SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
GREEN TREE FINANCIAL CORPORATION
- --------------------------------------------------------------------------------
(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):
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) 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):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[X] Fee paid previously with preliminary materials.
[_] 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.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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Notes:
[LOGO OF GREEN TREE FINANCIAL CORPORATION APPEARS HERE]CORPORATION]
GREEN TREE FINANCIAL CORPORATION
1100 LANDMARK TOWERS
345 ST. PETER STREET
SAINT PAUL, MINNESOTA 55102-1639
April 17, 199511, 1996
To Our Shareholders:Stockholders:
You are cordially invited to attend the 19951996 Annual Meeting of ShareholdersStockholders
of Green Tree Financial Corporation (the "Company") which will be held at 22:00
p.m. on Wednesday, May 17, 1995, in the Minnesota World Trade Center, Studio
Theatre, 3rd Floor, 30 East 7th15, 1996, at The Saint Paul Hotel, Casino Ballroom, 350
Market Street, Saint Paul, Minnesota 55101.55102.
At the meeting of shareholdersstockholders you will be asked to: (i)(1) elect two Directors
of the Company to hold office until their term shall expire; (ii)one Director;
(2) approve the reorganization of the Company to change its state of incorporation from
Minnesota to Delaware; (iii) approveChief Executive Cash Bonus and Stock Option Plan for the
Company's 1995 EmployeeChief Executive Officer; (3) increase the Company's number of
authorized shares of Common Stock Incentive Plan; (iv)to 400 million shares; (4) ratify the
selection of the Company's independent auditors; and (v)(5) transact such other
business as may properly come before the meeting or any adjournment thereof.
Following these matters, management will present a current report on the
business and current activities of the Company. You will also have an
opportunity to comment on or inquire about aspects of the business of the
Company that may be of interest to you.
Please read the enclosed Notice of Annual Meeting and Proxy Statement which
describes the business to come before the meeting. Please mark, sign and return
the accompanying Proxy Card promptly in the enclosed postage-paid envelope. We
hope you will be able to attend the meeting on May 17.15.
WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE MARK, SIGN AND RETURN YOUR PROXY
CARD PROMPTLY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN
THE UNITED STATES.
Sincerely,
/s/ Lawrence M. Coss
LAWRENCE M. COSS
Chairman and Chief
Executive Officer
[LOGO OF GREEN TREE FINANCIAL CORPORATION APPEARS HERE]CORPORATION]
GREEN TREE FINANCIAL CORPORATION
----------------
NOTICE OF 19951996 ANNUAL MEETING OF SHAREHOLDERSSTOCKHOLDERS
TO BE HELD ON MAY 17, 199515, 1996
To the ShareholdersStockholders of
Green Tree Financial Corporation:
NOTICE IS HEREBY GIVEN that the 19951996 Annual Meeting of ShareholdersStockholders of Green
Tree Financial Corporation, a MinnesotaDelaware corporation (the "Company"), has been
called to be held in the Minnesota World Trade Center, Studio Theatre, 3rd
Floor, 30 East 7that The Saint Paul Hotel, 350 Market Street, Saint Paul,
Minnesota 55101,55102, on Wednesday, May 17,
1995,15, 1996, at 22:00 p.m., for the following
purposes:
1. To elect two Directorsone Director of the Company to hold office until theirhis term shall
expire and until their successorshis successor shall have been duly elected and
qualified.
2. To approve a reorganization of the Company to change its state of
incorporation from Minnesota to Delaware.Chief Executive Cash Bonus and Stock Option Plan for the
Company's Chief Executive Officer.
3. To approveincrease the Company's 1995 Employeenumber of authorized shares of Common Stock Incentive Plan.to
400 million shares.
4. To ratify the selection of KPMG Peat Marwick, LLP as independent
auditors of the Company for the fiscal year ending December 31, 1995.1996.
5. To transact such other business as may properly come before the Annual
Meeting of ShareholdersStockholders or at any adjournments thereof.
The Board of Directors has fixed the close of business on Friday, March 27, 1995,29,
1996, as the record date for determination of shareholdersstockholders entitled to notice
of and to vote at the meeting and at any adjournments thereof.
Please date, sign and mail the Proxy Card in the enclosed self-addressed
return envelope. ShareholdersStockholders attending the meeting may withdraw their Proxies
at any time prior to their exercise by filing written notice with any officer
of the Company.
Dated: April 17, 199511, 1996
Saint Paul, Minnesota
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Richard G. Evans
RichardRICHARD G. Evans,EVANS, Secretary
[LOGO OF GREEN TREE FINANCIAL CORPORATION APPEARS HERE]CORPORATION]
GREEN TREE FINANCIAL CORPORATION
1100 LANDMARK TOWERS
345 ST. PETER STREET
SAINT PAUL, MINNESOTA 55102-1639
----------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERSSTOCKHOLDERS
TO BE HELD ON MAY 17, 199515, 1996
GENERAL MATTERS
SOLICITATION OF PROXIES
The Board of Directors of Green Tree Financial Corporation (the "Company") is
soliciting the accompanying Proxy in connection with the Annual Meeting of
ShareholdersStockholders to be held on May 17, 1995,15, 1996, at 22:00 p.m., and any adjournments of
the meeting. The Annual meeting will be held at The Saint Paul Hotel, 350
Market Street, Saint Paul, Minnesota 55102. This Proxy Statement and the
enclosed Proxy Card are being mailed to shareholdersstockholders commencing on or about
April 17, 1995.11, 1996.
The enclosed proxy may be revoked at any time before it is voted by: (i)(1)
delivering to any officer of the Company a written notice of termination of the
proxy's authority, (ii)(2) filing with an officer of the Company another proxy
bearing a later date, or (iii)(3) appearing and voting at the meeting.Annual Meeting of
Stockholders.
The Company will pay the costs of solicitation, including the cost of
preparing and mailing this Proxy Statement and Notice of Annual Meeting.
Solicitation will be primarily by mailing this Proxy Statement to all
shareholdersstockholders entitled to vote at the meeting. Proxies may be solicited by
officers of the Company by telephone or in person, but at no compensation in
addition to their regular compensation as officers. The Company will reimburse
brokers, banks, and others holding shares for the cost of distributing proxy
materials to and obtaining proxies from third parties. The Company has retained
Beacon Hill Partners,Georgeson & Company, Inc. to assist in the solicitation of proxies, and has
agreed to pay such firm approximately $5,000$7,000 plus reasonable expenses incurred
on behalf of the Company for its services. In addition, the Company has
retained Firstar Trust Company to tabulate and report on the votes cast by
shareholders.stockholders.
VOTING, EXECUTION AND REVOCATION OF PROXIES
Pursuant to Delaware law and the Company's Certificate of Incorporation and
Bylaws, Firstar Trust Company will treat abstentions as shares that are present
and entitled to vote for purposes of determining the presence of a quorum, but
as unvoted for purposes of determining the approval of any matter submitted to
the shareholdersstockholders for a vote. If a broker indicates on the proxy that it does
not have discretionary authority as to certain shares to vote on a particular
matter, those shares will be considered as present and entitled to vote for
purposes of determining the presence of a quorum, but will not be considered as present and entitled to vote with respect to such matters.vote.
Only the holders of the Company's Common Stock whose names of record appear
on the Company's books at the close of business on March 27, 199529, 1996 (the "Record
Date") will be entitled to vote at the Annual Meeting. At the close of business
on the Record Date, a total of 68,210,085136,673,206 shares of Company Common Stock were
outstanding, each share being entitled to one vote.
ANNUAL REPORT
A copy of the Company's Annual Report for the year ended December 31, 1994,1995,
was furnished to each shareholderstockholder on or about March 31, 1995.
29, 1996.
ELECTION OF DIRECTORSDIRECTOR
(ITEM 1)
NOMINEE FOR ELECTION AS DIRECTOR
Pursuant to the Bylaws of the Company, the Board of Directors has established
the number of Directors at six. The Bylaws provide that the directorsDirectors are
divided into three classes, as equal in number as possible. Each class of
directorsDirectors serves a three-year term.
Two Directors areOne Director is to be elected at the 19951996 Annual Meeting of Shareholders.Stockholders. The
Board of Directors has nominated Richard G. Evans and Robert S. NickoloffLawrence M. Coss for a three-year termsterm
expiring at the 19981999 Annual Meeting of Shareholders.Stockholders. Tania A. Modic's term as a
Director expires at the 1996 Annual Meeting of Stockholders. Ms. Modic has
determined not to stand for election to another term as a Director, but will
continue to serve the Company as an advisor to Mr. Coss, the Company's Chairman
and Chief Executive Officer. The Nominating Committee has commenced a search
for a candidate to fill the vacancy which will be created after the 1996 Annual
Meeting, and the Board of Directors will fill such vacancy upon identifying a
qualified candidate.
The following table setstables set forth information, as of March 31, 1995,1996, including
business experience during the past five years, as to the nomineesnominee for election
and as to the other directorsDirectors of the Company whose terms of office will
continue after the 19951996 Annual Meeting of Shareholders.
The Board of Directors recommends that the shareholders vote FOR each
nominee. The affirmative vote of a majority of the shares of the Company's
Common Stock present at the meeting, in person or by proxy, is required to
elect each nominee.
NOMINEES FOR ELECTION AS DIRECTORStockholders.
INFORMATION REGARDING NOMINEE
BUSINESS EXPERIENCE
NOMINEE FOR TERMDURING THE PAST
NAME, POSITIONS AND DIRECTOR TERM FIVE YEARS AND OTHER
OFFICES WITH COMPANY SINCE EXPIRING IN AGE DIRECTORSHIPS
-------------------- -------- ----------- --- --------------------
Lawrence M. Coss............ 1975 1999 57 Chairman and Chief
Chairman and Chief Executive Officer since
Executive Officer; April 1994; Chairman,
Director President and Chief
Executive Officer (1987-
1994); President and
Chief Executive Officer
(1975-1987); Company
founder.
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE NOMINEE.
THE AFFIRMATIVE VOTE OF A MAJORITY OF THE SHARES OF THE COMPANY'S COMMON STOCK
PRESENT AT THE MEETING, IN PERSON OR BY PROXY, IS REQUIRED TO ELECT THE
NOMINEE. PROXIES WILL BE VOTED IN FAVOR OF SUCH NOMINEE UNLESS OTHERWISE
SPECIFIED.
2
INFORMATION REGARDING CONTINUING DIRECTORS
BUSINESS EXPERIENCE DURING
TERM THE PAST
NAME, POSITIONS AND DIRECTOR EXPIRES FIVE YEARS AND OTHER
OFFICES WITH COMPANY SINCE IN AGE PAST FIVE YEARS AND OTHER DIRECTORSHIPS
-------------------- -------- --------------- --- ---------------------------------------
--------------------------
Richard G. Evans............ 1991 1998 4647 Executive Vice President
Executive Vice President and Secretary Executive Vice President since
and Secretary; Director December 1993; Senior Vice
and Secretary President, General Counsel
and
Director Secretary (1988-1993);
Vice President, General
Counsel and Secretary
(1985-88)(1985-1988).
Robert S. Nickoloff......... 1978 1998 65 Chairman of the Board, Medical
Director Innovation Capital, Inc; Director of
Minnesota Power.
CONTINUING DIRECTORS
TERM
NAME, POSITIONS, AND DIRECTOR EXPIRES BUSINESS EXPERIENCE DURING THE
OFFICES WITH COMPANY SINCE IN AGE PAST FIVE YEARS AND OTHER DIRECTORSHIPS
-------------------- -------- ------- --- ---------------------------------------
Lawrence M. Coss............ 1975 1996 56 Chairman and Chief Executive Officer
Chairman and Chief since April 1994; Chairman, President
Executive Officer and Chief Executive Officer (1987-
Director 1994); President and Chief Executive
Officer (1975-1987); Company founder.
W. Max McGee................ 1985 1997 6263 Partner, Marno-Max Company,
Director a real
Director estate and general
investment company, since
1981.
Tania A. Modic.............. 1994 1996 45 Principal, Western Investments Company,Robert S. Nickoloff......... 1978 1998 66 Chairman of the Board,
Director a private investment companyMedical Innovation Capital,
Inc; Director of Minnesota
Power and Light since October, 1981.1986.
Robert D. Potts............. 1994 1997 5253 President and Chief
President and Chief Operating Officer President and Chief since
Operating Officer; April 1994; Executive Vice
Operating OfficerDirector President and Chief
Operating Officer Director (December
1993- April1993-April 1994); Executive
Vice President,
Administration (October
1993 to November 1993);
Managing Partner, Deloitte
& Touche and its
predecessor, Touche Ross &
Co., Minneapolis, Minnesota
(1988-1993).
2
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Company's Board of Directors has an Executive Committee which consistsconsisted
of Lawrence M. Coss, Robert S. Nickoloff and Robert D. Potts.Potts during 1995. The
Executive Committee meets as necessary between meetings of the Board of
Directors to act on behalf of the Board or take any other action that may be
delegated to it. The Executive Committee conducted all its business between
meetings of the Board of Directors by written action during 1994.1995. Following the
19951996 Annual Meeting, it is anticipated that Lawrence M. Coss, Robert S.
Nickoloff and Robert D. Potts will be elected to the Executive Committee.
The Board of Directors has an Audit Committee which consistsconsisted of Tania A.
Modic, W. Max McGee, and Robert S. Nickoloff.Nickoloff during 1995. Among its duties, the
Audit Committee reviews and makes recommendations to the Board of Directors
with respect to designated financial and accounting matters. The Audit
Committee held threetwo meetings during the year ended December 31, 1994.1995. Following
the 19951996 Annual Meeting, it is anticipated that Tania A. Modic, W. Max McGee and Robert S.
Nickoloff will be elected to the Audit Committee.
The Board of Directors has a Compensation Committee which consistsconsisted of Tania
A. Modic, W. Max McGee and Robert S. Nickoloff.Nickoloff during 1995. Among its duties,
the Compensation Committee administers the provisions of the Company's Key
Employee Bonus Plan, 1987 Employee Stock Option Plan, 1995 Employee Stock
Option Plan and the Key Executive Stock Bonus Plan. The Compensation Committee held
threefour meetings during the year ended December 31, 1994.1995. After the 19951996 Annual
Meeting, it is anticipated that Tania
A. Modic, W. Max McGee and Robert S. Nickoloff will be
elected to the Compensation Committee.
The Board of Directors has a Nomination Committee which consistsconsisted of Lawrence
M. Coss, W. Max McGee and Robert S. Nickoloff.Nickoloff during 1995. The committeeCommittee makes
recommendations to the Board of Directors with respect to nominees to serve on
the Board. The nomination committeeNomination Committee did not meet during 1994. The1995 and took necessary
action in writing in preparation for the 1996 Annual Meeting of Stockholders.
In connection with its nominating responsibilities, the Nomination Committee
will consider qualified nominees proposedrecommended by a stockholder of the stockholders. Any stockholder
who wishes to recommend a prospective nominee forCompany if
the Board of Directors for
the Nomination Committee's consideration may do so by giving the candidate's
name and qualificationsrecommendation is submitted in writing to the
3
Secretary of the Company at 1100
Landmark Towers, 345 St. Peter Street, Saint Paul, Minnesota 55102-1639.no later than the December 31 preceding the annual
meeting. Any such recommendation must include information which will enable the
Committee to evaluate the qualifications of the proposed nominee.
During the year ended December 31, 1994,1995, the Board of Directors held sixseven
meetings. All incumbent directorsDirectors attended at least 75%75 percent of those
meetings of the Board and committees of which they were members that were held
while they were serving on the Board or on such committees.
COMPENSATION OF DIRECTORS
During the year ended December 31, 1994, directors1995, Directors received a fee of $2,000
per month plus travel expenses. In addition, members of the Audit Committee
received a fee of $1,250 per quarter. Outside Directors also received
compensation in the form of stock options. During 1994,1995, a total of 20,00048,000 stock
options (adjusted for a two-for-one stock split in the form of a dividend
distributed June 30, 1994) were granted to three outside Directors. The option price was the
closing price of the Company's Common Stock on the New York Stock Exchange on
the date of grant.
34
COMPARATIVE STOCK PERFORMANCE
The Performance Graph below compares the cumulative total stockholder return
on the Company's Common Stock against the S&P Composite-500 Stock Index and the
S&P Financial Index for the period of five fiscal years commencing December 31,
1990, and ending December 31, 1995. The graph presentation assumes $100
invested on December 31, 1990, in Company Common Stock, the S&P Composite-500
Stock Index and the S&P Financial Index, with dividends reinvested, and shows
such values at December 31, 1995. Based upon a study entitled, "Shareholders
Scoreboard" published in The Wall Street Journal on February 29, 1996, the
Board of Directors believes that the Company's stockholder return performance
for the five-year period is the single best performance of any company listed
on the New York Stock Exchange for such period.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
[STOCK PERFORMANCE GRAPH]
12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
- ---------------------------------------------------------------------------------
Green Tree Financial
Corporation............ 100 367 458 924 1,179 2,065
- ---------------------------------------------------------------------------------
S&P Composite-500 Index. 100 130 140 155 157 215
- ---------------------------------------------------------------------------------
S&P Financial Index..... 100 151 186 207 199 307
5
COMPENSATION OF EXECUTIVE OFFICERS
INFORMATION REGARDING EXECUTIVE OFFICERS
The following table sets forth certain information concerning the executive
officers of the Company:Company. Executive officers are elected annually by the Board
of Directors.
NAME, POSITIONS, AND BUSINESS EXPERIENCE DURING THE PAST
OFFICES WITH THE COMPANY AGE BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS
- ------------------------ --- ----------------------------------------------
-----------------------------------
Lawrence M. Coss................. 5657 Chairman and Chief Executive Officer
since April
Chief Executive Officer; since April 1994; Chairman, President and Chief Executive
Chairman of the Board and Chief Executive Officer (1987-1994)(1987-
1994); President and Chief Executive
Officer (1975-1987); Company founder;
Director of the Company since 1975
(term expires(nominee for term expiring in 1996)1999).
Robert D. Potts.................. 5253 President and Chief Operating Officer
since April,
President and Chief 1994; Executive Vice President and Chief Operating Operating Officer; Officer since December 1993;April 1994; Executive Vice
Officer; Director President and Chief Operating Officer
(December 1993 to April 1994);
Executive Vice President,
Administration October(October to November
1993;1993); Managing Partner, Deloitte &
Touche and its predecessor, Touche Ross
& Co., Minneapolis, Minnesota 1988(1988 to
May 1993;1993); Partner, Deloitte & Touche
1975(1975 to October 1993;1993); Director of the
Company since 1994 (term expires in
1997).
John W. Brink.................... 4950 Executive Vice President and Chief
Executive Vice President and Financial Officer from December 1995
Chief Financial Officer until his resignation on March 15,
1996; Executive Vice President,
Treasurer and Chief Executive Vice President, Financial Officer
of the Company since(December 1993 to
December Treasurer and Chief Financial 1993;1995); Senior Vice President,
Treasurer and Chief Officer Financial Officer
of the Company (1988-1993); Vice
President, Treasurer and Chief
Financial Officer (1986-88)(1986-1988).
Richard G. Evans................. 4647 Executive Vice President and Secretary
of the
Executive Vice President andof the Company since December 1993;
and Secretary; Director Senior Vice
Secretary, Director President, General Counsel
and Secretary of the Company (1988-1993)(1988-
1993); Vice President, General Counsel
and Secretary (1985-1988); Director of
the Company since 1991 (nominee for term expiring(term expires in
1998).
Robert A. Hegstrom............... 53 Executive Vice President, Commercial Division,
Former Executive December 1994 to January 18, 1995; Executive Vice
Vice President President, Home Improvement Division from December
1993 to November 1994;Lyle D. Zeller................... 40 Senior Vice President (1986-1993)of the Company
Senior Vice President since November 1993; Vice President of
the Company (August 1992 to November
1993); President and Chief Operating Officer
of Consolidated Casualty Company (subsidiary)
(1989-1994); President and Chief Operating Officer
of Green Tree Life Insurance Company (subsidiary)
(1988-1994)Management Consultant, KPMG Peat
Marwick (1983-1992).
46
EXECUTIVE COMPENSATION
The annual compensation for executive officers, including salaries,
directors'Directors' fees, bonuses, and option awards for the years ended December 31,
1992, 1993, 1994, and 1994,1995, was as follows:
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS(2)
-----------------------------------------
NAME OF INDIVIDUAL SECURITIES
AND PRINCIPAL POSITION SALARY BONUS UNDERLYING
- ---------------------- YEAR ($)(1) ($) OPTIONS
-----------------------------------------
Lawrence M. Coss..................... 1994Coss................. 1995 $433,608 $28,544,354(3)$65,146,594(3) None
Chief Executive Officer; 1993 433,600 13,601,133(4)1994 433,608 28,544,354(4) None
Chairman of the Board 1992 435,000 4,684,572(5)1993 433,600 13,601,133(5) None
Robert D. Potts......................Potts.................. 1995 333,000 850,000 300,000(6)
President and Chief 1994 281,008 600,000 None
President and ChiefOperating Officer; 1993 41,500 50,000 100,000
Operating Officer; 1992 -- -- --200,000(7)
Director
Richard G. Evans................. 1995 258,000 350,000 100,000(6)
Executive Vice President 1994 235,500 280,000 None
and Secretary; Director 1993 221,500 220,000 None
John W. Brink........................Brink.................... 1995 209,000 340,000 100,000(6)(8)
Executive Vice President 1994 206,500 250,000 None
Executive Vice President,and Chief Financial Officer 1993 198,500 220,000 None
Treasurer and Chief 1992 188,364 180,000 None
Financial Officer
Richard G. Evans..................... 1994 235,500 280,000 None
ExecutiveLyle D. Zeller................... 1995 179,000 250,000 80,000(6)
Senior Vice President 1994 159,000 200,000 None
1993 221,500 220,000 None
and Secretary; Director 1992 212,364 180,000 None
Robert A. Hegstrom................... 1994 268,008 400,000 None
Former Executive Vice President(6) 1993 263,500 400,000 None
1992 253,364 375,000135,500 150,000 None
- --------
(1) Includes director'sother compensation in the form of Director's fees, if applicable
and car allowances,allowances. Other compensation included does not exceed the lesser
of $50,000 or 10 percent of the total compensation and employer
contributions to the Company's 401-(k) Plan.is not separately
shown.
(2) The Company hasdid not issuedissue any restricted stock to the executive officers
listed or any other employees as of December 31, 1994.in 1995.
(3) Includes $24,538,866 (674,608$59,212,820.63 (1,998,745 shares) of Company Common Stock earned
as bonus, before stock withheld for federal and state tax withholdings.
(4) Includes $10,969,547 (443,214$24,538,866 (1,349,216 shares) of Company Common Stock earned as
bonus, before stock withheld for federal and state tax withholdings. Share
amount is adjusted for a two-for-one stock split in the form of a dividend
distributed June 30, 1994.October 15, 1995.
(5) Includes $3,255,889 (240,620$10,969,547 (886,428 shares) of Company Common Stock earned as
bonus, before stock withheld for federal and state tax withholdings. Share
amount is adjusted for two-for-one stock splits in the form of dividends
distributed June 30, 1994 and October 15, 1995.
(6) Option amount is adjusted for a two-for-one stock split in the form of a
dividend distributed June 30, 1994.
(6) Mr. Hegstrom resigned from the Company on January 18,October 15, 1995.
5
In April 1991, the Company and Mr. Coss entered into an employment agreement
which extended Mr. Coss's previous employment and noncompetition agreement with
the Company from January 1, 1992 through December 31, 1996. The agreement
provides that Mr. Coss(7) Option amount is entitled to receive 2 1/2% of the Company's pretax
income, after deductions for bonuses paid pursuant to the Key Executive Bonus
Program (described below) and certain other adjustments. The bonus will be
payable: (i) so long as the Key Executive Stock Bonus Program is in effect, 50%
in cash and 50% in Company Common Stock valued at $5.9375 per share (the
closing price for the Company's Common Stock on the New York Stock Exchange on
the day the employment agreement was executed, adjusted for two-for-one stock splits in the form of
dividends distributed on January 31, 1993 and June 30, 1994); or (ii) in all
other cases, 100% in cash. In1994 and October 15, 1995.
(8) Mr. Brink resigned effective March 15, 1996. The options for 100,000 shares
of Common Stock were not vested on the eventdate of a terminationresignation.
7
OPTIONS GRANTED, EXERCISED AND HELD BY EXECUTIVES
The following table shows the number and potential realizable value of employment after a
Critical Event (defined as the sale of all or substantially all of the assets
of the Company to, or the acquisition of more than 50% of the issued and
outstanding voting stock of the Company by, any person or group of persons
acting in concert, or if the Company is merged into another corporation or is
consolidated with another corporation), the Company shall pay the largest
amount that does not constitute an "excess parachute payment" within the
meaning of Section 280G of the Internal Revenue Code (the "Code"), as a
termination payment, and Mr. Coss may revoke his noncompetition agreement.
The Company has also entered into certain agreements with Messrs. Brink and
Evans that provide for specified financial arrangements upon termination of
employment with the Company after a change in control. Generally, the
agreements were for an initial one-year term and thereafter are automatically
renewable for additional one-year terms unless the Company gives notice to each
officer at least 90 days prior to each December 31 that it does not wish to
extend the agreement; provided, however, that notwithstanding any such notice
by the Company not to extend, the agreements will continue for a period of 24
months beyond their term if a change of control of the Company occurs during
such term. The agreements provide that after a change in control of the
Company, if one of the above officers leaves the Company's employ either
voluntarily or involuntarily (other than a termination for cause or due to
death or disability), he is entitled to compensation equal to three times the
sum of (i) the officer's annual base salary, and (ii) an amount equal to the
product of the officer's annual base salary multiplied by the percentage that
the discretionary bonus for the last complete fiscal year bears to the annual
base salary for the prior fiscal year. The agreements also require the payment
of all legal fees and expenses incurred by the officer in connection with such
a termination of employment.
6
None of the executive officers listed in the Summary Compensation Table were
granted stock
options or stock appreciation rights during 1994.
OPTIONS EXERCISED BY EXECUTIVE OFFICERS DURING 1994
AND YEAR-ENDgranted in 1995.
STOCK OPTION VALUES
AT DECEMBER 31, 1994GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
---------------------------------------------- POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF NUMBEROPTIONS ANNUAL RATES OF NET VALUE
SHARESSTOCK
SECURITIES SECURITIES OF NET VALUE OF
ACQUIREDGRANTED TO EXERCISE PRICE APPRECIATION FOR
UNDERLYING UNDERLYING EXERCISABLE UNEXERCISABLE
ON NET VALUE EXERCISABLE UNEXERCISABLEEMPLOYEES OR BASE OPTION TERM
OPTIONS AT OPTIONS ATIN FISCAL PRICE EXPIRATION ----------------------
NAME EXERCISE REALIZED(1) OPTIONS OPTIONS 12/31/94(2) 12/31/94(2)GRANTED (#)(1) YEAR ($/SH)(2) DATE 5%($) 10%($)
- ---- ---------------------- ---------- --------- ---------- ---------- ----------- ----------- ------------- ----------- -------------
Lawrence M. Coss........ -- -- -- -- -- --
Robert D. Potts......... 300,000 10.6% $24.000 07/12/05 $4,528,041 $11,474,946
Richard G. Evans........ 100,000 3.5% 24.000 07/12/05 1,509,347 3,824,982
John W. Brink........... 100,000(3) 3.5% 24.000 07/12/05 1,509,347 3,824,982
Lyle D. Zeller.......... 80,000 2.8% 24.000 07/12/05 1,207,478 3,059,986
- --------
(1) Stock options become exercisable at 20 percent of the total after each of
the first five anniversary dates from the date of grant, except that all
options become fully exercisable upon a change of control of the Company or
the death or disability of the executive.
(2) Optionees may tender previously-acquired shares of the Company's Common
Stock or request the Company to withhold sufficient shares in payment of
the exercise price of a stock option, and optionees may tender previously-
acquired shares or request the Company to withhold sufficient shares to pay
the taxes arising from the exercise. Under the terms of the 1995 Stock
Option Plan, the Compensation Committee may grant a reload stock option to
purchase the number of shares tendered and/or withheld in an exercise. The
reload option would have an exercise price equal to the closing price of
the Company's Common Stock on the date of the transaction, and would expire
on the scheduled expiration date of the exercised option. The Compensation
Committee has not previously granted reload options to any optionees.
(3) Mr. Brink resigned effective March 15, 1996. The options for 100,000 shares
of Common Stock were not vested on the date of resignation.
8
The following table shows the number and value of stock options exercised by
the named executive officers during 1995 and the number and value of stock
options retained at December 31, 1995.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END (#) FY-END ($)(1)
SHARES VALUE ----------------- ------------------------
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) ($) UNEXERCISABLE UNEXERCISABLE
- ---- ------------ ---------- ----------------- ------------------------
Lawrence M. Coss........ -- -- 800,000 / 200,000 $7,331,100 $4,887,400
Chairman and Chief
Executive Officer$18,724,800 / $4,681,200
Robert D. Potts......... -- -- -- / 500,000 -- / 4,793,750
Richard G. Evans........ 34,817(2) $1,178,339(3) 180,000 / 100,000 -- $1,843,750
President and Chief
Operating Officer;
Director3,923,438 / 237,500
John W. Brink........... 24,000(3) $618,749 160,000 -- $3,632,492 --
Executive Vice
President, Treasurer
and Chief
Financial Officer
Richard G. Evans........ -- -- 140,000 -- $3,089,368 --
Executive Vice
President
and Secretary; Director
Robert A. Hegstrom......320,000 / 100,000(4) 7,212,498 / 237,500(4)
Lyle D. Zeller.......... -- -- 120,000 -- $2,546,244 --
Former Executive Vice
President73,400 / 80,000 1,609,066 / 190,000
- --------
(1) Based upon the sale price for Common Stock sold upon exercise or the
closing price on the New York Stock Exchange on the date of exercise for
underlying Common Stock held.
(2) Based upon closing price of the Company's Common Stock on December 30, 199429, 1995
($30.375)26.375) less the option exercise price.
December 30 was(2) Mr. Evans sold the last trading
dayexercised shares. The exercised shares are net of the year.
(3) Net of 16,00015,183
shares withheld for Mr. Evans' federal and state tax liability.
(3) Based on the sale price for Common Stock sold upon exercise.
(4) Mr. Brink holds such shares.resigned effective March 15, 1996. The options for 100,000 shares
of Common Stock were not vested on the date of resignation.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Role of Committee. The Compensation Committee of the Board of Directors (the
"Committee") reviews and establishes compensation strategies and programs to
ensure that the Company attracts, retains, properly compensates, and motivates
the most qualified executives and other key employees. The Committee consists of the
three nonemployee directors.Directors. It regularly meets in November or December,
primarily to review and determine bonuses for executive and other key
personnel, and otherwise meets on an as-needed basis. In 1994,1995, the Committee
met threefour times.
Elements of Compensation Program. The Committee believes that the Company's
success depends greatly on the efforts of its officers, regional managers, and
other key personnel. The Committee also believes the Company must compete with
a number of other financial institutions for qualified personnel. For these
reasons, the Company seeks to attract, retain, and motivate its key employees
with compensation that is competitive within the financial services industry,
provided that performance of the Company and the individual warrant such
compensation. Historically, the most significant component of key employee
compensation has been remuneration in the form of cash bonus
7
bonuses and stock
options awarded pursuant to the Company's Key ExecutiveEmployee Bonus Program (the
"Bonus Program") and its stock option plans. Base salary levels for key Company
employees are generally conservative compared to similar positions at other
financial institutions. Cash bonuses typically represent a substantial portion
of a key employee's total cash compensation. The Committee believes that, by
putting a substantial portion of a key employee's compensation at risk, the
employee is further motivated to perform at a high level. The Committee also
believes that this performance-based philosophy better aligns the employeesemployee's
interests with those of the Company's shareholders.stockholders.
9
Under the Company's Bonus Program, cash bonuses aggregating up to 4%4 percent
of the Company's pretax earnings may be paid to executives and other key
employees, excluding the Company's Chief Executive Officer. Employees
participating in the program include Company officers, regional managers, and
other key employees designated by the Company's Chief Executive Officer and
approved by the Committee. For 1994, 911995, 118 employees participated in the Bonus
Program.
The Committee meets to consider the amount of bonuses payable to Bonus
Program participants in November or December of each year, and bonuses are paid
before year end. The Committee determines bonus amounts on the basis of
recommendations of the Company's Chief Executive Officer who, in turn,
considers the written performance evaluations of the supervisors of
participating key employees. The Committee analyzes those recommendations in
light of a number of factors relating to both Company and individual
performance. Company performance factors include the level of profitability,
return on equity, volume of business and market share, comparison to prior
years' performance, actual versus budgeted performance, portfolio performance,
performance in relation to competitors, and other factors. Individual
performance factors include an assessment of contribution to business unit
performance, quality of work, individual and overall responsibilities, length
of service, and other factors.
During fiscal year 1994,1995, the Committee considered the growth of the Company's business
and the returns it generated for its shareholdersstockholders in setting annual bonuses. In
particular, the Committee considered the Company's significant increase in the
principal balance of manufactured home contracts purchasedoriginated in 19941995 over 1993.1994. The principal
balance of manufactured home contracts purchased
increased 31%originated was $4.16 billion, an
increase of 30 percent in 19941995 compared to contracts purchasedoriginated in 1993.1994. The
Company's principal balance of home improvement loan originations increased 175%was $627
million, an increase of 35 percent during 19941995, and the Company's consumer
product loan originations increased 276 percent to $361 million. The Company's
equipment finance division lendingsubstantially increased 103%its loan originations to
$110 million during the year. In addition,year, and the Company actedCompany's floorplan lending program
increased its outstandings to broaden its base$574 million compared with $168 million in financial services
by instituting a manufactured home inventory financing program in 1994. The
outstanding balance of floorplan loans extended to manufactured home dealers
was $166.5 million at December 31, 1994.
Strong loan originations which
increased 41% over 1993 levels, led to record net earnings of $181.3 million.
Net$253,969,000, resulting
in a 40 percent increase in net earnings increased 56% duringcompared to 1994. ReturnLastly, the
Committee considered the Company's 30 percent return on equity, which exceeded
a 28 percent return on equity for 1994. Total return to shareholders (including
dividends reinvested) in 1995 was 28% in 1994 versus
30% in 1993, as75.1 percent, a result of a 5,750,000 share Common Stock offering in
September, 1993, which was effected to strengthenreturn well above the
Company's capital base
and provide for future loan originations and earnings growth.peer group.
Although the Bonus Program enables the Company to pay up to 4%4 percent of
pretax profits as bonuses, the Company has not always paid out as much as was
available. For 1994,1995, aggregate bonuses were $5,543,000$7,233,000 or 1.83%1.77 percent of
pretax earnings, and in the preceding two years aggregate bonuses under the
Bonus Program approximated 2.44%1.96 percent of pretax earnings. The aboveforegoing
amounts include the executive officers, other than the Company's Chief
Executive Officer, who received aggregate bonuses of $1,530,000$1,790,000 or .51%0.44 percent
of pretax earnings, and, in the preceding two years, bonus compensation to this
group of individuals approximated .74%0.51 percent and 1.04%0.74 percent of pretax
earnings, respectively. Because a significant portion of key employee cash
compensation is payable as a bonus, the Committee believes it wouldwill continue to
pay bonuses in a year for which the level of earnings declined from the
previous year, although the amount of the bonuses paid wouldwill, in all likelihood,
decline to reflect the reduction in earnings.
The Committee believes that it is important for key employees to have long-
term incentives through an equity interest in the Company. Accordingly, the
Company from
time to time the Company has granted key employees stock options pursuant to
the Company's stock option plans. As of February 28, 1995, 4329, 1996, 97 of the Company's
89112 total key employees (excluding the Company's Chief Executive Officer), held
options to acquire 1,706,3344,773,532 shares of the Company's Common Stock. As of the
same date, the executive officers, other than the 8
Company's Chief Executive
Officer, whose compensation is specifically disclosed herein, held stock and
options aggregating 551,5401,353,400 shares of the Company's Common Stock. The Company
has no other long-term incentive plans.
COMPENSATION OF CHIEF EXECUTIVE OFFICER10
Compensation of Chief Executive Officer for 1995. The compensation of the
Company's Chief Executive Officer for 1995 is based entirely on anthe existing
employment agreement between Mr. Coss and the Company. The Company and Mr. Coss
entered into the current agreement in April 1991 (the "1991 Employment
Agreement"), extending similar employment and compensation arrangements that
have been in effect since 1985. The current agreement1991 Employment Agreement expires on
December 31, 1996, and provides that, in addition to a base annual salary of
$400,000, Mr. Coss will receive an annual bonus as provided in his employment
contract. For a description of Mr. Coss's
employment contract,the 1991 Employment Agreement, see "Executive Compensation""Existing
Employment Agreement With Chief Executive Officer" beginning on page 6.13.
The Committee believes that the compensation arrangements with Mr. Coss are
consistent withmeet
the Company's overall approach to performance-related executive compensation
and serve to meet the Company'sits goal of retaining and motivating a highly qualified Chief Executive
Officer.Officer responsible for setting and implementing the strategic direction which
has enabled the Company to perform at a very high level. The employment agreement links1991 Employment
Agreement aligns management and stockholder interests by linking a substantial
portion of Mr. Coss's cash compensation to pretax earnings, with the result
that Chief Executive Officer compensation improves directly in relation to
improved Company profitability. The agreement also provides that a significant
portion of Mr. Coss's compensation is payable in Company stock. The Committee
believes that the equity position that Mr. Coss has in the Company as a result
of the employment agreement provides1991 Employment Agreement has provided Mr. Coss with long-term
incentives to help the Company achieve strong financial performance.
The Committee firmly believes that the Company's compensation policy for its
key employees, which emphasizes long-term incentives through equity
appreciation, has been a key contributing factor in the extraordinary financial
performance of the Company over the last five years. The Company's market
capitalization during this period has increased from $330 million at December
31, 1990 to $3.6 billion at December 31, 1995. The Company's earnings per share
has grown at a compound annual rate of 44 percent over the five-year period,
from $0.29 per share to $1.81 per share. The compound total annual return to
stockholders over the last five years, which includes dividends, was 83
percent. For additional information on stockholder performance and the
performance graph, see "Performance Graph" on page 5. The Committee has
reaffirmed its commitment to emphasize policies which will contribute to the
long-term incentivegrowth of stockholder values. It is with this commitment that the
Committee undertook discussions with Mr. Coss with respect to remaina new employment
agreement to be effective upon the expiration of the 1991 Employment Agreement.
New Employment Agreement With Chief Executive Officer. In mid-1995 the
Committee began informal discussions with Mr. Coss concerning a new employment
agreement to be effective after the expiration of the 1991 Employment Agreement
on December 31, 1996. The Committee determined that it would be in the best
interests of the Company to contribute activelyenter into a new employment agreement with Mr. Coss
prior to the Company's
continued growth and development,expiration of the 1991 Employment Agreement, so that the
provisions of the compensation arrangement which require stockholder approval
could be submitted to the stockholders at the 1996 Annual Meeting, rather than
wait until the 1997 Annual Meeting at which time the 1991 Employment Agreement
would have expired.
The Committee at its September 19, 1995, meeting determined to retain a
consultant to advise the Committee. On December 15, 1995, the Committee
retained Alan M. Johnson of Johnson Associates, Inc., an independent executive
compensation consultant (the "Consultant"), to advise the Committee and to
manageassist in developing proposals for a new employment agreement with Mr. Coss.
The Consultant provided the Committee with detailed information relating to
both the levels and methods of executive compensation and the performance of
other selected publicly-held companies. In addition to researching current and
historical market and comparative data, the Consultant interviewed Mr. Coss,
the members of the Committee, the other members of the Board of Directors,
certain senior managers, and certain long-term institutional stockholders to
gain further insight into the Company and its compensation practices, and to
obtain suggestions relative to a new employment agreement with Mr. Coss.
11
At the Committee's meeting on February 9, 1996, an agreement was reached with
Mr. Coss as to the terms of a new five-year employment agreement to be
effective January 1, 1997 (the "1997 Employment Agreement"). The Committee
determined that an increase in base salary from $400,000 to $600,000 per year
was appropriate, as Mr. Coss's base salary had not been increased since 1985.
At this level, Mr. Coss's base salary would continue to rank in the fourth
(bottom) quartile of chief executive officers of large financial services
companies and is consistent with the interestsCommittee's policy of its shareholders. As aestablishing modest
base salaries for key employees. The cash bonus and long-term incentive
provisions incorporated into the 1997 Employment Agreement are: (1) a cash
bonus to be determined pursuant to a new chief executive bonus and stock option
plan (the "1997 Chief Executive Plan"); and (2) the issuance to Mr. Coss of a
two million share stock option award pursuant to the 1997 Chief Executive Plan.
For an additional description of the terms of the 1997 Employment Agreement,
see "New Employment Agreement With Chief Executive Officer" beginning on page
13, below.
1997 Chief Executive Plan. The 1997 Chief Executive Plan provides for an
incentive-based cash bonus formula equal to 2.5 percent of the net income of
the Company in excess of a 12 percent return on equity ("ROE"). Based upon the
advice of the Consultant and the Company's extraordinary record over the past
five years in terms of stockholder performance returns, the Committee
believesdetermined that it would be appropriate to target total cash compensation for
Mr. Coss within the first (top) quartile of cash compensation of chief
executive officers of "large cap" public companies. In choosing a base or
threshold level of performance of ROE, the Committee considered the historical
ROE and comparative information provided by the Consultant.
The Committee also concluded that a stock option grant would create added
positive incentive for Mr. Coss to continue to lead management's efforts to
sustain the Company's strong financial performance. The Committee carefully
considered the following factors in deciding to grant stock options rather than
a stock bonus as provided in the 1991 Employment Agreement, and in determining
the number of options to grant to Mr. Coss pursuant to the 1997 Chief Executive
Plan: (1) the extraordinary growth of the Company in terms of loan volume,
income, net earnings, stockholders' equity and market capitalization; (2) the
desire to provide additional long-term incentives to foster continued strong
growth in stockholder values; (3) the equity made available to other chief
executives of public companies who have developed strategies and have guided
management in the execution of such strategies to achieve a significant
increase in stockholder value; (4) Mr. Coss's equity holdings will motivate performance even if,present level of investment in
the Company; and (5) the accounting treatment of stock options which would not
involve a charge to earnings. No one factor was given more weight than another
factor by the Committee, and the Committee made a determination that an option
grant to Mr. Coss of two million shares was appropriate.
Statement Regarding Tax Policy Compliance. Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), generally limits the Company's
federal income tax deduction for compensation paid in any particular
year pretax earnings decline from prior years' levels.to certain named
executives (including the Chief Executive Officer) to $1 million, to the extent
that such compensation is not "performance-based compensation" within the
meaning of Section 162(m) and the Treasury Regulations promulgated thereunder.
Accordingly, in structuring the Company's compensation arrangement with its
Chief Executive Officer under the 1997 Chief Executive Plan, the Committee
designed an incentive bonus formula and stock option plan which are intended to
qualify as "performance-based compensation" in order to decrease the after-tax
cost of such arrangements to the Company. In compliance with Section 162(m),
the 1997 Chief Executive Plan, which provides for incentive-based compensation,
is being submitted to stockholders for approval. Mr. Coss's compensation for
1995 and 1996 is pursuant to the 1991 Employment Agreement, which is
grandfathered under the provisions of Section 162(m).
By the Compensation Committee:
W. Max McGee
Tania A. Modic
Robert S. Nickoloff
912
SHAREHOLDER RETURN COMPARISONEXISTING EMPLOYMENT AGREEMENT WITH CHIEF EXECUTIVE OFFICER
In April 1991, the Company and Mr. Coss entered into the 1991 Employment
Agreement which extended Mr. Coss's previous employment and noncompetition
agreement with the Company from January 1, 1992, through December 31, 1996. The
graph below comparesagreement provides that Mr. Coss is entitled to receive a base salary of
$400,000 per year and a bonus equal to 2.5 percent percent of the yearly percentage changeCompany's
pretax income, after deductions for bonuses paid pursuant to the Key Executive
Stock Bonus Program (described below) and certain other adjustments. The bonus
will be payable: (1) so long as the Key Executive Stock Bonus Program is in
effect, 50 percent in cash and 50 percent in Company Common Stock, initially
valued at $23.75, the cumulative total
shareholder return (dividends reinvested) onclosing price for the Company's Common Stock againston the S&P Composite-500New
York Stock IndexExchange on the day the 1991 Employment Agreement was entered into;
or (2) in all other cases, 100 percent in cash. The Key Executive Stock Bonus
Program provides that the stock price for the issuance of stock in payment of
the bonus is to be adjusted for stock dividends and other corporate events
affecting the S&P Financial Indexnumber of shares outstanding. The stock price for the issuance of
stock in payment of the stock portion of the bonus is $2.96875 per share as a
result of adjustments to reflect three separate two-for-one stock splits in the
form of stock dividends, distributed to stockholders on January 31, 1993, June
30, 1994 and October 15, 1995.
NEW EMPLOYMENT AGREEMENT WITH CHIEF EXECUTIVE OFFICER
As indicated in the Report of the Compensation Committee, the Committee
determined that it would be in the best interests of the Company to enter into
a new employment agreement to be effective after the expiration of the 1991
Employment Agreement on December 31, 1996. The Committee retained the
Consultant to advise the Committee and to assist in developing proposals for a
new employment agreement with Mr. Coss.
The Compensation Committee reached agreement with Mr. Coss at the Committee's
meeting on February 9, 1996, as to the terms of a new employment agreement to
be effective on January 1, 1997 (the "1997 Employment Agreement"). The 1997
Employment Agreement will be for a term of five years beginning January 1, 1997
and ending on December 31, 2001. The 1997 Employment Agreement provides for:
(1) an increase in base salary from $400,000 to $600,000 per year; (2) a cash
bonus to be determined pursuant to a new chief executive officer bonus and
stock option plan (the "1997 Chief Executive Plan"); and (3) the issuance to
Mr. Coss of a two million share option award pursuant to the 1997 Chief
Executive Plan.
The Compensation Committee and Mr. Coss also agreed that the terms of his
noncompetition agreement would be extended and would apply for the five-year
term of the 1997 Employment Agreement, plus one year. If retirement or a change
of control occurs during the five-year term, the noncompetition agreement will
apply from the date of such event for the remainder of the original term of the
1997 Employment Agreement, plus one year. The current noncompetition agreement
expires one year after the termination of the 1991 Employment Agreement. Under
the current agreement, in the event of a change of control, Mr. Coss has the
right to terminate the 1991 Employment Agreement within one year of the event
and to terminate the noncompetition agreement.
APPROVAL OF CHIEF EXECUTIVE CASH BONUS
AND STOCK OPTION PLAN
(ITEM 2)
INFORMATION REGARDING PLAN AND STOCKHOLDER APPROVAL
The 1997 Chief Executive Plan provides for an incentive-based formula to
determine the amount of cash bonus compensation for the Chief Executive Officer
during the term of the 1997 Employment Agreement. The 1997 Chief Executive Plan
also provides for a two million share stock option award. The primary features
of the 1997 Chief Executive Plan are summarized below. A copy of the Plan is
attached to this Proxy Statement as Exhibit A.
13
Administration of the 1997 Chief Executive Plan. The Compensation Committee
will be responsible for the administration of all performance-based
compensation arrangements under the 1997 Chief Executive Plan and will make all
determinations and appropriate certifications with respect thereto. The
Compensation Committee's authority includes the authority to: (1) determine the
type(s) of awards to be granted; (2) determine the terms and conditions of any
award; (3) amend the terms and conditions of any award and accelerate the
exercisability of options or the lapse of restrictions relating to any awards;
(4) certify in writing that the performance threshold for the cash bonus has
been attained and certify as to the computation of the cash bonus; (5)
interpret and administer the 1997 Chief Executive Plan and any instrument or
agreement or award made or entered into pursuant thereto; (6) establish, amend,
suspend or waive such rules and regulations and appoint such agents as it shall
deem appropriate for the proper administration; and (7) make any other
determination and take any other action that the Committee deems necessary or
desirable for the administration of the 1997 Chief Executive Plan.
Description of Bonus Formula. The incentive-based bonus formula provides for
an annual cash bonus equal to 2.5 percent of the net income of the Company in
excess of a 12 percent return on equity ("ROE"), using the beginning equity for
the applicable year. The Consultant advised the Compensation Committee that
continued strong financial performance by the Company in excess of a 20 percent
ROE during the period of five fiscal years commencing January 1, 1990,the 1997 Employment Agreement would result in cash
compensation in the form of base salary and ending December 31, 1994.cash bonus targeted in the top
quartile of large cap corporations. Had the bonus formula been in place in 1995
the amount of cash bonus would have been approximately $5.2 million. In the
future, if the Company's ROE is 16 percent, the formula is targeted so that the
cash bonus would fall in the median of other chief executives. The graph presentation assumes $100 investedChief
Executive will not earn any cash bonus if the ROE does not exceed 12 percent.
For a discussion of the factors considered by the Compensation Committee in
arriving at the formula for determining the cash bonus, see "Compensation
Committee Report on January 1, 1990, in Company CommonExecutive Compensation--1997 Chief Executive Plan"
beginning on page 12.
Description of Stock Option Award. The 1997 Chief Executive Plan provides for
an award of a two million share stock option. The Compensation Committee
concluded that a stock option grant would best align the S&P Composite-500 Stock Indexlong-term interests of
the Chief Executive Officer and the S&P Financial Index,stockholders to best serve the Company. The
Compensation Committee desired to create positive incentives for Mr. Coss to
continue to lead management's efforts to sustain the Company's strong financial
performance. The options provide for an exercise price equal to the fair market
value of the Company's stock on February 9, 1996, the date of grant. The amount
of the exercise price is $30.875, the closing price of the Company's stock on
the New York Stock Exchange on that date. The term of the option is for ten
years, with a five-year vesting schedule providing vesting at 20 percent per
year for each full year of service beginning in 1997. The option will also
provide for acceleration of vesting in the event of death or disability of Mr.
Coss or a change of control of the Company on the same basis as provided for
other employees of the Company who have been granted stock options. It was also
agreed that if Mr. Coss were to retire during the first two years of the
agreement, he would vest in 50 percent of the stock options, and that if
retirement were to occur during the remainder of the term, vesting would be 100
percent.
The Company intends to file a Registration Statement on Form S-8 under the
Securities Act of 1933, as amended, and listing applications with the New York
and Pacific Stock Exchanges with respect to the additional shares issuable
under options and awards granted to Mr. Coss under the 1997 Chief Executive
Plan. The option granted pursuant to the 1997 Chief Executive Plan is issued as
a non-qualified option for tax purposes. The tax consequences of non-qualified
options provide that an optionee who exercises a non-qualified option will
recognize as taxable ordinary income at the time of exercise, an amount equal
to the excess of the fair market value of the shares on the date of exercise
over the exercise price. Such amount will ordinarily be deductible by the
Company in the same year, provided that the Company satisfies certain federal
income tax information reporting requirements and certain requirements relating
to limitations on deductions in excess of $1 million per year.
14
The following table shows such values at December 31, 1994.
[insertcertain information with respect to stock appreciation graph]options
granted to the Chief Executive Officer pursuant to the 1997 Chief Executive
Plan.
NEW PLAN BENEFITS
CHIEF EXECUTIVE CASH BONUS AND STOCK OPTION PLAN
12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94
- --------------------------------------------------------------------------------------NAME AND POSITION DOLLAR VALUE ($)(1) NUMBER OF UNITS(2)
----------------- ------------------- ------------------
Green Tree Financial Corpora-
tion......................... 100 97 288 360 725 926
- --------------------------------------------------------------------------------------
S&P 500 Index................. 100 79 126 136 150 152
- --------------------------------------------------------------------------------------
S&P Financial Index........... 100 79 118 146 162 157Lawrence M. Coss................... $7,000,000 2,000,000
Chief Executive Officer
- --------
(1) Based on the market value as of March 29, 1996 of the securities underlying
the options granted as of February 9, 1996.
(2) Stock options become exercisable for 20 percent of the total number of
shares covered by the grant after each full year beginning in 1997, except
that all options become exercisable after January 1, 1997 upon a change of
control of the Company or the death or disability of the Chief Executive
Officer. Such options have an exercise price of $30.875, which was the
closing price for the Company's Common Stock on the New York Stock Exchange
on February 9, 1996, the date of grant. The options expire on February 8,
2006.
Stockholder Approval of the 1997 Chief Executive Plan. Section 162(m) of the
Code generally limits the Company's federal income tax deduction for
compensation paid in any year to $1 million per year, to the extent that such
compensation is not "performance-based compensation." In order for compensation
to be performance-based, it must generally satisfy four tests: (1) it must be
based solely on the attainment of pre-established and objective performance
goals; (2) the goals must be established and administered by a compensation
committee comprised solely of at least two independent directors; (3) the
material terms must be approved by stockholders; and (4) the committee must
certify that the goals have been met. A stock option plan will, in general,
qualify as "performance-based" compensation if (1) it has an exercise price of
not less than the fair market value of the underlying stock on the date of
grant, (2) it is granted under a plan that limits the number of shares for
which options may be granted to any participant during a specified period,
which plan is approved by a majority of the stockholders entitled to vote
thereon, and (3) it is granted by a compensation committee consisting solely of
at least two independent directors. In structuring the Company's compensation
arrangement with its Chief Executive Officer under the 1997 Chief Executive
Plan, the Compensation Committee intends both the incentive formula for
determining a cash bonus and the stock option award to qualify as "performance-
based compensation" under Section 162(m) of the Code in order to decrease the
after-tax cost of such arrangements to the Company. There can be no assurance
that the Company's performance-based compensation arrangements with its Chief
Executive Officer will in fact qualify as such under Section 162(m) of the Code
or that the tax deductibility of compensation paid and stock options granted
pursuant thereto will not in fact be limited by the $1 million statutory cap on
deductible executive compensation.
The performance-based portions of the 1997 Chief Executive Plan with the
Chief Executive Officer are submitted for approval by a majority of holders of
Common Stock present or represented and entitled to vote at the 1996 Annual
Meeting. In the event the stockholders do not approve the 1997 Chief Executive
Plan, the 1997 Employment Agreement will be terminated and will have no further
effect.
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE 1997
CHIEF EXECUTIVE PLAN. THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE
SHARES OF THE COMPANY'S COMMON STOCK OUTSTANDING AND ENTITLED TO VOTE WILL BE
NECESSARY FOR APPROVAL OF THE 1997 CHIEF EXECUTIVE PLAN. PROXIES WILL BE VOTED
IN FAVOR OF SUCH PROPOSAL UNLESS OTHERWISE SPECIFIED.
15
OTHER INFORMATION RELATING TO DIRECTORS
AND EXECUTIVE OFFICERS
CHANGE OF CONTROL AGREEMENTS
The 1991 Employment Agreement with the Chief Executive Officer provides that
in the event Mr. Coss terminates his employment within one year after a
Critical Event (defined as the sale of all or substantially all of the assets
of the Company to, or the acquisition of more than 50 percent of the issued and
outstanding voting stock of the Company by, any person or group of persons
acting in concert, or if the Company is merged into another corporation or is
consolidated with another corporation), the Company shall pay the largest
amount that does not constitute an "excess parachute payment" within the
meaning of Section 280G of the Code, as a termination payment, and Mr. Coss may
revoke his noncompetition agreement. The 1997 Employment Agreement grants Mr.
Coss the right to terminate his employment within two years of a Critical
Event, provided that the term of the noncompetition agreement will remain in
effect for the balance of the term of the 1997 Employment Agreement, plus one
year. The 1997 Employment Agreement also provides for a termination payment
calculated in the same manner, provided that the amount thereof is subject to a
cap of 0.5 percent of the valuation placed on the entire Company in connection
with such Critical Event.
The Company has also entered into an agreement with Richard G. Evans,
Executive Vice President and Secretary, which provides for specified financial
arrangements upon termination of employment with the Company after a change in
control. Generally, the agreement was for an initial one-year term and
thereafter is automatically renewable for additional one-year terms unless the
Company gives notice to Mr. Evans at least 90 days prior to each December 31
that it does not wish to extend the agreement; provided, however, that
notwithstanding any such notice by the Company not to extend, the agreement
will continue for a period of 24 months beyond its term if a change of control
of the Company occurs during such term. The agreement provides that after a
change in control of the Company, if Mr. Evans leaves the Company's employ
either voluntarily or involuntarily (other than a termination for cause or due
to death or disability), he is entitled to compensation equal to three times
the sum of (i) his annual base salary, and (ii) an amount equal to the product
of his annual base salary multiplied by the percentage that the discretionary
bonus for the last complete fiscal year bears to the annual base salary for the
prior fiscal year. The agreement also requires the payment of all legal fees
and expenses incurred by Mr. Evans in connection with such a termination of
employment.
PENSION PLAN
Employees of the Company participate in a noncontributory pension plan (the
"Pension Plan"). The Pension Plan is a defined benefit plan qualified under the
Internal Revenue Code (the "Code"). To be eligible to receive benefits under
the Pension Plan, an employee must be at least 21 years of age, at the time
employment commences, have completed
one full year of employment, and have worked for the Company for a minimum of
1,000 hours in the preceding 12 months.
10
Normal retirement age under the Pension Plan is generally age 65 and benefits
are reduced or increased for retirement prior to or after age 65. The formula
to determine the amount of benefits payable to an employee upon normal
retirement is as follows: 1.2%1.2 percent of monthly average earnings up to covered
compensation plus 1.75%1.75 percent of monthly average earnings in excess of covered
compensation, multiplied by service up to 35 years. Monthly average earnings is
the employee's total pay during the 60 nonconsecutive months of the employee's
last 120 months of employment with the Company which give the highest average
compensation. None of the Chief Executive Officer's stock bonus payments count
as compensation under the Pension Plan. Covered compensation is the 35-year
average of the social security wage base, varying by year of birth. The normal
Pension Plan option, upon which the funding assumptions are based, is an option
that provides that the participant will receive benefits for his or her
lifetime. Section 415 of the Code limits the annual benefit which may be paid
under a qualified plan. The annual benefit limit for an individual age 65 as of
December 31, 1994,1995, was $118,800.$120,000. The Board of Directors adopted a Restated
Supplemental Pension Plan
16
in September 1987 pursuant to which the Company will pay any benefits lost due
to qualified plan limitations for the executive officers listed on page 56 and
certain other key officers of the Company.
On December 31, 1994,1995, all of the individuals named in the preceding Summary
Compensation Table were participants in the Pension Plan. Mr. Coss has accrued
2420 years of service; Mr. Potts, 1 year;2 years; Mr. Hegstrom, 15Evans, 11 years; Mr. Brink, 910
years; and Mr. Evans, 10Zeller, 3 years.
The following table below assumes a formula for normal retirement as described
above.above assuming all income is above covered compensation.
AVERAGE
ANNUAL
ESTIMATED ANNUAL PENSION BASED ON YEARS
EARNINGSAVERAGE OF SERVICE AT NORMAL RETIREMENT DATE
(HIGHESTNNUAL EARNINGSA ------------------------------------------------------
(IGHEST 5 ----------------------------------------------------
YEARS) 10H 15 20 25 30 35
- ----------------- ---------- -------- ---------- ---------- ---------- ----------
$5,000,000............... $873,500 $1,310,500 $1,747,500 $2,184,000 $2,621,000
4,000,000............... 698,500 1,048,000 1,397,500 1,746,500 2,096,000
3,000,000............... 523,500 785,500 1,047,500 1,309,000 1,571,000
2,000,000............... 348,500 523,000 697,500 871,500 1,046,000
1,500,000............... 261,000 391,500 522,500 653,000 783,500
1,000,000............... 173,500 260,500 347,500 434,000 521,000
500,000............... 86,000 129,000 172,500 215,500 258,500
400,000............... 68,500 103,000 137,500 171,500 206,000
300,000............... 51,000 76,500 102,500 128,000 153,500
225,000............... 38,000 57,000 76,000 95,000 114,000
200,000............... 33,500 50,500 67,500 84,000 101,000$5,000,000.............. $1,312,500 $1,750,000 $2,187,500 $2,625,000 $3,062,500
4,000,000.............. 1,050,000 1,400,000 1,750,000 2,100,000 2,450,000
3,000,000.............. 787,500 1,050,000 1,312,500 1,575,000 1,837,500
2,000,000.............. 525,000 700,000 875,000 1,050,000 1,225,000
1,500,000.............. 393,750 525,000 656,250 787,500 918,750
1,000,000.............. 262,500 350,000 437,500 525,000 612,500
500,000.............. 131,250 175,000 218,750 262,500 306,250
400,000.............. 140,000 175,000 210,000 245,000
300,000.............. 78,750 105,000 131,250 157,500 183,750
225,000.............. 59,060 78,750 98,440 118,130 137,810
200,000.............. 52,500 70,000 87,500 105,000 122,500
PROPOSAL TO APPROVE A REORGANIZATION OF THE COMPANY TO CHANGE ITS
STATE OF INCORPORATION FROM MINNESOTA TO DELAWARE
The Board of Directors has unanimously approved and recommends for
shareholder approval a proposal to change the Company's state of incorporation
from Minnesota to Delaware (the "Reincorporation"). If approved by the
shareholders, the Reincorporation will be effected by a merger transaction (the
"Merger") in which the Company will be merged with and into Green Tree
Financial Corporation, a Delaware corporation and a wholly owned subsidiary of
the Company ("Green Tree Delaware"), pursuant to the terms of an Agreement and
Plan of Merger and Reorganization (the "Merger Agreement"). Reincorporation in
Delaware will allow the Company to take advantage of certain provisions of the
corporate laws of Delaware. The purposes and effects of the proposed
transaction are summarized below.
The Reincorporation requires approval by the affirmative vote of a majority
of all of the outstanding shares of the Common Stock of the Company. Upon
shareholder approval of the Reincorporation and upon approval of appropriate
articles or certificates of merger by the Secretaries of State of the States of
Minnesota and Delaware, the Company will be merged with and into Green Tree
Delaware pursuant to the Merger
11
Agreement, resulting in a change in the Company's state of incorporation. The
Company will then be subject to the Delaware General Corporation Law and the
Certificate of Incorporation and Bylaws set forth in Appendices B and C,
respectively.
It is anticipated that the Merger will become effective as soon as
practicable following shareholder approval. However, the Merger Agreement
provides that the Merger may be abandoned by the Board of Directors of the
Company prior to the effective date of the Merger as specified in the Merger
Agreement (the "Effective Time") either before or after shareholder approval.
In addition, the Merger Agreement may be amended prior to the Effective Time,
either before or after shareholder approval; however, the Merger Agreement may
not be amended after shareholder approval if such amendment would, in the
judgment of the Board of Directors of the Company, have a material adverse
effect on the rights of such shareholders or in any manner violate applicable
law.
Green Tree Delaware, which was incorporated on March 21, 1995 for the sole
purpose of effecting the Merger, has not engaged in any business to date and
has no assets. Approval of the Reincorporation and the merger of the Company
into Green Tree Delaware will not result in any change in the name, business,
management, location of the principal executive offices or other facilities,
capitalization, assets or liabilities of the Company. The Company's employee
benefit arrangements will be continued by Green Tree Delaware upon the same
terms and subject to the same conditions. In management's judgment, no
presently contemplated activities of the Company will be either favorably or
unfavorably affected in any material respect by adoption of the Reincorporation
proposal. Shareholders should consider, however, that the corporation law of
Delaware and the corporation law of Minnesota differ in a number of significant
respects, including differences pertaining to the rights of shareholders, and
should carefully review the discussion of certain of these differences under
"Certain Significant Differences Between the Corporation Laws of Minnesota and
Delaware" set forth below.
The following summary of the Reincorporation does not purport to be a
complete description of the Reincorporation proposal and is qualified in its
entirety by reference to the Merger Agreement, the Certificate of Incorporation
of Green Tree Delaware, and the Bylaws of Green Tree Delaware, copies of which
are attached hereto as Appendix A, Appendix B and Appendix C, respectively.
CONVERSION OF SHARES AND EXCHANGE OF CERTIFICATES.
At the Effective Time, each outstanding share of Company Common Stock, $.01
par value, will automatically be converted into one share of Common Stock, $.01
par value, of Green Tree Delaware (other than shares as to which the holder
thereof has properly exercised appraisal rights under Minnesota law). From and
after the Effective Time, certificates representing shares of capital stock of
Green Tree Delaware will be deemed to have been issued without regard to the
date or dates on which certificates representing shares of capital stock are
physically surrendered for exchange or certificates representing shares of
capital stock of Green Tree Delaware are actually issued. Each certificate
representing shares of capital stock outstanding immediately prior to the
Effective Time will, from and after the Effective Time, be deemed for all
corporate purposes (except as hereinafter described) to represent the same
number of shares of capital stock of Green Tree Delaware.
Each stock option to purchase shares of the Company's Common Stock granted by
the Company under any stock option plan or similar plan of the Company
outstanding immediately prior to the Effective Time of the Merger shall, by
virtue of the Merger and without any action on the part of the holder thereof,
be converted into and become a stock option to purchase, upon the same terms
and conditions, the same number of shares of Green Tree Delaware Common Stock.
The exercise price per share under each of such options shall be equal to the
exercise price per share thereunder immediately prior to the Effective Time of
the Merger. Under the terms of the Merger Agreement, any stock option plan of
the Company will be assumed by and continue to be the plan of Green Tree
Delaware. All stock options granted thereunder, outstanding immediately prior
to the Effective Time of the Merger, shall be deemed to provide for the
purchase of Green Tree Delaware's capital stock.
12
It will not be necessary for shareholders of the Company to exchange their
existing stock certificates for stock certificates of Green Tree Delaware;
outstanding certificates of the Company should not be destroyed or sent to the
Company. Following the Reincorporation, delivery of previously outstanding
stock certificates of the Company will constitute "good delivery" in connection
with sales through a broker, or otherwise, of shares of Green Tree Delaware.
Shares of Green Tree Delaware's common stock will be traded on the New York
Stock Exchange and Pacific Stock Exchange, where shares of the Company's common
stock are presently traded.
PRINCIPAL REASONS FOR CHANGING THE COMPANY'S STATE OF INCORPORATION.
The Company's Board of Directors believes that the Reincorporation will
provide flexibility for both the management and business of the Company.
For many years Delaware has followed a policy of encouraging incorporation in
Delaware and, in furtherance of that policy, has adopted comprehensive, modern
and flexible corporate laws which are periodically updated and revised to meet
changing business needs. As a result, many major corporations have initially
chosen Delaware for their domicile or have subsequently reincorporated in
Delaware in a manner similar to that proposed by the Company. Because of
Delaware's significance as the state of incorporation for many major
corporations, the Delaware judiciary has become particularly familiar with
matters of corporate law, and a substantial body of court decisions has
developed construing Delaware's corporation laws. As a consequence, Delaware
corporate law has been, and is likely to continue to be, interpreted and
explained in a number of significant court decisions, a circumstance which will
provide greater predictability with respect to the Company's legal affairs.
In contrast, the Minnesota Business Corporation Act, to which the Company is
presently subject, was only recently enacted (becoming generally effective on
July 1, 1981) and has not been the subject of a significant number of judicial
decisions interpreting its provisions. Further, in the past several years, the
Minnesota legislature has amended the Act in several significant respects after
providing only limited time periods for the public to assess and furnish
comments on the proposed legislation. The Board of Directors believes the
interests of the shareholders are better served by reincorporating in a state
where legislative changes are likely to be adopted after greater deliberation
and after public hearing and review of proposed legislation affecting
corporations and shareholders.
CERTAIN SIGNIFICANT DIFFERENCES BETWEEN THE CORPORATION LAWS OF MINNESOTA AND
DELAWARE.
The rights and preferences of the holders of the Company's capital stock are
presently governed by the Minnesota Business Corporations Act. Upon the
Reincorporation, these rights and preferences will be governed by the Delaware
General Corporation Law. Although Delaware and Minnesota corporation laws
currently in effect are similar in many respects, certain differences will
affect the rights of Green Tree Delaware's shareholders if the Merger is
consummated. The following discussion summarizes certain differences considered
by management to be significant and is qualified in its entirety by reference
to the full text of the Minnesota and Delaware laws.
TREASURY SHARES UNDER DELAWARE LAW.
The Minnesota Business Corporation Act does not allow treasury shares. Under
the Delaware General Corporation Law the Company may hold treasury shares.
Treasury shares under Delaware law may be held, sold, lent, pledged or
exchanged by the Company. Such shares, however, are not outstanding shares and
therefore do not receive any dividends and do not have voting rights.
13
ANTI-TAKEOVER LEGISLATION.
Both the Minnesota Business Corporation Act and the Delaware General
Corporation Law contain provisions intended to protect shareholders from
individuals or companies attempting a takeover of a corporation in certain
circumstances. The anti-takeover provisions of the Minnesota Business
Corporation Act and the Delaware General Corporation Law differ in a number of
respects, and it is not practical to summarize all such differences here.
However, the following is a summary of certain significant differences.
Control Share Acquisition.
The Minnesota control share acquisition statute establishes various
disclosure and shareholder approval requirements to be met by individuals or
companies attempting a takeover. Delaware has no comparable provision. The
Minnesota statute applies to an "issuing public corporation." An "issuing
public corporation" is one which is incorporated under or governed by the
Minnesota Business Corporation Act and has at least fifty shareholders. The
Company is subject to the statute; Green Tree Delaware, because it is a
Delaware corporation, will not be subject to the statute.
The Minnesota statute requires disinterested shareholder approval for any
acquisition of shares of an "issuing public corporation" which results in the
"acquiring person" owning more than a designated percentage of the outstanding
shares of such corporation. Shareholders which exceed certain share ownership
thresholds whose shares are acquired without shareholder approval lose their
voting rights and are subject to certain redemption privileges of the
corporation. Such shares regain their voting rights only if the acquiring
person discloses certain information to the corporation and such voting rights
are granted by the shareholders at a special or annual meeting of the
shareholders. The Minnesota control share acquisition statute applies unless
the "issuing public corporation" opts out of the statute in its articles of
incorporation or bylaws. The Company has not opted out of such provisions.
Business Combinations.
While there is no Delaware statute comparable to the Minnesota control share
acquisition statute, both Minnesota and Delaware have business combination
statutes that are intended primarily to deter highly leveraged takeover bids
which propose to use the target's assets as collateral for the offeror's debt
financing and to liquidate the target, in whole or in part, to satisfy
financing obligations. Proponents of the business combination statute argue
that such takeovers have a number of abusive effects, such as adverse effects
on the community and employees, when the target is broken up. Further,
proponents argue that if the offeror can wholly finance its bid with the
target's assets, that fact suggests that the price offered is not fair in
relation to the value of the company, regardless of the current market price.
The Minnesota statute provides that an issuing public corporation (as
described above with respect to the Minnesota control share acquisition
statute) may not engage in certain business combinations with any person that
acquires beneficial ownership of 10 percent or more of the voting stock of that
corporation (i.e., an interested shareholder) for a period of four years
following the date that the person became a ten percent shareholder (the share
acquisition date) unless, prior to that share acquisition date, a committee of
the corporation's disinterested directors approve either the business
combination or the acquisition of shares.
Only defined types of "business combinations" are prohibited by the Minnesota
statute. In general, the definition includes: any merger or exchange of
securities of the corporation with the interested shareholder; certain sales,
transfers, or other disposition of assets of the corporation to an interested
shareholder; transfers by the corporation to interested shareholders of shares
that have a market value of five percent or more of the value of all
outstanding shares, except for a pro rata transfer made to all shareholders;
any liquidation or dissolution of, or reincorporation in another jurisdiction
of, the corporation which is proposed by the interested shareholder; certain
transactions proposed by the interested shareholder or any affiliate or
associate of the interested shareholder that would result in an increase in the
proportion of shares entitled to vote owned by the interested shareholder, and
transactions whereby the interested shareholder
14
receives the benefit of loans, advantages, guarantees, pledges, or other
financial assistance or tax advances or credits from the corporation.
For purposes of selecting a committee, a director or person is
"disinterested" if the director or person is neither an officer nor an
employee, nor has been an officer or employee within five years preceding the
formation of the committee of the issuing public corporation, or of a related
corporation. The committee must consider and act on any written, good faith
proposal to acquire shares or engage in a business combination. The committee
must consider and take action on the proposal and within 30 days render a
decision in writing regarding the proposal.
In contrast to the Minnesota provisions, the Delaware statute provides that
if a person acquires fifteen percent or more of the voting stock of a Delaware
corporation, the person is designated an interested stockholder and the
corporation may not engage in certain business combinations with such person
for a period of three years. However, an otherwise prohibited business
combination may be permitted if one of three conditions is met. First, if prior
to the date the person became an interested stockholder, the board of directors
approved either the business combination or the transaction which resulted in
the stockholder becoming an interested stockholder, then the business
combination is permitted. Second, a business combination is permitted if the
tender offer or other transaction pursuant to which the person acquires fifteen
percent stock ownership is attractive enough such that the interested
stockholder is able to acquire ownership in the same transaction of at least 85
percent of the outstanding voting stock (excluding for purposes of determining
the number of shares outstanding those shares owned by directors who are also
officers and shares owned by certain employee stock ownership plans (ESOPs)).
Finally, the business combination is permissible if approved by the board and
authorized at an annual or special meeting of stockholders, and not by written
consent, by the affirmative vote of two-thirds of the outstanding voting shares
held by disinterested stockholders.
As in Minnesota, only certain Delaware corporations are subject to the
business combination provisions. A corporation is subject to the statute if it
is incorporated under the laws of Delaware and has a class of voting stock that
is listed on a national securities exchange, quoted on Nasdaq, or held of
record by more than 2,000 shareholders. Green Tree Delaware will be subject to
the statute.
Only certain "business combinations" are prohibited under Delaware law. A
business combination is defined broadly to include any of the following: any
merger or consolidation with the interested stockholder; any sale, transfer or
other disposition of assets to the interested stockholder if the assets have a
market value equal to or greater than ten percent of the aggregate market value
of all of the corporation's assets; any transfer of stock of the corporation to
the interested stockholder, except for transfers in a conversion or exchange or
a pro rata distribution; and any receipt by the interested stockholder of any
loans, advances, guarantees, pledges, and other financial benefits, except in
connection with a pro rata transfer.
The Delaware provisions do not apply to any business combination in which the
corporation, with the support of a majority of those directors who were serving
as directors before any person became an interested stockholder, proposes a
merger, sale, lease, exchange or other disposition of at least fifty percent of
its assets, or supports (or does not oppose) a tender offer for at least fifty
percent of its voting stock. In such a case, all interested stockholders are
released from the three year prohibition and may compete with the corporation-
sponsored transaction.
A comparison of the Delaware and Minnesota statutes reveals that Minnesota
law is somewhat more restrictive with respect to a prospective takeover attempt
than Delaware. In Minnesota, an interested shareholder is one who owns ten
percent of the outstanding shares while in Delaware fifteen percent is the
threshold. An interested shareholder must wait four years in Minnesota to
engage in prohibited business combinations, while the waiting period is only
three years in Delaware. Minnesota also has a potentially broader definition of
a business combination which encompasses a larger variety of transactions.
15
Another difference between the two statutes is the method by which prohibited
transactions become permissible. In Delaware, an otherwise prohibited business
combination may be permitted by board approval, by stockholder approval, or by
an acquisition of 85 percent of the outstanding shares of voting stock. In
Minnesota, a prohibited transaction is only permitted by advance board
committee approval. In addition, the Delaware statute provides that if the
corporation proposes a merger or sale of assets, or does not oppose a tender
offer, all interested stockholders are released from the three year prohibition
and may compete with the company-sponsored transaction in certain
circumstances. The Minnesota statute does not have a comparable provision.
Both the Minnesota and Delaware provisions permit a corporation to "opt out"
of the business combination statute by electing to do so in its articles or
certificate of incorporation or bylaws. Neither the Restated and Amended
Articles of Incorporation (the "Articles") nor the Bylaws of the Company
contain such an "opt out" provision. Similarly, neither the Certificate of
Incorporation (the "Certificate") nor the Bylaws of Green Tree Delaware contain
such an "opt out" provision.
Other Anti-Takeover Provisions.
The Minnesota Business Corporation Act includes three other provisions
relating to takeovers that are not included in the Delaware General Corporation
Law. These provisions address a corporation's use of golden parachutes,
greenmail and the standard of conduct of the Board of Directors in connection
with the consideration of takeover proposals.
The Minnesota Business Corporation Act contains a provision which prohibits a
publicly-held corporation from entering into or amending agreements (commonly
referred to as golden parachutes) that increase current or future compensation
of any officer or director during any tender offer or request or invitation for
tenders.
The Minnesota Business Corporation Act also contains a provision which limits
the ability of a corporation to pay greenmail. The statute provides that a
publicly-held corporation is prohibited from purchasing or agreeing to purchase
any shares from a person who beneficially owns more than five percent of the
voting power of the corporation if the shares had been beneficially owned by
that person for less than two years, and if the purchase price would exceed the
market value of those shares. However, such a purchase will not violate the
statute if the purchase is approved at a meeting of the shareholders by a
majority of the voting power of all shares entitled to vote or if the
corporation's offer is of at least equal value per share and to all holders of
shares of the class or series and to all holders of any class or series into
which the securities may be converted.
The Minnesota Business Corporation Act authorizes the board of directors, in
considering the best interests of the corporation with respect to a proposed
acquisition of an interest in the corporation, to consider the interest of the
corporation's employees, customers, suppliers and creditors, the economy of the
state and nation, community and social considerations and the long-term as well
as short-term interests of the corporation and its shareholders, including the
possibility that these interests may be best served by the continued
independence of the corporation.
ANTI-TAKEOVER PROVISIONS IN THE COMPANY'S ARTICLES AND GREEN TREE DELAWARE'S
CERTIFICATE.
The Company's Articles presently contain three provisions which the Board of
Directors believe provide the Company and its shareholders with reasonable
protection from abuses or inequitable treatment that may arise when companies
are faced with a threat of change of control or with potential transactions
with major shareholders. These provisions make more difficult the acquisition
of control of the Company by means of a tender offer, open market purchase,
proxy contest or otherwise, that are not approved by the Board of Directors.
The purpose of these provisions is to discourage certain types of transactions
which may involve an actual or threatened change of control of the Company, and
to encourage persons seeking to acquire
16
control of the Company to consult first with the Board of Directors to
negotiate the terms of any proposed business combination or offer. The
provisions are designed to reduce the vulnerability of the Company to an
unsolicited proposal for a takeover that does not contemplate the acquisition
of all outstanding shares or is otherwise unfair to stockholders of the
Company, or an unsolicited proposal for the restructuring or sale of all or
part of the Company.
The Company believes that, as a general rule, such proposals would not be in
the best interests of it or its shareholders. These provisions, individually
and collectively, may make more difficult, and may discourage, a merger, tender
offer or proxy contest, even if such transaction or occurrence may be favorable
to the interests of the shareholders, and may delay or frustrate the assumption
of control by a holder of a large block of Company stock and the removal of
incumbent management, even if such removal might be beneficial to shareholders.
Furthermore, these provisions may deter or could be utilized to frustrate a
future takeover attempt which is not approved by the incumbent Board of
Directors, but which the holders of a majority of the shares may deem to be in
their best interests or in which stockholders may receive a substantial premium
for their stock over prevailing market prices of such stock. By discouraging
takeover attempts, these provisions might have the incidental effect of
inhibiting certain changes in management (some or all of the members of which
might be replaced in the course of a change of control) and also the temporary
fluctuations in the market price of the stock which often results from actual
or rumored takeover attempts.
Set forth below are summary descriptions of the provisions contained in the
Company's Articles. Such descriptions are intended as a summary only. Under the
Reincorporation proposal, Articles 8A, 8B and 9 of the Company's Articles will
be adopted without change in Articles 8A, 8B and 9 of the Certificate of Green
Tree Delaware.
Fair Price Provision.
Article 8A of the Company's Articles requires the approval of at least 80% of
the combined voting power of the then outstanding shares of voting stock,
voting together as a single class, as a condition to certain business
combinations, except, generally speaking, if the shareholders of the Company
receive a "fair price," as specified in Section 8B of the Company's Articles,
or if the business combination shall have been approved by a majority of
"continuing directors," as defined in the Company's Articles. The purpose of
this supermajority and fair price provision is to attempt to protect
shareholders who do not tender their stock in a takeover bid by assuring them a
minimum price for their shares in any subsequent merger or other freezeout
transaction. It is designed to relieve the pressure on shareholders to tender
and to create both procedural and substantive protections in the event of a
second-step freezeout. It is not intended to deter a financially strong bidder
willing to make a tender offer for any and all of the Company's shares. Under
the Company's Articles, the affirmative vote of the holders of at least 80% of
the combined voting power of the then outstanding voting stock, voting as a
single class, is required to amend, alter or adopt any provision inconsistent
with, or repeal, existing Article 8.
Anti-Greenmail Provision.
Article 9 of the Company's Articles contains an anti-greenmail provision,
intended to preclude the Company from repurchasing large blocks of its stock at
a premium price. "Greenmail" situations involving other corporations have
provided substantial profits for the "greenmailer" to the detriment of other
shareholders left with securities which may be diminished in value. Article 9
of the Company's Articles prohibits the Company from buying back shares of its
common stock from anyone holding more than 10% of the combined voting power of
the then outstanding common stock of the Company at a per-share price above
fair market value (as defined therein) as of the time of such purchase, unless
such purchase has been approved by the affirmative vote of the holders of at
least two-thirds of the shares of common stock voted thereon by "disinterested
shareholders," as defined therein.
17
SHAREHOLDER RIGHTS PLAN.
On August 16, 1990, the Company's Board of Directors approved and adopted an
amended Shareholder Rights Plan ("Plan"). The plan is designed to protect
shareholder interests in the event that coercive or unfair takeover tactics are
directed against the Company, including provisions to protect shareholders
against offers that do not treat all shareholders equally, the acquisition in
the open market of shares constituting control without offering fair value to
all shareholders, and other coercive takeover tactics that could impair the
Board's ability to represent shareholder interests fully. Upon the occurrence
of certain events described below, each holder of Company common stock shall
have the right to purchase one-hundredth of a share of Junior Participating
Preferred Stock, $.01 par value, of the Company, at a price of $125, subject to
adjustments. The events which make such rights exercisable are: (i) ten
business days following the public announcement that a person or group has
acquired 20% or more of the Company's common stock; or (ii) ten business days
after the commencement of a tender offer or exchange offer by any person or
group that would result in ownership of 20% or more of the Company's common
stock; or (iii) ten business days following a determination by the Independent
Directors of the Company's Board of Directors that a person or group owning 10%
or more of the outstanding common stock is likely to take action for short-term
benefit of such person or group to the detriment of the long-term interests of
the Company and its shareholders. The Company's amended Shareholder Rights Plan
is designed to encourage an acquiror to negotiate with the Board of Directors
of the Company, rather than proceeding unilaterally with a takeover, and to
dissuade the acquiror from employing abusive takeover tactics. Unless redeemed
earlier, the rights expire on October 31, 1995.
This description is qualified in its entirety by reference to the Summary of
Rights to Purchase Preferred Shares and by the Amended and Restated Rights
Agreement which has been filed with the Securities and Exchange Commission as
an Exhibit to a Registration Statement on Form 8-A dated October 17, 1985, as
amended by Form 8 dated August 20, 1990 (a copy of the Amended and Restated
Rights Agreement is available free of charge from the Rights Agent, Norwest
Bank Minnesota, N.A., whose address is 161 North Concord Exchange, South Saint
Paul, Minnesota 55075-0738. The telephone number is (612) 450-4064).
If the Reincorporation proposal is approved, the Company's Board of Directors
intends to adopt resolutions necessary and appropriate to amend the Company's
existing Shareholder Rights Plan to make it effective under Delaware law. At
present, the Company has no plans or intention to make any substantive change
in the plan, to extend its effective date, or to adopt a new plan upon the
expiration of the Plan. The Board of Directors does, however, reserve the right
in the future to adopt a new or different plan if circumstances should, in the
judgment of the Board, so warrant.
DIRECTORS' STANDARD OF CARE AND PERSONAL LIABILITY.
Minnesota law provides that a director shall discharge the director's duties
in good faith, in a manner the director reasonably believed to be in the best
interests of the corporation, and with the care an ordinarily prudent person in
a like position would have exercised under similar circumstances. A director
who so performs those duties may not be held liable by reason of being a
director or having been a director of the corporation.
Delaware law provides that the board of directors has the ultimate
responsibility for managing the business affairs of a Delaware corporation. In
discharging this function, Delaware law holds directors to fiduciary duties of
care and loyalty to the corporation and its stockholders. Delaware courts have
held that the duty of care requires the exercise of an informed business
judgment. An informed business judgment means that the directors have informed
themselves of all material information reasonably available to them. Having
become so informed, they then must act with requisite care in the discharge of
their duties. Liabilities of directors of a Delaware corporation to the
corporation or its stockholders for breach of the duty of care requires a
finding by the court that the directors were grossly negligent in the decision-
making context. The duty of loyalty requires that, in making a business
decision, directors act in good faith and in the honest belief that the action
taken was in the best interest of the corporation.
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LIMITATION OR ELIMINATION OF DIRECTOR'S PERSONAL LIABILITY.
Minnesota law provides that if the articles of incorporation so provide, the
personal liability of a director for breach of fiduciary duty as a director may
be eliminated or limited, but that the articles may not limit or eliminate such
liability for (a) any breach of the directors' duty of loyalty to the
corporation or its shareholders, (b) acts or omissions not in good faith or
that involve intentional misconduct or a knowing violation of law, (c) the
payment of unlawful dividends, stock repurchases or redemptions, (d) any
transaction in which the director received an improper personal benefit, (e)
certain violations of the Minnesota securities laws, and (f) any act or
omission occurring prior to the date when the provision in the articles
eliminating or limiting liability becomes effective. The Company's Restated and
Amended Articles of Incorporation ("Articles") contain a provision eliminating
the personal liability of its directors for breach of fiduciary duty as a
director, subject to the foregoing limitations.
Delaware law provides that if the certificate of incorporation so provides,
the personal liability of a director for breach of fiduciary duty as a director
may be eliminated or limited, but that the liability of a directors is not
limited or eliminated for (a) any breach of the directors' duty of loyalty to
the corporation or its shareholders, (b) acts or omissions not in good faith or
involving intentional misconduct or a knowing violation of law, (c) the payment
of unlawful dividends, stock repurchases or redemptions, or (d) any transaction
in which the director received an improper personal benefit. Green Tree
Delaware's Certificate of Incorporation ("Certificate") contains a provision
eliminating the personal liability of its directors for breach of fiduciary
duty as a director, subject to the foregoing limitations.
The Company is not aware of any pending or threatened litigation to which the
limitation of directors' liability would apply.
INDEMNIFICATION.
Minnesota law generally provides for mandatory indemnification of persons
acting in an official capacity on behalf of the corporation if such a person
acted in good faith, received no improper personal benefit, acted in a manner
the person reasonably believed to be in or not opposed to the best interest of
the corporation and, in the case of a criminal proceeding, had no reasonable
cause to believe that the conduct was unlawful.
Delaware law permits a corporation to indemnify officers, directors,
employees or agents and expressly provides that the indemnification provided
for therein shall not be deemed exclusive of any indemnification right provided
under any bylaw, vote of shareholders or disinterested directors or otherwise.
Delaware law permits indemnification against expenses and certain other
liabilities arising out of legal actions brought or threatened against parties
entitled to indemnity for their conduct on behalf of the corporation, provided
that each such person acted in good faith and in a manner such person
reasonably believed was in or not opposed to the best interests of the
corporation. Indemnification is available in a criminal action only if the
person seeking indemnity had no reasonable cause to believe that the person's
conduct was unlawful. Delaware law does not allow indemnification for directors
in the case of an action by or in the right of the corporation (including
stockholder derivative suits) as to which such director shall have been
adjudged to be liable to the corporation unless indemnification (limited to
expenses) is ordered by a court.
The bylaws of the Company provide for indemnification to the full extent
provided by Minnesota law. The bylaws of Green Tree Delaware also provide for
indemnification to the full extent permitted by Delaware law.
STOCKHOLDER VOTING.
Under both Minnesota law and Delaware law, action on certain matters,
including the sale, lease or exchange of all or substantially all of the
corporation's property or assets, mergers, and consolidations and voluntary
dissolution, must be approved by the holders of a majority of the outstanding
shares. In addition, both states' laws provide that the articles of
incorporation may provide for a supermajority of the voting power of the
outstanding shares to approve such extraordinary corporate transactions.
19
APPRAISAL RIGHTS IN CONNECTION WITH CORPORATE REORGANIZATIONS AND OTHER
ACTIONS.
Under Minnesota law and Delaware law, shareholders have the right, in some
circumstances, to dissent from certain corporate transactions by demanding
payment in cash for their shares equal to the fair value as determined by
agreement with the corporation or by a court in an action timely brought by the
dissenters. Minnesota law, in general, affords dissenters' rights upon certain
amendments to the articles that materially and adversely affect the rights or
preferences of the shares of the dissenting shareholder, upon the sale of
substantially all corporate assets, and upon merger or exchange by a
corporation, regardless of whether the shares of the corporation are listed on
a national securities exchange or widely held.
Delaware law allows for dissenters' rights only in connection with certain
mergers or consolidations. No such appraisal rights exist, however, for
corporations whose shares are listed on a national securities exchange or held
of record by more than 2,000 stockholders unless the certificate of
incorporation provides otherwise (the Green Tree Delaware Certificate does not
provide otherwise) or the shareholders are to receive in the merger or
consolidation anything other than (a) shares of stock of the corporation
surviving or resulting from such merger or consolidation, (b) shares of stock
of any other corporation which at the effective date of the merger or
consolidation will be either listed on a national securities exchange or held
of record by more than 2,000 shareholders, (c) cash in lieu of fractional
shares of the corporation described in the foregoing clauses (a) and (b), or
(d) any combination of (a), (b), or (c).
The procedures for asserting dissenters' rights in Delaware impose most of
the initial costs of such assertion on the dissenting shareholder, whereas the
Minnesota procedures pose little financial risk to the dissenting shareholder
in demanding payment in excess of the amount the Corporation determined to be
the fair value of its shares.
ACTION BY DIRECTORS WITHOUT A MEETING.
Minnesota and Delaware law each permit directors to take unanimous written
action without a meeting in an action otherwise required or permitted to be
taken at a board meeting. Minnesota law further provides that a corporation's
articles may provide for such written action, other than an action requiring
stockholder approval, by the number of directors that would be required to take
the same action at a meeting of the board at which all directors were present.
The Company's Articles contain such a provision. Delaware law contains no such
provision and thus written actions by the directors of Green Tree Delaware must
be unanimous.
Minnesota law also provides that if the articles or bylaws so provide, a
director may give advance written consent or opposition to a proposal to be
acted on at a board meeting; however, such consent or opposition of a director
not present at a meeting does not constitute presence for determining the
existence of a quorum. The Company's Articles do not contain such a provision.
Delaware law contains no advance written consent or opposition provision.
CUMULATIVE VOTING FOR DIRECTORS.
Minnesota law provides that each stockholder entitled to vote for directors
has the right to cumulate those votes in the election of directors by giving
written notice of intent to do so, unless the corporation's articles of
incorporation provide otherwise. The Company's Articles prohibit such
accumulation of votes in elections of directors. Under Delaware law, no such
cumulative voting exists, unless the certificate of incorporation provides
otherwise. Green Tree Delaware's Certificate does not provide for cumulative
voting in elections of directors.
CONFLICTS OF INTEREST.
Under both Minnesota law and Delaware law, a contract or transaction between
a corporation and one or more of its directors, or an entity in or of which one
or more of the corporation's directors are directors,
20
officers, or legal representatives or have a material financial interest, is
not void or voidable solely by reason of the conflict, provided that the
contract or transaction is fair and reasonable at the time it is authorized, it
is ratified by the corporation's stockholders after disclosure of the
relationship or interest, or is authorized in good faith by a majority of the
disinterested members of the board of directors after disclosure of the
relationship or interest. However, if the contract or transaction is authorized
by the board, under Minnesota law the interested director may not be counted in
determining the presence of a quorum and may not vote. Delaware law permits the
interested director to be counted in determining whether a quorum of the
directors is present at the meeting approving the transaction, and further
provides that the contract or transaction shall not be void or voidable solely
because the interested director's vote is counted at the meeting which
authorizes the transaction.
NUMBER OF DIRECTORS.
Minnesota law provides that the number of directors shall be fixed by or in
the manner provided in the articles or bylaws, and that the number of directors
may be changed at any time by amendment to or in the manner provided in the
articles or bylaws. The Company's Bylaws provide that the number of directors
shall be no less than three and no more than eleven, as established by
resolution of the Board of Directors.
Delaware law provides that the number of directors shall be fixed by, or in
the manner provided in, the bylaws, unless the certificate of incorporation
fixes the number of directors, in which case a change in the number of
directors shall be made only by amendment of the certificate. Green Tree
Delaware's Certificate does not set forth a number or manner of fixing the
number of directors. Under the Bylaws of Green Tree Delaware, the actual number
of directors may be fixed by resolution of the Board of Directors.
CLASSIFIED BOARD OF DIRECTORS.
Both Minnesota and Delaware permit a corporation's bylaws to provide for a
classified board of directors. Delaware permits a maximum of three classes;
Minnesota law does not limit the number of classes. The Bylaws of the Company
and of Green Tree Delaware provide for a classified board of directors, divided
into three classes, as equal in number as possible; only one class of directors
is elected at each annual meeting of directors, with the remaining classes
continuing their respective three-year terms.
REMOVAL OF DIRECTOR.
Under Minnesota law, in general, unless a corporation's articles provide
otherwise, a director may be removed with or without cause by the affirmative
vote of a majority of the shareholders. Under Delaware law, a director of a
corporation may be removed with or without cause by a majority vote of the
directors. However, a director of a Delaware corporation that has a classified
board may be removed only for cause, unless the certificate of incorporation
provides otherwise. Green Tree Delaware's Bylaws provide for a classified
board, and its Certificate provides that a director may be removed with or
without cause upon the affirmative vote of holders of at least 80% of the
shares entitled to vote at an election of directors.
VACANCIES ON BOARD OF DIRECTORS.
Under Minnesota law, unless the articles or bylaws provide otherwise, (a) a
vacancy on a corporation's board of directors may be filled by the vote of a
majority of directors then in office, although less than a quorum, (b) a newly
created directorship resulting from an increase in the number of directors may
be filled by the board, and (c) any director so elected shall hold office only
until a qualified successor is elected at the next regular or special meeting
of shareholders. The Company's Bylaws follow these provisions.
Under Delaware law, a vacancy on a corporation's board of directors may be
filled by a majority of the remaining directors, although less than a quorum,
or by the affirmative vote of a majority of the outstanding voting shares,
unless otherwise provided in the certificate of incorporation or bylaws. Green
Tree Delaware's Bylaws are the same as the Company's Bylaws on this point.
21
ANNUAL MEETINGS OF STOCKHOLDERS.
Minnesota law provides that if a regular meeting of stockholders has not been
held during the immediately preceding 15 months, a stockholder or stockholders
holding 3% or more of the voting power of all shares entitled to vote may
demand a regular meeting of stockholders. Delaware law provides that if no date
has been set for an annual meeting of stockholders for a period of 13 months
after the last annual meeting, the Delaware court may order a meeting to be
held upon the application of any stockholder or director.
SPECIAL MEETINGS OF STOCKHOLDERS.
Minnesota law provides that the chief executive officer, the chief financial
officer, two or more directors, a person authorized in the articles or bylaws
to call a special meeting, or a stockholder holding 10% or more of the voting
power of all shares entitled to vote, may call a special meeting of the
stockholders, except that a special meeting concerning a business combination
must be called by 25% of the voting power. Under Delaware law, only the board
of directors or those persons authorized by the corporation's certificate of
incorporation or bylaws may call a special meeting of the corporation's
stockholders. The bylaws of Green Tree Delaware provide that stockholders
holding 10% of the voting power can call special meetings.
VOLUNTARY DISSOLUTION.
Minnesota law provides that a corporation may be dissolved by the voluntary
action of holders of a majority of a corporation's shares entitled to vote at a
meeting called for the purpose of considering such dissolution. Delaware law
provides that voluntary dissolution of a corporation first must be deemed
advisable by a majority of the board of directors and then approved by a
majority of the outstanding stock entitled to vote. Delaware law further
provides for voluntary dissolution of a corporation without action of the
directors if all of the stockholders entitled to vote on such dissolution shall
have consented to the dissolution in writing.
INVOLUNTARY DISSOLUTION.
Minnesota law provides that a court may dissolve a corporation in an action
by a shareholder where: (a) the situation involves a deadlock in the management
of corporate affairs and the shareholders cannot break the deadlock; (b) the
directors have acted fraudulently, illegally, or in a manner unfairly
prejudicial to the corporation; (c) the shareholders are divided in voting
power for two consecutive regular meetings to the point where successor
directors are not elected; (d) there is a case of misapplication or waste of
corporate assets; or (e) the duration of the corporation has expired. The
Delaware law states that courts may revoke or forfeit the charter of any
corporation for abuse, misuse or nonuse of its corporate powers, privileges or
franchises.
INSPECTION OF SHAREHOLDER LISTS.
Under Minnesota law, any shareholder has an absolute right, upon written
demand, to examine and copy, in person or by a legal representative, at any
reasonable time, the corporation's share register. Under Delaware law, any
shareholder, upon written demand under oath stating the purpose thereof, has
the right during the usual hours for business to inspect for any proper purpose
a list of the corporation's shareholders and to make copies or extracts
therefrom.
AMENDMENT OF THE BYLAWS.
Minnesota law provides that unless reserved by the articles to the
stockholders, the power to adopt, amend, or repeal a corporation's bylaws is
vested in the board, subject to the power of the stockholders to adopt, repeal,
or amend the bylaws. After adoption of initial bylaws, the board of a Minnesota
corporation cannot adopt, amend, or repeal a bylaw fixing a quorum for meetings
of shareholders, prescribing procedures
22
for removing directors or filling vacancies in the board, or fixing the number
of directors or their classifications, qualifications, or terms of office, but
may adopt or amend a bylaw to increase the number of directors.
Delaware law provides that the power to adopt, amend, or repeal bylaws
remains with the corporation's stockholders, but permits the corporation, in
its certificate of incorporation, to place such power in the board of
directors. Green Tree Delaware's Certificate places the power to adopt, amend,
or repeal bylaws in the corporation's directors. Under Delaware law, the fact
that such power has been placed in the board of directors neither divests nor
limits the stockholders' power to adopt, amend, or repeal bylaws.
AMENDMENT OF THE CHARTER.
Under Minnesota law, before the shareholders may vote on an amendment to the
articles of incorporation, either a resolution to amend the articles must have
been approved by the affirmative vote of the majority of the directors present
at the meeting where such resolution was considered, or the amendment must have
been proposed by shareholders holding three percent or more of the voting power
of the shares entitled to vote. Amending the articles of incorporation requires
the affirmative vote of the holders of the majority of the voting power present
and entitled to vote at the meeting (and of each class, if entitled to vote as
a class), unless the articles of incorporation require a larger proportion.
Minnesota law provides that a proposed amendment may be voted upon by the
holders of a class or series even if the articles of incorporation would deny
that right, if among other things, the proposed amendment would increase or
decrease the aggregate number of authorized shares of the class or series,
change the rights or preferences of the class or series, create a new class or
series of shares having rights and preferences prior and superior to the shares
of that class or series or limit or deny any existing preemptive right of the
shares of the class or series.
Under Delaware law, the board of directors must adopt a resolution setting
forth an amendment to the certificate of incorporation before the shareholders
may vote thereon. Unless the certificate of incorporation provides otherwise,
amendments of the certificate of incorporation generally require the approval
of the holders of a majority of the outstanding stock entitled to vote thereon,
and if the amendment would increase or decrease the number of authorized shares
of any class or series or the par value of such shares or would adversely
affect the rights, powers or preferences of such class or series, a majority of
the outstanding stock of such class or series also must approve the amendment.
Green Tree Delaware's Certificate provides for the amendment thereof in a
manner prescribed by statute except that it requires approval of at least 80%
of the total voting power of all shares of stock entitled to vote, voting
together as a single class, for the amendment or repeal of, or the adoption of
any provision inconsistent with, the provisions of Green Tree Delaware's
Certificate relating to: the "fair price" and supermajority anti-takeover
provisions in Article 8; the anti-greenmail provisions in Article 9; and the
provisions relating to the amendment of the Bylaws in Article 12.
PROXIES.
Both Minnesota and Delaware law permit proxies of definite duration. In the
event the proxy is indefinite as to its duration, under Minnesota law it is
valid for 11 months, under Delaware law, for three years.
PREEMPTIVE RIGHTS.
Under Minnesota law, stockholders have preemptive rights to acquire a certain
fraction of the unissued securities or rights to purchase securities of a
corporation before the corporation may offer them to other persons, unless the
corporation's articles of incorporation otherwise provide. The Articles of
Incorporation of the Company provide that no such preemptive right exists in
the Company's stockholders. Under Delaware law, no such preemptive right will
exist, unless the corporation's certificate of incorporation specifies
otherwise. Green Tree Delaware's Certificate does not provide for any such
preemptive rights.
23
DIVIDENDS.
Generally, a Minnesota corporation may pay a dividend if its board determines
that the corporation will be able to pay its debts in the ordinary course of
business after paying the dividend and if, among other things, the dividend
payment does not reduce the remaining net assets of the corporation below the
aggregate preferential amount payable in the event of liquidation to the
holders of the shares having preferential rights, unless the payment is made to
those shareholders in the order and to the extent of their respective
priorities. A Delaware corporation may pay dividends out of surplus or, if
there is no surplus, out of net profits for the fiscal year in which the
dividend is declared and/or for the preceding fiscal year, except that
dividends may not be paid out of net profits if, after the payment of the
dividend, capital is less than the capital represented by the outstanding stock
of all classes having a preference upon the distribution of assets.
SHAREHOLDERS' ACTION WITHOUT A MEETING.
Under Minnesota law, any action required or permitted to be taken at a
shareholders' meeting may be taken without a meeting by written consent signed
by all of the shareholders entitled to vote on such action. This power cannot
be restricted by a Minnesota's corporation's articles. Delaware law permits
such an action to be taken if the written consent is signed by the holders of
shares that would have been required to effect the action at an actual meeting
of the stockholders. Generally, holders of a majority of outstanding shares
could effect such an action. However, Delaware law also provides that a
corporation's certificate of incorporation may restrict or prohibit
stockholders' action without a meeting, and Green Tree Delaware's Certificate
restricts such stockholder action without a meeting unless approved by the
board of directors.
Action by written consent may, in some circumstances, permit the taking of
shareholder action opposed by the board of directors more rapidly than would be
possible if a meeting of shareholders were required. The board of directors
believes, however, that it is important that it be able to give advance notice
of and consideration to any such shareholder action in certain circumstances,
and that shareholders be able to discuss at a meeting matters which may affect
their rights. The board of directors believes that it is inappropriate for
shareholders of a publicly-held corporation to take action affecting the
corporation and its shareholders without a meeting in certain circumstances.
Therefore, the certificate of incorporation of Green Tree Delaware includes a
restriction against shareholder action by written consent without a meeting
unless approved by the board of directors.
STOCK REPURCHASES.
A Minnesota corporation may acquire its own shares if, after the acquisition,
it is able to pay its debts as they become due in the ordinary course of
business and if enough value remains in the corporation to satisfy all
preferences of senior securities. Under Delaware law, a corporation may
purchase or redeem shares of any class except when its capital is impaired or
such purchase would cause impairment of capital, except that a corporation may
purchase or redeem out of capital any of its preferred shares if such shares
will be retired upon the acquisition and the capital of the corporation will be
thereby reduced. The Articles of the Company and the Certificate of Green Tree
Delaware contain additional restrictions on share repurchases. See "Anti-
Greenmail Provision" above.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER.
The reincorporation provided for in the Agreement and Plan of Merger is
intended to be tax free under the Internal Revenue Code. Accordingly, no gain
or loss will be recognized by shareholders for federal income tax purposes as a
result of the consummation of the Reincorporation Proposal. Each shareholder
will have a tax basis in the shares of capital stock of Green Tree Delaware
deemed received equal to the tax basis of the shareholder in the shares of
capital stock deemed exchanged therefor, and, provided that the shareholder
held the shares of capital stock as a capital asset, such shareholder's holding
period for the shares of capital
24
stock of Green Tree Delaware deemed to have been received will include the
holding period of the shares of capital stock deemed exchanged therefor. No
gain or loss will be recognized for federal income tax purposes by the Company
or Green Tree Delaware and Green Tree Delaware will succeed, without
adjustment, to the tax attributes of the Company.
Shareholders should consult their own tax advisers as to the particular tax
consequences to them of the Reincorporation Proposal under state, local or
foreign tax laws.
DISSENTERS' RIGHTS.
Section 302A.471 of the Minnesota Business Corporation Act ("MBCA") grants
any stockholder of the Company of record on March 27, 1995 who objects to the
Merger the right to have the Company purchase the shares owned by the
dissenting stockholder at their fair value at the Effective Time of the Merger.
It is the present intention of the Company to abandon the merger in the event
shareholders exercise dissenter's rights and the Company becomes obligated to
make a substantial payment to said dissenting shareholders.
To be entitled to payment, the dissenting stockholder must file prior to the
vote for the proposed reincorporation merger a written notice of intent to
demand payment of the fair value of the shares and must not vote in favor of
the proposed reincorporation merger; provided, that such demand shall be of no
force and effect if the proposed merger is not effected. The submission of a
blank proxy will constitute a vote in favor of the merger and a waiver of
dissenter's rights. The liability to the dissenting stockholder for the fair
value of the shares shall also be the liability of Green Tree Delaware when and
if the reincorporation is consummated. Any stockholder contemplating the
exercise of these dissenter's rights should review carefully the provisions of
Sections 302A.471 and 302A.473 of the MBCA, particularly the procedural steps
required to perfect such rights. SUCH RIGHTS WILL BE LOST IF THE PROCEDURAL
REQUIREMENTS OF SECTIONS 302A.471 AND 302A.473 ARE NOT FULLY AND PRECISELY
SATISFIED. A COPY OF SECTIONS 302A.471 AND 302A.473 IS ATTACHED AS APPENDIX D.
Stockholders of the Company who do not demand payment for their shares as
provided above and in Section 302A.473 of the MBCA shall be deemed to have
assented to the merger. A vote against the merger, however, is not necessary to
entitle dissenting shareholders to require the Company to purchase their
shares.
If and when the proposed reincorporation is approved by stockholders of the
Company and the plan of merger is not abandoned by the Board of Directors, the
Company shall notify all stockholders who have dissented as provided above of:
(1) the address to which demand for payment and certificates for shares
must be sent to obtain payment and the date by which they must be
received;
(2) any restriction on transfer of uncertificated shares that will apply
after the demand for payment is received;
(3) a form to be used to certify the date on which the stockholder, or the
beneficial owner on whose behalf the stockholder dissents, acquired the
shares or an interest in them and to demand payment; and
(4) a copy of Sections 302A.471 and 302A.473 of the MBCA and a brief
description of the procedures to be followed to dissent and obtain
payment of fair values for shares.
To receive the fair value of the shares, a dissenting stockholder must demand
payment and deposit share certificates within 30 days after the notice was
given, but the dissenter retains all other rights of a stockholder until the
proposed action takes effect. Under Minnesota law, notice by mail is given by
the Company when deposited in the United States mail. A stockholder who fails
to make demand for payment and to deposit certificates will lose the right to
receive the fair value of the shares notwithstanding the timely filing of the
first notice of intent to demand payment. After the effective date of the
reincorporation, the Company shall remit to the dissenting stockholders who
have complied with the above-described procedures the amount the Company
estimates to be the fair value of such stockholder's shares, plus interest.
25
If a dissenter believes that the amount remitted by the Company is less than
the fair value of the shares, with interest, the stockholder may give written
notice to the Company of the dissenting stockholder's estimate of fair value,
with interest, within 30 days after the Company mails such remittance and
demand payment of the difference. UNLESS A STOCKHOLDER MAKES SUCH A DEMAND
WITHIN SUCH THIRTY-DAY PERIOD, THE STOCKHOLDER WILL BE ENTITLED ONLY TO THE
AMOUNT REMITTED BY THE COMPANY.
Within sixty days after the Company receives such a demand from a
stockholder, it will be required either to pay the stockholder the amount
demanded or agreed to after discussion between the stockholder and the Company
or to file in court a petition requesting that the court determine the fair
value of the shares, with interest. All stockholders who have demanded payment
for their shares, but have not reached agreement with the Company, will be made
parties to the proceeding. The court will then determine whether the
stockholders in question have fully complied with the provisions of Section
302A.473 and will determine the fair value of the shares, taking into account
any and all factors the court finds relevant (including the recommendation of
any appraisers that may have been appointed by the court), computed by any
method that the court, in its discretion, sees fit to use, whether or not used
by the Company or a stockholder. The costs and expenses of the court proceeding
will be assessed against the Company, except that the court may assess part or
all of those costs and expenses against a stockholder whose action in demanding
payment is found to be arbitrary, vexatious, or not in good faith.
The fair value of the Company's shares means the fair value of the shares
immediately before the effectiveness of the merger. Under Section 302A.471, a
stockholder of the Company has no right at law or equity to set aside the
consummation of the merger, except if such consummation is fraudulent with
respect to such stockholder or the Company.
Any stockholder making a demand for payment of fair value may withdraw the
demand at any time prior to the determination of the fair value of the shares
by filing written notice of such withdrawal with the Company.
REQUIRED VOTE.
The Minnesota Business Corporation Act requires an affirmative vote of a
majority of outstanding shares to authorize the Merger. The enclosed form of
Proxy provides a means for stockholders to vote for the Merger, to vote against
the Merger, or to abstain from voting with respect to the Merger. Each properly
executed proxy received in time for the meeting will be voted at the meeting as
specified therein. IF A STOCKHOLDER EXECUTES AND RETURNS A PROXY BUT DOES NOT
SPECIFY OTHERWISE, THE SHARES REPRESENTED BY SUCH STOCKHOLDER'S PROXY WILL BE
VOTED FOR THE MERGER. A vote for the proposal will constitute specific approval
of the Merger, Green Tree Delaware's Certificate, and all transactions and
proceedings related to the Reincorporation described in this Proxy Statement.
RECOMMENDATION OF BOARD OF DIRECTORS.
THE COMPANY'S BOARD OF DIRECTORS HAS CONCLUDED THAT ADOPTION OF THE
REINCORPORATION PROPOSAL IS IN THE BEST INTERESTS OF THE COMPANY AND
ACCORDINGLY RECOMMENDS A VOTE "FOR" THE PROPOSAL.
PROPOSAL TO APPROVE THE 1995 EMPLOYEE STOCK INCENTIVE PLAN
The Company's 1995 Employee Stock Incentive Plan (the "Incentive Plan") was
adopted by the Board of Directors on February 3, 1995. Employees, consultants
and independent contractors providing services to the Company or its affiliates
are eligible to be granted awards ("Awards") under the Incentive Plan. If the
26
Incentive Plan is approved by the shareholders, no further awards will be made
under the Company's 1987 Employee Stock Option Plan. The Chief Executive
Officer is not a participant in the plan. His compensation is provided under a
separate employment contract.
The principal features of the Incentive Plan are summarized below.
GENERAL.
The purposes of the Incentive Plan are to encourage employees, officers,
consultants and independent contractors providing services to the Company or
any affiliate of the Company to increase their efforts to make the Company and
its affiliates more successful, to provide an additional inducement for such
persons to remain with or provide services to the Company or an affiliate, to
reward such persons by providing an opportunity to acquire Common Stock of the
Company on favorable terms, and to provide a means through which the Company
may attract able persons to provide services to the Company and its affiliates.
The aggregate number of shares of Common Stock which may be issued under the
Incentive Plan is 3,382,360 shares, subject to proportionate adjustment in the
event of stock splits and similar events.
ADMINISTRATION OF THE INCENTIVE PLAN.
The Incentive Plan will be administered by a committee (the "Committee")
appointed by the Board of Directors and consisting of not fewer than such
number of directors as shall be required to permit the Incentive Plan to
satisfy the requirements of Rule 16b-3 under the Securities Exchange Act of
1934 ("Rule 16b-3"). The Committee will initially be composed of Tania A.
Modic, W. Max McGee and Robert S. Nickoloff.
The Committee will have full authority, in its discretion, to grant awards
("Awards") under the Incentive Plan and to determine the individuals to whom
Awards shall be granted, the type or types of awards to be granted, and the
number of shares to be covered by each Award. The types of Awards which the
Committee will have authority to grant consist of (1) stock options (with or
without reload option rights) (2) stock appreciation rights, (3) restricted
stock and unrestricted stock units, (4) performance awards, and (5) other stock
based awards. Each of these types of Awards is described below.
STOCK OPTIONS.
Stock options granted by the Committee may be "incentive stock options"
(stock options qualifying under Section 422 of the Internal Revenue Code of
1986 (the "Code")) or "nonstatutory stock options" (stock options which do not
so qualify). Incentive stock options may be granted only to employees,
including officers and directors, of the Company and those of its affiliates
that are "subsidiary corporations" of the Company under Section 424(f) of the
Internal Revenue Code.
The option price for each stock option shall be determined by the Committee,
but may not be less than 100% of the fair market value of the Common Stock on
the date the stock option is granted in the case of incentive stock options or
50% of the fair market value of the Common Stock on the date the stock option
is granted in the case of nonstatutory stock options. Fair market value of
Common Stock, for purposes of the Incentive Plan, means the closing price of
the stock on the New York Stock Exchange on the date of valuation. On February
28, 1995 the fair market value of a share of the Company's Common Stock, as so
computed, was $38.25.
Subject to the foregoing and the other provisions of the Incentive Plan, the
Committee has the authority to determine the times at which an option may be
exercised, the method and form by which payment of the exercise price may be
made and such restrictions and other terms and conditions, if any, as shall be
determined by the Committee in its discretion.
27
RELOAD OPTION RIGHTS.
The Committee may in its discretion grant reload option rights separately or
in conjunction with a stock option. Reload option rights entitle the grantee of
a stock option to be granted a new stock option (1) upon payment of the
exercise price of a previously granted stock option through the delivery of
shares of the Company's Common Stock owned by the grantee pursuant to a stock
option plan of the Company, or (2) when shares of the Company's Common Stock
are tendered or forfeited as payment of the amount to be withheld under
applicable income tax laws in connection with the exercise of a stock option.
The reload option is for that number of shares of Common Stock not exceeding
the sum of (1) the number of shares of Common Stock delivered in payment of the
option price of the original option to which the reload option relates, and (2)
the number of shares of Common Stock tendered or forfeited as payment of the
amount to be withheld under applicable income tax laws in connection with the
exercise of the option to which the reload option relates. The reload option
shall have an option price equal to the fair market value of the Common Stock
on date of grant of the reload option.
Because the number of shares covered by a reload option is limited to the
number of previously owned shares delivered in payment of the option price of
the original option or in payment of taxes due in connection therewith, reload
option rights will not increase the net number of shares which may be acquired
under a stock option. Because the option price of the reload option equals the
fair market value of the Company's Common Stock on the date the underlying
option is exercised, reload option rights also will not increase the total net
value (excess of fair market value over the option price) realizable under the
original option. However, since an optionee who exercises an option before the
end of its term will not forfeit the potential for future market price
appreciation, reload option rights may encourage earlier stock option
exercises, thereby promoting the identification with shareholder interests
resulting from employee ownership of Common Stock.
STOCK APPRECIATION RIGHTS.
The Committee may grant stock appreciation rights to participants. A stock
appreciation right confers on the holder a right to receive upon exercise the
excess of (1) the fair market value of one share of Common Stock on the date of
exercise (or, if the Committee shall so determine, at any time during a
specified period before or after the date of exercise) over (2) the grant price
of the stock appreciation right as specified by the Committee, which grant
price shall not be less than 100% of the fair market value of one share of
Common Stock on the date of the grant of the stock appreciation right. The
Committee shall, in its discretion, determine the grant price, term, methods of
exercise, methods of settlement and other terms and conditions of any stock
appreciation right, and may impose such conditions or restrictions on the
exercise of any stock appreciation right as it may deem appropriate.
RESTRICTED STOCK.
The Committee may grant awards of restricted stock and restricted stock
units. Restricted shares of Common Stock awarded by the Committee will be
subject to such restrictions (which may include, without limitation,
restrictions on the right to vote the restricted share or receive any dividends
or distributions with respect thereto) as the Committee may impose thereon,
which restrictions may lapse in such fashion as the Committee deems
appropriate. The Committee shall have the discretion to determine performance
goals, performance periods and other terms and conditions of performance
awards.
Following a restricted stock award and prior to the lapse or termination of
the applicable restrictions, share certificates for the restricted shares will
be held by the Company. Upon the lapse or termination of the restrictions, the
share certificates will be delivered to the awardee.
PERFORMANCE AWARDS.
The Committee may grant performance awards, denominated or payable in cash,
stock (including without limitation, restricted stock), other securities, other
Awards or other property, to be earned by an
28
awardee based on the achievement of such performance goals over such periods as
the Committee shall establish. Except as determined by the Committee, upon
termination of employment (as determined under criteria established by the
Committee) during the applicable restriction period, all shares of restricted
stock and restricted stock units shall be forfeited and reacquired by the
Company, provided that the Committee may waive any such forfeiture if it finds
a waiver to be in the best interests of the Company.
OTHER STOCK BASED AWARDS.
The Committee may also grant other Awards under the Incentive Plan
denominated or payable in, valued by reference to, or otherwise related to
Common Stock (including without limitation, securities convertible into Common
Stock), on such terms and conditions determined by the Committee consistent
with the Incentive Plan.
MISCELLANEOUS.
All Awards shall be granted for no cash consideration or such minimal
consideration as may be required by law. Awards may be granted alone or in
addition to any other Awards, in the discretion of the Committee. The form of
payment to be made by the Company or by an affiliate of the Company pursuant to
an Award may be in such forms as the Committee may determine. No Award or right
under any Award is transferrable by a participant other than by will or by laws
of descent and distribution. Each Award or right under any Award is exercisable
during the participant's lifetime only by the participant or, if permissible
under applicable law, by the participant's guardian or legal representative.
Except as prohibited by law or by an Award Agreement or the Incentive Plan
itself, the Board of Directors may amend or terminate the Incentive Plan at any
time. Notwithstanding anything in the Plan or any Award Agreement, without the
approval of the Company's stockholders, no amendment or termination may be made
that, absent such approval, would cause Rule 16b-3 to become unavailable with
respect to the Plan, would violate certain stock exchange rules or rules of the
National Association of Securities Dealers, or that would cause the Company to
be unable to grant incentive stock options under the Code.
FEDERAL INCOME TAX CONSEQUENCES.
The following is a brief summary of the principal Federal income tax
consequences of the grant and exercise of Awards under present law.
Incentive Stock Options. An optionee will not recognize any taxable income
for Federal income tax purposes upon receipt of an incentive stock option or,
generally, at the time of exercise of an incentive stock option. The exercise
of an incentive stock option generally will result in an increase in an
optionee's taxable income for alternative minimum tax purposes.
If an optionee exercises an incentive stock option and does not dispose of
the shares received in a subsequent "disqualifying disposition" (generally, a
sale, gift or other transfer within two years after the date of grant of the
incentive stock option or within one year after the shares are transferred to
the optionee), upon disposition of the shares, any amount realized in excess of
the optionee's tax basis in the shares disposed of will be treated as a long-
term capital gain, and any loss will be treated as a long-term capital loss. In
the event of a "disqualifying disposition," the difference between the fair
market value of the shares received on the date of exercise and the option
price (limited, in the case of a taxable sale or exchange, to the excess of the
amount realized upon disposition over the optionee's tax basis in the shares)
will be treated as compensation received by the optionee in the year of
disposition. Any additional gain will be taxable as a capital gain and any loss
as a capital loss, which will be long-term or short-term depending on whether
the shares were held for more than one year. Under proposed regulations,
special rules apply in determining the compensation income recognized upon a
disqualifying disposition if the option price of the incentive stock option is
paid with shares of Common Stock or, in certain limited circumstances, if the
optionee is subject to
29
Section 16(b) of the 1934 Act. If shares of Common Stock received upon the
prior exercise of an incentive stock option are transferred to the Company in
payment of the option price of an incentive stock option within either of the
periods referred to above, the transfer will be considered a "disqualifying
disposition" of the shares transferred, but, under proposed regulations, only
compensation income determined as stated above, and no capital gain or loss,
will be recognized.
Neither the Company nor any of its subsidiaries will be entitled to a
deduction with respect to shares received by an optionee upon exercise of an
incentive stock option and not disposed of in a "disqualifying disposition." If
an amount is treated as compensation received by an optionee because of a
"disqualifying disposition," the Company or one of its subsidiaries generally
will be entitled to a corresponding deduction in the same amount for
compensation paid.
Nonstatutory Stock Option. An optionee will generally not recognize any
taxable income for Federal income tax purposes upon receipt of a nonstatutory
stock option. Upon the exercise of a nonstatutory stock option the amount by
which the fair market value of the shares received, determined as of the date
of exercise, exceeds the option price will be treated as compensation received
by the optionee in the year of exercise. If the option price of a nonstatutory
stock option is paid in whole or in part with shares of Common Stock, no
income, gain or loss will be recognized by the optionee on the receipt of
shares equal in value on the date of exercise to the shares delivered in
payment of the option price. The fair market value of the remainder of the
shares received upon exercise of the nonstatutory stock option, determined as
of the date of exercise, less the amount of cash, if any, paid upon exercise
will be treated as compensation income received by the optionee on the date of
exercise of the stock option. Special rules will apply upon the exercise of a
nonstatutory stock option in certain limited circumstances by an optionee who
is subject to Section 16(b) of the 1934 Act.
The Company or one of its subsidiaries generally will be entitled to a
deduction for compensation paid in the same amount treated as compensation
received by the optionee.
Reload Option Rights. An optionee should not recognize any taxable income for
Federal income tax purposes upon receipt of reload option rights and a reload
option should be treated as a nonstatutory stock option. See "Nonstatutory
Stock Options" above.
Stock Appreciation Rights. The grant of a stock appreciation right will not
result in any immediate tax consequence to the grantee. Upon the exercise of a
stock appreciation right, any cash received and the fair market value of any
stock received will constitute ordinary income to the participant. The Company
will generally be entitled to a deduction in the same amount.
Restricted Shares. A grantee of restricted shares will not recognize any
taxable income for Federal income tax purposes in the year of the award,
provided the shares are subject to restrictions (that is, they are
nontransferable and subject to a substantial risk of forfeiture). If a grantee
is subject to Section 16(b) of the 1934 Act on the date of the award, the
shares generally will be deemed to be subject to restrictions (in addition to
the restrictions imposed by the award) for at least six months following the
date of the award. However, the grantee may elect under Section 83(b) of the
Code to recognize compensation income in the year of the award in an amount
equal to the fair market value of the shares on the date of the award,
determined without regard to the restrictions. If the grantee does not make a
Section 83(b) election, the fair market value of the shares on the date the
restrictions lapse will be treated as compensation income to the grantee and
will be taxable in the year the restrictions lapse. The Company or one of its
subsidiaries generally will be entitled to a deduction for compensation paid in
the same amount treated as compensation income to the grantee.
Performance Awards. A grantee of Performance Awards will not recognize any
taxable income for Federal income tax purposes upon receipt of the award. Any
cash or shares of Common Stock received pursuant to the award will be treated
as compensation income received by the awardee generally in the year in which
the awardee receives such cash or shares of Common Stock. If performance units
are expressed in dollars but paid in whole or in part in shares of Common Stock
and the awardee is subject to Section 16(b) of
30
the 1934 Act on the date of receipt of such shares, the awardee generally will
not recognize compensation income until the expiration of six months from the
date of receipt, unless the awardee makes an election under Section 83(b) of
the Code to recognize compensation income on the date of receipt. In each case,
the amount of compensation income will equal the amount of cash and the fair
market value of the shares of Common Stock on the date compensation income is
recognized. The Company or one of its subsidiaries generally will be entitled
to a deduction for compensation paid in the same amount treated as compensation
income to the awardee.
REQUIRED VOTE.
The affirmative vote of the holders of at least a majority of the outstanding
shares of Common Stock is required for approval of adoption of the Incentive
Plan.
RECOMMENDATION OF BOARD OF DIRECTORS.
THE COMPANY'S BOARD OF DIRECTORS HAS CONCLUDED THAT APPROVAL OF THE 1995
EMPLOYEE STOCK INCENTIVE PLAN IS IN THE BEST INTERESTS OF THE COMPANY AND
ACCORDINGLY RECOMMENDS A VOTE "FOR" THE PROPOSAL.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of February 28, 1995,29, 1996, the Company is unaware of any owner of the Company's
Common Stock which beneficially owns more than 5%5 percent of such stock.
The following table sets forth as of February 28, 1995,29, 1996, information about the
ownership of the Company's Common Stock by each director andDirector, by each executive
officer named in the Summary Compensation Table and by all directorsDirectors and
officers as a group. The shareholdersstockholders listed in the table have sole voting and
investment powers with respect to the shares indicated.
PERCENT OF
AMOUNT AND NATURE OF OUTSTANDING
NAME OF BENEFICIAL PERCENT OF
OWNER OR IDENTITY NUMBER OF OUTSTANDING
OF GROUPBENEFICIAL OWNERSHIP SHARES
OWNED SHARES
------------------ ------------- ------------------------ -------------------- -----------
Lawrence M. Coss.............................. 5,564,149(1) 4.1%
Robert D. Potts............................... 40,000 *
Richard G. Evans.............................. 380,000(2) *
John W. Brink.................................. 188,320(1)Brink................................. 376,640(3) *
Lawrence M. Coss............................... 2,242,444(2) 3.3%
Richard G. Evans............................... 240,000(3) *
Robert A. Hegstrom............................. 7,220Lyle D. Zeller................................ 81,400(2) *
Tania A. Modic................................. 108,600(3)Modic................................ 233,200(4) *
W. Max McGee................................... 316,000(3)McGee.................................. 532,000(4) *
Robert S. Nickoloff............................ 66,000(3) *
Robert D. Potts................................ 16,000Nickoloff........................... 140,000(4) *
All Directors and Officers as a group (38(52
persons)...................................... 4,404,937(4) 6.4%..................................... 8,602,879(5) 6.3%
- --------
* Less*Less than one percent.
(1) Includes 32032,000 shares held by minor children, and options for 160,000 shares
of Common Stock exercisable on or within 60 days after February 28, 1995.
(2) Includes 8,000 shares held by minor children, 43,60087,200 shares held by
spouse, 40,00080,000 shares held by LVC Investment Company, Inc., and options for
400,0001,000,000 shares of Common Stock exercisable on or within 60 days after February
28,
1995.29, 1996.
17
(2) Includes 180,000 and 73,400 shares issuable to Messrs. Evans and Zeller,
respectively, upon exercise of stock options which are exercisable
currently or within 60 days of February 29, 1996.
(3) Includes 6,000, 140,000, 76,000640 shares held by minor children and 38,000options for 320,000 shares
of Common Stock exercisable within 60 days after February 29, 1996. Mr.
Brink resigned effective March 15, 1996.
(4) Includes 28,000, 52,000 and 92,000 shares issuable to Ms. Modic and to
Messrs. Evans, McGee and Nickoloff, respectively, relating to stock
issuable upon exercise of stock options
which are exercisable oncurrently or within 60 days afterof February 28, 1995.29, 1996. Mr.
McGee's holdings include 100,000200,000 shares held by his spouse and Ms. Modic's
holdings are held jointly with her spouse.
(4)(5) Includes 1,817,3342,749,532 shares issuable upon exercise of stock options
exercisable currently or within 60 days of February 28,29, 1996.
SECTION 16(A) REPORTING
Section 16(a) of the 1934 Act requires the Company's Directors, executive
officers and all person who beneficially own more than 10% of the outstanding
shares of the Company's Common Stock to file with the Securities and Exchange
Commission and the New York Stock Exchange initial reports of ownership and
reports of changes in ownership of such Common Stock. Directors, executive
officers and greater-than-10%-beneficial owners are also required to furnish
the Company with copies of all Section 16(a) reports they file. To the
Company's knowledge, based upon a review of the copies of such reports
furnished to the Company during the fiscal year ended December 31, 1995, all
Section 16(a) filing requirements applicable to the Company's Directors,
executive officers and greater-than-10% beneficial owners were complied with.
PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION TO
INCREASE THE AUTHORIZED SHARES OF COMMON STOCK
(ITEM 3)
INFORMATION REGARDING PROPOSED AMENDMENT
The Board of Directors has determined that Article 3 of the Company's
Certificate of Incorporation should be amended, and has voted to submit an
amendment to the Company's stockholders for adoption. Article 3 currently
provides that the aggregate number of shares of all classes of stock which the
Company shall have authority to issue is 165,000,000 shares, consisting of
15,000,000 shares of Preferred Stock and 150,000,000 shares of Common Stock.
The Board of Directors recommends to stockholders that the article be amended
to increase the number of authorized shares of Common Stock by 250,000,000
shares to 400,000,000 shares, thereby increasing to 415,000,000 the aggregate
number of shares of all classes of stock which the Company shall have authority
to issue, including 15,000,000 shares of Preferred Stock.
If the amendment is approved by the Company's stockholders, Article 3 of the
Certificate of Incorporation would read as follows:
The aggregate number of shares which this Corporation shall have
authority to issue is 415,000,000 shares, divided into 400,000,000 common
shares with a par value of $0.01 per share, which shall be known as "Common
Stock" and 15,000,000 preferred shares with a par value of $0.01 per share,
which shall be known as "Preferred Stock."
As of December 31, 1995, there were 135,483,266 shares of Common Stock
outstanding, and an additional 12,406,252 shares of Common Stock were reserved
for issuance pursuant to the Company's stock option and stock bonus plans. The
Company has 2,110,482 authorized but unissued, unreserved and uncommitted
shares of Common Stock available for issuance, including 2,051,000 shares held
in Treasury. There are no shares of Preferred Stock issued and outstanding.
The additional shares of Common Stock for which authorization is sought would
be a part of the existing class of Common Stock and, if and when issued, would
have the same rights and privileges as the shares of
18
Common Stock presently outstanding. Such additional shares would not (and the
shares of Common Stock presently outstanding do not) entitle holders thereof to
preemptive or cumulative voting rights.
The Company is proposing to increase the number of authorized shares of its
Common Stock to provide additional shares for general corporate purposes,
including stock dividends, raising additional capital, issuances pursuant to
employee stock plans and possible future acquisitions. In the most recent three
years, the Company has had three separate two-for-one stock splits in the form
of stock dividends which were distributed on January 31, 1993, June 30, 1994
and October 15, 1995. There is no present plan, understanding or agreement,
however, for issuing a material number of additional shares of Common Stock
from the additional shares of stock proposed to be authorized pursuant to the
amendment. The Board of Directors believes that an increase in the total number
of shares of authorized Common Stock will better enable the Company to meet its
future needs and give it greater flexibility in responding quickly to
advantageous business opportunities, as well as provide additional shares for
corporate purposes generally.
The issuance by the Company of shares of Common Stock, including the
additional shares that would be authorized if the proposed amendment is
adopted, may dilute the present equity ownership position of current holders of
Common Stock and may be made without stockholder approval, unless otherwise
required by applicable laws or stock exchange regulation. Under existing New
York Stock Exchange regulations, approval of a majority of the holders of
Common Stock would nevertheless be required in connection with any transaction
or series of related transactions that would result in the original issuance of
additional shares of Common Stock, other than in a public offer for cash, if:
(1) the Common Stock (including securities convertible into Common Stock) has,
or will have upon issuance, voting power equal to or in excess of 20 percent of
the number of shares outstanding before the issuance of the Common Stock; or
(2) the number of shares of Common Stock to be issued is or will be equal to or
in excess of 20 percent of the number of shares outstanding before the issuance
of the Common Stock; or (3) the issuance would result in a change of control of
the Company.
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE AMENDMENT
TO THE CERTIFICATE OF INCORPORATION TO INCREASE THE AUTHORIZED SHARES OF COMMON
STOCK. THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE SHARES OF THE
COMPANY'S COMMON STOCK OUTSTANDING AND ENTITLED TO VOTE WILL BE NECESSARY FOR
APPROVAL OF THE AMENDMENT. PROXIES WILL BE VOTED IN FAVOR OF SUCH PROPOSAL
UNLESS OTHERWISE SPECIFIED.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon the recommendation of its Audit Committee, has
appointed KPMG Peat Marwick, LLP to audit the books and accounts of the Company
and its subsidiaries for the fiscal year ending December 31, 1996, subject to
stockholder ratification.
A representative of KPMG Peat Marwick, LLP will be present at the 1996 Annual
Meeting of Stockholders with the opportunity to make a statement if he or she
desires to do so, and is expected to be available to respond to appropriate
questions from stockholders.
SELECTION OF AUDITORS
(ITEM 4)
The Board of Directors of the Company has selected the firm of KPMG Peat
Marwick, LLP as independent auditors of the Company for the year ending
December 31, 1996 subject to the approval of the stockholders.
19
Before the Audit Committee recommended to the full Board of Directors the
appointment of KPMG Peat Marwick, LLP, it carefully considered that firm's
qualifications. This included a review of its performance in prior years as
well as its reputation for integrity and competence in the fields of auditing
and accounting. The Audit Committee has expressed its satisfaction with KPMG
Peat Marwick in all these respects. Representatives of KPMG Peat Marwick will
be present at the Annual Meeting of Stockholders and will be given a
opportunity to make a statement if they desire to do so and will be available
to respond to appropriate questions following the meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE SELECTION
OF KPMG PEAT MARWICK, LLP AS THE COMPANY'S AUDITORS. PROXIES WILL BE VOTED IN
FAVOR OF SUCH PROPOSAL UNLESS OTHERWISE SPECIFIED.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain directorsDirectors and executive officers of the Company are eligible to
execute notes to the Company to purchase Company Common Stock pursuant to the
exercise of stock options. These notes would be collateralized by the stock
purchased. These notes would be due on demand and carry an interest rate of the
greater of six percent or the Internal Revenue Service applicable federal rate
for officer borrowings. Such directorsDirectors and executive officers would be required
to pay interest quarterly on such notes and make certain annual principal
repayments. No amounts were borrowed or outstanding on such officer notes
during 1994.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon the recommendation of its Audit Committee, has
appointed KPMG Peat Marwick LLP to audit the books and accounts of the Company
and its subsidiaries for the fiscal year ending December 31, 1995, subject to
shareholder ratification.
A representative of KPMG Peat Marwick LLP will be present at the 1995 Annual
Meeting of Shareholders with the opportunity to make a statement if he or she
desires to do so, and is expected to be available to respond to appropriate
questions from shareholders.1995.
PROPOSALS OF SHAREHOLDERSSTOCKHOLDERS FOR 19961997 ANNUAL MEETING
All proposals of shareholdersstockholders intended to be presented at the 19961997 Annual
Meeting of ShareholdersStockholders of the Company must be received by the Company at its
executive offices in Saint Paul, Minnesota on or before January 17, 1996.
OTHER MATTERS
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT.
Section 16(a) of the Securities Exchange Act of 1934 requiresDecember 11, 1996 for
inclusion in the Company's directorsProxy Statement and executive officers, and persons who own more than ten percent of
a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership ofProxy for such Company equity securities with the
Securities and Exchange Commission and the New York and Pacific Stock
Exchanges, and furnish copies of those reports to the Company.
Based upon the Company's records and the receipt of applicable filings from
its directors and executive officers or ten percent shareholders, if any, the
Company believes that, during the period from January 1, 1994 to December 31,
1994, all applicable filing requirements were met.meeting.
ANNUAL REPORT ON FORM 10-K.10-K
Copies of the Company's Annual Report on Form 10-K (an annual filing with the
Securities and Exchange Commission) for the fiscal year ended December 31,
1994,1995, may be obtained without charge by writing to Green Tree Financial
Corporation, 1100 Landmark Towers, 345 St. Peter Street, Saint Paul, Minnesota
55102-1639, Attention: John W. Brink, ExecutiveA. Dolphin, Vice President Treasurer and Chief Financial Officer.Director of Investor
Relations.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Richard G. Evans
RichardRICHARD G. EvansEVANS
Secretary
Dated: April 17, 1995
3211, 1996
20
APPENDIXEXHIBIT A
AGREEMENTGREEN TREE FINANCIAL CORPORATION
CHIEF EXECUTIVE CASH BONUS AND STOCK OPTION PLAN
OF MERGER AND REORGANIZATION
Agreement and Plan of Merger and Reorganization, dated as of April 10, 1995,
between Green Tree Financial Corporation,Section 1. Definitions. When the following terms are used herein with initial
capital letters, they shall have the following meanings:
Award. Either an Option or a Minnesota corporation ("Green
Tree"), and Green Tree Financial Corporation, a Delaware corporation and a
wholly-owned subsidiary of Green Tree (the "Surviving Corporation").
Whereas, Green Tree,Performance Bonus granted under the Plan.
Chief Executive Officer. Lawrence M. Coss or the individual serving in
that capacity for the Company as of the date hereof, has authorityfirst day of a Performance Period.
Code. The Internal Revenue Code of 1986, as it may be amended from time
to issue
165,000,000time, and any proposed, temporary or final Treasury Regulations
promulgated thereunder.
Committee. A committee of the Board of Directors of the Company
designated by such Board to administer the Plan, which shall consist of
members appointed from time-to-time by the Board of Directors and shall be
comprised of not less than such number of directors as shall be required to
permit the Plan to satisfy the requirements of Rule 16b-3. Each member of
the Committee shall be a "disinterested person" within the meaning of Rule
16b-3. In addition, to the extent required by Section 162(m) of the Code,
all members of the Committee shall be "outside directors" within the
meaning of Section 162(m) of the Code.
Company. GREEN TREE FINANCIAL CORPORATION is a Delaware corporation.
Net Income. With respect to each Performance Period, the Company's net
income, prior to any reduction for amounts paid pursuant hereto but after
taking into account all other expenses of the Company including taxes, as
computed in accordance with generally accepted accounting principles as in
effect for the Company's fiscal year ending December 31, 1995, without
regard to any changes thereto. For purposes of the foregoing computation,
extraordinary items, whether gains or losses, shall also not be taken into
account. In addition, for purposes of the foregoing computation,
discontinued operations, restructuring costs and all acquisitions and
disposition, as computed in accordance with generally accepted accounting
principles as in effect for the Company's fiscal year ending December 31,
1995, without regard to any changes thereto, shall be taken into account.
Option Agreement. Any written agreement, contract or other instrument or
document evidencing any Option granted under the Plan.
Participant. The Chief Executive Officer of the Company.
Performance Bonus. The right to receive a cash payment pursuant to
Section 4.1 of the Plan.
Performance Period. The period which coincides with the Company's fiscal
year.
Performance Threshold. The Company's Return on Equity must be at least
twelve percent (12%) for the Performance Period for which bonuses are being
paid.
Plan. This GREEN TREE FINANCIAL CORPORATION CHIEF EXECUTIVE CASH BONUS
AND STOCK OPTION PLAN.
Return on Equity or ROE. With respect to each Performance Period, the
Company's return on equity is a percentage computed as the Company's Net
Income divided by the Company's "equity." As used herein, Net Income shall
be computed as provided for above and with respect to each Performance
Period, and "equity" for each Performance Period shall be computed as of
the last day of the immediately preceding year-end, as computed in
accordance with generally accepted accounting principles as in effect for
the Company's fiscal year ending December 31, 1995, without regard to any
changes thereto. The same principles used in the computation of Net Income
shall also be taken into account in computing ROE.
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Shares. The shares of capital stock of which 150,000,000 are designated as
common shares,Common Stock, $.01 par value, and 15,000,000 shares are designated as
Preferred Shares, $.01 par value (the "Green Tree Preferred") and of which, as
of the date hereof, 68,210,085 shares of Green Tree Common Stock are issued and
outstanding, and no shares of Green Tree Preferred are issued and outstanding;
and
Whereas, the Surviving Corporation,Company or
such other securities or property as may become subject to Options pursuant
to an adjustment made under Section 3.3 of the date hereof, has authority to
issue 165,000,000 shares of capital stock, of which 150,000,000Plan.
Section 2. Administration.
2.1 Committee. The Plan shall be designated Common Shares, $.01 par value, and of which 15,000,000 shall be
designated Preferred Shares, $.01 par value (the "Surviving Corporation
Preferred"); and
Whereas, asadministered by the Committee. Subject to
the express provisions of the date hereof, 100 sharesPlan and to applicable law, including without
limitation the provisions of Section 162(m) of the Surviving Corporation
Common Stock are issuedCode, the Committee shall
have full power and outstanding and heldauthority to: (i) designate Participants; (ii) determine
the type or types of Awards to be granted to each Participant under the Plan;
(iii) determine the number of Shares to be covered by Green Tree and no shares of
the Surviving Corporation Preferred are issued and outstanding; and
Whereas, Green Tree and the Surviving Corporation desire that Green Tree
merge with and into the Surviving Corporation and that the Surviving
Corporation shall continue as the Surviving Corporation in such merger, uponeach Option; (iv)
determine the terms and subjectconditions of any Award; (v) amend the terms and
conditions of any Award and accelerate the exercisability of Options or the
lapse of restrictions relating to any Awards; (vi) interpret and administer the
Plan and any instrument or agreement relating to, or Award made under, the
Plan; (vii) establish, amend, suspend or waive such rules and regulations and
appoint such agents as it shall deem appropriate for the proper administration
of the Plan; and (viii) make any other determination and take any other action
that the Committee deems necessary or desirable for the administration of the
Plan. Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations and other decisions under or with respect to
the conditions set forth hereinPlan or any Award shall be within the sole discretion of the Committee, may
be made at any time and shall be final, conclusive and binding upon any
Participant, any holder or beneficiary of any Award and any employee of the
Company or any Affiliate.
2.2 Determinations made prior to each Performance Period. Not later than 90
days after the beginning of each Performance Period, the Committee shall
designate Participants, in addition to the Chief Executive Officer, who are to
receive Performance Bonuses for that Performance Period.
2.3 Certification. Following the close of each Performance Period and prior
to payment of any bonus under the Plan, the Committee must certify in writing
that the Performance Threshold has been attained and as to the computation of
the Performance Bonus provided for in Section 4.1 hereof.
2.4 Stockholder Approval. The material terms of this Plan shall be disclosed
to and approved by the stockholders of the Company at the Company's 1996 annual
meeting of stockholders in accordance with the lawsSection 162(m) of the StateCode. No
Performance Bonus shall be paid under this Plan unless such stockholder
approval has been obtained.
Section 3. Options.
3.1 Grant. The Committee is hereby authorized to grant Options to
Participants with the following terms and conditions and with such additional
terms and conditions not inconsistent with the provisions of Delawarethe Plan as the
Committee shall determine:
(a) Exercise Price. The purchase price per Share purchasable under an
Option shall be determined by the Committee; provided, however, that such
purchase price shall not be less than 100% of the fair market value of a
Share on the date of grant of such Option as reasonably determined by the
Committee.
(b) Option Term. The term of each Option shall be fixed by the Committee.
(c) Time and Method of Exercise. The Committee shall determine the time
or times at which an Option may be exercised in whole or in part and the
lawsmethod or methods by which, and the form or forms (including, without
limitation, cash, Shares, promissory notes, other securities, other Awards
or other property, or any combination thereof, having a fair market value
on the exercise date equal to the relevant exercise price) in which,
payment of the Stateexercise price with respect thereto may be made or deemed to
have been made.
3.2 Shares Available. Subject to adjustment as provided in Section 3.3, the
number of Minnesota;Shares available for granting Options under the Plan shall be
2,000,000. Shares to be issued under the Plan may be either
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Shares reacquired and Whereas,held in the respective Boardstreasury or authorized but unissued Shares.
If any Shares covered by an Option are not purchased or are forfeited, or if an
Option otherwise terminates without delivery of Directorsany Shares, then the number of
Green Tree andShares counted against the Surviving
Corporation have approved this Agreement and directedaggregate number of Shares available under the Plan
with respect to such Option, to the extent of any such forfeiture or
termination, shall again be available for granting Options under the Plan.
3.3 Adjustment. In the event that it be submitted to a
votethe Committee shall determine that any
dividend or other distribution (whether in the form of their stockholders.
Now, Therefore, in considerationcash, Shares, other
securities or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of Shares or other securities of the mutual agreementsCompany, issuance
of warrants or other rights to purchase Shares or other securities of the
Company or other similar corporate transaction or event affects the Shares such
that an adjustment is determined by the Committee to be appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan, then the Committee shall, in such manner
as it may deem equitable, adjust any or all of (i) the number and covenants set
forth herein,type of
Shares (or other securities or other property) which thereafter may be made the
parties hereto agreesubject of Options, (ii) the number and type of Shares (or other securities or
other property) subject to mergeoutstanding Options and (iii) the purchase or
exercise price with respect to any Options; provided, however, that the number
of Shares covered by any Option or to which such Options relates shall always
be a whole number.
3.4 Withholding. In order to comply with all applicable federal or state
income tax laws or regulations, the Company may take such action as follows:
ARTICLEit deems
appropriate to ensure that all applicable federal or state payroll,
withholding, income or other taxes, which are the sole and absolute
responsibility of a Participant, are withheld or collected from such
Participant. In order to assist a Participant in paying all or a portion of the
federal and state taxes to be withheld or collected upon exercise or receipt of
(or the lapse of restrictions relating to) an Option, the Committee, in its
discretion and subject to such additional terms and conditions as it may adopt,
may permit the Participant to satisfy such tax obligation by (i) electing to
have the Company withhold a portion of the Shares otherwise to be delivered
upon exercise or receipt of such Option with a fair market value, as reasonably
determined by the Committee, equal to the amount of such taxes or (ii)
delivering to the Company Shares other than Shares issuable upon exercise or
receipt of such Option with such a fair market value equal to the amount of
such taxes. The election, if any, must be made on or before the date that the
amount of tax to be withheld is determined.
3.5 Option Limitation. No Participant may be granted Options for more than
2,000,000 Shares in any calendar year beginning with the period commencing
January 1, Merger
1.1 Merger.1996. The foregoing annual limitation specifically includes the
grant of any Option representing "qualified performance-based compensation"
within the meaning of Section 162(m) of the Code.
Section 4. Performance Bonus.
4.1 Formula. Subject to the terms and conditions of this Agreement, Green Tree
shall be merged with and into the Surviving Corporation (the "Merger") in
accordance withPlan, including
stockholder approval, the General Corporation LawChief Executive Officer of the State of Delaware (the
"DGCL")Company shall receive
a cash, performance bonus for each Performance Period commencing January 1,
1997, in an amount equal to two and the Business Corporation Actone-half percent (2.5%) of the State of Minnesota (the
"MBCA"),difference
(but not less than zero) between (i) the separate existence of Green Tree shall ceaseCompany's Net Income for that
Performance Period, and the Surviving
Corporation shall be the surviving corporation and continue its corporate
existence under the laws of the State of Delaware.
1.2 Effect of the Merger. At the Effective Time of the Merger (as hereinafter
defined), the Surviving Corporation shall possess all the rights, privileges,
immunities and franchises, of a public as well as of a private nature, of each
of Green Tree and the Surviving Corporation; all property, real, personal and
mixed, and all debts due on any account, including subscriptions for shares,
and all other choses in action, and every other interest of or belonging to or
due to each of Green Tree and the Surviving Corporation shall vest in the
Surviving Corporation without any further act or deed; the title to any real
estate or any interest therein vested in Green Tree shall not revert nor in any
way become impaired by reason of the Merger; the Surviving Corporation shall be
responsible and liable for all the liabilities and obligations of each of Green
Tree and the Surviving Corporation; a claim of or against or a pending
proceeding by or against Green Tree or the
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Surviving Corporation may be prosecuted as if the Merger had not taken place,
or the Surviving Corporation may be substituted in the place of Green Tree; and
neither the rights of creditors nor any liens upon the property of Green Tree
or the Surviving Corporation shall be impaired by the Merger.
1.3 Effective Time of the Merger. The Merger shall become effective as of the
date and time (the "Effective Time of the Merger") the following actions are
completed: (a) this Agreement or an appropriate certificate of merger is filed
in accordance with Section 252 of the DGCL; and (b) appropriate articles of
merger are filed in accordance with Sections 302A.611, 302A.613 and 302A.641 of
the MBCA.
ARTICLE 2
Name, Articles of Incorporation, Bylaws,
Directors and Officers of the Surviving Corporation
2.1 Name of Surviving Corporation. The name of the Surviving Corporation
shall be "Green Tree Financial Corporation."
2.2 Certificate of Incorporation. The Certificate of Incorporation of the
Surviving Corporation shall be the certificate of incorporation of the
Surviving Corporation from and after the Effective Time of the Merger until
amended thereafter as provided therein or by law.
2.3 Bylaws. The Bylaws of the Surviving Corporation shall be the Bylaws of
the Surviving Corporation from and after the Effective Time of the Merger until
amended thereafter as provided therein or by law.
2.4 Directors and Officers. The directors and officers of Green Tree at the
Effective Time of the Merger shall be the directors and officers, respectively,
of the Surviving Corporation from and after the Effective Time of the Merger
and shall hold office in accordance with the Certificate of Incorporation and
Bylaws of the Surviving Corporation until the expiration of the terms to which
they were elected to serve as directors and officers of Green Tree and until
their successors are duly elected and qualified.
ARTICLE 3
Conversion and Exchange of Certificates
3.1 Conversion. At the Effective Time of the Merger, each of the following
transactions shall be deemed to occur simultaneously:
(a) Each share of Green Tree Common Stock (other than shares as to which
the holder thereof has properly exercised appraisal rights under Minnesota
law) issued and outstanding immediately prior to the Effective Time of the
Merger shall, by virtue of the Merger and without any action on the part of
the holder thereof, be converted into and become one validly issued, fully
paid and non-assessable share of the Surviving Corporation Common Stock.
The shares of Green Tree Common Stock so converted shall cease to exist as
such and shall exist only as shares of the Surviving Corporation Common
Stock.
(b) Each stock option to purchase shares of Green Tree Common Stock
granted by Green Tree or any of its subsidiaries under any of the stock
option or stock purchase plans of Green Tree and outstanding immediately
prior to the Effective Time of the Merger shall, by virtue of the Merger
and without any action on the part of the holder thereof, be converted into
and become a stock option to purchase, upon the same terms and conditions,
the number of shares of the Surviving Corporation Common Stock(ii) that amount which is equal to the numberamount of shares of Green Tree Common StockNet
Income which the optionee
would have received had he exercised his option or rightresults in full
immediately prior to the Effective Time of the Merger (whether or not such
option or right was then exercisable). The exercise price per share under
each of such options or warrants shall bean ROE which is equal to the exercise price per
share thereunder immediately prior toPerformance Threshold.
4.2 Limitations.
(a) No payment if Performance Threshold not achieved. In no event shall any
Participant receive a Performance Bonus hereunder if the Effective Time of the Merger.
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(c) Each share of the Surviving Corporation Common Stock issued and
outstanding immediately prior to the Effective Time of the Merger and held
by Green Tree, without any action on the part of Green Tree or any other
person, shall be canceled, and no shares of the Surviving Corporation or
other securities of the Surviving Corporation shall be issued or other
consideration paid in respect thereof.
3.2 Exchange of Certificates.
(a) From and after the Effective Time of the Merger, each holder of an
outstanding certificate which immediately prior to the Effective Time of
the Merger represented shares of Green Tree Common Stock shall be entitled
to receive in exchange therefor, upon surrender thereof to the transfer
agent designated by the Surviving Corporation, a certificate or
certificates representing the number of shares of the Surviving Corporation
Common Stock into which such holder's shares of Green Tree Common Stock
were converted.
(b) If any certificate for shares of the Surviving Corporation capital
stock is to be issued in a name other than that in which the certificate
for shares of Green Tree capital stock surrendered in exchange therefor is
registered, it shall be a condition of such exchange that the certificate
so surrendered shall be properly endorsed and otherwise in proper form for
transfer and the person requesting such exchange shall pay any transfer and
other taxes required by reason of the issuance of certificates for such
shares of the Surviving Corporation capital stock in a name other than that
of the registered holder of the certificate surrendered, or shall establish
to the satisfaction of the Surviving Corporation or its agent that such tax
has been paid orCompany Performance
Threshold is not applicable. Notwithstandingachieved during the foregoing, no party
hereto shall be liable to a holder of shares of Green Tree capital stock
for any shares of the Surviving Corporation capital stock or dividends or
distributions thereon delivered to a public official pursuantPerformance Period.
(b) Committee may reduce bonus payment. With respect to any applicable abandoned property, escheat or similar law.
ARTICLE 4
Employee Benefit and Compensation Plans
At the Effective Time of the Merger, any employee benefit plan or incentive
compensation plan, including any stock option plan, to which Green Tree is then
a party shall be assumed by, and continue to be the plan of the Surviving
Corporation. To the extent any employee benefit plan or incentive compensation
plan of Green Tree or any of its subsidiaries providesParticipant
except for the issuance or
purchase of, or otherwise relates to, Green Tree capital stock, from and after
the Effective Time of the Merger such plan shall be deemed to provide for the
issuance or purchase of, or otherwise to relate to, the Surviving Corporation
capital stock.
ARTICLE 5
Conditions
Consummation of the Merger is subject to the satisfaction at or prior to the
Effective Time of the Merger of the following conditions:
5.1 Green Tree Stockholder Approval. This Agreement and the Merger shall have
been adopted and approved by the stockholders of Green TreeChief Executive Officer in accordance with
the applicable provisions of the Minnesota Business Corporation Act.
5.2 The Surviving Corporation Stockholder Approval. This Agreement and the
Merger shall have been adopted and approved by Green Tree as the holder of all
the outstanding shares of the Surviving Corporation capital stock prior to the
Effective Time of the Merger.
5.3 Consents, etc. Any and all consents, permits, authorizations, approvals
and orders deemed in the sole discretion of Green Tree to be material to the
consummation of the Merger shall have been obtained.
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ARTICLE 6
General
6.1 Termination and Abandonment. This Agreement may be terminated and the
Merger and other transactions herein provided for abandoned at any time prior
to the Effective Time of the Merger, whether before or after adoption and
approval of this Agreement by the stockholders of Green Tree, by action of the
Board of Directors of Green Tree, if the Board of Directors of Green Tree
determines that the consummation of the transactions provided for herein would
not, for any reason, be in the best interests of Green Tree and its
stockholders. In the event of termination of this Merger Agreement, this Merger
Agreement shall become void and of no effect and there shall be no liability on
the part of either Green Tree or the Surviving Corporation or their respective
Boards of Directors or shareholders, except that Green Tree shall pay all
expenses incurred in connection with the Merger or in respect of this Merger
Agreement or relating thereto.
6.2 Amendment. This Agreement may be amended at any time prior to the
Effective Time of the Merger with the mutual consent of the Boards of Directors
of Green Tree and the Surviving Corporation; provided, however, that after it
has been adopted by the stockholders of Green Tree, this Agreement may not be
amended in any manner which, in the judgment of the Board of Directors of Green
Tree, would have a material adverse effect on the rights of such stockholders
or in any manner not permitted under applicable law; provided further, however,
that any amendment of this Agreement after its adoption by the sole stockholder
of the Surviving Corporation shall require the prior approval of such
stockholder.
6.3 Deferral. Consummation of the transactions herein provided for may be
deferred by the Board of Directors of Green Tree for a reasonable period of
time if the Board of Directors or officer determines that such deferral would
be, for any reason, in the best interests of Green Tree and its stockholders.
6.4 Headings. The headings set forth herein are inserted for convenience or
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
6.5 Counterparts. This Agreement may be executed in two counterparts, each of
which shall constitute an original, and all of which, when taken together,
shall constitute one and the same instrument.
6.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Minnesota without giving effect to the
principles of conflicts of law thereof, except to the extent the laws of the
State of Delaware are applicable to the Surviving Corporation in respect of the
Merger, in which case the laws of the State of Delaware shall apply without
giving effect to the principles of conflicts of law thereof.
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In Witness Whereof, each of the parties hereto has caused this Agreement to
be executed on its behalf and attested by its officers hereunto duly
authorized, all as of the day and year first above written.
Green Tree Financial Corporation
A Minnesota Corporation
By /s/ Robert D. Potts
----------------------------------
Its President and Chief Operating
Officer
Attest:
/s/ Richard G. Evans
- -------------------------------
Secretary
Green Tree Financial Corporation
A Delaware Corporation
By /s/ Robert D. Potts
----------------------------------
Its President and Chief Operating
Officer
Attest:
/s/ Richard G. Evans
- -------------------------------
Secretary
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APPENDIX B
CERTIFICATE OF INCORPORATION
GREEN TREE FINANCIAL CORPORATION
A DELAWARE CORPORATION
ARTICLE 1.
Name
The name of the Corporation is "Green Tree Financial Corporation."
ARTICLE 2.
Registered Office
The address of the registered office of the Corporation in Delaware is The
Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801, and
the name of its registered agent at such address is The Corporation Company.
ARTICLE 3.
Purpose
The purpose of this Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
the State of Delaware.
ARTICLE 4.
Authorized Shares
The aggregate number of shares which this Corporation shall have authority to
issue is 165,000,000 shares, divided into 150,000,000 common shares with a par
value of $0.01 per share, which shall be known as "Common Stock," and
15,000,000 preferred shares with a par value of $0.01 per share, which shall be
known as "Preferred Stock."
A. Common Stock. The holders of the Common Stock shall be entitled to
receive, when and as declared by the Board of Directors, out of earnings or
surplus legally available therefor, dividends payable either in cash, in
property, or in shares of the capital stock of the Corporation. Each holder of
record of the Common Stock shall have one vote for each share of Common Stock
standing in such holder's name on the books of the Corporation and entitled to
vote. The Common Stock shall have no special powers, preferences, or rights, or
qualifications, limitations, or restrictions thereof.
B. Preferred Stock. Shares of Preferred Stock may be issued from time to time
in one or more series as the Board of Directors may determine, as hereinafter
provided. The Board of Directors is hereby authorized, by resolution or
resolutions, to provide from time to time, out of the unissued shares of
Preferred Stock not then allocated to any series of Preferred Stock, for series
of the Preferred Stock. Before any shares of any such series of Preferred Stock
are issued, the Board of Directors shall fix and determine, and is hereby
expressly empowered to fix and determine, by resolution or resolutions, the
designations, powers, preferences, and relative participating, optional, and
other special rights, and the qualifications, limitations, and restrictions
thereof, of the shares of such series including, without limiting the
generality of the foregoing, any of the following provisions with respect to
which the Board of Directors shall determine to make affirmative provision:
B-1
1. The designation and name of such series and the number of shares that
shall constitute such series;
2. The annual dividend rate or rates payable on shares of such series,
the date or dates from which such dividends shall commence to accrue, and
the dividend payment dates for such dividends;
3. Whether dividends on such series are to be cumulative or
noncumulative, and the participating or other special rights, if any, with
respect to the payment of dividends;
4. Whether such series shall be subject to redemption and, if so, the
manner of redemption, the redemption price or prices and the terms and
conditions on which shares of such series may be redeemed;
5. Whether such series shall have a sinking fund or other retirement
provisions for the redemption or purchase of shares of such series, and, if
so, the terms and amount of such sinking fund or other retirement
provisions and the extent to which the charges therefore are to have
priority over the payment of dividends on or the making of sinking fund or
other like retirement provisions for shares of any other series or over the
payment of dividends on the Common Stock;
6. The amounts payable on shares of such series on voluntary or
involuntary dissolution, liquidation, or winding up of the affairs of the
Corporation and the extent to which such payment shall have priority over
the payment of any amount on voluntary or involuntary dissolution,
liquidation, or winding up of affairs of the Corporation on shares of any
other series or on the Common Stock;
7. The terms and conditions, if any, on which shares of such series may
be converted into, or exchanged for, shares of any other series or of
Common Stock;
8. The extent of the voting powers, if any, of the shares of such series;
9. The stated value, if any, for the shares of such series, the
consideration for which shares of such series may be issued and the amount
of such consideration that shall be credited to the capital account; and
10. Any other preferences and relative, participating, optional, or other
special rights, and qualifications, limitations, or restrictions thereof,
of the shares of such series.
The Board of Directors is expressly authorized to vary the provisions
relating to the foregoing matters between the various series of Preferred
Stock.
All shares of Preferred Stock of any one series shall be identical in all
respects with all other shares of such series, except that shares of any one
series issued at different times may differ as to the dates from which
dividends thereon shall be payable, and if cumulative, shall cumulate.
Shares of any series of Preferred Stock that shall be issued and thereafter
acquired by the Corporation through purchase, redemption (whether through the
operation of a sinking fund or otherwise), conversion, exchange, or otherwise,
shall, upon appropriate filing and recording to the extent required by law,
have the status of authorized and unissued shares of Preferred Stock and may be
reissued as part of such series or as part of any other series of Preferred
Stock. Unless otherwise provided in the resolution or resolutions of the Board
of Directors providing for the issuance thereof, the number of authorized
shares of stock of any series of Preferred Stock may be increased or decreased
(but not below the number of shares thereof then outstanding) by resolution or
resolutions of the Board of Directors and appropriate filing and recording to
the extent required by law. In case the number of shares of any such series of
Preferred Stock shall be decreased, the shares representing such decrease
shall, unless otherwise provided in the resolution or resolutions of the Board
of Directors providing for the issuance thereof, resume the status of
authorized but unissued shares of Preferred Stock, undesignated as to series.
B-2
ARTICLE 5.
No Cumulative Voting
There shall be no cumulative voting by the stockholders of the Corporation.
ARTICLE 6.
No Preemptive Rights
The stockholders of the Corporation shall not have preemptive rights to
subscribe for or acquire securities or rights to purchase securities of any
kind, class or series of the Corporation.
ARTICLE 7.
Stockholder Voting Requirement
Except as provided elsewhere in this Certificate of Incorporation, any
agreement for consolidation or merger with one or more foreign or domestic
corporations, amendment of this Certificate of Incorporation or dissolution of
this Corporation may be authorized by the affirmative vote of the holders of a
majority of the voting power of all shares entitled to vote.
ARTICLE 8.
Certain Business Combinations
A. In addition to an affirmative vote required by law or this Certificate of
Incorporation, and except as otherwise expressly provided in paragraph B of
this Article 8,
1. any merger or consolidation of the Corporation or any Subsidiary (as
hereinafter defined) with (a) an Interested Stockholder (as hereinafter
defined) or (b) any other corporation (whether or not itself an Interested
Stockholder) which is, or after such merger or consolidation would be, an
Affiliate or Associate (as such terms are hereinafter defined) of an
Interested Stockholder, or
2. any sale, lease, exchange, mortgage, pledge, grant of a security
interest, transfer, or other disposition (in one transaction or a series of
transactions), other than in the ordinary course of business, to or with
(a) an Interested Stockholder or (b) any other person (whether or not
itself an Interested Shareholder) which is, or after such sale, lease,
exchange, mortgage, pledge, grant of a security interest, transfer, or
other disposition would be, an Affiliate or Associate of an Interested
Stockholder, directly or indirectly, of all or any Substantial Part (as
hereinafter defined) of the assets of the Corporation (including, without
limitation, any voting securities of a Subsidiary) or any Subsidiary, or
both, or
3. the issuance or transfer by the Corporation or any Subsidiary (in one
transaction or a series of transactions) of any securities (except pursuant
to stock dividends, stock splits, or similar transactions which would not
have the effect of increasing the proportionate voting power of an
Interested Stockholder) of the Corporation or any Subsidiary, or both, to
(a) an Interested Stockholder or (b) any other person (whether or not
itself an Interested Stockholder) which is, or after such issuance or
transfer would be, an Affiliate or Associate of an Interested Stockholder,
or
4. the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of an Interested
Stockholder or any Affiliate or Associate of an Interested Stockholder, or
5. any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any other
B-3
transaction (whether or not with or into or otherwise involving an
Interested Stockholder) which has the effect, directly or indirectly, of
increasing the proportionate share of the outstanding shares of any class
of equity or convertible securities of the Corporation or any Subsidiary
directly or indirectly beneficially owned by (a) an Interested Stockholder
or (b) any other person (whether or not itself an Interested Stockholder)
which is, or after such reclassification, recapitalization, merger, or
consolidation, or other transaction would be, an Affiliate or Associate of
an Interested Stockholder,
shall not be consummated unless such consummation shall have been approved by
the affirmative vote of the holders of at least 80% of the combined voting
power of the then outstanding shares of Voting Stock (as hereinafter defined),
voting together as a single class. Such affirmative vote shall be required
notwithstanding the fact that no vote may be required, or that a lesser
percentage may be specified, by law, in this Certificate of Incorporation, in
any agreement with any national securities exchange, or otherwise.
B. The provisions of paragraph (A) of this Article 8 shall not be applicable
to any particular Business Combination (as hereinafter defined) and such
Business Combination shall require only such affirmative vote as is required by
law and any other provision of this Certificate of Incorporation, if the
Business Combination shall have been approved by a majority of the Continuing
Directors (as hereinafter defined) or all of the following conditions shall
have been met:
1. The transaction constituting the Business Combination shall provide
for a consideration to be received by all holders of Common Stock in
exchange for all their shares of Common Stock and the aggregate amount of
the cash and the Fair Market Value (as hereinafter defined) as of the date of the consummationadoption of
the Business CombinationPlan, the Committee retains sole discretion to reduce the amount of consideration other thanany
bonus otherwise payable under this Plan.
A-3
Section 5. Benefit Payments.
5.1 Time and Form of Payments. Subject to any deferred compensation election
pursuant to any such plans of the Company applicable hereto, benefits shall be
paid to the Participant in a single lump sum cash payment as soon as
administratively feasible after the Committee has certified the Company's Net
Income and the Performance Threshold for that Performance Period.
5.2 Nontransferability. Participants and beneficiaries shall not have the
right to assign, encumber or otherwise anticipate the payments to be received per share by holdersmade under
this Plan, and the benefits provided hereunder shall not be subject to seizure
for payment of Common Stock inany debts or judgments against any Participant or any
beneficiary.
5.3 Tax Withholding. In order to comply with all applicable federal or state
income tax laws or regulations, the Company may take such Business
Combinationaction as it deems
appropriate to ensure that all applicable federal or state payroll,
withholding, income or other taxes, which are the sole and absolute
responsibility of a Participant, are withheld or collected from such
Participant.
Section 6. General Terms of Awards.
(a) No Cash Consideration for Awards. Awards shall be at least equal togranted for no cash
consideration or for such minimal cash consideration as may be required by
applicable law.
(b) Awards May Be Granted Separately or Together. Awards may, in the
higherdiscretion of the following:
(a) (if applicable)Committee, be granted either alone or in addition to, in
tandem with or in substitution for any other Award or any award granted under
any plan of the highest per share price (includingCompany. Awards granted in addition to or in tandem with other
Awards or in addition to or in tandem with awards granted under any brokerage commissions, transfer taxessuch other
plan of the Company may be granted either at the same time as or at a different
time from the grant of such other Awards or awards.
(c) Limits on Transfer of Awards. No Award and soliciting dealers' fees)
paid in order to acquireno right under any sharessuch Award
shall be transferable by a Participant otherwise than by will or by the laws of
Common Stock beneficially owneddescent and distribution; provided, however, that, if so determined by an Interested Stockholder (i) within the
two-year period immediately
prior to the Announcement Date (as hereinafter defined), (ii) within
the two-year period immediately prior to the Determination Date (as
hereinafter defined), or (iii)Committee, a Participant may, in the transaction in which it became an
Interested Stockholder, whichever is highest;manner established by the Committee,
designate a beneficiary or (b)beneficiaries to exercise the Fair Market Value per share of Common Stock on the
Announcement Date or on the Determination Date, whichever is higher;
2. If the transaction constituting the Business Combination shall provide
for a consideration to be received by holders of any class or series of
outstanding Voting Stock other than Common Stock, the aggregate amountrights of the
cashParticipant and the Fair Market Value as of the date of the consummation of
the Business Combination of consideration other than cash to be received
per share by holders of shares of such class or series of Voting Stock
shall be at least equal to the highest of the following (it being intended
that the requirements of this subparagraph 2 shall be required to be metreceive any property distributable with respect to every classany Award
upon the death of the Participant. Each Award or right under any Award shall be
exercisable during the Participant's lifetime only by the Participant or, if
permissible under applicable law, by the Participant's guardian or legal
representative. No Award or right under any such Award may be pledged,
alienated, attached or otherwise encumbered, and seriesany purported pledge,
alienation, attachment or encumbrance thereof shall be void and unenforceable
against the Company or any Affiliate.
(d) Term of outstanding Voting Stock, whetherAwards. The term of each Award shall be for such period as may be
determined by the Committee.
(e) Restrictions; Securities Exchange Listing. All certificates for Shares or
not an Interested Stockholder has previously acquired any shares of a
particular class of Voting Stock):
(a) (if applicable)other securities delivered under the highest per share price (including any brokerage
commissions, transfer taxes, and soliciting dealers' fees) paid in order to
acquire any shares of such class or series of Voting Stock beneficially
owned by an Interested Stockholder (i) within the two-year period
immediately priorPlan pursuant to the Announcement Date, (ii) within the two-year period
immediately prior to the Determination Date, or (iii) in the transaction in
which it became an Interested Stockholder, whichever is highest; or
(b) the Fair Market Value per share of such class or series of Voting
Stock on the Announcement Date or the Determination Date, whichever is
higher; or
(c) (if applicable) the highest preferential amount per share to which
the holders of shares of such class or series of Voting Stock are entitled
in the eventexercise of any
voluntary or involuntary liquidation, dissolution, or
winding up of the Corporation;
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3. The consideration to be received by holders of a particular class or
series of outstanding Voting Stock (including Common Stock) shall be in
cash or in the same form as was previously paid in order to acquire shares
of such class or series of Voting Stock which are beneficially owned by an
Interested Stockholder and, if an Interested Stockholder beneficially owns
shares of any class or series of Voting Stock which were acquired with
varying forms of consideration, the form of consideration for such class or
series of Voting Stock shall be either cash or the form used to acquire the
largest number of shares of such class or series of Voting Stock
beneficially owned by it. The price determined in accordance with
subparagraphs 1 and 2 of this paragraphOption shall be subject to appropriate
adjustment insuch stop transfer orders and other reasonable
restrictions as the event of any recapitalization, stock dividend, stock
split, combination of shares,Committee may deem advisable under the Plan or similar event;
4. After an Interested Stockholder has become an Interested Stockholderthe rules,
regulations and prior to the consummation of such Business Combination:
(a) except as approved by a majority of the Continuing Directors,
there shall have been no failure to declare and pay at the regular date
therefor the full amount of any dividends (whether or not cumulative)
payable on any outstanding preferred stock;
(b) there shall have been (i) no reduction in the annual rate of
dividends paid on the Common Stock (except as necessary to reflect any
subdivision of the Common Stock) other than as approved by a majority
of the Continuing Directors and (ii) an increase in such annual rate of
dividends as necessary to prevent any such reduction in the event of
any reclassification (including any reverse stock split),
recapitalization, reorganization, or any similar transaction which has
the effect of reducing the number of outstanding shares of the Common
Stock, unless the failure so to increase such annual rate is approved
by a majority of the Continuing Directors; and
(c) such Interested Stockholder shall not have become the beneficial
owner of any additional shares of Voting Stock except as part of the
transaction in which it became an Interested Stockholder;
5. After an Interested Stockholder has become an Interested Stockholder,
such Interested Stockholder shall not have received the benefit, directly
or indirectly (except proportionately as a shareholder), of any loans,
advances, guarantees, pledges, or other financial assistance or any tax
credits or other tax advantages provided by the Corporation, whether in
anticipation of or in connection with such Business Combination or
otherwise; and
6. A proxy or information statement describing the proposed Business
Combination and complying with the requirements of the Securities and Exchange Act of 1934Commission
and any applicable federal or state securities laws, and the rulesCommittee may
cause a legend or legends to be placed on any such certificates to make
appropriate reference to such restrictions. If the Shares or other securities
are traded on a securities exchange, the Company shall not be required to
deliver any Shares or other securities covered by an Option unless and regulations thereunder (or any subsequent
provisions replacinguntil
such Act, rulesShares or regulations)other securities have been admitted for trading on such
securities exchange. The Committee shall be mailedprovide for the registration of the
securities covered by the Option pursuant to Form S-8.
Section 7. Amendment and Termination; Adjustments. Except to the stockholders of the Corporation, no later than the earlier of (a) 30 days
prior to any vote on the proposed Business Combination or (b) if no vote on
such Business Combination is required, 60 days prior to the consummation of
such Business Combination (whether or not such proxy or information
statement is required to be mailed pursuant to such Act or subsequent
provisions). Such proxy statement shall contain at the front thereof,extent
prohibited by applicable law and unless otherwise expressly provided in a
prominent place, any recommendations as to the advisability (or
inadvisability) of the Business Combination which the Continuing Directors,
or any of them, may have furnished in writing and, if deemed advisable by a
majority of the Continuing Directors, an
opinion of a reputable investment
banking firm as to the fairness (or lack of fairness) of the terms of such
Business Combination, from the point of view of the holders of Voting Stock
other than an Interested Stockholder (such investment banking firm to be
selected by a majority of the Continuing Directors, to be furnished with
all information it reasonable requests and to be paid a reasonable fee for
its services upon receipt by the Corporation of such opinion).
C. For the purposes of this Article 8:
1. "Business Combination" shall mean any transaction which is referred to
in any one or more of subparagraphs 1 through 5 of paragraph (A) of this
Article 8.
2. "Voting Stock" shall mean stock of all classes and series of the
Corporation entitled to vote generally in the election of directors.
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3. "Person" shall mean any individual, firm, trust, partnership,
association, corporation, or other entity.
4. "Interested Stockholder" shall mean any person (other than the
Corporation or any Subsidiary) who or which:
(a) is the beneficial owner, directly or indirectly, of more than 10%
of the combined voting power of the then outstanding Voting Stock; or
(b) is an Affiliate or Associate of the Corporation and at any time
within the two-year period immediately prior to the date in question
was the beneficial owner, directly or indirectly, of more than 10% of
the combined voting power of the then outstanding Voting Stock; or
(c) is an assignee of or has otherwise succeeded to the beneficial
ownership of any shares of Voting Stock which were at any time within
the two-year period immediately prior to the date in question
beneficially owned by an Interested Stockholder, unless such assignment
or succession shall have occurred pursuant to a Public Transaction (as
hereinafter defined) or any series of Public Transactions.
For the purposes of determining whether a person is an Interested
Stockholder, the number of shares of Voting Stock deemed to be outstanding
shall include shares deemed owned through application of subparagraph 6
below but shall not include any other shares of Voting Stock which may be
issuable pursuant to any agreement, arrangement or understanding, or upon
exercise of conversion rights, warrants or options, or otherwise.
5. "Public Transaction" shall mean any (a) purchase of shares offered
pursuant to an effective registration statement under the Securities Act of
1933 or (b) open-market purchase of shares on a national securities
exchangeAward or in the over-the-counter market if, in either such case,Plan:
(a) Amendments to the price and other terms of sale are not negotiated by the purchaser and the
seller of the beneficial interest in the shares.
6. A person shall be a "beneficial owner" of any Voting Stock:
(a) which such person or any of its Affiliates or Associates
beneficially owns, directly or indirectly; or
(b) which such person or any of its Affiliates or Associates has (i)
the right to acquire (whether such right is exercisable immediately or
only after the passage of time) pursuant to any agreement, arrangement,
or understanding or upon the exercise of conversion rights, exchange
rights, warrants, or options, or otherwise or (ii) the right to vote or
to direct the voting thereof pursuant to any agreement, arrangement or
understanding; or
(c) which is beneficially owned, directly or indirectly, by any other
person with which such person or any of its Affiliates or Associates
has any agreement, arrangement, or understanding for the purpose of
acquiring, holding, voting or disposing of any shares of Voting Stock.
7. "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on January 1, 1995.
8. "Subsidiary" shall mean any corporation of which a majority of any
class of equity security (as defined In Rule 3a11-1 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as in effect on
January 1, 1995) is owned, directly or indirectly, by the Corporation;
provided, however, that, for purposes of the definition of Interested
Stockholder set forth in subparagraph 4, the term "Subsidiary" shall mean
only a corporation of which a majority of each class of equity security is
owned, directly or indirectly, by the Corporation.
9. "Continuing Director" shall mean (A) any member of thePlan. The Board of Directors of the Corporation who (1) is not an AffiliateCompany may
amend, alter, suspend, discontinue or Associate of,
and not a nominee of, an Interested Stockholder, and (2) was a memberterminate the Plan; provided,
however, that, notwithstanding any other provision of the
board priorA-4
Plan or any Award, without the approval of the stockholders of the Company,
no such amendment, alteration, suspension, discontinuation or termination
shall be made that, absent such approval:
(i) would cause Rule 16b-3 to become unavailable with respect to the
time that any Interested Stockholder became an
Interested
B-6
Stockholder, and (B) any successorPlan; or
(ii) would violate the rules or regulations of any such member who is not an
Affiliate or an Associate of, and not a nominee of, such Interested
Stockholder and is recommended to succeed any such member by a majority of
all such members then on the Board of Directors.
10. "Announcement Date" shall mean the date of the first public
announcement of the proposed Business Combination.
11. "Determination Date" shall mean the date on which an Interested
Stockholder became an Interested Stockholder.
12. "Fair Market Value" shall mean: (a) in the case of stock, the highest
closing sale price during the 30-day period immediately preceding the date
in question of a share of such stock on the Composite Tape for New York
Stock Exchange-Listed Stocks, or, if such stock is not quoted on the
Composite Tape, on the New York Stock
Exchange, or, if such stock is not
listed on such Exchange, on the principal United Statesany other securities exchange registered under the Securities Exchange Act of 1934 on which such stock is
listed, or if such stock is not listed on any such exchange, the highest
closing bid quotation or last reported sale price, whichever is applicable,
with respect to a share of such stock during the 30-day period preceding
the date in question on the National Association of
Securities Dealers, Inc. Automated Quotations Systemthat are applicable to the Company.
(b) Amendments to Awards. The Committee may waive any conditions of or
rights of the Company under any outstanding Award, prospectively or
retroactively. The Committee may not amend, alter, suspend, discontinue or
terminate any outstanding Award, prospectively or retroactively, without
the consent of the Participant or holder or beneficiary thereof, except as
otherwise herein provided.
(c) Correction of Defects, Omissions and Inconsistencies. The Committee
may correct any defect, supply any omission or reconcile any inconsistency
in the Plan or any system thenAward in use, or if no such
quotations are available, the fair market value onmanner and to the date in questionextent it shall deem
desirable to carry the Plan into effect.
Section 8. Miscellaneous.
8.1 Effective Date. The Plan shall be effective as of a share of such stock as determinedFebruary 9, 1996,
subject to its approval by a majoritythe stockholders of the Continuing
Directors in good faith;Company, and (b) in the case of property other than cash or
stock, the fair market value of such property on the date in question as
determined by a majority of the Continuing Directors in good faith.
13. "Substantial Part"no payments
shall mean more than 30 percent of the fair market
value of the total assets of the Corporation as of the end of its most
recent fiscal year ending priorbe made pursuant to any Performance Bonus granted pursuant to the timePlan
until after the determination is being
made.
D. A majority of the Continuing Directors shall have the power and duty to
determine for the purposes of this Article 8, on the basis of information known
to them after reasonable inquiry, all facts necessary to determine compliance
with this Article 8, including, without limitation, (1) whether a person is an
Interested Stockholder, (2) the number of shares of Voting Stock beneficially
owned by any person, (3) whether a person is an Affiliate or Associate of
another, (4) whether the assets which are the subject of any Business
Combination constitute a Substantial Part of the assets of the Corporation or
the Subsidiary, or both, (5) whether the requirements of paragraph (B) of this
Article 8 have been met, and (6) such other matters with respect to which a
determination is required under this Article 8. The good faith determination of
a majority of the Continuing Directors on such matters shall be conclusive and
binding for all purposes of this Article 8.
E. Nothing contained in this Article 8 shall be construed to relieve an
Interested Stockholder from any fiduciary obligation imposed by law.
F. Notwithstanding any other provisions of this Certificate of Incorporation
or the Bylaws of the Corporation or the fact that a lesser percentage may be
specified by law, this Certificate of Incorporation or the Bylaws of the
Corporation, the affirmative vote of the holders of at least 80% of the
combined voting power of the then outstanding Voting Stock, voting as a single
class, shall be required to amend, alter, adopt any provision inconsistent with
or repeal this Article 8.
ARTICLE 9.
Purchases of Stock of the Corporation
A. Except as otherwise expressly provided in this Article 9, the Corporation
may not purchase any shares of Common Stock at a per-share price in excess of
the Fair Market Price (as hereinafter defined) as of the time of such purchase
from a person known by the Corporation to be a Substantial Stockholder (as
hereinafter
B-7
defined), unless such purchasePlan has been approved by the affirmative vote of the
holders of at least two-thirds of the shares of Common Stock voted thereon held
by Disinterested Stockholders (as hereinafter defined). Such affirmative vote
shall be required notwithstanding the fact that no vote may be required or that
a lesser percentage may be specified by law, in this Certificate of
Incorporation or in any agreement with any national securities exchange or
otherwise.
B. The provisions of this Article 9 shall not apply to (1) any purchase
pursuant to an offer to purchase which is made on the same terms and conditions
to the holders of all of the outstanding shares of Common Stock, (2) any open
market purchase that constitutes a Public Transaction (as hereinafter defined).
C. For the purposes of this Article 9:
1. The terms "Person", "Public Transaction", "Beneficial Owner",
"Affiliate", and "Associate" shall have the meanings given to them in
Article 8 of this Certificate of Incorporation.
2. "Substantial Stockholder" shall mean any person (other than any
employee benefit plan or trust of the Corporation or any similar entity)
who or which is the beneficial owner of shares of Common Stock constituting
more than 10% of the combined voting power of the then outstanding Common
Stock, and who or which acquired beneficial ownership of any such shares
within the two-year period immediately prior to the date on which the
Corporation purchases any such shares.
For the purposes of determining whether a person is a Substantial
Stockholder, the number of shares of Common Stock deemed to be outstanding
shall include shares deemed owned through application of subparagraph 5
below but shall not include any other shares of Common Stock which may be
issuable pursuant to any agreement, arrangement or understanding, or upon
exercise of conversion rights, warrants or options, or otherwise.
3. "Disinterested Stockholders" shall mean those holders of Common Stock
who are not Substantial Stockholders.
4. "Fair Market Price" shall mean the highest closing sale price on the
Composite Tape for New York Stock Exchange-Listed Stocks during the 30-day
period immediately preceding the date in question of a share of Common
Stock or, if such stock is not quoted on the Composite Tape, on the New
York Stock Exchange or, if such stock is not listed on such Exchange, on
the principal United States securities exchange registered under the
Securities Exchange Act of 1934 on which such stock is listed, or, if such
stock is not listed on any such exchange, the highest closing bid quotation
or last reported sale price, whichever is applicable, with respect to a
share of such stock during the 30-day period preceding the date in question
on the National Association of Securities Dealers, Inc. Automated
Quotations System or any system then in use, or, if no such quotations are
available, the fair market value on the date in question of a share of such
stock as determined by a majority of the Board of Directors in good faith.
5. A person shall be a "beneficial owner" of any Voting Stock:
(a) which such person or any of its Affiliates of Associates
beneficially owns, directly or indirectly; or
(b) which such person or any of its Affiliates of Associates has (i)
the right to acquire (whether such right is exercisable immediately or
only after the passage of time) pursuant to any agreement, arrangement,
or understanding or upon the exercise of conversion rights, exchange
rights, warrants, or options, or otherwise or (ii) the right to vote or
to direct the voting thereof pursuant to any agreement, arrangement or
understanding; or
(c) which is beneficially owned, directly or indirectly, by any other
person with which such person or any of its Affiliates or Associates
has any agreement, arrangement, or understanding for the purpose of
acquiring, holding, voting or disposing of any shares of Voting Stock.
B-8
D. A majority of the Board of Directors shall have the power and duty to
determine for the purposes of this Article 9, on the basis of information known
to them after reasonable inquiry, all facts necessary to determine compliance
with this Article 9, including without limitation (1) whether a person is a
Substantial Stockholder, (2) the number of shares of Common Stock beneficially
owned by any person, (3) whether a person is an Affiliate or Associate of
another, (4) whether a price is in excess of the Fair Market Price, (5) whether
a purchase constitutes a Public Transaction and (6) such other matters with
respect to which a determination is required under this Article 9. The good
faith determination of a majority of the Board of Directors on such matters
shall be conclusive and binding for all purposes of this Article 9.
E. Nothing contained in this Article 9 shall be construed to relieve a
Substantial Stockholder from any fiduciary obligation imposed by law.
F. Notwithstanding any other provisions of this Certificate of Incorporation
or the Bylaws of the Corporation or the fact that a lesser percentage may be
specified by law, this Certificate of Incorporation or the Bylaws of the
Corporation, the affirmative vote of the holders of at least 80% of the
combined voting power of the then outstanding voting stock, voting as a single
class, shall be required to amend, alter, adopt any provision inconsistent
with, or repeal this Article 9.
ARTICLE 10.
Directors
A director may be removed by the holders of the majority of shares then
entitled to vote at an election of directors, with or without cause.
ARTICLE 11.
Stockholders' Actions
No action shall be taken by the stockholders of the Corporation except at an
annual or special meeting of stockholders called in accordance with the Bylaws,
and no action shallCompany;
provided, however, that (i) a Stock Option may be taken by the stockholders by written consent.
ARTICLE 12.
Bylaws
The Board of Directors shall have the power to adopt, amend or repeal the
Bylaws of this Corporation, subjectgranted pursuant to the power of the shareholders to adopt,
amend, or repeal such bylaws. Bylaws fixing the number of directors or their
classifications, qualifications, or terms of office, or prescribing procedures
for removing directors or filling vacancies in the Board may be adopted,
amended or repealed only by (i) the Board of Directors, to the extent permitted
by law, or (ii) the affirmative vote of the holders of 80% of the combined
voting power of the then outstanding voting stock of this Corporation, voting
as a single class, or such lesser percentage of the outstanding voting stock as
may from time to time be provided in such Bylaws. Notwithstanding any other
provisions of this Certificate of Incorporation or the Bylaws of the
Corporation or the fact that a lesser percentage may be specified by law, this
Certificate of Incorporation or the Bylaws of the Corporation, the affirmative
vote of the holders of at least 80% of the combined voting power of the then
outstanding voting stock, voting as a single class, shall be required to amend,
alter, adopt any provision inconsistent with or repeal this Article 12.
B-9
ARTICLE 13.
Limitation of Directors' Liability
A Director of this Corporation shall not be personally liable to the
Corporation or its shareholders for monetary damages for breach of fiduciary
duty as a Director, except for liability (i) for any breach of the Director's
duty of loyalty to the Corporation or its shareholders; (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of the law; (iii) for the payment of an improper dividend or
improper repurchase of the Corporation's stock under Section 174 of the General
Corporation Law of the State of Delaware; (iv) for any transaction from which
the Director derived an improper personal benefit. If the General Corporation
Law of the State of Delaware is hereafter amended to authorize the further
elimination or limitation of the liability of directors, then the liability of
a director of the Corporation, in addition to the limitation on personal
liability provided herein, shall be limited to the fullest extent permitted by
the amended General Corporation Law. Any repeal or modification of the
foregoing provisions of this Article 13 by the shareholders of the Corporation
shall be prospective only and shall not adversely affect any right or
protection of a Director of the Corporation existing at the time of such repeal
or modification.
ARTICLE 14.
Incorporator
The name and the mailing address of the sole incorporator is:
Name
Drew S. Backstrand
Mailing Address
Green Tree Financial Corporation
300 Landmark Towers
St. Paul, MN 55102-1637
In Witness Whereof, this Certificate has been subscribed this 21st day of
March, 1995 by the undersigned who affirms that the statements made herein are
true and correct.
/s/ Drew S. Backstrand
-------------------------------------
Drew S. Backstrand
Sole Incorporator
B-10
APPENDIX C
BYLAWS
OF
GREEN TREE FINANCIAL CORPORATION,
A DELAWARE CORPORATION
ARTICLE I
Offices, Corporate Seal
Section 1.01. Offices. The address of the registered office of the
Corporation and the name of its registered agent, if any, at the address of the
registered office shall be set forth in the Certificate of Incorporation or in
the latest statement filed with the Secretary of State. The Corporation may
have such other offices, within or without the State of Delaware, as the Board
of Directors shall, from time to time, determine.
Section 1.02. Corporate Seal. The corporate seal shall be circular in form
and shall have inscribed thereon the name of the Corporation and the word
"Delaware" and the words "Corporate Seal". It shall not be necessary for the
Corporation to use the corporate seal on any document.
ARTICLE II
Meetings of Stockholders
Section 2.01. Place of Meeting. Meetings of the stockholders of the
Corporation shall be held at such place, either within or without the state of
Delaware, as may be designated from time to time by the Board of Directors, or
if not so designated, then at the office of the Corporation required to be
maintained pursuant to Section 1.01 hereof.
Section 2.02. Annual Meetings. The Corporation shall hold meetings of the
stockholders on an annual basis on such day or date and at such time and place
as the Board of Directors shall determine by resolution. At annual meetings,
the stockholders shall elect qualified successors for directors whose terms are
expiring and may transact such other business as may be appropriate for
stockholders' action.
Section 2.03. Special Meetings. The Corporation may hold special meetings of
the stockholdersPlan
at any time on or after the Effective Date, subject to such stockholder
approval; and, (ii) the first Performance Period for any purpose. The Chief Executive Officer,which a Performance Bonus
may be granted shall be for the Chief Financial Officer, two or more directors, or a stockholder or
stockholders holding at least 10%Company's fiscal year ending December 31, 1997.
8.2 Term of the voting power of all shares entitled to
vote may call a special meeting. A stockholderPlan. The Plan shall continue until December 31, 2006, unless
sooner discontinued or stockholders holding 10% or
more ofterminated by the voting power of all shares entitled to vote may demand a special
meeting of the stockholders by written notice of demandCommittee.
8.3 Headings. Headings are given to the Chief
Executive Officer or Chief Financial OfficerSections and subsections of the Corporation and containing
the purposes of the meeting. If the Board of Directors fails to cause a special
meeting to be called and held as required by this Section 2.03, the stockholder
or stockholders making the demand may call the meeting by giving notice as
required by Section 2.05, all at the expense of the Corporation. The
Corporation shall hold special meetings on the date and at the time and place
fixed by the Chief Executive Officer or the Board of Directors, except that the
Corporation shall hold a special meeting called by or at demand of a
stockholder or stockholders in the county where the Principal Executive Office
is located. The business transacted at a special meeting shall be limited to
the purposes as stated in the notice of the meeting. Any business transacted at
a special meeting that is not included in the purposes stated in the notice of
the meeting is voidable by or on behalf of the Corporation, unless all
stockholders have waived notice of the meeting.
Section 2.04. Record Date. The Board of Directors shall fix a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors,
C-1
and which record date shall not be more than sixty days nor less than ten days
preceding the date of any meeting of stockholders as the record date for the
determination of the stockholders entitled to notice of, and to vote at, such
meeting. When a record date is so fixed, only stockholders as of that date are
entitled to notice of and permitted to vote at that meeting of stockholders. In
the absence of action by the Board of Directors, such record date shall be the
forty-fifth day prior to a meeting, unless such forty-fifth day is not a
business day in which event the record date shall be the last business day
immediately prior to such forty-fifth day.
Section 2.05. Notice of Meeting. Except as otherwise specified in Section
2.07 or required by law, notice of each meeting of the stockholders stating the
date, time, and place and, in the case of a special meeting, the purpose or
purposes, shall be given at least ten days and not more than sixty days prior
to the meeting to every holder of shares entitled to vote at such meeting.
Section 2.06. Quorum. The holders of a majority of the voting power of the
shares entitled to vote at a meeting, whether present in person or by proxy,
shall constitute a quorum for the transaction of business at any annual or
special meeting. If a quorum is present when a duly called or held meeting is
convened, the stockholders present may continue to transact business until
adjournment, even though the withdrawal of a number of stockholders originally
present leaves less than the proportion or number otherwise required for a
quorum.
Section 2.07. Adjourned Meetings. Those present at a meeting may adjourn the
meeting from time to time, whether or not a quorum is present. The Corporation
shall not be required to give notice of the reconvened meeting to the
stockholders if the date, time, and place of the reconvened meeting is
announced at the meeting being adjourned; provided, however, that if the
adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting. At reconvened meetings at which a quorum is present, any business may
be transacted which might have been transacted at the meeting as originally
noticed.
Section 2.08. Act of the Stockholders. At any meeting of stockholders, the
stockholders shall take action by the affirmative vote of the holders of a
majority of the voting power of the shares present and entitled to vote, except
to the extent otherwise required by Delaware General Corporation Law. In the
event the Corporation shall have outstanding a class or series of shares that
are entitled to votePlan
solely as a class or series by Delaware General Corporation Law,
the Certificate of Incorporation, these Bylaws, or the terms of such shares,
the matter being voted upon must also receive the affirmative vote of the
holders of the same proportion of the shares of that class or series as is
required pursuantconvenience to the preceding sentence.
Section 2.09. Voting. At each meeting of the stockholders every stockholder
having the right to vote shall be entitled to vote either in person or by proxy
meeting the requirements of Section 2.10. Unless otherwise provided in the
Certificate of Incorporation, or according to the terms of the shares, each
stockholder shall have one vote for each share having voting power registered
in such stockholder's name on the books of the Corporation. Holders of shares
entitled to vote may vote any portion of the shares in any way the stockholder
chooses. If a stockholder votes without designating the proportion or number of
shares voted in a particular way, the stockholder is deemed to have voted all
of the shares in that way. Jointly owned shares may be voted by any joint owner
unless the Corporation receives written notice from any one of them denying the
authority of that person to vote the shares. Upon the demand of any
stockholder, the vote upon any question before the meeting shall be by ballot.
Section 2.10. Proxies. A stockholder may cast or authorize the casting of a
vote by filing a written appointment of a proxy with an officer of the
Corporation at or before the meeting at which the appointment is to be
effective. No proxy shall be voted or acted upon after three years from its
date, unless the proxy provides for a longer period. An appointment of a proxy
for shares held jointly by two or more stockholders
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is valid if signed by any one of them, unless the Corporation receives from any
one of those stockholders written notice either denying the authority of that
person to appoint a proxy or appointing a different proxy. To be valid, all
proxies must meet the requirements of, and shall be governed by, Delaware
General Corporation Law.
Section 2.11. Waiver Of Notice. Any stockholder may waive notice of any
regular or special meeting, either before, at, or after such meeting, orally or
in a writing signed by such stockholder or a representative entitled to vote
the share, of such stockholder. Attendance by a stockholder at any meeting of
stockholders is a waiver of notice of such meeting, except where the
stockholder objects at the beginning of the meeting to the transaction of
business because the meeting is not lawfully called or convened or objects
before a vote on an item of business because the item may not lawfully be
considered at that meeting and the stockholder does not participate in the
consideration of the item at that meeting.
Section 2.12. List of Stockholders. The Secretary shall prepare and make, at
least 10 days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at said meeting, arranged in alphabetical order,
showing the address of each stockholder and the number of shares registered in
the name of each stockholder.facilitate reference. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least 10 days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not specified, at the place where the
meeting is to be held. The list shall be produced and kept at the time and
place of meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
ARTICLE III
Directors
Section 3.01. General Powers. The business and affairs of the Corporation
shall be managed by or under the direction of the Board of Directors.
Section 3.02. Number, Qualification and Term of Office. The number of
directors shall not be less than three nor more than eleven and shall be
established by resolution of the Board of Directors. Directors need not be
stockholders. The number of directors may be increased beyond eleven or
decreased below three from time to time by a resolution adopted by the
stockholders of at least 80% of the shares of the Corporation entitled to vote
or, to the extent permitted by law, by the Board of Directors. The directors
shall be divided into three classes, as equal in number as possible. Directors
in the first class (currently two directors) shall serve until the 1996 regular
meeting of stockholders; directors in the second class (currently two
directors) shall serve until the 1997 regular meeting of stockholders; and
directors in the third class (currently two directors) shall serve until the
1998 regular meeting of stockholders. At each regular meeting of the
stockholders each director elected to succeed a director whose term has expired
shall hold office until the third succeeding regular meeting of the
stockholders after such director's election and until such directors successor
has been duly elected and qualified, or until the earlier death, resignation,
removal or disqualification of such director. In case of any increase or
decrease in the number of directors, the increase or decrease shall be
distributed among the several classes as equally as possible as shall be
determined by the Board of Directors or by the stockholders of at least 80% of
the shares of the Corporation entitled to vote; provided that any increase
shall first be applied to the class of directors having the shortest unexpired
term and any decrease shall first be applied to the class of directors having
the longest unexpired term.
Notwithstanding the foregoing, whenever the holders of any one or more series
of Preferred Stock issued by the Corporation pursuant to Article 4 of the
Certificate of Incorporation of the Corporation shall have the right, voting
separately as a class or by series, to elect directors at an annual or special
meeting of stockholders, the election, term of office, filling of vacancies and
other features of such directorships shall be
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governed by the terms of the series of Preferred Stock applicable thereto, and
such directors so elected shall not be divided into classes pursuant to this
Section 3.02 or Article III unless expressly provided by the terms of the
applicable series.
(a) Amendment. No provision of this Section 3.02 of Article III may be
amended or rescinded, except by the affirmative vote of the stockholders of
at least 80% of the outstanding shares of the Corporation entitled to vote,
or by the Board of Directors, to the extent permitted by law.
Section 3.03. Board Meetings. The Board of Directors may hold meetings from
time to time at such time and place as the notice of such meeting may designate
or at the place announced if no notice is required. The Board of Directors
shall meet each year immediately after the annual meeting of the stockholders
at the same place. No notice of any kind to either old or new members of the
Board of Directors shall be necessary for such annual meeting or for any
regular meeting of the directors fixed from time to time by resolution of a
majority of the Board of Directors.
Section 3.04. Calling Meetings, Notice. Meetings of the Board of Directors
may be called by the Chief Executive Officer, by giving at least twenty-four
hours notice of the date, time and place thereof to each director by mail,
telephone, telegram or in person. If the date, time and place of a Board of
Directors meeting have been announced at a previous meeting of the Board of
Directors, no notice is required. Notice of an adjourned meeting need not be
given other than by announcement at the meeting at which adjournment is taken
of the date, time and place at which the meeting will be reconvened.
Section 3.05. Waiver of Notice. Any director may waive notice of any meeting
of the Board of Directors either before, at, or after such meeting orally or in
writing signed by such director. A director, by the director's attendance at
any meeting of the Board of Directors, shall be deemed to have waived notice of
such meeting, except when the director objects at the beginning of the meeting
to the transaction of business because the meeting is not lawfully called or
convened and does not participate thereafter in the meeting.
Section 3.06. Quorum. A majority of the directors holding office immediately
prior to a meeting of the Board of Directors shall constitute a quorum for the
transaction of business at such meeting.
Section 3.07. Conference Communications. Any or all directors may participate
in any meeting or conference of the Board of Directors, or of any duly
constituted committee thereof, by any means of communication through which the
directors may simultaneously hear each other during such meeting and
participation in a meeting pursuant to this Section shall constitute presence
in person at the meeting.
Section 3.08. Vacancies. Vacancies in the Board of Directors of this
Corporation occurring by reason of death, resignation, removal, or
disqualification shall be filled for the unexpired term by a majority of the
remaining directors, even though less than a quorum. Vacancies resulting from
newly created directorships may be filled by a majority vote of the remaining
directors. Each director elected to fill a vacancy shall hold office, subject
to provisions of these Bylaws, until a qualified successor is elected by the
stockholders at a regular or special meeting. The stockholders shall elect a
director to fill the remainder of any unexpired term for which a director has
been elected to fill a vacancy by the Board of Directors at their next regular
or special meeting. No provision of this Section 3.08 of Article III may be
amended or repealed except by the affirmative vote of the holders of at least
80% of the outstanding shares of the Corporation entitled to vote, or by the
Board of Directors, to the extent permitted by law.
Section 3.09. Removal. The affirmative vote of the stockholders holding at
least 80% of the shares entitled to vote at an election of directors may remove
any or all of the directors from office at any time with or without cause. In
the event that the Board of Directors or any one or more directors be so
removed, new directors shall be elected at the same meeting. A director named
by the Board of Directors to fill a vacancy may be removed from office at any
time, with or without cause, by the affirmative vote of the remaining directors
if the stockholders have not elected directors in the interim between the time
of the appointment to fill such vacancy and the time of the removal. No
provision of this Section may be amended or repealed except
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by the affirmative vote of the holders of at least 80% of the outstanding
shares of the Corporation entitled to vote, or by the Board of Directors, to
the extent permitted by law.
Section 3.10. Committees. A resolution approved by the affirmative vote of a
majority of the whole Board of Directors may establish committees having the
authority of the Board of Directors in the management of the business of the
Corporation to the extent provided in the resolution except for those powers
expressly reserved to the Board of Directors under Delaware law. No such
committee shall have this power or authority in reference to amending the
Certificate of Incorporation (except as otherwise permitted by law); adopting
an agreement of merger or consolidation under Sections 251 or 252 of the
Delaware General Corporation Law; recommending to the stockholders the sale,
lease or exchange of all or substantially all of the Corporation's property and
assets; recommending to the stockholders a dissolution of the Corporation or a
revocation of a dissolution; or amending the bylaws of the Corporation. A
committee shall consist of one or more directors appointed by affirmative vote
of a majority of the whole Board of Directors. The Board of Directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the event of the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not such member or members constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. A majority of
the members of the committee present at a meeting is a quorum for the
transactions of business, unless a larger or smaller proportion or number is
provided in the resolution establishing the committee.
Section 3.11. Committee of Disinterested Persons. Pursuant to the procedure
set forth in Section 3.10, the Board of Directors may establish a committee
composed of two or more disinterested directors or other disinterested persons
to determine whether it is in the best interests of the Corporation to pursue a
particular legal right or remedy of the Corporation and whether to cause the
dismissal or discontinuance of a particular proceeding that seeks to assert a
right or remedy on behalf of the Corporation. The committee, once established,
is not subject to the direction or control of, or termination by, the Board of
Directors. The vacancy on the committee may be filled by a majority of the
remaining committee members. The good faith determinations of the committee are
binding upon the Corporation and its directors, officers and stockholders. The
committee shall terminate when it issues a written report of its determination
to the Board of Directors.
Section 3.12 Written Action. Any action which might be taken at a meeting of
the Board of Directors, or any duly constituted committee thereof, may be taken
without a meeting if done in writing and signed by all of the directors or
committee members, unless the Articles provide otherwise, and such action need
not be approved by the stockholders.
Section 3.13. Nomination of Director Candidates. Nominations of candidates
for election to the Board of Directors of the Corporation at any annual meeting
of the shareholders may be made only by or at the direction of the Board of
Directors or by a shareholder entitled to vote at such annual meeting. All such
nominations, except those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Corporation. To be timely, such notice must be received at the principal
executive offices of the Corporation not less than sixty days prior to the date
of such annual meeting and must set forth (i) the name, age, business address,
residence address and the principal occupation or employment of each nominee
proposed in such notice, (ii) the name and address of the shareholder giving
the notice as the same appears in the Corporation's stock register, (iii) the
number of shares of capital stock of the Corporation which are beneficially
owned by each such nominee and by such shareholder and (iv) such other
information concerning each such nominee as would be required soliciting
proxies for the election of such nominee. Such notice must also include a
signed consent of each such nominee to serve as a director of the Corporation,
if elected.
If the officer of the Corporation presiding at an annual meeting of the
shareholders determines that a director nomination was not made in accordance
with the foregoing procedures, such nomination shall be void and shall be
disregarded for all purposes.
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Section 3.14. Determination of Contested Elections. In the event that there
are more candidates for election to the Board of Directors at a meeting of the
shareholders than there are directors to be elected at such meeting (a
"Contested Election"), the vote for election of directors shall be by ballot
and the officer of the Corporation presiding at the meeting shall appoint two
persons, who need not be shareholders, to act as Inspectors of Election at such
meeting.
The Inspectors so appointed, before entering on the discharge of their
duties, shall take and subscribe on oath or affirmation faithfully to execute
the duties of Inspectors at such meeting with strict impartiality and according
to the best of their ability, and thereupon the Inspectors shall take charge of
the polls and after the balloting shall canvas the votes and determine in
accordance with law and make a certificate to the Corporation of the results of
the vote taken. No director or candidate for the office of director shall be
appointed an Inspector.
The nominees for election to the Board of Directors in a Contested Election
who are certified by the Inspectors as having been elected shall be deemed to
be duly elected and qualified upon the expiration of three business days
following the date of such certification, provided that, in the event any court
proceedings are commenced which challenge the results of such Contested
Election, such nomineesheadings shall not be
deemed in any way material or relevant to be duly elected and qualified
until all such court proceedings, including appeals, shall have been finally
concluded.
ARTICLE IV
Officers
Section 4.01. Number and Designation. The Corporation shall have onethe construction or more
natural persons exercising the functionsinterpretation of
the offices of Chief Executive
Officer and Chief Financial Officer. The Board of Directors may electPlan or appoint such other officers or agents as it deems necessary for the operation
and management of the Corporation, with such powers, rights, duties, and
responsibilities as may be determined by the Board of Directors, including,
without limitation, a President, one or more Vice Presidents, a Secretary, a
Treasurer, and such assistant officers or other officers as may from timeany provision thereof.
8.4 Applicability to time be elected or appointed by the Board of Directors. Each such officer shall
have the powers, rights, duties and responsibilities set forth in these Bylaws
unless otherwise determined by the Board of Directors. Any number of offices
may be held by the same person.
Section 4.02. Chief Executive Officer. Unless provided otherwise by a
resolution adopted by the Board of Directors, the Chief Executive Officer: (a)
shall have general active management of the business of the Corporation, (b)
shall, when present, preside at all meetings of the stockholders, (c) shall see
that all orders and resolutions of the Board of Directors are carried into
effect; (d) shall sign and deliver in the name of the Corporation any deed,
mortgages, bonds, contracts or other instruments pertaining to the business of
the Corporation, except in cases in which the authority to sign and deliver is
required by law to be exercised by another person or is expressly delegated by
these Bylaws or the Board of Directors to some other officer or agent of the
Corporation; and (e) shall perform such other duties as, from time to time,
that may be assigned by the Board of Directors.
Section 4.03. Chief Financial Officer. Unless provided otherwise by a
resolution adopted by the Board of Directors, the Chief Financial Officer or
Treasurer: (a) shall cause to be kept accurate financial records, for the
Corporation; (b) shall cause to be deposited all monies, drafts, and checks in
the name of and to the credit of the Corporation in such banks, and
depositories as the Board of Directors shall designate from time to time; (c)
shall cause to be endorsed for deposit all notes, checks and drafts received by
the Corporation as ordered by the Board of Directors, making proper vouchers
therefore; (d) shall cause to be disbursed corporate funds and shall cause to
be issued checks and drafts in the name of the Corporation, as ordered by the
Board of Directors; (e) shall render to the Chief Executive Officer and the
Board of Directors, whenever
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requested, an account of all the transactions as Chief Financial Officer and of
the financial condition of the Corporation; and (f) shall perform such other
duties as may be prescribed by the Board of Directors or the Chief Executive
Officer from time to time.
Section 4.04. President. Unless otherwise determined by the Board of
Directors, the PresidentSuccessors. This Plan shall be the Chief Executive Officer of the
Corporation. If an officer other than the President is designated Chief
Executive Officer, the President shall perform such duties as may from time to
time be assigned by the Board of Directors.
Section 4.05. Vice President. Each Vice President shall perform such duties
as may be prescribed from time to time by these Bylaws or by the Board of
Directors.
Section 4.06. Secretary. Unless provided otherwise by a resolution adopted by
the Board of Directors, the Secretary: (a) shall attend all meetings of the
stockholdersbinding upon and Board of Directors, and shall record all the proceedings of
such meetings in the minute book of the Corporation; (b) shall give proper
notice of meetings of stockholders and Board of Directors and other notices
required by law or these Bylaws, and (c) shall perform such other duties as
from time to time may be assigned by the Board of Directors.
Section 4.07. Treasurer. Unless otherwise determined by the Board of
Directors, the Treasurer shall be the Chief Financial Officer of the
Corporation. If an officer other than the Treasurer is designated Chief
Financial Officer, the Treasurer shall perform such duties as may from time to
time be assigned by the Board of Directors.
Section 4.08. Authority and Duties. In addition to the foregoing authority
and duties, all officers of the Corporation shall respectively have such
authority and perform such duties in the management of the business of the
Corporation as may be determined from time to time by the Board of Directors.
Unless prohibited by a resolution of the Board of Directors, an officer elected
or appointed by the Board of Directors may, without specific approval of the
Board of Directors, delegate some or all of the duties and powers of an office
to other persons.
Section 4.09. Removal and Vacancies. The Board of Directors may remove any
officer from office at any time, with or without cause, by a resolution
approved by the affirmative vote of a majority of the directors present. Such
removal, however, shall be without prejudice to the contract rights of the
person so removed. A vacancy in an office of the Corporation by reason of
death, resignation, removal, disqualification, or otherwise may, or in the case
of a vacancy in the office of the Chief Executive Officer or Chief Financial
Officer shall, be filled for the unexpired term by the Board of Directors.
Section 4.10. Compensation. The officers of this Corporation shall receive
such compensation for their services as may be determined by or in accordance
with resolutions of the Board of Directors.
ARTICLE V
Shares and Their Transfer
Section 5.01. Certificates for Shares. All shares of the Corporation shall be
certificated shares. Each holder of shares of the Corporation shall be entitled
to a certificate, to be in such form as shall be prescribed by the Board of
Directors, certifying the number of shares of the Corporation owned by such
stockholder. The certificates for such shares shall be numbered in the order in
which they shall be issued and shall be signed, in the name of the Corporation,
by the Chairman and Chief Executive Officer and by the Secretary or an
Assistant Secretary or by such officers as the Board of Directors may
designate. If the certificate is signed by a transfer agent or registrar, such
signatures of the corporate officers may be facsimiles, engraved or printed. A
certificate representing shares issued by this Corporation, if it is authorized
to issue shares of more than one class or series, shall set forth upon the face
or back of the certificate, or shall state that the
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Corporation will furnish to any stockholder upon request and without charge, a
full statement of the designations, preferences, limitations, and relative
rights of the shares of each class or series authorized to be issued, so far as
they have been determined, and the authority of the Board of Directors to
determine relative rights and preferences of subsequent classes or series.
Every certificate surrendered to the Corporation for exchange or transfer shall
be canceled, and no new certificate or certificates shall be issued in exchange
for any existing certificate until such existing certificate shall have been so
canceled, except in cases provided for in Section 5.03.
Section 5.02. Transfer of Shares. Transfer of shares on the books of the
Corporation may be authorized only by the stockholder named in the certificate,
or the stockholder's legal representative, or the stockholder's duly authorized
attorney-in-fact, and upon surrender of the certificate or the certificates for
such shares. The Corporation may treat as the absolute owner of shares of the
Corporation the person or persons in whose name shares are registered on the
books of the Corporation. The Board of Directors may appoint one or more
transfer agents and registrars to maintain the share records of the Corporation
and to effect share transfers on its behalf.
Section 5.03. Loss of Certificates. Any stockholder claiming a certificate
for shares to be lost, stolen or destroyed shall make an affidavit of that fact
in such form as the Board of Directors shall require and shall, if the Board of
Directors so requires, give the Corporation a bond of indemnity in form, in an
amount, and with one or more securities satisfactory to the Board of Directors,
to indemnify the Corporation against any claim which may be made against it on
account of the reissue of such certificate, whereupon a new certificate may be
issued in the same tenor and for the same number of shares as the one alleged
to have been lost, stolen or destroyed.
ARTICLE VI
Dividends, Record Date
Section 6.01. Dividends. The Board of Directors shall have the authority, to
declare dividends and other distributions upon shares to the extent permitted
by law.
Section 6.02. Record Date. The Board of Directors may fix a date not
exceeding sixty days nor less than ten days preceding the date fixed for the
payment of any dividend as the record date for the determination of the
stockholders entitled to receive payment of the dividend and, in such case,
only shareholders of record on the date so fixed shall be entitled to receive
payment of such dividend.
ARTICLE VII
Corporate Records
Section 7.01. Share Register. The Corporation shall keep at the office of its
transfer agent a share register not more than one year old, containing the
names and addresses of the many stockholders and the number and classes of
shares held by each stockholder. The Corporation shall also keep at the office
of its transfer agent a record of the dates on which certificates or
transaction statements representing shares were issued.
Section 7.02. Other Records. The Corporation shall keep at the office where
its Chief Executive Officer maintains his principal office originals or copies
of: (a) records of all proceeding of stockholders for the last three years; (b)
records of all proceedings of the Board of Directors for the last three years;
(c) the Articles of Incorporation and all amendments currently in effect; (d)
the Bylaws and all amendments currently in effect; (e) financial statements;
(f) reports made to stockholders generally within the last three years; (g) a
statement
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of the names and usual business addresses of the directors and principal
officers; (h) voting trust agreements described in Section 218 of the Delaware
General Corporation Law and (i) such other documents, instruments and records
required by Delaware General Corporation Law.
ARTICLE VIII
Securities of Other Corporations
Section 8.01. Voting Securities Held by the Corporation. The Chief Executive
Officer shall have full power and authority on behalf of the Corporation (a) to
attend any meeting of security holders of other corporations in which the
Corporation may hold securities and to vote such securities on behalf of the
Corporation; (b) to execute any proxy for such meeting on behalf of the
Corporation; or (c) to execute a written action in lieu of a meeting of such
other corporation on behalf of this Corporation. At such meeting, the Chief
Executive Officer shall possess and may exercise any and all rights and powers
incident to the ownership of such securities that the Corporation possesses.
The Board of Directors or the Chief Executive Officer may, from time to time,
confer or delegate such powers to one or one or more other persons.
Section 8.02. Purchase and Sale of Securities. The Chief Executive Officer
shall have full power and authority on behalf of the Corporation to purchase,
sell, transfer or encumber any and all securities of any other corporation
owned by the Corporation, and may execute and deliver such documents as may be
necessary to effectuate such purchase, sale, transfer or encumbrance. The Board
of Directors or the Chief Executive Officer may, from time to time, confer or
delegate such power to one or more other persons.
ARTICLE IX
Indemnification of Certain Persons
Section 9.01. Right to Indemnification. Each person who was or is made a
party or is threatened to be made a party to or is otherwise involved in any
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative (hereinafter a "proceeding"), by reason of the fact that he or
she is or was a director or officer of the Corporation or is or was serving at
the request of the Corporation as a director or officer of another corporation
or of a partnership, joint venture, trust, or other enterprise, including
service with respect to an employee benefit plan (hereinafter an "indemnitee"),
whether the basis of such proceeding is alleged action in an official capacity
as a director, officer, employee or agent or in any other capacity while
serving as a director, officer, employee or agent, shall be indemnified and
held harmless by the Corporation to the fullest extent authorized by the
Delaware General Corporation Law, as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader indemnification rights
than permitted prior thereto), against all expense, liability and loss
(including attorneys' fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid in settlement) reasonably incurred or suffered by such
indemnitee in connection therewith and such indemnification shall continue as
to an indemnitee who has ceased to be a director or officer and shall inure to
the benefit of the indemnitee'sCompany and each Participant, the successors and assigns of
the Company, and the beneficiaries, personal representatives and heirs executorsof each
Participant. If the Company becomes a party to any merger, consolidation or
reorganization, this Plan shall remain in full force and administrators; provided,
however, that, excepteffect as providedan
obligation of the Company or its successors in paragraph (b) hereofinterest.
8.5 Employment Rights and Other Benefit Programs. The provisions of this Plan
shall not give any Participant any right to be retained in the employment of
the Company. In the absence of any specific agreement to the contrary, this
Plan shall not affect any right of the Company, or of any affiliate of the
Company, to terminate, with or without cause, the participant's employment at
any time. This Plan is in addition to, and not in lieu of, any other employee
benefit plan or program in which any Participant may be or become eligible to
participate by reason of employment with the Company. Receipt of benefits
hereunder shall have such effect on contributions to and benefits under such
other plans or programs as the provisions of each such other plan or program
may specify.
8.6 No Rights to Awards. No Participant shall have any claim to be granted
any Award under the Plan, and there is no obligation for uniformity of
treatment of Participants or holders or beneficiaries of Awards under the Plan.
The terms and conditions of Awards need not be the same with respect to proceedingsany
Participant or with respect to enforce rightsdifferent Participants.
8.7 No Limit on Other Compensation Arrangements. Nothing contained in the
Plan shall prevent the Company from adopting or continuing in effect other or
additional compensation arrangements, and such arrangements may be either
generally applicable or applicable only in specific cases.
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8.8 No Trust or Fund Created. This Plan shall not create or be construed to
indemnification,create a trust or separate fund of any kind or a fiduciary relationship between
the Corporation shall
indemnifyCompany or any such indemnitee in connection withaffiliate and a proceeding (or part thereof)
initiated by such indemnitee only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation. The right to
indemnification conferred in this Section shall be a contract right and shall
include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition (hereinafter
an "advancement of expenses"); provided, however, that, if the Delaware General
Corporation Law requires, an advancement of expenses incurred by an indemnitee
in hisParticipant or her capacity as a director or officer (and not in any other capacity
in which service was or is rendered by such indemnitee, including, without
limitation, service to an employee benefit plan) shall be made only upon
delivery toperson. To the
Corporation of an undertaking (hereinafter an "undertaking"),
by or on behalf of such
C-9
indemnitee, to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision from which there is no further right to
appeal (hereinafter a "final adjudication")extent that such indemnitee is not
entitled to be indemnified for such expenses under this Section or otherwise.
Section 9.02. Right of Indemnitee to Bring Suit. If a claim under paragraph
(a) of this Section is not paid in full by the Corporation within sixty days
after a written claim has been received by the Corporation, except in the case
of a claim for an advancement of expenses, in which case the applicable period
shall be twenty days, the indemnitee may at any time thereafter bring suit
against the Corporation to recover the unpaid amount of the claim. If
successful in whole or in part in any such suit, or in a suit brought by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the indemnitee shall be entitled to be paid also the expense of
prosecuting or defending such suit. In (i) any suit brought by the indemnitee
to enforceperson acquires a right to indemnification hereunder (but not in a suit brought byreceive payments from the indemniteeCompany or
any affiliate pursuant to enforce athis Plan, such right to an advancement of expenses) it shall be a
defense that, and (ii) any suit by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking the Corporation shall be
entitled to recover such expenses upon a final adjudication that, the
indemnitee has not met the applicable standard of conduct set forth in the
Delaware General Corporation Law. Neither the failure of the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
suit that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set forth in
the Delaware General Corporation Law, nor an actual determination by the
Corporation (including its Board of Directors, independent legal counsel, or
its stockholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to
enforce a right to indemnification or to an advancement of expenses hereunder,
or by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the burden of proving that the indemnitee is not
entitled to be indemnified, or to such advancement of expenses, under this
Section or otherwise shall be on the Corporation.
Section 9.03. Non-Exclusivity of Rights. The rights to indemnification and to
the advancement of expenses conferred in this Section shall not be exclusive of
any other right which any person may have or hereafter acquire under any
statute, the Corporation's Certificate of Incorporation, these bylaws,
agreement, vote of stockholders or disinterested directors, or otherwise.
Section 9.04. Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee, or agent of the
Corporation or subsidiary or related entity against any expense, liability, or
loss, whether or not the Corporation would have the power to indemnity such
person against such expense, liability, or loss under the Delaware General
Corporation Law.
Section 9.05. Indemnification of Directors, Officers, Employees, and Agents
of Subsidiaries and Related Entities and Employees and Agents of the
Corporation. The Corporation may, to the extent authorized from time to time by
the Board of Directors, grant rights to indemnification, and to the advancement
of expenses to any director, officer, employee, or agent of a subsidiary or
related entity of the Corporation or to any employee or agent of the
Corporation to the fullest extent of the provisions of this Section with
respect to the indemnification and advancement of expenses of directors and
officers of the Corporation.
Section 9.06. Amendment. Notwithstanding any other provisions of these
Bylaws, the Certificate of Incorporation of the Corporation or the fact that a
lesser percentage may be specified by law, by these Bylaws, or by the
Certificate of Incorporation of this Corporation, the affirmative vote of the
holders of at least 80% of the combined voting power of the then outstanding
voting stock, voting as a single class, shall be required to amend, alter,
adopt any provision inconsistent with, or repeal this Article IX.
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ARTICLE X
Fiscal Year
Section 10.01. The fiscal year of the Corporation shall begin on the 1st day
of January of each year and end on the 31st day of December.
ARTICLE XI
Amendments
Section 11.01. These Bylaws may be amended at any meeting of the Board of
Directors if notice of such proposed amendment shall have been given in the
notice of such meeting. Such authority in the Board of Directors is subject to
(a) the limitations imposed by the Delaware General Corporation Law, as now
enacted or hereafter amended, or other applicable law and (b) the power of the
stockholders to change or repeal such Bylaws by a majority vote (except to the
extent ano greater percentage of stockholders shall be required by these Bylaws
or by the Certificate of Incorporation) of the stockholders present or
represented at any meeting of stockholders called for such purpose.
C-11
APPENDIX D
302A.471. RIGHTS OF DISSENTING SHAREHOLDERS
Subdivision 1. Actions creating rights. A shareholder of a corporation may
dissent from, and obtain payment for the fair value of the shareholder's shares
in the event of, any of the following corporate actions:
(a) An amendment of the articles that materially and adversely affects
the rights or preferences of the shares of the dissenting shareholder in
that it:
(1) alters or abolishes a preferential right of the shares;
(2) creates, alters, or abolishes a right in respect of the
redemption of the shares, including a provision respecting a sinking
fund for the redemption or repurchase of the shares;
(3) alters or abolishes a preemptive right of the holder of the
shares to acquire shares, securities other than shares, or rights to
purchase shares or securities other than shares;
(4) excludes or limits the
right of a shareholder to vote on a
matter, or to cumulate votes, except as the right may be excluded or
limited through the authorization or issuance of securities of an
existing or new class or series with similar or different voting
rights; except that an amendment to the articles of an issuing public
corporation that provides that section 302A.671 does not apply to a
control share acquisition does not give rise to the right to obtain
payment under this section;
(b) A sale, lease, transfer, or other disposition of all or
substantially allany unsecured general creditor of the propertyCompany or of any affiliate.
8.9 Governing Law. The validity, construction and assetseffect of the Corporation, but not
including a transaction permitted without shareholder approval in section
302A.661, subdivision 1,Plan or a disposition in dissolution described in
section 302A.725, subdivision 2, or a disposition pursuant to an order of a
court, or a disposition for cash on terms requiring that all or
substantially all ofany
bonus payable under the net proceeds of dispositionPlan shall be distributed to the
shareholdersdetermined in accordance with their respective interests within one year
after the
dateinternal laws, and not the laws of disposition;
(c) A plan on merger, whether under this chapter or under chapter 322B,
to which the Corporation is a party, except as provided in subdivision 3;
(d) A plan of exchange, whether under this chapter or under chapter 322B,
to which the Corporation is a party as the Corporation whose shares will be
acquired by the acquiring corporation, if the sharesconflicts, of the shareholder are
entitledState of Minnesota.
8.10 Severability. If any provision of the Plan is or becomes or is deemed to
be voted oninvalid, illegal or unenforceable in any jurisdiction such provision shall
be construed or deemed amended to conform to applicable laws, or if it cannot
be so construed or deemed amended without, in the plan;determination of the
Committee, materially altering the purpose or (e) Any other corporate action taken pursuant to a shareholder vote with
respect to whichintent of the articles, the bylaws, or a resolution approved by the
board directs that dissenting shareholders may obtain payment for their
shares.
Subd. 2. Beneficial owners. (a) A shareholderPlan, such
provision shall not assert dissenters'
rightsbe stricken as to less than allsuch jurisdiction, and the remainder of the
shares registeredPlan shall remain in the namefull force and effect.
8.11. Qualified Performance-Based Compensation. All of the shareholder, unless the shareholder dissents with respect to all the shares
that are beneficially owned by another person but registered in the nameterms and
conditions of the shareholder and disclosesPlan shall be interpreted in such a fashion as to qualify all
compensation paid hereunder as "qualified performance-based compensation"
within the name and addressmeaning of each beneficial owner on
whose behalf the shareholder dissents. In that event, the rightsSection 162(m) of the dissenter shall be determined as if the shares as to which the shareholder has
dissented and the other shares were registered in the names of different
shareholders.
(b) The beneficial owner of shares who is not the shareholder may assert
dissenters' rights with respect to shares held on behalf of the beneficial
owner, and shall be treated as a dissenting shareholder under the terms of
this section and section 302A.473, if the beneficial owner submits to the
Corporation at the time of or before the assertion of the right a written
consent of the shareholder.
Subd. 3. Rights not to apply. Unless the articles, the bylaws, or a
resolution approved by the board otherwise provide, the right to obtain payment
under this section does not apply to a shareholder of the surviving corporation
in a merger, if the shares of the shareholder are not entitled to be voted on
the merger.
D-1Code.
A-6
Subd. 4. Other rights. The shareholders of a corporation who have a right
under this section to obtain payment for their shares do not have a right at
law or in equity to have a corporate action described in subdivision 1 set
aside or rescinded, except when the corporate action is fraudulent with regard
to the complaining shareholder or the Corporation.
302A.473. PROCEDURES FOR ASSERTING DISSENTERS' RIGHTS
Subdivision 1. Definitions. (a) For purposes of this section, the terms
defined in this subdivision have the meanings given them.
(b) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action referred to in section 302A.471, subdivision 1 or the
successor by merger of that issuer.
(c) "Fair value of the shares" means the value of the shares of a corporation
immediately before the effective date of the corporate action referred to in
section 302A.471, subdivision 1.
(d) "Interest" means interest commencing five days after the effective date
of the corporate action referred to in section 302A.471, subdivision 1, up to
and including the date of payment, calculated at the rate provided in section
549.09 for interest on verdicts and judgments.
Subd. 2. Notice of action. If a corporation calls a shareholder meeting at
which any action described in section 302A.471, subdivision 1 is to be voted
upon, the notice of the meeting shall inform each shareholder of the right to
dissent and shall include a copy of section 302A.471 and this section and a
brief description of the procedure to be followed under these sections.
Subd. 3. Notice of dissent. If the proposed action must be approved by the
shareholders, a shareholder who wishes to exercise dissenters' rights must file
with the Corporation before the vote on the proposed action a written notice of
intent to demand the fair value of the shares owned by the shareholder and must
not vote the shares in favor of the proposed action.
Subd. 4. Notice of procedure; deposit of shares. (a) After the proposed
action has been approved by the board and, if necessary, the shareholders, the
Corporation shall send to all shareholders who have complied with subdivision 3
and to all shareholders entitled to dissent if no shareholder vote was
required, a notice that contains:
(1) The address to which a demand for payment and certificates of
certificated shares must be sent in order to obtain payment and the date by
which they must be received;
(2) Any restrictions on transfer of uncertificated shares that will apply
after the demand for payment is received;
(3) A form to be used to certify the date on which the shareholder, or
the beneficial owner on whose behalf the shareholder dissents, acquired the
shares or an interest in them and to demand payment; and
(4) A copy of section 302A.471 and this section and a brief description
of the procedures to be followed under these sections.
(b) In order to receive the fair value of the share, a dissenting shareholder
must demand payment and deposit certificated shares or comply with any
restrictions on transfer of uncertificated shares within 30 days after the
notice required by paragraph (a) was given, but the dissenter retains all other
rights of a shareholder until the proposed action takes effect.
Subd. 5. Payment; return of shares. (a) After the corporate action takes
effect, or after the Corporation receives a valid demand for payment, whichever
is later, the Corporation shall remit to each dissenting
D-2
shareholder who has complied with subdivision 3 and 4 the amount the
Corporation estimates to be the fair value of the shares, plus interest,
accompanied by:
(1) The Corporation's closing balance sheet and statement of income for a
fiscal year ending not more than 16 months before the effective date of the
corporate action, together with the latest available interim financial
statements; and
(2) An estimate by the Corporation of the fair value of the shares and a
brief description of the method used to reach the estimate; and
(3) A copy of section 302A.471 and this section, and a brief description
of the procedure to be followed in demanding supplemental payment.
(b) The Corporation may withhold the remittance described in paragraph (a)
from a person who was not a shareholder on the date the action dissented from
was first announced to the public or who is dissenting on behalf of a person
who was not a beneficial owner on that date. If the dissenter has complied with
subdivision 3 and 4, the Corporation shall forward to the dissenter the
materials described in paragraph (a), a statement of the reason for withholding
the remittance, and an offer to pay to the dissenter the amount listed in the
materials if the dissenter agrees to accept that amount in full satisfaction.
The dissenter may decline the offer and demand payment under subdivision 6.
Failure to do so entitles the dissenter only to the amount offered. If the
dissenter makes demand, subdivision 7 and 8 apply.
(c) If the Corporation fails to remit payment within 60 days of the deposit
of certificates or the imposition of transfer restrictions on uncertificated
shares, it shall return all deposited certificates and cancel all transfer
restrictions. However, the Corporation may again give notice under subdivision
4 and require deposit or restrict transfer at a later time.
Subd. 6. Supplemental payment; demand. If a dissenter believes that the
amount remitted under subdivision 5 is less than the fair value of the shares
plus interest, the dissenter may give written notice to the corporation of the
dissenter's own estimate of the fair value of the shares, plus interest, within
30 days after the Corporation mails the remittance under subdivision 5, and
demand payment of the difference. Otherwise, a dissenter is entitled only to
the amount remitted by the Corporation.
Subd. 7. Petition; determination. If the Corporation receives a demand under
subdivision 6, it shall, within 60 days after receiving the demand, either pay
to the dissenter the amount demanded or agreed to by the dissenter after
discussion with the Corporation or file in court a petition requesting that the
court determine the fair value of the shares, plus interest. The petition shall
be filed in the county in which the registered office of the Corporation is
located, except that a surviving foreign corporation that receives a demand
relating to the shares of a constituent domestic corporation shall file the
petition in the county in this state in which the last registered office of the
constituent corporation was located. The petition shall name as parties all
dissenters who have demanded payment under subdivision 6 and who have not
reached agreement with the Corporation. The Corporation shall, after filing a
petition, serve all parties with a summons and copy of the petition under the
rules of civil procedure. Nonresidents of this state may be served by
registered or certified mail or by publication as proved by law. Except as
otherwise provided, the rules of civil procedure apply to this proceeding. The
jurisdiction of the court is plenary and exclusive. The court may appoint
appraisers, with powers and authorities the court deems proper, to receive
evidence on and recommend the amount of the fair value of the shares. The court
shall determine whether the shareholder or shareholders in question have fully
complied with the requirements of this section, and shall determine the fair
value of the shares, taking into account any and all factors the court finds
relevant, computed by any method or combination of methods that the court, in
its discretion, sees fit to use, whether or not used by the corporation or by a
dissenter. The fair value of the shares as determined by the court is binding
on all shareholders, wherever located. A dissenter is entitled to judgment in
cash for the amount by which the fair value of the shares as determined by the
court, plus interest, exceeds the amount, if any, remitted under
D-3
subdivision 5, but shall not be liable to the corporation for the amount, if
any, by which the amount, if any, remitted to the dissenter under subdivision 5
exceeds the fair value of the shares as determined by the court, plus interest.
Subd. 8. Costs; fees; expenses. (a) The court shall determine the costs and
expenses of a proceeding under subdivision 7, including the reasonable expenses
and compensation of any appraisers appointed by the court, and shall assess
those costs and expenses against the Corporation, except that the court may
assess part or all of those costs and expenses against a dissenter whose action
in demanding payment under subdivision 6 is found to be arbitrary, vexatious,
or not in good faith.
(b) If the court finds that the Corporation has failed to comply
substantially with this section, the court may assess all fees and expenses of
any experts or attorneys as the court deems equitable. These fees and expenses
may also be assessed against a person who has acted arbitrarily, vexatiously,
or not in good faith in bringing the proceeding, and may be awarded to a party
injured by those actions.
(c) The court may award, in its discretion, fees and expenses to any attorney
for the dissenters out of the amount awarded to the dissenters, if any.
D-4
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PROXY GREEN TREE FINANCIAL CORPORATION
1100 LANDMARK TOWERS, 345 ST. PETER STREET
SAINT PAUL, MINNESOTA 55102-1639
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF GREEN TREE
FINANCIAL CORPORATION. The undersigned hereby appoints Lawrence M. Coss and
Richard G. Evans, and each of them, with power of substitution, to vote all
stock the undersigned is entitled to vote at the 19951996 Annual Meeting of
ShareholdersStockholders of Green Tree Financial Corporation to be held on May 17, 1995,15, 1996, at
2:00 p.m.,The Saint Paul Hotel, 350 Market Street, Saint Paul, Minnesota 55102, and at
any adjournments thereof, as specified below on the matters referred to, and in
their discretion, upon any other matters which may be brought before the
meeting.
1. ELECTION OF DIRECTORS.
___ FOR the nomineesnominee listed below. ___ WITHHOLD AUTHORITY to vote for the
-------------------------------------
nomineesnominee listed here. ABSTAIN
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Nomineesbelow.
Nominee for term expiring in 1998: Richard G. Evans and Robert S. Nickoloff1999: Lawrence M. Coss
2. PROPOSAL TO APPROVE A REORGANIZATIONINCREASE THE COMPANY'S NUMBER OF THE COMPANYAUTHORIZED SHARES OF COMMON
STOCK TO CHANGE ITS STATE OF
INCORPORATION FROM MINNESOTA TO DELAWARE.
__400 MILLION SHARES.
___ FOR _____ AGAINST _____ ABSTAIN
3. PROPOSAL TO APPROVE THE COMPANY'S 1995 EMPLOYEE1997 CHIEF EXECUTIVE CASH BONUS AND STOCK INCENTIVEOPTION
PLAN.
_____ FOR _____ AGAINST _____ ABSTAIN
4. PROPOSAL TO RATIFY THE APPOINTMENT OF AUDITORS.
_____ FOR _____ AGAINST _____ ABSTAIN
5. TO VOTE WITH DISCRETIONARY AUTHORITY ON ANY OTHER BUSINESS AS MAY PROPERLY
COME BEFORE THE MEETING.
_____ FOR _____ AGAINST _____ ABSTAIN
This Proxy, when properly executed, will be voted in the manner directed
herein by the undersigned Shareholder(s)Stockholder(s). If no direction is made, this Proxy
will be voted FOR the directorsdirector named in Item 1, FOR the proposals under Items
2, 3 and 4, and with discretionary authority on any other business as may
properly come before the meeting.
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PROXY NO. GREEN TREE NO. OF SHARES
Please sign exactly as name(s) appear below. When shares are held by joint
tenants, both shareholdersstockholders must sign. When signing as attorney, executor,
administrator, trustee or guardian, please include full title. If a
corporation, please type in full corporate name and sign by the President or
other authorized officer. If a partnership, please type in partnership name and
sign by an authorized person.
Individual(s), Corporation,
Partnership (or other
entity):
--------------------------------------------------
Signature
--------------------------------------------------
Signature (if jointly held)
Title ----------------_______________________
Dated: ________________, 19951996
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
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