<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A NO. 2
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
of the securities exchange act of 1934
For the transition period from _________ to _________
1-14074
------------------------
(Commission File Number)
CONTIFINANCIAL CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-3852588
- ------------------------------- -------------------
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
277 Park Avenue
NEW YORK, NEW YORK 10172
- ---------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 207-2800
Securities registered pursuant to Section 12(b) of the Act:
COMMON STOCK NEW YORK STOCK EXCHANGE
--------------------- -------------------------------------------
(Title of each Class) (Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
NONE
- --------------------------------------------------------------------------------
(Title of Class)
Indicate by check mark whether registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. _____
As of June 30, 1999 the aggregate market value of the voting stock held
by non-affiliates of the registrant was $33,159,561.
1
<PAGE>
As of June 30, 1999, there were 46,747,370 outstanding shares of the
Registrant's Common Stock, no par value.
This filing on Form 10-K/A No. 2 amends the Annual Report Form 10-K/A
No. 1 for the fiscal year ended March 31, 1999, of ContiFinancial Corporation
(the "Company"). The undersigned Registrant hereby amends the following items,
financial statements, exhibits or other portions of its report on Form 10-K/A
No. 1 for the fiscal year ended March 31, 1999 (the "Form 10-K/A No. 1"), as set
forth below:
The following items are hereby amended and restated to read in their
entirety as they appear in this amendment.
Part III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
2
<PAGE>
Item 10. Directors and Executive Officers of the Registrant.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Alan H. Fishman ....... 53 President, Chief Executive Officer and Director
Robert A. Major ....... 52 Executive Vice President of the Company and President and Chief
Executive Officer of ContiMortgage
Glenn S. Goldman ...... 37 Executive Vice President of the Company and Co-President and Managing
Director of ContiFinancial Services
Scott M. Mannes ....... 40 Executive Vice President of the Company and Co-President and Managing
Director of ContiFinancial Services
Peter Abeles .......... 44 Senior Vice President of the Company and Managing Director of
ContiFinancial Services
Robert J. Babjak ...... 56 Senior Vice President of the Company and Executive Vice President and
Chief Operating Officer of ContiMortgage
Frank W. Baier ........ 34 Senior Vice President, Chief Financial Officer and Treasurer
A. John Banu .......... 44 Senior Vice President of the Company and Senior Managing Director of
ContiFinancial Services
Daniel J. Egan ........ 44 Senior Vice President of the Company and Senior Vice President and
Chief Financial Officer of ContiMortgage
Michael J. Festo ...... 47 Senior Vice President, Human Resources
Alan L. Langus ........ 52 Senior Vice President, Chief Counsel and Secretary
Jerome M. Perelson .... 60 Senior Vice President of the Company and Managing Director and Chief
Credit Officer of ContiFinancial Services
Marc E. Halbreich ..... 52 Vice President-Taxes
Debra J. Huddleston ... 43 Vice President - Internal Audit
Mark R. Baker ......... 45 Director and Chairman of the Board
Paul J. Fribourg ...... 45 Director
John W. Spiegel ....... 58 Director
Donald L. Staheli ..... 67 Director
John P. Tierney ....... 67 Director
Lawrence G. Weppler ... 54 Director
Michael J. Zimmerman .. 48 Director
</TABLE>
Set forth below are the biographies of the Directors:
ALAN H. FISHMAN. Mr. Fishman has been President, Chief Executive
Officer and a Director of the Company since July 1999. Mr. Fishman is also a
founder and managing partner of Columbia Financial Partners, L.P., an investment
firm specializing in the financial services
3
<PAGE>
industry. Prior to founding Columbia Financial Partners, L.P., Mr. Fishman had
an extensive career in the financial services industry, serving at various times
as Chief Financial Officer of Chemical Bank, Senior Executive Vice President in
charge of Chemical Bank's worldwide investment banking operations, and President
of American International Group's financial services division. Mr. Fishman is a
Director of Keyspan Energy Corporation, Chairman and Director of Affinity
Technology Group, Inc. and Vice Chairman of the Brooklyn Academy of Music.
DONALD L. STAHELI. Mr. Staheli has been a Director of the Company since
October 1995. He was Chairman of the Board of Directors of Continental Grain
from June 1994 until July 1997 and from 1988 until his retirement in April 1997,
he was Chief Executive Officer of Continental Grain. From 1988 until June 1994,
Mr. Staheli served as President of Continental Grain. He has been a Director of
Continental Grain since 1988. Mr. Staheli serves currently as a Director of
Prudential Life Insurance Company of America (a property and life insurance
company) and Bankers Trust Corporation (a bank holding company). Mr. Staheli
also serves as a member of the Supervisory Board of Directors of Fresenius
Medical Care A.G (a foreign medical device manufacturing company).
PAUL J. FRIBOURG. Mr. Fribourg has been a Director of the Company since
October 1995. He has been President and Chief Executive Officer of Continental
Grain since April 1997 and Chairman of its Board of Directors since July 1997.
Previously, Mr. Fribourg had held the position of President and Chief Operating
Officer of Continental Grain since June 1994. From April 1990 to June 1994 Mr.
Fribourg served as Executive Vice President of the Bulk Commodities Group of
Continental Grain. He is also a Director of Loews Corporation (a diversified
holding company the main interest of which is insurance). Mr. Fribourg is the
son of Michel Fribourg.
JOHN W. SPIEGEL. Mr. Spiegel has been a Director of the Company and
Chairman of the Audit Committee since February 1996. Mr. Spiegel has been
Executive Vice President and Chief Financial Officer of SunTrust Banks, Inc.
since 1985 and Treasurer of Trust Company of Georgia since 1978. Mr. Spiegel
also is currently a member of the Boards of Directors of Rock-Tenn Company (a
manufacturer of paperboard products) and Suburban Lodges of America (an
extended stay hotelier).
LAWRENCE G. WEPPLER. Mr. Weppler has been a Director of the Company
since October 1995. He also has been Vice President and General
Counsel-Corporate of Continental Grain since April 1993. From 1980 to April
1993, Mr. Weppler served as Deputy General Counsel of Continental Grain.
MARK R. BAKER. Mr. Baker has been a Director of the Company since July
1999. He has been Senior Vice President and Chief Legal Officer of Continental
Grain since August 1997. Prior to joining Continental Grain, Mr. Baker was a
partner with the law firm of Dewey Ballantine LLP.
JOHN P. TIERNEY. Mr. Tierney has been a Director of the Company and
Chairman of the Independent Directors Committee since February 1996. From 1987
until his retirement in December 1994, Mr. Tierney was the Chairman of the Board
and Chief Executive Officer of
4
<PAGE>
Chrysler Financial Corporation (a non-bank finance company). Mr. Tierney is also
currently a Director of Charter One Financial, Inc. (a holding company for
Charter One Bank, Charter Michigan Bancorp and Rochester Community Savings Bank,
consumer banks offering a variety of financial services) and Dollar Thrifty
Automotive Group, Inc. (operator of two separate car rental companies, Dollar
and Thrifty).
MICHAEL J. ZIMMERMAN. Mr. Zimmerman has been a Director of the Company
since February 1997. He also has been Senior Vice President-Investments and
Strategy of Continental Grain since May 1996. From January 1985 to April 1996,
Mr. Zimmerman was a Managing Director at Salomon Brothers.
Set forth below are the biographies of the executive officers:
ROBERT A. MAJOR. Mr. Major has been Executive Vice President of the
Company since October 1995, President and a Director of ContiMortgage since July
1995 and Chief Executive Officer of ContiMortgage since June 1996. Prior to
becoming Chief Executive Officer, Mr. Major was the Chief Operating Officer, a
position he had held since July 1995. From February 1993 to July 1995, Mr. Major
was Chief Operating Officer for NationsCredit Corporation (a diversified
financial services company). From April 1990 to February 1993, Mr. Major was
Chief Executive Officer of Chrysler First (a consumer finance company acquired
by NationsBank Corporation in February 1993).
GLENN S. GOLDMAN. Mr. Goldman has been Executive Vice President of the
Company since July 1997, prior to which he had been Senior Vice President since
October 1995. He joined ContiFinancial Services in April 1990 and was appointed
Managing Director of ContiFinancial Services in August 1992 after holding the
position of Vice President, Corporate Finance. He was appointed Co-President of
ContiFinancial Services in July 1997.
SCOTT M. MANNES. Mr. Mannes has been Executive Vice President of the
Company since July 1997, prior to which he had been Senior Vice President since
October 1995. He joined ContiFinancial Services in September 1990 and was
appointed Managing Director of ContiFinancial Services in August 1992 after
holding the position of Vice President, Corporate Finance. He was appointed
Co-President of ContiFinancial Services in July 1997.
PETER ABELES. Mr. Abeles has been Senior Vice President of the Company
since October 1995. He joined ContiFinancial Services in 1989 and was appointed
Managing Director of ContiFinancial Services in August 1992 after serving as
Vice President, Corporate Finance from October 1989 to August 1992.
ROBERT J. BABJAK. Mr. Babjak has been Senior Vice President of the
Company since October 1995. He was appointed Executive Vice President and Chief
Operating Officer of ContiMortgage in June 1996 prior to which he was Senior
Vice President, Chief Credit Officer, a position he had held since October 1995
when he was also appointed as a Director of ContiMortgage. Prior to October 1995
he was Vice President, Chief Credit Officer of ContiMortgage, a position he had
held since April 1992. Mr. Babjak joined ContiMortgage in June 1991 as Chief
Credit Officer.
5
<PAGE>
FRANK W. BAIER. Mr. Baier has been Senior Vice President, Chief
Financial Officer and Treasurer of the Company since June 1999. Previously he
held the position of Vice President and Treasurer from September 1997 to May
1999. Mr. Baier joined the Company in September 1996 as Director of Corporate
Finance. Prior to joining the Company, Mr. Baier had been employed at RJR
Nabisco Inc. since June 1987 where he had a variety of positions in the
accounting and treasury functions most recently as Director, Corporate Finance,
the position he held from March 1995 through September 1996. He was Manager,
Corporate Finance of RJR Nabisco Inc. from January 1991 through March 1995.
A. JOHN BANU. Mr. Banu has been Senior Vice President of the Company
since October 1995. He joined ContiFinancial Services in 1984 as Vice President,
Debt Placement and was appointed Managing Director of ContiFinancial Services in
August 1992 and Senior Managing Director in July 1997.
DANIEL J. EGAN. Mr. Egan has been Senior Vice President of the Company
since October 1995. He was appointed Senior Vice President, Chief Financial
Officer and a Director of ContiMortgage in 1995, prior to which he was Vice
President, Chief Financial Officer of ContiMortgage, a position he had held
since April 1991. From October 1990 to April 1991, Mr. Egan was Controller of
ContiMortgage.
MICHAEL J. FESTO. Mr. Festo has been Senior Vice President, Human
Resources of the Company since September 1996, prior to which he held the
position of Vice President, Human Resources of the Company from October 1995. He
was appointed Vice President, Human Resources of ContiTrade Services Corporation
in July 1990. Mr. Festo held a number of staff and executive human resources
positions within Continental Grain since joining Continental Grain in 1974.
ALAN L. LANGUS. Mr. Langus has been Senior Vice President, Chief
Counsel and Secretary of the Company since September 1996, prior to which he
held the position of Vice President, Chief Counsel and Secretary of the Company
from October 1995. He was Vice President and Chief Counsel of ContiTrade
Services Corporation between December 1989 and October 1995.
JEROME M. PERELSON. Mr. Perelson has been Senior Vice President of the
Company since February 1997 prior to which he held the position of Senior Vice
President and Chief Financial Officer of the Company from October 1995. He has
been Managing Director and Chief Credit Officer of ContiFinancial Services since
September 1995. Mr. Perelson joined Continental Grain in 1971. He was appointed
Managing Director and Chief Credit Officer of ContiTrade Services Corporation in
August 1989 and President in November 1993, after serving as Corporate Deputy
Treasurer of Continental Grain.
MARC E. HALBREICH. Mr. Halbreich joined the Company in April 1998 as
Vice President - Taxes. He previously had worked for Continental Grain since
August 1987 where he held a number of corporate tax positions including
Assistant Vice President - International Taxes, the position he held from April
1990 through April 1998.
6
<PAGE>
DEBRA J. HUDDLESTON. Ms. Huddleston has been Vice President-Internal
Audit of the Company since May 1997. She was appointed Vice President-Internal
Audit of ContiMortgage in July 1992. Prior to that, Ms. Huddleston also had held
the position of Controller-Government Securities and Foreign Exchange Division
of Continental Grain since 1991.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Securities and Exchange Commission rules relating to reporting of
changes of beneficial ownership of the Company's common stock, Forms 4 reporting
Continental Grain's October 1998 purchases of the Company's common stock were to
have been filed by Continental Grain and Mr. Fribourg on or before November 10,
1998. The Forms 4 were filed November 19, 1998.
MEETINGS AND COMMITTEES
The Company has an Executive Committee, a Compensation Committee, an
Audit Committee, an Independent Directors Committee, and a 1995 Stock Plan
Committee (the "Stock Plan Committee") (which also serves as the Section 162(m)
Plan Committee). The Special Pricing Committee, which was formed to authorize
the price to be received by the Company from the sale of its shares in the
Company's primary offering of common stock, was disbanded effective September
16, 1998 by unanimous vote of the Board of Directors. There is no standing
nominating committee.
The Executive Committee, currently comprised of Messrs. Baker, Fishman,
Fribourg, and Zimmerman, is authorized and empowered, to the extent of Delaware
law, to exercise all functions of the Board of Directors in the interval between
meetings of the Board of Directors. The functions of the Compensation Committee,
currently comprised of Messrs. Baker, Fribourg, Spiegel, Staheli and Tierney,
include reviewing compensation of the executive officers of the Company. The
Audit Committee, currently comprised of Messrs. Spiegel and Tierney, assists the
Board of Directors in overseeing the financial reporting and the internal
operating control of the Company. The role of the Independent Directors
Committee, currently comprised of Messrs. Spiegel and Tierney, encompasses
reviewing and passing on the fairness of all future material agreements and
material transactions between the Company (or any of its subsidiaries) and
Continental Grain (or any of its subsidiaries other than the Company and its
subsidiaries). The Stock Plan Committee, currently comprised of Messrs. Spiegel
and Tierney, administers the ContiFinancial Corporation 1995 Long-Term Stock
Incentive Plan (the "Stock Plan") and any other Section 162(m) compensation
awards.
During the year ended March 31, 1999, there were eight meetings of the
Board of Directors, no meetings of the Executive Committee, six meetings of the
Compensation Committee, five meetings of the Audit Committee, three meetings of
the Independent Directors Committee and seven meetings of the Stock Plan
Committee. No Director attended fewer than 75% of the total number of meetings
of the Board of Directors and committees on which he served.
7
<PAGE>
CHANGES IN MANAGEMENT AND BOARD OF DIRECTORS
Several changes in the senior management and the Board of Directors of
the Company have occurred since the end of fiscal year 1999. In June 1999,
Daniel J. Willett resigned his position as Senior Vice President and Chief
Financial Officer; Mr. Willett was replaced by Frank W. Baier, who now holds the
titles of Senior Vice President, Chief Financial Officer and Treasurer. James E.
Moore resigned as President, Chief Executive Officer and a Director of the
Company in July 1999; Mr. Moore was replaced by Alan H. Fishman, who now holds
those titles. James J. Bigham resigned as Chairman of the Board of Directors in
July 1999; he was replaced by Mark R.
Baker.
8
<PAGE>
Item 11. Executive Compensation.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------- ----------------------
AWARDS PAYOUTS
-------------------- -------
FISCAL RESTRICTED STOCK LTIP
NAME YEAR SALARY BONUS STOCK OPTIONS PAYOUTS OTHER
- ---- ---- ------- ------ ------ ------- ------- -----
$ $ $ # $ $
<S> <C> <C> <C> <C> <C> <C> <C>
James E. Moore(a) 1999 275,000 0 ---- 93,000 ---- 6,195 (e)
President and Chief 1998 275,000 ---- 50,000 ---- 331,400
Executive Officer 1997 250,000 2,380,000 ---- ---- ---- 719,500
2,000,000
Robert A. Major 1999 245,833 0 ---- 81,000 ---- 6,266 (e)
Executive Vice President/ 1998 225,000 1,600,000 ---- 40,000 ---- 5,867
Chief Executive 1997 220,883 ---- --- ---- ----
Officer, ContiMortgage 1,500,000
Glenn S. Goldman 1999 190,000 0 ---- 74,000 ---- 4,833 (e)
Executive Vice President/ 1998 183,250 ---- 40,000 ---- 431,400
1,540,000
Co-President and 1997 164,667 1,160,000 ---- ---- ---- 674,500
Managing Director,
ContiFinancial Services
Scott M. Mannes 1999 190,000 0 ---- 74,000 ---- 4,833 (e)
Executive Vice President/ 1998 183,250 1,540,000 ---- 40,000 ---- 431,400
Co-President and 1997 164,667 1,160,000 ---- ---- ---- 674,500
Managing Director,
ContiFinancial Services
Daniel J. Willett (b) 1999 211,666 0 ---- 50,000 ---- 5,820 (e)
Senior Vice President and 1998 205,000 300,000(c) 213,780(d) 35,000 ---- N/A(e)
Chief Financial Officer 1997 34,160 ---- ---- ---- ---- N/A(e)
</TABLE>
(a) Mr. Moore resigned his position as President, Chief Executive
Officer and Director effective July 20, 1999.
(b) Mr. Willett resigned his position as Senior Vice President and
Chief Financial Officer effective June 1, 1999 and received a
termination payment of $440,000.
(c) Represents Mr. Willett's accrued and/or deferred bonus for
fiscal year ending March 31, 1998 under the Company's Named
Executive 162(m) Bonus Plan (as defined in the Joint Report of
Compensation Committee and Stock Plan Committee herein). A
portion of Mr. Willett's bonus was deferred in the form of
3,155 restricted shares of the Company's common stock which
vested prior to or at the time of his resignation in June
1999.
(d) Grant of 6,000 shares of restricted common stock to Mr.
Willett under the ContiFinancial Corporation 1995 Long-Term
Stock Incentive Plan which vested prior to or at the time of
his resignation in June 1999. Represents the value of such
stock on the date the grant was made.
The value of these 6,000 shares at March 31, 1999 was $42,780.
(e) Represents the Company's matching contributions under the
ContiFinancial Savings Plan, a defined contribution plan
established under Section 401(k) of the Internal Revenue Code
of 1986.
9
<PAGE>
Information on the Company's matching contributions for Mr.
Willett in fiscal years 1997 and 1998 is not available due to
a change in trustees for the ContiFinancial Savings Plan.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1999
AND FISCAL YEAR 1999 OPTION VALUE (A)
The following table provides information as to options exercised by
each of the named executive officers of the Company during fiscal 1999. The
table also sets forth the value of options held by such officers at year end
measured in terms of the reported last sale price of the Common Stock on the New
York Stock Exchange on March 31, 1999 and the option exercise price. No stock
appreciation rights ("SARs") have ever been granted to executive officers.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS IN THE MONEY
AT FISCAL YEAR END OPTIONS AT FISCAL YEAR END (a)
------------------ ------------------------------
SHARES
ACQUIRED VALUE
IN EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-------- -------- ----------- ------------- ----------- -------------
# # $ $
<S> <C> <C> <C> <C> <C> <C>
James E. Moore ----- ----- 474,975 147,445 35,030 70,060
Robert A. Major ----- ----- 324,652 115,963 30,510 61,020
Glenn S. Goldman ----- ----- 176,095 95,050 27,872 55,747
Scott M. Mannes ----- ----- 176,095 95,050 27,872 55,747
Daniel J. Willett ----- ----- 59,791 52,709 14,666 29,333
</TABLE>
(a) The 1999 year end value of the Company's Common Stock was $7.13. The dollar
value shown in the table is calculated by determining the difference between the
year end value of the Company's Common Stock and the exercise price of the
option exercisable at year end.
10
<PAGE>
OPTION GRANTS IN FISCAL YEAR 1999
The following table shows all grants of options during the fiscal year
ending March 31, 1999 to the executives of the Company named in the Summary
Compensation Table for fiscal 1999. The options were granted under the Company's
1995 Long-Term Stock Incentive Plan (the "Stock Plan"). Pursuant to Securities
and Exchange Commission rules, the table also shows the value of the options
granted at the end of the option terms (ten years) if the stock price were to
appreciate annually by 5% and 10%, respectively. There is no assurance that the
stock price will appreciate at the rates shown in the table.
<TABLE>
<CAPTION>
Potential Realizable Value at
Individual Grants Assumed Annual Rates of
---------------------------------------------------------------- Stock Price Appreciation
% of Total Options for Option Term (b)
Granted to
# of Options Employees in Exercise Price Expiration -----------------------
Name Granted (a) Fiscal Year 1999 ($ per share) Date 5% ($) 10% ($)
-----------------------
<S> <C> <C> <C> <C> <C> <C>
James E. Moore 93,000 12.4% $6.00 12/10/08 350,920 889,300
Robert A. Major 81,000 10.8% $6.00 12/10/08 305,370 774,360
Glenn S. Goldman 74,000 9.8% $6.00 12/10/08 278,980 707,440
Scott M. Mannes 74,000 9.8% $6.00 12/10/08 278,980 707,440
Daniel J. Willett 50,000 6.6% $6.25 12/18/08 196,500 498,000
</TABLE>
(a) Granted on December 10, 1998 to Messrs. Moore, Mannes, Major and Goldman
and on December 18, 1998 to Mr. Willett. These options have a ten-year
term, are subject to the individual's continued employment with the
Company, and vest as follows: for Messrs. Moore, Mannes, Major and
Goldman, 1/3 as of December 10, 1998, 1/3 as of December 10, 1999 and
1/3 as of December 10, 2000; and for Mr. Willett, 1/3 as of December 18,
1998, 1/3 as of December 18, 1999 and 1/3 as of December 18, 2000.
(b) These values were calculated assuming a 5% and 10% annual appreciation
of the price of the security at the time of the grant over the ten-year
term of the option. The grant was made at an exercise price of $6.00 per
share to Messrs. Moore, Major, Mannes and Goldman and $6.25 per share to
Mr. Willett.
PRESIDENT AND CHIEF EXECUTIVE OFFICER EMPLOYMENT ARRANGEMENT
On July 20, 1999 the Company negotiated with Mr. Fishman a preliminary
agreement outlining the terms and conditions of his employment. Included in that
agreement was a signing bonus of $1,000,000 and an annual base salary of
$750,000. Mr. Fishman will also be entitled to receive an annual incentive
bonus, in an amount and subject to performance criteria, to be determined by the
Compensation Committee of the Company's Board of Directors. Such bonus will be
equal to a minimum of $750,000 and a maximum of three times Mr. Fishman's annual
base salary. Mr. Fishman was also granted, subject to shareholder approvals, an
option to purchase 3,000,000 shares of the Company. The agreement also contains
a severance provision which entitles Mr. Fishman to three times his previous
year's compensation (base salary and
11
<PAGE>
bonus) if terminated not for cause or if he leaves for a "good reason" (such as
a change in control of the Company). His options will vest if severance is paid.
DIRECTOR COMPENSATION
The Company's policy is not to pay any additional compensation to
directors who are also employees of the Company and its subsidiaries.
Non-employee directors of the Company (including officers of Continental Grain)
receive a $23,000 annual fee for serving as a member of the Board of Directors,
a $9,000 annual fee for attending all meetings of the Board of Directors in any
fiscal year, a $3,000 annual fee for acting as a chairperson of a committee of
the Board of Directors and a $1,000 committee per diem meeting fee. All
non-employee directors who are employees of Continental Grain will transfer any
fees paid to them to Continental Grain in accordance with Continental Grain's
corporate policy.
Under the Directors Retainer Fee Plan (the "Directors Plan"), a
Director who is not an employee of the Company or an affiliate (an "Eligible
Director") may elect to receive payment of all or any portion of his or her
annual cash retainer and meeting fees (including fees for chairing committees)
either currently, in cash or shares of Common Stock, or may elect to defer
receipt of any such payment. Any deferral election must be made pursuant to an
irrevocable election made six months in advance of the deferral.
Deferrals are invested, at the election of the Eligible Director, in
(a) a stock unit account to which earnings are credited based on dividends
payable with respect to shares of Common Stock, or (b) a cash account to which
interest is credited annually at the prime rate as published in The Wall Street
Journal prior to the beginning of each fiscal year of the Company. As elected by
the Eligible Director, distributions are made on the first day of the month
following the earliest to occur of the Director's (a) death, (b) disability or
(c) termination of service or retirement. Distributions made from an Eligible
Director's stock unit account will be paid in a single payment in the form of
shares of Common Stock (and cash representing any fractional share);
distributions from an Eligible Director's cash account will be paid in a single
cash payment or in up to 15 annual installments, at the election of the Eligible
Director.
The Directors Plan is administered by the Board of Directors. No rights
granted under the Directors Plan are transferable other than pursuant to the
laws of descent or distribution. The Directors Plan may be amended or terminated
by the Board of Directors, provided that no amendment or termination may
adversely affect any rights accrued prior to the date of amendment or
termination and provided that any amendment for which stockholder approval is
required by law or in order to maintain continued qualification of the Directors
Plan under Rule 16b-3 promulgated under the Securities Exchange Act of 1934,
shall not be effective until such approval has been obtained. The aggregate
number of shares authorized for issuance under the Directors Plan is 50,000. As
of July 22, 1999, none had been issued.
12
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth security ownership information regarding
Common Stock as of July 9, 1999 by (a) each person who is known by the Company
to own beneficially more than 5% of Common Stock, (b) each Director (which
includes the two nominees for Director), (c) each of the executive officers
named in the Summary Compensation Table appearing below (the "Summary
Compensation Table") and (d) all directors and executive officers as a group.
Unless otherwise indicated, the address of each beneficial owner is in care of
ContiFinancial Corporation, 277 Park Avenue, New York, New York 10172.
<TABLE>
<CAPTION>
Name of Beneficial Owner Shares of Common Stock Percentage
- ------------------------ ---------------------- ----------
<S> <C> <C>
Continental Grain Company (a) 36,283,421 77.6%
Alan H. Fishman (b) 1,500,000 3.2%
James E. Moore (b) 773,175 1.6%
Robert A. Major (b) 327,652 (c)
Glenn S. Goldman (b) 303,450 (c)
Scott M. Mannes (b) 304,450 (c)
Daniel J. Willett (b) 70,446 (c)
Mark R. Baker (d) 0 N/A
Paul J. Fribourg (a) (d) (e) 37,000 (c)
John W. Spiegel 10,000 (c)
Donald L. Staheli 45,000 (c)
John P. Tierney 6,000 (c)
Lawrence G. Weppler (d) 1,000 (c)
Michael J. Zimmerman (d) 3,000 (c)
All Directors and Executive Officers 4,617,523 9.9%
as a Group (23 persons) (f)
</TABLE>
(a) Michel Fribourg, members of his family and trusts and partnerships for
their benefit beneficially own substantially all of the issued and
outstanding voting stock of Continental Grain Company. Paul J.
Fribourg is the son of Michel Fribourg.
(b) Included for Messrs. Moore, 298,100 shares; Goldman, 127,355 shares;
Mannes, 128,355 shares; and Willett, 9,155 shares of "restricted"
Common Stock and for Messrs. Fishman, 1,500,000 shares; Moore, 474,975
shares; Major, 324,652 shares; Goldman, 176,095 shares; Mannes,
176,095; and Willett, 59,791 shares of Common Stock issuable upon
exercise of options. Does not include 1,974,308 shares of Common Stock
issuable upon the exercise of options held by such officers not
exercisable within 60 days of the date hereof.
(c) Represents less than 1% of the Common Stock outstanding at July 9,
1999.
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<PAGE>
(d) Messrs. Baker, Fribourg, Weppler and Zimmerman are officers of
Continental Grain Company.
(e) By virtue of his position as Chairman, President and Chief Executive
Officer of Continental Grain Company, Mr. Fribourg may be deemed to
have beneficial ownership of the shares of the Company owned by
Continental Grain Company. Mr. Fribourg disclaims beneficial ownership
of such shares.
(f) Includes 1,006,602 shares of "restricted" Common Stock and 3,474,543
shares of Common Stock issuable upon the exercise of options. Does not
include 2,269,203 shares of Common Stock issuable upon the exercise of
options not exercisable within 60 days of the date hereof.
The shares of Common Stock beneficially owned by Continental Grain
Company ("Continental Grain") constitute approximately 78% of the shares of
Common Stock entitled to vote at the Annual Meeting. Continental Grain has
indicated to the Company that it intends to vote all such shares of Common Stock
"FOR" the election of Directors of each of the Company's nominees named below,
"FOR" the approval of the Amendments to the Company's 1995 Long-Term Stock
Incentive Plan, "FOR" the approval of the Performance Goal and "FOR" the
ratification of the appointment of Arthur Andersen LLP as independent
accountants for the Company.
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<PAGE>
Item 13. Certain Relationship and Related Transactions.
Continental Grain is the Company's largest stockholder, currently
owning approximately 78% of the Company's outstanding Common Stock. Continental
Grain effectively has voting control on all matters submitted to stockholders,
including the election of directors and the approval of extraordinary corporate
transactions. Five of the directors of the Company are current or former
officers of Continental Grain and such directors constitute a majority of the
Board of Directors.
Continental Grain is able to elect all of the directors of the Company
and to determine the outcome of any matter submitted to a vote of the Company's
stockholders for approval.
The following are summaries of the various agreements between the
Company (or one of its wholly-owned subsidiaries) and Continental Grain (or one
of its subsidiaries), which summaries are qualified in their entirety by
reference to such agreements.
The Company has adopted a policy that all material agreements entered
into following the initial public offering in February 1996 (the "IPO") between
the Company and Continental Grain and its affiliates will be reviewed and passed
on for fairness by the Independent Directors Committee.
INDEMNIFICATION AGREEMENT
Continental Grain and the Company have entered into an indemnification
agreement (the "Indemnification Agreement"). Subject to certain exceptions, the
Indemnification Agreement places financial responsibility for the liabilities
related to the business of the Company and its subsidiaries with the Company and
financial responsibility for the liabilities related to the business of
Continental Grain and its other subsidiaries with Continental Grain. Under the
Indemnification Agreement, each of Continental Grain and the Company indemnifies
the other in the event of certain liabilities, including liabilities under the
Securities Act of 1933 or the Securities Exchange Act of 1934. The Company is
not aware of any material payments that it will be required to make, or that it
may be entitled to receive, under the Indemnification Agreement. No amounts were
paid under the Indemnification Agreement in fiscal 1999.
TAX SHARING AGREEMENT
Effective June 4, 1997, upon the completion of the Company's primary
offering of common stock, Continental Grain's percentage ownership of the
Company was reduced from approximately 81% to approximately 75%. Consequently,
from that date, the Company was no longer included in Continental Grain's
consolidated U.S. Federal tax return. The Company continues to file certain
consolidated or combined state returns with Continental Grain. With respect to
the periods prior to the June 4, 1997 offering, the Company's Federal taxes were
determined in accordance with the tax sharing agreement (the "Tax Sharing
Agreement") between the Company and Continental Grain. On February 14, 1996 the
Company and Continental Grain entered into the Tax Sharing Agreement which (a)
defined their respective rights and obligations with respect to Federal, state,
local and all other taxes for all taxable
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<PAGE>
periods both prior to and after the IPO and (b) governed the conduct of all
audits and other tax controversies relating to the Company.
Pursuant to the Tax Sharing Agreement, the Company was charged or
credited, as applicable, for its state and Federal income tax liabilities or
refunds that would have been payable or received by the Company for such year,
or portion thereof, determined as if the Company had filed separate state and
Federal income tax returns computed in accordance with prevailing state and
Federal income tax laws and regulations as applied to the Company as if it were
a separate taxpayer. Under the Tax Sharing Agreement, the Company accrued a $8.7
million tax payable due to Continental Grain in fiscal 1999. The Company paid
this amount to Continental Grain subsequent to the end of fiscal year 1999.
EMPLOYEE BENEFIT ALLOCATION AGREEMENT
On February 14, 1996, Continental Grain and the Company entered into an
employee benefits allocation agreement (the "Employee Benefits Allocation
Agreement") which permitted the Company's employees to continue to participate
in the Continental Grain employee benefit plans. The cost of the Company's
employees' participation in these programs was allocated to the Company based on
the actual cost of benefit accruals and an allocated cost of administration of
the plans and overhead. Effective April 1, 1998, the Company discontinued its
participation in the Continental Grain health care plan and obtained independent
coverage, and effective July 1, 1998, the Company discontinued participation in
the Continental Grain pension plan.
SERVICES AGREEMENT
Pursuant to an agreement between Continental Grain and the Company (the
"Services Agreement"), Continental Grain provides the Company certain corporate
services, including treasury administration, risk management, internal audit,
Federal and state tax (including payroll) administration, management information
and communications support services, public affairs, and facilities management
through March 31, 1999 and from year to year thereafter unless terminated by
either party upon 90 days' prior written notice. The costs for services provided
pursuant to the Services Agreement are based on Continental Grain's costs for
providing such services attributable to the Company. The Company paid or accrued
$2.1 million for such services (which does not include the guarantee fees
described in the next paragraph) in fiscal 1999.
The Services Agreement also provides that Continental Grain may, but is
not obligated to, provide guarantees of obligations due third parties. For these
guarantees, the Company will pay Continental Grain annual fees of (a) 0.05% of
the daily average of the utilized sale capacity under any loan or purchase and
sale facility guaranteed by Continental Grain; (b) 0.25% of the (i) daily
average amount at risk to Continental Grain under any excess spread receivables
(which represent interest-only and residual certificates received upon the
completion of a securitization) or similar structured sale of excess spread
receivables guaranteed by Continental Grain; (ii) daily average amount of the
outstanding debt under any loan agreements or other debt instruments guaranteed
by Continental Grain; and (iii) annual average amount remaining to be paid by
the Company under any leases and other payment obligations guaranteed by
Continental Grain and
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<PAGE>
not described in clauses (i) and (ii) of this sub-clause (b); (c) 0.005% of the
amount of proceeds received by the Company in any underwriting agreement
guaranteed by Continental Grain; and (d) with respect to any other
indemnification and performance obligations guaranteed by Continental Grain,
0.25% of the lesser of (i) the daily average of the maximum amount payable by
the Company under such indemnity or performance obligation and (ii) the amount
of proceeds received by the Company in the related transaction. Any guarantee
fee ceases to be payable when the Company is no longer legally required to make
any such indemnification or performance payment. The Company paid or accrued
$164,500 in guarantee fees for such services in fiscal 1999.
Pursuant to the Services Agreement, the Company has agreed that if, and
at such time when, Continental Grain owns less than 20% of the voting stock of
the Company, the Company will, at the request of Continental Grain, change the
names of the Company and its subsidiaries to names that are not the same as, or
confusingly similar to, Continental Grain's current corporate name, including
eliminating the term "Conti" from such names.
Finally, the Services Agreement provides that the Company may request
Continental Grain to provide such other corporate services as it routinely
provides to other subsidiaries and divisions.
SUBSERVICING AGREEMENT
On November 1, 1998, the Company's largest home equity lending
subsidiary, ContiMortgage Corporation ("ContiMortgage"), and two other
subsidiaries of the Company entered into a subservicing agreement (the
"Subservicing Agreement") with Continental Grain and Manufacturers and Traders
Trust Company (the "Trustee"). Pursuant to the Subservicing Agreement,
Continental Grain, as subservicer, agrees to advance to the Trustee on each
monthly remittance date an amount equal to the delinquency advance, if any, that
is required to be made by ContiMortgage under certain agreements relating to
ContiMortgage's securitizations, but not in excess of $85 million of aggregate
outstanding advances. ContiMortgage is obligated to pay a subservicing fee to
Continental Grain as compensation for this service, which subservicing fee
totaled $582,000 in fiscal 1999.
In June 1999, Continental Grain extended a short-term warehouse
financing facility to the Company for a maximum amount of $60 million.
Availability under the facility is subject to a combined maximum amount of $85
million of this facility and the servicer advances facility under the
Subservicing Agreement.
SUBLEASE
The Company and Continental Grain have entered into a sublease
agreement (the "Sublease") pursuant to which the Company subleases from
Continental Grain office space at 277 Park Avenue, New York, New York. The
Company occupies approximately one and a third floors of space leased from
Continental Grain. Under the terms of the Sublease, the Company pays Continental
Grain its costs for the office space. As a subtenant, the Company assumes its
proportionate share of the additional rental expenses paid by Continental Grain
as a lessee under
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<PAGE>
the terms of its lease. The term of the Sublease extends through February 28,
2000. The Company paid $1.3 million to Continental Grain under its sublease
arrangements in fiscal 1999.
REGISTRATION RIGHTS
Under a Common Stock Registration Rights Agreement (the "Common Stock
Registration Rights Agreement") between the Company and Continental Grain, the
Company has granted Continental Grain the right to require the Company to
register shares of Common Stock held by Continental Grain for sale in accordance
with Continental Grain's intended method of disposition thereof (a "demand
registration"). Continental Grain may require up to six such demand
registrations, with no more than one every six months. Additionally, the Company
has granted to Continental Grain the right, subject to certain exceptions, to
participate in registrations of Common Stock initiated by the Company on its own
behalf or on behalf of its stockholders (a "piggy-back registration"). The
Company is required to pay expenses (other than underwriting discounts and
commissions) incurred by Continental Grain in connection with the demand and
piggy-back registrations. Subject to certain limitations specified in the Common
Stock Registration Rights Agreement, Continental Grain's registration rights are
assignable to third parties. The Common Stock Registration Rights Agreement
contains indemnification and contribution provisions by the Company for the
benefit of Continental Grain and permitted assigns and their related persons.
WITHHOLDING TAX LOAN PROGRAM
The Company has granted "restricted" Common Stock (the "Restricted
Stock") and options to purchase Common Stock (the "Options") to its key officers
and managers under the Stock Plan. In order to facilitate the continued
ownership of such Restricted Stock and Options by those key officers following
vesting, the Company implemented a withholding tax loan program to allow such
officers to borrow funds from the Company to pay for a portion of the
withholding taxes due upon the vesting of the Restricted Stock and Options.
The following list sets forth those directors and executive officers of
the Company who have received such loans in amounts over $60,000. It includes
the largest aggregate amount of the loan outstanding at any time during fiscal
year 1999 and the amount of the loan outstanding or committed as of June 30,
1999. Interest charged on each loan is equal to one-month LIBOR plus 1.25%.
Loans were made on March 14, 1996, March 14, 1997, March 31, 1997, March 31,
1998 and March 31, 1999.
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<PAGE>
<TABLE>
<CAPTION>
Largest Amount Amount Outstanding
Outstanding During as
Name Title Fiscal Year 1999 ($) of June 30, 1999 ($)
- ---- ----- -------------------- --------------------
<S> <C> <C> <C>
James E. Moore President, Chief Executive 857,858 857,858
Officer and Director
Glenn S. Goldman Executive Vice President 456,610 456,610
Scott M. Mannes Executive Vice President 600,109 0
Peter Abeles Senior Vice President 189,093 189,093
Robert J. Babjak Senior Vice President 177,245 177,245
A. John Banu Senior Vice President 303,552 303,552
Michael J. Festo Senior Vice President - 60,000 60,000
Human Resources
Jerome M. Perelson Senior Vice President 121,819 0
Debra J. Huddleston Vice President - Internal 119,918 119,918
Audit
</TABLE>
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<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Act of 1934, ContiFinancial Corporation has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
CONTIFINANCIAL CORPORATION
By: /s/ ALAN H. FISHMAN
-----------------------------------------------
Alan H. Fishman
President, Chief Executive Officer and Director
Date: July 29, 1999
Pursuant to the requirements of the Securities Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ ALAN H. FISHMAN President, Chief Executive Officer July 29, 1999
- ------------------------------ and Director (Principal Executive
Alan H. Fishman Officer)
/s/ FRANK W. BAIER Senior Vice President and Chief July 29, 1999
- ------------------------------ Financial Officer (Principal
Frank W. Baier Financial Officer)
/s/ DANIEL J. EGAN Senior Vice President and Principal July 29, 1999
- ------------------------------ Accounting Officer
Daniel J. Egan
* Director and Chairman of the Board July 29, 1999
- ------------------------------
Mark R. Baker
* Director July 29, 1999
- ------------------------------
Paul J. Fribourg
* Director July 29, 1999
- ------------------------------
John W. Spiegel
* Director July 29, 1999
- ------------------------------
Donald L. Staheli
* Director July 29, 1999
- ------------------------------
John P. Tierney
* Director July 29, 1999
- ------------------------------
Lawrence G. Weppler
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<PAGE>
* Director July 29, 1999
- ------------------------------
Michael J. Zimmerman
</TABLE>
* By: /s/ ALAN L. LANGUS
------------------------
Alan L. Langus
Attorney-In-Fact
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