EXHIBIT 23
RENTERS CHOICE, INC.
13800 Montfort Drive, Suite 300
Dallas, Texas 75240
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 19, 1997
To the Holders of Common Stock of
RENTERS CHOICE, INC.
The 1997 Annual Meeting of Stockholders of Renters Choice, Inc. (the
"Company") will be held at the offices of the Company, 13800 Montfort Drive,
Suite 300, Dallas, Texas 75240, on May 19, 1997, at 9:30 a.m., Dallas, Texas,
time, for the following purposes:
1. To elect two persons to serve as Class III directors in
accordance with the Amended and Restated Certificate of
Incorporation and Amended and Restated Bylaws of the Company;
and
2. To transact such other business as may properly come before
the meeting or any adjournments or postponements thereof (the
"Annual Meeting").
A copy of the Proxy Statement in which the foregoing matters are
described in more detail accompanies this Notice of Annual Meeting of
Stockholders.
Stockholders are urged to read carefully the attached Proxy Statement
for additional information concerning the matters to be considered at the Annual
Meeting. The Board of Directors has fixed the close of business on March 24,
1997 as the record date for determining stockholders entitled to notice of and
to vote at the Annual Meeting. A complete list of the stockholders will be
available for examination at the Company's offices located at 13800 Montfort
Drive, Suite 300, Dallas, Texas 75240, during normal business hours for ten days
before the meeting.
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER OR
NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE MARK, SIGN, DATE AND
PROMPTLY RETURN THE ACCOMPANYING PROXY CARD IN THE POSTAGE-PAID ENVELOPE
PROVIDED. IF YOU ATTEND THE ANNUAL MEETING IN PERSON, YOU MAY VOTE IN PERSON,
EVEN IF YOU RETURNED YOUR PROXY CARD.
By Order of the Board of Directors,
David M. Glasgow
SECRETARY
April ___, 1997
Dallas, Texas
RENTERS CHOICE, INC.
13800 Montfort Drive, Suite 300
Dallas, Texas 75240
--------------------
PROXY STATEMENT
-------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 19, 1997
--------------------
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Renters Choice, Inc. (the "Company") for
use at the Annual Meeting of Stockholders of the Company to be held at the time
and place and for the purposes set forth in the accompanying Notice of Annual
Meeting, and any postponements or adjournments thereof (the "Annual Meeting").
The Board of Directors does not intend to bring any matters before the
Annual Meeting other than those set forth in the accompanying Notice of Annual
Meeting and does not know of any additional matters to be brought before the
Annual Meeting by others. The Amended and Restated Bylaws of the Company require
advance notice of stockholder proposals for action to be taken at the Annual
Meeting and stockholder nominations of persons for election to the Board of
Directors. No such notices have been received.
This Proxy Statement and the accompanying proxy are first being mailed
to stockholders on or about [April __, 1997.] All duly executed proxies received
by the Company or its transfer agent prior to the Annual Meeting will be voted
in accordance with the instructions specified therein. As to a matter for which
no instruction has been specified in a properly executed proxy, the shares
represented thereby will be voted by the person named therein (1) FOR the
election of Joseph V. Mariner, Jr. and J. V. Lentell as Class III directors of
the Company, and (2) in the discretion of the persons named in the proxy, to
transact any other business that may properly come before the Annual Meeting. A
stockholder who attends the Annual Meeting may, if he or she wishes, vote by
ballot at the Annual Meeting, thereby cancelling any proxy previously given. In
addition, a stockholder giving a proxy may revoke it at any time before it is
voted at the Annual Meeting by delivering a written notice of revocation to the
Secretary of the Company or by delivering a properly executed proxy bearing a
later date.
The Board of Directors has fixed the close of business on March 24,
1997 as the record date for the determination of the stockholders of the Company
entitled to notice of, and to vote at, the Annual Meeting. At that date, there
were outstanding 24,792,685 shares of Common
Stock, the holders of which will be entitled to one vote per share of Common
Stock on each matter submitted at the Annual Meeting. The Company has no other
class of stock outstanding. The holders of a majority of the outstanding shares
of Common Stock, present in person or represented by proxy, will constitute a
quorum for the transaction of business at the Annual Meeting. If a quorum is not
present or represented at the Annual Meeting, the stockholders entitled to vote
who are present in person or represented by proxy have the power to adjourn the
Annual Meeting from time to time, without notice, other than by announcement at
the meeting, until a quorum is present or represented. At any such adjourned
meeting at which a quorum is present or represented, any business may be
transacted that might have been transacted at the original meeting. If and when
a quorum is present or represented at the Annual Meeting or any adjournment
thereof, the stockholders present or represented at the meeting may continue to
transact business until adjournment notwithstanding the withdrawal from the
meeting of stockholders counted in determining the existence of a quorum.
Votes cast by proxy or in person will be counted by two persons
appointed by the Company to act as inspectors at the Annual Meeting. The
election inspectors will treat shares represented by proxies that reflect
abstentions as shares that are present and entitled to vote for the purpose of
determining the presence of a quorum and of determining the outcome of any
matter submitted to the stockholders for a vote. Abstentions will have the same
legal effect as a vote against the matter on all matters other than the election
of directors.
Broker non-votes occur where a broker holding stock in street name
votes the shares on some matters but not others. The missing votes are deemed to
be "broker non-votes." The election inspectors will treat broker non-votes as
shares that are present and entitled to vote for the purpose of determining the
presence of a quorum. However, for the purpose of determining the outcome of any
matter as to which the broker or nominee has indicated on the proxy that it does
not have discretionary authority to vote, those shares will be treated as not
present and not entitled to vote with respect to that matter (even though those
shares are considered entitled to vote for quorum purposes and may be entitled
to vote on other matters).
The Company will bear the entire cost of soliciting proxies in the
accompanying form. In addition to the solicitation of proxies by mail, proxies
may also be solicited by telephone, telegram or personal interview by officers
and regular employees of the Company. The Company will reimburse brokers or
other persons holding stock in their names or in the names of their nominees for
their reasonable expenses incurred in forwarding proxy materials to beneficial
owners of stock.
-2-
ELECTION OF DIRECTORS
Pursuant to the Amended and Restated Certificate of Incorporation of
the Company (as amended), the Board of Directors currently is divided into three
separate classes (Class I, Class II and Class III). J. Ernest Talley currently
serves as the Class I director until the 1998 Annual Meeting of Stockholders of
the Company and until his successor has been duly elected and qualified. Mark E.
Speese and Rex W. Thompson currently serve as Class II directors until the 1999
Annual Meeting of Stockholders of the Company and until their successors have
been duly elected and qualified. Joseph V. Mariner, Jr. and J. V. Lentell
currently serve as Class III directors until the 1997 Annual Meeting of
Stockholders of the Company and until their successors have been duly elected
and qualified.
At this year's Annual Meeting, two persons will be elected to the Board
of Directors, to serve as Class III directors until the 2000 Annual Meeting of
Stockholders of the Company and until their successors have been duly elected
and qualified. At each subsequent Annual Meeting of Stockholders of the Company,
one class of directors will be elected on a rotating basis for a three-year
term. Pursuant to the Company's Amended and Restated Bylaws, directors shall be
elected by a plurality of votes cast in the election.
Unless contrary instructions are set forth in the accompanying proxy,
it is intended that the persons named in the proxy will vote all shares
represented thereby FOR the election to the Board of Directors of Joseph V.
Mariner, Jr. and J. V. Lentell who have been properly nominated to serve as
Class III directors. The Company has no reason to believe that Mr. Mariner or
Mr. Lentell will be unable or unwilling to serve if elected to the Board of
Directors. However, should either Mr. Mariner or Mr. Lentell become unable or
unwilling to serve prior to the Annual Meeting, the persons acting under the
proxy will vote for the election, in his stead, of such other persons as the
Board of Directors may recommend.
-3-
NOMINEES FOR ELECTION AS DIRECTOR
YEAR TERM WOULD
EXPIRE AFTER ELECTION
NAME AGE BUSINESS EXPERIENCE IF ELECTED, AND CLASS
J.V. Lentell 58 Mr. Lentell has served as a director of the 2000
Company since February 1995. Mr. Lentell (Class III)
was employed by Kansas State Bank & Trust
Co., Wichita, Kansas, from 1966 through July
1993, serving as Chairman of the Board from
1981 through July 1993. Since July 1993, he
has served as a director and Vice Chairman of
the Board of Directors of Intrust Bank, N.A.,
successor by merger to Kansas State Bank &
Trust Co.
Joseph V. Mariner, Jr. 76 Mr. Mariner has served as a director of the 2000
Company since February 1995. Until his (Class III)
retirement in 1978, Mr. Mariner served as
Chairman of the Board of Directors and Chief
Executive Officer of Hydrometals, Inc., a large
conglomerate with subsidiaries engaged in the
manufacture of retail plumbing supplies,
non-powered hand tools and electronic
components. Mr. Mariner currently serves as
a director of Temtex Industries, Inc., a
manufacturer of energy-efficient fireplaces and
gas logs, Peerless Mfg. Co, a manufacturer of
heavy oil and gas filtration equipment, Dyson
Kissner Moran Corp., a New York based
private investment company engaged in
acquiring and operating a multitude of
manufacturing companies with additional
holdings in real estate and broadcasting,
Industrial Flexible Materials, Inc., a company
engaged in the business of collecting and
shredding whole tires into chips which are
further processed into finely granulated rubber
for commercial industrial applications, and El
Chico Restaurants, Inc.
-4-
PERSONS CONTINUING AS DIRECTORS
Year Term
NAME AGE BUSINESS EXPERIENCE EXPIRES AND CLASS
J. Ernest Talley 62 Mr. Talley has served as Chairman of the 1998
Board of Directors of the Company since May (Class I)
1989 and Chief Executive Officer since
November 1994. Mr. Talley operated a
rent-to-own business from 1963 to 1974 in
Wichita, Kansas, which he sold to Remco (now
owned by Rent-a-Center, a unit of Thorn EMI
PLC) in 1974. From 1974 to 1988, he was
involved in the commercial real estate business
in Dallas, Texas. Mr. Talley co-founded
Talley Lease to Own, Inc. with his son,
Michael C. Talley, in 1987 and served as a
director and Chief Executive Officer of that
company from 1988 until its merger with the
Company on January 1, 1995.
Mark E. Speese 39 Mr. Speese has served as President and a 1999
director of the Company since 1990, and as (Class II)
Chief Operating Officer since November 1994.
From 1990 to November 1994, Mr. Speese
served as Chief Executive Officer. From the
Company's inception in 1986 until 1990, Mr.
Speese served as a Vice President responsible
for the Company's New Jersey operations.
Prior to joining the Company, Mr. Speese was
a regional manager for Rent-a-Center, a unit of
Thorn EMI PLC, from 1979 to 1986.
Rex W. Thompson 47 Mr. Thompson has served as a director of the 1999
Company since February 1995. Since 1988, (Class II)
Mr. Thompson has served as a Professor of
Finance at the Edwin L. Cox School of
Business, Southern Methodist University,
Dallas, Texas, where he also serves as
Chairman of the Finance Department and as
Associate Dean for Academic Affairs.
Mr. Thompson previously served as an
assistant professor at Carnegie-Mellon
University, and as an associate professor at the
University of British Columbia and the
Wharton School of Business.
-5-
COMMITTEES OF THE BOARD OF DIRECTORS
The Company currently has an Audit Committee and a Compensation
Committee of the Board of Directors. The Audit Committee is composed of Messrs.
Lentell, Mariner and Thompson, all of the members of the Board of Directors who
are not employees of the Company (the "Outside Directors"), and is responsible
for reviewing the functions of the Company's management and independent auditors
pertaining to the Company's financial statements and performing such other
duties and functions as are deemed appropriate by the Audit Committee or the
Board. Mr. Mariner is Chairman of the Audit Committee. The Compensation
Committee is also composed of the Outside Directors and is responsible for
recommending to the Board the base salaries and incentive bonuses for the
executive officers of the Company and for administering the Company's Long-Term
Incentive Plan. Mr. Thompson is Chairman of the Compensation Committee. The
Audit Committee met two times and the Compensation Committee met three times
during 1996. The Board of Directors does not have a standing nominating
committee or other committee performing similar functions.
MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors of the Company met six times during 1996,
including regularly scheduled and special meetings. Each director attended all
meetings of the Board of Directors and all meetings held by committees of the
Board on which he served.
COMPENSATION OF DIRECTORS
The Outside Directors receive $2,500 for each meeting of the Board of
Directors that they attend and $500 for attending a meeting of a committee of
the Board. In addition, all directors are reimbursed for travel and lodging
expenses of attending Board, stockholder and committee meetings. Automatic
annual awards of fully-vested stock options are made to each Outside Director on
the first business day of each year, which options provide for the purchase of
3,000 shares of Common Stock at a purchase price equal to the market value of
the Common Stock on such date. Each of such options is immediately exercisable.
The options granted to the Outside Directors on January 1, 1997, have an
exercise price of $14.50 per share. The Company has entered into agreements with
all directors pursuant to which the Company has agreed to indemnify them against
certain claims arising out of their service as directors. Directors are also
entitled to the protection of certain indemnification provisions in the
Company's Amended and Restated Certificate of Incorporation and in the Company's
Bylaws.
-6-
EXECUTIVE OFFICERS
The executive officers of the Company serve at the discretion of the
Board of Directors and are chosen annually by the Board at its first meeting
following the annual meeting of stockholders. The following table sets forth the
names and ages of the executive officers of the Company and all positions held
by them and a description of their business experience during at least the past
five years.
NAME AGE POSITIONS BUSINESS EXPERIENCE
J. Ernest Talley 62 Chairman of the Board of Mr. Talley has served as Chairman of the
Directors and Chief Board of Directors of the Company since
Executive Officer May 1989 and Chief Executive Officer
since November 1994. Mr. Talley operated
a rent-to-own business from 1963 to 1974
in Wichita, Kansas. From 1974 to 1988, he
was involved in the commercial real estate
business in Dallas, Texas. Mr. Talley
co-founded Talley Lease to Own, Inc. with
his son, Michael C. Talley, in 1987 and
served as a director and Chief Executive
Officer of that company from 1988 until its
merger with the Company on January 1,
1995.
Mark E. Speese 39 President, Chief Operating Mr. Speese has served as President and a
Officer and Director director of the Company since 1990, and as
Chief Operating Officer since November 1994.
From 1990 to November 1994, Mr. Speese served
as Chief Executive Officer. From the Company's
inception in 1986 until 1990, Mr. Speese served
as the Vice President responsible for the
Company's New Jersy operations. Prior to joining
the Company, Mr. Speese was a regional manager for
Rent-a-Center, a unit of Thorn EMI PLC, from 1979
to 1986.
Mitchell E. Fadel 39 President-ColorTyme, Inc. Mr. Fadel has served as President and Chief
Executive Officer of ColorTyme, Inc. since
November 1992. From January 1992 to
December 1994, he also served as President
of ColorTyme Stores, Inc., a former affiliate
of ColorTyme, Inc. ColorTyme, Inc. is a
national franchisor of 251 rent-to-own stores
and is a wholly-owned subsidiary of the
Company.
-7-
L. Dowell Arnette 49 Executive Vice President Mr. Arnette has served as an Executive
Vice President of the Company since
September 1996. From May 1995 to
September 1996, Mr. Arnette served as
Senior Vice President of the Company.
From November 1994 to May 1995, he
served as Regional Vice President of the
Company. From 1993 to November 1994,
he served as a regional manager of the
Company responsible for the southeastern
region. From 1975 until 1993, Mr. Arnette
was an Executive Vice President of DEF
Investments, Inc. ("DEF"), an operator of
rent-to-own stores. The Company acquired
substantially all of the assets of DEF and its
subsidiaries in April 1993. Mr. Arnette is
the brother of Joseph T. Arnette, Vice
President - Training & Personnel of the
Company.
Dana F. Goble 31 Senior Vice President Mr. Goble was appointed Senior Vice
President of the Company in December
1996 and served as a Regional Vice
President of the Company from May 1995
until December 1996. From April 1993 to
May 1995, Mr. Goble served as the
Company's regional manager for the Detroit,
Michigan area. From 1986 through April
1993, Mr. Goble held several positions with
DEF, including regional manager for the
states of Indiana, Michigan and Ohio.
Randall S. Simpson 30 Vice President - Finance Mr. Simpson has served as Vice President -
and Chief Financial Finance and Chief Financial Officer of the
Officer Company since November 1996. From October
1995 to November 1996, Mr. Simpson, who is
a certified public accountant, served as
controller of the Company. From May 1994
until October 1995, Mr. Simpson worked as
an Audit Supervisor for Grant Thornton LLP.
From March 1993 to May 1994, Mr. Simpson
was the sole proprietor of an accounting
practice and from June 1989 to March 1993,
Mr. Simpson was a Supervising Senior Auditor
for KPMG Peat Marwick.
-8-
Douglas R. Balduini 36 Regional Vice President Mr. Balduini has served as a Regional Vice
President of the Company since
December 1995. From November 1993 to
December 1995, Mr. Balduini served as the
Company's regional manager for northern
New Jersey. From the Company's inception
in 1986 until November 1993, Mr. Balduini
served the Company as a store manager in
various locations throughout northern New
Jersey.
Christopher R. Dement 35 Regional Vice President Mr. Dement has served as a Regional Vice
President of the Company since November
1994. Mr. Dement joined the Company as
a regional manager in 1992. From 1985
through 1992, Mr. Dement held various
store and regional management positions
with DEF.
Anthony M. Doll 28 Regional Vice President Mr. Doll has served as a Regional Vice
President of the Company since September
1996. From May 1995 to September 1996,
Mr. Doll served as the Company's regional
manager for the Detroit, Michigan area.
From April 1993 to May 1995, Mr. Doll
served as the manager of the Company's
stores in Michigan. Prior to that time, Mr.
Doll attended Michigan State University,
where he received a Bachelor's Degree in
Social Science in June 1992.
Michael T. Draughn 43 Regional Vice President Mr. Draughn has served as a Regional Vice
President of the Company since January
1997. From September 1995 to January
1997, Mr. Draughn served as a Regional
Manager of the Company. Mr. Draughn
served as a Store Manager for Magic
Rent-to-Own ("MRTO") from August 1992
to October 1993 and a Zone Manager for
MRTO from October 1993 until the
Company acquired MRTO in September
1995.
-9-
C. Edward Ford, III 30 Regional Vice President Mr. Ford has served as a Regional Vice
President of the Company since January
1997. From November 1994 until January
1997, Mr. Ford served as a Regional
Manager for the Company. From July 1993
until November 1994, Mr. Ford served as a
Store Manager for the Company. Prior to
joining the Company in May 1993, Mr.
Ford was employed as an insurance agent.
Mr. Ford attended the University of
Tennessee at Knoxville.
J. Kenneth Gossett 31 Regional Vice President Mr. Gossett has served as a Regional Vice
President of the Company since January
1997. Mr. Gossett served as a Regional
Manager for the Company from September
1994 until January 1997. Mr. Gossett
served as a Regional Manager for Magic
Rent-to-Own ("MRTO") from February
1991 until the Company acquired MRTO
in September 1995.
David A. Kraemer 35 Regional Vice President Mr. Kraemer has served as a Regional Vice
President of the Company since
December 1995. Mr. Kraemer served as a
Divisional Vice President for MRTO
Holdings, Inc. (d/b/a Magic Rent-to-Own)
("MRTO Holdings") from November 1990
until the Company acquired MRTO
Holdings in September 1995.
Thomas J. Lopez 37 Regional Vice President Mr. Lopez has served as a Regional Vice
President of the Company since
December 1995. Mr. Lopez served as a
Divisional Vice President for MRTO
Holdings from April 1991 until the
Company acquired MRTO Holdings in
September 1995. Prior to joining MRTO
Holdings, Mr. Lopez served as an area vice
president for U-Can-Rent, a rent-to-own
company based in Athens, Georgia.
William C. Nutt 40 Regional Vice President Mr. Nutt has served as a Regional Vice
President of the Company since
December 1995. From December 1992
through December 1995, Mr. Nutt served as
the Company's regional manager for the
northeast Ohio area. Prior to joining the
Company, Mr. Nutt was a partner in
McKenzie Leasing of Northern Ohio.
-10-
Leslie C. Preston 40 Regional Vice President Mr. Preston has served as a Regional Vice
President of the Company since January
1997. From 1993 until January 1997, Mr.
Preston served as a Regional Manager of
the Company. Prior to joining the
Company, Mr. Preston served as a Regional
Manager of DEF ColorTyme from 1991 to
1993.
John H. Spangle 41 Regional Vice President Mr. Spangle has served as a Regional Vice
President of the Company since
December 1995. Mr. Spangle served as a
Divisional Vice President for MRTO
Holdings from December 1990 until the
Company acquired MRTO Holdings in
September 1995. Prior to joining MRTO
Holdings, Mr. Spangle was the controller
for Pate Engineers, Inc., a Houston based
civil engineering firm.
Juan M. Velez 47 Regional Vice President Mr. Velez has served as a Regional Vice
President of the Company since March
1996. Mr. Velez served the Company as
regional manager for Puerto Rico from 1989
until March 1996.
John H. Whitehead 47 Regional Vice President Mr. Whitehead has served as a Regional
Vice President of the Company since May
1995. From July 1993 to May 1995, Mr.
Whitehead served as the Company's
regional manager for the Atlanta, Georgia
area and from July 1992 to July 1993, he
served as manager of one of the Company's
stores in New Jersey. From 1988 through
December 1991, Mr. Whitehead served as
the general manager and district manager of
Dairy Stores, Inc., a convenience store
chain based in Edison, New Jersey.
Joseph T. Arnette 46 Vice President - Training Mr. Arnette has served as Vice President -
& Personnel Training and Personnel of the Company
since September 1996. Mr. Arnette served
as General Manager of Consolidated Rentals
Systems, Inc., an operator of rent-to-own
stores in Georgia and Alabama, from
December 1989 until the Company acquired
Consolidated Rentals Systems, Inc. in May
1995. Mr. Arnette is the brother of L.
Dowell Arnette, Executive Vice President of
the Company.
-11-
David M. Glasgow 28 Secretary/Treasurer Mr. Glasgow has served as
Secretary/Treasurer of the Company since
June 1995. From March 1995 to June
1995, Mr. Glasgow served as the
Company's accounting operations supervisor
and from June 1993 to March 1995, he was
an accountant for the Company. From
January 1993 through May 1993,
Mr. Glasgow was an insurance adjuster for
Crawford & Company in Dallas, Texas.
Mr. Glasgow received a Bachelor of
Business Administration Degree from
Stephen F. Austin State University in
December 1992.
-12-
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the compensation for the years ended
December 31, 1994, 1995 and 1996 awarded to or earned by (i) each person serving
as chief executive officer of the Company at any time during such periods, and
(ii) certain other executive officers of the Company whose salary and bonus
exceeded $100,000 for services rendered in all capacities (the "Named Executive
Officers").
Annual Compensation(1) Long Term Compensation
------------------------- -------------------------------------------------------------
Restricted Stock Securities Underlying Other
Name and Principal Position Year Salary ($) Bonus ($) Awards ($) Options/SARs (#) Compensation($)(1)
- --------------------------- ---- ---------- --------- ---------- ---------------- ------------------
J. Ernest Talley (2) ............. 1996 240,000 -- -- -- --
Chairman of the Board and ........ 1995 240,000 -- -- -- --
Chief Executive Officer .......... 1994 60,000(2) -- -- -- --
Mark E. Speese ................... 1996 160,000 15,900 -- -- --
President and Chief Operating .... 1995 150,000 -- -- -- --
Officer .......................... 1994 150,000 9,668 -- -- --
Mitch Fadel (3) .................. 1996 140,000(3) 96,000 -- 10,000(6) --
President-ColorTyme, Inc. ........ 1995 -- -- -- -- --
1994 -- -- -- -- --
L. Dowell Arnette ................ 1996 150,000 15,900 -- -- --
Senior Vice President ............ 1995 132,000 22,990 -- 15,000(7) --
1994 139,251 26,280 -- -- --
David D. Real (4) ................ 1996 137,500 120,000(5) 384,375(5) -- --
Senior Vice President-Finance .... 1995 37,500(4) -- -- -- --
and Chief Financial Officer ...... 1994 -- -- -- -- --
Juan M. Velez .................... 1996 82,000 30,381 -- 2,500(8) --
Regional Vice President .......... 1995 51,165 36,325 -- 7,500(9) --
1994 50,497 35,448 -- -- --
- ----------
(1) The Named Executive Officers did not receive any annual compensation not
properly categorized as salary or bonus, except for certain perquisites or
other benefits the aggregate incremental cost of which to the Company for
each officer did not exceed the lesser of $50,000 or 10% of the total of
annual salary and bonus reported for each such officer.
(2) Mr. Talley received no salary or other compensation from the Company prior
to October 1, 1994. The amount presented for 1994 reflects the portion of
his $240,000 annual salary received in 1994.
(3) Mr. Fadel is President of ColorTyme, Inc., a wholly-owned subsidiary of the
Company, which was acquired by the Company in May 1996. The amount
presented for 1996 reflects the portion of his $210,000 annual salary
received in 1996.
(4) Mr. Real joined the Company in October 1995. His salary for 1995 and 1996
on an annualized basis was $150,000. Mr. Real resigned his position with
the Company in November 1996.
-13-
(5) On September 11, 1995, Mr. Real was awarded 62,500 shares of the Company's
common stock, par value $0.01 per share, (the "Common Stock") under the
Company's Long-Term Incentive Plan, subject to forfeiture on termination of
employment in certain circumstances. On September 11, 1996, Mr. Real vested
in 20% of the restricted shares awarded to him. In November 1996, Mr. Real
resigned his position with the Company. Upon his resignation, an additional
20%, or 12,500 shares, were awarded to Mr. Real as part of a Separation
Agreement. The remaining 37,500 shares were forfeited. The Company paid a
total of $120,000 in bonuses to defray all or a portion of Mr. Real's
federal income tax liability incurred pursuant to such forfeiture.
(6) In July 1996, Mr. Fadel was granted 10,000 options to purchase the
Company's Common Stock on a one-for-one basis, pursuant to the Company's
Long-Term Incentive Plan. The Plan provides for a vesting period of four
years, vesting in 25% increments on each anniversary date of the date of
grant. The options expire 10 years from the date of grant.
(7) In May 1995, Mr. Arnette was granted 15,000 options to purchase the
Company's Common Stock on a one-for-one basis, pursuant to the Company's
Long-Term Incentive Plan. The Plan provides for a vesting period of four
years, vesting in 25% increments on each anniversary date of grant. The
options expire 10 years from the date of grant.
(8) In January 1996, Mr Velez was granted 2,500 options to purchase the
Company's Common Stock on a one-for-one basis, pursuant to the Company's
Long-Term Incentive Plan. The Plan provides for a vesting period of four
years, vesting in 25% increments on each anniversary date of grant. The
options expire 10 years from the date of grant.
(9) In May 1995, Mr. Velez was granted 7,500 options to purchase the Company's
Common Stock on a one-for-one basis, pursuant to the Company's Long-Term
Incentive Plan. The Plan provides for a vesting period of four years,
vesting in 25% increments on each anniversary date of grant. The options
expire 10 years from the date of grant.
-14-
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential realizable value
at assumed annual rates
of stock price
apprreciation for option
Individual Grants Term (2)
- --------------------------------------------------------------------------------- ----------------------
Number of Percent of
securities total options Exercise
underlying granted to or base
options employees in price Expiration
Name Granted(1)(#) Fiscal Year ($/Sh) Date 5% ($) 10% ($)
- ----------------------- --------------- ------------- -------- ------------ ---------- ----------
J. Ernest Talley ...... 0 0 N/A N/A N/A N/A
Mark E. Speese ........ 0 0 N/A N/A N/A N/A
Mitch Fadel ........... 10,000(3) 1.4% $24.63(3) 7/2/2006(3) 154,923 392,602
L. Dowell Arnette ..... 0 0 N/A N/A N/A N/A
David D. Real ......... 0 0 N/A N/A N/A N/A
Juan Velez ............ 2,500 .4% $13.50 1/2/2006 21,229 53,798
_____________________________
(1) Options are exercisable at 25% per year, beginning one year from the date
of grant.
(2) These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises are dependent on the future
performance of the common stock of the Company, par value $0.01 per share
(the "Common Stock") and overall market conditions.
There can be no assurance that the amounts reflected in this table will be
achieved.
(3) These amounts represent options that were granted to Mr. Fadel in July 1996
and were outstanding as of December 31, 1996 (the "1996 Options").
Effective January 2, 1997, the 1996 Options were cancelled and Mr. Fadel
was granted new options to replace the 1996 Options as of January 2, 1997.
The new options vest at 25% per year, beginning January 2, 1998.
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EMPLOYMENT AGREEMENTS
Pursuant to the Company's acquisition of ColorTyme, Inc. ("ColorTyme")
in May 1996, the Company entered into a severance agreement (the "Severance
Agreement") with Mitch Fadel, President and Chief Executive Officer of
ColorTyme, whereby the Company agreed to provide certain health benefits and to
pay Mr. Fadel approximately $105,000 should his employment be terminated prior
to December 31, 1997.
The Company does not have employment agreements with any other
executive officers of other members of management.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
J. E. Talley, Chairman of the Board and Chief Executive Officer of the
Company, served as a member of the Company's Compensation Committee during a
portion of 1996. Other than Mr. Talley, no person who served as a member of the
Company's Compensation Committee during 1996 (i) was an officer or employee of
the Company during such year, (ii) was formerly an officer of the Company or
(iii) except for Mr. Lentell, was a party to any material transaction set forth
under the heading "Certain Relationships and Related Transactions" set forth
below.
J. V. Lentell, a director of the Company, serves as Vice Chairman of
the Board of Directors of Intrust Bank, N.A., one of the Company's lenders.
Intrust Bank, N.A. is a $18,000,000 participant in the Company's $90,000,000
line of credit. The Company also maintains a separate line of credit with such
lender, of which $1,755,000 was advanced as of March 24, 1997. No executive
officer of the Company served as a member of the compensation or similar
committee or Board of Directors of any other entity of which an executive
officer served on the Compensation Committee or Board of Directors of the
Company.
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BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
In February 1995, the Board of Directors established a Compensation
Committee to review and approve the compensation levels of members of
management, evaluate the performance of management, consider management
succession and consider any related matters for the Company. The Committee is
charged with reviewing with the Board of Directors in detail all aspects of
compensation for the executive officers of the Company.
The philosophy of the Company's compensation program is to employ,
retain and reward executives capable of leading the Company in achieving its
business objectives. These objectives include creating and then preserving
strong financial performance, increasing the assets of the Company, enhancing
stockholder value and ensuring the survival of the Company. The accomplishment
of these objectives is measured against conditions prevalent in the industry
within which the Company operates.
The available forms of executive compensation include base salary, cash
bonus awards and incentive stock options, restricted stock awards and stock
appreciation rights. Performance of the Company is a key consideration. The
Company's compensation policy recognizes, however, that stock price performance
is only one measure of performance and, given industry business conditions and
the long-term strategic direction and goals of the Company, it may not
necessarily be the best current measure of executive performance. Therefore, the
Company's compensation policy also gives consideration to the Company's
achievement of specified business objectives when determining executive officer
compensation. An additional achievement of the Compensation Committee has been
to offer officers equity compensation in addition to salary in keeping with the
Company's overall compensation philosophy, which attempts to place equity in the
hands of its employees in an effort to further instill stockholder
considerations and values in the actions of all the employees and executive
officers.
Compensation paid to executive officers is based upon a Company-wide
salary structure consistent for each position relative to its authority and
responsibility compared to industry peers. Stock option awards in fiscal year
1996 were used to reward certain officers and to retain them through the
potential of capital gains and equity buildup in the Company. The number of
stock options granted is determined by the subjective evaluation of the
officer's ability to influence the Company's long term growth and profitability.
Stock options have been granted only pursuant to the Company's Long-Term
Incentive Plan. The Board of Directors believes the award of options represents
an effective incentive to create value for the stockholders.
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The Chief Executive Officer's base salary for fiscal year 1996 remained
at $240,000. Effective _________, 1997, the Committee increased the Chief
Executive Officer's base salary approximately 4.2% to $250,000 to raise the
Chief Executive Officer's salary to a level the Committee deemed to be
commensurate with the Chief Executive Officer's position at comparable publicly
owned companies. In determining the compensation of the Chief Executive Officer,
the Committee considered the Chief Executive Officer's performance, his
compensation history and other subjective factors. The Committee believes that
the Chief Executive Officer's 1996 cash compensation was justified by the
Company's financial progress and performance against the goals set by the
Committee.
COMPENSATION COMMITTEE
Rex W. Thompson
J. V. Lentell
Joseph V. Mariner, Jr.
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PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change
in cumulative total stockholder return on the Company's Common Stock, with the
cumulative total return of the NASDAQ Stock Market - Market Index and the
Renters Choice "peer group" of competitors (the "Peer Group") for the period
beginning January 25, 1995, and ending December 31, 1996, assuming an investment
of $100.00 on January 25, 1995, and the reinvestment of dividends.
The Peer Group for fiscal year 1995 consisted of Aaron Rents, Inc.,
Advantage Companies, Inc., Heilig Meyers Company, Rent Way, Inc. and Rhodes,
Inc. During fiscal year 1996, Advantage Companies, Inc. and Rhodes, Inc. ceased
to be public companies, thus removing them from public trading and as a result,
from the Company's Peer Group. Bestway, Inc., a rent-to-own company, was added
to the Peer Group for fiscal year 1996, as 1996 was the first full year of
public trading of Bestway, Inc. The Peer Group for fiscal year 1996 was selected
from firms with similar lines of business. The companies in the Peer Group for
fiscal year 1996 are Aaron Rents, Inc., Bestway, Inc., Heilig Meyers Company,
and Rent Way, Inc.
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
1/2/95 12/31/95 12/31/96
------ -------- --------
Renters Choice, Inc. 100 358.51 378.07
NASDAQ Market Index 100 128.69 159.91
Peer Group, Inc. 100 77.86 77.62
ASSUMES $100 INVESTED ON JAN. 25, 1995
ASSUMES DIVIDENDS REINVESTED
FISCAL YEAR ENDING DEC. 31, 1996
The stock price performance shown on the graph reflects the change in
the Company's stock price relative to the noted indices at December 31, 1996,
and not for any interim period and is not necessarily indicative of future price
performance.
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INDEMNIFICATION ARRANGEMENTS
The Company's Amended and Restated Bylaws provide for the
indemnification of its executive officers and directors, and the advancement of
expenses to such persons in connection with proceedings and claims arising out
of their status as such, to the fullest extent permitted by the General
Corporation Law of the State of Delaware. The Amended and Restated Bylaws also
contain provisions intended to facilitate an indemnitee's receipt of such
benefits. In addition, the Company maintains a customary directors' and
officers' liability insurance policy covering its directors and officers.
PROPOSALS FOR STOCKHOLDER ACTION
I. ELECTION OF DIRECTORS
The nominees for election as directors are Joseph V. Mariner, Jr. and
J. V. Lentell. Information concerning the nominees is set forth in the section
captioned "Election of Directors."
THE BOARD RECOMMENDS A VOTE FOR EACH OF THE NOMINEES.
II. OTHER BUSINESS
The Board of Directors does not intend to bring any business before the
Annual Meeting other than the matters referred to in the accompanying Notice of
Annual Meeting and at this date has not been informed of any matters that may be
presented to the Annual Meeting by others. If, however, any other matters
properly come before the Annual Meeting, it is intended that the persons named
in the accompanying proxy will vote pursuant to the proxy in accordance with
their best judgment on such matters.
Representatives of Grant Thornton LLP, the Company's independent public
accountants for the fiscal year ended December 31, 1996, will attend the Annual
Meeting and be available to respond to appropriate questions which may be asked
by stockholders. Such representatives will also have an opportunity to make a
statement at the meeting if they desire to do so.
The Audit Committee of the Board of Directors of the Company has not
appointed an independent public accounting firm for the 1997 fiscal year. The
Board of Directors, and the Audit Committee thereof, annually review the
performance of the Company's independent public accountants and the fees charged
for their services. The Board of Directors anticipates, from time to time,
obtaining competitive proposals from other independent public accounting firms
for the Company's annual audit. Based upon the Board and Audit Committee's
analysis of such information, the Company will determine which independent
public accounting firm to engage to perform its annual audit each year.
-20-
ADDITIONAL INFORMATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of shares of Common Stock as of March 24, 1997 by (i) each
person who is the beneficial owner of 5% or more of the outstanding shares of
Common Stock, (ii) each director of the Company, (iii) each Named Executive
Officer, and (iv) all executive officers and directors of the Company as a
group. Unless otherwise indicated, the persons named below have the sole power
to vote and dispose of the shares of Common Stock beneficially owned by them,
subject to community property laws, where applicable.
Amount and Nature
Name of Beneficial Owner of Beneficial Ownership Percent of Class
- ------------------------ ----------------------- ----------------
J. Ernest Talley(1) 6,142,248(2) _____%
Mark E. Speese(1) 2,760,032(3) _____%
L. Dowell Arnette 412,414(4) _____%
Mitch Fadel 84,523 _____%
Juan Velez 76,781(5) _____%
J. V. Lentell 15,000(6) *
Rex W. Thompson 15,000(6) *
Joseph V. Mariner 9,602(7) *
All officers and directors as a
group (24 total) 9,668,628(8) _____%
- ---------------
* Less than 1%
(1) The address of J. Ernest Talley and Mark E. Speese is 13800 Montfort
Drive, Suite 300, Dallas, Texas 75240.
(2) Does not include an aggregate of 326,184 shares owned by two of Mr.
Talley's children, as to which Mr. Talley disclaims beneficial
ownership.
(3) Does not include an aggregate of 1,800 shares owned by three of Mr.
Speese's children, as to which Mr. Speese disclaims beneficial
ownership.
(4) Includes 7,500 shares issuable pursuant to options granted under the
Company's Long-Term Incentive Plan, 3,750 of which will become
exercisable on May 9, 1997, and 3,750 of which are currently
exercisable.
(5) Includes 8,125 shares issuable pursuant to options granted under the
Company's Long-Term Incentive Plan, 3,750 of which became exercisable
on May 9, 1996, 625 which became exercisable on January 2, 1997 and
3,750 which become exercisable on May 9, 1997.
(6) These shares are issuable pursuant to options granted under the
Company's Long-Term Incentive Plan, all of which are currently
exercisable.
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(7) 3,000 of these shares are issuable pursuant to options granted under
the Company's Long-Term Incentive Plan, all of which are currently
exercisable.
(8) Does not include shares as to which beneficial ownership is disclaimed.
-22-
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CERTAIN BUSINESS RELATIONSHIPS
J. V. Lentell, a director of the Company, serves as Vice Chairman of
the Board of Directors of Intrust Bank, N.A., one of the Company's lenders. The
total amount outstanding to such lender was $1,755,000 as of March 24, 1997,
1997.
ACQUISITION OF COLORTYME, INC.
On May 15, 1996, the Company, ColorTyme, Inc., a Texas corporation
("ColorTyme"), and CT Acquisition Corporation, a Texas corporation and a
wholly-owned subsidiary of the Company (the "Merger Sub"), entered into an
Agreement and Plan of Reorganization (the "Agreement of Reorganization")
pursuant to which ColorTyme was merged with and into the Merger Sub (the
"Merger"). The Merger Sub was the surviving corporation of the Merger (the
"Surviving Corporation").
The Merger became effective May 15, 1996 at 5:00 o'clock p.m. Dallas,
Texas time. Upon effectiveness of the Merger, the name of the Merger Sub was
automatically changed to ColorTyme, Inc.
The Merger consideration paid by the Company to the holders of the
outstanding shares of common stock of ColorTyme consisted of cash in the
aggregate amount of $2,839,754.50, plus 287,419 restricted shares of the
Company's common stock, par value $.01 per share (the "Company's Common Stock").
The Merger consideration paid by the Company to the sole holder of outstanding
shares of the Class A, Non-Voting Preferred Stock of ColorTyme consisted of cash
in the amount of $1,825,996.50, plus 55,756 restricted shares of the Company's
Common Stock. The closing sales price for the Company's Common Stock on May 15,
1996, as reported on the Nasdaq National Market, was $25.50.
The Company used existing cash from operations to pay the cash portion
of the Merger consideration. Management of the Company determined the total
Merger consideration based upon its assessment of the fair market value of
ColorTyme operating as a going concern.
In connection with the Merger, the Company entered into two-year
noncompetition agreements with certain of the former common shareholders of
ColorTyme. No additional consideration was paid by the Company pursuant to the
noncompetition agreements.
Immediately following the consummation of the Merger, ColorTyme
Financial Services, Inc. ("CTFS"), a Texas corporation and a wholly-owned
subsidiary of the Surviving Corporation, entered into a Portfolio Acquisition
Agreement (the "Portfolio Agreement") with STI Credit Corporation, a Nevada
corporation ("STI"), pursuant to which CTFS sold certain promissory notes and
other instruments, chattel paper, accounts and contracts (collectively, the
"Loans") owned by CTFC to STI for an aggregate purchase price of $21,150,630.57.
Approximately $13.5
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million of the net proceeds of such sale were used to repay certain indebtedness
owed by CTFS to Chrysler First Commercial Corporation. The Portfolio Agreement
is attached hereto as Exhibit 2.2. Pursuant to the terms of the Portfolio
Agreement, the portfolio purchase price was adjusted on or before May 30, 1996,
to reflect advances and payments made on the Loans between April 26 and May 15,
1996. If during the six-month period following May 15, 1996, STI determines, in
its reasonable judgment, that the balance of any Loan on May 15, 1996, was less
than the balance reflected in the Portfolio Agreement, CTFS must pay to STI, as
an adjustment to the portfolio purchase price, the net present value of the
difference between the actual balance and the balance reflected in the Portfolio
Agreement. [As of ______, 1997, an adjustment of $______ was made for such
loans.] If during the six-month period following May 15, 1996, STI determines
that any Loan, or CTFS's rights in the collateral securing such Loan, are not
properly documented, and such deficiency materially impacts the Loan, CTFS must
repurchase the Loan from STI. If any Loan is prepaid, CTFS must refund to STI
the premium paid by STI for such Loan. In addition, CTFS must pay to STI a
portion of the remaining balance of any Loan which goes into default, after
repossession and/or foreclosure proceedings by STI are unsuccessful in
liquidating the entire unpaid balance of the Loan. All of CTFS's obligations
under the Portfolio Agreement are guaranteed by the Company and the Surviving
Corporation.
The estate of Willie Ray Talley was the largest shareholder of
ColorTyme, owning approximately 63% of the outstanding shares of common stock.
Willie Ray Talley was the brother of J. Ernest Talley, Chairman of the Board of
Directors and Chief Executive Officer of the Company. J. Ernest Talley is the
executor of the estate of Willie Ray Talley. Willie Ray Talley had personally
guaranteed certain debts owed by ColorTyme and its subsidiaries which were paid
off in connection with the Merger. The Merger was approved by a majority of the
disinterested directors of the Company in compliance with Delaware law.
The Surviving Corporation is a franchisor of 251 rent-to-own stores in
37 states, and directly owns six rent-to-own stores. These stores generally
offer durable consumer goods such as televisions, video cassette recorders,
stereos, refrigerators, appliances, furniture and accessories, to individuals
under flexible rental purchase arrangements.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors, executive officers and holders of more than
10% of the Company's Common Stock to file with the Securities and Exchange
Commission ("SEC") initial reports of ownership and reports of changes in
ownership of Common Stock of the Company. Except as set forth below, the Company
believes, based solely on a review of the copies of such reports furnished to
the Company and written representations that no other reports were required,
that during 1996 all of the Company's directors, officers and holders of more
than 10% of its Common Stock complied with all Section 16(a) filing
requirements.
-24-
David D. Real and Juan M. Velez each failed to timely file one SEC Form
4 and Randall W. Simpson and Mitchell E. Fadel each failed to timely file one
SEC Form 3. Late reports were filed in each instance.
FUTURE STOCKHOLDER PROPOSALS
Proposals that stockholders of the Company intend to present for
inclusion in the Company's proxy statement and form of proxy with respect to the
Company's 1998 Annual Meeting of Stockholders must be received by the Company at
the address indicated on the first page of this Proxy Statement no later than
December 1, 1997. In addition, the Company's Amended and Restated Bylaws
generally require stockholders to give notice to the Company not less than 90
days prior to the anniversary date of the immediately preceding annual meeting
of stockholders of the Company in order to present proposals (whether or not
such proposals are to be included in the Company's proxy materials) or to
nominate directors.
ANNUAL REPORT
The Company's Annual Report for the year ended December 31, 1996 (which
includes a copy of the Company's Annual Report on Form 10-K) has been mailed to
all stockholders of record as of March 24, 1997. Such Annual Report is not a
part of the proxy solicitation material. The Company will provide without charge
a copy of the Annual Report on Form 10-K (without exhibits) to any stockholder
upon written request to David M. Glasgow, Secretary of the Company, 13800
Montfort Drive, Suite 300, Dallas, Texas 75240.
By Order of the Board of Directors,
David M. Glasgow
SECRETARY
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