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:
[X][_] 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):
[X][_] $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:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
[LOGO OF GREEN TREE FINANCIAL CORPORATION]
GREEN TREE FINANCIAL CORPORATION
1100 LANDMARK TOWERS
345 ST. PETER STREET
SAINT PAUL, MINNESOTA 55102-1639
April 11, 1996
To Our Stockholders:
You are cordially invited to attend the 1996 Annual Meeting of Stockholders
of Green Tree Financial Corporation (the "Company") which will be held at 2:00
p.m. on Wednesday, May 15, 1996, at The Saint Paul Hotel, Casino Ballroom, 350
Market Street, Saint Paul, Minnesota 55102.
At the meeting of stockholders you will be asked to: (1) elect one Director;
(2) approve the Chief Executive Cash Bonus and Stock Option Plan for the
Company's Chief Executive Officer; (3) increase the Company's number of
authorized shares of Common Stock to 400 million shares; (4) ratify the
selection of the Company's independent auditors; and (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 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]
GREEN TREE FINANCIAL CORPORATION
----------------
NOTICE OF 1996 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 15, 1996
To the Stockholders of
Green Tree Financial Corporation:
NOTICE IS HEREBY GIVEN that the 1996 Annual Meeting of Stockholders of Green
Tree Financial Corporation, a Delaware corporation (the "Company"), has been
called to be held at The Saint Paul Hotel, 350 Market Street, Saint Paul,
Minnesota 55102, on Wednesday, May 15, 1996, at 2:00 p.m., for the following
purposes:
1. To elect one Director of the Company to hold office until his term shall
expire and until his successor shall have been duly elected and
qualified.
2. To approve the Chief Executive Cash Bonus and Stock Option Plan for the
Company's Chief Executive Officer.
3. To increase the Company's number of authorized shares of Common Stock 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, 1996.
5. To transact such other business as may properly come before the Annual
Meeting of Stockholders or at any adjournments thereof.
The Board of Directors has fixed the close of business on Friday, March 29,
1996, as the record date for determination of stockholders 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. Stockholders 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 11, 1996
Saint Paul, Minnesota
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Richard G. Evans
RICHARD G. EVANS, Secretary
[LOGO OF GREEN TREE FINANCIAL CORPORATION]
GREEN TREE FINANCIAL CORPORATION
1100 LANDMARK TOWERS
345 ST. PETER STREET
SAINT PAUL, MINNESOTA 55102-1639
----------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 15, 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
Stockholders to be held on May 15, 1996, at 2:00 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 stockholders commencing on or about
April 11, 1996.
The enclosed proxy may be revoked at any time before it is voted by: (1)
delivering to any officer of the Company a written notice of termination of the
proxy's authority, (2) filing with an officer of the Company another proxy
bearing a later date, or (3) appearing and voting at the 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
stockholders 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
Georgeson & Company, Inc. to assist in the solicitation of proxies, and has
agreed to pay such firm approximately $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
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 stockholders 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 not be considered as present and entitled to 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 29, 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 135,621,266136,673,206 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, 1995,
was furnished to each stockholder on or about March 29, 1996.
ELECTION OF DIRECTOR
(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 Directors are
divided into three classes, as equal in number as possible. Each class of
Directors serves a three-year term.
One Director is to be elected at the 1996 Annual Meeting of Stockholders. The
Board of Directors has nominated Lawrence M. Coss for a three-year term
expiring at the 1999 Annual Meeting of 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 tables set forth information, as of March 31, 1996, including
business experience during the past five years, as to the nominee for election
and as to the other Directors of the Company whose terms of office will
continue after the 1996 Annual Meeting of Stockholders.
INFORMATION REGARDING NOMINEE
BUSINESS EXPERIENCE
NOMINEE FOR DURING 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 DIRECTORSHIPS
-------------------- -------- ------- --- --------------------------
Richard G. Evans............ 1991 1998 47 Executive Vice President
Executive Vice President and Secretary since
and Secretary; Director December 1993; Senior Vice
President, General Counsel
and Secretary (1988-1993);
Vice President, General
Counsel and Secretary
(1985-1988).
W. Max McGee................ 1985 1997 63 Partner, Marno-Max Company,
Director a real estate and general
investment company, since
1981.
Robert S. Nickoloff......... 1978 1998 66 Chairman of the Board,
Director Medical Innovation Capital,
Inc; Director of Minnesota
Power and Light since 1986.
Robert D. Potts............. 1994 1997 53 President and Chief
President and Chief Operating Officer since
Operating Officer; April 1994; Executive Vice
Director President and Chief
Operating Officer (December
1993-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).
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Company's Board of Directors has an Executive Committee which consisted
of Lawrence M. Coss, Robert S. Nickoloff and Robert D. 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 1995. Following the
1996 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 consisted of Tania A.
Modic, W. Max McGee, and Robert S. 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 two meetings during the year ended December 31, 1995. Following
the 1996 Annual Meeting, it is anticipated that W. Max McGee and Robert S.
Nickoloff will be elected to the Audit Committee.
The Board of Directors has a Compensation Committee which consisted of Tania
A. Modic, W. Max McGee and Robert S. 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 Key Executive Stock Bonus Plan. The Compensation Committee held
four meetings during the year ended December 31, 1995. After the 1996 Annual
Meeting, it is anticipated that W. Max McGee and Robert S. Nickoloff will be
elected to the Compensation Committee.
The Board of Directors has a Nomination Committee which consisted of Lawrence
M. Coss, W. Max McGee and Robert S. Nickoloff during 1995. The Committee makes
recommendations to the Board of Directors with respect to nominees to serve on
the Board. The Nomination Committee did not meet during 1995 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 recommended by a stockholder of the Company if
the recommendation is submitted in writing to the
3
Secretary of the Company 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, 1995, the Board of Directors held seven
meetings. All incumbent Directors attended at least 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, 1995, 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 1995, a total of 48,000 stock
options 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.
4
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. Executive officers are elected annually by the Board
of Directors.
NAME, POSITIONS, AND BUSINESS EXPERIENCE DURING THE PAST
OFFICES WITH THE COMPANY AGE FIVE YEARS
------------------------ --- -----------------------------------
Lawrence M. Coss................. 57 Chairman and Chief Executive Officer
Chief Executive Officer; since April 1994; Chairman, President
Chairman of the Board and Chief Executive Officer (1987-
1994); President and Chief Executive
Officer (1975-1987); Company founder;
Director of the Company since 1975
(nominee for term expiring in 1999).
Robert D. Potts.................. 53 President and Chief Operating Officer
President and Chief Operating since April 1994; Executive Vice
Officer; Director President and Chief Operating Officer
(December 1993 to April 1994);
Executive Vice President,
Administration (October to November
1993); Managing Partner, Deloitte &
Touche and its predecessor, Touche Ross
& Co., Minneapolis, Minnesota (1988 to
May 1993); Partner, Deloitte & Touche
(1975 to October 1993); Director of the
Company since 1994 (term expires in
1997).
John W. Brink.................... 50 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 Financial Officer
of the Company (December 1993 to
December 1995); Senior Vice President,
Treasurer and Chief Financial Officer
of the Company (1988-1993); Vice
President, Treasurer and Chief
Financial Officer (1986-1988).
Richard G. Evans................. 47 Executive Vice President and Secretary
Executive Vice President of the Company since December 1993;
and Secretary; Director Senior Vice President, General Counsel
and Secretary of the Company (1988-
1993); Vice President, General Counsel
and Secretary (1985-1988); Director of
the Company since 1991 (term expires in
1998).
Lyle D. Zeller................... 40 Senior Vice President of the Company
Senior Vice President since November 1993; Vice President of
the Company (August 1992 to November
1993); Management Consultant, KPMG Peat
Marwick (1983-1992).
6
EXECUTIVE COMPENSATION
The annual compensation for executive officers, including salaries,
Directors' fees, bonuses, and option awards for the years ended December 31,
1993, 1994, and 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................. 1995 $433,608 $65,146,594(3) None
Chief Executive Officer; 1994 433,608 28,544,354(4) None
Chairman of the Board 1993 433,600 13,601,133(5) None
Robert D. Potts.................. 1995 333,000 850,000 300,000(6)
President and Chief 1994 281,008 600,000 None
Operating Officer; 1993 41,500 50,000 200,000(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.................... 1995 209,000 340,000 100,000(6)(8)
Executive Vice President 1994 206,500 250,000 None
and Chief Financial Officer 1993 198,500 220,000 None
Lyle D. Zeller................... 1995 179,000 250,000 80,000(6)
Senior Vice President 1994 159,000 200,000 None
1993 135,500 150,000 None
- --------
(1) Includes other compensation in the form of Director's fees, if applicable
and car allowances. Other compensation included does not exceed the lesser
of $50,000 or 10 percent of the total compensation and is not separately
shown.
(2) The Company did not issue any restricted stock to the executive officers
listed or any other employees in 1995.
(3) Includes $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 $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 October 15, 1995.
(5) Includes $10,969,547 (886,428 shares) of Company Common Stock earned as
bonus, before stock withheld for federal and state tax withholdings. Share
amount is adjusted for two-for-one stock splits in the form of dividends
distributed June 30, 1994 and October 15, 1995.
(6) Option amount is adjusted for a two-for-one stock split in the form of a
dividend distributed October 15, 1995.
(7) Option amount is adjusted for two-for-one stock splits in the form of
dividends distributed June 30, 1994 and October 15, 1995.
(8) Mr. Brink resigned effective March 15, 1996. The options for 100,000 shares
of Common Stock were not vested on the date of resignation.
7
OPTIONS GRANTED, EXERCISED AND HELD BY EXECUTIVES
The following table shows the number and potential realizable value of stock
options granted in 1995.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
---------------------------------------------- POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO EXERCISE PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES OR BASE OPTION TERM
OPTIONS IN FISCAL PRICE EXPIRATION ----------------------
NAME GRANTED (#)(1) YEAR ($/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 $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 3,923,438 / 237,500
John W. Brink........... -- -- 320,000 / 100,000(4) 7,212,498 / 237,500(4)
Lyle D. Zeller.......... -- -- 73,400 / 80,000 1,609,066 / 190,000
- --------
(1) Based on closing price of the Company's Common Stock on December 29, 1995
($26.375) less the option exercise price.
(2) Mr. Evans sold the exercised shares. The exercised shares are net of 15,183
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 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 key employees. The Committee consists of the
three nonemployee 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 1995, the Committee
met four 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 bonuses and stock
options awarded pursuant to the Company's Key Employee 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 employee's
interests with those of the Company's stockholders.
9
Under the Company's Bonus Program, cash bonuses aggregating up to 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 1995, 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 1995, the Committee considered the growth of the Company's business
and the returns it generated for its stockholders in setting annual bonuses. In
particular, the Committee considered the Company's significant increase in the
principal balance of contracts originated in 1995 over 1994. The principal
balance of manufactured home contracts originated was $4.16 billion, an
increase of 30 percent in 1995 compared to contracts originated in 1994. The
Company's principal balance of home improvement loan originations was $627
million, an increase of 35 percent during 1995, and the Company's consumer
product loan originations increased 276 percent to $361 million. The Company's
equipment finance division substantially increased its loan originations to
$110 million during the year, and the Company's floorplan lending program
increased its outstandings to $574 million compared with $168 million in 1994.
Strong loan originations led to record net earnings of $253,969,000, resulting
in a 40 percent increase in net earnings compared to 1994. Lastly, 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 75.1 percent, a return well above the
Company's peer group.
Although the Bonus Program enables the Company to pay up to 4 percent of
pretax profits as bonuses, the Company has not always paid out as much as was
available. For 1995, aggregate bonuses were $7,233,000 or 1.77 percent of
pretax earnings, and in the preceding two years aggregate bonuses under the
Bonus Program approximated 1.96 percent of pretax earnings. The foregoing
amounts include the executive officers, other than the Company's Chief
Executive Officer, who received aggregate bonuses of $1,790,000 or 0.44 percent
of pretax earnings, and, in the preceding two years, bonus compensation to this
group of individuals approximated 0.51 percent and 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 will 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 will, 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, from
time to time the Company has granted key employees stock options pursuant to
the Company's stock option plans. As of February 29, 1996, 97 of the Company's
112 total key employees (excluding the Company's Chief Executive Officer) held
options to acquire 4,773,532 shares of the Company's Common Stock. As of the
same date, the executive officers, other than the Company's Chief Executive
Officer, whose compensation is specifically disclosed herein, held stock and
options aggregating 1,353,400 shares of the Company's Common Stock. The Company
has no other long-term incentive plans.
10
Compensation of Chief Executive Officer for 1995. The compensation of the
Company's Chief Executive Officer for 1995 is based entirely on the 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 1991 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 the 1991 Employment Agreement, see "Existing
Employment Agreement With Chief Executive Officer" beginning on page 13.
The Committee believes that the compensation arrangements with Mr. Coss meet
the Company's overall approach to performance-related executive compensation
and its goal of retaining and motivating a highly qualified Chief Executive
Officer responsible for setting and implementing the strategic direction which
has enabled the Company to perform at a very high level. The 1991 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 1991 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 growth of stockholder values. It is with this commitment that the
Committee undertook discussions with Mr. Coss with respect to a 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 enter into a new employment agreement with Mr. Coss
prior to the 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
assist 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 Committee's policy of establishing 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
determined 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 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 year 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
12
EXISTING 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
agreement 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 Company'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 closing price for the Company's Common Stock on the New
York Stock Exchange 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 number 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 the 1997 Employment Agreement would result in cash
compensation in the form of base salary and 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 Chief
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 Executive 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 long-term interests of
the Chief Executive Officer and the 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 $1 million per year.
14
The following table shows certain information with respect to stock options
granted to the Chief Executive Officer pursuant to the 1997 Chief Executive
Plan.
NEW PLAN BENEFITS
CHIEF EXECUTIVE CASH BONUS AND STOCK OPTION PLAN
NAME AND POSITION DOLLAR VALUE ($)(1) NUMBER OF UNITS(2)
----------------- ------------------- ------------------
Lawrence 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, 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.
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 percent of monthly average earnings up to covered
compensation plus 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, 1995, was $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 6 and
certain other key officers of the Company.
On December 31, 1995, all of the individuals named in the preceding Summary
Compensation Table were participants in the Pension Plan. Mr. Coss has accrued
20 years of service; Mr. Potts, 2 years; Mr. Evans, 11 years; Mr. Brink, 10
years; and Mr. Zeller, 3 years.
The following table assumes a formula for normal retirement as described
above assuming all income is above covered compensation.
ESTIMATED ANNUAL PENSION BASED ON YEARS
AVERAGE OF SERVICE AT NORMAL RETIREMENT DATE
NNUAL EARNINGSA ------------------------------------------------------
(IGHEST 5 YEARS)H 15 20 25 30 35
- ----------------- ---------- ---------- ---------- ---------- ----------
$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
SECURITY OWNERSHIP OF MANAGEMENT
As of February 29, 1996, the Company is unaware of any owner of the Company's
Common Stock which beneficially owns more than 5 percent of such stock.
The following table sets forth as of February 29, 1996, information about the
ownership of the Company's Common Stock by each Director, by each executive
officer named in the Summary Compensation Table and by all Directors and
officers as a group. The stockholders 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 OWNER BENEFICIAL OWNERSHIP SHARES
- ------------------------ -------------------- -----------
Lawrence M. Coss.............................. 5,564,149(1) 4.1%
Robert D. Potts............................... 40,000 *
Richard G. Evans.............................. 380,000(2) *
John W. Brink................................. 376,640(3) *
Lyle D. Zeller................................ 81,400(2) *
Tania A. Modic................................ 233,200(4) *
W. Max McGee.................................. 532,000(4) *
Robert S. Nickoloff........................... 140,000(4) *
All Directors and Officers as a group (52
persons)..................................... 8,602,879(5) 6.3%
- --------
*Less than one percent.
(1) Includes 32,000 shares held by minor children, 87,200 shares held by
spouse, 80,000 shares held by LVC Investment Company, Inc., and options for
1,000,000 shares of Common Stock exercisable within 60 days after February
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 640 shares held by minor children and options 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. McGee and Nickoloff, respectively, upon exercise of stock options
which are exercisable currently or within 60 days of February 29, 1996. Mr.
McGee's holdings include 200,000 shares held by his spouse and Ms. Modic's
holdings are held jointly with her spouse.
(5) Includes 2,749,532 shares issuable upon exercise of stock options
exercisable currently or within 60 days of February 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 Directors 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 Directors 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 1995.
PROPOSALS OF STOCKHOLDERS FOR 1997 ANNUAL MEETING
All proposals of stockholders intended to be presented at the 1997 Annual
Meeting of Stockholders of the Company must be received by the Company at its
executive offices in Saint Paul, Minnesota on or before December 11, 1996 for
inclusion in the Company's Proxy Statement and Proxy for such meeting.
ANNUAL REPORT ON FORM 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,
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 A. Dolphin, Vice President and Director of Investor
Relations.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Richard G. Evans
RICHARD G. EVANS
Secretary
Dated: April 11, 1996
20
EXHIBIT A
GREEN TREE FINANCIAL CORPORATION
CHIEF EXECUTIVE CASH BONUS AND STOCK OPTION PLAN
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 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 first day of a Performance Period.
Code. The Internal Revenue Code of 1986, as it may be amended from time
to time, 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.
A-1
Shares. The shares of Common Stock, $.01 par value, of the Company or
such other securities or property as may become subject to Options pursuant
to an adjustment made under Section 3.3 of the Plan.
Section 2. Administration.
2.1 Committee. The Plan shall be administered by the Committee. Subject to
the express provisions of the Plan and to applicable law, including without
limitation the provisions of Section 162(m) of the Code, the Committee shall
have full power and authority 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 each Option; (iv)
determine the terms and conditions 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 Plan 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 Section 162(m) of the Code. 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 the 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
method 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 exercise 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 Shares available for granting Options under the Plan shall be
2,000,000. Shares to be issued under the Plan may be either
A-2
Shares reacquired and held in the treasury 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 any Shares, then the number of
Shares counted against the aggregate 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 the Committee shall determine that any
dividend or other distribution (whether in the form of cash, 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 Company, 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 type of
Shares (or other securities or other property) which thereafter may be made the
subject of Options, (ii) the number and type of Shares (or other securities or
other property) subject to outstanding 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 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. 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, 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 the Plan, including
stockholder approval, the Chief Executive Officer of the Company shall receive
a cash, performance bonus for each Performance Period commencing January 1,
1997, in an amount equal to two and one-half percent (2.5%) of the difference
(but not less than zero) between (i) the Company's Net Income for that
Performance Period, and (ii) that amount which is equal to the amount of Net
Income which results in an ROE which is equal to the Performance 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 Company Performance
Threshold is not achieved during the Performance Period.
(b) Committee may reduce bonus payment. With respect to any Participant
except for the Chief Executive Officer in office as of the date of adoption of
the Plan, the Committee retains sole discretion to reduce the amount of any
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 made under
this Plan, and the benefits provided hereunder shall not be subject to seizure
for payment of any 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 action 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 granted 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
discretion of the 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 Company. Awards granted in addition to or in tandem with other
Awards or in addition to or in tandem with awards granted under any such 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 no right under any such Award
shall be transferable by a Participant otherwise than by will or by the laws of
descent and distribution; provided, however, that, if so determined by the
Committee, a Participant may, in the manner established by the Committee,
designate a beneficiary or beneficiaries to exercise the rights of the
Participant and receive any property distributable with respect to any 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 any purported pledge,
alienation, attachment or encumbrance thereof shall be void and unenforceable
against the Company or any Affiliate.
(d) Term of Awards. 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
other securities delivered under the Plan pursuant to the exercise of any
Option shall be subject to such stop transfer orders and other reasonable
restrictions as the Committee may deem advisable under the Plan or the rules,
regulations and other requirements of the Securities and Exchange Commission
and any applicable federal or state securities laws, and the Committee 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 until
such Shares or other securities have been admitted for trading on such
securities exchange. The Committee shall provide for the registration of the
securities covered by the Option pursuant to Form S-8.
Section 7. Amendment and Termination; Adjustments. Except to the extent
prohibited by applicable law and unless otherwise expressly provided in an
Award or in the Plan:
(a) Amendments to the Plan. The Board of Directors of the Company may
amend, alter, suspend, discontinue or terminate the Plan; provided,
however, that, notwithstanding any other provision of the
A-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
Plan; or
(ii) would violate the rules or regulations of the New York Stock
Exchange, any other securities exchange or the National Association of
Securities Dealers, Inc. that 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 Award in the manner and to the extent it shall deem
desirable to carry the Plan into effect.
Section 8. Miscellaneous.
8.1 Effective Date. The Plan shall be effective as of February 9, 1996,
subject to its approval by the stockholders of the Company, and no payments
shall be made pursuant to any Performance Bonus granted pursuant to the Plan
until after the Plan has been approved by the stockholders of the Company;
provided, however, that (i) a Stock Option may be granted pursuant to the Plan
at any time on or after the Effective Date, subject to such stockholder
approval; and, (ii) the first Performance Period for which a Performance Bonus
may be granted shall be for the Company's fiscal year ending December 31, 1997.
8.2 Term of the Plan. The Plan shall continue until December 31, 2006, unless
sooner discontinued or terminated by the Committee.
8.3 Headings. Headings are given to the Sections and subsections of the Plan
solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.
8.4 Applicability to Successors. This Plan shall be binding upon and inure to
the benefit of the Company and each Participant, the successors and assigns of
the Company, and the beneficiaries, personal representatives and heirs of each
Participant. If the Company becomes a party to any merger, consolidation or
reorganization, this Plan shall remain in full force and effect as an
obligation of the Company or its successors in interest.
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 any
Participant or with respect to different 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.
A-5
8.8 No Trust or Fund Created. This Plan shall not create or be construed to
create a trust or separate fund of any kind or a fiduciary relationship between
the Company or any affiliate and a Participant or any other person. To the
extent that any person acquires a right to receive payments from the Company or
any affiliate pursuant to this Plan, such right shall be no greater than the
right of any unsecured general creditor of the Company or of any affiliate.
8.9 Governing Law. The validity, construction and effect of the Plan or any
bonus payable under the Plan shall be determined in accordance with the
internal laws, and not the laws of conflicts, of the State of Minnesota.
8.10 Severability. If any provision of the Plan is or becomes or is deemed to
be invalid, 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 determination of the
Committee, materially altering the purpose or intent of the Plan, such
provision shall be stricken as to such jurisdiction, and the remainder of the
Plan shall remain in full force and effect.
8.11. Qualified Performance-Based Compensation. All of the terms and
conditions of the Plan shall be interpreted in such a fashion as to qualify all
compensation paid hereunder as "qualified performance-based compensation"
within the meaning of Section 162(m) of the Code.
A-6
- -------------------------------------------------------------------------------
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 1996 Annual Meeting of
Stockholders of Green Tree Financial Corporation to be held on May 15, 1996, at
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 nominee listed below. ___ WITHHOLD AUTHORITY to vote for the
nominee listed below.
___ ABSTAIN
Nominee for term expiring in 1999: Lawrence M. Coss
2. PROPOSAL TO INCREASE THE COMPANY'S NUMBER OF AUTHORIZED SHARES OF COMMON
STOCK TO 400 MILLION SHARES.
___ FOR ___ AGAINST ___ ABSTAIN
3. PROPOSAL TO APPROVE THE 1997 CHIEF EXECUTIVE CASH BONUS AND STOCK OPTION
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 Stockholder(s). If no direction is made, this Proxy
will be voted FOR the director 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.
- -----------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROXY NO. GREEN TREE NO. OF SHARES
Please sign exactly as name(s) appear below. When shares are held by joint
tenants, both stockholders 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.
- -------------------------------------------------------------------------------