<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
FREMONT GENERAL CORPORATION
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] 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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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<PAGE> 2
[LOGO]
FREMONT GENERAL CORPORATION
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 8, 1997
------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Stockholders of
Fremont General Corporation (the "Company") will be held in the Wedgewood Room
of the Miramar Sheraton Hotel, 101 Wilshire Boulevard, Santa Monica, California
90401, on Thursday, May 8, 1997 at 2:00 p.m., for the following purposes:
1. Election of a Board of seven (7) Directors to serve until the next
Annual Meeting or until their successors have been elected and
qualified;
2. Approval of the 1997 Stock Plan;
3. Ratification of the appointment of Ernst & Young LLP as independent
auditors; and
4. Transaction of such other business as may be properly brought before the
meeting or any adjournment thereof.
Stockholders of record at the close of business on March 21, 1997 will be
entitled to vote at said meeting or any postponement or adjournment thereof. A
list of such stockholders will be open to the examination of any stockholder at
the meeting and for a period of ten days prior to the date of the meeting at the
executive offices of Fremont General Corporation, 2020 Santa Monica Boulevard,
6th Floor, Santa Monica, California 90404.
Stockholders are requested to mark their choices, date, sign, and return
the enclosed proxy in the enclosed envelope, to which no postage need be affixed
if mailed in the United States. If you plan to attend the meeting and wish to
vote your shares personally, you may do so at any time before the proxy is
voted.
All stockholders are cordially invited to attend the meeting.
/S/ ALAN W. FAIGIN
---------------------------
Alan W. Faigin, Secretary
April 10, 1997
<PAGE> 3
FREMONT GENERAL CORPORATION
------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 8, 1997
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Fremont General Corporation, a Nevada Corporation
(hereinafter called the "Company" or "Fremont General"), of proxies to be used
at the Annual Meeting of Stockholders to be held on May 8, 1997 (the "Annual
Meeting"), and at any adjournments thereof. A form of proxy is enclosed for use
at the meeting. Unless contrary instructions are indicated on the proxy, the
persons designated as proxy holders in the proxy card will vote all shares
represented by valid proxies received pursuant to this solicitation (and not
revoked before they are voted) for the election of the seven nominees for
directors named below, for approval of the 1997 Stock Plan, for ratification of
the appointment of Ernst & Young LLP as independent auditors, and as recommended
by the Board of Directors with regard to any other matters, or if no
recommendation is given, in their own discretion.
A proxy may be revoked by a stockholder at any time before it is exercised
by giving written notice of revocation to the Secretary of the Company or by
submitting prior to the time of the meeting a properly executed proxy bearing a
later date. Stockholders having executed and returned a proxy, who attend the
meeting and desire to vote in person, whether by proxy, voice vote or ballot,
are requested to so notify the Secretary of the Company prior to the time of the
meeting.
The Company will bear the cost of solicitation of proxies. In addition to
the use of mails, proxies may be solicited by personal interview, telephone or
telegraph, by officers, directors and other employees of the Company. The
Company will also request persons, firms and corporations holding shares in
their names, or in the names of their nominees, which are beneficially owned by
others, to send or cause to be sent proxy material to, and obtain proxies from,
such beneficial owners and will reimburse such holders for their reasonable
expenses in so doing. The Company has engaged Georgeson and Company, Inc., Wall
Street Plaza, New York, New York, to aid in the solicitation of proxies for
which the Company will pay an estimated fee of $6,000 plus reimbursable
out-of-pocket expenses.
The principal executive office of the Company is 2020 Santa Monica
Boulevard, 6th Floor, Santa Monica, California 90404. The approximate date when
this Proxy Statement and form of proxy are being first sent to stockholders is
April 10, 1997.
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VOTING SECURITIES AND VOTE REQUIRED
The close of business on March 21, 1997 has been fixed by the Board of
Directors as the record date for the determination of stockholders entitled to
notice of and to vote at the Annual Meeting of Stockholders or any postponements
or adjournments thereof.
Shares of common stock, of which 29,418,848 shares were outstanding as of
March 21, 1997, are the only voting securities of the Company. Unless otherwise
noted, all statistics as to stock ownership are given as of March 21, 1997. Each
stockholder of record at the close of business on March 21, 1997 is entitled to
one vote for each share of common stock then held on each matter to come before
the meeting. There is no cumulative voting with respect to the election of
directors. The presence in person or by proxy of persons entitled to vote a
majority of the voting shares at any meeting shall constitute a quorum for the
transaction of business. If such quorum is present, the affirmative vote of the
majority of the shares represented and voting at the Annual Meeting (which
shares voting affirmatively also constitute at least a majority of the required
quorum) shall be the act of the stockholders, unless otherwise required by law
or by the Articles of Incorporation.
Votes cast by proxy or in person at the Annual Meeting will be counted by
the persons appointed by the Company to act as election inspectors for the
meeting. The election inspectors will treat shares represented by proxies that
reflect abstentions or include "broker non-votes" as shares that are present and
entitled to vote for purposes of determining the presence of a quorum.
Abstentions or "broker non-votes" do not constitute a vote "for" or "against"
any matter and thus will be disregarded in the calculation of "votes cast." If a
broker or nominee has indicated on the proxy that it does not have discretionary
authority to vote certain shares (i.e., "broker non-votes"), those shares will
be treated as not present and not entitled to vote with respect to that matter
(even though those shares shall be counted for quorum purposes and entitled to
vote on other matters).
Any unmarked proxies, including those submitted by brokers or nominees,
will be voted in favor of the proposals and nominees of the Board of Directors,
as indicated in the accompanying proxy card.
ITEM 1
ELECTION OF DIRECTORS
At the Annual Meeting, seven (7) Directors are to be elected to serve until
the next annual meeting of stockholders and until their respective successors
are elected and qualified. The shares represented by the enclosed proxy will be
voted for the election of the nominees named below as Directors, unless
authority to vote for Directors is withheld. If any nominee for any reason
presently unknown cannot be a candidate for election or if a vacancy should
occur before the election (which events are not anticipated), the shares
represented by valid proxies will be voted in favor of the remaining nominees
and may be voted for the election of a substitute nominee recommended by the
Board of Directors (or the number of authorized directors may be reduced).
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<PAGE> 5
The information set forth below as to each nominee for Director has been
furnished to the Company by the respective nominees for Director:
<TABLE>
<CAPTION>
PRINCIPAL BUSINESS
EXPERIENCE DURING PAST
FIVE YEARS AND CERTAIN DIRECTOR
NAME AGE OTHER DIRECTORSHIPS SINCE
- - ------------------------------- --- --------------------------------------------- --------
<S> <C> <C> <C>
James A. McIntyre(1) 64 Chairman and Chief Executive Officer of the 1972
Company.
Wayne R. Bailey 42 Executive Vice President, Treasurer and Chief 1996
Financial Officer of the Company since May
1995; Senior Vice President and CFO of the
Company, from February 1994 to May 1995; Vice
President and CFO from 1990 to 1994. Director
and officer of subsidiary companies during
the past 11 years.
Dr. Houston I. Flournoy(2)(3) 67 Special Assistant to the President for 1977
Governmental Affairs, University of Southern
California since August 1981; Professor,
University of Southern California from 1973
to 1993; Director and member of Audit and
Nominating Committees of Lockheed-Martin
Corporation, a manufacturer of aircraft;
Director and a member of the Audit and
Compensation Committees of Tosco Corporation,
an oil refiner.
C. Douglas Kranwinkle(1)(2)(3) 56 Managing Partner, O'Melveny & Myers since 1973
June 1996; Senior Partner, O'Melveny & Myers
from January 1989 to June 1996.
David W. Morrisroe(2)(3) 64 Formerly Vice President, Business and Finance 1989
and Treasurer, California Institute of
Technology; Director, Huntington Memorial
Hospital Board; Member, Huntington Library
Investment Committee; Member Emeritus, NASA
Space Telescope Institute Council; Member
Emeritus, National Optical Observatories
Board; Trustee Emeritus, University of San
Diego.
Louis J. Rampino(1) 44 President and Chief Operating Officer of the 1994
Company; Director and officer of the Company
and certain subsidiary companies during the
past 14 years; employee for 19 years.
Dickinson C. Ross(2)(3) 73 Retired; formerly Chairman of Johnson & 1987
Higgins of California, an international
insurance brokerage firm.
</TABLE>
- - ---------------
(1) Member of the Executive Committee (Mr. McIntyre, Chairman), which has the
authority to exercise the powers of the Board of Directors in the management
of the Company in accordance with the policy of the Company when said Board
is not in session, except for actions specifically required by statute to be
performed by the full Board. There were no meetings of the Executive
Committee during 1996.
(2) Member of the Audit Committee (Mr. Morrisroe, Chairman), which meets
periodically with management, the independent public accountants and the
internal auditors to make inquiries
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<PAGE> 6
regarding the manner in which the responsibilities of each are being
discharged and reports thereon to the Board of Directors. The Audit
Committee also recommends for the approval of the Board of Directors and
ratification by the stockholders, the annual appointment of the independent
public accountants with whom the Audit Committee reviews the scope of the
audit and non-audit assignments and the related fees, the accounting
principles being applied by the Company in financial reporting, the scope of
internal financial auditing procedures, and the adequacy of internal
controls. The Audit Committee met three (3) times during 1996.
(3) Member of the Compensation Committee (Mr. Ross, Chairman), which reviews and
makes recommendations to the Board of Directors with respect to the
Company's various compensation programs and administers the Company's stock
option and restricted stock award plans. The Compensation Committee met four
(4) times during 1996. See "Report of the Compensation Committee."
There were four (4) meetings of the Company's Board of Directors during
1996. No nominee for Director who served as a director during the past year
attended fewer than 75% of the aggregate of the total number of meetings of the
Board of Directors and the total number of meetings of committees of the Board
of Directors on which he served. There is no nominating committee of the Board
of Directors.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" THE NOMINEES
LISTED ABOVE.
COMPENSATION OF DIRECTORS
In addition to a monthly fee of $2,000, a per-meeting fee of $1,500 is paid
to Directors who are not also employees of the Company or any of its
subsidiaries for serving as such and for attending regular meetings of the Board
and meetings of the various committees on which they are members, plus
reimbursement for the actual expenses incurred to attend such meetings.
Non-employee Directors also receive $1,500 for each special meeting attended. No
additional compensation is provided for committee members, nor are Directors who
are also employees of the Company or any subsidiary paid compensation for
serving as Directors or members of committees of the Board.
The Board previously adopted a retirement plan for non-employee Directors
who serve at least five (5) years and achieve age sixty-five (65). Under the
plan, the Company will continue paying monthly service fees at the then-current
rate for three (3) years after a director's retirement, or in a lump sum at the
discretion of the Board. Such benefits as remain owing are extended to the
surviving spouse of a Director who dies prior to retirement or during the three
(3) year period thereafter. Age restrictions for sitting Directors when the plan
was adopted were grand-fathered. In May 1996, Kenneth L. Trefftzs retired from
the Company's Board of Directors and he is currently receiving fees under this
retirement plan.
Dr. Trefftzs' retirement became effective on May 9, 1996, the date of the
Annual Meeting of Stockholders. Dr. Trefftzs received $69,909 to compensate him
for non-vested stock options, lost as a result of his retirement from the Board,
which would otherwise have vested by or before May 14, 1996 if the 1996 Annual
Meeting of Stockholders had been held five days later.
Under the Company's Amended Non-Qualified Stock Option Plan of 1989 (the
"1989 Plan"), each non-employee Director was granted automatically on May 14,
1992, May 13, 1993, May 12, 1994 and on May 11, 1995, a non-qualified stock
option to purchase 6,188 shares of the Company's common stock at the exercise
price of $8.889, $13.435, $14.321 and $15.682 per share, respec-
4
<PAGE> 7
tively. The number of shares and exercise prices have been adjusted to reflect
the effect of stock splits and a stock dividend distributed by the Company
subsequent to the grant dates of the respective stock options. The purchase
price per share of common stock covered by each such option granted to a
non-employee Director was the fair market value of the common stock on the date
the option was granted. The options are exercisable at the rate of 25% per annum
commencing on the first anniversary of their grant and, unless earlier exercised
or terminated, will expire ten (10) years after they are granted. No stock
options were granted to Directors in 1996.
Each non-employee Director was awarded 26,000 shares of restricted common
stock under the Company's 1995 Restricted Stock Award Plan, As Amended. The
restrictions on these shares will generally be released at the rate of 10% per
year beginning on the first designated release date, commencing in 1997, and on
each of the nine anniversaries thereafter, provided that the Director is still
serving on the Board of Directors and the Company has not exercised its
reacquisition option with respect to such shares. See "1995 Restricted Stock
Award Plan, As Amended."
EXECUTIVE OFFICERS AND COMPENSATION
The following table sets forth the names, ages, employment dates and
positions of the executive officers and certain other officers of the Company
and the date each became an officer of the Company (or its predecessor
companies). All executive officers have been with the Company for over five (5)
years and have served as officers of the Company and its subsidiary companies.
Executive officers are elected annually.
<TABLE>
<CAPTION>
EMPLOYEE OFFICER
NAME POSITION AGE SINCE SINCE
- - ---------------------- ----------------------------------------- --- -------- -------
<S> <C> <C> <C> <C>
McIntyre, James A.(1) Chairman of the Board, & 64 1963 1963
Chief Executive Officer
Rampino, Louis J.(1) President & Chief Operating Officer 44 1977 1989
Bailey, Wayne R.(1) Executive Vice President, 42 1986 1989
Treasurer & Chief Financial Officer
Meyers, Raymond G. Senior Vice President & 50 1980 1989
Chief Administrative Officer
Faigin, Alan W.(1) Secretary & General Counsel 40 1980 1994
Donaldson, John A. Senior Vice President, Controller & 42 1981 1993
Chief Accounting Officer
Little, James E. President & Chief Executive Officer, 47 1979 1979
Fremont Compensation Insurance Group(2)
Zoota, Murray President & Chief Executive Officer, 52 1977 1983
Fremont Investment & Loan(2)
</TABLE>
- - ------------------------
(1) Messrs. McIntyre, Rampino, and Bailey are directors, and Messrs. McIntyre,
Rampino, and Faigin are officers, of Fremont Funding Inc., a wholly owned
subsidiary of the Company which has securities registered pursuant to
Section 12 of the Securities Exchange Act of 1934. Directors and officers of
Fremont Funding, Inc. are elected annually.
(2) Wholly owned subsidiaries of the Company.
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<PAGE> 8
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended (the "Exchange Act") that might incorporate
future filings, including this Proxy Statement, in whole or in part, the
following report and the Stock Price Performance Graph (see "Fremont General
Corporation Stock Price Performance") shall not be incorporated by reference
into such filings or any future filings, except to the extent the Company
specifically incorporates this report or the graph referenced therein, and the
report and the graph shall not be deemed soliciting material or otherwise deemed
filed under either of such Acts.
The Compensation Committee of the Board of Directors of the Company (the
"Committee") is comprised of independent, non-employee Directors. The
Committee's responsibilities include: (a) reviewing compensation policies
consistent with and linked to the Company's strategies; (b) reviewing and
recommending to the Board of Directors the adoption of any compensation plans in
which officers and directors of the Company are eligible to participate; (c)
assessing the performance of the Chief Executive Officer and other executive
officers; (d) ensuring that compensation is appropriate to Company performance;
(e) approving officers' compensation, (f) recommending the compensation of
executive management to the Board of Directors; and, (g) administering the
Company's employee stock option, restricted stock and incentive plans.
The compensation policy of the Company with respect to its executives and
employees has long been and continues to be focused on paying for performance
and results. This policy includes all forms of compensation -- base salary,
bonuses, stock options, restricted stock, benefits and perquisites. Particular
emphasis has been placed by the Committee on linking compensation to pre-tax
earnings targets.
The Committee is provided with reports and data developed by internal
Company staff and by retained outside compensation consultants with access to
extensive industry data in the compensation area. Also, at the request of the
Committee, the Company occasionally retains the services of a leading nationally
recognized consulting firm to review its compensation practices in keeping with
the stated policy of the Committee, and to ascertain that the Company's
compensation practices are comparable to those of companies in the various
market indices reported in the Performance Graph (see "Fremont General
Corporation Stock Price Performance") which have similar businesses, size, and
performance.
The Executive Compensation program for officers of Fremont General is
composed of three basic components tied to objective performance standards: (1)
base salary, (2) annual cash bonus opportunity, and (3) long term cash and stock
ownership opportunity. The Company's compensation policy is to pay its
executives for performance at rates which are above the averages of compensation
survey data reported by insurance, financial and diversified financial services
organizations of comparable size and structure.
Compensation Limitations. Under Section 162(m) of the Internal Revenue
Code, adopted in August 1993, and regulations adopted thereunder, publicly-held
companies may be precluded from deducting certain compensation paid to an
executive officer in excess of $1,000,000 in any one year, excluding from this
limit performance-based compensation. The Committee has considered the potential
future effects on the Company of Section 162(m) and does not currently
anticipate changing its policy solely for the purpose of qualifying such
compensation as performance-based within the meaning of Section 162(m).
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<PAGE> 9
BASE SALARY
Base salary represents only a portion of each executive's total targeted
cash compensation opportunity each year. Individual annual performance criteria
are used to annually adjust the base salary.
MANAGEMENT INCENTIVE COMPENSATION PLAN (ANNUAL BONUS PLAN)
The Company places significant emphasis on attaining predetermined earnings
targets. It provides each executive with an opportunity to earn an annual bonus
upon the Company's achievement of those goals.
Bonus "targets" represent the balance of each executive's total targeted
annual cash compensation opportunity, and range from 10% to 50% of each
executive's base salary. These individual "target" bonus amounts are set by the
Committee based on available total annual compensation survey data to reflect
the ranking and relative level of contribution to results each executive is
expected to make. Actual bonuses earned can range from half of the executive's
"target" amount for performance at the minimum acceptable earnings level as set
by the Committee, to a maximum of three (3) times the "target" amount for
results substantially in excess of the Company's goals.
LONG-TERM COMPENSATION
In addition to annual compensation considerations, the Company has adopted
three (3) forms of long-term compensation which focus the executives on
increasing stockholder value over the long term by aligning the interests of the
officers with those of the stockholders through equity ownership.
-- The Long-Term Incentive Compensation Plan ("LTICP") provides for a cash
bonus opportunity dependent upon the Company achieving a cumulative
pre-tax earnings target over a three (3) year period.
-- The Amended Non-Qualified Stock Option Plan of 1989 (the "1989 Plan")
provides a long-term compensation opportunity for the officers of the
Company and certain key subsidiary officers. The participants
("Optionees") accrue exercise rights at the rate of 25% per year
beginning on the first anniversary of each grant.
In determining the number of stock options to grant each executive, the
Committee considered a variety of methods used including a target gain
projection, a present value calculation and a structure based on
executive salary grades or salary multiples. The Committee opted to use
a salary multiple calculation model, which is common practice where
grants are staggered over three (3) to five (5) years. No stock options
were granted during 1996.
The Committee's intent in utilizing these methods, coupled with the
four (4) year vesting schedule on each grant, was to enhance the
long-term nature of this program and to achieve its goal of linking the
financial interests of the executives very closely to those of the
stockholders.
-- The 1995 Restricted Stock Award Plan, as amended ("RSAP") also provides
a long-term compensation opportunity for the officers and certain key
employees of the Company and its subsidiaries. The shares of Common
Stock awarded under the RSAP are restricted and may not be sold by the
participants ("RSAP Participants") until these restrictions lapse. All
of the shares issued under the RSAP are held in escrow by the Company
for the account of
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<PAGE> 10
each RSAP Participant pending the release of the restrictions. Shares
will generally be released from restriction at the rate of ten percent
(10%) per year beginning on the first designated release date and on
each of the nine anniversaries thereafter, provided that the RSAP
Participant's status as an employee or Director has not terminated and
the Company has not exercised its reacquisition option. RSAP
Participants have full voting and dividend rights with respect to the
shares.
The Committee uses a salary multiple calculation model to determine the
number of restricted shares to award to each RSAP Participant similar
to that used for determining the number of stock options it grants
under the 1989 Plan. During 1996, the Committee opted to award
restricted shares under the RSAP rather than to grant options under
the 1989 Plan.
The Company has entered into employment agreements with certain
executive officers which include provisions for acceleration of the
release of restrictions on shares awarded to them under the RSAP, and
for acceleration of vesting on stock options granted to them under the
1989 Plan, upon the occurrence of certain events.
In May 1966 the Committee approved a Split-Dollar Life Insurance Program
(the "Program") for Executive Officers and other key employees of the Company.
Participants under the Program are provided with individual life insurance
policies with death benefit limits at two (2) or two-and-one-half (2 1/2) times
compensation (depending upon the individual participant's position level with
the Company) with a cash value that accumulates over time. Participants are
entitled to any excess of the Program's cash surrender values over Company
premiums upon their termination of employment. At age sixty-five (65) the excess
cash surrender value is intended to provide a fully paid-up post-retirement life
insurance benefit equal to 50% of the pre-retirement life insurance benefit. The
covered participant owns the policy. The Company pays all premiums and retains a
collateral interest equal to the amount of such premiums. The Company will
recover this collateral interest upon the later to occur of the date the insured
participant reaches age sixty-five (65), after ten (10) policy years, when the
policy is fully or partially surrendered, or upon payment of the death benefit.
All employees who participate in this Program also have basic group term life
insurance coverage of $50,000 paid by the Company.
EMPLOYMENT AGREEMENTS
The Compensation Committee recommended and the Board of Directors approved
an amendment to the 1994 Employment Agreement with Mr. James A. McIntyre,
Chairman and Chief Executive Officer. The Compensation Committee recommended and
the Board of Directors approved Employment Agreements with Messrs. Louis J.
Rampino, President and Chief Operating Officer, and Wayne R. Bailey, Executive
Vice President and Chief Financial Officer, and a Management Continuity
Agreement with Messrs. Raymond G. Meyers, Senior Vice President and Chief
Administrative Officer, and James E. Little, President and Chief Executive
Officer, Fremont Compensation Insurance Group (a wholly owned subsidiary of the
Company) (see "Employment Agreements").
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Specifically, with respect to the compensation of James A. McIntyre,
Chairman and Chief Executive Officer, the Committee reports:
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<PAGE> 11
1. Base Salary -- Mr. McIntyre's base salary in 1996 was $718,817 (See
"Summary Compensation Table"), which accounted for approximately forty
percent (40%) of his total annual compensation earned in 1996. This amount
is within the 50th-75th percentile of salaries paid to Chief Executive
Officer's in companies of comparable-size in the diversified financial
services industries.
2. Annual Bonus -- Mr. McIntyre was awarded an annual bonus for 1996
of $1,050,000 pursuant to the 1996 Management Incentive Compensation Plan
which accounts for approximately fifty-eight percent (58%) of the total
annual compensation Mr. McIntyre earned in 1996. This bonus is equal to one
hundred forty-six percent (146%) of his 1996 base salary rate and results
from the Company's achievement of pretax profit in 1996 that exceeded the
goal set by the Committee at the beginning of 1996.
3. Long Term Incentive Compensation Plan ("LTICP") -- Mr. McIntyre
participates in the Company's Long Term Incentive Compensation Plan. This
"three year" plan was adopted by the Board in 1996, and provides for bonus
opportunity dependent upon the Company achieving a cumulative pre-tax
earnings target from 1996 through 1998. The current 1996 LTICP is
substantially a renewal of the 1993 LTICP, also a "three year" plan which
ran through December 31, 1995. The bonus amount at the maturity of the
LTICP will equal the cash value of a predetermined number of shares of
Company common stock. The number of shares used to calculate this bonus was
determined by the Board in 1996 based upon his salary, divided by the
common stock price on January 2, 1996 (as adjusted for stock splits and
stock dividends). See "1996 Long-Term Incentive Compensation Plan."
4. Other Compensation -- In 1996, other compensation paid to Mr.
McIntyre included Company contributions into the Investment Incentive Plan
(401(k) Plan), Supplemental Executive Retirement Plan, Employee Stock
Ownership Plan and Excess Benefits Plan (collectively, $264,115) and
contributions to fund supplemental medical and life insurance ($40,855).
The Company advanced a portion of the premiums payable in 1996 on a
split-dollar life insurance policy ($393,596) under an agreement between
the Company and a trust established by Mr. and Mrs. James A. McIntyre.
These advances are secured by a collateral assignment of the policy to the
Company. See "Employment Agreements." Mr. McIntyre also participates in the
Company's Split-Dollar Life Insurance Program under which the Company
advanced $140,000 in premiums in 1996. See "Split-Dollar Life Insurance
Program." In 1996 Mr. McIntyre was awarded 446,600 shares of restricted
stock under the RSAP.
The Company entered into an employment agreement with Mr. McIntyre in 1994
which replaced a prior agreement. In 1996, the Company entered into an amendment
to this employment agreement. This agreement ensures that the Company will
continue to have Mr. McIntyre's services available to it pursuant to the
agreement's terms. See "Employment Agreements."
The Committee's policies with respect to executive compensation for other
executive officers of the Company are substantially the same as those applied to
Mr. McIntyre on an appropriate scale based upon scope of responsibility and
position level. Each of these four (4) executives received annual base salaries,
annual bonuses, long-term bonuses, restricted stock awards and other
compensation as reported in the Summary Compensation Table (see "Summary
Compensation Table") on substantially the same basis as were applied to the
Chief Executive Officer, at lesser rates.
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<PAGE> 12
It remains the policy of the Committee to compensate executives of the
Company based principally on achievement of pretax earnings targets in an effort
to enhance stockholder value on a long term basis.
The tables that follow disclose details of compensation paid to the
executives of the Company in 1996, as well as that paid in the previous two (2)
years. Descriptions of the Company's employment agreements with its officers and
the retirement and benefit plans follow.
<TABLE>
<S> <C>
Compensation Committee
Dickinson C. Ross, Chair C. Douglas Kranwinkle
Houston I. Flournoy David W. Morrisroe
</TABLE>
The following table and accompanying notes provide information with respect
to total compensation earned or paid by the Company to the Chief Executive
Officer and the four most highly compensated executive officers serving at the
end of fiscal 1996 (the "Named Executive Officers") during fiscal years 1996,
1995 and 1994.
SUMMARY COMPENSATION TABLE
DOLLARS IN THOUSANDS ($000)
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------------------------- ----------------------- ------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND COMPENSATION AWARDS OPTIONS(1) PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($) ($) ($) ($) ($)
- - ------------------------ ----- --------- ---------- ------------ ----------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James A. McIntyre, 1996 $ 718.8 $ 1,050.0 $ 31.9 $ 11,265.4 -- $ -- $ 273.1
Chairman and CEO 1995 684.6 979.7 28.3 -- -- 1,099.3 194.7
1994 610.8 500.7 24.5 -- 77,550 -- 137.1
Louis J. Rampino, 1996 565.9 742.5 4.9 7,965.6 -- -- 186.9
President and COO 1995 544.1 653.1 4.8 -- -- 774.5 121.2
1994 411.4 300.4 4.3 -- 69,300 -- 79.4
Wayne R. Bailey, 1996 463.5 540.0 5.1 5,373.2 -- -- 133.8
Executive Vice 1995 391.1 464.4 4.7 -- -- 599.5 85.1
President, 1994 325.5 200.3 4.5 -- 49,500 -- 54.7
Treasurer and CFO
Raymond G. Meyers 1996 304.0 348.0 10.2 3,179.9 -- -- 96.6
Senior Vice President 1995 286.2 319.3 6.6 -- -- 444.6 66.1
and CAO 1994 258.7 166.9 6.2 -- 33,000 -- 45.5
Alan W. Faigin 1996 159.8 67.5 4.2 572.9 -- -- 38.5
Secretary and 1995 156.0 48.0 3.7 -- -- 324.4 23.9
General Counsel 1994 138.0 32.0 3.2 -- 4,950 -- 20.2
</TABLE>
- - ---------------
(1) Options reported here have been adjusted to reflect a stock split paid in
February 1996 and a stock dividend distributed in June 1995.
10
<PAGE> 13
SUMMARY COMPENSATION TABLE -- EXPLANATIONS
(c) SALARY includes all regular wages paid to the executive, including cash
automobile allowances, and includes any amount which was voluntarily
deferred by the executive pursuant to the INVESTMENT INCENTIVE PLAN (the
"401(k) Plan") and/or the SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN (the
"SERP").
(d) BONUS reflects cash compensation paid pursuant to the Company's MANAGEMENT
INCENTIVE COMPENSATION PLAN. Bonuses under this Plan are awarded upon the
achievement of annual pre-tax earnings targets as determined by the Board
at the beginning of each Plan year. Pre-tax earnings in a range of eighty
percent (80%) to one hundred twenty percent (120%) of the predetermined
target create a pool for bonuses. Participants are awarded amounts from
this pool derived from calculating variable percentages of their base
salaries. The percentage is based upon scope of responsibility and position
level as determined by the Chief Executive Officer and the Compensation
Committee, based upon independent compensation studies.
(e) OTHER ANNUAL COMPENSATION includes amounts paid on behalf of the executive
to provide for supplemental medical, life and personal liability insurance.
In addition to these amounts, the executive officers of the Company may
receive "perquisites" and other personal benefits. The aggregate amounts of
such personal benefits do not exceed $50,000 or ten percent (10%) of the
annual salary and bonus reported for any executive officer.
(f) RESTRICTED STOCK AWARDS represent the numbers of restricted shares of
common stock that were awarded under the 1995 Restricted Stock Award Plan,
As Amended (the "RSAP"). Ten percent (10%) of each RSAP participant's
shares are generally released from the Company's reacquisition option on
the first designated release date and on each of the nine (9) anniversaries
thereafter, provided that such participant's status as an employee or
director has not terminated and the Company has not exercised its
reacquisition option. All of the shares issued under the RSAP are
restricted and are held in escrow by the Company for the account of each
RSAP participant pending the release of the restrictions. Regular dividends
are paid on the restricted shares. (See "1995 Restricted Stock Award Plan,
As Amended.") At December 31, 1996, the number and market value ($31.00) of
the aggregate restricted stock held by the named executive officers were:
Mr. McIntyre, 446,600 shares, $13,844,600; Mr. Rampino, 308,160 shares,
$9,552,960; Mr. Bailey, 206,400 shares, $6,398,400; Mr. Meyers, 123,000
shares, $3,813,000; and, Mr. Faigin 21,250 shares $658,750.
(g) OPTIONS represent the numbers of shares of common stock for which options
to purchase were granted during each of the last three fiscal years. The
options vest in installments at the rate of twenty-five percent (25%) per
year, pursuant to the terms of the AMENDED 1989 NON-QUALIFIED STOCK OPTION
PLAN (the "1989 Plan"). The original exercise price, which was the fair
market value on the date of grant, has been adjusted from time to time for
stock dividends and stock splits. No stock options were granted to the
executive during 1995 or 1996. See "Amended 1989 Non-Qualified Stock Option
Plan" and "Option Exercises and Year-End Values Table."
(h) LTIP PAYOUTS represent bonuses earned pursuant to the LONG-TERM INCENTIVE
COMPENSATION PLAN ("LTICP") adopted by the Board in 1993. This "three-year"
plan provided for bonus opportunity dependent upon the Company achieving a
cumulative pre-tax earnings target from 1993 through 1995. The bonus amount
at the maturity of the LTICP was equal to the cash value of a predetermined
number of shares of Company stock. The number of such
11
<PAGE> 14
shares used to calculate this bonus was determined by the Board in 1993
based upon salaries (or salary grade midpoints) divided by the stock price
on January 3, 1993 (as adjusted for stock dividends and stock splits). The
Company's stockholders approved the LTICP in 1993, and in 1994 affirmed the
calculation of bonuses thereunder using Company stock value. A similar
LTICP was adopted by the Board in 1996 for the three-year period from 1996
through 1998, except that any bonus that becomes payable under the 1996
LTCIP will be paid in cash. See "1996 Long Term Incentive Compensation
Plan."
(i) ALL OTHER COMPENSATION includes Company contributions to the executives'
accounts in the EMPLOYEE STOCK OWNERSHIP PLAN (the "ESOP") and the 401(k)
PLAN, both of which are "qualified defined contribution retirement benefit"
plans under the Internal Revenue Code (the "IRS Code") and to the SERP and
the EXCESS BENEFIT PLAN ("EBP"), both of which are "nonqualified"
supplemental retirement plans under the IRS Code. The amounts allocated to
each executive officer in 1996 were:
<TABLE>
<CAPTION>
NAME ESOP 401(K) SERP EBP
---------- ----- ---- ------ ---
<S> <C> <C> <C> <C>
McIntyre $10.9 $6.3 $246.9 $ 0
Rampino 10.9 6.3 168.5 0
Bailey 10.9 6.3 116.0 0
Meyers 10.9 6.3 78.3 0
Faigin 10.9 6.3 21.0 0
</TABLE>
The premiums paid in 1996 for the Split-Dollar Life Insurance Program
implemented during fiscal year 1996 were: Mr. McIntyre, $140,000; Mr.
Rampino, $74,400; Mr. Bailey, $54,400; Mr. Meyers, $53,200; and Mr.
Faigin, $15,900. The Company intends to recover all premiums paid by it,
generally 10 years after purchase of the policy or when the insured
executive reaches age 65. Based upon an "actuarial modified premium test,"
the Company estimates the cash value of an Executive's policy on the
earliest possible date the premium paid by the Company may be refunded.
The present value of the portion of this cash value generated by the
premium paid in 1996 was then calculated, and the premium paid in 1996 was
subtracted from the result of this present value calculation in current
non-discounted dollars. The resulting difference was added to the "term"
value of the Executive's insurance policy (calculated pursuant to Internal
Revenue Service rules) and included in the All Other Compensation column.
In addition, the Company advanced a portion of the premiums payable in
1996 ($393,596) on an individual split-dollar life insurance policy under
an agreement between the Company and a trust established by Mr. and Mrs.
James A. McIntyre (see "Employment Agreements").
OPTION/SAR GRANTS IN LAST FISCAL YEAR
In 1996, there were no stock options granted to executive officers,
directors or to employees. The following table and accompanying notes summarize
exercises of stock options during 1996 by the Named Executive Officers and
certain required information regarding outstanding options held by them at the
end of fiscal 1996.
12
<PAGE> 15
OPTION EXERCISES AND YEAR-END VALUES TABLE
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED*
NUMBER OF UNEXERCISED* IN-THE-MONEY OPTIONS
SHARES ACQUIRED VALUE OPTIONS AT FY-END(#) AT FY-END($000)(1)
ON EXERCISE REALIZED ----------------------------- -----------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ---------- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
McIntyre 0 $ 0 541,329 54,077 $ 11,856.5 $ 879.9
Rampino 0 0 226,833 42,611 4,728.6 694.9
Bailey 0 0 124,371 29,081 2,532.9 474.7
Meyers 0 0 86,668 18,851 1,747.1 307.9
Faigin 2,476 39,007 0 2,474 0 40.5
----- ------- --------- ------- ----------- ----------
Total 2,476 $ 39,007 1,160,484 170,606 $ 20,865.1 $ 2,397.9
===== ======= ========= ======= =========== ==========
</TABLE>
- - ---------------
- - - Options and values reported in the table have been adjusted to reflect the
three-for-two stock split paid in February 1996 and a stock dividend
distributed in June 1995.
(1) VALUE OF UNEXERCISED IN-THE-MONEY OPTIONS AT YEAR END represents the
difference between the market value at December 31, 1996 ($31.00) of
unexercised options and the respective exercise prices of the options. No
representation regarding the "value" of such options is intended.
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR (1)
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e) (f)
PERFORMANCE
NUMBER OF OR OTHER PERIOD
SHARES, UNITS OR UNTIL MATURATION THRESHOLD TARGET MAXIMUM
NAME OTHER RIGHTS (#) OR PAYOUT (1) ($000)(2) ($000)(2) ($000)(2)
- - ------ ---------------- ---------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
McIntyre -- 3 years..... $ 492.2 $ 820.3 $ 1,230.5
Rampino -- 3 years..... 386.7 644.5 966.8
Bailey -- 3 years..... 316.4 527.3 791.0
Meyers -- 3 years..... 203.9 339.8 509.8
Faigin -- 3 years..... 105.5 175.8 263.7
---------- ---------- ----------
Total -- $ 1,504.7 $ 2,507.7 $ 3,761.8
</TABLE>
- - ---------------
(1) Awards under the 1996 Long-Term Incentive Compensation Plan (the "LTICP")
will be earned over the three (3) year period 1996 through 1998.
Participants and earnings targets are designated by the Board of Directors.
Earned bonuses will become payable after the end of 1998. Awards under the
LTICP will be earned over the three (3) year period, based upon the
achievement of at least sixty percent (60%) of the earnings targets and will
increase commensurate with performance greater than sixty percent (60%), as
a function of the participant's base salary (or salary grade midpoint) for
the period. Each of the Named Executive Officers have made an irrevocable
election to tie their LTICP payout to a future "closing" trading price of
the Company's common stock as determined under the terms of the LTICP senior
executive provision (see "1996 Long-Term Incentive Compensation Plan").
13
<PAGE> 16
(2) For purposes of calculating the values in the above table, each executive's
1996 base salary, at 60% for column (d), 100% for column (e), and 150% for
column (f), was divided by the price of the Company's common stock ($24.00)
on the inception date of the LTICP to determine a value, which was
multiplied by the closing price of the Company's common stock on March 31,
1997 ($28.125). The actual payouts under the LTICP are likely to be
different from those set forth in the above table, depending upon an average
"closing" price of the Company's Common Stock (see "1996 Long-Term Incentive
Compensation Plan"), the base salary (or salary grade midpoint) of each of
the executives and the actual performance achieved.
14
<PAGE> 17
FREMONT GENERAL CORPORATION STOCK PRICE PERFORMANCE
The Stock Price Performance Graph below includes comparisons required by
the Securities and Exchange Commission (the "SEC") and shall not be deemed
incorporated by reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act of 1933 or under
the Exchange Act, except to the extent Fremont General Corporation specifically
incorporates this information by reference, and shall not otherwise be deemed
soliciting material or filed under such Acts.
The graph below compares cumulative total return (i.e., change in stock
price plus reinvestment of dividends) of the Company's Common Stock measured
against the cumulative total return of the Wilshire 5000 Broad Index, and
specifically the Financial Sector Sub-Index of the Wilshire 5000 (the "Finance
Index"), which represent indices selected by the Company as an appropriate peer
group. The stock price performance shown in this graph is not necessarily
indicative of and not intended to suggest future stock price performance.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURNS
AMONG FREMONT GENERAL CORPORATION, WILSHIRE FINANCE INDEX
AND WILSHIRE 5000
<TABLE>
<CAPTION>
MEASUREMENT PERIOD FREMONT GENERAL WILSHIRE FINANCE
(FISCAL YEAR COVERED) CORP. INDEX WILSHIRE 5000
<S> <C> <C> <C>
1991 100 100 100
1992 147 127 109
1993 163 143 121
1994 159 140 121
1995 284 209 165
1996 367 278 200
</TABLE>
Assumes $100 invested on December 31, 1991, as adjusted for stock splits and
dividends. Total returns assume dividends reinvested on ex-date.
15
<PAGE> 18
EMPLOYMENT AGREEMENTS
In 1994, the Compensation Committee recommended and the Board of Directors
approved an employment agreement (the "Agreement") with Mr. James A. McIntyre,
Chairman and Chief Executive Officer of the Company, replacing a prior such
employment agreement which expired on December 31, 1993. In November 1996, the
Compensation Committee recommended and the Board of Directors approved a first
amendment to the Agreement (the "First Amendment") to conform the Agreement with
certain provisions of the employment agreements then in effect for Messrs.
Rampino and Bailey (see below). The First Amendment (i) adds a definition of
"Company Event" (as defined below) to the Agreement, (ii) provides that the
unvested and/or restricted portion of any stock option and restricted stock held
by Mr. McIntyre will accelerate in full so as to become completely vested and/or
unrestricted upon certain terminations of employment or in the event of a
"Company Event" (as defined below); and (iii) provides for a "Gross-Up Payment"
(as defined below) in the event that any payment by the Company to Mr. McIntyre
would be subject to excise tax under Sections 280G and 4999 of the Internal
Revenue Code. The Agreement provides for a base salary of $600,000, subject to
discretionary increases by the Board of Directors of the Company beginning in
1995. Mr. McIntyre's annual compensation rate was increased by the Board from
$550,000 to $600,000 in February 1994, to $675,000 in February 1995, to $700,000
in February 1996, and to $750,000 in February 1997. Mr. McIntyre also
participates in all of the bonus and incentive compensation plans and programs
generally available to the senior management of the Company, as well as other
employee benefit plans maintained by the Company for its employees. In the event
Mr. McIntyre's employment with the Company terminates for any reason other than
pursuant to a termination by the Company for cause or as the result of Mr.
McIntyre's death or total disability, Mr. McIntyre will receive a pro-rated
portion of his bonuses for the year in which he so terminates. In addition, Mr.
McIntyre will become a consultant to the Company. For the first five (5) years
of the consultancy, the Company will compensate Mr. McIntyre at an annual rate
equal to his base salary at the time his employment terminated. During that
period, Mr. McIntyre will also receive, whether by way of reimbursement, direct
compensation or otherwise, specified fringe and other benefits. After such
five-year period and for the remainder of Mr. McIntyre's life, Mr. McIntyre will
receive an annual amount equal to fifty percent (50%) of his base salary at the
time his employment terminated. In the event Mr. McIntyre's employment
terminates as a result of his disability, the Company will pay Mr. McIntyre, for
life, an annual amount equal to fifty percent (50%) of his base salary at the
time his employment terminated, offset by any disability benefits he receives.
In the event of Mr. McIntyre's death, the Company will pay his estate any earned
but unpaid salary, vacation pay and pro-rated bonus amounts accrued to the date
of his death.
In November 1995, a trust established by Mr. and Mrs. James A. McIntyre
entered into an agreement with the Company whereby the Company, with the
approval of the Compensation Committee of the Board of Directors, agreed to make
advances of a portion of the premiums payable on a split dollar life insurance
policy purchased by the trust on the lives of Mr. and Mrs. McIntyre. The Company
will be reimbursed the full amounts advanced, without interest, upon the first
to occur of (a) the death of the survivor of Mr. and Mrs. McIntyre or (b) the
surrender of the policy. These advances are secured by a collateral assignment
of the policy to the Company. During the fiscal year ended December 31, 1996 the
Company advanced $393,596 toward the payment of such premium.
The Compensation Committee recommended and the Board of Directors approved
Employment Agreements with Messrs. Louis J. Rampino and Wayne R. Bailey. These
Agreements, which
16
<PAGE> 19
were effective as of February 8, 1996, have a term of three (3) years, which
term extends for an additional three (3) years if not terminated on or before
February 8, 1998. The material terms of these agreements provide for base
salaries as of the effective date of $550,000 for Mr. Rampino and $450,000 for
Mr. Bailey. These base salaries will be reviewed annually, and may be increased
or decreased at the Committee's discretion but not below these levels. The
annual base salary for Messrs. Rampino and Bailey were increased by the Board of
Directors in February 1997 to $600,000 and to $475,000, respectively. These
executives will participate in any annual and/or longer term incentive plan(s),
as well as any retirement, welfare or other benefit plans made available to
other senior officers. In the event of termination of employment, other than a
voluntary termination or a termination by the Company for cause, but including
death or total disability (a "Termination"), the Company will pay the executive
(or his heirs) the equivalent of three (3) years' base salary at the
then-current rate, along with pro-rata portions of any annual and/or longer term
incentive plan(s). In addition, upon such a Termination (other than as a result
of the executive's death) the executive will continue to be provided welfare and
other employee benefits for up to three (3) years and the unvested and/or
restricted portion of any stock option or restricted stock held by the executive
at the time of such Termination will accelerate in full so as to become
completely vested and/or unrestricted. In the event the termination occurs
within the thirty-six (36) month period following a "Company Event" (as defined
below) a cash payment equal to the aggregate stock option exercise price
attributable to any then outstanding stock options shall be paid to the
executive.
In February 1996, the Company also entered into a Management Continuity
Agreement with Mr. Raymond G. Meyers which provides that upon a termination of
employment in the event of a Company Event (as defined below), the unvested
and/or restricted portion of any stock option and restricted stock held by the
executive will accelerate in full so as to become completely vested and/or
unrestricted. This Agreement provides for a base salary of $290,000, which is to
be reviewed annually, and may be increased or decreased at the Committee's
discretion subject to the terms of this Agreement. In February 1997, the Board
of Directors increased Mr. Meyers' annual base salary to $305,000. This
Agreement does not have a specified term. Mr. Meyers will participate in any
annual and/or longer term incentive plan(s), as well as any retirement, welfare
or other benefits made available to other senior officers.
For purposes of Messrs. McIntyre's, Rampino's, Bailey's and Meyers'
agreements, a "Company Event" is defined to have occurred when any one of the
following events occurs: (i) any "person" or "group" acquires thirty percent
(30%) or more of the total voting power represented by outstanding securities of
the Company; (ii) the occurrence of certain changes in the composition of the
Board of Directors; (iii) the stockholders approve a merger or consolidation of
the Company involving a fifty percent (50%) or more change in ownership of the
total voting power represented by the Company's outstanding securities; (iv) the
stockholders approve a complete liquidation or sale of all or substantially all
of the assets of the Company; or, (v) James A. McIntyre, while serving as
Chairman of the Board of Directors, has a conservator of his person appointed or
dies.
For purposes of Messrs. McIntyre's, Rampino's, Bailey's and Meyers'
agreements, to the extent that any payments made to the executive by the Company
trigger the excise tax pursuant to the Internal Revenue Code Sections 280G and
4999, additional payments will be made to the executive so that after taxes, the
net economic effect to such executive will be the same as if the additional
taxes imposed by Sections 280G and 4999 did not apply to such executive. These
additional payments are referred to as "Gross-Up Payments."
17
<PAGE> 20
RETIREMENT AND OTHER BENEFIT PLANS
A. INVESTMENT INCENTIVE PLAN ("401(K) PLAN")
The 401(k) Plan has qualified as an employee retirement plan under Section
401(a) and 401(k) of the Internal Revenue Code of 1986 (as amended, the "IRS
Code"). Participation is optional for employees once they are eligible to
participate.
Under the 401(k) Plan, employees may elect to have from one percent (1%) to
fifteen percent (15%) of their eligible compensation deferred and deposited with
the plan trustee which will invest the money at the employee's discretion among
a variety of investment funds including Company stock. Employee contributions of
up to six percent (6%) of compensation are matched by the Company at a rate
determined annually by the Board. In 1996 this matching rate was $0.70 for every
dollar contributed. The Company may make additional contributions in its
discretion. All employee contributions are one hundred percent (100%) vested.
Vesting in Company matching and other contributions accrues over a period of
years. Disbursement of the employee's account balance will occur upon
retirement, termination of employment, total disability or death. Shares of the
Company's common stock held in the 401(k) Plan and allocated to participants'
accounts are voted by the 401(k) Plan's Trustee upon instructions from the
participants.
B. EMPLOYEE STOCK OWNERSHIP PLAN ("ESOP")
In 1989, the Company adopted the ESOP which is a qualified retirement plan
as defined by the Internal Revenue Service. Under the Plan, the Company
contributes cash and/or stock to be held in trust for eligible employee
participants. Contributions are made in such amounts as the Board deems
appropriate and reasonable, taking into account the financial performance of the
participating companies. In general, contributions have ranged between zero and
fifteen percent (0-15%) of the eligible compensation of each employee
participant. The contributions allocated to each eligible participating employee
of participating companies are allocated as a percentage of the employee's
qualified earnings.
In 1990 and in 1993, the Board authorized the Company to loan funds to the
ESOP to finance the purchase of shares of the Company common stock. In 1994,
these loans from the Company were refinanced through a term credit facility with
Wells Fargo Bank, formerly First Interstate Bank of California, in the principal
amount of $11,000,000. In 1995, the amount of the term credit facility was
increased to $15,000,000. As of December 31, 1996, the outstanding loan balance
was $11,674,305. The Wells Fargo Bank note is due in six (6) annual
installments, commencing April 1, 1997. The Wells Fargo Bank note bears interest
at a variable rate, currently averaging six and one-half percent (6.5%) per
annum.
As of December 31, 1996 the ESOP had 2,142,309 shares allocated to its
participants' individual accounts and 737,741 unallocated shares representing
seven and six-tenths percent (7.6%) and two and six-tenths percent (2.6%),
respectively, of the outstanding shares of common stock of the Company on that
date, as adjusted for stock dividends and stock splits. Shares held by the ESOP
are voted by the ESOP's Trustee upon instructions from the participants to whose
accounts the stock is allocated, and from the ESOP committee appointed by the
Board as to the unallocated shares of stock. The committee is comprised of
Messrs. James A. McIntyre, Louis J. Rampino, Raymond G. Meyers, and Dickinson C.
Ross. Benefits from the ESOP are paid out upon retirement, termination of
employment, permanent disability or death.
18
<PAGE> 21
C. SUPPLEMENTAL RETIREMENT PLANS (THE "SERPS")
The Supplemental and the Senior Supplemental Executive Retirement Plans
(collectively, the "SERPs") are mechanisms for providing full benefits to those
executives subject to IRS Code limitations on deferring eligible compensation
into the Company's 401(k) Plan. The SERPs are non-qualified plans within the
meaning of the IRS Code. Employee compensation deferrals under the SERPs may be
combined with the employee's 401(k) compensation deferrals up to one hundred
percent (100%) of total eligible compensation. Compensation deferrals under the
SERPs are deposited to a grantor trust. The assets of the SERP remain those of
the Company until the SERP benefits are paid out upon retirement, termination,
death or disability.
D. EXCESS BENEFIT PLAN ("EBP")
The Board adopted the EBP in 1990 as a mechanism to insure that
participants who are subject to IRS Code limitations on ESOP contributions
receive the full retirement benefit declared by the Board. Contributions to the
EBP, as in the ESOP, are made in common stock. Pursuant to the terms and
conditions of the EBP, the combined contribution to both ESOP and EBP will not
exceed twenty-five percent (25%) of total compensation. Contributions under the
EBP are deposited to a grantor trust. The assets of the EBP remain those of the
Company until the EBP benefits are paid out upon retirement, termination, death
or disability.
E. AMENDED 1989 NON-QUALIFIED STOCK OPTION PLAN (THE "1989 PLAN")
In 1989 the Board adopted, and the stockholders approved, the 1989 Plan
which is administered by the Compensation Committee of the Board. Subsequently,
the Board adopted and the stockholders approved amendments to the 1989 Plan. The
1989 Plan provides long-term compensation opportunities for officers of the
Company and certain key subsidiary executives. Stock options have been granted
to such individuals in each year from 1989 to 1994, and provide for the right to
acquire shares of the common stock of the Company at a price based upon the fair
market value on the date of grant. In determining the number of options to grant
to each executive, the Committee has used a salary multiple calculation which
was set at levels consistent with the ranking of their respective positions.
Additional stock options may be granted from time to time at the discretion of
the Committee. Directors were granted stock options under the non-discretionary
provisions of the 1989 Plan in each year from 1989 to 1995. Stock options
granted under the 1989 Plan have a term of ten (10) years, and vest annually at
the rate of 25% per year beginning on the first anniversary of the date of
grant.
F. 1995 RESTRICTED STOCK AWARD PLAN, AS AMENDED (THE "RSAP")
In November 1995, the Board of Directors approved the RSAP. The RSAP became
effective upon adoption by the Board in November 1995 and will continue in
effect for a term of ten (10) years unless earlier terminated. The RSAP is a
long term employee benefit plan for officers, directors and employees that is
designed to attract and retain these individuals and to maximize stockholder
value by aligning the interests of such individuals with those of the
stockholders through equity ownership. The RSAP's goals are to be achieved by
providing such participants with awards of restricted common stock.
All shares of common stock awarded under the RSAP are subject to the
Company's reacquisition option and may not be sold by the RSAP participants
until these restrictions lapse. Ten percent
19
<PAGE> 22
(10%) of each RSAP Participant's shares are generally released from the
Company's reacquisition option on the first designated release date and on each
of the nine (9) anniversaries thereafter, provided that the RSAP participant's
status as an employee or director has not terminated and the Company has not
exercised its reacquisition option. All of the shares issued under the RSAP are
held in escrow by the Company for the account of each RSAP participant pending
the release of the restrictions. If RSAP shares are forfeited to the Company
they will become available for reissuance under the RSAP. Upon a Change of
Control of the Company, one hundred percent (100%) of the shares awarded under
the RSAP will become unrestricted and will be released from the Company's
reacquisition option.
The RSAP is administered by the Compensation Committee of the Board of
Directors. Participants are entitled to the rights of stockholders with respect
to shares awarded to them under the RSAP, including the right to vote such
shares and to receive cash and stock dividends, subject to the restrictions
under the RSAP. The number of shares of common stock awarded under the RSAP will
be proportionately adjusted for stock dividends and stock splits.
Awards were made in 1996 pursuant to the RSAP, and at December 31, 1996
there were 2,068,210 shares of restricted common stock issued under the RSAP,
including 104,500 forfeited shares. On the designated release date, commencing
on January 1, 1997, restrictions lapsed with respect to ten percent (10%) of
such shares. In 1996, the shares of restricted stock awarded to the named
executive officers were: Mr. McIntyre, 446,600; Mr. Rampino, 308,160; Mr.
Bailey, 206,400; Mr. Meyers,123,000; and Mr. Faigin, 21,250. Officers who
received awards of restricted stock were not granted stock options during 1995
or 1996. No awards of restricted stock under the RSAP were made in 1997 as of
the date of this proxy statement.
G. SPLIT-DOLLAR LIFE INSURANCE PROGRAM
In May 1996, the Company adopted a Split-Dollar Life Insurance Program for
Executive Officers and certain other key employees of the Company. Participants
under the Program are provided with individual permanent life insurance
policies, with death benefit limits at two (2) or two-and-one-half (2 1/2) times
compensation (depending upon the individual participant's position level with
the Company) and with a cash value that accumulates over time. The policy is
owned by the participant. The Company pays all premiums and retains a collateral
interest in the policy equal to the amount of such premiums. The Company will
recover this collateral interest when the insured participant reaches age
sixty-five (65), after ten (10) policy years, when the policy is fully or
partially surrendered, or upon payment of the death benefit. All employees in
this Program will continue to have basic group term life insurance coverage of
$50,000 paid by the Company.
H. 1996 LONG-TERM INCENTIVE COMPENSATION PLAN
The 1996 Long-Term Incentive Compensation Plan (the "LTICP") became
effective January 1, 1996 and matures on December 31, 1998. The LTICP is a three
(3) year plan designed to provide incentive to executives and other key
employees to achieve the pre-tax earnings targets of the Company for 1996
through 1998 by linking a substantial portion of their compensation to the long-
range growth and increased value of the Company. Participants and earnings
targets are designated by the Board of Directors. Awards under the LTICP will be
earned over the three (3) year period, based upon the achievement of at least
sixty percent (60%) of the earnings targets and will increase commensurate with
performance greater than sixty percent (60%), as a function of a
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<PAGE> 23
participant's base salary for the period. Bonuses earned under the LTICP are
payable in cash after the maturity date.
The LTICP includes a provision for senior executives whereby certain senior
officers, as designated by the Board of Directors, could make an irrevocable
election at the inception of the LTICP to tie their bonus earned under the LTICP
to a future "closing" trading price of the Company's common stock. This average
future trading price will be the average of the daily closing prices (NYSE) of
the common stock for each trading day commencing on the day after the Company
releases its 1998 year-end earnings through and including the day prior to the
regular February 1999 Board of Directors meeting. Under this provision, the
senior executive's bonus earned under the LTICP will equal the product of (i) a
number of shares of the Company's common stock determined by dividing the senior
executive's salary (three-year average, or salary grade midpoint) by the price
of the Company's common stock at the inception of the LTICP ($24.00), multiplied
by (ii) an average future trading price of the Company's common stock (as
described above). Each of the Named Executive Officers who were eligible for
this provision made the irrevocable election to have their bonus calculated in
this manner.
21
<PAGE> 24
PRINCIPAL AND MANAGEMENT STOCKHOLDERS
Except as otherwise provided, the following table sets forth certain
information as of February 28, 1997, with respect to shares of the Company's
Common Stock held by the only persons known to the Company to be the beneficial
owners of more than five percent (5%) of such stock. For purposes of this Proxy
Statement, the term "beneficial ownership" of securities as used herein is
defined in accordance with the rules of the Securities and Exchange Commission
and means generally the power to vote or to exercise investment discretion with
respect to securities, regardless of any economic interests therein, or to
acquire securities on or within sixty (60) days of the applicable date of
determination. The shares represented in the table have been adjusted to reflect
stock splits and dividends. On February 28, 1997, the Company had outstanding
29,403,070 shares of Common Stock.
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED
---------------------
NAME AND ADDRESS NUMBER OF
OF STOCKHOLDER SHARES PERCENT
------------------------------------------------------- --------- -------
<S> <C> <C>
FMR Corp.(1)........................................... 3,158,106 9.7%
82 Devonshire Street
Boston, Massachusetts 02109
Merrill Lynch & Co., Inc.(2)........................... 2,570,972 8.7%
World Financial Center, North Tower
250 Vesey Street
New York, New York 10281
James A. McIntyre(3)................................... 2,271,490 7.7%
2020 Santa Monica Blvd.
Santa Monica, CA 90404
Maurine H. McIntyre, Trustee, The Padaro Trust(4)...... 1,485,000 5.1%
2020 Santa Monica Blvd.
Santa Monica, CA 90404
</TABLE>
- - ---------------
(1) FMR Corp. has reported on its Schedule 13G, dated February 14, 1997, that it
was the beneficial owner of such shares, or 10.6% of the outstanding shares
of the Company at December 31, 1996, and stated that it has sole voting
power with respect to 291,693 such shares and no voting power with respect
to the remaining such shares, and sole dispositive powers with respect to
all such shares. FMR Corp. has stated that it has included in such shares
1,811,242 which would result from the assumed conversion of $93,910,000
principal amount of the Company's convertible Liquid Yield Option Notes Due
2013. Based upon the number of shares issued and outstanding as of the date
of the table, FMR Corp. would have a 9.7% beneficial ownership. The Company
is unaware of any subsequent change in beneficial ownership.
(2) Merrill Lynch & Co., Inc. has reported on its Schedule 13G, dated February
14, 1997, that it was the beneficial owner of such shares, or 9.3% of the
outstanding shares of the Company at December 31, 1996, and stated that it
has shared voting and dispositive powers with respect to such shares. Based
upon the number of shares issued and outstanding as of the date of the
table, Merrill Lynch & Co., Inc. would have a 8.7% beneficial ownership. The
Company is unaware of any subsequent change in beneficial ownership. This
does not include 738,741 unallocated ESOP shares of which Merrill Lynch &
Co., Inc. is Trustee, and which currently are pledged to Wells Fargo Bank
pursuant to the terms of the ESOP Loan described under
22
<PAGE> 25
"Employee Stock Ownership Plan." Unallocated shares of stock are voted upon
instructions from the ESOP committee appointed by the Board of Directors.
(3) Represents 1,360,741 shares held by the James A. McIntyre Living Trust under
which Mr. James A. McIntyre is the trustee and holds a vested beneficiary
ownership, 10,000 shares held by the James A. McIntyre Charitable Remainder
Uni-Trust under which Mr. McIntyre is the trustee, and 8,400 shares held by
the James A. McIntyre Grandchildren's Trust under which Mr. McIntyre is the
trustee. Also includes 245,409 shares owned directly or beneficially through
the trustee(s) of the employee retirement or other benefit plans, and
245,409 shares of restricted stock. In February 1997, Mr. McIntyre exercised
all of his vested stock option shares.
(4) Consists of 1,485,000 shares held by the Padaro Trust of which Mrs. Maurine
H. McIntyre is trustee and life beneficiary. James A. McIntyre, her son, is
a remainder beneficiary of the Padaro Trust and disclaims beneficial
ownership of such shares.
The following table sets forth certain information as of February 28, 1997
with respect to shares of the Company's Common Stock beneficially owned by each
nominee for director, director, Named Executive Officer and by all nominees,
directors, Named Executive Officers and executive officers as a group.
<TABLE>
<CAPTION>
COMMON COMMON STOCK
STOCK BENEFICIALLY
NUMBER OF OWNED
NAME SHARES(1) PERCENT
--------------------------------------- --------- ------------
<S> <C> <C>
James A. McIntyre...................... 2,271,490(2,3) 7.7%
Louis J. Rampino....................... 501,713(2,4) 1.7%
Wayne R. Bailey........................ 271,757(2,5) 1.0%
Raymond G. Meyers...................... 207,641(2,6) *
Alan W. Faigin......................... 51,054(2,7) *
Houston I. Flournoy.................... 41,890(8) *
C. Douglas Kranwinkle.................. 45,595(9) *
David W. Morrisroe..................... 44,945(10) *
Dickinson C. Ross...................... 47,822(11) *
--------- ----
All directors, nominees, Named
Executive Officers and executive
officers as a group (9 persons)...... 3,483,907(2-10) 11.8%
</TABLE>
- - ---------------
* Less than 1%.
(1) Includes shares ("option shares") which directors, nominees, Named
Executive Officers and executive officers own directly or indirectly or
have a right to acquire on or within sixty (60) days of the record date
through the exercise of stock options granted under the 1989 Plan. In
February 1997, the Named Executive Officers exercised all of their vested
stock option shares.
(2) Includes shares owned directly or beneficially through the trustee(s) of
the Company's various employee Retirement Benefit Plans (the "Plans").
Except for Messrs. McIntyre and Rampino, the percentages of shares
beneficially owned by any executive officer do not exceed one percent (1%)
of the Company's outstanding Common Stock.
(3) Mr. McIntyre owns 2,271,490 shares or 7.7% of the Company's outstanding
Common Stock and 20,800 shares (less than 1%) of the non-voting Fremont
General Financing I (a wholly
23
<PAGE> 26
owned subsidiary of the Company) 9% Trust Originated Preferred Securities
(TOPrS)(SM) (service mark of Merrill Lynch & Company). In addition he is a
remainder beneficiary of the Padaro Trust, for which he disclaims
beneficial ownership with respect to the 1,485,000 shares owned by such
trust. Includes 401,940 restricted shares awarded under the RSAP and
245,409 shares held by the trustee under the Plans.
(4) Includes 277,344 restricted shares awarded under the RSAP and 126,005
shares held by the trustee under the Plans.
(5) Includes 185,760 restricted shares awarded under the RSAP and 80,305 shares
held by the trustee under the Plans.
(6) Includes 110,700 restricted shares awarded under the RSAP and 65,441 shares
held by the trustee under the Plans.
(7) Includes 19,125 restricted shares awarded under the RSAP and 31,929 shares
held by the trustee under the Plans.
(8) Includes exercisable options to purchase 15,470 shares on or within sixty
(60) days of the record date, and 23,400 restricted shares awarded under
the RSAP. In addition, Dr. Flournoy owns beneficially 175 shares, less than
one percent (1%), of the non-voting Fremont General Financing I (a wholly
owned subsidiary of the Company) 9% Trust Originated Preferred Securities
(TOPrS)(SM) (service marks of Merrill Lynch & Company).
(9) Includes exercisable options to purchase 15,470 shares on or within sixty
(60) days of the record date, and 23,400 restricted shares awarded under
the RSAP.
(10) Includes exercisable options to purchase 13,470 shares on or within sixty
(60) days of the record date, and 23,400 restricted shares awarded under
the RSAP.
(11) Includes exercisable options to purchase 15,470 shares on or within sixty
(60) days of the record date, and 23,400 restricted shares awarded under
the RSAP.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers and persons who own more than 10% of the Company's
common stock to file reports of ownership and reports of changes in ownership of
common stock and certain other equity securities of the Company with the
Securities and Exchange Commission ("SEC") and the New York Stock Exchange.
Additionally, SEC regulations require that the Company identify any individuals
for whom one of the referenced reports was not filed on a timely basis during
the most recent fiscal year or prior fiscal years. To the Company's knowledge,
based solely on review of reports furnished to it and written representations
that no other reports were required during and with respect to the fiscal year
ended December 31, 1996, all Section 16(a) filing requirements applicable to its
officers, directors and more than ten percent (10%) beneficial owners of the
Company's common stock were complied with.
ITEM 2
APPROVAL OF THE 1997 STOCK PLAN
On April 3, 1997, the Board of Directors adopted the 1997 Stock Plan (the
"1997 Plan") and reserved 1,350,000 shares of the Company's common stock, plus
(i) any reserved but unissued
24
<PAGE> 27
Shares under the Company's Amended Non-Qualified Stock Option Plan of 1989 (the
"1989 Plan") as of the date of stockholder approval of this 1997 Plan and (ii)
any Shares returned to the 1989 Plan as a result of termination of options under
the 1989 Plan. In addition, an annual increase will be made to the 1997 Plan on
each anniversary date of the adoption of the 1997 Plan, in an amount equal to
(i) the number of shares awarded under the 1997 Plan in any given year or (ii) a
lesser amount determined by the Board of Directors. As of April 10, 1997 no
options or stock have been granted pursuant to the 1997 Plan. The 1997 Plan is
designed to retain, motivate and reward key employees of the Company and its
subsidiaries who have been or will be given responsibility for the management or
administration of the Company's business affairs, as well as non-employee
directors of the Company, by providing them a long term equity participation in
the Company relating directly to the financial performance and long term growth
of the Company. A summary of the material features of the 1997 Plan is included
below.
In 1993, Section 162(m) was added to the Internal Revenue Code of 1986, as
amended. Section 162(m) may limit the Company's ability to deduct for federal
income tax purposes compensation in excess of $1,000,000 paid to the Company's
Chief Executive Officer and its four other highest paid executive officers in
any one fiscal year. Grants under the 1997 Plan will not be subject to the
deduction limitation if the stockholders approve the 1997 Plan, including the
option grant limitations described below.
SUMMARY OF THE 1997 PLAN
General. The purpose of the 1997 Plan is to attract and retain the best
available persons for positions of substantial responsibility with the Company,
to provide additional incentive to the employees, directors and consultants of
the Company and to promote the success of the Company's business. Options
granted under the 1997 Plan may be either "incentive stock options," as defined
in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
non-statutory stock options. In addition, awards of or rights to purchase shares
of the Company's common stock ("Stock Rights") may be granted under the 1997
Plan.
Administration. The 1997 Plan may generally be administered by the
Compensation Committee of the Board (the "Administrator"). Subject to the other
provisions of the 1997 Plan, the Board has the authority to (i) interpret the
1997 Plan and apply its provisions; (ii) prescribe, amend or rescind rules and
regulations relating to the 1997 Plan; (iii) select the persons to whom options
and Stock Rights are to be granted; (iv) determine the number of shares to be
made subject to each option or Stock Right; (v) reduce the exercise price of any
option to the then current fair market value; (vi) prescribe the terms and
conditions of each option or Stock Right; (vii) amend any outstanding option or
Stock Right subject to applicable legal and 1997 Plan restrictions; (viii)
authorize any person to execute, on behalf of the Company, any instrument
required to effect the grant of an option or Stock Right; and (ix) take any
other actions deemed necessary or advisable for the administration of the 1997
Plan. All decisions, interpretations and other actions of the Administrator
shall be final and binding on all holders of options and Stock Rights and on all
persons deriving their rights therefrom.
Eligibility; Limitations. Non-statutory stock options and Stock Rights may
be granted under the 1997 Plan to employees, directors and consultants of the
Company or any parent or subsidiary of the Company. Incentive stock options may
be granted only to employees.
25
<PAGE> 28
As discussed above, Section 162(m) of the Code places limits on the
deductibility for federal income tax purposes of compensation paid to certain
executive officers of the Company. In order to preserve the Company's ability to
deduct the compensation income associated with options granted to such persons,
the 1997 Plan provides that no employee may be granted, in any fiscal year of
the Company, options to purchase more than 350,000 shares of common stock.
Notwithstanding this limit, however, in connection with an employee's initial
employment, he or she may be granted options to purchase up to an additional
50,000 shares of common stock.
Terms and Conditions of Options. Each option granted under the 1997 Plan is
evidenced by a written stock option agreement between the Company and the
optionee, and is subject to the following additional terms and conditions:
(a) Exercise Price. The Administrator determines the exercise price of
options at the time the options are granted. The exercise of an incentive
stock option may not be less than 100% of the fair market value of the
common stock on the date such option is granted; provided, however, the
exercise of an incentive stock option granted to a 10% stockholder may not
be less than 110% of the fair market value of the common stock on the date
such option is granted. The fair market value of the common stock is
generally determined with reference to the closing sale price for the
common stock (or the closing bid if no sales were reported) on the last
market trading day prior to the date the option is granted. The exercise
price of a non-statutory stock option may be determined by the
Administrator, provided however, the exercise price of a non-statutory
stock option intended to qualify as "performance-based compensation" within
the meaning of Section 162(m) of the Code may not be less than 100% of the
fair market value of the common stock on the date of grant.
(b) Exercise of Option. The Administrator determines when options
become exercisable, and may in its discretion, accelerate the vesting of
any outstanding option.
(c) Form of Consideration. The means of payment for shares issued upon
exercise of an option is specified in each option agreement. The 1997 Plan
permits payment to be made by cash, check, promissory note, other shares of
common stock of the Company (with some restrictions), cashless exercise, a
reduction in the amount of any Company liability to the optionee, any other
form of consideration permitted by applicable law, or any combination
thereof.
(d) Term of Option. The term of an incentive stock option may be no
more than ten years from the date of grant; provided that in the case of an
incentive stock option granted to a 10% stockholder, the term of the option
may be no more than five years from the date of grant. No option may be
exercised after the expiration of its term.
(e) Termination of Employment. If an optionee's employment,
directorship or consulting relationship terminates for any reason (other
than death or disability), then all options held by the optionee under the
1997 Plan expire on the earlier of (i) the date set forth in his or her
notice of grant or stock option agreement or (ii) the expiration date of
such option. To the extent the option is exercisable at the time of such
termination, the optionee may exercise all or part of his or her option at
any time before its termination.
(f) Permanent Disability; Death. If an optionee's employment,
directorship or consulting relationship terminates as a result of permanent
and total disability (as defined in the Code) or death, then all options
held by such optionee under the 1997 Plan will generally expire on the
26
<PAGE> 29
earlier of (i) twelve months from the date of termination of optionee's
employment or (ii) the expiration date of the option. The optionee or, if
applicable, the executor or other legal representative of the optionee's
estate may exercise all or part of the optionee's option at any time before
such expiration to the extent that such option was exercisable at the time
of termination of employment.
(g) Nontransferability of Options. Options granted under the 1997 Plan
generally are not transferable other than by will or the laws of descent
and distribution, and may be exercised during the optionee's lifetime only
by the optionee.
(h) Value Limitation. If the aggregate fair market value of all shares
of common stock subject to an optionee's incentive stock option which are
exercisable for the first time during any calendar year exceeds $100,000,
the excess portion of such option will be treated as a non-statutory stock
option.
(i) Other Provisions. The stock option agreement may contain other
terms, provisions and conditions not inconsistent with the 1997 Plan as may
be determined by the Administrator.
Stock Rights. A Stock Right may award the recipient common stock or may
give the recipient the right to purchase common stock. Shares received or
purchased pursuant to a Stock Right are subject to a restricted stock agreement
between the Company and the recipient. Unless the Administrator determines
otherwise, the restricted stock agreement shall give the Company a reacquisition
option exercisable upon the voluntary or involuntary termination of the
recipient's employment or consulting relationship with the Company for any
reason (including death and disability). The acquisition price for any shares
reacquired by the Company shall be the original price paid by the recipient, if
any. The reacquisition option lapses at a rate determined by the Administrator.
A Stock Right and the stock acquired pursuant thereto (while restricted) is
generally nontransferable other than by will or the laws of descent and
distribution.
Adjustments Upon Changes in Capitalization. In the event that the stock of
the Company changes by reason of any stock split, reverse stock split, stock
dividend, combination, reclassification or other similar changes in the capital
structure of the Company effected without the receipt of consideration,
appropriate adjustments will be made in the number and class of shares of stock
subject to the 1997 Plan, the number and class of shares of stock subject to any
option or Stock Right outstanding under the 1997 Plan, and the exercise price of
any such award. In the event of a liquidation or dissolution, any unexercised
options will terminate. The Administrator may, in its discretion, provide that
each optionee will fully vest in and have the right to exercise the optionee's
option or Stock Right as to all of the optioned stock, and shall release all
restrictions on any restricted stock prior to the consummation of the
liquidation or dissolution.
In connection with any merger, consolidation, acquisition of assets or like
occurrence involving the Company that is not a change of control, each
outstanding option or Stock Right shall be assumed or an equivalent option or
right substituted by the successor corporation. If the successor corporation
refuses to assume the options or Stock Rights or to substitute substantially
equivalent options or rights, the optionee shall fully vest in and have the
right to exercise the option or Stock Right as to all of the optioned stock and
any restrictions shall lapse with respect to restricted stock. In such event,
the Administrator shall notify the optionee that the option or Stock Right is
fully vested and exercisable for fifteen (15) days from the date of such notice,
that the option or Stock Right shall terminate upon expiration of such period,
and that all restrictions have lapsed with respect to their restricted shares.
27
<PAGE> 30
In connection with any change of control of the Company, the optionee shall
fully vest in and have the right to exercise the optionee's options or Stock
Rights as to all of the optioned stock, and any restrictions shall lapse with
respect to any unreleased restricted stock. In such event, the Administrator
shall notify the optionee that the option or Stock Right is fully vested and
exercisable for fifteen (15) days from the date of such notice, that the option
or Stock Purchase Right shall terminate upon expiration of such period, and that
restrictions have been released on restricted shares. A change of control is
defined to include certain mergers, asset sales, or consolidations, the
acquisition of more than fifty percent (50%) of the Company by any person or
certain changes in the composition of the Board of Directors.
Amendment and Termination of the 1997 Plan. The Board may amend, alter,
suspend or terminate the 1997 Plan, or any part thereof, at any time and for any
reason. No such action by the Board or stockholders may alter or impair any
option or Stock Right previously granted under the 1997 Plan without the written
consent of the optionee/recipient. Unless terminated earlier, the 1997 Plan will
terminate ten years from the date of its approval by the stockholders or the
Board, whichever is earlier.
FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options. An optionee who is granted an incentive stock
option does not generally recognize taxable income at the time the option is
granted or upon its exercise, although the exercise may subject the optionee to
the alternative minimum tax. Upon a disposition of the shares more than two
years after grant of the option and one year after exercise of the option, any
gain or loss is treated as long-term capital gain or loss. If these holding
periods are not satisfied, the optionee recognizes ordinary income at the time
of disposition equal to the difference between the exercise price and the lower
of (i) the fair market value of the shares at the date of the option exercise or
(ii) the sale price of the shares. Any gain or loss recognized on such a
premature disposition of the shares in excess of the amount treated as ordinary
income is treated as long-term or short-term capital gain or loss, depending on
the holding period. A different rule for measuring ordinary income upon such a
premature disposition may apply if the optionee is an officer, director, or 10%
stockholder of the Company. The Company is entitled to a deduction in the same
amount as the ordinary income recognized by the optionee.
Non-statutory Stock Options. An optionee does not recognize any taxable
income at the time he or she is granted a non-statutory stock option. Upon
exercise, the optionee recognizes taxable income generally by the excess of the
then fair market value of the shares over the exercise price. Any taxable income
recognized in connection with an option exercise by an employee of the Company
is subject to tax withholding by the Company. The Company is entitled to a
deduction in the same amount as the ordinary income recognized by the optionee.
Upon a disposition of such shares by the optionee, any difference between the
sale price and the optionee's exercise price, to the extent not recognized as
taxable income as provided above, is treated as long-term or short-term capital
gain or loss, depending on the holding period.
Stock Rights. Restricted stock is generally acquired pursuant to Stock
Rights. At the time of acquisition, restricted stock is subject to a
"substantial risk of forfeiture" within the meaning of Section 83 of the Code.
As a result, the recipient will not generally recognize ordinary income at the
time of acquisition. Instead, the recipient will recognize ordinary income on
the dates when the stock ceases to be subject to a substantial risk of
forfeiture. The stock will generally cease to be subject to a substantial risk
of forfeiture when it is no longer subject to the Company's right to reacquire
the
28
<PAGE> 31
stock upon the recipient's termination of employment with the Company. At such
times, the recipient will recognize ordinary income measured as the difference
between the purchase price (if any) and the fair market value of the stock on
the date the stock is no longer subject to a substantial risk of forfeiture.
The purchaser may accelerate to the date of acquisition his or her
recognition of ordinary income, if any, and the beginning of any capital gain
holding period, by timely filing an election pursuant to Section 83(b) of the
Code. In such event, the ordinary income recognized, if any, is measured as the
difference between the purchase price and the fair market value of the stock on
the date of purchase and the capital gain holding period commences on such date.
The ordinary income recognized by a purchaser who is an employee will be subject
to tax withholding by the Company. Different rules may apply if the purchaser is
also an officer, director, or 10% stockholder of the Company.
The foregoing is only a summary of the effect of federal income taxation
upon optionees and the Company with respect to the grant and exercise of
options, and upon recipients of Stock Rights, under the 1997 Plan. It does not
purport to be complete, and does not discuss the tax consequences of the
employee's, director's or consultant's death or the provisions of the income tax
laws of any municipality, state or foreign country in which the employee,
director or consultant may reside.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the shares entitled to
vote at the Annual Meeting will be required to approve the adoption of the 1997
Stock Plan.
The Board of Directors recommends that stockholders vote "FOR" the approval
of the Company's 1997 Stock Plan.
ITEM 3
SELECTION OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The firm of Ernst & Young LLP, independent certified public accountants,
has served as the Company's principal independent auditors since 1972, and is
familiar with the business and operations of the Company and its subsidiaries. A
representative of Ernst & Young LLP is expected to be present at the Annual
Meeting and will have the opportunity to make a statement and will be available
to answer appropriate questions.
On November 7, 1996, upon recommendation of its Audit Committee, the Board
of Directors approved the firm of Ernst & Young LLP to be the Company's
independent certified public accountants for the year 1997, to audit the books
of account and records of the Company and to make a report thereon to the
stockholders and the Board of Directors. Selection of Ernst & Young LLP as the
Company's auditors for the year 1997 will be submitted to the stockholders for
their approval at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF ERNST &
YOUNG LLP AS INDEPENDENT AUDITORS.
29
<PAGE> 32
ANNUAL REPORT TO STOCKHOLDERS AND ADDITIONAL INFORMATION
The Annual Report of the Company for the fiscal year ended December 31,
1996 was mailed on or about April 10, 1997 to stockholders of record on March
21, 1997. The Annual Report does not constitute, and should not be considered, a
part of this proxy solicitation material, except as otherwise expressly
provided.
THE COMPANY WILL PROVIDE, WITHOUT CHARGE, TO ANY STOCKHOLDER WHO SO
REQUESTS IN WRITING, A COPY OF THE COMPANY'S ANNUAL REPORT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31,
1996, WITHOUT EXHIBITS. REQUESTS SHOULD BE DIRECTED TO ALAN W. FAIGIN, SECRETARY
OF THE COMPANY, AT 2020 SANTA MONICA BOULEVARD, 6TH FLOOR, SANTA MONICA, CA
90404.
1998 ANNUAL MEETING -- RECEIPT OF STOCKHOLDER PROPOSALS
Any stockholder proposal must be submitted in writing to the Secretary of
the Company at 2020 Santa Monica Boulevard, 6th Floor, Santa Monica, CA 90404,
and received by December 21, 1997 if it is to be considered for inclusion in the
Company's 1998 proxy materials.
OTHER MATTERS
The Board of Directors does not know of any matter to be presented for
consideration at the Annual Meeting which is not listed on the Notice of Annual
Meeting and discussed above. If any such other business should properly come
before the meeting, the shares represented at the meeting by the proxies and
voting instructions solicited hereby will be voted in accordance with the
judgment of the proxy holders.
By Order of the Board of Directors
/s/ ALAN W. FAIGIN
----------------------------
Alan W. Faigin, Secretary
Dated: April 10, 1997
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FREMONT GENERAL CORPORATION
1997 STOCK PLAN
1. Purposes of the Plan. The purposes of this Stock Plan are:
o to attract and retain the best available personnel for
positions of substantial responsibility,
o to provide additional incentive to Employees, Directors and
Consultants, and
o to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant. Stock Rights may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall
apply:
(a) "Administrator" means the Board or any of its
Committees as shall be administering the Plan, in accordance with Section 4 of
the Plan.
(b) "Applicable Laws" means the requirements relating to
the administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options or Stock Rights are, or will
be, granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as
amended.
(e) "Committee" means a committee of Directors appointed
by the Board in accordance with Section 4 of the Plan.
(f) "Common Stock" means the common stock of the Company.
(g) "Company" means Fremont General Corporation, a Nevada
corporation.
(h) "Consultant" means any person, including an advisor,
engaged by the Company or a Parent or Subsidiary to render services to such
entity.
(i) "Director" means a member of the Board.
(j) "Disability" means total and permanent disability as
defined in Section 22(e)(3) of the Code.
<PAGE> 34
(k) "Employee" means any person, including Officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company.
A Service Provider shall not cease to be an Employee in the case of (i) any
leave of absence approved by the Company or (ii) transfers between locations of
the Company or between the Company, its Parent, any Subsidiary, or any
successor. For purposes of Incentive Stock Options, no such leave may exceed
ninety days, unless reemployment upon expiration of such leave is guaranteed by
statute or contract. If reemployment upon expiration of a leave of absence
approved by the Company is not so guaranteed, on the 181st day of such leave
any Incentive Stock Option held by the Optionee shall cease to be treated as an
Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory
Stock Option. Neither service as a Director nor payment of a director's fee by
the Company shall be sufficient to constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(m) "Fair Market Value" means, as of any date, the value
of Common Stock determined as follows:
(i) If the Common Stock is listed on any
established stock exchange or a national market system, including without
limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The
Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or system for the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the last market trading day prior
to the day of determination, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable; or
(iii) In the absence of an established market for
the Common Stock, the Fair Market Value shall be determined in good faith by
the Administrator.
(n) "Incentive Stock Option" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.
(o) "Nonstatutory Stock Option" means an Option not
intended to qualify as an Incentive Stock Option.
(p) "Notice of Grant" means a written or electronic
notice evidencing certain terms and conditions of an individual Option or Stock
Right grant.
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(q) "Officer" means a person who is an officer of the
Company within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(r) "Option" means a stock option granted pursuant to the
Plan.
(s) "Option Agreement" means an agreement between the
Company and an Optionee evidencing the terms and conditions of an individual
Option grant. The Option Agreement is subject to the terms and conditions of
the Plan.
(t) "Option Exchange Program" means a program whereby
outstanding Options are surrendered in exchange for Options with a lower
exercise price.
(u) "Optioned Stock" means the Common Stock subject to an
Option or Stock Right.
(v) "Optionee" means the holder of an outstanding Option
or Stock Right granted under the Plan.
(w) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(x) "Plan" means this 1997 Stock Plan.
(y) "Restricted Stock" means shares of Common Stock
acquired pursuant to a grant of a Stock Right under Section 11 of the Plan.
(z) "Restricted Stock Agreement" means a written
agreement between the Company and the Optionee evidencing the terms and
restrictions applying to stock received under a Stock Right. The Restricted
Stock Agreement is subject to the terms and conditions of the Plan and the
Notice of Grant.
(aa) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or
any successor rule or provision.
(bb) "Section 16(b)" means Section 16(b) of the Exchange
Act.
(cc) "Service Provider" means an Employee, Director or
Consultant.
(dd) "Share" means a share of the Common Stock, as
adjusted in accordance with Section 13 of the Plan.
(ee) "Stock Right" means a right to acquire Common Stock
pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
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(ff) "Subsidiary" means a "subsidiary corporation",
whether now or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of
Section 13 of the Plan, the maximum aggregate number of Shares which may be
optioned and sold under the Plan is 1,350,000 Shares, plus (a) any Shares which
have been reserved but not issued under the Company's Amended Non-Qualified
Stock Option Plan of 1989 (the "1989 Plan") as of the date of shareholder
approval of this Plan, (b) any Shares returned to the 1989 Plan as a result of
termination of options under the 1989 Plan and (c) an annual increase to be
added on each anniversary date of the adoption of the Plan equal to the lesser
of (i) the number of Shares subject to Options and Stock Rights granted in the
preceding year or (ii) a lesser amount determined by the Board. The Shares may
be authorized, but unissued, or reacquired Common Stock.
If an Option or Stock Right expires or becomes unexercisable without
having been exercised in full, or is surrendered pursuant to an Option Exchange
Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated); provided, however, that Shares that have actually been issued
under the Plan, whether upon exercise of an Option or Stock Right, shall not be
returned to the Plan and shall not become available for future distribution
under the Plan, except that if Shares of Restricted Stock are reacquired by the
Company at their original purchase price (if any), such Shares shall become
available for future grant under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. The Plan may
be administered by different Committees with respect to different groups of
Service Providers.
(ii) Section 162(m). To the extent that the
Administrator determines it to be desirable to qualify Options granted
hereunder as "performance-based compensation" within the meaning of Section
162(m) of the Code, the Plan shall be administered by a Committee of two or
more "outside directors" within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to
qualify transactions hereunder as exempt under Rule 16b-3, the transactions
contemplated hereunder shall be structured to satisfy the requirements for
exemption under Rule 16b-3.
(iv) Other Administration. Other than as provided
above, the Plan shall be administered by (A) the Board or (B) a Committee,
which committee shall be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the
provisions of the Plan, and in the case of a Committee, subject to the specific
duties delegated by the Board to such Committee, the Administrator shall have
the authority, in its discretion:
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(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom
Options and Stock Rights may be granted hereunder;
(iii) to determine the number of shares of Common
Stock to be covered by each Option and Stock Right granted hereunder;
(iv) to approve forms of agreement for use under
the Plan;
(v) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any Option or Stock Right granted
hereunder. Such terms and conditions include, but are not limited to, the
exercise price, the time or times when Options or Stock Rights may be exercised
(which may be based on performance criteria), any vesting acceleration or
waiver of forfeiture restrictions, and any restriction or limitation regarding
any Option or Stock Right of the shares of Common Stock relating thereto, based
in each case on such factors as the Administrator, in its sole discretion,
shall determine;
(vi) to reduce the exercise price of any Option or
Stock Right to the then current Fair Market Value if the Fair Market Value of
the Common Stock covered by such Option or Stock Right shall have declined
since the date the Option or Stock Right was granted;
(vii) to institute an Option Exchange Program;
(viii) to construe and interpret the terms of the
Plan and awards granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations relating to
sub-plans established for the purpose of qualifying for preferred tax treatment
under foreign tax laws;
(x) to modify or amend each Option or Stock Right
(subject to Section 15(c) of the Plan), including the discretionary authority
to extend the post-termination exercisability period of Options longer than is
otherwise provided for in the Plan;
(xi) to allow Optionees to satisfy withholding tax
obligations by electing to have the Company withhold from the Shares to be
issued upon exercise of an Option or Stock Right that number of Shares having a
Fair Market Value equal to the amount required to be withheld. The Fair Market
Value of the Shares to be withheld shall be determined on the date that the
amount of tax to be withheld is to be determined. All elections by an Optionee
to have Shares withheld for this purpose shall be made in such form and under
such conditions as the Administrator may deem necessary or advisable;
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(xii) to authorize any person to execute on behalf
of the Company any instrument required to effect the grant of an Option or
Stock Right previously granted by the Administrator;
(xiii) to make all other determinations deemed
necessary or advisable for administering the Plan.
(c) Effect of Administrator's Decision. The
Administrator's decisions, determinations and interpretations shall be final
and binding on all Optionees and any other holders of Options or Stock Rights.
5. Eligibility. Nonstatutory Stock Options and Stock Rights may
be granted to Service Providers. Incentive Stock Options may be granted only
to Employees.
6. Limitations.
(a) Each Option shall be designated in the Option
Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designation, to the extent that the aggregate
Fair Market Value of the Shares with respect to which Incentive Stock Options
are exercisable for the first time by the Optionee during any calendar year
(under all plans of the Company and any Parent or Subsidiary) exceeds $100,000,
such Options shall be treated as Nonstatutory Stock Options. For purposes of
this Section 6(a), Incentive Stock Options shall be taken into account in the
order in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option or Stock Right shall
confer upon an Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor shall they interfere
in any way with the Optionee's right or the Company's right to terminate such
relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of
Options:
(i) No Service Provider shall be granted, in any
fiscal year of the Company, Options to purchase more than 350,000 Shares.
(ii) In connection with his or her initial
service, a Service Provider may be granted Options to purchase up to an
additional 50,000 Shares which shall not count against the limit set forth in
subsection (i) above.
(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization
as described in Section 13.
(iv) If an Option is cancelled in the same fiscal
year of the Company in which it was granted (other than in connection with a
transaction described in Section 13), the cancelled Option will be counted
against the limits set forth in subsections (i) and (ii) above. For
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<PAGE> 39
this purpose, if the exercise price of an Option is reduced, the transaction
will be treated as a cancellation of the Option and the grant of a new Option.
7. Term of Plan. Subject to Section 19 of the Plan, the Plan
shall become effective upon its adoption by the Board. It shall continue in
effect for a term of ten (10) years unless terminated earlier under Section 15
of the Plan.
8. Term of Option. The term of each Option shall be stated in
the Option Agreement. In the case of an Incentive Stock Option, the term shall
be ten (10) years from the date of grant or such shorter term as may be
provided in the Option Agreement. Moreover, in the case of an Incentive Stock
Option granted to an Optionee who, at the time the Incentive Stock Option is
granted, owns stock representing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any Parent or
Subsidiary, the term of the Incentive Stock Option shall be five (5) years from
the date of grant or such shorter term as may be provided in the Option
Agreement.
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the
Shares to be issued pursuant to exercise of an Option shall be determined by
the Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the
time the Incentive Stock Option is granted, owns stock representing more than
ten percent (10%) of the voting power of all classes of stock of the Company or
any Parent or Subsidiary, the per Share exercise price shall be no less than
110% of the Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than
an Employee described in paragraph (A) immediately above, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(ii) In the case of a Nonstatutory Stock Option,
the per Share exercise price shall be determined by the Administrator. In the
case of a Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(iii) Notwithstanding the foregoing, Options may be
granted with a per Share exercise price of less than 100% of the Fair Market
Value per Share on the date of grant pursuant to a merger or other corporate
transaction.
(b) Waiting Period and Exercise Dates. At the time an
Option is granted, the Administrator shall fix the period within which the
Option may be exercised and shall determine any conditions which must be
satisfied before the Option may be exercised.
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(c) Form of Consideration. The Administrator shall
determine the acceptable form of consideration for exercising an Option,
including the method of payment. In the case of an Incentive Stock Option, the
Administrator shall determine the acceptable form of consideration at the time
of grant. Such consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six months on the date of surrender, and (B) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised;
(v) consideration received by the Company under a
cashless exercise program implemented by the Company in connection with the
Plan;
(vi) a reduction in the amount of any Company
liability to the Optionee, including any liability attributable to the
Optionee's participation in any Company-sponsored deferred compensation program
or arrangement;
(vii) any combination of the foregoing methods of
payment; or
(viii) such other consideration and method of
payment for the issuance of Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any
Option granted hereunder shall be exercisable according to the terms of the
Plan and at such times and under such conditions as determined by the
Administrator and set forth in the Option Agreement. Unless the Administrator
provides otherwise, vesting of Options granted hereunder shall be tolled during
any unpaid leave of absence. An Option may not be exercised for a fraction of
a Share.
An Option shall be deemed exercised when the Company
receives: (i) written or electronic notice of exercise (in accordance with the
Option Agreement) from the person entitled to exercise the Option, and (ii)
full payment for the Shares with respect to which the Option is exercised.
Full payment may consist of any consideration and method of payment authorized
by the Administrator and permitted by the Option Agreement and the Plan.
Shares issued upon exercise of an Option shall be issued in the name of the
Optionee or, if requested by the Optionee, in the name of the Optionee and his
or her spouse. Until the Shares are issued (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company), no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the
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Optioned Stock, notwithstanding the exercise of the Option. The Company shall
issue (or cause to be issued) such Shares promptly after the Option is
exercised. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the Shares are issued, except as provided
in Section 13 of the Plan.
Exercising an Option in any manner shall decrease the
number of Shares thereafter available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to which the Option is
exercised.
(b) Termination of Relationship as a Service Provider.
If an Optionee ceases to be a Service Provider, other than upon the Optionee's
death or Disability, the Optionee may exercise his or her Option within such
period of time as is specified in the Option Agreement to the extent that the
Option is vested on the date of termination (but in no event later than the
expiration of the term of such Option as set forth in the Option Agreement).
In the absence of a specified time in the Option Agreement, the Option shall
remain exercisable for three (3) months following the Optionee's termination.
If, on the date of termination, the Optionee is not vested as to his or her
entire Option, the Shares covered by the unvested portion of the Option shall
revert to the Plan. If, after termination, the Optionee does not exercise his
or her Option within the time specified by the Administrator, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be
a Service Provider as a result of the Optionee's Disability, the Optionee may
exercise his or her Option within such period of time as is specified in the
Option Agreement to the extent the Option is vested on the date of termination
(but in no event later than the expiration of the term of such Option as set
forth in the Option Agreement). In the absence of a specified time in the
Option Agreement, the Option shall remain exercisable for twelve (12) months
following the Optionee's termination. If, on the date of termination, the
Optionee is not vested as to his or her entire Option, the Shares covered by
the unvested portion of the Option shall revert to the Plan. If, after
termination, the Optionee does not exercise his or her Option within the time
specified herein, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.
(d) Death of Optionee. If an Optionee dies while a
Service Provider, the Option may be exercised within such period of time as is
specified in the Option Agreement (but in no event later than the expiration of
the term of such Option as set forth in the Notice of Grant), by the Optionee's
estate or by a person who acquires the right to exercise the Option by bequest
or inheritance, but only to the extent that the Option is vested on the date of
death. In the absence of a specified time in the Option Agreement, the Option
shall remain exercisable for twelve (12) months following the Optionee's
termination. If, at the time of death, the Optionee is not vested as to his or
her entire Option, the Shares covered by the unvested portion of the Option
shall immediately revert to the Plan. The Option may be exercised by the
executor or administrator of the Optionee's estate or, if none, by the
person(s) entitled to exercise the Option under the Optionee's will or the laws
of descent or distribution. If the Option is not so exercised within the time
specified herein, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.
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(e) Buyout Provisions. The Administrator may at any time
offer to buy out for a payment in cash or Shares an Option previously granted
based on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
11. Stock Rights.
(a) Grant. Stock Rights may be issued either alone, in
addition to, or in tandem with other awards granted under the Plan and/or cash
awards made outside of the Plan. After the Administrator determines that it
will offer Stock Rights under the Plan, it shall advise the offeree in writing
or electronically, by means of a Notice of Grant, of the terms, conditions and
restrictions related to the offer, including the number of Shares subject to
the Stock Right, the price to be paid (if any), and the time within which the
offeree must accept such offer. The offer shall be accepted by execution of a
Restricted Stock Agreement in such form as is determined by the Administrator.
(b) Reacquisition Option. Unless the Administrator
determines otherwise, the Restricted Stock Agreement shall grant the Company a
reacquisition option exercisable upon the voluntary or involuntary termination
of the recipient's status as a Service Provider for any reason (including death
or Disability) . The reacquisition price (if any) for Shares reacquired
pursuant to the Restricted Stock Agreement shall be determined by the
Administrator and may be paid by cancellation of any indebtedness of the
recipient to the Company. The reacquisition option shall lapse at a rate
determined by the Administrator.
(c) Other Provisions. The Restricted Stock Agreement
shall contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Administrator in its sole discretion.
(d) Rights as a Shareholder. Once Restricted Stock is
acquired pursuant to a Stock Right, the recipient shall have rights equivalent
to those of a shareholder, and shall be a shareholder when his or her
acquisition is entered upon the records of the duly authorized transfer agent
of the Company. No adjustment will be made for a dividend or other right for
which the record date is prior to the date of issuance of Common Stock pursuant
to a Stock Right, except as provided in Section 13 of the Plan.
12. Non-Transferability of Options and Stock Rights. Unless
determined otherwise by the Administrator, an Option or Stock Right may not be
sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee. If the
Administrator makes an Option or Stock Right transferable, such Option or Stock
Right shall contain such additional terms and conditions as the Administrator
deems appropriate.
13. Adjustments Upon Changes in Capitalization, Dissolution,
Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required
action by the shareholders of the Company, the number of shares of Common Stock
covered by each outstanding Option and Stock Right, and the number of shares of
Common Stock which have been authorized for issuance
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under the Plan but as to which no Options or Stock Rights have yet been granted
or which have been returned to the Plan upon cancellation or expiration of an
Option or Stock Right, as well as the price per share of Common Stock covered
by each such outstanding Option or Stock Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without
receipt of consideration by the Company; provided, however, that conversion of
any convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made by
the Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an Option
or Stock Right.
(b) Dissolution or Liquidation. In the event of the
proposed dissolution or liquidation of the Company, the Administrator shall
notify each Optionee as soon as practicable prior to the effective date of such
proposed transaction. The Administrator in its discretion may provide for an
Optionee to have the right to exercise his or her Option until ten (10) days
prior to such transaction as to all of the Optioned Stock covered thereby,
including Shares as to which the Option would not otherwise be exercisable. In
addition, the Administrator may provide that any Company reacquisition option
applicable to any Shares acquired upon exercise of an Option or Stock Right
shall lapse as to all such Shares, provided the proposed dissolution or
liquidation takes place at the time and in the manner contemplated. To the
extent it has not been previously exercised, an Option or Stock Right will
terminate immediately prior to the consummation of such proposed action.
(c) Merger or Asset Sale. Subject to Section 13(d), in
the event of a merger of the Company with or into another corporation, or the
sale of substantially all of the assets of the Company, each outstanding Option
and Stock Right shall be assumed or an equivalent option or right substituted
by the successor corporation or a Parent or Subsidiary of the successor
corporation. In the event that the successor corporation refuses to assume or
substitute for the Option or Stock Right, the Optionee shall fully vest in and
have the right to exercise the Option or Stock Right as to all of the Optioned
Stock, including Shares as to which it would not otherwise be vested or
exercisable, and any Company reacquisition option applicable to any Shares
acquired upon exercise of an Option or Stock Right shall lapse as to all such
Shares. If an Option or Stock Right becomes fully vested and exercisable in
lieu of assumption or substitution in the event of a merger or sale of assets,
the Administrator shall notify the Optionee in writing or electronically that
the Option or Stock Right shall be fully vested and exercisable for a period of
fifteen (15) days from the date of such notice, and the Option or Stock Right
shall terminate upon the expiration of such period. For the purposes of this
paragraph, the Option or Stock Right shall be considered assumed if, following
the merger or sale of assets, the option or right confers the right to purchase
or receive, for each Share of Optioned Stock subject to the Option or Stock
Right immediately prior to the merger or sale of assets, the consideration
(whether stock, cash, or other securities or property) received in the merger
or sale of assets by holders of Common Stock for each Share held on the
effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such consideration
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received in the merger or sale of assets is not solely common stock of the
successor corporation or its Parent, the Administrator may, with the consent of
the successor corporation, provide for the consideration to be received upon
the exercise of the Option or Stock Right, for each Share of Optioned Stock
subject to the Option or Stock Right, to be solely common stock of the
successor corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets.
(d) Change of Control. In the event of a Change of
Control (as defined below), the Optionee shall fully vest in and have the right
to exercise the Option or Stock Right as to all of the Optioned Stock,
including Shares as to which it would not otherwise be vested or exercisable,
and any Company reacquisition option applicable to any Shares acquired upon
exercise of an Option or Stock Right shall lapse as to all such Shares. If an
Option or Stock Right becomes fully vested and exercisable as the result of a
Change of Control, the Administrator shall notify the Optionee in writing or
electronically prior to the Change of Control that the Option or Stock Right
shall be fully vested and exercisable for a period of fifteen (15) days from
the date of such notice, and the Option or Stock Right shall terminate upon the
expiration of such period. For purposes of this Agreement, a "Change of
Control" means the happening of any of the following events:
(i) When any "person," as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), other than the Company, a subsidiary of the Company or a
Company employee benefit plan, including any trustee of such plan acting as
trustee, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the Company
representing fifty percent (50%) or more of the combined voting power of the
Company's then outstanding securities entitled to vote generally in the
election of directors; or
(ii) The shareholders of the Company approve a
merger or consolidation of the Company with any other corporation, other than a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into voting securities of the
surviving entity) more than fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the shareholders
of the Company approve an agreement for the sale or disposition by the Company
of all or substantially all the Company's assets; or
(iii) A change in the composition of the Board of
Directors of the Company, as a result of which fewer than a majority of the
directors are Incumbent Directors. "Incumbent Directors" shall mean directors
who either (A) are directors of the Company as of the date the Plan is approved
by the shareholders, or (B) are elected, or nominated for election, to the
Board of Directors of the Company with the affirmative votes of at least a
majority of the Incumbent Directors at the time of such election or nomination
(but shall not include an individual whose election or nomination is in
connection with an actual or threatened proxy contest relating to the election
of directors to the Company).
12
<PAGE> 45
14. Date of Grant. The date of grant of an Option or Stock Right
shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Right, or such other later date as
is determined by the Administrator. Notice of the determination shall be
provided to each Optionee within a reasonable time after the date of such
grant.
15. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time
amend, alter, suspend or terminate the Plan.
(b) Shareholder Approval. The Company shall obtain
shareholder approval of any Plan amendment to the extent necessary and
desirable to comply with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment,
alteration, suspension or termination of the Plan shall impair the rights of
any Optionee, unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by the Optionee
and the Company. Termination of the Plan shall not affect the Administrator's
ability to exercise the powers granted to it hereunder with respect to Options
granted under the Plan prior to the date of such termination.
16. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued
pursuant to the exercise of an Option or Stock Right unless the exercise of
such Option or Stock Right and the issuance and delivery of such Shares shall
comply with Applicable Laws and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
(b) Investment Representations. As a condition to the
exercise of an Option or Stock Right, the Company may require the person
exercising such Option or Stock Right to represent and warrant at the time of
any such exercise that the Shares are being acquired only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required.
17. Inability to Obtain Authority. The inability of the Company
to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
18. Reservation of Shares. The Company, during the term of this
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.
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<PAGE> 46
19. Shareholder Approval. The Plan shall be subject to approval
by the shareholders of the Company within twelve (12) months after the date the
Plan is adopted. Such shareholder approval shall be obtained in the manner and
to the degree required under Applicable Laws.
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PROXY
[LOGO] FREMONT GENERAL CORPORATION
C/O CHASEMELLON SHAREHOLDER SERVICES
P.O. Box 1515
New York, NY 10277-1515
Board of Directors Proxy
ANNUAL MEETING OF STOCKHOLDERS: May 8, 1997
John A. Donaldson and Raymond G. Meyers, or either of them, with full power
of substitution, are hereby appointed by the signatory of this Proxy to vote
all shares of Common Stock held by the signatory on March 21, 1997 at the
Annual Meeting of Stockholders of Fremont General Corporation, or any
postponement or adjournment thereof, on each of the items on the reverse side
and in accordance with the directions given there and, in their discretion,
on all other matters that may properly come before the Annual Meeting or any
postponement or adjournment thereof.
THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED ON THE REVERSE SIDE
OR IF NO DIRECTION IS GIVEN WILL BE VOTED FOR ITEMS 1, 2 AND 3.
(Continued, and to be dated and signed on reverse side)
-- FOLD AND DETACH HERE --
<PAGE> 48
Please mark ---
your vote X
as this ---
The Board of Directors recommends a vote FOR Items 1, 2 and 3.
WITHHOLD
AUTHORITY
to vote for
FOR ALL nominees
Item 1. ELECTION OF DIRECTORS --- ---
Duly nominated: J. A. McIntyre, W. R. Bailey,
H. I. Flournoy, C. D. Kranwinkle, --- ---
D. W. Morrisroe, L. J. Rampino, D. C. Ross
Withhold authority to vote for the following nominee(s):
---------------------------------------------------------
FOR AGAINST ABSTAIN
Item 2. Approval of 1997 Stock Plan. --- --- ---
--- --- ---
FOR AGAINST ABSTAIN
Item 3. Ratification of appointment of --- --- ---
Ernst & Young LLP as independent
auditors. --- --- ---
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
MAY 8, 1997 ANNUAL MEETING OF STOCKHOLDERS OF FREMONT GENERAL CORPORATION.
See other side for important information.
Signature(s):_______________________________________________ Dated: ___________
Please mark, date and sign as your name appears above and return in the
enclosed envelope. If acting as executor, administrator, trustee or guardian,
you should so indicate when signing. If the signer is a corporation, please
sign the full corporate name, by duly authorized officer. If shares are held
jointly, each stockholder named should sign.
-- FOLD AND DETACH HERE --
RESERVE SIDE
YOUR VOTE IS IMPORTANT TO THE COMPANY
PLEASE SIGN AND RETURN YOUR PROXY BY TEARING OFF THE TOP PORTION
OF THIS SHEET AND RETURNING IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
