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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
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RENT-A-CENTER, INC.
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[RENT-A-CENTER LOGO]
PROXY STATEMENT FOR
AND
NOTICE OF
2001 ANNUAL STOCKHOLDERS MEETING
ANNUAL May 15, 2001.
MEETING: 9:30 a.m. local time
LOCATION: Rent-A-Center, Inc.
5700 Tennyson Parkway
Fourth Floor
Plano, Texas 75024
RECORD Close of business on March 22, 2001.
DATE:
If you were a stockholder of record at the close of business on March 22, 2001, you may
vote at the meeting.
NUMBER OF VOTES: Holders of our Common Stock are entitled to one vote for each share of Common Stock they
owned on March 22, 2001. The holders of our Preferred Stock were entitled to convert their
281,756 shares of Preferred Stock into 10,086,129 shares of our Common Stock on March 22,
2001, and thus are entitled to an equal number of votes.
AGENDA: 1. To elect three directors, two of whom are to be elected by all of the stockholders and
one of whom is to be elected by the holders of our Preferred Stock;
2. To approve an amendment to our Amended and Restated Certificate of Incorporation
increasing the number of shares of Common Stock, par value $.01 per share, we are
authorized to issue from 50,000,000 to 125,000,000;
3. To approve amendments to our Long-Term Incentive Plan increasing the number of shares
of our Common Stock reserved for issuance under our Long-Term Incentive Plan from
6,200,000 to 7,900,000 shares, reducing the number of shares of Common Stock which are
reserved for issuance under our Long-Term Incentive Plan for director options from
496,000 to 210,000 shares, and reducing the number of shares of Common Stock which are
reserved for issuance under our Long-Term Incentive Plan for employee stock awards
from 310,000 to 31,250 shares; and
4. To transact any other proper business.
PROXIES: Unless you tell us on the proxy card to vote differently, we will vote signed returned
proxies "for" the Board's nominees, "for" the approval of the amendment to our Certificate
of Incorporation and "for" the approval of the Plan amendments. The proxy holders will use
their discretion on other matters. If a nominee cannot or will not serve as a director,
the proxy holders will vote for a person whom they believe will carry on our present
policies.
PROXIES The Board of Directors.
SOLICITED BY:
FIRST MAILING This proxy statement is dated April , 2001. We are first mailing this proxy statement on
DATE: or about April , 2001.
REVOKING You may revoke your proxy before it is voted at the meeting. To revoke, follow the
YOUR PROXY: procedures listed on page 31 under "Voting Procedures/Revoking Your Proxy."
PLEASE VOTE BY RETURNING YOUR PROXY- YOUR VOTE IS IMPORTANT
PROMPT RETURN OF YOUR PROXY WILL HELP REDUCE THE COSTS OF RESOLICITATION.
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CONTENTS
ELECTION OF DIRECTORS....................................... 2
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION..... 11
PERFORMANCE GRAPH........................................... 12
EXECUTIVE COMPENSATION AND OTHER INFORMATION................ 13
FISCAL YEAR END OPTION VALUES............................... 14
EMPLOYMENT AGREEMENTS....................................... 15
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION............................................. 15
PROPOSALS FOR STOCKHOLDER ACTION............................ 16
TAX EFFECTS OF PARTICIPATION IN THE LONG-TERM INCENTIVE
PLAN...................................................... 20
OPTIONS GRANTED UNDER THE PLAN.............................. 27
OTHER BUSINESS.............................................. 28
INDEPENDENT PUBLIC ACCOUNTANT INFORMATION................... 28
AUDIT COMMITTEE ON RENT-A-CENTER'S FINANCIAL STATEMENTS..... 29
SECTION 16 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE........ 29
RENT-A-CENTER STOCK OWNERSHIP............................... 30
VOTING PROCEDURES/REVOKING YOUR PROXY....................... 31
SUBMISSION OF STOCKHOLDER PROPOSALS......................... 32
EXHIBIT A -- CHARTER OF THE AUDIT COMMITTEE................. A-1
EXHIBIT B -- AMENDED AND RESTATED RENT-A-CENTER, INC. LONG
TERM INCENTIVE PLAN....................................... B-1
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ELECTION OF DIRECTORS
BOARD STRUCTURE: Our Board has eight members. The directors are divided into three classes. At each annual
meeting, the term of one class expires. In general, directors in each class serve for a
term of three years. Under the terms of our Certificate of Incorporation, the holders of
our Preferred Stock are entitled to elect two of our eight directors. In addition to
Apollo's rights as a holder of our Preferred Stock, Apollo has similar rights under the
stockholders agreement we entered into with them and Messrs. Talley and Speese.
NUMBER OF DIRECTORS TO Three directors are to be elected, two of whom are to be elected by all of our stockholders
BE ELECTED: and one of whom is to be elected by the holders of our Preferred Stock voting separately as
a class.
BOARD NOMINEES OUR BOARD HAS NOMINATED J. ERNEST TALLEY TO BE REELECTED BY ALL OF THE STOCKHOLDERS AND
MITCHELL E. FADEL TO BE ELECTED BY ALL OF THE STOCKHOLDERS. OUR BOARD HAS ALSO NOMINATED
PETER P. COPSES TO BE REELECTED BY THE HOLDERS OF OUR PREFERRED STOCK. WE URGE YOU TO VOTE
FOR MESSRS. TALLEY, FADEL AND COPSES.
TERMS TO EXPIRE AT THE J. Ernest Talley Mr. Talley has served as Chairman of our Board of Directors
2004 ANNUAL MEETING: since May 1989 and Chief Executive Officer since November
1994. Mr. Talley operated a rent-to-own business from 1963
to 1974 in Wichita, Kansas, which he sold to Remco (later
acquired by Thorn Americas and acquired by us as part of
the Thorn Americas acquisition) in 1974. From 1974 to 1988,
he was involved in the commercial real estate business in
Dallas, Texas. Mr. Talley co-founded Talley Lease to Own,
Inc. with his son, Michael C. Talley, in 1987 and served as
a director and Chief Executive Officer of that company from
1988 until its merger with us on January 1, 1995. Mr.
Talley's term as a director expires at this year's annual
stockholders meeting. Mr. Talley is 66 years old.
Mitchell E. Fadel Mr. Fadel has served as our President since July 2000 and
as a director since December 2000. From November 1992 until
July 2000, Mr. Fadel served as President and Chief
Executive Officer of ColorTyme. ColorTyme was acquired by
us in May 1996. From 1983 to 1991, Mr. Fadel was a Regional
Manager for Thorn Americas and its affiliates. Mr. Fadel's
term as a director expires at this year's annual
stockholder's meeting. Mr. Fadel is 43 years old.
Peter P. Copses Mr. Copses has served as one of our directors since August
1998. Since 1990, Mr. Copses has been a principal of Apollo
Advisors, L.P., which, together with its affiliates, acts
as managing general partner of Apollo Investment Fund,
L.P., AIF II, L.P., Apollo Investment Fund III, L.P. and
Apollo Investment Fund IV, L.P. Mr. Copses is also a
director of Zale Corporation, an operator of specialty
retail jewelry stores. Mr. Copses serves as one of the two
directors elected by the holders of our Preferred Stock.
Mr. Copses' term as a director expires at this year's
annual stockholders meeting. Mr. Copses is 42 years old.
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CONTINUING DIRECTORS
TERMS TO EXPIRE AT THE Mark E. Speese Mr. Speese has served as one of our directors since 1990.
2002 ANNUAL MEETING: Mr. Speese also served as our Vice Chairman from September
1999 until December 2000. From 1990 until April 1999, Mr.
Speese served as our President. Mr. Speese also served as
our Chief Operating Officer from November 1994 until March
1999. From our inception in 1986 until 1990, Mr. Speese
served as a Vice President responsible for our New Jersey
operations. Prior to joining us, Mr. Speese was a regional
manager for Thorn Americas from 1979 to 1986. Mr. Speese is
also a director of Transportation Components, Inc., a
distributor of replacement parts and supplies for
commercial vehicles and equipment. Mr. Speese's term as
director expires at our 2002 annual stockholders meeting.
Mr. Speese is 43 years old.
L. Dowell Arnette Mr. Arnette has served as one of our directors since May
1999 and as our Executive Vice President -- Growth since
July 2000. Mr. Arnette previously served as our President
from April 1999 until July 2000. From March 1999 until
March 2000, Mr. Arnette served as our Chief Operating
Officer. From September 1996 until March 1999, Mr. Arnette
served as our Executive Vice President, and from May 1995
to September 1996, Mr. Arnette served as our Senior Vice
President. From November 1994 to May 1995, Mr. Arnette
served as one of our Regional Vice Presidents. From 1993 to
November 1994, he served as our regional manager
responsible for the southeastern region. From 1975 until
1993, Mr. Arnette was an Executive Vice President of DEF
Investments, Inc., an operator of rent-to-own stores. We
acquired substantially all of the assets of DEF and its
subsidiaries in April 1993. Mr. Arnette is the brother of
Joe T. Arnette, Vice President -- Training & Personnel of
Rent-A-Center. Mr. Arnette's term as a director expires at
our 2002 annual stockholders meeting. Mr. Arnette is 53
years old.
Laurence M. Berg Mr. Berg has served as one of our directors since August
1998. Mr. Berg has been associated since 1992 and a
principal since 1995 with Apollo Advisors, L.P., which
together with its affiliates, acts as managing general
partner of Apollo Investment Fund, L.P., AIF II, L.P.,
Apollo Investment Fund III, L.P., and Apollo Investment
Fund IV, L.P. Mr. Berg is also a director of Berlitz
International, Inc., a provider of language services. Mr.
Berg serves as one of the two directors elected by the
holders of our Preferred Stock. Mr. Berg's term as a
director expires at our 2002 annual stockholders meeting.
Mr. Berg is 34 years old.
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TERMS TO EXPIRE AT THE Joseph V. Mariner, Jr. Mr. Mariner has served as one of our directors since
2003 ANNUAL MEETING: February 1995. Until his retirement in 1978, Mr. Mariner
served as Chairman of the Board of Directors and Chief
Executive Officer of Hydrometals, Inc., a large
conglomerate with subsidiaries engaged in the manufacture
of retail plumbing supplies, non-powered hand tools and
electronic components. Mr. Mariner currently serves as a
director of Temtex Industries, Inc., a manufacturer of
energy efficient fireplaces and gas logs, Peerless Mfg.
Co., a manufacturer of heavy oil and gas filtration
equipment and Dyson Kissner Moran Corp., a New York based
private investment company engaged in acquiring and
operating a multitude of manufacturing companies with
additional holdings in real estate. Mr. Mariner's term as a
director expires at our 2003 annual stockholders meeting.
Mr. Mariner has advised us that he intends to resign from
our Board of Directors following our 2001 annual
stockholders meeting. Mr. Mariner is 80 years old.
J.V. Lentell Mr. Lentell has served as one of our directors since
February 1995. Mr. Lentell was employed by Kansas State
Bank & Trust Co., Wichita, Kansas, from 1966 through July
1993, serving as Chairman of the Board from 1981 through
July 1993. Since July 1993, he has served as a director and
Vice Chairman of the Board of Directors of Intrust Bank,
N.A., successor by merger to Kansas State Bank & Trust Co.
Mr. Lentell's term as a director expires at our 2003 annual
stockholders meeting. Mr. Lentell is 62 years old.
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BOARD INFORMATION
BOARD MEETINGS: During 2000, our Board of Directors met six times, including regularly scheduled and
special meetings. Each director attended all meetings of the Board during his service as a
director, except that Mr. Arnette was unable to attend one meeting after receipt of proper
notice. The Board took action by unanimous written consent three times during 2000.
BOARD COMMITTEES: THE AUDIT COMMITTEE recommends the appointment of our independent auditors. It also
approves audit reports and plans, accounting policies, audit fees and certain other
expenses. The Audit Committee held two meetings in 2000. All members of the Audit Committee
are "independent" as defined in the NASD listing standards. Under our Certificate of
Incorporation, a director elected by the holders of our Preferred Stock must be a member of
the Audit Committee. The Board has adopted a written charter for the Audit Committee, a
copy of which is attached as Exhibit A to this proxy statement. Members: Mr. Mariner,
Chairman, and Messrs. Lentell and Berg.
THE COMPENSATION COMMITTEE manages executive officer compensation. It also administers our
compensation and incentive plans, including the Long-Term Incentive Plan. The Compensation
Committee evaluates the competitiveness of our compensation and the performance of our
Chief Executive Officer. It held one regular meeting in 2000 and acted by unanimous written
consent five times during 2000. All members of the Compensation Committee are non-employee
directors. Under our Certificate of Incorporation, a director elected by the holders of our
Preferred Stock must be a member of the Compensation Committee. Members: Mr. Lentell,
Chairman, and Messrs. Mariner and Copses.
THE FINANCE COMMITTEE. In connection with the completion of the financing of the Thorn
Americas acquisition, the Board created a Finance Committee. Under our Certificate of
Incorporation, the Finance Committee must approve the issuance of debt and equity
securities, except in limited circumstances. In certain cases the approval must be
unanimous. Under our Certificate of Incorporation, a director elected by the holders of our
Preferred Stock must be a member of the Finance Committee. The Finance Committee did not
meet during 2000. Members: Messrs. Lentell, Talley, and Copses.
BOARD COMPENSATION
RETAINER AND FEES: Non-employee directors each received $3,000 for each Board meeting and $1,000 for each
Committee meeting attended in 2000, and were reimbursed for their expenses in attending
such meetings. In 2001, non-employee directors will each receive $3,500 for each Board
meeting and $1,000 for each committee meeting attended and will be reimbursed for their
expenses in attending such meetings. Messrs. Talley, Speese, Fadel and Arnette did not
receive any compensation for their services as a director during 2000.
OPTION GRANTS: Non-employee directors receive options to purchase 9,000 shares of our Common Stock in
their first year of service as a director and options to purchase 3,000 shares of our
Common Stock on the first business day of each year thereafter. The exercise price of the
options is the fair market value of our shares of our Common Stock on the grant date. These
options vest and are exercisable immediately. Messrs. Talley, Speese, Fadel and Arnette
were not granted any options for their services as a director during 2000.
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INDEMNIFICATION As permitted by the Delaware General Corporation Law, we have adopted provisions in our
ARRANGEMENTS: Certificate of Incorporation and Bylaws that provide for the indemnification of our
directors and officers to the fullest extent permitted by applicable law. These provisions,
among other things, indemnify each of our directors and officers for certain expenses,
including attorneys' fees, judgments, fines and settlement amounts incurred by such
director or officer in any action or proceeding, including any action by or in the right of
Rent-A-Center, on account of such director's or officer's service as our director or
officer. In addition, we maintain a customary directors' and officers' liability insurance
policy covering our directors and officers. We believe that these indemnification
provisions are necessary to attract and retain qualified persons as directors and officers.
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EXECUTIVE OFFICERS
The Board appoints our executive officers at the first Board meeting following
our Annual Meeting of Stockholders, and updates the executive officer positions
as needed throughout the year. Each executive officer serves at the behest of
the Board and until their successors are elected and appointed or until the
earlier of their death, resignation or removal.
The following table sets forth certain information with respect to our executive
officers:
NAME AGE POSITION
---- --- --------
J. Ernest Talley.... 66 Chairman of the Board of Directors and Chief Executive
Officer
Mitchell E. Fadel... 43 President
Dana F. Goble....... 35 Executive Vice President and Chief Operating Officer
L. Dowell Arnette... 53 Executive Vice President -- Growth
Robert D. Davis..... 29 Senior Vice President -- Finance, Chief Financial
Officer and Treasurer
Bradley W. 40 Senior Vice President -- General Counsel
Denison...........
Anthony M. Doll..... 32 Senior Vice President
C. Edward Ford, 34 Senior Vice President
III...............
John H. Whitehead... 51 Senior Vice President
David A. Kraemer.... 39 Senior Vice President
William C. Nutt..... 44 Senior Vice President
Timothy J. Stough... 45 Senior Vice President
Mark S. Connelly.... 38 Senior Vice President
David G. Ewbank..... 44 Senior Vice President
David M. Glasgow.... 32 Corporate Secretary
J. Ernest Talley Mr. Talley has served as Chairman of our Board of
Directors since May 1989 and Chief Executive Officer
since November 1994. Mr. Talley operated a rent-to-
own business from 1963 to 1974 in Wichita, Kansas,
which he sold to Remco (later acquired by Thorn
Americas and acquired by us as part of the Thorn
Americas acquisition) in 1974. From 1974 to 1988, he
was involved in the commercial real estate business
in Dallas, Texas. Mr. Talley co-founded Talley Lease
to Own, with his son, Michael C. Talley, in 1987 and
served as a director and Chief Executive Officer of
that company from 1988 until its merger with us on
January 1, 1995.
Mitchell E. Fadel Mr. Fadel has served as our President since July
2000 and as a director since December 2000. From
November 1992 until July 2000, Mr. Fadel served as
President and Chief Executive Officer of ColorTyme.
ColorTyme was acquired by us in May 1996. From 1983
to 1991, Mr. Fadel was a regional manager for Thorn
Americas and its affiliates.
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Dana F. Goble Mr. Goble has served as our Chief Operating Officer
since March 2000 and our Executive Vice President
since March 1999. From December 1996 until March
1999, Mr. Goble served as our Senior Vice President,
and from May 1995 until December 1996, Mr. Goble
served as our Regional Vice President. From April
1993 to May 1995, Mr. Goble served as regional
manager for the Detroit, Michigan area.
L. Dowell Arnette Mr. Arnette has served as one of our directors since
May 1999 and as our Executive Vice President --
Growth since July 2000. Mr. Arnette served as our
President from April 1999 until July 2000. From
March 1999 until March 2000, Mr. Arnette served as
our Chief Operating Officer. From September 1996
until March 1999, Mr. Arnette served as our
Executive Vice President, and from May 1995 to
September 1996, Mr. Arnette served as our Senior
Vice President. From November 1994 to May 1995, Mr.
Arnette served as one of our Regional Vice
Presidents. From 1993 to November 1994, he served as
our regional manager responsible for the
southeastern region. From 1975 until 1993, Mr.
Arnette was an Executive Vice President of DEF
Investments, an operator of rent-to-own stores. We
acquired substantially all of the assets of DEF and
its subsidiaries in April 1993. Mr. Arnette is the
brother of Joe T. Arnette, Vice
President -- Training & Personnel of Rent-A-Center.
Robert D. Davis Mr. Davis has served as our Senior Vice President --
Finance since September 1999, our Chief Financial
Officer since March 1999 and our Treasurer since
January 1997. Between September 1998 and September
1999, Mr. Davis served as our Vice
President -- Finance and Treasurer. Between June
1997 and September 1998, Mr. Davis served as our
Treasurer. From January 1997 until June 1997, Mr.
Davis served as our Assistant Secretary and
Treasurer. Between June 1995 and January 1997, Mr.
Davis served as our Payroll Supervisor and from June
1993 to June 1995 served as an accountant for us.
Bradley W. Denison Mr. Denison has served as our Senior Vice
President -- General Counsel since October 1998.
Between September 1996 and October 1998, Mr. Denison
was Vice President and Assistant General Counsel for
Thorn Americas. From August 1996 to October 1996,
Mr. Denison served as Associate General Counsel for
Thorn Americas and from June 1994 until August 1996,
served as Director and Chief Counsel for Thorn
Americas. Prior to that time, Mr. Denison served as
a Staff Attorney for Thorn Americas.
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Anthony M. Doll Mr. Doll has served as one of our Senior Vice
Presidents since September 1998. From September 1996
until September 1998, Mr. Doll served as one of our
Regional Vice Presidents. Between May 1995 and
September 1996, Mr. Doll served as our regional
manager for the Detroit, Michigan area. From April
1993 to May 1995, Mr. Doll served as one of our
store managers in Michigan.
C. Edward Ford, III Mr. Ford has served as Senior Vice President since
September 1998. From January 1997 until September
1998, Mr. Ford served as one of our Regional Vice
Presidents. Between November 1994 and January 1997,
Mr. Ford served as our regional manager for the
Tennessee region. From July 1993 until November
1994, Mr. Ford served as one of our store managers.
John H. Whitehead Mr. Whitehead has served as one of our Senior Vice
Presidents since September 1997. Between May 1995
and September 1997, Mr. Whitehead served as one of
our Regional Vice Presidents. From July 1993 to May
1995, Mr. Whitehead served as our regional manager
for the Atlanta, Georgia area.
David A. Kraemer Mr. Kraemer has served as one of our Senior Vice
Presidents since September 1998. From December 1995
until September 1998, Mr. Kraemer served as one of
our Regional Vice Presidents. Prior to that time,
Mr. Kraemer served as a Divisional Vice President
for MRTO Holdings from November 1990 until we
acquired MRTO Holdings in September 1995.
William C. Nutt Mr. Nutt has served as one of our Senior Vice
Presidents since May 1998. Between December 1995 and
May 1998, Mr. Nutt served as one of our Regional
Vice Presidents. From December 1992 through December
1995, Mr. Nutt served as our regional manager for
the Northeast Ohio area.
Timothy J. Stough Mr. Stough has served as one of our Senior Vice
Presidents since February 2000. From September 1998
until February 2000, Mr. Stough served as one of our
Regional Directors. From January 1998 until
September 1998, Mr. Stough served as a Regional
Director of Thorn Americas, overseeing stores from
South Carolina to Vermont. From 1987 to 1998, Mr.
Stough served as a Market Manager for Thorn Americas
in North Carolina, South Carolina and Tennessee.
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Mark S. Connelly Mr. Connelly has served as one of our Senior Vice
Presidents since September 1999. Between June 1998
and September 1999, Mr. Connelly served as one of
our Regional Vice Presidents. Between February 1998
and May 1998, Mr. Connelly served as a Division
Manager of Central Rents. From October 1997 to
February 1998, Mr. Connelly acted as Director of
Operations/Acquisitions of Spin Cycle, a start-up
chain of coin-operated laundromats. From April 1997
to October 1997, Mr. Connelly was a group manager
with Rent Mart, a rent-to-own subsidiary of The
Associates. From June 1996 through March 1997, Mr.
Connelly was the Vice President-Operations of Trans
Texas Capital, a franchisee of ColorTyme. From
January 1995 to May 1995, Mr. Connelly served as the
Midwest area manager of Remco America.
David G. Ewbank Mr. Ewbank has served as one of our Senior Vice
Presidents since August 2000. From August 1999 until
August 2000, Mr. Ewbank served as one of our
Regional Directors. From October 1997 through August
1999, Mr. Ewbank served as one of our market
managers. From August 1996 until October 1997, Mr.
Ewbank served as a store manager. Prior to joining
us in August 1996, Mr. Ewbank served as a store
manager for First Cash Pawn.
David M. Glasgow Mr. Glasgow has served as our Corporate Secretary
since June 1995. Between June 1995 to June 1997, Mr.
Glasgow served as our Corporate Secretary and
Treasurer. From March 1995 to June 1995, Mr. Glasgow
served as our accounting operations supervisor, and
from June 1993 to March 1995, Mr. Glasgow served as
one of our accountants.
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COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
THE In February 1995, our Board established the
COMMITTEE: Compensation Committee to review and approve the
compensation levels for our members of senior
management, evaluate the performance of senior
management, consider management succession and
consider any related matters for us. The
Compensation Committee is charged with reviewing
with our Board in detail all aspects of
compensation for our executive officers.
OVERALL We have developed a compensation program for
PHILOSOPHY AND executives and key employees designed to meet the
OBJECTIVES: following goals:
- reward performance that increases the value of
your stock;
- attract, retain and motivate executives and key
employees with competitive compensation
opportunities;
- build and encourage ownership of our shares;
- balance short-term and long-term strategic
goals; and
- address the concerns of our stockholders,
employees, the financial community and the
general public.
To meet these objectives, we reviewed competitive
compensation data and implemented the base salary
and annual and long-term incentive programs
discussed below.
EXECUTIVE The available forms of executive compensation
COMPENSATION: include base salary, cash bonus awards and
incentive stock options, restricted stock awards
and stock appreciation rights. Our performance is
a key consideration in determining executive
compensation. However, our compensation policy
recognizes that stock price performance is only
one measure of performance and, given industry
business conditions and our long-term strategic
direction and goals, it may not necessarily be the
best current measure of executive performance.
Therefore, our compensation policy also gives
consideration to the achievement of specified
business objectives when determining executive
officer compensation. An additional achievement of
the Compensation Committee has been to offer
officers equity compensation in addition to salary
in keeping with our overall compensation
philosophy, which attempts to place equity in the
hands of our employees in an effort to further
instill stockholder considerations and values in
the actions of all the employees and executive
officers.
Compensation paid to executive officers is based
upon a company-wide salary structure consistent
for each position relative to its authority and
responsibility compared to industry peers. Stock
option awards in fiscal year 2000 were used to
reward certain officers and to retain them through
the potential of capital gains and equity buildup
in Rent-A-Center. The number of stock options
granted is determined by the subjective evaluation
of the officer's ability to influence our long
term growth and profitability. Stock options
granted to our senior management have been granted
only pursuant to our Long-Term Incentive Plan. The
Board believes the award of options represents an
effective incentive to create value for the
stockholders.
CEO Mr. Talley's base salary as our Chief Executive
COMPENSATION: Officer for fiscal year 2000 was $500,000. In
January 2001, we increased his base salary
approximately 10% to $550,000 in order to raise
his salary to a level the Compensation Committee
deemed to be commensurate with the Chief Executive
Officer's position at comparable publicly owned
companies and in recognition of his increased
responsibilities associated with our growth. In
determining the compensation of Mr. Talley, the
Compensation Committee considered Mr. Talley's
performance, his compensation history and other
subjective factors. The Compensation Committee
believes that the Chief Executive Officer's 2000
and 2001 compensation level is justified by
Rent-A-Center's financial progress and performance
against the goals set by the Compensation
Committee.
COMPENSATION COMMITTEE
J. V. Lentell
Joseph V. Mariner, Jr.
Peter P. Copses
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PERFORMANCE GRAPH(1)
Comparison of Cumulative Total Return Among
Rent-A-Center, Nasdaq Stock Market -- Market Index and Rent-A-Center's "Peer
Group"(2)
[PERFORMANCE GRAPH]
RENT-A-CENTER PEER GROUP NASDAQ
------------- ---------- ------
12/29/95 100.00 100.00 100.00
12/31/96 105.45 118.94 124.27
12/31/97 149.09 201.04 152.00
12/31/98 230.91 191.30 214.39
12/31/99 144.09 181.90 378.12
12/31/00 250.91 111.43 237.66
(1) Assumes $100 invested on December 29, 1995 and dividends reinvested.
Historical performance does not necessarily predict future results.
(2) Because of the consolidation in the rent-to-own industry, our peer group has
changed since December 29, 1995. Our peer group for the 2000 fiscal year
consists of Aaron Rents, Inc., Bestway, Inc., Heilig Meyers Company,
RentWay, Inc., and Rainbow Rentals, Inc.
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EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF The following table summarizes the compensation we paid the
COMPENSATION: Chairman and Chief Executive Officer and each of the four
other most highly compensated executive officers at the end
of 2000, based on salary, bonus and stock option grants.
LONG-TERM
COMPENSATION
ANNUAL ------------
COMPENSATION(1) SECURITIES
NAME & --------------------- UNDERLYING
PRINCIPAL POSITION SALARY($) BONUS($) OPTIONS(#)
------------------ --------- -------- ------------
J. Ernest Talley.................... 2000 $500,000 -- --
Chairman of the Board & 1999 400,000 -- 100,000(2)
Chief Executive Officer 1998 280,000 -- --
Mitchell E. Fadel................... 2000 $315,000 $76,600 35,000(3)
President 1999 245,000 121,200 5,000(4)
1998 235,000 104,000 --
L. Dowell Arnette................... 2000 $265,000 $17,370 --
Executive Vice President -- 1999 248,000 15,250 25,000(5)
Growth 1998 190,000 16,000 15,000(6)
Bradley W. Denison.................. 2000 $235,000 $17,370 --
Senior Vice President & 1999 235,000 15,250 --
General Counsel 1998 58,000(7) 211,000(8) 50,000(9)
Dana F. Goble....................... 2000 $233,000 $17,370 --
Executive Vice President 1999 176,000 15,250 20,000(10)
& Chief Operating Officer 1998 125,000 15,865 --
------------------------------
(1) The named executive officers did not receive any annual
compensation not properly categorized as salary or bonus,
except for certain perquisites or other benefits the
aggregate cost of which did not exceed the lesser of
$50,000 or 10% of the total of annual salary and bonus
for each such officer.
(2) In December 1999, Mr. Talley was granted 100,000 options
to purchase our Common Stock on a one-for-one basis,
pursuant to our Long-Term Incentive Plan. Of these
100,000 options, 20,189 vest over four years and expire
five years from the date of grant. The remaining 79,811
options vest over four years and expire 10 years from the
date of grant.
(3) In July 2000, Mr. Fadel was granted 35,000 options to
purchase our Common Stock on a one-for-one basis,
pursuant to our Long-Term Incentive Plan. The options
vest over four years and expire 10 years from the date of
grant.
(4) In December 1999, Mr. Fadel was granted 5,000 options to
purchase our Common Stock on a one-for-one basis,
pursuant to our Long-Term Incentive Plan. The options
vest over four years and expire 10 years from the date of
grant.
(5) In January 1999, Mr. Arnette was granted 15,000 options
to purchase our Common Stock on a one-for-one basis and,
in December 1999, was granted an additional 10,000
options to purchase our Common Stock on a one-for-one
basis, all pursuant to our Long-Term Incentive Plan. The
options each vest over four years and expire 10 years
from the date of grant.
(6) In July 1998, Mr. Arnette was granted 15,000 options to
purchase our Common Stock on a one-for-one basis,
pursuant to our Long-Term Incentive Plan. The options
vest over four years and expire 10 years from the date of
the grant.
(7) Mr. Denison was employed by Thorn Americas, Inc. prior to
our acquisition of Thorn Americas. This amount reflects
the portion of Mr. Denison's 1998 salary paid by us.
(8) Pursuant to the Thorn Americas acquisition, Mr. Denison
received change of control payments under benefit plans
that Thorn Americas had in place. The Thorn Americas
purchase price was reduced by the change-of-control
payments. This amount reflects the change-of-control
payments made to Mr. Denison, which were paid by us.
(9) In September 1998, Mr. Denison was granted 50,000 options
to purchase our Common Stock on a one-for-one basis,
pursuant to our Long-Term Incentive Plan. The options
vest over various periods and upon the achievement of
various objectives. The options expire 10 years from the
date of the grant.
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(10) In January 1999, Mr. Goble was granted 10,000 options to
purchase our Common Stock on a one-for-one basis and in
December 1999, was granted an additional 10,000 options
to purchase our Common Stock on a one-for-one basis, all
pursuant to our Long-Term Incentive Plan. The options
each vest over four years and expire 10 years from the
date of grant.
STOCK OPTIONS GRANTED The following table lists our grants during 2000 of stock
IN 2000: options to the officers named in the Summary Compensation
Table. The amounts shown as potential realizable values rely
on arbitrarily assumed rates of share price appreciation
prescribed by the SEC. In assessing those values, please
note that the ultimate value of the options, as well as your
shares, depends on actual future share values. Market
conditions and the efforts of the directors, the officers
and others to foster the future success of Rent-A-Center can
influence those future share values.
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF % OF ANNUAL STOCK PRICE
SECURITIES TOTAL APPRECIATION FOR
UNDERLYING GRANTED OPTION TERM(1)
OPTIONS IN FISCAL EXERCISE EXPIRATION ---------------------
NAME GRANTED(2) 2000 PRICE DATE 5% 10%
---- ---------- --------- -------- ---------- -------- ----------
J. Ernest Talley........... -- N/A N/A N/A N/A N/A
Mitchell E. Fadel.......... 35,000 2.0% 22.375(3) 07/24/10 $492,503 $1,248,100
L. Dowell Arnette.......... -- N/A N/A N/A N/A N/A
Bradley W. Denison......... -- N/A N/A N/A N/A N/A
Dana F. Goble.............. -- N/A N/A N/A N/A N/A
---------------------------------
(1) These amounts represent certain assumed rates of
appreciation only. Actual gains, if any, on stock option
exercises are dependent on the future performance of our
Common Stock and overall market conditions. There can be
no assurance that the amounts reflected in this table
will be achieved.
(2) Options are exercisable at 25% per year, beginning one
year from the date of grant.
(3) The exercise price was fixed at the date of the grant and
represented the fair market value per share of Common
Stock on such date.
2000 OPTION HOLDINGS: The following table contains the number of shares received, and the dollar value
realized, upon the exercise of options by our named executive officers during 2000, as
well as values for "in the money" options, meaning a positive spread between the
year-end share price of $34.50 and the exercise price for the options held by our named
executive officers. These values have not been, and may never be, realized. The options
might never be exercised, and the value, if any, will depend on the share price on the
exercise date.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
NUMBER OF VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED AT FISCAL YEAR END AT FISCAL YEAR END
ON VALUE EXERCISABLE(E)/ EXERCISABLE(E)/
NAME EXERCISE REALIZED UNEXERCISABLE(U) UNEXERCISABLE(U)(1)
---- -------- -------- ------------------- -------------------------
J. Ernest Talley..... -- N/A 24,999(E) 75,001(U) $357,173(E) $1,071,577(U)
Mitchell E. Fadel.... -- N/A 8,750(E) 41,250(U) $169,260(E) $ 529,753(U)
L. Dowell Arnette.... -- N/A 28,750(E) 26,250(U) $514,169(E) $ 200,156(U)
Bradley W. Denison... -- N/A 17,500(E) 32,500(U) $140,000(E) 260,000(U)
Dana F. Goble........ 15,000 $379,950 8,750(E) 16,250(U) $122,169(E) $ 165,306(U)
------------------------------
(1) The closing market price of our Common Stock on December
29, 2000 of $34.50, as reported on the Nasdaq National
Market of the Nasdaq Stock Market, Inc., was used in the
calculation to determine the value of unexercised options.
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EMPLOYMENT AGREEMENTS
MR. DENISON: We are a party to an employment agreement with Bradley W. Denison dated October 1,
1998, naming Mr. Denison our Senior Vice President -- General Counsel effective on
October 5, 1998. The employment agreement provides for an annual salary of $235,000
plus bonus and a severance amount equal to one year's salary in the event of
termination. Mr. Denison received options to purchase 50,000 shares of our Common Stock
under our Long-Term Incentive Plan at an exercise price of $26.50 per share. Of the
50,000 options granted, 17,500 were exercised during 2001.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
INTRUST BANK: J.V. Lentell, one of our directors, serves as Vice Chairman of the Board of Directors
of Intrust Bank, N.A., one of our lenders. Intrust Bank, N.A. was a $4,649,614
participant in our senior credit facility as of March 22, 2001. We also maintain a
$5,000,000 revolving line of credit with Intrust Bank, N.A. Although from time to time
we may draw funds from the revolving line of credit, no funds were advanced as of March
22, 2001. In addition, Intrust Bank, N.A. serves as trustee of the Company's 401(k)
plan.
PORTLAND/ In June 2000 we purchased Portland II RAC, Inc. and Wilson Enterprises of Maine, Inc.,
WILSON/CTME, each of which are our franchisees, for $19.4 million in cash based upon a purchase
LLC: formula established at the time of the Thorn Americas acquisition. Mr. Fadel held
approximately 15% of the stock of each of the franchisees and received $1,833,046 in
cash as a result of the purchase. In July 2000, Mr. Fadel's partners purchased his
33 1/3% interest in CTME, LLC, another of our franchisees, for $37,500. Mr. Fadel no
longer owns an interest in any ColorTyme franchisees.
APOLLO On August 5, 1998, affiliates of Apollo Management IV, L.P. purchased $250 million of
MANAGEMENT our Preferred Stock. Pursuant to the stock purchase agreement we entered into with
IV, L.P.: affiliates of Apollo Management IV, L.P., the affiliates of Apollo Management IV, L.P.
have voting control of 100% of our Preferred Stock, which gives them the right to elect
two individuals to our Board. Messrs. Berg and Copses currently serve as such directors
on our Board.
COMMITTEE None of our executive officers served as a member of the compensation or similar
INTERLOCKS: committee or as a member of the Board of Directors of any other entity of which an
executive officer served on the Compensation Committee or Board of Directors of
Rent-A-Center.
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PROPOSALS FOR STOCKHOLDER ACTION
1. ELECTION OF DIRECTORS
BOARD NOMINEES: Our Board has nominated J. Ernest Talley to be
reelected by all of the stockholders and Mitchell
E. Fadel to be elected by all of the stockholders.
Our Board has also nominated Peter P. Copses to be
reelected by the holders of our Preferred Stock.
We urge you to vote "FOR" Messrs. Talley, Fadel
and Copses.
2. APPROVAL OF THE AMENDMENTS TO THE AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
GENERAL: Currently, our Amended and Restated Certificate of
Incorporation authorizes the issuance of
50,000,000 shares of Common Stock with a par value
of $.01 per share. In March 2001, the Board
adopted a proposal to amend our Certificate of
Incorporation to increase the number of shares of
Common Stock we are authorized to issue from
50,000,000 shares to 125,000,000 shares, subject
to stockholder approval of the amendment. The
Board has declared the proposed amendment to be
advisable and has submitted the proposed amendment
to be voted on by the stockholders at the annual
meeting. We urge you to vote "FOR" the approval of
this amendment.
PROPOSED AMENDMENT: On March 22, 2001, of the 50,000,000 authorized
shares of Common Stock, a total of 25,145,799
shares were outstanding, approximately 990,099
shares were held in treasury and approximately
16,286,129 shares were reserved for potential
issuance in connection with our obligations to
issue stock in connection with our Long-Term
Incentive Plan and in connection with the
conversion of outstanding shares of Preferred
Stock. Based upon these outstanding and reserved
shares of Common Stock, we currently have
approximately 7,577,973 shares remaining available
for other purposes.
The following is the text of the first paragraph
of Article Fourth of our Amended and Restated
Certificate of Incorporation, including the
proposed amendment:
FOURTH: The aggregate number of shares of capital
stock which the Corporation shall have authority
to issue is 125,000,000 shares of common stock,
having a par value of $0.01 per share (the "Common
Stock"), and 5,000,000 shares of preferred stock,
having a par value of $0.01 per share (the
"Preferred Stock").
PURPOSE AND EFFECT OF We believe that the availability of additional
PROPOSED AMENDMENT: authorized but unissued shares will provide us
with the flexibility to issue Common Stock for a
variety of corporate purposes, including:
- to effect future stock splits in the form of
stock dividends;
- to make acquisitions through the use of
stock;
- to raise equity capital; and
- to adopt additional employee benefit plans or
reserve additional shares for issuance under
these plans and under plans of acquired
companies.
The Board will determine whether, when and on what
terms the issuance of shares of Common Stock may
be warranted in connection with any of these
purposes.
The Board believes that we will benefit by having
the additional shares available for such purposes
without delay or the necessity of a special
meeting of stockholders. We have no immediate
plans, arrangements, commitments or understandings
with respect to the issuance of any of the
additional shares of Common Stock which would be
authorized by the proposed amendment.
If the proposed amendment is approved by the
stockholders, the additional shares generally will
be available for issuance from time to time by the
Board without further action by the stockholders.
Stockholder approval of these issuances may be
required by applicable law, regulatory agencies or
by the rules of any stock exchange on which our
securities may then be listed, but in most
instances the Board will have the authority to
issue or reserve for issuance additional shares of
Common Stock without the approval of the
stockholders.
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In addition, stockholders do not have preemptive
rights with respect to our Common Stock. Thus,
should the Board elect to issue additional shares
of Common Stock, existing stockholders would not
have any preferential rights to purchase the
shares. If the Board elects to issue additional
shares of Common Stock, the issuance could have a
dilutive effect on the earnings per share, book
value per share, voting power and interest of
current stockholders.
The proposal could have an anti-takeover effect,
although that is not our intention. For example,
if we were the subject of a hostile takeover
attempt, we could try to impede the takeover by
issuing shares of Common Stock, thereby diluting
the voting power of the other outstanding shares
and increasing the potential cost of the takeover.
The availability of this defensive strategy could
discourage unsolicited takeover attempts, thereby
limiting the opportunity for stockholders to
realize a higher price for their shares than is
generally available in the public markets. The
Board is not aware of any attempt, or contemplated
attempt, to acquire control of our company, and
this proposal is not being presented with the
intent that it be used as a type of anti-takeover
device.
If the proposed amendment is adopted, it will
become effective upon filing of a certificate of
amendment to our Amended and Restated Certificate
of Incorporation with the Secretary of State of
the State of Delaware. However, if the
stockholders approve the proposed amendment to our
Amended and Restated Certificate of Incorporation,
the Board retains discretion under Delaware law
not to implement the proposed amendment. If the
Board exercised such discretion, the number of
authorized shares would remain at current levels.
3. APPROVAL OF THE AMENDMENTS TO THE LONG-TERM INCENTIVE PLAN
INFORMATION CONCERNING THE PLAN
GENERAL: In March 2001, the Board amended our Long-Term
Incentive Plan to increase the number of common
shares reserved for issuance under the Plan from
6,200,000 to 7,900,000 and to reduce the amount of
shares of common stock reserved for issuance under
director options and employee stock awards, all
for the purpose of retaining and recruiting
quality employees in order to achieve our growth
plans. A copy of the Plan is attached to this
Proxy as Exhibit B. We urge you to vote "FOR" the
approval of these amendments.
DESCRIPTION OF THE Under the Plan, officers, directors, employees and
LONG-TERM INCENTIVE independent contractors are eligible to receive
PLAN: awards in the form of stock options, stock
appreciation rights, restricted stock grants and
cash awards.
There are currently a total of 7,900,000 shares of
our Common Stock available for employee awards,
director options and independent contractor
options granted wholly or partly in Common Stock,
including rights or options which may be exercised
for or settled in Common Stock. Of the 7,900,000
shares, 210,000 are set aside for issuance
pursuant to director options and 31,250 are set
aside for stock awards. The Compensation Committee
may from time to time adopt and observe such
procedures concerning the counting of shares
against the Plan maximum as it may deem
appropriate under Rule 16b-3 under the Securities
Exchange Act.
ADMINISTRATION OF THE The Plan is administered by the Compensation
LONG-TERM INCENTIVE Committee of our Board of Directors. The members
PLAN: of the Committee may be changed by the Board at
any time as long as the composition of the
Committee still permits the Plan to comply with
Rule 16b-3 under the Exchange Act. The Committee
is presently comprised of Messrs. J. V. Lentell,
Joseph V. Mariner, Jr. and Peter P. Copses. Our
members of the Board serve three-year terms. Mr.
Copses' term expires at this year's annual
stockholders meeting, and Messrs. Lentell's and
Mariner's term will expire at our 2003 annual
stockholders meeting. Mr. Mariner has advised us
that he intends to resign from our Board following
our 2001 annual stockholders meeting.
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The Committee has full and exclusive power to
interpret the Plan and to adopt any rules,
regulations and guidelines for carrying out the
Plan as it may deem necessary or proper in the
best interests of Rent-A-Center and in keeping
with the objectives of the Plan. The Committee is
permitted, in its discretion, to
- provide for the extension of the exercisability
of an employee award, a director option or an
independent contractor option;
- accelerate the vesting or exercisability of an
employee award, a director option or an
independent contractor option;
- eliminate or make less restrictive any
restrictions contained in an employee award, a
director option or an independent contractor
option;
- waive any restriction or other provision of an
employee award, a director option or an
independent contractor option; or
- otherwise amend or modify an employee award, a
director option or an independent contractor
option in any manner that is either (a) not
adverse to the participant holding the employee
award, director option or independent
contractor option, or (b) consented to by the
participant.
The Committee has the authority to correct any
defect or supply any omission or reconcile any
inconsistency in the Plan or in any employee
award, director option or independent contractor
option in the manner and to the extent the
Committee deems necessary or desirable to carry it
into effect. Any decision made by the Committee in
the interpretation and administration of the Plan
is final, conclusive and binding on all parties
concerned. The Committee is permitted to delegate
to the Chief Executive Officer and to other senior
officers of Rent-A-Center its duties under the
Plan. However, the Committee is not permitted to
delegate any person the authority to grant
employee awards, director options or independent
contractor options to, or take other action with
respect to, participants who are subject to
Section 16 of the Exchange Act.
The Board has the authority to amend, modify,
suspend or terminate the Plan for the purpose of
meeting or addressing any changes in legal
requirements or for any other purpose permitted by
law, except that
- no amendment or alteration that would impair
the rights of any participant under any
employee award, director option or independent
contractor option previously granted to the
participant will be made without the
participant's consent, and
- no amendment or alteration will be effective
prior to approval by our stockholders to the
extent such approval is then required pursuant
to Rule 16b-3 in order to preserve the
applicability of any exemption provided by that
rule to any employee award, director option or
independent contractor option then outstanding,
unless the holder of such employee award,
director option or independent contractor
option consents, or to the extent stockholder
approval is otherwise required by applicable
legal requirements.
The Plan is not subject to any provision of the
Employee Retirement Income Security Act of 1974.
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PARTICIPANTS IN THE All of our employees and those of our subsidiaries
LONG-TERM INCENTIVE are eligible for employee awards under the Plan.
PLAN: The Committee selects the employees as
participants in the Plan from time to time by the
grant of employee awards under the Plan. The
Committee will determine the type or types of
awards to be made to employees under the Plan. Our
non-employee directors are entitled to receive
director options under the Plan. Directors options
are nonqualified stock options granted to each
eligible director on the first business day of
each year, providing for the purchase of 9,000
shares of our Common Stock in the first year of
service and 3,000 shares each year thereafter. The
Committee may, in its discretion, also grant
independent contractor options to independent
contractors. All independent contractor options
are nonqualified stock options. Each employee
award, director option and independent contractor
option is made by a written agreement, which
contains the terms, conditions and limitations of
the employee award, director option or independent
contractor option.
AWARDS UNDER THE An employee award may consist of
LONG-TERM INCENTIVE
PLAN: - a right to purchase a specified number of
shares of our Common Stock at a price specified by
the Committee in the agreement;
- a stock option, which is subject to applicable
terms, conditions and limitations established by
the Committee and, if the stock option is an
incentive stock option, which complies with
Section 422 of the Internal Revenue Code;
- a right to receive a payment, in cash or shares
of our Common Stock, equal to the excess of the
fair market value or other specified valuation
of a specified number of shares of our Common
Stock on the date the stock appreciation right
is exercised over a specified strike price as
set forth in the applicable agreement; or
- shares of our Common Stock or may be
denominated in units of our Common Stock.
All or part of any stock employee award may be
subject to conditions established by the
Compensation Committee and set forth in the
applicable agreement. These conditions may
include, but are not limited to,
- continuous service with us or our subsidiaries;
- achievement of specific business objectives;
- increases in specified indices; and
- attaining specified growth rates and other
comparable measurements of performance.
These employee awards may be based on fair market
value or other specified valuations. The
certificates evidencing shares of our Common Stock
issued in connection with a stock employee award
will contain appropriate legends and restrictions
describing the terms and conditions of the
restrictions applicable to the employee award.
An employee award may be denominated in cash with
the amount of the eventual payment subject to
future service and such other restrictions and
conditions as may be established by the Committee
and set forth in the applicable agreement. These
restrictions and conditions may include
- continuous service with us;
- achievement of specific business objectives;
- increases in specified indices;
- attaining specified growth rates; and
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- other comparable measurements of performance.
Payment of employee awards may be made in the form
of cash or newly issued shares of our Common Stock
or combinations thereof and may include such
restrictions as the Compensation Committee shall
determine including, in the case of shares of our
Common Stock, restrictions on transfer and
forfeiture provisions.
The Committee may, in its discretion, (A) permit
selected participants to elect to defer payments
of some or all types of employee awards in
accordance with procedures established by the
Committee, or (B) provide for the deferral of an
employee award in an agreement or otherwise. Any
such deferral may be in the form of installment
payments or a future lump sum payment. Any
deferred payment, whether elected by the
participant or specified by the applicable
agreement or by the Committee, may be forfeited if
and to the extent that the applicable agreement so
provides.
Dividends or dividend equivalent rights may be
extended to and made part of any employee award
denominated in shares of our Common Stock, subject
to such terms, conditions and restrictions as the
Committee may establish. The Committee may also
establish rules and procedures for the crediting
of interest on deferred cash payments and dividend
equivalents for deferred payment denominated in
shares of our Common Stock.
At the discretion of the Committee, a participant
may be offered an election to substitute an
employee award for another employee award of the
same or different type.
The price at which shares of our Common Stock may
be purchased under a stock option must be paid in
full at the time of exercise in cash or, if
permitted by the Committee, by means of tendering
shares of our Common Stock or surrendering all or
part of that or any other employee award,
including restricted stock, valued at the fair
market value on the date of exercise, or any
combination thereof. If permitted by the
Committee, payment may be made by successive
exercises by the participant. The Committee may
provide for procedures to permit the exercise or
purchase of employee awards, director options or
independent contractor options by (A) loans from
us, or (B) use of the proceeds to be received from
the sale of shares of our Common Stock issuable
pursuant to an employee award, a director option
or independent contractor option.
TAX EFFECTS OF PARTICIPATION IN THE LONG-TERM
INCENTIVE PLAN
The following briefly summarizes the federal
income tax consequences arising from participation
in the Plan. This discussion is based upon present
law, which is subject to change, possibly
retroactively. The tax treatment to persons who
participate in the Plan may vary depending upon
each person's particular situation and, therefore,
may be subject to special rules not discussed
below. This discussion does not address the
effects, if any, under any potentially applicable
foreign, state, or local tax laws, or the
consequences thereunder, or the effects, if any,
of any local, federal gift, estate, or inheritance
taxes, or the consequences thereunder, that may
result from the acquisition, holding, or
disposition of shares of our Common Stock issued
under the terms of the Plan.
We have the right to deduct applicable taxes from
any employee award, director option or independent
contractor option and withhold, at the time of
delivery or vesting of cash shares of our Common
Stock under the Plan, an appropriate amount of
cash or number of shares of our Common Stock or a
combination thereof for payment of taxes required
by law or to take such other action as may be
necessary in our opinion to satisfy all
obligations for withholding of such taxes. The
Committee may also permit withholding to be
satisfied by the transfer to us of shares of our
Common Stock owned by the holder of the employee
award, director option or independent contractor
option with respect to which withholding is
required. If shares of our Common Stock are used
to satisfy tax withholding, those shares shall be
valued based on the fair market value when the tax
withholding is required to be made.
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PARTICIPANTS SUBJECT The Plan is intended to comply with the
TO SECTION 16(b) OF requirements of Rule 16b-3 promulgated under the
THE EXCHANGE ACT: Exchange Act relating to rules for our directors,
officers and 10% stockholders. Therefore, because
the acquisition of shares of our Common Stock will
not be deemed to be a "purchase" for purposes of
Section 16(b) of the Exchange Act, a sale of
shares of our Common Stock by a Plan participant
within six months after the date of exercise of an
option or SAR, or the date restrictions on a
restricted stock award lapse, should not
necessarily subject the Plan participant to
liability under Section 16(b) of the Exchange Act.
However, because the sale of shares of our Common
Stock can still be "matched" with other purchases,
if a Plan participant has purchased shares of our
Common Stock or a right to acquire shares of our
Common Stock which is considered a "purchase" for
purposes of Section 16(b) within six months before
the date of exercise of an option or SAR, or the
date restrictions on a restricted stock award
lapse, the Plan participant may have short-swing
liability under Section 16(b) if he or she were to
sell shares of our Common Stock within six months
after the date of the interim purchase. The IRS
has not yet formally taken a position about the
tax consequences of this fact situation. However,
because an interim purchase would trigger
liability upon the sale of shares of our Common
Stock within six months after the interim
purchase, the shares of our Common Stock may be
treated as subject to a "substantial risk of
forfeiture" under Section 83(c) of the Internal
Revenue Code and not transferable and, therefore,
substantially non-vested. The following discussion
assumes either that no interim purchases were made
or that interim purchases do not cause shares of
our Common Stock to be substantially non vested
for Plan participants subject to Rule 16b-3. Plan
participants subject to Rule 16b-3 should consult
with a tax advisor.
NONQUALIFIED A Plan participant will not recognize taxable
STOCK income upon the grant of a nonqualified stock
OPTIONS: option. The federal income tax consequences to a
Plan participant of exercising a nonqualified
stock option will vary depending on whether the
shares of our Common Stock received upon the
exercise of such option are either "substantially
vested" or "substantially non-vested" within the
meaning of Section 83 of the Internal Revenue
Code. Generally, such shares will be
"substantially non-vested" if they are both
non-transferable and subject to a substantial risk
of forfeiture, and will be "substantially vested"
if they are either transferable or not subject to
a substantial risk of forfeiture. A Plan
participant generally should not recognize
compensation income upon exercising a nonqualified
stock option for shares that are "substantially
non-vested" until such shares become
"substantially vested." A Plan participant who
wishes to recognize compensation income at the
time of the exercise of such an option, rather
than when the shares become "substantially
vested," must file an election under Section 83(b)
of the Internal Revenue Code.
A Section 83(b) election is made by filing a
written notice with the IRS office with which the
Plan participant files his or her federal income
tax return. The notice must be filed within 30
days of the Plan participant's receipt of the
shares of our Common Stock related to the
applicable award and must meet certain technical
requirements.
Taxation of Plan Upon the exercise of a nonqualified stock option,
Participants a Plan participant will most likely receive stock
that is substantially vested. Therefore, the Plan
participant will recognize ordinary income upon
the exercise of the nonqualified stock option in
an amount equal to the excess of the fair market
value of the shares of our Common Stock received
on the date of exercise over the exercise price.
Company Deduction We will be entitled to a corresponding deduction
equal to the amount recognized as income by a Plan
participant at the time such amount is recognized
by the Plan participant, provided that the Plan
participant's compensation is reasonable in
amount, and otherwise within statutory
limitations.
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24
Basis The Plan participant's basis in the shares of our
Common Stock acquired upon the exercise of a
nonqualified stock option will be the exercise
price plus the amount of ordinary income
recognized by the Plan participant with respect to
those shares of Common Stock, assuming the
exercise price is paid solely in cash. The tax
basis in the shares of our Common Stock for which
the exercise price is paid in stock, if permitted
by the Committee pursuant to the Plan, is
discussed below under the caption "Tax
Implications Related to the Exercise of Stock
Options with Rent-A-Center Common Stock."
Subsequent Sale or Upon the sale or other disposition of the shares
Disposition of of our Common Stock acquired upon the exercise of
Common Stock a nonqualified stock option, a Plan participant
will recognize taxable income, or a deductible
loss, equal to the difference between the amount
realized on the sale or disposition and the Plan
participant's basis in the shares of our Common
Stock. The Plan participant's gain or loss will be
taxable as a capital gain or deductible as a
capital loss provided the shares constitute a
capital asset in the hands of the Plan
participant. The type of capital gain or loss will
depend upon the holding period of the shares of
our Common Stock. If the shares of our Common
Stock are held for twelve months or less, there
will be a short-term capital gain or loss on sale
or disposition. Finally, if the shares of our
Common Stock are held for more than twelve months,
there will be long-term capital gain or loss on
sale or disposition.
INCENTIVE Incentive stock options may be granted only to our
STOCK employees and employees of our subsidiaries.
OPTIONS:
An employee will not recognize any taxable income
upon the grant of an incentive stock option. An
employee also will not recognize any taxable
income upon the exercise of an incentive stock
option provided that the employee (A) was an
employee at all times beginning on the date the
option was granted and ending on the date three
months before the option was exercised, or one
year in the case of a disabled employee, and (B)
holds our Common Stock related to the option for
at least two years after the date the option was
granted and for at least one year after the date
the option was exercised.
Alternative The exercise of an incentive stock option will
Minimum Tax result, however, in an item of income for purposes
of determining the alternative minimum tax.
Liability for tax under the alternative minimum
tax rules will arise only if the employee's tax
liability determined under the alternative minimum
tax rules exceeds the employee's tax liability
determined under the ordinary income tax rules.
The exercise of an incentive stock option will
give rise to an item of alternative minimum tax
income to an employee in an amount equal to the
excess of the fair market value of the shares of
our Common Stock received on the date the option
is exercised over the exercise price. Plan
participants who exercise incentive stock options
and receive shares of our Common Stock that are
subject to a substantial risk of forfeiture within
the meaning of Section 83(c) of the Internal
Revenue Code are urged to consult their tax
advisor concerning the application of the
alternative minimum tax rules.
Company Deduction We will not be entitled to a deduction for federal
income tax purposes with respect to the grant of
an incentive stock option to an employee under the
Plan, the exercise of such option by the employee,
or the sale of the shares of our Common Stock
acquired through the exercise of such option by
the employee subsequent to the expiration of the
holding period.
Basis The employee's tax basis in the shares of our
Common Stock acquired upon the exercise of an
incentive stock option for which the exercise
price is paid solely in cash will be equal to the
amount of the cash paid. The tax basis in the
shares of our Common Stock for which the exercise
price is paid in stock, if permitted by the
Committee pursuant to the Plan, is discussed below
under the caption "Tax Implications Related to the
Exercise of Stock Options With Rent-A-Center
Common Stock."
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25
Subsequent Sale or If the shares of our Common Stock acquired upon
Disposition after the exercise of an incentive stock option are sold
Holding Period after the expiration of the holding period, which
is one year after grant and two years after
exercise, upon the sale of such shares of our
Common Stock, the employee will recognize a
long-term capital gain, or loss, in an amount
equal to the excess, or deficiency, of the sales
price over the employee's basis, provided the
shares are held as a capital asset by the
employee.
Disqualifying If the shares of our Common Stock acquired upon
Disposition by the exercise of an incentive stock option are sold
Employees before the expiration of the holding period, the
employee will recognize ordinary income in an
amount equal to the lesser of (A) the excess of
the fair market value of the shares of our Common
Stock on the date of exercise over the exercise
price, or (B) the amount realized on the sale of
such stock over the exercise price.
Capital Gain If the amount realized by an employee on the sale
of the shares of our Common Stock exceeds the fair
market value of such shares on the date of
exercise, the excess will be taxed to the employee
as a short-term or long-term capital gain,
provided that the employee held the shares of our
Common Stock as a capital asset.
Company Deduction Upon the occurrence of a disqualifying
disposition, we will be entitled to a deduction
for federal income tax purposes equal to the
amount of ordinary income recognized by the
employee, provided that the employee's
compensation is reasonable and is otherwise within
statutory limitations.
Alternative Minimum If an employee exercises an incentive stock option
Tax and sells the shares of our Common Stock related
thereto in a disqualifying disposition in the same
taxable year, the tax treatment for purposes of
ordinary income tax and alternative minimum tax
will be the same, resulting in no additional
alternative minimum tax liability. Conversely, if
the employee sells shares of our Common Stock in a
disqualifying disposition in a tax year subsequent
to the tax year in which the incentive stock
option was exercised, the employee will recognize
alternative minimum tax income, as determined
above, in the first taxable year, and ordinary
taxable income, but not alternative minimum tax
income, in the year in which the disposition was
made.
Exercise Following Under certain circumstances, shares of our Common
Employee's Death Stock acquired upon exercise of an incentive stock
option following the employee's death will receive
the tax treatment described herein without regard
to the holding period requirement.
TAX IMPLICATIONS The Plan permits, subject to the discretion of the
RELATED TO THE Committee, the exercise price of stock options to
EXERCISE OF STOCK be paid with shares of our Common Stock owned by
OPTIONS WITH the Plan participant. The Committee does not
RENT-A-CENTER COMMON presently intend to allow the use of shares of our
STOCK: Common Stock that are substantially non-vested,
i.e., nontransferable or subject to a substantial
risk of forfeiture and for which a Section 83(b)
election has not been filed, to pay the exercise
price of a stock option. Therefore, only shares of
our Common Stock that are substantially vested may
be used to pay the exercise price of a stock
option.
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26
Nonqualified Stock If a Plan participant pays the exercise price of a
Options nonqualified stock option with shares of our
Common Stock that are substantially vested,
including, pursuant to proposed IRS regulations,
stock obtained through the exercise of an
incentive stock option and not held for the
holding period, the Plan participant will not
recognize any gain on the shares surrendered. With
respect to the shares of our Common Stock
received, that portion of the shares of our Common
Stock equal in number to the shares of our Common
Stock surrendered will have a basis equal to the
basis of the shares surrendered. The excess shares
received will be taxable to the Plan participant
as ordinary compensation income in an amount equal
to the fair market value (A) if the excess shares
are substantially vested, as of the exercise date,
or (B) if the excess shares are substantially
non-vested, as of the applicable date. As used in
this discussion, "applicable date" means the
earlier of (A) the date the Plan participant
disposes of the shares of our Common Stock issued
under the terms of the Plan, or (B) the first date
on which shares of our Common Stock issued under
the terms of the Plan become substantially vested.
The Plan participant's basis in those excess
shares of our Common Stock will equal the amount
of ordinary compensation income recognized by the
Plan participant.
Incentive Stock The tax consequences to an employee from using
Options shares of our Common Stock to pay the exercise
price of incentive stock options will depend on
the status of the shares of our Common Stock
acquired.
If an employee pays the exercise price of an
incentive stock option for stock that is
substantially vested with shares of our Common
Stock that are substantially vested, under
proposed IRS regulations the employee will not
recognize any compensation income or gain with
respect to the shares surrendered. With respect to
the shares of our Common Stock received, that
portion of the shares of our Common Stock equal in
number to the shares of our Common Stock
surrendered will have a basis equal to the basis
of the shares surrendered. The holding period of
the surrendered shares will be carried over to the
equivalent number of shares of our Common Stock
received. The employee will recognize no gain with
respect to the excess shares received, the basis
of such shares will be zero, and the holding
period of such shares will begin on the date of
receipt thereof by the employee. Similarly, it
appears that if the employee pays the exercise
price for substantially non-vested shares of our
Common Stock with shares of our Common Stock that
are substantially vested, the tax consequences
will be the same.
If an employee exercises an incentive stock option
granted pursuant to the Plan using shares of our
Common Stock that were obtained through the
exercise of an incentive stock option, whether
granted under the Plan or under another one of our
plans, and that have been held by the employee for
the holding period for either substantially vested
shares of our Common Stock or substantially
non-vested shares of our Common Stock, the tax
consequences of such payment to the employee will
be identical to those discussed in the preceding
paragraph.
Conversely, if an employee exercises an incentive
stock option granted pursuant to the Plan using
shares of our Common Stock received upon the prior
exercise of an incentive stock option, whether
granted under the Plan or under another one of our
plans, and the employee has not held that Common
Stock for the holding period, under proposed IRS
regulations the employee will have made a
disqualifying disposition of the number of shares
of our Common Stock used as payment for the
exercise price of the incentive stock option. If
the employee receives shares of our Common Stock
that is substantially vested, the employee
generally will recognize ordinary compensation
income with respect to the surrender of those
shares equal to the excess of the fair market
value of the shares of our Common Stock
surrendered, determined as of the date the option
relating to such shares of our Common Stock was
exercised, over the exercise price of the shares
surrendered. It is unclear whether, if the
employee receives shares of our Common Stock that
is substantially non-vested, the recognition of
income will be deferred until the shares of our
Common Stock becomes substantially vested. The
basis of the shares received will equal the amount
of ordinary compensation income recognized by the
employee plus the employee's basis in the shares
surrendered, allocated equally among the shares
received.
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27
RESTRICTED STOCK
GRANTS:
Taxation of Plan A Plan participant who receives a restricted stock
Participants award will recognize ordinary income equal to the
fair market value of the shares of our Common
Stock received at the time the restrictions lapse,
unless the Plan participant makes a Section 83(b)
election to report the fair market value of the
shares of our Common Stock received as restricted
stock as ordinary income at the time of receipt.
If any amount is paid for the restricted stock,
the Plan participant will include in income the
excess of the fair market value of the shares of
our Common Stock received over the amount, if any,
paid for such shares, either at the time the
restrictions lapse or when the Plan participant
makes a Section 83(b) election.
Company Deduction We may deduct an amount equal to the income
recognized by the Plan participant at the time the
Plan participant recognizes the income, provided
the Plan participant's compensation is reasonable,
and otherwise within statutory limitations.
Basis The basis of the restricted stock in the hands of
the Plan participant will be equal to the fair
market value of the restricted stock on the date
the Plan participant recognizes ordinary income as
described above plus the amount of ordinary income
recognized in excess of fair market value, if any
amount is paid for the restricted stock in excess
of fair market value.
Subsequent Sale or The restrictions placed on restricted stock do not
Disposition permit sale or disposition until the restrictions
lapse. Upon the sale or disposition of restricted
stock after the restrictions lapse, a Plan
participant will recognize taxable income or loss
equal to the difference between the amount
realized by the Plan participant on the
disposition of the stock and the Plan
participant's basis in the stock. The gain or loss
will be taxable to the Plan participant as a
capital gain or deductible by the Plan participant
as a capital loss, either short-term or long-term,
depending on the holding period of the restricted
stock, provided that the Plan participant held the
restricted stock as a capital asset.
Dividends During the period in which a Plan participant
holds restricted stock, prior to the lapse of the
restrictions, if dividends are declared but not
distributed to the Plan participant until the
restrictions lapse, the dividends will be treated
for tax purposes by the Plan participant and us in
the following manner: (A) if the Plan participant
makes a Section 83(b) election to recognize income
at the time of receipt of the restricted stock,
the dividends will be taxed as dividend income to
the Plan participant when the restrictions lapse
and we will not be entitled to a deduction and
will not be required to withhold income tax, (B)
if the Plan participant does not make a Section
83(b) election, the dividends will be taxed as
compensation to the Plan participant when the
restrictions lapse and will be deductible by us
and subject to applicable federal income tax
withholding at that time.
If the Company pays the dividends to the Plan
participant prior to the lapse of the restrictions
and the Plan participant makes a Section 83(b)
election, the dividends will be taxed as dividend
income at the time of payment and will not be
deductible by us. Conversely, if the Plan
participant does not make a Section 83(b)
election, the dividends will be taxable to the
Plan participant as compensation at the time of
payment and we will be entitled to a deduction.
TAX IMPLICATIONS OF A Plan participant will not recognize taxable
STOCK APPRECIATION income upon the grant of a stock appreciation
RIGHTS: right.
Taxation of Plan Upon the exercise of a stock appreciation right, a
Participants Plan participant will recognize ordinary income in
an amount equal to the cash or fair market value
of the shares of our Common Stock received.
25
28
Company Deduction We will be entitled to a deduction in the amount
of, and at the time that, ordinary income is
recognized by the Plan participant in connection
with the exercise of a stock appreciation right,
provided that the Plan participant's compensation
is reasonable and is otherwise within the
statutory limitations.
Basis In the event that a stock appreciation right is
paid in whole or in part in shares of our Common
Stock, the amount recognized by the Plan
participant as ordinary income with respect to
those shares will be the Plan participant's basis
in those shares for purposes of determining any
gain or loss on the subsequent sale of those
shares.
THE ABOVE TAX INFORMATION IS ONLY A BRIEF
DESCRIPTION OF THE FEDERAL INCOME TAX CONSEQUENCES
OF RECEIPT AND/OR EXERCISE OF OPTIONS. IT IS BASED
ON PRESENT FEDERAL TAX AND SECURITIES LAWS,
REGULATIONS AND INTERPRETATIONS THEREOF AND DOES
NOT PURPORT TO BE A COMPLETE DESCRIPTION OF SUCH
FEDERAL TAX CONSEQUENCES. THE FOREGOING SUMMARY OF
FEDERAL INCOME TAX CONSEQUENCES MAY CHANGE IN THE
EVENT OF A CHANGE IN THE INTERNAL REVENUE CODE OR
REGULATIONS THEREUNDER OR INTERPRETATIONS THEREOF.
IF AN OPTION HOLDER IS CONSIDERING EXERCISING AN
OPTION, HE OR SHE SHOULD CONSULT A TAX ADVISOR
CONCERNING THE FEDERAL, STATE AND LOCAL INCOME TAX
CONSEQUENCES OF SUCH EXERCISE.
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29
OPTIONS GRANTED UNDER THE PLAN
The following table sets forth information with respect to options granted to
the listed persons and groups under the plan through March 22, 2001:
NUMBER OF
SHARES
NAME AND UNDERLYING
PRINCIPLE POSITION OPTIONS GRANT DATE EXERCISE PRICE EXPIRATION DATE
- ------------------ ---------- ------------------ ---------------- ------------------
J. Ernest Talley............. 100,000 December 31, 1999 $19.81 to $21.79 December 31, 2004
Chairman of the to
Board and Chief December 31, 2009
Executive Officer
Mitchell E. Fadel............ 50,000 January 2, 1997 $14.38 to $22.38 January 2, 2007
President to to
July 24, 2000 July 24, 2010
L. Dowell Arnette............ 55,000 May 9, 1995 $6.67 to $30.50 May 9, 2005
Executive Vice to to
President -- Growth December 31, 1999 December 31, 2009
Bradley W. Denison........... 50,000 September 30, $26.50 September 30, 2008
Senior Vice President 1998
and General Counsel
Dana Goble................... 40,000 May 9, 1995 $6.67 to $30.50 May 9, 2005
Executive Vice to to
President and Chief December 31, 1999 December 31, 2009
Operating Officer
All current executive 459,000 May 9, 1995 $14.38 to $22.38 May 9, 2005
officers as a group (15
persons)...................
to to
July 24, 2000 July 24, 2010
Lawrence M. Berg............. 15,000 January 4, 1999 $22.31 to $32.69 January 4, 2009
Director to to
January 2, 2001 January 2, 2011
Peter P. Copses.............. 15,000 January 4, 1999 $22.31 to $32.69 January 4, 2009
Director to to
January 2, 2001 January 2, 2011
J.V. Lentell................. 27,000 April 1, 1995 $3.34 to $32.69 April 1, 2005
Director to to
January 2, 2001 January 2, 2011
Joseph V. Mariner, Jr. ...... 27,000 April 1, 1995 $3.34 to $32.69 April 1, 2005
Director to to
January 2, 2001 January 2, 2011
Mark E. Speese............... 9,000 January 2, 2001 $32.69 January 2, 2011
Director
All current directors who are 93,000 April 1, 1995 $3.34 to $32.69 April 1, 2005
not executive officers as a
group (5 persons)..........
to to
January 2, 2001 January 2, 2011
All Employees (including 9,093,750(1) April 1, 1995 $3.34 to $32.69 April 1, 2005
current officers who are
not executive officers) as
a group....................
To to
January 2, 2001 January 2, 2011
- ---------------
(1) Pursuant to the terms of the Plan, when an optionee leaves our employ,
unvested options granted to that employee terminate and become available
for issuance. Vested options not exercised within 90 days from the date the
optionee leaves our employ terminate and become available for issuance. As
a result of terminations, the number of shares reserved under the Plan on a
historical basis, exceed the number of shares available for issuance.
However, at no time did grants under the Plan exceed the number of shares
available for issuance.
The closing sales price of the Common Stock as of March 22, 2001 was $46.3438
per share, as reported on Nasdaq.
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30
OTHER BUSINESS
The Board does not intend to bring any business before the annual stockholders
meeting other than the matters referred to in this notice and at this date has
not been informed of any matters that may be presented to the annual
stockholders meeting by others. If, however, any other matters properly come
before the annual stockholders meeting, it is intended that the persons named in
the accompanying proxy will vote pursuant to the proxy in accordance with their
best judgment on such matters.
Representatives of Grant Thornton LLP, the Company's independent public
accountants for the fiscal year ended December 31, 2000, will attend the annual
stockholders meeting and be available to respond to appropriate questions which
may be asked by stockholders. These representatives will also have an
opportunity to make a statement at the meeting if they desire to do so.
INDEPENDENT PUBLIC ACCOUNTANT INFORMATION
Grant Thornton LLP served as our independent accounting firm for the 2000 fiscal
year. We paid the following fees to Grant Thornton for professional and other
services rendered by them during fiscal 2000:
- The aggregate fees billed for professional services rendered by Grant
Thornton for the audit of our financial statements for the 2000 fiscal
year and the reviews of the financial statements included in our quarterly
reports on Form 10-Q for the fiscal year were $280,000;
- The aggregate fees billed for information technology services rendered by
Grant Thornton were $30,000; and
- The aggregate fees billed for all other services rendered by Grant
Thornton to us during the 2000 fiscal year, exclusive of those services
described above, were $50,000.
The Audit Committee of the Board has considered whether Grant Thornton's
provision of services, other than services rendered in connection with the audit
of our annual financial statements, is compatible with maintaining Grant
Thornton's independence.
The Audit Committee of the Board has not appointed an independent public
accounting firm for the 2001 fiscal year. The Board and the Audit Committee
annually review the performance of our independent public accountants and the
fees charged for their services. The Board anticipates, from time to time,
obtaining competitive proposals from other independent public accounting firms
for our annual audit. Based upon the Board and Audit Committee's analysis of
this information, we will determine which independent public accounting firm to
engage to perform our annual audit each year.
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31
AUDIT COMMITTEE REPORT ON RENT-A-CENTER'S FINANCIAL STATEMENTS
In February 1995, our Board established the Audit
Committee to recommend the appointment of our
independent accountants and approve audit reports and
THE COMMITTEE: plans, accounting policies, audit fees and certain
other expenses. The Audit Committee has prepared the
following report on its activities with respect to our
financial statements for the fiscal year ended December
31, 2000.
REVIEW AND In connection with the preparation of our audited
DISCUSSION: financial statements for the fiscal year ended December
31, 2000, the Audit Committee has
- reviewed and discussed the audited financial
statements with management;
- discussed with Grant Thornton, the Company's
independent accountants, the matters required to
be discussed by Statement on Auditing Standards
No. 61; and
- received the written disclosures and the letter
from Grant Thornton required by Independence
Standards Board Standard No. 1, and has discussed
with Grant Thornton its independence from
Rent-A-Center.
Based on the review and discussion referred to above
RECOMMENDATION: and relying thereon, the Audit Committee has
recommended to the Board of Directors that the audited
financial statements be included in our Annual Report
on Form 10-K for the fiscal year ended December 31,
2000, for filing with the U.S. Securities and Exchange
Commission.
AUDIT COMMITTEE
Joseph V. Mariner, Jr., Chairman
J.V. Lentell
Laurence M. Berg
SECTION 16 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on a review of reports filed by our directors, executive officers and
beneficial holders of 10% or more of our shares, and upon representations from
those persons, we believe that all SEC stock ownership reports required to be
filed by those reporting persons during 2000 were timely made, except for Mr.
Connelly, who filed one late Form 4 to reflect an option grant that was not
reported on a timely basis and Mr. Stough, who filed a late Form 3 to reflect
his initial beneficial ownership of our Common Stock.
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32
RENT-A-CENTER STOCK OWNERSHIP
The following tables list our stock ownership for our directors, our named
executive officers, and our known 5% stockholders. Ownership includes direct and
indirect (beneficial) ownership, as defined by SEC rules. To our knowledge, each
person, along with his or her spouse, has sole voting and investment power over
the shares unless otherwise noted. Information in the table is as of March 22,
2001.
SHARES OF SHARES OF SERIES A
COMMON STOCK PREFERRED STOCK
BENEFICIALLY OWNED BENEFICIALLY OWNED
---------------------- ------------------
NAME AND ADDRESS OF PERCENT PERCENT
BENEFICIAL OWNER NUMBER OF CLASS NUMBER OF CLASS
- ------------------- ---------- -------- ------- --------
J. Ernest Talley(1)...................................... 4,928,165(3) 19.57% -- --
Mark E. Speese(2)........................................ 1,760,832(4) 6.99% -- --
L. Dowell Arnette........................................ 197,414(5) * -- --
Mitchell E. Fadel........................................ 51,550(6) * -- --
Bradley W. Denison....................................... 0 * -- --
Dana F. Goble............................................ 28,378(7) * -- --
J.V. Lentell............................................. 22,000(8) * -- --
Joseph V. Mariner, Jr. .................................. 0 * -- --
Laurence M. Berg(9)...................................... 15,000(8)(9) * -- --
Peter P. Copses(9)....................................... 15,000(8)(9) * -- --
Apollo(10)............................................... 10,086,129 28.63% 281,756 100.0%
Wasatch Advisors, Inc.(11)............................... 2,375,554 9.45% -- --
Mellon Financial Corporation(12)......................... 1,322,531 5.26% -- --
All officers and directors as a group (19 total)......... 7,110,209 28.04% -- --
- ---------------
* Less than 1%.
(1) Mr. Talley's address is 5700 Tennyson Parkway Third Floor, Plano, Texas
75024.
(2) Mr. Speese's address is 5717 Arcady Place, Plano, Texas 75093.
(3) Includes (A) 1,903,166 shares of our Common Stock held directly by him, (B)
24,999 shares issuable pursuant to options granted under the Long-Term
Incentive Plan which are currently exercisable, (C) 420,191 shares held by
Mr. Talley's spouse, (D) 1,579,809 shares held by the Talley 1999 Trust, a
trust organized under the laws of the State of Texas of which Mr. Talley is
the sole trustee, and (E) 1,000,000 shares held by Talley Partners, Ltd., a
Texas limited partnership, whose sole general partner is Talley Management,
Inc., a Texas corporation, an entity controlled by Mr. Talley. The amount
listed in the table does not include an aggregate of 326,184 shares owned
by two of Mr. Talley's children, as to which Mr. Talley disclaims
beneficial ownership.
(4) Includes (A) 1,251,832 shares held directly by him, (B) 9,000 shares
issuable pursuant to options granted under the Long-Term Incentive Plan
which are currently exercisable, (C) 250,000 shares held by the Mark Speese
2000 Grantor Retained Annuity Trust, a trust organized under the laws of
the State of Texas, of which Mr. Speese is the sole trustee, and (D)
250,000 shares held by the Carolyn Speese 2000 Grantor Retained Annuity
Trust, a trust organized under the laws of the State of Texas, of which Mr.
Speese is the sole trustee.
(5) Includes 32,500 shares issuable pursuant to options granted under the
Long-Term Incentive Plan, all of which are currently exercisable.
(6) Includes 11,250 shares issuable pursuant to options granted under the
Long-Term Incentive Plan, all of which are currently exercisable.
(7) Includes 12,500 shares issuable pursuant to options granted under the
Long-Term Incentive Plan, all of which are currently exercisable.
(8) All of which are issuable pursuant to currently exercisable options granted
under the Long-Term Incentive Plan.
(9) Messrs. Berg and Copses are each principals and officers of certain
affiliates of Apollo. Accordingly, each of Messrs. Berg and Copses may be
deemed to beneficially own shares owned by Apollo. Messrs. Berg and Copses
disclaim beneficial ownership with respect to any such shares owned by
Apollo.
(10) The address of Apollo is 1999 Avenue of the Stars, Suite 1900, Los Angeles,
California 90067. The 10,086,129 shares of Common Stock represent the
shares of Common Stock into which the Series A Preferred Stock is
convertible. Apollo owns 270,933 shares of our Preferred Stock, which
represents in excess of 96% of the outstanding shares of our Preferred
Stock. Apollo also has the right to vote RC Acquisition Corp.'s 10,823
shares of Preferred Stock. Apollo disclaims any beneficial ownership in
these 10,823 shares other than its right to vote these shares.
(11) The address of Wasatch Advisors, Inc. is 150 Social Hall Avenue, Salt Lake
City, Utah 84111.
(12) The address of Mellon Financial Corporation is One Mellon Center,
Pittsburgh, Pennsylvania 15258.
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VOTING PROCEDURES/REVOKING YOUR PROXY
QUORUM: Because the holders of our Preferred Stock are entitled
to elect one director as a separate class, there are
different standards for determining if a quorum is
present. For purposes of electing the director to be
elected by the holders of our Preferred Stock, there
must be a majority of the outstanding shares of our
Preferred Stock on the Record Date, present in person
or by proxy, at this year's annual stockholders
meeting. For purposes of electing our other directors,
approving the amendment to our certificate of
incorporation and approving the Plan amendments, the
holders of a majority of the votes entitled to vote at
this year's annual stockholders meeting, including the
votes entitled to vote held by the holders of our
Preferred Stock, present in person or by proxy, will
constitute a quorum. For all other purposes, the
holders of the majority of the votes entitled to vote
at this year's annual stockholders meeting, present in
person or by proxy, will constitute a quorum.
VOTES REQUIRED TO To be elected, directors must receive a plurality of
APPROVE A PROPOSAL: the shares voting in person or by proxy, provided a
quorum exists. A plurality means receiving the largest
number of votes, regardless of whether that is a
majority. The affirmative vote of the votes entitled to
be cast, including the votes entitled to be cast held
by the holders of our Preferred Stock, is required to
approve the amendment to our certificate of
incorporation. Approval of the Plan amendments and all
other matters submitted to you at the meeting will be
decided by a majority of the votes cast on the matter,
provided a quorum exists, except as otherwise provided
by law or our Certificate of Incorporation or Bylaws.
SHARES OUTSTANDING On the Record Date, there were 25,145,799 shares of our
AND NUMBER OF Common Stock outstanding. Each share of Common Stock
VOTES: entitles the holder to one vote per share. On the
Record Date, there were 281,756 shares of Preferred
Stock outstanding. Each share of Preferred Stock
entitles the holder to approximately 35.8 votes per
share, or 10,086,129 votes in the aggregate.
ABSTENTIONS AND Those who fail to return a proxy or attend the meeting
BROKER NON-VOTES: will not count towards determining any required
plurality, majority or quorum. Stockholders and brokers
returning proxies or attending the meeting who abstain
from voting on the election of our directors, approval
of the amendment to the certificate of incorporation or
on the approval of the Plan amendments will count
towards determining a quorum. Such abstentions will
have no effect on the election of our directors or on
the approval of the Plan amendments, but will have the
same effect as a no vote on the approval of the
amendment to the certificate of incorporation.
Brokers holding shares of record for customers
generally are not entitled to vote on certain matters
unless they receive voting instructions from their
customers. In the event that a broker does not receive
voting instructions for these matters from its
customers, a broker may notify us that it lacks voting
authority to vote those shares. These "broker
non-votes" refer to votes that could have been cast on
the matter in question by brokers with respect to
uninstructed shares if the brokers had received their
customers' instructions. These broker non-votes will be
included in determining whether a quorum exists. These
broker non-votes will have no effect on the outcome of
the election of our directors or the Plan amendment,
but will have the same effect as a no vote on the
approval of the amendments to the certificate of
incorporation.
HOW THE PROXIES WILL The enclosed proxies will be voted in accordance with
BE VOTED: the instructions you place on the proxy card. Unless
otherwise stated, all shares represented by your
returned, signed proxy will be voted as noted on the
first page of this proxy statement.
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34
HOW YOU MAY REVOKE You may revoke your proxies by:
YOUR PROXIES:
- Delivering a signed, written revocation letter,
dated later than the proxy, to David M. Glasgow,
Corporate Secretary, at 5700 Tennyson Parkway,
Third Floor, Plano, Texas 75024;
- Delivering a signed proxy, dated later than the
first one, to Mellon Investor Services LLC, 600
Willow Tree Road, Leonia, NJ 07605, Attn: Norma
Cianfaglione; or
- Attending the meeting and voting in person or by
proxy. Attending the meeting alone will not revoke
your proxy.
PROXY SOLICITATION: We have employed Mellon Investor Services, LLC to
solicit proxies. The cost of this service is estimated
to be $8,500. We will reimburse banks, brokers,
custodians, nominees and fiduciaries for reasonable
expenses they incur in sending these proxy materials to
you if you are a beneficial holder of our shares.
SUBMISSION OF STOCKHOLDER PROPOSALS
DATES FOR From time to time, stockholders may seek to
SUBMISSION OF nominate directors or present proposals for
STOCKHOLDERS' inclusion in the proxy statement and form of proxy
PROPOSALS: for consideration at an annual stockholders
meeting. To be included in the proxy statement or
considered at an annual or any special meeting,
you must timely submit nominations of directors or
proposals, in addition to meeting other legal
requirements. We must receive proposals for the
2002 annual stockholders meeting no later than
December 15, 2001, for possible inclusion in the
proxy statement, or prior to February 14, 2002 for
possible consideration at the meeting, which is
expected to take place on May 15, 2002. Direct any
proposals, as well as related questions, to the
undersigned.
ANNUAL REPORT ON FORM 10-K
YOU MAY OBTAIN A COPY OF OUR ANNUAL REPORT ON FORM 10-K THAT WE FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, WITHOUT CHARGE, BY SUBMITTING A WRITTEN
REQUEST TO:
DAVID M. GLASGOW, CORPORATE SECRETARY
RENT-A-CENTER, INC.
5700 TENNYSON PARKWAY, THIRD FLOOR
PLANO, TEXAS 75024.
YOU MAY ALSO OBTAIN OUR SEC FILINGS THROUGH THE INTERNET AT WWW.SEC.GOV.
By order of the Board of Directors,
/s/ DAVID M. GLASGOW
David M. Glasgow
Corporate Secretary
PLEASE VOTE -- YOUR VOTE IS IMPORTANT
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35
EXHIBIT A
-----------
CHARTER OF
THE
AUDIT COMMITTEE
OF
RENT-A-CENTER, INC.
I. PURPOSE
The primary function of the Audit Committee (the "Committee") is to assist the
Board of Directors (the "Board") in fulfilling its oversight responsibilities by
reviewing (i) the financial reports and other financial information provided by
the Company to any governmental body or the public; (ii) the Company's systems
of internal controls regarding finance, accounting, legal compliance and ethics
that management and the Board have established; and (iii) the Company's
auditing, accounting and financial reporting processes generally. Consistent
with this function, the Committee should encourage continuous improvement of,
and should foster adherence to, the Company's policies, procedures and practices
at all levels. The Committee's primary duties and responsibilities are to:
- serve as an independent and objective party to monitor the Company's
financial reporting process and internal control system;
- review and appraise the audit efforts of the Company's independent
auditors; and
- provide an open avenue of communication among the Company's independent
auditors, financial and senior management and the Board.
The Audit Committee will primarily fulfill these responsibilities by carrying
out the activities enumerated in Section IV of this Charter.
II. COMPOSITION
The Committee shall be comprised of three or more directors as determined by the
Board, each of whom shall meet the independence and experience requirements of
the Nasdaq Stock Market, Inc. Each member of the Committee shall be free from
any relationship that, in the opinion of the Board, would interfere with the
exercise of his or her independent judgment in carrying out the responsibilities
as a member of the Committee. All members of the Committee shall have a working
familiarity with basic finance and accounting practices, and at least one member
of the Committee shall have accounting or related financial management expertise
or other comparable experience or background which results in the member's
financial sophistication, including having served as the Chief Executive Officer
or other senior officer having financial oversight responsibilities. Committee
members may enhance their familiarity with finance and accounting by
participating in educational programs conducted by the Company or an outside
consultant.
The members of the Committee shall be elected by the Board at the annual
organizational meeting of the Board or until their successors shall be duly
elected and qualified. Unless a Chair is elected by the full Board, the members
of the Committee may designate a Chair by majority vote of the full Committee
membership.
III. MEETINGS
The Committee shall meet at least twice annually, or more frequently as
circumstances dictate. As part of its job to foster open communication, the
Committee should meet at least annually with management and the independent
auditors in separate executive sessions to discuss any matters that the
Committee or each of these groups believe should be discussed privately. In
addition, the Committee or at least its Chair should meet with the independent
auditors and management quarterly to review the Corporations financial
statements.
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36
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties, the Committee shall:
Documents/Reports Review
1. Review, update and assess the adequacy of this Charter periodically, but at
least annually, as conditions dictate.
2. Review and discuss the annual audited financial statements with management,
and discuss with the independent auditors the matters required to be discussed
by relevant auditing standards, including the quality, not just the
acceptability, of the accounting principles and underlying estimates used in the
audited financial statements.
3. Report to the Board and to the stockholders whether, based on such reviews
and discussions, the Committee recommends to the Board that the most recent
year's audited financial statements be included in the Company's Form 10-K to be
filed with the Securities and Exchange Commission.
Independent Auditors
4. Recommend to the Board the selection of the Company's independent auditors,
considering independence and effectiveness, and approve the fees and other
compensation to be paid to the independent auditors.
5. Ensure that the Company's independent auditors provide annually to the
Committee a formal written statement delineating all relationships between the
Company and the independent auditors, consistent with Independence Standards
Board Standard 1, actively engage in a dialogue with the independent auditors
with respect to any disclosed relationships or services that may impact the
objectivity and independence of the independent auditors, and take or recommend
that the full Board take appropriate action to oversee the independence of the
independent auditors.
6. Communicate to the independent auditors their ultimate accountability to the
Board of Directors and the Committee.
7. Review the performance of the Company's independent auditors and recommend to
the Board, where appropriate, that the Company's independent auditors be
replaced (or proposed for stockholder approval in any proxy statement).
8. Periodically consult with the Company's independent auditors out of the
presence of management concerning the Company's internal controls and the
fullness and accuracy of the Company's financial statements.
Financial Reporting Processes
9. In consultation with the Company's independent auditors, review the integrity
of the Company's financial reporting processes, both internal and external.
10. Consider the Company's independent auditors' judgments concerning the
quality and appropriateness of the Company's accounting principles as applied in
its financial reporting.
11. Consider and approve, if appropriate, major changes of the Company's
auditing and accounting principles and practices as suggested by the Company's
independent auditors or management.
Process Improvement
12. Establish regular and separate systems of reporting to the Committee by each
of management and the Company's independent auditors regarding any significant
judgments made in management's preparation of the financial statements and the
view of each as to appropriateness of such judgments.
13. Following completion of the annual audit, review separately with each of
management and the Company's independent auditors any significant difficulties
encountered during the course of the audit, including any restrictions on the
scope of work or access to required information.
A-2
37
14. Review any significant disagreement among management and the Company's
independent auditors in connection with the preparation of the financial
statements.
15. Review with management and the Company's independent auditors the extent to
which changes or improvements in financial or accounting practices, as approved
by the Committee, have been implemented. This review should be conducted at an
appropriate time subsequent to implementation of changes or improvements, as
decided by the Committee.
A-3
38
EXHIBIT B
-----------
AMENDED AND RESTATED
RENT-A-CENTER, INC.
LONG-TERM INCENTIVE PLAN
1. Objectives. The Amended and Restated Rent-A-Center, Inc. Long-Term
Incentive Plan (formerly known as the 1994 Renters Choice, Inc. Long-Term
Incentive Plan) is designed to retain selected employees, non-employee directors
and Independent Contractors (as herein defined) of Rent-A-Center, Inc. (formerly
known as Renters Choice, Inc.) (the "Company") and reward them for making
significant contributions to the success of the Company and its Subsidiaries (as
hereinafter defined). These objectives are to be accomplished by making awards
under the Plan and thereby providing Participants (as hereinafter defined) with
a proprietary interest in the growth and performance of the Company and its
Subsidiaries.
2. Definitions. As used herein, the terms set forth below shall have the
following respective meanings:
"Agreement" means a written agreement between the Company and a
Participant that sets forth the terms, conditions and limitations applicable
to an Employee Award, a Director Option or an Independent Contractor Option.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" means such committee of the Board as is designated by the
Board to administer the Plan. The Committee shall be constituted to permit
the Plan to comply with Rule 16b-3.
"Common Stock" means the Common Stock, par value $0.01 per share, of the
Company.
"Director" means an individual serving as a member of the Board who is
not an employee of the Company or any Subsidiary of the Company.
"Director Option" means a nonqualified stock option granted to a
Director under the terms of this Plan.
"Employee Award" means the grant of any form of Employee Stock Option,
stock appreciation right, stock award or cash award, whether granted singly,
in combination or in tandem, to an employee of the Company or any Subsidiary
pursuant to any applicable terms, conditions and limitations as the
Committee may establish in order to fulfill the objectives of the Plan.
"Employee Stock Option" means an incentive stock option or a
nonqualified stock option granted to an employee of the Company or any of
its Subsidiaries under this Plan by the Committee.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
"Fair Market Value" means, as of a particular date, (a) if the shares of
Common Stock are listed on a national securities exchange, the mean between
the highest and lowest sales price per share of Common Stock on the
consolidated transaction reporting system for the principal such national
securities exchange on that date, or, if there shall have been no such sale
so reported on that date, on the last preceding date on which such a sale
was so reported, (b) if the shares of Common Stock are not so listed but are
quoted on the Nasdaq National Market, the mean between the highest and
lowest sales price per share of Common Stock on the Nasdaq National Market
on that date, or, if there shall have been no such sale so reported on that
date, on the last preceding date on which such a sale was so reported or (c)
if the Common Stock is not so listed or quoted, the mean between the closing
bid and asked price on that date, or, if there are no quotations available
for such date, on the last preceding date on which such quotations shall be
available, as reported by the Nasdaq Stock Market, Inc., or, if not reported
by the Nasdaq Stock Market, Inc., by the National Quotation Bureau, Inc.
"Independent Contractor" means any individual, partnership, limited
liability company, corporation, joint stock company, trust, estate, joint
venture, association or unincorporated organization or any other form of
business organization who or which is engaged by the Company or any
Subsidiary to render consulting, advisory or other independent contractor
services, as defined by the Board.
B-1
39
"Independent Contractor Option" means a nonqualified stock option
granted to an Independent Contractor under the terms of this Plan.
"Participant" means an employee of the Company or any of its
Subsidiaries to whom an Employee Award has been made, a Director to whom a
Director Option has been made or an Independent Contractor to whom an
Independent Contractor Option has been made under the terms of the Plan.
"Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act, or any
successor rule.
"Subsidiary" means any corporation of which the Company directly or
indirectly owns shares representing more than 50% of the voting power of all
classes or series of capital stock of such corporation which have the right
to vote generally on matters submitted to a vote of the stockholders of such
corporation.
3. Eligibility.
(a) Employee Awards. All employees of the Company and its
Subsidiaries are eligible for Employee Awards under this Plan. The Committee
shall select the employees who shall become Participants in the Plan from
time to time by the grant of Employee Awards under the Plan.
(b) Director Options. Recipients of Director Options shall include
all persons who, as of the time Director Options are awarded, are serving as
Directors of the Company.
(c) Independent Contractor Options. The Committee, in its
discretion, shall determine which Independent Contractors are eligible to
become Participants in the Plan from time to time by the grant of
Independent Contractor Options under the Plan.
4. Common Stock Available Under the Plan. There shall be available for
Employee Awards, Director Options and Independent Contractor Options, any of
which may be granted wholly or partly in Common Stock (including rights or
options which may be exercised for or settled in Common Stock) during the term
of this Plan an aggregate of 7,900,000 shares of Common Stock, subject to
adjustment as provided in Paragraph 15, 210,000 of which shall be set aside for
issuance pursuant to Director Options and 31,250 of which shall be set aside for
stock awards, as described in subparagraph 6(iii) hereof. The Board and the
appropriate officers of the Company shall from time to time take whatever
actions are necessary to file required documents with governmental authorities
and stock exchanges and transaction reporting systems to make shares of Common
Stock available for issuance pursuant to Employee Awards, Director Options and
Independent Contractor Options. Common Stock related to Employee Awards,
Director Options or Independent Contractor Options that are forfeited or
terminated, expire unexercised, are settled in cash in lieu of Common Stock or
in a manner such that all or some of the shares covered by an Employee Award, a
Director Option or an Independent Contractor Option are not issued to a
Participant, or are exchanged for Employee Awards that do not involve Common
Stock, shall immediately become available for Employee Awards, Director Options
and Independent Contractor Options hereunder. The Committee may from time to
time adopt and observe such procedures concerning the counting of shares against
the Plan maximum as it may deem appropriate under Rule 16b-3.
5. Administration. This Plan shall be administered by the Committee,
which shall have full and exclusive power to interpret this Plan and to adopt
such rules, regulations and guidelines for carrying out this Plan as it may deem
necessary or proper, all of which powers shall be exercised in the best
interests of the Company and in keeping with the objectives of this Plan. The
Committee may, in its discretion, provide for the extension of the
exercisability of an Employee Award, a Director Option or an Independent
Contractor Option, accelerate the vesting or exercisability of an Employee
Award, a Director Option or an Independent Contractor Option, eliminate or make
less restrictive any restrictions contained in an Employee Award, a Director
Option or an Independent Contractor Option, waive any restriction or other
provision of an Employee Award, a Director Option or an Independent Contractor
Option or otherwise amend or modify an Employee Award, a Director Option or an
Independent Contractor Option in any manner that is either (a) not adverse to
the Participant holding such Employee Award, Director Option or Independent
Contractor Option or (b) consented to by such Participant. The Committee may
correct any defect or supply any omission or reconcile any inconsistency in this
Plan or in any Employee Award, Director Option or Independent Contractor Option
in the manner and to the extent the Committee deems necessary or desirable to
carry it into effect. Any decision of the Committee in the interpretation and
administration of this Plan shall lie within its sole and absolute discretion
and shall be final, conclusive and binding on all parties concerned. No member
of the Committee or officer of the Company to whom it has delegated authority in
B-2
40
accordance with the provisions of this Plan shall be liable for anything done or
omitted to be done by him or her, by any member of the Committee or by any
officer of the Company in connection with the performance of any duties under
this Plan, except for his or her own willful misconduct or as expressly provided
by statute. The Committee may delegate to the Chief Executive Officer of the
Company and to other senior officers of the Company its duties under this Plan
pursuant to such conditions or limitations as the Committee may establish,
except that the Committee may not delegate to any person the authority to grant
Employee Awards, Director Options or Independent Contractor Options to, or take
other action with respect to, Participants who are subject to Section 16 of the
Exchange Act.
6. Employee Awards. The Committee shall determine the type or types of
awards to be made to each Participant under this Plan. Each Employee Award made
hereunder shall be embodied in an Agreement, which shall contain such terms,
conditions and limitations as shall be determined by the Committee in its sole
discretion and shall be signed by the Participant and by the Chief Executive
Officer, the Chief Operating Officer or any Vice President of the Company for
and on behalf of the Company. Employee Awards may consist of those listed in
this Paragraph 6 and may be granted singly, in combination or in tandem.
Employee Awards may also be made in combination or in tandem with, in
replacement of, or as alternatives to grants or rights (a) under this Plan or
any other employee plan of the Company or any of its Subsidiaries, including the
plan of any acquired entity, or (b) made to any Company or Subsidiary employee
by the Company or any Subsidiary. An Employee Award may provide for the granting
or issuance of additional, replacement or alternative Employee Awards upon the
occurrence of specified events, including the exercise of the original Employee
Award. Notwithstanding anything herein to the contrary, no Participant may be
granted Employee Awards consisting of stock options or stock appreciation rights
exercisable for more than 20% of the shares of Common Stock originally
authorized for Employee Awards under this Plan, subject to adjustment as
provided in Paragraph 15. In the event of an increase in the number of shares
authorized under the Plan, the 20% limitation will apply to the number of shares
authorized.
(i) Employee Stock Option. An Employee Award may consist of a right
to purchase a specified number of shares of Common Stock at a price
specified by the Committee in the Agreement or otherwise. An Employee Stock
Option may be in the form of an incentive stock option ("ISO") which, in
addition to being subject to applicable terms, conditions and limitations
established by the Committee, complies with Section 422 of the Code.
Notwithstanding the foregoing, no ISO can be granted under the Plan more
than ten years following the Effective Date of the Plan.
(ii) Stock Appreciation Right. An Employee Award may consist of a
right to receive a payment, in cash or Common Stock, equal to the excess of
the Fair Market Value or other specified valuation of a specified number of
shares of Common Stock on the date the stock appreciation right ("SAR") is
exercised over a specified strike price as set forth in the applicable
Agreement.
(iii) Stock Award. An Employee Award may consist of Common Stock or
may be denominated in units of Common Stock. All or part of any stock
Employee Award may be subject to conditions established by the Committee and
set forth in the Agreement, which conditions may include, but are not
limited to, continuous service with the Company and its Subsidiaries,
achievement of specific business objectives, increases in specified indices,
attaining specified growth rates and other comparable measurements of
performance. Such Employee Awards may be based on Fair Market Value or other
specified valuations. The certificates evidencing shares of Common Stock
issued in connection with a stock Employee Award shall contain appropriate
legends and restrictions describing the terms and conditions of the
restrictions applicable thereto.
(iv) Cash Award. An Employee Award may be denominated in cash with
the amount of the eventual payment subject to future service and such other
restrictions and conditions as may be established by the Committee and set
forth in the Agreement, including, but not limited to, continuous service
with the Company and its Subsidiaries, achievement of specific business
objectives, increases in specified indices, attaining specified growth rates
and other comparable measurements of performance.
7. Director Stock Options. Director Options shall be granted to each
eligible Director as of the date of consummation of the initial public offering
of the Common Stock providing for the purchase of 9,000 shares of Common Stock.
Commencing on January 1, 1996, automatic annual awards of Director Options shall
be made to each eligible Director on the first business day of the Company's
fiscal year,
B-3
41
providing for the purchase of 3,000 shares of Common Stock; provided that such
Director Options shall provide for the purchase of 9,000 shares of Common Stock
if the recipient of such Director Option had not previously received a grant of
a Director Option pursuant to this Plan. The purchase price of each share of
Common Stock placed under a Director Option shall be equal to the Fair Market
Value of such shares on the date the Director Option is granted; provided, that
the purchase price of each share of Common Stock placed under a Director Option
on the date of consummation of the initial public offering of the Common Stock
shall be equal to the initial public offering price of the Common Stock.
Director Options shall terminate and be of no force or effect with respect to
any shares not previously purchased by the Director Optionee upon the expiration
of ten years from the date of granting of each Director Option, notwithstanding
any earlier termination of the Director Optionee's status as a Director of the
Company. All Director Options shall be exercisable immediately on the date of
grant. Notwithstanding the foregoing, no grant of Director Options shall be made
unless the number of shares available under the Plan is sufficient to make all
automatic grants of Director Options on the grant date. All Director Options
shall be evidenced by a written Agreement conforming with the terms of this
Plan.
8. Independent Contractor Options. Independent Contractor Options shall
be granted to each eligible Independent Contractor (as selected by the Board or
the Committee) pursuant to the terms of an Agreement. Independent Contractor
Options granted under this Plan will contain such terms and conditions with
respect to the death or disability of the Independent Contractor or termination
of the Independent Contractor's relationship with the Company or a Subsidiary as
the Committee or Board deems necessary and/or appropriate.
9. Payment of Employee Awards.
(a) General. Payment of Employee Awards may be made in the form of
cash or Common Stock or combinations thereof and may include such
restrictions as the Committee shall determine including, in the case of
Common Stock, restrictions on transfer and forfeiture provisions. As used
herein, "Restricted Stock" means Common Stock that is restricted or subject
to forfeiture provisions.
(b) Deferral. The Committee may, in its discretion, (i) permit
selected Participants to elect to defer payments of some or all types of
Employee Awards in accordance with procedures established by the Committee
or (ii) provide for the deferral of an Employee Award in an Agreement or
otherwise. Any such deferral may be in the form of installment payments or a
future lump sum payment. Any deferred payment, whether elected by the
Participant or specified by the Agreement or by the Committee, may be
forfeited if and to the extent that the Agreement so provides.
(c) Dividends and Interest. Dividends or dividend equivalent rights
may be extended to and made part of any Employee Award denominated in Common
Stock or units of Common Stock, subject to such terms, conditions and
restrictions as the Committee may establish. The Committee may also
establish rules and procedures for the crediting of interest on deferred
cash payments and dividend equivalents for deferred payment denominated in
Common Stock or units of Common Stock.
(d) Substitution of Employee Awards. At the discretion of the
Committee, a Participant may be offered an election to substitute an
Employee Award for another Employee Award of the same or different type.
10. Stock Option Exercise. The price at which shares of Common Stock may
be purchased under a stock option (whether pursuant to an Employee Award, a
Director Option or an Independent Contractor Option) shall be paid in full at
the time of exercise in cash or, if permitted by the Committee, by means of
tendering Common Stock or surrendering all or part of that or any other Employee
Award, including Restricted Stock, valued at Fair Market Value on the date of
exercise, or any combination thereof. The Committee shall determine acceptable
methods for tendering Common Stock or Employee Awards to exercise a stock option
as it deems appropriate. If permitted by the Committee, payment may be made by
successive exercises by the Participant. The Committee may provide for
procedures to permit the exercise or purchase of Employee Awards, Director
Options or Independent Contractor Options by (a) loans from the Company or (b)
use of the proceeds to be received from the sale of Common Stock issuable
pursuant to an Employee Award, a Director Option or an Independent Contractor
Option. Unless otherwise provided in the applicable Agreement, in the event
shares of Restricted Stock are tendered as consideration for the exercise of a
stock option, a number of the shares issued upon the exercise of the stock
option, equal to the number of shares of Restricted Stock used as consideration
therefor, shall be subject to the same
B-4
42
restrictions as the Restricted Stock so submitted as well as any additional
restrictions that may be imposed by the Committee.
11. Tax Withholding. The Company shall have the right to deduct
applicable taxes from any Employee Award, Director Option or Independent
Contractor Option payment and withhold, as applicable, at the time of delivery
or vesting of cash or shares of Common Stock under this Plan, an appropriate
amount of cash or number of shares of Common Stock or a combination thereof for
payment of taxes required by law or to take such other action as may be
necessary in the opinion of the Company to satisfy all obligations for
withholding of such taxes. The Committee may also permit withholding to be
satisfied by the transfer to the Company of shares of Common Stock theretofore
owned by the holder of the Employee Award, Director Option or Independent
Contractor Option with respect to which withholding is required. If shares of
Common Stock are used to satisfy tax withholding, such shares shall be valued
based on the Fair Market Value when the tax withholding is required to be made.
12. Amendment, Modification, Suspension or Termination. The Board may
amend, modify, suspend or terminate this Plan for the purpose of meeting or
addressing any changes in legal requirements or for any other purpose permitted
by law except that (a) no amendment or alteration that would impair the rights
of any Participant under any Employee Award, Director Option or Independent
Contractor Option previously granted to such Participant shall be made without
such Participant's consent, and (b) no amendment or alteration shall be
effective prior to approval by the Company's stockholders to the extent such
approval is then required pursuant to Rule 16b-3 in order to preserve the
applicability of any exemption provided by such rule to any Employee Award,
Director Option or Independent Contractor Option then outstanding (unless the
Participant consents) or to the extent stockholder approval is otherwise
required by applicable legal requirements.
13. Termination of Employment or Provision of Service. Upon the
termination of employment or provision of service by a Participant, any
unexercised, deferred or unpaid Employee Awards, Director Options or Independent
Contractor Options shall be treated as provided in the specific Agreement
evidencing the Employee Award, Director Option or Independent Contractor Option.
In the event of such a termination, the Committee may, in its discretion,
provide for the extension of the exercisability of an Employee Award, a Director
Option or an Independent Contractor Option, accelerate the vesting or
exercisability of an Employee Award, a Director Option or an Independent
Contractor Option, eliminate or make less restrictive any restrictions contained
in an Employee Award, a Director Option or an Independent Contractor Option,
waive any restriction or other provision of this Plan or an Employee Award, a
Director Option or an Independent Contractor Option or otherwise amend or modify
the Employee Award, Director Option or Independent Contractor Option in any
manner that is either (a) not adverse to such Participant or (b) consented to by
such Participant.
14. Assignability. Unless otherwise determined by the Committee and
provided in the Agreement, no Employee Award, Director Option, Independent
Contractor Option or any other benefit under this Plan constituting a derivative
security within the meaning of Rule 16a-l(c) under the Exchange Act shall be
assignable or otherwise transferable except by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order as defined by
the Code or Title I of the Employee Retirement Income Security Act of 1974, as
amended, or the rules thereunder. The Committee may prescribe and include in
applicable Agreements other restrictions on transfer. Any attempted assignment
of an Employee Award, a Director Option, an Independent Contractor Option or any
other benefit under this Plan in violation of this Paragraph 14 shall be null
and void.
15. Adjustments.
(a) The existence of outstanding Employee Awards, Director Options or
Independent Contractor Options shall not affect in any manner the right or
power of the Company or its stockholders to make or authorize any or all
adjustments, recapitalizations, reorganizations or other changes in the
capital stock of the Company or its business or any merger or consolidation
of the Company, or any issue of bonds, debentures, preferred or prior
preference stock (whether or not such issue is prior to, on a parity with or
junior to the Common Stock) or the dissolution or liquidation of the
Company, or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding of any kind, whether or
not of a character similar to that of the acts or proceedings enumerated
above.
B-5
43
(b) In the event of any subdivision or consolidation of outstanding
shares of Common Stock or declaration of a dividend payable in shares of
Common Stock or capital reorganization or reclassification or other
transaction involving an increase or reduction in the number of outstanding
shares of Common Stock, the Committee may adjust proportionally (i) the
number of shares of Common Stock reserved under this Plan and covered by
outstanding Employee Awards, Director Options and Independent Contractor
Options denominated in Common Stock or units of Common Stock; (ii) the
exercise or other price in respect of such Employee Awards, Director Options
and Independent Contractor Options; and (iii) the appropriate Fair Market
Value and other price determinations for such Employee Awards, Director
Options and Independent Contractor Options. In the event of any
consolidation or merger of the Company with another corporation or entity or
the adoption by the Company of a plan of exchange affecting the Common Stock
or any distribution to holders of Common Stock of securities or property
(other than normal cash dividends or dividends payable in Common Stock), the
Committee shall make such adjustments or other provisions as it may deem
equitable, including adjustments to avoid fractional shares, to give proper
effect to such event. In the event of a corporate merger, consolidation,
acquisition of property or stock, separation, reorganization or liquidation,
the Committee shall be authorized to issue or assume stock options,
regardless of whether in a transaction to which Section 424(a) of the Code
applies, by means of substitution of new options for previously issued
options or an assumption of previously issued options, or to make provision
for the acceleration of the exercisability of, or lapse of restrictions with
respect to, Employee Awards, Director Options or Independent Contractor
Options and the termination of unexercised options in connection with such
transaction.
16. Restrictions. No Common Stock or other form of payment shall be
issued with respect to any Employee Award, Director Option or Independent
Contractor Option unless the Company shall be satisfied based on the advice of
its counsel that such issuance will be in compliance with applicable federal and
state securities laws. It is the intent of the Company that this Plan comply
with Rule 16b-3 with respect to persons subject to Section 16 of the Exchange
Act unless otherwise provided herein or in an Agreement, that any ambiguities or
inconsistencies in the construction of this Plan be interpreted to give effect
to such intention and that, if any provision of this Plan is found not to be in
compliance with Rule 16b-3, such provision shall be null and void to the extent
required to permit this Plan to comply with Rule 16b-3. Certificates evidencing
shares of Common Stock delivered under this Plan may be subject to such stop
transfer orders and other restrictions as the Committee may deem advisable under
the rules, regulations and other requirements of the Securities and Exchange
Commission, any securities exchange or transaction reporting system upon which
the Common Stock is then listed and any applicable federal and state securities
law. The Committee may cause a legend or legends to be placed upon any such
certificates to make appropriate reference to such restrictions.
17. Unfunded Plan. Insofar as it provides for Employee Awards of cash,
and Employee Awards, Director Options and Independent Contractor Options
covering Common Stock or rights thereto, this Plan shall be unfunded. Although
bookkeeping accounts may be established with respect to Participants who are
entitled to cash, Common Stock or rights thereto under this Plan, any such
accounts shall be used merely as a bookkeeping convenience. The Company shall
not be required to segregate any assets that may at any time be represented by
cash, Common Stock or rights thereto, nor shall this Plan be construed as
providing for such segregation, nor shall the Company, the Board or the
Committee be deemed to be a trustee of any cash, Common Stock or rights thereto
to be granted under this Plan. Any liability or obligation of the Company to any
Participant with respect to a grant of cash, Common Stock or rights thereto
under this Plan shall be based solely upon any contractual obligations that may
be created by this Plan and any Agreement, and no such liability or obligation
of the Company shall be deemed to be secured by any pledge or other encumbrance
on any property of the Company. None of the Company, the Board or the Committee
shall be required to give any security or bond for the performance of any
obligation that may be created by this Plan.
18. Governing Law. This Plan and all determinations made and actions
taken pursuant hereto, to the extent not otherwise governed by mandatory
provisions of the Code or the securities laws of the United States, shall be
governed by and construed in accordance with the laws of the State of Texas.
B-6
44
19. Effective Date of Plan.
(a) This Plan was approved by the Board of Directors of the Company
as of December 5, 1994, and by the unanimous written consent dated as of
December 21, 1994, of the holders of all of the shares of Common Stock
outstanding and entitled to vote thereon.
(b) The Plan was amended effective May 20, 1996 for the purpose of
increasing the number of shares reserved for issuance under the Plan from
1,500,000 to 2,000,000. The amendments to the Plan were approved by the
Board of Directors of the Company as of March 18, 1996, and by the holders
of a majority of the issued and outstanding shares of Common Stock of the
Company as of May 20, 1996.
(c) The Plan was again amended effective May 21, 1998 for the purpose
of increasing the number of shares reserved for issuance under the Plan from
2,000,000 to 3,000,000. The amendment to the Plan was approved by the Board
of Directors of the Company on March 16, 1998, and by the holders of a
majority of the issued and outstanding shares of Common Stock of the Company
on May 18, 1998. For purposes of ease of administration and clarity of
reference, the Plan was amended and restated to incorporate the 1996 and the
1998 amendments.
(d) The Plan was again amended on September 14, 1998 for the purpose
of increasing the number of shares reserved for issuance under the Plan from
3,000,000 to 4,500,000. The amendment to the Plan was approved by the Board
of Directors of the Company on September 14, 1998 and by the holders of a
majority of the issued and outstanding shares of Common Stock of the Company
on October 20, 1998. For purposes of ease of administration and clarity of
reference, the Plan was amended and restated to incorporate all amendments.
(e) The Plan was again amended by the Board of Directors in January
2000 for the purpose of adding independent contractors as participants under
the Plan. In March 2000, the Plan was amended by the Board of Directors to
increase the number of shares reserved for issuance under the Plan from
4,500,000 to 6,200,000. These amendments were approved by the holders of a
majority of the issued and outstanding shares of Common Stock and Preferred
Stock of the Company entitled to vote thereon on May 16, 2000. For purposes
of ease of administration and clarity of reference, the Plan was amended and
restated to incorporate all amendments.
RENT-A-CENTER, INC.
B-7
45
RENT-A-CENTER, INC.
5700 TENNYSON PARKWAY, 3RD FLOOR
PLANO, TEXAS 75024
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF THE COMPANY
---------------------------------------
COMMON STOCK
The undersigned, hereby revoking all prior proxies, hereby appoints Robert
D. Davis and David M. Glasgow jointly and severally, with full power to act
P alone, as my true and lawful attorneys-in-fact, agents and proxies, with full
and several power of substitution to each, to vote all the shares of Common
R Stock of Rent-A-Center, Inc. which the undersigned would be entitled to vote
if personally present at the Annual Meeting of Stockholders of Rent-A-Center,
O Inc. to be held on May 15, 2001 and at any adjournments and postponements
thereof. The above-named proxies are hereby instructed to vote as shown on
X the reverse side of this card.
Y THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS SPECIFIED HEREIN, BUT
WHERE NO DIRECTION IS GIVEN IT WILL BE VOTED "FOR" PROPOSALS 1, 2 AND 3 IN
THE DISCRETION OF THE ABOVE-NAMED PERSONS ACTING AS PROXIES ON SUCH OTHER
MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING.
- -------------------------------------------------------------------------------
COMMENTS/ADDRESS CHANGE: PLEASE MARK COMMENT/ADDRESS CHANGE ON REVERSE SIDE
(CONTINUED AND TO BE SIGNED ON OTHER SIDE)
- --------------------------------------------------------------------------------
o FOLD AND DETACH HERE o
46
- ------------------------------------------------------------------------------------------------------------------------------------
Please mark
your votes as
indicated in
this example [X]
1. ELECTION OF CLASS I DIRECTORS 2. To approve an amendment to our Amended and
for the Item set forth in the J. Ernest Talley and Restated Certificate of Incorporation
accompanying proxy statement. Mitchell E. Fadel increasing the number of shares of our Common
Stock, par value $.01 per share, we are
FOR the WITHHOLD WITHHELD FOR: (To withhold authorized to issue from 50,000,000 to
nominee AUTHORITY authority to vote for any 125,000,000.
listed to the to vote for the nominee individual nominee, write
right listed to the right the nominee's name in the FOR AGAINST ABSTAIN
space provided below.)
[ ] [ ] [ ] [ ] [ ]
--------------------------
3. To approve amendments to our Long-Term Incentive 4. In their discretion, upon such other business
Plan increasing the number of shares of our as may properly come before the meeting.
Common Stock reserved for issuance under our
Long-Term Incentive Plan from 6,200,000 to 7,900,000
shares, reducing the number of shares of Common Stock
which are reserved for issuance under our Long-Term
Incentive Plan for director options from 496,000 to
210,000 shares, and reducing the number of shares of
Common Stock which are reserved for issuance under
the Long-Term Incentive Plan for employee stock awards
from 310,000 to 31,250 shares.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
The undersigned(s) acknowledges receipt of the
Notice of 2001 Annual Meeting of Stockholders
and the proxy statement accompanying the same, each
dated April __, 2000.
Please date this proxy and sign your name exactly as
it appears hereon. If there is more than one owner,
I PLAN TO ATTEND [ ] each should sign. When signing as an agent,
attorney, administrator, guardian or trustee, please
indicate your title as such. If executed by a
corporation this proxy should be signed in the
corporate name by a duly authorized officer who
should so indicate his or her title.
PLEASE DATE, SIGN AND RETURN THIS PROXY
PROMPTLY IN THE ENCLOSED ENVELOPE.
----------------------------------------------------
Date
----------------------------------------------------
Signature
----------------------------------------------------
Signature if held jointly
- ------------------------------------------------------------------------------------------------------------------------------------
o FOLD AND DETACH HERE o
47
RENT-A-CENTER, INC.
5700 TENNYSON PARKWAY, 3RD FLOOR
PLANO, TEXAS 75024
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF THE COMPANY
---------------------------------------
SERIES A PREFERRED STOCK
The undersigned, hereby revoking all prior proxies, hereby appoints Robert
D. Davis and David M. Glasgow jointly and severally, with full power to act
P alone, as my true and lawful attorneys-in-fact, agents and proxies, with full
and several power of substitution to each, to vote all the shares of Series A
R Preferred Stock of Rent-A-Center, Inc. which the undersigned would be
entitled to vote if personally present at the Annual Meeting of Stockholders
O of Rent-A-Center, Inc. to be held on May 15, 2001 and at any adjournments and
postponements thereof. The above-named proxies are hereby instructed to vote
X as shown on the reverse side of this card.
Y THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS SPECIFIED HEREIN, BUT
WHERE NO DIRECTION IS GIVEN IT WILL BE VOTED "FOR" PROPOSALS 1, 2 AND 3 IN
THE DISCRETION OF THE ABOVE-NAMED PERSONS ACTING AS PROXIES ON SUCH OTHER
MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING.
- -------------------------------------------------------------------------------
COMMENTS/ADDRESS CHANGE: PLEASE MARK COMMENT/ADDRESS CHANGE ON REVERSE SIDE
(CONTINUED AND TO BE SIGNED ON OTHER SIDE)
- --------------------------------------------------------------------------------
o FOLD AND DETACH HERE o
48
- ------------------------------------------------------------------------------------------------------------------------------------
Please mark
your votes as
indicated in
this example [X]
1. ELECTION OF CLASS I DIRECTORS 2. To approve an amendment to our Amended and
for the Item set forth in the J. Ernest Talley, Restated Certificate of Incorporation
accompanying proxy statement. Mitchell E. Fadel increasing the number of shares of our Common
and Peter P. Copses Stock, par value $.01 per share, we are
authorized to issue from 50,000,000 to
FOR the WITHHOLD WITHHELD FOR: (To withhold 125,000,000.
nominee AUTHORITY authority to vote for any
listed to the to vote for the nominee individual nominee, write FOR AGAINST ABSTAIN
right listed to the right the nominee's name in the
space provided below.) [ ] [ ] [ ]
[ ] [ ]
--------------------------
3. To approve amendments to our Long-Term Incentive 4. In their discretion, upon such other business
Plan increasing the number of shares of our as may properly come before the meeting.
Common Stock reserved for issuance under our
Long-Term Incentive Plan from 6,200,000 to 7,900,000
shares, reducing the number of shares of Common Stock
which are reserved for issuance under our Long-Term
Incentive Plan for director options from 496,000 to
210,000 shares, and reducing the number of shares of
Common Stock which are reserved for issuance under
the Long-Term Incentive Plan for employee stock awards
from 310,000 to 31,250 shares.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
The undersigned(s) acknowledges receipt of the
Notice of 2001 Annual Meeting of Stockholders
and the proxy statement accompanying the same, each
dated April __, 2000.
Please date this proxy and sign your name exactly as
it appears hereon. If there is more than one owner,
I PLAN TO ATTEND [ ] each should sign. When signing as an agent,
attorney, administrator, guardian or trustee, please
indicate your title as such. If executed by a
corporation this proxy should be signed in the
corporate name by a duly authorized officer who
should so indicate his or her title.
PLEASE DATE, SIGN AND RETURN THIS PROXY
PROMPTLY IN THE ENCLOSED ENVELOPE.
----------------------------------------------------
Date
----------------------------------------------------
Signature
----------------------------------------------------
Signature if held jointly
- ------------------------------------------------------------------------------------------------------------------------------------
o FOLD AND DETACH HERE o