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Interesting Legal Documents about Check Into Cash INC.

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CDrUxHQvfSXo5T3Ju5K1LVNXRSxTM0E+wtkgznENau1pP6y05CBVbByhM34r08+q jWxkJElzAp+mFRQWfskYfA== 0000931763-98-001978.txt : 19980803 0000931763-98-001978.hdr.sgml : 19980803 ACCESSION NUMBER: 0000931763-98-001978 CONFORMED SUBMISSION TYPE: S-1 PUBLIC DOCUMENT COUNT: 14 FILED AS OF DATE: 19980731 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHECK INTO CASH INC CENTRAL INDEX KEY: 0001067289 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 621666096 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1 SEC ACT: SEC FILE NUMBER: 333-60377 FILM NUMBER: 98675565 BUSINESS ADDRESS: STREET 1: 224 NORTH OCOEE STREET STREET 2: P O BOX 550 CITY: CLEVELAND STATE: OH ZIP: 37364-0550 BUSINESS PHONE: 4234792400 MAIL ADDRESS: STREET 1: 224 NORTH OCOEE STREET STREET 2: P O BOX 550 CITY: CLEVELAND STATE: OH ZIP: 37364-0550 S-1 1 FORM S-1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 31, 1998 REGISTRATION NO. 333- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------------- CHECK INTO CASH, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) ---------------- DELAWARE 62-1666096 (STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.) INCORPORATION OR CLASSIFICATION CODE ORGANIZATION) NUMBER) 224 NORTH OCOEE STREET P.O. BOX 550 CLEVELAND, TENNESSEE 37364-0550 (423) 479-2400 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF THE REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) ---------------- J. SAMUEL CHOATE, JR. EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL CHECK INTO CASH, INC. 224 NORTH OCOEE STREET P.O. BOX 550 CLEVELAND, TENNESSEE 37364-0550 TELEPHONE: (423) 479-2400 FACSIMILE: (423) 559-1099 (NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) COPIES TO: DAVID E. BROWN, JR. STEVEN R. FINLEY MICHAEL R. MCALEVEY GIBSON, DUNN & CRUTCHER LLP ALSTON & BIRD LLP 200 PARK AVENUE ONE ATLANTIC CENTER NEW YORK, NEW YORK 10166 1201 WEST PEACHTREE STREET TELEPHONE: (212) 351-4000 ATLANTA, GEORGIA 30309-3424 FACSIMILE: (212) 351-4035 TELEPHONE: (404) 881-7000 FACSIMILE: (404) 881-4777 ---------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as practicable after the effectiveness of this registration statement. If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [_] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. [_] If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. [_] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [_] CALCULATION OF REGISTRATION FEE - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
PROPOSED MAXIMUM AGGREGATE AMOUNT OF TITLE OF EACH CLASS OF OFFERING REGISTRATION SECURITIES TO BE REGISTERED PRICE(1) FEE - ------------------------------------------------------------------------------- Common Stock, $.01 par value per share........... $50,000,000 $14,750
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- (1) Estimated solely for purposes of determining the registration fee pursuant to Rule 457(o). ---------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A + +REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE + +SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY + +OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT + +BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR + +THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE + +SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE + +UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF + +ANY SUCH STATE. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ SUBJECT TO COMPLETION, DATED JULY 31, 1998 PROSPECTUS SHARES [LOGO] CHECK INTO CASH, INC. COMMON STOCK ----------- Of the shares of common stock, par value $0.01 (the "Common Stock") offered hereby (the "Offering"), shares are being sold by Check Into Cash, Inc. ("Check Into Cash" or the "Company") and shares are being sold by Sirrom Capital Corporation ("Sirrom" or the "Selling Stockholder"). See "Principal and Selling Stockholders." The Company will receive no proceeds from the sale of shares by the Selling Stockholder. See "Use of Proceeds." Prior to the Offering, there has been no public trading market for the Common Stock, and there can be no assurance that any active trading market will develop. It currently is anticipated that the initial public offering price will be between $ and $ per share. See "Underwriting" for information relating to the determination of the initial public offering price. The Company has applied for the Common Stock to be approved for quotation on the Nasdaq National Market ("Nasdaq") under the symbol "CHEK." THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 7 HEREOF FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF SHARES OF COMMON STOCK. ----------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
PROCEEDS TO PRICE TO UNDERWRITING PROCEEDS TO SELLING PUBLIC DISCOUNT(1) COMPANY(2) STOCKHOLDER - -------------------------------------------------------------------------------- Per Share...................... - -------------------------------------------------------------------------------- Total(3).......................
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (1) See "Underwriting" for information concerning indemnification of the Underwriters and other information. (2) Before deducting expenses of the Offering payable by the Company estimated at $ . (3) The Company has granted the Underwriters an option, exercisable within 30 days from the date hereof, to purchase up to additional shares of Common Stock at the Price to Public per share, less the Underwriting Discount, solely for the purpose of covering over-allotments, if any. If the Underwriters exercise such option in full, the total Price to Public, Underwriting Discount and Proceeds to Company and Proceeds to Selling Stockholder will be $ , $ , $ and $ , respectively. See "Underwriting." ----------- The shares of Common Stock are offered by the Underwriters when, as and if delivered to and accepted by them, subject to their right to withdraw, cancel or reject orders in whole or in part and subject to certain other conditions. It is expected that delivery of certificates representing the shares of Common Stock will be made against payment on or about , 1998 at the office of CIBC Oppenheimer Corp., CIBC Oppenheimer Tower, World Financial Center, New York, New York 10281. ----------- CIBC OPPENHEIMER J.C. BRADFORD & CO. , 1998 [U.S. MAP SHOWING THE COMPANY'S COVERAGE AREA] CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THE OFFERING, AND MAY BID FOR, AND PURCHASE, SHARES OF THE COMMON STOCK IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING." 2 PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Unless the context indicates otherwise, all references to the "Company" or "Check Into Cash" include Check Into Cash, Inc. and its subsidiaries. All information contained herein reflects the 1,000-for-1 stock split effected on May 12, 1997 and a 7.49-for-1 stock split that will be effected contemporaneously with the Offering and, except as otherwise noted, assumes no exercise of the Underwriters' over-allotment option. THE COMPANY Check Into Cash, Inc. (the "Company") is a specialty financial services company that advances cash to its customers by cashing their personal checks and agreeing to hold the checks until they are redeemed by the customers or until a short holding period, typically less than 17 days, has expired. The Company targets customers who are currently employed and have an active checking account. To initiate a relationship with the Company, each customer is required to provide proof of income, proof of an active personal checking account, proof of residence and proper identification. The Company limits the amount of cash that it advances to customers to $300 per transaction and prohibits customers from having more than one outstanding transaction with the Company. The Company generally does not cash checks with a face amount exceeding 50.0% of the net "take-home" amount of the customer's next paycheck. In exchange for its service, the Company receives a fee ranging from approximately 11.5% to 18.0% of the face amount of the check. The Company believes that its customers have access to alternative sources of cash to satisfy their short-term financial needs but prefer the Company's simple, convenient, confidential service that enables customers to quickly obtain small amounts of short term cash, with payment due generally as of the date of the customers' next paycheck. In addition, management believes that the Company's customers prefer (i) to have the ability to redeem their checks rather than having them deposited and (ii) to pay the one-time flat fee charged by the Company as opposed to the ongoing finance charges associated with other alternatives. Moreover, because the Company does not require its customers to provide collateral or to satisfy traditional credit criteria, the Company believes that it eliminates the consumers' fear of credit denial. Management further believes that a primary reason for the growth in its business is the high cost of insufficient funds charges ("NSF") assessed by both banks and merchants and the high finance costs charged by financial service providers for small amounts of short-term cash. The Company's growth strategy is to open stores rapidly in middle income neighborhoods in high traffic shopping centers with a significant anchor tenant such as a supermarket or major discount retail store. The Company is also testing store locations in certain supermarkets, convenience stores and retail stores. Management targets particular geographic areas for development and seeks to develop all of the major, and many of the secondary, markets in that area in a "clustered" fashion that maximizes the effectiveness and efficiency of store opening processes, recruiting and training functions, and advertising and promotional efforts. The Company uses intensive employee training in customer service and targeted local advertising in order to build brand loyalty and customer awareness and to increase transaction volume. The Company commenced operations in June 1993 with one store and has expanded rapidly to a total of 266 stores at June 30, 1998. Revenues have increased substantially from $78,000 in 1993 to $21.4 million in 1997 and $21.2 million for the six months ended June 30, 1998. The Company's average store revenues from stores open for at least 12 months at the beginning of each of the following periods was $213,000 (two stores) in 1995, $255,000 (nine stores) in 1996, $233,000 (52 stores) in 1997 and $132,000 (63 stores) for the six months ended June 30, 1998. During the six months ended June 30, 1998, the Company completed 652,000 transactions attributable to 120,000 customers. As of June 30, 1998, the Company had approximately 67,000 held checks with an aggregate outstanding balance of $15.4 million. The Company incurred bad debt expense of $1,826 for 1993 (2.3% of revenues), $50,976 for 1994 (5.2% of revenues), $113,931 for 1995 (3.1% of revenues), $438,551 3 for 1996 (4.3% of revenues), $1.2 million for 1997 (5.6% of revenues) and $1.1 million (5.3% of revenues) for the six months ended June 30, 1998. Charge-offs, net, for such periods were $2,000 for 1993, $ 39,000 for 1994, $72,000 for 1995, $357,000 for 1996, $1.1 million for 1997 and $1.1 million for the six months ended June 30, 1998. The Company was incorporated in Delaware on December 23, 1996. The mailing address of its principal executive office is 224 North Ocoee Street, P.O. Box 550, Cleveland, Tennessee 37364-0550, and its telephone number is (423) 479- 2400. THE OFFERING Common Stock offered by the Company.. shares Common Stock offered by the Selling shares(1) Stockholder......................... Common Stock to be outstanding after shares(2) the Offering........................ Use of proceeds by the Company....... Repay certain indebtedness, pay S corporation dividends and for working capital and general corporate purposes, including the opening of new stores. See "Use of Proceeds." Proposed Nasdaq National Market sym- CHEK bol.................................
- -------- (1) See "Principal and Selling Stockholders." (2) Excludes shares that will be subject to outstanding warrants following completion of the Offering and 561,750 shares of Common Stock reserved for issuance under the Company's Amended and Restated 1997 Long-Term Incentive Plan, of which options to purchase 364,344 shares of Common Stock had been granted at June 30, 1998 at a weighted average exercise price of $6.95 per share. See "Management--Incentive Plan," "Shares Eligible for Future Sale" and Note 7 to the Company's Consolidated Financial Statements. 4 SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, ---------------------------------------------------------- ----------------------- 1993 1994 1995 1996 1997 1997 1998 --------- --------- ---------- ----------- ----------- ---------- ----------- STATEMENT OF OPERATIONS DATA: Revenues................ $ 77,743 $ 980,048 $3,715,056 $10,252,085 $21,446,588 $8,007,852 $21,241,222 --------- --------- ---------- ----------- ----------- ---------- ----------- Store expenses: Salaries and bene- fits.................. 15,851 202,585 783,615 2,374,450 5,031,970 2,068,250 4,715,050 Occupancy.............. 7,363 70,416 401,322 1,017,438 2,470,382 980,536 2,505,996 Bad debt expense....... 1,826 50,976 113,931 438,551 1,196,469 213,839 1,135,456 Other store expenses... 21,513 161,582 838,674 1,468,739 4,398,982 1,834,609 3,869,307 --------- --------- ---------- ----------- ----------- ---------- ----------- Total store ex- penses.............. 46,553 485,559 2,137,542 5,299,178 13,097,803 5,097,234 12,225,809 --------- --------- ---------- ----------- ----------- ---------- ----------- General and administra- tive expenses: Legal and professional expenses.............. -- 15,466 49,222 266,073 3,192,732 (1) 454,633 561,102 Other general and administrative expenses.............. -- 201,269 612,075 2,306,986 5,406,352 1,948,178 4,630,223 --------- --------- ---------- ----------- ----------- ---------- ----------- Total general and administrative expenses............. -- 216,735 661,297 2,573,059 8,599,084 2,402,811 5,191,325 --------- --------- ---------- ----------- ----------- ---------- ----------- Interest expense, net... -- 15,590 36,649 124,217 621,452 194,568 620,443 --------- --------- ---------- ----------- ----------- ---------- ----------- Income (loss) before in- come taxes............. 31,190 262,164 879,568 2,255,631 (871,751) 313,239 3,203,645 Provision for (benefit from) income taxes..... 1,958 46,080 346,540 515,109 (594,236) 200,636 1,082,515(2) --------- --------- ---------- ----------- ----------- ---------- ----------- Net income (loss)....... $ 29,232 $ 216,084 $ 533,028 $ 1,740,522 $ (277,515) $ 112,603 $ 2,121,130 ========= ========= ========== =========== =========== ========== =========== Historical net income (loss) per share: Basic.................. $ -- $ 0.02 $ 0.06 $ 0.19 $ (0.03) $ 0.01 $ 0.23 ========= ========= ========== =========== =========== ========== =========== Diluted................ $ -- $ 0.02 $ 0.06 $ 0.19 $ (0.03) $ 0.01 $ 0.22 ========= ========= ========== =========== =========== ========== =========== Weighted average common shares outstanding-- basic.................. 8,988,000 8,988,000 8,988,000 8,988,000 9,123,929 8,988,000 9,257,640 ========= ========= ========== =========== =========== ========== =========== Weighted average common shares outstanding-- diluted................ 8,988,000 8,988,000 8,988,000 9,060,084 9,123,929 9,475,247 9,778,397 ========= ========= ========== =========== =========== ========== =========== PRO FORMA DATA(3): Historical income (loss) before income taxes.... $ (871,751) $ 3,203,645 Pro forma provision for (benefit from) income taxes.................. (331,265) 1,217,385 ----------- ----------- Pro forma net income (loss)................. $ (540,486) $ 1,986,260 =========== =========== Pro forma earnings per share: Basic.................. $ $ =========== =========== Diluted................ $ $ =========== =========== Weighted average common shares outstanding-- basic.................. =========== =========== Weighted average common shares outstanding-- diluted................ =========== =========== OPERATING DATA: Stores open at beginning of period.............. -- 2 9 52 69 69 176 Stores opened during pe- riod................... 2 7 43 20 107 53 91 Stores closed during pe- riod................... -- -- -- (3) -- -- (1) --------- --------- ---------- ----------- ----------- ---------- ----------- Stores open at end of period................. 2 9 52 69 176 122 266 ========= ========= ========== =========== =========== ========== =========== Held checks at end of period, net............ $ 49,610 $ 455,719 $1,922,738 $ 3,466,898 $ 9,847,430 $5,000,455 $15,119,598 ========= ========= ========== =========== =========== ========== =========== Number of held checks at end of period.......... 374 1,683 9,728 19,012 45,871 26,255 67,195 ========= ========= ========== =========== =========== ========== =========== Bad debt expense as a percentage of revenues............... 2.3% 5.2% 3.1% 4.3% 5.6% 2.7% 5.3% ========= ========= ========== =========== =========== ========== ===========
5
DECEMBER 31, JUNE 30, 1998 -------------------------------------------------- ----------------------- 1993 1994 1995 1996 1997 ACTUAL ADJUSTED(4) ------- -------- --------- ----------- ----------- ----------- ----------- BALANCE SHEET DATA: Working capital......... $25,911 $194,047 $ 459,387 $ 3,212,497 $ 9,124,337 $14,834,241 Property and equipment, net.................... 2,861 58,872 287,036 645,859 2,184,527 3,032,223 Total assets............ 70,585 595,062 2,590,388 6,114,331 15,925,011 23,169,506 Long-term debt, less current maturities..... -- -- -- 562,939 8,650,069 13,591,392 Total stockholders' equity................. 29,232 255,601 788,629 3,112,284 2,433,121 3,893,460
- -------- (1) Includes nonrecurring charges of $2.2 million for the settlement of a class action lawsuit filed against the Company in Tennessee and related legal expenses of approximately $500,000. See "Business--Legal Proceedings." (2) On January 1, 1998, in connection with the S corporation election of Creditcorp of Tennessee, Inc., a wholly-owned subsidiary of the Company, the Company eliminated approximately $709,000 of previously recognized net deferred federal tax benefits. (3) Gives effect to the following in connection with the Company's termination of its S corporation status as if such termination occurred on January 1, 1997: (i) the estimated number of shares of Common Stock that would be required to be sold (at an assumed initial public offering price of $ per share) to fund the $3.9 million S corporation distribution and (ii) the recognition of federal and state income taxes as if the Company had been a C corporation based on the effective tax rates that would have been in effect during the periods reported. See "Prior S Corporation Status." (4) Adjusted to reflect the sale of shares of Common Stock offered hereby by the Company at an assumed initial public offering price of $ per share and the application of the estimated net proceeds therefrom to reduce long-term debt by $13.9 million and to fund the $3.9 million S corporation distribution to be effected at the closing of the Offering. See "Prior S Corporation Status," "Use of Proceeds," and "Capitalization." 6 RISK FACTORS An investment in the shares of Common Stock offered hereby involves a high degree of risk. In addition to the other information contained in this Prospectus, prospective investors should consider the following factors carefully in evaluating an investment in the Common Stock offered hereby. This Prospectus contains "forward-looking statements" relating to, without limitation, future economic performance, plans and objectives of management for future operations, and projections of revenues and other financial items that are based on the beliefs of, assumptions made by and information currently available to the Company's management. The words "expect," "estimate," "anticipate," "believe," "intend," "plan" and similar expressions and variations thereof are intended to identify forward-looking statements. The cautionary statements set forth in this "Risk Factors" section and elsewhere in this Prospectus identify important factors with respect to such forward-looking statements, including certain risks and uncertainties, that could cause actual results to differ materially from those expressed in or implied by such forward-looking statements. GROWTH STRATEGY; ABILITY TO IMPLEMENT AND MANAGE GROWTH STRATEGY The Company has experienced substantial growth in recent years. The Company's failure or inability to implement and manage its growth strategy successfully may have a material adverse effect on the Company's business, operating results and financial condition. The Company's growth strategy, which is based on rapidly opening a large number of stores in selected markets, is subject to significant risks. In addition to expanding operations in its existing markets, the Company intends to enter new markets. There can be no assurance that the Company will be able to expand its market presence in its current locations or successfully enter other markets through the opening of new stores or acquisitions. The Company's future expansion may be limited to those states that the Company believes have laws and regulations that are favorable to the Company's business. The Company may also compete for expansion opportunities with companies that have significantly greater financial and other resources than the Company. The Company's ability to execute its growth strategy will depend on a number of factors, including: (i) the ability to obtain adequate financing for expansion plans; (ii) the prevailing laws and regulatory environment of each state in which the Company operates or seeks to operate, which are subject to change at any time; (iii) the ability to adapt its infrastructure and systems to accommodate growth; (iv) the ability to recruit, train and retain additional qualified personnel, particularly store managers; (v) the availability of suitable locations; and (vi) the ability to obtain regulatory approvals or any government permits and licenses that may be required and other factors, some of which are beyond the control of the Company. There can be no assurance that the Company's systems, procedures, controls and existing space will be adequate to support expansion of the Company's operations. The Company's growth has placed significant demands on all aspects of the Company's business, including its administrative, technical and financial personnel and systems. Additional expansion by the Company may further strain the Company's management, financial and other resources. The Company's future operating results will substantially depend on the ability of its officers and key employees to manage changing business conditions and to implement and improve its technical, administrative, financial control and reporting systems. In addition, there can be no assurance that the Company will be able to implement its business strategy profitably in geographic areas it does not currently serve. See "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business--Growth Strategy" and "Management." LIQUIDITY AND ABILITY TO OBTAIN ADDITIONAL FINANCING The Company requires a substantial amount of cash to implement its business strategy, including, without limitation, cash to fund: held checks; operating costs such as payroll, occupancy, general and administrative expenses; start- up expenses of new stores; initial operating losses of new stores; and investments in capital equipment primarily for new stores. These cash requirements will increase as the number of stores increases. No assurance can be given that the Company will have access to the capital markets in the future for equity or debt financings or that financing through bank lines of credit or other means will be available on acceptable terms to satisfy the Company's cash requirements. The Company's inability to access the capital markets or obtain 7 acceptable bank lines of credit or other financing could have a material adverse effect on the Company's business, operating results, financial condition and growth. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." RISKS ASSOCIATED WITH OPENING NEW STORES The Company intends to grow primarily by opening new stores. Historically, opening new stores has involved losses over the initial period such stores are open. Stores opened during the year ended December 31, 1997 averaged 4.5 months for revenues to equal operating expenses. Moreover, for the year ended December 31, 1997, it averaged nine months for the Company to recapture the initial capital investment and operating losses incurred during the initial 4.5 month period. There can be no assurance, however, that new stores can be operated profitably within such time, if at all. Moreover, the start-up costs and the losses from initial operations attributable to each newly opened store place demands upon the Company's liquidity and cash flow, and there can be no assurance that the Company will be able to satisfy such demands. The opening of additional stores, individually or in the aggregate, may have a material adverse effect on the Company's business, operating results and financial condition. See "--Liquidity and Ability to Obtain Additional Financing" and "Business--Growth Strategy." CREDIT RISK ASSOCIATED WITH CUSTOMERS; LACK OF COLLATERAL The Company does not perform a credit check on its customers and does not require that its customers provide collateral as security for their advances. As a result, the Company is more susceptible to the risk that its customers will not satisfy their repayment obligations than are consumer lenders or finance companies that have underwriting criteria and typically have collateral which they can repossess in the event of a borrower's default. In addition, because the Company's customers often have limited liquidity, there can be no assurance that customer funds will be available to redeem or honor checks cashed by the Company. There can be no assurance that the rate of delinquencies and defaults will not increase in the future. MARKET ACCEPTANCE OF CASH ADVANCE SERVICES The operating success of the Company, like other participants in the cash advance industry, depends upon a number of factors, including consumer perception of the industry's role in the financial community, the regulatory environment for the industry's business and the market acceptance of its services. The Company believes that broad market acceptance of its services depends on several factors, including ease of use, price, access and quality of service, and the effectiveness of marketing efforts. There can be no assurance that the Company's services will achieve broad market acceptance. A decline in the demand for, or the failure to achieve broad market acceptance of, the Company's services would have a material adverse effect on the Company's business, operating results and financial condition. See "Business-- Market for Company's Service," "--Competition" and "--The Customer Transaction." LITIGATION AND GOVERNMENT REGULATION Several lawsuits have challenged cash advance transactions as violating state usury laws, as unauthorized small loan lending, or as violations of consumer protection laws. There can be no assurance that the Company will not be materially adversely affected by litigation or consumer initiatives directed against the Company or the cash advance industry generally. Several states have also raised questions related to the proper regulatory framework for cash advance transactions. The Company's business is regulated in each state where it operates by state laws and regulations, including those governing consumer protection and, in some cases, lending practices (such as truth-in-lending and state usury laws), which are subject to change. These laws and regulations, among other things, establish licensing requirements, regulate the Company's credit approval and application procedures, establish maximum fees and late charges, require specified disclosures to customers, and govern collection practices. Any adverse change in or interpretation of existing laws or regulations or the failure to comply with any such laws and regulations could result in fines, class-action litigation or interruption or cessation of certain business activities of the Company. In Tennessee and North Carolina, the Company is regulated under 8 laws that contain "sunset" provisions, pursuant to which such laws will expire, if not renewed or amended, in 1999 and 2001, respectively. In the event these laws are not renewed or amended, the Company's business will be unregulated in these states. Any of these events could have a material adverse effect on the Company's business, operating results and financial condition. In addition, there can be no assurance that amendments to, or renewals of, such laws and regulations or new or more restrictive laws or regulations or interpretations thereof will not be adopted in the future which may make compliance more difficult or expensive, further limit or restrict fees and other charges, curtail the current operations of the Company, restrict the Company's ability to operate or otherwise materially adversely affect the Company's business, operating results and financial condition. See "Business-- Government Regulation." GENERAL ECONOMIC RISK The risks associated with the Company's business may become more significant in an economic slowdown or recession. During periods of economic slowdown or recession, the Company may experience an increase in demand for its financial services and an increase in rates of delinquencies and frequency of losses. The Company's actual rates of delinquencies and frequency and severity of losses may be higher under adverse economic conditions than those experienced in the financial services industry generally due to several factors, including the Company's lack of credit requirements, the fact that each transaction is the result of a customer's short-term financial need, and the overall nature of the Company's business. Any sustained period of economic slowdown or recession could have a material adverse effect upon the Company's business, operating results and financial condition. INHERENT RISKS OF CASH BUSINESS Since the Company's business requires it to maintain a significant supply of cash in each of its stores, the Company is subject to the risk of cash shortfalls resulting from employee errors and from theft by employees or third parties. There can be no assurance that cash shortfalls will not increase in future periods. See "Business--Organizational Structure and Procedures" and "--Management Information Systems." RELIANCE ON INTERNAL CONTROLS Because the daily operations of each of the Company's stores, including decisions to advance cash, are managed by individual store managers, assistant managers and other on-site personnel, the Company's operations are dependent upon internal controls. There can be no assurance that these internal controls will result in sound employee decisions or prevent fraud, employee theft or other abuses. In addition, there can be no assurance that the Company's training program will result in the proper implementation and execution of any internal controls that the Company adopts. The Company's business, operating results and financial condition would be adversely affected to the extent that the Company's internal controls and training program prove to be inadequate or improperly implemented. See "Business--Organizational Structure and Procedures." DEPENDENCE ON KEY MANAGEMENT AND PERSONNEL The Company's success is largely dependent upon its executive officers and other key personnel, including W. Allan Jones, Jr., Chairman of the Board and Chief Executive Officer, Steve Scoggins, President and Chief Operating Officer, J. Samuel Choate, Jr., Executive Vice President and General Counsel, and Henry E. Ryan, Vice President-Development. The loss of one or more of these officers could have a material adverse effect on the Company's business, operating results and financial condition. The Company also believes that to be successful it must hire and retain highly qualified development and marketing personnel. The inability of the Company to locate, hire and retain such personnel could have a material adverse effect on the Company's business, operating results and financial condition. The Company's growth also will depend upon its ability to attract and retain additional skilled management personnel. No assurance can be given that the Company will be able to retain its key employees or that it will be able to attract qualified personnel in the future. See "Management" and "Business--Employees." 9 CONCENTRATION OF BUSINESS IN CERTAIN STATES The Company's business is and will likely continue to be highly concentrated within certain states. As a result, the Company's business relies strongly upon the prevailing economic, demographic, regulatory, competitive, and other conditions within each state in which its operations are concentrated, and changes in these conditions within any such state could have an adverse impact on the Company's business, operating results and financial condition. For the six months ended June 30, 1998, approximately 60.6% of the Company's revenues were derived from stores located in Ohio, Tennessee, Indiana and California. There can be no assurance that the Company's business will not continue to become more concentrated in these states in the future. See "Business-- Stores." COMPETITION In addition to other cash advance companies in its markets, the Company also competes with banks, credit card issuers, pawn shops, title pawn establishments and other financial services entities and retail businesses that provide short-term loans. The Company believes that the cash advance industry will become more competitive as the industry consolidates, and the Company could face additional competition as increasing numbers of traditional check cashers, pawn shops, commercial banks and other retail credit outlets add cash advance services and overdraft lines of credit to their financial product offerings. The entry of such competitors into the Company's markets could have a material adverse effect on the Company's business, operating results and financial condition. Commercial banks could also lower demand for the Company's services by reducing charges for insufficient funds fees. Some of the Company's competitors have larger and more established customer bases and substantially greater financial, marketing and other resources than the Company. See "Business--Market for Company's Service" and "--Competition." ACQUISITION RISKS Although the Company's growth strategy currently is not predicated on acquisitions, the Company may consider acquisitions of other companies in its industry. There can be no assurance that the Company will be able to successfully identify suitable acquisition candidates, complete acquisitions or integrate acquired businesses into its operations. Once integrated, acquired companies may not achieve levels of revenues, profitability or productivity comparable to those of the Company's existing locations or otherwise perform as expected. Acquisitions also involve special risks, including risks associated with unanticipated liabilities and contingencies, diversion of management attention and possible adverse effects on earnings resulting from goodwill amortization, increased interest costs, the issuance of additional securities and difficulties related to the integration of the acquired business, some or all of which could have a material adverse effect on the Company's business, operating results and financial condition. By acquiring another company, the Company may also become subject to litigation arising from the acquired company's operations prior to the acquisition, and, by virtue of its increased market share, the Company could become a more suitable target for class-action litigation brought by its cash advance customers. The Company is unable to predict whether or when any prospective acquisition candidate will become available or the likelihood that any acquisition will be completed. In addition, the value of Common Stock held by stockholders at the time of any acquisition may be diluted if the Company issues Common Stock to complete such acquisition. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources" and "Business--Growth Strategy." CONCENTRATION OF STOCK OWNERSHIP; VOTING CONTROL BY CERTAIN OFFICERS Upon completion of the Offering, W. Allan Jones, Jr. and members of his family will beneficially own approximately % of the Common Stock outstanding (approximately % of the outstanding Common Stock assuming full exercise of the Underwriters' over-allotment option). As a result, Mr. Jones and his family, voting together, will be able to control, or at a minimum to exercise significant influence over, all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. Such concentration of ownership also may have the effect of delaying or preventing a change in 10 control of the Company. Purchasers in the Offering will become minority stockholders of the Company and will be unable to control the management or business policies of the Company. See "Principal and Selling Stockholders" and "Description of Capital Stock--Certain Provisions of the Certificate, Bylaws and Delaware Law." ABSENCE OF PRIOR PUBLIC MARKET; OFFERING PRICE DETERMINED BY AGREEMENT Prior to the Offering, there has been no public market for the Common Stock. The initial public offering price of the Common Stock will be determined solely by negotiations among the Company and the representatives of the Underwriters and will not necessarily be related to the Company's book value, net worth or any other established criteria of value and may not be indicative of the market price for shares of Common Stock after the Offering. See "Underwriting" for a discussion of the factors to be considered in determining the initial public offering price for the Common Stock. VOLATILITY OF MARKET PRICE From time to time after the Offering, there may be significant volatility in the market price for the Common Stock. There can be no assurance that the market price of the Common Stock will not decline below the initial public offering price. The stock market has from time to time experienced significant price and volume fluctuations, which have particularly affected the market prices of the stocks of financial services companies, and which may be unrelated to the operating performance of particular companies. General market conditions, including changes in interest rates, could substantially affect the market value of the Common Stock. Moreover, numerous other factors, such as government regulatory action, could have a significant impact on the future market price of the Common Stock. The market price of the Common Stock could be subject to significant fluctuation in response to, and may be adversely affected by, variations in quarterly operating results, changes in earnings estimates by analysts, developments in the cash advance industry and general stock market conditions, as well as other factors. Any future shortfall in revenue or earnings from levels expected by securities analysts could have an immediate and significant adverse effect on the trading price of the Common Stock in any given period. The Company's financial performance may in the future experience substantial fluctuations as a consequence of industry patterns, general economic conditions and other factors affecting capital spending. There can be no assurance that such factors will not have a material adverse effect on the Company's business, operating results and financial condition. SHARES ELIGIBLE FOR FUTURE SALE Future sales, or the availability for future sale, of a significant number of shares of Common Stock could adversely affect the prevailing market price of the Common Stock. The million shares offered hereby will be eligible for immediate sale in the public market without restriction, except for any shares purchased in the Offering by "affiliates" of the Company, as such term is defined in Rule 144 of the Securities and Exchange Commission (the "Commission"). Of the remaining million shares of Common Stock which will be outstanding upon the completion of the Offering, all shares held by the directors and executive officers of the Company, all beneficial owners of more than 5% of the Common Stock and Sirrom will be subject to 180-day lock-up agreements with the Underwriters. Following the expiration of the 180-day lock-up period, substantially all such shares of Common Stock will be eligible for sale in the public market subject to compliance with certain volume limitations and other conditions of Rule 144. Following the Offering, sales, or the availability for future sale, of a significant number of shares of Common Stock not only would have the potential to cause a material decrease in the trading price of the Common Stock but also could impair the future ability of the Company to raise capital at prices or on terms favorable to the Company. The warrants that Sirrom will hold following the Offering provide certain rights with respect to the registration under the Securities Act of 1933, as amended (the "Securities Act"), of up to shares of Common Stock issuable upon exercise thereof. In the event the Company registers any of its Common Stock either for its own account or for the account of other securityholders, Sirrom is entitled to include such shares of Common Stock in the registration, subject to certain limitations. See "Description of Capital Stock--Warrants." 11 Further, the Company intends to file a Registration Statement on Form S-8 as soon as practicable after the completion of the Offering to register 562,000 shares of Common Stock that are issuable upon the exercise of outstanding stock options or that are available for issuance pursuant to the Amended and Restated 1997 Long-Term Incentive Plan (the "Incentive Plan"). All of such registered shares also generally would then be eligible for immediate sale in the public market. Public sales of a significant number of such registered shares could have a material adverse effect on the market price of the Common Stock and the Company's ability to raise funds in the capital markets at a time and price favorable to the Company. As a result, the Company may be materially and adversely affected. See "Certain Transactions," "Shares Eligible for Future Sale" and "Underwriting." SUBSTANTIAL DISCRETION OF MANAGEMENT CONCERNING USE OF PROCEEDS The Company expects to use approximately $17.8 million of the net proceeds of the Offering for specific, identified purposes, with the remaining net proceeds, expected to be approximately $ million, to be used for working capital and general corporate purposes, including the opening of new stores. Accordingly, management will have substantial discretion in spending a large part of the net proceeds to be received by the Company. There can be no assurance that management will use these proceeds in a manner that enhances stockholder value. See "Use of Proceeds." DILUTION The initial public offering price is substantially higher than the tangible book value per share of the outstanding Common Stock. Investors purchasing shares of Common Stock in the Offering therefore will incur immediate and substantial tangible book value dilution, and existing stockholders will receive a material increase in the tangible book value per share of their shares of Common Stock. At an assumed initial public offering price of $ . per share (the midpoint of the estimated price range set forth on the cover page of this Prospectus), the immediate dilution to new investors would be $ . per share. In addition, investors purchasing shares of Common Stock in the Offering will incur additional tangible book value dilution to the extent outstanding options and warrants are exercised. See "Dilution." DIVIDEND POLICY; RESTRICTIONS ON PAYMENT The Company currently anticipates that after completion of the Offering all of its earnings will be retained for development and expansion of its business. The Company does not anticipate paying any cash dividends in the foreseeable future. In addition, the Credit Facility prohibits the payment of cash dividends without the lender's consent. See "Prior S Corporation Status" and "Dividend Policy." ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION, BYLAWS AND DELAWARE LAW Certain provisions of the Company's Restated Certificate of Incorporation (the "Certificate") and Restated Bylaws (the "Bylaws") and the Delaware General Corporation Law could, together or separately, discourage potential acquisition proposals, delay or prevent a change in control of the Company and limit the price that certain investors might be willing to pay in the future for shares of the Common Stock. Certain of these provisions provide for the issuance, without further stockholder approval, of preferred stock with rights and privileges which could be senior to the Common Stock, the payment of a "fair" price in connection with certain business combinations with interested stockholders, provide no right of the stockholders to call a special meeting of stockholders, and limit the ability of stockholders to nominate directors and submit proposals to be considered at stockholders' meetings. The Certificate contains provisions that classify the Company's Board of Directors into three classes, each of which will serve for different three-year periods commencing with the Company's 1999 annual meeting of stockholders. The classified board provisions could prevent a party who acquires control of a majority of the outstanding voting stock of the Company from obtaining control of the Board of Directors until the second annual stockholders meeting following the date the acquiror obtains the controlling interest. The Company also is subject to Section 203 of the Delaware General Corporation Law which, subject to certain exceptions, prohibits a Delaware corporation from engaging in any of a broad range of business 12 combinations with any "interested" stockholder for a period of three years following the date that such stockholder became an interested stockholder. The Company may enter into employment agreements with certain of its employees that contain change in control provisions. The change in control provisions may hinder, delay, deter or prevent a tender offer, proxy contest or other attempted takeover because the covered employees can terminate their employment if such provisions are triggered and thereby receive severance pay of a lump sum. See "Management--Board of Directors" and "Description of Capital Stock--Certain Provisions of the Certificate, Bylaws and Delaware Law." 13 PRIOR S CORPORATION STATUS Because the Company has been an S corporation for federal and certain state income tax purposes, the Company's income (excluding the C corporation income of Creditcorp of Tennessee, Inc., a wholly-owned subsidiary of the Company ("CCT"), through December 31, 1997) has been allocated to the Company's individual stockholders rather than to the Company. The Company will terminate its S corporation status in connection with the closing of the Offering and will thereafter be taxed as a C corporation for federal and state income tax purposes. Prior to the termination of the Company's S corporation status, the Company expects to declare a distribution to its stockholders (the "Distribution"), which Distribution will be paid out of a portion of the net proceeds of the Offering. The Company estimates that the amount of the Distribution would have been approximately $3.9 million if the termination of the Company's S corporation status had occurred on June 30, 1998. The actual amount of the Distribution will reflect the Company's taxable income through the termination of its S corporation status. See "Use of Proceeds" and Note 2 of Notes to Consolidated Financial Statements. The Company's stockholders have agreed to indemnify the Company for any federal, state and other income taxes (including interest and penalties and other additions to tax) incurred by the Company for the period for which it reported its taxable income as an S corporation. In addition, as a result of the termination of its S corporation status in connection with the Offering, the Company will record a nonrecurring income tax benefit and a corresponding net deferred income tax asset (the "Deferred Tax Asset"). The amount of the Deferred Tax Asset would have been approximately $166,000 if the termination of the Company's S corporation status had occurred on June 30, 1998, but the actual amount will be adjusted based on the tax effect of differences in the bases in assets and liabilities for financial reporting and income tax purposes as of the date of the termination of S corporation status. USE OF PROCEEDS The net proceeds to the Company from the sale of the shares of Common Stock being offered by the Company at an assumed initial public offering price of $ . per share (the midpoint of the estimated price range set forth on the cover page of this Prospectus) are estimated to be approximately $ million (approximately $ million if the Underwriters' over-allotment option is exercised in full) after deducting estimated underwriting discounts and Offering expenses payable by the Company. The Company will not receive any proceeds from the sale of the shares of Common Stock offered by the Selling Stockholder. See "Principal and Selling Stockholders." The Company currently intends to reduce outstanding indebtedness under the Company's credit agreement (the "Credit Facility"), which indebtedness totaled approximately $9.6 million at June 30, 1998. The Credit Facility carries a variable interest rate (9.0% at June 30, 1998) based, at the Company's election, on: (i) the lender's prime rate plus/less an incentive pricing spread (the "Incentive Pricing Spread") based on certain financial ratios of the Company; or (ii) LIBOR plus the Incentive Pricing Spread. Substantially all assets have been pledged to secure indebtedness under the Credit Facility. The Company has historically used the Credit Facility for working capital and to finance the opening of new stores. The Credit Facility will terminate on October 14, 2000. The anticipated reduction in amounts outstanding under the Credit Facility will increase the availability of bank credit for general business purposes, including the opening of new stores. See "Management's Discussion and Analysis of Financial Condition and Results of Operations-- Liquidity and Capital Resources." The Company currently intends to repay outstanding indebtedness under its credit agreement with Sirrom (the "Sirrom Loan"), which indebtedness totaled approximately $4.3 million at June 30, 1998. The Sirrom Loan bears interest at 14.0% per annum. The Company has used the proceeds from the Sirrom Loan for working capital and to finance store openings. The Sirrom Loan will terminate on November 7, 2001. The Company currently intends to pay the Distribution to its existing stockholders, which the Company estimates would have been approximately $3.9 million if the termination of the Company's S corporation status 14 had occurred on June 30, 1998. The actual amount of the Distribution will reflect the Company's taxable income through the termination of the Company's S corporation status. See "Prior S Corporation Status" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." The Company currently intends to use the remaining approximately $ million of net proceeds for working capital and general corporate purposes, including the opening of new stores. Pending application of the net proceeds as described above, the Company intends to invest the net proceeds in short- term, interest-bearing, investment grade securities. DIVIDEND POLICY The Company presently intends to employ all available funds for the expansion of its business and therefore does not anticipate declaring or paying cash dividends on the Common Stock, other than the Distribution, in the foreseeable future. The Company has paid no cash dividends on its Common Stock in the past, other than payment of the prior S corporation dividends. See "Prior S Corporation Status." The payment of cash dividends, if any, in the future will depend upon the Company's earnings, financial condition, capital requirements, cash flow, long range plans and such other factors as the Board of Directors of the Company may deem relevant at that time. Additionally, the terms of the Credit Facility prohibit the Company, without the prior written consent of the Company's lender, from paying cash dividends. See Note 3 to the Company's Consolidated Financial Statements. 15 CAPITALIZATION The following table sets forth the indebtedness and capitalization of the Company at June 30, 1998: (i) on a historical basis, (ii) on a pro forma basis to reflect the transactions set forth in note (1) hereto, and (iii) on a pro forma as adjusted basis to reflect the sale by the Company of shares of the Common Stock offered hereby and the application of the estimated net proceeds therefrom, as described in "Use of Proceeds." This table should be read in conjunction with "Use of Proceeds," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements and Notes thereto included elsewhere in this Prospectus.
JUNE 30, 1998 ------------------------------------------ PRO FORMA ACTUAL PRO FORMA (1) AS ADJUSTED (2) ----------- ------------- --------------- Short-term debt (including current portion of long-term debt)........ $ 33,672 =========== ==== ==== Long-term debt (3): Sirrom Loan, net of unamortized discount........................ 3,921,314 Credit Facility.................. 9,644,930 Other............................ 25,148 ----------- ---- ---- Total long-term debt........... 13,591,392 =========== ==== ==== Warrants with redemption feature... 911,299 =========== ==== ==== Stockholders' equity: Preferred Stock.................. -- Common Stock(4).................. 92,576 Additional paid-in capital....... 851,442 Retained earnings................ 3,034,091 Accumulated other comprehensive loss............................ (84,649) ----------- ---- ---- Total stockholders' equity..... 3,893,460 =========== ==== ==== Total capitalization........... $18,429,823 =========== ==== ====
- -------- (1) Assumes the following transactions occurred as of June 30, 1998: (i) the completion of the Distribution of approximately $3.9 million in connection with the Company's termination of its S corporation status and (ii) the recognition of a net deferred tax asset of $166,000 resulting from the termination of the Company's S corporation status. See "Prior S Corporation Status." (2) Adjusted to reflect the sale of Common Stock offered by the Company and the use of the net proceeds therefrom. See "Use of Proceeds." (3) See Note 3 to the Company's Consolidated Financial Statements for a description of the Company's long-term debt. (4) Excludes shares that will be subject to outstanding warrants following completion of the Offering and 561,750 shares of Common Stock reserved for issuance under the Incentive Plan, of which options to purchase 364,344 shares of Common Stock had been granted at June 30, 1998 at a weighted average exercise price of $6.95 per share. See "Management--Incentive Plan," "Shares Eligible for Future Sale" and Note 7 to Consolidated Financial Statements. 16 DILUTION As of June 30, 1998, the net tangible book value of the Company was approximately $3.4 million, or $0.37 per share of Common Stock. "Net tangible book value per share" is defined as the book value of tangible assets of the Company less all liabilities, divided by the number of issued and outstanding shares of Common Stock. After giving effect to the sale by the Company of the shares of Common Stock offered by the Company at an assumed initial public offering price of $ . per share, the exercise of warrants to purchase an aggregate of shares of Common Stock, and the payment of the Distribution, and after deducting the estimated underwriting discounts and Offering expenses payable by the Company, the pro forma net tangible book value of the Company as of June 30, 1998, would have been approximately $ . or $ . per share. This represents an immediate increase in net tangible book value of $ . per share to existing stockholders and an immediate dilution in net tangible book value of $ . per share to purchasers of shares of Common Stock in the Offering. The following table illustrates the per share dilution: Assumed initial public offering price per share.................. $ --- Net tangible book value before the Offering.................... $0.37 Decrease per share attributable to the Distribution............ Increase per share attributable to new stockholders............ ----- Pro forma net tangible book value per share after giving effect to the Offering................................................. --- Dilution per share to new stockholders........................... $ ---
The following table sets forth, as of June 30, 1998, with respect to the existing stockholders and the new investors in the Offering, a comparison of the number of shares of Common Stock acquired from the Company, the percentage ownership of such shares, the total consideration paid, the percentage of total cash consideration paid and the average price per share:
SHARES TOTAL AVERAGE PURCHASED CONSIDERATION PRICE -------------- -------------- PER NUMBER PERCENT AMOUNT PERCENT SHARE ------ ------- ------ ------- ------- Existing stockholders..................... % $ % $ New stockholders --- ----- ---- ----- Total................................. 100.0% $ 100.0% === ===== ==== =====
Sales by Sirrom in the Offering will reduce the number of shares held by existing stockholders to , or %, and will increase the number of shares to be held by new investors to , or %, of the total number of shares of the Common Stock to be outstanding after the Offering ( shares, or %, if the Underwriters' over-allotment option is exercised in full). See "Principal and Selling Stockholders." The foregoing tables do not take into account the exercise of outstanding warrants and options to acquire shares of Common Stock. At June 30, 1998, there were outstanding warrants to purchase 487,247 shares of Common Stock at an aggregate exercise price of $0.05. In addition, at June 30, 1998, there were outstanding options to purchase 364,344 shares of Common Stock at a weighted average exercise price of $6.95 per share. See Note 7 to Consolidated Financial Statements and "Management--Incentive Plan." 17 SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA The following selected consolidated financial data as of December 31, 1996 and 1997 and for the years ended December 31, 1995, 1996, and 1997, have been derived from the consolidated financial statements of the Company included in this Prospectus, which have been audited by Arthur Andersen LLP, independent public accountants. The following selected consolidated financial data as of and for the years ended December 31, 1993 and 1994 and the six months ended June 30, 1997 and 1998, have been derived from unaudited consolidated financial statements of the Company and, in the opinion of management, have been prepared on the same basis as the audited financial statements and include all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation of such information. Operating results for the six months ended June 30, 1998 are not necessarily indicative of the results that may be expected for the entire year. Prior to the Offering, the Company was an S corporation; accordingly, certain financial data may not be comparable to or indicative of post-Offering results. The selected consolidated financial data are qualified by reference to, and should be read in conjunction with, the Company's consolidated financial statements and the notes thereto included in this Prospectus, as well as "Management's Discussion and Analysis of Financial Condition and Results of Operations."
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, ------------------------------------------------------ ---------------------- 1993 1994 1995 1996 1997 1997 1998 --------- --------- ---------- ----------- ----------- ---------- ----------- STATEMENT OF OPERATIONS DATA: Revenues................ $ 77,743 $ 980,048 $3,715,056 $10,252,085 $21,446,588 $8,007,852 $21,241,222 Store expenses: Salaries and benefits.. 15,851 202,585 783,615 2,374,450 5,031,970 2,068,250 4,715,050 Occupancy.............. 7,363 70,416 401,322 1,017,438 2,470,382 980,536 2,505,996 Bad debt expense....... 1,826 50,976 113,931 438,551 1,196,469 213,839 1,135,456 Other store expenses... 21,513 161,582 838,674 1,468,739 4,398,982 1,834,609 3,869,307 --------- --------- ---------- ----------- ----------- ---------- ----------- Total store expenses... 46,553 485,559 2,137,542 5,299,178 13,097,803 5,097,234 12,225,809 --------- --------- ---------- ----------- ----------- ---------- ----------- General and administra- tive expenses: Legal and professional expenses ............. -- 15,466 49,222 266,073 3,192,732(1) 454,633 561,102 Other general and administrative expenses.............. -- 201,269 612,075 2,306,986 5,406,352 1,948,178 4,630,223 --------- --------- ---------- ----------- ----------- ---------- ----------- Total general and administrative expenses............. -- 216,735 661,297 2,573,059 8,599,084 2,402,811 5,191,325 --------- --------- ---------- ----------- ----------- ---------- ----------- Interest expense, net... -- 15,590 36,649 124,217 621,452 194,568 620,443 --------- --------- ---------- ----------- ----------- ---------- ----------- Income (loss) before in- come taxes............. 31,190 262,164 879,568 2,255,631 (871,751) 313,239 3,203,645 Provision for (benefit from) income taxes..... 1,958 46,080 346,540 515,109 (594,236) 200,636 1,082,515(2) --------- --------- ---------- ----------- ----------- ---------- ----------- Net income (loss)....... $ 29,232 $ 216,084 $ 533,028 $ 1,740,522 $ (277,515) $ 112,603 $ 2,121,130 ========= ========= ========== =========== =========== ========== =========== Historical earnings per share: Basic.................. $ -- $ 0.02 $ 0.06 $ 0.19 $ (0.03) $ 0.01 $ 0.23 ========= ========= ========== =========== =========== ========== =========== Diluted................ $ -- $ 0.02 $ 0.06 $ 0.19 $ (0.03) $ 0.01 $ 0.22 ========= ========= ========== =========== =========== ========== =========== Weighted average common shares outstanding-- basic.................. 8,988,000 8,988,000 8,988,000 8,988,000 9,123,929 8,988,000 9,257,640 ========= ========= ========== =========== =========== ========== =========== Weighted average common shares outstanding-- diluted................ 8,988,000 8,988,000 8,988,000 9,060,084 9,123,929 9,475,247 9,778,397 ========= ========= ========== =========== =========== ========== =========== PRO FORMA DATA(3): Historical income (loss) before income taxes.... $ (871,751) $ 3,203,645 Pro forma provision for (benefit from) income taxes.................. (331,265) 1,217,385 ----------- ----------- Pro forma net income (loss)................. $ (540,486) $ 1,986,260 =========== =========== Pro forma earnings per share: Basic.................. $ $ =========== =========== Diluted................ $ $ =========== =========== Weighted average common shares outstanding-- basic.................. =========== =========== Weighted average common shares outstanding-- diluted................ =========== ===========
18
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, ------------------------------------------------------ ------------------------ 1993 1994 1995 1996 1997 1997 1998 ------- -------- ---------- ---------- ----------- ----------- ----------- OPERATING DATA: Stores open at beginning of period.............. -- 2 9 52 69 69 176 Stores opened during pe- riod................... 2 7 43 20 107 53 91 Stores closed during pe- riod................... -- -- -- (3) -- -- (1) ------- -------- ---------- ---------- ----------- ----------- ----------- Stores open at end of period................. 2 9 52 69 176 122 266 ======= ======== ========== ========== =========== =========== =========== Held checks at end of period, net............ $49,610 $455,719 $1,922,738 $3,466,898 $ 9,847,430 $ 5,000,455 $15,119,598 ======= ======== ========== ========== =========== =========== =========== Number of checks held at end of period.......... 374 1,683 9,728 19,012 45,871 26,255 67,195 ======= ======== ========== ========== =========== =========== =========== Bad debt expense as a percentage of revenues............... 2.3% 5.2% 3.1% 4.3% 5.6% 2.7% 5.3% ======= ======== ========== ========== =========== =========== ===========
DECEMBER 31 JUNE 30, 1998 -------------------------------------------------- ----------------------- 1993 1994 1995 1996 1997 ACTUAL ADJUSTED(4) ------- -------- ---------- ---------- ----------- ----------- ----------- BALANCE SHEET DATA: Working capital......... $25,911 $194,047 $ 459,387 $3,212,497 $ 9,124,337 $14,834,241 Property and equipment, net.................... 2,861 58,872 287,036 645,859 2,184,527 3,032,223 Total assets............ 70,585 595,062 2,590,388 6,114,331 15,925,011 23,169,506 Long-term debt, less current maturities..... 0 0 0 562,939 8,650,069 13,591,392 Total stockholders' eq- uity................... 29,232 255,601 788,629 3,112,284 2,433,121 3,893,460
- -------- (1) Includes nonrecurring charges of $2.2 million for the settlement of a class action lawsuit filed against the Company in Tennessee and related legal expenses of approximately $500,000. See "Business--Legal Proceedings." (2) On January 1, 1998, in connection with the S corporation election of CCT, the Company eliminated approximately $709,000 of previously recognized net deferred federal tax benefits. (3) Gives effect to the following in connection with the Company's termination of its S corporation status as if such termination occurred on January 1, 1997: (i) the estimated number of shares of Common Stock that would be required to be sold (at an assumed initial public offering price of $ . per share) to fund the $3.9 million Distribution and (ii) the recognition of federal and state income taxes as if the Company had been a C corporation based on the effective tax rates that would have been in effect during the periods reported. See "Prior S Corporation Status." (4) Adjusted to reflect the sale of shares of Common Stock offered hereby by the Company at an assumed initial public offering price of $ . per share and the application of the estimated net proceeds therefrom to reduce long-term debt by $13.9 million and to fund the $3.9 million Distribution to be effected at the closing of the Offering. See "Prior S Corporation Status," "Use of Proceeds" and "Capitalization." 19 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following analysis of the financial condition and results of operations of the Company should be read in conjunction with the preceding "Selected Consolidated Financial Data," the Company's Consolidated Financial Statements and the related Notes thereto included elsewhere in this Prospectus. With the exception of historical information, certain of the matters discussed in this Prospectus are forward-looking statements that involve risks and uncertainties and actual results could differ materially from those discussed. The words and phrases "should be," "will be," "predicted," "believe," "expect," "anticipate" and similar expressions identify forward-looking statements. These forward- looking statements reflect the Company's current views in respect of future events in financial performance, but are subject to many uncertainties and factors relating to the Company's operations and business environment which may cause its actual results to differ materially from any future results expressed or implied by such forward-looking statements. See "Risk Factors." OVERVIEW The Company is a specialty financial services company that advances cash to its customers by cashing their personal checks and agreeing to hold the checks until they are redeemed by the customers or until a short holding period, typically less than 17 days, has expired. The Company targets customers who are currently employed and have an active checking account. To initiate a relationship with the Company, each customer is required to provide proof of income, proof of an active personal checking account, proof of residence and proper identification. The Company limits the amount of cash that it advances to customers to $300 per transaction and prohibits customers from having more than one outstanding transaction with the Company. The Company generally does not cash checks with a face amount exceeding 50.0% of the net "take-home" amount of the customer's next paycheck. In exchange for its service, the Company receives a fee ranging from approximately 11.5% to 18.0% of the face amount of the check. As of June 30, 1998, the Company operated 266 stores in 12 states. The Company records an allowance for uncollectible checks based on its historical bad debt experience. The Company's practice is to charge off those checks that, as of the fifth day of each month, have remained in default for a period of at least 30 days. An analysis of the Company's allowance for uncollectible checks is as follows:
YEAR ENDED DECEMBER 31, -------------------------------- SIX MONTHS ENDED 1995 1996 1997 JUNE 30, 1998 -------- --------- ----------- ---------------- Beginning balance............ $ 11,631 $ 53,762 $ 135,000 $ 255,000 Bad debt expense............. 113,931 438,551 1,196,469 1,135,456 Charge-offs, net............. (71,800) (357,313) (1,076,469) (1,125,456) -------- --------- ----------- ----------- Ending balance............... $ 53,762 $ 135,000 $ 255,000 $ 265,000 ======== ========= =========== ===========
The Company commenced operations in June 1993 and has expanded rapidly, opening seven stores in 1994, 43 stores in 1995, 20 stores in 1996, 107 stores in 1997 and 91 stores during the six months ended June 30, 1998. Accordingly, the Company's recent rapid growth may distort some of the Company's ratios and financial statistics and may make period-to-period comparisons difficult. Furthermore, the Company's historical financial statistics may not be indicative of the Company's results in future periods. The Company's revenues, expenses and gross margin are all significantly affected by the number of new store openings as well as by the size of the markets in which these stores are opened. Moreover, because the Company expenses most of its store opening costs as incurred, the number of store openings significantly affects the Company's gross margin. The Company believes that its gross margin will continue to be adversely affected by new store openings. Revenues. The Company's revenues are derived from the fees that it charges its customers for its check cashing services. These fees range from approximately 11.5% to 18.0% of the face amount of the check. The Company recognizes revenues when cash is advanced to the customer. For the year ended December 31, 1997 and the six months ended June 30, 1998, the Company had revenues of $21.4 and $21.2 million, respectively. Growth in revenues has been driven by the number of new store openings and by increases in revenues generated 20 by existing stores. For example, revenue increased $11.1 million to $21.4 million for the year ended December 31, 1997 from $10.3 million for the year ended December 31, 1996. Of this increase, $5.5 million was attributable to the 107 stores opened during 1997 and $5.4 million was attributable to the 69 stores already opened at January 1, 1997. Revenues are also affected by the amount of fees the Company may charge for its services in the states in which it operates. For example, in Kentucky the Company may charge up to 15.0% of the face amount of the check, whereas in Mississippi the Company may charge up to 18.0% of the face amount of the check. In 1997, new legislation in Tennessee resulted in a 21.1% reduction of the Company's maximum fee on a transaction. At the same time, Tennessee increased the minimum capital requirements for companies to operate in the check cashing business within the state. The Company's revenue per store in Tennessee decreased as a result of the new legislation. The decrease, however, was partly offset by an increase in transaction volume as a result of a decrease in competition due to the implementation of the maximum permissible fee and to competitors being unable to meet the new minimum capital requirements. The ability of the Company to increase revenue depends upon the Company's ability to continue to open new stores, to increase the number of transactions at existing stores, and the effect of legislation. Store Expenses. Store expenses consist of salaries and benefits, occupancy costs and other store expenses. Occupancy costs consist of store rental, maintenance, utility and telephone charges. Rent expense constitutes the greatest portion of occupancy costs. In 1997, the Company experienced an increase of 27.0% in average monthly rent expense. This increase resulted from the opening of 107 additional stores and the Company's decision to locate its new stores in higher income neighborhoods where rents are higher. The Company expects rental expense to continue to increase at a moderate pace as the Company continues to open new stores in locations that charge higher rents. Other store expenses consist of bad debt expense and store-level advertising, depreciation and amortization, small equipment expense, travel and opening expenses for new stores. The Company's practice is to charge off those checks that, as of the fifth day of each month, have remained in default for a period of at least 30 days. In addition, an allowance for uncollectible checks is estimated and recorded (annually through December 31, 1997 and quarterly thereafter) based on the Company's historical bad debt experience. For the year ended December 31, 1997 and the six months ended June 30, 1998, the Company's bad debt expense was $1.2 million (5.6% of revenues) and $1.1 million (5.3% of revenues), respectively. Store opening costs are included in other store expenses and are expensed as incurred. For the year ended December 31, 1997, the initial capital required to open a new store averaged approximately $20,000 per store, primarily for leasehold improvements. Stores opened during the year ended December 31, 1997 averaged 4.5 months for revenues to increase to a level that equaled operating expenses. Moreover, for the year ended December 31, 1997, it averaged nine months for the Company to recapture the initial capital investment and operating losses incurred during the initial 4.5 month period. Other store expenses for the year ended December 31, 1996 were lower as a percentage of revenue than in 1995 or 1997 because the Company opened only 20 stores in 1996, whereas it had opened 43 stores in 1995 and 107 stores in 1997. In particular, in 1997, the Company opened 45 stores in the last four months of the year, which resulted in cumulative operating losses of approximately $500,000 for these stores during this period. General and Administrative Expenses. General and administrative expenses consist of general and administrative expenses not directly attributable to store operations, including legal and professional expenses, corporate salaries and bonuses, depreciation and amortization, occupancy costs, maintenance, utility and telephone charges, general advertising, travel and insurance. Legal and professional expenses increased significantly in 1996 and 1997 as a result of certain litigation in which the Company was involved. In 1997, the Company settled a class action lawsuit filed against the Company in Tennessee for $2.2 million and incurred additional legal expenses of approximately $500,000 resulting from the defense of such lawsuit. Termination of S Corporation Status. As a result of the termination of its S corporation status in connection with the Offering, the Company will record a nonrecurring income tax benefit and a corresponding net deferred income tax asset (the "Deferred Tax Asset"). The amount of the Deferred Tax Asset would have been approximately $166,000 if the termination of the Company's S corporation status had occurred on June 30, 1998, but the actual amount will be adjusted based on the tax effect of differences in the bases in assets and liabilities for financial reporting and income tax purposes as of the date of the termination of S corporation status. 21 RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, the components of the Company's consolidated statements of operations expressed as a percentage of revenues:
SIX MONTHS YEAR ENDED ENDED DECEMBER 31, JUNE 30, ------------------- ------------ 1995 1996 1997 1997 1998 ----- ----- ----- ----- ----- Revenue................................. 100.0% 100.0% 100.0% 100.0% 100.0% Store expenses: Salaries and benefits.................. 21.1 23.2 23.5 25.8 22.2 Occupancy.............................. 10.8 9.9 11.5 12.2 11.8 Bad debt expense....................... 3.1 4.3 5.6 2.7 5.3 Other store expenses................... 22.5 14.3 20.5 22.9 18.3 ----- ----- ----- ----- ----- Total store expenses.................. 57.5 51.7 61.1 63.7 57.6 ----- ----- ----- ----- ----- Gross margin............................ 42.5 48.3 38.9 36.3 42.4 ----- ----- ----- ----- ----- General and administrative expenses: Legal and professional................. 1.3 2.6 14.9 5.7 2.6 Other general and administrative....... 16.5 22.5 25.2 24.3 21.8 ----- ----- ----- ----- ----- Total general and administrative ex- penses 17.8 25.1 40.1 30.0 24.4 ----- ----- ----- ----- ----- Interest expense, net................... 1.0 1.2 2.9 2.4 2.9 ----- ----- ----- ----- ----- Income (loss) before income taxes....... 23.7 22.0 (4.1) 3.9 15.1 Provision for (benefit from) income tax- es..................................... 9.3 5.0 (2.8) 2.5 5.1 ----- ----- ----- ----- ----- Net income (loss)....................... 14.4% 17.0% (1.3)% 1.4% 10.0% ===== ===== ===== ===== =====
The following table presents, for each period indicated, the contribution of those stores opened during a given period as a percent of total revenues:
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30, ----------------------------------------------- ------------------------------- 1995 1996 1997 1997 1998 --------------- --------------- --------------- --------------- --------------- NUMBER PERCENT NUMBER PERCENT NUMBER PERCENT NUMBER PERCENT NUMBER PERCENT OF OF TOTAL OF OF TOTAL OF OF TOTAL OF OF TOTAL OF OF TOTAL STORES REVENUES STORES REVENUES STORES REVENUES STORES REVENUES STORES REVENUES ------ -------- ------ -------- ------ -------- ------ -------- ------ -------- 1993 Stores............. 2 14.1% 2 5.8% 2 2.7% 2 3.8% 2 1.2% 1994 Stores............. 7 41.1 7 17.0 7 7.9 7 11.0 7 3.9 1995 Stores............. 43 44.8 43 67.6 43 46.7 43 57.4 43 25.9 1996 Stores............. 17 9.6 17 16.5 17 18.4 17 11.7 1997 Stores............. 107 26.2 53 9.5 107 50.9 1998 Stores............. 90 6.3 --- ----- --- ----- --- ----- --- ----- --- ----- Total................... 52 100.0% 69 100.0% 176 100.0% 122 100.0% 266 100.0% === ===== === ===== === ===== === ===== === =====
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1998 TO THE SIX MONTHS ENDED JUNE 30, 1997 Revenues. Revenues for the six months ended June 30, 1998 increased $13.2 million, or 165%, to $21.2 million from $8.0 million for the same period in 1997. This growth resulted primarily from the increase in revenue generated by the 107 new stores opened in 1997 and the 71 stores opened in previous years. Additional growth resulted from the 91 stores opened during the six months ended June 30, 1998 as compared to 53 stores opened during the same period in 1997. The Company closed one store in January 1998. The Company's average store revenues for stores opened for at least 12 months at the beginning of each of the following periods was $132,000 (63 stores) for the six months ended June 30, 1998 as compared to $116,000 (19 stores) for the six months ended June 30, 1997. 22 The following table presents, for the periods provided, the amount of revenues, the number of stores and the average revenues per store for those stores opened during a given year, net of closings:
SIX MONTHS ENDED JUNE 30, -------------------------------------------------------------- 1997 1998 ------------------------------ ------------------------------- AVERAGE AVERAGE NUMBER OF REVENUES NUMBER OF REVENUES REVENUES STORES PER STORE REVENUES STORES PER STORE ---------- --------- --------- ----------- --------- --------- 1993 Stores.. $ 294,361 2 $147,180 $ 260,749 2 $130,375 1994 Stores.. 858,440 7 122,634 825,785 7 117,969 1995 Stores.. 4,485,635 43 104,317 5,468,745 43 127,180 1996 Stores.. 1,439,517 17 84,677 2,471,569 17 145,386 1997 Stores.. 740,835 53 13,978 10,733,359 107 100,312 1998 Stores.. 1,328,485 90 14,761 ---------- --- -------- ----------- --- -------- Total........ $7,818,788 122 $ 64,088 $21,088,692 266 $ 79,281 ========== === ======== =========== === ========
Store Expenses. Store expenses increased $7.1 million, or 140%, to $12.2 million for the six months ended June 30, 1998 from $5.1 million for the same period in 1997. The following table sets forth a line item comparison of store expenses for the six months ended June 30, 1998 and the six months ended June 30, 1997:
SIX MONTHS ENDED JUNE 30, -------------------------- 1997 1998 ------------ ------------- Salaries and benefits............................ $ 2,068,250 $ 4,715,050 Occupancy costs.................................. 980,536 2,505,996 Advertising...................................... 623,354 1,327,715 Bad debt expense................................. 213,839 1,135,456 Depreciation and amortization.................... 171,825 590,986 Supplies......................................... 247,085 602,817 Small equipment expenses......................... 248,698 329,817 Miscellaneous store expenses..................... 543,647 1,017,972 ------------ ------------- Total store expenses............................ $ 5,097,234 $ 12,225,809 ============ =============
The increase in store expenses was due primarily to the increase in the total number of stores. Store expenses as a percent of revenue decreased to 57.6% for the six months ended June 30, 1998 from 63.7% for the same period in 1997. Bad debt expense increased $922,000, or 431%, to $1.1 million (5.3% of revenues) for the six months ended June 30, 1998 from $214,000 (2.7% of revenues) for the same period in 1997. This increase reflected management's decision to pursue a broader customer base in the belief that the increase in revenues would exceed any corresponding increases in bad debt expense. General and Administrative Expenses. General and administrative expenses increased $2.8 million, or 116%, to $5.2 million for the six months ended June 30, 1998 from $2.4 million during the same period in 1997. The following table sets forth a line item comparison of general and administrative expenses for the six months ended June 30, 1998 and the six months ended June 30, 1997:
SIX MONTHS ENDED JUNE 30, ------------------------- 1997 1998 ------------ ------------ Salaries and wages................................ $ 1,161,211 $ 2,303,857 Legal and professional expenses................... 454,633 561,102 Depreciation and amortization..................... 50,922 139,239 Occupancy costs................................... 182,302 323,884 Other costs....................................... 553,743 1,863,243 ------------ ------------ Total general and administrative expenses........ $ 2,402,811 $ 5,191,325 ============ ============
23 The increase in general and administrative expenses for the six months ended June 30, 1998 was primarily due to the opening of 91 new stores. General and administrative expenses as a percent of revenue, however, declined to 24.4% for the six months ended June 30, 1998 from 30.0% for the same period in 1997. This percentage decrease was primarily the result of the Company's rapid growth coupled with the fixed nature of various expense items and the Company's commitment to control expenses. Interest Expense. Interest expense increased $425,000, or 218%, to $620,000 for the six months ended June 30, 1998 from $195,000 during the same period in 1997. The increase in interest expense resulted from increased borrowings to fund the Company's growth. The Company's weighted average cost of borrowings decreased to 10.5% in 1998 from 12.6% in 1997 due to the Company's lower cost of borrowings on the Credit Facility that was put in place in mid-1997. Provision for (Benefit from) Income Taxes. As of June 30, 1998, taxable income or loss of the Company and its subsidiaries, for federal income tax purposes, was reported by the equity holders on their respective income tax returns. Accordingly, no provision for federal income taxes was recorded on the consolidated statement of income for the Company as of June 30, 1998. The expense of $1.1 million as shown for the six months ended June 30, 1998 represents (i) a reversal of the previously recorded deferred federal tax asset of $709,000 for CCT, and (ii) the accrual of $374,000 for state income taxes owed on amounts earned during the first six months of 1998. CCT converted from a C corporation to an S corporation in January 1998, necessitating the reversal of the previously-recorded deferred federal tax asset. The tax provision of $201,000 for the six months ended June 30, 1997 principally reflects the federal and state income tax on income reported by the Company's two C corporation subsidiaries, CCT and Check into Cash Holdings, Inc. ("CICH"), for the six months ended June 30, 1997. COMPARISON OF THE YEAR ENDED DECEMBER 31, 1997 TO THE YEAR ENDED DECEMBER 31, 1996 Revenues. Revenues for the year ended December 31, 1997 increased $11.1 million, or 109%, to $21.4 million from $10.3 million for the year ended December 31, 1996. This growth resulted primarily from the increase in revenue generated by the 107 new stores opened in 1997 compared to 20 in 1996. The continuing growth of the stores opened in 1995 and 1996 also contributed to the growth in revenues. For the year ended December 31, 1997, 73.8% of the Company's revenues were derived from stores that were open at the beginning of the year, whereas 26.2% were derived from new stores that were opened during the year. The Company's average store revenues from stores open for at least 12 months at the beginning of 1996 and 1997 were $258,000 (nine stores) and $232,000 (52 stores), respectively. The following table presents, for the periods provided, the amount of revenues, the number of stores and the average revenues per store for those stores opened during a given year, net of closings:
YEAR ENDED DECEMBER 31, --------------------------------------------------------------- 1996 1997 ------------------------------- ------------------------------- AVERAGE AVERAGE NUMBER OF REVENUES NUMBER OF REVENUES REVENUES STORES PER STORE REVENUES STORES PER STORE ----------- --------- --------- ----------- --------- --------- 1993 Stores............. $ 588,792 2 $294,396 $ 564,779 2 $282,390 1994 Stores............. 1,729,061 7 247,009 1,670,982 7 238,712 1995 Stores............. 6,859,330 43 159,519 9,831,234 43 228,633 1996 Stores............. 968,722 17 56,984 3,483,581 17 204,917 1997 Stores............. 5,507,925 107 51,476 ----------- --- -------- ----------- --- -------- Total.................. $10,145,905 69 $147,042 $21,058,501 176 $119,651 =========== === ======== =========== === ========
24 Store Expenses. Store expenses increased $7.8 million, or 147%, to $13.1 million for the year ended December 31, 1997 from $5.3 million for the year ended December 31, 1996. The following table sets forth a line item comparison of store expenses for the year ended December 31, 1997 to the year ended December 31, 1996:
YEAR ENDED DECEMBER 31, ---------------------- 1996 1997 ---------- ----------- Salaries and benefits................................ $2,374,450 $ 5,031,970 Occupancy............................................ 1,017,438 2,470,382 Advertising.......................................... 503,745 1,580,160 Bad debt expense..................................... 438,551 1,196,469 Depreciation and amortization........................ 94,599 625,116 Supplies............................................. 217,731 543,199 Small equipment expense.............................. 73,410 364,366 Miscellaneous store expenses......................... 579,254 1,286,141 ---------- ----------- Total store expenses............................... $5,299,178 $13,097,803 ========== ===========
The increase in store expenses was due primarily to the increased number of stores and the Company's decision to increase its advertising expenditures, which resulted in advertising costs increasing $1.1 million, or 214%, to $1.6 million in 1997 from $504,000 in 1996. In addition, the Company, based on increased demographic knowledge of its customer base, began locating its stores in higher income neighborhoods. Rent for new store openings, together with higher rent for more desirable locations, resulted in the rental component of occupancy costs increasing $938,000, or 148%, to $1.6 million in 1997 from $636,000 in 1996. The average monthly rental for stores in existence at December 31, 1997 increased $265, or 27.3%, to $1,234 from $969 for those in existence at December 31, 1996. Bad debt expense increased $758,000, or 173%, to $1.2 million (5.6% of revenues) for 1997 from $439,000 (4.3% of revenues) for 1996. Also, depreciation and amortization increased $531,000 to $625,000 in 1997 from $95,000 in 1996. This increase was primarily due to the opening of 107 stores during 1997. Depreciation and amortization as a percentage of revenue increased because store opening costs are incurred before the new stores begin to generate revenues. In particular, in 1997, the Company opened 45 stores in the last four months of the year, which resulted in cumulative operating losses of approximately $500,000 for these stores. General and Administrative Expenses. General and administrative expenses increased $6.0 million, or 234%, to $8.6 million for 1997 from $2.6 million for 1996. The following table sets forth a line item comparison of general and administrative expenses for the year ended December 31, 1997 to the year ended December 31, 1996:
YEAR ENDED DECEMBER 31, ----------------------- 1996 1997 ----------- ----------- Salaries and wages.................................. $ 1,429,448 $2,959,340 Legal and professional expenses..................... 266,073 3,192,732 Depreciation and amortization....................... 21,598 284,224 Occupancy costs..................................... 98,421 382,530 Other costs......................................... 757,519 1,780,258 ----------- ----------- Total general and administrative expenses......... $ 2,573,059 $ 8,599,084 =========== ===========
The increase in general and administrative expenses was due in part to the increased number of stores and the significant increase in legal and professional expenses. Legal and professional expenses increased $2.9 million to $3.2 million for the year ended December 31, 1997 from $266,000 for the year ended December 31, 1996. This increase was due primarily to the Company's defense of the multiparty class action lawsuit filed against CCT on March 4, 1996, and its ultimate settlement on September 19, 1997 for $2.2 million which was all reflected in legal and professional fees. The Company estimates that it spent an additional $500,000 defending this lawsuit. Of the increase in salaries and wages in 1997, $266,400 is attributable to the grant of shares of Common Stock to Mr. Steve Scoggins. 25 Interest Expense. Interest expense increased $497,000, or 400%, to $621,000 for the year ended December 31, 1997 from $124,000 for 1996. This increase resulted from increased borrowings to fund the Company's growth. The Company's weighted average cost of borrowings increased to 11.6% in 1997 from 9.1% in 1996 due to the Company's higher cost of borrowings on the Sirrom Loan that was put in place in late 1996. Provision for (Benefit from) Income Taxes. In 1997, the Company and all its subsidiaries, except CCT and CICH, which were C corporations, were limited liability and S corporations. Accordingly, taxable income or loss, for federal income tax purposes, was reported by the equity holders on their respective income tax returns. The benefit from income taxes of $594,000 for the year ended December 31, 1997 represents the $709,000 benefit attributable to CCT's pre-tax loss for the year ended December 31, 1997, less $115,000 of state income tax accruals on earnings generated by certain subsidiaries in 1997. The tax of $515,000 for the year ended December 31, 1996 principally represents the income tax on the income attributable to the two C corporations, CCT and CICH. COMPARISON OF THE YEAR ENDED DECEMBER 31, 1996 TO THE YEAR ENDED DECEMBER 31, 1995 Revenues. Revenues for the year ended December 31, 1996 increased $6.6 million, or 176%, to $10.3 million from $3.7 million for the year ended December 31, 1995. This growth resulted from the increase in revenues generated by 69 stores in 1996 as compared to 52 stores in 1995. The Company consolidated the operations of three stores into other stores in 1996. The Company's average store revenues from stores open for at least 12 months at the beginning of each of the following periods was $263,000 (two stores) in 1995 and $258,000 (nine stores) in 1996. The following table presents, for the periods provided, the amount of revenues, the number of stores and the average revenues per store for those stores opened during a given year:
YEAR ENDED DECEMBER 31, -------------------------------------------------------------- 1995 1996 ------------------------------ ------------------------------- AVERAGE AVERAGE NUMBER OF REVENUES NUMBER OF REVENUES REVENUES STORES PER STORE REVENUES STORES PER STORE ---------- --------- --------- ----------- --------- --------- 1993 Stores.. $ 525,306 2 $262,653 $ 588,792 2 $294,396 1994 Stores.. 1,526,258 7 218,037 1,729,061 7 247,009 1995 Stores.. 1,663,492 43 38,686 6,859,330 43 159,519 1996 Stores.. 968,722 17 56,984 ---------- --- -------- ----------- --- -------- Total....... $3,715,056 52 $ 71,443 $10,145,905 69 $147,042 ========== === ======== =========== === ========
Store Expenses. Store expenses increased $3.2 million, or 148%, to $5.3 million for the year ended December 31, 1996 from $2.1 million for the year ended December 31, 1995. The following table sets forth a line item comparison of store expenses for the year ended December 31, 1996 to the year ended December 31, 1995:
YEAR ENDED DECEMBER 31, ----------------------- 1995 1996 ----------- ----------- Salaries and benefits............................... $ 783,615 $ 2,374,450 Occupancy costs..................................... 401,322 1,017,438 Advertising......................................... 445,188 503,745 Bad debt expense.................................... 113,931 438,551 Depreciation and amortization....................... 47,514 94,599 Supplies............................................ 82,490 217,731 Small equipment expense............................. 106,826 73,410 Miscellaneous store expenses........................ 156,656 579,254 ----------- ----------- Total store expense................................ $ 2,137,542 $ 5,299,178 =========== ===========
26 The increase in store expenses was due primarily to the increased number of stores in 1996 as compared to 1995. Store expenses as a percent of revenue decreased to 51.7% for the year ended December 31, 1996 from 57.5% for the year ended December 31, 1995 primarily as a result of a decrease in the rate of store openings from 43 in 1995 to 20 in 1996. In addition, advertising as a percent of revenue decreased to 4.9% for the year ended December 31, 1996 from 12.0% for the year ended December 31, 1995 as a result of management's decision to curtail its advertising campaign in light of the filing of the class action lawsuit against CCT. Bad debt expense increased $325,000, or 285%, to $439,000 (4.3% of revenues) for 1996 from $113,931 (3.1% of revenues) for 1995. The increase in miscellaneous store expenses was primarily attributable to a $299,000 increase in contract labor, which largely consisted of security services. General and Administrative Expenses. General and administrative expenses increased $1.9 million, or 289%, to $2.6 million for the year ended December 31, 1996 from $661,000 in 1995. The following table provides a line item comparison of general and administrative expenses for the year ended December 31, 1995 to the year ended December 31, 1996:
YEAR ENDED DECEMBER 31, ----------------------- 1995 1996 ----------------------- Salaries and wages.................................. $ 393,812 $ 1,429,448 Legal and professional expenses..................... 49,222 266,073 Depreciation and amortization....................... 3,582 21,598 Occupancy costs..................................... 37,557 98,421 Other costs......................................... 177,124 757,519 ---------- ------------ Total general and administrative expenses.......... $ 661,297 $ 2,573,059 ========== ============
The most significant increase in general and administrative expenses was the result of the increase in salaries and wages, which increased $1.0 million, or 263%, to $1.4 million for the year ended December 31, 1996 from $394,000 in 1995. This increase is the result of the Company's personnel additions to build the necessary infrastructure to support the Company's growth. The increase in legal and professional expenses was due largely to the use of outside professionals to assist in the Company's evaluation of various state regulations, and initial expenses of $80,000 incurred by CCT in defending against the class action lawsuit filed against it. Interest Expense. Interest expense increased $88,000, or 239%, to $124,000 for the year ended December 31, 1996 from $37,000 in 1995. This increase in interest expense was due to increased borrowings to fund the Company's growth. Provision for (Benefit from) Income Taxes. The provision for income taxes increased to $515,000 for the year ended December 31, 1996 from $347,000 for the year ended December 31, 1995. The effective tax rate, however, decreased to 23% in 1996 from 39% in 1995 due to the fact that all of the companies during 1996 elected to become limited liability and subchapter S corporations except CCT and CICH, which continued to be C corporations, and thus the taxable income or loss of the Company and its subsidiaries, for federal income tax purposes, was reported by the equityholders on their respective income tax returns. LIQUIDITY AND CAPITAL RESOURCES The Company's uses of cash are to fund held checks; operating costs such as payroll, occupancy, general and administrative expenses; start-up expenses of new stores; initial operating losses of new stores; and investments in capital equipment primarily for new stores. The Company's sources of cash are funds generated from operations and borrowings from banks and other lenders. Cash Flows from Operating Activities. Cash used in operating activities was $1.7 million for the six months ended June 30, 1998 and $1.4 million for the six months ended June 30, 1997. The increased use of cash in operating activities was primarily the result of the increase in held checks and prepaid expenses offset by the increase in net income and depreciation. Cash provided by (used in) operating activities for the year 27 ended December 31, 1997 and 1996 was ($3.5 million) and $809,000, respectively. The decrease in cash flows from operating activities from 1996 to 1997 was primarily the result of a decrease in net income and the increase in held checks, offset by increases in accounts payable and accrued liabilities. Cash Flows from Investing Activities. Cash used in investing activities was $1.5 million for the six months ended June 30, 1998 and $1.2 million for the six months ended June 30, 1997. Cash used in investing activities totaled $2.4 million and $652,000 in 1997 and 1996, respectively. Substantially all investing activities relate to capital expenditures for the Company's store expansions. The Company expects total budgeted capital expenditures for the remainder of 1998 to be approximately $1.8 million. These capital expenditures relate to planned openings of new stores. The actual amount of capital expenditures will depend in part on the actual number of stores opened. Cash Flows from Financing Activities. Cash provided from financing activities was $4.4 million for the six months ended June 30, 1998 and $2.7 million for the six months ended June 30, 1997. The increase was primarily the result of increased borrowings and decreased repayments of long-term debt and distributions to shareholders. Cash provided from financing activities totaled $6.0 million and $527,000 for 1997 and 1996, respectively. The increase resulted primarily from additional borrowings under long-term debt offset partially by increased repayment of long-term debt and distributions to shareholders. On November 8, 1996, the Company entered into the Sirrom Loan, which allows the Company to borrow up to $3.5 million until November, 2001. Borrowings under the Sirrom Loan bear interest at a rate of 14.0% per annum. On June 26, 1998, the Company amended the Sirrom Loan to allow the Company to borrow up to an additional $3.5 million (in increments of no less than $250,000) until June 2003. The outstanding borrowings under this line were $4.25 million at June 30, 1998. On June 2, 1997, the Company entered into a credit agreement with NationsBank (the "Credit Facility") which allows the Company to borrow up to $11.5 million until October 2000. Borrowings under the Credit Facility bear interest at LIBOR plus approximately 1.0% and miscellaneous fees (9.0% at June 30, 1998). The outstanding borrowings under the Credit Facility were $9.6 million at June 30, 1998. The availability of credit is determined based on two times the Company's earnings before interest, taxes, depreciation, and amortization for the last twelve months. Under the terms of the Credit Facility, the Company is required to maintain certain financial covenants. Substantially all assets have been pledged to secure indebtedness under the Credit Facility. As of June 30, 1998, the Company had $2.3 million in cash. The net proceeds from the Offering remaining after deducting (i) underwriting discounts, (ii) estimated offering expenses, and (iii) the repayment of outstanding indebtedness are expected to total approximately $ million. The Company expects to repay all amounts outstanding under the Sirrom Loan and all amounts to NationsBank under the Credit Facility with the net proceeds of the Offering. The Company believes that the proceeds of the Offering, funds to be provided by operations, and funds available under its existing borrowing arrangements will be sufficient to meet the Company's anticipated needs for working capital and store expansions for the next 12 months. The Company's working capital and store expansion plans beyond the next 12 months may require additional debt and/or equity financing. The Company's estimate of the time that its funding sources will be sufficient to meet its current needs is a forward-looking statement that is subject to risks and uncertainties. Actual results and working capital needs may differ materially from estimates. IMPACT OF INFLATION Inflation has not had a material effect on the Company's results of operations or financial condition during the past three years and management does not anticipate that future results will be materially affected by the levels of inflation. 28 YEAR 2000 The Year 2000 issue is the result of potential problems with computer systems or any equipment with computer chips that use dates that have been stored as two digits rather than four (e.g., "98" for 1998). On January 1, 2000, any clock or date recording mechanism, including date sensitive software, which uses only two digits to represent the year may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in system failures or miscalculations causing disruption of operations, including, among other things, a temporary inability to process transactions, send invoices or perform similar tasks. The Company has assessed the Year 2000 issue with respect to the software used by the Company in providing its services and with respect to its computerized information and operating systems. Although work is required to have its accounting software year 2000 compliant, the Company expects to complete all Year 2000 modifications by early 1999, leaving adequate time to assess and correct any significant issues that may materialize. Management does not believe that the costs to resolve the Company's Year 2000 issues will be material to the Company. This assessment is based on management's best estimates, which were derived utilizing numerous assumptions of future events. The Company is also discussing the Year 2000 issue with its significant suppliers to determine the extent to which the Company is vulnerable to those third parties' failures to remediate their own Year 2000 issues. The Company is not yet certain as to the extent to which the computer software and business systems of its suppliers are Year 2000 compliant. If systems of third parties on which the Company's systems rely are not timely converted or if such conversions are incompatible with the Company's systems, or if the Company fails to timely complete the remaining modifications to its own systems, the Year 2000 issue could have a material adverse effect on the Company's business, financial condition and results of operations. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In February 1997, the Financial Accounting Standards Board (the "FASB") issued Statement No. 128, "Earnings Per Share." This statement establishes standards for computing and presenting earnings per share and is effective for financial statements issued for periods ending after December 15, 1997. The Company adopted this statement effective January 1, 1998. This statement requires restatement (as applicable) of all prior-period earnings per share data presented. In February 1997, the FASB issued Statement No, 129, "Disclosure of Information about Capital Structure." This statement establishes standards for disclosing information about an entity's capital structure. Management intends to comply with the disclosure requirements of this statement, which are effective for periods ending after December 15, 1997. The implementation of this standard did not affect the Company's financial statements. In June 1997, the FASB issued Statement No. 130, "Reporting Comprehensive Income" ("SFAS 130"). This statement requires companies to classify items of other comprehensive income by their nature in a financial statement and display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in capital in the equity section of a statement of financial position. SFAS 130 is effective for financial statements issued for fiscal years beginning after December 15, 1997. The Company adopted SFAS 130 effective January 1, 1998. All prior periods have been restated to report and present comprehensive income and its components. In June 1997, the FASB also issued Statement No. 131, "Disclosure About Segments of an Enterprise and Related Information" ("SFAS 131"). This statement establishes additional standards for segment reporting in the financial statements and is effective for fiscal years beginning after December 15, 1997. Management believes that SFAS 131 will not affect the Company's financial statements. 29 BUSINESS GENERAL The Company is a specialty financial services company that advances cash to its customers by cashing their personal checks and agreeing to hold the checks until they are redeemed by the customers or until a short holding period, typically less than 17 days, has expired. The Company targets customers who are currently employed and have an active checking account. To initiate a relationship with the Company, each customer is required to provide proof of income, proof of an active personal checking account, proof of residence and a form of identification. The Company limits the amount of cash that it advances to customers to $300 per transaction and prohibits customers from having more than one outstanding transaction with the Company. The Company generally does not cash checks with a face amount exceeding 50.0% of the net "take-home" amount of the customer's next paycheck. In exchange for its service, the Company receives a fee ranging from approximately 11.5% to 18.0% of the face amount of the check. The Company's growth strategy is to rapidly open stores in middle income neighborhoods in high traffic shopping centers with a significant anchor tenant such as a supermarket or major discount retail store. The Company is also testing store locations in certain supermarkets, convenience stores and retail stores. Management targets particular geographic areas for development and seeks to develop all of the major, and many of the secondary, markets in that area in a "clustered" fashion that maximizes the effectiveness and efficiency of store opening processes, recruiting and training functions, and advertising and promotional efforts. The Company uses intensive employee training in customer service and targeted local advertising in order to build brand loyalty and customer awareness and to increase transaction volume. The Company commenced operations in June 1993 with one store and has expanded rapidly to a total of 266 stores at June 30, 1998. Revenues have increased substantially from $78,000 in 1993 to $21.4 million in 1997 and $21.2 million for the six months ended June 30, 1998. The Company's average store revenues from stores open for at least 12 months at the beginning of each of the following periods was $213,000 (two stores) in 1995, $255,000 (nine stores) in 1996, $233,000 (52 stores) in 1997 and $132,000 (63 stores) for the six months ended June 30, 1998. During the six months ended June 30, 1998, the Company completed 652,000 transactions attributable to 120,000 customers. As of June 30, 1998, the Company had approximately 67,000 held checks with an aggregate outstanding balance of $15.4 million. The Company incurred bad debt expense of $1,826 for 1993 (2.3% of revenues), $50,976 for 1994 (5.2% of revenues), $113,931 for 1995 (3.1% of revenues), $438,551 for 1996 (4.3% of revenues), $1.2 million for 1997 (5.6% of revenues) and $1.1 million (5.3% of revenues) for the six months ended June 30, 1998. Charge- offs, net, for such periods were $2,000 for 1993, $ 39,000 for 1994, $72,000 for 1995, $357,000 for 1996, $1.1 million for 1997 and $1.1 million for the six months ended June 30, 1998. During the six months ended June 30, 1998, approximately 93.4% of the Company's transactions were closed during the holding period or within four days following the expiration thereof and 6.6% remained open. Of the transactions closed within such period, approximately (i) 64.1% of the customers' checks were redeemed with cash and (ii) 24.4% were redeemed and immediately followed by "same day" transactions with the customer and 11.5% were extended, depending upon the Company's procedures and applicable state law. Of the 6.6% of transactions that remained open following the holding period, as of July 13, 1998, approximately 77.1% were ultimately closed and 12.9% (0.9% of the total transactions) were charged off, and the remaining 10.0% remain outstanding. The Company emphasizes a professional approach to collections that is designed to maintain a positive public image. Once a check is delinquent, store employees contact customers and encourage them to honor their checks. The Company's practice is to charge off those checks that, as of the fifth day of each month, have remained in default for a period of at least 30 days. Following charge off, the customer's account is referred to the Company's centralized internal collection department, which continues to contact the customers. In addition to providing an effective means of tracking and verifying the frequency and amount of the Company's bad debts, the Company's centralized internal collection procedures serve an important monitoring and internal audit function. 30 MARKET FOR COMPANY'S SERVICE Historically, consumers have satisfied their short-term cash needs by choosing from among the following alternatives: (i) charge cards, credit cards, home equity lines of credit, and bank overdraft lines of credit, (ii) unsecured loans from banks and finance companies, (iii) loans from friends and family members, (iv) payroll advances from employers, (v) title pawn loans or pawn shop transactions, (vi) sales of personal assets, (vii) overdrawing their personal bank accounts or (viii) defaulting on obligations. The Company believes that these traditional alternatives have not adequately satisfied consumers' needs and that the Company's business has developed in response to various shortcomings and disadvantages presented by such alternatives. Specifically, the Company believes that these alternatives are unattractive to many consumers for the following reasons: (i) consumers may dislike the complexity, inconvenience, or lead time associated with such alternatives, (ii) the minimum amount required to be borrowed or the repayment or other terms may be unsatisfactory in light of the consumers' needs, (iii) consumers may be ineligible by virtue of credit or other criteria, (iv) consumers may be unwilling or unable to pay the high costs of NSF and overdraft fees charged by banks and merchants or (v) consumers may fear the personal embarrassment that may result from the denial of credit or from approaching friends and family members for money. Management believes that its customers prefer the ease, convenience and simplicity of the Company's service. The Company's business, unlike that offered by these traditional alternatives, provides customers with a simple, convenient, confidential means of quickly obtaining small amounts of short term cash, with a single up-front fee and payment due generally as of the date of the customers' next paycheck. In addition, management believes that the Company's customers prefer (i) to have the ability to redeem their checks rather than having them deposited and (ii) to pay the one-time flat fee charged by the Company as opposed to the ongoing finance charges associated with other alternatives. Moreover, because the Company does not require its customers to provide collateral or to satisfy traditional credit criteria, the Company believes that it eliminates the consumer's fear of credit denial. Management further believes that a primary reason for the growth in its business is the high cost of NSF assessed by both banks and merchants and the high finance costs charged by financial service providers for small amounts of short-term cash. The Company's check cashing service is distinct from the services provided by traditional check cashers. Traditional check cashers generally operate in low-income neighborhoods of urban areas, providing a diverse range of consumer financial products and services primarily consisting of third-party check cashing, money orders, money transfers, consumer loans, insurance and bill payments, and in some cases serve as distribution centers for public assistance benefits and food stamps under government contracts. In contrast, the Company provides only personal check cashing services to those customers who can demonstrate that they are earning an income, work or reside in the area in which the store is located and have an active personal checking account. The Company generally locates its stores in middle-income neighborhoods in high traffic shopping centers with a significant anchor tenant such as a supermarket or a major discount retail store. GROWTH STRATEGY The Company intends to continue its rapid growth through continued implementation of the following strategies: . Open New Stores. The Company plans to increase revenue and profits primarily by opening new stores. The Company has grown from two stores in 1993 to 266 as of June 30, 1998 exclusively from internal expansion. Management believes new store development is currently more economical than growth through acquisition because of the relatively low cost of opening new stores as compared to acquiring and integrating existing stores. During 1997 and the first six-months of 1998, under the existing operational framework, the Company opened 5 to 30 new stores per month, with an average of 9 new stores per month in 1997 and 15 per month in 1998. . Enter New Markets and Develop Existing Markets. The Company seeks to develop its markets in a systematic, progressive fashion. The Company generally expands into states that, in the opinion of 31 management, have a favorable cash advance regulatory scheme. The Company analyzes the regulatory environment of each market and reviews demographic information to determine the numbers and profiles of potential customers. The Company enters into and develops its targeted markets in a progressive "clustered" fashion, initially locating a sufficient number of stores in a given area to realize efficiencies of scale and to maximize the effectiveness and efficiency of store opening costs, recruiting and training and advertising and promotional efforts. The Company generally locates its stores in middle income neighborhoods in high traffic shopping centers with a significant anchor tenant such as a supermarket or major discount retail store. Following entry into a new market, the Company opens additional stores within the area to further develop the cluster and to capture more of the market area. Generally, the Company continues to expand within a particular market as long as management believes that market will provide profitable incremental sales volume. . Develop Brand Awareness. The Company seeks to establish brand name awareness of its stores and its service in order to establish long-term franchise value. The Company operates under the federally registered service marks Check Into Cash(R), Quick, Easy and Confidential!(R) and Bob Cash(R) and the logos Check Into Cash and Bob Cash. The Company uses aggressive advertising campaigns to promote its business in its markets. The Company also believes that providing fast, personalized and courteous service in a clean and professional environment promotes the Company's image and leads to referral business. . Increase Same Store Revenues. The Company has historically pursued its growth strategy by rapidly opening clusters of stores in new geographic markets; however, the Company also believes that there is additional growth potential in most of its existing markets. The Company expands same store revenues through advertising and promotional campaigns. Management intends to increase same store revenues by continuing to emphasize its customer referral program. For the six months ended June 30, 1998, the Company attributed approximately 27.2% of the new business that it received to customer referrals. . Emphasize a High Standard of Customer Service. Fast, personalized customer service is critical to the Company's ability to generate repeat and referral business. The Company emphasizes courteous service and encourages store employees to recognize and develop good relationships with their customers. The Company also maintains a toll-free customer service line and a dedicated Internet e-mail address for customer service inquiries. Management believes that its service-oriented strategy has been successful and that a significant percentage of the Company's customers are repeat customers or referrals from existing customers. This emphasis on customer service also reinforces the Company's credibility with its customers, builds customer loyalty and minimizes customer complaints. For the six months ended June 30, 1998, approximately 89.2% of the Company's transactions were with repeat customers and the remaining 10.8% of transactions were with new customers. For the 12 months ended June 30, 1998, the Company's customers completed an average of approximately 12.6 transactions, including "same day" or extended transactions. Management attributes the Company's success in attracting repeat customers to the professional manner in which the Company's employees approach each transaction. 32 STORES The Company's stores are located in the States of California, Illinois, Indiana, Iowa, Kentucky, Mississippi, Missouri, North Carolina, Ohio, Tennessee, Washington and Wisconsin. As of June 30, 1998, the Company had 266 stores. The following table provides a breakdown of (i) the number of stores located in each state, and (ii) the percent of revenues attributable to such stores, for each of the periods presented:
YEARS ENDED DECEMBER 31, SIX MONTHS ------------------------------------------------------------------------------- ENDED 1993 1994 1995 1996 1997 JUNE 30, 1998 --------------- --------------- --------------- --------------- --------------- --------------- NUMBER PERCENT NUMBER PERCENT NUMBER PERCENT NUMBER PERCENT NUMBER PERCENT NUMBER PERCENT OF OF TOTAL OF OF TOTAL OF OF TOTAL OF OF TOTAL OF OF TOTAL OF OF TOTAL STORES REVENUES STORES REVENUES STORES REVENUES STORES REVENUES STORES REVENUES STORES REVENUES ------ -------- ------ -------- ------ -------- ------ -------- ------ -------- ------ -------- Tennessee............ 2 100.0% 9 100.0% 25 84.4% 28 51.9% 29 28.2% 31 15.1% Kentucky............. 8 3.6 9 12.7 9 11.5 10 6.9 Indiana.............. 18 11.9 23 31.3 25 24.8 26 14.5 Illinois............. 1 0.1 6 3.7 11 9.2 13 9.2 Wisconsin............ 3 0.4 17 7.2 18 7.5 California........... 32 3.0 54 13.5 Iowa................. 11 3.5 11 5.7 North Carolina....... 8 0.4 28 8.3 Ohio................. 34 12.2 38 17.5 Missouri............. 12 0.7 Washington........... 11 1.0 Mississippi.......... 14 0.1 --- ----- --- ----- --- ----- --- ----- --- ----- --- ----- 2 100.0% 9 100.0% 52 100.0% 69 100.0% 176 100.0% 266 100.0% === ===== === ===== === ===== === ===== === ===== === =====
The Company enters into and develops its targeted markets in a progressive "clustered" fashion, initially locating a sufficient number of stores in a given area to maximize the effectiveness and efficiency of store opening costs, recruiting and training and advertising and promotional efforts. Prior to entering a market, the Company's development department analyzes the market's demographic information, applicable laws and regulations, the proximity of competitors, traffic counts, area population, accessibility and cost. Management believes that most consumers reside within a five-mile radius of the store that they visit and that the convenience of a store's location is extremely important to customers. As a result, management seeks to open each new store within three miles of the market area that it is intended to serve. Stores are typically located in shopping centers that contain a large anchor tenant, usually a supermarket or major discount retail store, and other compatible tenants such as auto parts retailers, drugstores, convenience stores and fast food outlets. The surrounding area is typically populated with a high concentration of middle-income consumers. Following entry into a new market, the Company opens additional stores within the area to further develop the cluster and to capture more of the market area. Once a lease has been signed, the Company begins to prepare the location for the store opening. The preparation of each leased premises requires approximately two weeks at a cost of approximately $20,000 per store. The Company's typical store contains approximately 1,200-1,500 square feet consisting of a customer waiting area, customer service counter and a small office. Stores are well lighted and decorated to provide a professional and comfortable atmosphere. Stores opened during the year ended December 31, 1997 averaged 4.5 months for revenues to increase to a level that equaled operating expenses. Moreover, for the year ended December 31, 1997, it averaged nine months for the Company to recapture the initial capital investment and operating losses incurred during the initial 4.5 month period. MARKETING The Company markets its services primarily through radio, television, print, yellow pages, direct-mail and billboard advertising and the Company's customer referral program. For the six months ended June 30, 1998, the Company attributed 27.0% of the new business that it received to customer referrals, 26.0% to direct location signage, 17.0% to radio advertising and 13.0% to television advertising. The Company's television, radio and 33 direct-mail advertising explains how to use the Company's services and emphasizes the Company's quality of service, convenience and competitive rates. The Company provides a credit of up to $20 towards the fee on the referring customer's next transaction with the Company in exchange for successfully referring a new customer to the Company. The opening of a cluster of stores is followed by intensive advertising and promotions in the stores' area of dominant influence to educate consumers as to the Company's services, generate brand awareness and develop an initial customer base. Management believes that, by focusing on opening stores in multiple locations within a market and targeting advertising efforts towards the stores' area of dominant influence, the Company increases the effectiveness of its advertising expenditures. THE CUSTOMER TRANSACTION A typical transaction for a new customer begins when that customer needs short-term cash and visits one of the Company's stores. The customer is required to produce the following items: (i) a valid driver's license or other acceptable form of identification, (ii) a copy of his or her most recent bank statement which must reflect that the customer has a local, open checking account, which, in the Company's judgment, is active and (iii) his or her most recent payroll stub or other acceptable proof of income. In addition, each customer must satisfy two of the following three criteria: reside, work and bank locally. The customer also completes an information statement, which requires the customer to supply certain demographic, employment and other information including addresses and phone numbers at which the customer may be contacted. Prior to opening an account for the customer, the employee must search the records of Tele-Track(R) ("Tele-Track"), a database service that maintains records of uncured defaults with other Tele-Track subscribers. As of the date of this Prospectus, approximately 25.0% of the Company's stores access the Tele-Track service via modem and 75.0% use touchtone telephones followed by receipt of facsimile responses from Tele-Track. Management believes that, within six months, all of the Company's stores will access the Tele-Track system via modem. Upon receipt of a search request from the Company, the transaction inquiry is simultaneously entered into the Tele-Track database. The employee then completes a customer approval checklist to ensure that he has not overlooked any steps or failed to obtain any required information. Following this approval process, a customer file folder is created and a computer-generated account number is assigned. The employee then explains the terms of the transaction to the customer and asks the customer to execute the check cashing agreement. The agreements, which are a standard form developed by the Company with counsel, are generated by the stores' computer systems and customized to comply with state regulatory requirements. The computer systems require each portion of the agreement to be completed before the agreement can be printed and a transaction may be completed. The agreement provides that the customer will deliver a check payable to the Company, the face amount of which generally is equal to the sum of (i) the cash advanced and (ii) a prescribed fee, which is calculated according to guidelines established by the Company for each state in which it operates. The face amount of the check generally may not exceed 50.0% of the customer's net "take home" pay for their next paycheck. In exchange for its receipt of the check, the Company advances cash to the customer and agrees to hold the check until it is redeemed by the customer or until a short holding period has expired. The holding period typically extends from the date the check is cashed to the date of the customer's next paycheck, but generally does not exceed 17 days. After a new customer has established a relationship with one of the Company's stores, the procedures for a subsequent transaction are less burdensome. Repeat customers are required only to tender a check and execute a new check cash agreement without being re-approved. The computer located in each store has a "pop-up" feature that requires store employees to verify and update the information contained in a customer's file folder every six months before doing business with that customer again. SERVICING AND COLLECTIONS The Company emphasizes a professional approach to collections that is designed to maintain a positive public image. If on the last day prior to the expiration of the holding period (the "pickup date") a customer has 34 not redeemed his check, the Company places a courtesy telephone call to the customer to remind him that his outstanding check will become due the next day. If the customer fails to redeem his check on the pickup date, the Company initiates its internal collection procedures the following morning. The Company first contacts the customer's bank to verify the availability of funds in the customer's checking account. In the event that the necessary funds are available, the Company presents the check to the customer's bank and receives a cashier's check in exchange. If, however, the customer's checking account does not contain adequate funds, the Company telephones the customer on a daily basis to remind them of their payment obligation. Employees who make contact with customers are instructed to politely encourage the customer to redeem his check and to refrain from threatening or arguing with the customer. The Company delivers a notice letter to any customer whose check remains due for three days and whom the Company has been unable to contact, and, if the check remains due for five days without contact, an employee of the Company may make a field call to the customer's residence. Once a check has remained due for 10 days without contact, the Company sends a certified notice letter to the customer if a suitable commitment to repay has not been received. The Company's practice is to charge off those checks that, as of the fifth day of each month, have remained in default for a period of at least 30 days. Following charge off, the customer's account is referred to the Company's centralized internal collection department, which continues to contact the customers. In addition to reducing the Company's bad debt expense, the Company's centralized internal collection procedures serve an important monitoring function, reducing employee theft. Once a check has been charged off, the customer's account is removed permanently from the store's eligible customer list and the amount outstanding is written off as a bad debt. Every store is provided with the identity of the customer whose check has been charged off and the account is then turned over to the Company's internal collection department, which continues to attempt to contact the customer. Members of the Company's internal collection department apply the same professional approach to collection as the store employees, and, in addition, are authorized to develop payment plans to assist customers in honoring their debt. The Company does not presently employ an outside collection agency. ORGANIZATIONAL STRUCTURE AND PROCEDURES The Company's 266 stores are organized into three divisions. A divisional vice president directs five to seven regional managers who are in turn responsible for 10 to 15 stores each. Divisional vice presidents are experienced executives who report directly to the President. Regional managers reside in the regions that they supervise and monitor individual store performance on a daily basis. Each store is typically staffed with a manager and either an assistant manager or a customer service representative (a "CSR"). Individual store managers are responsible for customer relations, development of new accounts, cash entries, staffing and training and collections. Management at the Company's corporate offices directs and coordinates planning and controls, advertising and marketing, employee training and personnel matters. Operations personnel at the Company's corporate offices evaluate the performance of each store using on-site reviews and daily reports on operations. The Company distributes to all its employees written procedures and policies covering all aspects of store-level operations. These policies and procedures have been established to minimize the operating risks inherent in the cash advance business and to maintain uniformity in operations on a national basis. Management is also committed to providing its employees formal, supervised training. CSRs and store managers must complete formal training programs conducted by the Company. Training of new hires is conducted at the largest office in each region by corporate trained personnel. New CSRs typically receive four days of initial orientation followed by two weeks of supervised on-the-job training. A key objective of this training program is to teach new employees how to identify risks associated with cashing customer checks and the steps that can be taken to reduce these risks. Store managers are trained at one of the Company's stores for approximately two or three weeks prior to assignment to their store. After such assignment, the store managers are closely monitored on a daily basis for two to three months. 35 The Company has structured its compensation arrangements to provide divisional, regional and store-level manager's with an incentive to increase store revenue and profits. Store managers receive a monthly commission based on their store's performance as measured by: (i) growth in numbers of held checks, (ii) delinquencies rates and (iii) losses. Division and regional managers receive commissions based on the performance of the group of stores for which they are responsible. All store cash is deposited at the end of the business day with that store's bank. The deposit is reconciled against the transactions performed at each store by the Company's centralized accounting department on a daily basis. In addition, the Company's regional managers perform periodic internal audits and the Company employs two full-time auditors who perform cash audits on a random basis. The Company has also implemented various programs and systems (including alarms and security cameras) to reduce the risk of third party theft and to provide security for its facilities and employees. The Company also maintains insurance coverage for theft. MANAGEMENT INFORMATION SYSTEMS The Company employs a number of information systems and internal reporting processes to monitor the daily operations of each store and to gather information relating to its customers. These systems provide management with daily, weekly, monthly or year-to-date reports detailing key operational statistics for all stores. These systems have enabled the Company to expand its operations while maintaining a high degree of control over revenues, expenses and customer transactions. The Company believes that the following reporting procedures provide a significant competitive advantage over small local cash advance providers. At the end of each business day, each store manager completes and delivers to the appropriate regional manager (i) a report summarizing the store's transaction history for that day, the amount of checks held and present cash position, and (ii) a past due report detailing the status of payments and any collection efforts that have been made with respect to each customer account that is overdue. In addition, the store manager faxes to the Company's accounting department copies of any deposit slips, together with an exception report that explains any difference between the deposit slips and the amount of cash that should have been received and deposited. Divisional vice presidents and senior executives review group summaries, and exceptions to Company standards are addressed each day. On a weekly basis, store managers complete and deliver to the appropriate regional manager a held check summary, time sheets completed by each employee and a past due report summary. On a monthly basis, store managers mail to the appropriate regional manager all mileage and expense reports and copies of any correspondence with customers. On a monthly basis, store managers also mail any charge off requests to the collection supervisor at the Company's corporate offices. The Company equips each of its stores with an on-site computer. Employees create a customer account for each customer and record each transaction that is consummated as well as each collection action that is taken. Each night all newly entered information in each store's computer is downloaded to the central computer at the Company's corporate office. The data maintained by the store computers and the central computer are regularly backed-up. The Company uses the central computer's records to verify the written reports regularly delivered by the store managers. In addition, these records are used by the Company's internal auditors who regularly visit each store to ensure that there are no discrepancies between the records maintained at each store and those maintained on the central computer system. The Company presently has no plans to upgrade or replace its central computer system or any of the computers at its store locations, and management believes that the Company's central computer will adequately handle up to 1,000 stores without modification or upgrade. COMPETITION The cash advance industry is highly fragmented and highly competitive, and there is significant competition within each of the markets in which the Company operates. Competition within the industry is based primarily 36 on store location, convenience and customer service. Most of the Company's competitors are small, owner-operated stores that operate in a limited geographic area. Management believes that most store owners operate fewer than 20 stores. Management believes that, in many cases, these stores are operated by individuals who lack the capital resources and marketing expertise to expand their business, increase their profitability and compete effectively with larger operations. The Company believes that larger companies are able to operate more efficiently and provide a higher level of customer service than smaller companies. Management believes that these competitive advantages are the result of greater managerial and financial resources as well as economies of scale related to systems and marketing expenses. Management believes that these factors present an opportunity for well-capitalized operators to open additional businesses and create a high level of brand recognition and customer loyalty. In this regard, the Company faces competition from at least three large privately held check cashing chains. In addition, several large chains of traditional check cashing outlets are moving into cash advance services. In addition to other cash advance stores, the Company competes with banks, credit card issuers, pawn shops, title pawn establishments and other financial service entities and retail business that provide short-term loans. The Company could face additional competition as an increasing number of traditional check cashers, pawn shops, commercial banks and other retail outlets add cash advance services to their financial product portfolios. GOVERNMENT REGULATION The Company is regulated in each state in which it operates as (i) a consumer lender, (ii) a provider of deferred deposit services or (iii) a lender or deferred depositor, as authorized pursuant to a check cashing statute. In each state, the Company is licensed and regularly audited by a state supervisory agency. In addition, the Company is required to comply with certain federal regulations governing consumer protection and lending practices. State Small Loan Laws. In the states of Illinois, Indiana, Missouri, Washington and Wisconsin, the Company is licensed as a consumer lender. In these states the Company completed a licensing application process before doing business. The license is issued by the agency having general supervisory authority over financial institutions in the state. A separate license is required for each location. The Company is required to maintain its records for a designated period of time and to submit to regular audits by the state regulatory agency. These statutes generally establish a schedule of allowable fees that the Company may charge its customers and limit the size and number of loans that the Company may have with any one customer at any given time. In addition, these statutes require that the Company provide its customers with certain contractual disclosures explaining various aspects of their loan, such as principal, fees, annual percentage rate ("APR") and due dates. Finally, these statutes regulate the nature of the Company's advertising. State Deferred Deposit Laws. In Iowa, Kentucky, South Carolina and Tennessee, the Company is licensed as a provider of delayed, or deferred deposit, or presentment services. In these deferred deposit states the Company is authorized to accept, or cash, checks and hold them for a designated period of time within which the customer may redeem the check or the Company may deposit it for payment by the customer's bank. In these states, the Company is also required to be licensed by the state agency having general supervisory authority over financial institutions. The Company is required to complete a formal application process prior to receiving its license, which includes the provision for a minimum capital requirement for each location. A separate license is required for each location. The Company is also required to maintain its records for a designated period of time and to submit to regular audits by the state regulatory agency. The applicable state statutes generally establish a schedule of allowable fees that the Company may charge its customers and limit the size and number of transactions that the Company may have with any one customer at any given time. 37 In addition, the Company is required to provide its customers with certain contractual disclosures explaining various aspects of the transaction, such as cash advanced, the fee for deferring deposit of the customer's check and such fee expressed as an APR. These statutes also prohibit the Company from enforcing its transactions with its customers by use of the state's criminal bad check laws. State Check Cashing Laws. In California, Mississippi and North Carolina the Company is regulated as a check casher. In these states the Company is authorized to defer the deposit of personal checks that it cashes, or accepts, for a designated fee. These statutes require the Company to be licensed by the agency charged with the general supervisory authority over financial institutions. In each check cashing state, the Company is required to complete a formal application process prior to receiving its license to cash checks. In each check cashing state, the Company is required to maintain its records for a designated period of time and to submit to regular audits by the state regulatory agency. The size and number of transactions that the Company can have outstanding with any one customer is limited and the Company must provide its customers with contractual disclosures explaining various aspects of its transaction, such as the amount of cash advanced, fee for the advance and that fee expressed as an APR. In Ohio the Company is also regulated as a check casher, but its transaction is authorized as a check cashing loan. As such, the Company must also apply for an additional endorsement allowing it to engage in the business of check cashing loans. Federal Regulation. The Company's loan activities are subject to certain federal regulation, including the Truth-in-Lending Act ("TILA"), the Equal Credit Opportunity Act ("ECOA"), the Fair Credit Reporting Act ("FCRA") and the regulations promulgated for each. In addition, some of the check cashing and deferred deposit statutes require that TILA disclosures be given to customers. These laws require that Company to provide disclosure of the principal terms of each transaction to every customer, prohibit misleading advertising, protect against discriminatory lending practices and proscribe unfair credit practices. TILA and Regulation Z promulgated thereunder require, among other things, disclosure of pertinent elements of consumer credit transactions, including the dollar amount of the finance charge and that charge expressed in terms of an APR. The ECOA prohibits creditors from discriminating against loan applicants on the basis of race, sex, age or marital status. Pursuant to Regulation B promulgated under the ECOA, creditors are required to make certain disclosures regarding consumer rights and advise consumers whose credit applications are not approved of the reasons for the rejection. The FCRA requires the Company to provide certain information to consumers whose credit applications are not approved on the basis of a report obtained from a consumer reporting agency. EMPLOYEES As of June 30, 1998, the Company had approximately 575 employees, including 72 corporate and general administrative employees, three divisional vice presidents, three divisional directors, 24 regional directors and 266 store managers. None of the Company's employees are covered by a collective bargaining agreement nor has the Company ever experienced a work stoppage. The Company believes that its relationship with employees is satisfactory. PROPERTIES The Company's corporate headquarters consist of 13,800 square feet that the Company leases at four locations in Cleveland, Tennessee for an aggregate of $6,546 per month. The leases for the four locations expire in December 2006, December 2005, March 2001, and May 1999. The Company presently intends to renew these leases upon their expiration. The Company intends to expand its headquarters in the future to support additional growth. The Company leases all of its store locations, typically for a term of three to five years. Each store generally consists of 1,200 to 1,500 square feet at an average monthly lease rate of $1,234. The 266 store leases expire at various times through the year 2003, of which 43 will expire on or before June 30, 1999. Most of the store leases contain renewal options for additional periods at rental rates adjusted according to agreed upon formulas. 38 LEGAL PROCEEDINGS On March 4, 1996, a class action lawsuit was filed in the Circuit Court for Bradley County, Tennessee against a wholly-owned subsidiary of the Company, and W. Allan Jones, Jr., the Company's Chief Executive Officer, individually. This lawsuit, which alleged common law fraud as well as violations of TILA, the Tennessee usury statute, and the Tennessee Consumer Protection Act, sought injunctive relief and money damages. Although the Company believes this lawsuit was without merit, on September 19, 1997, the Company entered into a settlement agreement in order to allow management to focus its resources on the Company's operations. On January 21, 1998, the Court approved the settlement and entered an order of Final Judgment and Dismissal. The settlement agreement established a settlement fund of $1,380,000 for the benefit of class members, $23,000 for notice administration and $598,000 for the attorneys representing the class. On June 2, 1998, the court ordered settlement notices to be sent to an additional 5,939 class members, granted preliminary approval of an additional $166,000 to be included in the settlement fund, authorized an additional $33,000 of attorney fees to class counsel, ordered that claim forms be sent to all class members and scheduled a hearing on August 6, 1998 to consider any objections to the settlement that might be filed by any of the additional 5,939 class members. On July 9, 1998, representative plaintiffs filed a motion alleging that the Company collected and continues to collect money from class members for transactions which occurred prior to October 1, 1997, and that such collections violate the judgement and orders of the Court. The Company does not believe that the motion will result in a material liability to the Company and intends to vigorously defend against it. On April 28, 1998, a class action lawsuit was filed against Check Into Cash of Kentucky, LLC, a wholly-owned subsidiary of the Company ("CIC of Kentucky") and W. Allan Jones, Jr., individually, in the United States District Court of Eastern Kentucky. The lawsuit claims violations of TILA, violation of the Kentucky Disclosure of Finance Charge on Installment Credit Transaction Act, violation of the Kentucky usury statute, violation of the Kentucky Consumers Loans Act, violation of the Kentucky Consumer Protection Act and violation of the RICO Act. CIC of Kentucky and Mr. Jones have moved the Court to dismiss all counts for failure to state a claim and for lack of personal jurisdiction over Mr. Jones. CIC of Kentucky has asserted its licensure under the Kentucky Check Cashing Act as a complete defense. The Company believes this lawsuit to be without merit and intends to vigorously defend against it. On June 1, 1998 an adversary proceeding was filed against CIC of Kentucky in the Bankruptcy Court for the Eastern District of Kentucky alleging that its licensed check cashing transaction with a debtor violated the Kentucky usury statute and that agents of CIC of Kentucky violated the automatic stay provisions of 11 U.S.C. (S) 362 by contacting the debtor via phone after she had filed for bankruptcy and attempted to coerce the debtor to pay. The Company believes this adversary proceeding to be without merit and intends to vigorously defend against it. In addition, the Company is from time to time involved in other litigation incidental to the conduct of its business, none of which the Company believes to be material. 39 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY The executive officers and directors of the Company and their ages as of July 29, 1998, are as follows:
NAME AGE POSITION ---- --- -------- W. Allan Jones, Jr...... 45 Chairman of the Board, Chief Executive Officer and Director Steve M. Scoggins....... 37 President, Chief Operating Officer and Director J. Samuel Choate, Jr.... 50 Executive Vice President and General Counsel Frederick Krosner....... 62 Executive Vice President, Treasurer, Controller and Director Henry E. Ryan........... 37 Vice President--Development
W. ALLAN JONES, JR. has been Chairman of the Board and Chief Executive Officer of the Company since December 1996. Mr. Jones also served as President of the Company from 1993 through July 1997. Mr. Jones has served as Chairman, President and Chief Executive Officer of Credit Bureau Services, Inc. and affiliated companies since 1976. He served on the Board of Directors of Interfed Savings Bank, a publicly traded bank located in Chattanooga, Tennessee from 1990 to 1992. STEVE M. SCOGGINS has been the President and Chief Operating Officer of the Company since July 1997 and a Director of the Company since December 1996. Prior to that appointment, Mr. Scoggins served in a number of senior management positions with the Company since January 1994, including Resource Development Director, Senior Vice President of Operations and Executive Vice President of New Business Development. Prior to joining the Company, Mr. Scoggins was the Vice President of Human Resources and the Director of Training for McKenzie Development Corporation, a rental purchase company located in Cleveland, Tennessee. J. SAMUEL CHOATE, JR. has been Executive Vice President and General Counsel of the Company since April 1998. Prior to joining the Company, Mr. Choate was the principal of Choate & Associates, P.C., a private law firm based in Alexandria, Virginia. FREDERICK KROSNER has served as the Executive Vice President, Treasurer and Controller of the Company since May 1998 and has been a Director of the Company since December 1994. From December 1994 to May 1998, Mr. Krosner served in a number of senior management positions with the Company. From 1991 to 1994, Mr. Krosner was the President of First Thermal Systems, a manufacturer of industrial furnaces that filed for bankruptcy in 1994 and was subsequently liquidated. Mr. Krosner is a Certified Public Accountant. HENRY E. RYAN has been Vice President--Development of the Company since November 1996. Prior to that appointment, Mr. Ryan served in a number of management positions with the Company since July 1995. Prior to joining the Company, Mr. Ryan was a Regional Development Director of Studio Plus, Inc., an extended stay hotel company located in Lexington, Kentucky. BOARD OF DIRECTORS The Company's Board of Directors (the "Board") currently consists of three members who will serve a term expiring at the Company's 1999 annual meeting of stockholders. The Company intends to add two directors who are not executive officers of the Company (the "Outside Directors") within 90 days after listing on the Nasdaq National Market. It will be necessary for the Company to appoint these Outside Directors within the 90-day period to maintain its Nasdaq National Market listing. Failure to appoint such Outside Directors could result in delisting of the Common Stock from the Nasdaq National Market. The Company's Certificate provides that the Board of Directors shall consist of three classes of directors serving for staggered terms, beginning with the 1999 annual meeting of stockholders. The Board of Directors will be divided as equally as possible into Classes I, II and III, with the directors elected to such classes at the 1999 annual meeting of stockholders serving initial terms of one, two and three years, respectively. Upon the expiration of such terms, all classes of directors will be elected to serve three-year terms. 40 COMPENSATION OF DIRECTORS Prior to the completion of the Offering, each director received a fee of $400 for each quarterly meeting attended in person. Following the completion of the Offering, the Company intends to pay each director who is not an employee of the Company fees of $400 and $200 for each meeting and committee meeting attended in person, respectively. Directors are reimbursed for their out-of-pocket expenses incurred in connection with their service on the Board of Directors. In addition, following the completion of the Offering, under the Incentive Plan, directors may receive discretionary grants of options to purchase shares of Common Stock. See "--Incentive Plan." COMMITTEES OF THE BOARD Upon consummation of the Offering, the Board of Directors will establish a Compensation Committee and an Audit Committee. The Compensation Committee will consist of at least two directors who are "disinterested persons" within the meaning of Rule 16b-3, as amended from time to time, under the Exchange Act and "outside directors" within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), and will have the authority to determine compensation for the Company's executive officers and to administer the Incentive Plan. The Audit Committee will consist of at least two "outside directors" (as defined above) and will have the authority to review with the Company's independent accountants their audit plan, the scope and results of their audit engagement and the accompanying management letter, if any, review the scope and results of the Company's internal auditing procedures, consult with the independent accountants and management with regard to the Company's accounting methods and the adequacy of its internal accounting controls, approve professional services provided by the independent accountants, review the independence of the independent accountants, and review the range of the independent accountants' audit and non-audit fees. 41 EXECUTIVE COMPENSATION Summary Compensation The following table summarizes the compensation paid or accrued by the Company for services rendered by the Company's Chief Executive Officer and the Company's other executive officers whose total salary and bonus for 1997 exceeded $100,000 (collectively, the "Named Executive Officers"). SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION ---------------------------------- OTHER ANNUAL ALL OTHER NAME AND PRINCIPAL SALARY BONUS COMPENSATION(1) COMPENSATION(2) POSITION YEAR ($) ($) ($) ($) ------------------ ---- ------- ------- --------------- --------------- W. Allan Jones, Jr. .... 1997 150,000 134,005(3) 588,000(4) 1,200 Chairman of the Board, Chief Executive Officer and Director Steve M. Scoggins....... 1997 94,367 76,095(3) 346,320(5) 4,697 President, Chief Operating Officer and Director Frederick Krosner....... 1997 156,154 -- -- 4,685 Executive Vice Presi- dent, Treasurer, Controller and Director
- -------- (1) Excludes perquisites and other personal benefits which for each Named Executive Officer did not exceed the lesser of $50,000 or 10.0% of such individual's salary plus annual bonus. (2) Represents contributions by the Company under its 401(k) Plan on behalf of the Named Executive Officers. (3) Includes $26,095 of personal property. (4) Reflects a reimbursement by the Company of $588,000 for the payment of Mr. Jones' taxes. (5) Reflects a reimbursement by the Company of $79,920 for the payment of Mr. Scoggins' taxes, which is represented by an account receivable from Mr. Scoggins, one-third of which will be forgiven by the Company each year beginning in 1998, subject to Mr. Scoggins' continuing employment. Also reflects a grant by the Company of 179,760 shares of unrestricted Common Stock to Mr. Scoggins on August 1, 1997, valued at $177,600, or $0.99 per share (based upon an independent third party evaluation, as of such date) and a grant by the Company of 89,880 shares of restricted Common Stock to Mr. Scoggins on January 10, 1997, valued at $88,800, or $0.99 per share (based upon such independent third party evaluation), the restrictions with respect to which lapsed on July 31, 1997, pursuant to Mr. Scoggins' Employment Agreement. Stock Options The Named Executive Officers were not granted, and did not exercise, any stock options or stock appreciation rights during 1997, and no such options or rights were held by the Named Executive Officers at December 31, 1997. See Note 7 to the Company's Consolidated Financial Statements. 42 COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION As of the date of this Prospectus, the Board of Directors has not appointed a Compensation Committee or a committee performing similar functions. W. Allan Jones, Jr., Steve M. Scoggins and Frederick K. Krosner participated in deliberations of the Company's Board of Directors concerning executive compensation during 1997. Neither Messrs. Jones, Scoggins, or Krosner, nor any other executive officer of the Company, serves as a member of a board of directors or compensation committee of any entity that has one or more executive officers serving as a member of the Board of Directors. EMPLOYMENT AGREEMENTS The Company entered into employment agreements with Steve M. Scoggins on July 31, 1997 and with J. Samuel Choate, Jr. on April 28, 1998. Each employment agreement has a term of three years, with an automatic annual renewal, which may be terminated by either party to such agreement at any time. The employment agreements provide for minimum annual salaries to Messrs. Scoggins and Choate of $150,000 and $325,000, respectively. In addition, Mr. Scoggins' agreement provides for (i) the lapse of all contractual restrictions on the 89,880 shares of restricted Common Stock granted to Mr. Scoggins pursuant to a Restricted Stock Agreement with the Company, dated as of January 10, 1997, (ii) a grant to Mr. Scoggins of an additional 179,760 shares of unrestricted Common Stock, and (iii) the payment of an automobile allowance and country club dues. Mr. Choate's agreement provides for (i) the use of an automobile, (ii) the grant to Mr. Choate of options to purchase 251,686 shares of Common Stock at $7.88 per share, vesting at varying amounts over a four- year period, and (iii) the payment of certain insurance premiums, country club dues, professional licensing expenses, moving expenses, and certain expenses in connection with the winding up of the affairs of Choate & Associates, P.C. The Company may terminate either employment agreement at any time. Each employment agreement provides that upon its termination by the executive for "good reason" or by the Company other than for cause, death, disability or retirement, the executive shall receive all accrued obligations that remain unpaid plus an amount equal to one year's base salary, in the case of Mr. Scoggins, or up to two full years' base salary, in the case of Mr. Choate. Additionally, each employment agreement provides that upon such termination, the executive is entitled to continue to participate in the Company's benefit plans for one year and to receive certain other benefits. If the termination is by the Company for cause, death, or disability or by the executive for other than "good reason," the executive will be entitled only to receive payment of his accrued obligations and certain other benefits; provided that upon Mr. Choate's death, disability, or retirement, the option granted pursuant to his employment agreement shall vest and, in the event the Common Stock is not then freely tradeable, he shall have the right to require the Company to repurchase some or all of the option shares at their fair market value. Similarly, in the event Mr. Scoggins' employment agreement is terminated by reason of his death and the Common Stock is not then freely tradeable, Mr. Scoggins' estate shall have the right to require the Company to purchase some or all shares then owned by Mr. Scoggins. The Company entered into employment agreements with Henry E. Ryan on August 1, 1997 and with Frederick Krosner on May 1, 1998. Employment under each agreement is at will and may be terminated by either party at any time. The agreements provide for minimum annual salaries to Messrs. Ryan and Krosner of $60,000 and $170,000, respectively. In addition, Mr. Ryan's agreement provides that in the event the Company terminates such agreement for any reason, he shall be entitled to receive an amount equal to the greater of $30,000 or six months' base salary as severance pay. Mr. Krosner's agreement similarly provides for severance pay in an amount equal to one year's base salary. The agreements also provide for the grant to Messrs. Ryan and Krosner of options to purchase 55,359 and 57,299 shares of Common Stock at $1.81 and $7.88, respectively. Each of the agreements between the Company and Messrs. Scoggins, Choate, Ryan, and Krosner prohibit, for certain periods of time following the termination of his employment, the executive's disclosure and use of confidential information, his solicitation of certain employees of the Company, and his competition with the Company within a certain geographic area. 43 INCENTIVE PLAN The Check Into Cash, Inc. Amended and Restated 1997 Long-Term Incentive Plan was adopted by the Board of Directors of the Company on May 1, 1998 and was approved by the Company's stockholders on that date. A summary of the Incentive Plan is set forth below. The summary is qualified in its entirety by reference to the full text of the Incentive Plan. General. The purpose of the Incentive Plan is to promote the success and enhance the value of the Company by linking the personal interests of employees, officers, consultants and directors to those of the stockholders, and by providing such persons with an incentive for outstanding performance. As of June 30, 1998, there were approximately 575 persons eligible to participate in the Incentive Plan. The Incentive Plan authorizes the granting of awards ("Awards") to key employees, officers, consultants and directors of the Company or its subsidiaries in the following forms: (i) options to purchase shares of Common Stock ("Options"), which may be incentive stock options or non-qualified, (ii) stock appreciation rights ("SARs"); (iii) performance shares ("Performance Shares"); (iv) restricted stock ("Restricted Stock"); and (v) other stock- based awards. Subject to adjustment as provided in the Incentive Plan, the aggregate number of shares of Common Stock reserved and available for Awards or which may be used to provide a basis of measurement for or to determine the value of an Award (such as with a SAR or Performance Share) is 561,750. The maximum number of shares of Common Stock with respect to one or more Options and/or SARs that may be granted during any one calendar year under the Incentive Plan to any one participant is 394,500. The maximum fair market value of any Awards (other than Options and SARs) that may be received by a participant (less any consideration paid by the participant for such Award) during any one calendar year under the Incentive Plan is $500,000. Administration. The Incentive Plan will be administered by the Compensation Committee of the Board of Directors of the Company (the "Committee"). The Committee has the power, authority and discretion to: (i) designate participants; (ii) determine the type or types of Awards to be granted to each participant and the terms and conditions thereof; (iii) establish, adopt or revise any rules and regulations as it may deem necessary or advisable to administer the Incentive Plan; and (iv) make all other decisions and determinations that may be required under the Incentive Plan, or that the Committee deems necessary or advisable. Awards. The Committee may determine that any Award will be determined solely on the basis of (i) the achievement by the Company or a Parent or Subsidiary of a specified target return, or target growth in return, on equity or assets, (ii) the Company's, Parent's or Subsidiary's stock price, (iii) the achievement by the Company, Parent or Subsidiary or a business unit of the Company of a specified target, or target growth in, revenues, operating income, net income or earnings per share, or (iv) any combination of the goals set forth in (i) through (iii) above. Furthermore, the Committee reserves the right for any reason to reduce (but not increase) any Award, notwithstanding the achievement of a specified goal. If an Award is made on such basis, the Committee must establish goals prior to the beginning of the period for which such performance goal relates (or such later date as may be permitted under Section 162(m) of the Code or the regulations thereunder). Any payment of an Award granted with performance goals will be conditioned on the written certification of the Committee in each case that the performance goals and any other material conditions were satisfied. No unexercised or restricted Award will be assignable or transferable by a participant other than by will or the laws of descent and distribution or, except in the case of an incentive stock option, pursuant to a qualifying domestic relations order; provided, however, that the Committee may (but need not) permit other transfers where the Committee concludes that such transferability (i) does not result in accelerated taxation, (ii) does not cause any Option intended to be an incentive stock option to fail to be described in Code Section 422(b), and (iii) is otherwise appropriate and desirable, taking into account any factors deemed relevant, including without limitation, any state or federal tax or securities laws or regulations applicable to transferable Awards. A participant may, in the manner determined by the Committee, designate a beneficiary to exercise the rights of the participant and to receive any distribution with respect to any Award upon the participant's death. 44 Upon the participant's death or disability during his or her employment or his or her service as a director, all outstanding Options, SARs, and other Awards in the nature of rights that may be exercised will become fully exercisable and all restrictions on outstanding Awards will lapse. Any Options or SARs or other Awards will thereafter continue or lapse in accordance with the other provisions of the Incentive Plan and the Award Agreement. In the event of a Change in Control of the Company (as defined in the Incentive Plan), all outstanding Options, SARs, and other Awards in the nature of rights that may be exercised will become fully vested and all restrictions on all outstanding Awards will lapse. In the event of the occurrence of any circumstance, transaction or event not constituting a Change in Control as defined in the Incentive Plan but which the Board of Directors deems to be, or to be reasonably likely to lead to, an effective change in control of the Company, the Committee may in its sole discretion declare all outstanding Options, SARs, and other Awards in the nature of rights that may be exercised to become fully vested, and/or all restrictions on all outstanding Awards to lapse, in each case as of such date as the Committee may, in its sole discretion, declare, which may be on or before the consummation of such transaction or event. Termination and Amendment. The Board or the Committee may terminate, amend or modify the Incentive Plan without stockholder approval; provided, however, that the Board or the Committee may condition any amendment on the approval of stockholders of the Company if such approval is necessary or deemed advisable with respect to tax, securities or other applicable laws, policies or regulations. No termination, amendment, or modification of the Incentive Plan may adversely affect any Award previously granted under the Incentive Plan, without the consent of the participant. Benefits to Named Executive Officers and Others. As of June 30, 1998, 364,344 stock options had been granted or approved for grant under the Incentive Plan. Any additional future Awards will be made at the discretion of the Committee. Therefore, it is not presently possible to determine the number or terms of Awards to be made in the future. Section 162(m). The Omnibus Budget Reconciliation Act of 1993 added Section 162(m) to the Internal Revenue Code of 1986, as amended. Section 162(m) generally disallows a public company's tax deduction for compensation to the chief executive officer and four other most highly compensated executive officers in excess of $1.0 million in any tax year beginning on or after January 1, 1994. Compensation that qualifies as "performance-based compensation" is excluded from the $1 million deductibility cap, and therefore remains fully deductible by the company that pays it. The Company intends that options granted with an exercise price at least equal to 100.0% of fair market value of the underlying stock at the date of grant will qualify as such "performance-based compensation," although other awards under the Incentive Plan may not so qualify. 45 401(K) PLAN The Company sponsors a defined contribution plan (the "401(k) Plan") for eligible employees of the Company under Section 401(k) of the Code. Participants may contribute up to 15.0% of their annual salaries to the 401(k) Plan, subject to certain limitations. All contributions made by an employee are fully vested and are not subject to forfeiture. The Company may make discretionary matching contributions to the 401(k) Plan on behalf of all eligible employees. During the fiscal year ended December 31, 1997, the Company made matching contributions equal to 50.0% of the eligible contribution made by each employee to the 401(k) Plan. CERTAIN TRANSACTIONS The Company leases an aircraft from Jones Airways, LLC ("Jones Airways"). Jones Airways is wholly- owned by W. Allan Jones, Jr. and his wife. The terms of the lease dated November 14, 1997, call for a monthly fee of $30,000 plus $750 per flight hour in excess of 30 hours per month, plus certain operating costs. Prior to entering the November 14, 1997 lease, the Company leased an aircraft from Jones Airways pursuant to a lease dated May 2, 1997, for $500 per hour for each hour of use by the Company, plus certain fees. This lease was terminated and succeeded by the November 14, 1997 lease. Fees paid in 1996 and 1997 and for the six months ended June 30, 1998 were $232,000, $295,000 and $511,000, respectively. The Company believes that the terms of the lease are as favorable as could be obtained from unaffiliated third parties on an arm's length basis. During 1995, 1996 and 1997, the Company loaned amounts to Mr. Jones and various entities owned by Mr. Jones and his wife pursuant to several promissory notes (the "Jones Notes"). The Jones Notes permit the borrowers thereunder to borrow up to an aggregate of $1.3 million from the Company and each note bears interest at 9.0% per annum. As of June 30, 1998, the aggregate principal amount outstanding under the Jones Notes was $782,000 and aggregate accrued interest equaled $26,000. Mr. Jones intends to repay all amounts owed to the Company under the Jones Notes prior to the commencement of the Offering. On August 15, 1996 the Company and Credit Adjustment Bureau, Inc. ("CAB") entered into a promissory note pursuant to which the Company agreed to loan up to $132,000 to CAB. Allan Jones owned 49.0% of CAB. The note bore interest at 9.0% per annum. CAB borrowed an aggregate of $132,000 under the note. On November 1, 1997 CAB was dissolved and all principal and interest on the note was simultaneously written off by the Company. On January 1, 1997, Mr. Jones and his wife contributed all of their equity interests in CCT, Creditcorp of Indiana, LLC, Creditcorp of Kentucky, LLC, Creditcorp of Wisconsin, LLC and Jones Management Services to the Company in exchange for 7.5 million shares of Common Stock. On March 31, 1997 and May 1, 1997, Mr. Jones and his wife contributed their equity interests in Creditcorp of Ohio, LLC and Creditcorp of Illinois, LLC , respectively, to the Company in exchange for 1.5 million shares of Common Stock. Prior to January 1, 1997, when it became a wholly-owned subsidiary of the Company, Jones Management Services was wholly-owned by Mr. Jones and his wife and provided executive management and advisory services to various other entities owned by Mr. Jones and his wife, including entities which are now part of the Company. Fees for services rendered in 1996 were $106,000. During 1995, 1996 and 1997, the Company borrowed an aggregate of $582,000 from Allan Jones and various entities owned by Mr. Jones and his wife pursuant to several promissory notes (the "Company Notes"). The Company Notes bore interest at 9.0% per annum. The entire principal amount of and accrued interest on the Company Notes has been repaid. 46 During 1995, 1996 and 1997, Mr. Jones and his wife capitalized several of the Company's subsidiaries in part with an aggregate of $409,000 evidenced by promissory notes which bore interest at 9.0% per annum. The entire principal amount of and accrued interest on the notes has been paid. The Company leases properties located in Cleveland, Tennessee (i) from Mr. Jones d/b/a Jones Properties pursuant to a Commercial Lease dated January 20, 1997 for a term of 120 months at a monthly rental rate of $1,250, (ii) from Mr. Jones d/b/a Jones Properties pursuant to a Commercial Lease dated January 20, 1997 for a term of 108 months at a monthly rental rate of $1,250 and (iii) from Jones Properties LLC pursuant to a Commercial Lease dated March 16, 1998 for a term of 36 and one-half months at a monthly rental rate of $1,000. Certain of the transactions described above may be on terms more favorable to officers, directors and principal stockholders and their affiliates than they could obtain in a transaction with an unaffiliated party. 47 PRINCIPAL AND SELLING STOCKHOLDERS The following table sets forth certain information regarding the beneficial ownership of Common Stock as of July 29, 1998, and as adjusted to reflect the sale of Common Stock offered hereby, by: (i) each director of the Company who beneficially owns Common Stock; (ii) each Named Executive Officer of the Company; (iii) all directors and executive officers of the Company as a group; (iv) each person known to the Company to beneficially own more than 5% of the outstanding Common Stock; and (v) the Selling Stockholder. Unless otherwise indicated, shares of Common Stock all are owned directly and the indicated person has sole voting and investment power.
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY PRIOR TO OFFERING (1) NUMBER OF OWNED AFTER OFFERING -----------------------SHARES TO BE------------------------ NAME NUMBER PERCENT OFFERED NUMBER PERCENT ---- ------------ ---------------------- ---------- ---------- W. Allan Jones, Jr.(2).. 8,988,000 97.1 -- Janie Jones (3)......... 8,988,000 97.1 -- Steve M. Scoggins....... 269,640 2.9 -- Henry E. Ryan(4)........ 55,359 * -- Frederick Krosner(5).... 57,298 * -- J. Samuel Choate, Jr.(6)................. 62,922 * -- Sirrom(7)............... 487,247 5.0 All directors and executive officers as a group (5 persons)(8)... 9,433,219 100.0 --
- -------- (1) For purposes of this table, a person or group of persons is deemed to have "beneficial ownership" of any shares that such person or group has the right to acquire within 60 days after the date of this Prospectus or with respect to which such person has or shares voting or investment power. For purposes of computing the percentages of outstanding shares held by each person or group of persons, shares which such person or group has the right to acquire within 60 days after such date are deemed to be outstanding for purposes of computing the percentage for such person or group but are not deemed to be outstanding for the purpose of computing the percentage of any other person or group. (2) Includes 3,595,200 shares held by Mr. Jones' wife, as to which shares Mr. Jones may be deemed to have beneficial ownership. (3) Includes 5,392,800 shares held by Mr. Jones, as to which Mrs. Jones may be deemed to have beneficial ownership (4) Represents options to purchase 55,359 shares of Common Stock that become exercisable on the consummation of the Offering. (5) Represents options to purchase 57,298 shares of Common Stock that become exercisable on the consummation of the Offering. (6) Represents options to purchase 62,922 shares of Common Stock that are currently exercisable. (7) Represents 487,247 shares of Common Stock issuable upon exercise of the Sirrom Warrants, all of which become exercisable on the consummation of the Offering. (8) Includes options to purchase 175,579 shares of Common Stock that are exercisable or will become exercisable on the consummation of the Offering. 48 DESCRIPTION OF CAPITAL STOCK Upon consummation of the Offering, the authorized capital stock of the Company will consist of a total of 45.0 million shares of capital stock. Of the total shares authorized, 40.0 million shares have been authorized as Common Stock, par value $0.01 per share ("Common Stock"), and 5.0 million shares have been authorized as Preferred Stock, par value $0.01 per share ("Preferred Stock"). The following summary does not purport to be complete and is subject to and qualified in its entirety by the provisions of the Company's Certificate and Bylaws, and by the provisions of applicable law. COMMON STOCK Shares of Common Stock are identical in all respects and for all purposes. Holders of Common Stock are entitled to one vote per share on all matters on which the holders of Common Stock are entitled to vote. Holders of Common Stock have no preemptive, conversion, redemption or sinking fund rights. In the event of a liquidation, dissolution or winding up of the Company, holders of Common Stock are entitled to share ratably in the assets of the Company, if any, remaining after the payment of all debts and liabilities of the Company and the liquidation preference of any outstanding class or series of Preferred Stock. The outstanding shares of Common Stock are, and the shares of Common Stock offered by the Company hereby when issued will be, fully paid and nonassessable. The rights, preferences and privileges of holders of Common Stock are subject to any series of Preferred Stock which the Company may issue in the future as described below. As of July 29, 1998, the Company had 9.3 million shares of Common Stock issued and outstanding, all of which was held by three stockholders. PREFERRED STOCK The Board of Directors has the authority, pursuant to the Certificate, to issue the Preferred Stock in one or more series and to fix the price, rights, preferences, privileges and restrictions thereof, including dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences and the number of shares constituting any series or the designation of such series without further vote or action by the stockholders. The issuance of Preferred Stock by the Board of Directors could adversely affect the rights of holders of Common Stock. The issuance of Preferred Stock may have the effect of delaying, deferring or preventing a change in control of the Company without further action by the stockholders and may adversely affect the voting and other rights of the holders of Common Stock. There are currently no agreements or understandings regarding the issuance of Preferred Stock which agreements or understandings will survive the consummation of the Offering, and the Board of Directors has no present intention of issuing any shares of Preferred Stock. OPTIONS 561,750 million shares of Common Stock are reserved for issuance under the Incentive Plan. As of July 29, 1998, options to purchase an aggregate of 364,344 shares of Common Stock were outstanding at a weighted average exercise price of $6.95 per share. 49 WARRANTS In connection with the Sirrom Loan, the Company issued to Sirrom warrants to purchase 487,247 shares of Common Stock. In the event that the Sirrom Loan remains outstanding on November 8, 1999, Sirrom will receive an additional 51,561 shares of common stock; if the Sirrom Loan remains outstanding on November 8, 2000, Sirrom will receive an additional 52,115 shares of common stock, at an aggregate exercise price of $0.05. Sirrom has the option to require the Company to redeem the warrants for a period of 30 days prior to the expiration of the Sirrom Loan in November 2001, at a purchase price equal to fair market value, as defined. Upon completion of the Offering, such redemption right terminates. In connection with the June 1998 amendment to the Sirrom Loan, the Company issued to Sirrom warrants to purchase 5,415 shares of Common Stock. For each additional borrowing under the amended Sirrom Loan the Company will grant Sirrom additional warrants to purchase shares of Common Stock, up to a total of 0.25 percent of the capital stock of the Company as calculated on a fully diluted basis after exercise. However, the Company presently intends to repay all outstanding borrowings under the Sirrom Loan with proceeds of the Offering, and, as a result, the warrants issued in connection with such amendment will be cancelled. CERTAIN PROVISIONS OF THE CERTIFICATE, BYLAWS AND DELAWARE LAW The Company's Certificate and Bylaws contain certain provisions, described below, that could delay, defer or prevent a change in control of the Company that a stockholder may deem to be in such stockholder's best interest. Number, Term, Classification and Removal of Directors. The Company's Bylaws provide that the size of the Company's Board of Directors shall be fixed from time to time pursuant to a resolution adopted by a majority of the Board of Directors, but in no case shall the number of directors be less than three. The Company's Certificate provides that the Board of Directors shall consist of three classes of directors serving for staggered terms, beginning with the 1999 Annual Meeting of Stockholders. The Board of Directors will be divided as equally as possible into Classes I, II and III, with the directors elected to such classes at the 1999 Annual Meeting of Stockholders serving initial terms of one, two and three years, respectively. Upon the expiration of such terms, all classes of directors will be elected to serve three-year terms. The classified board provision could prevent a party who acquires control of a majority of the outstanding voting stock of the Company from obtaining control of the Board of Directors until the second annual stockholders meeting following the date the acquiror obtains the controlling interest. A director may be removed from office only with cause, upon the majority vote of the stockholders, at a meeting for which notice of the removal action was properly given. The directors may fill the place of any director which may become vacant prior to the expiration of his or her term, such appointment by the directors to continue until the expiration of the term of the director whose place has become vacant; or, the directors may fill any directorship created by reason of an increase in the number of directors, such appointment by the directors to continue for a term of office until the next election of directors by the stockholders and until the election and qualification of the successor. Call of and Notices Relating to Stockholder Meetings; Actions by Written Consent of Stockholders. The Company's Bylaws provide that special meetings of stockholders may be called at any time only by the Chairman of the Board or the Board of Directors of the Company. Special meetings are to be held at such time and place and on such date as specified in the notice of the meeting. Notice of annual or special stockholders' meetings shall be given not less than ten nor more than 60 days before the date of the meeting, and notice of any special meeting of stockholders shall state the purpose or purposes for which the meeting is called. Actions required to be taken at a stockholder meeting may be taken without a meeting only if the unanimous written consent of the stockholders entitled to vote at such meeting is obtained and delivered to the Company for inclusion in its minute book or other corporate records. DGCL Section 203. The Company is subject to the provisions of the Delaware General Corporate Law ("DGCL"), including the provisions of Section 203 prohibiting various "business combinations" involving "interested stockholders" for a period of five years after the stockholder becomes an interested stockholder of the Company. Such provisions prohibit any business combination with a interested stockholder unless either (i) prior to such time, the Board of Directors approves either the business combination or the transaction by which 50 such stockholder became an interested stockholder, (ii) in the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder became the beneficial owner of at least 85% of the outstanding voting stock of the Company which was not held by directors, officers, affiliates thereof, subsidiaries or certain employee stock option plans of the Company, or (iii) subsequent to becoming an interested stockholder, such stockholder acquired additional shares resulting in such stockholder owning at least 85% of the outstanding voting stock of the Company and the business combination is approved by a majority of the disinterested stockholders' shares not held by directors, officers, affiliates thereof, subsidiaries or certain employee stock options plans of the Company. Under the relevant provisions of Section 203, a "business combination" is defined to include, among other things, (i) any merger, consolidation, share exchange or any sale, transfer or other disposition (or series of related sales or transfers) of assets of the Company having an aggregate book value of 10% or more of the Company's net assets (measured as of the end of the most recent fiscal quarter), with an interested stockholder of the Company or any other corporation which is or, after giving effect to such business combination, becomes an affiliate of any such interested stockholder, (ii) the liquidation or dissolution of the Company, (iii) the receipt by an interested stockholder of any benefit from any loan, advance, guarantee, pledge, tax credit or other financial benefit from the Company, other than in the ordinary course of business and (iv) certain other transactions involving the issuance or reclassification of securities of the Company which produce the result that 5% or more of the total equity shares of the Company, or of any class or series thereof, is owned by an interested stockholder. An "interested stockholder" is defined by the DGCL to include any person or entity that, together with its affiliates, beneficially owns or has the right to own 15% or more of the outstanding voting shares of the Company, or any person that is an affiliate of the Company and has, at any time within the preceding two-year period, been the beneficial owner of 15% or more of the outstanding voting shares of the Company. The restrictions on business combinations shall not apply to any person who was an interested stockholder before the adoption of the Bylaw which made the provisions applicable to the Company nor to any persons who subsequently become interested stockholders inadvertently, subsequently divest sufficient shares so that the stockholder ceases to be an interested stockholder and would not, at any time within the five-year period immediately before a business combination involving the stockholder have been an interested stockholder but for the inadvertent acquisition. 51 SHARES ELIGIBLE FOR FUTURE SALE Prior to the Offering, there has been no public market for the Common Stock. Sales of substantial amounts of shares of the Common Stock in the public market following the Offering, or the perception that such sales could occur could adversely affect the market price of the Common Stock prevailing from time to time and could impair the Company's ability to raise capital in the future through sales of its equity securities at a time and price which it deems appropriate. Upon completion of the Offering, assuming no exercise of outstanding options or warrants, the Company will have shares of Common Stock outstanding. Of these shares, the shares of Common Stock sold in the Offering will be freely tradable without restriction or further registration under the Securities Act, except that any shares purchased by "affiliates" of the Company, as that term is defined in Rule 144 ("Rule 144") under the Securities Act ("Affiliates"), may generally only be sold in compliance with Rule 144 described below. The remaining shares of Common Stock are "Restricted Securities" as defined in Rule 144. Restricted Securities may be sold in the public market only if registered or if they qualify for an exemption from registration under Rules 144, 144(k) or 701 under the Securities Act, which rules are summarized below. SALES OF RESTRICTED SECURITIES Subject to the provisions of Rule 144 under the Securities Act, beginning 90 days after the Offering, shares will be eligible for immediate sale in the public market that are not otherwise subject to certain lock-up agreements among certain stockholders of the Company, including directors, officers and Selling Stockholders and the Underwriters (the "Lock-Up Agreements"). Beginning 180 days after the offering (or earlier with the written consent of CIBC Oppenheimer Corp. in its discretion), an aggregate of shares will be available for immediate sale in the public market upon expiration of Lock-Up Agreements and subject to the provisions of Rule 144. In general, under Rule 144 as currently in effect, beginning 90 days after the effective date of the registration statement containing this Prospectus, a person (or persons whose shares are aggregated) who has beneficially owned Restricted Securities for at least one year, including a person who may be deemed an Affiliate of the Company, is entitled to sell, within any three- month period, a number of shares of Common Stock equal to the greater of one percent of the shares of Common Stock outstanding (approximately shares after giving effect to the Offering) and the average weekly reported trading volume of the Common Stock during the four calendar weeks preceding such sale. Sales under Rule 144 are subject to certain restrictions relating to manner of sale, notice and availability of current public information about the Company. In addition, under Rule 144(k), a person who is not an Affiliate and has not been an Affiliate at any time during the 90 days preceding a sale, and who has beneficially owned shares for at least two years, would be entitled to sell such shares immediately following the offering without regard to the volume limitations, manner of sale provisions or notice or other requirements of Rule 144. In meeting the one and two year holding periods described above, a holder of Restricted Securities can include the holding periods of those persons from whom he or she purchased the Restricted Securities. The holding periods described above do not begin to run until the full purchase price or other consideration is paid by the person acquiring the Restricted Securities from the issuer or an Affiliate. OPTIONS AND WARRANTS As of July 29, 1998, options and warrants to purchase an aggregate of 851,591 shares of Common Stock were outstanding of which shares are being offered hereby by Sirrom. See "Management--Executive Compensation." Rule 701 under the Securities Act provides that shares of Common Stock acquired on the exercise of outstanding options may be resold by persons other than Affiliates, beginning 90 days after the date of this Prospectus, subject only to the manner of sale provisions of Rule 144, and by Affiliates under Rule 144 without compliance with its one-year minimum holding period, subject to certain limitations. 52 The Company may file one or more registration statements on Form S-8 under the Securities Act to register 561,750 shares of Common Stock issuable pursuant to the Incentive Plan. Shares of Common Stock covered by these registration statements will thereupon be eligible for sale in the public markets subject to Lock-Up Agreements, if applicable. The Sirrom warrants provide that, pursuant to certain "piggyback" registration rights, Sirrom is entitled to include up to an aggregate of 487,247 shares of Common Stock in any registration statement filed by the Company of which shares of Common Stock are being registered in connection with the Offering. LOCK-UP AGREEMENTS The Company, Sirrom, and all executive officers and directors of the Company have agreed, pursuant to Lock-Up Agreements, not to directly or indirectly, without the prior written consent of CIBC Oppenheimer Corp., offer to sell, contract to sell, or otherwise sell, dispose of, loan, pledge, or grant any rights with respect to an aggregate of shares of Common Stock, options to purchase an aggregate of shares of Common Stock and any securities convertible or exchangeable for shares of Common Stock beneficially owned by them or any such securities hereafter acquired by them for a period of 180 days after the date of this Prospectus other than (i) certain transfers to immediate family members during the security holder's lifetime or by laws of testamentary or intestate descent, or (ii) certain distributions to such holder's limited partners, stockholders, or other equity holders, as the case may be, provided any such transferee agrees to be bound by the terms of the Lock-Up Agreements. 53 UNDERWRITING Subject to the terms and conditions set forth in the Underwriting Agreement among the Company and the underwriters named below (the "Underwriters"), for whom CIBC Oppenheimer Corp. and J.C. Bradford & Co. are acting as representatives (the "Representatives"), each of the Underwriters has severally agreed to purchase from the Company, and the Company has agreed to sell to the Underwriters, the respective numbers of shares of Common Stock set forth opposite their names below:
NAME NUMBER OF SHARES ---- ---------------- CIBC Oppenheimer Corp...................................... J.C. Bradford & Co......................................... ---- Total..................................................... ====
The Underwriting Agreement provides that the obligations of the several Underwriters thereunder are subject to approval of certain legal matters by counsel and to various other conditions. The Underwriters are committed to purchase and pay for all of the above shares of Common Stock if any are purchased. The Underwriters have advised the Company that the Underwriters propose to offer the shares of Common Stock directly to the public at the offering price set forth on the cover page of this Prospectus, and to certain dealers at such price less a concession not in excess of $ . per share of Common Stock. The Underwriters may allow, and such dealers may re-allow, a concession not in excess of $ . per share of Common Stock on sales to certain other dealers. After the initial public offering of the shares, the public offering price, concession and re-allowance to dealers may be changed by the Underwriters. The Company has granted the Underwriters an option exercisable during the 30-day period after the date of this Prospectus to purchase up to additional shares of Common Stock, solely to cover over-allotments, if any, at the public offering price less the underwriting discount, as set forth on the cover page of this Prospectus. If the Underwriters exercise such over- allotment option, the Underwriters have severally agreed, subject to certain conditions, to purchase approximately the same percentage thereof as the number of shares of Common Stock offered hereby. The Underwriters may exercise such option only to cover over-allotments made in connection with the sale of the shares of Common Stock offered hereby. Prior to the Offering, there has been no public trading market for the Common Stock. Although the Company has applied for the Common Stock to be approved for quotation on Nasdaq, there can be no assurance that any active trading market will develop for the Common Stock or, if developed, will be maintained. The initial public offering price was determined through negotiations among the Company and the Representatives. The factors considered in determining the initial public offering price included the history of and the prospects for the industry in which the Company competes, the ability of the Company's management, the past and present operations of the Company, the historical results of operations of the Company, the prospects for future earnings of the Company, the general condition of the securities markets at the time of the Offering and the recent market prices of securities of generally comparable companies. 54 In connection with the Offering, the Underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the Common Stock. Specifically, the Underwriters may overallot the Offering, creating a short position in the Common Stock for their own account. The Underwriters may bid for and purchase shares of Common Stock in the open market to cover such short position or to stabilize the price of the Common Stock. In addition, the underwriting syndicate may reclaim selling concessions from syndicate members if it repurchases previously distributed Common Stock in syndicate covering transactions, in stabilizing transactions or otherwise. These activities may stabilize or maintain the market price of the Common Stock above independent market levels. The Underwriters are not required to engage in these activities and may terminate any of these activities at any time. The executive officers, directors and certain stockholders of the Company have agreed with the Representatives not to offer to sell or otherwise dispose of, or transfer, directly or indirectly, any shares of Common Stock they currently own, or any securities convertible into or exchangeable or exercisable for, any rights to purchase or acquire, shares of Common Stock for a period of 180 days from the date of this Prospectus, without the prior written consent of CIBC Oppenheimer Corp., except that the Company may issue shares in connection with the exercise of stock options granted pursuant to the Company's stock option plans. See "Shares Eligible for Future Sale." The Representatives have informed the Company that the Underwriters will not confirm, without customer authorization, sales to their customer accounts as to which they have discretionary trading power. The Underwriting Agreement provides that the Company will indemnify the Underwriters and controlling persons, if any, against certain civil liabilities, including liabilities under the Securities Act, or will contribute to payments that the Underwriters or any such controlling persons may be required to make in respect thereof. LEGAL MATTERS The legality of the shares of Common Stock offered hereby and certain other legal matters will be passed upon for the Company by Alston & Bird LLP, Atlanta, Georgia. Certain legal matters related to the Offering will be passed upon for the Underwriters by Gibson, Dunn & Crutcher LLP, New York, New York. EXPERTS The consolidated financial statements and schedules included in this Prospectus and elsewhere in the Registration Statement have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said reports. AVAILABLE INFORMATION The Company has not previously been subject to the reporting requirements of the Securities Exchange Act of 1934, as amended. The Company has filed with the Securities and Exchange Commission (the "Commission") a Registration Statement on Form S-1 (together with all amendments and exhibits thereto, the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act") with respect to the offer and sale of Common Stock pursuant to this Prospectus. This Prospectus, filed as a part of the Registration Statement, does not contain all of the information set forth in the Registration Statement or the exhibits and schedules thereto in accordance with the rules and regulations of the Commission and reference is hereby made to such omitted information. Statements made in this Prospectus concerning the contents of any contract, agreement or other document filed as an exhibit to the Registration Statement are summaries of the terms of such contracts, agreements or documents. Reference is made to each such exhibit for a more complete description of the matters 55 involved. The Registration Statement and the exhibits and schedules thereto filed with the Commission may be inspected, without charge, and copies may be obtained at prescribed rates, at the public reference facility maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional offices of the Commission located at 7 World Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. The Registration Statement and other information filed by the Company with the Commission are also available at the web site maintained by the Commission on the World Wide Web at http://www.sec.gov. For further information pertaining to the Company and the Common Stock offered by this Prospectus, reference is made to the Registration Statement. The Company intends to furnish its stockholders with annual reports containing financial statements audited by its independent accountants and quarterly reports for the first three quarters of each fiscal year containing unaudited financial statements. 56 CHECK INTO CASH, INC. INDEX TO FINANCIAL STATEMENTS
PAGE ---- Report of Independent Public Accountants................................. F-2 Consolidated Balance Sheets as of December 31, 1996 and 1997, and June 30, 1998 (Unaudited).................................................... F-3 Consolidated Statements of Operations and Comprehensive Income (Loss) for the Years Ended December 31, 1995, 1996, and 1997, and for the Six Months Ended June 30, 1997 and 1998 (Unaudited)......................... F-4 Consolidated Statements of Stockholders' Equity for the Years Ended De- cember 31, 1995, 1996, and 1997, and for the Six Months Ended June 30, 1998 (Unaudited)........................................................ F-5 Consolidated Statements of Cash Flows for the Years Ended December 31, 1995, 1996, and 1997, and for the Six Months Ended June 30, 1997 and 1998 (Unaudited)........................................................ F-6 Notes to Consolidated Financial Statements............................... F-7
F-1 After the stock split discussed in Note 11 to Check Into Cash, Inc.'s consolidated financial statements is affected, we expect to be in a position to render the following audit report. ARTHUR ANDERSEN LLP Chattanooga, Tennessee July 9, 1998 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Check Into Cash, Inc.: We have audited the accompanying consolidated balance sheets of CHECK INTO CASH, INC. (a Delaware corporation) AND SUBSIDIARIES as of December 31, 1996 and 1997 and the related consolidated statements of operations and comprehensive income (loss), stockholders' equity, and cash flows for the each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Check Into Cash, Inc. and subsidiaries as of December 31, 1996 and 1997 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1997 in conformity with generally accepted accounting principles. F-2 CHECK INTO CASH, INC. CONSOLIDATED BALANCE SHEETS
PRO FORMA DECEMBER 31 STOCKHOLDERS' ----------------------- JUNE 30, EQUITY AT 1996 1997 1998 JUNE 30, 1998 ---------- ----------- ----------- ------------- (UNAUDITED) (NOTE 6) (UNAUDITED) ASSETS Current assets: Cash..................... $ 997,212 $ 1,149,925 $ 2,282,009 Marketable securities.... 157,065 81,164 87,854 Held checks, less allow- ance for uncollectible checks of $135,000, $255,000, and $265,000, respectively............ 3,466,898 9,847,430 15,119,598 Other receivables........ 21,100 301,739 115,728 Receivables from related parties................. 478,384 666,941 929,093 Prepaid expenses and oth- er...................... 32,546 164,779 795,812 Deferred income taxes.... 30,400 885,999 139,502 ---------- ----------- ----------- Total current assets... 5,183,605 13,097,977 19,469,596 ---------- ----------- ----------- Property and equipment, net....................... 645,859 2,184,527 3,032,223 ---------- ----------- ----------- Other assets, net.......... 284,867 642,507 667,687 ---------- ----------- ----------- $6,114,331 $15,925,011 $23,169,506 ========== =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable............ $ 606,773 $ 45,587 $ 33,672 Accounts payable......... 235,047 1,352,225 1,378,611 Payables to related par- ties.................... 304,789 118,120 90,013 Accrued wages............ 229,269 302,069 875,524 Accrued income taxes..... 499,254 222,570 334,304 Other accrued liabili- ties.................... 95,976 101,069 164,394 Accrued litigation set- tlement (Note 9)........ 0 1,832,000 1,758,837 ---------- ----------- ----------- Total current liabili- ties.................. 1,971,108 3,973,640 4,635,355 ---------- ----------- ----------- Long term debt, net of un- amortized discount of $437,061, $344,861, and $328,686, respectively.... 562,939 8,650,069 13,591,392 ---------- ----------- ----------- Deferred income taxes...... 7,000 7,000 0 ---------- ----------- ----------- Other liabilities (Note 9)........................ 0 368,000 138,000 ---------- ----------- ----------- Commitments and contingen- cies (Note 9) Warrants with redemption feature (Note 5).......... 461,000 493,181 911,299 ---------- ----------- ----------- Stockholders' equity: Preferred stock, $.01 par value, 1,000,000 shares authorized, none is- sued.................... 0 0 0 Common stock, $.01 par value; shares authorized, 8,988,000, 9,257,640, and 9,257,640 shares issued and outstanding in 1996, 1997 and 1998, respectively............ 89,880 92,576 92,576 Additional paid in capi- tal..................... 587,738 851,442 851,442 Retained earnings........ 2,446,772 1,549,076 3,034,091 Accumulated other compre- hensive loss............ (12,106) (59,973) (84,649) ---------- ----------- ----------- --------- Total stockholders' eq- uity.................. 3,112,284 2,433,121 3,893,460 ---------- ----------- ----------- --------- $6,114,331 $15,925,011 $23,169,506 ========== =========== =========== =========
The accompanying notes are an integral part of these consolidated balance sheets. F-3 CHECK INTO CASH, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
FOR THE SIX MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31 JUNE 30 ----------------------------------- ------------------------- 1995 1996 1997 1997 1998 ---------- ----------- ----------- ------------ ------------ (UNAUDITED) Revenues: Store revenues......... $3,715,056 $10,145,905 $21,058,501 $ 7,818,788 $ 21,088,692 Other revenues......... 0 106,180 388,087 189,064 152,530 ---------- ----------- ----------- ----------- ------------ Total revenues........ 3,715,056 10,252,085 21,446,588 8,007,852 21,241,222 ---------- ----------- ----------- ----------- ------------ Store expenses: Salaries and benefits.. 783,615 2,374,450 5,031,970 2,068,250 4,715,050 Occupancy.............. 401,322 1,017,438 2,470,382 980,536 2,505,996 Other store expenses... 952,605 1,907,290 5,595,451 2,048,448 5,004,763 ---------- ----------- ----------- ----------- ------------ Total store expenses.. 2,137,542 5,299,178 13,097,803 5,097,234 12,225,809 ---------- ----------- ----------- ----------- ------------ General and administra- tive expenses: Legal and professional expense (Note 9)...... 49,222 266,073 3,192,732 454,633 561,102 Other general and ad- ministrative ex- penses................ 612,075 2,306,986 5,406,352 1,948,178 4,630,223 ---------- ----------- ----------- ----------- ------------ Total general and ad- ministrative ex- penses............... 661,297 2,573,059 8,599,084 2,402,811 5,191,325 ---------- ----------- ----------- ----------- ------------ Interest expense, net... 36,649 124,217 621,452 194,568 620,443 ---------- ----------- ----------- ----------- ------------ Income (loss) before in- come taxes............. 879,568 2,255,631 (871,751) 313,239 3,203,645 Provision for (benefit from) income taxes..... 346,540 515,109 (594,236) 200,636 1,082,515 ---------- ----------- ----------- ----------- ------------ Net income (loss)....... $ 533,028 $ 1,740,522 $ (277,515) $ 112,603 $ 2,121,130 ========== =========== =========== =========== ============ Other comprehensive loss, net of tax: Unrealized holding (losses) gain arising during period......... 0 (19,506) (75,901) (49,758) 6,690 Income tax effect of unrealized holding losses................ 0 7,400 28,034 18,908 (31,366) ---------- ----------- ----------- ----------- ------------ Other comprehensive loss, net of tax..... 0 (12,106) (47,867) (30,850) (24,676) ---------- ----------- ----------- ----------- ------------ Comprehensive income (loss)................. $ 533,028 $ 1,728,416 $ (325,382) $ 81,753 $ 2,096,454 ========== =========== =========== =========== ============ Net income (loss) per share (Note 2): Basic.................. $ 0.06 $ 0.19 $ (0.03) $ 0.01 $ 0.23 ========== =========== =========== =========== ============ Diluted................ $ 0.06 $ 0.19 $ (0.03) $ 0.01 $ 0.22 ========== =========== =========== =========== ============ Weighted average common shares outstanding-- basic................. 8,988,000 8,988,000 9,123,929 8,988,000 9,257,640 ========== =========== =========== =========== ============ Weighted average common shares outstanding-- diluted............... 8,988,000 9,060,084 9,123,929 9,475,247 9,778,397 ========== =========== =========== =========== ============ Pro forma data (unau- dited) (Notes 2 and 4): Historical (loss) in- come before pro forma income taxes.......... $ (871,751) $ 3,203,645 Pro forma (benefit from) provision for income taxes.......... (331,265) 1,217,385 ----------- ------------ Pro forma net (loss) income................ $ (540,486) $ 1,986,260 =========== ============ Pro forma net (loss) income per share: Basic.................. $ $ =========== ============ Diluted................ $ $ =========== ============ Weighted average common shares outstanding-- basic................. =========== ============ Weighted average common shares outstanding-- diluted............... =========== ============
The accompanying notes are an integral part of these consolidated statements. F-4 CHECK INTO CASH, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
ACCUMULATED COMMON STOCK ADDITIONAL OTHER ----------------- PAID IN RETAINED COMPREHENSIVE SHARES AMOUNT CAPITAL EARNINGS LOSS TOTAL --------- ------- ---------- ---------- ------------- ---------- BALANCE, DECEMBER 31, 1994................... 8,988,000 $89,880 $ 0 $ 173,222 $ 0 $ 263,102 Net income.............. 0 0 0 533,028 0 533,028 --------- ------- -------- ---------- -------- ---------- BALANCE, DECEMBER 31, 1995................... 8,988,000 89,880 0 706,250 0 796,130 Net income.............. 0 0 0 1,740,522 0 1,740,522 Contributions from stockholders........... 0 0 587,738 0 0 587,738 Unrealized loss on marketable securities, net.................... 0 0 0 0 (12,106) (12,106) --------- ------- -------- ---------- -------- ---------- BALANCE, DECEMBER 31, 1996................... 8,988,000 89,880 587,738 2,446,772 (12,106) 3,112,284 Net loss................ 0 0 0 (277,515) 0 (277,515) Accretion of warrants... 0 0 0 (32,181) 0 (32,181) Unrealized loss on marketable securities, net.................... 0 0 0 0 (47,867) (47,867) Issuance of common stock to employee............ 269,640 2,696 263,704 0 0 266,400 Distribution to stock- holders................ 0 0 0 (588,000) 0 (588,000) --------- ------- -------- ---------- -------- ---------- BALANCE, DECEMBER 31, 1997................... 9,257,640 92,576 851,442 1,549,076 (59,973) 2,433,121 Net income.............. 0 0 0 2,121,130 0 2,121,130 Accretion of warrants... 0 0 0 (418,118) 0 (418,118) Unrealized loss on marketable securities, net.................... 0 0 0 0 (24,676) (24,676) Distribution to stock- holders................ 0 0 0 (217,997) 0 (217,997) --------- ------- -------- ---------- -------- ---------- BALANCE, JUNE 30, 1998 (Unaudited)............ 9,257,640 $92,576 $851,442 $3,034,091 $(84,649) $3,893,460 ========= ======= ======== ========== ======== ==========
The accompanying notes are an integral part of these consolidated statements. F-5 CHECK INTO CASH, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS FOR THE YEAR ENDED DECEMBER 31 ENDED JUNE 30 ------------------------------------- ------------------------ 1995 1996 1997 1997 1998 ----------- ----------- ----------- ----------- ----------- (UNAUDITED) CASH FLOWS FROM OPERAT- ING ACTIVITIES: Net income (loss)...... $ 533,028 $ 1,740,522 $ (277,515) $ 112,603 $ 2,121,130 Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: Depreciation and amortization......... 51,096 140,136 990,073 268,847 776,325 Deferred income tax (benefit) provision.. (4,000) (12,000) (827,565) 0 708,131 Compensation expense related to issuance of common stock...... 0 0 266,400 0 0 Changes in operating assets and liabilities: Held checks, net..... (1,467,064) (1,544,115) (6,380,532) (1,533,557) (5,272,168) Prepaid expenses..... (638) (31,908) (132,233) (106,132) (648,025) Other assets......... (48,101) (31,868) (282,944) (174,007) 117,282 Accounts payable..... 31,492 191,833 1,109,677 224,787 26,385 Accrued liabilities.. 385,480 356,737 2,001,209 (193,683) 445,352 ----------- ----------- ----------- ----------- ----------- Net cash (used in) provided by operating activities......... (518,707) 809,337 (3,533,430) (1,401,142) (1,725,588) ----------- ----------- ----------- ----------- ----------- CASH FLOWS FROM INVEST- ING ACTIVITIES: Purchases of property and equipment......... (279,260) (475,020) (2,363,876) (1,185,373) (1,517,380) Investment in market- able securities....... 0 (176,571) 0 0 0 ----------- ----------- ----------- ----------- ----------- Net cash used in investing activities......... (279,260) (651,591) (2,363,876) (1,185,373) (1,517,380) ----------- ----------- ----------- ----------- ----------- CASH FLOWS FROM FINANC- ING ACTIVITIES: Proceeds from borrowings............ 588,559 1,086,159 8,049,059 4,046,112 5,108,308 Principal payments on borrowings............ 0 (67,945) (615,315) (615,315) (225,000) Debt issuance costs.... 0 (220,000) (428,000) (46,689) 0 Capital contributions.. 0 587,738 0 0 0 Distributions to stock- holders............... 0 0 (588,000) (588,000) (217,997) Borrowings from (pay- ments to) related par- ties, net............. 447,767 (859,318) (367,725) (71,756) (290,259) ----------- ----------- ----------- ----------- ----------- Net cash provided by financing activities......... 1,036,326 526,634 6,050,019 2,724,352 4,375,052 ----------- ----------- ----------- ----------- ----------- Net increase in cash.... 238,359 684,380 152,713 137,837 1,132,084 Cash, beginning of year................... 74,473 312,832 997,212 997,212 1,149,925 ----------- ----------- ----------- ----------- ----------- Cash, end of year....... $ 312,832 $ 997,212 $ 1,149,925 $ 1,135,049 $ 2,282,009 =========== =========== =========== =========== =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for: Interest.............. $ 24,765 $ 129,787 $ 528,648 $ 223,078 $ 717,090 =========== =========== =========== =========== =========== Income taxes.......... $ 45,197 $ 347,040 $ 402,779 $ 487,250 $ 290,589 =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated statements. F-6 CHECK INTO CASH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (INFORMATION AS OF JUNE 30, 1997 AND 1998 IS UNAUDITED) 1. ORGANIZATION AND BUSINESS ACTIVITIES As of December 31, 1997, Check Into Cash, Inc. and subsidiaries (the "Company") operates 176 retail stores in twelve states across the United States. These retail stores advance cash against their customers' personal checks and hold the checks until they are redeemed by the customers or until the holding period, which is typically 14 to 17 days, has expired. In exchange for its service, the Company receives a fee ranging from approximately 11.5% to 18.5% of the face amount of the check. In June 1993, the Company commenced its operations in Tennessee as Creditcorp of Tennessee, Inc. ("Creditcorp"). During 1995, Creditcorp created three wholly-owned subsidiaries for the purpose of opening and operating stores in Kentucky, Illinois and Indiana. On January 1, 1996, Creditcorp distributed its interest in the three subsidiaries to its principal shareholder. During 1996, these companies, along with additional companies organized in 1996 to open and operate new stores in Wisconsin, Ohio and Iowa, existed as stand-alone entities with common majority ownership in each. On January 1, 1997, the majority shareholders merged these companies and exchanged their equity interests for common stock in the newly created Check Into Cash, Inc. During 1997, Check Into Cash, Inc. organized five new subsidiaries to open and operate locations in North Carolina, California, Missouri, Nebraska and Washington. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Consolidation The accompanying consolidated financial statements of Check Into Cash, Inc. include the accounts of its wholly-owned subsidiaries, including six S corporations, six limited liability companies, and two C corporations. The 1997 merger described in Note 1 has been reflected retroactively in a manner similar to a pooling-of-interests transaction. All material intercompany transactions and balances have been eliminated. Risks and Uncertainties The Company's business is regulated by state laws and regulations in each state in which it operates, including those governing consumer protection and, in some cases, lending practices (such as truth-in-lending and state usury laws), which are subject to change. These laws and regulations, among other things, establish licensing requirements, regulate the Company's credit approval and application procedures, establish maximum fees and late charges, require specified disclosures to customers, and govern collection practices. Any adverse change in or interpretation of existing laws or regulations or the failure to comply with any such laws and regulations could result in fines, class-action litigation, or interruption or cessation of certain business activities of the Company. Any of these events could have a material adverse effect on the Company's business. In addition, there can be no assurance that amendments to such laws and regulations or new or more restrictive laws or regulations or interpretations thereof will not be adopted in the future which may make compliance more difficult or expensive, further limit or restrict fees and other charges, curtail the current operations of the Company, restrict the Company's ability to expand its operations or otherwise materially adversely affect the business or prospects of the Company. Uses of Estimates in the Preparation of Financial Statements The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates, although, in the opinion of the Company's management, such differences would not be significant. F-7 CHECK INTO CASH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Unaudited Interim Financial Information The accompanying consolidated financial statements as of June 30, 1998 and for the six months ended June 30, 1997 and 1998 are unaudited. In the opinion of the management of the Company, these financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial statements. The results of operations for the six months ended June 30, 1997 and 1998 are not necessarily indicative of the results that may be expected for a full year. Revenue Recognition The Company recognizes revenue when cash is advanced to the customer. Recognized revenue represents the Company's fee on the face amount of held checks. An allowance for uncollectible checks is estimated and recorded based on the Company's historical bad debt experience. Marketable Securities All marketable securities are classified as available-for-sale and are available to support current operations. These securities are stated at their estimated fair value based upon quoted market prices. Unrealized gains and losses, net of tax, are computed on the basis of specific identification and are included as a component of accumulated other comprehensive income (loss) in stockholders' equity. Realized gains, realized losses, and declines in value, judged to be other-than-temporary, are included in other income (expense). Property and Equipment Property and equipment are stated at cost. Expenditures, which materially increase useful lives, are capitalized and ordinary maintenance and repairs are expensed as incurred. When properties are retired or otherwise disposed of, their cost and accumulated depreciation are removed from the related accounts and any gain or loss is reflected in income. Depreciation is provided for using accelerated methods over the estimated useful life of the asset. Leasehold improvements are depreciated using the straight-line method over the shorter of the estimated useful life of the asset or the remaining term of the lease. Depreciation expense was $51,096, $116,197 and $825,208 for the years ended December 31, 1995, 1996 and 1997, respectively. Property and equipment at December 31, 1996 and 1997, consisted of the following:
1996 1997 USEFUL LIVES --------- ---------- ------------------- Furniture and fixtures.......... $ 175,403 $ 456,939 Seven years Computer and processing equip- ment........................... 162,179 925,722 Three to five years Leasehold improvements.......... 480,799 1,799,596 Lease term --------- ---------- 818,381 3,182,257 Accumulated depreciation........ (172,522) (997,730) --------- ---------- $ 645,859 $2,184,527 ========= ==========
Deferred Loan Costs Included in other assets in the accompanying consolidated balance sheets are deferred loan costs of approximately $220,000 and $428,000 for 1996 and 1997, respectively. Such costs consist of fees and other expenses incurred in connection with the Company entering into certain debt agreements (Note 3). These amounts are being amortized over the term of the related financing agreements. Amortization expense for the years ended December 31, 1995, 1996 and 1997 was $0, $0 and $72,665. F-8 CHECK INTO CASH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Long-Lived Assets The Company periodically reviews the values assigned to long-lived assets to be held and used when events and circumstances warrant such a review. The carrying value of a long-lived asset is considered impaired when the anticipated undiscounted cash flow from such asset is separately identified and is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair market value of the long-lived asset. Fair market value is determined primarily using anticipated cash flows discounted at a rate commensurate with the risk involved. Losses on long-lived assets to be disposed of are determined in a similar manner, except that fair market values are reduced for the cost to dispose. Advertising The Company expenses all advertising costs as incurred. The Company incurred and expensed advertising costs of $474,622, $617,272 and $1,968,513 during the years ended December 31, 1995, 1996 and 1997, respectively. Store Opening Costs Store opening costs, including advertising, payroll, legal, travel, training, and small equipment costs, are expensed as incurred. Income Taxes Except for two of the Company's wholly-owned subsidiaries, the taxable income or loss of all subsidiaries included in the consolidated financial statements of the Company, is reported by the owners/members on their respective individual income tax returns. Creditcorp of Tennessee, Inc. and Check Into Cash Holdings, Inc., account for income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes." Deferred income tax assets or liabilities are computed based on the differences in financial statement and income tax bases of assets and liabilities using the enacted tax rate. Effective January 1, 1998, Creditcorp elected to be taxed under the provisions of Subchapter S of the Internal Revenue Code. As such, the taxable income or loss of Creditcorp after January 1, 1998 will be included in the tax return of the shareholders for federal income tax purposes (Note 4). Prior to the proposed initial public offering (the "Offering") of its common stock as discussed in Note 11, the Company will convert from an S corporation to a C corporation (Note 4). Proceeds of the Offering will be used to fund a distribution of approximately $3,900,000 in previously undistributed S corporation earnings on which the shareholders have paid taxes. Net Income (Loss) Per Share Effective January 1, 1998, the Company adopted the requirements of Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share". Basic earnings (loss) per share is based on the weighted average number of shares outstanding. Diluted earnings (loss) per share is based on the weighted average number of shares outstanding and the dilutive effect of common stock equivalent shares issuable upon the exercise of stock options and warrants (using the treasury stock method). All common stock equivalents have been excluded for the year ended December 31, 1997 due to their antidilutive effect. The difference in basic and diluted earnings per share for the year ended December 31, 1996 was due to the assumed conversion of 487,247 warrants (Note 5). F-9 CHECK INTO CASH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Unaudited pro forma net income (loss) per share was calculated by dividing pro forma net income (loss) by the weighted average number of shares outstanding for the periods presented after giving effect to the number of shares that would be required to fund the $3,900,000 S corporation distribution. Fair Value of Financial Instruments The carrying values of cash, held checks and other receivables, trade accounts payable, and other accruals approximate their fair values principally because of the short-term nature of these instruments. The carrying value of the Company's long-term debt approximates its fair value based on the current rates offered to the Company for debt of similar terms and maturities. New Accounting Pronouncements In June 1997, the Financial Accounting Standards Board issued SFAS No. 130, "Reporting Comprehensive Income," which establishes standards for reporting and presentation of comprehensive income and its components in a full set of general purpose financial statements. The Company adopted SFAS No. 130 effective January 1, 1998. All prior periods have been restated to report and present comprehensive income and its components. 3. LONG-TERM DEBT Long-term debt consisted of the following at December 31, 1996 and 1997:
1996 1997 ---------- ---------- Line of credit, due November 2001.................... $1,000,000 $3,500,000 Line of credit with bank, due October 2000........... 0 5,494,930 8.25% note payable to bank, repaid during 1997....... 585,614 0 Other notes payable.................................. 21,159 45,587 ---------- ---------- 1,606,773 9,040,517 Less current portion................................. (606,773) (45,587) ---------- ---------- 1,000,000 8,994,930 Less original issue discount......................... (437,061) (344,861) ---------- ---------- $ 562,939 $8,650,069 ========== ==========
In November 1996, the Company entered into a $3,500,000 credit agreement with Sirrom Capital Corporation ("Sirrom") which matures November 2001 (the "Sirrom Credit Agreement"). Borrowings under this line of credit bear interest at 14% and are secured by substantially all assets of the Company and all common shares of the principal stockholders. In connection with the Sirrom Credit Agreement, the Company issued warrants to Sirrom to purchase 487,247 shares of the Company's common stock (Note 5). Upon their issuance, the value of these warrants was determined to be approximately $461,000 based on the relative fair value of the warrants to the line of credit. A corresponding amount of the loan proceeds has been allocated to the warrants and has been accounted for as debt discount and warrants with redemption feature in the accompanying consolidated balance sheet. In June 1997, the Company entered into a revolving credit facility with a bank (the "Credit Facility"). The Credit Facility is available to the Company up to $11,500,000, or such lesser amount as is determined to be available under the terms of the credit facility, and matures October 2000. Through December 31, 1997, the availability of credit under the Credit Facility is determined based on two and one-half times the Company's earnings before interest, taxes, depreciation, and amortization for the last twelve months. After December 31, F-10 CHECK INTO CASH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 1997, the availability of credit is determined based on two times the Company's earnings before interest, taxes, depreciation, and amortization for the last twelve months. Borrowings outstanding under the Credit Facility bear interest at a variable rate (8.97% at December 31, 1997) based on LIBOR plus a rate margin that fluctuates on the basis of the Company's leverage ratio. The maximum rate margin is 3%. Among other restrictions, the Credit Facility contains covenants relating to tangible net worth, leverage ratio, and ratio of held checks to indebtedness, as defined in the agreement. The Credit Facility is secured by substantially all of the Company's assets and is guaranteed by all of the Company's subsidiaries and by the Company's principal stockholder. At December 31, 1997, aggregate maturities of long-term debt are as follows: 1998.............................. $ 45,587 1999.............................. 0 2000.............................. 5,494,930 2001.............................. 3,500,000 ---------- $9,040,517 ==========
On June 26, 1998, the Company entered into an amendment to its credit agreement with Sirrom which allows the Company to borrow up to an additional $3,500,000 through 2003. Borrowings under this amended agreement are made in increments of no less than $250,000 and bear interest at 14%. In connection with this amended agreement, the Company issued warrants to purchase .25% (on a pro rata basis, determined by each draw) of the fully diluted outstanding common stock at $.01 per share beginning October 15, 1998 if borrowings are then outstanding. The full .25% will be earned on January 21, 1999 if any portion of the loan is still outstanding at that date. If any portion of the loan remains outstanding on June 26, 1999, the warrant will increase to 1.5% of the fully diluted common stock then outstanding. On June 26, 2001, if borrowings remain outstanding, additional shares will accrue at the rate of .25% per year until maturity. Sirrom has the option to require the Company to redeem the warrants for a period of 60 days after the maturity of the line of credit, at a purchase price equal to fair market value, as defined. 4. INCOME TAXES Taxable income or loss of all companies, except for Creditcorp of Tennessee, Inc. and Check Into Cash Holdings, Inc., is reported by the owners/members on their respective individual income tax returns. Accordingly, no provision for income taxes is recorded in the accompanying consolidated statement of income for these companies. The following is a reconciliation of income taxes at the federal statutory rate to income taxes recorded by the Company for the years ended December 31, 1995, 1996 and 1997:
1995 1996 1997 -------- --------- --------- Income tax provision (benefit) computed at the federal statutory rate............... $299,053 $ 766,915 $(296,395) Effect of income or loss of nontaxable subsidiaries............................. (33,831) (309,727) (261,872) State income tax provision (benefit) of taxable subsidiaries, net of federal income tax benefit.................................. 54,815 53,248 (71,078) Other, net................................ 26,503 4,673 35,109 -------- --------- --------- $346,540 $ 515,109 $(594,236) ======== ========= =========
F-11 CHECK INTO CASH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Deferred income tax assets and liabilities for 1996 and 1997 reflect the impact of temporary differences between the amounts of assets and liabilities for financial reporting and income tax reporting purposes. Temporary differences that give rise to deferred tax assets and liabilities at December 31, 1996 and 1997 are as follows:
1996 1997 ------- -------- Deferred tax assets: Allowance for uncollectible checks..................... $23,000 $ 13,744 Accrued litigation settlement.......................... 0 836,000 Other.................................................. 7,400 36,255 ------- -------- Deferred tax assets.................................. 30,400 885,999 Deferred tax liability: Depreciation........................................... 7,000 7,000 ------- -------- Net deferred tax assets.............................. $23,400 $878,999 ======= ========
As discussed in Note 2, effective January 1, 1998, Creditcorp elected to be taxed under the provisions of Subchapter S of the Internal Revenue Code. As such, the taxable income or losses of Creditcorp will be included in the individual tax returns of the Company's stockholders for federal income tax purposes. On January 1, 1998, in connection with this election, the Company eliminated $708,580 of previously recognized net deferred federal tax benefits. As discussed in Note 2, in connection with the Offering, the Company will convert from an S corporation to a C corporation. Following the Offering, the Company will make a distribution to its current stockholders to pay income taxes, the amount of which is not presently determinable, on earnings for the period from January 1, 1998 through the date of the termination of S corporation status. Additionally, proceeds of approximately $3,900,000 from the Offering will be used to fund a distribution of previously undistributed S corporation earnings on which the stockholders have paid taxes. Upon conversion to C corporation status, the Company will record deferred taxes for which it will be responsible. If the S corporation status had been terminated as of June 30, 1998, the Company would have recorded the following pro forma net deferred tax asset: Deferred tax assets: Depreciation................................................... $256,000 Allowance for uncollectible checks............................. 100,700 -------- Deferred tax assets.......................................... 356,700 Deferred tax liability: Deferred revenue............................................... 190,700 -------- Net pro forma deferred tax asset............................. $166,000 ========
The accompanying financial statements reflect a provision for (benefit from) income taxes on a pro forma basis as if the Company were a taxable corporate entity throughout the periods presented. The difference between the federal statutory income tax rate and the Company's pro forma effective tax rate results from state income taxes, net of the federal income tax benefit. F-12 CHECK INTO CASH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 5. WARRANTS WITH REDEMPTION FEATURE In connection with the issuance of the Sirrom Credit Agreement (Note 3), the Company issued warrants to purchase 487,247 shares of common stock. In the event that the Sirrom Credit Agreement remains outstanding on November 8, 1999, Sirrom will receive an additional 51,561 shares of common stock; if the Sirrom Note remains outstanding on November 8, 2000, Sirrom will receive an additional 52,115 shares of common stock, at an exercise price of $0.01 per percentage of ownership. As discussed in Note 3, the value assigned to these warrants was $461,000. Sirrom has the option to require the Company to redeem the warrants for a period of 30 days prior to the expiration of the Sirrom Note in November 2001, at a purchase price equal to fair market value, as defined. Upon completion of an initial public offering by the Company, the redemption right terminates. Accordingly, in periods prior to an initial public offering, the Company has accounted for the warrants as temporary equity under EITF 88-9, "Put Warrants." The excess of the redemption value over the carrying value is being accrued by periodic charges to retained earnings over the redemption period. This accrual amounted to $32,181 and $418,118 for the year ended December 31, 1997 and the six months ended June 30, 1998, respectively. Upon the completion of an initial public offering, the value of the warrants will be transferred to permanent equity. 6. STOCKHOLDERS' EQUITY Common Stock The holders of common stock shall be entitled to one vote for each share of such stock held by such holder. The holders of common stock are entitled to participate share for share in and cash or stock dividend and to receive pro rata the net assets of the Corporation upon liquidation. During 1997, the Company amended its Articles of Incorporation and increased the number of authorized shares of common stock to 5,000,000 shares. The Company's board of directors approved a 1,000-for-1 split of its common stock in the form of a stock dividend to stockholders of record as of May 12, 1997. All references to the number of common shares and per share amounts in the consolidated financial statements and related footnotes have been restated as appropriate to give effect to the split for all periods presented. On January 10, 1997 and August 1, 1997, the Company's board of directors granted 89,880 and 179,760 shares, respectively, of common stock to a Company officer under the Company's long-term incentive plan (Note 7). Preferred Stock During 1997, the Board of Directors approved the authorization of 1,000,000 shares of preferred stock with $.01 par value per share. The preferred stock may be of one or more classes or series thereof, as determined by the Board of Directors with each class having the voting powers, preferences and other rights as determined by the Board of Directors. At December 31, 1997, no shares of preferred stock were issued and outstanding. F-13 CHECK INTO CASH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Unaudited Pro Forma Stockholders' Equity Unaudited pro forma stockholders' equity at June 30, 1998 assumes the distribution of $3.9 million of previously undistributed S corporation earnings, the Company's conversion from an S corporation to a C corporation, and the termination of the redemption rights under the warrants with redemption feature. 7. LONG-TERM INCENTIVE PLAN In 1997, the Company's board of directors approved a long-term incentive plan for employees (the "Incentive Plan"). At the discretion of the board of directors, awards of stock, stock options, or other stock rights may be granted to employees, officers, directors, or consultants. Such awards are intended to constitute qualified performance-based compensation under Internal Revenue Code Section 162(m). On January 10, 1997 and August 1, 1997, the Company issued 89,880 and 179,760 shares, respectively, of common stock to an officer of the Company. Based on the estimated fair value at the dates of grant, the Company recorded $266,400 of compensation expense related to this stock issuance. On August 1, 1997, the Company granted 55,359 stock options to an employee. These options vest over three years and expire after ten years. All options will immediately vest upon the completion of the initial public offering. Although the Company adopted SFAS No. 123, "Accounting for Stock-Based Compensation," during 1997, it elected to continue to account for compensation expense for stock options granted under its Incentive Plan under APB No. 25. Accordingly, no compensation expense has been recognized for the Company's stock option grant since the options have an exercise price in excess of the market value at the date of grant. For FASB No. 123 purposes, the fair value of the Company's stock option grant during the year ended December 31, 1997 has been estimated as of the date of grant using the minimum-value option-pricing model with the following assumptions: risk-free interest rate of 6.06%, expected dividend yield of 0%, and expected life of 5 years. There were no stock options issued or outstanding during 1995 and 1996. The following table summarizes the stock option transactions under the Incentive Plan:
SHARES UNDER WEIGHTED AVERAGE OPTION EXERCISE PRICE ------------ ---------------- Outstanding at December 31, 1996............. 0 0 Granted...................................... 55,359 $1.81 ------ ----- Outstanding at December 31, 1997............. 55,359 $1.81 ====== =====
At December 31, 1997, the options had a remaining contractual life of 9.6 years. None of the options were exercisable as of December 31, 1997. The weighted average fair value of the options granted during the year ended December 31, 1997 was $0.99. On May 1, 1998, the Company granted 308,985 stock options to two officers of the Company. These options vest over three years and expire after ten years. Upon the completion of the initial public offering, 57,299 of these options will immediately vest. F-14 CHECK INTO CASH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 8. RELATED PARTY TRANSACTIONS The Company leases certain office space from other entities affiliated with the Company by common ownership. Rental expense on these leases amounted to $32,200, $56,400, and $144,060 for the years ended December 31, 1995, 1996, and 1997. Jones Management Services, LLC provides executive management and advisory services to certain entities owned by the principal owner. Fees for these services totaled $0, $106,180, and $388,087 for the years ended December 31, 1995, 1996, and 1997, respectively, and are included in revenues in the consolidated statements of operations. The Company leases an aircraft from a company affiliated with the Company by common ownership. Aircraft expenses for the years ended December 31, 1995, 1996, and 1997 totaled $0, $232,281, and $294,509, respectively. 9. COMMITMENTS AND CONTINGENCIES Leases The Company leases certain facilities under operating leases. Lease terms generally cover periods from three to five years. The following summarizes the future minimum lease payments under operating lease obligations: 1998.............................. $2,026,217 1999.............................. 1,693,223 2000.............................. 1,070,557 2001.............................. 420,621 2002.............................. 251,388 2003 and thereafter............... 205,180
Contingencies On April 3, 1996, a class action lawsuit was filed against Creditcorp of Tennessee, Inc. and W. Allan Jones, Jr., individually, in the Circuit Court for Bradley County, Tennessee. These lawsuits, which alleged common law fraud as well as violations of the Federal Truth in Lending Act, the Tennessee usury statute, and the Tennessee Consumer Protection Act, sought injunctive relief and money damages. In May 1997, the State of Tennessee enacted legislation, the Deferred Presentation Services Act, which specifically stated that the fee charged by Creditcorp of Tennessee, Inc. is to be characterized as a fee for service, not interest, and that the transaction was not a loan, but a deferred presentation transaction. This law, had it been in effect prior to the litigation, would have negated such a cause against the Company. On January 21, 1998, pursuant to a settlement reached in September 1997 by the parties, the court issued a final judgment and order of settlement, which became final on February 20, 1998. The total obligation of Creditcorp of Tennessee, Inc. under this settlement was $2,200,000 payable as follows: February 19, 1998................. $ 303,000 September 30, 1998................ 199,000 October 30, 1998.................. 1,330,000 January 15, 1999.................. 230,000 January 15, 2000.................. 138,000
F-15 CHECK INTO CASH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The current portion of this obligation has been included in accrued liabilities and the non-current portion as other liabilities in the accompanying financial statements. On July 9, 1998, representative plaintiffs filed a motion alleging that the Company collected and continues to collect money from class members for transactions which occurred prior to October 1, 1997, and that such collections violate the judgment and orders of the Court. The Company does not believe that the motion will result in a material liability to the Company and intends to vigorously defend against it. On April 28, 1998, a class action lawsuit was filed against Check Into Cash of Kentucky, LLC, a wholly owned subsidiary of the Company (the "Subsidiary") and W. Allan Jones, Jr. in the United States District Court of Eastern Kentucky. The lawsuit claims violations of the Federal Truth in Lending Act ("TILA"), the Kentucky Disclosure of Finance Charge on Installment Credit Transaction Act, the Kentucky usury statute, the Kentucky Consumers Loans Act, the Kentucky Consumer Protection Act and the RICO Act. The Subsidiary and Mr. Jones have requested the Court to dismiss all counts for failure to state a claim and for lack of personal jurisdiction over Mr. Jones. The Subsidiary has asserted its licensure under the Kentucky Check Cashing Act as a complete defense. As of this date, this suit is in its preliminary stage of litigation. The Company believes the suit to be without merit and intends to defend it vigorously. 10. DEFINED CONTRIBUTION PLAN The Company has a defined contribution plan covering all eligible full-time employees. Eligible participants may contribute up to 15% of their salary and receive a 50% matching employer contribution up to 6% of their salary. Under the terms of the plan, the Company may also make discretionary profit-sharing contributions. Company matching to the plan for the years ended December 31, 1995, 1996, and 1997 was approximately $3,496, $6,000, and $25,044. During 1995, 1996, and 1997, no discretionary profit-sharing contributions were made by the Company. 11. INITIAL PUBLIC OFFERING In the third quarter of 1998, the Company plans to sell approximately shares of common stock at an estimated initial public offering price of $ - $ per share in an initial public offering. There can be no assurance, however, that the initial public offering will be completed at a per share price within the estimated range or completed at all. In contemplation of the initial public offering, the Company effected a 7.49-for-1 stock split (in the form of a stock dividend) resulting in 9,257,640 shares of common stock outstanding. All amounts in the accompanying financial statements have been retroactively adjusted to give effect to this stock split. F-16 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH IN- FORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY ANY UNDERWRITER OR THE COMPANY OR ANY SELLING SHAREHOLDER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE COMMON STOCK BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. --------------- TABLE OF CONTENTS
PAGE ---- Prospectus Summary....................................................... 3 Risk Factors............................................................. 7 Prior S Corporation Status............................................... 14 Use of Proceeds.......................................................... 14 Dividend Policy.......................................................... 15 Capitalization........................................................... 16 Dilution................................................................. 17 Selected Consolidated Financial and Operating Data....................... 18 Management's Discussion and Analysis of Financial Condition and Results of Operations........................................................... 20 Business................................................................. 30 Management............................................................... 40 Certain Transactions..................................................... 46 Principal and Selling Stockholders....................................... 48 Description of Capital Stock............................................. 49 Shares Eligible for Future Sale.......................................... 52 Underwriting............................................................. 54 Legal Matters............................................................ 55 Experts.................................................................. 55 Available Information.................................................... 55 Index to Financial Statements............................................ F-1
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EF- FECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPAT- ING IN THIS DISTRIBU-TION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SHARES [LOGO] CHECK INTO CASH, INC. COMMON STOCK --------------- PROSPECTUS --------------- CIBC OPPENHEIMER J.C. BRADFORD & CO. , 1998 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following table sets forth the various expenses in connection with the issuance and distribution of the securities being registered hereby, other than underwriting discounts and commissions. SEC registration fee............................................. $ 14,750 NASD filing fee.................................................. 5,500 Accounting fees and expenses*.................................... 250,000 Nasdaq National Market listing fee............................... 84,875 Legal fees and expenses*......................................... 300,000 Printing and engraving expenses*................................. 150,000 Blue Sky fees and expenses*...................................... 10,000 Transfer agent and registrar fees and expenses*.................. 15,000 Miscellaneous*................................................... 19,875 -------- Total*......................................................... $850,000 ========
- -------- * Estimated solely for the purposes of this filing. ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 145(a) of the Delaware General Corporation Law ("DGCL") provides that a Delaware corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that such person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or enterprise, against expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no cause to believe his or her conduct was unlawful. Section 145(b) of the DGCL provides that a Delaware corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person acted in any of the capacities set forth above, against expenses actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if he or she acted under similar standards, except that no indemnification may be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his or her duty to the corporation unless and only to the extent that the court in which such action or suit was brought shall determine that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to be indemnified for such expenses which the court shall deem proper. Section 145 of DGCL further provides that to the extent a director or officer of a corporation has been successful in the defense of any action, suit or proceeding referred to in subsection (a) and (b) or in the defense of any claim, issue or matter therein, such officer or director shall be indemnified against expenses actually and reasonably incurred by him or her in connection therewith; that indemnification provided for by Section 145 shall not be deemed exclusive of any other rights to which the indemnified party may be entitled; and that the II-1 corporation may purchase and maintain insurance on behalf of a director or officer of the corporation against any liability asserted against such officer or director and incurred by him or her in any such capacity or arising out of his or her status as such, whether or not the corporation would have the power to indemnify him or her against such liabilities under Section 145. As permitted by Section 102(b)(7) of the DGCL, the Company's Restated Certificate of Incorporation ("Certificate"), provides that a director shall not be liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director. However, such provision does not eliminate or limit the liability of a director for acts or omissions not in good faith or for breaching his or her duty of loyalty, engaging in intentional misconduct or knowingly violating a law, paying a dividend or approving a stock repurchase which was illegal, or obtaining an improper personal benefit. A provision of this type has no effect on the availability of equitable remedies, such as injunction or rescission, for breach of fiduciary duty. The Company's Restated Bylaws ("Bylaws") require the Company to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Company) by reason of the fact that he is or was a director, officer or employee of the Company, or that being such a director, officer or employee he is or was serving at the request of the Company as a director, officer or employee of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company, and with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, does not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, that he had reasonable cause to believe that his conduct was unlawful. In addition, the Company's Bylaws require the Company to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Company to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the Company, or that being such a director, officer or employee he is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company, except that no indemnification may be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the Company unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. Any indemnification (unless ordered by a court) made by the Company may be only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct as set forth above. Such determination must be made (i) by the Board by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (iii) by the stockholders. To the extent that a director, officer, employee or agent of the Company has been successful on the merits or otherwise in defense of any covered action, suit or proceeding, or in defense of any covered claim, issue or II-2 matter therein, he will be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. Expenses incurred by an officer or director in defending a civil or criminal action, suit or proceeding may be paid by the Company in advance of the final disposition of such action, suit or proceeding as authorized by the Board in the specific case upon receipt of an undertaking by or on behalf of the director or officer to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified by the Company as authorized in the Bylaws. Such expenses incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the Board deems appropriate. The Company maintains policies of directors' and officers' liability insurance. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES On November 8, 1996, the Company issued to Sirrom warrants to purchase 486,768 shares of Common Stock in a transaction exempt from registration under the Securities Act pursuant to Section 4(2) of the Securities Act. On January 1, 1997, the Company issued and sold 7,415,000 shares of Common Stock in exchange for the shares of Creditcorp, Inc. and member interests in Creditcorp of Kentucky, LLC, Creditcorp of Indiana, LLC and Creditcorp of Wisconsin, LLC in a transaction exempt from registration under the Securities Act pursuant to Rule 505 of Regulation D. The shares of Common Stock were offered to and purchased by a limited number of accredited investors, including certain directors and executive officers of the Company. On January 10, 1997, the Company issued 89,880 shares of restricted Common Stock to Steve Scoggins, an executive officer and director of the Company, in a transaction exempt from registration under the Securities Act pursuant to Section 4(2) of the Securities Act. On March 31, 1997, the Company issued and sold 749,000 shares of Common Stock in exchange for the member interests in Check Into Cash of Ohio, LLC in a transaction exempt from registration under the Securities Act pursuant to Rule 505 of Regulation D. The shares of Common Stock were offered to and purchased by a limited number of accredited investors, including certain directors and executive officers of the Company. On May 2, 1997, the Company issued 14,980 shares of restricted Common Stock to Steve Scoggins, an executive officer and director of the Company, in a transaction exempt from registration under the Securities Act pursuant to Section 4(2) of the Securities Act. The shares were canceled as of July 1, 1997. On May 31, 1997, the Company issued and sold 749,000 shares of Common Stock in exchange for the member interests in Creditcorp of Illinois, LLC in a transaction exempt from registration under the Securities Act pursuant to Rule 505 of Regulation D. The shares of Common Stock were offered to and purchased by a limited number of accredited investors, including certain directors and executive officers of the Company. On August 1, 1997, the Company issued 179,760 shares of Common Stock to Steve Scoggins, an executive officer and director of the Company, in a transaction exempt from registration under the Securities Act pursuant to Section 4(2) of the Securities Act. II-3 ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) The following exhibits are filed as a part of this Registration Statement: 1 Underwriting Agreement* 3.1 Restated Certificate of Incorporation of Check Into Cash, Inc.* 3.2 Restated Bylaws of Check Into Cash, Inc.* 5 Opinion of Alston & Bird LLP* 10.1 Check Into Cash, Inc. Amended and Restated 1997 Long-Term Incentive Plan, dated as of May 1, 1998 10.2 Loan Agreement, dated as of June 2, 1997, by and between Check Into Cash, Inc. and NationsBank of Tennessee, N.A., as amended 10.3 Amended and Restated Loan Agreement, dated as of February 28, 1997, by and between Check Into Cash, Inc. and Sirrom Capital Corporation 10.4.1 Amended and Restated Stock Purchase Warrant, dated February 28, 1997, by and between Check into Cash, Inc. and Sirrom Capital Corporation 10.4.2 Stock Purchase Warrant, dated June 26, 1998, by and between Check Into Cash, Inc. to Sirrom Capital Corporation 10.5 Aircraft Lease, dated as of November 14, 1997, by and between Jones Airways, LLC and Check Into Cash, Inc. 10.6.1 Employment Agreement, dated as of July 3, 1997, by and between Check Into Cash, Inc. and Steve Scoggins 10.6.2 Employment, Confidentiality and Non-Competition Agreement, dated as of August 1, 1997, by and between Check Into Cash, Inc. and Ed Ryan. 10.6.3 Employment Agreement, dated as of April 28, 1998, by and among Check Into Cash, Inc., W. Allan Jones Jr. and J. Samuel Choate, Jr. 10.6.4 Employment, Confidentiality and Non-Competition Agreement, dated as of May 1, 1998, by and between Check Into Cash, Inc. and Frederick Krosner 21 Subsidiaries of the Registrant 23.1 Consent of Alston & Bird LLP (Included in Exhibit 5) 23.2 Form of Consent of Arthur Andersen LLP 24 Power of Attorney (included in Part II of the Registration Statement) 27 Financial Data Schedule
- -------- * To be filed by amendment (b) The following Financial Statement Schedules of Check Into Cash, Inc. are included in this Registration Statement: Report of Independent Public Accountants............................... S-1 Schedule II--Valuation and Qualifying Accounts......................... S-2
ITEM 17. UNDERTAKINGS. (a) The undersigned Registrant hereby undertakes to provide to the Underwriters at the closing specified in the Underwriting Agreement certificates in such denomination and registered in such names as required by the Underwriters to permit prompt delivery to each purchaser. II-4 (b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer, or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person of the registrant in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (c) The undersigned Registrant hereby undertakes that: (1) For the purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4), or 497(h) under the Securities Act, shall be deemed to be part of this Registration Statement as of the time it was declared effective. (2) For the purposes of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-5 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF CLEVELAND, STATE OF TENNESSEE, ON THE 31ST DAY OF JULY, 1998. CHECK INTO CASH, INC. /s/ W. Allan Jones, Jr. By: _________________________________ W. ALLAN JONES, JR. CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER AND DIRECTOR POWER OF ATTORNEY Know All Men By These Presents, that each person whose signature appears below constitutes and appoints W. Allan Jones, Jr. and J. Samuel Choate, Jr., or either of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including pre-effective and post-effective amendments) to this Registration Statement and to sign any registration statement (and any post-effective amendments thereto) effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposed as he might or could do in person, hereby ratifying and confirming that said attorney-in-fact, agent or their substitutes may lawfully do or cause to be done by virtue hereof. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED ON JULY 31, 1998.
SIGNATURE TITLE --------- ----- /s/ W. Allan Jones, Jr. Chairman of the Board, Chief Executive Officer ______________________________________ and Director (Principal Executive Officer) W. ALLAN JONES, JR. /s/ Steve M. Scoggins President and Director ______________________________________ STEVE M. SCOGGINS /s/ Frederick Krosner Executive Vice President, Treasurer and ______________________________________ Controller, and Director (Principal Financial FREDERICK KROSNER and Accounting Officer)
II-6 After the stock split discussed in Note 11 to Check into Cash, Inc.'s consolidated financial statements is affected, we expect to be in a position to render the following audit report. ARTHUR ANDERSEN LLP Chattanooga, Tennessee July 9, 1998 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Check into Cash, Inc.: We have audited in accordance with generally accepted auditing standards, the consolidated financial statements of Check Into Cash, Inc. included in this registration statement and have issued our report thereon dated , 1998. Our audit was made for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. The schedule listed in the index is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. The schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. S-1 CHECK INTO CASH, INC. SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
ADDITIONS ---------------- BALANCE AT CHARGED TO WRITE OFFS, BALANCE AT BEGINNING COSTS AND NET OF END OF OF PERIOD EXPENSES OTHER RECOVERIES PERIOD ---------- ---------- ----- ----------- ---------- Year ended 12/31/97 Allowance for uncollecti- ble checks............... $135,000 $1,196,469 -- $(1,076,469) $255,000 Year ended 12/31/96 Allowance for uncollecti- ble checks............... 53,762 438,551 -- (357,313) 135,000 Year ended 12/31/95 Allowance for uncollecti- ble checks............... 11,631 113,931 -- (71,800) 53,762
S-2 EXHIBIT INDEX (a) The following exhibits are filed as a part of this Registration Statement: 1 Underwriting Agreement* 3.1 Restated Certificate of Incorporation of Check Into Cash, Inc.* 3.2 Restated Bylaws of Check Into Cash, Inc.* 5 Opinion of Alston & Bird LLP* 10.1 Check Into Cash, Inc. Amended and Restated 1997 Long-Term Incentive Plan, dated as of May 1, 1998 10.2 Loan Agreement, dated as of June 2, 1997, by and between Check Into Cash, Inc. and NationsBank of Tennessee, N.A., as amended 10.3 Amended and Restated Loan Agreement, dated as of February 28, 1997, by and between Check Into Cash, Inc. and Sirrom Capital Corporation 10.4.1 Amended and Restated Stock Purchase Warrant, dated February 28, 1997, by and between Check into Cash, Inc. and Sirrom Capital Corporation 10.4.2 Stock Purchase Warrant, dated June 26, 1998, by and between Check Into Cash, Inc. to Sirrom Capital Corporation 10.5 Aircraft Lease, dated as of November 14, 1997, by and between Jones Airways, LLC and Check Into Cash, Inc. 10.6.1 Employment Agreement, dated as of July 3, 1997, by and between Check Into Cash, Inc. and Steve Scoggins 10.6.2 Employment, Confidentiality and Non-Competition Agreement, dated as of August 1, 1997, by and between Check Into Cash, Inc. and Ed Ryan. 10.6.3 Employment Agreement, dated as of April 28, 1998, by and among Check Into Cash, Inc., W. Allan Jones Jr. and J. Samuel Choate, Jr. 10.6.4 Employment, Confidentiality and Non-Competition Agreement, dated as of May 1, 1998, by and between Check Into Cash, Inc. and Frederick Krosner 21 Subsidiaries of the Registrant 23.1 Consent of Alston & Bird LLP (Included in Exhibit 5) 23.2 Form of Consent of Arthur Andersen LLP 24 Power of Attorney (included in Part II of the Registration Statement) 27 Financial Data Schedule
- -------- * To be filed by amendment (b) The following Financial Statement Schedules of Check Into Cash, Inc. are included in this Registration Statement: Report of Independent Public Accountants............................... S-1 Schedule II--Valuation and Qualifying Accounts......................... S-2
EX-10.1 2 CHECK INTO CASH, INC. AMENDED AND RESTATED EXHIBIT 10.1 CHECK INTO CASH, INC. AMENDED AND RESTATED 1997 LONG-TERM INCENTIVE PLAN ARTICLE I PURPOSE 1.1 GENERAL. The purpose of the Check into Cash, Inc. Amended and ------- Restated 1997 Long-Term Incentive Plan (the "Plan") is to promote the success, and enhance the value, of Check into Cash, Inc. (the "Corporation"), by linking the personal interests of its employees, officers and directors to those of Corporation stockholders and by providing such persons with an incentive for outstanding performance. The Plan is further intended to provide flexibility to the Corporation in its ability to motivate, attract, and retain the services of persons upon whose judgment, interest, and special effort the successful conduct of the Corporation's operation is largely dependent. Accordingly, the Plan permits the grant of incentive awards from time to time to selected employees, officers and directors. From and after the date, if any, upon which the Corporation's common stock shall be traded on a national securities exchange or on the Nasdaq National Market, consultants of the Corporation will also be eligible to receive Awards under the Plan. ARTICLE 2 EFFECTIVE DATE 2.1 EFFECTIVE DATE. The Plan shall be effective as of the date upon which -------------- it shall be approved by the Board. However, the Plan shall be submitted to the stockholders of the Corporation for approval within 12 months of the Board's approval thereof. No Incentive Stock Options granted under the Plan may be exercised prior to approval of the Plan by the stockholders and if the stockholders fail to approve the Plan within 12 months of the Board's approval thereof, any Incentive Stock Options previously granted hereunder shall be automatically converted to Non-Qualified Stock Options without any further act. In the discretion of the Committee, Awards may be made to Covered Employees which are intended to constitute qualified performance-based compensation under Code Section 162(m). Any such Awards shall be contingent upon the stockholders having approved the Plan. ARTICLE 3 DEFINITIONS 3.1 DEFINITIONS. When a word or phrase appears in this Plan with the ----------- initial letter capitalized, and the word or phrase does not commence a sentence, the word or phrase shall generally be given the meaning ascribed to it in this Section or in Section 1.1 unless a clearly different meaning is required by the context. The following words and phrases shall have the following meanings: (a) "Award" means any Option, Stock Appreciation Right, Restricted Stock Award, Performance Share Award, Dividend Equivalent Award, or Other Stock-Based Award, or any other right or interest relating to Stock or cash, granted to a Participant under the Plan. (b) "Award Agreement" means any written agreement, contract, or other instrument or document evidencing an Award. (c) "Board" means the Board of Directors of the Corporation. (d) "Change in Control" means and includes each of the following: (1) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the 1934 Act) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the 1934 Act) of 25% or more of the combined voting power of the then outstanding voting securities of the Corporation entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (1), the following acquisitions shall not constitute a Change of Control: (i) any acquisition by a Person who is on the Effective Date the beneficial owner of 25% or more of the Outstanding Company Voting Securities, (ii) any acquisition directly from the Corporation, including without limitation a public offering of securities, (iii) any acquisition by the Corporation, (iv) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Corporation or any corporation controlled by the Corporation, or (v) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (3) of this definition; or (2) Individuals who, as of the Effective Date, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the Corporation's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (3) Consummation of a reorganization, merger or consolidation to which the Corporation is a party or a sale or other disposition of all or substantially all of the assets of the Corporation (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the combined voting -2- power of the then outstanding voting securities entitled to vote generally in the election of directors of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Corporation or all or substantially all of the Corporation's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Voting Securities, and (ii) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Corporation or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 25% or more of the combined voting power of the then outstanding voting securities of the corporation resulting from such Business Combination except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board (including persons deemed to be members of the Incumbent Board by reason of the proviso to subsection (2) of this definition at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination. (e) "Code" means the Internal Revenue Code of 1986, as amended from time to time. (f) "Committee" means the committee of the Board described in Article 4. (g) "Corporation" means Check into Cash, Inc., a Delaware corporation. (h) "Covered Employee" means a covered employee as defined in Code Section 162(m)(3), provided that no employee shall be a Covered Employee until the deduction limitations of Section 162(m) are applicable to the Corporation and any reliance period under Section 162(m) has expired, as described in Section 16.15. (i) "Disability" shall mean any illness or other physical or mental condition of a Participant that renders the Participant incapable of performing his customary and usual duties for the Corporation, or any medically determinable illness or other physical or mental condition resulting from a bodily injury, disease or mental disorder which, in the judgment of the Committee, is permanent and continuous in nature. The Committee may require such medical or other evidence as it deems necessary to judge the nature and permanency of the Participant's condition. (j) "Dividend Equivalent" means a right granted to a Participant under Article 11. (k) "Effective Date" has the meaning assigned such term in Section 2.1. (l) "Fair Market Value," on any date, means (i) if the Stock is not -3- listed on a securities exchange or traded over the Nasdaq National Market or otherwise publicly quoted or traded, Fair Market Value will be determined by such method as the Committee determines in good faith to be reasonable; (ii) if the Stock is listed on a securities exchange or is traded over the Nasdaq National Market, the closing sales price on such exchange or the last reported sale price over such system on such date or, in the absence of reported sales on such date, the closing sales price or last sale price, as applicable on the immediately preceding date on which sales were reported; or (iii) if the Stock is not listed on a securities exchange or traded over the Nasdaq National Market, the mean between the bid and offered prices as quoted by Nasdaq or, if not quoted on Nasdaq, other recognized quotations service selected by the Committee in good faith for such date, provided that if it is determined that the fair market value is not properly reflected by such Nasdaq quotations, Fair Market Value will be determined by such other method as the Committee determines in good faith to be reasonable. (m) "Incentive Stock Option" means an Option that is intended to meet the requirements of Section 422 of the Code or any successor provision thereto. (n) "Non-Qualified Stock Option" means an Option that is not an Incentive Stock Option. (o) "Option" means a right granted to a Participant under Article 7 of the Plan to purchase Stock at a specified price during specified time periods. An Option may be either an Incentive Stock Option or a Non- Qualified Stock Option. (p) "Other Stock-Based Award" means a right, granted to a Participant under Article 12, that relates to or is valued by reference to Stock or other Awards relating to Stock. (q) "Parent" means a corporation which owns or beneficially owns a majority of the outstanding voting stock or voting power of the Corporation. For Incentive Stock Options, the term shall have the same meaning as set forth in Code Section 424(e). (r) "Participant" means a person who, as an officer, employee, consultant or director of the Corporation or any Parent or Subsidiary, has been granted an Award under the Plan. (s) "Performance Share" means a right granted to a Participant under Article 9, to receive cash, Stock, or other Awards, the payment of which is contingent upon achieving certain performance goals established by the Committee. (t) "Plan" means the Check into Cash, Inc. 1997 Long-Term Incentive Plan, as amended from time to time. -4- (u) "Restricted Stock Award" means Stock granted to a Participant under Article 10 that is subject to certain restrictions and to risk of forfeiture. (v) "Retirement" means a Participant's termination of employment with the Corporation, Parent or Subsidiary after attaining any normal or early retirement age specified in any pension, profit sharing or other retirement program sponsored by the Corporation, or, in the event of the inapplicability thereof with respect to the person in question, as determined by the Committee in its judgment. (w) "Stock" means the $0.01 par value Common Stock of the Corporation and such other securities of the Corporation as may be substituted for Stock pursuant to Article 14. (x) "Stock Appreciation Right" or "SAR" means a right granted to a Participant under Article 8 to receive a payment equal to the difference between the Fair Market Value of a share of Stock as of the date of exercise of the SAR over the grant price of the SAR, all as determined pursuant to Article 8. (y) "Subsidiary" means any corporation, limited liability company, partnership or other entity of which a majority of the outstanding voting stock or voting power is beneficially owned directly or indirectly by the Corporation. For Incentive Stock Options, the term shall have the meaning set forth in Code Section 424(f). (z) "1933 Act" means the Securities Act of 1933, as amended from time to time. (aa) "1934 Act" means the Securities Exchange Act of 1934, as amended from time to time. ARTICLE 4 ADMINISTRATION 4.1 COMMITTEE. The Plan shall be administered by the Compensation --------- Committee of the Board or, at the discretion of the Board from time to time, by the Board. The Committee shall consist of two or more members of the Board who are both (i) "outside directors" as that term is used in Section 162(m) of the Code and the regulations promulgated thereunder, to the extent Section 162(m) is applicable to the Corporation as described in Section 16.15 hereof, and (ii) "Non-Employee Directors" as that term is defined in Rule 16b-3 promulgated under the 1934 Act, if and when such rule applies with respect to officers and directors of the Corporation. Until such time as there shall be a Compensation Committee of the Board, the Plan shall be administered by the full Board and the Board shall have all the powers of the Committee hereunder, and any reference herein to the Committee (other than in this Section 4.1) shall include the Board. -5- 4.2 ACTION BY THE COMMITTEE. For purposes of administering the Plan, the ----------------------- following rules of procedure shall govern the Committee. A majority of the Committee shall constitute a quorum. The acts of a majority of the members present at any meeting at which a quorum is present and acts approved unanimously in writing by the members of the Committee in lieu of a meeting shall be deemed the acts of the Committee. Each member of the Committee is entitled to, in good faith, rely or act upon any report or other information furnished to that member by any officer or other employee of the Corporation or any Parent or Subsidiary, the Corporation's independent certified public accountants, or any executive compensation consultant or other professional retained by the Corporation to assist in the administration of the Plan. 4.3 AUTHORITY OF COMMITTEE. The Committee has the exclusive power, ---------------------- authority and discretion to: (a) Designate Participants; (b) Determine the type or types of Awards to be granted to each Participant; (c) Determine the number of Awards to be granted and the number of shares of Stock to which an Award will relate; (d) Determine the terms and conditions of any Award granted under the Plan, including but not limited to, the exercise price, grant price, or purchase price, any restrictions or limitations on the Award, any schedule for lapse of forfeiture restrictions or restrictions on the exercisability of an Award, and accelerations or waivers thereof, based in each case on such considerations as the Committee in its sole discretion determines; (e) Accelerate the vesting or lapse of restrictions of any outstanding Award, based in each case on such considerations as the Committee in its sole discretion determines; (f) Determine whether, to what extent, and under what circumstances an Award may be settled in, or the exercise price of an Award may be paid in, cash, Stock, other Awards, or other property, or an Award may be canceled, forfeited, or surrendered; (g) Prescribe the form of each Award Agreement, which need not be identical for each Participant; (h) Decide all other matters that must be determined in connection with an Award; (i) Establish, adopt or revise any rules and regulations as it may deem necessary or advisable to administer the Plan; and (j) Make all other decisions and determinations that may be required under the Plan or as the Committee deems necessary or advisable to administer the Plan, and -6- (k) Amend the Plan or any Award Agreement as provided herein. 4.4. DECISIONS BINDING. The Committee's interpretation of the Plan, any ----------------- Awards granted under the Plan, any Award Agreement and all decisions and determinations by the Committee with respect to the Plan are final, binding, and conclusive on all parties. ARTICLE 5 SHARES SUBJECT TO THE PLAN 5.1. NUMBER OF SHARES. Subject to adjustment as provided in Section 14.1, ---------------- the aggregate number of shares of Stock reserved and available for Awards or which may be used to provide a basis of measurement for or to determine the value of an Award (such as with a Stock Appreciation Right or Performance Share Award) shall be 75,000 shares. 5.2. LAPSED AWARDS. To the extent that an Award is canceled, terminates, ------------- expires or lapses for any reason, any shares of Stock subject to the Award will again be available for the grant of an Award under the Plan and shares subject to SARs or other Awards settled in cash will be available for the grant of an Award under the Plan. 5.3. STOCK DISTRIBUTED. Any Stock distributed pursuant to an Award may ----------------- consist, in whole or in part, of authorized and unissued Stock, treasury Stock or Stock purchased on the open market. 5.4. LIMITATION ON NUMBER OF SHARES SUBJECT TO AWARDS. Notwithstanding any ------------------------------------------------ provision in the Plan to the contrary, the maximum number of shares of Stock with respect to one or more Options and/or SARs that may be granted during any one calendar year under the Plan to any one Covered Employee shall be 50,000. The maximum fair market value of any performance-based Awards (other than Options and SARs) that may be received by a Covered Employee (less any consideration paid by the Participant for such Award) during any one calendar year under the Plan shall be $1,000,000. ARTICLE 6 ELIGIBILITY 6.1. GENERAL. Awards may be granted only to individuals who are employees, ------- officers or directors of the Corporation or a Parent or Subsidiary. From and after the date, if any, upon which the Stock shall be traded on a national securities exchange or on the Nasdaq National Market, consultants of the Corporation will also be eligible to receive Awards under the Plan. ARTICLE 7 STOCK OPTIONS 7.1. GENERAL. The Committee is authorized to grant Options to Participants ------- on the following terms and conditions: -7- (a) EXERCISE PRICE. The exercise price per share of Stock under an -------------- Option shall be determined by the Committee. (b) TIME AND CONDITIONS OF EXERCISE. The Committee shall determine ------------------------------- the time or times at which an Option may be exercised in whole or in part. The Committee also shall determine the performance or other conditions, if any, that must be satisfied before all or part of an Option may be exercised. The Committee may waive any exercise provisions at any time in whole or in part based upon such factors as the Committee may determine in its sole discretion so that the Option becomes exercisable at an earlier date. (c) PAYMENT. The Committee shall determine the methods by which the ------- exercise price of an Option may be paid, the form of payment, including, without limitation, cash, shares of Stock, or other property (including "cashless exercise" arrangements), and the methods by which shares of Stock shall be delivered or deemed to be delivered to Participants. Without limiting the power and discretion conferred on the Committee pursuant to the preceding sentence, the Committee may, in the exercise of its discretion, but need not, allow a Participant to pay the Option price by directing the Corporation to withhold from the shares of Stock that would otherwise be issued upon exercise of the Option that number of shares having a Fair Market Value on the exercise date equal to the Option price, all as determined pursuant to rules and procedures established by the Committee. (d) EVIDENCE OF GRANT. All Options shall be evidenced by a written ----------------- Award Agreement between the Corporation and the Participant. The Award Agreement shall include such provisions as may be specified by the Committee. 7.2. INCENTIVE STOCK OPTIONS. The terms of any Incentive Stock Options ----------------------- granted under the Plan must comply with the following additional rules: (a) EXERCISE PRICE. The exercise price per share of Stock shall be -------------- set by the Committee, provided that the exercise price for any Incentive Stock Option shall not be less than the Fair Market Value as of the date of the grant. (b) EXERCISE. In no event may any Incentive Stock Option be -------- exercisable for more than ten years from the date of its grant. (c) LAPSE OF OPTION. An Incentive Stock Option shall lapse under the --------------- earliest of the following circumstances; provided, however, that the Committee may, prior to the lapse of the Incentive Stock Option under the circumstances described in paragraphs (3), (4) and (5) below, provide in writing that the Option will extend until a -8- later date, but if Option is exercised after the dates specified in paragraphs (3), (4) and (5) above, it will automatically become a Non- Qualified Stock Option: (1) The Incentive Stock Option shall lapse as of the option expiration date set forth in the Award Agreement. (2) The Incentive Stock Option shall lapse ten years after it is granted, unless an earlier time is set in the Award Agreement. (3) If the Participant terminates employment for any reason other than as provided in paragraph (4) or (5) below, the Incentive Stock Option shall lapse, unless it is previously exercised, three months after the Participant's termination of employment; provided, however, that if the Participant's employment is terminated by the Corporation for cause or by the Participant without the consent of the Corporation, the Incentive Stock Option shall (to the extent not previously exercised) lapse immediately. (4) If the Participant terminates employment by reason of his Disability, the Incentive Stock Option shall lapse, unless it is previously exercised, one year after the Participant's termination of employment. (5) If the Participant dies while employed, or during the three- month period described in paragraph (3) or during the one-year period described in paragraph (4) and before the Option otherwise lapses, the Option shall lapse one year after the Participant's death. Upon the Participant's death, any exercisable Incentive Stock Options may be exercised by the Participant's beneficiary. Unless the exercisability of the Incentive Stock Option is accelerated as provided in Article 13, if a Participant exercises an Option after termination of employment, the Option may be exercised only with respect to the shares that were otherwise vested on the Participant's termination of employment. (d) INDIVIDUAL DOLLAR LIMITATION. The aggregate Fair Market Value ---------------------------- (determined as of the time an Award is made) of all shares of Stock with respect to which Incentive Stock Options are first exercisable by a Participant in any calendar year may not exceed $100,000.00. (e) TEN PERCENT OWNERS. No Incentive Stock Option shall be granted to ------------------ any individual who, at the date of grant, owns stock possessing more than ten percent of the total combined voting power of all classes of stock of the Corporation or any Subsidiary unless the exercise price per share of such Option is at least 110% of the Fair Market Value per share of Stock at the date of grant and the Option expires no later than five years after the date of grant. (f) EXPIRATION OF INCENTIVE STOCK OPTIONS. No Award of an Incentive ------------------------------------- Stock Option may be made pursuant to the Plan after the day immediately prior to the tenth anniversary of the Effective Date. -9- (g) RIGHT TO EXERCISE. During a Participant's lifetime, an Incentive ----------------- Stock Option may be exercised only by the Participant or, in the case of the Participant's Disability, by the Participant's guardian or legal representative. (h) DIRECTORS. The Committee may not grant an Incentive Stock Option --------- to a non-employee director. The Committee may grant an Incentive Stock Option to a director who is also an employee of the Corporation or Parent or Subsidiary but only in that individual's position as an employee and not as a director. ARTICLE 8 STOCK APPRECIATION RIGHTS 8.1. GRANT OF SARs. The Committee is authorized to grant SARs to ------------- Participants on the following terms and conditions: (a) RIGHT TO PAYMENT. Upon the exercise of a Stock Appreciation ---------------- Right, the Participant to whom it is granted has the right to receive the excess, if any, of: (1) The Fair Market Value of one share of Stock on the date of exercise; over (2) The grant price of the Stock Appreciation Right as determined by the Committee, which shall not be less than the Fair Market Value of one share of Stock on the date of grant in the case of any SAR related to an Incentive Stock Option. (b) OTHER TERMS. All awards of Stock Appreciation Rights shall be ----------- evidenced by an Award Agreement. The terms, methods of exercise, methods of settlement, form of consideration payable in settlement, and any other terms and conditions of any Stock Appreciation Right shall be determined by the Committee at the time of the grant of the Award and shall be reflected in the Award Agreement. ARTICLE 9 PERFORMANCE SHARES 9.1. GRANT OF PERFORMANCE SHARES. The Committee is authorized to grant --------------------------- Performance Shares to Participants on such terms and conditions as may be selected by the Committee. The Committee shall have the complete discretion to determine the number of Performance Shares granted to each Participant. All Awards of Performance Shares shall be evidenced by an Award Agreement. 9.2. RIGHT TO PAYMENT. A grant of Performance Shares gives the Participant ---------------- rights, valued as determined by the Committee, and payable to, or exercisable by, the Participant to whom the Performance Shares are granted, in whole or in part, as the Committee shall establish at grant or thereafter. The Committee -10- shall set performance goals and other terms or conditions to payment of the Performance Shares in its discretion which, depending on the extent to which they are met, will determine the number and value of Performance Shares that will be paid to the Participant. 9.3. OTHER TERMS. Performance Shares may be payable in cash, Stock, or ----------- other property, and have such other terms and conditions as determined by the Committee and reflected in the Award Agreement. ARTICLE 10 RESTRICTED STOCK AWARDS 10.1. GRANT OF RESTRICTED STOCK. The Committee is authorized to make ------------------------- Awards of Restricted Stock to Participants in such amounts and subject to such terms and conditions as may be selected by the Committee. All Awards of Restricted Stock shall be evidenced by a Restricted Stock Award Agreement. 10.2. ISSUANCE AND RESTRICTIONS. Restricted Stock shall be subject to ------------------------- such restrictions on transferability and other restrictions as the Committee may impose (including, without limitation, limitations on the right to vote Restricted Stock or the right to receive dividends on the Restricted Stock). These restrictions may lapse separately or in combination at such times, under such circumstances, in such installments, upon the satisfaction of performance goals or otherwise, as the Committee determines at the time of the grant of the Award or thereafter. 10.3. FORFEITURE. Except as otherwise determined by the Committee at the ---------- time of the grant of the Award or thereafter, upon termination of employment during the applicable restriction period or upon failure to satisfy a performance goal during the applicable restriction period, Restricted Stock that is at that time subject to restrictions shall be forfeited and reacquired by the Corporation; provided, however, that the Committee may provide in any Award Agreement that restrictions or forfeiture conditions relating to Restricted Stock will be waived in whole or in part in the event of terminations resulting from specified causes, and the Committee may in other cases waive in whole or in part restrictions or forfeiture conditions relating to Restricted Stock. 10.4. CERTIFICATES FOR RESTRICTED STOCK. Restricted Stock granted under --------------------------------- the Plan may be evidenced in such manner as the Committee shall determine. If certificates representing shares of Restricted Stock are registered in the name of the Participant, certificates must bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock. ARTICLE 11 DIVIDEND EQUIVALENTS 11.1 GRANT OF DIVIDEND EQUIVALENTS. The Committee is authorized to grant ----------------------------- Dividend Equivalents to Participants subject to such terms and conditions as may -11- be selected by the Committee. Dividend Equivalents shall entitle the Participant to receive payments equal to dividends with respect to all or a portion of the number of shares of Stock subject to an Option Award or SAR Award, as determined by the Committee. The Committee may provide that Dividend Equivalents be paid or distributed when accrued or be deemed to have been reinvested in additional shares of Stock, or otherwise reinvested. ARTICLE 12 OTHER STOCK-BASED AWARDS 12.1. GRANT OF OTHER STOCK-BASED AWARDS. The Committee is authorized, --------------------------------- subject to limitations under applicable law, to grant to Participants such other Awards that are payable in, valued in whole or in part by reference to, or otherwise based on or related to shares of Stock, as deemed by the Committee to be consistent with the purposes of the Plan, including without limitation shares of Stock awarded purely as a "bonus" and not subject to any restrictions or conditions, convertible or exchangeable debt securities, other rights convertible or exchangeable into shares of Stock, and Awards valued by reference to book value of shares of Stock or the value of securities of or the performance of specified Parents or Subsidiaries. The Committee shall determine the terms and conditions of such Awards. ARTICLE 13 PROVISIONS APPLICABLE TO AWARDS 13.1. STAND-ALONE, TANDEM, AND SUBSTITUTE AWARDS. Awards granted under ------------------------------------------ the Plan may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with, or in substitution for, any other Award granted under the Plan. If an Award is granted in substitution for another Award, the Committee may require the surrender of such other Award in consideration of the grant of the new Award. Awards granted in addition to or in tandem with other Awards may be granted either at the same time as or at a different time from the grant of such other Awards. 13.2. EXCHANGE PROVISIONS. The Committee may at any time offer to ------------------- exchange or buy out any previously granted Award for a payment in cash, Stock, or another Award (subject to Section 14.1), based on the terms and conditions the Committee determines and communicates to the Participant at the time the offer is made. 13.3. TERM OF AWARD. The term of each Award shall be for the period as ------------- determined by the Committee, provided that in no event shall the term of any Incentive Stock Option or a Stock Appreciation Right granted in tandem with the Incentive Stock Option exceed a period of ten years from the date of its grant (or, if Section 7.2(e) applies, five years from the date of its grant). 13.4. FORM OF PAYMENT FOR AWARDS. Subject to the terms of the Plan and -------------------------- any applicable law or Award Agreement, payments or transfers to be made by the Corporation or a Parent or Subsidiary on the grant or exercise of an Award may be made in such form as the Committee determines at or after the time of grant, -12- including without limitation, cash, Stock, other Awards, or other property, or any combination, and may be made in a single payment or transfer, in installments, or on a deferred basis, in each case determined in accordance with rules adopted by, and at the discretion of, the Committee. 13.5. LIMITS ON TRANSFER. No right or interest of a Participant in any ------------------ unexercised or restricted Award may be pledged, encumbered, or hypothecated to or in favor of any party other than the Corporation or a Parent or Subsidiary, or shall be subject to any lien, obligation, or liability of such Participant to any other party other than the Corporation or a Parent or Subsidiary. No unexercised or restricted Award shall be assignable or transferable by a Participant other than by will or the laws of descent and distribution or, except in the case of an Incentive Stock Option, pursuant to a domestic relations order which would satisfy Section 414(p)(1)(A) of the Code if such Section applied to an Award under the Plan; provided, however, that the Committee may (but need not) permit other transfers where the Committee concludes that such transferability (i) does not result in accelerated taxation, (ii) does not cause any Option intended to be an incentive stock option to fail to be described in Code Section 422(b), and (iii) is otherwise appropriate and desirable, taking into account any state or federal securities laws applicable to transferable Awards. 13.6 BENEFICIARIES. Notwithstanding Section 13.5, a Participant may, in ------------- the manner determined by the Committee, designate a beneficiary to exercise the rights of the Participant and to receive any distribution with respect to any Award upon the Participant's death. A beneficiary, legal guardian, legal representative, or other person claiming any rights under the Plan is subject to all terms and conditions of the Plan and any Award Agreement applicable to the Participant, except to the extent the Plan and Award Agreement otherwise provide, and to any additional restrictions deemed necessary or appropriate by the Committee. If no beneficiary has been designated or survives the Participant, payment shall be made to the Participant's estate. Subject to the foregoing, a beneficiary designation may be changed or revoked by a Participant at any time provided the change or revocation is filed with the Committee. 13.7. STOCK CERTIFICATES. All Stock certificates delivered under the Plan ------------------ are subject to any stop-transfer orders and other restrictions as the Committee deems necessary or advisable to comply with federal or state securities laws, rules and regulations and the rules of any national securities exchange or automated quotation system on which the Stock is listed, quoted, or traded. The Committee may place legends on any Stock certificate to reference restrictions applicable to the Stock. 13.8 ACCELERATION UPON DEATH OR DISABILITY. Notwithstanding any other ------------------------------------- provision in the Plan or any Participant's Award Agreement to the contrary, upon the Participant's death or Disability during his employment or his service as a director, all outstanding Options, Stock Appreciation Rights, and other Awards in the nature of rights that may be exercised shall become fully exercisable and all restrictions on outstanding Awards shall lapse. Any such Option, Stock Appreciation Rights or other Awards shall thereafter continue or lapse in accordance with the other provisions of the Plan and the Award Agreement. To the extent that this provision causes Incentive Stock Options to exceed the dollar limitation set forth in Section 7.2(d), the excess Options shall be deemed to be Non-Qualified Stock Options. -13- 13.9. ACCELERATION UPON A CHANGE IN CONTROL. Except as otherwise provided ------------------------------------- in the Award Agreement, upon the occurrence of a Change in Control, all outstanding Options, Stock Appreciation Rights, and other Awards in the nature of rights that may be exercised shall become fully exercisable and all restrictions on outstanding Awards shall lapse; provided, however, that such acceleration will not occur if, in the opinion of the Corporation's accountants, such acceleration would preclude the use of "pooling of interest" accounting treatment for a Change in Control transaction that (a) would otherwise qualify for such accounting treatment, and (b) is contingent upon qualifying for such accounting treatment. To the extent that this provision causes Incentive Stock Options to exceed the dollar limitation set forth in Section 7.2(d), the excess Options shall be deemed to be Non-Qualified Stock Options. 13.10. ACCELERATION UPON CERTAIN EVENTS NOT CONSTITUTING A CHANGE IN ------------------------------------------------------------- CONTROL. In the event of the occurrence of any circumstance, transaction or - ------- event not constituting a Change in Control (as defined in Section 3.1) but which the Board of Directors deems to be, or to be reasonably likely to lead to, an effective change in control of the Corporation of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of the 1934 Act (regardless of whether the Corporation is then subject to such Act), the Committee may in its sole discretion declare all outstanding Options, Stock Appreciation Rights, and other Awards in the nature of rights that may be exercised to be fully exercisable, and/or all restrictions on all outstanding Awards to have lapsed, in each case as of such date as the Committee may, in its sole discretion, declare, which may be on or before the consummation of such transaction or event. To the extent that this provision causes Incentive Stock Options to exceed the dollar limitation set forth in Section 7.2(d), the excess Options shall be deemed to be Non-Qualified Stock Options. 13.11. ACCELERATION FOR ANY OTHER REASON. Regardless of whether an event --------------------------------- has occurred as described in Section 13.9 or 13.10 above, the Committee may in its sole discretion at any time determine that all or a portion of a Participant's Options, Stock Appreciation Rights, and other Awards in the nature of rights that may be exercised shall become fully or partially exercisable, and/or that all or a part of the restrictions on all or a portion of the outstanding Awards shall lapse, in each case as of such date as the Committee may, in its sole discretion, declare. The Committee may discriminate among Participants and among Awards granted to a Participant in exercising its discretion pursuant to this Section 13.11. 13.12 EFFECT OF ACCELERATION. If an Award is accelerated under Section ---------------------- 13.9, 13.10 or 13.11, the Committee may, in its sole discretion, provide (i) that the Award will expire after a designated period of time after such acceleration to the extent not then exercised, (ii) that the Award will be settled in cash rather than Stock, (iii) that the Award will be assumed by another party to the transaction giving rise to the acceleration or otherwise be equitably converted in connection with such transaction, or (iv) any combination of the foregoing. The Committee's determination need not be uniform and may be different for different Participants whether or not such Participants are similarly situated. -14- 13.13. PERFORMANCE GOALS. The Committee may determine that any Award ----------------- granted pursuant to this Plan to a Participant (including, but not limited to, Participants who are Covered Employees) shall be determined solely on the basis of (a) the achievement by the Corporation or a Parent or Subsidiary of a specified target return, or target growth in return, on equity or assets, (b) the Corporation's, Parent's or Subsidiary's stock price, (c) the achievement by the Corporation, Parent or Subsidiary or a business unit of the Corporation, Parent or Subsidiary of a specified target, or target growth in, revenues, operating income, net income or earnings per share, or (d) any combination of the goals set forth in (a) through (c) above. Furthermore, the Committee reserves the right for any reason to reduce (but not increase) any Award, notwithstanding the achievement of a specified goal. If an Award is made on such basis, the Committee shall establish goals prior to the beginning of the period for which such performance goal relates (or such later date as may be permitted under Code Section 162(m) or the regulations thereunder). Any payment of an Award granted with performance goals shall be conditioned on the written certification of the Committee in each case that the performance goals and any other material conditions were satisfied. 13.14. TERMINATION OF EMPLOYMENT. Whether military, government or other ------------------------- service or other leave of absence shall constitute a termination of employment shall be determined in each case by the Committee at its discretion, and any determination by the Committee shall be final and conclusive. A termination of employment shall not occur in a circumstance in which a Participant transfers from the Corporation to one of its Parents or Subsidiaries, transfers from a Parent or Subsidiary to the Corporation, or transfers from one Parent or Subsidiary to another Parent or Subsidiary. ARTICLE 14 CHANGES IN CAPITAL STRUCTURE 14.1. GENERAL. In the event a stock dividend is declared upon the Stock, ------- the number of shares of Stock subject to grant pursuant to this Plan shall be increased proportionately and the number of shares of Stock then subject to each Award shall be increased proportionately without any change in the aggregate purchase price therefor. In the event the Stock shall be changed into or exchanged for a different number or class of shares of stock or securities of the Corporation or of another corporation, whether through reorganization, recapitalization, stock split-up, combination of shares, merger or consolidation, there shall be substituted for each such share of Stock then subject to each Award the number and class of shares into which each outstanding share of Stock shall be so exchanged, all without any change in the aggregate purchase price for the shares then subject to each Award. In the event the Stock shall be changed into or exchanged for cash or other property not consisting of shares of stock or securities of the Corporation or of another corporation, whether through reorganization, recapitalization, merger or consolidation, the Committee may, in its sole discretion, provide (i) that the Award will expire after a designated period of time to the extent not then exercised, (ii) that the Award will be settled in cash rather than Stock, (iii) that the Award will be assumed by another party to the transaction or otherwise be equitably converted in connection with such transaction, or (iv) any combination of the foregoing. The Committee's determination need not be uniform and may be different for different Participants whether or not such Participants are similarly situated. -15- ARTICLE 15 AMENDMENT, MODIFICATION AND TERMINATION 15.1. AMENDMENT, MODIFICATION AND TERMINATION. The Board or the Committee --------------------------------------- may, at any time and from time to time, amend, modify or terminate the Plan without stockholder approval; provided, however, that the Board or Committee may condition any amendment or modification on the approval of stockholders of the Corporation if such approval is necessary or deemed advisable with respect to tax, securities or other applicable laws, policies or regulations. 15.2 AWARDS PREVIOUSLY GRANTED. At any time and from time to time, the ------------------------- Committee may amend, modify or terminate any outstanding Award without approval of the Participant; provided, however, that such amendment, modification or termination shall not, without the Participant's consent, reduce or diminish the value of such Award determined as if the Award had been exercised, vested, cashed in or otherwise settled on the date of such amendment or termination. ARTICLE 16 GENERAL PROVISIONS 16.1. NO RIGHTS TO AWARDS. No Participant or any employee, officer, ------------------- consultant or director shall have any claim to be granted any Award under the Plan, and neither the Corporation nor the Committee is obligated to treat Participants or employees, officers, directors or consultants uniformly. 16.2. NO STOCKHOLDER RIGHTS. No Award gives the Participant any of the --------------------- rights of a stockholder of the Corporation unless and until shares of Stock are in fact issued to such person in connection with such Award. 16.3. WITHHOLDING. The Corporation or any Parent or Subsidiary shall have ----------- the authority and the right to deduct or withhold, or require a Participant to remit to the Corporation, an amount sufficient to satisfy federal, state, and local taxes (including the Participant's FICA obligation) required by law to be withheld with respect to any taxable event arising as a result of the Plan. With respect to withholding required upon any taxable event under the Plan, the Committee may, at the time the Award is granted or thereafter, require that any such withholding requirement be satisfied, in whole or in part, by withholding shares of Stock having a Fair Market Value on the date of withholding equal to the amount to be withheld for tax purposes, all in accordance with such procedures as the Committee establishes. 16.4. NO RIGHT TO EMPLOYMENT OR DIRECTORSHIP. Nothing in the Plan or any -------------------------------------- Award Agreement shall interfere with or limit in any way the right of the Corporation or any Parent or Subsidiary to terminate any Participant's employment or status as a director or consultant at any time, nor confer upon any Participant any right to continue in the employ or directorship of the Corporation or any Parent or Subsidiary. -16- 16.5. UNFUNDED STATUS OF AWARDS. The Plan is intended to be an "unfunded" ------------------------- plan for incentive and deferred compensation. With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award Agreement shall give the Participant any rights that are greater than those of a general creditor of the Corporation or any Parent or Subsidiary. 16.6. INDEMNIFICATION. To the extent allowable under applicable law, each --------------- member of the Committee shall be indemnified and held harmless by the Corporation from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such member in connection with or resulting from any claim, action, suit, or proceeding to which such member may be a party or in which he may be involved by reason of any action or failure to act under the Plan and against and from any and all amounts paid by such member in satisfaction of judgment in such action, suit, or proceeding against him provided he gives the Corporation an opportunity, at its own expense, to handle and defend the same before he undertakes to handle and defend it on his own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Corporation's Articles of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Corporation may have to indemnify them or hold them harmless. 16.7. RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan shall be ------------------------------ taken into account in determining any benefits under any pension, retirement, savings, profit sharing, group insurance, welfare or benefit plan of the Corporation or any Parent or Subsidiary unless provided otherwise in such other plan. 16.8. EXPENSES. The expenses of administering the Plan shall be borne by -------- the Corporation and its Parents or Subsidiaries. 16.9. TITLES AND HEADINGS. The titles and headings of the Sections in the ------------------- Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control. 16.10. GENDER AND NUMBER. Except where otherwise indicated by the ----------------- context, any masculine term used herein also shall include the feminine; the plural shall include the singular and the singular shall include the plural. 16.11. FRACTIONAL SHARES. No fractional shares of Stock shall be issued ----------------- and the Committee shall determine, in its discretion, whether cash shall be given in lieu of fractional shares or whether such fractional shares shall be eliminated by rounding up. 16.12. GOVERNMENT AND OTHER REGULATIONS. The obligation of the -------------------------------- Corporation to make payment of awards in Stock or otherwise shall be subject to all applicable laws, rules, and regulations, and to such approvals by government agencies as may be required. The Corporation shall be under no obligation to register under the 1933 Act, any of the shares of Stock paid under the Plan. If the shares paid under the Plan may in certain circumstances be exempt from -17- registration under the 1933 Act, the Corporation may restrict the transfer of such shares in such manner as it deems advisable to ensure the availability of any such exemption. 16.13. GOVERNING LAW. To the extent not governed by federal law, the Plan -------------- and all Award Agreements shall be construed in accordance with and governed by the laws of the State of Delaware. 16.14 ADDITIONAL PROVISIONS. Each Award Agreement may contain such other --------------------- terms and conditions as the Committee may determine; provided that such other terms and conditions are not inconsistent with the provisions of this Plan. 16.15 CODE SECTION 162(m). The deduction limits of Code Section 162(m) ------------------- and the regulation thereunder do not apply to the Corporation until such time, if any, as any class of the Corporation's common equity securities is registered under Section 12 of the 1934 Act or the Corporation otherwise meets the definition of a "publicly held corporation" under Treasury Regulation 1.162- 27(c) or any successor provision. Upon becoming a publicly held corporation, the deduction limits of Code Section 162(m) and the regulations thereunder shall not apply to compensation payable under this Plan until the expiration of the reliance period described in Treasury Regulation 1.162-27(f) or any successor regulation. The foregoing is hereby acknowledged as being the Check Into Cash, Inc. Amended and Restated 1997 Long-Term Incentive Plan as adopted by the Board of Directors of the Corporation on May 1, 1998. CHECK INTO CASH, INC. By: /s/ W. Allan Jones, Jr. ------------------------------ W. Allan Jones, Jr. Chairman of the Board and Chief Executive Officer -18- EX-10.2 3 NATIONSBANK OF TENNESSEE, INC. EXHIBIT 10.2 - -------------------------------------------------------------------------------- LOAN AGREEMENT between CHECK INTO CASH, INC. and NATIONSBANK OF TENNESSEE, N.A. Dated as of June 2, 1997 - -------------------------------------------------------------------------------- TABLE OF CONTENTS ----------------- Page ---- SECTION 1. DEFINITIONS................................................... 1 1.1 Defined Terms...................................................... 1 ------------- 1.2 Other Definitional Provisions...................................... 11 ----------------------------- SECTION 2. AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENT............... 11 2.1 Revolving Credit Commitment........................................ 11 --------------------------- 2.2 Note............................................................... 11 ---- 2.3 Procedure for Revolving Credit Borrowing........................... 11 ---------------------------------------- 2.4 Credit Account..................................................... 12 -------------- 2.5 Letter of Credit Subfeature........................................ 12 --------------------------- 2.6 Usage Fee.......................................................... 13 --------- SECTION 3. GENERAL PROVISIONS APPLICABLE TO THE LOANS.................... 13 3.1 Optional Prepayments............................................... 13 -------------------- 3.2 Interest Rates and Payment Dates................................... 13 -------------------------------- 3.3 Computation of Interest and Fees................................... 14 -------------------------------- SECTION 4. REPRESENTATIONS AND WARRANTIES................................ 14 4.1 Financial Condition................................................ 14 ------------------- 4.2 No Change.......................................................... 15 --------- 4.3 Existence; Compliance with Law..................................... 15 ------------------------------ 4.4 Power; Authorization; Enforceable Obligations...................... 15 --------------------------------------------- 4.5 No Legal Bar....................................................... 16 ------------ 4.6 No Litigation...................................................... 16 ------------- 4.7 No Default......................................................... 16 ---------- 4.8 Ownership of Property; Liens....................................... 16 ---------------------------- 4.9 Intellectual Property.............................................. 16 --------------------- 4.10 No Burdensome Restrictions........................................ 17 -------------------------- 4.11 Taxes............................................................. 17 ----- 4.12 Federal Regulations............................................... 17 ------------------- 4.13 ERISA............................................................. 17 ----- 4.14 Investment Company Act; Other Regulations......................... 18 ----------------------------------------- 4.15 Subsidiaries...................................................... 18 ------------ 4.16 Purpose of Loans.................................................. 18 ---------------- 4.17 Environmental Matters............................................. 19 --------------------- 4.18 Security Agreement................................................ 19 ------------------ 4.19 Capitalization.................................................... 20 -------------- 4.20 Solvency.......................................................... 20 -------- 4.21 Fees; Commissions................................................. 20 ----------------- 4.22 Truth of Representations.......................................... 20 ------------------------ SECTION 5. CONDITIONS PRECEDENT.......................................... 21 5.1 Conditions to Initial Loans........................................ 21 --------------------------- 5.2 Conditions to All Loans............................................ 23 ----------------------- SECTION 6. AFFIRMATIVE COVENANTS......................................... 24 6.1 Financial Statements............................................... 24 -------------------- 6.2 Certificates; Other Information.................................... 25 ------------------------------- 6.3 Payment of Obligations............................................. 26 ---------------------- i 6.4 Conduct of Business, Maintenance of Existence............... 26 --------------------------------------------- 6.5 Maintenance of Property; Insurance.......................... 26 ---------------------------------- 6.6 Inspection of Property; Books and Records; ----------------------------------------- Discussions................................................. 27 ----------- 6.7 Notices..................................................... 27 ------- 6.8 Environmental Laws.......................................... 28 ------------------ 6.9 Accounts.................................................... 28 -------- 6.10 ERISA....................................................... 28 ----- SECTION 7. NEGATIVE COVENANTS........................................ 29 7.1 Financial Condition Covenants............................... 29 ----------------------------- 7.2 Limitation on Indebtedness.................................. 30 -------------------------- 7.3 Limitation on Liens......................................... 30 ------------------- 7.4 Limitation on Guarantee Obligations......................... 31 ----------------------------------- 7.5 Limitation on Fundamental Changes........................... 31 --------------------------------- 7.6 Limitation on Sale of Assets................................ 31 ---------------------------- 7.7 Limitation on Dividends and Stock Redemption................ 32 -------------------------------------------- 7.8 Intentionally omitted....................................... 32 --------------------- 7.9 Limitation on Investments, Loans and Advances............... 32 --------------------------------------------- 7.10 Transactions with Affiliates............................... 32 ---------------------------- 7.11 Sale and Leaseback......................................... 33 ------------------ 7.12 Fiscal Year................................................ 33 ----------- 7.13 Limitation on Negative Pledge Clauses...................... 33 ------------------------------------- 7.14 Remuneration............................................... 33 ------------ SECTION 8. EVENTS OF DEFAULT......................................... 33 8.1 Events of Default........................................... 33 ----------------- SECTION 9. MISCELLANEOUS............................................. 37 9.1 Amendments and Waivers...................................... 37 ---------------------- 9.2 Notices..................................................... 38 ------- 9.3 No Waiver; Cumulative Remedies.............................. 38 ------------------------------ 9.4 Survival of Representations and Warranties................... 38 ----------------------------------------- 9.5 Payment of Expenses and Taxes............................... 38 ----------------------------- 9.6 Successors and Assigns; Participations...................... 39 -------------------------------------- 9.7 Adjustments; Set-off........................................ 40 -------------------- 9.8 Counterparts................................................ 40 ------------ 9.9 Severability................................................ 40 ------------ 9.10 Integration................................................ 40 ----------- 9.11 GOVERNING LAW.............................................. 41 ------------- 9.12 Acknowledgements........................................... 41 ---------------- 9.13 Further Assurances......................................... 41 ------------------ 9.14 Release and Indemnification................................ 41 --------------------------- 9.15 Joint and Several Liability................................ 42 --------------------------- 9.16 Arbitration................................................ 42 ----------- EXHIBIT 4.6...................................................... 46 ----------- EXHIBIT 4.9...................................................... 47 ----------- EXHIBIT 4.10..................................................... 48 ------------ EXHIBIT 4.15..................................................... 49 ------------ EXHIBIT 4.19..................................................... 50 ------------ ii LOAN AGREEMENT, dated as of June 2, 1997, among CHECK INTO CASH, INC., a Delaware corporation (the "Company"), NATIONSBANK OF TENNESSEE, N.A., a national banking association (the "Bank"), and the Subsidiary Guarantors described below. The parties hereto hereby agree as follows: SECTION 1. DEFINITIONS 1.1 Defined Terms. As used in this Agreement, the following terms ------------- shall have the following meanings: "Affiliate": as to any Person, (a) any other Person which, directly --------- or indirectly, is in control of, is controlled by, or is under common control with, such Person or (b) any Person who is a director, officer, shareholder or partner (i) of such Person, (ii) of any Subsidiary of such Person or (iii) of any Person described in the preceding clause (a). For purposes of this definition, "control" of a Person means the power, directly or indirectly, either to (i) vote 50% or more of the securities having ordinary voting power for the election of directors of such Person or (ii) direct or cause the direction of the management and policies of such Person whether by contract or otherwise. "Agreement": this Loan Agreement, as amended, supplemented or --------- otherwise modified from time to time. "Authorized Employee": as defined in subsection 2.3. ------------------- "Available Credit Commitment": means from time to time, as determined --------------------------- as of the end of each month, the product determined by multiplying Corporate EBITDA for the preceding twelve (12) months (on a trailing 12- month basis) times two (2). "Business Day": a day other than a Saturday, Sunday or other day on ------------ which commercial banks in Chattanooga, Tennessee, are authorized or required by law to close. "Capital Stock": any and all shares, interests, participations or ------------- other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) such as membership interests in limited liability companies and partnership interests in partnerships, and any and all warrants, options, rights or conversion privileges to purchase any of the foregoing. "Cash Equivalents": any of the following: (i) direct obligations of ---------------- the United States or any agency thereof with maturities of one year or less from the date of acquisition; 1 (ii) commerical paper of a domestic issuer rated at least "A-1" by Standard & Poors Corporation or "P-1" by Moody's Investors Service, Inc.; and (iii) certificates of deposit with maturities of one year or less from the date of acquisition issued by any commerical bank having capital and surplus in excess of One Hundred Million Dollars ($100,000,000). "Change in Control": shall mean at any time: (i) if the Individual ----------------- Guarantor and Janie P. Jones do not own at least fifty-one percent (51%) of the Capital stock of the Company unless otherwise consented to in writing by the Bank (which consent will not be unreasonably withheld in connection with a public offering of the Company's Capital Stock or in connection with Individual Guarantor's estate planning); (ii) if the Individual Guarantor at any time ceases to serve as chief executive officer of the Company; or (iii) if the Company does not own at least fifty-one percent (51%) of the Capital Stock of each Subsidiary Guarantor. "Closing Date": the date on which the Bank makes the initial Loans. ------------ "Code": the Internal Revenue Code of 1986, as amended from time to time. ---- "Collateral": all of the items and types of property on which the Bank is ---------- granted a Lien pursuant to the Security Documents. "Commitment Period": the period from and including the date hereof to, but ------------------ not including, the Termination Date or such earlier date on which the Revolving Credit Commitment shall terminate as provided herein. "Commonly Controlled Entity": an entity, whether or not incorporated, -------------------------- which is under common control with the Company within the meaning of Section 4001(b) of ERISA or is part of a group which includes the Company and which is treated as a single employer under Sections 414(b) or (c) of the Code including, without limitation, the Subsidiary Guarantors. In addition, for purposes of this Agreement as it relates to Code Section 412(n), the term Commonly Controlled Entity shall mean any entity aggregated with the Company under Code Section 414(b), (c), (m) or (o). 2 "Contractual Obligation": as to any Person, any provision of any security ---------------------- issued by such Person or of any agreement, instrument or other undertaking (written or oral) to which such Person is a party or by which it or any of its property is bound. "Corporate EBITDA": with respect to the applicable periods as set forth ---------------- herein, the sum, without duplication, of (i) Corporate Net Income for such period less gain on the sale of assets, dividends and other distributions, withdrawals, and treasury stock purchases and similar transactions and (ii) to the extent deducted in determining such Corporate Net Income: (A) all income taxes, including but not limited to, Federal, foreign and state income taxes (including any deferred taxes); (B) Corporate InterestExpense; and (C) depreciation, amortization and similar non-cash charges, provided, that there -------- shall be excluded therefrom non-operating gains and non-operating losses. "Corporate Fixed Charges": for the applicable fiscal period of the Company ----------------------- and the Subsidiary Guarantors on a consolidated basis, the sum of (i) the aggregate principal amount of Indebtedness scheduled to be paid during such period (including, without limitation, amounts scheduled to be paid under Finance Leases and with respect to other Indebtedness for Borrowed Money) plus (ii) Corporate Interest Expense scheduled to be paid during such period. "Corporate Interest Expense": for the applicable fiscal period of the -------------------------- Company and the Subsidiary Guarantors on a consolidated basis, the amount which, in conformity with GAAP, would be set forth opposite the caption "interest expense" or any like caption (excluding amortization of deferred finance charges) on the consolidated income statement of the Company and Subsidiary Guarantors for such period, provided, however, that in no event shall interest -------- ------- income be deducted therefrom in computing such amount. "Corporate Lease Expense": for the applicable fiscal period, the aggregate ----------------------- rental expenses of the Company and the Subsidiary Guarantors on a consolidated basis, determined in accordance with GAAP, payable in respect of such period under leases (other than Financing Leases) for real and/or personal property. "Corporate Net Income": for the applicable fiscal period, the amount -------------------- which, in conformity with GAAP, will be set forth opposite the caption "net income or loss" (after taxes) or any like caption on the income statement of the Company and the Subsidiaries on a consolidated basis for such period. 3 "Corporate Net Worth": at a particular date, all amounts which would be ------------------- included under shareholders' equity on the consolidated balance sheet of the Company determined in accordance with GAAP. "Credit Account": as defined in subsection 2.4. -------------- "Current Assets": shall mean, as of the date of determination, all assets -------------- of the Company and the Subsidiary Guarantors which would, in accordance with GAAP, be classified as current assets. "Current Liabilities": shall mean, as of the date of determination, all ------------------- liabilities (including tax and other proper accruals) of the Company and the Subsidiary Guarantor which would, in accordance with GAAP, be classified as current liabilities, but in any event including all Indebtedness, whether secured or unsecured, payable on demand or maturing not more than one (1) year after such date, including any fixed and (at such time as the amount thereof shall be determined) any contingent payments required to be made by the Company or any Subsidiary Guarantor not more than one (1) year after such date in respect of the principal of any of its Indebtedness for Borrowed Money. "Default": any of the events specified in Section 8, whether or not any ------- requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "Dollars" and "$": dollars in lawful currency of the United States of ------- - America. "Environmental Laws": any and all Federal, state, local or municipal laws, ------------------ rules, orders, regulations, statutes, ordinances, codes, decrees or requirements of any Governmental Authority regulating, relating to or imposing liability or standards of conduct concerning environmental protection matters, including without limitation, Hazardous Materials, as now or may at any time hereafter be in effect. "ERISA": the Employment Retirement Income Security Act of 1974, as amended ----- from time to time, any successor statutes thereto, and any regulations or guidance promulgated thereunder. "Event of Default": any of the events specified in Section 8, provided that ---------------- -------- any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. 4 "Financing Lease": any lease of property, real or personal, the --------------- obligations of the lessee in respect of which are required in accordance with GAAP to be capitalized on a balance sheet of the lessee. "Fixed Charges Coverage": means for the appropriate period of Company and ---------------------- Subsidiary Guarantors on a consolidated basis the ratio of (i) Corporate EBITDA to (ii) the sum of Corporate Fixed Charges plus one-third of the principal amount of the Loan outstanding on the last day of that period provided that such amounts are not already included as scheduled principal payments of Indebtedness in the definition of Corporate Fixed Charges. "GAAP": generally accepted accounting principles in the United States of ---- America applied on a consistent basis with prior periods. "Governmental Authority": any nation or government, any state or other ---------------------- political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Guarantee": the Continuing Guaranty executed by the Individual Guarantor --------- in favor of the Bank on or about even date herewith, and the Continuing Guaranty executed by Subsidiary Guarantors in favor of the Bank on or about even date herewith, all as the same may be amended, supplemented or otherwise modified from time to time. "Guarantee Obligation": as to any Person (the "guaranteeing person"), any -------------------- ------------------- obligation of (i) the guaranteeing person or (ii) another Person (including without limitation, any bank under any letter or credit) to induce the creation of any Indebtedness for which the guaranteeing person has issued a reimbursement, counter, indemnity or similar obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations (the "primary obligations") of any other third Person (the ------------------- "primary obligor") in any manner, whether directly or indirectly, including, --------------- without limitation, any obligation of the guaranteeing person, whether or not contingent, (a) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (b) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary 5 obligation or (d) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however, that the -------- ------- term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lower of (i) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (ii) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person's maximum reasonably anticipated liability in respect thereof as determined by the Bank in good faith. "Hazardous Materials": friable asbestos and other asbestos contaminating ------------------- material, urea formaldehyde foam insulation, polychlorinated biphenyls, petroleum and petroleum byproducts, pesticides, herbicides, and any and all substances and materials now or hereafter defined or designated as hazardous materials, hazardous waste, hazardous constituents, or hazardous or toxic substances as defined or regulated as such in or under any Environmental Law. "Indebtedness": all liabilities, obligations and indebtedness of any Person ------------ at any date of any and every kind and nature, whether matured or not matured, whether joint or several, and whether heretofore, now or hereafter owing, arising, due or payable and howsoever evidenced, created, incurred, acquired or owing, whether primary, secondary, direct, contingent, fixed or otherwise and regardless of the class of such liabilities, obligations and indebtedness including, without in any way limiting the generality of the foregoing, the following: (i) all Indebtedness for Borrowed Money of such Person; (ii) all obligations of such Person in respect of acceptances issued or created for the account of such Person; and (iii) all liabilities secured by any Lien on any property owned by such Person even though such Person has not assumed or otherwise become liable for the payment thereof. "Indebtedness" shall not include any lease that is not a Financing Lease. "Indebtedness for Borrowed Money": as applied to any Person, all ------------------------------- Indebtedness of such Person evidenced by any note, bond, debenture or other instrument or in respect of borrowed money, and any Financing Lease or any portion of the purchase price of property or services that is deferred for a period of one year or more from the date of purchase. 6 "Individual Guarantor": W. Allan Jones, Jr., an individual residing in -------------------- Bradley County, Tennessee. "Insolvency": with respect to any Multiemployer Plan, the condition that ---------- such Plan is insolvent within the meaning of Section 4245 of ERISA. "Insolvent": pertaining to a condition of Insolvency. --------- "Intellectual Property": has the meaning given such term in Section 4.9. --------------------- "Intercreditor Agreements": the subordination and intercreditor ------------------------ agreements between the Bank and: (i) Sirrom Capital Corporation; and (ii) Individual Guarantor, relating to the Indebtedness of the Company and the Subsidiary Guarantors all in form and substance satisfactory to Bank. "Interest Payment Date": the first day of each calendar month to occur --------------------- while the Loan is outstanding commencing July 1, 1997. "Landlord's Waiver": that certain Landlord's Waiver executed by W. Allan ----------------- Jones, Jr. d/b/a Jones Properties in favor of the Bank in form and substance satisfactory to the Bank. "Letter of Credit": as defined in subsection 2.5. ---------------- "Leverage ratio": means for the applicable fiscal period of the Company -------------- and Subsidiary Guarantors on a consolidated basis, the ratio of Indebtedness for Borrowed Money (including subordinated Indebtedness for Borrowed Money) of the Company and Subsidiary Guarantors to Corporate EBITDA. "Lien": any mortgage, pledge, hypothecation, assignment, deposit ---- arrangement, encumbrance, lien (statutory or other), or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any Financing Lease having substantially the same economic effect as any of the foregoing, and the filing of any financing statement under the UCC or comparable law of any jurisdiction in respect of any of the foregoing). "Loan": the loan made by the Bank pursuant to this Agreement as further ---- defined in Section 2.1. 7 "Loan Documents": this Agreement, the Note, the Security Documents, the -------------- Intercreditor Agreements and any other document, instrument or agreement now or hereafter existing, evidencing, securing or otherwise relating to any Indebtedness of the Company, the Individual Guarantor, or any Subsidiary Guarantor to the Bank. "Material Adverse Effect": a material adverse effect on (i) the business, ----------------------- operations, assets, or position (financial or otherwise) of the Company and Subsidiary Guarantors taken as a whole or the Individual Guarantor (ii) the ability of the Company, Individual Guarantor, or any Subsidiary Guarantor generally to perform its obligations under this Agreement, the Note or any of the other Loan Documents, or (iii) the validity or enforceability of this Agreement, the Note, any Guarantee, any Security Document, or any of the other Loan Documents or the rights or remedies of the Bank hereunder or thereunder. "Maximum Credit Amount": means the lesser of (i) Three Million One Hundred --------------------- Thousand Dollars ($3,100,000) and (ii) the Available Credit Commitment. "Multiemployer Plan": a Plan which is a multiemployer plan as defined in ------------------ Section 4001(a)(3) of ERISA. "Note": the Promissory Note in the principal amount of Three Million One ---- Hundred Thousand Dollars ($3,100,000) executed by the Company payable to Bank dated on or about even date herewith, as the same may be amended, supplemented or otherwise modified from time to time, together with all other promissory notes now or hereafter payable by the Company or any Subsidiary Guarantor to the Bank and all amendments, supplements and modifications thereof. "Operating Account": means a checking account maintained by the Company ----------------- with the Bank. "PBGC": the Pension Benefit Guaranty Corporation established pursuant to ---- Subtitle A of Title IV of ERISA or any entity succeeding to any or all of its functions. "Participant": as defined in subsection 9.6. ----------- "Person": an individual, partnership, corporation, limited liability ------ company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature. "Permitted Liens": as defined in subsection 7.3. --------------- 8 "Plan": at a particular time, any employee benefit plan which is covered ---- by ERISA and in respect of which the Company or a Commonly Controlled Entity is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Prohibited Transaction": any transaction set forth in Section 406 of ---------------------- ERISA or Section 4975 of the Code, for which a statutory, regulatory or individual exemption is not applicable. "Regulation U": Regulation U of the Board of Governors of the Federal ------------ Reserve System. "Reorganization": with respect to any Multiemployer Plan, the condition -------------- that such plan is in reorganization within the meaning of Section 4241 of ERISA. "Reportable Event": any of the events set forth in Section 4043 of ERISA ---------------- (other than a Reportable Event as to which the provision of 30 days' notice has been waived by the PBGC under applicable regulations or to which penalties for failure to provide notice have been waived by applicable regulation or administrative action by the PBGC). "Requirement of Law": as to any Person, the charter (certificate of ------------------ incorporation) and by-laws, articles of organization and operating agreements, and other organizational or governing documents of such Person, and any law, treaty, rule, order, regulation, statute, ordinance, code, decree or requirement of any Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject, as may nor or at any time hereafter be in effect. "Responsible Officer": the president of the Company or, with respect to ------------------- financial matters, the chief financial officer of the Company. "Revolving Credit Commitment": the obligation of the Bank to make the Loan --------------------------- to the Company hereunder in an aggregate principal amount at any one time outstanding not to exceed the Maximum Credit Amount. "Security Agreement": the Security Agreement entered into by the Company ------------------ and the Bank on or about even date herewith, and the Security Agreement(s) entered into by the Subsidiary Guarantors and the Bank on or about even date herewith, all as the same may be amended, supplemented or otherwise modified from time to time, and related UCC financing statements. 9 "Security Documents": the Security Agreement and the financing statements ------------------- relating thereto, the Guarantee, the Security Agreement and Collateral Assignment of Membership Interests entered into between the Company and Bank on or about even date herewith, the Pledge and Security Agreement entered into between the Company and Bank on or about even date herewith, the Trademark Security Agreement entered into between the Company and the Bank on or about even date herewith, and all other documents, instruments and agreements now or hereafter securing repayment of the Loan. "Single Employer Plan": any Plan which is covered by Title IV of ERISA, but --------------------- which is not a Multiemployer Plan. "Subsidiary": as to any Person, a corporation, partnership or other entity ----------- of which shares of stock or other ownership interests having ordinary voting power to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. With respect to the Company, the term "Subsidiary" shall include, without limitation, the Subsidiary Guarantors. "Subsidiary Guarantor(s)": Creditcorp of Tennessee, Inc., Check Into Cash ------------------------ of Iowa, Inc., Check into Cash of Kentucky, LLC, Check into Cash of Indiana, LLC, Check into Cash of Illinois, LLC, Check into Cash of Wisconsin, LLC, Check into Cash of Ohio, LLC, Jones Management Services, LLC, Check into Cash Holdings, Inc., Check into Cash of California, Inc., Check into Cash of Missouri, Inc., and Check into Cash of Nebraska, Inc., together with all other Persons now or hereafter party to the Guarantee executed by the Subsidiary Guarantors. "Tangible Net Worth": at any time, Corporate Net Worth less all amounts ------------------- included in the calculation thereof attributable to (i) goodwill (including all customer lists), (ii) intellectual property, (iii) non-competition agreements, (iv) unamortized financing costs, (v) amounts due from Affiliates, Subsidiaries and other inter-company debts (but not including bona fide amounts owing for transactions permitted by Section 7.10) and (vi) all other intangibles which appear on the consolidated balance sheet of the Company and the Subsidiary Guarantors, all as determined in accordance with GAAP. The capitalized value of the warrants issued in favor of Sirrom Capital Corporation and the organizational expenses incurred by the Company and the Subsidiary Guarantors shall not be deducted from Corporate Net Worth in determining Tangible Net --- Worth. "Termination Date": June 2, 2000. ----------------- 10 "UCC": the Uniform Commercial Code as from time to time in effect in --- the State of Tennessee. "Working Capital": at any time, the amount equal to the difference ---------------- between Current Assets and Current Liabilities. 1.2 Other Definitional Provisions. (a) Unless otherwise specified ----------------------------- therein, all terms defined in this Agreement shall have the defined meanings when used in the Note and other Loan Documents or any certificate or other document made or delivered pursuant hereto. (b) As used herein and in the Note, and any certificate or other document made or delivered pursuant hereto accounting terms relating to the Company and the Subsidiary Guarantors not defined in subsection 1.1 and accounting terms partly defined in subsection 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP. (c) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, subsection and Schedule references are to this Agreement unless otherwise specified. (d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. SECTION 2. AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENT 2.1 Revolving Credit Commitment. Subject to the terms and conditions --------------------------- hereof, the Bank agrees to make revolving credit loans (the "Loan") to the Company from time to time during the Commitment Period in an aggregate principal amount at any one time outstanding not to exceed the Maximum Credit Amount. Notwithstanding anything to the contrary contained in any Loan Document, if the aggregate principal amount of the Loan at any time outstanding exceeds the Maximum Credit Amount, the Company shall immediately pay to the Bank such amounts necessary to reduce the then outstanding principal amount of the Loan to an amount not exceeding such Maximum Credit Amount. 2.2 Note. The Loan made by the Bank shall be evidenced by the Note. ---- 2.3 Procedure for Revolving Credit Borrowing. The Company shall ---------------------------------------- designate to the Bank from time to time the officers and employees of the Company who may request that the Bank make advances of the Loan (an "Authorized Employee"). An Authorized Employee shall be deemed to be an Authorized Employee for the purpose of requesting advances of the Revolving Credit 11 Loans until thirty (30) days after the Bank receives written notice from the Company to the contrary. The Bank shall have no duty to verify the authenticity of the signature of any Authorized Employee on a written request for an advance of the Loan and, with respect to a verbal request for an advance of the Loan, the Bank shall have no duty to verify the identity of any person who represents himself or herself as an Authorized Employee. The Company shall make verbal requests for advances which shall be promptly confirmed in writing (by facsimile notice or other means) on such form reasonably required from time to time by the Bank. Each such request shall be given to the Bank not later than 12:00 p.m. E.S.T. on the Business Day during which the requested advance is to be made. All advances of the Loan may be made by the Bank into the Operating Account. The Bank shall not be required to make any advances into the Operating Account unless such advances are in accordance with this Agreement. The failure of the Bank to require any written requests for an advance or to follow any other procedures set forth in this Agreement shall not in any way affect the treatment of any advance into the Operating Account as an advance of the Loan under this Agreement. 2.4 Credit Account. The Bank shall maintain on its books an account -------------- (the "Credit Account") which shall be debited for advances of the Loan (including all advances into the Operating Account) and other amounts chargeable to the Company with respect thereto (including interest accruing thereon) and credited for all payments received on the Loan. Each month the Bank shall render to the Company a statement of the Company's Credit Account which shall be deemed correct and accepted by and binding upon the Company unless the Bank receives a written statement of the Company's specific exceptions thereto within thirty (30) days from the date of mailing of the written statement to the Company. The statements of the Credit Account and books of account of the Bank shall constitute prima facie evidence of the balance in the Credit Account. 2.5 Letter of Credit Subfeature. As a subfeature under the Loan, Bank --------------------------- may from time to time up to and including the Termination Date, issue letters of credit for the account of Company (each a "Letter of Credit" and collectively, "Letters of Credit"); provided, however, that the form and substance of each Letter of Credit shall be subject to the approval by Bank in its sole discretion and the Company shall pay the Bank a fee of one percent (1%) per annum due upon issuance or renewal of a Letter of Credit; provided further that the aggregate undrawn amount of all outstanding Letters of Credit shall not at any time exceed Five Hundred Thousand Dollars ($500,000.00). Each Letter of Credit shall be issued for a term not to exceed three hundred and sixty (360) days, as designated by Company. The undrawn amount of all Letters of Credit plus any and all amounts paid by Bank in connection with drawings under any Letter of Credit for which the Bank has not been reimbursed shall be reserved under the 12 revolving credit facility established under this Agreement, shall be considered an outstanding Loan under this Agreement for purposes of computing the Maximum Credit Amount. Each draft paid by Bank under a Letter of Credit shall be deemed an advance under the Loan and shall be repaid in accordance with the terms of the Note; provided, however, that if at the time any draft is paid by the Bank, advances are not available under the Loan due to any limitation of borrowing set forth herein or in any other Loan Document or for any other reason (including, without limitation, at any time the then outstanding Loans exceed the Maximum Credit Amount or any time a draft is paid by the Bank after the Termination Date), then the full amount of such draft shall be immediately due and payable, together with interest thereon, from the date such amount is paid by Bank to the date such amount is fully repaid by Borrower, at the Default Rate of interest as set forth in the Note. In such event, Company agrees that Bank, in Bank's sole discretion, may debit the Company's deposit accounts with Bank for the amount of such draft. If the expiry date of any Letter of Credit is later than the Termination Date, then at least fifteen (15) days prior to the Termination Date the Company shall deposit with the Bank funds in the amount of the face amount of such Letters of Credit or such other collateral as Bank may reasonably request. 2.6 Usage Fee. Company will pay hereafter on the last day of each --------- March, June, September and December, during the Commitment Period, commencing September 30, 1997, and shall also pay on the Termination Date, an unused loan fee at a rate of .125 percent per annum of the average daily unused portion of the Loan (the aggregate undrawn amount of all outstanding Letters of Credit shall be considered as used for purposes of calculating this fee) during the prior period. The Company may at any time upon written notice to Bank permanently reduce the amount of the Loan at which time the obligation of the Company to pay an unused loan fee shall thereupon correspondingly be reduced. SECTION 3. GENERAL PROVISIONS APPLICABLE TO THE LOANS 3.1 Optional Prepayments. The Company may at any time and from time -------------------- to time prepay the Loan, in whole or in part, on one Business Days' irrevocable notice to the Bank, specifying the date and amount of prepayment. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein. 3.2 Interest Rates and Payment Dates. (a) The Loan shall bear -------------------------------- interest at a rate per annum equal to the rate set forth in the Note. (b) Upon the occurrence of an Event of Default and the acceleration of the amounts due under the Note, to the extent permitted by applicable law, the rate of interest on the 13 aggregate of the unpaid principal amount of the Note, accrued interest and all other sums payable in connection therewith, shall (as well after as before judgment), at the option of Bank, be increased to an amount equal to two percent (2%) above the then applicable interest rate set forth in the Note, such amount not to exceed the Maximum Rate (as defined in the Note). In addition to the foregoing, to the extent permitted by applicable law, Bank may impose a delinquency charge in an amount not to exceed five percent (5%) of any payment not received within fifteen (15) days of its due date. (c) Interest shall be payable in arrears on each Interest Payment Date, provided that interest accruing pursuant to paragraph (b) of this -------- subsection shall be payable on demand. 3.3 Computation of Interest and Fees. (a) Interest on the Loan shall -------------------------------- be calculated on the basis of a 360-day year for the actual number of days elapsed to the extent permitted by applicable law. To the extent applicable, any change in the interest rate on the Loan resulting from a change in the LIBOR Rate (as defined in the Note) shall become effective as of the opening of business on the day on which such change is announced. (b) All payments (including prepayments) to be made by the Company hereunder and under the Note, whether on account of principal, interest, fees or otherwise, shall be made without set off or counterclaim and shall be made prior to 12:00 Noon, Chattanooga time, on the due date thereof to the Bank, at its offices in Chattanooga, Tennessee, in Dollars and in immediately available funds. If any payment hereunder becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day, and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. SECTION 4. REPRESENTATIONS AND WARRANTIES To induce the Bank to enter into this Agreement and to make the Loan, the Company and each Subsidiary Guarantor hereby represents and warrants to the Bank that: 4.1 Financial Condition. The combined balance sheet of the Company ------------------- and Subsidiary Guarantors as at December 31, 1996, and the related combined statements of income, of equity and of cash flows for the period ended on such date, copies of which have heretofore been furnished to the Bank, are complete and correct and present fairly the combined financial position of the Company and Subsidiary Guarantors as at such date, and the combined results of its operations and cash flows for the period then ended. The unaudited balance sheet of the Individual Guarantor as of December 31, l996, and the related unaudited statements of income and of cash flows for the period ending on 14 such date, copies of which have heretofore been furnished to the Bank, are complete and correct and present fairly the financial position of the Individual Guarantor as at such date. All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved. 4.2 No Change. Since the date of the financial statements referred to --------- in subsection 4.1, there has been no development or event nor any prospective development or event, which has had or could have a Material Adverse Effect and there are no liabilities of the Company, any Subsidiary Guarantor or the Individual Guarantor, fixed or contingent, which are material but are not reflected in such financial statements other than liabilities arising in the ordinary course of business since December 31, 1996. The Company, the Individual Guarantor, and the Subsidiary Guarantors do not have any Indebtedness or Guarantee Obligation other than those which have been disclosed to the Bank in writing. 4.3 Existence; Compliance with Law. The Company and each Subsidiary ------------------------------ Guarantor (a) is duly organized, validly existing and in good standing under the laws of the state of its organization, (b) has the power, authority, and legal right to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification and (d) is in compliance with all Requirements of Law except any noncompliance which in the aggregate would not have a Material Adverse Effect. The Company, each Subsidiary Guarantor, and the Individual Guarantor have complied with all Requirements of Law in the operation of their business and the ownership of their assets (including obtaining licenses and permits necessary for the operation of their business) except any noncompliance which in the aggregate would not have a Material Adverse Effect. 4.4 Power; Authorization; Enforceable Obligations. Company and each --------------------------------------------- Subsidiary Guarantor has the power and authority, and the legal right, to make, deliver and perform this Agreement, the Note, the Guarantee, and the other Loan Documents to which it is a party, as applicable, and to borrow hereunder and has taken all necessary action to authorize the borrowings on the terms and conditions of this Agreement, the Note, the Guarantee, and the other Loan Documents to which it is a party and to authorize the execution, delivery and performance of this Agreement, the Note, the Guarantee, and the other Loan Documents to which it is a party. No consent or authorization of, filing with or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the borrowings hereunder or with respect to the execution, delivery, 15 performance, validity or enforceability of this Agreement, the Note, the Guarantee, or any of the other Loan Documents. This Agreement has been, and each Note, the Guarantee, and other Loan Document will be, duly executed and delivered on behalf of the Company and each Subsidiary Guarantor (as applicable). This Agreement constitutes, and the Note, the Guarantee, and the other Loan Documents when executed and delivered will constitute, legal, valid and binding obligations of the Company, the Individual Guarantor, and the Subsidiary Guarantors (as applicable), enforceable against the Company, the Individual Guarantor, and the Subsidiary Guarantors (as applicable) in accordance with its terms. 4.5 No Legal Bar. The execution, delivery and performance of this ------------ Agreement, the Note and the other Loan Documents, the borrowings hereunder and the use of the proceeds thereof will not violate any Requirement of Law or Contractual Obligation of the Company, the Individual Guarantor, or any Subsidiary Guarantor and will not result in, or require, the creation or imposition of any Lien on any of its or their respective properties or revenues pursuant to any such Requirement of Law or Contractual Obligation. 4.6 No Litigation. No litigation, investigation or proceeding of or ------------- before any arbitrator or Governmental Authority is pending or, to the knowledge of the Company or any Subsidiary Guarantor, threatened by or against the Company, the Individual Guarantor, or any Subsidiary Guarantor, or against any of its or their respective properties or revenues except as set forth on Exhibit 4.6. 4.7 No Default. None of the Company, the Individual Guarantor, or any ---------- Subsidiary Guarantor is in default under or with respect to any of its Contractual Obligations except such defaults which in the aggregate do not have a Material Adverse Effect. No Default or Event of Default has occurred and is Continuing. 4.8 Ownership of Property; Liens. The Company and each Subsidiary ---------------------------- Guarantor has good and marketable title to all its assets and none of such assets is subject to any Lien other than a Permitted Lien. 4.9 Intellectual Property. The Company and each Subsidiary Guarantor --------------------- owns, or is licensed to use, all trademarks, trade names, service names, service marks, copyrights, patents, technology, know-how and processes necessary for the conduct of its business as currently conducted (the "Intellectual Property"). No claim has been asserted and is pending by any Person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property, nor does the Company or any Subsidiary know of any valid basis for any such claim. The use 16 of such Intellectual Property by the Company or any Subsidiary does not infringe on the rights of any Person. Except as set forth on Exhibit 4.9, neither the Company nor any Subsidiary Guarantor has registered any trademark, trade name, service name, service mark, copyright, or patent. 4.10 No Burdensome Restrictions. Except as set forth on Exhibit 4.10, -------------------------- there is no Requirement of Law or Contractual Obligation of the Company or any Subsidiary Guarantor with respect to which the Company or Subsidiary Guarantor is not in compliance, the failure to be in compliance with which would have a Material Adverse Effect. 4.11 Taxes. The Company, the Individual Guarantor, and each ----- subsidiary Guarantor has filed or caused to be filed all tax returns which are required to be filed and have paid all taxes shown to be due and payable on said returns or on any assessments made against any of them or any of their property and all other taxes, fees or other charges imposed on any of them or any of their property by any Governmental Authority (other than any the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on its books); no tax Lien has been filed; and, no claim is being asserted, with respect to any such tax, fee or other charge. 4.12 Federal Regulations. No part of the proceeds of the Loan will be ------------------- used for "purchasing" or "carrying" any "margin stock" within the respective meanings of each of the quoted terms under Regulation U of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in effect or for any purpose which violates the provisions of the Regulations of such Board of Governors. If requested by the Bank, the Company will furnish to the Bank a statement to the foregoing effect in conformity with the requirements of FR Form 0-1 referred to in said Regulation U. 4.13 ERISA. Each Plan which is intended to be qualified under Section ----- 401(a) of the Code as currently in effect has been determined by the Internal Revenue Service to be so qualified, and each trust related to any such Plan is exempt from federal income tax under Section 501(a) of the Code as currently in effect. Neither a Reportable Event nor Prohibited Transaction which could reasonably result in a Material Adverse Effect has occurred with respect to any Plan. Each Plan has complied in all material respects with the applicable provisions of ERISA and the Code. No circumstances exist which constitute reasonable grounds entitling the PBGC to institute proceedings to terminate, or appoint a trustee to administer, any Plan, nor has the PBGC instituted any such proceeding. The present value of all benefit liabilities under each Single Employer Plan maintained by the Company or any Commonly Controlled Entity (based on those assumptions used to fund the Plans) did not, as of the last 17 annual valuation date prior to the date on which this representation is made or deemed made, exceed the value of the assets of such Plan allocable to such benefit liabilities. Neither the Company nor any Commonly Controlled Entity has had a complete or partial withdrawal from any Multiemployer Plan that could reasonably result in a Material Adverse Effect. Neither the Company nor any Commonly Controlled Entity would become subject to any liability under ERISA that could reasonably result in a Material Adverse Effect if the Company or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made. To the knowledge of the Company, no such Multiemployer Plan is in Reorganization or Insolvent. The present value (determined using actuarial and other assumptions which are reasonable in respect of the benefits provided and the employees participating) of the liability of the Company and each Commonly Controlled Entity for post retirement benefits to be provided to their current and former employees under Plans which are welfare benefit plans (as defined in Section 3(1) of ERISA) does not, in the aggregate, exceed the assets under all such Plans allocable to such benefits. 4.14 Investment Company Act; Other Regulations. Neither the Company ----------------------------------------- nor any Subsidiary Guarantor is an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. Neither the Company nor any Subsidiary Guarantor is subject to regulation under any Federal or State statute or regulation which limits its ability to incur Indebtedness. 4.15 Subsidiaries. The Company has no Subsidiaries or Affiliates that ------------ are not natural Persons except for the Subsidiary Guarantors and the other ------ Affiliates and Subsidiaries identified on Exhibit 4.15 (as such Exhibit 4.15 may be updated from time to time in connection with the formation of new Affiliates and Subsidiaries). The Subsidiary Guarantors have no Subsidiaries and have no Affiliates that are not natural Persons except the Company, the other Subsidiary Guarantors and the other Affiliates identified on Exhibit 4.15 (as such Exhibit 4.15 may be updated from time to time in connection with the formation of new Affiliates and Subsidiaries). 4.16 Purpose of Loans. The proceeds of the Loan shall be used by the ---------------- Company and the Subsidiary Guarantors for general working capital, to fund the operations of the Company and the Subsidiary Guarantors (including but not limited to, capitalizing new Subsidiary Guarantors, lending or contributing funds to Subsidiary Guarantors to finance their respective operations, and expanding the existing operations of the Company and the Subsidiary Guarantors in existing and new markets), and to refinance existing senior debt facilities (not including the 18 current debt facilities owing to Sirrom Capital Corporation) and for capital expenditures. The proceeds of the Loan will not be used for any other purpose. 4.17 Environmental Matters. To the best of the Company's and each --------------------- Subsidiary Guarantor's knowledge and except as to matters which individually or in the aggregate are not reasonably expected to result in a Material Adverse Effect, each of the representations and warranties set forth in paragraphs (a) through (e) of this subsection is true and correct with respect to each parcel of real property owned or leased by the Company or any Subsidiary Guarantor (individually, a "Property" and collectively, the "Properties"): (a) The Properties do not contain in, on, or under, including, without limitation, the soil and groundwater thereunder, any Hazardous Materials. (b) The Properties and all operations and facilities at the Properties are in material compliance with all applicable Environmental Laws, and there is no violation of any applicable Environmental Law which will materially interfere with the continued operation of any of the Properties or materially impair the fair saleable value of any thereof. (c) Neither the Company nor any Subsidiary Guarantor has received any notice of material violation or violation of any applicable Environmental Law, the violation of which will have a Material Adverse Effect, with regard to the Properties, nor is the Company or any Subsidiary Guarantor aware that any Governmental Authority is contemplating delivering to the Company any such notice. (d) Hazardous Materials have not been generated, treated, stored, disposed of by the Company or any Subsidiary Guarantor, at, on or under any of the Properties, nor have any Hazardous Materials been transferred by the Company or any Subsidiary Guarantor from the Properties to any other location. (e) There are no governmental, administrative actions or judicial proceedings pending under any Environmental Laws to which the Company is named as a party with respect to the Properties which if adversely determined is likely to have a Material Adverse Effect, nor are there any consent decrees, consent orders or administrative orders outstanding under any applicable Environmental Law with respect to any of the Properties. 4.18 Security Agreement. The provisions of the Security Documents are ------------------ effective to create in favor of the Bank a legal, valid and enforceable security interest in all right, 19 title and interest of the Company and the Subsidiary Guarantors in the Collateral described therein, and upon the filing and recording of the financing statements executed in connection with this Agreement, the Bank shall have a fully perfected security interest in all right, title and interest of the Company and Subsidiary Guarantors in such Collateral in which a security interest may be perfected by the filing of a financing statement superior in right to any Liens which any third Person may have against such Collateral or interests therein (assuming the validity and enforceability of the Intercreditor Agreement entered into between the Bank and Sirrom Capital Corporation) save and except for Permitted Liens. 4.19 Capitalization. As of the date of this Agreement, the -------------- Capital Stock of the Company and each of the Subsidiary Guarantors is owned as set forth in Exhibit 4.19. Neither Company nor any Subsidiary Guarantor is a party to any agreement, whether oral or written, or both, concerning the issuance, repurchase or redemption of any of its Capital Stock except for the Stock Purchase Warrants issued in favor of Sirrom Capital Corporation and the potential forfeiture of restricted stock issued to Steven Scoggins as described on Exhibit 4.19. All of the Capital Stock of the Company and each Subsidiary Guarantor has been validly and properly issued in accordance with all Requirements of Law including, without limitation, the "blue sky" laws of all applicable state and the federal securities laws. 4.20 Solvency. The Company and the Subsidiary Guarantors on a -------- consolidated basis are and after the consummation of the transactions described in this Agreement will be solvent, able to pay their debts as they become due, and have and will have sufficient capital to carry on their businesses. The Company and the Subsidiary Guarantors now own property having a value on a consolidated basis both of fair valuation and at present fair salable value greater than the amount required to pay the Company's and the Subsidiary Guarantors' (as applicable) Indebtedness (including all Indebtedness contemplated by this Agreement). The Company and the Subsidiary Guarantors on a consolidated basis will not be rendered insolvent by the execution and delivery of this Agreement or any of the other Loan Documents or by the transactions contemplated hereby or thereby. 4.21 Fees; Commissions. The Company and Subsidiary Guarantors ----------------- have not agreed to pay any finder's fee, commissions, origination fee or other fee or charge to any Person or entity other than Bank with respect to the transactions contemplated by this Agreement. 4.22 Truth of Representations. Neither this Agreement nor any ------------------------ of the other Loan Documents, nor any other agreements, instruments, reports, schedules, certificates or documents heretofore simultaneously with the execution of this Agreement 20 delivered to Bank in connection with the negotiation and the making of the Loans contains any misrepresentation or untrue statement of a material fact or omits to state any material fact necessary to make this Agreement, the other Loan Documents, and such other agreements, instruments, reports, schedules, certificates and documents not misleading. SECTION 5. CONDITIONS PRECEDENT 5.1 Conditions to Initial Loans. The agreement of the Bank to --------------------------- make the Loan is subject to the satisfaction, immediately prior to or concurrently with the making of such Loan on the Closing Date, of the following conditions precedent: (a) Loan Documents. The Bank shall have received (i) this -------------- Agreement, executed and delivered by a duly authorized officer of the Company and each Subsidiary Guarantor (as applicable), (ii) the Note executed by a duly authorized officer of the Company, (iii) the Security Agreements and related UCC-l financing statements, executed and delivered by a duly authorized officer of the Company and each Subsidiary Guarantor (as applicable), (iv) the Guarantee, executed and delivered by the Individual Guarantor and each Subsidiary Guarantor (as applicable), and (v) all of the other Loan Documents executed by a duly authorized officer of the Company or Subsidiary Guarantor (as applicable) and by the Individual Guarantor where required. (b) Corporate Proceedings. The Bank shall have received: (i) --------------------- a copy of the resolutions, in form and substance satisfactory to the Bank, of the Board of Directors of the Company and the Board of Directors or Members, as applicable of each Subsidiary Guarantor authorizing (a) the execution, delivery and performance of this Agreement, the Note and the other Loan Documents, and (b) the borrowings contemplated hereunder, certified by the Secretary of the Company and appropriate officer of each Subsidiary Guarantor as of the Closing Date, which certificate shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded and shall be in form and substance satisfactory to the Bank; and (ii) an incumbency certificate concerning the Company's and each Subsidiary Guarantor's officers certified by the Secretary of the Company and appropriate officer of each Subsidiary Guarantor in form and substance satisfactory to the Bank. (c) Corporate Documents. The Bank shall have received true ------------------- and complete copies of the certificate of incorporation of the Company and certificate of incorporation/articles of organization, as amended, of each Subsidiary Guarantor, certified as of the Closing Date by the Secretary of State as a complete and correct copy thereof, a certificate of 21 existence regarding the Company and each Subsidiary Guarantor from the Secretary of State, and bylaws of the Company and bylaws/operating agreement of each Subsidiary Guarantor, certified as of the Closing Date as a complete and correct copy thereof by the Secretary of the Company and appropriate officer of the Subsidiary Guarantor. (d) No Violation. The consummation of the transactions ------------ contemplated hereby shall not contravene, violate or conflict with, nor involve the Bank, Company, any Subsidiary Guarantor, or the Individual Guarantor in any violation of, any Requirement of Law. (e) Officer's Certificate. The Bank shall have received a --------------------- certificate of a Responsible Officer of the Company and an appropriate officer of each Subsidiary Guarantor stating that all of the representations and warranties are true and correct in all material respects as of the Closing Date. (f) Legal Opinions. The Bank shall have received the executed -------------- legal opinion of Alston & Bird LLP, counsel to the Company and the Subsidiary Guarantors in the form and substance satisfactory to Bank. (g) Filings, Registrations and Recordings. Any documents, ------------------------------------- including, without limitation, financing statements, required to be filed, and any other actions required to be taken, under or in connection with any of the Security Documents in order to create, in favor of the Bank, a perfected first priority security interest in the Collateral, shall have been properly filed and the Bank shall have received evidence satisfactory to it of each such filing, registration, recordation or other action and satisfactory evidence of the payment of any necessary fee, tax or expense relating thereto. (h) Lien Releases. The Bank shall have received evidence ------------- satisfactory to it that UCC-3 termination statements and other Lien release documentation shall have been duly executed and properly filed or delivered to the Bank for filing on terms and conditions acceptable to the Bank, and all other necessary actions shall have been taken, to the extent necessary to effect the complete and irrevocable release of all Liens on the assets of the Company or any Subsidiary Guarantor except for Permitted Liens. (i) Lien Searches. The Bank shall have received the results ------------- of a recent search by a Person satisfactory to the Bank of the Uniform Commercial Code filings and tax and judgment liens which may have been filed with respect to the 22 personal or real property of the Company and each Subsidiary Guarantor. 23 (j) Insurance. The Bank shall have received such --------- certificates, endorsements and other evidence satisfactory to it that the Company and each Subsidiary Guarantor has obtained the insurance policies required by subsection 6.5 and by the Security Documents all in form and substance satisfactory to the Bank. (k) Financial Statements. The Bank shall have received -------------------- consolidated financial statements of the Company and Subsidiary Guarantors and financial statements of the Individual Guarantor which must be satisfactory in form and substance to the Bank. (1) Intercreditor Agreements. The Bank shall have received ------------------------ the Intercreditor Agreements which shall be in form and substance satisfactory to the Bank. (m) Landlord's Waiver. The Bank shall have received the ----------------- Landlord's Waiver which shall be in form and substance satisfactory to the Bank, and a certified copy of the leases relating to the Landlord's Waiver. (n) Miscellaneous. The Bank shall have received such other ------------- approvals, opinions, documents and agreements as Bank shall reasonably request all in form and substance satisfactory to Bank. 5.2 Conditions to All Loans. The agreement of the Bank to ----------------------- make any advance of the Loan requested to be made by it on any date is subject to the satisfaction of the following conditions precedent: (a) Representations and Warranties. Each of the ------------------------------ representations and warranties made by the Company, any Subsidiary Guarantor, or Individual Guarantor in or pursuant to the Loan Documents shall be true and correct in all material respects on and as of such date as if made on and as of such date, except any and all representations made as of a specified date, and by this subsection, the Company and each Subsidiary Guarantor represents and warrants that on the date of each Loan such representations and warranties shall be true and correct in all material respects. (b) No Default. No Default or Event of Default shall have ---------- occurred and be continuing on such date or after giving effect to the advance requested to be made on such date. (c) Additional Documents. The Bank shall have received each -------------------- additional document, instrument, legal opinion or item of information reasonably requested by it. 24 (d) Additional Matters. All corporate and other proceedings, and all ------------------ documents, instruments and other legal matters in connection with the transactions contemplated by this Agreement, and the other Loan Documents shall be satisfactory in form and substance to the Bank, and the Bank shall have received such other documents and legal opinions in respect of any aspect or consequence of the transactions contemplated hereby or thereby as it shall reasonably request. Each borrowing by the Company hereunder shall constitute a representation and warranty by the Company and each Subsidiary Guarantor as of the date of such Loan that the conditions contained in this subsection 5.2 have been satisfied. SECTION 6. AFFIRMATIVE COVENANTS The Company and each Subsidiary Guarantor hereby agrees that, so long as the Revolving Credit Commitment remains in effect, any Note (or Letter of Credit) remains outstanding and unpaid or any other Indebtedness is owing to the Bank hereunder or under any other Loan Document, the Company and each Subsidiary Guarantor shall: 6.1 Financial Statements. Furnish to the Bank: -------------------- (a) as soon as available, but in any event within one hundred twenty (120) days after the end of each fiscal year of the Company, a copy of the consolidated balance sheet of the Company and the Subsidiary Guarantors as at the end of such year and the related consolidated statements of income, of equity and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year, reported on without a "going concern" or like qualification or exception, or qualification arising out of the scope of the audit, accompanied by an audit report including an unqualified opinion on such statements acceptable to the Bank by an independent certified public accountant selected by the Company and acceptable to the Bank; and (b) as soon as available, but in any event not later than forty-five (45) days after the end of each month, the consolidated balance sheet of the Company and the Subsidiary Guarantors as at the end of such month and the related unaudited statements of income and retained earnings and of cash flows of the Company and the Subsidiary Guarantors for such month and the portion of the fiscal year through the end of such month and for the twelve month period ending at the end of such month (i.e., rolling twelve month), setting forth in each case in comparative form the figures for the previous year, certified and signed by a Responsible Officer as being fairly stated in all material respects. 25 (c) As soon as available, but in any event not later than fifteen (15) days after the end of each month, a monthly volume and status report to include the total amount of checks then held by the Company and Subsidiary Guarantors, the bad debt reserve of the Company and the Subsidiary Guarantors, the delinquencies, and aged recency and contractual basis reports, all of which shall be certified and signed by a Responsible Officer as being fairly stated in all material respects; and (d) as soon as available, but in any event not later than one hundred twenty (120) days after the end of each calendar year, the unaudited balance sheet of the Individual Guarantor as at the end of such year and related statements as reasonably requested by Bank certified and signed by the Guarantor as being fairly stated in all material respects all in such form as Bank may from time to time request; all such financial statements to be complete and correct in all material respects and to be prepared in reasonable detail and in the case of items (a), (b), and (d) of this Section 6.1, in accordance with GAAP applied consistently throughout the periods reflected therein and with prior periods. 6.2 Certificates; Other Information. Furnish to Bank: ------------------------------- (a) concurrently with the delivery of the financial statements referred to in subsection 6.1(a), a certificate of the independent certified public accountants reporting on such financial statements stating that in making the examination necessary therefor no knowledge was obtained of any Default or Event of Default, except as specified in such certificate; (b) concurrently with the delivery of the financial statements referred to in subsections 6.1(a) and with delivery of the monthly statements referred to in subsection 6.1(b), a certificate of a Responsible Officer stating that the Company and Subsidiary Guarantors during such period have observed or performed all of the covenants and other agreements, and satisfied every condition, contained in this Agreement and in the Note and the other Loan Documents to which it is a party to be observed, performed or satisfied by it, and that no Default or Event of Default has occurred except as specified in such certificate, which certificates shall also include a computation of all quantitative covenants (including, without limitation, the computation of the Leverage Ratio for purposes of adjusting the interest rate under the Note); (c) not later than thirty (30) days prior to the end of each fiscal year of the Company and Subsidiary Guarantors, a copy of the projections by the Company of the operating 26 budget and cash flow budget of the Company and Subsidiary Guarantors for the succeeding fiscal year, such projections to be accompanied by a certificate of a Responsible Officer to the effect that such officer has no reason to believe they are incorrect or misleading in any material respect and are based on reasonable assumptions; (d) promptly, such additional financial and other information as Bank may from time to time reasonably request. 6.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or ---------------------- before maturity or before they become delinquent, as the case may be, all its obligations and Indebtedness of whatever nature (including, without limitation, the obligations and Indebtedness under the Loan Documents and all taxes and other charges levied by any Governmental Authority), except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the Company. 6.4 Conduct of Business, Maintenance of Existence and Compliance with ----------------------------------------------------------------- Law. Continue to engage in business of the same general type as now conducted by - --- it and preserve, renew and keep in full force and effect its corporate (organizational) existence, good standing and qualification in all jurisdictions where such qualification is required, and take all reasonable action to maintain all rights, privileges, franchises and Intellectual Property necessary or desirable in the normal conduct of its business; comply with all Contractual Obligations and Requirements of Law except for noncompliances which in the aggregate do not have a Material Adverse Effect. If Company or any Subsidiary Guarantor begins using any new trademark, trade name, service name, service mark, copyright or patent then Company and the Subsidiary Guarantor shall provide Bank prompt notice of that use and execute all documents and take such other actions as may be requested by Bank to perfect Bank's security interest therein. 6.5 Maintenance of Property; Insurance. Keep all assets useful and ---------------------------------- necessary in its business in good working order and condition; maintain with financially sound and reputable insurance companies insurance in at least such amounts and against at least such risks (but including in any event public liability, product liability, fire and extended coverage, worker's compensation, and business interruption) as are usually insured against in the same general area by companies engaged in the same or a similar business and in accordance with the Security Documents and as otherwise from time to time reasonably requested by Bank; and furnish to the Bank, upon written request, full information as to the insurance carried. 27 6.6 Inspection of Property; Books and Records; Discussions. ------------- ---------------------------------------- Keep proper books of records and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities, and permit representatives of the Bank to visit and inspect any of its properties and Collateral (including all checks and other instruments then held by it) and examine and make abstracts from any of its books and records at any reasonable time and as often as may reasonably be desired and to discuss the business, operations, properties and financial and other condition of the Company and Subsidiary Guarantors with officers and employees of the Company and Subsidiary Guarantors and with their independent certified public accountants. 6.7 Notices. Promptly give notice to the Bank of: ------- (a) the occurrence of any Default or Event of Default; (b) any (i) default or event of default under any Contractual Obligation of the Company or any Subsidiary Guarantor which may have a Material Adverse Effect or (ii) litigation, investigation or proceeding which may exist at any time between the Company or any Subsidiary Guarantor and any Governmental Authority which may have a Material Adverse Effect; (c) any litigation or proceeding affecting the Company, the Individual Guarantor, or any Subsidiary Guarantor in which the amount involved is Fifty Thousand Dollars ($50,000) or more or in which injunctive or similar relief is sought; (d) the following events, as soon as possible and in any event within thirty (30) days after the Company or any Subsidiary Guarantor knows or has reason to know thereof: (i) the occurrence or expected occurrence of any Reportable Event with respect to any Plan, or any withdrawal from, or the termination, Reorganization or Insolvency of any Multiemployer Plan or (ii) the institution of proceedings or the taking of any other action by the PBGC or the Company or any Commonly Controlled Entity or any Multiemployer Plan with respect to the withdrawal from, or the terminating, Reorganization or Insolvency of, any Plan; (e) a material adverse change in the business, operations, assets or position (financial or otherwise) of the Company, Individual Guarantor or any Subsidiary Guarantor; and 28 (f) any default by Company, Individual Guarantor or any Subsidiary under any other Indebtedness including, without limitation, any Indebtedness owing to any other party to the Intercreditor Agreements. Each notice pursuant to this subsection shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action the Company, Individual Guarantor or Subsidiary Guarantor proposes to take with respect thereto. 6.8 Environmental Laws. ------------------ (a) Comply with, and insure material compliance by all tenants and subtenants, if any, with, all applicable Environmental Laws and obtain and comply with and maintain, and insure that all tenants and subtenants obtain and comply with and maintain, any and all licenses, registrations or permits required by applicable Environmental Laws; (b) conduct all investigations, studies, sampling and testing, and all remedial, removal and other actions required of the Company or any Subsidiary Guarantor under applicable Environmental Laws and comply with all lawful orders against the Company or any Subsidiary Guarantor of all Governmental Authorities respecting applicable Environmental Laws; and (c) defend, indemnify and hold harmless the Bank and its employees, agents, officers and directors, from and against any claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature known or unknown, contingent or otherwise, arising out of, or in any way relating to the material violation of or noncompliance by the Company or any Subsidiary Guarantor with any applicable Environmental Laws or the presence of any Hazardous Wastes on any property owned or operated by Company or any Subsidiary Guarantor, or any orders, requirements or demands of Governmental Authorities related thereto, including, without limitation, reasonable attorney's and consultant's fees, investigation and laboratory fees, court costs and litigation expenses. The covenants contained in this Section shall survive the repayment of the Indebtedness hereunder and the termination of this Agreement. 6.9 Accounts. Maintain the Operating Account at Bank into which -------- advances of the Loan may be made in accordance with Section 2.3. 6.10 ERISA. Fund all Plans in accordance with ERISA and not permit, ----- with respect to a Single Employer Plan, any unfunded pension liability or Reportable Event to occur that 29 could reasonably result in a Material Adverse Effect, and cause each Plan (other than a Multiemployer Plan) to comply in all material respects with the provisions of ERISA and the Code and all other Requirements of Law and the respective requirements of the governing documents for such Plans. With respect to any Plan (other than a Multiemployer Plan), neither Company, any Commonly Controlled Entity, nor any such Plan shall engage in any Prohibited Transaction, incur any "accumulated funding deficiency" (as defined in ERISA) whether or not waived, under fund or terminate any Plan in an manner which could result in the imposition of a Lien on any assets of the Company or any Commonly Controlled Entity under ERISA, or take, or permit to be taken, any act which would constitute a violation of Section 4.13 except for such actions, omissions or failures that would not in the aggregate reasonably result in a Material Adverse Effect. SECTION 7. NEGATIVE COVENANTS The Company and each Subsidiary Guarantor hereby agrees that, so long as the Revolving Credit Commitment remains in effect, any Note (or Letter of Credit) remains outstanding and unpaid or any other Indebtedness is owing to the Bank hereunder or under any other Loan Document, the Company and each Subsidiary Guarantor shall not: 7.1 Financial Condition Covenants ----------------------------- (a) Maintenance of Tangible Net Worth. Permit Tangible Net Worth --------------------------------- (measured at the end of each fiscal quarter beginning with the quarter ended December 31, 1996) of Company and Subsidiary Guarantors on a consolidated basis to be less than the sum of: $1,750,000 (giving effect to the 1996 tax allowance) plus seventy-five percent (75%) of cumulative ---- Corporate Net Income (after allowance for shareholders tax liability if S corporation election is made and after allowance for member tax liability with respect to limited liability companies including allowance for such shareholder and member tax liabilities for the period ending December 31, 1996) for each fiscal quarter beginning with the quarter ending March 31, 1997, plus any amounts received in connection with the issuance of any ---- Capital Stock. (b) Leverage Ratio. Permit the Leverage Ratio to be greater than the -------------- amount set opposite such period below: 30 Period Ratio ------ ----- Closing Date through Fiscal Year Ending December 31, 1997 2.8 to 1 January 1, 1998 through June 30, 1998 2.5 to 1 For each period after June 30, 1998 2.0 to 1 The Leverage Ratio shall be measured at the end of each fiscal quarter on a rolling four-quarter basis. (c) Fixed Charges Coverage Ratio. Permit Fixed Charges Coverage of ---------------------------- Company and Subsidiary Guarantors on a consolidated basis to be less than or equal to the ratio set forth opposite such period below: Period Ratio ------ ----- Closing Date through Fiscal Year Ending December 31, 1997 1.25 to 1 Fiscal Year Ending December 31, 1998 1.35 to 1 For each period after December 31, 1998 1.4 to 1 The Fixed Charges Coverage ratio shall be measured at the end of each fiscal quarter on a rolling four-quarter basis. 7.2 Limitation on Indebtedness. Create, incur, assume or suffer to -------------------------- exist any Indebtedness, except: (i) Indebtedness in respect of the Loan, the Note and other obligations of the Company under this Agreement and the other Loan Documents; (ii) accounts payable for goods or services which are incurred in the ordinary course of business; (iii) Indebtedness permitted under the Intercreditor Agreements to the extent such Indebtedness is subordinated to the Indebtedness owing to the Bank pursuant to the Intercreditor Agreements; (iv) Indebtedness relating to purchase money security interests to the extent permitted under Subsection 7.3 below; and (v) Indebtedness from a Subsidiary Guarantor to the Company or between or among Subsidiary Guarantors. 7.3 Limitation on Liens. Create, incur, assume or suffer to exist any ------------------- Lien upon any of its property, assets or revenues (including, without limitation, the Collateral), whether now owned or hereafter acquired, except for (i) Liens for taxes 31 not yet due or which are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained -------- on the books of the Company or Subsidiary Guarantor (as applicable) in conformity with GAAP, (ii) Liens in favor of the Bank under the Loan Documents, (iii) Liens in favor of Sirrom Capital Corporation to the extent such Liens are subordinated to the Liens in favor of the Bank pursuant to the provisions of the Intercreditor Agreements, (iv) Liens for purchase money security interests on the assets financed with such purchase money loans so long as the aggregate amount of such purchase money loans does not exceed $150,000 per calendar year, and (v) mechanics' and materialmens' Liens for amounts payable by the Company or a Subsidiary Guarantor which are not yet due or which are being contested in good faith by appropriate proceedings, provided that adequate reserves with -------- respect thereto are maintained on the books of the Company or Subsidiary Guarantor (as applicable) in conformity with GAAP ("Permitted Liens"). 7.4 Limitation on Guarantee Obligations. Create, incur, assume or ----------------------------------- suffer to exist any Guarantee Obligation other than the Guarantee Obligations of the Subsidiary Guarantors in favor of the Bank and in favor of Sirrom Capital Corporation so long as such Guarantee Obligations are subordinated to the Indebtedness owing to the Bank in accordance with the provisions of the Intercreditor Agreements. 7.5 Limitations on Fundamental Changes. Enter into any merger, ---------------------------------- consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer or otherwise dispose of, all or substantially all of its property, business or assets, or make any material change in its present method of conducting business. Neither Company nor any Subsidiary Guarantor shall have any Affiliates (other than Creditors' Adjustment Bureau, Inc.) or subsidiaries which are engaged in the check cashing or deferred deposit business or operate with the trade style "Check into Cash" or any similar trade style other than Company and the Subsidiary Guarantors (provided that Company may form such Subsidiaries after the date of this Agreement if such Subsidiaries become Subsidiary Guarantors before commencing active operation of their respective businesses). All new Subsidiary Guarantors shall join in the Guarantee and shall execute an appropriate Security Agreement and other Security Documents, and the Company shall execute appropriate stock/membership pledge agreements relating to the Capital Stock of all new Subsidiary Guarantors. Neither Company nor any Subsidiary Guarantor shall begin operations in any new market or other territory without providing Bank prior written notice of the intended operations and providing Bank all UCC-l Financing Statements and other documents necessary to perfect Bank's interest in the Collateral in or with respect to the new market or territory. 32 7.6 Limitation on Sale of Assets. Convey, sell, lease, assign, ---------------------------- transfer or otherwise dispose of any of its property, business or assets (including, without limitation, receivables and leasehold interests and including, without limitation, the Collateral), whether now owned or hereafter acquired, except that any Subsidiary Guarantor may enter into any such transaction with the Company or any other Subsidiary Guarantor. 7.7 Limitation on Dividends and Stock Redemption. Declare or pay any -------------------------------------------- dividend (other than dividends payable solely in common stock) on, make any other distribution in respect of, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any Capital Stock of the Company or any Subsidiary Guarantor or any warrants or options to purchase any such Capital Stock, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of the Company or any Subsidiary Guarantor except that (i) any Subsidiary Guarantor which is a limited liability company may make distributions to its members in the amount necessary for those members to pay income taxes on amounts attributable to the operations of the Subsidiary Guarantor; (ii) any Subsidiary Guarantor may make distributions to any other Subsidiary Guarantor or the Company, as the case may be; and (iii) the Company, as appropriate and required, may redeem the shares of restricted stock issued to Steven Scoggins in accordance with the terms described on Exhibit 4.19. 7.8 Intentionally omitted. --------------------- 7.9 Limitation on Investments, Loans and Advances. Make any advance, --------------------------------------------- loan, extension of credit or capital contribution to, or purchase any stock, bonds, notes, debentures or other securities of or any assets constituting a business unit of, or make any other investment in, any Person, except: (a) advances of cash in the ordinary course of business; and (b) investments in and loans to (i) the Subsidiary Guarantors by the Company or any other Subsidiary Guarantor or (ii) the Company by any Subsidiary Guarantor (provided that the Company or the Subsidiary Guarantor (as the case may be) making such loan or advance shall, if such loan or advance is evidenced by an instrument or other document, deliver such document or instrument to the Bank with all necessary endorsements as additional Collateral); and (c) investments in Cash Equivalents. 33 7.10 Transactions with Affiliates. Enter into any transaction, ---------------------------- including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliate or Subsidiary unless such transaction is otherwise not prohibited under this Agreement, is in the ordinary course of the Company's or Subsidiary Guarantor's business and is upon fair and reasonable terms no less favorable to the Company or the Subsidiary Guarantor, as the case may be, than it would obtain in a comparable arm's length transaction with a Person not an Affiliate or Subsidiary. Without limiting the generality of the foregoing, neither the Company nor any Subsidiary Guarantor will transfer any funds to any other Affiliate or Subsidiary except that the Company and the Subsidiary Guarantors may, in the ordinary course of business, transfer funds among each other and the Company and Subsidiary Guarantors may enter into transactions with other Affiliates and Subsidiaries if such transactions are not prohibited by the preceding sentence, Section 7.2, or any other provision of this Agreement or any other Loan Document. 7.11 Sale and Leaseback. Enter into any arrangement with any Person ------------------ providing for the leasing by the Company or the Subsidiary Guarantor of real or personal property which has been or is to be sold or transferred by the Company or the Subsidiary Guarantor to such Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of the Company or the Subsidiary Guarantor. 7.12 Fiscal Year. Permit the fiscal year of the Company or any ----------- Subsidiary Guarantor to be any period other than January 1 through December 31. 7.13 Limitation on Negative Pledge Clauses. Enter into any agreement ------------------------------------- with any Person other than the Bank and the parties to the Intercreditor Agreements which prohibits or limits the ability of the Company or any Subsidiary Guarantor to create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired. 7.14 Remuneration. Pay compensation, directly or indirectly, whether ------------ by way of salaries, bonuses, participations in pension or profit sharing plans, fees under management contracts or professional services, to any of its officers, directors, stockholders, members or owners, or other management and key employees, or to any of their family members or relatives in amounts which are in excess of the aggregate amount agreed to by Bank from time to time provided, however, that Bank agrees that performance bonuses and similar payments to management and key employees in an amount not exceeding $400,000 per year on an aggregate basis (i.e., from all Subsidiary Guarantors and the Company) may be made. 34 SECTION 8. EVENTS OF DEFAULT 8.1 Events of Default. If any of the following events shall occur: ----------------- (a) The Company, the Individual Guarantor or any Subsidiary Guarantor shall fail to pay any principal, interest or other sum when due under any Note or any of the other Loan Documents (provided, however, that the Company will be given the opportunity to cure the nonpayment of interest under the Note within fifteen (15) days of Default two (2) times during any twelve (12) month period); or (b) Any representation or warranty made or deemed made by the Company, the Individual Guarantor, or any Subsidiary Guarantor herein or in any other Loan Document or which is contained in any certificate, document or financial or other statement furnished at any time under or in connection with this Agreement shall prove to have been incorrect in any material respect on or as of the date made or deemed made; or (c) The Company, the Individual Guarantor, or any Subsidiary Guarantor shall default in the observance or performance of any covenant, term or agreement contained in this Agreement or any of the other Loan Documents (provided that the Company shall have forty-five (45) days after it knows or through the exercise of reasonable diligence should have known of a violation of a financial covenant in Section 7.1 to cure that Default if curable and the Company shall have thirty (30) days after it knows or through the exercise of reasonable diligence should have known of a violation of any other term or agreement to cure that Default if curable, if the violation was not intentionally caused by the Company or a Subsidiary Guarantor, and if any delay resulting from the application of the cure period will not have a Material Adverse Effect); (d) The Company, the Individual Guarantor, or any Subsidiary Guarantor shall (i) default in any payment of principal of or interest on any Indebtedness (including, without limitation, any Indebtedness owing to Bank, any of the parties to the Intercreditor Agreements, or any other Person) or in the payment of any Guarantee Obligation, beyond the period of grace (not to exceed 45 days), if any, provided in the instrument or agreement under which such Indebtedness or Guarantee Obligation was created; or (ii) default in the observance or performance of any other covenant, term or agreement relating to any such Indebtedness or Guarantee Obligation or contained in any instrument or agreement evidencing, securing or relating thereto (subject to any applicable cure periods contained therein), or any other event shall occur or condition exist, 35 the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Guarantee Obligation (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity or such Guarantee Obligation to become payable unless the default caused by the failure to observe or perform that covenant, term or agreement or such other event or condition has been unconditionally waived in writing by the holders of such of Indebtedness; or (e) (i) The Company, the Individual Guarantor, or any Subsidiary Guarantor shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its assets, or the Company, the Individual Guarantor, or any Subsidiary Guarantor shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against the Company, the Individual Guarantor, or any Subsidiary Guarantor any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 30 days; or (iii) there shall be commenced against the Company, the Individual Guarantor, or any Subsidiary Guarantor any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within 30 days from the entry thereof; or (iv) the Company, the Individual Guarantor, or any Subsidiary Guarantor shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) the Company, the Individual Guarantor, or any Subsidiary Guarantor shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or (f) (i) The Company or any of its Affiliates or Subsidiaries shall engage in any "prohibited transaction" 36 (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is, in the reasonable opinion of the Bank, likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the Company or any Commonly Controlled Entity or Subsidiary shall, or in the reasonable opinion of the Bank is likely to, incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan or (vi) any other adverse event or condition shall occur or exist, with respect to a Plan; and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, could subject the Company or any Subsidiary Guarantor to any tax, penalty or other liabilities that could reasonably result in a Material Adverse Effect; or (g) One or more final judgments or decrees shall be entered against the Company, the Individual Guarantor, or any Subsidiary Guarantor involving in the aggregate a liability (not paid or fully covered by insurance) of Fifty Thousand Dollars ($50,000.00) or more and all such judgments and decrees shall remain unsatisfied for 30 days from the entry thereof or if any execution or similar process is issued with respect to any such judgment or decree; or (h) A Change in Control shall occur; or (i) The Security Documents shall at any time cease to create a valid and perfected first priority Lien on the Collateral subject only to Permitted Liens; or (j) The Guarantee (or any of them) shall at any time cease to be in full force and affect or shall be declared null and void, or the validity or enforceability thereof shall be contested by the Individual Guarantor or any Subsidiary Guarantor, or the Individual Guarantor or any Subsidiary Guarantor shall deny it has any further liability or obligation thereunder or shall fail to perform its obligations thereunder or if the Individual Guarantor shall die or become incompetent; or (k) Any default or event of default occurs under any of the other Loan Documents (including, without limitation 37 any default under the Intercreditor Agreements by any party thereto); (l) If in the reasonable judgement of Bank a materially adverse change in the business, operations, assets, or position (financial or otherwise) of the Company and the Subsidiary Guarantors taken as a whole, or of the Individual Guarantor, has occurred or the occurrence of any other condition which, in Bank's reasonable determination, constitutes an impairment of the Company's and the Subsidiary Guarantor's ability (taken as a whole) or the Individual Guarantor's ability to perform its obligations under the Loan Documents, the foregoing including, without limitation, any materially adverse decision in the litigation described in Exhibit 4.6. then, and in any such event (after the expiration of any applicable cure period) (A) if such event is an Event of Default specified in paragraph (e) above automatically the Revolving Credit Commitment shall immediately terminate and the Loan hereunder (with accrued interest thereon) and all other amounts owing under this Agreement, the Note and all other Loan Documents shall immediately become due and payable, and (B) if such event is any other Event of Default, the following actions (or any of them) may be taken: (i) the Bank may in its sole discretion and without notice to the Company or any other Person declare the Revolving Credit Commitment to be terminated forthwith, whereupon the Revolving Credit Commitment shall immediately terminate; (ii) the Bank may in its sole discretion and without notice to the Company or any other Person declare the Loan hereunder (with accrued interest thereon) and all other amounts owing under this Agreement, the Note and the other Loan Documents to be immediately due and payable, whereupon the same shall immediately become due and payable. Except as expressly provided in this Agreement, presentment, demand, protest and all notices of any kind are hereby expressly waived. In addition to the remedies set forth above, upon the occurrence of any Event of Default the Bank may immediately exercise any and all rights and remedies possessed by it pursuant to the terms of the Security Documents and the other Loan Documents, all of the rights and remedies of secured party under the UCC, and all other rights and remedies which the Bank may now or hereafter possess at law, in equity or by statute. In addition to all other remedies, upon the occurrence of any Event of Default, the Company and each Subsidiary Guarantor shall immediately deliver to the Bank all checks, drafts and other instruments and Collateral then in possession of the Company or any Subsidiary Guarantor with all endorsements requested by Bank. SECTION 9. MISCELLANEOUS 9.1 Amendments and Waivers. Neither this Agreement, any Note, any ---------------------- other Loan Document, nor any terms hereof of 38 thereof may be amended, supplemented, modified or waived except in writing signed by the party sought to be bound thereby. No such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon. 9.2 Notices. All notices, requests and demands to or upon the ------- respective parties hereto to be effective shall be in writing (including by telecopy, telegraph or telex), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered by hand, three days after being deposited in the mail, postage prepaid, when deposited with a national overnight carrier service, or, in the case of telecopy notice, when received, addressed as follows, or to such other address as may be hereafter notified by the respective parties hereto and any future holders of the Note: The Company and Subsidiary Guarantors: Check Into Cash, Inc. 205 Second Street, N.W. Cleveland, Tennessee 37364 Attention: Chief Financial Officer Facsimile: 423/476-9200 The Bank: NationsBank of Tennessee, N.A. One Republic Centre 633 Chestnut Street Chattanooga, Tennessee 37450 Attention: Lawrence Richey Senior Vice President Facsimile: 423/755-0689 9.3 No Waiver; Cumulative Remedies. No failure to exercise and no ------------------------------ delay in exercising, on the part of the Bank, any right, remedy, power or privilege hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges provided herein and in the other Loan Documents are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law, in equity or by statute. 9.4 Survival of Representations and Warranties. All representations ------------------------------------------ and warranties made hereunder, under any other Loan Document, and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement, the Note and the other Loan Documents. 9.5 Payment of Expenses and Taxes. The Company and each Subsidiary ----------------------------- Guarantor jointly and severally agrees (a) to pay or reimburse the Bank for all its reasonable out-of-pocket costs 39 and expenses incurred in connection with the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement and the Note and the other Loan Documents and any other documents prepared in connection herewith or therewith, and the consummation of the transactions contemplated hereby and thereby, including, without limitation, the reasonable fees and disbursements of counsel to the Bank, (b) to pay or reimburse the Bank for all its reasonable costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the Note, the other Loan Documents and any such other documents, including, without limitation, the reasonable fees and disbursements of counsel to the Bank, and (c) to pay, indemnify, and hold the Bank harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the Note, the other Loan Documents and any such other documents, and (d) to pay, indemnify, and hold the Bank harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement, the Note, the other Loan Documents and any such other documents. 9.6 Successors and Assigns; Participations. This Agreement, the Note -------------------------------------- and all the other Loan Documents may be endorsed, assigned and/or transferred in whole or in part by Bank, and any such holder and/or assignee of the same shall succeed to and be possessed of the rights and powers of the Bank under all of the same to the extent transferred and assigned. Bank may grant participations in all or any portion of its interest in this Agreement and the other Loan Documents to any other Person ("Participants"). In the event of any sale or other transfer or assignment by the Bank of any interest in this Agreement or the other Loan Documents or the participation of this Agreement or any of the other Loan Documents to any Participant, the Bank shall remain responsible for the Revolving Credit Commitment in accordance with the terms of this Agreement. The Company and each Subsidiary Guarantor authorizes Bank to disclose to any prospective Participant and any prospective successor or assignee of Bank any and all financial information in the Bank's possession concerning the Company, the Individual Guarantor and the Subsidiary Guarantors which has been delivered to the Bank by or on behalf of the Company pursuant to this Agreement or which has been delivered to the Bank by or on behalf of the Company in connection with such Bank's credit evaluation of the Company, Individual Guarantor, or any Subsidiary Guarantor prior to becoming a party to this Agreement. Neither Company nor 40 any Subsidiary Guarantor may assign any of its rights or delegate any of its duties under this Agreement or any of the other Loan Documents without the prior written consent of the Bank. 9.7 Adjustments; Set-off. In addition to any rights and remedies of -------------------- the Bank provided by law, the Bank, its successors and assigns, and each Participant shall have the right, without prior notice to the Company or any Subsidiary Guarantor, any such notice being expressly waived by the Company and Subsidiary Guarantors to the extent permitted by applicable law, upon the occurrence of any Event of Default to set-off and appropriate and apply against such amount then owing any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by the Bank to or for the credit or the account of the Company or any Subsidiary Guarantor. 9.8 Counterparts. This Agreement may be executed by one or more of ------------ the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. 9.9 Severability. Any provision of this Agreement or any other Loan ------------ Document which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. In any action or proceeding involving bankruptcy, insolvency, reorganization or other law affecting the rights of creditors generally, if the indebtedness, obligations or liabilities of Company or any Subsidiary Guarantor to Bank would otherwise be held or determined to be void, invalid or unenforceable on account of the amount of its liability hereunder or under any other Loan Document, notwithstanding any other provision to the contrary, the amount of the liability of the affected Company or Subsidiary Guarantor, without, further action by any party or any other Person, shall be automatically limited and reduced to the highest amount which is valid and enforceable as determined in such action or proceeding, it being the intention of the parties that the indebtedness, obligations and liabilities of the Company and the Subsidiary Guarantors hereunder and under the other Loan Documents be valid and enforceable to the maximum extent permitted by applicable law. 9.10 Integration. This Agreement represents the agreement of the ----------- Company and the Bank with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the Bank relative to subject 41 matter hereof not expressly set forth or referred to herein or in the other Loan Documents. 9.11 GOVERNING LAW. THIS AGREEMENT, THE NOTE AND THE OTHER LOAN ------------- DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF TENNESSEE WITHOUT REFERENCE TO ANY CONFLICTS OF LAW PRINCIPLES. 9.12 Acknowledgements. The Company and each Subsidiary Guarantor ---------------- hereby acknowledges that: (a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the Note and the other Loan Documents; (b) the Bank has no fiduciary relationship to the Company or any Subsidiary Guarantor, and the relationship between the Bank, on one hand, and the Company and Subsidiary Guarantors, on the other hand, is solely that of debtor and creditor; and (c) no joint venture exists between the Bank and the Company or Subsidiary Guarantors. 9.13 Further Assurances. The Company and each Subsidiary Guarantor ------------------ agrees from time to time to execute and deliver such additional documents, instruments and agreements, and to take all actions necessary or required in Bank's judgment, to more fully carry out the intent of this Agreement. 9.14 Release and Indemnification. Company and each Subsidiary --------------------------- Guarantor releases Bank (and each director, officer, employee and agent of Bank) from, and will jointly and severally indemnify and hold Bank (and each director, officer, employee and agent of Bank) harmless against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements of any kind or nature whatsoever, whether now existing or hereafter arising, and regardless by whom asserted or imposed, which arise out of, result from, or are otherwise connected with the transactions contemplated by this Agreement, the other Loan Documents, and any of the rights or remedies of Bank hereunder or thereunder unless and only to the extent that it shall be finally judicially determined that such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements resulted primarily from the negligence or willful misconduct of the Bank. Company and each Subsidiary Guarantor will jointly or severally pay or reimburse all legal or other expenses reasonably incurred by Bank (and each director, officer, employee and agent of Bank) in connection with the investigation or defense of any action or proceeding (whether or not resulting 42 in liability) with respect to any such liabilities, obligations, losses, damages, penalties, costs, expenses or disbursements in respect of which indemnity may be sought pursuant to this subsection. The covenants of Company and Subsidiary Guarantors contained in this subsection shall survive the execution of this Agreement and the other Loan Documents and the repayment of the Indebtedness hereunder and thereunder. 9.15 Joint and Several Liability. The liability of the Company and --------------------------- each Subsidiary Guarantor hereunder is joint and several. 9.16 Arbitration. ANY CONTROVERSY OR CLAIM BETWEEN OR ----------- AMONG THE PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF JUDICIAL ARBITRATION AND MEDIATION SERVICES, INC. (J.A.M.S.), AND THE "SPECIAL RULES" SET FORTH BELOW. IN THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY TO THIS AGREEMENT MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION. (a) SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN HAMILTON ------------- COUNTY, TENNESSEE AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60 DAYS. (b) RESERVATION OF RIGHTS. NOTHING IN THIS AGREEMENT SHALL BE --------------------- DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS AGREEMENT; OR (II) BE A WAIVER BY THE BANK OF THE PROTECTION AFFORDED TO IT BY 12 U.S.C. SEC. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF THE BANK HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR (C) TO OBTAIN PROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A RECEIVER. THE BANK MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON 43 SUCH PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING AND AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS AGREEMENT. NEITHER THIS EXERCISE OF SELF HELP REMEDIES NOR THE INSTITUTION OR MAINTENANCE OF ANY ACTION FOR FORECLOSURE OR PROVISIONAL OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE CONTROVERSY OF CLAIM OCCASIONING RESORT TO SUCH REMEDIES. [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK] 44 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered in Chattanooga, Tennessee by their proper and duly authorized officers as of the day and year first above written. COMPANY: CHECK INTO CASH, INC. By: [SIGNATURE APPEARS HERE] ------------------------------ Title: EXECUTIVE V.P. BANK: [SIGNATURE APPEARS HERE] ---------------------------- NATIONSBANK OF TENNESSEE, N.A. By: /s/ Lawrence M. Richey ------------------------------ Title: Senior Vice President The undersigned Subsidiary Guarantors join in executing this Agreement for the purpose of making the representations and warranties and agreeing to be bound by the covenants and other agreements applicable to the Subsidiary Guarantors hereunder. CREDITCORP OF TENNESSEE, INC. By: /s/ Fred Krosner ------------------------------ Title: V.P. CHECK INTO CASH OF IOWA, INC. By: /s/ Fred Krosner ------------------------------ Title: V.P. 45 CHECK INTO CASH OF KENTUCKY, LLC By: /s/ Fred Krosner ------------------------------ Title: VP CHECK INTO CASH OF INDIANA, LLC By: /s/ Fred Krosner ------------------------------ Title: VP CHECK INTO CASH OF ILLINOIS, LLC By: /s/ Fred Krosner ------------------------------- Title: VP CHECK INTO CASH OF WISCONSIN, LLC By: /s/ Fred Krosner ------------------------------- Title: VP JONES MANAGEMENT SERVICES, LLC. By: /s/ Fred Krosner ------------------------------ Title: VP 46 CHECK INTO CASH HOLDINGS, INC. By: /s/ Fred Krosner ------------------------------------- Title: Vice President CHECK INTO CASH OF CALIFORNIA, INC. By: /s/ Fred Krosner ------------------------------------- Title: Treasurer CHECK INTO CASH OF NEBRASKA, INC. By: /s/ Fred Krosner ------------------------------------- Title: Vice President CHECK INTO CASH OF MISSOURI, INC. By: /s/ Fred Krosner ------------------------------------- Title: Vice President CHECK INTO CASH OF OHIO, LLC By: /s/ Fred Krosner ------------------------------------- Title: Vice President 47 STATE OF TENNESSEE : : S.S. ###-##-#### COUNTY OF BRADLEY : Before me, a Notary Public of the state and county aforesaid, personally appeared Fred Krosner, with whom I am personally acquainted (or proved to me on the basis of satisfactory evidence), and who, upon oath, acknowledged himself to be Vice-President of Check into Cash, Inc., the within named bargainor, a corporation, and that he as such Fred Krosner executed the foregoing instrument for the purposes therein contained, by signing the name of the corporation by himself as Vice-President. WITNESS my hand and seal, at office in Bradley County, Tennessee, this 3rd day of June, 1997. /s/ Claudia S. Gray ------------------------------ Notary Public My Commission Expires: 11-5-2000 --------- 48 STATE OF TENNESSEE : : S.S. ###-##-#### COUNTY OF BRADLEY : Before me, a Notary Public of the state and county aforesaid, personally appeared Steve Scoggins, with whom I am personally acquainted (or proved to me on the basis of satisfactory evidence), and who, upon oath, acknowledged himself to be Executive Vice-President of Check into Cash of Iowa, Inc., the within named bargainor, a corporation, and that he as such Steve Scoggins, executed the foregoing instrument for the purposes therein contained, by signing the name of the corporation by himself as Executive Vice-Pres. WITNESS my hand and seal, at office in Bradley County, Tennessee, this 3rd day of June, 1997. /s/ Claudia S. Gray ------------------------------ Notary Public My Commission Expires: 11-5-2000 --------- 49 EXHIBIT 4.6 ----------- LITIGATION ---------- CASE NAME COURT CASE NUMBER DATE FILED - -------------------------------------------------------------------------------- Goins, et al v. Creditcorp Bradley County, TN V-96-175 3/4/96 Circuit Court Bennett, et al v. W. Allan Bradley County, TN V-96-245 3/20/96 Jones, Jr. d/b/a Check Into Circuit Court Cash Bennett, et al v. Creditcorp Bradley County, TN V-96-249 3/20/96 d/b/a Check Into Cash Circuit Court The two Bennett cases, along with several other similar lawsuits filed against other defendants in the Bradley County Circuit Court, have all been consolidated with the Goins case and are currently being treated as one lawsuit. Claims. All three cases make the same allegations, that the check cashing - ------ business in Tennessee violates the Tennessee usury statute, the federal Truth- In-Lending Act, the Tennessee Consumer Protection Act, the Tennessee Constitution, and other laws and regulations. The plaintiffs in all of the consolidated cases, including the three cases specifically listed above, have filed a motion for certification of a plaintiffs class. The defendants are opposed to class action certification and have filed papers objecting to the certification. A hearing was held on May 21, 1997, on the Plaintiffs' Motion for Class Certification, and the court took the motion under advisement. Amount Involved. The plaintiffs seek to recover prejudgment interest, three - --------------- times actual damages (although they do not specify the amount of their actual damages), refund of fees, and twice the amount of all other charges, and attorneys' fees and costs of litigation. No specific dollar amount is claimed. Status. A Special Judge has been appointed to hear all of the consolidated cases - ------ in Bradley County. An Answer has been filed on behalf of Creditcorp and W. Allan Jones, Jr. in the Goins case denying all material allegations. Prior to the ----- consolidation, Motions to Dismiss were filed on behalf of W. Allan Jones, Jr. and Creditcorp in the two Bennett cases. These motions are still pending. Much ------- discovery has already been accomplished, and the current discovery deadline is July 24, 1997. The case is scheduled to go to trial on September 9, 1997, before a jury. EEOC Claim ---------- On or about February 25, 1997, a former employee of Creditcorp of Tennessee, Inc., Susan L. West, who was employed in Tennessee, filed a complaint with the EEOC against the Check into Cash, Inc. She alleges that she was denied hospitalization coverage in connection with her colitis. Additionally, she indicates she was discharged on September 10, 1996, because of poor performance and because she was found under the influence of alcohol at work. A response to the Charge of Discrimination was sent out on or about March 21, 1997. We believe the Check into Cash, Inc. has meritorious defenses and we will assist them in vigorously defending the action, but at this point in time it is difficult to assess potential for liability. -2- EXHIBIT 4.9 ----------- INTELLECTUAL PROPERTY --------------------- United States Registration - -------------------------------------------------------------------------------- | MARK | REG. NO. | REG. DATE | OWNER | - -------------------------------------------------------------------------------- | CHECK INTO CASH & Design | 1,987,021 | July 16, 1996 | Check Into Cash, | | | | | Inc. | - -------------------------------------------------------------------------------- Tennessee State Registrations - -------------------------------------------------------------------------------- | MARK | REG. NO. | REG. DATE | OWNER | - -------------------------------------------------------------------------------- | CASH IN A FLASH | N/A | March 9, 1994 | Creditcorp | | | | | | - -------------------------------------------------------------------------------- | CHECK INTO CASH CHECK | N/A | March 9, 1994 | Creditcorp | | SERVICES & Design | | | | | | | | | - -------------------------------------------------------------------------------- | IF YOU HAVE AN ACTIVE | N/A | June 28, 1994 | Creditcorp | | CHECKING ACCOUNT AND | | | | | NEED CASH TODAY, WE WILL | | | | | CASH YOUR PERSONAL | | | | | CHECK AND WAIT EITHER | | | | | DAYS OR YOUR NEXT PAY | | | | | DAY TO DEPOSIT | | | | | | | | | - -------------------------------------------------------------------------------- | OVERDRAFT CHECK | N/A | March 9, 1994 | Creditcorp | | CASHING SERVICES | | | | | | | | | - -------------------------------------------------------------------------------- | QUICK, EASY, CONFIDENTIAL | N/A | March 9, 1994 | Creditcorp | | | | | | - -------------------------------------------------------------------------------- Wisconsin State Registration - -------------------------------------------------------------------------------- | MARK | REG. NO. | REG. DATE | OWNER | - -------------------------------------------------------------------------------- | CHECK INTO CASH | N/A | March 27, 1996| Creditcorp of | | | | | Wisconsin, LLC | - -------------------------------------------------------------------------------- EXHIBIT 4.10 ------------ NON-COMPLIANCE WITH LAWS OR CONTRACTS ------------------------------------- During the course of the litigation described in Exhibit 4.6, Creditcorp of Tennessee, Inc. has been accused of violating laws relating to the provision of consumer credit services. See Exhibit 4.6 for a more complete description of these allegations. In connection with the EEOC claim described in Exhibit 4.6, Check into Cash, Inc. has been accused of violating laws relating to employment and the provision of employee benefits. See Exhibit 4.6 for a more complete description of these allegations. EXHIBIT 4.15 ------------ NON-GUARANTOR AFFILIATES ------------------------ Credit Bureau Services, Inc., a Tennessee corporation. Jones Airways, LLC, a Tennessee limited liability company. Creditors' Adjustment Bureau, Inc., a Tennessee corporation. Preferred One, LLC, a Tennessee limited liability company. EXHIBIT 4.19 ------------ CAPITAL STOCK -------------
Entity Shares Authorized Total Shares Owners Issued & Outstanding Check into Cash, 5,000,000 Common 1,212,000 Common W. Allan Jones, Jr. Inc. 720,000 shares; 1,000,000 Preferred -0- Preferred Janie Jones 480,000 shares; Stephen Scoggins 36,000 shares. Check into Cash 1,000 Common 1,000 Common Check into Cash, Holdings, Inc. Inc. 1,000 shares. Creditcorp of 10,000 Common 1,000 Common Check into Cash, Tennessee, Inc. Inc. 1,500 shares. Check into Cash of 1,000 Common 1,000 Common Check into Cash, Iowa, Inc. Inc. 1,000 shares. Check into Cash of n/a n/a Check into Cash, Kentucky, LLC Inc. 99%; Check into Cash Holdings, Inc. 1% Check into Cash of n/a n/a Check into Cash, Indiana, LLC Inc. 99%; Check into Cash Holdings, Inc. 1% Check into Cash of n/a n/a Check into Cash, Illinois, LLC Inc. 99%; Check into Cash Holdings, Inc. 1% Check into Cash of n/a n/a Check into Cash, Wisconsin, LLC Inc. 99%; Check into Cash Holdings, Inc. 1%
Entity Shares Authorized Total Shares Owners Issued & Outstanding Check into Cash of n/a n/a Check into Cash, Ohio, LLC Inc. 99%; Check into Cash Holdings, Inc. 1% Check into Cash of 1,000 Common 1,000 Common Check into Cash, California, Inc. Inc. 1,000 shares. Check into Cash of 1,000 Common 1,000 Common Check into Cash, Nebraska, Inc. Inc. 1,000 shares. Check into Cash of 1,000 Common 1,000 Common Check into Cash, Missouri, Inc. Inc. 1,000 shares. Jones Management n/a n/a Check into Cash, Services, LLC Inc. 99%; Check into Cash Holdings, Inc. 1% In addition to the above, Check into Cash, Inc. is party to the following agreements relating to the purchase of its capital stock: 1. Stock Purchase Warrant, dated February 28, 1997, issued by Check into Cash, Inc. to Sirrom Capital Corporation. 2. Check into Cash, Inc. 1997 Long Term Incentive Plan, dated January 10, 1997. 3. Restricted Stock Award Agreement, dated May 2, 1997, between Check into Cash, Inc. and Stephen Scoggins. -2- EXHIBIT 2(f) ------------ PREVIOUS NAMES OF DEBTORS AND GUARANTORS ---------------------------------------- Current Name of Entity Previous Name(s) of Entity Check into Cash, Inc. None. Check into Cash Holdings, Inc. None. Creditcorp of Tennessee, Inc. Creditcorp. Check into Cash of Iowa, Inc. None. Check into Cash of Kentucky, LLC. Creditcorp of Kentucky, LLC; COK, LLC; Creditcorp of Kentucky, Inc. Check into Cash of Indiana, LLC. Creditcorp of Indiana, LLC; Creditcorp of Indiana, Inc. Check into Cash of Illinois, LLC. Creditcorp of Illinois, LLC; Creditcorp of Illinois, Inc. Check into Cash of Wisconsin, LLC. Creditcorp of Wisconsin, LLC. Check into Cash of Ohio, LLC. Creditcorp of Ohio, LLC; Creditcorp of Ohio, Ltd. Check into Cash of California, Inc. None. Check into Cash of Nebraska, Inc. None. Check into Cash of Missouri, Inc. None. Jones Management Services, LLC. None. FIRST AMENDMENT TO LOAN AGREEMENT --------------------------------- THIS FIRST AMENDMENT TO LOAN AGREEMENT (the "Amendment"), dated as of September 1, 1997, is made and entered into by and between CHECK INTO CASH, INC., a Delaware corporation (the "Company"), and NATIONSBANK OF TENNESSEE, N.A., a Tennessee corporation (the "Bank"). WITNESSETH ---------- WHEREAS, the Bank and the Company entered into a Loan Agreement, dated as of June 2, 1997; and WHEREAS, the Company is an "S" corporation under the Internal Revenue Code of 1986, as amended; and WHEREAS, the Bank and the Company agree that the covenants of the Company in the Loan Agreement should not prevent the Company from making distributions to its shareholders for the purpose of paying federal income taxes on the income of Borrower that is attributed to Borrower's shareholders; and WHEREAS, the Bank and the Company agree that the covenants of the Company in the Loan Agreement should not prevent the Company from extending a loan to Stephen Scoggins for the payment of income taxes incurred by Scoggins in connection with the lapse of restrictions on shares of the Company's common stock held by Scoggins and the grant of additional unrestricted shares of the Company's common stock to Scoggins; and WHEREAS, this Amendment shall amend the Loan Agreement. AGREEMENT --------- 1. The Loan Agreement is hereby amended such that the following language is added at the end of Section 7.7; "(iv) the Company may, so long as it retains "S" corporation status under the Internal Revenue Code, make distributions to its shareholders for the payment of federal income taxes on Company income that is attributed to such shareholders." 2. The parties agree that any distributions made prior to the date of this Amendment that would have been permissible had this Amendment been in effect are hereby approved by the Bank. 3. Bank hereby waives the Company's covenant not to extend credit or make loans contained in Section 7.9 of the Loan Agreement, to the extent such covenant prevents the Company from lending money to Stephen Scoggins ("Scoggins"), pursuant to Section 6(c) of that certain Employment Agreement, dated as of July 31, 1997 by and between Scoggins and the Company (the "Scoggins Employment Agreement"), for the payment of taxes incurred by Scoggins in connection with the lapse of restrictions on shares of the Company's common stock held by Scoggins and the grant of additional unrestricted shares of the Company's common stock to Scoggins, pursuant to Sections 6(a) and 6(b) of the Scoggins Employment Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their duly authorized officers, as of the date first written above. NATIONSBANK OF TENNESSEE, N.A. By: /s/ Lawrence M. Richey ---------------------------------- Title: Senior Vice President ------------------------------- CHECK INTO CASH, INC. By: /s/ Fred Krosner ---------------------------------- Title: VP ------------------------------- -2- SECOND AMENDMENT TO LOAN AGREEMENT AND LOAN DOCUMENTS ----------------------------------------------------- THIS SECOND AMENDMENT TO LOAN AGREEMENT AND LOAN DOCUMENTS ("Second Amendment") is entered into on October 23, 1997, among CHECK INTO CASH, INC., a Delaware corporation (the "Company"), NATIONSBANK OF TENNESSEE, N.A., a national banking association (the "Bank"), W. Allan Jones, Jr. ("Individual Guarantor"), and Creditcorp of Tennessee, Inc., Check Into Cash of Iowa, Inc., Check into Cash of Kentucky, LLC, Check into Cash of Indiana, LLC, Check Into Cash of Illinois, LLC, Check Into Cash of Wisconsin, LLC, Check Into Cash of Ohio, LLC, Jones Management Services, LLC, Check into Cash Holdings, Inc., Check into Cash of California, Inc., Check into Cash of Nebraska, Inc., Check into Cash of Missouri, Inc. (collectively "Subsidiary Guarantors"). WITNESSETH: ---------- WHEREAS, on June 2, 1997, the Company, the Bank, and the Subsidiary Guarantors entered into a certain Loan Agreement (the "Original Agreement") pursuant to which the Bank made a certain credit facility available to the Company; and WHEREAS, on September 1, 1997, the Company and the Bank entered into a certain First Amendment to Loan Agreement (the "First Amendment"; the Original Agreement as amended by the First Amendment and as amended hereby is referred to as the "Agreement") in order to amend certain covenants contained in the Original Agreement; and WHEREAS, the parties have agreed to increase the Maximum Credit Amount available under the Agreement and make certain other modifications to the Agreement and the other Loan Documents; NOW, THEREFORE, in consideration of the premises, the mutual covenants contained herein, and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. The definition of "Available Credit Commitment" as set forth in Section 1.1 of the Agreement is amended to read as follows: "Available Credit Commitment": means from time to time, as determined ---------------------------- as of the end of each month, the product determined by multiplying Corporate EBITDA for the preceding twelve (12) months (on a trailing 12-month basis) times two (2); provided, however, that through and including December 31, 1997, "Available Credit Commitment" shall mean the product determined by multiplying Corporate EBITDA for the preceding twelve (12) months (on a trailing-12 month basis) times two and one-half (2.5). 2. The definition of the term "Corporate EBITDA" as set forth in Section 1.1 of the Agreement is amended to read as follows: "Corporate EBITDA" with respect to the applicable periods as set forth ---------------- herein, the sum, without duplication, of (i) Corporate Net Income for such period less gain on the sale of assets, dividends and other distributions, withdrawals, and treasury stock purchases and similar transactions and (ii) to the extent deducted in determining such Corporate Net Income: (A) all income taxes, including but not limited to, Federal, foreign and state income taxes (including any deferred taxes); (B) Corporate Interest Expense; and (C) depreciation, amortization and similar non-cash charges, provided, that there shall -------- be excluded therefrom non-operating gains and non-operating losses, and provided further that with respect to the fiscal year ending ---------------- December 31, 1996, there shall be added to the amount calculated in accordance with the foregoing the 1996 tax distributions of $297,733.00 made by the Company in December, 1996, and that with respect to the fiscal year ending December 31, 1997, there shall be added to the amount calculated in accordance with the foregoing the compensation in the amount of $266,400.00 paid to Steven Scoggins by the Company in August, 1997, in connection with the issuance of Capital Stock in the Company to Steven Scoggins. 3. The definition of the term "Maximum Credit Amount" as set forth in Section 1.1 of the Agreement is amended to read as follows: "Maximum Credit Amount": means the lesser of (i) Eleven Million --------------------- Five Hundred Thousand Dollars ($11,500,000.00) and (ii) the Available Credit Commitment. 4. The definition of the term "Note" as set forth in Section 1.1 of the Agreement is amended to read as follows: "Note": the Amended and Restated Promissory Note dated October 23, 1997, in the principal amount of Eleven Million Five Hundred Thousand Dollars ($l1,500,000.00) executed by the Company payable to Bank, as the same may be amended, supplemented or otherwise modified from time to time, together with all other promissory notes now or hereafter payable by the Company or any Subsidiary Guarantor to the Bank and all amendments, supplements, and modifications thereof. The Agreement, the Security Documents (including, without limitation, the Guarantee, the Security Agreement, the Security Agreement and Collateral Assignment of Membership Interests described below, the Pledge and Security Agreement described below, and the Trademark Security Agreement described below), and the other Loan Documents are amended so that: (i) all references to the "Note" therein shall include, without limitation, the Amended and Restated Promissory Note dated October 23, 1997, in the principal amount of Eleven Million Five Hundred Thousand Dollars ($11,500,000.00) executed by the Company payable to the Bank, as the same may be amended, supplemented or otherwise modified from time to time; and (ii) all references to the "Loan Agreement" shall include the Original Agreement as amended by the First Amendment and as amended hereby, and as further amended, supplemented or otherwise modified from time to time. 5. The definition of the term "Termination Date" as set forth in Section 1.1 of the Agreement is amended to read as follows: "Termination Date": October 23, 2000. ----------------- 6. The date "December 31, 1996" contained in Section 4.1 is deleted and in place thereof the date "August 31, 1997" is inserted, the Company hereby making all of the representations and warranties contained in Section 4.1 with respect to the financial statements for the period ending August 31, 1997. 7. Section 7.1(b) of the Agreement is amended to read as follows: (b) Leverage Ratio. Permit the Leverage Ratio to be greater than the -------------- amount set opposite such period below: Period Ratio ------ ----- Closing Date through Fiscal 2.8 to 1 Year ending December 31, 1997 January 1, 1998 through 2.5 to 1 December 31, 1998 For each period after 2.0 to 1 December 31, 1988 The Leverage Ratio shall be measured at the end of each fiscal quarter on a rolling four-quarter basis. 8. Section 7.1(c) of the Agreement is amended to read as follows: (c) Held Check Ratio. At any time permit the aggregate amount of (A) ---------------- all checks then being held by the Company and the Subsidiary Guarantors plus (B) $3,000.00 for each store (location) then being ---- operated by Company and Subsidiary Guarantors to be greater than Indebtedness for Borrowed Money (including subordinated Indebtedness for Borrowed Money) after deducting the notes payable discount (if any) permitted in accordance with GAAP with respect to the Indebtedness for Borrowed Money owing to Sirrom Capital Corporation and reflected on the consolidated balance sheet of the Company and the Subsidiary Guarantors. 9. The following Section 7.15 is inserted in the Agreement: 7.15 Limitation on Acquisitions. Acquire any other Person (whether -------------------------- through the acquisition of Capital Stock or acquisition of assets) if the cash portion of the acquisition price paid by the Company or the Subsidiary Guarantor is greater than $500,000.00. 10. Exhibit 4.6, Exhibit 4.9, and Exhibit 4.19 to the Agreement are amended to read as attached to this Second Amendment. 11. The Company, the Individual Guarantor and the Subsidiary Guarantors hereby reaffirm all of the representations and warranties contained in Agreement, the Guarantee and the other Loan Documents and represent to the Bank that such representations and warranties are true and correct as of the date of this Second Amendment. 12. The Agreement and the other Loan Documents are hereby amended where appropriate to reflect: (i) the increase in the Maximum Credit Amount; (ii) the extension of the Termination Date until October 23, 2000; and (iii) the other amendments set forth in this Second Amendment. The parties specifically agree that the Security Agreement, the Guarantee, the Security Agreement and Collateral Assignment of Membership Interest between the Company and the Bank dated June 2, 1997, the Pledge and Security Agreement between the Company and the Bank dated June 2, 1997, the Trademark Security Agreement between the Company and the Bank dated June 2, 1997, and all of the other Security Documents continue to secure all indebtedness, obligations and liabilities now or hereafter owing by the Company, the Subsidiary Guarantors or the Individual Guarantor (as applicable and as more specifically set forth in the Security Documents) including the indebtedness, obligations and liabilities under the Agreement and other Loan Documents as amended hereby, it being the intention of the parties that the increase in the amount of the Revolving Credit Commitment be entitled to all of the rights and benefits of all of the Loan Documents. The parties to the Security Agreement and Collateral Assignment of Membership Interest and the Pledge and Security Agreement hereby acknowledge and consent to the continuing security interests and assignments thereunder and to the extent permitted by applicable law waive any requirements or conditions contained in any certificate of incorporation, charter, bylaws, articles or certificate of organization, operating agreement, shareholder or member agreement, or any other agreement or instrument of any kind that would restrict the assignments and security interests created thereunder (including, without limitation, any rights of first refusal, any requirement that a opinion of counsel be obtained to the effect that no registration under federal or state securities laws is required, and any other prohibition or restriction on transfer). 13. The parties agree that the Agreement, the Guarantee, the Security Documents, and all of the other Loan Documents remain in full force and effect as amended hereby. Nothing in this Second Amendment shall constitute a novation of the Agreement, the Guarantee, the Security Documents or any other Loan Document. All capitalized terms used in this Second Amendment shall have the meanings given such terms in the Agreement unless otherwise defined herein. The Agreement and the other Loan Documents are incorporated herein by reference. IN WITNESS WHEREOF, the parties executed this Second Amendment effective as of the date first above written. [COUNTERPART SIGNATURE PAGES ATTACHED] COMPANY: CHECK INTO CASH, INC. By: [SIGNATURE APPEARS HERE] ------------------------------------ Title: PRESIDENT ------------------------------ BANK: NATIONSBANK OF TENNESSEE, N.A. By: /s/ Lawrence M. Richey ------------------------------------ LAWRENCE M. RICHEY Senior Vice President SUBSIDIARY GUARANTORS: CREDITCORP OF TENNESSEE, INC. By: /s/ Fred Krosner ------------------------------------ Title: VP CHECK INTO CASH OF IOWA, INC. By: /s/ Fred Krosner ------------------------------------ Title: VP CHECK INTO CASH OF KENTUCKY, LLC By: /s/ Fred Krosner ------------------------------------ Title: VP CHECK INTO CASH OF INDIANA, LLC By: /s/ Fred Krosner ------------------------------------ Title: VP [COUNTERPART SIGNATURE PAGE] CHECK INTO CASH OF ILLINOIS, LLC By: /s/ Fred Krosner -------------------------------------- Title: VP CHECK INTO CASH OF WISCONSIN, LLC By: /s/ Fred Krosner -------------------------------------- Title: VP JONES MANAGEMENT SERVICES, LLC. By: /s/ Fred Krosner -------------------------------------- Title: VP CHECK INTO CASH HOLDINGS, INC. By: /s/ Fred Krosner -------------------------------------- Title: VP CHECK INTO CASH OF CALIFORNIA, INC. By: /s/ Fred Krosner -------------------------------------- Title: VP CHECK INTO CASH OF NEBRASKA, INC. By: /s/ Fred Krosner -------------------------------------- Title: VP CHECK INTO CASH OF MISSOURI, INC. By: /s/ Fred Krosner -------------------------------------- Title: VP [COUNTERPART SIGNATURE PAGE] CHECK INTO CASH OF OHIO, LLC By: /s/ Fred Krosner -------------------------------------- Title: VP [COUNTERPART SIGNATURE PAGE] INDIVIDUAL GUARANTOR: /s/ W. Allan Jones, Jr. ------------------------------------ W. ALLAN JONES, JR. Personally STATE OF TENNESSEE COUNTY OF Bradley Before me, a Notary Public of the state and county aforesaid, personally appeared W. ALLAN JONES, to me known (or proved to me on the basis of satisfactory evidence) to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same as his free act and deed. WITNESS my hand and seal, at office in Cleveland, Tennessee, this 23rd day of October, 1997. /s/ Claudia S. Gray ------------------------------------ Notary Public My Commission Expires: 11-5-2000 --------- [COUNTERPART SIGNATURE PAGE] EXHIBIT 4.6 ----------- LITIGATION ---------- CASE NAME COURT CASE NUMBER DATE FILED - -------------------------------------------------------------------------------- Goins, et al v. Creditcorp Bradley County, TN V-96-I75 3/4/96 Circuit Court Bennett, et al v. W. Allan Bradley County, TN V-96-245 3/20/96 Jones, Jr. d/b/a Check Into Circuit Court Cash Bennett, et al v. Creditcorp Bradley County, TN V-96-249 3/20/96 d/b/a Check Into Cash Circuit Court The two Bennett cases, along with several other similar lawsuits filed against other defendants in the Bradley County Circuit Court, have all been consolidated with the Goins case and are currently being treated as one lawsuit. Claims. All three cases make the same allegations, that the check cashing - ------ business in Tennessee violates the Tennessee usury statute, the federal Truth- In-Lending Act, the Tennessee Consumer Protection Act, the Tennessee Constitution, and other laws and regulations. The plaintiffs in all of the consolidated cases, including the three cases specifically listed above, have filed a motion for certification of a plaintiffs class. The defendants are opposed to class action certification and have filed papers objecting to the certification. A hearing was held on May 21, 1997, on the Plaintiffs' Motion for Class Certification, and the court took the motion under advisement. Amount Involved. The plaintiffs seek to recover prejudgment interest, three - --------------- times actual damages (although they do not specify the amount of their actual damages), refund of fees, and twice the amount of all other charges, and attorneys' fees and costs of litigation. No specific dollar amount is claimed. Status. A Special Judge has been appointed to hear all of the consolidated cases - ------ in Bradley County. An Answer has been filed on behalf of Creditcorp and W. Allan Jones, Jr. in the Goins case denying all material allegations. Prior to the consolidation, Motions to Dismiss were filed on behalf of W. Allan Jones, Jr. and Creditcorp in the two Bennett cases. These motions are still pending. Much discovery has already been accomplished, and the current discovery deadline is July 24, 1997. As of October 9, 1997, the parties are engaged in settlement negotiations, subject to a definitive settlement agreement and approval of such agreement by the Special Judge appointed to hear this case. EEOC Claim ---------- On or about February 25, 1997, a former employee of Creditcorp of Tennessee, Inc., Susan L. West, who was employed in Tennessee, filed a complaint with the EEOC against the Check into Cash, Inc. She alleges that she was denied hospitalization coverage in connection with her colitis. Additionally, she indicates she was discharged on September 10, 1996, because of poor performance and because she was found under the influence of alcohol at work. A response to the Charge of Discrimination was sent out on or about March 21, 1997. We believe the Check into Cash, Inc. has meritorious defenses and we will assist them in vigorously defending the action, but at this point in time it is difficult to assess potential for liability. -2- EXHIBIT 4.9 ----------- INTELLECTUAL PROPERTY --------------------- United States Registration - ------------------------------------------------------------------------------- |MARK | REG. NO./ | REG. DATE/ | OWNER | | | APP. NO. | FILING DATE | | |---------------------------|-------------|-----------------|-----------------| |CHECK INTO CASH & Design | 1,987,021 | July 16, 1996 | Check Into Cash,| | | | | Inc. | | | | | | |---------------------------|-------------|-----------------|-----------------| |BOB CA$H CHECK INTO CA$H | 75/308009 | June 12, 1997 | Check Into Cash,| |CASH ADVANCE IT'S QUICK, | | | Inc. | |EASY & CONFIDENTIAL and | | | | |Design | | | | - ------------------------------------------------------------------------------- Tennessee State Registrations - ------------------------------------------------------------------------------- |MARK | REG. NO. | REG. DATE | OWNER | |---------------------------|-------------|-----------------|-----------------| |CASH IN A FLASH | N/A | March 9, 1994 | Creditcorp | | | | | | |---------------------------|-------------|-----------------|-----------------| |CHECK INTO CASH CHECK | N/A | March 9, 1994 | Creditcorp | |SERVICES & Design | | | | | | | | | |---------------------------|-------------|-----------------|-----------------| |IF YOU HAVE AN ACTIVE | N/A | June 28, 1994 | Creditcorp | |CHECKING ACCOUNT AND | | | | |NEED CASH TODAY, WE WILL | | | | |CASH YOUR PERSONAL | | | | |CHECK AND WAIT EITHER... | | | | |DAYS OR YOUR NEXT PAY | | | | |DAY TO DEPOSIT | | | | | | | | | |---------------------------|-------------|-----------------|-----------------| |OVERDRAFT CHECK | N/A | March 9, 1994 | Creditcorp | |CASHING SERVICES | | | | | | | | | |---------------------------|-------------|-----------------|-----------------| |QUICK, EASY, CONFIDENTIAL | N/A | March 9, 1994 | Creditcorp | | | | | | - ------------------------------------------------------------------------------- Wisconsin State Registration - ------------------------------------------------------------------------------- |MARK | REG. NO. | REG. DATE | OWNER | - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CHECK INTO CASH N/A March 27, 1996 Creditcorp of Wisconsin, LLC - -------------------------------------------------------------------------------- -4- EXHIBIT 4.19 ------------ CAPITAL STOCK ------------- Entity Shares Authorized Total Shares Owners Issued & Outstanding Check into Cash, 5,000,000 Common 1,212,000 Common W. Allan Jones, Jr. Inc. 720,000 shares; 1,000,000 Preferred -0- Preferred Janie Jones 480,000 shares; Stephen Scoggins 36,000 shares. Check into Cash 1,000 Common 1,000 Common Check into Cash, Holdings, Inc. Inc. 1,000 shares. Creditcorp of 10,000 Common 1,000 Common Check into Cash, Tennessee, Inc. Inc. 1,500 shares. Check into Cash of 1,000 Common 1,000 Common Check into Cash, Iowa, Inc. Inc. 1,000 shares. Check into Cash of n/a n/a Check into Cash, Kentucky, LLC Inc. 99%; Check into Cash, Holdings, Inc. 1% Check into Cash of n/a n/a Check into Cash, Indiana, LLC Inc. 99%; Check into Cash Holdings, Inc. 1% Check into Cash of n/a n/a Check into Cash, Illinois, LLC Inc. 99%; Check into Cash Holdings, Inc. 1% Check into Cash of n/a n/a Check into Cash, Wisconsin, LLC Inc. 99%; Check into Cash Holdings, Inc. 1% Entity Shares Authorized Total Shares Owners Issued & Outstanding Check into Cash of n/a n/a Check into Cash, Ohio, LLC Inc. 99%; Check into Cash Holdings, Inc. 1% Check into Cash of 1,000 Common 1,000 Common Check into Cash, California, Inc. Inc. 1,000 shares. Check into Cash of 1,000 Common 1,000 Common Check into Cash, Nebraska, Inc. Inc. 1,000 shares. Check into Cash of 1,000 Common 1,000 Common Check into Cash, Missouri, Inc. Inc. 1,000 shares. Jones Management n/a n/a Check into Cash, Services, LLC Inc. 99%; Check into Cash Holdings, Inc. 1% In addition to the above, Check into Cash, Inc. is party to the following agreements relating to the purchase of its capital stock: 1. Stock Purchase Warrant, dated February 28, 1997, issued by Check into Cash, Inc. to Sirrom Capital Corporation. 2. Check into Cash, Inc. 1997 Long Term Incentive Plan, dated January 10, 1997. -2-
EX-10.3 4 SIRROM CAPITAL CORPORATION $7,000,000 LOAN AGREEMENT EXHIBIT 10.3 AMENDED AND RESTATED LOAN AGREEMENT ----------------------------------- THIS AMENDED AND RESTATED LOAN AGREEMENT ("Agreement"), dated as of the 28th day of February, 1997, is made and entered into on the terms and conditions hereinafter set forth, by and between CHECK INTO CASH, INC., a Delaware corporation ("Borrower"), and SIRROM CAPITAL CORPORATION, a Tennessee corporation ("Lender"). RECITALS: -------- WHEREAS, Lender made a loan to Creditcorp of Tennessee, Inc. (f/k/a Creditcorp.), Creditcorp of Kentucky, LLC, Creditcorp of Illinois, LLC, Creditcorp of Indiana, LLC and Creditcorp of Wisconsin, LLC (the "Original Borrowers") in the original principal amount of up to $3,500,000 (the "Loan") pursuant to a Loan Agreement dated as of November 8, 1996 (the "Original Loan Agreement"), and Borrower has assumed the obligations of the Original Borrowers in connection with the Loan; and WHEREAS, Lender and Borrower, in connection with Borrower's assumption of the obligations of the Original Borrowers under the Loan Agreement, desire to amend and restate the Loan Agreement; WHEREAS, in order to induce Lender to agree to the assumption of the Loan by Borrower, Borrower has made certain representations to Lender; and WHEREAS, Lender, in reliance upon the representations and inducements of Borrower, has agreed to the assumption of the Loan by Borrower upon the terms and conditions hereinafter set forth. AGREEMENT: --------- NOW, THEREFORE, in consideration of the agreement of Lender to make the Loan, the mutual covenants and agreements hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Borrower and Lender hereby agree as follows: ARTICLE 1 THE LOAN -------- 1.1 Evidence of Loan Indebtedness and Repayment. Subject to the terms and ------------------------------------------- conditions hereof, Lender shall make the Loan to Borrower by wire transfer in immediately available funds. The Loan shall be advance to Borrower in up to eight (8) advances (individually, an "Advance" and collectively, the "Advances"). The first Advance was in the principal amount of $500,000 and was made on November 8, 1996. The second advance was in the principal amount of $500,000 and was made on December 26, 1996. Subsequent Advances shall be in amount of not less than $500,000 each (except for the last advance which may be for the remainder of the Loan amount) and shall be made as requested by Borrower, provided, however, that Lender's obligation to fund subsequent Advances shall be subject to the conditions set forth in Section 4.2. The Loan shall be evidenced by one (1) or more Secured Promissory Notes in the original principal amount of the applicable advance, substantially in the form of Exhibit A attached hereto and incorporated herein by this reference (individually, a "Note" and collectively, the "Notes"), dated as of the date of the applicable Advance, executed by Borrower, in favor of Lender. Each Advance shall be payable in accordance with the terms of the applicable Note. The Notes, this Agreement and any other instruments and documents executed by Borrower, any guarantor of the Loan, or any shareholder, member, partner, subsidiary, or affiliate of Borrower, now or hereafter evidencing, securing or in any way related to the indebtedness evidenced by the Notes are herein individually referred to as a "Loan Document" and collectively referred to as the "Loan Documents." 1.2 Processing Fee. A processing fee of $70,000 has been paid to Lender -------------- in connection with the Loan. 1.3 Purpose(s) of Loan and Use of Proceeds. The purposes of the Loan shall -------------------------------------- be (i) to provide working capital to Borrower and any or all of the other CIC Entities (as hereinafter defined), (ii) to finance new store expansion (including expansion into other states through other affiliates of Borrower), (iii) to pay all costs and expenses incurred by the parties hereto in connection with the making and documenting of the Loan, including attorneys' fees and expenses, and (iv) for general corporate and business purposes. 1.4 Prepayment. Borrower any prepay the indebtedness evidenced by the ---------- Notes in whole or in part at any time and from time to time without premium or penalty. 2 ARTICLE 2 REPRESENTATIONS AND WARRANTIES ------------------------------ 2.1 Borrower's Representations. Borrower hereby represents and warrants to -------------------------- Lender as follows: (a) Corporate Status. Borrower is a corporation duly organized, ---------------- validly existing and in good standing under the laws of the State of Delaware; and has the corporate power to own and operate its properties, to carry on its business as now conducted and to enter into and to perform its obligations under this Agreement and the other Loan Documents to which it is a party. Borrower is duly qualified to do business and in good standing in each state in which a failure to be so qualified and in good standing would have a material adverse effect on Borrower's financial position or its ability to conduct its business in the manner now conducted. (b) Other Business Organizations. Schedule 2.1(b) hereto is a ---------------------------- --------------- complete list as of the date hereof of each corporation, limited liability company, partnership, joint venture or other business organization (whether now or hereafter existing, the "Subsidiary" or, with respect to all organizations, the "Subsidiaries"; Borrower, the Subsidiaries, Creditcorp of Illinois, LLC and Creditcorp of Ohio, LLC are referred to hereinafter, individually as a "CIC Entity" and collectively as the "CIC Entities") in which Borrower or any Subsidiary owns, directly or indirectly, and capital stock or other equity interest, or with respect to which Borrower or any Subsidiary, alone or in combination with others, is in a control position, which list shows the jurisdiction of incorporation or other organization and the percentage of stock or other equity interest of each Subsidiary. Each CIC Entity which is a corporation is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and is duly qualified to transact business as a foreign corporation and is in good standing in the jurisdictions listed in Schedule -------- 2.1(b), and there is no other jurisdiction in which a failure to be so ------ qualified and in good standing would have a material adverse effect on such CIC Entity's financial position or its ability to conduct its business in the manner now being conducted. Each CIC Entity which is not a corporation is a limited liability company duly organized and validly existing under the laws of the jurisdiction of its organization and is duly qualified to transact business as a foreign entity and is in good standing in the jurisdictions listed in Schedule 2.1(b), and then is no other jurisdiction --------------- in which a failure to be so qualified and in good standing would have a material adverse effect on such CIC Entity's financial position or its ability to conduct is business in the manner now being conducted. The outstanding capital stock of each CIC Entity which is a corporation is validly issued, fully paid and nonassessable. The CIC Entities have good and valid title to the equity interests in the Subsidiaries shown as owned by each of them on Schedule 2.1(b), free and clear of all liens, claims, --------------- charges, restrictions, security interests, equities, proxies, pledges or encumbrances of any kind, except for any and all pledges in favor of Lender. 3 (c) Authorization. Each of the CIC Entities has full legal right, ------------- power and authority to conduct its business and affairs. Each of the CIC Entities has full legal right, power and authority to enter into and perform its obligations under the Loan Documents to which it is a party, without the consent or approval of any other person, firm, governmental agency or other legal entity. The execution and delivery of this Agreement, the borrowing hereunder, the execution and delivery of each Loan Document to which each CIC Entity is a party, and the performance by each CIC Entity of its obligations thereunder are within the powers of such CIC Entity (corporate or otherwise) and have been duly authorized by all necessary action (corporate or otherwise) properly taken, have received all necessary governmental approvals, if any were required, and do not and will not contravene or conflict with any provision of law, any applicable judgment, ordinance, regulation or order of any court or governmental agency, the charter of bylaws or other organizational documents of such CIC Entity, or any agreement binding upon such CIC Entity. The officer(s) executing this Agreement, the Note and all of the other Loan Documents to which Borrower is a party are duly authorized to act on behalf of such Borrower, The officers executing the Loan Documents on behalf of each of the other CIC Entities are duly authorized to act on behalf of such other CIC Entities. (d) Validity and Binding Effect. This Agreement and the other Loan --------------------------- Documents to which any CIC Entity is a party are the legal, valid and binding obligations of such CIC Entity, enforceable in accordance with their respective terms, subject to limitations imposed by bankruptcy, insolvency, moratorium or other similar laws affecting the rights of creditors generally or the application of general equitable principles. (e) Capitalization of Borrower and CIC Entities Which Are Not --------------------------------------------------------- Subsidiaries. ----------- (1) As of the date hereof, the authorized capital stock of Borrower consists solely of ten thousand (10,000) shares of common stock, $0.01 par value per share ("Common Stock"), of which one thousand ten (1,010) shares are issued and outstanding (the "Shares") and sixty-five (65) shares of which shall be reserved for issuance upon exercise of the Stock Purchase Warrant dated as of the date hereof and issued to Lender by Borrower (the "Borrower Warrant"); provided, however, that the number shares reserved for issuance upon exercise of the Borrower Warrant shall be increased from time to time in accordance with the terms of the Borrower Warrant. As of the date hereof, Borrower shall not have outstanding any stock or securities convertible or exchangeable for any shares of its Common Stock or containing any profit participation features, nor (other than employee stock options which grant options entitling the holders thereof to acquire shares which do not exceed 15% of the shares outstanding provided that the exercise price per share of capital stock under each option or other right granted under the option plan shall in no event be less than 100% of the fair market value of the capital 4 stock on the date such option or other right is granted) shall it have outstanding any rights or options to subscribe for or to purchase its Common Stock or any stock or securities convertible into or exchangeable for its Common Stock or any stock appreciation rights or phantom stock plans, except for the Borrower Warrant. As of the date hereof, Borrower shall not be subject to any obligation (contingent or otherwise) to repurchase, redeem, retire or otherwise acquire any shares of its capital stock or any warrants, options or other rights to aquire its capital stock (other than forfeitures which do not require Borrower to pay consideration), except as set forth in the Warrant. As of the date hereof, all of the outstanding shares of Borrower's capital stock shall be validly issued, fully paid and nonassessable. There are no statutory or contractual preemptive rights, rights of first refusal, antidilution rights or any similar rights, held by stockholders or option holders of Borrower, with respect to the issuance of the Warrant or the issuance of the Common Stock upon exercise of the Warrant. Borrower has not violated any applicable federal or state securities laws in connection with the offer, sale or issuance of any of its capital stock, and (assuming Lender is an "accredited investor" as defined in SEC Rule 501(a) and complies with the covenants therein contained) the offer, sale and issuance of the Warrant hereunder do not require registration under the Securities Act or any applicable state securities laws. To the best of Borrower's knowledge, there are no agreements among Borrower's stockholders with respect to any aspect of Borrower's affairs. (2) Creditcorp of Illinois, LLC and Creditcorp of Ohio, LLC are hereinafter referred to sometimes as the "Non-Subsidiary Entities." As of the date hereof, the membership interests of the Non-Subsidiary Entities are owned as follows: W. Allan Jones - 81% and Janie P. Jones - 19%. As of the date hereof, neither of the Non-Subsidiary Entities is subject to any obligation (contingent or otherwise) to repurchase, redeem, retire or otherwise acquire any of its membership interests or any warrants, options or other rights to acquire its membership interests, except for warrants issued or to be issued by the Non- Subsidiary Entities to Lender in connection with the Loan (the "Non-Subsidiary Warrants") and employee options which grant options entitling the holders thereof to acquire interests which do not exceed 15% of the membership interests outstanding (provided that the exercise price for any interests under each option or other right granted under the option plan shall in no event be less than 100% of the fair market value of the interests on the date such option or other right is granted). There are no statutory or contractual rights of first refusal, or any similar rights, held by members or option holders of any of the Non-Subsidiary Entities, with respect to the Non-Subsidiary Entities or the issuance of membership interests upon exercise of any of the Non-Subsidiary Warrants. Neither of the Non-Subsidiary Entities has violated any applicable federal or state securities laws in connection with the offer, sale or issuance of its membership interest, and (assuming Lender 5 is an "accredited investor" as defined in SEC Rule 501(a) and complies with the covenants therein contained) the offer, sale and issuance of the Non- Subsidiary Warrants hereunder do not require registration under the Securities Act or any applicable state securities law. Except for their Operating Agreements, there are no agreements among the members of the Non- Subsidiary Entities with respect to any aspect of the Non-Subsidiary Entities' affairs. (f) Trademarks, Patents, Etc. Schedule 2.1(f) is an accurate and complete ----------------------------------------- list of all patents, trademarks, tradenames, trademark registrations, service names, service marks, copyrights, licenses, formulas and applications therefor owned by any of the CIC Entities or used or required by any of the CIC Entities in the operation of its business, title to each of which is, except as set forth in Schedule 2.1(f) hereto, held by Borrower, free and clear of all adverse --------------- claims, liens, security agreements, restrictions or other encumbrances. There is no infringement action, lawsuit, claim or complaint which asserts that the operations of any of the CIC Entities violate or infringe the rights or the trade names, trademarks, trademark registration, service name, service mark or copyright of others with respect to any apparatus or method of any of the CIC Entities or any adversely held trademark, trade name, trademark registration, service name, service mark or copyright, nor are any of the CIC Entities in any way making use of any confidential information or trade secrets of any person except with the consent of such person. (g) No Conflicts. Consummation of the transactions hereby contemplated and ------------ the performance of the obligations of any of the CIC Entities under and by virtue of the respective Loan Documents to which they are a party will not result in any breach of, or constitute a default under, any material mortgage, security deed or agreement, deed of trust, lease, bank loan or credit agreement, corporate charter or bylaws, articles or certificate of organization or operating agreement, agreement or certificate of limited partnership, partnership agreement, license, franchise or any other material instrument or agreement to which any of the CIC Entities are a party or by which any of the CIC Entities, or their respective properties may be bound or affected or to which any of the CIC Entities have not obtained an effective waiver. (h) Litigation. Except as set forth on Schedule 2.1(h), as of the date of ---------- --------------- this Agreement there are no actions, suits or proceedings pending, or, to the knowledge of Borrower, threatened, against or affecting any of the CIC Entities or involving the validity or enforceability of any of the Loan Documents at law or in equity, or before any governmental or administrative agency; and to Borrower's knowledge, none of the CIC Entities are in default with respect to any order, writ, injunction, decree or demand of any court or any governmental authority where such default could have a material adverse effect on it. 6 (i) Financial Statements. The financial statements of the CIC Entities, -------------------- dated December 31, 1996, attached hereto as Schedule 2.1(i)(A), are true and ------------------- correct in all material respects have been prepared on the basis of accounting principles consistently applied, and fairly present the financial condition of the CIC Entities as of the date(s) thereof. No material adverse change has occurred in the financial condition of Borrower since the date(s) thereof, and as of the date of this Agreement, no additional borrowings beyond those borrowings reflected on such financial statements have been made by any of the CIC Entities since the date(s) thereof other than as set forth on Schedule -------- 2.1(i)(B). - --------- (j) Other Agreements; No Defaults. None of the CIC Entities is a party to ----------------------------- indentures, loan or credit agreements, leases or other agreements or instruments, or subject to any charter or corporate restrictions that could have a material adverse effect on its business, properties, assets, operations or conditions, financial or otherwise, or its ability to carry out its obligations under the Loan Documents to which it is a party. None of the CIC Entities is in default in any respect in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement or instrument material to its business, including but not limited to this Agreement and the other Loan Documents to which it is a party, and no other default or event has occurred and is continuing that with notice or the passage of time or both would constitute a default or event of default under any of same. (k) Compliance With Law. Each of the CIC Entities has obtained all ------------------- material licenses, permits and approvals and authorizations necessary or required in order to conduct its business and affairs as heretofore conducted and as hereafter intended to be conducted. To Borrower's knowledge, each of the CIC Entities is in compliance with all laws, regulations, decrees and orders applicable to it (including but not limited to laws, regulations, decrees and orders relating to environmental, occupational and health standards and controls, antitrust, monopoly, restraint of trade or unfair competition), except to the extent that noncompliance, in the aggregate, cannot reasonably be expected to have a material adverse effect on its business, operations, property or financial condition and will not materially adversely affect its ability to perform its obligations under the Loan Documents to which it is a party. (l) Debt. Schedule 2.1(l) is a complete and correct list of all credit ---- --------------- agreements, indentures, purchase agreements, promissory notes and other evidences of indebteness, guaranties, capital leases and other instruments, agreements and arrangements presently in effect providing for or relating to extensions of credit (including agreements and arrangements for the issuance of letters of credit or for acceptance financing) in respect of which any of the CIC Entities, or any of the properties thereof, are in any manner directly or contingently obligated as of the date hereof; and the maximum principal or face amounts of the credit in question that are outstanding and that can be outstanding are correctly stated, and all liens of any 7 nature given or agreed to be given as security therefor are correctly described or indicated in such Schedule. (m) Taxes. Each of the CIC Entities has filed or caused to be filed ----- all tax returns that to Borrower's knowledge are required to be filed (except for returns that have been appropriately extended), and has paid, or will pay when due, all taxes shown to be due and payable on said returns and all other taxes, impositions, assessments, fees or other charges imposed on them by any governmental authority, agency or instrumentality, prior to any delinquency with respect thereto (other than taxes, impositions, assessments, fees and charges currently being contested in good faith by appropriate proceedings, for which appropriate amounts have been reserved). No tax liens have been filed against any of the CIC Entities, or any of the property thereof. (n) [Intentionally omitted.] (o) Certain Transactions. Except as set forth on Schedule 2.1(o), as -------------------- --------------- of the date hereof, none of the CIC Entities is indebted, directly or indirectly, to any of its shareholders, officers, directors, members, governors or managers, or to their respective spouses or children, in any amount whatsoever; except as set forth on Schedule 2.1(o), as of the date --------------- hereof, none of said shareholders, officers, directors, members, governors or managers or any members of their immediate families, is indebted to any of the CIC Entities or has any direct or indirect ownership interest in any firm or corporation with which any of the CIC Entities have a business relationship, or any firm or corporation which competes with any of the CIC Entities, except that shareholders, officers, directors, members, governors or managers of any of the CIC Entities may own no more than 4.9% of outstanding stock of publicly traded companies which may compete with any of the CIC Entities. Except as set forth on Schedule 2.1(o), as of the date --------------- hereof, no officer, director, member, governor or manager of any of the CIC Entities or any member of their immediate families, is, directly or indirectly, interested in any material contract with any of the CIC Entities. Except as contemplated hereby, none of the CIC Entities is a guarantor or indemnitor of any indebtedness of any other person, firm or corporation. (p) Statements Not False or Misleading. No representation or warranty ---------------------------------- given as of the date hereof by Borrower contained in this Agreement or any schedule attached hereto or any statement in any document, certificate or other instrument furnished or to be furnished by any of the CIC Entities to Lender pursuant hereto, taken as a whole, contains or will (as of the time so furnished) contain any untrue statement of a material fact, or omits or will (as of the time so furnished) omit to state any material fact required to be stated therein and necessary in order to make the statements contained therein not misleading. 8 (q) Margin Regulations. None of the CIC Entities are engaged in the ------------------ business of extending credit for the purpose of purchasing or carrying margin stock. No proceeds received pursuant to this Agreement will be used to purchase or carry any equity security of a class which is registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended. (r) Significant Contracts. Schedule 2.1(r) is a complete and correct --------------------- --------------- list of all contracts, agreements and other documents pursuant to which any of the CIC Entities receives, as of the date hereof, revenues in excess of $25,000 per fiscal year. Each such contract, agreement and other document is in full force and effect as of the date hereof and Borrower knows of no reason why such contracts, agreements and other documents would not remain in full force and effect pursuant to the terms thereof. (s) Environmental Matters. Each of the CIC Entities has duly complied --------------------- with, and its business, operations, assets, equipment, property, leaseholds or other facilities are in compliance with, the provisions of all federal, state and local environmental, health, and safety laws, codes and ordinances, and all rules and regulations promulgated thereunder, except to the extent that failure to do so would not have a material adverse effect on its business. Each of the CIC Entities has been issued and will maintain all required federal, state and local permits, licenses, certificates and approvals relating to (1) air emissions; (2) discharges to surface water or groundwater; (3) noise emissions; (4) solid or liquid waste disposal; (5) the use, generation, storage, transportation or disposal of toxic or hazardous substances or wastes (which shall include any and all such materials listed in any federal, state or local law, code or ordinance and all rules and regulations promulgated thereunder as hazardous or potentially hazardous); or (6) other environmental, health or safety matters, except to the extent that failure to do so would not have a material adverse effect on its business. None of the CIC Entities has received notice of, or knows of, or suspects facts which might constitute any violations of any federal, state or local environmental, health or safety laws, codes or ordinances, and any rules or regulations promulgated thereunder with respect to its businesses, operations, assets, equipment, property, leaseholds, or other facilities. Except in accordance with a valid governmental permit, license, certificate or approval, with respect to the operation of the CIC Entities, there has been no emission, spill, release or discharge into or upon (1) the air; (2) soils, or any improvements located thereon; (3) surface water or groundwater; or (4) the sewer, septic system or waste treatment, storage or disposal system servicing the premises, of any toxic or hazardous substances or wastes at or from the premises; and accordingly the premises of each of the CIC Entities are free of all such toxic or hazardous substances or wastes. There has been no complaint, order, directive, claim, citation or notice by any governmental authority or any person or entity with respect to (1) air emissions; (2) spills, releases or discharges to soils or improvements located thereon, surface water, groundwater or the sewer, septic system or waste treatment, storage or disposal systems servicing the premises; (3) noise emissions; (4) solid or liquid waste disposal; (5) the use, 9 generation, storage, transportation or disposal of toxic or hazardous substances or waste; or (6) other environmental, health or safety matters affecting any of the CIC Entities or their respective businesses, operations, assets, equipment, property, leaseholds or other facilities. None of the CIC Entities has any indebtedness, obligation or liability (absolute or contingent, matured or not matured), with respect to the storage, treatment, cleanup or disposal of any solid wastes, hazardous wastes or other toxic or hazardous substances (including without limitation any such indebtedness, obligation, or liability with respect to any current regulation, law or statute regarding such storage, treatment, cleanup or disposal). (t) Fees; Commissions. Except for the processing and commitment fees paid ----------------- pursuant to Section 1.2 and paid to Decosimo Management Consulting, LLP, none of the CIC Entities has agreed to pay any finder's fee, commission, origination fee or other fee or charge to any person or entity with respect to the Loan and investment transactions contemplated hereunder. (u) ERISA. Each of the CIC Entities is in compliance in all material ----- respects with all applicable provisions of ERISA (as defined in Section 3.11 hereof). With respect to each of the CIC Entities, neither a reportable event nor a prohibited transaction (as defined in ERISA) has occurred and is continuing with respect to any Plan (as defined in Section 3.11 hereof); no notice of intent to terminate a Plan has been filed nor has any Plan been terminated; no circumstances exist which constitute grounds entitling the Pension Benefit Guaranty Corporation (together with any entity succeeding to any or all of its functions, the "PBGC") to institute proceedings to terminate, or appoint a trustee to administer, a Plan, nor has the PBGC instituted any such proceedings; neither the CIC Entities, nor any commonly controlled entity (as defined in ERISA) has completely or partially withdrawn from a multiemployer plan (as defined in ERISA); Each of the CIC Entities and each commonly controlled entity has met its minimum funding requirements under ERISA with respect to all of its Plans and the present fair market value of all Plan property exceeds the present value of all vested benefits under each Plan, as determined on the most recent valuation date of the Plan and in accordance with the provisions of ERISA and the regulations thereunder for calculating the potential liability of each of the CIC Entities, or any commonly controlled entity to the PBGC or the Plan under Title IV of ERISA; and neither the CIC Entities, nor any commonly controlled entity has incurred any liability to the PBGC under ERISA. (v) Title to Properties. Each of the CIC Entities has good, indefeasible ------------------- and insurable title to, or valid leasehold interests in, all its real properties and good title to its other assets, free and clear of all liens other than Permitted Liens (as defined in Section 3.15 hereof). 10 (w) Material Adverse Effect. Since December 31, 1996, no event has ----------------------- occurred which has resulted or which Borrower reasonably believes could be expected to result in a material adverse effect on any of the CIC Entity's ability to perform its obligations under the Loan Documents to which it is a party. No default or event of default under any other agreement will occur as a result of the transactions contemplated by this Agreement or by the Warrant. (x) Financial Solvency. Neither Borrower nor any of the other CIC ------------------ Entities are entering into the arrangements contemplated by this Agreement and the other Loan Documents to which each is a party with actual intent to hinder, delay or defraud either present or future creditors. On and as of the date hereof on a pro forma basis after giving effect to the transactions contemplated by the Loan Documents and to all debts incurred or to be created in connection herewith: (1) the present fair salable value of the assets of each of the CIC Entities (on a going concern basis) will exceed its probable liability on its debts (including its contingent obligations); (2) None of the CIC Entities has incurred, nor does it intend to or believe that it will incur, debts (including contingent obligations) beyond its ability to pay such debts as such debts mature (taking into account the timing and amounts of cash to be received from any source, and of amounts to be payable on or in respect of debts); and the amount of cash available to each of the CIC Entities after taking into account all other anticipated uses of funds is anticipated to be sufficient to pay all such amounts on or in respect of debts, when such amounts are required to be paid; and (3) Each of the CIC Entities will have sufficient capital with which to conduct its present and proposed business and the property of each of the CIC Entities does not constitute unreasonably small capital with which to conduct its current business at present levels of operations. For purposes of this Section 2.1(x) "debt" means any liability on a (i) right to payment whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured; or (ii) right to an equitable remedy for breach of performance if such breach gives rise to a payment, whether or not such a right to an equitable remedy is reduced to judgment, fixed, contingent, unmatured, disputed, undisputed, secured, or unsecured. (y) Offering of Notes and Warrant. None of the CIC Entities, nor ----------------------------- anyone acting on their behalf, has offered the Notes, the Warrants (as hereinafter defined) or any similar securities for sale, to or solicited any offer to buy any of the same from, or otherwise approached or negotiated in respect thereof, with, any person other than Lender and not more than 35 other institutional investors. None of the 11 CIC Entities, nor anyone acting on their behalf, has taken, or will take, any action which would subject the issuance or sale of the Notes or the Warrants to Section 5 of the Securities Act of 1933, as amended, or the registration or qualification provisions of the blue sky laws of any state. (z) Registration Rights. Except as described in the Warrants, none of ------------------- the CIC Entities is under any obligation to register under the Securities Act of 1933, as amended, or the Trust Indenture Act of 1939, as amended, any of its presently outstanding securities or any of its securities that may subsequently be issued. (aa) Employees. None of the CIC Entities has any current labour --------- problems or disputes which have resulted in, or which Borrower reasonably believes could be expected to have, a material adverse effect. (ab) Issuance Taxes. All taxes imposed on any of the CIC Entities in -------------- connection with the issuance, sale and delivery of the Notes, the Warrants, and the capital stock or other equity interests issuable upon exercise of the Warrants have been or will be fully paid, and all laws imposing such taxes have been or will be fully satisfied. (ac) List of Deposit Institutions. Schedule 2.1(ac) sets forth a true ---------------------------- --------------- and complete list of all deposit institutions at which any of the CIC Entities has or maintains an account or deposits of any kind. (ad) Locations and Names. Except as set forth on Schedule 2.1(ad), ------------------- ------------ none of the CIC Entities has, during the five years preceding the date of this Agreement, been known as or used any other corporate, trade or fictitious name, nor acquired all or substantially all of the assets, capital stock or operating units of any person. None of the CIC Entities has, during the five years preceding the date of this Agreement, had a business location at any address other than its address(es) set forth on Schedule 2.1(ad). --------------- ARTICLE 3 COVENANTS AND AGREEMENTS ------------------------ Borrower covenants and agrees that during the term of this Agreement: 3.1 Payment of Obligations. Borrower shall pay the indebtedness evidenced ---------------------- by the Notes according to the respective terms thereof, and shall timely pay or perform, as the case may be, all of the other obligations of Borrower to Lender, direct or contingent, however evidenced or denominated, and however and whenever incurred, including but not limited to indebtedness incurred pursuant to any present or future commitment of Lender to Borrower, together with interest thereon, and any extensions, modifications, consolidations and/or renewals thereof and any notes given in payment thereof. 12 3.2 Financial Statements and Reports. Borrower shall furnish to Lender (i) -------------------------------- as soon as practicable and in any event within ninety (90) days after the end of each fiscal year of the CIC Entities, a consolidated or combined balance sheet of the CIC Entities as of the close of such fiscal year, a consolidated or combined statement of earnings and retained earnings of the CIC Entities as of the close of such fiscal year and a consolidated or combined statement of cash flows for the CIC Entities for such fiscal year, prepared in accordance with generally accepted accounting principles consistently applied ("GAAP"), audited by an independent certified public accountant reasonably acceptable to Lender and certified by an officer of Borrower and accompained by a certificate of the President of Borrower stating that to the best of the knowledge of such officer, each of the CIC Entities has kept, observed, performed and fulfilled each covenant, term and condition of this Agreement and the other Loan Documents to which it is a party during the preceding fiscal year and that no Event of Default, as herein defined, has occurred and is continuing (or if an Event of Default has occurred and is continuing, specifying the nature of same, the period of existence of same and the action taken or proposed to be taken in connection therewith), (ii) within fifteen (15) days after the end of each calendar month, a consolidated or combined balance sheet of the CIC Entities as of the close of such month and a consolidated or combined statement of earnings and retained earnings of the CIC Entities as of the close of such month, all in reasonable detail (including financial information for the preceding six (6) months), and prepared substantially in accordance with GAAP (except for the absence of footnotes and subject to year-end adjustments), and (iii) with reasonable promptness, such other financial data as Lender may reasonably request. Without Lender's prior written consent, none of the CIC Entities shall modify or change any accounting policies or procedures in effect on the date hereof. 3.3 Maintenance of Books and Records; Inspection. Each of the CIC Entities -------------------------------------------- shall maintain its books, accounts and records in accordance with GAAP, and after reasonable notice from Lender, shall permit Lender, its officers, employees and any professionals designated by Lender in writing, at such CIC Entity's expense, to visit, inspect and/or audit any of its properties, books and financial records, and to discuss its accounts, affairs and finances with such CIC Entity or the principal officers of such CIC Entity during reasonable business hours, all at such times as Lender may reasonably request; provided that no such visit, inspection and/or audit shall materially interfere with the conduct of such CIC Entity's business and the cost of such visit, inspection and/or audit shall not exceed an aggregate of $5,000 per year. 3.4 Insurance. Without limiting any of the requirements of any of the --------- other Loan Documents, each of the CIC Entities shall maintain in amounts customary for entities engaged in comparable business activity (i) to the extent required by applicable law, worker's compensation insurance (or maintain a legally sufficient amount of self insurance against worker's compensation liabilities, with adequate reserves, under a plan approved by Lender, such approval not to be unreasonably withheld or delayed) and (ii) fire and "all risk" casualty insurance on its properties against such hazards and in at least such amounts as are customary in its business. Each of the CIC Entities will make reasonable efforts to obtain and maintain public liability insurance in an amount, and at a cost, deemed reasonable to 13 its Board of Directors or Board of Governors, as the case may be. At the request of Lender, Borrower will deliver forthwith a certificate specifying the details of such insurance in effect. 3.5 Taxes and Assessments. Each of the CIC Entities shall (i) file all tax --------------------- returns and appropriate schedules thereto that are required to be filed under applicable law, prior to the date of delinquency, (ii) pay and discharge all taxes, assessments and governmental charges or levies imposed upon it with respect to its income and profits or upon any properties belonging to it, prior to the date on which penalties attach thereto, and (iii) pay all taxes, assessments and governmental charges or levies that, if unpaid, might become a lien or charge upon any of its properties; provided, however, that any of the CIC Entities, in good faith, may contest any such tax, assessment, governmental charge or levy described in the foregoing clauses (ii) and (iii) so long as appropriate reserves are maintained with respect thereto. 3.6 Legal Existence. Each of the CIC Entities shall maintain its legal --------------- existence and good standing in the state of its formation, and its qualification and good standing as a foreign entity in each jurisdiction in which a failure to be so qualified would have a material adverse effect on its financial position or its ability to conduct its business in the manner now being conducted. 3.7 Compliance with Law and Other Agreements. Except where the failure to ---------------------------------------- do so would not materially adversely affect such CIC Entity's operations or its ability to fulfill its obligations under the Loan Documents to which it is a party, each of the CIC Entities shall maintain its business, operations and property owned or used in connection therewith in compliance with (i) all applicable federal, state and local laws, regulations and ordinances governing such business operations and the use and ownership of such property, and (ii) all agreements, licenses, franchises, indentures and mortgages to which it is a party or by which it or any of its properties is bound. Without limiting the foregoing, each of the CIC Entities shall pay all of its indebtedness promptly in accordance with the terms thereof. 3.8 Notice of Default. Borrower shall give written notice to Lender of the ----------------- occurrence of any default or Event of Default under this Agreement or any other Loan Document promptly upon the occurrence thereof. 3.9 Notice of Litigation. Borrower shall give notice, in writing, to -------------------- Lender of (i) any actions, suits or proceedings instituted by any persons whomsoever against any of the CIC Entities, or affecting any of the assets of any the CIC Entities, wherein the amount at issue is in excess of Twenty-Five Thousand and No/100ths Dollars ($25,000.00), and (ii) any dispute, not resolved within sixty (60) days of the commencement thereof, between any of the CIC Entities on the one hand and any governmental regulatory body on the other hand, which dispute might materially interfere with the normal operations of any of the CIC Entities. 14 3.10 Conduct of Business, Name and Location of Business. Each of the CIC -------------------------------------------------- Entities will continue to engage in a business of the same general type and manner as conducted by it on the date of this Agreement. Without Lender's prior written consent (which will not be unreasonably withheld), none of the CIC Entities shall modify or change any terms or conditions of any material contracts and/or agreements to which it is a party on the date hereof. None of the CIC Entities will change its name or any location of its business without providing Lender with 10 days' written notice of such change. In the event any of the CIC Entities makes a change of its name or location of business, Borrower shall cause it to promptly execute any and all financing statements, and amendments or continuations thereof and any other documents that Lender may reasonably request to evidence, continue, and/or perfect any security interest in or pledge of collateral securing the Loan. 3.11 ERISA Plan. If any of the CIC Entities has in effect, or hereafter ---------- institutes, a pension plan that is subject to the requirements of Title IV of the Employee Retirement Income Security Act of 1974, Pub. L. No. 93-406, September 2, 1974, 88 Stat. 829, 29 U.S.C.A. (S) 1001 et seq. (1975), as amended ------ from time to time ("ERISA"), then the following warranty and covenants shall be applicable during such period as any such plan (the "Plan") shall be in effect: (i) Borrower hereby warrants that no fact that might constitute grounds for the involuntary termination of the Plan, or for the appointment by the appropriate United States District Court of a trustee to administer the Plan, exists at the time of execution of this Agreement, (ii) Borrower hereby covenants that throughout the existence of the Plan, the contributions of such CIC Entity under the Plan will meet the minimum funding standards required by ERISA and such CIC Entity will not institute a distress termination of the Plan, and (iii) Borrower covenants that it will send to Lender a copy of any notice of a reportable event (as defined in ERISA) required by ERISA to be filed with the Labor Department or the Pension Benefit Guaranty Corporation, at the time that such notice is so filed. 3.12 Dividends, Distributions, Stock Rights, etc. Except as set forth in ------------------------------------------- this Section 3.12 below, none of the CIC Entities which are corporations shall declare or pay any dividend of any kind (other than stock dividends payable to all holders of any class of capital stock), in cash or in property, on any class of its capital stock, or purchase, redeem, retire or otherwise acquire for value any shares of such stock, nor make any distribution of any kind in cash or property in respect thereof, nor make any return of capital of shareholders, nor make any payments in cash or property in respect of any stock options, stock bonus or similar plan (except as required or permitted hereunder), nor make any payments in cash or property in respect of any bonus or similar plan, nor pay any performance bonuses (in excess of $400,000 in the aggregate in any calendar year) and similar payments to management or key employees nor grant any preemptive rights with respect to its capital stock, without the prior written consent of Lender. Except as set forth in this Section 3.12 below, none of the CIC Entities which are limited liability companies shall make any distributions to their members (except to the extent necessary for members to pay taxes attributable to income from their operations) or purchase, redeem, retire or otherwise acquire for value any membership interest, nor make any distribution of any kind in cash or 15 property in respect thereof, nor make any return of capital of members, nor make any payments in cash or property in respect of any bonus or similar plan, performance bonuses (in excess of $400,000 in the aggregate in any calendar year) and similar payments to management or key employees, nor grant any preemptive rights with respect to their membership interests, without the prior written consent of Lender. Notwithstanding anything in this Section 3.12 or elsewhere to the contrary, nothing herein shall prevent any CIC Entity from declaring or paying any dividend of any kind or making any other distribution of any kind to Borrower. 3.13 Guaranties; Loans; Payment of Debt. Without Lender's prior express ---------------------------------- written consent, none of the CIC Entities shall guarantee nor be liable in any manner, whether directly or indirectly, or become contingently liable after the date of this Agreement in connection with the obligations or indebtedness in excess of $100,000 of any person or entity whatsoever, except for the endorsement of negotiable instruments payable to any of the CIC Entities for deposit or collection in the ordinary course of business. Without Lender's prior express written consent, except as set forth in Section 3.14 hereof, none of the CIC Entities shall (i) make any loan, advance or extension of credit to any person other than in the normal course of its business or (ii) make any payment on any subordinated debt. 3.14 Debt. Without the express prior written consent of Lender, none of ---- the CIC Entities may create, incur, assume or suffer to exist indebtedness of any description whatsoever, excluding (i) the indebtedness evidenced by the Notes, (ii) the endorsement of negotiable instruments payable to any of the CIC Entities for deposit or collection in the ordinary course of business, (iii) indebtedness incurred in the ordinary course of business (each of which, individually, does not exceed $100,000), (iv) the indebtedness listed on Schedule 2.1(1) hereto), and (v) loans by any of the CIC Entities to any of the - --------------- other CIC Entities. Notwithstanding the foregoing, Lender agrees that Borrower may incur additional indebtedness up to $2,500,000 in the aggregate (the "Additional Indebtedness") from a bank, venture capital company or other institutional lender and Lender agrees to subordinate the Loan and any security interest in favor of Lender with respect to the Loan to the Additional Indebtedness and enter into intercreditor agreements with respect to the Additional Indebtedness, all on terms reasonably acceptable to Lender. 3.15 No Liens. None of the CIC Entities shall create, incur, assume or -------- suffer to exist any lien, security interest, security title, mortgage, deed of trust or other encumbrance upon or with respect to any of its properties, now owned or hereafter acquired, except the following permitted liens (the "Permitted Liens"): (a) liens in favor of Lender; (b) liens for taxes or assessments or other governmental charges or levies if not yet due and payable; (c) liens in connection with the leasing of equipment in favor of the lessor of such equipment; 16 (d) liens described on Schedule 2.1(I) hereto; --------------- (e) liens securing the Additional Indebtedness; (f) rights reserved to or vested in any public authority by the terms of any provision of law affecting the properties of any of the CIC Entities; (g) any liens of mechanics, materialmen and laborers for work or services performed or materials furnished in connection with the properties of any of the CIC Entities, which are not due and payable or which are not delinquent or which, or the amount or validity of which, are being contested in good faith by proper proceedings or otherwise preliminary to the institution of such proceedings and for which reasonable reserves have been established; and (h) easements, rights-of-way, servitudes, restrictions and other minor defects, encumbrances and irregularities in the title to such property (including, without limitation, leases in the ordinary course of business) which do not materially adversely affect the value thereof. 3.16 Mergers, Consolidations, Acquisitions and Sales. Without the prior ----------------------------------------------- written consent of Lender which consent will not be unreasonably withheld, none of the CIC Entities shall (a) be a party to any merger, consolidation or reorganization unless (i) all of the parties to the merger, consolidation or reorganization are CIC Entities, (ii) if Borrower is a party to the merger, consolidation or reorganization, Borrower survives the merger, consolidation or reorganization, and (iii) Borrower causes each CIC Entity that survives the merger, consolidation or reorganization to execute and deliver to Lender any and all documents requested by Lender in order for Lender to receive a pledge of, and/or security interest in, the capital stock or other ownership interest of said CIC Entity, a security interest and/or lien on all of the assets of such CIC Entity, and a guaranty by such CIC Entity of the obligations of Borrower pursuant hereto, nor (b) except in connection with the organization of subsidiaries to do business in additional states, purchase or otherwise acquire all or substantially all of the assets or stock of, or any partnership or joint venture interest in, any other person, firm or entity, nor (c) except for Permitted Liens, sell, transfer, convey, grant a security interest in or lease all or any substantial part of its assets, nor (d) except in connection with the organization of subsidiaries to do business in additional states, create any Subsidiaries nor convey any of its assets to any Subsidiary. In the event that any of the CIC Entities (or individual owners thereof with respect to the creation of new entities for the purpose of conducting business in other states) create or acquire any new subsidiaries, then any such CIC Entity shall, and/or shall cause each new subsidiary to, execute any and all documents requested by Lender in order for Lender to receive a pledge of, and/or a security interest in, the capital stock or other ownership of said subsidiary, a security interest in and/or lien on all of the assets of said subsidiary, and a guarantee by said subsidiary of the obligations of the CIC Entities pursuant hereto. 17 3.17 Transactions With Affiliates. None of the CIC Entities shall enter ---------------------------- into any transaction, including, without limitation, the purchase, sale or exchange of property or the rendering of any service, with any affiliate, except as set forth on Schedule 2.1(o) on the date hereof or, subsequently, in the --------------- ordinary course of and pursuant to the reasonable requirements of their respective business and upon fair and reasonable terms no less favorable to them than they would obtain in a comparable arm's length transaction with a person not an affiliate. For the purposes of this Section 3.17, "affiliate" shall mean a person, corporation, partnership or other entity controlling by or under common control with any CIC Entity. 3.18 Environment. Each of the CIC Entities shall be and remain in ----------- compliance with the provisions of all federal, state and local environmental, health, and safety laws, codes and ordinances, and all rules and regulations issued thereunder; notify Lender immediately of any notice of a hazardous discharge or environmental complaint received from any governmental agency or any other party; notify Lender immediately of any hazardous discharge from or affecting its premises; immediately contain and remove the same, in compliance with all applicable laws; promptly pay any fine or penalty assessed in connection therewith; permit Lender to inspect the premises, to conduct tests thereon, and to inspect all books, correspondence, and records pertaining thereto; and at Lender's request, and at its expense, provide a report of a qualified environmental engineer, satisfactory in scope, form, and content to Lender, and such other and further assurances reasonably satisfactory to Lender that the condition has been corrected. ARTICLE 4 CONDITIONS TO CLOSING --------------------- 4.1 Closing of the Loan. The obligation of Lender to fund the Loan on the ------------------- date hereof (the "Closing Date") is subject to the fulfillment, on or prior to the Closing Date, of each of the following conditions: (a) Borrower shall have performed and complied in all material respects with all of the covenants, agreements, obligations and conditions required by this Agreement. (b) Lender shall have received an opinion of Borrower's counsel, Alston & Bird dated the Closing Date, in form and substance satisfactory to Lender's counsel, Chambliss & Bahner, PLLC. (c) Lender shall have received opinions of local counsel to Check Into Cash of Iowa, Inc. and Creditcorp of Ohio, LLC (such local counsel must be satisfactory to Lender's counsel, Chambliss & Bahner, PLLC), dated the Closing Date, in form and substance satisfactory to Lender's counsel, Chambliss & Bahner, PLLC. (d) Borrower shall have delivered to Lender an Amended, Restated and Consolidated Second Promissory Note executed by Borrower. 18 (e) Borrower shall have delivered to Lender the Borrower Warrant executed by Borrower, in a form acceptable to Lender and each of the Non- Subsidiary Warrants executed by the applicable Non-Subsidiary Entity, each in a form acceptable to Lender (collectively, by the "Warrants"). (f) Borrower shall have delivered to Lender a Security Agreement executed by Borrower (in form acceptable to Lender) and related UCC-1 Financing Statement(s) (in form acceptable to Lender) executed by Borrower. (g) Borrower shall have delivered to Lender a Pledge and Security Agreement (in a form acceptable to Lender) and a related stock proxy, stock power, and stock certificate (all in form acceptable to Lender), executed by each shareholder of Borrower, and a related stock pledge letter (in the form acceptable to Lender) executed by Borrower with respect to each such shareholder. (h) Borrower shall have delivered to Lender a Security Agreement and Collateral Assignment of Membership Interests (all in a form acceptable to Lender) and related UCC-1 Financing Statements (all in a form acceptable to Lender) executed by Borrower with respect to each of the Subsidiaries which are limited liability companies. (i) Borrower shall have delivered to Lender a Security Agreement and Collateral Assignment of Membership Interests (all in form acceptable to Lender) and related UCC-1 Financing Statements (all in a form acceptable to Lender) executed by W. Allan Jones, Jr. with respect to each of the Non- Subsidiary Entities. (j) Borrower shall have delivered to Lender a Security Agreement and Collateral Assignment of Membership Interests (all in form acceptable to Lender) and related UCC-1 Financing Statements (all in a form acceptable to Lender) executed by Janie P. Jones with respect to each of the Non- Subsidiary Entities. (k) Borrower shall have delivered to Lender a Pledge and Security Agreement (in form acceptable to Lender) executed by Borrower with respect to each of the Subsidiaries which are corporations. (l) Borrower shall have delivered to Lender an Amended and Restated Security Agreement executed by each of the CIC Entities other than Borrower (in form acceptable to Lender) and related UCC-1 Financing Statements (in form acceptable to Lender) executed by each of the CIC Entities other than Borrower. (m) Borrower shall have delivered to Lender a Guaranty Agreement executed by each of the CIC Entities other than Borrower (in form acceptable to Lender). (n) Borrower shall have delivered to Lender a Landlord's Consent and Subordination of Lien with respect to Borrower's corporation headquarters, executed by the applicable landlord and in a form acceptable to Lender. 19 (o) Lender shall have received copies of the charter (or certificate of incorporation) and other publicly filed organizational documents of Borrower (and each of the other CIC Entities which are corporations), certified by the Secretary of State or other appropriate public official in the jurisdiction in which Borrower (and each of the other CIC Entities which are corporations) is incorporated. (p) Lender shall have received copies of the operating agreements of each of the CIC Entities which are limited liability companies, certified to Lender by an officer, manager or member of the applicable CIC Entity, and copies of the articles of organization and other publicly filed documents of each of the CIC Entities which are limited liability companies, certified by the Secretary of State or other appropriate public official jurisdiction in which each of such CIC Entities is organized. (q) Lender shall have received certified (as of the date of this Agreement) copies of all corporate action taken by Borrower, including resolutions of its Board of Directors, authorizing the execution, delivery and performance of the Loan Documents to which Borrower is a party. (r) Lender shall have received certified (as of the date of this Agreement) copies of all actions taken by each of the CIC Entities other than Borrower, including resolutions of their directors, members or managers (as applicable), authorizing the execution, delivery and performance of the Loan Documents to which each such CIC Entity is a party. (s) Lender shall have received a certificate as to the legal existence and good standing of Creditcorp of Ohio, LLC and Check Into Cash of Iowa, Inc., issued by the Secretary of State or other appropriate public official in the jurisdiction in which each such party is incorporated or formed. (t) With respect to each of the CIC Entities, Lender shall have received certificates of the Secretaries of State or other appropriate public officials as to their qualification to do business and good standing in each jurisdiction in which a failure to be so qualified would have a material adverse effect on their financial positions or their ability to conduct their business in the manner now conducted and as hereafter intended to be conducted. (u) Each of the CIC Entities shall have delivered to Lender a Collateral Assignment of Note, executed by each of them, in a form acceptable to Lender, together with all original promissory notes held by each of them. (v) Borrower shall have delivered to Lender a Trademark Security Agreement executed by Borrower (in form acceptable to Lender) and related UCC-1 Financing Statement(s) (in form acceptable to Lender) executed by Borrower. 20 (w) Lender shall have received an Intercreditor Estoppel Agreement executed by Cleveland Bank & Trust Company in a form acceptable to Lender. (x) Lender shall have received an Intercreditor Agreement executed by W. Allan Jones, Jr. d/b/a Jones Properties in a form acceptable to Lender. 4.2 Subsequent Advances. The obligation of Lender to fund the subsequent ------------------- Advances of the Loan on the date of each such Advance is subject to the fulfillment, on or prior to such date, of each of the following conditions: (a) An Event of Default (as herein defined) shall not have occurred and be continuing. (b) Borrower shall have delivered a Note executed by Borrower in the original principal amount of the applicable Advance. (c) Borrower shall have delivered a Closing Certificate (in form acceptable to Lender), executed by Borrower. (d) Borrower shall have caused to be delivered to Lender any and all documents reasonably necessary to secure the Loan with the assets and ownership interest of any subsidiaries and/or affiliates of Borrower created for the expansion of Borrower's business into a state other than one in which Borrower operates on the date hereof. ARTICLE 5 DEFAULT AND REMEDIES -------------------- 5.1 Events of Default. The occurrence of any of the following shall ----------------- constitute an Event of Default hereunder: (a) Default by Borrower in the payment of the principal of or interest on the indebtedness evidenced by the Note in accordance with the terms of the Note, which default is not cured within five (5) days; (b) Any misrepresentation by any of the CIC Entities, or any subsidiary, member, shareholder or affiliate of any of the CIC Entities, as to any material matter hereunder or under any of the other Loan Documents, or delivery by any of the CIC Entities or any subsidiary, member, shareholder or affiliate of any of the CIC Entities of any schedule, statement, resolution, report, certificate, notice or writing to Lender that is untrue in any material respect on the date as of which the facts set forth therein are stated or certified; 21 (c) Failure of any of the CIC Entities, or any subsidiary, member, shareholder or affiliate of any of the CIC Entities, to perform any of its obligations, covenants or agreements under this Agreement, the Note or any of the other Loan Documents to which it is a party; (d) Any of the CIC Entities or their members (i) shall generally not pay or shall be unable to pay its debts as such debts become due; or (ii) shall make an assignment for the benefit of creditors or petition or apply to any tribunal for the appointment of a custodian, receiver or trustee for it or a substantial part of its assets; or (iii) shall commence any proceeding under any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, whether now or hereafter in effect; or (iv) shall have had any such petition or application filed or any such proceeding commenced against it in which an order for relief is entered or an adjudication or appointment is made; or (v) shall indicate, by any act or intentional and purposeful omission, its consent to, approval of or acquiescence in any such petition, application, proceeding or order for relief or the appointment of a custodian, receiver or trustee for it or a substantial part of its assets; or (vi) shall suffer any such custodianship, receivership or trusteeship to continue undischarged for a period of sixty (60) days or more; (e) Any of the CIC Entities shall be liquidated, dissolved, partitioned or terminated, or the charter thereof shall expire or be revoked; (f) A default or event of default shall occur under any of the other Loan Documents and, if subject to a cure right, such default or event of default shall not be cured within the applicable cure period; (g) Any of the CIC Entities shall default in the timely payment or performance of any obligation now or hereafter owed to Lender in connection with any other indebtedness of Borrower or any of the CIC Entities now or hereafter owed to Lender; (h) Any of the CIC Entities shall have defaulted and continue to be in default in the timely payment or performance of any other indebtedness or obligation, which in the aggregate exceeds Fifty Thousand and No/100ths Dollars ($50,000.00) or materially adversely affects Borrower's financial condition; (i) W. Allan Jones, Jr. shall no longer be significantly involved in the management of Borrower. With respect to any Event of Default described above that is capable of being cured and that does not already provide its own cure procedure (a "Curable Default"), the occurrence of such Curable Default shall not constitute an Event of Default hereunder if such Curable Default is fully cured and/or corrected within thirty (30) days (ten (10) days, if such Curable Default may be cured by payment of a sum of money) of notice thereof to Borrower given in accordance with the provisions hereof; provided, however, that this provision shall not require notice to 22 Borrower and an opportunity to cure any Curable Default of which Borrower has had actual knowledge for the requisite number of days set forth. 5.2 Acceleration of Maturity; Remedies. Upon the occurrence of any ---------------------------------- Event of Default described in subsection 5.1(d), the indebtedness evidenced by the Notes as well as any and all other indebtedness of any of the CIC Entities to Lender shall be immediately due and payable in full; and upon the occurrence of any other Event of Default described above, Lender at any time thereafter may at its option accelerate the maturity of the indebtedness evidenced by the Notes as well as any and all other indebtedness of any of the CIC Entities to Lender; all without notice of any kind. Upon the occurrence of any such Event of Default and the acceleration of the maturity of the indebtedness evidenced by the Notes: (a) Lender shall be immediately entitled to exercise any and all rights and remedies possessed by Lender pursuant to the terms of the Notes and all of the other Loan Documents; and (b) Lender shall have any and all other rights and remedies that Lender may now or hereafter possess at law, in equity or by statute. 5.3 Remedies Cumulative; No Wavier. No right, power or remedy ------------------------------ conferred upon or reserved to Lender by this Agreement or any of the other Loan Documents is intended to be exclusive of any other right, power or remedy, but each and every such right, power and remedy shall be cumulative and concurrent and shall be in addition to any other right, power and remedy given hereunder, under any of the other Loan Documents or now or hereafter existing at law, in equity or by statute. No delay or omission by Lender to exercise any right, power or remedy accruing upon the occurrence of any Event of Default shall exhaust or impair any such right, power or remedy or shall be construed to be a waiver of any such Event of Default or an acquiescence therein, and every right, power and remedy given by this Agreement and the other Loan Documents to Lender may be exercised from time to time and as often as may be deemed expedient by Lender. 5.4 Proceeds of Remedies. Any or all proceeds resulting from the -------------------- exercise of any or all of the foregoing remedies shall be applied as set forth in the Loan Document(s) providing the remedy or remedies exercised; if none are specified, or if the remedy is provided by this Agreement, then as follows: First, to the costs and expenses, including, without limitation, reasonable attorney's fees incurred by Lender in connection with the exercise of its remedies; Second, to the expenses of curing the default that has occurred, in the event that Lender elects, in its sole discretion, to cure the default that has occurred; Third, to the payment of the obligations of the CIC Entities under the Loan Documents (the "Obligations"), including but not limited to the payment of the principal 23 of and interest on the indebtedness evidenced by the Note, in such order of priority as Lender shall determine in its sole discretion; and Fourth, the remainder, if any, to Borrower or to any other person lawfully thereunto entitled. ARTICLE 6 TERMINATION ----------- 6.1 Termination of this Agreement. This Agreement shall remain in ----------------------------- full force and effect until the later of (i) the Maturity Date (as defined in the Notes), or (ii) the payment by Borrower of all amounts owed to Lender, at which time Lender shall cancel the Notes and deliver them to Borrower; provided, however, that if at any time Borrower has satisfied all obligations to Lender, Borrower may terminate this Agreement by providing written notice to Lender. ARTICLE 7 MISCELLANEOUS ------------- 7.1 Performance By Lender. If Borrower shall default in the payment, --------------------- performance or observance of any covenant, term or condition of this Agreement, which default is not cured within the applicable cure period, then Lender may, at its option, pay, perform or observe the same, and all payments made or costs or expenses incurred by Lender in connection therewith (including but not limited to reasonable attorney's fees), with interest thereon at the highest default rate provided in the Note, shall be immediately repaid to Lender by Borrower and shall constitute a part of the Obligations. Lender shall be the sole judge of the necessity for any such actions and of the amounts to be paid. 7.2 Successors and Assigns Included in Parties. Whenever in this ------------------------------------------ Agreement one of the parties hereto is named or referred to, the heirs, legal representatives, successors, successors-in-title and assigns of such parties shall be included, and all covenants and agreements contained in this Agreement by or on behalf of Borrower or by or on behalf of Lender shall bind and inure to the benefit of their respective heirs, legal representatives, successors-in-title and assigns, whether so expressed or not. 7.3 Costs and Expenses. Borrower agrees to pay all reasonable costs ------------------ and expenses incurred by Lender in connection with the making of the Loan, including but not limited to filing fees, recording taxes, indebtedness taxes, and reasonable attorneys' fees, promptly upon demand of Lender. Borrower further agrees to pay all premiums for insurance required to be maintained by the CIC Entities pursuant to the terms of the Loan Documents and all of the out-of-pocket costs and expenses incurred by Lender in connection with the collection of the Loan, amendment to the Loan Documents, or prepayment of the Loan, including but not limited to reasonable attorneys' fees, promptly upon demand of Lender. 24 7.4 Assignment. The Note, this Agreement and the other Loan Documents may ---------- be endorsed, assigned and/or transferred in whole or in part by Lender, and any such holder and/or assignee of the same shall succeed to and be possessed of the rights and powers of Lender under all of the same to the extent transferred and assigned. Lender may grant participations in all or any portion of its interest in the indebtedness evidenced by the Notes, and in such event Borrower shall continue to make payments due under the Loan Documents to which it is a party to Lender and Lender shall have the sole responsibility of allocating and forwarding such payments in the appropriate manner and amounts. Borrower covenants that none of the CIC Entities shall assign any of its rights nor delegate any of its duties hereunder or under any of the other Loan Documents without the prior express written consent of Lender. 7.5 Time of the Essence. Time is of the essence with respect to each and ------------------- every covenant, agreement and obligation of any of the CIC Entities hereunder and under all of the other Loan Documents. 7.6 Severability. If any provision(s) of this Agreement or the application ------------ thereof to any person or circumstance shall be invalid or unenforceable to any extent, the remainder of this Agreement and the application of such provisions to other persons or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law. 7.7 Interest and Loan Charges Not to Exceed Maximum Allowed by Law. -------------------------------------------------------------- Anything in this Agreement, the Notes or any of the other Loan Documents to the contrary notwithstanding, in no event whatsoever, whether by reason of advancement of proceeds of the Loan, acceleration of the maturity of the unpaid balance of the Loan or otherwise, shall the interest and loan charges agreed to be paid to Lender for the use of the money advanced or to be advanced hereunder exceed the maximum amounts collectible under applicable laws in effect from time to time. It is understood and agreed by the parties that, if for any reason whatsoever the interest or loan charges paid or contracted to be paid by Borrower in respect of the indebtedness evidenced by the Notes shall exceed the maximum amounts collectible under applicable laws in effect from time to time, then ipso facto, the obligation to pay such interest and/or loan charges shall ---------- be reduced to the maximum amounts collectible under applicable laws in effect from time to time, and any amounts collected by Lender that exceed such maximum amounts shall be applied to the reduction of the principal balance of the indebtedness evidenced by the Notes and/or refunded to Borrower so that at no time shall the interest or loan charges paid or payable in respect of the indebtedness evidenced by the Notes exceed the maximum amounts permitted from time to time by applicable law. 7.8 Article and Section Headings: Terminology. Numbered and titled article ----------------------------------------- and section headings and defined terms are for convenience only and shall not be construed as amplifying or limiting any of the provisions of this Agreement. All personal pronouns used in this Agreement, whether used on the masculine, feminine or neuter gender, shall include all other genders; the singular shall include the plural and vice versa. 25 7.9 Notices. Any and all notices, elections or demands permitted or ------- required to be made under this Agreement or any of the Loan Documents shall be in writing, signed by the party giving such notice, election or demand and shall be delivered personally, telecopied, or sent by certified mail or overnight via nationally recognized courier service (such as Federal Express), to the other party at the address set forth below, or at such other address as may be supplied in writing and of which receipt has been acknowledged in writing. The date of personal delivery, telecopy or telex or two (2) business days after the date of mailing (or the next business day after delivery to such courier service), as the case may be, shall be the date of such notice, election or demand. For the purposes of this Agreement: The Address of Lender is: Sirrom Capital Corporation Suite 200 500 Church Street Nashville, TN 37219 Attention: John Harrison Telecopy: 615/726-1208 with a copy to: Chambliss & Bahner, PLLC 1000 Tallan Building Two Union Square Chattanooga, TN 37402 Attention: J. Patrick Murphy, Esq. Telecopy: 423/265-9574 The Address of Borrower is: Check into Cash, Inc. P.O. Box 1015 205 Second Street N.W., Jones Building Cleveland, TN 37364-1015 Attention: W. Allan Jones, Jr. Telecopy: 423/476-9200 with a copy to: Alston & Bird One Atlantic Center 1201 West Peachtree Street Atlanta, Georgia 30309-3424 Attention: David B. Brown, Jr. Telecopy: (404) 881-7777 7.10 Entire Agreement. This Agreement and the other written agreements ---------------- between Borrower and Lender represent the entire agreement between the parties concerning the subject matter hereof, and all oral discussions and prior agreements are merged herein; provided, if there is a conflict between this Agreement and any other document executed contemporaneously herewith with respect to the Obligations, the provision of this Agreement shall control. The execution and delivery of this Agreement and the other Loan Documents by the CIC Entities were not based upon any fact or material provided by Lender, nor were the 26 CIC Entities induced or influenced to enter into this Agreement or the other Loan Documents by any representation, statement, analysis or promise by Lender. 7.11 Governing Law and Amendments. This Agreement and all of the Loan ---------------------------- Documents shall be construed and enforced under the laws of the State of Tennessee applicable to contracts to be wholly performed in such State except to the extent certain rights and privileges may be granted Lender under applicable federal laws in which event federal law shall control. No amendment or modification hereof shall be effective except in a writing executed by each of the parties hereto. 7.12 Survival of Representations and Warranties. All covenants, ------------------------------------------ representations and warranties contained herein or in any of the Loan Documents, or made by or furnished on behalf of the CIC Entities in connection herewith or any of the Loan Documents, shall survive the execution and delivery of this Agreement and all other Loan Documents and shall continue in full force and effect so long as the Obligations are unpaid. 7.13 Jurisdiction and Venue. Borrower, for itself and the other CIC ---------------------- Entities, hereby consents to the jurisdiction of the courts of the State of Tennessee and the United States District Court for the Middle District of Tennessee, as well as to the jurisdiction of all courts from which an appeal may be taken from such courts, for the purpose of any suit, action or other proceeding arising out of any obligations arising under this Agreement or any other Loan Documents or with respect to the transactions contemplated hereby, and expressly waives any and all objections it may have as to venue in any of such courts. 7.14 Waiver of Trial by Jury. LENDER AND BORROWER (FOR ITSELF AND THE ----------------------- OTHER CIC ENTITIES) HEREBY WAIVE TRIAL BY JURY IN ANY ACTIONS, PROCEEDINGS, CLAIMS OR COUNTER-CLAIMS, WHETHER IN CONTRACT OR TORT, AT LAW OR IN EQUITY, ARISING OUT OF OR IN ANY WAY RELATING TO THIS AGREEMENT OR THE LOAN DOCUMENTS. 7.15 Counterparts. This Agreement may be executed in any number of ------------ counterparts and by different parties to this Agreement in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same Agreement. 7.16 Construction and Interpretation. Should any provision of this ------------------------------- Agreement require judicial interpretation, the parties hereto agree that the court interpreting or construing the same shall not apply a presumption that the terms hereof shall be more strictly construed against one party by reason of the rule of construction that a document is to be more strictly construed against the party that itself or through its agent prepared the same, it being agreed that Borrower, Lender and their respective agents have participated in the preparation hereof. 27 IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or have caused this Agreement to be executed by their duly authorized officers, as of the day and year first above written. LENDER: ------ SIRROM CAPITAL CORPORATION, a Tennessee corporation By: /s/ John C. Harrison ---------------------------- Title: VP ------------------------- BORROWER: -------- CHECK INTO CASH, INC., a Delaware corporation By: /s/ Nelson Bechhon ----------------------------- Title: President -------------------------- 28 FIRST AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT ----------------------------------- THIS FIRST AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT (the "Amendment") dated as of the 1st day of July, 1997, is made and entered into on the terms and conditions hereinafter set forth, by and between CHECK INTO CASH, INC., a Delaware corporation ("Borrower"), and SIRROM CAPITAL CORPORATION, a Tennessee corporation ("Lender"). WITNESSETH: ---------- WHEREAS, Lender made a term loan to Borrower in the original principal amount of Three Million Five Hundred Thousand and No/100ths Dollars ($3,500,000.00) (the "Loan") on the terms and conditions set forth in that certain Amended and Restated Loan Agreement dated as of February 28, 1997, by and between Lender and Borrower (as now or hereafter amended, the "Loan Agreement"); capitalized terms used herein but not otherwise defined shall have the meanings ascribed thereto in the Loan Agreement; and WHEREAS, Borrower has created certain new Subsidiaries which are Check into Cash of California, Inc., Check into Cash of Missouri, Inc., and Check into Cash of Nebraska, Inc. (collectively, the "New Subsidiaries"), changed the name of other Subsidiaries, and taken other actions with respect to its corporate structure, and in connection therewith, is obligated pursuant to the Loan Agreement to execute and deliver to Lender the additional agreements and documents described below; and WHEREAS, this Agreement shall amend the Loan Agreement. AGREEMENT: --------- NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Borrower and Lender hereby agree as follows: 1. Borrower confirms to Lender that the representations, warranties and covenants contained in the Loan Agreement apply to all of its Subsidiaries (as defined in the Loan Agreement). 2. Borrower hereby represents and warrants to Lender that all of the representations made in Section 2.1 of the Loan Agreement are (i) now applicable to Borrower and the Subsidiaries and (ii) true and correct as of the date hereof. 3. Contemporaneous with the execution and delivery of this Amendment. Borrower shall cause to be delivered to Lender the following: (a) an Amended and Restated Stock Purchase Warrant executed by Borrower, together with a warrant valuation letter, each in form and substance acceptable to Lender; (b) a Second Amended and Restated Security Agreement and an Amended and Restated Guaranty Agreement executed by each of the Subsidiaries and in form and substance satisfactory to Lender; (c) UCC-3 Financing Statements executed by each of the Subsidiaries ("changed Subsidiaries") whose names have changed since February 28, 1997, for filing with the Tennessee Secretary of State and each of the Changed Subsidiaries' state of incorporation, each in form and substance satisfactory to Lender; (d) UCC-1 Financing Statements executed by each of the New Subsidiaries as debtors for filing with the Tennessee Secretary of State and the state of each of the New Subsidiaries' incorporation, each in form and substance statisfactory to Lender; (e) a First Amended to Security Agreement and Collateral Assignment of Membership Interests and an Amended and Restated Membership Assignment Letter, each executed by Borrower and in form and substance satisfactory to Lender; (f) Amendments to Pledge and Security Agreement executed by Allan Jones and Janie Jones in form and substance acceptable to Lender; (g) such additional stock powers, stock proxies, and other instruments as may be required to evidence Lender's security interests and/or pledges in Borrower and the Subsidiaries, all in form and substance satisfactory to Lender; (h) certified resolutions of the New Subsidiaries approving the Loan Documents to which each is a party; and (i) UCC-3 Amendments executed by Borrower and Check into Cash Holdings, Inc. reflecting the name changes to the Changed Subsidiaries. 4. The terms "Loan Document" and "Loan Documents" as defined in the Loan Agreement are amended to include this Amendment and any and all other documents relating to the Loan or the Additional Loan (i) by and between Borrower or any other person or entity and Lender or (ii) executed by Borrower or any other person or entity in favor of Lender. All capitalized terms not defined herein shall have the meanings given to them in the Loan Agreement. 5. Except as modified and amended hereby, the Loan Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed this Amendment, or have caused this Amendment to be executed by their duly authorized officers, as of the day and year first above written. BORROWER: LENDER: - -------- ------ CHECK INTO CASH, INC., SIRROM CAPITAL CORPORATION, a Delaware corporation a Tennessee corporation By: /s/ Fred Krosner By: /s/ John C. Harrison ---------------------------- ----------------------------- Title: VP Title: VP ------------------------ ------------------------ 3 SECOND AMENDMENT TO ------------------- AMENDED AND RESTATED LOAN AGREEMENT ----------------------------------- THIS SECOND AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT (the "Amendment"), dated as of September ___,1997, is made and entered into on the terms and conditions hereinafter set forth, by and between CHECK INTO CASH, INC., a Delaware corporation ("Borrower"), and SIRROM CAPITAL CORPORATION, a Tennessee corporation ("Lender"). WITNESSETH ---------- WHEREAS, Lender and Borrower entered into an Amended and Restated Loan Agreement, dated as of February 28, 1997, ("Loan Agreement") and subsequently agreed to a First Amendment to Amended and Restated Loan Agreement, dated as of June 2, 1997; and WHEREAS, Borrower is an "S" corporation under the Internal Revenue Code of 1986, as amended; and WHEREAS, Lender and Borrower agree that the affirmative covenants of Borrower in the Loan Agreement should not prevent Borrower from making distributions to its shareholders for the purpose of paying federal income taxes on the income of Borrower that is attributed to Borrower's shareholders; and WHEREAS, Lender and Borrower agree that the covenants of the Borrower in the Loan Agreement should not prevent the Borrower from granting a stock bonus to Stephen Scoggins or extending a loan to Scoggins to pay income taxes incurred in connection with such bonus; and WHEREAS, this Amendment shall amend the Loan Agreement. AGREEMENT --------- 1. The Loan Agreement is hereby amended by striking the last sentence of Section 3.l2 and replacing that sentence with the following: "Notwithstanding anything in this Section 3.12 or elsewhere to the contrary, nothing herein shall prevent any CIC Entity from declaring or paying any dividend of any kind or making any other distribution of any kind to Borrower, nor shall anything in this Section 3.12 or elsewhere prevent Borrower, while it retains its status as an "S" corporation under the Internal Revenue Code, from declaring or paying any dividend to is shareholders for the payment of federal income taxes on Borrower's income that is attributed to such shareholders." 2. The parties hereto agree that any distributions made by Borrower prior to the date of this Amendment that would have been permissible if this Amendment had been in effect, are hereby approved by Lender. 3. Lender hereby waives Borrower's covenants, contained in Sections 3.12 and 3.13 of the Loan Agreement, not to pay dividends, make distributions or make any payments in cash or property to its shareholders or employees, nor to make loans, advances or other extensions of credit, to the extent such covenants prevent Borrower from making the following distributions, paying the following bonuses or making the following loans: (i) July 1, 1997, stock bonus to Stephen Scoggins, pursuant to that certain Employment Agreement by and between Borrower and Stephen Scoggins, dated July 31, 1997 (the "Scoggins Employment Agreement"); and (ii) Loan to Stephen Scoggins, on a future date to be determined, pursuant to Section 6(c) of the Scoggins Employment Agreement, for the purpose of paying federal income taxes incurred by Stephen Scoggins in connection with the July 1, 1997 stock bonus, and the future forgiveness of such loan in consideration of Mr. Scoggins' continued service to Borrower. 4. Pursuant to Section 3.13 of the Loan Agreement, this letter shall also constitute Lender's written consent to Borrower's extension of a loan to Stephen Scoggins, pursuant to Section 6(c) of the Scoggins Employment Agreement, in the amount of the income taxes payable as a result of the July 1, 1997 stock bonus, and the future forgiveness of such loan by the Borrower in consideration of Scoggins' continued service to Borrower. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their duly authorized officers, as of the date first written above. SIRROM CAPITAL CORPORATION By:/s/ John C. Harrison ----------------------- Title: VP -------------------- CHECK INTO CASH, INC. By:/s/ Fred Krosner ----------------------- Title: VP -------------------- -2- THIRD AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT --------------------------- THIS THIRD AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT ("Amendment") dated as of the 26th day of June, 1998, is made and entered into on the terms and conditions hereinafter set forth, by and between CHECK INTO CASH, INC., a Delaware corporation ("Borrower"), SIRROM CAPITAL CORPORATION, a Tennessee corporation ("Lender"), and SIRROM FUNDING CORPORATION, a Delaware corporation and a wholly-owned subsidiary of Lender ("Funding"). RECITALS: -------- WHEREAS, Lender has previously made a term loan to Borrower in the original principal amount of Three Million Five Hundred Thousand and No/100ths Dollars ($3,500,000.00) (the "Original Loan") on the terms and conditions set forth in that certain Amended and Restated Loan Agreement dated February 28, 1997, by and between Lender and Borrower, as amended by that certain First Amendment to Amended and Restated Loan Agreement dated July 1, 1997 by and between Lender and Borrower (the "First Amendment") and that certain Second Amendment to Amended and Restated Loan Agreement dated September 1997 (the "Second Amendment") (the Loan Agreement, as amended by the First Amendment and the Second Amendment, and as now or hereafter amended, is hereinafter referred to as the "Loan Agreement"); WHEREAS, the Original Loan is further evidenced and secured by certain agreements, documents and instruments as more particularly described in the Loan Agreement and defined therein as the "Loan Documents"; WHEREAS, Borrower desires to borrow from Lender and Lender desires to lend to Borrower up to an additional Three Million Five Hundred Thousand and No/100ths Dollars ($3,500,000.00) (the "Additional Loan") pursuant to a Secured Promissory Note of even date herewith by Borrower in favor of Lender, on the terms and conditions set forth in the Loan Agreement, secured by the Loan Documents, including without limitation (a) a security interest in certain tangible and intangible personal property granted pursuant to that certain Security Agreement dated February 28, 1997, by and between Borrower and Lender; (b) a security interest in certain royalties, trademarks and other general intangibles granted pursuant to the Trademark Security Agreement dated February 28, 1997, by and between Borrower and Lender; (c) a pledge of certain securities pursuant to the terms of that certain Pledge and Security Agreement dated February 28, 1997, as amended, by and between Allan Jones and Lender (the "A.J. Pledge Agreement"); (d) a pledge of certain securities pursuant to the terms of that certain Pledge and Security Agreement dated February 28, 1997, as amended, by and between Janie Jones and Lender (the "J.J. Pledge Amendment"); (e) an Amended and Restated Guaranty Agreement dated July 1, 1997 by the Current Subsidiaries (as defined on the execution pages hereof) in favor of Lender (the "Guaranty"); (f) a Second Amended and Restated Security Agreement dated July 1, 1997 by and between the Current Subsidiaries and Lender (the "Guarantor Security Agreement"); (g) a Security Agreement and Collateral Assignment of Membership Interests dated February 28, 1997, as amended, by and between Borrower and Lender; and (h) a Pledge and Security Agreement dated February 28, 1997, by and between Borrower and Lender (the "Borrower Pledge Agreement"). WHEREAS, Lender has transferred the Original Loan and the Loan Documents to Funding, subject to the reservation by Lender of certain rights with respect to the making of additional loans to Borrower; and WHEREAS, this Amendment shall amend the Loan Documents. AGREEMENT: --------- NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Borrower, Funding and Lender hereby agree as follows: 1. Capitalized terms used herein but not otherwise defined shall have the meanings ascribed thereto in the Loan Agreement. 2. Section 1.1 of the Agreement is hereby amended to read in its entirety as follows: (a) Subject to the terms and conditions hereof, Lender shall make the Loan to Borrower by wire transfer in immediately funds. The Loan shall be evidenced by (i) certain Secured Promissory Notes (collectively, the "Original Notes") in the aggregate original principal amount of Three Million Five Hundred Thousand and No/100th Dollars ($3,500,000.00), dated respectively, November 8, 1996, December 26, 1996, March 11, 1997, April 3, 1997, April 17, 1997, May 2, 1997, and May 21, 1997, each in the original principal amount of Five Hundred Thousand and No/100th Dollars ($500,000.00), executed by Borrower in favor of Lender, substantially in the form attached hereto as Exhibit A and incorporated herein by this reference and (ii) a Secured Promissory Note (the "New Note") in the original principal amount of up to Three Million Five Hundred Thousand and No/100th Dollars ($3,500,000.00), dated of even date herewith, executed by Borrower in favor of Lender, substantially in the form of Exhibit A attached to the Third Amendment to Loan Agreement and 2 Loan Documents and incorporated herein by this reference (the Original Notes and the New Note shall be referred to herein collectively as the "Notes"). The Loan shall be payable in accordance with the Notes. The Notes, this Agreement and any other instruments and documents executed by Borrower, any guarantor of the Loan, or any shareholder, member, partner, subsidiary, or affiliate of Borrower, now or hereafter evidencing, securing or in any way related to the indebtedness evidenced by the Notes are herein individually referred to as a "Loan Document" and collectively referred to as the "Loan Documents." (b) The portion of the Loan represented by the New Note shall be advanced to Borrower in multiple advances (individually, an "Advance" and collectively, the "Advances"). The first Advance shall be in the principal amount of $750,000 and shall be made on the date hereof. The subsequent Advances shall be in increments of at least $500,000. Lender's obligation to fund the subsequent Advances shall be subject to the conditions set forth in Section 4.2. In no event shall the subsequent Advances be made after October 15, 1998. 3. Section 4.2. of the Loan Agreement is hereby amended to read as follows: 4.2 Subsequent Advances. The obligation of Lender to fund the ------------------- subsequent Advances on the date of any Advance is subject to the fulfillment, on or prior to such date, of each of the following conditions: (a) An Event of Default (as herein defined) shall not have occurred and be continuing; (b) Borrower shall have delivered a Closing Certificate (in a form acceptable to Lender), executed by Borrower; and (c) Borrower shall have delivered to Lender a Closing Statement (in a form acceptable to Lender), executed by Borrower. 4. The obligations of Borrower in connection with and/or relating to the Additional Loan are further evidenced and/or secured by the Loan Documents. In connection therewith: (a) Each of the New Subsidiaries (as defined in the execution pages hereof) hereby agree to be a party to and subject to the Guaranty in accordance with its terms. Without limiting the foregoing, each of the New Subsidiaries guarantees to Lender the full and prompt payment and performance of (a) the indebtedness evidenced by the Notes, 3 including, without limitation, principal and any and all interest accrued or to accrue thereon, (b) the obligations of Borrower to Lender pursuant to the Notes, the Loan Agreement and any and all other instruments, documents and/or agreements now or hereafter further evidencing, securing or otherwise related to the indebtedness evidenced by the Notes (collectively the "Loan Documents") and (c) any and all other indebtedness and other obligations of Borrower to Lender, direct or contingent (including but not limited to obligations incurred as indorser, guarantor or surety), however evidenced or denominated, and however and whenever incurred, including but not limited to indebtedness incurred pursuant to any present or future commitment of Lender to Borrower (the aforesaid indebtedness and other obligations are sometimes herein collectively referred to as the "Guaranteed Obligations"). (b) Each of the New Subsidiaries agree to be a party to and subject to the Guarantor Security Agreement in accordance with its terms. Without limiting the foregoing, each of the New Subsidiaries ("Grantor") hereby grants to Lender a security interest in the following described property and any and all proceeds and products thereto and accessions thereto: (i) Equipment. All equipment and other tangible personal --------- property of Grantor of any kind and description, whether now owned or hereafter acquired and wherever located, together with all parts, accessories and attachments and all replacements thereof and additions thereto; (ii) Inventory, Accounts, Contract Rights, Chattel Paper, --------------------------------------------------- Documents, Instruments and General Intangibles. All of Grantor's ---------------------------------------------- inventory and any agreements for lease of same and rentals therefrom, and all of Grantor's accounts, accounts receivable, contract rights, chattel paper, software, documents, instruments and general intangibles (including but not limited to goodwill, patents and trademarks) and the proceeds therefrom, whether now in existence or owned or hereafter arising or acquired, entered into or created, and wherever located; and whether held for lease or sale, or furnished or to be furnished under contracts of service; (iii) Trademarks, Etc. All trademarks, trade names, and service --------------- marks now held or hereafter acquired by Grantor, both those that are registered with the United States Patent and Trademark office and any unregistered marks used by Grantor in the United States, and trade dress, including logos and designs, in connection with which any such marks are used, 4 together with all registrations regarding such marks and the rights to renewals thereof, and the goodwill of the business of Grantor symbolized by such marks, and all patents, licenses, technology and other intangible property of Grantor, whether now owned or hereafter acquired; (iv) Copyrights. All copyrights now held or hereafter acquired by ---------- Grantor and any applications for U.S. copyrights hereafter made by Grantor; and (v) Proprietary Information, Computer Data, Etc. All proprietary -------------------------------------------- information and trade secrets of Grantor with respect to Grantor's business, whether now owned or hereafter acquired, and all of Grantor's computer programs and the information contained therein and all intellectual property rights with respect thereto, whether now owned or hereafter acquired. 5. Borrower hereby represents and warrants to Lender that all of the representations made in Section 2 of the Loan Agreement are true and correct as of the date hereof except for those representations and warranties which expressly relate to an earlier date (which representations and warranties shall be true and correct as of such date), and except as modified or supplemented by Schedule A attached hereto and incorporated herein by this reference. With - ---------- respect to any representations and warranties which expressly relate to an earlier date, Borrower represents that it has set forth on Schedule A any ---------- exceptions to such representations and warranties that are necessary to make them true and correct as of the date hereof. 6. Borrower hereby represents and warrants to Lender that the address designated as Borrower's principal place of business on Schedule B attached ---------- hereto and incorporated herein by this reference is the principal place of Borrower's business and that all of the locations set forth on said Schedule B ---------- are the records of all tangible collateral and the place where the records concerning all intangible collateral are kept and/or maintained. 7. Borrower shall pay to Lender a processing fee of 2% of the Additional Loan which will be paid on a pro rata basis at the time each Advance. In addition, Borrower shall pay all expenses of Lender incurred in connection with the Additional Loan upon the funding of the First Advance of the Additional Loan. 8. Borrower hereby covenants to Lender that it shall use the proceeds of the Additional Loan for working capital. 5 9. The obligation of Lender to fund the Additional Loan on the date hereof is subject to Borrower's delivery to Lender or Lender's receipt of each of the following: (a) a Secured Promissory Note executed by Borrower, in form and substance acceptable to Lender; (b) a Stock Purchase Warrant executed by Borrower, in form and substance acceptable to Lender and a related warrant valuation letter executed by Borrower in form acceptable to Lender; (c) an opinion of Borrower's counsel Alston & Bird, in form and substance satisfactory to Lender's counsel; (d) a BIDCO Report executed by Borrower, in form and substance acceptable to Lender; (e) a Second Amendment to a Subordination Agreement between NationsBank of Tennessee, Inc., N.A. ("NationsBank") and Borrower executed by NationsBank in form acceptable to Lender; (f) a UCC-3 statement of Amendment executed by Borrower for recording with the Tennessee Secretary of State to reflect the increase in the maximum principal indebtedness of the Loan; (g) UCC-1 Financing Statements executed by each of the New Subsidiaries for recording with the Tennessee Secretary of State and their respective states of incorporation; (h) an Amendment to Stock Pledge Agreement executed by Borrower in form acceptable to Lenders together with related stock proxies, stock powers and stock certificates with respect to each of the New Subsidiaries (all in form acceptable to Lender), executed by Borrower, and related stock pledge letters (all in form acceptable to Lender) executed by each of the New Subsidiaries. (i) copies of the certificates or articles of incorporation of Borrower and each of the New Subsidiaries certified by the Secretary of State or other appropriate public official in their respective states of incorporation; (j) a certificate as to the legal existence and good standing of Borrower and each of the New Subsidiaries issued by the Secretary of State or other appropriate public official in their respective states of incorporation; (k) certified resolutions of the Board of Directors of Borrower and each of the Subsidiaries (including the Subsidiaries) set forth on the signature page hereof 6 authorizing their participation in the transactions set forth and contemplated hereby; and (l) the execution of this Agreement by each of the parties set forth on the execution pages hereof. 10. Borrower represents and warrants that (a) the Loan Documents are valid, binding and enforceable against Borrower and each of the New Subsidiaries and the Current Subsidiaries according to their terms, subject to principles of equity and laws applicable to the rights of creditors generally, including bankruptcy laws, and (b) no default or Event of Default presently exists under the Loan Documents and no condition presently exists which, with the giving of notice, the passing of time, or both would cause such a default or Event of Default. Borrower further acknowledges that the obligations of Borrower and each of the New Subsidiaries and the Current Subsidiaries evidenced by the Loan Documents are not subject to any counterclaim, defense or right of setoff, and Borrower hereby releases Lender from any claim, known or unknown, that Borrower may have against Lender as of the date of execution of this Amendment. 11. The terms "Loan Document" and "Loan Documents" as defined in the Loan Agreement are amended to include this Amendment. 12. This Amendment may be executed in any number of counterparts and by different parties to this Amendment in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same Amendment. 13. Borrower hereby acknowledges that the Loan Documents have been assigned to Funding, subject to the reservation of certain rights with respect to the making of additional loans, and that all references to Lender in the Loan Documents shall hereafter include Funding and Funding is and shall be entitled to all rights and benefits thereunder. 14. Except as modified and amended hereby, the Loan Documents shall remain in full force and effect. 7 IN WITNESS WHEREOF, the parties hereto have executed this Amendment, or have caused this Amendment to be executed by their duly authorized officers, as of the day and year first above written. BORROWER: LENDER: -------- ------ CHECK INTO CASH, INC. SIRROM CAPITAL CORPORATION, a Delaware corporation a Tennessee corporation By: /s/ Fred Krosner By: JOHN C. HARRISON --------------------------- -------------------------- Title: VP Title: VP ----------------------- ------------------------ SIRROM FUNDING CORPORATION, a Delaware corporation By:JOHN C. HARRISON -------------------------- Title: VP ----------------------- 8 CURRENT SUBSIDIARIES -------------------- The following parties (the "Current Subsidiaries") join in the execution of this Amendment to acknowledge and confirm that the Additional Loan is guaranteed pursuant to the Guaranty and is secured by the Guarantor Security Agreement. The terms of the Guaranty and the Guarantor Security Agreement are hereby modified accordingly. CREDITCORP OF TENNESSEE, INC. By: /s/ Fred Krosner -------------------------- Title: VP ------------------------ CHECK INTO CASH HOLDINGS, INC. By: /s/ Fred Krosner -------------------------- Title: VP ------------------------ CHECK INTO CASH OF IOWA, INC. By: /s/ Fred Krosner -------------------------- Title: VP ------------------------ CHECK INTO CASH OF KENTUCKY, LLC By: /s/ Fred Krosner -------------------------- Title: VP ------------------------ CHECK INTO CASH OF INDIANA, LLC By: /s/ Fred Krosner -------------------------- Title: VP ------------------------ CHECK INTO CASH OF ILLINOIS, LLC By: /s/ Fred Krosner -------------------------- Title: VP ------------------------ 9 CHECK INTO CASH OF WISCONSIN, LLC. By: /s/ Fred Krosner ------------------------------ Title: VP ---------------------------- CHECK INTO CASH OF OHIO, LLC By: /s/ Fred Krosner ------------------------------ Title: VP ---------------------------- JONES MANAGEMENT SERVICES, LLC By: /s/ Fred Krosner ------------------------------ Title: VP ---------------------------- CHECK INTO CASH OF NEBRASKA, INC. By: /s/ Fred Krosner ------------------------------ Title: VP ---------------------------- CHECK INTO CASH OF MISSOURI, INC. By: /s/ Fred Krosner ------------------------------ Title: VP ---------------------------- CHECK INTO CASH OF CALIFORNIA, INC. By: /s/ Fred Krosner ------------------------------ Title: VP ---------------------------- 10 NEW SUBSIDIARIES ---------------- The following parties (the "New Subsidiaries") join in the execution of this Amendment for the purpose of agreeing to be bound by Subsections 4(a) and 4(b) hereof. CHECK INTO CASH OF PENNSYLVANIA, INC. By: /s/ Fred Krosner -------------------------- Title: VP ------------------------ CHECK INTO CASH OR OREGON, INC. By: /s/ Fred Krosner -------------------------- Title: VP ------------------------ CHECK INTO CASH OR WASHINGTON, INC. By: /s/ Fred Krosner -------------------------- Title: VP ------------------------ CHECK INTO CASH OF NORTH CAROLINA, INC. By: /s/ Fred Krosner -------------------------- Title: VP ------------------------ CHECK INTO CASH OF MISSISSIPPI, INC. By: /s/ Fred Krosner -------------------------- Title: VP ------------------------ CHECK INTO CASH OF SOUTH CAROLINA, INC. By: /s/ Fred Krosner -------------------------- Title: ------------------------ 11 PLEDGES ------- The following parties join in the execution of this Amendment to acknowledge and confirm that the Additional Loan is secured by (i) the A.J. Pledge Agreement, and (ii) the J.J. Pledge Agreement, as applicable. /s/ W. Allan Jones Jr. ------------------------- W. Allan Jones, Jr. /s/ Janie P. Jones ------------------------- Janie P. Jones 12 EX-10.4.1 5 AMENDED AND RESTATED STOCK PURCHASE WARRANT EXHIBIT 10.4.1 THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT UNDER THE ACT OR SUCH APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (II) IN THE OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY, REGISTRATION UNDER SUCH SECURITIES ACTS OR SUCH APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER. AMENDED AND RESTATED STOCK PURCHASE WARRANT ------------------------------------------- This Amended and Restated Warrant (the "Warrant") is issued this 12th day of May, 1997, by CHECK INTO CASH, INC., a Delaware corporation (the "Company"), to SIRROM CAPITAL CORPORATION, a Tennessee corporation (SIRROM CAPITAL CORPORATION and any subsequent assignee or transferee hereof are hereinafter referred to collectively as "Holder" or "Holders"). WHEREAS, the Company and the Holder are parties to that certain Stock Purchase Warrant dated February 28, 1997; and WHEREAS, as a result of a stock split, the number of shares of the Company's common stock outstanding has increased, and the Holder and the Company desire to amend and restate the Stock Purchase Warrant described above to accurately reflect the number of shares to which Holder is entitled; NOW, THEREFORE, in consideration of the premises, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Holder hereby agree that the above-referenced Stock Purchase Warrant is amended to read as follows: AGREEMENT: 1. Issuance of Warrant; Term. For and in consideration of SIRROM CAPITAL ------------------------- CORPORATION making a loan to the Company in an amount of up to Three Million Five Hundred Thousand and no/100ths Dollars ($3,500,000) pursuant to one or more secured promissory notes (collectively, the "Note") and a related Amended and Restated Loan Agreement dated February 28, 1997 (the "Loan Agreement"), and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company hereby grants to Holder the right to purchase 63,789 shares of the Company's common stock (the "Common Stock"), which the Company represents equals 5% of the capital stock of the Company on the date hereof, calculated on a fully diluted basis after exercise ("Base Amount"), provided that in the event that the indebtedness evidenced by the Note is outstanding on the following dates, the Base Amount shall be increased to the corresponding number set forth below: 1 Date Base Amount ------------------------------ ----------------------------------------- November 8, 1999 70,540 shares of Common Stock, which the Company represents equals 5.5% of the capital stock of the Company on the date hereof calculated on a fully diluted basis after exercise. November 8, 2000 77,362 shares of Common Stock, which the Company represents equals 6% of the capital stock of the Company on the date hereof calculated on a fully diluted basis after exercise. The shares of Common Stock issuable upon exercise of this Warrant are hereinafter referred to as the "Shares." This Warrant shall be exercisable at any time and from time to time from the date hereof until December 31, 2001. For purposes of this Warrant the term "fully diluted basis" shall be determined in accordance with generally accepted accounting principles as of the date hereof. 2. Exercise Price. The exercise price (the "Exercise Price") per share -------------- for which all or any of the Shares may be purchased pursuant to the terms of this Warrant shall be One Cent ($.01). 3. Exercise. This Warrant may be exercised by the Holder hereof (but only -------- on the conditions hereinafter set forth) as to all or any increment hereof, upon delivery of written notice of intent to exercise to the Company at the following address: 205 Second Street N.W., Jones Building, Cleveland, TN 37364-1015, or such other address as the Company shall designate in a written notice to the Holder hereof, together with this Warrant and payment to the Company of the aggregate Exercise Price of the Shares so purchased. The Exercise Price shall be payable, at the option of the Holder, (i) by certified or bank check, (ii) by the surrender of the Note or portion thereof having an outstanding principal balance equal to the aggregate Exercise Price or (iii) by the surrender of a portion of this Warrant having a fair market value equal to the aggregate Exercise Price. Upon exercise of this Warrant as aforesaid, the Company shall as promptly as practicable, and in any event within fifteen (15) days thereafter, execute and deliver to the Holder of this Warrant a certificate or certificates for the total number of whole Shares for which this Warrant is being exercised in such names and denominations as are requested by such Holder. If this Warrant shall be exercised with respect to less than all of the Shares, the Holder shall be entitled to receive a new Warrant covering the number of Shares in respect of which this Warrant shall not have been exercised, which new Warrant shall in all other respects be identical to this Warrant. The Company covenants and agrees that it will pay when due any and all state and federal issue taxes which may be payable in respect of the issuance of this Warrant or the issuance of any Shares upon exercise of this Warrant. 2 4. Covenants and Conditions. The above provisions are subject to the ------------------------ following: (a) Neither this Warrant nor the Shares have been registered under the Securities Act of 1933, as amended ("Securities Act") or any state securities laws ("Blue Sky Laws"). This Warrant has been acquired for investment purposes and not with a view to distribution or resale and may not be pledged, hypothecated, sold, made subject to a security interest, or otherwise transferred without (i) an effective registration statement for such Warrant under the Securities Act and such applicable Blue Sky Laws, or (ii) an opinion of counsel, which opinion and counsel shall be reasonably satisfactory to the Company and its counsel, that registration is not required under the Securities Act or under any applicable Blue Sky Laws (the Company hereby acknowledges that Bass, Berry & Sims, PLC is acceptable counsel). Transfer of the shares issued upon the exercise of this Warrant shall be restricted in the same manner and to the same extent as the Warrant and the certificates representing such Shares shall bear substantially the following legend: THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT UNDER THE ACT OR SUCH APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (II) IN THE OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY, REGISTRATION UNDER SUCH SECURITIES ACTS OR SUCH APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER. The Holder hereof and the Company agree to execute such other documents and instruments as counsel for the Company reasonably deems necessary to effect the compliance of the issuance of this Warrant and any shares of Common Stock issued upon exercise hereof with applicable federal and state securities laws. (b) The Company covenants and agrees that all Shares which may be issued upon exercise of this Warrant will, upon issuance and payment therefor, be legally and validly issued and outstanding, fully paid and nonassessable, free from all taxes, liens, charges and preemptive rights, if any, with respect thereto or to the issuance thereof. The Company shall at all times reserve and keep available for issuance upon the exercise of this Warrant such number of authorized but unissued shares of Common Stock as will be sufficient to permit the exercise in full of this Warrant. 3 (c) In the event that the Company sells shares of the Company's capital stock at a price below the fair market value of such shares, the number of shares of Common Stock issuable upon exercise of this Warrant shall be equal to the product obtained by multiplying the number of shares then issuable pursuant to this Warrant prior to such sale by a fraction, the numerator of which shall be the product of (x) the total number of shares of Common Stock outstanding on a fully diluted basis immediately after such issuance or sale, multiplied by (y) the fair market value of a share of Common Stock immediately prior to such issuance or sale and the denominator of which shall be the sum of (i) the number of shares of Common Stock outstanding on a fully diluted basis immediately prior to such issuance or sale multiplied by the fair market value of a share of Common Stock immediately prior to such issuance or sale, plus (ii) the aggregate amount of the consideration received by the Company upon such issuance or sale (as illustrated on Schedule I hereto). 5. Transfer of Warrant. Subject to the provisions of Section 4 hereof, ------------------- this Warrant may be transferred, in whole or in part, to any person or business entity, by presentation of the Warrant to the Company with written instructions for such transfer. Upon such presentation for transfer, the Company shall promptly execute and deliver a new Warrant or Warrants in the form hereof in the name of the assignee or assignees and in the denominations specified in such instructions. The Company shall pay all expenses incurred by it in connection with the preparation, issuance and delivery of Warrants under this Section. 6. Warrant Holder Not Shareholder; Rights Offering; Preemptive Rights; ------------------------------------------------------------------- Preference Rights. Except as otherwise provided herein, this Warrant does not - ----------------- confer upon the Holder, as such, any right whatsoever as a shareholder of the Company. Notwithstanding the foregoing, if the Company should offer to all of the Company's shareholders the right to purchase any securities of the Company, then all shares of Common Stock that are subject to this Warrant shall be deemed to be outstanding and owned by the Holder and the Holder shall be entitled to participate in such rights offering. The Company shall not grant any preemptive rights with respect to any of its capital stock without the prior written consent of the Holder. The Company shall not issue any securities which entitle the holder thereof to obtain any preference over holders of Common Stock upon the dissolution, liquidation, winding-up, sale, merger, or reorganization of the Company without the prior written consent of the Holder. 7. Observation Rights. The Holder of this Warrant shall (a) receive ------------------ notice of and be entitled to attend or may send a representative to attend all meetings of the Company's Board of Directors in a non-voting observation capacity, (b) receive copies of all notices, packages and documents provided to members of the Company's Board of Directors for each board of directors meeting, and (c) receive copies of all actions taken by written consent by the Company's Board of Directors, from the date hereof until such rime as the indebtedness evidenced by the Note has been paid in full. Holder agrees to hold as confidential information received pursuant to this Section 7, to the same extent as if Holder were a director of the Company. 4 8. Adjustment Upon Changes in Stock. -------------------------------- (a) If all or any portion of this Warrant shall be exercised subsequent to any stock split, stock dividend, recapitalization, combination of shares of the Company, or other similar event, occurring after the date hereof, then the Holder exercising this Warrant shall receive, for the aggregate price paid upon such exercise, the aggregate number and class of shares which such Holder would have received if this Warrant had been exercised immediately prior to such stock split, stock dividend, recapitalization, combination of shares, or other similar event. If any adjustment under this Section 8(a) would create a fractional share of Common Stock or a right to acquire a fractional share of Common Stock, such fractional share shall be disregarded and the number of shares subject to this Warrant shall be the next higher number of shares, rounding all fractions upward. Whenever there shall be an adjustment pursuant to this Section 8(a), the Company shall forthwith notify the Holder or Holders of this Warrant of such adjustment, setting forth in reasonable detail the event requiring the adjustment and the method by which such adjustment was calculated. (b) If all or any portion of this Warrant shall be exercised subsequent to any merger, consolidation, exchange of shares, separation, reorganization or liquidation of the Company, or other similar event, occurring after the date hereof, as a result of which shares of Common Stock shall be changed into the same or a different number of shares of the same or another class or classes of securities of the Company or another entity or other property or assets of the Company or another entity or cash, then the Holder exercising this Warrant shall receive, for the aggregate price paid upon such exercise, the aggregate number and class of shares, other property or assets or cash which such Holder would have received if this Warrant had been exercised immediately prior to such merger, consolidation, exchange of shares, separation, reorganization or liquidation, or other similar event. If any adjustment under this Section 8(b) would create a fractional share of Common Stock or any other security or a right to acquire a fractional share of Common Stock or any other security, such fractional share shall be disregarded and the number of shares subject to this Warrant shall be the next higher number of shares, rounding all fractions upward. Whenever there shall be an adjustment pursuant to this Section 8(b), the Company shall forthwith notify the Holder or Holders of this Warrant of such adjustment, setting forth in reasonable detail the event requiring the adjustment and the method by which such adjustment was calculated. The provisions of this paragraph shall similarly apply to successive mergers, consolidations, exchanges of shares, separations, reorganizations or liquidations, or other similar events. Upon any merger, consolidation, exchange of shares, separation, reorganization, liquidation or other similar event hereinabove referred to, this Warrant shall continue in full force and effect and the terms hereof shall be applicable to the shares of stock and other securities, property, assets and cash receivable upon the exercise of this Warrant after the consummation of such merger, consolidation, exchange of shares, separation, reorganization, liquidation or other similar event, as the case may be. 5 9. Put Agreement. ------------- (a) The Company hereby irrevocably grants and issues to Holder the right and option to sell to the Company (the "Put") this Warrant for a period of 30 days immediately prior to the expiration thereof, at a purchase price (the "Purchase Price") equal to the excess of the Fair Market Value (as hereinafter defined) of the shares of Common Stock then issuable to Holder upon exercise of this Warrant over the aggregate exercise price payable upon exercise of this Warrant. (b) The Company shall pay to the Holder, in cash or certified or cashier's check, the Purchase Price in exchange for the delivery to the Company of this Warrant within thirty (30) days of the receipt of written notice, addressed as set forth in Section 3 hereto, from the Holder of its intention to exercise the Put. (c) The Fair Market Value of the shares of Common Stock of the Company issuable pursuant to this Warrant shall be the average trading price of shares of Common Stock during the week preceding the date of purchase or if the Common Stock is not publicly traded at such time shall be determined as follows: (i) The Company and the Holder shall each appoint an independent, experienced appraiser who is a member of a recognized professional association of business appraisers or of an investment banking firm. The two appraisers shall determine the value of the shares of Common Stock which would be issued upon the exercise of the Warrant, taking into consideration that such shares would constitute a minority interest, and would lack liquidity, and further assuming that the sale would be between a willing buyer and a willing seller, both of whom have full knowledge of the financial and other affairs of the Company, and neither of whom is under any compulsion to sell or to buy. (ii) If the highest of the two appraisals is not more than 10% more than the lowest of the appraisals, the Fair Market Value shall be the average of the two appraisals. If the highest of the two appraisals is 10% or more higher than the lowest of the two appraisals, then a third appraiser shall be appointed by the two appraisers, and if they cannot agree on a third appraiser, the American Arbitration Association shall appoint the third appraiser. The third appraiser, regardless of who appoints him or her, shall have the same qualifications as the first two appraisers. (iii) The Fair Market Value after the appointment of the third appraiser shall be the arithmetic mean of the three appraisals. (iv) The fees and expenses of the appraisers shall be paid one-half by the Company and one-half by the Holder. 6 (v) The Put shall terminate upon the Company's successful completion of a bona fide underwritten public offering of its capital stock with net proceeds to the Company of at least $10,000,000 ("IPO"), or upon the conversion of this Warrant into the right to receive a publicly traded security of an entity having an aggregate market value of at least $30,000,000. 10. Registration. ------------ (a) The Company and the holders of the Shares agree that if at any time after the date hereof the Company shall propose to file a registration statement with respect to any of its Common Stock on a form suitable for a secondary offering, it will give notice in writing to such effect to the registered holder(s) of the Shares at least thirty (30) days prior to such filing, and, at the written request of any such registered holder, made within ten (10) days after the receipt of such notice, will include therein at the Company's cost and expense (including the fees and expenses of counsel to such holder(s), but excluding underwriting discounts, commissions and filing fees attributable to the Shares included therein) such of the Shares as such holder(s) shall request; provided, however, that if the offering being registered by the Company is underwritten, the Shares included in such registration shall be included in such underwriting, and if the representative of the underwriters certifies in writing that the inclusion therein of the Shares would materially and adversely affect the sale of the securities to be sold by the Company thereunder, then the Company shall be required to include in the offering and such underwriting only that number of securities, including the Shares, which the underwriters determine in their sole discretion will not jeopardize the success of the offering (the securities so included to be apportioned pro rata among all selling shareholders according to the total amount of securities entitled to be included therein owned by each selling shareholder, but in no event shall the total number of Shares included in the offering be less than the number of securities included in the offering by any other single selling shareholder) and any Shares not so included shall not be registered in such registration statement. (b) Whenever the Company undertakes to effect the registration of any of the Shares, the Company shall, as expeditiously as reasonably possible: (i) Prepare and file with the Securities and Exchange Commission (the "Commission") a registration statement covering such Shares and use its best efforts to cause such registration statement to be declared effective by the Commission as expeditiously as possible and to keep such registration effective until the earlier of (A) the date when all Shares covered by the registration statement have been sold or (B) ninety (90) days from the effective dare of the registration statement; provided, that before filing a registration statement or prospectus or any amendment or supplements thereto, the Company will furnish to each Holder of Shares covered by such registration statement and the underwriters, if any, copies of all such documents proposed to be filed (excluding exhibits, unless any such person shall specifically request exhibits), 7 which documents will be subject to the review of such Holders and underwriters, and the Company will not file such registration statement or any amendment thereto or any prospectus or any supplement thereto (including any documents incorporated by reference therein) with the Commission if (A) the underwriters, if any, shall reasonably object to such filing or (B) if information in such registration statement or prospectus concerning a particular selling Holder has changed and such Holder or the underwriters, if any, shall reasonably object. (ii) Prepare and file with the Commission such amendments and post-effective amendments to such registration statement as may be necessary to keep such registration statement effective during the period referred to in Section 1O(b)(i) and to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement, and cause the prospectus to be supplemented by any required prospectus supplement, and as so supplemented to be filed with the Commission pursuant to Rule 424 under the Securities Act. (iii) Furnish to the selling Holder(s) such numbers of copies of such registration statement, each amendment thereto, the prospectus included in such registration statement (including each preliminary prospectus), each supplement thereto and such other documents as they may reasonably request in order to facilitate the disposition of the Shares owned by them. (iv) Use its best efforts to register and qualify under such other securities laws of such jurisdictions as shall be reasonably requested by any selling Holder and do any and all other acts and things which may be reasonably necessary or advisable to enable such selling Holder to consummate the disposition of the Shares owned by such Holder, in such jurisdictions; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to qualify to transact business or to file a general consent to service of process in any such states or jurisdictions. (v) Promptly notify each selling Holder of the happening of any event as a result of which the prospectus included in such registration statement contains an untrue statement of a material fact or omits any fact necessary to make the statements therein not misleading and, at the request of any such Holder, the Company will prepare a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Shares, such prospectus will not contain an untrue statement of a material fact or omit to state any fact necessary to make the statements therein not misleading. (vi) Provide a transfer agent and registrar for all such Shares not later than the effective date of such registration statement. 8 (vii) Enter into such customary agreements (including underwriting agreements in customary form for a primary offering) and take all such other actions as the underwriters, if any, reasonably request in order to expedite or facilitate the disposition of such Shares (including, without limitation, effecting a stock split or a combination of shares). (viii) Make available for inspection by any selling Holder or any underwriter participating in any disposition pursuant to such registration statement and any attorney, accountant or other agent retained by any such selling Holder or underwriter, all financial and other records, pertinent corporate documents and properties of the Company, and cause the officers, directors, employees and independent accountants of the Company to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such registration statement. (ix) Promptly notify the selling Holder(s) and the underwriters, if any, of the following events and (if requested by any such person) confirm such notification in writing: (A) the filing of the prospectus or any prospectus supplement and the registration statement and any amendment or post-effective amendment thereto and, with respect to the registration statement or any post-effective amendment thereto, the declaration of the effectiveness of such documents, (B) any requests by the Commission for amendments or supplements to the registration statement or the prospectus or for additional information, (C) the issuance or threat of issuance by the Commission of any stop order suspending the effectiveness of the registration statement or the initiation of any proceedings for that purpose, and (D) the receipt by the Company of any notification with respect to the suspension of the qualification of the Shares for sale in any jurisdiction or the initiation or threat of initiation of any proceeding for such purposes. (x) Make every reasonable effort to prevent the entry of any order suspending the effectiveness of the registration statement and to obtain at the earliest possible moment the withdrawal of any such order, if entered. (xi) Cooperate with the selling Holder(s) and the underwriters, if any, to facilitate the timely preparation and delivery of certificates representing the Shares to be sold and not bearing any restrictive legends, and enable such Shares to be in such lots and registered in such names as the underwriters may request at least two (2) business days prior to any delivery of the Shares to the underwriters. (xii) Provide a CUSIP number for all the Shares not later than the effective date of the registration statement. 9 (xiii) Prior to the effectiveness of the registration statement and any post-effective amendment thereto and at each closing of an underwritten offering, (A) make such representations and warranties to the selling Holder(s) and the underwriters, if any, with respect to the Shares and the registration statement as are customarily made by issuers in primary underwritten offerings; (B) use its best efforts to obtain "cold comfort" letters and updates thereof from the Company's independent certified public accountants addressed to the selling Holders and the underwriters, if any, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters by underwriters in connection with primary underwritten offerings; (C) deliver such documents and certificates as may be reasonably requested (1) by the holders of a majority of the Shares being sold, and (2) by the underwriters, if any, to evidence compliance with clause (A) above and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company; and (D) obtain opinions of counsel to the Company and updates thereof (which counsel and which opinions shall be reasonably satisfactory to the underwriters, if any), covering the matters customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by the selling Holders and underwriters or their counsel. Such counsel shall also state that no facts have come to the attention of such counsel which cause them to believe that such registration statement, the prospectus contained therein, or any amendment or supplement thereto, as of their respective effective or issue dates, contains any untrue statement of any material fact or omits to state any material fact necessary to make the statements therein not misleading (except that no statement need be made with respect to any financial statements, notes thereto or other financial data or other expertized material contained therein). If for any reason the Company's counsel is unable to give such opinion, the Company shall so notify the Holders of the Shares and shall use its best efforts to remove expeditiously all impediments to the rendering of such opinion. (xiv) Otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make generally available to its security holders earnings statements satisfying the provisions of Section 11(a) of the Securities Act, no later than forty-five (45) days after the end of any twelve-month period (or ninety (90) days, if such period is a fiscal year) (A) commencing at the end of any fiscal quarter in which the Shares are sold to underwriters in a firm or best efforts underwritten offering, or (B) if not sold to underwriters in such an offering, beginning with the first month of the first fiscal quarter of the Company commencing after the effective date of the registration statement, which statements shall cover such twelve-month periods. 10 (c) After the date hereof the Company shall not grant to any holder of securities of the Company any registration rights which have a priority greater than or equal to those granted to Holders pursuant to this Warrant without the prior written consent of the Holder(s). (d) The Company's obligations under Section 10(a) above with respect to each holder of Shares are expressly conditioned upon such holder's furnishing to the Company in writing such information concerning such holder and the terms of such holder's proposed offering as the Company shall reasonably request for inclusion in the registration statement and in the event that the offering is underwritten, upon such Holder executing an underwriting agreement in customary form. If any registration statement including any of the Shares is filed, then the Company shall indemnify each holder thereof (and each underwriter for such holder and each person, if any, who controls such underwriter within the meaning of the Securities Act) from any loss, claim, damage or liability arising out of, based upon or in any way relating to any untrue statement of a material fact contained in such registration statement or any omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except for any such statement or omission based on information furnished in writing by such holder of the Shares expressly for use in connection with such registration statement; and such holder shall indemnify the Company (and each of its officers and directors who has signed such registration statement, each director, each person, if any, who controls the Company within the meaning of the Securities Act, each underwriter for the Company and each person, if any, who controls such underwriter within the meaning of the Securities Act) and each other such holder against any loss, claim, damage or liability arising from any such statement or omission which was made in reliance upon information furnished in writing to the Company by such holder of the Shares expressly for use in connection with such registration statement. (e) For purposes of this Section 10, all of the Shares shall be deemed to be issued and outstanding. 11. Certain Notices. In case at any time the Company shall propose to: --------------- (a) declare any cash dividend upon its Common Stock; (b) declare any dividend upon its Common Stock payable in stock or make any special dividend or other distribution to the holders of its Common Stock; (c) offer for subscription to the holders of any of its Common Stock any additional shares of stock in any class or other rights; (d) reorganize, or reclassify the capital stock of the Company, or consolidate, merge or otherwise combine with, or sell all or substantially all of its assets to, another corporation; or 11 (e) voluntarily or involuntarily dissolve, liquidate or wind up the affairs of the Company; then, in any one or more of said cases, the Company shall give to the Holder of the Warrant, by certified or registered mail, (i) at least thirty (30) days' prior written notice of the date on which the books of the Company shall close or a record shall be taken for such dividend, distribution or subscription rights or for determining rights to vote in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up, and (ii) in the case of such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up, at least twenty (20) days' prior written notice of the date when the same shall take place. Any notice required by clause (i) shall also specify, in the case of any such dividend, distribution or subscription rights, the date on which the holders of Common Stock shall be entitled thereto, and any notice required by clause (ii) shall specify the date on which the holders of Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up, as the case may be. 12. Rights of Co-Sale. ----------------- (a) Co-Sale Right. Neither W. Allan Jones, Jr. nor Janie P. Jones ------------- (collectively, "Selling Shareholder") shall enter into any transaction that would result in the sale by him or her of any Common Stock now or hereafter owned by him or her other than transfers to family members, transfers to trusts for the benefit of family members which agree to be bound by the terms of this paragraph 12, or transfers to affiliates of a Selling Shareholder, which agree to be bound by the terms of this paragraph 12, unless prior to such sale the Selling Shareholder shall give notice to Holder of his or her intention to effect such sale in order that Holder may exercise its rights under this Section 12 as hereinafter described. Such notice shall set forth (i) the number of shares to be sold by the Selling Shareholder, (ii) the principal terms of the sale, including the price at which the shares are intended to be sold, and (iii) an offer by the Selling Shareholder to use his or her best efforts to cause to be included with the shares to be sold by him or her in the sale, on a pro rata basis and on the same terms and conditions, the Shares issuable or issued to Holder pursuant this Warrant. (b) Rejection of Co-Sale Offer. If Holder has not accepted such -------------------------- offer in writing within a period of ten (10) days from the date of receipt of the notice, then the Selling Shareholder shall thereafter be free for a period of ninety (90) days to sell the number of shares specified in such notice, at a price no greater than the price set forth in such notice and on otherwise no more favorable terms to the Selling Shareholder than as set forth in such notice, without any further obligation to Holder in connection with such sale. In the event that the Selling Shareholder fails to consummate such sale within such ninety-day period, the shares specified in such notice shall continue to be subject to this Section. 12 (c) Acceptance of Co-Sale Offer. If Holder accepts such offer in --------------------------- writing within such ten (10) day period, such acceptance shall be irrevocable unless the Selling Shareholder shall be unable to cause to be included in his sale the number of Shares of stock held by Holder and set forth in the written acceptance. In that event, the Selling Shareholder and Holder shall participate in the sale pro rata based on their respective ownership interests in the Company. 13. Stock Option Plan. Notwithstanding anything contained herein to the ----------------- contrary, the Company may establish an employee stock incentive plan pursuant to which stock grants or options to purchase a number of shares of the Company's common stock not to exceed 15% of the shares outstanding may be granted to the Company's employees; provided, however, that the exercise price per share of capital stock under each option granted under the option plan shall in no event be less than 100% of the fair market value of the capital stock on the date such option is granted. 14. Equity Participation. This Warrant is issued in connection with the -------------------- Loan Agreement. It is intended that this Warrant constitute an equity participation under and pursuant to T.C.A. (S)47-24-101, et seq. and that such ------ equity participation be permitted under said statutes and not constitute interest on the Note. If under any circumstances whatsoever, fulfillment of any obligation of this Warrant, the Loan Agreement, or any other agreement or document executed in connection with the Loan Agreement, shall violate the lawful limit of any applicable usury statute or any other applicable law with regard to obligations of like character and amount, then the obligation to be fulfilled shall be reduced to such lawful limit, such that in no event shall there occur, under this Warrant, the Loan Agreement, or any other document or instrument executed in connection with the Loan Agreement, any violation of such lawful limit, but such obligation shall be fulfilled to the lawful limit. If any sum is collected in excess of the lawful limit, such excess shall be applied to reduce the principal amount of the Note. 15. Governing Law. This warrant shall be governed by the laws of the State ------------- of Tennessee applicable to agreements made entirely within the State. [Space Intentionally Left Blank] 13 IN WITNESS WHEREOF, the parties hereto have set their hands as of the date first above written. CHECK INTO CASH, INC., a Delaware corporation By: /s/ Fred Krosner ------------------------------- Title: V.P. ---------------------------- SIRROM CAPITAL CORPORATION, a Tennessee corporation By: /s/ John C. Harrison ------------------------------- Title: V.P. ---------------------------- The undersigned shareholders join in the execution of this Warrant for the purposes of acknowledging and agreeing to be bound by Section 12 hereof. /s/ W. Allan Jones, Jr. ---------------------------------- W. Allan Jones, Jr. /s/ Janie P. Jones ---------------------------------- Janie P. Jones 14 SCHEDULE I ----------- Illustration of Anti-Dilution Provision --------------------------------------- Assumptions: Outstanding Common Stock: 100,000 Shares (fully diluted) Fair Market Value per share: $10 New Issuance: 20,000 Shares New Issue Price (all in) $8 Debt Warrant: 10,000 Shares FMV of Warrant Shares: $100,000 ($10 x 10,000 shares) Formula: 10,000 x (120,000 x $10) ------------------------------- (100,000 x $10) + (20,000 x $8) 10,000 x 1,200,000 --------- 1,160,000 10,000 x 1.0345 Adjusted No. of Warrant Shares: 10,344.83 Percentage of Outstanding: 10,344.83 = 0.0862 --------- 120,000 FMV of Adj. Warrant Shares: .0862 x 1,160,000 = $100,000 15 EX-10.4.2 6 STOCK PURCHASE WARRANT, DATED JUNE 26, 1998 EXHIBIT 10.4.2 THE SHARES OF COMMON STOCK REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT UNDER THE ACT OR SUCH APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (II) IN THE OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY, REGISTRATION UNDER SUCH SECURITIES ACTS OR SUCH APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER. STOCK PURCHASE WARRANT ---------------------- This Stock Purchase Warrant (the "Warrant") is issued this 26th day of June, 1998, by CHECK INTO CASH, INC., a Delaware corporation (the "Company"), to SIRROM CAPITAL CORPORATION, a Tennessee corporation (SIRROM CAPITAL CORPORATION and any subsequent assignee or transferee hereof are hereinafter referred to collectively as "Holder" or "Holders"). AGREEMENT: 1. Issuance of Warrant; Term. -------------------------- (a) For and in consideration of SIRROM CAPITAL CORPORATION making a loan to the Company in an amount of up to Three Million Five Hundred Thousand and no/100ths Dollars ($3,500,000.00) (the "Loan") pursuant to a secured promissory note of even date herewith (the "Note") and a related Amended and Restated Loan Agreement dated February 28, 1997 (as previously or hereafter amended and as amended on the date hereof, the "Loan Agreement"), and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company hereby grants to Holder the right to purchase 723 shares (the "Base Amount") of the Company's common stock (the "Common Stock"), which the Company represents to equal three-fourteenths (3/l4ths) of 0.25% of the capital stock of the Company on the date hereof, calculated on a fully diluted basis after exercise. (b) The Base Amount as set forth in Section 1(a) above is based on the Company borrowing an initial amount of $750,000 under the Note (the "Initial Draw"). If the Company borrows more than the Initial Draw under the Note, the Base Amount will increase automatically at the time of each advance on the following basis: With respect to each additional $250,000 that is borrowed by the Company under the Note in excess of the Initial Draw (regardless of whether Borrower has prepaid any of the principal amount of the Note), the Company hereby grants to the Holder the right to purchase an additional 241 shares of the Common Stock which the Company represents to equal one-fourteenth (1/14th) of 0.25% of the capital stock of the Company on the date hereof, calculated on a fully diluted basis after exercise. Such adjustments shall occur automatically without further action by the parties and the Base Amount shall increase in accordance with such adjustments. By way of illustration, if the Company borrows an additional $2,000,000 under the Note, the Holder shall have the right to purchase 1933 shares which represents four-sevenths (4/7ths) of 0.25% of the capital stock of the Company on the date hereof calculated on a fully diluted basis after exercise. (c) The Holder shall not have the right to exercise this Warrant prior to October 15, 1998. If the Loan is paid in full prior to October 15, 1998, the Holder shall have no right to purchase any shares of the Common Stock hereunder. (d) Notwithstanding the foregoing, regardless of the amount of the indebtedness evidenced by the Note which is outstanding on January 21, 1999 and regardless of the aggregate amount of the Loan which has previously been advanced to the Company, in the event that any portion of the indebtedness evidenced by the Note is outstanding on January 21, 1999, the Base Amount shall be 3,383 shares which the Company represents to equal 0.25% of the capital stock of the Company on the date hereof, calculated on a fully diluted basis after exercise. (e) Notwithstanding the foregoing, in the event any portion of the indebtedness evidenced by the Note is outstanding on June 26, 1999, the Base Amount shall increase automatically, without further action by the parties, to 20,553 shares of the Common Stock which the Company represents to equal 1.5% of the capital stock of the Company on the date hereof, calculated on a fully diluted basis after exercise. In such event, the Company hereby grants to the Holder the right to purchase such increased Base Amount. (f) Notwithstanding the foregoing, in the event any portion of the indebtedness evidenced by the Note is outstanding on June 26, 2001, the Base Amount shall increase automatically, without further action by the parties, to 24,039 shares of the Common Stock which the Company represents to equal 1.75% the capital stock of the Company on the date hereof, calculated on a fully diluted basis after exercise. In such event, the Company hereby grants to the Holder the right to purchase such increased Base Amount. (g) The shares of Common Stock issuable upon exercise of this Warrant are hereinafter referred to as the "Shares." This Warrant shall be exercisable at any time and from time to time from the date hereof until January 31, 2001. For purposes of this Warrant the term "fully diluted basis" shall be determined in accordance with generally accepted accounting principles as of the date hereof. 2 2. Exercise Price. The exercise price (the "Exercise Price") per share -------------- for which all or any of the Shares may be purchased pursuant to the terms of this Warrant shall be One Cent ($.01). 3. Exercise. This Warrant may be exercised by the Holder hereof (but -------- only on the conditions hereinafter set forth) in whole or in part, upon delivery of written notice of intent to exercise to the Company in the manner and at the address set forth in Section 14 hereof, together with this Warrant and payment to the Company of the aggregate Exercise Price of the Shares so purchased. The Exercise Price shall be payable, at the option of the Holder, (i) by certified or bank check, (ii) by the surrender of the Note or portion thereof having an outstanding principal balance equal to the aggregate Exercise Price or (iii) by the surrender of a portion of this Warrant where the Shares subject to the portion of this Warrant that is surrendered have a fair market value equal to the aggregate Exercise Price. In the absence of an established public market for the Common Stock, fair market value shall be established by the Company's board of directors in a commercially reasonable manner. Upon exercise of this Warrant as aforesaid, the Company shall as promptly as practicable, and in any event within fifteen (15) days thereafter, execute and deliver to the Holder of this Warrant a certificate or certificates for the total number of whole Shares for which this Warrant is being exercised in such names and denominations as are requested by such Holder. If this Warrant shall be exercised with respect to less than all of the Shares, the Holder shall be entitled to receive a new Warrant covering the number of Shares in respect of which this Warrant shall not have been exercised, which new Warrant shall in all other respects be identical to this Warrant. The Company covenants and agrees that it will pay when due any and all state and federal issue taxes which may be payable in respect of the issuance of this Warrant or the issuance of any Shares upon exercise of this Warrant. 4. Covenants and Conditions. The above provisions are subject to the ------------------------ following: (a) Neither this Warrant nor the Shares have been registered under the Securities Act of 1933, as amended ("Securities Act") or any state securities laws ("Blue Sky Laws"). This Warrant has been acquired for investment purposes and not with a view to distribution or resale and may not be sold or otherwise transferred without (i) an effective registration statement for such Warrant under the Securities Act and such applicable Blue Sky Laws, or (ii) an opinion of counsel, which opinion and counsel shall be reasonably satisfactory to the Company and its counsel, that registration is not required under the Securities Act or under any applicable Blue Sky Laws (the Company hereby acknowledges that Chambliss, Bahner & Stophel, P.C. is acceptable counsel). Transfer of the Shares shall be 3 restricted in the same manner and to the same extent as the Warrant and the certificates representing such Shares shall bear substantially the following legend: THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT UNDER THE ACT AND SUCH APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (II) IN THE OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY, REGISTRATION UNDER SUCH SECURITIES ACTS AND SUCH APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER. The Holder hereof and the Company agree to execute such other documents and instruments as counsel for the Company reasonably deems necessary to effect the compliance of the issuance of this Warrant and any shares of Common Stock issued upon exercise hereof with applicable federal and state securities laws. (b) The Company covenants and agrees that all Shares which may be issued upon exercise of this Warrant will, upon issuance and payment therefor, be legally and validly issued and outstanding, fully paid and nonassessable, free from all taxes, liens, charges and preemptive rights, if any, with respect thereto or to the issuance thereof. The Company shall at all times reserve and keep available for issuance upon the exercise of this Warrant such number of authorized but unissued shares of Common Stock as will be sufficient to permit the exercise in full of this Warrant. (c) In the event that the Company sells shares of the Company's capital stock at a price below the fair market value of such shares, the number of shares of Common Stock issuable upon exercise of this Warrant shall be equal to the product obtained by multiplying the number of shares then issuable pursuant to this Warrant prior to such sale by a fraction, the numerator of which shall be the product of (x) the total number of shares of Common Stock outstanding on a fully diluted basis immediately after such issuance or sale, multiplied by (y) the fair market value of a share of Common Stock immediately prior to such issuance or sale and the denominator of which shall be the sum of (i) the number of shares of Common Stock outstanding on a fully diluted basis immediately prior to such issuance or sale multiplied by the fair market value of a share of Common Stock immediately prior to such issuance or sale, plus (ii) the aggregate amount of the consideration received by the Company upon such issuance or sale (as illustrated on Schedule I hereto). 4 5. Transfer of Warrant. Subject to the provisions of Section 4 hereof, ------------------- this Warrant may be transferred, in whole or in part, to any person or business entity, by presentation of the Warrant to the Company with written instructions for such transfer. Upon such presentation for transfer, the Company shall promptly execute and deliver a new Warrant or Warrants in the form hereof in the name of the assignee or assignees and in the denominations specified in such instructions. The Company shall pay all expenses incurred by it in connection with the preparation, issuance and delivery of Warrants under this Section. 6. Warrant Holder Not Shareholder; Rights Offering; Preemptive Rights; ------------------------------------------------------------------- Preference Rights. Except as otherwise provided herein, this Warrant does not - ----------------- confer upon the Holder, as such, any right whatsoever as a shareholder of the Company. Notwithstanding the foregoing, if the Company should offer to all of the Company's shareholders the right to purchase any securities of the Company, then all shares of Common Stock that are subject to this Warrant shall be deemed to be outstanding and owned by the Holder and the Holder shall be entitled to participate in such rights offering. The Company shall not grant any preemptive rights with respect to any of its capital stock without the prior written consent of the Holder. The Company shall not issue any securities which entitle the holder thereof to obtain any preference over holders of Common Stock upon the dissolution, liquidation, winding-up, sale, merger, or reorganization of the Company without the prior written consent of the Holder. 7. Observation Rights. The Holder of this Warrant shall (a) receive ------------------ notice of and be entitled to attend or may send a representative to attend all meetings of the Company's Board of Directors in a non-voting observation capacity, (b) receive copies of all notices, packages and documents provided to members of the Company's Board of Directors for each board of directors meeting, and (c) receive copies of all actions taken by written consent by the Company's Board of Directors, from the date hereof until such time as the indebtedness evidenced by the Note has been paid in full. Holder agrees to hold as confidential information received pursuant to this Section 7, to the same extent as if Holder were a director of the Company. 8. Adjustments Upon Changes in Stock. --------------------------------- (a) If all or any portion of this Warrant shall be exercised subsequent to any stock split, stock dividend, recapitalization, combination of shares of the Company, or other similar event, occurring after the date hereof, then the Holder exercising this Warrant shall receive, for the aggregate price paid upon such exercise, the aggregate number and class of shares which such Holder would have received if this Warrant had been exercised immediately prior to such stock split, stock dividend, recapitalization, 5 combination of shares, or other similar event. If any adjustment under this Section 8(a) would create a fractional share of Common Stock or a right to acquire a fractional share of Common Stock, such fractional share shall be disregarded and the number of shares subject to this Warrant shall be the next higher number of shares, rounding all fractions upward. Whenever there shall be an adjustment pursuant to this Section 8(a), the Company shall forthwith notify the Holder or Holders of this Warrant of such adjustment, setting forth in reasonable detail the event requiring the adjustment and the method by which such adjustment was calculated. (b) If all or any portion of this Warrant shall be exercised subsequent to any merger, consolidation, exchange of shares, separation, reorganization or liquidation of the Company, or other similar event, occurring after the date hereof, as a result of which shares of Common Stock shall be changed into the same or a different number of shares of the same or another class or classes of securities of the Company or another entity, or the holders of Common Stock are entitled to receive cash or other property, then the Holder exercising this Warrant shall receive, for the aggregate price paid upon such exercise, the aggregate number and class of shares, cash or other property which such Holder would have received if this Warrant had been exercised immediately prior to such merger, consolidation, exchange of shares, separation, reorganization or liquidation, or other similar event. If any adjustment under this Section 8(b) would create a fractional share of Common Stock or any other security or a right to acquire a fractional share of Common Stock or any other security, such fractional share shall be disregarded and the number of shares subject to this Warrant shall be the next higher number of shares, rounding all fractions upward. Whenever there shall be an adjustment pursuant to this Section 8(b), the Company shall forthwith notify the Holder or Holders of this Warrant of such adjustment, setting forth in reasonable detail the event requiring the adjustment and the method by which such adjustment was calculated. The provisions of this paragraph shall similarly apply to successive mergers, consolidations, exchanges of shares, separations, reorganizations or liquidations, or other similar events. Upon any merger, consolidation, exchange of shares, separation, reorganization, liquidation or other similar event hereinabove referred to, this Warrant shall continue in full force and effect and the terms hereof shall be applicable to the shares of stock and other securities, property, assets and cash receivable upon the exercise of this Warrant after the consummation of such merger, consolidation, exchange of shares, separation, reorganization, liquidation or other similar event, as the case may be. 6 9. Put Agreement. ------------- (a) The Company hereby irrevocably grants and issues to Holder the right and option to sell to the Company (the "Put") this Warrant for a period of 60 days immediately prior to the expiration thereof, at a purchase price (the "Purchase Price") equal to the excess of the Fair Market Value (as hereinafter defined) of the shares of Common Stock then issuable to Holder upon exercise of this Warrant over the aggregate exercise price payable upon exercise of this Warrant. (b) The Holder may exercise the Put by giving written notice to the Company of such exercise in the manner and at the address of the Company set forth in Section 14 hereof. The Company shall pay to the Holder, in cash or certified or cashier's check, the Purchase Price in exchange for the delivery to the Company of this Warrant within thirty (30) days of the receipt of written notice, addressed as set forth in Section 3 hereto, from the Holder of its intention to exercise the Put. (c) For purposes of this Section 9, the Fair Market Value of the shares of Common Stock of the Company issuable pursuant to this Warrant shall be the average trading price of shares of Common Stock during the week preceding the date of purchase or if the Common Stock is not publicly traded at such time shall be determined as follows: (i) The Company and the Holder shall each appoint an independent, experienced appraiser who is a member of a recognized professional association of business appraisers or of an investment banking firm. The two appraisers shall determine the value of the shares of Common Stock which would be issued upon the exercise of the Warrant, taking into consideration that such shares would constitute a minority interest, and would lack liquidity, and further assuming that the sale would be between a willing buyer and a willing seller, both of whom have full knowledge of the financial and other affairs of the Company, and neither of whom is under any compulsion to sell or to buy. (ii) If the higher of the two appraisals is not greater than 10% more than the lower of the appraisals, the Fair Market Value shall be the average of the two appraisals. If the higher of the two appraisals is 10% or more higher than the lowest of the two appraisals, then a third appraiser shall be appointed by the two appraisers, and if they cannot agree on a third appraiser, the American Arbitration Association shall appoint the third appraiser. The third appraiser, regardless of who appoints him or her, shall have the same qualifications as the first two appraisers. 7 (iii) The Fair Market Value after the appointment of the third appraiser shall be the arithmetic mean of the three appraisals. (iv) The fees and expenses of the appraisers shall be paid one-half by the Company and one-half by the Holder. (v) The Put shall terminate upon the Company's successful completion of a bona fide underwritten public offering of its capital stock with net proceeds to the Company of at least $10,000,000 ("IPO"), or upon the conversion of this Warrant into the right to receive a publicly traded security of an entity having an aggregate market value of at least $30,000,000. 10. Registration. ------------ (a) The Company and the Holders of this Warrant and the Shares agree that if at any time after the date hereof the Company shall propose to file a registration statement with respect to any of its Common Stock on a form suitable for a secondary offering, it will give notice in writing to such effect to the Holder(s) at least thirty (30) days prior to such filing, and, at the written request of any such registered holder, made within ten (10) days after the receipt of such notice, will include therein at the Company's cost and expense (including the fees and expenses of counsel to such Holder(s), but excluding underwriting discounts, commissions and filing fees attributable to the Shares included therein) such of the Shares as such Holder(s) shall request; provided, however, that if the offering being registered by the Company is underwritten, the Shares included in such registration shall be included in such underwriting, and if the representative of the underwriters certifies in writing that the inclusion therein of the Shares would materially and adversely affect the sale of the securities to be sold by the Company thereunder, then the Company shall be required to include in the offering and such underwriting only that number of securities, including the Shares, which the underwriters determine in their sole discretion will not jeopardize the success of the offering (the securities so included to be apportioned pro rata among all selling shareholders according to the total amount of securities entitled to be included therein owned by each selling shareholder, but in no event shall the total number of Shares included in the offering be less than the number of securities included in the offering by any other single selling shareholder) and any Shares not so included shall not be registered in such registration statement. 8 (b) Whenever the Company undertakes to effect the registration of any of the Shares, the Company shall, as expeditiously as reasonably possible: (i) Prepare and file with the Securities and Exchange Commission (the "Commission") a registration statement covering such Shares and use its best efforts to cause such registration statement to be declared effective by the Commission as expeditiously as possible and to keep such registration effective until the earlier of (A) the date when all Shares covered by the registration statement have been sold or (B) one hundred eighty (180) days from the effective date of the registration statement; provided, that before filing a registration statement or prospectus or any amendment or supplements thereto, the Company will furnish to each Holder of Shares covered by such registration statement and the underwriters, if any, copies of all such documents proposed to be filed (excluding exhibits, unless any such person shall specifically request exhibits), which documents will be subject to the review of such Holders and underwriters, and the Company will not file such registration statement or any amendment thereto or any prospectus or any supplement thereto (including any documents incorporated by reference therein) with the Commission if (A) the underwriters, if any, shall reasonably object to such filing or (B) if information in such registration statement or prospectus concerning a particular selling Holder has changed and such Holder or the underwriters, if any, shall reasonably object. (ii) Prepare and file with the Commission such amendments and post-effective amendments to such registration statement as may be necessary to keep such registration statement effective during the period referred to in Section 10(b) (i) and to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement, and cause the prospectus to be supplemented by any required prospectus supplement, and as so supplemented to be filed with the Commission pursuant to Rule 424 under the Securities Act. (iii) Furnish to the selling Holder(s) such numbers of copies of such registration statement, each amendment thereto, the prospectus included in such registration statement (including each preliminary prospectus), each supplement thereto and such other documents as they may reasonably request in order to facilitate the disposition of the Shares owned by them. 9 (iv) Use its best efforts to register and qualify under such other securities laws of such jurisdictions as shall be reasonably requested by any selling Holder and do any and all other acts and things which may be reasonably necessary or advisable to enable such selling Holder to consummate the disposition of the Shares owned by such Holder, in such jurisdictions; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to qualify to transact business or to file a general consent to service of process in any such states or jurisdictions. (v) Promptly notify each selling Holder of the happening of any event as a result of which the prospectus included in such registration statement contains an untrue statement of a material fact or omits any fact necessary to make the statements therein not misleading and, at the request of any such Holder, the Company will prepare a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Shares, such prospectus will not contain an untrue statement of a material fact or omit to state any fact necessary to make the statements therein not misleading. (vi) Provide a transfer agent and registrar for all such Shares not later than the effective date of such registration statement. (vii) Enter into such customary agreements (including underwriting agreements in customary form for a primary offering) and take all such other actions as the underwriters, if any, reasonably request in order to expedite or facilitate the disposition of such Shares (including, without limitation, effecting a stock split or a combination of shares). (viii) Make available for inspection by any selling Holder or any underwriter participating in any disposition pursuant to such registration statement and any attorney, accountant or other agent retained by any such selling Holder or underwriter, all financial and other records, pertinent corporate documents and properties of the Company, and cause the officers, directors, employees and independent accountants of the Company to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such registration statement. (ix) Promptly notify the selling Holder(s) and the underwriters, if any, of the following events and (if requested by any such person) confirm such notification 10 in writing: (A) the filing of the prospectus or any prospectus supplement and the registration statement and any amendment or post- effective amendment thereto and, with respect to the registration statement or any post-effective amendment thereto, the declaration of the effectiveness of such documents, (B) any requests by the Commission for amendments or supplements to the registration statement or the prospectus or for additional information, (C) the issuance or threat of issuance by the Commission of any stop order suspending the effectiveness of the registration statement or the initiation of any proceedings for that purpose, and (D) the receipt by the Company of any notification with respect to the suspension of the qualification of the Shares for sale in any jurisdiction or the initiation or threat of initiation of any proceeding for such purposes. (x) Make every reasonable effort to prevent the entry of any order suspending the effectiveness of the registration statement and to obtain at the earliest possible moment the withdrawal of any such order, if entered. (xi) Cooperate with the selling Holder(s) and the underwriters, if any, to facilitate the timely preparation and delivery of certificates representing the Shares to be sold and not bearing any restrictive legends, and enable such Shares to be in such lots and registered in such names as the underwriters may request at least two (2) business days prior to any delivery of the Shares to the underwriters. (xii) Provide a CUSIP number for all the Shares not later than the effective date of the registration statement. (xiii) Prior to the effectiveness of the registration statement and any post-effective amendment thereto and at each closing of an underwritten offering, (A) make such representations and warranties to the selling Holder(s) and the underwriters, if any, with respect to the Shares and the registration statement as are customarily made by issuers in primary underwritten offerings; (B) use its best efforts to obtain "cold comfort" letters and updates thereof from the Company's independent certified public accountants addressed to the selling Holders and the underwriters, if any, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters by underwriters in connection with primary underwritten offerings; (C) deliver such documents and certificates as may be reasonably requested (1) by the holders of a majority of the 11 Shares being sold, and (2) by the underwriters, if any, to evidence compliance with clause (A) above and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company; and (D) obtain opinions of counsel to the Company and updates thereof (which counsel and which opinions shall be reasonably satisfactory to the underwriters, if any), covering the matters customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by the selling Holders and underwriters or their counsel. Such counsel shall also state that no facts have come to the attention of such counsel which cause them to believe that such registration statement, the prospectus contained therein, or any amendment or supplement thereto, as of their respective effective or issue dates, contains any untrue statement of any material fact or omits to state any material fact necessary to make the statements therein not misleading (except that no statement need be made with respect to any financial statements, notes thereto or other financial data or other expertized material contained therein). If for any reason the Company's counsel is unable to give such opinion, the Company shall so notify the Holders of the Shares and shall use its best efforts to remove expeditiously all impediments to the rendering of such opinion. (xiv) Otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make generally available to its security holders earnings statements satisfying the provisions of Section 11(a) of the Securities Act, no later than forty-five (45) days after the end of any twelve-month period (or ninety (90) days, if such period is a fiscal year) (A) commencing at the end of any fiscal quarter in which the Shares are sold to underwriters in a firm or best efforts underwritten offering, or (B) if not sold to underwriters in such an offering, beginning with the first month of the first fiscal quarter of the Company commencing after the effective date of the registration statement, which statements shall cover such twelve-month periods. (c) After the date hereof, the Company shall not grant to any holder of securities of the Company any registration rights which have a priority greater than or equal to those granted to Holders pursuant to this Warrant without the prior written consent of the Holder(s). (d) The Company's obligations under Section 10(a) above with respect to each Holder are expressly conditioned upon such Holder's furnishing to the Company in writing such information concerning such holder and the terms of such 12 Holder's proposed offering as the Company shall reasonably request for inclusion in the registration statement and in the event that the offering is underwritten, upon such Holder executing an underwriting agreement in customary form. If any registration statement including any of the Shares is filed, then the Company shall indemnify each holder thereof (and each underwriter for such Holder and each person, if any, who controls such underwriter within the meaning of the Securities Act) from any loss, claim, damage or liability arising out of, based upon or in any way relating to any untrue statement of a material fact contained in such registration statement or any omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except for any such statement or omission based on information furnished in writing by such Holder expressly for use in connection with such registration statement; and such holder shall indemnify the Company (and each of its officers and directors who has signed such registration statement, each director, each person, if any, who controls the Company within the meaning of the Securities Act, each underwriter for the Company and each person, if any, who controls such underwriter within the meaning of the Securities Act) and each other such Holder against any loss, claim, damage or liability arising from any such statement or omission which was made in reliance upon information furnished in writing to the Company by such holder of the Shares expressly for use in connection with such registration statement. (e) For purposes of this Section 10, all of the Shares shall be deemed to be issued and outstanding. 11. Certain Notices. In case at any time the Company shall propose to: --------------- (a) declare any cash dividend upon its Common Stock; (b) declare any dividend upon its Common Stock payable in stock or make any special dividend or other distribution to the holders of its Common Stock; (c) offer for subscription to the holders of any of its Common Stock any additional shares of stock in any class or other rights; (d) reorganize, or reclassify the capital stock of the Company, or consolidate, merge or otherwise combine with, or sell all or substantially all of its assets to, another corporation; (e) voluntarily or involuntarily dissolve, liquidate or wind up of the affairs of the Company; or 13 (f) redeem or purchase any shares of its capital stock or securities convertible into its capital stock; then, in any one or more of said cases, the Company shall give to the Holder of the Warrant, by certified or registered mail, (i) at least thirty (30) days' prior written notice of the date on which the books of the Company shall close or a record shall be taken for such dividend, distribution or subscription rights or for determining rights to vote in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up, and (ii) in the case of such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up, at least twenty (20) days' prior written notice of the date when the same shall take place. Any notice required by clause (i) shall also specify, in the case of any such dividend, distribution or subscription rights, the date on which the holders of Common Stock shall be entitled thereto, and any notice required by clause (ii) shall specify the date on which the holders of Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up, as the case may be. 12. Rights of Co-Sale. ----------------- (a) Co-Sale Right. Neither W. Allan Jones, Jr. nor Janie P. Jones ------------- (collectively, "Selling Shareholder") shall enter into any transaction that would result in the sale by him or her of any Common Stock now or hereafter owned by him or her other than transfers to family members, transfers to trusts for the benefit of family members which agree to be bound by the terms of this paragraph 12, or transfer's to affiliates of a Selling Shareholder, which agree to be bound by the terms of this paragraph 12, unless prior to such sale the Selling Shareholder shall give notice to Holder of his or her intention to effect such sale in order that Holder may exercise its rights under this Section 12 as hereinafter described. such notice shall set forth (i) the number of shares to be sold by the Selling Shareholder, (ii) the principal terms of the sale, including the price at which the shares are intended to be sold, and (iii) an offer by the Selling Shareholder to use his or her best efforts to cause to be included with the shares to be sold by him or her in the sale, on a pro rata basis and on the same terms and conditions, the Shares issuable or issued to Holder pursuant this Warrant. (b) Rejection of Co-Sale Offer. If Holder has not accepted such offer in -------------------------- writing within a period of ten (10) days from the date of receipt of the notice, then the 14 Selling Shareholder shall thereafter be free for a period of ninety (90) days to sell the number of shares specified in such notice, at a price no greater than the price set forth in such notice and on otherwise no more favorable terms to the Selling Shareholder than as set forth in such notice, without any further obligation to Holder in connection with such sale. In the event that the Selling Shareholder fails to consummate such sale within such ninety-day period, the shares specified in such notice shall continue to be subject to this Section. (c) Acceptance of Co-Sale Offer. If Holder accepts such offer in --------------------------- writing within such ten (10) day period, such acceptance shall be irrevocable unless the Selling Shareholder shall be unable to cause to be included in his sale the number of Shares of stock held by Holder and set forth in the written acceptance. In that event, the Selling Shareholder and Holder shall participate in the sale pro rata based on their respective ownership interests in the Company. 13. Stock Option Plan. Notwithstanding anything contained herein to the ----------------- contrary, the Company may establish an employee stock incentive plan pursuant to which stock grants or options to purchase a number of shares of the Company's common stock not to exceed 15% of the shares outstanding may be granted to the Company's employees; provided, however, that the exercise price per share of capital stock under each option granted under the option plan shall in no event be less than l00% of the fair market value of the capital stock on the date such option is granted. 14. Notice. Any and all notices, elections or demands permitted or ------ required to be made under this Warrant shall be in writing, signed by the party giving such notice, election or demand and shall be delivered personally, telescoped, or sent by certified mail or overnight via nationally recognized courier service (such as Federal Express), to the other party at the address set forth below, or at such other address as may be supplied in writing and of which receipt has been acknowledged in writing. The date of personal delivery or telecopy or two (2) business days after the date of mailing (or the next business day after delivery to such courier service), as the case may be, shall be the date of such notice, election or demand. For the purposes of this Warrant: The Address of Holder is: Sirrom Capital Corporation Suite 200 500 Church Street Nashville, TN 37219 Attention: John C. Harrison Telecopy No. 615/726-1208 15 with a copy to: Chambliss, Bahner & Stophel, P.C. 1000 Tallan Building Two Union Square Chattanooga, TN 37402 Attention: J. Patrick Murphy, Esq. Telecopy No. 423/265-9574 The Address of Company is: Check into Cash, Inc. 205 Second Street, N.W. Jones Building Cleveland, TN 37364-1015 Attention: W. Allan Jones, Jr. Telecopy No. 423/476-9200 with a copy to: Alston & Bird, LLP One Atlantic Center 1201 Peachtree Street Atlanta, GA 30309-3424 Attn.: David E. Brown, Jr. Telecopy No. 404/881-7777 15. Equity Participation. This Warrant is issued in connection with the -------------------- Loan Agreement. It is intended that this Warrant constitute an equity participation under and pursuant to T.C.A. (S)47-24-101, et seq. and that such ------- equity participation be permitted under said statutes and not constitute interest on the Note. If under any circumstances whatsoever, fulfillment of any obligation of this Warrant, the Loan Agreement, or any other agreement or document executed in connection with the Loan Agreement, shall violate the lawful limit of any applicable usury statute or any other applicable law with regard to obligations of like character and amount, then the obligation to be fulfilled shall be reduced to such lawful limit, such that in no event shall there occur, under this Warrant, the Loan Agreement, or any other document or instrument executed in connection with the Loan Agreement, any violation of such lawful limit, but such obligation shall be fulfilled to the lawful limit. If any sum is collected in excess of the lawful limit, such excess shall be applied to reduce the principal amount of the Note. 16. Severability. If any provisions(s) of this Warrant or the application ------------ thereof to any person or circumstances shall be invalid or unenforceable to any extent, the remainder of this Warrant and the application of such provisions to other persons or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law. 17. Entire Agreement. This Warrant between the Company and Holder ---------------- represents the entire agreement between the parties concerning the subject matter hereof, and all oral discussions and prior agreement are merged herein. 16 18. Governing Law. This warrant shall be governed by the laws of the ------------- State of Tennessee applicable to agreements made entirely within the State. 19. Counterparts. This Warrant may be executed in any number of ------------ counterparts and be different parties to this Warrant in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same Warrant. 20. Consent to Jurisdiction; Exclusive Venue. The Company hereby ---------------------------------------- irrevocably consents to the jurisdiction of the United States District Court for the Middle District of Tennessee and of all Tennessee state courts sitting in Davidson County, Tennessee, for the purpose of any litigation to which Holder may be a party and which concerns this Warrant. It is further agreed that venue for any such action shall lie exclusively with courts sitting in Davidson County, Tennessee, unless Holder agrees to the contrary in writing. 21. Waiver of Trial by Jury. HOLDER AND THE COMPANY HEREBY KNOWINGLY AND ----------------------- VOLUNTARILY WITH THE BENEFIT OF COUNSEL WAIVE TRIAL BY JURY IN ANY ACTIONS, PROCEEDINGS, CLAIMS OR COUNTER-CLAIMS, WHETHER IN CONTRACT OR TORT OR OTHERWISE, AT LAW OR IN EQUITY, ARISING OUT OF OR IN ANY WAY RELATING TO THIS WARRANT. [Space Intentionally Left Blank] 17 IN WITNESS WHEREOF, the parties hereto have set their hands as of the date first above written. CHECK INTO CASH, INC., a Delaware corporation By: /s/ Fred Krosner ------------------------------------- Title: V.P. ---------------------------------- SIRROM CAPITAL CORPORATION, a Tennessee corporation By: /s/ Kim Stringfield ------------------------------------- Title: Treasurer ---------------------------------- The undersigned shareholders join in the execution of this Warrant for the purposes of acknowledging and agreeing to be bound by Section 12 hereof. /s/ W. Allan Jones, Jr. ----------------------------------------- W. Allan Jones, Jr. /s/ Janie P. Jones ----------------------------------------- Janie P. Jones IN WITNESS WHEREOF, the parties hereto have set their hands as of the date first above written. CHECK INTO CASH, INC., a Delaware corporation By: /s/ Fred Krosner ------------------------------------- Title: VP ---------------------------------- SIRROM CAPITAL CORPORATION, & Tennessee corporation By: [Signature Appears Here] ------------------------------------- Title: ---------------------------------- The undersigned shareholders join in the execution of this Warrant for the purposes of acknowledging and agreeing to be bound by Section 12 hereof. /s/ W. Allan Jones, Jr. ---------------------------------------- W. Allan Jones, Jr. /s/ Jamie P. Jones ---------------------------------------- Jamie P. Jones 19 SCHEDULE I ---------- Illustration of Anti-Dilution Provision --------------------------------------- Assumptions: Outstanding Common Stock: 100,000 Shares (fully diluted) Fair Market Value per share: $10 New Issuance: 20,000 Shares New Issue Price (all in) $8 Debt Warrant: 10,000 Shares FMV of Warrant Shares: $100,000 ($10 x 10,000 shares) Formula: 10,000 x (120,000 x $10) ------------------------------------ (100,000 x $10) + (20,000 x $8) 10,000 x 1,200,000 --------- 1,160,000 10,000 x 1.0345 Adjusted No. of Warrant Shares: 10,344.83 Percentage of Outstanding: 10,344.83 = 0.0862 --------- 120,000 FMV of Adj. Warrant Shares: .0862 x 1,160,000 = $100,000 20 EX-10.5 7 AIRCRAFT LEASE EXHIBIT 10.5 AIRCRAFT LEASE THIS AIRCRAFT LEASE is made and entered into effective as of November 14, 1997 by and between JONES AIRWAYS, LLC, ("Lessor") a Delaware limited liability company, and CHECK INTO CASH, INC. ("Lessee") a Delaware corporation. WITNESSETH: WHEREAS, Lessor is the registered owner of an aircraft described in Exhibit A, attached hereto and incorporated by reference herein, and hereinafter - --------- referred to as the "Aircraft", which aircraft is available for lease to a qualified Lessee; and WHEREAS, Lessee desires to lease the Aircraft under such terms and conditions as are mutually set forth herein. NOW, THEREFORE, the parties agree as follows: SECTION I LEASE OF AIRCRAFT In consideration of the rent to be charged as set forth below, Lessor hereby leases the Aircraft to Lessee or its affiliated companies on a non-exclusive basis. It is acknowledged by Lessee that the Lessor also contemplates leasing the Aircraft to other parties, on a non-exclusive basis, and that any conflicts in usage of the Aircraft by such lessees will be determined by the Lessor and shall consider which Lessee first reserved usage of the Aircraft with the Lessor. Any such conflicts as to time of usage will be finally resolved by Lessor. Lessor however commits to having the Aircraft available to Lessee or any of its affiliates for a minimum of thirty (30) hours per month. During any time that the Aircraft is leased to Lessee, the Lessee shall have the complete possession, command and control of the Aircraft, and shall be responsible for pilots for the aircraft and for maintenance of the aircraft, as herein provided. SECTION II TERM This lease shall commence on the date of this lease, and unless terminated sooner as provided herein, the lease shall be for a term of five (5) years. Notwithstanding any provisions in this lease to the contrary, either party may terminate this lease upon ten (10) days notice to the other party hereunder. SECTION III RENT The rent payable by Lessee to Lessor shall be calculated at the rate of Thirty Thousand Dollars ($30,000.00) per month plus Seven Hundred Fifty Dollars ($750.00) per flight hour in excess of thirty (30) hours per month. Flight hours shall be measured from the time of takeoff to the time of touchdown and shall be verified by the use of the Aircraft's flight hour meter (Hobbs). The rent shall be due and payable no later than fifteen (15) days after the close of each month. SECTION IV OPERATING COSTS Lessee shall be responsible for the cost of fuel, flight crew, flight crew expenses and all trip related expenses, including but not limited to, landing fees, parking and catering fees as the same may apply from time to time. SECTION V RISK OF LOSS Lessor shall, at Lessor's own expense, keep the Aircraft, together with all its equipment and accessories, insured against loss or damage from crash, fire, windstorm, collision, or other casualty. To the extent not covered by insurance, Lessee shall be liable for any loss or damage to the Aircraft which occurs in any manner from any cause while the Aircraft is under the possession and control of the Lessee during the term of this Lease. SECTION VI RESTRICTIONS ON USE Lessee and/or its affiliated companies may operate the Aircraft only for the purposes, and within the geographical limits, set forth in the insurance policy or policies covering the Aircraft and obtained by Lessor. Furthermore, Lessee and/or its affiliates shall not use Aircraft in violation of any foreign, federal, state, territorial, or municipal law or regulation and shall be solely responsible for any fines, penalties, or forfeiture occasioned by any violation. If such fines or penalties are imposed on Lessor and paid by Lessor, Lessee shall reimburse Lessor for the amount thereof within ten (10) days of receipt by Lessee of written demand from Lessor. Lessee will not base Aircraft, or permit it to be based, outside the limits of the United States of America, without the prior written consent of Lessor. The Aircraft shall be flown only by licensed and qualified pilots. In the event the insurance on the Aircraft is invalidated because Lessee is unable to obtain licensed and qualified pilots, Lessee shall not operate the Aircraft until such time as licensed and qualified pilots are obtained and insurance on the Aircraft is made valid. SECTION VII INSPECTION BY LESSOR Lessee agrees to permit Lessor or an authorized agent to inspect the Aircraft at any reasonable time and to furnish any information in respect to the Aircraft and its use that Lessor may reasonably request. SECTION VIII ALTERATIONS Lessee shall not have the right to alter, modify, or make additions or improvements to the Aircraft without written permission from Lessor. In the event written permission is given, all such alterations, modifications, additions, and improvements as are so made shall become the property of Lessor and shall be subject to all of the terms of this agreement. SECTION IX MAINTENANCE AND REPAIR Lessee, at it's own expense, shall repair and maintain the Aircraft so as to keep it in good and safe operating condition, subject only to normal wear and tear accepted in the aircraft industry consistent with maintaining a safe aircraft. Lessee shall pay all costs and expenses of new parts and accessories for replacement, including the transportation charges thereon. All inspection, repairs, modifications, maintenance, and overhaul work to be accomplished shall be performed by personnel licensed to perform such work and shall be performed in accordance with the standards set by the Federal Aviation Administration regulations and requirements. Lessee shall maintain all log books and records pertaining to the Aircraft during the term of this agreement in accordance with the rules and regulations of the Federal Aviation Administration. Such records shall be made available for examination by Lessor, and Lessee, at the end of the term of this agreement, shall deliver such records to Lessor. SECTION X TITLE The registration of, and title to, the Aircraft shall be in the name of Lessor, and the Aircraft, at all times during the term of this agreement, or any extension, shall bear United States registration markings. All responsibility and obligations in regard to the operation of the Aircraft, while in the possession and control of Lessee, shall be borne by Lessee, and the inability, if any, of Lessee to operate the Aircraft because of ownership, registration, and markings, or for any other cause, shall not affect the provisions of this agreement. SECTION XI PAYMENT OF TAXES Lessor shall pay or cause to be paid all taxes incurred by reason of ownership of the Aircraft during the term of this agreement, including personal property taxes, but Lessee shall pay all operating taxes, fees, and charges, including sales taxes on rents payable hereunder, any excise taxes, gasoline sales taxes, and any tax or fee assessed or charged for the use of any airport or facilities or for the use of premises occupied in landing incurred while the Aircraft is in the possession of the Lessee. SECTION XII ASSIGNMENT Lessee shall not assign this lease or any interest in the Aircraft, or sublet the Aircraft, without prior written consent of Lessor. Subject to the foregoing, this lease insures to the benefit of, and is binding on, the heirs, legal representatives, successors, and assigns of the parties. SECTION XIII ACCIDENT AND CLAIM Lessee shall immediately notify Lessor of each accident involving the Aircraft, which notification shall specify the time, place, and nature of the accident or damage, the names and addressees of parties involved, persons injured, witnesses, and owners of properties damaged, and such other information as may be known. Lessee shall advise Lessor of all correspondence, papers, notices, and documents whatsoever received by Lessee in connection with any claim or demand involving or relating to Aircraft or its operation, and shall aid in any investigation instituted by Lessor and in the recovery of damages from third persons liable therefor. SECTION XIV INDEMNIFICATION Each party agrees to indemnify and hold harmless the other for any damages, fines, penalties and any other costs of any description, including reasonable attorney's fees, arising out of or relating to any breach of this agreement by such party. SECTION XV RETURN OF AIRCRAFT TO OWNER On the termination of this Lease by expiration or otherwise, Lessee shall return the Aircraft to Lessor in as good operating condition and appearance as when received, ordinary wear, tear, and deterioration expected, and shall indemnify Lessor against any claim for loss or damage occurring prior to the actual physical delivery of the Aircraft to Lessor. SECTION XVI DEFAULT If Lessee fails to make any payment of rent or other charges within fifteen (15) days after such amounts are due and payable, or if Lessee fails to comply with any provision of this agreement, Lessor shall have the right to take possession of the Aircraft wherever it may be located, without demand or notice and without any court order or other process of law and to located, without demand or notice and without any court order or other process of law and to pursue any other remedy available to Lessor at law or in equity. In the event of such default by Lessee, Lessor, at Lessor's option, may terminate this agreement. Notwithstanding any repossession or other action that Lessor may take, Lessee shall be and remain liable for the full performance of all obligations on the part of Lessee to be performed under this lease. Lessor's waiver of any default on the part of Lessee shall not constitute a waiver of subsequent defaults. SECTION XVII GOVERNING LAW This agreement is entered into under, and is to be construed in accordance with, the laws of the State of Tennessee, without regard to the rules of conflicts of law thereof. SECTION XVIII MODIFICATION AGREEMENT This agreement constitutes the entire understanding between the parties, and any change or modification must be in writing and signed by both parties. IN WITNESS WHEREOF, the parties have executed this lease agreement of the day and year first above written. JONES AIRWAYS, LLC By: /s/ W. Allan Jones --------------------------------- (W. Allan Jones) Chief Manager Title: Member LESSOR CHECK INTO CASH, INC. By: /s/ Steve Scoggins --------------------------------- (Steve Scoggins) Title: President LESSEE EXHIBIT A --------- DESCRIPTION OF AIRCRAFT ----------------------- 1979 CESSNA CITATION II Serial Number 550-0044 ENGINES: Pratt & Whitney JT15D Engines Serial Numbers: PCE70210 PCE70467 AVIONICS: Dual Sperry SPZ-500 5" & 4" Flight Director Bendix RDR - 1150 Color Radar Dual Sperry SPX-500 IFCS Sperry AA-125 radar Altimeter Dual Collins VHF-20 A Comms Wulfsberg Flitephone III Dual Collins VIR-30A Navs J.E.T. Standby Gyro Dual Collins DME-40 DME's Teledyne Angle of Attack Dual Collins ADF-60 ADF's Dual Collins TDR-90 Transponders OTHER EQUIPMENT: Rohr Thrust Reversers Freon Air Conditioning Anti-Skid Brakes Engine Fan/Turbine Synch 64 Cubic Foot Oxygen System INTERIOR: Nine passenger double club configuration appointed in Bone Leather with Taupe Carpet and matching side panels. EXTERIOR: White with Gold and Teal Accents. EX-10.6.1 8 EMPLOYMENT AGREEMENT EXHIBIT 10.6.1 EXHIBIT 1 --------- EMPLOYMENT AGREEMENT This EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into this 31st day of July, 1997 by and between Check into Cash, Inc., a Delaware corporation (hereinafter, the "Company"), and Steve Scoggins (hereinafter, "Executive"). BACKGROUND ---------- The Company desires to engage Executive in Executive capacities set forth herein, in accordance with the terms and conditions of this Agreement. Executive is willing to serve as such in accordance with the terms and conditions of this Agreement. NOW THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Effective Date. This Agreement is effective as of July 1, 1997 (the -------------- "Effective Date"). 2. Employment. Executive is hereby employed on the Effective Date as the ---------- President of the Company. Executive's responsibilities under this Agreement shall be in accordance with the policies and objectives established by the Chief Executive Officer and the Board of Directors of the Company and shall be consistent with the responsibilities of similarly situated executives of comparable companies in similar lines of business. In his capacity as President of the Company, Executive will report directly to the Chief Executive Officer of the Company. 3. Employment Period. Unless earlier terminated herein in accordance with ----------------- Section 7 hereof, Executive's employment shall be for a three-year term (the "Employment Period"), beginning on the Effective Date. The Employment Period shall, without further action by Executive or the Company, be extended for an additional one-year period on each anniversary of the Effective Date; provided, however, that either party may, by notice to the other given at any time prior to such next anniversary of the Effective Date, cause the Employment Period to cease to extend automatically. Upon such notice, the Employment Period shall terminate upon the expiration of the then-current term, including any prior extensions. 4. Extent of Service. During the Employment Period, and excluding any ----------------- periods of vacation and sick leave to which Executive is entitled, Executive agrees to devote his business time, attention, skill and efforts exclusively to the faithful performance of his duties hereunder; provided, however, that it shall not be a violation of this Agreement for Executive to (i) devote reasonable periods of time to charitable and community activities, and/or (ii) manage personal business interests and investments, so long as such activities do not interfere with the performance of Executive's responsibilities under this Agreement. 5. Compensation and Benefits. ------------------------- (a) Base Salary. During the Employment Period, the Company will pay to ----------- Executive a base salary in the amount of $100,000 for the remainder of 1997, rising to $150,000 per year on January 1, 1998 ("Base Salary"), less normal withholdings, payable in equal monthly or more frequent installments as are customary under the Company's payroll practices from time to time. The Board of Directors of the Company shall review Executive's Base Salary annually and in its sole discretion, subject to approval of the Board of Directors of the Company, may increase Executive's Base Salary from year to year. The annual review of Executive's salary by the Board will consider, among other things, Executive's own performance and the Company's performance. (b) Bonus. On or before December 20, 1997, the Company will pay to ----- Executive a cash bonus in the amount of $50,000. Future bonuses will be made on a discretionary basis in accordance with the Company's incentive plans referred to in subsection (c) below. (c) Incentive, Savings and Retirement Plans. During the Employment --------------------------------------- Period, Executive shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs applicable generally to similarly situated officers of the Company and its affiliated companies, and on the same relative basis as such other similarly situated officers. (d) Welfare Benefit Plans. During the Employment Period, Executive and --------------------- Executive's family shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to similarly situated officers of the Company and its affiliated companies. (e) Expenses. During the Employment Period, Executive shall be -------- entitled to receive prompt reimbursement for all reasonable expenses incurred by Executive in accordance with the policies, practices and procedures of the Company and its affiliated companies to the extent applicable generally to other similarly situated officers of the Company and its affiliated companies. (f) Fringe Benefits. During the Employment Period, Executive shall be --------------- entitled to fringe benefits in accordance with the plans, practices, programs and 2 policies of the Company and its affiliated companies in effect for similarly situated officers of the Company and its affiliated companies. (g) Automobile. Without limiting the foregoing, during the Employment ---------- Period, the Company shall pay Executive an automobile allowance of not less than $475 per month. (h) Club Dues. Without limiting the foregoing, during the Employment --------- Period, the Company shall pay Executive's membership dues at the Cleveland Golf and Country Club. (i) Boat. On or about the Effective Date, the Company shall confer to ---- Executive title to a Yamaha Exciter 220 HP personal ski boat. 6. Stock Awards. ------------ (a) Lapse of Restrictions on Existing Restricted Stock Award. -------------------------------------------------------- Effective as of the Effective Date, all restrictions applicable to the grant to Executive of 12,000 shares of the $0.01 par value common stock of the Company ("Common Stock") pursuant to that certain Restricted Stock Agreement, dated as of January 10, 1997, by and between Executive and the Company, shall lapse and be of no further force or effect. (b) Grant of Unrestricted Shares. The Company hereby grants to ---------------------------- Executive, as of the Effective Date and pursuant to the Company's 1997 Long-Term Incentive Plan, 24,000 additional shares of Common Stock, which shares are not subject to any restrictions on vesting. (c) Loan to Pay Taxes. The Company shall lend to Executive, interest ----------------- free, an amount in cash sufficient to pay all federal and state and local income and other taxes incurred by Executive in connection with the lapse of vesting restrictions and grant of additional shares of Common Stock pursuant to this Section 6. Such loan shall be evidenced by a loan agreement and promissory note to be mutually agreed by Executive and the Company and shall be repayable in full on the earlier to occur of (i) the fifth anniversary of the Effective Date, (ii) the date of Executive's termination of employment if such termination is by the Company for Cause or by Executive without Good Reason (as such capitalized terms are defined in Sections 7(b) and 7(c) hereof), or (iii) 240 days after the Common Stock first becomes listed for trading on a national securities exchange, the Nasdaq National Market or in the over-the-counter market. 7. Termination of Employment. ------------------------- (a) Death, Retirement or Disability. Executive's employment shall ------------------------------- terminate automatically upon Executive's death or Retirement during the Employment Period. If the Company determines in good faith that the Disability of Executive has 3 occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to Executive written notice in accordance with Section 14(f) of this Agreement of its intention to terminate Executive's employment. In such event, Executive's employment with the Company shall terminate effective on the 30th day after receipt of such written notice by Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, Executive shall not have returned to full-time performance of Executive's duties. For purposes of this Agreement, "Disability" shall mean a mental or physical disability as determined by the Board of Directors of the Company in accordance with standards and procedures similar to those under the Company's employee long-term disability plan, if any. At any time that the Company does not maintain such a long-term disability plan, Disability shall mean the inability of Executive, as determined by the Board, to substantially perform the essential functions of his regular duties and responsibilities due to a medically determinable physical or mental illness which has lasted (or can reasonably be expected to last) for a period of six consecutive months. For purposes of this Agreement, "Retirement" shall mean voluntary termination of employment after age 65. (b) Termination for Cause. The Company may terminate Executive's --------------------- employment during the Employment Period for Cause. For purposes of this Agreement, "Cause" shall mean: (i) the willful and continued failure of Executive to perform substantially Executive's duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to Executive by the Board of Directors of the Company which specifically identifies the manner in which such Board believes that Executive has not substantially performed Executive's duties, or (ii) the willful engaging by Executive in illegal conduct or gross misconduct the consequence of which is materially and demonstrably injurious to the Company. For purposes of this provision, no act or failure to act, on the part of Executive, shall be considered "willful" unless it is done, or omitted to be done, by Executive in bad faith or without reasonable belief that Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by Executive in good faith and in the best interests of the Company. The cessation of employment of Executive shall not be deemed to be for Cause unless and until there shall have been delivered to Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board of Directors of the Company (excluding Executive, if then a director) at a meeting of such Board called and held for such purpose (after reasonable notice is provided to Executive and 4 Executive is given an opportunity, together with counsel, to be heard before such Board), finding that, in the good faith opinion of such Board, Executive is guilty of the conduct described in subparagraph (i) or (ii) above, and specifying the particulars thereof in detail. (c) Good Reason. Executive's employment may be terminated by Executive ----------- for Good Reason. For purposes of this Agreement, "Good Reason" shall mean: (i) without the written consent of Executive, the assignment to Executive of any duties materially inconsistent with Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 2 of this Agreement, or any other action by the Company which results in a material diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by Executive; (ii) a reduction by the Company in Executive's Base Salary and benefits as in effect on the Effective Date or as the came may be increased from time to time, unless a similar reduction is made in salary and benefits of similarly-situated officers of the Company, or the failure by the Company to increase Executive's Base Salary each year during the Employment Period by an amount which at least equals, on a percentage basis, the mean average percentage increase in base salary for all officers of the Company, unless such failure to increase is based on non-arbitrary criteria applied to Executive and other similarly-situated employees; (iii) any purported termination by the Company of Executive's employment otherwise than for Cause, death, Disability or Retirement; or (iv) any failure by the Company to comply with and satisfy Section 13(b) of this Agreement. (d) Notice of Termination. Any termination by the Company for Cause, --------------------- or by Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 14(f) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated, and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not less than 30 days after the giving of such notice). The failure by Executive or the Company to set forth in the Notice of Termination any fact or circumstance which 5 contributes to a showing of Good Reason or Cause shall not waive any right of Executive or the Company, respectively, hereunder or preclude Executive or the Company, respectively, from asserting such fact or circumstance in enforcing Executive's or the Company's rights hereunder. (e) Date of Termination. "Date of Termination" means (i) if ------------------- Executive's employment is terminated by the Company for Cause, or by Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies Executive of such termination, (iii) if Executive's employment is terminated by reason of death, Disability or Retirement, the Date of Termination shall be the date of death or Retirement of Executive or the Disability Effective Date, as the case may be, and (iv) if Executive's employment is terminated by Executive other than for Good Reason, death, Disability or Retirement, the Date of Termination shall be the date of specified in the notice of termination, which shall be not less than 30 days after the giving of such notice. 8. Obligations of the Company upon Termination. ------------------------------------------- (a) Termination by Executive for Good Reason; Termination by the ------------------------------------------------------------ Company Other Than for Cause, Death, Disability or Retirement. If, during the - ------------------------------------------------------------- Employment Period, the Company shall terminate Executive's employment other than for Cause, death, Disability or Retirement, or Executive shall terminate employment for Good Reason, then in consideration of Executive's services rendered prior to such termination and as reasonable compensation for his compliance with the Restrictive Covenants in Section 12 hereof: (i) the Company shall pay to Executive in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts: A. the sum of (1) Executive's Base Salary through the Date of Termination to the extent not theretofore paid, and (2) any compensation previously deferred by Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case to the extent not theretofore paid (the sum of the amounts described in clauses (1) and (2) shall be hereinafter referred to as the "Accrued Obligations"); and B. the amount equal to Executive's Base Salary in effect as of the Date of Termination, annualized for one full year (the "Severance Payment"); and 6 (ii) for one year after Executive's Date of Termination, or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue benefits to Executive and/or Executive's family at least equal to those which would have been provided to them in accordance with the welfare plans, programs, practices and policies described in Section 5(d) of this Agreement if Executive's employment had not been terminated or, if more favorable to Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies and their families, provided, however, that if Executive becomes re-employed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility ("Welfare Benefits"); and (iii) to the extent not theretofore paid or provided, the Company shall timely pay or provide to Executive any other amounts or benefits required to be paid or provided or which Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits"). (b) Death. If Executive's employment is terminated by reason of Executive's ----- death during the Employment Period, this Agreement shall terminate without further obligations to Executive's legal representatives under this Agreement, other than for payment of Accrued Obligations, the timely payment or provision of Other Benefits, and the repurchase of Common Stock as described in the following sentence. If the Common Stock is not freely tradable by Executive on the date of his death, by reason of securities restrictions or otherwise, the Company shall, at the request of Executive's surviving spouse or executor or administrator, repurchase all of such shares of Common Stock then held by Executive (or his estate) at the then-current Fair Market Value of such Common Stock (as defined in the Company's 1997 Long-Term Incentive Plan, except that if the Common Stock is not publicly traded, the Fair Market Value shall be determined by appraisal conducted by a recognized firm of independent appraisers). Accrued Obligations shall be paid to Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 8(b) shall include, without limitation, and Executive's estate and/or beneficiaries shall be entitled to receive, benefits under such plans, programs, practices and policies relating to death benefits, if any, as applicable generally to similarly situated officers of the Company and its affiliated companies and their beneficiaries, and on the same basis as such similarly situated officers and their beneficiaries. 7 (c) Disability or Retirement. If Executive's employment is terminated by ------------------------ reason of Executive's Disability or Retirement during the Employment Period, this Agreement shall terminate without further obligations to Executive, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 8(c) shall include, without limitation, and Executive shall be entitled after the Date of Termination to receive, disability or retirement and other benefits under such plans, programs, practices and policies relating to disability or retirement, if any, as applicable generally to similarly situated officers of the Company and its affiliated companies and their families, and on the same basis as such similarly situated officers and their families. (d) Cause or Voluntary Termination without Good Reason. If Executive's -------------------------------------------------- employment shall be terminated for Cause during the Employment Period, or if Executive voluntarily terminates employment during the Employment Period without Good Reason, this Agreement shall terminate without further obligations to Executive, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. 9. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or ------------------------- limit Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which Executive may qualify, nor, subject to Section 14(d), shall anything herein limit or otherwise affect such rights as Executive may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. 10. Full Settlement; Release; Cost of Enforcement. The Company's obligation --------------------------------------------- to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against Executive or others; provided, however, that the Company's obligation to pay the Severance Payment in accordance with Section 8(a)(i)(B) hereof shall be conditioned upon Executive's execution of a Release in favor of the Company in substantially the form of Exhibit A attached hereto. The Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which Executive may reasonably incur as a result of any contest (to the extent that Executive is successful, in whole or in part, in such contest) by the Company, Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of 8 performance thereof (including as a result of any contest by Executive about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code"). 11. Representations and Warranties. Executive hereby represents and ------------------------------ warrants to the Company that Executive is not a party to, or otherwise subject to, any covenant not to compete with any person or entity, and Executive's execution of this Agreement and performance of his obligations hereunder will not violate the terms or conditions of any contract or obligation, written or oral, between Executive and any other person or entity. 12. Restrictions on Conduct of Executive. ------------------------------------ (a) General. Executive and the Company understand and agree that the ------- purpose of the provisions of this Section 12 is to protect legitimate business interests of the Company, as more fully described below, and is not intended to eliminate Executive's post-employment competition with the Company per se, nor is it intended to impair or infringe upon Executive's right to work, earn a living, or acquire and possess property from the fruits of his labor. Executive hereby acknowledges that the post-employment restrictions set forth in this Section 12 are reasonable and that they do not, and will not, unduly impair his ability to earn a living after the termination of this Agreement. Therefore, subject to the limitations of reasonableness imposed by law upon the restrictions set forth herein, Executive shall be subject to the restrictions set forth in this Section 12. (b) Definitions. The following capitalized terms used in this Section ----------- 12 shall have the meanings assigned to them below, which definitions shall apply to both the singular and the plural forms of such terms: "Competitive Services" means any services provided by Company at the Determination Date, including, but not limited to, the business of cashing checks, deferring deposit of checks for specified periods of time, and extending short-term, unsecured credit. "Confidential Information" means any confidential or proprietary information possessed by the Company or its affiliated entities or relating to its or their business, including without limitation, any confidential "know- how", customer lists, details of client or consultant contracts, current and anticipated customer requirements, pricing policies price lists, market studies, business plans, operational methods, marketing plans or strategies, product development techniques or plans, computer software programs (including object code and source code), data and documentation, data base technologies, systems, structures and architectures, inventions and ideas, past, current and planned research and development, compilations, devices, methods, 9 techniques, processes, financial information and data, business acquisition plans, new personnel acquisition plans and any other information that would constitute a Trade Secret (as defined herein). "Determination Date" means the date of termination of Executive's employment with the Company for any reason whatsoever or any earlier date (during the Employment Period) of an alleged breach of the Restrictive Covenants by Executive. "Person" means any individual or any corporation, partnership, joint venture, association or other entity or enterprise. "Principal or Representative" means a principal, owner, partner, shareholder, joint venturer, investor, member, trustee, director, officer, manager, employee, agent, representative or consultant. "Protected Employees" means employees of the Company who were employed by the Company at any time within six (6) months prior to the Determination Date. "Restricted Period" means the Employment Period and a period extending two (2) years from the later of (i) the Date of Termination or (ii) the last date on which the Company makes a payment to Executive pursuant to Section 8 of this Agreement; provided, however that such period shall be extended by any length of time during which Executive is in breach of the Restricted Covenants. "Restrictive Covenants" means the restrictive covenants contained in Section 12(c) hereof. "Trade Secret" means any item of Confidential Information that constitutes a "trade secret(s)" under the common law or statutory law of the State of Tennessee. (c) Restrictive Covenants. --------------------- (i) Restriction on Disclosure and Use of Confidential Information. ------------------------------------------------------------- Executive understands and agrees that the Confidential Information constitutes a valuable asset of the Company and its affiliated entities, and may not be converted to Executive's own use. Accordingly, Executive hereby agrees that Executive shall not, directly or indirectly, at any time during the Restricted Period reveal, divulge, or disclose to any Person not expressly authorized by the Company any Confidential Information, and Executive shall not, directly or indirectly, at any time during the Restricted Period use or make use of any Confidential Information in connection with any business activity other than that 10 of the Company; provided, however, in the event the Confidential Information constitutes a Trade Secret, the Restricted Period referred to above shall be five (5) years. (ii) Nonsolicitation of Protected Employees. Executive understands -------------------------------------- and agrees that the relationship between the Company and each of its Protected Employees constitutes a valuable asset of the Company and may not be converted to Executive's own use. Accordingly, Executive hereby agrees that during the Restricted Period Executive shall not directly or indirectly on Executive's own behalf or as a Principal or Representative of any Person or otherwise solicit or induce any Protected Employee to terminate his or her employment relationship with the Company or to enter into any relationship of employment, agency or independent contractorship with any other Person. (iii) Noncompetition with the Company. During the Restricted ------------------------------- Period, Executive, unless acting in accordance with the Company's prior written consent, will not directly provide any Competitive Services to, and will not, directly or indirectly, (i) own, manage, operate, join, control, finance or participate in the ownership, management, operation, control or financing of, or (ii) be connected as a Principal or Representative or otherwise with, or (iii) permit Executive's name to be used by or in connection with, any Person engaged in providing Competitive Services to any Person conducting business activities within a ten (10) mile radius of any store location from which the Company is or was engaged in the provision of the Competitive Services on the Determination Date, including any store location for which a lease had been entered into by the Company on or before the Determination Date but was not then operational; provided, however, that the provisions of this Agreement shall not be deemed to prohibit the ownership by Executive of any securities of the Company or its affiliated entities or not more than five percent (5%) of any class of securities of any corporation having a class of securities registered pursuant to the Securities Exchange Act of 1934, as amended. (d) Exceptions from Disclosure Restrictions. Anything herein to the --------------------------------------- contrary notwithstanding, Executive shall not be restricted from disclosing or using Confidential Information that: (a) is or becomes generally available to the public other than as a result of an unauthorized disclosure by Executive or his agent; (b) becomes available to Executive in a manner that is not in contravention of applicable law from a source (other than the Company or its affiliated entities or one of its or their officers, employees, agents or representatives) that is not bound by a confidential relationship with the Company or its affiliated entities or by a confidentiality or other similar agreement; (c) was known to Executive on a non-confidential basis and not in contravention of applicable law or a confidentiality or other similar agreement before its disclosure to Executive by the Company or its affiliated entities or one of its or their officers, employees, agents or representatives; or (d) is required to be disclosed by law, 11 court order or other legal process; provided, however, that in the event disclosure is required by law, Executive shall provide the Company with prompt notice of such requirement so that the Company may seek an appropriate protective order prior to any such required disclosure by Executive. (e) Enforcement of Restrictive Covenants. ------------------------------------ (i) Rights and Remedies Upon Breach. In the event Executive ------------------------------- breaches, or threatens to commit a breach of, any of the provisions of the Restrictive Covenants, the Company shall have the following rights and remedies, which shall be independent of any others and severally enforceable, and shall be in addition to, and not in lieu of, any other rights and remedies available to the Company at law or in equity: A. the right and remedy to enjoin, preliminarily and permanently, Executive from violating or threatening to violate the Restrictive Covenants and to have the Restrictive Covenants specifically enforced by any court of competent jurisdiction, it being agreed that any breach or threatened breach of the Restrictive Covenants would cause irreparable injury to the Company and that money damages would not provide an adequate remedy to the Company; and B. the right and remedy to require Executive to account for and pay over to the Company all compensation, profits, monies, accruals, increments or other benefits derived or received by Executive as the result of any transactions constituting a breach of the Restrictive Covenants. (ii) Severability of Covenants. Executive acknowledges and agrees ------------------------- that the Restrictive Covenants are reasonable and valid in time and scope and in all other respects. If any court determines that any of the Restrictive Covenants, or any part thereof, are invalid or unenforceable, the remainder of the Restrictive Covenants shall not thereby be affected and shall be given full effect, without regard to the invalid portions. (iii) Attorneys' Fees. In any action relating to the enforcement of --------------- the Restrictive Covenants, the prevailing party in such action shall be entitled to be paid any and all costs and expenses incurred by him or it in enforcing or establishing his or its rights thereunder, including, without limitation, reasonable attorneys' fees, whether suit be brought or not, and whether or not incurred in trial, bankruptcy or appellate proceedings. 12 13. Assignment and Successors. ------------------------- (a) Executive. This Agreement is personal to Executive and without --------- the prior written consent of the Company shall not be assignable by Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Executive's legal representatives. (b) The Company. This Agreement shall inure to the benefit of and be ----------- binding upon the Company and its successors and assigns. The Company will require any successor to all or substantially all of the business and/or assets of the Company (whether direct or indirect, by purchase, merger, consolidation or otherwise) to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "the Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law or otherwise. 14. Miscellaneous. ------------- (a) Waiver. Failure of either party to insist, in one or more ------ instances, on performance by the other in strict accordance with the terms and conditions of this Agreement shall not be deemed a waiver or relinquishment of any right granted in this Agreement or of the future performance of any such term or condition or of any other term or condition of this Agreement, unless such waiver is contained in a writing signed by the party making the waiver. (b) Severability. If any provision or covenant, or any part thereof, ------------ of this Agreement should be held by any court to be invalid, illegal or unenforceable, either in whole or in part, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of the remaining provisions or covenants, or any part thereof, of this Agreement, all of which shall remain in full force and effect. (c) Other Agents. Nothing in this Agreement is to be interpreted as ------------ limiting the Company from employing other personnel on such terms and conditions as may be satisfactory to it. (d) Entire Agreement. Except as provided herein, this Agreement ---------------- contains the entire agreement between the Company and Executive with respect to the subject matter hereof, and it supersedes and invalidates any previous agreements or contracts between them which relate to the subject matter hereof. No representations, inducements, promises or agreements, oral or otherwise, which are not embodied herein shall be of any force or effect. (e) Governing Law. Except to the extent preempted by federal law, and ------------- without regard to conflict of laws principles, the laws of the State of Tennessee shall 13 govern this Agreement in all respects, whether as to its validity, construction, capacity, performance or otherwise. (f) Notices. All notices, requests, demands and other communications ------- required or permitted hereunder shall be in writing and shall be deemed to have been duly given if delivered or three days after mailing if mailed, first class, certified mail, postage prepaid: To Company: Check into Cash, Inc. Post Office Box 1015 Cleveland, Tennessee 37364-1015 Facsimile No. (423) 476-9200 Attention: W. Allan Jones, Jr., Chairman and Chief Executive Officer To Executive: Steve Scoggins _____________________ _____________________ Any party may change the address to which notices, requests, demands and other communications shall be delivered or mailed by giving notice thereof to the other party in the same manner provided herein. (g) Amendments and Modifications. This Agreement may be amended or ---------------------------- modified only by a writing signed by both parties hereto, which makes specific reference to this Agreement. (signatures on following page) 14 IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Employment Agreement as of the date first above written. CHECK INTO CASH, INC. By: /s/ W. Allan Jones, Jr. ---------------------------- W. Allan Jones, Jr. Chairman of the Board and Chief Executive Officer EXECUTIVE: /s/ Steve Scoggins --------------------------------- Steve Scoggins 15 EX-10.6.2 9 EMPLOYMENT AGREEMENT EXHIBIT 10.6.2 EMPLOYMENT, CONFIDENTIALITY AND NON-COMPETITION AGREEMENT ----------------------------- THIS EMPLOYMENT, CONFIDENTIALITY AND NON-COMPETITION AGREEMENT ("Agreement") is made and entered into as of the 1st day of August, 1997 by and between Check into Cash, Inc., a Delaware corporation (hereinafter, the "Company"), and Ed Ryan (hereinafter, "Employee"). BACKGROUND ---------- The Company desires to engage Employee in the capacities set forth herein, in accordance with the terms and conditions of this Agreement. Employee is willing to serve as such in accordance with the terms and conditions of this Agreement. NOW THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Effective Date. This Agreement is effective as of August 1, 1997 (the -------------- "Effective Date"). 2. Employment. Employee is hereby employed on the Effective Date as Vice ---------- President for Business Development of the Company. Employee's responsibilities under this Agreement shall be in accordance with the policies and objectives established by the Chief Executive Officer and the Board of Directors of the Company and shall be consistent with the responsibilities of similarly situated employees of comparable companies in similar lines of business. 3. Term. Employment under this Agreement shall be at will. Either of ---- Employee or the Company may terminate this Agreement at any time for any reason. 4. Extent of Service. During the employment period, and excluding any ----------------- periods of vacation and sick leave to which Employee is entitled, Employee agrees to devote his business time, attention, skill and efforts exclusively to the faithful performance of his duties hereunder; provided, however, that it shall not be a violation of this Agreement for Employee to (i) devote reasonable periods of time to charitable and community activities, and/or (ii) manage personal business interests and investments, so long as such activities do not interfere with the performance of Employee's responsibilities under this Agreement. 5. Compensation and Benefits. ------------------------- (a) Base Salary. During the employment period, the Company will pay to ----------- Employee a base salary in the amount of $60,000 per year ("Base Salary"), less normal withholdings, payable in equal monthly or more frequent installments as are customary under the Company's payroll practices from time to time. The Board of Directors of the Company shall review Employee's Base Salary annually and in its sole discretion, subject to approval of the Board of Directors of the Company, may increase or decrease Employee's Base Salary from year to year. The annual review of Employee's salary by the Board will consider, among other things, Employee's own performance and the Company's performance. (b) Bonuses. The Board of Directors in its sole discretion may, from time ------- to time, declare and pay to Employee bonuses, whether in cash or otherwise. (c) Incentive, Savings and Retirement Plans. During the employment period, --------------------------------------- Employee shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs applicable generally to similarly situated employees of the Company and its affiliated companies, and on the same relative basis as such other similarly situated employees. (d) Welfare Benefit Plans. During the employment period, Employee and --------------------- Employee's family shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to similarly situated employees of the Company and its affiliated companies. (e) Expenses. During the employment period, Employee shall be entitled to -------- receive prompt reimbursement for all reasonable expenses incurred by Employee in accordance with the policies, practices and procedures of the Company and its affiliated companies to the extent applicable generally to other similarly situated employees of the Company and its affiliated companies. (f) Fringe Benefits. During the employment period, Employee shall be --------------- entitled to fringe benefits in accordance with the plans, practices, programs and policies of the Company and its affiliated companies in effect for similarly situated employees of the Company and its affiliated companies. (g) Severance. If the Company elects for any reason at any time to --------- terminate Employee's employment under this Agreement, the Company shall pay to Employee all amounts due as salaries and bonuses up to the effective date of the termination, plus an amount equal to the greater of $30,000 or six months' Base Salary as severance pay. 6. Stock Option Grants. As additional consideration to enter into this ------------------- Agreement, the Company has granted Employee options to purchase 7,391 shares of the common stock of the Company, pursuant to an Option Agreement by and between Employee and Company, dated as of the date of this Agreement. 7. Representations and Warranties. Employee hereby represents and warrants ------------------------------ to the Company that Employee is not a party to, or otherwise subject to, any covenant not to compete with any person or entity, and Employee's execution of this Agreement and performance of his obligations hereunder will not violate the terms or conditions of any contract or obligation, written or oral, between Employee and any other person or entity. 8. Restrictions on Conduct of Employee. ----------------------------------- (a) General. Employee and the Company understand and agree that the ------- purpose of the provisions of this Section 8 is to protect legitimate business interests of the Company, as more fully described below, and is not intended to eliminate Employee's post-employment competition with the Company per se, nor is it intended to impair or infringe upon Employee's right to work, earn a living, or acquire and possess property from the fruits of his labor. Employee hereby acknowledges that the post-employment restrictions set forth in this Section 8 are reasonable and that they do not, and will not, unduly impair his ability to earn a living after the termination of this Agreement. Therefore, subject to -2- the limitations of reasonableness imposed by law upon the restrictions set forth herein, Employee shall be subject to the restrictions set forth in this Section 8. (b) Definitions. The following capitalized terms used in this Section 8 ----------- shall have the meanings assigned to them below, which definitions shall apply to both the singular and the plural forms of such terms: "Affiliates" shall mean Check into Cash Holdings, Inc., Check into Cash of California, Inc., Check into Cash of Illinois, LLC, Check into Cash of Indiana, LLC, Check into Cash of Iowa, Inc., Check into Cash of Kentucky, LLC, Check into Cash of Missouri, Inc., Check into Cash of Nebraska, Inc., Check into Cash of North Carolina, Inc., Check into Cash of Ohio, LLC, Check into Cash of Wisconsin, LLC, Creditcorp of Tennessee, Inc., Creditors Adjustment Bureau, Inc., Jones Management Services, Inc., Jones Properties, LLC, Preferred One, LLC, and any other entities that may be formed in the future under the control of the Company, any Affiliate or W. Allan Jones, Jr.; "Competitive Services" means any services provided by Company and the Affiliates at the Determination Date, including, without limitation, the business of cashing checks, deferring deposit of checks for specified periods of time, and extending short-term, unsecured credit. "Confidential Information" means any confidential or proprietary information possessed by the Company or the Affiliates or relating to its or their business, including, without limitation, any confidential "know-how," customer lists, details of client or consultant contracts, current and anticipated customer requirements, pricing policies, price lists, market studies, business plans, operational methods, marketing plans or strategies, product development techniques or plans, computer software programs (including object code and source code), data and documentation, data base technologies, systems, structures and architectures, inventions and ideas, past, current and planned research and development, compilations, devices, methods, techniques, processes, financial information and data, business acquisition plans, new personnel acquisition plans and any other information that would constitute a Trade Secret (as defined herein). "Determination Date" means the date of termination of Employee's employment with the Company for any reason whatsoever or any earlier date (during the employment period) of an alleged breach of the Restrictive Covenants by Employee. "Person" means any individual or any corporation, partnership, joint venture, association or other entity or enterprise. "Principal or Representative" means a principal, owner, partner, shareholder, joint venturer, investor, member, trustee, director, officer, manager, employee, agent, representative or consultant. "Protected Employees" means persons who were employed by the Company or the Affiliates at any time within six (6) months prior to the Determination Date. "Restricted Period" means the employment period and a period extending two (2) years from the date of termination of Employee's employment under this Agreement; provided, however, in the event the Confidential Information constitutes a Trade Secret, the Restricted Period shall be five (5) years. -3- "Restrictive Covenants" means the restrictive covenants contained in Section 8(c) hereof. "Trade Secret" means any item of Confidential Information that constitutes a "trade secret" under the common law or statutory law of the State of Tennessee. (c) Restrictive Covenants. --------------------- (i) Restriction on Disclosure and Use of Confidential Information. ------------------------------------------------------------- Employee understands and agrees that the Confidential Information constitutes a valuable asset of the Company and its Affiliates, and may not be converted to Employee's own use. Accordingly, Employee hereby agrees that Employee shall not, directly or indirectly, at any time during the Restricted Period reveal, divulge, or disclose to any Person not expressly authorized by the Company any Confidential Information, and Employee shall not, directly or indirectly, at any time during the Restricted Period use or make use of any Confidential Information in connection with any business activity other than that of the Company. (ii) Nonsolicitation of Protected Employees. Employee understands and -------------------------------------- agrees that the relationship between the Company and its Affiliates and each of its Protected Employees constitutes a valuable asset of the Company and its Affiliates and may not be converted to Employee's own use. Accordingly, Employee hereby agrees that during the Restricted Period Employee shall not directly or indirectly on Employee's own behalf or as a Principal or Representative of any Person or otherwise solicit or induce any Protected Employee to terminate his or her employment relationship with the Company. (iii) Noncompetition with the Company. During the Restricted Period, ------------------------------- Employee, unless acting in accordance with the Company's prior written consent, will not directly provide any Competitive Services to, and will not, directly or indirectly, (i) own, manage, operate, join, control, finance or participate in the ownership, management, operation, control or financing of, or (ii) be connected as a Principal or Representative or otherwise with, or (iii) permit Employee's name to be used by or in connection with, any Person engaged in providing Competitive Services to any Person conducting business activities within a ten (10) mile radius of any store location from which the Company or any Affiliate is or was engaged in the provision of the Competitive Services on the Determination Date, including any store location for which a lease had been entered into by the Company or any Affiliate on or before the Determination Date but was not then operational; provided, however, that the provisions of this Agreement shall not be deemed to prohibit the ownership by Employee of any securities of the Company or its affiliated entities or not more than five percent (5%) of any class of securities of any corporation having a class of securities registered pursuant to the Securities Exchange Act of 1934, as amended. The provisions of this Section 8(c)(iii) shall not apply in the event that the employee is terminated by the Company. (d) Exceptions from Disclosure Restrictions. Anything herein to the --------------------------------------- contrary notwithstanding, Employee shall not be restricted from disclosing or using Confidential Information that: (a) is or becomes generally available to the public other than as a result of an unauthorized disclosure by Employee or his agent; (b) becomes available to Employee in a manner that is not in contravention of applicable law from a source (other than the Company or its Affiliates or one of its or their officers, employees, agents or representatives) that is not bound by a confidential relationship with the Company or its Affiliates or by a confidentiality or other similar agreement; (c) was known to Employee on a non-confidential basis and not in contravention of applicable law or a confidentiality or other similar agreement before its disclosure to Employee by the Company or its Affiliates or one of its -4- or their officers, employees, agents or representatives; or (d) is required to be disclosed by law, court order or other legal process; provided, however, that in the event disclosure is required by law, court order or other legal process, Employee shall provide the Company with prompt notice of such requirement so that the Company may seek an appropriate protective order prior to any such required disclosure by Employee. (e) Enforcement of Restrictive Covenants. ------------------------------------ (i) Rights and Remedies Upon Breach. In the event Employee breaches, ------------------------------- or threatens to commit a breach of, any of the provisions of the Restrictive Covenants, the Company shall have the following rights and remedies, which shall be independent of any others and severally enforceable, and shall be in addition to, and not in lieu of, any other rights and remedies available to the Company at law or in equity: A. the right and remedy to enjoin, preliminarily and permanently, Employee from violating or threatening to violate the Restrictive Covenants and to have the Restrictive Covenants specifically enforced by any court of competent jurisdiction, it being agreed that any breach or threatened breach of the Restrictive Covenants would cause irreparable injury to the Company or an Affiliate and that money damages would not provide an adequate remedy to the Company or the Affiliate; and B. the right and remedy to require Employee to account for and pay over to the Company all compensation, profits, monies, accruals, increments or other benefits derived or received by Employee as the result of any transactions constituting a breach of the Restrictive Covenants. (ii) Severability of Covenants. Employee acknowledges and agrees that ------------------------- the Restrictive Covenants are reasonable and valid in time and scope and in all other respects. If any court determines that any of the Restrictive Covenants, or any part thereof, are invalid or unenforceable, the remainder of the Restrictive Covenants shall not thereby be affected and shall be given full effect, without regard to the invalid portions. (iii) Attorneys' Fees. In any action relating to the enforcement of --------------- the Restrictive Covenants, the prevailing party in such action shall be entitled to be paid any and all costs and expenses incurred by him or it in enforcing or establishing his or its rights thereunder, including, without limitation, reasonable attorneys' fees, whether suit be brought or not, and whether or not incurred in trial, bankruptcy or appellate proceedings. 9. Assignment and Successors. ------------------------- (a) Employee. This Agreement is personal to Employee and without the -------- prior otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Employee's legal representatives. (b) The Company. This Agreement shall inure to the benefit of and be ----------- binding upon the Company and its successors and assigns. The Company will require any successor to all or substantially all of the business and/or assets of the Company (whether direct or indirect, by purchase, merger, consolidation or otherwise) to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such -5- succession had taken place. As used in this Agreement, "the Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law or otherwise. 10. Miscellaneous. ------------- (a) Waiver. Failure of either party to insist, in one or more instances, ------ on performance by the other in strict accordance with the terms and conditions of this Agreement shall not be deemed a waiver or relinquishment of any right granted in this Agreement or of the future performance of any such term or condition or of any other term or condition of this Agreement, unless such waiver is contained in a writing signed by the party making the waiver. (b) Severability. If any provision or covenant, or any part thereof, of ------------ this Agreement should be held by any court to be invalid, illegal or unenforceable, either in whole or in part, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of the remaining provisions or covenants, or any part thereof, of this Agreement, all of which shall remain in full force and effect. (c) Other Agents. Nothing in this Agreement is to be interpreted as ------------ limiting the Company from employing other personnel on such terms and conditions as may be satisfactory to it. (d) Entire Agreement. Except as provided herein, this Agreement contains ---------------- the entire agreement between the Company and Employee with respect to the subject matter hereof, and it supersedes and invalidates any previous agreements or contracts between them which relate to the subject matter hereof, including, but not limited to that certain Employment, Confidentiality and Non-Competition Agreement that was previously executed by and between Employee and the Company. No representations, inducements, promises or agreements, oral or otherwise, which are not embodied herein shall be of any force or effect. (e) Governing Law. Except to the extent preempted by federal law, the ------------- laws of the State of Tennessee and, without regard to Tennessee's conflict of laws principles, shall govern this Agreement in all respects, whether as to its validity, construction, capacity, performance or otherwise. (f) Notices. All notices, requests, demands and other communications ------- required or permitted hereunder shall be in writing and shall be deemed to have been duly given if delivered or three days after mailing if mailed, first class, certified mail, postage prepaid: To Company: Check into Cash, Inc. Post Office Box 1015 Cleveland, Tennessee 37364-1015 Facsimile No. (423) 476-9200 Attention: W. Allan Jones, Jr., Chairman and Chief Executive Officer To Employee: Ed Ryan Cleveland, Tennessee Any party may change the address to which notices, requests, demands and other communications shall be delivered or mailed by giving notice thereof to the other party in the same manner provided herein. -6- (g) Amendments and Modifications. This Agreement may be amended or ---------------------------- modified only by a writing signed by both parties hereto, which makes specific reference to this Agreement. IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Employment, Confidentiality and Non-Competition Agreement as of the date first above written. CHECK INTO CASH, INC. By: /s/ W. Allan Jones, Jr. ------------------------------ W. Allan Jones, Jr. Chairman of the Board and Chief Executive Officer EMPLOYEE: /s/ Ed Ryan ----------------------------------- Ed Ryan -7- EX-10.6.3 10 EMPLOYMENT AGREEMENT EXHIBIT 10.6.3 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into this 28th day of April, 1998 by and among Check into Cash, Inc., a Delaware corporation (hereinafter, the "Company"), W. Allan Jones, Jr. (hereinafter "Jones"), and J. Samuel Choate, Jr. (hereinafter, "Executive"). BACKGROUND ---------- The Company desires to engage Executive in Executive capacities set forth herein, in accordance with the terms and conditions of this Agreement. Executive is willing to serve as such in accordance with the terms and conditions of this Agreement. NOW THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Effective Date. This Agreement is effective as of May 1, 1998 (the -------------- "Effective Date"). 2. Employment. Executive is hereby employed on the Effective Date as the ---------- Executive Vice President and General Counsel of the Company. Executive's responsibilities under this Agreement shall be in accordance with the policies and objectives established by the Chief Executive Officer and the Board of Directors of the Company and shall be consistent with the responsibilities of similarly situated executives of comparable companies in similar lines of business. In his capacity as Executive Vice President and General Counsel of the Company, Executive will report directly to the Chief Executive Officer of the Company. 3. Employment Period. Unless earlier terminated herein in accordance with ----------------- Section 7 hereof, Executive's employment shall be for a three-year term (the "Employment Period"), beginning on the Effective Date. The Employment Period shall, without further action by Executive or the Company, be extended for an additional one-year period on each anniversary of the Effective Date; provided, however, that either party may, by notice to the other given at any time prior to such next anniversary of the Effective Date, cause the Employment Period to cease to extend automatically. Upon such notice, the Employment Period shall terminate upon the expiration of the then-current term, including any prior extensions. 4. Extent of Service. During the Employment Period, and excluding any ----------------- periods of vacation and sick leave to which Executive is entitled, Executive agrees to devote his business time, attention, skill and efforts exclusively to the faithful performance of his duties hereunder; provided, however, that it shall not be a violation of this Agreement for Executive to (i) devote reasonable periods of time to charitable and community activities, and/or (ii) manage personal business interests and investments (including winding up of the affairs of Choate & Associates, P.C.), so long as such activities do not interfere with the performance of Executive's responsibilities under this Agreement. Executive shall re-establish his principal residence in the Chattanooga/Cleveland, Tennessee area as soon as practicable and shall commence service at the Company's headquarters on or before July 6, 1998 (the date on which such service actually commences, the "Relocation Date"). 5. Compensation and Benefits. ------------------------- (a) Base Salary. During the Employment Period, the Company will pay to ----------- Executive a base salary in the amount of $325,000 ("Base Salary"), less normal withholdings, payable in equal monthly or more frequent installments as are customary under the Company's payroll practices from time to time. The Board of Directors of the Company shall review Executive's Base Salary annually and in its sole discretion may increase Executive's Base Salary from year to year. The annual review of Executive's salary by the Board will consider, among other things, Executive's own performance and the Company's performance. (b) Bonus. Bonuses will be made on a discretionary basis in accordance ----- with the Company's incentive plans referred to in subsection (c) below. (c) Incentive, Savings and Retirement Plans. During the Employment _______________________________________ Period, Executive shall be entitled to participate in all incentive (including cash bonus and stock-based), savings and retirement plans, practices, policies and programs applicable generally to similarly situated officers of the Company and its affiliated companies, and on the same relative basis as such other similarly situated officers. (d) Welfare Benefit Plans. During the Employment Period, Executive and --------------------- Executive's family shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to similarly situated officers of the Company and its affiliated companies. (e) Expenses. During the Employment Period, Executive shall be entitled ________ to receive prompt reimbursement for all reasonable expenses incurred by Executive in accordance with the policies, practices and procedures of the Company and its affiliated companies to the extent applicable generally to other similarly situated officers of the Company and its affiliated companies. (f) Fringe Benefits. During the Employment Period, Executive shall be --------------- entitled to fringe benefits in accordance with the plans, practices, programs and policies of the Company and its affiliated companies in effect for similarly situated officers of the Company and its affiliated companies. (g) Automobile. Without limiting the foregoing, during the Employment ---------- Period, commencing on the Relocation Date, the Company shall provide to Executive a 1996 or later Mercedes model 400 or equivalent automobile. If such automobile is leased by the -2- Company, Executive shall have the option to purchase such automobile upon expiration of the lease term. (h) Club Dues. Without limiting the foregoing, during the Employment --------- Period, the Company shall pay Executive's initiation and monthly membership dues at the Chattanooga Golf and Country Club or the Cleveland Golf and Country Club. (i) Insurance Premiums. Without limiting the foregoing, during the ------------------ Employment Term, the Company shall pay on Executive's behalf premiums of $4,042.50 per quarter on Executive's Manulife Financial Variable Universal Life Insurance policy. (j) Bar Expenses. Without limiting the foregoing, during the Employment ------------ Term, the Company shall pay all costs associated with maintaining Executive's state Bar association memberships, including required continuing legal education requirements. (k) Moving Expenses. Without limiting the foregoing, the Company shall --------------- reimburse Executive for all reasonable expenses incurred in packing and moving Executive's personal and professional property from Alexandria, Virginia to the Chattanooga/Cleveland, Tennessee area. (l) Other Expenses. The Company shall pay directly to Choate & -------------- Associates, P.C. for all reasonable expenses incurred in connection with the winding up of the affairs of Choate & Associates, P.C. between May 1, 1998 and June 30, 1998, including salaries of associates (other than ________________) and secretary, rent and other expenses normally expended during the preceding months of operation of Choate & Associates, P.C., in consideration of services to be rendered to the Company by Choate & Associates, P.C. during that period. 6. Stock Option Award. ------------------ (a) As soon as practicable after the date hereof the Company shall grant to Executive under the Company's 1997 Long Term Incentive Plan (the "Plan"), or any successor plan, an option (the "Option") to purchase shares (the "Option Shares") of the $0.01 par value common stock of the Company ("Common Stock"). The number of Option Shares subject to the Option and the exercise price per Option Share shall be determined in accordance with the parties' mutual understanding as reflected in correspondence contemporaneous with the execution of this Agreement. The Option shall be exercisable as to one-fourth of the Option Shares beginning on the Relocation Date and as to one-third of the remaining Option Shares beginning on each of the first three anniversaries of the date of grant; provided, that the Option shall become fully exercisable as to all remaining Option Shares upon death or Disability (as defined below) of Executive or upon a Change of Control (as such term is defined in the Plan) to the extent provided in the Plan. (b) Notwithstanding the foregoing, in the event that, prior to consummation of an initial public offering of the Company's Common Stock, all or substantially all of the equity -3- interest in the Company shall be acquired by any person (whether by merger, share exchange or otherwise), Executive shall be entitled to receive, upon consummation of such acquisition, consideration having an aggregate value equal to the sum of (i) 3% of the aggregate consideration paid in such acquisition (including such consideration as may be paid to Executive pursuant to this paragraph (b)), minus (ii) the fair market value of any consideration received by Executive in consideration of surrender of the Option or received in respect of Option Shares. The consideration to be paid to Executive pursuant to this paragraph (b) shall be in the same form as that received by all other shareholders of the Company (provided that if shareholders receive a mix of forms of consideration, Executive shall be entitled to receive the same mix of forms of consideration and if shareholders are entitled to elect which form of or mix of forms of consideration to receive, Executive shall be entitled to make the same election). Payment of the consideration to which Executive is entitled pursuant to this paragraph (b) shall be paid in the same manner and at substantially the same time as the consideration paid to shareholders of the Company. 7. Termination of Employment. ------------------------- (a) Death, Retirement or Disability. Executive's employment shall ------------------------------- terminate automatically upon Executive's death or Retirement during the Employment Period. If the Company determines in good faith that the Disability of Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to Executive written notice in accordance with Section 14(f) of this Agreement of its intention to terminate Executive's employment. In such event, Executive's employment with the Company shall terminate effective on the 30th day after receipt of such written notice by Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, Executive shall not have returned to full-time performance of Executive's duties. For purposes of this Agreement, "Disability" shall mean a mental or physical disability as determined by the Board of Directors of the Company in accordance with standards and procedures similar to those under the Company's employee long-term disability plan, if any. At any time that the Company does not maintain such a long-term disability plan, Disability shall mean the inability of Executive, as determined by the Board, to substantially perform the essential functions of his regular duties and responsibilities due to a medically determinable physical or mental illness which has lasted (or can reasonably be expected to last) for a period of six consecutive months. For purposes of this Agreement, "Retirement" shall mean voluntary termination of employment after age 65. (b) Termination for Cause. The Company may terminate Executive's --------------------- employment during the Employment Period for Cause. For purposes of this Agreement, "Cause" shall mean: (i) the willful and continued failure of Executive to perform substantially Executive's duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to Executive by the Board of Directors of the Company which specifically identifies the manner in which such Board believes that Executive has not substantially performed Executive's duties, or -4- (ii) the willful engaging by Executive in illegal conduct or gross misconduct the consequence of which is materially and demonstrably injurious to the Company. For purposes of this provision, no act or failure to act, on the part of Executive, shall be considered "willful" unless it is done, or omitted to be done, by Executive in bad faith or without reasonable belief that Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by Executive in good faith and in the best interests of the Company. The cessation of employment of Executive shall not be deemed to be for Cause unless and until there shall have been delivered to Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board of Directors of the Company (excluding Executive, if then a director) at a meeting of such Board called and held for such purpose (after reasonable notice is provided to Executive and Executive is given an opportunity, together with counsel, to be heard before such Board), finding that, in the good faith opinion of such Board, Executive is guilty of the conduct described in subparagraph (i) or (ii) above, and specifying the particulars thereof in detail. (c) Good Reason. Executive's employment may be terminated by Executive ----------- for Good Reason. For purposes of this Agreement, "Good Reason" shall mean: (i) without the written consent of Executive, the assignment to Executive of any duties materially inconsistent with Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 2 of this Agreement, or any other action by the Company which results in a material diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by Executive; (ii) a reduction by the Company in Executive's Base Salary and benefits as in effect on the Effective Date or as increased from time to time, or the failure by the Company to increase Executive's Base Salary each year during the Employment Period by an amount which at least equals, on a percentage basis, the mean average percentage increase in base salary for all officers of the Company, unless such failure to increase is based on nonarbitrary criteria applied to Executive and other similarly-situated employees; (iii) any purported termination by the Company of Executive's employment otherwise than for Cause, death, Disability or Retirement; (iv) any failure by the Company to comply with and satisfy Section 13(b) of this Agreement; or (v) a termination by Executive for any reason during the 30-day period immediately following the first anniversary of a Change in Control (as defined in the Plan, or any successor plan). -5- (d) Notice of Termination. Any termination by the Company for Cause, or --------------------- by Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 14(f) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated, and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not less than 30 days after the giving of such notice). The failure by Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of Executive or the Company, respectively, hereunder or preclude Executive or the Company, respectively, from asserting such fact or circumstance in enforcing Executive's or the Company's rights hereunder. (e) Date of Termination. "Date of Termination" means (i) if Executive's ------------------- employment is terminated by the Company for Cause, or by Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies Executive of such termination, (iii) if Executive's employment is terminated by reason of death, Disability or Retirement, the Date of Termination shall be the date of death or Retirement of Executive or the Disability Effective Date, as the case may be, and (iv) if Executive's employment is terminated by Executive other than for Good Reason, death, Disability or Retirement, the Date of Termination shall be the date of specified in the notice of termination, which shall be not less than 30 days after the giving of such notice. 8. Obligations of the Company upon Termination. ------------------------------------------- (a) Termination by Executive for Good Reason; Termination by the Company -------------------------------------------------------------------- Other Than for Cause, Death, Disability or Retirement. If, during the - ----------------------------------------------------- Employment Period, the Company shall terminate Executive's employment other than for Cause, death, Disability or Retirement, or Executive shall terminate employment for Good Reason, then in consideration of Executive's services rendered prior to such termination and as reasonable compensation for his compliance with the Restrictive Covenants in Section 12 hereof: (i) the Company shall pay to Executive in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts: A. the sum of (1) Executive's Base Salary through the Date of Termination to the extent not theretofore paid, and (2) any compensation previously deferred by Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case to the extent not theretofore -6- paid (the sum of the amounts described in clauses (1) and (2) shall be hereinafter referred to as the "Accrued Obligations"); and B. the amount equal to two times the Executive's Base Salary in effect as of the Date of Termination (provided, if Executive terminates employment pursuant to Section 7(c)(v), the amount shall equal the greater of (i) Executive's Base Salary in effect as of the Date of Termination or (ii) the Base Salary to which Executive would have been entitled during the then-remaining term of this Agreement had such employment not been terminated, provided that in no event shall the amount paid under this provision exceed two times Executive's Base Salary in effect as of the Date of Termination) (the "Severance Payment"); and (ii) for one year after Executive's Date of Termination, or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue benefits to Executive and/or Executive's family at least equal to those which would have been provided to them in accordance with the welfare plans, programs, practices and policies described in Section 5(d) of this Agreement if Executive's employment had not been terminated or, if more favorable to Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies and their families, provided, however, that if Executive becomes re-employed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility ("Welfare Benefits"); and (iii) to the extent not theretofore paid or provided, the Company shall timely pay or provide to Executive any other amounts or benefits required to be paid or provided or which Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits"); and (iv) the entire unvested portion of the Option shall immediately vest. (b) Death. If Executive's employment is terminated by reason of ----- Executive's death during the Employment Period, this Agreement shall terminate without further obligations to Executive's legal representatives under this Agreement, other than for payment of Accrued Obligations, the timely payment or provision of Other Benefits, the immediate vesting of the entire unvested portion of the Option, and the repurchase of Option Shares as described in the following sentence. If the Common Stock is not freely tradable by Executive on the date of his death, by reason of securities restrictions or otherwise, the Company shall, at the request of Executive's surviving spouse or executor or administrator, repurchase some or all of such Option Shares then held by Executive (or his estate) or acquired by Executive's estate upon exercise of the Option at the then-current Fair Market Value of such Common Stock (as defined in the Plan, except that if the Common Stock is not publicly traded, the Fair Market Value shall be determined by appraisal -7- conducted by a recognized firm of independent appraisers), provided further, that the Executive's surviving spouse or administrator shall not have the right to require the Company to purchase any shares under this Section 8(b) if such purchase would cause the Company to be in violation of any covenant in any loan agreement to which the Company is a party that is in effect at the time of the required purchase, unless the Company has failed to make reasonable efforts to secure waiver of such covenants from the relevant lenders. Accrued Obligations shall be paid to Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 8(b) shall include, without limitation, and Executive's estate and/or beneficiaries shall be entitled to receive, benefits under such plans, programs, practices and policies relating to death benefits, if any, as applicable generally to similarly situated officers of the Company and its affiliated companies and their beneficiaries, and on the same basis as such similarly situated officers and their beneficiaries. (c) Disability or Retirement. If Executive's employment is terminated by ------------------------ reason of Executive's Disability or Retirement during the Employment Period, this Agreement shall terminate without further obligations to Executive, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits, the immediate vesting of the entire unvested portion of the Option, and the repurchase of Option Shares as described in the following sentence. If the Common Stock is not freely tradable by Executive on the date of his Disability or Retirement, by reason of securities restrictions or otherwise, the Company shall, at the request of Executive or his legal representative, repurchase some or all of such Option Shares then held by Executive (or his legal representative) or acquired by Executive (or his legal representative) upon exercise of the Option at the then-current Fair Market Value of such Common Stock (as defined in the Plan, except that if the Common Stock is not publicly traded, the Fair Market Value shall be determined by appraisal conducted by a recognized firm of independent appraisers), provided further, that the Executive or his legal representative shall not have the right to require the Company to purchase any shares under this Section 8(c) if such purchase would cause the Company to be in violation of any covenant in any loan agreement to which the Company is a party that is in effect at the time of the required purchase, unless the Company has failed to make reasonable efforts to secure waiver of such covenants from the relevant lenders. Accrued Obligations shall be paid to Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 8(c) shall include, without limitation, and Executive shall be entitled after the Date of Termination to receive, disability or retirement and other benefits under such plans, programs, practices and policies relating to disability or retirement, if any, as applicable generally to similarly situated officers of the Company and its affiliated companies and their families, and on the same basis as such similarly situated officers and their families. (d) Cause or Voluntary Termination without Good Reason. If Executive's -------------------------------------------------- employment shall be terminated for Cause during the Employment Period, or if Executive voluntarily terminates employment during the Employment Period without Good Reason, this Agreement shall terminate without further obligations to Executive, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. -8- 9. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or ------------------------- limit Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which Executive may qualify, nor, subject to Section 14(d), shall anything herein limit or otherwise affect such rights as Executive may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. 10. Full Settlement; Release; Cost of Enforcement. The Company's obligation --------------------------------------------- to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against Executive or others; provided, however, that the Company's obligation to pay the Severance Payment in accordance with Section 8(a)(i)(B) hereof shall be conditioned upon Executive's execution of a Release in favor of the Company in substantially the form of Exhibit A attached hereto at the time such Severance Payment becomes due and payable. The Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which Executive may reasonably incur as a result of any contest (to the extent that Executive is successful, in whole or in part, in such contest) by the Company, Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by Executive about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code"). 11. Representations and Warranties. Executive hereby represents and warrants ------------------------------ to the Company that Executive is not a party to, or otherwise subject to, any covenant not to compete with any person or entity, and Executive's execution of this Agreement and performance of his obligations hereunder will not violate the terms or conditions of any contract or obligation, written or oral, between Executive and any other person or entity. 12. Restrictions on Conduct of Executive. ------------------------------------ (a) General. Executive and the Company understand and agree that the ------- purpose of the provisions of this Section 12 is to protect legitimate business interests of the Company, as more fully described below, and is not intended to eliminate Executive's post-employment competition with the Company per se, nor is it intended to impair or infringe upon Executive's right to work, earn a living, or acquire and possess property from the fruits of his labor. Executive hereby acknowledges that the post-employment restrictions set forth in this Section 12 are reasonable and that they do not, and will not, unduly impair his ability to earn a living after the termination of this Agreement. Therefore, subject to the limitations of reasonableness imposed by law upon the restrictions set forth herein, Executive shall be subject to the restrictions set forth in this Section 12. -9- (b) Definitions. The following capitalized terms used in this Section 12 ----------- shall have the meanings assigned to them below, which definitions shall apply to both the singular and the plural forms of such terms: "Competitive Services" means any services provided by Company at the Determination Date, including, but not limited to, the business of cashing checks, deferring deposit of checks for specified periods of time, and extending short-term, unsecured credit, but shall not include the practice of law or the provision of legal services. It is particularly understood and agreed between the Company and Executive that no post-employment restriction shall affect Executive's ability to represent any person or company even, and especially, if such person or company is engaged in a "Competitive Service" if Executive is exclusively engaged in the private practice of law. "Confidential Information" means any confidential or proprietary information possessed by the Company or its affiliated entities or relating to its or their business, including without limitation, any confidential "know- how", customer lists, details of client or consultant contracts, current and anticipated customer requirements, pricing policies price lists, market studies, business plans, operational methods, marketing plans or strategies, product development techniques or plans, computer software programs (including object code and source code), data and documentation, data base technologies, systems, structures and architectures, inventions and ideas, past, current and planned research and development, compilations, devices, methods, techniques, processes, financial information and data, business acquisition plans, new personnel acquisition plans and any other information that would constitute a Trade Secret (as defined herein). "Determination Date" means the date of termination of Executive's employment with the Company for any reason whatsoever or any earlier date (during the Employment Period) of an alleged breach of the Restrictive Covenants by Executive. "Person" means any individual or any corporation, partnership, joint venture, association or other entity or enterprise. "Principal or Representative" means a principal, owner, partner, shareholder, joint venturer, investor, member, trustee, director, officer, manager, employee, agent, representative or consultant (but shall not include service as non-employee legal counsel). "Protected Employees" means employees of the Company who were employed by the Company at any time within six (6) months prior to the Determination Date. "Restricted Period" means the Employment Period and a period extending two (2) years from the later of (i) the Date of Termination or (ii) the last date on which the Company makes a payment to Executive pursuant to Section 8 of this Agreement; provided, however that such period shall be extended by any length of time during which Executive is in breach of the Restricted Covenants. -10- "Restrictive Covenants" means the restrictive covenants contained in Section 12(c) hereof. "Trade Secret" means any item of Confidential Information that constitutes a "trade secret(s)" under the common law or statutory law of the State of Tennessee. (c) Restrictive Covenants. --------------------- (i) Restriction on Disclosure and Use of Confidential Information. _____________________________________________________________ Executive understands and agrees that the Confidential Information constitutes a valuable asset of the Company and its affiliated entities, and may not be converted to Executive's own use. Accordingly, Executive hereby agrees that Executive shall not, directly or indirectly, at any time during the Restricted Period reveal, divulge, or disclose to any Person not expressly authorized by the Company any Confidential Information, and Executive shall not, directly or indirectly, at any time during the Restricted Period use or make use of any Confidential Information in connection with any business activity other than that of the Company; provided, however, in the event the Confidential Information constitutes a Trade Secret, the Restricted Period referred to above shall be five (5) years. (ii) Nonsolicitation of Protected Employees. Executive understands ______________________________________ and agrees that the relationship between the Company and each of its Protected Employees constitutes a valuable asset of the Company and may not be converted to Executive's own use. Accordingly, Executive hereby agrees that during the Restricted Period Executive shall not directly or indirectly on Executive's own behalf or as a Principal or Representative of any Person or otherwise solicit or induce any Protected Employee to terminate his or her employment relationship with the Company or to enter into any relationship of employment, agency or independent contractorship with any other Person. (iii) Noncompetition with the Company. During the Restricted Period, _______________________________ Executive, unless acting in accordance with the Company's prior written consent, will not directly provide any Competitive Services to, and will not, directly or indirectly, (i) own, manage, operate, join, control, finance or participate in the ownership, management, operation, control or financing of, or (ii) be connected as a Principal or Representative with, or (iii) permit Executive's name to be used by or in connection with, any Person engaged in providing Competitive Services to any Person conducting business activities within a ten (10) mile radius of any store location from which the Company is or was engaged in the provision of the Competitive Services on the Determination Date, including any store location for which a lease had been entered into by the Company on or before the Determination Date but was not then operational; provided, however, that the provisions of this Agreement shall not be deemed to prohibit the ownership by Executive of any securities of the Company or its affiliated entities or not more than five percent (5%) of any class of securities of any corporation having a class of securities registered pursuant to the Securities Exchange Act of 1934, as amended. -11- (d) Exceptions from Disclosure Restrictions. Anything herein to the --------------------------------------- contrary notwithstanding, Executive shall not be restricted from disclosing or using Confidential Information that: (a) is or becomes generally available to the public other than as a result of an unauthorized disclosure by Executive or his agent; (b) becomes available to Executive in a manner that is not in contravention of applicable law from a source (other than the Company or its affiliated entities or one of its or their officers, employees, agents or representatives) that is not bound by a confidential relationship with the Company or its affiliated entities or by a confidentiality or other similar agreement; (c) was known to Executive on a non-confidential basis and not in contravention of applicable law or a confidentiality or other similar agreement before its disclosure to Executive by the Company or its affiliated entities or one of its or their officers, employees, agents or representatives; or (d) is required to be disclosed by law, court order or other legal process; provided, however, that in the event disclosure is required by law, Executive shall provide the Company with prompt notice of such requirement so that the Company may seek an appropriate protective order prior to any such required disclosure by Executive. (e) Enforcement of Restrictive Covenants. ------------------------------------ (i) Rights and Remedies Upon Breach. In the event Executive breaches, _______________________________ or threatens to commit a breach of, any of the provisions of the Restrictive Covenants, the Company shall have the following rights and remedies, which shall be independent of any others and severally enforceable, and shall be in addition to, and not in lieu of, any other rights and remedies available to the Company at law or in equity: A. the right and remedy to enjoin, preliminarily and permanently, Executive from violating or threatening to violate the Restrictive Covenants and to have the Restrictive Covenants specifically enforced by any court of competent jurisdiction, it being agreed that any breach or threatened breach of the Restrictive Covenants would cause irreparable injury to the Company and that money damages would not provide an adequate remedy to the Company; and B. the right and remedy to require Executive to account for and pay over to the Company all compensation, profits, monies, accruals, increments or other benefits derived or received by Executive as the result of any transactions constituting a breach of the Restrictive Covenants. (ii) Severability of Covenants. Executive acknowledges and agrees _________________________ that the Restrictive Covenants are reasonable and valid in time and scope and in all other respects. If any court determines that any of the Restrictive Covenants, or any part thereof, are invalid or unenforceable, the remainder of the Restrictive Covenants shall not thereby be affected and shall be given full effect, without regard to the invalid portions. (iii) Attorneys' Fees. In any action relating to the enforcement of _______________ the Restrictive Covenants, the prevailing party in such action shall be entitled to be paid any and all costs and expenses incurred by him or it in enforcing or establishing his or its rights -12- thereunder, including, without limitation, reasonable attorneys' fees, whether suit be brought or not, and whether or not incurred in trial, bankruptcy or appellate proceedings. 13. Assignment and Successors. ------------------------- (a) Executive. This Agreement is personal to Executive and without the _________ prior written consent of the Company shall not be assignable by Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Executive's legal representatives. (b) The Company. This Agreement shall inure to the benefit of and be ___________ binding upon the Company and its successors and assigns. The Company will require any successor to all or substantially all of the business and/or assets of the Company (whether direct or indirect, by purchase, merger, consolidation or otherwise) to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "the Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law or otherwise. (c) Jones. This Agreement is personal to Jones and without the prior _____ written consent of Executive shall not be assignable by Jones otherwise than by will or the laws of descent and distribution. 14. Personal Guaranty. Jones is entering into this Agreement for the sole ----------------- purpose of guaranteeing the obligations of the Company hereunder. Jones hereby irrevocably and unconditionally guarantees (the "Guaranty") the due and punctual payment and performance when due of the Company's obligations under this Agreement (the "Guaranteed Obligations"). This Guaranty is a guaranty of payment, and not of collection, and an obligation of Jones for his own account. Accordingly, Executive shall not be obligated or required before enforcing this Guaranty against Jones: (a) to pursue any right or remedy Executive may have against the Company or commence any suit or other proceeding against the Company in any court or other tribunal; (b) to make any claim in a liquidation or bankruptcy of the Company; or (c) to make demand of the Company. Jones guarantees that the Guaranteed Obligations will be paid strictly in accordance with the terms of this Agreement, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of Executive with respect thereto. The liability of Jones under this Guaranty shall be absolute and unconditional in accordance with its terms and shall remain in full force and effect without regard to, and shall not be released, suspended, discharged, terminated or otherwise affected by, any circumstance or occurrence whatsoever, provided that this Guaranty shall expire and shall be of no further force or effect from and after consummation of an initial public offering of the Company's Common Stock. Jones, to the fullest extent permitted by law, hereby waives notice of acceptance hereof or any presentment, demand, protest or notice of any kind, and any other act or thing, or omission or delay to do any other act or thing, which in any manner or to any extent might vary the risk of Jones or which otherwise might operate to discharge Jones from its obligations hereunder. Jones -13- shall be subrogated to the rights of Executive hereunder in the event and to the extent that Jones makes any payment to Executive pursuant to this Guaranty. 15. Miscellaneous. ------------- (a) Waiver. Failure of either party to insist, in one or more instances, ------ on performance by the other in strict accordance with the terms and conditions of this Agreement shall not be deemed a waiver or relinquishment of any right granted in this Agreement or of the future performance of any such term or condition or of any other term or condition of this Agreement, unless such waiver is contained in a writing signed by the party making the waiver. (b) Severability. If any provision or covenant, or any part thereof, of ------------ this Agreement should be held by any court to be invalid, illegal or unenforceable, either in whole or in part, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of the remaining provisions or covenants, or any part thereof, of this Agreement, all of which shall remain in full force and effect. (c) Other Agents. Nothing in this Agreement is to be interpreted as ------------ limiting the Company from employing other personnel on such terms and conditions as may be satisfactory to it. (d) Entire Agreement. Except as provided herein, this Agreement contains ---------------- the entire agreement between the Company and Executive with respect to the subject matter hereof, and it supersedes and invalidates any previous agreements or contracts between them which relate to the subject matter hereof. No representations, inducements, promises or agreements, oral or otherwise, which are not embodied herein shall be of any force or effect. (e) Governing Law. Except to the extent preempted by federal law, and ------------- without regard to conflict of laws principles, the laws of the State of Tennessee shall govern this Agreement in all respects, whether as to its validity, construction, capacity, performance or otherwise. (f) Notices. All notices, requests, demands and other communications ------- required or permitted hereunder shall be in writing and shall be deemed to have been duly given if delivered or three days after mailing if mailed, first class, certified mail, postage prepaid: To Company Check into Cash, Inc. and Jones: Post Office Box 1015 Cleveland, Tennessee 37364-1015 Facsimile No. (423) 476-9200 Attention: W. Allan Jones, Jr., Chairman and Chief Executive Officer -14- To Executive: J. Samuel Choate, Jr. 921 King Street Alexandria, VA 22314 Any party may change the address to which notices, requests, demands and other communications shall be delivered or mailed by giving notice thereof to the other party in the same manner provided herein. (g) Amendments and Modifications. This Agreement may be amended or ---------------------------- modified only by a writing signed by both parties hereto, which makes specific reference to this Agreement. (signatures on following page) -15- IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Employment Agreement as of the date first above written. CHECK INTO CASH, INC. By: /s/ W. Allan Jones, Jr. ----------------------------- W. Allan Jones, Jr. Chairman of the Board and Chief Executive Officer JONES: /s/ W. Allan Jones, Jr. ----------------------------------- W. Allan Jones, Jr. EXECUTIVE: /s/ J. Samuel Choate, Jr. ----------------------------------- J. Samuel Choate, Jr. -16- NON-QUALIFIED STOCK OPTION AGREEMENT under the CHECK INTO CASH, INC. 1997 LONG-TERM INCENTIVE PLAN Optionee: J. Samuel Choate, Jr. Number Shares Subject to Option: 33,600 Exercise Price per Share: $59.00 Date of Grant: May 1, 1998 1. Grant of Option. Check into Cash, Inc. (the "Corporation") hereby --------------- grants to the Optionee named above (the "Optionee"), under the Check into Cash, Inc. 1997 Long-Term Incentive Plan (the "Plan"), a Non-Qualified Stock Option to purchase, on the terms and conditions set forth in this agreement (this "Option Agreement"), the number of shares indicated above of the Corporation's common stock (the "Stock"), at the exercise price per share set forth above (the "Option"). Capitalized terms used herein and not otherwise defined shall have the meanings assigned such terms in the Plan, or, to the extent not defined therein, in the Employment Agreement, dated as of April 28, 1998, between the Corporation and Grantee (the "Employment Agreement"). 2. Vesting of Option. Unless the exercisability of the Option is ----------------- accelerated in accordance with Article 13 of the Plan or the terms of any Employment Agreement between Optionee and the Corporation (the "Employment Agreement"), the Option shall vest (become exercisable) in accordance with the following schedule. Date Percent of Option Shares Vested ---- ------------------------------- Relocation Date (as defined 25% in the Employment Agreement) May 1, 1999 50% May 1, 2000 75% May 1, 2001 100% 3. Period of Option and Limitations on Right to Exercise. The Option ----------------------------------------------------- will, to the extent not previously exercised, lapse under the earliest of the following circumstances, provided, however, that the Committee may, prior to the lapse of the Option under the circumstances described in paragraphs (b), (c) and (d) below, provide in writing that the Option will extend until a later date: (a) The Option shall lapse as of 5:00 p.m., Eastern Time, on the day immediately prior to the tenth anniversary of the date of the grant (the "expiration Date"). (b) The Option shall lapse three months after the Optionee's termination of employment for any reason other than the Optionee's death or Disability; provided, however, that if the Optionee's employment is terminated by the Corporation for Cause or by the Optionee (other than for Good Reason) without the consent of the Corporation, the Option shall lapse immediately. (c) If the Optionee's employment terminates by reason of Disability, the Option shall lapse one year after the date of the Optionee's termination of employment. (d) If the Optionee dies while employed, or during the three- month period described in subsection (b) above during the one-year period described in subsection (c) above and before the Option otherwise lapses, the Option shall lapse one year after the date of the Optionee's death. Upon the Optionee's death, the Option may be exercised by the Optionee's beneficiary. If the Optionee or his beneficiary exercises an Option after termination of employment, the Option may be exercised only with respect to the shares that were otherwise vested on the Optionee's termination of employment (including vesting by acceleration in accordance with Article 13 of the Plan or the Employment Agreement). 4. Exercise of Option. The Option shall be exercised by written ------------------ notice directed to the Secretary of the Corporation at the principal executive offices of the Corporation in substantially the form attached hereto as Exhibit A, or such other form as the Committee may approve. Such written notice shall be accompanied by full payment in cash, shares of Stock previously acquired by the Optionee, or any combination thereof, for the number of shares specified in such written notice; provided, however, that if shares of Stock are used to pay the exercise price, such shares must have been held by the Optionee for at least six months. The Fair Market Value of the surrendered Stock as of the date of the exercise shall be determined in valuing Stock used in payment of the exercise price. To the extent permitted under Regulation T of the Federal Reserve Board, and subject to applicable securities laws, the Option may be exercised through a broker in a so-called "cashless exercise" whereby the broker sells the Option shares and delivers cash sales proceeds to the Corporation in payment of the exercise price and all withholding tax obligations, if any (whether federal, state or local), imposed on the Corporation by reason of the exercise of the Option (the "Withholding Tax Obligations"). The Committee may, in the exercise of its discretion, but need not, allow the Optionee to pay the exercise price by directing the Corporation to withhold from the shares of Stock that would otherwise be issued upon exercise of the Option that number of shares having a Fair Market on the exercise dated equal to the exercise price and the Withholding Obligations, all as determined pursuant to rules and procedures established by the Committee. Subject to the terms of this Option Agreement, the Option may be exercised at any time and without regard to any other option held by the Optionee to purchase stock of the Corporation. 5. Participation in Shareholder Agreement Execution of this Option -------------------------------------- Agreement shall constitute a writing, pursuant to Section 7.2 of the Check into Cash, Inc. Shareholder Agreement (the "Shareholder Agreement"), evidencing the Optionee's agreement to become a "Shareholder" under the Shareholder Agreement. Execution of the Option Agreement by the Optionee shall have the same effect as execution of a counterpart to the Shareholder Agreement. 6. Limitations of Rights The Option does not confer to the Optionee or --------------------- Optionee's personal representative any rights of a shareholder of the Corporation unless and until shares of Stock are in fact issued to such a person in connection with the exercise of the Option, except for those rights and obligations specifically provided to the Optionee pursuant to the Shareholder Agreement. Nothing in this Option Agreement shall interfere with or limit in any way the right of the Corporation or any Subsidiary to terminate the Optionee's employment at any time, nor confer upon the Optionee any right to continue in the employ of the Corporation or any Subsidiary. 7. Stock Reserve The Corporation shall at all times during the term of ------------- this Option Agreement reserve and keep available such number of shares of Stock as will be sufficient to satisfy the requirements of this Option Agreement. 8. Optionee's Covenant The Optionee hereby agrees to use his best ------------------- efforts to provide services to the Corporation in a workmanlike manner and to promote the Corporation's interests. 9. Restrictions on Transfer and Pledge The Option may not be pledged, ----------------------------------- encumbered, or hypothecated to or in favor of any party other than the Corporation or a Parent or Subsidiary, or be subject to any lien, obligation, or liability of the Optionee to any other party other than the Corporation or a Parent or Subsidiary. The Option is not assignable or transferable by the Optionee other than by will or the laws of descent and distribution; provided, however, that the Committee may (but need not) permit other transfers where the Committee concludes that such transferability (i) does not result in a accelerated taxation and (ii) is otherwise appropriate and desirable, taking into account any state or federal tax or securities laws applicable to transferable options. The Option may be exercised during the lifetime of the Optionee only by the Optionee or by the Optionee's legal representative. 10. Restrictions on Issuance of Shares If at any time the Board shall ---------------------------------- determine in its discretion, that listing, registration or qualification of the shares of Stock covered by the Option or the Optionee's legal representative upon any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition to the exercise of the Option, the Option may not be exercised in whole or in part unless and until such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Board. 11. Plan Controls The terms contained in the Plan are incorporated into ------------- and made a part of this Option Agreement and this Option Agreement shall be governed by and construed in accordance with the Plan. In the event of any actual or alleged conflict between the provisions of the Plan and the provisions of this Option Agreement, the provisions of the Plan shall be controlling and determinative. -3- 12. Successors. This Option Agreement shall be binding upon any ---------- successor of the Corporation, in accordance with the terms of this Option Agreement and the Plan. 13. Severability. If any one or more of the provisions contained in ------------ this Option Agreement are invalid, illegal or unenforceable, the other provisions of this Option Agreement will be construed and enforced as if the invalid, illegal or unenforceable provision had never been included. 14. Notice. Notices and communications under this Option Agreement ------ must be in writing and either personally delivered or sent by registered or certified United States mail, return receipt requested, postage prepaid. Notices to the Corporation must be addressed to: Check into Cash, Inc. 205 Second Street, N.W. The Jones Building Cleveland, Tennessee 37311 Attn: W. Allan Jones, Jr. or any other address designated by the Corporation in a written notice to the Optionee. Notices to the Optionee will be directed to the address of the Optionee then currently on file with Corporation, or at any other address given by the Optionee in a written notice to the Corporation. IN WITNESS WHEREOF, Check into Cash, Inc., acting by and through its duly authorized officers, has caused this Option Agreement to be executed, and the Optionee has executed this Option Agreement, all as of the day and year first above written. CHECK INTO CASH, INC. By: /s/ W. Allan Jones, Jr. --------------------------------- Name: W. Allan Jones, Jr. Title: Chairman & CEO OPTIONEE: /s/ J. Samuel Choate, Jr. ------------------------------------ J. SAMUEL CHOATE, JR. -4- EX-10.6.4 11 EMPLOYMENT AGREEMENT EXHIBIT 10.6.4 EMPLOYMENT, CONFIDENTIALITY AND NON-COMPETITION AGREEMENT ----------------------------- THIS EMPLOYMENT, CONFIDENTIALITY AND NON-COMPETITION AGREEMENT ("Agreement") is made and entered into as of the 1st day of May, 1998 by and between Check into Cash, Inc., a Delaware corporation (hereinafter, the "Company"), and Frederick Krosner (hereinafter, "Employee"). BACKGROUND ---------- The Company desires to engage Employee in the capacities set forth herein, in accordance with the terms and conditions of this Agreement. Employee is willing to serve as such in accordance with the terms and conditions of this Agreement. NOW THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Effective Date. This Agreement is effective as of May 1, 1998 (the -------------- "Effective Date"). 2. Employment. Employee is hereby employed on the Effective Date as Vice ---------- President, Treasurer and Controller of the Company. Employee's responsibilities under this Agreement shall be in accordance with the policies and objectives established by the Chief Executive Officer and the Board of Directors of the Company and shall be consistent with the responsibilities of similarly situated employees of comparable companies in similar lines of business. 3. Term. Employment under this Agreement shall be at will. Either of ---- Employee or the Company may terminate this Agreement at any time for any reason. 4. Extent of Service. During the employment period, and excluding any ----------------- periods of vacation and sick leave to which Employee is entitled, Employee agrees to devote his business time, attention, skill and efforts exclusively to the faithful performance of his duties hereunder; provided, however, that it shall not be a violation of this Agreement for Employee to (i) devote reasonable periods of time to charitable and community activities, and/or (ii) manage personal business interests and investments, so long as such activities do not interfere with the performance of Employee's responsibilities under this Agreement. 5. Compensation and Benefits. ------------------------- (a) Base Salary. During the employment period, the Company will pay to ----------- Employee a base salary in the amount of $170,000 per year ("Base Salary"), less normal withholdings, payable in equal monthly or more frequent installments as are customary under the Company's payroll practices from time to time. The Board of Directors of the Company shall review Employee's Base Salary annually and in its sole discretion, subject to approval of the Board of Directors of the Company, may increase Employee's Base Salary from year to year. The annual review of Employee's salary by the Board will consider, among other things, Employee's own performance and the Company's performance. (b) Bonuses. The Board of Directors in its sole discretion may, from time ------- to time, declare and pay to Employee bonuses, whether in cash or otherwise. (c) Incentive, Savings and Retirement Plans. During the employment --------------------------------------- period, Employee shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs applicable generally to similarly situated employees of the Company and its affiliated companies, and on the same relative basis as such other similarly situated employees. (d) Welfare Benefit Plans. During the employment period, Employee and --------------------- Employee's family shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to similarly situated employees of the Company and its affiliated companies. (e) Expenses. During the employment period, Employee shall be entitled to -------- receive prompt reimbursement for all reasonable expenses incurred by Employee in accordance with the policies, practices and procedures of the Company and its affiliated companies to the extent applicable generally to other similarly situated employees of the Company and its affiliated companies. (f) Fringe Benefits. During the employment period, Employee shall be --------------- entitled to fringe benefits in accordance with the plans, practices, programs and policies of the Company and its affiliated companies in effect for similarly situated employees of the Company and its affiliated companies. (g) Severance. If the Company elects for any reason at any time to --------- terminate Employee's employment under this Agreement, the Company shall pay to Employee all amounts due as salaries and bonuses up to the effective date of the termination, plus an amount equal to one year's Base Salary as severance pay. 6. Stock Option Grants. As additional consideration to enter into this ------------------- Agreement, the Company has granted Employee options to purchase 7,650 shares of the common stock of the Company, pursuant to an Option Agreement by and between Employee and Company, dated as of the date of this Agreement. 7. Representations and Warranties. Employee hereby represents and warrants ------------------------------ to the Company that Employee is not a party to, or otherwise subject to, any covenant not to compete with any person or entity, other than Credit Bureau Services, Inc., and Employee's execution of this Agreement and performance of his obligations hereunder will not violate the terms or conditions of any contract or obligation, written or oral, between Employee and any other person or entity. 8. Restrictions on Conduct of Employee. ----------------------------------- (a) General. Employee and the Company understand and agree that the ------- purpose of the provisions of this Section 8 is to protect legitimate business interests of the Company, as more fully described below, and is not intended to eliminate Employee's post-employment competition with the Company per se, nor is it intended to impair or infringe upon Employee's right to work, earn a living, or acquire and possess property from the fruits of his labor. Employee hereby acknowledges that the post-employment restrictions set forth in this Section 8 are reasonable and that they do not, and will not, unduly impair his ability to earn a living after the termination of this Agreement. Therefore, subject to the limitations of reasonableness imposed by law upon the restrictions set forth herein, Employee shall be subject to the restrictions set forth in this Section 8. -2- (b) Definitions. The following capitalized terms used in this Section 8 ----------- shall have the meanings assigned to them below, which definitions shall apply to both the singular and the plural forms of such terms: "Affiliates" shall mean Check into Cash Holdings, Inc., Check into Cash of California, Inc., Check into Cash of Illinois, LLC, Check into Cash of Indiana, LLC, Check into Cash of Iowa, Inc., Check into Cash of Kentucky, LLC, Check into Cash of Missouri, Inc., Check into Cash of Nebraska, Inc., Check into Cash of North Carolina, Inc., Check into Cash of Ohio, LLC, Check into Cash of Wisconsin, LLC, Credit Bureau Services, Inc., Creditcorp of Tennessee, Inc., Creditors Adjustment Bureau, Inc., Jones Management Services, Inc., Jones Properties, LLC, Preferred One, LLC, and any other entities that may be formed in the future under the control of the Company, any Affiliate or W. Allan Jones, Jr.; "Competitive Services" means any services provided by Company and the Affiliates at the Determination Date, including, without limitation, the business of cashing checks, deferring deposit of checks for specified periods of time, and extending short-term, unsecured credit. "Confidential Information" means any confidential or proprietary information possessed by the Company or the Affiliates or relating to its or their business, including, without limitation, any confidential "know-how," customer lists, details of client or consultant contracts, current and anticipated customer requirements, pricing policies, price lists, market studies, business plans, operational methods, marketing plans or strategies, product development techniques or plans, computer software programs (including object code and source code), data and documentation, data base technologies, systems, structures and architectures, inventions and ideas, past, current and planned research and development, compilations, devices, methods, techniques, processes, financial information and data, business acquisition plans, new personnel acquisition plans and any other information that would constitute a Trade Secret (as defined herein). "Determination Date" means the date of termination of Employee's employment with the Company for any reason whatsoever or any earlier date (during the employment period) of an alleged breach of the Restrictive Covenants by Employee. "Person" means any individual or any corporation, partnership, joint venture, association or other entity or enterprise. "Principal or Representative" means a principal, owner, partner, shareholder, joint venturer, investor, member, trustee, director, officer, manager, employee, agent, representative or consultant. "Protected Employees" means persons who were employed by the Company or the Affiliates at any time within six (6) months prior to the Determination Date. "Restricted Period" means the employment period and a period extending two (2) years from the date of termination of Employee's employment under this Agreement; provided, however, in the event the Confidential Information constitutes a Trade Secret, the Restricted Period shall be five (5) years. "Restrictive Covenants" means the restrictive covenants contained in Section 8(c) hereof. -3- "Trade Secret" means any item of Confidential Information that constitutes a "trade secret" under the common law or statutory law of the State of Tennessee. (c) Restrictive Covenants. --------------------- (i) Restriction on Disclosure and Use of Confidential Information. ------------------------------------------------------------- Employee understands and agrees that the Confidential Information constitutes a valuable asset of the Company and its Affiliates, and may not be converted to Employee's own use. Accordingly, Employee hereby agrees that Employee shall not, directly or indirectly, at any time during the Restricted Period reveal, divulge, or disclose to any Person not expressly authorized by the Company any Confidential Information, and Employee shall not, directly or indirectly, at any time during the Restricted Period use or make use of any Confidential Information in connection with any business activity other than that of the Company. (ii) Nonsolicitation of Protected Employees. Employee understands and -------------------------------------- agrees that the relationship between the Company and its Affiliates and each of its Protected Employees constitutes a valuable asset of the Company and its Affiliates and may not be converted to Employee's own use. Accordingly, Employee hereby agrees that during the Restricted Period Employee shall not directly or indirectly on Employee's own behalf or as a Principal or Representative of any Person or otherwise solicit or induce any Protected Employee to terminate his or her employment relationship with the Company. (iii) Noncompetition with the Company. During the Restricted Period, ------------------------------- Employee, unless acting in accordance with the Company's prior written consent, will not directly provide any Competitive Services to, and will not, directly or indirectly, (i) own, manage, operate, join, control, finance or participate in the ownership, management, operation, control or financing of, or (ii) be connected as a Principal or Representative or otherwise with, or (iii) permit Employee's name to be used by or in connection with, any Person engaged in providing Competitive Services to any Person conducting business activities within a ten (10) mile radius of any store location from which the Company or any Affiliate is or was engaged in the provision of the Competitive Services on the Determination Date, including any store location for which a lease had been entered into by the Company or any Affiliate on or before the Determination Date but was not then operational; provided, however, that the provisions of this Agreement shall not be deemed to prohibit the ownership by Employee of any securities of the Company or its affiliated entities or not more than five percent (5%) of any class of securities of any corporation having a class of securities registered pursuant to the Securities Exchange Act of 1934, as amended. The provisions of this Section 8(c)(iii) shall not apply in the event that the employee is terminated by the Company. (d) Exceptions from Disclosure Restrictions. Anything herein to the --------------------------------------- contrary notwithstanding, Employee shall not be restricted from disclosing or using Confidential Information that: (a) is or becomes generally available to the public other than as a result of an unauthorized disclosure by Employee or his agent; (b) becomes available to Employee in a manner that is not in contravention of applicable law from a source (other than the Company or its Affiliates or one of its or their officers, employees, agents or representatives) that is not bound by a confidential relationship with the Company or its Affiliates or by a confidentiality or other similar agreement; (c) was known to Employee on a non-confidential basis and not in contravention of applicable law or a confidentiality or other similar agreement before its disclosure to Employee by the Company or its Affiliates or one of its or their officers, employees, agents or representatives; or (d) is required to be disclosed by law, court order or other legal process; provided, however, that in the event disclosure is required by law, court order or other legal process, Employee shall provide the Company with prompt notice of such -4- requirement so that the Company may seek an appropriate protective order prior to any such required disclosure by Employee. (e) Enforcement of Restrictive Covenants. ------------------------------------ (i) Rights and Remedies Upon Breach. In the event Employee breaches, ------------------------------- or threatens to commit a breach of, any of the provisions of the Restrictive Covenants, the Company shall have the following rights and remedies, which shall be independent of any others and severally enforceable, and shall be in addition to, and not in lieu of, any other rights and remedies available to the Company at law or in equity: A. the right and remedy to enjoin, preliminarily and permanently, Employee from violating or threatening to violate the Restrictive Covenants and to have the Restrictive Covenants specifically enforced by any court of competent jurisdiction, it being agreed that any breach or threatened breach of the Restrictive Covenants would cause irreparable injury to the Company or an Affiliate and that money damages would not provide an adequate remedy to the Company or the Affiliate; and B. the right and remedy to require Employee to account for and pay over to the Company all compensation, profits, monies, accruals, increments or other benefits derived or received by Employee as the result of any transactions constituting a breach of the Restrictive Covenants. (ii) Severability of Covenants. Employee acknowledges and agrees that ------------------------- the Restrictive Covenants are reasonable and valid in time and scope and in all other respects. If any court determines that any of the Restrictive Covenants, or any part thereof, are invalid or unenforceable, the remainder of the Restrictive Covenants shall not thereby be affected and shall be given full effect, without regard to the invalid portions. (iii) Attorneys' Fees. In any action relating to the enforcement of --------------- the Restrictive Covenants, the prevailing party in such action shall be entitled to be paid any and all costs and expenses incurred by him or it in enforcing or establishing his or its rights thereunder, including, without limitation, reasonable attorneys' fees, whether suit be brought or not, and whether or not incurred in trial, bankruptcy or appellate proceedings. 9. Assignment and Successors. ------------------------- (a) Employee. This Agreement is personal to Employee and without the -------- prior written consent of the Company shall not be assignable by Employee otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Employee's legal representatives. (b) The Company. This Agreement shall inure to the benefit of and be ----------- binding upon the Company and its successors and assigns. The Company will require any successor to all or substantially all of the business and/or assets of the Company (whether direct or indirect, by purchase, merger, consolidation or otherwise) to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "the Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law or otherwise. -5- 10. Miscellaneous. ------------- (a) Waiver. Failure of either party to insist, in one or more instances, ------ on performance by the other in strict accordance with the terms and conditions of this Agreement shall not be deemed a waiver or relinquishment of any right granted in this Agreement or of the future performance of any such term or condition or of any other term or condition of this Agreement, unless such waiver is contained in a writing signed by the party making the waiver. (b) Severability. If any provision or covenant, or any part thereof, of ------------ this Agreement should be held by any court to be invalid, illegal or unenforceable, either in whole or in part, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of the remaining provisions or covenants, or any part thereof, of this Agreement, all of which shall remain in full force and effect. (c) Other Agents. Nothing in this Agreement is to be interpreted as ------------ limiting the Company from employing other personnel on such terms and conditions as may be satisfactory to it. (d) Entire Agreement. Except as provided herein, this Agreement contains ---------------- the entire agreement between the Company and Employee with respect to the subject matter hereof, and it supersedes and invalidates any previous agreements or contracts between them which relate to the subject matter hereof, including, but not limited to that certain Employment, Confidentiality and Non-Competition Agreement that was previously executed by and between Employee and the Company. No representations, inducements, promises or agreements, oral or otherwise, which are not embodied herein shall be of any force or effect. (e) Governing Law. Except to the extent preempted by federal law, the ------------- laws of the State of Tennessee and, without regard to Tennessee's conflict of laws principles, shall govern this Agreement in all respects, whether as to its validity, construction, capacity, performance or otherwise. (f) Notices. All notices, requests, demands and other communications ------- required or permitted hereunder shall be in writing and shall be deemed to have been duly given if delivered or three days after mailing if mailed, first class, certified mail, postage prepaid: To Company: Check into Cash, Inc. Post Office Box 1015 Cleveland, Tennessee 37364-1015 Facsimile No. (423) 476-9200 Attention: W. Allan Jones, Jr., Chairman and Chief Executive Officer To Employee: Frederick Krosner 6211 Flag Point Drive Ooltewah, Tennessee 37363 Any party may change the address to which notices, requests, demands and other communications shall be delivered or mailed by giving notice thereof to the other party in the same manner provided herein. (g) Amendments and Modifications. This Agreement may be amended or ---------------------------- modified only by a writing signed by both parties hereto, which makes specific reference to this Agreement. -6- IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Employment, Confidentiality and Non-Competition Agreement as of the date first above written. CHECK INTO CASH, INC. By: /s/ W. Allan Jones, Jr. ---------------------------- W. Allan Jones, Jr. Chairman of the Board and Chief Executive Officer EMPLOYEE: /s/ Frederick Krosner ------------------------------ Frederick Krosner -7- EX-21 12 EXHIBIT 21 EXHIBIT 21 The Registrant has 12 direct subsidiaries: Check Into Cash of California, Inc., a California corporation Check Into Cash of Iowa, Inc., an Iowa corporation Check Into Cash of Mississippi, Inc., a Mississippi corporation Check Into Cash of Missouri, Inc., a Missouri corporation Check Into Cash of Nebraska, Inc., a Nebraska corporation Check Into Cash of North Carolina, Inc., a North Carolina corporation Check Into Cash of Oregon, Inc., an Oregon corporation Check Into Cash of Pennsylvania, Inc., a Pennsylvania corporation Check Into Cash of South Carolina, Inc., a South Carolina corporation Creditcorp of Tennessee, Inc., a Tennessee corporation Check Into Cash of Washington, Inc., a Washington corporation Check Into Cash Holdings, Inc., a Delaware corporation In addition, Check Into Cash Holdings, Inc. has six indirect subsidiaries: Check Into Cash of Illinois, LLC, an Illinois limited liability company Check Into Cash of Indiana, LLC, an Indiana limited liability company Check Into Cash of Kentucky, LLC, a Kentucky limited liability company Check Into Cash of Ohio, LLC, an Ohio limited liability company Check Into Cash of Wisconsin, LLC, a Wisconsin limited liability company Jones Management Services, LLC, a Tennessee limited liability company EX-23.2 13 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS EXHIBIT 23.2 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our reports (and to all references to our Firm) included in or made a part of this registration statement. ARTHUR ANDERSEN LLP July 28, 1998 Chattanooga, Tennessee EX-27 14 FINANCIAL DATA SCHEDULE
5 YEAR 6-MOS DEC-31-1997 DEC-31-1998 JAN-01-1997 JAN-01-1998 DEC-31-1997 JUN-30-1998 1,149,925 2,282,009 81,164 87,854 10,102,430 15,384,598 255,000 265,000 0 0 13,097,977 19,469,596 3,182,257 4,700,098 997,730 1,667,875 15,925,011 23,169,506 3,973,640 4,635,355 0 0 0 0 0 0 12,360 12,360 2,420,761 3,881,100 15,925,011 23,169,506 21,050,501 21,088,692 21,446,588 21,241,222 13,097,803 12,225,809 21,696,887 17,417,134 0 0 0 0 621,452 620,443 871,751 3,203,645 594,236 1,082,515 277,515 2,121,130 0 0 0 0 0 0 277,515 2,121,130 .23 1.72 .23 1.62
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