================================================================================
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
ACE CASH EXPRESS, INC.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
ACE CASH EXPRESS, INC.
1231 GREENWAY DRIVE, SUITE 800
IRVING, TEXAS 75038
--------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 14, 1997
--------------------
To the Shareholders of Ace Cash Express, Inc.:
The Annual Meeting of Shareholders of Ace Cash Express, Inc., a Texas
corporation (the "Company"), will be held at the Four Seasons Hotel, 4150 North
MacArthur Blvd., Irving, Texas 75038, on November 14, 1997, at 10:00 a.m.,
Dallas, Texas time, for the following purposes:
(a) To elect six directors to serve until the next annual meeting of
shareholders or until their respective successors are elected and
qualified;
(b) to consider and vote upon a proposal to approve the ACE Cash Express,
Inc. 1997 Stock Option Plan;
(c) to consider and vote upon an amendment to the Company's Restated
Articles of Incorporation to increase the number of authorized shares
of Common Stock, $.01 par value per share, of the Company from
10,000,000 to 20,000,000; and
(d) to transact such other business as may properly come before the
meeting or any adjournment thereof.
Only shareholders of record at the close of business on September 26, 1997,
are entitled to notice of, and to vote at, the meeting or any adjournment
thereof. A list of shareholders entitled to vote at the meeting will be
available for examination at the Company's corporate offices at 1231 Greenway
Drive, Suite 800, Irving, Texas 75038, for ten days before the meeting.
Whether or not you plan to attend the Annual Meeting, please date and sign
the enclosed proxy and return it in the enclosed envelope. No postage is
required if the proxy is mailed in the United States. Your prompt response will
reduce the time and expense of solicitation. Any shareholder that returns a
proxy may revoke it by voting in person at the meeting.
By order of the Board of Directors,
Jay B. Shipowitz
Secretary
Irving, Texas
October 21, 1997
ACE CASH EXPRESS, INC.
1231 GREENWAY DRIVE, SUITE 800
IRVING, TEXAS 75038
--------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 14, 1997
--------------------
This Proxy Statement is furnished to shareholders of Ace Cash Express,
Inc., a Texas corporation (the "Company"), in connection with the solicitation,
at the Company's expense, on behalf of the Board of Directors of the Company of
proxies to be used at the Annual Meeting of Shareholders of the Company to be
held November 14, 1997 (the "Annual Meeting"). Proxies in the form enclosed will
be voted at the Annual Meeting if properly executed, returned to the Company
before the Annual Meeting and not revoked. Any shareholder giving such a proxy
may revoke it at any time before it is voted by written revocation delivered to
the Company's Secretary, by voting in person at the Annual Meeting or by giving
a later proxy. This Proxy Statement and the enclosed proxy form are first being
sent to shareholders on or about October 21, 1997.
Included with this Proxy Statement are copies of the Company's Annual
Report to Shareholders for the fiscal year ended June 30, 1997 ("fiscal 1997").
The Annual Report to Shareholders does not form any part of the proxy
solicitation material.
TABLE OF CONTENTS PAGE
Outstanding Capital Stock............................................ 3
Quorum and Voting.................................................... 3
Solicitation of Proxies; Action to be Taken at Meeting............... 3
Security Ownership of Certain Beneficial Owners and Management....... 4
Directors and Executive Officers.....................................
Board of Directors................................................ 6
Directors......................................................... 6
Committees, Meetings and Compensation of Members of the
Board of Directors............................................... 7
Compliance with Section 16(a) of the Securities Exchange Act...... 8
Executive Officers................................................ 9
Executive Compensation...............................................
Summary Compensation Table........................................ 10
Senior Management Bonus Plan...................................... 10
Stock Options..................................................... 11
Compensation Committee Interlocks and Insider Participation....... 11
Compensation Committee Report on Executive Compensation........... 12
Stock Performance Chart.............................................. 14
Proposal to Approve Ace Cash Express, Inc. 1997 Stock Option Plan
Background and Summary of Terms................................... 14
Tax Status of Stock Options....................................... 16
Required Vote..................................................... 16
Proposal to Approve an Amendment to the Restated Articles of
Incorporation to Increase the Authorized Shares of Common Stock.....
Background and Rationale.......................................... 17
Required Vote..................................................... 18
Relationship with Independent Public Accountants..................... 18
Shareholder Proposals................................................ 18
Miscellaneous........................................................ 18
2
OUTSTANDING CAPITAL STOCK
The record date for shareholders entitled to vote at the Annual Meeting is
September 26, 1997. At the close of business on that date the Company had
issued, outstanding and entitled to vote at the Annual Meeting 6,473,327 shares
of Common Stock, $.01 par value per share ("Common Stock").
QUORUM AND VOTING
The presence, in person or by proxy, of the holders of a majority of all
outstanding shares of the Common Stock on the record date is necessary to
constitute a quorum at the Annual Meeting. Assuming the presence of a quorum,
affirmative votes equal to at least (i) a plurality of the votes cast at the
Annual Meeting in person or by proxy is required for the election of directors,
(ii) the votes of a majority of all shares of Common Stock outstanding and
entitled to vote at the Annual Meeting in person or by proxy is required to
approve an amendment to the Company's Restated Articles of Incorporation, and
(iii) a majority of the votes cast at the Annual Meeting in person or by proxy
is required to approve any other matter. In deciding all questions, each
shareholder is entitled to one vote, in person or by proxy, for each share of
Common Stock held in such shareholder's name on the record date. Abstentions
will be included in vote totals and, as such, will have the same effect on each
proposal as a negative vote. Where nominee record holders do not vote on
specific matters because they did not receive specific instructions on such
matters from the beneficial owners of such shares ("broker non-votes"), such
broker non-votes will not be included in vote totals and, as such, will have no
effect on any proposal other than the proposal to amend the Company's Restated
Articles of Incorporation to increase the number of authorized shares of Common
Stock. Because such an amendment requires the approval of a majority of all
outstanding shares of Common Stock, broker non-votes will have the same effect
as a negative vote.
SOLICITATION OF PROXIES; ACTION TO BE TAKEN AT MEETING
The accompanying proxy for the Annual Meeting is solicited on behalf of the
Board of Directors. The Company will bear the expense of preparing, printing and
mailing the proxy solicitation material and the form of proxy. In addition to
the use of the mails, proxies may be solicited by personal interview, telephone
and telegram by the Company's directors, officers and employees. Arrangements
may also be made with brokerage houses and other custodians, nominees and
fiduciaries to forward solicitation material to the beneficial owners of shares
of Common Stock held of record by such persons, and the Company may reimburse
them for reasonable out-of-pocket expenses they incur in connection therewith.
When shareholders have appropriately specified how their proxies should be
voted, the proxies will be voted accordingly. Unless the shareholder otherwise
specifies therein, the accompanying proxy will be voted (i) for the election as
directors of the Company of the six persons named under the caption "Directors
and Executive Officers -- Board of Directors," (ii) for the proposal to approve
the ACE Cash Express, Inc. 1997 Stock Option Plan, (iii) for the proposal to
approve an amendment to the Company's Restated Articles of Incorporation to
increase the number of authorized shares of Common Stock from 10,000,000 to
20,000,000, and (iv) at the discretion of the proxy holders, with respect to any
other matter or business that may properly come before the Annual Meeting. The
Board of Directors does not know of any such other matter or business.
3
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock, as of September 26, 1997 by each person the
Company knows to beneficially own more than 5% of the outstanding Common Stock,
each of the Company's directors, the Named Executive Officers (as defined in
"Executive Compensation -- Summary Compensation Table" below), and all directors
and executive officers as a group. The Company believes each such shareholder
has sole voting and dispositive power over the shares held, except as otherwise
indicated.
Percentage of
Shares of Common Stock Common Stock
Beneficially Owned Beneficially Owned
---------------------- ------------------
Raymond C. Hemmig 518,092 (1) 8.0%
10000 N. Central Expressway,
Suite 1060
Dallas, Texas 75231
Donald H. Neustadt 612,613 (2) 9.5%
1231 Greenway Drive, Suite 800
Irving, Texas 75038
Howard W. Davis 12,000 (3) (8)
Marshall B. Payne 908,747 (4) 14.0%
500 Crescent Court, Suite 250
Dallas, Texas 75201
Edward W. Rose III 908,747 (5) 14.0%
500 Crescent Court, Suite 250
Dallas, Texas 75201
Charles Daniel Yost 9,000 (6) (8)
Raymond E. McCarty 124,205 (7) 1.9%
1231 Greenway Drive, Suite 800
Irving, Texas 75038
Jay B. Shipowitz 0 (8)
1231 Greenway Drive, Suite 800
Irving, Texas 75038
Greenbriar Partners, Ltd. 546,655 (9) 8.4%
1901 North Akard
Dallas, Texas 75201
Peter H. Kamin 379,070 (10) 5.9%
One Financial Center, Suite 1600
Boston, Massachusetts 02111
Edwin H. Morgens 382,200 (11) 5.9%
610 Fifth Avenue
New York, New York 10020
All directors and executive officers 2,184,657 (12) 33.7%
as a group (8 persons)
4
(1) Includes 5,000 shares Mr. Hemmig holds as custodian for his children and
options on 42,461 shares exercisable within 60 days of the date of this
Proxy Statement.
(2) Includes 1,500 shares Mr. Neustadt holds as custodian for a child and
options on 17,768 shares exercisable within 60 days of the date of this
Proxy Statement. Also includes 47,500 shares held by KLN Foundation, a
private charitable foundation of which Mr. Neustadt is one of three
trustees. Mr. Neustadt shares voting and dispositive power with the other
trustees. Mr. Neustadt disclaims beneficial ownership of the shares held by
KLN Foundation.
(3) Consists of options on 12,000 shares exercisable within 60 days of the date
of this Proxy Statement.
(4) Includes 136,723 shares of Common Stock owned by Mr. Payne and 16,080
shares owned by Scout Ventures, a Texas general partnership of which Mr.
Payne is a general partner ("Scout"). Also includes 746,944 shares of
Common Stock beneficially owned by other persons who may, with Mr. Payne
and Scout, constitute a group, according to a Schedule 13D filed with the
Securities and Exchange Commission on January 5, 1995, as supplemented by a
Form 4 filed by one of the persons thereafter (the "Schedule 13D"). The
other members of such group and their respective beneficial ownership of
shares, as reported in the Schedule 13D, are as follows:
a) Stephen J. Summers -- 4,500 shares.
b) Kaiser-Francis Oil Company - 18,450 shares.
c) Ruth Kaiser Nelson - 6,150 shares.
d) Rankin Investment Corporation ("RIC") - 750 shares. R. Todd Rankin,
the president and treasurer and a director of RIC, is an employee
of Cardinal Investment Company, Inc. ("Cardinal").
e) Edward W. Rose III - 610,510 shares, excluding any shares
beneficially owned by his wife, Evelyn P. Rose, or two trusts of
which she is the trustee.
f) Evelyn P. Rose and two trusts, the Lela Helen Rose Trust and the
William Edward Rose Trust, of which she is the trustee - 105,834
shares. Of these shares, 76,894 are owned by Mrs. Rose, and 14,470
are owned by each of the trusts.
g) Kathleen E. Wright - 750 shares. Ms. Wright is an employee of
Cardinal.
Mr. Payne disclaims beneficial ownership of any shares of Common Stock
owned by any such other member of the group that filed the Schedule 13D.
(5) Includes 610,510 shares of Common Stock owned by Mr. Rose. Also includes
298,237 shares beneficially owned by the other persons who may, with Mr.
Rose, constitute the group described in Note (4) above, including Mr. Payne
and Scout. Mr. Rose disclaims beneficial ownership of any shares of Common
Stock owned by any such other member of the group that filed the Schedule
13D.
(6) Consists of options on 9,000 shares exercisable within 60 days of the date
of this Proxy Statement.
(7) Includes options on 24,683 shares exercisable within 60 days of the date of
this Proxy Statement.
(8) Less than 1%.
(9) Includes 3,000 shares held by Mr. Frederick E. Rowe, Jr., the general
partner of Greenbriar Partners, Ltd. ("Greenbriar"). As general partner,
Mr. Rowe has the power to manage Greenbriar's operations, including the
shared right with Greenbriar to vote and dispose of the shares of Common
Stock Greenbriar holds. Mr. Rowe has sole voting and dispositive power over
the 3,000 shares he holds. Also includes an additional 10,000 shares owned
by the Rowe Family Partnership, of which Mr. Rowe is a general partner.
(10) Consists of 379,070 shares held by Peak Investment Limited Partnership
("Peak"), Petrus Fund LP ("Petrus") and Pleiades. Mr. Kamin has the
discretionary authority to manage Peak's, Petrus' and Pleiades' operations,
including the shared right with Peak, Petrus or Pleiades, as the case may
be, to vote and dispose of the shares of Common Stock that Peak and Petrus
hold. Mr. Kamin disclaims beneficial ownership of these shares.
(11) These shares consist of shares beneficially held by Morgens Waterfall
Vintiadis Investments N.V. ("MWV"), Betje Partners ("Betje"), Phaeton
International, N.V. ("Phaeton"), and Phoenix Partners ("Phoenix"). Betje,
Phaeton and Phoenix have sole voting and dispositive power over 70,800,
114,150 and 197,250 shares, respectively. Mr. Bruce Waterfall, 610 Fifth
Avenue, New York, New York 10020, could be deemed a beneficial owner of
these shares of Common Stock due to direct and indirect interests he holds
in the Morgens Group.
(12) See Notes (1) through (7).
5
DIRECTORS AND EXECUTIVE OFFICERS
BOARD OF DIRECTORS
Six directors are to be elected at the Annual Meeting. Each nominee will be
elected to hold office until the next annual meeting of the shareholders or
until his successor is elected and qualified. Proxy holders will not be able to
vote the proxies held by them for more than six persons. To be elected a
director, each nominee must receive a plurality of all of the votes cast at the
Annual Meeting for the election of directors. Should any nominee become unable
or unwilling to accept nomination or election, the proxy holders may vote the
proxies for the election, in his stead, of any other person the Board of
Directors may recommend. Each nominee is currently a director of the Company.
Each nominee has expressed his intention to serve the entire term for which
election is sought.
The Board of Directors' nominees for the office of director are as follows:
Year First
Age Became Director
--- ---------------
Raymond C. Hemmig 47 1988
Donald H. Neustadt 48 1987
Howard W. Davis 52 1995
Marshall B. Payne 40 1987
Edward W. Rose III 56 1987
Charles Daniel Yost 48 1996
DIRECTORS
Raymond C. Hemmig has served as the Chairman of the Board of the Company
since September 1988. From September 1988 to October 1994, Mr. Hemmig also
served as the Company's Chief Executive Officer. Mr. Hemmig serves as a director
of the National Association of Check Cashers and has served as President of the
Texas Association of Check Cashers, Inc. since its inception in November 1991
and as a member of the American Express MoneyGram Agent Advisory Board since
February 1991. Since February 1996, Mr. Hemmig has served as a director of Party
City Inc., a publicly held retail company. Since December 1995, Mr. Hemmig also
has served as the Chairman of the Board and Chief Executive Officer of Retail
and Restaurant Growth Capital, a licensed Small Business Investment Corporation
and a provider of financing to emerging retail and restaurant companies. From
1990 until May 1994, Mr. Hemmig also served as a director of On The Border
Cafes, Inc., a restaurant chain. Mr. Hemmig also serves as a director of various
private companies. From 1985 to September 1988, Mr. Hemmig was a partner and co-
founder of Hemmig & Martin, a consulting firm to clients in the food service,
retail and franchise industries.
Donald H. Neustadt has served as the President and Chief Executive Officer
of the Company since October 1994 and as a director of the Company since January
1987. Mr. Neustadt served as the Company's President and Chief Operating Officer
from January 1987 to October 1994. From 1972 to January 1987, Mr. Neustadt
served in various capacities with Associates Corporation of North America
("Associates NA") and its affiliates, including as President of Associates
Financial Express, Inc. ("Associates Financial"), a money order company; as
Senior Vice President and Controller of Associates Diversified Services, Inc.,
which owned a consumer credit card bank, a savings and loan and Associates
Financial; as Vice President of Strategic Planning for Associates NA; and as
Controller of Consumer Operations and a systems manager for Associates Financial
Services, a consumer finance company.
6
Howard W. Davis has served as a director of the Company since February
1995. Since 1993, Mr. Davis has managed his personal investments, served as a
consultant for a number of companies and worked on a volunteer basis for several
civic and charitable organizations. From 1981 to 1993, Mr. Davis served as the
President and Chief Executive Officer of Dallas-based Tracy Locke, Inc., a major
national advertising and public relations firm.
Marshall B. Payne has served as a director of the Company since 1987. Since
1983, Mr. Payne has been Vice President of Cardinal Investment Company, Inc., an
investment management firm. He is also a director of Leslie Building Products,
Inc., a building products manufacturer, and as a director of various private
companies.
Edward W. Rose III has served as a director of the Company since 1987.
Since 1974, Mr. Rose has been the President and sole shareholder of Cardinal
Investment Company, Inc. In addition, Mr. Rose serves as Chairman of the Board
of Drew Industries, Inc., an aluminum window manufacturer, and of Leslie
Building Products, Inc., a manufacturer and marketer of specialty building
products: as Co-Managing General Partner of the partnership that owns The Texas
Rangers Baseball Team; and as a director of various private companies.
Charles Daniel Yost has served as a director of the Company since August
1996. In July 1997, Mr. Yost joined Netcom Online Communications Systems, Inc.
as President and Chief Operating Officer. From 1994 to July 1997, Mr. Yost
served as President of the Southwest Region of AT&T Wireless Services, Inc., a
provider of cellular telephone service. From 1991 to June 1994, Mr. Yost served
as President of the Southwest Region for McCaw Cellular Communications/LIN
Broadcasting. From 1985 to July 1991, Mr. Yost served as President/General
Manager for MetroCel Cellular Telephone Company. From 1971 to April 1985, Mr.
Yost served in various capacities with Compucon, Inc. and its affiliates,
including as Executive Vice President of the Wireless Business Division; Vice
President and Division Manager of the Satellite Communications Services; and
Business Unit Manager of Danray, Inc., a Compucon subsidiary. In addition, Mr.
Yost serves as a director of Reese Associates, Inc., a privately held
architectural services provider.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE ELECTION OF
---
EACH NOMINEE.
COMMITTEES, MEETINGS AND COMPENSATION OF MEMBERS OF THE BOARD OF DIRECTORS
The Board of Directors of the Company has an Audit Committee and a
Compensation Committee to assist the Board of Directors in carrying out its
duties.
The Audit Committee's duties include: (i) engaging auditors and determining
their compensation; (ii) making recommendations to the Board of Directors for
reviewing the completed audit and audit report with the independent auditors,
the conduct of the audit, significant accounting adjustments, recommendations
for improving internal controls and all other significant findings during the
audit; (iii) meeting periodically with the Company's management and auditors to
discuss internal accounting and financial controls; and (iv) initiating and
supervising any special investigation it deems necessary regarding the Company's
accounting and financial policies and controls. Messrs. Rose and Yost are
currently the Audit Committee members.
The Compensation Committee's primary functions are to: (i) establish and
administer the Company's compensation policies, (ii) administer the Company's
1987 Stock Option Plan, as amended (the "1987 Option Plan"), the Company's Non-
Employee Directors Stock Option Plan (the "Directors Option Plan") and, if
approved by the shareholders, the Company's 1997 Stock Option Plan, and (iii)
oversee the administration of other employee benefit plans and fringe benefits
paid to or provided for the Company's officers. See "Executive Compensation -
Compensation Committee Report on Executive Compensation." Messrs. Davis and
Payne are the Compensation Committee members.
7
In fiscal 1997, the directors attended at least 75% of the meetings of the
Board of Directors and all of the meetings of committees of the Board of
Directors of which they are members. During fiscal 1997, the Board of Directors
held four meetings, the Audit Committee held one meeting, and the Compensation
Committee held two meetings.
The Company has no nominating committee. The entire Board of Directors is
responsible for selecting nominees for election as directors.
Each outside director (currently each director other than Messrs. Hemmig
and Neustadt) receives $1,500 for attendance at each Board of Directors meeting
and $500 for attendance at each meeting of a committee of the Board of Directors
that is not held in conjunction with a Board of Directors meeting.
Under the Directors Option Plan, an option to purchase 4,500 shares of
Common Stock is granted to each non-employee director on December 1 of each
year, commencing December 1, 1995, and an option to purchase 7,500 shares of
Common Stock is granted to each non-employee director elected to the Board of
Directors who has not previously served as a director of the Company on the date
of his election to the Board of Directors of the Company. The Directors Option
Plan requires that the exercise price of each option must be equal to the
closing price of the Common Stock on The Nasdaq Stock Market on the date the
option is granted.
Under the Directors Option Plan, (i) an option to purchase 7,500 shares of
Common Stock at an exercise price of $5.50 per share was granted to Mr. Davis in
March 1995 relating to his election to the Board of Directors; (ii) Mr. Davis,
Mr. Payne, and Mr. Rose each was granted an option to purchase 4,500 shares of
Common Stock at an exercise price of $6.17 per share on December 1, 1995; (iii)
an option to purchase 7,500 shares of Common Stock at an exercise price of $8.33
per share was granted to Mr. Yost when he was elected to the Board of Directors
in August 1996; and (iv) Mr. Davis, Mr. Payne, Mr. Rose and Mr. Yost each was
granted an option to purchase 4,500 shares of Common Stock at an exercise price
of $10.50 per share on December 1, 1996.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, executive officers and
holders of more than 10% of the Common Stock to file with the Securities and
Exchange Commission ("SEC") reports of ownership and reports of changes in
ownership of Common Stock. SEC regulations require such directors, executive
officers, and greater than 10% shareholders to furnish the Company with copies
of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required during fiscal 1997, directors, executive officers and
greater than 10% shareholders complied with all applicable Section 16(a) filing
requirements, except as described below in this section.
During fiscal 1997, a number of inadvertent failures to file or delays in
filing certain of the required forms was discovered, and corrective filings have
been made with the SEC. The Company understands that the omitted or delayed
filings concerned only becoming a reporting person or the receipt of stock
options granted under the 1987 Option Plan or the Directors Option Plan; timely
filings concerning sales and purchases (including the exercise of options) of
Common Stock were made.
Form 3 was not filed by Mr. Yost when he first became a director and was
granted a stock option in August 1996 or by Mr. Shipowitz when he became an
executive officer on May 1997 and was granted stock options in June 1997; each
of those persons filed a Form 5 for fiscal 1997 instead. Forms 5 to report the
annual grant of stock options under the Directors Option Plan to each of Messrs.
Davis, Payne, and Rose in fiscal 1996 were filed late. Forms 5 to report the
annual grant of stock options under the 1987 Option Plan to each of Messrs.
Hemmig and McCarty in each of fiscal 1993 through fiscal 1996 were not filed;
the Form 5 for fiscal
8
1997 filed by Mr. Hemmig included the requisite information for him, and a Form
5 filed by Mr. McCarty during fiscal 1997 included the requisite information for
him.
EXECUTIVE OFFICERS
NAME POSITION
---- --------
Raymond C. Hemmig Chairman of the Board
Donald H. Neustadt President and Chief Executive Officer
Raymond E. McCarty Senior Vice President of Operations,
President of Ace Franchise Group
Jay B. Shipowitz Senior Vice President, Chief Financial Officer,
Secretary and Treasurer
See "-- Directors" above for business experience information concerning
Messrs. Hemmig and Neustadt.
Raymond E. McCarty, age 55, has served as Senior Vice-President --
Operations of the Company since 1985. From 1982 to 1985, Mr. McCarty served as
Division Vice President of Associates NA and was responsible for organizing
Associates NA's first home improvement loan portfolio acquisition and for
establishing an automobile lending program. From 1963 to 1982, Mr. McCarty
served in various capacities with an affiliate of Barclays American Corporation,
including as an area director for a seven-state region. The Board of Directors
appointed Mr. McCarty, and he serves at its discretion.
Jay B. Shipowitz, age 34, has served as Senior Vice President and Chief
Financial Officer of the Company since May 27, 1997. From July 1996 to May 1997,
Mr. Shipowitz served as Senior Vice President and Chief Financial Officer of
USDATA Corporation, a software company, in Richardson, Texas. From June 1993 to
July 1996, Mr. Shipowitz served as Vice President of Finance and Administration
and Chief Financial Officer of Westinghouse Security Systems, Inc., a
residential security company, in Dallas, Texas. From 1987 to 1993, Mr. Shipowitz
worked at Price Waterhouse in Baltimore, Maryland, in various positions, the
last of which was senior manager. From 1985 to 1987, Mr. Shipowitz worked at
KPMG Peat Marwick in Greensboro, North Carolina. The Board of Directors
appointed Mr. Shipowitz, and he serves at its discretion.
9
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth all compensation paid or accrued for
services rendered to the Company for the last three fiscal years by the Chief
Executive Officer ("CEO") and each of the executive officers of the
Company whose total annual salary and bonus for fiscal 1997 exceeded $100,000
(collectively with the CEO, the "Named Executive Officers"):
Annual Compensation Long-Term Compensation
---------------------------------------------------------------------------------
Awards Payouts
Other ------------------------------------
Year Annual Restricted Securities LTIP All Other
Ended Compensation Stock Underlying Payouts Compensation
Name and Principal Position June 30, Salary($) Bonus($) ($)(1) Awards(S) Options/SARs(#) ($) ($)
- - ----------------------------------------------------------------------------------------------------------------------------
Raymond C. Hemmig 1997 80,006 - 13,875 - 5,300 - -
(Chairman of the 1996 80,006 - 13,875 - 5,250 - -
Board) 1995 109,309 - 13,875 - 5,250 - -
Donald H. Neustadt 1997 229,254 191,360 13,735 - - - -
(President and Chief 1996 188,569 85,651 13,735 - - - -
Executive Officer) 1995 167,167 - 13,735 - - - -
Raymond E. McCarty 1997 138,590 92,667 13,584 - 2,600 - -
(Senior Vice President 1996 119,217 43,320 13,584 - 2,625 - -
- - -Operations) 1995 114,302 - 13,584 - 2,625 - -
Jay B. Shipowitz(2) 1997 11,538 - 1,015 - 27,500 - -
(Senior Vice President
- - -Finance, Chief
Financial Officer,
Secretary and Treasurer
- - -----------------------------------
(1) Includes a cash car allowance of $9,000 annually.
(2) Mr. Shipowitz commenced his employment with the Company on May 27, 1997 at
an annual salary of $150,000. He is also entitled to participate in the
Senior Management Bonus Plan as described below.
SENIOR MANAGEMENT BONUS PLAN
The compensation table above includes bonuses paid under the Senior
Management Bonus Plan (the "Bonus Plan") for fiscal 1997. Under the Bonus Plan,
if the Company achieved 88% of a fiscal 1997 net income target established by
the Board of Directors, bonuses would be paid to the Named Executive Officers
and certain other members of management. Partial payments from the pool would
commence if the Company achieved over 88% of its fiscal 1997 pre-tax income
target. The total bonus pool would be payable if the Company achieved 100% of
its fiscal 1997 net income target and would be increased by 7.3% for each 1%
increase over 100% of the fiscal 1997 net income target. A total of $366,000 was
paid to the Named Executive Officers and other participating members of
management. See - "Compensation Committee Report on Executive Compensation"
below.
10
STOCK OPTIONS
The following table provides information on stock option/SAR grants to the
Named Executive Officers under the 1987 Option Plan during fiscal 1997:
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION FOR
INDIVIDUAL GRANTS (1) OPTION TERM (2)
- - ------------------------------------------------------------------------- ----------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION
NAME (#) FISCAL YEAR ($/SH) DATE 5% ($)(3) 10% ($)(3)
- - -------------------- ------------ ------------ ----------- ---------- --------- ----------
Raymond C. Hemmig 5,300 2.2 11.55 12/01/01 16,912 37,372
Raymond E. McCarty 2,600 1.1 10.50 12/01/01 7,542 16,667
Jay B. Shipowitz 27,500 11.3 11.00 06/06/02 83,575 184,679
(1) All options become exercisable in three equal annual installments. The
exercise price of each option is equal to the closing price per share of
the Common Stock on The Nasdaq Stock Market on the date the option was
granted. Each option was granted under the 1987 Option Plan in tandem with
stock appreciation rights, which provide that, in lieu of payment by the
optionholders and issuance of shares of Common Stock upon exercise of the
option, the Compensation Committee, in its discretion, may elect to pay the
optionholder an amount equal to the excess of the fair market value per
share on the date of exercise over the per share exercise price, multiplied
by the number of shares covered by the option being exercised.
(2) The values shown in these columns reflect growth rate assumptions the SEC
prescribes. Actual gains, if any, on stock option exercises and Common
Stock holdings are dependent on the Common Stock's future performance and
overall stock market conditions. There can be no assurance that the amounts
reflected in this table will be achieved.
(3) These values represent the difference between the assumed appreciation in
the Common Stock's market value at the date of grant and the exercise price
of the options/SARs.
The following table provides information on the stock options/SARs that the
Named Executive Officers held at June 30, 1997:
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED IN-
UNEXERCISED THE-MONEY
OPTIONS/SARS OPTIONS/SARS AT
AT FY-END (#) FY-END ($)*
SHARES VALUE ---------------- ---------------
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) ($) UNEXERCISABLE UNEXERCISABLE
- - -------------------------- ------------ -------- ---------------- --------------
Raymond C.Hemmig - - 37,194/10,550 213,494/46,737
Donald H. Neustadt - - 17,768/0 124,376/0
Raymond E. McCarty 10,000 128,750 22,066/5,225 140,119/27,013
Jay B. Shipowitz - - 0/27,500 0/41,250
- - ---------------------------
* Based on the closing price on The Nasdaq Stock Market of the Common Stock on
June 30, 1997 of $12.50 per share.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Howard W. Davis and Marshall B. Payne are, and were during fiscal 1997, the
members of the Compensation Committee. Neither of the members of the
Compensation Committee was during fiscal 1997, or has ever been, an officer or
employee of the Company or any of its subsidiaries.
11
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee has furnished the following report on the
Company's executive compensation program. The report describes the Compensation
Committee's compensation policies applicable to the Company's executive officers
and provides specific information regarding the CEO's compensation.
Non-employee members of the Company's Board of Directors review all
decisions the Compensation Committee makes relating to the Company's executive
officers' compensation. Only the Compensation Committee makes decisions about
grants or awards under the 1987 Option Plan.
Compensation Policy. The Compensation Committee's overall policy regarding
compensation of the Company's executive officers is to provide salary levels and
compensation incentives that attract and retain qualified individuals in key
positions; that recognize individual performance and the Company's performance;
and that support the Company's objective of achieving sustained improvements in
its financial condition, operating results and market position. The Compensation
Committee attempts to implement this policy by paying the Company's executive
officers slightly above average compensation with an emphasis on performance
related pay. The Company's objective is to pay its executive officers less in
base pay and automobile allowances than similarly situated executives at
comparable companies, and then to more than compensate for such reduced base pay
by providing executive officers the opportunity to earn significantly higher
than average performance-based compensation. The performance-based compensation
is made up of awards under the Bonus Plan and stock options under the 1987
Option Plan.
In determining executive officer compensation, the Compensation Committee
considers the Company's performance as compared to its budget, each individual
officer's experience level, level of responsibility and performance as compared
to the budgeted performance goals for such officer, the Company's growth and
cash flow performance. Individual salaries are reviewed every nine to 15 months
and, based on evaluations of individual performance, are adjusted in accordance
with budgeted compensation guidelines the Board of Directors has established for
all officers.
Base Salaries and Allowances. The Compensation Committee determines the
base pay and allowances for the CEO and reviews the compensation of the
Company's other officers as determined by the CEO. In this determination or
review, as the case may be, as a basis for comparison, the Compensation
Committee attempts to determine the base salaries and allowances of similarly
situated executives in comparable companies. The Compensation Committee
identifies such comparable companies, in its discretion, after considering a
broad range of factors, including levels of revenues, geographic regions of
operations, growth and industry (e.g., service versus manufacturing). Then the
Compensation Committee determines a base salary and automobile allowance that is
slightly less than that which such similarly situated executives at the
comparable companies would be paid.
Performance Pay. The Compensation Committee determines the performance-
based compensation for the CEO and reviews the performance-based compensation of
the Company's other executive officers as determined by the CEO. In this
determination or review, as the case may be, if the Company's executive officers
have performed in accordance with the Compensation Committee's expectations as
delineated above, the Compensation Committee ensures the CEO and the other
senior executives are provided with above average (as compared to similarly
situated executives at comparable companies) performance-based bonuses through
the Bonus Plan and stock options through the 1987 Option Plan.
Senior Management Bonus Plan. The Company maintains the Bonus Plan, which
is an incentive program for the Named Executive Officers and certain other
members of management. The Bonus Plan's goal is to place a portion of the
participants' annual compensation at risk to encourage and reward performance
that meets or exceeds the Company's budgeted expectations. Under the Bonus Plan,
at the beginning of each fiscal year, the Compensation Committee recommends, and
the Board of Directors approves, Company pre-tax income targets and the size of
the bonus pool if such targets are achieved. The Compensation Committee
determines each participant's share of the bonus pool by assuming the Company
reaches 100% of its income target and
12
determining the additional income that each such officer needs for his total
compensation to be slightly above that offered to similarly situated officers at
comparable companies.
Under the Bonus Plan, if the Company achieved 88% of the fiscal 1997 pre-
tax income target established by the Board of Directors, bonuses would be paid
to the Named Executive Officers and certain other members of management. Partial
payments from the pool would commence if the Company achieved over 88% of its
fiscal 1997 pre-tax income target. The total bonus pool would be payable if the
Company achieved 100% of its fiscal 1997 pre-tax income target and would be
increased by 7.3% for each 1% increase over 100% of the fiscal 1997 net income
target.
Stock Options. The Compensation Committee grants stock options under the
1987 Option Plan to encourage and facilitate personal stock ownership by
officers and key employees, including the CEO, thus strengthening their
commitment to the Company and encouraging a longer-term perspective to their
responsibilities. This feature of the Company's compensation program directly
links officers' and key employees' interests with those of the Company's
shareholders. The Compensation Committee reviews grants of stock options to the
Company's officers and considers the value and benefit of such options during
its review of such officers' overall compensation packages. The Compensation
Committee's policy is to grant stock option awards under the 1987 Option Plan
based on individual performance and the potential for the option recipient to
contribute to the Company's future success. Under the 1987 Option Plan, the
Compensation Committee may grant either incentive or non-qualified options, but
typically grants incentive stock options because of the tax advantages to the
optionees resulting from the grant of such options. In addition, although the
1987 Option Plan provides that options may be granted with terms of up to 10
years and permits options to be immediately exercisable, the Compensation
Committee generally grants options under the 1987 Option Plan that expire in
five years and become exercisable in equal installments over a three-year
period.
The Compensation Committee believes that such limitations provide those
holding options with incentives to remain in the employment of the Company,
while also providing a performance incentive that can provide direct benefits
within a relatively short period of time.
CEO Compensation. In accordance with the policies described above in this
report, the fiscal 1997 base salary of Mr. Neustadt was established at $229,254.
The Compensation Committee believed that this salary was within the range of
salaries paid to chief executive officers of comparable companies in October
1996, when it was established. This salary, which constituted an increase of
approximately 22% of the salary that had been set for Mr. Neustadt in fiscal
1996, reflected the Committee's assessment of Mr. Neustadt's past performance
and anticipated future contributions to the Company. Mr. Neustadt has overseen
the Company's operations since October 1995, and has served as a key role in
the expansion of the various kinds of business that the Company conducts and in
its growth strategy, including major acquisitions. He is thoroughly familiar
with the consumer or retail financial services industry and would (the
Compensation Committee believed) continue to lead the Company's growth and
success. In accordance with the terms of the Bonus Plan, Mr. Neustadt received a
bonus of $191,360 in fiscal 1997. The committee authorized a grant to Mr.
Neustadt of options to acquire 2,500 shares of Common Stock under the 1987 Plan,
but Mr. Neustadt declined such grant.
The Compensation Committee of the Board of Directors
Howard W. Davis
Marshall B. Payne
13
STOCK PERFORMANCE CHART
The following chart compares the return on the Common Stock with the NASDAQ
Market Index and a financial services peer group (consisting of Cash America
International, Inc., EZ Corp, Inc., First Cash, Inc., H&R Block, Inc., Mercury
Finance Company and World Acceptance Corp.) for the period from December 2, 1992
(the initial day of trading in the Common Stock) through June 30, 1997. The
comparison assumes that $100 was invested on December 2, 1992 and assumes
reinvestment of dividends and distributions.
[PERFORMANCE GRAPH APPEARS HERE]
COMPARISON OF CUMULATIVE TOTAL RETURN
OF COMPANY, PEER GROUP AND BROAD MARKET
-------------------------------FISCAL YEAR ENDING----------------------------
COMPANY 1992 1993 1994 1995 1996 1997
ACE CASH EXPRESS INC 100 54.70 54.70 62.39 100.86 128.14
PEER GROUP 100 101.49 109.79 121.60 107.62 80.62
BROAD MARKET 100 114.80 125.89 147.65 185.86 223.89
THE PEER GROUP CHOSEN WAS:
Customer Selected Stock List
THE BROAD MARKET INDEX CHOSEN WAS:
NASDAQ MARKET INDEX
THE PEER GROUP IS MADE UP OF THE FOLLOWING SECURITIES:
BLOCK, H&R INC
CASH AMERICA INTERNAT
EZCORP INC CL A
FIRST CASH INC
MERCURY FINANCE CO
WORLD ACCEPTANCE CORP
PROPOSAL TO APPROVE ACE CASH EXPRESS, INC. 1997 STOCK OPTION PLAN
BACKGROUND AND SUMMARY OF TERMS
On August 4, 1997, the Board of Directors of the Company adopted the Ace
Cash Express, Inc. 1997 Stock Option Plan (the "1997 Option Plan") pursuant to
which options may be granted to the key employees of the Company and its
subsidiaries for the purchase of shares of Common Stock, subject to the approval
of the shareholders. The proposed 1997 stock option plan replaces the 1987 stock
option plan upon its expiration in December of 1997. At the Annual Meeting,
shareholders are being asked to approve the 1997 Option Plan. The Company
intends for all options granted under the 1997 Option Plan to conform with the
provisions of Rule 16b-3 under the Exchange Act. The 1997 Option Plan is
intended to replace the 1987 Option Plan, which expires by its terms on December
17, 1997, so that no more options can thereafter be granted under that plan.
However, any outstanding options granted pursuant to the 1987 Option Plan will
remain outstanding and be administered pursuant to the terms and conditions of
that plan.
The following description of the 1997 Option Plan is a summary, does not
purport to be detailed, and is qualified in its entirety by reference to the
provisions of the 1997 Option Plan itself. A copy of the 1997 Option Plan is
attached as Exhibit A to this Proxy Statement.
The 1997 Option Plan permits the grant of options to the key employees
(including officers) of the Company and its subsidiaries to purchase shares of
Common Stock. The employees eligible for options under the 1997 Option Plan are
those employees whose performance and responsibilities are determined by the
Compensation Committee of the Board of Directors to be influential to the
success of the Company and its subsidiaries. The total number of shares of
Common Stock available for grant under the 1997 Option Plan is 600,000 shares.
The option
14
period (i.e., the term of an option) may not be more than ten years from the
date the option is granted. The Compensation Committee determines in its
discretion the key employees who will receive grants, the number of shares
subject to each option granted, the exercise price and the option period, and it
administers and interprets the 1997 Option Plan. Approximately 560 of the
Company's employees are eligible to participate in the 1997 Option Plan.
Full payment for shares purchased upon exercise of an option must be made
at the time of exercise, and no shares may be issued until full payment is made.
The exercise price of each option is payable in cash or by check or, if the
applicable stock option agreement so provides, in shares of Common Stock at the
fair market value per share on the date of exercise.
Though the Compensation Committee has discretion to determine the terms of
the exercise of any option, it is expected that options will generally be
exercisable in equal annual installments over a four-year period. All
installments that become exercisable are cumulative and may be exercised at any
time after they become exercisable until the expiration of the option period.
Incentive stock options and, unless otherwise specified in the applicable stock
option agreements, nonqualified stock options may not be transferred other than
by will or by the laws of descent and distribution. If an optionee dies or
becomes permanently disabled before the termination of his option without having
totally exercised the option, the option may be exercised, to the extent that
the optionee could have exercised it on the date of his death or disability, by
(i) in the case of death, his estate or the person who acquired the right to
exercise the option by bequest or inheritance, or (ii) in the case of
disability, the optionee or his personal representative, provided that the
option is exercised before the date of the expiration of the option period or
180 days after the date of the optionee's death or disability, whichever occurs
first.
Both incentive stock options and nonqualified stock options may be granted
under the 1997 Option Plan. The 1997 Option Plan requires that the exercise
price of each incentive stock option will not be less than 100% of the fair
market value of the Common Stock at the time of the grant of the option. No
incentive stock option, however, may be granted under the 1997 Option Plan to
anyone who owns more than 10% of the outstanding Common Stock unless the
exercise price is at least 110% of the fair market value of the Common Stock at
the date of grant and the option is not exercisable for more than five years
after it is granted. There is no limit on the fair market value of incentive
stock options that may be granted to an employee in any calendar year, but no
employee may be granted incentive stock options that first become exercisable
during a calendar year for the purchase of stock with an aggregate fair market
value (determined as of the date of grant of each option) in excess of $100,000.
An option (or an installment thereof) counts against the annual limitation only
in the calendar year it first becomes exercisable.
Unless the Board of Directors terminates it sooner, the 1997 Option Plan
will terminate on August 4, 2007, and no options may be granted under the 1997
Option Plan thereafter. The Board of Directors or the Compensation Committee may
amend, alter or discontinue the 1997 Option Plan without the shareholders'
approval, except that the Board of Directors or the Compensation Committee does
not have the power or authority to materially increase the number of securities
that may be issued under the 1997 Option Plan or to materially modify the
requirements of eligibility for participation in the 1997 Option Plan. The Board
of Directors or the Compensation Committee, however, may make appropriate
adjustments in the number of shares the 1997 Option Plan covers, in the number
of outstanding options, and in the option exercise prices to reflect any stock
dividend, stock split, share combination or other recapitalization and, with
respect to outstanding options and option prices, to reflect any merger,
consolidation, reorganization, liquidation or similar transaction involving the
Company.
On the date of this Proxy Statement, no options have been granted pursuant
to the 1997 Option Plan; however, on June 30, 1997, options to purchase an
aggregate of 510,842 shares of Common Stock (net of expired or terminated
options) remained outstanding under the 1987 Option Plan. As of June 30, 1997,
the market value of all shares of Common Stock subject to outstanding options
was approximately $6.4 million (based upon the closing price of the Common Stock
of $12.50 per share as reported on The Nasdaq Stock Market on such date).
15
TAX STATUS OF STOCK OPTIONS
Pursuant to the 1997 Option Plan, the Compensation Committee may provide
for an option to qualify either as an "incentive stock option" ("ISO") or as a
"nonqualified option" for United States federal income tax purposes.
Incentive Stock Options. All stock options that qualify under the rules of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), will
be entitled to ISO treatment. To receive ISO treatment, an optionee must not
dispose of the acquired stock within two years after the option is granted or
within one year after exercise. In addition, the individual must have been an
employee of the Company for the entire time from the date of granting of the
option until three months (or one year if the employee is disabled) before the
date of the exercise. The requirement that the individual be an employee and the
two-year and one-year holding periods are waived in the case of death of the
employee. If all such requirements are met, no tax will be imposed upon exercise
of the option, and any gain upon sale of the stock will be entitled to capital
gain treatment. The employee's gain on exercise (the excess of fair market value
at the time of exercise over the exercise price) of an ISO is a tax preference
item and, accordingly, is included in the computation of alternative minimum
taxable income.
If an employee does not meet the two-year and one-year holding requirement
(a "disqualifying disposition"), but does meet all other requirements, tax will
be imposed at the time of sale of the stock, but the employee's gain on exercise
will be treated as ordinary income rather than capital gain and the Company will
get a corresponding deduction at the time of sale. Any remaining gain on sale
will be short-term or long-term capital gain, depending on the holding period of
the stock. If the amount realized on the disqualifying disposition is less than
the value at the date of exercise, the amount includible in gross income, and
the amount deductible by the Company, will equal the excess of the amount
realized on the sale or exchange over the exercise price.
An optionee's stock option agreement may permit payment for stock upon the
exercise of an ISO to be made with other shares of Common Stock. In such a case,
in general, if an employee uses stock acquired pursuant to the exercise of an
ISO to acquire other stock in connection with the exercise of an ISO, it may
result in ordinary income if the stock so used has not met the minimum statutory
holding period necessary for favorable tax treatment as an ISO.
Nonqualified Options. In general, no taxable income will be recognized by
the optionee, and no deduction will be allowed to the Company, upon the grant of
an option. Upon exercise of a nonqualified option an optionee will recognize
ordinary income (and the Company will be entitled to a corresponding tax
deduction if applicable withholding requirements are satisfied) in an amount
equal to the amount by which the fair market value of the shares on the exercise
date exceeds the option exercise price. Any gain or loss realized by an optionee
on disposition of such shares generally is a capital gain or loss and does not
result in any tax deduction to the Company.
The foregoing statements are based upon present federal income tax laws and
regulations and are subject to change if the tax laws and regulations, or
interpretations thereof, are changed.
REQUIRED VOTE
The favorable vote of the holders of a majority of the shares of Common
Stock present and entitled to vote at the Annual Meeting in person or by proxy
is required to approve the 1997 Option Plan. If the requisite vote of the
shareholders is not obtained, the 1997 Option Plan will be null and void.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSAL TO
---
APPROVE THE 1997 OPTION PLAN.
16
PROPOSAL TO APPROVE AN AMENDMENT TO THE RESTATED
ARTICLES OF INCORPORATION TO INCREASE
THE AUTHORIZED SHARES OF COMMON STOCK
BACKGROUND AND RATIONALE
The Board of Directors believes that it is desirable to amend the Company's
currently effective Restated Articles of Incorporation (the "Articles") to
increase the number of authorized shares of Common Stock from 10,000,000 to
20,000,000.
During fiscal 1997, the Company effected a three-for-two stock split in the
form of a 50% stock dividend payable to shareholders of record as of November
15, 1996. As a result of that stock split and exercises of outstanding stock
options, particularly under the 1987 Option Plan, out of the 10,000,000 shares
of Common Stock currently authorized in the Articles, 6,473,327 shares were
issued as of September 26, 1997. Of the remaining 3,526,673 authorized shares of
Common Stock, a total of 791,783 shares were reserved for issuance in connection
with the 1987 Option Plan and the Directors Option Plan. Also, if the 1997
Option Plan is approved by the shareholders, an additional 600,000 shares of
Common Stock would be reserved in connection with the 1997 Option Plan.
Except for those shares currently reserved or proposed to be reserved for
issuance under option plans, the Company does not have any present plan,
understanding or agreement to issue additional shares of Common Stock. However,
the Board of Directors believes that the proposed increase in authorized shares
of Common Stock is desirable to enhance the Company's flexibility in connection
with possible future actions, such as stock splits, stock dividends, financings,
corporate mergers, or acquisitions of property; for incentive compensation under
stock option plans and other employee benefit plans; or for other corporate
purposes. The Board of Directors will determine whether, when, and on what terms
the issuance of shares of Common Stock may be warranted in connection with any
of the foregoing purposes.
The Board of Directors generally does not intend to seek further
shareholder approval before the issuance of any additional shares unless
required by law, the Articles, or the rules of The Nasdaq Stock Market or any
stock exchange upon which the Common Stock may be listed. The Board of Directors
does not intend to issue any Common Stock to be authorized under the proposed
amendment to the Articles except upon terms the Board of Directors deems to be
in the best interest of the Company and its shareholders. The issuance of
additional Common Stock may, depending upon the circumstances of the issuance,
have a dilutive effect on earnings per share and may decrease the percentage
ownership in the Company (for voting, distributions, and other purposes) of
existing holders of Common Stock. Holders of shares of Common Stock have no
preemptive rights to acquire any additional securities issued by the Company.
The availability for issuance of the additional authorized shares of Common
Stock may also be viewed as having the effect of discouraging an unsolicited
attempt by another person or entity to acquire control of the Company. Although
the Board of Directors has no present intention to do so, the Company's
authorized but unissued Common Stock could be issued in one or more transactions
that would make a takeover of the Company more difficult or costly, and
therefore less likely. Management of the Company is not aware of any person or
entity who is seeking to acquire control of the Company.
The text of the proposed amendment to the Articles is attached as Exhibit B
to this Proxy Statement.
The proposed amendment would not change the authorized number of shares of
the Preferred Stock, $1.00 par value, of the Company, none of which is
outstanding on the date of this Proxy Statement.
Other than increasing the number of authorized shares of Common Stock from
10,000,000 to 20,000,000, the proposed amendment does not change the Articles.
17
The Board of Directors has unanimously adopted resolutions setting forth
the proposed amendment to the Articles and recommending that the proposed
amendment be approved by the shareholders of the Company. If approved by the
shareholders, the amendment will become effective upon the filing of articles of
amendment to the Articles with the Secretary of State of Texas as required by
the Texas Business Corporation Act.
REQUIRED VOTE
The favorable vote of the holders of a majority of all of the outstanding
shares of Common Stock on the record date for the Annual Meeting is required to
approve the proposed amendment to the Articles.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSED
---
AMENDMENT TO THE ARTICLES.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP served as the independent auditors of the Company for
fiscal 1997 and has been selected by the Board of Directors as the independent
auditors of the Company for the current fiscal year. One or more representatives
of Arthur Andersen LLP are expected to attend the Annual Meeting, at which they
will have an opportunity to make a statement and will respond to appropriate
questions from shareholders.
SHAREHOLDER PROPOSALS
Any proposals from shareholders to be presented for consideration for
inclusion in the proxy material in connection with the 1998 Annual Meeting of
Shareholders of the Company must be submitted in accordance with the SEC's rules
and received by the Company's Secretary at the Company's principal executive
offices no later than the close of business on June 10, 1998.
MISCELLANEOUS
All information contained in this Proxy Statement relating to the
occupations, affiliations and securities holdings of directors and executive
officers of the Company and their relationship and transactions with the Company
is based upon information received from the individual directors and executive
officers. All information relating to any beneficial owner of more than 5% of
the Common Stock is based upon information contained in reports filed by such
owner with the SEC.
The Company will furnish without charge a copy of its Annual Report on Form
10-K, including the financial statements and schedules thereto, for the fiscal
year ended June 30, 1997 filed with the SEC pursuant to Section 13 or 15(d) of
the Exchange Act to any shareholder (including any beneficial owner) upon
written request to Investor Relations/Corporate Communications, 1231 Greenway
Drive, Suite 800, Irving, Texas 75038. A copy of the exhibits to such report
will be furnished to any shareholder upon written request therefor and payment
of a nominal fee.
By order of the Board of Directors,
Jay B. Shipowitz
Secretary
Irving, Texas
October 21, 1997
18
Exhibit A
---------
ACE CASH EXPRESS, INC.
1997 STOCK OPTION PLAN
On August 4, 1997, the Board of Directors of Ace Cash Express, Inc. adopted
the following 1997 Stock Option Plan:
1. PURPOSE. The purpose of the Plan is to provide key employees with
a proprietary interest in the Company through the granting of options which
will
(a) increase the interest of the key employees in the Company's and
its Subsidiaries' welfare;
(b) furnish an incentive to the key employees to continue their
services for the Company and its Subsidiaries; and
(c) provide a means through which the Company and its Subsidiaries
may attract able persons to enter its employ.
2. ADMINISTRATION. The Plan will be administered by the Committee.
3. PARTICIPANTS. The Committee shall, from time to time, select the
particular key employees of the Company and its Subsidiaries to whom options
are to be granted and who will, upon such grant, become participants in the
Plan. For purposes of the Plan, "key employees" are those officers and
employees whose performance and responsibilities are determined by the
Committee to be influential to the success of the Company and its
Subsidiaries.
4. STOCK OWNERSHIP LIMITATION. No Incentive Option may be granted to
a key employee who owns more than 10% of the voting power of all classes of
capital stock of the Company or its Parent or Subsidiaries; except that this
limitation will not apply if the option price is at least 110% of the fair
market value of the Common Stock at the time the
Incentive Option is granted and the Incentive Option is not exercisable more
than five years from the date it is granted.
5. SHARES SUBJECT TO PLAN. The Committee may not grant options under
the Plan for more than 600,000 shares of Common Stock, but this number may
be adjusted to reflect, if deemed appropriate by the Committee, any stock
dividend, stock split, share combination, recapitalization, or the like of
or by the Company. Shares to be optioned and sold may be made available
from either authorized but unissued Common Stock or Common Stock held by the
Company in its treasury. Shares that by reason of the expiration of an
option or otherwise are no longer subject to purchase pursuant to an option
granted under the Plan may be re-offered under the Plan.
6. LIMITATION ON AMOUNT. The aggregate fair market value (determined
at the time of grant) of the shares of Common Stock which any key employee
is first eligible to purchase in any calendar year by exercise of Incentive
Options granted under the Plan and all incentive stock option plans of the
Company or its Parent or Subsidiaries shall not exceed $100,000. For this
purpose, the fair market value (determined at the date of grant of each
option) of the Common Stock purchasable by exercise of an Incentive Option
(or an installment thereof) shall be counted against the $100,000 annual
limitation for a key employee only for the calendar year such Common Stock
is first purchasable under the terms of the option.
7. ALLOTMENT OF SHARES. The Committee shall determine the number of
shares of Common Stock to be offered from time to time by grant of options
to key employees of the Company or its Subsidiaries. The grant of an option
to a key employee shall not be deemed to entitle the employee to, or to
disqualify the employee from, participation in any other grant of options
under the Plan.
2
8. GRANT OF OPTIONS. All options under the Plan shall be granted by
the Committee, which is authorized to grant Incentive Options and
Nonqualified Options under the Plan. Each grant of options shall be
evidenced by a stock option agreement containing such terms and provisions
as are approved by the Committee, but not inconsistent with the Plan,
including (without limitation) provisions that may be necessary to assure
that any option that is intended to be an Incentive Option will comply with
Section 422 of the Internal Revenue Code. The Company shall execute stock
option agreements upon instructions from the Committee. The Plan shall be
submitted to the Company's shareholders for approval. The Committee may
grant options under the Plan prior to the time of shareholder approval, and
those options will be effective when granted, but if for any reason the
shareholders of the Company do not approve the Plan prior to one year from
the date of adoption of the Plan by the Board, all options granted under the
Plan will be terminated and of no effect. No option may be exercised in
whole or in part prior to such shareholder approval. A stock option
agreement may provide that the participant may request approval from the
Committee to exercise an option or a portion thereof by tendering shares of
Common Stock, at the fair market value per share on the date of exercise, in
lieu of cash payment of the exercise price.
9. OPTION PRICE. The option price of an Incentive Option shall not be
less than 100% of the fair market value per share of the Common Stock (or
110% of such value if required by Section 4) on the date the Incentive
Option is granted. The Committee shall determine the fair market value of
the Common Stock on the date of grant of the Incentive Option, using any
reasonable valuation method, and shall set forth the determination in the
resolutions it adopts or in minutes.
10. OPTION PERIOD. The Option Period will begin on the date the
option is granted, which will be the date the Committee authorizes the
option unless the Committee
3
specifies another date (which can only be a later date if the option is an
Incentive Option). No option may terminate later than ten years from the
date the option is granted. The Committee may provide for the exercise of
options in installments and upon such terms, conditions, and restrictions as
it may determine. The Committee may provide for termination of the option in
the case of termination of employment or for any other reason.
11. RIGHTS IN EVENT OF DEATH OR DISABILITY. If a participant dies or
becomes disabled (within the meaning of Section 22(e)(3) of the Internal
Revenue Code) prior to expiration of his or her right to exercise an option
in accordance with the provisions of the applicable stock option agreement
without having totally exercised the option, the option may be exercised, to
the extent of the shares with respect to which the option could have been
exercised by the participant on the date of his or her death or disability
(or to such other extent provided in the stock option agreement), (a) in the
case of death, by the participant's estate or by the person who acquired the
right to exercise the option by bequest or inheritance or by reason of the
death of the participant, or (b) in the case of disability, by the
participant or his or her personal representative, provided the option is
exercised prior to the date of its expiration or not more than 180 days
after the date of termination of the participant's employment because of his
or her death or disability (or such other date as may be provided in the
stock option agreement), whichever first occurs. The date of disability of
a participant shall be determined by the Committee.
12. PAYMENT. Full payment for shares purchased upon exercising an
option shall be made at the time of exercise in cash or by check, or if the
stock option agreement so permits, by tendering shares of Common Stock at
the fair market value per share at that time, or on such other terms as are
set forth in the applicable stock option agreement. No shares may be issued
until full payment of the purchase price therefor has been made, and a
participant will have none
4
of the rights of a shareholder of the Company regarding those shares until
those shares are issued to him. In addition, the participant shall tender
payment of such amount as may be requested by the Company, if any, for the
purpose of satisfying its liability to withhold federal, state, or local
income or other taxes incurred by reason of the exercise of an option.
13. EXERCISE OF OPTION. Options granted under the Plan may be
exercised during the Option Period at such times, in such amounts, in
accordance with such terms, and subject to such restrictions as are set
forth in the applicable stock option agreements. A stock option agreement
may provide for acceleration of exercise upon termination of employment for
any reason. In no event may an option be exercised or shares be issued
pursuant to the exercise of an option if any requisite action, approval, or
consent of any governmental authority of any kind having jurisdiction over
the exercise of options shall not have been taken or secured.
14. CAPITAL ADJUSTMENTS AND REORGANIZATIONS. The number of shares of
Common Stock covered by each outstanding option granted under the Plan and
the option or purchase price may be adjusted to reflect, as deemed
appropriate by the Committee, any stock dividend, stock split, share
combination, exchange of shares, sale of all or substantially all
outstanding capital stock, recapitalization, merger, consolidation,
separation, reorganization, sale of all or substantially all assets,
liquidation, or the like of or by the Company.
In the event of a merger, consolidation, share exchange, sale of all or
substantially all outstanding capital stock, reorganization, sale of all or
substantially all assets, liquidation, recapitalization, separation, or the
like of or by the Company, the Company (acting by or through the Board or
the Committee) may make such arrangements as it deems advisable with respect
to outstanding options granted under the Plan, and those arrangements shall
be binding upon each participant who holds an outstanding option granted
under the Plan, including
5
(without limitation) arrangements for the substitution of new options for
any options then outstanding (by conversion or otherwise), the assumption of
any such outstanding options, or the payment for any such outstanding
options. Any such arrangements relating to an Incentive Option shall comply
with the requirements of Section 422 of the Internal Revenue Code and the
regulations thereunder. If (a) the Company becomes a party to an agreement
providing for the merger, consolidation, or share exchange of or by the
Company, any other sale of all or substantially all of the outstanding
Common Stock, or any sale of all or substantially all of the assets of the
Company (any such transaction, a "Transaction") and the agreement provides
that the holders of the outstanding shares of Common Stock will receive
cash, securities, or other property directly or indirectly from one or more
persons or entities other than the Company or any of its Subsidiaries
(collectively, if more than one, the "Purchaser") upon the effectiveness of
the Transaction, and (b) the Company does not make arrangements for the
substitution of new options from the Purchaser for any options then
outstanding (by conversion or otherwise), the assumption of such options by
the Purchaser, or the payment for such options, then the Plan shall
terminate and any options outstanding under the Plan shall terminate upon
the effectiveness of such Transaction; provided, however, that all
outstanding options granted under the Plan (whether or not theretofore
vested or exercisable) shall become immediately exercisable during the ten
days immediately preceding the effective date of such Transaction as well as
on the effective date of the Transaction until it is effective. If the
options will so terminate upon the effectiveness of a Transaction, the
Company shall give each holder of an option at least ten days' notice of the
opportunity to exercise his or her options before such termination. The
Company shall, prior to the effectiveness of the Transaction, issue all
Common Stock purchased by exercise of outstanding options, and such Common
Stock shall be treated as issued and outstanding for purposes of the
Transaction.
6
15. NON-ASSIGNABILITY. Incentive Options and, unless specified in the
applicable stock option agreement, Nonqualified Options may not be
transferred other than by will or by the laws of descent and distribution.
Except to the extent provided in Section 11, during a participant's
lifetime, Incentive Options and, unless specified in the applicable stock
option agreement, Nonqualified Options granted to a participant may be
exercised only by the participant.
16. INTERPRETATION AND LIABILITY. The Committee shall interpret the
Plan and shall prescribe such rules and regulations in connection with the
operation of the Plan as it determines to be advisable for the
administration of the Plan. The Committee may rescind and amend its rules
and regulations. Neither the Committee nor any member thereof shall be
liable for any action, omission, interpretation, construction, or
determination made in connection with the Plan in good faith, and the
members of the Committee shall be entitled to indemnification and
reimbursement by the Company in respect of any claim, loss, damage, or
expense (including, without limitation, attorneys' fees) arising therefrom
to the full extent permitted by law and the Articles of Incorporation and
the Bylaws of the Company.
17. AMENDMENT OR DISCONTINUANCE. The Plan may be amended or
discontinued by the Board or the Committee without the approval of the
shareholders of the Company, except that any amendment that would (a)
materially increase the number of securities that may be issued under the
Plan or (b) materially modify the requirements of eligibility for
participation in the Plan must be approved by the shareholders of the
Company.
18. EFFECT OF PLAN. Neither the adoption of the Plan nor any action
of the Board or the Committee shall be deemed to give any key employee any
right to be granted an option to purchase Common Stock or any other rights
except as may be evidenced by a stock option agreement, or any amendment
thereto, duly authorized by the Committee and executed
7
on behalf of the Company, and then only to the extent and on the terms and
conditions expressly set forth therein. The existence of the Plan and the
options granted hereunder shall not affect in any way the right or power of
the Board or the shareholders of the Company to make or authorize any
adjustment, recapitalization, reorganization, or other change in the
Company's capital structure or its business, any merger or consolidation of
the Company, any issue of bonds, debentures, or shares of preferred stock
ahead of or affecting the Common Stock or the rights of the holders thereof,
the dissolution or liquidation of the Company or any sale or transfer of all
or any part of its assets or business, or any other corporate act or
proceeding. Nothing in this Plan shall be construed as conferring upon any
participant the right to continue as an employee, officer, or director of
the Company.
19. TERM. Unless sooner terminated by action of the Board, this Plan
will terminate on August 4, 2007. The Committee may not grant options
under the Plan after that date, but options granted before that date will
continue to be effective in accordance with their terms.
20. APPLICABLE LAW. This Plan shall be construed and enforced in
accordance with, and governed by, the laws of the State of Texas.
21. DEFINITIONS. For the purpose of this Plan, unless the context
requires otherwise, the following terms shall have the meanings indicated:
(a) "Board" means the Board of Directors of the Company.
(b) "Committee" means the committee of the Board appointed to
administer the Plan, or in the absence of such a committee, the
entire Board.
8
(c) "Common Stock" means the Common Stock which the Company is
currently authorized to issue or may in the future be authorized to
issue (as long as the common stock varies from that currently
authorized, if at all, only in amount of par value).
(d) "Company" means Ace Cash Express, Inc., a Texas corporation.
(e) "Incentive Option" means an option granted under the Plan which
meets the requirements of Section 422 of the Internal Revenue Code.
(f) "Internal Revenue Code" means the Internal Revenue Code of 1986,
as amended, and any successor statute.
(g) "Nonqualified Option" means an option granted under the Plan which
is not an Incentive Option.
(h) "Option Period" means the period during which an option may be
exercised.
(i) "Parent" means any corporation in an unbroken chain of corporations
ending with the Company if, at the time of granting of the option,
each of the corporations other than the Company owns capital stock
possessing 50% or more of the total combined voting power of all
classes of capital stock in one of the other corporations in the
chain.
(j) "Plan" means this 1997 Stock Option Plan as may be amended from
time to time.
(k) "Subsidiary" means any corporation in an unbroken chain of
corporations beginning with the Company if, at the time of the
granting of the option, each of the corporations other than the
last corporation in the unbroken chain owns capital stock
possessing 50% or more of the total combined voting power of all
9
classes of capital stock in one of the other corporations in the
chain, and "Subsidiaries" means more than one of any such
corporations.
10
Exhibit B
---------
PROPOSED AMENDMENT TO ARTICLES
Section A of Article V of the Restated Articles of Incorporation, as
amended, of the Corporation be amended to read in its entirety as follows:
A. Capitalization. The aggregate number of shares which the
--------------
Corporation is authorized to issue is 21,000,000 shares, consisting of:
(1) 20,000,000 shares of Common Stock having a par value of $.01
per share; and
(2) 1,000,000 shares of Preferred Stock having a par value of
$1.00 per share.
The following is a statement of the relative rights, preferences and
limitations with respect to the shares of each class of capital stock of
the Corporation, insofar as the same are fixed in these Articles of
Incorporation, and of the authority expressly vested in the Board of
Directors of the Corporation to divide the Preferred Stock into series and
to fix and determine the variations in the relative rights and preferences
as between series:
ACE CASH EXPRESS, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS -- NOVEMBER 14,1997
I (i) acknowledge receipt of the Notice of Annual Meeting of Shareholders
of Ace Cash Express, Inc., a Texas corporation (the "Company"), to be held on
Friday, November 14, 1997, at 10:00 a.m., Dallas time, at the Four Seasons
Hotel, 4150 North MacArthur Blvd., Irving, Texas 75038, and the Proxy Statement
in connection therewith; and (ii) appoint Raymond C. Hemmig and Donald H.
Neustadt, and each of them, my proxies with full power of substitution, for and
in my name, place and stead, to vote upon and act with respect to all of the
Company's shares of Common Stock standing in my name, or with respect to which I
am entitled to vote and act, at the meeting and at any adjournment thereof, and
as indicated on the reverse side.
If more than one of the proxies named herein shall be present in person or
by substitute at the meeting or at any adjournment thereof, both of the proxies
so present and voting, either in person or by substitute, shall exercise all of
the powers hereby given.
I hereby revoke any proxy or proxies heretofore given to vote upon or act
with respect to such stock and hereby ratify and confirm all that the proxies,
their substitutes, or any of them, may lawfully do by virtue hereof.
TITLE PROXY IS SOLICITED ON BEHALF OF THE COMPANY'S BOARD OF DIRECIORS.
IMPORTANT: SIGN AND DATE ON OTHER SIDE
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED. UNLESS
OTHERWISE MARKED, THIS PROXY WILL BE VOTED FOR ITEMS 1, 2 AND 3.
1. Election of Directors
FOR all nominees listed below (except as marked to the contrary below)
Raymond C. Hemmig, Donald H. Neustadt, Howard W. Davis,
Marshall B. Payne, Edward W. Rose III, and Charles Daniel Yost
WITHHOLD AUTHORITY to vote for all nominees listed above
(INSTRUCTIONS: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.)
---------------------------------------------------------------------------
2. To consider and vote upon the proposal to adopt the ACE Cash Express, Inc.
1997 Stock Option Plan;
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To consider and vote upon an amendment to the Company's Restated Articles of
Incorporation to increase the number of authorized shares of Common Stock,
$.0l par value per share, of the Company from 10,000,000 to 20,000,000;
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. In the discretion of the proxies, on any other matter that may properly come
before the meeting of any adjournment thereof.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
DATE: ________________________, 1997
-----------------------------------------------
Signature of Shareholder
-----------------------------------------------
Printed Name of Shareholder
-----------------------------------------------
Title, if applicable
Please date this proxy and sign your name
exactly as it appears hereon. Where there is
more than one owner, each should sign. When
signing as an attorney, administrator, executor,
guardian or trustee, please add your title as
such. If executed by a corporation, a duly
authorized officer should sign the proxy.
EACH JOINT TENANT SHOULD SIGN.
-----------------------------
PLEASE MARK, SIGN, DATE AND RETURN YOUR PROXY
PROMPTLY IN THE ENCLOSED ENVELOPE. NO POSTAGE
IS REQUIRED.
Votes must be indicated (x) in Black or Blue ink