Definitive Proxy Statement
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a)
of
the Securities Exchange Act of 1934
Filed
by
the Registrant þ
Filed
by
a Party other than the Registrant o
Check
the
appropriate box:
o
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Preliminary
Proxy Statement
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o
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Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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þ
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Definitive
Proxy Statement
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o
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Definitive
Additional Materials
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o
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Soliciting
Material Pursuant to § 240.14a-12
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AMERICA’S
CAR-MART, INC.
(Name
of
Registrant as Specified In Its Charter)
(Name
of
Person(s) Filing Proxy Statement if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
o
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title
of each class of securities to which transaction applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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Per
unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is
calculated and state how it was determined):
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(4)
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Proposed
maximum aggregate value of transaction:
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o
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Fee
paid previously with preliminary materials.
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o
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Check
box if any part of the fee is offset as provided by Exchange Act
Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid
previously. Identify the previous filing by registration statement
number,
or the Form or Schedule and the date of its filing.
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(1)
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Amount
Previously Paid:____________________________________________________
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(2)
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Form,
Schedule or Registration Statement
No.:____________________________________
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(3)
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Filing
Party:______________________________________________________________
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(4)
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Date
Filed:_______________________________________________________________
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AMERICA’S
CAR-MART, INC.
802
Southeast Plaza Ave., Suite 200
Bentonville,
Arkansas 72712
Notice
of Annual Meeting of Stockholders
To
be held October 16, 2007
To
the
holders of common stock of America’s Car-Mart, Inc.:
Notice
is
hereby given that the annual meeting of stockholders of America’s Car-Mart,
Inc., a Texas corporation, will be held at the Clarion Hotel, 211 Southeast
Walton Boulevard, Bentonville, Arkansas 72712, on Tuesday, October 16, 2007
at
10:00 a.m., local time, for the following purposes:
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(1)
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To
elect six directors to serve for a term of one year and until their
successors have been elected and
qualified;
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(2)
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To
approve and adopt our 2007 Stock Option Plan;
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(3)
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To
approve an amendment to our Stock Incentive Plan to increase to 150,000
the number of shares of our common stock that may be issued under
such
plan; and
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(4)
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To
conduct such other business as may properly come before the meeting
or any
adjournments thereof.
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Only
stockholders of record as of the close of business on August 27, 2007 will
be
entitled to notice of and to vote at the annual meeting of stockholders or
any
adjournment or postponement thereof.
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Very
truly yours,
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Tilman
J. Falgout, III
Chief
Executive Officer and General Counsel
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September
5, 2007
Your
vote is important. Whether or not you plan to attend the meeting in person,
you
are urged to complete, sign, date and mail the enclosed proxy in the
accompanying return envelope to which no postage need be affixed if mailed
within the United States.
AMERICA’S
CAR-MART, INC.
802
Southeast Plaza Ave., Suite 200
Bentonville,
Arkansas 72712
ANNUAL
MEETING OF STOCKHOLDERS
TO
BE HELD
OCTOBER
16, 2007
Unless
the context indicates otherwise, all references in this proxy statement to
"we,"
"us" and "our" refer to America’s Car-Mart, Inc. and its
subsidiaries.
This
proxy statement, which is first being mailed to stockholders on or about
September 5, 2007, is furnished in connection with the solicitation of proxies
by and on behalf of our board of directors for use at the annual meeting of
stockholders to be held at the Clarion Hotel, 211 Southeast Walton Boulevard,
Bentonville, Arkansas 72712, on Tuesday, October 16, 2007 at 10:00 a.m., local
time, and at any or all adjournments or postponements thereof. The address
of
our principal executive offices is 802 Southeast Plaza Ave., Suite 200,
Bentonville, Arkansas 72712 and our telephone number is (479)
464-9944.
Any
person giving a proxy pursuant to this proxy statement may revoke it at any
time
before it is exercised at the annual meeting of stockholders by notifying,
in
writing, our Secretary at the address above prior to the annual meeting date.
In
addition, if the person executing the proxy is present at the annual meeting,
he
or she may, but need not, revoke the proxy by notice of such revocation to
our
Secretary at the annual meeting, and vote his or her shares in person. Proxies
in the form enclosed, if duly signed and received in time for voting, and not
so
revoked, will be voted at the annual meeting in accordance with the instructions
specified thereon. Where no choice is specified, proxies will be voted “FOR” the
election of the nominees for director named in the proxy statement, “FOR” the
approval of our 2007 Stock Option Plan, “FOR” the approval of the amendment to
our Stock Incentive Plan and, on any other matters presented for a vote, in
accordance with the judgment of the persons acting under the
proxies.
Please
complete, sign, date and return the accompanying proxy card promptly in the
enclosed addressed envelope even if you plan to attend the annual meeting.
Postage need not be affixed to the envelope if mailed within the United States.
The immediate return of your proxy card will be of great assistance in preparing
for the annual meeting and is, therefore, urgently requested. If you attend
the
annual meeting and vote in person, your proxy card will not be
used.
Only
stockholders of record at the close of business on August 27, 2007 will be
entitled to notice of and to vote at the annual meeting and any adjournments
or
postponements thereof. Each share of our common stock issued and outstanding
on
such record date is entitled to one vote. As of August 27, 2007, we had
11,878,115 shares of common stock outstanding.
The
presence at the annual meeting of the holders of a majority of the outstanding
shares of our common stock as of the record date is necessary to constitute
a
quorum. Stockholders will be counted as present at the annual meeting if they
are present in person at the annual meeting or if they have properly submitted
a
proxy card. A plurality of the votes duly cast is required for the election
of
directors. With respect to our 2007 Stock Option Plan and the amendment to
our
Stock Incentive Plan, the affirmative vote of the holders of a majority of
the
shares entitled to vote on, and that vote for or against or expressly abstain
with respect to, each proposal at the annual meeting, if a quorum is present,
shall be the act of the stockholders.
Any
abstaining votes and broker “non-votes” will be counted as present and entitled
to vote and; therefore, will be included for purposes of determining whether
a
quorum is present at the annual meeting. Neither abstentions nor broker
“non-votes” will be deemed to be “votes cast.” As a result, broker “non-votes”
and abstentions will not be included in the tabulation of the voting results
on
the election of directors and; therefore, will not have any effect on such
votes, but will have the same effect as a vote against each of the other
proposals. 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 with respect to that item and has not
received instructions from the beneficial owner.
We
will
bear the entire cost of the proxy solicitation, including preparation, assembly,
printing and mailing of this proxy statement, the proxy card and any additional
materials furnished to stockholders. Copies of proxy solicitation materials
will
be furnished to brokerage houses, fiduciaries and custodians holding shares
in
their names that are beneficially owned by others to forward to such beneficial
owners. In addition, we may reimburse such persons for their cost of forwarding
the solicitation materials to such beneficial owners. Solicitation of proxies
by
mail may be supplemented by one or more of telephone, e-mail, telegram,
facsimile or personal solicitation by our directors, officers or regular
employees. No additional compensation will be paid for such services. We may
engage the services of a professional proxy solicitation firm to aid in the
solicitation of proxies from certain brokers, bank nominees and other
institutional owners. Our costs for such services, if any, will not be
material.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth certain information as of July 31, 2007 with respect
to ownership of our outstanding common stock by (i) all persons known to us
to
beneficially own more than five percent of our outstanding common stock, (ii)
each of our directors and nominees for director, (iii) each of our named
executive officers, and (iv) all directors and executive officers as a
group.
Name
of Beneficial Owner
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Number of Shares
Beneficially
Owned
(1)
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Percent
of
Shares
Outstanding
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Skystone
Advisors LLC
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687,104(2)
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5.8%
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Wasatch
Advisors, Inc.
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1,189,248(3)
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10.0%
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F&C
Asset Management plc
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669,268(4)
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5.6%
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Royce
& Associates, LLC
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715,300(5)
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6.0%
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Tilman
J. Falgout, III
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1,025,838(6)
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8.5%
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William
M. Sams
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586,250(7)
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4.9%
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William
H. Henderson
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120,531(8)
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1.0%
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Daniel
J. Englander
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173,915(9)
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1.5%
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Eddie
L. Hight
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71,241(10)
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*
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Jeffrey
A. Williams
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24,222(11)
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*
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John
David Simmons
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30,963(12)
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*
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William
A. Swanston
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15,750
(13)
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*
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All
directors and executive officers as a group (8 persons)
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2,048,710(14)
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16.8%
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_______________________________________
*
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Less
than 1% of outstanding shares.
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(1)
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"Beneficial
ownership" includes shares for which an individual, directly or
indirectly, has or shares voting or investment power, or both, and
also
includes options that are exercisable within 60 days of July 31,
2007.
Unless otherwise indicated, all of the listed persons have sole voting
and
investment power over the shares listed opposite their names. Beneficial
ownership as reported in the above table has been determined in accordance
with Rule 13d-3 of the Securities Exchange Act of 1934, as amended,
referred to in this proxy statement as the Exchange Act. Pursuant
to the
rules of the Securities and Exchange Commission, referred to in this
proxy
statement as the SEC, certain shares of our common stock that a beneficial
owner has the right to acquire within 60 days pursuant to the exercise
of
stock options or warrants are deemed to be outstanding for the purpose
of
computing the percentage ownership of such owner, but are not deemed
outstanding for the purpose of computing the percentage ownership
of any
other person.
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(2)
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Based
on a Schedule 13G filed with the SEC on February 13, 2007 by Skystone
Advisors LLC and Kerry Nelson, referred to in this proxy statement
as the
Skystone Filers. The shares are held by HSO Limited Partnership and
HSE
Master Fund Limited Partnership. Skystone Advisors LLC is the investment
member of the general partner of HSO Limited Partnership and the
general
partner of HSE Master Fund Limited Partnership. Ms. Nelson is the
managing
member of Skystone Advisors LLC. The Skystone Filers reported shared
power
to vote and dispose of the shares of common stock. We make no
representation as to the accuracy or completeness of the information
reported. The address reported by the Skystone Filers is Two International
Place, Suite 1800, Boston, MA 02110.
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(3)
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Based
on a Schedule 13G filed with the SEC on April 10, 2007 by Wasatch
Advisors, Inc. We make no representation as to the accuracy or
completeness of the information reported. The address reported by
Wasatch
Advisors, Inc. is 150 Social Hall Avenue, Salt Lake City, UT
84111.
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(4)
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Based
on a Schedule 13G filed with the SEC on January 24, 2007 by F&C Asset
Management plc. We make no representation as to the accuracy or
completeness of the information reported. The address reported by
F&C
Asset Management plc is 80 George Street, Edinburgh EH2 3BU, United
Kingdom.
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(5)
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Based
on a Schedule 13G filed with the SEC on January 17, 2007 by Royce
&
Associates, LLC. We make no representation as to the accuracy or
completeness of the information reported. The address reported by
Royce
& Associates, LLC is 1414 Avenue of the Americas, New York, NY
10019.
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(6)
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Includes
191,898 shares subject to stock options that are currently exercisable,
10,000 shares of common stock that will vest in two equal installments
on
April 30, 2008 and April 30, 2009, and 600,000 shares held in a
corporation controlled by Mr. Falgout.
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(7)
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Includes
11,250 shares subject to stock options that are currently
exercisable.
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(8)
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Includes
34,682 shares subject to stock options that are currently exercisable
and
10,000 shares of common stock that will vest in two equal installments
on
April 30, 2008 and April 30, 2009.
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(9)
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Includes
158,300 shares held in a limited partnership of which Mr. Englander
is the
sole general partner, 11,865 held by trusts of which Mr. Englander
is a
trustee, and 3,750 shares subject to stock options that are currently
exercisable.
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(10)
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Includes
18,000 shares subject to stock options that are currently exercisable
and
6,667 shares of common stock that will vest in two equal installments
on
April 30, 2008 and April 30, 2009.
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(11)
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Includes
5,000 shares of common stock which will vest in two equal installments
on
April 30, 2008 and April 30, 2009.
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(12)
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Includes
22,500 shares subject to stock options that are currently
exercisable.
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(13)
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Includes
3,750 shares subject to stock options that are currently
exercisable.
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(14)
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Includes
285,831 shares subject to stock options that are currently exercisable
and
31,666 shares of common stock that will vest in two equal installments
on
April 30, 2008 and April 30, 2009.
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PROPOSAL
NO. 1
ELECTION
OF DIRECTORS
Pursuant
to our bylaws, our board of directors has set the number of directors for the
ensuing year at six, all of whom are proposed to be elected at the annual
meeting of stockholders. In the event any nominee is unable or declines to
serve
as a director at the time of the annual meeting, the persons named as proxies
therein will have discretionary authority to vote the proxies for the election
of such person or persons as may be nominated in substitution by the present
board of directors, upon the recommendation of the nominating committee of
the
board of directors. Management knows of no current circumstances that would
render any nominee named herein unable to accept nomination for election.
Directors shall be elected by plurality of the votes cast by the holders of
shares entitled to vote in the election at the annual meeting at which a quorum
is present.
Members
of our board of directors are elected annually to serve until the next annual
meeting and until their successors are elected and qualified.
The
following persons have been nominated for election to our board of
directors:
Tilman
J. Falgout, III,
age 58,
has served as our Chief Executive Officer since May 2002 and as our General
Counsel since March 1995. Mr. Falgout also served as our Executive Vice
President from 1995 to May 2002. Mr. Falgout has served as Chairman of our
board
of directors since May 2004 and as a director since September 1992.
Daniel
J. Englander,
age 38,
has served as one of our directors since February 2007. Mr. Englander is the
founder and currently the Managing Partner of Ursula Investors, an investment
partnership founded in 2004. From January 2005 to June 2006, Mr. Englander
served as a Partner of Prescott Securities, an investment fund, and from October
1994 to January 2005, he served with Allen & Company, an investment merchant
bank, most recently as Managing Director. Mr. Englander is also currently on
the
board of directors of Copart, Inc.
William
H. Henderson,
age 44,
has served as our President since May 2002. From 1999 until May 2002, Mr.
Henderson served as Chief Operating Officer of Car-Mart, our wholly owned
operating subsidiary. From 1992 until 1998, Mr. Henderson served as General
Manager of Car-Mart. From 1987 until 1992, Mr. Henderson primarily held
positions of District Manager and Regional Manager of Car-Mart. Mr. Henderson
has served as Vice Chairman of our board of directors since May 2004 and as
a
director since September 2002.
William
M. Sams,
age 69,
has served as one of our directors since March 2005. Mr. Sams currently manages
his personal investments. From 1981 until 2000, Mr. Sams was the President
and
Chief Investment Officer of FPA Paramount Fund, Inc., as well as Executive
Vice
President of both First Pacific Advisors and FPA Perennial Fund, Inc. He started
his career in 1966 in the mutual fund industry. Mr. Sams is currently on the
board of directors of Unifi, Inc.
John
David Simmons,
age 71,
has served as one of our directors since August 1986. Since 1970, Mr. Simmons
has been President of Simmons & Associates LLC, a real estate development
company, and Management Resource LLC, a management consulting firm.
William
A. Swanston,
age 53,
has served as one of our directors since October 2006. Mr. Swanston has held
a
number of executive level positions with Frito Lay, a division of PepsiCo,
Inc.,
over the course of a 25 year Pepsico career. Mr. Swanston has extensive
strategy, supply chain and procurement experience. Mr. Swanston joined Dean
Foods as Senior Vice President - Business Transformation in August
2006.
The
board of directors recommends a vote FOR each of the six nominees to our board
of directors.
PROPOSAL
NO. 2
APPROVAL
OF 2007 STOCK OPTION PLAN
On
August
27, 2007, the board of directors adopted, subject to stockholder approval,
the
2007 Stock Option Plan, referred to in this proxy statement as the 2007 Plan.
The 2007 Plan will become effective upon stockholder approval. The following
summary of certain features of the 2007 Plan is qualified in its entirety by
reference to the full text of the 2007 Plan, which is attached to this proxy
statement as Appendix A and incorporated herein by reference.
The
affirmative vote of the holders of a majority of the shares entitled to vote
on,
and that vote for or against or expressly abstain with respect to, this proposal
at the annual meeting, if a quorum is present, shall be the act of the
stockholders.
Nature
and Purpose of 2007 Plan
The
2007
Plan provides for the grant of both incentive and non-qualified stock options.
The primary purpose of the 2007 Plan is to encourage our selected employees,
directors and independent contractors and those of our subsidiaries to acquire
or increase their holdings of our common stock in order to promote a closer
identification of their interests with our interests and the interests of our
stockholders, thereby further stimulating their efforts to enhance our
efficiency, soundness, profitability, growth and stockholder value. We believe
that employees, directors and independent contractors who participate in the
2007 Plan will have a closer identification with us by virtue of their ability
as stockholders to participate in our growth and earnings. The 2007 Plan also
is
designed to provide motivation for participating employees and directors to
remain in our employ and to give greater effort on our behalf.
Effective
Date
The
effective date of the 2007 Plan is August 27, 2007. The 2007 Plan shall remain
in effect until all shares subject to, or which may become subject to, the
2007
Plan have been purchased pursuant to options granted under the 2007 Plan,
provided that options under the 2007 Plan must be granted within ten years
from
the effective date.
Authorized
Shares
The
2007
Plan provides for the grant of options to purchase up to an aggregate of
1,000,000 shares of our common stock. The shares of our common stock available
for issuance under the 2007 Plan may, at the election of our board of directors,
be unissued shares or treasury shares, or shares purchased on the open market
or
by private purchase. Any shares subject to an option which for any reason
expires or is terminated may again be subject to an option under the 2007 Plan.
Administration
The
2007
Plan shall be administered by our board of directors or by a committee comprised
of no fewer than two members appointed by our board of directors from among
its
members, referred to in this proxy statement as the committee. Each member
of
the committee must be a “non-employee director,” as such term is defined under
Rule 16b-3 of the Exchange Act. The committee must also be comprised of two
or
more “outside directors,” as such term is defined under Section 162(m) of the
Code and be in compliance with the applicable rules and regulation of the Nasdaq
Stock Market. Subject to provisions of the 2007 Plan, our board of directors
or
the committee has the authority to determine the individuals to whom options
shall be granted, determine exercise prices, vesting requirements, the term
of
and the number of shares covered by each option, and interpret, construe and
implement provisions of the 2007 Plan.
Eligibility
Under
the
2007 Plan, options may be granted only to our employees and directors and those
of our subsidiaries, and certain of our independent contractors, consultants
and
advisors. As of August 27, 2007, approximately 850 persons were eligible to
receive options pursuant to the 2007 Plan.
The
following table indicates the number of options that will be awarded to each
of
the following individuals and groups under the 2007 Plan to the extent such
awards are determinable.
2007
Stock Option Plan
|
Name
and Position
|
Number
of Units1
|
Tilman
J. Falgout, III
Chief
Executive Officer
|
Not
presently determinable
|
William
H. Henderson
President
|
180,0002
|
Jeffrey
A. Williams
Chief
Financial Officer
|
72,0002
|
Eddie
L. Hight
Chief
Operating Officer
|
108,0002
|
Executive
Group
|
|
Non-Executive
Director Group
|
15,0003
|
Non-Executive
Officer Employee Group
|
Not
presently determinable
|
___________________________
1 Options
granted to the persons indicated in the table will be granted at an exercise
price equal to 100% of the fair market value on the date the options are
granted.
2 Represents
the number of shares underlying options to be granted, subject to stockholder
approval of the 2007 Plan, pursuant to the terms of new employment agreements,
which are subject to the achievement of certain performance goals. See
“Executive Compensation - Employment Agreements - New Employment
Agreements.”
3 Determined
based on the current number of non-executive directors (4 persons) each
receiving options to purchase 3,750 shares for one fiscal year.
Exercise
Price, Terms of Exercise and Payment for Shares
Each
option granted under the 2007 Plan will be represented by an option agreement
which will set forth the terms particular to that option, including the number
of shares covered by the option, the exercise price, the term of the option
and
any vesting requirements.
The
exercise price of options granted under the 2007 Plan will be determined by
the
committee, but in no event shall such exercise price be less than the market
price of the common stock on the date of grant or the par value per share of
the
common stock. The term market price is defined in the 2007 Plan to be the
closing sales price of our common stock on the Nasdaq Stock Market on the date
immediately preceding the date the option is granted. If our common stock is
not
traded on the Nasdaq Stock Market or on any other national securities exchange,
the market price shall mean the fair market value of our common stock as
determined by our board of directors or the committee by the reasonable
application of any other reasonable valuation method that is consistently
applied for all of our equity compensation arrangements and is in compliance
with applicable law, including, but not limited to, the applicable provisions
of
Section 409A of the Code.
Options
may be exercised in whole or in part by the optionee, but in no event later
than
ten years from the date of grant with respect to incentive options. Any
incentive option granted under the 2007 Plan to an individual who owns more
than
10% of the total combined voting power of all classes of our stock or the stock
of one of our subsidiaries may not be purchased at a price less than 110% of
the
market price on the date of grant, and no such option may be exercised more
than
five years from the date of grant. Unless an option agreement specifies
otherwise, the purchase price for the shares shall be paid in the form of cash,
delivery of written notice of exercise to us and delivery to a broker of written
notice of exercise and irrevocable instructions to promptly deliver to us the
amount of sale or loan proceeds, or a combination of both. Upon payment, we
will
deliver stock certificates for such shares to the optionee.
For
incentive stock options granted under the 2007 Plan, the aggregate fair market
value (determined at the time the option was granted) of shares with respect
to
which incentive stock options are exercisable for the first time by an optionee
during any calendar year shall not exceed $100,000. Any amounts exceeding this
limit are treated as non-qualified stock options.
Termination
of Service
Generally,
unless an individual option agreement provides otherwise, no option granted
to
an individual who was an employee at the time of grant may be exercised unless
such individual is, at the time of exercise, an employee and has been an
employee since the date of grant. If the employment of an individual is
terminated because of a disability, or if the individual dies while he is an
employee or dies after termination of his employment because of a disability,
the options of such individual may be exercised only to the extent such options
were exercisable on the date of such individual’s termination date or date of
death while employed. The board of directors or the committee may, in its
discretion, accelerate the date for exercising all or any part of the options
that were not otherwise exercisable on the termination date. The options must
be
exercised prior to the close of the period of twelve months next succeeding
the
termination date or, if earlier, the end of the option period.
In
addition, unless an individual option agreement provides otherwise, if the
employment of an individual is terminated for any reason other than disability,
death or for cause, such individual’s options may be exercised to the extent
exercisable on such individual’s termination date, except that the board of
directors or the committee may, in its discretion, accelerate the date for
exercising all or any part of the options that were not otherwise exercisable
on
the termination date. The options must be exercised prior to the first of three
months after the termination date or, if earlier, the end of the option period.
If the individual dies following such termination date and prior to the earlier
of the such dates, the individual will be treated as having died while employed.
An
optionee shall have no rights as a stockholder with respect to any shares
covered by an option until the date of issuance of the stock certificate to
the
optionee for such shares.
Reorganization
and Recapitalization
If
there
is any change in the shares of our common stock because of a merger,
consolidation or reorganization involving us or any of our subsidiaries, or
if
our board of directors declares a stock dividend or stock split distributable
in
shares of common stock, or if there is a change in control in our capital
structure or capital structure of one of our subsidiaries that affect our common
stock, the number of shares of common stock reserved for issuance will be
correspondingly adjusted, and our board of directors or the committee, will
make
adjustments to awards or to any provision of the 2007 Plan it deems equitable
to
prevent dilution or enlargement of awards.
Unless
specifically modified by an option agreement or employment agreement, in the
event of a change in control in which (1) an individual, entity or group (within
the meaning of Section 409A of the Code) acquires ownership of our stock that,
together with stock held by such person, constitutes more than 50% of the total
fair market value of total voting power of our stock; (2) an individual, entity
or group (within the meaning of Section 409A of the Code) acquires, during
the
twelve-month period ending on the date of the most recent acquisition by such
person, ownership of our stock possessing 35% or more of the total voting power
of our stock; (3) there is the replacement of a majority of the members of
our
board of directors during any twelve-month period by directors whose appointment
or election is not endorsed by a majority of the members of our board of
directors prior to the date of the appointment or election; or (4) an
individual, entity or group (within the meaning of Section 409A of the Code)
acquires, during the twelve-month period ending on the date of the most recent
acquisition by such person of our assets that have a total gross fair market
value equal to or more than 40% of the total gross fair market value of all
of
our assets immediately prior to such acquisitions, all options outstanding
as of
the date of such change in control will become fully exercisable.
Notwithstanding the foregoing, in the event of a change in control, our board
of
directors or the committee may, in its sole discretion, determine that any
and
all awards granted pursuant to the 2007 Plan shall not vest or become
exercisable on an accelerated basis if our board of directors, or the board
of
directors of the surviving or acquiring corporation, has taken such action
as is
equitable or appropriate to protect the rights and interests of the participants
under the 2007 Plan.
Amendment
and Termination of 2007 Plan
The
2007
Plan and any award granted pursuant to the 2007 Plan may be amended or
terminated at any time by our board of directors; provided that, (1) amendment
or termination of an award will not, without the consent of the recipient of
the
award, adversely affect the rights of the recipient of the outstanding award,
and (2) approval of an amendment to the 2007 Plan by our stockholders will
only
be required in the event such stockholder approval of any such amendment is
required by applicable law, rule or regulation.
Federal
Income Tax Consequences
Incentive
Stock Options.
All
incentive stock options granted or to be granted under the 2007 Plan which
are
designated as incentive stock options are intended to be incentive stock options
as defined in Section 422 of the Code.
Under
the
provisions of Section 422 of the Code, neither the holder of an incentive stock
option nor we will recognize income, gain, deduction or loss upon the grant
or
exercise of an incentive stock option. An optionee will be taxed only when
the
stock acquired upon exercise of an incentive stock option is sold or otherwise
disposed of in a taxable transaction. If at the time of such sale or disposition
the optionee has held the shares for the required holding period (two years
from
the date the option was granted and one year from the date of the transfer
of
the shares to the optionee), the optionee will recognize long-term capital
gain
or loss, as the case may be, based upon the difference between his exercise
price and the net proceeds of the sale. However, if the optionee disposes of
the
shares before the end of such holding period, the optionee will recognize
ordinary income on such disposition in an amount equal to the lesser
of:
|
(a) |
gain
on the sale or other disposition;
or
|
|
(b)
|
the
amount by which the fair market value of the shares on the date of
exercise exceeded the option exercise price, with any excess gain
being
capital gain, long-term or short-term, depending on how long the
shares
had previously been held on the date of sale or other taxable
disposition.
|
The
foregoing discussion and the reference to capital gain or loss treatment therein
assume that the option shares are a capital asset in the hands of the optionee.
A sale or other disposition which results in the recognition of ordinary income
to the optionee will also result in corresponding income tax deduction for
us.
The
2007
Plan permits an optionee to pay all or part of the purchase price for common
shares acquired pursuant to exercise of an incentive stock option by
transferring to us other shares of our common stock owned by the optionee,
and
Section 422 of the Code provides that an option will continue to be treated
as
an incentive stock option if it is exercised in such manner. Upon the exchange,
and except as otherwise described herein, no gain or loss is recognized by
the
optionee upon delivering previously acquired common shares to us as payment
of
the exercise price. The common shares received by the optionee, equal in number
to the previously acquired common shares exchanged therefore, will have the
same
basis and holding period for long-term capital gain purposes as the previously
acquired common shares. The optionee, however, will not be able to utilize
the
prior holding period for the purpose of satisfying the incentive stock option
statutory holding period requirements. Common shares received by the optionee
in
excess of the number of previously acquired common shares will have a basis
of
zero (plus, in the case of payment of the purchase price in a combination of
cash and surrendered shares, the amount of any cash paid) and a holding period
which commences as of the date the common shares are transferred to the optionee
upon exercise of the incentive stock option. If the exercise of any incentive
stock option is effected using common shares previously acquired through the
exercise of an incentive stock option, the exchange of the previously acquired
common shares will be considered a disposition of the common shares for the
purpose of determining whether a disqualifying disposition has occurred and,
thus, whether ordinary income will be recognized. In such case, the optionee’s
basis in the number of new common shares so acquired that is equal to the number
of common shares surrendered will be equal to the optionee’s cost basis in the
common shares surrendered plus the amount of ordinary income, if any,
recognized. The optionee’s basis in the additional number of new common shares
received will be zero plus, in the case of payment of the purchase price in
a
combination of cash and surrendered common shares, the amount of any cash paid.
However, the incentive stock option stock acquired through the exchange of
statutory option stock will still qualify for favorable tax treatment under
Section 422 of the Code.
Section
424(c)(3) of the Code provides that if “statutory option stock” is transferred
in connection with the exercise of an incentive stock option, and if the holding
period requirements under Section 422(a)(1) of the Code are not met with respect
to such statutory option stock before such transfer, then ordinary income will
be recognized as a result of the transfer of statutory option stock. However,
the incentive stock option stock acquired through the exchange of statutory
option stock will still qualify for favorable tax treatment under Section 422
of
the Code.
The
excess of the fair market value of shares acquired through the exercise of
an
incentive stock option over the exercise price is taken into account in
computing an individual taxpayer’s alternative minimum taxable income. Thus, the
exercise of an incentive stock option could result in the imposition of an
alternative minimum tax liability.
In
general, an option granted under the 2007 Plan that is designated as an
incentive stock option would be taxed as described above. However, in some
circumstances an option that is designated as an incentive stock option will
be
treated as a non-qualified stock option and the holder taxed accordingly. For
example, a change in the terms of an option that gives the employee additional
benefits may be treated as the grant of a new option. Unless all the criteria
for treatment as an incentive stock option are met on the date the “new option”
is considered granted (such as the requirement that the option be granted only
to an employee), the option will be treated and taxed as a non-qualified stock
option.
Non-Qualified
Stock Options.
All
options granted or to be granted under the 2007 Plan which do not qualify as
incentive stock options are non-statutory options not entitled to special tax
treatment under Section 422 of the Code.
A
participant in the 2007 Plan will recognize taxable income upon the grant of
a
non-qualified stock option only if such option has a readily ascertainable
fair
market value as of the date of grant. However, under the applicable Treasury
Regulations, the non-qualified stock options issued under the 2007 Plan will
not
have readily ascertainable fair market value unless at the time such options
are
granted we have similar options actively traded on an established market. We
presently have no such actively traded options.
Upon
the
exercise of a non-qualified stock option not having a readily ascertainable
fair
market value, the optionee recognizes ordinary income in an amount equal to
the
excess of the fair market value of the shares on the date of exercise over
the
option exercise price for those shares. We are not entitled to an income tax
deduction with respect to the grant of a non-statutory stock option or the
sale
of stock acquired pursuant thereto. We generally are permitted a deduction
equal
to the amount of ordinary income the optionee is required to recognize as a
result of the exercise of a non-statutory stock option.
If
an
optionee pays the exercise price, in whole or in part, with previously acquired
common shares, the participant will recognize ordinary income in the amount
which the fair market value of the common shares received exceeds the exercise
price. The optionee will not recognize the gain or loss upon delivering the
previously acquired common shares to us. Common shares received by an optionee,
equal in number to the previously acquired common shares exchanged therefor,
will have the same basis and holding period for long-term capital gain purposes
as the previously acquired common shares. Common shares received by an optionee
in excess of the number of such previously acquired common shares will have
a
basis equal to the amount of ordinary compensation income recognized as the
result of the exercise of the option plus, in the case of payment of the
purchase price in a combination of cash and surrendered shares, the amount
of
any cash paid. The holding period for the additional common shares will commence
as of the date of exercise or such other relevant date.
General.
The 2007
Plan is not qualified under Section 401(a) of the Code and is not subject to
the
provisions of the Employee Retirement Income Security Act of 1974.
The
preceding discussion is based upon federal income tax laws and regulations
in
effect on the date of this proxy statement, which are subject to change, and
upon an interpretation of the statutory provisions of Section 422 of the Code,
its legislative history and related income tax regulations. Furthermore, the
foregoing is only a general discussion of the federal income tax consequences
of
the 2007 Plan and does not purport to be a complete description of all federal
income tax aspects of the 2007 Plan. Option holders may also be subject to
state
and local taxes in connection with the grant or exercise of options granted
under the 2007 Plan and the sale or other disposition of shares acquired upon
exercise of the options.
Impact
of Section 409A of the Internal Revenue Code
The
tax
consequences described above under “Federal Income Tax Consequences” may be
impacted by the Congress’ adoption of Section 409A of the Code, which became
effective January 1, 2005 and generally applies to (i) all awards granted after
December 31, 2004, and (ii) the portion of any awards granted prior to January
1, 2005 which had not yet vested as of December 31, 2004. If an award violates
Section 409A of the Code, the affected participant’s award and all similar
awards of the affected participant made under our other similar plans or
arrangements, plus related earnings on such awards, for that year and all
preceding years, will be includible in the participant’s gross income to the
extent the amounts are not subject to a substantial risk of forfeiture. In
addition, the participant will be charged interest (generally from the date
that
the award vests) at the Internal Revenue Service underpayment rate plus one
percent, plus an additional tax equal to 20 percent of the compensation that
is
required to be included in gross income. Plans are required to be amended to
comply with Section 409A of the Code by December 31, 2007.
The
terms
of the 2007 Plan are intended to comply with the requirements of Section 409A
of
the Code. However, the statutory language of Section 409A of the Code is
somewhat ambiguous, and the proper application of certain of its provisions
is
currently unclear despite the issuance of final regulations by the Treasury.
The
Treasury has indicated that it intends to issue additional guidance in the
future further clarifying the application of Section 409A of the Code. We intend
to amend the 2007 Plan, if and as necessary, to conform its provisions to the
requirements of Section 409A of the Code as clarified in such additional
guidance.
The
board of directors recommends that stockholders vote FOR the 2007 Stock Option
Plan.
PROPOSAL
NO. 3
APPROVAL
OF AMENDMENT TO STOCK INCENTIVE PLAN
On
August
27, 2007, the board of directors adopted, subject to stockholder approval,
an
amendment to the Stock Incentive Plan, referred to in this proxy statement
as
the Incentive Plan, to increase to 150,000 the number of shares of our common
stock that may be issued under the Incentive Plan. The amendment to the
Incentive Plan will become effective upon stockholder approval.
The
affirmative vote of the holders of a majority of the shares entitled to vote
on,
and that vote for or against or expressly abstain with respect to, this proposal
at the annual meeting, if a quorum is present, shall be the act of the
stockholders.
Nature
and Purpose of the Incentive Plan
The
Incentive Plan permits us to grant common stock, which broadens the array of
equity alternatives available to our compensation committee when designing
compensation incentives. The purpose of the Incentive Plan is to promote our
success and enhance our value by linking the personal interests of participants
to those of our stockholders, and by providing participants with an incentive
for outstanding performance. The Incentive Plan is further intended to provide
flexibility to us in our ability to motivate, attract and retain the services
of
participants upon whose judgment, interest and special effort the successful
conduct of our operations is largely dependent.
Authorized
Shares
The
Incentive Plan originally provided for the grant of 100,000 shares of common
stock. As of April 30, 2007, 39,728 shares of common stock remained available
for grant under the Incentive Plan. Pursuant to section 8.1 of the Incentive
Plan, our board of directors recommends that the number of shares that may
be
issued be increased from 100,000 to 150,000. The proposed increase in the number
of authorized shares would ensure uninterrupted continuation of the Incentive
Plan.
Certain
certificates for shares of common stock delivered under the Incentive Plan
are
subject to restrictions and legends as our compensation committee deems
advisable and/or required by applicable law or Federal or state securities
laws.
The number and kind of shares issued under the Incentive Plan or authorized
for
issuance will be appropriately adjusted by our compensation committee to reflect
certain spinoffs and other changes in our capital structure that might result
in
unintended increases or decreases in the value of a participant’s award.
Administration
The
Incentive Plan is administered by our compensation committee, and will continue
to be so as long as the membership on such committee meets the requirements
necessary for awards under the Incentive Plan to satisfy exemption from the
short-swing profit provisions under Rule 16b-3 of the Exchange Act and the
performance-based exemption to the limitations of Section 162(m) of the Code.
We
believe that our compensation committee currently satisfies these requirements.
If at any future time the compensation committee fails to meet these
requirements, our board of directors will serve in its place. Subject to the
provisions of the Incentive Plan, our compensation committee has plenary
authority in its discretion to select the individuals to whom shares are
awarded, the number of shares to be included in each award, the time or times
at
which shares are awarded and whether the shares included in any award are
subject to payment by the respective participant of a purchase price and the
amount of such purchase price. Our compensation committee has the discretionary
authority to interpret the Incentive Plan and to prescribe, amend and rescind
rules and regulations relating to it.
Eligibility
An
award
of shares may be made only to those persons selected by our compensation
committee from among our employees, officers and directors or the employees,
officers and directors of one of our subsidiaries. As of August 27, 2007,
approximately 800 persons were eligible to receive shares pursuant to the
Incentive Plan.
In
making
awards of shares to participants, our compensation committee takes into account
the duties of the respective participants, their present and potential
contribution to our success and the success of our subsidiaries, and such other
factors as our compensation committee deems relevant in connection with
accomplishing the purposes of the Incentive Plan. Although all of our executive
and non-executive officers, employees and directors will be eligible for awards
under the Incentive Plan, as amended, if selected by our compensation committee
in its discretion, it is not possible, at this time, to predict the benefits
and
amounts that will actually be received by all individual participants or groups
of participants in the future. The following table indicates the number of
shares that will be awarded to each of the following individuals and groups
under the Incentive Plan to the extent such awards are
determinable.
Stock
Incentive Plan
|
Name
and Position
|
Dollar
value ($)
|
Number
of Units
|
Tilman
J. Falgout, III
Chief
Executive Officer
|
-
|
Not
presently determinable
|
William
H. Henderson
President
|
$490,400
|
40,0002
|
Jeffrey
A. Williams
Chief
Financial Officer
|
-
|
Not
presently determinable
|
Eddie
L. Hight
Chief
Operating Officer
|
$306,500
|
25,0002
|
Executive
Group
|
$796,900
|
65,000
|
Non-Executive
Director Group
|
-
|
Not
presently determinable
|
Non-Executive
Officer Employee Group
|
-
|
Not
presently determinable
|
____________________________
1 Based
on
the market price of our common stock on August 27, 2007.
2 Represents
the number of shares to be granted, subject to stockholder approval of the
amendment to the Incentive Plan, pursuant to the terms of new employment
agreements. See “Executive Compensation - Employment Agreements - New Employment
Agreements.”
Restricted
Shares
Our
compensation committee may impose such conditions and/or restrictions on any
award made pursuant to the Incentive Plan as it may deem advisable, including,
without limitation, payment of a purchase price for each share, restrictions
based upon the achievement of specific performance goals, time-based
restrictions, and/or restrictions under applicable Federal or state securities
laws. The conditions and restrictions imposed on any award need not be uniform
among all awards or shares issued to the same participant or to other
participants pursuant to the Incentive Plan. Our compensation committee, in
its
sole discretion, may accelerate or otherwise modify the period of restriction
applicable to any share or substitute new awards in place of outstanding awards,
provided that in the event that outstanding awards will be materially and
adversely affected, the participant’s written consent must be
obtained.
Upon
the
award to a participant of shares, the participant will become a stockholder
with
respect to such shares and, subject to the provisions of the Incentive Plan,
will have the rights of a stockholder with respect to such shares; provided,
however, that a participant who is granted restricted shares may be required
by
the compensation committee to execute an irrevocable proxy granting us the
right
to vote his or her shares until the end of any period of
restriction.
Amendment,
Modification or Termination of the Incentive Plan
Our
board
of directors may at any time alter, amend, suspend or terminate the Incentive
Plan in whole or in part; provided, however, that to the extent required by
applicable laws or Federal or state securities laws, any such modification
or
termination will be subject to the approval of our stockholders; and provided
further, however, that such amendment will not materially adversely affect
any
outstanding awards unless the affected participant’s written consent is
obtained.
Federal
Income Tax Consequences
The
following discussion of the Federal income tax consequences of the issuance,
vesting, payment, sale and forfeiture of awards under the Incentive Plan is
based on an analysis of the Code, existing laws, judicial decisions and
administrative rulings and regulations, all of which are subject to change.
In
addition to being subject to the Federal income tax consequences described
below, a participant may also be subject to state and local tax consequences
in
the jurisdiction in which he or she works and/or resides.
An
award
under the Incentive Plan of shares of our common stock with no restrictions
will
be recognized as ordinary income to the participant in the participant’s tax
year in which the shares are awarded in an amount of the fair market value
of
the shares awarded at the time of the award. We are entitled to a deduction
for
Federal income tax purposes for our taxable year in which ends the participant’s
taxable year in which the participant is required to recognize the income from
the award.
In
general, no income will be recognized by a participant at the time an award
of
restricted stock is granted to him or her. Ordinary income will be recognized
by
a participant at the time any restrictions which apply to any restricted share
terminate and the participant is no longer subject to a substantial risk of
forfeiting such restricted share to us. The amount of such ordinary income
due
with respect to the award will normally equal the excess, if any, of the fair
market value of the underlying shares of the common stock on the date the
restricted share vests, over the price paid by the participant for the shares,
if any. This ordinary income will also constitute wages subject to withholding
by us. Any subsequent realized gain or loss on shares will be a capital gain
or
loss with the participant’s holding period measured from the date of vesting and
with the participant’s basis in each share being equal to the price paid by the
participant for such share, if any, plus the amount of ordinary income, if
any,
recognized with respect to such share upon vesting.
Notwithstanding
the foregoing, a participant may within 30 days after a share is granted to
him
or her under the Incentive Plan elect under Section 83(b) of the Code, referred
to in this proxy statement as a Section 83(b) election, to include in income
as
of the date of such grant the excess, if any, of the fair market value of a
share of the common stock on the date of grant, over the price paid by the
participant for such restricted share, if any. Such income will be ordinary
income that will also constitute wages subject to withholding by us. If a
participant subsequently vests in restricted shares as to which a Section 83(b)
election has been made, such vesting will not result in a taxable event to
the
participant. If a participant makes a Section 83(b) election with respect to
any
restricted share, and subsequently is required under the Incentive Plan to
forfeit such restricted share or to sell the restricted share to us for the
price paid by the participant, if any, the participant will not be entitled
to a
deduction with respect thereto and will not have a capital loss as a result
thereof. Any gain or loss subsequently realized on a restricted share with
respect to which a Section 83(b) election was made will be a capital gain or
loss with the participant’s holding period measured from the date of grant and
with the participant’s basis in each share being equal to the price paid by the
participant for such share, if any, plus the amount of ordinary income, if
any,
recognized with respect to such share at the time of the Section 83(b)
election.
We
are
entitled to a deduction for Federal income tax purposes for our taxable year
in
which ends the participant’s taxable year in which the participant is required
to recognize the income from the award. Such deduction will ordinarily be in
an
amount equal to the amount included in income by the participant, although
it is
subject to certain specified limitations under Section 162(m) of the
Code.
The
board of directors recommends that stockholders vote FOR the amendment to the
Incentive Plan.
CORPORATE
GOVERNANCE AND BOARD MATTERS
Meetings
of the Board of Directors
During
our last fiscal year, our board of directors held five meetings. Each incumbent
director attended at least 75% of the aggregate number of meetings held by
the
board of directors and by the committees of the board of directors on which
such
director served.
It
is the
policy of our board of directors that all directors should attend the annual
meeting of stockholders unless unavoidably prevented from doing so by unforeseen
circumstances. All of our directors attended the 2006 annual meeting of
stockholders.
Board
Independence
Our
board
of directors consists of six members. Our board of directors has determined
that Daniel
J.
Englander, William M. Sams, John David Simmons and William A. Swanston have,
and
that Carl E. Baggett had, no relationship with us that would interfere with
the
exercise of independent judgment in carrying out the responsibilities of a
director and are independent within the rules of The Nasdaq Stock Market,
referred to in this proxy statement as Nasdaq.
Shareholder
Communications with the Board of Directors
Our
board
of directors has implemented a process for stockholders to send communications
to our board of directors. Any stockholder desiring to communicate with our
board of directors, or with specific individual directors, may do so by writing
to our Secretary at 802 Southeast Plaza Ave., Suite 200, Bentonville, Arkansas
72712. Our Secretary has been instructed by our board of directors to promptly
forward all such communications to our board of directors or such individual
directors.
Committees
of the Board
of Directors
Our
board
of directors presently has three standing committees: audit committee,
compensation and stock option committee, referred to in this proxy statement
as
the compensation committee, and nominating committee. Each of these committees
is described below.
Audit
Committee
Our
audit
committee presently assists our board of directors in overseeing our accounting
and financial reporting process and audits for our financial statements. It
is
directly responsible for the appointment, compensation, retention and oversight
of the work of our registered public accounting firm. Our audit committee
reviews the auditing accountant’s audit of our financial statements and its
report thereon, management’s report on our system of internal controls over
financial reporting, various other accounting and auditing matters and the
independence of the auditing accountants. The committee reviews and pre-approves
all audit and non-audit services performed by our auditing accountants, or
other
accounting firms, other than as may be allowed by applicable law. Our audit
committee has established procedures for the receipt, retention and treatment
of
complaints regarding accounting, internal accounting controls or auditing
matters, and the confidential, anonymous submission by employees of concerns
regarding questionable accounting and auditing matters. Our audit committee
meets with management to review any issues related to matters within the scope
of the audit committee’s duties. The committee operates pursuant to a written
charter adopted by our board of directors, which may be found on our website
at
www.car-mart.com.
Our
audit
committee is currently composed of William A. Swanston, William M. Sams and
John
David Simmons, Chairman, each of whom is an “independent director,” as such term
is defined by Nasdaq’s listing standards. Our board of directors has determined
that William A. Swanston is an “audit committee financial expert,” as defined by
the rules of the SEC. Our audit committee held five meetings during the last
fiscal year. See “Audit Committee Report” for additional information regarding
our audit committee.
Compensation
Committee
Our
compensation committee presently consists of John David Simmons, William M.
Sams
and Daniel J. Englander, Chairman. Our compensation committee assists our board
of directors with respect to our compensation programs and compensation of
our
executive officers and is authorized to administer our equity and non-equity
incentive plans. Our compensation committee operates pursuant to a written
charter adopted by our board of directors, which may be found on our website
at
www.car-mart.com.
Our
compensation committee held three meetings during the last fiscal year. See
“Executive Compensation - Compensation Discussion and Analysis - Role of
Compensation Committee” for additional information.
Nominating
Committee
Our
nominating committee presently consists of John David Simmons, William M. Sams,
Daniel J. Englander and William A. Swanston, Chairman. Our nominating committee
operates pursuant to a written charter adopted by our board of directors, which
may be found on our website at www.car-mart.com.
Nominees for election to our board of directors are considered and recommended
by our nominating committee. Our full board of directors considers the
recommendations of the nominating committee and recommends the nominees to
our
stockholders. Our nominating committee’s process for identifying and evaluating
potential nominees includes soliciting recommendations from our directors and
officers. Absent special circumstances, our nominating committee will continue
to nominate qualified incumbent directors whom the nominating committee believes
will continue to make important contributions to our board of directors. Our
nominating committee generally requires that nominees be persons of sound
ethical character, be able to represent all stockholders fairly, have no
material conflicts of interest, have demonstrated professional achievement,
have
meaningful experience and have a general appreciation of the major issues facing
us. Our nominating committee held two meetings during the last fiscal
year.
Shareholder
Nominations
Our
nominating committee will consider persons recommended by our stockholders
in
selecting nominees for election. Our nominating committee does not have a formal
policy with regard to the consideration of any director candidates recommended
by stockholders because it believes that it can adequately evaluate any such
nominee on a case-by-case basis. However, our nominating committee would
consider for possible nomination qualified nominees recommended by stockholders.
Stockholders who wish to propose a qualified nominee for consideration should
submit complete information as to the identity and qualifications of that person
to our Secretary at 802 Southeast Plaza Ave., Suite 200, Bentonville, Arkansas
72712. See “Stockholder Proposals” for information regarding the procedures that
must be followed by stockholders in order submit stockholder proposals,
including proposals to nominate candidates.
Compensation
Committee Interlocks and Insider Participation
None
of
the members of our compensation committee is or has been one of our officers
or
employees. There are no compensation committee interlocks and no insider
participation in compensation decisions that are required to be disclosed in
this proxy statement.
Code
of Ethics
We
have
adopted a code of business conduct and ethics that applies to all employees,
including executive officers and directors. A copy of our code was filed as
Exhibit 14.1 to our annual report on Form 10-K for the fiscal year ended April
30, 2004. In the event that we make any amendments to, or grant any waiver
from,
a provision of the code that requires disclosure under applicable SEC or Nasdaq
rules, we will disclose such amendment or waiver and the reasons therefore
as
required.
Section 16(a)
Beneficial Ownership Reporting
Compliance
Section 16(a)
of the Exchange Act requires our directors, executive officers and persons
who
own more than 10% of our outstanding common stock to file with the SEC reports
of changes in ownership of our common stock held by such persons. Executive
officers, directors and greater than 10% shareholders are also required to
furnish us with copies of all forms they file under this regulation. To our
knowledge, based solely on a review of the copies of such reports furnished
to
us and representations that no other reports were required, during the fiscal
year ended April 30, 2007, our executive officers, directors and greater than
10% shareholders complied with all Section 16(a) filing requirements
applicable to them, except as follows: John David Simmons, William A. Sams
and
Carl E. Baggett, who is no longer one of our directors, each filed one report
late reporting one transaction.
EXECUTIVE
OFFICERS
Our
executive officers are as follows:
|
|
|
|
|
Name
|
|
Age
|
|
Position
Held
|
Tilman
J. Falgout, III
|
|
58
|
|
Chief
Executive Officer and General Counsel
|
William
H. Henderson
|
|
44
|
|
President
|
Eddie
L. Hight
|
|
44
|
|
Chief
Operating Officer
|
Jeffrey
A. Williams
|
|
44
|
|
Chief
Financial Officer, Vice President Finance and
Secretary
|
See
"Election of Directors" for information with respect to Tilman J. Falgout,
III
and William H. Henderson.
Jeffrey
A. Williams
has
served as our Chief Financial Officer, Vice President Finance and Secretary
since October 1, 2005. From October 2004 until his employment by us, he served
as the Chief Financial Officer of Budgetext Corporation, a distributor or new
and used textbooks. From February 2004 to October 2004, Mr. Williams was the
President and founder of Clearview Enterprises, LLC, a regional distributor
of
animal health products. From January 1999 to January 2004, Mr. Williams was
Chief Financial Officer and Vice President of Operations of Wynco, LLC, a
nationwide distributor of animal health products.
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
Compensation
Philosophy
Our
compensation philosophy is to align the interests of our executive officers
with
those of our stockholders. We believe that this is best accomplished by the
following:
· |
paying
executives a base salary commensurate with their backgrounds, industry
knowledge, special skill sets and responsibilities;
|
· |
offering
incentive cash bonuses conditioned on our consolidated financial
results;
and
|
· |
making
periodic grants of restricted stock and/or stock options to induce
executives to remain in our employ as well as align their interests
with
those of our stockholders.
|
Our
overall goal is to ensure that our executive compensation program and policies
are consistent with our strategic business objectives and that we provide
incentives for the attainment of those objectives. We strive to accomplish
this
goal in the context of a compensation program that includes annual base salary,
annual cash incentives and stock ownership.
Role
of Compensation Committee
Our
compensation committee retains broad flexibility in the administration of our
executive compensation program. We believe this flexibility is critical to
retaining key executives. Our compensation committee is focused on ensuring
that
executive compensation is directly tied to our economic
performance.
Our
compensation committee operates under a written charter adopted by our board
of
directors. Our compensation committee has several duties and responsibilities,
including the following:
· |
establish
and review our overall executive compensation
philosophy;
|
· |
review
and approve our goals and objectives relevant to the compensation
of our
Chief Executive Officer and other executive officers, including annual
performance objectives;
|
· |
on
an annual basis, review the compensation and performance of our officers,
review and approve corporate goals relevant to the compensation of
our
Chief Executive Officer and other executive officers, evaluate our
Chief
Executive Officer’s performance in light of these goals and objectives,
evaluate the performance of our senior executive officers, and based
on
such evaluation, approve the annual compensation of our Chief Executive
Officer and other executive
officers;
|
· |
review
the annual compensation discussion and analysis and produce an annual
report on executive compensation for inclusion in our annual proxy
statement, in accordance with all applicable rules and
regulations;
|
· |
as
requested by our board of directors, make recommendations to our
board of
directors with respect to the approval of incentive compensation
plans and
equity-based incentive plans, and administer such
plans;
|
· |
periodically
review the policies and criteria for the administration of all executive
compensation programs, the operations of the compensation programs
and
whether they are achieving their intended
purposes;
|
· |
monitor
compliance by executives with the terms and conditions of our executive
compensation plans and programs;
|
· |
establish
and periodically review policies in the area of senior management
perquisites;
|
· |
review
board of director compensation levels and practices periodically,
and
recommend to our board of directors, from time to time, changes in
such
compensation levels and practices;
|
· |
review
and approve plans and processes for management development and succession;
and
|
· |
periodically
review and reassess the adequacy of the compensation committee charter
and
recommend any proposed changes to our board of directors for
approval.
|
For
additional information on the duties and responsibilities of our compensation
committee, see our compensation committee charter available on our website
at
www.car-mart.com.
Compensation
Process
Our
compensation committee reviews and administers our compensation program for
each
of our named executive officers. Compensation is typically set at three-year
increments in order to help ensure that longer-term results are the primary
focus, which we believe is critically important in our industry. Our
compensation committee periodically meets with our Chief Executive Officer,
who
provides insight into how individual executives are performing.
Employment
Agreements
We
have
employment agreements with all of our named executive officers. We believe
that
the employment agreements, which include change-in-control provisions, are
necessary to attract and retain executives in light of all relevant factors,
which include each officer’s past employment experience, desired terms and
conditions of employment, and the strategic importance of their respective
positions. We believe that the change-in-control provisions are necessary to
maintain stability among our executive group and that the terms of such
provisions are reasonable based on our review of similar provisions for similar
companies. Our compensation committee reviews the employment agreements at
the
time such agreements are entered into in order to determine current market
terms
for the particular executive and agreement. See “ Executive Compensation -
Employment Agreements” and “Executive Compensation - Change in Control
Agreements” for a discussion of the terms of the employment
agreements.
Total
Compensation and Elements of Compensation
Our
principal focus is on total compensation, a significant portion of which is
based on each executive’s performance and is not guaranteed. Although we do
informally review what other
companies within our industry or other companies of comparable size, growth,
performance and complexity are offering to their executives,
we
believe the appropriate level of compensation is determined through careful
consideration of the individual employee and our business goals. We consider
a
variety of factors in determining the total compensation for our named executive
officers, including their backgrounds, industry knowledge, special skill sets
and responsibilities.
Our
executive compensation program primarily consists of base salary, annul
short-term incentives in the form of cash, and long-term incentives in the
form
of restricted stock and/or stock options. We also provide certain of our named
executive officers with minimal perquisites and personal benefits. In addition,
we provide our named executive officers with the ability to contribute a portion
of their earnings to our 401(k) plan. Our 401(k) plan is available generally
to
all of our employees.
Base
Salary
We
offer
what we believe to be competitive base salaries to our named executive officers.
The base salary must be sufficient to attract talented executives and provide
a
secure base of cash compensation. Due to the relatively small size of our
industry and the non-existence of public competitors, we have not engaged in
any
formal compensation benchmarking studies; however, our base salary levels for
our named executive officers are generally set to be competitive in relation
to
salary levels of executive officers in other companies within our industry
or
other companies of comparable size, growth, performance and complexity, while
also taking into consideration the executive officer’s position, responsibility
and special expertise. Annual base salary increases, typically determined in
May
of each year, are not assured and adjustments to base salary take into account
subjective factors such as the executive’s performance during the prior year,
responsibilities and experience. In fiscal 2007, our named executive officers
did not receive an increase in base salary from the fiscal 2006 levels. For
fiscal 2008, our named executive officers will receive the following increases
in base salary from fiscal 2007 levels: our Chief Executive Officer will receive
a $0 increase with a base salary of $330,000; our President will receive a
$45,000, or 17.6%, increase with a base salary of $300,000; our Chief Operating
Officer will receive a $15,000, or 8.8%, increase with a base salary of
$185,000; and our Chief Financial Officer will receive a $5,000, or 2.9%,
increase with a base salary of $180,000.
Economic
Profit
Beginning
with fiscal 2008, the performance criteria for certain of our named executive
officers for their short-term and long-term incentive compensation will be
economic profit, as opposed to profit under generally accepted accounting
principals, referred to in this proxy statement as GAAP. We define economic
profit as net operating profit after taxes minus a charge for the cost of
capital necessary to generate those profits. Economic profits are realized
only
if actual financial results exceed the cost of capital to generate those
profits. Economic profit is neither in accordance with, nor should it be
considered an alternative to, GAAP. However, we believe that maximizing economic
profit is the clearest path to creating long-term stockholder value and that
it
provides our stockholders with another meaningful tool to evaluate our
performance. We consider economic profit to be the best measure of our financial
performance.
Short-Term
Incentive Compensation
Our
short-term incentive plans for our named executive officers, which are contained
in their employment agreements, are intended to drive short-term, typically
one
to three years, operating and financial results deemed crucial to our long-term
term success. Our program entails granting annual cash bonuses reflecting our
performance. The purpose of the annual cash bonuses paid to our named executive
officers is to reflect the breadth of their experience and responsibility,
and
to make the cash component of their compensation competitive. These cash bonuses
are a material portion of the named executive officers’ overall compensation.
All such cash bonuses are subject to our compensation committee’s discretion to
award bonuses greater than the target if deemed appropriate. Our compensation
committee also administers the calculation of amounts earned under the
short-term incentive plans.
The
performance criterion for our short-term incentive plans for fiscal 2007 for
our
Chief Executive Officer, President and Chief Operating Officer was based on
our
net income. The performance criterion for our short-term incentive plans
beginning in fiscal 2008 for our President, Chief Financial Officer and Chief
Operating Officer, which was selected by our compensation committee, includes
attaining certain levels of economic profit per diluted share. Target payments
will typically range from 10% to 20% of base salary, depending on the named
executive officer’s position and our performance as related to our economic
profit goals. Our compensation committee has set the awards for each named
executive officer based on the time of employment with us, job responsibilities,
industry knowledge, special skills and performance. The performance goals have
been set at levels that our compensation committee considers attainable, but
not
assured, and representative of solid operating and financial performance within
our industry. In addition, our compensation committee may, in its discretion,
revise the target levels for the performance goals for fiscal years 2009 and
2010. The short-term incentive compensation for our Chief Executive Officer
will
continue to be based on our net income in accordance with his existing
employment agreement. See “Executive Compensation - Employment Agreements” for a
discussion of the performance criteria for each named executive officer.
Long-Term
Incentive Compensation
Our
compensation objective of
inducing
executives to remain in our employ as well as aligning their interests with
those of our stockholders
leads us
to make periodic equity awards. These awards provide incentives for our named
executive officers to remain with us over the long term and additional
flexibility to our compensation committee to reward superior performance by
our
named executive officers. We believe that dependence on equity for a significant
portion of a named executive officer’s compensation more closely aligns such
executive’s interests with those of our stockholders, since the ultimate value
of such compensation is linked directly to our stock price.
We
have
primarily utilized two equity incentive plans, including the 1997 Stock Option
Plan, which we intend to replace with the 2007 Stock Option Plan, and the
Incentive Plan. See “Proposal No. 2 - Approval of 2007 Stock Option Plan” and
“Proposal No. 3 - Approval of Amendment to Stock Incentive Plan” for a
discussion of the specific terms of our equity incentive plans. A majority
of
the stock options granted by us have been non-qualified stock options, expire
ten years from the date of grant and have had exercise prices equal to or
greater than the fair market value of the underlying stock at the time of grant.
Awards have historically been made on a periodic basis at the discretion of
our
compensation committee based on individual performance, as well as our overall
performance. For fiscal 2008, certain awards were made for a three-year period,
are performance-based and, like short-term incentive compensation, will only
be
earned by the named executive officer if we meet certain economic profit goals.
In
addition, our compensation committee may, in its discretion, revise the target
levels for the performance goals for fiscal years 2009 and 2010. See
“Executive Compensation - Employment Agreements” for a discussion of the
performance criteria for certain of our executive officers.
As
discussed below under the section entitled “Executive Compensation - Employment
Agreements,” and subject to stockholder approval of the 2007 Plan and the
amendment to the Incentive Plan, we are prepared to issue significant equity
awards to certain key executives as part of our strategy of providing meaningful
long-term performance-based incentives for our management team and to more
closely align management’s interest with the interests of our stockholders. A
large portion of the equity awards that will be issued will be performance-based
and will only vest if economic profit meets or exceeds goals for the three-year
period ending April 30, 2010.
Perquisites
and Personal Benefits
Our
named
executive officers receive additional compensation consistent with our
philosophy of hiring and retaining key personnel. Such perquisites include
disability insurance, automobile allowances and matching contributions to our
401(k) plan. See “Executive Compensation - Summary Compensation Table for Fiscal
2007” for the aggregate incremental cost to us during fiscal 2007 of such
benefits.
Equity
Ownership Guidelines
We
have
an ownership philosophy, rather than a formal policy, regarding equity ownership
by our named executive officers. The objectives of our philosophy are to instill
an ownership mindset among our senior management and to align the interests
of
our named executive officers with the interests of our stockholders. The
long-term incentive compensation arrangements discussed above are intended
to
bring the beneficial ownership interests of our named executive officers more
in
line with our compensation committee’s ownership level
expectations.
Deductibility
of Executive Compensation
The
deductibility of executive compensation under Section 162(m) of the Internal
Revenue Code, as amended, which provides that we may not deduct compensation
of
more than $1,000,000 that is paid to certain individuals, has not been a
material consideration for our compensation committee due to the levels and
types of compensation paid to our named executive officers.
Accounting
for Stock-Based Compensation
Effective
at the beginning of fiscal 2007, we began accounting for stock-based payments
in
accordance with the requirements of SFAS No.123R. The expense related to equity
compensation has been and will continue to be a material consideration in the
overall compensation program.
Summary
Compensation Table for Fiscal 2007
The
following table provides certain information for the fiscal year ended April
30,
2007 concerning compensation earned for services rendered in all capacities
by
our principal executive officer, principal financial officer and our two other
executive officers during the fiscal year ended April 30, 2007.
Name
and
Principal
Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)1
|
Option
Award
($)
|
Non-Equity
Incentive Plan Compensation
($)
|
Change
in Pension Value and Nonqualified Deferred Compensation Earnings
($)
|
All
Other Compensation
($)1
|
Total
($)
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
|
(j)
|
Tilman
J. Falgout, III
Chief
Executive Officer and General Counsel
|
2007
|
$330,000
|
$21,162
|
$102,350
|
-
|
-
|
-
|
$22,715
|
$476,227
|
William
H. Henderson
President
|
2007
|
$255,000
|
$42,325
|
$102,350
|
-
|
-
|
-
|
$8,357
|
$408,032
|
Jeffrey
A. Williams
Chief
Financial Officer and Secretary
|
2007
|
$175,000
|
$50,000
|
$51,175
|
-
|
-
|
-
|
$4,312
|
$280,487
|
Eddie
L. Hight
Chief
Operating Officer
|
2007
|
$170,000
|
$21,162
|
$68,233
|
-
|
-
|
-
|
$8,216
|
$267,611
|
____________________________
1 Refer
to
“Financial Statements and Supplementary Data - Notes to Consolidated Financial
Statements - Stock-Based Compensation” included in our annual report on Form
10-K filed on July 13, 2007 for the relevant assumptions used to determine
the
valuation of our stock awards.
2 These
amounts include contributions to our 401(k) plan, payment of disability
insurance premiums and use of company automobile, including as follows:
Mr.
Falgout $5,011 for disability insurance, $13,750 for use of company automobile
and $3,954 for 401(k) plan.
The
following table provides certain information concerning the grants of awards
in
fiscal 2007 to the named executive officers pursuant to plans.
Name
|
Grant
Date
|
Estimated
Possible Payouts Under Non-Equity Incentive Plan Awards
|
Estimated
Future Payouts Under Equity Incentive Plan Awards
|
All
Other Stock Awards: Number of Shares of Stock or Units
(#)1
|
All
Other Option Awards: Number of Securities
Underlying
Options
(#)
|
Exercise
or Base Price of Option Awards ($/Sh)
|
Full
Grant-Date Fair Value
($)
|
|
|
Threshold
($)
|
Target
($)
|
Maximum
($)
|
Threshold
(#)
|
Target
(#)
|
Maximum
(#)
|
|
|
|
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
|
(j)
|
(k)
|
(l)
|
Tilman
J. Falgout
|
5/1/06
|
|
|
|
|
|
|
15,000
|
|
|
$307,050
|
William
H. Henderson
|
5/1/06
|
|
|
|
|
|
|
15,000
|
|
|
$307,050
|
Jeffrey
A. Williams
|
5/1/06
|
|
|
|
|
|
|
7,500
|
|
|
$153,525
|
Eddie
L. Hight
|
5/1/06
|
|
|
|
|
|
|
10,000
|
|
|
$204,700
|
_____________________________
1
Grants
pursuant to Incentive Plan. The restricted stock vests in three equal
installments on April 30, 2007, April 30, 2008 and April 30, 2009.
Our
named
executive officers are entitled to all benefits generally made available to
our
employees, including the eligibility to participate in our 401(k) plan. Our
401(k) plan is intended to be a tax-qualified defined contribution plan under
Section 401(k) of the Internal Revenue Code of 1986, as amended, referred to
in
this proxy statement as the Code. In general, all of our employees who are
at
least 21 years of age are eligible to participate one year following the date
they were hired. Our 401(k) plan includes a salary deferral arrangement pursuant
to which the participants may contribute up to the maximum amount permitted
by
the Code. We may make both matching and additional contributions, subject to
certain Code limitations, at the discretion of our board of directors. A
separate account is maintained for each participant in our 401(k) plan. The
portion of a participant’s account attributable to his or her own contributions
is 100% vested. Distributions from our 401(k) plan may be made in the form
of a
lump sum cash payment or, for required minimum distribution, in installment
payments. We made the following contributions for each of our named executive
officers in fiscal 2007: (i) $3,954 for Tilman J. Falgout, III; (ii) $3,507
for
William H. Henderson; (iii) $1,212 for Jeffrey A. Williams; and (iv) $3,866
for
Eddie L. Hight.
Employment
Agreements
Agreements
related to Fiscal Year 2007 Compensation
The
following is a discussion of the employment agreements related to the
compensation earned by and paid to our named executive officers for fiscal
2007.
We have entered into new employment agreements with all of our named executive
officers, other than our Chief Executive Officer. See “New Employment
Agreements” below for a discussion of the terms of such agreements. However, we
have amended the change in control provisions contained in our Chief Executive
Officer’s employment agreement. See “Executive Compensation - Change in Control
Agreements” below.
Tilman
J. Falgout.
Pursuant
to an employment agreement, which was authorized by our compensation committee
on May 10, 2006, Tilman J. Falgout agreed to serve as a senior executive officer
of America’s Car-Mart, Inc., an Arkansas corporation that is referred to in this
proxy statement as our operating subsidiary, for a term ending on April 30,
2009. Mr. Falgout is entitled to an annual salary of $330,000, or such higher
annual salary approved by our board of directors. Mr. Falgout has the right
to
participate in any operating subsidiary 401(k) profit sharing plan, as well
as
the medical and life insurance programs offered by our operating subsidiary.
In
addition, Mr. Falgout is eligible to earn a bonus each fiscal quarter equal
to
one-half percent of our net income during such quarter. At least 50% of such
bonus, net of applicable taxes, must be used to purchase shares of our common
stock, and, at his option, up to 100% of the bonus, net of applicable taxes,
may
be used to purchase shares of our common stock. All such shares vest immediately
upon issuance and are purchased at market price. In addition, we granted to
Mr.
Falgout, pursuant to our Incentive Plan, 15,000 shares of our common stock,
which vest in equal proportions on April 30, 2007, 2008 and 2009.
Pursuant
to the terms of his employment agreement, if we terminate Mr. Falgout without
cause and not in connection with a change in control, Mr. Falgout is entitled
to
his base salary then in effect through the term of the employment agreement.
The
estimated amount would have been $660,000, assuming Mr. Falgout was terminated
on April 30, 2007.
Mr.
Falgout’s employment agreement contains an agreement not to compete, which
covers the term of employment and one year thereafter, a covenant against
solicitation of employees and customers, which covers the term of employment
and
one year thereafter, and a provision against the use, exploitation and removal
of secret processes and confidential information, which covers the term of
employment and an indefinite period thereafter.
William
H. Henderson.
Pursuant
to an employment agreement, which was authorized by our compensation committee
on May 10, 2006, William H. Henderson agreed to serve as a senior executive
officer of our operating subsidiary for a term ending on April 30, 2009. Mr.
Henderson was entitled to an annual salary of $255,000 and eligible to earn
a
bonus each fiscal quarter equal to one percent of our net income during such
quarter. At least 25% of such bonus, net of applicable taxes, had to be used
to
purchase shares of our common stock. All such shares vested immediately upon
issuance and were purchased at market price. In addition, we granted to Mr.
Henderson, pursuant to our Incentive Plan, 15,000 shares of our common stock,
which vest in equal proportions on April 30, 2007, 2008, and 2009.
Eddie
L. Hight.
Pursuant
to an employment agreement, which was authorized by our compensation committee
on May 10, 2006, Eddie Hight agreed to serve as a senior executive officer
of
our operating subsidiary for a term ending on April 30, 2009. Mr. Hight was
entitled to an annual salary of $170,000 and eligible to earn a bonus each
fiscal quarter equal to one-half percent of our net income during such quarter.
In addition, we granted to Mr. Hight, pursuant to our Incentive Plan, 10,000
shares of our common stock, which vest in equal proportions on April 30, 2007,
2008 and 2009.
Jeffrey
A. Williams.
For the
2007 fiscal year, we did not have a written employment agreement with Jeffrey
A.
Williams, although, on May 10, 2006, our compensation committee approved for
Mr.
Williams a salary in the amount of $175,000. Mr. Williams was also eligible
to
earn a cash bonus to be paid quarterly and to participate in any operating
subsidiary employment benefit plans. In addition, we granted Mr. Williams,
pursuant to our Incentive Plan, 7,500 shares of our common stock, which vest
in
equal proportions on April 30, 2007, 2008 and 2009.
New
Employment Agreements
After
the
end of the 2007 fiscal year, we entered into new written employment agreements
with William H. Henderson, Eddie L. Hight and Jeffrey A. Williams. All of the
employment agreements were authorized by our compensation committee on August
27, 2007. Each of the new employment agreements contains an agreement not to
compete, which covers the term of employment and one year thereafter, a covenant
against the solicitation of employees and customers, which covers the term
of
employment and one year thereafter, a provision against the use and disclosure
of trade secrets, which covers the term of employment and an indefinite period
thereafter, and a provision against the use and disclosure of confidential
information, which covers the term of employment and two years
thereafter.
William
H. Henderson.
Pursuant
to his new employment agreement, Mr. Henderson agreed to serve as a senior
executive officer of our operating subsidiary for a term ending on April 30,
2010. Mr. Henderson is entitled to an annual salary of $300,000, or such higher
annual salary approved by our board of directors. Mr. Henderson has the right
to
participate in any operating subsidiary 401(k) profit sharing plan, as well
as
the medical and life insurance programs offered by our operating subsidiary.
In
addition, Mr. Henderson is entitled to earn an annual bonus during the term
beginning May 1, 2007 and ending April 30, 2010. Such bonus will range between
$40,000 to $60,000 per fiscal year, be based upon our “economic profit per
share,” and depend on us attaining a minimum of 85% of our projected economic
profit, in which case a $40,000 bonus would be paid, and will increase ratably
up to 115% of our projected economic profit, in which case a $60,000 bonus
would
be paid.
Pursuant
to his new employment agreement, Mr. Henderson will receive 40,000 shares of
our
restricted common pursuant to our Incentive Plan, which shares will vest in
equal increments each year during the term of the employment agreement. The
restricted stock award will be made on the date of the 2007 annual meeting
of
stockholders, subject to approval by our stockholders of the proposed amendment
to the Incentive Plan. In addition, we are required to make a cash payment
to
Mr. Henderson in an amount equal to 32% of the fair market value of such
restricted shares on the respective vesting dates to defray taxes.
Mr.
Henderson will also receive, pursuant to our 2007 Plan, non-qualified stock
options to purchase 180,000 shares of our common stock, with vesting of such
options subject to the attainment of our projected economic profit per share
over the three fiscal years ending April 30, 2010. If we attain 115% or 100%
of
our projected economic profit per share, 180,000 or 150,000 options will vest,
respectively. No options will vest unless we attain at least 85% of the
applicable fiscal year’s projected economic profit per share; provided, however,
“give-backs and claw-backs” will apply to the vesting of the options. For
example, if we attain 70% of our projected economic profit per share in year
one
and then attain 120% of the projection in year two, Mr. Henderson will receive
94% of the two year total of options. Also, if we attain 90% and 75% of
projected economic profit per share in year one and two, respectively, then
the
options vested in year one would be forfeited after year two since the two-year
average is less than 85%. The stock option award will be made on the date of
the
2007 annual meeting of stockholders, subject to approval by our stockholders
of
the 2007 Plan.
Pursuant
to the terms of his employment agreement, if we terminate Mr. Henderson without
cause and not in connection with a change in control, Mr. Henderson’s base
salary will continue to be payable through the term of the employment agreement,
Mr. Henderson will be paid, within 60 days after termination, the pro rata
portion of any bonus earned through the date of termination, and all unvested
restricted stock and stock options will immediately vest in full without regard
to the achievement of any applicable performance goals. The estimated payment
amount would have been $1,033,706, assuming
Mr. Henderson was terminated on April 30, 2007.
Eddie
L. Hight.
Pursuant
to his new employment agreement, Mr. Hight agreed to serve as a senior executive
officer of our operating subsidiary for a term ending on April 30, 2010. Mr.
Henderson is entitled to an annual salary of $185,000, or such higher annual
salary approved by our board of directors. Mr. Hight has the right to
participate in any operating subsidiary 401(k) profit sharing plan, as well
as
the medical and life insurance programs offered by our operating subsidiary.
In
addition, Mr. Hight is entitled to earn an annual bonus during the term
beginning May 1, 2007 and ending April 30, 2010. Such bonus will range between
$24,000 to $36,000 per fiscal year, be based upon our “economic profit per
share,” and depend on us attaining a minimum of 85% of our projected economic
profit, in which case a $24,000 bonus would be paid, and will increase ratably
up to 115% of our projected economic profit, in which case a $36,000 bonus
would
be paid.
Pursuant
to his new employment agreement, Mr. Hight will receive 25,000 shares of our
restricted common pursuant to our Incentive Plan, which shares will vest in
equal increments each year during the term of the employment agreement. The
restricted stock award will be made on the date of the 2007 annual meeting
of
stockholders, subject to approval by our stockholders of the proposed amendment
to the Incentive Plan. In addition, we are required to make a cash payment
to
Mr. Hight in an amount equal to 32% of the fair market value of such restricted
shares on the respective vesting dates to defray taxes.
Mr.
Hight
will also receive, pursuant to our 2007 Plan, non-qualified stock options to
purchase 108,000 shares of our common stock, with vesting of such options
subject to the attainment of our projected economic profit per share over the
three fiscal years ending April 30, 2010. If we attain 115% or 100% of our
projected economic profit per share, 108,000 or 90,000 options will vest,
respectively. No options will vest unless we attain at least 85% of the
applicable fiscal year’s projected economic profit per share; provided, however,
“give-backs and claw-backs” will apply to the vesting of the options as
described above with respect to Mr. Henderson’s agreement. The stock option
award will be made on the date of the 2007 annual meeting of stockholders,
subject to approval by our stockholders of the 2007 Plan.
Pursuant
to the terms of his employment agreement, if we terminate Mr. Hight without
cause and not in connection with a change in control, Mr. Hight’s base salary
will continue to be payable through the term of the employment agreement, Mr.
Hight will be paid, within 60 days after termination, the pro rata portion
of
any bonus earned through the date of termination, and all unvested restricted
stock and stock options will immediately vest in full without regard to the
achievement of any applicable performance goals. The estimated payment amount
would have been $644,127, assuming
Mr. Hight was terminated on April 30, 2007.
Jeffrey
A. Williams.
Pursuant
to his new employment agreement, Mr. Williams agreed to serve as a senior
executive officer of our operating subsidiary for a term ending on April 30,
2010. Mr. Williams is entitled to an annual salary of $180,000, or such higher
annual salary approved by our board of directors. Mr. Williams has the right
to
participate in any operating subsidiary 401(k) profit sharing plan, as well
as
the medical and life insurance programs offered by our operating subsidiary.
In
addition, Mr. Williams is entitled to earn an annual bonus during the term
beginning May 1, 2007 and ending April 30, 2010. Such bonus will range between
$20,000 to $30,000 per fiscal year, be based upon our “economic profit per
share,” and depend on us attaining a minimum of 85% of our projected economic
profit, in which case a $20,000 bonus would be paid, and will increase ratably
up to 115% of our projected economic profit, in which case a $30,000 bonus
would
be paid.
Mr.
Williams will also receive, pursuant to our 2007 Plan, non-qualified stock
options to purchase 72,000 shares of our common stock, with vesting of such
options subject to the attainment of our projected economic profit per share
over the three fiscal years ending April 30, 2010. If we attain 115% or 100%
of
our projected economic profit per share, 72,000 or 60,000 options will vest,
respectively. No options will vest unless we attain at least 85% of the
applicable fiscal year’s projected economic profit per share; provided, however,
“give-backs and claw-backs” will apply to the vesting of the options as
described above with respect to Mr. Henderson’s agreement. The stock option
award will be made on the date of the 2007 annual meeting of stockholders,
subject to approval by our stockholders of the 2007 Plan.
Pursuant
to the terms of his employment agreement, if we terminate Mr. Williams without
cause and not in connection with a change in control, Mr. Williams’ base salary
will continue to be payable through the term of the employment agreement, Mr.
Williams will be paid, within 60 days after termination, the pro rata portion
of
any bonus earned through the date of termination, and all unvested restricted
stock and stock options will immediately vest in full without regard to the
achievement of any applicable performance goals. The estimated payment amount
would have been $606,853, assuming
Mr. Williams was terminated on April 30, 2007.
Stock
Plans
1997
Stock Option Plan.
In July
1997, our board of directors adopted the 1997 Plan, which was subsequently
approved by our stockholders at our 1997 annual meeting of stockholders. The
1997 Plan set aside 1,500,000 shares of our common stock for grants to
employees, directors and certain advisors at a price not less than fair market
value of our common stock on the date of grant. The options vest upon issuance.
The purchase price of the shares purchased upon exercise must be equal to 100%
of the market price on the date of grant; provided, that the purchase price
of
stock delivered upon the exercise of a qualified incentive stock option granted
to a ten percent owner must not be less than 110% of the market price on the
date of grant. Options granted pursuant to the 1997 Plan will expire five to
ten
years from the date of grant. At April 30, 2007, there were 28,558 shares of
common stock available for grant under the 1997 Plan. No options were granted
to
our named executive officers during the last fiscal year. The 1997 Plan expired
in July 2007. See “Proposal No. 2 - Approval of 2007 Stock Option Plan” for
information regarding our new stock option plan.
Stock
Incentive Plan.
In
August 2005, our board of directors adopted the Incentive Plan, which was
subsequently approved by our stockholders at our 2005 annual meeting of
stockholders. The Incentive Plan set aside 100,000 shares of our common stock
for grants to our employees, officers and directors. Shares granted under the
Incentive Plan have full voting rights prior to the date of vesting, if any;
however, holders of any unvested shares must execute an irrevocable proxy
granting us the right to vote such shares until the shares vest. At April 30,
2007, there were 39,728 shares of common stock available for grant under the
Incentive Plan. 47,500 shares of stock were granted to our named executive
officers during the last fiscal year. The Incentive Plan will expire pursuant
to
its terms in August 2015. See “Proposal No. 3 - Approval of Amendment to Stock
Incentive Plan” for information regarding the proposal to increase the
authorized shares issuable under the Incentive Plan.
Outstanding
Equity Awards at 2007 Fiscal Year-End
The
following table provides certain information concerning the outstanding equity
awards for each named executive officer as of April 30, 2007.
|
Option
Awards
|
Stock
Awards
|
Name
|
Number
of Securities Underlying Unexercised Options (#)
Exercisable
|
Number
of Securities Underlying Unexercised Options (#)
Unexercisable
|
Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised
Unearned Options
(#)
|
Option
Exercise Price ($)
|
Option
Expiration Date
|
Number
of Shares or Units of Stock That Have Not Vested
(#)1
|
Market
Value of Shares or Units of Stock That Have Not Vested
($)
|
Equity
Incentive Plan Awards: Number of Unearned Shares, Units or Other
Rights
That Have Not Vested
(#)
|
Equity
Incentive Plan Awards: Market or Payout Value of Unearned Shares,
Units or
Other Rights That Have Not Vested
($)
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
|
(j)
|
Tilman
J. Falgout, III
|
30,000
|
|
|
$8.77
|
05/01/12
|
|
|
|
|
137,898
|
|
|
$3.67
|
12/30/08
|
|
|
|
|
24,000
|
|
|
$23.75
|
12/08/14
|
|
|
|
|
|
|
|
|
|
10,000
|
$128,200
|
|
|
|
|
|
|
|
|
|
|
|
|
William
H. Henderson
|
10,682
|
|
|
$6.59
|
03/28/12
|
|
|
|
|
24,000
|
|
|
$23.75
|
12/08/14
|
|
|
|
|
|
|
|
|
|
10,000
|
$128,200
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey
A. Williams
|
|
|
|
|
|
5,000
|
$64,100
|
|
|
|
|
|
|
|
|
|
|
|
Eddie
L. Hight
|
18,000
|
|
|
$23.75
|
10/30/08
|
|
|
|
|
|
|
|
|
|
6,667
|
$85,458
|
|
|
|
|
|
|
|
|
|
|
|
____________________
1The
restricted stock vests in two equal installments on April 30, 2008 and April
30,
2009.
Option
Exercises and Stock Vested during Fiscal 2007
The
following table provides certain information concerning the option exercises
and
stock vested for each named executive officer during the fiscal year ended
April
30, 2007.
|
Option
Awards
|
Stock
Awards
|
Name
|
Number
of Shares
Acquired
on Exercise
(#)
|
Value
Realized on
Exercise
($)
|
Number
of Shares
Acquired
on Vesting
(#)
|
Value
Realized on
Vesting
($)
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
Tilman
J. Falgout, III
|
10,000
|
$150,450
|
5,000
|
$64,100
|
William
H. Henderson
|
|
|
5,000
|
$64,100
|
Jeffrey
A. Williams
|
|
|
2,500
|
$32,050
|
Eddie
L. Hight
|
|
|
3,333
|
$42,729
|
Change
in Control Agreements
The
employment agreements of our named executive officers contain change in control
provisions entitling them, upon the occurrence of certain events, to a portion
of their base salary and the immediate vesting of stock options and restricted
stock. Under the terms of the employment agreements, a change in control
generally means the following:
· |
the
acquisition by an individual, entity or group (within the meaning
of
Section 409A of the Code) of ownership of our stock that, together
with
stock held by such person, constitutes more than 50% of the total
fair
market value of total voting power of our stock;
|
· |
the
acquisition by an individual, entity or group (within the meaning
of
Section 409A of the Code) during the twelve-month period ending on
the
date of the most recent acquisition by such person of ownership of
our
stock possessing 35% or more of the total voting power of our
stock;
|
· |
the
replacement of a majority of the members of our board of directors
during
any twelve-month period by directors whose appointment or election
is not
endorsed by a majority of the members of our board of directors prior
to
the date of the appointment or election;
or
|
· |
the
acquisition by an individual, entity or group (within the meaning
of
Section 409A of the Code) during the twelve-month period ending on
the
date of the most recent acquisition by such person of our assets
that have
a total gross fair market value equal to or more than 40% of the
total
gross fair market value of all of our assets immediately prior to
such
acquisition.
|
In
the
event of a change in control while the named executive officer is still
employed under his employment agreement, on the date the change in control
becomes effective, we must pay the named executive officer a lump sum cash
payment equal to 2.99 times the “base amount” with respect to his compensation
and all unvested restricted stock and stock options previously granted vest
in
full, without regard to the achievement of any applicable performance goals.
Such payments are referred to in this proxy statement as change in control
payments. If, prior to the change in control, we terminate the named executive
officer without cause in connection with the change in control, then, for
purposes of his change in control payments, such named executive officer will
be
treated as being employed on the date the change in control becomes effective.
If it is determined that any payment made in connection with a change in control
or termination thereafter would be subject to excise taxes, the named executive
officer will be entitled to receive a one-time additional payment in an amount
reasonably determined by an independent accounting firm to be equal to such
excise tax. Payments are payable even if such named executive officer is not
eligible for termination benefits under his employment agreement. In the event
of any underpayment of such amount, the amount of such underpayment will be
promptly paid by us. In the event of any overpayment, the named executive
officer will, at our direction and expense, take steps as are reasonably
necessary to correct such overpayment; provided, however, that the named
executive officer will in no event be obligated to return to us an amount
greater than the net after-tax portion of the overpayment and the applicable
provisions of the employment agreement will be interpreted in a manner
consistent with the intent of making the named executive officer whole, on
an
after-tax basis.
Assuming
that (1) the new employment agreements and the amendment to Mr. Falgout’s
employment agreement had been effective on April 30, 2007, (2) a change in
control occurred on April 30, 2007, and (3) the named executive officers were
not terminated without cause in connection with the change in control, the
estimated payment amounts would have been as follows: $2,709,361 for Mr.
Falgout; $1,983,125 for Mr. Henderson; $1,272,986 for Mr. Hight; and $808,806
for Mr. Williams. Assuming that (1) the new employment agreements and the
amendment to Mr. Falgout’s employment agreement had been effective on April 30,
2007, (2) a change in control occurred on April 30, 2007, and (3) the named
executive officers were terminated without cause in connection with the change
in control, the estimated payment amounts would have been as follows: $3,501,361
for Mr. Falgout; $3,063,125 for Mr. Henderson; $1,938,986 for Mr. Hight; and
$1,456,806 for Mr. Williams.
If
a
named executive officer is a “specified employee” within the meaning of Section
409A of the Code, any benefits or payments that constitute a “deferral of
compensation” under the Section 409A of the Code, become payable as a result of
the named executive officer’s termination for reasons other than death, and
become due under the employment agreement during the first six months after
termination of employment will be delayed and all such delayed payments will
be
paid to such named executive officers in full in the seventh month after the
date of termination and all subsequent payments will be paid in accordance
with
their original payment schedule.
Director
Compensation Table
The
following table provides certain information concerning compensation for each
non-employee director during the fiscal year ended April 30, 2007. Tilman J.
Falgout, III and William H. Henderson, both of whom are members of our board
of
directors, have been omitted from this table since they receive no compensation
for serving on our board of directors.
Name
|
Fees
Earned or
Paid
in
Cash
($)
|
Stock
Awards
($)
|
Option
Awards
($)
(1)(2)(3)
|
Non-Equity
Incentive
Plan
Compensation
($)
|
Change
in
Pension
Value
and
Nonqualified
Deferred
Compensation
Earnings
|
All
Other
Compensation
($)
|
Total
($)
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
Daniel
J. Englander
|
$6,000
|
-
|
-
|
-
|
-
|
-
|
$6,000
|
William
M. Sams
|
$36,000
|
-
|
$43,074
|
-
|
-
|
-
|
$79,073
|
John
David Simmons
|
$60,000
|
-
|
$43,074
|
-
|
-
|
-
|
$103,074
|
William
A. Swanston
|
$18,000
|
-
|
-
|
-
|
-
|
-
|
$18,000
|
|
(1)
|
Refer
to “Financial Statements and Supplementary Data - Notes to Consolidated
Financial Statements - Stock-Based Compensation” included in our Annual
Report on Form 10-K filed on July 13, 2007 for the relevant assumptions
used to determine the valuation of our option
awards.
|
|
(2)
|
The
grant date fair value of each stock option award to our directors
is
$11.49.
|
|
(3)
|
The
following are the aggregate number of option awards outstanding that
have
been granted to each of our director as of April 30, 2007: Mr. Englander
0; Mr. Sams - 7,500; Mr. Simmons -18,750; and Mr. Swanston -
0.
|
Discussion
of Director Compensation
Effective
November 1, 2004, each non-employee director receives a $3,000 monthly retainer.
The Chairman of our audit committee receives an additional $2,000 monthly
retainer. Directors who are also our employees do not receive separate
compensation for their services as a director. On the first business day of
July
in each year, each of our then serving non-employee directors is automatically
granted an option to purchase 3,750 shares of common stock, at an exercise
price
equal to the fair market value of our common stock on the date of grant. These
options are exercisable for a period of up to ten years from the date of grant
or, in the event that a director ceases to be one of our directors for any
reason, one year following the date on which such director ceased to be a
director, if earlier (under the terms of the 2007 Plan).
TRANSACTIONS
WITH RELATED PERSONS, PROMOTERS AND CERTAIN CONTROL
PERSONS
For
the
fiscal year ended April 30, 2007, there were no transactions with related
persons required to be disclosed in this proxy statement.
In
accordance with our audit committee charter, our audit committee is responsible
for reviewing and approving, or rejecting, any transactions with related
persons. Any financial transaction with any officer or director, or any
immediate family member of any officer or director, would need to be approved
by
our audit committee prior to our company entering into such transaction. To
assist us in identifying any transactions with related persons, each year we
submit and require our officers and directors to complete questionnaires
identifying any transactions with us in which any of our officers or directors,
or their immediate family members, have an interest.
AUDIT
COMMITTEE REPORT
In
accordance with the written charter adopted by our board of directors, a copy
of
which is available on our website, the audit committee assists the board of
directors in fulfilling its responsibility for oversight of the quality and
integrity of our accounting, auditing and financial reporting practices. During
the fiscal year ended April 30, 2007, the audit committee met five times and
discussed internal control, accounting, auditing and our financial reporting
practices with our Chief Financial Officer and our independent auditors and
accountants, Grant Thornton LLP. In discharging its oversight responsibility
as
to the audit process, each member of our audit committee has reviewed our
audited financial statements as of and for the fiscal year ended April 30,
2007
and the audit committee held one meeting with management and Grant Thornton
LLP
to discuss the audited financial statements prior to filing our annual report
on
Form 10-K. Our audit committee also met with Grant Thornton LLP to discuss
the
matters required to be disclosed by statement on Auditing Standards No. 61,
as
amended (Professional Standards), prior to filing our annual report on Form
10-K.
The
audit
committee has received and reviewed the letter from Grant Thornton LLP required
by Independence Standards Board Standard No. 1 (Independence Discussions with
Audit Committees) and has discussed with Grant Thornton LLP its independence
in
connection with its audit of our financial statements for the fiscal year ended
April 30, 2007. Our audit committee has also considered whether Grant Thornton
LLP’s provision of non-audit services to us is compatible with maintaining such
firm’s independence with respect to us and has determined that the provision of
certain non-audit services is consistent with and compatible with Grant Thornton
LLP maintaining its independence. See “Principal Accounting Fees and Services.”
Based upon the foregoing, the audit committee recommended to our board of
directors that the audited financial statements be included in our annual report
on Form 10-K for the fiscal year ended April 30, 2007.
John
David Simmons, Jr., Chairman
William
M. Sams
William
A. Swanston
The
compensation committee is primarily responsible for: (i) assisting our
board of directors in discharging its responsibilities with respect to our
compensation programs and compensation of our executive officers;
(ii) reviewing our annual compensation discussion and analysis disclosure;
(iii) providing recommendations regarding management successors; and
(iv) administering our equity and non-equity incentive plans.
The
compensation committee has reviewed and discussed the Compensation Discussion
and Analysis section of this proxy statement with management. Based upon such
review and discussion, the compensation committee recommended to our board
of
directors that the Compensation Discussion and Analysis be included in this
proxy statement.
Daniel
J.
Englander, Chairman
John
David Simmons, Jr.
William
M. Sams
Grant
Thornton LLP served as our independent auditors for the fiscal year ended April
30, 2007. We have not as yet executed an engagement letter with respect to
the
audit of our financial statements for the fiscal year ending April 30, 2008,
but
we expect to do so in due course. Historically, we and Grant Thornton LLP have
executed an engagement letter near the end of the fiscal year being audited.
The
engagement letter also covers quarterly reviews for the first three quarters
in
the subsequent fiscal year.
A
representative of Grant Thornton LLP is expected to be present at the annual
meeting of stockholders, will have an opportunity to make a statement and will
be available to respond to appropriate questions that stockholders may have.
We
know of no direct or indirect material financial interest or relationship that
members of this firm have with us.
Audit
Fees
The
aggregate fees billed by Grant Thornton LLP for professional services rendered
for the audit of our annual financial statements included in our annual report
on Form 10-K, the audit of the effectiveness of our internal control over
financial reporting, the audit of our 401(k) plan and the review of the
financial statements included in our quarterly reports on Form 10-Q totaled
$399,000 for the fiscal year ended April 30, 2007 and $406,350 for the fiscal
year ended April 30, 2006.
Audit-Related
Fees
The
aggregate fees billed by Grant Thornton LLP related to assurance and related
services for the performance of the audit or review of our financial statements
totaled $0 for the fiscal year ended April 30, 2007 and $31,172 for the fiscal
year ended April 30, 2006.
Tax
Fees
The
aggregate fees billed by Grant Thornton LLP for professional services rendered
for tax compliance, tax advice or tax planning totaled $24,437 for the fiscal
year ended April 30, 2007 and $2,189 for the fiscal year ended April 30,
2006.
All
Other Fees
The
aggregate of all other fees for services provided by Grant Thornton LLP were
$0
for the fiscal year ended April 30, 2007 and $0 for the fiscal year ended April
30, 2006.
Our
audit
committee has considered whether the provision of non-audit services by Grant
Thornton LLP to us is compatible with maintaining such firm’s independence with
respect to us and has determined that the provision of the specified non-audit
services is consistent with and compatible with Grant Thornton LLP maintaining
its independence. See “Audit Committee Report.”
Policy
on Audit Committee Pre-Approval of Services of Independent
Auditors
Our
audit
committee has established policies and procedures regarding pre-approval of
all
services provided by our independent auditor. Our audit committee will annually
review and pre-approve the services that may be provided by our independent
auditor without obtaining specific pre-approval from the audit committee. Unless
a type of service has received general pre-approval, it requires specific
pre-approval by our audit committee if it is to be provided by our independent
auditor. During the fiscal year ended April 30, 2007, our audit committee
pre-approved all audit and permitted non-audit services that were provided
to us
by our independent auditors.
ANNUAL
REPORT ON FORM 10-K
Our
annual report on Form 10-K for the fiscal year ended April 30, 2007, as filed
with the SEC, is available to stockholders who make a written request therefore
to our Secretary at our offices, 802 Southeast Plaza Ave., Suite 200,
Bentonville, Arkansas 72712. Copies of exhibits filed with that report or
referenced therein will be furnished to stockholders of record upon request
and
payment of our expenses in furnishing such documents. Our annual report on
Form
10-K (including exhibits thereto) and this proxy statement are also available
by
the following link on our website at www.car-mart.com
under
the “SEC Filings” section, which is under the “Investor Relations”
section.
STOCKHOLDER
PROPOSALS
Any
proposal to be presented at the 2008 annual meeting of stockholders must be
received at our principal executive offices no later than May 1, 2008, directed
to the attention of the Secretary, for consideration for inclusion in our proxy
statement and form of proxy relating to that meeting. In connection with next
year’s annual meeting, if we do not receive notice of a matter or proposal to be
considered by July 19, 2008, then the persons appointed by our board of
directors to act as the proxies for such annual meeting (named in the form
of
proxy) will be allowed to use their discretionary voting authority with respect
to any such matter or proposal at the annual meeting if such matter or proposal
is raised at that annual meeting. Any such proposals must comply in all respects
with the rules and regulations of the SEC.
OTHER
MATTERS
Management
does not know of any matter to be brought before the meeting other than those
referred to above. If any other matter properly comes before the meeting, the
persons designated as proxies will vote on each such matter in accordance with
their best judgment.
Appendix
A
2007
STOCK OPTION PLAN
OF
AMERICA’S
CAR-MART, INC.
Effective
August 27, 2007
The
purpose of the 2007 Stock Option Plan of America’s Car-Mart, Inc. (the "Plan")
is to encourage
and enable selected employees, directors and independent contractors of
America’s Car-Mart, Inc., a Texas corporation,
(the
"Corporation") and its related corporations to acquire or to increase their
holdings of common stock
of
the Corporation (the "Common Stock") and other proprietary interests
in the Corporation in
order to
promote a closer identification of their interests with those of the Corporation
and its stockholders, thereby further stimulating their efforts to enhance
the
efficiency, soundness, profitability, growth and stockholder value of the
Corporation. This purpose will be carried out through
the granting of benefits (collectively referred to herein as "Awards") to
selected employees, independent
contractors and directors, including the granting of incentive stock options
that qualify under Section 422(b) of the Internal Revenue Code ("Incentive
Options")
and nonqualified stock options that are exempt from Section 409A of the Internal
Revenue Code ("Nonqualified Options") to such participants.
Incentive Options and Nonqualified Options shall be referred to herein
collectively as
"Options."
2. |
Administration
of the Plan
|
(a) The
Plan
shall be administered by the Board of Directors of the Corporation (the
"Board"). The Board may, in its sole discretion, delegate all or part of its
administrative authority with respect to the Plan to a committee of the Board
(the "Committee"). For purposes herein, the Board,
and, upon its delegation of the administrative responsibilities for the Plan
to
the Committee, the
Committee shall be referred to as the "Administrator." The Committee shall
be
comprised solely of two or more "non-employee directors," as said term is
defined in Rule 16b-3 under the Securities Exchange Act of 1934, as amended
(the
“Exchange Act”), unless the Board determines that such committee composition is
not necessary or advisable. Further, the Committee shall, unless the Board
determines otherwise, be comprised solely of two or more "outside directors,"
as
such term is defined under Section 162(m) of the Internal Revenue Code or the
regulations thereunder (the “Code”), or otherwise in accordance with Code
Section 162(m). Further, the composition of the Committee shall be in compliance
with the applicable rules and regulations of the Nasdaq Stock
Market.
(b) Any
action of the Administrator with respect to the Plan may be taken by a written
instrument
signed by all of the members of the Administrator and any such action
so
taken by written
consent
shall be as fully effective as if it had been taken by a majority of the members
at a meeting duly
held
and called. Subject to the provisions of the Plan and compliance with Section
409A of the Code, and unless authority is granted to the chief
executive officer or president as provided in Section 2(c), the Administrator
shall have full and sole authority
in its discretion to take any action with respect to the Plan including, without
limitation, the
authority (i) to determine all matters relating to Awards, including selection
of individuals to be granted Awards, the types of Awards, the number of shares
of the Common Stock, if any, subject to an Award, and all terms, conditions,
restrictions and limitations of an Award, (ii) to prescribe the form
or
forms of the agreements evidencing any Awards granted under the Plan;
(iii)
to
establish, amend
and
rescind rules and regulations for the administration of the Plan; (iv) to
construe and
interpret the Plan and agreements evidencing Awards granted under the Plan;
(v)
to establish and interpret rules and regulations for administering the Plan
and
to make all other determinations deemed necessary or advisable for administering
the Plan. The Administrator shall also have authority, in its sole discretion,
to accelerate the date that any Award which was not otherwise exercisable
or vested shall become exercisable or vested in whole or in part without any
obligation to accelerate
such date with respect to any other Award granted to any recipient. In addition,
the Administrator
shall have the authority and discretion to establish terms and conditions of
Awards as
the
Administrator determines to be necessary or appropriate to conform to the
applicable requirements or practices of jurisdictions outside of the United
States.
(c) Notwithstanding
the other provisions of Section 2 herein, and provided such delegation is
permitted under applicable law, including the law of the state of incorporation,
the Administrator may delegate
to the chief executive officer or president of the Corporation the authority
to
grant Awards,
and to
make any or all of the determinations reserved for the Administrator in the
Plan
and summarized in Section 2(b) herein with respect to such Awards, to eligible
individuals; provided,
however,
that,
to the extent required by Section 16 of the Exchange Act or Section 162(m)
of
the Code, the individual, at the time of said grant or other determination,
(i)
is not deemed to be an officer
or director of the Corporation within the meaning of Section 16 of the Exchange
Act; and (ii)
is not
deemed to be a Covered Employee. To the extent that the Administrator has
delegated authority to grant Awards pursuant to this Section 2(c) to the chief
executive officer or president, references to the Administrator shall include
references to such person, subject, however, to the requirements of the Plan,
Rule 16b-3 and other applicable law.
The
effective date of the Plan shall be August 27, 2007 (the "Effective Date").
Awards may be granted under the Plan on and after the Effective Date, but no
Awards will be granted after the tenth anniversary of the Effective
Date.
4. |
Shares
of Stock Subject to the Plan; Award
Limitations
|
(a) The
number of shares of Common Stock that may be issued pursuant to Awards shall
be
one million (1,000,000) shares. Such shares shall be authorized but unissued
shares or treasury shares of the Corporation, or shares purchased on the open
market or by private purchase.
(b) The
Corporation hereby reserves sufficient authorized shares of Common Stock to
meet
the grant of Awards hereunder. Any shares subject to an Award which is
subsequently forfeited, expires or is terminated may again be the subject of
an
Award granted under the Plan. To the
extent that any shares of Common Stock subject to
an
Award are not delivered to a Participant (or his
beneficiary) because the Award is forfeited, canceled, settled in cash, or
used
to satisfy applicable
tax
withholding obligations, such shares shall not be deemed to have been issued
for
purposes of determining
the maximum number of shares of Common Stock available for issuance under the
Plan. If
the
Option Price of an Award granted under the Plan is satisfied by tendering shares
of Common Stock,
only the number of shares issued
net of the shares of Common Stock tendered shall be deemed
issued
for purposes of determining the maximum number of shares of Common Stock
available for issuance under the Plan.
(c) If
there
is any change in the shares of Common Stock because of a merger, consolidation
or reorganization involving the Corporation or a related corporation, or if
the
Board declares a stock dividend or stock split distributable in shares of
Common
Stock, or if there is a change in the capital stock structure of the Corporation
or a related corporation affecting the Common Stock, the number of shares of
Common Stock reserved for issuance under the Plan shall be correspondingly
adjusted, and the Administrator shall make such adjustments to Awards or to
any
provisions of this Plan as the Administrator deems equitable to prevent dilution
or enlargement of Awards.
An
Award
may be granted only to an individual who satisfies the following eligibility
requirements on the date the Award is granted:
(a) The
individual is either (i) an employee of the Corporation or a related
corporation, (ii) a director of the Corporation or a related corporation, or
(iii) an independent contractor, consultant or advisor (collectively,
"independent contractors") providing bona fide services to the Corporation
or a
related corporation. For this purpose, an individual shall be considered to
be
an "employee" if there exists between the individual and the Corporation or
a
related corporation the legal and bona fide relationship of employer and
employee, or if the individual otherwise is included in the definition of
“employee” contained in the General Instructions to the Registration Statement
on Form S-8 under the Securities Act of 1933, as amended.
(b) With
respect to the grant of Incentive Options, the individual is an employee of
the
Corporation or a related entity (within the meaning of Section 1.421-1 of the
Treasury Regulations) and does not own, immediately before the time that the
Incentive Option is granted, stock possessing more than ten percent (10%) of
the
total combined voting power of all classes of stock of the Corporation.
Notwithstanding the foregoing, an individual who otherwise qualifies but owns
more than ten percent (10%) of the total combined voting power of the
Corporation (a “10% Owner”) may be granted an Incentive Option if the Option
Price (as determined pursuant to Section 6(b) herein), is at least 110% of
the
Fair Market Value of the Common Stock (as defined in Section 6(b) herein),
and
the Option Period (as defined in Section 6(c) herein) does not exceed five
years. For this purpose, an individual will be deemed to own stock which is
attributable to him under Section 424(d) of the Code.
The
individual, being otherwise eligible under this Section 5, is selected by the
Administrator as an individual to whom an Award shall be granted (a
"Participant").
(a) Grant
of Options: Subject
to the limitations of the Plan, the Administrator may in its sole and absolute
discretion grant Options to such eligible individuals in such numbers, upon
such
terms and at such times as the Administrator shall determine. Both Incentive
Options and Nonqualified Options may be granted under the Plan. Each Option
grant shall be evidenced by an option agreement (an “Option Agreement”)
specifying the type of Option being granted and all other terms and conditions
as required by this Plan. To the extent necessary to comply with Section 422
of
the Code, if an Option is designated as an Incentive Option but does not qualify
as such under Section 422 of the Code, the Option (or portion thereof) shall
be
treated as a Nonqualified Option.
(b) Option
Price:
The
price per share at which an Option may be exercised (the "Option Price")
shall be established by the Administrator at the time the Option is granted
and
shall be set forth
in
the terms of the Option Agreement evidencing the grant of the Option; provided
that the
Option Price shall in no event be less than the Fair Market Value per share
of
the Common Stock on the date the Option is granted or the par value per share
of
the Common Stock (or, in the case of a 10% Owner, 110% of such Fair Market
Value). In addition, the following rules shall apply:
(i) An
Incentive Option shall be considered to be granted on the date that the
Administrator acts to grant the Option, or on any later date specified by the
Administrator as the effective date of the Option. A Nonqualified Option shall
be considered to be granted on the date the Administrator acts to grant the
Option or any later date specified by the Administrator as the date of grant
of
the Option.
(ii) For
the
purposes of the Plan, the Fair Market Value of the shares shall be determined
in
good faith by the Administrator and, except as may otherwise be determined
by
the Administrator, Fair Market Value shall be determined in accordance with
the
following provisions: (A) if the shares of Common Stock are listed or admitted
for trading on an established securities market, including the New York Stock
Exchange, the Nasdaq Stock Market or the American Stock Exchange, the Fair
Market Value shall be the closing sales price of the shares on the principal
exchange on the date immediately preceding the date the Option is granted,
or,
if there is no transaction on such date, then on the trading date nearest
preceding the date the Option is granted for which closing price information
is
available, or (B) if the shares of Common Stock are not listed or admitted
to
trading on an established securities market, then the Fair Market Value shall
be
determined by the Administrator by the reasonable application of any other
reasonable valuation method which is consistently applied for all equity
compensation arrangements of the Corporation and is in compliance with
applicable law, including but not limited to the applicable provisions of
Sections 409A and 422 of the Code.
(iii) To
the
extent that there first becomes exercisable by an employee in any one calendar
year Incentive Options granted by the Corporation or any related corporation
with respect
to shares having an aggregate Fair
Market Value (determined at the time an Incentive
Option
is granted) greater than $100,000, such excess Options shall be treated as
Nonqualified Options.
(c) Option
Period and Limitations on the Right to Exercise Options
(i) The
term
of an Option (the "Option Period") shall be determined by the Administrator
at the time the Option is granted. With respect to Incentive Options,
such period
shall not extend more than ten years from the date on which the Option is
granted (or, in the case of a 10% Owner, five years).
Any
Option or portion thereof not exercised before expiration of the Option Period
shall terminate. The period or periods during which an Option may be exercised
shall be determined by the Administrator at the time the Option is
granted.
(ii) An
Option
may be exercised by giving written notice to the Corporation at such place
as
the Corporation or its designee shall direct. Such notice shall specify the
number
of
shares to be purchased pursuant to an Option and the aggregate Option Price
to
be paid
therefor, and shall be accompanied by the payment of such Option Price. Unless
an individual Option Agreement provides otherwise, such payment shall be in
the
form of (A) cash; (B) delivery of written notice of exercise to the Corporation
and delivery to a broker of written notice of exercise and irrevocable
instructions to promptly deliver to the Corporation the amount of sale or loan
proceeds to pay the Option Price; or (C) a combination of the foregoing
methods.
(iii) Unless
an
individual Option Agreement provides otherwise, no Option granted to a
Participant who was an employee at the time of grant shall be exercised unless
the Participant is, at the time of exercise, an employee as described in Section
5(a), and has been an employee continuously since the date the Option was
granted, subject to the following:
(A) An
Option
shall not be affected by any change in the terms, conditions or status of the
Participant's employment, provided that the Participant continues to be an
employee of the Corporation or a related corporation.
(B) The
employment relationship of a Participant shall be treated as
continuing intact for any period
that
the Participant is on military
or
sick
leave or
other bona fide leave of absence, provided that the period of such leave does
not exceed ninety days (or such other period as required by applicable law),
or,
if longer, as long as the Participant's right to re-employment is guaranteed
either by statute or by contract. The employment
relationship of a Participant
shall also be treated as continuing intact
while the Participant
is not in active service because of Disability.
The
Administrator shall determine whether a Participant is disabled within the
meaning of this paragraph, and, if applicable, the date of a Participant's
termination of employment or service for any reason (the "Termination
Date").
(C) Unless
an
individual Option Agreement provides otherwise, if the employment of a
Participant is terminated because of Disability within the meaning of
subparagraph (B), or if the Participant dies while he is an employee or dies
after the termination of his employment because of Disability, the Option may
be
exercised only to the extent exercisable on the Participant's Termination Date
or date of death while employed, except that the Administrator may in its
discretion accelerate the date for exercising all or any part of the Option
which was not otherwise exercisable on the Termination Date. The Option must
be
exercised, if at all, prior to the first to occur of the following, whichever
shall be applicable: (X) the close of the period of twelve months next
succeeding the Termination Date; or (Y) the close of the Option Period. In
the
event of the Participant's death, such Option shall be exercisable by such
person or persons as shall have acquired the right to exercise the Option by
will or by the laws of intestate succession.
(D) Unless
an
individual Option Agreement provides otherwise, if the employment of the
Participant is terminated for any reason other than Disability
(as defined in subparagraph (B)) or death or for "cause," his Option
may be
exercised to the extent exercisable on such Termination Date,
except
that the Administrator may in its discretion accelerate the
date for
exercising all or any part of the Option which was not otherwise exercisable
on
the Termination Date. The Option must be exercised, if at all, prior to the
first to occur of the following, whichever shall be applicable: (X) the close
of
the period of three (3) months next succeeding the Termination Date; or (Y)
the
close of the Option Period. If the Participant dies following such Termination
Date and prior to the earlier of the dates specified in (X) or (Y) of this
subparagraph (D), the Participant shall be treated as having died while employed
under subparagraph (C) immediately preceding (treating for this purpose the
Participant's
date of termination of employment as the Termination Date). In the
event
of the Participant's death, such Option shall be exercisable by such
person
or persons as shall have acquired the right to exercise the Option by will
or by
the laws of intestate succession.
(E) Unless
an
individual Option Agreement provides otherwise, if the employment of the
Participant is terminated for "cause," his Option shall lapse and no longer
be
exercisable as of his Termination Date, as determined by the Administrator.
For
purposes of this subparagraph
(E) and subparagraph (D), the Participant's termination shall be for
"cause" if such termination results from the Participant's:
(W) termination,
if any,
for "cause" under the terms of the Participant's employment agreement with
the
Corporation or a related corporation; or, if there is no written employment
agreement between the Participant and the Corporation or one of its related
corporations, termination shall be for “cause” if such termination results from:
(X) dishonesty or conviction of a crime; (Y) failure to perform his duties
to
the satisfaction of the Corporation; or (Z) engaging in conduct that could
be
materially damaging to the Corporation without a reasonable good faith belief
that such conduct was in the best interest of the Corporation. The determination
of "cause" shall be made by the Administrator and its determination shall be
final and conclusive.
(F) Notwithstanding
the foregoing and subject to compliance with Section 409A of the Code, the
Administrator shall have authority,
in
its discretion, to extend the period
during which an Option may be
exercised or modify the other terms and conditions of exercise;
provided
that, in
the event that any such extension or modification shall cause an Incentive
Option to be designated as a Nonqualified Option, no such extension
or modification shall be made without the prior
written
consent
of
the
Participant.
(iv) Notwithstanding
Section 6(c)(i), herein, unless an individual Option Agreement provides
otherwise, an Option granted to a Participant who was an independent
contractor
or non-employee director of the Corporation or a related corporation at the
time
of grant
(and who does not thereafter become an employee, in which case he shall be
subject to the provisions of Section 6(c)(iii) herein) may be exercised only
to
the extent exercisable on the
date
of the Participant's termination of service to the Corporation or a related
corporation (unless
the termination was for cause), and must be exercised, if at all, prior to
the
first to occur of the following, as applicable: (X) the close of the period
of
one year next succeeding the effective time of his termination of service;
or
(Y) the close of the Option Period. If the services of such a Participant are
terminated for cause (as defined in Section 6(c)(iii)(E) herein), his Option
shall lapse and no longer be exercisable as of the effective time of his
termination of services, as determined by the Administrator. Notwithstanding
the
foregoing and subject to compliance with Section 409A of the Code, the
Administrator may in its discretion accelerate the date for exercising all
or
any part of an Option which was not otherwise exercisable on the effective
time
of termination of service, extend the period during which an Option may be
exercised, modify the other terms and conditions of exercising or any
combination of the foregoing.
(v) A
Participant or his legal representative, legatees or distributees shall not
be
deemed to be the holder of any shares subject to an Option and shall not have
any rights as a stockholder unless and until certificates for such shares are
delivered to him or them under the Plan.
(vi) Nothing
in the Plan shall confer upon the Participant any right to continue in the
service of the Corporation or a related corporation as an employee, director,
or
independent contractor or to interfere in any way with the right of the
Corporation or a related corporation to terminate the Participant's employment
or service at any time.
(vii) A
certificate or certificates for shares of Common Stock acquired upon exercise
of
an Option shall be issued in the name of the Participant (or his beneficiary)
and distributed to the Participant (or his beneficiary) as soon as practicable
following receipt of notice of exercise and payment of the purchase
price.
(d) Nontransferability
of Options: Incentive
Options shall not be transferable other than by will or the laws of intestate
succession. Nonqualified Options shall not be transferable other than by will
or
the laws
of
intestate succession, except as may be permitted by the Administrator in a
manner consistent
with the registration provisions of the Securities Act of 1933, as amended
(the
"Securities Act"). Except as may be permitted by the preceding sentence, an
Option shall be exercisable during the Participant's lifetime only by him or
by
his guardian or legal representative. The designation of a beneficiary does
not
constitute a transfer.
The
Corporation shall withhold all required local, state and federal taxes from
any
amount payable in cash with respect to an Award. The Corporation shall require
any recipient of an Award payable in shares of the Common Stock to pay to the
Corporation in cash the amount of any tax or other amount required by any
governmental authority, to be withheld and paid over by the Corporation to
such
authority for the account of such recipient. Notwithstanding the foregoing,
the
recipient
may satisfy such obligation in whole or in part, and any other local, state
or
federal income tax
obligations relating to such an Award, by electing (the "Election") to have
the
Corporation withhold shares of Common Stock from the shares to which the
recipient is entitled. The number of shares to be withheld shall have a Fair
Market Value as of the date that the amount of tax to be withheld is determined
(the "Tax Date") as nearly equal as possible to (but not exceeding) the amount
of such obligations being satisfied. Each Election must be made in writing
to
the Administrator in accordance with election procedures established by the
Administrator.
8. |
Performance-Based
Compensation
|
To
the
extent that Section 162(m) of the Code is applicable, the Administrator shall
determine
the extent, if any, that Awards conferred under the Plan to Covered Employees,
as such term is defined in Section 17 herein, comply with the qualified
performance-based compensation exception to employer compensation deductions
set
forth in Section 162(m) of the Code.
9. |
Section
16(b) Compliance
|
It
is the
general intent of the Corporation that transactions under the Plan which are
subject to Section 16 of the Exchange Act shall comply with Rule 16b-3 under
the
Exchange Act. Notwithstanding anything in the Plan to the contrary, the
Administrator, in its sole and absolute discretion, may bifurcate the Plan
so as
to restrict, limit or condition the use of any provision of the Plan to
Participants who are officers or directors subject to Section 16 of the Exchange
Act without so restricting, limiting or conditioning the Plan with respect
to
other Participants.
10. |
No
Right or Obligation of Continued
Employment
|
Nothing
contained in the Plan shall confer upon a Participant the right to continue
in
the employment or service of the Corporation or a related corporation as an
employer, director or independent contractor or interfere in any way with the
right of the Corporation or a related corporation to terminate the Participant's
employment or service at any time. Except as otherwise provided in the Plan,
or
a related agreement, Awards granted under the Plan to employees of the
Corporation or a related corporation shall not be affected by any change in
the
duties or position of the Participant, as long as such individual remains an
employee of the Corporation or a related corporation.
11. |
Unfunded
Plan; Not a Retirement
Plan
|
(a) Neither
a
Participant nor any other person shall, by reason of the Plan, acquire any
right
in or title to any assets, funds or property of the Corporation or any related
corporation including, without limitation, any specific funds, assets or other
property which the Corporation or any related corporation, in their discretion,
may set aside in anticipation of a liability under the Plan. A Participant
shall
have only a contractual right to the Common Stock or amounts, if any, payable
under the Plan, unsecured by any assets of the Corporation or any related
corporation. Nothing contained in the Plan shall constitute a guarantee that
the
assets of such corporations shall be sufficient to pay any benefits to any
person.
(b) In
no
event shall any amounts accrued, distributable or payable under the Plan be
treated as compensation for the purpose of determining the amount of
contributions or benefits to which any person shall be entitled under any
retirement plan sponsored by the Corporation or a related corporation that
is
intended to be a qualified plan within the meaning of Section 401(a) of the
Code.
12. |
Amendment
and Termination of the Plan
|
Except
as
may be otherwise provided in the Plan, the Plan and any Award granted pursuant
to the Plan, may be amended or terminated at any time
by
the Board; provided, that (i) amendment or termination of an
Award
shall not, without the consent of the applicable Participant, adversely affect
the rights of the Participant
with respect to an outstanding Award; and (ii) approval of an amendment to
the
Plan by the
stockholders of the Corporation shall only be required in the event such
stockholder approval of any such amendment is required by applicable law, rule
or regulation.
13. |
Restrictions
on Shares
|
The
Administrator may impose such restrictions on any shares representing Awards
hereunder as it may deem advisable, including without limitation restrictions
under the Securities Act,
under the requirements of any stock exchange or similar organization and under
any blue sky or
state
securities laws applicable to such shares. The Corporation may cause a
restrictive legend to be placed on any certificate issued pursuant to an Award
hereunder in such form as may be prescribed from time to time by applicable
laws
and regulations or as may be advised by legal counsel. As a condition to the
issuance and delivery of Common Stock hereunder, or the grant of any benefit
pursuant to the terms of the Plan, the Corporation may require a Participant
or
other person to become a party to a stockholders' agreement, buy-sell agreement,
redemption agreement, repurchase agreement, restriction agreement or similar
agreement between the Corporation and stockholders of the Corporation or among
stockholders of the Corporation restricting the transfer of the Common
Stock.
The
Plan
shall be governed by and construed in accordance with the laws of the State
of
Texas, without regard to the conflict of laws provisions of any state.
The
Plan
and all Awards granted hereunder shall comply at all times with all laws and
regulations of any governmental authority which may be applicable thereto
(including Section 409A of the Code). To the extent that an Award granted
hereunder is designated as an Incentive Option, it shall comply with Section
422
of the Code, and all provisions of the Plan and any Option Agreement for such
Option shall be construed in such manner as to effectuate that intent. Any
provision of the Plan or any Option Agreement notwithstanding, the Participant
shall not be entitled to receive the benefits of Awards and the Corporation
shall not be obligated to pay any benefits to a Participant if such exercise,
delivery, receipt or payment of benefits would constitute a violation by such
individual or the Corporation of any provision of any such law or regulation.
Any reference herein to “compliance with Section 409A of the Code” or words of
similar import shall be interpreted to mean application of the terms of the
Plan
or any Award, or administration of the Plan or any Award, as the case may be,
in
such a manner that no additional income tax is imposed on a Participant pursuant
to Section 409A(1)(a) of the Code; provided,
however,
that
this provision shall not limit the application of the $100,000 limit on
Incentive Options set forth in the Plan or any recharacterization of an Option
resulting therefrom. If additional guidance is issued under or modifications
are
made to Section 409A of the Code or any other law affecting the Awards issued
hereunder, the Administrator shall take such actions (including amending the
Plan or any Agreement without the necessity of obtaining any Participant’s
consent as otherwise required by the Plan) as it deems necessary, in its sole
discretion, to ensure continued compliance with such law.
The
Plan
is subject to approval by the stockholders of the Corporation, which approval
must occur, if at all, within twelve months of the Effective Date of the Plan.
Awards granted prior to such stockholder approval shall be conditioned upon
and
shall be effective only upon approval of the Plan by such stockholders on or
before such date.
(a) Notwithstanding
any other provision of the Plan to the contrary, in the event
of
a change
in
control (as defined in Section 16(b) herein), unless specifically modified
by an
individual's Option Agreement or employment agreement between the individual
and
the Corporation or a related corporation (in which case the terms of such Option
Agreement or employment agreement shall supersede this Section 16):
(i) All
Options outstanding as of the date of such change in control shall become fully
exercisable, whether or not then otherwise exercisable.
(ii) Notwithstanding
the foregoing, in the event of a change in control, the Administrator may,
in
its sole and absolute discretion, determine that any or all Awards granted
pursuant to the Plan shall not vest or become exercisable on an accelerated
basis, if the Board or the board of directors of the surviving or acquiring
corporation, as the case may be, shall have taken such action, including but
not
limited to the assumption of Awards granted under the Plan or the grant of
substitute awards (in either case, with substantially similar or equivalent
terms as Awards granted under the Plan), as in the opinion of the Administrator
is equitable or appropriate to protect the rights and interests of Participants
under the Plan and in compliance with applicable law. For the purposes herein,
if the Committee is acting as the Administrator, the Committee authorized to
make the determinations provided for in this Section shall be appointed by
the
Board, two-thirds of the members of which shall have been directors of the
Corporation prior to the change in control.
(b) For
purposes of this Section 16, “change in control” of the Corporation shall mean:
(i) Change
in
Ownership. The acquisition by an individual, entity or group (within the meaning
of Code Section 409A) (a "Person") of ownership of stock of the Corporation
that, together with stock held by such Person, constitutes more than 50% of
the
total fair market value or total voting power of the stock of the Corporation.
However, if any Person is considered to own more than 50% of the total fair
market value of total voting power of the stock of the Corporation, the
acquisition of additional stock by the same Person is not considered to cause
a
change in ownership of the Corporation (or to cause a change in the effective
control of the Corporation). An increase in the percentage of stock owned by
any
one Person as a result of a transaction in which the Corporation acquires its
stock in exchange for property will be treated as an acquisition of stock for
purposes of this paragraph. This paragraph applies only when there is a transfer
of stock of the Corporation (or issuance of stock of the Corporation) and stock
in the Corporation remains outstanding after the transaction; or
(ii) Change
in
Effective Control. (A) the acquisition by any individual, entity or group
(within the meaning of Code Section 409A) (a "Person") during the 12-month
period ending on the date of the most recent acquisition by such Person, of
ownership of stock of the Corporation possessing 35% or more of the total voting
power of the stock of the Corporation; or (B) the replacement of a majority
of
members of the Corporation's Board of Directors during any 12-month period
by
directors whose appointment or election is not endorsed by a majority of the
members of the Corporation's Board of Directors prior to the date of the
appointment or election.
A
change
in effective control also may occur in any transaction in which either of the
two corporations involved in the transaction has a "Change in Ownership" under
paragraph (i) or "Change in Ownership of a Substantial Portion of the Company's
Assets" under paragraph (iii). If any one Person is considered to effectively
control the Corporation, the acquisition of additional control of the
Corporation by the same Person is not considered to cause a change in the
effective control of the Corporation (or to cause a "Change in Ownership" of
the
Corporation within the meaning of paragraph (i) above); or
(iii) Change
in
Ownership of a Substantial Portion of Assets. The acquisition by an individual,
entity or group (within the meaning of Code Section 409A) (a "Person") during
the 12-month period ending on the date of the most recent acquisition by such
Person, of assets from the Corporation that have a total gross fair market
value
equal to or more than 40% of the total gross fair market value of all of the
assets of the Corporation immediately prior to such acquisition(s). For this
purpose, gross fair market value means the value of the assets of the
Corporation, or the value of the assets being disposed of, determined without
regard to any liabilities associated with such assets. No change in control
shall be deemed to have occurred in the event of a transfer to a related person
or as described in Code Section 409A.
The
definition of change in control in this Subsection 16(b), and all other terms
and provisions of this Agreement, shall be interpreted at all times in such
a
manner as to comply with Code Section 409A, meaning that no additional income
tax is imposed on the Associate pursuant to Code Section
409A(1)(a).
For
purposes of the Plan, the following terms shall have the meaning
indicated:
(a) "Covered
Employee" shall have the meaning given the term in Section 162(m) of the
Code.
(b) "Disability"
shall mean the inability to engage in any substantial gainful activity by
reason
of
any medically determinable physical or mental impairment which can be expected
to result
in
death, or which has lasted or can be expected to last for a continuous period
of
not less than twelve months (or, in the case of Incentive Options, such other
definition as required by Section 422 of the Code).
(c) "Option
Agreement" means any written agreement or agreements between the Corporation
and
the
recipient of an Award pursuant to the Plan relating to the terms, conditions
and
restrictions of Options.
(d) "Parent"
or "parent corporation" shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations ending with the Corporation if each
corporation other
than the Corporation owns stock possessing 50% or more of the total
combined voting power
of all
classes of stock in another corporation in the chain.
(e) "Predecessor"
or "predecessor corporation" means a corporation which was a party to a
transaction described in Section 424(a) of the Code (or which would be so
described if a substitution or assumption under that Section had occurred)
with
the Corporation, or a corporation which is a parent or subsidiary of the
Corporation, or a predecessor of any such corporation.
(f) "Related
corporation" means any Parent, Subsidiary or Predecessor of the
Corporation.
(g) "Subsidiary"
or "subsidiary corporation" means any corporation (other than the Corporation)
in an unbroken chain of corporations beginning with the Corporation if each
corporation
other than the last corporation in the unbroken chain owns stock possessing
50%
or more
of the
total combined voting power of all classes of stock in another corporation
in
the chain.
This
will
certify that the Plan was adopted by vote of the Board and stockholders of
the
Corporation effective as of August 27, 2007 and October 16, 2007, respectively.
_____________________________________________
Name:
Jeffrey A.
Williams
Title:
Chief
Financial Officer
Date:
________________, 2007
Appendix
B
Amendment
to Stock Incentive Plan
AMENDMENT
TO AMERICA’S CAR-MART, INC.
STOCK
INCENTIVE PLAN
Adopted
August 27, 2007
America’s
Car-Mart, Inc., a Texas corporation (the “Company”), hereby amends (the
“Amendment”) the America’s Car-Mart, Inc. Stock Incentive Plan (the “Plan”),
originally effective as of October 12, 2005, as set forth herein.
1. Background
Information.
The
Company established the Plan effective as of October 12, 2005 and amended the
Plan on December 11, 2006. Section 8.1 of the Plan provides that the board
of
directors of the Company may at any time amend the Plan in whole or in part;
provided, however, that no amendment that requires shareholder approval will
be
effective unless such amendment is approved by the requisite vote of
shareholders of the Company entitled to vote thereon. The Company wishes to
amend the Plan as set forth in this Amendment to increase the number of
authorized shares that may be issued under the Plan. The Company will submit
this Amendment for approval by the requisite vote of shareholders of the Company
entitled to vote thereon at the 2007 annual meeting of shareholders to be held
on October 16, 2007.
2. Amendment
to
Section 4.1 - Number of Shares Available.
Section
4.1 is amended in its entirety to read as follows:
“Section
4.1 Number
of
Shares Available. Subject to adjustment as provided in Section 4.3, there is
hereby authorized 150,000 Shares for issuance under this Plan.”
IN
WITNESS WHEREOF, the Employer has caused this Amendment to be duly executed
on
this 27th
day of
August, 2007.
America’s
Car-Mart,
Inc.
By:
_________________________
Jeffrey
A.
Williams
Chief
Financial
Officer and Secretary
(Principal
Financial
and Accounting Officer)
This
proxy is solicited on behalf of the board of directors
of
AMERICA’S
CAR-MART, INC.
The
undersigned stockholder(s) of America’s Car-Mart, Inc., a Texas corporation,
hereby appoints Tilman J. Falgout, III and William H. Henderson, and each of
them, proxies and attorneys-in-fact, with full power to each of substitution,
on
behalf and in the name of the undersigned, to represent the undersigned at
the
annual meeting of the stockholders of America’s Car-Mart, Inc. to be held on
October 16, 2007 at 10:00 a.m. local time at the Clarion Hotel, 211 Southeast
Walton Boulevard, Bentonville, Arkansas 72712, to vote the shares of common
stock which the undersigned would be entitled to vote if then and there
personally present, on the matters set forth below:
(1) To
elect
six directors for a term of one year and until their successors are elected
and
qualified:
¨ FOR
all
nominees listed below (except as indicated to the contrary below)
¨ WITHHOLD
AUTHORITY to vote for all nominees
Tilman
Falgout,
III
William
H. Henderson
John
David Simmons Daniel
J.
Englander
William
M.
Sams
William
A. Swanston
If
you
wish to withholder authority to vote for any individual nominee(s), write the
name(s) on the line below:
______________________________________________________________________________________________________________________________
|
(2)
|
To
approve the America’s Car-Mart, Inc. 2007 Stock Option
Plan.
|
¨ FOR ¨ AGAINST ¨ ABSTAIN
|
(3)
|
To
approve the amendment to the America’s Car-Mart, Inc. Stock Incentive Plan
to increase to 150,000 the number of shares of common stock that
may be
issued under the plan.
|
¨ FOR ¨ AGAINST ¨ ABSTAIN
|
(4)
|
In
their discretion, upon such other matter or matters which may properly
come before the meeting or any adjournment or postponement
thereof.
|
PLEASE
COMPLETE, DATE, SIGN AND RETURN THIS PROXY PROMPTLY. This proxy, when properly
executed, will be voted in accordance with directions given by the undersigned
stockholder. If no direction is made, it will be voted FOR Proposals 1, 2 and
3
and as the proxies deem advisable on such other matters as may come before
the
meeting.
Date:________________________________
_____________________________________
Signature
_______________________________________
Signature
(This
proxy should be marked, dated and signed by the stockholder(s) exactly as his
or
her name appears hereon and returned promptly in the enclosed envelope. Persons
signing in a fiduciary capacity should so indicate. If shares are held by joint
tenants or as community property, both should sign.)