<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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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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<PAGE> 2
[FREMONT LOGO]
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 16, 2000
------------------------
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 Fairmont Sheraton Hotel, 101 Wilshire Boulevard, Santa Monica, California
90401, on Tuesday, May 16, 2000 at 2:00 p.m., for the following purposes:
1. Election of seven (7) Directors to serve until the next Annual Meeting
or until their successors have been elected and qualified;
2. Ratification of the appointment of Ernst & Young LLP as independent
auditors; and
3. Transaction of such other business as may be properly brought before the
meeting and any postponement or adjournment thereof.
Stockholders of record at the close of business on March 31, 2000 will be
entitled to vote at said meeting and 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 13, 2000
<PAGE> 3
FREMONT GENERAL CORPORATION
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PROXY STATEMENT
------------------------
ANNUAL MEETING OF STOCKHOLDERS
MAY 16, 2000
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 Tuesday, May 16, 2000 at
2:00 in the Wedgewood Room at the Fairmont Sheraton Hotel located at 101
Wilshire Boulevard, Santa Monica, California 90401 and at any postponement or
adjournments thereof (the "Annual Meeting"). A form of proxy is enclosed for use
at the Annual 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" 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 Annual 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, may revoke their prior proxy in that manner.
The Company will bear the cost of soliciting the proxies. In addition to
the use of mails, proxies may be solicited by personal contact, telephone or
telegraph, electronically via the internet and 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 Shareholder Communications Inc., Wall Street Plaza, New York, New
York, to assist with the solicitation of proxies for a fee not to exceed $6,000
plus reimbursement for 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 13, 2000.
VOTING SECURITIES AND VOTE REQUIRED
The close of business on March 31, 2000 (the "Record Date") 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.
Shares of common stock, of which 70,025,094 shares were outstanding as of
the Record Date, are the only voting securities of the Company. Unless otherwise
noted, all statistics as to stock ownership are given as of the Record Date.
Each stockholder of record at the close of business on the Record Date 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 outstanding voting shares entitled to vote at any meeting
will constitute a quorum for the transaction of business. If such quorum is
present, the seven nominees for director receiving the highest number of votes
will be elected and the affirmative vote of the majority of the shares
represented and voting at the Annual Meeting is required to elect each nominee
as director and to ratify the appointment of Ernst & Young LLP as independent
auditors for the Company.
<PAGE> 4
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. 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"), these
shares will be treated as not present and not entitled to vote with respect to
that matter. These shares will be counted, however, for quorum purposes and
entitled to vote on other matters. With respect to the election of directors and
ratification of auditors, abstentions and broker non-votes will have no effect
on the outcome of the vote.
Any executed but unmarked proxies, including those submitted by brokers or
nominees will be voted "for" each of the foregoing 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 validly executed proxies
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).
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 DIRECTOR
NAME AGE FIVE YEARS AND CERTAIN OTHER DIRECTORSHIPS SINCE
---- --- ------------------------------------------ --------
<S> <C> <C> <C>
James A. McIntyre(1)................. 67 Chairman and Chief Executive Officer of the 1972
Company.
Wayne R. Bailey...................... 45 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 14 years.
Dr. Houston I. Flournoy(2)(3)........ 70 Retired; Special Assistant to the President 1977
for Governmental Affairs, University of
Southern California from August 1981 to
December 1999; Professor, University of
Southern California from 1973 to 1993;
Director and a member of the Audit and
Compensation (Chairman) Committees of Tosco
Corporation.
C. Douglas Kranwinkle(1)(2)(3)....... 59 Managing Partner, O'Melveny & Myers LLP a law 1973
firm, since June 1996; previously Senior
Partner, O'Melveny & Myers LLP since 1989.
David W. Morrisroe(2)(3)............. 67 Retired; Certified Financial Analyst; 1989
Formerly Vice President, Business and Finance
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.
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
PRINCIPAL BUSINESS EXPERIENCE DURING PAST DIRECTOR
NAME AGE FIVE YEARS AND CERTAIN OTHER DIRECTORSHIPS SINCE
---- --- ------------------------------------------ --------
<S> <C> <C> <C>
Louis J. Rampino(1).................. 47 President and Chief Operating Officer of the 1994
Company; Director and officer of the Company
and certain subsidiary companies during the
past 17 years; employee for 22 years.
Dickinson C. Ross(2)(3).............. 76 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 the 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 1999.
(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 regarding the manner in which the
responsibilities of each are being discharged and reports their findings 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 1999.
(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, met four (4) times during 1999. See
"Report of the Compensation Committee."
The Company's Board of Directors met four (4) times during 1999. Each
nominee for director who served as a director during the past year attended 100%
of the total number of meetings of the Board of Directors and 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 and special meetings
of the Board of Directors and meetings of the various Board committees of which
they are members, plus reimbursement for the actual expenses incurred to attend
such meetings. 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 of Directors previously adopted a retirement plan for
non-employee directors who retire from active service on the Board after
completing at least five (5) years of service as a director of the Company and
attaining age sixty-five (65). Under the plan, the Company will continue paying
monthly service fees for three (3) years after a director's retirement from the
Board, or, at the discretion of the Board, a lump sum payment will be made to
the retired director. Such benefits as remain owing are extended to the
surviving spouse of an eligible 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 grandfathered. In May 1996, Dr. Kenneth L.
Trefftzs retired from the Company's Board of Directors and received fees under
this retirement plan until April 1999.
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 12,376 shares of the Company's common stock at the exercise
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<PAGE> 6
price of $4.4445, $6.717, $7.1605 and $7.841 per share, respectively. 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. On May 8, 1997, under the Company's 1997
Stock Plan (the "1997 Plan"), each non-employee director was granted a
non-qualified stock option to purchase 20,000 shares of the Company's common
stock at the exercise price of $14.00 per share (as adjusted for the two-for-one
stock split distributed on December 10, 1998). 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
non-employee directors in 1996 or since 1997.
Each non-employee director was awarded 52,000 shares (as adjusted for the
two-for-one stock split distributed on December 10, 1998) of restricted common
stock in 1996 under the Company's 1995 Restricted Stock Award Plan, As Amended
(the "1995 Plan"). 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. No
restricted stock awards have been made to non-employee directors since 1996.
Dr. Flournoy and Mr. Morrisroe also serve on the Board of Directors of
Fremont Investment & Loan, a subsidiary company, for which Fremont Investment &
Loan paid each of them $24,000 in 1999. Directors of Fremont Investment & Loan
are elected annually.
EXECUTIVE OFFICERS
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 by the Board of Directors. There are no
family relationships among directors, nominees for director, and executive
officers.
<TABLE>
<CAPTION>
EMPLOYEE OFFICER
NAME POSITION AGE SINCE SINCE
---- -------- --- -------- -------
<S> <C> <C> <C> <C>
McIntyre, James A. ............. Chairman of the Board and Chief 67 1963 1963
Executive Officer
Rampino, Louis J. .............. President and Chief Operating 47 1977 1989
Officer
Bailey, Wayne R. ............... Executive Vice President, 45 1986 1989
Treasurer and Chief Financial
Officer
Meyers, Raymond G. ............. Senior Vice President and Chief 53 1980 1989
Administrative Officer
Donaldson, John A. ............. Senior Vice President, 45 1981 1993
Controller and Chief Accounting
Officer
Lamb, Patrick E. ............... Vice President, Finance 40 1986 1998
Faigin, Alan W. ................ Secretary and General Counsel 43 1980 1994
</TABLE>
4
<PAGE> 7
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 within the
meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code") and Rule 16b-3 under the Exchange Act, respectively. The Compensation
Committee reviews and recommends executive compensation levels, cash and equity
incentives for executive officers and reports such recommendations to the Board
of Directors for its consideration and action. The Committee's responsibilities
include: (a) reviewing compensation policies and programs to ensure that they
are consistent with and linked to the Company's strategies; (b) reviewing and
recommending executive compensation levels, cash and equity incentives for
executive officers, and any compensation plans in which officers and directors
of the Company are eligible to participate and reports such recommendations to
the Board of Directors for its consideration and action; (c) assessing the
performance of the Chief Executive Officer and other executive officers; (d)
ensuring that executive and senior officers' compensation is based on objective
measures of performance at the individual, corporate and applicable business
unit level; and (e) administering the Company's employee stock option,
restricted stock, and annual and long term incentive plans. The Committee
believes that compensation should be driven by the long term interests of the
stockholders and should be directly linked to corporate performance.
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
principally as related to achievement of pretax earnings targets. This policy
includes all forms of compensation -- base salary, bonuses, stock options,
restricted stock, benefits and perquisites.
The Executive Compensation program for officers of Fremont General is
composed of three basic components tied to financial 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 that are above the averages of
compensation survey data reported by insurance, financial and diversified
financial services organizations of comparable size and structure.
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.
Compensation Limitations. Under Section 162(m) of the Code, adopted in
August 1993, and regulations adopted thereunder, publicly-held companies may be
precluded from deducting compensation paid to certain executive officers 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 compensation practices solely for the purpose of
qualifying such compensation as performance-based within the meaning of Section
162(m).
5
<PAGE> 8
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. The executives' base salary rates
were not increased in 1999. In February 2000, executive's annual base salary
rates were adjusted as follows: Mr. Rampino, from $650,000 to $700,000; Mr.
Bailey, from $550,000 to $600,000; Mr. Donaldson, from $240,000 to $260,000; Mr.
Faigin from $190,000 to $250,000. The annual base salary rates of Mr. McIntyre
and Mr. Meyers remain at $800,000 and $325,000, respectively. See "Employment
Agreements."
MANAGEMENT INCENTIVE COMPENSATION PLAN (ANNUAL BONUS PLAN)
The Company places significant emphasis on attaining predetermined pretax
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 at the beginning of the plan year based on available total annual
compensation survey data to reflect the ranking and relative level of
contribution each executive is expected to make to the achievement of the
Company's predetermined pretax earnings targets. 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 earnings substantially in excess of the Company's
goals.
LONG TERM COMPENSATION
In addition to annual compensation considerations, the Company has adopted
the following three (3) forms of long term compensation that focus the
executives on increasing stockholder value over the long term by aligning the
interests of the officers with those of the stockholders.
BONUS OPPORTUNITY:
A Long Term Incentive Compensation Plan ("LTICP") provides for a cash bonus
opportunity dependent upon the Company achieving a predetermined cumulative
pretax earnings target over a three (3) year period. The Board of Directors has
authorized the Company's officers to construct a successor plan to the 1996
LTICP, which was in effect for the three year period beginning January 1, 1996
through December 31, 1998. As of the date of this proxy statement, a new LTICP
had not been fully implemented. (See "Summary Compensation Table.")
STOCK OWNERSHIP:
In determining the number of stock options and Stock Rights (restricted
stock) to grant each executive, the Committee considered a variety of methods to
use, 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. The Committee's intent in
utilizing these methods, coupled with the four (4) year vesting schedule for
each stock option 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 Committee used a salary multiple
calculation model to determine the number of restricted shares to award to each
1995 Plan and 1997 Plan Participant.
- The 1997 Stock Plan (the "1997 Plan") provides a long term compensation
opportunity for the officers and certain key employees of the Company and
its subsidiaries. Stock options and awards of rights to purchase shares
of the Company's common stock ("Stock Rights") may be granted under the
1997 Plan. Stock options granted under the 1997 Plan may be either
"incentive stock options," as defined in Section 422 of the Code, or
non-statutory stock options. Non-statutory stock options and Stock Rights
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<PAGE> 9
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. A Stock Right
may award the recipient shares of common stock or may give the recipient
the right to purchase common stock. Such shares are subject to the
Company's reacquisition option (which is similar to that under the 1995
Plan) and may not be sold by the participants ("1997 Plan Participants")
until the Company releases its reacquisition option on such shares.
Pending release from the Company's reacquisition option, all of the Stock
Right shares issued under the 1997 Plan are held in escrow by the Company
for the account of each 1997 Plan Participant. The reacquisition option
lapses at a rate determined by the 1997 Plan Administrator, but generally
shares will 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 1997 Plan
Participant's status as an employee, director or consultant has not
terminated and the Company has not exercised its reacquisition option.
1997 Plan Participants have full voting and dividend rights with respect
to their respective outstanding Stock Right shares. During 1999, no
awards under the 1997 Plan were granted to non-employee directors and
2,105,000 Stock Rights in the form of restricted common stock were
awarded to executive officers and certain key employees of the Company
and its subsidiary companies under the 1997 Plan. No stock options were
granted during 1999. In February 2000, 160,000 shares of restricted
common stock were awarded under the 1997 Plan to officers of the Company,
including 75,000 shares to Mr. Rampino and 50,000 shares to Mr. Bailey.
Restrictions on these 160,000 shares will be released at a rate of
twenty-five percent (25%) per year. Shares representing the first twenty-
five percent (25%) of such awards were released from restrictions on
March 7, 2000. Restrictions on the remaining restricted shares will be
released annually on January 1st of each of the next three years as to
twenty-five percent (25%) of the original award.
- The 1995 Restricted Stock Award Plan, As Amended (the "1995 Plan"), 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 1995 Plan are subject to restrictions and
may not be sold by the participants ("1995 Plan Participants") until
these restrictions lapse. Pending the release of the Company's
reacquisition option, all of the shares issued under the 1995 Plan are
held in escrow by the Company for the account of each 1995 Plan
Participant. 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 1995 Plan Participant's status as an employee or director has
not terminated and the Company has not exercised its reacquisition
option. 1995 Plan Participants have full voting and dividend rights with
respect to the shares awarded to them. In 1999, there were 90,000 shares
of restricted common stock awarded to executive officers and certain key
employees under the 1995 Plan. No restricted stock awards were made to
non-employee directors under the 1995 Plan in 1999.
- 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. Stock options granted to the
participants ("Optionees") vest at the rate of 25% per year beginning on
the first anniversary of each grant and generally have a term of ten
years. Following adoption of the 1997 Stock Plan, no additional awards
were granted under the 1989 Plan. Forfeited shares under the 1989 Plan
pour over into the 1997 Plan and become available for future grants under
the 1997 Plan.
The Company has entered into employment agreements with certain executive
officers which include provisions for early release of restrictions on shares
awarded to them under the 1995 Plan and 1997 Plan, and for acceleration of
vesting of stock options granted to them under the 1989 Plan and 1997 Plan, upon
the occurrence of certain events. (See "Employment Agreements.")
SPLIT-DOLLAR LIFE AND PERSONAL LIABILITY INSURANCE:
- In May 1996, the Company adopted a Split-Dollar Life Insurance Program
(the "Program") for Executive Officers and certain other key employees of
the Company. Participants under the Program
7
<PAGE> 10
are provided with individual permanent life insurance policies, with
death benefit limits of 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.
Participants are entitled to any excess cash surrender values over
premiums paid by the Company 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 fifty
percent (50%) of the pre-retirement life insurance benefit. 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. For Executive Officers, this Program incorporates the
basic group term life insurance coverage of $50,000 paid by the Company
for all employees.
- In June 1997, the Company adopted a Personal Liability Insurance Program
for Executive Officers and certain other key employees of the Company.
Participants under this program are provided with personal liability
protection of $2 million to $15 million, depending upon the individual
participant's position level with the Company.
EMPLOYMENT AGREEMENTS -- EXECUTIVE OFFICERS
In 1997 the 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. In 1996, the 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
Mr. Raymond G. Meyers, Senior Vice President and Chief Administrative Officer.
See "Employment Agreements."
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
With respect to the compensation of James A. McIntyre, Chairman and Chief
Executive Officer, the Committee reports:
1. Base Salary -- the base salary paid to Mr. McIntyre in 1999 was
$800,100 (see "Summary Compensation Table"), which accounted for
approximately ninety-one and five-tenths percent (91.5%) of his total
annual compensation earned in 1999. This amount is within the 50th - 75th
percentile of salaries paid to Chief Executive Officers in companies of
comparable-size in the diversified financial services industries.
2. Annual Bonus -- Mr. McIntyre did not receive a bonus payment under
the 1999 Management Incentive Compensation Plan, which would have paid an
annual bonus to him had the Company achieved pretax profits in 1999 that
were set by the Committee at the beginning of 1999.
3. Long Term Incentive Compensation Plan ("LTICP") -- The Board of
Directors authorized the Company's executive officers to construct a
successor LTICP to its 1996 LTICP, a three year plan which ran from January
1, 1996 through December 31, 1998 and provided for bonus opportunity
dependent upon the Company achieving a predetermined cumulative pretax
earnings target during the three-year period. A successor plan has not been
fully implemented as of the date of this proxy statement. Mr. McIntyre will
be a participant in such a plan if an LTICP is fully implemented in 2000.
4. Other Compensation -- In 1999, other compensation paid to Mr.
McIntyre included an automobile allowance of $21,600, Company contributions
to the Investment Incentive Plan (the "401(k) Plan"), Supplemental
Executive Retirement Plan, Employee Stock Ownership Plan and Excess Benefit
Plan, collectively, $313,937, contributions to fund supplemental medical,
life and personal liability insurance of $46,057, a service recognition
award under the Company's service award program of $5,480, and $1,404 for
employer-paid non-qualified FICA taxes. The Company advanced a portion of
the premiums payable in 1999 ($393,596) on a split-dollar life insurance
policy, under an agreement between
8
<PAGE> 11
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 1999. See "Split-Dollar Life Insurance
Program." In 1999, Mr. McIntyre was awarded 320,000 shares of restricted
common stock under the 1997 Stock Plan.
The Company entered into an employment agreement with Mr. McIntyre in 1994
that replaced a prior agreement. In 1996 and 1997, the Company entered into
amendments 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 the other four (4) executive officers reported in the
Summary Compensation Table received annual base salaries, auto allowances,
restricted stock awards and other compensation (see "Summary Compensation
Table") on substantially the same basis as was applied to the Chief Executive
Officer, at lesser rates. In February 2000, discretionary bonuses of $65,000 and
$48,000 were paid to Messrs. Meyers and Donaldson, respectively.
It remains the primary goal of the Committee to relate compensation to
corporate performance and to compensate executives of the Company based
principally on achievement of pretax earnings targets in an effort to enhance
stockholder value on a long term basis. Because consolidated pretax earnings
targets were not met during 1999, no bonus payments were paid out under the MICP
to the executive officers reported in the Summary Compensation Table.
The tables that follow disclose details of compensation paid to the
executives of the Company in 1999, as well as that paid in the previous two (2)
years. Descriptions of the Company's employment agreements with its officers and
the retirement and benefit plans follow.
Compensation Committee:
Dickinson C. Ross, Chairman
Houston I. Flournoy
C. Douglas Kranwinkle
David W. Morrisroe
9
<PAGE> 12
The following table and accompanying notes provide information with respect
to total compensation earned or paid by the Company to the Chief Executive
Officer and the four most highly compensated executive officers of the Company
serving at the end of fiscal 1999 (the "Named Executive Officers") during fiscal
years 1999, 1998 and 1997.
SUMMARY COMPENSATION TABLE
DOLLARS IN THOUSANDS
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
----------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------------------ ----------------------- --------
(A) (B) (C) (D) (E) (F) (G) (H) (I)
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND COMPENSATION AWARDS OPTIONS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($) ($) (#) ($) ($)
------------------ ---- --------- -------- ------------ ---------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James A. McIntyre,............ 1999 $800.1 $ -- $ 74.5 $3,625.1 -- $ -- $313.9
Chairman and Chief 1998 794.3 944.7 190.6 7,270.0 -- 2,361.3 274.8
Executive Officer 1997 773.2 793.9 154.1 5,311.0 600,000 -- 355.9
Louis J. Rampino,............. 1999 650.1 -- 29.6 2,811.8 -- -- 250.1
President and Chief 1998 644.3 767.6 104.3 6,815.7 -- 1,946.8 191.5
Operating Officer 1997 617.4 571.6 29.2 4,700.0 320,000 -- 248.7
Wayne R. Bailey,.............. 1999 550.1 -- 25.7 1,906.2 -- -- 198.4
Executive Vice President,
Treasurer and 1998 542.6 649.5 24.7 4,543.8 -- 1,563.7 151.3
Chief Financial Officer 1997 499.7 410.7 105.5 3,384.0 180,000 -- 193.2
Raymond G. Meyers,............ 1999 325.1 65.0 22.5 821.1 -- -- 116.1
Senior Vice President 1998 322.8 307.0 22.8 908.8 -- 973.9 88.2
and Chief Administrative
Officer 1997 315.1 258.3 24.1 940.0 122,000 -- 129.5
John A. Donaldson,............ 1999 240.1 48.0 20.1 345.1 -- -- 57.9
Senior Vice President 1998 238.4 226.7 19.5 908.8 -- 842.7 49.0
and Chief Accounting Officer 1997 230.9 190.5 20.1 705.0 16,000 -- 72.7
</TABLE>
- ---------------
(1) Options have been adjusted to reflect a two-for-one stock split distributed
on 12/10/98.
SUMMARY COMPENSATION TABLE -- EXPLANATIONS
(c) SALARY includes all regular wages paid to the executive, and 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 for 1999 reflects cash compensation paid as discretionary
bonuses. BONUS for 1998 and 1997 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. Pretax earnings in a range of
eighty percent (80%) to one hundred twenty percent (120%) of the predetermined
target created a pool for bonuses. Participants were awarded amounts from this
pool as a percentage 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 automobile allowances, and 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 service recognition awards on milestone
anniversary years under the Company's service award program, "perquisites" and
other personal benefits. The aggregate amounts of such personal benefits do not
exceed the lesser of $50,000 or ten percent (10%) of the annual salary and bonus
reported for any executive officer.
(f) RESTRICTED STOCK AWARDS represent the fair market value on the date of
grant of restricted shares of common stock that were awarded under the 1995 Plan
and the 1997 Plan. Ten percent (10%) of each 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
10
<PAGE> 13
option. All such shares issued under the 1995 Plan and the 1997 Plan are
restricted and are held in escrow by the Company for the account of each
participant pending the release of the restrictions. Regular cash dividends are
paid on the restricted shares. See "1995 Restricted Stock Award Plan, As
Amended" and "1997 Stock Plan." At December 31, 1999 the number and market value
($7.375 per share) of the aggregate restricted stock held by the Named Executive
Officers were: Mr. McIntyre, 1,414,040 shares, $10,428,545; Mr. Rampino,
1,181,424 shares, $8,713,002; Mr. Bailey, 859,160 shares, $6,336,305; Mr.
Meyers, 300,200 shares, $2,213,975; and, Mr. Donaldson, 166,900 shares,
$1,230,888. The number of shares and market value 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 restricted stock awards.
Officers who received awards of restricted stock in 1998 and 1999 were not
granted stock options during 1999.
(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 1989 Plan and/or the 1997 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 executives during 1998 or 1999. See "Amended 1989
Non-Qualified Stock Option Plan," "1997 Stock Plan" and "Aggregated Option/SAR
Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR Values."
(h) LTIP PAYOUTS represent bonuses earned pursuant to the Long Term
Incentive Compensation Plan ("LTICP") adopted by the Board in 1996. The 1996
LTICP provided for bonus opportunity dependent upon the Company achieving a
cumulative pretax earnings target for the three year period from January 1, 1996
through December 31, 1998. The cash bonus amount paid at the maturity of the
1996 LTICP, as reported in the table, resulted from the Company achieving 121%
of the pretax earnings target established by the Board in 1996 at the inception
of the 1996 LTICP.
(i) ALL OTHER COMPENSATION includes Company contributions to the executive
officers' 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 Code and to the SERP and the Excess Benefit Plan
("EBP"), both of which are "non-qualified" supplemental retirement plans under
the Code. The amounts allocated to each Named Executive Officer in 1999 were:
<TABLE>
<CAPTION>
NAME ESOP 401(K) SERP EBP
---- ---- ------ ------ ---
DOLLARS IN THOUSANDS
<S> <C> <C> <C> <C>
McIntyre.................................... $6.6 $8.2 $299.2 $--
Rampino..................................... 6.6 8.2 235.4 --
Bailey...................................... 6.6 8.2 183.7 --
Meyers...................................... 6.6 8.2 101.4 --
Donaldson................................... 6.6 8.2 43.1 --
</TABLE>
The premiums paid in each of the respective years 1997, 1998 and 1999 for
the Split-Dollar Life Insurance Program implemented by the Company during fiscal
year 1996 were: Mr. McIntyre, $140,000; Mr. Rampino, $74,400; Mr. Bailey,
$54,400; Mr. Meyers, $53,200; and Mr. Donaldson, $23,000. Upon retirement (age
65) the Company will recover its net premium outlays and release the policy when
it determines that the policy cash value is sufficient on an actuarial basis to
provide the post-retirement benefit. Based upon an "actuarial modified premium
test," the Company estimates the cash value of a Named Executive Officer'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 1999 was then calculated, and the premium paid in 1999 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 Named Executive Officer's insurance policy (calculated pursuant to Internal
Revenue Service rules) and included in the All Other Compensation column. A
similar calculation was done for premiums paid during 1997 and 1998. See
"Split-Dollar Life Insurance Program." In addition, the Company advanced a
portion of the premiums payable in 1997, 1998 and 1999 ($393,596 in each of the
respective years) on an individual split-dollar life
11
<PAGE> 14
insurance policy under an agreement between the Company and a trust established
by Mr. and Mrs. James A. McIntyre. See "Employment Agreements."
OPTION/SAR GRANTS IN LAST FISCAL YEAR
There were no stock options or SARs granted during 1999.
OPTION EXERCISES AND YEAR-END OPTION VALUES
Each Optionee is responsible for any and all tax liabilities resulting from
the exercise of stock options or any portion thereof, subject to contingent
rights to surrender or offset shares to satisfy tax withholding obligations.
Stock options granted pursuant to the 1989 Plan and the 1997 Plan include tax
withholding rights.
The following table and accompanying notes summarize certain required
information regarding outstanding options held by the Named Executive Officers
at the end of fiscal 1999. There were no exercises of stock options during 1999
by these officers.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES(1)
DOLLARS IN THOUSANDS
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS/ IN-THE-MONEY OPTIONS/SARS
SARS AT FY-END(#)(2) AT FY-END($)(2)(3)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
McIntyre................................... 408,154 300,000 $ 5.0 $--
Rampino.................................... 245,222 160,000 4.5 --
Bailey..................................... 148,162 90,000 3.2 --
Meyers..................................... 98,702 61,000 2.1 --
Donaldson.................................. 19,712 8,000 .5 --
------- ------- ----- ---
Total............................ 919,952 619,000 $15.3 $--
======= ======= ===== ===
</TABLE>
- ---------------
(1) There are no SARs outstanding.
(2) Options and values reported in the table have been adjusted to reflect the
two-for-one stock split distributed in December 1998, a three-for-two stock
split distributed in February 1996 and a stock dividend distributed in June
1995.
(3) Value of unexercised in-the-money options at year end represents the
difference between the market value at December 31, 1999 ($7.375 per share)
of unexercised options and the respective exercise prices of the options. No
representation regarding the "value" of such options is intended.
12
<PAGE> 15
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 five year cumulative total return of the Standard & Poor's ("S&P")
Smallcap 600 Index, the S&P Smallcap 600 indices for Insurance (Property &
Casualty), Savings & Loan Companies and Financial (Diversified) which represent
indices selected by the Company as appropriate peer groups. 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, S&P SMALLCAP 600 INDEX,
AND S&P SMALLCAP 600 INDICES FOR INSURANCE (PROPERTY & CASUALTY),
SAVINGS & LOAN AND FINANCIAL (DIVERSIFIED)
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------------------------------------------
TOTAL RETURN INDEX 1994 1995 1996 1997 1998 1999
------------------ ---- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Fremont General Corporation...... $100 $178.31 $230.80 $413.76 $385.13 $115.93
S&P Smallcap 600 Index........... 100 129.96 157.67 198.01 195.42 219.66
S&P Smallcap 600 Indices for:
Insurance (Property &
Casualty)................... 100 141.79 191.35 290.21 286.75 196.18
Savings & Loan Companies....... 100 160.21 219.17 375.13 341.88 295.07
Financial (Diversified)........ 100 153.58 195.84 287.90 318.78 265.98
</TABLE>
Assumes $100 invested on December 31, 1994, as adjusted for stock splits
and dividends. Total returns assume dividends reinvested on ex-date.
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
13
<PAGE> 16
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). 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, to $750,000 in February 1997, and to $800,000 in
February 1998. His salary was not increased in 1999 or 2000 and remains at
$800,000. 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 1997, the Compensation Committee recommended and the Board of
Directors approved a Second Amendment to the Agreement to extend the employment
period under the Agreement for an additional term of three years. After such
additional three-year period, or any extension term, the employment period
automatically extends for additional one-year terms unless terminated by either
party with at least ninety (90) days' advance written notice prior to the end of
the then-current term.
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 each of the fiscal years ended December 31,
1996 through 1999, the Company advanced $393,596 toward the payment of such
premium.
In 1996, the Compensation Committee recommended and the Board of Directors
approved Employment Agreements with Messrs. Louis J. Rampino and Wayne R.
Bailey. These Agreements, which were effective as of February 8, 1996, have a
term of three (3) years, which term automatically extended for an additional
three (3) years on 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 salaries for Messrs. Rampino and Bailey were increased
in 1997, 1998 and 2000 by the Board of Directors and as of the date of this
proxy statement were $700,000 and $600,000, 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 officer
(or his heirs) the
14
<PAGE> 17
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 will be paid to the executive.
In February 1996, the Company 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 1998, the Board
of Directors increased Mr. Meyers' annual base salary to $325,000, which is the
amount of his annual base salary as of the date of this proxy statement. 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."
RETIREMENT AND OTHER BENEFIT PLANS
INVESTMENT INCENTIVE PLAN (THE "401(K) PLAN")
The 401(k) Plan has qualified as an employee retirement plan under Section
401(a) and 401(k) of the Code. Participation is optional for employees once they
are eligible to participate.
Under the 401(k) Plan, employees may elect to have up 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 are matched
by the Company at a rate determined annually by the Board. In 1999 this matching
rate was $0.85 for every dollar contributed up to six percent (6%) of eligible
compensation. 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.
15
<PAGE> 18
EMPLOYEE STOCK OWNERSHIP PLAN (THE "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 to each eligible participating employee of
participating companies are allocated as a percentage of the employee's eligible
compensation.
In 1990 and in 1993, the Board authorized the Company to loan funds to the
ESOP to finance the purchase of shares of 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, 1999, the outstanding loan balance
was $3,552,646. Payments on the Wells Fargo Bank note were due in six (6) annual
installments, commencing April 1, 1997. Interest on the Wells Fargo Bank note
was at a variable rate, which at December 31, 1999 averaged 7.1875% per annum.
In January 2000, the Company repaid the outstanding loan balance in full.
As of December 31, 1999 the ESOP had 4,115,960 shares of Company common
stock allocated to its participants' individual accounts and 449,009 unallocated
shares representing five and nine-tenths percent (5.9%) and six-tenths percent
(0.6%), 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 by 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, Wayne R. Bailey, Raymond G. Meyers,
and Dickinson C. Ross. Benefits from the ESOP are paid out upon retirement,
termination of employment, permanent disability or death.
SUPPLEMENTAL AND SENIOR SUPPLEMENTAL RETIREMENT PLANS (COLLECTIVELY, THE "SERP")
The SERP are mechanisms for providing full benefits to those executives
subject to IRS Code limitations. These limits may affect (i) the amount of
eligible compensation permitted to be deferred into the Company's 401(k) Plan,
and (ii) the amount of any ESOP contribution declared by the Board to be
allocated to the ESOP. In addition, employee compensation deferrals under the
SERP, in combination with the employee's 401(k) compensation deferrals, may
equal up to one hundred percent (100%) of total eligible compensation. The SERP
are non-qualified plans within the meaning of the Code. Compensation deferrals
under the SERP are deposited to a grantor trust. The assets of the SERP remain
those of the Company until the SERP's benefits are paid out upon retirement,
termination, death or disability.
EXCESS BENEFIT PLAN (THE "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. The EBP accommodates any
contributions to the ESOP that are limited as a result of the "annual additions
limit", which is twenty-five percent (25%) or $30,000, whichever is less, of a
participant's total eligible 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.
1997 STOCK PLAN (THE "1997 PLAN")
In April 1997, the Board of Directors approved the 1997 Plan. The 1997 Plan
became effective upon approval by the Company's stockholders in May 1997 and
will continue in effect for a term of ten (10) years unless earlier terminated.
The 1997 Plan provides a long term compensation opportunity for the officers and
16
<PAGE> 19
certain key employees of the Company and its subsidiaries, and is designed to
attract and retain these individuals and to align interests of such individuals
with those of the stockholders through equity ownership.
Stock options granted under the 1997 Plan may be either incentive stock
options, as defined in Section 422 of the Code, or non-statutory stock options.
Non-statutory stock options and awards of rights to purchase shares of the
Company's common stock ("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. A
Stock Right may award the recipient shares of 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 1997 Plan Administrator determines
otherwise, such agreement gives the Company a reacquisition option exercisable
upon the termination of the recipient's employment or consulting relationship
with the Company. All shares of common stock awarded as Stock Rights under the
1997 Plan are subject to the Company's reacquisition option and may not be sold
by the recipients until these restrictions lapse. The reacquisition option
lapses at a rate determined by the 1997 Plan Administrator. Ten percent (10%) of
each 1997 Plan 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 1997 Plan Participant's
status as an employee or director has not terminated and the Company has not
exercised its reacquisition option. Pending release of the restrictions, all of
the Stock Right shares issued under the 1997 Plan are held in escrow by the
Company for the account of each 1997 Plan Participant. Forfeited 1997 Plan
shares are retired and become available for reissuance under the 1997 Plan's
authorized shares. Upon a Change of Control of the Company, one hundred percent
(100%) of the restricted shares awarded under the 1997 Plan outstanding at that
time will become unrestricted and will be released from the Company's
reacquisition option.
The 1997 Plan is administered by the Compensation Committee of the Board of
Directors. Participants are entitled to the rights of stockholders with respect
to shares issued to them under the 1997 Plan, including the right to vote such
shares and to receive cash and stock dividends, subject to the restrictions
under the 1997 Plan. The number of shares of common stock awarded under and
subject to the 1997 Plan will be proportionately adjusted for stock dividends
and stock splits. As of February 29, 1999, 879,908 shares of common stock (as
adjusted for the two-for-one stock split distributed on December 10, 1998) were
reserved for issuance under the 1997 Plan, including forfeitures and the shares
available for grant under the 1989 Plan that poured over into the 1997 Plan as
of May 8, 1997. In addition, shares that would have returned to the 1989 Plan as
a result of termination of options granted under the 1989 Plan flow into, and
become available for awards under the 1997 Plan. Under the terms of the 1997
Plan, annually in May, an increase will be made to the shares authorized for
issuance under the 1997 Plan in an amount equal to (i) the number of shares
awarded under the 1997 Plan during the preceding year or (ii) a lesser amount
determined by the Board of Directors.
During 1999, 2,105,000 shares, and during 2000, 160,000 shares, of
restricted common stock were issued under the 1997 Plan. As of February 29, 2000
there were 3,131,350 restricted shares that were still subject to the Company's
reacquisition option and 75,000 stock options outstanding under the 1997 Plan.
In 1999 the shares of restricted stock awarded to the Named Executive Officers
under the 1997 Plan were: Mr. McIntyre, 320,000 shares; Mr. Rampino, 320,000
shares; Mr. Bailey, 275,000 shares; Mr. Meyers, 60,000 shares; and Mr.
Donaldson, 60,000 shares. Officers who received awards of restricted stock in
1999 were not granted stock options during 1999. In February 2000, under the
1997 Plan, 75,000 shares of restricted common stock were awarded to Mr. Rampino
and 50,000 shares of restricted common stock were awarded to Mr. Bailey. Twenty-
five percent (25%) of the restricted stock shares awarded to Messrs. Rampino and
Bailey, respectively, in February 2000 will be released from the Company's
reacquisition option on the first designated release date commencing on March 7,
2000, and on January 1st in each of the three (3) anniversaries thereafter,
provided that the Company has not exercised its reacquisition option.
1995 RESTRICTED STOCK AWARD PLAN, AS AMENDED (THE "1995 PLAN")
In November 1995, the Board of Directors approved the 1995 Plan. The 1995
Plan became effective upon adoption by the Board in November 1995 and will
continue in effect for a term of ten (10) years unless earlier
17
<PAGE> 20
terminated. The 1995 Plan 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 1995 Plan's goals
are to be achieved by providing participants with awards of restricted common
stock.
All shares of common stock awarded under the 1995 Plan are subject to the
Company's reacquisition option and may not be sold by the 1995 Plan Participants
until this option lapses. Ten percent (10%) of each 1995 Plan 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 1995 Plan 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 1995 Plan are held in escrow by the
Company for the account of each 1995 Plan Participant pending the release from
the Company's reacquisition option. If 1995 Plan shares are forfeited to the
Company, they will become available for reissuance under the 1995 Plan. Upon a
Change of Control of the Company, one hundred percent (100%) of the shares
awarded under the 1995 Plan will become unrestricted and will be released from
the Company's reacquisition option.
The 1995 Plan 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 1995 Plan, including the right to vote such
shares and to receive cash and stock dividends, subject to the restrictions
under the 1995 Plan. The number of shares of common stock awarded under the 1995
Plan will be proportionately adjusted for stock dividends and stock splits.
During 1999, there were 90,000 shares of restricted common stock awarded
under the 1995 Plan. As of December 31, 1999 there had been 4,051,460 restricted
stock shares awarded and issued, net of forfeitures, pursuant to the 1995 Plan
since its inception. As of February 29, 2000 there were 2,513,032 of such shares
that were still subject to restriction pursuant to the Company's reacquisition
option. In 1999 there were no shares of restricted stock awarded under the 1995
Plan to the Named Executive Officers. The numbers of shares have been adjusted
to reflect the effect of stock splits and a stock dividend distributed by the
Company after the grant dates of the respective restricted stock awards. All
shares awarded in 1999 under the 1995 Plan were made with forfeited shares. As
of the date of this proxy statement, no awards were made in 2000 under the 1995
Plan.
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 were 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 used a salary multiple calculation that was set
at levels consistent with the ranking of their respective positions.
Non-employee 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. Following adoption and approval of the 1997 Plan, all shares available
for awards under the 1989 Plan flowed into the 1997 Plan, such that no
additional awards will be made under the 1989 Plan. If 1989 Plan shares are
forfeited, they will become available for issuance under the 1997 Plan.
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 (the
"Program"). Participants under the Program are provided with individual
permanent life insurance policies, with death benefit limits of 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
18
<PAGE> 21
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. For Executive Officers this Program incorporates the basic group term
life insurance coverage of $50,000 paid by the Company for all employees.
LONG TERM INCENTIVE COMPENSATION PLAN
The Board of Directors has authorized the Company's executive officers to
construct a new Long Term Incentive Compensation Plan (the "LTICP") as a
successor plan to the 1996 LTICP, which ran from January 1, 1996 through
December 31, 1998. As of the date of this proxy statement, a successor plan had
not been fully constructed or implemented. Generally, the 1996 LTICP was a three
year plan designed to provide incentive to executives and other key employees to
achieve the cumulative pretax 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. The 1996 LTICP provided for a bonus
opportunity dependent upon the Company achieving a predetermined cumulative
pretax earnings target during the period from January 1, 1996 through December
31, 1998, and as a function of a participant's base salary for the period.
Bonuses earned under the 1996 LTICP become payable in cash after the maturity
date. Participants and earnings targets were designated by the Board of
Directors at the 1996 LTICP's inception.
1999 MANAGEMENT INCENTIVE COMPENSATION PLAN
The 1999 Management Incentive Compensation Plan (the "MICP") was adopted by
the Board of Directors effective January 1, 1999 and matured on December 31,
1999. Participants and earnings targets were designated at the beginning of 1999
by the Board of Directors based upon the Compensation Committee's
recommendations. The MICP provides executives with an opportunity to earn an
annual bonus upon achievement of the predetermined pretax earnings targets set
by the Board. Pretax 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 as a percentage of their base
salaries. Bonus "targets" represent the balance of each participant'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
Compensation Committee at the beginning of the MICP's plan year based on
available total annual compensation survey data to reflect the ranking and
relative level of contribution each participant is expected to make to the
achievement of the Company's predetermined pretax earnings targets. Actual
bonuses earned can range from half of the executive's "target" amount for
performance at the minimum acceptable earnings level to a maximum of three (3)
times the "target" amount for earnings substantially in excess of the Company's
goals. No bonuses were paid to the Named Executive Officers under the 1999 MICP.
PERSONAL LIABILITY INSURANCE PROGRAM
In June 1997, the Company adopted a Personal Liability Insurance Program
for Executive Officers and certain other key employees of the Company.
Participants under this program are provided with personal liability protection
of $2 million to $15 million, depending upon the individual participants
position level with the Company.
19
<PAGE> 22
PRINCIPAL AND MANAGEMENT STOCKHOLDERS
Except as otherwise provided, the following table sets forth certain
information as of February 29, 2000 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 days of the applicable date of
determination. The following table also sets forth certain information as of
February 29, 2000 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 for director, directors, Named Executive Officers
and executive officers as a group. The shares represented in the table have been
adjusted to reflect stock splits and dividends. On February 29, 2000, the
Company had 70,031,844 shares of common stock outstanding.
<TABLE>
<CAPTION>
COMMON COMMON STOCK
STOCK BENEFICIALLY
NUMBER OF OWNED
NAME SHARES (1) PERCENT
---- ---------- ------------
<S> <C> <C>
James A. McIntyre...................................... 9,215,219(2,3) 13.1%
Louis J. Rampino....................................... 1,969,179(2,4) 2.8%
Wayne R. Bailey........................................ 1,237,576(2,5) 1.8%
Raymond G. Meyers...................................... 648,008(2,6) 1.0%
John A. Donaldson...................................... 273,062(2,7) *
Houston I. Flournoy.................................... 72,914(8) *
C. Douglas Kranwinkle.................................. 72,864(9) *
David W. Morrisroe..................................... 120,018(10) *
Dickinson C. Ross...................................... 108,228(11) *
---------- ----
All directors, nominees, Named Executive Officers and
executive officers as a group (10 persons)........... 13,802,218(2-11) 19.3%
========== ====
</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 February 29, 2000
through the exercise of stock options granted under the 1989 Plan and 1997
Plan.
(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, Rampino, Bailey and Meyers, the percentages of
shares beneficially owned by any executive officer do not exceed one
percent (1%) of the Company's outstanding common stock.
(3) Includes (i) 2,907,502 shares held by the James A. McIntyre Living Trust
under which Mr. James A. McIntyre is the trustee and holds a vested
beneficiary ownership, (ii) 20,000 shares held by the James A. McIntyre
1994 Charitable Remainder Unitrust under which Mr. McIntyre is the trustee,
(iii) 50,700 shares held by the James A. McIntyre Grandchildren's Trust
under which Mr. McIntyre is the trustee, (iv) 10,000 shares held by the
James A. McIntyre 1998 Charitable Remainder Unitrust under which Mr.
McIntyre is the trustee, (v) 3,000,000 shares held by the Padaro
Partnership, L.P. of which the James A. McIntyre Living Trust is a 2%
general partner (a 98% limited partner interest of the Padaro Partnership
L.P. is held by The Padaro Trust, of which Mr. McIntyre is a remainder
beneficiary and his mother Mrs. Maurine McIntyre is trustee), (vi) 558,154
stock option shares which Mr. McIntyre has the right to exercise within
sixty days of the date of the table, (vii) 924,823 shares owned directly or
beneficially through the trustee(s) of the employee retirement or other
benefit plans, (viii) 1,238,120 shares of restricted stock, and (ix)
330,000 shares which were given by the James A. McIntyre Living Trust in
1997, 1998 and 1999 to the McIntyre Foundation in which Mr. McIntyre has no
pecuniary interest. In addition, 60,000 units of Preferred Securities, less
than one percent (1%) of the
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<PAGE> 23
Preferred Securities issued and outstanding, are held by the James A.
McIntyre 1994 Charitable Remainder Unitrust, under which Mr. McIntyre is
the trustee. The Severn Trust, a Charitable Remainder Trust under which
Mrs. Maureen McIntyre, Mr. McIntyre's mother, is Trustee holds $1,550,000,
aggregate principal amount, of the Company's 7.70% Series B Senior Notes
Due 2004. Mr. McIntyre disclaims beneficial ownership of these Senior
Notes.
(4) Includes 1,112,792 restricted shares awarded under the 1995 Plan and 1997
Plan and 334,437 shares owned directly or beneficially through the
trustee(s) of the employee retirement or other benefit plans. Also includes
exercisable options to purchase 325,222 shares on or within sixty days of
the date of the table.
(5) Includes 805,980 restricted shares awarded under the 1995 Plan and 1997
Plan and 223,050 shares owned directly or beneficially through the
trustee(s) of the employee retirement or other benefit plans. Also includes
exercisable options to purchase 193,162 shares on or within sixty days of
the date of the table.
(6) Includes 261,600 restricted shares awarded under the 1995 Plan and 1997
Plan and 182,206 shares owned directly or beneficially through the
trustee(s) of the employee retirement or other benefit plans. Also includes
exercisable options to purchase 129,202 shares on or within sixty days of
the date of the table. In addition, Mr. Meyers owns 1,275 units of
Preferred Securities, less than one percent (1%).
(7) Includes 19,145 shares held by the Donaldson Family Trust under which Mr.
Donaldson is a trustee and holds a vested beneficiary interest. Includes
147,200 restricted shares awarded under the 1995 Plan and 1997 Plan and
76,705 shares owned directly or beneficially through the trustee(s) of the
employee retirement or other benefit plans. Also includes exercisable
options to purchase 23,712 shares on or within sixty days of the date of
the table. Includes 6,300 shares of common stock owned by a trust
established by Mr. Donaldson's mother, under which Mr. Donaldson is a
trustee. In addition, 800 units of Preferred Securities, less than one
percent (1%), are owned by the trust established by Mr. Donaldson's mother
under which Mr. Donaldson is a trustee.
(8) Includes 10,032 shares held by the Flournoy Family Trust, under which Dr.
Flournoy is trustee and holds a vested beneficiary interest. Includes
exercisable options to purchase 19,282 shares on or within sixty days of
the date of the table, and 31,200 restricted shares awarded under the 1995
Plan. In addition, Dr. Flournoy owns beneficially, through his wife's
individual retirement account, 175 units of Preferred Securities, less than
one percent (1%).
(9) Includes 31,200 restricted shares awarded under the 1995 Plan. Also
includes exercisable options to purchase 8,094 shares on or within sixty
days of the date of the table. In addition, Mr. Kranwinkle owns
beneficially, in his O'Melveny & Myers 401(k) plan, 5,000 units of
Preferred Securities, less than one percent (1%).
(10) Includes 42,276 shares held by the Morrisroe Family Trust, under which Mr.
Morrisroe is a trustee and holds a vested beneficiary ownership. Includes
exercisable options to purchase 34,752 shares on or within sixty days of
the date of the table, and 31,200 restricted shares awarded under the 1995
Plan. In addition, Mr. Morrisroe owns beneficially in the Morrisroe Family
Trust, 17,548 units of Preferred Securities, less than one percent (1%).
(11) Includes 67,104 shares held by the D.C. Ross Separate Property Trust, of
which Mr. Ross is the trustee and holds a vested beneficiary interest, and
11,714 shares held by the Ross Community Property Trust, of which Mr. Ross
is a trustee and holds a vested beneficiary interest. Includes exercisable
options to purchase 10,000 shares on or within sixty days of the date of
the table and 31,200 restricted shares awarded under the 1995 Plan. In
addition, Mr. Ross' wife owns 4,400 shares through her separate property
trust, for which Mr. Ross disclaims beneficial ownership.
21
<PAGE> 24
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has retained the services of the law firm of O'Melveny & Myers
LLP as outside legal counsel. Mr. C. Douglas Kranwinkle, a director and nominee
for director, is Managing Partner of O'Melveny & Myers LLP.
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 a referenced report was not filed on a timely basis during the most
recent fiscal year or prior fiscal years. Mr. David Morrisroe, a director of the
Company, unintentionally failed to report on a timely basis reports disclosing
the September 1998 purchase of 2,000 shares of the Company's Preferred
Securities at $25.687 per share. 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, 1999, 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
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 February 25, 2000, 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 2000, 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. Ratification of Ernst & Young LLP as
the Company's auditors for the year 2000 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. IF NOT OTHERWISE SPECIFIED, PROXIES WILL BE
VOTED "FOR" ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR 2000.
ANNUAL REPORT TO STOCKHOLDERS AND ADDITIONAL INFORMATION
The Company's Annual Report for the fiscal year ended December 31, 1999 was
mailed on or about April 13, 2000 to stockholders of record on March 31, 2000.
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,
1999, 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.
2001 ANNUAL MEETING -- RECEIPT OF STOCKHOLDER PROPOSALS
Any stockholder proposal must be submitted in writing to Alan W. Faigin,
Secretary of the Company, at 2020 Santa Monica Boulevard, 6th Floor, Santa
Monica, CA 90404, and received by December 14, 2000 if it
22
<PAGE> 25
is to be considered for inclusion in the Company's 2000 proxy materials. Any
such proposal must comply with all of the requirements of Rule 14a-8 under the
Securities Exchange Act of 1934, as amended.
If a stockholder submits a proposal at the Company's Annual Meeting of
Stockholders to be held in 2000 other than in accordance with Rule 14a-8, and
does not provide notice of such proposal to the Company by February 18, 2001,
the holders of any proxy solicited by the Company's Board of Directors for use
at such meeting will have discretionary authority to vote with respect to any
proposal as to which timely notice is not given.
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 Annual Meeting, the shares represented at the Annual 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 13, 2000
23
<PAGE> 26
FREMONT GENERAL CORPORATION
BOARD OF DIRECTORS PROXY
ANNUAL MEETING OF STOCKHOLDERS: MAY 16, 2000
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 31, 2000, 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 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 AND 2.
(Continued, and to be dated and signed on reverse side)
- -------------------------------------------------------------------------------
-- FOLD AND DETACH HERE --
<PAGE> 27
Please mark
your votes [X]
as this
The Board of Directors recommends a vote FOR Items 1 and 2
<TABLE>
<CAPTION>
WITHHOLD
AUTHORITY
to vote for
FOR ALL nominees FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C> <C> <C>
Item 1: ELECTION OF DIRECTORS [ ] [ ] Item 2: RATIFICATION OF APPOINTMENT OF ERNST & [ ] [ ] [ ]
YOUNG LLP AS INDEPENDENT AUDITORS
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)
- -------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS FOR THE MAY 16, 2000 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.
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-- FOLD AND DETACH HERE --
REVERSE 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
