10-K 1 FORM 10-K 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------- FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December 31, 1994 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from ___________ to ____________ Commission File Number 1-9733 ------------------------- CASH AMERICA INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) TEXAS 75-2018239 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1600 WEST 7TH STREET FORT WORTH, TEXAS 76102-2599 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (817) 335-1100 ------------------------- Securities Registered Pursuant to Section 12(b) of the Act:
Name of Each Exchange Title of Each Class on Which Registered ------------------- --------------------- Common Stock New York Stock Exchange $.10 par value per share
Securities Registered Pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of 27,834,156 shares of the registrant's common stock held by nonaffiliates on March 8, 1995 was approximately $198,318,361. At March 8, 1995 there were 28,577,575 shares of the registrant's Common Stock, $.10 par value, issued and outstanding. DOCUMENTS INCORPORATED BY REFERENCE The Registrant's Annual Report to Shareholders for the year ended December 31, 1994 and the definitive Proxy Statement pertaining to the 1995 Annual Meeting of Shareholders are incorporated herein by reference into Parts II and IV, and Part III, respectively. ================================================================================ 2 CASH AMERICA INTERNATIONAL, INC. YEAR ENDED DECEMBER 31, 1994 INDEX TO FORM 10-K PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . 14 PART II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Item 5. Market for Registrant's Common Equity and Related Stockholder Matters . . . . . . . . . . . . . 14 Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . 15 Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . 15 PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . 15 Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . . . . 15 Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . . . . 15 PART IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K . . . . . . . . . . . . . . . 16
SIGNATURES i 3 INTRODUCTION Cash America International, Inc. (the "Company") was incorporated in Texas on October 4, 1984, to succeed to the business, assets and liabilities of a predecessor corporation formed one year earlier to engage in the pawnshop business. As of December 31, 1994, the Company owns pawnshops through wholly-owned subsidiaries in Texas, Louisiana, Tennessee, Oklahoma, Georgia, Florida, Ohio, Kentucky, Indiana, Colorado, Missouri, Alabama, North Carolina, South Carolina, the United Kingdom and Sweden. The Company's principal executive offices are located at 1600 West Seventh Street, Fort Worth, Texas 76102, and its telephone number is (817) 335-1100. As used herein, the "Company" includes Cash America International, Inc., its subsidiaries and its predecessor company. PART I ITEM 1. BUSINESS GENERAL The Company is engaged in acquiring, establishing and operating pawnshops which lend money on the security of pledged tangible personal property. Pawnshops function as convenient sources of consumer loans and as sellers primarily of previously-owned merchandise acquired in forfeited pawn transactions. The Company contracts for a pawn service charge to compensate it for the loan. The pawn service charge is calculated as a percentage of the loan amount based on the size and duration of the loan, in a manner similar to which interest is charged on a loan, and has generally ranged from 12% to 240% annually, as permitted by applicable state pawnshop laws. The pledged property is held through the term of the loan, which, in the Company's domestic operations, is generally one month with an automatic sixty-day redemption period unless otherwise earlier paid, renewed or extended. (For pawn service charges and loan periods applicable to the Company's foreign operations, see "Business--Regulation." ) A majority of the amounts loaned by the Company are paid in full, together with accrued service charges, or are renewed or extended through payment of accrued service charges. For the years 1992, 1993, and 1994, loans paid and renewed as a percentage of loans made were 69.7%, 71.7%, and 70.7% respectively. In the event that the borrower does not pay his loan, the unredeemed collateral is forfeited to the Company and then becomes inventory available for sale in the pawnshop. The Company's growth has been the result of its business strategy of acquiring existing pawnshops and establishing new pawnshops that can benefit from the Company's centralized management and standardized operations. The Company intends to continue its business strategy of acquiring and establishing pawnshops, increasing its share of consumer loan business, and concentrating multiple pawnshops in regional and local markets in order to expand market penetration, enhance name recognition and reinforce marketing programs. The Company believes that a large portion of its customers consists of individuals who do not regularly transact business with banks. These generally are persons who do not have checking accounts and conduct as many of their transactions as possible on a cash basis. Pursuant to the Company's business expansion strategy, the Company added a net 71 locations in 1992, 31 locations in 1993 and 60 locations in 1994. Of these net 162 locations added, 88 were acquisitions and 88 were start-ups, while 14 locations were either closed or combined. Included in the 1992 acquisitions are the February 1992 acquisition of the Harvey & Thompson pawnbrokerage business, consisting of 26 locations situated in London, England and 11 other cities in the United Kingdom, and the November 1992 purchase of a chain of 12 pawnshops located in the Fort Worth, Texas area. On June 30, 1993, the Company acquired 18 pawnshops, located primarily in San Antonio and Houston, Texas, from Express Cash International Corporation. On September 22, 1994, the Company acquired the ten-pawnshop Svensk Pantbelaning chain in Sweden. As of December 31, 1994, the Company had 300 domestic and 40 foreign operating locations. 1 4 The Company plans to continue to expand its operating locations through acquisitions and new start-ups. However, during 1992 the Company moved to a strategy of opening more start-up units and acquiring fewer stores relative to total additions. Excluding the two chains discussed above, the Company acquired 15 stores in individual purchase transactions during 1993 and 1994. LENDING FUNCTION The Company is engaged in the business of lending money on the security of pledged goods. The pledged goods are generally tangible personal property other than securities or printed evidences of indebtedness and generally consist of jewelry, tools, televisions and stereos, musical instruments, firearms, and other miscellaneous items. (In the Company's foreign operations, the pledged goods predominately consist of jewelry.) The pledged tangible personal property is intended to provide security to the Company for the repayment of the loan. Pawn loans are made without personal liability to the borrower. Because the loan is made without the borrower's personal liability, the Company does not investigate the creditworthiness of the borrower, but relies on the pledged personal property, and the possibility of its forfeiture, as a basis for its lending decision. The Company contracts for a pawn service charge as compensation for the loan. Pawn service charges contributed approximately 74% of the Company's total revenues net of costs of sales in 1992, 76% in 1993 and 78% in 1994. At the time a pawn transaction is entered into, a pawn loan agreement, commonly referred to as a pawn ticket, is delivered to the borrower (pledgor) that sets forth, among other items, the name and address of the pawnshop and the borrower, the borrower's identification number from his or her driver's license or other approved identification, the date, the identification and description of the pledged goods, including applicable serial numbers, the amount financed, the pawn service charge, the maturity date, the total amount that must be paid to redeem the pledged goods on the maturity date and the annual percentage rate. With regard to domestic operations, the amount that the Company is willing to finance is typically based on a percentage of the pledged personal property's estimated resale value. The sources for the Company's determination of the estimated resale value are numerous and include catalogues, blue books, newspapers and previous similar pawn loan transactions. These sources, together with the employees' experience in selling similar items of merchandise in particular pawnshops, influence the determination of the estimated resale value of such items. The Company does not utilize a standard or mandated percentage of estimated resale value in determining the amount to be financed. Rather, the employees have the authority to set the percentage for a particular item and determine the ratio of loan amount to estimated resale value with the expectation that, if the item is forfeited to the pawnshop, its subsequent resale would yield a gross profit margin consistent with the Company's historical experience. The pledged property is held through the term of the loan, which generally is one month with an automatic sixty-day redemption period (see "Regulation" for exceptions in certain states), unless earlier paid, renewed or extended. A majority of the amounts loaned by the Company are paid in full with accrued service charges or are renewed or extended through payment of accrued service charges. In the event the borrower does not pay, renew or extend his loan, the unredeemed collateral is forfeited to the Company and then becomes inventory available for sale. The Company does not record loan losses or charge-offs inasmuch as, if the loan is not repaid, the principal amount loaned plus the accrued service charge becomes the carrying cost of the forfeited collateral ("inventory") that is to be recovered through the resale function described below. With regard to the Company's foreign operations, the amount that the pawnshop is willing to finance in a pledge of jewelry is typically based on a fixed amount per gram of the gold or silver content of the pledged property plus additional amounts for diamonds and other features which, in the store management's assessment, enhance the market value of the pledged property. Declines in gold and silver prices historically have resulted in reduction of the amount that the pawnshop is willing to lend against an item, which reduces the amount of the pawnshop's loan portfolio and related pawn service charge income. Declines in gold and silver prices generally will also reduce the resale value of jewelry items acquired by the pawnbroker in pawn transactions, and could adversely affect the Company's ability to recover the carrying cost of the acquired collateral. The pawn loans are made for a term of six months with an approximate annual yield in 1994 of 65%. The collateral is held through the term of 2 5 the loan, and, in the event that the loan is not paid or renewed on or before maturity, the unredeemed collateral is sold at auction or by private sale. Based on the Company's approximate average annual yield on its pawn loans, the average amount of accrued service charges on pawn loans not repaid approximates 50% of the principal amount loaned. The recovery of the principal amount loaned and accrued service charges, as well as realization of an additional gross profit on sales of inventory, is dependent on the Company's initial assessment of the property's estimated resale value. Improper assessment of the resale value of the collateral in the lending function can result in reduced marketability of the property and resale of the property for an amount less than the principal plus accrued service charge. However, historically, the Company has experienced gross profits from sales of inventory. For 1992, 1993 and 1994, the Company experienced gross profit margins on sales of inventory of 21%, 19% and 19%, respectively. At December 31, 1994, the Company had approximately 879,800 loans outstanding with an aggregate balance outstanding of $78,095,000 or $89 per loan outstanding. Presented below is information with respect to pawn loans (exclusive of accrued pawn service charges) made, acquired, repaid and forfeited for the years ended December 31, 1992, 1993 and 1994:
Year Ended December 31, ------------------------------------------ 1992 1993 1994 -------- -------- -------- ($ in thousands) Loans made (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $192,536 $224,165 $285,818 Loans acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,159 3,267 17,297 Loans paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (88,358) (105,739) (136,575) Loans renewed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (45,852) (54,967) (65,356) Loans Forfeited: Transferred to inventory . . . . . . . . . . . . . . . . . . . . . . (51,406) (62,300) (70,032) Sold at auction . . . . . . . . . . . . . . . . . . . . . . . . . . (721) (1,724) (3,111) Effect of exchange rate translation . . . . . . . . . . . . . . . . . . . (1,782) (270) 965 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -0- (269) -0- -------- -------- -------- Net increase in pawn loans outstanding at end of period . . . . . . $17,576 $2,163 $29,006 ======== ======== ======== Loans paid or renewed as a percent of loans made . . . . . . . . . . . . 69.7% 71.7% 70.7% ======== ======== ========
_________________________ (a) Includes loans renewed. RESALE FUNCTION The Company engages in the sale of inventory acquired when a pawn loan is not repaid, when used goods are purchased from the general public and when new merchandise is acquired from vendors. New goods consist primarily of accessory merchandise which enhances the marketability of existing inventory, such as tools, consumer electronics and new jewelry items purchased during peak selling seasons. For the year ended December 31, 1994, $142,524,000 of merchandise was added to inventory, other than from pawnshop acquisitions. Of such 3 6 amount, $107,926,000 was from pawn loans not paid, including $37,894,000 from accrued pawn service charges and $70,032,000 from the principal amount of loans forfeited. The Company does not provide its customers with warranties on the used merchandise sold. The Company permits its customers to purchase inventory on a layaway plan whereby the customer agrees to purchase an item by making an initial cash deposit representing a small part of the selling price and making additional, non-interest bearing payments of the balance of the selling price in accordance with a specified schedule. The Company then separates the specified item from its showroom and holds the item until the selling price is paid in full. Should the customer fail to make a required payment, the item is returned to the showroom. At December 31, 1994, the Company held approximately $3,576,000 in customer layaway deposits. The Company provides an allowance for shrinkage and valuation of its inventory based on management's evaluation of the merchandise. Management's evaluation takes into consideration historical shrinkage, the quantity and age of slow-moving goods on hand and markdowns necessary to liquidate slow-moving goods. At December 31, 1994, total inventory on hand was $80,894,000, after deducting $2,514,000 for allowance for shrinkage and valuation of inventory. OPERATIONS Store Management Each location has a manager who is responsible for supervising its personnel and assuring that it is managed in accordance with Company guidelines and established policies and procedures. Each manager reports to an Area Manager who typically oversees approximately five to ten store managers. Each Area Manager reports to a Regional Manager or Division Manager. As of January 1, 1995, the Company has established five geographic operating divisions, each of which is managed by a Division Manager. The Harvey & Thompson and Svensk Pantbelaning chains follow a similar management organization, with a managing director overseeing these operations. Trade Name The Company operates its pawnshops under the trade name "Cash America Pawn" in the U.S., "Harvey & Thompson Pawnbrokers" in the U.K., and "Svensk Pantbelaning" in Sweden. The Company has registered the "Cash America" mark and descriptive logos and phrases with the United States Patent and Trademark Office. Personnel The Company employs approximately 2,475 employees as of December 31, 1994. Of the total employees, approximately 180 were in executive, administrative, clerical and accounting functions. The Company has an established training program that provides a combination of classroom instruction, video presentation and on-the-job loan and sales experience. The new employee is introduced to the business through an orientation program and through a three-month training program that includes classroom and on-the-job training in loans, layaways, inventory and general administration of store operations. The experienced employee receives training and an introduction to the fundamentals of management to acquire the skills necessary to move into management positions within the organization. Manager training involves a twelve month program and includes additional management principles and more extensive training in income maximization, recruitment, inventory control and cost efficiency. 4 7 FUTURE EXPANSION Since its inception, the Company has engaged in a series of mergers and acquisitions to expand its business. The Company's objective is to continue to expand the number of pawnshops it owns and operates through acquisitions and by establishing new stores. Management believes that such anticipated expansion will provide economies of scale in supervision, purchasing, administration and marketing by decreasing the overall average cost of such functions per store owned. The primary pawnshop acquisition criteria include evaluation of the volume of annual loan transactions, outstanding loan balances, inventory on hand, sales history, and location and condition of the facility, including lease terms or fair market value of the facility if it is to be purchased. The primary pawnshop start-up criteria include the facility-related items noted above and conditions in the surrounding community indicating a sufficient level of potential customers. The Company's business strategy is to continue expanding its pawnshop business into jurisdictions outside of its existing geographic markets. Consistent with its business strategy, in 1993 the Company expanded operations into the states of Indiana and Colorado and in 1994 expanded into Missouri, Alabama, North Carolina, South Carolina, and Sweden. The Company will consider expanding into other markets which meet the risk/reward considerations of the Company. The Company's expansion has not only been in acquiring previously owned pawnshops, but also in establishing new locations. After a suitable location has been found and a lease and license are obtained, the new location can be ready for business within four to six weeks, with completion of sales counters, vaults and security system and transfer of inventory from other locations. The approximate start-up costs, including fixtures, for recently established pawnshops have ranged from $150,000 to $250,000, with an average cost per location of approximately $200,000. This amount does not include inventory transferred from other stores, funds to advance on pawn loans and operating expenses. The Company's expansion program is subject to numerous factors which cannot be predicted, such as the availability of attractive acquisition candidates or sites on suitable terms and general economic conditions. Further, there can be no assurance that future expansion can be continued on a profitable basis. Among other factors, the following factors will impact the Company's future planned expansion. Statutory Requirements. The Company's ability to add newly-established stores in Texas counties having a population of more than 250,000 is limited by a law that became effective September 1, 1991, which requires a finding of public need and probable profitability by the Texas Consumer Credit Commissioner as a condition to the issuance of any new pawnshop license. In addition, the present statutory and regulatory environment of some states renders expansion into those states impractical. See "Business -- Regulation." Competition. The Company faces competition in its acquisition program. In recent years, several pawnshop companies have completed public securities offerings and have announced active expansion and acquisition programs. A number of smaller companies have also entered the market. While the Company believes that it is the largest pawnshop operator in the United States, there can be no assurance that the Company will be more successful than its competitors in pursuing acquisition opportunities and leases for attractive start-up locations. Increased competition could also increase prices for attractive acquisition candidates. Access to Capital. In some states, the Company is required by law to maintain a minimum amount of certain unencumbered net assets (currently $150,000 in Texas) for each pawnshop location. The Company's expansion plans will therefore be limited in these states to the extent the Company is unable to maintain these required levels of unencumbered net assets. These requirements also make it difficult for the Company to rely on secured financing for expansion purposes due to the requirement that expansion capital be unencumbered, which would reduce the availability of capital for expansion purposes. 5 8 Availability of Qualified Store Management Personnel. The Company's ability to expand may also be limited by the availability of qualified store management personnel. While the Company seeks to train its existing personnel to enable those capable of doing so to assume management positions and to create attractive compensation packages to retain existing management personnel, there can be no assurance that sufficient qualified personnel will be available to satisfy the Company's needs with respect to its planned expansion. COMPETITION The Company encounters significant competition in connection with its lending and resale operations. Some competitors may have greater financial resources than the Company. Several competing pawnshop companies have completed securities offerings in recent years. See "Business -- Future Expansion." These competitive conditions may adversely affect the Company's revenues and profitability. The Company, in connection with the lending of money, competes with other pawnshops and forms of financial institutions such as consumer finance companies, which generally lend on an unsecured as well as secured basis. Other lenders may lend money on terms more favorable than the Company. The pawnshop industry is characterized by a large number of independent owner-operators, some of whom own and operate multiple pawnshops. REGULATION The Company's pawnshop operations are subject to extensive regulation, supervision and licensing under various federal, state and local statutes, ordinances and regulations. At December 31, 1994, the Company had 146 pawnshops in operation in Texas, 40 in Florida, 21 in Georgia, 20 in Tennessee, 17 in Oklahoma, 16 in Louisiana, 13 in Indiana, nine in Kentucky, six in Missouri, four in North Carolina, three in South Carolina, three in Alabama, one in Colorado, and one in Ohio in the U.S., and 30 pawnshops in 14 cities in the U.K. and 10 pawnshops in six cities in Sweden. Texas Pawnshop Regulations. Pursuant to the terms of the Texas Pawnshop Act, the Texas Consumer Credit Commissioner has primary responsibility for the regulation of pawnshops and enforcement of laws relating to pawnshops in Texas. The Company is required to furnish the Texas Consumer Credit Commissioner with copies of information, documents and reports which are required to be filed by it with the Securities and Exchange Commission. The Texas Pawnshop Act prescribes the stratified loan amounts and the maximum allowable rates of service charge that pawnbrokers in Texas may charge for the lending of money within each stratified range of loan amounts. That is, the Texas law establishes the maximum allowable service charge rates based on the amount financed per pawn loan. The maximum allowable pawn service charges under the Texas Pawnshop Act for the various stratified loan amounts for the fiscal years ended June 30, 1993, 1994 and 1995 are as follows: 6 9
Year Ended June 30, 1993 Year Ended June 30, 1994 Year Ended June 30, 1995 ------------------------ ------------------------ ------------------------ Maximum Maximum Maximum Amount Allowable Amount Allowable Amount Allowable Financed Annual Financed Annual Financed Annual Per Pawn Percentage Per Pawn Percentage Per Pawn Percentage Loan Rate Loan Rate Loan Rate ---- ---- ---- ---- ---- ---- $ 1 to $ 117 240% $ 1 to $ 120 240% $ 1 to $ 126 240% 118 to 390 180 121 to 400 180 127 to 420 180 391 to 1,170 30 401 to 1,200 30 421 to 1,260 30 1,171 to 9,750 12 1,201 to 10,000 12 1,261 to 10,500 12
These rates are reviewed and established annually. The maximum allowable service charge rates were established and have not been revised since 1971 when the Texas Pawnshop Act was enacted. Since 1981, the ceiling amounts for stratification of the loan amounts to which these rates apply have been revised each July 1 in relation to the Consumer Price Index. The Texas Pawnshop Act also prescribes the maximum allowable pawn loan. Under current Texas law, a pawn loan may not exceed $10,500. In addition to establishing maximum allowable service charge rates and loan ceilings, the Texas Pawnshop Act also provides for the licensing of pawnshops and pawnshop employees. To be eligible for a pawnshop license in Texas, an applicant must (i) be of good moral character, (ii) have net assets of at least $150,000 readily available for use in conducting the business of each licensed pawnshop, (iii) show that the pawnshop will be operated lawfully and fairly in accordance with the Texas Pawnshop Act, (iv) show that the applicant has the financial responsibility, experience, character, and general fitness to command the confidence of the public in its operations, and (v) in the case of a business entity, the good moral character requirement shall apply to each officer, director and holder of 5% or more of the entity's outstanding shares. As part of the license application process, any existing pawnshop licensee who would be affected by the granting of the proposed application may request a public hearing at which to appear and present evidence for or against the application. For an application for a new license in a county with a population of 250,000 or more, the Consumer Credit Commissioner must find not only that the applicant meets the other requirements for a license, but also that (i) there is a public need for the proposed pawnshop and (ii) the volume of business in the community in which the pawnshop will conduct business indicates a profitable operation is probable. The Texas Consumer Credit Commissioner may, after notice and hearing, suspend or revoke any license for a Texas pawnshop upon finding, among other things, that (i) any fees or charges have not been paid; (ii) the licensee violates (whether knowingly or unknowingly without due care) any provisions of the Texas Pawnshop Act or any regulation or order thereunder; or (iii) any fact or condition exists which, if it had existed at the time the original application was filed for a license, would have justified the Commissioner in refusing such license. Under the Texas Pawnshop Act, a pawnbroker may not accept a pledge from a person under the age of 18 years; make any agreement requiring the personal liability of the borrower; accept any waiver of any right or protection accorded to a pledgor under the Texas Pawnshop Act; fail to exercise reasonable care to protect pledged goods from loss or damage; fail to return pledged goods to a pledgor upon payment of the full amount due; make any charge for insurance in connection with a pawn transaction; enter into any pawn transaction that has a maturity date of more than one month; display for sale in storefront windows or sidewalk display cases, pistols, swords, canes, blackjacks and similar weapons; operate a pawnshop between the hours of 9:00 p.m. and 7:00 a.m.; or purchase used or secondhand personal property or certain building construction materials unless a record is 7 10 established containing the name, address and identification of the seller, a complete description of the property, including serial number, and a signed statement that the seller has the right to sell the property. Tennessee Pawnshop Regulations. Tennessee state law provides for the licensing of pawnbrokers in that state. It also (i) requires that pawn transactions be reported to local law enforcement agencies, (ii) requires pawnbrokers to maintain insurance coverage on the property held on pledge for the benefit of the pledgor, (iii) establishes certain hours during which pawnshops may be open for business and (iv) requires certain bookkeeping records be maintained. Tennessee law prohibits pawnbrokers from selling, redeeming or disposing of any goods pledged or pawned to or with them within 48 hours after making their report to local law enforcement agencies. The Tennessee statute establishes a maximum allowable interest rate of 24% per annum; however, the pawnshop operator may charge reasonable fees for investigating the title, storing and insuring the security and various other expenses. Louisiana Pawnshop Regulations. Louisiana law provides for the licensing and bonding of pawnbrokers in that state. In addition, the act requires that pawn transactions be reported to local law enforcement agencies, establishes hours during which pawnbrokers may be open for business and requires certain bookkeeping practices. Under the Louisiana statute, no pawnbroker may sell any jewelry pledged as collateral until the lapse of six months from the time the loan was made or extended by payment of accrued interest. All other unredeemed collateral from loans can be sold after the lapse of three months. Louisiana state law establishes maximum allowable rates of interest on pawn loans of 10% per month. In addition, Louisiana law provides that the pawnbroker may also charge a one-time fee not to exceed 10% for all other services. Various municipalities and parishes in the state of Louisiana have promulgated additional ordinances and regulations pertaining to pawnshops. Oklahoma Pawnshop Regulations. The Company's Oklahoma operations are subject to the Oklahoma Pawnshop Act. Following substantially the same statutory scheme as the Texas Pawnshop Act, the Oklahoma Pawnshop Act provides for the licensing and bonding of pawnbrokers in Oklahoma and provides for the Oklahoma Administrator of Consumer Credit to investigate the general fitness of the applicant and generally regulate pawnshops in that state. The Administrator has broad rule-making authority with respect to Oklahoma pawnshops. In general, the Oklahoma Pawnshop Act prescribes the stratified loan amounts and the maximum rates of service charges which pawnbrokers in Oklahoma may charge for lending money in Oklahoma within each stratified range of loan amounts. The regulations provide for a graduated rate structure similar to that utilized in federal income tax computations. For example, under this method of calculation a $500 pawn loan earns interest as follows: (a) the first $150 at 240%, annually, (b) the next $100 at 180%, annually and (c) the remaining $250 at 120%, annually. The maximum allowable pawn service charges for the various stratified loan amounts under the Oklahoma statute are as follows:
Maximum Amount Allowable Financed Annual Per Pawn Percentage Loan Rate ----------- ---------------- $ 1 to $ 150 . . . . . . . . 240% 151 to 250 . . . . . . . . 180 251 to 500 . . . . . . . . 120 501 to 1,000 . . . . . . . . 60 1,001 to 25,000 . . . . . . . . 36
A pawn loan in Oklahoma may not exceed $25,000. Georgia Pawnshop Regulations. Georgia state law requires pawnbrokers to maintain detailed permanent records concerning pawn transactions and to keep them available for inspection by duly authorized law enforcement authorities. The Georgia statute prohibits pawnbrokers from failing to make entries of material 8 11 matters in the their permanent records; making false entries in their records; falsifying, obliterating, destroying, or removing permanent records from their places of business; refusing to allow duly authorized law enforcement officers to inspect their records; failing to maintain records of each pawn transaction for at least four years; accepting a pledge or purchase from a person under the age of eighteen or who the pawnbroker knows is not the true owner of the property; making any agreement requiring the personal liability of the pledgor or seller or waiving any of the provisions of the Georgia statute; or failing to return or replace pledged goods upon payment of the full amount due (unless the pledged goods have been taken into custody by a court or a law enforcement officer). In the event pledged goods are lost or damaged while in the possession of the pawnbroker, the pawnbroker must replace the lost or damaged goods with like kinds of merchandise. Under Georgia law, total interest and service charges may not, during each thirty-day period of the loan, exceed 25% of the principal amount advanced in the pawn transaction (except that after ninety days from the original date of the loan, the maximum rate declines to 12.5% for each subsequent thirty- day period). The statute provides that municipal authorities may license pawnbrokers, define their powers and privileges by ordinance, impose taxes upon them, revoke their licenses, and exercise such general supervision as will ensure fair dealing between the pawnbroker and his customers. Florida Pawnshop Regulations. The Florida statute governing the Company's operations in that state provides that pawn transactions may take the form of a loan of money or a buy-sell agreement, whereby the pawnbroker agrees to hold property for a specified period of time to allow the seller the exclusive right to repurchase the property. The Company's Florida transactions take the form of buy-sell agreements. The property placed with a pawnbroker is subject to sale or disposal when the seller has not repurchased the property from the pawnbroker and there has been no payment on account made for a period of sixty days after the sale. The Florida law provides for registrations of pawnbrokers with the Florida Department of Revenue, which has broad power to enforce the registration requirements under the statute, to adopt rules and regulations to effectuate the purposes of the statute, and to impose fines for violation of the registration requirements. The statute prohibits pawnbrokers from entering into pawn transactions with a person who is under the influence of alcohol or drugs, a person who is under the age of eighteen, or a person using a name other than his own name or the registered name of his business. Also, pawnbrokers may not engage in or conduct business as such between the hours of 10:00 p.m. and 8:00 a.m. and may not conduct any pawn transaction at a drive-through window or similar device. The law also requires pawnbrokers to maintain detailed records of all transactions in secondhand goods and to deliver such records to the appropriate local law enforcement agencies. The statute referred to above does not establish a maximum allowable rate of interest or fees that pawnbrokers may charge. Kentucky Pawnshop Regulations. Kentucky law provides for the licensing and bonding of pawnbrokers in that state. In addition, state law requires certain bookkeeping practices, regulates the hours during which pawnbrokers may be open for business and requires pawnbrokers to keep their registers of loans and purchases open to inspection by officers of the state. The Kentucky statute establishes a maximum allowable interest rate of 2% per month; however, the pawnbroker may charge a reasonable fee, not to exceed one-fifth of the value of the loan per month, for investigating the title, storing and insuring the property and various other expenses. The pawnbroker must hold a pawned article for ninety days from the maturity of the loan before selling the article, provided that ten days before making the sale a notice is mailed to the pledgor indicating that, unless the article is redeemed within ten days, it will be subject to sale. Indiana Pawnshop Regulations. The Indiana Pawnbroking Law provides for a maximum allowable interest rate of 36% per annum for loans up to $870, 21% per annum for loans over $870 and up to $2,900, and 15% per annum for loans for over $2,900. Pawnbrokers may charge an additional fee of up to one-fifth of the principal amount of the loan per month for investigating the title, storing, providing security, appraisal, handling, making daily reports to local law enforcement officers and other expenses and costs associated with servicing the pledge. The pawnbroker must hold a pawned item for ninety days from the maturity of the loan before selling the item, provided that ten days before making the sale a notice is mailed to the pledgor indicating that, unless the item is redeemed within ten days, it will be subject to sale. The Indiana Pawnbroking Law also provides for the licensing and bonding of pawnbrokers in that state. Pawnbrokers must maintain detailed permanent records 9 12 concerning pawn transactions and keep those records available for inspection by duly authorized law enforcement authorities. The Indiana Department of Financial Institutions administers the licensing of pawnbrokers and generally regulates Indiana pawnshops and enforces the Indiana Pawnbroking Law. United Kingdom Regulations. Pawnshops in the United Kingdom conduct pawn operations in a manner that is similar to the Company's domestic operations, except that pawnshops generally lend money only on the security of jewelry and gold and silver items. The Consumer Credit Act 1974 in the United Kingdom requires that the pawnbroker notify the customer following the expiration of the six month loan term and before the pledged items are sold by the pawnbroker. Unredeemed items are generally sold at auction nine months after the initial pledge date. For loans exceeding 25 pounds sterling, any amounts received on the sale in excess of the principal amount of the loan, accrued pawn service charge and disposition expenses must be held by the pawnbroker to be reclaimed by the customer. If the pawnbroker is the highest bidder at the auction, it reclaims the merchandise for later resale through its retail operations and may realize gross profit on resale. For loans of 25 pounds sterling or less, unredeemed merchandise is automatically forfeited to the pawnbroker, and the pawnbroker resells such merchandise through its retail operations. Pawnbrokers in the United Kingdom are licensed and regulated by the Office of Fair Trading (the "OFT") pursuant to the Consumer Credit Act 1974. Licenses are valid for five years, subject to possible revocation, suspension, or variance by the OFT. Unlike most state statutes in the United States governing pawnbrokers, the Consumer Credit Act 1974 and the regulations promulgated thereunder do not specify a maximum allowable interest rate chargeable by pawnbrokers in the United Kingdom. Rather, the statute prohibits pawnbrokers from entering into "extortionate credit bargains" with customers. Currently, the Company charges a rate of six percent (6%) per month. Sweden Regulations. The regulatory environment for pawnshops in Sweden is very similar to that in the United Kingdom. Sweden's 1949 statute governing pawnbroking provides that the pawn loan may not mature less than four months from the loan date and that the pawnbroker may not sell unredeemed merchandise less than two months after maturity. The sale must take place at an official auction, and any excess sales proceeds (if at least 10 Swedish Crown) must be held for pick-up by the original customer. Sweden's pawnbroking statute does not specify a maximum allowable interest rate for pawn loans. Instead, it provides for licensing and supervision of pawnshops by the local County Administrative Boards. The pawnshop license has a duration of ten years and specifies the maximum rate chargeable by the pawnbroker and certain other conditions of operation. The maximum rates vary among County Administrative Boards within the range of three percent (3%) to four percent (4%) per month. Other Regulatory Matters, Etc. With respect to gun sales, each of the pawnshops must comply with the Brady Handgun Violence Prevention Act (the "Brady Act"), which took effect on February 28, 1994. The Brady Act imposes a waiting period/background check requirement in connection with sales of handguns by federally licensed firearms dealers. In addition, the Company must continue to comply with the longstanding regulations promulgated by the Department of the Treasury, Bureau of Alcohol, Tobacco and Firearms which require each pawnshop dealing in guns to maintain a permanent written record of all guns received or disposed of. In addition to the state statutes and regulations described above, many of the Company's pawnshops are subject to municipal ordinances, which may require, for example, local licenses or permits and specified recordkeeping procedures, among other things. Each of the Company's pawnshops voluntarily or pursuant to municipal ordinance provides to the police department having jurisdiction copies of all daily transactions involving pawn loans and over-the-counter purchases. These daily transaction reports are designed to provide the local police with a detailed description of the goods involved including serial numbers, if any, and the name and address of the owner obtained from a valid identification card. 10 13 A copy of the transaction ticket is provided to local law enforcement agencies for processing by the National Crime Investigative Computer to determine rightful ownership. Goods held to secure pawn loans or goods purchased which are determined to belong to an owner other than the borrower or seller are subject to recovery by the rightful owner. Historically, the Company has not experienced a significant number of rightful owner claims. In connection with pawnshops acquired by the Company, there is a risk that acquired merchandise may be subject to claims of rightful owners, but historically the company has not experienced a material number of claims of this sort and the claims experienced have not had a material adverse effect on the Company's results of operations. Casualty insurance, including burglary coverage, is maintained for each of the Company's pawnshops, and fidelity coverage is maintained on each of the Company's employees. Management of the Company believes its operations are conducted in compliance with all federal, state and local laws and ordinances applicable to its business. EXECUTIVE OFFICERS The following sets forth, as of March 10, 1995, certain data concerning the executive officers of the Company, all of whom are elected on an annual basis. There is no family relationship between any of the executive officers.
Name Age Position ----------------------- --- ----------------------------------------------------------- Jack R. Daugherty 47 Chairman of the Board and Chief Executive Officer Daniel R. Feehan 44 President, Chief Operating Officer and Director Terry R. Kuntz 48 Executive Vice President - Operations Thomas A. Bessant, Jr. 36 Vice President - Finance and Treasurer D. Eugene Kellough 55 Vice President and Controller Hugh A. Simpson 35 Vice President - General Counsel and Secretary Gregory W. Trees 51 Vice President - Marketing and Merchandising Dale R. Westerfeld 41 Vice President and Chief Financial Officer
Jack R. Daugherty has been Chairman of the Board and Chief Executive Officer of the Company since its founding in 1984. Mr. Daugherty has owned and operated pawnshops since 1971. Daniel R. Feehan has been President and Chief Operating Officer since January 1990. Terry R. Kuntz has served as Executive Vice President - Operations since joining the Company in January 1992. From 1978 until that time, Mr. Kuntz served in various officer positions with Western Auto Supply Company, including Executive Vice President -- Retail Store Division from 1988 to January 1992. Thomas A. Bessant, Jr. joined the Company in May 1993 as Vice President-Finance and Treasurer. Prior to joining the Company, Mr. Bessant was a Senior Manager in the Corporate Finance Consulting Services Group of Arthur Andersen & Co., S. C. in Dallas, Texas from June 1989. Prior to that time, Mr. Bessant was Vice President in the Corporate Banking Division of NCNB Texas, N.A., and its predecessor banking corporations, beginning in 1981. 11 14 D. Eugene Kellough joined the Company in March 1985 and served as Assistant Controller until April 1988, when he was elected as Vice President and Controller of the Company. Mr. Kellough was elected Vice President and Assistant Secretary of the Company in January 1989 and on March 1, 1989 was elected Vice President and Secretary of the Company. In April 1991, Mr. Kellough was elected Vice President and Controller. Hugh A. Simpson joined the Company in December 1990 as Vice President and General Counsel. In April 1991, Mr. Simpson was elected Vice President - General Counsel and Secretary. Prior to joining the Company, Mr. Simpson was a shareholder of the law firm of Law, Snakard & Gambill in Fort Worth, Texas and was with the firm for more than five years. Gregory W. Trees has served as Vice President-Marketing and Merchandising since joining the Company in March 1992. For a period of thirteen years leading up to the time he joined the Company, Mr. Trees served as Vice President of Marketing with Western Auto Supply Company. Dale R. Westerfeld joined the Company in May 1987 and served as Executive Vice President, Chief Financial Officer and Secretary of the Company's principal operating subsidiary. Mr. Westerfeld served as Vice President and Controller of the Company from January 1989 until January 1990, when he was elected Vice President and Chief Financial Officer. ITEM 2. PROPERTIES As of March 10, 1995, the Company owns the real estate and buildings for 16 of its pawnshop locations. Since May 1992, the Company's headquarters have been located in a nine-story building adjacent to downtown Fort Worth, Texas. The Company purchased the building in January 1992. All of the Company's other locations are leased from unaffiliated parties under non-cancelable operating leases. The following table sets forth, as of March 10, 1995, the geographic markets served by the Company and the number of locations in such markets in which it presently operates.
Number of Locations in Area ------------------------------ Texas: Dallas/Ft. Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Houston . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Central/South Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 West Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Rio Grande Valley . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 --- Total Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145 --- Florida: Tampa/St. Petersburg . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Orlando . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Jacksonville . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 --- Total Florida . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 --- Georgia: Atlanta . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Savannah . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 --- Total Georgia . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 ---
12 15 Tennessee: Memphis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Nashville . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 --- Total Tennessee . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 -- Oklahoma: Tulsa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Oklahoma City . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 --- Total Oklahoma . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 --- Louisiana: Baton Rouge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 New Orleans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 --- Total Louisiana . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 --- Indiana: Indianapolis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Fort Wayne . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 --- Total Indiana . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 --- Missouri: Kansas City . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 St. Louis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 --- Total Missouri . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 --- Kentucky: Louisville . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 --- Alabama: Mobile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Birmingham . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 --- Total Alabama . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 North Carolina: Charlotte . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 --- South Carolina: Charleston . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 --- Colorado: Denver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 --- Ohio: Cincinnati . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 --- Total United States . . . . . . . . . . . . . . . . . . . . . . . . . 312 ---
13 16 United Kingdom: London . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 --- Total United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . 33 --- Sweden: Stockholm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 --- Total Sweden . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 --- GRAND TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 355 ===
The Company considers its equipment, furniture and fixtures and owned buildings to be in good condition. The Company has its own construction supervisors who engage local contractors to remodel and upgrade its domestic pawnshop facilities throughout the year. The Company's leases typically require the Company to pay all maintenance costs, insurance costs and property taxes. For additional information concerning the Company's leases see Note 11 of Notes to Consolidated Financial Statements in the Annual Report which is incorporated herein by reference. ITEM 3. LEGAL PROCEEDINGS The Company is a defendant in certain lawsuits encountered in the ordinary course of its business. Certain of these matters are covered to an extent by insurance. In the opinion of management, the resolution of these matters will not have a material adverse effect on the Company's financial position, results of operations or liquidity. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to the Company's security holders during the fourth quarter ended December 31, 1994. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Information contained under the caption "Common Stock Data" in the Annual Report is incorporated herein by reference in response to this Item 5. ITEM 6. SELECTED FINANCIAL DATA Information contained under the caption "Historical Summary of Operating Results and Financial Position" in the Annual Report is incorporated herein by reference in response to this Item 6. 14 17 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Information contained under the caption "Financial Condition and Results of Operations" in the Annual Report is incorporated herein by reference in response to this Item 7. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Financial Statements and Income Statement Quarterly Data for the Company are contained in the Annual Report and are incorporated herein by reference in response to this Item 8. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE The Company had no disagreements on accounting or financial disclosure matters with its independent public accountants to report under this Item 9. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information contained under the caption "Election of Directors" in the Company's Proxy Statement is incorporated herein by reference in response to this Item 10. See Item 1, "Executive Officers" for information concerning executive officers. ITEM 11. EXECUTIVE COMPENSATION Information contained under the caption "Executive Compensation" in the Company's Proxy Statement is incorporated herein by reference in response to this Item 11. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information contained under the caption "Security Ownership of Certain Beneficial Owners and Management" in the Company's Proxy Statement is incorporated herein by reference in response to this Item 12. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information contained under the caption "Executive Compensation" in the Company's Proxy Statement is incorporated herein by reference in response to this Item 13. 15 18 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (1) The following financial statements of the Company and Report of Independent Accountants are contained in the Annual Report and are incorporated herein by reference. CONSOLIDATED FINANCIAL STATEMENTS: Consolidated Balance Sheets as of December 31, 1994 and 1993. Consolidated Income Statements for the years ended December 31, 1994, 1993 and 1992. Consolidated Statements of Stockholders' Equity for the years ended December 31, 1994, 1993 and 1992. Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1993 and 1992. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS REPORT OF INDEPENDENT ACCOUNTANTS (2) The following financial statement schedule of the Company, as listed below, is included herein. Schedule II -- Allowance for Valuation of Inventory. Report of Independent Accountants on Financial Statement Schedule. All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions, are inapplicable, or the required information is included elsewhere in the financial statements. (3) The exhibits filed in response to Item 601 of Regulation S-K are listed in the Exhibit Index on pages 21 through 22. (4) During the fourth quarter ended December 31, 1994, the Company did not file any reports on Form 8-K. 16 19 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 22, 1995. CASH AMERICA INTERNATIONAL, INC. By: /s/ JACK R. DAUGHERTY Jack R. Daugherty Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on March 22, 1995 on behalf of the registrant and in the capacities indicated.
Signature Title Date --------- ----- ---- /s/JACK R. DAUGHERTY Chairman of the Board and Jack R. Daugherty Chief Executive Officer March 22, 1995 (Principal Executive Officer) /s/DANIEL R. FEEHAN President, Chief Operating Daniel R. Feehan Officer and Director March 22, 1995 /s/DALE R. WESTERFELD Vice President and Chief March 22, 1995 Dale R. Westerfeld Financial Officer (Principal Financial and Accounting Officer) /s/MORTON A. COHN Director March 22, 1995 Morton A. Cohn /s/A. R. DIKE Director March 22, 1995 A. R. Dike /s/JAMES H. GREER Director March 22, 1995 James H. Greer
17 20 /s/B. D. HUNTER Director March 22, 1995 B. D. Hunter /s/CLIFTON H. MORRIS, JR. Director March 22, 1995 Clifton H. Morris, Jr. /s/CARL P. MOTHERAL Director March 22, 1995 Carl P. Motheral /s/SAMUEL W. RIZZO Director March 22, 1995 Samuel W. Rizzo /s/R. L. WALTRIP Director March 22, 1995 R. L. Waltrip
18 21 REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE To the Board of Directors and Stockholders Cash America International, Inc. Our report on the consolidated financial statements of Cash America International, Inc. and Subsidiaries has been incorporated by reference in this Form 10-K from page 26 of the 1994 Annual Report to Stockholders of Cash America International, Inc. In connection with our audits of such financial statements, we have also audited the related financial statement schedule listed on page 16 of this Form 10-K. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein. COOPERS & LYBRAND L.L.P. Fort Worth, Texas January 27, 1995 19 22 CASH AMERICA INTERNATIONAL, INC. SCHEDULE II--ALLOWANCE FOR VALUATION OF INVENTORY For the Three Years Ended December 31, 1994
Additions --------------------------- Balance at Charged Charged Balance Beginning to to at End Description of Period Expense Other Deductions(a) of Period ----------- --------- ------- ----- ------------- --------- ($ in thousands) Year Ended: December 31, 1994 . . . . . . . $2,120 $2,371 $ -0- $1,977 $2,514 ====== ====== ===== ====== ====== December 31, 1993 . . . . . . . $1,898 $2,398 $ -0- $2,176 $2,120 ====== ====== ===== ====== ====== December 31, 1992 . . . . . . . $1,490 $1,553 $ -0- $1,145 $1,898 ====== ====== ===== ====== ======
_______________________________ (a) Deducted from allowance for write-off or other disposition of inventory. 20 23 EXHIBIT INDEX The following documents are filed as a part of this report. Those exhibits previously filed and incorporated herein by reference are identified below. Exhibits not required for this report have been omitted.
Exhibit Description ------- ----------- 3.1 --Articles of Incorporation of Cash America Investments, Inc. filed in the office of the Secretary of State of Texas on October 4, 1984.(a) (Exhibit 3.1) 3.2 --Articles of Amendment to the Articles of Incorporation of Cash America Investments, Inc. filed in the office of the Secretary of State of Texas on October 26, 1984.(a) (Exhibits 3.2) 3.3 --Articles of Amendment to the Articles of Incorporation of Cash America Investments, Inc. filed in the office of the Secretary of State of Texas on September 24, 1986.(a) (Exhibit 3.3) 3.4 --Articles of Amendment to the Articles of Incorporation of Cash America Investments, Inc. filed in the office of the Secretary of State of Texas on September 30, 1987.(b) (Exhibit 3.4) 3.5 --Articles of Amendment to the Articles of Incorporation of Cash America Investments, Inc. filed in the office of the Secretary of State of Texas on April 23, 1992 to change the Company's name to "Cash America International, Inc." (c) (Exhibit 3.5) 3.6 --Articles of Amendment to the Articles of Incorporation of Cash America International, Inc. filed in Office of the Secretary of State of Texas on May 21, 1993. (d) (Exhibit 3.6) 3.7 --Bylaws of Cash America International, Inc.(e) (Exhibit 3.5) 3.8 --Amendment to Bylaws of Cash America International, Inc. dated effective September 26, 1990.(f) (Exhibit 3.6) 3.9 --Amendment to Bylaws of Cash America International, Inc. dated effective April 22, 1992.(c) Exhibit 3.8) 4.1 --Form of Stock Certificate.(a) (Exhibit 4.1) 4.1a --Form of Stock Certificate.(f) (Exhibit 4.1a) 4.1b --Form of Stock Certificate.(c) (Exhibit 4.1b) 10.1 --1987 Stock Option Plan (with Stock Appreciation Rights) for Cash America International, Inc.(g) (Exhibit 4.1) 10.2 --Cash America International, Inc. Employee Monthly Stock Investment Plan.(h) (Exhibit 10.1) 10.3 --1989 Non-Employee Director Stock Option Plan.(i) (Exhibit 10.47) 10.4 --1989 Key Employee Stock Option Plan.(i) (Exhibit 10.48) 10.5 --1994 Long-Term Incentive Plan. 10.6 --Executive Employment Agreements between the Company and Messrs. Daugherty and Feehan, each dated April 25, 1990.(j) (Exhibit 10.48) 10.7 --Consultation Agreements between the Company and Messrs. Cohn, Dike, Greer, Hunter, Morris, Motheral, Rizzo and Waltrip, each dated April 25, 1990.(j) (Exhibit 10.49)
21 24 10.8 --Executive Employment Agreement between the Company and Terry R. Kuntz dated January 15, 1992.(k) (Exhibit 10.52) 10.9 --Executive Employment Agreement between the Company and Gregory W. Trees dated March 30, 1992. 10.10 --Note Agreement between the Company and Teachers Insurance and Annuity Association of America dated as of May 6, 1993.(l) (Exhibit 10.1) 10.11 --First Supplement to Note Agreement between the Company and Teachers Insurance and Annuity Association of America dated as of September 20, 1994. 10.12 --Senior Revolving Credit Facility Agreement among the Company and NationsBank of Texas, N.A., Bank One, Texas, N.A., First Interstate Bank of Texas, N.A., Daiwa Bank, Ltd., and Texas Commerce Bank, National Association, dated June 29, 1993.(m) (Exhibit 10.1) 10.13 --First Amendment (June 7, 1994), Second Amendment (September 21, 1994), and Third Amendment (March 10, 1995) to Senior Revolving Credit Facility Agreement. 13 --1994 Annual Report to Stockholders of the Company and 1995 Proxy Statement. 21 --Subsidiaries of Cash America International, Inc. 23 --Consent of Coopers & Lybrand L.L.P. 27 --Financial Data Schedule. ------------------------
Certain Exhibits are incorporated by reference to the Exhibits shown in parenthesis contained in the Company's following filings with the Securities and Exchange Commission: (a) Registration Statement Form S-1, File No. 33-10752. (b) Amendment No. 1 to its Registration Statement on Form S-4, File No. 33-17275. (c) Annual Report on Form 10-K for the year ended December 31, 1992. (d) Annual Report on Form 10-K for the year ended December 31, 1993. (e) Post-Effective Amendment No. 1 to its Registration Statement on Form S-4, File No. 33-17275. (f) Annual Report on Form 10-K for the year ended December 31, 1990. (g) Registration Statement on Form S-8, File No. 33-29658. (h) Post-Effective Amendment No. 1 to its Registration Statement on Form S-8, File No. 33-18150. (i) Annual Report on Form 10-K for the year ended December 31, 1989. (j) Post-Effective Amendment No. 4 to its Registration Statement on Form S-4, File No. 33-17275. (k) Annual Report on Form 10-K for the year ended December 31, 1991. (l) Quarterly Report on Form 10-Q for the quarter ended March 31, 1993. (m) Quarterly Report on Form 10-Q for the quarter ended June 30, 1993. 22 EX-10.5 2 LONG TERM INCENTIVE PLAN 1 EXHIBIT 10.5 2 CASH AMERICA INTERNATIONAL, INC. 1994 LONG-TERM INCENTIVE PLAN SECTION 1. PURPOSE The purpose of the Cash America International, Inc. 1994 Long-Term Incentive Plan (the "Plan") is to promote the interests of the Company and its shareholders by (i) attracting and retaining executive personnel and other key employees of outstanding ability; (ii) motivating executive personnel and other key employees, by means of performance-related incentives, to achieve longer-range performance goals; and (iii) enabling such employees to participate in the long-term growth and financial success of the Company. SECTION 2. DEFINITIONS "Act" shall mean the Securities Exchange Act of 1934, as amended. "Affiliate" shall mean any corporation or other entity which is not a Subsidiary but as to which the Company possesses a direct or indirect ownership interest and has representation on the board of directors or any similar governing body. "Award" shall mean a grant or award under Section 6 through 10, inclusive, of the Plan, as evidenced in a written document delivered to a Participant as provided on Section 11(b). "Board of Directors" shall mean the Board of Directors of the Company. "Change in Control" shall be deemed to have occurred if (i) any person(s) (as such term is used in Sections 13(d) and 14(d)2 of the Act) or party becomes the beneficial owner (as defined in Rule 13d-3 under the Act), directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the Company's then outstanding securities, or (ii) the stockholders of the Company approve a merger, consolidation, sale or disposition of all or substantially all of the Company's assets or plan of liquidation. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. "Committee" shall mean the Executive Compensation Committee of the Board of Directors. The committee shall be made up of at least three outside directors, and only outside directors may serve on the Committee. The outside director cannot be a former officer of the company or a former employee receiving deferred compensation. The director cannot be an employee or 5% shareholder of another company that receives more than 5% of its gross receipts or $60,000 worth of business from the Company, whichever is less. The director cannot receive any renumeration, other than directors' fees, from the Company or any Subsidiary, nor can the director beneficially own more than 50% of an entity that receives any renumeration from the Company or any Subsidiary. "Common Stock" or "Stock" shall mean the Common Stock of the Company. "Company" shall mean Cash America International, Inc. -1- 3 "Designated Beneficiary" shall mean the beneficiary designated by the Participant, in a manner determined by the Committee, to receive amounts due the Participant in the event of the Participant's death. In the absence of an effective designation by the Participant, Designated Beneficiary shall mean the Participant's estate. "Employee" shall mean any key employee of the Employer. "Employer" shall mean the Company and any Subsidiary or Affiliate. "Fair Market Value" shall mean the closing price of the Stock on the last day prior to the date in question on which the Stock was traded. "Fiscal Year" shall mean the fiscal year of the Company. "Incentive Stock Option" shall mean a stock option granted under Section 6 which is intended to meet the requirements of Section 422 of the Code. "Non-Stock Based Incentive Compensation" refers to incentive compensation whose value is not based in whole or in part on the value of Common Stock. "Nonqualified Stock Option" shall mean a stock option granted under Section 6 which is not intended to be an Incentive Stock Option. "Option" shall mean an Incentive Stock Option or a Nonqualified Stock Option. "Participant" shall mean an individual who is selected by the Committee to receive an Award under the Plan. "Payment Value" shall mean the dollar amount assigned to a Performance Share which shall be equal to the Fair Market Value of the Common Stock on the day of the Committee's determination under Section 8 (c)(1) with respect to the applicable Performance Cycle. "Performance Cycle" or "Cycle" shall mean the period of years selected by the Committee during which the performance is measured for the purpose of determining the extent to which an award of Performance Shares has been earned. "Performance Goals" shall mean the objectives established by the Committee for a Performance Cycle, for the purpose of determining the extent to which Performance Shares which have been contingently awarded for such Cycle are earned. "Performance Share" shall mean an award granted pursuant to Section 8 of the Plan expressed as a share of Common Stock. "Restricted Period" shall mean the period of years selected by the Committee during which a grant of Restricted Stock or Restricted Stock Units may be forfeited to the Company. "Restricted Stock" shall mean shares of Common Stock contingently granted to a Participant under Section 9 of the Plan. -2- 4 "Restricted Stock Unit" shall mean a fixed or variable dollar denominated unit contingently awarded under Section 9 of the Plan. "Stock Appreciation Right" shall mean a right granted under Section 7. "Stock Exchange" shall mean the national securities exchange on which the Common Stock is traded as of the particular time in question. "Stock Unit Award" shall mean an award of Common Stock or units granted under Section 10. "Subsidiary" shall mean any business entity in which the Company possesses directly or indirectly fifty percent (50%) or more of the total combined voting power. SECTION 3. ADMINISTRATION The Plan shall be administered by the Committee. The Committee shall have sole and complete authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the operation of the Plan as it shall from time to time deem advisable, and to interpret the terms and provisions of the Plan. The Committee may delegate to one or more executive officers of the Company the power to make Awards to Participants who are not executive officers or directors of the Company, provided the Committee shall fix the maximum amount of such Awards for the group and a maximum for any one Participant. The Committee's decisions shall be binding upon all persons, including the Company, stockholders, an Employer, Employees, Participants and Designated Beneficiaries. SECTION 4. ELIGIBILITY All Employees and non-employee consultants and advisors (other than members of the Committee) who, in the opinion of the Committee, have the capacity for contributing in a substantial measure to the successful performance of the Company are eligible to be Participants in the Plan. SECTION 5. MAXIMUM AMOUNT AVAILABLE FOR AWARDS (a) The maximum number of shares of Stock in respect of which Awards may be made under the Plan shall be a total of 1,400,000 shares of Common Stock. In addition, no Employee may be granted Options for more than 700,000 shares of Common Stock in the aggregate during the ten-year period beginning on the effective date of the Plan. Shares of Common Stock may be made available from the authorized but unissued shares of the Company or from shares reacquired by the Company, including shares purchased in the open market. In the event that (i) an Option or Stock Appreciation Right is settled for cash or expires or is terminated unexercised as to any shares of Common Stock covered thereby, or (ii) any Award in respect of shares is cancelled or forfeited for any reason under the Plan without the delivery of shares of Common Stock, such shares shall thereafter be again available for award pursuant to the Plan. In the event that any Option or other Award granted hereunder is exercised through the delivery of shares of Common Stock, the number of shares of Common Stock available for Awards under the Plan shall be increased by the number of shares so surrendered, to the extent permissible under Rule 16b-3, as promulgated under the Act and as interpreted from time to time by the Securities and Exchange Commission or its staff. -3- 5 (b) In the event that the Committee shall determine that any stock dividend, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, exchange of shares, warrants or rights offering to purchase Common Stock at a price substantially below fair market value, or other similar corporate event affects the Common Stock such that an adjustment is required in order to preserve the benefits or potential benefits intended to be made available under this Plan, then the Committee shall adjust appropriately any or all of (1) the number and kind of shares which thereafter may be awarded or optioned and sold or made the subject of Stock Appreciation Rights under the Plan, (2) the number and kind of shares subject of Stock Options and other Awards, and (3) the grant, exercise or conversion price with respect to any of the foregoing and/or, if deemed appropriate, make provision for cash payment to a Participant or a person who has an outstanding Option or other Award; provided, however, that the number of shares subject to any Option or other Award shall always be a whole number. SECTION 6. STOCK OPTIONS (a) Grant. Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the Employees to whom Options shall be granted, the number of shares to be covered by each Option, the option price therefor and the conditions and limitations applicable to the exercise of the Option. The Committee shall have the authority to grant Incentive Stock Options, or to grant Nonqualified Stock Options, or to grant both types of options. In the case of Incentive Stock Options, the terms and conditions of such grants shall be subject to and comply with such rules as may be prescribed by Section 422 of the Code, as from time to time amended, and any implementing regulations. (b) Option Price. The Committee shall, in its discretion, establish the option price at the time each Option is granted, which for Incentive Stock Options shall not be less than 100% of the Fair Market Value of the Common Stock on the date of grant. (c) Exercise. (1) Each Option shall be exercisable at such times and subject to such terms and conditions as the Committee may, in its sole discretion, specify in the applicable Award or thereafter; provided, however, that in no event may any Option granted hereunder be exercisable after the expiration of ten years from the date of such grant. The Committee may impose such conditions with respect to the exercise of Options, including without limitation, any relating to the application of federal or state securities laws, as it may deem necessary or advisable. (2) No shares shall be delivered pursuant to any exercise of an Option until payment in full of the option price therefor is received by the Company. Such payment may be made in cash, or its equivalent, or, if and to the extent permitted by the Committee, by exchanging shares of Common Stock owned by the optionee (which are not the subject of any pledge or other security interest), or by a combination of the foregoing, provided that the combined value of all cash and cash equivalents and the Fair Market Value of any such Common Stock so tendered to the Company, valued as of the date of such tender, is at least equal to such option price. -4- 6 (3) The Company, in its sole discretion, may lend money to an Employee, guarantee a loan to an Employee or otherwise assist an Employee to obtain the cash necessary to exercise all or any portion of an Option granted under the Plan. SECTION 7. STOCK APPRECIATION RIGHTS (a) The Committee may, with sole and complete authority, grant Stock Appreciation Rights in tandem with an Option, in addition to an Option, or freestanding and unrelated to an Option. Stock Appreciation Rights granted in tandem with or in addition to an Option may be granted either at the same time as the Option or at a later time. Stock Appreciation Rights shall not be exercisable earlier than six months after grant, shall not be exercisable after the expiration of ten years from the date of grant and shall have an exercise price of not less than 100% of the Fair Market Value of the Common Stock on the date of grant. (b) A Stock Appreciation Right shall entitle the Participant to receive from the Company an amount equal to the excess of the Fair Market Value of a share of Common Stock on the exercise of the Stock Appreciation Right over the exercise price thereof, provided that the Committee may for administrative convenience determine that, for any Stock Appreciation Right which is not related to an Incentive Stock Option which Stock Appreciation Right can only be exercised during limited periods of time in order to satisfy the conditions of certain rules of the Securities and Exchange Commission, the exercise of any Stock Appreciation Right for cash during such limited period shall be deemed to occur for all purposes hereunder on the day during such limited period on which the Fair Market Value of the Stock is the highest. Any such determination by the Committee may be changed by the Committee from time to time and may govern the exercise of Stock Appreciation Rights granted prior to such determination as well as Stock Appreciation Rights thereafter granted. The Committee shall determine upon the exercise of a Stock Appreciation Right whether such Stock Appreciation Right shall be settled in cash, shares of Common Stock, Stock Options, or a combination thereof. (c) A Limited SAR related to an Option which can only be exercised during limited periods following a Change in Control of the Company, may entitle the Participant to receive an amount based upon the highest price paid or offered for Common Stock in any transaction relating to the Change in Control or paid during the thirty-day period immediately preceding the occurrence of the Change in Control in any transaction reported on the Stock Exchange. SECTION 8. PERFORMANCE SHARES (a) The Committee shall have sole and complete authority to determine the Employees who shall receive Performance Shares, the number of such shares for each Performance Cycle, the Performance Goals on which each Award shall be contingent, the duration of each Performance Cycle, and the value of each Performance Share. There may be more than one Performance Cycle in existence at any one time, and the duration of Performance Cycle may differ from each other. (b) The Committee shall establish Performance Goals for each Cycle on the basis of such criteria and to accomplish such objectives as the Committee may from time to time select. During any Cycle, the Committee may adjust the Performance Goals for such Cycle as it deems equitable in recognition of unusual or non-recurring events affecting the Company, changes in applicable tax laws or accounting principles, or such other factors as the Committee may determine. -5- 7 (c) (1) As soon as practicable after the end of a Performance Cycle, the Committee shall determine the number of Performance Shares which have been earned on the basis of performance in relation to the established Performance Goals. (2) Payment Values of earned Performance Shares shall be distributed to the Participant or, if the Participant has died, to the Participant's Designated Beneficiary, as soon as practicable after the expiration of the Performance Cycle and the Committee's determination under paragraph (1), above. The Committee shall determine whether Payment Values are to be distributed in the form of cash or shares of Common Stock. SECTION 9. RESTRICTED STOCK AND RESTRICTED STOCK UNITS (a) Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the Employees to whom shares of Restricted Stock and Restricted Stock Units shall be granted, the number of shares of Restricted Stock and the number of Restricted Stock Units to be granted to each Participant, the duration of the Restricted Period during which, and the conditions under which, the Restricted Stock and Restricted Stock Units may be forfeited to the Company, and the other terms and conditions of such awards. The Restricted Period may be shortened, lengthened or waived by the Committee at any time in its discretion with respect to one or more Participants or Awards outstanding. (b) Shares of Restricted Stock and Restricted Stock Units may not be sold, assigned, transferred, pledged or otherwise encumbered, except as herein provided, during the Restricted Period. Certificates issued in respect of shares of Restricted Stock shall be registered in the name of the Participant and deposited by such Participant, together with a stock power endorsed in blank, with the Company. At the expiration of the Restricted Period, the Company shall deliver such certificates to the Participant or the Participant's legal representative, except to the extent such Restricted Stock or Restricted Stock Units have been forfeited to the Company under the terms and conditions of the Award. Payment for Restricted Stock Units shall be made to the Company in cash and/or shares of Common Stock, as determined at the sole discretion of the Committee. SECTION 10. OTHER STOCK BASED AWARDS (a) In addition to granting Options, Stock Appreciation Rights, Performance Shares, Restricted Stock and Restricted Stock Units, the Committee shall have authority to grant to Participants Stock Unit Awards which can be in the form of Common Stock or units, the value of which is based, in whole or in part, on the value of Common Stock. Subject to the provisions of the Plan, including Section 11 (b) below, Stock Unit Awards shall be subject to such terms, restrictions, conditions, vesting requirements and payment rules (all of which are sometimes hereinafter collectively referred to as "rules") as the Committee may determine in its sole and complete discretion at the time of grant. The rules need not be identical for each Stock Unit Award. (b) In the sole and complete discretion of the Committee, a Stock Unit Award may be granted subject to the following rules: (1) Any shares of Common Stock which are part of a Stock Unit Award may not be assigned, sold, transferred, pledged or otherwise encumbered prior to the date on which the shares are issued or, if later, the date provided by the Committee at the time of grant of the Stock Unit Award. -6- 8 (2) Stock Unit Awards may provide for the payment of cash consideration by the person to whom such Award is granted or provide that the Award, and any Common Stock to be issued in connection therewith, if applicable, shall be delivered without the payment of cash consideration, provided that for any Common Stock to be purchased in connection with a Stock Unit Award the purchase price shall be at least 50% of the Fair Market Value of such Common Stock on the date such Award is granted. (3) Stock Unit Awards may relate in whole or in part to certain performance criteria established by the Committee at the time of grant. (4) Stock Unit Awards may provide for deferred payment schedules and/or vesting over a specified period of employment. (5) In such circumstances as the Committee may deem advisable, the Committee may waive or otherwise remove, in whole or in part, any restriction or limitation to which a Stock Unit Award was made subject at the time of grant. (c) In the sole and complete discretion of the Committee, an Award, whether made as a Stock Unit Award under this Section 10 or as an Award granted pursuant to Sections 6 through 9, may provide the Participant with (i) dividends or dividend equivalents (payable on a current or deferred basis) and (ii) cash payments in lieu of or in addition to an Award. SECTION 11. GENERAL PROVISIONS (a) Withholding. The Employer shall have the right to deduct from all amounts paid to a Participant in cash (whether under this Plan or otherwise) any taxes required by law to be withheld in respect of Awards under this Plan. In the case of payments of incentive awards in the form of Common Stock, the Employer may require the Participant to pay to the Employer the amount of any taxes required to be withheld with respect to such Common Stock. However, the Participant may pay all or any portion of the taxes required to be withheld by the Employer or paid by the Participant with respect to such Common Stock by electing to have the Employer withhold shares of Common Stock, or by delivering previously owned shares of Common Stock, having a Fair Market Value equal to the amount required to be withheld or paid. The Participant must make the foregoing election on or before the date that the amount of tax to be withheld is determined ("Tax Date"). Any such election is irrevocable and subject to disapproval by the Committee. If the Participant is subject to the short-swing profits recapture provisions of Section 16(b) of the Exchange Act, any such election shall be subject to the following additional restrictions: (i) Such election may not be made within six months of the grant of the Award, provided that this limitation shall not apply in the event of death or disability, and (ii) Such election must be made either six months or more prior to the Tax Date or in a Window Period (as hereinafter defined). Where the Tax Date in respect of the exercise of all or any portion of an Option is deferred until after such exercise and the Participant elects Common Stock withholding, the full amount of shares of Common Stock will be issued or transferred to the Participant upon exercise of the Option, but the Participant shall be unconditionally obligated to tender back to the Employer on the Tax Date the number of shares of Common Stock necessary to discharge with respect to such Option exercise the greater of (i) the Employer's -7- 9 withholding obligation and (ii) all or any portion of the holder's federal and state tax obligation attributable to the Option exercise. A "Window Period" is any period commencing on the third business day following the Company's release of a quarterly or annual summary statement of sales and earnings and ending on the twelfth business day following such release. (b) Awards. Each Award hereunder shall be evidenced in writing, delivered to the Participant and shall specify the terms and conditions thereof and any rules applicable thereto, including but not limited to the effect on such Award of the death, retirement or other termination of employment of the Participant and the effect thereon, if any, of a Change in Control of the Company. (c) Nontransferability. No Award shall be assignable or transferable except by will or the laws of descent and distribution, and no right or interest of any Participant shall be subject to any lien, obligation or liability of the Participant. Notwithstanding the above, in the discretion of the Committee, awards may be transferable pursuant to a Qualified Domestic Relations Order ("QDRO"), as determined by the Committee or its designee. (d) No Right to Employment. No person shall have any claim or right to be granted an Award, and the grant of an Award shall not be construed as giving a Participant the right to be retained in the employ of the Employer. Further, the Employer expressly reserves the right at any time to dismiss a Participant free from any liability, or any claim under the Plan, except as provided herein or in any agreement entered into with respect to an Award. (e) No Rights as Stockholder. Subject to the provisions of the applicable Award, no Participant or Designated Beneficiary shall have any rights as a stockholder with respect to any shares of Common Stock to be distributed under the Plan until he or she has become the holder thereof. Notwithstanding the foregoing, in connection with each grant of Restricted Stock or Stock Unit Award hereunder, the applicable Award shall specify if and to what extent the Participant shall not be entitled to the rights of a stockholder in respect of such Restricted Stock or Stock Unit Award. (f) Construction of the Plan. The validity, construction, interpretation, administration and effect of the Plan and of its rules and regulations, and rights relating to the Plan, shall be determined solely in accordance with the laws of the State of Texas. (g) Effective Date. Subject to the approval of the stockholders of the Company, the Plan shall be effective on April 27, 1994. No Options or Awards may be granted under the Plan after April 26, 2004; however, all previous awards made that have not expired under their original terms at the time the Plan expires will remain outstanding. -8- 10 (h) Amendment of Plan. The Board of Directors may amend, suspend or terminate the Plan or any portion thereof at any time, provided that no amendment shall be made without stockholder approval if such approval is necessary to comply with any tax or regulatory requirement, including for these purposes any approval requirement which is a prerequisite for exemptive relief under Section 16 (b) of the Act. Notwithstanding anything to the contrary contained herein, the Committee may amend the Plan in such manner as may be necessary so as to have the Plan conform with local rules and regulations. (i) Amendment of Award. The Committee may amend, modify or terminate any outstanding Award without the Participant's consent at any time prior to payment or exercise in any manner not inconsistent with the terms of the Plan, including without limitation, (i) to change the date or dates as of which (A) an Option or Stock Appreciation Right becomes exercisable; (B) a Performance Share is deemed earned; (C) Restricted Stock becomes nonforfeitable; or (ii) to cancel and reissue an Award under such different terms and conditions as it determines appropriate. (j) Change in Control In order to preserve a Participant's rights under an Award in the event of a Change in Control of the Company, the Committee in its discretion may, at the time an Award is made or any time thereafter, take one or more of the following actions: (i) provide for the acceleration of any time period relating to the exercise of the Award, (ii) provide for the purchase of the Award upon the Participant's request for an amount of cash or other property that could have been received upon the exercise or realization of the Award had the Award been currently exercisable or payable, (iii) adjust the terms of the Award in a manner determined by the Committee to reflect the Change in Control, (iv) cause the Award to be assumed, or new rights substituted therefor, by another entity, or (v) make such other provision as the Committee may consider equitable and in the best interests of the Company. -9- EX-10.9 3 EXECUTIVE EMPLOYMENT AGREEMENT 1 EXHIBIT 10.9 2 EXECUTIVE EMPLOYMENT AGREEMENT THIS AGREEMENT, dated effective March 30, 1992, is made and entered into by and between CASH AMERICA INTERNATIONAL, INC., a Texas corporation, having an office at 1600 West Seventh Street, Fort Worth, Texas 76102 (hereinafter referred to as "Employer") and GREGORY W. TREES, an executive employee of Employer (hereinafter referred to as "Executive"). WHEREAS, Executive has agreed to serve as an employee of Employer pursuant to the terms of this Agreement; and WHEREAS, Employer desires that Executive serve as an employee of Employer to provide the necessary leadership and senior management skills that are important to the success of Employer. Employer believes that retaining Executive's services as an employee of Employer and the benefits of his business experience are of material importance to Employer and Employer's shareholders. NOW, THEREFORE, in consideration of Executive's employment by Employer and the mutual promises and covenants contained herein, the receipt and sufficiency of which consideration is hereby acknowledged, Employer and Executive intend by this Agreement to specify the terms and conditions of Executive's employment relationship with Employer and the post-employment obligations of Executive. 1. General Duties of Employer and Executive: 1.1. Employer agrees to employ Executive and Executive agrees to accept employment by Employer and to serve Employer in an executive capacity upon the terms and conditions set forth herein. The duties and responsibilities of Executive shall include those described for the particular position held by Executive while employed hereunder in the By-Laws of Employer or other documents of Employer, and shall also include such other or additional duties as may from time to time be assigned to Executive by the Board of Directors of Employer or any duly authorized committee thereof or an authorized officer of Employer. The executive capacity that Executive shall hold during the term hereof shall be that position as determined by the Board of Directors, or any duly authorized committee thereof, from time to time in its sole discretion. While employed hereunder, the initial position that Executive shall hold (until such time as such position may be changed as aforesaid) shall be the position of Vice President - Marketing/Merchandising. 1.2. While employed hereunder, Executive shall obey the lawful directions of the Board of Directors of Employer, or any duly authorized committee thereof, or authorized officers of Employer and shall use his best efforts to promote the interests of Employer and to maintain and to promote the reputation thereof. While employed hereunder, Executive shall 3 devote his time, efforts, skills and attention to the affairs of Employer in order that he shall faithfully perform his duties and obligations hereunder and such as may be assigned to or vested in him by the Board of Directors of Employer, or any duly authorized committee thereof, or any duly authorized officer of Employer. 1.3. During the term of this Agreement, Executive may from time to time engage in any businesses or activities that do not compete directly with Employer and any of its subsidiaries, provided that such businesses or activities do not materially interfere with his performance of the duties assigned to him in compliance with this Agreement by the Board of Directors of Employer or any duly authorized committee thereof or an authorized officer of Employer. In any event, Executive is permitted to (i) invest his personal assets as a passive investor in such form or manner as will not contravene the best interests of Employer, (ii) participate in various charitable efforts, or (iii) serve as a director or officer of any other entity or organization when such position has previously been approved by the Board of Directors of Employer. 2. Compensation and Benefits: 2.1. As compensation for services to Employer, Employer shall pay to Executive during the term of this Agreement a salary at an annual rate to be fixed from time to time by the Board of Directors of Employer or any duly authorized committee thereof, which annual rate shall in no event be less than $125,000 per annum while Executive is employed hereunder. The salary shall be payable in equal bi-weekly installments, subject only to such payroll and withholding deductions as may be required by law and other deductions applied generally to employees of Employer for insurance and other employee benefit plans. The Board of Directors or any authorized committee or officer of Employer shall review Executive's overall annual compensation at least annually, with a view to ascertaining the adequacy thereof and such compensation may be increased by the Board of Directors from time to time by an amount that in the opinion of the Board of Directors is justified by Executive's performance. 2.2. Upon Executive's furnishing to Employer customary and reasonable documentary support (such as receipts or paid bills) evidencing costs and expenses incurred by him in the performance of his services and duties hereunder (including, without limitation, travel, and entertainment expenses) and containing sufficient information to establish the amount, date, place and essential character of the expenditure, Executive shall be reimbursed for such costs and expenses in accordance with Employer's normal expense reimbursement policy. Executive shall be entitled to participate in all insurance, stock option and other stock programs and compensation plans and such other benefits plans or programs as may be from time to time specifically adopted and approved by Employer for Executive. Employer shall provide Executive with an automobile allowance in accordance with the policies from time-to-time established by Employer. -2- 4 2.3. As long as this Agreement is in effect, Employer shall maintain hospitalization and medical insurance coverage on Executive as may from to time be specifically approved and adopted by Employer for its officers generally. 2.4. Executive shall be eligible to receive cash bonuses or other incentive compensation as may be determined by the Board of Directors of Employer from time to time. As long as this Agreement is in effect, Employer shall maintain an Executive Bonus Program, and Executive shall be eligible to participate therein in accordance with Employer's regular practices with its senior officers. 2.5. Executive shall have the right to participate in any additional compensation, benefit, life insurance, hospitalization, medical services or other plan or arrangement of Employer now or hereafter existing for the benefit of executives of Employer. 2.6. Executive shall be entitled to such vacation (in no event less than three weeks per year), holiday, and (subject to the provisions of Section 6.2 hereof) other paid or unpaid leave of absence as consistent with Employer's normal policies or as otherwise approved by the Board of Directors. 3. Preservation of Business; Fiduciary Responsibility: Executive shall use his best efforts to preserve the business and organization of Employer, to keep available to Employer the services of present employees and to preserve the business relations of Employer with suppliers, distributors, customers and others. Executive shall not commit any act, or in any way assist others to commit any act, that would injure Employer. So long as Executive is employed by the Company, Executive shall observe and fulfill proper standards of fiduciary responsibility attendant upon his service and office. 4. Executive's Obligation to Refrain From Using or Disclosing Information: 4.1. As part of Executive's fiduciary duties to Employer, Executive agrees, both during the term of this Agreement and thereafter, to protect, preserve the confidentiality of and safeguard Employer's secret or confidential information, knowledge, ideas, concepts, improvements, discoveries and inventions, and, except as may be expressly required by Employer, Executive shall not, either during his employment by Employer or thereafter, directly or indirectly, use for his own benefit or for the benefit of another, or disclose to another, any of such information, ideas, concepts, improvements, discoveries or inventions. 4.2. Upon termination of his employment with Employer, or at any other time upon request, Executive shall immediately deliver to Employer all documents embodying any of Employer's secret or confidential information, ideas, concepts, improvements, discoveries and inventions. -3- 5 5. Initial Term; Extensions of the Term: 5.1. The initial term of this Agreement shall commence on the effective date hereof and shall end on March 31, 1995. 5.2. The term of this Agreement shall automatically be extended for two additional one-year periods commencing on April 1, 1995 and on April 1, 1996, unless either Executive or Employer gives written notice to the other on or before December 31, 1994 or December 31, 1995 of his or its intention not to extend this Agreement. 6. Termination other than by Expiration of the Term: Employer or Executive may terminate Executive's employment under this Agreement at any time, but only on the following terms: 6.1. Employer may terminate Executive's employment under this Agreement at any time, without prior notice, for "due cause" upon the good faith determination by the Board of Directors of Employer that "due cause" existed for the termination of the employment relationship. As used herein, the term "due cause" shall mean any of the following events: (i) any intentional misapplication by Executive of Employer's funds, or any other act of dishonesty committed by Executive; or (ii) Executive's conviction of a crime involving moral turpitude; or (iii) Executive's use or possession of any controlled substance or abuse of alcoholic beverages; or (iv) any other action by the Executive involving willful and deliberate malfeasance or gross negligence in the performance of Executive's duties. 6.2. In the event Executive is incapacitated by accident, sickness, or otherwise so as to render Executive mentally or physically incapable of performing the services required under Section 1 of this Agreement for a period of one hundred eighty (180) consecutive business days, and such incapacity is confirmed by the written opinion of two (2) practicing medical doctors licensed by and in good standing in the state in which they maintain offices for the practice of medicine, upon the expiration of such period or at any time reasonably thereafter, or in the event of Executive's death, Employer may terminate Executive's employment under this Agreement upon giving Executive or his legal representative written notice at least thirty (30) days' prior to the termination date. Executive agrees, after written notice by the Board of Directors of Employer or a duly authorized committee or officer of Employer, to submit to examinations by such practicing medical doctors selected by the Board of Directors of Employer or a duly authorized committee or officer of Employer. -4- 6 6.3. Employer may terminate Executive's employment under this Agreement at any time for any reason whatsoever, even without "due cause," by giving a written notice of termination to Executive, in which case the employment relationship shall terminate immediately upon the giving of such notice. 7. Effect of Termination: 7.1. In the event the employment relationship is terminated (a) by Employer for "due cause" pursuant to Section 6.1 hereof, or (b) by Executive breaching this Agreement by refusing to continue his employment, all compensation and benefits shall cease as of the date of termination (it being specifically agreed that Executive shall not be entitled to any bonuses not yet paid at the date of termination), other than: (i) those benefits that are provided by retirement and benefit plans and programs specifically adopted and approved by Employer for Executive that are earned and vested by the date of termination, and (ii) Executive's pro rata annual salary plus all earned and vested bonuses through the date of termination. Executive's right to exercise stock options and Executive's rights in other stock plans, if any, shall remain governed by the terms and conditions of the appropriate stock plan. 7.2. If Executive's employment relationship is terminated pursuant to Section 6.2 hereof due to Executive's incapacity or death, Executive (or, in the event of Executive's death, Executive's legal representative) will be entitled to those benefits that are provided by retirement and benefits plans and programs specifically adopted and approved by Employer for Executive that are earned and vested at the date of termination and, even though no longer employed by Employer, shall continue to receive the salary compensation (payable in the manner as prescribed in the second sentence of Section 2.1) for one (1) year following the date of termination. Executive (or, in the event of Executive's death, Executive's legal representative) shall not, however, be entitled to any bonuses not yet paid at the date of the termination of employment. Executive's right to exercise stock options and Executive's rights in other stock plans, if any, shall remain governed by the terms and conditions of the appropriate stock plan. 7.3. If Employer (i) terminates the employment of Executive other than pursuant to Section 6.1 hereof for "due cause" or other than for a disability or death pursuant to Section 6.2 hereof, (ii) demotes the Executive to a nonexecutive position, or (iii) decreases the Executive's salary below the level or reduces the employee benefits and perquisites below the level provided for by the terms of Section 2 hereof, other than as a result of any amendment or termination of any employee and/or executive benefit plan or arrangement, which amendment or termination is applicable to all executives of Employer, then such action by Employer, unless consented to in writing by Executive, shall be deemed to be a constructive termination by Employer of Executive's employment (a "Constructive Termination"). In the event of a Constructive Termination, the Executive shall be entitled to receive, in a lump sum within 30 days after the date of the Constructive Termination, an amount equal to the Executive's then current annual base salary. For purposes of this Section 7.3, the term "salary" shall mean the annual rate of compensation provided to Executive under Section 2.1 hereof immediately prior to the event giving rise to the Constructive Termination. In the event of such Constructive Termination, all -5- 7 other rights and benefits Executive may have under the employee and/or executive benefit plans and arrangements of Employer generally shall be determined in accordance with the terms and conditions of such plans and arrangements. 8. Executive's Non-Competition Obligation: 8.1. Executive acknowledges and agrees that he serves in a special capacity for Employer pursuant to which he has acquired unique knowledge of the operations and business of Employer and, as such, is not engaged in a common calling. During the existence of Executive's employment by Employer hereunder and for a period of three (3) years from the date on which he shall cease to be employed by Employer, Executive shall not, acting alone or in conjunction with others, directly or indirectly, and whether as principal, agent, officer, director, partner, employee, consultant, broker, dealer or otherwise, in any of the Business Territories (as defined below), engage in any business in competition with the business conducted by Employer or any subsidiary of Employer, whether for his own account or otherwise, or solicit, canvass or accept any business or transaction for or from any other company or business in competition with such business of Employer in any of the Business Territories. For purposes hereof, the term "Business Territories" means the geographical regions within the geographic borders of each State in which Employer is doing business during the term of this Agreement and (in the case of post-employment non-competition obligations) at the date of the termination of Executive's employment with Employer and any State in which Employer had reasonable prospects of engaging in business during the three-year noncompetition period following termination of employment. Any retail business which does not involve the lending of money to obtain merchandise shall not be considered a business in competition with the business conducted by Employer or any subsidiary of Employer. 8.2. It is the desire and intent of the parties that the provisions of Section 8.1 shall be enforced to the fullest extent permissible under the laws and public policies of the State of Texas. Accordingly, if any particular portion of Section 8.1 shall be adjudicated to be invalid or unenforceable, Section 8.1 shall be deemed amended to (i) reform the particular portion to provide for such maximum restrictions as will be valid and enforceable, or if that is not possible, then (ii) delete therefrom the portion thus adjudicated to be invalid or unenforceable. 9. Obligations to Refrain From Competing Unfairly: 9.1. In addition to the other obligations agreed to by Executive in this Agreement, Executive agrees that during his employment with Employer and for a period of three (3) years following the termination of his employment by Employer he shall not, directly or indirectly, (a) induce, entice, or solicit any employee of Employer to leave his employment, or (b) contact, communicate or solicit any customer of Employer derived from any customer list, customer lead, mail, printed matter or other information secured from Employer or its present or past employees, with respect to any business in competition with the business conducted by Employer or any subsidiary of Employer, or (c) in any other manner use any customer lists or customer leads, mail, telephone numbers, printed material or material of Employer relating thereto. -6- 8 10. Miscellaneous: 10.1. All notices and other communications required or permitted hereunder or necessary or convenient in connection herewith shall be in writing and shall be deemed to have been given when mailed by registered mail or certified mail, return receipt requested, as follows (provided that notice of change of address shall be deemed given only when received): If to Employer, to: Cash America International, Inc. 1600 West Seventh Street Fort Worth, Texas 76102 Attention: President If to Executive, to: Gregory W. Trees 6500 Castle Pines Drive Fort Worth, Texas 76132 or to such other names or addresses as Employer or Executive, as the case may be, shall designate by notice to the other party hereto in the manner specified in this Section 10.1. 10.2. This Agreement shall be binding upon and inure to the benefit of Employer, its successors, legal representatives and assigns, and upon Executive, his heirs, executors, administrators, representatives and assigns. Executive agrees that his rights and obligations hereunder are personal to him and may not be assigned without the express written consent of Employer. 10.3. This Agreement may not be modified in any respect by any verbal statement, representation or agreement made by any employee, officer, or representative of Employer or by any written agreement unless signed by an officer of Employer who is expressly authorized by Employer to execute such document. 10.4. (a) If any provision of this Agreement or application thereof to anyone or under any circumstances shall be determined to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions or applications of this Agreement which can be given effect without the invalid or unenforceable provision or application. (b) Without intending to limit the remedies available to Employer, it is mutually understood and agreed that Executive's services are of a special, unique, unusual, extraordinary and intellectual character giving them a peculiar value, the loss of which cannot be reasonably or adequately compensated in damages in an action at law, and, therefore, in the event of a breach by Executive, Employer shall be entitled to equitable relief by way of injunction or otherwise. -7- 9 (c) Executive acknowledges that Sections 4, 8 and 9 are expressly for the benefit of Employer, that Employer would be irreparably injured by a violation of Sections 4, 8 and/or 9 and that Employer would have no adequate remedy at law in the event of such violation. Therefore, Executive acknowledges and agrees that injunctive relief, specific performance or any other appropriate equitable remedy (without any bond or other security being required) are appropriate remedies to enforce compliance by Employer with Section 4, Section 8 and Section 9. 10.5. Executive acknowledges that, from time to time, Employer may establish, maintain and distribute employee manuals or handbooks or personnel policy manuals, and officers or other representatives of Employer may make written or oral statements relating to personnel policies and procedures. Such manuals, handbooks and statements are intended only for general guidance. No policies, procedures or statements of any nature by or on behalf of Employer (whether written or oral, and whether or not contained in any employee manual or handbook or personnel policy manual), and no acts or practices of any nature shall be construed to modify this Agreement or to create express or implied obligations or any nature to Executive. 10.6. The laws of the State of Texas will govern the interpretation, validity and effect of this Agreement without regard to the place of execution or the place for performance thereof, and Employer and Executive agree that the state and federal courts situated in Tarrant County, Texas shall have personal jurisdiction over Employer and Executive to hear all disputes arising under this Agreement. This Agreement is to be at least partially performed in Tarrant County, Texas and, as such, Employer and Executive agree that venue shall be proper with the state or federal courts in Tarrant County, Texas to hear such disputes. In the event either Employer or Executive is not able to effect service of process upon the other with respect to such disputes, Employer and Executive expressly agree that the Secretary of State for the State of Texas shall be an agent of Employer and/or the Executive to receive service of process on behalf of Employer and/or the Executive with respect to such disputes. 11. Additional Instruments: Executive and Employer shall execute and deliver any and all additional instruments and agreements that may be necessary or proper to carry out the purposes of this Agreement. -8- 10 IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have executed this Agreement as of the date first written above. CASH AMERICA INTERNATIONAL, INC. By: /s/ Daniel R. Feehan Daniel R. Feehan, President EXECUTIVE: /s/Gregory W. Trees Gregory W. Trees -9- EX-10.11 4 1ST SUPPLEMENT TO NOTE AGREEMENT 1 EXHIBIT 10.11 2 FIRST SUPPLEMENT TO NOTE AGREEMENT This First Supplement to Note Agreement (the "First Supplement") is made and entered into as of the 20th day of September, 1994, by and between Cash America International, Inc. (the "Company") and Teachers Insurance and Annuity Association of America ("Teachers"). RECITALS WHEREAS, the parties hereto have entered into a Note Agreement, dated as of May 6, 1993 (the "Note Agreement"), pursuant to which the Company issued and Teachers purchased $30,000,000 aggregate principal amount of the Company's 8.33% Senior Notes Due May 1, 2003; WHEREAS, the Company intends to enter into a series of transactions (the "Transactions"), which are more particularly described as follows: 1. The Company will form CAII Pantbelaning AB, a Swedish corporation ("Borrower"), which will be a wholly-owned subsidiary of the Company; 2. Borrower will acquire all of the capital stock of Thomas Hjelm AB, a Swedish corporation ("THAB"); 3. Simultaneously with the acquisition of the capital stock of THAB by Borrower, THAB shall acquire all of the assets and assume all of the liabilities of each of the following Swedish corporations that are currently owned directly or indirectly by THAB (collectively, the "Affiliated Corporations"): Pantintressenter i Stockholm AB, AB Svensk Pantbelaning, and Svenska Aktionsgruppen AB; 4. Borrower will incur indebtedness in the approximate amount of SEK 193,750,000 to finance the acquisition of THAB's capital stock and to pay off the existing bank indebtedness of the Affiliated Corporations that THAB will assume; 5. The Company and each of its Subsidiaries domiciled in the United States will guarantee the indebtedness incurred by Borrower; and 6. Neither Borrower or THAB will execute a guarantee of the Notes. WHEREAS, in connection with the Transactions, the Company and Teachers desire to amend certain provisions of the Note Agreement. NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Teachers hereby agree as follows: 3 1. Amendment to Section 2.01 of the Note Agreement. Section 2.01 of the Note is hereby amended to include the following definitions: "Pantbelaning" means CAII Pantbelaning AB, a corporation organized under the laws of Sweden and a Wholly-Owned Subsidiary. "Pantbelaning Indebtedness" means indebtedness of Pantbelaning for borrowed money in the approximate amount of SEK 193,750,000 pursuant to that certain Loan Agreement, dated as of September 19, 1994, among Pantbelaning, the Lenders who are a party thereto, and NationsBank of Texas, National Association, as Administrative Lender. "Thomas Hjelm" means Thomas Hjelm AB, a corporation organized under the laws of Sweden and, after the acquisition of its capital stock by Pantbelaning, a Wholly-Owned Subsidiary. "Thomas Hjelm Affiliates" means the following corporations, each of which (i) are organized under the laws of Sweden and (ii) after the acquisition of the capital stock of Thomas Hjelm by Pantbelaning will be a Wholly-Owned Subsidiary: Pantintressenter i Stockholm AB, AB Svensk Pantbelaning, and Svenska Aktionsgruppen AB; "SEK" means the legal currency of Sweden. 2. Amendment to Section 9.01 of the Note Agreement. Section 9.01 of the Note Agreement is hereby amended to read in its entirety as follows: SECTION 9.01. Consolidated Indebtedness for Money Borrowed. The Company will not permit Consolidated Indebtedness for Money Borrowed, as of the last day of any Fiscal Quarter commencing on or after January 1, 1993, to be greater than the amount determined by multiplying the Applicable Percentage for such date times the sum of (a) Consolidated Indebtedness for Money Borrowed as of such date and (b) Consolidated Tangible Net Worth as of such date. As used in this Section 9.01, "Applicable Percentage" means (i) for any date prior to July 1, 1994, 47.5%, (ii) for any date from July 1, 1994 up to and including September 30, 1994, 55%, and (iii) for any date after September 30, 1994. 50%. 3. Amendment to Section 9.04 of the Note Agreement. Section 9.04 of the Note Agreement is hereby amended to read in its entirety as follows: SECTION 9.04. Current Assets to Total Indebtedness Ratio. The Company will not permit the ratio of (a) Consolidated Current Assets to (b) Consolidated Current Liabilities plus Consolidated Funded Debt to be less than 1.25 to 1 as of the last day of any Fiscal Quarter commencing on or after January 1, 1993; provided that with respect to the Fiscal Quarter commencing on July 1, 1994, the Company will not permit such 2 4 ratio to be less than 1.20 to 1. As used in this Section 9.04, "Consolidated Funded Debt" means, at any time, Consolidated Indebtedness for Money Borrowed at such time, provided that in no event shall Consolidated Funded Debt include any obligation included in Consolidated Current Liabilities. 4. Amendment to Section 9.05 of the Note Agreement. Section 9.05 of the Note Agreement is hereby amended to read in its entirety as follows: SECTION 9.05. Inventory Turnover. The Company will not at any time permit the ratio of (a) cost of goods sold by the Company and the Consolidated Subsidiaries for the Computation Period (as shown on the consolidated statements of income delivered by the Company pursuant to clause (a) or (b) of Section 8.01 with respect to the Computation Period) to (b) the Average Monthly Inventory for the Computation Period to be less than (i) 1.75 to 1 for any date on or prior to June 30, 1994, (ii) 1.65 to 1 for any date after June 30, 1994 up to and including December 31, 1994, and (iii) 1.75 to 1 for any date after December 31, 1994. As used in this Section 9.05, (i) "Computation Period" means, at any time, the 12 month period ended on the date of the most recent balance sheet delivered (or required to be delivered) by the Company pursuant to clause (a) or (b) of Section 8.01 and (ii) "Average Monthly Inventory" means, when used with reference to any Computation Period, the amount determined by dividing (A) the aggregate amounts of inventory appearing on the books of the Company and the Consolidated Subsidiaries as of the last day of such calendar month within such Computation Period by (B) twelve. 5. Amendment to Section 9.08(b) of the Note Agreement. Section 9.08(b) of the Note Agreement is hereby amended by (i) deleting the word "and" at the end of clause (11)thereof, (ii) deleting the period at the end of clause (12) thereof and inserting in its place ";and", and (iii) adding a clause (13) to read in its entirety as follows: (13) in the case of Pantbelaning, the Pantbelaning Indebtedness. 6. Amendment to Section 9.09 of the Note Agreement. Section 9.09 of the Note Agreement is hereby amended to read in its entirety as follows: SECTION 9.09. Assurances. The Company will not, and will not permit any Subsidiary to, enter into, assume or become or be liable in respect of any Assurance, except for (i) Assurances by the Company of indebtedness of Subsidiaries permitted by Section 9.08(b), (ii) Assurances by one or more Guarantors of indebtedness (other than the Obligations) of the Company permitted by Section 9.08(a) but only if and so long as the Guaranty is in full force and effect, (iii) Assurances of the Guarantors evidenced by the Guaranty, (iv) Assurances by the Company and one or more Subsidiaries of the Pantbelaning Indebtedness and (v) other Assurances not otherwise permitted by this Section 9.09 but only to the extent that the aggregate amount of all indebtedness relating to such Assurances does not exceed $500,000. 3 5 7. Amendment to Section 9.20(a) of the Note Agreement. Section 9.20(a) of the Note Agreement is hereby amended to read in its entirety as follows: SECTION 9.20. Limitation on Acquisition of New Subsidiaries. (a) The Company will not, and will not permit any Subsidiary to, (i) acquire any Stock of any Person, (ii) enter into any partnership or joint venture or (iii) take any action which would result in the Company having any Subsidiary other than those listed in Schedule II, except that, from time to time, the Company may: (l) acquire (whether by purchase, merger or other similar transaction) any Person, but only if: (A) immediately after giving effect to such acquisition, such person shall constitute a Wholly-Owned Subsidiary; (B) immediately after giving effect to such acquisition, no Default shall be in existence and the consummation of such acquisition did not have, and could not be reasonably expected to have, a Material Adverse Effect; (C) each Holder shall have received an Owners' Certificate, dated not more than ten days prior to the effective date of such acquisition, describing (except in the case of the Company's acquisition of Express Cash International Corporation) such acquisition (including the name of such Person and the business conducted by it) and stating that such acquisition is permitted by this Section 9.20, which Officers' Certificate shall be accompanied by complete and accurate copies of the Organizational Documents of such Person; and (D) promptly (and in any event within 15 days) after the consummation of such acquisition, such Person shall duly authorize, execute and deliver to each Holder an instrument in writing pursuant to which such Person agrees to become a Guarantor under, and to be bound as a Guarantor by the terms of, the Guaranty; provided, that Pantbelaning shall be permitted to acquire the capital stock of Thomas Hjelm without Thomas Hjelm or the Thomas Hjelm Affiliates complying with clause (D) above so long as Thomas Hjelm and the Thomas Hjelm Affiliates do not guarantee the Pantbelaning Indebtedness or indebtedness of the Company arising out of the Bank Loan Agreement; and (2) create or form a new corporation or limited partnership (the "New Entity") and thereupon cause the New Entity to become a Wholly-Owned Subsidiary, but only if: 4 6 (A) no Default shall exist immediately after the New Entity becomes a Subsidiary; (B) subject to paragraph (b) below, promptly (and in any event within 15 days) after its creation or formation, the New Entity shall duly authorize, execute and deliver to each Holder an instrument in writing pursuant to which the New Entity agrees to become a Guarantor under, and to be bound as a Guarantor by the terms of, the Guaranty; (C) except as required by clause (B) above, the New Entity shall not conduct any businesses prior to becoming a Subsidiary; and (D) Subject to paragraph (b) below, promptly (and in any event within 15 days) after the creation or formation of the New Entity, the Company shall deliver to each Holder an Officers' Certificate notifying the Holders of the formation or creation of the New Entity, which Officers' Certificate shall (i) specify the name of the New Entity and the jurisdiction of its incorporation or formation, (ii) describe, in reasonable detail, the business proposed to be conducted by the New Entity, (iii) state that the Company is authorized to form or create the New Entity and to cause it to become a Subsidiary in accordance with this Section 9.20 and (iv) be accompanied by complete and accurate copies of the Organizational Documents of the New Entity; provided that the Company shall be permitted to form Pantbelaning without complying with clause (C) above or clause (B) above so long as Pantbelaning does not guarantee the indebtedness of the Company arising out of the Bank Loan Agreement. 8. Definitions. All capitalized terms used herein and not otherwise specifically defined shall have the respective meanings set forth in the Note Agreement. 9. Ratification of Note Agreement. Except as specified hereinabove, all other terms of the Note Agreement shall remain unchanged and are hereby ratified and confirmed. All references to "this Agreement" or "the Agreement" appearing in the Note Agreement, and all references to the Note Agreement appearing in any other instrument or document, shall be deemed to refer to the Note Agreement as supplemented and amended by this First Supplement. 10. Counterparts. This First Supplement may be executed in any number of counterparts and by the parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all the counterparts shall together constitute one and the same instrument. 5 7 IN WITNESS WHEREOF, the undersigned have executed this First Supplement to Note Agreement as of the date first written above. CASH AMERICA INTERNATIONAL, INC. By: /s/ THOMAS A. BESSANT, JR. Thomas A. Bessant, Jr., Vice President TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA By: /s/ NANCY F. HELLER Nancy F. Heller, Director Private Placements 6 EX-10.13 5 REVOLVING CREDIT AGREEMENT 1 EXHIBIT 10.13 2 FIRST AMENDMENT TO SENIOR REVOLVING CREDIT FACILITY AGREEMENT THIS FIRST AMENDMENT TO SENIOR REVOLVING CREDIT FACILITY AGREEMENT (the "First Amendment") is entered into as of the 7th day of June, 1994, by and among NATIONSBANK OF TEXAS, N.A. ("NationsBank"), FIRST INTERSTATE BANK OF TEXAS, N.A. ("First Interstate"), BANK ONE, TEXAS, N.A. ("Bank One"), THE DAIWA BANK, LTD. ("Daiwa") and TEXAS COMMERCE BANK NATIONAL ASSOCIATION (successor by merger to Texas Commerce Bank, National Association) ("Texas Commerce") (such banks, and their successors and assigns, are collectively referred to herein as "Banks"), CASH AMERICA INTERNATIONAL, INC., a Texas corporation ("Company") and NationsBank as Issuing Bank and as Administrative Agent for Banks to the extent and in the manner provided for in the "Credit Agreement" (defined below and herein so called), with the acknowledgement, approval and agreement of all "Guarantors" and "Consolidated Subsidiaries" (as each of such terms is defined in the Credit Agreement) existing as of the date hereof. W I T N E S S E T H : WHEREAS, Banks, Company, Issuing Bank and Administrative Agent are parties to that certain Senior Revolving Credit Facility Agreement dated as of June 29, 1993 (the "Credit Agreement"); and WHEREAS, Company has requested that Banks modify the revolving credit facility described in the Credit Agreement and agree to certain amendments to the Credit Agreement as set forth hereinbelow; and WHEREAS, Banks are willing to consent to such modifications and amendments, subject to the terms and conditions of this First Amendment; and WHEREAS, the parties desire to amend the Credit Agreement by this First Amendment to reflect the agreements, modifications and amendments as set forth hereinbelow; NOW, THEREFORE, for and in consideration of the above premises and for other good and valuable consideration, the parties hereto agree as follows: 1. Definitions. Capitalized terms used in this First Amendment which are defined in the Credit Agreement, as amended by this First Amendment, shall have the same meanings as assigned therein when used herein, unless otherwise provided herein or the context hereof shall otherwise require. 2. Representations and Warranties. In order to induce Banks to enter into this First Amendment, Company represents and warrants to Banks that: A. Company, Guarantors and Consolidated Subsidiaries (including without limitation all New Subsidiaries) each have the corporate power and requisite authority to execute, deliver and carry out the terms and provisions of this First Amendment, the Credit Agreement, as amended hereby, and the Loan Papers to be executed by them, and Company, Guarantors and Consolidated Subsidiaries have each taken all corporate action necessary to authorize such matters; - 1 - 3 B. Each Affiliate of Company which has executed or shall execute any Loan Papers (including without limitation Cash America Pawn L.P. and Cash America Management L.P., Delaware limited partnerships) has the power and requisite authority to execute, deliver and carry out the terms and provisions of such Loan Papers; C. Neither the execution and delivery of this First Amendment, nor any other documents executed by Company or any of Guarantors, Consolidated Subsidiaries or other Affiliates of Company in connection herewith, nor the consummation of any of the transactions herein or therein contemplated, nor compliance with the terms and provisions hereof or thereof, will contravene or conflict with any provision of law, statute or regulation to which Company or any of its Subsidiaries or other Affiliates of Company or any of Guarantors is subject or any judgment, license, order or permit applicable to Company or any of its Subsidiaries or other Affiliates of Company or any of Guarantors or any indenture, agreement or other instrument to which Company or any of its Subsidiaries or other Affiliates of Company or Guarantors may be subject; no consent, approval, authorization or order of any court, Governmental Authority or third party is required in connection with the execution and delivery of this First Amendment or any of the other documents executed and delivered in connection herewith or to consummate the transactions contemplated herein or therein; D. This First Amendment, the Credit Agreement, as amended hereby, and the Loan Papers are the legal and binding obligations of the parties executing such documents, enforceable in accordance with their respective terms, except as limited by bankruptcy, insolvency or other laws of general application relating to the enforcement of creditors' rights; E. As of the date of this First Amendment, and after giving effect hereto, no event has occurred and is continuing which constitutes an Event of Default or a Potential Event of Default, except for the technical default under Section 8.14(d) of the Credit Agreement referred to in and waived by that certain letter from Administrative Agent (on behalf of Majority Banks) to Company dated May 12, 1994; and F. Except for the technical default referred to in Section 2E above, all of the representations and warranties of Company contained in Article 6 of the Credit Agreement, as amended by this First Amendment, are true and correct as of the date hereof. 3. Conditions Precedent. This First Amendment and the obligations of Banks hereunder are subject to the condition precedent that Administrative Agent shall have received for each Bank the following, each in form and substance satisfactory to Administrative Agent and such Bank: A. First Amendment. A fully executed original counterpart of this First Amendment, signed by duly authorized officers of all of the parties hereto; B. First Revolving Credit Notes. A duly executed promissory note (collectively, the "First Revolving Credit Notes" and each, a "First Revolving Credit Note"), drawn to the order of such Bank in the form of Exhibit "A" attached hereto, with appropriate insertions and otherwise complying with the provisions of the Credit Agreement as amended by this First Amendment. C. Second Revolving Credit Notes. A duly executed promissory note (collectively, the "Second Revolving Credit Notes" and each, a "Second Revolving Credit Note"), drawn to the order - 2 - 4 of such Bank in the form of Exhibit "B" attached hereto, with appropriate insertions and otherwise complying with the provisions of the Credit Agreement as amended by this First Amendment. D. Officers' Certificates. A Certificate signed by duly authorized officers of Company and all Guarantors and Consolidated Subsidiaries stating (in their representative capacities, but not in their individual capacities) that (to the best knowledge and belief of such officers, after reasonable investigation and review of matters pertinent to the subject matter of such certificate): except for the technical default referred to in Section 2E above, (i) all of the representations and warranties contained in Article 6 of the Credit Agreement, as amended by this First Amendment, and the other Loan Papers are true and correct as of the date hereof and will be true and correct upon execution and delivery of this First Amendment and all Loan Papers in connection herewith and after giving effect hereto and thereto; (ii) no event has occurred and is continuing, or would result from the execution, delivery and performance of the Credit Agreement, as amended by this First Amendment, and the Loan Papers which constitutes an Event of Default or a Potential Event of Default; and (iii) the Officer Certificates and all attachments thereto (including copies of resolutions, articles of incorporation, partnership agreements and by-laws) which have previously been delivered to Administrative Agent and Banks by Company, Guarantors and Consolidated Subsidiaries and their respective officers are true and correct, have not been altered (except as specifically noted) and are in full force and effect. E. Other Items. Such other items as Administrative Agent or Banks may reasonably request prior to the execution, delivery and acceptance of this First Amendment. 4. Amendments to Credit Agreement. Effective as of the date of this First Amendment, and subject only to the conditions precedent set forth in Section 3 hereof, the Credit Agreement shall be, and is hereby, amended as follows: A. Section 1.06 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: 1.06. "Advance" shall mean a First Facility Advance or a Second Facility Advance, as the case may be. B. Section 1.09 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: 1.09. "Borrowing" shall mean the combined First Facility Advances or Second Facility Advances made by Banks on a single date, or the combined Swing Advances made by NationsBank on a single date, as the case may be. C. Section 1.20 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: 1.20. "Commitment" shall mean, as to any Bank on any date, the sum of the First Commitment and the Second Commitment of such Bank on such date. D. Section 1.21 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: - 3 - 5 1.21. "Commitment Fee" shall mean the First Commitment Fee and/or the Second Commitment Fee, as the case may be. E. Section 1.89 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: 1.89. "Revolving Credit Loans" shall mean the First Revolving Credit Loans and the Second Revolving Credit Loans. F. Section 1.90 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: 1.90. "Revolving Credit Notes" shall mean the First Revolving Credit Notes and the Second Revolving Credit Notes. G. Section 1.91 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: 1.91. "Revolving Credit Period" shall mean (i) with respect to the First Commitment and the First Revolving Credit Loans, the First Revolving Credit Period, and (ii) with respect to the Second Commitment and the Second Revolving Credit Loans, the Second Revolving Credit Period. H. Section 1.93 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: 1.93. "Scheduled Maturity Date" shall mean (i) with respect to the First Revolving Credit Loans, April 30, 1997, and (ii) with respect to the Second Revolving Credit Loans, June 6, 1995, either of which dates may be extended one or more times by written agreement pursuant to the terms of Section 2.01(b) hereof. I. Section 1.104 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: 1.104. "Termination Date" shall mean the earliest of the following dates: (a) with respect to the First Commitments and the First Revolving Credit Notes, the Scheduled Maturity Date for the First Revolving Credit Loans, (b) with respect to the Second Commitments and the Second Revolving Credit Notes, the Scheduled Maturity Date for the Second Revolving Credit Loans, (c) the date on which Majority Banks terminate Banks' commitments to lend hereunder after the occurrence of an Event of Default, pursuant to Section 10.02, and (d) the date upon which an Event of Default specified in Sections 10.01(f) or 10.01(g) occurs. J. Section 1.105 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: 1.105. "Total Commitment" shall mean, on any date, the sum of the Total First Commitment and the Total Second Commitment on such date. - 4 - 6 K. Section 1.106A of the Credit Agreement is hereby added to the Credit Agreement to immediately follow Section 1.106 of the Credit Agreement and to read as follows: 1.106A. Additional Defined Terms. (a) "Consolidated Funded Debt" shall mean, as of any date, the sum of (i) the principal amount of all interest bearing indebtedness of Company and its Consolidated Subsidiaries, whether current or funded, and whether secured or unsecured, incurred in connection with borrowings evidenced by a note, bond, indenture or similar instrument, plus (ii) all Capital Leases of Company and its Consolidated Subsidiaries, plus (iii) Letter of Credit Liability. (b) "Consolidated Net Worth" shall mean, as of any date, the total shareholder's equity which would appear on a consolidated balance sheet of Company and its Consolidated Subsidiaries prepared as of such date in accordance with GAAP, but specifically excluding all currency translation adjustments (gains and losses). (c) "First Commitment" shall have the meaning assigned to it in Section 2.01 hereof. (d) "First Commitment Fee" shall have the meaning assigned to it in Section 2.01 hereof. (e) "First Facility Advance" shall have the meaning assigned to it in Section 2.01 hereof. (f) "First Revolving Credit Loan" shall have the meaning assigned to it in Section 2.01 hereof. (g) "First Revolving Credit Note" shall mean, with respect to each Bank, the promissory note payable to such Bank referred to in Section 4.01(a) hereof in the form of Exhibit "A" attached to that certain First Amendment to Senior Revolving Credit Facility Agreement dated as of June 7, 1994, by, among others, Company and Banks, executed by Company in favor of such Bank in an original principal amount equal to the amount of such Bank's Percentage of the Total First Commitment, together with any renewals, modifications, extensions and increases thereof. (h) "First Revolving Credit Period" shall have the meaning assigned to it in Section 2.01 hereof. (i) "Second Commitment" shall have the meaning assigned to it in Section 2.01 hereof. (j) "Second Commitment Fee" shall have the meaning assigned to it in Section 2.01 hereof. - 5 - 7 (k) "Second Facility Advance" shall have the meaning assigned to it in Section 2.01 hereof. (l) "Second Revolving Credit Loan" shall have the meaning assigned to it in Section 2.01 hereof. (m) "Second Revolving Credit Note" shall mean, with respect to each Bank, the promissory note payable to such Bank referred to in Section 4.01(b) hereof in the form of Exhibit "B" attached to that certain First Amendment to Senior Revolving Credit Facility Agreement dated as of June 7, 1994, by, among others, Company and Banks, executed by Company in favor of such Bank in an original principal amount equal to the amount of such Bank's Percentage of the Total Second Commitment, together with any renewals, modifications, extensions and increases thereof. (n) "Second Revolving Credit Period" shall have the meaning assigned to it in Section 2.01 hereof. (o) "Total First Commitment" shall have the meaning assigned to it in Section 2.01 hereof. (p) "Total Second Commitment" shall have the meaning assigned to it in Section 2.01 hereof. L. Section 2.01 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: 2.01. Revolving Loan Commitments. (a1) Banks and Percentages. Each "Bank" which is a party to this Credit Agreement is named below, and the "Percentage" of each such Bank is set forth opposite its name below:
Bank Percentage ----------------------------------------------------------- ---------- NationsBank of Texas, N.A. 28.0% First Interstate Bank of Texas, N.A. 28.0% Bank One, Texas, N.A. 24.0% The Daiwa Bank, Ltd. 12.0% Texas Commerce Bank National Association (successor by merger to Texas Commerce Bank, National Association) 8.0% ----- 100.0%
- 6 - 8 (a2) First Commitments. Subject to the terms and conditions of this Credit Agreement, each Bank severally agrees to extend to Company, during a period commencing on the date hereof and ending on the earlier of (i) the date on which the conditions for termination of the Total First Commitment by Company pursuant to the terms of Section 2.01(c) hereof have been met, or (ii) the Termination Date for the First Commitments (the "First Revolving Credit Period"), a revolving line of credit which shall not exceed at any one time outstanding the amount equaling the product obtained by multiplying, for each Bank, the Total First Commitment times such Bank's Percentage (for each Bank, such amount, as it may be adjusted from time to time in accordance with the terms hereof, is hereinafter referred to as the "First Commitment of such Bank"). Until such revolving lines of credit are terminated in accordance with the terms hereof, the "Total First Commitment" shall be $100,000,000.00 during the First Revolving Credit Period and may be utilized for First Revolving Credit Loans and the issuance of Letters of Credit; provided, however, that the terms and conditions set forth in this Credit Agreement, specifically including without limitation the terms and conditions set forth in subsection (a4) of this Section 2.01, are complied with at all times. According to such terms and conditions and within the limits set forth herein, during the First Revolving Credit Period Company may borrow, repay and reborrow under the Total First Commitment. Each advance made by a Bank under its First Commitment, other than a Swing Advance by NationsBank, is herein called a "First Facility Advance"; the aggregate unpaid principal balance of all First Facility Advances made by a Bank are herein collectively called the "First Revolving Credit Loan" of such Bank; the aggregate unpaid principal balance of all First Facility Advances made by all Banks are herein collectively called the "First Revolving Credit Loans". (a3) Second Commitments. Subject to the terms and conditions of this Credit Agreement, each Bank severally agrees to extend to Company (in addition to the revolving line of credit under the First Commitment of such Bank), during a period commencing on the date hereof and ending on the earlier of (i) the date on which the conditions for termination of the Total Second Commitment by Company pursuant to the terms of Section 2.01(c) hereof have been met, or (ii) the Termination Date for the Second Commitments (the "Second Revolving Credit Period"), a revolving line of credit which shall not exceed at any one time outstanding the amount equaling the product obtained by multiplying, for each Bank, the Total Second Commitment times such Bank's Percentage (for each Bank, such amount, as it may be adjusted from time to time in accordance with the terms hereof, is hereinafter referred to as the "Second Commitment of such Bank"). Until such revolving lines of credit are terminated in accordance with the terms hereof, the "Total Second Commitment" shall be $25,000,000.00 during the Second Revolving Credit Period and may be utilized for Second Revolving Credit Loans and the issuance of Letters of Credit; provided, however, that the terms and conditions set forth in this Credit Agreement, specifically including without limitation the terms and conditions set forth in subsection (a4) of this Section 2.01, are complied with at all times. According to such terms and conditions and within the limits set forth herein, during the Second Revolving Credit Period Company may borrow, repay and reborrow under the Total Second Commitment. Each advance made by a Bank under its Second Commitment, other than a Swing Advance by NationsBank, is herein called a "Second Facility Advance"; the aggregate unpaid principal balance of all Second Facility Advances made by a Bank are herein collectively called the "Second Revolving Credit Loan" of such Bank; the aggregate unpaid principal balance of all Second Facility Advances made by all Banks are herein collectively called the "Second Revolving Credit Loans". - 7 - 9 (a4) Certain Terms and Conditions. The following terms and conditions, together with all other terms and conditions set forth in this Credit Agreement, shall apply to the revolving lines of credit described in subsections (a2) and (a3) above of this Section 2.01: (i) notwithstanding anything to the contrary contained in this Credit Agreement or in any of the Loan Papers, the Total Second Commitment (and the commitment of each Bank to lend under its Second Commitment) shall be subject to the condition that, on the date requested by Company for any Borrowing under the Total Second Commitment, there shall be no availability for such Borrowing under the Total First Commitment, (ii) each Borrowing (excluding a Borrowing comprised solely of a Swing Advance or Swing Advances) shall be funded ratably by Banks in proportion to their respective Percentages. (iii) the aggregate number of unpaid CD Borrowings and Eurodollar Borrowings shall not exceed six (6) at any time, (iv) the respective Commitments of Banks shall be adjusted from time to time in accordance with the terms of Section 3.05 hereof in connection with the issuance of Letters of Credit, (v) Letter of Credit Liability shall not exceed $5,000,000.00 at any one time, (vi) the Commitment of NationsBank may also be utilized for the Swing Loan, provided that the Commitment of NationsBank shall be adjusted from time to time in accordance with the terms of Section 2.02 hereof and the aggregate amount of (A) the First Revolving Credit Loan by NationsBank, (B) the Second Revolving Credit Loan by NationsBank, (C) the Swing Loan, and (D) the product obtained by multiplying the Percentage of NationsBank times Letter of Credit Liability, shall at no time exceed the Commitment of NationsBank, and (vii) the outstanding Swing Loan may not exceed $2,000,000.00 at any time and may not exceed $1,000,000.00 for any four (4) consecutive Business Days, and (viii) the aggregate amount of (A) all First Revolving Credit Loans, (B) all Second Revolving Credit Loans, (C) the Swing Loan, and (D) Letter of Credit Liability (such aggregate amount being herein called the "Revolving Credit Balance") shall at no time exceed the Total Commitment. (b) Annual Review of Revolving Loan Commitments. On an annual basis, upon request by Company prior to April 30 of any such year, and after the receipt by Banks of the statements and information required under Section 8.01(b) hereof, Banks and Company shall review the Commitments which are then in effect and, at the time of any such review, Banks and Company may mutually agree in writing to extend any of the Scheduled Maturity Dates which are then in effect for one additional year, provided that Banks shall at no time have any obligation whatsoever to extend any Scheduled Maturity Date. (c) Termination of Commitments. Company shall have the right to terminate the Total First Commitment, the Total Second Commitment or the Total Commitment upon three (3) prior Business Days' written notice to Administrative Agent and full and final payment of the Obligation then outstanding with respect to the portion of the Total Commitment being terminated, after which any further obligation of Company under Section 2.01(d) hereof under the portion of the Total Commitment being terminated shall also terminate. (d) Commitment Fees. In addition to the Facility Fee, the Letter of Credit Fees and other fees and expenses payable hereunder and in connection herewith, and in addition to the payments provided for in Articles 3 and 4 hereof, (i) during the First Revolving Credit Period, Company shall pay to Administrative Agent, for the account of each Bank, a commitment fee (the "First Commitment Fee") determined at the rate of 0.375% per annum (computed on the basis of the actual number of days elapsed over a year consisting of 365 days), on (A) with respect to each Bank other than NationsBank, the actual daily difference between the sum of (x) - 8 - 10 the aggregate unpaid balance of the First Revolving Credit Loan of such Bank, plus (y) the product obtained by multiplying the Percentage of such Bank times Letter of Credit Liability, and the First Commitment of such Bank, and (B) with respect to NationsBank, the actual daily difference between the sum of (x) the aggregate unpaid balance of the First Revolving Credit Loan by NationsBank, plus (y) the aggregate unpaid balance of Swing Advances made under the Total First Commitment, plus (z) the product obtained by multiplying the Percentage of NationsBank times Letter of Credit Liability, and the First Commitment of NationsBank, and (ii) during the Second Revolving Credit Period, Company shall pay to Administrative Agent, for the account of each Bank, a commitment fee (the "Second Commitment Fee") determined at the rate of 0.150% per annum (computed on the basis of the actual number of days elapsed over a year consisting of 365 days), on (A) with respect to each Bank other than NationsBank, the actual daily difference between the sum of (x) the aggregate unpaid balance of the Second Revolving Credit Loan of such Bank, plus (y) the product obtained by multiplying the Percentage of such Bank times Letter of Credit Liability, and the Second Commitment of such Bank, and (B) with respect to NationsBank, the actual daily difference between the sum of (x) the aggregate unpaid balance of the Second Revolving Credit Loan by NationsBank, plus (y) the aggregate unpaid balance of Swing Advances made under the Total Second Commitment, plus (z) the product obtained by multiplying the Percentage of NationsBank times Letter of Credit Liability, and the Second Commitment of NationsBank. The First Commitment Fee shall accrue from and after the first day of the First Revolving Credit Period and shall be payable in arrears on the last Business Day of each March, June, September and December during the First Revolving Credit Period, and on the Termination Date for the First Commitments. The Second Commitment Fee shall accrue from and after the first day of the Second Revolving Credit Period and shall be payable in arrears on the last Business Day of each March, June, September and December during the Second Revolving Credit Period, and on the Termination Date for the Second Commitments. Company and Banks acknowledge and agree that the First Commitment Fee and the Second Commitment Fee payable hereunder are comprised of bona fide fees that are intended as reasonable compensation to Banks for committing to make funds available to Company as described herein and for no other purpose. The First Commitment Fee, the Second Commitment Fee and, except as otherwise set forth herein, all fees referred to herein shall be payable to Administrative Agent, for the account of each Bank, in federal or other immediately available funds at its office located at 500 West Seventh Street, Fort Worth, Texas 76102, or such other place for payment as may be reasonably designated by Administrative Agent from time to time. All amounts paid by Company under this Section 2.01(d) shall be nonrefundable unless otherwise required herein or under applicable law. M. Clause (A) of Section 2.02 of the Credit Agreement is hereby amended to replace the phrase "Revolving Credit Loan of NationsBank" with the phrase "Revolving Credit Loans of NationsBank". N. Subsection (b) of Section 2.04 of the Credit Agreement is hereby deleted in its entirety. O. Subsection (c) of Section 2.04 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: - 9 - 11 (c) Rate for Certain First Facility Advances During Final Year of First Revolving Credit Period. The unpaid principal of each First Facility Advance which is a CD Advance or a Eurodollar Advance made during the last three hundred sixty (360) days immediately preceding the Scheduled Maturity Date then in effect for the First Revolving Credit Loans shall bear interest from the date of advance until paid at a rate per annum which shall be equal to the lesser of (a) the rate which would otherwise apply under subsection (a) of this Section 2.04 plus one-quarter of one percent (0.25%), or (b) the Maximum Rate. P. Section 4.01 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: 4.01. Revolving Credit Notes. (a) First Revolving Credit Notes. The First Facility Advances made by a Bank shall be evidenced by a promissory note (each, as more specifically defined in Article 1 hereof, a "First Revolving Credit Note" and collectively, the "First Revolving Credit Notes") of Company, which First Revolving Credit Note shall (i) be dated June 7, 1994, (ii) be in the principal amount of such Bank's Percentage of the Total First Commitment, (iii) be payable to the order of such Bank at the office of Administrative Agent, (iv) bear interest in accordance with Section 2.04 hereof, and (v) be in the form of Exhibit "A" attached to that certain First Amendment to Senior Revolving Credit Facility Agreement dated as of June 7, 1994, among Company and Banks, with blanks appropriately completed in conformity herewith. Notwithstanding the principal amount of any Bank's First Revolving Credit Note as stated on the face thereof, the amount of principal actually owing on such First Revolving Credit Note at any given time shall be the aggregate of all First Facility Advances theretofore made to Company hereunder, less all payments of principal theretofore actually received hereunder by Administrative Agent for the account of such Bank on the First Revolving Credit Loans. Each Bank is authorized, but is not required, to endorse on the schedule attached to its First Revolving Credit Note appropriate notations evidencing the date and amount of each First Facility Advance as well as the amount of each payment made by Company with respect thereto. (b) Second Revolving Credit Notes. The Second Facility Advances made by a Bank shall be evidenced by a promissory note (each, as more specifically defined in Article 1 hereof, a "Second Revolving Credit Note" and collectively, the "Second Revolving Credit Notes") of Company, which Second Revolving Credit Note shall (i) be dated June 7, 1994, (ii) be in the principal amount of such Bank's Percentage of the Total Second Commitment, (iii) be payable to the order of such Bank at the office of Administrative Agent, (iv) bear interest in accordance with Section 2.04 hereof, and (v) be in the form of Exhibit "B" attached to that certain First Amendment to Senior Revolving Credit Facility Agreement dated as of June 7, 1994, among Company and Banks, with blanks appropriately completed in conformity herewith. Notwithstanding the principal amount of any Bank's Second Revolving Credit Note as stated on the face thereof, the amount of principal actually owing on such Second Revolving Credit Note at any given time shall be the aggregate of all Second Facility Advances theretofore made to Company hereunder, less all payments of principal theretofore actually received hereunder by Administrative Agent for the account of such Bank on the Second Revolving Credit Loans. Each Bank is authorized, but is not required, to endorse on the schedule attached to its Second - 10 - 12 Revolving Credit Note appropriate notations evidencing the date and amount of each Second Facility Advance as well as the amount of each payment made by Company with respect thereto. Q. Subsection (a) of Section 8.14 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: (a) Consolidated Indebtedness and Letter of Credit Liability to Consolidated Net Worth. Company shall not permit, as of the last day of each fiscal quarter, the sum of (i) Consolidated Indebtedness plus (ii) Letter of Credit Liability to exceed the product obtained by multiplying the sum of (iii) Consolidated Funded Debt plus (iv) Consolidated Net Worth by 0.50. R. Subsection (c) of Section 8.14 of the Credit Agreement is hereby deleted in its entirety. S. Subsection (d) of Section 8.14 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: (d) Minimum Average Inventory Turnover. Company shall not permit, as of the last day of each fiscal quarter, the ratio of (i) cost of goods sold by Company and its Consolidated Subsidiaries for the most recent twelve months to (ii) average monthly inventory of Company and its Consolidated Subsidiaries (based on the sum of the thirteen amounts of fiscal month end inventory balance of Company and its Consolidated Subsidiaries for the most recent thirteen fiscal months of Company, divided by thirteen) to be less than 1.60 to 1.0. T. Clause (vii) of Section 9.03 of the Credit Agreement is hereby deleted and replaced in its entirety with the following clauses (vii) and (viii): (vii) loans to officers of Company and its Subsidiaries not to exceed at any time an aggregate amount of $5,000,000.00, and (viii) any other Investments, which other Investments shall not exceed on any date an aggregate amount equal to the product obtained by multiplying (i) Consolidated Tangible Net Worth times (ii) .075 on such date. 6. Modification, Renewal and Extension of Revolving Credit Notes. Each "Revolving Credit Note" payable to a Bank (or its predecessor) referred to in the Credit Agreement (prior to this First Amendment) dated June 29, 1993, shall be modified (by splitting such Revolving Credit Note into the First Revolving Credit Note payable to such Bank and the Second Revolving Credit Note payable to such Bank), renewed and extended by the promissory notes to be executed by Company and payable to such Bank in accordance with this First Amendment, in the form of Exhibit "A" and Exhibit "B" attached hereto, respectively. 7. Certain Loan Papers. In order to induce Banks to enter into the Credit Agreement, as amended by this First Amendment, and to extend credit to Company as contemplated thereby, all of the undersigned Guarantors have executed and delivered to Banks the Joint and Several Guaranty and the Subrogation and Contribution Agreement and each of such Guarantors hereby consents to the terms of this First Amendment and other Loan Papers and to the execution hereof and thereof and further agrees and confirms that (i) the Joint and Several Guaranty and Joint and Several Subrogation and Contribution Agreement continue in full force and effect, (ii) the "Guaranteed Debt" defined in the Joint and Several - 11 - 13 Guaranty refers to, without limitation, all of the Obligation and all indebtedness evidenced by the Notes, (iii) neither the execution of this First Amendment, the Credit Agreement or any Loan Papers in connection herewith or therewith, nor the consummation of the transactions described herein or therein shall alter the liability or obligations of any of the Guarantors under the terms of the Joint and Several Guaranty and the Subrogation and Contribution Agreement, and (iv) each reference in the Joint and Several Guaranty and the Subrogation and Contribution Agreement to the "Loan Agreement" or the "Senior Revolving Credit Facility Agreement" shall be deemed to refer to the Credit Agreement, as amended by this First Amendment. 8. Further Assurances. Company, its Subsidiaries and all Affiliates of Company which shall ever execute Loan Papers, including without limitation Guarantors, shall each make, execute or endorse, and acknowledge and deliver or file or cause same to be done, all such documents, notices or other assurances, and take all such other action consistent with the terms and provisions of the Credit Agreement, as amended hereby, as Majority Banks or Administrative Agent may, from time to time, deem reasonably necessary or proper in connection with this First Amendment. 9. Scope of Amendments. Any and all other provisions of the Credit Agreement and any other Loan Papers are hereby amended and modified wherever necessary and even though not specifically addressed herein, so as to conform to the amendments and modifications set forth in this First Amendment. 10. Limitation on Agreements. The amendments set forth herein are limited in scope as described herein and shall not be deemed (a) to be a consent under or waiver of any other term or condition in the Credit Agreement or any of the Loan Papers, or (b) to prejudice any right or rights which any of Banks or Administrative Agent now has or may have in the future under, or in connection with the Credit Agreement, as amended hereby, the Notes, the Loan Papers, or any of the documents referred to herein or therein. 11. Governing Law. This First Amendment has been prepared, is being executed and delivered and is intended to be performed in the State of Texas, and the substantive laws of such state and the applicable federal laws of the United States of America shall govern the validity, construction, enforcement and interpretation of this First Amendment. 12. Multiple Counterparts. This First Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same agreement, and any of the parties hereto may execute this First Amendment by signing any such counterpart. By signing below where indicated, the undersigned, CASH AMERICA, INC. OF SOUTH CAROLINA, FLORIDA CASH AMERICA, INC., GEORGIA CASH AMERICA, INC., CASH AMERICA, INC. OF LOUISIANA, CASH AMERICA, INC. OF NORTH CAROLINA, CASH AMERICA, INC. OF TENNESSEE, CASH AMERICA, INC. OF OKLAHOMA, CASH AMERICA, INC. OF KENTUCKY, CASH AMERICA PAWN, INC. OF OHIO, CASH AMERICA MANAGEMENT L.P., CASH AMERICA PAWN L.P., CASH AMERICA HOLDING, INC., EXPRESS CASH INTERNATIONAL CORPORATION (successor in interest to Express Cash Acquisition, Inc.), CASH AMERICA, INC. OF ALABAMA, CASH AMERICA, INC. OF COLORADO, CASH AMERICA, INC. OF INDIANA, CASH AMERICA, INC. and CASH AMERICA OF MISSOURI, INC., as Consolidated Subsidiaries and as Guarantors, and HARVEY & THOMPSON LIMITED, as a Consolidated Subsidiary, do each acknowledge and approve the Credit Agreement, as amended by this First Amendment, and the Loan Papers, and the terms thereof, and specifically agree to comply with all - 12 - 14 provisions therein and herein which refer to or affect such Guarantors, the Joint and Several Guaranty, the Subrogation and Contribution Agreement and any matter in connection therewith. THE CREDIT AGREEMENT, AS AMENDED BY THIS FIRST AMENDMENT, AND THE LOAN PAPERS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. IN WITNESS WHEREOF, Company, Banks, Guarantors, Consolidated Subsidiaries, Administrative Agent and Issuing Bank have executed this First Amendment as of the day and year first above written. COMPANY CASH AMERICA INTERNATIONAL, INC. By: /s/ THOMAS A. BESSANT, JR. Thomas A. Bessant, Jr. Vice President-Finance and Treasurer - 13 - 15 CONSOLIDATED SUBSIDIARIES AND GUARANTORS CASH AMERICA, INC. OF SOUTH CAROLINA* FLORIDA CASH AMERICA, INC.* GEORGIA CASH AMERICA, INC.* CASH AMERICA, INC. OF LOUISIANA* CASH AMERICA, INC. OF NORTH CAROLINA* CASH AMERICA, INC. OF TENNESSEE* CASH AMERICA, INC. OF OKLAHOMA* CASH AMERICA, INC. OF KENTUCKY* CASH AMERICA PAWN, INC. OF OHIO* CASH AMERICA MANAGEMENT L.P., a Delaware limited partnership, by its general partner, Cash America Holding, Inc.* CASH AMERICA PAWN L.P., a Delaware limited partnership, by its general partner, Cash America Holding, Inc.* CASH AMERICA HOLDING, INC.* EXPRESS CASH INTERNATIONAL CORPORATION CASH AMERICA, INC. OF ALABAMA* CASH AMERICA, INC. OF COLORADO* CASH AMERICA, INC. OF INDIANA* CASH AMERICA, INC.* CASH AMERICA OF MISSOURI, INC.* ----------------------------- * - By: /s/ THOMAS A. BESSANT Thomas A. Bessant, Jr., Vice President - 14 - 16 CONSOLIDATED SUBSIDIARY HARVEY & THOMPSON LIMITED By: /s/ DALE R. WESTERFELD Dale R. Westerfeld, Director - 15 - 17 BANKS NATIONSBANK OF TEXAS, N.A. TEXAS COMMERCE BANK NATIONAL ASSOCIATION By: /s/ TODD SHIPLEY By: /s/ MICHAEL BURR Todd Shipley Michael Burr, Vice President Senior Vice President BANK ONE, TEXAS, N.A. THE DAIWA BANK, LTD. By: /s/ MIKE PALMER By: /s/ JAMES T. WANG Mike Palmer, James T. Wang Senior Vice President Vice President and Manager By: /s/ KIM A. UHLEMANN Kim A. Uhlemann Vice President FIRST INTERSTATE BANK OF TEXAS, N.A. By: /s/ KIMBERLY WHITE Kimberly White, Banking Officer - 16 - 18 ADMINISTRATIVE AGENT AND ISSUING BANK NATIONSBANK OF TEXAS, N.A. By: /s/ TODD SHIPLEY Todd Shipley Vice President - 17 - 19 SECOND AMENDMENT TO SENIOR REVOLVING CREDIT FACILITY AGREEMENT THIS SECOND AMENDMENT TO SENIOR REVOLVING CREDIT FACILITY AGREEMENT (the "Second Amendment") is entered into as of the 21st day of September, 1994, by and among NATIONSBANK OF TEXAS, N.A. ("NationsBank"), FIRST INTERSTATE BANK OF TEXAS, N.A. ("First Interstate"), BANK ONE, TEXAS, N.A. ("Bank One"), THE DAIWA BANK, LTD. ("Daiwa") and TEXAS COMMERCE BANK NATIONAL ASSOCIATION (successor by merger to Texas Commerce Bank, National Association) ("Texas Commerce") (such banks, and their successors and assigns, are collectively referred to herein as "Banks"), CASH AMERICA INTERNATIONAL, INC., a Texas corporation ("Company"), and NationsBank as Issuing Bank and as Administrative Agent for Banks to the extent and in the manner provided for in the "Credit Agreement (defined below and herein so called), with the acknowledgement, approval and agreement of all "Guarantors" and "Consolidated Subsidiaries" (as each of such terms is defined in the Credit Agreement) existing as of the date hereof. W I T N E S S E T H: WHEREAS, Banks, Company, Issuing Bank and Administrative Agent are parties to that certain Senior Revolving Credit Facility Agreement dated as of June 29, 1993, as amended by that certain First Amendment to Senior Revolving Credit Facility Agreement, dated as of June 7, 1994 (said Credit Agreement, as amended, the "Credit Agreement"); and WHEREAS, Company has requested that Banks agree to certain amendments to the Credit Agreement as set forth hereinbelow; and WHEREAS, Banks are willing to consent to such amendments, subject to the terms and conditions of this Second Amendment; and WHEREAS, the parties desire to amend the Credit Agreement by this Second Amendment to reflect the agreements, modifications and amendments as set forth hereinbelow; NOW, THEREFORE, for and in consideration of the above premises and for other good and valuable consideration, the parties hereto agree as follows: 1. Definitions. Capitalized terms used in this Second Amendment which are defined in the Credit Agreement, as amended by this Second Amendment, shall have the same meanings as assigned therein when used herein, unless otherwise provided herein or the context hereof shall otherwise require. 2. Representations and Warranties. In order to induce Banks to enter into this Second Amendment, Company represents and warrants to Banks that: 20 A. Company, Guarantors and Consolidated Subsidiaries (including without limitation all New Subsidiaries) each have the corporate power and requisite authority to execute, deliver and carry out the terms and provisions of this Second Amendment, the Credit Agreement, as amended hereby, the Joint and Several Guaranty and the other Loan Papers to be executed by them, and Company, Guarantors and Consolidated Subsidiaries have each taken all corporate action necessary to authorize such matters; B. Each Affiliate of Company which has executed or shall execute any Loan Papers (including without limitation Cash America Pawn L.P. and Cash America Management L.P., each a Delaware limited partnership) has the power and requisite authority to execute, deliver and carry out the terms and provisions of such Loan Papers; C. Neither the execution and delivery of this Second Amendment, the Joint and Several Guaranty nor any other documents executed by Company or any of Guarantors, Consolidated Subsidiaries or other Affiliates of Company in connection herewith, nor the consummation of any of the transactions herein or therein contemplated, nor compliance with the terms and provisions hereof or thereof, will contravene or conflict with any provision of law, statute or regulation to which Company or any of its Subsidiaries or other Affiliates of Company or any of Guarantors is subject or any judgment, license, order or permit applicable to Company or any of its Subsidiaries or other Affiliates of Company or any of Guarantors or any indenture, agreement or other instrument to which Company or any of its Subsidiaries or other Affiliates of Company or Guarantors may be subject; no consent, approval, authorization or order of any court, Governmental Authority or third party is required in connection with the execution and delivery of this Second Amendment, the Joint and Several Guaranty or any of the other documents executed and delivered in connection herewith or to consummate the transactions contemplated herein or therein; D. This Second Amendment, the Credit Agreement, as amended hereby, the Joint and Several Guaranty and the other Loan Papers are the legal and binding obligations of the parties executing such documents, enforceable in accordance with their respective terms, except as limited by bankruptcy, insolvency or other laws of general application relating to the enforcement of creditors' rights; E. As of the date of this Second Amendment, and after giving effect hereto, no event has occurred and is continuing which constitutes an Event of Default or a Potential Event of Default; and F. All of the representations and warranties of Company contained in Article 6 of the Credit Agreement, as amended by this Second Amendment, are true and correct as of the date hereof. 3. Conditions Precedent. This Second Amendment and the obligations of Banks hereunder are subject to the condition precedent that Administrative Agent shall have received - 2 - 21 for each Bank the following, each in form and substance satisfactory to Administrative Agent and such Bank: A. Second Amendment. A fully executed original counterpart of this Second Amendment, signed by duly authorized officers of all of the parties hereto; B. Joint and Several Guaranty. A fully executed original counterpart of the Joint and Several Guaranty, signed by duly authorized officers of each Guarantor; C. CAII Pantbelaning AB Loan Agreement. All of the conditions precedent to the initial Advance set forth in Article IV of that certain Loan Agreement, dated as of September 21, 1994, among Nybyggaren 39:375 AB, under name change to CAII Pantbelaning Aktiebolag, certain of the Banks, and NationsBank, as Administrative Lender thereunder shall have been satisfied; and D. Other Items. Such other items as Administrative Agent or Banks may reasonably request prior to the execution, delivery and acceptance of this Second Amendment. 4. Amendments to Credit Agreement. Effective as of the date of this Second Amendment, and subject only to the conditions precedent set forth in Section 3 hereof, the Credit Agreement shall be, and is hereby, amended as follows: A. Section 1.04 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: "1.04. 'Adjusted Consolidated Net Cash Flow' shall have the same meaning as Consolidated Net Cash Flow, except in the event that the aggregate Net Cash Flow of all Consolidated Subsidiaries which are not Guarantors as of any calculation date (calculated in the same manner as Consolidated Net Cash Flow) (for purposes of this section only, the "Net Cash Flow" of such Consolidated Subsidiaries) shall exceed ten (10.0%) of the Consolidated Net Cash Flow for such period, then that portion in excess of ten percent (10.0%) of Consolidated Net Cash Flow shall be deducted from the Consolidated Net Cash Flow for such period in order to obtain the Adjusted Consolidated Net Cash Flow for such period." B. Section 1.49 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: "1.49. 'Guarantors' shall mean all Domestic Subsidiaries and all other Persons which, as of any date, shall have executed a Joint and Several Guaranty as of such date." - 3 - 22 C. The introductory portion of Section 1.54 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: "1.54. 'Interest Period' shall mean, with respect to a Eurodollar Advance or CD Advance, a period commencing (i) on the borrowing date of such Eurodollar Advance or CD Advance made pursuant to Section 2.01 of this Credit Agreement, or (ii) on the Conversion Date pertaining to such Eurodollar Advance or CD Advance, if such Eurodollar Advance or CD Advance is made pursuant to a conversion as described in Section 2.03(c) hereof; or (iii) on the date of borrowing specified in the Request for Borrowing in the case of a rollover to a successive Interest Period, and ending 30, 60, or 90 days thereafter (in the case of a CD Advance), or 14 days or one, two, three, or six months thereafter (in the case of a Eurodollar Advance) as Company shall elect in accordance with Section 2.03(c) of this Credit Agreement; provided, that:" D. Section 1.57 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: "1.57. 'Joint and Several Guaranty' shall mean the unconditional, unlimited guaranty or guaranties of payment of the Obligation, to be executed by all Domestic Subsidiaries, jointly and severally, in favor of Banks in accordance with item (b) of Section 7.01 hereof and Section 8.15 hereof, and all amendments, restatements, supplements thereof and thereto." E. Section 1.73 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: "1.73. 'Obligation' shall mean all present and future indebtedness, obligations, and liabilities of Company or any Subsidiary to Banks, Issuing Bank and any of them, and all renewals and extensions thereof, and any part thereof, including, without limitation, (i) all indebtedness, obligations and liabilities of Company to Banks and Issuing Bank arising pursuant to this Credit Agreement or represented by the Notes, and all interest accruing thereon, including any portion thereof, (ii) all indebtedness, obligations, reimbursement obligations and liabilities of Company to Issuing Bank arising by reason of any extension of credit, issuance or amendment of a Letter of Credit (or payment of any draft drawn thereunder), and (iii) all reasonable attorneys' fees incurred in the enforcement or collection of any and all of the foregoing, regardless of whether such indebtedness, obligations and liabilities are direct, indirect, fixed, contingent, joint, several or joint and several; together with all indebtedness, obligations and liabilities of Company or any Subsidiary evidenced or arising pursuant to any of the other Loan Papers, and all renewals and extensions thereof, or part thereof." - 4 - 23 F. Section 1.82 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: "1.82. 'Private Placement Debt' shall mean the indebtedness of Company (and Guaranty of Domestic Subsidiaries) in the aggregate original principal amount of $30,000,000.00 under its senior notes designated "8.33% Senior Notes Due May 1, 2003", payable in accordance with the terms of such notes and the Note Agreement." G. Section 1.96 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: "1.96. 'Subrogation and Contribution Agreement' shall mean the subrogation and contribution agreement or agreements to be executed by Company and all Domestic Subsidiaries in accordance with item (b) of Section 7.01 hereof and Section 8.15 hereof, and all amendments, restatements and supplements thereof and thereto." H. Section 1.97 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: "1.97. 'Subsidiary' of Company means any corporation, partnership, joint venture, trust or estate of which (or in which) 50% or more of: (a) the outstanding capital stock having voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (b) the interest in the capital or profits of such partnership or joint venture, or (c) the beneficial interest in such trust or estate, is at the time directly or indirectly owned by Company, by Company and one or more of its Subsidiaries or by one or more of Company's Subsidiaries; provided, however, before Company may form or acquire a Subsidiary which is not a corporation, Company shall provide written notice to the Banks of its intent to form or create such Subsidiary and Banks shall have consented in writing to the formation or creation of such Subsidiary." - 5 - 24 I. Section 1.103 of the Credit Agreement is hereby amended by (i) deleting the "." at the end thereof and inserting "and" in lieu thereof and (ii) adding the following new clause (ix) thereto to read as follows: "(ix) with respect to Subsidiaries organized under the laws of Sweden, certificates of deposit and other instruments substantially equivalent to a certificate of deposit maturing within 180 days from the date of acquisition and issued by a bank or trust company organized and located in the Sweden having an IBCA rating on long term debt of A+ or better." J. Section 1.106B of the Credit Agreement is hereby added to the Credit Agreement immediately following Section 1.106A of the Credit Agreement to read as follows: "1.106B. Additional Defined Terms. (a) "CAII Pantbelaning AB Loan Agreement" shall mean that certain Loan Agreement, dated as of September 21, 1994, among Nybyggaren 39:375 AB, under name change to CAII Pantbelaning Aktiebolag, a Swedish joint stock company and wholly-owned Subsidiary of Borrower, the lenders party thereto and NationsBank of Texas, National Association, as Administrative Lender, as amended, modified, supplemented or restated from time to time. (b) "Domestic Subsidiary" shall mean any Subsidiary of Company which is not a Foreign Subsidiary. (c) "Foreign Subsidiary" shall mean CAII Pantbelaning AB, a Swedish joint stock company, Svensk Pantbelaning AB, a Swedish joint stock company, Harvey & Thompson, and, in addition, any Subsidiary acquired, incorporated or otherwise established by Company or any other Subsidiary which is organized under the laws of a jurisdiction other than the United States of America, any state thereof or the District of Columbia. (d) "Hjelm Acquisition" shall mean the acquisition by CAII Pantbelaning AB of all authorized, issued and outstanding shares of Thomas Hjelm AB, a Swedish joint stock company, pursuant to the terms of that certain Share Purchase Agreement, dated as of September 22, 1994, between CAII Pantbelaning AB and Erik Thomas Hjelm. (e) "SEK" shall mean the legal currency of Sweden." K. Section 4.05 of the Credit Agreement is hereby amended and restated in its entirety as follows: - 6 - 25 "4.05. Payment of Interest. Interest on the unpaid principal amount of each Prime Advance shall be payable quarterly as it accrues on the last Business Day of each March, June, September and December during the Revolving Credit Period and on the Termination Date. Interest on the unpaid principal amount of each Eurodollar Advance and CD Advance shall be payable as it accrues on the last day of the Interest Period with respect thereto; provided, however, if such Interest Period has a duration of more than three months with respect to a Eurodollar Advance or 90 days with respect to a CD Advance, interest shall also be payable on each day that occurs during such Interest Period every three months with respect to a Eurodollar Advance and every 90 days with respect to a CD Advance from the first day of such Interest Period." L. Section 6.20 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: "6.20. Subsidiaries; Trade Names. Except for Consolidated Subsidiaries and any New Subsidiaries of which Company has notified Banks in writing with respect thereto (which New Subsidiaries, if a Domestic Subsidiary, shall strictly comply with Section 8.15 hereof), Company has not formed, created or acquired any Subsidiary. All trade names used by any of the Company and/or Subsidiaries have been provided in writing to Banks, and assumed name certificates have been duly filed of record with appropriate Governmental Authorities for each of such trade names." M. Subsection (a) of Section 8.14 of the Credit Agreement is hereby amended by amending the title thereto to read as follows: "(a) Consolidated Indebtedness and Letter of Credit Liability to Consolidated Funded Debt plus Consolidated Net Worth." N. Subsection (e) of Section 8.14 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: "(e) Restricted Payments. Company will not, and will not permit any Subsidiary to, (i) declare or make any Dividends, (ii) purchase, redeem or acquire for value any of Company's or any Subsidiary's Stock (iii) make any principal payment on (or make any payment, transfer or deposit for the purpose of canceling, extinguishing, satisfying or defeasing) any indebtedness of Company which is subordinate in right of payment to the Notes or any of the Obligation, (iv) set aside funds for any such purposes or (v) become liable to do any of the foregoing (in each case, a "Restricted Payment") unless, on the effective date thereof (and immediately after giving effect thereto), (A) no Event of Default or Potential Event of Default shall exist and (B) the aggregate amount of all - 7 - 26 Restricted Payments made by Company and all Subsidiaries since May 1, 1993 does not exceed twenty percent (20.0%) of Consolidated Adjusted Net Income for the period commencing on January 1, 1992 and ending on such effective date. Notwithstanding the foregoing provisions of this Section 8.14(e), Company may, so long as no Event of Default or Potential Event of Default shall be in existence or shall result therefrom, purchase, redeem or acquire shares of Company's Stock to the extent of the net cash proceeds received by Company during the immediately preceding 18-month period from the sale of other shares of Company's Stock, in which event both the receipt and expenditure of such proceeds shall be excluded from any calculation under the immediately preceding paragraph above. Nothing in this Section 8.14(e) shall prohibit any (i) Subsidiary from making any Restricted Payment to the Company or any wholly-owned Subsidiary which has executed a Joint and Several Guaranty or (ii) Svensk Pantbelaning AB from making any Restricted Payment to CAII Pantbelaning AB, and no such Restricted Payment in either case shall be taken into account in any calculation under the immediately preceding paragraph above." O. Subsection (g) of Section 8.14 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: "(g) Certain Consolidated Indebtedness and Letter of Credit Liability to Adjusted Consolidated Net Cash Flow. Company shall not permit, as of the end of fiscal quarters of Company indicated below, the ratio of (i) the sum of (A) outstanding unpaid indebtedness under the Notes, plus (B) the outstanding Private Placement Debt, plus (C) Letter of Credit Liability, plus (D) outstanding unpaid indebtedness under the CAII Pantbelaning AB Loan Agreement, each as of the end of such fiscal quarter, to (ii) Adjusted Consolidated Net Cash Flow for the most recent four (4) fiscal quarters of Company to be greater than (A) 4.50 to 1.0 as of the last fiscal quarter of each fiscal year-end of Company or (B) 5.00 to 1.0 as of any other fiscal quarter of Company." P. Section 8.15 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: "8.15. New Subsidiaries. Company has advised Banks that Company intends to form new, wholly owned Subsidiaries (each a "New Subsidiary"), after the date hereof. Promptly upon the formation or creation of any New Subsidiary which is a Domestic Subsidiary and prior to the consummation of any business by any such New Subsidiary, Company shall cause such New Subsidiary to execute and deliver to Administrative Agent, for each Bank, a Joint and Several Guaranty and a Subrogation and Contribution Agreement and related corporate and authorizing documents and to furnish opinions and such other items as - 8 - 27 Majority Banks may reasonably request which are satisfactory to Majority Banks." Q. Section 9.01 of the Credit Agreement is hereby amended by amending clauses (vi), (x), (xii) and (xiii) thereof to read as follows: "(vi) intercompany loans and advances, provided that the aggregate amount of outstanding loans and advances made after March 31, 1993 by Company and Subsidiaries to or in Persons located or doing substantially all of their business outside of the United States (including, without limitation, any Foreign Subsidiary), together with Investments made pursuant to Section 9.03(iii) hereof, Investments made pursuant to Section 9.03(x) hereof which are outside the United States and acquisitions made pursuant to Section 9.09(ii)(A)(y) hereof, shall not exceed $5,000,000.00 at any time, (x) indebtedness of Harvey & Thompson under an unsecured line of credit not to exceed 5,000,000.00 British Pounds Sterling in aggregate principal amount, (xii) existing indebtedness of Express Cash International Corporation in respect of Capital Leases permitted under the terms of the Note Agreement, and (xiii) indebtedness outstanding in respect of the CAII Pantbelaning AB Loan Agreement not to exceed SEK 193,750,000.00 in aggregate principal amount." R. Section 9.03 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: "9.03. Limitation on Investments, Company will not, and will not permit any of Subsidiaries to, make or have outstanding any Investments in or to any Person, except for (i) pawn transactions and pawn loans in the ordinary course of its day to day business, (ii) ownership of Stock of Subsidiaries which have executed a Joint and Several Guaranty, (iii) ownership of Stock of Foreign Subsidiaries, provided that the aggregate amount of such Investments, together with loans and advances permitted under Section 9.01(vi) hereof, acquisitions made pursuant to Section 9.09(ii)(A)(y) hereof, and Investments made pursuant to Section 9.03(x) hereof which are outside the United States, shall not exceed $5,000,000 at any time, (iv) Temporary Cash Investments and such other "cash equivalent" investments as Majority Banks may from time to time approve, (v) other Investments permitted under Section 9.09 hereof, (vi) Investments for the purchase of real estate made after July 1, 1993, provided that such Investments shall only be for the purpose of operating pawnshops and provided further that the cumulative amount of such Investments shall not exceed - 9 - 28 $5,000,000.00, (vii) loans to officers of Company and its Subsidiaries not to exceed at any time an aggregate amount of $5,000,000, (viii) the Hjelm Acquisition, (ix) any other investments previously made in or to any Person as reflected on the December 31, 1992 financial statements referred to in Section 6.06 hereof, provided that no further Investments (whether by loan or purchase or otherwise) shall be made in or to such Person except as permitted elsewhere herein, and (x) any other Investments which other Investments shall not exceed on any date an aggregate amount equal to the product obtained by multiplying (i) Consolidated Tangible Net Worth times (ii) .075 on such date." S. Section 9.09 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: "9.09. Liquidation, Mergers, Consolidations, Acquisitions and Dispositions of Substantial Assets. Company will not, and will not permit any of Subsidiaries to, (i) dissolve or liquidate, (ii) become a party to any merger or consolidation, or acquire by purchase, lease or otherwise all or substantially all of the assets or Stock, bonds or other investment securities of any Person, except for (A) such acquisitions by Company or any Subsidiary only with respect to existing lines of business of Company and Subsidiaries as of December 31, 1992, where Company or any Subsidiary becomes the owner of assets or stock of such other Person, provided that (x) acquisitions of real estate after the date hereof shall only be for the purpose of operating pawnshops and shall be subject to the provisions of Section 9.03(vi) hereof, (y) such acquisitions outside the United States shall be permitted only to the extent that the aggregate amount of such acquisitions made after July 1, 1993 by Company and Subsidiaries of or in Persons located or doing business outside the United States, together with loans and advances permitted under Section 9.01(vi) hereof, Investments made pursuant to Section 9.03(iii) hereof, and Investments made pursuant to Section 9.03(x) hereof which are outside the United States, is less than $5,000,000.00 at any time, and (z) the amount of any such acquisition within the United States (whether involving assets, stock, or both assets and stock) made after July 1, 1993 shall not exceed $20,000,000.00, (B) acquisitions of operating assets located in the United States in the ordinary course of business with respect to the existing lines of business of Company and Subsidiaries as of December 31, 1992, and (C) the Hjelm Acquisition, or (iii) sell, transfer, lease or otherwise dispose of all or any substantial part of its property or assets or business, provided, however, that the foregoing shall not operate to prevent mergers or consolidations of any wholly owned Subsidiary into Company or into a Guarantor or a sale, transfer or lease of assets by any wholly owned Subsidiary to Company or to a Guarantor." T. Section 9.14 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: - 10 - 29 "9.14. No New Subsidiaries. Neither Company nor any Subsidiary shall create or form any Subsidiary other than New Subsidiaries of which Company shall have notified Banks in writing and which, if a New Subsidiary is a Domestic Subsidiary, such New Subsidiary strictly complies with Section 8.15 hereof." U. Section 10.01 of the Credit Agreement is hereby amended by (i) deleting the "or" at the end of Section 10.01(h) thereof, (ii) deleting the "." at the end of Section 10.01(i) and inserting "; or" in lieu thereof and (iii) adding the following new Section 10.01(j) thereto to read as follows: "(j) an "Event of Default" as defined in the CAII Pantbelaning AB Loan Agreement shall occur." 5. Certain Loan Papers. Each of the undersigned Guarantors hereby consents to the terms of this Second Amendment, the Joint and Several Guaranty and other Loan Papers and to the execution hereof and thereof and further agrees and confirms that (i) Joint and Several Subrogation and Contribution Agreement continue in full force and effect, except as provided in Section 5.01 of the Joint and Several Guaranty, (ii) neither the execution of this Second Amendment, the Credit Agreement, the Joint and Several Guaranty or any other Loan Papers in connection herewith or therewith, nor the consummation of the transactions described herein or therein shall alter the liability or obligations of any of the Guarantors under the terms of the Joint and Several Guaranty and the Subrogation and Contribution Agreement, and (iii) each reference in the Joint and Several Guaranty and the Subrogation and Contribution Agreement to the "Loan Agreement" or the "Senior Revolving Credit Facility Agreement" shall be deemed to refer to the Credit Agreement, as amended by this Second Amendment. 6. Further Assurances. Company, its Subsidiaries and all Affiliates of Company which shall ever execute Loan Papers, including without limitation Guarantors, shall each make, execute or endorse, and acknowledge and deliver or file or cause same to be done, all such documents, notices or other assurances, and take all such other action consistent with the terms and provisions of the Credit Agreement, as amended hereby, as Majority Banks or Administrative Agent may, from time to time, deem reasonably necessary or proper in connection with this Second Amendment. 7. Scope of Amendments. Any and all other provisions of the Credit Agreement and any other Loan Papers are hereby amended and modified wherever necessary and even though not specifically addressed herein, so as to conform to the amendments and modifications set forth in this Second Amendment. 8. Limitation on Agreements. The amendments set forth herein are limited in scope as described herein and shall not be deemed (a) to be a consent under or waiver of any other term or condition in the Credit Agreement or any of the Loan Papers, or (b) to prejudice any right or rights which any of Banks or Administrative Agent now has or may have in the future - 11 - 30 under, or in connection with the Credit Agreement, as amended hereby, the Notes, the Loan Papers, or any of the documents referred to herein or therein. 9. Governing Law. This Second Amendment has been prepared, is being executed and delivered and is intended to be performed in the State of Texas, and the substantive laws of such state and the applicable federal laws of the United States of America shall govern the validity, construction, enforcement and interpretation of this Second Amendment. 10. Multiple Counterparts. This Second Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same agreement, and any of the parties hereto may execute this Second Amendment by signing any such counterpart. By signing below where indicated, the undersigned, CASH AMERICA, INC. OF SOUTH CAROLINA, FLORIDA CASH AMERICA, INC., GEORGIA CASH AMERICA, INC., CASH AMERICA, INC. OF LOUISIANA, CASH AMERICA, INC. OF NORTH CAROLINA, CASH AMERICA, INC. OF TENNESSEE, CASH AMERICA, INC. OKLAHOMA, CASH AMERICA, INC. OF KENTUCKY, CASH AMERICA PAWN, INC. OF OHIO, CASH AMERICA MANAGEMENT L.P., CASH AMERICA PAWN L.P., CASH AMERICA HOLDING, INC., EXPRESS CASH INTERNATIONAL CORPORATION (successor in interest to Express Cash Acquisition, Inc.), CASH AMERICA, INC. OF ALABAMA, CASH AMERICA, INC. OF COLORADO, CASH AMERICA, INC. OF INDIANA, CASH AMERICA, INC. and CASH AMERICA OF MISSOURI, INC., as Consolidated Subsidiaries and as Guarantors, and HARVEY & THOMPSON LIMITED, CAII PANTBELANING AB and SVENSK PANTBELANING AB, as Consolidated Subsidiaries, do each acknowledge and approve the Credit Agreement, as amended by this Second Amendment, and the Loan Papers, and the terms thereof, and specifically agree to comply with all provisions therein and herein which refer to or affect such Guarantors, the Joint and Several Guaranty, the Subrogation and Contribution Agreement and any matter in connection therewith. THE CREDIT AGREEMENT, AS AMENDED BY THIS SECOND AMENDMENT, AND THE LOAN PAPERS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. REMAINDER OF PAGE LEFT INTENTIONALLY BLANK - 12 - 31 IN WITNESS WHEREOF, Company, Banks, Guarantors, Consolidated Subsidiaries, Administrative Agent and Issuing Bank have executed this Second Amendment as of the day and year first above written. COMPANY CASH AMERICA INTERNATIONAL, INC. By: /s/ THOMAS A BESSANT, JR. Thomas A. Bessant, Jr. Vice President-Finance and Treasurer - 13 - 32 GUARANTORS CASH AMERICA, INC. OF SOUTH CAROLINA FLORIDA CASH AMERICA, INC. GEORGIA CASH AMERICA, INC. CASH AMERICA, INC. OF LOUISIANA CASH AMERICA, INC. OF NORTH CAROLINA CASH AMERICA, INC. OF TENNESSEE CASH AMERICA, INC. OF OKLAHOMA CASH AMERICA, INC. OF KENTUCKY CASH AMERICA PAWN, INC. OF OHIO CASH AMERICA MANAGEMENT L.P., a Delaware limited partnership, by its general partner, Cash America Holding, Inc. CASH AMERICA PAWN L.P., a Delaware limited partnership, by its general partner, Cash America Holding, Inc. CASH AMERICA HOLDING, INC. EXPRESS CASH INTERNATIONAL CORPORATION, a Delaware corporation CASH AMERICA, INC. OF ALABAMA CASH AMERICA, INC. OF COLORADO CASH AMERICA, INC. OF INDIANA CASH AMERICA, INC. CASH AMERICA OF MISSOURI, INC. By: /s/ THOMAS A. BESSANT, JR. Thomas A. Bessant, Jr. Vice President for All - 14 - 33 CONSOLIDATED SUBSIDIARIES HARVEY & THOMPSON LIMITED By: /s/ DANIEL R. FEEHAN Daniel R. Feehan, Director SVENSK PANTBELANING AB By: /s/ DANIEL R. FEEHAN Daniel R. Feehan, Director - 15 - 34 CONSOLIDATED SUBSIDIARIES NYBYGGAREN 39:375 AB By: /s/ DANIEL R. FEEHAN Daniel R. Feehan, Director - 15A - 35 CONSOLIDATED SUBSIDIARIES CAII PANTBELANING AKTIEBOLAG By: /s/ DANIEL R. FEEHAN Daniel R. Feehan, Director - 15A - 36 BANKS NATIONSBANK OF TEXAS, N.A. By: /s/ TODD SHIPLEY Todd Shipley Vice President TEXAS COMMERCE BANK NATIONAL ASSOCIATION By: /s/ MICHAEL BURR Michael Burr Senior Vice President BANK ONE, TEXAS, N.A. By: /s/ MIKE PALMER Mike Palmer Senior Vice President THE DAIWA BANK, LTD. By: /s/ KIRK L. STITES Kirk L. Stites Vice President By: /s/ JAMES T. WANG James T. Wang Vice President and Manager -16- 37 FIRST INTERSTATE BANK OF TEXAS, N.A. By: /s/ KIMBERLY WHITE Kimberly White Banking Officer -17- 38 ADMINISTRATIVE AGENT AND ISSUING BANK NATIONSBANK OF TEXAS, N.A. By: /s/ TODD SHIPLEY Todd Shipley Vice President -18- 39 THIRD AMENDMENT TO SENIOR REVOLVING CREDIT FACILITY AGREEMENT THIS THIRD AMENDMENT TO SENIOR REVOLVING CREDIT FACILITY AGREEMENT (the "Third Amendment") is entered into as of March 10, 1995, by and among NATIONSBANK OF TEXAS, N.A. ("NationsBank"), FIRST INTERSTATE BANK OF TEXAS, N.A. ("First Interstate"), BANK ONE, TEXAS, N.A. ("Bank One"), THE DAIWA BANK, LIMITED ("Daiwa") and TEXAS COMMERCE BANK NATIONAL ASSOCIATION (successor by merger to Texas Commerce Bank, National Association) ("Texas Commerce") (such banks, and their successors and assigns, are collectively referred to herein as "Banks"), CASH AMERICA INTERNATIONAL, INC., a Texas corporation ("Company"), and NationsBank as Issuing Bank and as Administrative Agent for Banks to the extent and in the manner provided for in the "Credit Agreement" (defined below and herein so called), with the acknowledgement, approval and agreement of all "Guarantors" and "Consolidated Subsidiaries" (as each of such terms is defined in the Credit Agreement) existing as of the date hereof. BACKGROUND. Banks, Company, Issuing Bank and Administrative Agent are parties to that certain Senior Revolving Credit Facility Agreement dated as of June 29, 1993, as amended by the First Amendment to Senior Revolving Credit Facility Agreement, dated as of June 7, 1994 and the Second Amendment to Senior Revolving Credit Facility Agreement, dated as of September 21, 1994 (said Credit Agreement, as amended, the "Credit Agreement"). Company has requested that Banks agree to certain amendments to the Credit Agreement as set forth in this Third Amendment. Banks are willing to consent to such amendments, subject to the terms and conditions of this Third Amendment. The parties desire to amend the Credit Agreement by this Third Amendment to reflect the agreements, modifications and amendments as set forth hereinbelow. AGREEMENT. NOW, THEREFORE, for and in consideration of the above premises and for other good and valuable consideration, the parties hereto agree as follows: 1. Definitions. Capitalized terms used in this Third Amendment which are defined in the Credit Agreement, as amended by this Third Amendment, shall have the same meanings as assigned therein when used herein, unless otherwise provided herein or the context hereof shall otherwise require. 2. Representations and Warranties. In order to induce Banks to enter into this Third Amendment, Company represents and warrants to Banks that: A. Company, Guarantors and Consolidated Subsidiaries (including without limitation all New Subsidiaries) each have the corporate power and requisite authority to 40 execute, deliver and carry out the terms and provisions of this Third Amendment, the Credit Agreement, as amended hereby and the other Loan Papers to be executed by them, and Company, Guarantors and Consolidated Subsidiaries have each taken all corporate action necessary to authorize such matters; B. Each Affiliate of Company which has executed or shall execute any Loan Papers (including without limitation Cash America Pawn L.P. and Cash America Management L.P., each a Delaware limited partnership) has the power and requisite authority to execute, deliver and carry out the terms and provisions of such Loan Papers; C. Neither the execution and delivery of this Third Amendment nor any other documents executed by Company or any of Guarantors, Consolidated Subsidiaries or other Affiliates of Company in connection herewith, nor the consummation of any of the transactions herein or therein contemplated, nor compliance with the terms and provisions hereof or thereof, will contravene or conflict with any provision of law, statute or regulation to which Company or any of its Subsidiaries or other Affiliates of Company or any of Guarantors is subject or any judgment, license, order or permit applicable to Company or any of its Subsidiaries or other Affiliates of Company or any of Guarantors or any indenture, agreement or other instrument to which Company or any of its Subsidiaries or other Affiliates of Company or Guarantors may be subject; no consent, approval, authorization or order of any court, Governmental Authority or third party is required in connection with the execution and delivery of this Third Amendment or any of the other documents executed and delivered in connection herewith or to consummate the transactions contemplated herein or therein; D. This Third Amendment, the Credit Agreement, as amended hereby, and the other Loan Papers are the legal and binding obligations of the parties executing such documents, enforceable in accordance with their respective terms, except as limited by bankruptcy, insolvency or other laws of general application relating to the enforcement of creditors' rights; E. As of the date of this Third Amendment, and after giving effect hereto, no event has occurred and is continuing which constitutes an Event of Default or a Potential Event of Default; and F. All of the representations and warranties of Company contained in Article 6 of the Credit Agreement, as amended by this Third Amendment, are true and correct as of the date hereof. 3. Conditions Precedent. This Third Amendment and the obligations of Banks hereunder are subject to the condition precedent that Administrative Agent shall have received for each Bank the following, each in form and substance satisfactory to Administrative Agent and such Bank: - 2 - 41 A. Third Amendment. A fully executed original counterpart of this Third Amendment, signed by duly authorized officers of all of the parties hereto; B. Authorization. A fully executed original officer's certificate and resolutions of Cash America Holding, Inc., in the form of Exhibit A; C. Other Items. Such other items as Administrative Agent or Banks may reasonably request prior to the execution, delivery and acceptance of this Third Amendment. 4. Amendments to Credit Agreement. Effective as of the date of this Third Amendment, and subject only to the conditions precedent set forth in Section 3 hereof, the Credit Agreement shall be, and is hereby, amended as follows: A. Section 1.04 of the Credit Agreement is deleted in its entirety and the following is substituted, in lieu thereof: 1.04. Adjusted Consolidated Net Cash Flow shall have the same meaning as Consolidated Net Cash Flow, except in the event that the aggregate Net Cash Flow of all Consolidated Subsidiaries which are not Guarantors as of any calculation date (calculated in the same manner as Consolidated Net Cash Flow) (for purposes of this Section 1.04 only, the "Net Cash Flow" of such Consolidated Subsidiaries) shall exceed (i) with respect to any calculation date occurring on or before September 30, 1994, ten percent (10.0%) of the Consolidated Net Cash Flow for such period and (ii) with respect to any calculation date occurring on or after October 1, 1994, fifteen percent (15.0%) of the Consolidated Net Cash Flow for such period, then that portion in excess of (i) ten percent (10.0%) (with respect to calculation dates occurring on or before September 30, 1994) or fifteen percent (15.0%) (with respect to calculation dates occurring on or after October 1, 1994) of Consolidated Net Cash Flow shall be deducted from the Consolidated Net Cash Flow for such period in order to obtain the Adjusted Consolidated Net Cash Flow for such period. B. Section 8.14(f) of the Credit Agreement is deleted in its entirety and the following is substituted in lieu thereof: (f) Minimum Fixed Charge Coverage. Company shall not permit, as of the end of any fiscal quarter of Company the ratio of (i) the sum of Consolidated Adjusted Net Income for the most recent four (4) fiscal quarters of Company plus the taxes, rents, leases and interest expenses deducted from gross income to obtain such Consolidated Adjusted Net Income for such four (4) fiscal quarters, to (ii) such rents, leases and interest expenses so deducted for such four (4) quarters, to be - 3 - 42 less than (A) with respect to each fiscal quarter ended on or before September 30, 1994, 2.50 to 1.0, (B) with respect to each fiscal quarter ended on December 31, 1994 and through December 31, 1995, 1.80 to 1.0, (C) with respect to each fiscal quarter ended on March 31, 1996 and through December 31, 1996, 1.85 to 1.0, and (D) with respect to each fiscal quarter ended on and after March 31, 1997, 1.90 to 1.0. 5. Certain Loan Papers. Each of the undersigned Guarantors hereby consents to the terms of this Third Amendment and other Loan Papers and to the execution hereof and thereof and further agrees and confirms that (a) the Joint and Several Guaranty and the Subrogation and Contribution Agreement continue in full force and effect, except as provided in Section 5.01 of the Joint and Several Guaranty, (b) neither the execution of this Third Amendment or any other Loan Papers in connection herewith or therewith, nor the consummation of the transactions described herein or therein shall alter the liability or obligations of any of the Guarantors under the terms of the Joint and Several Guaranty and the Subrogation and Contribution Agreement, and (c) each reference in the Joint and Several Guaranty and the Subrogation and Contribution Agreement to the "Loan Agreement" or the "Senior Revolving Credit Facility Agreement" shall be deemed to refer to the Credit Agreement, as amended by this Third Amendment. 6. Further Assurances. Company, its Subsidiaries and all Affiliates of Company which shall ever execute Loan Papers, including without limitation Guarantors, shall each make, execute or endorse, and acknowledge and deliver or file or cause same to be done, all such documents, notices or other assurances, and take all such other action consistent with the terms and provisions of the Credit Agreement, as amended hereby, as Majority Banks or Administrative Agent may, from time to time, deem reasonably necessary or proper in connection with this Third Amendment. 7. Scope of Amendments. Any and all other provisions of the Credit Agreement and any other Loan Papers are hereby amended and modified wherever necessary and even though not specifically addressed herein, so as to conform to the amendments and modifications set forth in this Third Amendment. 8. Limitation on Agreements. The amendments set forth herein are limited in scope as described herein and shall not be deemed (a) to be a consent under or waiver of any other term or condition in the Credit Agreement or any of the Loan Papers, or (b) to prejudice any right or rights which any of Banks or Administrative Agent now has or may have in the future under, or in connection with the Credit Agreement, as amended hereby, the Notes, the Loan Papers, or any of the documents referred to herein or therein. 9. Governing Law. This Third Amendment has been prepared, is being executed and delivered and is intended to be performed in the State of Texas, and the substantive laws of such state and the applicable federal laws of the United States of America shall govern the validity, construction, enforcement and interpretation of this Third Amendment. - 4 - 43 10. Multiple Counterparts. This Third Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same agreement, and any of the parties hereto may execute this Third Amendment by signing any such counterpart. By signing below where indicated, the undersigned, CASH AMERICA, INC. OF SOUTH CAROLINA, FLORIDA CASH AMERICA, INC., GEORGIA CASH AMERICA, INC., CASH AMERICA, INC. OF LOUISIANA, CASH AMERICA, INC. OF NORTH CAROLINA, CASH AMERICA, INC. OF TENNESSEE, CASH AMERICA, INC. OKLAHOMA, CASH AMERICA, INC. OF KENTUCKY, CASH AMERICA PAWN, INC. OF OHIO, CASH AMERICA MANAGEMENT L.P., CASH AMERICA PAWN L.P., CASH AMERICA HOLDING, INC., EXPRESS CASH INTERNATIONAL CORPORATION (successor in interest to Express Cash Acquisition, Inc.), CASH AMERICA, INC. OF ALABAMA, CASH AMERICA, INC. OF COLORADO, CASH AMERICA, INC. OF INDIANA, CASH AMERICA, INC. and CASH AMERICA OF MISSOURI, INC., as Consolidated Subsidiaries and as Guarantors, and HARVEY & THOMPSON LIMITED, CAII PANTBELANING AKTIEBOLAG and SVENSK PANTBELANING AB, as Consolidated Subsidiaries, do each acknowledge and approve the Credit Agreement, as amended by this Third Amendment, and the Loan Papers, and the terms thereof, and specifically agree to comply with all provisions therein and herein which refer to or affect such Guarantors, the Subrogation and Contribution Agreement and any matter in connection therewith. THE CREDIT AGREEMENT, AS AMENDED BY THIS THIRD AMENDMENT, AND THE LOAN PAPERS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK. - 5 - 44 IN WITNESS WHEREOF, Company, Banks, Guarantors, Consolidated Subsidiaries, Administrative Agent and Issuing Bank have executed this Third Amendment as of the day and year first above written. COMPANY CASH AMERICA INTERNATIONAL, INC. By: /s/ THOMAS A. BESSANT, JR. Thomas A. Bessant, Jr. Vice President-Finance and Treasurer THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK. - 6 - 45 GUARANTORS CASH AMERICA, INC. OF SOUTH CAROLINA FLORIDA CASH AMERICA, INC. GEORGIA CASH AMERICA, INC. CASH AMERICA, INC. OF LOUISIANA CASH AMERICA, INC. OF NORTH CAROLINA CASH AMERICA, INC. OF TENNESSEE CASH AMERICA, INC. OF OKLAHOMA CASH AMERICA, INC. OF KENTUCKY CASH AMERICA PAWN, INC. OF OHIO CASH AMERICA MANAGEMENT L.P., a Delaware limited partnership, by its general partner, Cash America Holding, Inc. CASH AMERICA PAWN L.P., a Delaware limited partnership, by its general partner, Cash America Holding, Inc. CASH AMERICA HOLDING, INC. EXPRESS CASH INTERNATIONAL CORPORATION, a Delaware corporation CASH AMERICA, INC. OF ALABAMA CASH AMERICA, INC. OF COLORADO CASH AMERICA, INC. OF INDIANA CASH AMERICA, INC. CASH AMERICA OF MISSOURI, INC. By: /s/ THOMAS A. BESSANT, JR. Thomas A. Bessant, Jr. Vice President for All - 7 - 46 CONSOLIDATED SUBSIDIARIES HARVEY & THOMPSON LIMITED By: /s/ DANIEL R. FEEHAN Daniel R. Feehan, Director SVENSK PANTBELANING AB By: /s/ DANIEL R. FEEHAN Daniel R. Feehan, Director CAII PANTBELANING AKTIEBOLAG By: /s/ DANIEL R. FEEHAN Daniel R. Feehan, Director - 8 - 47 BANKS NATIONSBANK OF TEXAS, N.A. By: /s/ TODD SHIPLEY Todd Shipley Senior Vice President FIRST INTERSTATE BANK OF TEXAS, N.A. By: /s/ KIMBERLY WHITE Kimberly White Banking Officer BANK ONE, TEXAS, N.A. By: /s/ BARRY KROMANN Barry Kromann Vice President THE DAIWA BANK, LIMITED By: /s/ KIRK L. STITES Kirk L. Stites Vice President By: /s/ JAMES T. WANG James T. Wang Vice President and Manager - 9 - 48 TEXAS COMMERCE BANK NATIONAL ASSOCIATION By: /s/ MICHAEL BURR Michael Burr Senior Vice President ADMINISTRATIVE AGENT AND ISSUING BANK NATIONSBANK OF TEXAS, N.A. By: /s/ TODD SHIPLEY Todd Shipley Senior Vice President - 10 - EX-13 6 ANNUAL REPORT 1 EXHIBIT 13 HISTORICAL SUMMARY OF OPERATING RESULTS AND FINANCIAL POSITION - December 31 -------------------------------------------------------------------------------- (Dollars in thousands, except per share)
1994 1993 1992 1991(a) 1990 1989 1988 1987 ---------------------------------------------------------------------------------------------------------------- OPERATIONS - for the year Revenues $262,105 $224,700 $185,410 $137,681 $115,644 $87,008 $66,935 $39,223 Cost of sales 126,254 112,882 90,756 68,716 57,207 42,048 32,309 18,174 Operations expense 78,204 64,178 54,572 39,247 32,070 24,415 18,446 11,419 Administration expense 13,918 12,416 11,362 7,692 7,297 6,343 5,460 3,021 Amortization and depreciation 12,359 9,962 7,026 4,738 3,944 3,139 2,635 1,532 ---------------------------------------------------------------------------------------------------------------- Operating income 31,370 25,262 21,694 17,288 15,126 11,063 8,085 5,077 Interest expense, net 6,265 3,608 1,419 1,720 1,492 203 139 309 Other income/(expense) (147) 112 73 250 57 241 54 58 Securities gains - - - 1,646 - - - - ---------------------------------------------------------------------------------------------------------------- Income before taxes and extraordinary item 24,958 21,766 20,348 17,464 13,691 11,101 8,000 4,826 Provision for income taxes 9,460 7,927 7,342 6,951 5,029 4,099 2,913 2,085 ---------------------------------------------------------------------------------------------------------------- Income before extraordinary item 15,498 13,839 13,006 10,513 8,662 7,002 5,087 2,741 Extraordinary item - - - 393 - - - - ---------------------------------------------------------------------------------------------------------------- Net income $ 15,498 $ 13,839 $ 13,006 $ 10,906 $ 8,662 $ 7,002 $ 5,087 $ 2,741 ================================================================================================================ Earnings per share - Fully diluted $.53 $.48 $.45 $.44 $.36 $.29 $.22 $.16 Dividends per share $.05 $.05 $.04 3/4 $.04 $.02 2/3 $.02 $.02 $.01 2/3 Weighted average shares outstanding - Fully diluted (in thousands) 29,269 29,070 28,788 24,640 24,216 24,110 23,050 17,646 ---------------------------------------------------------------------------------------------------------------- FINANCIAL POSITION - at year end Loans $ 78,095 $ 49,089 $ 46,926 $ 28,990 $ 23,305 $20,043 $12,893 $10,220 Inventory 80,894 62,817 55,007 35,610 30,335 21,103 15,331 11,677 Working capital 168,209 117,727 109,902 70,741 59,595 46,334 46,042 26,120 Total assets 324,257 245,094 216,449 137,693 116,920 97,855 90,208 66,827 Long-term debt 119,796 64,000 50,000 30,528 20,050 9,575 2,709 8,628 Stockholders' equity 183,434 166,722 153,946 100,099 89,937 81,570 82,484 53,296 Current ratio 9.0x 9.3x 9.8x 11.0x 9.6x 7.9x 10.2x 6.3x Debt to equity 65.3% 38.4% 32.5% 30.5% 22.3% 11.7% 3.3% 16.2% ---------------------------------------------------------------------------------------------------------------- LOCATIONS - at year end 340 280 249 178 151 123 101 82 ================================================================================================================
(a) Income before extraordinary item and net income include $469,000 of securities gains, net of taxes. 12 2 FINANCIAL CONDITION AND RESULTS OF OPERATIONS -------------------------------------------------------------------------------- IMPACT OF EXPANDING OPERATIONS The Company has expanded its operations over the three years ended December 31, 1994 by acquiring 88 stores and by opening an additional 88 units. Fourteen stores were closed or combined into existing locations to end the three-year period with 340 operating pawnshops, or a net addition of 162 stores compared to the December 31, 1991 total of 178. Of these new locations, 28 stores were acquired and two were opened in the United Kingdom, with the initial 26 of these units acquired in the Harvey & Thompson acquisition during February 1992. On June 30, 1993 the Company acquired 18 pawnshops in Texas from Express Cash International Corporation for the largest domestic acquisition in the period. On September 22, 1994 a subsidiary of Cash America acquired the largest pawnbroking chain in the Kingdom of Sweden, Svensk Pantbelaning, which operates 10 stores in Stockholm and five other cities throughout Sweden. Revenues net of cost of sales increased 21% in 1994 and 18% in 1993, with stores in operation for at least one year increasing 9% in 1994 and 3% in 1993. The remaining increase was attributed to increases in the average number of stores in operation of 18% in 1994 and 19% in 1993. SALES AND GROSS PROFIT Retail sales have increased during the periods by 12% in 1994 and 22% in 1993. Sales increases in 1994 were impacted by flat same store sales in 1994 compared to 4% same store sales growth during 1993 combined with the increase in average number of locations as noted above. Gross profit margins during 1994 and 1993 were consistent at 19%, compared to the 21% margin during 1992. Higher gross profit margins in 1992 were the result of the Company deriving an increased percentage of its sales from purchased merchandise than from unredeemed pledged goods. Since the Company has a higher cost basis in its unredeemed pledged goods than in purchased merchandise, this change in the mix of merchandise sold decreased margins after 1992. Additionally, during the most recent two-year period the Company operated with higher average inventory levels per store. Historically, when higher average inventory levels per store have occurred, the Company has utilized price discounting to increase sales and reduce inventories per store, which depressed gross profit margins on sales in 1994 and 1993 compared to 1992. PAWN SERVICE CHARGES Pawn service charge revenues increased 25% in 1994 and 20% in 1993 as a result of same store increases in average pawn loans outstanding of 12% in 1994 and 5% in 1993, and the increases in the average number of stores in operation as noted above. In addition, the results of operations of Svensk Pantbelaning during the period it was owned by the Company contributed 3% of the increase in pawn service charges during 1994. During the periods the consolidated average yield on loans outstanding remained relatively constant, although several factors applied pressure to the yield in offsetting directions. The approximate 172% annual yield represents a weighted average of the distinctive loan yields which the Company realizes in the three different countries in which it operates. In its domestic operations, Cash America has historically realized in excess of a 200% annual yield, with the three-year period producing yields of 214% in 1994, 201% in 1993 and 200% in 1992. Internationally, loans at Harvey & Thompson in the United Kingdom yielded 71% during 1994 compared to yields in 1993 and 1992 of just under 70%, while Svensk Pantbelaning in Sweden yielded approximately 50% per annum during the period after its acquisition in 1994, producing a blended international yield in 1994 of 65%. Domestic yields increased in 1994 compared to the two earlier years as a result of an increase in loans in the lower-dollar loan stratification, which produces higher pawn service charge rates, and due to expansion into states which allow higher rates than those states in which the Company has historically operated. The combination of the higher domestic yield and lower international yield in 1994 produced a consolidated annual yield on loans of 172%, which is consistent with the 173% and 171% annual yields achieved during 1993 and 1992, respectively. The increases in average loan balance per average location in operation and in the average pawn loan at the end of the year are both a result of the acquisition of the Swedish pawnbroking locations, which have higher averages per location and amounts per loan. There were no significant variations during the three periods in either the U.S. or the U.K. relating to the average loan balance per average location or the average pawn loan at end of year. EXPENSES Operating and administrative expenses as a percentage of revenues net of cost of sales have declined slightly throughout the periods as a result of greater efficiencies of scale of operating multiple units and increased international operations. Domestic increases in the number of new store start-ups, from an average of 23 in 1992 and 1993 to 41 in 1994, caused domestic expenses as a percentage of revenues net of cost of sales to increase from 70% in 1993 to 70.5% in 1994, which were both improved from 71.5% in 1992 as a result of spreading costs of administration over a larger store base. International improvement in this ratio due to improved efficiencies and the addition of Svensk Pantbelaning in 1994 caused the overall percentage to decline compared to 1993 despite the domestic increase. The lower cost structure in the U.K. and Sweden is due to the nature of the loans-only, primarily jewelry operation, in which low loan forfeiture rates and the resulting reduced retail operations allow for sharply lower personnel, occupancy and other costs than in domestic stores. Depreciation and amortization as a percentage of revenues net of cost of sales increased during both 1993 and 1994 as a result of two factors. Depreciation and amortization related to leasehold improvements, equipment, startup expenses, and intangible assets on the 162 net store additions during the periods accounted for much of the increase. Additionally, depreciation expense increased as a result of the Company's installation during the periods of a point-of-sale computer system and related supporting systems, which was substantially completed in late 1994. Interest expense increased sharply during the periods due to increased interest rates and higher levels of average debt outstanding. Rates increased in 1993 over 1992 as a result of a long-term, fixed rate debt related to a private placement of $30 million completed in May 1993. During 1994 short-term rates on the Company's borrowings under its bank line of credit increased due to the increasing interest rate market in the United States in the second half of the year. Also contributing to the increased interest expense was the acquisition of Svensk Pantbelaning in September 1994, which was financed almost entirely with borrowings of Swedish kronor under a term loan which bears interest at rates in effect for Swedish currency which are higher than U.S. short-term interest rates. 13 3 FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued -------------------------------------------------------------------------------- OTHER INCOME Other income consists of rent income, miscellaneous refunds, gains or losses on the disposition of non-operating assets and other items. In 1994 the Company recognized a loss before taxes on the sale of non-operating assets of approximately $200,000. In addition, the $23,000 adjustment to the Company's equity investment in Mr. Payroll Corporation is included as a reduction of other income for 1994. INCOME TAXES Effective income tax rates have increased during the periods to 37.9% in 1994 from 36.4% in 1993 and 36.1% in 1992. On January 1, 1993 the Company changed its method of accounting for income taxes from the deferred method to the liability method required by FASB Statement No. 109, resulting in the reduction of income taxes by $265,000. Without this change the resulting rate would have been 37.6% in 1993. The increase in rates in 1994 and 1993 as compared to 1992 is due to the implementation of provisions in the 1993 Revenue Reconciliation Act and to increased earnings in states which have state income taxes. IMPACT OF FOREIGN OPERATIONS ON FUTURE FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company is subject to the risk of unexpected changes in foreign currency exchange rates by virtue of its operations in the United Kingdom and the Kingdom of Sweden. The Company's foreign assets, liabilities and earnings are denominated in either British pounds sterling or Swedish kronor, but are converted to U.S. dollars in accordance with generally accepted accounting principles for consolidation into the Company's financial statements. Any translation losses or gains resulting from converting balance sheet accounts are recorded in the equity section of the balance sheet. At December 31, 1994 the Company had recorded a cumulative reduction to stockholders' equity of $3.7 million as a result of fluctuations in the foreign currency exchange rates. Of this amount, a $1.6 million increase occurred in 1994 and a $600,000 decrease occurred during 1993, resulting from changes in the exchange rates in the United Kingdom as of the balance sheet dates in 1994, 1993 and 1992, respectively. Foreign currency exchange rates had an immaterial effect on the balance sheet for Svensk Pantbelaning at December 31, 1994 as compared to the acquisition date due to its small net equity at year-end, resulting from the Company acquiring the subsidiary with debt denominated in Swedish kronor. For income statement purposes, British pounds sterling during 1994, 1993, and 1992 and Swedish kronor in 1994 were translated to U.S. dollars using the average foreign exchange rate in effect for each of the respective years. Net income from foreign operations during 1994, 1993 and 1992 translated to $4.1 million, $2.6 million and $2.3 million, respectively, for the three years. Future earnings and comparisons with prior periods reported by the Company may fluctuate depending on applicable average exchange rates in effect during the periods. In the past, the Company has entered into hedging arrangements designed to minimize exchange rate fluctuations that may impact reported earnings and their comparisons, and it may consider similar transactions in future periods. LIQUIDITY AND CAPITAL RESOURCES For the year 1994, the Company invested $12 million on the acquisition of 21 pawnshops and $23 million on real estate, leasehold improvements, and equipment for startup locations, remodeling selected pawnshops, additions to its computer systems, and other fixed asset purchases. Included in these acquisitions was the September 22, 1994 acquisition of all of the shares of a group of companies in Sweden which comprise the Svensk Pantbelaning chain of 10 pawnbroking locations. The transaction was denominated in Swedish kronor, and at foreign exchange rates in effect at the date of finalization the Company paid $5 million and assumed liabilities of $17 million to obtain the companies, which had as their principal assets pawn loans outstanding of $16 million. The funding of capital investments has come from the Company's $125 million revolving line of credit, operating earnings, and a term loan for 193,750,000 Swedish kronor ($26 million at December 31, 1994 exchange rates), which was used to facilitate the acquisition of Svensk Pantbelaning. The term loan was established on September 21, 1994 by the Company's wholly-owned subsidiary, CAII Pantbelaning AB, matures three years from the date of inception, and has no scheduled amortization of the principal balance prior to maturity. Interest is payable at Stockholm InterBank Offered Rate (STIBOR) plus 1%. The $125 million revolving line of credit is with a syndicate of five banks, had a balance of $64 million at December 31, 1994, and bears interest at a rate of LIBOR plus 1%. The line of credit is segmented into two traunches--a $100 million three-year facility and a $25 million one-year facility. All borrowings in 1994 were under the three-year facility. Harvey & Thompson has entered into a 5 million pound sterling line of credit with a U.K.-based commercial bank, with no usage under this line in 1994. Effective May 12, 1993, the Company issued $30 million of Senior Unsecured Notes, maturing May 2003, in a private placement to Teachers Insurance and Annuity Association of America. Proceeds were used to pay down on the Company's bank line of credit. The unsecured notes bear interest at 8.33% per year and are payable in seven equal principal installments beginning May 1, 1997. Effective June 2, 1993, the Company entered into interest rate exchange contracts on $20 million of the debt. The effective interest rate under the notes for the twelve months ended December 31, 1994 was 8.12%. For the six-month period commencing December 2, 1994 the effective interest rate on the notes is 9.52% on an annualized basis. On July 13, 1994 the Company acquired for $2 million a 49% interest in Mr. Payroll Corporation, a private, Texas-based company which sells franchised check-cashing kiosks primarily in the southwestern states. The Company has accounted for the investment and the earnings therefrom under the equity method of accounting. Management believes that borrowings available under its $125 million and 5 million pound sterling revolving bank line of credit facilities, cash generated from operations and current working capital of $168 million will be sufficient to meet the Company's anticipated future capital requirements. 14 4 FINANCIAL CONDITION AND RESULTS OF OPERATIONS - December 31 -------------------------------------------------------------------------------- (Dollars in thousands) SUMMARY The Company has expanded its operations significantly over the past three years by increasing its operating locations from 178 locations at December 31, 1991, to 340 locations at December 31, 1994. This growth in store locations has occurred from acquisitions and the start-up of new Company stores. Presented below is selected consolidated data for the Company for the three years ended December 31:
1994 1993 1992 ---------------------------------------------------------------------------------------------------- REVENUES NET OF COST OF SALES Sales $156,247 $139,950 $115,008 Cost of sales 126,254 112,882 90,756 ---------------------------------------------------------------------------------------------------- Gross profit 29,993 22.1% 27,068 24.2% 24,252 25.6% Pawn service charges 105,858 77.9% 84,750 75.8% 70,402 74.4% ---------------------------------------------------------------------------------------------------- Revenues net of cost of sales $135,851 100.0% $111,818 100.0% $ 94,654 100.0% ==================================================================================================== OTHER DATA Gross profit as a percentage of sales 19.2% 19.3% 21.1% Average annual inventory turnover 1.8x 1.8x 2.1x Average inventory per average location in operation $230 $236 $201 Yield on loans outstanding 172% 173% 171% Average loan balance per average location in operation $202 $187 $187 Average pawn loan at end of year (whole dollars) $ 89 $ 75 $ 77 Expenses as a percentage of revenues net of cost of sales: Operations and Administration 67.8% 68.5% 69.7% Depreciation and amortization 9.1 8.9 7.4 Interest, net 4.6 3.2 1.5 Income before income taxes as a percent of total revenues 9.5% 9.7% 11.0% Locations in operation: Beginning of year 280 249 178 Acquired 21 22 45 Start-ups 42 19 27 Combined or closed (3) (10) (1) ---------------------------------------------------------------------------------------------------- End of year 340 280 249 ---------------------------------------------------------------------------------------------------- Average number of locations in operation 309 262 220 ====================================================================================================
15 5 CONSOLIDATED BALANCE SHEETS - December 31 -------------------------------------------------------------------------------- (Dollars in thousands)
1994 1993 -------------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $ 4,827 $ 2,245 Service charges receivable 18,626 12,740 Loans 78,095 49,089 Inventory, net 80,894 62,817 Prepaid expenses and other 6,794 4,986 -------------------------------------------------------------------------------- Total current assets 189,236 131,877 Property and equipment, net 63,241 49,867 Intangible assets, net 64,915 60,490 Other assets 6,865 2,860 -------------------------------------------------------------------------------- Total assets $324,257 $245,094 ================================================================================ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 13,790 $ 8,990 Customer layaway deposits 3,576 2,753 Income taxes currently payable 3,661 2,407 -------------------------------------------------------------------------------- Total current liabilities 21,027 14,150 Long-term debt 119,796 64,000 Deferred income taxes - 222 -------------------------------------------------------------------------------- Total liabilities 140,823 78,372 -------------------------------------------------------------------------------- Commitments and contingencies (Note 11) Stockholders' equity: Common stock, $.10 par value per share, 80,000,000 shares authorized; shares issued, 30,235,164 in 1994 and 1993 3,024 3,024 Paid in surplus 121,481 120,955 Retained earnings 70,081 56,004 Foreign currency translation adjustment (3,692) (5,308) -------------------------------------------------------------------------------- 190,894 174,675 Less - shares held in treasury, at cost (1,666,099 in 1994 and 1,832,137 in 1993) (7,460) (7,953) -------------------------------------------------------------------------------- Total stockholders' equity 183,434 166,722 -------------------------------------------------------------------------------- Total liabilities and stockholders' equity $324,257 $245,094 ================================================================================
See notes to consolidated financial statements. 16 6 CONSOLIDATED INCOME STATEMENTS - Years Ended December 31 -------------------------------------------------------------------------------- (Dollars in thousands, except per share)
1994 1993 1992 -------------------------------------------------------------------------------- REVENUES Sales $156,247 $139,950 $115,008 Pawn service charges 105,858 84,750 70,402 -------------------------------------------------------------------------------- Total revenues 262,105 224,700 185,410 COST OF SALES 126,254 112,882 90,756 -------------------------------------------------------------------------------- Revenues net of cost of sales 135,851 111,818 94,654 -------------------------------------------------------------------------------- OPERATING EXPENSES Operations 78,204 64,178 54,572 Administration 13,918 12,416 11,362 Amortization 3,545 3,278 2,435 Depreciation 8,814 6,684 4,591 -------------------------------------------------------------------------------- Total operating expenses 104,481 86,556 72,960 -------------------------------------------------------------------------------- Income from operations 31,370 25,262 21,694 Interest expense, net (6,265) (3,608) (1,419) Other income/(expense) (147) 112 73 -------------------------------------------------------------------------------- Income before income taxes 24,958 21,766 20,348 Provision for income taxes 9,460 7,927 7,342 -------------------------------------------------------------------------------- NET INCOME $ 15,498 $ 13,839 $ 13,006 ================================================================================ Earnings per share: Primary $.54 $.48 $.45 Fully diluted $.53 $.48 $.45 Weighted average shares (in thousands): Primary 28,930 28,938 28,698 Fully diluted 29,269 29,070 28,788 ================================================================================
See notes to consolidated financial statements. 17 7 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - Years Ended December 31 -------------------------------------------------------------------------------- (Dollars in thousands, except per share)
Foreign Common Stock Treasury Stock Currency --------------- Paid in Retained ------------------ Translation Shares Amount Surplus Earnings Shares Amount Adjustment Total ------------------------------------------------------------------------------------------------------------------------ Balance at December 31, 1991 25,635,164 $2,564 $ 72,859 $31,874 1,881,774 $(7,198) $ 0 $100,099 Shares issued in exercise of warrants - - (50) - (13,134) 50 - - Shares issued in public offering 4,600,000 460 47,977 - - - - 48,437 Treasury shares acquired - - - - 235,000 (1,916) - (1,916) Treasury shares reissued - - 36 - (65,916) 266 - 302 Dividends declared - $.04 3/4 per share - - - (1,302) - - - (1,302) Foreign currency translation adjustment - - - - - - (4,680) (4,680) Net income - - - 13,006 - - - 13,006 ------------------------------------------------------------------------------------------------------------------------ Balance at December 31, 1992 30,235,164 3,024 120,822 43,578 2,037,724 (8,798) (4,680) 153,946 Treasury shares reissued - - (128) - (205,587) 845 - 717 Tax benefit from exercise of option shares - - 261 - - - - 261 Dividends declared - $.05 per share - - - (1,413) - - - (1,413) Foreign currency translation adjustment - - - - - - (628) (628) Net income - - - 13,839 - - - 13,839 ------------------------------------------------------------------------------------------------------------------------ Balance at December 31, 1993 30,235,164 3,024 120,955 56,004 1,832,137 (7,953) (5,308) 166,722 Treasury shares acquired - - - - 68,500 (552) - (552) Treasury shares reissued - - 441 - (234,538) 1,045 - 1,486 Tax benefit from exercise of option shares - - 85 - - - - 85 Dividends declared - $.05 per share - - - (1,421) - - - (1,421) Foreign currency translation adjustment - - - - - - 1,616 1,616 Net income - - - 15,498 - - - 15,498 ------------------------------------------------------------------------------------------------------------------------ BALANCE AT DECEMBER 31, 1994 30,235,164 $3,024 $121,481 $70,081 1,666,099 $(7,460) $(3,692) $183,434 ========================================================================================================================
See notes to consolidated financial statements. 18 8 CONSOLIDATED STATEMENTS OF CASH FLOWS - Years Ended December 31 -------------------------------------------------------------------------------- (Dollars in thousands)
1994 1993 1992 ---------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Sales $ 156,247 $ 139,950 $ 115,008 Pawn service charges 64,525 51,904 41,821 Other income (expense) (147) 267 302 Additions to inventory, including loans forfeited (104,611) (85,981) (80,322) Operations and administration expense (91,108) (80,450) (63,425) Interest paid (6,408) (3,538) (1,679) Layaway deposits, net 759 (13) 605 Income taxes paid (9,197) (7,021) (5,658) ---------------------------------------------------------------------------------------------------- Net cash provided by operating activities 10,060 15,118 6,652 ---------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Loans forfeited and transferred to inventory 73,143 64,025 51,767 Loans repaid or renewed 201,929 160,697 134,210 Loans made, including loans renewed (285,818) (224,157) (192,536) ---------------------------------------------------------------------------------------------------- Net (increase) decrease in loans (10,746) 565 (6,559) ---------------------------------------------------------------------------------------------------- Acquisitions (11,693) (9,347) (42,107) Investment in and advances to affiliate (2,600) - - Purchases of property and equipment (22,784) (16,704) (19,616) Proceeds from sales of property and equipment 1,330 186 16 ---------------------------------------------------------------------------------------------------- Net cash used by investing activities (46,493) (25,300) (68,266) ---------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds from issuance of common stock 778 717 48,716 Net borrowings (payments) under bank lines of credit 55,533 (16,000) 19,500 Proceeds from issuance of long-term debt - 30,000 - Payments on notes payable and other obligations (15,471) (5,076) (51) Treasury shares acquired (552) - (1,916) Dividends paid (1,421) (1,413) (1,302) ---------------------------------------------------------------------------------------------------- Net cash provided by financing activities 38,867 8,228 64,947 ---------------------------------------------------------------------------------------------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH 148 (34) (529) ---------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,582 (1,988) 2,804 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 2,245 4,233 1,429 ---------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 4,827 $ 2,245 $ 4,233 ---------------------------------------------------------------------------------------------------- RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Net income $ 15,498 $ 13,839 $ 13,006 Adjustments to reconcile net income to net cash provided by operating activities: Amortization 3,545 3,278 2,435 Depreciation 8,814 6,684 4,591 (Increase) decrease in service charge receivable (3,439) 91 (1,991) Increase in inventory (16,251) (6,036) (16,156) Increase in prepaid expenses and other (2,286) (1,595) (707) Increase (decrease) in accounts payable and accrued expenses 3,157 (2,036) 3,185 Increase (decrease) in layaway deposits, net 759 (13) 605 Increase in income taxes currently payable 1,235 791 2,198 Increase (decrease) in deferred income taxes (972) 380 (514) Cumulative effect of accounting change - (265) - ---------------------------------------------------------------------------------------------------- Net cash provided by operating activities $ 10,060 $ 15,118 $ 6,652 ====================================================================================================
See notes to consolidated financial statements. 19 9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------------------------------------------- NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The accompanying consolidated financial statements include the accounts of Cash America International, Inc. and its wholly owned subsidiaries ("Company") and the Company's 49% investment in and share of net earnings or losses of an unconsolidated affiliate treated as an equity investment. All significant intercompany accounts and transactions have been eliminated in consolidation. The Company is engaged in acquiring, establishing and operating pawnshops in the United States, the United Kingdom and the Kingdom of Sweden. FOREIGN CURRENCY TRANSLATION The assets and liabilities of international subsidiaries are translated into United States Dollars at the rates of exchange in effect at the balance sheet date, and resulting adjustments are accumulated as a separate component of stockholders' equity. Revenues and expenses are translated at the average exchange rates prevailing during the year. CASH AND CASH EQUIVALENTS The Company considers cash on hand in stores, deposits in banks, and short-term marketable securities with original maturities of 90 days or less as cash and cash equivalents. LOANS AND INCOME RECOGNITION Pawn loans ("loans") are generally made on the pledge of tangible personal property. Pawn service charges on loans are recorded on a constant yield basis over the loan term. If the loan is not repaid, the principal amount loaned plus accrued pawn service charges becomes the carrying value of the forfeited collateral ("inventory") which is recovered through sale. INVENTORY Inventory represents merchandise acquired from forfeited loans, merchandise purchased directly from the public and new merchandise purchased from vendors. Inventory is stated at the lower of cost or market. The Company provides an allowance for shrinkage and valuation based on management's evaluation of the merchandise. The allowance deducted from the carrying value of inventory amounted to $2,514,000 and $2,120,000, at December 31, 1994 and 1993, respectively. PROPERTY AND EQUIPMENT Property and equipment are recorded at cost. Depreciation expense is generally provided on a straight-line basis, using estimated useful lives of 15 to 30 years on buildings and 3 to 10 years for equipment and leasehold improvements. The cost of property retired or sold and the related accumulated depreciation is removed from the accounts, and any resulting gain or loss is recognized in the income statement. INTANGIBLE ASSETS Intangible assets, consisting primarily of excess purchase price over net assets acquired in acquisitions, are being amortized on a straight-line basis over their expected periods of benefit, generally 25 to 40 years. Management assesses the realizability of intangible assets by comparing the intangible assets to earnings generated by the acquired stores over the anticipated period of benefit. Pre-opening costs associated with the establishment of new stores are capitalized and expensed over three years. Generally, revenues in new pawnshops attain a mature store level after three years. Pre-opening costs remaining to be amortized totaled $655,000 and $723,000 at December 31, 1994 and 1993, respectively. Accumulated amortization of intangible assets at December 31, 1994 and 1993 was $13,463,000 and $12,081,000, respectively. INCOME TAXES The Company files a consolidated federal income tax return for its domestic operations. The provision for income taxes is based on pretax income as reported for financial statement purposes. Deferred income taxes result from differences in the bases of certain assets and liabilities for income tax purposes and financial reporting purposes. Deferred federal income taxes are not provided on the undistributed earnings of its foreign subsidiaries to the extent the Company intends to permanently reinvest such earnings in the United Kingdom and the Kingdom of Sweden. Effective January 1, 1993, the Company changed its method of accounting for income taxes from the deferred method to the liability method required by FAS 109. As permitted under the new rules, prior years' financial statements have not been restated. The cumulative effect of adopting FAS 109 was to increase net income by $265,000, or $.01 per share, through a reduction in the provision for income taxes during the first quarter of 1993. 20 10 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued ----------------------------------------------------------------------------- FAIR VALUES OF FINANCIAL INSTRUMENTS Pawn loans are outstanding for a relatively short period, generally 90 days or less for domestic loans and 180 days or less for foreign loans, depending on local regulations. The rate of pawn service charge bears no relationship to interest rate market movements. Generally, pawn loans may not be resold to anyone but a licensed pawnbroker. For these reasons, management believes that the fair value of pawn loans approximates their carrying value. The Company's bank credit facilities bear interest at rates which adjust frequently based on market rate changes. Accordingly, management believes that the fair value of that debt approximates its carrying value. The fair value of the 8.33% Senior Unsecured Notes payable (See Note 6) was estimated based on quoted market values for debt issues with similar characteristics, or rates currently available for debt with similar terms. Management believes that the fair value of that debt approximates its carrying value. The Company is not an active participant in financial derivative transactions other than some hedging instruments entered into in the ordinary course of business. The Company may, from time to time, enter into forward sale contracts with an industry buyer of fine gold which is produced from the Company's liquidation of forfeited gold merchandise. In the event the Company transfers funds between foreign currencies, it may enter into a currency hedge at the time of the transaction to eliminate the risk of foreign currency fluctuations. The Company is a party to two interest rate exchange contracts to modify the interest rate pricing on a small portion of its outstanding debt (which is described more fully in the long-term debt discussion). SHARES, PER SHARE DATA AND EARNINGS PER SHARE Earnings per share calculations assume exercise of all outstanding stock options and warrants with appropriate adjustment to weighted average shares outstanding using the treasury stock method of calculation. RECLASSIFICATIONS Interest expense and other income have been reclassified in the consolidated statements of operations for the years ended December 31, 1993 and 1992 to conform with the presentation for the year ended December 31, 1994. These reclassifications have no effect on the net income as previously reported. NOTE 2 - ACQUISITIONS During 1994, the Company acquired 21 pawnshops in purchase transactions occurring throughout the year for an aggregate consideration of $11,693,000. On September 22, 1994, the Company acquired all of the shares of a group of companies which comprise Svensk Pantbelaning, which consisted of 10 pawnshops located in the Kingdom of Sweden, for cash consideration of approximately $5 million and assumed liabilities of $17 million. Eleven other pawnshops were acquired in purchase transactions throughout 1994. The results of operations for these pawnshops have been included in the Company's operations from the date of acquisition. During 1993, the Company acquired 22 pawnshops in purchase transactions throughout the year for an aggregate cash consideration of $9,347,000. On June 30, 1993, the Company purchased all of the outstanding stock of Express Cash International Corporation ("Express Cash") for $6.2 million in cash, and the assumption of $8.7 million of Express Cash liabilities, to obtain 18 pawnshops. The four other pawnshops were acquired in individual purchase transactions during 1993. NOTE 3 - PROPERTY AND EQUIPMENT Major classifications of property and equipment at December 31, 1994 and 1993 were as follows:
1994 1993 ----------------------------------------------------------------- (Dollars in thousands) Land $ 4,995 $ 4,151 Buildings and improvements 10,936 9,117 Equipment, leasehold improvements and other 74,308 55,188 ----------------------------------------------------------------- Total 90,239 68,456 Less - accumulated depreciation (26,998) (18,589) ----------------------------------------------------------------- Property and equipment - net $ 63,241 $ 49,867 =================================================================
NOTE 4 - INVESTMENT IN AFFILIATE On July 13, 1994, the Company paid $2 million to acquire a 49% interest in a private Texas based company which sells franchised check-cashing kiosks. In conjunction with this investment, the Company has entered into a revolving credit agreement with the affiliate, which provides for a maximum borrowing of $1 million from the Company. As of December 31, 1994 the affiliate had borrowings outstanding of $600,000. The affiliate has granted a security interest and lien to all of its assets. The entire unpaid principal balance is due and payable on February 28, 1997, with interest paid quarterly at LIBOR plus 4 percent. The amounts are included in other assets. 21 11 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued ----------------------------------------------------------------------------- NOTE 5 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses at December 31, 1994 and 1993 were as follows:
1994 1993 ------------------------------------------------------------------ (Dollars in thousands) Trade accounts payable $ 4,864 $3,692 Accrued taxes, other than income 3,572 2,505 Accrued payroll and fringes 3,069 1,687 Accrued interest payable 836 523 Other accrued liabilities 1,449 583 ------------------------------------------------------------------ Total $13,790 $8,990 ==================================================================
NOTE 6 - LONG-TERM DEBT On June 7, 1994, the Company made certain modifications to its three-year $125,000,000 unsecured line of credit originally entered into on June 29, 1993. The agreement was modified to extend the maturity of $100,000,000 of the line of credit to April 30, 1997, with the remaining $25,000,000 portion scheduled to mature on June 6, 1995. The entire $125,000,000 line of credit is governed by a single credit agreement which requires that the Company maintain certain financial ratios and limit specific payments and equity distributions, including cash dividends and the redemption of Company stock. At year end, the agreement limits the aggregate of such payments to approximately $10.7 million. The Company has the option each year to request a one-year extension, thus moving the maturity date of each facility forward one year. Interest is paid quarterly at rates determined at the Company's option of either the bank's prime lending rate or LIBOR plus 1%. In addition, the agreement provides for annual commitment fees of 3/8% per annum on the unused portion of $100,000,000 of the commitment and .15% per annum on the unused portion of $25,000,000 of the commitment. During 1994 the weighted average amount outstanding under the line of credit was $54,700,000, with an effective interest rate paid of 5.62%. At December 31, 1994, the amount outstanding under the $100,000,000 portion of the facility was $63,700,000 with a weighted average interest rate of 6.83%. On May 12, 1993, the Company issued $30,000,000 of "8.33% Senior Unsecured Notes," due May 1, 2003. Interest is payable on May 1 and November 1 of each year. Mandatory annual payments of $4,285,714 commence May, 1997. On May 28, 1993, the Company entered into two three-year swap agreements for $10,000,000 each, under which the Company receives a fixed rate of 4.87% and pays a variable rate based on the prevailing six-month BBA average LIBOR rate (6.5625% as of December 31, 1994), repriced every six months. The effective interest rate on the Senior Unsecured Notes for the twelve months ended December 31, 1994, was 8.12% after taking into account the two swap transactions. For the six-month period commencing December 2, 1994, the effective rate of interest on the Senior Unsecured Notes is 9.52% on an annualized basis. The 8.33% Senior Unsecured Notes are governed by a separate note agreement which requires that the Company maintain certain financial ratios and limit specific payments and equity distributions, including cash dividends and the redemption of Company stock. On September 21, 1994, in conjunction with the acquisition of Svensk Pantbelaning, the Company's wholly owned subsidiary, CAII Pantbelaning AB established a 193,750,000 Swedish Kronor ("SEK") term loan (approximately $26.1 million as of December 31, 1994). The term loan matures three years from the date of inception, and there is no scheduled amortization of the principal balance prior to maturity. Interest is payable at the Stockholm InterBank Offered Rate (STIBOR) plus 1% (8.98% as of December 31, 1994). The term loan is governed by a credit agreement which relies on the same financial covenants contained in the Company's $125,000,000 line of credit agreement. The Company's wholly owned subsidiary, Harvey & Thompson, Ltd., has a committed 5 million pound sterling unsecured line of credit, which matures on February 8, 1996, from a U.K. based commercial bank. Interest is payable quarterly at an interest rate equal to the Bank's sterling cost of funds plus 60 basis points for borrowings less than 13 days and 55 basis points for borrowings of 14 days or more. Harvey & Thompson, Ltd. pays a fee on the unused portion of the line of credit of .15% per annum. The facility is governed by a credit agreement which provides minimum levels of assets and net worth which must be maintained by Harvey & Thompson. Harvey & Thompson did not borrow under the line of credit during 1994, and there was no balance outstanding as of December 31, 1994. The annual maturities of long-term debt through 1999 are: 1995-none; 1996-none; 1997-$94.1 million; 1998-$4.3 million; 1999-$4.3 million. The scheduled maturities in 1997 include $63.7 million outstanding under the Company's line of credit which contains an annual extension option as noted above. 22 12 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued -------------------------------------------------------------------------------- NOTE 7 - INCOME TAXES The components of the Company's deferred tax liabilities and assets as of December 31 are as follows:
1994 1993 ---------------------------------------------------------------------- (Dollars in thousands) Deferred tax liabilities: Deferred acquisition and start-up costs $ 224 $442 Reversal of revenues reported on a cash basis by acquired subsidiary 97 194 Amortization of acquired intangibles 215 101 Foreign tax reserves 172 - Other 293 216 ---------------------------------------------------------------------- Total deferred tax liabilities $1,001 $ 953 ====================================================================== Deferred tax assets: Provision for inventory valuation allowance $ 648 $ 509 Tax over book depreciation 813 224 Net operating loss carryforwards 652 782 Other 363 242 ---------------------------------------------------------------------- Total deferred tax assets $2,476 $1,757 Valuation allowance for deferred tax assets (702) (905) ---------------------------------------------------------------------- Net deferred tax assets 1,774 852 ---------------------------------------------------------------------- Net deferred tax (assets) liabilities $ (773) $ 101 ======================================================================
The components of the provision for income taxes and the income to which it relates for the years ended December 31, 1994, 1993 and 1992 are shown below:
1994 1993 1992 -------------------------------------------------------------------------------- (Dollars in thousands) Income from continuing operations before income taxes: Domestic $18,625 $17,752 $17,082 Foreign 6,333 4,014 3,266 -------------------------------------------------------------------------------- $24,958 $21,766 $20,348 ================================================================================
Provision for income taxes:
Liability Deferred Method Method -------------------------------------------------------------------------------- 1994 1993 1992 -------------------------------------------------------------------------------- (Dollars in thousands) Current portion of provision: Federal $7,293 $6,145 $6,419 Foreign 2,151 1,399 1,138 State and local 428 231 299 -------------------------------------------------------------------------------- $9,872 $7,775 $7,856 ================================================================================ Deferred portion of (benefit) provision: Federal $ (491) $ 118 $ (559) Foreign 79 34 45 State and local - - - -------------------------------------------------------------------------------- $ (412) $ 152 $ (514) -------------------------------------------------------------------------------- Total provision $9,460 $7,927 $7,342 ================================================================================
The effective tax rate differs from the federal statutory rate for the following reasons:
Liability Deferred Method Method -------------------------------------------------------------------------------- 1994 1993 1992 -------------------------------------------------------------------------------- (Dollars in thousands) Tax provision computed at the statutory federal income tax rate $8,735 $7,618 $6,918 Non-deductible amortization of intangible assets 439 421 392 Foreign tax rate difference (170) (78) (33) Other 456 (34) 65 -------------------------------------------------------------------------------- Total provision $9,460 $7,927 $7,342 ================================================================================ Effective tax rate 37.9% 36.4% 36.1% ================================================================================
As of December 31, 1994, the Company has net operating loss carryforwards of $1,451,000 for U.S. income tax purposes. The loss carryforwards resulted from the 1993 acquisition of Express Cash International Corporation and expire December 31, 2002 through 2006. The amount of these losses which the Company can utilize each year is limited to approximately $342,000. At December 31, 1994, the deferred tax assets related to these carryforwards and pre-acquisition deductible temporary differences of Express Cash have been offset by a $702,000 valuation allowance. When realized, the tax benefits from these items will be applied to reduce goodwill related to the Express Cash acquisition. During 1994 goodwill was reduced by $482,000 for the realization of deductible temporary differences and utilization of net operating loss carryforwards. The Company also has a $519,000 net operating loss carryforward which was incurred by a Swedish subsidiary in 1994. No valuation allowance has been provided against the deferred tax asset related to this carryforward because the loss can be used to reduce 1995 taxes of other Swedish subsidiaries. During 1994 the Company realized an $85,000 tax benefit from the exercise of stock options by officers and directors. This benefit was applied as a direct increase to paid in surplus. Domestic income taxes have not been provided on undistributed earnings of foreign subsidiaries to the extent that it is the Company's intent to reinvest these earnings overseas indefinitely. Upon distribution of accumulated earnings of all foreign subsidiaries, the Company would be subject to U.S. income taxes (net of foreign tax credits) of approximately $273,000. 23 13 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued -------------------------------------------------------------------------------- NOTE 8 - STOCKHOLDERS' EQUITY On February 20, 1992, the Company completed a public offering of 4,600,000 shares (after stock split) of its $.10 par value common stock at $11.25 per share. The Company received, after underwriting discounts and commissions, net proceeds of $49,059,000. After paying expenses of $622,000 the Company added $48,437,000 to stockholders' equity. The Company used the net proceeds to retire $48,000,000 of its revolving line of credit, of which $26,851,000 was incurred in the acquisition of the Pawnbroking division of Harvey & Thompson PLC. On March 25, 1992, the Board of Directors declared a 2-for-1 stock split to be effected in the form of a 100% common stock dividend, payable on April 22, 1992 to stockholders of record on April 8, 1992. Average common shares and common equivalent shares outstanding, income per average common share and common equivalent share, stock option prices and exercise prices have been restated to reflect the stock split. Pursuant to a stock repurchase program during the fourth quarter of 1992, the Company purchased a total of 235,000 shares of its common stock in private and public transactions for a total of $1,916,000. The Company has reserved 1,500,000 shares of its common stock for issuance under its 1987 Stock Option Plan (with appreciation rights) ("1987 Plan"), 3,000,000 shares for issuance under its 1989 Non-Employee Director Stock Option Plan and Key Employee Stock Option Plan ("1989 Plans") and 1,400,000 shares for issuance under the 1994 Long-Term Incentive Plan ("1994 Plan"). Under the 1987 Plan, options are granted at fair market prices at the date of the grant, and expire in five years from the date of the grant. Options that have been granted pursuant to the 1987 Plan are exercisable 25% each year beginning one year after the date of the grant. At December 31, 1994, 44,872 shares were reserved for future grants under the 1987 Plan. A summary of stock option activity under the 1987 Plan is as follows:
Options Outstanding ---------------------------------------------------------------------- Number Option Price Stock Option Activity of Shares per Share ---------------------------------------------------------------------- December 31, 1991 895,618 $3.54-$9.38 Granted 236,500 $7.75-$9.88 Exercised (63,526) $3.54-$7.00 ---------------------------------------------------------------------- December 31, 1992 1,068,592 $3.54-$9.88 Granted 173,000 $6.88-$8.88 Exercised (212,349) $3.54-$7.75 Cancelled (13,372) $5.94-$9.38 ---------------------------------------------------------------------- December 31, 1993 1,015,871 $3.54-$9.88 ---------------------------------------------------------------------- Granted 75,000 $7.75 Exercised (210,371) $3.54-$7.00 Cancelled (7,500) $7.00 ---------------------------------------------------------------------- December 31, 1994 873,000 $5.94-$9.88 ---------------------------------------------------------------------- Exercisable at December 31, 1994 490,500 $5.94-$9.88 ======================================================================
Under the 1989 Plans, options were granted in October 1989 to purchase 3,000,000 shares at $6.34 per share. The options were granted at fair market price at date of grant and expire 10 years from that date. Options granted to purchase 1,545,000 of the 3,000,000 shares are exercisable 40% six months from date of grant and 10% each year thereafter. Options granted to purchase 750,000 shares are exercisable 40% from date of grant and 10% each year thereafter. Options granted to purchase 705,000 shares are exercisable 20% from date of grant and 20% each year thereafter. A summary of stock option activity under the 1989 Plan is as follows:
Options Outstanding ---------------------------------------------------------------------- Number Option Price Stock Option Activity of Shares per Share ---------------------------------------------------------------------- Inception of plan - October 1989 3,000,000 $6.34 Cancelled 1990 (150,000) $6.34 Cancelled 1992 (30,000) $6.34 ---------------------------------------------------------------------- Outstanding at December 31, 1994 2,820,000 $6.34 ---------------------------------------------------------------------- Exercisable at December 31, 1994 2,590,500 $6.34 ======================================================================
On April 27, 1994, the Company adopted the 1994 Long-Term Incentive Plan ("1994 Plan") and reserved 1,400,000 shares of Company Common Stock to be used in the form of stock options, performance shares and restricted stock for key employees of the Company. The 1994 Plan will expire ten years from its effective date unless terminated earlier or extended by the Board of Directors. Options that have been granted pursuant to the 1994 Plan are exercisable 25% each year beginning one year after the date of the grant. 24 14 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued -------------------------------------------------------------------------------- A summary of stock option activity under the 1994 Plan is as follows:
Options Outstanding ---------------------------------------------------------------------- Number Option Price Stock Option Activity of Shares per Share ---------------------------------------------------------------------- Granted 1994 449,500 $7.88 ---------------------------------------------------------------------- Exercisable at December 31, 1994 - - ======================================================================
Shares issued upon exercise of options may be issued from treasury shares or from authorized but unissued shares. NOTE 9 - EMPLOYEE BENEFIT PLAN The Cash America International, Inc. 401(K) Employees' Savings Plan, which commenced on January 1, 1991 and was amended April 1, 1994, is open to substantially all employees who have been employed for one year and work at least 1,000 hours per year. Under the 401(K) plan a participant may contribute up to 15% of their earnings not to exceed the current statutory limits. The Company may make a discretionary matching contribution equal to a percentage of the amount of the participant contributions. This percentage is determined annually by the Company, and any matching contributions may be made in cash or in Company stock. Contributions made to participants' accounts become vested at the rate of 25% per year after two years of service until 100% vesting is achieved after five years of service. Total Company contributions to this plan were $162,000 and $38,000 in 1994 and 1993. Adoption of the Statement of Financial Accounting Standards No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, during 1993 had no effect on results of operations. During the first quarter of 1994 the Company adopted the Statement of Financial Accounting Standards No. 112 "Employers' Accounting for Post Employment Benefits." The adoption of this standard had no effect on the Company's results of operations. NOTE 10 - BUSINESS SEGMENT INFORMATION The Company operates in a single industry. In addition to its domestic operations, it has subsidiaries in the United Kingdom and the Kingdom of Sweden.
UNITED STATES FOREIGN CONSOLIDATED --------------------------------------------------------------------- (Dollars in thousands) 1994 ---- Total revenues $248,514 $13,591 $262,105 Income from operations 24,495 6,875 31,370 Total assets excluding cash and equivalents 265,229 54,201 319,430 1993 ---- Total revenues $215,809 $ 8,891 $224,700 Income from operations 21,420 3,842 25,262 Total assets excluding cash and equivalents 216,305 26,544 242,849 1992 ---- Total revenues $177,200 $ 8,210 $185,410 Income from operations 18,359 3,335 21,694 Total assets excluding cash and equivalents 188,629 23,587 212,216 =====================================================================
British pounds sterling and Swedish kronor are translated into dollars at exchange rates in effect at each December 31 for balance sheet data, and at the annual average exchange rate for income statement information. NOTE 11 - COMMITMENTS AND CONTINGENCIES The Company leases certain of its pawnshop facilities under operating leases. Future minimum rentals due under non-cancelable leases are as follows for each of the years ending December 31:
(Dollars in thousands) 1995 $12,951 1996 11,100 1997 8,200 1998 5,796 1999 3,706 Later years 8,091 ---------------------------------------------------------- Total $49,844 ==========================================================
Rent expense was $11,201,000, $9,110,000 and $7,323,000 for 1994, 1993 and 1992, respectively. The Company is party to a number of lawsuits arising in the normal course of business. In the opinion of management, the resolution of these matters will not have a material adverse effect on the Company's financial position, results of operations or liquidity. 25 15 REPORT OF INDEPENDENT ACCOUNTANTS -------------------------------------------------------------------------------- TO THE BOARD OF DIRECTORS AND STOCKHOLDERS CASH AMERICA INTERNATIONAL, INC. We have audited the accompanying consolidated balance sheets of Cash America International, Inc. and Subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Cash America International, Inc. and Subsidiaries as of December 31, 1994 and 1993, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. Coopers & Lybrand L.L.P. Fort Worth, Texas January 27, 1995 26 16 INCOME STATEMENT QUARTERLY DATA (UNAUDITED) -------------------------------------------------------------------------------- (In thousands, except per share)
FIRST SECOND THIRD FOURTH 1994 QUARTER QUARTER QUARTER QUARTER ----------------------------------------------------------------------------------------- Total revenues $55,314 $57,203 $63,261 $86,327 Net income $ 2,932 $ 3,055 $ 4,211 $ 5,300 Net income per share - Fully diluted $.10 $.11 $.15 $.18 Weighted average shares - Fully diluted 28,984 28,864 28,869 29,304 1993 ----------------------------------------------------------------------------------------- Total revenues $51,987 $52,369 $55,069 $65,275 Net income $ 2,803 $ 2,535 $ 3,673 $ 4,828 Net income per share - Fully diluted $.10 $.09 $.13 $.17 Weighted average shares - Fully diluted 28,896 28,814 28,908 29,110 =========================================================================================
COMMON STOCK DATA -------------------------------------------------------------------------------- The New York Stock Exchange is the principal exchange on which Cash America International, Inc. common stock is traded. There were 942 stockholders of record (not including individual participants in security listings) as of February 22, 1995. The high and low sales prices of common stock as quoted on the composite tape of the New York Stock Exchange and cash dividends per share during 1994 and 1993 were as follows:
FIRST SECOND THIRD FOURTH 1994 QUARTER QUARTER QUARTER QUARTER ----------------------------------------------------------------------------------------- High $10.13 $8.88 $8.50 $9.88 Low 7.63 7.75 7.50 7.63 Close 7.88 7.75 8.00 9.88 Cash Dividend .01 1/4 .01 1/4 .01 1/4 .01 1/4 1993 ----------------------------------------------------------------------------------------- High $11.00 $9.00 $9.00 $9.88 Low 8.00 6.38 7.00 8.13 Close 8.63 7.88 8.38 9.38 Cash Dividend .01 1/4 .01 1/4 .01 1/4 .01 1/4 =========================================================================================
27 17 CASH AMERICA INTERNATIONAL, INC. 1600 WEST 7TH STREET FORT WORTH, TEXAS 76102 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 26, 1995 To Our Shareholders: The Annual Meeting of Shareholders of Cash America International, Inc. (the "Company") will be held at the Fort Worth Club, 12th Floor, Fort Worth Club Building, 306 West 7th Street, Fort Worth, Texas on Wednesday, April 26, 1995 at 10:00 a.m., Fort Worth Time, for the following purposes: (1) To elect ten (10) persons to serve as directors of the Company to hold office until the next annual meeting of shareholders or until their successors are duly elected and qualified. (2) To ratify the appointment of Coopers & Lybrand as the Company's independent auditors for the year 1995. (3) To transact such other business as may properly come before the meeting or any adjournments thereof. Only holders of record of the Common Stock of the Company at the close of business on March 8, 1995 are entitled to notice of and to vote at the Annual Meeting. The presence, in person or by proxy, of the holders of a majority of the issued and outstanding Common Stock entitled to vote at the meeting is required for a quorum to transact business. The stock transfer books will not be closed. Management sincerely desires your presence at the meeting. However, so that we may be sure that your shares are represented and voted in accordance with your wishes, please sign and date the enclosed proxy and return it promptly in the enclosed stamped envelope. If you attend the meeting, you may revoke your proxy and vote in person. By Order of the Board of Directors, HUGH A. SIMPSON Secretary Fort Worth, Texas March 27, 1995 18 CASH AMERICA INTERNATIONAL, INC. 1600 WEST 7TH STREET FORT WORTH, TEXAS 76102 (PRINCIPAL EXECUTIVE OFFICES) PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS APRIL 26, 1995 SOLICITATION OF PROXIES The proxy statement and accompanying proxy are furnished in connection with the solicitation by the Board of Directors of Cash America International, Inc., a Texas corporation (the "Company"), of proxies to be voted at the Annual Meeting of Shareholders (the "Annual Meeting") to be held at the Fort Worth Club located on the 12th Floor of the Fort Worth Club Building, 306 West 7th Street, Fort Worth, Texas on Wednesday, April 26, 1995 at 10:00 a.m., Fort Worth Time and at any recess or adjournment thereof. The solicitation will be by mail, and this Proxy Statement and the accompanying form of proxy will be mailed to shareholders on or about March 27, 1995. The enclosed proxy, even though executed and returned, may be revoked at any time prior to the voting of the proxy by giving written notice of revocation to the Secretary of the Company at its principal executive offices or by executing and delivering a later-dated proxy or by attending the Annual Meeting and voting his or her shares in person. However, no such revocation shall be effective until such notice has been received by the Company at or before the Annual Meeting. Such revocation will not affect a vote on any matters taken prior to receipt of such revocation. Mere attendance at the Annual Meeting will not of itself revoke the proxy. The expense of such solicitation will be borne by the Company and will include reimbursement paid to brokerage firms and other custodians, nominees and fiduciaries for their expenses in forwarding solicitation material regarding the meeting to beneficial owners. The Company has retained Kissel-Blake Inc. to assist in the solicitation of proxies from shareholders, and will pay such firm a fee for its services of approximately $4,000.00. Further solicitation of proxies may be made by telephone, telegraph or oral communication following the original solicitation by directors, officers and regular employees of the Company or by its transfer agent who will not be additionally compensated therefor, but will be reimbursed by the Company for out-of-pocket expenses. A copy of the Annual Report to Shareholders of the Company for its fiscal year ended December 31, 1994 is being mailed with this Proxy Statement to all shareholders entitled to vote, but does not form any part of the information for solicitation of proxies. VOTING SECURITIES OUTSTANDING; QUORUM The record date for the determination of shareholders entitled to notice of and to vote at the Annual Meeting was the close of business on March 8, 1995 (the "Record Date"). At the close of business on March 8, 1995, there were 28,577,575 shares of Common Stock, par value $.10 per share, issued and outstanding, each of which is entitled to one vote on all matters properly brought before the meeting. There are no cumulative voting rights. The presence in person or by proxy of the holders of a majority of the issued and outstanding shares of Common Stock on the Record Date is necessary to constitute a quorum at the Annual Meeting. Assuming the presence of a quorum, the affirmative vote of a majority of the shares of Common Stock present, or represented by proxy, and entitled to vote at the Annual Meeting is necessary for the election of directors and for ratification of the appointment of independent auditors. Shares voted for a proposal and shares represented by returned proxies that do not contain instructions to vote against a proposal 19 or to abstain from voting will be counted as shares cast for the proposal. Shares will be counted as cast against the proposal if the shares are voted either against the proposal or to abstain from voting. Broker non-votes will not change the number of votes for or against the proposal and will not be treated as shares entitled to vote. PURPOSES OF THE ANNUAL MEETING At the Annual Meeting, the shareholders of the Company will consider and vote on the following matters: (1) The election of ten (10) persons to serve as directors of the Company to hold office until the next annual meeting of shareholders or until their successors are duly elected and qualified. (2) Ratification of the appointment of Coopers & Lybrand as the Company's independent auditors for the year 1995. (3) Such other business as may properly come before the Annual Meeting or any adjournments thereof. ELECTION OF DIRECTORS The Company's Board of Directors for the ensuing year will consist of ten (10) members who are to be elected for a term expiring at the next annual meeting of shareholders or until their successors shall be elected and shall have qualified. The following slate of ten nominees has been chosen by the Board of Directors and the Board recommends that each be elected. Unless otherwise indicated in the enclosed form of Proxy, the persons named in such proxy intend to nominate and vote for the election of the following nominees for the office of director. All of such nominees are presently serving as directors.
PRINCIPAL OCCUPATION DIRECTOR NAME AND AGE DURING PAST FIVE YEARS SINCE ------------------------------ ----------------------------------------------------- -------- Jack Daugherty Chairman of the Board and Chief Executive Officer of 1983 (47)(a) the Company since its inception. Mr. Daugherty has owned and operated pawnshops since 1971. Morton A. Cohn Mr. Cohn has owned and served as President of Morton 1985 (54) Cohn Investments (a private investment firm) since 1970. A. R. Dike Mr. Dike has owned and served as Chairman of the 1988 (59)(b) Board and Chief Executive Officer of The Dike Co., Inc. (a private insurance agency) for the past twenty years. He was Chairman and Chief Executive Officer of The Insurance Alliance, Inc. from January 1988 to September 1991 and has been Chairman of Willis Corroon Corporation of Texas since September 1991. Daniel R. Feehan President and Chief Operating Officer of the Company 1984 (44)(a)(e) since January 1990. James H. Greer President of Shelton W. Greer Co., Inc. (engineering, 1987 (68)(a)(d) manufacturing, fabrication and installation of building specialty products) for more than five years. B. D. Hunter Mr. Hunter is founder and Chairman of the Board and 1984 (65)(b)(d) Chief Executive Officer of Huntco, Inc. (a holding company with interests in steel fabrication, manufacturing, nursing homes, radio broadcasting and farming). Clifton H. Morris, Jr. Chairman of the Board and Chief Executive Officer of 1984 (59)(a)(c)(d)(e) AmeriCredit Corp. (a publicly held company engaged in the financing of used cars) since July 1988.
2 20
PRINCIPAL OCCUPATION DIRECTOR NAME AND AGE DURING PAST FIVE YEARS SINCE ------------------------------ ----------------------------------------------------- -------- Carl P. Motheral Mr. Motheral has served over twenty-five years as 1983 (68)(a)(c) President and Chief Executive Officer and also Director of Motheral Printing Company (a commercial printing company). Samuel W. Rizzo Executive Vice President and Chief Financial Officer 1984 (59)(a)(c)(e) of Service Corporation International ("SCI"), a publicly held company that owns and operates funeral homes and related businesses, since February 1990 and, prior to that, Executive Assistant to the Chairman of the Board of SCI since November 1987. R. L. Waltrip Chairman of the Board of Directors and Chief 1984 (64)(a)(b)(e) Executive Officer of SCI since 1962.
--------------- (a) Member of Executive Committee. (b) Member of Executive Compensation Committee. (c) Member of Audit Committee. (d) Member of Stock Option Committee. (e) Member of Finance Committee. The Board of Directors does not contemplate that any of the above-named nominees for director will refuse or be unable to accept election as a director of the Company. Should any of them become unavailable for nomination or election or refuse to be nominated or accept election as a director of the Company then the persons named in the enclosed form of proxy intend to vote such shares represented in such proxy for the election of such other person or persons as may be nominated or designated by the Board of Directors. Certain nominees for director of the Company hold directorships in companies with a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934. Mr. Hunter is a director of Mark Twain Bancshares, Celebrity, Inc., and Huntco Inc. Messrs. Greer and Morris are directors of AmeriCredit Corp. Messrs. Greer, Hunter, Morris, Rizzo and Waltrip are directors of SCI. Messrs. Daugherty, Feehan and Rizzo are directors of Hallmark Financial Services, Inc., which is engaged in the insurance business. Messrs. Daugherty and Feehan are also directors of KBK Capital Corporation, a company engaged in the factoring business. Messrs. Waltrip, Greer and Rizzo are also directors of Tanknology Environmental, Inc., a company engaged in the environmental services business, primarily testing underground storage tanks. Also, Mr. Daugherty is a director of Dog World Inc., which sells a variety of pet services and supplies. MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS The Board of Directors held four meetings during the fiscal year ended December 31, 1994. Standing committees of the Board include the Executive Committee, Audit Committee, Executive Compensation Committee, Stock Option Committee, and Finance Committee. The Company does not have a Nominating Committee. The Executive Committee's principal responsibilities include: (a) approval of acquisitions, and (b) general review of the Company's financial condition and results of operations, and (c) exercising other powers of the Board when the Board is not in session. The Executive Committee held eight meetings during fiscal 1994. The Audit Committee's principal responsibilities consist of (a) recommending the selection of independent accountants, (b) reviewing the scope of the audit conducted by such auditors, as well as the audit itself, and (c) reviewing the Company's internal audit activities and matters concerning financial reporting, accounting and audit procedures, and policies generally. The Audit Committee held four meetings during fiscal 1994. 3 21 The Stock Option Committee has the general duty to review and approve granting of stock options. The Stock Option committee administers the Company's 1987 Stock Option Plan (with Stock Appreciation Rights) and the 1989 Key Employee Plan. The Stock Option Committee did not meet during fiscal year 1994. The Finance Committee has the responsibility of reviewing and making recommendations to the Board concerning (a) the Company's credit facilities and permitted indebtedness, (b) the Company's capital needs and its opportunities in the capital markets, and (c) other aspects of the Company's financial strategies, policies and structure. The Finance Committee did not meet in 1994. All directors attended 75% or more of the total number of meetings of the Board and of committees on which they serve. DIRECTORS' COMPENSATION Directors each receive a retainer of $1,500 per quarter. In addition, Board members receive $1,500 per quarterly Board meeting attended, Executive Committee members receive $1,200 for each Executive Committee meeting attended, and all other committee members receive $750 for each committee meeting attended. During 1989, the Company adopted the 1989 Non-Employee Director Stock Option Plan (the "Non-Employee Director Plan"), which provided for the grant to the Company's non-employee directors of options to purchase the Company's $.10 par value Common Stock. The Non-Employee Director Plan was approved by the Company's shareholders at the 1990 Annual Meeting. Effective October 25, 1989, options were granted under the Non-Employee Director Plan in the following amounts (after adjustment for stock splits in 1990 and 1992): 225,000 shares to each non-employee director serving on the Executive Committee of the Board of Directors (i.e., Messrs. Waltrip, Rizzo, Cohn, Motheral and Morris), 150,000 shares to each other non-employee director with at least each two years of service on the Board of Directors as of the date of grant (i.e., Messrs. Hunter and Greer), and 120,000 shares to each other non-employee director (i.e., Mr. Dike). The exercise price for all shares underlying such options was the last reported sale price of the Common Stock on the American Stock Exchange on the day preceding the date of grant ($6.33 after adjustment for stock splits in 1990 and 1992). The options granted are for a term of 10 years from the date of grant. The options may be exercised with respect to 40 per cent of the number of shares subject to the options six months after the date of grant, and an additional 10 per cent of the shares subject to the options shall be exercisable as of the first, second, third, fourth, fifth and sixth anniversaries of the date of grant, except that in the event of the death or termination of service as a director by reason of disability, or in the event of a "change in control" of the Company (as that term is defined in the Non-Employee Director Plan), the options shall be immediately exercisable in full. An option holder may use already-owned Common Stock as full or partial payment for the exercise of options granted under the Non-Employee Director Plan. As a condition to participation in the Non-Employee Director Plan, each director named above in this paragraph entered into a Consultation Agreement with the Company dated as of April 25, 1990. Under these Agreements, the non-employee directors have agreed to serve the Company in an advisory and consultive capacity. They do not receive any additional compensation under these Agreements, however. 4 22 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The Company has only one outstanding class of equity securities, its Common Stock, par value $.10 per share. The following table sets forth certain information, as of the Record Date, with respect to each person or entity who is known to the Company to be the beneficial owner of more than five percent (5%) of the Company's Common Stock. The information below was derived solely from filings made by such owners with the Securities and Exchange Commission.
AMOUNT OF NAME AND ADDRESS OF BENEFICIAL PERCENT BENEFICIAL OWNER OWNERSHIP OF CLASS ------------------------------------------------------------------------ --------- -------- David L. Babson & Co., Inc.............................................. 1,954,400(1) 6.88% One Memorial Drive Cambridge, Massachusetts 02142 Shufro, Rose & Ehrman................................................... 1,484,850(2) 5.23% 745 Fifth Avenue New York, New York 10151
--------------- (1) Based upon information contained in a Schedule 13G, filed with the Company, which indicates that David L. Babson & Co., Inc. has the voting power with regard to 937,100 shares and the right to dispose of all 1,954,400 shares. (2) Based upon information contained in a Schedule 13G, filed with the Company, which indicates that Shufro, Rose & Ehrman has the voting power with regard to 146,300 shares and the right to dispose of all 1,484,850 shares. The following table sets forth information with respect to the beneficial ownership of the Company's Common Stock, as of February 27, 1995, by its directors, nominees for election as directors, named executive officers, and all directors and executive officers as a group.
AMOUNT AND NATURE OF BENEFICIAL PERCENT NAME OWNERSHIP(1)(2) OF CLASS ---------------------------------------------------------- ----------------- -------- Jack Daugherty............................................ 801,875(3) 2.74% Morton A. Cohn............................................ 381,298(4) 1.32% A. R. Dike................................................ 114,000(5) .40% Daniel R. Feehan.......................................... 386,983(6) 1.34% James H. Greer............................................ 135,000(7) .47% B. D. Hunter.............................................. 150,000(8) .52% Clifton H. Morris, Jr..................................... 204,500(9) .71% Carl P. Motheral.......................................... 421,565(10) 1.46% Samuel W. Rizzo........................................... 284,210(11) .99% R. L. Waltrip............................................. 230,778(12) .80% Terry R. Kuntz............................................ 38,625(13) .13% Gregory W. Trees.......................................... 17,715(14) * Dale R. Westerfeld........................................ 45,535(15) .16% All Directors and Executive Officers as a group (16 persons)................................................ 3,262,794(16) 10.49%
--------------- * Indicates ownership of less than .1% of the Company's Common Stock. (1) Beneficial ownership as reported in the above table has been determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended. Unless otherwise indicated, each of the persons named has sole voting and investment power with respect to the shares reported. (2) Except for the percentages of certain parties that are based on presently exercisable options which are indicated in the following footnotes to this table, the percentages indicated are based on 28,577,575 5 23 shares of Common Stock issued and outstanding on February 27, 1995. In the case of parties holding presently exercisable options, the percentage ownership is calculated on the assumption that the shares presently purchasable or purchasable within the next sixty days underlying such options are outstanding. (3) This amount includes 736,375 shares subject to options that are exercisable within the next sixty days. (4) This amount includes 68,248 shares held in trust for Mr. Cohn's children over which Mr. Cohn has voting power only in the form of an irrevocable voting proxy. Mr. Cohn disclaims any beneficial ownership thereof. Also, this amount includes 202,500 shares subject to options that are exercisable within the next sixty days. (5) Includes 108,000 shares subject to options that are exercisable within the next sixty days. (6) This amount includes 280,625 shares subject to options that are exercisable within the next sixty days. This amount also includes 2,400 shares owned by Mr. Feehan's wife and 600 shares in the name of Mr. Feehan's children. (7) Consists of 135,000 shares subject to options that are exercisable within the next sixty days. (8) This amount includes 15,000 shares held by a corporation that Mr. Hunter indirectly controls. Mr. Hunter disclaims beneficial ownership of such shares. Also, this amount includes 135,000 shares subject to options that are exercisable within the next sixty days. (9) This amount includes 2,000 shares owned by Mr. Morris' wife. Also, this amount includes 202,500 shares subject to options that are exercisable within the next sixty days. (10) This amount includes 202,500 shares subject to options that are exercisable over the next sixty days. (11) This amount includes 18,600 shares owned by trusts of which Mr. Rizzo is trustee and 4,000 shares owned by Mr. Rizzo's wife. This amount also includes 202,500 shares subject to options that are exercisable within the next sixty days. (12) This amount includes 202,500 shares subject to options that are exercisable within the next sixty days. (13) Consists of 38,625 shares subject to options that are exercisable within the next 60 days. (14) This amount includes 15,375 shares subject to options that are exercisable within the next sixty days. (15) This amount includes 22,375 shares subject to options that are exercisable within the next sixty days. This amount also includes 450 shares owned in the name of Mr. Westerfeld's children. (16) This amount includes 2,519,375 shares that directors and executive officers have the right to acquire within the next sixty days through the exercise of stock options. COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934 The Company's executive officers and directors are required to file under the Securities Exchange Act of 1934 reports of ownership and changes of ownership with the Securities and Exchange Commission. Based solely upon information provided to the Company by individual directors and executive officers, the Company believes that during the fiscal year ended December 31, 1994 all filing requirements applicable to executive officers and directors have been complied with, except that Mr. Motheral inadvertently failed to file a Form 4 in a timely manner in connection with the open market purchase of 12,815 shares of the Company's common stock in April 1994 effected by the custodian of his individual retirement account. 6 24 EXECUTIVE COMPENSATION The following sets forth information concerning the compensation of the Company's Chief Executive Officer and each of the other four most highly compensated executive officers of the Company for the fiscal years shown. SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION -- AWARDS -------------- ANNUAL COMPENSATION SECURITIES ------------------------------------------ UNDERLYING ALL OTHER NAME AND OTHER ANNUAL OPTIONS/ COMPENSATION PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) SARS (#) ($)(1) -------------------------- ---- --------- -------- --------------- -------------- ------------ Jack R. Daugherty, 1994 360,000 36,000 175,000 42,202 Chairman and CEO 1993 300,000 60,000 25,500 38,399 1992 303,461 -- 20,000 3,399 Daniel R. Feehan, 1994 300,000 28,500 33,200(2) 145,000 29,242 President and Chief 1993 240,000 48,000 20,500 27,721 Operating Officer 1992 242,769 -- 18,500 27,721 Terry R. Kuntz, 1994 215,000 19,000 15,000 4,144 Executive Vice 1993 190,000 19,000 14,500 2,644 President -- Operations(3) 1992 182,700 -- 50,000 151,376 Gregory W. Trees, 1994 137,500 12,500 7,000 2,576 Vice President -- 1993 125,000 9,375 6,500 1,034 Marketing and 1992 96,154 -- 27,500 67,238 Merchandising(4) Dale R. Westerfeld, 1994 120,000 10,000 6,500 2,473 Vice President -- 1993 97,500 9,750 6,500 644 Chief Financial Officer 1992 98,625 6,750 7,500 644
--------------- (1) The amounts disclosed in this column include: (a) Company contributions of the following amounts under the Company's 401(k) Employees' Savings Plan on behalf of Mr. Daugherty, $260 in 1992 and 1993 and $3,560 in 1994; Mr. Feehan, $260 in 1992 and 1993 and $2,560 in 1994; Mr. Kuntz, $1,500 in 1994; Mr. Trees, $390 in 1993 and $1,932 in 1994; and Mr. Westerfeld, $1,829 in 1994. (b) Payment by the Company of premiums of $644 per year for term life insurance on behalf of each of the named individuals, except that in 1994 the premiums for Messrs. Feehan, Trees and Westerfeld were $377, $1,066, and $377, respectively. (c) Payment of the following amounts for additional term life insurance on behalf of Mr. Daugherty, $2,495 in 1992 and 1993 and $2,998 in 1994; Mr. Feehan, $1,817 in 1992 and 1993 and $1,038 in 1994; and Mr. Kuntz, $2,000 in 1993 and 1994. (d) Premium payments under split-dollar life insurance policies on Mr. Feehan ($25,000 per year for 1992 through 1994) and on Mr. Daugherty's spouse ($35,000 in 1993 and 1994). (2) This amount includes a $1,100 per month automobile allowance and a $20,000 annual allowance for professional fees and expenses. (3) Mr. Kuntz joined the Company on January 15, 1992. The amount in the last column for fiscal 1992 includes $148,732, consisting of a signing bonus and an allowance for moving and temporary living expenses. (4) Mr. Trees joined the Company on March 30, 1992. The amounts in the last column include $66,809 for fiscal 1992, which consists of a signing bonus and an allowance for moving and temporary living expenses, and $9,721 for additional moving and temporary living expenses in fiscal 1993. 7 25 OPTION/SAR GRANTS IN LAST FISCAL YEAR The following table shows all individual grants of stock options to the named executive officers of the Company during the fiscal year ended December 31, 1994.
INDIVIDUAL GRANTS --------------------------------------------------------- NUMBER OF SECURITIES UNDERLYING % OF TOTAL OPTIONS/ OPTIONS/SARS SARS GRANTED TO EXERCISE OR GRANT DATE GRANTED EMPLOYEES IN BASE PRICE EXPIRATION PRESENT NAME (#) FISCAL YEAR ($/SH) DATE VALUE($)(1) -------------------------------------------- --------- ------------ ----------- ---------- ----------- Jack R. Daugherty, 87,500(2) 16.7 7.75 6/30/04 341,250 Chairman and CEO 87,500(3) 16.7 7.75 6/30/99 252,875 Daniel R. Feehan, 72,450(2) 13.8 7.75 6/30/04 282,555 President and Chief 72,550(3) 13.8 7.75 6/30/99 209,670 Operating Officer Terry R. Kuntz, 15,000(4) 2.9 7.875 7/26/99 42,750 Executive Vice President -- Operations Gregory W. Trees, 7,000(4) 1.3 7.875 7/26/99 19,950 Vice President -- Marketing and Merchandising Dale Westerfeld, 6,500(4) 1.2 7.875 7/26/99 18,525 Vice President -- Chief Financial Officer
--------------- (1) As permitted by the Securities and Exchange Commission's rules on executive compensation disclosure, the Company used the Black-Scholes model of option valuation to determine grant date present value. The Company does not advocate or necessarily agree that the Black-Scholes model can properly determine the value of an option. Calculations are based upon the following assumptions: (i) dividend yield of .5% per share based on the Company's history of dividend payments; (ii) volatility of 33.07 percent; (iii) exercise of the option at the end of the option term; (iv) a risk-free rate of return of 6.7% for five-year options and 7.3% for ten-year options (based on the then quoted yield of Treasury Strips maturing 5 and 10 years from the grant date, respectively); and (v) a 3% annual discount factor for vesting limitations. (2) These stock options become exercisable in seven equal annual installments beginning one year after the grant date. (3) These stock options become exercisable in two equal annual installments beginning one year after the grant date. (4) These stock options become exercisable in four equal annual installments beginning one year after the grant date. 8 26 AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES The following table provides information concerning option exercises in fiscal 1994 and the value of unexercised options held by each of the named executive officers at the end of the Company's last fiscal year.
NUMBER OF SECURITIES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED OPTIONS/SARS AT IN-THE-MONEY FY-END OPTIONS/SARS AT (#)(1) FY-END ($)(2) SHARES --------------- -------------------- ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/ NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE ------------------------------------ ------------ ------------ --------------- -------------------- Jack R.Daugherty, 25,500 41,438 736,375/285,625 2,528,599/414,404 Chairman and CEO Daniel R. Feehan, 22,500 28,125 280,625/175,875 919,674/346,204 President and Chief Operating Officer Terry R. Kuntz, -0- N/A 28,625/50,875 24,232/55,196 Executive Vice President -- Operations Gregory W. Trees, -0- N/A 15,375/25,625 9,586/27,694 Vice President -- Marketing and Merchandising Dale R. Westerfeld, 9,000 14,625 22,375/17,625 50,742/27,882 Vice President & CFO
--------------- (1) These figures reflect the appropriate adjustments for the Company's three-for-two stock split in May 1990 and the two-for-one stock split in April 1992. (2) Values stated are based upon the closing price of $9.875 per share of the Company's Common Stock on the New York Stock Exchange on December 30, 1994, the last trading day of the fiscal year. COMPENSATION COMMITTEE REPORT The Executive Compensation Committee of the Company's Board of Directors consists entirely of outside directors of the Company. The Committee oversees and administers the Company's executive compensation program and administers the Company's 1994 Long-Term Incentive Plan. Its decisions relating to executive compensation are reviewed by the full Board of Directors. The Committee held one meeting during fiscal 1994. -- OVERALL EXECUTIVE COMPENSATION POLICIES The basic philosophy of the Company's executive compensation program is to link the compensation of its executive officers to their contribution toward the enhancement of shareholder value. Consistent with that philosophy, the program is designed to meet the following policy objectives: - Attracting and retaining qualified executives critical to the long-term success of the Company. - Tying executive compensation to the Company's general performance and specific attainment of long-term strategic goals. - Rewarding executives for contributions to strategic management designed to enhance long-term shareholder value. - Providing incentives that align the executive's interest with those of the Company's shareholders. 9 27 -- ELEMENTS OF EXECUTIVE COMPENSATION The Company's executive compensation program consists of the following elements designed to meet the policy objectives set out above: Base Salary The Committee set the annual salary of the Company's Chief Executive Officer and the President and reviewed the annual salaries of the Company's other executive officers for fiscal 1994. In setting appropriate annual salaries, the Committee takes into consideration the minimum salaries set forth in certain executives' employment contracts (described elsewhere in this Proxy Statement), the level and scope of responsibility, experience, and performance of the executive, the internal fairness and equity of the Company's overall compensation structure, and the relative compensation of executives in similar positions in the marketplace. The Committee relies on information supplied by an outside compensation consulting firm pertaining to competitive compensation. The Committee tends to position base salary and annual incentive targets at the 50th percentile of the competitive market. The Committee believes that very few of the companies in the peer group described below under "Performance Graph" are included in the surveys used for compensation comparisons. Those surveys represent a much broader collection of U.S. companies. Annual Incentive Compensation Beginning in fiscal 1989, the Board of Directors adopted an annual incentive cash bonus plan for its highest ranking executive officers, who for fiscal 1994 were Messrs. Daugherty and Feehan. Under this plan, such executive officers could receive an annual incentive cash bonus based on the Company's annual pre-tax earnings performance measured against the financial plan approved by the Board of Directors for that year. The incentive bonus ranges from 20 percent to 50 percent of each executive officer's base salary. The 20 percent bonus is payable upon the Company achieving the specified pre-tax earnings goal, and additional sums are payable if and to the extent the Company exceeds the goal, with the full 50 percent payable if the Company exceeds the goal by 5 percent or more. The Board of Directors adopted a similar bonus plan for the other executive officers and vice presidents of the Company. For those participants, the incentive bonus ranges from 10 percent to 20 percent of their base salary. No bonuses were paid in fiscal 1994 under this plan. However, in 1994 the Committee elected to award a discretionary bonus to the participants in an amount less than the minimum bonus payable under the bonus plan (except that, in Mr. Daugherty's case, the amount equalled the minimum bonus payable under the bonus plan). The Committee considered this award to be appropriate in light of the following accomplishments of the Company in 1993: (1) a 21% increase in total revenues over the prior fiscal year; (2) a 16% year-to-year improvement in earnings before interest and taxes; (3) the acquisition of the 18-store Express Cash International pawnbroking chain in Texas; (4) the successful implementation of expense reduction and cost containment initiatives early in 1993; and (5) the attainment of a $125,000,000 credit facility with a group of five banks and a $30,000,000 private placement of notes with an institutional lender. Stock Options In furtherance of the objective of providing long-term incentives that relate to improvement in long-term shareholder value, the Company has awarded stock options to its executive officers under its 1987 Stock Option Plan (with Stock Appreciation Rights). As stated elsewhere in this Proxy Statement, this Plan is administered by the Board's Stock Option Committee. The Company did not grant any options to its executive officers under this Plan in 1994. 10 28 Long-Term Incentive Plan Upon the recommendation of the Committee, the Board of Directors adopted the 1994 Long-Term Incentive Plan in January 1994, and the shareholders of the Company approved the 1994 Plan at the Annual Meeting in April 1994. The 1994 Plan provides for expanded forms of stock-based long-term incentive compensation awards. This Plan is intended to further the objective of fostering and promoting improvement in long-term financial results and increases in shareholder value. Awards under the 1994 Plan may take the form of restricted stock grants, stock options, stock appreciation rights, performance share awards, or a combination of the above. The Company granted options to its executive officers in 1994 at an exercise price equal to the closing price of the Company's common stock on the New York Exchange on the day preceding the date of grant. The options become exercisable in equal increments annually beginning on the first anniversary of the date of grant. (For an explanation of the different vesting schedules, see the "Options/SAR Grants in Last Fiscal Year" table in this Proxy Statement.) This arrangement rewards effective management that results in long-term increases in the Company's stock price. The number of options granted to the Company's five highest paid executive officers, as reflected elsewhere in this Proxy Statement, is based in part on many of the same considerations underlying the determination of annual base salary. The Committee relies on its outside compensation consultant to supply market data on long-term incentives. The committee uses the Black-Scholes model to determine competitive option awards equal to the 50th percentile of general industry practices. Deductibility Cap on Executive Compensation Beginning in 1994, a new federal tax law disallows corporate deductibility for certain compensation paid in excess of $1,000,000 to the Chief Executive Officer and the four other most highly paid executive officers. "Performance-based compensation," as defined in the tax law, is not subject to the deductibility limitation, provided certain shareholder approval and other requirements are met. Although the cash compensation paid to the Company's Chief Executive Officer and the four other most highly paid executive officers is well below the $1,000,000 level in each case, the Committee determined that the Company should seek to ensure that future stock option and performance award compensation under the 1994 Plan qualifies as "performance-based compensation." Accordingly, the 1994 Plan is intended to meet the requirements of the new law and thereby preserve full deductibility of both stock option and stock-based performance award compensation expense. -- CEO'S COMPENSATION FOR FISCAL 1994 The fiscal 1994 salary of Mr. Jack R. Daugherty, Chief Executive Officer of the Company, was based primarily on his rights under his ten-year employment agreement with the Company dated April 25, 1990, which is described elsewhere in this Proxy Statement. Under that agreement, Mr. Daugherty's minimum base salary is $225,000. The Committee has increased Mr. Daugherty's base salary annually since that time (except in 1993) after taking into consideration the factors described under "Base Salary" above. For fiscal 1994, the Committee set Mr. Daugherty's base salary at $360,000. A portion of the increase in Mr. Daugherty's base salary is attributable to the fact that he did not receive an increase in 1993 from his base salary for 1992. In addition, the Committee approved the payment of a $36,000 bonus to Mr. Daugherty in 1994 for the reasons described above in "Annual Incentive Compensation." The Committee believes that the total cash compensation paid to Mr. Daugherty was appropriate in light of the Company's accomplishments in 1994, including the following: (1) a 21% increase in revenue net of cost of goods sold; (2) a 24% increase in income from operations; and (3) the acquisition of the Svensk Pantbelaning pawnbroking chain, the largest chain of pawnshops in Sweden. 11 29 These 1994 accomplishments also support the Committee's belief that the fiscal 1994 cash compensation of the Company's other executive officers was set at appropriate levels. EXECUTIVE COMPENSATION COMMITTEE R. L. Waltrip, Chairman A. R. Dike B. D. Hunter Notwithstanding anything to the contrary set forth in any of the Company's previous filings under the Securities Act of 1933 or the Securities Exchange Act of 1934 that might incorporate future filings, including this Proxy Statement, in whole or in part, the preceding report and the Performance Graph on Page 13 shall not be incorporated by reference into any such filings. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The following non-employee directors serve on the Executive Compensation Committee of the Company's Board of Directors: A. R. Dike, B. D. Hunter, and R. L. Waltrip. EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS As a condition to receiving grants of options under the 1989 Key Employee Stock Option Plan for Cash America International, Inc. discussed below, the recipients of the options entered into employment agreements with the Company during fiscal 1990. The agreements contained initial terms of five years (ten years in the case of Mr. Daugherty), and compensation thereunder is determined annually by the Company's Board of Directors, subject to minimum annual compensation for Messrs. Daugherty and Feehan of $225,000 and $190,000, respectively. Included in each agreement is a covenant of the employee not to compete with the Company during the term of his employment and for a period of three years thereafter. The employment agreements also provide that if the employee is terminated by the Company other than for cause, the Company will pay to the employee the remainder of his current year's salary (undiscounted) plus the discounted present value (employing an interest rate of 8%) of two additional years' salary. In the event the employee resigns or is terminated other than for cause within twelve months after a "change in control" of the Company (as that term is defined in the employment agreement), the employee will be entitled to earned and vested bonuses at the date of termination plus the remainder of his current year's salary (undiscounted) plus the present value (employing an interest rate of 8%) of two additional years' salary (for which purpose "salary" includes the annual rate of compensation immediately prior to the "change in control" plus the average annual cash bonus for the immediately preceding three year period). Effective January 15, 1992, the Company entered into a similar employment agreement with Terry R. Kuntz, who joined the Company as its Executive Vice President -- Operations. The agreement provides for minimum annual compensation to Mr. Kuntz of $190,000, and the term of the agreement expires contemporaneously with the expiration of the agreement with Mr. Feehan. The Company also entered into a similar employment agreement effective March 30, 1992 with Gregory W. Trees, Vice President -- Marketing and Merchandising. It provides for minimum annual compensation of $125,000. The primary term of the agreement expires on March 31, 1995 and is followed by two one-year renewal terms. 12 30 PERFORMANCE GRAPH The following Performance Graph shows the changes over the past five year period in the value of $100 invested in: (1) the Company's Common Stock, (2) the Standard & Poor's 500 Index, and (3) the common stock of a peer group of companies whose returns are weighted according to their respective market capitalizations. The values of each investment as of the beginning of each year are based on share price appreciation and the reinvestment of dividends. The peer group consists of the following companies, whose businesses taken as a whole resemble the Company's unique combination of consumer lending and retail activities: Beneficial Corp., Household International, Circuit City Stores, Jewelmaster, Inc., Peoples Jewellers, MacFrugal's Bargains, Luria (L.) & Sons, Inc., Oshman's Sporting Goods, Lowe's Corp., and Tandy Corp. COMPARISON OF CUMULATIVE SHAREHOLDER RETURN 1989 -- 1994 [GRAPH]
MEASUREMENT PERIOD CASH AMERICA PEER GROUP (FISCAL YEAR COVERED) INTERNATIONAL S&P 500 INDEX 1989 100 100 100 1990 101 97 74 1991 129 126 104 1992 146 136 130 1993 127 150 184 1994 134 152 202
Data Source: S&P Compustat Services TRANSACTIONS WITH MANAGEMENT The Board of Directors of the Company adopted an officer stock loan program in 1994. The purpose of the program is (i) to facilitate and encourage the ownership of Company common stock by the officers of the Company and (ii) to establish the terms for stock loan transactions with officers. Participants in the program can utilize loan proceeds to acquire and hold common stock of the Company by means of option exercises or otherwise. The stock to be held as a result of the loan must be pledged to the Company to secure the obligation to repay the loan. The loan proceeds for a particular borrowing may not exceed a certain percentage of the then current value of the stock to be pledged, with that percentage varying depending on whether the stock is acquired through option exercise or otherwise. Under the terms of the loan, interest accrues at the rate of 1% over a designated bank's "prime rate." Interest is payable annually and may be paid with additional loan proceeds, provided that the outstanding aggregate principal balance of the officer's loan would not exceed the then aggregate value of the pledged stock that would secure the loan. The limit on the principal balance that a participant may have outstanding under this program is three times annual base salary for executive officers and twice the amount of annual base salary for other officers. The aggregate principal balance of all outstanding loans under the program may not exceed $5,000,000 at any time. A participant may not obtain additional loan proceeds at any time when his then outstanding principal balance would exceed the aggregate value of his pledged stock. If that outstanding balance exceeds the value of the pledged stock for a period of 13 31 24 consecutive months, the borrower must repay the principal balance in 20 equal quarterly installments. As of December 31, 1994, Messrs. Daugherty, Feehan and Westerfeld had stock loans outstanding under this program in the aggregate principal amounts of $450,500, $717,500, and $116,000, respectively. INDEPENDENT ACCOUNTANTS Coopers & Lybrand served as independent public accountants for the Company for fiscal 1994 and has reported on the Company's financial statements. The Board of Directors of the Company has selected Coopers & Lybrand of Fort Worth, Texas to audit the accounts of the Company for the fiscal year ending December 31, 1995 and recommends to the shareholders to ratify this selection for the ensuing fiscal year ending December 31, 1995. The Company has been advised that Coopers & Lybrand has no relationship with the Company or its subsidiaries other than that arising from the firm's employment as auditors. The affirmative vote of a majority of the outstanding shares of Common Stock present at the Annual Meeting in person or by proxy is necessary for the ratification of the appointment of Coopers & Lybrand as independent public accountants. A representative of Coopers & Lybrand is expected to be present at the Annual Meeting and will be afforded an opportunity to make a statement and will be available to respond to appropriate questions at such meeting. While shareholder ratification is not required for the selection of Coopers & Lybrand since the Board of Directors has the responsibility for the selection of the Company's independent public accountants, the selection is being submitted for ratification at the Annual Meeting with a view towards soliciting the shareholders' opinion thereon, which opinion will be taken into consideration in future deliberations. THE BOARD RECOMMENDS A VOTE "FOR" THE RATIFICATION OF COOPERS & LYBRAND AS INDEPENDENT PUBLIC ACCOUNTANTS OF THE COMPANY FOR THE 1995 FISCAL YEAR. OTHER BUSINESS Any proposal to be presented by a shareholder at the Company's 1996 Annual Meeting of Shareholders must be presented to the Company at least 120 days prior to the date that the Company mails the notice for such meeting. It is estimated such deadline will be November 20, 1995, with the mailing of such notice to be approximately March 19, 1996. It is important that proxies be returned promptly to avoid unnecessary expense. Therefore, shareholders are urged, regardless of the number of shares of stock owned, to date, sign and return the enclosed proxy in the enclosed reply envelope. By Order of the Board of Directors HUGH A. SIMPSON Secretary March 27, 1995 14 EX-21 7 LIST OF SUBSIDIARIES 1 EXHIBIT 21 2 SUBSIDIARIES OF CASH AMERICA INTERNATIONAL, INC.
Jurisdiction of Incorporation or Formation ------------ Cash America, Inc. Delaware Cash America, Inc. of Louisiana Delaware Cash America, Inc. of North Carolina North Carolina Georgia Cash America, Inc. Georgia Florida Cash America, Inc. Florida Cash America, Inc. of South Carolina South Carolina Cash America, Inc. of Kentucky Kentucky Cash America, Inc. of Oklahoma Oklahoma Cash America, Inc. of Tennessee Tennessee Cash America Pawn, Inc. of Ohio Ohio Cash America, Inc. of Alabama Alabama Cash America, Inc. of Colorado Colorado Cash America, Inc. of Indiana Indiana Cash America of Missouri, Inc. Missouri Express Cash International Corporation Delaware Cash America Holding, Inc. Delaware Cash America Pawn L.P. Delaware Cash America Management L.P. Delaware Harvey & Thompson Limited United Kingdom CAII Pantbelaning Aktiebolag Sweden Svensk Pantbelaning AB Sweden
EX-23 8 CONSENT OF COOPERS & LYBRAND 1 EXHIBIT 23 2 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the three separate registration statements of Cash America International, Inc. on Form S-8, (File No. 33-18150, File No. 33-29658 and File No. 33-36430) of our reports dated January 27, 1995, on our audits of the consolidated financial statements and financial statement schedules of Cash America International, Inc. as of December 31, 1994 and 1993, and for each of the three years in the period ended December 31, 1994, which reports are included or incorporated by reference in this Annual Report on Form 10-K. COOPERS & LYBRAND Fort Worth, Texas March 27, 1995 EX-27 9 FINANCIAL DATA SCHEDULE
5 1000 YEAR DEC-31-1994 JAN-01-1994 DEC-31-1994 4,827 0 96,721 0 80,894 189,236 90,239 (26,998) 324,257 21,027 119,796 3,024 0 0 180,410 324,257 156,247 262,105 126,254 204,458 26,277 0 6,265 24,958 9,460 15,498 0 0 0 15,498 .54 .53