SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
RENTERS CHOICE, INC.
(Name of Registrant as Specified in Its Charter)
NOT APPLICABLE
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction 5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Filing Date:
<PAGE>
RENTERS CHOICE, INC.
13800 Montfort Drive, Suite 300
Dallas, Texas 75240
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 18, 1998
To the Holders of Common Stock of
RENTERS CHOICE, INC.
The 1998 Annual Meeting of Stockholders of Renters Choice, Inc. (the
"Company") will be held at the offices of the Company, 13800 Montfort Drive,
Suite 300, Dallas, Texas 75240, on Monday, May 18, 1998 at 9:30 a.m., Dallas,
Texas time, for the following purposes:
1. To elect one person to serve as a Class I director in accordance
with the Amended and Restated Certificate of Incorporation and
Amended and Restated Bylaws of the Company;
2. To approve an amendment to the Amended and Restated 1994 Renters
Choice, Inc. Long-Term Incentive Plan (the "Plan") to increase
the number of shares of the Company's common stock, par value
$.01 per share (the "Common Stock") issuable under the Plan from
2,000,000 to 3,000,000; and
3. To transact such other business as may properly come before the
meeting or any adjournments or postponements thereof (the "Annual
Meeting").
A copy of the Proxy Statement in which the foregoing matters are
described in more detail accompanies this Notice of Annual Meeting of
Stockholders.
Stockholders are urged to read carefully the attached Proxy Statement
for additional information concerning the matters to be considered at the Annual
Meeting. The Board of Directors has fixed the close of business on March 23,
1998 as the record date for determining stockholders entitled to notice of and
to vote at the Annual Meeting. A complete list of the stockholders will be
available for examination at the Company's offices located at 13800 Montfort
Drive, Suite 300, Dallas, Texas 75240, during normal business hours for ten days
before the meeting.
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER OR
NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE MARK, SIGN, DATE AND
PROMPTLY RETURN THE ACCOMPANYING PROXY CARD IN THE POSTAGE-PAID ENVELOPE
PROVIDED. IF YOU ATTEND THE ANNUAL MEETING IN PERSON, YOU MAY VOTE IN PERSON,
EVEN IF YOU RETURNED YOUR PROXY CARD.
By Order of the Board of Directors,
/s/ DAVID M. GLASGOW
David M. Glasgow
SECRETARY
April 6, 1998
Dallas, Texas
<PAGE>
RENTERS CHOICE, INC.
13800 Montfort Drive, Suite 300
Dallas, Texas 75240
--------------------
PROXY STATEMENT
-------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 18, 1998
--------------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Renters Choice, Inc. (the "Company") for
use at the Annual Meeting of Stockholders of the Company to be held at the time
and place and for the purposes set forth in the accompanying Notice of Annual
Meeting, and any postponements or adjournments thereof (the "Annual Meeting").
The Board of Directors does not intend to bring any matters before the
Annual Meeting other than those set forth in the accompanying Notice of Annual
Meeting and does not know of any additional matters to be brought before the
Annual Meeting by others. The Amended and Restated Bylaws of the Company require
advance notice of stockholder proposals for action to be taken at the Annual
Meeting and stockholder nominations of persons for election to the Board of
Directors. No such notices have been received.
This Proxy Statement and the accompanying proxy are first being mailed
to stockholders on or about April 6, 1998. All duly executed proxies received by
the Company or its transfer agent prior to the Annual Meeting will be voted in
accordance with the instructions specified therein. As to a matter for which no
instruction has been specified in a properly executed proxy, the shares
represented thereby will be voted by the person named therein (1) FOR the
election of J. Ernest Talley as the Class I director of the Company; (2) FOR an
amendment to the Amended and Restated 1994 Renters Choice, Inc. Long-Term
Incentive Plan (the "Plan") to increase the number of shares of the Company's
common stock, par value $.01 per share (the "Common Stock") issuable under the
Plan from 2,000,000 to 3,000,000; and (3) in the discretion of the persons named
in the proxy, to transact any other business that may properly come before the
Annual Meeting. A stockholder who attends the Annual Meeting may, if he or she
wishes, vote by ballot at the Annual Meeting, thereby canceling any proxy
previously given. In addition, a stockholder giving a proxy may revoke it at any
time before it is voted at the Annual Meeting by delivering a written notice of
revocation to the Secretary of the Company or by delivering a properly executed
proxy bearing a later date.
<PAGE>
The Board of Directors has fixed the close of business on March 23, 1998
as the record date for the determination of the stockholders of the Company
entitled to notice of, and to vote at the Annual Meeting. At that date, there
were outstanding 24,948,758 shares of Common Stock, the holders of which will be
entitled to one vote per share of Common Stock on each matter submitted at the
Annual Meeting. The Company has no other class of stock outstanding. The holders
of a majority of the outstanding shares of Common Stock, present in person or
represented by proxy, will constitute a quorum for the transaction of business
at the Annual Meeting. If a quorum is not present or represented at the Annual
Meeting, the stockholders entitled to vote who are present in person or
represented by proxy have the power to adjourn the Annual Meeting from time to
time, without notice, other than by announcement at the meeting, until a quorum
is present or represented. At any such adjourned meeting at which a quorum is
present or represented, any business may be transacted that might have been
transacted at the original meeting. If and when a quorum is present or
represented at the Annual Meeting or any adjournment thereof, the stockholders
present or represented at the meeting may continue to transact business until
adjournment notwithstanding the withdrawal from the meeting of stockholders
counted in determining the existence of a quorum.
The Class I director shall be elected by a plurality of the votes cast
in the election. All other matters require the affirmative vote of a majority of
the shares of Common Stock represented at the Annual Meeting, in person or by
proxy, and entitled to vote thereon.
Votes cast by proxy or in person will be counted by two persons
appointed by the Company to act as inspectors at the Annual Meeting. The
election inspectors will treat shares represented by proxies that reflect
abstentions as shares that are present and entitled to vote for the purpose of
determining the presence of a quorum and of determining the outcome of any
matter submitted to the stockholders for a vote. Abstentions will have the same
legal effect as a vote against the matter on all matters other than the election
of directors.
Broker non-votes occur where a broker holding stock in street name votes
the shares on some matters but not others. The missing votes are deemed to be
"broker non-votes." The election inspectors will treat broker non-votes as
shares that are present and entitled to vote for the purpose of determining the
presence of a quorum. However, for the purpose of determining the outcome of any
matter as to which the broker or nominee has indicated on the proxy that it does
not have discretionary authority to vote, those shares will be treated as not
present and not entitled to vote with respect to that matter (even though those
shares are considered entitled to vote for quorum purposes and may be entitled
to vote on other matters).
The Company has retained ChaseMellon Shareholder Services, L.L.C.
("ChaseMellon") to aid in the solicitation of proxies. It is estimated that the
cost of these services will be approximately $5,500 plus expenses. The Company
will bear the entire cost of soliciting proxies in the accompanying form. In
addition to the solicitation of proxies by mail, proxies may also be solicited
by telephone, telegram or personal interview by officers and regular employees
of ChaseMellon and the Company. The Company will reimburse brokers or other
persons holding stock in their names or in the names of their nominees for their
reasonable expenses incurred in forwarding proxy materials to beneficial owners
of stock.
2
<PAGE>
ELECTION OF DIRECTORS
Pursuant to the Amended and Restated Certificate of Incorporation of the
Company (as amended), the Board of Directors currently is divided into three
separate classes (Class I, Class II and Class III). J. Ernest Talley currently
serves as the Class I director until the 1998 Annual Meeting of Stockholders of
the Company and until his successor has been duly elected and qualified. Mark E.
Speese and Rex W. Thompson currently serve as Class II directors until the 1999
Annual Meeting of Stockholders of the Company and until their successors have
been duly elected and qualified. Joseph V. Mariner, Jr. and J. V. Lentell
currently serve as Class III directors until the 2000 Annual Meeting of
Stockholders of the Company and until their successors have been duly elected
and qualified.
At this year's Annual Meeting, one person will be elected to the Board
of Directors, to serve as a Class I director until the 2001 Annual Meeting of
Stockholders of the Company and until a successor has been duly elected and
qualified. At each subsequent Annual Meeting of Stockholders of the Company, one
class of directors will be elected on a rotating basis for a three-year term.
Pursuant to the Company's Amended and Restated Bylaws, directors shall be
elected by a plurality of votes cast in the election.
Unless contrary instructions are set forth in the accompanying proxy, it
is intended that the persons named in the proxy will vote all shares represented
thereby FOR the election of J. Ernest Talley, who has been properly nominated to
serve as a Class I director, to the Board of Directors. The Company has no
reason to believe that Mr. Talley will be unable or unwilling to serve if
elected to the Board of Directors. However, should Mr. Talley become unable or
unwilling to serve prior to the Annual Meeting, the persons acting under the
proxy will vote for the election, in his stead, of such other persons as the
Board of Directors may recommend.
3
<PAGE>
NOMINEE FOR ELECTION AS DIRECTOR
<TABLE>
<CAPTION>
YEAR TERM WOULD
EXPIRE AFTER
ELECTION IF
NAME AGE BUSINESS EXPERIENCE ELECTED, AND CLASS
- ---- --- ------------------- ------------------
<S> <C> <C>
J. Ernest Talley 63 Mr. Talley has served as Chairman of 2001
the Board of Directors of the Company (Class I)
since May 1989 and Chief Executive
Officer since November 1994. Mr.
Talley operated a rent-to-own
business from 1963 to 1974 in
Wichita, Kansas, which he sold to
Remco (now owned by Rent-a-Center, a
unit of Thorn EMI PLC) in 1974. From
1974 to 1988, he was involved in the
commercial real estate business in
Dallas, Texas. Mr. Talley co-founded
Talley Lease to Own, Inc. with his
son, Michael C. Talley, in 1987 and
served as a director and Chief
Executive Officer of that company
from 1988 until its merger with the
Company on January 1, 1995.
PERSONS CONTINUING AS DIRECTORS
YEAR TERM
NAME AGE BUSINESS EXPERIENCE EXPIRES AND CLASS
- ---- --- ------------------- -----------------
Mark E. Speese 40 Mr. Speese has served as President 1999
and a director of the Company since (Class II)
1990, and as Chief Operating Officer
since November 1994. From the
Company's inception in 1986 until
1990, Mr. Speese served as a Vice
President responsible for the
Company's New Jersey operations.
Prior to joining the Company, Mr.
Speese was a regional manager for
Rent-a-Center, a unit of Thorn EMI
PLC, from 1979 to 1986.
4
<PAGE>
Rex W. Thompson 48 Mr. Thompson has served as a director 1999
of the Company since February 1995. (Class II)
Since 1988, Mr. Thompson has served
as a Professor of Finance at the
Edwin L. Cox School of Business,
Southern Methodist University,
Dallas, Texas, where he also serves
as Chairman of the Finance
Department. Mr. Thompson previously
served as an assistant professor at
Carnegie-Mellon University, and as an
associate professor at the University
of British Columbia and the Wharton
School of Business.
J.V. Lentell 59 Mr. Lentell has served as a director 2000
of the Company since February 1995. (Class III)
Mr. Lentell was employed by Kansas
State Bank & Trust Co., Wichita,
Kansas, from 1966 through July 1993,
serving as Chairman of the Board from
1981 through July 1993. Since July
1993, he has served as a director and
Vice Chairman of the Board of
Directors of Intrust Bank, N.A.,
successor by merger to Kansas State
Bank & Trust Co.
Joseph V. Mariner, Jr. 77 Mr. Mariner has served as a director of the 2000
Company since February 1995. Until his (Class III)
retirement in 1978, Mr. Mariner served as
Chairman of the Board of Directors and Chief
Executive Officer of Hydrometals, Inc., a
large conglomerate with subsidiaries engaged
in the manufacture of retail plumbing
supplies, non-powered hand tools and
electronic components. Mr. Mariner currently
serves as a director of Temtex Industries,
Inc., a manufacturer of energy efficient
fireplaces and gas logs, Peerless Mfg. Co, a
manufacturer of heavy oil and gas filtration
equipment and Dyson Kissner Moran Corp., a New
York based private investment company engaged
in acquiring and operating a multitude of
manufacturing companies
with additional holdings in real
estate.
</TABLE>
5
<PAGE>
COMMITTEES OF THE BOARD OF DIRECTORS
The Company currently has an Audit Committee and a Compensation
Committee of the Board of Directors. The Audit Committee is composed of Messrs.
Lentell, Mariner and Thompson, who are all of the members of the Board of
Directors who are not employees of the Company (the "Outside Directors"), and is
responsible for reviewing the functions of the Company's management and
independent auditors pertaining to the Company's financial statements and
performing such other duties and functions as are deemed appropriate by the
Audit Committee or the Board. Mr. Mariner is Chairman of the Audit Committee.
The Compensation Committee is also composed of the Outside Directors and is
responsible for recommending to the Board the base salaries and incentive
bonuses for the executive officers of the Company and for administering the
Company's Long-Term Incentive Plan. Mr. Thompson is Chairman of the Compensation
Committee. The Audit Committee met two times and the Compensation Committee met
one time during 1997. The Compensation Committee took action by written consent
on some occasions during 1997. Each director attended all meetings of all
committees on which he served during 1997. The Board of Directors does not have
a standing nominating committee or other committee performing similar functions.
MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors of the Company met four times during 1997,
including regularly scheduled and special meetings. Each director attended all
meetings of the Board of Directors.
COMPENSATION OF DIRECTORS
The Outside Directors receive $3,000 for each meeting of the Board of
Directors that they attend and $1,000 for attending a meeting of a committee of
the Board. In addition, all directors are reimbursed for travel and lodging
expenses of attending Board, stockholder and committee meetings. Automatic
annual awards of fully-vested stock options are made to each Outside Director on
the first business day of each year, which provide for the purchase of 3,000
shares of Common Stock at a purchase price equal to the market value of the
Common Stock on such date. These options are immediately exercisable by the
individual Outside Directors. The options granted to the Outside Directors on
January 2, 1998, have an exercise price of $18.00 per share. The Company has
entered into agreements with all directors pursuant to which the Company has
agreed to indemnify them against certain claims arising out of their service as
directors. Directors are also entitled to the protection of certain
indemnification provisions in the Company's Amended and Restated Certificate of
Incorporation and in the Company's Bylaws.
6
<PAGE>
EXECUTIVE OFFICERS
The executive officers of the Company serve at the discretion of the
Board of Directors and are chosen annually by the Board at its first meeting
following the annual meeting of stockholders. The following table sets forth the
names and ages of the executive officers of the Company and all positions held
by them and a description of their business experience during at least the past
five years.
In late 1996, the Board determined that the management structure of the
Company should be adjusted to take into account the continued growth of the
Company. The Board determined that a Senior Vice President level within the
Company's management structure should be created to oversee the Company's
sixteen Regional Vice Presidents. Since that time, Dana F. Goble and John H.
Whitehead were appointed by the Board to fill these positions. During 1997, as a
result of the creation of the Senior Vice President level, the Board determined
that the Regional Vice President positions should no longer be classified as an
officer (an "Officer") within the meaning of Section 16 ("Section 16") of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Board
determined that the Regional Vice President position no longer met the
definition of an Officer under Section 16, as each Regional Vice President's
responsibilities and duties had changed since the Company's initial public
offering. As a result of the Board's decision, the Company's Regional Vice
Presidents are no longer included as Officers below.
<TABLE>
<CAPTION>
NAME AGE POSITIONS BUSINESS EXPERIENCE
- ---- --- --------- -------------------
<S> <C>
J. Ernest Talley 63 Chairman of the Board Mr. Talley has served as Chairman
of Directors and of the Board of Directors of the
Chief Executive Company since May 1989 and Chief
Officer Executive Officer since November
1994. Mr. Talley operated a
rent-to-own business from 1963 to
1974 in Wichita, Kansas. From 1974
to 1988, he was involved in the
commercial real estate business in
Dallas, Texas. Mr. Talley
co-founded Talley Lease to Own,
Inc. with his son, Michael C.
Talley, in 1987 and served as a
director and Chief Executive
Officer of that company from 1988
until its merger with the Company
on January 1, 1995.
7
<PAGE>
Mark E. Speese 40 President, Chief Mr. Speese has served as President
Operating Officer and and a director of the Company since
Director 1990, and as Chief Operating
Officer since November 1994. From
1990 to November 1994, Mr. Speese
served as Chief Executive Officer.
From the Company's inception in
1986 until 1990, Mr. Speese served
as a Vice President responsible for
the Company's New Jersey
operations. Prior to joining the
Company, Mr. Speese was a regional
manager for Rent-a-Center, a unit
of Thorn EMI PLC, from 1979 to 1986.
Mitchell E. Fadel 40 President and Chief Mr. Fadel has served as President
Executive Officer- and Chief Executive Officer of
ColorTyme, Inc. ColorTyme, Inc. since November
1992. From January 1992 to
December 1994, he also served as
President of ColorTyme Stores,
Inc., a former affiliate of
ColorTyme, Inc. ColorTyme, Inc. is
a national franchisor of 262
rent-to-own stores and is a wholly
owned subsidiary of the Company.
L. Dowell Arnette 50 Executive Vice Mr. Arnette has served as an
President Executive Vice President of the
Company since September 1996. From
May 1995 to September 1996, Mr.
Arnette served as Senior Vice
President of the Company. From
November 1994 to May 1995, he
served as Regional Vice President
of the Company. From 1993 to
November 1994, he served as a
regional manager of the Company
responsible for the southeastern
region. From 1975 until 1993, Mr.
Arnette was an Executive Vice
President of DEF Investments, Inc.
("DEF"), an operator of rent-to-own
stores. The Company acquired
substantially all of the assets of
DEF and its subsidiaries in April
1993. Mr. Arnette is the brother
of Joe T. Arnette, Vice President -
Training & Personnel of the
Company.
</TABLE>
8
<PAGE>
Dana F. Goble 32 Senior Vice President Mr. Goble was appointed
Senior Vice President of the
Company in December 1996 and
served as a Regional Vice
President of the Company from
May 1995 until December 1996.
From April 1993 to May 1995,
Mr. Goble served as the
Company's regional manager
for the Detroit, Michigan
area. From 1986 through April
1993, Mr. Goble held several
positions with DEF, including
regional manager for the
states of Indiana, Michigan
and Ohio.
John H. Whitehead 48 Senior Vice President Mr. Whitehead was appointed
Senior Vice President of the
Company in August 1997 and
served as a Regional Vice
President of the Company from
May 1995 to August 1997. From
July 1993 to May 1995, Mr.
Whitehead served as the
Company's regional manager
for the Atlanta, Georgia area
and from July 1992 to July
1993, he served as manager of
one of the Company's stores
in New Jersey. From 1988
through December 1991, Mr.
Whitehead served as the
general manager and district
manager of Dairy Stores,
Inc., a convenience store
chain based in Edison, New
Jersey.
Danny Z. Wilbanks 42 Senior Vice President Mr. Wilbanks was appointed
- Finance and Chief Senior Vice President -
Financial Officer Finance and Chief Financial
Officer of the Company in
April 1997. From January 1995
to April 1997, Mr. Wilbanks
served as President and Chief
Executive Officer of Trans
Texas Capital, L.L.C., a
rental purchase company, the
assets of which were acquired
by the Company in February
1997. Between August 1993 and
January 1995, Mr. Wilbanks
was a self-employed
consultant in the rent-to-own
industry. From January 1986
to August 1993, Mr. Wilbanks,
who is a certified public
accountant, served as Chief
Financial Officer of REMCO, a
rental purchase company.
9
<PAGE>
Joe T. Arnette 47 Vice President - Mr. Arnette has served as
Training & Personnel Vice President - Training and
Personnel of the Company
since September 1996. Mr.
Arnette served as general
manager of Consolidated
Rentals Systems, Inc., an
operator of rent-to-own
stores in Georgia and
Alabama, from December 1989
until the Company acquired
the assets of Consolidated
Rentals Systems, Inc. in May
1995. Mr. Arnette is the
brother of L. Dowell
Arnette, Executive Vice
President of the Company.
Ann L. Davids 29 Vice President - Mrs. Davids was appointed to
Director of the office of Vice President
Advertising - Director of Advertising in
February of 1998. From April
1995 to February 1998, Mrs.
Davids was a senior account
executive for John F.
Bagwell, Inc. DBA Bagwell
Agency, devoting the majority
of her time to managing the
Renters Choice, Inc.
advertising account. From May
1994 to April 1995, Mrs.
Davids was the National
Advertising Director for
Crown Leasing Corporation, a
company acquired by Renters
Choice, Inc. in April 1995.
Prior to serving as Crown's
National Advertising
Director, Mrs. Davids was
employed with Crown in
various capacities from
January 1990. Mrs. Davids
received a bachelors degree
from Texas A&M University,
Texarkana in 1994.
Robert D. Davis 26 Treasurer Mr. Davis has served as
Treasurer of the Company
since June of 1997. From
January 1997 to June 1997,
Mr. Davis served as the
Company's Assistant
Secretary/Treasurer. From
June 1995 to January 1997,
Mr. Davis served as the
Company's Payroll Supervisor
and from June 1993 to June
1995 served as an accountant
for the Company. Mr. Davis
received a Bachelor of
Business Administration
Degree from Southern
Methodist University in
May 1993.
10
<PAGE>
David M. Glasgow 29 Secretary Mr. Glasgow has served as
Secretary of the Company
since June of 1995. From June
1995 to June 1997, Mr.
Glasgow served as Secretary
and Treasurer of the Company.
From March 1995 to June 1995,
Mr. Glasgow served as the
Company's accounting
operations supervisor and
from June 1993 to March 1995,
he was an accountant for the
Company. From January 1993
through May 1993, Mr. Glasgow
was an insurance adjuster for
Crawford & Company in Dallas,
Texas. Mr. Glasgow received a
Bachelor of Business
Administration Degree from
Stephen F. Austin State
University in December 1992.
11
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the compensation for the years ended
December 31, 1997, 1996 and 1995 awarded to or earned by (i) each person serving
as chief executive officer of the Company at any time during such periods, and
(ii) the four most highly compensated executive officers of the Company (other
than the Chief Executive Officer) whose salary and bonus exceeded $100,000 for
services rendered in all capacities (collectively, the "Named Executive
Officers").
<TABLE>
<CAPTION>
ANNUAL LONG TERM
COMPENSATION(1) COMPENSATION
-------------------- ---------------------------------
SECURITIES
NAME AND PRINCIPAL RESTRICTED UNDERLYING OTHER
POSITION YEAR SALARY ($) BONUS ($) STOCK AWARDS OPTIONS/SARS(#) COMPENSATION($)(1)
- -------- ---- -------------------- ------------ --------------- ------------------
<S> <C> <C>
J. Ernest Talley 1997 250,000 -- -- -- --
Chairman of the Board and 1996 240,000 -- -- -- --
Chief Executive Officer 1995 240,000 -- -- -- --
Mark E. Speese 1997 170,000 21,000 -- -- --
President and Chief 1996 160,000 16,000 -- -- --
Operating 1995 150,000 10,000 -- -- --
Officer
10,000(3)
Mitchell E. Fadel (2) 1997 210,000 96,000 -- --
President and Chief 1996 105,000(2) 96,000 -- -- --
Executive Officer - 1995 -- -- -- -- --
ColorTyme, Inc.
L. Dowell Arnette 1997 160,000 25,000 -- -- --
Executive Vice President 1996 150,000 16,000 -- -- --
1995 132,000 23,000 -- 15,000(4) --
--
-- --
--
Dana F. Goble 1997 120,000 14,000 -- 5,000(5)
Senior Vice President 1996 82,000 22,000 --
1995 60,000 12,000 -- 15,000(6)
</TABLE>
- ------------------
(1) The Named Executive Officers did not receive any annual compensation not
properly categorized as salary or bonus, except for certain perquisites
or other benefits the aggregate cost of which did not exceed the lesser
of $50,000 or 10% of the total of annual salary and bonus for each such
officer.
(2) Mr. Fadel is President and Chief Executive Officer of ColorTyme, Inc., a
wholly owned subsidiary of the Company which was acquired by the Company
in May 1996. The amount presented for 1996 reflects the portion of his
$210,000 annual salary received in 1996.
(3) These amounts represent options to purchase the Company's Common Stock
that were granted to Mr. Fadel in July 1996 and were outstanding as of
December 31, 1996 (the "1996 Options"). Effective January 2, 1997, the
1996 Options were cancelled and Mr. Fadel was granted 10,000 new options
to replace the 1996 Options. The new options vest at 25% per year,
beginning January 2, 1998.
12
<PAGE>
(4) In May 1995, Mr. Arnette was granted 15,000 options to purchase the
Company's Common Stock on a one-for-one basis, pursuant to the Company's
Long Term Incentive Plan. The options vest over four years and expire 10
years from the date of the grant.
(5) In January 1997, Mr. Goble was granted 5,000 options to purchase the
Company's Common Stock on a one-for-one basis, pursuant to the Company's
Long Term Incentive Plan. The options vest over four years and expire 10
years from the date of the grant.
(6) In May 1995, Mr. Goble was granted 15,000 options to purchase the
Company's Common Stock on a one-for-one basis, pursuant to the Company's
Long Term Incentive Plan. The options vest over four years and expire 10
years from the date of the grant.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------- POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENT OF AT ASSUMED ANNUAL RATESTION
SECURITIES TOTAL OPTIONS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM (1)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ---------------------------
NAME GRANTED(2)(#) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- ---------------- -------------- ------------- ------------ --------- --------- -------
<S> <C> <C>
J. Ernest Talley 0 0 N/A N/A N/A N/A
Mark E. Speese 0 0 N/A N/A N/A N/A
Mitchell E. Fadel 10,000(3) 1.16% $14.38 1/2/07 90,450 229,217
L. Dowell Arnette 0 0 N/A N/A N/A N/A
Dana F. Goble 5,000 0.58% $14.38 1/2/07 45,225 114,609
</TABLE>
- ------------
(1) These amounts represent certain assumed rates of appreciation only.
Actual gains, if any, on stock option exercises are dependent on the
future performance of the Company's Common Stock and overall market
conditions. There can be no assurance that the amounts reflected in this
table will be achieved.
(2) Options are exercisable at 25% per year, beginning one year from the
date of grant.
(3) These amounts represent the 1996 Options that were granted to Mr. Fadel
in July 1996 and were outstanding as of December 31, 1996. Effective
January 2, 1997, the 1996 Options were cancelled and Mr. Fadel was
granted 10,000 new options (the "New Options") to replace the 1996
Options. The New Options vest at 25% per year, beginning January 2,
1998, have an exercise price of $14.38 per share and expire on January
2, 2007.
13
<PAGE>
OPTION EXERCISES AND YEAR-END OPTION VALUES
The following table sets forth certain information with respect to the
value of unexercised options held by the Named Executive Officers at December
31, 1997. No options were exercised by any of the Named Executive Officers
during 1997.
AGGREGATE OPTION EXERCISES IN THE LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR END AT FISCAL YEAR END
NAME EXERCISABLE(E)/UNEXERCISABLE(U) EXERCISABLE (E)/UNEXERCISABLE (U)
---- --------------------------------- ---------------------------------
<S> <C> <C> <C> <C>
J. Ernest Talley 0 (E) 0 (U) 0 (E) 0 (U)
Mark E. Speese 0 (E) 0 (U) 0 (E) 0 (U)
Mitchell E. Fadel 0 (E) 10,000 (U) 0 (E) $185,000 (U)
L. Dowell Arnette 7,500 (E) 7,500 (U) $138,750 (E) $138,750 (U)
Dana F. Goble 7,500 (E) 12,500 (U) $138,750 (E) $231,250 (U)
</TABLE>
- ------------
(a) The closing market price of the Company's Common Stock on December 31,
1997 as reported on the Nasdaq National Market of the Nasdaq Stock
Market, Inc. ("Nasdaq") of $18.50 was used in the calculation to
determine the value of unexercised options.
14
<PAGE>
REPORT ON OPTION REPRICING
The Company believes that the granting of stock options to employees has
provided a significant incentive to the Company's employees to align their
interest with those of the Company's stockholders. A substantial portion of the
Company's employees have received options in the past. In January 1997, when the
fair market value of the Company's common stock was $14.38, the Company's
Compensation Committee (the "Compensation Committee") reviewed the Company's
outstanding options and determined that the Company had outstanding options to
purchase 188,500 shares at exercise prices significantly above market (the "Old
Options").
The Compensation Committee believed that because of the significant
decrease in the price of the Company's stock from the time of the granting of
the Old Options, it was unlikely that these options would provide significant
incentive for employees, particularly in the short term. Accordingly, on January
2, 1997, the Company notified each of the holders of the Old Options that they
had the opportunity to cancel their Old Options in exchange for the same number
of options at the current market value (the "New Options"). Of the 188,500 Old
Options, holders of 174,000 Old Options elected to have their Old Options
cancelled and were issued the same number of New Options. This cancellation and
reissuance was the equivalent of a repricing of the 174,000 Old Options. The
Committee believed it was in the best interests of the Company to cancel these
options and to issue new stock options because the granting of new stock options
would provide an additional incentive for employees and would result in
increased stockholder value. Of the Old Options that were repriced, 10,000 were
held by Mitchell E. Fadel, President and Chief Executive Officer of ColorTyme,
Inc. No other Old Options were held by any Named Executive Officer.
The following table presents information on the repricing of stock
options for Mr. Fadel and any other executive officer during the period the
Company has been publicly listed.
RENTERS CHOICE, INC. - EXECUTIVE OFFICER OPTION REPRICING
<TABLE>
<CAPTION>
LENGTH OF
EXERCISE ORIGINAL
NUMBER OF MARKET PRICE PRICE NEW OPTION TERM
OPTIONS AT TIME OF AT TIME OF EXERCISE REMAINING AT
NAME DATE REPRICED REPRICING REPRICING PRICE DATE OF REPRICING
- ------------ ---------------- -------------- ------------- -------------- ---------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Mitchell E. Fadel January 2, 1997 10,000 $14.38 $24.63 $14.38 9.5 years
</TABLE>
COMPENSATION COMMITTEE
Rex W. Thompson
J.V. Lentell
Joseph V. Mariner, Jr.
15
<PAGE>
EMPLOYMENT AGREEMENTS
The Company entered into an employment agreement with Danny Z. Wilbanks
dated March 28, 1997, pursuant to which Mr. Wilbanks became the Senior Vice
President - Finance and Chief Financial Officer of the Company effective April
1, 1997. The employment agreement provides for Mr. Wilbanks' employment by the
Company for a two-year period commencing April 1, 1997, subject to earlier
termination by the Company or Mr. Wilbanks at any time for any reason, and for
an annual salary of $140,000 for the first year, with annual increases
thereafter as authorized by the Company's Board of Directors. The Company and
Mr. Wilbanks also entered into a stock option agreement pursuant to which Mr.
Wilbanks received an option to purchase 60,000 shares of the Company's Common
Stock, par value $0.01 per share, under the Company's Long-Term Incentive Plan,
at an exercise price of $14.00 per share. Of the 60,000 options granted, 20,000
are currently exercisable, with the remaining options vesting over the remaining
four-year period through the year 2002 on each anniversary date of the
agreement.
The Company does not have employment agreements with any other executive
officers or other members of management.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
J. V. Lentell, a director of the Company, serves as Vice Chairman of the
Board of Directors of Intrust Bank, N.A., one of the Company's lenders. Intrust
Bank, N.A. is a $18,000,000 participant in the Company's $90,000,000 line of
credit. The Company also maintains a separate line of credit with Intrust Bank,
N.A., of which $380,000 was advanced as of March 23, 1998.
No executive officer of the Company served as a member of the
compensation or similar committee or Board of Directors of any other entity of
which an executive officer served on the Compensation Committee or Board of
Directors of the Company.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
In February 1995, the Board of Directors established the Compensation
Committee to review and approve the compensation levels of members of
management, evaluate the performance of management, consider management
succession and consider any related matters for the Company. The Compensation
Committee is charged with reviewing with the Board of Directors in detail all
aspects of compensation for the executive officers of the Company.
The philosophy of the Company's compensation program is to employ,
retain and reward executives capable of leading the Company in achieving its
business objectives. These objectives include creating and then preserving
strong financial performance, increasing the assets of the Company, enhancing
stockholder value and ensuring the survival of the Company. The accomplishment
of these objectives is measured against conditions prevalent in the industry
within which the Company operates.
16
<PAGE>
The available forms of executive compensation include base salary, cash
bonus awards and incentive stock options, restricted stock awards and stock
appreciation rights. Performance of the Company is a key consideration. The
Company's compensation policy recognizes, however, that stock price performance
is only one measure of performance and, given industry business conditions and
the long-term strategic direction and goals of the Company, it may not
necessarily be the best current measure of executive performance. Therefore, the
Company's compensation policy also gives consideration to the Company's
achievement of specified business objectives when determining executive officer
compensation. An additional achievement of the Compensation Committee has been
to offer officers equity compensation in addition to salary in keeping with the
Company's overall compensation philosophy, which attempts to place equity in the
hands of its employees in an effort to further instill stockholder
considerations and values in the actions of all the employees and executive
officers.
Compensation paid to executive officers is based upon a Company-wide
salary structure consistent for each position relative to its authority and
responsibility compared to industry peers. Stock option awards in fiscal year
1997 were used to reward certain officers and to retain them through the
potential of capital gains and equity buildup in the Company. The number of
stock options granted is determined by the subjective evaluation of the
officer's ability to influence the Company's long term growth and profitability.
Stock options have been granted only pursuant to the Company's Long-Term
Incentive Plan. The Board of Directors believes the award of options represents
an effective incentive to create value for the stockholders.
The Chief Executive Officer's base salary for fiscal year 1997 was
$250,000. Effective January 1, 1998, the Committee increased the Chief Executive
Officer's base salary approximately 12% to $280,000 to raise the Chief Executive
Officer's salary to a level the Compensation Committee deemed to be commensurate
with the Chief Executive Officer's position at comparable publicly owned
companies. In determining the compensation of the Chief Executive Officer, the
Compensation Committee considered the Chief Executive Officer's performance, his
compensation history and other subjective factors. The Compensation Committee
believes that the Chief Executive Officer's 1997 and 1998 compensation levels
are justified by the Company's financial progress and performance against the
goals set by the Compensation Committee.
COMPENSATION COMMITTEE
Rex W. Thompson
J. V. Lentell
Joseph V. Mariner, Jr.
17
<PAGE>
PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change
in cumulative total stockholder return on the Company's Common Stock, with the
cumulative total return of the Nasdaq Stock Market - Market Index and the
Renters Choice, Inc. "peer group" of competitors (the "Peer Group") for the
period beginning January 25, 1995, and ending December 31, 1997, assuming an
investment of $100.00 on January 25, 1995, and the reinvestment of dividends.
The Peer Group for fiscal year 1995 consisted of Aaron Rents, Inc.,
Advantage Companies, Inc., Heilig Meyers Company, Rent Way, Inc., and Rhodes,
Inc. During fiscal year 1996, Advantage Companies, Inc. and Rhodes, Inc. ceased
to be public companies, thus removing them from public trading and as a result,
from the Company's Peer Group. Bestway, Inc., a rent-to-own company, was added
to the Peer Group for fiscal year 1996. The Peer Group for fiscal year 1996
consisted of Aaron Rents, Inc., Bestway, Inc., Heilig Meyers Company, and Rent
Way, Inc. In 1997, Alrenco, Inc., and Thorn PLC were added to the peer group for
fiscal year 1997 and the peer group for fiscal year 1996 was updated to reflect
the addition of these companies (the "Revised 1996 Peer Group"), as both
Alrenco, Inc. and Thorn PLC were publicly traded for the entire 1996 year. The
Company believes that including Alrenco, Inc. and Thorn PLC provides a better
identification of the Company's Peer Group. The companies in both the Revised
1996 Peer Group and for the fiscal year 1997 Peer Group are Aaron Rents, Inc.,
Alrenco, Inc. Bestway, Inc., Heilig Meyers Company, Rent Way, Inc., and Thorn
PLC.
The stock price performance shown on the graph reflects the change in
the Company's stock price relative to the noted indices at December 31, 1995,
1996 and 1997, and not for any interim periods and is not necessarily indicative
of future price performance.
COMPARISON OF CUMULATIVE TOTAL RETURN
OF COMPANY, PEER GROUP AND BROAD MARKET
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
---------------FISCAL YEAR ENDING------------------
COMPANY 1995 1995 1996 1997
- ------- ---- ---- ---- ----
RENTERS CHOICE GROUP 100.00 358.51 378.07 534.51
PEER GROUP 100.00 77.86 70.77 195.61
BROAD MARKET 100.00 128.69 159.91 195.61
<PAGE>
INDEMNIFICATION ARRANGEMENTS
The Company's Amended and Restated Bylaws provide for the
indemnification of its executive officers and directors, and the advancement of
expenses to such persons in connection with proceedings and claims arising out
of their status as such, to the fullest extent permitted by the General
Corporation Law of the State of Delaware. The Amended and Restated Bylaws also
contain provisions intended to facilitate an indemnitee's receipt of such
benefits. In addition, the Company maintains a customary directors' and
officers' liability insurance policy covering its directors and officers.
PROPOSALS FOR STOCKHOLDER ACTION
I. ELECTION OF DIRECTORS
The nominee for election as director is J. Ernest Talley. Information
concerning the nominee is set forth in the section captioned "Election of
Directors."
THE BOARD RECOMMENDS A VOTE FOR THE NOMINEE.
II. AMENDMENT TO INCREASE THE NUMBER OF SHARES
OF COMMON STOCK RESERVED UNDER
THE AMENDED AND RESTATED 1994 RENTERS CHOICE, INC.
LONG-TERM INCENTIVE PLAN
DESCRIPTION OF THE PLAN
Under the Plan, designated officers, employees and directors of the
Company are eligible to receive awards in the form of stock options, stock
appreciation rights, restricted stock grants and cash awards.
An aggregate of 2,000,000 shares of Common Stock is currently reserved
for issuance under the Long Term Incentive Plan, subject to adjustment in the
event of a stock split, stock dividend or other change in the Common Stock or
the capital structure of the Company. As of March 23, 1998, 1,321,838 options
were outstanding under the Plan with a market value of $33,376,410 (based on the
March 23, 1998 closing sales price of $25.25 per share), 290,138 of which are
currently exercisable.
Under the Plan, no employee participant may be granted awards for more
than 20% of the total number of shares authorized for issuance under the Plan.
The Plan is administered by the Compensation Committee of the Board of
Directors. Subject to the Plan's terms and provisions, the Compensation
Committee is authorized to determine who may participate in the Plan, the number
and types of awards made to each participant and the terms, conditions and
limitations applicable to each award. The Compensation Committee determines all
questions of interpretation and application of the Plan as well as any award
under the Plan. The Board of Directors has the authority to adopt, amend and
rescind rules and regulations relating to the Plan and to make all other
determinations necessary for administering the Plan.
19
<PAGE>
STOCK OPTIONS. The Compensation Committee is authorized to grant options
to purchase shares of Common Stock, including options qualifying as "incentive
stock options" ("ISOs") under Section 422 of the Internal Revenue Code to
employees and options that do not so qualify ("NQSOs") to employees and
directors, as additional compensation for their services to the Company. A
$100,000 limit applies to the aggregate fair market value (determined at grant)
of stock with respect to which ISOs are first exercisable by an optionee under
all incentive stock option plans of the Company during any calendar year.
Options are exercisable over such period as may be determined by the
Compensation Committee, but no ISO may be exercised after ten years from the
date of grant. Options are evidenced by option agreements. No option may be
transferred other than by will, by the laws of descent and distribution or by
domestic order. The purchase price of Common Stock issued pursuant to the
exercise of any option must be paid in full at the time of exercise in cash or,
if permitted by the Compensation Committee with respect to options granted to
employees, in shares of Common Stock or by surrender of all or part of that or
any other award granted under the Plan.
OUTSIDE DIRECTOR STOCK OPTIONS. Of the shares reserved for issuance
under the Plan, a total of 160,000 have been reserved for issuance pursuant to
options granted to Outside Directors. On the first day of business each year,
each Outside Director receives an automatic annual award of fully-vested stock
options, providing for the purchase of 3,000 shares of Common Stock at a price
equal to the fair market value of such shares on the date of grant.
STOCK APPRECIATION RIGHTS. Stock appreciation rights ("SAR's") may be
granted in tandem with a stock option, in addition to a stock option or
freestanding and unrelated to a stock option. SARs granted in tandem with or in
addition to a stock option may be granted either at the same time as the stock
option or at a later time. SARs have an exercise price as determined by the
Compensation Committee on the date of grant.
RESTRICTED STOCK. The Compensation Committee may grant up to an
aggregate of 100,000 shares of restricted Common Stock under the Plan, which may
be subject to forfeiture under such conditions and for such period of time as
the Compensation Committee may determine. Such restrictions may include
restrictions related to transferability or tied to continued employment,
individual performance goals or the Company's financial performance. The
Compensation Committee may cancel all or any portion of any outstanding
restrictions prior to the expiration of such restrictions with respect to any or
all of the shares of restricted Common Stock awarded to an employee.
CASH AWARDS. An employee award may be denominated in cash with the
amount of the eventual payment subject to such conditions and restrictions as
may be established by the Compensation Committee, including continued employment
and the achievement of specified business objectives.
Since the Plan provides that future as well as present employees,
officers, and directors may participate, it is not possible to determine the
number of such persons who will be eligible to participate. Further, since
receipt of benefits under the Plan depends upon the particular grants made from
time to time by the Compensation Committee, in its discretion, it is not
possible to determine the amounts that will be received under the Plan.
20
<PAGE>
FEDERAL TAX CONSEQUENCES. The following briefly summarizes the federal
income tax consequences arising from participation in the Plan. This discussion
is based upon present law, which is subject to change, possibly retroactively.
The tax treatment to persons who participate in the Plan may vary depending upon
each person's particular situation and, therefore, may be subject to special
rules not discussed below. This discussion does not address the effects, if any,
under any potentially applicable foreign, state, or local tax laws, or the
consequences thereunder, or the effects, if any, of any local, federal, gift,
estate, or inheritance taxes, or the consequences thereunder, that may result
from the acquisition, holding, or disposition of Common Stock issued under the
terms of the Plan.
The Company has the right to deduct applicable taxes from any employee
award payment and withhold, at the time of delivery or vesting of cash shares of
Common Stock under the Plan, an appropriate amount of cash or number of shares
of Common Stock or a combination thereof for payment of taxes required by law or
to take such other action as may be necessary in the opinion of the Company to
satisfy all obligations for withholding of such taxes. The Compensation
Committee may also permit withholding to be satisfied by the transfer to the
Company of shares of Common Stock theretofore owned by the holder of the
employee award with respect to which withholding is required. If shares of
Common Stock are used to satisfy tax withholding, such shares shall be valued
based on the fair market value when the tax withholding is required to be made.
PARTICIPANTS SUBJECT TO SECTION 16(B) OF THE SECURITIES EXCHANGE ACT OF 1934
The Plan is intended to comply with the requirements of Rule 16b-3
promulgated under the Exchange Act relating to rules for directors, officers and
10% owners of the Company. Therefore, because the acquisition of the Common
Stock will not be deemed to be a "purchase" for purposes of Section 16(b) of the
Exchange Act, a sale of Common Stock by a Plan participant within six months
after the date of exercise of an option or SAR (or the date restrictions on a
restricted stock award lapse) should not necessarily subject the Plan
participant to liability under Section 16(b) of the Exchange Act ("Section
16(b)"). However, because the sale of the Common Stock can still be "matched"
with other purchases, if a Plan participant has purchased Common Stock or a
right to acquire Common Stock which is considered a "purchase" for purposes of
Section 16(b) within six months before the date of exercise of an option or SAR
(or the date restrictions on a restricted stock award lapse) (an "Interim
Purchase"), the Plan participant may have short-swing liability under Section
16(b) if he were to sell the Common Stock within six months after the date of
the Interim Purchase. The Internal Revenue Service (the "IRS") has not yet
formally taken a position about the tax consequences of this fact situation.
However, IRS regulations suggest that because an interim purchase would trigger
liability upon the sale of the Common Stock within six months after the interim
purchase, the Common Stock may be treated as subject to a "substantial risk of
forfeiture" under Section 83(c) of the Internal Revenue Code (the "Code") and
not transferable and, therefore, substantially nonvested. Tax consequences
regarding this issue are discussed below.
21
<PAGE>
NONQUALIFIED STOCK OPTIONS
A Plan participant will not recognize taxable income upon the grant of a
nonqualified stock option. The federal income tax consequences to a Plan
participant of exercising a nonqualified stock option will vary depending on
whether the Common Stock received upon the exercise of such option are either
"substantially vested" or "substantially non-vested" within the meaning of
Section 83 of the Code. Generally, such shares will be "substantially
non-vested" if they are both non-transferable and subject to a substantial risk
of forfeiture, and will be "substantially vested" if they are either
transferable or not subject to a substantial risk of forfeiture. A Plan
participant generally should not recognize compensation income upon exercising a
nonqualified stock option for shares that are "substantially non-vested" until
such shares become "substantially vested." A Plan participant who wishes to
recognize compensation income at the time of the exercise of such an option
(rather than when the shares become "substantially vested") must file an
election under section 83(b) of the Code (a "Section 83(b) Election").
A Section 83(b) Election is made by filing a written notice with the IRS
office with which the Plan participant files his federal income tax return. The
notice must be filed within 30 days of the Plan participant's receipt of the
Common Stock related to the applicable employee award and must meet certain
technical requirements.
PLAN PARTICIPANTS NOT SUBJECT TO SECTION 16(B). Upon the exercise of a
nonqualified stock option, an employee who is not subject to Section 16(b) will
receive stock that is substantially vested. Therefore, the employee will
recognize ordinary income upon the exercise of the nonqualified stock option in
an amount equal to the excess of the fair market value of the Common Stock
received on the date of exercise over the exercise price.
PLAN PARTICIPANTS SUBJECT TO SECTION 16(B) - IF INTERIM PURCHASES CAUSE
COMMON STOCK ISSUED UNDER THE TERMS OF THE PLAN TO BE SUBSTANTIALLY NON-VESTED.
If a Plan participant who is subject to Section 16(b) has made an interim
purchase of shares of Common Stock (or a right to acquire Common Stock which is
considered a "purchase" for purposes of Section 16(b)) within six months prior
to the exercise of the nonqualified stock option, such interim purchase may,
under IRS positions yet to be announced, cause the Common Stock to be
substantially non-vested and, as a result, the employee will recognize ordinary
income on the Applicable Date (as hereinafter defined) equal to the difference
between the exercise price and the fair market value of the Common Stock on the
Applicable Date unless the Plan participant has made a Section 83(b) Election.
Alternatively, if the Plan participant makes a Section 83(b) Election, then the
Plan participant will recognize ordinary income on the date of exercise in an
amount equal to the excess of the fair market value of the Common Stock on the
date of exercise over the exercise price.
As used in this discussion, "Applicable Date" means the earlier of (i)
the date the Plan participant disposes of the Common Stock issued under the
terms of the Plan or (ii) the first date on which the sale of Common Stock
issued under the terms of the Plan will not subject the Plan participant to
liability under Section 16(b).
22
<PAGE>
PLAN PARTICIPANTS SUBJECT TO SECTION 16(B)--IF INTERIM PURCHASES DO NOT
CAUSE COMMON STOCK ISSUED UNDER THE TERMS OF THE PLAN TO BE SUBSTANTIALLY
NON-VESTED. If no interim purchases were made or if the IRS concludes that
interim purchases do not cause the Common Stock to be substantially non-vested,
the tax consequences will be the same as if the Plan participant were not
subject to Section 16(b). Therefore, upon the exercise of a nonqualified stock
option, a Plan participant will recognize ordinary income in an amount equal to
the excess of the fair market value of the Common Stock received on the date of
exercise over the exercise price.
COMPANY DEDUCTION. The Company will be entitled to a corresponding
deduction equal to the amount recognized as income by a Plan participant at the
time such amount is recognized by the Plan participant, provided that the Plan
participant's compensation is reasonable in amount, and otherwise within
statutory limitations.
BASIS. The Plan participant's basis in Common Stock acquired upon the
exercise of a nonqualified stock option will be the exercise price plus the
amount of ordinary income recognized by the Plan participant with respect to
those Common Stock, assuming the exercise price is paid solely in cash. The tax
basis in the Common Stock for which the exercise price is paid in stock (if
permitted by the Compensation Committee pursuant to the Plan) is discussed below
under the caption "Exercise of Stock Options with Common Stock."
SUBSEQUENT SALE OR DISPOSITION OF COMMON STOCK. Upon the sale or other
disposition of Common Stock acquired upon the exercise of a nonqualified stock
option, a Plan participant will recognize taxable income (or a deductible loss)
equal to the difference between the amount realized on the sale or disposition
and the Plan participant's basis in the Common Stock. The Plan participant's
gain or loss will be taxable as a capital gain or deductible as a capital loss
provided the shares constitute a capital asset in the hands of the Plan
participant. The type of capital gain or loss will depend upon the holding
period of the Common Stock. If the Common Stock is held for less than twelve
months, there will be a short-term capital gain or loss on sale or disposition.
If the Common Stock is held between twelve and eighteen months, there will be
mid-term capital gain or loss. Finally, if the Common Stock is held for eighteen
months or longer, there will be long-term capital gain or loss on sale or
disposition.
INCENTIVE STOCK OPTIONS
Incentive stock options may be granted only to employees of the Company
and its subsidiaries.
An employee will not recognize any taxable income upon the grant of an
incentive stock option. An employee also will not recognize any taxable income
upon the exercise of an incentive stock option provided that the employee (i)
was an employee of the Company (or any subsidiary of the Company) at all times
beginning on the date the option was granted and ending on the date three months
before the option was exercised (one year in the case of a disabled employee)
and (ii) holds the Common Stock related to the option for at least two years
after the date the option was granted and for at least one year after the date
the option was exercised (collectively, these periods shall be referred to as
the "Holding Period").
23
<PAGE>
ALTERNATIVE MINIMUM TAX. The exercise of an incentive stock option will
result, however, in an item of income for purposes of determining the
alternative minimum tax (the "AMT"). Liability for tax under the AMT rules will
arise only if the employee's tax liability determined under the AMT rules
exceeds the employee's tax liability determined under the ordinary income tax
rules. The exercise of an incentive stock option will give rise to an item of
AMT income to an employee in an amount equal to the excess of the fair market
value of the Common Stock received on the date the option is exercised over the
exercise price. Plan participants who exercise incentive stock options and
receive Common Stock that are subject to a substantial risk of forfeiture within
the meaning of Section 83(c) of the Code are urged to consult their tax advisor
concerning the application of the AMT rules.
COMPANY DEDUCTION. Neither the Company (nor any subsidiary of the
Company) will be entitled to a deduction for federal income tax purposes with
respect to the grant of an incentive stock option to an employee under the Plan,
the exercise of such option by the employee, or the sale of the Common Stock
acquired through the exercise of such option by the employee subsequent to the
expiration of the Holding Period.
BASIS. The employee's tax basis in the Common Stock acquired upon the
exercise of an incentive stock option for which the exercise price is paid
solely in cash will be equal to the amount of the cash paid. The tax basis in
the Common Stock for which the exercise price is paid in stock (if permitted by
the Compensation Committee pursuant to the Plan) is discussed below under the
caption "Exercise of Stock Options With Common Stock."
SUBSEQUENT SALE OR DISPOSITION AFTER HOLDING PERIOD. If shares of Common
Stock acquired upon the exercise of an incentive stock option are sold after the
expiration of the Holding Period, upon the sale of such Common Stock the
employee will recognize a mid-term or long-term capital gain (or loss) in an
amount equal to the excess (or deficiency) of the sales price over the
employee's basis, provided the shares are held as a capital asset by the
employee.
DISQUALIFYING DISPOSITIONS
DISQUALIFYING DISPOSITION BY EMPLOYEES NOT SUBJECT TO SECTION
16(B). If shares of Common Stock acquired upon the exercise of an incentive
stock option are sold before the expiration of the Holding Period (hereinafter
referred to as a "Disqualifying Disposition"), the employee will recognize
ordinary income in an amount equal to the lesser of (i) the excess of the fair
market value of the Common Stock on the date of exercise over the exercise price
or (ii) the amount realized on the sale of such stock over the exercise price.
DISQUALIFYING DISPOSITION BY EMPLOYEES SUBJECT TO SECTION 16(B) -
IF INTERIM PURCHASES CAUSE COMMON STOCK ISSUED UNDER THE TERMS OF THE PLAN TO BE
SUBSTANTIALLY NON-VESTED. If an employee who is subject to Section 16(b) has
made an interim purchase of shares of Common Stock (or a right to acquire Common
Stock which is considered a "purchase" for purposes of Section 16(b)) within six
months prior to the exercise of an incentive stock option (and if such interim
purchase causes the Common Stock to be substantially non-vested as heretofore
discussed) and the employee sells the Plan shares in a Disqualifying
Disposition, the employee will recognize ordinary income in an amount equal to
the lesser of (i) the excess of the fair market value of the Common Stock on the
Applicable Date over the exercise price or (ii) the amount realized on the sale
of such stock over the
24
<PAGE>
exercise price, unless the employee makes a Section 83(b) Election, in which
case the tax consequences will be the same as if the employee was not subject to
Section 16(b) as described in the immediately preceding paragraph.
DISQUALIFYING DISPOSITION BY EMPLOYEES SUBJECT TO SECTION 16(B) -
IF THERE ARE NO INTERIM PURCHASES OR INTERIM PURCHASES DO NOT CAUSE COMMON STOCK
ISSUED UNDER THE TERMS OF THE PLAN TO BE SUBSTANTIALLY NON-VESTED. If no interim
purchases were made or the IRS concludes that interim purchases do not cause the
Common Stock to be substantially non-vested, the tax consequences will be the
same as if the employee was not subject to Section 16(b) as described in the
second preceding paragraph.
CAPITAL GAIN. If the amount realized by an employee on the sale
of the Common Stock exceeds the fair market value of such shares on the date of
exercise, the excess will be taxed to the employee as a short-term, mid-term or
long-term capital gain, provided that the employee held the Common Stock as a
capital asset.
COMPANY DEDUCTION. Upon the occurrence of a Disqualifying
Disposition, the Company will be entitled to a deduction for federal income tax
purposes equal to the amount of ordinary income recognized by the employee,
provided that the employee's compensation is reasonable and is otherwise within
statutory limitations.
ALTERNATIVE MINIMUM TAX. If an employee exercises an incentive
stock option and sells the Common Stock related thereto in a Disqualifying
Disposition in the same taxable year, the tax treatment for purposes of ordinary
income tax and AMT will be the same (resulting in no additional AMT liability).
Conversely, if the employee sells Common Stock in a Disqualifying Disposition in
a tax year subsequent to the tax year in which the incentive stock option was
exercised, the employee will recognize AMT income (as determined above) in the
first taxable year, and ordinary taxable income (but not AMT income) in the year
in which the disposition was made.
EXERCISE FOLLOWING EMPLOYEE'S DEATH. Under certain circumstances, Common
Stock acquired upon exercise of an incentive stock option following the
employee's death will receive the tax treatment described herein without regard
to the Holding Period requirement.
EXERCISE OF STOCK OPTIONS WITH COMMON STOCK
The Plan permits, subject to the discretion of the Compensation
Committee, the exercise price of stock options to be paid with shares of Common
Stock owned by the Plan participant. The Compensation Committee does not
presently intend to allow the use of shares of Common Stock that are
substantially non-vested (I.E., nontransferable or subject to a substantial risk
of forfeiture and for which a Section 83(b) Election has not been filed) to pay
the exercise price of a stock option. Therefore, only shares of Common Stock
that are substantially vested may be used to pay the exercise price of a stock
option.
NONQUALIFIED STOCK OPTIONS. If a Plan participant pays the exercise
price of a nonqualified stock option with shares of Common Stock that are
substantially vested (including, pursuant to proposed IRS regulations, stock
obtained through the exercise of an incentive stock option
25
<PAGE>
and not held for the Holding Period), the Plan participant will not recognize
any gain on the shares surrendered. With respect to the Common Stock received,
that portion of the Common Stock equal in number to the shares of Common Stock
surrendered will have a basis equal to the basis of the shares surrendered. The
excess shares received will be taxable to the Plan participant as ordinary
compensation income in an amount equal to the fair market value (i) if the
excess shares are substantially vested, as of the exercise date, or (ii) if the
excess shares are substantially non-vested, as of the Applicable Date. The Plan
participant's basis in those excess Common Stock will equal the amount of
ordinary compensation income recognized by the Plan participant.
INCENTIVE STOCK OPTIONS. The tax consequences to an employee from using
shares of Common Stock to pay the exercise price of incentive stock options will
depend on the status of the Common Stock acquired.
If an employee pays the exercise price of an incentive stock option for
stock that is substantially vested with shares of Common Stock that are
substantially vested, under proposed IRS regulations the employee will not
recognize any compensation income or gain with respect to the shares
surrendered. With respect to the Common Stock received, that portion of the
Common Stock equal in number to the shares of Common Stock surrendered will have
a basis equal to the basis of the shares surrendered. The Holding Period of the
surrendered shares will be carried over to the equivalent number of shares of
Common Stock received. The employee will recognize no gain with respect to the
excess shares received, the basis of such shares will be zero, and the Holding
Period of such shares will begin on the date of receipt thereof by the employee.
Similarly, it appears that if the employee pays the exercise price for
substantially non-vested Common Stock with shares of Common Stock that are
substantially vested, the tax consequences will be the same.
If an employee exercises an incentive stock option granted pursuant to
the Plan using shares of Common Stock that were obtained through the exercise of
an incentive stock option (whether granted under the Plan or under another plan
of the Company) and that have been held by the employee for the Holding Period
for either substantially vested Common Stock or substantially non-vested Common
Stock, the tax consequences of such payment to the employee will be identical to
those discussed in the preceding paragraph.
Conversely, if an employee exercises an incentive stock option granted
pursuant to the Plan using shares of Common Stock received upon the prior
exercise of an incentive stock option (whether granted under the Plan or under
another plan of the Company) and the employee has not held that Common Stock for
the Holding Period, under proposed IRS regulations the employee will have made a
Disqualifying Disposition of the number of shares of Common Stock used as
payment for the exercise price of the incentive stock option. If the employee
receives Common Stock that is substantially vested, the employee generally will
recognize ordinary compensation income with respect to the surrender of those
shares equal to the excess of the fair market value of the Common Stock
surrendered (determined as of the date the option relating to such Common Stock
was exercised) over the exercise price of the shares surrendered. It is unclear
whether, if the employee receives Common Stock that is substantially non-vested,
the recognition of income will be deferred until the Common Stock becomes
substantially vested. The basis of the shares received will equal the amount of
ordinary compensation income recognized by the employee plus the employee's
basis in the shares surrendered, allocated equally among the shares received.
26
<PAGE>
RESTRICTED STOCK
PLAN PARTICIPANTS NOT SUBJECT TO SECTION 16(B). A Plan participant who
is not subject to Section 16(b) who receives a restricted stock award will
recognize ordinary income equal to the fair market value of the Common Stock
received at the time the restrictions lapse, unless the Plan participant makes a
Section 83(b) Election to report the fair market value of the Common Stock
received as restricted stock as ordinary income at the time of receipt.
PLAN PARTICIPANTS SUBJECT TO SECTION 16(B). A Plan participant subject
to Section 16(b) who receives a restricted stock award will recognize ordinary
income equal to the fair market value of the stock received at the later of (i)
the Applicable Date or (ii) the date on which the restrictions lapse, unless the
Plan participant makes a Section 83(b) Election to report the fair market value
of the Common Stock received as restricted stock as ordinary income at the time
of receipt.
COMPANY DEDUCTION. The Company may deduct an amount equal to the income
recognized by the Plan participant at the time the Plan participant recognizes
the income, provided the Plan participant's compensation is reasonable, and
otherwise within statutory limitations.
BASIS. The basis of the restricted stock in the hands of the Plan
participant will be equal to the fair market value of the restricted stock on
the date the Plan participant recognizes ordinary income as described above.
SUBSEQUENT SALE OR DISPOSITION. The restrictions placed on restricted
stock do not permit sale or disposition until the restrictions lapse. Upon the
sale or disposition of restricted stock after the restrictions lapse, a Plan
participant will recognize taxable income or loss equal to the difference
between the amount realized by the Plan participant on the disposition of the
stock and the Plan participant's basis in the stock. The gain or loss will be
taxable to the Plan participant as a capital gain or deductible by the Plan
participant as a capital loss (either short- mid-term or long-term, depending on
the holding period of the restricted stock), provided that the Plan participant
held the restricted stock as a capital asset.
DIVIDENDS. During the period in which a Plan participant holds
restricted stock, prior to the lapse of the restrictions, if dividends are
declared but not distributed to the Plan participant until the restrictions
lapse, the dividends will be treated for tax purposes by the Plan participant
and the Company in the following manner: (i) if the Plan participant makes a
Section 83(b) Election to recognize income at the time of receipt of the
restricted stock, the dividends will be taxed as dividend income to the Plan
participant when the restrictions lapse and the Company will not be entitled to
a deduction and will not be required to withhold income tax, (ii) if the Plan
participant does not make a Section 83(b) Election, the dividends will be taxed
as compensation to the Plan participant when the restrictions lapse and will be
deductible by the Company and subject to applicable federal income tax
withholding at that time.
If the Company pays the dividends to the Plan participant prior to the
lapse of the restrictions and the Plan participant makes a Section 83(b)
Election, the dividends will be taxed as dividend income at the time of payment
and will not be deductible by the Company. Conversely, if the Plan participant
27
<PAGE>
does not make a Section 83(b) Election, the dividends will be taxable to the
Plan participant as compensation at the time of payment and the Company will be
entitled to a deduction.
STOCK APPRECIATION RIGHTS
A Plan participant will not recognize taxable income upon the grant of a
stock appreciation right.
PLAN PARTICIPANTS NOT SUBJECT TO SECTION 16(B). Upon the exercise of an
SAR, a Plan participant who is not subject to Section 16(b) will recognize
ordinary income in an amount equal to the cash and fair market value of the
Common Stock received.
PLAN PARTICIPANTS SUBJECT TO SECTION 16(B) - IF INTERIM PURCHASES CAUSE
COMMON STOCK ISSUED UNDER THE TERMS OF THE PLAN TO BE SUBSTANTIALLY NON-VESTED.
If a Plan participant who is subject to Section 16(b) has made an interim
purchase of shares of Common Stock (or a right to acquire Common Stock which is
considered a "purchase" for purposes of Section 16(b)) within six months prior
to the exercise of an SAR and the IRS concludes that such interim purchase
causes the Common Stock received in settlement of an SAR to be substantially
non-vested, the Plan participant will recognize ordinary income in an amount
equal to the cash received and the fair market value of any Common Stock
received determined as of (i) the exercise date if the Plan participant makes a
Section 83(b) Election or (ii) the Applicable Date if the Plan participant does
not make a Section 83(b) Election.
PLAN PARTICIPANTS SUBJECT TO SECTION 16(B) - IF THERE ARE NO INTERIM
PURCHASES OR INTERIM PURCHASES DO NOT CAUSE COMMON STOCK ISSUED UNDER THE TERMS
OF THE PLAN TO BE SUBSTANTIALLY NON-VESTED. If no interim purchases were made or
the IRS determines that interim purchases do not cause the Common Stock paid in
settlement of an SAR to be substantially non-vested, the tax consequences will
be the same as if the Plan participant was not subject to Section 16(b).
Therefore, upon the exercise of an SAR, the Plan participant will recognize
ordinary income in an amount equal to the cash and fair market value of the
Common Stock received.
COMPANY DEDUCTION. The Company will be entitled to a deduction in the
amount of, and at the time that, ordinary income is recognized by the Plan
Participant in connection with the exercise of an SAR, provided that the Plan
participant's compensation is reasonable and is otherwise within the statutory
limitations.
BASIS. In the event that an SAR is paid in whole or in part in Common
Stock, the amount recognized by the Plan participant as ordinary income with
respect to those shares will be the Plan participant's basis in those Common
Stock for purposes of determining any gain or loss on the subsequent sale of
those shares.
28
<PAGE>
OTHER CONSIDERATIONS
Any Common Stock subject to restrictions in order to comply with the
"Pooling-of-Interest Accounting" rules set forth in Accounting Series Release
Numbered 130 ((10/5/72) 37 F.R. 20937; 17 C.F.R. 211.130) and Accounting Series
Release Numbered 135 ((1/18/73) 38 F.R. 1734; 176 C.F.R. 211.135) are considered
to be substantially non-vested. As discussed above, the time for determining the
fair market value of such Common Stock would be the date on which such
restrictions lapse.
Pursuant to the Omnibus Budget Reconciliation Act of 1993, the Company's
tax deduction for all compensation (including the value of restricted stock when
it becomes taxable to the officer) paid to specified officers in any one year
after 1993 is limited to $1,000,000. The Plan is intended to comply with certain
provisions of the Code that will allow the Company's deduction arising from an
officer's exercise of a stock option or stock appreciation right (or the sale of
the underlying stock acquired through the exercise of an incentive stock option
before the required holding periods are met) to be exempt from this limitation.
However, stock options that may be granted with a "bargain" exercise price are
not eligible for such exemption.
29
<PAGE>
OPTIONS GRANTED UNDER THE PLAN. The following table sets forth certain
information with respect to options awarded to the specified persons and groups
under the Plan through March 23, 1998:
<TABLE>
<CAPTION>
NAME AND NUMBER
PRINCIPAL POSITION OF SHARES GRANT DATE EXERCISE PRICE EXPIRATION DATE
------------------ --------- ---------- -------------- ---------------
<S> <C> <C> <C> <C>
J. Ernest Talley................
Chairman of the Board and
Chief Executive Officer 0 N/A N/A N/A
Mark E. Speese..................
President 0 N/A N/A N/A
L. Dowell Arnette...............
Executive Vice President 15,000 May 9, 1995 $6.67 May 9, 2005
Mitchell E. Fadel
President and Chief Executive
Officer - ColorTyme, Inc. 10,000 January 2, 1997 $14.38 January 2, 2007
May 9, 1995 May 9, 2005
Dana F. Goble................... to to
Senior Vice President 20,000 January 2, 1997 $6.67 to $14.38 January 2, 2007
All current executive officers May 9, 1995 May 9, 2005
as a group...................... to to
(11 persons) 146,500 January 2, 1998 $6.67 to $22.50 January 2, 2008
April 1, 1995 April 1, 2005
J.V. Lentell.................... to To
Director 18,000 January 2, 1998 $3.34 to $18.00 January 2, 2008
April 1, 1995 April 1, 2005
Joseph V. Mariner, Jr........... to To
Director 18,000 January 2, 1998 $3.34 to $18.00 January 2, 2008
April 1, 1995 April 1, 2005
Rex W. Thompson................. to To
Director 18,000 January 2, 1998 $3.34 to $18.00 January 2, 2008
All current directors who are
not executive officers as a April 1, 1995 April 1, 2005
group........................... to to
(3 persons) 54,000 January 2, 1998 $3.34 to $18.00 January 2, 2008
All Employees (including April 1, 1995 April 1, 2005
current officers who are not to to
executive officers) as a group.. 2,758,500(1) January 2, 1998 $3.34 to $26.75 January 2, 2008
</TABLE>
- -----------------------
(1) Pursuant to the terms of the Plan, when an optionee leaves the employ of the
Company, unvested options granted to that employee terminate and become
available for issuance. Vested options not exercised within 90 days from the
date the optionee leaves the employ of the Company terminate and become
available for issuance. As a result of terminations, the number of shares
reserved under the Plan on a historical basis, exceed the number of shares
available for issuance. However, at no time did grants under the Plan exceed
the number of shares available for issuance.
30
<PAGE>
The closing sales price of the Common Stock as of March 23, 1998 was $25.25
per share, as reported on Nasdaq.
PROPOSED AMENDMENT TO THE PLAN
The Board of Directors has unanimously adopted, subject to shareholder
approval, an amendment to the Long Term Incentive Plan, which amendment would
increase the number of shares of the Company's Common Stock reserved for grants
to be made pursuant to the Plan from 2,000,000 shares to 3,000,000 shares. The
proposed amendment does not change the Plan in any other manner. The Board of
Directors believes that the proposed amendments to the Plan will offer the
Company added flexibility in its efforts to attract and retain key employees,
officers and directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSED INCREASE IN
SHARES RESERVED FOR ISSUANCE UNDER THE PLAN.
III. OTHER BUSINESS
The Board of Directors does not intend to bring any business before the
Annual Meeting other than the matters referred to in the accompanying Notice of
Annual Meeting and at this date has not been informed of any matters that may be
presented to the Annual Meeting by others. If, however, any other matters
properly come before the Annual Meeting, it is intended that the persons named
in the accompanying proxy will vote pursuant to the proxy in accordance with
their best judgment on such matters.
Representatives of Grant Thornton LLP, the Company's independent public
accountants for the fiscal year ended December 31, 1997, will attend the Annual
Meeting and be available to respond to appropriate questions which may be asked
by stockholders. Such representatives will also have an opportunity to make a
statement at the meeting if they desire to do so.
The Audit Committee of the Board of Directors of the Company has not
appointed an independent public accounting firm for the 1998 fiscal year. The
Board of Directors, and the Audit Committee thereof, annually review the
performance of the Company's independent public accountants and the fees charged
for their services. The Board of Directors anticipates, from time to time,
obtaining competitive proposals from other independent public accounting firms
for the Company's annual audit. Based upon the Board and Audit Committee's
analysis of such information, the Company will determine which independent
public accounting firm to engage to perform its annual audit each year.
31
<PAGE>
ADDITIONAL INFORMATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of shares of Common Stock as of March 23, 1998 by (i) each
person who is the beneficial owner of 5% or more of the outstanding shares of
Common Stock, (ii) each director of the Company, (iii) each Named Executive
Officer, and (iv) all executive officers and directors of the Company as a
group. Unless otherwise indicated, the persons named below have the sole power
to vote and dispose of the shares of Common Stock beneficially owned by them,
subject to community property laws, where applicable.
AMOUNT AND NATURE
NAME OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP PERCENT OF CLASS
- ------------------------ ----------------------- ----------------
J. Ernest Talley(1) 5,893,265(2) 23.6%
Mark E. Speese(1) 2,528,432 10.1%
Montgomery Asset Management, LLC 1,739,200(3) 7.0%
L. Dowell Arnette 416,164(4) 1.7%
Mitchell E. Fadel 87,023(5) *
Dana F. Goble 21,563(6) *
J. V. Lentell 13,000(7) *
Rex W. Thompson 12,000(7) *
Joseph V. Mariner, Jr. 7,602(8) *
All officers and directors as a
group (14 total) 9,027,025(9) 36.1%
- ---------------
* Less than 1%
(1) The address of J. Ernest Talley and Mark E. Speese is 13800 Montfort Drive,
Suite 300, Dallas, Texas 75240.
(2) Does not include an aggregate of 326,184 shares owned by two of Mr.
Talley's children, as to which Mr. Talley disclaims beneficial ownership.
(3) The address of Montgomery Asset Management, LLC is 101 California Street
San Francisco, California 94111.
(4) Includes 11,250 shares issuable pursuant to options granted under the
Company's Long Term Incentive Plan, 3,750 of which will become exercisable
on May 9, 1998, and 7,500 of which are currently exercisable.
(5) Includes 2,500 shares issuable pursuant to options granted under the
Company's Long Term Incentive Plan, all of which are currently exercisable.
(6) Includes 12,500 shares issuable pursuant to options granted under the
Company's Long Term Incentive Plan, 3,750 of which will become exercisable
on May 9, 1998, and 8,750 of which are currently exercisable.
(7) These shares are issuable pursuant to options granted under the Company's
Long Term Incentive Plan, all of which are currently exercisable.
(8) 4,000 of these shares are issuable pursuant to options granted under the
Company's Long Term Incentive Plan, all of which are currently exercisable.
(9) Does not include shares as to which beneficial ownership is disclaimed.
32
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CERTAIN BUSINESS RELATIONSHIPS
J. V. Lentell, a director of the Company, serves as Vice Chairman of the
Board of Directors of Intrust Bank, N.A., one of the Company's lenders. Intrust
Bank, N.A. is a $18,000,000 participant in the Company's $90,000,000 line of
credit. The Company also maintains a separate line of credit with Intrust Bank,
N.A., of which $380,000 was advanced as of March 23, 1998.
ACQUISITION OF TRANS TEXAS CAPITAL, L.L.C.
In February 1997, the Company acquired fourteen stores in Texas from
Trans Texas Capital, LLC ("Trans Texas") for approximately $7.3 million in cash
(the "Trans Texas Acquisition"). Danny Z. Wilbanks, Senior Vice President and
Chief Financial Officer of the Company was the managing member of Trans Texas.
At the time of the Trans Texas Acquisition, Mr. Wilbanks was not an executive
officer of the Company.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and holders of more than 10% of the Company's Common Stock to
file with the Securities and Exchange Commission ("SEC") initial reports of
ownership and reports of changes in ownership of Common Stock of the Company.
Except as set forth below, the Company believes, based solely on a review of the
copies of such reports furnished to the Company and written representations that
no other reports were required, that during 1997 all of the Company's directors,
officers and holders of more than 10% of its Common Stock complied with all
Section 16(a) filing requirements, except that Teri Kommers, Doug Balduini,
Niels Boensch, Todd Coppedge, Angel Cruz, John Dixon, Michael Draughn, Roger
Estep, Kenneth Gossett, Joe Mucci and Leslie Preston (each, at the time, a
Regional Vice President, none of whom are currently considered "Officers" within
the meaning of Section 16 - See "Executive Officers") each failed to timely file
one Form 3 with the SEC. Dana F. Goble, Angel Cruz, John Dixon and Anthony Doll
failed to timely file one Form 4 with the SEC. Late reports were filed in each
instance.
FUTURE STOCKHOLDER PROPOSALS
Proposals that stockholders of the Company intend to present for
inclusion in the Company's proxy statement and form of proxy with respect to the
Company's 1999 Annual Meeting of Stockholders must be received by the Company at
the address indicated on the first page of this Proxy Statement no later than
December 1, 1998. In addition, the Company's Amended and Restated Bylaws
generally require stockholders to give notice to the Company not less than 90
days prior to the anniversary date of the immediately preceding annual meeting
of stockholders of the Company in order to present proposals (whether or not
such proposals are to be included in the Company's proxy materials) or to
nominate directors.
33
<PAGE>
ANNUAL REPORT
The Company's Annual Report for the year ended December 31, 1997 (which
includes a copy of the Company's Annual Report on Form 10-K) has been mailed to
all stockholders of record as of March 23, 1998. Such Annual Report is not a
part of the proxy solicitation material. The Company will provide without charge
a copy of the Annual Report on Form 10-K (without exhibits) to any stockholder
upon written request to David M. Glasgow, Secretary of the Company, 13800
Montfort Drive, Suite 300, Dallas, Texas 75240.
By Order of the Board of Directors,
/s/ DAVID M. GLASGOW
David M. Glasgow
SECRETARY
<PAGE>
APPENDIX A
AMENDED AND RESTATED
1994 RENTERS CHOICE, INC.
LONG-TERM INCENTIVE PLAN
1. OBJECTIVES. The 1994 Renters Choice, Inc. Long-Term Incentive
Plan (the "Plan") is designed to retain selected employees and non-employee
directors of Renters Choice, Inc. (the "Company") and reward them for making
significant contributions to the success of the Company and its Subsidiaries (as
hereinafter defined). These objectives are to be accomplished by making awards
under the Plan and thereby providing Participants (as hereinafter defined) with
a proprietary interest in the growth and performance of the Company and its
Subsidiaries.
2. DEFINITIONS. As used herein, the terms set forth below shall have
the following respective meanings:
"Agreement" means a written agreement between the Company and a
Participant that sets forth the terms, conditions and limitations applicable to
an Employee Award or a Director Option.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Committee" means such committee of the Board as is designated by
the Board to administer the Plan. The Committee shall be constituted to permit
the Plan to comply with Rule 16b-3.
"Common Stock" means the Common Stock, par value $0.01 per share, of
the Company.
"Director" means an individual serving as a member of the Board who
is not an employee of the Company or any Subsidiary of the Company.
"Director Option" means a nonqualified stock option granted to a
Director under the terms of this Plan.
"Employee Award" means the grant of any form of Employee Stock
Option, stock appreciation right, stock award or cash award, whether granted
singly, in combination or in tandem, to an employee of the Company or any
Subsidiary pursuant to any applicable terms, conditions and limitations as the
Committee may establish in order to fulfill the objectives of the Plan.
<PAGE>
"Employee Stock Option" means an incentive stock option or a
nonqualified stock option granted to an employee of the Company or any of its
Subsidiaries under this Plan by the Committee.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
"Fair Market Value" means, as of a particular date, (a) if the
shares of Common Stock are listed on a national securities exchange, the mean
between the highest and lowest sales price per share of Common Stock on the
consolidated transaction reporting system for the principal such national
securities exchange on that date, or, if there shall have been no such sale so
reported on that date, on the last preceding date on which such a sale was so
reported, (b) if the shares of Common Stock are not so listed but are quoted on
the Nasdaq National Market, the mean between the highest and lowest sales price
per share of Common Stock on the Nasdaq National Market on that date, or, if
there shall have been no such sale so reported on that date, on the last
preceding date on which such a sale was so reported or (c) if the Common Stock
is not so listed or quoted, the mean between the closing bid and asked price on
that date, or, if there are no quotations available for such date, on the last
preceding date on which such quotations shall be available, as reported by the
Nasdaq Stock Market, Inc., or, if not reported by the Nasdaq Stock Market, Inc.,
by the National Quotation Bureau, Inc.
"Participant" means an employee of the Company or any of its
Subsidiaries to whom an Employee Award has been made under this Plan or a
Director who has received a Director Option.
"Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act, or
any successor rule.
"Subsidiary" means any corporation of which the Company directly or
indirectly owns shares representing more than 50% of the voting power of all
classes or series of capital stock of such corporation which have the right to
vote generally on matters submitted to a vote of the stockholders of such
corporation.
3. ELIGIBILITY.
(a) EMPLOYEE AWARDS. All employees of the Company and its
Subsidiaries are eligible for Employee Awards under this Plan. The Committee
shall select the employees who shall become Participants in the Plan from time
to time by the grant of Employee Awards under the Plan.
(b) DIRECTOR OPTIONS. Recipients of Director Options shall include
all persons who, as of the time Director Options are awarded, are serving as
Directors of the Company.
4. COMMON STOCK AVAILABLE UNDER THE Plan. There shall be available
for Employee Awards granted wholly or partly in Common Stock (including rights
or options which may be exercised for or settled in Common Stock) and Director
Options during the term of this Plan an aggregate of 2,000,000 shares of Common
Stock, subject to adjustment as provided in Paragraph 14,
<PAGE>
160,000 of which shall be set aside for issuance pursuant to Director Options
and 100,000 of which shall be set aside for stock awards, as described in
subparagraph 6(iii) hereof. The Board and the appropriate officers of the
Company shall from time to time take whatever actions are necessary to file
required documents with governmental authorities and stock exchanges and
transaction reporting systems to make shares of Common Stock available for
issuance pursuant to Employee Awards and Director Options. Common Stock related
to Employee Awards and Director Options that are forfeited or terminated, expire
unexercised, are settled in cash in lieu of Common Stock or in a manner such
that all or some of the shares covered by an Employee Award or Director Option
are not issued to a Participant, or are exchanged for Employee Awards that do
not involve Common Stock, shall immediately become available for Employee Awards
and Director Options hereunder. The Committee may from time to time adopt and
observe such procedures concerning the counting of shares against the Plan
maximum as it may deem appropriate under Rule 16b-3.
5. ADMINISTRATION. This Plan shall be administered by the Committee,
which shall have full and exclusive power to interpret this Plan and to adopt
such rules, regulations and guidelines for carrying out this Plan as it may deem
necessary or proper, all of which powers shall be exercised in the best
interests of the Company and in keeping with the objectives of this Plan. The
Committee may, in its discretion, provide for the extension of the
exercisability of an Employee Award, accelerate the vesting or exercisability of
an Employee Award, eliminate or make less restrictive any restrictions contained
in an Employee Award, waive any restriction or other provision of an Employee
Award or otherwise amend or modify an Employee Award in any manner that is
either (a) not adverse to the Participant holding such Employee Award or (b)
consented to by such Participant. The Committee may correct any defect or supply
any omission or reconcile any inconsistency in this Plan or in any Employee
Award in the manner and to the extent the Committee deems necessary or desirable
to carry it into effect. Any decision of the Committee in the interpretation and
administration of this Plan shall lie within its sole and absolute discretion
and shall be final, conclusive and binding on all parties concerned. No member
of the Committee or officer of the Company to whom it has delegated authority in
accordance with the provisions of this Plan shall be liable for anything done or
omitted to be done by him or her, by any member of the Committee or by any
officer of the Company in connection with the performance of any duties under
this Plan, except for his or her own willful misconduct or as expressly provided
by statute. The Committee may delegate to the Chief Executive Officer of the
Company and to other senior officers of the Company its duties under this Plan
pursuant to such conditions or limitations as the Committee may establish,
except that the Committee may not delegate to any person the authority to grant
Employee Awards to, or take other action with respect to, Participants who are
subject to Section 16 of the Exchange Act.
6. EMPLOYEE AWARDS. The Committee shall determine the type or types
of Awards to be made to each Participant under this Plan. Each Employee Award
made hereunder shall be embodied in an Agreement, which shall contain such
terms, conditions and limitations as shall be determined by the Committee in its
sole discretion and shall be signed by the Participant and by the Chief
Executive Officer, the Chief Operating Officer or any Vice President of the
Company for and on behalf of the Company. Employee Awards may consist of those
listed in this Paragraph 6 and may be granted singly, in combination or in
tandem. Employee Awards may also be made in combination or in tandem with, in
replacement of, or as alternatives to grants or rights (a) under this Plan or
any other employee plan of the Company or any of its Subsidiaries, including the
plan of any acquired entity, or
<PAGE>
(b) made to any Company or Subsidiary employee by the Company or any Subsidiary.
An Employee Award may provide for the granting or issuance of additional,
replacement or alternative Employee Awards upon the occurrence of specified
events, including the exercise of the original Employee Award. Notwithstanding
anything herein to the contrary, no Participant may be granted Employee Awards
consisting of stock options or stock appreciation rights exercisable for more
than 20% of the shares of Common Stock originally authorized for Employee Awards
under this Plan, subject to adjustment as provided in Paragraph 14. In the event
of an increase in the number of shares authorized under the Plan, the 20%
limitation will apply to the number of shares authorized.
(i) EMPLOYEE STOCK OPTION. An Employee Award may consist of a right
to purchase a specified number of shares of Common Stock at a price specified by
the Committee in the Agreement or otherwise. A stock option may be in the form
of an incentive stock option ("ISO") which, in addition to being subject to
applicable terms, conditions and limitations established by the Committee,
complies with Section 422 of the Code. Notwithstanding the foregoing, no ISO can
be granted under the Plan more than ten years following the Effective Date of
the Plan.
(ii) STOCK APPRECIATION RIGHT. An Employee Award may consist of a
right to receive a payment, in cash or Common Stock, equal to the excess of the
Fair Market Value or other specified valuation of a specified number of shares
of Common Stock on the date the stock appreciation right ("SAR") is exercised
over a specified strike price as set forth in the applicable Agreement.
(iii) STOCK AWARD. An Employee Award may consist of Common Stock or
may be denominated in units of Common Stock. All or part of any stock Employee
Award may be subject to conditions established by the Committee and set forth in
the Agreement, which conditions may include, but are not limited to, continuous
service with the Company and its Subsidiaries, achievement of specific business
objectives, increases in specified indices, attaining specified growth rates and
other comparable measurements of performance. Such Employee Awards may be based
on Fair Market Value or other specified valuations. The certificates evidencing
shares of Common Stock issued in connection with a stock Employee Award shall
contain appropriate legends and restrictions describing the terms and conditions
of the restrictions applicable thereto.
(iv) CASH AWARD. An Employee Award may be denominated in cash with
the amount of the eventual payment subject to future service and such other
restrictions and conditions as may be established by the Committee and set forth
in the Agreement, including, but not limited to, continuous service with the
Company and its Subsidiaries, achievement of specific business objectives,
increases in specified indices, attaining specified growth rates and other
comparable measurements of performance.
7. DIRECTOR STOCK OPTIONS. Director Options shall be granted to each
eligible Director as of the date of consummation of the initial public offering
of the Common Stock providing for the purchase of 9,000 shares of Common Stock.
Commencing on January 1, 1996, automatic annual awards of Director Options shall
be made to each eligible Director on the first business day of the Company's
fiscal year, providing for the purchase of 3,000 shares of Common Stock;
provided that such Director Options shall provide for the purchase of 9,000
shares of Common Stock if the recipient
<PAGE>
of such Director Option had not previously received a grant of a Director Option
pursuant to this Plan. The purchase price of each share of Common Stock placed
under a Director Option shall be equal to the Fair Market Value of such shares
on the date the Director Option is granted; provided, that the purchase price of
each share of Common Stock placed under a Director Option on the date of
consummation of the initial public offering of the Common Stock shall be equal
to the initial public offering price of the Common Stock. Director Options shall
terminate and be of no force or effect with respect to any shares not previously
purchased by the Director Optionee upon the expiration of ten years from the
date of granting of each Director Option, notwithstanding any earlier
termination of the Director Optionee's status as a Director of the Company. All
Director Options shall be exercisable immediately on the date of grant.
Notwithstanding the foregoing, no grant of Director Options shall be made unless
the number of shares available under the Plan is sufficient to make all
automatic grants of Director Options on the grant date. All Director Options
shall be evidenced by a written Agreement conforming with the terms of this
Plan.
8. PAYMENT OF EMPLOYEE AWARDS.
(a) GENERAL. Payment of Employee Awards may be made in the form of
cash or Common Stock or combinations thereof and may include such restrictions
as the Committee shall determine including, in the case of Common Stock,
restrictions on transfer and forfeiture provisions. As used herein, "Restricted
Stock" means Common Stock that is restricted or subject to forfeiture
provisions.
(b) DEFERRAL. The Committee may, in its discretion, (i) permit
selected Participants to elect to defer payments of some or all types of
Employee Awards in accordance with procedures established by the Committee or
(ii) provide for the deferral of an Employee Award in an Agreement or otherwise.
Any such deferral may be in the form of installment payments or a future lump
sum payment. Any deferred payment, whether elected by the Participant or
specified by the Agreement or by the Committee, may be forfeited if and to the
extent that the Agreement so provides.
(c) DIVIDENDS AND INTEREST. Dividends or dividend equivalent rights
may be extended to and made part of any Employee Award denominated in Common
Stock or units of Common 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 Common Stock or units
of Common Stock.
(d) SUBSTITUTION OF EMPLOYEE AWARDS. At the discretion of the
Committee, a Participant may be offered an election to substitute an Employee
Award for another Employee Award of the same or different type.
9. STOCK OPTION EXERCISE. The price at which shares of Common Stock
may be purchased under a stock option shall be paid in full at the time of
exercise in cash or, if permitted by the Committee, by means of tendering Common
Stock or surrendering all or part of that or any other Employee Award, including
Restricted Stock, valued at Fair Market Value on the date of exercise, or any
combination thereof. The Committee shall determine acceptable methods for
tendering Common
<PAGE>
Stock or Employee Awards to exercise a stock option as it deems appropriate. If
permitted by the Committee, payment may be made by successive exercises by the
Participant. The Committee may provide for procedures to permit the exercise or
purchase of Employee Awards by (a) loans from the Company or (b) use of the
proceeds to be received from the sale of Common Stock issuable pursuant to an
Employee Award. Unless otherwise provided in the applicable Agreement, in the
event shares of Restricted Stock are tendered as consideration for the exercise
of a stock option, a number of the shares issued upon the exercise of the stock
option, equal to the number of shares of Restricted Stock used as consideration
therefor, shall be subject to the same restrictions as the Restricted Stock so
submitted as well as any additional restrictions that may be imposed by the
Committee.
10. TAX WITHHOLDING. The Company shall have the right to deduct
applicable taxes from any Employee Award payment and withhold, at the time of
delivery or vesting of cash or shares of Common Stock under this Plan, an
appropriate amount of cash or number of shares of Common Stock or a combination
thereof for payment of taxes required by law or to take such other action as may
be necessary in the opinion of the Company to satisfy all obligations for
withholding of such taxes. The Committee may also permit withholding to be
satisfied by the transfer to the Company of shares of Common Stock theretofore
owned by the holder of the Employee Award with respect to which withholding is
required. If shares of Common Stock are used to satisfy tax withholding, such
shares shall be valued based on the Fair Market Value when the tax withholding
is required to be made.
11. AMENDMENT, MODIFICATION, SUSPENSION OR TERMINATION. The Board
may amend, modify, suspend or terminate this Plan for the purpose of meeting or
addressing any changes in legal requirements or for any other purpose permitted
by law except that (a) no amendment or alteration that would impair the rights
of any Participant under any Employee Award previously granted to such
Participant shall be made without such Participant's consent, (b) no amendment
or alteration shall be effective prior to approval by the Company's stockholders
to the extent such approval is then required pursuant to Rule 16b-3 in order to
preserve the applicability of any exemption provided by such rule to any
Employee Award then outstanding (unless the holder of such Employee Award
consents) or to the extent stockholder approval is otherwise required by
applicable legal requirements, and (c) the Plan shall not be amended more than
once every six months to the extent such limitation is required by Rule
l6b-3(c)(2)(ii) (or any successor provision) under the Exchange Act as then in
effect.
12. TERMINATION OF EMPLOYMENT. Upon the termination of employment by
a Participant, any unexercised, deferred or unpaid Employee Awards shall be
treated as provided in the specific Agreement evidencing the Employee Award. In
the event of such a termination, the Committee may, in its discretion, provide
for the extension of the exercisability of an Employee Award, accelerate the
vesting or exercisability of an Employee Award, eliminate or make less
restrictive any restrictions contained in an Employee Award, waive any
restriction or other provision of this Plan or an Employee Award or otherwise
amend or modify the Employee Award in any manner that is either (a) not adverse
to such Participant or (b) consented to by such Participant.
13. ASSIGNABILITY. Unless otherwise determined by the Committee and
provided in the Agreement, no Employee Award, Director Option or any other
benefit under this Plan constituting a derivative security within the meaning of
Rule 16a-l(c) under the Exchange Act shall be assignable or
<PAGE>
otherwise transferable except by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order as defined by the Code or Title
I of the Employee Retirement Income Security Act, or the rules thereunder. The
Committee may prescribe and include in applicable Agreements other restrictions
on transfer. Any attempted assignment of an Employee Award, Director Option or
any other benefit under this Plan in violation of this Paragraph 13 shall be
null and void.
14. ADJUSTMENTS.
(a) The existence of outstanding Employee Awards shall not affect in
any manner the right or power of the Company or its stockholders to make or
authorize any or all adjustments, recapitalizations, reorganizations or other
changes in the capital stock of the Company or its business or any merger or
consolidation of the Company, or any issue of bonds, debentures, preferred or
prior preference stock (whether or not such issue is prior to, on a parity with
or junior to the Common Stock) or the dissolution or liquidation of the Company,
or any sale or transfer of all or any part of its assets or business, or any
other corporate act or proceeding of any kind, whether or not of a character
similar to that of the acts or proceedings enumerated above.
(b) In the event of any subdivision or consolidation of outstanding
shares of Common Stock or declaration of a dividend payable in shares of Common
Stock or capital reorganization or reclassification or other transaction
involving an increase or reduction in the number of outstanding shares of Common
Stock, the Committee may adjust proportionally (i) the number of shares of
Common Stock reserved under this Plan and covered by outstanding Employee Awards
and Director Options denominated in Common Stock or units of Common Stock; (ii)
the exercise or other price in respect of such Employee Awards and Director
Options; and (iii) the appropriate Fair Market Value and other price
determinations for such Employee Awards and Director Options. In the event of
any consolidation or merger of the Company with another corporation or entity or
the adoption by the Company of a plan of exchange affecting the Common Stock or
any distribution to holders of Common Stock of securities or property (other
than normal cash dividends or dividends payable in Common Stock), the Committee
shall make such adjustments or other provisions as it may deem equitable,
including adjustments to avoid fractional shares, to give proper effect to such
event. In the event of a corporate merger, consolidation, acquisition of
property or stock, separation, reorganization or liquidation, the Committee
shall be authorized to issue or assume stock options, regardless of whether in a
transaction to which Section 424(a) of the Code applies, by means of
substitution of new options for previously issued options or an assumption of
previously issued options, or to make provision for the acceleration of the
exercisability of, or lapse of restrictions with respect to, Employee Awards and
the termination of unexercised options in connection with such transaction.
15. RESTRICTIONS. No Common Stock or other form of payment shall be
issued with respect to any Employee Award unless the Company shall be satisfied
based on the advice of its counsel that such issuance will be in compliance with
applicable federal and state securities laws. It is the intent of the Company
that this Plan comply with Rule 16b-3 with respect to persons subject to Section
16 of the Exchange Act unless otherwise provided herein or in an Agreement, that
any ambiguities or inconsistencies in the construction of this Plan be
interpreted to give effect to such intention and that, if any provision of this
Plan is found not to be in compliance with Rule 16b-3, such provision shall be
null and void to the extent required to permit this Plan to comply with Rule
16b-3.
<PAGE>
Certificates evidencing shares of Common Stock delivered under this Plan
may be subject to such stop transfer orders and other restrictions as the
Committee may deem advisable under the rules, regulations and other requirements
of the Securities and Exchange Commission, any securities exchange or
transaction reporting system upon which the Common Stock is then listed and any
applicable federal and state securities law. The Committee may cause a legend or
legends to be placed upon any such certificates to make appropriate reference to
such restrictions.
16. UNFUNDED PLAN. Insofar as it provides for Employee Awards of
cash, and Employee Awards and Director Options covering Common Stock or rights
thereto, this Plan shall be unfunded. Although bookkeeping accounts may be
established with respect to Participants who are entitled to cash, Common Stock
or rights thereto under this Plan, any such accounts shall be used merely as a
bookkeeping convenience. The Company shall not be required to segregate any
assets that may at any time be represented by cash, Common Stock or rights
thereto, nor shall this Plan be construed as providing for such segregation, nor
shall the Company, the Board or the Committee be deemed to be a trustee of any
cash, Common Stock or rights thereto to be granted under this Plan. Any
liability or obligation of the Company to any Participant with respect to a
grant of cash, Common Stock or rights thereto under this Plan shall be based
solely upon any contractual obligations that may be created by this Plan and any
Agreement, and no such liability or obligation of the Company shall be deemed to
be secured by any pledge or other encumbrance on any property of the Company.
None of the Company, the Board or the Committee shall be required to give any
security or bond for the performance of any obligation that may be created by
this Plan.
17. GOVERNING LAW. This Plan and all determinations made and actions
taken pursuant hereto, to the extent not otherwise governed by mandatory
provisions of the Code or the securities laws of the United States, shall be
governed by and construed in accordance with the laws of the State of Texas.
18. EFFECTIVE DATE OF PLAN.
(a) This Plan was approved by the Board of Directors of the Company
as of December 5, 1994, and by the unanimous written consent dated as of
December 21, 1994, of the holders of all of the shares of Common Stock
outstanding and entitled to vote thereon.
(b) The Plan was amended effective May 20, 1996 for the purpose of
increasing the number of shares reserved for issuance under the Plan from
1,500,000 to 2,000,000. The amendments to the Plan were approved by the Board of
Directors of the Company as of March 18, 1996, and by the holders of a majority
of the issued and outstanding shares of Common Stock of the Company as of May
20, 1996. For purposes of ease of administration and clarity of reference, the
Plan was amended and restated to incorporate the 1996 amendments.
RENTERS CHOICE, INC.
<PAGE>
RENTERS CHOICE, INC.
13800 Montfort Drive, Suite 300
Dallas, Texas 75240
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF THE COMPANY
P The undersigned, hereby revoking all prior proxies, hereby appoints
Mark E. Speese, Danny Z. Wilbanks and David M. Glasgow jointly and
R severally, with full power to act alone, as my true and lawful attorneys-in-
fact, agents and proxies, with full and several power of substitution to
O each, to vote all the shares of Common Stock of Renters Choice, Inc. (the
"Company") which the undersigned would be entitled to vote if personally
X present at the Annual Meeting of Stockholders of Renters Choice, Inc. to be
held on May 18, 1998 and at any adjournments and postponements thereof. The
Y above-named proxies are hereby instructed to vote as shown on the reverse
side of this card.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS SPECIFIED HEREIN, BUT
WHERE NO DIRECTION IS GIVEN IT WILL BE VOTED "FOR" PROPOSALS 1 AND 2 AND IN
THE DISCRETION OF THE ABOVE-NAMED PERSONS ACTING AS PROXIES ON SUCH OTHER
MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING.
COMMENTS/ADDRESS CHANGE, PLEASE MARK COMMENT/ADDRESS CHANGE ON REVERSE SIDE
(Continued and to be signed on other side)
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
Please mark [X]
your votes
as in this
example.
1. ELECTION OF CLASS I DIRECTORS for the term set forth in the accompanying
proxy statement.
FOR all WITHHOLD J. Ernest Talley
nominees AUTHORITY
listed to to vote for all WITHHELD FOR: (To withhold authority to vote
the right nominees listed for any individual nominee, write the
to the right nominee's name in the space provided below.
[ ] [ ] ___________________________________________
2. INCREASE in the number of shares of the Company's common stock, par value
$.01 per share, reserver for issuance under the Amended and Restated Renters
Choice, Inc. 1994 Long-Term Incentive Plan, from 2,000,000 to 3,000,000
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. In their discretion, upon such The undersigned(s) acknowledges receipt
other business as may properly of the Notice of 1997 Annual Meeting of
come before the meeting. Stockholders and the proxy statement
accompanying the same, each dated
April 6, 1997.
Please date this proxy and sign your
name exactly as it appears hereon. If
there is more than one owner, each
should sign. When signing as an agent,
attorney, administrator, guardian or
trustee, please indicate your title as
such. If executed by a corporation this
proxy should be signed in the corporate
name by a duly authorized officer who
should so indicate his or her title.
PLEASE DATE, SIGN AND RETURN THIS PROXY
PROMPTLY IN THE ENCLOSED ENVELOPE.
_____________________________________
Date
_____________________________________
Signature
_____________________________________
Signature if held jointly
