UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): January 25, 2012
CASH AMERICA INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
| Texas | 1-9733 | 75-2018239 | ||
| (State of incorporation) |
(Commission File No.) |
(IRS Employer Identification No.) | ||
| 1600 West 7th Street Fort Worth, Texas |
76102 | |||
| (Address of principal executive offices) |
(Zip Code) | |||
Registrant’s telephone number, including area code: (817) 335-1100
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
ITEM 5.02 DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS
2012 Short-Term Incentive Plan
On January 25, 2012, the independent members of the Board of Directors (the “Board”) of Cash America International, Inc. (the “Company”), on the recommendation of its Management Development and Compensation Committee (the “Committee”), approved the terms and conditions of the short term incentive compensation plan for executive officers of the Company for 2012 (the “2012 STI plan”), which is a cash-based incentive plan that will be administered by the Committee under the Company’s Senior Executive Bonus Plan, as amended. Under the 2012 STI plan, a cash bonus pool may be funded based on the Company’s achievement of certain financial objectives for 2012.
The 2012 STI plan consists of the following three components (each an “STI Component”):
| • | the EBT component (the “EBT Component”), which is based on the Company’s consolidated 2012 earnings before taxes, excluding certain unusual items; |
| • | the Retail Services Division component (the “Retail Services Division Component”), which is based on the 2012 earnings before taxes for the Retail Services Division, excluding certain unusual items; and |
| • | the E-Commerce Division component (the “E-Commerce Division Component”), which is based on the 2012 earnings before interest, taxes, depreciation and amortization of the E-Commerce Division, excluding certain unusual items. |
The target 2012 short-term incentive (“STI”) award for the Company’s Chief Executive Officer is 100% of his base salary, and the target 2012 STI award for all other executive officers is 70% of their respective base salaries. STI payments, if any, will be determined by the Committee in January 2013 and will be based on the following: (a) 50% on the EBT Component and 50% on the Retail Services Division Component for the Company’s President-Retail Services Division, (b) 100% on the E-Commerce Division Component for the Company’s President-E-Commerce Division and (c) 100% on the EBT Component for all other executive officers, including the Chief Executive Officer, Chief Financial Officer and General Counsel.
Under the terms of the 2012 STI plan, potential STI awards will begin to accrue under each STI Component once the Company exceeds a certain earnings threshold (the “Earnings Threshold”) established for that STI Component, and the potential STI awards can increase ratably up to 100% of the portion of a target award related to the applicable STI Component if earnings in the particular STI Component reach a specified earnings target (the “Earnings Target”) established for such STI Component. If earnings in a particular STI Component do not reach the Earnings Threshold applicable to such STI Component, no portion of the STI award related to that STI Component will be available for payment. If earnings in any STI Component exceed the applicable Earnings Target for such component, the potential STI award applicable to such STI Component will increase above the portion of the target award corresponding to such STI Component based on a formula set forth in the 2012 STI plan not to exceed a cap of 200%. The Committee also has discretion under the 2012 STI plan to reduce or eliminate amounts that may be paid under the plan. The 2012 STI plan contains a “clawback” provision that allows the Committee to recoup all or some of the amount paid to an executive officer under certain circumstances when there is a material restatement of the Company’s financial results.
2011 Short-Term Incentive Plan Payments
On January 25, 2012, the independent members of the Board, on the recommendation of the Committee, approved cash payments to each of the Company’s executive officers named in its 2011 Proxy Statement (the “Named Executive Officers”) under its 2011 STI plan that will be paid in February. All payments were determined in accordance with the Company’s 2011 STI plan as described in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 1, 2011.
In determining payments to be made under the 2011 STI plan, the Committee used its discretion under the plan only with respect to the amount to be paid to Mr. Weese, the Company’s President-Retail Services Division. An additional payment under the 2011 STI plan will be made to Mr. Weese in the amount of $53,677, for a total payment of $388,207. Similar to the 2012 STI Plan, Mr. Weese’s 2011 award was based 50% on a Retail Services Division Component and 50% on an EBT Component. While the Company had strong earnings within the Retail Services Division and exceeded the earnings threshold required for awards to begin to accrue for the Retail Services Division Component of Mr. Weese’s 2011 award, it fell slightly below the Retail Services Division Component earnings target that was set under the 2011 STI plan. The Company did, however, significantly exceed its earnings target that was set under the 2011 STI plan for the EBT Component of Mr. Weese’s award during 2011. Based on both of these components, the resulting STI payment as calculated pursuant to the 2011 STI plan would have been 106.2% of Mr. Weese’s target award (which target award was 70% of his 2011 base salary), but the Committee used its discretion to award Mr. Weese an additional payment of 17% of his total target award. In using its discretion to award Mr. Weese an additional payment under the 2011 STI plan, the Committee considered Mr. Weese’s contribution to the Company during 2011, including the continued integration of a significant-sized pawn business acquired in 2010, his role in the Company’s acquisition activity, the introduction of new products and services in the Company’s retail services locations and the restructuring of the Company’s management team for its foreign retail services business. As a result of the foregoing, Mr. Weese will receive a final 2011 STI payment equal to 123.2% of his target award.
Long Term Incentive Plan Restricted Stock Unit Awards
On January 25, 2012, the independent members of the Board, on the recommendation of the Committee, approved awards of restricted stock units (“RSU”) to the Company’s Named Executive Officers, excluding the President-E-Commerce Division, under the Cash America International, Inc. First Amended and Restated 2004 Long-Term Incentive Plan, as amended (the “2004 LTIP”). In connection with these grants and pursuant to the 2004 LTIP, the Board approved form award agreements (the “RSU Agreements”) that set forth the terms and conditions of the RSU awards.
A portion of the RSUs granted in 2012 under the RSU Agreements will vest in four equal installments on February 24, 2013 and on January 31, 2014, 2015 and 2016 (the “Time-Based RSUs”). The remaining portion (the “Performance-Based RSUs”) will vest subject to the Company’s achievement of an improved earnings per share of the Company over the three-year period ending December 31, 2014 as set forth in the RSU Agreement. Based on the Company’s performance during that period, 0% to 200% of the target Performance-Based RSUs will be eligible to vest on January 1, 2015, subject to the Committee certifying the applicable performance results. The vesting of all RSU awards are subject to the award recipient’s continuous service as an employee or director of the Company on the applicable vesting date, with certain exceptions as set forth in the RSU Agreement. In addition, the RSU Agreements contain a “clawback” provision that allows the Committee to recoup all or some of the Performance-Based RSU awards under certain circumstances when there is a material restatement of the Company’s financial results. Other terms of these awards are consistent with previously disclosed terms of the 2004 LTIP.
The following table shows the shares issuable upon the vesting of each RSU award, including the percentage of the aggregate award represented by the Time-Based RSUs and the Performance-Based RSUs.
| Share Amounts Awarded |
Percentage of Total Award (1) | |||||||||||||||
| Name |
Time- Based RSUs |
Target Performance- Based RSUs (2) |
Time- Based RSUs |
Target Performance- Based RSUs |
||||||||||||
| Daniel R. Feehan, President and Chief Executive Officer |
14,080 | 14,080 | 50 | % | 50 | % | ||||||||||
| Thomas A Bessant, Jr., Executive Vice President and Chief Financial Officer |
8,572 | 2,858 | 75 | % | 25 | % | ||||||||||
| Dennis J. Weese, President -Retail Services Division |
8,860 | 2,953 | 75 | % | 25 | % | ||||||||||
| J. Curtis Linscott, Executive Vice President, General Counsel & Secretary |
6,708 | 2,235 | 75 | % | 25 | % | ||||||||||
| (1) | Based on the target Performance-Based RSU shares shown in the table. |
| (2) | Reflects the target number of shares issuable upon vesting for the Performance-Based RSUs if the Company achieves its target performance objectives. The number of Performance-Based RSUs that each of the Named Executive Officers listed above could receive pursuant to these RSU awards if the Company exceeds its target performance objectives increases ratably up to the maximum number of Performance-Based RSUs established for each Named Executive Officer shown in the table, as follows: Mr. Feehan – 28,160; Mr. Bessant – 5,716; Mr. Weese – 5,906; and Mr. Linscott – 4,470. |
Amended Change in Control Severance Agreements
The Company has previously entered into Executive Change-in-Control Severance Agreements with each of the Named Executive Officers, other than its Chief Executive Officer and President, Mr. Feehan, who has an employment agreement with the Company. These agreements are designed to promote stability and continuity of senior management because the Company has not entered into employment agreements with these executive officers. On January 25, 2012, the Board approved the Cash America International, Inc. First Amended and Restated Executive Change-in-Control Severance Agreements for its Named Executive Officers other than Mr. Feehan (the “Amended Change-in-Control Agreements”), and each such Named Executive Officer entered into the Amended Change-in-Control Agreement on the same date.
The Executive Change-in-Control Severance Agreements were primarily amended to (a) remove the provision in the agreement that allowed for a gross-up payment for excise and certain other taxes that could become payable as a result of payments made in connection with a change-in-control of the Company (as defined in the agreement) (b) update the change-in-control definition to be consistent with certain other Company agreements that utilize the change-in-control definition of Section 409A of the Internal Revenue Code of 1986, as amended, and (c) include a clawback provision that allows the Company to recoup all or some of the incentive compensation paid, issued or granted to the executive under certain circumstances when there is a material restatement of the Company’s financial results. The foregoing description of the Amended Change-in-Control Agreement is qualified in its entirety by the complete terms and conditions of the Amended Change-in-Control Agreement, a form of which is incorporated herein by reference as Exhibit 10.1.
| ITEM 9.01 | FINANCIAL STATEMENTS AND EXHIBITS |
| (d) | Exhibits |
| Exhibit No. |
Description | |
| 10.1 | Form of Cash America International, Inc. First Amended and Restated Executive Change-in-Control Severance Agreements |
Forward Looking Statements
This report contains forward-looking statements about the business, financial condition and prospects of the Company. The actual results of the Company could differ materially from those indicated by the forward-looking statements because of various risks and uncertainties including, without limitation, changes in pawn, consumer loan, tax and other domestic and foreign laws and governmental rules and regulations applicable to the Company’s business, changes in demand for the Company’s services, acceptance by consumers, legislators or regulators of the negative characterization by the media and consumer activists with respect to certain of the Company’s loan products, the continued acceptance of the online distribution channel by the Company’s online loan customers, the actions of third parties who provide, acquire or offer products and services to, from or for the Company, fluctuations in the price of gold, changes in competition, the ability of the Company to open new locations or complete acquisitions in accordance with its plans, changes in economic conditions, real estate market fluctuations, interest rate fluctuations, changes in foreign currency exchange rates, changes in the capital markets, changes in the Company’s ability to satisfy its debt obligations or to refinance existing debt obligations or obtain new capital to finance growth, the ability to successfully integrate newly acquired businesses into the Company’s operations, the loss of services of any of the Company’s executive officers, a prolonged interruption in the Company’s operations of its facilities, systems and business functions, including its information technology and other business systems, the effect of any current or future litigation proceedings on the Company, the implementation of new, or changes in the interpretation of existing, accounting principles or financial reporting requirements, acts of God, war or terrorism, pandemics and other events, the effect of any of such changes on the Company’s business or the markets in which it operates, risks related to the Company’s previously-announced proposed initial public offering of Common Stock of Enova International, Inc. (“Enova”), and other risks and uncertainties indicated in the Company’s filings with the Securities and Exchange Commission. These risks and uncertainties are beyond the ability of the Company to control, nor can the Company predict, in many cases, all of the risks and uncertainties that could cause its actual results to differ materially from those indicated by the forward-looking statements. When used in this report, terms such as “believes,” “estimates,” “should,” “could,” “would,” “plans,” “expects,” “anticipates,” “may,” “forecasts,” “projects” and similar expressions and variations as they relate to the Company or its management are intended to identify forward-looking statements. The Company disclaims any intention or obligation to update or revise any forward-looking statements to reflect events or circumstances occurring after the date of this report.
On September 15, 2011, Enova, a wholly-owned subsidiary of the Company that comprises the Company’s E-commerce segment, filed a Registration Statement on Form S-1 with the Securities and Exchange Commission in connection with a proposed initial public offering of Enova Common Stock by the Company and Enova. The Registration Statement on Form S-1 that was filed with the Securities and Exchange Commission has not yet become effective. The completion of the offering of Common Stock of Enova is subject to numerous conditions, including market conditions, and the Company can provide no assurance that it will be successfully completed. The securities offered under Enova’s Registration Statement may not be sold, nor may offers to buy be accepted prior to the time that the Registration Statement becomes effective. The information contained in this report with respect to the offering shall not constitute an offer to sell or a solicitation of an offer to buy these securities.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| CASH AMERICA INTERNATIONAL, INC. | ||||||
| Date: January 31, 2012 | By: | /s/ J. Curtis Linscott | ||||
| J. Curtis Linscott | ||||||
| Executive Vice President, General Counsel & Secretary | ||||||
EXHIBIT INDEX
| Exhibit No. |
Description | |
| 10.1 | Form of Cash America International, Inc. First Amended and Restated Executive Change-in-Control Severance Agreements |
Exhibit 10.1
Form of Cash America International, Inc. First Amended and Restated
Executive Change-in-Control Severance Agreement
THIS FIRST AMENDED AND RESTATED EXECUTIVE CHANGE-IN-CONTROL SEVERANCE AGREEMENT (the “Agreement”) is made and entered into by and between Cash America International, Inc. (the “Controlling Company”), a Texas corporation, and (“Executive”), and is effective on the 25th day of January, 2012 (hereinafter referred to as the “Effective Date”).
WHEREAS, the Executive is currently employed by the Controlling Company or one of its subsidiaries as ; and
WHEREAS, the Executive possesses considerable experience and knowledge of the business and affairs of the Controlling Company concerning its policies, methods, personnel, and operations; and
WHEREAS, the Controlling Company is desirous of assuring insofar as possible, that it will continue to have the benefit of the Executive’s services, and the Executive is desirous of having such assurances; and
WHEREAS, the Controlling Company recognizes that circumstances may arise in which a Change in Control of the Controlling Company occurs, through acquisition or otherwise, thereby causing uncertainty of employment without regard to the Executive’s competence or past contributions. Such uncertainty may result in the loss of the valuable services of the Executive to the detriment of the Controlling Company and the shareholders of the Controlling Company; and
WHEREAS, both the Controlling Company and the Executive are desirous that any proposal for a Change in Control or acquisition will be considered by the Executive objectively and with reference only to the business interests of the Controlling Company and the shareholders of the Controlling Company; and
WHEREAS, the Executive will be in a better position to consider the Controlling Company’s best interests if the Executive is afforded reasonable security, as provided in this Agreement, against altered conditions of employment which could result from any such Change in Control or acquisition; and
WHEREAS, the Controlling Company and the Executive previously entered into an Executive Change-in-Control Severance Agreement, which was later amended effective January 1, 2009 (the “Original Executive Change-in-Control Severance Agreement”).
NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements of the parties set forth in this Agreement, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree that the Original Executive Change-in-Control Severance Agreement shall be amended and restated as follows:
Article 1. Definitions
Wherever used in this Agreement, the following terms shall have the meanings set forth below and, when the meaning is intended, the initial letter of the word is capitalized:
| (a) | “Agreement” means this Executive Change-in-Control Severance Agreement. |
| (b) | “Base Salary” means, at any time, the then regular annual rate of pay which the Executive is receiving as annual salary, excluding amounts: (i) received under short-term or long-term incentive or other bonus plans, regardless of whether or not the amounts are deferred, or (ii) designated by the Company as payment toward reimbursement of expenses. |
| (c) | “Board” means the Board of Directors of the Controlling Company. |
| (d) | “Cause” shall be determined solely by the Committee in the exercise of good faith and reasonable judgment, and shall mean the occurrence of any one or more of the following: |
| (i) | The Executive’s willful and continued failure to substantially perform his duties with the Company (other than any such failure resulting from the Executive’s Disability), after a written demand for substantial performance is delivered to the Executive that specifically identifies the manner in which the Committee believes that the Executive has not substantially performed his duties, and the Executive has failed to remedy the situation within fifteen (15) business days of such written notice from the Company; or |
| (ii) | The Executive’s conviction of a felony; or |
| (iii) | The Executive’s willful engaging in conduct that is demonstrably and materially injurious to the Company, monetarily or otherwise. However, no act or failure to act on the Executive’s part shall be deemed “willful” unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the action or omission was in the best interests of the Company. |
| (e) | “Change in Control” means a change in ownership or effective control of the Controlling Company or a change in the ownership of a substantial portion of the assets of the Controlling Company, all within the meaning of Code Section 409A, except that 35% shall be substituted for 30% in applying Treasury Regulations Section 1.409A-3(i)(5)(vi) and 50% shall be substituted for 40% in applying Treasury Regulations Section 1.409A-3(i)(5)(vii). As a general overview, a Change in Control shall occur on the date that any of the following events occurs: |
(i) Any one person, or more than one person acting as a group (as defined in Code Section 409A), acquires ownership of stock of the Controlling Company that, together with all other Controlling Company stock held by such person or group constitutes more than 50 percent of the total voting power of the stock of the Controlling Company. However, if any one person, or more than one person acting as a group, is considered to own more than 50 percent of the total fair market value or total voting power of the stock of the Controlling Company, the acquisition of additional stock by the same person or persons is not considered to cause a change in the ownership of the Controlling Company or to cause a change in the effective control of the Controlling Company.
(ii) The date any one person, or more than one person acting as a group, acquires (or has acquired, during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Controlling Company possessing 35 percent or more of the total voting power of the stock of the Controlling Company.
(iii) The date that any one person, or more than one person acting as a group acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from the Controlling Company that have a total gross fair market value equal to or more than 50 percent of the total gross fair market value of all of the assets of the Controlling Company immediately before such acquisition or acquisitions.
(iv) The date a majority of the Controlling Company’s board of directors is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Controlling Company’s board of directors before the date of the appointment or election.
| (f) | “Code” means the Internal Revenue Code of 1986, as amended. |
| (g) | “Committee” means the Management Development and Compensation Committee of the Board, or, if no Management Development and Compensation Committee exists, then the full Board, or a committee of Board members, as appointed by the full Board to administer this Agreement. |
| (h) | “Company” means the Controlling Company (including any and all subsidiaries). |
| (i) | “Controlling Company” means Cash America International, Inc., a Texas corporation or any entity that becomes a successor thereto in a transaction (i) that qualifies under Code Section 368(a)(1)(F) as a mere change in identity, form or place of organization, or (ii) that is a liquidation into a parent corporation described in Code Section 332(b). |
| (j) | “Disability” shall have the meaning ascribed to such term in the Executive’s governing long-term disability plan, or if no such plan exists, at the discretion of the Board. |
| (k) | “Effective Date” means the date specified in the opening sentence of this Agreement. |
| (l) | “Effective Date of Termination” means the date on which a Qualifying Termination occurs, as provided in Section 2.2 herein. |
| (m) | “Exchange Act” means the Securities Exchange Act of 1934, as amended. |
| (n) | “Good Reason” means, without the Executive’s express written consent, the occurrence after a Change in Control of the Controlling Company of any one (1) or more of the following events which remains uncured after the expiration of 30 days following the delivery of written notice of such event to the Controlling Company in accordance with section 2.7: |
| (i) | The assignment of the Executive to duties materially inconsistent with, and which would constitute a material diminution with respect to, the Executive’s authorities, duties, responsibilities, and status (including offices, titles, and reporting requirements) as an executive and/or officer of the Company, or a material reduction or alteration in the nature or status of the Executive’s authorities, duties, or responsibilities from those in effect as of ninety (90) calendar days prior to the Change in Control, other than any insubstantial and inadvertent act; |
| (ii) | The Company’s requiring the Executive to be based at a location in excess of thirty-five (35) miles from the location of the Executive’s principal job location or office immediately prior to the Change in Control; except for required travel on the Company’s business to an extent substantially consistent with the Executive’s then-present business travel obligations; |
| (iii) | A material reduction by the Company of the Executive’s Base Salary in effect on the Effective Date hereof, or as the same shall be increased from time to time; |
| (iv) | The failure of the Company to continue in effect any of the Company’s short- and long-term incentive compensation plans, or employee benefit or retirement plans, policies, practices, or other compensation arrangements in which the Executive participates which results in a material diminution in the incentive compensation opportunity or benefits provided to the Executive, unless such failure to continue the plan, policy, practice, or arrangement pertains to all plan participants generally; or the failure by the Company to continue the Executive’s participation therein on materially the same basis, both in terms of the amount of benefits provided and the level of the Executive’s participation relative to other participants, as existed immediately prior to the Change in Control of the Controlling Company; |
| (v) | The failure of the Company to obtain a satisfactory agreement from any successor to the Controlling Company as a result of a Change in Control of the Controlling Company to assume and agree to perform the Company’s obligations under this Agreement, such that there is a breach of Article 7 herein; and |
| (vi) | A material breach of this Agreement by the Company which is not remedied by the Company within ten (10) business days of receipt of written notice of such breach delivered by the Executive to the Company. |
| (o) | “Qualifying Termination” means any of the events described in Section 2.2 herein, the occurrence of which gives rise to the entitlement to the payment of Severance Benefits hereunder. |
| (p) | “SERP” means the Cash America International, Inc. Supplemental Executive Retirement Plan, as amended from time to time. |
| (q) | “Separation from Service” or “Separate from Service” means the Executive separates from service with the Company as determined under Code Section 409A. For purposes of determining whether a Separation from Service has occurred, the “Company” shall include the Controlling Company (or the subsidiary or former subsidiary of the Controlling Company) that employs the Executive immediately before the separation (the “Employing Entity”) and all entities that would be treated as a single employer with the Employing Entity at such time under Code Sections 414(b) or (c), but substituting “at least 50 percent” instead of “at least 80 percent” each place it appears in applying such rules. |
| (r) | “Severance Benefits” mean the payment of severance compensation as provided in Section 2.3 herein. |
Article 2. Severance Benefits
2.1 Right to Severance Benefits. The Executive shall be entitled to receive from the Company Severance Benefits as described in Section 2.3 herein, if there has been a Change in Control of the Controlling Company and if, within twenty-four (24) months thereafter, the Executive Separates from Service with the Company for any reason specified in Section 2.2 herein as being a Qualifying Termination.
The Executive shall not be entitled to receive Severance Benefits if he is terminated for Cause, or if his employment with the Company ends due to death, Disability, or due to a voluntary termination of employment for reasons other than as specified in Section 2.2(b) herein.
2.2 Qualifying Termination. The occurrence of any one of the following events within twenty-four (24) months after a Change in Control of the Controlling Company shall be considered a “Qualifying Termination” and shall give rise to Executive’s entitlement to Severance Benefits under this Agreement:
| (a) | The Company’s involuntary termination of the Executive’s employment without Cause; and |
| (b) | The Executive’s voluntary termination of employment following the initial existence of a Good Reason. |
For purposes of this Agreement, a Qualifying Termination shall not include a termination of employment by reason of death or Disability, the Executive’s voluntary termination for reasons other than as specified in Section 2.2(b) herein, or the Company’s involuntary termination for Cause.
2.3 Description of Severance Benefits. In the event that the Executive becomes entitled to receive Severance Benefits, as provided in Sections 2.1 and 2.2 herein, the Company shall pay to the Executive and provide him with the following Severance Benefits:
| (a) | A lump-sum amount equal to the Executive’s unpaid Base Salary, accrued vacation pay and unreimbursed business expenses, as well as all other items earned by and owed to the Executive to the extent permitted under Code Section 409A, through and including the Effective Date of Termination. |
| (b) | A lump-sum amount equal to the Executive’s annual target bonus amount, established under the annual bonus plan in which the Executive is then participating, for the bonus plan year in which the Executive’s Effective Date of Termination occurs, multiplied by a fraction the numerator of which is the number of full completed months in the year from January 1 through the Effective Date of Termination, and the denominator of which is twelve (12). This payment will be in lieu of any other payment to be made to the Executive under the annual bonus plan in which the Executive is then participating for the plan year. |
| (c) | A lump-sum amount equal to two (2) multiplied by the higher of: (i) the Executive’s annual rate of Base Salary in effect upon the Effective Date of Termination, or (ii) the Executive’s annual rate of Base Salary in effect on the date of the Change in Control. |
| (d) | A lump-sum amount equal to two (2) multiplied by the higher of: (i) the Executive’s annual target bonus established under the annual bonus plan in which the Executive is then participating for the bonus plan year in which the Executive’s Effective Date of Termination occurs, or (ii) the actual annual bonus payment made to the Executive under the annual bonus plan in which the Executive participated in the year preceding the year in which the Effective Date of Termination occurs. |
| (e) | An immediate vesting of any and all outstanding cash-based long-term incentive awards held by the Executive, as granted to the Executive by the Company as a component of the Executive’s compensation. The vested amount shall be the greater of: (i) an amount calculated under the terms of the incentive award based on the higher of actual performance goal achievement or target award level established for each award, multiplied by a fraction the numerator of which is the full number of completed calendar months in the preestablished performance period as of the Effective Date of Termination, and the denominator of which is the full number of months in the entire performance period; or (ii) the amount to which the Executive would be entitled under the terms of the long-term incentive award in the absence of this provision. The time and form of payment of this vested amount shall be determined pursuant to the terms of the long-term incentive awards. |
| (f) | An immediate vesting and the lapse of all restrictions on any and all outstanding stock-based awards held by the Executive, including the maximum amount of any performance-based awards, to the extent not already provided for in the award agreement. |
| (g) | Equivalent payment for continued medical coverage under the Company’s group health plan and/or under the Company’s supplemental executive medical expense reimbursement plan (“MERP”), if any, for a period of twenty-four (24) months following the date of Separation from Service, based on the same coverage level, including dependent coverage, as in effect on the Effective Date of Termination. Executive’s dependents shall be entitled to continue coverage for the full twenty-four (24) month period following the Effective Date of Termination, even if the Executive dies during such period. Each payment or premium discount provided under this subsection shall be considered a separate payment for purposes of Code Section 409A. Equivalent payment under this subsection shall be provided as follows: |
| (i) | With respect to coverage other than the MERP, such equivalent payment shall be provided by: |
| (A) | providing reimbursement of the portion of the monthly COBRA premium in excess of the amounts (if any) that similarly-situated active employees would pay for similar coverage under the Company’s plans for the eighteen (18) month period, or such shorter period, of time during which Executive has COBRA coverage, or a direct reduction in premiums in lieu of reimbursement if determined by the Company in its discretion; |
| (B) | providing a lump-sum payment equal to the reimbursement described in clause (i)(A) of this subsection for the first monthly COBRA premium times six (6); and |
| (C) | if for any reason during the eighteen (18) month period following the Effective Date of Termination, Executive does not have COBRA coverage under the Company’s group health plan, the Company shall make an additional lump sum payment to Executive (or to Executive’s estate if Executive has died), equal to the reimbursement described in clause (i)(A) of this subsection for the first monthly COBRA premium times the number of months in the period from the date Executive’s COBRA coverage ends through the end of the eighteenth (18th) month following the Effective Date of Termination. |
| (ii) | The Company shall also pay a lump-sum payment equal to the portion of the monthly MERP premium in excess of the amounts (if any) that similarly-situated active employees would pay for similar coverage under the MERP for a period of twenty-four (24) months. |
| (h) | Up to $50,000 for reimbursement of amounts paid by the Executive for reasonable outplacement services from a reputable executive search firm of the Executive’s selection (or direct payment to such search firm), to the extent that the Executive incurs such expenses (i) as a direct result of the Separation from Service and (ii) within twenty-four (24) months after the date of the Separation from Service. Notwithstanding anything in this Agreement to the contrary, the Company shall provide any reimbursements described in this Section 2.3(h) to the Executive on or before the December 31 of the third calendar year following the calendar year that includes the Separation from Service. |
2.4 Termination for Total and Permanent Disability. Following a Change in Control, if the Executive’s employment is terminated with the Company due to Disability, the Executive’s benefits shall be determined in accordance with the Company’s retirement, insurance, and other applicable plans and programs then in effect.
2.5 Termination for Death. Following a Change in Control, if the Executive’s employment with the Company is terminated by reason of his death, the Executive’s benefits shall be determined in accordance with the Company’s retirement, survivor’s benefits, insurance, and other applicable programs then in effect.
2.6 Termination for Cause or by the Executive Other Than for Good Reason. Following a Change in Control, if the Executive’s employment is terminated either: (i) by the Company for Cause; or (ii) voluntarily by the Executive for reasons other than as specified in Section 2.2(b) herein, the Company shall pay the Executive his full Base Salary at the rate then in effect, accrued vacation, and other items earned by and owed to the Executive through the Effective Date of Termination, plus all other amounts to which the Executive is entitled under any compensation plans of the Company at the time such payments are due, and the Company shall have no further obligations to the Executive under this Agreement.
2.7 Notice of Termination. Any termination of the Executive’s employment by the Company for Cause or by the Executive for Good Reason shall be communicated by Notice of Termination to the other party. For purposes of this Agreement, a “Notice of Termination” shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon, and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated. In order to terminate for Good Reason, (i) the Executive must give the Company 30 days’ written notice of the intent to terminate for Good Reason within 90 days of the initial existence of the conditions purportedly constituting Good Reason; (ii) the termination for Good Reason shall only take effect if the Company has not cured any conditions that are identified in such notice by Executive, and that constitute Good Reason, within 30 days after such notice; and (iii) the date of termination of employment may not be later than 130 days after the date of the initial existence of the conditions purportedly constituting Good Reason.
Article 3. Form and Timing of Severance Benefits
3.1 Form and Timing of Severance Benefits. The Severance Benefits described in Sections 2.3(a), 2.3(b), 2.3(c) and 2.3(d) herein and the lump sum payments described in Sections 2.3(g)(i)(B) and 2.3(g)(ii) herein shall be paid in cash to the Executive in a single lump sum as soon as practicable following the date of Separation from Service, but in no event later than ten (10) calendar days from such date. Notwithstanding the foregoing, to the extent required by Code Section 409A, all or a portion of such payments shall be delayed to the date that is six months after the date of Separation from Service. The lump sum payment described in section 2.3(g)(i)(C) herein, if applicable, shall be paid in cash to the Executive in a single lump sum on the first day of the nineteenth (19th) month following the date of Separation from Service.
3.2 Withholding of Taxes. Upon payment of Severance Benefits or other amounts payable under this Agreement, the Company shall withhold from those Severance Benefits or other amounts all federal, state, city, or other taxes as legally shall be required.
Article 4. The Company’s Payment Obligation
4.1 Payment Obligations Absolute. Except as provided in Section 8.8 herein, the Company’s obligation to make the payments and the arrangements provided for herein shall be absolute and unconditional, and shall not be affected by any circumstances including, without limitation, any offset, counterclaim, recoupment, defense, or other right which the Company may have against the Executive or anyone else. All amounts payable by the Company hereunder shall be paid without notice or demand. Each and every payment made hereunder by the Company shall be final, and except as provided in Section 8.8 herein, the Company shall not seek to recover all or any part of such payment from the Executive or from whomsoever may be entitled thereto, for any reasons whatsoever.
The Executive shall not be obligated to seek other employment in mitigation of the amounts payable or arrangements made under any provision of this Agreement, and the obtaining of any such other employment shall in no event effect any reduction of the Company’s obligations to make the payments and arrangements required to be made under this Agreement, except to the extent provided in Section 2.3(h) herein.
4.2 Contractual Rights to Benefits. This Agreement establishes and vests in the Executive a contractual right to the benefits to which he is entitled hereunder. However, nothing herein contained shall require or be deemed to require, or prohibit or be deemed to prohibit, the Company to segregate, earmark, or otherwise set aside any funds or other assets, in trust or otherwise, to provide for any payments to be made or required hereunder.
Article 5. Term of Agreement
This Agreement will commence on the Effective Date and shall continue in effect for two (2) full years. However, at the end of such two (2) year period and, if extended, at the end of each additional year thereafter, the term of this Agreement shall be extended automatically for one (1) additional year, unless either party delivers written notice six (6) months prior to the end of such term, or extended term, stating that the Agreement will not be extended. In such case, the Agreement will terminate at the end of the term, or extended term, then in progress.
However, in the event of a Change in Control of the Controlling Company, the term of this Agreement shall automatically be extended for two (2) years from the date of the Change in Control.
Article 6. Legal Remedies
6.1 Dispute Resolution. The Executive shall have the right and option to elect to have any good faith dispute or controversy arising under or in connection with this Agreement settled by litigation or arbitration. If arbitration is selected, such proceeding shall be conducted by final and binding arbitration before a panel of three (3) arbitrators in accordance with the laws and under the administration of the American Arbitration Association.
6.2 Payment of Legal Fees. In the event that it shall be necessary or desirable for the Executive to retain legal counsel and/or to incur other costs and expenses in connection with the enforcement of any or all of his rights under this Agreement, the Company shall pay (or the Executive shall be entitled to recover from the Company) on or before December 31 of the calendar year following the calendar year in which the legal costs and expenses are incurred, any reasonable attorneys’ fees, costs, and expenses in connection with the good faith enforcement of the Executive’s rights (including the enforcement of any arbitration award) that arise during the Executive’s lifetime. This shall include, without limitation, court costs and attorney’s fees incurred by the Executive as a result of any good faith claim, action, or proceeding, including any such action against the Company arising out of, or challenging the validity or enforceability of, this Agreement or any provision hereof. This right to receive legal fees is not subject to liquidation or exchange for another benefit, and the amount of fees or expenses provided during one calendar year will not affect the amount of fees or expenses eligible for reimbursement or provided in any other calendar year.
Article 7. Successors
The Controlling Company shall require any successor (whether direct or indirect, by purchase, merger, reorganization, consolidation, acquisition of property or stock, liquidation, or otherwise) of all or a significant portion of the assets of the Controlling Company (including without limitation any acquirer in a Change in Control event described in subsection (e)(iii) of Article 1 hereof) by agreement, in form and substance satisfactory to the Executive, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. Regardless of whether such agreement is executed, this Agreement shall be binding upon any successor in accordance with the operation of law and such successor shall be deemed the “Company” for purposes of this Agreement. Notwithstanding the foregoing, any change in control of a successor not deemed to be the “Controlling Company” under Section 1(i) hereto shall not be considered a “Change in Control.”
Article 8. Miscellaneous
8.1 Employment Status. This Agreement is not, and nothing herein shall be deemed to create, an employment contract between the Executive and the Controlling Company or any of its subsidiaries. The Executive acknowledges that the rights of the Company remain wholly intact to change or reduce at any time and from time to time his compensation, title, responsibilities, location, and all other aspects of the employment relationship, or to discharge him prior to a Change in Control (subject to such discharge possibly being considered a Qualifying Termination pursuant to Section 2.2).
8.2 Entire Agreement. This Agreement contains the entire understanding of the Company and the Executive with respect to the subject matter hereof. In addition, the payments provided for under this Agreement in the event of the Executive’s termination of employment shall be in lieu of any severance benefits payable under any severance plan, program, or policy of the Company to which he might otherwise be entitled.
8.3 Notices. All notices, requests, demands, and other communications hereunder shall be sufficient if in writing and shall be deemed to have been duly given if delivered by hand or if sent by registered or certified mail to the Executive at the last address he has filed in writing with the Company or, in the case of the Company, at its principal offices.
8.4 Execution in Counterparts. This Agreement may be executed by the parties hereto in counterparts, each of which shall be deemed to be original, but all such counterparts shall constitute one and the same instrument, and all signatures need not appear on any one counterpart.
8.5 Conflicting Agreements. The Executive hereby represents and warrants to the Company that his entering into this Agreement, and the obligations and duties undertaken by him hereunder, will not conflict with, constitute a breach of, or otherwise violate the terms of, any other employment or other agreement to which he is a party, except to the extent any such conflict, breach, or violation under any such agreement has been disclosed to the Board in writing in advance of the signing of this Agreement.
8.6 Severability. In the event any provision of this Agreement shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Agreement, and the Agreement shall be construed and enforced as if the illegal or invalid provision had not been included. Further, the captions of this Agreement are not part of the provisions hereof and shall have no force and effect. Notwithstanding any other provisions of this Agreement to the contrary, the Company shall have no obligation to make any payment to the Executive hereunder to the extent, but only to the extent, that such payment is prohibited by the terms of any final order of a federal or state court or regulatory agency of competent jurisdiction; provided, however, that such an order shall not affect, impair, or invalidate any provision of this Agreement not expressly subject to such order.
8.7 Modification. No provision of this Agreement may be modified, waived, or discharged unless such modification, waiver, or discharge is agreed to in writing and signed by the Executive and by the Company, as applicable, or by the respective parties’ legal representatives or successors. Notwithstanding the foregoing, if any provision of this Agreement would cause compensation to be includible in the Executive’s income pursuant to Section 409A of the Code, then such provision shall be null and void, and the Company shall amend the Agreement in such a way as to cause substantially similar economic results without causing such inclusion; any such amendment shall be binding on the Executive.
8.8 Compensation Recovery. Notwithstanding anything in this Agreement to the contrary, in the event that the Controlling Company is required to materially restate its financial results due to the Controlling Company’s material noncompliance with any financial reporting requirement under Federal securities laws, excluding a restatement of such financial results due solely to a change in generally accepted accounting principles in the United States or such other accounting principles that may be adopted by the Securities and Exchange Commission and are or become applicable to the Controlling Company, the Committee may, in its discretion or as necessary to comply with applicable law, require the Executive to repay the Controlling Company an amount equal to all or any portion of any incentive compensation (including stock and stock-based awards) that has been paid, issued or granted to the Executive pursuant to any incentive compensation program within the two years preceding the date on which the Controlling Company is required to prepare an accounting restatement, to the extent that such amount was based on the erroneous data and exceeded the amount that would have been paid, issued or granted to the Executive under the accounting restatement. Such cancellation or repayment obligation shall be effective as of the date specified by the Committee. Any repayment obligation shall be satisfied in cash or in such other form of consideration, such as shares of stock of the Controlling Company, permitted by applicable law and acceptable to the Committee, and the Committee may provide for an offset to any future payments owed by the Controlling Company or its affiliates to the Executive if necessary to satisfy the repayment obligation; provided however, that if any such offset is prohibited under applicable law, the Committee shall not permit any such offset and may require immediate repayment by the Executive. Notwithstanding the foregoing, to the extent required to comply with applicable law, any applicable stock exchange listing requirements, and/or any compensation recovery or clawback policy adopted by the Controlling Company after the Effective Date, the Controlling Company may unilaterally amend this Section 8.8 and such amendment shall be binding on the Executive; provided, however, regardless of whether the Controlling Company makes such a unilateral amendment, the Executive shall be bound by any compensation recovery or clawback policy adopted by the Company after the Effective Date.
8.9 Applicable Law. To the extent not preempted by the laws of the United States, the laws of the State of Texas shall be the controlling law in all matters relating to this Agreement without giving effect to principles of conflicts of laws.
8.10 Construction. This Agreement is intended to provide for severance payments and benefits and short-term deferrals exempt from Internal Revenue Code Section 409A, and shall be construed accordingly. To the extent that this Agreement provides for amounts not eligible for such exemptions, this Agreement is intended to comply with Internal Revenue Code Section 409A, and shall be construed accordingly.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date.
| CASH AMERICA INTERNATIONAL, INC. | ||||
| By: |
| |||
| James H. Graves, Chairman of the Cash America International, Inc. Management Development & Compensation Committee | ||||
| EXECUTIVE | ||||
|
| ||||
| NAME: | ||||