5
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
[x]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended September 30, 1998
OR
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE
REQUIRED]
For the transition period from ______________ to
_____________
Commission File Number 0-19424
_______________________________
EZCORP, INC.
(Exact name of registrant as specified in its charter)
Delaware 74-2540145
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1901 Capital Parkway
Austin, Texas 78746
(Address of principal executive offices)(Zip code)
Registrant's telephone number, including area code: (512)314-3400
____________________________________
Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
Class A Non-voting Common Stock The Nasdaq Stock Market
$.01 par value per share
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 disclosures 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 only class of voting securities of the registrant
issued and outstanding is the Class B Voting Common Stock,
par value $.01 per share, 100% of which is owned by one
record holder who is an affiliate of the registrant. There
is no trading market for the Class B Voting Common Stock.
The aggregate market value of the Class A Non-voting Common
Stock held by non-affiliates of the registrant as of
December 1, 1998, based on the closing price on The Nasdaq
Stock Market on such date, was $84 million.
As of December 1, 1998, 10,811,541 shares of the
registrant's Class A Non-Voting Common Stock, par value $.01
per share and 1,190,057 shares of the registrant's Class B
Voting Common Stock, par value $.01 per share were
outstanding.
<PAGE>
EZCORP, INC.
YEAR ENDED SEPTEMBER 30, 1998
INDEX TO FORM 10-K
Item Page
No. No.
INTRODUCTION
PART I.
1. Business 2
2. Properties 13
3. Legal Proceedings 15
4. Submission of Matters to a Vote of
Security Holders 16
PART II.
5. Market for Registrant's Common Equity and Related
Stockholder Matters 16
6. Selected Financial Data 16
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 18
7A. Qualitative and Quantitative Disclosures About
Market Risk 22
8. Financial Statements and Supplementary Data 23
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 41
PART III.
10. Directors and Executive Officers of the
Registrant 41
11. Executive Compensation 43
12. Security Ownership of Certain Beneficial Owners and
Management 48
13. Certain Relationships and Related Party
Transactions 49
PART IV.
14. Financial Statement Schedules, Exhibits, and
Reports on Forms 8-K 50
SIGNATURES
<PAGE>
PART I
Item 1. Business
EZCORP, Inc. (the "Company") is a Delaware corporation;
its principal executive offices are located at 1901 Capital
Parkway, Austin, Texas 78746, and its telephone number is
(512) 314-3400. As used herein, the Company includes the
subsidiaries listed in Exhibit 22.1.
The discussion in this section of this report contains
forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ
materially from those discussed herein. Factors that could
cause or contribute to such differences include, but are not
limited to, those discussed in this section and those
discussed elsewhere in this report.
General
The Company is primarily engaged in establishing,
acquiring, and operating pawnshops which function as
convenient sources of consumer credit and as value-oriented
specialty retailers of primarily previously owned
merchandise. Through its lending function, the Company makes
relatively small, non-recourse loans secured by pledges of
tangible personal property. The Company contracts for a pawn
service charge to compensate it for each pawn loan. Pawn
service charges, which generally range from 12% to 300% per
annum, are calculated based on the dollar amount and
duration of the loan and accounted for approximately 43% of
the Company's revenues for the year ended September 30, 1998
("Fiscal 1998"). In Fiscal 1998, approximately 78% of the
loans made by the Company were redeemed in full together
with the payment of the pawn service charge or were renewed
or extended through the payment of the pawn service charge.
In most states in which the Company operates, collateral is
held one month with a 60 day extension period after which
such collateral is forfeited for resale.
As of December 1, 1998, the Company operated 300
locations: 171 in Texas, 24 in Colorado, 23 in Indiana, 20
in Oklahoma, 13 in Alabama, 12 in Florida, 10 in Georgia, 8
in Tennessee, 6 in California, 3 in Louisiana, 3 in
Mississippi, 3 in Nevada, 3 in North Carolina, and 1 in
Arkansas. The Company intends to expand through the
establishment or acquisition of stores primarily in existing
markets to form efficient regional clusters. The Company
intends to expand in states with regulatory, competitive,
and demographic characteristics conducive to successful
pawnshop operation.
The pawnshop industry in the United States is a large,
highly fragmented, and growing industry. The industry
consists of over 10,000 pawnshops owned primarily by
independent operators who typically own one to three
locations.
Lending Activities
The Company is primarily engaged in the business of
making pawn loans, which typically are relatively small, non-
recourse loans secured by pledges of tangible personal
property. As of September 30, 1998, the Company had
approximately 700,000 loans outstanding, representing an
aggregate principal balance of $49.6 million. The Company
contracts for a pawn service charge to compensate it for a
pawn loan. A majority of the Company's outstanding pawn
loans are in an amount that permits pawn service charges of
20% per month or 240% per annum. For Fiscal 1998, pawn
service charges accounted for approximately 43% of the
Company's total revenues.
Collateral for the Company's pawn loans consists of
tangible personal property, generally jewelry, consumer
electronics, tools, firearms, and musical instruments. The
Company does not investigate the creditworthiness of a
borrower, but relies on the estimated resale value of the
pledged property, the perceived probability of its
redemption, and the estimated time required to sell the item
as a basis for its credit decision. The amount that the
Company is willing to lend generally ranges from 20% to 65%
of the pledged property's estimated resale value depending
on an evaluation of these factors. The sources for the
Company's determination of the resale value of collateral
are numerous and include catalogues, blue books, newspaper
advertisements, and previous sales of similar merchandise.
The pledged property is held through the term of the
loan, which in Texas is one month with an automatic 60-day
grace period, unless repaid or renewed earlier. The Company
seeks to maintain a redemption rate of between
<PAGE>
70% and 80%, and in each of the Company's last three fiscal
periods, it achieved this targeted redemption rate. The
redemption rate is maintained through loan policy and proper
implementation of such policy at the store level. If a
borrower does not repay, extend or renew a loan, the
collateral is forfeited to the Company and then becomes
inventory available for sale in the Company's pawnshops. The
Company does not record loan losses or charge-offs because
the principal amount of an unpaid loan and any accrued pawn
service charges become the carrying cost of the forfeited
collateral, which is recorded as the Company's inventory.
The Company evaluates the salability of inventory and
provides an allowance for valuation of inventory, based on
the type of merchandise, recent sales trends and margins,
and the age of merchandise.
The table below shows the dollar amount of loans made,
loans repaid, loans forfeited and loans acquired for the
Company for the fiscal years ended September 30, 1996, 1997,
and 1998:
Fiscal Years Ended
September 30,
1996 1997 1998
-------------------------
(dollars in millions)
Loans made $ 151.4 $ 170.4 $ 180.9
Loans repaid (105.7) (108.9) (114.4)
Loans forfeited (50.8) (53.3) (60.3)
Loans acquired - - 0.6
---------------------------
Net increase (decrease) in
pawn loans outstanding at
the end of the year $ (5.1) $ 8.2 $ 6.8
===========================
The realization of gross profit on sales of inventory
primarily depends on the Company's initial assessment of the
property's estimated resale value. Improper assessment of
the resale value of the collateral in the lending function
can result in reduced marketability of the property and
resale of the property for an amount less than the carrying
cost of the property. Jewelry, which constitutes
approximately 60% of the principal amount of items pledged,
can be evaluated primarily based on weight, carat content,
and value of gemstones, if any. The other items pawned
typically consist of consumer electronics, tools, firearms,
and musical instruments.
At the time a pawn transaction is made, a pawn loan
agreement, commonly referred to as a pawn ticket, is
delivered to the borrower. It sets forth, among other
things, the name and address of the pawnshop and the
borrower, the borrower's identification number from his
driver's license, military identification or other official
number, the date of the loan, an identification and
description of the pledged goods (including applicable
serial numbers) the amount financed, the pawn service
charge, the maturity date of the loan, the total amount that
must be paid to redeem the pledged goods on the maturity
date, and the annual percentage rate.
Of the Company's 300 locations in operation as of
December 1, 1998, 171 were stores located in Texas.
Accordingly, Texas pawnshop laws govern most of the
Company's operations. In Texas, pawnshop operations are
regulated by the State of Texas Office of Consumer Credit
Commissioner in accordance with Chapter 371 of the Texas
Finance Code, commonly known as the Texas Pawnshop Act (the
"Pawnshop Act"). See "Regulation."
The maximum allowable pawn service charges for
stratified loan amounts made in the State of Texas are set
in accordance with Texas law under the Pawnshop Act.
Historically, the maximum allowable pawn service charges
under Texas law have not changed; however, the stratified
loan amounts have been adjusted upward by nominal amounts
each year. The maximum allowable pawn service charges under
the Pawnshop Act for the various stratified loan amounts for
the year beginning July 1, 1997, and ending June 30, 1998,
and for the year beginning July 1, 1998, and ending June 30,
1999, are as follows:
<PAGE>
Schedule of Applicable Loan Service Charges for Texas
Year Ending June 30, 1998 Year Ending June 30, 1999
Maximum Maximum
Allowable Allowable
Annual Annual
Amount Financed Percentage Amount Financed Percentage
Per Pawn Loan Rate Per Pawn Loan Rate
- --------------- ---------- --------------- ----------
$1 to $135 240% $1 to $138 240%
$136 to $450 180% $139 to $460 180%
$451 to $1,350 30% $461 to $1,380 30%
$1,351 to $11,250 12% $1,381 to $11,500 12%
Under Texas law, there is a ceiling on the maximum
allowable pawn loan. For the period July 1, 1997 through
June 30, 1998, the loan ceiling was $11,250. For the period
July 1, 1998 through June 30, 1999, the loan ceiling is
$11,500. The Company's average loan amount for Fiscal 1998
was approximately $71.
Retail Activities
Jewelry sales represent approximately 48% of the
Company's merchandise sales with the remaining sales
consisting primarily of consumer electronics, tools,
firearms, and musical instruments. The Company believes its
ability to offer quality used merchandise at prices
significantly lower than original retail prices attracts
value-conscious customers. The Company obtains its inventory
primarily from unredeemed collateral, and to a lesser
extent, from purchases from the general public and from
wholesale sources. For Fiscal 1998, purchases from the
general public and from wholesale sources constituted
approximately 7% of the dollar value of inflows to
inventory. During Fiscal 1998, $92.3 million of merchandise
was added to inventory through forfeited collateral. Of such
amount, approximately $60.3 million was from the principal
amount of unredeemed pawn loans, and $32.0 million was from
accrued service charges. For Fiscal 1998, retail activities
accounted for approximately 57% of the Company's total
revenues, but only 18% of the Company's net revenue, after
deducting cost of goods sold on merchandise sales.
Analysis of the sales and inventory data provided by the
Company's management information systems facilitate the
design of promotional and merchandising programs and
merchandise pricing decisions. Regional merchandising
managers develop and implement promotional and merchandising
programs, review merchandise pricing decisions and balance
inventory levels within markets. During Fiscal 1998, the
Company continued to upgrade merchandise presentations
through improved category merchandise displays and better
retail signage.
The Company does not give prospective buyers any
warranties on most merchandise sold through its retail
operations, except for certain purchases of new, wholesale-
purchased merchandise, which may have a limited
manufacturer's warranty. Prospective buyers may purchase an
item on layaway through the Company's "EZ Layaway" program.
Through EZ Layaway, a prospective purchaser will typically
put down a minimum of 20% of an item's purchase price as a
customer layaway deposit. The Company will hold the item for
a 90-day period during which the customer is required to pay
for the item in full. As of September 30, 1998, the Company
had $2.2 million in customer layaway deposits and related
payments.
The Company's overall inventory is stated at the lower
of cost or market. The Company provides inventory reserves
for shrinkage and cost in excess of market value. The
Company estimates these reserves through study and analysis
of sales trends, inventory turnover, inventory aging,
margins achieved on recent sales, and shrinkage. Valuation
allowances, including shrinkage reserves, amounted to $6.8
million as of September 30, 1998. At September 30, 1998,
total inventory on hand was $44.0 million, after deducting
an allowance for shrinkage and valuation of inventory.
<PAGE>
Seasonality
Historically, pawn service charge revenues are highest
in the Company's fiscal fourth quarter (July, August and
September) due to higher loan demand during the summer
months and merchandise sales are highest in the Company's
fiscal first and second fiscal quarters (October through
March) due to the holiday season and tax refunds.
Operations
General
The typical Company location is a free-standing
building or part of a retail strip center. Nearly all of the
Company's pawnshop locations have contiguous parking
facilities. Store interiors are designed to resemble small
discount operations and attractively display merchandise by
category. Distinctive exterior design and attractive in-
store signage provide an appealing atmosphere to customers.
The typical store has approximately 1,800 square feet of
retail space and approximately 3,200 square feet dedicated
to lending activities (principally collateral storage). The
Company maintains property and general liability insurance
for each of its pawnshops. The Company's stores are open six
or seven days a week, depending on location.
Store Management
A typical Company store employs five to six people
consisting of a manager, an assistant manager, and three to
four sales and lending representatives. Store managers are
specifically responsible for ensuring that their store is
run in accordance with the Company's established policies
and procedures, and for operating their store according to
performance parameters consistent with the Company's store
operating guidelines. Each manager reports to one of
approximately 35 area managers who are responsible for the
stores within a specific operating region. Area managers are
responsible for the performance of all stores within their
area and report to one of five regional directors. The
regional directors report to two directors of operations.
The directors of operations report to the President of the
Company.
Management Information Systems and Controls
The Company has a store level point of sale (POS)
system that automates the recording of all store-level
transactions. Financial summary data from all stores is
retrieved and processed at the corporate office each day and
is available for management review by early morning for the
preceding day's transactions. This information is available
to field management via the Company's internal network. The
Company's communications network provides access to each
store from the corporate offices.
During 1998, the Company continued the development of
the next generation of its POS system. This new system will
provide additional store level functionality, increase
breadth of service offerings, enhance reporting and controls
and provide software and hardware scalability. The Company
plans to beta test this new system in its first fiscal 2000
quarter and, based on the success of this test, install the
system chain wide by the end of fiscal 2000. Also, the
Company has invested in its home office systems by replacing
its financial and human resource information systems. The
Company believes that these systems will provide better
tools to analyze, monitor, manage, grow and control the
business.
The Company, like many companies, faces the Year 2000
Issue. This is a result of computer programs being written
using two digits rather than four (for example, "98" for
1998) to define the applicable year. Any of the Company's
programs that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000.
This could result in a system failure or miscalculations
causing disruptions of operations, including, among other
things a temporary inability to process transactions or
engage in other normal business activities.
Based on recent assessments, the Company has determined
that it will be required to modify or replace portions of
its software and certain hardware so that those systems will
properly utilize dates beyond December 31, 1999. The
Company presently believes that with modifications or
replacements of existing software and certain hardware, the
Year 2000 Issue can be mitigated. However, if such
modifications and replacements are not completed timely, the
Year 2000 Issue could have a material impact on the
operations of the Company.
<PAGE>
The Company's plan to resolve the Year 2000 Issue
involves the following four phases: assessment, remediation,
testing, and implementation. To date, the Company has fully
completed its assessment of all systems that could be
affected by the Year 2000. The results of the assessment
indicated that the information technology system which would
be affected is the Company's store level point of sale
system . The Company is in the process of completing the
replacement of its financial and human resources information
systems and expects to have those fully replaced by the end
of its second fiscal 1999 quarter. Those systems will be
Year 2000 compliant. In addition, the Company has gathered
information about the Year 2000 compliance status of various
third parties and continues to monitor their compliance. To
date, the Company is not aware of any third party with a
Year 2000 Issue that would materially impact the Company's
results of operations, liquidity, or capital resources.
However, the Company has no means of ensuring that these
third parties will be Year 2000 ready.
For its information technology exposures to date, the
Company is 90% complete on the remediation phase and 70%
complete with regards to the remaining phases. It expects
to be fully complete with respect to software reprogramming,
replacement, testing and implementation no later than March
1999, however, there can be no assurances that such
expectations will be met.
The Company will utilize internal resources to
reprogram, test, and implement the software and operating
equipment for Year 2000 modifications. The total cost of
the Year 2000 project is estimated to be less than $100,000
and is being funded through operating cash flows. These
costs are being expensed as incurred. The costs of
replacing the financial and human resources systems are
excluded from this amount as the decision to replace those
systems was not accelerated by the Year 2000 Issue. This
amount also excludes the costs of continued development of
the next generation POS system.
Management of the Company believes it has an effective
program in place to resolve the Year 2000 Issue in a timely
manner. As noted above, the Company has not yet completed
all necessary phases of the Year 2000 program. In the event
that the Company does not complete all additional phases,
the Company might not be able to process customer
transactions. In addition, disruptions in the economy
generally resulting from Year 2000 Issues could materially
adversely affect the Company. The amount of potential
liability and lost revenue cannot be reasonably estimated at
this time.
The Company currently has no contingency plans in place
in the event it does not complete all phases of the Year
2000 program. The Company plans to evaluate the status of
completion in March 1999, and determine whether such a plan
is necessary.
The Company has an internal audit staff of
approximately 20 employees to ensure that the Company's
policies and procedures are consistently followed. In
addition, the audit department carefully monitors, among
other matters, the Company's perpetual inventory system,
lending practices and regulatory compliance.
Human Resources
As of September 30, 1998, the Company employed
approximately 2,200 people, including approximately 300
management and administrative personnel. The Company
believes that its profitability is dependent upon its
employees' ability to make loans that achieve optimum
redemption rates, to sell retail merchandise effectively,
and to provide prompt and courteous customer service. The
Company seeks to hire people who will become long-term,
career employees. To achieve the Company's long-range
personnel goals, the Company strives to develop its
employees through a combination of classroom training and
supervised on-the-job loan and sales training for new
employees.
Assistant managers receive additional training,
primarily on-the-job, focusing on product knowledge and
inventory management. Managers attend on-going management
skills and operations performance training. Directors of
operations, regional directors and area managers receive
leadership training in utilizing their human resources to
increase each store's profitability. The Company's
management believes that its managers, at all levels, are
the principal trainers in the organization.
The Company anticipates that the store managers for new
stores will be promoted primarily from the ranks of existing
store employees and has created a process for forecasting
future needs and identifying potential internal candidates
for position openings. The Company's career development plan
not only develops and advances
<PAGE>
employees within the Company, but also provides training for
the efficient integration of experienced retail managers and
pawnbrokers from outside the Company.
In Texas, each pawnshop employee is required to be
licensed in order to make loans or sell merchandise and is
required to file for that license within 30 days of the date
of hire. The licensing fee is $65.00 and the licensing
process includes a review of the individual's background.
Licenses are renewed annually at a fee of $10.00; renewals
also include a review of each individual's background.
Trade Name
The Company currently operates virtually all of its
pawnshops under the name "EZ Pawn," which it has registered
with the United States Patent and Trademark Office. The
Company also uses and has registered the following marks :
"E-Z PAWN," "EZCORP," "JEWELRYLAND OUTLET," and "EZ MONEY
CENTER."
Growth and Expansion
During Fiscal 1998, the Company established 35 stores,
acquired three stores and closed one store. The Company
plans to continue its expansion in existing markets and to
enter new markets in other states which have regulatory,
demographic, and competitive characteristics that are
conducive to successful pawnshop operations. The Company
seeks to establish clusters of stores in specific geographic
regions depending upon individual market demographics. In
this manner, the Company expects to achieve certain
economies of scale relative to its advertising, name
recognition, and managerial and administrative costs.
The four most recently established stores with 12 full
months of operating data, opened by the Company through
September 30, 1998, required an average gross investment
(including inventory, pawn loans and property, plant and
equipment) of approximately $600,000 per pawnshop during the
first 12 months of operation.
The Company's expansion program is dependent on several
variables, such as the availability of acceptable sites or
acquisition candidates and qualified personnel. The
Company's ability to add newly established stores in Texas
counties having a population of 250,000 or more has been
adversely affected by Texas law which 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 such counties. Since September 1, 1991,
the Company has opened or acquired 51 locations in Texas
counties having a population of less than 250,000. See
"Regulation."
Competition
The Company encounters significant competition in
connection with the operation of its business. These
competitive conditions may adversely affect the Company's
revenues, profitability, and its ability to expand. In
connection with the lending of money, the Company competes
primarily with other pawnshops. The majority of the
Company's competitors are independently owned pawnshops. The
Company is the second largest publicly held chain of
pawnshops in the United States. The Company believes that
the primary elements of competition in the pawnshop business
are store location and design, the ability to loan
competitive amounts on items pawned, management of store-
level employees, and the quality of customer service. In
addition, as the pawnshop industry consolidates, the Company
believes that the ability to compete effectively will be
based increasingly on strong general management, regional
market focus, automated management information systems, and
access to capital. Some of the Company's competitors may
have greater financial resources than the Company.
To a certain extent, the Company also competes with
other types of financial institutions such as consumer
finance companies, which generally lend on an unsecured as
well as a secured basis. Other lenders may and do lend money
on an unsecured basis, at interest rates which are lower
than the service charges of the Company, and on other terms
more favorable than those offered by the Company.
The Company's competitors, in connection with the sale
of merchandise, include numerous retail and wholesale
stores, including jewelry stores, gun stores, discount
retail stores, consumer electronics stores, other pawnshops,
and other retailers of previously owned merchandise.
Competitive factors in the Company's retail operations
include the ability to provide the customer with a variety
of merchandise at an exceptional value. On a retail level,
the Company competes with numerous other retailers who have
significantly greater financial resources than the Company.
<PAGE>
Regulation
Pawnshop Operations
The Company's pawnshop operations are subject to
extensive regulation, supervision, and licensing under
various federal, state, and local statutes, ordinances, and
regulations. Of the Company's 300 locations as of December
1, 1998, 171 were in Texas. Accordingly, Texas pawnshop laws
govern most of the Company's operations. The laws of
Colorado, Indiana, Oklahoma, Alabama, Florida, Georgia,
Tennessee, California, Louisiana, Mississippi, Nevada, North
Carolina and Arkansas, apply to the Company's pawnshop
operations in those states. At December 1, 1998, the Company
operated 300 locations: 171 in Texas, 24 in Colorado, 23 in
Indiana, 20 in Oklahoma, 13 in Alabama, 12 in Florida, 10 in
Georgia, 8 in Tennessee, 6 in California, 3 in Louisiana, 3
in Mississippi, 3 in Nevada, 3 in North Carolina and 1 in
Arkansas. In the states in which the Company operates other
than Texas, Oklahoma, and Alabama, pawnshops are subject to
local regulation at the municipal and county level, which
regulation may affect the ability of the Company to expand
its operations in those states.
Texas Pawnshop Regulations
In Texas, pawnshops are governed by the Texas Pawnshop
Act and the Rules of Operation promulgated thereunder, and
are subject to licensing by and supervision of the State of
Texas Office of Consumer Credit Commissioner. In addition,
pawnshops and pawnshop employees in Texas are required to be
licensed by the Texas Consumer Credit Commissioner.
Furthermore, the Company is required to supply the Texas
Consumer Credit Commissioner with copies of information
filed with the Securities and Exchange Commission.
The maximum allowable pawn service charges for
stratified loan amounts made in the State of Texas are set
in accordance with the Texas Pawnshop Act. Historically, the
maximum allowable pawn service charges under Texas law have
not changed; however, the stratified loan amounts have been
adjusted upward by nominal amounts each year. Under Texas
law, there is a ceiling on the maximum allowable pawn loan.
From July 1, 1997 to June 30, 1998, the loan ceiling was
$11,250. For the period July 1, 1998 through June 30, 1999,
the loan ceiling is $11,500. A table of the maximum
allowable pawn service charges under the Texas Pawnshop Act
for the various stratified loan amounts for July 1, 1997 to
June 30, 1998 is presented in "Lending Activities."
To be eligible for a license to operate a pawnshop in
Texas, an applicant must: (i) be of good moral character,
which in the case of a business entity applies to each
officer, director, and holder of five percent or more of the
entity's outstanding shares; (ii) have net unencumbered
assets (as defined in the Texas Pawnshop Act) of at least
$150,000 readily available for use in conducting the
business of each licensed pawnshop; (iii) demonstrate that
the applicant has the financial responsibility, experience,
character, and general fitness to command the confidence of
the public in its operation; and (iv) demonstrate that the
pawnshop will be operated lawfully and fairly in accordance
with the Texas Pawnshop Act. Current applications to the
Texas Consumer Credit Commissioner inquire, among other
matters, into the applicant's credit history and criminal
record.
In addition, the Texas Pawnshop Act requires the Texas
Consumer Credit Commissioner to make a determination of
public need and probable profitability, in counties with a
population of 250,000 or more, for a new pawnshop license,
or for a relocation of a pawnshop more than one mile away
from the existing address. The determination of public need
and probable profitability may be made administratively by
the Commissioner; however, if a public hearing is requested
by the Commissioner or by any pawnshop licensee that would
be affected by the granting of the proposed application, the
determination of public need and probable profitability must
be made in a public hearing with notice and opportunity for
all affected parties to participate. For a new license
application in any Texas county, the Commissioner provides
notice of the application, and the opportunity for a public
hearing, to the other licensed pawnshops in the county in
which the applicant proposes to operate. The timeframe for
the license application approval process generally requires
the Commissioner's office to process an application within
60 days of its receipt of a complete application file. When
a public hearing is requested, however, the public hearing
process can increase the timeframe substantially or result
in no application approval at all. The Company's ability to
add newly established stores, particularly in Texas counties
having a population of 250,000 or more where public need and
probable profitability must be shown, has been adversely
affected by the referenced provisions of the Texas Pawnshop
Act.
<PAGE>
The Texas Consumer Credit Commission may, after notice
and hearing, suspend or revoke any license for a Texas
pawnshop upon finding, among other matters, that: (i) any
fees or charges have not been paid; (ii) the licensee has
violated (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.
The Texas Consumer Credit Commissioner has also
promulgated Rules of Operation which regulate the day-to-day
management of the Company's pawnshops. Under the Pawnshop
Act and the Rules of Operation, a pawnbroker may not do any
of the following: 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 sale in storefront windows or
sidewalk display cases, pistols, swords, canes, blackjacks
or similar weapons; or purchase used or second hand personal
property 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.
Colorado Pawnshop Regulations
Colorado law provides for the licensing and bonding of
pawnbrokers in that state. It also requires that pawn
transactions be reported to local authorities and that
certain bookkeeping records be maintained. Under Colorado
law, the maximum allowable pawn service charge is 240%
annually for pawn loans up to $50, and 120% annually for
pawn loans in excess of $50.
Indiana Pawnshop Regulation
The Company's Indiana operations are regulated by the
Department of Financial Institutions. The Department
requires all persons or entities to obtain a license to act
as a pawnbroker. The Indiana Pawnbroker's Act provides for
the Department of Financial Institutions to investigate the
general fitness of the applicant, to determine whether the
convenience and needs of the public will be served by
granting an applicant a license, and generally to regulate
pawnshops in the state.
The Department of Financial Institutions has broad
investigatory and enforcement authority under the statute.
The Department may grant, revoke, and suspend licenses. For
compliance purposes, pawnshops are required to keep such
books, accounts, and records as will enable the Department
to determine if the pawnshop is complying with the statute.
Each pawnshop is required to give authorized agents of the
Department of Financial Institutions free access to its
books and accounts for these purposes. The Indiana statute
allows the following annual rates of interest plus pawn
service charges: 276% annually on transactions of $300 or
less; 261% annually on transactions greater than $300, but
not exceeding $1,000; and 255% annually on transactions
greater than $1,000.
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, among other matters, 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
stratified loan amounts and 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 the graduated rate structure utilized in federal
income tax computations. Under this method of calculation, a
$500 loan, for example, earns interest as follows: (1) first
$150 at 240% annually, (2) next $100 at 180% annually, and
(3) 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:
<PAGE>
Maximum Allowable
Amount Financed Annual Percentage
Per Pawn Loan Rate
--------------- -----------------
$1 to $150 240%
$151 to $250 180%
$251 to $500 120%
$501 to $1,000 60%
$1,001 to $25,000 36%
The amount financed in Oklahoma may not exceed $25,000 per
pawn transaction. In addition, the Oklahoma Pawnshop Act
requires each applicant to (1) be of good moral character;
(2) have net assets of at least $25,000; (3) show that the
pawnshop will be operated lawfully and fairly within the
purpose of the Oklahoma Pawnshop Act; and (4) not have been
convicted of any felony which directly relates to the duties
and responsibilities of the occupation of pawnbroker.
Alabama Pawnshop Regulations
The Alabama Pawnshop Act regulates the licensing and
operation of pawnshops in that state. The general fitness of
pawnshop applicants is investigated by the Supervisor of the
Bureau of Loans of the State Department of Banking. The
Supervisor also issues pawnshop licenses. The Alabama
Pawnshop Act requires that certain bookkeeping records be
maintained and made available to the Supervisor and to local
law enforcement authorities. The Alabama Pawnshop Act
establishes a maximum allowable pawn service charge of 300%
annually.
Florida Pawnshop Regulations
Pawnshop transactions in Florida are subject to Florida
regulations codified in Chapter 539 of the Florida Statutes.
Under such regulations, licensing of pawnshops and
regulatory enforcement of such shops is performed by the
Division of Consumer Services of the Department of
Agriculture and Consumer Services. Such regulations
require, among other things, that the pawnshop fill out a
Pawnbroker Transaction Form showing the customer name, type
of item pawned, and disclosing the amount of the pawn loan
and the applicable finance charges. A copy of each form
must be delivered to local law enforcement officials at the
end of each business day.
Pawn loans in Florida typically have a 30 day maturity
date. If the customer does not redeem the loan within 30
days following the maturity date (or the next business day,
whichever is later), all right, title, and interest to the
property vests in the pawnbroker. The pawnbroker is
entitled to charge two percent of the amount financed for
each 30 days as interest, and an additional amount as pawn
service charges, provided the total amount of such charge,
inclusive of interest, does not exceed 25% of the amount
financed for each 30 day period in a pawn transaction. The
pawnbroker may charge a minimum pawn service charge of $5.00
for each 30 day period. Pawns may be extended by agreement,
with the charge applicable being one-thirtieth of the
original total pawn service charge for each day by which the
loan is extended. For loans redeemed greater than 60 days
after the date made, pawn service charges continue to accrue
at the daily rate of one-thirtieth of the original total
pawn service charge.
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 material matters
in their permanent records, and allows duly authorized
officers to inspect such records. Under applicable Georgia
statutes, 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 the pawnshop customers.
Georgia law establishes a maximum allowable rate of
interest and service charge of 25% of the principal amount
of a pawn transaction for each 30 days. This annual rate is
in effect for the first 90 days of any pawn transaction or
extension or continuation thereof. The maximum allowable
charge for interest and service charges is reduced to 12.5%
for each 30 day period thereafter. Georgia law requires a
grace period after default on a pawn
<PAGE>
transaction. During the grace period, the pawnbroker may not
sell the pledged item. The grace period is 30 days for motor
vehicles and 10 days for all other pawn collateral.
Tennessee Pawnshop Regulations
Tennessee law provides for the licensing of pawnbrokers
in that state. It further requires (1) that pawn
transactions be reported to local law enforcement agencies,
(2) requires pawnbrokers to maintain insurance coverage on
the property held on pledge for the benefit of the pledgor,
(3) establishes certain hours during which pawnshops may be
opened for business, and (4) requires 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 15 days after making their
report to local law enforcement agencies.
Applicable Tennessee law provides that pawnbrokers may
charge interest of 2% a month, plus service charge of 20% or
one-fifth of the amount of the loan for investigating the
title, storing and insuring the pledged goods, closing the
loan, and for other expenses and losses associated with the
loan.
California Regulations
In California, both state and city or county licenses
are required. Applicants must pass a state and local
background check, post a bond in the amount of $20,000 and
maintain net assets of at least $100,000 per location. Pawn
loans in California require a written contract, which must
provide for a four month loan period. If the pledgor does
not redeem the loan within such period, the pawnbroker must,
within 30 days thereafter, send a notification to the
pledgor giving him ten days from the date of the mailing to
redeem the pawn. The pawnbroker may charge up to $2 for
this notice.
In California, a pawnbroker may charge an initial set
up fee of $2 on a pawn transaction. In addition, a
pawnbroker may charge interest of 2.5% per month on loans up
to $225; 2.0% per month on the portion of any loan between
$225.01 and $900; 1.5% per month on the portion of any loan
between $900.01 and $1,650; and 1.0% per month on the
portion of any loan that is $1,650.01 and above.
Pawnbrokers may also charge storage fees of $3 for any
article that cannot be contained within one cubic foot, $9
for any article that cannot be contained withing three cubic
feet, and $18 for any article that cannot be contained
within six cubic feet. Additionally, pawnbrokers may make
service charges consistent with the following schedule:
For loans not more than 30 days:
Amount Financed Maximum Allowable
Per Pawn Loan Charge
--------------- -----------------
$1 to $14.99 $1
For loans not more than 90 days:
Amount Financed Maximum Allowable
Per Pawn Loan Charge
--------------- -----------------
$15 to $19.99 $3
$20 to $24.99 $4
$25 to $39.99 $5
$40 to $49.99 $6
$50 to $64.99 $7.50
$65 to $74.99 $8.50
$75 to $99.99 $10
$100 to $124.99 $12.50
$125 to $149.99 $13.50
$150 to $224.99 $15
$225 to $324.99 $20
$325 to $449.99 $25
$450 to $599.99 $35
$600 to $799.99 $45
$800 to $999.99 $55
<PAGE>
Amount Financed Maximum Allowable
Per Pawn Loan Charge
--------------- -----------------
$1,000 to $1,199.99 $70
$1,200 to $1,499.99 $85
$1,500 to $1,799.99 $100
$1,800 to $2,099.99 $120
$2,100 to $2,499.99 $140
Louisiana Pawnshop Regulations
The Company's Louisiana operations are governed by the
Louisiana Pawnshop Act. The statute gives regulatory and
enforcement powers to the Commissioner of the Office of
Financial Institutions within the Department of Economic
Development. This statute provides for, among other things,
the licensing and bonding of all pawnbrokers in Louisiana.
Under Louisiana law, the maximum allowable interest
charge is 120% annually. In addition, pawnshops may collect
a 10% service charge for the first month of a pawn
transaction. Louisiana law requires that a pawnbroker hold
jewelry that is pledged as collateral until the lapse of six
months prior to resale from the time the loan was entered or
extended. The law requires a three-month lapse on other
items.
Mississippi Pawnshop Regulations
The Company's Mississippi operations are subject to the
Mississippi Pawnshop Act. The Mississippi Pawnshop Act is
administered by the Commissioner of Banking. Municipalities
in the state may enact ordinances which are in compliance
with, but not more restrictive than those in the Mississippi
Pawnshop Act.
The Mississippi Pawnshop Act provides for, among other
matters, the licensing of pawnbrokers. The Act also provides
for the Commissioner of Banking to investigate the general
fitness of the applicant and generally to regulate pawnshops
in the state. The Commissioner has broad rule-making
authority with respect to Mississippi pawnshops. The
Mississippi Pawnshop Act establishes a maximum allowable
pawn service charge of 300% annually.
Nevada Regulations
In Nevada, all pawn loans must be held for redemption
for at least 120 days after the date the loan is made. A
pawnbroker may charge interest at the rate of 10% per month
for money loaned on the security of personal property
actually received. In addition, the pawnbroker may collect
an initial set up fee of $5. Property received in pledge
may not be removed from the pawnshop, except when redeemed
by the owner, prior to 30 days after a report of the receipt
of such property is reported to the sheriff or chief of
police.
North Carolina Pawnshop Regulations
In North Carolina, a pawnbroker must obtain a license
by showing sufficient net assets and moral character to
demonstrate that it will not operate to the detriment of the
public. The applicable interest and service charges are two
percent per month interest, and a monthly fee not to exceed
20% for the following: (1) title investigation, (2)
handling, appraisal and storage, (3) insuring and security,
(4) application fee, (5) making daily reports to law
enforcement or other services. The total monthly fees may
not exceed $100 in the first month, $75 in the second month,
$75 in the third month, $50 in the fourth month and for any
subsequent months. Pawn loans in North Carolina are to have
a 30 day loan term, with a 60 day grace period, after which
time the collateral is subject to resale by the pawnbroker.
Arkansas Pawnshop Regulations
Arkansas law does not provide for the licensing of
pawnbrokers or pawnshops in that state. By statute,
pawnbrokers must maintain certain records of each pawn
transaction and make those records available to local law
enforcement agencies. Arkansas law establishes a maximum
allowable interest rate of 17% annually; however, a pawnshop
operator may charge reasonable fees for investigating title,
storage, and other services.
<PAGE>
Local Regulations
At the local level, each pawnshop, voluntarily or
pursuant to municipal ordinance, provides copies of
transactions involving pawn loans and over-the-counter
purchases to the local police department. 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 names and addresses of the
owners obtained from valid identification cards.
A copy of each 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. While a risk exists that pledged or
purchased merchandise may be subject to claims of rightful
owners, historically, the Company has experienced such
claims with respect to less than 0.5% of pawn loans made.
There can be no assurance that additional local, state,
or federal legislation will not be enacted or that existing
laws and regulations will not be amended which would
materially, adversely impact the Company's operations and
financial condition.
Firearms Regulations
With respect to gun and ammunition sales, each pawnshop
must comply with the regulations promulgated by the Federal
Bureau of Alcohol, Tobacco and Firearms (BATF) which require
each pawnshop dealing in guns to maintain a permanent
written record of all transactions involving the receipt or
disposition of guns.
The BATF promulgated rules under the Brady Handgun
Violence Prevention Act (the "Brady Act") on February 28,
1994. The rules, in effect as of September 30, 1998,
basically require that all licensees, in either selling
inventoried or redeeming pawned firearms have the buyer
complete appropriate forms and wait the requisite five-day
period prior to completing the sale and delivering the
firearm. On November 30, 1998, the permanent provisions of
the Brady Act took effect. From that date, all purchases of
firearms and all people redeeming pledged firearm property
must complete a background check before the transfer of the
firearm can be completed.
The Company complies with the Brady Act, and rules
promulgated by the United States Department of the Treasury
relating thereto. The Company does not believe that
compliance with the Brady Act and the new rules promulgated
thereunder have materially affected the Company's
operations. There can be no assurance, however, that
compliance with the Brady Act will not adversely affect the
Company's operations.
Item 2. Properties
As of December 1, 1998, the Company owned the real
estate and buildings for 31 of its pawnshops and leased 269
of its operating pawnshop locations. The Company generally
leases facilities for a term of five to ten years with one
or more options to renew. The Company's existing leases
expire on dates ranging between December 1, 1998 and
February 28, 2008. All leases provide for specified periodic
rental payments. Most leases require the Company to maintain
the property and pay the cost of insurance and taxes. The
Company believes that termination of a particular lease
would not have a material adverse effect on the Company's
operations. All of such leases provide for market rental
rates. The Company's strategy is generally to lease, rather
than acquire, space for its pawnshop locations unless the
Company finds what it believes is a superior location at an
attractive price. The Company believes that the facilities
owned and leased by it as pawnshop locations are suitable
for such purpose.
The following table presents the metropolitan areas or
regions (as defined by the Company) generally served by the
Company and the number of retail locations serving each such
market as of December 1, 1998:
Number of
Locations in
Area/Region Each Area
-------------- ------------
Texas:
Houston 59
San Antonio 18
Austin Area 10
<PAGE>
Valley 19
Central and Northeast 18
Dallas 11
Laredo Area 11
North Texas 10
Panhandle 9
Corpus Christi 6
---
Total Texas 171
Colorado:
Denver Area 17
Colorado Springs Area 5
Pueblo 2
---
Total Colorado 24
Indiana:
Indianapolis Area 13
Other Areas 10
---
Total Indiana 23
Oklahoma:
Oklahoma City Area 8
Tulsa Area 10
Other Areas 2
---
Total Oklahoma 20
Alabama:
Birmingham Area 6
Montgomery 4
Mobile 2
Other Areas 1
---
Total Alabama 13
Florida:
Pensacola 12
---
Total Florida 12
Georgia:
Atlanta Area 10
---
Total Georgia 10
Tennessee:
Memphis 8
---
Total Tennessee 8
California:
Sacramento 6
---
Total California 6
Louisiana:
New Orleans Area 2
Other Areas 1
---
Total Louisiana 3
Mississippi:
Jackson 2
<PAGE>
Other Areas 1
---
Total Mississippi 3
Nevada:
Las Vegas 3
---
Total Nevada 3
North Carolina:
Raleigh-Durham Area 3
---
Total North Carolina 3
Arkansas:
West Helena 1
---
Total Arkansas 1
---
Total Company 300
===
In addition to its store locations, the Company owns
its corporate offices and leases certain warehouse
facilities. In Fiscal 1992, the Company purchased a 27,400
square foot building in Austin, Texas for use as a corporate
office. The Company also leases approximately 8,100 square
feet for its Central Jewelry Processing Center under a five-
year lease agreement with one five-year option to renew.
Item 3. Legal Proceedings
From time to time, the Company is involved in
litigation relating to claims arising from its normal
business operations. Currently, the Company is a defendant
in several lawsuits. Some of these lawsuits involve claims
for substantial amounts. While the ultimate outcome of these
lawsuits cannot be ascertained, after consultation with
counsel, the Company believes the resolution of these suits
will not have a material adverse effect on the Company's
financial condition. There can be no assurance, however,
that this will be the case.
Pursuant to a settlement agreement dated February 4,
1998, the Company and its founder and former President and
Chief Executive Officer, Courtland L. Logue, Jr., reached an
out of court settlement in the lawsuit styled EZCORP, Inc.
v. Courtland L. Logue, Jr., in the 201st District Court of
Travis County, Texas. Under the terms of the settlement,
which closed February 18, 1998, both the Company and Mr.
Logue released their claims against each other, including
all claims under Mr. Logue's employment agreement, and
neither party admitted any liability nor paid any cash
consideration to the other.
The Company agreed to accelerate the release of
contractual restrictions on the transfer of Mr. Logue's
967,742 shares of common stock, which converted, as of
February 18, 1998, to publicly traded Class A Non-voting
Common Stock. In exchange, Mr. Logue agreed to assign
10,000 shares of his stock to the Company.
The settlement released 191,548 shares immediately from
certain restrictions against transfer, and a like amount was
released as of October 29, 1998. An additional 95,774
shares will be released from restrictions on each of October
29, 1999 and October 29, 2000, with the remaining 40% of the
shares to be released in July 2001, as originally scheduled.
The Company and Mr. Logue also clarified the scope of Mr.
Logue's continuing non-competition agreement, agreed to a
five-year limitation on Mr. Logue's financial investments in
competing pawnshop businesses and agreed to renewal options
with respect to certain existing real estate leases for
store locations.
The Company is also the nominal defendant in a lawsuit
filed July 18, 1997 by a holder of 39 shares of Company
stock styled for the benefit of the Company against certain
directors of the Company in the Castle County Court of
Chancery in the State of Delaware. The suit alleges the
defendants breached their fiduciary duties to the Company in
approving certain management incentive compensation
arrangements and an affiliate's financial advisory services
contract with the Company. The suit seeks rescission of the
subject agreements, unspecified damages and expenses,
including plaintiff's legal fees. On December 16, 1998, the
plaintiff filed a Stipulation and Order of
<PAGE>
Dismissal with the Court, stipulating that the lawsuit would
be dismissed with prejudice to the plaintiff. The court
approved the Stipulation and Order of Dismissal on December
18, 1998, thereby dismissing the lawsuit.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
Since August 27, 1991, the Company's Class A Non-voting
Common Stock ("Class A Common Stock") has traded on The
Nasdaq Stock Market under the symbol EZPW. As of December 1,
1998, there were 270 stockholders of record of the Company's
Class A Non-voting Common Stock. There is no trading market
for the Company's Class B Voting Common Stock ("Class B
Common Stock"), and as of December 1, 1998, such stock was
held by one stockholder of record.
The high and low per share price for the Company's
Class A Common Stock for the past two fiscal years, as
reported by The Nasdaq Stock Market, were as follows:
High Low
--------- ---------
Fiscal 1997:
First quarter ended
December 31, 1996 $ 8.88 $ 5.75
Second quarter ended
March 31, 1997 8.13 6.38
Third quarter ended
June 30, 1997 10.25 7.38
Fourth quarter ended
September 30, 1997 11.06 8.75
Fiscal 1998:
First quarter ended
December 31, 1997 $13.50 $10.00
Second quarter ended
March 31, 1998 12.13 9.88
Third quarter ended
June 30, 1998 12.38 10.25
Fourth quarter ended
September 30, 1998 12.00 6.75
As of December 1, 1998, the Company's Class A Common
Stock closed at $7.75 per share.
The Company's restated certificate of incorporation
provides that cash dividends on common stock, when declared,
must be declared and paid share and share alike on the Class
A Common Stock and the Class B Common Stock. On July 27,
1998, the Board of Directors declared an annual cash
dividend of $0.05 per share payable quarterly on both the
Class A Common Stock and the Class B Common Stock. The
first quarterly dividend of $0.0125 per share to
stockholders of record on August 11, 1998 was paid on August
25, 1998.
Item 6. Selected Financial Data
The following selected financial information should be
read in conjunction with, and is qualified in its entirety
by reference to the financial statements of the Company and
the notes thereto included elsewhere in this Form 10-K:
<PAGE>
Selected Financial Data
<TABLE> The Company
<CAPTION> Fiscal Years Ended
September 30,
1994 1995 1996 1997 1998
------------------------------------------
(Amounts in thousands, except
per share and store figures)
<S> <C> <C> <C> <C> <C>
Operating Data:
Sales (1) $104,773 $115,220 $103,511 $101,454 $112,307
Pawn service charges 63,169 74,254 70,115 78,845 85,087
-------------------------------------------
Total revenues (1) 167,942 189,474 173,626 180,299 197,394
Cost of goods sold (1) 88,256 113,227 88,953 84,468 94,084
-------------------------------------------
Net revenues 79,686 76,247 84,673 95,831 103,310
Store operating expenses 58,181 74,417 58,969 60,735 66,742
Corporate administrative
expenses 12,668 15,406 10,712 13,320 12,810
Depreciation and amortization 4,471 7,352 7,573 7,616 7,596
Interest expense 1,512 3,059 1,884 982 1,398
Equity interest in income of
unconsolidated affiliate - - - - (95)
------------------------------------------
Income (loss) before income
taxes 2,854 (23,987) 5,535 13,178 14,859
Income tax expense (benefit) 1,065 (8,138) 1,992 4,745 5,646
------------------------------------------
Net income (loss) $ 1,789 $(15,849) $ 3,543 $ 8,433 $ 9,213
==========================================
Earnings (loss) per
common share - diluted $ 0.15 $ (1.32) $ 0.30 $ 0.70 $ 0.77
Cash dividends per
common share $ - $ - $ - $ - $0.0125
Weighted average common
shares and share
equivalents - diluted 11,975 11,977 11,988 12,002 12,014
Stores operated at end
of period 234 261 246 249 286
September 30,
1994 1995 1996 1997 1998
---------------------------------------------
Balance Sheet Data:
Pawn loans $ 37,777 $ 39,782 $ 34,636 $ 42,837 $ 49,632
Inventory 63,070 41,575 35,834 39,258 44,011
Working capital 106,691 94,916 76,158 89,451 104,648
Total assets 173,989 164,588 140,366 151,051 189,911
Long-term debt, net 36,791 42,916 16,244 19,133 48,123
Stockholders' equity 125,086 109,375 112,991 121,461 130,554
</TABLE>
(1) Sales from scrap and wholesale activities were reclassified
from cost of goods sold to sales in the 1994 and 1995
operating data.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
This discussion and analysis compares the results of
operations for the 12 month periods ending September 30,
1998, 1997, and 1996 (designated as "Fiscal 1998", "Fiscal
1997", and "Fiscal 1996"). The discussion should be read in
conjunction with, and is qualified in its entirety by, the
accompanying financial statements and related notes.
Summary Financial Data
Fiscal Years Ended September 30,
<TABLE> 1996 1997 1998
--------------------------------
<CAPTION> (Dollars in thousands, except
as indicated)
<S> <C> <C> <C>
Net Revenues:
Sales $103,511 $101,454 $112,307
Pawn service charges 70,115 78,845 85,087
------------------------------
Total revenues 173,626 180,299 197,394
Cost of sales 88,953 84,468 94,084
------------------------------
Net revenues $ 84,673 $ 95,831 $103,310
==============================
Other Data:
Gross margin 14.1% 16.7% 16.2%
Average annual inventory
turnover 2.3x 2.4x 2.4x
Average inventory per
location at year end $146 $158 $154
Average loan balance per
location at year end $141 $172 $174
Average pawn loan at year end
(whole dollars) $67 $73 $71
Average yield on loan portfolio 209% 211% 207%
Redemption rate 78% 78% 78%
Expenses and income as a percentage
of total revenue (%):
Store operating 33.9 33.7 33.8
Administrative 6.2 7.4 6.5
Depreciation and amortization 4.4 4.2 3.8
Interest 1.1 0.5 0.7
Income before income taxes 3.2 7.3 7.5
Net income 2.0 4.7 4.7
Stores in operation:
Beginning of year 261 246 249
Acquired - - 3
New openings 11 5 35
Sold, combined, or closed (26) (2) (1)
-----------------------------
End of year 246 249 286
Average number of locations
during the year (1) 254 248 268
</TABLE>______________
(1) Average locations in operation during the period is
calculated based on the average of the stores operating
at the beginning and end of such period.
<PAGE>
Results of Operations
The Company's primary activity is the making of small,
non-recourse loans secured by tangible personal property.
The income earned on this activity is pawn service charge
revenue. For Fiscal 1998, pawn service charge revenue
increased $6.2 million from Fiscal 1997 to $85.1 million as
a result of an increase in same store pawn service charge
revenue ($3.5 million), pawn service charge revenue from new
stores not opened the full 12 month period ($2.8 million),
reduced by stores which were closed ($0.1 million). At
September 30, 1998, same store pawn loan balances were 9%
above September 30, 1997, and the annualized yield decreased
by four percentage points to 207% primarily as a result of a
mix shift to lower yielding loans.
For Fiscal 1997, pawn service charge revenue increased
$8.7 million from Fiscal 1996 to $78.8 million as a result
of an increase in same store pawn service charge revenue
($8.5 million), pawn service charge revenue from new stores
not open the full 12 month period ($0.6 million), reduced by
stores which were closed ($0.4 million). At September 30,
1997, same store pawn loan balances were 23% above September
30, 1996 and the annualized yield increased by two
percentage points to 211%.
A secondary, but related, activity of the Company is
the sale of merchandise, primarily collateral forfeited from
its lending activity. For Fiscal 1998, merchandise sales
increased approximately $10.9 million from Fiscal 1997 to
$112.3 million. An increase in same store merchandise sales
($7.8 million), and new store sales ($3.8 million) were
offset by merchandise sales of the closed stores ($0.2
million) and a decrease in wholesale jewelry sales ($0.5
million). Same store merchandise sales were up 8% compared
to Fiscal 1997.
For Fiscal 1997, merchandise sales decreased
approximately $2.1 million from Fiscal 1996 to approximately
$101.4 million. A decline in same store merchandise sales
($0.3 million), merchandise sales of the closed stores ($0.8
million), and the decrease in wholesale jewelry sales ($3.8
million) were partially offset by new store sales ($2.8
million). Same store sales for Fiscal 1997 declined 0.3%
from Fiscal 1996.
During Fiscal 1996, the Company sold on a wholesale
basis or scrapped $3.8 million of jewelry which had been
identified as excess and written down to net realizable
value during the Company's fourth Fiscal 1995 quarter.
These sales and their related cost are included in
"Merchandise Sales" and "Cost of Goods Sold." Due to the
earlier write-down, these sales had no effect on income for
Fiscal 1996.
The Company's gross margin level (gross profit as a
percentage of merchandise sales) results from, among other
factors, the composition, quality and age of its inventory.
At September 30, 1998, 1997 and 1996, the Company's
inventories consisted of approximately 60%, 63% and 66%
jewelry (e.g., ladies' and men's rings, chains, bracelets,
etc.) and 40%, 37%, and 34% general merchandise (e.g.,
televisions, VCRs, tools, sporting goods, musical
instruments, firearms, etc.). At September 30, 1998, 1997
and 1996, approximately 88%, 87%, and 75% of the jewelry
inventory was less than 12 months old based on the Company's
date of acquisition (date of forfeiture for collateral or
date of purchase) as was approximately 96%, 96%, and 87% of
the general merchandise inventory.
For Fiscal 1998, gross margins decreased 0.5 of a
percentage point from Fiscal 1997 to 16.2% as a result of a
decline in margins on merchandise sales (1.1 percentage
points), a reduction in inventory shrinkage when measured as
a percentage of merchandise sales (down 0.1 of a percentage
point to approximately 1.3%) and improved gross profit on
wholesale and scrap jewelry sales (an increase of 0.5 of a
percentage point).
For Fiscal 1997, gross margins improved 2.6 percentage
points from Fiscal 1996 to 16.7% as a result of improved
margins on merchandise sales (0.9 of a percentage point), a
reduction in inventory shrinkage when measured as a
percentage of merchandise sales (down 0.8 of a percentage
point to approximately 1.4%) and improved gross profit on
wholesale and scrap jewelry sales (an increase of 0.9 of a
percentage point).
In Fiscal 1998, operating expenses as a percentage of
total revenues increased 0.1 of a percentage point from
Fiscal 1997 to 33.8% primarily as a result of increased new
store openings. Administrative expenses decreased 0.9 of a
percentage point from Fiscal 1997 to 6.5% primarily as a
result of a reduction in management bonuses earned in Fiscal
1998 compared to Fiscal 1997.
<PAGE>
In Fiscal 1997, operating expenses as a percentage of
total revenues decreased 0.2 of a percentage point from
Fiscal 1996 to 33.7% primarily as a result of the economies
realized from the approximately four percent total revenue
increase. Administrative expenses increased 1.2 percentage
points from Fiscal 1996 to 7.4% primarily as a result of an
increase in management bonuses earned and non-capitalized
system development costs in Fiscal 1997.
Depreciation and amortization expense, when measured as
a percent of total revenue, declined to 3.8% in Fiscal 1998
from 4.2% in Fiscal 1997. The decline is a net effect of
greater revenues and an absolute decline in depreciation and
amortization expense. Depreciation and amortization expense
declined because the impact of some assets becoming fully
depreciated exceeded the additional depreciation of asset
additions. In Fiscal 1997, depreciation and amortization
expense increased slightly compared to Fiscal 1996 due to
the fewer new store openings. In Fiscal 1996, depreciation
and amortization expense increases were partially offset by
the effect of stores that were closed.
Interest expense increased to $1.4 million in Fiscal
1998 from $1.0 million in Fiscal 1997 largely due to
increased average debt balances for the full 12 month
period. Interest expense decreased by $0.9 million in
Fiscal 1997 from $1.9 million largely due to decreases in
average debt balances for the full 12 month period.
Income tax expense for Fiscal 1998 was $5.6 million
(38% of pretax income) compared to $4.7 million (36% of
pretax income) for Fiscal 1997 and $2 million (36% of pretax
income) for Fiscal 1996. The increased effective tax rate
was due to higher effective state income taxes in some
states in which the Company operates.
Net income for Fiscal 1998 was $9.2 million compared to
net income of $8.4 million for Fiscal 1997. The improvement
in net income results primarily from higher pawn service
charge revenues and increased net revenues on higher
merchandise sales, partially offset by higher operating
costs. Net income for Fiscal 1997 was $8.4 million compared
to net income $3.5 million for Fiscal 1996. The improvement
results primarily from higher pawn service charge revenues
and improved gross margins on merchandise sales partially
offset by higher administrative costs.
The Year 2000 Issue
The Company, like many companies, faces the Year 2000
Issue. This is a result of computer programs being written
using two digits rather than four (for example, "98" for
1998) to define the applicable year. Any of the Company's
programs that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000.
This could result in a system failure or miscalculations
causing disruptions of operations, including, among other
things a temporary inability to process transactions or
engage in similar normal business activities.
Based on recent assessments, the Company has determined
that it will be required to modify or replace portions of
its software and certain hardware so that those systems will
properly utilize dates beyond December 31, 1999. The
Company presently believes that with modifications or
replacements of existing software and certain hardware, the
Year 2000 Issue can be mitigated. However, if such
modifications and replacements are not completed timely, the
Year 2000 Issue could have a material impact on the
operations of the Company.
The Company's plan to resolve the Year 2000 Issue
involves the following four phases: assessment, remediation,
testing, and implementation. To date, the Company has fully
completed its assessment of all systems that could be
affected by the Year 2000. The completed assessment
indicated that the information technology system which would
be affected is the Company's store level point of sale
system. The Company is in the process of completing the
replacement of its financial and human resources information
systems and expects to have those fully replaced by the end
of its second fiscal 1999 quarter. The new systems will be
Year 2000 compliant. In addition, the Company has gathered
information about the Year 2000 compliance status regarding
relationships it has with various third parties and
continues to monitor their compliance. To date, the Company
is not aware of any third party with a Year 2000 Issue that
would materially impact the Company's results of operations,
liquidity, or capital resources. However, the Company has
no means of ensuring that all third parties will be Year
2000 ready.
For its information technology exposures to date, the
Company is 100% complete on the assessment phase, 90%
complete on the remediation phase and 70% complete with
regards to the remaining phases. It expects to be
<PAGE>
100% fully complete with respect to software reprogramming,
replacement, testing and implementation by March 1999.
The Company will utilize internal resources to
reprogram, test, and implement the software and operating
equipment for Year 2000 modifications. The total cost of
the Year 2000 project is estimated to be less than $100,000
and is being funded through operating cash flows. These
costs are being expensed as incurred. The costs of
replacing the financial and human resources systems are
excluded from this amount as the decision to replace those
systems was not accelerated by the Year 2000 Issue.
Management of the Company believes it has an effective
program in place to resolve the Year 2000 Issue in a timely
manner. As noted above, the Company has not yet completed
all necessary phases of the Year 2000 program. In the event
that the Company does not complete any additional phases,
the Company might not be able to process customer
transactions. In addition, disruptions in the economy
generally resulting from Year 2000 Issues could also
materially adversely affect the Company. The amount of
potential liability and lost revenue cannot be reasonably
estimated at this time.
The Company currently has no contingency plans in place
in the event it does not complete all phases of the Year
2000 program. The Company plans to evaluate the status of
completion in March 1999, and determine at that time whether
such a plan is necessary.
Liquidity and Capital Resources
Net cash provided by operating activities for Fiscal
1998 was $10.8 million compared to $10.4 million provided in
Fiscal 1997 and $22.1 million provided in Fiscal 1996.
Improved operating results offset by increases in
inventories and pawn service charges receivable were the
main factors for the increased cash provided by operating
activities. In addition, a portion of the Fiscal 1996
operating cash flow is the result of income tax refunds from
the carryback of the Company's Fiscal 1995 net operating
loss and the lower level of taxes payable resulting from the
carryforward of this net operating loss ($6.2 million). In
Fiscal 1998, bank borrowings increased $28.8 million. These
borrowings, along with $10.8 million provided by operating
activities, were used by investing activities ($6.2 million
increase in investments in pawn loans, $17.6 million
invested in property, plant and equipment, $10.8 million
invested in the unconsolidated affiliate, Albemarle & Bond
Holdings, plc, $3.6 million for acquisition of pawn stores
and $0.9 million for the purchase of other pawn related
assets) resulting in a net increase in cash of $0.5 million.
In Fiscal 1998, the Company invested $22.2 million to
open 35 newly established stores, to acquire three stores,
to remodel or relocate existing stores, and to upgrade or
replace existing equipment and computer systems. The
Company funded these expenditures largely from cash flow
provided by operating activities and bank borrowings. The
Company plans to open approximately 60 new stores in the
next 12 months and to continue the conversion of the
computer systems requiring a combined total capital
investment of approximately $28 million. The Company
anticipates that cash flow from operations and funds
available under its existing bank line of credit will be
adequate to fund these capital expenditures and the
anticipated pawn loan growth during the coming year. There
can be no assurance, however, that the Company's cash flow
and line of credit will provide adequate funds for these
expenditures.
On May 9, 1997, the Company amended its November 29,
1994 revolving line of credit. The amended revolving line
of credit matures January 30, 2000. Terms of the amended
agreement require, among other things, that the Company meet
certain financial covenants. Borrowings under the line are
unsecured and bear interest at the bank's Eurodollar rate
plus 0.75% to 1.5%.
On December 10, 1998, the Company completed a new
$110,000,000 syndicated credit facility. Jointly with the
closing on this facility, the Company terminated its
existing facility dated November 29, 1994, as amended
through the fifth amendment dated October 5,1998. The new
credit facility is unsecured and matures December 3, 2001.
Terms of the credit agreement require, among other things,
that the Company meet certain financial covenants. The
outstanding balance under the facility bears interest,
payable monthly, at the agent bank's Prime Rate or
Eurodollar rate plus 87.5 to 137.5 basis points, depending
on certain performance criteria. In addition, the Company
pays an unused commitment fee equal to a fixed rate of 25
basis points of the unused
<PAGE>
amount of the total commitment. At December 15, 1998, the
Company had $58 million outstanding on the line of credit.
See Note F - Long-Term Debt.
Seasonality
Historically, pawn service charge revenues are highest
in the Company's fiscal fourth quarter (July, August and
September) due to higher loan demand during the summer
months and merchandise sales are highest in the Company's
fiscal first and second fiscal quarters (October through
March) due to the holiday season and tax refunds.
Forward-Looking Information
This Annual Report on Form 10-K includes "forward-
looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements
other than statement of historical information provided
herein are forward-looking and may contain information about
financial results, economic conditions, trends and known
uncertainties. The Company cautions the reader that actual
results could differ materially from those expected by the
Company depending on the outcome of certain factors,
including without limitation (i) fluctuations in the
Company's inventory and loan balances, inventory turnover,
average yields on loan portfolios, redemption rates, labor
and employment matters, competition, operating risk,
acquisition and expansion risk, liquidity and capital
requirements and the effect of government and environmental
regulations and (ii) adverse changes in the market for the
Company's services. Readers are cautioned not to place
undue reliance on these forward-looking statements, which
speak only as of the date hereof. The Company undertakes no
obligations to release publicly the results of any revisions
to these forward-looking statements which may be made to
reflect events or circumstances after the date hereon,
including without limitation, changes in the Company's
business strategy or planned capital expenditures, or to
reflect the occurrence of unanticipated events.
Item 7A. Qualitative and Quantitative Disclosures about
Market Risk
Market Risk Disclosures
The following discussion about the Company's market
risk disclosures involves forward-looking statements.
Actual results could differ materially from those projected
in the forward-looking statements. The Company is exposed
to market risk related to changes in interest rates and
foreign currency exchange rates. The Company does not use
derivative financial instruments.
The Company's earnings are affected by changes in
interest rates due to the impact those changes have on its
variable-rate debt instruments. The majority of the
Company's long-term debt at September 30, 1998 is a variable-
rate debt instrument. If interest rates average 25 basis
points more in 1999 than they did in 1998, the Company's
annual interest expense would be increased by less than
$100,000. These amounts are determined by considering the
impact of the hypothetical interest rates on the Company's
variable-rate long-term debt at September 30, 1998.
The Company's earnings and financial position are
affected by foreign exchange rate fluctuations related to
the equity investment in Albemarle & Bond Holdings, plc
("A&B"). A&B's operation's functional currency is the U.K.
pound. The U.K. pound exchange rate can directly and
indirectly impact the Company's results of operations and
financial position in several manners, including potential
economic recession in the U.K. resulting from a devalued
pound. The impact on the Company's financial position and
results of operations of a hypothetical change in the
exchange rate between the U.S. dollar and the U.K. pound
cannot be reasonably estimated. The cumulative translation
adjustment representing the decline in the U.K. pound during
Fiscal 1998 was approximately $30,000. On December 15,
1998, the U.K. pound closed at 0.5928 to 1.00 U.S. dollar,
an increase from 0.5886 at September 30, 1998. No assurance
can be given as to the future valuation of the U.K. pound
and how further movements in the pound could effect future
earnings or the financial position of the Company.
<PAGE>
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements
Page
Report of Independent Auditors 24
Consolidated Financial Statements:
Consolidated Balance Sheets as of September 30, 1997
and 1998 25
Consolidated Statements of Operations for each
of the Three Fiscal Years Ended September 30, 1998 26
Consolidated Statements of Cash Flows for each of the
Three Fiscal Years Ended September 30, 1998 27
Consolidated Statements of Stockholders' Equity for
each of the Three Fiscal Years Ended September 30, 1998 28
Notes to Consolidated Financial Statements 29
<PAGE>
Report of Independent Auditors
Board of Directors
EZCORP, Inc.
We have audited the accompanying consolidated balance sheets
of EZCORP, Inc. and its subsidiaries as of September 30,
1997 and 1998, and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of
the three years in the period ended September 30, 1998. Our
audits also included the financial statement schedule listed
in the Index at Item 14(a)(2). These financial statements
and schedule 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 consolidated financial statements
referred to above present fairly, in all material respects,
the consolidated financial position of EZCORP, Inc. and its
subsidiaries at September 30, 1997 and 1998, and the
consolidated results of their operations and their cash
flows for each of the three years in the period ended
September 30, 1998, in conformity with generally accepted
accounting principles. Also in our opinion, the related
financial statement schedule, when considered in relation to
the basic financial statements taken as a whole, presents
fairly in all material respects the information set forth
therein.
ERNST & YOUNG LLP
Austin, Texas
November 10, 1998, except for Note P as
to which the date is December 16, 1998
<PAGE>
Consolidated Balance Sheets
September 30,
1997 1998
----------------------------
(In thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
Assets:
Current assets:
Cash and cash equivalents $ 829 $ 1,328
Pawn loans 42,837 49,632
Service charges receivable 13,130 14,843
Inventory, net 39,258 44,011
Deferred tax asset 1,889 1,882
Federal income tax recoverable - 840
Prepaid expenses and other assets 1,965 3,170
-----------------------
Total current assets 99,908 115,706
Investment in unconsolidated affiliate - 10,909
Property and equipment, net 32,586 43,666
Other assets:
Goodwill, net 12,532 13,605
Deferred tax asset 1,730 -
Notes receivable related parties 3,033 3,000
Other assets, net 1,262 3,025
-----------------------
Total assets $151,051 $189,911
=======================
Liabilities and Stockholders' Equity:
Current liabilities:
Current maturities of long-term debt $ 9 $ 10
Accounts payable and other accrued
expenses 7,715 8,874
Customer layaway deposits 1,914 2,174
Federal income taxes payable 819 -
-----------------------
Total current liabilities 10,457 11,058
Long-term debt, less current maturities 19,133 48,123
Deferred tax liability - 24
Other long-term liabilities - 152
-----------------------
Total long-term liabilities - 48,299
Commitments and contingencies
Stockholders' equity:
Preferred Stock, par value $.01
per share - Authorized 5,000,000
shares; none issued and outstanding - -
Class A Non-voting Common Stock,
par value $.01 per share 105 108
Authorized 40,000,000 shares;
10,524,563 issued and
10,515,530 outstanding in 1997;
10,820,574 issued and
10,811,541 outstanding in 1998
Class B Voting Common Stock, convertible,
par value $.01 per share 15 12
Authorized 1,484,407 shares in 1997;
1,480,301 shares issued and
outstanding in 1997;
Authorized 1,198,990 shares in 1998;
1,190,057 issued and outstanding in
1998
Additional paid-in capital 114,338 114,398
Retained earnings 7,767 16,830
----------------------
122,225 131,348
Treasury stock (9,033 shares in 1997
and 1998) (35) (35)
Receivables from stockholders (729) (729)
Accumulated foreign currency
translation adjustment - (30)
----------------------
Total stockholders' equity 121,461 130,554
----------------------
Total liabilities and stockholders'
equity $151,051 $189,911
</TABLE> ======================
See notes to consolidated financial statements.
<PAGE>
Consolidated Statements of Operations
Years Ended September 30,
1996 1997 1998
------------------------------------
(In thousands, except
per share amounts)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Revenues:
Sales $ 103,511 $ 101,454 $ 112,307
Pawn service charges 70,115 78,845 85,087
----------------------------------
Total revenues 173,626 180,299 197,394
Costs of goods sold 88,953 84,468 94,084
----------------------------------
Net revenues 84,673 95,831 103,310
Operating expenses:
Operations 58,969 60,735 66,742
Administrative 10,712 13,320 12,810
Depreciation 6,302 6,761 6,895
Amortization 1,271 855 701
----------------------------------
Total operating expenses 77,254 81,671 87,148
----------------------------------
Operating income 7,419 14,160 16,162
Interest expense, net 1,884 982 1,398
Equity in net income of
unconsolidated affiliate - - (95)
----------------------------------
Income before income taxes 5,535 13,178 14,859
Income tax expense 1,992 4,745 5,646
----------------------------------
Net income $ 3,543 $ 8,433 $ 9,213
==================================
Basic and diluted
earnings per share $ 0.30 $ 0.70 $ 0.77
==================================
Weighted average shares outstanding
Basic 11,988 11,995 11,999
Diluted 11,988 12,002 12,014
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Consolidated Statements of Cash Flows
Years Ended September 30,
1996 1997 1998
-------------------------------------
(In thousands)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Operating Activities:
Net income $ 3,543 $ 8,433 $ 9,213
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and amortization 7,573 7,616 7,596
Net (gain)/loss on sale or
disposal of assets (167) 520 (32)
Income from investment in
unconsolidated affiliate - - (95)
Changes in operating assets
and liabilities:
Service charges receivable 1,190 (2,868) (1,575)
Inventory 5,741 (3,424) (4,303)
Notes receivable related
parties (3) (2) 33
Prepaid expenses and other
assets (55) 862 (1,689)
Accounts payable and accrued
expenses (1,778) (431) 1,169
Customer layaway deposits (124) (62) 251
Other long-term liabilities - - 152
Federal income taxes payable 800 19 (819)
Deferred taxes 1,192 (279) 1,761
Income taxes recoverable 4,236 - (840)
Net cash provided by operating ----------------------------------
activities 22,148 10,384 10,822
Investing Activities:
Pawn loans forfeited and
transferred to inventory 50,805 53,272 60,297
Pawn loans made (151,437) (170,379) (180,894)
Pawn loans repaid 105,778 108,906 114,429
-----------------------------------
5,146 (8,201) (6,168)
Additions to property,
plant and equipment (5,836) (5,505) (17,830)
Acquisitions, net of cash
acquired - - (3,600)
Purchase of pawn related assets - - (925)
Investment in unconsolidated
affiliate - - (10,844)
Proceeds from sale of assets 2,031 6 203
Net cash provided by/(used in) ----------------------------------
investing activities 1,341 (13,700) (39,164)
Financing Activities:
Proceeds from bank borrowings 5,000 15,000 48,000
Payments on bank borrowings (31,671) (12,274) (19,009)
Collections of stockholder
notes receivable 8 - -
Payment of dividends - - (150)
----------------------------------
Net cash provided by/(used in)
financing activities (26,663) 2,726 28,841
----------------------------------
Change in cash and equivalents (3,174) (590) 499
Cash and equivalents at
beginning of period 4,593 1,419 829
Cash and equivalents at ----------------------------------
end of period $ 1,419 $ 829 $ 1,328
===================================
Cash paid during the periods for:
Interest $ 2,481 $ 1,237 $ 1,850
Income taxes $ - $ 5,006 $ 5,934
Noncash investing and financing activities:
Issuance of common stock to
401(k) plan $ 65 $ 37 $ 60
Accumulated foreign currency
translation adjustment $ - $ - $ (30)
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Consolidated Statements of Stockholders' Equity
Accumulated
Foreign
Add'l Retained Receivables Currency
Common Stock Paid in Earnings/ Treasury from Translation
Shares Par Value Capital (Deficit) Stock StockholdersAdjustment Total
------ --------- ------- --------- -------- ----------- ---------- --------
<TABLE>
<CAPTION>
<S><C> <C> <C> <C> <C> <C> <C> <C>
(In thousands)
Balances at September 30, 1995
11,987 $120 $114,236 $(4,209) $(35) $(737) $ - $109,375
Issuance of common stock to
401(k) plan
12 - 65 - - - - 65
Reductions on stockholder notes
- - - - - 8 - 8
Net income
- - - 3,543 - - - 3,543
Balances at September 30, 1996
-------------------------------------------------------------------------
11,999 120 114,301 (666) (35) (729) - 112,991
Issuance of common stock to
401(k) plan
5 - 37 - - - - 37
Net income
- - - 8,433 - - - 8,433
Balances at September 30, 1997
-------------------------------------------------------------------------
12,004 120 114,338 7,767 (35) (729) - 121,461
Issuance of common stock to
401(k) plan
7 - 60 - - - - 60
Payment of dividends
- - - (150) - - - (150)
Foreign currency translation adjustment
- - - - - - (30) (30)
Net income
- - - 9,213 - - - 9,213
Balances at September 30, 1998
------------------------------------------------------------------------
12,011 $120 $114,398 $16,830 $ (35) $(729) $(30) $130,554
========================================================================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Notes to Consolidated Financial Statements
Note A - Organization and Summary of Significant Accounting
Policies
Organization: The Company is primarily engaged in
establishing, acquiring, and operating pawnshops. As of
September 30, 1998, the Company operated 286 locations in 14
states. The pawnshops function as sources of customer
credit and as specialty retailers primarily of previously
owned merchandise.
Consolidation: The consolidated financial statements
include the accounts of the Company and its wholly owned
subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Additionally, the Company accounts for its 29.99% interest
in Albemarle & Bond Holdings, plc ("A&B") using the equity
method.
Revenue Recognition: Pawn loans ("loans") are generally
made on the pledge of tangible personal property for one
month with an automatic 60 day grace period (the "loan
term"). Pawn service charges on loans are recorded based on
the interest method. If the loan is not repaid, the
forfeited collateral (inventory) is valued at the lower of
cost (principal plus accrued interest) or market (net
realizable value) of the property. When this inventory is
sold, sales revenue and the related cost are recorded at the
time of sale.
Concentrations of Credit Risk: Collateral for the Company's
pawn loans consists of tangible personal property, generally
jewelry, consumer electronics, tools, firearms and musical
instruments. The Company does not investigate the
creditworthiness of a borrower, but relies on the estimated
resale value of the pledged property, the perceived
probability of its redemption, and the estimated time
required to sell the item as a basis for its credit
decision. As a result, the Company believes it has very
little credit risk.
Cash and Cash Equivalents: For purposes of this statement,
the Company considers investments with maturities of 90 days
or less when purchased to be cash equivalents.
Inventory: Inventory is stated at the lower of cost
(specific identification) or market (net realizable value).
Inventory consists of merchandise acquired from forfeited
loans, merchandise purchased from customers, merchandise
acquired from the acquisition of other pawnshops, and new
merchandise purchased from vendors. The Company provides an
allowance for shrinkage and valuation based on management's
evaluation of the age, condition, and salability of the
merchandise. The valuation allowance deducted from the
carrying value of inventory amounted to $6,933,476 and
$6,817,048 at September 30, 1997 and 1998, respectively.
Software Development Costs: The Company accounts for
software development costs in accordance with SOP 98-1,
Accounting for the Costs of Computer Software Developed for
or Obtained for Internal Use. The SOP was issued by the
AICPA in March 1998 and is effective for fiscal years
beginning after December 15, 1998; however, as permitted,
the Company chose early adoption of the SOP. The SOP
requires the capitalization of certain costs incurred after
the date of adoption in connection with developing or
obtaining software for internal use. During 1998,
approximately $5,150,000 of costs were capitalized in
connection with the development of internal software
systems. Included in this amount is $230,000 of capitalized
interest. Capitalized costs will be amortized over the
estimated useful life once each system is complete and ready
for its intended use.
Customer Layaway Deposits: Customer layaway deposits are
recorded as deferred revenue until the entire related sales
price has been collected.
Property and Equipment: Property and equipment are stated
at cost. Provisions for depreciation are computed on a
straight-line basis using estimated useful lives of 30 years
for buildings and 5 to 10 years for equipment, leasehold
improvements and software development costs.
Intangible Assets: Intangible assets consist primarily of
excess purchase price over net assets acquired in
acquisitions. Excess cost over fair value of net assets
acquired (or goodwill) is amortized on a straight-line basis
over 20 to 40 years (the expected period of benefit).
Accumulated amortization of goodwill was approximately
$5,716,000 and
<PAGE>
$6,217,000 at September 30, 1997 and 1998, respectively.
Accumulated amortization of all other intangible assets was
approximately $6,353,000 and $6,553,000 at September 30,
1997 and 1998, respectively.
Long-Lived Assets: Long-lived assets (i.e., property,
equipment and intangible assets) are reviewed for impairment
whenever events or changes in circumstances indicate that
the net book value of the asset may not be recoverable. An
impairment loss would be recognized if the sum of the
expected future cash flows (undiscounted and before
interest) from the use of the asset is less than the net
book value of the asset. Generally, the amount of the
impairment loss is measured as the difference between the
net book value of the assets and the estimated fair value of
the related assets.
Fair Value of Financial Instruments: The fair value of
financial instruments is determined by reference to various
market data and other valuation techniques, as appropriate.
Unless otherwise disclosed, the fair values of financial
instruments approximate their recorded values, due primarily
to their short-term nature.
Foreign Currency Translation: The Company's equity
investment in A&B is translated into U.S. dollars at the
exchange rate as of A&B's balance sheet date, and the
related interest in A&B's net income is translated at
average exchange rates for the period from the date of
acquisition through A&B's balance sheet date. Resulting
translation adjustments are reflected as a separate
component of stockholders' equity.
Advertising: Advertising costs are expensed as incurred.
Advertising expense was approximately $2,701,000, $1,267,000
and $1,208,000, for the fiscal years ended September 30,
1996, 1997, and 1998, respectively.
Income Taxes: The Company files a consolidated return with
its wholly owned subsidiaries. Deferred taxes are recorded
based on the liability method and result primarily from
differences in the timing of the recognition of certain
revenue and expense items for federal income tax purposes
and financial reporting purposes.
Stock-Based Compensation: The Company accounts for its
stock based compensation plans in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB 25"). In October 1995, the
Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for
Stock Based Compensation" ("SFAS 123"). SFAS 123 encourages
expensing the fair value of employee stock options, but
allows an entity to continue to account for stock-based
compensation to employees under APB 25 with disclosures of
the pro forma effect on net income had the fair value
accounting provisions of SFAS 123 been adopted. These pro
forma disclosures are effective for option grants in fiscal
years 1996 and after. The Company has calculated the fair
value of options granted in these periods using the Black-
Scholes option pricing model and has determined the pro
forma impact on net income. See Note G - Common Stock,
Warrants and Options.
Use of Estimates: The preparation of financial statements
in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those
estimates.
Recently Issued Accounting Pronouncements: In April 1998,
the Accounting Standards Executive Committee (AcSEC) issued
Statement of Position (SOP) 98-5, "Reporting on the Costs of
Start-Up Activities." The SOP requires the costs of start-
up activities and organization costs to be expensed as
incurred. The SOP is effective for fiscal years beginning
after December 15, 1998. The Company's existing accounting
policies are consistent with those of the SOP, and as such,
the Company does not expect the SOP to have a significant
impact on future operating results.
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. The Company
believes that this Statement will not significantly change
its current financial statement presentation.
<PAGE>
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
that this Statement will not significantly change its
current financial statement presentation.
Note B - Earnings Per Share
In February 1997, the Financial Accounting Standards Board
issued Statement No. 128, "Earnings per Share." Statement
128 replaces the previously reported primary and fully
diluted earnings per share with basic and diluted earnings
per share. Unlike primary earnings per share, basic
earnings per share excludes any dilutive effects of options,
warrants and convertible securities. Diluted earnings per
share is very similar to the previously reported fully
diluted earnings per share. All earnings per share amounts
for all periods have been presented, and where necessary,
restated to conform to the Statement 128 requirements. The
impact of Statement 128 has not materially changed the
current calculation of earnings per share as the dilutive
effect of stock options and warrants outstanding is not
currently material.
The following table sets forth the computation of basic and
diluted earnings per share:
<TABLE> Years Ended September 30,
<CAPTION> 1996 1997 1998
-----------------------------
(In thousands)
<S> <C> <C> <C>
Numerator
Numerator for basic and diluted
earnings per share - net income $ 3,543 $ 8,433 $ 9,213
Denominator ==============================
Denominator for basic earnings
per share - weighted average
shares 11,988 11,995 11,999
Effect of dilutive securities:
Employee stock options - - 3
Warrants - 7 12
------------------------------
Dilutive potential common shares - 7 15
------------------------------
Denominator for diluted earnings
per share - adjusted weighted
average shares and assumed
conversions 11,988 12,002 12,014
==============================
Basic earnings per share $ 0.30 $ 0.70 $ 0.77
==============================
Diluted earnings per share $ 0.30 $ 0.70 $ 0.77
</TABLE> ==============================
For the 12 months ended September 30, 1998, options to
purchase 618,643 weighted average shares of common stock at
an average price of $13.36 per share were outstanding. These
options were not included in the computation of diluted
earnings per share because the options' exercise price was
greater than the average market price of common shares and,
therefore, the effect would be anti-dilutive.
For the 12 months ended September 30, 1997, options to
purchase 619,203 weighted average shares of common stock at
an average price of $13.22 per share were outstanding. These
options were not included in the computation of diluted
earnings per share because the options' exercise price was
greater than the average market price of common shares and,
therefore, the effect would be anti-dilutive.
For the 12 months ended September 30, 1996, options to
purchase 694,476 weighted average shares of common stock at
an average price of $13.18 per share were outstanding. These
options were not included in the computation of diluted
earnings per share because the options' exercise price was
greater than the average market price of common shares and,
therefore, the effect would be anti-dilutive.
<PAGE>
Note C - Acquisition of Pawn Stores and Purchase of Pawn
Related Assets
There were no acquisitions during the fiscal years ended
September 30, 1997 and 1996.
During the fiscal year ended September 30, 1998, the Company
paid approximately $3,600,000 for the acquisition of pawn
stores. The purchase price for the acquisitions was funded
primarily from an existing revolving credit line. These
acquisitions have been accounted for under the purchase
method of accounting. The operating results of the acquired
locations have been included in the Company's consolidated
results of operations since their respective purchase dates.
Excess of cost over the fair value of the assets acquired of
approximately $1,300,000 is being amortized on a straight-
line basis over periods ranging from 20 to 40 years.
Since none of these acquisitions are material to the total
Company (individually or collectively) per the SEC
significance test, Rule 1-02(w) of Regulation S-X, there is
no inclusion of pro forma results.
On March 28, 1998, the Company acquired 29.99% of the common
shares of Albemarle & Bond Holdings, plc ("A&B") for
approximately $10.8 million. A&B is primarily engaged in
pawnbroking, retail jewelry sales and check cashing. A&B
operates in England and Wales. The excess of the purchase
price over the fair market value of net assets acquired of
approximately $7.6 million is being amortized over 20 years.
Summarized financial information for this equity investment
is not shown since the investment is not material in
relation to the financial position or results of operations
of the Company. The acquisition is accounted for using the
equity method of accounting for investment in common stock.
A&B's fiscal year ends June 30. Therefore, the income
reported for the Company's fiscal year end of September 30
represents its percentage of the results for A&B from April
1 to June 30, 1998, which is a three (3) month lag in
reporting. See Note P - Subsequent Events.
Also during 1998, the Company paid approximately $925,000
for the purchase of certain pawn related assets including
inventory, pawn loans, property and equipment. Excess of
cost over the fair value of the assets acquired of
approximately $238,000 is being amortized on a straight line
basis over 40 years.
Note D - Property and Equipment
Major classifications of property and equipment were as
follows:
<TABLE>
<CAPTION>
September 30,
1997 1998
--------------------------
(In thousands)
<S> <C> <C>
Land $ 1,351 $ 2,110
Buildings and improvements 29,633 35,424
Furniture and equipment 23,724 29,865
Software development costs 645 5,792
-------------------------
Total 55,353 73,191
Less - accumulated depreciation (22,767) (29,525)
------------------------
$32,586 $43,666
</TABLE> ========================
Note E - Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consisted of the
following:
<TABLE>
<CAPTION>
September 30,
1997 1998
------------------------
(In thousands)
<S> <C> <C>
Trade accounts payable $ 895 $ 3,252
Accrued payroll and related expenses 2,296 2,479
Other accrued expenses 4,524 3,143
---------------------
$ 7,715 $ 8,874
</TABLE> =====================
<PAGE>
Note F - Long-Term Debt
Long-term debt consisted of:
<TABLE>
<CAPTION>
September 30,
1997 1998
----------------------
(In thousands)
<S> <C> <C>
Note payable to bank under $50 million line of credit
agreement amended as of May 1997; interest on used
portion payable monthly at prime rate or the bank's
Eurodollar rate plus 0.75% to 1.50% (6.625% at
September 30, 1998); principal due January 2000. $ 19,000 $ 48,000
Note payable to individual with interest at 10%,
payable in monthly installments of $1,881 including
interest, maturing August 2002 - land and building
pledged as collateral. 142 133
-----------------
19,142 48,133
Less current maturities 9 10
-----------------
$ 19,133 $ 48,123
</TABLE> =================
The Company has a $50,000,000 unsecured revolving line of
credit with a bank group of which $48,000,000 was
outstanding as of September 30, 1998. Credit availability is
based upon a percentage of inventory levels and outstanding
pawn loans. Fees under the line of credit include an annual
$25,000 agent fee, a $25,000 facility fee and a commitment
fee equal to 0.25% of the unused amount of the commitment.
Terms of the loan require, among other things, that the
Company meet certain financial covenants. In addition,
incurring additional debt is restricted and the payment of
dividends is limited to 25% of the Company's net income
during each fiscal year. See Note P - Subsequent Events.
The Company has a $691,300 letter of credit with a bank
group as required by a legal agreement relating to certain
insurance policies.
Note G - Common Stock, Warrants and Options
The capital stock of the Company consists of two classes of
common stock designated as Class A Non-voting Common Stock
and Class B Voting Common Stock. The rights, preferences,
and privileges of the Class A and Class B Common Stock are
similar except that each share of Class B Common Stock has
one vote and each share of Class A Common Stock has no
voting privileges. All Class A Common Stock is publicly
held. Holders of Class B Voting Common Stock may,
individually or as a class, convert some or all of their
shares into Class A Non-voting Common Stock. Class A Common
Stock becomes voting common stock upon the conversion of all
Class B Common Stock to Class A Common Stock. The Company is
required to reserve such number of authorized but unissued
shares of Class A Non-voting Common Stock as would be
issuable upon conversion of all outstanding shares of Class
B Voting Common Stock.
At September 30, 1998, warrants to purchase 23,591 shares of
Class A Non-voting Common Stock and 4,074 shares of Class B
Voting Common Stock at $6.17 per share were outstanding. The
warrants are exercisable through July 25, 2009.
The Company has an Incentive Stock Option Plan (the "1991
Plan") under which options to purchase Class A Non-voting
Common Stock may be granted to employees. Options granted
under the 1991 Plan are generally granted at exercise prices
equal to or greater than the fair market value of the Class
A Common Stock on the date of grant. The options vest at 20%
each year and are fully vested in five years. They have a
contractual life of ten years. In October 1994, the Board
of Directors increased the number of shares available under
the 1991 Plan to 1,800,000 and amended the 1991 Plan to
provide accelerated vesting upon a change in control of the
Company. Total options available for grant at September 30,
1998 was 1,152,490 shares.
As of September 30, 1998, the Company had 647,510 options
outstanding (options granted less options canceled due to
employee termination) at exercise prices ranging from $8.75
to $21.75 and a weighted average remaining
<PAGE>
contractual life of 6.3 years. Of these options, 383,828 are
vested with a weighted average exercise price of $13.61 per
share and none have been exercised. A summary of 1991 Plan
activity for each of the three fiscal years ended September
30, 1996, 1997 and 1998 follows:
Stock Option Plans
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Number of Shares Price Range of Shares Weighted Average
Under Option Under Option Exercise Price
---------------- --------------------- ----------------
Outstanding at
September 30, 1995 719,838 $ 8.75-$21.75 $13.32
Granted 62,624 $ 8.75 $ 8.75
Canceled (138,815) $ 8.75-$21.75 $11.61
Exercised 0 - -
Outstanding at -----------------------------------------------
September 30, 1996 643,647 $ 8.75-$21.75 $13.24
Granted 24,313 $12.75 $12.75
Canceled (105,955) $ 8.75-$21.75 $11.97
Exercised 0 - -
Outstanding at -----------------------------------------------
September 30, 1997 562,005 $ 8.75-$21.75 $13.46
Granted 138,250 $12.00-$12.50 $12.05
Canceled (52,745) $ 8.75-$21.75 $12.91
Exercised 0 - -
Outstanding at -----------------------------------------------
September 30, 1998 647,510 $ 8.75-$21.75 $13.20
</TABLE>
Range of Options Outstanding
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Weighted Exercisable
Weighted Average Shares
Number of Average Remaining Weighted
Range of Shares Exercise Contractual Avg. Exer.
Exercise Prices Outstanding Price Life (years) Exercisable Price
- --------------- ----------- --------- ------------ ---------- ---------
$8.75-$12.00 133,023 $11.54 8.9 13,363 $9.99
$12.50-$12.75 105,287 $12.62 5.9 44,445 $12.61
$13.00-$13.00 256,400 $13.00 5.7 203,840 $13.00
$14.00-$14.50 125,400 $14.00 5.8 100,260 $14.00
$21.75-$21.75 27,400 $21.75 4.2 21,920 $21.75
$8.75-$21.75 647,510 $13.46 6.3 383,828 $13.61
</TABLE>
In accordance with SFAS 123, the fair value of these options
was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted average
assumptions for the years ended September 30, 1997 and 1998,
respectively:
<TABLE>
<CAPTION>
September 30, September 30,
1997 1998
------------- -------------
<S> <C> <C>
Risk-free interest rate 5.90% 5.74%
Dividend yield 0% 0%
Volatility factor of the
expected market price of the
Company's common stock 0.386 0.419
Expected life of the options 5 years 5 years
</TABLE>
The Black-Scholes option valuation model was developed for
use in estimating the fair value of traded options which
have no vesting restrictions and are fully transferable. In
addition, this option valuation model requires the input of
highly subjective assumptions including the expected stock
price volatility. Because the Company's employee stock
options have characteristics significantly different from
those of traded options, and because changes in the
subjective input assumptions can materially affect the fair
value estimate, in management's opinion, the Black-Scholes
model does not necessarily provide a reliable single measure
of the fair value of its employee stock options.
Additionally,
<PAGE>
because the provisions of SFAS 123 are not effective for
options granted prior to October 1, 1996 and due to the
nature and timing of option grants, the resulting pro forma
compensation costs may not be indicative of future
compensation costs.
For purposes of pro forma disclosures, the estimated fair
value of the options is amortized to expense over the
options' vesting period. The Company's pro forma net income
is as follows:
<TABLE>
<CAPTION>
1996 1997 1998
---------------------------
<S> <C> <C> <C>
Net income - as reported $ 3,543 $ 8,433 $ 9,213
Less: pro forma compensation
expense 12 10 110
---------------------------
Net income - pro forma $ 3,531 $ 8,432 $ 9,103
===========================
Basic earnings per share
- pro forma $ 0.29 $ 0.70 $ 0.76
===========================
Diluted earnings per share
- pro forma $ 0.29 $ 0.70 $ 0.76
</TABLE> ===========================
On November 5, 1998, the Compensation Committee of the Board
of Directors approved the adoption of the EZCorp, Inc. 1998
Incentive Plan, which provides for stock option awards of up
to 1,275,000 of the Company's Class A Non-voting Common
Stock. In approving such plan, the Compensation Committee
resolved that no further options would be granted under any
previous plans. The Board granted stock options totalling
1,023,000 at an exercise price of $10 per share. The
majority of the options vest at the end of 119 months but
are subject to early vesting from November 5, 1999 to
November 5, 2005 if the Company meets certain earnings per
share targets. The options have a contractual life of ten
years.
The Compensation Committee of the Board of Directors
approved the grant of the following options, exercisable at
$10.00 per share, and, except as provided below, vesting on
October 6, 2008:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Tranche A Options Tranche B Options Tranche C Options
----------------- ----------------- -----------------
Sterling B. Brinkley 200,000 100,000 50,000
Vincent A. Lambiase 200,000 100,000 50,000
J. Jefferson Dean 83,350 41,650 25,000
Daniel N. Tonissen 50,000 25,000 25,000
</TABLE>
The following specified percentage of the options will vest
prior to October 6, 2008 if the Company meets certain
earnings per share ("EPS") targets described below and
maintains a certain debt to equity ratio.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings Per Share for Fiscal Year
----------------------------------
1999 2000 2001 2002 2003 2004 2005
---- ---- ---- ---- ---- ---- ----
Targeted EPS for Tranche A Options
$0.85$1.05$1.30$1.60$2.00$2.50$3.10
Targeted EPS for Tranche B Options
$0.85$1.06$1.43$1.92$2.46$3.06$3.66
Targeted EPS for Tranche C Options
$3.00$3.00$3.00$3.00$3.00$3.00$3.00
Percent Vested if Targets Met for Fiscal Year
----------------------------------------------
1999 2000 2001 2002 2003 2004 2005
---- ---- ---- ---- ---- ---- ----
Applicable percentage 10% 10% 15% 15% 20% 20% 10%
Amount for Tranche A and Tranche B
Applicable percentage 100% 100% 100% 100% 100% 100% 100%
Amount for Tranche C
</TABLE>
<PAGE>
In addition, with respect to Tranche A and Tranche B
Options, to the extent that the applicable EPS target is not
met for a particular fiscal year, but the EPS target is
exceeded in the next following fiscal year, the excess may
be carried back to satisfy the shortfall in the immediately
prior year. Once the EPS target for the Tranche C Options
is met, 100% of the Tranche C Options vest, and no further
Tranche C Options shall vest in any subsequent year in which
the EPS target is met. Finally, if any of the above-
described options fail to qualify as incentive options under
the Internal Revenue Code, the Company has agreed to pay a
bonus to each Optionee at the time and in the amount of any
tax savings actually realized by the Company resulting
therefrom.
The EPS targets set forth above do not represent the
Company's projections, forecasts or forward-looking
statements concerning future performance. Instead, they
have been established through negotiations with the named
executives to identify appropriate incentives as part of a
broad-based executive compensation program. To the extent
the EPS targets may be deemed forward-looking statements,
they are subject in their entirety to the safe-harbor
provisions set forth elsewhere in this report.
The above-described options are also subject to accelerated
vesting upon a change of control of the Company, as
described in the 1998 Plan.
Shares of reserved common stock at September 30, 1998, were
as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Class A Class B
--------- --------
Stock option plan 1,800,000 -
Stock warrants 23,559 4,106
401(k) plan 100,000 -
Conversion of Class B Voting
Stock 1,484,407 -
-------------------
3,407,966 4,106
</TABLE> ===================
Note H - Income Taxes
The income tax provision consisted of:
<TABLE>
<CAPTION>
Years Ended September 30,
1996 1997 1998
-----------------------------
(In thousands)
<S> <C> <C> <C>
Current
Federal $ 800 $ 4,906 $ 3,586
State - 118 299
-----------------------------
800 5,024 3,885
Deferred
Federal 1,192 (279) 1,761
State - - -
-----------------------------
1,192 (279) 1,761
-----------------------------
$ 1,992 $ 4,745 $ 5,646
</TABLE> =============================
A reconciliation of income taxes calculated at the statutory
rate and the provision for income taxes were as follows:
<TABLE>
<CAPTION>
Years Ended September 30,
1996 1997 1998
------------------------------
(In thousands)
<S> <C> <C> <C>
Income taxes at the federal
statutory rate $ 1,882 $ 4,612 $ 5,201
Effect of nondeductible
amortization of intangible
assets 27 27 27
State income tax, net of
federal benefit - 118 298
Other 83 (12) 120
------------------------------
$ 1,992 $ 4,745 $ 5,646
</TABLE> ==============================
Income before income taxes on the statements of operations
differs from taxable income due to the following, which are
accounted for differently for financial statement purposes
than for federal income tax purposes and result in deferred
tax expense (benefit):
<PAGE>
<TABLE>
<CAPTION>
Years Ended September 30,
1996 1997 1998
----------------------------
(In thousands)
<S> <C> <C> <C>
Inventory basis $ (105) $ (176) $ (312)
Provision for store closings
and related charges 1,365 (365) 302
Software basis - - 1,949
Other (68) 262 (178)
----------------------------
$1,192 $ (279) $1,761
</TABLE> ============================
Significant components of the Company's deferred tax
liabilities and assets as of September 30, 1997 and 1998 are
as follows:
<TABLE>
<CAPTION>
Years Ended September 30,
1997 1998
-------------------------
(In thousands)
<S> <C> <C>
Deferred tax liabilities:
Amortization of software costs $ - $1,949
Book over tax inventory basis 539 227
Prepaid expenses 354 517
---------------------
Total deferred tax liabilities 893 2,693
Deferred tax assets: ---------------------
Book over tax depreciation 1,432 1,834
Inventory reserve 2,357 2,337
Amortization of non-competes 297 91
Accrued liabilities 390 251
Other, net 36 38
Total deferred tax assets 4,512 4,551
----------------------
Net deferred tax asset $ 3,619 $ 1,858
</TABLE> ======================
The Company's tax return for the year ended September 30,
1996 was examined by the Internal Revenue Service resulting
in no change to the return as filed.
Note I - Related Party Transactions
Pursuant to the terms of a financial advisory services
agreement, an affiliate of the general partner of the
majority stockholder provides management consulting and
investment banking services to the Company for a $33,333
monthly retainer. These services include ongoing
consultation with respect to offerings by the Company of its
securities, including, but not limited to, the form, timing,
and structure of such offerings. In addition to the
retainer, the affiliate earns fees from the Company for
other business and financial consulting services. In Fiscal
1998, Morgan Schiff received $33,333 per month for its
services as a financial advisor and an additional $250,000
in connection with the Company's acquisition of Albemarle &
Bond Holdings, plc ("A&B") and received expense
reimbursements of $370,848 of which $98,404 was related to
the acquisition of A&B. In the years ended September 30,
1996 and 1997, total management fees and expense
reimbursements of approximately $650,000 and $590,000,
respectively, were paid to the affiliate.
From July 1994 to August 1994, the Company loaned the
President and Chief Executive Officer $729,113 to purchase
50,000 shares of Class A Non-voting Common Stock, which is
shown as a reduction of stockholders' equity in these
financial statements. Interest accrues annually at a rate
equal to the prime rate plus one half of one percent.
Interest is payable annually on December 31 of each year
until June 30, 1999. As of September 30, 1998, the amount
owed is approximately $729,000 plus accrued interest of
approximately $49,000. The Company records interest income
on the loan and annually, the Board of Directors makes a
determination of the amount of interest to be forgiven, if
any, and charges such amount to compensation expense to the
President and Chief Executive Officer.
In October 1994, the Board of Directors approved agreements
which provide incentive compensation to the Chairman and the
Chief Executive Officer based on growth in the share price
of the Company's publicly traded common stock. Both
executives were advanced $1.5 million evidenced by a
recourse promissory note, due in 2004 and bearing interest
at the minimum rate allowable for federal income tax
purposes (ranging from 5.44% to 5.76% for 1998).
<PAGE>
Specified percentages of loan principal will be forgiven
each time the average closing price of the Company's Class A
Common Stock exceeds specified Stock Price Targets for at
least ten consecutive trading days. The Stock Price Targets
range from $22.50 to $62.50 per share and provide for
complete forgiveness of principal if the share price exceeds
$32.50 per share within five years or $62.50 per share
within ten years. The Program provides that Stock Price
Targets will be adjusted proportionately for certain capital
transactions and that the death or disability of the
executive, or certain changes in control, will result in
forgiveness of the then remaining principal and interest.
Accrued interest is forgiven based upon continued employment
of the executive and the Company is required to reimburse
each executive for the income tax consequences of this
Program. Through September 30, 1998, no Stock Price Targets
have been attained. Charges to operations consist of
interest forgiveness and related income tax costs and
totaled approximately $306,000, $322,000 and $306,000 for
the years ended September 30, 1996, 1997 and 1998,
respectively. On November 5, 1998, the Compensation
Committee of the Board of Directors approved amendments to
such agreements, providing forgiveness of such loans if,
prior to October 1, 2005, a stock price target of $28.25 is
attained. These amendments become effective only upon
acceptance of the Chairman and Chief Executive Officer,
respectively.
Note J - Leases
The Company leases various facilities and certain equipment
under operating leases. Future minimum rentals due under
noncancelable leases including stores which were closed are
as follows for each of the years ending September 30:
<TABLE>
<CAPTION>
Total
(In thousands)
<S> <C>
1999 $11,190
2000 9,135
2001 7,854
2002 6,079
2003 3,857
Thereafter 2,044
-------
$40,159
</TABLE> =======
The Company subleases some of the above facilities. Future
minimum rentals expected under these subleases are as
follows for each of the years ending September 30:
<TABLE>
<CAPTION>
Total
(In thousands)
<S> <C>
1999 $ 552
2000 214
2001 190
2002 172
2003 159
Thereafter 701
-------
$ 1,988
</TABLE> =======
Rent expense for the year ending September 30 was as
follows:
<TABLE>
<CAPTION>
Total
(In thousands)
<S> <C>
1996 $ 9,967
1997 10,330
1998 11,387
------
$31,684
</TABLE> ======
Note K - Employment Agreement
Pursuant to a settlement agreement dated February 4, 1998,
the Company and its founder and former President and Chief
Executive Officer, Courtland L. Logue, Jr., reached an out
of court settlement to the lawsuit styled EZCORP,
<PAGE>
Inc. v. Courtland L. Logue, Jr., in the 201st District Court
of Travis County, Texas. Under the terms of the settlement,
which closed February 18, 1998, both the Company and Mr.
Logue released their claims against each other, including
all claims under Mr. Logue's employment agreement, and
neither party admitted any liability nor paid any cash
consideration to the other.
The Company agreed to accelerate the release of contractual
restrictions on the transfer of Mr. Logue's 967,742 shares
of common stock. The settlement released 191,548 shares
immediately, and a like amount was released on October 29,
1998. An additional 95,774 shares will be released from
restrictions on each of October 29, 1999 and October 29,
2000, with the remaining 40% of the shares to be released in
July, 2001, as originally scheduled. As a result of this
settlement, on February 4, 1998, 285,417 shares of Mr.
Logue's Class B Voting Common Stock were converted to
publicly traded Class A Non-voting Common Stock. The
majority holder of the Class B Voting Common Stock had
previously approved and implemented the conversion of Mr.
Logue's other 682,325 shares from Class B Common Stock to
Class A Common Stock during the fiscal years ended September
30, 1996 and 1997. Also as a part of this settlement, Mr.
Logue agreed to assign 10,000 shares of his stock to the
Company. The Company accounted for the receipt of these
shares as a capital transaction and has excluded the effect
of this transfer from net income. The Company and Mr. Logue
also clarified the scope of Mr. Logue's continuing non-
competition agreement, negotiated a five year limitation on
Mr. Logue's financial investments in competing pawnshop
businesses and negotiated renewal options with respect to
certain existing real estate leases for store locations.
Vincent A. Lambiase, President and Chief Executive Officer
of the Company, is employed pursuant to an employment
agreement with the Company. The agreement engages Mr.
Lambiase as Chief Executive Officer from July 1, 1994
through June 30, 1999. Commencing on July 1, 1999 and each
July 1 thereafter, this term is to be extended for an
additional year unless the Company or Mr. Lambiase gives
notice at least 30 days prior to any such July 1 date that
it or he does not wish to extend the agreement.
In addition to a minimum base salary of $350,000 (which may
be increased by the Board of Directors), the agreement
entitles Mr. Lambiase to receive a bonus of 75% or more of
his base compensation based upon objectives determined each
year by the Executive Committee of the Board of Directors.
The agreement also provides for a loan by the Company to Mr.
Lambiase of sufficient cash to purchase 50,000 shares of
Company stock. Mr. Lambiase purchased such stock at various
times between July 25, 1994 and August 11, 1994 at an
average price per share of $14.49. The Company loaned Mr.
Lambiase a total of approximately $729,000 to purchase this
stock. Interest, charged at the prime rate plus one-half of
one percent, is payable annually on December 31 of each year
until the earlier of June 30, 1999, or one year after the
death or permanent disability of Mr. Lambiase or a default
in payment on the loan. The agreement also grants to Mr.
Lambiase the option to purchase, pursuant to the Company's
Long-Term Incentive Plan, 250,000 shares of the Class A Non-
voting Common Stock of the Company. The exercise price of
the options is $13.00 per share.
Note L - 401(k) Plan
Effective October 1, 1991, the Company's Board of Directors
established a 401(k) Plan whereby eligible employees of the
Company may contribute a maximum of 15% of their
compensation within allowable limits. To be eligible, an
employee must be at least 21 years old and have been
employed by the Company for at least six months. The
Company will match 25% of each employee's contribution, up
to 6% of their compensation, in the form of the Company's
Class A Non-voting Common Stock. Contribution expense
related to the plan for 1996, 1997 and 1998 was
approximately $65,000, $37,000, and $60,000, respectively.
Note M - Contingencies
From time to time, the Company is involved in litigation
relating to claims arising from its normal business
operations. Currently, the Company is a defendant in several
lawsuits. Some of these lawsuits involve claims for
substantial amounts. While the ultimate outcome of these
lawsuits cannot be ascertained, after consultation with
counsel, the Company believes the resolution of these suits
will not have a material adverse effect on the Company's
financial condition or results of operations. However,
there can be no assurance as to the ultimate outcome of
these matters.
<PAGE>
The Company is also the nominal defendant in a lawsuit filed
July 18, 1997 by a holder of 39 shares of Company stock
styled for the benefit of the Company against certain
directors of the Company in the Castle County Court of
Chancery in the State of Delaware. The suit alleges the
defendants breached their fiduciary duties to the Company in
approving certain management incentive compensation
arrangements and an affiliate's financial advisory services
contract with the Company. The suit seeks rescission of the
subject agreements, unspecified damages and expenses,
including plaintiff's legal fees. See Note P - Subsequent
Events.
Note N - Stockholders' Equity
On July 27, 1998, the Board of Directors declared an annual
$0.05 per share cash dividend payable quarterly. The first
quarterly dividend of $0.0125 per share due to stockholders
of record on August 11, 1998 was paid on August 25, 1998.
On July 27, 1998, the Board of Directors approved the
repurchase of up to 2,000,000 shares of the Company's Class
A Non-voting Common Stock in open market transactions over
the next 12 months.
Note O - Quarterly Information (Unaudited)
<TABLE>
<CAPTION>
Year Ended September 30, 1998
First Quarter Second Quarter Third Quarter Fourth Quarter
---------------------------------------------------------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Total revenues $51,944 $49,680 $45,210 $50,560
Net income 2,259 2,037 2,154 2,763
Net income per share $0.19 $0.17 $0.18 $0.23
Year Ended September 30, 1997
First Quarter Second Quarter Third Quarter Fourth Quarter
---------------------------------------------------------
(In thousands, except per share amounts)
Total revenues $45,842 $46,296 $42,405 $45,756
Net income 1,903 1,769 2,050 2,711
Net income per share $0.16 $0.15 $0.17 $0.23
</TABLE>
Note P - Subsequent Events
On December 10, 1998, the Company completed a new
$110,000,000 syndicated credit facility. Jointly with the
closing on this facility, the Company terminated its
existing facility dated November 29, 1994, as amended
through the fifth amendment dated October 5,1998. The new
credit facility is unsecured and matures December 3, 2001.
Terms of the credit agreement require, among other things,
that the Company meet certain financial covenants. The
outstanding balance under the facility bears interest,
payable monthly, at the agent bank's Prime Rate or
Eurodollar rate plus 87.5 to 137.5 basis points, depending
on certain performance criteria. In addition, the Company
pays an unused commitment fee equal to a fixed rate of 25
basis points of the unused amount of the total commitment.
At December 15, 1998, the Company had $58 million
outstanding on the line of credit. See Note F - Long-Term
Debt.
On October 16, 1998, the Company acquired an additional
1,896,666 newly issued common shares of Albemarle & Bond
Holdings, plc ("A&B"), for approximately $2 million.
Following this purchase the Company owns 13,276,666 common
shares of A&B, or approximately of 29.7% of the total
outstanding shares. See Note C - Acquisitions.
On December 16, 1998, the plaintiff to the lawsuit described
in Note M filed a Stipulation and Order of Dismissal with
the Court, stipulating that the lawsuit would be dismissed
with prejudice to the plaintiff. The court approved the
Stipulation and Order of Dismissal on December 18, 1998,
thereby dismissing the lawsuit.
<PAGE>
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 certified
public accountants to report under this Item 9.
PART III
Item 10. Directors and Executive Officers of the Registrant
The executive officers and directors of the Company as
of December 1, 1998 were as follows:
Name Age Title
-------------------------- --- -----------------------
Sterling B. Brinkley(1) 46 Chairman of the Board
of Directors
Vincent A. Lambiase(1) (3) 58 President, Chief
Executive Officer, and
Director
Daniel N. Tonissen(1) (3) 48 Senior Vice
President, Chief
Financial Officer,
Assistant Secretary,
and Director
J. Jefferson Dean 32 Vice President
Strategic Planning and
Business Development,
Secretary and Director
Filbert A. DiNardo 55 Vice President Human
Resources
Richard W. Rew, II 30 Assistant Secretary
Michelle R. Cuzzort 31 Assistant Secretary
Mark C. Pickup(2) (4) 48 Director
Richard D. Sage (2) (4) 58 Director
John E. Cay, III (4) 53 Director
Steve Price (2) 60 Director
-----------------------------
(1) Member of Executive Committee
(2) Member of Incentive Compensation Committee
(3) Member of Section 401(k) Plan Committee
(4) Member of Audit Committee
The Class B Stockholder intends to re-elect the above-
listed directors at the Annual Stockholders' Meeting
expected to be held on or about March 1, 1999.
Mr. Brinkley has served as either Chairman of the Board
or Chairman of the Executive Committee of the Board of
Directors of the Company since 1989. He served as a Managing
Director of Morgan Schiff & Co., Inc., an affiliate of Mr.
Phillip Cohen, from 1986 to 1990. See "Security Ownership of
Certain Beneficial Owners and Management." Mr. Brinkley has
also served as Chairman of the Board or Chairman of the
Executive Committee of Crescent Jewelers, Inc., a 150 store
jewelry chain since 1988. In addition, since 1990, he has
served as Chairman of the Board or Chairman of the Executive
Committee of Friedman's, Inc., a 471+ store jewelry chain,
and MS Pietrafesa, L.P., an apparel manufacturing business.
In addition, Mr. Brinkley is President and Chairman of the
Board of MS Pawn Corporation, the general partner of MS Pawn
Limited Partnership. Morgan Schiff & Co., Inc., Crescent
Jewelers, Inc., and MS Pietrafesa, L.P. are affiliates of
the Company.
Mr. Lambiase has served as a director, President, and
Chief Executive Officer of the Company since July 1994.
From 1991 to 1994, he was a Vice President for Blockbuster
Entertainment, Inc. From 1986 to 1991, he was an associate
of E.S. Jacobs & Company, a venture capital firm. From 1978
to 1985, he was CEO of Winchell's Donut House.
Mr. Tonissen has served as a director, Senior Vice
President, Chief Financial Officer, and Assistant Secretary
of the Company since August 1994. From 1992 to 1994, he was
Vice President and Chief Financial Officer of La Salsa
Holding Company, an operator and franchiser of restaurants.
<PAGE>
Mr. Dean has served as a director of the Company since
1992, Secretary since 1995 and Vice President Strategic
Planning and Business Development since 1997. From 1994 to
1996, Mr. Dean served as Director of Strategic Planning for
the Company. From 1990 to 1996, Mr. Dean served as Vice
President Strategic Planning and as a director of MS
Pietrafesa, L.P., an apparel manufacturing business. In
addition, from 1991 to 1994, Mr. Dean served the Company as
Director of Financial Planning. From 1989 to 1990, Mr. Dean
served as an Associate of Morgan Schiff & Co., Inc., an
affiliate of Mr. Phillip Cohen (see "Security Ownership of
Certain Beneficial Owners and Management").
Mr. DiNardo has served as Vice President Human
Resources of the Company since July 1998. From 1995 to
1998, he was Vice President of Human Resources for Boston
Market, Northeast Division. From 1989 to 1995, he was Vice
President of Human Resources, The Americas, with TNT Express
Worldwide, a Dutch-owned international freight forwarder.
Mr. Rew has served as Assistant Secretary of the
Company since March 1998. Since 1996, Mr. Rew has also
served as General Counsel of the Company. Mr. Rew served as
Assistant General Counsel of the Company from 1994 to 1995
and as Assistant Corporate Counsel of the Company from 1993
to 1994. Mr. Rew is a member of the State Bar of Texas.
Ms. Cuzzort has served as Assistant Secretary of the
Company since March 1998. Since 1996, Ms. Cuzzort has also
served as Controller of the Company. From 1995 to 1996, Ms.
Cuzzort served as Director of Financial Planning of the
Company. From 1993 to 1994, Ms. Cuzzort was an accounting
manager of the Company. Ms. Cuzzort is a Certified Public
Accountant licensed by the Texas State Board of Public
Accountancy.
Mr. Pickup has served as a director of the Company
since 1993. He served as President and Co-Chief Executive
Officer of Crescent Jewelers, Inc. from 1993 to 1995 and
Chief Financial Officer of Crescent Jewelers, Inc. from 1992
until 1995. Since 1993, Mr. Pickup has also served as a
director of Friedman's, Inc. (and MS Jewelers Corporation,
its predecessor).
Mr. Sage has served as a director of the Company since
July 1995. He was a co-founder of AmeriHealth, Inc., which
owned and managed hospitals. He served as Treasurer of
AmeriHealth, Inc. from April 1983 to October 1995 and was a
member of the board of directors of AmeriHealth, Inc. from
April 1983 to December 1994. Mr. Sage served from June 1988
to June 1993 as a Regional Vice President of HHL Financial
Services Company, which specializes in the collection of
health care accounts receivable. He was a member of the
Board of Directors of Champion Healthcare Corporation from
January 1995 to August 1996. Since June 1993, he has been
associated with Sage Law Offices in Miami, Florida.
Mr. Cay has served as a director of the Company since
March 1997. He has served as President and CEO of Palmer &
Cay, Inc., a Savannah based insurance brokerage and employee
benefit consulting firm, since 1970. In February 1997, he
was elected to the board of directors of Friedman's, Inc., a
471+ store jewelry chain. Since 1987, he has also served as
a director of First Union National Bank of Georgia. He is
also a director of Omni Insurance Group, an Atlanta based
automobile insurance company.
Mr. Price has served as a director of the Company since
September 1998. He has served as President and CEO of
JAMS/Endispute, a mediation and arbitration firm, since
1997. From 1994 to 1997, he served as President and CEO of
Supercuts, a hair styling and product salon. From 1988 to
1994, he was a senior vice president of Citibank.
Committees of the Board
The Board of Directors held five meetings and acted by
unanimous consent on one other occasion during the year
ended September 30, 1998. The Board of Directors has
appointed four committees, an Executive Committee, an Audit
Committee, a Compensation Committee and a Section 401(k)
Plan Committee. The members of the Executive Committee for
Fiscal 1998 were Mr. Brinkley, Mr. Lambiase and Mr.
Tonissen. The Executive Committee held four meetings which
all members attended. The members of the Audit Committee for
Fiscal 1998 were Mr. Pickup, Mr. Sage, and Mr. Cay. The
Audit Committee held four meetings which all members
attended. The Compensation Committee, comprised of Mr.
Pickup and Mr. Sage held one meeting during Fiscal 1998 of
which all members attended. The
<PAGE>
committee that administers the Section 401(k) Plan consists
of Mr. Lambiase and Mr. Tonissen and held one meeting during
Fiscal 1998 of which all members attended. All directors
attended at least 75% of the total number of meetings of the
Board and of the committees on which they serve.
Compliance with Section 16(a) of the Exchange Act
All officers and directors were timely throughout the
fiscal year in filing all reports required by Section 16(a)
of the Exchange Act.
Item 11. Executive Compensation
Cash Compensation
The following table sets forth compensation paid by the
Company and its subsidiaries for services during Fiscal
1996, Fiscal 1997, and Fiscal 1998 to the Company's Chief
Executive Officer, and to each of the Company's four most
highly compensated executive officers whose total annual
compensation exceeded $100,000 (such four persons
collectively herein referred to as the "Named Executive
Officers").
<TABLE>
<CAPTION>
All other
Annual Compensation Compensation
Name and Principal Position Year Salary($) Bonus($) Other ($)($)(1)(2)
- --------------------------- ---- ---------- -------- ----- ------------
<S> <C> <C> <C> <C> <C>
Sterling B. Brinkley 1996 300,000 84,565 79,799 -
Chairman of the Board(3) 1997 300,000 188,572 83,580 -
1998 325,000 183,993 79,259 -
Vincent A. Lambiase 1996 350,000 149,611 211,878 3,780
President & ChiefExecutive
Officer(4) 1997 400,000 602,700 250,960 3,780
1998 450,000 149,193 184,218 4,224
Daniel N. Tonissen 1996 155,000 - 40,474 1,674
Senior Vice President,
Chief Financial 1997 183,249 131,250 21,054 1,872
Officer, and Assistant
Secretary 1998 225,000 - 21,483 3,216
J. Jefferson Dean 1996 100,000 - - 1,080
Vice President Strategic 1997 130,538 97,500 - 1,080
Planning & Business
Development, 1998 175,000 - - 2,472
and Secretary
</TABLE>
- ---------------------------
(1) The Company's long-term compensation program for most
senior officers does not include long-term incentive
payouts, stock options, SARs, or other forms of
compensation.
(2) This category includes the value of any insurance
premiums paid on behalf of the named executive.
(3) Mr. Brinkley's Other Annual Compensation includes
$79,259 for payment of taxes for Fiscal 1998.
(4) Mr. Lambiase's Other Annual Compensation includes
$103,892 for payment of taxes for Fiscal 1998.
Employment Agreements
Vincent A. Lambiase, President and Chief Executive
Officer of the Company, is employed pursuant to an
employment agreement with the Company. The agreement engages
Mr. Lambiase as Chief Executive Officer from July 1, 1994
through June 30, 1999. Commencing on July 1, 1999 and each
July 1 thereafter, this term is to be extended for an
additional year unless the Company or Mr. Lambiase gives
notice at least 30 days prior to any such July 1 date that
it or he does not wish to extend the agreement.
In addition to a minimum base salary of $350,000 (which
may be increased by the Board of Directors), the agreement
entitles Mr. Lambiase to receive a bonus of 75% or more of
his base compensation based upon objectives determined each
year by the Executive Committee of the Board of Directors.
The agreement also provides for a loan by the Company to Mr.
Lambiase of sufficient cash to purchase 50,000 shares of
Company stock. Mr. Lambiase
<PAGE>
purchased such stock at various times between July 25, 1994
and August 11, 1994 at an average price per share of $14.49.
The Company loaned Mr. Lambiase a total of $729,113 to
purchase this stock. Interest, charged at the prime rate
plus one-half of one percent, is payable annually on
December 31 of each year until the earlier of June 30, 1999,
or one year after the death or permanent disability of Mr.
Lambiase or a default in payment on the loan. The agreement
also grants to Mr. Lambiase the option to purchase, pursuant
to the Company's Long-Term Incentive Plan, 250,000 shares of
the Class A Non-voting Common Stock of the Company.
On October 7, 1994, pursuant to an authorization by the
Board of Directors on October 1, 1994, the Company funded
loans of $1,500,000 to each of Mr. Lambiase and Mr. Sterling
B. Brinkley, Chairman of the Board of the Company (the
"Executive Loans"). These Executive Loans originally were
to be partially or wholly forgiven during the ten-year
period between October 7, 1994 and October 7, 2004, to the
extent that the Company's stock price reached the levels set
forth in the following tables. Table I was to have applied
during the first five years of the ten-year term, and Table
II was to have applied during the last five years.
TABLE I
PERCENTAGE OF ORIGINAL
PRINCIPAL AMOUNT OF
STOCK PRICE TARGET LOAN FORGIVEN
------------------ ---------------------
$22.50 10%
$25.00 25%
$27.50 50%
$30.00 75%
$32.50 100%
TABLE II
PERCENTAGE OF REMAINING
PRINCIPAL AMOUNT OF
STOCK PRICE TARGET LOAN FORGIVEN
------------------ -----------------------
$32.50 50%
$40.00 60%
$47.50 70%
$55.00 80%
$62.50 100%
The closing stock prices set forth above were required
to average the above amounts for ten consecutive trading
days and were adjustable for any stock split,
recapitalization or other similar event. In the event of any
forgiveness, the Company was to remit to applicable taxing
authorities amounts sufficient to satisfy the tax
obligations of such person arising from the forgiveness. The
Executive Loans were also subject to forgiveness for each
person in the event that such person dies or becomes
disabled or in the event of a change in control of the
Company. The Executive Loans bore interest at the lowest
rate allowable under the Internal Revenue Code, which would
preclude consideration of the loan as a "below market loan"
for purposes of Section 7872 of the Internal Revenue Code.
Each person received a bonus in an amount sufficient to pay
interest on the Executive Loans and taxes arising from the
bonus. On November 5, 1998, the Compensation Committee of
the Board of Directors approved amendments to such
agreements, providing forgiveness of such loans if, prior to
October 1, 2005, a stock price target of $28.25 is attained.
These amendments become effective only upon acceptance of
the Chairman and Chief Executive Officer, respectively.
On November 5, 1998, the Compensation Committee of the
Board of Directors approved an amendment to the Executive
Loans which provided for the forgiveness of such loans if,
prior to October 1, 2005, a stock price target (calculated
as defined in the amendment) of $28.25 per share is met. If
such target is met, the Company shall also pay an amount
sufficient to satisfy any taxes.
On November 5, 1998, the Compensation Committee of the
Board of Directors approved the grant of the following
options, exercisable at $10.00 per share, and, except as
provided below, vesting on October 6, 2008:
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Tranche A Options Tranche B Options Tranche C Options
----------------- ----------------- -----------------
Sterling B. Brinkley 200,000 100,000 50,000
Vincent A. Lambiase 200,000 100,000 50,000
J. Jefferson Dean 83,350 41,650 25,000
Daniel N. Tonissen 50,000 25,000 25,000
</TABLE>
The following specified percentage of the options will
vest prior to October 6, 2008 if the Company meets certain
earnings per share ("EPS") targets described below and
maintains a certain debt to equity ratio.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings Per Share for Fiscal Year
-----------------------------------------
1999 2000 2001 2002 2003 2004 2005
---- ---- ---- ---- ---- ---- ----
Targeted EPS for
Tranche A Options $0.85 $1.05 $1.30 $1.60 $2.00 $2.50 $3.10
Targeted EPS for
Tranche B Options $0.85 $1.06 $1.43 $1.92 $2.46 $3.06 $3.66
Targeted EPS for
Tranche C Options $3.00 $3.00 $3.00 $3.00 $3.00 $3.00 $3.00
Percent Vested if Targets Met for Fiscal Year
----------------------------------------------
1999 2000 2001 2002 2003 2004 2005
---- ---- ---- ---- ---- ---- ----
Applicable percentage 10% 10% 15% 15% 20% 20% 10%
Amount for Tranche A and Tranche B
Applicable percentage 100% 100% 100% 100% 100% 100% 100%
Amount for Tranche C
</TABLE>
In addition, with respect to Tranche A and Tranche B
Options, to the extent that the applicable EPS target is not
met for a particular fiscal year, but the EPS target is
exceeded in the next following fiscal year, the excess may
be carried back to satisfy the shortfall in the immediately
prior year. Once the EPS target for the Tranche C Options
is met, 100% of the Tranche C Options vest, and no further
Tranche C Options shall vest in any subsequent year in which
the EPS target is met. Finally, if any of the above-
described options fail to qualify as incentive options under
the Internal Revenue Code, the Company has agreed to pay a
bonus to each Optionee at the time and in the amount of any
tax savings actually realized by the Company resulting
therefrom.
The EPS targets set forth above do not represent the
Company's projections, forecasts or forward-looking
statements concerning future performance. Instead, they
have been established through negotiations with the named
executives to identify appropriate incentives as part of a
broad-based executive compensation program. To the extent
the EPS targets may be deemed forward-looking statements,
they are subject in their entirety to the safe-harbor
provisions set forth elsewhere in this report.
The above-described options are also subject to
accelerated vesting upon a change of control of the Company,
as described in the 1998 Plan.
Outside directors receive between $12,000 and $25,000
per annum as determined by the Board of Directors for their
services on the Board and its committees as well as the
reimbursement of their out-of-pocket expenses to attend
Board and Committee meetings.
<PAGE>
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term (2)
------------------------ --------------------------------
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employeesin Base Price Expiration
Name Granted(#)(1) Fiscal Year ($/Sh) Date 5% 10%
- ------------ ------------ ----------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Daniel N. Tonissen
30,000 22% 12.00 11/14/07 $195,860 $525,115
Senior Vice President and Chief
Financial Officer and Assistant
Secretary
J. Jefferson Dean
25,000 18% 12.00 11/14/07 $163,217 $437,596
Vice President Strategic Planning and
Business Development and Secretary
</TABLE>
- ---------------------------------
(1) Stock options become exercisable in five equal
installments beginning one year after the date of
grant.
(2) As suggested by the Securities and Exchange
Commission's rules on executive compensation
disclosure, the Company projected the potential
realizable value of each grant of options or
freestanding SARs, assuming that the market price of
the underlying security appreciates in value from the
date of grant to the end of the option or SAR term at
annualized rates of 5% and 10%.
Aggregate Options/SAR Exercises in Last
Fiscal Year and FY-End Option/SAR Values
The following table sets forth certain information
concerning the exercise of stock options (or tandem SARs)
and freestanding SARs in Fiscal 1998 and the value of
unexercised options and SARs held by each of the Named
Executive Officers at the end of the Company's last fiscal
year.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
nderlying Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-End (#) FY-End ($) (1)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise(#) Realized($)Unexercisable Unexercisable
- ----------- -------------- -------- ----------------- -------------------
<S> <C> <C> <C> <C>
Sterling B. Brinkley
- - 100,000/25,000 0/0
Chairman of the Board
Vincent A. Lambiase
- - 200,000/50,000 0/0
President & Chief Executive Officer
Daniel N. Tonissen
- - 14,588/39,725 0/0
Senior Vice President, Chief Financial
Officer, and Assistant Secretary
J. Jefferson Dean
- - 4,863/44,450 0/0
Vice President Strategic Planning and
Business Development, and Secretary
</TABLE>
- -----------------------------------
(1) Values stated are based upon the closing price of
$8.188 per share of the Company's Class A Non-voting
Common Stock on The Nasdaq Stock Market on September
30, 1998, the last trading day of the fiscal year.
Compensation Pursuant to Plans
Stock Incentive Plan
The Company's Board of Directors and stockholders
adopted the EZCORP, Inc. 1991 Long-Term Incentive Plan on
June 6, 1991 (the "1991 Plan"). The 1991 Plan provides for
(i) the granting of stock options qualified under the
Internal Revenue Code of 1986, as amended (the "Code")
section 422 (so-called "incentive stock options") to
purchase Class A Common Stock, (ii) the granting of stock
options not qualified under Code section 422 ("nonqualified
stock options") to purchase Class A Common Stock, (iii) the
granting of stock appreciation rights ("SARs"), which give
the holder the right to receive cash or Class A Common Stock
in an amount equal to the difference between the fair market
value of a share of Class A Common Stock on the date of
exercise and the date of grant, (iv) the granting of limited
stock appreciation rights ("LSARs"), which give the holder
the right under
<PAGE>
limited circumstances to receive cash in an amount equal to
the difference between (a) the per-share price paid in an
applicable tender offer or exchange offer for the Company or
fair market value of the Class A Common Stock in the event
of specified "change of control" events and (b) the fair
market value of the Class A Common Stock on the date of
grant. The 1991 Plan permits the exercise price of the
options to be paid either in cash, by withholding from the
shares to be delivered pursuant to the exercise of the
option that number of shares equal in value to the exercise
price, or by the delivery of already-owned Class A Common
Stock.
There are 1,800,000 shares of Class A Common Stock
(subject to certain adjustments) reserved under the Plan for
issuance upon the exercise of options and the settlement of
SARs and LSARs. Shares subject to an option, SAR, or LSAR
that is terminated or that expires will again be available
for grant under the Plan. Persons eligible to receive
options, SARs, and LSARs are all employees of the Company
selected by the Compensation Committee. Non-employee
directors are not eligible to receive awards under the 1991
Plan.
In general, the Committee has the discretion to
establish the terms, conditions, and restrictions to which
options, SARs, and LSARs are subject. The options, SARs, and
LSARs are not transferable except by will and by the laws of
descent and distribution, and under other limited
circumstances. The 1991 Plan is intended to be qualified
under Rule 16b-3 promulgated by the Securities and Exchange
Commission, which Rule generally exempts certain option
grants and certain stock or cash awards from the provisions
of Section 16(b) under the Securities Exchange Act of 1934.
Options granted under the 1991 Plan are generally
granted at exercise prices equal to the fair market value on
the date of the grant. In October 1994, the Board of
Directors increased the number of shares available under the
Plan to 1,800,000 and amended the Plan to provide
accelerated vesting upon a change in control of the Company.
As of September 30, 1998, the Company had 647,510 active
options outstanding (options granted less options canceled
due to employee termination) under the 1991 Plan at prices
ranging from $8.75 to $21.75. Of these options, 383,828 are
vested and none have been exercised.
On November 5, 1998, the Compensation Committee of the
Board of Directors approved the adoption of the EZCorp, Inc.
1998 Incentive Plan (the "1998 Plan"). The 1998 Plan
permits grants of the sames types of options, SARs and LSARs
as the 1991 Plan and provides for stock option awards of up
to 1,275,000 of the Company's Class A Common Stock. In
approving such plan, the Compensation Committee resolved
that no further options would be granted under any previous
plans. In 1998, the Board granted stock options totalling
1,023,000 at an exercise price of $10.00 per share under the
1998 Plan. The options vest as described above and have a
contractual life of ten years.
The following directors received awards under the 1998
Plan on the terms described above. See "Employment
Agreements.":
<TABLE>
<CAPTION>
<S> <C>
Number of Options
-----------------
Sterling B. Brinkley 350,000
Vincent A. Lambiase 350,000
J. Jefferson Dean 150,000
Daniel N. Tonissen 100,000
-------
950,000
</TABLE> =======
These options vest at the end of 119 months, but are subject
to early vesting from November 5, 1999 to November 5, 2005
(10%, 10%, 15%, 15%, 20%, 20% and 10%) if the Company meets
certain earnings per share targets. See Notes to
Consolidated Financial Statements - Note H "Common Stock,
Warrants and Options."
401(k) Plan
On June 6, 1991, the Company adopted the EZCORP, Inc.
401(k) Plan (the "401(k) Plan"), a savings and profit
sharing plan intended to qualify under Section 401(k) of the
Code. Under the 401(k) Plan, employees of the Company and
those subsidiaries that adopt it may contribute up to 15% of
their compensation (not to exceed $10,000 in 1998) to the
plan trust. The Company will match 25% of an employee's
contributions up to 6% of his compensation. Employer
contributions may be made in the form of or invested in
Class A Common Stock. Contribution expense related to the
401(k) Plan for 1998 was approximately $60,000. The
Company's contributions vest based on the employee's length
of service with the Company and its subsidiaries, with 20%
of the total contributions vesting each year once the
employee has three years of service. On termination of
employment, an
<PAGE>
employee will receive all of his contributions and any
vested portion of the Company's contributions, as adjusted
by any earnings and losses.
Compensation Committee Interlocks and Insider Participation
Not applicable.
Item 12. Security Ownership of Certain Beneficial Owners
and Management
Security Ownership of Management and Principal Stockholders
The Company is controlled, indirectly, by Phillip Ean
Cohen, through his ownership of all of the issued and
outstanding stock of MS Pawn Corporation, the sole general
partner of MS Pawn Limited Partnership ("MS Pawn") which
owns 100% of the Class B Voting Common Stock of the Company.
The table below sets forth information regarding the
beneficial ownership of the Company's Common Stock as of
December 1, 1998 for (i) each of the Company's current
directors, (ii) each of the named executive officers, (iii)
beneficial owners known to the registrant to own more than
five percent of any class of the Company's voting
securities, and (iv) all current officers and directors as a
group.
<TABLE>
<CAPTION>
Class A Class B
Non-voting Voting
Name and Address Common Stock Common Stock Voting
of the Beneficial Owners(a) Number Percent Number Percent Percent
- -------------------------- ------ ------- ------ ------- -------
<S> <C> <C> <C> <C> <C>
MS Pawn Limited Partnership(b)(g)
1,388,857(h)11.56%(h)1,194,131100.00% 100%
MS Pawn Corporation
Phillip Ean Cohen
350 Park Avenue, 8th Floor
New York, New York 10022
Sterling B. Brinkley(c) 300,615 2.75% -- -- --
350 Park Avenue, 8th Floor
New York, New York 10022
Vincent A. Lambiase(d) 263,150 2.39% -- -- --
1901 Capital Parkway
Austin, Texas 78746
Daniel N. Tonissen(e) 30,450 0.28% -- -- --
1901 Capital Parkway
Austin, Texas 78746
J. Jefferson Dean(i) 56,324 0.52% -- -- --
1901 Capital Parkway
Austin, Texas 78746
Mark C. Pickup 2,600 0.02% -- -- --
6734 Corte Segunda
Martinez, California 94553
Richard D. Sage (j) 31 0.00% -- -- --
13636 Deering Bay Drive
Coral Gables, Florida 33158
John E. Cay, III 5,000 0.05% -- -- --
P.O. Box 847
Savannah, GA 31402
All officers and directors
as a group
(eleven persons) (b) (f)662,653 5.94% -- -- --
</TABLE>
- -----------------------------
(a) Except as indicated in the footnotes to this table, the
persons named in the table have sole voting and
investment power with respect to all shares of Class B
Common Stock shown as beneficially owned by them,
subject to community property laws where applicable.
<PAGE>
(b) MS Pawn Corporation is the general partner of MS Pawn
and has the sole right to vote its shares of Class B
Common Stock and to direct their disposition. Mr. Cohen
is the sole stockholder of MS Pawn Corporation. See
"Certain Relationships and Related Transactions." Mr.
Cohen also owns 189,341 shares of Class A common stock
directly.
(c) Includes options to acquire 100,000 shares of Class A
Common Stock at $14.00 per share and warrants to
acquire 1,191 shares of Class A Common Stock at $6.17
per share. Does not include options to acquire 350,000
shares of Class A Common Stock at $10.00 per share,
none of which are currently exercisable.
(d) Includes options to acquire 200,000 shares of Class A
Common Stock at $13.00 per share. Does not include
options to acquire 350,000 shares of Class A Common
Stock at $10.00 per share, none of which are currently
exercisable.
(e) Includes options to acquire 19,450 shares of Class A
Common Stock at $12.75 per share and 6,000 shares of
Class A Common Stock at $12.00 per share. Does not
include options to acquire 100,000 shares of Class A
Common Stock at $10.00 per share, none of which are
currently exercisable.
(f) Includes options to acquire 346,063 shares of Class A
Common Stock at prices ranging from $12.00 to $14.00
per share and warrants to acquire 1,405 Class A Common
Stock shares at $6.17 per share.
(g) Includes warrants for 4,093 shares of Class A Common
Stock and 4,074 shares of Class B Common Stock held by
MS Pawn and warrants for 1,292 shares of Class A Common
Stock held by Mr. Cohen.
(h) The number of shares and percentage reflect Class A
Common Stock, together with Class B Common Stock which
is convertible to Class A Common Stock.
(i) Includes options to acquire 9,725 shares of Class A
Common Stock at $12.75 per share and 5,000 shares of
Class A Common Stock at $12.00 per share and Warrants
to acquire 183 shares of Class A Common Stock at $6.17
per share. Does not include options to acquire
150,000 shares of Class A Common Stock at $10.00 per
share, none of which are currently exercisable.
(j) Includes warrants to acquire 31 shares of Class A
Common Stock at $6.17 per share.
In February 1998, as part of a settlement agreement
between the Company and its former President and Chief
Executive Officer, Courtland L. Logue, Jr., 285,417 shares
of Class B Voting Common Stock held by Mr. Logue were
converted to Class A Common Stock. The majority holder of
the Class B Voting Common Stock previously had approved and
implemented the conversion of Mr. Logue's other 682,325
shares from Class B Common Stock to Class A Common Stock
during the Company's Fiscal Year ended September 30, 1996
and the first half of Fiscal Year ended September 30, 1997.
In March 1998, MS Pawn Limited Partnership approved and
implemented the conversion of 4,827 shares of Class B Common
Stock into the same number of shares of Class A Common
Stock.
Item 13. Certain Relationships and Related Transactions
For information concerning the $729,113 loan from the
Company to Mr. Lambiase and $1,500,000 loans from the
Company to each of Mr. Brinkley and Mr. Lambiase, see
"Executive Compensation - Employment Agreements."
The Company and Morgan Schiff & Co., Inc. ("Morgan
Schiff"), whose sole stockholder is Mr. Cohen, are parties
to a Financial Advisory Agreement renewed January 1, 1998,
pursuant to which Morgan Schiff receives certain fees for
its provision of financial advisory services to the Company.
These services include, among other matters, ongoing
consultation with respect to the business and financial
strategies of the Company. In Fiscal 1998, Morgan Schiff
received $33,333 per month for its services as a financial
advisor and an additional $250,000 in connection with the
Company's acquisition of Albemarle & Bond Holdings, plc
("A&B") and received expense reimbursements of $370,848 of
which $98,404 was related to the acquisition of A&B. The
Company anticipates renewing this agreement in fiscal 1999.
<PAGE>
PART IV
Item 14. Financial Statement Schedules, Exhibits, and
Reports on Form 8-K
(a)(1)The following consolidated financial statements of
EZCORP, Inc. and subsidiaries are included in Item 8:
Consolidated Financial Statements
Report of Independent Auditors
Consolidated Balance Sheets as of September 30, 1998
and 1997
Consolidated Statements of Operations for each of the
three years in the period ended
September 30, 1998
Consolidated Statements of Cash Flows for each of the
three years in the period ended
September 30, 1998
Consolidated Statements of Stockholders' Equity for
each of the three years in the period ended September
30, 1998
Notes to Consolidated Financial Statements.
(2) The following Financial Statement Schedule is
included herein:
Schedule VIII - Allowance for Valuation of Inventory
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 or are inapplicable, and therefore, have
been omitted.
(3) Listing of Exhibits (included herein)
(b) Through the fourth quarter ended September 30, 1998,
the Company has not filed any reports on Form 8-K.
<PAGE>
EZCORP, INC. AND SUBSIDIARIES
Schedule VIII - Allowance for Valuation of Inventory
(In millions)
<TABLE>
<CAPTION>
Balance at Additions Balance at
Beginning Charged to Charged to End of
Description of Period Expense Other Accts. Deductions Period
- -------------- --------- --------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Allowance for valuation of inventory:
Year ended September
30, 1996 $14.0 $ 5.4 - $11.5 $ 7.9
Year ended September
30, 1997 $ 7.9 $ 5.4 - $ 6.4 $ 6.9
Year ended September
30, 1998 $ 6.9 $ 5.4 - $ 5.5 $ 6.8
</TABLE>
The Company does not determine its inventory valuation
allowance by specific inventory items; therefore, the
amount charged to expense and the deductions are based on
estimates of the beginning inventory sold during the period
and the portion of the beginning inventory valuation
allowance attributable to the items sold.
<PAGE>
Listing of Exhibits
Page Number if Incorporated by
Number Description Filed herein Reference to
- ------ ----------- -------------- ---------------
3.1 Amended and Restated Certificate Exhibit 3.1 to the Registra-
of Incorporation of the Company. tion Statement
on Form S-1
effective August
23, 1991
(File No. 33-
41317)
3.1A Certificate of Amendment to Exhibit 3.1A to the Registration
Certificate of Incorporation of Statement on
the Company Form S-1 effective
July 15, 1996
(File No. 33-1317)
3.2 Bylaws of the Company. Exhibit 3.2 to the
Registration
Statement on Form
S-1 effect-
ive August 23,
1991
(File No. 33-41317)
3.3 Amendment to the Bylaws. Exhibit 3.3 to
Registrant's
Quarterly Report
on Form 10-Q
for the quarter
ended June
30, 1994 (File No.
0-19424)
3.4 Amendment to the Certificate of Exhibit 3.4 to Registrant's
Incorporation of the Company. Annual Report
on Form 10-K
for the year ended
September
30, 1994 (File No.
0-19424)
3.5 Amendment to the Certificate of Exhibit 3.5 to Registrant's
Incorporation of the Company Annual Report
on Form 10-K
for the year ended
September 30, 1997
3.6 Amendment to the Certificate of Exhibit 3.6 to Registrant's
Incorporation of the Company Quarterly Report
on Form 10-Q
for the quarter ended March
31, 1998
4.1 Specimen of Class A Non-voting Exhibit 4.1 to the Registra-
Common Stock certificate of the tion Statement on Form S-1
Company. effective August
23, 1991
(File No. 33-
41317)
10.1 omitted N/A
10.2 omitted N/A
10.3 $5 million Revolving Credit Note - Exhibit 10.3 to Registrant's
Franklin Federal Bancorp. Annual Report on
Form 10-K
for the year ended
September 30, 1992
(File No. 0-19424)
10.4 omitted N/A
<PAGE>
10.5 Security Agreement executed by Exhibit 10.5 to Registrant's
EZPAWN Texas, Inc. (substan- Annual Report on Form 10-K
tially the same agreement also for the year ended
was executed by EZPAWN Okla- September 30, 1992
homa, Inc.; EZPAWN Mississippi, (File No. 0-19424)
Inc.; EZPAWN Arkansas, Inc.;
EZPAWN Colorado, Inc.;
EZPAWN Alabama, Inc.;
EZPAWN Tennessee, Inc.; and
Houston Financial Corporation).
10.6 Guaranty Agreement executed by Exhibit 10.6 to Registrant's
EZPAWN Texas, Inc. (substan- Annual Report on Form 10-K
tially the same agreement also for the year ended
was executed by EZPAWN Okla- September 30, 1992
homa, Inc.; EZPAWN Mississippi, (File No. 0- 19424)
Inc.; EZPAWN Arkansas, Inc.;
EZPAWN Colorado, Inc.;
EZPAWN Alabama, Inc.;
EZPAWN Tennessee, Inc.; and
Houston Financial Corporation).
10.7 Loan Agreement between the Exhibit 10.7 to Registrant's
Company, as Borrower, and Annual Report on Form 10-K
Franklin Federal Bancorp, FSB, for the year ended September
as lender, dated April 30, 1993. 30, 1993 (File No. 0-19424)
10.8 omitted N/A
10.9 omitted N/A
10.10 Letter agreement executed December Exhibit 10.10 to the Registra-
20, 1990 between Morgan tion Statement on Form S-1
Schiff & Co., Inc. ("Morgan Schiff") effective August 23, 1991
and the Company. (File No. 33-41317)
10.11 Stock Purchase Agreement be- Exhibit 10.11 to the Registra-
tween the Company, Courtland L. tion Statement on Form S-1
Logue, Jr., Courtland L. Logue, effective August 23, 1991
Sr., James D. McGee, M. Frances (File No. 33-41317)
Spears, Porter A. Stratton and
Steve A. Stratton dated as of May
18, 1989.
10.12 Capitalization and Subscription Exhibit 10.12 to the Registra-
Agreement between MS Pawn tion Statement on Form S-1
Limited Partnership ("MS Pawn") effective August 23, 1991
and the Company, dated as of July (File No. 33-41317)
25, 1989.
10.13 omitted N/A
10.14 Consulting Agreement between Exhibit 10.14 to Registrant's
the Company and Courtland L. Annual Report on Form 10-K
Logue, Sr., dated February 15, 1993 for the year ended September
30, 1993 (File No. 0-19424)
10.15 omitted N/A
<PAGE>
10.16 Junior Subordinated Note due Exhibit 10.16 to Registra-
1996 issued July 25, 1989 to Court- tion Statement on Form S-1
land L. Logue, Sr. in the original effective August 23,1991
principal amount of $238,319.95. (File No. 33- 41317)
10.17 omitted N/A
10.18 Warrant Certificate issued by the Exhibit 10.18 to the Registra-
Company to MS Pawn on July 25, tion Statement on Form S-1
1989. effective August 23, 1991
(File No. 33-41317)
10.19 Amendment to the Stock Purchase Exhibit 10.19 to the Registra-
Agreement dated as of June tion Statement on Form S-1
19, 1989 between the Company effective August 23, 1991
and the stockholders of the Prede- (File No. 33-41317)
cessor Company.
10.20 Second Amendment to Stock Pur- Exhibit 10.20 to the Registra-
chase Agreement dated as of April tion Statement on Form S-1
20, 1990 between the Company effective August 23, 1991
and the stockholders of the Prede- (File No. 33-41317)
cessor Company.
10.21 omitted N/A
10.22 omitted N/A
10.23 omitted N/A
10.24 omitted N/A
10.25 omitted N/A
10.27 omitted N/A
10.28 omitted N/A
10.29 omitted N/A
10.30 omitted N/A
10.31 omitted N/A
10.32 omitted N/A
10.33 omitted N/A
10.34 omitted N/A
10.35 Stockholders' Agreement dated as Exhibit 10.35 to the Registra-
of July 25, 1989 between the Com- tion Statement on Form S-1
pany, MS Pawn and Courtland L. effective August 23, 1991
Logue, Jr. (File No. 33-41317)
<PAGE>
10.36 Joinder Agreement to the Stock- Exhibit 10.36 to the Registra-
holders' Agreement dated as of tion Statement on Form S-1
May 1, 1991 between the Com- effective August 23, 1991
pany, MS Pawn, Mr. Kofnovec, (File No. 33-41317)
Mr. Gary, Mr. Ross and Ms.
Berger.
10.37 Incentive Stock Option Plan. Exhibit 10.37 to the Registra-
tion Statement on Form S-1
effective August 23, 1991
(File No. 33-41317)
10.38 401(k) Plan. Exhibit 10.38 to the Registra-
tion Statement on Form S-1
effective August 23, 1991
(File No. 33-41317)
10.39 Section 125 Cafeteria Plan. Exhibit 10.39 to the Registra-
tion Statement on Form S-1
effective August 23, 1991
(File No. 33-41317)
10.40 Lease of 1970 Cessna 210K Air- Exhibit 10.40 to the Registra-
craft between Courtland L. Logue, tion Statement on Form S-1
Jr. and Transamerica Pawn Cor- effective August 23, 1991
poration, dated July 25, 1989. (File No. 33-41317)
10.41 omitted N/A
10.42 omitted N/A
10.43 omitted N/A
10.44 Lease of Cessna P210 Aircraft Exhibit 10.44 to the Registra-
between Courtland L. Logue, Jr. tion Statement on Form S-1
and Transamerica Pawn Corpo- effective August 23, 1991
ration, dated December 29, 1989. (File No. 33-41317)
10.45 Lease between Logue, Inc. and E-Z Exhibit 10.45 to the Registra-
Corporation for real estate located tion Statement on Form S-1
at 1166 Airport Boulevard, Austin, effective August 23, 1991
Texas, dated July 25, 1989. (File No. 33-41317)
10.46 Lease between Logue, Inc. and E-Z Exhibit 10.46 to the Registra-
Corporation for real estate located tion Statement on Form S-1
at 5415 North Lamar Boulevard, effective August 23, 1991
Austin, Texas, dated July 25, 1989 (File No. 33-41317)
10.47 Agreement of Lease between LDL Exhibit 10.47 to the Registra-
Partnership and Logue-Drouin tion Statement on Form S-1
Industries, Inc. for real property effective August 23, 1991
at 8540 Broadway Blvd., Houston, (File No. 33- 41317)
Texas, dated May 3, 1988 and related
Assignment of Lease.
<PAGE>
10.48 Lease Agreement between C Minus Exhibit 10.48 to the Registra-
Corporation and Logue-Drouin tion Statement on Form S-1
Industries, Inc. DBA E-Z Pawn #5 effective August 23, 1991
for real property located at 5209 (File No. 33-41317)
Cameron Road, Austin, Texas,
dated December 28, 1987.
10.49 Lease Agreement between Logue, Exhibit 10.49 to the Registra-
Inc. and E-Z Corporation for real tion Statement on Form S-1
property located at 901 E. 1st St., effective August 23, 1991
Austin, Texas, dated July 25, 1989. (File No. 33-41317)
10.50 Agreements between the Company Exhibit 10.50 to the Registra-
and MS Pawn dated February 18, tion Statement on Form S-1
1992 for the payment of $1.377 effective March 16, 1992
million of Series A Increasing Rate (File No. 33-45807)
Senior Subordinated Notes held by
MS Pawn.
10.51 Agreement Regarding Reservation Exhibit 10.51 to Registrant's
of Shares. Quarterly Report on Form 10-
Q for the quarter ended June
30, 1993 (File No. 0-19424)
10.52 omitted N/A
10.53 omitted N/A
10.54 omitted N/A
10.55 omitted N/A
10.56 omitted N/A
10.57 omitted N/A
10.58 omitted N/A
10.59 omitted N/A
10.60 Loan Agreement between Sterling B. Exhibit 10.60 to Registrant's
Brinkley and the Company dated Annual Report on Form 10-K
October 7, 1994 (an identical document for the year ended September
exists with respect to Vincent A. Lambiase).30, 1995 (File No. 0-19424)
10.61 Promissory Note between Sterling Exhibit 10.61 to Registrant's
B. Brinkley and the Company in Annual Report on Form 10-K
the original principal amount of for the year ended September
$1,500,000 attached thereto (an 30, 1995 (File No. 0-19424)
identical document exists with respect
to Vincent A. Lambiase).
10.62 July 1, 1994 Employment Agreement Exhibit 10.62 to Registrant's
between the Company and Vincent Annual Report on Form 10-K
A. Lambiase and Promissory Note in for the year ended September
the amount of $729,112.50 in 30, 1995 (File No. 0-19424)
connection therewith.
<PAGE>
10.63 EZCorp, Inc. Incentive Stock Option
Award Agreement, Employee Form* 58 N/A
10.64 EZCorp, Inc. Incentive Stock Option
Award Agreement, Executive Form* 70 N/A
10.71 Amended and restated Loan Agreement Exhibit 10.71 to Registrant's
between the Company, as Borrower, and Quarterly Report on Form 10-
Franklin Federal Bancorp, FSB, as Lender,Q for the quarter ended March
dated March 17, 1994. 31, 1994 (File No. 0-19424)
10.72 First Amendment to Amended and Restated Form 10-Q for the quarter
Loan Agreement between the Company and ended December 31, 1994
First Interstate Bank of Texas, N.A. as Agent, (File No. 0-19424)
re: Revolving Credit Loan.
10.73 Second Amendment to Amended and Restated Form 10-Q for the quarter
Loan Agreement between the Company and ended June 30, 1995 (File
First Interstate Bank of Texas, N.A. as Agent, No. 0-19424)
re: Revolving Credit Loan.
10.74 Third Amendment to Amended and Restated Form 10-Q for the quarter
Loan Agreement between the Company and ended June 30, 1996 (File
Wells Fargo Bank (Texas), N.A. as Agent, No. 0-19424)
re: Revolving Credit Loan.
10.75 Fourth Amendment to Amended and Restated Form 10-Q for the quarter
Loan Agreement between the Company and ended March 31, 1997 (File
Wells Fargo Bank (Texas), N.A. as Agent, No. 0-19424)
re: Revolving Credit Loan.
10.76 Fifth Amendment to Amended and Restated
Loan Agreement between the Company and
Wells Fargo Bank (Texas), N.A. as Agent,
re: Revolving Credit Loan.* 82 N/A
10.77 Credit Agreement between the
Company and Wells Fargo Bank (Texas),
N.A., as Agent and Issuing Bank, re:
$110 million Revolving Credit Loan* 100 N/A
22.1 Subsidiaries of Registrant.* 165 N/A
23.1 Consent of Ernst & Young LLP.* 166 N/A
27 Financial Data Schedule* N/A
* Filed herewith.
<PAGE>
Exhibit 10.63
EZCORP, INC. INCENTIVE STOCK OPTION AWARD AGREEMENT
PART I
Optionee:
Grant Date:
Aggregate Number of Option Shares:
Exercise Price per Share: $10.00
Vesting Schedule:
CERTAIN EARLY DISPOSITIONS OF SHARES PURCHASED
UPON EXERCISE OF THIS OPTION (GENERALLY, SALE OF
THE SHARES WITHIN TWO YEARS OF THE OPTION GRANT OR
WITHIN ONE YEAR OF THE OPTION EXERCISE) MAY RESULT
IN LOSS OF "INCENTIVE STOCK OPTION" TREATMENT.
THE COMPANY RECOMMENDS THAT OPTIONEE CONSULT WITH
HIS OR HER PERSONAL TAX ADVISOR PRIOR TO
EXERCISING ANY OPTIONS.
Part II of this Agreement is attached hereto and
incorporated herein for all purposes.
EXECUTED to be effective as of the Grant Date set forth
above.
______________________________
EZCORP, Inc. By: Vincent A.
Lambiase
President and C.E.O.
OPTIONEE
_______________________________
Address:
<PAGE>PART II
This Incentive Stock Option Award Agreement (this
"Agreement") is made and entered into by and between EZCORP,
Inc., a Delaware corporation (the "Company"), and the
optionee named on Part I (the "Optionee"), as of the date
set forth on Part I (the "Grant Date").
RECITALS:
The Company has adopted the EZCORP, Inc. 1998 Incentive
Plan (the "Plan") to provide an incentive for key employees,
consultants and directors of the Company or its Subsidiaries
to remain in the service of the Company or its Subsidiaries,
to extend to them the opportunity to acquire a proprietary
interest in the Company so that they will apply their best
efforts for the benefit of the Company and its Subsidiaries,
and to aid the Company in attracting able persons to enter
the service of the Company and its Subsidiaries;
The Board of Directors of the Company (or the
Compensation Committee of the Company, if one has been
authorized to administer the Plan by the Company's Board of
Directors (the "Committee")), believes that the granting of
the stock options herein described to the Optionee is
consistent with the purposes for which the Plan was adopted;
NOW, THEREFORE, in consideration of the mutual
covenants and conditions set forth in this Agreement and for
other good and valuable consideration, the Company and the
Optionee agree as follows:
I. Grant of the Option. The Company hereby
grants to the Optionee the right and option (the "Option")
to purchase the aggregate number of shares set forth on Part
I (such number being subject to adjustment as provided
herein) of common stock, .01 par value per share, of the
Company (the "Shares") on the terms and conditions set forth
in this Agreement. The Option awarded under this Agreement
may be exercised in whole or in part and from time to time,
subject to the terms and conditions of this Agreement and of
the Plan. The Option granted under this Agreement is
intended to qualify as an "incentive stock option" under
Section 422 of the Code and shall be so construed.
I. Exercise Price. The price at which the
Optionee shall be entitled to purchase the Shares covered by
the Option shall be the price per Share set forth on Part I
subject to adjustment as provided in paragraph 9.
I. Vesting and Term of the Option.
(a) General. The right to exercise the Option
shall vest in the hands of the Optionee in accordance with
the provisions of Part I. Shares which shall have vested
shall be referred to as "Vested Shares." Shares which shall
not have vested shall be referred to as "Nonvested Shares."
The respective numbers of Vested and Nonvested Shares shall
adjust proportionately in accordance with any adjustments to
the number of Shares pursuant to paragraph 9. In addition,
Shares may become Vested Shares in accordance with paragraph
7 or Section 9 of the Plan. In general, Nonvested Shares
may become Vested Shares only if the Optionee has been
continuously employed as a full-time employee of the Company
or any Subsidiary from the Grant Date to and including the
last date of the month with respect to which such Shares may
vest pursuant to Part I.
(b) Exercisable for Vested Shares Only. Subject
to the relevant provisions and limitations contained herein,
the Optionee may exercise the Option to purchase some or all
of the Vested Shares. In no event shall the Optionee be
entitled to exercise the Option with respect to Nonvested
Shares or a fraction of a Vested Share.
<PAGE>
(c) Expiration. Notwithstanding any other
provision contained herein to the contrary, the unexercised
portion of the Option, if any, will automatically and
without notice terminate upon the earlier of (i) ten years
following the Grant Date (provided, however, that any
portion of the Option which shall not become exercisable
until the tenth anniversary of the Grant Date may be
exercisable for a period of 30 days preceding the tenth
anniversary of the Grant Date) or (ii) the date determined
pursuant to paragraph 7. The Option will cease to be
exercisable with respect to a Share when the Optionee
purchases the Share.
(d) Change in Control. In the event of a Change
in Control as defined in the Plan, the Company may, with
respect to this Option, in its sole discretion, take any one
or more of the actions described in Section 9.2 of the Plan.
I. Method of Exercising Option. The
Optionee may exercise the Option at any time prior to the
termination of the Option with respect to all or any part of
the Vested Shares. Subject to the terms and conditions of
this Agreement, the Option may be exercised by timely
delivery to the Company of a written notice in the form
attached hereto as Exhibit A (the "Exercise Notice"), which
Exercise Notice shall be effective, subject to the
requirements of this Agreement and of the Plan, on the date
received by the Company. The Exercise Notice shall state
the Optionee's election to exercise the Option, the number
of Vested Shares in respect of which an election to exercise
has been made, the method of payment elected (see paragraph
5), the exact name or names in which the Vested Shares then
being purchased will be registered and the social security
number of the Optionee. The Exercise Notice must be signed
by the Optionee and must be accompanied by payment of the
aggregate Exercise Price of the Vested Shares then being
purchased, determined in accordance with paragraph 2. If
the Option must be exercised by a person or persons other
than the Optionee pursuant to paragraph 7, the Exercise
Notice must be signed by such other person or persons and
must be accompanied by proof acceptable to the Company of
the legal right of such person or persons to exercise the
Option. If the Option is exercised by a person other than
the Optionee, the Vested Shares issued upon such exercise
shall be subject to the limitations applicable to such
Vested Shares in the hands of the Optionee. All Vested
Shares delivered by the Company upon exercise of the Option
as provided in this Agreement shall be fully paid and
nonassessable upon delivery. Unless the Vested Shares
issued upon the exercise of the Option are then the subject
of a registration statement effective under the Securities
Act (and, if required, there is available for delivery a
prospectus meeting the requirements of Section 10(a)(3) of
the Securities Act), the delivery of the Exercise Notice
shall be deemed to be the making by the person delivering
such Exercise Notice of the representations, acknowledgments
and agreements which would be contained in the Investment
Letter referred to in paragraph 10.
I. Method of Payment for Options. Unless
otherwise permitted by the Committee in accordance with the
Plan, the full Exercise Price for the Vested Shares
purchased upon the exercise of the Option (i.e., the number
of Vested Shares being purchased multiplied by the Exercise
Price per Share) must be made in cash. The Company will
accept payment by cashier's check or by personal check,
provided that if such personal check is returned for
insufficient funds, payment for the Shares and for any
applicable taxes required to be withheld by the Company
shall be deemed not to have occurred. In addition, the
Option shall not be deemed to be exercised until the
Optionee has provided payment for any withholding taxes
which may be due with respect to such exercise.
<PAGE>
I. Delivery of Shares. No Shares shall be
delivered to the Optionee upon exercise of the Option until
(I) the Exercise Price for such Shares being purchased is
paid in full in the manner provided in this Agreement;
(ii) all the applicable taxes required to be withheld have
been paid or withheld in full; (iii) approval of any
governmental authority required in connection with the
Option, or the issuance of Shares pursuant to this Agreement
has been received by the Company; and (iv) if required by
the Committee, the Optionee has delivered to the Committee
an Investment Letter in form and content satisfactory to the
Company as provided in paragraph 10.
I. Termination of Employment. If the
Optionee's employment relationship with the Company is
terminated for any reason other than (a) the Optionee's
death or (b) the Optionee's Disability as defined in Section
10.4 of the Plan, then any and all Options held pursuant to
this Agreement as of the date of the termination that are
not yet exercisable (or for which restrictions have not
lapsed) shall become null and void as of the date of such
termination; provided, however, that the portion, if any, of
such Options that are exercisable as of the date of
termination shall be exercisable for a period of the lesser
of (a) the remainder of the term of the Option or (b) the
date which is 30 days after the date of termination. Any
portion of an Option not exercised upon the expiration of
the lesser of the period specified above shall be null and
void unless the Optionee dies during such period, in which
case the provisions of paragraph 7(a) shall govern.
(a) Death. Upon the death of the Optionee, any
and all Options held by the Optionee pursuant to this
Agreement that are not yet exercisable (or for which
restrictions have not lapsed) as of the date of the
Optionee's death shall become exercisable as provided below
and any restrictions shall immediately lapse as of the date
of death; provided, however, that the Options held by the
Optionee as of the date of death shall be exercisable by
that Optionee's legal representatives, heirs, legatees, or
distributees for a period of 90 days following the date of
the Optionee's death. Any portion of an Option not
exercised upon the expiration of such period shall be null
and void. Except as expressly provided in this paragraph,
no Option held by an Optionee shall be exercisable after the
death of that Optionee.
(b) Disability. If the Optionee's employment
relationship is terminated by reason of the Optionee's
Disability, then the portion, if any, of any and all Options
held by the Optionee that are not yet exercisable (or for
which restrictions have not lapsed) as of the date of that
termination for Disability shall become exercisable as
provided below and any restrictions shall immediately lapse
as of the date of termination; provided, however, that the
Options held by the Optionee as of the date of that
termination shall be exercisable by the Optionee, his
guardian or his legal representative for a period of 90 days
following the date of such termination, unless the Optionee
is permanently and totally disabled as defined in the Plan,
in which case the Options may be exercisable by the
Optionee, his guardian or his legal representative for a
period of one year following the date of termination. Any
portion of an Option not exercised upon the expiration of
such period shall be null and void unless the Optionee dies
during such period, in which event the provisions of
paragraph 7(a) shall govern.
I. Nontransferability. The Option granted
by this Agreement shall be exercisable only during the
period specified in paragraph 3 and, except as provided in
paragraph 7, only by the Optionee during his or her lifetime
and while an employee of the Company. No Option granted by
this Agreement is transferable by the Optionee other than by
will or pursuant to applicable laws of descent and
distribution. The Option, and any rights and privileges in
connection therewith, cannot be transferred, assigned,
pledged or hypothecated by the Optionee, or by any other
person or persons, in any way, whether by operation of law,
or otherwise, and may not be subject to execution,
attachment, garnishment or similar process. In the event of
any such occurrence, this Agreement will automatically
terminate and will thereafter be null and void.
I. Adjustments. If there is any change in
the capital structure of the Company through merger,
consolidation, reorganization, recapitalization, stock
dividend, stock split, combination of shares or similar
event (a "Restructuring"), the rights of the Optionee shall
be adjusted as provided in Section 9 of the Plan. Nothing
in this Agreement or in the Plan shall affect in any way the
right or power of the Company to make or authorize any
Restructuring.
<PAGE>
I. Securities Act. The Company will not be
required to deliver any Shares pursuant to the exercise of
all or any part of the Option if, in the opinion of counsel
for the Company, such issuance would violate the Securities
Act or any other applicable federal or state securities laws
or regulations. The Committee may require that the
Optionee, prior to the issuance of any such Shares pursuant
to exercise of the Option, sign and deliver to the Company a
written statement (an "Investment Letter") stating that (a)
the Optionee is purchasing the Shares for his own account
and not with a view to, or for sale in connection with, any
distribution thereof, he has no present or contemplated
agreement, undertaking, arrangement, obligation,
indebtedness or commitment providing for the disposition
thereof and he does not currently have any reason to
anticipate a change in the foregoing; (b) the Optionee
understands that the Shares have not been registered under
the Securities Act or any applicable state securities laws
or regulations and, therefore, cannot be offered or resold
unless the Shares are so registered or an applicable
exemption from registration is available; and c the Optionee
agrees that the certificates representing the Shares may
bear a legend to the effect set forth in clause (b) above.
The Investment Letter must be in form and substance
acceptable to the Committee in its sole discretion.
I. Notice. All notices required or
permitted under this Agreement, including an Exercise
Notice, must be in writing and personally delivered or sent
by mail and shall be deemed to be delivered on the date on
which actually received by the Company properly addressed to
the person who is to receive it. An Exercise Notice shall
be effective when actually received by the Company, in
writing and in conformance with this Agreement and the Plan.
Until changed in accordance herewith, the Company and the
Optionee specify their respective addresses as set forth
below:
Company: EZCORP, Inc.
1901 Capital Parkway
Austin, TX 78746
Attention: President
Optionee: As indicated on Part I hereto.
I. Information Confidential. As partial
consideration for the granting of this Option, the Optionee
agrees that he will keep confidential all information and
knowledge that he or she has relating to the manner and
amount of his participation in the Plan; provided, however,
that such information may be disclosed as required by law
and may be given in confidence to the Optionee's spouse, tax
and financial advisors, or a financial institution to the
extent that such information is necessary to obtain a loan.
I. Definitions; Copy of Plan. To the
extent not specifically provided in this Agreement or
otherwise required by context, all capitalized terms used in
this Agreement but not defined herein shall have the same
meanings ascribed to them in the Plan. By the execution of
this Agreement, the Optionee acknowledges that he has
received and reviewed a copy of the Plan.
I. Administration. This Agreement is
subject to the terms and conditions of the Plan. The Plan
will be administered by the Board of Directors and by the
Committee in accordance with its terms. The Committee has
sole and complete discretion with respect to all matters
reserved to it by the Board of Directors of the Company and
by the Plan, and decisions of the Board of Directors and of
the Committee with respect to the Plan and this Agreement
shall be final and binding upon the Optionee. If a conflict
between the terms and conditions of this Agreement and the
Plan exists, the provisions of the Plan shall control.
I. Arbitration. Any legal or equitable
claims or disputes between Optionee and the Company,
including without limitation, those arising out of or in
connection with the employment, or the termination of
employment, of Optionee by the Company (other than a suit
for injunctive relief) will be resolved exclusively by
binding arbitration. This Agreement applies to the
following allegations, disputes, and claims for relief, but
is not limited to those listed: wrongful discharge under
statutory law and common law; employment discrimination
based on federal, state, or local statute, ordinance, or
governmental regulation; retaliatory discharge or other
action; compensation disputes; tortious conduct; contractual
violations (although no contractual
<PAGE>
relationship, other than at will employment and this
Agreement and agreement to arbitrate, is hereby created);
ERISA violations; and other statutory and common law claims
and disputes.
The arbitration proceedings shall be conducted in
Austin, Texas in accordance with the Employment Dispute
Resolution Rules ("EDR Rules") of the American Arbitration
Association ("AAA") in effect at the time a demand for
arbitration is made. Optionee is entitled to representation
by an attorney throughout the proceedings at his own
expense.
One arbitrator shall be used and shall be chosen by
mutual agreement of the parties. If, within 30 days after
the Optionee notifies the Company of an arbitrable dispute,
no arbitrator has been chosen, an arbitrator shall be chosen
from a list or lists of proposed arbitrators submitted by
the AAA pursuant to its EDR Rules, except that (I) the
number of preemptory strikes shall not be limited, and (ii)
if the parties fail to select an arbitrator from one or more
lists, AAA shall not have the power to appoint the
arbitrator but shall continue to submit lists until the
arbitrator has been selected. The arbitrator shall
coordinate, and limit as appropriate, all pre-arbitral
discovery, which shallD include document production,
information requests, and depositions. The arbitrator shall
issue a written decision and award stating the reasons
therefor. The decision and award shall be final and binding
on both parties, their heirs, executors, administrators,
successors, and assigns. The costs and expenses of the
arbitration shall be borne evenly by the parties.
I. No Guarantee of Continuation of
Employment. This Agreement shall not be construed to confer
upon the Optionee any right to continue in the employ of the
Company or its Subsidiaries and shall not limit the right of
the Company or its Subsidiaries, in their sole discretion,
to terminate the employment of the Optionee at any time,
with or without cause. The parties' employment relationship
is at will, and no other inference is to be drawn from this
Agreement. The Company may, at any time and from time to
time, cause Optionee to be employed by any entity that is a
Subsidiary or Affiliate. Either party may terminate the
employment relationship at any time for any or no reason.
Any agreement abrogating the at will relationship must be in
writing and signed by both Optionee and the Company.
I. No Obligation to Exercise. The Optionee
shall have no obligation to exercise any Option granted by
this Agreement.
I. Governing Law; Construction. This
Agreement shall be governed by the laws of the State of
Texas without regard to choice of law and conflicts of law
principles. Titles and headings are for ease of reference
only and shall not be considered in construing this
Agreement. Pronouns shall be deemed to include the
masculine, feminine, neuter, singular and plural as the
context may require. References to paragraphs and exhibits
are to paragraphs and Exhibits of this Agreement unless
otherwise indicated. All such Exhibits are incorporated in
this Agreement by reference and are a part hereof.
I. Amendments. This Agreement may be
amended only by a written agreement executed by the Company
and the Optionee.
I. Proprietary Information. In
consideration of the Company's grant of this Option and the
Company's agreement to provide Optionee with confidential
information of the Company, Optionee agrees to keep
confidential and not to use or to disclose to others at any
time during the term of this Agreement or after its
termination, except as expressly consented to in writing by
the Company or required by law, any secrets or confidential
technology or proprietary information of the Company,
including, without limitation, any customer list, marketing
plans or materials, or other trade secrets of the Company,
or any matter or thing ascertained by Optionee through
Optionee's affiliation with the Company, the use or
disclosure of which matter or thing might reasonably be
construed to be contrary to the best interests of the
Company or to give any other party a competitive advantage
to the Company. Optionee further agrees that should
Optionee leave the employment of the Company, Optionee will
neither take nor retain, without prior written authorization
from the Company, any documents pertaining to the Company
(other than paycheck stubs, benefit information, offer
letters, or other materials pertaining to his salary or
benefits with the Company). Without limiting the generality
of the foregoing, Optionee agrees that he will not retain,
use or disclose any papers, customer lists, marketing
materials or information, books, records, files, or other
documents, copies thereof, or notes or other materials
derived therefrom, or other confidential information of any
kind belonging to the Company pertaining to the Company's
<PAGE>
business, sales, financial condition, or products. Without
limiting other possible remedies to the Company for the
breach of this covenant, Optionee agrees that injunctive or
other equitable relief shall be available to enforce this
covenant, such relief to be without the necessity of posting
a bond, cash, or otherwise. Optionee further agrees that if
any restriction contained in this paragraph is held by any
court to be unenforceable or unreasonable, a lesser
restriction shall be enforced in its place and remaining
restrictions contained herein shall be enforced
independently of each other. Optionee's obligations under
this paragraph apply to all confidential information of the
Company as well as to any and all confidential information
relating to the Company's Subsidiaries and Affiliates.
I. Noncompetition.
(a) Basis of Covenants. The Company's business
involves the operation of pawnshops, jewelry stores, and
check cashing operations. Optionee recognizes that the
Company's decision to enter into this Agreement and to grant
the Option herein granted is induced primarily because of
the covenants and assurances made by Optionee in this
Agreement, that irrevocable harm and damage will be done to
the Company if Optionee violates the obligation to maintain
the confidentiality of proprietary information, or competes
with the Company. Optionee stipulates and agrees that the
consideration given by the Company in granting this Option
and in granting Optionee access to the confidential
information of the Company gives rise to the Company's
interest in the promises made by Optionee in this paragraph;
further, Optionee stipulates that the promises Optionee
makes in this paragraph are designed to enforce the promises
made by Optionee, including those set forth in paragraph 20.
Optionee will continue to receive the Company's proprietary
information and will receive training of substantial value
as a result of his affiliation with the Company.
(b) Noncompetition Covenant. Optionee agrees
that during the term of this Agreement and for a period of
one year following termination of this Agreement by either
party, for whatever reason, Optionee shall not, directly or
indirectly, as an employee, employer, contractor,
consultant, agent, principal, shareholder of 5% or more,
corporate officer, director, or in any other individual or
representative capacity, engage or participate in any
business or practice that is in competition in any manner
whatsoever with the business of the Company.
(c) Non-Interference Covenant. Optionee
covenants and agrees that, for a period of one year
subsequent to the termination, for whatever reason, of his
employment with the Company, that Optionee shall not
recruit, hire or attempt to recruit or hire, directly or by
assisting others, any other employees of the Company, nor
shall Optionee contact or communicate with any other
employees of the Company for the purpose of inducing other
employees to terminate their employment with the Company.
For purposes of this covenant, "other employees" means
employees who are actively employed by the Company at the
time of the attempted recruiting or hiring.
(d) Remedies.
(i) This covenant shall be construed as an
agreement ancillary to the other provisions of this
Agreement and the existence of any claim or cause of action
of Optionee against the Company, whether predicated on this
Agreement or otherwise, shall not constitute a defense to
the enforcement by the Company of this covenant. Without
limiting other possible remedies to the Company for breach
of this covenant, Optionee agrees that injunctive or other
equitable relief will be available to enforce the covenants
of this provision, such relief to be without the necessity
of posting a bond, cash, or otherwise.
(ii) If Optionee violates any of the
covenants of this paragraph 21, the one-year term of the
restriction violated shall be extended by the amount of time
that Optionee was in violation.
(iii) The Company and Optionee further
agree that if any restriction contained in this paragraph 21
is held by any appropriate forum to be unenforceable or
unreasonable, a lesser restriction will be enforced in its
place and remaining restrictions contained herein will be
enforced independently of each other.
<PAGE>
Optionee agrees to pay any attorneys' fees and expenses
incurred by the Company if the Company chooses, in its sole
discretion, to enforce any provision hereunder.
(iv) If Optionee violates paragraph 20 or 21
of this Agreement at a time that he holds Options, the
Options shall be immediately canceled and shall have no
further force and effect. In addition, if Optionee violates
paragraph 20 or 21 of this Agreement following his exercise
of Options, he shall forfeit to the Company an amount equal
to the difference between the fair market value (determined
in accordance with paragraph 22(f)) on the date of exercise
for each Option exercised and the Exercise Price. This
amount shall be paid to the Company in addition to payment
of all other damages that the Company has suffered as a
result of Optionee's breach and in addition to all other
relief to which the Company is entitled under this Agreement
and under applicable law.]
I. Right to Repurchase. The receipt by
Optionee of Shares upon his exercise of Options shall be
subject to the following terms and conditions:
(a) Restriction on Transfer. Optionee shall not
sell, exchange, transfer, assign, encumber, or otherwise
dispose of any of the Shares to any person, corporation,
partnership, joint venture, trust or other entity without
the prior written consent of the Board of Directors of the
Company. Any transferee shall take the Shares subject to
the terms and provisions of this paragraph 22, and shall, as
a condition to the transfer of the Shares, sign a Joinder
Agreement attached as Exhibit B agreeing to be bound by the
provisions of this paragraph 22.
(b) Grant of Repurchase Right. The Company (or
its assigns) is hereby granted the right (the "Repurchase
Right"), exercisable upon the death, total physical or
mental disability of Optionee, or upon the termination of
Optionee's employment with the Company, to repurchase at the
Purchase Price (as hereinafter defined) all or any portion
of the Shares.
(i) Exercise of Repurchase Right. The
Repurchase Right shall be exercisable by written notice
delivered by the Company (or its assigns) to the Owner (as
defined in paragraph 22(c)) prior to the expiration of the
60-day period commencing on the death, total physical or
mental disability of Optionee or the termination of
Optionee's employment with the Company. The notice shall
indicate the number of Shares to be repurchased and the date
on which the repurchase is to be effected, such date to be
not more than 30 days after the date of notice. To the
extent one or more certificates representing Shares may have
been previously delivered to the Owner, then Owner shall,
prior to the close of business on the date specified for the
repurchase, deliver to the Secretary of the Company the
certificates representing the Shares to be repurchased, each
certificate to be properly endorsed for transfer. The
Company (or its assigns) shall, concurrently with the
receipt of such stock certificates, pay to Owner in cash or
cash equivalents (including the cancellation of any purchase-
money indebtedness), an amount equal to the Purchase Price.
(ii) Termination of Repurchase Right. The
Repurchase Right shall terminate with respect to any Shares
for which the Repurchase Right is not timely exercised under
paragraph 22(b)(i). In addition, the Repurchase Right shall
terminate on the consummation by the Company of an
underwritten initial public offering of its Common Stock,
registered under the Securities Act of 1933.
(c) Definition of Owner. For purposes of
paragraph 22 of this Agreement, the term "Owner" shall
include the Optionee and all subsequent holders of the
Shares who derive their chain of ownership through a
permitted transfer from the Optionee in accordance with
paragraph 22(a).
(d) Agreement Applicable to Community Interests.
Any right or interest of a spouse of an Owner in Shares,
whether such right or interest is created by law (including
community property laws) or otherwise, shall for all
purposes hereof be included in, deemed a part of and bound
by the same terms hereof as the Shares to which such right
or interest relates or appertains, and any action taken,
offer made or purchase right exercisable hereunder with
reference to Shares owned by an Owner shall be applicable to
any right or interest which the spouse of such Owner may
have or be entitled to have therein.
<PAGE>
(e) Purchase of Spouse's Interest in Shares. In
the event of the death of an Owner's spouse, or the divorce
of an Owner and his or her spouse, such Owner shall have the
right to purchase all or any part of the Shares to which
such spouse (or the estate of such spouse) is or may be
entitled at a purchase price equal to the Purchase Price.
Such purchase shall be effected on the following terms and
conditions:
(i) The Owner's right to purchase his or her
spouse's interest in the Shares shall continue for a period
of 30 days from the date of entry of the divorce decree or
from the date of qualification of the personal
representative of the spouse in the event of death, as the
case may be, and shall be considered exercised by such Owner
when written notice of such exercise has been delivered or
mailed, properly addressed, to such spouse or the personal
representative of such spouse.
(ii) If the Owner shall fail to exercise his
or her right in its entirety in the manner and time
prescribed, then the spouse or the personal representative
of the spouse, as the case may be, shall so notify the
Company in writing, which notice shall state the address of
such spouse or personal representative and the number of
Shares owned by such spouse or the estate of such spouse.
Thereupon the Company shall have the right to purchase all
Shares not purchased by such Owner for a period of 60 days
following the receipt by the Company of such notice. The
purchase right shall be exercisable by the Company in the
manner set forth in paragraph 22(b) of this Agreement.
(iii) The purchase right set forth in
this paragraph 22(e) shall terminate with respect to any
Shares for which the purchase right is not timely exercised
under paragraph 22(e)(i) and (ii). In addition, the
purchase right shall terminate on the consummation by the
Company of an underwritten initial public offering of its
Common Stock, registered under the Securities Act of 1933.
(f) Definition of Purchase Price. The "Purchase
Price" as used herein shall refer to the fair market value
of the Shares, as reasonably determined by the Board of
Directors of the Company.
I. Termination. The Company may terminate
the Plan at any time; however, such termination will not
modify the terms and conditions of the Option awarded under
this Agreement without the Optionee's consent.
I. No Rights as a Shareholder. Optionee
shall not by virtue of this Agreement, have any rights as a
shareholder until the date of the issuance to the Optionee
of Shares pursuant to a valid Exercise Notice.
* * * * *
<PAGE>
EXHIBIT A
EXERCISE NOTICE
Notice is hereby given to the Company of Optionee's
election to exercise Options as follows:
Name of Optionee (please print):
Optionee's Social Security Number:
Note: For Incentive Stock Options, complete only items A
through D in chart below.
A. Number of Vested Shares to be
exercised:
B. Exercise Price per Share: $
C. Method of payment (check one): Cash
Other- as authorized
by Committee as
follows:
D. Exercise Price tendered herewith: $
(A x B)
E. Market Price per share on date of $
Exercise:
F. Difference Between Market Price and $
Exercise Price
(E - B):
G. Total Difference (F x A): $
H. Withholding Tax Rate: 28%*
I. Amount of Tax Withholding tendered $
herewith (G x H):
J. Total Amount Due on Exercise (D + $
I):
*Upon exercise of Options, the Company may collect 28%
withholding tax (or the then applicable amount) of the
difference between the market value of the Option Shares on
the day of the exercise less the price (the "difference").
This difference will be included on a Form 1099 issued to
the Optionee following the end of the year.
<PAGE>
Exact name(s) for Share certificate(s):
Date:
Signature of Optionee
PLEASE COMPLETE AND SIGN THIS NOTICE AND RETURN IT TO:
EZCORP, Inc.
Attn: Legal Department
1901 Capital Parkway
Austin, TX 78746
<PAGE>
EXHIBIT B
JOINDER AGREEMENT
For good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the
undersigned, by execution of this Joinder Agreement, agrees
to become a party to the Incentive Stock Option Award
Agreement dated as of ________________, 199___, by and
between _____________________________, a _____ corporation
(the "Company"), and ____________________________, Optionee
thereunder (the "Agreement"), a copy of which is attached
hereto as Exhibit A to the extent and as provided by this
Joinder Agreement. The undersigned acknowledges that by his
execution of this Joinder Agreement he will become a party
to the Agreement for purposes of paragraph [22] (and only
with respect to such paragraph), such paragraph providing
for the Company's repurchase right with respect to Shares
issued on exercise of Options granted in the Agreement. The
undersigned represents and warrants that he has read and
consents to, agrees to be bound by, the repurchase right
provisions of the Agreement.
EXECUTED to be effective the _____ day of
__________________, 199___.
Name:
SPOUSAL CONSENT
I, spouse of __________________, have read and am aware
of, understand and fully consent and agree to the provisions
of the Agreement attached hereto and its binding effect upon
any interest, community or otherwise, I may own now or
hereafter in any Shares, and agree that the termination of
my marriage to ________________ for any reason shall not
have the effect of removing any Shares otherwise subject to
the Agreement from the coverage thereof. I hereby evidence
such awareness, understanding, consent and agreement by
joining in the Agreement and by executing this Joinder
Agreement below.
Signature of Spouse
Printed Name:
Address:
<PAGE>
Exhibit 10.64
NO. 98-_____
EZCORP, INC.
INCENTIVE STOCK OPTION AWARD AGREEMENT
PART I
Optionee: _________________________
Grant Date: November 5, 1998
Aggregate Number of Option Shares: Tranche A Options
Tranche B Options
Tranche C Options
Exercise Price per Share: $10.00 per share
Vesting Schedule:
As set forth in Annex A
Expiration Date: All Options
granted hereunder, whether or
not vested, shall terminate
and be of no further force and
effect at 5:30 p.m. on
November 5, 2008.
Termination: Upon
termination of Optionee's
employment with the Company
for any reason, all Options
related to Nonvested Shares
shall lapse and be deemed
forfeited. Optionee
acknowledges that the
provisions of this paragraph
shall prevail over any other
conflicting provision of the
Plan, or of any employment
contract or other arrangement
that may exist between the
Optionee and the Company.
CERTAIN EARLY DISPOSITIONS OF SHARES PURCHASED
UPON EXERCISE OF THIS OPTION (GENERALLY, SALE OF
THE SHARES WITHIN TWO YEARS OF THE OPTION GRANT OR
WITHIN ONE YEAR OF THE OPTION EXERCISE), MAY
RESULT IN LOSS OF "INCENTIVE STOCK OPTION"
TREATMENT. THE COMPANY RECOMMENDS THAT OPTIONEE
CONSULT WITH HIS OR HER PERSONAL TAX ADVISOR PRIOR
TO EXERCISING ANY OPTIONS.
Part II of this Agreement is attached hereto and
incorporated herein for all purposes.
<PAGE>
EXECUTED to be effective as of the Grant Date shown above.
EZCORP, INC.
By:
Name:
Title:
OPTIONEE
__________________________
Address:
<PAGE>
ANNEX A
VESTING CRITERIA
Vesting of Tranche A Options and Tranche B Options
(collectively, "Options") shall occur in accordance with the
provisions of this Annex A. The vesting of all Options will
be dependent upon the Company having achieved certain levels
of earnings per share as reported in the Company's annual
report filed with the Securities and Exchange Commission on
Form 10-K, or, if no such report is filed, in accordance
with the Company's year-end financial statements, audited in
accordance with generally accepted accounting principles,
applied from year to year on a consistent basis; provided,
however, such earnings per share calculation shall disregard
the effect, if any, of the incentive bonuses awarded by the
Company to Sterling B. Brinkley and Vincent A. Lambiase in
1994. The date as of which such earnings per share shall be
determined shall be the earlier of (i) the date the Company
publicly announces its earnings, (ii) the date the Company
files its annual report on Form 10-K, or (iii) the date
audited year-end financial statements are delivered to the
Company. The results of the calculations referred to in
this paragraph shall be referred to herein, with respect to
any particular Fiscal Year (as defined below), as "Earnings
Per Share" or "EPS."
Subject to the provisions of (a), (b), (c), (d) and
(e), below, the following table shall be used to determine
whether actual EPS meet the targeted EPS for each specified
Fiscal Year ("Targeted EPS"), and, if so, the percentage of
all Options that vest with respect to such Fiscal Year: (i)
if for the Company's 1999 through 2005 fiscal years (each a
"Fiscal Year") the Company's EPS equals or exceeds the
Targeted EPS amount set forth below for Tranche A Options,
the Optionee shall become vested as to Tranche A Options
with respect to the applicable percentage thereof shown for
such Fiscal Year; (ii) if for a Fiscal Year the Company's
EPS equals or exceeds the Targeted EPS amount set forth
below for Tranche B Options, the Optionee shall become
vested as to Tranche B Options with respect to the
applicable percentage thereof shown for such Fiscal Year.
All Tranche C Options shall vest in accordance with (c) and
(d), below.
Notwithstanding the above:
(a) If the Targeted EPS amount for either Tranche A
Options or Tranche B Options is not met in any Fiscal Year
(the deficiency thereof being referred to herein as the
"Shortfall"), the vesting that otherwise might have occurred
for such Fiscal Year shall be deferred but only until the
next subsequent Fiscal Year; if as to such subsequent Fiscal
Year, there is Excess EPS, then such Excess EPS shall be
applied to satisfy any Shortfall for the immediate prior
Fiscal Year, and to the extent the Targeted EPS amount is
satisfied for such prior Fiscal Year by applying the Excess
EPS, Options for such prior Fiscal Year shall be deemed to
vest.
(b) If EPS for a Fiscal Year, (plus any Excess EPS
that is carried back and applied pursuant to (a), above), is
less than EPS for the immediate prior Fiscal Year, all
Options that otherwise might have vested with respect to the
current Fiscal Year shall not vest until 30 days prior to
the Expiration Date.
(c) All Option Shares underlying Tranche C Options
shall become Vested Shares at the earlier of (i) the date on
which the Company reports EPS for a Fiscal Year of $3.00 per
share or more, or (ii) as set forth in (d), below.
(d) In determining that Option Shares become Vested
Shares as of any time as provided by (c), above, or as
provided by the table, below, the Company as of the date EPS
is calculated, shall have a debt-to-equity ratio not in
excess of 1.25 to 1; if such ratio is in excess thereof the
Option Shares that otherwise might have vested with respect
to that Fiscal Year, shall not vest until the time provided
in (e), below.
(e) All Option Shares that do not become Vested Shares
in accordance with the table set forth below or (c), above,
shall become Vested Shares 30 days prior the Expiration
Date.
TABLE
<PAGE>
Earnings Per Share
for Fiscal Year
1999 2000 2001 2002 2003 2004 2005
Targeted EPS for $0.85$1.05$1.30 $1.60 $2.00 $2.50 $3.10
Tranche A Options
Targeted EPS for $0.85$1.06 $1.43$1.92 $2.46 $3.06 $3.66
Tranche B Options
Fiscal Year
1999 2000 2001 2002 2003 2004 2005
Applicable 10% 10% 15% 15% 20% 20% 10%
Percentage Amount
<PAGE>
PART II
This Incentive Stock Option Award Agreement (this
"Agreement") is made and entered into by and between EZCORP,
Inc., a Delaware corporation (the "Company"), and the
optionee named in Part I of this Agreement (the "Optionee"),
as of the date set forth on Part I (the "Grant Date").
RECITALS:
The Company has adopted the EZCORP, Inc. 1998 Incentive
Plan (the "Plan") to provide an incentive for key employees,
consultants and directors of the Company or its Subsidiaries
to remain in the service of the Company or its Subsidiaries,
to extend to them the opportunity to acquire a proprietary
interest in the Company so that they will apply their best
efforts for the benefit of the Company and its Subsidiaries,
and to aid the Company in attracting able persons to enter
the service of the Company and its Subsidiaries;
The Compensation Committee of the Company, which has
been authorized to administer the Plan by the Company's
Board of Directors (the "Committee"), believes that the
granting of the stock options herein described to the
Optionee is consistent with the purposes for which the Plan
was adopted;
NOW, THEREFORE, in consideration of the mutual
covenants and conditions set forth in this Agreement and for
other good and valuable consideration, the Company and the
Optionee agree as follows:
I. Grant of the Award. The Company hereby
grants to the Optionee the right and option (the "Option")
to purchase the aggregate number of shares set forth on Part
I (such number being subject to adjustment as provided below
and as provided in paragraph 9) of Class A Non-Voting common
stock, par value $0.01 per share, of the Company (the
"Shares") on the terms and conditions set forth in this
Agreement. The Option awarded under this Agreement may be
exercised in whole or in part and from time to time, subject
to the terms and conditions of this Agreement and of the
Plan. The Option granted under this Agreement is intended
to qualify as an "incentive stock option" under Section 422
of the Code and shall be so construed.
I. Exercise Price. The price at which the
Optionee shall be entitled to purchase the Shares covered by
the Option shall be the price per Share set forth on Part I
subject to adjustment as provided in paragraph 9.
I. Vesting and Term of the Option.
(a) General. The right to exercise the Option
shall vest in the hands of the Optionee in accordance with
the provisions of Part I. Shares which shall have vested
shall be referred to as "Vested Shares." Shares which shall
not have vested shall be referred to as "Nonvested Shares."
The respective numbers of Vested and Nonvested Shares shall
adjust proportionately in accordance with any adjustments to
the number of Shares pursuant to paragraph 9. In addition,
Shares may become Vested Shares in accordance with paragraph
7 or Section 9 of the Plan. In general, Nonvested Shares
may become Vested Shares only if the Optionee has been
continuously employed as a full-time employee of the Company
or any Subsidiary from the Grant Date to and including the
last date of the month with respect to which such Shares may
vest pursuant to Part I.
(b) Exercisable for Vested Shares Only. Subject
to the relevant provisions and limitations contained herein,
the Optionee may exercise the Option to purchase some or all
of the Vested Shares. In no event shall the Optionee be
entitled to exercise the Option with respect to Nonvested
Shares or a fraction of a Vested Share.
<PAGE>
(c) Expiration. Notwithstanding any other
provision contained herein to the contrary, the unexercised
portion of the Option, if any, will automatically and
without notice terminate upon the earlier of (a) ten years
following the Grant Date (provided, however, that any
portion of the Option which shall not become exercisable
until the tenth anniversary of the Grant Date may be
exercisable for a period of 30 days preceding the tenth
anniversary of the Grant Date) or (b) the date determined
pursuant to paragraph 7. The Option will cease to be
exercisable with respect to a Share when the Optionee
purchases the Share.
(d) Change in Control. In the event of a Change
in Control as defined in the Plan, the Company may, with
respect to this Option, in its sole discretion, take any one
or more of the actions described in Section 9.2 of the Plan.
I. Method of Exercising Option. The Optionee
may exercise the Option at any time prior to the termination
of the Option with respect to all or any part of the Vested
Shares. Subject to the terms and conditions of this
Agreement, the Option may be exercised by timely delivery to
the Company of a written notice in the form attached hereto
as Exhibit A (the "Exercise Notice"), which Exercise Notice
shall be effective, subject to the requirements of this
Agreement and of the Plan, on the date received by the
Company. The Exercise Notice shall state the Optionee's
election to exercise the Option, the number of Vested Shares
in respect of which an election to exercise has been made,
the method of payment elected (see paragraph 5), the exact
name or names in which the Vested Shares then being
purchased will be registered and the social security number
of the Optionee. The Exercise Notice must be signed by the
Optionee and must be accompanied by payment of the aggregate
Exercise Price of the Vested Shares then being purchased,
determined in accordance with paragraph 2. If the Option
must be exercised by a person or persons other than the
Optionee pursuant to paragraph 7, the Exercise Notice must
be signed by such other person or persons and must be
accompanied by proof acceptable to the Company of the legal
right of such person or persons to exercise the Option. If
the Option is exercised by a person other than the Optionee,
the Vested Shares issued upon such exercise shall be subject
to the limitations applicable to such Vested Shares in the
hands of the Optionee. All Vested Shares delivered by the
Company upon exercise of the Option as provided in this
Agreement shall be fully paid and nonassessable upon
delivery. Unless the Vested Shares issued upon the exercise
of the Option are then the subject of a registration
statement effective under the Securities Act (and, if
required, there is available for delivery a prospectus
meeting the requirements of Section 10(a)(3) of the
Securities Act), the delivery of the Exercise Notice shall
be deemed to be the making by the person delivering such
Exercise Notice of the representations, acknowledgments and
agreements which would be contained in the Investment Letter
referred to in paragraph 10.
I. Method of Payment for Options. Unless
otherwise permitted by the Committee in accordance with the
Plan, the full Exercise Price for the Vested Shares
purchased upon the exercise of the Option (i.e., the number
of Vested Shares being purchased multiplied by the Exercise
Price per Share) must be made in cash. The Company will
accept payment by cashier's check or by personal check,
provided that if such personal check is returned for
insufficient funds, payment for the Shares and for any
applicable taxes required to be withheld by the Company
shall be deemed not to have occurred. In addition, the
Option shall not be deemed to be exercised until the
Optionee has provided payment for any withholding taxes
which may be due with respect to such exercise.
<PAGE>
I. Delivery of Shares. No Shares shall be
delivered to the Optionee upon exercise of the Option until
(a) the Exercise Price for such Shares being purchased is
paid in full in the manner provided in this Agreement;
(b) all the applicable taxes required to be withheld have
been paid or withheld in full; (c) approval of any
governmental authority required in connection with the
Option, or the issuance of Shares pursuant to this Agreement
has been received by the Company; and (d) if required by the
Committee, the Optionee has delivered to the Committee an
"Investment Letter" in form and content satisfactory to the
Company as provided in paragraph 10.
I. Termination of Employment. If the Optionee's
employment relationship with the Company is terminated for
any reason other than (a) the Optionee's death or (b) the
Optionee's Disability as defined in Section 10.4 of the
Plan, then any and all Options held pursuant to this
Agreement as of the date of the termination that are not yet
exercisable (or for which restrictions have not lapsed)
shall become null and void as of the date of such
termination; provided, however, that the portion, if any, of
such Options that are exercisable as of the date of
termination shall be exercisable for a period of the lesser
of (a) the remainder of the term of the Option or (b) the
date which is 30 days after the date of termination. Any
portion of an Option not exercised upon the expiration of
the lesser of the period specified above shall be null and
void unless the Optionee dies during such period, in which
case the provisions of paragraph 7(a) shall govern.
(a) Death. Upon the death of the Optionee,
any and all Options held by the Optionee pursuant to this
Agreement that are not yet exercisable (or for which
restrictions have not lapsed) as of the date of the
Optionee's death shall become exercisable as provided below
and any restrictions shall immediately lapse as of the date
of death; provided, however, that the Options held by the
Optionee as of the date of death shall be exercisable by
that Optionee's legal representatives, heirs, legatees, or
distributees for a period of 90 days following the date of
the Optionee's death. Any portion of an Option not
exercised upon the expiration of such period shall be null
and void. Except as expressly provided in this paragraph,
no Option held by a Optionee shall be exercisable after the
death of that Optionee.
(a) Disability. If the Optionee's
employment relationship is terminated by reason of the
Optionee's Disability, then the portion, if any, of any and
all Options held by the Optionee that are not yet
exercisable (or for which restrictions have not lapsed) as
of the date of that termination for Disability shall become
exercisable as provided below and any restrictions shall
immediately lapse as of the date of termination; provided,
however, that the Options held by the Optionee as of the
date of that termination shall be exercisable by the
Optionee, his guardian or his legal representative for a
period of one year following the date of such termination,
unless the Optionee is permanently and totally disabled as
defined in the Plan, in which case the Options may be
exercisable by the Optionee, his guardian or his legal
representative for a period of one year following the date
of termination. Any portion of an Option not exercised upon
the expiration of such period shall be null and void unless
the Optionee dies during such period, in which event the
provisions of paragraph 7(a) shall govern.
I. Nontransferability. The Option granted by
this Agreement shall be exercisable only during the period
specified in paragraph 3 and, except as provided in
paragraph 7, only by the Optionee during his or her lifetime
and while an employee of the Company. No Option granted by
this Agreement is transferable by the Optionee other than by
will or pursuant to applicable laws of descent and
distribution. The Option, and any rights and privileges in
connection therewith, cannot be transferred, assigned,
pledged or hypothecated by the Optionee, or by any other
person or persons, in any way, whether by operation of law,
or otherwise, and may not be subject to execution,
attachment, garnishment or similar process. In the event of
any such occurrence, this Agreement will automatically
terminate and will thereafter be null and void.
I. Adjustments. If there is any other change in
the capital structure of the Company through merger,
consolidation, reorganization, recapitalization, stock
dividend, stock split, combination of shares or similar
event (a "Restructuring"), the rights of the Optionee shall
be adjusted as provided in Section 9 of the Plan. Nothing
in this Agreement or in the Plan shall affect in any way the
right or power of the Company to make or authorize any
Restructuring.
<PAGE>
I. Securities Act. The Company will not be
required to deliver any Shares pursuant to the exercise of
all or any part of the Option if, in the opinion of counsel
for the Company, such issuance would violate the Securities
Act or any other applicable federal or state securities laws
or regulations. The Committee may require that the
Optionee, prior to the issuance of any such Shares pursuant
to exercise of the Option, sign and deliver to the Company a
written statement (an "Investment Letter") stating that (a)
the Optionee is purchasing the Shares for his own account
and not with a view to, or for sale in connection with, any
distribution thereof, he has no present or contemplated
agreement, undertaking, arrangement, obligation,
indebtedness or commitment providing for the disposition
thereof and he does not currently have any reason to
anticipate a change in the foregoing; (b) the Optionee
understands that the Shares have not been registered under
the Securities Act or any applicable state securities laws
or regulations and, therefore, cannot be offered or resold
unless the Shares are so registered or an applicable
exemption from registration is available; and (c) the
Optionee agrees that the certificates representing the
Shares may bear a legend to the effect set forth in clause
(b) above. The Investment Letter must be in form and
substance acceptable to the Committee in its sole
discretion.
I. Notice. All notices required or permitted
under this Agreement, including an Exercise Notice, must be
in writing and personally delivered or sent by mail and
shall be deemed to be delivered on the date on which
actually received by the Company properly addressed to the
person who is to receive it. An Exercise Notice shall be
effective when actually received by the Company, in writing
and in conformance with this Agreement and the Plan. Until
changed in accordance herewith, the Company and the Optionee
specify their respective addresses as set forth below:
Company: EZCORP, Inc.
1901 Capital Parkway
Austin, Texas 78746
Attention: President
Optionee: As indicated on Part I hereto.
I. Information Confidential. As partial
consideration for the granting of this Option, the Optionee
agrees that he will keep confidential all information and
knowledge that he or she has relating to the manner and
amount of his participation in the Plan; provided, however,
that such information may be disclosed as required by law
and may be given in confidence to the Optionee's spouse, tax
and financial advisors, or a financial institution to the
extent that such information is necessary to obtain a loan.
I. Definitions; Copy of Plan. To the extent not
specifically provided in this Agreement or otherwise
required by context, all capitalized terms used in this
Agreement but not defined herein shall have the same
meanings ascribed to them in the Plan. By the execution of
this Agreement, the Optionee acknowledges that he has
received and reviewed a copy of the Plan.
I. Administration. This Agreement is subject to
the terms and conditions of the Plan. The Plan will be
administered by the Board of Directors and by the Committee
in accordance with its terms. The Committee has sole and
complete discretion with respect to all matters reserved to
it by the Board of Directors of the Company and by the Plan,
and decisions of the Board of Directors and of the Committee
with respect to the Plan and this Agreement shall be final
and binding upon the Optionee. If a conflict between the
terms and conditions of this Agreement and the Plan exists,
the provisions of the Plan shall control.
I. Arbitration. Any legal or equitable claims
or disputes between Optionee and the Company, including
without limitation, those arising out of or in connection
with the employment, or the termination of employment, of
Optionee by the Company, other than suits for injunctive
relief, will be resolved exclusively by binding arbitration.
This Agreement applies to the following allegations,
disputes, and claims for relief, but is not limited to those
listed: wrongful discharge under statutory law and common
law; employment discrimination based on federal, state, or
local statute, ordinance, or governmental regulation;
retaliatory discharge
<PAGE>
or other action; compensation disputes; tortious conduct;
contractual violations (although no contractual
relationship, other than at will employment and this
Agreement and agreement to arbitrate, is hereby created);
ERISA violations; and other statutory and common law claims
and disputes.
The arbitration proceedings shall be conducted in
Austin, Texas in accordance with the Employment Dispute
Resolution Rules ("EDR Rules") of the American Arbitration
Association ("AAA") in effect at the time a demand for
arbitration is made. Optionee is entitled to representation
by an attorney throughout the proceedings at his own
expense; however, the Company agrees not to use an attorney
in the arbitration hearing if the Optionee agrees to the
same.
One arbitrator shall be used and shall be chosen by
mutual agreement of the parties. If, within 30 days after
the Optionee notifies the Company of an arbitrable dispute,
no arbitrator has been chosen, an arbitrator shall be chosen
from a list or lists of proposed arbitrators submitted by
the AAA pursuant to its EDR Rules, except that (a) the
number of preemptory strikes shall not be limited, and (b)
if the parties fail to select an arbitrator from one or more
lists, AAA shall not have the power to appoint the
arbitrator but shall continue to submit lists until the
arbitrator has been selected. The arbitrator shall
coordinate, and limit as appropriate, all pre-arbitral
discovery, which shall include document production,
information requests, and depositions. The arbitrator shall
issue a written decision and award stating the reasons
therefor. The decision and award shall be final and binding
on both parties, their heirs, executors, administrators,
successors, and assigns. The costs and expenses of the
arbitration shall be borne evenly by the parties.
I. Continuation of Employment. This Agreement
shall not be construed to confer upon the Optionee any right
to continue in the employ of the Company or its Subsidiaries
and shall not limit the right of the Company or its
Subsidiaries, in their sole discretion, to terminate the
employment of the Optionee at any time, with or without
cause. Absent an express written contract to the contrary,
the parties' employment relationship is at will, and no
other inference is to be drawn from this Agreement. The
Company may, at any time and from time-to-time, cause
Optionee to be employed by any entity that is a Subsidiary
or Affiliate. Either party may terminate the employment
relationship at any time for any or no reason. Any
agreement abrogating the at will relationship must be in
writing and signed by both Optionee and the Company. If the
Company terminates Optionee's employment for any reason,
with or without cause, and whether or not in violation of
any applicable contract or legal requirement, Optionee
expressly agrees that all Nonvested Options shall
immediately become null and void as provided in paragraph 7.
II. No Obligation to Exercise. The Optionee
shall have no obligation to exercise any Option granted by
this Agreement.
I. Governing Law; Construction. This Agreement
shall be governed by the laws of the State of Texas without
regard to choice of law and conflicts of law principles.
Titles and headings are for case of reference only and shall
not be considered in construing this Agreement. Pronouns
shall be deemed to include the masculine, feminine, neuter,
singular and plural as the context may require. References
to paragraphs and exhibits are to paragraphs and exhibits of
this Agreement unless otherwise indicated. All such
exhibits are incorporated in this Agreement by reference and
are a part hereof.
I. Amendments. This Agreement may be amended
only by a written agreement executed by the Company and the
Optionee.
I. Proprietary Information. In consideration of
the Company's grant of this Option and the Company's
agreement to provide Optionee with confidential information
of the Company, Optionee agrees to keep confidential and not
to use or to disclose to others at any time during the term
of this Agreement or after its termination, except as
expressly consented to in writing by the Company or required
by law, any secrets or confidential technology or
proprietary information of the Company, including, without
limitation, any customer list, marketing plans or materials,
or other trade secrets of the Company, or any matter or
thing ascertained by Optionee through Optionee's affiliation
with the Company, the use or disclosure of which matter or
thing might reasonably be construed to be contrary to the
best interests of the Company or to give any other party a
competitive advantage to the Company. Optionee further
agrees that should Optionee leave the employment of the
Company, Optionee will neither take nor retain, without
prior written authorization from the Company, any documents
pertaining to the Company (other than paycheck stubs,
benefit information, offer letters, or other
<PAGE>
materials pertaining to his salary or benefits with the
Company). Without limiting the generality of the foregoing,
Optionee agrees that he will not retain, use or disclose any
papers, customer lists, marketing materials or information,
books, records, files, or other documents, copies thereof,
or notes or other materials derived therefrom, or other
confidential information of any kind belonging to the
Company pertaining to the Company's business, sales,
financial condition, or products. Without limiting other
possible remedies to the Company for the breach of this
covenant, Optionee agrees that injunctive or other equitable
relief shall be available to enforce this covenant, such
relief to be without the necessity of posting a bond, cash,
or otherwise. Optionee further agrees that if any
restriction contained in this paragraph is held by any court
to be unenforceable or unreasonable, a lesser restriction
shall be enforced in its place and remaining restrictions
contained herein shall be enforced independently of each
other.
Optionee's obligations under this paragraph apply to
all confidential information of the Company as well as to
any and all confidential information relating to the
Company's Subsidiaries and Affiliates.
I. Noncompetition.
(a) Basis of Covenants. The Company's business
involves the operation of pawn shops, retail jewelry stores
and the sale of used merchandise. Optionee recognizes that
the Company's decision to enter into this Agreement and to
grant the Option herein granted is induced primarily because
of the covenants and assurances made by Optionee in this
Agreement, that irrevocable harm and damage will be done to
the Company if Optionee violates the obligation to maintain
the confidentiality of proprietary information, or competes
with the Company. Optionee stipulates and agrees that the
consideration given by the Company in granting this Option
and in granting Optionee access to the confidential
information of the Company gives rise to the Company's
interest in the promises made by Optionee in this paragraph;
further, Optionee stipulates that the promises Optionee
makes in this paragraph are designed to enforce the promises
made by Optionee, including those set forth in paragraph 20.
Optionee will continue to receive the Company's proprietary
information and will receive training of substantial value
as a result of his affiliation with the Company.
(b) Noncompetition Covenant. Optionee agrees
that during the term of this Agreement and for a period of
one year following termination of this Agreement by either
party, for whatever reason, Optionee shall not, directly or
indirectly, as an employee, employer, contractor,
consultant, agent, principal, shareholder, corporate
officer, director, or in any other individual or
representative capacity, engage or participate in any
business or practice that is in competition in any manner
whatsoever with the business of the Company within a 25-mile
radius of a Company office.
(c) Nonsolicitation Covenant. In addition,
Optionee agrees that during the term of this Agreement and
for a period of one year following termination of this
Agreement by either party, for whatever reason, Optionee
will not solicit, contact, or otherwise communicate with any
person, company or business that was a customer, supplier,
vendor or prospective customer, supplier or vendor of the
Company, whom Optionee personally solicited, contacted,
communicated with or accepted business from while he was an
employee of the Company at any time during the 12 months
preceding termination of his employment with the Company.
(d) Non-Interference Covenant. Optionee
covenants and agrees that, for a period of one year
subsequent to the termination, for whatever reason, of his
employment with the Company, that Optionee shall not
recruit, hire or attempt to recruit or hire, directly or by
assisting others, any other employees of the Company, nor
shall Optionee contact or communicate with any other
employees of the Company for the purpose of inducing other
employees to terminate their employment with the Company.
For purposes of this covenant, "other employees" means
employees who are actively employed by the Company at the
time of the attempted recruiting or hiring.
(e) Remedies.
(i) This covenant shall be construed as an
agreement ancillary to the other provisions of this
Agreement and the existence of any claim or cause of action
of Optionee against the Company, whether predicated on this
Agreement or otherwise, shall not constitute a defense to
the enforcement by the Company of this covenant. Without
limiting other possible remedies to the Company for breach
of this covenant, Optionee agrees that injunctive or other
equitable relief will be available to enforce the covenants
of this provision, such relief to be without the necessity
of posting a bond, cash, or otherwise.
(ii) If Optionee violates any of the
covenants of this paragraph 21, the one-year term of the
restriction violated shall be extended by the amount of time
that Optionee was in violation.
(iii) The Company and Optionee further
agree that if any restriction contained in this paragraph 21
is held by any appropriate forum to be unenforceable or
unreasonable, a lesser restriction will be enforced in its
place and remaining restrictions contained herein will be
enforced independently of each other. Optionee agrees to
pay any attorneys' fees and expenses incurred by the
Company if the Company chooses, in its sole discretion, to
enforce any provision hereunder.
(iv) If Optionee violates paragraph 20 or 21
of this Agreement at a time that he holds Options, the
Options shall be immediately cancelled and shall have no
further force and effect. In addition, if Optionee violates
paragraph 20 or 21 of this Agreement following his exercise
of Options, he shall forfeit to the Company an amount equal
to the difference between the Exercise Price and the fair
market value (determined in accordance with paragraph 22(f))
on the date of exercise for each Option exercised. This
amount shall be paid to the Company in addition to payment
of all other damages that the Company has suffered as a
result of Optionee's breach and in addition to all other
relief to which the Company is entitled under this Agreement
and under applicable law.
I. [Omitted.]
I. Termination. The Company may terminate the
Plan at any time; however, such termination will not modify
the terms and conditions of the Option awarded under this
Agreement without the Optionee's consent.
I. No Rights as a Shareholder. Optionee shall
not by virtue of this Agreement, have any rights as a
shareholder until the date of the issuance to the Optionee
of Shares pursuant to a valid Exercise Notice.
* * * * *
<PAGE>
EXHIBIT A
EXERCISE NOTICE
Notice is hereby given to the Company of Optionee's
election to exercise Options as follows:
Name of Optionee (please print):
Optionee's Social Security Number:
Number of Vested Shares to be exercised:
Exercise Price per Share:
Method of payment (check one): Cash
Other--as authorized by
Committee as follows:
Amount tendered herewith: $
Exact name(s) for Share certificate(s):
Date:
Signature of Optionee
PLEASE COMPLETE AND SIGN THIS NOTICE AND DELIVER IT TO:
EZCORP, Inc.
Attn: Compensation Committee
1901 Capital Parkway
Austin, Texas 78746
<PAGE>
Exhibit 10.76
FIFTH AMENDMENT TO AMENDED AND RESTATED
LOAN AGREEMENT
THIS FIFTH AMENDMENT TO AMENDED AND RESTATED LOAN
AGREEMENT (the "Amendment"), is entered into as of October
5, 1998 among EZCORP, INC., a Delaware corporation
("Borrower"), each of the Banks, and WELLS FARGO BANK
(TEXAS), NATIONAL ASSOCIATION, a national banking
association, as Agent for itself and the other Banks (in
such capacity, together with its successors in such capacity
the "Agent") and as the Issuing Bank.
RECITALS:
0.0.1. Borrower, Agent, Banks and Issuing Bank have
previously entered into that certain Amended and Restated
Loan Agreement dated as of November 29, 1994 as amended by
(i) that certain First Amendment to Amended and Restated
Loan Agreement effective as of February 15, 1995, (ii) that
certain Second Amendment to Amended and Restated Loan
Agreement and Waiver dated as of August 3, 1995, (iii) that
certain Third Amendment to Amended and Restated Loan
Agreement effective as of June 24, 1996, and (iv) that
certain Fourth Amendment to Amended and Restated Loan
Agreement dated as of May 9, 1997 (as amended, the
"Agreement").
0.0.2. Borrower, Agent, Banks and Issuing Bank now
desire to amend the Agreement to provide for an additional
interim revolving credit facility as hereinafter more
specifically provided.
NOW, THEREFORE, in consideration of the premises and
mutual covenants herein contained, the parties hereto agree
as follows:
ARTICLE 1.
Definitions
1.1. Definitions. All capitalized terms not otherwise
defined herein, shall have the same meanings as in the
Agreement, as amended hereby.
ARTICLE 2.
Amendments
2.1. Definitions. Effective as of the date hereof:
2.1.0.0.1. The definition of "Borrowing Cap"
appearing in Section 1.1 of the Agreement is hereby
deleted.
2.1.0.0.2. The definitions of "Advance,"
"Advance Request Form," "Applicable Rate," and "Notes"
appearing in Section 1.1 of the Agreement are hereby
amended and restated in their entirety to read as
follows:
"'Advance' means an advance of funds by
the Banks or any of them to the Borrower
pursuant to Article II or Article IIA
(inclusive of the Revolving Credit Loan, the
Swing Loan and the Interim Revolving Credit
Loan) and the Continuation or Conversion
thereof (except for the Interim Revolving
Credit Loan which may consist of Prime Rate
Advances only) pursuant to Section 2.6 and
Article V hereof.
'Advance Request Form' means a
certificate, in substantially the form of
Exhibit "B" hereto, properly completed and
signed by the Borrower requesting an Advance
under the Revolving Credit Loan.
'Applicable Rate' means: (a) during the
period that a Revolving Credit Loan Advance
or a Swing Loan Advance is a Prime Rate
Advance, the Prime Rate; (b) during the
period that a Revolving Credit Loan Advance
is a Eurodollar Advance, the Adjusted
Eurodollar Rate, plus the Eurodollar Margin;
and (c) with respect to Interim Revolving
Credit Loan Advances, the Prime Rate, minus
one-half of one percent (0.50%).
<PAGE>
'Notes' means the Revolving Credit
Notes, the Swing Note and the Interim
Revolving Credit Note."
2.1.0.0.3. The following definitions are
hereby added to Section 1.1 of the Agreement in the
proper alphabetical order:
"'Interim Revolving Credit Loan' means
the interim revolving credit loan made or to
be made hereunder to Borrower pursuant to
Section 2A.1.
'Interim Revolving Credit Loan Advance'
means an Advance under the Interim Revolving
Credit Loan.
'Interim Revolving Credit Loan Advance
Request Form' means a certificate, in
substantially the form of Exhibit 'B-2'
hereto, properly completed and signed by the
Borrower requesting an Advance under the
Interim Revolving Credit Loan.
'Interim Revolving Credit Loan
Commitment' means, as to Wells Fargo Bank
(Texas), National Association, the obligation
of such Bank to make Advances under the
Interim Revolving Credit Loan as described in
Article IIA in an aggregate principal amount
at any one time outstanding up to but not
exceeding the amount set forth opposite the
name of such Bank on Schedule 7 hereto under
the heading 'Commitment', as the same may be
terminated pursuant to Section 11.2.
'Interim Revolving Credit Note' means
the promissory note of the Borrower payable
to the order of Wells Fargo Bank (Texas),
National Association in the aggregate
principal amount of the Interim Revolving
Credit Loan, in substantially the form of
Exhibit 'A-2' hereto, and all extensions,
renewals, and modifications thereof.
'Interim Revolving Credit Loan
Termination Date' means 10:00 A.M. Austin,
Texas time on December 15, 1998, or such
earlier date and time on which the Interim
Revolving Credit Loan Commitment terminates
as provided in this Agreement."
2.2. Interim Revolving Credit Loan. Effective as of
the date hereof, the following Article IIA is hereby added
immediately following Article II:
"ARTICLE IIA
Interim Revolving Credit Loan
Section 2A.1 Interim Revolving Credit Loan
Commitment. Subject to the terms and conditions
of this Agreement, Wells Fargo Bank (Texas),
National Association agrees to make one or more
Interim Revolving Credit Loan Advances to the
Borrower from time to time from the date hereof to
and including the Interim Revolving Credit Loan
Termination Date in an aggregate principal amount
at any time outstanding up to but not exceeding
the amount of such Bank's Interim Revolving Credit
Loan Commitment as then in effect, provided that
the aggregate amount of all Interim Revolving
Credit Loan Advances at any time outstanding shall
not exceed the Interim Revolving Credit Loan
Commitment. Subject to the foregoing limitations,
and the other terms and provisions of this
Agreement, the Borrower may borrow, repay, and
reborrow hereunder the amount of the Interim
Revolving Credit Loan Commitment by means of Prime
Rate Advances only. Interim Revolving Credit Loan
Advances shall be made and maintained at such
Bank's Applicable Lending Office for Advances of
such Type.
Section 2A.2 Interim Revolving Credit Note.
The obligation of the Borrower to repay Wells
Fargo Bank (Texas), National Association for
Interim Revolving Credit Loan Advances made by
such Bank and interest thereon shall be evidenced
by an Interim Revolving Credit Note executed by
the Borrower, payable to the order of such Bank,
in the principal amount of the Interim Revolving
Credit Loan Commitment dated the date of the Fifth
Amendment to this Agreement.
Section 2A.3 Repayment of Interim Revolving
Credit Loan. The Borrower shall repay the
outstanding principal amount of the Interim
Revolving Credit Loan on the Interim Revolving
Credit Loan Termination Date.
<PAGE>
Section 2A.4 Interest. The unpaid principal
amount of the Interim Revolving Credit Loan shall
bear interest at a varying rate per annum equal
from day to day to the lesser of (a) the Maximum
Rate, or (b) the Applicable Rate. If at any time
the Applicable Rate for any Advance under the
Interim Revolving Credit Loan shall exceed the
Maximum Rate, thereby causing the interest
accruing on such Advance to be limited to the
Maximum Rate, then any subsequent reduction in the
Applicable Rate for such Advance shall not reduce
the rate of interest on such Advance below the
Maximum Rate until the aggregate amount of
interest accrued on such Advance equals the
aggregate amount of interest which would have
accrued on such Advance if the Applicable Rate had
at all times been in effect. Accrued and unpaid
interest on the Interim Revolving Credit Loan
Advances shall be due and payable on each Monthly
Payment Date and on the Interim Revolving Credit
Loan Termination Date.
Notwithstanding the foregoing, all outstanding
principal of all Interim Revolving Credit Loan
Advances shall bear interest at all times
following the occurrence and during (but only
during) the continuance of (i) a Financial
Covenant Event of Default or a Financial Reporting
Event of Default, which has been waived by the
Required Banks, at the Initial Default Rate, (ii)
a Financial Covenant Event of Default or a
Financial Reporting Event of Default, which has
not been waived by the Required Banks, at the
Default Rate, and (iii) a Payment Default,
regardless of whether the Required Banks have
given a waiver thereof, at the Default Rate.
Interest payable at the Initial Default Rate and
the Default Rate shall be payable on the dates
above stated and from time to time on demand.
Section 2A.5 Interim Revolving Credit Loan
Borrowing Procedure. The Borrower shall give the
Agent notice by means of an Interim Revolving
Credit Loan Advance Request Form of each requested
Interim Revolving Credit Loan Advance not later
than 10:00 A.M., Austin, Texas time at least one
(1) Business Day before the requested date of
such, specifying: (a) the requested date of such
Interim Revolving Credit Loan Advance (which shall
be a Business Day), and (b) the amount of such
Interim Revolving Credit Loan Advance. Each
Interim Revolving Credit Loan Advance shall be in
a minimum principal amount of Five Hundred
Thousand and No/100 Dollars ($500,000) or in
greater increments of One Hundred Thousand and
No/100 Dollars ($100,000). Not later than 10:00
A.M. Austin, Texas time on the date specified for
each Interim Revolving Credit Loan Advance
hereunder, Wells Fargo Bank (Texas), National
Association will make available to the Agent at
the Principal Office in immediately available
funds, for the account of the Borrower, the
Interim Revolving Credit Loan Advance. After the
Agent's receipt of such funds and subject to the
other terms and conditions of this Agreement, the
Agent will make each Interim Revolving Credit Loan
Advance available to the Borrower by depositing
the same, in immediately available funds, in an
account of the Borrower (designated by the
Borrower) maintained with the Agent at the
Principal Office. All notices by the Borrower
under this Section shall be irrevocable."
2.3. Method of Payment. Effective as of the date
hereof, the second sentence of Section 4.1 of the Agreement
is hereby amended and restated in its entirety to read as
follows:
"The Borrower shall, at the time of making
each such payment, specify to the Agent the sums
payable by the Borrower under this Agreement and
the other Loan Documents to which such payment is
to be applied, provided that, at any time while
any Interim Revolving Credit Loan Advances are
outstanding, all payments made by the Borrower
shall first be applied to the payment of
outstanding principal and accrued interest on such
Interim Revolving Credit Loan Advances. Subject
to the foregoing limitation and subject to Section
4.4 hereof, in the event that the Borrower fails
to so specify, or if an Event of Default has
occurred and is continuing, the Agent may apply
such payment to the Obligations in such order and
manner as it may elect in its sole discretion."
2.4. Pro Rata Treatment. Effective as of the date
hereof, subsection (a) of Section 4.4 of the Agreement is
hereby amended and restated in its entirety to read as
follows:
"(a) each Revolving Credit Loan Advance shall
be made by the Banks under Section 2.1, each
Interim Revolving Credit Loan Advance shall be
made by Wells Fargo Bank (Texas), National
Association under Section 2A.1, each payment of
the Commitment Fee under Section 2.9 and each
payment of the Letter of Credit fee under Section
3.5 (except as provided therein) shall be made for
the account of the Banks, and each termination or
reduction of the Commitments under Section 2.10
shall be applied to the Commitments of the Banks,
pro rata according to the respective Commitments;"
2.5. Conditions Precedent. Effective as of the date
hereof, Section 6.2 of the Agreement is hereby amended as
follows:
(a) Section 6.2 (a) of the Agreement is hereby amended
and restated in its entirety to read as follows:
<PAGE>
"(a) Advance Request Form or Letter of
Credit Request Form. The Agent in respect of
Advances and the Issuing Bank in respect of
Letters of Credit shall have received, in
accordance with Section 2.5, 2A.5, or 3.2, as
the case may be, an Advance Request Form,
Letter of Credit Request Form or Interim
Revolving Credit Loan Advance Request Form,
as applicable, executed by an authorized
officer of the Borrower;
(b) Section 6.2(d) of the Agreement is hereby
renumbered to be Section 6.2(e).
(c) The following Section 6.2(d) is hereby added to
the Agreement immediately following Section 6.2(c):
"(d) Interim Revolving Credit Loan
Advances. With respect to all Interim
Revolving Credit Loan Advances, the
Commitments must be fully utilized on the
date of the requested Interim Revolving
Credit Loan Advance."
2.6. Borrowing Cap. Effective as of the date hereof,
Section 10.9 of the Agreement is hereby deleted in its
entirety.
2.7. Remedies. Effective as of the date hereof,
Section 11.2 of the Agreement is hereby amended as follows:
(a) Section 11.2(a)(ii) of the Agreement is hereby
amended and restated in its entirety to read as
follows:
"(ii) Termination of Commitments and
Interim Revolving Credit Loan Commitment.
Terminate the Commitments or the Interim
Revolving Credit Loan Commitment, or both,
and the obligation of the Issuing Bank to
issue Letters of Credit without notice to the
Borrower."
(b) The proviso in Section 11.2(a) of the Agreement is
hereby amended by adding the words "and the Interim
Revolving Credit Loan Commitment" immediately following
the word "Commitments" in the second line of such
proviso.
2.8. Sharing of Payments, Etc. Effective as of the date
hereof, Section 12.3 of the Agreement is hereby amended by
adding the parenthetical "(other than Interim Revolving
Credit Advances)" immediately following the word "Advance"
in the second line of such section.
2.9. Exhibit A-2. Effective as of the date hereof,
Exhibit A-2 is hereby added to the Agreement in the form of
Annex I attached hereto.
2.10. Exhibit B-2. Effective as of the date
hereof, Exhibit B-2 is hereby added to the Agreement in the
form of Annex II attached hereto.
2.11. Schedule 6. Effective as of the date hereof,
Schedule 6 to the Agreement is hereby amended and restated
in its entirety to read as set forth on Annex III attached
hereto.
2.12. Schedule 7. Effective as of the date hereof,
Schedule 7 is hereby added to the Agreement in the form of
Annex IV attached hereto.
ARTICLE 3.
Conditions Precedent
3.1. Condition. The effectiveness of this Amendment is
subject to the satisfaction of the following conditions
precedent:
3.1.0.0.1. Agent shall have received all of
the following, each dated (unless otherwise indicated)
the date of this Amendment, in form and substance
satisfactory to the Agent:
3.1.0.0.1.0.1. This Amendment executed
by all parties hereto.
3.1.0.0.1.0.2. An Interim Revolving Credit
Note executed by the Borrower in favor of Wells
Fargo Bank (Texas), National Association in the
amount of such Bank's Interim Revolving Credit
Commitment.
<PAGE>
3.1.0.0.1.0.3. Resolutions of the Board
of Directors of Borrower certified by its
secretary or assistant secretary which authorizes
the execution, delivery and performance by
Borrower of this Amendment, the Interim Revolving
Credit Note and the other Loan Documents executed
in connection herewith.
3.1.0.0.1.0.4. A certificate of
incumbency certified by the secretary or the
assistant secretary of Borrower certifying the
names of the officers thereof authorized to sign
this Amendment, the Interim Revolving Credit Note
and the other Loan Documents together with
specimen signatures of such officers.
3.1.0.0.1.0.5. Resolutions of the Board
of Directors of each of the Guarantors certified
by its secretary or assistant secretary which
authorize the execution, delivery and performance
by each of the Guarantors of this Amendment and
the other Loan Documents executed in connection
herewith.
3.1.0.0.1.0.6. A certificate of
incumbency certified by the secretary or the
assistant secretary of each Guarantor certifying
the names of the officers thereof authorized to
sign this Amendment and the other Loan Documents
together with specimen signatures of such
officers.
3.1.0.0.2. No Default. No Default shall have
occurred and be continuing.
3.1.0.0.3. Representations and Warranties.
All of the representations and warranties contained in
Article VII of the Agreement, as amended hereby and in
the other Loan Documents shall be true and correct on
and as of the date of this Amendment with the same
force and effect as if such representations and
warranties had been made on and as of such date, except
to the extent such representations and warranties speak
to a specific date.
3.1.0.0.4. Amendment Fee. Borrower shall have
paid to the Agent for its own account an amendment fee
in the amount agreed to by the Borrower and the Agent.
ARTICLE 4.
Ratifications, Representations and Warranties
4.1. Ratifications. The terms and provisions set
forth in this Amendment shall modify and supersede all
inconsistent terms and provisions set forth in the Agreement
and except as expressly modified and superseded by this
Amendment, the terms and provisions of the Agreement and the
other Loan Documents are ratified and confirmed and shall
continue in full force and effect. Borrower, Banks, Issuing
Bank and Agent agree that the Agreement as amended hereby
and the other Loan Documents shall continue to be legal,
valid, binding and enforceable in accordance with their
respective terms.
4.2. Representations and Warranties. Borrower hereby
represents and warrants to Banks, Agent and Issuing Bank
that (i) the execution, delivery and performance of this
Amendment, the Interim Revolving Credit Note, and any and
all other Loan Documents executed and/or delivered in
connection herewith have been authorized by all requisite
corporate action on the part of Borrower and will not
violate the articles of incorporation or bylaws of Borrower,
(ii) the representations and warranties contained in the
Agreement, as amended hereby, and any other Loan Document
are true and correct on and as of the date hereof as though
made on and as of the date hereof, except to the extent such
representations and warranties speak to a specific date,
(iii) no Event of Default has occurred and is continuing and
no event or condition has occurred that with the giving of
notice or lapse of time or both would be an Event of
Default, and (iv) Borrower is in full compliance with all
covenants and agreements contained in the Agreement as
amended hereby.
ARTICLE 5.
Miscellaneous
5.1. Survival of Representations and Warranties. All
representations and warranties made in this Amendment or any
other Loan Document including any Loan Document furnished
in connection with this Amendment shall survive the
execution and delivery of this Amendment and the other Loan
Documents, and no investigation by Banks, Agent or Issuing
Bank or any closing shall affect the representations and
warranties or the right of Banks or Agent or Issuing Bank to
rely upon them.
5.2. Reference to Agreement. Each of the Loan
Documents, including the Agreement and any and all other
agreements, documents, or instruments now or hereafter
executed and delivered pursuant to the terms hereof or
pursuant to the terms of the Agreement as amended hereby,
are hereby amended so that any reference in such Loan
Documents to the Agreement shall mean a reference to the
Agreement as amended hereby.
<PAGE>
5.3. Severability. Any provision of this Amendment
held by a court of competent jurisdiction to be invalid or
unenforceable shall not impair or invalidate the remainder
of this Amendment and the effect thereof shall be confined
to the provision so held to be invalid or unenforceable.
5.4. Applicable Law. This Amendment and all other Loan
Documents executed pursuant hereto shall be deemed to have
been made and to be performable in Austin, Travis County,
Texas and shall be governed by and construed in accordance
with the laws of the State of Texas.
5.5. Successors and Assigns. This Amendment is binding
upon and shall inure to the benefit of Banks, Agent, Issuing
Bank and Borrower and their respective successors and
assigns, except Borrower may not assign or transfer any of
its rights or obligations hereunder without the prior
written consent of Banks.
5.6. Counterparts. This Amendment may be executed in
one or more counterparts, each of which when so executed
shall be deemed to be an original, but all of which when
taken together shall constitute one and the same instrument.
5.7. ENTIRE AGREEMENT. THIS AMENDMENT AND ALL OTHER
INSTRUMENTS, DOCUMENTS AND AGREEMENTS EXECUTED AND DELIVERED
IN CONNECTION WITH THIS AMENDMENT REPRESENT THE FINAL
AGREEMENT AMONG THE PARTIES HERETO AND MAY NOT BE
CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS
OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES
HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE
PARTIES HERETO.
Executed as of the date first written above.
BORROWER:
EZCORP, INC.
By: /s/Dan N. Tonissen
Name: Dan N. Tonissen
Title: Chief Financial officer
Address for Notices:
1901 Capital Parkway
Austin, TX 78746
Fax No.: (512) 314-3402
Telephone No.: (512) 329-5233
Attention: Dan Tonissen
Chief Financial Officer
AGENT:
WELLS FARGO BANK (TEXAS), NATIONAL
ASSOCIATION
By: /s/Keith Smith
Name: Keith Smith
Title: Vice President
Address for Notices:
100 Congress Avenue, Suite 150
Austin, TX 78701
Fax No.: (512) 469-3311
Telephone No.: (512) 794-2200
Attention: Keith Smith
<PAGE>
ISSUING BANK:
WELLS FARGO BANK (TEXAS), NATIONAL
ASSOCIATION
By: /s/Keith Smith
Name: Keith Smith
Title: Vice President
Address for Notices:
100 Congress Avenue, Suite 150
Austin, TX 78701
Fax No.: (512) 469-3311
Telephone No.: (512) 794-2200
Attention: Keith Smith
BANKS:
WELLS FARGO BANK (TEXAS), NATIONAL
ASSOCIATION
By: /s/Keith Smith
Name: Keith Smith
Title: Vice President
Address for Notices
100 Congress Avenue, Suite 150
Austin, TX 78701
Fax No.: (512) 469-3311
Telephone No.: (512) 794-2200
Attention: Keith Smith
Lending Office for Prime Rate Advances
and Eurodollar Advances
100 Congress Ave.
Austin, TX 78701
GUARANTY FEDERAL BANK, F.S.B.
By: /s/Chris Harkrider
Name: Chris Harkrider
Title:
Address for Notices:
301 Congress, Suite 1075
Austin, TX 78701
Attention: Chris Harkrider
Fax No.: (512) 320-1041
Telephone No.: (512) 320-1205
Lending Office for Prime Rate Advances
and Eurodollar Advances
8333 Douglas Avenue
Dallas, TX 75255
<PAGE> Guarantors hereby consent and agree to this
Amendment and agree that each Guaranty shall remain in full
force and effect and shall continue to (i) guarantee the
Obligations, including without limitation, the Interim
Revolving Credit Note, and (ii) be the legal, valid and
binding obligation of Guarantors enforceable against
Guarantors in accordance with their respective terms.
GUARANTORS:
EZPAWN Alabama, Inc.
EZPAWN Arkansas, Inc.
EZPAWN Colorado, Inc.
EZPAWN Florida, Inc.
EZPAWN Georgia, Inc.
EZPAWN Holdings, Inc.
EZPAWN Indiana, Inc.
EZPAWN Louisiana, Inc.
EZPAWN Oklahoma, Inc.
EZPAWN Tennessee, Inc.
Texas EZPAWN Management, Inc.
EZ Car Sales, Inc.
EZPAWN Construction, Inc.
EZPAWN Kansas, Inc.
EZPAWN Kentucky, Inc.
EZPAWN Missouri, Inc.
EZPAWN Nevada, Inc.
EZPAWN North Carolina, Inc.
EZPAWN South Carolina, Inc.
By: /s/ Dan N. Tonissen
Name: Dan N. Tonissen
Title: Chief Financial Officer
Texas EZPAWN L.P.
By: Texas EZPAWN Management, Inc.,
its sole general partner
By: /s/ Dan N. Tonissen
Name: Dan N. Tonissen
Title: Vice President of Sole General Partner
<PAGE>
ANNEX I
Exhibit A-2 to Loan Agreement
EXHIBIT "A-2"
Interim Revolving Credit Note
<PAGE>
INTERIM REVOLVING CREDIT NOTE
$10,000,000.00 Austin, Texas October 5, 1998
FOR VALUE RECEIVED, the undersigned, EZCORP, Inc., a
Delaware corporation (the "Borrower") hereby promises to pay
to the order of WELLS FARGO BANK (TEXAS), NATIONAL
ASSOCIATION (the "Bank"), at the Agent's office located at
100 Congress Avenue, Suite 150, Austin, Texas 78701 for the
account of the Applicable Lending Office of the Bank, in
lawful money of the United States of America and in
immediately available funds, the principal amount of TEN
MILLION and No/100 Dollars ($10,000,000.00) or such lesser
amount as shall equal the aggregate unpaid principal amount
of the Interim Revolving Credit Loan Advances made by the
Bank to the Borrower under the Loan Agreement referred to
below, on the dates and in the principal amounts provided in
the Loan Agreement, and to pay interest on the amount of
each such Interim Revolving Credit Loan Advance, at such
office, in like money and funds, for the period commencing
on the date of such Interim Revolving Credit Loan Advance
until such Interim Revolving Credit Loan Advance shall be
paid in full, at the rates per annum and on the dates
provided in the Loan Agreement.
The Borrower hereby authorizes the Bank to endorse on
the Schedule annexed to this Note the amount of Interim
Revolving Credit Loan Advances made to the Borrower by the
Bank, which endorsements shall, in the absence of manifest
error, be conclusive as to the outstanding principal amount
of all such Interim Revolving Credit Loan Advances;
provided, however, that the failure to make such notation
with respect to any such Interim Revolving Credit Loan
Advance or payment shall not limit or otherwise affect the
obligations of the Borrower under the Loan Agreement or this
Note.
This Note is the Interim Revolving Credit Note referred
to in the Amended and Restated Loan Agreement dated as of
November 29, 1994, as amended, among the Borrower, the Bank,
the other Banks and Wells Fargo Bank (Texas), National
Association (formerly known as First Interstate Bank of
Texas, N.A.), as Agent and as Issuing Bank (such Amended and
Restated Loan Agreement, as amended and as the same may be
amended, modified, or supplemented from time to time, being
referred to herein as the "Loan Agreement"), and evidences
Interim Revolving Credit Loan Advances made by the Bank
thereunder. The Loan Agreement, among other things,
contains provisions for acceleration of the maturity of this
Note upon the happening of certain stated events and also
for prepayments of Interim Revolving Credit Loan Advances
prior to the maturity of this Note upon the terms and
conditions specified in the Loan Agreement. Capitalized
terms used in this Note have the respective meanings
assigned to them in the Loan Agreement.
Notwithstanding anything to the contrary contained
herein, no provision of this Note shall require the
payment or permit the collection of interest in excess
of the Maximum Rate. If any excess of interest in such
respect is herein provided for, or shall be adjudicated
to be so provided, in this Note or otherwise in
connection with this loan transaction, the provisions
of this paragraph shall govern and prevail, and neither
the Borrower nor the sureties, guarantors, successors
or assigns of the Borrower shall be obligated to pay
the excess amount of such interest, or any other excess
sum paid for the use, forbearance or detention of sums
loaned pursuant hereto. If for any reason interest in
excess of the Maximum Rate shall be deemed charged,
required or permitted by any court of competent
jurisdiction, any such excess shall be applied as a
payment and reduction of the principal of indebtedness
evidenced by this Note; and, if the principal amount
hereof has been paid in full, any remaining excess
shall forthwith be paid to the Borrower. In
determining whether or not the interest paid or payable
exceeds the Maximum Rate, the Borrower and the Bank
shall, to the extent permitted by applicable law,
5.7.0.0.1. characterize any non-principal payment as an
expense, fee, or premium rather than as interest,
5.7.0.0.1. exclude voluntary prepayments and the
effects thereof, and 5.7.0.0.1. amortize, prorate,
allocate, and spread in equal or unequal parts the
total amount of interest throughout the entire
contemplated term of the indebtedness evidenced by this
Note so that the interest for the entire term does not
exceed the Maximum Rate.
This Note shall be governed by and construed in
accordance with the laws of the State of Texas and the
applicable laws of the United States of America. This Note
is performable in Travis County, Texas.
<PAGE>
The Borrower and each surety, guarantor, endorser, and
other party ever liable for payment of any sums of money
payable on this Note jointly and severally waive notice,
presentment, demand for payment, protest, notice of protest
and non-payment or dishonor, notice of acceleration, notice
of intent to accelerate, notice of intent to demand,
diligence in collecting, grace, and all other formalities of
any kind, and consent to all extensions without notice for
any period or periods of time and partial payments, before
or after maturity, and any impairment of any collateral
securing this Note, all without prejudice to the holder.
The holder shall similarly have the right to deal in any
way, at any time, with one or more of the foregoing parties
without notice to any other party, and to grant any such
party any extensions of time for payment of any of said
indebtedness, or to release or substitute part or all of the
collateral securing this Note, or to grant any other
indulgences or forbearances whatsoever, without notice to
any other party and without in any way affecting the
personal liability of any party hereunder.
EZCORP, INC.
By:
Name:
Title:
<PAGE>
Schedule
Date Amount Amount Unpaid
Made of of Princip
or Paid Advance Principa al
l Balance
Paid of Note
<PAGE>
ANNEX II
Exhibit B-2 to Loan Agreement
EXHIBIT "B-2"
Interim Revolving Credit Loan Advance Request Form
INTERIM REVOLVING CREDIT LOAN ADVANCE REQUEST FORM
TO: Wells Fargo Bank (Texas), National Association, as
Agent
100 Congress Avenue, Suite 150
Austin, Texas 78701
Attention: Keith Smith
Vice President
Gentlemen:
The undersigned is an officer of EZCORP, Inc. (the
"Borrower"), and is authorized to make and deliver this
certificate pursuant to that certain Amended and Restated
Loan Agreement dated November 29, 1994, among the Borrower,
Wells Fargo Bank (Texas), National Association, as Agent and
Issuing Bank, and the Banks named therein as amended by
(i) that certain First Amendment to Amended and Restated
Loan Agreement effective as of February 15, 1995, (ii) that
certain Second Amendment to Amended and Restated Loan
Agreement and Waiver dated as of August 3, 1995, (iii) that
certain Third Amendment to Amended and Restated Loan
Agreement effective as of June 24, 1996, (iv) that certain
Fourth Amendment to Amended and Restated Loan Agreement
dated as of May 9, 1997, and (v) that certain Fifth
Amendment to Amended and Restated Loan Agreement dated as of
September __, 1998 (such Amended and Restated Loan
Agreement, as the same has been or may be amended, modified,
or supplemented from time to time being referred to herein
as the "Loan Agreement"). All terms defined in the Loan
Agreement shall have the same meaning herein. In accordance
with the Loan Agreement, the Borrower hereby requests that
Wells Fargo Bank (Texas), National Association make an
Interim Revolving Credit Loan Advance in the amount set
forth in item (c) below on the date set forth in item (d)
below.
In connection with the foregoing and pursuant to the
terms and provisions of the Loan Agreement, the undersigned
hereby certifies to Agent and the Banks that the following
statements are true and correct:
(i) The representations and warranties contained
in Article VII of the Loan Agreement and in each of the
other Loan Documents are true and correct in all
material respects on and as of the date hereof with the
same force and effect as if made on and as of such date
except to the extent such representations and
warranties speak to a specific date.
(ii) No Default has occurred and is continuing or
would result from the Interim Revolving Credit Loan
Advance requested hereunder.
(iii) The amount of the Interim Revolving
Credit Loan Advance requested hereunder, when added to
all outstanding Interim Revolving Credit Advances will
not exceed the Interim Revolving Credit Loan
Commitment.
(iv) The Commitments will be fully utilized on the
date of the requested Interim Revolving Credit Loan
Advance.
(v) All information supplied below is true,
correct, and complete as of the date hereof.
Interim Revolving Credit Loan Advance Information
(a) Amount of Interim Revolving Credit Loan
Commitment $____________
<PAGE>
(b) Outstanding principal amount of Interim
Revolving Credit
Loan Advances $____________
(c) Amount of requested Interim Revolving Credit
Loan Advance $____________
(d) Date of requested Interim Revolving Credit
Loan Advance ____________
BORROWER:
EZCORP, Inc.
By:
Name:
Title:
Dated as of:________________
[insert date of requested
Interim Revolving Credit
Loan Advance]
<PAGE>
ANNEX III
Schedule 6 to Loan Agreement
[See Attached.]
<PAGE>
SCHEDULE 6
Commitments
BANKS
COMMITMENTS
Wells Fargo Bank (Texas), National Association
$30,875,000
Guaranty Federal Bank, F.S.B.
$19,125,000
<PAGE>
ANNEX IV
Schedule 7 to Loan Agreement
[See Attached.]
<PAGE>
SCHEDULE 7
Interim Revolving Credit Commitment
BANK COMMITMENT
Wells Fargo Bank (Texas), National Association
$10,000,000
<PAGE>
Exhibit 10.77
EZCORP, INC.
CREDIT AGREEMENT
DATED AS OF DECEMBER 10, 1998
$110,000,000 REVOLVING CREDIT LOAN
WELLS FARGO BANK (TEXAS), NATIONAL ASSOCIATION,
AS AGENT
AND
ISSUING BANK
<PAGE>
TABLE OF CONTENTS
ARTICLE IDefinitions 1Section 1.1 Definitions
1Section 1.2 Other Definitional Provisions 15
ARTICLE II
Revolving Credit Loan and Swing Loan 15
Section 2.1 Commitments 15
Section 2.2 Revolving Credit Notes 15
Section 2.3 Repayment of Revolving Credit Loan 16
Section 2.4 Interest 16
Section 2.5 Revolving Credit Loan Borrowing Procedure 16
Section 2.6 Conversions and Continuations 17
Section 2.7 Swing Loans 17
Section 2.8 Use of Proceeds 19
Section 2.9 Fees 19
Section 2.10 Determination of Eurodollar Margin,
Commitment Fee
and Base Rate Margin 19
Section 2.11 Reduction or Termination of Commitments 20
ARTICLE III
Letters of Credit 21
Section 3.1 Letters of Credit 21
Section 3.2 Procedure for Issuing Letters of Credit 22
Section 3.3 Presentment and Reimbursement 23
Section 3.4 Payment 23
Section 3.5 Letter of Credit Fee 24
Section 3.6 Obligations Absolute 24
Section 3.7 Limitation of Liability 25
ARTICLE IV
Payments 25
Section 4.1 Method of Payment 25
Section 4.2 Voluntary Prepayment 26
Section 4.3 Mandatory Prepayments 26
Section 4.4 Pro Rata Treatment 27
Section 4.5 Non-Receipt of Funds by the Agent 27
Section 4.6 Withholding Taxes 28
Section 4.7 Withholding Tax Exemption 28
Section 4.8 Computation of Interest 28
ARTICLE V
Yield Protection; Limitations on Advances; Capital Adequacy 29
Section 5.1 Additional Costs 29
Section 5.2 Limitation on Types of Advances 30
Section 5.3 Illegality 31
Section 5.4 Treatment of Affected Advances 31
Section 5.5 Compensation 31
<PAGE>
Section 5.6 Capital Adequacy 32
Section 5.7 Additional Costs in Respect of Letters of
Credit 32
ARTICLE VI
Conditions Precedent 33
Section 6.1 Initial Extension of Credit 33
Section 6.2 All Extensions of Credit 34
ARTICLE VII
Representations and Warranties 35
Section 7.1 Existence 35
Section 7.2 Financial Statements 35
Section 7.3 Action; No Breach 35
Section 7.4 Operation of Business 36
Section 7.5 Litigation and Judgments 36
Section 7.6 Rights in Properties; Liens 36
Section 7.7 Enforceability 36
Section 7.8 Approvals 36
Section 7.9 Debt 36
Section 7.10 Taxes 37
Section 7.11 Use of Proceeds; Margin Securities 37
Section 7.12 ERISA 37
Section 7.13 Disclosure 37
Section 7.14 Subsidiaries 38
Section 7.15 Agreements 38
Section 7.16 Compliance with Laws 38
Section 7.17 Investment Company Act 38
Section 7.18 Public Utility Holding Company Act 38
Section 7.19 Environmental Matters 38
ARTICLE VIII
Positive Covenants 39
Section 8.1 Reporting Requirements 40
Section 8.2 Maintenance of Existence; Conduct of Business 42
Section 8.3 Maintenance of Properties 42
Section 8.4 Taxes and Claims 42
Section 8.5 Insurance 42
Section 8.6 Inspection Rights 42
Section 8.7 Keeping Books and Records 42
Section 8.8 Compliance with Laws 43
Section 8.9 Compliance with Agreements 43
Section 8.10 Further Assurances; Subsidiary Guaranty and
Contribution and Indemnification Agreement 43
Section 8.11 ERISA 43
Section 8.12 Year 2000 Compliance 43
ARTICLE IX
Negative Covenants 44
Section 9.1 Debt 44
<PAGE>
Section 9.2 Limitation on Liens 44
Section 9.3 Mergers, Etc 45
Section 9.4 Restricted Payments 45
Section 9.5 Investments 46
Section 9.6 Limitation on Issuance of Capital Stock 46
Section 9.7 Transactions With Affiliates 46
Section 9.8 Disposition of Assets 47
Section 9.9 Nature of Business 47
Section 9.10 Environmental Protection 47
Section 9.11 Accounting 47
Section 9.12 Prepayment of Debt 47
ARTICLE X
Financial Covenants 48
Section 10.1 Consolidated Net Worth 48
Section 10.2 Leverage Ratio 48
Section 10.3 Capital Expenditures 48
Section 10.4 Inventory Turnover 48
Section 10.5 Fixed Charge Coverage Ratio 48
ARTICLE XI
Default 49
Section 11.1 Events of Default 49
Section 11.2 Remedies 51
Section 11.3 Cash Collateral 52
Section 11.4 Performance by the Agent 52
ARTICLE XII
The Agent 52
Section 12.1 Appointment, Powers and Immunities 52
Section 12.2 Rights of Agent as a Lender 55
Section 12.3 Sharing of Payments, Etc. 55
Section 12.4 Indemnification 55
Section 12.5 Independent Credit Decisions 56
Section 12.6 Several Commitments 56
Section 12.7 Successor Agent 57
ARTICLE XIII
Miscellaneous 57
Section 13.1 Expenses 57
Section 13.2 INDEMNIFICATION 58
Section 13.3 Limitation of Liability 58
Section 13.4 No Duty 59
Section 13.5 No Fiduciary Relationship 59
Section 13.6 Equitable Relief 59
Section 13.7 No Waiver; Cumulative Remedies 59
Section 13.8 Successors and Assigns 59
Section 13.9 Survival 62
Section 13.10 Amendments, Etc. 62
Section 13.11 Maximum Interest Rate 63
Section 13.12 Notices 63
Section 13.13 Governing Law; Venue; Service of Process 63
Section 13.14 Binding Arbitration 64
<PAGE>
Section 13.15 Counterparts 66
Section 13.16 Severability 66
Section 13.17 Headings 66
Section 13.18 Non-Application of Chapter 346 of Texas
Credit Finance Code 66
Section 13.19 Construction 66
Section 13.20 Independence of Covenants 66
Section 13.21 Confidentiality 66
Section 13.22 WAIVER OF JURY TRIAL 67
Section 13.23 ENTIRE AGREEMENT 67
<PAGE>
INDEX TO EXHIBITS
Exhibit Description of Exhibit Section
"A-1" Form of Revolving Credit Note 1.1, 2.2,
6.1(f)
"A-2" Form of Swing Note 1.1, 2.7,
6.1(f)
"B-1" Advance Request Form 1.1, 2.5,
6.2(a)
"B-2" Letter of Credit Request Form 1.1, 3.2,
6.2(a)
"C" Form of Guaranty 1.1, 6.1(g)
"D" Form of Assignment and Acceptance 1.1, 13.8
"E" Contribution and Indemnification Agreement 1.1,
6.1(h)
INDEX TO SCHEDULES
Schedule Description of Schedule Section
1.1a Commitments 1.1
1.1b Existing LCs 1.1
7.14 List of Subsidiaries 7.14
9.1 Existing Debt 7.9, 9.1
9.2 Existing Liens 9.2(a)
<PAGE>
CREDIT AGREEMENT THIS CREDIT AGREEMENT (the "Agreement"),
dated as of December 10, 1998, is among EZCORP, INC., a
Delaware corporation ("Borrower"), each of the banks or
other lending institutions which is or which may from time
to time become a signatory hereto or any successor or
assignee thereof (individually, a "Lender" and,
collectively, the "Lenders"), and WELLS FARGO BANK (TEXAS),
NATIONAL ASSOCIATION, a national banking association, as
agent for itself and the other Lenders (in such capacity,
together with its successors in such capacity, the "Agent")
and as the Issuing Bank (hereinafter defined).
R E C I T A L S
The Borrower has requested that the Lenders and the
Issuing Bank extend credit to the Borrower in the form of
revolving credit advances, standby letters of credit and
swing-line advances not to exceed an aggregate principal
amount of One Hundred Ten Million and No/100 Dollars
($110,000,000.00) at any time outstanding. The Lenders are
willing to make such extensions of credit to the Borrower
upon the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties hereto agree
as follows:
ARTICLE 6.
Definitions
Section 6.1. Definitions. As used in this Agreement,
the following terms have the following meanings:
"Additional Costs" has the meaning specified in
Section 5.1.
"Adjusted Eurodollar Rate" means, for any
Eurodollar Advance for any Interest Period therefor,
the rate per annum (rounded upwards, if necessary, to
the nearest 1/16 of 1%) determined by the Agent to be
equal to (a) the Eurodollar Rate for such Eurodollar
Advance for such Interest Period divided by (b) the
remainder of 1 minus the Reserve Requirement for such
Eurodollar Advance for such Interest Period.
"Adjustment Date" has the meaning specified in
Section 2.10.
"Advance" means an advance of funds by the Lenders
or any of them to the Borrower pursuant to Article II
(inclusive of the Revolving Credit Loan and the Swing
Loan) and the Continuation or Conversion thereof
pursuant to Section 2.6 and Article V hereof.
"Advance Request Form" means a certificate, in
substantially the form of Exhibit "B-1" hereto,
properly completed and signed by the Borrower
requesting an Advance.
"Affiliate" means, as to any Person, any other
Person (a) that directly or indirectly, through one or
more intermediaries, controls or is controlled by, or
is under common control with, such Person; (b) that
directly or indirectly beneficially owns or holds five
percent (5%) or more of any class of voting stock of
such Person; or (c) five percent (5%) or more of the
voting stock of which is directly or indirectly
beneficially owned or held by the Person in question.
The term "control" means the possession, directly or
indirectly, of the power to direct or cause direction
of the management and policies of a Person, whether
through the ownership of voting securities, by
contract, or otherwise; provided, however, in no event
shall the Agent or any Lender be deemed an Affiliate of
the Borrower or any of its Subsidiaries.
"Agent" has the meaning set forth in the
introductory paragraph of this Agreement.
"Agreement" has the meaning set forth in the
introductory paragraph of this Agreement.
<PAGE>
"Applicable Lending Office" means for each Lender
and each Type of Advance, the Lending Office of such
Lender (or of an Affiliate of such Lender) designated
for such Type of Advance below its name on the
signature pages hereof or such other office of such
Lender (or of an Affiliate of such Lender) as such
Lender may from time to time specify to the Borrower
and the Agent as the office by which its Advances of
such Type are to be made and maintained.
"Applicable Rate" means: (a) during the period
that an Advance is a Base Rate Advance, the Base Rate,
plus the Base Rate Margin; and (b) during the period
that a Revolving Credit Loan is a Eurodollar Advance,
the Adjusted Eurodollar Rate, plus the Eurodollar
Margin.
"Assessment Rate" means, at any time, the rate
(rounded upwards, if necessary, to the nearest 1/16 of
1%) then charged by the Federal Deposit Insurance
Corporation (or any successor) to the Reference Bank
for deposit insurance for Dollar time deposits with the
Reference Bank at its principal office as determined by
the Reference Bank.
"Assignment and Acceptance" means an assignment
and acceptance entered into by a Lender and its
assignee and accepted by the Agent pursuant to Section
13.8, in substantially the form of Exhibit "D" hereto.
"Base Rate" means as of any date of determination,
a rate per annum equal to the greater of (a) the Prime
Rate in effect on such day, or (b) the sum of the
Federal Funds Rate in effect on such day plus one-half
of one percent (0.5%). Any change in the Base Rate due
to a change in the Prime Rate or the Federal Funds Rate
shall be effective on the effective date of such change
in the Prime Rate or the Federal Funds Rate,
respectively, without notice to Borrower.
"Base Rate Advances" means Advances that bear
interest at rates based upon the Base Rate.
"Base Rate Margin" shall have the meaning set
forth in Section 2.10.
"Basle Accord" means the proposals for risk-based
capital framework described by the Basle Committee on
Banking Regulations and Supervisory Practices in its
paper entitled "International Convergence of Capital
Measurement and Capital Standards" dated July 1988, as
amended, supplemented and otherwise modified and in
effect from time to time, or any replacement thereof.
"Borrower" has the meaning set forth in the
introductory paragraph of this Agreement.
"Business Day" means (a) any day on which
commercial banks are not authorized or required to
close in San Francisco, California, and, (b) with
respect to all borrowings, payments, Conversions,
Continuations, Interest Periods, and notices in
connection with Eurodollar Advances, any day which is a
Business Day described in clause (a) above and which is
also a day on which dealings in Dollar deposits are
carried out in the London interbank market.
"Capital Expenditures" means, for any period, all
expenditures of the Borrower and its Subsidiaries which
are classified as additions to property, plant and
equipment on the consolidated statement of cash flows
of the Borrower in accordance with GAAP, including all
such expenditures so classified as "recurring capital
expenditures" and all such expenditures associated with
Capital Lease Obligations.
"Capital Lease Obligation" means, as to any
Person, the obligations of such Person to pay rent or
other amounts under a lease of (or other agreement
conveying the right to use) real and/or personal
property, which obligations are required to be
classified and accounted for as a capital lease on a
balance sheet of such Person under GAAP. For purposes
of this Agreement, the amount of such Capital Lease
Obligations shall be the capitalized amount thereof,
determined in accordance with GAAP.
"Cash Equivalent Investment" means, as to any
Person, (i) securities issued or directly and fully
guaranteed or insured by the United States or any
agency or instrumentality thereof (provided that the
full
<PAGE>
faith and credit of the United States is pledged in
support thereof) having maturities of not more than six
months from the date of acquisition, (ii) time deposits
and certificates of deposit of any commercial bank
having, or which is the principal banking subsidiary of
a bank holding company having, a long-term unsecured
debt rating of at least "AAA" or the equivalent thereof
from Standard & Poor's Corporation or "Aaa" or the
equivalent thereof from Moody's Investors Service, Inc.
with maturities of not more than six months from the
date of acquisition by such Person, (iii) repurchase
obligations with a term of not more than seven days for
underlying securities of the types described in clause
(i) above entered into with any bank meeting the
qualifications specified in clause (ii) above, (iv)
commercial paper issued by any Person incorporated in
the United States rated at least A-1 or the equivalent
thereof by Standard & Poor's Corporation or at least
P-1 or the equivalent thereof by Moody's Investors
Service, Inc. and in each case maturing not more than
six months after the date of acquisition by such Person
and (v) investments in money market funds substantially
all of whose assets are comprised of securities of the
types described in clauses (i) through (iv) above.
"Code" means the Internal Revenue Code of 1986, as
amended, and the regulations promulgated and rulings
issued thereunder.
"Commitment" means, as to each Lender, the
obligation of such Lender to make Advances as described
in Article II hereunder and purchase participations (or
with respect to the Swing Lender or the Issuing Bank,
hold other interests in) the Swing Loan and in Letters
of Credit as described in Articles II and III hereunder
in an aggregate principal amount at any one time
outstanding up to but not exceeding the amount set
forth opposite the name of such Lender on Schedule 1.1a
hereto under the heading "Commitment", as the same may
be reduced pursuant to Section 2.11 or terminated
pursuant to Section 2.11 or 11.2.
"Commitment Fee" shall have the meaning set forth
in Section 2.10.
"Consolidated Net Income" means, at any time, the
aggregate net income or loss of the Borrower and its
consolidated Subsidiaries determined on a consolidated
basis as determined in accordance with GAAP.
"Consolidated Net Worth" means, at any particular
time, all amounts which, in conformity with GAAP, would
be included as stockholders' equity on a consolidated
balance sheet of the Borrower and the Subsidiaries;
provided, however, there shall be excluded therefrom
any amount at which shares of capital stock of the
Borrower appear as an asset on the Borrower's balance
sheet.
"Continue", "Continuation", and "Continued" shall
refer to the continuation pursuant to Section 2.6 of a
Eurodollar Advance as a Eurodollar Advance from one
Interest Period to the next Interest Period.
"Contribution and Indemnification Agreement" means
the Contribution and Indemnification Agreement executed
by the Borrower and the Guarantors, in substantially
the form of Exhibit "E" hereto, as the same may be
amended or otherwise modified from time to time.
"Convert", "Conversion", and "Converted" shall
refer to a conversion pursuant to Section 2.6 or
Article V of one Type of Advance into another Type of
Advance.
"Debt" means as to any Person at any time (without
duplication): (a) all obligations of such Person for
borrowed money, (b) all obligations of such Person
evidenced by bonds, notes, debentures, or other similar
instruments, (c) all obligations of such Person to pay
the deferred purchase price of property or services,
except trade accounts payable of such Person arising in
the ordinary course of business that are not past due
by more than ninety (90) days, (d) all Capital Lease
Obligations of such Person, (e) all Debt or other
obligations of others Guaranteed by such Person, (f)
all obligations secured by a Lien existing on property
owned by such Person, whether or not the obligations
secured thereby have been assumed by such Person or are
non-recourse to the credit of such Person, (g) all
reimbursement obligations of such Person (whether
contingent or otherwise) in respect of letters of
credit, bankers' acceptances, surety or other bonds
<PAGE>
and similar instruments, and (h) all liabilities of
such Person in respect of unfunded vested benefits
under any Plan.
"Default" means an Event of Default or the
occurrence of an event or condition which with notice
or lapse of time or both would become an Event of
Default.
"Default Rate" means the lesser of (a) the Maximum
Rate or, (b) the sum of the Base Rate in effect from
day to day plus five percent (5%).
"Dispute" has the meaning specified in Section
13.14.
"Dollars" and "$" mean lawful money of the United
States of America.
"EBITDA" means Consolidated Net Income, plus, to
the extent that any of the following were deducted in
calculating such Consolidated Net Income, interest
expense, tax expenses, and depreciation and
amortization, but excluding all extraordinary items of
income and loss.
"Eligible Assignee" means (i) a Lender, (ii) an
Affiliate of a Lender, and (iii) any other Person
approved by the Agent, and, unless a Default has
occurred and is continuing at the time any assignment
is effected, in accordance with Section 13.8, the
Borrower, such approval not to be unreasonably withheld
or delayed by the Borrower; provided, however, that
neither the Borrower nor an Affiliate of the Borrower
shall qualify as an Eligible Assignee.
"Environmental Laws" means any and all federal,
state, and local laws, regulations, and requirements
pertaining to health, safety, or the environment, as
such laws, regulations, and requirements may be amended
or supplemented from time to time.
"Environmental Liabilities" means, as to any
Person, all liabilities, obligations, responsibilities,
Remedial Actions, losses, damages, punitive damages,
consequential damages, treble damages, costs, and
expenses, (including, without limitation, all
reasonable fees, disbursements and expenses of counsel,
expert and consulting fees and costs of investigation
and feasibility studies), fines, penalties, sanctions,
and interest incurred as a result of any claim or
demand, by any Person, whether based in contract, tort,
implied or express warranty, strict liability, criminal
or civil statute, including any Environmental Law,
permit, order or agreement with any Governmental
Authority or other Person, arising from environmental,
health or safety conditions or the Release or
threatened Release of a Hazardous Material into the
environment.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended from time to time, and
the regulations and published interpretations
thereunder.
"ERISA Affiliate" means any corporation or trade
or business which is a member of the same controlled
group of corporations (within the meaning of Section
414(b) of the Code) as the Borrower, which is under
common control (within the meaning of Section 414(c) of
the Code) with the Borrower, or which is otherwise
affiliated with the Borrower (within the meaning of
Section 414(m) or Section 414(o) of the Code).
"Eurodollar Advances" means Advances the interest
rates on which are determined on the basis of the rates
referred to in the definition of "Adjusted Eurodollar
Rate" in this Section 1.1.
"Eurodollar Margin" shall have the meaning set
forth in Section 2.10.
"Eurodollar Rate" means, for any Eurodollar
Advance for any Interest Period of either one, two,
three or six months therefor, the rate per annum
(rounded upwards, if necessary, to the nearest 1/16 of
1%) quoted by the Reference Bank at approximately 11:00
A.M. London time (or as soon thereafter as practicable)
two Business Days prior to the first day of such
Interest Period for the offering by the Reference Bank
to leading banks in the London interbank market of
Dollar deposits in immediately available funds having a
term comparable to such Interest Period and in an
amount comparable to the
<PAGE>
principal amount of the Eurodollar Advance made by the
Reference Bank to which such Interest Period relates.
If the Reference Bank is not participating in any
Eurodollar Advances during any Interest Period therefor
(pursuant to Section 5.4 or for any other reason), the
Adjusted Eurodollar Rate for such Advances for such
Interest Period shall be determined by reference to the
amount of the Advances which the Reference Bank would
have made had it been participating in such Advances.
"Event of Default" has the meaning specified in
Section 11.1.
"Excess Net Proceeds" has the meaning specified in
Section 2.11(b).
"Exchange Act" means the Securities and Exchange
Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
"Existing Credit Agreement" has the meaning
specified in Section 6.1(k).
"Existing Debt" means the Debt listed on
Schedule 9.1.
"Existing LCs" means those letters of credit
described on Schedule 1.1b issued pursuant to the
Existing Credit Agreement.
"Federal Funds Rate" means, for any day, the rate
per annum (rounded upwards, if necessary, to the
nearest 1/16 of 1%) equal to the weighted average of
the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by
Federal funds brokers on such day, as published by the
Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (a) if the day
for which such rate is to be determined is not a
Business Day, the Federal Funds Rate for such day shall
be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding
Business Day, and (b) if such rate is not so published
on such next succeeding Business Day, the Federal Funds
Rate for any day shall be the average rate charged to
Wells Fargo Bank (Texas), National Association on such
day on such transactions as determined by the Agent.
"Fiscal Quarter" means any three-month period
ending December 31, March 31, June 30 or September 30.
"Fiscal Year" means each 12 month period ending
September 30 of each year.
"Fixed Charge Coverage Ratio" means, for each
Fiscal Quarter, the quotient determined by dividing
(i) the sum of EBITDA plus Rental (hereinafter defined)
minus Maintenance Capital Expenditures (hereinafter
defined) minus taxes paid in cash by the Borrower and
its consolidated Subsidiaries, in each case for such
Fiscal Quarter and the prior three (3) Fiscal Quarters
by (ii) the sum of the aggregate interest expense and
Rental of the Borrower and its consolidated
Subsidiaries, in each case for such Fiscal Quarter and
the prior three (3) Fiscal Quarters. As used herein
the term "Rental" means the amounts paid by the
Borrower and each Subsidiary to lease facilities for
business operations. As used herein, the phrase
"Maintenance Capital Expenditures" means for each
Fiscal Quarter, capital expenditures equal to an
aggregate amount equal to Three Thousand Dollars
($3,000.00) multiplied by the Average Number of Stores
(hereinafter defined) operated by the Borrower and the
Subsidiaries for such Fiscal Quarter. As used herein,
the phrase "Average Number of Stores" for any Fiscal
Quarter means the number of stores calculated by
dividing the sum of the stores operated by the Borrower
and the Subsidiaries at the end of each month for the
most recent four (4) months by four (4).
"Funded Debt" means, at any particular time, the
sum of the following, calculated on a consolidated
basis for the Borrower and the Subsidiaries in
accordance with GAAP: (i) all obligations for borrowed
money, including but not limited to senior bank debt,
senior notes and subordinated debt, (ii) all
obligations relating to the deferred purchase price of
property and services, (iii) all Capital Lease
Obligations, (iv) all obligations as a reimbursement
obligor with respect to an issued letter of credit or
similar instrument (whether drawn or undrawn), (v) all
obligations under a Guarantee of borrowed money, or any
other type of direct or contingent obligation.
<PAGE>
"GAAP" means generally accepted accounting
principles, applied on a consistent basis, as set forth
in Opinions of the Accounting Principles Board of the
American Institute of Certified Public Accountants
and/or in statements of the Financial Accounting
Standards Board and/or their respective successors and
which are applicable in the circumstances as of the
date in question. Accounting principles are applied on
a "consistent basis" when the accounting principles
applied in a current period are comparable in all
material respects to those accounting principles
applied in a preceding period.
"Governmental Authority" means any nation or
government, any state or political subdivision thereof
and any entity exercising executive, legislative,
judicial, regulatory, or administrative functions of or
pertaining to government.
"Guarantee" by any Person means any obligation,
contingent or otherwise, of such Person directly or
indirectly guaranteeing any Debt or other obligation of
any other Person and, without limiting the generality
of the foregoing, any obligation, direct or indirect,
contingent or otherwise, of such Person (a) to purchase
or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation (whether
arising by virtue of partnership arrangements, by
agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (b)
entered into for the purpose of assuring in any other
manner the obligee of such Debt or other obligation of
the payment thereof or to protect the obligee against
loss in respect thereof (in whole or in part), provided
that the term Guarantee shall not include endorsements
for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Guarantor" means each and every domestic
Subsidiary of Borrower whether now in existence or
hereafter created which include but are not limited to
those Subsidiaries listed on Schedule 7.14.
"Guaranty" means the joint and several guaranty of
each Guarantor in favor of the Agent and the Lenders,
in substantially the form of Exhibit "C" hereto, as the
same may be amended, supplemented, or otherwise
modified from time to time.
"Hazardous Material" means any substance, product,
waste, pollutant, material, chemical, contaminant,
constituent, or other material which is or becomes
listed, regulated, or addressed under any Environmental
Law.
"Interest Period" means the period commencing,
with respect to any Eurodollar Advances, on the date
such Eurodollar Advances are made or Converted from
Advances of another Type or, in the case of each
subsequent, successive Interest Period applicable to a
Eurodollar Advance, the last day of the next preceding
Interest Period with respect to such Advance, and
ending on the numerically corresponding day in the
first, second, third or sixth calendar month
thereafter, as the Borrower may select as provided in
Section 2.5 or 2.6 hereof, except that each such
Interest Period which commences on the last Business
Day of a calendar month (or on any day for which there
is no numerically corresponding day in the appropriate
subsequent calendar month) shall end on the last
Business Day of the first, second, third or sixth
calendar month thereafter, as the case may be.
Notwithstanding the foregoing: (a) each Interest Period
which would otherwise end on a day which is not a
Business Day shall end on the next succeeding Business
Day or, if such succeeding Business Day falls in the
next succeeding calendar month, on the next preceding
Business Day; (b) any Interest Period for Eurodollar
Advances under the Revolving Credit Loan which would
otherwise extend beyond the Revolving Credit Loan
Termination Date shall end on the Revolving Credit Loan
Termination Date and the provisions of Section 5.5
shall apply; (c) no more than five (5) Interest Periods
shall be in effect at the same time; and (d) no
Interest Period for any Eurodollar Advances shall have
a duration of less than one (1) month, and, if the
Interest Period for any Eurodollar Advances would
otherwise be a shorter period, such Advances shall not
be available hereunder.
<PAGE>
"Inventory" means at any particular time,
inventory (as defined in the UCC) of the Borrower or
any of the Subsidiaries including, without limitation,
all materials and goods held by or for the benefit of
Borrower or any of the Subsidiaries for sale, lease or
consumption.
"Inventory Turnover" means, for each Fiscal
Quarter, the quotient determined by dividing the cost
of Inventory items sold during the most recent 12 (12)
month period by the Average Inventory (hereinafter
defined) for such period. As used herein, "Average
Inventory" means Inventory calculated by dividing the
total of all ending Inventory for each month for the
most recent thirteen (13) months by thirteen (13).
"Issuing Bank" means, with respect to any Letter
of Credit, Wells Fargo Bank (Texas), National
Association.
"LC Participation" means, with respect to any
Lender, at any time, the amount of participating
interest held by such Lender (or in the case of the
Issuing Bank, other interests) in respect of a Letter
of Credit.
"Lender" has the meaning set forth in the
introductory paragraph of this Agreement.
"Letter of Credit" means, any standby letter of
credit issued by the Issuing Bank for the account of
the Borrower pursuant to Article III.
"Letter of Credit Disbursement" means a
disbursement by the Issuing Bank to the beneficiary of
a Letter of Credit in connection with a drawing
thereunder.
"Letter of Credit Liabilities" means, at any time,
the sum of (i) the aggregate face amounts of all
outstanding Letters of Credits and (ii) the aggregate
amount of all Letter of Credit Disbursements for which
the Issuing Bank has not been reimbursed by the
Borrower.
"Letter of Credit Request Form" means, a
certificate, in substantially the form of Exhibit "B-2"
hereto, properly completed and signed by the Borrower
requesting issuance of a Letter of Credit.
"Leverage Ratio" means, as of any Fiscal Quarter
end the ratio of Funded Debt to EBITDA, in each case
for such Fiscal Quarter and the prior three (3) Fiscal
Quarters.
"Lien" means any lien, mortgage, security
interest, tax lien, financing statement, pledge,
charge, hypothecation, assignment, preference,
priority, or other encumbrance of any kind or nature
whatsoever (including, without limitation, any
conditional sale or title retention agreement), whether
arising by contract, operation of law, or otherwise.
"Loan Documents" means this Agreement, the Notes,
the Guaranties, the Contribution and Indemnification
Agreement, and all other promissory notes, guaranties,
and other instruments, documents, and agreements now or
hereafter executed and delivered pursuant to or in
connection with this Agreement, as such instruments,
documents, and agreements may be amended, modified,
renewed, extended, or supplemented from time to time.
"Material Adverse Effect" means a material adverse
effect on (a) the business, condition (financial or
otherwise), operations, prospects, or properties of the
Borrower and the Subsidiaries taken as a whole, or (b)
the validity of enforceability of this Agreement or any
of the other Loan Documents or the rights or remedies
of the Agent or the Lenders hereunder or thereunder.
In determining whether any individual event could
reasonably be expected to result in a Material Adverse
Effect, notwithstanding that such event does not itself
have such effect, a Material Adverse Effect shall be
deemed to have occurred if the cumulative effect of
such event and all other then existing events could
reasonably be expected to result in a Material Adverse
Effect.
"Maximum Rate" means, at any time and with respect
to any Lender, the maximum rate of interest under
applicable law that such Lender may charge the
Borrower. The Maximum Rate shall be calculated in a
manner that takes into account any and all fees,
payments, and other charges in respect of the Loan
Documents that constitute interest under applicable
law. Each change in any interest rate provided for
herein based upon the Maximum Rate resulting from a
change in the Maximum Rate shall take effect without
notice to the Borrower at the time of such change in
the Maximum Rate. For purposes of
<PAGE>
determining the Maximum Rate under Texas law, the
applicable rate ceiling shall be the applicable weekly
ceiling described in, and computed in accordance with,
Article 5069-1D.001 et seq., as amended or codified,
Vernon's Texas Civil Statutes.
"Monthly Payment Date" means the third day of each
calendar month of each year, the first of which shall
be January 3, 1999.
"Multiemployer Plan" means a multiemployer plan
defined as such in Section 3(37) of ERISA to which
contributions have been made by the Borrower or any
ERISA Affiliate and which is covered by Title IV of
ERISA.
"Net Proceeds" from any issuance, sale or
disposition of any shares of equity securities (or any
securities convertible or exchangeable for any such
shares, or any rights, warrants, or options to
subscribe for or purchase any such shares) means the
amount equal to (a) the aggregate gross proceeds of
such issuance, sale or other disposition, less (b) the
following: (i) placement agent fees, (ii) underwriting
discounts and commissions, (iii) bank and other lender
fees, and (iv) reasonable legal fees and other
reasonable expenses payable by the issuer in connection
with such issuance, sale or other disposition. "Net
Proceeds" from any disposition of assets means the
amount equal to (a) the aggregate gross proceeds of
such disposition, less (b) the following: (i) sales or
other similar taxes paid or payable by the seller in
connection with such disposition, (ii) reasonable
broker fees in connection with such disposition,
(iii) reasonable legal fees and other reasonable
expenses payable by the seller in connection with such
disposition and (iv) the amount of any Debt secured by
the assets that must be repaid in connection with such
disposition so long as it is a Debt permitted under
this Agreement.
"Notes" means, collectively, the Revolving Credit
Notes and the Swing Note.
"Obligated Party" means each Guarantor and any
other Person who is or becomes party to any written
agreement that guarantees or secures payment and
performance of the Obligations or any part thereof.
"Obligations" means all obligations, indebtedness,
and liabilities of the Borrower to the Agent, the
Issuing Bank, and the Lenders, or any of them, arising
pursuant to any of the Loan Documents, now existing or
hereafter arising, whether direct, indirect, related,
unrelated, fixed, contingent, liquidated, unliquidated,
joint, several, or joint and several, including,
without limitation, the obligations, indebtedness, and
liabilities of the Borrower under this Agreement, the
Notes and the other Loan Documents (including without
limitation, all of the Borrower's contingent
reimbursement obligations in respect of Letters of
Credit), and all interest accruing thereon and all
attorneys' fees and other expenses incurred in the
enforcement or collection thereof.
"PBGC" means the Pension Benefit Guaranty
Corporation or any entity succeeding to all or any of
its functions under ERISA.
"Permitted Debt" means (a) the Obligations, (b)
Existing Debt and (c) Debt permitted by Section 9.1 of
this Agreement.
"Permitted Liens" means Liens permitted by Section
9.2 of this Agreement.
"Person" means any individual, corporation,
business trust, association, company, partnership,
joint venture, Governmental Authority, or other entity.
"Plan" means any employee benefit plan (within the
meaning of Section 3(3) of ERISA) established or
maintained by the Borrower or any ERISA Affiliate,
which plan is subject to the provisions of ERISA.
"Prime Rate" means, at any time, the rate of
interest per annum then most recently announced by
Wells Fargo Bank, National Association at its principal
office in San Francisco as its prime rate, which rate
<PAGE>
may not be the lowest rate of interest charged by Wells
Fargo Bank, National Association to its borrowers.
Each change in any interest rate provided for herein
based upon the Prime Rate resulting from a change in
the Prime Rate shall take effect on the date the change
is announced by Wells Fargo Bank, National Association
without notice to the Borrower at the time of such
change in the Prime Rate.
"Principal Office" means the principal office of
the Agent in Austin, Texas, presently located at 100
Congress Avenue, Suite 150, Austin, Texas 78701.
"Prohibited Transaction" means any transaction set
forth in Section 406 or 407 of ERISA or Section
4975(c)(1) of the Code for which there does not exist a
statutory or administrative exemption.
"Quarterly Payment Date" means the third day of
each January, April, July and October of each year, the
first of which shall be January 3, 1999.
"Reference Bank" means Wells Fargo Bank (Texas),
National Association or any successor thereto.
"Regulation D" means Regulation D of the Board of
Governors of the Federal Reserve System as the same may
be amended or supplemented from time to time.
"Regulatory Change" means, with respect to any
Lender, any change after the date of this Agreement in
United States federal, state, or foreign laws or
regulations (including Regulation D) or the adoption or
making after such date of any interpretations,
directives, or requests applying to a class of lenders
including such Lender of or under any United States
federal or state, or any foreign, laws or regulations
(whether or not having the force of law) by any court
or governmental or monetary authority charged with the
interpretation or administration thereof.
"Release" means, as to any Person, any release,
spill, emission, leaking, pumping, injection, deposit,
disposal, disbursement, leaching, or migration of
Hazardous Materials into the indoor or outdoor
environment or into or out of property owned by such
Person, including, without limitation, the movement of
Hazardous Materials through or in the air, soil,
surface water, ground water, or property in violation
of Environmental Laws.
"Remedial Action" means all actions required to
(a) clean up, remove, treat, or otherwise address
Hazardous Materials in the indoor or outdoor
environment, (b) prevent the Release or threat of
Release or minimize the further Release of Hazardous
Materials so that they do not migrate or endanger or
threaten to endanger public health or welfare or the
indoor or outdoor environment, or (c) perform
pre-remedial studies and investigations and
post-remedial monitoring and care.
"Reportable Event" means any of the events set
forth in Section 4043 of ERISA.
"Required Lenders" means at any time while no
Advances or Letter of Credit Liabilities are
outstanding, two or more Lenders having at least
sixty-six and two-thirds percent (66-2/3%) of the
aggregate amount of the Commitments and, at any time
while Advances or Letter of Credit Liabilities are
outstanding, two or more Lenders holding at least
sixty-six and two-thirds percent (66-2/3%) of the
outstanding aggregate principal amount of the Revolving
Credit Loan Advances, LC Participations, and SL
Participations.
"Reserve Requirement" means, for any Eurodollar
Advance for any Interest Period therefor, the average
maximum rate at which reserves (including any marginal,
supplemental or emergency reserves) are required to be
maintained during such Interest Period under
Regulation D by member banks of the Federal Reserve
System in New York City with deposits exceeding one
billion Dollars against "Eurocurrency Liabilities" as
such term is used in Regulation D. Without limiting
the effect of the foregoing, the Reserve Requirement
shall reflect any other reserves required to be
maintained by such member banks by reason of any
Regulatory Change against (i) any category of
liabilities which includes
<PAGE>
deposits by reference to which the Adjusted Eurodollar
Rate is to be determined, or (ii) any category of
extensions of credit or other assets which include
Eurodollar Advances.
"Revolving Credit Loan" means the revolving credit
loan made or to be made hereunder to Borrower pursuant
to Section 2.1.
"Revolving Credit Loan Advance" means an Advance
under the Revolving Credit Loan.
"Revolving Credit Loan Termination Date" means
8:00 A.M. San Francisco, California time on December 3,
2001, or such earlier date and time on which the
Commitments terminate as provided in this Agreement.
"Revolving Credit Notes" means the promissory
notes of the Borrower payable to the order of the
Lenders in the aggregate principal amount of the
Revolving Credit Loan, in substantially the form of
Exhibit "A-1" hereto, and all extensions, renewals, and
modifications thereof.
"RICO" means the Racketeer Influenced and Corrupt
Organization Act of 1970, as amended from time to time.
"SL Participation" means, with respect to any
Lender, at any time, the amount of participating
interest held by such Lender (or in the case of the
Swing Lender, other interests) in respect of the Swing
Loan.
"Subsidiary"means any corporation (or other
entity) of which at least a majority of the outstanding
shares of stock (or other ownership interests) having
by the terms thereof ordinary voting power to elect a
majority of the board of directors (or similar
governing body) of such corporation (or other entity)
(irrespective of whether or not at the time stock (or
other ownership interests) of any other class or
classes of such corporation (or other entity) shall
have or might have voting power by reason of the
happening of any contingency) is at the time directly
or indirectly owned or controlled by the Borrower or
one or more of the Subsidiaries or by the Borrower and
one or more of the Subsidiaries.
"Swing Commitment" means an amount (subject to
reduction or cancellation as herein provided) equal to
Three Million Dollars ($3,000,000).
"Swing Lender" means Wells Fargo Bank (Texas),
National Association.
"Swing Loan" means the swing loan made or to be
made hereunder to Borrower pursuant to Section 2.7.
"Swing Loan Advance" means an Advance under the
Swing Loan.
"Swing Note" means the promissory note of the
Borrower payable to the order of the Swing Lender in
the principal amount of the Swing Commitment in
substantially the form of Exhibit "A-2" hereto, and all
extensions, renewals, and modifications thereof.
"Type" means any type of Advance (i.e., Base Rate
Advance or Eurodollar Advance).
"UCC" means the Uniform Commercial Code as in
effect in the State of Texas.
Section 6.2. Other Definitional Provisions. All
definitions contained in this Agreement are equally
applicable to the singular and plural forms of the terms
defined. The words "hereof", "herein", and "hereunder" and
words of similar import referring to this Agreement refer to
this Agreement as a whole and not to any particular
provision of this Agreement. Unless otherwise specified,
all Article and Section references pertain to this
Agreement. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP. Terms
used herein that are defined in the UCC, unless otherwise
defined herein, shall have the meanings specified in the
UCC.
<PAGE>
ARTICLE 7.
Revolving Credit Loan and Swing Loan
Section 7.1. Commitments. Subject to the terms and
conditions of this Agreement, each Lender severally agrees
to make one or more Revolving Credit Loan Advances to the
Borrower from time to time from the date hereof to but
excluding the Revolving Credit Loan Termination Date in an
aggregate principal amount at any time outstanding up to but
not exceeding the amount of such Lender's Commitment as then
in effect, provided that the aggregate amount of all
Revolving Credit Loan Advances at any time outstanding shall
not exceed (A) the Commitments, minus (B) the sum of the
outstanding Swing Loan Advances and the Letter of Credit
Liabilities. Subject to the foregoing limitations, and the
other terms and provisions of this Agreement, the Borrower
may borrow, repay, and reborrow hereunder the amount of the
Commitments by means of Base Rate Advances and Eurodollar
Advances and, until the Revolving Credit Loan Termination
Date, the Borrower may Convert Revolving Credit Loan
Advances of one Type into Revolving Credit Loan Advances of
another Type. Revolving Credit Loan Advances of each Type
made by each Lender shall be made and maintained at such
Lender's Applicable Lending Office for Advances of such
Type.
Section 7.2. Revolving Credit Notes. The obligation
of the Borrower to repay each Lender for Revolving Credit
Loan Advances made by such Lender and interest thereon shall
be evidenced by a Revolving Credit Note executed by the
Borrower, payable to the order of such Lender, in the
principal amount of such Lender's Commitment dated the date
hereof.
Section 7.3. Repayment of Revolving Credit Loan. The
Borrower shall repay the outstanding principal amount of the
Revolving Credit Loan on the Revolving Credit Loan
Termination Date.
Section 7.4. Interest. The unpaid principal amount
of the Revolving Credit Loan shall bear interest at a
varying rate per annum equal from day to day to the lesser
of (a) the Maximum Rate, or (b) the Applicable Rate. If at
any time the Applicable Rate for any Advance shall exceed
the Maximum Rate, thereby causing the interest accruing on
such Advance to be limited to the Maximum Rate, then any
subsequent reduction in the Applicable Rate for such Advance
shall not reduce the rate of interest on such Advance below
the Maximum Rate until the aggregate amount of interest
accrued on such Advance equals the aggregate amount of
interest which would have accrued on such Advance if the
Applicable Rate had at all times been in effect. Accrued
and unpaid interest on the Revolving Credit Loan Advances
shall be due and payable as follows:
7.4.0.0.0.0.1. in the case of all Base Rate
Advances, on each Monthly Payment Date;
7.4.0.0.0.0.2. in the case of all Eurodollar
Advances, on the last day of the Interest Period with
respect thereto and, in the case of an Interest Period
with a duration greater than three months, at
three-month intervals after the first day of such
Interest Period;
7.4.0.0.0.0.3. upon the payment or prepayment of
any Eurodollar Advance or the Conversion of any
Eurodollar Advance to an Advance of another Type (but
only on the principal amount so paid, prepaid, or
Converted); and
7.4.0.0.0.0.4. on the Revolving Credit Loan
Termination Date.
Notwithstanding the foregoing, upon the occurrence and
during the continuance of an Event of Default, the
outstanding principal amounts of all Advances and (to the
fullest extent permitted by law) any other amounts payable
by the Borrower under any Loan Document shall bear interest
at the Default Rate at the Required Lenders' option
beginning upon the occurrence of such Event of Default or
such later date as selected by the Required Lenders.
Interest payable at the Default Rate shall be payable from
time to time on demand.
Section 7.5. Revolving Credit Loan Borrowing
Procedure. The Borrower shall give the Agent notice by
means of an Advance Request Form of each requested Revolving
Credit Loan Advance at least one (1) Business Day before the
requested date of each Base Rate Advance, and at least three
(3) Business Days before the requested
<PAGE>
date of each Eurodollar Advance, specifying: (a) the
requested date of such Revolving Credit Loan Advance (which
shall be a Business Day), (b) the amount of such Revolving
Credit Loan Advance, (c) the Type of Revolving Credit Loan
Advance, and (d) in the case of a Eurodollar Advance, the
duration of the Interest Period for such Revolving Credit
Loan Advance. Each Eurodollar Advance under the Revolving
Credit Loan shall be in a minimum principal amount of One
Million Dollars ($1,000,000) or an integral multiple
thereof. Each Base Rate Advance under the Revolving Credit
Loan shall be in a minimum principal amount of Five Hundred
Thousand Dollars ($500,000) or in greater increments of One
Hundred Thousand Dollars ($100,000). The Agent shall notify
each Lender of the contents of each such notice promptly.
Not later than 11:00 A.M. San Francisco, California time on
the date specified for each Revolving Credit Loan Advance
hereunder, each Lender will make available to the Agent at
the Principal Office in immediately available funds, for the
account of the Borrower, its pro rata share of each
Revolving Credit Loan Advance. After the Agent's receipt of
such funds and subject to the other terms and conditions of
this Agreement, the Agent will make each Revolving Credit
Loan Advance available to the Borrower by depositing the
same, in immediately available funds, in an account of the
Borrower (designated by the Borrower) maintained with the
Agent at the Principal Office. All notices by the Borrower
under this Section shall be irrevocable and shall be given
not later than 9:00 A.M. San Francisco, California time on
the day which is not less than the number of Business Days
specified above for such notice.
Section 7.6. Conversions and Continuations. The
Borrower shall have the right from time to time to Convert
all or part of a Revolving Credit Loan Advance of one Type
into an Advance of another Type or to Continue Eurodollar
Advances as Eurodollar Advances by giving the Agent written
notice at least one (1) Business Day before Conversion into
a Base Rate Advance, and at least three (3) Business Days
before Conversion into or Continuation of a Eurodollar
Advance, specifying: (a) the Conversion or Continuation
date, (b) the amount of the Advance to be Converted or
Continued, (c) in the case of Conversions, the Type of
Advance to be Converted into, and (d) in the case of a
Continuation of or Conversion into a Eurodollar Advance, the
duration of the Interest Period applicable thereto; provided
that (i) Eurodollar Advances may only be Converted on the
last day of the Interest Period, (ii) except for Conversions
into Base Rate Advances, no Conversions shall be made while
a Default has occurred and is continuing, and (iii) no more
than five (5) Interest Periods shall be in effect at the
same time. The Agent shall notify each Lender of the
contents of each such notice promptly and in any event not
later than one (1) Business Day after receipt thereof. All
notices by the Borrower under this Section shall be
irrevocable and shall be given not later than 9:00 A.M. San
Francisco, California time on the day which is not less than
the number of Business Days specified above for such notice.
If the Borrower shall fail to give the Agent the notice as
specified above for Continuation or Conversion of a
Eurodollar Advance prior to the end of the Interest Period
with respect thereto, such Eurodollar Advance shall be
Converted automatically into a Base Rate Advance on the last
day of the then current Interest Period for such Eurodollar
Advance.
Section 7.7. Swing Loans.
7.7.0.0.1. Making Swing Loans; Interest Rate.
For the convenience of the parties and as an integral
part of the transactions contemplated by the Loan
Documents, the Swing Lender, solely for its own
account, agrees, on the terms and conditions
hereinafter set forth, to make Swing Loans to Borrower
(which Borrower may repay and reborrow from time to
time in accordance with the terms and provisions
hereof) from time to time on any Business Day during
the period from the date hereof to but excluding the
Revolving Credit Loan Termination Date in an aggregate
principal amount at any one time outstanding which
shall not exceed the Swing Commitment; provided that,
the Swing Lender shall not be obligated to make any
Swing Loan (i) which when added to the then outstanding
Revolving Credit Loan Advances plus the outstanding
Letter of Credit Liabilities plus the outstanding Swing
Loan Advances would exceed the Commitments, and (ii) at
any time after any Lender has refused to purchase a
participation in any Swing Loan as provided in Section
2.7(d). All Swing Loans shall bear interest at the
lesser of (A) the Maximum Rate and (B) the Base Rate
(subject to Section 2.4) and shall be included within
the Obligations hereunder. Each Swing Loan shall be
subject to all the terms and conditions applicable to
the Revolving Credit Loan; provided that, (i) there
shall be no minimum Swing Loan Advance amount or
repayment for a Swing Loan, and (ii) each Swing Loan
shall be available and may be prepaid on same day
telephonic notice to be followed promptly with an
Advance Request Form (except for telephonic notices of
prepayment) from Borrower to the Swing Lender, so long
as such notice is received by the Swing Lender prior to
1:00 P.M. (San Francisco, California time).
<PAGE>
7.7.0.0.2. Swing Note. The Swing Loans made
by the Swing Lender shall be evidenced by a single
promissory note of the Borrower in substantially the
form of Exhibit "B-2" hereto, payable to the order of
the Swing Lender in a principal amount equal to the
Swing Commitment as originally in effect and otherwise
duly completed.
7.7.0.0.3. Repayment of Swing Loans. Upon the
earlier to occur of (i) the date fourteen (14) Business
Days after each Swing Loan Advance, and (ii) demand by
the Swing Lender, Borrower shall promptly borrow
Revolving Credit Loans from the Lenders, pursuant to
Section 2.1 hereof and apply the proceeds of such
Revolving Credit Loans to the repayment of such Swing
Loan Advance then outstanding.
7.7.0.0.4. Participation of Lenders. In the
event Borrower shall fail to repay any Swing Loan, each
Lender shall irrevocably and unconditionally purchase
from the Swing Lender an SL Participation in such Swing
Loan in lawful money of the United States and in the
same day funds, in an amount equal to such Lender's pro
rata share (based on the Commitments) of the principal
amount of such Swing Loans then outstanding; provided
that, no Lender shall be obligated to purchase a
participation in the Swing Loans which would cause the
outstanding Advances owed to such Lender plus such
Lender's pro rata part of outstanding Letter of Credit
Liabilities to exceed such Lender's Commitment. If
such amount is not in fact made available to the Swing
Lender by any Lender, the Swing Lender shall be
entitled to recover such amount on demand from such
Lender together with accrued interest thereon, for each
day from the date of demand therefor, if made prior to
11:00 A.M. (San Francisco, California time) on any
Business Day, or, if made at any other time, from the
next Business Day following the date of such demand,
until the date such amount is paid to the Swing Lender
by such Lender at the Federal Funds Rate. If such
Lender does not pay such amount forthwith upon the
Swing Lender's demand therefor, and until such time as
such Lender makes the required payment, the Swing
Lender shall be deemed to continue to have outstanding
a Swing Loan in the amount of such unpaid participation
obligation for all purposes under the Loan Documents
other than those provisions requiring the other Lenders
to purchase a participation therein. Thereafter, each
payment of all or any part of the Obligations evidenced
by the Swing Note shall be paid to the Swing Lender for
the ratable benefit of the Swing Lender and the Lenders
who are participants in the Swing Loan; provided that,
with respect to any participation hereunder, all
interest accruing on the Swing Loan (or any portion
thereof) to which such participation relates prior to
the date of purchase of any participation hereunder
shall be payable solely to the Swing Lender for its own
account.
Section 7.8. Use of Proceeds. The proceeds of
Advances shall be used by the Borrower for working capital
in the ordinary course of business, the opening of new
pawnshop stores, the acquisition from other Persons of
existing pawnshop stores and other general corporate
purposes.
Section 7.9. Fees. (a) On the date hereof and on or
prior to each December 6 during the term hereof, the
Borrower agrees to pay to the Agent for the account of the
Agent an annual agent fee in an amount to be agreed to by
the Borrower and the Agent pursuant to a side letter
agreement, (b) The Borrower agrees to pay to the Agent for
the account of the Lenders a Commitment Fee (herein so
called) on the average daily unused amount of such Lender's
Commitment for the period from and including the date of
this Agreement to and including the Revolving Credit Loan
Termination Date, at the rate specified in Section 2.10
below, based on a 360 day year and the actual number of days
elapsed. The accrued Commitment Fee shall be payable in
arrears on each Quarterly Payment Date and on the Revolving
Credit Loan Termination Date. For the purpose of
calculating the Commitment Fee hereunder, the Commitments
shall be deemed utilized by the amount of all Advances under
the Revolving Credit Loan and all Letter of Credit
Liabilities and without giving effect to any Advances under
the Swing Loan.
Section 7.10. Determination of Eurodollar Margin,
Commitment Fee and Base Rate Margin. The Eurodollar Margin,
the Commitment Fee and the Base Rate Margin shall be defined
and determined as follows:
"Commitment Fee" shall mean (i) during the period
from the date hereof and ending on but not including
the first Adjustment Date (as defined below), one
quarter of one percent (.25%) per annum; and
<PAGE>
(ii) during each period, from and including one
Adjustment Date to but excluding the next Adjustment
Date (herein a "Calculation Period"), the percent per
annum set forth in the table below in this Section 2.10
under the heading "Commitment Fee" opposite the
Leverage Ratio calculated for the completed four (4)
Fiscal Quarters which immediately preceded the
beginning of the applicable Calculation Period.
"Base Rate Margin" shall mean (i) during the
period commencing on the date hereof and ending on but
not including the first Adjustment Date, zero percent
(0%) per annum, and (ii) during each Calculation
Period, the percent per annum set forth in the table
below in this Section 2.10 under the heading "Base Rate
Margin" opposite the Leverage Ratio calculated for the
completed four (4) Fiscal Quarters which immediately
preceded the beginning of the applicable Calculation
Period.
"Eurodollar Margin" shall mean (i) during the
period commencing on the date hereof and ending on but
not including the first Adjustment Date, one and one
eighth percent (1.125%) per annum, and (ii) during each
Calculation Period, the percent per annum set forth in
the table below in this Section 2.10 under the heading
"Eurodollar Margin" opposite the Leverage Ratio
calculated for the completed four (4) Fiscal Quarters
which immediately preceded the beginning of the
applicable Calculation Period.
Commitment Eurodolla Base
Leverage Fee r Margin Rate
Ratio Margin
Greater
than or 0.25% 1.375% 0%
equal to
3.0 to 1.0
Greater
than or
equal to 0.25% 1.125% 0%
2.0 to 1.0
but less
than 3.0
to 1.0
Less than 0.25% 0.875% 0%
2.0 to 1.0
Upon delivery of the Quarterly Certificate pursuant to
Section 8.1(c) in connection with the financial statements
required to be delivered pursuant to Section 8.1(b) at the
end of each Fiscal Quarter commencing with such Quarterly
Certificate delivered at the end of the Fiscal Quarter
ending on December 31, 1998, the Commitment Fee, the
Eurodollar Margin and the Base Rate Margin shall
automatically be adjusted as set forth in the table above,
such automatic adjustment to take effect as of the first
Business Day after the receipt by the Agent of the related
Quarterly Certificate (each such Business Day when the
Commitment Fee, Eurodollar Margin or Base Rate Margin is
adjusted pursuant to this sentence or below, herein an
"Adjustment Date"). If the Borrower fails to deliver such
Quarterly Certificate which so sets forth the Leverage Ratio
within the period of time required by Section 8.1(c), the
Commitment Fee, the Eurodollar Margin and the Base Rate
Margin shall automatically be adjusted to highest applicable
percentage set forth in the grid above, such automatic
adjustment to take effect as of the first Business Day after
the last day on which the Borrower was required to deliver
the applicable Quarterly Certificate in accordance with
Section 8.1(c) and to remain in effect until subsequently
adjusted in accordance herewith upon the delivery of a
Quarterly Certificate.
Section 7.11. Reduction or Termination of Commitments.
<PAGE>
7.11.0.0.1. Optional. The Borrower shall have
the right to terminate in whole or reduce in part the
unused portion of the Commitments (including the Swing
Commitment) upon at least five (5) Business Days prior
notice (which notice shall be irrevocable) to the Agent
and each Lender specifying the effective date thereof,
whether a termination or reduction is being made, and
the amount of any partial reduction, provided that each
partial reduction shall be in the amount of Five
Million Dollars ($5,000,000) (or in the case of the
Swing Commitment, One Million Dollars [$1,000,000]) or
an integral multiple thereof and the Commitments (other
than the Swing Commitment) shall not be reduced below
the outstanding Letter of Credit Liabilities, and the
Borrower shall simultaneously prepay the amount by
which the unpaid principal amount of the Advances and
outstanding Letter of Credit Liabilities exceeds the
Commitments (after giving effect to such notice) plus
accrued and unpaid interest on the principal amount so
prepaid. The Commitments may not be reinstated after
they have been terminated or reduced. In addition the
Swing Commitment may never be less than the Commitments
(exclusive of the Swing Commitment).
7.11.0.0.2. Mandatory. On the date of each
sale of assets (other than the sale of Inventory in the
ordinary course of business or the sale and leaseback
of certain real property owned by the Borrower) by the
Borrower or any Subsidiary resulting in Net Proceeds
which, when aggregated with the Net Proceeds from all
other such sale of assets in the same Fiscal Year,
exceed Three Million Dollars ($3,000,000) (such excess
being referred to herein as the "Excess Net Proceeds"),
(i) the Commitments shall automatically reduce by the
amount equal to 100% of the Excess Net Proceeds from
the sale of assets occurring on such date, and (ii) the
Borrower shall simultaneously prepay the amount by
which the unpaid principal amount of the Advances plus
the Letter of Credit Liabilities exceeds the
Commitments (after giving effect to such reduction)
plus accrued and unpaid interest on the principal
amount so prepaid.
ARTICLE 8.
Letters of Credit
Section 8.1. Letters of Credit.
8.1.0.0.1. Subject to the terms and conditions
of this Agreement, the Issuing
<PAGE>
Bank agrees to issue one or more standby Letters of
Credit for the account of the Borrower from time to
time from the date hereof to but excluding the
Revolving Credit Loan Termination Date; provided,
however, that the outstanding Letter of Credit
Liabilities shall not at any time exceed the lesser of
(i) Five Million Dollars ($5,000,000.00), and (ii) an
amount equal to (A) the Commitments, minus (B) the sum
of the outstanding Advances. Each Letter of Credit
shall have an expiration date not beyond the earlier of
(a) one year from the date of issuance of such Letter
of Credit or (b) the Revolving Credit Loan Termination
Date, shall be payable in Dollars, must support a
transaction that is entered into in the ordinary course
of the Borrower's business, must be satisfactory in
form and substance to the Issuing Bank, and shall be
issued pursuant to such documents and instruments
(including, without limitation, the Issuing Bank's
standard application for issuance of letters of credit
as then in effect) as the Issuing Bank may require. No
Letter of Credit shall require any payment by the
Issuing Bank to the beneficiary thereunder pursuant to
a drawing prior to the third Business Day following
presentment of a draft and any related documents to the
Issuing Bank.
8.1.0.0.2. By the issuance of each Letter of
Credit and without any further action on the part of
the Issuing Bank or any of the Lenders in respect
thereof, the Issuing Bank hereby grants to each Lender
and each Lender hereby agrees to acquire from the
Issuing Bank a participation in each Letter of Credit
and the related Letter of Credit Liabilities, effective
upon the issuance thereof without recourse or warranty,
equal to such Lender's pro rata share (based on the
Commitments) of such Letter of Credit and Letter of
Credit Liabilities. In furtherance of the foregoing,
each Lender hereby absolutely and unconditionally
agrees to pay to the Issuing Bank, as and when required
by Section 3.4, such Lender's pro rata share of each
Letter of Credit Disbursement. Each Lender
acknowledges and agrees that its obligation to acquire
participations pursuant to this Section 3.1(b) in
respect of each Letter of Credit is absolute and
unconditional and shall not be affected by any
circumstance whatsoever, including without limitation
the occurrence and continuance of any Default, and that
each such payment shall be made without any offset,
abatement, withholding, or reduction whatsoever. This
agreement to grant and acquire participations is an
agreement between the Issuing Bank and the Lenders, and
neither Borrower nor any beneficiary of a Letter of
Credit shall be entitled to rely thereon. Borrower
agrees that each Lender purchasing a participation from
the Issuing Bank pursuant to this Section 3.1(b) may
exercise all its rights to payment against Borrower
including the right of setoff, with respect to such
participation as fully as if such Lender were the
direct creditor of Borrower in the amount of such
participation.
8.1.0.0.3. The Issuing Bank agrees with each
Lender that it shall transfer to such Lender, without
any offset, abatement, withholding, or reduction
whatsoever, such Lender's proportionate share of any
payment of a reimbursement obligation of Borrower with
respect to a Letter of Credit Disbursement, including
interest payments made to the Issuing Bank on such
Letter of Credit Disbursement, based on the proportion
that the payment made by such Lender to the Issuing
Bank in respect of the principal amount of such Letter
of Credit Disbursement bears to the outstanding
principal amount of such Letter of Credit Disbursement.
8.1.0.0.4. Schedule 1.1b contains a
description of all letters of credit which were issued
pursuant to the Existing Credit Agreement and which are
to remain outstanding under this Agreement. Each of
the Existing LCs shall constitute a Letter of Credit
for all purposes of this Agreement and shall, for
purposes of this Agreement, be deemed issued on the
date hereof.
Section 8.2. Procedure for Issuing Letters of Credit.
Each Letter of Credit shall be issued on at least three (3)
Business Days prior notice from Borrower to the Issuing Bank
by means of a Letter of Credit Request Form describing the
transaction proposed to be supported thereby and specifying
(a) the date on which such Letter of Credit is to be issued
(which shall be a Business Day) and the face amount thereof,
(b) the name and address of the beneficiary, (c) whether
such Letter of Credit shall permit a single drawing or
multiple drawings, (d) the conditions permitting the drawing
or drawings thereunder, (e) whether the draft thereunder
shall be a sight or time draft and, if the latter, the date
when the draft shall be payable, (f) the form of the draft
and any other documents required to be presented at the time
of any drawing (such notice to set forth the exact wording
of such documents or to attach copies thereof), and (g) the
expiration date of such Letter of Credit. Upon fulfillment
of the applicable conditions precedent in Article VI, the
Issuing Bank shall make the applicable Letter of Credit
available to Borrower or, if so requested by Borrower, to
the beneficiary of the Letter of Credit.
Section 8.3. Presentment and Reimbursement. (a)
Promptly upon receipt of any documents purporting to
represent a demand for payment under a Letter of Credit, the
Issuing Bank shall give notice to Borrower of the receipt
thereof, which notice may be telephonic. If the Issuing
Bank shall have determined that a demand for payment under a
Letter of Credit appears on its face to be in conformity
with the terms and conditions of such Letter of Credit, the
Issuing Bank shall give notice to Borrower, which notice may
be telephonic, of the receipt and amount of such drawing and
the date on which payment thereon will be made. If Borrower
shall not have discharged in full by 8:00 A.M., San
Francisco,
<PAGE>
California time on the date of such payment, its obligation
to reimburse the Issuing Bank in the amount of such drawing
under such Letter of Credit, then the amount of such drawing
for which the Issuing Bank shall not have been reimbursed by
Borrower shall be paid by Borrower to the Issuing Bank or,
to the extent the Issuing Bank shall have received payments
with respect to such drawing from the Lenders, to the
Issuing Bank for the account of the Lenders, within three
(3) Business Days after the date of such drawing (but in any
event before the Revolving Credit Loan Termination Date),
together with interest on such amount at the Default Rate
from the date of payment by the Issuing Bank to the
beneficiary under the Letter of Credit (each such payment
made after 8:00 A.M., San Francisco, California time on such
due date to be deemed to be made on the next succeeding
Business Day). The obligations of Borrower under this
Section 3.3 shall be unconditional, absolute, and
irrevocable in all respects.
Section 8.4. Payment. If the Issuing Bank shall pay
any draft presented under a Letter of Credit issued by it
and if the Borrower shall not have discharged in full its
reimbursement obligation by 8:00 A.M., San Francisco,
California time on the date of such Letter of Credit
Disbursement, then the Issuing Bank shall as promptly as
practicable give telephonic (which shall be promptly
confirmed in writing) or facsimile notice to each Lender of
the date of such payment and the amount of such payment and
each Lender shall pay to the Issuing Bank, in immediately
available funds, not later than 1:00 P.M., San Francisco,
California time on the date of such payment (or, if Issuing
Bank shall notify the Lenders of such payment after 9:00
A.M., San Francisco, California time, then not later than
10:00 A.M., San Francisco, California time on the next
succeeding Business Day), an amount equal to such Lender's
pro rata share of such drawing; provided that, if any Lender
shall for any reason fail to pay the Issuing Bank its pro
rata share of the drawing on the date of such payment, the
Issuing Bank shall itself fund such Lender's pro rata share
while retaining the right to proceed against such Lender for
reimbursement therefor. In the event that the Issuing Bank
shall fund a Lender's pro rata share of a drawing, the
amount so funded shall bear interest at a rate per annum
equal to the Federal Funds Rate and shall be payable by such
Lender when it reimburses the Issuing Bank for funding its
pro rata part (with interest to accrue from and including
the date of such funding to and excluding the date of
reimbursement). In the event that a Lender, after notice,
pays its pro rata share of a drawing hereunder and such
payment is not required to fund a Letter of Credit
Disbursement, the Issuing Bank shall return such payment to
the Lender with interest calculated at a rate per annum
equal to the Federal Funds Rate (with interest to accrue
from and including the date of such funding to and excluding
the date of return). The obligation of each Lender to pay
to the Issuing Bank such Lender's pro rata part of any
drawing under a Letter of Credit shall be absolute and
unconditional under any and all circumstances (including
without limitation the passage of the Revolving Credit Loan
Termination Date), and such obligations shall be several and
not joint.
Section 8.5. Letter of Credit Fee. Borrower shall
pay to the Agent, for the account of the Lenders, a
nonrefundable letter of credit fee payable on the date each
Letter of Credit is issued and on each quarterly anniversary
date thereof in an amount equal to the applicable Eurodollar
Margin multiplied by the undrawn amount of such Letter of
Credit, based on a 360 day year and the actual number of
days in the stated term of such Letter of Credit. In
addition, the Borrower shall pay to the Issuing Bank, solely
for its own account as issuer of Letters of Credit,
nonrefundable fronting, amendment, transfer, negotiation and
other fees as determined in accordance with the Issuing
Bank's current fee policy, a copy of which has been provided
to the Borrower.
Section 8.6. Obligations Absolute. The obligations
of Borrower under this Agreement and the other Loan
Documents (including without limitation the obligation of
Borrower to reimburse the Issuing Bank for draws under any
Letter of Credit) shall be absolute, unconditional, and
irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement and the other Loan
Documents under all circumstances whatsoever, including
without limitation the following circumstances:
8.6.0.0.1. Any lack of validity or
enforceability of any Letter of Credit or any other
Loan Document;
<PAGE>
8.6.0.0.2. Any amendment or waiver of or any
consent to departure from any Loan Document;
8.6.0.0.3. The existence of any claim,
set-off, counterclaim, defense or other rights which
Borrower, any Obligated Party, or any other Person may
have at any time against any beneficiary of any Letter
of Credit, the Issuing Bank, any Lender, the Agent, or
any other Person, whether in connection with this
Agreement or any other Loan Document or any unrelated
transaction;
8.6.0.0.4. Any statement, draft, or other
document presented under any Letter of Credit proving
to be forged, fraudulent, invalid, or insufficient in
any respect or any statement therein being untrue or
inaccurate in any respect whatsoever;
8.6.0.0.5. Payment by the Issuing Bank under
any Letter of Credit against presentation of a draft or
other document which does not comply with the terms of
such Letter of Credit; or
8.6.0.0.6. Any other circumstance or happening
whatsoever, whether or not similar to any of the
foregoing.
Section 8.7. Limitation of Liability. Borrower
assumes all risks of the acts or omissions of any
beneficiary of any Letter of Credit with respect to its use
of such Letter of Credit. Neither the Issuing Bank, the
Lenders, the Agent, nor any of their officers or directors
shall have any responsibility or liability to Borrower or
any other Person for: (a) the failure of any draft to bear
any reference or adequate reference to any Letter of Credit,
or the failure of any documents to accompany any draft at
negotiation, or the failure of any Person to surrender or to
take up any Letter of Credit or to send documents apart from
drafts as required by the terms of any Letter of Credit, or
the failure of any Person to note the amount of any
instrument on any Letter of Credit, each of which
requirements, if contained in any Letter of Credit itself,
it is agreed may be waived by the Issuing Bank, (b) errors,
omissions, interruptions, or delays in transmission or
delivery of any messages, (c) the validity, sufficiency, or
genuineness of any draft or other document, or any
endorsement(s) thereon, even if any such draft, document or
endorsement should in fact prove to be in any and all
respects invalid, insufficient, fraudulent, or forged or any
statement therein is untrue or inaccurate in any respect,
(d) the payment by the Issuing Bank to the beneficiary of
any Letter of Credit against presentation of any draft or
other document that does not comply with the terms of the
Letter of Credit, or (e) any other circumstance whatsoever
in making or failing to make any payment under a Letter of
Credit. Borrower shall have a claim against the Issuing
Bank, and the Issuing Bank shall be liable to Borrower, to
the extent of any direct, but not consequential, damages
suffered by Borrower which Borrower proves in a final
nonappealable judgment were caused by (i) the Issuing Bank's
willful misconduct or gross negligence in determining
whether documents presented under any Letter of Credit
complied with the terms thereof or (ii) the Issuing Bank's
willful failure to pay under any Letter of Credit after
presentation to it of documents strictly complying with the
terms and conditions of such Letter of Credit. The Issuing
Bank may accept documents that appear on their face to be in
order, without responsibility for further investigation,
regardless of any notice or information to the contrary.
<PAGE>
ARTICLE 9.
Payments
Section 9.1. Method of Payment. Except as provided
in Article III, all payments of principal, interest, and
other amounts to be made by the Borrower under this
Agreement and the other Loan Documents shall be made to the
Agent at the Principal Office for the account of each
Lender's Applicable Lending Office in Dollars and in
immediately available funds, without setoff, deduction, or
counterclaim, not later than 11:00 A.M., San Francisco,
California time on the date on which such payment shall
become due (each such payment made after such time on such
due date to be deemed to have been made on the next
succeeding Business Day). The Borrower shall, at the time
of making each such payment, specify to the Agent the sums
payable by the Borrower under this Agreement and the other
Loan Documents to which such payment is to be applied (and
in the event that the Borrower fails to so specify, or if an
Event of Default has occurred and is continuing, the Agent
may apply such payment to the Obligations in such order and
manner as it may elect in its sole discretion, subject to
Section 4.4 hereof). Each payment received by the Agent
under this Agreement or any other Loan Document for the
account of a Lender shall be paid by the Agent to such
Lender, in immediately available funds, for the account of
such Lender's Applicable Lending Office within one (1)
Business Day following receipt thereof. Whenever any
payment under this Agreement or any other Loan Document
shall be stated to be due on a day that is not a Business
Day, such payment may be made on the next succeeding
Business Day, and such extension of time shall in such case
be included in the computation of the payment of interest
and the Commitment Fee, as the case may be.
Section 9.2. Voluntary Prepayment. The Borrower may,
upon at least one (1) Business Days prior notice to the
Agent in the case of Base Rate Advances (except for Swing
Loan Advances), and at least three (3) Business Days prior
notice to the Agent in the case of Eurodollar Advances,
voluntarily prepay the Advances in whole at any time or from
time to time in part without premium or penalty but with
accrued interest to the date of prepayment on the amount so
prepaid, provided that (a) Eurodollar Advances may be
prepaid only on the last day of the Interest Period for such
Advances, and (b) each partial prepayment shall be in the
principal amount of One Million Dollars ($1,000,000) or an
integral multiple thereof. All notices under this Section
shall be irrevocable and shall be given not later than 9:00
A.M. San Francisco, California, time on the day which is not
less than the number of Business Days specified above for
such notice.
Section 9.3. Mandatory Prepayments.
9.3.0.0.1. If at any time the amount equal to
the sum of (i) the outstanding principal amount of all
Advances under the Revolving Credit Loan and the Swing
Loan, plus (ii) the Letter of Credit Liabilities
exceeds the aggregate amount of the Commitments, the
Borrower shall promptly prepay the outstanding Advances
by the amount of the excess or, if no Advances are
outstanding, the Borrower shall immediately pledge to
the Agent cash or Cash Equivalent Investments (subject
to no other Liens) in an amount equal to the excess as
security for the Obligations. Any such mandatory
prepayments shall be applied first to Swing Loan
Advances then to Base Rate Advances under the Revolving
Credit Loan, then to Eurodollar Advances and then to
the Letter of Credit Liabilities.
9.3.0.0.2. After any reduction in the
Commitments pursuant to Section 2.11, the Borrower
shall promptly prepay the outstanding Advances by the
amount which the sum of the outstanding principal
amount of the Advances under the Revolving Credit Loan
and the Swing Loan plus the Letter of Credit
Liabilities exceeds the aggregate amount of the
Commitments, as reduced.
9.3.0.0.3. Upon the issuance, sale or other
disposition of any shares of equity securities (or any
securities convertible or exchangeable for any such
shares, or any rights,
<PAGE>
warrants, or options to subscribe for or purchase any
such shares), by the Borrower or any Subsidiary, the
Borrower shall promptly prepay the Advances by an
amount equal to 100% of the Net Proceeds of any such
issuances. Any such mandatory prepayments shall be
applied first to Swing Loan Advances then to Base Rate
Advances under the Revolving Credit Loan, then to
Eurodollar Advances and then to the Letter of Credit
Disbursements for which the Issuing Bank has not been
reimbursed by the Borrower.
Section 9.4. Pro Rata Treatment. Except to the
extent otherwise provided herein: (a) each Revolving Credit
Loan Advance shall be made by the Lenders under Section 2.1,
each payment of the Commitment Fee under Section 2.9 and
each payment of the Letter of Credit fee under Section 3.5
(except as provided therein) shall be made for the account
of the Lenders, and each termination or reduction of the
Commitments under Section 2.11 shall be applied to the
Commitments of the Lenders, pro rata according to the
respective Commitments; (b) the making, Conversion, and
Continuation of Advances of a particular Type (other than
Conversions provided for by Section 5.4) shall be made pro
rata among the Lenders holding Advances of such Type
according to the amounts of their respective Commitments;
(c) each payment and prepayment of principal of or interest
on Advances by the Borrower or any Obligated Party of a
particular Type shall be made to the Agent for the account
of the Lenders holding Advances of such Type pro rata in
accordance with the respective unpaid principal amounts of
such Advances held by such Lenders; (d) any and all other
monies received by the Agent from any source other than
pursuant to any of (a) through (c) hereinabove (including,
without limitation, from the Borrower or any Guarantor) to
be applied against the Obligations shall be for the pro rata
benefit and account of the Lenders based upon each Lender's
aggregate outstanding Advances of all Types and LC
Participations and SL Participations to the aggregate
outstanding Advances of all Types and LC Participations and
SL Participations of all Lenders; and (e) the Lenders shall
purchase from the Issuing Bank and the Swing Lender pursuant
to Section 4.1 and Section 2.7 respectively, participations
in the Letters of Credit and the related Letter of Credit
Liabilities and the Swing Loans respectively, pro rata in
accordance with their Commitments.
Section 9.5. Non-Receipt of Funds by the Agent.
Unless the Agent shall have been notified by a Lender or the
Borrower (the "Payor") prior to the date on which such
Lender is to make payment to the Agent hereunder or the
Borrower is to make a payment to the Agent for the account
of one or more of the Lenders, as the case may be (such
payment being herein called the "Required Payment"), which
notice shall be effective upon receipt, that the Payor does
not intend to make the Required Payment to the Agent, the
Agent may assume that the Required Payment has been made and
may, in reliance upon such assumption (but shall not be
required to), make the amount thereof available to the
intended recipient on such date and, if the Payor has not in
fact made the Required Payment to the Agent, (a) the
recipient of such payment shall, on demand, pay to the Agent
the amount made available to it together with interest
thereon in respect of the period commencing on the date such
amount was so made available by the Agent until the date the
Agent recovers such amount at a rate per annum equal to
(i) if recovered from a Lender, at the Federal Funds Rate
for such period and (ii) if recovered from the Borrower, the
rate of interest applicable to the respective Loan, as
determined pursuant to Section 2.4 and (b) Agent shall be
entitled to offset against any and all sums to be paid to
such recipient, the amount calculated in accordance with the
foregoing clause (a).
Section 9.6. Withholding Taxes. All payments by the
Borrower of principal of and interest on the Advances and in
reimbursement of draws under any Letter of Credit and of all
fees and other amounts payable under any Loan Document are
payable without deduction for or on account of any present
or future taxes, duties or other charges levied or imposed
by the United States of America or by the government of any
jurisdiction outside the United States of America or by any
political subdivision or taxing authority of or in any of
the foregoing through withholding or deduction with respect
to any such payments. If any such taxes, duties or other
charges are so levied or imposed, the Borrower will pay
additional interest or will make additional payments in such
amounts so that every net payment of principal of and
interest on the Advances and of all other amounts payable by
it under any Loan Document, after withholding or deduction
for or on account of any such present or future taxes,
duties or other charges, will not be less than the amount
provided for herein or therein, provided that the Borrower
shall have no obligation to pay such additional amounts to
any Lender to the extent that such taxes, duties, or other
<PAGE>
charges are levied or imposed by reason of the failure of
such Lender to comply with the provisions of Section 4.7.
The Borrower shall furnish promptly to the Agent for
distribution to each affected Lender, as the case may be,
official receipts evidencing any such withholding or
reduction.
Section 9.7. Withholding Tax Exemption. Each Lender
that is not incorporated under the laws of the United States
of America or a state thereof agrees that it will deliver to
the Borrower and the Agent two duly completed copies of
United States Internal Revenue Service Form 1001 or 4224,
certifying in either case that such Lender is entitled to
receive payments from the Borrower under any Loan Document
without deduction or withholding of any United States
federal income taxes. Each Lender which so delivers a Form
1001 or 4224 further undertakes to deliver to Borrower and
the Agent two additional copies of such form (or a successor
form) on or before the date such form expires or becomes
obsolete or after the occurrence of any event requiring a
change in the most recent form so delivered by it, and such
amendments thereto or extensions or renewals thereof as may
be reasonably requested by the Borrower or the Agent, in
each case certifying that such Lender is entitled to receive
payments from the Borrower under any Loan Document without
deduction or withholding of any United States federal income
taxes, unless an event (including without limitation any
change in treaty, law or regulation) has occurred prior to
the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which
would prevent such Lender from duly completing and
delivering any such form with respect to it and such Lender
advises the Borrower and the Agent that it is not capable of
receiving such payments without any deduction or withholding
of United States federal income tax.
Section 9.8. Computation of Interest. Interest on
the Advances and all other amounts payable by the Borrower
hereunder shall be computed on the basis of a year of 360
days and the actual number of days elapsed (including the
first day but excluding the last day) unless such
calculation would result in a usurious rate, in which case
interest shall be calculated on the basis of a year of 365
or 366 days, as the case may be.
ARTICLE 10.
Yield Protection; Limitations on Advances; Capital Adequacy
Section 10.1. Additional Costs.
10.1.0.0.1. The Borrower shall pay directly to
each Lender from time to time such amounts as such
Lender may determine to be necessary to compensate it
for any costs incurred by such Lender which such Lender
determines are attributable to its making or
maintaining of any Eurodollar Advances hereunder or its
obligation to make any of such Advances hereunder, or
any reduction in any amount receivable by such Lender
hereunder in respect of any such Advances or such
obligation (such increases in costs and reductions in
amounts receivable being herein called "Additional
Costs"), resulting from any Regulatory Change which:
10.1.0.0.1.0.1. changes the basis of
taxation of any amounts payable to such Lender
under this Agreement or its Note in respect of any
of such Advances (other than taxes imposed on the
overall net income of such Lender or its
Applicable Lending Office for any of such Advances
by the jurisdiction in which such Lender has its
principal office or such Applicable Lending
Office);
10.1.0.0.1.0.2. imposes or modifies
any reserve, special deposit, minimum capital,
capital ratio, or similar requirement relating to
any extensions of credit or other assets of, or
any deposits with or other liabilities or
commitments of, such Lender (including any of such
Advances or any deposits referred to in the
definition of "Eurodollar Rate" in Section 1.1
hereof); or
<PAGE>
10.1.0.0.1.0.3. imposes any other
condition affecting this Agreement or the Notes or
any of such extensions of credit or liabilities or
commitments.
Each Lender will notify the Borrower of any event
occurring after the date of this Agreement which will
entitle such Lender to compensation pursuant to this
Section 5.1(a) as promptly as practicable after it
obtains knowledge thereof and determines to request
such compensation, and will designate a different
Applicable Lending Office for the Advances affected by
such event if such designation will avoid the need for,
or reduce the amount of, such compensation and will
not, in the sole opinion of such Lender, violate any
law, rule, or regulation or be in any way
disadvantageous to such Lender, provided that such
Lender shall have no obligation to so designate an
Applicable Lending Office located in the United States
of America. Each Lender will furnish the Borrower with
a certificate setting forth the basis and the amount of
each request of such Lender for compensation under this
Section 5.1(a). If any Lender requests compensation
from the Borrower under this Section 5.1(a), the
Borrower may, by notice to such Lender (with a copy to
the Agent) suspend the obligation of such Lender to
make or Continue making, or Convert Advances into,
Advances of the Type with respect to which such
compensation is requested until the Regulatory Change
giving rise to such request ceases to be in effect (in
which case the provisions of Section 5.4 hereof shall
be applicable).
10.1.0.0.2. Without limiting the effect of the
foregoing provisions of this Section 5.1, in the event
that, by reason of any Regulatory Change, any Lender
either (i) incurs Additional Costs based on or measured
by the excess above a specified level of the amount of
a category of deposits or other liabilities of such
Lender which includes deposits by reference to which
the interest rate on Eurodollar Advances is determined
as provided in this Agreement or a category of
extensions of credit or other assets of such Lender
which includes Eurodollar Advances or (ii) becomes
subject to restrictions on the amount of such a
category of liabilities or assets which it may hold,
then, if such Lender so elects by notice to the
Borrower (with a copy to the Agent), the obligation of
such Lender to make or Continue making, or Convert
Advances into, Eurodollar Advances hereunder shall be
suspended until such Regulatory Change ceases to be in
effect (in which case the provisions of Section 5.4
hereof shall be applicable).
10.1.0.0.3. Determinations and allocations by
any Lender for purposes of this Section 5.1 of the
effect of any Regulatory Change on its costs of
maintaining its obligations to make Eurodollar Advances
or of making or maintaining Eurodollar Advances or on
amounts receivable by it in respect of Eurodollar
Advances, and of the additional amounts required to
compensate such Lender in respect of any Additional
Costs, shall be conclusive, provided that such
determinations and allocations are made on a reasonable
basis.
Section 10.2. Limitation on Types of Advances.
Anything herein to the contrary notwithstanding, if with
respect to any Eurodollar Advances for any Interest Period
therefor:
10.2.0.0.1. The Agent determines (which
determination shall be conclusive) that quotations of
interest rates for the relevant deposits referred to in
the definition of "Eurodollar Rate" in Section 1.1
hereof are not being provided in the relative amounts
or for the relative maturities for purposes of
determining the rate of interest for such Advances as
provided in this Agreement; or
10.2.0.0.2. Required Lenders determine (which
determination shall be conclusive absent manifest
error) and notify the Agent that the relevant rates of
interest referred to in the definition of "Eurodollar
Rate" in Section 1.1 hereof on the basis of which the
rate of interest for such Advances for such Interest
Period is to be determined do not accurately reflect
the cost to the Lenders of making or maintaining such
Advances for such Interest Period;
<PAGE>
then the Agent shall give the Borrower prompt notice thereof
specifying the relevant amounts or periods, and so long as
such condition remains in effect, the Lenders shall be under
no obligation to make additional Eurodollar Advances or to
Convert Base Rate Advances into Eurodollar Advances and the
Borrower shall, on the last day(s) of the then current
Interest Period(s) for the outstanding Eurodollar Advances,
either prepay such Eurodollar Advances or Convert such
Eurodollar Advances into Base Rate Advances in accordance
with the terms of this Agreement.
Section 10.3. Illegality. Notwithstanding any other
provision of this Agreement, in the event that it becomes
unlawful for any Lender or its Applicable Lending Office to
(a) honor its obligation to make Eurodollar Advances
hereunder or (b) maintain Eurodollar Advances hereunder,
then such Lender shall promptly notify the Borrower (with a
copy to the Agent) thereof and such Lender's obligation to
make or maintain Eurodollar Advances and to Convert Base
Rate Advances into Eurodollar Advances hereunder shall be
suspended until such time as such Lender may again make and
maintain Eurodollar Advances (in which case the provisions
of Section 5.4 hereof shall be applicable).
Section 10.4. Treatment of Affected Advances. If the
Eurodollar Advances of any Lender (such Eurodollar Advances
being hereinafter called "Affected Advances") are to be
Converted pursuant to Section 5.1 or 5.3 hereof, such
Lender's Affected Advances shall be automatically Converted
into Base Rate Advances on the last day(s) of the then
current Interest Period(s) for the Affected Advances (or, in
the case of a Conversion required by Section 5.1(b) or 5.3
hereof, on such earlier date as such Lender may specify to
the Borrower with a copy to the Agent) and, unless and until
such Lender gives notice as provided below that the
circumstances specified in Section 5.1 or 5.3 hereof which
gave rise to such Conversion no longer exist:
10.4.0.0.1. To the extent that such Lender's
Affected Advances have been so Converted, all payments
and prepayments of principal which would otherwise be
applied to such Lender's Affected Advances shall be
applied instead to its Base Rate Advances; and
10.4.0.0.2. All Affected Advances which would
otherwise be made or Continued by such Lender as
Eurodollar Advances shall be made as or Converted into
Base Rate Advances and all Affected Advances of such
Lender which would otherwise be Converted into
Eurodollar Advances shall be Converted instead into (or
shall remain as) Base Rate Advances.
If such Lender gives notice to the Borrower (with a copy to
the Agent) that the circumstances specified in Section 5.1
or 5.3 hereof which gave rise to the Conversion of such
Lender's Affected Advances pursuant to this Section 5.4 no
longer exist (which such Lender agrees to do promptly upon
such circumstances ceasing to exist) at a time when Affected
Advances are outstanding, such Lender's Base Rate Advances
shall be automatically Converted, on the first day(s) of the
next succeeding Interest Period(s) for such outstanding
Affected Advances to the extent necessary so that, after
giving effect thereto, all Eurodollar Advances held by the
Lenders holding Eurodollar Advances and by such Lender are
held pro rata (as to principal amounts, and Interest
Periods) in accordance with their respective Commitments.
Section 10.5. Compensation. The Borrower shall pay to
the Agent for the account of each Lender, upon the request
of such Lender through the Agent, such amount or amounts as
shall be sufficient (in the reasonable opinion of such
Lender) to compensate it for any loss, cost, or expense
incurred by it as a result of:
10.5.0.0.1. Any payment, prepayment or
Conversion of a Eurodollar Advance for any reason
(including, without limitation, the acceleration of the
outstanding Advances pursuant to Section 11.2) on a
date other than the last day of an Interest Period for
such Eurodollar Advance; or
<PAGE>
10.5.0.0.2. Any failure by the Borrower for any
reason (including, without limitation, the failure of
any conditions precedent specified in Article VI to be
satisfied) to borrow, Convert, or prepay a Eurodollar
Advance on the date for such borrowing, Conversion, or
prepayment, specified in the relevant notice of
borrowing, prepayment, or Conversion under this
Agreement.
Section 10.6. Capital Adequacy. If after the date
hereof, any Lender shall have determined that the adoption
or implementation of any applicable law, rule, or regulation
regarding capital adequacy (including, without limitation,
any law, rule, or regulation implementing the Basle Accord),
or any change therein, or any change in the interpretation
or administration thereof by any central bank or other
Governmental Authority charged with the interpretation or
administration thereof, or compliance by such Lender (or its
parent) with any guideline, request, or directive regarding
capital adequacy (whether or not having the force of law) of
any central bank or other Governmental Authority (including,
without limitation, any guideline or other requirement
implementing the Basle Accord), has or would have the effect
of reducing the rate of return on such Lender's (or its
parent's) capital as a consequence of its obligations
hereunder or the transactions contemplated hereby to a level
below that which such Lender (or its parent) could have
achieved but for such adoption, implementation, change or
compliance (taking into consideration such Lender's policies
with respect to capital adequacy) by an amount deemed by
such Lender to be material, then from time to time, within
ten (10) Business Days after demand by such Lender (with a
copy to the Agent), the Borrower shall pay to such Lender
such additional amount or amounts as will compensate such
Lender (or its parent) for such reduction. A certificate of
such Lender claiming compensation under this Section and
setting forth the additional amount or amounts to be paid to
it hereunder shall be conclusive, provided that the
determination thereof is made on a reasonable basis. In
determining such amount or amounts, such Lender may use any
reasonable averaging and attribution methods.
Section 10.7. Additional Costs in Respect of Letters
of Credit. If as a result of any Regulatory Change there
shall be imposed, modified, or deemed applicable any tax,
reserve, special deposit, or similar requirement against or
with respect to or measured by reference to Letters of
Credit issued or to be issued hereunder or the Issuing
Bank's commitment to issue Letters of Credit hereunder, and
the result shall be to increase the cost to the Issuing Bank
of issuing or maintaining any Letter of Credit or its
commitment to issue Letters of Credit hereunder or reduce
any amount receivable by the Issuing Bank hereunder in
respect of any Letter of Credit (which increase in cost, or
reduction in amount receivable, shall be the result of the
Issuing Bank's reasonable allocation of the aggregate of
such increases or reductions resulting from such event),
then, upon demand by the Issuing Bank, the Borrower agrees
to pay the Issuing Bank, from time to time as specified by
the Issuing Bank, such additional amounts as shall be
sufficient to compensate the Issuing Bank for such increased
costs or reductions in amount. A statement as to such
increased costs or reductions in amount incurred by the
Issuing Bank, submitted by the Issuing Bank to the Borrower,
shall be conclusive as to the amount thereof, provided that
the determination thereof is made on a reasonable basis.
ARTICLE 11.
Conditions Precedent
Section 11.1. Initial Extension of Credit. The
obligation of each Lender to make its initial Advance and of
the Issuing Bank to issue the initial Letter of Credit, is
subject to the condition precedent that the Agent shall have
received on or before the day of such Advance or Letter of
Credit all of the following, each dated (unless otherwise
indicated) the date hereof, in form and substance
satisfactory to the Agent:
11.1.0.0.1. Resolutions. Resolutions of the
Board of Directors of the Borrower and each Guarantor
certified by its Secretary or an Assistant Secretary
which authorize the execution, delivery, and
performance of the Loan Documents to which it is or is
to be a party;
<PAGE>
11.1.0.0.2. Incumbency Certificate. A
certificate of incumbency certified by the Secretary or
an Assistant Secretary of the Borrower and each
Guarantor certifying the names of each of its officers
authorized to sign the Loan Documents to which it is or
is to be a party (including the certificates
contemplated herein) together with specimen signatures
of such officers;
11.1.0.0.3. Articles of Incorporation. The
articles or certificate of incorporation of the
Borrower and each Guarantor certified by the Secretary
of State of the state of its incorporation;
11.1.0.0.4. Bylaws. The bylaws of the Borrower
and each Guarantor certified by the Secretary or an
Assistant Secretary;
11.1.0.0.5. Governmental Certificates.
Certificates of the appropriate government officials of
the state of incorporation of the Borrower and each
Guarantor as to its existence and good standing and
certificates of appropriate government officials of
each state in which the Borrower and the Guarantor is
required to qualify to do business and where failure to
so qualify could reasonably be expected to have a
Material Adverse Effect, as to the Borrower's and each
such Guarantor's qualification to do business and good
standing in such state, all dated a current date;
11.1.0.0.6. Notes. The Notes executed by the
Borrower;
11.1.0.0.7. Guaranty. A Guaranty executed by
each Guarantor;
11.1.0.0.8. Contribution and Indemnification
Agreement. A Contribution and Indemnification
Agreement executed by the Borrower and the Guarantors.
11.1.0.0.9. Opinion of Counsel. A favorable
opinion of legal counsel to the Borrower and each
Guarantor satisfactory to the Agent, as to such matters
as the Agent or the Required Lenders may reasonably
request;
11.1.0.0.10. Attorneys' Fees and Expenses.
Evidence that the costs and expenses (including
attorneys' fees) referred to in Section 13.1, to the
extent incurred, shall have been paid in full by the
Borrower;
11.1.0.0.11. Termination Agreement. A
termination agreement in form and substance reasonably
satisfactory to the Agent confirming the prior credit
facilities provided pursuant to that certain Amended
and Restated Loan Agreement dated as of November
24,1994, as amended by and among Borrower, the lenders
party thereto and Wells Fargo Bank (Texas), National
Association, as agent (the "Existing Credit
Agreement"), shall be terminated and paid in full
effective as of the date hereof.
Section 11.2. All Extensions of Credit. The
obligation of each Lender to make any Advance and of the
Issuing Bank to issue any Letter of Credit (including the
initial Advance and the initial Letter of Credit) is subject
to the following additional conditions precedent:
11.2.0.0.1. Advance Request Form, Telephonic
Request, or Letter of Credit Request Form. The Agent
in respect of Revolving Credit Loan Advances, the Swing
Lender in respect of Swing Loan Advances, and the
Issuing Bank in respect of Letters of Credit shall have
received, in accordance with Section 2.5, 2.7 or 3.2,
as the case may be, an Advance Request Form. a
telephonic request, or Letter of Credit Request Form,
as applicable, executed by an authorized officer of the
Borrower;
<PAGE>
11.2.0.0.2. No Default or Event of Default. No
Default or Event of Default shall have occurred and be
continuing, or would result from such Advance or Letter
of Credit;
11.2.0.0.3. Representations and Warranties.
All of the representations and warranties contained in
Article VII hereof and in the other Loan Documents
shall be true and correct in all material respects on
and as of the date of such Advance or issuance of
Letter of Credit with the same force and effect as if
such representations and warranties had been made on
and as of such date except to the extent such
representations and warranties speak to a specific
date;
11.2.0.0.4. No Material Adverse Effect.
Neither any Material Adverse Effect or any material
adverse change in the financial or capital markets
shall have occurred since the date of the most recent
financial statements delivered to the Agent and the
Lenders pursuant to Section 8.1 hereof; and
11.2.0.0.5. Additional Documentation. The
Agent shall have received such additional approvals,
opinions, or documents as the Agent or its legal
counsel, Winstead Sechrest & Minick P.C., may
reasonably request.
ARTICLE 12.
Representations and Warranties
To induce the Agent, the Issuing Bank, and the Lenders
to enter into this Agreement, the Borrower represents and
warrants to the Agent, the Issuing Bank, and the Lenders
that:
Section 12.1. Existence. The Borrower and each
Subsidiary (a) is a corporation (or other entity as set
forth on Schedule 7.14) duly organized, validly existing,
and in good standing under the laws of the jurisdiction of
its incorporation or organization; (b) has all requisite
power and authority to own its assets and carry on its
business as now being or as proposed to be conducted; and
(c) is qualified to do business in all jurisdictions in
which the nature of its business makes such qualification
necessary and where failure to so qualify would have a
Material Adverse Effect. The Borrower and each Guarantor
have the power and authority to execute, deliver, and
perform its obligations under the Loan Documents to which it
is or may become a party.
Section 12.2. Financial Statements. The Borrower has
delivered to the Agent audited consolidated financial
statements of the Borrower and its Subsidiaries as at and
for the fiscal year ended September 30, 1997, and unaudited
consolidated financial statements of the Borrower and its
Subsidiaries for the nine (9)-month period ended June 30,
1998. Such financial statements are true and correct, have
been prepared in accordance with GAAP, and fairly and
accurately present, on a consolidated basis, the financial
condition of the Borrower and its Subsidiaries as of the
respective dates indicated therein and the results of
operations for the respective periods indicated therein. As
of the date hereof, neither the Borrower nor any of its
Subsidiaries has any material contingent liabilities,
liabilities for taxes, unusual forward or long-term
commitments, or unrealized or anticipated losses from any
unfavorable commitments except as referred to or reflected
in such financial statements, and there has been no Material
Adverse Effect since the effective date of the most recent
financial statements referred to in this Section.
Section 12.3. Action; No Breach. The execution,
delivery, and performance by the Borrower and each Guarantor
of the Loan Documents to which it is or may become a party,
and compliance with the terms and provisions hereof and
thereof have been duly authorized by all requisite action on
the part of the Borrower and each Guarantor and do not and
will not (a) violate or conflict with, or result in a breach
of, or require any consent, other than such consents which
have been obtained and copies of which have been
<PAGE>
provided to the Agent, under (i) the articles of
incorporation or bylaws or the applicable organizational
documents of the Borrower or any Guarantor, (ii) any
applicable law, rule, or regulation or any order, writ,
injunction, or decree of any Governmental Authority or
arbitrator, or (iii) any agreement or instrument to which
the Borrower or any of the Guarantors is a party or by which
any of them or any of their property is bound or subject, or
(b) constitute a default under any such agreement or
instrument, or result in the creation or imposition of any
Lien upon any of the revenues or assets of the Borrower or
any Guarantor.
Section 12.4. Operation of Business. The Borrower and
each of its Subsidiaries possess all licenses, permits,
franchises, patents, copyrights, trademarks, and tradenames,
or rights thereto, necessary to conduct their respective
businesses substantially as now conducted and as presently
proposed to be conducted, and the Borrower and each of its
Subsidiaries are not in violation of any valid rights of
others with respect to any of the forgoing except where such
violation individually or in combination with all other such
violations could not reasonably be expected to have a
Material Adverse Effect.
Section 12.5. Litigation and Judgments. There is no
action, suit, investigation, or proceeding before or by any
Governmental Authority or arbitrator pending, or to the
knowledge of the Borrower, threatened against or affecting
the Borrower or any Subsidiary, that could, if adversely
determined, reasonably be expected to have a Material
Adverse Effect. As of the date hereof, there are no
outstanding judgments against the Borrower or any
Subsidiary.
Section 12.6. Rights in Properties; Liens. The
Borrower and each Subsidiary have good and indefeasible
title to or valid leasehold interests in their respective
properties and assets, real and personal, including the
properties, assets, and leasehold interests reflected in the
financial statements described in Section 7.2, and none of
the properties, assets, or leasehold interests of the
Borrower or any Subsidiary is subject to any Lien, except as
permitted by Section 9.2.
Section 12.7. Enforceability. The Loan Documents to
which the Borrower or a Guarantor is a party, when
delivered, shall constitute the legal, valid, and binding
obligations of the Borrower or such Guarantor, as
applicable, enforceable against the Borrower or such
Guarantor, as applicable, in accordance with their
respective terms, except as limited by bankruptcy,
insolvency, or other laws of general application relating to
the enforcement of creditors' rights and general principles
of equity.
Section 12.8. Approvals. No authorization, approval,
or consent of, and no filing or registration with, any
Governmental Authority or third party is or will be
necessary for the execution, delivery, or performance by the
Borrower of this Agreement and by the Borrower or any
Guarantor of the other Loan Documents to which the Borrower
or such Guarantor, as applicable, is or may become a party
or for the validity or enforceability thereof.
Section 12.9. Debt. The Borrower and the Subsidiaries
have no Debt, except as permitted by Section 9.1.
Section 12.10. Taxes. The Borrower and each Subsidiary
have filed all tax returns (federal, state, and local)
required to be filed, including all income, franchise,
employment, property, and sales tax returns, and have paid
all of their respective liabilities for taxes, assessments,
governmental charges, and other levies that are due and
payable other than those being contested in good faith by
appropriate proceedings diligently pursued for which
adequate reserves have been established. The Borrower knows
of no pending investigation of the Borrower or any
Subsidiary by any taxing authority or of any pending but
unassessed tax liability of the Borrower or any Subsidiary.
Section 12.11. Use of Proceeds; Margin Securities.
Neither the Borrower nor any Subsidiary is engaged
principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing
or carrying margin stock (within the meaning of Regulations
T, U, or X of the Board of Governors of the Federal Reserve
System), and no part of the proceeds of any Advance will be
used to
<PAGE>
purchase or carry any margin stock or to extend credit to
others for the purpose of purchasing or carrying margin
stock.
Section 12.12. ERISA. As of the date hereof, the
Borrower, each Subsidiary, ERISA Affiliate, and each Plan
are in compliance in all material respects with all
applicable provisions of ERISA and the Code except for
events of noncompliance that will not have a Material
Adverse Effect. Neither a Reportable Event nor a Prohibited
Transaction has occurred and is continuing with respect to
any Plan. No notice of intent to terminate a Plan has been
filed, nor has any Plan been terminated. No circumstances
exist which constitute grounds entitling the PBGC to
institute proceedings to terminate, or appoint a trustee to
administer, a Plan, nor has the PBGC instituted any such
proceedings. Neither the Borrower nor any ERISA Affiliate
has completely or partially withdrawn from a Multiemployer
Plan. The Borrower and each ERISA Affiliate have met their
minimum funding requirements under ERISA with respect to all
of their Plans, and no "accumulated funding deficiency" (for
which an excise tax is due or would be due in the absence of
a waiver) as defined in Section 412 of the Code or Section
302(a)(2) of ERISA, whichever may apply, has been incurred
with respect to any Plan, whether or not waived. The
present value of all vested benefits under each Plan do not
exceed the fair market value of all Plan assets allocable to
such benefits, determined on a termination basis as of the
most recent valuation date of the Plan and in accordance
with ERISA. Neither the Borrower nor any ERISA Affiliate
has incurred any liability to the PBGC under ERISA. Neither
the Borrower nor any ERISA Affiliate is subject to any lien
imposed under Section 412(n) of the Code or Section 302(f)
or 4068 of ERISA, whichever may apply, with respect to any
Plan. Neither the Borrower nor any ERISA Affiliate is
required to provide security to a Plan under Section
401(a)(29) of the Code.
Section 12.13. Disclosure. All factual information
(taken as a whole) furnished by or on behalf of the Borrower
in writing to the Agent or any Lender (including, without
limitation, all information contained in the Loan Documents)
for purposes of or in connection with this Agreement, the
other Loan Documents or any transaction contemplated herein
or therein is, and all other such factual information (taken
as a whole) hereafter furnished by or on behalf of the
Borrower to the Agent or any Lender, will be true and
accurate in all material respects on the date as of which
such information is dated or certified and not incomplete by
omitting to state any fact necessary to make such
information (taken as a whole) not misleading in any
material respect at such time in light of the circumstances
under which such information was provided.
Section 12.14. Subsidiaries. As of the date hereof,
the Borrower has no Subsidiaries other than those listed on
Schedule 7.14 hereto, and Schedule 7.14 (a) sets forth the
type of each Subsidiary listed thereon, (b) sets forth the
jurisdiction of incorporation or organization of each
Subsidiary, and the percentage of the Borrower's ownership
of the outstanding voting stock or other ownership interests
of each Subsidiary. All of the outstanding capital stock of
each corporate Subsidiary has been validly issued, is fully
paid, and is nonassessable. There are no outstanding
subscriptions, options, warrants, calls, or rights to
acquire, and no outstanding securities or instruments
convertible into, capital stock of any Subsidiary except as
listed on Schedule 7.14.
Section 12.15. Agreements. Neither the Borrower nor
any Subsidiary is a party to any indenture, loan, or credit
agreement, or to any lease or other agreement or instrument,
or subject to any charter or corporate restriction which
could reasonably be expected to have a Material Adverse
Effect. Neither the Borrower nor any Subsidiary is in
default in any material respect in the performance,
observance, or fulfillment of any of the obligations,
covenants, or conditions contained in any agreement or
instrument material to its business to which it is a party
other than defaults which could not reasonably be expected
to have a Material Adverse Effect.
Section 12.16. Compliance with Laws. Neither the
Borrower nor any Subsidiary is in violation of any law,
rule, regulation, order, or decree of any Governmental
Authority or arbitrator, other than violations which could
not reasonably be expected to have a Material Adverse
Effect.
<PAGE>
Section 12.17. Investment Company Act. Neither the
Borrower nor any Subsidiary is an "investment company"
within the meaning of the Investment Company Act of 1940, as
amended.
Section 12.18. Public Utility Holding Company Act.
Neither the Borrower nor any Subsidiary is a "holding
company"' or a "subsidiary company" of a "holding company"
or an "affiliate" of a "holding company" or a "public
utility" within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
Section 12.19. Environmental Matters. Except for those
matters which will not have a Material Adverse Effect:
12.19.0.0.1. The Borrower, each Subsidiary, and
all of their respective properties, assets, and
operations are in full compliance with all
Environmental Laws. The Borrower is not aware of, nor
has the Borrower received notice of, any past, present,
or future conditions, events, activities, practices, or
incidents which may interfere with or prevent the
compliance or continued compliance of the Borrower and
the Subsidiaries with all Environmental Laws;
12.19.0.0.2. The Borrower and each Subsidiary
have obtained all permits, licenses, and authorizations
that are required under applicable Environmental Laws,
and all such permits are in good standing and the
Borrower and its Subsidiaries are in compliance with
all of the terms and conditions of such permits;
12.19.0.0.3. No Hazardous Materials exist on,
about, or within or have been used, generated, stored,
transported, disposed of on, or Released from any of
the properties or assets of the Borrower or any
Subsidiary. The use which the Borrower and the
Subsidiaries make and intend to make of their
respective properties and assets will not result in the
use, generation, storage, transportation, accumulation,
disposal, or Release of any Hazardous Material on, in,
or from any of their properties or assets except in
compliance with Environmental Laws;
12.19.0.0.4. Neither the Borrower nor any of its
Subsidiaries nor any of their respective currently or
previously owned or leased properties or operations is
subject to any outstanding or, to the best of its
knowledge, threatened order from or agreement with any
Governmental Authority or other Person or subject to
any judicial or docketed administrative proceeding with
respect to (i) failure to comply with Environmental
Laws, (ii) Remedial Action, or (iii) any Environmental
Liabilities arising from a Release or threatened
Release;
12.19.0.0.5. There are no conditions or
circumstances associated with the currently or
previously owned or leased properties or operations of
the Borrower or any of its Subsidiaries that could
reasonably be expected to give rise to any
Environmental Liabilities;
12.19.0.0.6. Neither the Borrower nor any of its
Subsidiaries is a treatment, storage, or disposal
facility requiring a permit under the Resource
Conservation and Recovery Act, 42 U.S.C. 6901 et
seq., regulations thereunder or any comparable
provision of state law. The Borrower and its
Subsidiaries are in compliance with all applicable
financial responsibility requirements of all
Environmental Laws;
12.19.0.0.7. Neither the Borrower nor any of its
Subsidiaries has filed or failed to file any notice
required under applicable Environmental Law reporting a
Release; and
<PAGE>
12.19.0.0.8. No Lien arising under any
Environmental Law has attached to any property or
revenues of the Borrower or its Subsidiaries.
ARTICLE 13.
Positive Covenants
The Borrower covenants and agrees that, as long as the
Obligations or any part thereof are outstanding or any
Lender has any Commitment hereunder, or the Issuing Bank has
any obligation to issue Letters of Credit hereunder, the
Borrower will perform and observe the following positive
covenants:
Section 13.1. Reporting Requirements. The Borrower
will furnish to the Agent, the Issuing Bank, and each
Lender:
13.1.0.0.1. Annual Financial Statements. As
soon as available, and in any event within one hundred
twenty (120) days after the end of each Fiscal Year of
the Borrower and the Subsidiaries, beginning with the
Fiscal Year ending September 30, 1998, (i) a copy of
the annual audited financial statements of the Borrower
and the Subsidiaries for such fiscal year containing,
on a consolidated basis, balance sheets and statements
of income, retained earnings, and cash flow as at the
end of such Fiscal Year and for the 12-month period
then ended, in each case setting forth in comparative
form the figures for the preceding Fiscal Year, all in
reasonable detail and audited and certified by Ernst &
Young, or other independent certified public
accountants of recognized standing acceptable to the
Agent, to the effect that such report has been prepared
in accordance with GAAP; and (ii) a certificate of such
independent certified public accountants to the Agent
and the Lenders (A) stating that in the course of their
audit they have not become aware of any Default or
Event of Default or specifying any Defaults or Events
of Default of which they are aware, and (B) stating
that nothing came to their attention that the
calculations set forth in the officer's certificate
delivered simultaneously therewith, as of the date of
the balance sheet, were not prepared in accordance with
the audited financial statements;
13.1.0.0.2. Quarterly Financial Statements. As
soon as available and in any event within fifty (50)
days after the end of each Fiscal Quarter in each
Fiscal Year of the Borrower a copy of an unaudited
financial report of the Borrower and the Subsidiaries
as of the end of such Fiscal Quarter and for the
portion of the Fiscal year then ended, containing, on a
consolidated basis, balance sheets and statements of
income, retained earnings, and cash flow in each case
setting forth in comparative form the figures for the
corresponding period of the preceding Fiscal Year, all
in reasonable detail certified by the chief financial
officer of the Borrower to have been prepared in
accordance with GAAP and to fairly and accurately
present (subject to year-end audit adjustments) the
financial condition and results of operations of the
Borrower and the Subsidiaries, on a consolidated basis,
at the date and for the periods indicated therein;
13.1.0.0.3. Quarterly Certificate. As soon as
available, and in any event within fifty (50) days,
after the end of each Fiscal Quarter of each Fiscal
Year of the Borrower, a certificate of the chief
financial officer of the Borrower (i) stating that to
the best of such officer's knowledge, no Default has
occurred and is continuing, or if a Default has
occurred and is continuing, a statement as to the
nature thereof and the action that is proposed to be
taken with respect thereto, and (ii) showing in
reasonable detail the most recent Fiscal Quarter
calculations demonstrating compliance with Article X,
and accompanied by a certificate executed by the
Borrower representing that attached thereto is a
current (as of the date thereof) list of existing store
locations owned or leased by Borrower and each
Guarantor;
<PAGE>
13.1.0.0.4. Projections. As soon as available
and in any event not later than thirty (30) days prior
to the end of each Fiscal Year, projections of
consolidated financial statements of the Borrower and
its Subsidiaries for the upcoming Fiscal Year;
13.1.0.0.5. Management Letters. Promptly upon
receipt thereof, a copy of any management letter or
written report submitted to the Borrower or any
Subsidiary by independent certified public accountants
with respect to the business, condition (financial or
otherwise), operations, prospects, or properties of the
Borrower or any Subsidiary;
13.1.0.0.6. Notice of Litigation. Promptly
after the commencement thereof, notice of all actions,
suits, and proceedings before any Governmental
Authority or arbitrator affecting the Borrower or any
Subsidiary which, if determined adversely to the
Borrower or such Subsidiary, could reasonably be
expected to have a Material Adverse Effect;
13.1.0.0.7. Notice of Default. As soon as
possible and in any event within ten (10) days after
the Borrower knows of the occurrence of each Default, a
written notice setting forth the details of such
Default and the action that the Borrower has taken and
proposes to take with respect thereto;
13.1.0.0.8. ERISA Reports. Promptly after the
filing or receipt thereof, copies of all reports,
including annual reports, and notices which the
Borrower or any ERISA Affiliate files with or receives
from the PBGC or the U.S. Department of Labor under
ERISA; and as soon as possible and in any event within
five (5) days after the Borrower or any ERISA Affiliate
knows or has reason to know that any Reportable Event
(as to which the thirty day notice requirement to the
PBGC has not been waived) or Prohibited Transaction has
occurred with respect to any Plan or that the PBGC or
the Borrower or any Subsidiary or any ERISA Affiliate
has instituted or will institute proceedings under
Title IV of ERISA to terminate any Plan, a certificate
of the chief financial officer of the Borrower setting
forth the details as to such Reportable Event or
Prohibited Transaction or Plan termination and the
action that the Borrower proposes to take with respect
thereto;
13.1.0.0.9. Notice of Material Adverse Effect.
As soon as possible and in any event within ten (10)
days after the Borrower knows of the occurrence
thereof, written notice of any matter that could
reasonably be expected to have a Material Adverse
Effect;
13.1.0.0.10. Proxy Statements, Etc. As soon as
available, one copy of each financial statement,
report, notice or proxy statement sent by the Borrower
or any Subsidiary to its stockholders generally and one
copy of each regular, periodic or special report,
registration statement, or prospectus filed by the
Borrower or any Subsidiary with any securities exchange
or the Securities and Exchange Commission or any
successor agency; and
13.1.0.0.11. General Information. Promptly,
such other information concerning the Borrower or any
Subsidiary as the Agent or any Lender may from time to
time reasonably request.
Section 13.2. Maintenance of Existence; Conduct of
Business. The Borrower will preserve and maintain, and will
cause each Subsidiary to preserve and maintain, its
corporate (or partnership) existence and all of its leases,
privileges, licenses, permits, franchises, qualifications,
and rights that are necessary or desirable in the ordinary
conduct of its business. The Borrower will conduct, and
will cause each Subsidiary to conduct, its business in an
orderly and efficient manner in accordance with good
business practices customary in the industry in which the
Borrower and the Subsidiaries are engaged.
<PAGE>
Section 13.3. Maintenance of Properties. The Borrower
will maintain, keep, and preserve, and cause each Subsidiary
to maintain, keep, and preserve, all of its properties
(tangible and intangible) necessary or useful in the proper
conduct of its business in good working order and condition
(ordinary wear and tear excepted).
Section 13.4. Taxes and Claims. The Borrower will pay
or discharge, and will cause each Subsidiary to pay or
discharge, at or before maturity or before becoming
delinquent (a) all taxes, levies, assessments, and
governmental charges imposed on it or its income or profits
or any of its property, and (b) all lawful claims for labor,
material, and supplies, which, if unpaid, might become a
Lien upon any of its property; provided, however, that
neither the Borrower nor any Subsidiary shall be required to
pay or discharge any tax, levy, assessment, or governmental
charge which is being contested in good faith by appropriate
proceedings diligently pursued, and for which adequate
reserves have been established.
Section 13.5. Insurance. The Borrower will maintain,
and will cause each of the Subsidiaries to maintain,
insurance with financially sound and reputable insurance
companies in such amounts and covering such risks as is
usually carried by corporations engaged in similar
businesses and owning similar properties in the same general
areas in which the Borrower and the Subsidiaries operate,
provided that in any event the Borrower will maintain and
cause each Subsidiary to maintain workmen's compensation
insurance, property insurance, comprehensive general
liability insurance, reasonably satisfactory to the Agent.
Section 13.6. Inspection Rights. At any reasonable
time and from time to time, the Borrower will permit, and
will cause each Subsidiary to permit, representatives of the
Agent and each Lender to examine, copy, and make extracts
from its books and records, to visit and inspect its
properties, and to discuss its business, operations, and
financial condition with its officers, employees, and
independent certified public accountants.
Section 13.7. Keeping Books and Records. The Borrower
will maintain, and will cause each Subsidiary to maintain,
proper books of record and account in which full, true, and
correct entries in conformity with GAAP shall be made of all
dealings and transactions in relation to its business and
activities.
Section 13.8. Compliance with Laws. The Borrower will
comply, and will cause each Subsidiary to comply, in all
respects with all applicable laws, rules, regulations,
orders, and decrees of any Governmental Authority or
arbitrator other than such non-compliance which could not
reasonably be expected to have a Material Adverse Effect.
Section 13.9. Compliance with Agreements. The
Borrower will comply, and will cause each Subsidiary to
comply, in all respects with all agreements, contracts, and
instruments binding on it or affecting its properties or
business other than such non-compliance which could not
reasonably be expected to have a Material Adverse Effect.
Section 13.10. Further Assurances; Subsidiary Guaranty
and Contribution and Indemnification Agreement. The
Borrower will, and will cause each Subsidiary to, execute
and deliver such further agreements and instruments and take
such further action as may be reasonably requested by the
Agent to carry out the provisions and purposes of this
Agreement and the other Loan Documents. Without limiting
the foregoing, upon the creation or acquisition of any
Subsidiary, the Borrower shall (a) provide written notice of
such event to the Agent within five (5) Business Days
following the date the Borrower has knowledge thereof and
(b) cause each such domestic Subsidiary to execute and
deliver a Guaranty, a Contribution and Indemnification
Agreement, and such other documentation as the Agent may
request to cause such domestic Subsidiary to evidence or
otherwise implement the guaranty of the Obligations
contemplated by a Guaranty or a Contribution and
Indemnification Agreement within thirty (30) calendar days
following the date the Borrower has knowledge thereof. If
any Subsidiary is created or acquired after the date hereof,
the Borrower shall execute and deliver to the Agent (a) an
amendment to Schedule 7.14 to
<PAGE>
this Agreement (which only needs the signature of the Agent
to be effective if the only change is the addition of the
new Subsidiary) and (b) any other documents which would have
otherwise been required to be delivered to the Agent and the
Lenders if such Subsidiary had been a Subsidiary as of the
date hereof.
Section 13.11. ERISA. The Borrower will comply, and
will cause each Subsidiary to comply, with all minimum
funding requirements, and all other material requirements of
ERISA, if applicable, so as not to give rise to any
liability thereunder which could reasonably be expected to
have a Material Adverse Effect.
Section 13.12. Year 2000 Compliance. Borrower shall
and shall cause each Subsidiary to, perform all acts
reasonably necessary to ensure that (i) Borrower and each
Subsidiary and any business in which Borrower or a
Subsidiary holds a substantial interest, and (ii) all
customers, suppliers and vendors that are material to
Borrower's and each Subsidiary's business, become Year 2000
Compliant in a timely manner. Such acts shall include,
without limitation, performing a comprehensive review and
assessment of all of Borrower's and each Subsidiary's
systems and adopting a detailed plan, with itemized budget,
for the remediation, monitoring and testing of such systems.
As used in this paragraph, "Year 2000 Compliant" shall mean,
in regard to any entity, that all software, hardware,
firmware, equipment, goods or systems utilized by or
material to the business operations or financial condition
of such entity, will properly perform date sensitive
functions before, during and after the year 2000. Borrower
shall, immediately upon request, provide to the Agent such
certifications or other evidence of Borrower's compliance
with the terms of this paragraph as the Agent may from time
to time require.
ARTICLE 14.
Negative Covenants
The Borrower covenants and agrees that, as long as the
Obligations or any part thereof are outstanding or any
Lender has any Commitment hereunder or the Issuing Bank has
any obligation to issue Letters of Credit hereunder, the
Borrower will perform and observe the following negative
covenants:
Section 14.1. Debt. The Borrower will not incur,
create, assume, or permit to exist, and will not permit any
Subsidiary to incur, create, assume, or permit to exist, any
Debt, except:
14.1.0.0.1. Debt to the Lenders and the Issuing
Bank pursuant to the Loan Documents;
14.1.0.0.2. Debt listed on Schedule 9.1; and
14.1.0.0.3. (i) Debt in addition to that
specifically described in clauses (a) and (b) above not
to exceed Five Million Dollars ($5,000,000) in the
aggregate, and (ii) Debt incurred in connection with
unsecured seller financing as part of an acquisition
not to exceed Ten Million Dollars ($10,000,000) in the
aggregate, minus the amount of any Debt incurred
pursuant to clause (i) above.
Section 14.2. Limitation on Liens. The Borrower will
not incur, create, assume, or permit to exist, and will not
permit any Subsidiary to incur, create, assume, or permit to
exist, any Lien upon any of its property, assets, or
revenues, whether now owned or hereafter acquired, except:
(a) Liens disclosed on Schedule 9.2
hereto and Liens in favor of the Agent for
the benefit of the Lenders;
(b) Liens for taxes, assessments, or
other governmental charges which are not
delinquent or which are being contested in
good faith and for which adequate reserves
have been established;
<PAGE>
(c) Liens of mechanics, materialmen,
warehousemen, carriers, or other similar
statutory Liens securing obligations that are
not yet due and are incurred in the ordinary
course of business;
(d) Liens resulting from good faith
deposits to secure payments of workmen's
compensation or other social security
programs or to secure the performance of
tenders, statutory obligations, surety and
appeal bonds, bids, contracts (other than for
payment of Debt), or leases made in the
ordinary course of business; and
(e) Purchase money Liens securing
Permitted Debt described in Section 9.1(b)
and (c)(i); provided that. the Debt secured
by any such Lien encumbers only the asset so
purchased.
Neither Borrower nor any Subsidiary shall enter into or
assume any agreement (other than the Loan Documents)
prohibiting the creation or assumption of any Lien upon its
properties or assets whether now owned or hereafter
acquired; provided that in connection with the creation of
purchase money Liens permitted hereby, the Borrower or the
Subsidiary may agree that it will not permit any other Liens
to encumber the assets subject to such purchase money Lien.
Further, Borrower will not and will not permit any
Subsidiaries directly or indirectly to create or otherwise
cause or suffer to exist to become effective any consensual
encumbrance or restriction of any kind on the ability of any
Subsidiary to: (i) pay dividends or make any other
distribution on any of such Subsidiaries' capital stock
owned by Borrower or any Subsidiary of Borrower;
(ii) subject to subordination provisions pay any Debt owed
to Borrower or any other Subsidiary; (iii) make loans or
advances to Borrower or any other Subsidiary; or
(iv) transfer any of its properties or assets to Borrower or
any other Subsidiary not restricted hereby.
Section 14.3. Mergers, Etc. The Borrower will not, and
will not permit any Subsidiary to become a party to a merger
or consolidation, or to purchase or otherwise acquire all or
a substantial part of the business or assets of any Person
(other than pawnshop stores in the ordinary course of
business) or any shares or other equity interest of any
Person (whether or not certificated), or wind-up, dissolve,
or liquidate itself; provided that, (i) a domestic
Subsidiary may wind-up, dissolve or liquidate if no Default
exists or would result therefrom and its assets are
transferred to Borrower or another domestic Subsidiary; (ii)
a foreign Subsidiary may wind-up, dissolve or liquidate if
no Default exists or would result therefrom; (iii) any
Subsidiary may merge with and into Borrower if Borrower is
the surviving entity and no Default exists or would result
therefrom; (iv) any Subsidiary may merge with and into any
other domestic Subsidiary if the domestic Subsidiary is the
surviving entity, no Default exists or would result
therefrom and Section 8.10 is complied with; (v) any foreign
Subsidiary may merge with any other foreign Subsidiary if no
Default exists or would result therefrom; and (vi) the
Borrower or a Subsidiary may make investments permitted
under Section 9.5 hereof.
Section 14.4. Restricted Payments. The Borrower will
not redeem, purchase, retire, or otherwise acquire any of
its capital stock; provided, that the Borrower may redeem
shares of its capital stock in an aggregate amount not to
exceed Thirty Million Dollars ($30,000,000).
Section 14.5. Investments. The Borrower will not
make, and will not permit any Subsidiary to make, any
advance, loan, extension of credit, or capital contribution
to or investment in, or purchase or own, or permit any
Subsidiary to purchase or own, any stock, bonds, notes,
debentures, or other securities of, any Person, except:
14.5.0.0.1. readily marketable direct
obligations of the United States of America or any
agency thereof with maturities of eighteen (18) months
or less from the date of acquisition;
<PAGE>
14.5.0.0.2. fully insured certificates of
deposit with maturities of one year or less from the
date of acquisition issued by any commercial bank
operating in the United States of America having
capital and surplus in excess of Fifty Million Dollars
($50,000,000);
14.5.0.0.3. commercial paper of a domestic
issuer if at the time of purchase such paper is rated
in one of the two highest rating categories of Standard
and Poor's Corporation or Moody's Investors Service,
Inc.;
14.5.0.0.4. auction rate preferred stock and
municipal bonds that at the time of purchase are rated
in one of the two highest rating categories of Standard
& Poor's Corporation or Moody's Investment Services,
Inc.;
14.5.0.0.5. money market funds and mutual funds
that invest in securities deemed acceptable for
outright purchase;
14.5.0.0.6. investments in Subsidiaries
existing on the date of this Agreement and investments
in subsequently created domestic Subsidiaries formed
for the purpose of expanding the Borrower's business
into a new state;
14.5.0.0.7. pawn loans to customers in the
ordinary course of business; and
14.5.0.0.8. any loans or investments not
covered in the previous sections of this Section 9.4
not to exceed Ten Million Dollars ($10,000,000) for any
such individual loan or investment (except for the
Thirteen Million Dollar [$13,000,000] investment in
Albemarle & Bond Holdings plc) and not to exceed Thirty
Million Dollars ($30,000,000) in the aggregate.
Section 14.6. Limitation on Issuance of Capital Stock.
The Borrower will not permit any of its Subsidiaries to, at
any time issue, sell, assign, or otherwise dispose of (a)
any of its capital stock (or any equivalent interest
therein), (b) any securities exchangeable for or convertible
into or carrying any rights to acquire any of its capital
stock (or any equivalent interest therein), or (c) any
option, warrant, or other right to acquire any of its
capital stock (or any equivalent interest therein).
Section 14.7. Transactions With Affiliates. The
Borrower will not enter into, and will not permit any
Subsidiary to enter into, any transaction, including,
without limitation, the purchase, sale, or exchange of
property or the rendering of any service, with any Affiliate
of the Borrower or such Subsidiary, except in the ordinary
course of and pursuant to the reasonable requirements of the
Borrower's or such Subsidiary's business and upon fair and
reasonable terms no less favorable to the Borrower or such
Subsidiary than would be obtained in a comparable
arm's-length transaction with a Person not an Affiliate of
the Borrower or such Subsidiary.
Section 14.8. Disposition of Assets. The Borrower
will not sell, lease, assign, transfer, or otherwise dispose
(collectively "Dispositions") of any of its assets, or
permit any Subsidiary to do so with any of its assets in
excess of Three Million Dollars ($3,000,000) per Fiscal
Year, except for (a) Dispositions of inventory in the
ordinary course of business, (b) Dispositions to a Guarantor
as to which Agent has in its possession an executed
Guaranty, (c) Dispositions in addition to those described in
(a) and (b) above, for which the Borrower and the
Subsidiaries have received fair consideration, and
(d) Dispositions which result in the sale, sale and
leaseback or exchange of up to Fifteen Million Dollars
($15,000,000) of property owned by the Borrower as of
September 30, 1998, upon fair and reasonable terms no less
favorable to the Borrower or such Subsidiary than would be
obtained in a comparable arm's-length transaction with a
Person not an Affiliate of the Borrower or such Subsidiary.
Section 14.9. Nature of Business. The Borrower will
not, and will not permit any Subsidiary to, engage in any
business other than the businesses in which they are engaged
on the date hereof and businesses related or incidental
thereto. Without in any way limiting the foregoing,
related businesses
<PAGE>
shall include, but not be limited to, the following:
check-cashing, money wires, Pay-Day Advance Loans
(hereinafter defined), jewelry sales and other financial
services incidental to the foregoing. As used herein, the
term "Pay-Day Advance Loans" means loans made by the
Borrower or any Subsidiary in accordance with past business
practices which are anticipated to be repaid by the proceeds
of post-dated checks.
Section 14.10. Environmental Protection. The Borrower
will not, and will not permit any of its Subsidiaries to,
(a) use (or permit any tenant to use) any of their
respective properties or assets for the handling,
processing, storage, transportation, or disposal of any
Hazardous Material, (b) generate any Hazardous Material, (c)
conduct any activity that is likely to cause a Release or
threatened Release of any Hazardous Material, or (d)
otherwise conduct any activity or use any of their
respective properties or assets in any manner that is likely
to violate any Environmental Law or create any Environmental
Liabilities for which the Borrower or any of its
Subsidiaries would be responsible.
Section 14.11. Accounting. The Borrower will not, and
will not permit any of its Subsidiaries to, change its
Fiscal Year or make any change in accounting treatment or
reporting practices, except as permitted by GAAP and
disclosed to the Agent.
Section 14.12. Prepayment of Debt. The Borrower will
not, and will not permit any Subsidiary to, prepay any Debt
except the Obligations.
ARTICLE 15.
Financial Covenants
The Borrower covenants and agrees that, as long as the
Obligations or any part thereof are outstanding or any
Lender has any Commitment hereunder or the Issuing Bank has
any obligation to issue Letters of Credit hereunder, the
Borrower will perform and observe the following financial
covenants:
Section 15.1. Consolidated Net Worth. Beginning with
the Fiscal Quarter ending December 31, 1998, the Borrower
will at all times maintain Consolidated Net Worth in an
amount not less than (a) One Hundred Twenty Million Dollars
($120,000,000) plus (b) an amount equal to seventy-five
percent (75%) of Consolidated Net Income (not less than zero
(0) dollars [$0.00]) for all periods subsequent to the
Fiscal Quarter ending December 31, 1998, plus (c) an amount
equal to one hundred percent (100%) of the Net Proceeds of
all equity offerings (including conversions of debt
securities into common stock) of the Borrower subsequent to
the date of this Agreement.
Section 15.2. Leverage Ratio. Beginning with the
Fiscal Quarter ending December 31, 1998, Borrower will at
all times maintain a Leverage Ratio of not greater than
(a) 3.50 to 1.0 through and including September 30, 2000 and
(b) 3.25 to 1.00 from October 1, 2000 and thereafter.
Section 15.3. Capital Expenditures. Borrower will not
permit the aggregate amount of Capital Expenditures of
Borrower and the Subsidiaries to exceed Thirty Million
Dollars ($30,000,000) during any Fiscal Year.
Section 15.4. Inventory Turnover. Borrower on a
consolidated basis will at all times maintain an Inventory
Turnover of not of not less than 1.75.
Section 15.5. Fixed Charge Coverage Ratio. Borrower
will at all times maintain a Fixed Charge Coverage Ratio of
not less than 1.50 to 1.0.
ARTICLE 16.
Default
<PAGE>
Section 16.1. Events of Default. Each of the
following shall be deemed an "Event of Default":
16.1.0.0.1. The Borrower shall fail to pay when
due the Obligations or any part thereof.
16.1.0.0.2. Any representation or warranty made
or deemed made by the Borrower or any Obligated Party
(or any of their respective officers) in any Loan
Document or in any certificate, report, notice, or
financial statement furnished at any time in connection
with this Agreement shall be false, misleading, or
erroneous in any material respect when made or deemed
to have been made.
16.1.0.0.3. The Borrower shall fail to perform,
observe, or comply with any covenant, agreement, or
term contained in Section 8.1, Article IX, or Article X
of this Agreement; or the Borrower or any Obligated
Party shall fail to perform, observe, or comply with
any other covenant, agreement, or term contained in
this Agreement or any other Loan Document (other than
covenants to pay the Obligations) and such failure
shall continue for a period of fifteen (15) days.
16.1.0.0.4. The Borrower, any Subsidiary, or
any Obligated Party shall commence a voluntary
proceeding seeking liquidation, reorganization, or
other relief with respect to itself or its debts under
any bankruptcy, insolvency, or other similar law now or
hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian, or other
similar official of it or a substantial part of its
property or shall consent to any such relief or to the
appointment of or taking possession by any such
official in an involuntary case or other proceeding
commenced against it or shall make a general assignment
for the benefit of creditors or shall generally fail to
pay its debts as they become due or shall take any
corporate action to authorize any of the foregoing.
16.1.0.0.5. An involuntary proceeding shall be
commenced against the Borrower, any Subsidiary, or any
Obligated Party seeking liquidation, reorganization, or
other relief with respect to it or its debts under any
bankruptcy, insolvency, or other similar law now or
hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other
similar official for it or a substantial part of its
property, and such involuntary proceeding shall remain
undismissed and unstayed for a period of thirty (30)
days.
16.1.0.0.6. The Borrower, any Subsidiary, or
any Obligated Party shall fail to discharge within a
period of forty-five (45) days after the commencement
thereof any attachment, sequestration, or similar
proceeding or proceedings involving an aggregate amount
in excess of Two Hundred Fifty Thousand Dollars
($250,000.00) against any of its assets or properties.
16.1.0.0.7. A final judgment or judgments for
the payment of money in excess of Two Hundred Fifty
Thousand Dollars ($250,000.00) in the aggregate shall
be rendered by a court or courts against the Borrower,
any of its Subsidiaries, or any Obligated Party and the
same shall not be discharged (or provision shall not be
made for such discharge), or a stay of execution
thereof shall not be procured, within forty-five (45)
days from the date of entry thereof and the Borrower or
the relevant Subsidiary or Obligated Party shall not,
within said period of forty-five (45) days, or such
longer period during which execution of the same shall
have been stayed, appeal therefrom and cause the
execution thereof to be stayed during such appeal.
<PAGE>
16.1.0.0.8. The Borrower, any Subsidiary, or
any Obligated Party shall fail to pay when due any
principal of or interest on any Material Debt
(hereinafter defined) (other than the Obligations), or
the maturity of any such Debt shall have been
accelerated, or any such Debt shall have been required
to be prepaid prior to the stated maturity thereof, or
any event shall have occurred that permits any holder
or holders of such Debt or any Person acting on behalf
of such holder or holders to accelerate the maturity
thereof or require any such prepayment. For purposes
of this clause (h) the term "Material Debt" means Debt
owed by the Borrower or any Subsidiary the principal
amount of which exceeds Two Hundred Fifty Thousand
Dollars ($250,000).
16.1.0.0.9. This Agreement or any other Loan
Document shall cease to be in full force and effect or
shall be declared null and void or the validity or
enforceability thereof shall be contested or challenged
by the Borrower, any Subsidiary, any Obligated Party or
any of their respective shareholders, or the Borrower
or any Obligated Party shall deny that it has any
further liability or obligation under any of the Loan
Documents.
16.1.0.0.10. Any of the following events shall
occur or exist with respect to the Borrower or any
ERISA Affiliate: (i) any Prohibited Transaction
involving any Plan; (ii) any Reportable Event with
respect to any Plan; (iii) the filing under Section
4041 of ERISA of a notice of intent to terminate any
Plan or the termination of any Plan; (iv) any event or
circumstance that might constitute grounds entitling
the PBGC to institute proceedings under Section 4042 of
ERISA for the termination of, or for the appointment of
a trustee to administer, any Plan, or the institution
by the PBGC of any such proceedings; or (v) complete or
partial withdrawal under Section 4201 or 4204 of ERISA
from a Multiemployer Plan or the reorganization,
insolvency, or termination of any Multiemployer Plan;
and in each case above, such event or condition,
together with all other events or conditions, if any,
have subjected or could in the reasonable opinion of
Required Banks subject the Borrower to any tax,
penalty, or other liability to a Plan, a Multiemployer
Plan, the PBGC, or otherwise (or any combination
thereof) which in the aggregate exceed or could
reasonably be expected to exceed Two Hundred Fifty
Thousand Dollars ($250,000.00).
16.1.0.0.11. Any Person or group of related
Persons for purposes of Section 13(d) of the Exchange
Act acquires after the date hereof "beneficial
ownership" (within the meaning of Section 13(d) of the
Exchange Act) in excess of thirty-three percent (33%)
of the total voting power of all classes of capital
stock then outstanding of Borrower entitled (without
regard to the occurrence of any contingency) to vote in
elections of directors of Borrower.
16.1.0.0.12. The Borrower or any of its
Subsidiaries, or any of their properties, revenues, or
assets, shall become the subject of an order of
forfeiture, seizure, or divestiture (whether under RICO
or otherwise) and the same shall not have been
discharged (or provisions shall not be made for such
discharge) within thirty (30) days from the date of
entry thereof.
16.1.0.0.13. Any Material Adverse Effect shall
occur.
Section 16.2. Remedies.
16.2.0.0.1. If any Event of Default shall occur
and be continuing, the Agent may (and if directed by
Required Lenders, shall) do any one or more of the
following:
16.2.0.0.1.0.1. Acceleration.
Declare all outstanding principal of and accrued
and unpaid interest on the Notes, all outstanding
Letter of Credit Disbursements, and all other
obligations of the Borrower under the Loan
Documents immediately due and payable, and the
same shall thereupon become immediately due and
payable,
<PAGE>
without notice, demand, presentment, notice of
dishonor, notice of acceleration, notice of intent
to accelerate, protest, or other formalities of
any kind, all of which are hereby expressly waived
by the Borrower.
16.2.0.0.1.0.2. Termination of
Commitments. Terminate the Commitments and the
obligation of the Issuing Bank to issue Letters of
Credit without notice to the Borrower.
16.2.0.0.1.0.3. Judgment. Reduce
any claim to judgment.
16.2.0.0.1.0.4. Foreclosure.
Foreclose or otherwise enforce any Lien granted to
the Agent for the benefit of itself and the
Lenders to secure payment and performance of the
Obligations in accordance with the terms of the
Loan Documents.
16.2.0.0.1.0.5. Rights. Exercise
any and all rights and remedies afforded by the
laws of the State of Texas or any other
jurisdiction, by any of the Loan Documents, by
equity, or otherwise.
Provided, however, that upon the occurrence of an Event
of Default under Subsection (d) or (e) of Section 11.1,
the Commitments of all of the Lenders and the
obligation of the Issuing Bank to issue Letters of
Credit shall automatically terminate, and the
outstanding principal of and accrued and unpaid
interest on the Notes and all other obligations of the
Borrower under the Loan Documents shall thereupon
become immediately due and payable without notice,
demand, presentment, notice of dishonor, notice of
acceleration, notice of intent to accelerate, protest,
or other formalities of any kind, all of which are
hereby expressly waived by the Borrower.
16.2.0.0.2. If an Event of Default shall have
occurred and be continuing, each Lender is hereby
authorized at any time and from time to time, without
notice to the Borrower (any such notice being hereby
expressly waived by the Borrower), to set off and apply
any and all deposits (general or special, time or
demand, provisional or final) at any time held and
other indebtedness at any time owing by such Lender to
or for the credit or the account of the Borrower
against any and all of the obligations of the Borrower
now or hereafter existing under this Agreement, such
Lender's Note, or any other Loan Document, irrespective
of whether or not the Agent or such Lender shall have
made any demand under this Agreement or such Lender's
Note or such other Loan Document and although such
obligations may be unmatured. Each Lender agrees
promptly to notify the Borrower (with a copy to the
Agent and to each Lender) after any such setoff and
application, provided that the failure to give such
notice shall not affect the validity of such setoff and
application. The rights and remedies of each Lender
hereunder are in addition to other rights and remedies
(including, without limitation, other rights of setoff)
which such Lender may have.
Section 16.3. Cash Collateral. If an Event of Default
shall have occurred and be continuing the Borrower shall, if
requested by the Agent or Required Lenders, pledge to the
Agent as security for the Obligations an amount in
immediately available funds equal to the then outstanding
Letter of Credit Liabilities, such funds to be held in a
cash collateral account at the Agent without any right of
withdrawal by the Borrower.
Section 16.4. Performance by the Agent. If the
Borrower shall fail to perform any covenant or agreement in
accordance with the terms of the Loan Documents, the Agent
may, at the direction of Required Lenders, perform or
attempt to perform such covenant or agreement on behalf of
the Borrower. In such event, the Borrower shall, at the
request of the Agent, promptly pay any amount reasonably
expended by the Agent or the Lenders in connection with such
performance or attempted performance to the Agent at the
Principal Office, together with interest thereon at the
Default Rate from and including the date of such expenditure
to but excluding the date such expenditure is paid in full.
Notwithstanding the
<PAGE>
foregoing, it is expressly agreed that neither the Agent nor
any Lender shall have any liability or responsibility for
the performance of any obligation of the Borrower under this
Agreement or any of the other Loan Documents.
ARTICLE 17.
The Agent
Section 17.1. Appointment, Powers and Immunities. In
order to expedite the various transactions contemplated by
this agreement, the Lenders and the Issuing Bank hereby
irrevocably appoint and authorize Wells Fargo Bank (Texas),
National Association to act as their Agent hereunder and
under each of the other Loan Documents. Wells Fargo Bank
(Texas), National Association consents to such appointment
and agrees to perform the duties of the Agent as specified
herein. The Lenders and the Issuing Bank authorize and
direct the Agent to take such action in their name and on
their behalf under the terms and provisions of the Loan
Documents and to exercise such rights and powers thereunder
as are specifically delegated to or required of the Agent
for the Lenders and/or the Issuing Bank, together with such
rights and powers as are reasonably incidental thereto. The
Agent is hereby expressly authorized to act as the Agent on
behalf of itself, the other Lenders and the Issuing Bank:
17.1.0.0.1. To receive on behalf of each of the
Lenders and the Issuing Bank any payment of principal,
interest, fees (except for the annual agent fee
described in Section 2.9(b)) or other amounts paid
pursuant to this Agreement and the Notes and to
distribute to each Lender and/or the Issuing Bank its
share of all payments so received as provided in this
Agreement;
17.1.0.0.2. To receive all documents and items
to be furnished under the Loan Documents;
17.1.0.0.3. To act as nominee for and on behalf
of the Lenders and the Issuing Bank in and under the
Loan Documents;
17.1.0.0.4. To arrange for the means whereby
the Advances are to be made available to the Borrower;
17.1.0.0.5. To distribute to the Lenders and
the Issuing Bank information, requests, notices,
payments, prepayments, documents and other items
received from the Borrower, the other Obligated
Parties, and other Persons;
17.1.0.0.6. To execute and deliver to the
Borrower, the other Obligated Parties, and other
Persons, all requests, demands, approvals, notices, and
consents received from the Lenders and the Issuing
Bank;
17.1.0.0.7. To the extent permitted by the Loan
Documents, to exercise on behalf of each Lender and the
Issuing Bank all rights and remedies of Lenders and the
Issuing Bank upon the occurrence of any Event of
Default;
17.1.0.0.8. To serve as liaison between the
Lenders, the Issuing Bank and the Borrower with respect
to future negotiations, amendments and waivers of the
terms of this Agreement and transmittal of copies of
such amendments and waivers for signature to each
Lender and the Issuing Bank;
17.1.0.0.9. To receive signed copies of this
Agreement, future amendments hereto, waivers of any
terms hereof, and related documents comprising the Loan
<PAGE>
Documents, and provide appropriate signed or
reproduction copies thereof to each Lender, the Issuing
Bank and the Borrower;
17.1.0.0.10. To forward to each Lender and the
Issuing Bank copies of all Loan Documents and opinions
furnished to Agent under this Agreement or any of the
other Loan Documents;
17.1.0.0.11. To receive notices of Defaults,
copies of which shall be forwarded to all Lenders and
the Issuing Bank, and any waivers of Defaults under
this Agreement and forward copies thereof to all
Lenders and the Issuing Bank;
17.1.0.0.12. To advise each Lender and the
Issuing Bank of all notices received or furnished by
Agent hereunder;
17.1.0.0.13. To take such other actions as may
be requested by Required Lenders; and
17.1.0.0.14. To accept, execute, and deliver any
and all security documents as the secured party.
Neither the Agent nor any of its Affiliates, officers,
directors, employees, attorneys, or agents shall be liable
to the Lenders for any action taken or omitted to be taken
by any of them hereunder or otherwise in connection with
this Agreement or any of the other Loan Documents except for
its or their own gross negligence or willful misconduct.
Without limiting the generality of the preceding sentence,
the Agent (i) may treat the payee of any Note as the holder
thereof until the Agent receives written notice of the
assignment or transfer thereof signed by such payee and in
form satisfactory to the Agent; (ii) shall have no duties or
responsibilities except those expressly set forth in this
Agreement and the other Loan Documents, and shall not by
reason of this Agreement or any other Loan Document be a
trustee or fiduciary for any Lender or the Issuing Bank;
(iii) shall not be required to initiate any litigation or
collection proceedings hereunder or under any other Loan
Document except to the extent requested by Required Lenders;
(iv) shall not be responsible to the Lenders or the Issuing
Bank for any recitals, statements, representations or
warranties contained in this Agreement or any other Loan
Document, or any certificate or other document referred to
or provided for in, or received by any of them under, this
Agreement or any other Loan Document, or for the value,
validity, effectiveness, enforceability, or sufficiency of
this Agreement or any other Loan Document or any other
document referred to or provided for herein or therein or
for any failure by any Person to perform any of its
obligations hereunder or thereunder; (v) may consult with
legal counsel (including counsel for the Borrower),
independent public accountants, and other experts selected
by it and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with
the advice of such counsel, accountants, or experts; and
(vi) shall incur no liability under or in respect of any
Loan Document by acting upon any notice, consent,
certificate, or other instrument or writing believed by it
to be genuine and signed or sent by the proper party or
parties. As to any matters not expressly provided for by
this Agreement, the Agent shall in all cases be fully
protected in acting, or in refraining from acting, hereunder
in accordance with instructions signed by Required Lenders,
and such instructions of Required Lenders and any action
taken or failure to act pursuant thereto shall be binding on
all of the Lenders; provided, however, that the Agent shall
not be required to take any action which exposes the Agent
to personal liability or which is contrary to this Agreement
or any other Loan Document or applicable law.
Section 17.2. Rights of Agent as a Lender. With
respect to its Commitment, the Advances made by it and the
Notes issued to it, Wells Fargo Bank (Texas), National
Association in its capacity as a Lender hereunder shall have
the same rights and powers hereunder as any other Lender and
may exercise the same as though it were not acting as the
Agent, and the term "Lender" or "Lenders" shall, unless the
context otherwise indicates, include the Agent in its
individual capacity. The Agent and its Affiliates may
(without having to account therefor to any Lender) accept
deposits from, lend money to, act as trustee under
indentures of, provide merchant banking services to, and
generally engage in any kind of business
<PAGE>
with the Borrower, any of its Subsidiaries, any other
Obligated Party, and any other Person who may do business
with or own securities of the Borrower, any Subsidiary, or
any other Obligated Party, all as if it were not acting as
the Agent and without any duty to account therefor to the
Lenders.
Section 17.3. Sharing of Payments, Etc. If any Lender
shall obtain any payment of any principal of or interest on
any Advance made by it under this Agreement or payment of
any other obligation under the Loan Documents then owed by
the Borrower or any other Obligated Party to such Lender,
whether voluntary, involuntary, through the exercise of any
right of set-off, banker's lien, counterclaim or similar
right, or otherwise, in excess of its pro rata share
(calculated (i) pursuant to Section 3.5 in respect of letter
of credit fees, and (ii) for all other of the Obligations on
the basis of the unpaid principal of and interest on the
Revolving Credit Loan, the Swing Loan and LC Participations
and SL Participations held by it), such Lender shall
promptly purchase from the other Lenders participations in
the Obligations owed to them hereunder in such amounts, and
make such other adjustments from time to time as shall be
necessary to cause such purchasing Lender to share the
excess payment ratably with each of the other Lenders in
accordance with its pro rata portion thereof. To such end,
all of the Lenders shall make appropriate adjustments among
themselves (by the resale of participations sold or
otherwise) if all or any portion of such excess payment is
thereafter rescinded or must otherwise be restored. The
Borrower agrees, to the fullest extent it may effectively do
so under applicable law, that any Lender so purchasing a
participation in the Advances and LC Participations made by
the other Lenders may exercise all rights of set-off,
banker's lien, counterclaim, or similar rights with respect
to such participation as fully as if such Lender were a
direct holder of Advances to, or Letter of Credit
Disbursements for the account of, the Borrower in the amount
of such participation. Nothing contained herein shall
require any Lender to exercise any such right or shall
affect the right of any Lender to exercise, and retain the
benefits of exercising, any such right with respect to any
other indebtedness or obligation of the Borrower.
Section 17.4. Indemnification. THE LENDERS HEREBY
AGREE TO INDEMNIFY THE AGENT AND THE ISSUING BANK FROM AND
HOLD THE AGENT AND THE ISSUING BANK HARMLESS AGAINST (TO THE
EXTENT NOT REIMBURSED UNDER SECTIONS 13.1 AND 13.2, BUT
WITHOUT LIMITING THE OBLIGATIONS OF THE BORROWER UNDER
SECTIONS 13.1 AND 13.2), RATABLY IN ACCORDANCE WITH THEIR
RESPECTIVE COMMITMENTS, ANY AND ALL LIABILITIES,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS,
DEFICIENCIES, SUITS, COSTS, EXPENSES (INCLUDING REASONABLE
ATTORNEYS' FEES), AND DISBURSEMENTS OF ANY KIND OR NATURE
WHATSOEVER WHICH MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED
AGAINST THE AGENT AND THE ISSUING BANK IN ANY WAY RELATING
TO OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY ACTION
TAKEN OR OMITTED TO BE TAKEN BY THE AGENT AND THE ISSUING
BANK UNDER OR IN RESPECT OF ANY OF THE LOAN DOCUMENTS;
PROVIDED, FURTHER, THAT NO LENDER SHALL BE LIABLE FOR ANY
PORTION OF THE FOREGOING TO THE EXTENT CAUSED BY THE AGENT'S
OR THE ISSUING BANK'S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT. WITHOUT LIMITING ANY OTHER PROVISION OF THIS
SECTION, EACH LENDER AGREES TO REIMBURSE THE AGENT AND THE
ISSUING BANK PROMPTLY UPON DEMAND FOR ITS PRO RATA SHARE
(CALCULATED ON THE BASIS OF THE COMMITMENTS) OF ANY AND ALL
OUT-OF-POCKET EXPENSES (INCLUDING REASONABLE ATTORNEYS'
FEES) INCURRED BY THE AGENT AND THE ISSUING BANK IN
CONNECTION WITH THE PREPARATION, EXECUTION, DELIVERY,
ADMINISTRATION, MODIFICATION, AMENDMENT OR ENFORCEMENT
(WHETHER THROUGH NEGOTIATIONS, LEGAL PROCEEDINGS, OR
OTHERWISE) OF, OR LEGAL ADVICE IN RESPECT OF RIGHTS OR
RESPONSIBILITIES UNDER, THE LOAN DOCUMENTS, TO THE EXTENT
THAT THE AGENT OR THE ISSUING BANK IS NOT REIMBURSED FOR
SUCH EXPENSES BY THE BORROWER.
Section 17.5. Independent Credit Decisions. Each
Lender agrees that it has independently and without reliance
on the Agent, the Issuing Bank or any other Lender, and
based on such documents and information as it has deemed
appropriate, made its own credit analysis of the Borrower
and decision to enter into this Agreement and that it will,
independently and without reliance upon the Agent, the
Issuing
<PAGE>
Bank or any other Lender, and based upon such documents and
information as it shall deem appropriate at the time,
continue to make its own analysis and decisions in taking or
not taking action under this Agreement or any of the other
Loan Documents. The Agent shall not be required to keep
itself informed as to the performance or observance by the
Borrower or any Obligated Party of this Agreement or any
other Loan Document or to inspect the properties or books of
the Borrower or any Obligated Party. Except for notices,
reports and other documents and information expressly
required to be furnished to the Lenders and the Issuing Bank
by the Agent hereunder or under the other Loan Documents,
neither the Agent nor the Issuing Bank shall have any duty
or responsibility to provide any Lender with any credit or
other financial information concerning the affairs,
financial condition or business of the Borrower or any
Obligated Party (or any of their Affiliates) which may come
into the possession of the Agent, the Issuing Bank or any of
their Affiliates.
Section 17.6. Several Commitments. The Commitments
and other obligations of the Lenders under this Agreement
are several. The default by any Lender in making an Advance
in accordance with its Commitment shall not relieve the
other Lenders of their obligations under this Agreement. In
the event of any default by any Lender in making any
Advance, each nondefaulting bank shall be obligated to make
its Advance but shall not be obligated to advance the amount
which the defaulting Lender was required to advance
hereunder. In no event shall any Lender be required to
advance an amount or amounts which shall in the aggregate
exceed such Lender's Commitment. No Lender shall be
responsible for any act or omission of any other Lender.
Section 17.7. Successor Agent. Subject to the
appointment and acceptance of a successor Agent as provided
below, the Agent may resign at any time by giving notice
thereof to the Lenders, the Issuing Bank and the Borrower
and the Agent may be removed at any time with or without
cause by Required Lenders. Upon any such resignation or
removal, Required Lenders will have the right to appoint a
successor Agent. If no successor Agent shall have been so
appointed by Required Lenders and shall have accepted such
appointment within thirty (30) days after the retiring
Agent's giving of notice of resignation or the Required
Lenders' removal of the retiring Agent, then the retiring
Agent may, on behalf of the Lenders and the Issuing Bank,
appoint a successor Agent, which shall be a commercial bank
organized under the laws of the United States of America or
any State thereof and having combined capital and surplus of
at least One Hundred Million Dollars ($100,000,000). Upon
the acceptance of its appointment as successor Agent, such
successor Agent shall thereupon succeed to and become vested
with all rights, powers, privileges, immunities, and duties
of the resigning or removed Agent, and the resigning or
removed Agent shall be discharged from its duties and
obligations under this Agreement and the other Loan
Documents. After any Agent's resignation or removal as
Agent, the provisions of this Article XII shall continue in
effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was the Agent. After the
retiring Agent's resignation or removal hereunder as Agent,
each reference herein to a place of giving of notice or
delivery to Agent shall be deemed to refer to the principal
office of the successor Agent as it may specify to each
party hereto.
<PAGE>
ARTICLE 18.
Miscellaneous
Section 18.1. Expenses. The Borrower hereby agrees to
pay on demand: (a) all reasonable costs and expenses of the
Agent and the Issuing Bank in connection with the
preparation, negotiation, execution, and delivery of this
Agreement and the other Loan Documents and any and all
amendments, modifications, renewals, extensions, and
supplements thereof and thereto, including, without
limitation, the reasonable fees and expenses of legal
counsel for the Agent and the Issuing Bank, (b) all costs
and expenses of the Agent, the Issuing Bank and the Lenders
in connection with any Default and the enforcement of this
Agreement or any other Loan Document, including, without
limitation, the fees and expenses of legal counsel for the
Agent, the Issuing Bank and the Lenders, (c) all transfer,
stamp, documentary, or other similar taxes, assessments, or
charges levied by any Governmental Authority in respect of
this Agreement or any of the other Loan Documents, (d) all
costs, expenses, assessments, and other charges incurred in
connection with any filing, registration, recording, or
perfection of any security interest or Lien, if any,
contemplated by this Agreement or any other Loan Document,
and (e) all other costs and expenses incurred by the Agent
and the Issuing Bank in connection with this Agreement or
any other Loan Document.
Section 18.2. INDEMNIFICATION. THE BORROWER HEREBY
AGREES TO INDEMNIFY THE AGENT, THE ISSUING BANK AND EACH
LENDER AND EACH AFFILIATE THEREOF AND THEIR RESPECTIVE
OFFICERS, DIRECTORS, EMPLOYEES, ATTORNEYS, AND AGENTS FROM,
AND HOLD EACH OF THEM HARMLESS AGAINST, ANY AND ALL LOSSES,
LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS,
DISBURSEMENTS, COSTS, AND EXPENSES (INCLUDING REASONABLE
ATTORNEYS' FEES) TO WHICH ANY OF THEM MAY BECOME SUBJECT
WHICH DIRECTLY OR INDIRECTLY ARISE FROM OR RELATE TO (a) THE
NEGOTIATION, EXECUTION, DELIVERY, PERFORMANCE,
ADMINISTRATION, OR ENFORCEMENT OF ANY OF THE LOAN DOCUMENTS,
(b) ANY OF THE TRANSACTIONS CONTEMPLATED BY THE LOAN
DOCUMENTS, (c) ANY BREACH BY THE BORROWER OF ANY
REPRESENTATION, WARRANTY, COVENANT, OR OTHER AGREEMENT
CONTAINED IN ANY OF THE LOAN DOCUMENTS, (d) THE PRESENCE,
RELEASE, THREATENED RELEASE, DISPOSAL, REMOVAL, OR CLEANUP
OF ANY HAZARDOUS MATERIAL LOCATED ON, ABOUT, WITHIN, OR
AFFECTING ANY OF THE PROPERTIES OR ASSETS OF THE BORROWER OR
ANY SUBSIDIARY, (e) THE USE OR PROPOSED USE OF ANY LETTER OF
CREDIT, (f) ANY AND ALL TAXES, LEVIES, DEDUCTIONS, AND
CHARGES IMPOSED ON THE ISSUING BANK OR ANY OF THE ISSUING
BANK'S CORRESPONDENTS IN RESPECT OF ANY LETTER OF CREDIT, OR
(g) ANY INVESTIGATION, LITIGATION, OR OTHER PROCEEDING,
INCLUDING, WITHOUT LIMITATION, ANY THREATENED INVESTIGATION,
LITIGATION, OR OTHER PROCEEDING RELATING TO ANY OF THE
FOREGOING AND ANY LEGAL PROCEEDING RELATING TO ANY COURT
ORDER, INJUNCTION OR OTHER PROCESS OR DECREE RESTRAINING OR
SEEKING TO RESTRAIN THE ISSUING BANK FROM PAYING ANY AMOUNT
UNDER ANY LETTER OF CREDIT. WITHOUT LIMITING ANY PROVISION
OF THIS AGREEMENT OR OF ANY OTHER LOAN DOCUMENT, IT IS THE
EXPRESS INTENTION OF THE PARTIES HERETO THAT EACH PERSON TO
BE INDEMNIFIED UNDER THIS SECTION SHALL BE INDEMNIFIED FROM
AND HELD HARMLESS AGAINST ANY AND ALL LOSSES, LIABILITIES,
CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS, COSTS,
AND EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEES) ARISING
OUT OF OR RESULTING FROM THE SOLE OR CONTRIBUTORY NEGLIGENCE
OF SUCH PERSON; PROVIDED HOWEVER, NO PERSON SHALL BE
INDEMNIFIED HEREUNDER FOR ITS OWN GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT.
Section 18.3. Limitation of Liability. None of the
Agent, the Issuing Bank, any Lender, or any Affiliate,
officer, director, employee, attorney, or agent thereof
shall have any liability with respect to,
<PAGE>
and the Borrower hereby waives, releases, and agrees not to
sue any of them upon, any claim for any special, indirect,
incidental, or consequential damages suffered or incurred by
the Borrower in connection with, arising out of, or in any
way related to, this Agreement or any of the other Loan
Documents, or any of the transactions contemplated by this
Agreement or any of the other Loan Documents, including
without limitation, any damages suffered or incurred by the
Borrower in connection with Swing Loan Advances made by
telephonic notice pursuant to Section 2.7(a) hereto, except
for such Person's gross negligence or willful misconduct.
Section 18.4. No Duty. All attorneys, accountants,
appraisers, and other professional Persons and consultants
retained by the Agent, the Issuing Bank and the Lenders
shall have the right to act exclusively in the interest of
the Agent, the Issuing Bank and the Lenders and shall have
no duty of disclosure, duty of loyalty, duty of care, or
other duty or obligation of any type or nature whatsoever to
the Borrower or any of the Borrower's shareholders or any
other Person.
Section 18.5. No Fiduciary Relationship. The
relationship between the Borrower and each of the Issuing
Bank and the Lenders is solely that of debtor and creditor,
and neither the Agent, the Issuing Bank nor any Lender has
any fiduciary or other special relationship with the
Borrower, and no term or condition of any of the Loan
Documents shall be construed so as to deem the relationship
between the Borrower and any of the Issuing Bank and the
Lenders to be other than that of debtor and creditor.
Section 18.6. Equitable Relief. The Borrower
recognizes that in the event the Borrower fails to pay,
perform, observe, or discharge any or all of the
Obligations, any remedy at law may prove to be inadequate
relief to the Agent, the Issuing Bank and the Lenders. The
Borrower therefore agrees that the Agent, the Issuing Bank
and the Lenders, if the Agent, the Issuing Bank or the
Lenders so request, shall be entitled to temporary and
permanent injunctive relief in any such case without the
necessity of proving actual damages.
Section 18.7. No Waiver; Cumulative Remedies. No
failure on the part of the Agent, the Issuing Bank or any
Lender to exercise and no delay in exercising, and no course
of dealing with respect to, any right, power, or privilege
under this Agreement shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power, or
privilege under this Agreement preclude any other or further
exercise thereof or the exercise of any other right, power,
or privilege. The rights and remedies provided for in this
Agreement and the other Loan Documents are cumulative and
not exclusive of any rights and remedies provided by law.
Section 18.8. Successors and Assigns.
<PAGE>
18.8.0.0.1. This Agreement shall be binding
upon and inure to the benefit of the parties hereto
and their respective successors and assigns. The
Borrower may not assign or transfer any of its rights
or obligations hereunder without the prior written
consent of the Agent, the Issuing Bank and all of the
Lenders. Any Lender may sell participations to one or
more banks or other institutions in or to all or a
portion of its rights and obligations under this
Agreement and the other Loan Documents (including,
without limitation, all or a portion of its Commitments
and the Advances owing to it and the LC Participations
held by it); provided, however, that (i) such Lender's
obligations under this Agreement and the other Loan
Documents (including, without limitation, its
Commitment) shall remain unchanged, (ii) such Lender
shall remain solely responsible to the Borrower for the
performance of such obligations, (iii) such Lender
shall remain the holder of its Note and LC
Participations for all purposes of this Agreement, (iv)
the Borrower shall continue to deal solely and directly
with such Lender in connection with such Lender's
rights and obligations under this Agreement and the
other Loan Documents, and (v) such Lender shall not
sell a participation that conveys to the participant
the right to vote or give or withhold consents under
this Agreement or any other Loan Document, other than
the right to vote upon or consent to (A) any increase
of such Lender's Commitment, (B) any reduction of the
principal amount of, or interest to be paid on, the
Advances and LC Participations of such Lender, (C) any
reduction of any commitment fee or other amount payable
to such Lender under any Loan Document, or (D) any
postponement of any date for the payment of any amount
payable in respect of the Advances or LC Participations
of such Lender.
18.8.0.0.2. The Borrower and each of the
Issuing Bank and the Lenders agree that any Lender (the
"Assigning Lender") may at any time assign to one or
more Eligible Assignees all, or a proportionate part of
all, of its rights and obligations under this Agreement
and the other Loan Documents (including, without
limitation, its Commitment and Advances and LC
Participations) (each an "Assignee"); provided,
however, that (i) each such assignment shall be of a
consistent, and not a varying, percentage of all of the
Assigning Lender's rights and obligations under this
Agreement and the other Loan Documents, (ii) except in
the case of an assignment of all of a Lender's rights
and obligations under this Agreement and the other Loan
Documents, the amount of the Commitment of the
Assigning Lender being assigned pursuant to each
assignment (determined as of the date of the Assignment
and Acceptance with respect to such assignment) shall
in no event be less than Five Million Dollars
($5,000,000.00), and (iii) the parties to each such
assignment shall execute and deliver to the Agent for
its acceptance and recording in the Register (as
defined below), an Assignment and Acceptance, together
with the Note subject to such assignment, and a
processing and recordation fee of Three Thousand
Dollars ($3000.00). Upon such execution, delivery,
acceptance, and recording, from and after the effective
date specified in each Assignment and Acceptance, which
effective date shall be at least five (5) Business Days
after the execution thereof, or, if so specified in
such Assignment and Acceptance, the date of acceptance
thereof by the Agent, (x) the assignee thereunder shall
be a party hereto as a "Lender" and, to the extent that
rights and obligations hereunder have been assigned to
it pursuant to such Assignment and Acceptance, have the
rights and obligations of a Lender hereunder and under
the Loan Documents and (y) the Assigning Lender shall,
to the extent that rights and obligations hereunder
have been assigned by it pursuant to such Assignment
and Acceptance, relinquish its rights and be released
from its obligations under this Agreement and the other
Loan Documents (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an
Assigning Lender's rights and obligations under the
Loan Documents, such Assigning Lender shall cease to be
a party thereto).
18.8.0.0.3. By executing and delivering an
Assignment and Acceptance, the Assigning Lender and the
Assignee thereunder confirm to and agree with each
other and the other parties hereto as follows: (i)
other than as provided in such Assignment and
<PAGE>
Acceptance, such Assigning Lender makes no
representation or warranty and assumes no
responsibility with respect to any statements,
warranties, or representations made in or in connection
with the Loan Documents or the execution, legality,
validity, and enforceability, genuineness, sufficiency,
or value of the Loan Documents or any other instrument
or document furnished pursuant thereto; (ii) such
Assigning Lender makes no representation or warranty
and assures no responsibility with respect to the
financial condition of the Borrower or any Obligated
Party or the performance or observance by the Borrower
or any Obligated Party of its obligations under the
Loan Documents; (iii) such assignee confirms that it
has received a copy of the other Loan Documents,
together with copies of the financial statements
referred to in Section 7.2 and such other documents and
information as it has deemed appropriate to make its
own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee will,
independently and without reliance upon the Agent, the
Issuing Bank or any Lender and based on such documents
and information as it shall deem appropriate at the
time, continue to make its own credit decisions in
taking or not taking action under this Agreement and
the other Loan Documents; (v) such assignee confirms
that it is an Eligible Assignee; (vi) such assignee
appoints and authorizes the Agent to take such action
as agent on its behalf and exercise such powers under
the Loan Documents are as delegated to the Agent by the
terms thereof, together with such powers as are
reasonably incidental thereto; and (vii) such assignee
agrees that it will perform in accordance with their
terms all of the obligations which by the terms of the
Loan Documents are required to be performed by it as a
Lender.
18.8.0.0.4. The Agent shall maintain at its
Principal Office a copy of each Assignment and
Acceptance delivered to and accepted by it and a
register for the recordation of the names and addresses
of the Lenders and the Commitment of, and principal
amount of the Advances owing to, and LC Participations
held by, each Lender from time to time (the
"Register"). The entries in the Register shall be
conclusive and binding for all purposes, absent
manifest error, and the Borrower, the Agent, the
Issuing Bank and the Lenders may treat each Person
whose name is recorded in the Register as a Lender
hereunder for all purposes under the Loan Documents.
The Register shall be available for inspection by the
Borrower, any Lender or the Issuing Bank at any
reasonable time and from time to time upon reasonable
prior notice.
18.8.0.0.5. Upon its receipt of an Assignment
and Acceptance executed by an assigning Lender and
assignee representing that it is an Eligible Assignee,
together with any Note subject to such assignment, the
Agent shall, if such Assignment and Acceptance has been
completed and is in substantially the form of Exhibit
"E" hereto, (i) accept such Assignment and Acceptance,
(ii) record the information contained therein in the
Register, and (iii) give prompt written notice thereof
to the Borrower. Within five (5) Business Days after
its receipt of such notice, the Borrower, at its
expense, shall execute and deliver to the Agent in
exchange for the surrendered Note a new Note to the
order of such Eligible Assignee in an amount equal to
the Commitment assumed by it pursuant to such
Assignment and Acceptance and, if the assigning Lender
has retained a Commitment, a new Note to the order of
the assigning Lender in an amount equal to the
Commitment retained by it hereunder (each such
promissory note shall constitute a "Note" for purposes
of the Loan Documents). Such new Notes shall be in an
aggregate principal amount of the surrendered Note,
shall be dated the effective date of such Assignment
and Acceptance, and shall otherwise be in substantially
the form of Exhibit "A-1" hereto.
18.8.0.0.6. Any Lender may, in connection with
any assignment or participation or proposed assignment
or participation pursuant to this Section, disclose to
the assignee or participant or proposed assignee or
participant, any information relating to the Borrower
or its Subsidiaries furnished to such Lender by or on
behalf of the Borrower or its Subsidiaries.
<PAGE>
Section 18.9. Survival. All representations and
warranties made in this Agreement or any other Loan Document
or in any document, statement, or certificate furnished in
connection with this Agreement shall survive the execution
and delivery of this Agreement and the other Loan Documents,
and no investigation by the Agent, the Issuing Bank or any
Lender or any closing shall affect the representations and
warranties or the right of the Agent, the Issuing Bank or
any Lender to rely upon them. Without prejudice to the
survival of any other obligation of the Borrower hereunder,
the obligations of the Borrower under Article V and Sections
13.1 and 13.2 shall survive repayment of the Notes and
termination of the Commitments and the Letters of Credit.
Section 18.10. Amendments, Etc. No amendment or waiver
of any provision of this Agreement, the Notes, or any other
Loan Document to which the Borrower or any Obligated Party
is a party, nor any consent to any departure by the Borrower
or Obligated Party therefrom, shall in any event be
effective unless the same shall be agreed or consented to by
Required Lenders and the Borrower or the Obligated Party, as
applicable, and each such waiver or consent shall be
effective only in the specific instance and for the specific
purpose for which given; provided, that no amendment,
waiver, or consent shall, unless in writing and signed by
all of the Lenders and the Borrower, do any of the
following: (a) increase Commitments of the Lenders or
subject the Lenders to any additional obligations; (b)
reduce the principal of, or interest on, the Notes or any
fees or other amounts payable hereunder; (c) postpone any
date fixed for any payment of principal of, or interest on,
the Notes or Letter of Credit Disbursements or any fees or
other amounts payable hereunder; (d) waive any of the
conditions specified in Article VI; (e) change the
percentage of the Commitments or of the aggregate unpaid
principal amount of the Notes or Letter of Credit
Liabilities or the number of Lenders which shall be required
for the Lenders or any of them to take any action under this
Agreement; (f) change any provision contained in this
Section 13.10; and (g) release the Borrower from any of its
obligations under this Agreement or the other Loan Documents
or release any Guarantor from its obligations under its
Guaranty. Notwithstanding anything to the contrary
contained in this Section, no amendment, waiver, or consent
shall be made (a) with respect to Article XII hereof without
the prior written consent of the Agent, (b) with respect to
Section 2.7 hereof without the prior written consent of the
Swing Lender, or (c) with respect to Article III hereof
without the prior written consent of the Issuing Bank.
Section 18.11. Maximum Interest Rate. No provision of
this Agreement or of any other Loan Document shall require
the payment or the collection of interest in excess of the
maximum amount permitted by applicable law. If any excess
of interest in such respect is hereby provided for, or shall
be adjudicated to be so provided, in any Loan Document or
otherwise in connection with this loan transaction, the
provisions of this Section shall govern and prevail and
neither the Borrower nor the sureties, guarantors,
successors, or assigns of the Borrower shall be obligated to
pay the excess amount of such interest or any other excess
sum paid for the use, forbearance, or detention of sums
loaned pursuant hereto. In the event any Lender ever
receives, collects, or applies as interest any such sum,
such amount which would be in excess of the maximum amount
permitted by applicable law shall be applied as a payment
and reduction of the principal of the indebtedness evidenced
by the Notes and the LC Participations; and, if the
principal of the Notes and the LC Participations has been
paid in full, any remaining excess shall forthwith be paid
to the Borrower. In determining whether or not the interest
paid or payable exceeds the Maximum Rate, the Borrower and
each Lender shall, to the extent permitted by applicable
law, (a) characterize any non-principal payment as an
expense, fee, or premium rather than as interest,
(b) exclude voluntary prepayments and the effects thereof,
and (c) amortize, prorate, allocate, and spread in equal or
unequal parts the total amount of interest throughout the
entire contemplated term of the indebtedness evidenced by
the Notes and LC Participations so that interest for the
entire term does not exceed the Maximum Rate.
Section 18.12. Notices. Except as provided in Section
2.7, all notices and other communications provided for in
this Agreement and the other Loan Documents to which the
Borrower is a party shall be given or made by telex,
telegraph, telecopy, cable, or in writing and telexed,
telecopied, telegraphed, cabled, mailed by certified mail
return receipt requested, or delivered to the intended
recipient at the "Address for Notices" specified below its
name on the signature pages hereof, or, as to any party at
<PAGE>
such other address as shall be designated by such party in a
notice to each other party given in accordance with this
Section. Except as otherwise provided in this Agreement,
all such communications shall be deemed to have been duly
given when transmitted by telex or telecopy, subject to
telephone confirmation of receipt, or delivered to the
telegraph or cable office, subject to telephone confirmation
of receipt, or when personally delivered or, in the case of
a mailed notice, when duly deposited in the mails, in each
case given or addressed as aforesaid; provided, however,
notices to the Agent pursuant to Article II and to the
Issuing Bank pursuant to Article III shall not be effective
until received by the Agent or the Issuing Bank, as
applicable.
Section 18.13. Governing Law; Venue; Service of
Process. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas and the
applicable laws of the United States of America. This
Agreement has been entered into in Travis County, Texas, and
it shall be performable for all purposes in Travis County,
Texas. Subject to Section 13.14 of this Agreement, any
action or proceeding against the Borrower under or in
connection with any of the Loan Documents may be brought in
any state or federal court in Travis County, Texas. The
Borrower hereby irrevocably (a) submits to the nonexclusive
jurisdiction of such courts, and (b) waives any objection it
may now or hereafter have as to the venue of any such action
or proceeding brought in any such court or that any such
court is an inconvenient forum. The Borrower agrees that
service of process upon it may be made by certified or
registered mail, return receipt requested, at its address
specified or determined in accordance with the provisions of
Section 13.12. Nothing herein or in any of the other Loan
Documents shall affect the right of the Agent, the Issuing
Bank or any Lender to serve process in any other manner
permitted by law or shall limit the right of the Agent, the
Issuing Bank or any Lender to bring any action or proceeding
against the Borrower or with respect to any of its property
in courts in other jurisdictions. Subject to Section 13.14
of this Agreement, any action or proceeding by the Borrower
against the Agent, the Issuing Bank or any Lender shall be
brought only in a court located in Travis County, Texas.
Section 18.14. Binding Arbitration.
18.14.0.0.1. Arbitration. Upon the demand of
any party, any Dispute shall be resolved by binding
arbitration (except as set forth in (e) below) in
accordance with the terms of this Agreement. A
"Dispute" shall mean any action, dispute, claim or
controversy of any kind, whether in contract or tort,
statutory or common law, legal or equitable, now
existing or hereafter arising under or in connection
with, or in any way pertaining to, any of the Loan
Documents, or any past, present or future extensions of
credit and other activities, transactions or
obligations of any kind related directly or indirectly
to any of the Loan Documents, including without
limitation, any of the foregoing arising in connection
with the exercise of any self-help, ancillary or other
remedies pursuant to any of the Loan Documents. Any
party may by summary proceedings bring an action in
court to compel arbitration of a Dispute. Any party
who fails or refuses to submit to arbitration following
a lawful demand by any other party shall bear all costs
and expenses incurred by such other party in compelling
arbitration of any Dispute.
18.14.0.0.2. Governing Rules. Arbitration
proceedings shall be administered by the American
Arbitration Association ("AAA") or such other
administrator as the parties shall mutually agree upon
in accordance with the AAA Commercial Arbitration
Rules. All Disputes submitted to arbitration shall be
resolved in accordance with the Federal Arbitration Act
(Title 9 of the United States Code), notwithstanding
any conflicting choice of law provision in any of the
Loan Documents. The arbitration shall be conducted at
a location in Texas selected by the AAA or other
administrator. If there is any inconsistency between
the terms hereof and any such rules, the terms and
procedures set forth herein shall control. All
statutes of limitation applicable to any Dispute shall
apply to any arbitration proceeding. All discovery
activities shall be expressly limited to matters
directly relevant to the Dispute being arbitrated.
Judgment upon any award rendered in an arbitration may
be entered in any court having jurisdiction; provided
however, that nothing contained herein
<PAGE>
shall be deemed to be a waiver by any party that is a
bank of the protections afforded to it under 12 U.S.C.
91 or any similar applicable state law.
18.14.0.0.3. No Waiver; Provisional Remedies,
Self-Help and Foreclosure. No provision hereof shall
limit the right of any party to exercise self-help
remedies such as setoff, foreclosure against or sale of
any real or personal property collateral or security,
or to obtain provisional or ancillary remedies,
including without limitation injunctive relief,
sequestration, attachment, garnishment or the
appointment of a receiver, from a court of competent
jurisdiction before, after or during the pendency of
any arbitration or other proceeding. The exercise of
any such remedy shall not waive the right of any party
to compel arbitration hereunder.
18.14.0.0.4. Arbitrator Qualifications and
Powers Awards. Arbitrators must be active members of
the Texas State Bar with expertise in the substantive
laws applicable to the subject matter of the Dispute.
Arbitrators are empowered to resolve Disputes by
summary rulings in response to motions filed prior to
the final arbitration hearing. Arbitrators (i) shall
resolve all Disputes in accordance with the substantive
law of the state of Texas, (ii) may grant any remedy or
relief that a court of the state of Texas could order
or grant within the scope hereof and such ancillary
relief as is necessary to make effective any award, and
(iii) shall have the power to award recovery of all
costs and fees, to impose sanctions and to take such
other actions as they deem necessary to the same extent
a judge could pursuant to the Federal Rules of Civil
Procedure, the Texas Rules of Civil Procedure or other
applicable law. Any Dispute in which the amount in
controversy is $5,000,000 or less shall be decided by a
single arbitrator who shall not render an award of
greater than $5,000,000 (including damages, costs, fees
and expenses). By submission to a single arbitrator,
each party expressly waives any right or claim to
recover more than $5,000,000. Any Dispute in which the
amount in controversy exceeds $5,000,000 shall be
decided by majority vote of a panel of three
arbitrators; provided however, that all three
arbitrators must actively participate in all hearings
and deliberations.
18.14.0.0.5. Judicial Review. Notwithstanding
anything herein to the contrary, in any arbitration in
which the amount in controversy exceeds $25,000,000,
the arbitrators shall be required to make specific,
written findings of fact and conclusions of law. In
such arbitrations (i) the arbitrators shall not have
the power to make any award which is not supported by
substantial evidence or which is based on legal error,
(ii) an award shall not be binding upon the parties
unless the findings of fact are supported by
substantial evidence and the conclusions of law are not
erroneous under the substantive law of the state of
Texas, and (iii) the parties shall have in addition to
the grounds referred to in the Federal Arbitration Act
for vacating, modifying or correcting an award the
right to judicial review of (A) whether the findings of
fact rendered by the arbitrators are supported by
substantial evidence, and (B) whether the conclusions
of law are erroneous under the substantive law of the
state of Texas. Judgment confirming an award in such a
proceeding may be entered only if a court determines
the award is supported by substantial evidence and not
based on legal error under the substantive law of the
state of Texas.
18.14.0.0.6. Miscellaneous. To the maximum
extent practicable, the AAA, the arbitrators and the
parties shall take all action required to conclude any
arbitration proceedings within 180 days of the filing
of the Dispute with the AAA. No arbitrator or other
party to an arbitration proceeding may disclose the
existence, content or results thereof, except for
disclosures of information by a party required in the
ordinary course of its business, by applicable law or
regulations, or to the extent necessary to exercise any
judicial review rights set forth herein. If more than
one agreement for arbitration by or between the parties
potentially applies to a Dispute, the arbitration
provisions most directly related to the Loan Documents
or the subject matter of the Dispute shall control.
This
<PAGE>
arbitration provision shall survive termination,
amendment or expiration of any of the Loan Documents or
any relationship between the parties.
Section 18.15. Counterparts. This Agreement may be
executed in one or more counterparts, each of which shall be
deemed an original, but all of which together shall
constitute one and the same instrument.
Section 18.16. Severability. Any provision of this
Agreement held by a court of competent jurisdiction to be
invalid or unenforceable shall not impair or invalidate the
remainder of this Agreement and the effect thereof shall be
confined to the provision held to be invalid or illegal.
Section 18.17. Headings. The headings, captions, and
arrangements used in this Agreement are for convenience only
and shall not affect the interpretation of this Agreement.
Section 18.18. Non-Application of Chapter 346 of Texas
Credit Finance Code. The provisions of Chapter 346 of the
Texas Finance Code (Vernon's Texas Civil Statutes) are
specifically declared by the parties hereto not to be
applicable to this Agreement or any of the other Loan
Documents or to the transactions contemplated hereby.
Section 18.19. Construction. The Borrower, the Agent,
the Issuing Bank and each Lender acknowledges that each of
them has had the benefit of legal counsel of its own choice
and has been afforded an opportunity to review this
Agreement and the other Loan Documents with its legal
counsel and that this Agreement and the other Loan Documents
shall be construed as if jointly drafted by the parties
hereto.
Section 18.20. Independence of Covenants. All
covenants hereunder shall be given independent effect so
that if a particular action or condition is not permitted by
any of such covenants, the fact that it would be permitted
by an exception to, or be otherwise within the limitations
of, another covenant shall not avoid the occurrence of a
Default if such action is taken or such condition exists.
Section 18.21. Confidentiality. The Agent and each
Lender (each, a "Lending Party") agrees to keep confidential
any information furnished or made available to it by the
Borrower pursuant to this Agreement that is marked
confidential; provided that nothing herein shall prevent any
Lending Party from disclosing such information (a) to any
other Lending Party or any affiliate of any Lending Party,
or any officer, director, employee, agent, or advisor of any
Lending Party or affiliate of any Lending Party, (b) to any
other Person if reasonably incidental to the administration
of the credit facility provided herein, (c) as required by
any law, rule, or regulation, (d) upon the order of any
court or administrative agency, (e) upon the request or
demand of any regulatory agency or authority, (f) that is or
becomes available to the public or that is or becomes
available to any Lending Party other than as a result of a
disclosure by any Lending Party prohibited by this
Agreement, (g) in connection with any litigation to which
such Lending Party or any of its affiliates may be a party,
(h) to the extent necessary in connection with the exercise
of any remedy under this Agreement or any other Loan
Document, and (i) subject to provisions substantially
similar to those contained in this Section, to any actual or
proposed participant or assignee.
Section 18.22. WAIVER OF JURY TRIAL. TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES
HERETO HEREBY IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO
A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM
(WHETHER BASED UPON CONTRACT, TORT, OR OTHERWISE) ARISING
OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED THEREBY OR THE ACTIONS OF THE
AGENT, THE ISSUING BANK, OR ANY LENDER IN THE NEGOTIATION,
ADMINISTRATION, OR ENFORCEMENT THEREOF.
Section 18.23. ENTIRE AGREEMENT. THIS AGREEMENT, THE
NOTES, AND THE OTHER LOAN DOCUMENTS REFERRED TO HEREIN
REPRESENT THE FINAL AGREEMENT
<PAGE>
AMONG THE PARTIES HERETO AND MAY NOT BE CONTRADICTED OR
VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES HERETO.
[Balance of this page intentionally left blank.]
<PAGE> IN WITNESS WHEREOF, the parties hereto have duly
executed this Agreement as of the day and year first above
written.
<PAGE>
BORROWER:
EZCORP, INC.
By:
Name:
Title:
Address for Notices:
1901 Capital Parkway
Austin, TX 78746
Fax No.: (512) 314-3402
Telephone No.: (512) 329-5233
Attention: Dan Tonissen
Chief Financial Officer
AGENT:
WELLS FARGO BANK (TEXAS), NATIONAL
ASSOCIATION
By:
Name: Keith Smith
Title: Vice President
Address for Notices:
100 Congress Avenue, Suite 150
Austin, TX 78701
Fax No.: (512) 469-3311
Telephone No.: (512) 794-2200
Attention: Keith Smith
<PAGE>
with a copy to:
Winstead, Sechrest & Minick, P.C.
5400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270
Fax No.: (214) 745-5390
Telephone No.: (214) 745-5265
Attention: Randy Matthews
ISSUING BANK:
WELLS FARGO BANK (TEXAS), NATIONAL
ASSOCIATION
By:
Name: Keith Smith
Title: Vice President
Address for Notices:
100 Congress Avenue, Suite 150
Austin, TX 78701
Fax No.: (512) 469-3311
Telephone No.: (512) 794-2200
Attention: Keith Smith
LENDERS:
WELLS FARGO BANK (TEXAS), NATIONAL
ASSOCIATION
By:
Name: Keith Smith
Title: Vice President
Address for Notices:
100 Congress Ave., Suite 150
Austin, Texas 78701
Fax No.: (512) 467-3311
Telephone No.: (512) 794-2200
Attention: Keith Smith
Lending Office for Prime Rate Advances
and Eurodollar Advances
100 Congress Ave.
Austin, Texas 78701
<PAGE>
BANK ONE, TEXAS, NATIONAL ASSOCIATION
By:
Name:
Title:
Address for Notices:
221 W. Sixth Street
Suite 219
Austin, Texas 78701
Fax No.: (512) 479-5720
Telephone No.: (512) 479-5783
Attention: Chris Calvert
Lending Office for Prime Rate Advances
and Eurodollar Advances
221 W. Sixth Street
Suite 219
Austin, Texas 78701
<PAGE>
GUARANTY FEDERAL BANK, F.S.B. By:
Name:
Title:
Address for Notices:
301 Congress Avenue
Suite 1500
Austin, Texas 78701
Fax No.: (512) 320-1041
Telephone No.: (512) 320-1205
Attention: Chris Harkrider
Lending Office for Prime Rate Advances
and Eurodollar Advances
301 Congress Avenue
Suite 1500
Austin, Texas 78701
<PAGE>COMERICA BANK-TEXAS By: Name:
Title: Address for Notices:P.O. Box 2727
Austin, Texas 78768Fax No.: (512) 427-7120 Telephone No.:
(512) 427-7121Attention: Mark Hensley
and
1601 West Elm Street
Thanksgiving Tower, 4th Floor
P.O. Box 650282
Dallas, Tx. 75265-0282
Telephone No.: (214) 969-6472
Attention: Gary Orr, Chief Credit Officer
Lending Office for Prime Rate Advances
and Eurodollar Advances
804 Congress Avenue
Suite 320
Austin, Texas 78701
<PAGE>
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION By: Name:
Title: Address for Notices:700 Lavaca, 2nd FloorAustin,
Texas 78701Fax No.: (512) 479-2814Telephone No.: (512)
479-2244
Attention: Blake Beavers
Lending Office for Prime Rate Advances
and Eurodollar Advances
700 Lavaca, 2nd Floor
Austin, Texas 78701
<PAGE>
EZCORP, Inc.
Exhibit 22.1
Form 10-K for Fiscal Year Ended September 30, 1998
Subsidiaries of EZCORP, Inc.
1. EZPAWN Colorado, Inc.
2. EZPAWN Arkansas, Inc.
3. EZPAWN Mississippi, Inc. (1)
4. EZPAWN Oklahoma, Inc.
5. EZPAWN Tennessee, Inc. (2)
6. EZPAWN Alabama, Inc.
7. EZPAWN Kansas, Inc.
8. EZPAWN Missouri, Inc.
9. EZPAWN Florida, Inc.
10. EZPAWN Georgia, Inc.
11. EZPAWN Indiana, Inc.
12. EZPAWN North Carolina, Inc.
13. EZPAWN South Carolina, Inc.
14. EZPAWN Construction, Inc.
15. EZPAWN Kentucky, Inc.
16. EZPAWN Nevada, Inc.
17. EZPAWN Louisiana, Inc.
18. EZPAWN Holdings, Inc. (1)(3)
19. Texas EZPAWN Management, Inc. (3)
20. EZ MONEY North Carolina, Inc.
21. EZCORP International, Inc.
(1) EZPAWN Mississippi, Inc.
merged with EZPAWN Holdings,
Inc. on January 1, 1995,
leaving EZPAWN Holdings, Inc.
as the surviving entity.
(2) EZ Car Sales, Inc. is a
subsidiary of EZPAWN
Tennessee, Inc.
(3) EZPAWN Texas, Inc. transferred
all its assets to Texas
EZPAWN, L.P., a Texas limited
partnership, of which EZPAWN
Holdings, Inc., formerly
EZPAWN Texas, Inc. is the
limited partner, and Texas
EZPAWN Management, Inc. is the
sole general partner and holds
a certificate of authority to
conduct business in Texas.
<PAGE>
Exhibit 23.1
CONSENT OF ERNST & YOUNG LLP
We consent to the incorporation by reference in the
Registration Statement (Form S-8 No. 33-63078) pertaining to
the 1991 EZCORP, Inc. Stock Incentive Plan and the
Registration Statement (Form S-8 No. 33-63082) pertaining to
the EZCORP, Inc. 401(k) Plan of our report dated November
10, 1998, except for Note P as to which the date is December
16, 1998 with respect to the consolidated financial
statements and schedule of EZCORP, Inc. and subsidiaries
included in the Form 10-K for the year ended September 30,
1998.
ERNST & YOUNG LLP
Austin, Texas
December 18, 1998
<PAGE>
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.
EZCORP, Inc.
-------------------------
December 18, 1998 By: /s/ Vincent A. Lambiase
(Vincent A. Lambiase)
(President & Chief
Executive Officer)
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities
and on the dates indicated.
Signature Title Date
- -------------------------
/s/ Sterling B. Brinkley Chairman of the Board December 18, 1998
Sterling B. Brinkley of Directors
- ------------------------
/s/ Vincent A. Lambiase President, Chief Executive December 18, 1998
Vincent A. Lambiase Officer & Director
(Principal Executive Officer)
- ------------------------
/s/ Daniel N. Tonissen Senior Vice President, Chief December 18, 1998
Daniel N. Tonissen Financial Officer & Director
(Principal Financial and
Accounting Officer)
- ------------------------
/s/ J. Jefferson Dean Vice President Strategic December 18, 1998
J. Jefferson Dean Planning & Business
Development & Director
- -----------------------
/s/ Mark C. Pickup Director December 18, 1998
Mark C. Pickup
- -----------------------
/s/ Richard D. Sage Director December 18, 1998
Richard D. Sage
- -----------------------
/s/ John E. Cay, III Director December 18, 1998
John E. Cay, III
- -----------------------
/s/ Steve Price Director December 18, 1998
Steve Price
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,328
<SECURITIES> 0
<RECEIVABLES> 64,475
<ALLOWANCES> 0
<INVENTORY> 44,011
<CURRENT-ASSETS> 115,706
<PP&E> 73,191
<DEPRECIATION> 29,525
<TOTAL-ASSETS> 189,911
<CURRENT-LIABILITIES> 11,058
<BONDS> 0
0
0
<COMMON> 120
<OTHER-SE> 130,434
<TOTAL-LIABILITY-AND-EQUITY> 189,911
<SALES> 112,307
<TOTAL-REVENUES> 197,394
<CGS> 94,084
<TOTAL-COSTS> 181,232
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,398
<INCOME-PRETAX> 14,859
<INCOME-TAX> 5,646
<INCOME-CONTINUING> 9,213
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,213
<EPS-PRIMARY> 0.77
<EPS-DILUTED> 0.77
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