<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / 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 sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
THE FOOTHILL GROUP, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 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:
/ / 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:
<PAGE> 2
THE FOOTHILL GROUP, INC.
11111 SANTA MONICA BOULEVARD
LOS ANGELES, CALIFORNIA 90025
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 27, 1995
TO THE STOCKHOLDERS OF
THE FOOTHILL GROUP, INC.
NOTICE IS HEREBY GIVEN that the 1995 Annual Meeting of Stockholders (the
"Meeting") of THE FOOTHILL GROUP, INC. (the "Company") will be held at the
Peninsula Hotel, 9882 Little Santa Monica Boulevard, Beverly Hills, California
90212, on Thursday, April 27, 1995 at 2:00 p.m., Pacific Time, for the purpose
of considering and acting upon the following:
1. To elect the following seven persons as Directors of the Company,
to serve until the next Annual Meeting of Stockholders and until their
successors have been duly elected and qualified:
Don L. Gevirtz Steven L. Volla
John F. Nickoll Jeffrey A. Lipkin
Dr. Warren Bennis Joseph J. Finn-Egan
Arthur Malin, M.D.
2. To transact such other business as may properly come before the
Meeting or any adjournment or adjournments thereof.
All holders of record of shares of the Company's Common Stock and Series A
Convertible Preferred Stock at the close of business on March 7, 1995 are
entitled to notice of and to vote at the Meeting or any adjournment or
adjournments thereof.
A copy of the Company's Annual Report to its stockholders for the year
ended December 31, 1994 is being mailed with this Notice but is not to be
considered part of the proxy soliciting material.
By Order of the Board of Directors
HENRY K. JORDAN
Secretary
Los Angeles, California
March 21, 1995
IT IS IMPORTANT THAT ALL STOCKHOLDERS BE REPRESENTED AT THE ANNUAL MEETING.
STOCKHOLDERS WHO DO NOT EXPECT TO ATTEND THE ANNUAL MEETING ARE REQUESTED TO
SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING POSTAGE-PAID AND
ADDRESSED ENVELOPE. PROXIES ARE REVOCABLE AT ANY TIME AND STOCKHOLDERS WHO ARE
PRESENT AT THE MEETING MAY WITHDRAW THEIR PROXIES AND VOTE IN PERSON IF THEY SO
DESIRE.
------------------------
REQUESTS FOR ADDITIONAL COPIES OF PROXY MATERIALS SHOULD BE ADDRESSED TO
HENRY K. JORDAN, CORPORATE SECRETARY, AT THE OFFICES OF THE COMPANY, 11111 SANTA
MONICA BOULEVARD, LOS ANGELES, CALIFORNIA 90025.
<PAGE> 3
THE FOOTHILL GROUP, INC.
11111 SANTA MONICA BOULEVARD
LOS ANGELES, CALIFORNIA 90025
------------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 27, 1995
------------------------
The accompanying Proxy is solicited by the Board of Directors of The
Foothill Group, Inc., a Delaware corporation (the "Company"), for use at the
1995 Annual Meeting of Stockholders (the "Meeting") to be held on Thursday,
April 27, 1995 at 2:00 p.m., Pacific Time, at the Peninsula Hotel, 9882 Little
Santa Monica Boulevard, Beverly Hills, California 90212, or any adjournment or
adjournments thereof. Shares represented by valid proxies in the enclosed form
will be voted as specified if executed and received in time for the Meeting. A
stockholder who executes and returns the accompanying form of Proxy may revoke
it at any time prior to its being voted by signing another form of Proxy bearing
a later date or by signing a written notice of revocation and, in either case,
delivering the Proxy or notice to the Secretary of the Company by mail prior to
the Meeting or in person at the Meeting. Irrespective of the above, execution of
the form of Proxy will not in any way affect a stockholder's privilege to attend
the Meeting and vote in person. This Proxy Statement and the accompanying form
of Proxy are being mailed to stockholders on or about March 21, 1995. A copy of
the Company's Annual Report to its stockholders for the year ended December 31,
1994 is being mailed to stockholders with this Proxy Statement but is not to be
considered part of the proxy soliciting material.
VOTING SECURITIES
All stockholders of record of the Company's Class A Common Stock, no par
value per share ("Common Stock"), and Series A Convertible Preferred Stock,
$1.00 par value per share ("Series A Stock"), at the close of business on March
7, 1995 are entitled to notice of and to vote at the Meeting or at any
adjournment or adjournments thereof. At the close of business on that date,
there were 16,697,551 shares of Common Stock and 100,000 shares of Series A
Stock outstanding. As to all matters, each stockholder is entitled to one vote
for each share of Common Stock and 6.66666 votes for each share of Series A
Stock (which represents the number of shares of Common Stock into which each
share of Series A Stock is currently convertible) he or she holds. Abstentions
and broker non-votes are counted for purposes of determining the presence or
absence of a quorum for the transaction of business. In the election of
Directors, the holders of the Common Stock and Series A Stock, voting together
as a single class, are entitled to elect six Directors with the six candidates
who receive the highest number of affirmative votes being elected, and the
holders of the Series A Stock, voting separately as a class, are entitled to
elect one Director, with the candidate receiving the highest number of
affirmative votes being elected. Votes against a candidate and votes withheld
have no legal effect. In matters other than the election of Directors,
abstentions are counted as votes against in tabulations of the votes cast on
proposals presented to stockholders, whereas broker non-votes are not counted
for purposes of determining whether a proposal has been approved.
1
<PAGE> 4
BENEFICIAL OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table indicates the number of shares of Common Stock and
Series A Stock owned beneficially as of January 31, 1995, by (i) each person
known to the Company to own more than 5% of the Company's outstanding Common
Stock or Series A Stock, (ii) Directors of the Company and (iii) all executive
officers and Directors as a group:
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OF AMOUNT OF
TITLE OF CLASS BENEFICIAL OWNER BENEFICIALLY OWNED(1) CLASS
- -------------- ------------------------------------- ---------------------- -------
<C> <S> <C> <C>
COMMON STOCK
John F. Nickoll 1,077,388(2) 6.5%
Don L. Gevirtz 698,804(3) 4.2%
Dr. Warren Bennis 1,700 *
Arthur Malin, M.D. 53,294(4) 0.3%
Steven L. Volla -- --
Joseph J. Finn-Egan 666,666(5) 3.9%
Jeffrey A. Lipkin 666,666(5) 3.9%
Peter E. Schwab 155,981(6) *
David C. Hilton 97,648(7) *
Henry K. Jordan 21,186(8) *
All Executive Officers and Directors
as a Group (10 individuals) 2,772,667(5)(9) 15.8%
SERIES A STOCK
Recovery Equity Investors, L.P. 100,000(5) 100%
901 Mariners Island Blvd.
Suite 555
San Mateo, CA 94404
Joseph J. Finn-Egan 100,000(5) 100%
Jeffrey A. Lipkin 100,000(5) 100%
</TABLE>
- ------------
* Less than 1%
(1) Except as indicated in other notes to this table, each stockholder listed
has sole voting and dispositive power with respect to the shares
beneficially owned, subject to any limitations on such power arising under
community property and similar laws.
(2) Includes 10,370 shares owned by Mr. Nickoll's wife and children and 109,102
shares acquirable within 60 days after January 31, 1995 through exercise of
employee stock options. Of the 1,077,388 shares, Mr. Nickoll has sole
voting and dispositive power with respect to 1,047,018 shares and shared
voting and dispositive power with respect to 30,370 shares.
(3) Includes 299,388 shares owned by MDG Corporation, a corporation wholly
owned by Mr. Gevirtz and his wife, and 141,202 shares acquirable within 60
days after January 31, 1995 through exercise of employee stock options.
(4) Includes 2,910 shares of Common Stock held by a pension plan for the
benefit of Dr. Malin.
(5) Recovery Equity Investors, L.P. ("Recovery Investors") is a Delaware
limited partnership whose general partner is Recovery Equity Partners,
L.P., a Delaware limited partnership ("Recovery Partners"). Messrs.
Finn-Egan and Lipkin are general partners of Recovery Partners. As reported
in the Schedule 13D filed by Recovery Investors, Recovery Partners and
Messrs. Finn-Egan and Lipkin with the SEC on July 5, 1991, Recovery
Investors has claimed sole voting and dispositive power and full beneficial
ownership with respect to all such shares. The Schedule 13D also states
that Recovery Partners and Messrs. Finn-Egan and Lipkin may be deemed to
possess voting and dispositive power and full beneficial ownership with
respect to all such shares under the definition of "beneficial owner"
provided in Rule 13d-3 promulgated under the Exchange Act. Each share of
Series A Stock is currently convertible into 6.66666 shares of Common
Stock.
2
<PAGE> 5
(6) Includes 91,316 shares acquirable within 60 days after January 31, 1995
through the exercise of employee stock options.
(7) Includes 67,610 shares acquirable within 60 days after January 31, 1995
through the exercise of employee stock options.
(8) Includes 9,900 shares acquirable within 60 days after January 31, 1995
through the exercise of employee stock options.
(9) Includes 419,130 shares acquirable within 60 days after January 31, 1995
through exercise of employee stock options.
PROPOSAL 1: ELECTION OF DIRECTORS
Pursuant to the Restated Certificate of Incorporation of the Company and
the Certificate of Designations, Preferences and Relative Rights,
Qualifications, Limitations and Restrictions of the Series A Stock of the
Company, the holders of the Series A Stock, voting as a separate class, shall be
entitled to elect one Director of the Company (the "Series A Director"). The
holders of the Series A Stock and the Common Stock, voting together as a single
class, shall elect the remaining Directors. Accordingly, seven directors are to
be elected and qualified at the Meeting. Proxies for election of the Series A
Director are not being solicited; the Series A Stock will be voted by written
ballot or unanimous written consent at the Meeting. The holder of the Series A
Stock has advised the Company that Mr. Finn-Egan will be nominated for election
as the Series A Director for a term commencing on the date of the Meeting and
continuing until the next Annual Meeting of Stockholders and until his successor
has been duly elected and qualified. In the absence of instructions to the
contrary, Proxies covering shares of Common Stock and Series A Stock will be
voted in favor of the election of the persons listed below as Directors of the
Company for a term commencing on the date of the Meeting and continuing until
the next Annual Meeting of Stockholders and until their successors have been
duly elected and qualified. In the event that any nominee for Director should
become unavailable to serve, it is intended that votes will be cast, pursuant to
the enclosed Proxy, for such substitute nominee as may be nominated by the
Company. Management has no present knowledge that any of the persons named will
be unavailable to serve.
INFORMATION CONCERNING INCUMBENT DIRECTORS
Information is set forth below concerning the incumbent Directors. All of
the incumbent Directors were elected at the Company's 1994 Annual Meeting of
Stockholders. All of the incumbent Directors are nominees for election as
Directors at the Meeting. Each nominee has furnished the information as to his
beneficial ownership of Common Stock and Series A Stock of the Company as of
January 31, 1995 and, if not employed by the Company, the nominee's principal
occupation. Each nominee has consented to being named in this Proxy Statement as
a nominee for Director and has agreed to serve as a Director if elected.
<TABLE>
<CAPTION>
NAME, AGE, PRINCIPAL
OCCUPATION AND YEAR
FIRST BECAME A DIRECTOR OTHER INFORMATION; COMMITTEE MEMBERSHIPS
- ----------------------------- -----------------------------------------------------------
<S> <C>
DON L. GEVIRTZ, 67 Mr. Gevirtz has been Chief Executive Officer of the Company
Chairman of the Board and since January 1970 and Chairman of the Board since April
Chief Executive Officer 1972. From April 1972 until April 1977, Mr. Gevirtz also
of the Company was President of the Company. Mr. Gevirtz is also a
1972 Director of The Presley Companies.
JOHN F. NICKOLL, 60 Mr. Nickoll has been President of the Company since April
President and Co-Chief 1977, Vice Chairman of the Board and Chief Operating
Executive Officer of the Officer of the Company since April 1972 and Co-Chief
Company Executive Officer since January 1985. From 1972 until
1972 becoming President in 1977, Mr. Nickoll served as
Executive Vice President of the Company. Mr. Nickoll is
also a Director of CIM High Yield Securities, Regency
Health Services, Inc., ORNDA Health Corporation,
Precision Aerotech and Carson Pirie Scott.
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
NAME, AGE, PRINCIPAL
OCCUPATION AND YEAR
FIRST BECAME A DIRECTOR OTHER INFORMATION; COMMITTEE MEMBERSHIPS
- ----------------------------- -----------------------------------------------------------
<S> <C>
DR. WARREN BENNIS, 70 Dr. Bennis has been a Professor, School of Business
Professor, School of Administration, University of Southern California, since
Business 1980. From February 1, 1978 to February 1, 1980, Dr.
Administration, University Bennis was a Management Consultant, Fellow of the Corbett
of Southern California Foundation, Aspen, Colorado.
1983 Committee Memberships: Audit, Compensation, Nominations
ARTHUR MALIN, M.D., 69 Dr. Malin has been a practicing psychiatrist since 1954 in
Clinical Professor of Beverly Hills, California and is a Clinical Professor of
Psychiatry, U.C.L.A. School Psychiatry, U.C.L.A. School of Medicine. Dr. Malin was
of Medicine elected an officer of the Company in 1970, and served as
1972 a Vice President of the Company from April 1972 until
April 1979.
Committee Memberships: Audit, Compensation, Nominations
STEVEN L. VOLLA, 48 Mr. Volla has been Chairman of the Board and Chief
Chairman of the Board and Executive Officer of Primary Health Systems, L.P. since
Chief Executive Officer, May 1994. Mr. Volla was Chairman and Chief Executive
Primary Health Systems, Officer of American Healthcare Management, Inc. from 1990
L.P. until April 1994. Mr. Volla was Senior Vice President of
Universal Health Services from 1982 to 1990. Mr. Volla is
also a Director of Kendall International.
Committee Memberships: Audit, Compensation, Nominations
JEFFREY A. LIPKIN, 48 Mr. Lipkin has been a general partner of Recovery Equity
General Partner of Recovery Partners, L.P. since 1987. Mr. Lipkin is also a director
Equity Partners, L.P. of CMI Corporation. Mr. Lipkin was appointed to the Board
1991 of Directors concurrently with the sale of the Series A
Stock to Recovery Investors, and, although no contractual
right exists which would obligate the Board to do so, it
is anticipated that a representative of Recovery
Investors (in addition to the Series A Director) will be
nominated to the Board so long as it continues to own its
equity interest in the Company.
Committee Memberships: Audit, Compensation, Nominations
SERIES A DIRECTOR
JOSEPH J. FINN-EGAN, 61 Mr. Finn-Egan has been a general partner of Recovery Equity
General Partner of Recovery Partners, L.P. since 1987. Mr. Finn-Egan is also a
Equity Partners, L.P. director of CMI Corporation.
1991 Committee Memberships: Audit, Compensation, Nominations
</TABLE>
THE BOARD OF DIRECTORS
MEETINGS AND REMUNERATION
During the year ended December 31, 1994, the Board of Directors met four
times and took various actions by unanimous written consent. For their services
on the Board, each non-employee Director receives a retainer of $12,000
annually, payable in quarterly installments of $3,000 each. Each non-employee
Director also receives $1,500 for each regularly scheduled Board meeting
actually attended; however, if two Board meetings occur on the same day, the fee
is paid only once. Each non-employee Director who is a member of a committee of
the Board of Directors receives $1,500 for each committee meeting actually
attended; however, if two committee meetings occur on the same day, the fee is
paid only once. Directors receive $500 for each special meeting attended in
person and for each specially scheduled telephonic meeting. The Company has
adopted a retirement plan for outside directors. (See "Retirement Plan For
Outside Directors" below.) Standing committees of the Board of Directors include
the Audit Committee, Compensation Committee and Nominations Committee. During
the year ended December 31, 1994, no Director attended less than 75% of the
aggregate of all Board meetings and of all meetings held by any committee of the
Board on which he served.
4
<PAGE> 7
RETIREMENT PLAN FOR OUTSIDE DIRECTORS
The Company adopted The Foothill Group, Inc. Retirement Plan for Outside
Directors (the "Directors' Plan") effective January 1, 1991. Participation in
the Directors' Plan is limited to those members of the Board of Directors who
are not employees of the Company ("Outside Directors"). The Directors' Plan is
designed to provide benefits to participants upon their termination of service
as an Outside Director. Administration of the Directors' Plan is the
responsibility of the Board of Directors or its delegate. Participants in the
Directors' Plan are not permitted to make contributions to the Directors' Plan.
Outside Directors become eligible for participation in the Directors' Plan
following the completion of at least 7 years of service as an Outside Director.
Outside Directors will receive credit for a year of service for each 12 month
period of service on the Board of Directors as an Outside Director and are given
credit for years of service prior to the effective date of the Directors' Plan.
Separate periods of service as an Outside Director will be aggregated.
Benefits under the Directors' Plan are payable monthly, starting on the
first day of the month coincident with or next following the later of (a) the
attainment of age 70 or (b) ceasing to be a member of the Board of Directors. At
that time, an Outside Director will become eligible to receive a benefit of
$12,000 per year, assuming he has accrued 7 years of service. For each
additional year of service greater than 7 years, the Outside Director will be
entitled to an additional annual benefit of $1,500; however, in no event will
any years of service in excess of 15 be taken into account. Accordingly, the
maximum benefit available to an Outside Director under the Directors' Plan is
$24,000 per year. The Directors' Plan is currently unfunded, and the Company has
made no payments under the Directors' Plan.
AUDIT COMMITTEE
The Audit Committee recommends to the Board of Directors the engagement or
discharge of the Company's independent auditors; reviews with the independent
auditors their engagement, audit plan, scope and timing of the fiscal year-end
and interim audits, any nonaudit services and the fees related to such services;
reviews the independence of the independent auditors; reviews with the
independent auditors and the Company's internal audit staff the scope and
results of the Company's internal audits and the adequacy of the Company's
system of internal accounting controls to assure that transactions correspond
with management's authorization and are recorded; and conducts or supervises
such additional projects or reviews as may be relevant to its duties. The Audit
Committee currently consists of Dr. Bennis, Dr. Malin, Mr. Volla, Mr. Finn-Egan
and Mr. Lipkin, none of whom are employees of the Company. The Audit Committee
met four times during the year ended December 31, 1994.
COMPENSATION COMMITTEE
The Compensation Committee approves the compensation policies and
guidelines for the entire executive and managerial group; oversees the role of
chief executives and their performance, especially as these impact their
compensation; establishes proper compensation levels for the Chairman of the
Board and President; and reviews the Chief Executive's recommendations for
compensation, including bonus allocation for individuals in the management group
and ensures that such recommendations are within the guidelines authorized by
the Board of Directors. See "Executive Compensation -- Compensation Committee
Report" below. The Compensation Committee has also been designated by the Board
of Directors to administer the Company's 1978 Employee Stock Option Plan, 1979
Employee Stock Purchase Plan and 1990 Foothill Performance and Equity Incentive
Plan. The Compensation Committee currently consists of Dr. Bennis, Dr. Malin,
Mr. Volla, Mr. Finn-Egan and Mr. Lipkin, none of whom are employees of the
Company. The Compensation Committee met four times during the year ended
December 31, 1994.
NOMINATIONS COMMITTEE
The Nominations Committee has the responsibility of recommending to the
Board of Directors nominees for the Board. The Nominations Committee also makes
recommendations to the Board concerning the membership of the committees of the
Board and their chairpersons as well as a successor to the Chief Executive
Officer when a vacancy occurs through retirement or otherwise. Nominations
recommended by stockholders of the Company will be considered by the Nominations
Committee. Suggestions for candidates
5
<PAGE> 8
for nomination at the Company's 1996 Annual Meeting of Stockholders, accompanied
by biographical material and material regarding each candidate's qualifications
to serve as a Director, must be sent to the Secretary of the Company at the
Company's principal executive offices no later than November 21, 1995. The
Nominations Committee currently consists of Dr. Bennis, Dr. Malin, Mr. Volla,
Mr. Finn-Egan and Mr. Lipkin, none of whom are employees of the Company. The
Nominations Committee met once during the year ended December 31, 1994.
EXECUTIVE COMPENSATION
GENERAL
The following table summarizes the total compensation of the Company's
Chief Executive Officer, Co-Chief Executive Officer and the three other most
highly compensated executive officers for the years ended December 31, 1994,
1993 and 1992:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-------------------------------------
AWARDS
-------------------------
ANNUAL COMPENSATION SECURITIES PAYOUTS
----------------------------------- RESTRICTED UNDERLYING -------
OTHER ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARD(S) SARS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($)(1) ($)(2) ($)(3) ($) (#)(4) ($) ($)(5)
- ------------------------ ---- -------- ------- ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Don L. Gevirtz 1994 346,131 346,131 -- 0 35,000 0 2,539,674(6)
Chief Executive Officer 1993 337,689 337,689 -- 0 40,000 0 1,728,350(7)
1992 325,955 118,851 -- 0 0 0 361,256(8)
John F. Nickoll 1994 346,131 346,131(9) -- 0 35,000 0 2,513,354(6)
President, 1993 337,689 337,689(9) -- 0 40,000 0 1,715,948(7)
Co-Chief Executive 1992 325,955 118,851 -- 0 0 0 345,979(8)
Officer
and Chief Operating Officer
Peter E. Schwab 1994 261,170 261,170 -- 0 15,000 0 299,950(6)
Executive Vice 1993 254,800 217,000 -- 0 15,000 0 231,197(7)
President 1992 245,000 110,250 -- 0 0 0 91,085(8)
David C. Hilton 1994 223,860 223,860 -- 0 10,000 0 298,670(6)
Executive Vice 1993 218,400 185,640 -- 0 5,000 0 229,151(7)
President 1992 210,000 90,000 -- 0 0 0 88,971(8)
Henry K. Jordan 1994 137,000 137,000 -- 0 10,000 0 18,240
Senior Vice President, 1993 130,600 130,600 -- 0 10,000 0 17,994
Chief Financial Officer 1992 125,000 47,200 -- 0 0 0 17,364
and Secretary
</TABLE>
- ---------------
(1) Messrs. Gevirtz and Nickoll each have an employment agreement with the
Company and a subsidiary of the Company which expires on December 31, 1996
and provides for an annual base salary for 1995 of $349,592, to be
increased in subsequent years by a factor based on the Consumer Price
Index, and payment of up to $12,000 in medical expenses per year. Such
agreements provide that upon a termination of employment for cause, the
employee is only entitled to his base salary through the date of
termination. Messrs. Schwab, Hilton and Jordan have employment contracts
with subsidiaries of the Company which expire on December 31, 1995 or two
years after a change in control of the Company or sale of substantially all
of its assets; however, the contracts will automatically be renewed every
year for an additional year unless the Company or the employee gives
written notice to the contrary prior to expiration.
(2) See "Management Incentive Plans" below.
(3) Perquisites and other personal benefits did not exceed 10 percent of the
annual salary and bonus for any named executive in 1994.
(4) See "Stock Option Plans" below.
6
<PAGE> 9
(5) Comprised of life insurance premiums paid by the Company, various other
perquisites, Company contributions to The Foothill Group, Inc. Retirement
Plan and partnership distributions more fully described in footnotes below.
(6) Messrs. Gevirtz and Nickoll, together with the Company and several other
members of management, are the general partners of Foothill Partners, L.P.
and Foothill Partners II, L.P., investment limited partnerships organized
by the Company (the "Partners Fund" and the "Partners II Fund,"
respectively), and as such are entitled to receive distributions from the
partnership (i) on their invested capital proportionately with all other
general and limited partners and (ii) as general partners, as profits are
distributed (after achieving specified preferential returns to all
partners), proportionately with the other general partners in accordance
with the terms of the partnership agreement. See "Transactions with
Management and Others" below. The amounts shown in the table include
$1,338,088 and $1,338,099 distributed by the Partners Fund to Messrs.
Gevirtz and Nickoll, respectively, as their general partners' override
distributions during the year ended December 31, 1994. Not included are
$24,224 and $24,298 distributed by the Partners Fund to Messrs. Gevirtz and
Nickoll as their proportionate distributions on invested capital. The
amounts shown in the table include $1,118,542, $1,112,883, $86,363 and
$86,363 allocable by the Partners II Fund to Messrs. Gevirtz, Nickoll,
Schwab and Hilton, respectively, as their general partners' override
distributions during the year ended December 31, 1994. Not included are
$81,066, $71,057, $6,268 and $6,268 distributed by the Partners II Fund to
Messrs. Gevirtz, Nickoll, Schwab and Hilton, respectively, as their
proportionate distributions on invested capital. Under the terms of the
Foothill Partners II, L.P. partnership agreement, override earnings
(totalling 200% of subscribed capital) allocable to general partners were
initially retained in the partnership and may be distributed to general
partners subject to and depending on future financial performance of the
Partnership. Additionally, Foothill Capital Corporation pays Messrs. Schwab
and Hilton periodic amounts determined in relation to the general partner
profit distributions from the Partners Fund. In 1994, Foothill Capital
Corporation paid Messrs. Schwab and Hilton each $183,233 pursuant thereto.
(7) The amounts shown in the table include $1,519,912 and $1,519,908
distributed by the Partners Fund to Messrs. Gevirtz and Nickoll,
respectively, as their general partners' override distributions during the
year ended December 31, 1993. Not included are $43,450 and $43,419
distributed by the Partners Fund to Messrs. Gevirtz and Nickoll as their
proportionate distributions on invested capital. The amounts shown in the
table include $139,742, $139,742, $10,627 and $10,627 allocable by the
Partners II Fund to Messrs. Gevirtz, Nickoll, Schwab and Hilton,
respectively, as their general partners' override distributions during the
year ended December 31, 1993. Not included are $9,662, $9,643, $111 and
$111 distributed by the Partners II Fund to Messrs. Gevirtz, Nickoll,
Schwab and Hilton, respectively, as their proportionate distributions on
invested capital. Under the terms of the Foothill Partners II, L.P.
partnership agreement, override earnings allocable to general partners are
initially retained in the partnership and may be distributed to general
partners subject to and depending on future financial performance of the
Partnership. Additionally, Foothill Capital Corporation pays Messrs. Schwab
and Hilton periodic amounts determined in relation to the general partner
profit distributions from the Partners Fund. In 1993, Foothill Capital
Corporation paid Messrs. Schwab and Hilton each $210,083 pursuant thereto.
(8) Amounts include $316,180 and $316,181 distributed by the Partners Fund to
Messrs. Gevirtz and Nickoll, respectively, as their general partners'
override distributions, and $73,243 paid to each of Messrs. Schwab and
Hilton by Foothill Capital Corporation during the year ended December 31,
1992. Not included are $22,218 and $22,232 distributed to Messrs. Gevirtz
and Nickoll, respectively, as their proportionate distributions on invested
capital.
(9) Mr. Nickoll deferred the payment of one half of the bonus portion of his
1994 compensation and 100% of the bonus portion of his 1993 compensation
until January 10, 1996 pursuant to the Company's Top Executive Incentive
Compensation Plan dated July 1, 1992, of which $146,300, $68,375 and
$63,750 was used to purchase an aggregate of 20,000 shares of Common Stock
on March 28, 1994, April 26, 1994 and June 24, 1994, respectively. The
remaining deferred amount will be payable with interest at the Bank of
America prime rate. The interest rate payable on this deferred bonus will
be subject to adjustment on a quarterly basis.
7
<PAGE> 10
MANAGEMENT INCENTIVE PLANS
The Company has plans and arrangements which provide for the payment of
cash incentive bonuses to certain management personnel of the Company, including
persons included in the preceding table. These plans and arrangements are
adopted, and the terms thereof are determined, by the Board of Directors.
Participation in such plans and arrangements is limited to certain management
personnel of the Company and its subsidiaries, and is determined by the Board of
Directors based upon the employee's responsibility for operations, the
employee's impact upon the Company's profitability, and other related factors as
determined by the Board of Directors. These plans and arrangements are
determined on an annual basis and provide for incentive bonuses of up to 100% of
such person's base salary based on the performance of the Company's subsidiaries
and the attainment of applicable stated individual performance goals. In
addition, at the end of the fiscal year the Board of Directors may in its
discretion also award bonuses to certain management personnel based upon the
Company's or that employee's performance for such fiscal year, and upon other
relevant factors. See "Compensation Committee Report" below.
Messrs. Gevirtz, Nickoll, Schwab, Hilton and Jordan ("executive officers")
participate in an incentive plan which provides for incentive compensation based
on the Company's return on average assets and growth in net earnings. The plan
provides that if the Company's return on average assets and growth in net
earnings for any year are 1.75% and 5%, respectively (the "Bonus Threshold"),
the bonuses payable to the executive officers under the plan will equal 25% of
their respective base salaries for that year. Greater return on average assets
and/or growth in net earnings will result in increased bonuses, up to a maximum
of 100% of such salaries when return on average assets and growth in net
earnings equal or exceed 2.75% and 20%, respectively. The executive officers may
elect to defer their incentive bonuses, and in such event the bonuses will be
increased to include an amount equal to interest accrued on the bonuses during
the period of deferral at the rate announced by Bank of America, NT & SA as its
"prime rate," which rate will be adjusted quarterly. Amounts sets forth under
Bonus for Messrs. Nickoll and Gevirtz in 1992 in the Summary Compensation Table
above were pursuant to a prior incentive plan, based on the Company's return on
average equity, which is no longer in effect. Amounts set forth under Bonus for
Messrs. Schwab, Hilton and Jordan in the 1992 and 1993 Summary Compensation
Table above were pursuant to a prior incentive plan, based on performance of the
Company's subsidiary and the attainment of applicable stated individual
performance goals, which is no longer in effect.
On July 15, 1986, the Company, as general partner, and certain members of
management of the Company, as limited partners, formed Foothill Managers
Limited, a California limited partnership ("Managers I"), for the purpose of
investing in equity securities of privately held companies and securities
evidencing the right to acquire equity securities of such companies ("Portfolio
Securities"), and in publicly-traded equity securities of other companies,
including the Company. On June 1, 1988, the Company, as general partner, and
certain members of management of the Company, as limited partners, formed
Foothill Managers Limited II, a California limited partnership ("Managers II"),
also for the purpose of investing in Portfolio Securities and in publicly-traded
equity securities of other companies, including the Company. Managers I and
Managers II were organized in order to provide an additional incentive for such
members of management who chose to participate as limited partners. Limited
partners of Managers I and Managers II have invested their personal funds in
such partnerships, and no contribution was made to such partnerships by the
Company on their behalf. The Company held a one percent general partnership
interest in Managers I and Managers II and had contributed capital to such
partnerships commensurate to that interest. Managers I and Managers II were
liquidated as of December 31, 1993. The respective share of the losses of
Managers I for the year ended December 31, 1993, allocable to each of the
persons named in the preceding summary compensation table, was as follows: Don
L. Gevirtz, $11,383; John F. Nickoll, $12,472; Peter E. Schwab, $6,273; David C.
Hilton, $5,703; and Henry K. Jordan, $1,985. The respective share of losses of
Managers II for the year ended December 31, 1993, allocable to each of the
persons named in the preceding summary compensation table, was as follows: Don
L. Gevirtz, $679; John F. Nickoll, $3,361; Peter E. Schwab, $679; David C.
Hilton, $0; and Henry K. Jordan, $679.
8
<PAGE> 11
STOCK OPTION PLANS
In 1990, the Company adopted the 1990 Foothill Performance and Equity
Incentive Plan (the "1990 Plan"). The 1990 Plan replaced the Company's prior
stock option plan, the 1978 Employee Stock Option Plan (the "1978 Plan"). The
1978 Plan terminated upon stockholder approval of the 1990 Plan, except as to
options previously granted under the 1978 Plan and then outstanding.
The 1990 Plan empowers the Company to award or grant from time to time
until December 31, 2000, when the 1990 Plan expires except with respect to
awards then outstanding, to officers and other key employees of the Company and
its subsidiaries incentive, non-qualified and deferred compensation stock
options, stock appreciation rights, restricted stock and restricted unit grants,
performance share and performance unit grants, any other stock-based awards
(collectively referred to as "Awards") authorized by the committee which
administers the 1990 Plan, and any combination of any or all of such awards,
whether in tandem with each other or otherwise. All Awards under the 1990 Plan
to date have consisted of non-qualified and incentive stock options.
Under the Company's 1979 Employee Stock Purchase Plan (the "1979 Plan"), as
amended, eligible employees of the Company and its subsidiaries are afforded the
opportunity to participate in the ownership of the Company by acquiring a right
to purchase shares of Common Stock. Purchases are made on December 31 with
respect to that year's options at the lower of the fair market value of the
Common Stock on the prior January 1 or 90% of the fair market value of the
Common Stock on December 31. Purchases are made from participants' accounts
funded through payroll deductions elected by such participants.
RETIREMENT PLAN
The Company adopted The Foothill Group, Inc. Retirement Plan (the
"Retirement Plan") effective December 1, 1985. All employees, including
officers, of the Company and its subsidiaries are eligible to participate in the
Retirement Plan following the completion of 90 days of service with the Company,
provided they complete at least 250 hours of service during the time period.
Subject to certain limitations, participants in the Retirement Plan may make
contributions of up to 15% of their gross compensation, up to a maximum of
$9,240 per year, subject to annual adjustments for inflation. The Company will
make a matching contribution equal to 100% of the first 6% of compensation
contributed by each participant. Participants are entitled to direct the
investment of their contributions and the matching contributions made on their
behalf. The Retirement Plan is designed to qualify under Sections 401(a) and
401(k) of the Internal Revenue Code of 1986 and, therefore, contributions by the
Company and the participants are deductible by the Company and not includible in
the income of the participants for federal income tax purposes. During the year
ended December 31, 1994, the Company contributed $9,000 on behalf of each of the
individuals named in the preceding table.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Company adopted The Foothill Group, Inc. Supplemental Executive
Retirement Plan (the "Supplemental Plan") effective January 1, 1991. The
Supplemental Plan is designed to provide benefits to participants upon their
retirement from the Company's service. The Supplemental Plan covers a designated
group of the Company's and its subsidiaries' management or highly compensated
employees. Participants are determined by the Board of Directors.
Under the Supplemental Plan, a participant's 65th birthday is deemed his
normal retirement date ("Normal Retirement Date"), at which time a participant
will receive a yearly benefit payable monthly of 2% of his average base
compensation for his highest three consecutive years, multiplied by the actual
number of his years of service. The benefit is paid for the rest of the
participant's lifetime following retirement (straight life annuity). Benefits
may be paid in an optional form (such as one that provides continuing benefits
for the participant's surviving spouse). However, the amount payable under an
optional form is adjusted so that it is the actuarial equivalent of a straight
life annuity. A participant may also elect early retirement before his Normal
Retirement Date, subject to certain restrictions, but his retirement benefit
would be reduced 1/4 of 1% for each month of retirement prior to his 65th
birthday. A participant's benefit is subject to adjustment for estimated Social
Security benefits and matching contributions made by the Company to the
Retirement Plan on his behalf. In addition, special rules apply following a
change in control of the Company. If a participant's
9
<PAGE> 12
employment is terminated within five years following a change in control of the
Company, the participant is generally credited with five additional years of
service and is entitled to a lump sum distribution of the present value of his
accrued benefit.
The following table shows the estimated annual retirement benefits, before
any applicable offset for Social Security benefits or matching contributions
made under the Retirement Plan on the participant's behalf, that would be
payable to participants in the Supplemental Plan on their Normal Retirement Date
on a straight life annuity basis. Offsets for matching contributions made under
the Retirement Plan may be substantial.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
AVERAGE ANNUAL YEARS OF SERVICE AT RETIREMENT
ELIGIBLE -----------------------------------------------
COMPENSATION 15 20 25 30
- -------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
$200,000 $ 60,000 $ 80,000 $100,000 $120,000
$250,000 $ 75,000 $100,000 $125,000 $150,000
$300,000 $ 90,000 $120,000 $150,000 $180,000
$350,000 $105,000 $140,000 $175,000 $210,000
</TABLE>
At December 31, 1994, the years of credited service under the Supplemental
Plan for Messrs. Gevirtz, Nickoll, Schwab, Hilton and Jordan were 24 years, 24
years, 11 years, 15 years and 10 years, respectively. The Supplemental Plan is
currently unfunded, and the Company has made no payments under the plan.
The following tables show for the year ended December 31, 1994, certain
information regarding options granted to, exercised by and held at year end by
the Company's Chief Executive Officer, Co-Chief Executive Officer and the three
other most highly compensated executive officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- -------------------------------------------------------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTION/SARS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT VALUE
NAME GRANTED(#)(1) FISCAL YEAR ($/SH) DATE ($)(2)
- ------------------------------- ------------- ------------ ----------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
Don L. Gevirtz 35,000 17.0% 13.88 April 28, 2004 237,650
John L. Nickoll 35,000 17.0% 13.88 April 28, 2004 237,650
Peter E. Schwab 15,000 7.3% 13.88 April 28, 2004 101,850
David C. Hilton 10,000 4.9% 13.88 April 28, 2004 67,900
Henry K. Jordan 10,000 4.9% 13.88 April 28, 2004 67,900
</TABLE>
- ---------------
(1) These options were granted with an exercise price equal to the fair market
value of the Common Stock on the date of grant. One third of the options
granted to each named executive officer become exercisable each year the
Company achieves growth in earnings of ten percent or greater and an annual
return on average assets of 2.25% or greater. Notwithstanding the foregoing,
any remaining unvested options will vest 100% on October 28, 2003, if the
options have not otherwise terminated pursuant to their terms.
(2) Calculated using a variation of the Black-Scholes option pricing method
based on the following assumptions: 7.30% risk free rate; 10 year option
period adjusted for three year vesting; 1.21% dividend yield; 0.349 expected
stock volatility using three year historical data; and $13.88 exercise
price.
10
<PAGE> 13
OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE TABLE
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END AT FISCAL YEAR-END
SHARES ACQUIRED ON VALUE REALIZED (#) ($)(2)
NAME EXERCISE (#) ($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ----------------- ------------------ -------------- -------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
Don L. Gevirtz -- -- 141,202 36,666 1,184,604 101,064
John F. Nickoll 32,100 248,133 109,102 36,666 864,246 101,064
Peter E. Schwab 10,700 117,004 91,316 15,150 820,308 39,918
David C. Hilton 10,700 122,408 67,610 8,400 627,975 17,058
Henry K. Jordan 20,447 176,676 9,900 10,100 40,788 26,612
</TABLE>
- ---------------
(1) Value calculated by subtracting the exercise price from the closing price of
the Common Stock on the date of exercise.
(2) Value calculated by subtracting the exercise price from the closing price
($15.00) of the Common Stock on December 31, 1994.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Dr. Arthur Malin, a member of the Compensation Committee until January 1,
1995, served as a Vice President of the Company from April 1972 until April
1979.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors is composed entirely
of outside directors and is responsible for developing executive compensation
policies and programs. In addition, the Committee, pursuant to authority
delegated by the Board, determines on an annual basis the overall compensation
to be provided for the Chief Executive Officer and the Co-Chief Executive
Officer and determines, based on recommendations of the Chief Executive Officer
and the Co-Chief Executive Officer, the compensation provisions for other
executive officers. The Committee has access to independent compensation data
which it uses when evaluating the Company's practices with regard to base
salaries, annual incentives and stock option grants.
The objectives of the Company's executive compensation arrangements are to:
- Support the achievement of targeted Company performance goals;
- Provide compensation that will attract and retain superior talent and
reward excellent performance and the creation of value for stockholders;
and
- Align the interests of executive officers with the success of the Company
and the creation of value for stockholders by making a portion of
compensation dependent upon achievement of specific Company goals.
Mr. Gevirtz, Chief Executive Officer, and Mr. Nickoll, Co-Chief Executive
Officer, are the founders of the Company and serve in substantially equal
capacities. Historically, the Committee has treated them equally when
determining their compensation levels, but there is no obligation for the
Committee to do so in the future if it determines that they no longer serve in
substantially equal capacities. For purposes of this report, however, Messrs.
Gevirtz and Nickoll will be collectively referred to as the Co-Chief Executive
Officers.
The Company's executive compensation package is currently comprised of
three components -- base salary, annual incentives and stock options. In
addition to the compensation provisions discussed below, executive officers also
participate in the Retirement Plan and the Supplemental Plan discussed above
under "Management Incentive Plans".
11
<PAGE> 14
Base Salary.
Base salaries for executives are reviewed on an annual basis and may be
adjusted at that time based on the determination that the individual executive's
contribution to the Company has changed. The review may also take into
consideration whether base compensation levels for executives at other
comparable companies have changed. For the Co-Chief Executive Officers, this
determination is made by the Committee. For other executive officers, a
recommendation is made to the Committee by the Co-Chief Executive Officers, but
the final determination is made by the Committee. As a result of its annual
review, the Committee increased, effective January 1, 1994, base salaries of
Messrs. Schwab, Hilton and Jordan. Each of these executive officers is subject
to the terms of an employment agreement that provides for base salary increases
equal to or greater than increases in the Consumer Price Index (CPI) for Los
Angeles County. For 1993, the increase to the CPI was 2.5%. Messrs. Schwab and
Hilton were granted base salary increases of 2.5%. Mr. Jordan was granted a base
salary increase of 4.9% in recognition of his outstanding performance in
carrying out his duties as Chief Financial Officer of the Company and overseeing
the spin-off of Foothill Thrift & Loan to shareholders in 1993.
The Co-Chief Executive Officers each have an employment agreement with the
Company, effective January 1, 1991, which expires in 1996. The Compensation
Committee, as then comprised, determined that it was in the best interests of
the Company to enter into these employment agreements to assure the retention of
the services of the Co-Chief Executive Officers. The employment agreements
provided for base salaries for each of the Co-Chief Executive Officers in 1994
of $346,131 and provide for cost of living adjustments in subsequent years. The
cost of living adjustment will result in 1995 base salaries for each of the
Co-Chief Executive Officers of $349,592.
Annual Incentives.
Annual incentives for executives reflect the Committee's belief that
executive compensation should be significantly tied to the achievement of
specified performance criteria. The Co-Chief Executive Officers and certain
other executive officers have the opportunity to earn significant distributions
in their capacities as general partners of the partnerships discussed below. As
a result, the Committee felt that a formula partially excluding partnership
performance overrides was appropriate in determining annual incentive
compensation for the Co-Chief Executive Officers based on overall Company
performance. In light of this, the Committee, acting upon the recommendation of
an outside compensation consulting firm, developed the Top Executive Incentive
Plan and implemented it in July of 1992. Under the plan, which replaced the 1985
Incentive Compensation Plan, incentive payments are made only when growth in net
earnings (excluding partnership performance overrides above one-half of one
percent of the average assets of the Company) equals or exceeds 5% and return on
average assets equals or exceeds 1.75% after considering the effect of bonuses
in the calculation. If these minimum financial performance criteria are met,
each participant earns an incentive bonus equal to 25% of base salary. Greater
return on average assets and/or growth in net earnings will result in increased
bonuses, up to a maximum of 100% of base salary when return on average assets
and growth in earnings equal or exceed 2.75% and 20%, respectively. The
Committee may award additional incentive bonuses to executives for any fiscal
year in which return on average assets exceeds 2.75% or growth in net earnings
exceeds 20%. Messrs. Gevirtz and Nickoll each received an incentive award of
$346,131 for 1994. Messrs. Schwab, Hilton and Jordan received an incentive award
of $261,170, $223,860 and $137,000, respectively. These awards were based on
return on average assets of 4.50% and growth in net earnings of 37.40% in 1994
as adjusted for partnership performance overrides discussed above.
The Co-Chief Executive Officers, together with the Company and two other
members of management of the Company, are the general partners of Foothill
Partners, L.P., a limited partnership established in 1990, and as such are
entitled to receive distributions and profits from the partnership. The decision
to allow the Co-Chief Executive Officers to be general partners along with the
Company was made by the outside directors of the Board after consultation with
counsel and in response to the advice of the placement agent for the limited
partnership interests, a national investment banking firm, that the alignment of
the Co-Chief Executive Officers' interests in the partnership with that of the
Company was necessary to successfully place the limited partnership interests
with the institutional investors that were the primary targeted investor group.
In March of 1993, Foothill Partners II, L.P. was established and the Co-Chief
Executive Officers, the Company,
12
<PAGE> 15
Messrs. Schwab and Hilton, and four other members of management of the Company
were made general partners on the basis of similar advice from the same
placement agent. The Co-Chief Executive Officers are each actively involved in
the management of both partnerships and are only entitled to receive
distributions therefrom to the extent that partnership investments are disposed
of profitably and specified minimum cumulative partnership returns have been
met. The Committee determined that, while reasonable, these general partnership
interests provided significant annual incentives to the Co-Chief Executive
Officers and that therefore it was appropriate to replace the 1985 Incentive
Compensation Plan for them as described in the prior paragraph. See
"Transactions With Management and Others."
Stock Options.
Stock options are utilized as a component of executive compensation to
motivate executives to improve long-term stock performance, to encourage equity
ownership of the Company by executives and to align executive interest with the
enhancement of stockholder value. Grants are made, with the exception of grants
to the Co-Chief Executive Officers, on the recommendation of the Co-Chief
Executive Officers, taking into account the respective scope of accountability,
strategic and operational goals and performance of each optionee. Awards to the
Co-Chief Executive Officers are fixed separately by the Committee and are based,
among other things, on the Committee's perception of past and expected future
contributions to the Company's achievement of long-term performance goals. The
Committee awarded options to all named executive officers in 1994. One third of
these 1994 options become exercisable each year the Company achieves growth in
earnings of ten percent or greater and an annual return on average assets of
2.25% or greater. Notwithstanding the foregoing, any remaining unvested 1994
options will vest 100% on October 28, 2003, if the options have not otherwise
terminated pursuant to their terms.
In addition, the Committee has imposed guidelines for Company stock
ownership for the executive officers and all other stock option recipients
commencing in 1994. The Committee felt that it was in the best interests of the
Company to encourage stock ownership by requiring employees who participate in
the stock option plan to own Company stock valued in the following amounts:
Senior Executive Officers -- 150% of salary
Senior Vice Presidents -- 100% of salary
Vice Presidents -- 50% of salary
Assistant Vice Presidents -- 15% of salary
Failure to comply with these ownership requirements within a specified
period, and in the absence of special individual circumstances, will result in
exclusion from future stock option grant consideration until these requirements
are met.
It is the policy of the Committee to maximize, to the extent reasonably
possible, the Company's ability to obtain a corporate tax deduction for
compensation paid to executive officers of the Company to the extent consistent
with the best interests of the Company and its stockholders. The Committee does
not presently anticipate that compensation for any member of the named executive
officer group will exceed the one million dollar limit for deductibility under
Section 162(m) of the Internal Revenue Code.
The foregoing report has been furnished by Dr. Bennis, Mr. Finn-Egan, Mr.
Lipkin, Dr. Malin and Mr. Volla. Dr. Malin has resigned from the Committee
effective January 1, 1995 and has been replaced in his role as chairman of the
Committee by Dr. Bennis.
13
<PAGE> 16
COMMON STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total return of The Foothill Group,
Inc., the New York Stock Exchange Market Index and a peer group index comprised
of companies selected using objective criteria. The peer group consists of New
York Stock Exchange and American Stock Exchange listed companies, Nasdaq
National Market companies and Nasdaq Small Cap companies (whose securities trade
in two different areas of the country) each with Standard Industrial
Classification Code 615 (Business Credit Institutions). This graph was prepared
assuming $100 is invested on January 1, 1989 and all dividends are reinvested.
The peer group consists of 28 companies which reflects an increase of 4
companies over the course of the last year. Companies in the peer group are as
follows: Allied Capital Lending, Allstate Financial Corporation, Ampal --
American Israel, Burlington Resources Coal Seam-Royalty Trust, Consumer
Portfolio Services, CVD Financial Corporation, Dean Witter Discover & Co.,
Financial Federal Corporation, Financing For Science, Finova Group Inc., First
Merchants Acceptance, First USA Inc., The Foothill Group, Foxmoor Industries
Limited, HPSC Inc., KBK Capital Corporation, Mercer International Inc. SBI,
Olympic Financial Limited, Oxford Resources Corporation, PDS Financial
Corporation, Rochester Community Savings Bank, Search Capital Group Inc.,
Servicios Financieros SA, Student Loan Corporation, Student Loan Marketing, TFC
Enterprises Inc., Transmedia Europe Inc. and Western Transmedia Company. The
Company relied upon information provided by a service firm not affiliated with
the Company with respect to the contents of the graph.
<TABLE>
<CAPTION>
Measurement Period The Foothill Peer Group NYSE Market
(Fiscal Year Covered) Group Index Index
<S> <C> <C> <C>
1989 100 100 100
1990 44.70 91.46 95.92
1991 76.37 145.83 124.12
1992 126.66 140.65 129.96
1993 250.80 136.71 147.56
1994 229.75 123.08 144.69
</TABLE>
14
<PAGE> 17
SECTION 16 FILINGS
Section 16(a) of the Exchange Act ("Section 16") requires the Company's
directors and executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities (collectively, "Insiders"),
to file reports of ownership and changes in ownership with the SEC and the New
York Stock Exchange. Insiders are required by SEC regulation to furnish the
Company with copies of all Section 16 forms they file.
To the Company's knowledge, based solely on its review of the copies of
such forms received by it, or written representations from certain Insiders that
no Form 5s were required for those persons, the Company believes that for 1994,
all Section 16 filing requirements applicable to its Insiders were complied
with.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
In October 1990, the Company formed the Partners Fund to invest primarily
in bank debt of companies which are involved in reorganizations or are
experiencing financial distress. The Partners Fund presently has $116,676,768 of
capital subscriptions and will not seek new investors. The general partners of
the Partners Fund are the Company, Don L. Gevirtz, Chairman of the Board and
Chief Executive Officer of the Company, John F. Nickoll, President and Co-Chief
Executive Officer of the Company, and two other members of the Company's
management (the "General Partners"). The General Partners have committed to
invest $1,166,768 in the aggregate in the Partners Fund on a proportionate basis
equal to their capital interests.
The partnership agreement of the Partners Fund provides that the Company,
as a General Partner, will be entitled to a management fee accruing at the
annual rate of 2% of total committed capital. None of the other General Partners
are entitled to receive a management fee. Proceeds generated by the Partners
Fund that are not reinvested in securities or used to pay expenses of the
Partners Fund will be distributed as follows: first, to all partners until,
following a return of their capital invested in the securities yielding the
proceeds, all partners have earned a 10% rate of return compounded semiannually
on their capital contributions; second, 80% to all partners in proportion to
their capital contributions and 20% to the General Partners until the limited
partners have earned a 25% rate of return compounded semiannually on their
capital contributions invested in the securities yielding the proceeds; third,
20% to all partners in proportion to their capital contributions and 80% to the
General Partners until the General Partners have received 25% of the cumulative
non-capital distributions made to all of the partners pertaining to the
securities yielding the proceeds; and thereafter, 80% to all partners in
proportion to their capital contributions and 20% to the General Partners.
Amounts distributed to the General Partners shall be allocated 60% to the
Company, 15% to Mr. Gevirtz, 15% to Mr. Nickoll, and 5% each to the two
remaining General Partners, in accordance with their respective capital
contributions. See "Executive Compensation" above for information concerning
distributions made during the year ended December 31, 1994. The Partners Fund is
scheduled to terminate on December 31, 1996, unless extended for up to two years
by the General Partners.
In March 1993, the Company formed the Partners II Fund to invest primarily
in senior loans and other senior debt obligations of companies experiencing
financial difficulties. The Partners II Fund presently has $404,040,404 of
capital commitments and will not seek new investors. The general partners of the
Partners II Fund are the Company, Don L. Gevirtz, John F. Nickoll, and six other
members of the Company's management including Messrs. Schwab and Hilton (the
"General Partners"). The General Partners have committed to invest $2,100,201 in
the aggregate in the Partners II Fund on a proportionate basis equal to their
capital interests.
The Partnership Agreement of the Partners II Fund provides that the
Company, as a General Partner, will be entitled to a management fee accruing at
an annual rate of 1.1% on limited partners capital contributions. None of the
other General Partners are entitled to receive a management fee. Proceeds
generated by the Partners II Fund that are not reinvested in securities or used
to pay expenses of the Partners II Fund will be distributed as follows: first,
to all partners until, following a return of their capital invested in the
securities yielding the proceeds, all partners have earned a 10% rate of return
on their capital contributions; second, 60% to all partners in proportion to
their capital contributions and 40% to the General Partners until the General
Partners have received 25% of the cumulative non-capital distributions made to
all partners; and thereafter, 80% to all partners in proportion to their capital
contributions and 20% to the General Partners.
15
<PAGE> 18
Amounts distributed to the General Partners shall be allocated 48% to the
Company, 13% to Mr. Gevirtz, 13% to Mr. Nickoll, 1% to Mr. Schwab, 1% to Mr.
Hilton and 24% to the remaining General Partners, in accordance with their
respective capital contributions. The Partners II Fund is scheduled to terminate
on December 31, 1999, unless extended for up to two years by the General
Partners.
There are presently no material proceedings to which any director, officer,
affiliate or greater than 5% stockholder of the Company, or any associate of
such persons, is a party adverse to the Company or any of its subsidiaries or
has a material interest adverse to the Company or its subsidiaries.
OTHER BUSINESS
The Board of Directors is not aware of any matter which may properly be
presented for action at the Meeting other than the matters set forth herein, but
should any other matter requiring a vote of the stockholders arise, it is
intended that Proxies in the accompanying form will be voted in respect thereof
in accordance with the best judgment of the person or persons voting the Proxies
under the authority conferred by the Proxies.
AUDITORS
The firm of Ernst & Young served as the Company's auditors for 1994. The
Company has been advised that Ernst & Young is independent with respect to the
Company and its subsidiaries within the meaning of the Securities Act of 1933,
as amended, and the applicable published rules and regulations thereunder. A
representative of Ernst & Young is expected to be present at the Meeting and
will have the opportunity to make a statement if he or she desires and to
respond to appropriate questions related to the audit of the Company's financial
statements.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be included in the proxy statement
for the 1996 Annual Meeting of Stockholders and form of proxy must be received
by the Company no later than November 21, 1995.
Under Rule 14a-8 adopted by the SEC under the Exchange Act, proposals of
stockholders must conform to certain requirements as to form and may be omitted
from the proxy statement and proxy under certain circumstances. In order to
avoid unnecessary expenditures of time and money by stockholders and the
Company, stockholders are urged to review this rule and, if questions arise, to
consult legal counsel prior to submitting a proposal to the Company.
ANNUAL REPORT (FORM 10-K)
THE COMPANY UNDERTAKES, ON WRITTEN REQUEST, TO PROVIDE, WITHOUT CHARGE,
EACH PERSON FROM WHOM THE ACCOMPANYING PROXY IS SOLICITED WITH A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1994, AS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE FINANCIAL
STATEMENTS AND SCHEDULES. COPIES OF EXHIBITS NOT INCLUDED IN THE FORM 10-K WILL
ALSO BE MADE AVAILABLE, ON REQUEST, AT THE COMPANY'S COST THEREFOR. REQUESTS
SHOULD BE ADDRESSED TO HENRY K. JORDAN, CORPORATE SECRETARY, AT THE OFFICES OF
THE COMPANY, 11111 SANTA MONICA BOULEVARD, LOS ANGELES, CALIFORNIA 90025.
16
<PAGE> 19
PROXIES AND SOLICITATION
Proxies for the Meeting are being solicited by mail directly and through
brokerage and banking institutions. The Company will pay all expenses in
connection with the solicitation of Proxies. In addition to the use of mails,
Proxies may be solicited by Directors, officers and employees of the Company
personally, by telephone, or by telecopy. The Company does not expect to pay any
fees or compensation for the solicitation of Proxies but may reimburse brokers
and other persons holding stock in their names, or in the names of nominees, for
their expenses in sending proxy materials to principals and obtaining their
Proxies as well as paying fees of up to $5,000 (plus reimbursement of expenses)
to Corporate Investor Communications, Inc. for soliciting such Proxies from
brokers and other persons holding stock in their names or in the names of
nominees.
All stockholders are urged to complete, sign and promptly return the
enclosed Proxy card.
By Order of the Board of Directors
HENRY K. JORDAN
Secretary
Los Angeles, California
March 21, 1995
17
<PAGE> 20
PROXY PROXY
THE FOOTHILL GROUP, INC.
This Proxy is Solicited on Behalf of the Board of Directors
Common Stock and Series A Stock
The undersigned hereby appoints David E. Evans and Mary G. McCray, or
either of them, the true and lawful attorneys and proxies of the undersigned,
with full power of substitution, to vote all shares of the Class A Common
Stock, no par value ("Common Stock"), and Series A Convertible Preferred Stock,
$1.00 par value ("Series A Stock"), of THE FOOTHILL GROUP, INC. which the
undersigned is entitled to vote, at the Annual Meeting of the Stockholders of
THE FOOTHILL GROUP, INC. to be held at the Peninsula Hotel, 9882 Little Santa
Monica Boulevard, Beverly Hills, California 90212, on Thursday, April 27, 1995
at 2:00 p.m., Pacific Time, and at any and all adjournments thereof, on the
proposal set forth below and any other matters properly brought before the
Meeting.
Unless a contrary direction is indicated, this Proxy will be voted FOR
all nominees listed in Proposal 1; if specific instructions are indicated, this
Proxy will be voted in accordance therewith.
All proxies to vote at said Meeting or any adjournment thereof
heretofore given by the undersigned are hereby revoked. Receipt of Notice of
Annual Meeting and Proxy Statement dated March 21, 1995 is hereby acknowledged.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY IN THE
ACCOMPANYING PREPAID ENVELOPE.
(Continued and to be signed on reverse side.)
THE FOOTHILL GROUP, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. (X)
[ ]
THE DIRECTORS RECOMMEND A VOTE FOR ALL NOMINEES LISTED IN PROPOSAL 1.
1. ELECTION OF DIRECTORS
Nominees: Don L. Gevirtz, Dr. Warren Bennis, Arthur Malin, M.D.
John F. Nickoll, Jeffrey A. Lipkin, Steven L. Volla
For [ ] Withheld [ ] For All Except [ ]
(INSTRUCTION: (To withhold authority to vote for any nominee(s), strike a
line through the nominee's name above and fill in the "For All Except"
oval.)
2. SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
For [ ] Withheld [ ] Abstain [ ]
Dated: ____________________, 1995
_________________________________
Signature
_________________________________
Signature
Please sign exactly as your name
appears hereon. When signing as
attorney, executor, administrator,
trustee, guardian, or corporate
officer, please include full title.
