Document:

exv10w2

 

Exhibit 10.2

Cash America International, Inc.

Executive Change-in-Control Severance Agreement

     THIS EXECUTIVE CHANGE-IN-CONTROL SEVERANCE AGREEMENT is made, entered into, and is
effective this 27th day of July, 2006 (hereinafter referred to as the “Effective Date”), by and
between Cash America International, Inc. (the “Company”), a Texas corporation, and J. Curtis
Linscott (“Executive”).

     WHEREAS, the Executive is currently employed by the Company as its Executive Vice President,
General Counsel and Secretary; and

     WHEREAS, the Executive possesses considerable experience and knowledge of the business and
affairs of the Company concerning its policies, methods, personnel, and operations; and

     WHEREAS, the Company is desirous of assuring insofar as possible, that it will continue to
have the benefit of the Executive’s services; and the Executive is desirous of having such
assurances; and

     WHEREAS, the Company recognizes that circumstances may arise in which a Change in Control of
the Company occurs, through acquisition or otherwise, thereby causing uncertainty of employment
without regard to the Executive’s competence or past contributions. Such uncertainty may result in
the loss of the valuable services of the Executive to the detriment of the Company and its
shareholders; and

     WHEREAS, both the Company and the Executive are desirous that any proposal for a Change in
Control or acquisition will be considered by the Executive objectively and with reference only to
the business interests of the Company and its shareholders; and

     WHEREAS, the Executive will be in a better position to consider the Company’s best interests
if the Executive is afforded reasonable security, as provided in this Agreement, against altered
conditions of employment which could result from any such Change in Control or acquisition.

     NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements
of the parties set forth in this Agreement, and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be
legally bound, agree as follows:

Article 1. Definitions

     Wherever used in this Agreement, the following terms shall have the meanings set forth
below and, when the meaning is intended, the initial letter of the word is capitalized:

	 	(a)	 	“Agreement” means this Executive Change-in-Control Severance Agreement.

 

 

	 	(b)	 	“Base Salary” means, at any time, the then regular annual rate of pay which the
Executive is receiving as annual salary, excluding amounts: (i) received under short-term
or long-term incentive or other bonus plans, regardless of whether or not the amounts are
deferred, or (ii) designated by the Company as payment toward reimbursement of expenses.
	 
	 	(c)	 	“Beneficial Owner” shall have the meaning ascribed to such term in Rule 13d-3 of the
General Rules and Regulations under the Exchange Act.
	 
	 	(d)	 	“Board” means the Board of Directors of the Company.
	 
	 	(e)	 	“Cause” shall be determined solely by the Committee in the exercise of good faith and
reasonable judgment, and shall mean the occurrence of any one or more of the following:

	 	(i)	 	The Executive’s willful and continued failure to substantially
perform his duties with the Company (other than any such failure resulting from
the Executive’s Disability), after a written demand for substantial performance is
delivered to the Executive that specifically identifies the manner in which the
Committee believes that the Executive has not substantially performed his duties,
and the Executive has failed to remedy the situation within fifteen (15) business
days of such written notice from the Company; or
	 
	 	(ii)	 	The Executive’s conviction of a felony; or
	 
	 	(iii)	 	The Executive’s willful engaging in conduct that is demonstrably and
materially injurious to the Company, monetarily or otherwise. However, no act or
failure to act on the Executive’s part shall be deemed “willful” unless done, or
omitted to be done, by the Executive not in good faith and without reasonable
belief that the action or omission was in the best interests of the Company.

	 	(f)	 	“Change in Control” of the Company shall mean the occurrence of any one (1) or more
of the following events:

	 	(i)	 	Any Person (other than the Company, any corporation owned, directly
or indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company, and any trustee or other
fiduciary holding securities under an employee benefit plan of the Company or such
proportionately owned corporation), is or becomes the Beneficial Owner, directly
or indirectly, of securities of the Company representing thirty percent (30%) or
more of the combined voting power of the Company’s then outstanding securities;
	 
	 	(ii)	 	During any period of not more than twenty-four (24) consecutive
months, individuals who at the beginning of such period constitute the Board of
Directors of the Company, and any new director whose election by the Board or
nomination for election by the Company’s stockholders was approved by a vote of
at least two-thirds (2/3) of the directors then still in office who either were

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	 	 	 	directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute at least
a majority thereof;
	 
	 	(iii)	 	The consummation of a merger or consolidation of the Company with any
other corporation, other than: (i) a merger or consolidation which would result in
the voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than sixty percent (60%) of the
combined voting power of the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation; or (ii) a merger
or consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no Person acquires more than thirty percent (30%) of
the combined voting power of the Company’s then outstanding securities;
	 
	 	(iv)	 	The Company’s stockholders approve a plan of complete liquidation or
dissolution of the Company, or an agreement for the sale or disposition by the
Company of all or substantially all of the Company’s assets (or any transaction
having a similar effect); or
	 
	 	(v)	 	Any other transaction that the Board of Directors of the Company
designates as being a Change in Control.

	 	(g)	 	“Code” means the Internal Revenue Code of 1986, as amended.
	 
	 	(h)	 	“Committee” means the Management Development and Compensation Committee of the Board
of Directors of the Company, or, if no Management Development and Compensation Committee
exists, then the full Board of Directors of the Company, or a committee of Board members,
as appointed by the full Board to administer this Agreement.
	 
	 	(i)	 	“Company” means Cash America International, Inc., a Texas corporation (including any
and all subsidiaries), or any successor thereto as provided in Article 8 herein.
	 
	 	(j)	 	“Disability” shall have the meaning ascribed to such term in the Executive’s
governing long-term disability plan, or if no such plan exists, at the discretion of the
Board.
	 
	 	(k)	 	“Effective Date” means the date this Agreement is approved by the Board or the
Committee, or such other date as the Board or Committee shall designate in its resolution
approving this Agreement, and as specified in the opening sentence of this Agreement.
	 
	 	(l)	 	“Effective Date of Termination” means the date on which a Qualifying Termination
occurs, as provided in Section 2.2 herein, which triggers the payment of Severance
Benefits hereunder.
	 
	 	(m)	 	“Exchange Act” means the Securities Exchange Act of 1934, as amended.

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	 	(n)	 	“Good Reason” means, without the Executive’s express written consent, the occurrence
after a Change in Control of the Company of any one (1) or more of the following:

	 	(i)	 	The assignment of the Executive to duties materially inconsistent
with the Executive’s authorities, duties, responsibilities, and status (including
offices, titles, and reporting requirements) as an executive and/or officer of the
Company, or a material reduction or alteration in the nature or status of the
Executive’s authorities, duties, or responsibilities from those in effect as of
ninety (90) calendar days prior to the Change in Control, other than an
insubstantial and inadvertent act that is remedied by the Company promptly after
receipt of notice thereof given by the Executive;
	 
	 	(ii)	 	The Company’s requiring the Executive to be based at a location in
excess of thirty-five (35) miles from the location of the Executive’s principal
job location or office immediately prior to the Change in Control; except for
required travel on the Company’s business to an extent substantially consistent
with the Executive’s then present business travel obligations;
	 
	 	(iii)	 	A reduction by the Company of the Executive’s Base Salary in effect on
the Effective Date hereof, or as the same shall be increased from time to time;
	 
	 	(iv)	 	The failure of the Company to continue in effect any of the Company’s
short- and long-term incentive compensation plans, or employee benefit or
retirement plans, policies, practices, or other compensation arrangements in which
the Executive participates unless such failure to continue the plan, policy,
practice, or arrangement pertains to all plan participants generally; or the
failure by the Company to continue the Executive’s participation therein on
substantially the same basis, both in terms of the amount of benefits provided and
the level of the Executive’s participation relative to other participants, as
existed immediately prior to the Change in Control of the Company;
	 
	 	(v)	 	The failure of the Company to obtain a satisfactory agreement from
any successor to the Company to assume and agree to perform the Company’s
obligations under this Agreement, as contemplated in Article 8 herein; and
	 
	 	(vi)	 	A material breach of this Agreement by the Company which is not
remedied by the Company within ten (10) business days of receipt of written notice
of such breach delivered by the Executive to the Company.

	 	 	 	The Executive’s right to terminate employment for Good Reason shall not be affected by
the Executive’s incapacity due to physical or mental illness. The Executive’s continued
employment shall not constitute consent to, or a waiver of rights with respect to, any
circumstance constituting Good Reason herein.

	 	(o)	 	“Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the
Exchange Act and used in Sections 13(d) and 14(d) thereof, including a “group” as defined
in Section 13(d).

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	 	(p)	 	“Qualifying Termination” means any of the events described in Section 2.2 herein, the
occurrence of which triggers the payment of Severance Benefits hereunder.
	 
	 	(q)	 	“SERP” means the Cash America International, Inc. Supplemental Executive Retirement
Plan, as amended from time to time.
	 
	 	(r)	 	“Severance Benefits” mean the payment of severance compensation as provided in
Section 2.3 herein.

Article 2. Severance Benefits

     2.1 Right to Severance Benefits. The Executive shall be entitled to receive from the
Company Severance Benefits as described in Section 2.3 herein, if there has been a Change in
Control of the Company and if, within twenty-four (24) calendar months thereafter, the Executive’s
employment with the Company shall end for any reason specified in Section 2.2 herein as being a
Qualifying Termination.

     The Executive shall not be entitled to receive Severance Benefits if he is terminated for
Cause, or if his employment with the Company ends due to death, Disability, voluntary normal
retirement (as defined under the then established rules of the Company’s tax-qualified retirement
plan), or due to a voluntary termination of employment for reasons other than as specified in
Section 2.2(b) herein.

     2.2 Qualifying Termination. The occurrence of any one of the following events within
twenty-four (24) calendar months after a Change in Control of the Company shall trigger the payment
of Severance Benefits to the Executive under this Agreement:

	 	(a)	 	The Company’s involuntary termination of the Executive’s employment
without Cause; and
	 
	 	(b)	 	The Executive’s voluntary employment termination for Good Reason.

     For purposes of this Agreement, a Qualifying Termination shall not include a termination of
employment by reason of death, Disability, or voluntary normal retirement (as such term is defined
under the then established rules of the Company’s tax-qualified retirement plan), the Executive’s
voluntary termination for reasons other than as specified in Section 2.2(b) herein, or the
Company’s involuntary termination for Cause.

     2.3 Description of Severance Benefits. In the event that the Executive becomes entitled to
receive Severance Benefits, as provided in Sections 2.1 and 2.2 herein, the Company shall pay to
the Executive and provide him with the following Severance Benefits:

	 	(a)	 	A lump-sum amount equal to the Executive’s unpaid Base Salary, accrued
vacation pay, unreimbursed business expenses, and all other items earned by and
owed to the Executive through and including the Effective Date of Termination.
	 
	 	(b)	 	A lump-sum amount equal to the Executive’s annual target bonus amount,
established under the annual bonus plan in which the Executive is then

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	 	 	 	participating, for the bonus plan year in which the Executive’s Effective Date of
Termination occurs, multiplied by a fraction the numerator of which is the number
of full completed months in the year from January 1 through the Effective Date of
Termination, and the denominator of which is twelve (12). This payment will be in
lieu of any other payment to be made to the Executive under the annual bonus plan
in which the Executive is then participating for the plan year.
	 
	 	(c)	 	A lump-sum amount equal to two (2) multiplied by the higher of: (i) the
Executive’s annual rate of Base Salary in effect upon the Effective Date of
Termination, or (ii) the Executive’s annual rate of Base Salary in effect on the
date of the Change in Control.
	 
	 	(d)	 	A lump-sum amount equal to two (2) multiplied by the higher of: (i) the
Executive’s annual target bonus established under the annual bonus plan in which
the Executive is then participating for the bonus plan year in which the
Executive’s Effective Date of Termination occurs, or (ii) the actual annual bonus
payment made to the Executive under the annual bonus plan in which the Executive
participated in the year preceding the year in which the Effective Date of
Termination occurs.
	 
	 	(e)	 	An immediate vesting and cash-out of any and all outstanding cash-based
long-term incentive awards held by the Executive, as granted to the Executive by
the Company as a component of the Executive’s compensation. The cash-out shall be
in a lump-sum amount equal to the higher of actual performance goal achievement
or target award level established for each award, multiplied by a fraction the
numerator of which is the full number of completed calendar months in the
preestablished performance period as of the Effective Date of Termination, and
the denominator of which is the full number of months in the entire performance
period (i.e., typically thirty-six (36) months). This payment will be in lieu of
any other payment to be made to the Executive under these long-term
performance-based award plans.
	 
	 	(f)	 	An immediate vesting and the lapse of all restrictions on any and all
outstanding stock option, restricted stock and restricted stock unit awards held by
the Executive, as determined by the relevant plan document or award agreement.
	 
	 	(g)	 	Equivalent payment for continued medical coverage for a period of
twenty-four (24) months. Such equivalent payment shall be provided based on the
same coverage level, including dependent coverage, as in effect on the Effective
Date of Termination by: (i) providing payment of the Company’s portion of the
monthly COBRA premium (for the eighteen (18) months COBRA period); and (ii)
providing a lump-sum payment equal to the Company’s portion of the first monthly
COBRA premium times six (6). Dependent coverage shall continue for the full
twenty-four month period even if the Executive dies during the period. The
Company shall also pay for the Executive’s continued coverage under Exec-U-Care
or any similar successor coverage thereto under the same coverage level for the
twenty-four month period.

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	 	(h)	 	For a period of up to twenty-four (24) months following a Qualifying
Termination, the Executive shall be entitled, at the expense of the Company, to
receive standard executive placement services from a reputable executive
search/placement firm of the Executive’s selection. However, the Company’s total
obligation shall not exceed fifty thousand dollars ($50,000.00).

     2.4 Termination for Total and Permanent Disability. Following a Change in Control, if the
Executive’s employment is terminated with the Company due to Disability, the Executive’s benefits
shall be determined in accordance with the Company’s retirement, insurance, and other applicable
plans and programs then in effect.

     2.5 Termination for Retirement or Death. Following a Change in Control, if the Executive’s
employment with the Company is terminated by reason of his voluntary normal retirement (as defined
under the then established rules of the Company’s tax-qualified retirement plan), or death, the
Executive’s benefits shall be determined in accordance with the Company’s retirement, survivor’s
benefits, insurance, and other applicable programs then in effect.

     2.6 Termination for Cause or by the Executive Other Than for Good Reason. Following a Change
in Control, if the Executive’s employment is terminated either: (i) by the Company for Cause; or
(ii) voluntarily by the Executive for reasons other than as specified in Section 2.2(b) herein, the
Company shall pay the Executive his full Base Salary at the rate then in effect, accrued vacation,
and other items earned by and owed to the Executive through the Effective Date of Termination, plus
all other amounts to which the Executive is entitled under any compensation plans of the Company at
the time such payments are due, and the Company shall have no further obligations to the Executive
under this Agreement.

     2.7 Notice of Termination. Any termination of the Executive’s employment by the Company for
Cause or by the Executive for Good Reason shall be communicated by Notice of Termination to the
other party. For purposes of this Agreement, a “Notice of Termination” shall mean a written notice
which shall indicate the specific termination provision in this Agreement relied upon, and shall
set forth in reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive’s employment under the provision so indicated.

Article 3. Form and Timing of Severance Benefits

     3.1 Form and Timing of Severance Benefits. The Severance Benefits described in Sections
2.3(a), 2.3(b), 2.3(c), 2.3(d), 2.3(e) and 2.3(g) herein shall be paid in cash to the Executive in
a single lump sum as soon as practicable following the Effective Date of Termination, but in no
event beyond ten (10) calendar days from such date; provided, however, if any such payment is
deferred compensation subject to Section 409A of the Code, then such amount shall be paid as soon
as practicable after the six-month anniversary of the Effective Date of Termination, or at such
earlier date as is permitted under Section 409A of the Code.

     3.2 Withholding of Taxes. The Company shall withhold from any amounts payable under this
Agreement all federal, state, city, or other taxes as legally shall be required.

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Article 4. Excise Tax

     4.1 Excise Tax Payment. If any portion of the Severance Benefits or any other payment
under this Agreement, or under any other agreement with, or plan of the Company (in the aggregate,
“Total Payments”) would constitute an “excess parachute payment,” such that a golden parachute
excise tax is due, the Company shall provide to the Executive, in cash, an additional payment in an
amount sufficient to cover the full cost of any excise tax and all of the Executive’s additional
state and federal income, excise, and employment taxes that arise on this additional payment
(cumulatively, the “Full Gross-Up Payment”), such that the Executive is in the same after-tax
position as if he had not been subject to the excise tax. For this purpose, the Executive shall be
deemed to be in the highest marginal rate of federal and state taxes. This payment shall be made as
soon as possible following the date of the Executive’s Qualifying Termination, but in no event
later than ten (10) calendar days from such date.

     For purposes of this Agreement, the term “excess parachute payment” shall have the meaning
assigned to such term in Section 280G of the Internal Revenue Code, as amended (the “Code”), and
the term “excise tax” shall mean the tax imposed on such excess parachute payment pursuant to
Sections 280G and 4999 of the Code.

     4.2 Subsequent Recalculation. In the event the Internal Revenue Service subsequently adjusts
the excise tax computation herein described, the Company shall reimburse the Executive for the full
amount necessary to make the Executive whole on an after-tax basis (less any amounts received by
the Executive that the Executive would not have received had the computations initially been
computed as subsequently adjusted), including the value of any underpaid excise tax, and any
related interest and/or penalties due to the Internal Revenue Service.

Article 5. The Company’s Payment Obligation

     5.1 Payment Obligations Absolute. The Company’s obligation to make the payments and the
arrangements provided for herein shall be absolute and unconditional, and shall not be affected by
any circumstances including, without limitation, any offset, counterclaim, recoupment, defense, or
other right which the Company may have against the Executive or anyone else. All amounts payable by
the Company hereunder shall be paid without notice or demand. Each and every payment made hereunder
by the Company shall be final, and the Company shall not seek to recover all or any part of such
payment from the Executive or from whomsoever may be entitled thereto, for any reasons whatsoever.

     The Executive shall not be obligated to seek other employment in mitigation of the amounts
payable or arrangements made under any provision of this Agreement, and the obtaining of any such
other employment shall in no event effect any reduction of the Company’s obligations to make the
payments and arrangements required to be made under this Agreement, except to the extent
provided in Section 2.3(h) herein.

     5.2 Contractual Rights to Benefits. This Agreement establishes and vests in the Executive a
contractual right to the benefits to which he is entitled hereunder. However, nothing herein
contained shall require or be deemed to require, or prohibit or be deemed to prohibit, the Company
to

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segregate, earmark, or otherwise set aside any funds or other assets, in trust or otherwise, to
provide for any payments to be made or required hereunder.

Article 6. Term of Agreement

     This Agreement will commence on the Effective Date and shall continue in effect for
two (2) full years. However, at the end of such two (2) year period and, if extended, at the
end of each additional year thereafter, the term of this Agreement shall be extended automatically
for one (1) additional year, unless either party delivers written notice six (6) months prior to
the end of such term, or extended term, stating that the Agreement will not be extended. In such
case, the Agreement will terminate at the end of the term, or extended term, then in progress.

     However, in the event of a Change in Control of the Company, the term of this Agreement shall
automatically be extended for two (2) years from the date of the Change in Control.

Article 7. Legal Remedies

     7.1 Dispute Resolution. The Executive shall have the right and option to elect to have
any good faith dispute or controversy arising under or in connection with this Agreement settled by
litigation or arbitration. If arbitration is selected, such proceeding shall be conducted by final
and binding arbitration before a panel of three (3) arbitrators in accordance with the laws and
under the administration of the American Arbitration Association.

     7.2 Payment of Legal Fees. In the event that it shall be necessary or desirable for the
Executive to retain legal counsel and/or to incur other costs and expenses in connection with the
enforcement of any or all of his rights under this Agreement, the Company shall pay (or the
Executive shall be entitled to recover from the Company) the Executive’s reasonable attorneys’
fees, costs, and expenses in connection with the good faith enforcement of his rights including the
enforcement of any arbitration award. This shall include, without limitation, court costs and
attorneys’ fees incurred by the Executive as a result of any good faith claim, action, or
proceeding, including any such action against the Company arising out of, or challenging the
validity or enforceability of, this Agreement or any provision hereof.

Article 8. Successors

     The Company shall require any successor (whether direct or indirect, by purchase,
merger, reorganization, consolidation, acquisition of property or stock, liquidation, or otherwise)
of all or a significant portion of the assets of the Company by agreement, in form and substance
satisfactory to the Executive, to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform if no such succession
had taken place. Regardless of whether such agreement is executed, this Agreement shall be binding
upon any successor in accordance with the operation of law and such successor shall be deemed the
“Company” for purposes of this Agreement.

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Article 9. Miscellaneous

     9.1 Employment Status. This Agreement is not, and nothing herein shall be deemed to
create, an employment contract between the Executive and the Company or any of its subsidiaries.
The Executive acknowledges that the rights of the Company remain wholly intact to change or reduce
at any time and from time to time his compensation, title, responsibilities, location, and all
other aspects of the employment relationship, or to discharge him prior to a Change in Control
(subject to such discharge possibly being considered a Qualifying Termination pursuant to Section
2.2).

     9.2 Entire Agreement. This Agreement contains the entire understanding of the Company and the
Executive with respect to the subject matter hereof. In addition, the payments provided for under
this Agreement in the event of the Executive’s termination of employment shall be in lieu of any
severance benefits payable under any severance plan, program, or policy of the Company to which he
might otherwise be entitled.

     9.3 Notices. All notices, requests, demands, and other communications hereunder shall be
sufficient if in writing and shall be deemed to have been duly given if delivered by hand or if
sent by registered or certified mail to the Executive at the last address he has filed in writing
with the Company or, in the case of the Company, at its principal offices.

     9.4 Execution in Counterparts. This Agreement may be executed by the parties hereto in
counterparts, each of which shall be deemed to be original, but all such counterparts shall
constitute one and the same instrument, and all signatures need not appear on any one counterpart.

     9.5 Conflicting Agreements. The Executive hereby represents and warrants to the Company that
his entering into this Agreement, and the obligations and duties undertaken by him hereunder, will
not conflict with, constitute a breach of, or otherwise violate the terms of, any other employment
or other agreement to which he is a party, except to the extent any such conflict, breach, or
violation under any such agreement has been disclosed to the Board in writing in advance of the
signing of this Agreement.

     9.6 Severability. In the event any provision of this Agreement shall be held illegal or
invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the
Agreement, and the Agreement shall be construed and enforced as if the illegal or invalid provision
had not been included. Further, the captions of this Agreement are not part of the provisions
hereof and shall have no force and effect.

     Notwithstanding any other provisions of this Agreement to the contrary, the Company shall have
no obligation to make any payment to the Executive hereunder to the extent, but only to the extent,
that such payment is prohibited by the terms of any final order of a federal or state court or
regulatory agency of competent jurisdiction; provided, however, that such an order shall not
affect, impair, or invalidate any provision of this Agreement not expressly subject to such order.

     9.7 Modification. No provision of this Agreement may be modified, waived, or discharged unless
such modification, waiver, or discharge is agreed to in writing and signed by the Executive and by
the Company, as applicable, or by the respective parties’ legal representatives or successors.

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Notwithstanding the foregoing, if any provision of this Agreement would cause compensation to be
includible in the Executive’s income pursuant to Section 409A of the Code, then such provision
shall be null and void, and the Company shall amend the Agreement in such a way as to cause
substantially similar economic results without causing such inclusion; any such amendment shall be
binding on the Executive.

     9.8 Applicable Law. To the extent not preempted by the laws of the United States, the laws of
the State of Texas shall be the controlling law in all matters relating to this Agreement without
giving effect to principles of conflicts of laws.

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date.

	 	 	 	 	 	 	 	 	 
	 	 	CASH AMERICA INTERNATIONAL, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:
	 	/s/
	 	 Daniel R. Feehan	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Daniel R. Feehan	 	 
	 

	 	 	 	 	 	Chief Executive Officer and President	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	EXECUTIVE	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	/s/ J. Curtis Linscott	 	 
	 	 	 	 	 
	 

	 	 	 	 	 	J. Curtis Linscott	 	 

11exv10w1

 

	 	 	 	 	 

Exhibit 10.1

Superconductor Technologies Inc.

Management Incentive Plan

(July 24, 2006)

			
	I	 	Plan Objective

     The Management Incentive Plan (the “MIP”) is an annual bonus program designed to
reward eligible participants for achievement of the financial, operational and strategic objectives
of Superconductor Technologies Inc. (the “Company”).

			
	II	 	Plan Administrator

     (a) The MIP shall be administered by the Compensation Committee (the “Committee”) of
the Board of Directors of the Company. The Committee may delegate responsibility regarding the
grant and administration of awards with respect to participants other than the executive officers
(as such term is defined in Rule 3b-7 of the SEC’s Regulations promulgated under the Securities
Exchange Act of 1934, as amended). The term “Plan Administrator” as used herein shall mean
the Committee or its designee.

     (b) The Plan Administrator shall have full authority to establish the rules and regulations
relating to the MIP, to interpret the MIP and those rules and regulations, to approve participants
in the MIP, to determine each participant’s target award, to approve all of the awards, to decide
the facts in any case arising under the MIP and to make all other determinations, including factual
determinations, and to take all other actions necessary or appropriate for the proper
administration of the MIP, including the delegation of such authority or power, where appropriate;
provided, however, that only the Committee shall have authority to amend or terminate the MIP and
the Plan Administrator shall not be authorized to increase the amount of the award payable to a
participant that would otherwise be payable pursuant to the terms of the MIP. The Plan
Administrator’s administration of the MIP, including all such rules and regulations,
interpretations, selections, determinations, approvals, decisions, delegations, amendments,
terminations and other actions, shall be final and binding on the Company and all employees of the
Company, including the participants in the MIP and their respective beneficiaries.

			
	III	 	Eligibility

     Subject to such limitations or restrictions as the Plan Administrator may impose, the
individuals eligible to participate in the MIP shall be regular employees in senior management
roles for the Company and its subsidiaries in all locations.

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     The Plan Administrator shall approve the individuals who shall participate in the MIP for each
Plan Year. A person who joins the Company after September 30 will not be eligible to participate
in the Plan until the following year.

			
	IV	 	Performance Goals

     (a) For each Plan Year for which awards are to be made under the MIP, the Committee will
pre-establish the performance goals to be achieved in order for any awards to be payable for that
Plan Year and the threshold, target and maximum amounts that may be paid if the performance goals
are met.

     (b) The performance goals for MIP participants will be based on one or more financial,
operational and strategic criteria determined annually by the Committee. The following is a
non-exclusive list of possible criteria:

	 	•	 	Net income (before or after taxes) or operating income;
	 
	 	•	 	EBITDA (earnings before interest, taxes, depreciation and amortization);
	 
	 	•	 	Sales or revenue targets;
	 
	 	•	 	Cash flow or free cash flow (cash flow from operations less capital
expenditures);
	 
	 	•	 	Implementation, completion or progress of projects, processes, products or
product-lines strategic or critical to the Company’s business operations;
	 
	 	•	 	Growth in sales of products or product lines;
	 
	 	•	 	Any combination of, or a specified increase in, any of the foregoing.

     Each of these measures will be defined by the Plan Administrator on a corporation, subsidiary,
group or division basis and may include or exclude specified extraordinary items, as determined by
the Plan Administrator.

			
	V	 	Target Bonus Levels

     (a) The Plan Administrator shall approve the performance goals for each participant which may
be based on the Company’s achievement of specified targets. The Plan Administrator will also
approve individual performance goals for each participant. The Plan Administrator will approve the
threshold, target and maximum bonus levels for each participant in the MIP that will be paid upon
the attainment of specified performance goals.

     (b) Each participant will earn an award for a Plan Year based on the achievement of the
performance goals established under the Plan. The Plan Administrator may adjust, upward or
downward, the award for each participant, based on the Plan Administrator’s determination of the
participant’s achievement of personal and other performance goals approved by the Plan
Administrator and other factors as the Plan Administrator determines.

     (c) Unless determined otherwise by the Plan Administrator, the target bonus amounts will be
expressed as a dollar amount. In no event may the bonus paid to a

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participant for a Plan Year exceed 200% of the participant’s target bonus for the Plan Year.

			
	VI	 	Payment of Bonuses

     (a) The Plan Administrator shall certify and announce to the participants the awards that will
be paid by the Company as soon as practicable following the final determination of the Company’s
financial results for the Plan Year. Payment of the awards certified by the Plan Administrator
shall be made as soon as practicable following such certification. Payments shall be made either
(a) in a single lump sum cash payment or (b) through the granting or vesting of equity awards under
the Company’s 2003 Equity Incentive Plan or any successor plan. Solely for the purpose of testing
compliance with any provision or limitation set forth in the MIP, the value of an equity award
shall be determined in accordance with Statement of Financial Accounting Standard No. 123R, Share
Based Payment, as in effect at the time of such testing.

     (b) Participants must be employed on the last day of the Plan Year to be eligible for an award
from the MIP, except as described in subsections (c) and (d) below.

     (c) Participants who terminate employment prior to the last day of the Plan Year will not be
eligible for any award payment for the Plan Year. However, the Plan Administrator shall have the
discretion to authorize a full or partial payment of the bonus to which the participant would have
actually become entitled had such individual continued in employee status through the payment date,
should such participant’s employment terminate prior to such date by reason of his or her death,
disability, retirement, or involuntary termination due to a reduction in force, departmental
reduction or job reduction that occurs after at least six months of service during the Plan Year.
The bonus amounts in these cases will be based on the achievement of the performance goals for the
Plan Year and the participant’s actual level of individual performance. The awards may be prorated
based on the period calculated from the date when the individual became eligible for the MIP to the
date of termination. Payment will be made in a single payment at the same time as all other awards
for the Plan Year are distributed.

     (d) In the case of the death of a participant, any award payable to the participant shall be
paid to his or her beneficiary. For this purpose, the Company will use the beneficiary named under
the Company-sponsored life insurance plan. If no life insurance beneficiary is designed, the
beneficiary will be the decedent’s estate.

     (e) The Plan Administrator may establish appropriate terms and conditions to accommodate newly
hired and transferred employees.

			
	VII	 	Changes to Performance Goals and Target Awards

     At any time prior to the final determination of awards the Plan Administrator may adjust the
performance goals and target awards to reflect a change in corporate capitalization (such as a
stock split or stock dividend), or a corporate transaction (such

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as a merger, consolidation, separation, reorganization, or partial or complete liquidation),
or to reflect equitably the occurrence of any extraordinary event, any change in applicable
accounting rules or principles, any change in the Company’s method of accounting, any change in
applicable law, any change due to any merger, consolidation, acquisitions, reorganization, stock
split, stock dividend, combination of shares or other changes in the Company’s corporate structure
or share, or any other change of a similar nature. The Plan Administrator may make the foregoing
adjustments with respect to participants’ awards to the extent the Plan Administrator deems
appropriate.

			
	VIII	 	Timing of Distributions; Additional Conditions Applicable To Nonqualified Deferred
Compensation Under Section 409A

     Bonus awards under the MIP are not intended to constitute “nonqualified deferred compensation”
within the meaning of Section 409A (a “409A Award”). Thus, in order to avoid such
classification, the Company shall pay all bonuses under the MIP within 2-1/2 months after the end
of the fiscal year.

     However, if payment is not made by such date or for any other reason any bonus award under the
MIP is determined to constitute a 409A Award, the following additional conditions shall apply and
shall supersede any contrary provisions of the MIP or the terms of any agreement relating to such
award.

     (a) Distributions. Except as provided in Section VIII(b) hereof, no 409A Award shall
be distributable earlier than upon one of the following:

          (i) Specified Time. A specified time or a fixed schedule established in a written
instrument evidencing the 409A Award.

          (ii) Separation from Service. Separation from service (within the meaning of Section
409A) by the 409A Award recipient; provided, however, that if the 409A Award recipient is a
“key employee” (as defined in Section 416(i) of the Code without regard to paragraph (5) thereof)
and any of the Company’s stock is publicly traded on an established securities market or otherwise,
payment of the 409A Award may not be made before the date that is six months after the date of
separation from service.

          (iii) Death. The date of death of the 409A Award recipient.

          (iv) Disability. The date the 409A Award recipient becomes disabled (within the
meaning of Section VIII(c)(iii) hereof).

          (v) Unforeseeable Emergency. The occurrence of an unforeseeable emergency (within the
meaning of Section VIII(c)(iv) hereof), but only if the payment does not exceed the amounts
necessary to satisfy such emergency plus amounts necessary to pay taxes reasonably anticipated as a
result of the payment, after taking into account the extent to which the emergency is or may be
relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the

4

 

recipient’s other assets (to the extent such liquidation would not itself cause severe
financial hardship).

          (vi) Change in Control Event. The occurrence of a Change in Control Event (within the
meaning of Section VIII(c)(i) hereof), including the Company’s discretionary exercise of the right
to accelerate vesting of such grant upon a Change in Control Event or to terminate the Plan or any
409A Award granted hereunder within 12 months of the Change in Control Event.

     (b) No Acceleration. The payment of a 409A Award may not be accelerated prior to the
time specified in Section VIII(a) hereof, except in the case of one of the following events:

          (i) Domestic Relations Order. The 409A Award may permit the acceleration of the
distribution time or schedule to an individual other than the recipient as may be necessary to
comply with the terms of a domestic relations order (as defined in Section 414(p)(1)(B) of the
Code).

          (ii) Conflicts of Interest. The 409A Award may permit the acceleration of the
distribution time or schedule as may be necessary to comply with the terms of a certificate of
divestiture (as defined in Section 1043(b)(2) of the Code).

          (iii) Change in Control Event. The Committee may exercise the discretionary right to
accelerate the vesting of such 409A Award upon a Change in Control Event or to terminate the Plan
or any 409A Award granted thereunder within 12 months of the Change in Control Event and cancel the
409A Award for other compensation.

     (c) Definitions. Solely for purposes of this Section VIII and not for other purposes
of the Plan, the following terms shall be defined as set forth below:

          (i) “Change in Control Event” means the occurrence of a change in the ownership of the
Company, a change in effective control of the Company, or a change in the ownership of a
substantial portion of the assets of the Company (as defined in Section 1.409A-3(g) of the proposed
regulations promulgated under Section 409A by the Department of the Treasury on September 29, 2005
or any subsequent guidance).

          (ii) “Code” means the Internal Revenue Code of 1986, as amended, and any successor Code, and
related rules, regulations and interpretations.

          (iii) “Disabled” means a participant who (i) is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment that can be expected
to result in death or can be expected to last for a continuous period of not less than 12 months,
or (ii) is, by reason of any medically determinable physical or mental impairment that can be
expected to result in death or can be expected to last for a continuous period of not less than 12
months, receiving income replacement benefits for a period of not less than three months under an
accident and health plan covering employees of the Company or its subsidiaries.

5

 

          (iv) “Unforeseeable Emergency” means a severe financial hardship to the recipient resulting
from an illness or accident of the participant, the recipient’s spouse, or a dependent (as defined
in Section 152(a) of the Code) of the recipient, loss of the recipient’s property due to casualty,
or similar extraordinary and unforeseeable circumstances arising as a result of events beyond the
control of the recipient.

			
	IX	 	Amendment and Termination

     Notwithstanding the above, the Committee, at its sole discretion, may amend, modify or change
the MIP or its implementation at any time, including, but not limited to, revising performance
targets, form of consideration for bonus payment, bonus multipliers, strategic goals and objectives
and actual bonus payments; provided that no such action shall adversely affect any
incentive payments previously awarded under the MIP. The Committee may terminate the MIP at any
time.

			
	X	 	Miscellaneous

     (a) The “Plan Year” means the calendar year beginning January 1 and ending December
31.

     (b) Neither the establishment of the MIP, nor any action taken hereunder, shall be construed
as giving any participant any right to be retained in the employ of the Company or any of its
subsidiaries. Nothing in the MIP, and no action taken pursuant to the MIP, shall affect the right
of the Company to terminate a participant’s employment at any time and for any or no reason. The
Company is under no obligation to continue the MIP.

     (c) The MIP is not the exclusive means of awarding annual bonuses to participants, and the
Committee retains discretionary authority to grant other cash and non-cash bonuses to MIP
participants as and when it deems appropriate. The Committee may grant such discretionary bonuses
in addition to any bonus earned under the MIP and regardless of whether annual performance goals
for a bonus under the MIP have been achieved.

     (d) A participant’s right and interest under the MIP may not be assigned or transferred,
except upon death, and any attempted assignment or transfer shall be null and void and shall
extinguish, in the Company’s sole discretion, the Company’s obligation under the MIP to pay awards
with respect to the participant. The Company’s obligations under the MIP may be assigned to any
corporation which acquires all of substantially all of the Company’s assets or any corporation into
which the Company may be merged or consolidated.

     (e) The MIP shall be unfunded. The Company shall not be required to establish any special or
separate fund, or to make any other segregation of assets, to assure payment of awards. The
Company’s obligations hereunder shall constitute a general, unsecured obligation; awards shall be
paid solely out of the Company’s general assets, and no participant shall have any right to any
specific assets of the Company.

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     (f) The Company shall have the right to deduct from awards, or require the prior payment of,
any and all federal, state and local taxes or other amounts required by law to be withheld.

     (g) The validity, construction, interpretation and effect of the MIP shall exclusively be
governed by and determined in accordance with the laws of the State of California.

*** [END OF DOCUMENT] ***

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