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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0000926236-01-000032.txt : 20010402
<SEC-HEADER>0000926236-01-000032.hdr.sgml : 20010402
ACCESSION NUMBER: 0000926236-01-000032
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 6
CONFORMED PERIOD OF REPORT: 20001231
FILED AS OF DATE: 20010330
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: FIRST CASH FINANCIAL SERVICES INC
CENTRAL INDEX KEY: 0000840489
STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-MISCELLANEOUS RETAIL [5900]
IRS NUMBER: 752237318
STATE OF INCORPORATION: DE
FISCAL YEAR END: 0930
FILING VALUES:
FORM TYPE: 10-K
SEC ACT:
SEC FILE NUMBER: 000-19133
FILM NUMBER: 1587403
BUSINESS ADDRESS:
STREET 1: 690 E LAMAR BLVD
STREET 2: STE 400
CITY: ARLINGTON
STATE: TX
ZIP: 76011
BUSINESS PHONE: 8174603947
MAIL ADDRESS:
STREET 1: 690 E LAMAR BLVD
STREET 2: STE 400
CITY: ARLINGTON
STATE: TX
ZIP: 76011
FORMER COMPANY:
FORMER CONFORMED NAME: FIRST CASH INC
DATE OF NAME CHANGE: 19940218
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>0001.txt
<DESCRIPTION>FORM 10-K YEAR ENDED DEC 31, 2000
<TEXT>
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
For the year ended December 31, 2000, or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ___________
Commission file number 0-19133
FIRST CASH FINANCIAL SERVICES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 75-2237318
------------------------------- ---------------------------------
(state or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
690 East Lamar Blvd., Suite 400
Arlington, Texas 76011
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (817) 460-3947
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if 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 the voting stock held by non-affiliates
of the registrant, based upon the last reported sales price on the Nasdaq
National Market on March 26, 2001 is $24,148,740. As of March 26, 2001,
there were 8,666,687 shares of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The Company's Proxy Statement in connection with its Annual Meeting of
Stockholders to be held on June 27, 2001 is incorporated by reference in
Part III, Items 10, 11, 12 and 13.
<PAGE>
FIRST CASH FINANCIAL SERVICES, INC.
FORM 10-K
For the Year Ended December 31, 2000
TABLE OF CONTENTS
-----------------
PART I
Item 1 Business............................................. 1
Item 2 Properties........................................... 8
Item 3. Legal Proceedings ................................... 9
Item 4. Submission of Matters to a Vote of Security Holders.. 9
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters................................ 9
Item 6. Selected Financial Data ............................. 10
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations................ 11
Item 8. Financial Statements and Supplementary Data ......... 17
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................ 17
PART III........................................................ 17
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K....................................... 18
SIGNATURES..................................................... 19
<PAGE>
PART I
Item 1. Business
General
First Cash Financial Services, Inc. (the "Company") is the nation's
third largest publicly traded pawnshop operator and currently owns 116 pawn
stores in Texas, Oklahoma, Washington, D.C., Maryland, Missouri, South
Carolina, Virginia and Mexico. The Company's pawn stores engage in both
consumer finance and retail sales activities. The Company's pawn stores
provide a convenient source for consumer loans, lending money against
pledged tangible personal property such as jewelry, electronic equipment,
tools, sporting goods and musical equipment. These pawn stores also
function as retailers of previously-owned merchandise acquired in forfeited
pawn transactions and over-the-counter purchases from customers. The
Company's pawn stores also offer short-term, secured advances ("payday
advances"). The Company's primary business plan is to significantly expand
its payday advance operations by opening new stores in Texas and other
states, by accelerating the growth of its joint venture, Cash & Go, Ltd,
which operates payday advance and check cashing kiosks inside convenience
stores, and by expanding its payday advance operations in its existing pawn
stores.
The Company also currently owns 33 check cashing and payday advance
stores in California, Washington, Oregon, Illinois, and Washington, D.C.
These stores provide a broad range of consumer financial services, including
check cashing, money order sales, wire transfers, bill payment services and
payday advances. The Company also owns Answers, etc., a company which
provides computer hardware and software to third party check cashing and
payday advance operators throughout the country, as well as ongoing
technical support. In addition, the Company is a 50% partner in Cash & Go,
Ltd., a joint venture, which currently owns and operates 36 financial
services kiosks located inside convenience stores. For the year ended
December 31, 2000, the Company's revenues were derived 52% from retail
activities, 44% from lending activities, and 4% from other sources,
including check-cashing fees.
Management believes the pawnshop industry is highly fragmented with
approximately 15,000 stores in the United States. The four publicly traded
pawnshop companies currently operate approximately 975, or less than 7%, of
the pawnshops in the United States. Management believes significant
economies of scale, increased operating efficiencies, and revenue growth are
achievable by increasing the number of stores under operation and
introducing modern merchandising techniques, point-of-sale systems, improved
inventory management and store remodeling. In addition, management believes
that revenues and operating income of its existing pawn stores can be
enhanced by continuing to add consumer financial services, such as payday
advances, which will attract new customers to its pawn stores, and provide a
broader array of services to its existing customer base. During the years
ended December 31, 2000 and 1999, the five months ended December 31, 1998,
and the year ended July 31, 1998 , the Company added 2, 10, 20 and 29 pawn
stores to its network, respectively.
<PAGE>
The Company made its initial entry into the check cashing and payday
advance business during the twelve months ended July 31, 1998, with the
purchase of 11 stores in California and Washington. Management estimates
there are approximately 7,000 such check cashing and payday advance
locations throughout the United States. The check cashing and payday
advance industry is experiencing rapid growth. During the years ended
December 31, 2000 and 1999, the five months ended December 31, 1998, and the
year ended July 31, 1998, the Company added 2, 4, 16 and 11 check cashing
and payday advance stores to its network, respectively.
The Company was formed as a Texas corporation in July 1988 and in April
1991 the Company reincorporated as a Delaware corporation. Except as
otherwise indicated, the term "Company" includes its wholly owned
subsidiaries, American Loan & Jewelry, Inc., Famous Pawn, Inc., JB Pawn,
Inc., Miraglia, Inc., One Iron Ventures, Inc., Capital Pawnbrokers, Inc.,
Silver Hill Pawn, Inc., Elegant Floors, Inc. and First Cash, S.A. De C.V.,
First Cash, Ltd., First Cash Corp, First Cash Management, LLC, and First
Cash, Inc. The Company's principal executive offices are located at 690
East Lamar Blvd., Suite 400, Arlington, Texas 76011, and its telephone
number is (817)460-3947.
Industry
The pawnshop industry in the United States is an established industry,
with the highest concentration of pawnshops being in the Southeast and
Southwest. The operation of pawnshops is governed primarily by state laws,
and accordingly, states that maintain pawn laws most conducive to profitable
operations have historically seen the greatest development of pawnshops.
The Company believes that the majority of pawnshops are owned by individuals
operating one to three locations. Management further believes that the
highly fragmented nature of the industry is due in part to the lack of
qualified management personnel, the difficulty of developing adequate
financial controls and reporting systems, and the lack of financial
resources.
The check cashing and payday advance industry is a relatively new
industry, and management estimates that there are approximately 7,000 check
cashing and payday advance locations throughout the United States. Some
states have enacted formal check cashing laws which regulate the amount of
fees that operators may charge for cashing checks, and in some cases states
have regulated the amount of service charges that may be charged on small
consumer advances, commonly referred to as "payday advances". Management
believes that at least half of the check cashing locations in the United
States are operated by individuals owning from one to ten locations.
Management further believes that this fragmented nature of the industry is
due among other factors to the lack of qualified management personnel, the
difficulty of developing adequate financial controls and reporting systems,
and the lack of financial resources.
<PAGE>
Business Strategy
The Company's primary business plan is to significantly expand its
payday advance operations by opening new stores in Texas and other states,
by accelerating the growth of its joint venture, Cash & Go, Ltd, which
operates payday advance and check cashing kiosks inside convenience stores,
and by expanding its payday advance operations in its existing pawn stores.
Secondarily, the Company also plans to open new pawn stores in selective
markets, including Mexico, and to selectively acquire check cashing and
payday advance stores.
New Store Openings
The Company has opened 18 new pawn stores and 8 new check
cashing/payday advance stores since its inception and currently intends to
open additional check cashing and payday advance stores in locations where
management believes appropriate demand and other favorable conditions exist.
In addition, the Company's joint venture, Cash & Go, Ltd., has opened 36
financial services kiosks inside convenience stores since its inception in
August 1999. Management seeks to locate new stores where demographics are
favorable and competition is limited. It is the Company's experience that
after a suitable location has been identified and a lease and licenses are
obtained, a new store can be ready for business within six weeks. The
investment required to open a new pawn store includes inventory, funds
available for pawn loans, store fixtures, security systems, computer
equipment, and start-up losses. Although the total investment varies and is
difficult to predict for each location, it has been the Company's experience
that between $200,000 and $300,000 is required to fund a new pawn store for
the first six months of operation. Because existing pawn stores already
have an established customer base, loan portfolio, and retail-sales
business, acquisitions generally contribute more quickly to revenues than do
start-up stores. The Company estimates that approximately $100,000 to
$150,000 is required to fund a new check cashing/payday advance store for
the first six months of operation, which includes investments for leasehold
improvements, equipment, loan portfolio, store operating cash, and start-up
losses.
Acquisitions
Because of the highly fragmented nature of both the pawn industry and
the check cashing/payday advance industry, as well as the availability of
"mom & pop" sole proprietors willing to sell their stores, the Company
believes that acquisition opportunities as well as favorable new store
locations exist.
The timing of any future acquisitions is based on identifying suitable
stores and purchasing them on terms that are viewed as favorable to the
Company. Before making an acquisition, management typically studies a
demographic analysis of the surrounding area, considers the number and size
of competing stores, and researches regulatory issues. Specific pawn store
acquisition criteria include an evaluation of the volume of annual loan
transactions, outstanding loan balances, historical redemption rates, the
quality and quantity of inventory on hand, and location and condition of the
facility, including lease terms. Factors involved in evaluating the
acquisition of check cashing/payday advance stores include the annual volume
of transactions, location and condition of facilities, and a demographic
evaluation of the surrounding area to determine the potential for the
Company's payday advance product.
<PAGE>
Store Clusters
Whether acquiring an existing store or opening a new store, the Company
seeks to establish clusters of several stores in a specific geographic area
in order to achieve certain economies of scale relative to supervision,
purchasing and marketing. In Texas, such clusters have been established in
the Dallas/Fort Worth metroplex, the Rio Grande Valley area, the Corpus
Christi area, and the El Paso area. Store clusters have also been
established in the St. Louis, Missouri area, the Oklahoma City, Oklahoma
area, in Washington D.C. and its surrounding Maryland suburbs, in Baltimore,
Maryland, in Northern California, in the Chicago, Illinois area, in South
Carolina, and in the Pacific Northwest. The Company currently plans to
continue its expansion in existing markets in Texas, Northern California,
the Pacific Northwest and Mexico, and to enter new markets in other states
with favorable demographics and regulatory environments.
Enhance Productivity of Existing and Acquired Stores
The primary factors affecting the profitability of the Company's
existing store base are the level of loans outstanding, the volume of retail
sales and gross profit on retail sales, the volume of check cashing and
related consumer financial services, and the control of store expenses. To
increase customer traffic, which management believes is a key determinant to
increasing its stores' profitability, the Company has taken several steps to
distinguish its stores from traditional pawn and check cashing/payday
advance stores and to make customers feel more comfortable. In addition to
well-lit parking facilities, several of the stores' exteriors display an
attractive and distinctive awning similar to those used by contemporary
convenience and video rental stores. The Company also has upgraded or
refurbished the interior of certain of its stores and improved merchandise
presentation by categorizing items into departments, improving the lighting
and installing better in-store signage.
Operating Controls
The Company has an organizational structure that it believes is capable
of supporting a larger, multi-state store base. Moreover, the Company has
installed an employee training program for both store and corporate-level
personnel that stresses productivity and professionalism. Each store is
monitored on a daily basis from corporate headquarters via an online, real-
time computer network, and the Company has strengthened its operating and
financial controls by increasing its internal audit staff as well as the
frequency of store audit visits. Management believes that the current
operating and financial controls and systems are adequate for the Company's
existing store base and can accommodate reasonably foreseeable growth in the
near-term.
<PAGE>
Pawn Lending Activities
The Company's pawn stores loan money against the security of pledged
goods. The pledged goods are tangible personal property generally
consisting of jewelry, electronic equipment, tools, sporting goods and
musical equipment. The pledged goods provide security to the Company for
the repayment of the loan, as pawn loans cannot be made with personal
liability to the borrower. Therefore, the Company does not investigate the
creditworthiness of the borrower, relying instead on the marketability and
sale value of pledged goods as a basis for its credit decision. The Company
contracts for a pawn service charge in lieu of interest to compensate it for
the loan. The statutory service charges on loans at its Texas stores range
from 12% to 240% on an annualized basis depending on the size of the loan,
and from 36% to 240% on an annualized basis at the Company's Oklahoma
stores. Loans made in the Maryland stores bear service charges of 144% to
240% on an annualized basis, while loans in Virginia earn 120% to 180%
annually. In Washington, D.C., a flat $2 charge per month applies to all
loans of up to $40, and a 48% to 60% annualized service charge applies to
loans of greater than $40. In Missouri, loans bear a total service and
storage charge of 240% on an annualized basis, and South Carolina rates
range from 60% to 300%. As of December 31, 2000, the Company's average loan
per pawn ticket was approximately $86. Service charges from pawn loans
during the years ended December 31, 2000 and 1999, the five months ended
December 31, 1998, and the year ended July 31, 1998 accounted for
approximately 19%, 27%, 29%, and 33%, respectively, of the Company's total
revenues.
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 that
sets forth, among other items, the name and address of the pawnshop,
borrower's name, borrower's identification number from his/her driver's
license or other identification, date, identification and description of the
pledged goods, including applicable serial numbers, amount financed, pawn
service charge, maturity date, total amount that must be paid to redeem the
pledged goods on the maturity date, and the annual percentage rate.
<PAGE>
The amount the Company is willing to finance typically is based on a
percentage of the estimated sale value of the collateral. There are no
minimum or maximum loan to fair market value restrictions in connection with
the Company's lending activities. The basis for the Company's determination
of the sale value includes such sources as catalogs, blue books, and
newspapers. The Company also utilizes its computer network to recall recent
selling prices of similar merchandise in its own stores. These sources,
together with the employees' experience in selling similar items of
merchandise in particular stores, influence the determination of the
estimated sale value of such items. The Company does not utilize a standard
or mandated percentage of estimated sale value in determining the amount to
be financed. Rather, the employee has the authority to set the percentage
for a particular item and to determine the ratio of loan amount to estimated
sale value with the expectation that, if the item is forfeited to the
pawnshop, its subsequent sale should yield a gross profit margin consistent
with the Company's historical experience. It is the Company's policy to
value merchandise on a conservative basis to avoid the risks associated with
over-valuation. The pledged property is held through the term of the loan,
which is 30 days in Texas, South Carolina, Missouri, Virginia, Oklahoma and
Maryland, with an automatic extension period of 15 to 60 days depending on
state laws, unless the loan is earlier paid or renewed. In Washington,
D.C., pledged property is held for 30 days. In the event the borrower does
not pay or renew a loan within 90 days in Texas, South Carolina and
Missouri, 60 days in Oklahoma, 45 days in Maryland and Virginia, and 30 days
in Washington, D.C., the unredeemed collateral is forfeited to the Company
and becomes inventory available for general liquidation or sale in one of
the Company's stores. The Company does not record loan losses or charge-
offs because if the loan is not paid, the principal amount loaned becomes
the carrying cost of the forfeited collateral ("inventory") that is
recovered by sale.
The recovery of the principal and realization of gross profit on sales
of inventory is dependent on the Company's initial assessment of the
property's estimated sale value. Improper assessment of the sale value of
the collateral in the lending function can result in reduced marketability
of the property and sale of the property for an amount less than the
principal amount loaned. For the years ended December 31, 2000 and 1999,
the five months ended December 31, 1998, and the year ended July 31, 1998,
the Company's annualized yield on average pawn loan balance was 127%, 145%,
142%, and 136%, respectively.
Payday Advance Activities
The Company's check cashing/payday advance stores make secured, short-
term advances in which the customer writes the store a personal check in
exchange for cash, net of a transaction fee. Fees for payday advances may
be regulated by state law and are generally 15% to 18% of the amount
advanced per transaction. The term of these advances is thirty days or
less. Service charges from payday advances during the years ended December
31, 2000 and 1999, the five months ended December 31, 1998, and the year
ended July 31, 1998 accounted for approximately 25%, 15%, 7%, and 1%,
respectively, of the Company's total revenues.
<PAGE>
To qualify for a payday advance, customers generally must have proof of
steady income, a checking account with a minimum of returned items within a
specified period, and valid identification. Upon completing an application
and subsequent approval, the customer writes a check on their personal
checking account for the amount of the advance, plus applicable fees. At
maturity, the customer may either return to the store and pay off the
advance with cash, in which case the check is returned to the customer, or
the store can deposit the check into its checking account. A significant
amount of payday advance checks deposited by the Company are returned by the
bank; however, a large percentage of these bad debts are subsequently
collected by the Company through various means. The profitability of the
Company's check cashing stores is dependent upon adequate collection of
these returned items.
Retail Activities
The Company acquires merchandise inventory primarily through forfeited
pawn loans and purchases of used goods from the general public. Sales of
inventory during the years ended December 31, 2000 and 1999, the five months
ended December 31, 1998, and the year ended July 31, 1998, accounted for
approximately 52%, 54%, 60%, and 64%, respectively, of the Company's total
revenues for these periods. For the years ended December 31, 2000 and 1999,
the five months ended December 31, 1998, and the year ended July 31, 1998,
the Company realized gross profit margins on merchandise sales of 36%, 32%,
36%, and 33%, respectively.
By operating multiple stores, the Company is able to transfer inventory
between stores to best meet consumer demand. The Company has established
the necessary internal financial controls to implement such inter-store
transfers.
Merchandise acquired by the Company through defaulted pawn loans is
carried in inventory at the amount of the related pawn loan. Management
believes that this practice lessens the likelihood that the Company will
incur significant, unexpected inventory devaluations.
The Company does not provide financing to purchasers of its merchandise
nor does it give the prospective buyer any warranties on the merchandise
purchased. Nevertheless, the Company may, at its discretion, refund
purchases if merchandise is returned because it was damaged or not in good
working order when purchased. The Company permits its customers to purchase
inventory on a "layaway" plan. Should the customer fail to make a required
payment, the item is returned to inventory and previous payments are
forfeited to the Company.
Pawnshop Operations
The typical Company store is a free-standing building or part of a
small retail strip shopping center with adequate, well-lit parking.
Management has established a standard store design intended to distinguish
the Company's stores from the competition. The design consists of a well-
illuminated exterior with a distinctive awning and a layout similar to a
contemporary convenience store or video rental store. The Company's stores
are typically open six to seven days a week from 9:00 a.m. to between 6:00
p.m. and 9:00 p.m.
<PAGE>
The Company's computer system permits a store manager or clerk to
recall rapidly the cost of an item in inventory, the date it was purchased
as well as the prior transaction history of a particular customer. It also
facilitates the timely valuation of goods by showing values assigned to
similar goods in the past. The Company has networked its stores to permit
the Company's headquarters to more efficiently monitor each store's
operations, including sales, interest income, loans written and redeemed,
and changes in inventory.
The Company attempts to attract retail shoppers seeking bargain prices
through the use of seasonal promotions, special discounts for regular
customers, prominent display of impulse purchase items such as jewelry and
tools, tent sales and sidewalk sales, and a layaway purchasing plan. The
Company attempts to attract and retain pawn loan customers by lending a
competitively large percentage of the estimated sale value of items
presented for pledge and by providing quick loan, renewal and redemption
service in an appealing atmosphere.
<PAGE>
<TABLE>
As of March 26, 2001, the Company operated pawn stores in the following
markets:
Number of
Locations
---------
<S> <C>
Texas:
-----
Dallas/Fort Worth metropolitan area 27
Corpus Christi..................... 8
South Texas........................ 17
El Paso............................ 6
---
58
Missouri:
--------
St. Louis metropolitan area........ 3
---
3
Oklahoma:
--------
Oklahoma City...................... 5
---
5
South Carolina:
--------------
South Carolina..................... 13
---
13
Mexico:
------
Mexico............................. 5
---
5
Mid Atlantic:
------------
Baltimore, Maryland................ 7
Washington, D.C. and surrounding
Maryland suburbs.................. 23
Virginia........................... 2
---
32
---
Total.............................. 116
===
</TABLE>
Each pawnshop employs a manager, one or two assistant managers, and
between one and eight sales personnel, depending upon the size, sales volume
and location of the store. The store manager is responsible for supervising
personnel and assuring that the store is managed in accordance with Company
guidelines and established policies and procedures. Each manager reports to
an area supervisor who typically oversees four to seven store managers.
Each area supervisor reports to one of four regional vice-presidents.
<PAGE>
The Company believes that profitability of its pawnshops is dependent,
among other factors, upon its employees' ability to make loans that achieve
optimum redemption rates, to be effective sales people and to provide prompt
and courteous service. Therefore, the Company trains its employees through
direct instruction and on-the-job loan and sales experience. The new
employee is introduced to the business through an orientation and training
program that includes on-the-job training in lending practices, layaways,
merchandise valuation and general administration of store operations.
Certain experienced employees receive training and an introduction to the
fundamentals of management to acquire the skills necessary to advance into
management positions within the organization. Management training typically
involves exposure to income maximization, recruitment, inventory control and
cost efficiency. The Company maintains a performance-based compensation
plan for all store employees, based, among other factors, on sales, gross
profits and special promotional contests.
Check Cashing/Payday Advance Operations
The Company's check cashing/payday advance locations are typically part
of a small retail strip shopping center with adequate, well-lit parking.
Management has established a standard store design intended to distinguish
the Company's stores from the competition. The design consists of a well-
illuminated exterior with a lighted sign, and distinctive, conservative
window signage. The interiors usually feature an ample lobby, separated
from employee work areas by floor-to-ceiling teller windows. The Company's
stores are typically open six to seven days a week from 9:00 a.m. to between
6:00 p.m. and 9:00 p.m.
Computer operating systems in the Company's check cashing/payday
advance stores allow a store manager or clerk to recall rapidly customer
check cashing histories, payday advance histories, and other vital
information. The Company attempts to attract customers primarily through
television advertisements and yellow page advertisements.
<TABLE>
As of March 26, 2001, the Company operated check cashing/payday advance
stores in the following markets:
Number of
Locations
---------
<S> <C>
Chicago, Illinois........................... 10
Washington, D.C............................. 3
Oregon...................................... 2
Northern California......................... 15
Washington.................................. 3
---
33
===
</TABLE>
<PAGE>
Each check cashing store employs a manager, an assistant manager, and
between three and eight tellers, depending upon the size, sales volume and
location of the store. The store manager is responsible for supervising
personnel and assuring that the store is managed in accordance with Company
guidelines and established policies and procedures. Each manager reports to
a district manager who typically oversees two to five store managers.
Competition
The Company encounters significant competition in connection with all
aspects of its business operations. These competitive conditions may
adversely affect the Company's revenues, profitability and ability to
expand.
The Company competes primarily with other pawn store operators and
check cashing/payday advance operators. Both the pawnshop and check
cashing/payday advance industries are characterized by a large number of
independent owner-operators, some of whom own and operate multiple
locations. The Company believes that the primary elements of competition in
these businesses are store location, the ability to lend competitive amounts
on both pawn loans and payday advances, customer service, and management of
store employees. In addition, the Company competes with financial
institutions, such as consumer finance companies, which generally lend on an
unsecured as well as on a secured basis. Other lenders may and do lend
money on terms more favorable than those offered by the Company. Many of
these competitors have greater financial resources than the Company.
In its retail operations, the Company's competitors include numerous
retail and wholesale stores, including jewelry stores, gun stores, discount
retail stores, consumer electronics stores and other pawnshops. Competitive
factors in the Company's retail operations include the ability to provide
the customer with a variety of merchandise items at attractive prices. Many
retailers have significantly greater financial resources than the Company.
In addition, the Company faces competition in its acquisition program.
There are several other publicly held pawnshop and check cashing companies,
including Cash America International, Inc., ACE Cash Express, Inc. and
EZCORP, Inc., that have announced active expansion and acquisition programs
as well. Management believes that the increased competition for attractive
acquisition candidates may increase acquisition costs.
Regulation
General
The Company is subject to extensive regulation in several jurisdictions
in which it operates, including jurisdictions that regulate pawn lending,
payday advance fees and check cashing fees. The Company is also subject to
federal and state regulation relating to the reporting and recording of
certain currency transactions. There can be no assurance that additional
state or federal statutes or regulations will not be enacted at some future
date which could inhibit the ability of the Company to expand, significantly
decrease the service charges for lending money, or prohibit or more
stringently regulate the sale of certain goods, any of which could cause a
significant adverse effect on the Company's future prospects.
<PAGE>
State Regulations
The Company operates in seven states that have licensing and/or fee
regulations on pawn loans, including Texas, Oklahoma, Maryland, Virginia,
South Carolina, Washington, D.C., and Missouri. The Company is licensed in
each of the states in which a license is currently required for it to
operate as a pawn lender. The Company's fee structures are at or below the
applicable rate ceilings adopted by each of these states. In addition, the
Company is in compliance with the net asset requirements in states where it
is required to maintain certain levels of liquid assets for each pawn store
it operates in the applicable state.
The Company also operates in states which have licensing and/or fee
regulations on check cashing and payday advances, including California,
Washington, Missouri, South Carolina, Oregon, Illinois and Washington, D.C.
The Company is licensed in each of the states in which a license is
currently required for it to operate as a check casher and/or payday lender.
In addition, in some jurisdictions, check cashing companies or money
transmission agents are required to meet minimum bonding or capital
requirements and are subject to record-keeping requirements.
Federal Regulations
Under the Bank Secrecy Act regulations of the U.S. Department of the
Treasury (the "Treasury Department"), transactions involving currency in an
amount greater than $10,000 or the purchase of monetary instruments for cash
in amounts from $3,000 to $10,000 must be recorded. In general, every
financial institution, including the Company, must report each deposit,
withdrawal, exchange of currency or other payment or transfer, whether by,
through or to the financial institution, that involves currency in an amount
greater than $10,000. In addition, multiple currency transactions must be
treated as single transactions if the financial institution has knowledge
that the transactions are by, or on behalf of, any person and result in
either cash in or cash out totaling more than $10,000 during any one
business day.
Other
In jurisdictions that do not have favorable payday lending laws, the
Company has entered into agreements with out-of-state federally insured
financial institutions to act as a loan servicer for such banks in that
jurisdiction. The Company receives a fee from the financial institution for
acting as that institution's loan servicer.
With respect to firearms and ammunition sales, each pawn store must
comply with the regulations promulgated by the Department of the Treasury-
Bureau of Alcohol, Tobacco and Firearms, which requires each pawn store
dealing in firearms to maintain a permanent written record of all firearms
received or disposed of and a similar record for all ammunition sales. The
Company does not currently sell handguns to the public.
<PAGE>
Under some municipal ordinances, pawn stores must provide 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. If these ordinances
are applicable, 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 owners.
In connection with pawnshops operated by the Company, there is a risk
that acquired merchandise may be subject to claims of rightful owners.
Historically, the Company has not found these claims to have a material
adverse effect upon results of operations. The Company does not maintain
insurance to cover the costs of returning merchandise to its rightful
owners.
The Company's pawnshop and payday advance operations are subject to,
and must comply with, extensive regulation, supervision and licensing from
various federal, state and local statutes, ordinances and regulations. These
statutes prescribed, among other things, service charges and interest rates
that may be charged. These regulatory agencies have broad discretionary
authority. There can be no assurance that additional local, state or
federal legislation will not be enacted or that existing laws and
regulations will not be amended which could have an adverse impact on the
Company's operations and financial condition.
Employees
The Company had approximately 1,090 employees as of March 18, 2001,
including approximately 53 persons employed in executive, administrative and
accounting functions. None of the Company's employees are covered by
collective bargaining agreements. The Company considers its employee
relations to be satisfactory.
Insurance
The Company maintains fire, casualty, theft and public liability
insurance for each of its pawn stores and check cashing/payday advance
locations in amounts management believes to be adequate. The Company
maintains workers' compensation insurance in Maryland, Missouri, California,
Virginia, Washington, Oregon, South Carolina, Illinois, Washington, D.C. and
Oklahoma, as well as excess employer's indemnification insurance in Texas.
The Company is a non-subscriber under the Texas Workers' Compensation Act
and does not maintain other business risk insurance.
<PAGE>
Item 2. Properties
The Company currently owns the real estate and buildings for three of
its pawn stores and leases 146 pawn stores and check cashing/payday advance
locations. Leased facilities are generally leased for a term of two to ten
years with one or more options to renew. The Company's existing leases
expire on dates ranging between 2001 and 2016. All current leases provide
for specified periodic rental payments ranging from approximately $500 to
$9,100 per month. Most leases require the Company to maintain the property
and pay the cost of insurance and property taxes. The Company believes that
termination of any particular lease would not have a material adverse effect
on the Company's operations. The Company's strategy is generally to lease,
rather than purchase, space for its pawnshop and check cashing locations
unless the Company finds what it believes is a superior location at an
attractive price. The Company believes that the facilities currently owned
and leased by it as pawn stores and check cashing/payday advance locations
are suitable for such purpose. The Company considers its equipment,
furniture and fixtures to be in good condition.
The Company currently leases approximately 17,000 square feet in
Arlington, Texas for its executive offices. The lease, which expires
December 31, 2001, currently provides for monthly rental payments of
approximately $25,000.
Item 3. Legal Proceedings
The Company was sued by three plaintiffs, who alleged that the Company
engaged in deferred presentment transactions which violate the Federal
Racketeering Influenced and Corrupt Organizations Act, the Federal Truth and
Lending Act, common law and various state statutes and regulations. Class
certification has been requested, but not yet been obtained. The Company
intends to vigorously defend this claim. Since discovery has not yet
commenced, nor the scope of the case been determined, management can provide
no assurance as to the outcome of such litigation.
Additionally, the Company is from time to time a defendant (actual or
threatened) in certain other lawsuits encountered in the ordinary course of
its business, the resolution of which, in the opinion of management, should
not have a material adverse effect on the Company's financial position,
results of operations, or cash flows.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of the Company's security holders
during the fourth quarter of fiscal 2000.
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
<TABLE>
The Company's Common Stock is quoted on the Nasdaq National Market
under the symbol "FCFS". The following table sets forth the quarterly high
and low closing sales prices per share for the Common Stock, as reported by
the Nasdaq National Market.
Common Stock
Price Range
------------
High Low
----- ----
<S> <C> <C>
Year Ended December 31, 1999
Quarter Ended March 31, 1999.......... $14.38 $9.13
Quarter Ended June 30, 1999........... 11.63 9.00
Quarter Ended September 30, 1999...... 12.75 9.75
Quarter Ended December 31, 1999....... 11.00 7.00
Year Ended December 31, 2000
Quarter Ended March 31, 2000.......... $ 8.38 $6.13
Quarter Ended June 30, 2000........... 6.38 3.00
Quarter Ended September 30, 2000...... 3.20 2.00
Quarter Ended December 31, 2000....... 2.88 1.66
</TABLE>
On March 26, 2001, the closing sales price for the Common Stock as
reported by the Nasdaq National Market was $4.94 per share. On March 26,
2001, there were approximately 83 stockholders of record of the Common
Stock.
No cash dividends have been paid by the Company on its Common Stock,
and the Company does not currently intend to pay cash dividends on its
Common Stock. The current policy of the Company's Board of Directors is to
retain earnings, if any, to provide funds for operation and expansion of the
Company's business. Such policy will be reviewed by the Board of Directors
of the Company from time to time in light of, among other things, the
Company's earnings and financial position and limitations imposed by its
revolving line of credit with its syndicate of commercial lenders (the
"Credit Facility"). Pursuant to the terms of its agreement with its
lenders, the Company is prohibited from paying any dividends until payment
in full of its obligations under the Credit Facility.
<PAGE>
Item 6. Selected Financial Data
The information below should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations
included in Item 7 and the Company's Consolidated Financial Statements and
related notes thereto required by Item 8.
<TABLE>
Five Months
Year Ended December 31, Ended Year Ended July 31,
----------------------- December 31, ------------------------------
2000 1999 1998 1998 1997 1996
-------- -------- -------- -------- -------- --------
(in thousands, except per share amounts and certain operating data)
<S> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Revenues:
Merchandise sales ....... $ 54,797 $ 52,977 $ 20,418 $ 37,998 $ 32,628 $ 24,823
Service charges ......... 46,597 40,630 12,434 20,332 16,517 13,149
Check cashing fees ...... 2,216 2,184 754 255 - -
Other ................... 2,248 1,960 472 419 286 51
-------- -------- -------- -------- -------- --------
105,858 97,751 34,078 59,004 49,431 38,023
-------- -------- -------- -------- -------- --------
Cost of goods sold and
expenses:
Cost of goods sold ...... 35,140 36,260 13,157 25,463 22,502 16,714
Operating expenses ...... 47,082 39,243 12,335 19,608 15,774 12,573
Interest expense ........ 2,859 2,602 1,122 2,031 2,340 2,124
Depreciation ............ 2,765 1,590 475 922 717 540
Amortization ............ 1,718 1,500 563 783 636 565
Administrative expenses.. 8,387 6,867 2,249 4,134 3,831 3,150
-------- -------- -------- -------- -------- --------
97,951 88,062 29,901 52,941 45,800 35,666
-------- -------- -------- -------- -------- --------
Income before income taxes 7,907 9,689 4,177 6,063 3,631 2,357
Provision for income taxes 3,005 3,211 1,608 2,265 1,337 917
-------- -------- -------- -------- -------- --------
Income before cumulative
effect of change in
accounting principle.... 4,902 6,478 2,569 3,798 2,294 1,440
Cumulative effect of change
in accounting principle.. (2,287) - - - - -
-------- -------- -------- -------- -------- --------
Net income................. $ 2,615 $ 6,478 $ 2,569 $ 3,798 $ 2,294 $ 1,440
======== ======== ======== ======== ======== ========
<PAGE>
Net income per share:
Basic
Income before cumulative
effect of change in
accounting principle... $ .56 $ .75 $ .32 $ .74 $ .60 $ .39
Cumulative effect of change
in accounting principle (.26) - - - - -
-------- -------- -------- -------- -------- --------
Net income .............. $ .30 $ .75 $ .32 $ .74 $ .60 $ .39
======== ======== ======== ======== ======== ========
Diluted
Income before cumulative
effect of change in
accounting principle... $ .55 $ .70 $ .29 $ .59 $ .46 $ .35
Cumulative effect of change
in accounting principle (.26) - - - - -
-------- -------- -------- -------- -------- --------
Net income .............. $ .29 $ .70 $ .29 $ .59 $ .46 $ .35
======== ======== ======== ======== ======== ========
Unaudited pro forma amounts
assuming retroactive
application of change in
accounting principle:
Revenues ................ $ 105,858 $ 93,028 $ 32,351 $ 55,621 $ 46,702 $ 35,792
Net income .............. 4,902 5,850 2,267 3,218 2,144 1,207
Basic earnings per share .56 .68 .28 .63 .56 .33
Diluted earning per share .55 .63 .26 .51 .44 .31
Operating Data:
Locations in operation:
Beginning of the period.. 147 133 97 57 50 43
Acquisitions ............ 2 4 34 38 7 7
Opened .................. 2 10 2 2 - 1
Consolidated/closed ..... (3) - - - - (1)
-------- -------- -------- -------- -------- --------
End of the period ....... 148 147 133 97 57 50
======== ======== ======== ======== ======== ========
Receivables............... $ 22,043 $ 23,568 $ 20,392 $ 17,054 $ 12,877 $ 11,701
Average receivables balance
per store............... $ 149 $ 160 $ 153 $ 176 $ 226 $ 234
Average inventory per pawn
store................... $ 148 $ 182 $ 164 $ 154 $ 176 $ 175
Annualized inventory
turnover................ 1.8x 1.9x 2.1x 2.2x 2.4x 2.1x
Gross profit percentage on
merchandise sales ....... 35.9% 31.6% 35.6% 33.0% 31.0% 32.7%
Balance Sheet Data:
Working capital........... $ 41,835 $ 54,333 $ 39,421 $ 31,987 $ 23,616 $ 21,098
Total assets.............. 119,118 128,847 131,325 91,128 56,677 51,945
Long-term liabilities..... 44,833 55,560 42,699 34,533 26,892 28,655
Total liabilities......... 53,464 62,324 52,617 39,611 30,398 31,362
Stockholders' equity..... 65,654 66,523 60,708 51,517 26,279 20,583
</TABLE>
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
The Company's pawn store revenues are derived primarily from service
charges on pawn loans, service charges from short term, secured advances
("payday advances"), and the sale of unredeemed goods, or "merchandise
sales." Pawn loans are made for a 30-day term with an automatic extension
of 60 days in Texas, South Carolina and Missouri, 30 days in Oklahoma and 15
days in Maryland and Virginia. Pawn loans made in Washington, D.C. are made
for a 120 day term with no automatic extension. All pawn loans are
collateralized by tangible personal property placed in the custody of the
Company. The annualized service charge rates on pawn loans are set by state
laws and range between 12% and 240% in Texas and 36% and 240% in Oklahoma,
depending on the size of the loan. Service charge rates are 144% to 240% on
an annualized basis in Maryland, with a $6 monthly minimum charge. In
Washington, D.C., loans up to $40 bear a flat $2 charge per month, while
loans over $40 bear a 48% to 60% annualized rate. Missouri pawn loans bear
service and storage charges totaling 240% per year, and in Virginia rates
range from 120% to 180% annually. Annualized rates in South Carolina range
from 60% to 300%. The Company now accrues pawn service charge revenue on a
constant yield basis over the life of the loan for all pawn loans that the
Company deems collection to be probable based on historical loan redemption
statistics. If a loan is not repaid prior to the expiration of the
automatic extension period, if applicable, the property is forfeited to the
Company and transferred to inventory at a value equal to the loan principal.
Service charges from payday advances, which range from 15% to 18% of the
amount advanced, are recognized on a constant-yield basis over the life of
the advance, which is generally 30 days or less.
Effective January 1, 2000, the Company changed its method of
income recognition on pawn loans. The Company now accrues pawn service
charge revenue on a constant yield basis over the life of the loan for all
pawn loans that the Company deems collection to be probable based on
historical loan redemption statistics. For loans not repaid, the cost of
the forfeited collateral (inventory) is the cash amount originally loaned.
Prior to 2000, the Company recognized service charge income on a constant
yield basis over the initial loan period for all pawn loans written. Service
charges applicable to the extension periods or additional loan periods were
not recognized as income until the loan was repaid or renewed. If the loan
was not repaid, the carrying value of the forfeited collateral (inventory)
was stated at the lower of cost (the principal amount loaned plus accrued
service charges) or market. The Company believes the accounting change
provides a more timely matching of revenues and expenses with which to
measure the results of operations. The cumulative effect of the accounting
method change on all periods since inception through December 31, 1999 is
$2,287,000 (after an income tax benefit of $1,373,000) and is included as a
one-time reduction of net income for the year ended December 31, 2000.
<PAGE>
Revenues at the Company's check cashing and payday advance stores are
derived primarily from check cashing fees, fees on payday advances, and fees
from the sale of money orders and wire transfers. Payday advances carry a
15% to 18% service charge. The Company recognizes service charge income on
payday advances on a constant-yield basis over the life of the advance,
which is generally 30 days or less. The Company charges operating expense
for the estimated net potential losses on returned checks in the same period
in which revenues from the payday advances are recognized.
Although the Company has had significant increases in revenues due
primarily to acquisitions and secondarily to new store openings, the Company
has also incurred increases in operating expenses attributable to the
additional stores and increases in administrative expenses attributable to
building a management team and the support personnel required by the
Company's growth. Operating expenses consist of all items directly related
to the operation of the Company's stores, including salaries and related
payroll costs, rent, utilities, equipment depreciation, advertising,
property taxes, licenses, supplies, security and net returned checks (bad
debts). Administrative expenses consist of items relating to the operation
of the corporate office, including the salaries of corporate officers, area
supervisors and other management, accounting and administrative costs,
liability and casualty insurance, outside legal and accounting fees and
stockholder-related expenses.
Presented below are selected consolidated data for the Company. The
following table, as well as the discussion following, should be read in
conjunction with Selected Financial Data included in Item 6 and the
Consolidated Financial Statements and notes thereto of the Company required
by Item 8.
<TABLE>
Year Year Five Months Year
Ended Ended Ended Ended
December 31, December 31, December 31, July 31,
2000 1999 1998 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income statement items as a
percent of total revenues:
Revenues:
Merchandise sales .......... 51.8% 54.2% 59.9% 64.4%
Service charges ............ 44.0 41.6 36.5 34.5
Check cashing fees ......... 2.1 2.2 2.2 .4
Other ...................... 2.1 2.0 1.4 .7
Expenses:
Operating expenses ......... 44.5 40.1 36.2 33.2
Interest expense ........... 2.7 2.7 3.3 3.4
Depreciation ............... 2.6 1.6 1.4 1.6
Amortization ............... 1.6 1.5 1.7 1.3
Administrative expenses .... 7.9 7.0 6.6 7.0
Gross profit as a percent of
merchandise sales........... 35.9 31.6 35.6 33.0
</TABLE>
<PAGE>
The Company has three primary operating segments: pawn lending stores,
check cashing and payday advance stores, and a software and hardware
provider. The Company's pawn stores offer non-recourse loans on the
collateral of pledged tangible personal property. The Company's pawn stores
also offer short-term secured consumer loans commonly referred to as payroll
advances. The Company's check cashing and payday advance stores provide
check cashing services, short-term secured consumer loans, bill payment
services, money transfer services and money order sales. The Company's
computer software subsidiary, Answers, etc., provides turnkey point of sale
operating systems to other check cashing and payday advance operators
unaffiliated with the Company. Information concerning the segments is set
forth below (in thousands):
<TABLE>
Check Cashing/
Pawn Payday Advance
Stores Stores Software Consolidated
------ ------ -------- ------------
<S> <C> <C> <C> <C>
Year Ended December 31, 2000
----------------------------
Total revenues $ 87,145 $ 16,582 $ 2,131 $ 105,858
Depreciation and amortization 3,501 804 178 4,483
Income before interest and
income taxes 7,420 4,582 (1,236) 10,766
Total assets at December 31, 2000 89,208 27,093 2,817 119,118
Capital expenditures 1,523 349 183 2,055
Year Ended December 31, 1999
----------------------------
Total revenues 79,470 14,573 3,708 97,751
Depreciation and amortization 2,293 709 88 3,090
Income before interest and
income taxes 8,019 3,927 345 12,291
Total assets at December 31, 1999 91,516 34,800 2,531 128,847
Capital expenditures 2,539 431 312 3,282
Five Months Ended
December 31, 1998
-------------------
Total revenues 29,140 3,484 1,454 34,078
Depreciation and amortization 804 221 13 1,038
Income before interest and
income taxes 4,051 1,036 212 5,299
Total assets at December 31, 1998 80,586 30,495 2,244 113,325
Capital expenditures 806 145 46 997
Year Ended July 31, 1998
------------------------
Total revenues 57,082 1,133 789 59,004
Depreciation and amortization 1,627 74 4 1,705
Income before interest and
income taxes 7,700 272 122 8,094
Total assets at July 31, 1998 68,143 21,411 1,574 91,128
Capital expenditures 999 11 11 1,021
</TABLE>
<PAGE>
Results of Operations
Twelve Months Ended December 31, 2000 Compared to Twelve Months Ended
December 31, 1999
Total revenues increased 8% to $105,858,000 for the fiscal year ended
December 31, 2000 ("Fiscal 2000") as compared to $97,751,000 for the fiscal
year ended December 31, 1999 ("Fiscal 1999"). The change resulted from an
increase in revenues of $663,000 generated by the 18 pawn and check
cashing/payday advance stores which were opened or acquired during Fiscal
1999 and Fiscal 2000, and an increase of $7,444,000, at the 130 stores which
were in operation during all of Fiscal 1999 and Fiscal 2000. Of the
$8,107,000 increase in total revenues, 22%, or $1,820,000, was attributable
to increased merchandise sales, 74%, or $5,967,000 was attributable to
increased service charges on pawn loans and payday advances, $32,000 was
attributable to increased check cashing fees, and the remaining increase of
$288,000, or 4% was attributable to the increase in other income. As a
percentage of total revenues, merchandise sales decreased from 54% to 52%
during Fiscal 2000 as compared to Fiscal 1999, service charges increased
from 42% to 44%, check cashing fees and other income remained at 4%.
The aggregate receivables balance decreased 6% from $23,568,000 at
December 31, 1999 to $22,043,000 at December 31, 2000. Of the $1,525,000
decrease, an increase of $1,594,000 was attributable to growth at the 18
pawn and check cashing/payday advance stores opened or acquired during
Fiscal 1999 and Fiscal 2000, while a $3,119,000 decrease was attributable
to the 130 pawn stores and check cashing/payday advance stores which were in
operation during all of Fiscal 1999 and Fiscal 2000. The annualized yield on
the average aggregate receivables balance was 204% during Fiscal 2000
compared to 183% during Fiscal 1999. The Company's average receivables
balance per store decreased from $160,000 as of December 31, 1999 to
$149,000 as of December 31, 2000, primarily due to our lowering of our loan
to value ratio on pawn loans during 2000; as well as a higher ratio of
payday advance stores in the Company's store count as of December 31, 2000,
which generally have lower per-store receivables balances than the Company's
pawn stores.
Gross profit as a percentage of merchandise sales increased from 32%
during Fiscal 1999 to 36% during Fiscal 2000. This increase in the
Company's gross profit margin was primarily the result of the change in
accounting principle in Fiscal 2000. The 1999 pro forma gross profit as a
percentage of merchandise sales was 39%. Sales of scrap gold had a negative
effect on gross profit margins during Fiscal 1999 and Fiscal 2000.
Factoring out the negative impact of scrap sales, pro forma margins would
have been 41% and 39% during Fiscal 1999 and Fiscal 2000, respectively.
<PAGE>
Operating expenses increased 20% to $47,082,000 during Fiscal 2000
compared to $39,243,000 during Fiscal 1999, primarily as a result of the
addition of 18 pawn stores and check cashing/payday advance stores in Fiscal
1999 and Fiscal 2000, and increases in net bad debt expense in 2000 due to
increases in the volume of payday advances in the pawnshops. During the
fourth quarter of 2000 the Company recorded a one-time non-cash pretax
charge in the amount of $765,000 to write-off fixed assets and goodwill
relating to approximately nine stores. These stores are primarily located
in the Company's East Coast market, and continue to be unprofitable or under
performing locations. This one-time store closing charge had a $0.05 per
share impact on the Company's earnings per share. The Company will continue
to evaluate and aggressively address any stores that do not measure up to
the Company's earnings expectations. Administrative expenses increased 22%
to $8,387,000 during Fiscal 2000 compared to $6,867,000 during Fiscal 1999
due primarily to the addition of personnel to supervise store operations.
Interest expense increased to $2,859,000 in Fiscal 2000 compared to
$2,602,000 in Fiscal 1999 as a result of higher average outstanding debt
balances and higher average interest rates during Fiscal 2000.
For Fiscal 2000 and 1999, the Company's effective federal income tax
rates of 38% and 33%, respectively, differed from the statutory tax rate of
34% primarily as a result of state income taxes, utilization of tax net
operating loss carryforwards from acquisitions, and amortization of non-
deductible intangible assets.
Twelve Months Ended December 31, 1999 Compared to Twelve Months Ended July
31, 1998
Total revenues increased 66% to $97,751,000 for the fiscal year ended
December 31, 1999 ("Fiscal 1999") as compared to $59,004,000 for the fiscal
year ended July 31, 1998 ("Fiscal 1998"). The change resulted from an
increase in revenues of $37,948,000 generated by the 90 pawn and check
cashing/payday advance stores which were opened or acquired during Fiscal
1998, the five months ended December 31, 1998 and Fiscal 1999, and an
increase of $799,000, or 2%, at the 57 stores which were in operation during
all of Fiscal 1998 and Fiscal 1999. Of the $38,747,000 increase in total
revenues, 39%, or $14,979,000, was attributable to increased merchandise
sales, 52%, or $20,298,000 was attributable to increased service charges on
pawn loans and payday advances, 5%, or $1,929,000 was attributable to
increased check cashing fees, and the remaining increase of $1,541,000, or
4% was attributable to the increase in other income. As a percentage of
total revenues, merchandise sales decreased from 64% to 54% during Fiscal
1999 as compared to Fiscal 1998, service charges increased from 35% to 42%,
check cashing fees increased from 0% to 2%, and other income increased from
1% to 2%, respectively.
The aggregate receivables balance increased 38% from $17,054,000 at
July 31, 1998 to $23,568,000 at December 31, 1999. Of the $6,514,000
increase, $2,668,000 was attributable to growth at the 97 pawn and check
cashing/payday advance stores in operation at July 31, 1998 and December 31,
1999, while $3,846,000 was attributable to the addition of 50 pawn stores
and check cashing/payday advance stores since August 1, 1998. The annualized
yield on the average aggregate receivables balance was 183% during Fiscal
1999 compared to 136% during Fiscal 1998. The Company's average receivables
balance per store decreased from $176,000 as of July 31, 1998 to $160,000 as
of December 31, 1999, primarily due to a higher ratio of payday advance
stores in the Company's store count as of December 31, 1999, which generally
have lower per-store receivables balances than the Company's pawn stores.
<PAGE>
Gross profit as a percentage of merchandise sales decreased from 33%
during Fiscal 1998 to 32% during Fiscal 1999. This decrease in the
Company's gross profit margin was primarily the result of lower gold prices
during Fiscal 1999 compared to Fiscal 1998, which yielded lower margins on
scrap jewelry sales during Fiscal 1999.
Operating expenses increased 100% to $39,243,000 during Fiscal 1999
compared to $19,608,000 during Fiscal 1998, primarily as a result of the
addition of 90 pawn stores and check cashing/payday advance stores in Fiscal
1998, the five months ended December 31, 1998 and Fiscal 1999, and the
addition of personnel viewed as necessary to support the increased number of
store level transactions. Administrative expenses increased 66% to
$6,867,000 during Fiscal 1999 compared to $4,134,000 during Fiscal 1998 due
primarily to the addition of personnel to supervise store operations.
Interest expense increased to $2,602,000 in Fiscal 1999 compared to
$2,031,000 in Fiscal 1998 as a result of higher average outstanding debt
balances during Fiscal 1999.
For Fiscal 1999 and 1998, the Company's effective federal income tax
rates of 33% and 37%, respectively, differed from the statutory tax rate of
34% primarily as a result of state income taxes, utilization of tax net
operating loss carryforwards from acquisitions, and amortization of non-
deductible intangible assets.
Liquidity and Capital Resources
The Company's operations and acquisitions have been financed with funds
generated from operations, bank and other borrowings, and the issuance of
the Company's securities.
The Company currently maintains a $50,000,000 long-term line of credit
with a group of commercial lenders (the "Credit Facility"). At December 31,
2000, $39,000,000 was outstanding under this Credit Facility and an
additional $9,327,000 was available to the Company pursuant to the available
borrowing base. The Credit Facility bears interest at the prevailing LIBOR
rate (which was approximately 6.6% at December 31, 2000) plus one percent,
and matures on September 1, 2002. Amounts available under the Credit
Facility are limited to 325% of the Company's earnings before income taxes,
interest, depreciation and amortization for the trailing twelve months.
Under the terms of the Credit Facility, the Company is required to maintain
certain financial ratios and comply with certain technical covenants. The
Company was in compliance with these requirements and covenants during the
year ended December 31, 2000 and as of March 26, 2001. The Company is
required to pay an annual commitment fee of 1/8 of 1% on the average daily
unused portion of the Credit Facility commitment. The Company is prohibited
from paying dividends to its stockholders. Substantially all of the
unencumbered assets of the Company have been pledged as collateral against
indebtedness under the Credit Facility.
In December 2000, the Company acquired the assets of one pawn store in
LaFeria, Texas and one pawn store in Laredo, Texas. The aggregate purchase
price for these two acquisitions was $1,200,000. The Company financed
substantially all of the cash purchase price for its Fiscal 2000
acquisitions through its Credit Facility. The purchase price for these
acquisitions was determined based upon the volume of annual loan and sales
transactions, outstanding receivable balances, inventory on hand, location
and condition of the facilities, and projected future operating results.
<PAGE>
In February 1999, the Company acquired the assets of two pawn stores in
El Paso, Texas. In September 1999, the Company acquired the assets of one
pawn store in Arlington, Virginia, and in October 1999, the Company acquired
the assets of one pawn store in Palm View, Texas. The aggregate purchase
price for these four acquisitions was $2,019,000, including legal,
consulting, assumed liabilities and other costs incidental to the
acquisitions. The Company financed substantially all of the cash purchase
price for its fiscal 1999 acquisitions through its Credit Facility. The
purchase price for these acquisitions was determined based upon the volume
of annual loan and sales transactions, outstanding receivable balances,
inventory on hand, location and condition of the facilities, and projected
future operating results.
The Company acquired the assets of one pawn store in Alice, Texas in
September 1998, five pawn stores in El Paso, Texas in October 1998, one pawn
store in Dallas, Texas in October 1998, and twelve pawn stores in South
Carolina in November 1998. In addition, the Company acquired the assets of
three check cashing and payday advance stores in California in August 1998,
and one check cashing and payday advance store in San Francisco, California
in December 1998. The aggregate purchase price for these 23 stores acquired
during the five months ended December 31, 1998 was $8,175,000, including
legal, consulting, assumed liabilities and other costs incidental to the
acquisitions. In December 1998, the Company also acquired 100% of the
outstanding common stock of One Iron Ventures, Inc., which operates eleven
payday advance stores in the Chicago, Illinois area, for a total purchase
price of $5,704,000 consisting of 430,000 shares of First Cash Financial
Services, Inc. common stock valued at $4,623,000, or $10.75 per share,
assumed liabilities of $904,000, and legal, consulting and assumed
liabilities totaling $177,000. The Company financed substantially all of
the cash purchase price for acquisitions made during the five months ended
December 31, 1998 through its Credit Facility. The purchase price for these
acquisitions was determined based upon the volume of annual loan and sales
transactions, outstanding receivable balances, inventory on hand, location
and condition of the facilities, and projected future operating results.
As of December 31, 2000, the Company's primary sources of liquidity
were $6,611,000 in cash and cash equivalents, $2,707,000 in service charges
receivable, $22,043,000 in receivables, $17,221,000 in inventories and
$9,327,000 of available and unused funds under the Company's Credit
Facility. The Company had working capital as of December 31, 2000 of
$41,835,000 and a liabilities to equity ratio of 0.8 to 1.
Net cash provided by operating activities of the Company during the
year ended December 31, 2000 was $14,628,000, consisting primarily of net
income before non-cash depreciation and amortization and cumulative effect
of change in accounting principle of $9,385,000, plus decreases in inventory
and accrued service fees of $1,568,000 and $728,000 respectively. Net cash
used for investing activities during the year ended December 31, 2000 was
$4,998,000, which was primarily comprised of cash provided from decreasing
receivables of $1,021,000, and cash paid for acquisitions, other fixed asset
additions, and cash paid to fund the expansion of our Cash & Go, Ltd.
joint venture of $6,019,000. Net cash used by financing activities was
$13,736,000 during the year ended December 31, 2000, which primarily
consisted of a net decrease in the Company's debt of $10,252,000 and an
increase in common stock receivables from officers of $3,234,000.
<PAGE>
The profitability and liquidity of the Company is affected by the
amount of pawn loans outstanding, which is controlled in part by the
Company's lending decisions. The Company is able to influence the frequency
of loan redemption by increasing or decreasing the amount loaned in relation
to the resale value of the pledged property. Tighter credit decisions
generally result in smaller loans in relation to the estimated resale value
of the pledged property and can thereby decrease the Company's aggregate
loan balance and, consequently, decrease pawn service charges.
Additionally, small loans in relation to the pledged property's estimated
resale value tends to increase loan redemptions and improve the Company's
liquidity. Conversely, providing larger loans in relation to the estimated
resale value of the pledged property can result in an increase in the
Company's pawn service charge income. Also, larger average loan balances
can result in an increase in loan forfeitures, which increases the quantity
of goods on hand and, unless the Company increases inventory turnover,
reduces the Company's liquidity. The Company's renewal policy allows
customers to renew pawn loans by repaying all accrued interest on such pawn
loans, effectively creating a new loan transaction. In addition to these
factors, the Company's liquidity is affected by merchandise sales and the
pace of store expansions.
Management believes that the Credit Facility and cash generated from
operations will be sufficient to accommodate the Company's current
operations for fiscal 2001. The Company has no significant capital
commitments. The Company currently has no written commitments for
additional borrowings or future acquisitions; however, the Company intends
to continue to grow and will likely seek additional capital to facilitate
expansion. The Company will evaluate acquisitions, if any, based upon
opportunities, acceptable financing, purchase price, strategic fit and
qualified management personnel.
The Company currently intends to continue to engage in a plan of
expansion through existing store acquisitions and new store openings. The
Company currently plans to open between 10 and 15 check cashing/payday
advance locations; as well as 25 to 30 check cashing/payday advance kiosks
for Cash & Go, Ltd., the Company's 50% convenience store joint venture.
These new locations will be funded through the Company's Credit Facility.
While the Company continually looks for, and is presented with, potential
acquisition candidates, the Company has no definitive plans or commitments
for further acquisitions. The Company has no immediate plans to open any
other new stores. If the Company encounters an attractive opportunity to
acquire or open a new store in the near future, the Company will seek
additional financing, the terms of which will be negotiated on a case-by-
case basis. Between January 1, 2001 and March 26, 2001, the Company opened
one new check cashing/payday advance location.
<PAGE>
Forward Looking Information
This annual report contains certain statements that are "forward-
looking statements" within the meaning of Section 27A of the Securities Act
and Section 21E of the Exchange Act. Forward-looking statements can be
identified by the use of forward-looking terminology such as "believes,"
"expects," "may," "estimates," "will," "should," "plans," or "anticipates"
or the negative thereof, or other variations thereon, or comparable
terminology, or by discussions of strategy. Such statements include, but
are not limited to, the discussions of the Company's operations, liquidity,
and capital resources. Forward-looking statements are included in the
"Liquidity and Capital Resources" section of this annual report. Although
the Company believes that the expectations reflected in forward-looking
statements are reasonable, there can be no assurances that such expectations
will prove to be accurate. Generally, these statements relate to business
plans, strategies, anticipated strategies, levels of capital expenditures,
liquidity and anticipated capital funding needed to effect the business
plan. All phases of the Company's operations are subject to a number of
uncertainties, risks and other influences, many of which are outside the
control of the Company and cannot be predicted with any degree of accuracy.
Factors such as changes in regional or national economic conditions, changes
in governmental regulations, unforeseen litigation, changes in interest
rates or tax rates, significant changes in the prevailing market price of
gold, future business decisions and other uncertainties may cause results to
differ materially from those anticipated by some of the statements made in
this report. In light of the significant uncertainties inherent in the
forward-looking statements made in this report, the inclusion of such
statements should not be regarded as a representation by the Company or any
other person that the objectives and plans of the Company will be achieved.
Security holders are cautioned that such forward-looking statements involve
risks and uncertainties. The forward-looking statements contained in this
report speak only as of the date of this report and the Company expressly
disclaims any obligation or undertaking to release any updates or revisions
to any such statement to reflect any change in the Company's expectations or
any change in events, conditions or circumstance on which any such statement
is based.
Inflation
The Company does not believe that inflation has had a material effect
on the amount of loans and payday advances made or unredeemed goods sold by
the Company or its results of operation.
Seasonality
The Company's retail business is seasonal in nature with its highest
volume of sales of unredeemed goods occurring during the first and fourth
calendar quarters of each year. The Company's lending and payday advance
activities are also seasonal, with the highest volume of lending activity
occurring during the second and third calendar quarters of each year.
<PAGE>
New Accounting Pronouncements
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting
for Derivative Instruments and Hedging Activities," is effective for all
fiscal years beginning after June 15, 2000. SFAS 133, as amended,
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and
for hedging activities. Under SFAS 133, certain contracts that were not
formerly considered derivatives may now meet the definition of a derivative.
The Company adopted SFAS 133 effective January 1, 2001. The adoption of SFAS
133 did not have a significant impact on the financial position, results of
operations, or cash flows of the Company.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 ("SAB101") "Revenue Recognition In
Financial Statements." SAB 101 summarizes certain of the SEC's views in
applying generally accepted accounting principles to revenue recognition in
financial statements. The adoption of SAB 101 did not have a material effect
on the Company's financial position or results of operations.
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to market risk in the form of interest rate
risk. At December 31, 2000, the Company had $39 million outstanding under
its revolving line of credit. This revolving line is priced with a variable
rate based on LIBOR or a base rate, plus one percent. See "Note 8 -
Revolving Credit Facility". Based on the average outstanding indebtedness
during the year ended December 31, 2000, a 10% increase in interest rates
would have increased the Company's interest expense by approximately
$310,000 for the year ended December 31, 2000.
Item 8. Financial Statements and Supplementary Data
The financial statements prepared in accordance with Regulation S-X are
included in a separate section of this report. See the index to Financial
Statements at Item 14(a)(1) and (2) of this report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There have been no disagreements concerning matters of accounting
principles or financial statement disclosure between the Company and
Deloitte & Touche LLP requiring disclosure hereunder.
PART III
In accordance with General Instruction G(3), a presentation of
information required in response to Items 10, 11, 12, and 13 shall appear in
the Company's definitive Proxy Statement to be filed pursuant to Regulation
14A within 120 days of the Company's year end and shall be incorporated
herein by reference when filed.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as a part of this report:
(1) Consolidated Financial Statements: Page
Report of Independent Auditors..................... F-1
Consolidated Balance Sheets........................ F-2
Consolidated Statements of Income.................. F-3
Consolidated Statements of Cash Flows.............. F-4
Consolidated Statements of Changes in Stockholders'
Equity........................................... F-5
Notes to Consolidated Financial Statements......... F-6
(b) During Fiscal 2000 the Company filed no reports on Form 8-K.
(c) Exhibits:
3.1(5) Amended Certificate of Incorporation
3.2(6) Amended Bylaws
4.2a(2) Common Stock Specimen
10.3(1) First Cash, Inc. 1990 Stock Option Plan
10.8(8) Employment Agreement -- Rick Powell
10.15(8) Employment Agreement -- Rick L. Wessel
10.59(4) Acquisition Agreement - Miraglia, Inc.
10.60(3) Audited Financial Statements of Miraglia,
Inc. for the ten months ended May 31, 1998.
10.61(5) Acquisition Agreement for Twelve Pawnshops
in South Carolina
10.62(5) Acquisition Agreement for One Iron Ventures, Inc.
10.63(5) First Cash Financial Services, Inc. 1999 Stock
Option Plan
18.1(7) Letter re Change in Accounting Principle
21.0(8) Subsidiaries
23.1(8) Independent Auditors' Consent of Deloitte & Touche LLP
23.2(8) Consent of Brewer & Pritchard, P.C.
(d) All schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
(1) Filed as an exhibit to the Company's Registration Statement on Form
S-18 (No. 33-37760-FW) and incorporated herein by reference.
(2) Filed as an exhibit to the Company's Registration Statement on Form
S-1 (No. 33-48436) and incorporated herein by reference.
(3) Filed as an exhibit to Form 8-K dated September 22, 1998.
(4) Filed as an exhibit to the Annual Report on Form 10-K for the fiscal
year ended July 31, 1998 (File No. 0 - 19133) and incorporated herein
by reference.
(5) Filed as an exhibit to the Company's Registration Statement on Form S-3
dated January 22, 1999 (File No. 333-71077) and incorporated herein by
reference.
(6) Filed as an exhibit to the Annual Report on Form 10-K for the year
ended December 31, 1999 (File No. 0 - 19133) and incorporated herein
by reference.
(7) Filed as an exhibit to the quarterly report on Form 10-Q for the
quarter ended March 31, 2000 (File No. 0 - 19133) and incorporated
herein by reference.
(8) Filed herein.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
FIRST CASH FINANCIAL SERVICES, INC.
/S/ PHILLIP E. POWELL
------------------------------------------
Phillip E. Powell, Chief Executive Officer
March 26, 2001
/S/ RICK L. WESSEL
--------------------------------------------
Rick L. Wessel, Principal Accounting Officer
March 26, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Capacity Date
--------- -------- ----
/S/ PHILLIP E. POWELL Chairman of the Board and March 26, 2001
--------------------- Chief Executive Officer
Phillip E. Powell
/S/ RICK L. WESSEL President, Chief Financial March 26, 2001
--------------------- Officer, Secretary and
Rick L. Wessel Treasurer
/S/ JOE R. LOVE Director March 26, 2001
---------------------
Joe R. Love
/S/ RICHARD T. BURKE Director March 26, 2001
---------------------
Richard T. Burke
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of
First Cash Financial Services, Inc.
We have audited the accompanying consolidated balance sheets of First Cash
Financial Services, Inc. and subsidiaries as of December 31, 2000 and
1999, and the related consolidated statements of income, stockholders'
equity, and cash flows for each of the years ended December 31, 2000 and
1999, the five months ended December 31, 1998 and the year ended July 31,
1998. These consolidated 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 auditing standards generally
accepted in the United States of America. 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, such consolidated financial statements present fairly, in
all material respects, the consolidated financial position of First Cash
Financial Services, Inc. and subsidiaries at December 31, 2000 and 1999,
and the consolidated results of its operations and its cash flows for each
of the years ended December 31, 2000 and 1999, the five months ended
December 31, 1998 and the year ended July 31, 1998 in conformity with
accounting principles generally accepted in the United States of America.
As discussed in Note 3 to the financial statements, the Company changed
its method of accounting for income recognition on pawn loans in 2000.
DELOITTE & TOUCHE LLP
Fort Worth, Texas
February 6, 2001
<PAGE>
<TABLE>
FIRST CASH FINANCIAL SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
2000 1999
------- -------
(in thousands, except share data)
ASSETS
<S> <C> <C>
Cash and cash equivalents.................... $ 6,611 $ 10,717
Service charges receivable................... 2,707 3,826
Receivables.................................. 22,043 23,568
Inventories.................................. 17,221 21,091
Prepaid expenses and other current assets.... 1,884 1,895
------- -------
Total current assets....................... 50,466 61,097
Property and equipment, net.................. 10,378 10,954
Intangible assets, net of accumulated
amortization of $7,136 and $5,418,
respectively............................... 53,508 54,600
Receivable from Cash & Go, Ltd............... 4,580 1,816
Other........................................ 186 380
------- -------
$119,118 $128,847
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt and notes
payable.................................... $ 1,643 $ 1,689
Accounts payable and accrued expenses........ 6,460 4,892
Income taxes payable......................... 528 183
------- -------
Total current liabilities ................. 8,631 6,764
Revolving credit facility.................... 39,000 47,000
Long-term debt and notes payable, net of
current portion............................ 3,019 5,020
Deferred income taxes........................ 2,814 3,540
------- -------
53,464 62,324
------- -------
Stockholders' equity:
Preferred stock; $.01 par value; 10,000,000
shares authorized; no shares issued or
outstanding.............................. - -
Common stock; $.01 par value; 20,000,000
shares authorized; 9,320,868 and
9,320,868 shares issued, respectively;
8,796,027 and 8,849,909 shares
outstanding, respectively................ 93 93
Additional paid-in capital................. 50,953 50,953
Retained earnings.......................... 22,949 20,334
Common stock receivables from officers..... (5,826) (2,592)
Common stock held in treasury, at cost,
524,841 and 470,959 shares, respectively (2,515) (2,265)
------- -------
65,654 66,523
------- -------
$119,118 $128,847
======= =======
Commitments and contingencies (see Note 11)
The accompanying notes are an
integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
FIRST CASH FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Year Year Five Months Year
Ended Ended Ended Ended
December 31, December 31, December 31, July 31,
2000 1999 1998 1998
------- ------- ------- -------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Revenues:
Merchandise sales .......... $ 54,797 $ 52,977 $ 20,418 $ 37,998
Service charges ............ 46,597 40,630 12,434 20,332
Check cashing fees ......... 2,216 2,184 754 255
Other ...................... 2,248 1,960 472 419
------- ------- ------- -------
105,858 97,751 34,078 59,004
------- ------- ------- -------
Cost of goods sold and expenses:
Cost of goods sold ......... 35,140 36,260 13,157 25,463
Operating expenses ......... 47,082 39,243 12,335 19,608
Interest expense ........... 2,859 2,602 1,122 2,031
Depreciation ............... 2,765 1,590 475 922
Amortization ............... 1,718 1,500 563 783
Administrative expenses .... 8,387 6,867 2,249 4,134
------- ------- ------- -------
97,951 88,062 29,901 52,941
------- ------- ------- -------
Income before income taxes..... 7,907 9,689 4,177 6,063
Provision for income taxes..... 3,005 3,211 1,608 2,265
------- ------- ------- -------
Income before cumulative effect
of change in accounting
principle .................. 4,902 6,478 2,569 3,798
Cumulative effect of change in
accounting principle (2,287) - - -
------- ------- ------- -------
Net income..................... $ 2,615 $ 6,478 $ 2,569 $ 3,798
======= ======= ======= =======
<PAGE>
Net income per share:
Basic
Income before cumulative
effect of change in
accounting principle $ 0.56 $ 0.75 $ 0.32 $ 0.74
Cumulative effect of
change in accounting
principle .............. (0.26) - - -
------- ------- ------- -------
Net income................ $ 0.30 $ 0.75 $ 0.32 $ 0.74
======= ======= ======= =======
Diluted
Income before cumulative
effect of change in
accounting principle $ 0.55 $ 0.70 $ 0.29 $ 0.59
Cumulative effect of
change in accounting
principle .............. (0.26) - - -
------- ------- ------- -------
Net income................ $ 0.29 $ 0.70 $ 0.29 $ 0.59
======= ======= ======= =======
Unaudited pro forma amounts
assuming retroactive
application of change
in accounting principle:
Revenues ................... $105,858 $ 93,028 $ 32,351 $ 55,621
Net income ................. 4,902 5,850 2,267 3,218
Basic earnings per share ... 0.56 0.68 0.28 0.63
Diluted earnings per share . 0.55 0.63 0.26 0.51
The accompanying notes are an
integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
FIRST CASH FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Year Year Five Months Year
Ended Ended Ended Ended
December 31, December 31, December 31, July 31,
2000 1999 1998 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Cash flows from operating activities: (in thousands)
Net income ..................... $ 2,615 $ 6,478 $ 2,569 $ 3,798
Adjustments to reconcile net income to
net cash flows from operating activities:
Depreciation and amortization 4,483 3,090 1,038 1,705
Cumulative effect of change in
accounting principle.................. 2,287 - - -
Changes in operating assets and
liabilities, net of effect of purchases
of existing stores:
Service charges receivable ............. 728 (162) 10 (195)
Inventories ............................ 1,568 (3,354) (2,551) (1,614)
Prepaid expenses and other assets....... 205 1,161 (13) (2,115)
Accounts payable and accrued expenses... 1,546 452 773 (241)
Current and deferred income taxes....... 1,196 (232) 985 1,159
------- ------- ------- -------
Net cash flows from operating activities..... 14,628 7,433 2,811 2,497
------- ------- ------- -------
Cash flows from investing activities:
Net (increase) decrease in receivables..... 1,021 (3,587) (1,130) (1,050)
Purchases of property and equipment........ (2,055) (3,282) (997) (1,021)
Acquisition of existing operations......... (1,200) (2,060) (4,734) (11,954)
Increase in receivable from Cash & Go, Ltd. (2,764) (1,816) - -
------- ------- ------- -------
Net cash flows from investing activities..... (4,998) (10,745) (6,861) (14,025)
------- ------- ------- -------
Cash flows from financing activities:
Proceeds from debt ........................ 6,000 21,000 12,250 13,440
Repayments of debt ........................ (16,252) (10,490) (4,856) (6,227)
Common stock receivables from officers..... (3,234) (1,303) (1,289) -
Purchase of treasury stock ................ (250) - - -
Registration fees ......................... - (12) - -
Proceeds from exercise of options and
warrants.................................. - 376 821 4,758
------- ------- ------- -------
Net cash flows from financing activities..... (13,736) 9,571 6,926 11,971
------- ------- ------- -------
Change in cash and cash equivalents.......... (4,106) 6,259 2,876 443
Cash and cash equivalents at beginning
of the year................................ 10,717 4,458 1,582 1,139
------- ------- ------- -------
Cash and cash equivalents at end of the year $ 6,611 $ 10,717 $ 4,458 $ 1,582
======= ======= ======= =======
<PAGE>
Supplemental disclosure of cash flow
information:
Cash paid during the year for:
Interest ................................. $ 2,813 $ 2,553 $ 1,061 $ 2,061
======= ======= ======= =======
Income taxes ............................. $ 2,013 $ 2,296 $ - $ 985
======= ======= ======= =======
Supplemental disclosure of noncash investing
and financing activities:
Noncash transactions in connection with
various acquisitions:
Fair market value of assets acquired
and goodwill.......................... $ 1,222 $ 2,602 13,164 $ 31,196
Less issuance of common stock......... - - (4,622) (8,712)
Less amounts payable in cash or
common stock........................ - - (2,331) -
Less issuance of debt ................ - (523) (1,070) (6,000)
Less assumption of liabilities and
costs of acquisition................ (22) (19) (407) (4,530)
Net cash paid........................... $ 1,200 $ 2,060 $ 4,734 $ 11,954
======= ======= ======= =======
Noncash conversion of subordinated
debentures into shareholders' equity .. $ - $ - $ - $ 6,522
======= ======= ======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
FIRST CASH FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Additional Common Stock
Common Stock Paid- Preferred Stock Receivables Treasury Stock
-------------- In --------------- Retained From --------------
Shares Amount Capital Shares Amount Earnings Officers Shares Amount Total
------ ------ ------- ------ ------ -------- -------- ------ ------ -------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at July 31, 1997 4,931 $ 50 $ 21,005 - - $ 7,489 $ - 471 $(2,265) $ 26,279
Exercise of stock options
and warrants, including
income tax benefit of $1,894 1,151 11 6,640 - - - - - - 6,651
Conversion of debentures 1,402 14 6,063 - - - - - - 6,077
Common stock issued in con-
nection with an acquisition 850 8 8,704 - - - - - - 8,712
Net income - - - - - 3,798 - - - 3,798
------ ------ ------- ------ ------ -------- -------- ------ ------ -------
Balance at July 31, 1998 8,334 83 42,412 - - 11,287 - 471 (2,265) 51,517
Exercise of stock options
and warrants, including
income tax benefit of $528 325 3 1,996 - - - - - - 1,999
Common stock issued in con-
nection with an acquisition 430 5 4,618 - - - - - - 4,623
Common stock receivables from
officers - - - - - - (1,289) - - (1,289)
Net income - - - - - 2,569 - - - 2,569
------ ------ ------- ------ ------ -------- -------- ------ ------ -------
Balance at December 31, 1998 9,089 91 49,026 - - 13,856 (1,289) 471 (2,265) 59,419
Exercise of stock options
and warrants, including
income tax benefit of $24 77 1 376 - - - - - - 377
Common stock issued to
retire debt 155 1 1,551 - - - - - - 1,552
Common stock receivables from
officers - - - - - - (1,303) - - (1,303)
Net income - - - - - 6,478 - - - 6,478
------ ------ ------- ------ ------ -------- -------- ------ ------ -------
Balance at December 31, 1999 9,321 93 50,953 - - 20,334 (2,592) 471 (2,265) 66,523
Common stock receivables from
officers - - - - - - (3,234) - - (3,234)
Purchase of treasury stock - - - - - - - 54 (250) (250)
Net income - - - - - 2,615 - - - 2,615
------ ------ ------- ------ ------ -------- -------- ------ ------ -------
Balance at December 31, 2000 9,321 $ 93 $ 50,953 - - $ 22,949 $ (5,826) 525 $(2,515) $ 65,654
====== ====== ======= ====== ====== ======== ======== ====== ====== =======
The accompanying notes are an
integral part of these consolidated financial statements.
</TABLE>
<PAGE>
FIRST CASH FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND NATURE OF THE COMPANY
First Cash Financial Services, Inc. (the "Company") was incorporated
in Texas on July 5, 1988 and was reincorporated in Delaware in April 1991.
The Company is engaged in the operation of pawn stores which lend money on
the collateral of pledged personal property, and which retail previously-
owned merchandise acquired through loan forfeitures. In addition to making
short-term secured loans, most of the Company's pawn stores offer short-
term secured advances ("payday advances"). The Company also operates check
cashing and payday advance stores that provide payday advances, check
cashing services, and other related financial services. The Company also
supplies computer hardware and software to third-party check cashing
operators, as well as ongoing technical support, and owns "firstcash.com",
a website offering previously-owned jewelry, electronics and other
products. As of December 31, 2000, the Company owned 116 pawn stores and
32 check cashing and payday advance stores.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies
followed in the preparation of these financial statements.
Principles of consolidation - The accompanying consolidated
financial statements of the Company include the accounts of its wholly-
owned subsidiaries. All significant intercompany accounts and transactions
have been eliminated. In August 1999, the Company entered into a joint
venture to form Cash & Go, Ltd., a company which owns financial services
kiosks inside convenience stores. The Company presently has a 50%
ownership interest in the partnership, which is accounted for by the equity
method of accounting whereby the Company records its 50% share of the
partnership's earnings or losses in its consolidated financial statements.
The joint venture had a pretax loss of $179,000 and $203,000 for the years
ended December 31, 2000 and 1999, respectively. The Company funds
substantially all of the capital requirements of the joint venture, and at
December 31, 2000 and 1999, had a receivable from this joint venture
totaling $4,580,000 and $1,816,000, respectively. This receivable bears
interest at the prime rate plus 1%, and matures on August 31, 2002.
Cash and cash equivalents - The Company considers any highly liquid
investments with an original maturity of three months or less at date of
acquisition to be cash equivalents.
<PAGE>
Receivables and income recognition - Receivables on the accompanying
balance sheet consist of pawn loans and payday advances. Pawn loans
("loans") are made on the pledge of tangible personal property. The
Company accrues pawn service charge revenue on a constant yield basis over
the life of the loan for all pawn loans that the Company deems collection
to be probable based on historical loan redemption statistics. If the
loan is not repaid, the principal amount loaned becomes the carrying value
of the forfeited collateral ("inventory") which is recovered through sale.
Payday advances are made for thirty days or less. The Company recognizes
the service charges associated with payday advances on a constant yield
basis over the term of the payday advance.
Returned checks - The Company charges operating expense for the
estimated net potential losses on returned checks in the same period in
which revenues from the payday advances are recognized.
Operating expenses - Costs incurred in operating the pawn stores and
check cashing stores have been classified as operating expenses. Operating
expenses include salary and benefit expense of store employees, rent and
other occupancy costs, bank charges, security, net returned checks,
utilities, cash shortages and other costs incurred by the stores.
Layaway and deferred revenue - Interim payments from customers on
layaway sales are credited to deferred revenue and subsequently recorded as
income during the period in which final payment is received.
Inventories - Inventories represent merchandise purchased directly
from the public and merchandise acquired from forfeited loans. Inventories
purchased directly from customers are recorded at cost. Inventories from
forfeited loans are recorded at the amount of the loan principal on the
unredeemed goods. The cost of inventories is determined on the specific
identification method. Inventories are stated at the lower of cost or
market; accordingly, inventory valuation allowances are established when
inventory carrying values are in excess of estimated selling prices, net of
direct costs of disposal. Management has evaluated inventory and
determined that a valuation allowance is not necessary.
Property and equipment - Property and equipment are recorded at
cost. Depreciation is determined on the straight-line method based on
estimated useful lives of thirty-one years for buildings and three to ten
years for equipment. The costs of improvements on leased stores are
capitalized as leasehold improvements and are amortized on the straight-
line method over the applicable lease period, or useful life if shorter.
Maintenance and repairs are charged to expense as incurred; renewals
and betterments are charged to the appropriate property and equipment
accounts. Upon sale or retirement of depreciable assets, the cost and
related accumulated depreciation is removed from the accounts, and the
resulting gain or loss is included in the results of operations in the
period retired.
<PAGE>
Intangible assets - Intangible assets consist of the excess of
purchase price over net assets acquired and non-compete agreements. Excess
purchase price over net assets acquired is being amortized on a straight-
line basis over an estimated useful life of forty years and payments
relative to non-compete agreements are amortized over their estimated
useful lives, generally ranging from five to ten years. The Company's
amortization policy is reviewed annually by the Board of Directors to
determine if any change is appropriate. Management of the Company
periodically evaluates the carrying value of the excess purchase price over
the net tangible assets of businesses acquired to determine that no
diminution in carrying value has occurred by comparing expected future cash
flows, undiscounted and without interest charges, to the net carrying value
of the related intangibles. Upon any such diminution in value, an
appropriate amount would be charged to earnings.
Long-lived assets - Long-lived assets (i.e., property, plant and
equipment and intangible assets) are reviewed for impairment whenever
events or changes in circumstances indicate that the net book value of the
asset may not be recoverable. An impairment loss is recognized if the sum
of the expected future cash flows (undiscounted and before interest) from
the use of the asset is less than the net book value of the asset.
Generally, the amount of the impairment loss is measured as the difference
between the net book value of the assets and the estimated fair value of
the related assets. During the fourth quarter of 2000 the Company recorded
a one-time non-cash pretax charge in the amount of $765,000 to write-off
fixed assets and goodwill relating to approximately nine stores.
Fair value of financial instruments - The fair value of financial
instruments is determined by reference to various market data and other
valuation techniques, as appropriate. Unless otherwise disclosed, the fair
values of financial instruments approximate their recorded values, due
primarily to their short-term nature.
Income taxes - The Company uses the liability method of computing
deferred income taxes on all material temporary differences. Temporary
differences are the differences between the reported amounts of assets and
liabilities and their tax bases.
Advertising - The Company expenses the costs of advertising the
first time the advertising takes place. Advertising expense for the fiscal
years ended December 31, 2000 and 1999, the five months ended December 31,
1998, and the fiscal year ended July 31, 1998 was $1,283,000, $1,112,000,
$191,000 and $248,000, respectively.
Stock-Based Compensation - Compensation expense is recorded with
respect to stock option grants and retention stock awards to employees
using the intrinsic value method as prescribed by Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB
25"). Entities electing to remain with the accounting in APB 25 must make
pro forma disclosures of net income and earnings per share as if the fair
value based method of accounting defined in Statement of Financial
Accounting Standard No. 123, "Accounting for Stock-Based Compensation"
("SFAS 123") had been applied. The Company accounts for stock-based
employee compensation plans under the intrinsic method pursuant to APB 25
and has made the disclosures in the footnotes as required by SFAS 123.
<PAGE>
Earnings per share - Basic net income per share is computed by
dividing net income by the weighted average number of shares outstanding
during the year. Diluted net income per share is calculated by giving
effect to the potential dilution that could occur if securities or other
contracts to issue common shares were exercised and converted into common
shares during the year.
<TABLE>
The following table sets forth the computation of basic and diluted
earnings per share (in thousands, except per share data):
Year Year Five Months Year
Ended Ended Ended Ended
December 31, December 31, December 31, July 31,
2000 1999 1998 1998
----- ----- ----- -----
<S> <C> <C> <C> <C>
Numerator:
Net income for calculating
basic earnings per share $2,615 $6,478 $2,569 $3,798
Plus interest expense, net of taxes,
relating to convertible debentures - - - 399
----- ----- ----- -----
Net income for calculating
diluted earnings per share $2,615 $6,478 $2,569 $4,197
===== ===== ===== =====
Denominator:
Weighted-average common shares
for calculating basic earnings
per share 8,813 8,656 8,030 5,101
Effect of dilutive securities:
Stock options and warrants 56 478 667 897
Contingently issuable shares due
to acquisitions - 133 71 -
Convertible debentures - - - 1,163
----- ----- ----- -----
Weighted-average common shares
for calculating diluted earnings
per share 8,869 9,267 8,768 7,161
===== ===== ===== =====
Basic earnings per share $ 0.30 $ 0.75 $ 0.32 $ 0.74
Diluted earnings per share $ 0.29 $ 0.70 $ 0.29 $ 0.59
</TABLE>
Pervasiveness of estimates - The preparation of financial statements
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, and related revenues and expenses and
disclosure of gain and loss contingencies at the date of the financial
statements. Such estimates and assumptions are subject to a number of
risks and uncertainties which may cause actual results to differ materially
from the Company's estimates.
<PAGE>
Reclassification - Certain amounts as of December 31, 1999 and for
the year ended December 31, 1999, the five months ended December 31, 1998,
and the year ended July 31, 1998, have been reclassified in order to
conform with the 2000 presentation.
New Accounting Standards - Statement of Financial Accounting
Standards (SFAS) No. 133, "Accounting for Derivative Instruments and
Hedging Activities," is effective for all fiscal years beginning after June
15, 2000. SFAS 133, as amended, establishes accounting and reporting
standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. Under
SFAS 133, certain contracts that were not formerly considered derivatives
may now meet the definition of a derivative. The Company adopted SFAS 133
effective January 1, 2001. The adoption of SFAS 133 did not have a
significant impact on the financial position, results of operations, or
cash flows of the Company.
In December 1999, the Securities and Exchange Commission ("SEC")
issued Staff Accounting Bulletin No. 101 ("SAB101") "Revenue Recognition In
Financial Statements." SAB 101 summarizes certain of the SEC's views in
applying generally accepted accounting principles to revenue recognition in
financial statements. The adoption of SAB 101 did not have a material
effect on the Company's financial position or results of operations.
NOTE 3 - CHANGE IN ACCOUNTING PRINCIPLE
Effective January 1, 2000, the Company changed its method of income
recognition on pawn loans. The Company now accrues pawn service charge
revenue on a constant yield basis over the life of the loan for all pawn
loans that the Company deems collection to be probable based on historical
loan redemption statistics. For loans not repaid, the cost of the
forfeited collateral (inventory) is the cash amount originally loaned.
Prior to 2000, the Company recognized service charge income on a constant
yield basis over the initial loan period for all pawn loans written.
Service charges applicable to the extension periods or additional loan
periods were not recognized as income until the loan was repaid or renewed.
If the loan was not repaid, the carrying value of the forfeited collateral
(inventory) was stated at the lower of cost (the principal amount loaned
plus accrued service charges) or market. The Company believes the
accounting change provides a more timely matching of revenues and expenses
with which to measure the results of operations. The cumulative effect of
the accounting method change on all periods since inception through
December 31, 1999 is $2,287,000 (after an income tax benefit of
$1,373,000) and is included as a one-time reduction of net income for the
year ended December 31, 2000.
Operating results for Fiscal 2000 have been calculated using the new
accounting method. The effect for Fiscal 2000 of adopting the change in
income recognition on pawn loans was to decrease net income before
cumulative effect of change in accounting principle $9,000, and decrease
net income $2,296,000 ($.26 per share.) The unaudited pro forma amounts
shown in the statements of income reflect the effect of retroactive
application on service charge revenues, cost of goods sold, and related
income taxes.
<PAGE>
NOTE 4 - BUSINESS ACQUISITIONS
In December 2000, the Company acquired the assets of one pawn store in
LaFeria, Texas, and one pawn store in Laredo, Texas. The aggregate
purchase price for these two acquisitions was $1,200,000, including legal,
consulting, assumed liabilities and other costs incidental to the
acquisitions. The Company financed substantially all of the cash purchase
price for its fiscal 2000 acquisitions through its Credit Facility. The
purchase price for these acquisitions was determined based upon the volume
of annual loan and sales transactions, outstanding receivable balances,
inventory on hand, location and condition of the facilities, and projected
future operating results.
In February 1999, the Company acquired the assets of two pawn stores
in El Paso, Texas. In September 1999, the Company acquired the assets of
one pawn store in Arlington, Virginia, and in October 1999, the Company
acquired the assets of one pawn store in Palm View, Texas. The aggregate
purchase price for these four acquisitions was $2,019,000, including legal,
consulting, assumed liabilities and other costs incidental to the
acquisitions. The Company financed the cash purchase price for its fiscal
1999 acquisitions through its Credit Facility. The purchase price for
these acquisitions was determined based upon the volume of annual loan and
sales transactions, outstanding receivable balances, inventory on hand,
location and condition of the facilities, and projected future operating
results.
The Company acquired the assets of one pawn store in Alice, Texas in
September 1998, five pawn stores in El Paso, Texas in October 1998, one
pawn store in Dallas, Texas in October 1998, and twelve pawn stores in
South Carolina in November 1998. In addition, the Company acquired the
assets of three check cashing and payday advance stores in California in
August 1998, and one check cashing and payday advance store in San
Francisco, California in December 1998. The aggregate purchase price for
these 23 stores acquired during the five months ended December 31, 1998 was
$8,175,000, including legal, consulting, assumed liabilities and other
costs incidental to the acquisitions. In December 1998, the Company also
acquired 100% of the outstanding common stock of One Iron Ventures, Inc.,
which operates eleven payday advance stores in the Chicago, Illinois area,
for a total purchase price of $5,704,000 consisting of 430,000 shares of
First Cash Financial Services, Inc. common stock valued at $4,623,000, or
$10.75 per share, assumed liabilities of $904,000, and legal, consulting
and assumed liabilities totaling $177,000. The Company financed
substantially all of the cash purchase price for acquisitions made during
the five months ended December 31, 1998 through its credit facility. The
purchase price for these acquisitions was determined based upon the volume
of annual loan and sales transactions, outstanding receivable balances,
inventory on hand, location and condition of the facilities, and projected
future operating results.
<PAGE>
In April 1998, the Company acquired 100% of the outstanding common
stock of JB Pawn, Inc., which operates ten pawn stores in Texas and
Maryland, for a total cash price of $2,000,000 (see Note 5 - Related Party
Transactions). In June 1998, the Company acquired 100% of the outstanding
common stock of Miraglia, Inc. for a total purchase price of $21,175,000
consisting of 850,000 shares of First Cash Financial Services common stock
valued at $8,712,000, or $10.25 per share, a $6,000,000 note payable to the
sellers, $6,300,000 cash, and legal, consulting and assumed liabilities
totaling $163,000. Miraglia, Inc. operates eleven check cashing stores
located in California and Washington, as well as Answers, etc., a provider
of software to third-party operators of check cashing stores. In addition
to JB Pawn, Inc. and Miraglia, Inc., the Company acquired a total of 19
additional individual pawnshops in various regions at various times during
the fiscal year for an aggregate purchase price of $4,813,000, including
legal, consulting, assumed liabilities and other costs incidental to the
acquisitions. The Company financed substantially all of the cash purchase
price for all of its fiscal 1998 acquisitions through its credit facility.
The purchase price for these acquisitions was determined based upon the
volume of annual loan and sales transactions, outstanding loan balances,
inventory on hand, location and condition of the facilities, and projected
future operating results.
All of these acquisitions have been accounted for using the purchase
method of accounting. Accordingly, the purchase price was allocated to
assets and liabilities acquired based upon their estimated fair market
values at the dates of acquisition. The excess purchase price over the
fair market value of the net tangible assets acquired and identifiable
intangible assets has been recorded as goodwill. Goodwill and other
intangible assets, net of accumulated amortization, resulting from
acquisitions was $53,508,000 and $54,600,000 as of December 31, 2000 and
1999, respectively. The results of operations of the acquired companies
are included in the consolidated financial statements from their respective
dates of acquisition. In connection with these acquisitions, the Company
entered into non-compete agreements with the former owners, generally
ranging from five to ten years.
NOTE 5 - RELATED PARTY TRANSACTIONS
From August 1996 through March 1998, the Company was involved in a
management agreement to operate and manage pawnshops for JB Pawn, Inc., a
Texas corporation which, up until March 31, 1998, was 100% owned and
controlled by Mr. Jon Burke, the brother of Mr. Richard Burke, a director
of First Cash Financial Services, Inc. Through March 31, 1998, JB Pawn,
Inc. owned and provided 100% of the financing for its pawnshops, and
incurred all direct costs to operate the pawnshops, including payroll,
store operating expenses, cost of inventory, and pawn loans. The Company
received a monthly management fee for each store managed, and provided
computer support, accounting, auditing, oversight and management of these
stores. As discussed in Note 4, the Company purchased 100% of the
outstanding common stock of JB Pawn, Inc. on April 1, 1998. The Company
recorded management fee revenue of $247,000 under this agreement during the
fiscal year ended July 31, 1998. In January 1996, the Company issued to
Mr. Jon Burke warrants to purchase 50,000 shares of the Company's common
stock at an exercise price of $4.625 per share for consulting services to
be provided through January 2001. The warrants vest over a five year
period.
<PAGE>
In June 1998, in conjunction with the purchase of Miraglia, Inc.
(see Note 4 - Acquisitions), the Company entered into lease agreements for
one of its check cashing locations, as well as for certain office space
located in Concorde, California. These properties are partially owned by
Mr. Blake Miraglia, an employee of the Company. Total lease payments made
pursuant to these leases were $130,000, $239,000, $100,000 and $20,000
during the fiscal years ended December 31, 2000 and 1999, the five months
ended December 31, 1998, and the fiscal year ended July 31, 1998,
respectively, which approximated market rates. In addition, the Company
has an outstanding, unsecured note payable due July 5, 2003, bearing
interest at 7%, to Mr. Miraglia, which amounted to $1,281,000 and
$1,761,000 as of December 31, 2000 and December 31, 1999, respectively,
including accrued interest.
At December 31, 2000 and 1999, the Company had notes receivable
outstanding from certain of its officers totaling $5,826,000 and
$2,592,000, respectively. These notes are secured by a total of 784,000
shares of common stock of the Company owned by these individuals, term life
insurance policies, and bear interest at seven percent. These notes are
due upon the sale of the underlying shares of common stock.
NOTE 6 - PROPERTY AND EQUIPMENT
<TABLE>
Property and equipment consist of the following (in thousands):
December 31, December 31,
2000 1999
------ ------
<S> <C> <C>
Land ............................ $ 672 $ 672
Buildings ....................... 1,002 1,002
Leasehold improvements .......... 2,127 2,127
Furniture, fixtures and equipment 15,089 12,960
------ ------
18,890 16,761
Less: accumulated depreciation (8,512) (5,807)
------ ------
$10,378 $10,954
====== ======
</TABLE>
<PAGE>
NOTE 7 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
<TABLE>
Accounts payable and accrued expenses consist of the following (in
thousands):
December 31, December 31,
2000 1999
------ ------
<S> <C> <C>
Accounts payable ................ $ 450 $ 558
Money orders payable ............ 850 611
Wire transfers payable .......... 395 189
Accrued payroll ................. 779 592
Layaway deposits ................ 1,017 946
Sales tax payable ............... 364 367
Other ........................... 2,605 1,629
------ ------
$ 6,460 $ 4,892
====== ======
</TABLE>
NOTE 8 - REVOLVING CREDIT FACILITY
The Company currently maintains a $50,000,000 long-term line of
credit with a group of commercial lenders (the "Credit Facility"). At
December 31, 2000, $39,000,000 was outstanding under this Credit Facility
and an additional $9,327,000 was available to the Company pursuant to the
available borrowing base. The Credit Facility bears interest at the
prevailing LIBOR rate (which was approximately 6.6% at December 31, 2000)
plus one percent, and matures on September 1, 2002. Amounts available
under the Credit Facility are limited to 325% of the Company's earnings
before income taxes, interest, depreciation and amortization for the
trailing twelve months. Under the terms of the Credit Facility, the
Company is required to maintain certain financial ratios and comply with
certain technical covenants. The Company was in compliance with these
requirements and covenants during the year ended December 31, 2000.
Pursuant to the terms of the Credit Facility, the Company is prohibited
from paying any dividends.
<PAGE>
NOTE 9 - LONG-TERM DEBT AND NOTES PAYABLE
<TABLE>
Long-term debt and notes payable consist of the following (in
thousands, except payment information):
December 31, December 31,
2000 1999
------ ------
<S> <C> <C>
Note payable to a bank; bearing interest at
LIBOR plus 2%; monthly principal and interest
payments of $5,257; matures
December 31, 2004; secured by real estate $ 474 $ 498
Note payable to a bank; bearing interest at
LIBOR plus 2%; monthly principal and interest
payments of $5,518; matures
December 31, 2004; secured by real estate 406 439
Unsecured demand note payable to an individual;
bearing interest at 7%; interest payable
monthly in installments of $583 100 100
Note payable to a bank; bearing interest at 8.9%;
monthly principal and interest payments of
$7,367, until maturity at October 1, 2001;
secured by equipment 71 149
Note payable to a bank; bearing interest at 9.2%;
monthly principal and interest payments of
$5,797, until maturity at January 15, 2002;
secured by equipment 71 131
Note payable to a bank; bearing interest at 9.3%;
monthly principal and interest payments of
$5,452, until maturity at July 1, 2002;
secured by equipment 96 150
Note payable to a corporation; bearing interest
at 14.7%; monthly principal and interest payments
of $1,658 until maturity at August 22, 2001;
secured by equipment 13 24
Note payable to a corporation; bearing interest
at 7%; monthly principal and interest payments
were $2,566 until the entire unpaid balance
was retired in December 2000; secured by
acquired assets - 150
Note payable to a corporation; bearing interest
at 7%; monthly principal and interest payments
were $4,528 until the entire unpaid balance
was retired in December 2000; secured by
acquired assets - 266
Note payable to a corporation; bearing interest
at 7%; monthly principal and interest payments
of $16,151 until maturity at March 1, 2002;
secured by specific acquired assets 231 402
Notes payable to five former shareholders of
Miraglia, Inc.; bearing interest at 7%;
quarterly principal payments of $300,000
and quarterly interest payments based upon
the unpaid balance until maturity at July 5,
2003; unsecured 3,200 4,400
------ ------
4,662 6,709
Less: current portion (1,643) (1,689)
------ ------
$ 3,019 $ 5,020
====== ======
Long-term debt and notes payable are scheduled to mature as follows (in
thousands):
Fiscal
------
<S> <C>
2001 ............... $1,643
2002 ............... 1,342
2003 ............... 952
2004 ............... 725
-----
$4,662
=====
</TABLE>
<PAGE>
NOTE 10 - INCOME TAXES
<TABLE>
Components of the provision for income taxes consist of the following
(in thousands):
Year Year Five Months Year
Ended Ended Ended Ended
December 31, December 31, December 31, July 31,
2000 1999 1998 1998
----- ----- ----- -----
<S> <C> <C> <C> <C>
Current:
Federal $2,156 $2,506 $ 504 $1,481
State 399 441 119 117
----- ----- ----- -----
2,555 2,947 623 1,598
Deferred 450 264 985 667
----- ----- ----- -----
$3,005 $3,211 $1,608 $2,265
===== ===== ===== =====
</TABLE>
<TABLE>
The principal current and non-current deferred tax liabilities consist
of the following at December 31, 2000 and December 31, 1999 (in thousands):
December 31, December 31,
2000 1999
------ ------
<S> <C> <C>
Deferred tax liabilities:
Intangible asset amortization $ 3,166 $ 2,624
Depreciation 1,046 1,067
Change in accounting principle (1,373) -
Net operating loss benefit carryforward (394) -
State income taxes 377 434
Service charges receivable 50 68
Legal accruals (435) -
Other 377 (653)
------ ------
Net deferred tax liability $ 2,814 $ 3,540
====== ======
Reported as:
Current liabilities - income
taxes payable $ - $ -
Non-current liabilities - deferred
income taxes 2,814 3,540
------ ------
Net deferred tax liability $ 2,814 $ 3,540
====== ======
</TABLE>
<PAGE>
<TABLE>
The provision for income taxes differs from the amounts determined by
applying the expected federal statutory tax rate to income before income
taxes. The following is a reconciliation of such differences (in
thousands):
Year Year Five Months Year
Ended Ended Ended Ended
December 31, December 31, December 31, July 31,
2000 1999 1998 1998
----- ----- ----- -----
<S> <C> <C> <C> <C>
Tax at the federal
statutory rate $2,688 $3,294 $1,420 $2,061
State income taxes, net
of federal tax benefit 278 381 153 197
Other, net 39 (464) 35 7
----- ----- ----- -----
$3,005 $3,211 $1,608 $2,265
===== ===== ===== =====
</TABLE>
NOTE 11 - COMMITMENTS AND CONTINGENCIES
<TABLE>
The Company leases certain of its facilities and equipment under
operating leases with terms generally ranging from three to ten years. Most
facility leases contain renewal and/or purchase options. Remaining future
minimum rentals due under non-cancelable operating leases are as follows (in
thousands):
Fiscal
------
<S> <C>
2001 ................ 6,218
2002 ................ 4,594
2003 ................ 3,535
2004 ................ 2,595
2005 ................ 2,068
Thereafter .......... 5,849
------
$24,859
======
Rent expense under such leases was $6,311,000, $5,708,000, $1,942,000,
and $3,596,000 for the years ended December 31, 2000 and 1999, the five
months ended December 31, 1998, and the year ended July 31, 1998,
respectively.
<PAGE>
The Company was sued by three plaintiffs, who alleged that the Company
engaged in deferred presentment transactions which violate the Federal
Racketeering Influenced and Corrupt Organizations Act, the Federal Truth and
Lending Act, common law and various state statutes and regulations. Class
certification has been requested, but not yet been obtained. The Company
intends to vigorously defend this claim. Since discovery has not yet
commenced, nor the scope of the case been determined, management can provide
no assurance as to the outcome of such litigation.
Additionally, the Company is from time to time a defendant (actual or
threatened) in certain other lawsuits encountered in the ordinary course of
its business, the resolution of which, in the opinion of management, should
not have a material adverse effect on the Company's financial position,
results of operations, or cash flows.
NOTE 12 - EMPLOYEE STOCK OPTION PLAN AND OUTSTANDING WARRANTS
On October 30, 1990, the Company's Board of Directors adopted the 1990
Stock Option Plan (the "1990 Plan"). The 1990 Plan provides for the
issuance of incentive stock options and non-qualified stock options to key
employees and directors of the Company. The total number of shares of
Common Stock authorized and reserved for issuance under the 1990 Plan is
250,000 shares. The exercise price for each stock option granted under the
1990 Plan may not be less than the fair market value of the Common Stock on
the date of the grant, unless, in the case of incentive stock options, the
optionee owns greater than 10% of the total combined voting power of all
classes of capital stock of the Company, in which case the exercise price
may not be less than 110% of the fair market value of the Common Stock on
the date of the grant. Unless otherwise determined by the Board, options
granted under the 1990 Plan have a maximum duration of five years and vest
in up to four equal installments, commencing on the first anniversary of the
date of grant. As of December 31, 2000, options to purchase 17,187 shares
of Common Stock were available for grant under the 1990 Plan. Options to
purchase 113,000 shares were vested at December 31, 2000.
On January 14, 1999, the Company's shareholders adopted the 1999 Stock
Option Plan (the "1999 Plan"). The 1999 Plan provides for the issuance of
incentive stock options and non-qualified stock options to key employees and
directors of the Company. The total number of shares of Common Stock
authorized and reserved for issuance under the 1999 Plan is 1,200,000
shares. The exercise price for each stock option granted under the 1999
Plan may not be less than the fair market value of the Common Stock on the
date of the grant, unless, in the case of incentive stock options, the
optionee owns greater than 10% of the total combined voting power of all
classes of capital stock of the Company, in which case the exercise price
may not be less than 110% of the fair market value of the Common Stock on
the date of the grant. Unless otherwise determined by the Board, options
granted under the 1999 Plan have a maximum duration of ten years unless, in
the case of incentive stock options, the optionee owns at least 10% of the
total combined voting power of all classes of capital stock of the Company,
in which case the maximum duration is five years. As of December 31, 2000,
options to purchase 294,500 shares of Common Stock were available for grant
under the 1999 Plan. Options to purchase 625,000 shares of common stock
under the 1999 Plan were vested as of December 31, 2000.
<PAGE>
The Company also issues warrants to purchase shares of Common Stock to
certain key members of management, to members of the Board of Directors who
are not employees or officers of the Company and to outside consultants and
advisors in connection with various acquisitions, debt offerings and
consulting engagements. In accordance with the provisions of FAS 123, the
issuance of warrants to outside consultants and advisors is accounted for
using the fair value method prescribed by FAS 123. Warrants granted to
outside consultants and advisors prior to December 15, 1995 are accounted
for using methods prescribed by APB 25.
Stock option and warrant activity from July 31, 1997 through December
31, 2000 is summarized in the accompanying chart (in thousands, except
exercise price).
Exercisable
-----------------
Weighted
Weighted Average
Average Exercise
Options Warrants Exercise Price Number Price
------- -------- -------------- ------ -----
<S> <C> <C> <C> <C> <C>
July 31, 1997 201 2,977 $ 7.82 3,120 $7.88
Granted 27 480 8.00
Cancelled (1) (450) 14.65
Exercised (13) (1,138) 4.13
---- ------
July 31, 1998 214 1,869 8.42 2,027 8.48
Granted 22 352 12.00
Cancelled (2) - 7.26
Exercised - (325) 4.53
---- ------
December 31, 1998 234 1,896 9.65 2,075 9.66
Granted 480 - 10.07
Exercised (73) (5) 4.63
---- ------
December 31, 1999 641 1,891 9.88 2,001 9.84
Granted 475 - 2.00
Cancelled (65) (630) 14.35
---- ------
December 31, 2000 1,051 1,261 6.92 1,816 6.28
===== ======
</TABLE>
<PAGE>
<TABLE>
Options and warrants outstanding as of December 31, 2000 are as follows
(in thousands, except exercise price and life):
Total Warrants Weighted Average
Exercise Price and Options Remaining Life Currently Exercisable
-------------- ----------- -------------- ---------------------
<S> <C> <C> <C>
$2.00 475 10.0 425
4.63 562 10.0 562
4.75 9 10.6 9
8.00 483 2.1 380
10.00 424 8.4 200
11.00 7 8.5 -
12.00 352 2.7 240
----- -----
2,312 1,816
===== =====
</TABLE>
The Company applies the intrinsic value method in accounting for its
stock option and warrant issuances. Accordingly, no compensation cost has
been recognized for its stock option and warrant grants. Had compensation
cost for the Company's stock options and warrants been determined based on
the fair value at the grant dates for such option and warrant awards, the
Company's net income would have been reduced by $1,349,000, $748,000,
$262,000, and $397,000 during the years ended December 31, 2000 and 1999,
the five months ended December 31, 1998, and the year ended July 31, 1998,
respectively. Basic and diluted earnings per share would have been reduced
by $0.15 and $0.15, $0.09 and $0.08, respectively, during the years ended
December 31, 2000 and 1999, by $0.03 and $0.03, respectively, during the
five months ended December 31, 1998, by $0.07 and $0.06, respectively,
during the year ended July 31, 1998.
<TABLE>
Weighted average grant-date fair values of options issued were $1.59,
$6.62, $5.50, and $5.71 per unit during the years ended December 31, 2000
and 1999, the five months ended December 31, 1998, and the year ended July
31, 1998, respectively, which were calculated in accordance with the Black-
Scholes option pricing model, using the following assumptions:
Year Year Five Months Year
Ended Ended Ended Ended
December 31, December 31, December 31, July 31,
2000 1999 1998 1998
----- ----- ----- -----
<S> <C> <C> <C> <C>
Expected volatility 80% 55% 50% 99%
Expected dividend yield - - - -
Expected option term 10 years 10 years 5 years 5 years
Risk-free rate of return 5.0% 5.5% 5.0% 6.0%
</TABLE>
<PAGE>
NOTE 13 - FIRST CASH 401(k) PLAN
The First Cash 401(k) Plan (the "Plan") is provided by the Company for
all full-time employees who have been employed with the Company for one
year. Under the Plan, a participant may contribute up to 15% of earnings,
with the Company matching the first 3% at a rate of 50%. The employee
contributions are paid to a corporate trustee and invested in various funds.
Company contributions are invested in its common stock, and contributions
made to participants' accounts become fully vested upon completion of five
years of service. The total Company contributions to the Plan were
$146,000, $121,000, $48,000, and $95,000 for the years ended December 31,
2000 and 1999, the five months ended December 31, 1998, and the year ended
July 31, 1998, respectively.
NOTE 14 - OPERATING SEGMENT INFORMATION
The Company has three reportable operating segments: pawn lending
stores, check cashing/payday advance stores, and a software and hardware
provider. The Company's pawn stores offer non-recourse loans on the
collateral of pledged tangible personal property. The Company's pawn stores
also provide short-term unsecured consumer loans, commonly referred to as
payroll advances. The Company's check cashing and payday advance stores
provide check cashing services, short-term unsecured consumer loans, bill
payment services, money transfer services and money order sales. The
Company's computer software subsidiary, Answers, etc., provides turnkey
point of sale operating systems to other check cashing and payday advance
operators unaffiliated with the Company.
<PAGE>
The accounting policies of the segments are the same as those described
in Note 2. Management of the Company evaluates performance based on the
operating income of each segment. There are no intersegmental sales. Each
segment is supervised separately. Information concerning the segments is
set forth below (in thousands):
<TABLE>
Check Cashing/
Pawn Payday Advance
Stores Stores Software Consolidated
------ ------ -------- ------------
<S> <C> <C> <C> <C>
Year Ended December 31, 2000
- ----------------------------
Total revenues $ 87,145 $ 16,582 $ 2,131 $ 105,858
Depreciation and amortization 3,501 804 178 4,483
Income before interest and
income taxes 7,420 4,582 (1,236) 10,766
Total assets at December 31, 2000 89,208 27,093 2,817 119,118
Capital expenditures 1,523 349 183 2,055
Year Ended December 31, 1999
- ----------------------------
Total revenues 79,470 14,573 3,708 97,751
Depreciation and amortization 2,293 709 88 3,090
Income before interest and
income taxes 8,019 3,927 345 12,291
Total assets at December 31, 1999 91,516 34,800 2,531 128,847
Capital expenditures 2,539 431 312 3,282
Five Months Ended December 31, 1998
- -----------------------------------
Total revenues 29,140 3,484 1,454 34,078
Depreciation and amortization 804 221 13 1,038
Income before interest and
income taxes 4,051 1,036 212 5,299
Total assets at December 31, 1998 80,586 30,495 2,244 113,325
Capital expenditures 806 145 46 997
Year Ended July 31, 1998
- ------------------------
Total revenues 57,082 1,133 789 59,004
Depreciation and amortization 1,627 74 4 1,705
Income before interest and
income taxes 7,700 272 122 8,094
Total assets at July 31, 1998 68,143 21,411 1,574 91,128
Capital expenditures 999 11 11 1,021
</TABLE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.8
<SEQUENCE>2
<FILENAME>0002.txt
<DESCRIPTION>EXECUTIVE EMPLOYMENT AGREEMENT
<TEXT>
Exhibit 10.8
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT IS SUBJECT TO MANDATORY AND BINDING ARBITRATION
This Employment Agreement (the "Agreement") is entered into as of
September 30, 2000 (the "Effective Date"), by and between First Cash
Financial Services, Inc. (the "Company"), a Delaware corporation, and
Phillip Eric Powell (the "Executive").
WHEREAS, Executive has provided a significant contribution to the
success of the Company over a long period of time, including but not limited
to the following: Executive has been primarily responsible for building the
company from its inception, has been an integral part of its attaining
fiscal/financial stability, has been its primary guidance in determining the
strategic vision of the Company, and has forgone bonuses and salary
adjustments otherwise due and payable for the good of the Company and its
public shareholders; and
WHEREAS, Executive is presently employed by the Company pursuant to an
employment agreement dated May 31, 1992, between the parties ("Old
Employment Agreement"), and the parties desire to terminate that agreement
and enter into a new agreement based on the terms and conditions set forth
below, and
NOW, THEREFORE, in consideration of the mutual covenants and
obligations hereinafter set forth, the parties agree as follows:
1. TERMINATION OF OLD EMPLOYMENT AGREEMENT.
The parties agree that the Old Employment Agreement shall be terminated
concurrently with the execution of this Agreement and shall be of no further
force or effect. The parties hereto waive and release all rights they may
have under the Old Employment Agreement as of the date hereof.
2. EMPLOYMENT.
The Company desires to continue to employ the Executive, and the
Executive agrees to continue to work in the employ of the Company, according
to the following terms and conditions.
3. DUTIES.
(a) The Company will continue to employ the Executive as Chief
Executive Officer ("CEO") of the Company.
(b) The Executive will serve in the Company's employ in that position.
<PAGE>
(c) Under the direction of the Board of Directors of the Company (the
"Board"), the Executive shall perform such duties, and have such powers,
authority, functions, duties and responsibilities for the Company and
corporations and other entities affiliated with the Company commensurate and
consistent with his employment in the position of CEO. The Executive also
shall have such additional powers, authority, functions, duties and
responsibilities as may be assigned to him by the Board; provided that,
without the Executive's written consent, those additional powers, authority,
functions, duties and responsibilities shall not be materially inconsistent
or interfere with, or detract from, those herein vested in, or otherwise
then being performed for the Company by, the Executive. In the event of an
increase in the Executive's duties, beyond the duties of CEO, the Board
shall review the Executive's compensation and benefits to determine if an
adjustment in compensation and employee benefits commensurate with the
Executive's new duties is warranted, in accordance with the Company's
compensation policies.
4. TERM OF EMPLOYMENT.
The term of employment of Executive is through December 31, 2005.
Subject to the provisions of Section 9, the term of the Executive's
Employment hereunder shall commence on September 30, 2000. At the
discretion of the Board, the term of employment shall be extended for
additional successive periods of 1 year, each year beginning on January 1,
2002, and each anniversary date thereafter, provided that during the
previous year, the Executive met the stipulated performance criteria
established by the Board.
5. EXTENT OF SERVICES.
The Executive shall not at any time during his Employment engage in any
other business related activities unless those activities do not interfere
materially with the Executive's duties and responsibilities to the Company
at that time. The foregoing, however, shall not preclude the Executive from
engaging in appropriate civic, charitable, professional or trade association
activities or from serving on one or more other boards of directors of
public or private companies, as long as such activities and services do not
conflict with his responsibilities to the Company.
6. NO FORCED RELOCATION.
The Executive shall not be required to move his principal place of
residence from the Arlington, Texas area or to perform regular duties that
could reasonably be expected to require either such move against his wish or
to spend amounts of time each week outside the Arlington, Texas area which
are unreasonable in relation to the duties and responsibilities of the
Executive hereunder, and the Company agrees that, if it requests the
Executive to make such a move and the Executive declines that request, (a)
that declination shall not constitute any basis for a termination of the
Executive's Employment and (b) no animosity or prejudice will be held
against Executive.
<PAGE>
7. COMPENSATION.
(a) SALARY.
An annual base salary shall be payable to the Executive by the Company
as a guaranteed minimum amount under this Agreement for each calendar year
during the period from September 30, 2000 to the termination date of the
Executive's Employment. That annual base salary shall (i) accrue daily on
the basis of a 365-day year, (ii) be payable to the Executive in the
intervals consistent with the Company's normal payroll schedules (but in no
event less frequently than semi-monthly) and (iii) be payable beginning
September 30, 2000 at an initial annual rate of $375,000. The Executive's
annual base salary shall not be decreased, but shall be adjusted annually in
each December to reflect such adjustments, if any, as the compensation
committee of the Board determines appropriate based on the Executive's
performance during the most recent performance period, in accordance with
the Company's compensation policies. A failure of the Company to increase
the Executive's annual base salary shall not constitute a breach or
violation of this Agreement by the Company.
(b) BONUS.
At the discretion of the Board's compensation committee, Executive
shall be eligible to be paid an annual bonus by the Company for each
calendar year during the period from January 1, 2000 to the termination date
of the Executive's Employment. That annual bonus shall be payable at such
rate and in such amount as is determined by the compensation committee of
the board of directors. The Executive's annual bonus, if any, shall be
adjusted annually in each December to reflect such adjustments, if any, as
the Board's compensation committee determines appropriate based on the
Executive's performance during the most recent performance period, in
accordance with the Company's compensation policies. A failure of the
Company to pay Executive an annual bonus shall not constitute a breach or
violation of this Agreement by the Company.
(c) OTHER COMPENSATION.
The Executive shall be entitled to participate in all Compensation
Plans from time to time in effect while in the Employment of the Company,
regardless of whether the Executive is an Executive Officer. All awards to
the Executive under all Incentive Plans shall take into account the
Executive's positions with and duties and responsibilities to the Company
and its subsidiaries and affiliates. The Company shall supply Executive
with an automobile, the make and model of which is subject to the approval
of the compensation committee of the Board, and be responsible for all
expenses related thereto throughout the term of this Agreement. Executive
may select an automobile of his own choosing which is reasonable in cost,
appearance and function, taking into account the powers, authority,
functions, duties and responsibilities of Executive, and the financial
position and condition of the Company. In consideration and in support of
Executive's duties under this Agreement, which include fostering the
goodwill, growth and earnings of the Company, the Company shall pay for a
private club membership for Executive, for such amount as is reasonable
taking into account the powers, authority, functions, duties and
responsibilities of Executive, subject to approval of the compensation
committee of the Board.
<PAGE>
(d) EXPENSES.
The Executive shall be entitled to prompt reimbursement of all
reasonable business expenses incurred by him in the performance of his
duties during the term of this Agreement, subject to the presenting of
appropriate vouchers and receipts in accordance with the Company's policies.
8. OTHER BENEFITS.
(a) EMPLOYEE BENEFITS AND PROGRAMS.
During the term of this Agreement, the Executive and the members of his
immediate family shall be entitled to participate in any employee benefit
plans or programs of the Company to the extent that his position, tenure,
salary, age, health and other qualifications make him or them, as the case
may be, eligible to participate, subject to the rules and regulations
applicable thereto.
(b) SUBSCRIPTIONS AND MEMBERSHIPS.
The Company shall pay periodical subscription costs and membership fees
and dues for the Executive to join professional organizations appropriate
for the Executive, and which further the interests of the Company. The
Company shall also pay or reimburse Executive for Executive's membership in
such additional clubs and organizations as may be agreed upon as reasonable
and appropriate between Executive and the Company.
(c) LOANS TO PAY FEDERAL TAXES.
If the Executive requests and the Company is in a financial position to
do so, in the discretion of the Board, the Company may loan to the Executive
sufficient funds to pay all federal income tax liability ("Tax Liability")
due by reason of the issuance of any securities of the Company. Such loan
shall bear interest at the rate of 7%, per annum (the "Tax Note"), which
shall be secured by Executive's interest in the securities. The Tax Note
shall be pre-payable at any time and mature no later than five years from
the date any funds were first advanced to the Executive under this Section
8(c). If the Executive sells any such securities (or any securities into
which Company issued securities have been converted) for cash while the Tax
Note remains outstanding and unpaid, the Executive shall prepay the Tax Note
within five business days after the Executive receives the proceeds from
that sale in the amount equal to the lesser of (i) the then unpaid balance
plus all interest earned under the Tax Note or (ii) the cash proceeds, net
of any applicable commission and other sale expense and any applicable
capital gain or other income tax, the Executive receives from that sale. The
Tax Note shall be payable either in cash or, in the event that on any date
the Executive makes any payment thereon the Common Stock is listed on the
American Stock Exchange or another national securities exchange or is quoted
through the Nasdaq National Market System (the "NMS") and the Executive
desires to pay such loan by delivery of shares of Common Stock, in shares of
Common Stock valued at the closing price of the Common Stock on (i) the
national securities exchange on which the Common Stock is listed (or, if
there is more than one, the national securities exchange the Company has
designated as the principal market for the Common Stock) or (ii) the NMS, as
the case may be, on the then most recent day on which the Common Stock
traded on such national securities exchange or the NMS, as the case may be;
provided, however, that if the securities issued by the Company to the
Executive are not publicly tradable before the Tax Note shall be due and
payable, payment of the Tax Note may be made by the Executive tendering all
the securities to the Company in exchange for cancellation of the Tax Note.
<PAGE>
(d) LOANS TO EXERCISE OPTIONS
If the Executive requests, the Company shall loan to the Executive
sufficient funds to purchase or exercise any options owned by Executive in
the stock of the Company. The maximum amount of funds, which the Company
shall loan, shall be determined by the exercise price of such options. Such
loan shall bear interest at 7%, per annum, and shall be evidenced by a
promissory note (the "Option Note"), secured by the subject options or
securities. The Option Note shall be pre-payable at any time and mature in
full no later than five years from the date any funds were first advanced to
the Executive under this Section 8(d). If the Executive sells any such
securities (or any securities into which Company issued securities have been
converted) for cash while the Option Note remains outstanding and unpaid,
the Executive shall prepay the Option Note within five business days after
the Executive receives the proceeds from that sale in the amount equal to
the lesser of (i) the then unpaid balance of the Option Note or (ii) the
cash proceeds, net of any applicable commission and other sale expense and
any applicable capital gain or other income tax, the Executive receives from
that sale. The Option Note shall be payable either in cash or, in the event
that on any date the Executive makes any payment thereon the Common Stock is
listed on the American Stock Exchange or another national securities
exchange or is quoted through the Nasdaq National Market System (the "NMS")
and the Executive desires to pay such loan by delivery of shares of Common
Stock, the Common Stock will be valued at the closing price of the Common
Stock on (i) the national securities exchange on which the Common Stock is
listed (or, if there is more than one, the national securities exchange the
Company has designated as the principal market for the Common Stock) or (ii)
the NMS, as the case may be, on the then most recent day on which the Common
Stock traded on such national securities exchange or the NMS, as the case
may be; provided, however, that if the securities issued by the Company to
the Executive are not publicly tradable before the Option Note shall be due
and payable, payment of the Option Note may be made by the Executive
tendering all the Common Stock issued from the proceeds of the Option Note
to the Company in exchange for cancellation of the Option Note.
(e) VACATION.
The Executive shall be entitled to four weeks of vacation leave with
full pay during each year of this Agreement (each such year being a 12-month
period ending on the one year anniversary date of the commencement of the
Executive's employment.) The times for such vacations shall be selected by
the Executive, provided the dates selected do not interfere materially with
the performance of Executive's duties and responsibilities under this
agreement. The Executive may accrue up to eight weeks of vacation time from
year to year, but vacation time otherwise shall not accrue from year to
year.
(f) BOOKKEEPING AND ACCOUNTING
The Executive shall be entitled to Company paid or reimbursed,
bookkeeping services up to $300 per month and annual accounting services of
up to $700 per year.
<PAGE>
(g) INSURANCE
For the term of this Agreement, the Company will provide, at no cost to
Executive, term life insurance benefits under two separate policies. The
first policy shall be in the amount of $2 million with the Company
designated as the beneficiary. The second policy shall be in the amount of
$4 million with the loss payee designated by the Executive. In the
discretion of the Board, during the term of this Agreement, the Company
shall also provide, at no cost to Executive, disability insurance sufficient
to provide, in the event Executive becomes disabled, payments that would be
made to Executive equal or up to the amount equal to Executive's base
salary, as of the date of disability, provided such coverage is reasonably
available at reasonable cost. Executive may procure his own disability
coverage and be reimbursed, if the same is not provided by the Company.
9. TERMINATION.
The Executive's Employment hereunder may be terminated prior to the
term provided for in Section 4 only under the following circumstances:
(a) DEATH.
The Executive's Employment shall terminate automatically on the date of
his death.
(b) DISABILITY.
If a Disability occurs and is continuing, the Executive's Employment
shall terminate 180 days after the Company gives the Executive written
notice that it intends to terminate his Employment on account of that
Disability, or on such later date as the Company specifies in such notice.
If the Executive resumes the performance of substantially all of his duties
under this Agreement before the termination becomes effective, the notice of
intent to terminate shall be deemed to have been revoked. Disability of
Executive shall not prevent the Company from making necessary changes during
the period of Executive's Disability to conduct its affairs.
(c) VOLUNTARY TERMINATION.
The Executive may terminate his Employment at any time and without Good
Cause with 90 days' prior written notice to the Company.
<PAGE>
(d) TERMINATION FOR GOOD CAUSE.
The Executive may terminate his Employment for Good Cause at any time
within 180 days (90 days if the Good Cause is the occurrence of a Change of
Control) after the Executive becomes consciously aware that the facts and
circumstances constituting Good Cause exist are continuing and by giving the
Company 30 days' prior written notice that the Executive intends to
terminate his Employment for Good Cause, which notice will state with
specificity the basis for Executive's contention that Good Cause exists;
provided, however, that if Executive terminates for Good Cause due to a
Change in Control, the Change in Control must actually occur. A Change in
Control will not be deemed to have actually occurred merely because of a
pending or possible event. The Executive shall not have Good Cause to
terminate his Employment solely by reason of the occurrence of a Change in
Control until 90 days after the date such Change in Control actually occurs.
The Executive may not terminate for Good Cause if the facts and
circumstances constituting Good Cause are substantially cured by the Company
within 30 days following notice to the Company.
(e) INVOLUNTARY TERMINATION.
The Executive's Employment is at will. The Company reserves the right
to terminate the Executive's Employment at anytime whatsoever, without
cause, with 30 days' prior written notice to the Executive.
(f) INVOLUNTARY TERMINATION FOR CAUSE.
The Company reserves the right to terminate the Executive's Employment
for Cause. In the event that the Company determines that Cause exists under
Section 13(f)(i) for the termination of the Executive's Employment, the
Company shall provide in writing (the "Notice of Cause"), the basis for that
determination and the manner, if any, in which the breach or neglect can be
cured. If either the Company has determined that the breach or neglect
cannot be cured, as set forth in the Notice of Cause, or has advised the
Executive in the Notice of Cause of the manner in which the breach or
neglect can be cured, but the Executive fails to substantially effect that
cure within 60 days after his receipt of the Notice of Cause, the Company
shall be entitled to give the Executive written notice of the Company's
intention to terminate Executive's Employment for Cause (the "Notice of
Intent to Terminate"). Executive shall have the right to object to any
Notice of Intent to Terminate Executive's Employment for Cause, by
furnishing the Company within ten days of receipt by Executive of the Notice
of Intent to Terminate Executive's Employment for Cause, written notice
specifying the reasons Executive contends either (i) Cause under Section
13(f)(i) does not exist or has been timely cured or (ii) in the circumstance
of a Notice of Intent to Terminate Executive's Employment for Cause under
Section 13(f)(ii), that such Cause does not exist (the "Notice of Intent to
Join Issue over Cause"). The failure of Executive to timely furnish the
Company with a Notice of Intent to Join Issue over Cause shall serve to
conclusively establish Cause hereunder, and the right of the Company to
terminate the Executive's Employment for Cause. Within 30 days following
its receipt of a timely Notice of Intent to Join Issue Over Cause, the
Company must either rescind the Notice of Intent to Terminate the
Executive's Employment for Cause, or file a demand for arbitration in
accordance with Section 27, to determine whether the Company is entitled to
terminate Executive's Employment for Cause. During the pendency of the
arbitration proceeding, and until such time as Executive's Employment is
terminated, Executive shall be entitled to receive Compensation under this
<PAGE>
Agreement. In the discretion of the Board, however, the Executive may be
reassigned or suspended with pay, during not only the pendency of the
arbitration proceeding, but during the period from the date the Company
furnishes Executive with a Notice of Intent to Terminate the Executive's
Employment for Cause until such date as the notice is rescinded, a
determination that Cause does not exist is made in the arbitration
proceeding or in the event of a determination that Cause does exist in the
arbitration proceeding, the effective date of the termination of Executive's
Employment for Cause. In the event that the Company determines that Cause
exists under Section 13(f)(ii) for the termination of the Executive's
Employment, it shall be entitled to immediately furnish Executive with a
Notice of Intent to Terminate Executive's Employment without providing a
Notice of Cause or any opportunity prior to that notice to contest that
determination. Any termination of the Executive's Employment for Cause
pursuant to this Section 9(f) shall be effective immediately upon the
Executive's receipt of the Company's written notice of that termination and
the Cause therefore.
(g) VOLUNTARY TERMINATION AT CONCLUSION OF TERM
At the expiration of the term of employment as stated in Section 4,
either party may terminate this Agreement by giving the other party written
notice at least six months before the expiration of the term of employment
stated in Section 4.
10. SEVERANCE PAYMENTS.
Unless effected under Section 9(g), if the Executive's Employment is
terminated during the term of this Agreement, the Executive shall be
entitled to receive severance payments as follows:
(a) If the Executive's Employment is terminated under Section 9(a),
(b), (d), (e) or (g), the Company will pay or cause to be paid to the
Executive (or, in the case of a termination under Section 9(a), the
beneficiary the Executive has designated in writing to the Company to
receive payment pursuant to this Section 10(a) or, in the absence of such
designation, the Executive's estate): (i) the Accrued Salary; (ii) the
Other Earned Compensation; (iii) the Reimbursable Expenses; and (iv) the
Severance Benefit. Additionally, the Company shall cancel Executive's
obligations under that certain promissory note dated December 31, 2000, in
the principal amount of $2,000,395.82 plus all other loans and advances
(principal and interest), and return to Executive, (or, in the case of
termination under Section 9(a), the beneficiary the Executive has designated
in writing to the Company to receive payment pursuant to Section 10(a) or in
the absence of such designation, the Executive's estate) within ten days,
all property securing the payment thereof. Any taxes due by Executive as a
result of the forgiveness under this provision of the Executive's debt to
the Company will be the sole obligation of the Company, and will be promptly
paid when due.
(b) If the Executive's Employment is terminated under Section 9(c) or
(f), the Company will pay or cause to be paid to the Executive: (i) the
Accrued Salary determined as of and through the termination date of the
Executive's Employment; (ii) the Other Earned Compensation; and (iii) the
Reimbursable Expenses.
<PAGE>
(c) Any payments to which the Executive (or his designated
beneficiary or estate, if Section 9(a) applies) is entitled pursuant to
paragraph (i) of subsection (a) of this Section 10 or paragraph (i) of
subsection (b) of this Section 10, as applicable, will be paid in a single
lump sum within thirty days after the termination date of the Executive's
Employment. At the sole option and election of the Executive (or his
designated beneficiary or estate, if Section 9(a) applies), which election
shall be made within 30 days of the termination of Executive's Employment,
the Company shall pay the executive the Severance Benefit, if at all, (1) in
a lump sum on a present value basis; (2) on a semi-monthly basis (as if
Executive's employment had continued), or (3) on such other periodic basis
reasonably requested by Executive (or his designated beneficiary or estate,
if Section 9(a) applies), in which event, the payments will be discounted to
the extent the periodic basis selected by Executive (or his designated
beneficiary or estate, if Section 9(a) applies) results in an earlier payout
to Executive (or his designated beneficiary or estate, if Section 9(a)
applies) than if Executive were paid on a semi-monthly basis. The Company
shall be given credit for all life or disability insurance proceeds paid to
Executive (or his designated beneficiary or estate, if Section 9(a)
applies) on any policy procured, paid for or reimbursed by the Company
pursuant to this Agreement (up to $2 million in the case of life insurance).
Upon the failure of the Executive to timely make an election as provided
herein, such option and election shall revert to the Company. However, if
Section 9(a) applies and the Executive's designated beneficiary or estate is
the beneficiary of one or more insurance policies purchased by the Company
and then in effect the proceeds of which are payable to that beneficiary by
reason of the Executive's death, then (i) the Company, at its option, may
credit the amount of those proceeds, as and when paid by the insurer to that
beneficiary, against the payment to which the Executive's designated
beneficiary or estate is entitled pursuant to paragraph (iv) of subsection
(a) of this Section 10 and, if it exercises that option, (ii) the payment
otherwise due pursuant to that paragraph (iv) will bear interest on the
outstanding balance thereof from and including the fifth day after that
termination date to the date of payment by the insurer to that beneficiary
at the rate of interest specified in Section 32; and provided, further, that
if Section 10(b) applies and the Executive is the beneficiary of disability
insurance purchased by the Company and then in effect, the Company, at its
option, may credit the proceeds of that insurance which are payable to the
Executive, valued at their present value as of that termination date using
the interest rate specified in Section 32 and then in effect as the discount
rate, against the payment to which the Executive is entitled pursuant to
paragraph (iv) of subsection (a) of this Section 10. Any payments to which
the Executive (or his designated beneficiary or estate, if Section 9(a)
applies) is entitled pursuant to paragraphs (ii) and (iii) of subsection (a)
or (b) of this Section 10, as applicable, will be paid in a single lump sum
within five days after the termination date of the Executive's Employment or
as soon thereafter as is administratively feasible, together with interest
accrued thereon from and including the fifth day after that termination date
to the date of payment at the rate of interest specified in Section 32.
(d) Except as provided in Sections 15, 25 and this Section, the Company
will have no payment obligations under this Agreement to the Executive (or
his designated beneficiary or estate, if Section 9(a) applies) after the
termination date of the Executive's Employment.
<PAGE>
11. RESIGNATIONS.
Upon termination of Executive's employment with or without cause,
Executive shall resign as an officer and director of the Company and will
thereafter refuse election as an officer or director of the Company.
12. RETURN OF DOCUMENTS.
Upon termination of Executive's employment with or without cause,
Executive shall immediately return and deliver to the Company and shall not
retain any originals or copies of any books, papers, price lists, customer
contracts, bids, customer lists, files, notebooks or any other documents
containing any of the Confidential information or otherwise relating to
Executive's performance of duties under this Agreement. Executive further
acknowledges and agrees that all such documents are the Company's sole and
exclusive property.
13. DEFINITION OF TERMS.
The following terms used in this Agreement when capitalized shall have
the following meanings:
(a) ACCRUED SALARY.
"Accrued Salary" shall mean the salary that has accrued, and the salary
that would accrue through and including the last day of the pay period in
which the termination date of the Executive's Employment occurs, under
Section 7(a), which has not been paid to the Executive as of that
termination date.
(b) ACQUIRING PERSON.
"Acquiring Person" shall mean any person who or which, together with
all Affiliates and Associates of such person, is or are the Beneficial Owner
of 50 percent or more of the shares of Common Stock then outstanding, but
does not include any Exempt Person; provided, however, that a person shall
not be or become an Acquiring Person if such person, together with its
Affiliates and Associates, shall become the Beneficial Owner of 50 percent
or more of the shares of Common Stock then outstanding solely as a result of
a reduction in the number of shares of Common Stock outstanding due to the
repurchase of Common Stock by the Company, unless and until such time as
such person or any Affiliate or Associate of such person shall purchase or
otherwise become the Beneficial Owner of additional shares of Common Stock
constituting 1% or more of the then outstanding shares of Common Stock or
any other person (or persons) who is (or collectively are) the Beneficial
Owner of shares of Common Stock constituting 1% or more of the then
outstanding shares of Common Stock shall become an Affiliate or Associate of
such person, unless, in either such case, such person, together with all
Affiliates and Associates of such person, is not then the Beneficial Owner
of 50% or more of the shares of Common Stock then outstanding.
(c) AFFILIATE.
"Affiliate" has the meaning ascribed to that term in Rule 405 of
Regulation C.
<PAGE>
(d) ASSOCIATE.
"Associate" shall mean, with reference to any person, (i) any
corporation, firm, partnership, association, unincorporated organization or
other entity (other than the Company or a subsidiary of the Company) of
which that person is an officer or general partner (or officer or general
partner of a general partner) or is, directly or indirectly, the Beneficial
Owner of 10% or more of any class of its equity securities, (ii) any trust
or other estate in which that person has a substantial beneficial interest
or for or of which that person serves as trustee or in a similar fiduciary
capacity and (iii) any relative or spouse of that person, or any relative of
that spouse, who has the same home as that person.
<PAGE>
(e) BENEFICIAL OWNER.
A specified person shall be deemed the "Beneficial Owner" of, and shall
be deemed to "beneficially own," any securities: (i) of which that person
or any of that person's Affiliates or Associates, directly or indirectly, is
the "beneficial owner" (as determined pursuant to Rule 13d-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
otherwise has the right to vote or dispose of, including pursuant to any
agreement, arrangement or understanding (whether or not in writing);
provided, however, that a person shall not be deemed the "Beneficial Owner"
of, or to "beneficially own," any security under this subparagraph (i) as a
result of an agreement, arrangement or understanding to vote that security
if that agreement, arrangement or understanding: (A) arises solely from a
revocable proxy or consent given in response to a public (that is, not
including a solicitation exempted by Exchange Act Rule 14a-2(b)(2)) proxy or
consent solicitation made pursuant to, and in accordance with, the
applicable provisions of the Exchange Act; and (B) is not then reportable by
such person on Exchange Act Schedule 13D (or any comparable or successor
report); (ii) which that person or any of that person's Affiliates or
Associates, directly or indirectly, has the right or obligation to acquire
(whether that right or obligation is exercisable or effective immediately or
only after the passage of time or the occurrence of an event) pursuant to
any agreement, arrangement or understanding (whether or not in writing) or
on the exercise of conversion rights, exchange rights, other rights,
warrants or options, or otherwise; provided, however, that a person shall
not be deemed the "Beneficial Owner" of, or to "beneficially own,"
securities tendered pursuant to a tender or exchange offer made by that
person or any of that person's Affiliates or Associates until those
tendered securities are accepted for purchase or exchange; or (iii) which
are beneficially owned, directly or indirectly, by (A) any other person (or
any Affiliate or Associate thereof) with which the specified person or any
of the specified person's Affiliates or Associates has any agreement,
arrangement or understanding (whether or not in writing) for the purpose of
acquiring, holding, voting (except pursuant to a revocable proxy or consent
as described in the proviso to subparagraph (i) of this definition) or
disposing of any voting securities of the Company or (B) any group (as that
term is used in Exchange Act Rule 13d-5(b)) of which that specified person
is a member; provided, however, that nothing in this definition shall cause
a person engaged in business as an underwriter of securities to be the
"Beneficial Owner" of, or to "beneficially own," any securities acquired
through that person's participation in good faith in a firm commitment
underwriting until the expiration of 40 days after the date of that
acquisition. For purposes of this Agreement, "voting" a security shall
include voting, granting a proxy, acting by consent making a request or
demand relating to corporate action (including, without limitation, calling
a stockholder meeting) or otherwise giving an authorization (within the
meaning of Section 14(a) of the Exchange Act) in respect of such security.
(f) CAUSE.
"Cause" shall mean that the Executive has (i) willfully breached or
habitually neglected (otherwise than by reason of injury, or physical or
mental illness, or any disability as defined by the Americans with
Disabilities Act of 1990, Public Law 101_336, 42 U.S.C.A. S 12101 et seq.)
material duties which he was required to perform under the terms of this
Agreement, or (ii) committed and been charged with act(s) of dishonesty or
fraud.
<PAGE>
(g) CHANGE OF CONTROL.
"Change of Control" shall mean the occurrence of the following events:
(i) any person or entity becomes an Acquiring Person, or (ii) a merger of
the Company with or into, or a sale by the Company of its properties and
assets substantially as an entirety to, another person or entity; (iii) a
majority of the incumbent board of directors cease for any reason to
constitute at least a majority of the Board; and (iv) immediately after the
occurrence of (i), (ii) or (iii) above, any person or entity, other than an
Exempt Person, together with all Affiliates and Associates of such person or
entity, shall be the Beneficial Owner of 50% or more of the total voting
power of the then outstanding Voting Shares of the person or entity
surviving that transaction (in the case or a merger or consolidation), or
the person or entity acquiring those properties and assets substantially as
an entirety.
(h) COMPANY.
"Company" shall mean (i) First Cash Financial Services, Inc., a
Delaware corporation, and (ii) any person or entity that assumes the
obligations of "the Company" hereunder, by operation of law, pursuant to
Section 18 or otherwise.
(i) COMPENSATION PLAN.
"Compensation Plan" shall mean any compensation arrangement, plan,
policy, practice or program established, maintained or sponsored by the
Company or any subsidiary of the Company, or to which the Company or any
subsidiary of the Company contributes, on behalf of any Executive Officer or
any member of the immediate family of any Executive Officer by reason of his
status as such, (i) including (A) any "employee pension benefit plan" (as
defined in Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) or other "employee benefit plan" (as defined in
Section 3(3) of ERISA), (B) any other retirement or savings plan, including
any supplemental benefit arrangement relating to any plan intended to be
qualified under Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), or whose benefits are limited by the Code or ERISA,
(C) any "employee welfare plan" (as defined in Section 3(1) of ERISA), (D)
any arrangement, plan, policy, practice or program providing for severance
pay, deferred compensation or insurance benefit, (E) any Incentive Plan and
(F) any arrangement, plan, policy, practice or program (1) authorizing and
providing for the payment or reimbursement of expenses attributable to air
travel and hotel occupancy while traveling on business for the Company or
(2) providing for the payment of business luncheon and country club dues,
long-distance charges, mobile phone monthly air time or other recurring
monthly charges or any other fringe benefit, allowance or accommodation of
employment, but (ii) excluding any compensation arrangement, plan, policy,
practice or program to the extent it provides for annual base salary.
(j) DISABILITY.
"Disability" shall mean that the Executive, with reasonable
accommodation, has been unable to perform his essential duties under this
Agreement for a period of at least six consecutive months as a result of his
incapacity due to injury or physical or mental illness, any disability as
defined in a disability insurance policy which provides coverage for the
Executive, or any disability as defined by the Americans with Disabilities
Act of 1990, Public Law 101_336, 42 U.S.C.A. S 12101 et seq.
<PAGE>
(k) EMPLOYMENT.
"Employment" shall mean the salaried employment of the Executive by the
Company or a subsidiary of the Company hereunder.
(l) EXECUTIVE OFFICER.
"Executive Officer" shall mean any of the chief executive officer, the
chief operating officer, the chief financial officer, the president, any
executive, regional or other group or senior vice president or any vice
president of the Company.
(m) EXEMPT PERSON.
"Exempt Person" shall mean: (i)(A) the Company, any subsidiary of the
Company, any employee benefit plan of the Company or any subsidiary of the
Company and (B) any person organized, appointed or established by the
Company for or pursuant to the terms of any such plan or for the purpose of
funding any such plan or funding other employee benefits for employees of
the Company or any subsidiary of the Company; (ii) the Executive, any
Affiliate of the Executive which the Executive controls or any group (as
that term is used in Exchange Act Rule 13d-5(b)) of which the Executive or
any such Affiliate is a member.
(n) GOOD CAUSE.
"Good Cause" for the Executive's termination of his Employment shall
mean: (i) any decrease in the annual base salary under Section 7(a) or any
other violation hereof in any material respect by the Company; (ii) any
material reduction in the Executive's compensation under Section 7; (iii)
the assignment to the Executive of duties inconsistent in any material
respect with the Executive's then current positions (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities or any other action by the Company which results in a
material diminution in those positions, authority, duties or
responsibilities; (iv) any unapproved relocation of the Executive; or (v)
the occurrence of a Change of Control. Good Cause shall not exist if the
Company cures within the period prescribed herein.
(o) INCENTIVE PLAN.
"Incentive Plan" shall mean any compensation arrangement, plan, policy,
practice or program established, maintained or sponsored by the Company or
any subsidiary of the Company, or to which the Company or any subsidiary of
the Company contributes, on behalf of any Executive Officer and which
provides for incentive, bonus or other performance-based awards of cash,
securities, the phantom equivalent of securities or other property,
including any stock option, stock appreciation right and restricted stock
plan, but excluding any plan intended to qualify as a plan under any one or
more of Sections 401(a), 401(k) or 423 of the Code.
(p) OTHER EARNED COMPENSATION.
"Other Earned Compensation" shall mean all the compensation earned by
the Executive prior to the termination date of his Employment as a result of
his Employment (including compensation the payment of which has been
deferred by the Executive, but excluding Accrued Salary and compensation to
be paid to the Executive in accordance with the terms of any Compensation
Plan), together with all accrued interest or earnings, if any, thereon,
which has not been paid to the Executive as of that date.
<PAGE>
(q) REIMBURSABLE EXPENSES.
"Reimbursable Expenses" shall mean the expenses incurred by the
Executive on or prior to the termination date of his Employment which are to
be reimbursed to the Executive under Section 7(c) and which have not been
reimbursed to the Executive as of that date.
(r) SEVERANCE BENEFIT.
"Severance Benefit" shall mean all Compensation provided for under
Section 7 through the remainder of the Executive's term of employment, it
being the parties' intent that, except for a termination under Section 9(c),
(f) or (g) the Executive shall receive all Compensation as if his term of
employment continued as provided for under Section 4. The term "Severance
Benefit" shall also include $1,875,000.00. In the event the Board exercises
its option to extend the term of this Agreement pursuant to Section 4
hereof, the $1,875,000 portion of the Severance Benefit shall be reduced 20%
for each year the term is extended.
14. COVENANTS NOT TO COMPETE
(a) Executive's Acknowledgment. Executive agrees and acknowledges
that in order to assure the Company that it will retain its value
as a going concern, it is necessary that Executive undertake not
to utilize his special knowledge of the business and his
relationships with customers and suppliers to compete with the
Company. Executive further acknowledges that:
(i) the Company is and will be engaged in the business of pawn
shop services, pay day loan services and check cashing
services;
(ii) Executive will occupy a position of trust and confidence with
the Company prior to the date of this agreement and, during
such period and Executive's employment under this agreement,
Company's trade secrets and with other proprietary and
confidential information concerning the Company;
(iii) the agreements and covenants contained in this Section 14
are essential to protect the Company and the goodwill of the
business; and
(iv) Executive's employment with the Company has special, unique
and extraordinary value to the Company and the Company would
be irreparably damaged if Executive were to provide services
to any person or entity in violation of the provisions of
this agreement.
(b) Company's Acknowledgement. The Company hereby acknowledges that
it will provide Executive with confidential and trade secret
information relating to the operation of the Company's business,
including but not limited to, customer lists, operating manuals,
and financing operations.
<PAGE>
(c) Competitive Activities. Executive hereby agrees that for a period
commencing on the date hereof and ending two years following the
later of (i) termination of Executive's employment with the
Company for whatever reason, and (ii) the conclusion of the
period, if any, during which the Company is making payments to
Executive, he will not, directly or indirectly, as employee,
agent, consultant, stockholder, director, co-partner or in any
other individual or representative capacity, own, operate, manage,
control, engage in, invest in or participate in any manner in, act
as a consultant or advisor to, render services for (alone or in
association with any person, firm, corporation or entity), or
otherwise assist any person or entity (other than the Company)
that engages in or owns, invests in, operates, manages or controls
any venture or enterprise that directly or indirectly engages or
proposes in engage in the business of pawnshops, check cashing
services, payday loan services or proposes to in engage in the
business of the distribution or sale of (i) products distributed,
sold or licensed by the Company or services provided by the
Company at the time of termination or (ii) products or services
proposed at the time of such termination to be distributed, sold,
licensed or provided by the Company within 50 miles of any of the
Company's locations (the "Territory"); provided, however, that
nothing contained herein shall be construed to prevent Executive
from investing in the stock of any competing corporation listed on
a national securities exchange or traded in the over-the-counter
market, but only if Executive is not involved in the business of
said corporation and if Executive and his associates (as such term
is defined in Regulation 14(A) promulgated under the Securities
Exchange Act of 1934, as in effect on the date hereof),
collectively, do not own more than an aggregate of two percent of
the stock of such corporation. With respect to the Territory,
Executive specifically acknowledges that the Company has conducted
the business throughout those areas comprising the Territory and
the Company intends to continue to expand the business throughout
the Territory.
(d) Blue Pencil. If an arbitrator shall at any time deem the terms of
this agreement or any restrictive covenant too lengthy or the
Territory too extensive, the other provisions of this section 14
shall nevertheless stand, the restrictive period shall be deemed
to be the longest period permissible by law under the
circumstances and the Territory shall be deemed to comprise the
largest territory permissible by law under the circumstances. The
arbitrator in each case shall reduce the restricted period and/or
the Territory to permissible duration or size.
(e) Non-Solicitation of Employees. Executive agrees that while
employed by the Company and for two (2) years after the cessation
of the Executive's employment for whatever reason, the Executive
will not recruit, hire or attempt to recruit or hire, directly or
assisted by others, any other employee of the Company with whom
the Executive had contact during the Executive=s employment with
the Company. For the purposes of this paragraph Acontact@ means
any interaction whatsoever between the Executive and the other
employee.
<PAGE>
(f) Non-Solicitation of Customers. Executive agrees that while
employed by the Company and for two (2) years after the cessation
of the Executive=s employment for whatever reason, the Executive
will not directly or indirectly, for himself or on behalf of any
other person, partnership, company, corporation or other entity,
solicit or attempt to solicit, for the purpose of engaging in
competition with the Company,
(i) any person or entity whose account was serviced by
Executive at the Company; or
(ii) any person or entity who is or has been a customer of
the Company prior to Executive's termination; or
(iii) any person or entity the Company has targeted and
contacted prior to Executive's termination for the purpose of
establishing a customer relationship.
Executive agrees that these restrictions are necessary to protect
Executive's legitimate business interests, and Executive agrees that these
restrictions will not prevent Executive from earning a livelihood.
<PAGE>
15. TAX INDEMNITY.
Should any of the payments of salary, other incentive or supplemental
compensation, benefits, allowances, awards, payments, reimbursements or
other perquisites, or any other payment in the nature of compensation,
singularly, in any combination or in the aggregate, that are provided for
hereunder to be paid to or for the benefit of the Executive be determined or
alleged to be subject to an excise or similar purpose tax pursuant to
Section 4999 of the Code, or any successor or other comparable federal,
state or local tax law by reason of being a "parachute payment" (within the
meaning of Section 280G of the Code), the parties agree to negotiate in good
faith changes to this Agreement necessary to avoid such excise or similar
purpose tax, without diminishing Executive's salary, other incentive or
supplemental compensation, benefits, allowances, awards, payments,
reimbursements or other perquisites, or any other payment in the nature of
compensation. Alternatively, the Company shall pay to the Executive such
additional compensation as is necessary (after taking into account all
federal, state and local taxes payable by the Executive as a result of the
receipt of such additional compensation) to place the Executive in the same
after-tax position (including federal, state and local taxes) he would have
been in had no such excise or similar purpose tax (or interest or penalties
thereon) been paid or incurred. The Company hereby agrees to pay such
additional compensation within the earlier to occur of (i) five business
days after the Executive notifies the Company that the Executive intends to
file a tax return taking the position that such excise or similar purpose
tax is due and payable in reliance on a written opinion of the Executive's
tax counsel (such tax counsel to be chosen solely by the Executive) that it
is more likely than not that such excise tax is due and payable or (ii) 24
hours of any notice of or action by the Company that it intends to take the
position that such excise tax is due and payable. The costs of obtaining the
tax counsel opinion referred to in clause (i) of the preceding sentence
shall be borne by the Company, and as long as such tax counsel was chosen by
the Executive in good faith, the conclusions reached in such opinion shall
not be challenged or disputed by the Company. If the Executive intends to
make any payment with respect to any such excise or similar purpose tax as a
result of an adjustment to the Executive's tax liability by any federal,
state or local tax authority, the Company will pay such additional
compensation by delivering its cashier's check payable in such amount to the
Executive within five business days after the Executive notifies the Company
of his intention to make such payment. Without limiting the obligation of
the Company hereunder, the Executive agrees, in the event the Executive
makes any payment pursuant to the preceding sentence, to negotiate with the
Company in good faith with respect to procedures reasonably requested by the
Company which would afford the Company the ability to contest the imposition
of such excise or similar purpose tax; provided, however, that the Executive
will not be required to afford the Company any right to contest the
applicability of any such excise or similar purpose tax to the extent that
the Executive reasonably determines (based upon the opinion of his tax
counsel) that such contest is inconsistent with the overall tax interests of
the Executive.
16. LOCATIONS OF PERFORMANCE.
The Executive's services shall be performed primarily in the vicinity
of Arlington, Texas. The parties acknowledge, however, that the Executive
will be required to travel in connection with the performance of his duties.
<PAGE>
17. PROPRIETARY INFORMATION.
(a) The Executive agrees to comply fully with the Company's policies
relating to non-disclosure of the Company's trade secrets and proprietary
information and processes. Without limiting the generality of the foregoing,
the Executive will not, during the term of his Employment, disclose any such
secrets, information or processes to any person, firm, corporation,
association or other entity for any reason or purpose whatsoever except as
may be required by law or governmental agency or legal process, nor shall
the Executive make use of any such property for his own purposes or for the
benefit of any person, firm, corporation or other entity (except the Company
or any of its subsidiaries) under any circumstances during or after the term
of his Employment, provided that after the term of his Employment this
provision shall not apply to secrets, information and processes that are
then in the public domain (provided that the Executive was not responsible,
directly or indirectly, for such secrets, information or processes entering
the public domain without the Company's consent).
(b) The Executive hereby sells, transfers and assigns to the Company
all the entire right, title and interest of the Executive in and to all
inventions, ideas, disclosures and improvements, whether patented or
unpatented, and copyrightable material, to the extent made or conceived by
the Executive solely or jointly with others during the term of this
Agreement The Executive shall communicate promptly and disclose to the
Company, in such form as the Company requests, all information, details and
data pertaining to the aforementioned and, whether during the term hereof or
thereafter, the Executive shall execute and deliver to the Company such
formal transfers and assignments and such other papers and documents as may
be required of the Executive to permit the Company to file and prosecute any
patent applications relating to same and, as to copyrightable material, to
obtain copyright thereon.
(c) Trade secrets, proprietary information and processes shall not be
deemed to include information which is: (i) known to the Executive at the
time it is disclosed to him; (ii) publicly known (or becomes publicly
known) without the fault or negligence of Executive; (iii) received from a
third party without restriction and without breach of this Agreement; (iv)
approved for release by written authorization of the Company; or (v)
required to be disclosed by law or legal process; provided, however, that in
the event of a proposed disclosure pursuant to this subsection (c)(v), the
Executive shall give the Company prior written notice before such disclosure
is made in a time and manner which will best provide the Company with the
ability to oppose such disclosure.
<PAGE>
18. ASSIGNMENT.
This Agreement may not be assigned by either party; provided that the
Company may assign this Agreement (i) in connection with a merger or
consolidation involving the Company or a sale of its business, properties
and assets substantially as an entirety to the surviving corporation or
purchaser as the case may be, so long as such assignee assumes the Company's
obligations hereunder; and (ii) so long as the assignment in the reasonable
discretion of Executive does not result in a materially increased risk of
non-performance of the Company's obligations hereunder by the assignee. The
Company shall require as a condition of such assignment any successor
(direct or indirect (including, without limitation, by becoming the sole
stockholder of the Company) and whether by purchase, merger, consolidation,
share exchange or otherwise) to the business, properties and assets of the
Company substantially as an entirety expressly to assume and agree to
perform this Agreement in the same manner and to the same extent the Company
would have been required to perform it had no such succession taken place.
This Agreement shall be binding upon all successors and assigns. In the
event of a Change of Control, and regardless of whether the Executive's
employment is thereafter terminated, the Company shall cancel Executive's
obligations under that certain promissory note dated 12/31/00, in the
principal amount of $2,000,395.82, plus all other loans and advances
(principal and interest), and return to Executive, (or, in the case of
termination under Section 9(a), the beneficiary the Executive has designated
in writing to the Company to receive payment pursuant to Section 9(a) or in
the absence of such designation, the Executive's estate) within ten days,
all property securing the payment thereof. Any taxes due by Executive as a
result of the forgiveness under this provision of the Executive's debt to
the Company will be the sole obligation of the Company.
19. NOTICES.
Any notice required or permitted to be given under this Agreement shall
be sufficient if in writing and sent by registered or certified mail to the
Executive at his residence maintained on the Company's records, or to the
Company at its address at 690 E. Lamar Blvd. Suite 400, Arlington, Texas
76011, Attention: Corporate Secretary, or such other addresses as either
party shall notify the other in accordance with the above procedure.
20. FORCE MAJEURE.
Neither party shall be liable to the other for any delay or failure to
perform hereunder, which delay or failure is due to causes beyond the
control of said party, including, but not limited to: acts of God; acts of
the public enemy; acts of the United States of America or any state,
territory or political subdivision thereof or of the District of Columbia;
fires; floods; epidemics; quarantine restrictions; strikes; or freight
embargoes; provided, however, that this Section 20 will not relieve the
Company of any of its payment obligations to the Executive under this
Agreement. Notwithstanding the foregoing provisions of this Section 20, in
every case the delay or failure to perform must be beyond the control and
without the fault or negligence of the party claiming excusable delay.
<PAGE>
21. INTEGRATION.
This Agreement represents the entire agreement and understanding
between the parties as to the subject matter hereof and supersedes all prior
or contemporaneous agreements whether written or oral. No waiver, alteration
or modification of any of the provisions of this Agreement shall be binding
unless in writing and signed by duly authorized representatives of the
parties hereto.
22. WAIVER.
Failure or delay on the part of either party hereto to enforce any
right, power or privilege hereunder shall not be deemed to constitute a
waiver thereof. Additionally, a waiver by either party of a breach of any
promise herein by the other party shall not operate as or be construed to
constitute a waiver of any subsequent breach by such other party.
23. SAVINGS CLAUSE.
If any term, covenant or condition of this Agreement or the application
thereof to any person or circumstance shall to any extent be invalid or
unenforceable, the remainder of this Agreement, or the application of such
term, covenant or condition to persons or circumstances other than those as
to which it is held invalid or unenforceable shall not be affected thereby,
and each term, covenant or condition of this Agreement shall be valid and
enforced to the fullest extent permitted by law.
24. AUTHORITY TO CONTRACT.
The Company warrants and represents to the Executive that the Company
has full authority to enter into this Agreement and to consummate the
transactions contemplated hereby and that this Agreement is not in conflict
with any other agreement to which the Company is a party or by which it may
be bound. The Company further warrants and represents to the Executive that
the individual executing this Agreement on behalf of the Company has the
full power and authority to bind the Company to the terms hereof and has
been authorized to do so in accordance with the Company's articles or
certificate of incorporation and bylaws.
<PAGE>
25. PAYMENT OF EXPENSES.
If at any time during the term hereof or afterwards: (a) there should
exist a dispute or conflict between the Executive and the Company or another
Person as to the validity, interpretation or application of any term or
condition hereof, or as to the Executive's entitlement to any benefit
intended to be bestowed hereby, which is not resolved to the satisfaction of
the Executive, (b) the Executive must (i) defend the validity of this
Agreement or (ii) contest any determination by the Company concerning the
amounts payable (or reimbursable) by the Company to the Executive or (c) the
Executive must prepare responses to an Internal Revenue Service ("IRS")
audit of, or otherwise defend, his personal income tax return for any year
the subject of any such audit, or an adverse determination, administrative
proceedings or civil litigation arising therefrom, which is occasioned by or
related to an audit by the IRS of the Company's income tax returns, then the
Company hereby unconditionally agrees: (a) on written demand of the Company
by the Executive, to provide sums sufficient to advance and pay on a current
basis (either by paying directly or by reimbursing the Executive) not less
than 30 days after a written request therefor is submitted by the Executive,
all the Executive's costs and expenses (including, without limitation,
attorney's fees, expenses of investigation, travel, lodging, copying,
delivery services and disbursements for the fees and expenses of experts,
etc.) incurred by the Executive in connection with any such matter; (b) the
Executive shall be entitled, on demand in accordance with Section 27, below,
to the entry of a mandatory injunction without the necessity of posting any
bond with respect thereto which compels the Company to pay or advance such
costs and expenses on a current basis; and (c) the Company's obligations
under this Section 25 will not be affected if the Executive is not the
prevailing party in the final resolution of any such matter unless it is
determined pursuant to Section 27 that, in the case of one or more of such
matters, the Executive has acted in bad faith or without a reasonable basis
for his position, in which event and, then only with respect to such matter
or matters, the successful or prevailing party or parties shall be entitled
to recover from the Executive reasonable attorneys' fees and other costs
incurred in connection with that matter or matters (including the amounts
paid by the Company in respect of that matter or matters pursuant to this
Section 25), in addition to any other relief to which it or they may be
entitled.
26. REMEDIES.
In the event of a breach by the Executive of Section 14 or 17 of this
Agreement, in addition to other remedies provided by applicable law, the
Company will be entitled to issuance of a temporary restraining order or
preliminary injunction enforcing its rights under such Section.
27. ARBITRATION.
This Agreement Is Subject to Binding Arbitration. Any dispute or
controversy arising under or in connection with this Agreement or in any
manner associated with Employee's employment (other than those described in
Section 26 _ Remedies) shall be settled exclusively by arbitration in
Arlington, Texas, in accordance with the rules of the American Arbitration
Association then in effect. The parties agree to execute and be bound by
the mutual agreement to arbitrate claims attached hereto as Attachment A.
<PAGE>
28. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Texas.
29. WAIVER OF ACTUAL OR POTENTIAL CONFLICTS OF INTEREST
Should it become necessary for Executive to seek to enforce the terms
of this Agreement, the Company consents to Executive's use of counsel which
either then or may have in the past represented the Company, provided that
counsel agrees to undertake Executive's representation, and such
representation and waiver of actual or potential conflicts of interest is in
accordance with the Texas State Bar Rules, including the Texas Disciplinary
Rules of Professional Conduct. To the extent permitted by the Rules, the
Company waives any such actual or potential conflict of interest arising
thereby.
30. COUNTERPARTS.
This Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the
same instrument.
31. INDEMNIFICATION.
The Executive shall be indemnified by the Company to the maximum
permitted by the law of the state of the Company's incorporation, and by the
law of the state of incorporation of any subsidiary of the Company of which
the Executive is a director or an officer or employee, as the same may be in
effect from time to time.
32. INTEREST.
If any amounts required to be paid or reimbursed to the Executive
hereunder are not so paid or reimbursed at the times provided herein
(including amounts required to be paid by the Company pursuant to Sections
7, 15 and 25), those amounts shall bear interest at the rate of 7% from the
date those amounts were required to have been paid or reimbursed to the
Executive until those amounts are finally and fully paid or reimbursed;
provided, however, that in no event shall the amount of interest contracted
for, charged or received hereunder exceed the maximum non-usurious amount of
interest allowed by applicable law.
33. TIME OF THE ESSENCE.
Time is of the essence with respect to any act required to be performed
by this Agreement.
34. PRIOR INSTRUMENTS UNAFFECTED.
Except for the Old Employment Agreement which is being terminated
pursuant to this Agreement, all prior instruments between the Company and
Executive shall remain in full force and effect and the terms and conditions
thereof shall not be affected by this Agreement.
<PAGE>
FIRST CASH FINANCIAL SERVICES, INC. EXECUTIVE
/S/ RICHARD T. BURKE /S/ PHILLIP E. POWELL
----------------------------------- -----------------------------
Richard T. Burke Phillip Eric Powell
Director
<PAGE>
ATTACHMENT "A"
MUTUAL AGREEMENT TO ARBITRATE
1. I, Phillip Eric Powell, recognize that differences could arise between
First Cash Financial Services, Inc. ("the Company") and me during or
following my employment with the Company. I understand and agree that by
entering into this Mutual Agreement to Arbitrate ("Agreement"), I gain the
benefits of a speedy, impartial dispute-resolution procedure.
2. I understand that any reference in this Agreement to the Company will be
a reference also to all stockholders, directors, officers, employees,
parents, subsidiaries and affiliated entities, all benefit plans, the
benefit plans' sponsors, fiduciaries, administrators, and all successors and
assigns of any of them.
Claims Covered by the Agreement
3. The Company and I mutually agree to the resolution by arbitration of all
claims or controversies ("claims"), whether or not arising out of my
employment (or its termination), that the Company may have against me or
that I may have against the Company. The claims covered by this Agreement
include, but are not limited to, claims under my Employment Agreement,
claims for wages or other compensation due; for breach of any contract or
covenant (express or implied); tort claims; claims for discrimination
(including, but not limited to, race sex, color, religion, national origin,
age (state or federal Age Discrimination in Employment Act), marital status,
veterans status, sexual preference, medical condition, handicap or
disability); claims for benefits (except where an employee benefit or
pension plan specifies that its claims procedure shall culminate in an
arbitration procedure different from this one); and claims for violation of
any federal, state, or other law, statute, regulation, or ordinance, except
claims excluded in the following paragraphs.
Claims Not Covered by the Agreement
4. Claims I may have for workers' compensation or unemployment compensation
benefits are not covered by this Agreement.
<PAGE>
Arbitration
5. (a) Procedure for Injunctive Relief. In the event either the Company
or myself seeks injunctive relief, the claim shall be administratively
expedited by the American Arbitration Association ("AAA"), which shall
appoint a single, neutral arbitrator for the limited purpose of deciding
such claim. Such arbitrator shall be a qualified member of the State Bar of
Texas in good standing, and preferably shall be a retired state or federal
district judge. The single arbitrator shall decide the claim for injunctive
relief immediately on hearing or receiving the parties' submissions (unless,
in the interests of justice, he must rule ex parte); provided, however, that
the single arbitrator shall rule on such claims within 24 hours of
submission of the claim to the AAA. The single arbitrator's ruling shall
not extend beyond 14 calendar days and on application by the claimant, up to
an additional 14 days following which, after a hearing on the claim for
injunctive relief, a temporary injunction may issue pending the award. Any
relief granted under this procedure for injunctive relief shall be
specifically enforceable in Harris County District Court on an expedited, ex
parte basis and shall not be the subject of any evidentiary hearing or
further submission by either party, but the court, on application to enforce
a temporary order, shall issue such orders as necessary to its enforcement.
(b) Procedure after a Claim for Injunctive Relief or where no Claim
for Injunctive Relief Is Made. The arbitrator shall be selected as
follows: in the event the Company and I agree on one arbitrator, the
arbitration shall be conducted by such arbitrator. In the event the Company
and I do not agree, the Company and I shall each select one independent,
qualified arbitrator, and the two arbitrators so selected shall select the
third arbitrator. The arbitrator(s) are herein referred to as the "Panel."
The Company reserves the right to object to any individual arbitrator who
shall be employed by or affiliated with a competing organization.
(c) The Arbitration shall take place at Arlington, Texas, or any
other location mutually agreeable to us. At the request of either of us,
arbitration proceedings will be conducted in the utmost secrecy; in such
case all documents, testimony and records shall be received, heard and
maintained by the Panel in secrecy, available for inspection only by the
Company or me and our respective attorneys and our respective experts, who
shall agree in advance and in writing to receive all such information
confidentially and to maintain such information in secrecy until such
information shall become generally known. The Panel shall be able to award
any and all relief, including relief of an equitable nature. The award
rendered by the Panel may be enforceable in any court having jurisdiction
thereof.
(d) The Company will pay all the fees and out-of-pocket expenses of
each arbitrator selected pursuant to this Section 5 and the AAA. In
addition, the Company will pay my reasonable attorneys' fees, unless the
arbitration is the result of a termination for cause as defined in Section
13(f)(ii) of the Executive Employment Agreement to which this Attachment is
appended.
Requirements for Modification or Revocation
6. This Agreement to arbitrate shall survive the termination of my
employment. It can only be revoked or modified by a writing signed by the
Company and I, which specifically states a mutual intent to revoke or modify
this Agreement.
<PAGE>
Sole and Entire Agreement
7. This is the complete agreement of us on the subject of arbitration of
disputes [except for any arbitration agreement in connection with any
pension or benefit plan].
This Agreement supersedes any prior or contemporaneous oral or written
understanding on the subject.
8. Neither of us is relying on any representations, oral or written, on the
subject of the effect, enforceability or meaning of this Agreement, except
as specifically set forth in this Agreement.
Construction
9. If any provision of this Agreement is found to be void or otherwise
unenforceable, in whole or in part, such adjudication shall not affect the
validity of the remainder of the Agreement.
Consideration
10. The promises by the Company and by me to arbitrate differences, rather
than litigate them before courts or other bodes, provide consideration for
each other. In addition, I have entered into an Employment Agreement as
further consideration for entering into this Agreement.
Not an Employment Agreement
11. This Arbitration Agreement is purely procedural. It does not provide
any substantive rights in addition to those provided by applicable law or my
Employment Agreement.
Voluntary
12. I acknowledge that I have carefully read this agreement, that I
understand its terms, that all understandings and agreements between the
company and me relating to the subjects covered in the agreement are
contained in it, and that I have entered into the agreement voluntarily and
not in reliance on any promises or representations by the company other than
those contained in this agreement itself.
<PAGE>
13. The Age Discrimination in Employment Act protects individuals over 40
years of age from age discrimination. The ADEA contains some special
requirements before an employee can give up the right to file a lawsuit in
court. The following provisions are designed to comply with those
requirements.
a. I agree that this Agreement to arbitrate is valuable to me,
because it permits a faster resolution of claims that I would receive in
court.
b. I have been advised to consult an attorney before signing this.
c. I have 21 days to consider this Agreement. However, I may sign it
sooner if I wish to do so.
d. I have 7 days following my signing this Agreement to revoke my
signature, and the Agreement will not be legally binding until the 7 day
period has gone by.
33. I FURTHER ACKNOWLEDGE THAT I HAVE BEEN GIVEN THE OPPORTUNITY TO DISCUSS
THIS AGREEMENT WITH MY PRIVATE LEGAL COUNSEL AND HAVE AVAILED MYSELF TO THAT
OPPORTUNITY TO THE EXTENT I WISH TO DO SO.
First Cash Financial Services, Inc. Executive
/S/ RICHARD T. BURKE /S/ PHILLIP E. POWELL
----------------------------------- -----------------------------
Richard T. Burke Phillip Eric Powell
Director
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.0
<SEQUENCE>3
<FILENAME>0003.txt
<DESCRIPTION>EXECUTIVE EMPLOYMENT AGREEMENT
<TEXT>
Exhibit 10.15
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT IS SUBJECT TO MANDATORY AND BINDING ARBITRATION
This Employment Agreement (the "Agreement") is entered into as of
September 30, 2000 (the "Effective Date"), by and between First Cash
Financial Services, Inc. (the "Company"), a Delaware corporation, and Rick
L. Wessel (the "Executive").
WHEREAS, Executive is presently employed by the Company pursuant to an
employment agreement dated May 31, 1992, between the parties ("Old
Employment Agreement"), and the parties desire to terminate that agreement
and enter into a new agreement based on the terms and conditions set forth
below, and
NOW, THEREFORE, in consideration of the mutual covenants and
obligations hereinafter set forth, the parties agree as follows:
1. TERMINATION OF OLD EMPLOYMENT AGREEMENT.
The parties agree that the Old Employment Agreement shall be terminated
concurrently with the execution of this Agreement and shall be of no further
force or effect. The parties hereto waive and release all rights they may
have under the Old Employment Agreement as of the date hereof.
2. EMPLOYMENT.
The Company desires to continue to employ the Executive, and the
Executive agrees to continue to work in the employ of the Company, according
to the following terms and conditions.
3. DUTIES.
(a) The Company will continue to employ the Executive as President and
Chief Financial Officer ("CFO") of the Company.
(b) The Executive will serve in the Company's employ in that position.
(c) Under the direction of the Board of Directors of the Company (the
"Board"), the Executive shall perform such duties, and have such powers,
authority, functions, duties and responsibilities for the Company and
corporations and other entities affiliated with the Company commensurate and
consistent with his employment in the position of President and CFO. The
Executive also shall have such additional powers, authority, functions,
duties and responsibilities as may be assigned to him by the Board; provided
that, without the Executive's written consent, those additional powers,
authority, functions, duties and responsibilities shall not be materially
inconsistent or interfere with, or detract from, those herein vested in, or
otherwise then being performed for the Company by, the Executive. In the
event of an increase in the Executive's duties, beyond the duties of
President and CFO, the Board shall review the Executive's compensation and
benefits to determine if an adjustment in compensation and employee benefits
commensurate with the Executive's new duties is warranted, in accordance
with the Company's compensation policies.
<PAGE>
4. TERM OF EMPLOYMENT.
The term of employment of Executive is through December 31, 2005.
Subject to the provisions of Section 9, the term of the Executive's
Employment hereunder shall commence on September 30, 2000. At the
discretion of the Board, the term of employment shall be extended for
additional successive periods of 1 year, each year beginning on January 1,
2002, and each anniversary date thereafter, provided that during the
previous year, the Executive met the stipulated performance criteria
established by the Board.
5. EXTENT OF SERVICES.
The Executive shall not at any time during his Employment engage in any
other business related activities unless those activities do not interfere
materially with the Executive's duties and responsibilities to the Company
at that time. The foregoing, however, shall not preclude the Executive from
engaging in appropriate civic, charitable, professional or trade association
activities or from serving on one or more other boards of directors of
public or private companies, as long as such activities and services do not
conflict with his responsibilities to the Company.
6. NO FORCED RELOCATION.
The Executive shall not be required to move his principal place of
residence from the Arlington, Texas area or to perform regular duties that
could reasonably be expected to require either such move against his wish or
to spend amounts of time each week outside the Arlington, Texas area which
are unreasonable in relation to the duties and responsibilities of the
Executive hereunder, and the Company agrees that, if it requests the
Executive to make such a move and the Executive declines that request, (a)
that declination shall not constitute any basis for a termination of the
Executive's Employment and (b) no animosity or prejudice will be held
against Executive.
7. COMPENSATION.
(a) SALARY.
An annual base salary shall be payable to the Executive by the Company
as a guaranteed minimum amount under this Agreement for each calendar year
during the period from September 30, 2000 to the termination date of the
Executive's Employment. That annual base salary shall (i) accrue daily on
the basis of a 365-day year, (ii) be payable to the Executive in the
intervals consistent with the Company's normal payroll schedules (but in no
event less frequently than semi-monthly) and (iii) be payable beginning
January 1, 20072001 at an initial annual rate of $250,000. The Executive's
annual base salary shall not be decreased, but shall be adjusted annually in
each December to reflect such adjustments, if any, as the compensation
committee of the Board determines appropriate based on the Executive's
performance during the most recent performance period, in accordance with
the Company's compensation policies. A failure of the Company to increase
the Executive's annual base salary shall not constitute a breach or
violation of this Agreement by the Company.
<PAGE>
(b) BONUS.
At the discretion of the Board's compensation committee, Executive
shall be eligible to be paid an annual bonus by the Company for each
calendar year during the period from January 1, 2000 to the termination date
of the Executive's Employment. That annual bonus shall be payable at such
rate and in such amount as is determined by the compensation committee of
the board of directors. The Executive's annual bonus, if any, shall be
adjusted annually in each December to reflect such adjustments, if any, as
the Board's compensation committee determines appropriate based on the
Executive's performance during the most recent performance period, in
accordance with the Company's compensation policies. A failure of the
Company to pay Executive an annual bonus shall not constitute a breach or
violation of this Agreement by the Company.
(c) OTHER COMPENSATION.
The Executive shall be entitled to participate in all Compensation
Plans from time to time in effect while in the Employment of the Company,
regardless of whether the Executive is an Executive Officer. All awards to
the Executive under all Incentive Plans shall take into account the
Executive's positions with and duties and responsibilities to the Company
and its subsidiaries and affiliates. The Company shall supply Executive
with an automobile, the make and model of which is subject to the approval
of the compensation committee of the Board, and be responsible for all
expenses related thereto throughout the term of this Agreement. Executive
may select an automobile of his own choosing which is reasonable in cost,
appearance and function, taking into account the powers, authority,
functions, duties and responsibilities of Executive, and the financial
position and condition of the Company. ?In consideration and in support of
Executive's duties under this Agreement, which include fostering the
goodwill, growth and earnings of the Company, the Company shall pay for a
private club membership for Executive, for such amount as is reasonable
taking into account the powers, authority, functions, duties and
responsibilities of Executive, subject to approval of the compensation
committee of the Board.
(d) EXPENSES.
The Executive shall be entitled to prompt reimbursement of all
reasonable business expenses incurred by him in the performance of his
duties during the term of this Agreement, subject to the presenting of
appropriate vouchers and receipts in accordance with the Company's policies.
8. OTHER BENEFITS.
(a) EMPLOYEE BENEFITS AND PROGRAMS.
During the term of this Agreement, the Executive and the members of his
immediate family shall be entitled to participate in any employee benefit
plans or programs of the Company to the extent that his position, tenure,
salary, age, health and other qualifications make him or them, as the case
may be, eligible to participate, subject to the rules and regulations
applicable thereto.
<PAGE>
(b) SUBSCRIPTIONS AND MEMBERSHIPS.
The Company shall pay periodical subscription costs and membership fees
and dues for the Executive to join professional organizations appropriate
for the Executive, and which further the interests of the Company. The
Company shall also pay or reimburse Executive for Executive's membership in
such additional clubs and organizations as may be agreed upon as reasonable
and appropriate between Executive and the Company.
(c) LOANS TO PAY FEDERAL TAXES.
If the Executive requests and the Company is in a financial position to
do so, in the discretion of the Board, the Company may loan to the Executive
sufficient funds to pay all federal income tax liability ("Tax Liability")
due by reason of the issuance of any securities of the Company. Such loan
shall bear interest at the rate of 7% (the "Tax Note"), which shall be
secured by Executive's interest in the securities. The Tax Note shall be
pre-payable at any time and mature no later than five years from the date
any funds were first advanced to the Executive under this Section 8(c). If
the Executive sells any such securities (or any securities into which
Company issued securities have been converted) for cash while the Tax Note
remains outstanding and unpaid, the Executive shall prepay the Tax Note
within five business days after the Executive receives the proceeds from
that sale in the amount equal to the lesser of (i) the then unpaid balance
plus all interest earned under the Tax Note or (ii) the cash proceeds, net
of any applicable commission and other sale expense and any applicable
capital gain or other income tax, the Executive receives from that sale. The
Tax Note shall be payable either in cash or, in the event that on any date
the Executive makes any payment thereon the Common Stock is listed on the
American Stock Exchange or another national securities exchange or is quoted
through the Nasdaq National Market System (the "NMS") and the Executive
desires to pay such loan by delivery of shares of Common Stock, in shares of
Common Stock valued at the closing price of the Common Stock on (i) the
national securities exchange on which the Common Stock is listed (or, if
there is more than one, the national securities exchange the Company has
designated as the principal market for the Common Stock) or (ii) the NMS, as
the case may be, on the then most recent day on which the Common Stock
traded on such national securities exchange or the NMS, as the case may be;
provided, however, that if the securities issued by the Company to the
Executive are not publicly tradable before the Tax Note shall be due and
payable, payment of the Tax Note may be made by the Executive tendering all
the securities to the Company in exchange for cancellation of the Tax Note.
<PAGE>
(d) LOANS TO EXERCISE OPTIONS
If the Executive requests, the Company shall loan to the Executive
sufficient funds to purchase or exercise any options owned by Executive in
the stock of the Company. The maximum amount of funds, which the Company
shall loan, shall be determined by the exercise price of such options. Such
loan shall bear interest at the rate of 7%, per annum, and shall be
evidenced by a promissory note (the "Option Note"), secured by the subject
options or securities. The Option Note shall be pre-payable at any time and
mature in full no later than five years from the date any funds were first
advanced to the Executive under this Section 8(d). If the Executive sells
any such securities (or any securities into which Company issued securities
have been converted) for cash while the Option Note remains outstanding and
unpaid, the Executive shall prepay the Option Note within five business days
after the Executive receives the proceeds from that sale in the amount equal
to the lesser of (i) the then unpaid balance of the Option Note or (ii) the
cash proceeds, net of any applicable commission and other sale expense and
any applicable capital gain or other income tax, the Executive receives from
that sale. The Option Note shall be payable either in cash or, in the event
that on any date the Executive makes any payment thereon the Common Stock is
listed on the American Stock Exchange or another national securities
exchange or is quoted through the Nasdaq National Market System (the "NMS")
and the Executive desires to pay such loan by delivery of shares of Common
Stock, the Common Stock will be valued at the closing price of the Common
Stock on (i) the national securities exchange on which the Common Stock is
listed (or, if there is more than one, the national securities exchange the
Company has designated as the principal market for the Common Stock) or (ii)
the NMS, as the case may be, on the then most recent day on which the Common
Stock traded on such national securities exchange or the NMS, as the case
may be; provided, however, that if the securities issued by the Company to
the Executive are not publicly tradable before the Option Note shall be due
and payable, payment of the Option Note may be made by the Executive
tendering all the Common Stock issued from the proceeds of the Option Note
to the Company in exchange for cancellation of the Option Note.
(e) VACATION.
The Executive shall be entitled to four weeks of vacation leave with
full pay during each year of this Agreement (each such year being a 12-month
period ending on the one year anniversary date of the commencement of the
Executive's employment.) The times for such vacations shall be selected by
the Executive, provided the dates selected do not interfere materially with
the performance of Executive's duties and responsibilities under this
agreement. The Executive may accrue up to eight weeks of vacation time from
year to year, but vacation time otherwise shall not accrue from year to
year.
(f) BOOKKEEPING AND ACCOUNTING
The Executive shall be entitled to Company paid or reimbursed,
bookkeeping services up to $300 per month and annual accounting services of
up to $700 per year.
<PAGE>
(g) INSURANCE
For the term of this Agreement, the Company will provide, at no cost to
Executive, term life insurance benefits under two separate policies. The
first policy shall be in the amount of $2 million with the Company
designated as the beneficiary. The second policy shall be in the amount of
$2 million with the loss payee designated by the Executive. In the
discretion of the Board, during the term of this Agreement, the Company
shall also provide, at no cost to Executive, disability insurance sufficient
to provide, in the event Executive becomes disabled, payments that would be
made to Executive equal or up to the amount equal to Executive's base
salary, as of the date of disability, provided such coverage is reasonably
available at reasonable cost. Executive may procure his own disability
coverage and be reimbursed, if the same is not provided by the Company.
9. TERMINATION.
The Executive's Employment hereunder may be terminated prior to the
term provided for in Section 4 only under the following circumstances:
(a) DEATH.
The Executive's Employment shall terminate automatically on the date of
his death.
(b) DISABILITY.
If a Disability occurs and is continuing, the Executive's Employment
shall terminate 180 days after the Company gives the Executive written
notice that it intends to terminate his Employment on account of that
Disability, or on such later date as the Company specifies in such notice.
If the Executive resumes the performance of substantially all of his duties
under this Agreement before the termination becomes effective, the notice of
intent to terminate shall be deemed to have been revoked. Disability of
Executive shall not prevent the Company from making necessary changes during
the period of Executive's Disability to conduct its affairs.
(c) VOLUNTARY TERMINATION.
The Executive may terminate his Employment at any time and without Good
Cause with 90 days' prior written notice to the Company.
<PAGE>
(d) TERMINATION FOR GOOD CAUSE.
The Executive may terminate his Employment for Good Cause at any time
within 180 days (90 days if the Good Cause is the occurrence of a Change of
Control) after the Executive becomes consciously aware that the facts and
circumstances constituting Good Cause exist are continuing and by giving the
Company 30 days' prior written notice that the Executive intends to
terminate his Employment for Good Cause, which notice will state with
specificity the basis for Executive's contention that Good Cause exists;
provided, however, that if Executive terminates for Good Cause due to a
Change in Control, the Change in Control must actually occur. A Change in
Control will not be deemed to have actually occurred merely because of a
pending or possible event. The Executive shall not have Good Cause to
terminate his Employment solely by reason of the occurrence of a Change in
Control until one year after the date such Change in Control actually
occurs. The Executive may not terminate for Good Cause if the facts and
circumstances constituting Good Cause are substantially cured by the Company
within 30 days following notice to the Company.
(e) INVOLUNTARY TERMINATION.
The Executive's Employment is at will. The Company reserves the right
to terminate the Executive's Employment at anytime whatsoever, without
cause, with 30 days' prior written notice to the Executive.
<PAGE>
(f) INVOLUNTARY TERMINATION FOR CAUSE.
The Company reserves the right to terminate the Executive's Employment
for Cause. In the event that the Company determines that Cause exists under
Section 13(f)(i) for the termination of the Executive's Employment, the
Company shall provide in writing (the "Notice of Cause"), the basis for that
determination and the manner, if any, in which the breach or neglect can be
cured. If either the Company has determined that the breach or neglect
cannot be cured, as set forth in the Notice of Cause, or has advised the
Executive in the Notice of Cause of the manner in which the breach or
neglect can be cured, but the Executive fails to substantially effect that
cure within 60 days after his receipt of the Notice of Cause, the Company
shall be entitled to give the Executive written notice of the Company's
intention to terminate Executive's Employment for Cause (the "Notice of
Intent to Terminate"). Executive shall have the right to object to any
Notice of Intent to Terminate Executive's Employment for Cause, by
furnishing the Company within ten days of receipt by Executive of the Notice
of Intent to Terminate Executive's Employment for Cause, written notice
specifying the reasons Executive contends either (i) Cause under Section
13(f)(i) does not exist or has been timely cured or (ii) in the circumstance
of a Notice of Intent to Terminate Executive's Employment for Cause under
Section 13(f)(ii), that such Cause does not exist (the "Notice of Intent to
Join Issue over Cause"). The failure of Executive to timely furnish the
Company with a Notice of Intent to Join Issue over Cause shall serve to
conclusively establish Cause hereunder, and the right of the Company to
terminate the Executive's Employment for Cause. Within 30 days following
its receipt of a timely Notice of Intent to Join Issue Over Cause, the
Company must either rescind the Notice of Intent to Terminate the
Executive's Employment for Cause, or file a demand for arbitration in
accordance with Section 27, to determine whether the Company is entitled to
terminate Executive's Employment for Cause. During the pendency of the
arbitration proceeding, and until such time as Executive's Employment is
terminated, Executive shall be entitled to receive Compensation under this
Agreement. In the discretion of the Board, however, the Executive may be
reassigned or suspended with pay, during not only the pendency of the
arbitration proceeding, but during the period from the date the Company
furnishes Executive with a Notice of Intent to Terminate the Executive's
Employment for Cause until such date as the notice is rescinded, a
determination that Cause does not exist is made in the arbitration
proceeding or in the event of a determination that Cause does exist in the
arbitration proceeding, the effective date of the termination of Executive's
Employment for Cause. In the event that the Company determines that Cause
exists under Section 13(f)(ii) for the termination of the Executive's
Employment, it shall be entitled to immediately furnish Executive with a
Notice of Intent to Terminate Executive's Employment without providing a
Notice of Cause or any opportunity prior to that notice to contest that
determination. Any termination of the Executive's Employment for Cause
pursuant to this Section 9(f) shall be effective immediately upon the
Executive's receipt of the Company's written notice of that termination and
the Cause therefore.
(g) VOLUNTARY TERMINATION AT CONCLUSION OF TERM
At the expiration of the term of employment as stated in Section 4,
either party may terminate this Agreement by giving the other party written
notice at least six months before the expiration of the term of employment
stated in Section 4.
<PAGE>
10. SEVERANCE PAYMENTS.
Unless effected under Section 9(g), if the Executive's Employment is
terminated during the term of this Agreement, the Executive shall be
entitled to receive severance payments as follows:
(a) If the Executive's Employment is terminated under Section 9(a),
(b), (d), (e) or (g), the Company will pay or cause to be paid to the
Executive (or, in the case of a termination under Section 9(a), the
beneficiary the Executive has designated in writing to the Company to
receive payment pursuant to this Section 10(a) or, in the absence of such
designation, the Executive's estate): (i) the Accrued Salary; (ii) the
Other Earned Compensation; (iii) the Reimbursable Expenses; and (iv) the
Severance Benefit. Additionally, the Company shall cancel Executive's
obligations under that certain promissory note dated December 31, 2000, in
the principal amount of $1,529,828, plus all other loans and advances
(principal and interest), and return to Executive, (or, in the case of
termination under Section 9(a), the beneficiary the Executive has designated
in writing to the Company to receive payment pursuant to Section 10(a) or in
the absence of such designation, the Executive's estate) within ten days,
all property securing the payment thereof. Any taxes due by Executive as a
result of the forgiveness under this provision of the Executive's debt to
the Company will be the sole obligation of the Company, and will be promptly
paid when due.
(b) If the Executive's Employment is terminated under Section 9(c) or
(f), the Company will pay or cause to be paid to the Executive: (i) the
Accrued Salary determined as of and through the termination date of the
Executive's Employment; (ii) the Other Earned Compensation; and (iii) the
Reimbursable Expenses.
<PAGE>
(c) Any payments to which the Executive (or his designated beneficiary
or estate, if Section 9(a) applies) is entitled pursuant to paragraph (i) of
subsection (a) of this Section 10 or paragraph (i) of subsection (b) of this
Section 10, as applicable, will be paid in a single lump sum within thirty
days after the termination date of the Executive's Employment. At the sole
option and election of the Executive (or his designated beneficiary or
estate, if Section 9(a) applies), which election shall be made within 30
days of the termination of Executive's Employment, the Company shall pay the
executive the Severance Benefit, if at all, (1) in a lump sum on a present
value basis; (2) on a semi-monthly basis (as if Executive's employment had
continued), or (3) on such other periodic basis reasonably requested by
Executive (or his designated beneficiary or estate, if Section 9(a)
applies), in which event, the payments will be discounted to the extent the
periodic basis selected by Executive (or his designated beneficiary or
estate, if Section 9(a) applies) results in an earlier payout to Executive
(or his designated beneficiary or estate, if Section 9(a) applies) than if
Executive were paid on a semi-monthly basis. The Company shall be given
credit for all life or disability insurance proceeds paid to Executive (or
his designated beneficiary or estate, if Section 9(a) applies) on any policy
procured, paid for or reimbursed by the Company pursuant to this Agreement
(up to $2 million in the case of life insurance). Upon the failure of the
Executive to timely make an election as provided herein, such option and
election shall revert to the Company. However, if Section 9(a) applies and
the Executive's designated beneficiary or estate is the beneficiary of one
or more insurance policies purchased by the Company and then in effect the
proceeds of which are payable to that beneficiary by reason of the
Executive's death, then (i) the Company, at its option, may credit the
amount of those proceeds, as and when paid by the insurer to that
beneficiary, against the payment to which the Executive's designated
beneficiary or estate is entitled pursuant to paragraph (iv) of subsection
(a) of this Section 10 and, if it exercises that option, (ii) the payment
otherwise due pursuant to that paragraph (iv) will bear interest on the
outstanding balance thereof from and including the fifth day after that
termination date to the date of payment by the insurer to that beneficiary
at the rate of interest specified in Section 32; and provided, further, that
if Section 10(b) applies and the Executive is the beneficiary of disability
insurance purchased by the Company and then in effect, the Company, at its
option, may credit the proceeds of that insurance which are payable to the
Executive, valued at their present value as of that termination date using
the interest rate specified in Section 32 and then in effect as the discount
rate, against the payment to which the Executive is entitled pursuant to
paragraph (iv) of subsection (a) of this Section 10. Any payments to which
the Executive (or his designated beneficiary or estate, if Section 9(a)
applies) is entitled pursuant to paragraphs (ii) and (iii) of subsection (a)
or (b) of this Section 10, as applicable, will be paid in a single lump sum
within five days after the termination date of the Executive's Employment or
as soon thereafter as is administratively feasible, together with interest
accrued thereon from and including the fifth day after that termination date
to the date of payment at the rate of interest specified in Section 32.
(d) Except as provided in Sections 15, 25 and this Section, the Company
will have no payment obligations under this Agreement to the Executive (or
his designated beneficiary or estate, if Section 9(a) applies) after the
termination date of the Executive's Employment.
<PAGE>
11. RESIGNATIONS.
Upon termination of Executive's employment with or without cause,
Executive shall resign as an officer and director of the Company and will
thereafter refuse election as an officer or director of the Company.
12. RETURN OF DOCUMENTS.
Upon termination of Executive's employment with or without cause,
Executive shall immediately return and deliver to the Company and shall not
retain any originals or copies of any books, papers, price lists, customer
contracts, bids, customer lists, files, notebooks or any other documents
containing any of the Confidential information or otherwise relating to
Executive's performance of duties under this Agreement. Executive further
acknowledges and agrees that all such documents are the Company's sole and
exclusive property.
13. DEFINITION OF TERMS.
The following terms used in this Agreement when capitalized shall have
the following meanings:
(a) ACCRUED SALARY.
"Accrued Salary" shall mean the salary that has accrued, and the salary
that would accrue through and including the last day of the pay period in
which the termination date of the Executive's Employment occurs, under
Section 7(a), which has not been paid to the Executive as of that
termination date.
(b) ACQUIRING PERSON.
"Acquiring Person" shall mean any person who or which, together with
all Affiliates and Associates of such person, is or are the Beneficial Owner
of 50 percent or more of the shares of Common Stock then outstanding, but
does not include any Exempt Person; provided, however, that a person shall
not be or become an Acquiring Person if such person, together with its
Affiliates and Associates, shall become the Beneficial Owner of 50 percent
or more of the shares of Common Stock then outstanding solely as a result of
a reduction in the number of shares of Common Stock outstanding due to the
repurchase of Common Stock by the Company, unless and until such time as
such person or any Affiliate or Associate of such person shall purchase or
otherwise become the Beneficial Owner of additional shares of Common Stock
constituting 1% or more of the then outstanding shares of Common Stock or
any other person (or persons) who is (or collectively are) the Beneficial
Owner of shares of Common Stock constituting 1% or more of the then
outstanding shares of Common Stock shall become an Affiliate or Associate of
such person, unless, in either such case, such person, together with all
Affiliates and Associates of such person, is not then the Beneficial Owner
of 50% or more of the shares of Common Stock then outstanding.
(c) AFFILIATE.
"Affiliate" has the meaning ascribed to that term in Rule 405 of
Regulation C.
<PAGE>
(d) ASSOCIATE.
"Associate" shall mean, with reference to any person, (i) any
corporation, firm, partnership, association, unincorporated organization or
other entity (other than the Company or a subsidiary of the Company) of
which that person is an officer or general partner (or officer or general
partner of a general partner) or is, directly or indirectly, the Beneficial
Owner of 10% or more of any class of its equity securities, (ii) any trust
or other estate in which that person has a substantial beneficial interest
or for or of which that person serves as trustee or in a similar fiduciary
capacity and (iii) any relative or spouse of that person, or any relative of
that spouse, who has the same home as that person.
(e) BENEFICIAL OWNER.
A specified person shall be deemed the "Beneficial Owner" of, and shall
be deemed to "beneficially own," any securities: (i) of which that person
or any of that person's Affiliates or Associates, directly or indirectly, is
the "beneficial owner" (as determined pursuant to Rule 13d-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
otherwise has the right to vote or dispose of, including pursuant to any
agreement, arrangement or understanding (whether or not in writing);
provided, however, that a person shall not be deemed the "Beneficial Owner"
of, or to "beneficially own," any security under this subparagraph (i) as a
result of an agreement, arrangement or understanding to vote that security
if that agreement, arrangement or understanding: (A) arises solely from a
revocable proxy or consent given in response to a public (that is, not
including a solicitation exempted by Exchange Act Rule 14a-2(b)(2)) proxy or
consent solicitation made pursuant to, and in accordance with, the
applicable provisions of the Exchange Act; and (B) is not then reportable by
such person on Exchange Act Schedule 13D (or any comparable or successor
report); (ii) which that person or any of that person's Affiliates or
Associates, directly or indirectly, has the right or obligation to acquire
(whether that right or obligation is exercisable or effective immediately or
only after the passage of time or the occurrence of an event) pursuant to
any agreement, arrangement or understanding (whether or not in writing) or
on the exercise of conversion rights, exchange rights, other rights,
warrants or options, or otherwise; provided, however, that a person shall
not be deemed the "Beneficial Owner" of, or to "beneficially own,"
securities tendered pursuant to a tender or exchange offer made by that
person or any of that person's Affiliates or Associates until those
tendered securities are accepted for purchase or exchange; or (iii) which
are beneficially owned, directly or indirectly, by (A) any other person (or
any Affiliate or Associate thereof) with which the specified person or any
of the specified person's Affiliates or Associates has any agreement,
arrangement or understanding (whether or not in writing) for the purpose of
acquiring, holding, voting (except pursuant to a revocable proxy or consent
as described in the proviso to subparagraph (i) of this definition) or
disposing of any voting securities of the Company or (B) any group (as that
term is used in Exchange Act Rule 13d-5(b)) of which that specified person
is a member; provided, however, that nothing in this definition shall cause
a person engaged in business as an underwriter of securities to be the
"Beneficial Owner" of, or to "beneficially own," any securities acquired
through that person's participation in good faith in a firm commitment
underwriting until the expiration of 40 days after the date of that
acquisition. For purposes of this Agreement, "voting" a security shall
include voting, granting a proxy, acting by consent making a request or
demand relating to corporate action (including, without limitation, calling
a stockholder meeting) or otherwise giving an authorization (within the
meaning of Section 14(a) of the Exchange Act) in respect of such security.
<PAGE>
(f) CAUSE.
"Cause" shall mean that the Executive has (i) willfully breached or
habitually neglected (otherwise than by reason of injury, or physical or
mental illness, or any disability as defined by the Americans with
Disabilities Act of 1990, Public Law 101_336, 42 U.S.C.A. S 12101 et seq.)
material duties which he was required to perform under the terms of this
Agreement, or (ii) committed and been charged with act(s) of dishonesty or
fraud.
(g) CHANGE OF CONTROL.
"Change of Control" shall mean the occurrence of the following events:
(i) any person or entity becomes an Acquiring Person, or (ii) a merger of
the Company with or into, or a sale by the Company of its properties and
assets substantially as an entirety to, another person or entity; (iii) a
majority of the incumbent board of directors cease for any reason to
constitute at least a majority of the Board; and (iv) immediately after the
occurrence of (i), (ii) or (iii) above, any person or entity, other than an
Exempt Person, together with all Affiliates and Associates of such person or
entity, shall be the Beneficial Owner of 50% or more of the total voting
power of the then outstanding Voting Shares of the person or entity
surviving that transaction (in the case or a merger or consolidation), or
the person or entity acquiring those properties and assets substantially as
an entirety.
(h) COMPANY.
"Company" shall mean (i) First Cash Financial Services, Inc., a
Delaware corporation, and (ii) any person or entity that assumes the
obligations of "the Company" hereunder, by operation of law, pursuant to
Section 18 or otherwise.
(i) COMPENSATION PLAN.
"Compensation Plan" shall mean any compensation arrangement, plan,
policy, practice or program established, maintained or sponsored by the
Company or any subsidiary of the Company, or to which the Company or any
subsidiary of the Company contributes, on behalf of any Executive Officer or
any member of the immediate family of any Executive Officer by reason of his
status as such, (i) including (A) any "employee pension benefit plan" (as
defined in Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) or other "employee benefit plan" (as defined in
Section 3(3) of ERISA), (B) any other retirement or savings plan, including
any supplemental benefit arrangement relating to any plan intended to be
qualified under Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), or whose benefits are limited by the Code or ERISA,
(C) any "employee welfare plan" (as defined in Section 3(1) of ERISA), (D)
any arrangement, plan, policy, practice or program providing for severance
pay, deferred compensation or insurance benefit, (E) any Incentive Plan and
(F) any arrangement, plan, policy, practice or program (1) authorizing and
providing for the payment or reimbursement of expenses attributable to air
travel and hotel occupancy while traveling on business for the Company or
(2) providing for the payment of business luncheon and country club dues,
long-distance charges, mobile phone monthly air time or other recurring
monthly charges or any other fringe benefit, allowance or accommodation of
employment, but (ii) excluding any compensation arrangement, plan, policy,
practice or program to the extent it provides for annual base salary.
<PAGE>
(j) DISABILITY.
"Disability" shall mean that the Executive, with reasonable
accommodation, has been unable to perform his essential duties under this
Agreement for a period of at least six consecutive months as a result of his
incapacity due to injury or physical or mental illness, any disability as
defined in a disability insurance policy which provides coverage for the
Executive, or any disability as defined by the Americans with Disabilities
Act of 1990, Public Law 101_336, 42 U.S.C.A. S 12101 et seq.
(k) EMPLOYMENT.
"Employment" shall mean the salaried employment of the Executive by the
Company or a subsidiary of the Company hereunder.
(l) EXECUTIVE OFFICER.
"Executive Officer" shall mean any of the chief executive officer, the
chief operating officer, the chief financial officer, the president, any
executive, regional or other group or senior vice president or any vice
president of the Company.
(m) EXEMPT PERSON.
"Exempt Person" shall mean: (i)(A) the Company, any subsidiary of the
Company, any employee benefit plan of the Company or any subsidiary of the
Company and (B) any person organized, appointed or established by the
Company for or pursuant to the terms of any such plan or for the purpose of
funding any such plan or funding other employee benefits for employees of
the Company or any subsidiary of the Company; (ii) the Executive, any
Affiliate of the Executive which the Executive controls or any group (as
that term is used in Exchange Act Rule 13d-5(b)) of which the Executive or
any such Affiliate is a member.
(n) GOOD CAUSE.
"Good Cause" for the Executive's termination of his Employment shall
mean: (i) any decrease in the annual base salary under Section 7(a) or any
other violation hereof in any material respect by the Company; (ii) any
material reduction in the Executive's compensation under Section 7; (iii)
the assignment to the Executive of duties inconsistent in any material
respect with the Executive's then current positions (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities or any other action by the Company which results in a
material diminution in those positions, authority, duties or
responsibilities; (iv) any unapproved relocation of the Executive; or (v)
the occurrence of a Change of Control. Good Cause shall not exist if the
Company cures within the period prescribed herein.
<PAGE>
(o) INCENTIVE PLAN.
"Incentive Plan" shall mean any compensation arrangement, plan, policy,
practice or program established, maintained or sponsored by the Company or
any subsidiary of the Company, or to which the Company or any subsidiary of
the Company contributes, on behalf of any Executive Officer and which
provides for incentive, bonus or other performance-based awards of cash,
securities, the phantom equivalent of securities or other property,
including any stock option, stock appreciation right and restricted stock
plan, but excluding any plan intended to qualify as a plan under any one or
more of Sections 401(a), 401(k) or 423 of the Code.
(p) OTHER EARNED COMPENSATION.
"Other Earned Compensation" shall mean all the compensation earned by
the Executive prior to the termination date of his Employment as a result of
his Employment (including compensation the payment of which has been
deferred by the Executive, but excluding Accrued Salary and compensation to
be paid to the Executive in accordance with the terms of any Compensation
Plan), together with all accrued interest or earnings, if any, thereon,
which has not been paid to the Executive as of that date.
(q) REIMBURSABLE EXPENSES.
"Reimbursable Expenses" shall mean the expenses incurred by the
Executive on or prior to the termination date of his Employment which are to
be reimbursed to the Executive under Section 7(c) and which have not been
reimbursed to the Executive as of that date.
(r) SEVERANCE BENEFIT.
"Severance Benefit" shall mean all Compensation provided for under
Section 7 through the remainder of the Executive's term of employment, it
being the parties' intent that, except for a termination under Section 9(c),
(f) or (g), the Executive shall receive all Compensation as if his term of
employment continued as provided for under Section 4.
14. COVENANTS NOT TO COMPETE
(a) Executive's Acknowledgment. Executive agrees and acknowledges
that in order to assure the Company that it will retain its value
as a going concern, it is necessary that Executive undertake not
to utilize his special knowledge of the business and his
relationships with customers and suppliers to compete with the
Company. Executive further acknowledges that:
(i) the Company is and will be engaged in the business of pawn
shop services, pay day loan services and check cashing
services;
(ii) Executive will occupy a position of trust and confidence with
the Company prior to the date of this agreement and, during
such period and Executive's employment under this agreement,
Company's trade secrets and with other proprietary and
confidential information concerning the Company;
<PAGE>
(iii) the agreements and covenants contained in this Section
14 are essential to protect the Company and the goodwill of
the business; and
(iv) Executive's employment with the Company has special, unique
and extraordinary value to the Company and the Company would
be irreparably damaged if Executive were to provide services
to any person or entity in violation of the provisions of
this agreement.
(b) Company's Acknowledgement. The Company hereby acknowledges that
it will provide Executive with confidential and trade secret
information relating to the operation of the Company's business,
including but not limited to, customer lists, operating manuals,
and financing operations.
(c) Competitive Activities. Executive hereby agrees that for a period
commencing on the date hereof and ending two years following the
later of (i) termination of Executive's employment with the
Company for whatever reason, and (ii) the conclusion of the
period, if any, during which the Company is making payments to
Executive, he will not, directly or indirectly, as employee,
agent, consultant, stockholder, director, co-partner or in any
other individual or representative capacity, own, operate, manage,
control, engage in, invest in or participate in any manner in, act
as a consultant or advisor to, render services for (alone or in
association with any person, firm, corporation or entity), or
otherwise assist any person or entity (other than the Company)
that engages in or owns, invests in, operates, manages or controls
any venture or enterprise that directly or indirectly engages or
proposes in engage in the business of pawnshops, check cashing
services, payday loan services or proposes to in engage in the
business of the distribution or sale of (i) products distributed,
sold or licensed by the Company or services provided by the
Company at the time of termination or (ii) products or services
proposed at the time of such termination to be distributed, sold,
licensed or provided by the Company within 50 miles of any of the
Company's locations (the "Territory"); provided, however, that
nothing contained herein shall be construed to prevent Executive
from investing in the stock of any competing corporation listed on
a national securities exchange or traded in the over-the-counter
market, but only if Executive is not involved in the business of
said corporation and if Executive and his associates (as such term
is defined in Regulation 14(A) promulgated under the Securities
Exchange Act of 1934, as in effect on the date hereof),
collectively, do not own more than an aggregate of two percent of
the stock of such corporation. With respect to the Territory,
Executive specifically acknowledges that the Company has conducted
the business throughout those areas comprising the Territory and
the Company intends to continue to expand the business throughout
the Territory.
<PAGE>
(d) Blue Pencil. If an arbitrator shall at any time deem the terms of
this agreement or any restrictive covenant too lengthy or the
Territory too extensive, the other provisions of this section 14
shall nevertheless stand, the restrictive period shall be deemed
to be the longest period permissible by law under the
circumstances and the Territory shall be deemed to comprise the
largest territory permissible by law under the circumstances. The
arbitrator in each case shall reduce the restricted period and/or
the Territory to permissible duration or size.
(e) Non-Solicitation of Employees. Executive agrees that while
employed by the Company and for two (2) years after the cessation
of the Executive's employment for whatever reason, the Executive
will not recruit, hire or attempt to recruit or hire, directly or
assisted by others, any other employee of the Company with whom
the Executive had contact during the Executive=s employment with
the Company. For the purposes of this paragraph Acontact@ means
any interaction whatsoever between the Executive and the other
employee.
(f) Non-Solicitation of Customers. Executive agrees that while
employed by the Company and for two (2) years after the cessation
of the Executive's employment for whatever reason, the Executive
will not directly or indirectly, for himself or on behalf of any
other person, partnership, company, corporation or other entity,
solicit or attempt to solicit, for the purpose of engaging in
competition with the Company,
(i) any person or entity whose account was serviced by Executive
at the Company; or
(ii) any person or entity who is or has been a customer of
the Company prior to Executive's termination; or
(iii) any person or entity the Company has targeted and
contacted prior to Executive's termination for the purpose of
establishing a customer relationship.
Executive agrees that these restrictions are necessary to protect
Executive's legitimate business interests, and Executive agrees that these
restrictions will not prevent Executive from earning a livelihood.
<PAGE>
15. TAX INDEMNITY.
Should any of the payments of salary, other incentive or supplemental
compensation, benefits, allowances, awards, payments, reimbursements or
other perquisites, or any other payment in the nature of compensation,
singularly, in any combination or in the aggregate, that are provided for
hereunder to be paid to or for the benefit of the Executive be determined or
alleged to be subject to an excise or similar purpose tax pursuant to
Section 4999 of the Code, or any successor or other comparable federal,
state or local tax law by reason of being a "parachute payment" (within the
meaning of Section 280G of the Code), the parties agree to negotiate in good
faith changes to this Agreement necessary to avoid such excise or similar
purpose tax, without diminishing Executive's salary, other incentive or
supplemental compensation, benefits, allowances, awards, payments,
reimbursements or other perquisites, or any other payment in the nature of
compensation. Alternatively, the Company shall pay to the Executive such
additional compensation as is necessary (after taking into account all
federal, state and local taxes payable by the Executive as a result of the
receipt of such additional compensation) to place the Executive in the same
after-tax position (including federal, state and local taxes) he would have
been in had no such excise or similar purpose tax (or interest or penalties
thereon) been paid or incurred. The Company hereby agrees to pay such
additional compensation within the earlier to occur of (i) five business
days after the Executive notifies the Company that the Executive intends to
file a tax return taking the position that such excise or similar purpose
tax is due and payable in reliance on a written opinion of the Executive's
tax counsel (such tax counsel to be chosen solely by the Executive) that it
is more likely than not that such excise tax is due and payable or (ii) 24
hours of any notice of or action by the Company that it intends to take the
position that such excise tax is due and payable. The costs of obtaining the
tax counsel opinion referred to in clause (i) of the preceding sentence
shall be borne by the Company, and as long as such tax counsel was chosen by
the Executive in good faith, the conclusions reached in such opinion shall
not be challenged or disputed by the Company. If the Executive intends to
make any payment with respect to any such excise or similar purpose tax as a
result of an adjustment to the Executive's tax liability by any federal,
state or local tax authority, the Company will pay such additional
compensation by delivering its cashier's check payable in such amount to the
Executive within five business days after the Executive notifies the Company
of his intention to make such payment. Without limiting the obligation of
the Company hereunder, the Executive agrees, in the event the Executive
makes any payment pursuant to the preceding sentence, to negotiate with the
Company in good faith with respect to procedures reasonably requested by the
Company which would afford the Company the ability to contest the imposition
of such excise or similar purpose tax; provided, however, that the Executive
will not be required to afford the Company any right to contest the
applicability of any such excise or similar purpose tax to the extent that
the Executive reasonably determines (based upon the opinion of his tax
counsel) that such contest is inconsistent with the overall tax interests of
the Executive.
<PAGE>
16. LOCATIONS OF PERFORMANCE.
The Executive's services shall be performed primarily in the vicinity
of Arlington, Texas. The parties acknowledge, however, that the Executive
will be required to travel in connection with the performance of his duties.
17. PROPRIETARY INFORMATION.
(a) The Executive agrees to comply fully with the Company's policies
relating to non-disclosure of the Company's trade secrets and proprietary
information and processes. Without limiting the generality of the foregoing,
the Executive will not, during the term of his Employment, disclose any such
secrets, information or processes to any person, firm, corporation,
association or other entity for any reason or purpose whatsoever except as
may be required by law or governmental agency or legal process, nor shall
the Executive make use of any such property for his own purposes or for the
benefit of any person, firm, corporation or other entity (except the Company
or any of its subsidiaries) under any circumstances during or after the term
of his Employment, provided that after the term of his Employment this
provision shall not apply to secrets, information and processes that are
then in the public domain (provided that the Executive was not responsible,
directly or indirectly, for such secrets, information or processes entering
the public domain without the Company's consent).
(b) The Executive hereby sells, transfers and assigns to the Company
all the entire right, title and interest of the Executive in and to all
inventions, ideas, disclosures and improvements, whether patented or
unpatented, and copyrightable material, to the extent made or conceived by
the Executive solely or jointly with others during the term of this
Agreement The Executive shall communicate promptly and disclose to the
Company, in such form as the Company requests, all information, details and
data pertaining to the aforementioned and, whether during the term hereof or
thereafter, the Executive shall execute and deliver to the Company such
formal transfers and assignments and such other papers and documents as may
be required of the Executive to permit the Company to file and prosecute any
patent applications relating to same and, as to copyrightable material, to
obtain copyright thereon.
(c) Trade secrets, proprietary information and processes shall not be
deemed to include information which is: (i) known to the Executive at the
time it is disclosed to him; (ii) publicly known (or becomes publicly
known) without the fault or negligence of Executive; (iii) received from a
third party without restriction and without breach of this Agreement; (iv)
approved for release by written authorization of the Company; or (v)
required to be disclosed by law or legal process; provided, however, that in
the event of a proposed disclosure pursuant to this subsection (c)(v), the
Executive shall give the Company prior written notice before such disclosure
is made in a time and manner which will best provide the Company with the
ability to oppose such disclosure.
<PAGE>
18. ASSIGNMENT.
This Agreement may not be assigned by either party; provided that the
Company may assign this Agreement (i) in connection with a merger or
consolidation involving the Company or a sale of its business, properties
and assets substantially as an entirety to the surviving corporation or
purchaser as the case may be, so long as such assignee assumes the Company's
obligations hereunder; and (ii) so long as the assignment in the reasonable
discretion of Executive does not result in a materially increased risk of
non-performance of the Company's obligations hereunder by the assignee. The
Company shall require as a condition of such assignment any successor
(direct or indirect (including, without limitation, by becoming the sole
stockholder of the Company) and whether by purchase, merger, consolidation,
share exchange or otherwise) to the business, properties and assets of the
Company substantially as an entirety expressly to assume and agree to
perform this Agreement in the same manner and to the same extent the Company
would have been required to perform it had no such succession taken place.
This Agreement shall be binding upon all successors and assigns. In the
event of a Change of Control, and regardless of whether the Executive's
employment is thereafter terminated, the Company shall cancel Executive's
obligations under that certain promissory note dated December 31, 2000, in
the principal amount of $1,529,828.00, plus all other loans and advances
(principal and interest), and return to Executive, (or, in the case of
termination under Section 9(a), the beneficiary the Executive has designated
in writing to the Company to receive payment pursuant to Section 9(a) or in
the absence of such designation, the Executive's estate) within ten days,
all property securing the payment thereof. Any taxes due by Executive as a
result of the forgiveness under this provision of the Executive's debt to
the Company will be the sole obligation of the Company.
19. NOTICES.
Any notice required or permitted to be given under this Agreement shall
be sufficient if in writing and sent by registered or certified mail to the
Executive at his residence maintained on the Company's records, or to the
Company at its address at 690 E. Lamar Blvd. Suite 400, Arlington, Texas
76011, Attention: Corporate Secretary, or such other addresses as either
party shall notify the other in accordance with the above procedure.
20. FORCE MAJEURE.
Neither party shall be liable to the other for any delay or failure to
perform hereunder, which delay or failure is due to causes beyond the
control of said party, including, but not limited to: acts of God; acts of
the public enemy; acts of the United States of America or any state,
territory or political subdivision thereof or of the District of Columbia;
fires; floods; epidemics; quarantine restrictions; strikes; or freight
embargoes; provided, however, that this Section 20 will not relieve the
Company of any of its payment obligations to the Executive under this
Agreement. Notwithstanding the foregoing provisions of this Section 20, in
every case the delay or failure to perform must be beyond the control and
without the fault or negligence of the party claiming excusable delay.
<PAGE>
21. INTEGRATION.
This Agreement represents the entire agreement and understanding
between the parties as to the subject matter hereof and supersedes all prior
or contemporaneous agreements whether written or oral. No waiver, alteration
or modification of any of the provisions of this Agreement shall be binding
unless in writing and signed by duly authorized representatives of the
parties hereto.
22. WAIVER.
Failure or delay on the part of either party hereto to enforce any
right, power or privilege hereunder shall not be deemed to constitute a
waiver thereof. Additionally, a waiver by either party of a breach of any
promise herein by the other party shall not operate as or be construed to
constitute a waiver of any subsequent breach by such other party.
23. SAVINGS CLAUSE.
If any term, covenant or condition of this Agreement or the application
thereof to any person or circumstance shall to any extent be invalid or
unenforceable, the remainder of this Agreement, or the application of such
term, covenant or condition to persons or circumstances other than those as
to which it is held invalid or unenforceable shall not be affected thereby,
and each term, covenant or condition of this Agreement shall be valid and
enforced to the fullest extent permitted by law.
24. AUTHORITY TO CONTRACT.
The Company warrants and represents to the Executive that the Company
has full authority to enter into this Agreement and to consummate the
transactions contemplated hereby and that this Agreement is not in conflict
with any other agreement to which the Company is a party or by which it may
be bound. The Company further warrants and represents to the Executive that
the individual executing this Agreement on behalf of the Company has the
full power and authority to bind the Company to the terms hereof and has
been authorized to do so in accordance with the Company's articles or
certificate of incorporation and bylaws.
<PAGE>
25. PAYMENT OF EXPENSES.
If at any time during the term hereof or afterwards: (a) there should
exist a dispute or conflict between the Executive and the Company or another
Person as to the validity, interpretation or application of any term or
condition hereof, or as to the Executive's entitlement to any benefit
intended to be bestowed hereby, which is not resolved to the satisfaction of
the Executive, (b) the Executive must (i) defend the validity of this
Agreement or (ii) contest any determination by the Company concerning the
amounts payable (or reimbursable) by the Company to the Executive or (c) the
Executive must prepare responses to an Internal Revenue Service ("IRS")
audit of, or otherwise defend, his personal income tax return for any year
the subject of any such audit, or an adverse determination, administrative
proceedings or civil litigation arising therefrom, which is occasioned by or
related to an audit by the IRS of the Company's income tax returns, then the
Company hereby unconditionally agrees: (a) on written demand of the Company
by the Executive, to provide sums sufficient to advance and pay on a current
basis (either by paying directly or by reimbursing the Executive) not less
than 30 days after a written request therefor is submitted by the Executive,
all the Executive's costs and expenses (including, without limitation,
attorney's fees, expenses of investigation, travel, lodging, copying,
delivery services and disbursements for the fees and expenses of experts,
etc.) incurred by the Executive in connection with any such matter; (b) the
Executive shall be entitled, on demand in accordance with Section 27, below,
to the entry of a mandatory injunction without the necessity of posting any
bond with respect thereto which compels the Company to pay or advance such
costs and expenses on a current basis; and (c) the Company's obligations
under this Section 25 will not be affected if the Executive is not the
prevailing party in the final resolution of any such matter unless it is
determined pursuant to Section 27 that, in the case of one or more of such
matters, the Executive has acted in bad faith or without a reasonable basis
for his position, in which event and, then only with respect to such matter
or matters, the successful or prevailing party or parties shall be entitled
to recover from the Executive reasonable attorneys' fees and other costs
incurred in connection with that matter or matters (including the amounts
paid by the Company in respect of that matter or matters pursuant to this
Section 25), in addition to any other relief to which it or they may be
entitled.
26. REMEDIES.
In the event of a breach by the Executive of Section 14 or 17 of this
Agreement, in addition to other remedies provided by applicable law, the
Company will be entitled to issuance of a temporary restraining order or
preliminary injunction enforcing its rights under such Section.
27. ARBITRATION.
This Agreement Is Subject to Binding Arbitration. Any dispute or
controversy arising under or in connection with this Agreement or in any
manner associated with Employee's employment (other than those described in
Section 26 _ Remedies) shall be settled exclusively by arbitration in
Arlington, Texas, in accordance with the rules of the American Arbitration
Association then in effect. The parties agree to execute and be bound by
the mutual agreement to arbitrate claims attached hereto as Attachment A.
<PAGE>
28. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Texas.
29. WAIVER OF ACTUAL OR POTENTIAL CONFLICTS OF INTEREST
Should it become necessary for Executive to seek to enforce the terms
of this Agreement, the Company consents to Executive's use of counsel which
either then or may have in the past represented the Company, provided that
counsel agrees to undertake Executive's representation, and such
representation and waiver of actual or potential conflicts of interest is in
accordance with the Texas State Bar Rules, including the Texas Disciplinary
Rules of Professional Conduct. To the extent permitted by the Rules, the
Company waives any such actual or potential conflict of interest arising
thereby.
30. COUNTERPARTS.
This Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the
same instrument.
31. INDEMNIFICATION.
The Executive shall be indemnified by the Company to the maximum
permitted by the law of the state of the Company's incorporation, and by the
law of the state of incorporation of any subsidiary of the Company of which
the Executive is a director or an officer or employee, as the same may be in
effect from time to time.
32. INTEREST.
If any amounts required to be paid or reimbursed to the Executive
hereunder are not so paid or reimbursed at the times provided herein
(including amounts required to be paid by the Company pursuant to Sections
7, 15 and 25), those amounts shall bear interest at the rate of 7%, from the
date those amounts were required to have been paid or reimbursed to the
Executive until those amounts are finally and fully paid or reimbursed;
provided, however, that in no event shall the amount of interest contracted
for, charged or received hereunder exceed the maximum non-usurious amount of
interest allowed by applicable law.
33. TIME OF THE ESSENCE.
Time is of the essence with respect to any act required to be performed
by this Agreement.
34. PRIOR INSTRUMENTS UNAFFECTED.
Except for the Old Employment Agreement which is being terminated
pursuant to this Agreement, all prior instruments between the Company and
Executive shall remain in full force and effect and the terms and conditions
thereof shall not be affected by this Agreement.
<PAGE>
FIRST CASH FINANCIAL SERVICES, INC. EXECUTIVE
/S/ PHILLIP E. POWELL /S/ RICK L. WESSEL
---------------------------------- -----------------------------
Phillip E. Powell, Chief Executive Rick L. Wessel
Officer and Chairman of the Board
<PAGE>
ATTACHMENT "A"
MUTUAL AGREEMENT TO ARBITRATE
1. I, Rick L. Wessel, recognize that differences could arise between First
Cash Financial Services, Inc. ("the Company") and me during or following my
employment with the Company. I understand and agree that by entering into
this Mutual Agreement to Arbitrate ("Agreement"), I gain the benefits of a
speedy, impartial dispute-resolution procedure.
2. I understand that any reference in this Agreement to the Company will be
a reference also to all stockholders, directors, officers, employees,
parents, subsidiaries and affiliated entities, all benefit plans, the
benefit plans' sponsors, fiduciaries, administrators, and all successors and
assigns of any of them.
Claims Covered by the Agreement
3. The Company and I mutually agree to the resolution by arbitration of all
claims or controversies ("claims"), whether or not arising out of my
employment (or its termination), that the Company may have against me or
that I may have against the Company. The claims covered by this Agreement
include, but are not limited to, claims under my Employment Agreement,
claims for wages or other compensation due; for breach of any contract or
covenant (express or implied); tort claims; claims for discrimination
(including, but not limited to, race sex, color, religion, national origin,
age (state or federal Age Discrimination in Employment Act), marital status,
veterans status, sexual preference, medical condition, handicap or
disability); claims for benefits (except where an employee benefit or
pension plan specifies that its claims procedure shall culminate in an
arbitration procedure different from this one); and claims for violation of
any federal, state, or other law, statute, regulation, or ordinance, except
claims excluded in the following paragraphs.
Claims Not Covered by the Agreement
4. Claims I may have for workers' compensation or unemployment compensation
benefits are not covered by this Agreement.
<PAGE>
Arbitration
5. (a) Procedure for Injunctive Relief. In the event either the Company
or myself seeks injunctive relief, the claim shall be administratively
expedited by the American Arbitration Association ("AAA"), which shall
appoint a single, neutral arbitrator for the limited purpose of deciding
such claim. Such arbitrator shall be a qualified member of the State Bar of
Texas in good standing, and preferably shall be a retired state or federal
district judge. The single arbitrator shall decide the claim for injunctive
relief immediately on hearing or receiving the parties' submissions (unless,
in the interests of justice, he must rule ex parte); provided, however, that
the single arbitrator shall rule on such claims within 24 hours of
submission of the claim to the AAA. The single arbitrator's ruling shall
not extend beyond 14 calendar days and on application by the claimant, up to
an additional 14 days following which, after a hearing on the claim for
injunctive relief, a temporary injunction may issue pending the award. Any
relief granted under this procedure for injunctive relief shall be
specifically enforceable in Harris County District Court on an expedited, ex
parte basis and shall not be the subject of any evidentiary hearing or
further submission by either party, but the court, on application to enforce
a temporary order, shall issue such orders as necessary to its enforcement.
(b) Procedure after a Claim for Injunctive Relief or where no Claim
for Injunctive Relief Is Made. The arbitrator shall be selected as
follows: in the event the Company and I agree on one arbitrator, the
arbitration shall be conducted by such arbitrator. In the event the Company
and I do not agree, the Company and I shall each select one independent,
qualified arbitrator, and the two arbitrators so selected shall select the
third arbitrator. The arbitrator(s) are herein referred to as the "Panel."
The Company reserves the right to object to any individual arbitrator who
shall be employed by or affiliated with a competing organization.
(c) The Arbitration shall take place at Arlington, Texas, or any
other location mutually agreeable to us. At the request of either of us,
arbitration proceedings will be conducted in the utmost secrecy; in such
case all documents, testimony and records shall be received, heard and
maintained by the Panel in secrecy, available for inspection only by the
Company or me and our respective attorneys and our respective experts, who
shall agree in advance and in writing to receive all such information
confidentially and to maintain such information in secrecy until such
information shall become generally known. The Panel shall be able to award
any and all relief, including relief of an equitable nature. The award
rendered by the Panel may be enforceable in any court having jurisdiction
thereof.
(d) The Company will pay all the fees and out-of-pocket
expenses of each arbitrator selected pursuant to this Section 5 and the AAA.
In addition, the Company will pay my reasonable attorneys' fees, unless the
arbitration is the result of a termination for cause as defined in Section
13(f)(ii) of the Executive Employment Agreement to which this Attachment is
appended.
<PAGE>
Requirements for Modification or Revocation
6. This Agreement to arbitrate shall survive the termination of my
employment. It can only be revoked or modified by a writing signed by the
Company and I, which specifically states a mutual intent to revoke or modify
this Agreement.
Sole and Entire Agreement
7. This is the complete agreement of us on the subject of arbitration of
disputes [except for any arbitration agreement in connection with any
pension or benefit plan].
This Agreement supersedes any prior or contemporaneous oral or written
understanding on the subject.
8. Neither of us is relying on any representations, oral or written, on the
subject of the effect, enforceability or meaning of this Agreement, except
as specifically set forth in this Agreement.
Construction
9. If any provision of this Agreement is found to be void or otherwise
unenforceable, in whole or in part, such adjudication shall not affect the
validity of the remainder of the Agreement.
Consideration
10. The promises by the Company and by me to arbitrate differences, rather
than litigate them before courts or other bodes, provide consideration for
each other. In addition, I have entered into an Employment Agreement as
further consideration for entering into this Agreement.
Not an Employment Agreement
11. This Arbitration Agreement is purely procedural. It does not provide
any substantive rights in addition to those provided by applicable law or my
Employment Agreement.
Voluntary
12. I acknowledge that I have carefully read this agreement, that I
understand its terms, that all understandings and agreements between the
company and me relating to the subjects covered in the agreement are
contained in it, and that I have entered into the agreement voluntarily and
not in reliance on any promises or representations by the company other than
those contained in this agreement itself.
13. The Age Discrimination in Employment Act protects individuals over 40
years of age from age discrimination. The ADEA contains some special
requirements before an employee can give up the right to file a lawsuit in
court. The following provisions are designed to comply with those
requirements.
<PAGE>
a. I agree that this Agreement to arbitrate is valuable to me,
because it permits a faster resolution of claims that I would receive in
court.
b. I have been advised to consult an attorney before signing this.
c. I have 21 days to consider this Agreement. However, I may sign it
sooner if I wish to do so.
d. I have 7 days following my signing this Agreement to revoke my
signature, and the Agreement will not be legally binding until the 7 day
period has gone by.
33. I FURTHER ACKNOWLEDGE THAT I HAVE BEEN GIVEN THE OPPORTUNITY TO DISCUSS
THIS AGREEMENT WITH MY PRIVATE LEGAL COUNSEL AND HAVE AVAILED MYSELF TO THAT
OPPORTUNITY TO THE EXTENT I WISH TO DO SO.
First Cash Financial Services, Inc. Executive
/S/ PHILLIP E. POWELL /S/ RICK L. WESSEL
---------------------------------- -----------------------------
Phillip E. Powell, Chief Executive Rick L. Wessel
Officer and Chairman of the Board
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21.0
<SEQUENCE>4
<FILENAME>0004.txt
<DESCRIPTION>SUBSIDIARIES
<TEXT>
Exhibit 21.0
FIRST CASH FINANCIAL SERVICES, INC.
SUBSIDIARIES
Percentage
Country/State of Owned
Subsidiary Name Incorporation by Registrant
--------------- ------------- -------------
American Loan and Jewelry, Inc. Texas 100%
Famous Pawn, Inc. Maryland 100%
JB Pawn, Inc. Texas 100%
Miraglia, Inc. California 100%
Capital Pawnbrokers, Inc. Maryland 100%
Silver Hill Pawn, Inc. Maryland 100%
Elegant Floors, Inc. Maryland 100%
One Iron Ventures, Inc. Illinois 100%
First Cash, S.A. De C.V. Mexico 100%
First Cash, Ltd. Texas 100%
First Cash Corp Delaware 100%
First Cash Management, LLC Delaware 100%
First Cash, Inc. Nevada 100%
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>5
<FILENAME>0005.txt
<DESCRIPTION>INDEPENDENT AUDITORS' CONSENT
<TEXT>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement
No. 333-71077 of First Cash Financial Services, Inc. on Form S-3 and
Registration Statement No. 333-73391 on Form S-8 of our report dated
February 6, 2001 (which report expresses an unqualified opinion and
includes an explanatory paragraph relating to the Company's change in
method of accounting for income recognition on pawn loans in 2000),
appearing in this Annual Report on Form 10-K of First Cash Financial
Services, Inc. for the year ended December 31, 2000.
DELOITTE & TOUCHE LLP
Fort Worth, Texas
March 30, 2001
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.2
<SEQUENCE>6
<FILENAME>0006.txt
<DESCRIPTION>CONSENT
<TEXT>
Exhibit 23.2
CONSENT
The Board of Directors
First Cash Financial Services, Inc.
We consent to the incorporation by reference of our legal opinion
contained in the Registration Statement on Form S-3 dated January 22,
1999, File No. 333-71077 and in the Registration Statement on Form S-8
dated March 5, 1999, File No. 333-73391.
BREWER & PRITCHARD, P.C.
Houston, Texas
March 28, 2001
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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