45
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[x]QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 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)
(512) 314-3400
(Registrant's telephone number, including area code)
NA
(Former name, former address and former fiscal year,
if changed since last report)
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__
APPLICABLE ONLY TO CORPORATE ISSUERS:
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.
As of December 31, 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.
INDEX TO FORM 10-Q
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -
December 31, 1998, December 31, 1997 and
September 30, 1998 1
Condensed Consolidated Statements of Operations -
Three Months Ended December 31, 1998 and 1997 2
Condensed Consolidated Statements of Cash Flows -
Three Months Ended December 31, 1998 and 1997 3
Notes to Interim Condensed Consolidated Financial
Statements 4
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 7
PART II. OTHER INFORMATION 12
SIGNATURE 13
<PAGE>
PART I
Item 1. Financial Statements (Unaudited)
EZCORP, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
<TABLE>
<CAPTION>
December 31,December 31,September 30,
1998 1997 1998
-------------------------------------
(In thousands)
<S> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $ 2,792 $ 1,084 $ 1,328
Pawn loans 48,490 39,109 49,632
Service charge receivable 14,800 11,851 14,843
Inventory, net 49,245 40,928 44,011
Deferred tax asset 1,882 1,364 1,882
Income tax recoverable - - 840
Prepaids and other assets 3,009 2,619 3,170
--------------------------------
Total current assets 120,218 96,955 115,706
Investment in unconsolidated
affiliate 13,116 - 10,909
Property and equipment, net 49,027 32,577 43,666
Other assets:
Goodwill, net 13,927 13,795 13,605
Deferred tax asset - 1,730 -
Notes receivable, related
parties 3,000 3,000 3,000
Other assets, net 3,422 1,334 3,025
--------------------------------
Total assets $202,710 $149,391 $189,911
================================
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Current maturities of
long-term debt $ 10 $ 9 $ 10
Accounts payable and
other accrued expenses 10,572 7,065 8,874
Customer layaway deposits 2,404 2,068 2,174
Income taxes payable 591 1,212 -
-------------------------------
Total current liabilities 13,577 10,354 11,058
Long-term debt, less current
maturities 56,120 15,130 48,123
Deferred tax liability 24 - 24
Other long-term liabilities 140 187 152
-------------------------------
Total long-term liabilities 56,284 15,317 48,299
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value
$.01 a share - Authorized - - -
5,000,000 shares; none
issued and outstanding
Class A Non-voting Common
stock, par value $.01 a
share - 108 105 108
Authorized 40,000,000
shares; 10,820,574 shares
issued and 10,811,541
shares outstanding at
December 31, 1998
and September 30, 1998;
10,524,563 shares issued
and 10,515,530 shares
outstanding at December
31, 1997
Class B Voting Common stock,
par value $.01 a share - 12 15 12
Authorized 1,198,990 shares
in 1998; 1,190,057 shares
issued and outstanding at
December 31, 1998 and
September 30, 1998;
Authorized 1,484,407 shares
in 1997; 1,480,301 shares
issued and outstanding at
December 31, 1997
Additional paid-in capital 114,398 114,338 114,398
Retained earnings 19,059 10,026 16,830
----------------------------
133,577 124,484 131,348
Treasury stock (9,033 shares
in 1997 and 1998) (35) (35) (35)
Receivables from stockholders (729) (729) (729)
Accumulated foreign currency
translation adjustment 36 - (30)
Total stockholders' ----------------------------
equity 132,849 123,720 130,554
Total liabilities and ----------------------------
stockholders' equity $202,710 $149,391 $189,911
</TABLE> ============================
See Notes to Interim Condensed Consolidated Financial Statements
(unaudited).
<PAGE>
EZCORP, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1998 1997
-------------------
(In thousands, except
per share amounts)
<S> <C> <C>
Revenues:
Sales $ 34,434 $ 30,926
Pawn service charges 25,831 20,988
Other 150 30
------------------
Total revenues 60,415 51,944
Cost of goods sold 29,022 26,079
------------------
Net revenues 31,393 25,865
Operating expenses:
Operations 20,120 16,689
Administrative 4,415 3,355
Depreciation and amortization 2,285 1,798
------------------
Total operating expenses 26,820 21,842
------------------
Operating income 4,573 4,023
Interest expense 846 380
Equity in net income of
unconsolidated affiliate (110) -
------------------
Income before income taxes 3,837 3,643
Income tax expense 1,458 1,384
------------------
Net income $ 2,379 $ 2,259
==================
Basic and diluted earnings per share $ 0.20 $ 0.19
==================
Cash dividends per common share $ 0.0125 $ -
Weighted average shares outstanding
Basic 12,001,598 11,995,831
========== ==========
Diluted 12,009,225 12,011,698
========== ==========
</TABLE>
See Notes to Interim Condensed Consolidated Financial Statements
(unaudited).
<PAGE>
EZCORP, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1998 1997
---------------------
(In thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 2,379 $ 2,259
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 2,285 1,798
Deferred income taxes - 526
Loss/(gain) on sale or disposal
of assets 71 (109)
Income from investment in
unconsolidated affiliate (110) -
Changes in operating assets
and liabilities:
Service charge receivable 43 1,402
Inventories (5,140) (1,503)
Prepaid expenses and other assets (499) (757)
Accounts payable and accrued
expenses 1,698 (650)
Customer layaway deposits 226 145
Other long term liabilities (12) 187
Income taxes recoverable 840 -
Income taxes payable 591 391
-------------------
Net cash provided by operating
activities 2,372 3,689
INVESTING ACTIVITIES:
Pawn loans forfeited and transferred
to inventories 20,795 17,358
Pawn loans made (50,548) (40,986)
Pawn loans repaid 31,032 27,770
--------------------
Net decrease in loans 1,279 4,142
Additions to property, plant, and
equipment (7,500) (1,672)
Acquisitions, net of cash acquired (504) (2,104)
Investment in unconsolidated affiliate (2,031) -
Sale of assets - 203
--------------------
Net cash provided by/(used in)
investing activities (8,756) 569
FINANCING ACTIVITIES:
Payment of dividends (150) -
Proceeds from bank borrowings 10,000 2,000
Payments on borrowings (2,002) (6,003)
--------------------
Net cash provided by/(used in)
financing activities 7,848 (4,003)
--------------------
Increase in cash and cash equivalents 1,464 255
Cash and cash equivalents at beginning
of period 1,328 829
--------------------
Cash and cash equivalents at end
of period $ 2,792 $ 1,084
====================
NONCASH INVESTING AND FINANCING ACTIVITIES:
Foreign currency translation adjustment $ 66 $ -
</TABLE>
See Notes to Interim Condensed Consolidated Financial Statements
(unaudited).
<PAGE>
EZCORP, Inc. and Subsidiaries
Notes to Interim Condensed Consolidated Financial Statements
(Unaudited)
December 31, 1998
Note A - Basis of Presentation
The accompanying unaudited condensed consolidated
financial statements have been prepared in accordance with
generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by
generally accepted accounting principles for complete
financial statements. In the opinion of management, all
adjustments (consisting of normal recurring entries)
considered necessary for a fair presentation have been
included. The accompanying financial statements should be
read with the Notes to Consolidated Financial Statements
included in the Company's Annual Report on Form 10-K for the
year ended September 30, 1998.
The Company's business is subject to seasonal
variations, and operating results for the three-month period
ended December 31, 1998 are not necessarily indicative of
the results of operations for the full fiscal year.
Note B - Accounting Principles and Practices
The provision for federal income taxes has been
calculated based on the Company's estimate of its effective
tax rate for the full fiscal year.
The Company provides inventory reserves for shrinkage
and cost in excess of market value. The Company estimates
these reserves using analysis of sales trends, inventory
aging, sales margins and shrinkage on inventory. As of
December 31, 1998, inventory reserves were $7.4 million.
Property and equipment is shown net of accumulated
depreciation of $31.4 million, $29.5 million and $24.3
million at December 31, 1998, September 30, 1998 and
December 31, 1997, respectively.
Note C - Earnings Per Share
The following table sets forth the computation of basic and
diluted earnings per share:
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1998 1997
--------------------
(In thousands)
<S> <C> <C>
Numerator
Numerator for basic and
diluted earnings per share -
net income $ 2,379 $ 2,259
Denominator ===================
Denominator for basic earnings
per share - weighted
average shares 12,002 11,996
Effect of dilutive securities:
Employee stock options - 4
Warrants 7 12
-------------------
Dilutive potential common shares 7 16
Denominator for diluted earnings -------------------
per share - adjusted weighted
average shares and assumed
conversions 12,009 12,012
===================
Basic earnings per share $ 0.20 $ 0.19
===================
Diluted earnings per share $ 0.20 $ 0.19
</TABLE> ===================
<PAGE>
EZCORP, Inc. and Subsidiaries
Notes to Interim Condensed Consolidated Financial Statements
(Unaudited)
December 31, 1998
Options to purchase 1,267,817 weighted average shares
of common stock at an average price of $11.61 per share were
outstanding at December 31, 1998, but were not included in
the computation of diluted earnings per share because the
options' exercise price was greater than the average market
price of the common shares and, therefore, the effect would
be anti-dilutive.
Options to purchase 567,476 weighted average shares of
common stock at an average price of $13.53 per share were
outstanding at December 31, 1997, but were not included in
the computation of diluted earnings per share because the
options' exercise price was greater than the average market
price of the common shares and, therefore, the effect would
be anti-dilutive.
Note D - Investment in Unconsolidated Affiliate
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.
The Company accounts for its investment in A&B using
the equity method. A&B reports its results to the public
every six months and the most recently reported period ended
June 30, 1998. Therefore, the amount included in the
Company's results of operations represents an estimate based
on A&B's reported earnings for that period. The Company
plans to reconcile this difference during its quarter ending
March 31, 1999 after the results for the period of July 1998
to December 1998 have been reported to the public. The
Company does not expect the actual results to differ
materially from this estimate.
Note E - Litigation
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.
The Company was 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 alleged that
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
sought 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 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>
EZCORP, Inc. and Subsidiaries
Notes to Interim Condensed Consolidated Financial Statements
(Unaudited)
December 31, 1998
Note F - Comprehensive Income
In June 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income," which is effective for
fiscal years beginning after December 15, 1997.
Comprehensive income includes net income and other revenues,
expenses, gains and losses that are excluded from net income
but are included as a component of total shareholders'
equity. Comprehensive income for the three months ended
December 31, 1998 was approximately $2,445,000. The
difference between comprehensive income and net income is
comprised of the effect of currency translation adjustments
and hedging activity in accordance with Financial Accounting
Standards Board Statement No. 52, "Foreign Currency
Translation." The accumulated balance of foreign currency
and hedging activity, excluded from net income, is presented
in the Condensed Consolidated Balance Sheets as "Accumulated
Foreign Currency Translation Adjustment."
<PAGE>
Item 2.Management's Discussion and Analysis of Financial
Condition and Results of Operations
First Quarter Ended December 31, 1998 vs. First Quarter
Ended December 31, 1997
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.
The following table sets forth selected, unaudited,
consolidated financial data with respect to the Company for
the three months ended December 31, 1998 and 1997.
<TABLE>
<CAPTION>
Three Months Ended % or
December 31,(a) Point
1998 1997 Change(b)
------------------- ---------
<S> <C> <C> <C>
Net Revenues:
Sales $ 34,434 $ 30,926 11.3%
Pawn service charges 25,831 20,988 23.1%
Other 150 30 400.0%
-----------------
Total revenues 60,415 51,944 16.3%
Cost of goods sold 29,022 26,079 11.3%
-----------------
Net revenues $ 31,393 $ 25,865 21.4%
Other Data: =================
Gross profit as a
percent of sales 15.7% 15.7% 0.0 pt.
Average annual inventory
turnover 2.4x 2.5x (0.1)x
Inventory balance per
average location as of the
end of the quarter $162 $164 (1.2)%
Loan balance per average
location as of the end
of the quarter $160 $156 2.6%
Average yield on loan
portfolio 209% 204% 5.0 pts.
Redemption rate 75% 76% (1.0) pt.
Expenses as a Percent of Total Revenues:
Operating 33.4% 32.1% 1.3 pts.
Administrative 7.2% 6.5% 0.7 pt.
Depreciation and amortization3.8% 3.5% 0.3 pt.
Interest, net 1.4% 0.7% 0.7 pt.
Locations in Operation:
Beginning of period 286 249
Acquired 1 1
Established 17 1
Sold, combined or closed - (1)
----- -----
End of period 304 250
===== =====
Average locations in operation
during the period(c) 295.0 249.5
===== =====
a In thousands, except percentages, inventory turnover
and store count.
b In comparing the period differences between dollar
amounts or store counts, a percentage change is used.
In comparing the period differences between two
percentages, a percentage point (pt.) change is used.
c Average locations in operation during the period is
calculated based on the average of the locations
operating at the beginning and end of such period.
</TABLE>
<PAGE>
Results of Operations
The following discussion compares results for the three-
month period ended December 31, 1998 ("Fiscal 1999 Period")
to the three-month period ended December 31, 1997 ("Fiscal
1998 Period"). The discussion should be read in conjunction
with the accompanying financial statements and related
notes.
Early in the Company's 1998 fiscal year, the Company
began to expand rapidly primarily through newly established
stores. The Company expects these newly established stores
to be unprofitable for the first three to four quarters that
they are open as they develop their loan and sales customer
base. Despite this unprofitable startup period, the Company
believes that newly established stores will provide a better
return on invested capital when compared to most
acquisitions. During the Fiscal 1999 Period, the Company
opened seventeen newly established stores and acquired one
store. During the twelve (12) months ended December 31,
1998, the Company opened fifty-one newly establish stores
and acquired three (3) stores. As a group, the thirteen
newly established stores that opened in the six month period
ended March 31, 1998 produced operating income in the Fiscal
1999 Period of approximately $60,000. As a group, the fifty-
one newly established stores that opened in the last twelve
months ended December 31, 1998 produced an operating loss of
approximately $0.9 million.
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 the Fiscal 1999 Period, pawn service charge
revenue increased $4.8 million from the Fiscal 1998 Period
to $25.8 million. This resulted from an increase in same
store pawn service charge revenue ($3.4 million) and the
pawn service charge revenue from new stores not open the
full three-month period ($1.4 million). At December 31,
1998, same store pawn loan balances were 16 percent above
December 31, 1997. The annualized yield on the average pawn
loan balance increased five percentage points from the
Fiscal 1998 Period to 209 percent. Variations in the
annualized loan yield, as we saw between these periods, are
due generally to a mix shift in the loan portfolio between
loans with different loan yields.
A secondary, but related, activity of the Company is
the sale of merchandise, primarily collateral forfeited from
its lending activity. For the Fiscal 1999 Period, sales
increased approximately $3.5 million from the Fiscal 1998
Period to approximately $34.4 million. This resulted from
an increase in same store merchandise sales ($1.2 million),
new store sales ($2.6 million), and a reduction in jewelry
scrapping activity ($0.3 million). Same store sales for the
Fiscal 1999 Period increased 4 percent from the Fiscal 1998
Period. Inventory turnover, at 2.4 times, was slightly
lower in the Fiscal 1999 Period compared to the Fiscal 1998
Period largely due to new stores which typically have slower
inventory turnover.
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 December 31, 1998, and 1997, respectively, the Company's
inventories consisted of approximately 58 and 64 percent
jewelry (e.g. ladies' and men's rings, chains, bracelets,
etc.) and 42 and 36 percent general merchandise (e.g.,
televisions, VCRs, tools, sporting goods, musical
instruments, firearms, etc.). At December 31, 1998 and
1997, respectively, 86 percent and 88 percent of the jewelry
was less than twelve months old based on the Company's date
of acquisition (date of forfeiture for collateral or date of
purchase) as was approximately 96 percent of the general
merchandise inventory for each period.
For the Fiscal 1999 Period, gross margins were
unchanged at 15.7 percent compared to the Fiscal 1998
Period. Inventory shrinkage when measured as a percentage
of merchandise sales was 1.2 percent, the same as the prior
year period.
In the Fiscal 1999 Period, operating expenses as a
percentage of total revenues increased 1.3 percentage points
from the Fiscal 1998 Period to 33.4 percent. This increase
results primarily from new
<PAGE>
stores which typically experience higher levels of operating
expense relative to revenues. Administrative expenses
increased 0.7 of a percentage point in the Fiscal 1999
Period to 7.2 percent.
Depreciation and amortization increased by 0.3 of a
percentage point from the Fiscal 1998 Period to 3.8 percent.
This resulted from increased new store openings in the
Fiscal 1999 Period. Interest expense increased by 0.7 of a
percentage point from the Fiscal 1998 Period largely due to
increased average debt balances.
Liquidity and Capital Resources
Net cash provided by operating activities for the
Fiscal 1999 Period was $2.4 million as compared to $3.7
million provided in the Fiscal 1998 Period. Increases in
inventories, primarily related to new stores, were partially
offset by improved operating results and other working
capital changes. Net cash used by investing activities was
$8.8 million for the Fiscal 1999 Period compared to $0.6
million provided in the Fiscal 1998 Period. The change is
due to smaller decreases in pawn loan balances in the Fiscal
1999 Period compared to the Fiscal 1998 Period, higher
levels of capital expenditures and acquisitions in the
Fiscal 1999 Period compared to the Fiscal 1998 Period and an
additional investment in the unconsolidated affiliate,
Albemarle & Bond Holdings, plc.
In the Fiscal 1999 Period, the Company invested
approximately $8.0 million to open seventeen (17) newly
established stores, to acquire one (1) store, to upgrade or
replace existing equipment and computer systems, and for
improvements at existing stores. The Company funded these
expenditures largely from cash flow provided by operating
activities. The Company plans to open approximately 60
stores during fiscal 1999, including the 18 stores already
opened. The Company anticipates that cash flow from
operations and funds available under its existing bank line
of credit should be adequate to fund these capital
expenditures and expected 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 capital expenditures.
On December 10, 1998, the Company completed a new
$110,000,000 syndicated credit facility. 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 31, 1998, the Company had $56 million
outstanding on the line of credit.
Seasonality
Historically, pawn service charge revenues are highest
in the fourth fiscal quarter (July, August and September)
due to higher loan demand during the summer months and
merchandise sales are highest in the first and second fiscal
quarters (October through March) due to the holiday season
and tax refunds.
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.
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
<PAGE>
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. For this exposure, the
Company is 100 percent complete on the assessment phase, 90
percent complete on the remediation phase and 70 percent
complete with regard to the remaining phases. It expects to
be 100 percent complete with respect to software
reprogramming, replacement, testing and implementation by
April 1999. 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.
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 Company's management believes it has an effective
program in place to resolve the Year 2000 Issue. As noted
above, the Company has not completed all necessary phases of
this program. In the event the Company does not complete
all phases, the Company may not be able to process customer
transactions which could have a material impact on the
operations of the Company. 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.
Qualitative and Quantitative Disclosures about Market Risk
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 December 31, 1998 is a variable-
rate debt instrument. There have been no material changes
relating to interest rates since the Company's most recent
fiscal year, which ended on 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. During Fiscal 1998, the
U.K. pound weakened resulting in a cumulative translation
adjustment loss of $30,000. During the first fiscal quarter
ended December 31, 1998, the U.K. pound strengthened
resulting in a cumulative translation adjustment gain of
$36,000. On December 31, 1998, the U.K. pound closed at
0.60260 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>
Forward-Looking Information
This Quarterly Report on Form 10-Q 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 yield on loan portfolio, 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.
<PAGE>
PART II
Item 1. 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.
The Company was 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 alleged that
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
sought 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 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 2. Changes in Securities
Not Applicable
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
By written consent, the sole holder of the Company's
Class B Voting Common Stock approved the adoption of the
EZCORP, Inc. 1998 Incentive Plan.
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit Incorporated by
Number Description Reference to
------- ----------------------------- ---------------
Exhibit 10.65 EZCORP, Inc. 1998 Incentive Plan Filed herewith
Exhibit 27 Financial Data Schedule Filed herewith
(b) Reports on Form 8-K
The Company has not filed any reports on Form 8-K for the
quarter ended December 31, 1998.
<PAGE>
SIGNATURE
Pursuant to the requirements 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.
(Registrant)
Date: February 12, 1999 By: /s/ DAN N. TONISSEN
--------------------------
(Signature)
Dan N. Tonissen
Senior Vice President and
Chief Financial Officer
<PAGE>
Exhibit 10.65
EZCORP, INC.
1998 INCENTIVE PLAN
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS 1
SECTION 2. SHARES OF STOCK SUBJECT TO THE PLAN 7
2.1 Maximum Number of Shares 7
2.2 Limitation of Shares 7
2.3 Description of Shares 8
2.4 Registration and Listing of Shares 9
SECTION 3. ADMINISTRATION OF THE PLAN 9
3.1 Committee 9
3.2 Duration, Removal, Etc. 9
3.3 Meetings and Actions of Committee 9
3.4 Committee's Powers 10
SECTION 4. ELIGIBILITY AND PARTICIPATION 10
4.1 Eligible Individuals 10
4.2 Grant of Awards 11
4.3 Date of Grant 11
4.4 Award Agreements 11
4.5 Limitation for Incentive Options 11
4.6 No Right to Award 11
SECTION 5. TERMS AND CONDITIONS OF OPTIONS 12
5.1 Number of Shares 12
5.2 Vesting 12
5.3 Expiration of Options 12
5.4 Exercise Price 12
5.5 Method of Exercise 12
5.6 Incentive Option Exercises 12
5.7 Medium and Time of Payment 13
5.8 Payment with Sale Proceeds 13
5.9 Payment of Taxes 13
5.10 Limitation on Aggregate Value of Shares That May
Become First
Exercisable During Any Calendar Year Under an
Incentive Option
5.11 No Fractional Shares 14
5.12 Modification, Extension, and Renewal of Options 14
5.13 Other Agreement Provisions 15
SECTION 6. STOCK APPRECIATION RIGHTS 15
6.1 Form of Right 15
6.2 Rights Related to Options 15
(a) Exercise and Transfer 15
(b) Value of Right 15
6.3 Right Without Option 16
(a) Number of Shares 16
(b) Vesting 16
(c) Expiration of Rights 16
(d) Value of Right 16
6.4 Limitations on Rights 16
6.5 Payment of Rights 16
<PAGE>
6.6 Payment of Taxes 17
6.7 Other Agreement Provisions 17
SECTION 7. RESTRICTED STOCK AWARDS 17
7.1 Restrictions 18
(a) Transferability 18
(b) Conditions to Removal of Restrictions 18
(c) Legend 18
(d) Possession 18
(e) Other Conditions 18
7.2 Expiration of Restrictions 18
7.3 Rights as Shareholder 18
7.4 Payment of Taxes 18
7.5 Other Agreement Provisions 19
SECTION 8. AWARDS TO NON-EMPLOYEE DIRECTORS 19
8.1 Awards to Committee Members 19
8.2 Eligibility for Awards 19
SECTION 9. ADJUSTMENT PROVISIONS 19
9.1 Adjustment of Awards and Authorized Stock 19
9.2 Changes in Control 20
9.3 Restructuring Without Change in Control 21
9.4 Notice of Restructuring 23
SECTION 10. ADDITIONAL PROVISIONS 23
10.1 Termination of Employment 23
10.2 Other Loss of Eligibility - Non-Employees 23
10.3 Death 24
10.4 Disability 24
10.5 Leave of Absence 24
10.6 Transferability of Awards 25
10.7 Forfeiture and Restrictions on Transfer 25
10.8 Delivery of Certificates of Stock 25
10.9 Conditions to Delivery of Stock 25
10.10 Certain Directors and Officers 26
10.11 Securities Act Legend 26
10.12 Legend for Restrictions on Transfer 27
10.13 Rights as a Shareholder 27
10.14 Furnish Information 27
10.15 Obligation to Exercise 27
10.16 Adjustments to Awards 27
10.17 Remedies 28
10.18 Information Confidential 28
10.19 Consideration 28
SECTION 11. DURATION AND AMENDMENT OF PLAN 28
11.1 Duration 28
11.2 Amendment 28
SECTION 12. GENERAL 29
12.1 Application of Funds 29
12.2 Right of the Corporation and Subsidiaries to
Terminate Employment 29
12.3 No Liability for Good Faith Determinations 29
<PAGE>
12.4 Other Benefits 29
12.5 Exclusion From Pension and Profit-Sharing
Compensation 29
12.6 Execution of Receipts and Releases 30
12.7 Unfunded Plan 30
12.8 No Guarantee of Interests 30
12.9 Payment of Expenses 30
12.10 Corporation Records 30
12.11 Information 31
12.12 No Liability of Corporation 31
12.13 Corporation Action 31
12.14 Severability 31
12.15 Notices 31
12.16 Successors 32
12.17 Headings 32
12.18 Governing Law 32
12.19 Word Usage 32
<PAGE>
EZCORP, INC.
1998 INCENTIVE PLAN
SCOPE AND PURPOSE OF PLAN
EZCORP, Inc., a Delaware corporation (the Corporation),
has adopted this 1998 Incentive Plan (the "Plan") to provide
for the granting of:
(a) Incentive Options (hereafter defined) to certain
Key Employees (hereafter defined);
(b) Nonstatutory Options (hereafter defined) to
certain Key Employees, Non-Employee Directors
(hereafter defined) and other Persons;
(c) Restricted Stock Awards (hereafter defined) to
certain Key Employees and other Persons; and
(d) Stock Appreciation Rights (hereafter defined) to
certain Key Employees and other Persons.
The purpose of the Plan is to provide an incentive for
Key Employees and directors of the Corporation or its
Subsidiaries (hereafter defined) to aid the Corporation in
attracting able Persons to enter the service of the
Corporation and its Subsidiaries, to extend to them the
opportunity to acquire a proprietary interest in the
Corporation so that they will apply their best efforts for
the benefit of the Corporation, and to remain in the service
of the Corporation or its Subsidiaries. This Plan has been
adopted by the Board of Directors and shareholders of the
Corporation prior to the registration of any securities of
the Corporation under the Exchange Act (hereafter defined)
and accordingly amounts paid under the Plan are exempt from
the provisions of Section 162(m) of the Code (hereafter
defined).
SECTION 1. DEFINITIONS
1.1"Acquiring Person" means any Person other than the
Corporation, any Subsidiary of the Corporation, any employee
benefit plan of the Corporation or of a Subsidiary of the
Corporation or of a corporation owned directly or indirectly
by the shareholders of the Corporation in substantially the
same proportions as their ownership of Stock of the
Corporation, or any trustee or other fiduciary holding
securities under an employee benefit plan of the Corporation
or of a Subsidiary of the Corporation or of a corporation
owned directly or indirectly by the shareholders of the
Corporation in substantially the same proportions as their
ownership of Stock of the Corporation.
1.2"Affiliate" means (a) any Person who is directly or
indirectly the beneficial owner of at least 10% of the
voting power of the Voting Securities or (b) any Person
controlling, controlled by, or under common control with the
Company or any Person contemplated in clause (a) of this
Section 1.2.
1.3"Award" means the grant of any form of Option,
Restricted Stock Award, or Stock Appreciation Right under
the Plan, whether granted individually, in combination, or
in tandem, to a Holder pursuant to the terms, conditions,
and limitations that the Committee may establish in order to
fulfill the objectives of the Plan.
1.4"Award Agreement" means the written agreement
between the Corporation and a Holder evidencing the terms,
conditions, and limitations of the Award granted to that
Holder.
1.5"Board of Directors" means the board of directors of
the Corporation.
<PAGE>
1.6"Business Day" means any day other than a Saturday,
a Sunday, or a day on which banking institutions in the
State of Texas are authorized or obligated by law or
executive order to close.
1.7"Change in Control" means the event that is deemed
to have occurred if:
(a)any Acquiring Person is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of
the Corporation representing fifty percent or more of
the combined voting power of the then outstanding
Voting Securities of the Corporation; or
(b)members of the Incumbent Board cease for any
reason to constitute at least a majority of the Board
of Directors; or
(c)a public announcement is made of a tender or
exchange offer by any Acquiring Person for fifty
percent or more of the outstanding Voting Securities of
the Corporation, and the Board of Directors approves or
fails to oppose that tender or exchange offer in its
statements in Schedule 14D-9 under the Exchange Act; or
(d)the shareholders of the Corporation approve a
merger or consolidation of the Corporation with any
other corporation or partnership (or, if no such
approval is required, the consummation of such a merger
or consolidation of the Corporation), other than a
merger or consolidation that would result in the Voting
Securities of the Corporation outstanding immediately
before the consummation thereof continuing to represent
(either by remaining outstanding or by being converted
into Voting Securities of the surviving entity or of a
parent of the surviving entity) a majority of the
combined voting power of the Voting Securities of the
surviving entity (or its parent) outstanding
immediately after that merger or consolidation; or
(e)the shareholders of the Corporation approve a
plan of complete liquidation of the Corporation or an
agreement for the sale or disposition by the
Corporation of all or substantially all the
Corporation's assets (or, if no such approval is
required, the consummation of such a liquidation, sale,
or disposition in one transaction or series of related
transactions) other than a liquidation, sale, or
disposition of all or substantially all the
Corporation's assets in one transaction or a series of
related transactions to a corporation owned directly or
indirectly by the shareholders of the Corporation in
substantially the same proportions as their ownership
of Stock of the Corporation.
1.8"Code" means the Internal Revenue Code of 1986, as
amended.
1.9"Committee" means the Committee, which Committee
shall administer this Plan and is further described under
Section 3.
1.10"Convertible Securities" means evidences of
indebtedness, shares of capital stock, or other securities
that are convertible into or exchangeable for shares of
Stock, either immediately or upon the arrival of a specified
date or the happening of a specified event.
1.11"Corporation" has the meaning given to it in the
first paragraph under "Scope and Purpose of Plan."
1.12"Date of Grant" has the meaning given it in Section
4.3.
1.13"Disability" has the meaning given it in Section
10.4.
1.14"Effective Date" means October 26, 1998.
<PAGE>
1.15"Eligible Individuals" means (a) Key Employees,
(b) Non-Employee Directors only for purposes of Nonstatutory
Options pursuant to Section 8, (c) any other Person that the
Committee designates as eligible for an Award (other than
for Incentive Options) because the Person performs, or has
performed, valuable services for the Corporation or any of
its Subsidiaries (other than services in connection with the
offer or sale of securities in a capital-raising
transaction) and the Committee determines that the Person
has a direct and significant effect on the financial
development of the Corporation or any of its Subsidiaries,
and (d) any transferee of an Award if the Award Agreement
provides for transfer of the Award and the Award is
transferred in accordance with the terms of the Award
Agreement. Notwithstanding the foregoing provisions of this
Section 1.15, to ensure that the requirements of the fourth
sentence of Section 3.1 are satisfied, the Board of
Directors may from time to time specify individuals who
shall not be eligible for the grant of Awards or equity
securities under any plan of the Corporation or its
Affiliates. Nevertheless, the Board of Directors may at any
time determine that an individual who has been so excluded
from eligibility shall become eligible for grants of Awards
and grants of such other equity securities under any plans
of the Corporation or its Affiliates so long as that
eligibility will not impair the Plan's satisfaction of the
conditions of Rule 16b-3.
1.16"Employee" means any employee of the Corporation or
of any of its Subsidiaries, including officers and directors
of the Corporation who are also employees of the Corporation
or of any of its Subsidiaries.
1.17"Exchange Act" means the Securities Exchange Act of
1934 and the rules and regulations promulgated thereunder,
or any successor law, as it may be amended from time to
time.
1.18"Exercise Notice" has the meaning given it in
Section 5.5.
1.19"Exercise Price" has the meaning given it in
Section 5.4.
1.20"Fair Market Value" means, for a particular day:
(a)If shares of Stock of the same class are listed
or admitted to unlisted trading privileges on any
national or regional securities exchange at the date of
determining the Fair Market Value, then the last
reported sale price, regular way, on the composite tape
of that exchange on the last Business Day before the
date in question or, if no such sale takes place on
that Business Day, the average of the closing bid and
asked prices, regular way, in either case as reported
in the principal consolidated transaction reporting
system with respect to securities listed or admitted to
unlisted trading privileges on that securities
exchange; or
(b)If shares of Stock of the same class are not
listed or admitted to unlisted trading privileges as
provided in Section 1.20(a) and sales prices for shares
of Stock of the same class in the over-the-counter
market are reported by the National Association of
Securities Dealers, Inc. Automated Quotations, Inc.
("NASDAQ") National Market System (or such other system
then in use) at the date of determining the Fair Market
Value, then the last reported sales price so reported
on the last Business Day before the date in question
or, if no such sale takes place on that Business Day,
the average of the high bid and low asked prices so
reported; or
(c)If shares of Stock of the same class are not
listed or admitted to unlisted trading privileges as
provided in Section 1.20(a) and sales prices for shares
of Stock of the same class are not reported by the
NASDAQ National Market System (or a similar system then
in use) as provided in Section 1.20(b), and if bid and
asked prices for shares of Stock of the same class in
the over-the-counter market are reported by NASDAQ (or,
if not so reported, by the National Quotation Bureau
Incorporated) at the date of determining the Fair
Market Value, then the average of the high bid and low
asked prices on the last Business Day before the date
in question; or
<PAGE>
(d)If shares of Stock of the same class are not
listed or admitted to unlisted trading privileges as
provided in Section 1.20(a) and sales prices or bid and
asked prices therefor are not reported by NASDAQ (or
the National Quotation Bureau Incorporated) as provided
in Section 1.20(b) or Section 1.20(c) at the date of
determining the Fair Market Value, then the value
determined in good faith by the Committee, which
determination shall be conclusive for all purposes; or
(e)If shares of Stock of the same class are listed
or admitted to unlisted trading privileges as provided
in Section 1.20(a) or sales prices or bid and asked
prices therefor are reported by NASDAQ (or the National
Quotation Bureau Incorporated) as provided in Section
1.20(b) or Section 1.20(c) at the date of determining
the Fair Market Value, but the volume of trading is so
low that the Board of Directors determines in good
faith that such prices are not indicative of the fair
value of the Stock, then the value determined in good
faith by the Committee, which determination shall be
conclusive for all purposes notwithstanding the
provisions of Sections 1.20(a), (b), or (c).
For purposes of valuing Incentive Options, the Fair Market
Value of Stock shall be determined without regard to any
restriction other than one that, by its terms, will never
lapse. For purposes of the redemption provided for in
Section 9.3(d)(v), Fair Market Value shall have the meaning
and shall be determined as set forth above; provided,
however, that the Committee, with respect to any such
redemption, shall have the right to determine that the Fair
Market Value for purposes of the redemption should be an
amount measured by the value of the shares of Stock, other
securities, cash, or property otherwise being received by
holders of shares of Stock in connection with the
Restructuring and upon that determination the Committee
shall have the power and authority to determine Fair Market
Value for purposes of the redemption based upon the value of
such shares of stock, other securities, cash, or property.
Any such determination by the Committee, as evidenced by a
resolution of the Committee, shall be conclusive for all
purposes.
1.21"Fiscal Year" means the fiscal year of the
Corporation ending on September 30 of each year.
1.22"Holder" means an Eligible Individual to whom an
outstanding Award has been granted, or, pursuant to the
terms of the Award Agreement, the permitted transferee of a
Holder.
1.23"Incumbent Board" means the individuals who, as of
the Effective Date, constitute the Board of Directors and
any other individual who becomes a director of the
Corporation after that date and whose election or
appointment by the Board of Directors or nomination for
election by the Corporation's shareholders was approved by a
vote of at least a majority of the directors then comprising
the Incumbent Board.
1.24"Incentive Option" means an incentive stock option
as defined under Section 422 of the Code and regulations
thereunder.
1.25"Key Employee" means any Employee whom the
Committee identifies as having a direct and significant
effect on the performance of the Corporation or any of its
Subsidiaries.
1.26"Non-Employee Director" means a director of the
Corporation who while a director is not an Employee.
1.27"Nonstatutory Option" means a stock option that
does not satisfy the requirements of Section 422 of the Code
or that is designated at the Date of Grant or in the
applicable Award Agreement to be an option other than an
Incentive Option.
<PAGE>
1.28"Non-Surviving Event" means an event of
Restructuring as described in either Section 1.35(b) or
Section 1.35(c).
1.29"Normal Retirement" means the separation of the
Holder from employment with the Corporation and its
Subsidiaries with the right to receive an immediate benefit
under a retirement plan approved by the Corporation. If no
such plan exists, Normal Retirement shall mean separation of
the Holder from employment with the Corporation and its
Subsidiaries at age 62 or later.
1.30"Option" means either an Incentive Option or a
Nonstatutory Option, or both.
1.31"Person" means any person or entity of any nature
whatsoever, specifically including (but not limited to) an
individual, a firm, a company, a corporation, a partnership,
a trust, or other entity. A Person, together with that
Person's affiliates and associates (as "affiliate" and
"associate" are defined in Rule 12b-2 under the Exchange Act
for purposes of this definition only), and any Persons
acting as a partnership, limited partnership, joint venture,
association, syndicate, or other group (whether or not
formally organized), or otherwise acting jointly or in
concert or in a coordinated or consciously parallel manner
(whether or not pursuant to any express agreement), for the
purpose of acquiring, holding, voting, or disposing of
securities of the Corporation with that Person, shall be
deemed a single "Person."
1.32"Plan" means the Corporation's 1998 Incentive Plan,
as it may be amended or restated from time to time.
1.33"Restricted Stock" means Stock that is
nontransferable or subject to substantial risk of forfeiture
until specific conditions are met.
1.34"Restricted Stock Award" means the grant or
purchase, on the terms and conditions of Section 7 or that
the Committee otherwise determines, of Restricted Stock.
1.35"Restructuring" means the occurrence of any one or
more of the following:
(a)The merger or consolidation of the Corporation
with any Person, whether effected as a single
transaction or a series of related transactions, with
the Corporation remaining the continuing or surviving
entity of that merger or consolidation and the Stock
remaining outstanding and not changed into or exchanged
for stock or other securities of any other Person or of
the Corporation, cash, or other property;
(b)The merger or consolidation of the Corporation
with any Person, whether effected as a single
transaction or a series of related transactions, with
(i) the Corporation not being the continuing or
surviving entity of that merger or consolidation or
(ii) the Corporation remaining the continuing or
surviving entity of that merger or consolidation but
all or a part of the outstanding shares of Stock are
changed into or exchanged for stock or other securities
of any other Person or the Corporation, cash, or other
property; or
(c)The transfer, directly or indirectly, of all or
substantially all of the assets of the Corporation
(whether by sale, merger, consolidation, liquidation,
or otherwise) to any Person, whether effected as a
single transaction or a series of related transactions.
1.36"Rule 16b-3" means Rule 16b-3 under Section 16(b)
of the Exchange Act as adopted in Exchange Act Release No.
34-37260 (May 31, 1996), or any successor rule, as it may be
amended from time to time.
1.37"Securities Act" means the Securities Act of 1933
and the rules and regulations promulgated thereunder, or any
successor law, as it may be amended from time to time.
<PAGE>
1.38"Stock" means the Class A Non-voting common stock,
$0.01 par value per share, of the Corporation, or any other
securities that are substituted for the Stock as provided in
Section 9.
1.39"Stock Appreciation Right" means the right to
receive an amount equal to the excess of the Fair Market
Value of a share of Stock (as determined on the date of
exercise) over, as appropriate, the Exercise Price of a
related Option or the Fair Market Value of the Stock on the
Date of Grant of the Stock Appreciation Right.
1.40"Subsidiary" means, with respect to any Person, any
corporation, or other entity of which a majority of the
Voting Securities is owned, directly or indirectly, by that
Person.
1.41"Total Shares" has the meaning given it in Section
9.2.
1.42"Voting Securities" means any securities that are
entitled to vote generally in the election of directors, in
the admission of general partners or in the selection of any
other similar governing body.
SECTION 2. SHARES OF STOCK SUBJECT TO THE PLAN
2.1Maximum Number of Shares. Subject to the provisions
of Section 2.2 and Section 9, the aggregate number of shares
of Stock that may be issued or transferred pursuant to
Awards under the Plan shall be 1,275,000.
2.2Limitation of Shares. For purposes of the
limitations specified in Section 2.1, the following
principles shall apply:
(a)the following shall count against and decrease
the number of shares of Stock that may be issued for
purposes of Section 2.1: (i) shares of Stock subject
to outstanding Options, outstanding shares of
Restricted Stock, and shares subject to outstanding
Stock Appreciation Rights granted independent of
Options (based on a good faith estimate by the
Corporation or the Committee of the maximum number of
shares for which the Stock Appreciation Right may be
settled (assuming payment in full in shares of Stock)),
and (ii) in the case of Options granted in tandem with
Stock Appreciation Rights, the greater of the number of
shares of Stock that would be counted if one or the
other alone was outstanding (determined as described in
clause (i) above);
(b)the following shall be added back to the number
of shares of Stock that may be issued for purposes of
Section 2.1: (i) shares of Stock with respect to which
Options, Stock Appreciation Rights granted independent
of Options, or Restricted Stock Awards expire, are
cancelled, or otherwise terminate without being
exercised, converted, or vested, as applicable, and
(ii) in the case of Options granted in tandem with
Stock Appreciation Rights, shares of Stock as to which
an Option has been surrendered in connection with the
exercise of a related ("tandem") Stock Appreciation
Right, to the extent the number surrendered exceeds the
number issued upon exercise of the Stock Appreciation
Right; provided that, in any case, the holder of such
Awards did not receive any dividends or other benefits
of ownership with respect to the underlying shares
being added back, other than voting rights and the
accumulation (but not payment) of dividends of Stock;
(c)shares of Stock subject to Stock Appreciation
Rights granted independent of Options (calculated as
provided in clause (a) above) that are exercised and
paid in cash shall be added back to the number of
shares of Stock that may be issued for purposes of
Section 2.1, provided that the Holder of such Stock
Appreciation Right did not receive any dividends or
other benefits of ownership, other than voting rights
and the accumulation (but not payment) of dividends, of
the shares of Stock subject to the Stock Appreciation
Right;
<PAGE>
(d)shares of Stock that are transferred by a
Holder of an Award (or withheld by the Corporation) as
full or partial payment to the Corporation of the
purchase price of shares of Stock subject to an Option
or the Corporation's or any Subsidiary's tax
withholding obligations shall not be added back to the
number of shares of Stock that may be issued for
purposes of Section 2.1 and shall not again be subject
to Awards; and
(e)if the number of shares of Stock counted
against the number of shares that may be issued for
purposes of Section 2.1 is based upon an estimate made
by the Corporation or the Committee as provided in
clause (a) above and the actual number of shares of
Stock issued pursuant to the applicable Award is
greater or less than the estimated number, then, upon
such issuance, the number of shares of Stock that may
be issued pursuant to Section 2.1 shall be further
reduced by the excess issuance or increased by the
shortfall, as applicable.
Notwithstanding the provisions of this Section 2.2, no Stock
shall be treated as issuable under the Plan to Eligible
Individuals subject to Section 16 of the Exchange Act if
otherwise prohibited from issuance under Rule 16b-3.
2.3Description of Shares. The shares to be delivered
under the Plan shall be made available from (a) authorized
but unissued shares of Stock, (b) Stock held in the treasury
of the Corporation, or (c) previously issued shares of Stock
reacquired by the Corporation, including shares purchased on
the open market, in each situation as the Board of Directors
or the Committee may determine from time to time at its sole
option.
2.4Registration and Listing of Shares. From time to
time, the Board of Directors and appropriate officers of the
Corporation shall and are authorized to take whatever
actions are necessary to file required documents with
governmental authorities, stock exchanges, and other
appropriate Persons to make shares of Stock available for
issuance pursuant to the exercise of Awards.
SECTION 3. ADMINISTRATION OF THE PLAN
3.1Committee. The Committee shall administer the Plan
with respect to all Eligible Individuals who are subject to
Section 16(b) of the Exchange Act (other than members of the
Committee), but shall not have the power to appoint members
of the Committee or to terminate, modify, or amend the Plan.
The full Board of Directors shall administer the Plan with
respect to all members of the Committee. Except for
references in Sections 3.1, 3.2 and 3.3, and unless the
context otherwise requires, references herein to the
Committee shall also refer to the Board of Directors as
administrator of the Plan for members of the Committee. The
Committee shall be constituted so that, as long as Stock is
registered under Section 12 of the Exchange Act, each member
of the Committee shall be a Non-Employee Director and so
that the Plan in all other applicable respects will qualify
transactions related to the Plan for the exemptions from
Section 16(b) of the Exchange Act provided by Rule 16b-3, to
the extent exemptions thereunder may be available. The
number of Persons that shall constitute the Committee shall
be determined from time to time by a majority of all the
members of the Board of Directors and, unless that majority
of the Board of Directors determines otherwise or Rule 16b-3
is amended to require otherwise, shall be no less than two
Persons. The Board of Directors may designate the
Compensation Committee of the Board of Directors to serve as
the Committee hereunder. To the extent that Rule 16b-3
promulgated under the Exchange Act requires a system of
administration that is different from this Section 3.1, this
Section 3.1 shall automatically be deemed amended to the
extent necessary to cause it to be in compliance with Rule
16b-3.
3.2Duration, Removal, Etc. The members of the
Committee shall serve at the discretion of the Board of
Directors, which shall have the power, at any time and from
time to time, to remove members from or add members to the
Committee. Removal from the Committee may be with or
without cause. Any individual serving as a member of the
Committee shall have the right to resign from membership in
the Committee by at least three days' written notice to the
Board of Directors. The Board of Directors, and not the
remaining members of the Committee, shall have the power and
authority to fill all vacancies on the Committee. The Board
of Directors shall promptly fill any vacancy that causes the
number of members of the Committee to be below two or any
other number that Rule 16b-3 may require from time to time.
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3.3Meetings and Actions of Committee. The Board of
Directors shall designate which of the Committee members
shall be the chairman of the Committee. If the Board of
Directors fails to designate a Committee chairman, the
members of the Committee shall elect one of the Committee
members as chairman, who shall act as chairman until he
ceases to be a member of the Committee or until the Board of
Directors elects a new chairman. The Committee shall hold
its meetings at those times and places as the chairman of
the Committee may determine. At all meetings of the
Committee, a quorum for the transaction of business shall be
required and a quorum shall be deemed present if at least a
majority of the members of the Committee are present. At
any meeting of the Committee, each member shall have one
vote. All decisions and determinations of the Committee
shall be made by the majority vote or majority decision of
all of its members present at a meeting at which a quorum is
present; provided, however, that any decision or
determination reduced to writing and signed by all of the
members of the Committee shall be as fully effective as if
it had been made at a meeting that was duly called and held.
The Committee may make any rules and regulations for the
conduct of its business that are not inconsistent with the
provisions of the Plan, the Articles or Certificate of
Incorporation of the Corporation, the bylaws of the
Corporation, and Rule 16b-3 so long as it is applicable, as
the Committee may deem advisable.
3.4Committee's Powers. Subject to the express
provisions of the Plan and Rule 16b-3, the Committee shall
have the authority, in its sole and absolute discretion, to
(a) adopt, amend, and rescind administrative and
interpretive rules and regulations relating to the Plan;
(b) determine the Eligible Individuals to whom, and the time
or times at which, Awards shall be granted; (c) determine
the amount of cash and the number of shares of Stock, Stock
Appreciation Rights, or Restricted Stock Awards, or any
combination thereof, that shall be the subject of each
Award; (d) determine the terms and provisions of each Award
Agreement (which need not be identical), including
provisions defining or otherwise relating to (i) the term
and the period or periods and extent of exercisability of
the Options, (ii) the extent to which the transferability of
shares of Stock issued or transferred pursuant to any Award
is restricted, (iii) the effect of termination of employment
of the Holder on the Award, and (iv) the effect of approved
leaves of absence (consistent with any applicable
regulations of the Internal Revenue Service);
(e) accelerate, pursuant to Section 9, the time of
exercisability of any Option that has been granted;
(f) construe the respective Award Agreements and the Plan;
(g) make determinations of the Fair Market Value of the
Stock pursuant to the Plan; (h) delegate its duties under
the Plan to such agents as it may appoint from time to time,
provided that the Committee may not delegate its duties with
respect to making Awards to, or otherwise with respect to
Awards granted to, Eligible Individuals who are subject to
Section 16(b) of the Exchange Act; and (i) make all other
determinations, perform all other acts, and exercise all
other powers and authority necessary or advisable for
administering the Plan, including the delegation of those
ministerial acts and responsibilities as the Committee deems
appropriate. Subject to Rule 16b-3, the Committee may
correct any defect, supply any omission, or reconcile any
inconsistency in the Plan, in any Award, or in any Award
Agreement in the manner and to the extent it deems necessary
or desirable to carry the Plan into effect, and the
Committee shall be the sole and final judge of that
necessity or desirability. The determinations of the
Committee on the matters referred to in this Section 3.4
shall be final and conclusive.
SECTION 4. ELIGIBILITY AND PARTICIPATION
4.1Eligible Individuals. Awards may be granted
pursuant to the Plan only to Persons who are Eligible
Individuals at the time of the grant thereof.
4.2Grant of Awards. Subject to the express provisions
of the Plan, the Committee shall determine which Eligible
Individuals shall be granted Awards from time to time. In
making grants, the Committee shall take into consideration
the contribution the potential Holder
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has made or may make to the success of the Corporation or
its Subsidiaries and such other considerations as the Board
of Directors may from time to time specify. The Committee
shall also determine the number of shares subject to each of
the Awards and shall authorize and cause the Corporation to
grant Awards in accordance with those determinations.
4.3Date of Grant. The date on which the Committee
completes all action resolving to offer an Award to an
individual, including the specification of the number of
shares of Stock to be subject to the Award, shall be the
date on which the Award covered by an Award Agreement is
granted (the "Date of Grant"), even though certain terms of
the Award Agreement may not be determined at that time and
even though the Award Agreement may not be executed until a
later time. In no event shall a Holder gain any rights in
addition to those specified by the Committee in its grant,
regardless of the time that may pass between the grant of
the Award and the actual execution of the Award Agreement by
the Corporation and the Holder.
4.4Award Agreements. Each Award granted under the Plan
shall be evidenced by an Award Agreement that is executed by
the Corporation and the Eligible Individual to whom the
Award is granted and incorporating those terms that the
Committee shall deem necessary or desirable. More than one
Award may be granted under the Plan to the same Eligible
Individual and be outstanding concurrently. In the event an
Eligible Individual is granted both one or more Incentive
Options and one or more Nonstatutory Options, those grants
shall be evidenced by separate Award Agreements, one for
each of the Incentive Option grants and one for each of the
Nonstatutory Option grants.
4.5Limitation for Incentive Options. Notwithstanding
any provision contained herein to the contrary, (a) a Person
shall not be eligible to receive an Incentive Option unless
he is an Employee of the Corporation or a corporate
Subsidiary or, to the extent permitted by law, a partnership
Subsidiary, and (b) a Person shall not be eligible to
receive an Incentive Option if, immediately before the time
the Option is granted, that Person owns (within the meaning
of Sections 422 and 424(d) of the Code) stock possessing
more than ten percent of the total combined voting power or
value of all classes of outstanding stock of the Corporation
or a Subsidiary. Nevertheless, Section 4.5(b) shall not
apply if, at the time the Incentive Option is granted, the
Exercise Price of the Incentive Option is at least one
hundred ten percent of Fair Market Value and the Incentive
Option is not, by its terms, exercisable after the
expiration of five years from the Date of Grant.
4.6No Right to Award. The adoption of the Plan shall
not be deemed to give any Person a right to be granted an
Award.
SECTION 5. TERMS AND CONDITIONS OF OPTIONS
All Options granted under the Plan shall comply with,
and the related Award Agreements shall be deemed to include
and be subject to, the terms and conditions set forth in
this Section 5 (to the extent each term and condition
applies to the form of Option) and also to the terms and
conditions set forth in Sections 9 and 10; provided,
however, that the Committee may authorize an Award Agreement
that expressly contains terms and provisions that differ
from the terms and provisions set forth in Sections 9.2,
9.3, and 9.4 and any of the terms and provisions of Section
10 (other than Sections 10.9 and 10.10).
5.1Number of Shares. Each Award Agreement shall state
the total number of shares of Stock to which it relates.
5.2Vesting. Each Award Agreement shall state the time
or periods in which, or the conditions upon satisfaction of
which, the right to exercise the Option or a portion thereof
shall vest and the number of shares of Stock for which the
right to exercise the Option shall vest at each such time,
period, or fulfillment of condition.
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5.3Expiration of Options. No Option shall be exercised
after the expiration of a period of ten years commencing on
the Date of Grant of the Option; provided, however, that any
portion of a Nonstatutory Option that pursuant to the terms
of the Award Agreement under which such Nonstatutory Option
is granted shall not become exercisable until the date which
is the tenth anniversary of the Date of Grant of such
Nonstatutory Option may be exercisable for a period of 30
days following the date on which such portion becomes
exercisable.
5.4Exercise Price. Each Award Agreement shall state
the exercise price per share of Stock (the "Exercise
Price"); provided, however, that the exercise price per
share of Stock subject to an Incentive Option shall not be
less than the greater of (a) the par value per share of the
Stock or (b) 100% of the Fair Market Value per share of the
Stock on the Date of Grant of the Option.
5.5Method of Exercise. The Option shall be exercisable
only by written notice of exercise (the "Exercise Notice")
delivered to the Corporation during the term of the Option,
which notice shall (a) state the number of shares of Stock
with respect to which the Option is being exercised, (b) be
signed by the Holder of the Option or, if the Holder is dead
or becomes affected by a Disability, by the Person
authorized to exercise the Option pursuant to Sections 10.3
and 10.4, (c) be accompanied by the Exercise Price for all
shares of Stock for which the Option is being exercised, and
(d) include such other information, instruments, and
documents as may be required to satisfy any other condition
to exercise contained in the Award Agreement. The Option
shall not be deemed to have been exercised unless all of the
requirements of the preceding provisions of this Section 5.5
have been satisfied.
5.6Incentive Option Exercises. Except as otherwise
provided in Section 10.4 or in the Award Agreement, during
the Holder's lifetime, only the Holder may exercise an
Incentive Option.
5.7Medium and Time of Payment. The Exercise Price of
an Option shall be payable in full upon the exercise of the
Option (a) in cash or by an equivalent means acceptable to
the Committee, (b) on the Committee's prior consent, with
shares of Stock owned by the Holder (including shares
received upon exercise of the Option or restricted shares
already held by the Holder) and having a Fair Market Value
at least equal to the aggregate Exercise Price payable in
connection with such exercise, or (c) by any combination of
clauses (a) and (b). If the Committee elects to accept
shares of Stock in payment of all or any portion of the
Exercise Price, then (for purposes of payment of the
Exercise Price) those shares of Stock shall be deemed to
have a cash value equal to their aggregate Fair Market Value
determined as of the date the certificate for such shares is
delivered to the Corporation. If the Committee elects to
accept shares of restricted Stock in payment of all or any
portion of the Exercise Price, then an equal number of
shares issued pursuant to the exercise shall be restricted
on the same terms and for the restriction period remaining
on the shares used for payment.
5.8Payment with Sale Proceeds. In addition, at the
request of the Holder and to the extent permitted by
applicable law, the Committee may (but shall not be required
to) approve arrangements with a brokerage firm under which
that brokerage firm, on behalf of the Holder, shall pay to
the Corporation the Exercise Price of the Option being
exercised and the Corporation shall promptly deliver the
exercised shares of Stock to the brokerage firm. To
accomplish this transaction, the Holder must deliver to the
Corporation an Exercise Notice containing irrevocable
instructions from the Holder to the Corporation to deliver
the Stock certificates representing the shares of Stock
directly to the broker. Upon receiving a copy of the Exer
cise Notice acknowledged by the Corporation, the broker
shall sell that number of shares of Stock or loan the Holder
an amount sufficient to pay the Exercise Price and any
withholding obligations due. The broker then shall deliver
to the Corporation that portion of the sale or loan proceeds
necessary to cover the Exercise Price and any withholding
obligations due. The Committee shall not approve any
transaction of this nature if the Committee believes that
the transaction would give rise to the Holder's liability
for short-swing profits under Section 16(b) of the Exchange
Act.
5.9Payment of Taxes. The Committee may, in its
discretion, require a Holder to pay to the Corporation (or
the Corporation's Subsidiary if the Holder is an employee
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of a Subsidiary of the Corporation), at the time of the
exercise of an Option or thereafter, the amount that the
Committee deems necessary to satisfy the Corporation's or
its Subsidiary's current or future obligation to withhold
federal, state, or local income or other taxes that the
Holder incurs by exercising an Option. In connection with
the exercise of an Option requiring tax withholding, a
Holder may (a) direct the Corporation to withhold from the
shares of Stock to be issued to the Holder the number of
shares necessary to satisfy the Corporation's obligation to
withhold taxes, that determination to be based on the
shares' Fair Market Value as of the date of exercise; (b)
deliver to the Corporation sufficient shares of Stock (based
upon the Fair Market Value as of the date of such delivery)
to satisfy the Corporation's tax withholding obligations,
which tax withholding obligation is based on the shares'
Fair Market Value as of the later of the date of exercise or
the date as of which the shares of Stock issued in
connection with such exercise become includible in the
income of the Holder; or (c) deliver sufficient cash to the
Corporation to satisfy its tax withholding obligations.
Holders who elect to use such a Stock withholding feature
must make the election at the time and in the manner that
the Committee prescribes. The Committee may, at its sole
option, deny any Holder's request to satisfy withholding
obligations through Stock instead of cash. In the event the
Committee subsequently determines that the aggregate Fair
Market Value (as determined above) of any shares of Stock
withheld or delivered as payment of any tax withholding
obligation is insufficient to discharge that tax withholding
obligation, then the Holder shall pay to the Corporation,
immediately upon the Committee's request, the amount of that
deficiency in the form of payment requested by the
Committee.
5.10Limitation on Aggregate Value of Shares That May
Become First Exercisable During Any Calendar Year Under an
Incentive Option. Except as is otherwise provided in
Section 9.3, with respect to any Incentive Option granted
under this Plan, the aggregate Fair Market Value of shares
of Stock subject to an Incentive Option and the aggregate
Fair Market Value of shares of Stock or stock of any
Subsidiary (or a predecessor of the Corporation or a
Subsidiary) subject to any other incentive stock option
(within the meaning of Section 422 of the Code) of the
Corporation or its Subsidiaries (or a predecessor
corporation of any such corporation) that first become
purchasable by a Holder in any calendar year may not (with
respect to that Holder) exceed $100,000, or such other
amount as may be prescribed under Section 422 of the Code or
applicable regulations or rulings from time to time. As
used in the previous sentence, Fair Market Value shall be
determined as of the Date of Grant of the Incentive Option.
For purposes of this Section 5.10, "predecessor corporation"
means (a) a corporation that was a party to a transaction
described in Section 424(a) of the Code (or which would be
so described if a substitution or assumption under that
Section had been effected) with the Corporation, (b) a
corporation which, at the time the new incentive stock
option (within the meaning of Section 422 of the Code) is
granted, is a Subsidiary of the Corporation or a predecessor
corporation of any such corporations, or (c) a predecessor
corporation of any such corporations. Failure to comply
with this provision shall not impair the enforceability or
exercisability of any Option, but shall cause the excess
amount of shares to be reclassified in accordance with the
Code.
5.11No Fractional Shares. The Corporation shall not in
any case be required to sell, issue, or deliver a fractional
share with respect to any Option. In lieu of the issuance of
any fractional share of Stock, the Corporation shall pay to
the Holder an amount in cash equal to the same fraction (as
the fractional Stock) of the Fair Market Value of a share of
Stock determined as of the date of the applicable Exercise
Notice.
5.12Modification, Extension, and Renewal of Options.
Subject to the terms and conditions of and within the
limitations of the Plan, Rule 16b-3, and any consent
required by the last sentence of this Section 5.12, the
Committee may (a) modify, extend, or renew outstanding
Options granted under the Plan, (b) accept the surrender of
Options outstanding hereunder (to the extent not previously
exercised) and authorize the granting of new Options in
substitution for outstanding Options (to the extent not
previously exercised), and (c) amend the terms of an
Incentive Option at any time to include provisions that have
the effect of changing the Incentive Option to a
Nonstatutory Option. Nevertheless, without the consent of
the Holder, the Committee may not modify any outstanding
Options so as to specify a higher or lower Exercise Price or
accept the surrender
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of outstanding Incentive Options and authorize the granting
of new Options in substitution therefor specifying a higher
or lower Exercise Price. In addition, no modification of an
Option granted hereunder shall, without the consent of the
Holder, alter or impair any rights or obligations under any
Option theretofore granted to such Holder under the Plan
except, with respect to Incentive Options, as may be
necessary to satisfy the requirements of Section 422 of the
Code or as permitted in clause (c) of this Section 5.12.
5.13Other Agreement Provisions. The Award Agreements
relating to Options shall contain such provisions in
addition to those required by the Plan (including without
limitation restrictions or the removal of restrictions upon
the exercise of the Option and the retention or transfer of
shares thereby acquired) as the Committee may deem
advisable. Each Award Agreement shall identify the Option
evidenced thereby as an Incentive Option or Nonstatutory
Option, as the case may be, and no Award Agreement shall
cover both an Incentive Option and a Nonstatutory Option.
Each Award Agreement relating to an Incentive Option granted
hereunder shall contain such limitations and restrictions
upon the exercise of the Incentive Option to which it
relates as shall be necessary for the Incentive Option to
which such Award Agreement relates to constitute an
incentive stock option, as defined in Section 422 of the
Code.
SECTION 6. STOCK APPRECIATION RIGHTS
All Stock Appreciation Rights granted under the Plan
shall comply with, and the related Award Agreements shall be
deemed to include and be subject to, the terms and
conditions set forth in this Section 6 (to the extent each
term and condition applies to the form of Stock Appreciation
Right) and also the terms and conditions set forth in
Sections 9 and 10; provided, however, that the Committee may
authorize an Award Agreement related to a Stock Appreciation
Right that expressly contains terms and provisions that
differ from the terms and provisions set forth in Sections
9.2, 9.3, and 9.4 and any of the terms and provisions of
Section 10 (other than Sections 10.9 and 10.10).
6.1Form of Right. A Stock Appreciation Right may be
granted to an Eligible Individual (a) in connection with an
Option, either at the time of grant or at any time during
the term of the Option, or (b) independent of an Option.
6.2Rights Related to Options. A Stock Appreciation
Right granted pursuant to an Option shall entitle the
Holder, upon exercise, to surrender that Option or any
portion thereof, to the extent unexercised, and to receive
payment of an amount computed pursuant to Section 6.2(b).
That Option shall then cease to be exercisable to the extent
surrendered. Stock Appreciation Rights granted in
connection with an Option shall be subject to the terms of
the Award Agreement governing the Option, which shall comply
with the following provisions in addition to those
applicable to Options:
(a)Exercise and Transfer. Subject to Section
10.9, a Stock Appreciation Right granted in connection
with an Option shall be exercisable only at such time
or times and only to the extent that the related Option
is exercisable and shall not be transferable except to
the extent that the related Option is transferable.
(b)Value of Right. Upon the exercise of a Stock
Appreciation Right related to an Option, the Holder
shall be entitled to receive payment from the
Corporation of an amount determined by multiplying:
(i)The difference obtained by subtracting
the Exercise Price of a share of Stock specified
in the related Option from the Fair Market Value
of a share of Stock on the date of exercise of the
Stock Appreciation Right, by
(ii)The number of shares as to which that
Stock Appreciation Right has been exercised.
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6.3Right Without Option. A Stock Appreciation Right
granted independent of an Option shall be exercisable as
determined by the Committee and set forth in the Award
Agreement governing the Stock Appreciation Right, which
Award Agreement shall comply with the following provisions:
(a)Number of Shares. Each Award Agreement shall
state the total number of shares of Stock to which the
Stock Appreciation Right relates.
(b)Vesting. Each Award Agreement shall state the
time or periods in which the right to exercise the
Stock Appreciation Right or a portion thereof shall
vest and the number of shares of Stock for which the
right to exercise the Stock Appreciation Right shall
vest at each such time or period.
(c)Expiration of Rights. Each Award Agreement
shall state the date at which the Stock Appreciation
Rights shall expire if not previously exercised.
(d)Value of Right. Each Stock Appreciation Right
shall entitle the Holder, upon exercise thereof, to
receive payment of an amount determined by multiplying:
(i)The difference obtained by subtracting
the Fair Market Value of a share of Stock on the
Date of Grant of the Stock Appreciation Right from
the Fair Market Value of a share of Stock on the
date of exercise of that Stock Appreciation Right,
by
(ii)The number of shares as to which the
Stock Appreciation Right has been exercised.
6.4Limitations on Rights. Notwithstanding Sections
6.2(b) and 6.3(d), the Committee may limit the amount
payable upon exercise of a Stock Appreciation Right. Any
such limitation must be determined as of the Date of Grant
and be noted on the Award Agreement evidencing the Holder's
Stock Appreciation Right.
6.5Payment of Rights. Payment of the amount determined
under Section 6.2(b) or 6.3(d) and Section 6.4 may be made,
in the sole discretion of the Committee unless specifically
provided otherwise in the Award Agreement, solely in whole
shares of Stock valued at Fair Market Value on the date of
exercise of the Stock Appreciation Right, solely in cash, or
in a combination of cash and whole shares of Stock. If the
Committee decides to make full payment in shares of Stock
and the amount payable results in a fractional share,
payment for the fractional share shall be made in cash.
6.6Payment of Taxes. The Committee may, in its
discretion, require a Holder to pay to the Corporation (or
the Corporation's Subsidiary if the Holder is an employee of
a Subsidiary of the Corporation), at the time of the
exercise of a Stock Appreciation Right or thereafter, the
amount that the Committee deems necessary to satisfy the
Corporation's or its Subsidiary's current or future
obligation to withhold federal, state, or local income or
other taxes that the Holder incurs by exercising a Stock
Appreciation Right. In connection with the exercise of a
Stock Appreciation Right requiring tax withholding, a Holder
may (a) direct the Corporation to withhold from the shares
of Stock to be issued to the Holder the number of shares
necessary to satisfy the Corporation's obligation to
withhold taxes, that determination to be based on the
shares' Fair Market Value as of the date of exercise;
(b) deliver to the Corporation sufficient shares of Stock
(based upon the Fair Market Value as of the date of such
delivery) to satisfy the Corporation's tax withholding
obligations, which tax withholding obligation is based on
the shares' Fair Market Value as of the later of the date of
exercise or the date as of which the shares of Stock issued
in connection with such exercise become includible in the
income of the Holder; or (c) deliver sufficient cash to the
Corporation to satisfy its tax withholding obligations.
Holders who elect to have Stock withheld pursuant to (a) or
(b) above must make the election at the time and in the
manner that the Committee prescribes. The Committee may, in
its sole discretion, deny any Holder's request to satisfy
withholding obligations through Stock instead of cash. In
the event the Committee
<PAGE>
subsequently determines that the aggregate Fair Market Value
(as determined above) of any shares of Stock withheld or
delivered as payment of any tax withholding obligation is
insufficient to discharge that tax withholding obligation,
then the Holder shall pay to the Corporation, immediately
upon the Committee's request, the amount of that deficiency
in the form of payment requested by the Commission.
6.7Other Agreement Provisions. The Award Agreements
relating to Stock Appreciation Rights shall contain such
provisions in addition to those required by the Plan
(including without limitation restrictions or the removal of
restrictions upon the exercise of the Stock Appreciation
Right and the retention or transfer of shares thereby
acquired) as the Committee may deem advisable.
SECTION 7. RESTRICTED STOCK AWARDS
All Restricted Stock Awards granted under the Plan
shall comply with and be subject to, and the related Award
Agreements shall be deemed to include, the terms and
conditions set forth in this Section 7 and also to the terms
and conditions set forth in Sections 9 and 10; provided,
however, that the Committee may authorize an Award Agreement
related to a Restricted Stock Award that expressly contains
terms and provisions that differ from the terms and
provisions set forth in Sections 9.2, 9.3, and 9.4 and the
terms and provisions set forth in Section 10 (other than
Sections 10.9 and 10.10).
7.1Restrictions. All shares of Restricted Stock Awards
granted or sold pursuant to the Plan shall be subject to the
following conditions:
(a)Transferability. The shares may not be sold,
transferred, or otherwise alienated or hypothecated
until the restrictions are removed or expire.
(b)Conditions to Removal of Restrictions.
Conditions to removal or expiration of the restrictions
may include, but are not required to be limited to,
continuing employment or service as a director,
officer, or Key Employee or achievement of performance
objectives described in the Award Agreement.
(c)Legend. Each certificate representing
Restricted Stock Awards granted pursuant to the Plan
shall bear a legend making appropriate reference to the
restrictions imposed.
(d)Possession. The Committee may require the
Corporation to retain physical custody of the
certificates representing Restricted Stock Awards
during the restriction period and may require the
Holder of the Award to execute stock powers in blank
for those certificates and deliver those stock powers
to the Corporation, or the Committee may require the
Holder to enter into an escrow agreement providing that
the certificates representing Restricted Stock Awards
granted or sold pursuant to the Plan shall remain in
the physical custody of an escrow holder until all
restrictions are removed or expire.
(e)Other Conditions. The Committee may impose
other conditions on any shares granted or sold as
Restricted Stock Awards pursuant to the Plan as it may
deem advisable, including without limitation
(i) restrictions under the Securities Act or Exchange
Act, (ii) the requirements of any securities exchange
upon which the shares or shares of the same class are
then listed, and (iii) any state securities law
applicable to the shares.
7.2Expiration of Restrictions. The restrictions
imposed in Section 7.1 on Restricted Stock Awards shall
lapse as determined by the Committee and set forth in the
applicable Award Agreement, and the Corporation shall
promptly deliver to the Holder of the Restricted Stock Award
a certificate representing the number of shares for which
restrictions have lapsed, free of any restrictive legend
relating to the lapsed restrictions. Each Restricted Stock
Award may have a different restriction period as determined
by the Committee in its sole discretion. The Committee may,
in its discretion, prospectively reduce the restriction
period applicable to a particular Restricted Stock Award.
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7.3Rights as Shareholder. Subject to the provisions of
Sections 7.1 and 10.10, the Committee may, in its
discretion, determine what rights, if any, the Holder shall
have with respect to the Restricted Stock Awards granted or
sold, including the right to vote the shares and receive all
dividends and other distributions paid or made with respect
thereto.
7.4Payment of Taxes. The Committee may, in its
discretion, require a Holder to pay to the Corporation (or
the Corporation's Subsidiary if the Holder is an employee of
a Subsidiary of the Corporation) the amount that the
Committee deems necessary to satisfy the Corporation's or
its Subsidiary's current or future obligation to withhold
federal, state, or local income or other taxes that the
Holder incurs by reason of the Restricted Stock Award. The
Holder may (a) direct the Corporation to withhold from the
shares of Stock to be issued to the Holder the number of
shares necessary to satisfy the Corporation's obligation to
withhold taxes, that determination to be based on the
shares' Fair Market Value as of the date on which tax
withholding is to be made; (b) deliver to the Corporation
sufficient shares of Stock (based upon the Fair Market Value
as of the date of such delivery) to satisfy the
Corporation's tax withholding obligations, which tax
withholding obligation is based on the shares' Fair Market
Value as of the later of the date of issuance or the date as
of which the shares of Stock issued become includible in the
income of the Holder; or (c) deliver sufficient cash to the
Corporation to satisfy its tax withholding obligations.
Holders who elect to have Stock withheld pursuant to (a) or
(b) above must make the election at the time and in the
manner that the Committee prescribes. The Committee may, in
its sole discretion, deny any Holder's request to satisfy
withholding obligations through Stock instead of cash. In
the event the Committee subsequently determines that the
aggregate Fair Market Value (as determined above) of any
shares of Stock withheld or delivered as payment of any tax
withholding obligation is insufficient to discharge that tax
withholding obligation, then the Holder shall pay to the
Corporation, immediately upon the Committee's request, the
amount of that deficiency.
7.5Other Agreement Provisions. The Award Agreements
relating to Restricted Stock Awards shall contain such
provisions in addition to those required by the Plan as the
Committee may deem advisable.
SECTION 8. AWARDS TO NON-EMPLOYEE DIRECTORS
8.1Awards to Committee Members. The full Board of
Directors shall determine the number of Awards to be granted
to members of the Committee, the Exercise Price and the
vesting schedule thereof.
8.2Eligibility for Awards. Non-Employee Directors
shall be eligible to receive any Awards under the Plan other
than an Award of an Incentive Option.
SECTION 9. ADJUSTMENT PROVISIONS
9.1Adjustment of Awards and Authorized Stock. The
terms of an Award and the number of shares of Stock
authorized pursuant to Section 2.1 and Section 8 for
issuance under the Plan shall be subject to adjustment from
time to time, in accordance with the following provisions:
(a) If at any time, or from time to time, the
Corporation shall subdivide as a whole (by
reclassification, by a Stock split, by the issuance of
a distribution on Stock payable in Stock, or otherwise)
the number of shares of Stock then outstanding into a
greater number of shares of Stock, then (i) the maximum
number of shares of Stock available for the Plan as
provided in Section 2.1 shall be increased
proportionately, and the kind of shares or other
securities available for the Plan shall be
appropriately adjusted, (ii) the number of shares of
Stock (or other kind of shares or securities) that may
be acquired under any Award shall be increased
proportionately, and (iii) the price (including
Exercise Price) for each share of Stock (or other kind
of shares or securities) subject to then outstanding
Awards shall be reduced proportionately, without
changing the aggregate purchase price or value as to
which outstanding Awards remain exercisable or subject
to restrictions.
<PAGE>
(b) If at any time, or from time to time, the
Corporation shall consolidate as a whole (by
reclassification, reverse Stock split, or otherwise)
the number of shares of Stock then outstanding into a
lesser number of shares of Stock, then (i) the maximum
number of shares of Stock available for the Plan as
provided in Section 2.1 shall be decreased
proportionately, and the kind of shares or other
securities available for the Plan shall be
appropriately adjusted, (ii) the number of shares of
Stock (or other kind of shares or securities) that may
be acquired under any Award shall be decreased
proportionately, and (iii) the price (including
Exercise Price) for each share of Stock (or other kind
of shares or securities) subject to then outstanding
Awards shall be increased proportionately, without
changing the aggregate purchase price or value as to
which outstanding Awards remain exercisable or subject
to restrictions.
(c) Whenever the number of shares of Stock subject
to outstanding Awards and the price for each share of
Stock subject to outstanding Awards are required to be
adjusted as provided in this Section 9.1, the Committee
shall promptly prepare a notice setting forth, in
reasonable detail, the event requiring adjustment, the
amount of the adjustment, the method by which such
adjustment was calculated, and the change in price and
the number of shares of Stock, other securities, cash,
or property purchasable subject to each Award after
giving effect to the adjustments. The Committee shall
promptly give each Holder such a notice.
(d) Adjustments under Sections 9(a) and (b) shall
be made by the Committee, and its determination as to
what adjustments shall be made and the extent thereof
shall be final, binding, and conclusive. No fractional
interest shall be issued under the Plan on account of
any such adjustments.
9.2Changes in Control. Any Award Agreement may provide
that, upon the occurrence of a Change in Control, one or
more of the following apply: (a) each Holder of an Option
shall immediately be granted corresponding Stock
Appreciation Rights; (b) all outstanding Stock Appreciation
Rights and Options shall immediately become fully vested and
exercisable in full, including that portion of any Stock
Appreciation Right or Option that pursuant to the terms and
provisions of the applicable Award Agreement had not yet
become exercisable (the total number of shares of Stock as
to which a Stock Appreciation Right or Option is exercisable
upon the occurrence of a Change in Control is referred to
herein as the "Total Shares"); and (c) the restriction
period of any Restricted Stock Award shall immediately be
accelerated and the restrictions shall expire. An Award
Agreement does not have to provide for any of the foregoing.
If a Change in Control involves a Restructuring or occurs in
connection with a series of related transactions involving a
Restructuring and if such Restructuring is in the form of a
Non-Surviving Event and as a part of such Restructuring
shares of stock, other securities, cash, or property shall
be issuable or deliverable in exchange for Stock, then the
Holder of an Award shall be entitled to purchase or receive
(in lieu of the Total Shares that the Holder would otherwise
be entitled to purchase or receive), as appropriate for the
form of Award, the number of shares of Stock, other
securities, cash, or property to which that number of Total
Shares would have been entitled in connection with such
Restructuring (and, for Options, at an aggregate exercise
price equal to the Exercise Price that would have been
payable if that number of Total Shares had been purchased on
the exercise of the Option immediately before the
consummation of the Restructuring). Nothing in this Section
9.2 shall impose on a Holder the obligation to exercise any
Award immediately before or upon the Change in Control, or
cause a Holder to forfeit the right to exercise the Award
during the remainder of the original term of the Award
because of a Change in Control; provided, however, in
connection with any Non-Surviving Event, the relevant merger
agreement, purchase agreement or similar agreement pursuant
to which such transaction occurs may contain provisions by
which all outstanding Awards may, without the consent of the
Holders thereof, be converted into the right to receive, in
cash, an amount that would fairly reflect the value of such
Award giving due consideration to (i) the Exercise Price of
any Award in the form of an Option or the value to be given
by the Holder with respect to any other Award and (ii) the
consideration payable pursuant to the transaction with
respect to a share of outstanding Stock.
<PAGE>
9.3Restructuring Without Change in Control. In the
event a Restructuring shall occur at any time while there is
any outstanding Award hereunder and the Restructuring does
not occur in connection with a Change in Control or a series
of related transactions involving a Change in Control, then:
(a) no outstanding Option or Stock Appreciation
Right shall immediately become fully vested and
exercisable in full merely because of the occurrence of
the Restructuring;
(b) no Holder of an Option shall automatically be
granted corresponding Stock Appreciation Rights;
(c) the restriction period of any Restricted Stock
Award shall not immediately be accelerated and the
restrictions expire merely because of the occurrence of
the Restructuring; and
(d) at the option of the Committee, the Committee
may (but shall not be required to) cause the
Corporation to take any one or more of the following
actions:
(i)accelerate in whole or in part the time
of the vesting and exercisability of any one or
more of the outstanding Stock Appreciation Rights
and Options so as to provide that those Stock
Appreciation Rights and Options shall be
exercisable before, upon, or after the
consummation of the Restructuring;
(ii)grant each Holder of an Option
corresponding Stock Appreciation Rights;
(iii) accelerate in whole or in part the
expiration of some or all of the restrictions on
any Restricted Stock Award;
(iv)if the Restructuring is in the form of a
Non-Surviving Event, cause the surviving entity to
assume in whole or in part any one or more of the
outstanding Awards upon such terms and provisions
as the Committee deems desirable; or
(v) redeem in whole or in part any one or
more of the outstanding Awards (whether or not
then exercisable) in consideration of a cash
payment, as such payment may be reduced for tax
withholding obligations as contemplated in
Sections 5.9, 6.6, or 7.4, as applicable, in an
amount equal to:
(A)for Options and Stock Appreciation
Rights granted in connection with Options,
the excess of (1) the Fair Market Value,
determined as of the date immediately
preceding the consummation of the
Restructuring, of the aggregate number of
shares of Stock subject to the Award and as
to which the Award is being redeemed over (2)
the Exercise Price for that number of shares
of Stock;
(B)for Stock Appreciation Rights not
granted in connection with an Option, the
excess of (1) the Fair Market Value,
determined as of the date immediately
preceding the consummation of the
Restructuring, of the aggregate number of
shares of Stock subject to the Award and as
to which the Award is being redeemed over (2)
the Fair Market Value of that number of
shares of Stock on the Date of Grant; and
<PAGE>
(C)for Restricted Stock Awards, the Fair
Market Value, determined as of the date
immediately preceding the consummation of the
Restructuring, of the aggregate number of
shares of Stock subject to the Award and as
to which the Award is being redeemed.
The Corporation shall promptly notify each Holder of any
election or action taken by the Corporation under this
Section 9.3. In the event of any election or action taken
by the Corporation pursuant to this Section 9.3 that
requires the amendment or cancellation of any Award
Agreement as may be specified in any notice to the Holder
thereof, that Holder shall promptly deliver that Award
Agreement to the Corporation in order for that amendment or
cancellation to be implemented by the Corporation and the
Committee. The failure of the Holder to deliver any such
Award Agreement to the Corporation as provided in the
preceding sentence shall not in any manner affect the
validity or enforceability of any action taken by the
Corporation and the Committee under this Section 9.3,
including without limitation any redemption of an Award as
of the consummation of a Restructuring. Any cash payment to
be made by the Corporation pursuant to this Section 9.3 in
connection with the redemption of any outstanding Awards
shall be paid to the Holder thereof currently with the
delivery to the Corporation of the Award Agreement
evidencing that Award; provided, however, that any such
redemption shall be effective upon the consummation of the
Restructuring notwithstanding that the payment of the
redemption price may occur subsequent to the consummation.
If all or any portion of an outstanding Award is to be
exercised or accelerated upon or after the consummation of a
Restructuring that does not occur in connection with a
Change in Control and is in the form of a Non-Surviving
Event, and as a part of that Restructuring shares of stock,
other securities, cash, or property shall be issuable or
deliverable in exchange for Stock, then the Holder of the
Award shall thereafter be entitled to purchase or receive
(in lieu of the number of shares of Stock that the Holder
would otherwise be entitled to purchase or receive) the
number of shares of Stock, other securities, cash, or
property to which such number of shares of Stock would have
been entitled in connection with the Restructuring (and, for
Options, upon payment of the aggregate exercise price equal
to the Exercise Price that would have been payable if that
number of Total Shares had been purchased on the exercise of
the Option immediately before the consummation of the
Restructuring) and such Award shall be subject to
adjustments that shall be as nearly equivalent as may be
practical to the adjustments provided for in this Section 9.
9.4Notice of Restructuring. The Corporation shall
attempt to keep all Holders informed with respect to any
Restructuring or of any potential Restructuring to the same
extent that the Corporation's shareholders are informed by
the Corporation of any such event or potential event.
SECTION 10. ADDITIONAL PROVISIONS
10.1Termination of Employment. If a Holder is an
Eligible Individual because the Holder is an Employee and if
that employment relationship is terminated for any reason
other than (a) that Holder's death or (b) that Holder's
Disability (hereafter defined), then any and all Awards held
by such Holder in such Holder's capacity as an Employee 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 Awards 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 Award or (b) the date which is 30 days
following the date of termination. Any portion of an Award
not exercised upon the expiration of the lesser of the
periods specified above shall be null and void unless the
Holder dies during such period, in which case the provisions
of Section 10.3 shall govern.
10.2Other Loss of Eligibility - Non-Employees. If a
Holder is an Eligible Individual because the Holder is
serving in a capacity other than as an Employee and if that
capacity is terminated for any reason other than the
Holder's death or Disability, then that portion, if any, of
any and all Awards held by the Holder that were granted
because of that capacity which are not yet exercisable (or
for which restrictions have not lapsed) as of the date of
the termination shall become null and void as of the date of
the termination; provided, however, that the
<PAGE>
portion, if any, of any and all Awards held by the Holder
that are then exercisable as of the date of the termination
shall be exercisable for a period of the lesser of (a) the
remainder of the term of the Award or (b) 30 days following
the date such capacity is terminated. If a Holder is an
Eligible Individual because the Holder is serving in a
capacity other than as an Employee and if that capacity is
terminated by reason of the Holder's death or Disability,
then the portion, if any, of any and all Awards held by the
Holder that are not yet exercisable (or for which
restrictions have not lapsed) as of the date of termination
for death or Disability shall become exercisable (and the
restrictions thereon, if any, shall lapse) and all such
Awards held by that Holder as of the date of termination
that are exercisable (either as a result of this sentence or
otherwise) shall be exercisable for a period of the lesser
of (a) the remainder of the term of the Award or (b) the
date which is 30 days following the date of termination.
Any portion of an Award not exercised upon the expiration of
the periods specified in (a) or (b) of the preceding two
sentences shall be null and void upon the expiration of such
period, as applicable.
10.3Death. Upon the death of a Holder, any and all
Awards held by the Holder that are not then exercisable (or
for which restrictions have not lapsed) shall become
immediately exercisable (and any restrictions shall
immediately lapse) and such Awards shall be exercisable by
that Holder's legal representatives, heirs, legatees, or
distributees for a period of 90 days following the date of
the Holder's death unless the Award Agreement specifies a
longer period of time. Any portion of an Award not
exercised upon the expiration of such period shall be null
and void. Except as expressly provided in this Section
10.3, no Award held by a Holder shall be exercisable after
the death of that Holder.
10.4Disability. If a Holder is an Eligible Individual
because the Holder is an Employee and if that employment
relationship is terminated by reason of the Holder's
Disability, then the portion, if any, of any and all Awards
held by the Holder that are not then exercisable (or for
which restrictions have not lapsed) shall become immediately
exercisable (and any restrictions shall immediately lapse)
and such Awards shall be exercisable by the Holder, his
guardian or his legal representative for a period of 90 days
following the date of such termination except as otherwise
provided below. Any portion of an Award not exercised upon
the expiration of such period shall be null and void unless
the Holder dies during such period, in which event the
provisions of Section 10.3 shall govern. "Disability" shall
have the meaning given it in the employment agreement of the
Holder; provided, however, that if the Holder has no
employment agreement defining such term, "Disability" shall
mean, as determined by the Board of Directors in the sole
discretion exercised in good faith of the Board of
Directors, a physical or mental impairment of sufficient
severity that either the Holder is unable to continue
performing the duties he performed before such impairment or
the Holder's condition entitles him to disability benefits
under any insurance or employee benefit plan of the
Corporation or its Subsidiaries and that impairment or
condition is cited by the Corporation as the reason for
termination of the Holder's employment. Notwithstanding the
foregoing, in the event the Holder is permanently and
totally disabled so that he is unable to engage in any
substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be
expected to result in death or which has lasted or can be
expected to last for a continuous period of not less than 12
months, and the Holder furnishes proof of the existence
thereof in such form and manner, and at such time, as the
Internal Revenue Service may require, then the Holder shall
have one year from the date of termination within which to
exercise such Awards.
10.5Leave of Absence. With respect to an Award, the
Committee may, in its sole discretion, determine that any
Holder who is on leave of absence for any reason will be
considered to still be in the employ of the Corporation or
any of its Subsidiaries, as applicable, for any or all
purposes of the Plan and the Award Agreement of such Holder.
10.6Transferability of Awards. In addition to such
other terms and conditions as may be included in a
particular Award Agreement, an Award requiring exercise
shall be exercisable during a Holder's lifetime only by that
Holder or by that Holder's guardian or legal representative.
An Award requiring exercise shall not be transferable other
than (i) by will or the laws of descent and distribution, or
(ii) in accordance with the terms of the Award Agreement.
<PAGE>
10.7Forfeiture and Restrictions on Transfer. Each
Award Agreement may contain or otherwise provide for
conditions giving rise to the forfeiture of the Stock
acquired pursuant to an Award or otherwise and may also
provide for those restrictions on the transferability of
shares of the Stock acquired pursuant to an Award or
otherwise that the Committee in its sole and absolute
discretion may deem proper or advisable. The conditions
giving rise to forfeiture may include, but need not be
limited to, the requirement that the Holder render
substantial services to the Corporation or its Subsidiaries
for a specified period of time. The restrictions on
transferability may include, but need not be limited to,
options and rights of first refusal in favor of the
Corporation and shareholders of the Corporation other than
the Holder of such shares of Stock who is a party to the
particular Award Agreement or a subsequent Holder of the
shares of Stock who is bound by that Award Agreement.
10.8Delivery of Certificates of Stock. Subject to
Section 10.9, the Corporation shall promptly issue and
deliver a certificate representing the number of shares of
Stock as to which (a) an Option has been exercised after the
Corporation receives an Exercise Notice and upon receipt by
the Corporation of the Exercise Price and any tax
withholding as may be requested, (b) a Stock Appreciation
Right has been exercised (to the extent the Committee
determines to pay such Stock Appreciation Right in shares of
Stock pursuant to Section 6.5) and upon receipt by the
Corporation of any tax withholding as may be requested, and
(c) restrictions have lapsed with respect to a Restricted
Stock Award and upon receipt by the Corporation of any tax
withholding as may be requested. The value of the shares of
Stock or cash transferable because of an Award under the
Plan shall not bear any interest owing to the passage of
time, except as may be otherwise provided in an Award
Agreement. If a Holder is entitled to receive certificates
representing Stock received for more than one form of Award
under the Plan, separate Stock certificates shall be issued
with respect to Incentive Options and Nonstatutory Options.
10.9Conditions to Delivery of Stock. Nothing herein or
in any Award granted hereunder or any Award Agreement shall
require the Corporation to issue any shares with respect to
any Award if that issuance would, in the opinion of counsel
for the Corporation, constitute a violation of the
Securities Act or any similar or superseding statute or
statutes, any other applicable statute or regulation, or the
rules of any applicable securities exchange or securities
association, as then in effect. At the time of any exercise
of an Option or Stock Appreciation Right, or at the time of
any grant of a Restricted Stock Award, the Corporation may,
as a condition precedent to the exercise of such Option or
Stock Appreciation Right or vesting of any Restricted Stock
Award, require from the Holder of the Award (or in the event
of his death, his legal representatives, heirs, legatees, or
distributees) such written representations, if any,
concerning the Holder's intentions with regard to the
retention or disposition of the shares of Stock being
acquired pursuant to the Award and such written covenants
and agreements, if any, as to the manner of disposal of such
shares as, in the opinion of counsel to the Corporation, may
be necessary to ensure that any disposition by that Holder
(or in the event of the Holder's death, his legal
representatives, heirs, legatees, or distributees) will not
involve a violation of the Securities Act or any similar or
superseding statute or statutes, any other applicable state
or federal statute or regulation, or any rule of any
applicable securities exchange or securities association, as
then in effect.
10.10Certain Directors and Officers. With respect to
Holders who are directors or officers of the Corporation or
any of its Subsidiaries and who are subject to Section 16(b)
of the Exchange Act, Awards and all rights under the Plan
shall be exercisable during the Holder's lifetime only by
the Holder or the Holder's guardian or legal representative,
but not for at least six months after grant, unless (a) the
Board of Directors expressly authorizes that an Award shall
be exercisable before the expiration of the six-month period
or (b) the death or Disability of the Holder occurs before
the expiration of the six-month period. In addition, no
such officer or director shall exercise any Stock
Appreciation Right or have shares of Stock withheld to pay
tax withholding obligations within the first six months of
the term of an Award. Any election by any such officer or
director to have tax withholding obligations satisfied by
the withholding of shares of Stock shall be irrevocable and
shall be communicated to the Committee during the period
beginning on the third day following the date of release of
quarterly or annual summary statements of sales and earnings
and ending on the twelfth business day following such date
(the "Window Period") or by an irrevocable election
communicated to the Committee at least six months before the
date of exercise of the Award for which such withholding is
desired. Any election by an officer or director to receive
cash in full or partial settlement of a Stock Appreciation
Right, as well as any exercise by such individual of a Stock
Appreciation Right for cash, in either case to the extent
permitted under the applicable Award Agreement or otherwise
permitted by the Committee, shall be made during the Window
Period or within any other periods that the Committee shall
specify from time to time.
<PAGE>
10.11Securities Act Legend. Certificates for shares of
Stock, when issued, may have the following legend, or
statements of other applicable restrictions (including,
without limitation, restrictions required under any federal,
state or foreign law), endorsed thereon and may not be
immediately transferable:
THE SHARES OF STOCK REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THE SHARES MAY NOT BE OFFERED
FOR SALE, SOLD, PLEDGED, TRANSFERRED, OR OTHERWISE
DISPOSED OF UNTIL THE HOLDER HEREOF PROVIDES
EVIDENCE SATISFACTORY TO THE ISSUER (WHICH, IN THE
DISCRETION OF THE ISSUER, MAY INCLUDE AN OPINION
OF COUNSEL SATISFACTORY TO THE ISSUER) THAT SUCH
OFFER, SALE, PLEDGE, TRANSFER, OR OTHER
DISPOSITION WILL NOT VIOLATE APPLICABLE FEDERAL OR
STATE LAWS.
This legend shall not be required for shares of Stock issued
pursuant to an effective registration statement under the
Securities Act.
10.12Legend for Restrictions on Transfer. Each
certificate representing shares issued to a Holder pursuant
to an Award granted under the Plan shall, if such shares are
subject to any transfer restriction, including a right of
first refusal, provided for under this Plan or an Award
Agreement, bear a legend that complies with applicable law
with respect to the restrictions on transferability
contained in this Section 10.12, such as:
THE SHARES OF STOCK REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY IMPOSED BY THAT CERTAIN INSTRUMENT
ENTITLED "EZCORP, INC. 1998 INCENTIVE PLAN" AS
ADOPTED BY THE CORPORATION, AND AN AGREEMENT
THEREUNDER BETWEEN THE CORPORATION AND THE INITIAL
HOLDER THEREOF DATED OCTOBER 26, 1998, AND MAY NOT
BE TRANSFERRED, SOLD, OR OTHERWISE DISPOSED OF
EXCEPT AS THEREIN PROVIDED. THE CORPORATION WILL
FURNISH A COPY OF SUCH INSTRUMENT AND AGREEMENT TO
THE RECORD HOLDER OF THIS CERTIFICATE WITHOUT
CHARGE ON REQUEST TO THE CORPORATION AT ITS
PRINCIPAL PLACE OF BUSINESS OR REGISTERED OFFICE.
10.13Rights as a Shareholder. A Holder shall have no
right as a shareholder with respect to any shares covered by
his Award until a certificate representing those shares is
issued in his name. No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash or
other property) or distributions or other rights for which
the record date is before the date that certificate is
issued, except as contemplated by Section 9 hereof.
Nevertheless, dividends, dividend equivalent rights and
voting rights may be extended to and made part of any Award
denominated in Stock or units of Stock, subject to such
terms, conditions and restrictions as the Committee may
establish. The Committee may also establish rules and
procedures for the crediting of interest on deferred cash
payments and dividend equivalents for deferred payment
denominated in Stock or units of Stock.
<PAGE>
10.14Furnish Information. Each Holder shall furnish to
the Corporation all information requested by the Corporation
to enable it to comply with any reporting or other
requirement imposed upon the Corporation by or under any
applicable statute or regulation.
10.15Obligation to Exercise. The granting of an Award
hereunder shall impose no obligation upon the Holder to
exercise the same or any part thereof.
10.16Adjustments to Awards. Subject to the general
limitations set forth in Sections 5, 6, and 9, the Committee
may make any adjustment in the Exercise Price of, the number
of shares subject to, or the terms of a Nonstatutory Option
or Stock Appreciation Right by canceling an outstanding
Nonstatutory Option or Stock Appreciation Right and
regranting a Nonstatutory Option or Stock Appreciation
Right. Such adjustment shall be made by amending,
substituting, or regranting an outstanding Nonstatutory
Option or Stock Appreciation Right. Such amendment,
substitution, or regrant may result in terms and conditions
that differ from the terms and conditions of the original
Nonstatutory Option or Stock Appreciation Right. The
Committee may not, however, impair the rights of any Holder
of previously granted Nonstatutory Options or Stock
Appreciation Rights without that Holder's consent. If such
action is effected by amendment, such amendment shall be
deemed effective as of the Date of Grant of the amended
Award.
10.17Remedies. The Corporation shall be entitled to
recover from a Holder reasonable attorneys' fees incurred in
connection with the enforcement of the terms and provisions
of the Plan and any Award Agreement whether by an action to
enforce specific performance or for damages for its breach
or otherwise.
10.18Information Confidential. As partial
consideration for the granting of each Award hereunder, the
Holder shall agree with the Corporation that he will keep
confidential all information and knowledge that he 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 Holder's spouse, tax or financial advisors, or to a
financial institution to the extent that such information is
necessary to secure a loan. In the event any breach of this
promise comes to the attention of the Committee, it shall
take into consideration that breach in determining whether
to recommend the grant of any future Award to that Holder,
as a factor mitigating against the advisability of granting
any such future Award to that Person.
10.19Consideration. No Option or Stock Appreciation
Right shall be exercisable and no restriction on any
Restricted Stock Award shall lapse with respect to a Holder
unless and until the Holder thereof shall have paid cash or
property to, or performed services for, the Corporation or
any of its Subsidiaries that the Committee believes is equal
to or greater in value than the par value of the Stock
subject to such Award.
SECTION 11. DURATION AND AMENDMENT OF PLAN
11.1Duration. No Awards may be granted hereunder after
the date that is ten years from the earlier of (a) the date
the Plan is adopted by the Board of Directors or (b) the
date the Plan is approved by the shareholders of the
Corporation.
11.2Amendment. The Board of Directors may, insofar as
permitted by law, with respect to any shares which, at the
time, are not subject to Awards, suspend or discontinue the
Plan or revise or amend it in any respect whatsoever and may
amend any provision of the Plan or any Award Agreement to
make the Plan or the Award Agreement, or both, comply with
Section 16(b) of the Exchange Act and the exemptions from
that Section in the regulations thereunder. The Board of
Directors may also amend, modify, suspend, or terminate the
Plan for the purpose of meeting or addressing any changes in
other legal requirements applicable to the Corporation or
the Plan or for any other purpose permitted by law. The
Plan may not be amended without the consent of the holders
of a
<PAGE>
majority of the shares of Stock then outstanding to (a)
increase materially the aggregate number of shares of Stock
that may be issued under the Plan (except for adjustments
pursuant to Section 9 hereof), (b) increase materially the
benefits accruing to Eligible Individuals under the Plan, or
(c) modify materially the requirements about eligibility for
participation in the Plan; provided, however, that such
amendments may be made without the consent of shareholders
of the Corporation if changes occur in law or other legal
requirements (including Rule 16b-3) that would permit such
changes. In connection with any amendment of the Plan, the
Board of Directors shall be authorized to incorporate such
provisions as shall be necessary for amounts paid under the
Plan to be exempt from Section 162(m) of the Code.
SECTION 12. GENERAL
12.1Application of Funds. The proceeds received by the
Corporation from the sale of shares pursuant to Awards may
be used for any general corporate purpose.
12.2Right of the Corporation and Subsidiaries to
Terminate Employment. Nothing contained in the Plan or in
any Award Agreement shall confer upon any Holder the right
to continue in the employ of the Corporation or any
Subsidiary or interfere in any way with the rights of the
Corporation or any Subsidiary to terminate the Holder's
employment at any time.
12.3No Liability for Good Faith Determinations. Neither
the members of the Board of Directors nor any member of the
Committee shall be liable for any act, omission or
determination taken or made in good faith with respect to
the Plan or any Award granted under it; and members of the
Board of Directors and the Committee shall be entitled to
indemnification and reimbursement by the Corporation in
respect of any claim, loss, damage, or expense (including
attorneys' fees, the costs of settling any suit, provided
such settlement is approved by independent legal counsel
selected by the Corporation, and amounts paid in
satisfaction of a judgment, except a judgment based on a
finding of bad faith) arising therefrom to the full extent
permitted by law and under any directors' and officers'
liability or similar insurance coverage that may from time
to time be in effect. This right to indemnification shall
be in addition to, and not a limitation on, any other
indemnification rights any member of the Board of Directors
or the Committee may have.
12.4Other Benefits. Participation in the Plan shall
not preclude the Holder from eligibility in any other stock
or stock option plan of the Corporation or any Subsidiary or
any old age benefit, insurance, pension, profit sharing
retirement, bonus, or other extra compensation plans that
the Corporation or any Subsidiary has adopted, or may, at
any time, adopt for the benefit of its Employees. Neither
the adoption of the Plan by the Board of Directors nor the
submission of the Plan to the shareholders of the
Corporation for approval shall be construed as creating any
limitations on the power of the Board of Directors to adopt
such other incentive arrangements as it may deem desirable,
including, without limitation, the granting of stock options
and the awarding of Stock and cash otherwise than under the
Plan and such arrangements may be either generally
applicable or applicable only in specific cases.
12.5Exclusion From Pension and Profit-Sharing
Compensation. By acceptance of an Award (regardless of
form), as applicable, each Holder shall be deemed to have
agreed that the Award is special incentive compensation that
will not be taken into account in any manner as salary,
compensation, or bonus in determining the amount of any
payment under any pension, retirement, or other employee
benefit plan of the Corporation or any Subsidiary, unless
any pension, retirement, or other employee benefit plan of
the Corporation or Subsidiary expressly provides that such
Award shall be so considered for purposes of determining the
amount of any payment under any such plan. In addition,
each beneficiary of a deceased Holder shall be deemed to
have agreed that the Award will not affect the amount of any
life insurance coverage, if any, provided by the Corporation
or a Subsidiary on the life of the Holder that is payable to
the beneficiary under any life insurance plan covering
Employees of the Corporation or any Subsidiary.
<PAGE>
12.6Execution of Receipts and Releases. Any payment of
cash or any issuance or transfer of shares of Stock to the
Holder, or to his legal representative, heir, legatee, or
distributee, in accordance with the provisions hereof,
shall, to the extent thereof, be in full satisfaction of all
claims of such Persons hereunder. The Committee may require
any Holder, legal representative, heir, legatee, or
distributee, as a condition precedent to such payment, to
execute a release and receipt therefor in such form as it
shall determine.
12.7Unfunded Plan. Insofar as it provides for Awards
of cash and Stock, the Plan shall be unfunded. Although
bookkeeping accounts may be established with respect to
Holders who are entitled to cash, Stock, or rights thereto
under the Plan, any such accounts shall be used merely as a
bookkeeping convenience. The Corporation shall not be
required to segregate any assets that may at any time be
represented by cash, Stock, or rights thereto, nor shall the
Plan be construed as providing for such segregation, nor
shall the Corporation nor the Board of Directors nor the
Committee be deemed to be a trustee of any cash, Stock, or
rights thereto to be granted under the Plan. Any liability
of the Corporation to any Holder with respect to a grant of
cash, Stock, or rights thereto under the Plan shall be based
solely upon any contractual obligations that may be created
by the Plan and any Award Agreement; no such obligation of
the Corporation shall be deemed to be secured by any pledge
or other encumbrance on any property of the Corporation.
Neither the Corporation nor the Board of Directors nor the
Committee shall be required to give any security or bond for
the performance of any obligation that may be created by the
Plan.
12.8No Guarantee of Interests. Neither the Committee
nor the Corporation guarantees the Stock of the Corporation
from loss or depreciation.
12.9Payment of Expenses. All expenses incident to the
administration, termination, or protection of the Plan,
including, but not limited to, legal and accounting fees,
shall be paid by the Corporation or its Subsidiaries;
provided, however, the Corporation or a Subsidiary may
recover any and all damages, fees, expenses, and costs
arising out of any actions taken by the Corporation to
enforce its right to purchase Stock under this Plan.
12.10Corporation Records. Records of the Corporation
or its Subsidiaries regarding the Holder's period of
employment, termination of employment and the reason
therefor, leaves of absence, re-employment, and other
matters shall be conclusive for all purposes hereunder,
unless determined by the Committee to be incorrect.
12.11Information. The Corporation and its Subsidiaries
shall, upon request or as may be specifically required
hereunder, furnish or cause to be furnished all of the
information or documentation which is necessary or required
by the Committee to perform its duties and functions under
the Plan.
12.12No Liability of Corporation. The Corporation
assumes no obligation or responsibility to the Holder or his
legal representatives, heirs, legatees, or distributees for
any act of, or failure to act on the part of, the Committee.
12.13Corporation Action. Any action required of the
Corporation shall be by resolution of its Board of Directors
or by a Person authorized to act by resolution of the Board
of Directors.
12.14Severability. In the event that any provision of
this Plan, or the application hereof to any Person or
circumstance, is held by a court of competent jurisdiction
to be invalid, illegal, or unenforceable in any respect
under present or future laws effective during the effective
term of any such provision, such invalid, illegal, or
unenforceable provision shall be fully severable; and this
Plan shall then be construed and enforced as if such
invalid, illegal, or unenforceable provision had not been
contained in this Plan; and the remaining provisions of this
Plan shall remain in full force and effect and shall not be
affected by the illegal, invalid, or unenforceable provision
or by its severance from this Plan. Furthermore, in lieu of
each such illegal, invalid, or unenforceable provision,
there shall be
<PAGE>
added automatically as part of this Plan a provision as
similar in terms to such illegal, invalid, or unenforceable
provision as may be possible and be legal, valid, and
enforceable. If any of the terms or provisions of this Plan
conflict with the requirements of Rule 16b-3 (as those terms
or provisions are applied to Eligible Individuals who are
subject to Section 16(b) of the Exchange Act), then those
conflicting terms or provisions shall be deemed inoperative
to the extent they so conflict with the requirements of Rule
16b-3 and, in lieu of such conflicting provision, there
shall be added automatically as part of this Plan a
provision as similar in terms to such conflicting provision
as may be possible and not conflict with the requirements of
Rule 16b-3. If any of the terms or provisions of this Plan
conflict with the requirements of Section 422 of the Code
(with respect to Incentive Options), then those conflicting
terms or provisions shall be deemed inoperative to the
extent they so conflict with the requirements of Section 422
of the Code and, in lieu of such conflicting provision,
there shall be added automatically as part of this Plan a
provision as similar in terms to such conflicting provision
as may be possible and not conflict with the requirements of
Section 422 of the Code. With respect to Incentive Options,
if this Plan does not contain any provision required to be
included herein under Section 422 of the Code, that
provision shall be deemed to be incorporated herein with the
same force and effect as if that provision had been set out
at length herein; provided, however, that, to the extent any
Option that is intended to qualify as an Incentive Option
cannot so qualify, that Option (to that extent) shall be
deemed a Nonstatutory Option for all purposes of the Plan.
12.15Notices. Whenever any notice is required or
permitted hereunder, such notice must be in writing and
personally delivered or sent by mail. Any notice required
or permitted to be delivered hereunder shall be deemed to be
delivered on the date on which it is actually received by
the Corporation addressed to the attention of the Corporate
Secretary at the Corporation's office as specified in the
applicable Award Agreement. The Corporation or a Holder may
change, at any time and from time to time, by written notice
to the other, the address which it or he had previously
specified for receiving notices. Until changed in
accordance herewith, the Corporation and each Holder shall
specify as its and his address for receiving notices the
address set forth in the Award Agreement pertaining to the
shares to which such notice relates. Any Person entitled to
notice hereunder may waive such notice.
12.16Successors. The Plan shall be binding upon the
Holder, his legal representatives, heirs, legatees, and
distributees, upon the Corporation, its successors and
assigns and upon the Committee and its successors.
12.17Headings. The titles and headings of Sections are
included for convenience of reference only and are not to be
considered in construction of the provisions hereof.
12.18Governing Law. All questions arising with respect
to the provisions of the Plan shall be determined by
application of the laws of the State of Texas, without
giving effect to any conflict of law provisions thereof,
except to the extent Texas law is preempted by federal law.
Questions arising with respect to the provisions of an Award
Agreement that are matters of contract law shall be governed
by the laws of the state specified in the Award Agreement,
except to the extent that [Texas] corporate law subconflicts
with the contract law of such state, in which event [Texas]
corporate law shall govern irrespective of any conflict of
law laws. The obligation of the Corporation to sell and
deliver Stock hereunder is subject to applicable federal,
state and foreign laws and to the approval of any
governmental authority required in connection with the
authorization, issuance, sale, or delivery of such Stock.
<PAGE>
12.19Word Usage. Words used in the masculine shall
apply to the feminine where applicable, and wherever the
context of this Plan dictates, the plural shall be read as
the singular and the singular as the plural.
IN WITNESS WHEREOF, the Corporation, acting by and
through its officers hereunto duly authorized, has executed
this 1998 Incentive Plan, to be effective as of October 26,
1998.
EZCORP, INC.,
a Delaware corporation
By:_____________________________
Vincent A. Lambiase, President
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<ARTICLE> 5
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> DEC-31-1998
<CASH> 2,792
<SECURITIES> 0
<RECEIVABLES> 63,290
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<INVENTORY> 49,245
<CURRENT-ASSETS> 120,218
<PP&E> 80,462
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<TOTAL-ASSETS> 202,710
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0
0
<COMMON> 120
<OTHER-SE> 132,729
<TOTAL-LIABILITY-AND-EQUITY> 202,710
<SALES> 34,434
<TOTAL-REVENUES> 60,415
<CGS> 29,022
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<INTEREST-EXPENSE> 846
<INCOME-PRETAX> 3,837
<INCOME-TAX> 1,458
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