DLLR Dfc Global Corp (MM)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934

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DOLLAR FINANCIAL CORP.

(Name of Registrant as Specified In Its Charter)

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DOLLAR FINANCIAL CORP.
1436 LANCASTER AVENUE, SUITE 300
BERWYN, PA 19312
(610) 296-3400

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on November 11, 2010

 

Dear Stockholder:

 

You are cordially invited to attend the annual meeting of stockholders of Dollar Financial Corp., a Delaware corporation, to be held at The Boca Raton Bridge Hotel located at 999 East Camino Real, Boca Raton, Florida 33432 on Thursday, November 11, 2010, at 8:30 a.m., local time. The purpose of the meeting is to consider and take action on the proposals listed below:

 

1. To elect two persons to serve as Class C directors on our board of directors for a three-year term and until their successors are duly elected and qualified;

 

2. To amend and restate the Dollar Financial Corp. 2007 Equity Incentive Plan to increase the number of shares of our common stock, par value $0.001, available for issuance under the Plan from 2,500,000 to 7,000,000 and to make certain other changes to the Plan;

 

3. To approve an amendment to our Amended and Restated Certificate of Incorporation to increase the number of authorized shares of common stock, par value $0.001, from 55,500,000 to 100,000,000;

 

4. To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending June 30, 2011; and

 

5. To transact such other business as may properly come before the meeting and any adjournments or postponements of the meeting.

 

The board of directors has fixed the close of business on September 24, 2010 as the record date for the determination of the stockholders entitled to notice of, and to vote at, the meeting and any adjournments or postponements of the meeting. Only holders of record of common stock at the close of business on the record date will be entitled to receive notice of, and to vote, at the meeting and at any adjournments or postponements of the meeting. At the annual meeting, such stockholders will be asked to consider and take action on the proposals discussed in the accompanying proxy statement and any other matter that properly comes before the annual meeting or any adjournment or postponement thereof.

 

Sincerely,

 

Roy W. Hibberd Senior Vice President,
General Counsel and Secretary

 

October 14, 2010

 

WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE ACT PROMPTLY TO VOTE YOUR SHARES. YOU MAY VOTE YOUR SHARES BY MARKING, SIGNING AND DATING THE ENCLOSED PROXY CARD AND RETURNING IT IN THE POSTAGE PAID ENVELOPE PROVIDED. YOU MAY ALSO VOTE YOUR SHARES BY TELEPHONE OR THROUGH THE INTERNET BY FOLLOWING THE INSTRUCTIONS SET FORTH ON THE PROXY CARD. IF YOU ATTEND THE MEETING, YOU MAY VOTE YOUR SHARES IN PERSON, EVEN IF YOU HAVE PREVIOUSLY SUBMITTED A PROXY IN WRITING, BY TELEPHONE OR THROUGH THE INTERNET.

DOLLAR FINANCIAL CORP.
1436 LANCASTER AVENUE, SUITE 300
BERWYN, PA 19312
(610) 296-3400

 

PROXY STATEMENT

 

DATED OCTOBER 14, 2010

 

FOR THE ANNUAL MEETING OF STOCKHOLDERS
To be held on November 11, 2010

 

Introduction

 

The enclosed proxy is solicited by and on behalf of the board of directors of Dollar Financial Corp., a Delaware corporation, which we refer to in this proxy statement as the company, we or us, for use at the annual meeting of stockholders to be held on Thursday, November 11, 2010 at 8:30 a.m., local time, and at any postponement or adjournment thereof, which we refer to in this proxy statement as the annual meeting. This proxy statement and the enclosed form of proxy are first being mailed to stockholders on or about October 14, 2010.

 

Only stockholders of record at the close of business on September 24, 2010, which we refer to in this proxy statement as the record date, will be entitled to notice of, and to vote, at the annual meeting and any adjournments or postponements thereof. At the annual meeting, such stockholders will be asked to consider and take action on the proposals discussed in this proxy statement and any other matter that properly comes before the annual meeting or any adjournment or postponement thereof.

 

Our 2010 Annual Report to Stockholders containing our consolidated financial statements for our fiscal year ended June 30, 2010, which we refer to in this proxy statement as our fiscal 2010, is being mailed together with this proxy statement to all stockholders entitled to vote at the annual meeting.

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON NOVEMBER 11, 2010: The Notice of Annual Meeting, this Proxy Statement and our 2010 Annual Report to Stockholders are available on our website at http://www.dfg.com/ir.

 

TABLE OF CONTENTS

 

 

At our annual meeting, stockholders will act upon the matters outlined in the notice of annual meeting above, including:

 

 

The record date for the determination of stockholders entitled to notice of, and to vote at, the annual meeting is the close of business on September 24, 2010. Each holder of shares of our common stock as of the record date is entitled to vote. On the record date, there were 24,372,947 shares of our common stock issued and outstanding. Each share of our common stock outstanding on the record date is entitled to one vote on each matter to be voted on at the annual meeting. Stockholders have no cumulative voting rights.

 

Registered Holders .  If you are a registered holder (meaning that your shares are held directly in your name), you are not required to attend the annual meeting in order to be able to vote. While you may attend the annual meeting and vote your shares in person, you also may choose to submit your proxies by any of the following methods:

 

 

Shares Held in “Street Name .”   If you are a stockholder whose shares are held in “street name” ( i.e. , in the name of a broker, bank or other record holder), you must either direct the record holder of your shares how to vote your shares or obtain a proxy, executed in your favor, from the record holder to be able to vote at the annual meeting. You will receive separate instructions from the broker, bank or other record holder describing how to vote your shares. The availability of telephonic or Internet voting will depend on the voting process of the broker, bank or other record holder. Please check with the broker, bank or other record holder and follow the voting procedures that they provide to you.

 

The recommendations of our board of directors are set forth below, together with the description of each item in this proxy statement. In summary, our board of directors recommends a vote:

 

 

With respect to any other matter that properly comes before the annual meeting, the proxy holders will vote as recommended by our board of directors or, if no recommendation is given, in their own discretion.

 

IF YOU SIGN AND RETURN YOUR PROXY CARD BUT DO NOT SPECIFY HOW YOU WANT TO VOTE YOUR SHARES, THE PERSONS NAMED AS PROXY HOLDERS ON THE PROXY CARD WILL VOTE IN ACCORDANCE WITH THE RECOMMENDATIONS OF OUR BOARD OF DIRECTORS.

 

How to Revoke Your Vote

 

You may revoke your proxy at any time before it is voted at the annual meeting by any of the following methods:

 

 

Dollar Financial Corp.
1436 Lancaster Avenue, Suite 300
Berwyn, PA 19312
Attention: Roy W. Hibberd, Senior Vice President, General Counsel and Secretary

 

 

Our bylaws provide that at any meeting of stockholders, the holders of a majority of the issued and outstanding shares of common stock entitled to vote at the annual meeting, present in person or by proxy, constitute a quorum for the transaction of business. Both abstentions and broker non-votes are counted as present for purposes of

determining the presence of a quorum. The election of directors will be decided by a plurality of the votes cast, in person or by proxy, at the annual meeting. Accordingly, abstentions and broker non-votes will not affect the outcome of the election of directors. A broker non-vote occurs when a nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power for that proposal and has not received voting instructions from the beneficial owner.

 

Approval of the proposal to amend our Amended and Restated Certificate of Incorporation to increase the number of authorized shares of common stock requires the affirmative vote of a majority of the outstanding shares of common stock entitled to vote at the meeting. On all other matters being submitted to stockholders, including the proposal to amend and restate our 2007 equity incentive plan to increase the number of shares available for issuance under our 2007 equity incentive plan and the proposal to ratify the selection of auditors for fiscal 2011, the affirmative vote of a majority of the votes cast affirmatively or negatively on the matter is required for approval. Accordingly, abstentions and broker non-votes will not affect the outcome with respect to such proposals, but they will have the effect of a vote against the proposal to amend our Amended and Restated Certificate of Incorporation to increase the number of authorized shares of common stock.

 

The persons named as proxies and attorneys-in-fact are our officers. All properly executed proxies returned in time to be counted at the annual meeting will be voted. Where a choice has been specified on the proxy with respect to the foregoing matters, the shares represented by the proxy will be voted in accordance with the specifications, and will be voted FOR the proposal if no specification is indicated. IN THE ABSENCE OF SPECIFIC DIRECTION, SHARES REPRESENTED BY A PROXY WILL BE VOTED “ FOR ” THE ELECTION OF ALL DIRECTORS, “ FOR ” THE AMENDMENT AND RESTATEMENT OF OUR 2007 EQUITY INCENTIVE PLAN, “ FOR ” THE AMENDMENT OF OUR AMENDED AND RESTATED CERTIFICATE OF INCORPORATION AND “ FOR ” THE RATIFICATION OF ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL 2011.

PROPOSAL 1: ELECTION OF DIRECTORS

 

We currently have seven directors. Our bylaws provide for a classified board of directors, consisting of three classes of directors (Class A, Class B and Class C), with each class serving a staggered three-year term. As a result, only a portion of our board of directors is elected each year. The two director nominees identified below are to be elected by our stockholders at our upcoming annual meeting as Class C directors, each to hold office for a three-year term expiring in 2013 or until his successor is duly elected and qualified. The directors have no reason to believe that either of the nominees will be unable or unwilling to be a candidate for election at the time of the annual meeting. If either nominee is unable or unwilling to serve, the persons named in the proxy will use their best judgment in selecting and voting for a substitute candidate or our board of directors may reduce the number of directors.

 

Each individual elected as a director at the annual meeting will serve until the annual meeting of stockholders to be held in 2013 or until his successor is duly elected and qualified.

Proposed Nominees for Election as Class C Directors for a Three-Year Term Continuing Until the 2013 Annual Meeting of Stockholders

 

The following table sets forth information with respect to the directors nominated for re-election as Class C directors at the annual meeting.

 

 

The nominees for election as Class C directors were recommended for nomination to our board by the corporate governance and nominating committee.

 

The following are biographical summaries of the directors identified above:

 

Clive Kahn has served as a director since 2007. Mr. Kahn, a chartered accountant, has served since August 2007 as the Chief Executive Officer of Cardsave Group, Ltd., a provider of point of sale terminals and credit

card processing facilities. Prior to that, Mr. Kahn was the Chief Executive Officer of Travelex Limited. Prior to becoming Chief Executive Officer, Mr. Kahn was the Chief Financial Officer of Travelex Limited. Mr. Kahn was employed by Travelex for 21 years. Prior to his employment with Travelex, Mr. Kahn practiced as a chartered accountant with the firm of BDO Stoy Hawyard. We believe that Mr. Kahn is qualified to serve on our board of directors because of his extensive management and operational experience, including his experience in the foreign exchange industry, as well as his financial and accounting experience.

 

John Gavin has served as a director since 2007. Presently, Mr. Gavin is serving as an Operating Partner with LLR Partners, a growth oriented private equity firm with $1.3 billion under management. Mr. Gavin previously served as the Vice Chairman, and was the Chief Executive Officer and President of DBM (Drake, Beam, Morin), an international career management and transitions management firm. Before joining DBM in 2006, Mr. Gavin was President and Chief Operating Officer of Right Management Consultants, a global provider of integrated consulting solutions across the employment lifecycle. Mr. Gavin originally joined Right Management as Executive Vice President of Business Development in 1996. Prior to joining Right Management, Mr. Gavin worked for Andersen Worldwide. Mr. Gavin is a director of Interline Brands, Inc., a distributor of maintenance, repair and operating products, and CSS Industries, Inc., a consumer products company. From 2000 to 2005, Mr. Gavin was a director of Opinion Research Corporation. We believe that Mr. Gavin is qualified to serve on our board of directors because of his extensive management and operational experience, his current and prior service on the board of directors of other publicly and privately held companies and his financial and accounting experience, including his experience as a certified public accountant with a nationally recognized public accounting firm and his service on the audit committees of other publicly held companies.

 

Directors are elected by a plurality of votes cast at the annual meeting.

 

Our board of directors unanimously recommends that stockholders vote “FOR” Proposal 1 to elect each of the nominated directors.

Directors Whose Terms Do Not Expire at the Annual Meeting

 

The following table sets forth information with respect to the remaining members of our board of directors:

 

 

The following are biographical summaries of the remaining members of our board of directors:

 

Jeffrey A. Weiss has served as our Chairman and Chief Executive Officer since an affiliate of Bear Stearns & Co. Inc., an investment banking firm, acquired us in 1990. Until 1992, Mr. Weiss was also a Managing Director at Bear Stearns & Co. with primary responsibility for that firm’s investments in small to mid-sized companies, in addition to serving as chairman and chief executive officer for several of these companies. We believe that Mr. Weiss is qualified to serve on our board of directors because of his extensive operational experience with us and his knowledge of our industry.

 

Ronald McLaughlin has served as a director since 2008. Mr. McLaughlin founded Chapman Inc. in 2000 and since that time has worked with a variety of clients, directly and through Chapman Inc. or a partnership with McLaughlin-Moses on a diverse array of mandates, including raising investment capital, strategic government relations and developing strategic alternatives for businesses that would benefit from effective partnering with the Canadian government. From 1997 to 2000, Mr. McLaughlin was the Chief of Staff for the

Premier of the Province of Ontario. He currently serves on the board of directors of Pro-Demnity Insurance Company. We believe that Mr. McLaughlin is qualified to serve on our board of directors because of his extensive management and operational experience and his understanding of matters relating to the Canadian marketplace.

 

David Jessick has served as a director since 2005. Self-employed since 2005, Mr. Jessick served as a consultant to the Chief Executive and Senior Financial staff at Rite Aid Corporation from July 2002 to February 2005. Mr. Jessick served as Rite Aid’s Senior Executive Vice President and Chief Administrative Officer from December 1999 to June 2002. Prior to that, from February 1997 to June 1999, Mr. Jessick was the Chief Financial Officer and Executive Vice President of Finance and Investor Relations for Fred Meyer, Inc. From 1979 to 1996, he held various roles of increasing responsibility at Thrifty Payless Holdings, Inc., including Executive Vice President and Chief Financial Officer from 1993 to 1996. Mr. Jessick began his career as a Certified Public Accountant for Peat, Marwick, Mitchell & Co. He currently serves on the board of directors of Big 5 Sporting Goods Corporation (audit committee chair and nominating committee member and compensation committee) and Rite Aid Corporation (audit committee chair). From 2005 to 2007, Mr. Jessick served as a member of the board of directors of Pathmark Stores, Inc., from 2005 to 2008, Mr. Jessick served as a member of the board of directors of Pinnacle Foods Group, Inc., and from 2005 to 2009, Mr. Jessick served as a member of the board of directors of Source Interlink Companies, Inc. We believe that Mr. Jessick is qualified to serve on our board of directors because of his extensive accounting and financial experience, his current and prior service on the board of directors of other publicly and privately held companies, including membership on multiple audit committees, and his management and operational experience, including his more than 30 years’ experience as a corporate executive and chief financial officer of publicly traded companies in the retail sector.

 

Kenneth Schwenke has served as a director since 2006. After graduation from Syracuse University and service as an officer in the U.S. Marine Corps, Mr. Schwenke received an MBA degree from Duke University in 1986. He then served as a Senior Human Resources Executive for companies including PepsiCo, Honeywell, and Aramark, leaving Aramark as SVP HR in 2001 to found the Off-Campus Dining Network, exiting with a sale to Sodexo, Inc. in 2006. Mr. Schwenke then founded Gravitas LLC in 2007, where he currently serves as managing partner. Mr. Schwenke additionally serves as an Adjunct Professor of Business at Villanova University, on the boards of four privately-held companies, as a board member for the Marine Corps Association Foundation, and as a Trustee of the Haverford School. We believe that Mr. Schwenke is qualified to serve on our board of directors because of his extensive management and operational experience, including his experience in the human resources field.

 

Michael Kooper has served as a director since 2008. Since November 2004, Mr. Kooper has been the Area Chairman of Gallagher Benefit Services, Inc., a benefits consulting firm. From December 1998 until November 2004, Mr. Kooper was the President of The Kooper Group, a benefits consulting firm. We believe that Mr. Kooper is qualified to serve on our board of directors because of his extensive management and strategic experience, including his experience in the employee benefits area.

 

The following table sets forth compensation paid to our non-employee directors during the year ended June 30, 2010:

 

 

 

 

Compensation of Independent Directors

 

Our independent directors are eligible to receive the following annual compensation:

 

 

In addition, at the first board meeting after each annual meeting of stockholders, the then-current non-employee members of our board of directors are entitled to receive a grant of restricted stock units as well as options to purchase shares of our common stock. These awards vest on the earliest of (a) the date of the next annual meeting of stockholders, (b) the first anniversary of the grant, (c) the death of the recipient, or (d) our change in control. The aggregate annual award to each non-employee board member is made in an amount, calculated in accordance with

generally accepted accounting principles, equal to two-times the average annual cash compensation for the non-employee members who served on our board of directors for the entire prior fiscal year, with one-half of such value represented as an option grant to purchase shares of our common stock and one-half of such value represented as restricted stock units. If a board member joins our board of directors after a grant date, such director will receive a prorated award on the date of joining our board.

 

The shares of our common stock purchased on exercise of the options issued to non-employee directors cannot be sold until the earlier of (a) our change in control, or (b) the 91st day after the recipient ceases to serve on our board of directors, except to the extent necessary to generate funds to pay taxes incurred upon exercise of options. Shares of our common stock underlying restricted stock units granted to our non-employee directors will be delivered upon the first to occur of (a) our change in control, or (b) the earlier of (i) the 91st day after the recipient ceases to serve on the board or (ii) the 15th day of the third month following the calendar year in which the recipient ceases to serve on the board, except to the extent (subject to compliance with Section 409A of the Internal Revenue Code) necessary to generate funds to pay taxes incurred with regard to the units.

 

At the election of a non-employee member of our board of directors, such member’s board retainer and meeting fees will be paid in vested restricted stock units (subject to the delivery rules set forth in the paragraph above) rather than in cash. The election to receive board retainer and meeting fees in vested restricted stock units must be made by the non-employee director prior to December 31st of the calendar year preceding the fiscal year in which such fees are earned.

 

In addition, Messrs. Gavin, Jessick, Kooper, McLaughlin and Schwenke participate in our health benefit program with the full cost paid by us.

 

Committees of the Board

 

Our board of directors maintains standing audit, corporate governance and nominating and human resources and compensation committees, each of which is described below.

 

Audit Committee .  The audit committee assists our board of directors in overseeing: (i) the integrity of our financial statements; (ii) our compliance with legal and regulatory requirements; (iii) the independence and qualifications of our independent registered public accounting firm; and (iv) the performance of our internal audit function and independent registered public accounting firm. The audit committee’s charter was adopted by our board of directors in February 2005, and was amended most recently in April 2005. A current copy of the audit committee charter was attached to our proxy statement for our 2008 annual meeting of stockholders filed with the Securities and Exchange Commission on October 7, 2008.

 

Our Code of Business Conduct and Ethics includes information regarding procedures established by the audit committee for the submission of complaints about our accounting or auditing matters. Our Code of Business Conduct and Ethics is applicable to our executives, employees and directors, and reflects and reinforces our commitment to integrity in the conduct of our business. Amendments to our Code of Business Conduct and Ethics and any grant of a waiver from a provision of our Code of Business Conduct and Ethics requiring disclosure under applicable Securities and Exchange Commission rules will be disclosed on our website (www.dfg.com). A copy of our Code of Business Conduct and Ethics is available on our website (www.dfg.com/ethics.asp). A copy of the Code may also be obtained upon request from our Secretary at the following address: Dollar Financial Corp., 1436 Lancaster Avenue, Suite 300, Berwyn, PA 19312.

 

The audit committee currently consists of Messrs. Jessick (Chairman), Gavin and Kahn, each of whom is independent within the meaning of the Securities and Exchange Commission regulations and the listing requirements of the Nasdaq Stock Market, which we refer to in this proxy statement as Nasdaq. The audit committee met 7 times during fiscal 2010.

 

Each member of the audit committee is financially literate, knowledgeable and qualified to review financial statements. Our board of directors has determined that Mr. Jessick is qualified as an “audit committee financial expert” within the meaning of Securities and Exchange Commission regulations. Our board of directors reached its conclusion as to the qualifications of Mr. Jessick based on his education and experience in analyzing financial statements of a variety of companies, most notably as the Chief Financial Officer and Executive Vice President of Finance and Investor Relations for Fred Meyer, Inc. from February 1997 to June 1999 and as the Executive Vice President and Chief Financial Officer at Thrifty Payless Holdings, Inc. from 1993 to 1996. He is currently a director of Rite Aid Corporation (where he also serves the audit committee chairman) and Big 5 Sporting Goods Corporation (where he also serves as the audit committee chairman and a nominating committee member and compensation committee). Consistent with Nasdaq listing requirements, our board of directors has determined that Mr. Jessick’s concurrent service on these boards and committees does not impair his ability to effectively serve on the audit committee.

 

Corporate Governance and Nominating Committee .  The corporate governance and nominating committee is responsible for: (i) identifying individuals qualified to become board members and recommending to our board of directors the nominees for election to our board; (ii) leading our board of directors in its annual review of our board’s performance, and making recommendations to our board of directors regarding board organization, membership, function and effectiveness, as well as committee structure, membership, function and effectiveness; (iii) recommending to our board of directors nominees for each committee of our board; (iv) reviewing our efforts to promote diversity among directors, officers, employees and contractors; and (v) arranging for an orientation for all directors.

 

The corporate governance and nominating committee amended its charter on September 24, 2008. A current copy of the amended and restated corporate governance and nominating committee charter was attached to our proxy statement for our 2008 annual meeting of stockholders filed with the Securities and Exchange Commission on October 7, 2008. The corporate governance and nominating committee met one time during fiscal 2010.

The corporate governance and nominating committee currently consists of Messrs. Gavin (Chairman), Kahn, Jessick, McLaughlin and Schwenke, each of whom is independent within the meaning of Nasdaq listing requirements and the charter of the corporate governance and nominating committee.

 

Human Resources and Compensation Committee .  The human resources and compensation committee is authorized to determine compensation for our senior executives and non-employee directors. The human resources and compensation committee met 11 times during fiscal 2010. The human resources and compensation committee amended its charter on September 24, 2008. A current copy of the amended and restated human resources and compensation committee charter was attached to our proxy statement for our 2008 annual meeting of stockholders filed with the Securities and Exchange Commission on October 7, 2008.

 

The human resources and compensation committee currently consists of Messrs. Schwenke (Chairman), Kooper and McLaughlin, each of whom is independent within the meaning of Nasdaq listing requirements, a “nonemployee director” within the meaning of Rule 16b-3 promulgated under Section 16 of the Securities Exchange Act of 1934, as amended, and an “outside director” within the meaning of Section 162(m) of the Internal Revenue Code.

 

See “Executive Officer and Executive Compensation —  Compensation Discussion and Analysis” , ‘‘ —  Report of the Compensation Committee” and “— Human Resources and Compensation Committee Process and Procedures” below for more information regarding the human resources and compensation committee.

 

Our board of directors met 14 times during fiscal 2010. Each incumbent director attended at least 75% of the aggregate meetings of our board during fiscal 2010 that were held following his election and of the meetings held by all committees on which he served.

 

It is our policy that all of our board members attend annual meetings of stockholders, except where the failure to attend is due to unavoidable circumstances or conflicts. All of our directors attended our 2009 annual meeting of stockholders.

 

No director is deemed to be independent unless our board of directors affirmatively determines that the director has no material relationship with us, directly or as an officer, stockholder or partner of an organization that has a material relationship with us and, in doing so, our board of directors considers information regarding the relationships between each director and his family, on the one hand, and us, on the other. In assessing director independence, our board of directors considers all commercial, charitable or other business relationships that any director may have with us and our affiliates, including those reported under “Certain Relationships and Related Transactions” below. Nasdaq’s “independence” definition includes a series of objective tests, such as that the director is not an employee of ours and has not engaged in various types of business dealings with us. In addition, as further required by Nasdaq listing requirements, our board of directors has made a subjective determination with respect to each independent director that no relationships exist which, in the opinion of our board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In making these determinations, our board of directors reviewed and discussed information provided by the directors and us with regard to each director’s business and personal activities as they may relate to us and our management. As a result of its review, our board of directors affirmatively determined that all of our directors (other than Mr. Weiss) are independent of us and our management under Nasdaq’s “independence” definition and that the audit committee, corporate governance and nominating committee and human resources and compensation committee are comprised exclusively of independent directors under applicable Nasdaq rules. Mr. Weiss is not considered to be independent because of his employment as one of our executives. Our board of directors also determined that the directors who serve as members of the audit committee are also “independent” for purposes of Section 10(A)(3) of the Securities Exchange Act of 1934, as amended.

 

Our board of directors does not have a policy regarding the separation of the roles of Chief Executive Officer and Chairman of our board of directors as our board of directors believes it is in our best interests to make that determination based on the position and direction of our company and the membership of our board of directors. Our board of directors has determined that having our Chief Executive Officer serve as Chairman of our board of directors is in the best interest of the our stockholders at this time. This structure makes the best use of our Chief Executive Officer’s extensive knowledge of us and our industry, as well as fostering greater communication between our management and our board of directors. Our board of directors has not appointed a lead independent director. The non-management members of our board, however, meet periodically, and no less than twice per fiscal year, in executive session to discuss the effectiveness of our management, the quality of the board of directors meetings and any other issues or concerns.

 

In making its recommendations as to nominees for election to our board of directors, the corporate governance and nominating committee may consider, in its sole judgment, recommendations of our Chief Executive Officer, other directors, senior executives, stockholders and third parties. The corporate governance and nominating committee may also retain third-party search firms to identify potential nominees.

 

Stockholders desiring to recommend nominees should submit their recommendations in writing to Roy W. Hibberd, Senior Vice President, General Counsel and Secretary, Dollar Financial Corp., 1436 Lancaster Avenue, Suite 300, Berwyn, PA 19312. Recommendations from stockholders should include pertinent information concerning the proposed nominee’s background and experience. The corporate governance and nominating committee may consider, as one of the factors in its evaluation of stockholder recommended nominees, the size and duration of the interest of the recommending stockholder or stockholder group in our capital stock. The corporate governance and nominating committee may also consider the extent to which the recommending stockholder intends to continue holding its interest in our capital stock, including, in the case of nominees recommended for election at an annual meeting of stockholders, whether the recommending stockholder intends to continue holding its interest at least through the time of such annual meeting.

 

Based on the information provided to the corporate governance and nominating committee, it will make an initial determination whether to conduct a full evaluation of a candidate. As part of the full evaluation process, the corporate governance and nominating committee may conduct interviews, obtain additional background information and conduct reference checks of potential nominees. The corporate governance and nominating committee may also ask potential nominees to meet with management and other members of our board of directors. After completing this evaluation process, the corporate governance and nominating committee makes a recommendation to the full board of directors, which makes the final determination whether to nominate the candidate as a director.

 

In evaluating a candidate, our board of directors, with the assistance of the corporate governance and nominating committee, takes into account a variety of factors as it deems appropriate, including the following:

 

 

The corporate governance and nominating committee also considers such other factors as it deems appropriate, including a nominee’s integrity, experience, achievements, judgment, intelligence, personal character and capacity to make independent analytical inquiries, ability and willingness to devote adequate time to board duties, and the

likelihood that he or she will be able to serve on our board for a sustained period. The corporate governance and nominating committee also considers factors such as global experience, experience as a director of a public company and knowledge of relevant industries. Although neither the corporate governance and nominating committee nor our board of directors has a specific policy with regard to the consideration of diversity in identifying director nominees, the corporate governance and nominating committee gives due consideration to our board’s overall balance of diversity of perspectives, backgrounds and experiences when selecting individuals for nomination for election to our board of directors.

 

Our board of directors assumes an active role, as a whole and also at the committee level, in overseeing management of our risks. Our board of directors regularly receives reports from senior management on areas of material risk to us, including our credit, liquidity, operational and legal and regulatory risks. Pursuant to its charter, the audit committee reviews our major financial risk exposures and the steps management has taken to monitor and control such exposures, and it also meets periodically with management to discuss risk assessment and risk management. In addition, the human resources and compensation committee oversees the management of risks relating to our executive and non-executive compensation plans and arrangements, and the nominating and corporate governance committee manages risks associated with the independence of our board of directors and potential conflicts of interest. Although each committee oversees certain risks and the management of such risks, our entire board of directors is regularly informed through committee reports about such risks.

 

We encourage our employees to raise possible ethical issues. We maintain an ethics hotline that is available 24 hours a day, seven days a week, and which is centrally answered by an independent, third-party service. Callers may remain anonymous and, to further protect the caller’s anonymity, the telephone compliance hotline staff does not identify the gender of the caller, tape record the call or use “caller ID” or other methods to identify the telephone number of the caller. We prohibit retaliatory action against any individual for raising possible ethical issues, and employees at all levels are prohibited from retribution against anyone for reporting or supplying information about an ethical concern.

 

Our board of directors recommends that stockholders deliver any communications with our board in writing by sending them in care of our Secretary. Stockholders may send such communications by email to Roy W. Hibberd, our Senior Vice President, General Counsel and Secretary at Roy.Hibberd@dfg.com, or by mail to Roy W. Hibberd, Senior Vice President, General Counsel and Secretary, Dollar Financial Corp., 1436 Lancaster Avenue, Suite 300, Berwyn, PA 19312. The name(s) of any specific intended board recipient(s) should be noted in the communication.

 

The following table sets forth information as of September 24, 2010 regarding the beneficial ownership of our common stock by each director, by each executive officer named in the 2010 Summary Compensation Table appearing elsewhere in this proxy statement, by all directors and executive officers as a group, and by each person known to us to be the beneficial owner of more than 5% of our outstanding common stock. Except as indicated below, to our knowledge, all of such common stock is owned directly, and the indicated person has sole voting and investment power.

 

We have calculated beneficial ownership in accordance with the rules of the Securities and Exchange Commission. Shares of our common stock subject to options currently exercisable or exercisable within 60 days of September 24, 2010 are deemed to be outstanding for calculating the percentage of outstanding shares of the person holding those options, but are not deemed outstanding for calculating the percentage of any other person. As of September 24, 2010, there were a total of 24,372,947 shares of our common stock issued and outstanding. Unless otherwise indicated below in the footnotes to the table, the address of each officer and director is c/o Dollar Financial Corp., 1436 Lancaster Avenue, Suite 300, Berwyn, Pennsylvania 19312.

 

 

 

 

Executive Officers

 

Our executive officers, as of September 24, 2010, including their respective ages and positions, are set forth below:

 

 

The following are biographical summaries of our executive officers.

 

Jeffrey A. Weiss has served as our Chairman and Chief Executive Officer since an affiliate of Bear Stearns & Co. Inc., an investment banking firm, acquired us in 1990. Until 1992, Mr. Weiss was also a Managing Director at Bear Stearns & Co. with primary responsibility for that firm’s investments in small to mid-sized companies, in addition to serving as chairman and chief executive officer for several of these companies.

 

Randy Underwood has served as our Executive Vice President, Chief Financial Officer and Assistant Secretary since 2004. Previously, Mr. Underwood served for three years as Senior Vice President, Global Finance and Administration and Chief Financial Officer for The Coleman Company, Inc., a manufacturer of outdoor recreation products. Prior to his tenure at The Coleman Company, Mr. Underwood held senior executive positions with Strategic Development Partners, Inc. from 1999 through 2001 and with Thorn EMI, plc, the parent company of Rent-A-Center, Inc., an operator of retail rent-to-own stores, including Senior Vice President and Chief Financial Officer and Division President, from 1988 through 1998. Earlier in his career, he practiced as a Certified Public Accountant with the firm of Peat, Marwick, Mitchell and Co., a public accounting firm.

 

Norman Miller has served as our Executive Vice President and Chief Operating Officer since 2007. Previously, Mr. Miller was employed by Aramark, Inc., a provider of managed services to business, educational, healthcare, governmental and other institutions, where he served from 2003 to 2006 as its Group President of Sports & Entertainment. He also served from 2002 to 2003 as Aramark’s President of Correctional Services. From 1992 to 1997, Mr. Miller was a Regional General Manager at Nestle. From 1989 to 1992, Mr. Miller was employed by Kraft General Foods, as a Regional Sales Manager. From 1988 to 1989, Mr. Miller was employed by PepsiCo as a Regional Operations Manager. Mr. Miller is a 1983 graduate of the United States Military Academy at West Point.

 

Sydney Franchuk has served as our Executive Vice President and Chairman-National Money Mart since 2007. Mr. Franchuk served as President of our North America operations from November 1997 until January 2007. Previously, Mr. Franchuk held the position of Vice President of Finance and Administration for National Money Mart Company and Check Mart, an affiliated company in the United States. Prior to joining us in 1985, Mr. Franchuk was a public accountant with Woods & Company and Ernst & Young LLP Chartered Accountants, each an accounting firm, and is a Certified Management Accountant.

 

Silvio Piccini has served as our Senior Vice President and Managing Director — United Kingdom Operations since 2008. From January 2007 until December 2007, Mr. Piccini served as a Principal of Strategic Retail Management, a retail consulting firm. Prior to that, Mr. Piccini served for one year as the Executive Vice President and Chief Merchandising Officer for Movie Gallery, Inc., a retail store video chain which acquired his employer of nine years, Hollywood Entertainment, in 2005. During Mr. Piccini’s collective 10 years of employment in the video store industry, he held several positions including Vice President of Operations, Senior Vice President of Planning

and Allocation, Senior Vice President of Merchandising, Senior Vice President of Marketing, and finally, Executive Vice President and Chief Merchandising Officer of the combined organization. Prior to that, Mr. Piccini worked for Taco Bell Corporation, then a subsidiary of Pepsico, Inc., for seven years in increasing roles of responsibility.

 

Roy W. Hibberd has served as our Senior Vice President, General Counsel since July 2005, and as our Secretary since June 2008. Prior to joining us, Mr. Hibberd served as a Managing Director of Smooth Engine, Inc., a consulting company, and as a Managing Director of Millennium Services Corp., a franchise and business consulting firm, from July 2002 to July 2005. From 2000 until 2002, he served as the General Counsel and Managing Director (US) for the United States operations of Virtual Internet, plc, a London based public company providing internet services, and from 1996 to 1999 as the Vice President and General Manager, The Americas, of the American Express Company.

 

Peter Sokolowski has served as our Senior Vice President of Finance and Corporate Treasurer since January 2008. Mr. Sokolowski previously was our Senior Vice President of Finance and Chief Credit Officer and also served as our Vice President, Finance from 1991 to 2002. Prior to joining us in 1991, Mr. Sokolowski worked in various financial positions in the commercial banking industry.

 

William Athas has served as our Senior Vice President of Finance and Corporate Controller since January 2007. Previously, he was our Vice President, Finance and Corporate Controller. Prior to joining us in 2000, he was the divisional controller of Timet, a titanium metals company, from December 1998 until January 2000. Mr. Athas worked at Asarco, Inc., a non-ferrous metals company, from 1987 to 1998, where he was the assistant corporate controller. Mr. Athas is a graduate of Boston College and attained his Certified Public Accountant certification in 1989.

 

Melissa Soper has served as our Senior Vice President of Corporate Administration since July 2007. Previously, Ms. Soper served as our Vice President and General Manager, We the People Division, from July 2005 until July 2007, and previously served from October 1996 through July 2005 as our Vice President, Corporate Human Resources, with overall responsibility for development of our global human resources department and for compliance with state and federal labor laws.

 

As a global provider of financial products and services to the unbanked and under-banked community, we believe that the value we deliver to our customers and stockholders depends in large part upon the quality and capabilities of our people. Our business model is based on our ability both to attract new customers and maintain relationships with existing customers as well as to maintain our mission, customer focus and entrepreneurial spirit. As with all of our employees, the recruitment, retention and motivation of our executive officers are critical factors to our business success. We believe that the senior leadership provided by our Chairman and Chief Executive Officer, as well as the other individuals included in the “2010 Summary Compensation Table” below, to whom we refer in this proxy statement as our named executive officers, is the cornerstone to successfully implementing and achieving our strategic plans. Through the following questions and answers, we will explain the material elements of our executive compensation programs.

 

What are the objectives of our executive compensation programs?

 

Our compensation philosophy is to provide a strong focus on overall company financial performance, business development and creation of stockholder value. As a growth-oriented and entrepreneurial company, our executive compensation programs are designed to align compensation with corporate performance and the creation of stockholder value. We seek to compensate our executives at levels that are competitive with our peer companies in order to attract, retain and motivate superior quality and highly experienced executives. Accordingly, our executive compensation programs emphasize variable pay in the form of annual and long-term incentive programs which tie a significant portion of each executive’s compensation to our success in achieving our key strategic and financial goals.

 

For our executive compensation programs for each of fiscal 2010 and 2011, the human resources and compensation committee of our board of directors retained the Hay Group, a global management consulting firm, to gather data regarding the types and amount of compensation that our peer companies, which we identify below, as well as other international retail and consumer companies from which we recruit, pay their executives and other key employees. The Hay Group assists our human resources and compensation committee in the review of relevant data and the determination of appropriate executive compensation levels. These reviews provide us with valuable data regarding the compensation levels and practices of our peer and other targeted companies, which, in turn, assist us in setting our compensation levels at competitive levels.

 

We set annual compensation for fiscal 2010 and fiscal 2011 based, in part, on a detailed report from the Hay Group that we received prior to the start of each of those fiscal years. In these reports, the Hay Group:

 

 

Our Chairman and Chief Executive Officer and our Executive Vice President and Chief Financial Officer, and our Chairman and Chief Executive Officer with regard to our Executive Vice President and Chief Financial Officer, provided our human resources and compensation committee with:

 

 

The human resources and compensation committee considered this information in each instance, and discussed the data and recommendations referenced above with our Chairman and Chief Executive Officer for recommendations for named executive officers other than himself, and representatives from the Hay Group, with respect to our senior executives’ base pay and our annual cash bonus and long-term incentive programs. The human resources and compensation committee considered all of the inputs described above, as well as additional factors such as retention issues, our short and long-term performance goals and our overall compensation philosophy, and presented its recommendations to our board of directors for each element of compensation then being considered. Based on the empirical compensation data gathered by our compensation consultants, combined with the compensation philosophy and objectives communicated by the human resources and compensation committee, our board of directors discussed, considered and approved these recommendations.

 

With respect to the compensation of our Chairman and Chief Executive Officer, the human resources and compensation committee is responsible for reviewing and approving the goals and objectives relating to our Chairman and Chief Executive Officer’s compensation, evaluating the performance of our Chairman and Chief Executive Officer in light of such goals and objectives, and setting our Chairman and Chief Executive Officer’s compensation level, perquisites and other benefits based on this evaluation, which are also then approved by our board of directors.

 

What are the principal components of our executive compensation programs?

 

Our executive compensation programs consist of three key elements: (i) base salary; (ii) a performance-based annual bonus, payable in cash; and (iii) long-term incentive compensation, which for fiscal 2010 and fiscal 2011 included grants of shares of restricted common stock, restricted stock units, options to purchase our common stock and long-term cash incentives. Generally, as an executive’s responsibilities increase, the human resources and compensation committee allocates a greater portion of his or her total compensation potential from fixed components such as base salary to variable components such as annual bonus and long-term incentive compensation. We believe that this allocation approach reflects our pay-for-performance compensation philosophy due to the greater influence that most of our senior executives have on our annual and long-term business results. In addition, we offer certain additional compensation items to our Chairman and Chief Executive Officer and our Executive Vice President and Chief Financial Officer pursuant to employment agreements that recognize and reflect the respective roles each such individual undertakes within our organization. Each of these principal components is described in more detail below.

 

Base Salary:   We use base salary as a significant retention tool to provide executives with a base level of income. Historically, base salary determinations for our named executive officers take into account many factors, including:

 

 

In addition to the factors described above, the human resources and compensation committee also considered the findings of the Hay Group in making its base salary determinations for fiscal 2010 and fiscal 2011. Consistent with our compensation objectives of attracting and retaining top executive talent, we believe that the base salaries of our named executive officers should be set at levels which, while not always leading, are strongly competitive with, our peer group. As such, our human resources and compensation committee, our Chairman and Chief Executive Officer and our Executive Vice President and Chief Financial Officer has determined that the appropriate base salary target for our named executive officers should reflect a combination of the 50th percentile of the base salaries of comparable executives at our peer companies as a group as well as the aforementioned surveys and

methodological data provided by the Hay Group, with the ability to move higher based on the factors noted above and other variables deemed relevant by our human resources and compensation committee. Given our international business model, we seek executive talent with large, international public company experience, preferably including substantial consumer retail experience. Therefore, we consider benchmarking against the consumer/retail services industries to be more relevant than specialized financial services companies. We believe that benchmarking our executive pay to this broader industry group has enabled us to attract and retain high caliber executives from that group.

 

In light of the challenging economic conditions that we faced in fiscal 2010, and the fact that, based on input from the Hay Group, the named executive officers were near the median in total direct compensation (including base salaries and short and long-term incentives) relative to similar executive officers in our peer group, the human resources and compensation committee elected not to increase the base salaries of any of our named executive officers for fiscal year 2010 except with respect to Mr. Weiss, whose salary increase (from $900,000 to $985,000) was made effective as of July 1, 2009 under the terms of the employment agreement that we entered into with him on October 30, 2009. In lieu of base salary increases in fiscal 2010, the human resources and compensation committee awarded the named executive officers the following discretionary cash bonus awards for fiscal 2009 based on the committee’s subjective judgment and our performance against financial and strategic objectives:

 

 

Based upon input from the Hay Group, the human resources and compensation committee increased the base salaries for fiscal 2011 for each of Messrs. Underwood (from $445,000 to $505,000), Miller (from $450,000 to $505,000) and Piccini (from $275,000 to $305,000) in order to maintain each executive’s salary within the targeted percentile of our peer group, after taking into account each executive’s respective role and level of responsibility within our organization as well as his expected contributions to our long-term business strategies and objectives. These base salary increases were effective as of July 1, 2010, except with respect to Mr. Underwood, whose salary increase was effective May 17, 2010 under the terms of the amended and restated employment agreement that we entered into with him on that date. We did not increase Mr. Weiss’ base salary for fiscal 2011 based on information provided by the Hay Group. We did not increase Mr. Franchuk’s base salary for fiscal 2011 based on an assessment of his current role and responsibilities within our organization.

 

Annual Bonus:   Each of Messrs. Weiss, Underwood and Miller is entitled to receive annual cash bonuses pursuant to the terms of his respective employment agreement with us. Each of our other named executive officers is eligible to receive an annual cash incentive award under our management bonus program in which our other officers and key personnel participate. The target annual bonus award for each of Messrs. Weiss, Underwood and Miller is dictated by his respective employment agreement. In general, participants in the management bonus program fall within grade levels depending on position title, level of responsibility and scope of duties, with an executive’s target annual bonus opportunity increasing as the executive progresses in grade level.

 

Our annual cash bonus program is designed to motivate our named executive officers to improve our overall profitability through the achievement of targeted financial goals. For fiscal 2010, the annual bonus for each of our named executive officers other than Messrs. Franchuk and Piccini were determined largely based on the extent to which we achieved our consolidated targeted annual earnings before income taxes, depreciation, amortization and other items, to which we refer in this proxy statement as EBITDA. Mr. Franchuk’s annual bonus was determined based on the extent to which our Canadian retail operation achieved its EBITDA target in fiscal 2010. Mr. Piccini’s annual bonus was determined in part based on the extent to which our United Kingdom retail operations achieved its EBITDA target in fiscal 2010 and in part based on the extent to which we achieved our targeted consolidated EBITDA target in fiscal 2010.

Each of our named executive officers was entitled to receive a stated percentage of his base salary as a bonus to the extent we satisfied the applicable EBITDA target(s) in fiscal 2010. Our named executive officers were only entitled to receive a cash bonus for fiscal 2010 if we achieved 90% of the applicable EBITDA target(s), to which we refer as the lower threshold. To the extent our actual EBITDA for fiscal 2010 was above the lower threshold but less than the target amount, the named executive officer was entitled to a bonus determined based on linear interpolation between such amounts. Each named executive officer was also eligible to receive a stretch bonus to the extent that we exceeded the applicable EBITDA target(s), with the amount determined based on linear interpolation between such amounts up to the maximum bonus opportunity.

 

The table set forth below summarizes the annual cash bonus opportunities for each of our named executive officers for fiscal 2010 as approved by our human resources and compensation committee:

 

 

The following cash bonuses were earned by our named executive officers for fiscal 2010, and are reflected in the “2010 Summary Compensation Table” below:

 

 

Final bonus payments are determined and paid after the completion of our fiscal year audit. On August 25, 2010, our board of directors approved the payment of the annual cash bonuses for fiscal 2010 in accordance with the previously approved bonus plan.

 

On June 7, 2010, the human resources and compensation committee approved our cash bonus program for fiscal 2011 for certain members of our executive management team and key personnel based upon EBITDA operating targets to be determined by our board of directors and the human resources and compensation committee. The target bonus award and maximum bonus opportunities for each of our named executive officers for fiscal 2011 are set forth in the table below:

 

Our board of directors has indicated that it may award additional bonuses from time to time in its discretion based upon individual and company-wide performance against strategic objectives.

 

Long-Term Incentive Compensation:   Our equity-based awards to executives have typically taken the form of shares of restricted common stock, restricted stock units or options to purchase shares of our common stock granted under our 2005 Equity Incentive Plan and our 2007 Equity Incentive Plan. Awards are recommended by our Chairman and Chief Executive Officer and the human resources and compensation committee, and are based on discretionary factors including but not limited to an executive’s position, level and breadth of responsibility, and significant contributions to us.

 

Our human resources and compensation committee approved the adoption of long-term incentive programs, to which we refer collectively as our LTIP, for fiscal 2010 and fiscal 2011 on August 11, 2009 and June 7, 2010, respectively. Our LTIP is intended to achieve the following objectives:

 

 

We consider a number of alternatives for our long-term incentives to our executives and, after evaluating the various alternatives in light of our long-term incentive compensation objectives, the human resources and compensation committee determined that including restricted stock units, non-qualified options to purchase shares of our common stock and long-term cash incentives in our LTIP for fiscal 2011, the same elements used for the LTIP for fiscal 2010, would provide us with the opportunity to achieve the largest number of these objectives.

 

All of our named executive officers participate in our LTIP for fiscal 2011. All of our named executive officers, other than Mr. Weiss, participated in our LTIP for fiscal 2010. The parameters for each of the components of our LTIP are as follows:

 

Restricted Stock Units and Non-Qualified Stock Options :  Restricted stock unit awards and option awards for each of fiscal 2010 and 2011 vest ratably on a quarterly basis over a three-year period beginning with the quarter ending September 30 after the grant date, provided that the grant recipient remains employed by us on each vesting date over the three year period, thereby achieving what we believe to be a desired balance between short-term and long-term retention objectives for our key management and executives.

 

Long-Term Cash Incentives:   Awards for each of fiscal 2010 and fiscal 2011 vest ratably on an annual basis over a three-year period, provided that we meet certain EBITDA targets (which are the same that apply to our annual bonus programs discussed above) and/or other strategic objectives as set by our board for fiscal 2010 and fiscal 2011, respectively, and the award recipient remains employed with us on each respective payment date over the three year period.

 

The human resources and compensation committee intends to review our LTIP program each fiscal year to determine whether, and to what extent, new awards under our LTIP will be granted in subsequent fiscal years.

 

For fiscal 2010, long-term incentives were provided to our named executive officers in the form of restricted stock units, options to purchase shares of our common stock and long-term incentive cash awards. Restricted stock units and long-term incentive cash awards each represent approximately forty percent (40%) of the total value of the LTIP awards to each recipient, with options to purchase shares of our common stock valued at the remaining twenty percent (20%) of the total award value. Based on the market volatility at the time, we believed restricted stock units

and long-term cash incentives were more likely to enhance management retention. For fiscal 2010, our named executive officers received the following LTIP awards:

 

 

 

 

On August 27, 2009, the human resources and compensation committee approved a discretionary grant of an equity award under our 2007 Equity Incentive Plan to Mr. Weiss consisting of 20,258 shares of restricted stock units and options to purchase 12,909 shares of our common stock at an exercise price equal to $16.66, the closing price of our common stock on the date of grant. This award will vest in its entirety on December 31, 2010, subject to Mr. Weiss remaining employed with us through that date and subject to earlier vesting upon certain termination events.

 

On November 11, 2009, pursuant to an employment agreement that we entered into with Mr. Weiss dated October 30, 2009, the human resources and compensation committee approved the grant of a equity award under our 2007 Equity Incentive Plan to Mr. Weiss consisting of 31,899 shares of restricted common stock and options to purchase 14,759 shares of our common stock at an exercise price equal to $22.86, the closing price of our common stock on the date of grant. This award will vest ratably in equal annual installments over a three-year period beginning on November 11, 2010, subject to Mr. Weiss remaining employed with us through the applicable vesting dates, subject to earlier vesting upon certain termination events.

 

For fiscal 2011, long-term incentives were provided to our named executive officers in the form of restricted stock units, options to purchase shares of our common stock and long term cash awards. The allocation of the total value of the LTIP awards granted to each executive for fiscal 2011 is the same that was used with respect to LTIP awards for fiscal 2010, with restricted stock units and long-term incentive cash awards each representing approximately 40% and options representing the remaining 20%, of the total value of the award.

 

For fiscal 2011, our named executive officers received the following awards under our LTIP program:

 

 

 

 

 

Pursuant to Mr. Weiss’ current employment agreement with us, Mr. Weiss is entitled to receive annual awards beginning with fiscal 2011 equal to 200% of his base salary, one half of which is payable in cash and one half of which is payable in a combination of restricted stock units, non-qualified stock options and cash. The latter awards are granted under our LTIP and are described in the table above. See below for a more detailed discussion of Mr. Weiss’ annual awards. Pursuant to the employment agreements that we have entered into with Mr. Underwood and Mr. Miller, each such individual is entitled to receive annual LTIP awards at a level commensurate with his position within our organization and with other comparable senior executives. The annual LTIP awards to Mr. Underwood is entitled under his employment agreement must consist of 20% non-qualified stock options, 40% restricted stock units and 40% cash, based on the value of the awards. The LTIP awards for fiscal 2011 received by Messrs. Weiss, Underwood and Miller and reflected in the table above are consistent with the terms of their respective employment agreements.

 

Deferred Compensation Plan:   Certain of our key executives, including our named executive officers, are eligible to participate in our executive Deferred Compensation Plan. Our Deferred Compensation Plan provides participants with the opportunity to save and accumulate additional income on a pre-tax basis which otherwise would be lost under our tax qualified 401(k) plan on account of Internal Revenue Code provisions which limit the compensation that may be taken into account, and the benefits that may be accrued under, a qualified plan.

 

Similar to a qualified 401(k) plan, our Deferred Compensation Plan enables each plan participant to defer a percentage of his or her base salary and or bonus compensation and to choose how such deferred amounts are invested. Furthermore, as with our 401(k) plan, our Deferred Compensation Plan allows each plan participant to earn a rate of return, based on the participant’s investment elections, on their account balance on a tax-deferred basis. In addition, our Deferred Compensation Plan offers the flexibility of saving for retirement or for a shorter period of time. From time-to-time, we may make discretionary contributions to our Deferred Compensation Plan on an executive’s behalf. These contributions are subject to vesting conditions as established by our board of directors. We made no discretionary contributions to our Deferred Compensation Plan during fiscal 2010.

 

Other Compensation:   In addition to our standard compensation elements, we have agreed to provide to each of our Chairman and Chief Executive Officer and our Executive Vice President and Chief Financial Officer certain additional amounts pursuant to employment agreements with each such officer.

 

Pursuant to the terms of his employment agreement with us, Mr. Weiss is entitled to receive a supplemental retirement benefit, which we refer to as the capstone award, upon certain qualifying terminations of Mr. Weiss’s employment. The capstone award is a lump-sum payment which is the actuarial equivalent of an annual benefit of $300,000 payable to Mr. Weiss in equal monthly installments during his lifetime commencing the month that follows the applicable vesting date and a $150,000 annual survivor benefit payable on his subsequent death to his surviving spouse for her lifetime.

 

Under the terms of his employment agreement, Mr. Weiss is also entitled to receive an additional supplemental retirement benefit for each of fiscal 2010 and fiscal 2011, which we refer to as the incremental capstone award, if (i) Mr. Weiss remains continuously employed by us through such date(s) and his employment terminates by reason of his retirement on or after June 30, 2012 or the termination of his employment by us for any reason after June 30, 2014, (ii) Mr. Weiss’ employment is terminated by us for reason of disability or without cause (as defined in his employment agreement), (iii) Mr. Weiss resigns his employment for good reason (as defined in his employment agreement), or (iv) a change in control (as defined in his employment agreement) occurs during the term of Mr. Weiss’ employment with us, which such dates we refer to as incremental vesting dates. The incremental capstone award is a lump-sum payment which is the actuarial equivalent of an annual benefit of $75,000 payable to Mr. Weiss in equal monthly installments during his lifetime, commencing the first business day of the calendar month that follows the applicable incremental vesting date, with a $37,500 per year survivor benefit payable on his subsequent death to his surviving spouse for her lifetime. $1.0 million of the incremental capstone award (or, if the value of the incremental capstone award is less than $1.0 million, then all of such incremental capstone award) will

be payable on the first anniversary of the incremental vesting date, with any balance thereof payable on the first business day of the calendar month that follows the applicable incremental vesting date.

 

Under the terms of his employment agreement, if Mr. Weiss is employed by us as of June 30 of each year during the term of the agreement, Mr. Weiss is entitled to receive an award equal to 200% of his base salary for such completed fiscal year that is payable one-half in cash, which we refer to as the cash awards, and one-half in a combination of restricted stock units, non-qualified stock options and cash, which we refer to as the plan awards. Each cash award is payable upon the appointment by our board of directors of Mr. Weiss’ permanent successor as Chief Executive Officer of the Company; provided that a cash award will be payable (i) in a given year if our board of directors concludes, in its reasonable discretion, that satisfactory progress has been achieved by Mr. Weiss in planning for the succession of his Chief Executive Officer position, or (ii) upon a change of control, in each case subject to the condition that Mr. Weiss has remained continuously employed by us through such date. If Mr. Weiss’ successor as our permanent Chief Executive Officer is appointed by our board of directors prior to June 30, 2012, and provided that he has remained continuously employed by us through such date, Mr. Weiss is entitled to receive payment, on the date such successor is appointed by our board of directors, of the amount of the cash awards to which Mr. Weiss would have otherwise been entitled to receive under the terms of his employment agreement had he remained employed by us through June 30, 2012. Each plan award will be apportioned between restricted stock units, non-qualified stock options and cash in the same proportion as other members of our management that participate in our LTIP. If Mr. Weiss’ successor as our permanent Chief Executive Officer is appointed by our board of directors prior to June 30, 2012, and provided that he has remained continuously employed by us through such date, Mr. Weiss is entitled to receive the pro rata portion of the plan awards that would have been granted had he remained employed by us until the end of the fiscal year that includes the date such successor is appointed by our board of directors. The plan awards in the form of restricted stock units and stock options vest ratably on a quarterly basis over a three-year period from the grant date, provided that Mr. Weiss remains continuously employed by us through such dates. The cash component of the plan awards vest annually over a three-year period from the grant date, provided that we meet EBITDA targets and/or other strategic objectives as determined by our board of directors. Cash and plan awards will vest immediately upon a change in control or upon certain qualifying termination of Mr. Weiss’ employment.

 

On July 28, 2010, the human resources and compensation committee approved the grant to Mr. Weiss of a cash award for an amount equal to his current base salary of $985,000, and determined that the requisite succession planning conditions had been met and that such cash award was immediately payable to Mr. Weiss.

 

For a further discussion of Mr. Weiss’ cash awards, plan awards, capstone award and incremental capstone award, see “— Potential Payments upon Termination or Change in Control — Jeffrey A. Weiss” below.

 

Pursuant to the terms of his employment agreement with us, Mr. Underwood is entitled to receive an annual retention bonus at the rate of $150,000 per year, which we refer to as the annual retention bonus, upon certain qualifying terminations of Mr. Underwood’s employment described below. Mr. Underwood’s annual retention bonus is payable to him in equal monthly installments during his lifetime (and, upon his death, if Mr. Underwood has remained married to his spouse through the date of his death, his spouse will be entitled to receive an annual benefit of $75,000 payable in equal monthly installments during her lifetime). Mr. Underwood’s right to the annual retention bonus will become vested upon the occurrence of the following: (i) the termination of Mr. Underwood’s employment for any reason on or after June 30, 2011, (ii) the termination of Mr. Underwood’s employment by us without cause (as defined in his employment agreement) or by Mr. Underwood with good reason (as defined in his employment agreement), or (iii) by reason of Mr. Underwood’s death or disability. Mr. Underwood will be entitled to receive the annual retention bonus commencing the first month after such a qualifying termination, except in the case of a termination by Mr. Underwood of his employment for good reason or termination by us without cause prior to June 30, 2011, in which case payments with respect to the annual retention bonus would not commence until the expiration of a severance period of 12 months during which Mr. Underwood would be entitled to receive his base salary and cash bonus at the time of such termination. Upon a change of control (as defined in his employment agreement), Mr. Underwood will be entitled to receive in a lump sum equal to the actuarial equivalent of the value of the annual retention bonus in lieu of any future payments with respect to the annual retention bonus (and regardless

of whether Mr. Underwood’s right to the annual retention bonus had otherwise vested at the time of the change of control).

 

Under the terms of his employment agreement, Mr. Underwood is also entitled to receive an incremental retention bonus, which we refer to as the incremental retention bonus, upon certain qualifying terminations of Mr. Underwood’s employment described below. Mr. Underwood’s incremental retention bonus is an annual benefit of $50,000 payable to Mr. Underwood in equal monthly installments during his lifetime (and, upon his death, if Mr. Underwood has remained married to his spouse through the date of his death, in which case his spouse will be entitled to receive an annual benefit of $25,000 payable in equal monthly installments during her lifetime). Pursuant to the terms of the Mr. Underwood’s employment agreement, the incremental retention bonus will become payable if Mr. Underwood’s employment is terminated (i) for any reason on or after December 31, 2012, (ii) by the Company without cause, or by Mr. Underwood with good reason, or (iii) by reason of Mr. Underwood’s death or disability. Mr. Underwood will be entitled to receive the incremental retention bonus commencing the first month after such a qualifying termination, except in the case of a termination by Mr. Underwood of his employment for good reason or termination by us without cause prior to June 30, 2012, in which case payments with respect to the incremental retention bonus would not commence until the expiration of a severance period of 12 months during which Mr. Underwood would be entitled to receive his base salary and cash bonus at the time of such termination. Upon a change of control (as defined in his employment agreement), Mr. Underwood will be entitled to receive in a lump sum equal to the actuarial equivalent of the value of the incremental retention bonus in lieu of any future payments with respect to the incremental retention bonus (and regardless of whether Mr. Underwood’s right to the incremental retention bonus had otherwise vested at the time of the change of control).

 

For a further discussion of Mr. Underwood’s annual retention bonus and incremental retention bonus, see “— Potential Payments upon Termination or Change in Control — Randy Underwood” below.

 

• What do we seek to reward and accomplish through our executive compensation programs?

 

We believe that our compensation programs, collectively, should enable us to attract, retain and motivate high quality executives with international and public company experience. We provide annual bonus awards primarily to motivate key employees to meet business unit and corporate annual performance targets that take into account, and that we believe enhance, our performance. We evaluate our performance by reference both to our annual performance targets as compared to our annual internal EBITDA goals and to strategic objectives established by our board of directors. Strategic objectives are annual objectives which contribute to our long-term growth strategies. We design long-term incentive awards primarily to retain as well as to motivate and reward key employees over longer periods, generally ranging up to three years. Through the vesting and forfeiture provisions that we include in annual awards of stock options, restricted stock units, and long-term cash incentives, we believe that provide an additional incentive to executives to act in furtherance of our long-term and our stockholder’s interests.

 

• Why have we selected each principal component of our executive compensation programs?

 

We have selected programs that we have found to be commonly used by international public companies, both within and outside of our industry, because believe that such commonly used programs are well understood by our stockholders, our executives, executives we seek to hire, and analysts and credit rating agencies. Moreover, we selected each program only after we have first confirmed, with the assistance of outside professional advisors, that the program comports with settled legal and tax rules.

 

• How do we determine the amount of each principal component of compensation to our executives?

 

The human resources and compensation committee exercises judgment and discretion in setting compensation for our senior executives only after it has first reviewed industry data and peer company practices, Hay Group compensation surveys, addressed targeted compensation with an independent compensation consultant, evaluated the recommendations of our Chairman and Chief Executive Officer and our Executive Vice President and Chief Financial Officer, and evaluated our corporate performance. The human resources and compensation committee has generally attempted to set our executive compensation as a whole within the middle range of comparative pay based

on our peer group companies and compensation surveys, as described in more detail below under the heading “To what extent do we benchmark total compensation and material elements of compensation and what are the benchmarks that we use?”

 

Employment agreements that we have entered into with certain of our named executive officers provide for salary and, other than with respect to the employment agreement with our Executive Vice President and Chairman — National Money Mart, target annual bonus percentages, at fixed rates agreed to by the parties, and therefore, these components cannot be reduced at the discretion of our human resources and compensation committee.

 

• What specific items of corporate performance do we take into account in setting compensation policies and making compensation decisions?

 

Historically, achievement of our targeted EBITDA at the consolidated and business unit levels and the achievement of strategic objectives established by our board of directors have been the primary incentive targets under our annual bonus and long-term incentive compensation programs. For purposes of determining whether annual EBITDA targets have been achieved, our human resources and compensation committee may make adjustments to our EBITDA results in any objective manner it deems appropriate in its discretion to take into account the impact of extraordinary or non-recurring events such as a significant investment, disposition or acquisition, or performance toward and achievement of our strategic objectives. Additionally, under our LTIP for fiscal 2010 and fiscal 2011, we make payments for the long-term cash incentive compensation component if we meet certain EBITDA targets and/or other strategic objectives as set by our board for the respective fiscal years and, the named executive officer remains employed with us on each respective payment date.

 

• What factors do we consider in decisions to increase or decrease compensation materially?

 

As stated above under the heading “How do we determine the amount of each principal component of compensation to our executives?” , we have contractual commitments with Messrs. Weiss, Underwood, Miller and Franchuk and certain of our other executives who are not named executive officers with respect to a rate of base salary, and with Messrs. Weiss, Underwood and Miller and certain of our other executives who are not named executive officers regarding annual target bonuses, mutually agreed upon as a result of the arms’ length negotiation of each such named executive officer’s employment agreement with us, thereby limiting our ability to decrease those components of their compensation during the respective terms of their employment agreements. The factors that we consider in decisions to increase compensation include the individual performance of the executive, our corporate performance, and the annual benchmarking initiatives as discussed throughout this Compensation Discussion and Analysis.

 

• How do accounting considerations impact our compensation practices?

 

Prior to implementation of a compensation program and the granting of awards under the program, we evaluate the cost of the program and awards in light of our current performance and anticipated budgeted performance. We also review the design of compensation programs to assure that the recognition of expense for financial reporting purposes is consistent with our financial modeling. We designed our fiscal 2010 and fiscal 2011 programs so that overall costs fell within a budgeted dollar amount and that the awards under those programs would be accounted for under standards governing equity-based arrangements and, more specifically, so that they would be afforded fixed treatment under those standards.

 

• How do tax considerations impact our compensation practices?

 

Prior to our implementation of a compensation program and awards under the program, we evaluate the Federal and international income tax consequences, both to us and to our executives, of the contemplated program and awards. Before approving a program, our human resources and compensation committee receives an explanation from our outside professionals as to the tax treatment of the program and awards under the program, and assurances from our outside professionals that the tax treatment should be respected by domestic and international taxing authorities.

Section 162(m) of the Internal Revenue Code limits our tax deduction each year for compensation to each of our Chairman and Chief Executive Officer and our three other highest paid executive officers (not including our Chief Financial Officer) to $1 million unless, in general, the compensation is paid under a plan that is performance-related, non-discretionary and has been approved by our shareholders. The human resources and compensation committee monitors, and will continue to monitor, the effect of Section 162(m) on our compensation programs; however, given our significant net operating losses, we have not attempted to structure compensation to be fully deductible under Section 162(m).

 

We adopted our Deferred Compensation Plan primarily for our U.S. executives to provide them with an opportunity to save for the future without paying a current tax on the deferred amounts.

 

• Why have we entered into agreements with named executive officers that provide for post-employment payments following a change-in-control?

 

We believe that it is in our best interest to have agreements with certain of our named executive officers to assure that we will have the continued dedication and objectivity of those individuals, notwithstanding the possibility, threat or occurrence of a change in control. The agreements with our Chairman and Chief Executive Officer, Executive Vice President and Chief Financial Officer, Executive Vice President and Chief Operating Officer, and Executive Vice President and Chairman-National Money Mart provide for post-employment payments following a change in control as described under “— Payments upon Termination of Employment and Change in Control” below.

 

• To what extent do we benchmark total compensation and material elements of compensation and what are the benchmarks that we use?

 

In setting compensation for our named executive officers for fiscal 2010 and 2011, the human resources and compensation committee compared the elements of total compensation to compensation provided by peer groups of industry, financial services and broader consumer/retail services peers, preferably with international operations. The human resources and compensation committee used peer group data and Hay Group compensation surveys primarily as a frame of reference to set executive compensation as a whole within the middle range of comparative pay at the peer group companies. We maintained for fiscal 2011 the group of peer companies that was utilized for fiscal 2010, which included financial services and broader consumer/retail services peers, since we believe that such companies are frequently more reflective of the companies with which we compete for executive talent than our industry peers. These peer companies are listed in alphabetical order below:

 

 

 

 

We have not adopted a policy that provides for recovery of an award if a performance measure used to calculate the award is subsequently adjusted in a manner that would reduce the size of the award. Although, we have not previously experienced any such restatements or adjustments, if we were to experience such an adjustment, the human resources and compensation committee would assess the circumstances relating to the adjustment and take such actions as it believes to be appropriate.

• What is the role of our executive officers in the compensation process?

 

The human resources and compensation committee meets periodically with our Chairman and Chief Executive Officer and our Executive Vice President and Chief Financial Officer to address executive compensation, including the rationale for our compensation programs and the efficacy of the programs in achieving our compensation objectives. The human resources and compensation committee invites representatives of the Hay Group to join pertinent meetings and occasionally requests one or more other members of senior management to participate in certain meetings. Through these meetings, the human resources and compensation committee directs senior management and the compensation consultant to provide industry data, including levels and forms of compensation provided at peer companies, and legal, tax and financial analyses and counsel. The human resources and compensation committee also relies on senior management to evaluate compensation programs to assure that they are designed and implemented in compliance with laws and regulations, including SEC reporting requirements. The human resources and compensation committee principally relies on the recommendations of our Chairman and Chief Executive Officer regarding the performance of his direct reports. At meetings held in June 2010, the human resources and compensation committee received recommendations from our Chairman and Chief Executive Officer regarding salary adjustments, discretionary bonus awards and long-term incentive awards for fiscal 2011 for our executive officers other than himself. The human resources and compensation committee accepted these recommendations after concluding that the recommendations comported with the human resources and compensation committee’s objectives and philosophy and its evaluation of our performance, and industry and other supporting data.

 

• Do we consider the relative risks of our compensation programs to us and our business?

 

When establishing and reviewing our executive compensation programs, the human resources and compensation committee and our board of directors consider whether the programs encourage risks which are reasonably likely to have a material adverse affect on us. In April 2010, the human resources and compensation committee received from its compensation consultant, the Hay Group, factors to consider in determining the extent to which the features of our compensation programs aggravate or mitigate risk. In reviewing these considerations, in light of the our broad-based plans, including those in which our named executive officers participate, the human resources and compensation committee determined that our compensation programs are not reasonably likely to have a material adverse effect on us. A review of those features and our compensation programs is highlighted below:

 

The human resources and compensation committee has noted that we do not engage in the practices that aggravate risk and further noted a number of design features of our annual cash bonus plan and long-term incentive plan reduce the likelihood of excessive risk taking. For example, the human resources and compensation committee believes that our annual cash bonus program appropriately balances risk and the desire to focus executives on specific short-term financial goals important to our success. Furthermore, a significant portion of the compensation provided to our named executive officers is in the form of long-term equity awards that are important to help further align executives’ interests with those of our stockholders. The human resources and compensation committee determined and the our board of directors concurred that, for all employees, our compensation programs do not encourage excessive risk and instead encourage behaviors that support sustainable value creation.

Compensation Committee Report

 

Our human resources and compensation committee has reviewed and discussed the Compensation Discussion and Analysis with our management and, based on the review and discussion, recommended to our board of directors that the Compensation Discussion and Analysis be included in this proxy statement and thereby incorporated by reference into our Annual Report on Form 10-K. Our board of directors accepted the recommendation of the human resources and compensation committee. This report is made by the undersigned members of the human resources and compensation committee.

 

Kenneth Schwenke (Chair)
Ron McLaughlin
Michael Kooper

 

Notwithstanding anything to the contrary set forth in any of our previous or future filings under the Securities Act or the Exchange Act that might incorporate this proxy statement or future filings with the Securities and Exchange Commission, in whole or in part, the above report shall not be deemed to be “soliciting material” or “filed” with the Securities and Exchange Commission and shall not be deemed to be incorporated by reference into any such filing.

 

The human resources and compensation committee’s charter has been approved by our board of directors upon the recommendation of the corporate governance and nominating committee. The human resources and compensation committee and the corporate governance and nominating committee review the charter no less frequently than annually. Under its charter, the human resources and compensation committee’s responsibilities include:

 

 

 

In the questions and answers set forth above under the caption “— Compensation Discussion and Analysis” above, we have addressed the role of executive officers in the executive compensation process. See the question “What is the role of our executive officers in the compensation process?” under the caption “— Compensation Discussion and Analysis” above. With respect to compensation of directors, the role of our executive officers is limited to furnishing such industry data, summaries and legal and financial analyses as the human resources and compensation committee requests from time to time.

 

As discussed under the caption “— Compensation Discussion and Analysis” above, our human resources and compensation committee has engaged the Hay Group since fiscal 2008 to provide it with peer group and industry compensation data, compensation surveys and advice on compensation best practices. The instructions given by our human resources and compensation committee to the Hay Group will vary yearly but typically will include a request: (i) that the firm prepare an executive compensation peer group analysis that covers our senior executives; (ii) that the firm compile current data with regard to industry compensation trends and practices; and (iii) for a recommendation as to ranges for base salary, annual incentives and long-term incentives for executives officers and directors. Pursuant to the terms of its engagement by the human resources and compensation committee, the Hay Group is directed to recommend programs that are fair, reasonable and balanced and designed to attract, retain, motivate and reward executives for performance, while closely aligning the interests of executives with those of our stockholders. We paid the Hay Group less than $120,000 in the aggregate for all the services that it provided to us in fiscal 2010.

 

The following table sets forth summary information concerning compensation of our principal executive officer and principal financial officer and each of the next three most highly compensated current executive officers whose total compensation (excluding any compensation as a result of a change in pension value and non-qualified deferred compensation earnings) exceeded $100,000 during fiscal 2010. We refer to these persons in this proxy statement as our named executive officers.

 

 

 

 

 

 

 

 

 

 

 

Grants of Plan Based Awards

 

The following table sets forth information regarding grants of plan based awards to our named executive officers for fiscal 2010 and, with respect to non-equity incentive plan awards, represents the threshold, target and maximum payouts designated under our annual bonus plans discussed above under “— Compensation Discussion and Analysis.”