 1997 1996 1995
----------------- ----------------- -----------------
WEIGHTED Weighted Weighted
AVERAGE Average Average
EXERCISE Exercise Exercise
SHARES PRICES Shares Prices Shares Prices
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 3,759 $ 6.63 3,959 $ 6.76 4,143 $ 6.81
Granted 1,028 $ 10.17 25 $ 6.63 173 $ 5.74
Exercised 311 $ 7.40 -- NA 155 $ 5.94
Forfeited 24 $ 9.38 39 $ 7.24 70 $ 8.30
Expired 18 $ 7.75 186 $ 9.30 132 $ 9.02
------ -------- ------ -------- ------ --------
Outstanding at end of year 4,434 $ 7.40 3,759 $ 6.63 3,959 $ 6.76
------ -------- ------ -------- ------ --------
Exercisable at end of year 3,189 $ 6.53 3,351 $ 6.58 3,309 $ 6.67
------ -------- ------ -------- ------ --------
Weighted average fair value of
options granted $4.03 $1.96 $1.57
----- ----- -----
</TABLE>
The fair value of each stock option granted is estimated on the date of
grant using the Black-Scholes option-pricing model with the following weighted
average assumptions for grants in fiscal 1997, 1996, and 1995:
<TABLE>
<CAPTION>
Year Ended December 31, 1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Expected term (years) 7.2 4.5 4.5
Risk-free interest rate 6.21% 6.51% 5.53%
Expected dividend yield 0.50% 0.75% 0.87%
Expected volatility 23.5% 23.5% 23.5%
</TABLE>
Options outstanding as of December 31, 1997 are summarized below (shares in
thousands):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------------------------- ----------------------------------
WEIGHTED
AVERAGE YEARS
OF REMAINING WEIGHTED WEIGHTED
RANGE OF NUMBER CONTRACTUAL AVERAGE NUMBER AVERAGE EXERCISE
EXERCISE PRICES OUTSTANDING LIFE EXERCISE PRICE EXERCISABLE PRICE
--------------- ----------- ------------- -------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$5.63 TO $7.00 2,891 6.63 $6.31 2,802 $6.33
$7.01 TO $10.81 1,543 7.30 $9.43 387 $8.02
--------------- ----- ---- ----- ----- -----
$5.63 TO $10.81 4,434 6.86 $7.40 3,189 $6.53
</TABLE>
<PAGE> 16
29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
================================================================================
NOTE 14 BUSINESS SEGMENT INFORMATION
The Company operates in the pawn and check cashing service industries. In
addition to its domestic lending operations, it has pawn subsidiaries in the
United Kingdom and Sweden, and a wholly owned subsidiary, Mr. Payroll.
<TABLE>
<CAPTION>
PAWN OPERATIONS
-----------------------
UNITED STATES FOREIGN MR. PAYROLL CONSOLIDATED
------------- -------- ----------- ------------
(In thousands)
<S> <C> <C> <C> <C>
1997
Total revenues $275,775 $ 24,341 $ 3,250 $303,366
Income (loss) from
operations 28,837 11,059 (1,682) 38,214
Total assets excluding
cash and equivalents 257,436 69,927 12,797 340,160
1996
Total revenues $257,381 $ 23,587 $ -- $280,968
Income from operations 24,058 11,255 -- 35,313
Total assets excluding
cash and equivalents 244,006 72,901 6,841 323,748
1995
Total revenues $233,250 $ 20,329 n/a $253,579
Income from operations 22,627 8,866 n/a 31,493
Total assets excluding
cash and equivalents 249,893 60,779 n/a 310,672
</TABLE>
NOTE 15 COMMITMENTS AND CONTINGENCIES
The Company leases certain of its pawnshop facilities under operating leases
with terms ranging from three to ten years, with certain rights to extend for
additional periods. Future minimum rentals due under non-cancelable leases are
as follows for each of the years ending December 31:
<TABLE>
<S> <C>
1998 $14,292
1999 10,757
2000 6,448
2001 4,575
2002 2,202
Later years 6,830
-------
Total $45,104
=======
</TABLE>
Rent expense was $15,949,000, $14,936,000 and $14,285,000 for 1997, 1996
and 1995, respectively.
The Company is party to a number of lawsuits arising in the normal course
of business. In the opinion of management, the resolution of these matters will
not have a material adverse effect on the Company's financial position, results
of operations or liquidity.
<PAGE> 17
30
REPORT OF INDEPENDENT ACCOUNTANTS
================================================================================
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
CASH AMERICA INTERNATIONAL, INC.
We have audited the accompanying consolidated balance sheets of Cash
America International, Inc. and Subsidiaries as of December 31, 1997 and 1996,
and the related consolidated statements of income, stockholders' equity, and
cash flows for each of the three years in the period ended December 31, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Cash America
International, Inc. and Subsidiaries as of December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
As discussed in Note 3 to the consolidated financial statements, the
Company changed its method of revenue recognition on pawn loans effective
January 1, 1995.
COOPERS & LYBRAND L.L.P.
Fort Worth, Texas
January 20, 1998
<PAGE> 18
31
INCOME STATEMENT QUARTERLY DATA (Unaudited)
================================================================================
(In thousands, except per share data)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
1997 QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
Total revenues $76,519 $69,419 $70,311 $87,117
Margin on disposition of merchandise $17,703 $16,237 $15,599 $21,905
Net income $ 3,790 $ 3,011 $ 3,442 $ 6,336
Net income per share - diluted* $ .15 $ .12 $ .14 $ .25
Weighted average shares - diluted* 24,875 24,949 25,224 25,568
1996
Total revenues $68,540 $65,927 $64,674 $81,827
Margin on disposition of merchandise $17,964 $16,472 $14,951 $21,405
Net income $ 3,210 $ 2,770 $ 3,463 $ 6,241
Net income per share - diluted* $ .11 $ .10 $ .12 $ .22
Weighted average shares - diluted* 28,740 28,754 28,930 28,887
</TABLE>
* Net income per share and weighted average shares have been restated to
conform to the requirements of FAS 128. See Note 2 of Notes to
Consolidated Financial Statements for further discussion.
COMMON STOCK DATA
================================================================================
The New York Stock Exchange is the principal exchange on which Cash
America International, Inc. common stock is traded. There were 954 stockholders
of record (not including individual participants in security listings) as of
February 18, 1998. The high and low sales prices of common stock as quoted on
the composite tape of the New York Stock Exchange and cash dividends per share
during 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
1997 QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
High $ 10.50 $ 10.50 $ 11.75 $ 13.75
Low 8.00 8.50 9.50 10.88
Close 9.75 10.50 11.25 12.94
Cash dividend per share $ .01 1/4 $ .01 1/4 $ .01 1/4 $ .01 1/4
1996
High $ 6.50 $ 6.75 $ 7.63 $ 8.50
Low 4.75 5.13 6.00 6.88
Close 5.38 6.50 7.13 8.50
Cash dividend per share $ .01 1/4 $ .01 1/4 $ .01 1/4 $ .01 1/4
</TABLE>
<PAGE> 19
32
CORPORATE INFORMATION
================================================================================
<TABLE>
<CAPTION>
BOARD OF DIRECTORS EXECUTIVE OFFICERS OTHER INFORMATION
<S> <C> <C>
JACK R. DAUGHERTY (a) JACK R. DAUGHERTY CORPORATE OFFICES
Chairman of the Board and Chairman of the Board and Cash America International Building
Chief Executive Officer Chief Executive Officer 1600 West 7th Street
Cash America International, Inc. Fort Worth, Texas 76102-2599
DANIEL R. FEEHAN (817) 335-1100
A.R. DIKE (b)(d) President and
Chairman Chief Operating Officer TRANSFER AGENT AND REGISTRAR
Willis Corroon Life, Inc. ChaseMellon Shareholder Services
JAMES H. KAUFFMAN 2323 Bryan St., Ste. 2300
DANIEL R. FEEHAN (a) President Dallas, Texas 76201-2656
President and Cash America Pawn 1-800-635-9270
Chief Operating Officer
Cash America International, Inc. MICHAEL C. STINSON INDEPENDENT PUBLIC ACCOUNTANTS
President Coopers & Lybrand L.L.P.
JAMES H. GRAVES (a)(b) Mr. Payroll Corporation Fort Worth, Texas
Managing Director and Partner
J.C. Bradford & Co. ROBERT D. BROCKMAN INVESTOR RELATIONS
Executive Vice President Information requests
B.D. HUNTER (a)(b) Administration should be forwarded to:
Chairman of the Board Thomas A. Bessant, Jr.
Huntco, Inc. MICHAEL D. GASTON
Executive Vice President STOCK LISTING
TIMOTHY J. MCKIBBEN (a)(c) Business Development New York Stock Exchange (NYSE)
Chairman of the Board Symbol: PWN
Ancor Holdings L.L.C. THOMAS A. BESSANT, JR.
Senior Vice President ANNUAL STOCKHOLDERS' MEETING
ALFRED M. MICALLEF (d) Chief Financial Officer and Treasurer April 21, 1998 9:00 am
Chief Executive Officer Fort Worth Club Building
JMK International, Inc. WILLIAM R. HORNE 12th Floor
Senior Vice President 306 West 7th Street
CARL P. MOTHERAL (d) Information Technology Fort Worth, Texas
Chairman
Motheral Printing Company HUGH A. SIMPSON
Senior Vice President
SAMUEL W. RIZZO (a)(c) General Counsel and Secretary A copy of the Company's Annual Report to the
Consultant; Private Investor Securities and Exchange Commission on Form
WILLIAM J. WHITE 10-K can be obtained without charge upon
ROSALIN ROGERS (a)(c) Senior Vice President written request to the office of Investor
Private Investor Public and Governmental Relations Relations.
(a) Executive Committee Member
(b) Compensation Committee Member
(c) Audit Committee Member
(d) Stock Option Committee Member
Design: Graphic Concepts Group
Printing: Motheral Printing
</TABLE>
<PAGE> 20
CASH AMERICA INTERNATIONAL, INC.
1600 WEST 7TH STREET
FORT WORTH, TEXAS 76102
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 21, 1998
To Our Shareholders:
The Annual Meeting of Shareholders of Cash America International, Inc. (the
"Company") will be held at the Fort Worth Club, 12th Floor, Fort Worth Club
Building, 306 West 7th Street, Fort Worth, Texas on Tuesday, April 21, 1998 at
9:00 a.m., Fort Worth Time, for the following purposes:
(1) Election of eleven (11) persons to serve as directors of the
Company to hold office until the next annual meeting of shareholders or
until their successors are duly elected and qualified;
(2) To consider and act upon a proposal to ratify the appointment of
Coopers & Lybrand L.L.P. as independent auditors of the Company for the
year 1998; and
(3) To transact such other business as may properly come before the
meeting or any adjournments thereof.
Only holders of record of the Common Stock of the Company at the close of
business on March 3, 1998 are entitled to notice of and to vote at the Annual
Meeting. The presence, in person or by proxy, of the holders of a majority of
the issued and outstanding Common Stock entitled to vote at the meeting is
required for a quorum to transact business. The stock transfer books will not be
closed.
Management sincerely desires your presence at the meeting. However, so that
we may be sure that your shares are represented and voted in accordance with
your wishes, please sign and date the enclosed proxy and return it promptly in
the enclosed stamped envelope. If you attend the meeting, you may revoke your
proxy and vote in person.
By Order of the Board of Directors,
HUGH A. SIMPSON
Secretary
Fort Worth, Texas
March 16, 1998
<PAGE> 21
CASH AMERICA INTERNATIONAL, INC.
1600 WEST 7TH STREET
FORT WORTH, TEXAS 76102
(PRINCIPAL EXECUTIVE OFFICES)
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
APRIL 21, 1998
SOLICITATION OF PROXIES
The proxy statement and accompanying proxy are furnished in connection with
the solicitation by the Board of Directors of Cash America International, Inc.,
a Texas corporation (the "Company"), of proxies to be voted at the Annual
Meeting of Shareholders (the "Annual Meeting") to be held at the Fort Worth Club
located on the 12th Floor of the Fort Worth Club Building, 306 West 7th Street,
Fort Worth, Texas on Tuesday, April 21, 1998 at 9:00 a.m., Fort Worth Time and
at any recess or adjournment thereof. The solicitation will be by mail, and this
Proxy Statement and the accompanying form of proxy will be mailed to
shareholders on or about March 16, 1998.
The enclosed proxy, even though executed and returned, may be revoked at
any time prior to the voting of the proxy by giving written notice of revocation
to the Secretary of the Company at its principal executive offices or by
executing and delivering a later-dated proxy or by attending the Annual Meeting
and voting in person. However, no such revocation shall be effective until such
notice has been received by the Company at or before the Annual Meeting. Such
revocation will not affect a vote on any matters taken prior to receipt of such
revocation. Mere attendance at the Annual Meeting will not of itself revoke the
proxy.
The expense of such solicitation will be borne by the Company and will
include reimbursement paid to brokerage firms and other custodians, nominees and
fiduciaries for their expenses in forwarding solicitation material regarding the
meeting to beneficial owners. The Company has retained Kissel-Blake Inc. to
assist in the solicitation of proxies from shareholders, and will pay such firm
a fee for its services of approximately $5,000.00. Further solicitation of
proxies may be made by telephone, telegraph or oral communication following the
original solicitation by directors, officers and regular employees of the
Company or by its transfer agent who will not be additionally compensated
therefor, but will be reimbursed by the Company for out-of-pocket expenses.
A copy of the Annual Report to Shareholders of the Company for its fiscal
year ended December 31, 1997 is being mailed with this Proxy Statement to all
shareholders entitled to vote, but does not form any part of the information for
solicitation of proxies.
VOTING SECURITIES OUTSTANDING; QUORUM
The record date for the determination of shareholders entitled to notice of
and to vote at the Annual Meeting was the close of business on March 3, 1998
(the "Record Date"). At the close of business on March 3, 1998, there were
24,445,218 shares of Common Stock, par value $.10 per share, issued and
outstanding, each of which is entitled to one vote on all matters properly
brought before the meeting. There are no cumulative voting rights. The presence
in person or by proxy of the holders of a majority of the issued and outstanding
shares of Common Stock on the Record Date is necessary to constitute a quorum at
the Annual Meeting. Assuming the presence of a quorum, the affirmative vote of a
majority of the shares of Common Stock present, or represented by proxy, and
entitled to vote at the Annual Meeting is necessary for the election of
directors and for ratification of the appointment of independent auditors.
Shares voted for a proposal and shares represented by returned proxies that do
not contain instructions to vote against a proposal
<PAGE> 22
or to abstain from voting will be counted as shares cast for the proposal.
Shares will be counted as cast against the proposal if the shares are voted
either against the proposal or to abstain from voting. Broker non-votes will not
change the number of votes for or against the proposal and will not be treated
as shares entitled to vote, but such shares will be counted for purposes of
determining the presence of a quorum.
PURPOSES OF THE ANNUAL MEETING
At the Annual Meeting, the shareholders of the Company will consider and
vote on the following matters:
(1) Election of eleven (11) persons to serve as directors of the
Company to hold office until the next annual meeting of shareholders or
until their successors are duly elected and qualified;
(2) Ratification of the appointment of Coopers & Lybrand L.L.P. as
independent auditors of the Company for the year 1998; and
(3) Such other business as may properly come before the meeting or any
adjournments thereof.
ELECTION OF DIRECTORS
The Company's Board of Directors for the ensuing year will consist of
eleven (11) members who are to be elected for a term expiring at the next annual
meeting of shareholders or until their successors shall be elected and shall
have qualified. The following slate of eleven nominees has been chosen by the
Board of Directors and the Board recommends that each be elected. Unless
otherwise indicated in the enclosed form of Proxy, the persons named in such
proxy intend to nominate and vote for the election of the following nominees for
the office of director. All of such nominees except Clifton H. Morris, Jr. are
presently serving as directors.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DIRECTOR
NAME AND AGE DURING PAST FIVE YEARS SINCE
------------ ---------------------- --------
<S> <C> <C>
Jack Daugherty Chairman of the Board and Chief Executive Officer of 1983
(50) the Company since its inception. Mr. Daugherty has
owned and operated pawnshops since 1971.
A. R. Dike Mr. Dike has owned and served as Chairman of the Board 1988
(62) and Chief Executive Officer of The Dike Co., Inc. (a
private insurance agency) for the past twenty years.
He was Chairman and Chief Executive Officer of The
Insurance Alliance, Inc. from January 1988 to September
1991 and has been Chairman of Willis Corroon Life, Inc.
of Texas since September 1991.
Daniel R. Feehan President and Chief Operating Officer of the Company 1984
(47) since January 1990.
James H. Graves Managing Director of J. C. Bradford & Co., a Nashville 1996
(49) based securities firm, where he has worked for more
than five years.
B. D. Hunter Mr. Hunter is the founder of Huntco, Inc., an 1984
(68) intermediate steel processing company, and for more
than five years has served as its Chairman of the Board
and Chief Executive Officer.
Timothy J. McKibben Chairman of the Board of Ancor Holdings, a private 1996
(49) investment firm, since 1993, and prior to that,
Chairman of the Board and President of Anago
Incorporated, a company he co-founded in 1978 that
manufactures disposable medical products.
</TABLE>
2
<PAGE> 23
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DIRECTOR
NAME AND AGE DURING PAST FIVE YEARS SINCE
------------ ---------------------- --------
<S> <C> <C>
Alfred M. Micallef President since 1974, and currently Chief Executive 1996
(55) Officer, of JMK International, Inc., a holding company
of rubber and plastics manufacturing businesses.
Carl P. Motheral Mr. Motheral has served over twenty-five years as 1983
(71) President and Chief Executive Officer and also Director
of Motheral Printing Company (a commercial printing
company).
Samuel W. Rizzo Consultant and private investor since 1995, and prior 1984
(62)(a)(c) to that Executive Vice President of Service Corporation
International ("SCI"), a publicly held company that
owns and operates funeral homes and related businesses,
since February 1990.
Rosalin Rogers Private investor since 1986, and prior to that a 1996
(47) principal with the brokerage firm of Financial First,
Inc. in New York, New York.
Clifton H. Morris, Jr. Chairman of the Board and Chief Executive Officer of --
(62) AmeriCredit Corp., a national automobile consumer finance
company, since July 1988. (Mr. Morris served as a director
of the Company from 1984 to 1996.)
</TABLE>
Each nominee for election as a director has consented to serve if elected.
The Board of Directors does not contemplate that any of the above-named nominees
for director will be unable to accept election as a director of the Company.
Should any of them become unavailable for election as a director of the Company
then the persons named in the enclosed form of proxy intend to vote such shares
represented in such proxy for the election of such other person or persons as
may be nominated or designated by the Board of Directors.
Certain nominees for director of the Company hold directorships in
companies with a class of securities registered pursuant to Section 12 of the
Securities Exchange Act of 1934. Mr. Hunter is a director of Mark Twain
Bancshares, Inc., Celebrity, Inc., SCI, and Huntco Inc. Messrs. Daugherty, Rizzo
and Graves are directors of Hallmark Financial Services, Inc. Mr. Feehan is a
director of KBK Capital Corporation. Mr. Morris is a director of AmeriCredit
Corp. and SCI. Also, Mr. Rizzo is a director of Tanknology Environmental, Inc.
and Mr. Micallef is a director of Snyder Oil Company.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held six meetings during the fiscal year ended
December 31, 1997. Standing committees of the Board include the Executive
Committee, Audit Committee, Executive Compensation Committee, and Stock Option
Committee. The Company does not have a Nominating Committee.
The Audit Committee's principal responsibilities consist of (a)
recommending the selection of independent accountants, (b) reviewing the scope
of the audit conducted by such auditors, as well as the audit itself, and (c)
reviewing the Company's internal audit activities and matters concerning
financial reporting, accounting and audit procedures, and policies generally.
Its members are Messrs. Rizzo and McKibben and Ms. Rogers. The Audit Committee
held three meetings during fiscal 1997.
The Executive Compensation Committee oversees and administers the Company's
executive compensation program and administers the Company's 1994 Long-Term
Incentive Plan. Its decisions relating to executive compensation are reviewed by
the full Board of Directors. Its members are Messrs. Hunter, Dike and Graves.
The Committee held three meetings during fiscal 1997.
The Stock Option Committee has the general duty to administer the Company's
1987 Stock Option Plan (with Stock Appreciation Rights) and the 1989 Key
Employee Plan. Its members are Messrs. Dike, Micallef and Motheral. The Stock
Option Committee held no meetings during fiscal year 1997.
3
<PAGE> 24
All directors attended 75% or more of the total number of meetings of the
Board and of committees on which they serve.
DIRECTORS' COMPENSATION
Directors each receive a retainer of $2,500 per quarter. In addition, Board
members receive $2,500 per Board meeting attended, Executive Committee members
receive $1,500 for each Executive Committee meeting attended, and all other
committee members receive $1,000 for each committee meeting attended.
During 1989, the Company adopted the 1989 Non-Employee Director Stock
Option Plan (the "Non-Employee Director Plan"), which provided for the grant to
the Company's non-employee directors of options to purchase the Company's $.10
par value Common Stock. The Non-Employee Director Plan was approved by the
Company's shareholders at the 1990 Annual Meeting. Effective October 25, 1989,
options were granted under the Non-Employee Director Plan in the following
amounts (after adjustment for stock splits in 1990 and 1992): 225,000 shares to
each non-employee director serving on the Executive Committee of the Board of
Directors (i.e., Messrs. Rizzo, Motheral and Morris), 150,000 shares to each
other non-employee director with at least each two years of service on the Board
of Directors as of the date of grant (i.e., Mr. Hunter) and 120,000 shares to
each other non-employee director (i.e., Mr. Dike). The exercise price for all
shares underlying such options was the last reported sale price of the Common
Stock on the American Stock Exchange on the day preceding the date of grant
($6.33 after adjustment for stock splits in 1990 and 1992). The options expire
15 years from the date of grant. The options may be exercised with respect to 40
per cent of the number of shares subject to the options six months after the
date of grant, and an additional 10 per cent of the shares subject to the
options shall be exercisable as of the first, second, third, fourth, fifth and
sixth anniversaries of the date of grant, except that in the event of the death
or termination of service as a director by reason of disability, or in the event
of a "change in control" of the Company (as that term is defined in the
Non-Employee Director Plan), the options shall be immediately exercisable in
full. An option holder may use already-owned Common Stock as full or partial
payment for the exercise of options granted under the Non-Employee Director
Plan. As a condition to participation in the Non-Employee Director Plan, each
director named above in this paragraph entered into a Consultation Agreement
with the Company dated as of April 25, 1990. Under these Agreements, the
non-employee directors have agreed to serve the Company in an advisory and
consultive capacity. They do not receive any additional compensation under these
Agreements, however.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Company has only one outstanding class of equity securities, its Common
Stock, par value $.10 per share.
The following table sets forth certain information, as of the Record Date,
with respect to each person or entity who is known to the Company to be the
beneficial owner of more than five percent (5%) of the Company's Common Stock.
The information below was derived solely from filings made by such owners with
the Securities and Exchange Commission.
<TABLE>
<CAPTION>
AMOUNT OF
NAME AND ADDRESS OF BENEFICIAL PERCENT OF
BENEFICIAL OWNER OWNERSHIP CLASS
------------------- ---------- ----------
<S> <C> <C>
Eagle Asset Management, Inc................................. 2,245,985(1) 9.25%
880 Carillon Parkway
St. Petersburg, Florida 33716
David L. Babson & Co., Inc.................................. 1,828,790(2) 7.49%
One Memorial Drive
Cambridge, Massachusetts 02142
</TABLE>
- ------------------
(1) Based upon information contained in a Schedule 13G, filed with the Company,
which indicates that Eagle Asset Management, Inc. has sole voting power with
regard to all 2,245,985 shares and the sole right to dispose of all
2,245,985 shares.
4
<PAGE> 25
(2) Based upon information contained in a Schedule 13G, filed with the Company,
which indicates that David L. Babson & Co., Inc. has sole voting power with
regard to all 1,828,790 shares and the sole right to dispose of all
1,828,790 shares.
The following table sets forth information with respect to the beneficial
ownership of the Company's Common Stock, as of February 23, 1998 by its
directors, nominees for election as directors, named executive officers, and all
directors and executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME BENEFICIAL OWNERSHIP(1)(2) CLASS
---- -------------------------- ----------
<S> <C> <C>
Jack Daugherty...................................... 1,016,493 4.00%
A. R. Dike.......................................... 136,000 .55%
Daniel R. Feehan.................................... 497,582(3) 2.00%
James H. Graves..................................... 3,200 *
B. D. Hunter........................................ 165,000(4) .67%
Timothy J. McKibben................................. 2,900 *
Alfred M. Micallef.................................. 10,000 *
Carl P. Motheral.................................... 444,065 1.79%
Samuel W. Rizzo..................................... 303,710(5) 1.23%
Rosalin Rogers...................................... 10,000 *
James H. Kauffman................................... 39,186 .16%
Robert D. Brockman.................................. 8,750 *
Michael C. Stinson.................................. 200(6) *
Clifton H. Morris, Jr............................... 227,000(7) .92%
All Directors and Executive Officers as a group (18
persons).......................................... 2,924,692(8) 10.96%
</TABLE>
- ------------------
* Indicates ownership of less than .1% of the Company's Common Stock.
(1) Beneficial ownership as reported in the above table has been determined in
accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as
amended. Unless otherwise indicated, each of the persons named has sole
voting and investment power with respect to the shares reported.
(2) Except for the percentages of certain parties that are based on options
exercisable within sixty days of February 23, 1998, as indicated below, the
percentages indicated are based on 24,445,218 shares of Common Stock issued
and outstanding on February 23, 1998. In the case of parties holding
options, the percentage ownership is calculated on the assumption that the
shares presently purchasable or purchasable within the next sixty days
underlying such options are outstanding. The shares subject to options that
are exercisable within sixty days of February 23, 1998 are as follows: Mr.
Daugherty -- 900,500 shares; Messrs. Motheral, Rizzo and Morris -- 225,000
shares each; Mr. Dike -- 120,000 shares; Mr. Feehan -- 349,100 shares; Mr.
Hunter -- 150,000 shares; Mr. Kauffman -- 6,250 shares; and Mr.
Brockman -- 8,750 shares;.
(3) This amount includes 2,400 shares owned by Mr. Feehan's wife and 600 shares
in the name of Mr. Feehan's children.
(4) This amount includes 15,000 shares held by a corporation that Mr. Hunter
indirectly controls. Mr. Hunter disclaims beneficial ownership of such
shares.
(5) This amount includes 19,500 shares owned by trusts of which Mr. Rizzo is
trustee and 4,000 shares owned by Mr. Rizzo's wife.
(6) This amount represents shares held in the name of Mr. Stinson's children.
(7) This amount includes 2,000 shares owned by Mr. Morris' wife.
(8) This amount includes 2,235,100 shares that directors and executive officers
have the right to acquire within the next sixty days through the exercise of
stock options.
5
<PAGE> 26
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
The Company's executive officers and directors are required to file under
Section 16(a) of the Securities Exchange Act of 1934 reports of ownership and
changes of ownership with the Securities and Exchange Commission. Based solely
upon its review of the copies of such reports received by it, and written
representations from individual directors and executive officers, the Company
believes that during the fiscal year ended December 31, 1997 all filing
requirements applicable to executive officers and directors have been complied
with, except that Mr. William R. Horne, Senior Vice President, reported a
September 1997 cashless option exercise on Form 5 instead of on a current report
on Form 4.
EXECUTIVE COMPENSATION
The following sets forth information for each of the Company's last three
fiscal years concerning the compensation of the Company's Chief Executive
Officer and each of the other four most highly compensated executive officers
who were serving as executive officers at the end of the last fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION --
AWARDS
---------------
SECURITIES
ANNUAL COMPENSATION UNDERLYING ALL OTHER
NAME AND -------------------- OPTIONS/ COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) SARS (#) ($)(1)
------------------ ---- --------- -------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Jack R. Daugherty, 1997 395,900 229,939 133,344 40,750
Chairman and CEO 1996 378,000 196,727 -- 40,628
1995 378,000 -- -- 48,534
Daniel R. Feehan, 1997 395,000 229,459 233,486 41,694
President and Chief 1996 341,750 177,834 -- 30,953
Operating Officer 1995 315,000 -- -- 30,464
James H. Kauffman, 1997 238,900 125,640 99,100 12,637
President -- Cash America 1996 112,500 46,840 25,000 4,754
Pawn(2)
Robert D. Brockman, 1997 174,700 87,312 63,204 6,208
Executive Vice President -- 1996 169,200 70,447 -- 10,515
Administration(3) 1995 87,500 21,045 7,500 33,534
Michael C. Stinson, 1997 207,692 51,185 54,000 2,217
President -- Mr. Payroll
Corporation(4)
</TABLE>
- ---------------
(1) The amounts disclosed in this column for 1997 include:
(a)Company contributions of the following amounts under the Company's
401(k) Savings Plan on behalf of Mr. Daugherty: $4,013; Mr. Feehan:
$14,014; Mr. Kauffman: $7,537; Mr. Brockman: $4,742; and Mr. Stinson:
$1,041.
(b)Payment by the Company of premiums for term life insurance on behalf of
Mr. Daugherty: $1,737; Mr. Feehan: $2,680; Mr. Kauffman: $5,100; Mr.
Brockman: $1,466; and Mr. Stinson: $1,176.
(c)Annual premium payments under split-dollar life insurance policies on
Mr. Feehan ($25,000) and on Mr. Daugherty's spouse ($35,000).
(2) Mr. Kauffman joined the Company on July 1, 1996.
(3) Mr. Brockman joined the Company on June 21, 1995.
(4) Mr. Stinson became an executive officer in 1997.
6
<PAGE> 27
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information concerning option exercises in
fiscal 1997 and the value of unexercised options held by each of the named
executive officers at the end of the Company's last fiscal year.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE VALUE($)(1)
---- ------------ ------------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Jack R. Daugherty 133,344(2) 13.0 10.8125 09/30/07 547,244
Daniel R. Feehan 101,200(3) 9.8 8.3750 01/21/07 341,044
132,286(2) 12.9 10.8125 09/30/07 542,902
James H. Kauffman 24,100(3) 2.3 8.3750 01/21/07 81,217
75,000(2) 7.3 10.8125 09/30/07 307,800
Robert D. Brockman 18,400(3) 1.8 8.3750 01/21/07 62,008
44,804(2) 4.4 10.8125 09/30/07 183,876
Michael C. Stinson 54,000(2) 5.3 10.8125 09/30/07 221,616
</TABLE>
- ---------------
(1) As permitted by the Securities and Exchange Commission's rules on executive
compensation disclosure, the Company used the Black-Scholes model of option
valuation to determine grant date present value. The Company does not
advocate or necessarily agree that the Black-Scholes model can properly
determine the value of an option. Calculations are based upon the following
assumptions as of the grant date: (i) dividend yield per share of .68% for
the January options and .64% for the September options based on the
Company's history of dividend payments; (ii) volatility of 27.6% for the
January options and 29.8% for the September options; (iii) exercise of the
option at the end of the option term; (iv) a risk-free rate of return of
6.59% for the January options and 6.10% for the September options (based on
the then quoted yield of Treasury Notes maturing 10 years from the grant
date); and (v) a 3% annual discount factor for vesting limitations.
(2) These stock options were granted on September 30, 1997 and become
exercisable on September 30, 2004, subject to accelerated vesting as
follows: The options would vest 50% if the market price of the Company's
common stock equals or exceeds 150% of the exercise price for 20 consecutive
calendar days, and the options would vest 100% if the market price equals or
exceeds 200% of the exercise price for 20 consecutive calendar days.
(3) These stock options were granted on January 21, 1997 and become exercisable
on January 21, 2000.
7
<PAGE> 28
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
The following table shows all individual grants of stock options to the
named executive officers of the Company during the fiscal year ended December
31, 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FY-END(#)(1) FY-END($)(2)
---------------------- --------------------
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE UNEXERCISABLE
---- ---------------------- --------------------
<S> <C> <C>
Jack R. Daugherty 900,500/183,344 5,702,280/543,523
Daniel R. Feehan 349,100/274,886 2,105,914/958,107
James H. Kauffman 6,250/117,850 39,438/387,959
Robert D. Brockman 8,750/ 71,954 56,478/235,814
Michael C. Stinson -0-/ 54,000 -0-/114,750
</TABLE>
- ---------------
(1) These figures reflect the appropriate adjustments for the Company's
three-for-two stock split in May 1990 and the two-for-one stock split in
April 1992.
(2) Values stated are based upon the closing price of $12.9375 per share of the
Company's Common Stock on the New York Stock Exchange on December 31, 1997,
the last trading day of the fiscal year.
COMPENSATION COMMITTEE REPORT
- -- OVERALL EXECUTIVE COMPENSATION POLICIES
The basic philosophy of the Company's executive compensation program is to
link the compensation of its executive officers to their contribution toward the
enhancement of shareholder value. Consistent with that philosophy, the program
is designed to meet the following policy objectives:
- Attracting and retaining qualified executives critical to the long-term
success of the Company.
- Tying executive compensation to the Company's general performance and
specific attainment of long-term strategic goals.
- Rewarding executives for contributions to strategic management designed
to enhance long-term shareholder value.
- Providing incentives that align the executive's interest with those of
the Company's shareholders.
- -- ELEMENTS OF EXECUTIVE COMPENSATION
The Company's executive compensation program consists of the following
elements designed to meet the policy objectives set out above:
Base Salary
The Committee sets the annual salary of the Company's Chief Executive
Officer and the President and reviews the annual salaries of the Company's other
executive officers. In setting appropriate annual salaries, the Committee takes
into consideration the minimum salaries set forth in certain executives'
employment contracts (described elsewhere in this Proxy Statement), the level
and scope of responsibility, experience, and performance of the executive, the
internal fairness and equity of the Company's overall compensation structure,
and the relative compensation of executives in similar positions in the
marketplace. The Committee relies on information supplied by an outside
compensation consulting firm pertaining to competitive compensation. The
Company's executive compensation program is designed to position base salary at
the 50th percentile of the competitive market and total cash compensation,
including annual performance incentives, at the 75th percentile of the
competitive market. The Committee believes that very few of the
8
<PAGE> 29
companies in the peer groups described below under "Performance Graph" are
included in the surveys used for compensation comparisons. Those surveys
represent a much broader collection of U.S. companies.
Annual Incentive Compensation
In 1996, the Committee modified the Company's executive compensation
program to formalize its short-term and long-term components.
a. Short-Term Component
Under this component, the Company's executive officers are eligible to
receive annual incentive cash bonuses equal to certain percentages of their
annual base salaries. The bonus percentage varies depending upon the officer's
position with the Company, and the percentages increase if the Company's
earnings performance exceeds the financial plan. A portion of the bonus amount
is based on the officer's accomplishment of certain individual performance
objectives established at the outset of the year.
b. Long-Term Component
Under this component, the Company's executive officers are eligible to
receive long-term incentive grants in the form of restricted stock and/or stock
options, with the number of shares of stock and/or options to equal certain
percentages of the officers' annual base salaries. The applicable percentage
varies depending upon the officer's position with the Company. The allocation
between restricted stock and stock options is determined by the Committee at its
discretion. The Company's 1994 Long-Term Incentive Plan (the "1994 Plan"),
approved by the shareholders of the Company at the April 1994 Annual Meeting,
allows for these forms of stock-based long-term incentive compensation awards.
This long-term incentive component rewards effective management that results in
long-term increases in the Company's stock price. In this way, it is designed to
further the objective of fostering and promoting improvement in long-term
financial results and increases in shareholder value. The Company granted
options to certain of its executive officers in 1997 at an exercise price equal
to the closing price of the Company's common stock on the New York Stock
Exchange on the day preceding the date of grant. (See the "Options/SAR Grants in
Last Fiscal Year" table in this Proxy Statement.) This arrangement rewards
effective management that results in long-term increases in the Company's stock
price. The number of options granted to the Company's highest paid executive
officers, as reflected elsewhere in this Proxy Statement, is based in part on
many of the same considerations underlying the determination of annual base
salary. The options granted to certain of the Company's executive officers in
October 1997 vest seven years after the date of grant. However, vesting will
accelerate if the Company's stock price hits certain target levels: the options
vest 50% if the stock price equals or exceeds 150% of the exercise price for
twenty consecutive calendar days, and the options vest 100% if the stock price
equals or exceeds 200% of the exercise price for twenty consecutive calendar
days. Those executive officers covered by this grant would be scheduled to
receive a comparable grant of options three years after the grant date or upon
100% vesting of these options, whichever comes first. With this grant, the
Company further strengthened the link between its senior management's interests
and those of the Company's shareholders.
Deductibility Cap on Executive Compensation
A federal tax law enacted in 1994 disallows corporate deductibility for
certain compensation paid in excess of $1,000,000 to the Chief Executive Officer
and the four other most highly paid executive officers. "Performance-based
compensation," as defined in the tax law, is not subject to the deductibility
limitation, provided certain shareholder approval and other requirements are
met. Although the cash compensation paid to the Company's Chief Executive
Officer and the four other most highly paid executive officers is well below the
$1,000,000 level in each case, the Committee determined that the Company should
seek to ensure that future stock option and performance award compensation under
the 1994 Plan qualifies as "performance-based compensation." Accordingly, the
1994 Plan is intended to meet the requirements of this tax law and thereby
preserve full deductibility of both stock option and stock-based performance
award compensation expense.
9
<PAGE> 30
- -- CEO'S COMPENSATION FOR FISCAL 1997
The fiscal 1997 salary of Mr. Jack R. Daugherty, Chief Executive Officer of
the Company, was based primarily on his rights under his employment agreement
with the Company, which is described elsewhere in this Proxy Statement. Under
that agreement, Mr. Daugherty's minimum base salary is $386,000. The Committee
believes that the total cash compensation paid to Mr. Daugherty was appropriate
in light of the Company's accomplishments in 1997, including a 22% increase in
earnings per share on the strength of continued improvement in the average unit
loan-to-merchandise ratio and a continuing rise in net revenue yield on
merchandise held for disposition.
These 1997 accomplishments also support the Committee's belief that the
fiscal 1997 cash compensation of the Company's other executive officers was set
at appropriate levels.
EXECUTIVE COMPENSATION COMMITTEE
B. D. Hunter, Chairman
A. R. Dike
James H. Graves
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933 or the Securities Exchange Act
of 1934 that might incorporate future filings, including this Proxy Statement,
in whole or in part, the preceding report and the Performance Graph on Page 11
shall not be incorporated by reference into any such filings.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the Executive Compensation Committee of the
Company's Board of Directors is an officer, former officer, or employee of the
Company or any subsidiary of the Company.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
As a condition to receiving grants of options under the 1989 Key Employee
Stock Option Plan for Cash America International, Inc., Messrs. Daugherty and
Feehan entered into employment agreements with the Company dated April 25, 1990.
Effective August 1, 1997, Messrs. Daugherty and Feehan entered into amended and
restated employment agreements with the Company. The initial term of each of
these agreements expires July 31, 2002. Under these agreements, compensation is
determined annually by the Company's Board of Directors, subject to minimum
annual compensation of $386,000 for each of Messrs. Daugherty and Feehan.
Included in each agreement is a covenant of the employee not to compete with the
Company during the term of his employment and for a period of three years
thereafter. The employment agreements also provide that if the employee is
terminated by the Company other than for cause, the Company will pay to the
employee the remainder of his current year's salary plus an amount equal to the
employees' salary, at the then current rate, for a period equal to the greater
of three years or the remainder of the term of the agreement, with that amount
payable in thirty-six equal monthly installments. In the event the employee
resigns or is terminated other than for cause within twelve months after a
"change in control" of the Company (as that term is defined in the employment
agreement), the employee will be entitled to earned and vested bonuses at the
date of termination plus the remainder of his current year's salary
(undiscounted) plus the present value (employing an interest rate of 8%) of five
additional years' salary (for which purpose "salary" includes the annual rate of
compensation immediately prior to the "change in control" plus the average
annual cash bonus for the immediately preceding three year period).
10
<PAGE> 31
PERFORMANCE GRAPH
The following Performance Graph shows the changes over the past five year
period in the value of $100 invested in: (1) the Company's Common Stock, (2) the
Standard & Poor's 500 Index, and (3) the common stock of a peer group of
companies whose returns are weighted according to their respective market
capitalizations. The values of each investment as of the beginning of each year
are based on share price appreciation and the reinvestment of dividends. The
peer group consists of the other companies in the pawnbroking industry with
publicly traded common stock.
COMPARISON OF CUMULATIVE SHAREHOLDER RETURN
<TABLE>
<CAPTION>
CASH
MEASUREMENT PERIOD AMERICA INTL S&P 500
(FISCAL YEAR COVERED) INC. COMP INDEX PEER GROUP
<S> <C> <C> <C>
DEC92 100.00 100.00 100.00
DEC93 86.73 110.08 61.32
DEC94 91.90 111.53 42.11
DEC95 51.56 153.45 23.24
DEC96 80.30 188.68 34.49
DEC97 122.81 251.63 52.68
</TABLE>
DATA SOURCE: STANDARD & POOR'S COMPUSTAT
TRANSACTIONS WITH MANAGEMENT
The Board of Directors of the Company adopted an officer stock loan program
in 1994 and modified the program in 1996. The purpose of the program is (i) to
facilitate and encourage the ownership of Company common stock by the officers
of the Company and (ii) to establish the terms for stock loan transactions with
officers. Participants in the program can utilize loan proceeds to acquire and
hold common stock of the Company by means of option exercises or otherwise. The
stock to be held as a result of the loan must be pledged to the Company to
secure the obligation to repay the loan. Under the terms of the loan, interest
accrues at the "applicable Federal rate" for loans of this type, as published by
the Internal Revenue Service from time to time. Interest is payable annually and
may be paid with additional loan proceeds. Each loan has a one year maturity and
is renewable thereafter for successive one year terms, except that the Committee
could notify the borrower during any renewal term that the loan would not renew
again after the next succeeding renewal term. The aggregate principal balance of
all outstanding loans under the program may not exceed $5,000,000 at any time.
As of December 31, 1997, Messrs. Daugherty and Feehan had stock loans
outstanding under this program in the aggregate principal amounts of $899,296,
and $1,205,508, respectively.
11
<PAGE> 32
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P. of Fort Worth, Texas served as independent public
accountants for the Company for fiscal 1997 and has reported on the Company's
financial statements. The Board of Directors of the Company has selected Coopers
& Lybrand L.L.P. to audit the accounts of the Company for the fiscal year ending
December 31, 1998 and recommends to the shareholders that they ratify this
selection for the ensuing fiscal year ending December 31, 1998. The Company has
been advised that Coopers & Lybrand L.L.P. has no relationship with the Company
or its subsidiaries other than that arising from the firm's employment as
auditors. The affirmative vote of a majority of the outstanding shares of Common
Stock present at the Annual Meeting in person or by proxy is necessary for the
ratification of the appointment of Coopers & Lybrand L.L.P. as independent
public accountants.
A representative of Coopers & Lybrand L.L.P. is expected to be present at
the Annual Meeting and will be afforded an opportunity to make a statement and
will be available to respond to appropriate questions at such meeting.
While shareholder ratification is not required for the selection of Coopers
& Lybrand L.L.P. since the Board of Directors has the responsibility for the
selection of the Company's independent public accountants, the selection is
being submitted for ratification at the Annual Meeting with a view towards
soliciting the shareholders' opinion thereon, which opinion will be taken into
consideration in future deliberations.
THE BOARD RECOMMENDS A VOTE "FOR" THE RATIFICATION OF COOPERS & LYBRAND
L.L.P. AS INDEPENDENT PUBLIC ACCOUNTANTS OF THE COMPANY FOR THE 1998 FISCAL
YEAR.
OTHER BUSINESS
Any proposal to be presented by a shareholder at the Company's 1999 Annual
Meeting of Shareholders must be presented to the Company by no later than
November 13, 1998.
It is important that proxies be returned promptly to avoid unnecessary
expense. Therefore, shareholders are urged, regardless of the number of shares
of stock owned, to date, sign and return the enclosed proxy in the enclosed
reply envelope.
By Order of the Board of Directors
HUGH A. SIMPSON
Secretary
March 16, 1998
12
<PAGE> 33
CASH AMERICA INTERNATIONAL, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR ANNUAL MEETING APRIL 21, 1998
The undersigned hereby constitutes and appoints Jack R. Daugherty, Daniel R.
Feehan and Hugh A. Simpson, and each of them, my true and lawful attorneys
and proxies, with power of substitution, to represent the undersigned and
vote at the annual meeting of shareholders of Cash America International,
Inc. (the "Company") to be held in Fort Worth, Texas on April 21, 1998, and
at any adjournment thereof, all of the stock of the Company standing in my
name as of the record date of March 3, 1998 on all matters coming before
said meeting.
(CHANGE OF ADDRESS)
----------------------------------------
----------------------------------------
----------------------------------------
(If you have written in the above space,
please mark the corresponding box on
the reverse side of this card).
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES,
SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXIES CANNOT
VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
<PAGE> 34
<TABLE>
<S> <C> <C> <C> <C>
PLEASE MARK YOUR
VOTES AS INDICATED
IN THIS EXAMPLE [X]
FOR WITHHELD
Election of Directors, Nominees:
Jack R. Daugherty, A.R. Dike, Daniel R. Feehan, James H. Graves, [ ] [ ]
B.D. Hunter, Timothy J. McKibbon, Alfred M. Micallef, Carl P. Monthoral,
Samuel W. Rizzo, Rosalin Rogers, Clifton H. Morris, Jr.
except vote withheld from the following nominee(s).
- ---------------------------------------------------
FOR AGAINST ABSTAIN
Ratification of the appointment of Coopers & Lybrand L.L.P. as independent
auditors for the year 1998. [ ] [ ] [ ]
On their discretion the proxies are authorized to vote upon such other
matters as may come before the meeting or any adjournments thereof.
[ ]
CHANGE
OF [ ]
ADDRESS
SIGNATURE SIGNATURE DATE
--------------------------------------------- ------------------------------------------ --------------------
NOTE: PLEASE SIGN AS NAME APPEARS HEREON. JOINT OWNERS SHOULD EACH SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH.
</TABLE>
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF CASH AMERICA INTERNATIONAL, INC.
<TABLE>
<CAPTION>
Jurisdiction of
Name Incorporation
---- -------------
<S> <C>
Cash America International, Inc. Texas
Cash America, Inc. Delaware
Cash America, Inc. of Tennessee Tennessee
Cash America, Inc. of Oklahoma Oklahoma
Cash America, Inc. of Kentucky Kentucky
Cash America, Inc. of South Carolina South Carolina
Florida Cash America, Inc. Florida
Georgia Cash America, Inc. Georgia
Cash America, Inc. of North Carolina North Carolina
Cash America Pawn, Inc. of Ohio Ohio
Cash America, Inc. of Alabama Alabama
Cash America, Inc. of Colorado Colorado
Cash America, Inc. of Indiana Indiana
Cash America, Inc. of Louisiana Delaware
Cash America Pawn L.P. Delaware
Cash America Management L.P. Delaware
Cash America Holding, Inc. Delaware
Harvey & Thompson Limited England
Express Cash International Corporation Delaware
CAII Pantbelaning AB Sweden
Cash America of Missouri, Inc. Missouri
Vincent's Jewelers and Loan, Inc. Missouri
Mr. Payroll Corporation Texas
Cash America, Inc. of Utah Utah
Cash America Franchising, Inc. Delaware
Cash America, Inc. of Illinois Illinois
</TABLE>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the three separate registration
statements of Cash America International, Inc. on Form S-8, (File No. 33-29658,
File No. 33-36430 and File No. 33-59733) of our reports dated January 20, 1998,
which include an explanatory paragraph related to a change in accounting
principle, on our audits of the consolidated financial statements and financial
statement schedule of Cash America International, Inc. as of December 31, 1997
and 1996, and for each of the three years in the period ended December 31,
1997, which reports are included or incorporated by reference in this Annual
Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Fort Worth, Texas
March 30, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,119
<SECURITIES> 0
<RECEIVABLES> 129,654
<ALLOWANCES> 0
<INVENTORY> 53,468
<CURRENT-ASSETS> 202,293
<PP&E> 121,897
<DEPRECIATION> 55,509
<TOTAL-ASSETS> 341,279
<CURRENT-LIABILITIES> 26,816
<BONDS> 146,142
0
0
<COMMON> 3,024
<OTHER-SE> 165,297
<TOTAL-LIABILITY-AND-EQUITY> 341,279
<SALES> 196,728
<TOTAL-REVENUES> 303,366
<CGS> 125,284
<TOTAL-COSTS> 226,502
<OTHER-EXPENSES> 38,650
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,644
<INCOME-PRETAX> 26,157
<INCOME-TAX> 9,578
<INCOME-CONTINUING> 16,579
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,579
<EPS-PRIMARY> 0.68
<EPS-DILUTED> 0.66
</TABLE>
