<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 sec. 240.14a-11(c) or sec. 240.14a-12
ASSOCIATES FIRST CAPITAL CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
N/A
- --------------------------------------------------------------------------------
(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)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(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 paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
[ASSOCIATES FIRST CAPITAL CORPORATION LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 29, 1997
TO OUR STOCKHOLDERS:
The annual meeting of stockholders of Associates First Capital Corporation
(the "Company") will be held in the Monet Ballroom of the Wyndham Anatole Hotel,
2201 Stemmons Freeway, Dallas, Texas, at 10:00 a.m., Central Daylight Savings
Time, on Thursday, May 29, 1997, to vote on the following:
1. The election of six directors of the Company;
2. The approval of the Company's Incentive Compensation Plan; and
3. The selection by the Audit Committee of Coopers & Lybrand L.L.P. as the
Company's independent public accountants for 1997.
The record date for the meeting, used to determine which stockholders are
entitled to vote at the meeting and receive these materials, is March 31, 1997.
If you plan to attend the meeting, please see the instructions on page 29 of the
proxy statement. If you will need special assistance at the meeting because of a
disability, please notify the Office of the General Counsel, P.O. Box 660237,
Dallas, Texas 75266-0237.
By Order of the Board of Directors,
/s/ JOHN M. RINTAMAKI
JOHN M. RINTAMAKI
Secretary
Irving, Texas
April 25, 1997
YOUR VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR PROXY CARD
<PAGE> 3
TERMS USED
"401(k) Plan" means the Associates Savings and Profit-Sharing Plan.
"Annual Meeting" means the annual meeting of stockholders of the Company,
which will be held on May 29, 1997.
"Annual Report" means the Company's annual report to stockholders for the
year ended December 31, 1996.
"Board of Directors" means the Board of Directors of the Company.
"CAPP" means the Company's Corporate Annual Performance Plan, which is
described beginning on page 11 of this proxy statement.
"Class A Common Stock" or "Shares" means the Company's Class A Common
Stock, par value $.01 per share.
"Class B Common Stock" means the Company's Class B Common Stock, par value
$.01 per share.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" or "we" or "us" means Associates First Capital Corporation.
"Corporate Agreement" means the corporate agreement between the Company and
Ford, which is described beginning on page 7 of this proxy statement.
"EBP" means the Company's Excess Benefit Plan, which is described beginning
on page 18 of this proxy statement.
"EDP" means the Company's Equity Deferral Plan, which is described
beginning on page 12 of this proxy statement.
"Ford" means Ford Motor Company.
"Ford Common Stock" means Ford's common stock, par value $1.00 per share.
"Ford FSG" means Ford FSG, Inc., a wholly owned indirect subsidiary of
Ford.
"Ford Holdings" means Ford Holdings, Inc., an indirect wholly owned
subsidiary of Ford.
"ICP" or "Incentive Compensation Plan" means the Company's Incentive
Compensation Plan, formerly called the Long-Term Equity Compensation Plan, which
is described beginning on page 11 of this proxy statement.
"IPO" means the initial public offering of the Class A Common Stock, which
occurred in May 1996.
"ISOs" means incentive stock options, which may be awarded under the ICP.
"LTPP" means the Company's Long-Term Performance Plan, which is described
beginning on page 11 of this proxy statement.
"Named Executive Officers" means the Chief Executive Officer and the four
other most highly compensated executive officers of the Company as of December
31, 1996.
"NQSOs" means nonqualified stock options, which may be awarded under the
ICP.
"NYSE" means the New York Stock Exchange.
"Pension Plan" means the Company's Pension Plan, which is described
beginning on page 18 of this proxy statement.
"PSARs" means phantom stock appreciation rights.
"PSAR Plan" means the Company's Phantom Stock Appreciation Right Plan,
which is described beginning on page 12 of this proxy statement.
"Record Date" means March 31, 1997, the date established by the Board of
Directors for determining the stockholders of the Company entitled to vote at
the Annual Meeting.
"SARs" means stock appreciation rights, which may be awarded under the ICP.
"SEC" means the United States Securities and Exchange Commission.
"SRIP" means the Company's Supplemental Retirement Income Plan, which is
described beginning on page 18 of this proxy statement.
"Stock Option" means the option to purchase capital stock of the Company
granted to Ford pursuant to the Corporate Agreement.
"Tax-Sharing Agreement" means the tax-sharing agreement between the Company
and Ford, which is described beginning on page 8 of this proxy statement.
"Voting Stock" means the Class A Common Stock and the Class B Common Stock.
<PAGE> 4
ASSOCIATES FIRST CAPITAL CORPORATION
PROXY STATEMENT
The Board of Directors is soliciting proxies to be used at your Annual
Meeting, which will be held in the Monet Ballroom of the Wyndham Anatole Hotel,
2201 Stemmons Freeway, Dallas, Texas, at 10:00 a.m., Central Daylight Savings
Time, on Thursday, May 29, 1997. This proxy statement, the enclosed form of
proxy and the Annual Report are being mailed to you beginning April 25, 1997.
The Annual Report does not constitute a part of the proxy solicitation
materials. Our mailing address is P.O. Box 660237, Dallas, Texas 75266-0237.
Holders of record of Class A Common Stock and holders of record of Class B
Common Stock on March 31, 1997, may vote at the Annual Meeting. On the Record
Date, 90,748,299 shares of Class A Common Stock and 255,881,180 shares of Class
B Common Stock were outstanding and entitled to vote at the Annual Meeting. No
other voting securities of the Company were outstanding. Each stockholder is
entitled to one vote for each share of Class A Common Stock and five votes for
each share of Class B Common Stock held on the Record Date. Holders of Class A
Common Stock and Class B Common Stock vote together without regard to class on
the matters that will come before the Annual Meeting.
If you return your executed proxy in time to permit its review and count,
your shares will be voted as you direct. You can specify whether or not shares
represented by the proxy are to be voted for the election of all nominees for
director or are to be withheld from some or all of them. You also can specify
approval, disapproval or abstention as to each of two additional items that will
be presented at the Annual Meeting by management. Each additional item is
included and commented on in this proxy statement.
IF YOUR PROXY CARD DOES NOT SPECIFY HOW YOU WANT TO VOTE YOUR SHARES, THEY
WILL BE VOTED "FOR" THE ELECTION OF ALL NOMINEES FOR DIRECTOR, AS SET FORTH
UNDER "ELECTION OF DIRECTORS" BELOW, AND "FOR" ITEM 2 AND ITEM 3.
You may revoke your proxy at any time before it is exercised by written
notice to the Secretary, by timely submission of a properly executed later-dated
proxy or by voting in person at the Annual Meeting.
The election of directors requires a plurality of the votes that could be
cast by stockholders who are present in person or represented by proxy at the
Annual Meeting. The approval of each of Items 2 and 3 requires a majority of the
votes that could be cast on such Item by stockholders who are present in person
or represented by proxy at the Annual Meeting.
The total number of votes that could be cast at the Annual Meeting is the
sum of votes cast and abstentions. Abstentions are counted as "shares present"
at the Annual Meeting for purposes of determining the presence of a quorum and
have the effect of a vote "against" any matter as to which they are specified.
Proxies submitted by brokers that do not indicate a vote for any or all of the
Items (so-called "broker nonvotes") are not considered "shares present" and will
not affect the outcome of the vote.
We do not know of any other matter to be presented at the Annual Meeting.
Under the Company's By-Laws, no business other than that stated in the notice of
Annual Meeting may be transacted at the Annual Meeting. If any other matter is
presented at the Annual Meeting on which a vote properly may be taken, the
shares represented by proxies in the accompanying form will be voted in
accordance with the judgment of the person or persons voting those shares.
<PAGE> 5
ITEM 1.
ELECTION OF DIRECTORS
Six directors will be elected at the Annual Meeting. Each director will
serve until the next annual meeting of the stockholders or until he or she is
succeeded by another qualified director who has been elected.
We will vote your shares for the election of all the nominees named below,
unless you give a different direction on the proxy form. If unforeseen
circumstances (for example, death or disability) make it necessary for the Board
of Directors to substitute another person for any of the nominees, your shares
will be voted for that other person.
Each of the nominees is now a member of the Board of Directors. More
information on the nominees is provided below. This information has been given
to the Company by the nominees.
The Board of Directors met two times after August 1, 1996, the date the
four non-officer directors of the Company were elected to the Board of
Directors. On May 8, 1996, the Class A Common Stock became publicly traded on
the NYSE. Prior to that date, the Company was a wholly owned indirect subsidiary
of Ford, and the Board of Directors regularly took action by unanimous consent.
NOMINEES
KEITH W. HUGHES
Age: 50
Director Since: November 1988
Principal Occupation: Chairman of the Board and Chief Executive Officer
of the Company
Business Experience: Mr. Hughes has served as Chairman of the Board and
Chief Executive Officer of the Company since
February 1995. He served as President of the
Company from August 1991 until February 1995.
Other Directorships: Mr. Hughes is also a director of American Eagle
Group, Inc. and VISA USA, Inc.
J. CARTER BACOT
Age: 64
Director Since: August 1996
Principal Occupation: Chairman and Chief Executive Officer of The Bank of
New York
Business Experience: Mr. Bacot has served as Chairman and Chief
Executive Officer of The Bank of New York since
January 1982.
Other Directorships: Mr. Bacot is also a director of the Federal Reserve
Bank of New York, Phoenix Home Life Mutual
Insurance Co., Centennial Insurance Co., Atlantic
Mutual Insurance Co., Time Warner, Inc. and
Woolworth Corporation.
JOHN M. DEVINE
Age: 52
Director Since: August 1996
Principal Occupation: Executive Vice President and Chief Financial
Officer of Ford
Business Experience: Mr. Devine has served as an Executive Vice
President of Ford since November 1996 and as its
Chief Financial Officer since October 1994. He
served as Chairman and Chief Executive Officer of
First Nationwide Bank from April 1991 until May
1994 and as a Vice President of Ford from June
1994 until September 1994.
Other Directorships: Mr. Devine is also a director of The Hertz
Corporation.
2
<PAGE> 6
HAROLD D. MARSHALL
Age: 61
Director Since: November 1988
Principal Occupation: President and Chief Operating Officer of the
Company
Business Experience: Mr. Marshall has served as President and Chief
Operating Officer of the Company since May 1996.
He served as Vice Chairman of the Company from
November 1988 until May 1996.
Other Directorships: Mr. Marshall is also a director and Vice Chairman
of the American Trucking Association Foundation,
Inc.
H. JAMES TOFFEY, JR.
Age: 66
Director Since: August 1996
Principal Occupation: Retired Managing Director of First Boston, Inc.
Business Experience: Mr. Toffey served as Managing Director of First
Boston, Inc. from 1978 until his retirement in
1986, and was a director of First Boston, Inc.
from 1984 until 1988.
KENNETH WHIPPLE
Age: 62
Director Since: August 1996
Principal Occupation: Executive Vice President of Ford, President of Ford
Financial Services Group and Chairman and Chief
Executive Officer of Ford Motor Credit Company
Business Experience: Mr. Whipple has served as an Executive Vice
President of Ford and President of Ford Financial
Services Group since March 1988. He has served as
Chairman and Chief Executive Officer of Ford
Motor Credit Company since March 1997.
Other Directorships: Mr. Whipple is also a director of CMS Energy
Corporation.
COMMITTEES OF THE BOARD OF DIRECTORS
AUDIT COMMITTEE
Number of Members: 2
Members: J. Carter Bacot (Chairman)
H. James Toffey, Jr.
Number of Meetings in
1996: 2
Functions: Selects independent public accountants to audit the
books of account and other records of the
Company, subject to ratification by stockholders;
consults with such accountants and reviews and
approves the scope of their audit; reviews
internal controls, accounting practices,
financial structure and financial reporting; and
reports to the Board of Directors as appropriate
regarding these consultations and reviews.
3
<PAGE> 7
COMPENSATION COMMITTEE
Number of Members: 2
Members: H. James Toffey, Jr. (Chairman)
J. Carter Bacot
Number of Meetings in
1996: 2
Functions: Considers and approves salaries, bonuses and
stock-based compensation for the Company's
executive officers; administers and makes awards
under the Incentive Compensation Plan; considers
and makes recommendations on the Company's bonus,
long-term incentive, deferred compensation and
retirement programs.
NOMINATING COMMITTEE
Number of Members: 5
Members: Keith W. Hughes (Chairman)
J. Carter Bacot
John M. Devine
H. James Toffey, Jr.
Kenneth Whipple
Number of Meetings in
1996: None
Functions: Makes recommendations on the management
organization of the Company, nominations for
elections of directors and officers of the
Company, the size and composition of the Board of
Directors and the appointments of other employees
of the Company; considers stockholder suggestions
for nominees for director other than
self-nomination suggestions. Suggestions for
consideration by the Nominating Committee may be
submitted to the Secretary of the Company, P.O.
Box 660237, Dallas, Texas 75266-0237. The
Nominating Committee will consider suggestions
received by the Secretary of the Company before
December 31 at a regular meeting of the
Nominating Committee during the following year
and before proxy materials are mailed to
stockholders.
4
<PAGE> 8
SECURITY OWNERSHIP
SECURITY OWNERSHIP OF MANAGEMENT
The table below shows, as of December 31, 1996, the number of shares of
Class A Common Stock and Ford Common Stock owned by each director, nominee and
Named Executive Officer, and by the directors and executive officers of the
Company as a group. No director, nominee or Named Executive Officer beneficially
owned 1% or more of the total outstanding Class A Common Stock or Ford Common
Stock. As a group, the directors and executive officers (including the Named
Executive Officers) beneficially owned less than 1% of the total outstanding
Class A Common Stock and less than 1% of the total outstanding Ford Common
Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
--------------------------------------------------------
CLASS A COMMON STOCK FORD COMMON STOCK(1)
-------------------------- --------------------------
NAME OF UNRESTRICTED RESTRICTED UNRESTRICTED RESTRICTED
BENEFICIAL OWNER SHARES SHARES(2) SHARES SHARES(3)
---------------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
Keith W. Hughes................................ 7,560(4) 51,730 3,598(5) 0
J. Carter Bacot................................ 1,000 0 0 0
John M. Devine................................. 1,000 0 14,104(6) 0
Harold D. Marshall............................. 6,900(7) 17,250 0 0
H. James Toffey, Jr............................ 3,000 0 15,000 0
Kenneth Whipple................................ 15,000 0 58,036(8) 202,905
Joseph M. McQuillan............................ 12,500(9) 17,250 0 0
Lawrence J. Pelka.............................. 5,000(10) 6,130 1,000 0
Thomas R. Slone................................ 1,000(11) 6,130 0 0
All directors and executive officers as a group
(17 persons)................................. 71,900(12) 135,350 93,688 202,905
</TABLE>
- ---------------
(1) The following individuals have currently exercisable options to acquire
shares of Ford Common Stock through the exercise of options awarded under
Ford's 1990 Long-Term Incentive Plan as follows: Mr. Hughes -- 7,500
shares; Mr. Devine -- 96,250 shares; Mr. Marshall -- 5,000 shares; Mr.
McQuillan -- 5,000 shares; and Mr. Whipple -- 331,000 shares.
(2) Awarded under the ICP and subject to restrictions as described in the
Report from the Compensation Committee Regarding Executive Compensation
beginning on page 10 of this proxy statement.
(3) Includes shares awarded under Ford's 1990 Long-Term Incentive Plan and
shares contingently credited under Ford's Supplemental Compensation Plan.
(4) Includes units in the Associates Stock Fund credited to Mr. Hughes under
the 401(k) Plan, representing approximately 2,560 shares of Class A Common
Stock. The Security Ownership of Management table does not include deferred
compensation units acquired under the EDP, which track the performance of
29,990.545 shares of Class A Common Stock. The Security Ownership of
Management table also does not include Mr. Hughes' options to acquire
249,900 shares of Class A Common Stock pursuant to the ICP. None of such
options under the ICP has vested as of the date of this proxy statement.
(5) Includes units in the Ford Stock Fund credited to Mr. Hughes under the
401(k) Plan, representing approximately 3,598 shares of Ford Common Stock.
(6) Includes units in the Ford Stock Fund credited to Mr. Devine under Ford's
Savings and Stock Investment Plan, representing approximately 11,854 shares
of Ford Common Stock.
(7) The Security Ownership of Management table does not include deferred
compensation units acquired under the EDP, which track the performance of
11,139.346 shares of Class A Common Stock. The Security Ownership of
Management table also does not include Mr. Marshall's options to acquire
86,180 shares of Class A Common Stock pursuant to the ICP. None of such
options under the ICP has vested as of the date of this proxy statement.
(8) Includes units in the Ford Stock Fund credited to Mr. Whipple under Ford's
Savings and Stock Investment Plan, representing approximately 1,217 shares
of Ford Common Stock.
(9) The Security Ownership of Management table does not include deferred
compensation units acquired under the EDP, which track the performance of
11,349.279 shares of Class A Common Stock. The Security Ownership of
Management table also does not include Mr. McQuillan's options to acquire
86,180 shares of Class A Common Stock pursuant to the ICP. None of such
options under the ICP has vested as of the date of this proxy statement.
(10) The Security Ownership of Management table does not include deferred
compensation units acquired under the EDP, which track the performance of
5,055.549 shares of Class A Common Stock. The Security Ownership of
Management table also does not
5
<PAGE> 9
include Mr. Pelka's options to acquire 31,900 shares of Class A Common
Stock pursuant to the ICP. None of such options under the ICP has vested as
of the date of this proxy statement.
(11) The Security Ownership of Management table does not include deferred
compensation units acquired under the EDP, which track the performance of
6,426.545 shares of Class A Common Stock. The Security Ownership of
Management table also does not include Mr. Slone's options to acquire
31,900 shares of Class A Common Stock pursuant to the ICP. None of such
options under the ICP has vested as of the date of this proxy statement.
(12) The Security Ownership of Management Table does not include deferred
compensation units acquired under various of the Company's nonqualified
deferred compensation plans, which track the performance of an aggregate of
approximately 98,145 shares of Class A Common Stock. The Security Ownership
of Management Table does not include options to purchase an aggregate of
approximately 687,460 shares of Class A Common Stock held by the directors
and executive officers pursuant to the ICP. None of such options under the
ICP has vested as of the date of this proxy statement.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on the Company's records and other information, the Company believes
that all SEC filing requirements applicable to its directors and officers for
1996 and prior fiscal years were complied with.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The table below shows, as of December 31, 1996, the name and address of
each person known to the Company that beneficially owns in excess of 5% of any
class of Voting Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
-----------------------------------------
SHARED
SOLE VOTING AND VOTING AND
NAME AND ADDRESS INVESTMENT INVESTMENT PERCENT
TITLE OF CLASS OF STOCK OF BENEFICIAL OWNER POWER POWER OF CLASS
----------------------- ------------------- --------------- ---------- --------
<S> <C> <C> <C> <C>
Class A Common Stock.............................. Ford Motor Company 23,603,669 0 26%(1)
The American Road
Dearborn, Michigan
48121-1899
Class A Common Stock.............................. Janus Capital 0 9,265,990(2) 10.2%(2)
Corporation
100 Fillmore Street
Denver, Colorado
80206-4923
Class A Common Stock.............................. Thomas H. Bailey 0 9,265,990(2) 10.2%(2)
100 Fillmore Street
Denver, Colorado
80206-4923
Class A Common Stock.............................. Janus Fund 0 9,265,990(2) 10.2%(2)
100 Fillmore Street
Denver, Colorado
80206-4923
Class B Common Stock.............................. Ford Motor Company 255,881,180 0 100%(1)
The American Road
Dearborn, Michigan
48121-1899
</TABLE>
- ---------------
(1) The Class A Common Stock and Class B Common Stock will be voted as a single
class at the Annual Meeting for purposes of the Items set forth in this
proxy statement. Because the holder of the Class B Common Stock is entitled
to five votes per share, Ford holds 95.1% of the aggregate voting power of
the Class A Common Stock and Class B Common Stock.
(2) Based on Schedule 13G, dated January 9, 1997, filed with the SEC, which
indicates that (a) Janus Capital Corporation is a registered investment
adviser that furnishes investment advice to several investment companies
registered under Section 8 of the Investment Company Act of 1940 and other
individual and institutional clients, including Janus Fund, and, as a result
of Janus Capital Corporation's role as investment adviser to those clients,
it may be deemed to be the beneficial owner of 9,265,990 shares of Class A
Common Stock, (b) Janus Fund has shared voting and dispositive power over
4,697,275 shares of Class A Common Stock and that, because Janus Fund is a
client of and receives investment advice from Janus Capital Corporation, it
may be deemed to be the beneficial owner of 9,265,990 shares of Class A
Common Stock and (c) Thomas H. Bailey is a stockholder and serves as
president and chairman of the board of Janus Capital Corporation and that,
as a result of his stock ownership and positions, he may be deemed to be the
beneficial owner of 9,265,990 shares of Class A Common Stock.
6
<PAGE> 10
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RELATIONSHIP WITH FORD
As of the date of this proxy statement, Ford beneficially owned 26% of the
outstanding Class A Common Stock and 100% of the outstanding Class B Common
Stock (which Class B Common Stock is entitled to five votes per share on any
matter submitted to a vote of the Company's stockholders). The Voting Stock
beneficially owned by Ford represented in the aggregate 95.1% of the combined
voting power of all of the outstanding Voting Stock. For as long as Ford
continues to beneficially own shares of Voting Stock representing more than 50%
of the combined voting power of the Voting Stock, Ford will be able to direct
the election of all of the members of the Board of Directors and exercise a
controlling influence over the business and affairs of the Company, including
any determinations with respect to mergers or other business combinations
involving the Company, the acquisition or disposition of assets by the Company,
the incurrence of indebtedness by the Company, the issuance of any additional
Voting Stock or other equity securities, and the payment of dividends with
respect to Voting Stock. Similarly, Ford will have the power to determine
matters submitted to a vote of the Company's stockholders without the consent of
the Company's other stockholders, will have the power to prevent a change in
control of the Company and could take other actions that might be favorable to
Ford.
In addition, by virtue of its controlling beneficial ownership and the
terms of a tax-sharing agreement between the Company and Ford, Ford effectively
controls all of the Company's tax decisions, and conflicts of interest regarding
tax matters between the Company and Ford may arise.
Certain agreements, relationships and transactions between the Company and
Ford are described below.
CORPORATE AGREEMENT
The Company and Ford have entered into a Corporate Agreement under which
the Company granted to Ford a continuing Stock Option, assignable to any of its
subsidiaries, to purchase, under certain circumstances, additional shares of
Class B Common Stock or shares of nonvoting capital stock of the Company. The
Stock Option may be exercised simultaneously with the issuance of any equity
security of the Company, with respect to Class B Common Stock, only to the
extent necessary to maintain its then-existing percentage of the total voting
power and value of the Company and, with respect to shares of nonvoting capital
stock, to the extent necessary to own 80% of each outstanding class of such
stock. The purchase price of the shares of Class B Common Stock purchased upon
any exercise of the Stock Option, subject to certain exceptions, will be based
on the market price of the Class A Common Stock, and the purchase price of
nonvoting capital stock will be the price at which such stock may be purchased
by third parties. The Stock Option expires in the event that Ford reduces its
beneficial ownership of Voting Stock in the Company to less than 45% of the
outstanding shares of Voting Stock.
The Corporate Agreement further provides that, upon the request of Ford,
the Company will use its best efforts to effect the registration under
applicable federal and state securities laws of any of the shares of Voting
Stock and nonvoting capital stock (and any other securities issued in respect of
or in exchange for either) beneficially owned by Ford for sale in accordance
with Ford's intended method of disposition of the shares, and will take any
other actions that are necessary to permit the sale of the shares in other
jurisdictions, subject to certain specified limitations. Ford also has the
right, which, subject to certain limitations, it may exercise at any time and
from time to time, to include the shares of Voting Stock and nonvoting capital
stock (and any other securities issued in respect of or in exchange for either)
beneficially owned by it in certain other registrations of common equity
securities of the Company initiated by the Company on its own behalf or on
behalf of its other stockholders. The Company has agreed to pay all
out-of-pocket costs and expenses in connection with each such registration that
Ford requests or in which Ford participates. Subject to certain limitations
specified in the Corporate Agreement, these registration rights are assignable
by Ford and its assigns. The Corporate Agreement contains indemnification and
contribution provisions: (i) by Ford and its permitted assigns for the benefit
of the Company and related persons; and (ii) by the Company for the benefit of
Ford and the other persons entitled to effect registrations of Voting Stock (and
other securities) pursuant to its terms and related persons.
7
<PAGE> 11
The Corporate Agreement also provides that for so long as Ford maintains
beneficial ownership of a majority of the outstanding shares of Voting Stock,
the Company may not take any action or enter into any commitment or agreement
which may reasonably be anticipated to result, with or without notice and with
or without lapse of time, or otherwise, in a contravention (or an event of
default) by Ford of: (i) any provision of applicable law or regulation,
including but not limited to provisions pertaining to the Code or the Employee
Retirement Income Security Act of 1974, as amended; (ii) any provision of
Ford's, Ford Holdings' or Ford FSG's certificates of incorporation or by-laws;
(iii) any credit agreement or other material instrument binding upon Ford, Ford
Holdings or Ford FSG or any of their respective assets; or (iv) any judgment,
order or decree of any governmental body, agency or court having jurisdiction
over Ford, Ford Holdings or Ford FSG or any of their respective assets.
The Corporate Agreement provides that the Company will enter into a similar
agreement for the benefit of any transferee of the Class B Common Stock.
TRADEMARK LICENSE AGREEMENT
The Company and Ford are parties to a trademark license agreement pursuant
to which Ford has granted to the Company a nonexclusive license that permits the
Company to use Ford's name and trademark for general corporate identification
purposes and in connection with the business of Ford Consumer Finance Company,
Inc., an indirect subsidiary of the Company, in the United States (i.e., home
equity lending and manufactured housing lending) and the Company's credit card
operations. The agreement is terminable at the will of either party upon at
least 180 days' prior written notice and will automatically terminate if at any
time Ford ceases to own, directly or indirectly, more than 50% of the
outstanding Voting Stock. Within 90 days following termination of the agreement,
the Company must cease using Ford's name and trademark; provided that it will
not be required to replace trademark branded credit cards except in the normal
course of business on the normal expiration date of each such card, but in any
event, within two years of the date of termination. The Company has agreed to
pay to Ford an annual royalty for the license in an amount equal to 0.01% of the
Company's total domestic assets at December 31 of each year. Such payment was
approximately $3.7 million for 1996. Prior to January 1, 1996, the Company's use
of Ford's name and trademark was royalty free. The royalty is subject to review
by the parties every five years and may be changed by the parties based on
advice from an independent appraiser as to the market value of the license.
TAX-SHARING AGREEMENT
The Company is included in Ford's federal consolidated income tax group,
and the Company's federal income tax liability is included in the consolidated
federal income tax liability of Ford and its subsidiaries. In certain
circumstances, certain of the Company's subsidiaries will also be included with
certain Ford subsidiaries in combined, consolidated or unitary income tax groups
for state and local tax purposes. Pursuant to a Tax-Sharing Agreement between
the Company and Ford, the Company and Ford make payments between them such that,
with respect to any period, the amount of taxes to be paid by the Company,
subject to certain adjustments, is determined as though the Company were to file
separate federal, state and local income tax returns (including, except as
provided below, any amounts determined to be due as a result of a
redetermination of the tax liability of Ford arising from an audit or otherwise)
as the common parent of an affiliated group of corporations filing combined,
consolidated or unitary (as applicable) federal, state and local returns rather
than a consolidated subsidiary of Ford with respect to federal, state and local
income taxes. With respect to certain tax items, however, such as foreign tax
credits and any alternative minimum tax penalty payments, the Company's right to
reimbursement is determined based on the usage of such foreign tax credits and
alternative minimum tax credits by the consolidated group.
In determining the amount of tax-sharing payments under the Tax-Sharing
Agreement, Ford prepares pro forma returns with respect to federal and
applicable state and local income taxes that reflect the same positions and
elections used by Ford in preparing the returns for Ford's consolidated group
and other applicable groups. Ford has all the rights of a parent of a
consolidated group (and similar rights provided for by applicable state and
local law with respect to a parent of a combined, consolidated or unitary
group), is the sole and exclusive agent for the Company in any and all matters
relating to the income, franchise and
8
<PAGE> 12
similar liabilities of the Company, has sole and exclusive responsibility for
the preparation and filing of consolidated federal and consolidated or combined
state and local income tax returns (or amended returns), and has the power, in
its sole discretion, to contest or compromise any asserted tax adjustment or
deficiency and to file, litigate or compromise any claim for refund on behalf of
the Company. In addition, Ford has agreed to undertake to provide these services
with respect to the Company's separate state and local returns and the Company's
foreign returns.
In general, the Company is included in Ford's consolidated group for
federal income tax purposes for so long as Ford beneficially owns at least 80%
of the total voting power and value of the outstanding Voting Stock. Each member
of a consolidated group is jointly and severally liable for the federal income
tax liability of each other member of the consolidated group. Accordingly,
although the Tax-Sharing Agreement allocates tax liabilities between the Company
and Ford, during the period in which the Company is included in Ford's
consolidated group, the Company could be liable in the event that any federal
tax liability is incurred, but not discharged, by any other member of Ford's
consolidated group. At December 31, 1996, the Company's current income taxes
payable to Ford were approximately $77.4 million.
MANAGEMENT SERVICES AGREEMENT
Ford has provided (and as long as Ford beneficially owns more than 50% of
the outstanding Voting Stock of the Company, Ford expects to continue to
provide), at the request of the Company, certain services to the Company for
commercially reasonable fees. These services, which are the subject of a
management services agreement between the Company and Ford, include: (i)
management and other technical and professional (e.g., legal and tax) support;
(ii) accounting and bookkeeping, including assistance with policies, principles
and procedures, budget and cost controls, and audit programs; (iii) pension
asset management; (iv) sales, marketing and operational planning, including
providing the Company with Ford customer data to facilitate cross-marketing; and
(v) insurance coverage under Ford's property and casualty insurance policies
such as liability, crime, property, workers' compensation and directors' and
officers' insurance. The aggregate annual payments by the Company for (i) the
services provided in clauses (i) through (iv) of the preceding sentence are $3.5
million, subject to adjustment for inflation and (ii) the insurance coverage
provided in clause (v) of the preceding sentence is based on the Company's
proportional share of the premium costs of such coverages. Ford and the Company
may each terminate the management services agreement by giving the other party
at least 180 days prior written notice. In addition, if at any time Ford ceases
to beneficially own more than 50% of the outstanding Voting Stock of the Company
or ceases for any reason, as determined in Ford's reasonable discretion, to have
effective control of the Company, then the management services agreement will
terminate automatically. Following any termination of the management services
agreement, the Company will remain liable for any retroactive insurance premium
adjustment for the periods the Company participated in Ford's insurance
programs. The Company paid approximately $6.0 million in fees for such services
in 1996.
OTHER SERVICES
The Company also provides relocation services to Ford and, through its auto
club operations, administers Ford's roadside assistance program. Ford is the
Company's largest corporate client for relocation services and roadside
assistance services. Revenue related to these services was $33.4 million in
1996. In addition, the Company operates a computer system that supports the
term-funding operations of a Ford subsidiary.
ACQUISITION OF RECEIVABLES FROM THE BANK OF NEW YORK
In March 1997, the Company purchased approximately $800 million in credit
card receivables from The Bank of New York. See "Compensation of Directors and
Executive Officers -- Compensation Committee Interlocks and Insider
Participation" on page 13 of this proxy statement.
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<PAGE> 13
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
COMPENSATION OF DIRECTORS
Directors who do not receive compensation as officers or employees of the
Company or any of its affiliates (currently, Messrs. Bacot and Toffey) are paid
an annual board membership fee of $25,000, an attendance fee of $1,000 for each
meeting of the Board of Directors the directors attend, and an annual membership
fee of $5,000 for service on each of the Audit Committee and the Compensation
Committee. The Company does not pay any additional compensation to directors who
receive compensation as officers or employees of the Company or any of its
affiliates.
Under the Company's Deferred Compensation Plan for Non-Employee Directors,
non-employee directors each year may make irrevocable elections to defer all or
part of the following year's annual Board of Directors membership fee,
attendance fees and committee membership fees. Deferred amounts are deemed
invested as each director elects among available investment measures. Each
director's account is adjusted at the end of each calendar quarter to reflect
changes in the underlying investment measures, but no actual investments are
made. Deferred amounts are held in the general funds of the Company, and each
director's account is payable in cash, generally after the director's service on
the Board of Directors ends. Each director has the option to receive payment of
his or her account in a lump sum or in annual installments over a period of up
to 15 years.
REPORT FROM THE COMPENSATION COMMITTEE REGARDING EXECUTIVE COMPENSATION
OVERVIEW AND PHILOSOPHY
The Company's executive compensation program provides salary and incentive
and stock-based compensation to the Named Executive Officers and other
executives of the Company and its subsidiaries. Since its organization in April
1996 in connection with the IPO, the Compensation Committee has reviewed the
Company's overall executive compensation program, considered the Company's
recommendations as to compensation for the executive officers and approved such
compensation for the executive officers as furthering stockholder interests.
Before the IPO, the Company's recommendations as to compensation for the
executive officers were subject to review and approval by Ford.
The Compensation Committee has prepared this report to provide an overview
of the Company's executive compensation program. This report includes a
discussion of the relationship of the Company's performance to executive
officers' compensation and the factors and criteria considered in determining
the Chief Executive Officer's compensation for 1996. No current member of the
Compensation Committee is a former or current officer or employee of the Company
or any of its affiliates. The current members of the Compensation Committee were
elected effective August 1, 1996.
The Compensation Committee has adopted an executive compensation program
designed to attract, retain and reward exceptional executives by compensating
superior performance in a manner highly competitive with that of other
well-managed organizations in the financial services industry and in general
industry. The executive compensation program is designed also to link
executives' interests with stockholders' interests by emphasizing equity-based
and other incentive compensation. In evaluating the Company's executive
compensation program, the Compensation Committee has considered a report,
prepared by an independent compensation consulting firm, summarizing the key
features of the program. The Compensation Committee has also considered
discussion by senior members of Company and Ford management regarding the
Company's executive compensation program, particularly with respect to the Chief
Executive Officer's compensation as compared to his peers' compensation.
The Company's executive compensation program has been developed with input
from the consulting firm, including a report prepared by the consulting firm in
1995 that compared the Company's executive compensation to the compensation paid
to corresponding officers of 21 diversified financial services organizations
within the Company's industry. Organizations selected by the consulting firm
were money center and large regional banks and nationally diversified financial
institutions with assets comparable in amount to those managed by the Company,
which include some, but not all, of the organizations used in developing the
10
<PAGE> 14
Company's performance graph shown in the "Comparative Stock Performance" section
on page 22 of this proxy statement. The consulting firm prepared similar reports
in 1991 and 1993 to aid the Company in determining appropriate executive
compensation levels.
INCENTIVE COMPENSATION
The Company's executive compensation program emphasizes performance, both
by the individual and by the Company. Although each executive receives a salary
competitive within the industry, the amount of each executive's compensation in
any year depends significantly upon awards of incentive compensation. The
Company pays annual and long-term incentive compensation awards from incentive
pools, the size of which depend on whether and the degree to which the Company's
profits meet or exceed target levels established in advance for each fiscal
year. The amount of each executive's incentive compensation award relative to
other executives' awards depends largely on each executive's individual
performance for the year. The Company's incentive compensation plans are as
follows:
Corporate Annual Performance Plan. The CAPP rewards performance by
executives, including each Named Executive Officer, by payment of annual cash
bonuses. At the beginning of each fiscal year, the Company sets target profit
levels for the year. If the Company's performance for the year meets or exceeds
those targets, the Company funds an incentive pool for the CAPP. The size of
that incentive pool is determined by a formula that takes into account the
degree to which the Company met or exceeded its goals, subject to a maximum
profit level imposed under the plan. Once the size of the pool is determined by
formula, the Company evaluates the performance during the year of each executive
eligible for a CAPP award. The Compensation Committee reviews and approves CAPP
bonuses for executive officers of the Company, taking into account the Company's
and individual's performance during the fiscal year.
Long-Term Performance Plan. The LTPP also rewards performance by certain
executives of the Company, including each Named Executive Officer, by payment of
annual cash bonuses. Annual target profit levels for the LTPP are the same as
for the CAPP, but a higher maximum profit level may be considered under the
LTPP. The Company funds the LTPP incentive pool based on the Company's
performance over a four-year period, instead of only one year as under the CAPP.
To fund the LTPP incentive pool, the Company applies a formula that takes into
account the Company's overall success in meeting or exceeding the LTPP target
levels over the four-year performance period. As with the CAPP, once the size of
the LTPP pool is determined by formula, the Company evaluates the performance of
each executive eligible for an LTPP award. The Compensation Committee reviews
and approves LTPP bonuses for executive officers of the Company, taking into
account the Company's and individual's performance during the applicable
performance period.
EQUITY-BASED COMPENSATION
The Company further links executives' interests with stockholders'
interests by emphasizing equity-based compensation. All executives are eligible
for stock option awards each year, and certain key executives, including the
Named Executive Officers, have received awards of restricted stock. In addition,
the Company has implemented stock ownership guidelines for executives. The
Company has added under the 401(k) Plan an investment option that invests
principally in Class A Common Stock. Finally, the Company has added Class A
Common Stock as a deemed investment measure under all of the Company's
nonqualified deferred compensation plans. The Company's equity-based
compensation programs are summarized as follows:
Incentive Compensation Plan. The ICP provides for awards of ISOs, NQSOs,
performance shares, restricted stock and SARs, all based on shares of Class A
Common Stock. (The ICP also permits awards of performance units, which are not
necessarily based on shares of Class A Common Stock. No awards of performance
units have been made.) While the amount of an award under the ICP reflects and
rewards an individual's performance with the Company, the equity-based nature of
most such awards makes their long-term value dependent upon the performance of
the Class A Common Stock. The Compensation Committee administers the ICP and has
discretion as to the recipients, type, amount, terms and conditions of such
awards, subject to the terms of the ICP. Awards may be made to any of the
Company's salaried employees or
11
<PAGE> 15
officers, including the Named Executive Officers and other executive officers,
and reflect each individual's ongoing performance. During 1996, the Compensation
Committee awarded restricted Class A Common Stock to 19 key executives,
including the Named Executive Officers, and NQSOs to purchase Class A Common
Stock to a broader group of approximately 750 officers and salaried employees of
the Company and its subsidiaries. Restrictions on transferability of the
restricted stock lapse after five years; the NQSOs vest over periods from three
to five years, depending on the terms of each award.
Stock Ownership Guidelines. To encourage and further emphasize integrating
executives' interests with those of the Company's stockholders, the Compensation
Committee has approved Class A Common Stock ownership guidelines for the Named
Executive Officers and certain other executives of the Company. The Chief
Executive Officer is required to meet minimum ownership levels of Class A Common
Stock with an estimated market value at least equal to three times the Chief
Executive Officer's annual base salary. The President and Vice Chairman are
required to meet value guidelines equal to two times annual base salary. The
other Named Executive Officers are required to meet value guidelines equal to
annual base salary. In addition to Class A Common Stock purchased directly by
executives in the open market or obtained through exercises of ISOs, NQSOs or
SARs or by awards of restricted stock under the ICP, executives may satisfy the
value guidelines through investments in Class A Common Stock under the 401(k)
Plan and deemed investments in Class A Common Stock under the Company's
nonqualified deferred compensation plans.
Equity Deferral Plan. Before the IPO, the Company traditionally sought to
link executives' compensation with the Company's long-term performance through
awards of PSARs under the PSAR Plan. In preparation for the IPO, the Company
terminated the PSAR Plan effective December 31, 1995, and cashed out all
employees' interests. To preserve and emphasize the connection between certain
key executives' compensation and the Company's long-term performance, the
Company required the Named Executive Officers and 15 other executives to defer
under the EDP for a minimum of five years (assuming continued employment)
certain amounts otherwise payable to them upon termination of the PSAR Plan.
Deferred amounts are deemed invested in Class A Common Stock although no actual
investment is made, and the value of each executive's interest in the EDP is
adjusted to reflect the performance of Class A Common Stock over the deferral
period. In general, the deferred amounts, as adjusted, will be distributed in
cash on the fifth anniversary of the IPO or upon termination of employment, if
earlier.
Elective Deferred Compensation Programs. Executives, including the Named
Executive Officers, may elect to defer payment of current cash compensation
(i.e., base salary, CAPP awards and LTPP awards, as applicable) through
nonqualified deferred compensation plans sponsored by the Company. Deferred
amounts are deemed invested as the executives elect among available investment
measures, but no actual investments are made. Among the available investment
measures is a deemed investment in Class A Common Stock, with the value of the
deferred amount adjusted to reflect the performance of Class A Common Stock.
Executives, as well as all employees of the Company, may also elect to defer
compensation under the 401(k) Plan, under which the Company has added as an
investment option the Associates Stock Fund, which invests principally in Class
A Common Stock.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Company recommended, subject to approval by Ford, a salary for Mr.
Hughes for 1996 that took into account (a) the consulting firm's most recent
report of competitive compensation levels for chief executive officers of
comparable companies, (b) Mr. Hughes' substantial experience and his performance
in prior positions with the Company, (c) the then-impending IPO, and (d) the
extent to which the Company emphasizes performance-oriented compensation through
incentive and equity-based plans. The Company believes that Mr. Hughes' 1996
base salary was moderately below the median of competitive data and was
appropriately established, considering the CAPP, the LTPP and the ICP, to
support a competitive, performance-based total compensation package.
After considering the Company's growth and profit performance for 1996 and
for the four-year performance period of the LTPP, the Compensation Committee
considered and approved Mr. Hughes' 1996 CAPP and LTPP awards and awards made in
1996 to Mr. Hughes of NQSOs and restricted stock. The
12
<PAGE> 16
Compensation Committee also considered Mr. Hughes' individual performance in
providing strategic direction for the Company and in successfully completing the
IPO in 1996. The Compensation Committee believes that Mr. Hughes' 1996 total
annual compensation is competitive and appropriate, based on discussion
regarding compensation of peer executives and the philosophy underlying the
Company's executive compensation program.
The value of Mr. Hughes' restricted stock and NQSO awards made under the
ICP depends on the long-term performance of Class A Common Stock. See
"-- Equity-Based Compensation -- Incentive Compensation Plan" on page 11 of this
proxy statement. The value of CAPP and LTPP awards may also depend on the
long-term performance of Class A Common Stock to the extent that Mr. Hughes
defers any or all of the awards and elects a deemed investment of the deferred
amount in Class A Common Stock. See "-- Equity-Based Compensation -- Elective
Deferred Compensation Programs" on page 12 of this proxy statement.
TAX DEDUCTIBILITY
The Code limits the extent to which compensation paid to Named Executive
Officers of publicly traded companies may be deducted by the companies. Certain
types of compensation may be exempted from the deduction limit if they qualify
as "performance-based compensation" as defined in the Code and the underlying
regulations. The Company believes that the ICP meets all of the current tests
required for compensation attributable to NQSOs awarded under the ICP to be
deductible to the Company for federal income tax purposes. The Company is
proposing expanding the ICP to include CAPP awards and making certain
adjustments to the CAPP award process to allow CAPP awards to qualify as
"performance-based compensation." See Item 2 on page 22 of this proxy statement.
The Company has reserved the right with respect to other executive compensation
to use good independent judgment, on a case by case basis, to attract and retain
qualified executives to manage the Company and to reward its employees for
service while taking into consideration the financial effects such action may
have on the Company.
Compensation Committee
H. JAMES TOFFEY, JR. (Chairman)
J. CARTER BACOT
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In March 1997, the Company purchased approximately $800 million in credit
card receivables from The Bank of New York. J. Carter Bacot, a director and
member of the Compensation Committee, is Chairman and Chief Executive Officer of
The Bank of New York. Mr. Bacot will not receive any individual remuneration or
other benefit from the Company as a result of this transaction. The Bank of New
York and the Company are not otherwise affiliated.
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<PAGE> 17
EXECUTIVE OFFICERS AND COMPENSATION
EXECUTIVE OFFICERS
The following table shows certain information concerning the executive
officers of the Company as of February 1, 1997:
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME AGE AND FIVE-YEAR EMPLOYMENT HISTORY
---- --- ------------------------------------------
<S> <C> <C>
Keith W. Hughes........... 50 Chairman of the Board and Chief Executive Officer since
February 1995 and a Director since August 1991; President
from August 1991 until February 1995
Harold D. Marshall........ 61 President and Chief Operating Officer since May 1996 and a
Director since November 1988; Vice Chairman of the Board
from November 1988 until May 1996
Joseph M. McQuillan(1).... 65 Vice Chairman of the Board and a Director since August 1991
Walter B. Copeland........ 43 President of Associates Information Services, Inc. since
November 1994; Executive Vice President and Controller of
Associates Financial Services Company, Inc. from August
1989 until November 1994
Roy A. Guthrie............ 43 Chief Financial Officer since March 1996; Executive Vice
President since June 1995; a Director from June 1995 until
July 1996; Senior Vice President, Comptroller and Chief
Accounting Officer from December 1991 until June 1995
Wilfred Y. Horie.......... 51 Executive Vice President -- International Operations since
May 1996; Representative Director and President of AIC
Corporation from April 1980 until July 1996
Chester D. Longenecker.... 50 Executive Vice President and General Counsel since June 1986
Lawrence J. Pelka......... 54 Executive Vice President -- Commercial Operations since May
1996; Executive Vice President of Associates Commercial
Corporation since October 1981
Joseph N. Scarpinato...... 52 Executive Vice President -- Credit Card Operations since May
1996; President of Associates Credit Card Services, Inc.
since October 1991
Thomas W. Sisson.......... 47 Executive Vice President -- Strategic Planning since January
1997; Regional President of Citibank -- Illinois from 1995
until 1996; Regional Business Manager of
Citibank -- Illinois for Greece, Italy and Hungary in
1974; Citibank -- Illinois Country Business Manager for
Greece from 1989 until 1994
Thomas R. Slone........... 54 Executive Vice President -- Consumer Branch Operations since
May 1996; Executive Vice President -- Continental Branch
Operations of Associates Financial Services Company, Inc.
since 1986
Fredrick H. Stern......... 44 Senior Vice President since February 1995; Senior Vice
President of Associates Corporation of North America (A
Texas Corporation) since February 1987
James B. Watts............ 61 Executive Vice President since May 1990
</TABLE>
- ---------------
(1) Mr. McQuillan retired March 31, 1997.
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<PAGE> 18
SUMMARY COMPENSATION TABLE
The following table shows the compensation for the Company's last three
fiscal years received by the Company's Chairman and Chief Executive Officer and
by the four other most highly compensated executive officers who were serving as
executive officers as of December 31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------------------- -----------------------------------------
AWARDS PAYOUTS
----------------------- --------------
RESTRICTED SECURITIES LONG-TERM
NAME AND BASE OTHER ANNUAL STOCK UNDERLYING INCENTIVE PLAN ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARDS OPTIONS PAYOUTS COMPENSATION
------------------ ---- ------- ------- ------------ ---------- ---------- -------------- ------------
($) ($) ($)(2) ($)(3) ($)(4) ($)(7) ($)(13)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Keith W. Hughes(1)..... 1996 485,000 750,000 125,316 1,500,170 249,900(5) 3,154,022(8) 503,137(14)
Chairman and Chief 1995 431,667 700,000 17,176 0 0 1,088,050(8) 30,675(14)
Executive Officer
Harold D. Marshall..... 1996 406,917 420,000 27,739 500,250 86,180(5) 1,222,377(9) 202,327(15)
President 1995 342,750 350,000 13,919 0 0 458,000(9) 101,364(15)
1994 325,900 330,000 15,138 0 10,000(6) 1,114,828(9) 24,648(15)
Joseph M. McQuillan.... 1996 342,500 410,000 30,922 500,250 86,180(5) 3,223,026(10) 239,861(16)
Vice Chairman 1995 315,250 410,000 16,820 0 0 438,000(10) 73,425(16)
1994 296,625 385,000 14,665 0 10,000(6) 365,000(10) 64,509(16)
Lawrence J. Pelka...... 1996 265,158 185,000 17,372 177,770 31,900(5) 474,001(11) 96,002(17)
Executive Vice 1995 230,450 135,000 5,140 0 0 175,000(11) 25,321(17)
President 1994 212,850 122,000 5,875 0 0 621,127(11) 17,479(17)
Thomas R. Slone........ 1996 258,333 195,000 16,302 177,770 31,900(5) 589,260(12) 108,457(18)
Executive Vice 1995 205,083 195,000 8,117 0 0 195,000(12) 88,636(18)
President 1994 182,750 180,000 7,497 0 0 443,809(12) 12,618(18)
</TABLE>
- ---------------
(1) Mr. Hughes was elected Chairman and Chief Executive Officer on February 1,
1995. The compensation information provided for 1995 includes the period
before Mr. Hughes was elected Chairman and Chief Executive Officer.
(2) Compensation reported in the "Other Annual Compensation" column is the
Company's payment to cover each Named Executive Officer's taxes with
respect to the value of benefits and perquisites includable in the Named
Executive Officer's taxable income for the year reported (commonly known as
a "tax gross-up"). In addition, compensation reported for Mr. Hughes in
1996 includes $72,501.32, which represents the value of perquisites and
other personal benefits provided by the Company to Mr. Hughes. This amount
includes $39,715.31 for club membership dues and expenses. The value of any
other single perquisite or personal benefit the Company provided to Mr.
Hughes in 1996 did not exceed 25 percent of the aggregate value of all such
perquisites and personal benefits. The Company provides similar perquisites
and personal benefits to the other Named Executive Officers. The aggregate
value of such perquisites and personal benefits provided to each of the
other Named Executive Officers in any year reported, and to Mr. Hughes in
1995, did not exceed the lesser of $50,000 or 10 percent of such Named
Executive Officer's salary and bonus reported for such year.
(3) The compensation reported in the "Restricted Stock Awards" column is the
value on the date of issuance of shares of restricted Class A Common Stock
awarded under the ICP. The value at December 31, 1996, for each such
Restricted Stock Award was as follows: Mr. Hughes, $2,282,586; Mr.
Marshall, $761,156; Mr. McQuillan, $761,156; Mr. Pelka, $270,486; and Mr.
Slone, $270,486. Subject to the terms of the ICP, dividends will be paid on
such shares of restricted stock although risk of forfeiture exists and
restrictions on transferability of such restricted stock have not yet
lapsed.
(4) Until 1996, the Company awarded PSARs under the PSAR Plan. PSARs have been
classified as long-term incentive plan compensation throughout this
Executive Compensation section, rather than as stock appreciation rights,
because the value of the PSARs is determined by a profit-based formula
rather than appreciation in the Company's stock price.
(5) NQSOs to purchase Class A Common Stock awarded under the ICP.
(6) Incentive stock options to purchase Ford Common Stock awarded under Ford's
1990 Long-Term Incentive Plan.
(7) Compensation reported in the "Long-Term Incentive Plan Payouts" column is
the amount awarded to each Named Executive Officer under the LTPP for the
performance period ending in the year reported and, if specifically noted,
the amount paid under the PSAR Plan with respect to PSARs exercised by the
Named Executive Officer during the year reported or, for 1996 only,
payments made following termination of the PSAR Plan effective December 31,
1995.
(8) For Mr. Hughes, the LTPP award was $900,000 in 1996, and $700,000 in 1995.
He received $3,108,722 (of which approximately $854,700 was deferred under
the EDP and is adjusted to reflect the performance of 29,990.545 shares of
the Class A Common Stock over the deferral period and is not included in
the amount reported) in 1996 upon termination of his interest in the PSAR
Plan, and $388,050 in 1995 for PSARs exercised in 1995.
(9) For Mr. Marshall, the LTPP award was $600,000 in 1996, $458,000 in 1995,
and $370,000 in 1994. He received $939,837 (of which approximately $317,460
was deferred under the EDP and is adjusted to reflect the performance of
11,139.346 shares of the Class A Common Stock over the deferral period and
is not included in the amount reported) in 1996 upon termination of his
interest in the PSAR Plan, and $744,828 in 1994 for PSARs exercised in
1994.
(10) For Mr. McQuillan, the LTPP award was $438,000 in 1996, $438,000 in 1995
and $365,000 in 1994. He received $3,108,469 (of which approximately
$323,443 was deferred under the EDP and is adjusted to reflect the
performance of 11,349.279 shares of the Class A Common Stock over the
deferral period and is not included in the amount reported) in 1996 upon
termination of his interest in the PSAR Plan.
(11) For Mr. Pelka, the LTPP award was $188,000 in 1996, $175,000 in 1995 and
$145,000 in 1994. He received $430,079 (of which approximately $144,078 was
deferred under the EDP and is adjusted to reflect the performance of
5,055.549 shares of the Class A Common Stock over the deferral period and
is not included in the amount reported) in 1996 upon termination of his
interest in the PSAR Plan, and $476,127 in 1994 for PSARs exercised in
1994.
(12) For Mr. Slone, the LTPP award was $242,000 in 1996, $195,000 in 1995 and
$135,000 in 1994. He received $530,410 (of which approximately $183,150 was
deferred under the EDP and is adjusted to reflect the performance of
6,426.545 shares of the Class A
15
<PAGE> 19
Common Stock over the deferral period and is not included in the amount
reported) in 1996 upon termination of his interest in the PSAR Plan, and
$308,809 in 1994 for PSARs exercised in 1994.
(13) Compensation reported in the "All Other Compensation" column includes (i)
matching and profit-sharing contributions and values of certain credits
made by the Company on behalf of each Named Executive Officer pursuant to
the Company's tax-qualified and non-qualified supplemental defined
contribution plans ("DCP Contributions"), (ii) above-market earnings
accrued by the Company for the reported year with respect to each Named
Executive Officer's elective deferrals of salary, bonus, PSAR payouts,
and/or LTPP payouts ("Above-Market Earnings on Deferred Compensation") and
(iii) amounts includable in compensation for premiums paid by the Company
for additional term life insurance ("Term Insurance Compensation").
Earnings are considered to be above-market to the extent they exceed 120%
of the applicable federal rate (as defined in the Code).
(14) For Mr. Hughes, DCP Contributions were (i) $30,312 for 1996 and (ii)
$26,979 for 1995. Above-Market Earnings on Deferred Compensation were (i)
$467,353 for 1996 and (ii) $898 for 1995. Term Insurance Compensation was
(i) $5,472 for 1996 and (ii) $2,798 for 1995.
(15) For Mr. Marshall, DCP Contributions were (i) $25,432 for 1996, (ii) $20,940
for 1995, and (iii) $19,554 for 1994. Above-Market Earnings on Deferred
Compensation were (i) $166,505 for 1996, (ii) $74,781 for 1995, and (iii)
$0 for 1994. Term Insurance Compensation was (i) $10,390 for 1996, (ii)
$5,643 for 1995, and (iii) $5,094 for 1994.
(16) For Mr. McQuillan, DCP Contributions were (i) $21,406 for 1996, (ii)
$19,290 for 1995, and (iii) $17,798 for 1994. Above-Market Earnings on
Deferred Compensation were (i) $200,563 in 1996, (ii) $44,939 for 1995, and
(iii) $38,638 for 1994. Term Insurance Compensation was (i) $17,892 for
1996, (ii) $9,196 for 1995, and (iii) $8,073 for 1994.
(17) For Mr. Pelka, DCP Contributions were (i) $11,788 for 1996, (ii) $14,410
for 1995, and (iii) $12,771 for 1994. Above-Market Earnings on Deferred
Compensation were (i) $82,112 for 1996, (ii) $9,137 for 1995, and (iii)
$3,141 for 1994. Term Insurance Compensation was (i) $2,102 for 1996, (ii)
$1,774 for 1995, and (iii) $1,567 for 1994.
(18) For Mr. Slone, DCP Contributions were (i) $16,146 for 1996, (ii) $12,818
for 1995, and (iii) $10,965 for 1994. Above-Market Earnings on Deferred
Compensation were (i) $89,892 for 1996, (ii) $73,773 for 1995, and (iii) $0
for 1994. Term Insurance Compensation was (i) $2,419 for 1996, (ii) $2,045
for 1995, and (iii) $1,653 for 1994.
STOCK OPTION AWARDS DURING 1996
Stock options and other rights related to Class A Common Stock may be
awarded to executives under the ICP. Stock options and other rights related to
Ford Common Stock may be awarded under Ford's 1990 Long-Term Incentive Plan. The
following table shows the stock options awarded under the ICP to the Named
Executive Officers in 1996. No stock options were awarded to the Named Executive
Officers under Ford's 1990 Long-Term Incentive Plan in 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------
% OF TOTAL
NUMBER OF OPTIONS POTENTIAL REALIZABLE VALUE AT
SECURITIES GRANTED TO ASSUMED ANNUAL RATES OF STOCK
UNDERLYING EMPLOYEES EXERCISE PRICE APPRECIATION FOR OPTION TERM
OPTIONS IN FISCAL BASE EXPIRATION ------------------------------------
NAME GRANTED(1) YEAR PRICE DATE 0% 5% 10%
---- ---------- ------------ -------- ----------- ----- ------------ -------------
(#) ($/SH)
<S> <C> <C> <C> <C> <C> <C> <C>
Keith W. Hughes 249,900 10.3% $ 29.00 May 7, 2006 $ 0 $4,557,622 $11,550,011
Chairman and Chief
Executive Officer
Harold D. Marshall 86,180 3.5% 29.00 May 7, 2006 0 1,571,746 3,983,113
President
Joseph M. McQuillan 86,180 3.5% 29.00 May 7, 2006 0 1,571,746 3,983,113
Vice Chairman
Lawrence J. Pelka 31,900 1.3% 29.00 May 7, 2006 0 581,790 1,474,371
Executive Vice
President
Thomas R. Slone 31,900 1.3% 29.00 May 7, 2006 0 581,790 1,474,371
Executive Vice
President
</TABLE>
- ---------------
(1) Includes (a) annual stock options, one-third of which vests on each of the
first, second and third anniversary of the date of grant, awarded as
follows: Mr. Hughes -- 94,790; Mr. Marshall -- 34,470; Mr.
McQuillan -- 34,470; Mr. Pelka -- 15,520; and Mr. Slone -- 15,520; and (b)
other stock options awarded in connection with the IPO, which vest on the
fifth anniversary of the date of grant, as follows: Mr. Hughes -- 155,110;
Mr. Marshall -- 51,710; Mr. McQuillan -- 51,710; Mr. Pelka -- 16,380; and
Mr. Slone -- 16,380. None of such options under the ICP has vested as of the
date of this proxy statement.
16
<PAGE> 20
The following table and notes have additional information on stock options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS AT
AT 12/31/96 12/31/96
(#) ($)
SHARES ------------------- ------------------
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
---- ----------- -------- ------------------- ------------------
<S> <C> <C> <C> <C>
Keith W. Hughes
Chairman and Chief Executive Officer
Class A Common Stock(1)............... 0 $0 0/249,900 $ 0/$3,779,738
Ford Common Stock(2).................. 0 0 7,500/ 7,500 27,188/ 27,188
Harold D. Marshall
President
Class A Common Stock(1)............... 0 0 0/ 86,180 0/ 1,303,473
Ford Common Stock(2).................. 0 0 5,000/ 5,000 18,125/ 18,125
Joseph M. McQuillan
Vice Chairman
Class A Common Stock(1)............... 0 0 0/ 86,180 0/ 1,303,473
Ford Common Stock(2).................. 0 0 5,000/ 5,000 18,125/ 18,125
Lawrence J. Pelka
Executive Vice President
Class A Common Stock(1)............... 0 0 0/ 31,900 0/ 482,488
Ford Common Stock(2).................. 0 0 0/ 0 0/ 0
Thomas R. Slone
Executive Vice President
Class A Common Stock(1)............... 0 0 0/ 31,900 0/ 482,488
Ford Common Stock(2).................. 0 0 0/ 0 0/ 0
</TABLE>
- ---------------
(1) The options reported in this line item are NQSOs to purchase shares of Class
A Common Stock awarded under the ICP. The exercise price of the options is
$29.00 per share, and the closing trading price on the NYSE of Class A
Common Stock at December 31, 1996, was $44.125.
(2) The options reported in this line item are incentive stock options and
nonqualified stock options to purchase shares of Ford Common Stock awarded
under Ford's 1990 Long-Term Incentive Plan. The exercise price of the
options is $28.625 per share, and the closing trading price on the NYSE of
Ford Common Stock at December 31, 1996, was $32.25.
17
<PAGE> 21
DEFINED BENEFIT RETIREMENT PLANS
The Company sponsors three defined benefit retirement plans pursuant to
which retirement income is payable to covered employees, including the Named
Executive Officers: the Pension Plan, the EBP and the SRIP. The Pension Plan is
a tax-qualified defined benefit plan covering all eligible employees of the
Company. The EBP covers certain executives whose retirement income from the
Pension Plan and the 401(k) Plan is affected by (i) elections to defer
compensation and (ii) limitations imposed on tax-qualified retirement plans by
certain Code sections. The EBP restores benefits that, if it were not for such
limitations, would otherwise be available under the Pension Plan and the 401(k)
Plan. Of the Named Executive Officers, based on assumed retirement at normal
retirement age, only Mr. Slone will receive a pension benefit under the EBP.
The following table illustrates the yearly pension commencing at "normal
retirement age" for Mr. Slone pursuant to the Pension Plan and the EBP.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE(2)(3)
------------------------------
REMUNERATION ($)(1) 30 35 40
- ------------------- -------- -------- --------
<S> <C> <C> <C> <C>
$250,000................................................. $125,500 $137,500 $150,000
275,000................................................. 137,500 151,250 165,000
300,000................................................. 150,000 165,000 180,000
325,000................................................. 162,500 178,750 195,000
350,000................................................. 175,000 192,500 210,000
375,000................................................. 187,500 206,250 225,000
400,000................................................. 200,000 220,000 240,000
425,000................................................. 212,500 233,750 255,000
450,000................................................. 225,000 247,500 270,000
475,000................................................. 237,500 261,250 285,500
500,000................................................. 250,000 275,000 300,000
525,000................................................. 262,500 288,750 315,000
550,000................................................. 275,000 302,500 330,000
</TABLE>
- ---------------
(1) Remuneration is the sum of a participant's base salary plus any bonus under
the CAPP paid or payable for a fiscal year, including amounts that the
recipient elects to defer.
(2) The estimated credited service at December 31, 1996, for Mr. Slone is 30
years.
(3) The estimated annual benefits illustrated in the table are subject to offset
by the Named Executive Officer's Social Security benefits. The normal form
of payment is a life annuity for a single participant and an actuarially
equivalent 50% joint and survivor annuity for a married participant. The
estimated annual benefits illustrated in the Pension Plan Table are in the
form of a life annuity.
The SRIP covers only certain designated executives of the Company and is
designed to provide a target retirement income for participants. Retirement
benefits are payable under the SRIP to the extent benefits under the Pension
Plan do not achieve the target level of retirement income. Messrs. Hughes,
Marshall, McQuillan and Pelka are participants in the SRIP and, based on assumed
retirement on or after age 62, will receive a benefit under the SRIP.
The SRIP provides each participant with an annuity, commencing upon
retirement on or after age 62, equal to 50% of the participant's "average
monthly compensation," offset by the monthly equivalent of any benefits payable
to the participant under the Pension Plan and Social Security. For purposes of
the SRIP, "average monthly compensation" means, generally, the average monthly
compensation for a participant's highest five consecutive years of the 10 years
immediately preceding retirement, with compensation determined for these
purposes as total remuneration set aside for the participant for a calendar year
(including base salaries and annual bonuses, but excluding LTPP and PSAR
payments and employer contributions to tax-qualified retirement plans).
18
<PAGE> 22
The table below shows the estimated projected annual pension payable for
the Named Executive Officers (other than Mr. Slone) under the Pension Plan and
the SRIP commencing at age 62:
<TABLE>
<CAPTION>
PROJECTED ANNUAL
RETIREMENT BENEFITS
NAME AND PRINCIPAL POSITION AT AGE 62 ($)(1)(2)
--------------------------- ---------------------
<S> <C>
Keith W. Hughes......................... $617,500
Chairman and Chief Executive Officer
Harold D. Marshall...................... 413,458
President
Joseph M. McQuillan..................... 326,528
Vice Chairman
Lawrence J. Pelka....................... 225,079
Executive Vice President
</TABLE>
- ---------------
(1) Projected annual retirement benefits reflect the total amount payable to the
Named Executive Officer commencing at normal retirement age pursuant to the
SRIP and the Pension Plan (on a combined basis), and are subject to offset
by the Named Executive Officer's Social Security benefits.
(2) Annual retirement benefits are based on "average monthly compensation" for
each Named Executive Officer at age 62. The normal form of benefit is a
single life annuity for the life of the Named Executive Officer.
EMPLOYMENT, SEVERANCE AND CHANGE-IN-CONTROL ARRANGEMENTS
The Company has entered into individual employment agreements with 20 key
executives, including each Named Executive Officer. All Named Executive
Officers' employment agreements are substantially identical, other than for
commencement dates. The employment agreements covering key executives who are
not Named Executive Officers are generally identical to the employment
agreements for Named Executive Officers, again other than for commencement
dates. The Named Executive Officers' employment agreements are described below.
Each employment agreement has an initial three-year term, commencing on
November 16, 1995, for Messrs. Hughes, Marshall and McQuillan and on September
13, 1995, for Messrs. Pelka and Slone. Each agreement renews automatically for
one-year periods after the initial term unless terminated by either party at
least 60 days before the end of the initial term or renewal period, as
applicable.
Each employment agreement provides for certain compensation and benefits
during the term of the agreement, including any renewal periods. The agreements
guarantee minimum annual base salaries for Messrs. Hughes, Marshall, McQuillan,
Pelka and Slone of at least $500,000, $381,000, $350,000, $258,000 and $250,000,
respectively.
The Company may terminate any Named Executive Officer at any time with 15
days' prior written notice, with or without "cause." Each employment agreement
defines "cause" as, generally, the Named Executive Officer's willful
malfeasance, unreasonable neglect or refusal to perform his duties, conviction
of a felony, engaging in activity competitive with the Company or adverse to the
Company's best interests, or violation of Company policy regarding corporate
conduct, in all cases as determined by the Board of Directors. If the Company
terminates a Named Executive Officer with "cause," the Company's obligations
under that Named Executive Officer's employment agreement cease.
If the Company terminates a Named Executive Officer without "cause" or if a
"constructive termination" (without "cause") occurs within 12 months of a
"change in control," the Named Executive Officer will receive the following in
lieu of any other compensation or benefits under his employment agreement:
(a) A cash payment equal to the sum of (i) the Named Executive Officer's
base salary then in effect multiplied by three for Messrs. Hughes, Marshall
and McQuillan and two for Messrs. Pelka and Slone, plus (ii) the average of
the bonuses paid to the Named Executive Officer under the CAPP during each
of the three years immediately preceding the year of termination multiplied
by three for Messrs. Hughes, Marshall and McQuillan and two for Messrs.
Pelka and Slone, plus (iii) a pro rata portion, based on the portion of the
current performance year preceding termination, equal to the average of the
Named
19
<PAGE> 23
Executive Officer's bonuses under the CAPP and LTPP during each of the
three years preceding the year of termination.
(b) Immediate 100% vesting or lapse of restrictions, as applicable, with
respect to any outstanding awards to the Named Executive Officer under the
ICP.
(c) Coverage under the Company's life, medical, dental and disability
plans for three years for Messrs. Hughes, Marshall and McQuillan and two
years for Messrs. Pelka and Slone. Coverage will terminate earlier,
however, if the Named Executive Officer becomes covered by similar coverage
provided by a successor employer.
If either termination without "cause" or "constructive termination" occurs
within 12 months of a "change in control," the Named Executive Officer also will
become 100% vested in his accrued benefits under the EBP or the SRIP, as
applicable, and will be entitled to receive immediate distribution of his EDP
account balance. If a "change in control" for purposes of the employment
agreements occurs and such "change in control" constitutes a change in control
within the meaning of Code Section 280G, the total compensation payable as
determined above to any Named Executive Officer as a result of the "change in
control" may not exceed 2.99 times the average of the Named Executive Officer's
"annualized includible compensation for the base period" (as defined in Code
Section 280G(d)(1)).
Each employment agreement defines "constructive termination" as, generally,
any of the following that results from a "change in control" (unless the Named
Executive Officer consents in writing):
(a) Assignment to the Named Executive Officer of any duties inconsistent
in any respect with the Executive's position, authority, duties or
responsibilities or any other action which results in a substantial
diminution in such position, authority, duties or responsibilities.
(b) Failure (i) to allow the Named Executive Officer to continue to
participate, on substantially the same terms as before the "change in
control," in the same benefit or compensation plans as the Named Executive
Officer participated in before the "change in control" or (ii) to provide
the Named Executive Officer with the fringe benefits generally provided to
employees at the Named Executive Officer's level within the Company.
(c) Substantial reduction, without good business reasons and the Named
Executive Officer's express written consent, of the facilities and
perquisites available to the Named Executive Officer immediately before
such reduction.
Each employment agreement defines "change in control" as, generally, any of
the following:
(a) Any merger, consolidation or similar combination with or involving
the Company, as of the date of the conclusion of such event, other than a
merger, consolidation or similar combination of the Company with Ford or
any of its affiliates.
(b) Any transaction or series of transactions that results in the sale
or divestiture of all or substantially all of the Company's assets, as of
the conclusion of such transaction or series of transactions.
(c) Any capital reorganization, transaction or series of transactions
that results in Ford and its affiliates owning common stock of the Company
having less than 50% of the combined voting power of outstanding capital
stock of the Company, as of the date of the conclusion of such
reorganization, transaction or series of transactions.
(d) The successful completion of a public offering, or distribution to
the public by dividend or spinoff, that results in Ford and its affiliates
owning common stock of the Company having less than 50% of the combined
voting power of the outstanding capital stock of the Company.
If a Named Executive Officer becomes permanently disabled (as determined
under the Company's long-term disability plan) during the term of his agreement,
including any renewal periods, the Named Executive Officer will receive monthly
for six months after the determination of disability both his then-current
monthly base salary and an amount equal to one-twelfth of the average of the
Named Executive Officer's
20
<PAGE> 24
CAPP bonuses during the three years immediately preceding the year of
disability, reduced by any amounts received through any disability or other
salary continuation plan generally provided by the Company.
If a Named Executive Officer dies during the term of his agreement,
including any renewal periods, his estate or designated beneficiaries will
receive a cash payment equal to the Named Executive Officer's then-current
annual base salary plus the average of the Named Executive Officer's CAPP
bonuses during the three years immediately preceding the year of death.
Each Named Executive Officer agrees under his employment agreement to
execute the Company's standard confidentiality, conflicts of interest and
proprietary property agreements. Each Named Executive Officer also agrees under
his employment agreement not to solicit, for 12 months following the Named
Executive Officer's termination of employment, any of the Company's employees to
leave employment with the Company. Finally, each Named Executive Officer agrees
under his employment agreement, during the term of the agreement (including any
renewal periods) and for two years afterward, not to compete with the Company,
either directly or indirectly. Each employment agreement provides that a Named
Executive Officer's right to any benefits under the agreement will cease if the
Board of Directors determines that the Named Executive Officer has either
violated the agreement's non-competition clause or engaged in activity adverse
to the best interests of the Company or any affiliate.
21
<PAGE> 25
COMPARATIVE STOCK PERFORMANCE
SEC rules require proxy statements to contain a performance graph that
compares the performance of the Class A Common Stock against Standard & Poor's
500 Stock Index and a published industry or line of business index or group of
"peer issuers," covering a five-year period. The Company selected the S&P
Financials Index as the appropriate line of business index for purposes of this
comparison. Because the Class A Common Stock did not begin trading on the NYSE
until May 8, 1996, the graph compares performance from that date forward through
December 31, 1996. The graph assumes an investment of $100 at the beginning of
the period at the IPO price of $29 per share of Class A Common Stock and
quarterly reinvestment of dividends:
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
THE COMPANY, S&P 500 AND S&P FINANCIALS
(PERFORMANCE RESULTS THROUGH DECEMBER 31, 1996)
<TABLE>
<CAPTION>
MEASUREMENT PERIOD S&P
(FISCAL YEAR COVERED) AFS S&P 500 FINANCIALS
<S> <C> <C> <C>
MAY 8 100 100 100
MAY 31 128 104 104
JUN 28 132 104 105
JUL 31 132 100 103
AUG 30 137 102 107
SEP 30 142 108 114
OCT 31 149 111 122
NOV 29 168 119 134
DEC 31 153 117 129
</TABLE>
ITEM 2.
APPROVAL OF THE COMPANY'S INCENTIVE COMPENSATION PLAN
At the Annual Meeting, stockholders will be asked to approve the ICP, as
amended and restated and approved by the Board of Directors effective January 1,
1997. The Company originally established the ICP effective April 1, 1996,
subject to stockholder approval, and Ford FSG, as the sole stockholder of the
Company at that time, approved the ICP by written consent. The Compensation
Committee has made 1996 and 1997 awards of NQSOs and restricted stock under the
ICP, and the Company believes that, under the transition rule provided in
Treasury Regulation 1.162-27(f)(4)(iii), the NQSO awards qualify as
performance-based compensation under Code Section 162(m). The Company further
believes, however, that stockholder approval of the material terms of the ICP is
required for awards made on or after the date of the Annual Meeting to qualify
as performance-based compensation under Code Section 162(m). If the Company's
stockholders do not approve the material terms of the ICP, no awards of annual
performance pay, ISOs, NQSOs or SARs will be made to any of the Named Executive
Officers or to
22
<PAGE> 26
any person whom the Compensation Committee considers likely to become a Named
Executive Officer on or after the date of the Annual Meeting. The material terms
of the ICP will be considered approved by the Company's stockholders for
purposes of Code Section 162(m) if, in a separate vote, a majority of the votes
cast on the issue are cast in favor of approval.
The purpose of the ICP is to optimize the profitability and growth of the
Company through incentives that are consistent with the Company's goals and that
link the individual interests of participants in the ICP with those of the
Company's stockholders; to provide participants with an incentive for excellence
in individual performance; to provide flexibility to the Company in its ability
to motivate, attract and retain employees who make significant contributions to
the Company's success; and to allow employees to share in the Company's success.
The ICP permits awards of annual performance pay, ISOs, NQSOs, performance
shares, performance units, restricted stock and SARs.
MATERIAL TERMS OF THE ICP
The material terms of the ICP are summarized below. The full text of the
ICP, which you are urged to read carefully, is set forth as Exhibit A to this
proxy statement.
GENERAL
Duration. The ICP will remain in effect until all awards made under the ICP
have been satisfied by the issuance of Shares and/or the payment of cash, unless
earlier terminated by the Board of Directors. No awards may be made under the
ICP on or after March 31, 2006.
Administration. The Compensation Committee administers the ICP and makes
awards pursuant to its terms.
Maximum Awards. The maximum number of Shares with respect to which awards
may be made under the ICP is 20,799,268. The maximum aggregate number of Shares
with respect to which awards of ISOs, NQSOs or SARs may be made to any one
individual under the ICP in any one calendar year is 400,000. Both numbers may
be adjusted to reflect any change in capitalization of the Company, certain
corporate transactions, reorganizations or partial or complete liquidation of
the Company. Shares issued under the ICP may be either authorized but unissued
Shares, treasury Shares or any combination of the two. The maximum annual
performance pay that may be awarded to any one individual under the ICP in any
one calendar year is $5,000,000.
Participation. Officers and salaried employees of the Company with
potential to contribute to the success of the Company or its subsidiaries are
eligible to receive awards under the ICP. The Compensation Committee determines
which individuals actually receive awards in any year.
Awards. The Compensation Committee determines the amount, type, terms and
conditions of each award, the details of which are generally reflected in an
award agreement between the Company and each participant. The Compensation
Committee may adjust outstanding awards in recognition of unusual or
nonrecurring events affecting the Company or its financial statements and/or
changes in applicable laws, regulations or accounting principles, unless an
adjustment would cause an award designed to qualify as performance-based
compensation for purposes of Code Section 162(m) to fail to so qualify, in which
case no adjustment may be made.
Deferrals. The Compensation Committee may permit or require any participant
in the ICP to defer receipt of a cash payment or delivery of Shares otherwise
due the participant.
Withholding. The Company may withhold from any payment of an award, or
require a participant to remit, an amount necessary to satisfy applicable tax
withholding requirements. The Company may permit a participant to elect to
satisfy any withholding obligations with respect to any award by surrendering
Shares obtained by the participant through that award or by tendering previously
acquired Shares (owned by the participant at least six months before tender).
23
<PAGE> 27
Termination of Employment. The Compensation Committee determines if, and
the extent to which, rights to awards will terminate if a participant leaves the
Company's employ. How termination of employment affects awards may vary from
award to award and may reflect the reasons for termination of employment.
Nontransferability. Generally, rights to awards under the ICP are available
only to participants and may not be sold, assigned or otherwise transferred
(other than by will or operation of law).
Termination of ICP. Although the Compensation Committee administers the
ICP, the Board of Directors retains the right to amend or terminate the ICP at
any time for any reason or no reason.
ANNUAL PERFORMANCE PAY
Incentive Pools. Annual performance pay is awarded each year from one of
two incentive pools, one of which funds annual performance pay for the Named
Executive Officers only and the other of which funds annual performance pay for
other executives. The value of the incentive pool for the Named Executive
Officers is determined each year by multiplying a fixed base amount (set by the
Compensation Committee each year at the same time that it establishes
performance targets) by a performance percentage that depends on the achievement
of performance targets established as described below. The Compensation
Committee has discretion to determine each year the value of the incentive pool
for other executives.
Performance Measures. Annual performance pay awards to the Named Executive
Officers are designed to qualify for the performance-based compensation
exception to the tax deductibility limitations of Code Section 162(m). As a
result, such awards are subject to performance measures selected by the
Compensation Committee. The Compensation Committee must (i) select performance
measures from among profits, net income (either before or after taxes), share
price, earnings per share, total stockholder return, return on assets, return on
equity, operating income, return on capital or investments, or economic value
added and (ii) specify performance targets, based on the selected measures,
within the first 90 days of each year.
Calculation of Awards. The Compensation Committee specifies, concurrent
with establishing the performance targets for each year, the percentage of the
Named Executive Officers' incentive pool that will be payable to each Named
Executive Officer if the appropriate performance targets are achieved. The
Compensation Committee retains the right to exercise "negative discretion" with
respect to any award to a Named Executive Officer and adjust such award
downward. Annual performance pay awards to other participants may be determined
in the Compensation Committee's discretion.
Payment of Awards. The Compensation Committee directs when and in what form
(cash, Shares or a combination) participants receive annual performance pay
awards.
STOCK OPTIONS
Option Awards and Option Price. The Compensation Committee may award either
ISOs, which are intended to qualify as "incentive stock options" under Code
Section 422, or NQSOs, which are not intended to so qualify. An award of either
an ISO or a NQSO allows a participant to purchase Shares at a fixed option
price, which must be at least 100% of the fair market value of a Share on the
date of grant. Fair market value for this purpose is defined as the closing sale
price at which the Shares were sold regular way on the NYSE on the relevant
date.
Duration. The Compensation Committee determines when ISOs and NQSOs expire
(not later than the 10th anniversary of the date of grant).
Exercise and Payment of Awards. ISOs and NQSOs may be exercised as
described in each participant's award agreement, the details of which are
determined by the Compensation Committee. Generally, payment of the option price
may be made in cash or a cash equivalent, by tendering previously acquired
Shares (owned by the participant at least six months before tender), or by a
cashless exercise in which the participant directs the Company's designee to
have a broker sell a sufficient number of the Shares available for purchase
through exercise of the ISO or NQSO to yield at least the option price and any
applicable taxes and fees. The participant receives the Shares purchased or, in
the case of a cashless exercise, may elect to receive
24
<PAGE> 28
instead of Shares the cash proceeds remaining after payment of the option price
and any applicable taxes and fees.
PERFORMANCE SHARES AND PERFORMANCE UNITS
Performance Share/Unit Awards and Value. The Compensation Committee may
award either performance shares or performance units, payment of which depends
on whether certain performance goals (established by the Compensation Committee)
are met within a specified performance period. The initial value of a
performance share is the fair market value of a Share on the performance share's
date of grant. The initial value of a performance unit is established by the
Compensation Committee at the time of grant. Fair market value for this purpose
has the same meaning as for stock options.
Achievement of Performance Goals and Payment of Awards. The Compensation
Committee determines at the end of each performance period whether, and the
extent to which, the performance goals were met. The Compensation Committee
generally may permit a participant to elect to receive the value of any
performance shares or performance units payable to the participant in either
cash or Shares (or a combination).
Dividends. If dividends were declared on Shares during a performance
period, the Compensation Committee may permit a participant receiving payment
with respect to performance shares also to receive a cash payment equal in
amount to the dividends that would have been paid with respect to the
performance shares if they were actual Shares.
RESTRICTED STOCK
Restricted Stock Awards and Period of Restriction. The Compensation
Committee may award restricted stock, which are Shares subject to restrictions
on transferability during a specified period and to a substantial risk of
forfeiture. The Compensation Committee determines the period of restriction and
the terms and conditions applicable to restricted stock during such period,
which may include a purchase price and restrictions based on the achievement of
specified performance goals.
Voting Rights and Dividends. Each participant holding restricted stock may
exercise full voting rights with respect to such Shares during the period of
restriction. Dividends payable during the period of restriction with respect to
such Shares may be credited to participants, subject to any restrictions the
Compensation Committee considers appropriate.
STOCK APPRECIATION RIGHTS
SAR Awards and Grant Price. The Compensation Committee may award SARs
either alone (a "stand-alone SAR") or in connection with a stock option (a
"tandem SAR"). In either case, an SAR gives a participant the right to receive
the value of any appreciation in the value of a Share over the grant price. The
grant price for a stand-alone SAR is the fair market value of a Share on the
date of grant, and the grant price for a tandem SAR is the option price of the
related option. Fair market value for this purpose has the same meaning as for
stock options.
Duration. The Compensation Committee determines when SARs expire (not later
than the 10th anniversary of the date of grant).
Exercise and Payment of Awards. SARs may be exercised as described in each
participant's award agreement, the details of which are determined by the
Compensation Committee. Generally, a tandem SAR may be exercised for all or part
of the Shares subject to the related stock option by surrendering the right to
exercise the equivalent portion of the option. Special rules apply to a tandem
SAR awarded in connection with an ISO. A participant generally may elect upon
exercise of an SAR to receive either cash or Shares (or a combination) in an
amount equal to (i) the difference between the fair market value of a Share on
the date the SAR is exercised and the grant price, multiplied by (ii) the number
of Shares with respect to which the SAR is exercised.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF AWARDS
Annual Performance Pay and Performance Shares/Units. Generally, a
participant will recognize ordinary compensation income upon payment of an award
of annual performance pay or performance shares or performance units, and the
Company will be allowed a federal income tax deduction in the amount of such
ordinary compensation income. To the extent that a participant elects to defer
any portion of such payments, the deferred amount generally will not be taxable
to the participant or deductible to the Company until actually paid to the
participant.
ISOs. Generally, a participant will not recognize ordinary income at either
the time of grant or the time of exercise of an ISO, nor will the Company be
allowed a federal income tax deduction at either time. Any excess in the fair
market value of a Share over the option price at the time of exercise may,
however, constitute a tax preference item that may have alternative minimum tax
consequences for the participant. If the participant sells the Shares purchased
through exercise of an ISO more than one year after the date of purchase and
more than two years after the ISO's date of grant, the participant normally will
recognize long-term capital gain or loss equal to any difference between the
aggregate sale price of the Shares and the aggregate option price, but the
Company typically will not be allowed a federal income tax deduction upon either
the ISO exercise or the subsequent sale. If the participant does not hold the
Shares purchased through exercise of the ISO for at least the periods noted
above, the participant upon sale of the Shares generally will recognize ordinary
compensation income and possibly capital gain or loss, and the Company typically
will be entitled to a federal income tax deduction in the amount of such
ordinary compensation income.
NQSOs. Generally, a participant will not recognize income at the time of
grant of a NQSO. Upon exercise of the NQSO, however, the participant generally
will recognize ordinary compensation income equal to any difference between the
aggregate fair market value of the Shares purchased pursuant to the option and
the aggregate option price, and the Company typically will be entitled to a
federal income tax deduction in the amount of such ordinary compensation income.
Restricted Stock. Generally, a participant will not recognize income with
respect to restricted stock until all restrictions on transferability lapse and
no substantial risk of forfeiture exists, at which time the participant
typically will recognize ordinary compensation income equal to any difference
between the aggregate fair market value of the Shares at that time and the
aggregate amount, if any, paid by the participant for such Shares. The Company
typically will be entitled to a federal income tax deduction in the amount of
such ordinary compensation income.
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1996 AWARDS UNDER THE ICP
The table below shows information with respect to awards to the Named
Executive Officers, executive officers of the Company as a group, and other
employees of the Company as a group in 1996 under the ICP. Directors who are not
employees of the Company are not eligible to participate in the ICP.
AWARDS UNDER THE ICP IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INCENTIVE COMPENSATION PLAN
---------------------------------------------------
NONQUALIFIED
RESTRICTED STOCK
STOCK DOLLAR OPTION
NAME AND POSITION OR GROUP AWARDS(1) VALUE(2) AWARDS(3)
-------------------------- --------------- ---------- ------------------
<S> <C> <C> <C>
Keith W. Hughes
Chairman and Chief
Executive Officer....................................... 51,730 $1,500,170 249,900
Harold D. Marshall
President............................................... 17,250 500,250 86,180
Joseph M. McQuillan
Vice Chairman........................................... 17,250 500,250 86,180
Lawrence J. Pelka
Executive Vice President................................ 6,130 177,770 31,900
Thomas R. Slone
Executive Vice President................................ 6,130 177,770 31,900
Executive Officers (13 persons)........................... 135,350 3,925,150 687,460
Non-Executive Officer
Employee Group (753 persons)............................ 34,280 994,120 1,748,830
</TABLE>
- ---------------
(1) Reflects the number of restricted Shares awarded under the ICP.
(2) Reflects the value on the date of issuance of restricted Shares awarded
under the ICP. The value at December 31, 1996, of restricted Shares was as
follows: Mr. Hughes, $2,282,586; Mr. Marshall, $761,156; Mr. McQuillan,
$761,156; Mr. Pelka, $270,486; Mr. Slone, $270,486; Executive Officers as a
group, $5,972,319; and Non-Executive Officer Employee Group, $1,512,605.
Subject to the terms of the ICP, dividends will be paid on such restricted
stock although risk of forfeiture exists and restrictions on transferability
of such restricted stock have not lapsed.
(3) Reflects the number of Shares underlying the options awarded under the ICP
and includes (a) annual stock options, one-third of which vests on each of
the first, second and third anniversary of the date of grant, awarded as
follows: Mr. Hughes -- 94,790; Mr. Marshall -- 34,470; Mr.
McQuillan -- 34,470; Mr. Pelka -- 15,520; Mr. Slone -- 15,520; Executive
Officers -- 303,830; and Non-Executive Officer Employee Group -- 1,660,880;
and (b) other stock options awarded in connection with the IPO, which vest
on the fifth anniversary of the date of grant, as follows: Mr.
Hughes -- 155,110; Mr. Marshall -- 51,710; Mr. McQuillan -- 51,710; Mr.
Pelka -- 16,380; Mr. Slone -- 16,380; Executive Officers -- 383,630; and
Non-Executive Officer Employee Group -- 87,950. None of such options under
the ICP has vested as of the date of this proxy statement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEM 2.
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<PAGE> 31
ITEM 3.
SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee selects and hires independent public accountants to
audit the books of account and other records of the Company. You must ratify or
reject the Audit Committee's selection for 1997.
The Audit Committee selected Coopers & Lybrand L.L.P. to audit the books of
account and other records of the Company for 1997. This firm has audited the
Company's books since 1989, and is considered to be well qualified.
Representatives of Coopers & Lybrand L.L.P. will be present at the Annual
Meeting with the opportunity to make a statement and answer questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEM 3.
---------------------
STOCKHOLDER PROPOSALS FOR 1998
Stockholders may propose matters to be presented at stockholders' meetings
and may also nominate persons to be directors. Any stockholder proposal intended
for inclusion in the proxy materials for the 1998 annual meeting must be
received by the Company, addressed to the Secretary of the Company, P.O. Box
660237, Dallas, Texas 75266-0237, no later than December 27, 1997.
ANNUAL REPORT AND OTHER MATTERS
The Company's Annual Report, including financial statements, was mailed to
you with this proxy statement. A list of stockholders of record entitled to vote
at the Annual Meeting will be available for review by any stockholder, for any
purpose related to the Annual Meeting, between 9:00 a.m. and 5:00 p.m. at the
corporate offices of the Company, 250 East Carpenter Freeway, Irving, Texas, for
ten days prior to the Annual Meeting.
EXPENSES OF SOLICITATION
The cost of soliciting proxies in the accompanying form will be paid by the
Company. We do not expect to pay any fees for the solicitation of proxies, but
may pay brokers, nominees, fiduciaries and other custodians their reasonable
fees and expenses for sending proxy materials to beneficial owners and obtaining
their instructions. In addition to solicitation by mail, proxies may be
solicited in person, or by telephone, facsimile transmission or other means of
electronic communication, by directors, officers and other employees of the
Company.
By Order of the Board of Directors
Rintamaki sig
JOHN M. RINTAMAKI
Secretary
Irving, Texas
April 25, 1997
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<PAGE> 32
HOW TO ATTEND THE ANNUAL MEETING
Stockholders of Record
When you complete your proxy, if you plan to attend the Annual Meeting,
please check the box to let us know. We will issue an admission ticket to you at
the door.
"Street Name" Holders
If you plan to attend the Annual Meeting, tell your broker you plan to
attend and would like a proxy. Simply bring that form to the Annual Meeting, and
we will give you a ticket at the door. If you cannot get a proxy in time, we
will give you a ticket at the door if you bring a copy of your most recent
brokerage account statement showing that you own Voting Stock.
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<PAGE> 33
EXHIBIT A
ASSOCIATES FIRST CAPITAL CORPORATION
INCENTIVE COMPENSATION PLAN
(AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1997)
ARTICLE 1. PURPOSE AND DURATION
1.1. PURPOSE OF THE PLAN. Associates First Capital Corporation, a Delaware
corporation, hereby amends and restates, effective January 1, 1997, the
Associates First Capital Corporation Incentive Compensation Plan (formerly
called the "Associates First Capital Corporation Long-Term Equity Compensation
Plan"), as set forth in this document, to allow the Company (a) to optimize the
profitability and growth of the Company through incentives that are consistent
with the Company's goals and that link the individual interests of Participants
with those of the Company's stockholders, (b) to provide Participants with an
incentive for excellence in individual performance, (c) to provide flexibility
to the Company in its ability to motivate, attract and retain the services of
Employees who make significant contributions to the Company's success, and (d)
to allow such Employees to share in the success of the Company. The Plan permits
awards of Corporate Annual Performance Pay, Incentive Stock Options,
Nonqualified Stock Options, Performance Shares, Performance Units, Restricted
Stock and Stock Appreciation Rights.
1.2. DURATION OF THE PLAN. On and after the Effective Date, subject to
approval by the Company's stockholders, the provisions of the amended and
restated Plan shall govern all Awards. The Plan shall remain in effect
indefinitely, subject to the right of the Board of Directors to amend or
terminate the Plan at any time pursuant to Article 13, until all Awards are
satisfied by the issuance of Shares and/or the payment of cash. Notwithstanding
the foregoing, in no event may an Award be made on or after March 31, 2006.
ARTICLE 2. DEFINITIONS
2.1. GENERAL. Whenever used in the Plan, the following terms shall have the
meanings set forth below, and when any such meaning is intended, the initial
letter of the word shall be capitalized. Except where the context otherwise
indicates, any masculine term used herein shall include the feminine, the plural
shall include the singular, and the singular shall include the plural.
2.2. "AWARD" means, individually or collectively, an award under the Plan
of Corporate Annual Performance Pay, Incentive Stock Options, Nonqualified Stock
Options, Performance Shares, Performance Units, Restricted Stock or Stock
Appreciation Rights.
2.3. "AWARD AGREEMENT" means an agreement, entered into between the Company
and a Participant, setting forth the terms and conditions applicable to an
Award.
2.4. "BOARD" or "BOARD OF DIRECTORS" means the board of directors of the
Company.
2.5. "CLASS A COMMON STOCK" means the Class A Common Stock, par value $.01
per share, of the Company.
2.6. "CODE" means the Internal Revenue Code of 1986, as amended from time
to time, or any successor thereto.
2.7. "COMMITTEE" means the Committee designated pursuant to Section 12.1 to
administer the Plan.
2.8. "COMPANY" means Associates First Capital Corporation, a Delaware
corporation, and any successor thereto as provided in Section 14.5.
2.9. "CORPORATE ANNUAL PERFORMANCE PAY" OR "CAPP" means annual incentive
compensation awarded under Article 5.
2.10. "DIRECTOR" means any individual who is a member of the Board of
Directors.
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2.11. "EFFECTIVE DATE" means January 1, 1997, as provided in Section 1.1.
The original effective date of the Plan was April 1, 1996.
2.12. "EMPLOYEE" means any individual who is a full-time, active employee
of the Company or any Subsidiary.
2.13. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor thereto.
2.14. "FAIR MARKET VALUE" means the closing sale price at which Shares were
sold regular way on the relevant date on the principal securities exchange on
which Shares were traded on such date or, if there was no sale on the relevant
date, then on the last previous day on which there was such a sale; provided
that "Fair Market Value" for any Awards made concurrent with or contingent upon
the consummation of the initial public offering of Shares in 1996 means the
initial public offering price of Shares covered by such initial public offering.
2.15. "FREESTANDING SAR" means an SAR, awarded under Article 9, that is
granted independently of any Option.
2.16. "INCENTIVE STOCK OPTION" or "ISO" means an option to purchase Shares,
awarded under Article 6, that is intended to qualify as an "incentive stock
option" within the meaning of Code Section 422.
2.17. "INSIDER" means an individual who is, on the relevant date, an
officer or Director of the Company or a beneficial owner (as the term
"beneficial owner" is defined in Rule 13d-3 of the General Rules and Regulations
promulgated under the Exchange Act) of 10 percent (10%) or more of any class of
the Company's equity securities that is registered pursuant to Section 12 of the
Exchange Act, as such terms are used under Section 16 of the Exchange Act and
the General Rules and Regulations promulgated thereunder.
2.18. "NAMED EXECUTIVE OFFICER" means an individual who, as of the date of
payment, exercise and/or lapse of restrictions with respect to an Award, as
applicable, is a "covered employee" as defined in Code Section 162(m) and the
Treasury Regulations promulgated thereunder.
2.19. "NON-EMPLOYEE DIRECTOR" means a Director who is not an Employee of
the Company or any Subsidiary or of Ford Motor Company or any of its direct or
indirect subsidiaries.
2.20. "NONQUALIFIED STOCK OPTION" or "NQSO" means an option to purchase
Shares, awarded under Article 6, that is not intended to be treated as an
"incentive stock option" within the meaning of Code Section 422.
2.21. "OPTION" means an Incentive Stock Option or a Nonqualified Stock
Option, as applicable.
2.22. "OPTION PRICE" means the price at which a Share may be purchased by a
Participant pursuant to an Option.
2.23. "PARTICIPANT" means an Employee selected pursuant to Article 4 to
receive an Award.
2.24. "PERFORMANCE-BASED EXCEPTION" means the performance-based
compensation exception from the tax deductibility limitations of Code Section
162(m).
2.25. "PERFORMANCE SHARE" means a performance-based grant, awarded under
Article 7, the initial value of which is based on the Fair Market Value of a
Share on the date of grant.
2.26. "PERFORMANCE UNIT" means a performance-based grant, awarded under
Article 7, the initial value of which is established by the Committee at the
time of grant.
2.27. "PLAN" means the Associates First Capital Corporation Incentive
Compensation Plan (formerly called the "Associates First Capital Corporation
Long-Term Equity Compensation Plan"), as amended and restated effective January
1, 1997.
2.28. "RESTRICTED STOCK" means Class A Common Stock, awarded under Article
8, that is subject to restrictions on transferability and to a substantial risk
of forfeiture.
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<PAGE> 35
2.29. "SHARES" means shares of Class A Common Stock.
2.30. "STOCK APPRECIATION RIGHT" or "SAR" means a right, awarded under
Article 9, either alone or in connection with an Option, to receive the value of
the appreciation over time in the value of a Share. An SAR may be either a
Freestanding SAR or a Tandem SAR.
2.31. "SUBSIDIARY" means any corporation, partnership, joint venture or
other entity in which the Company has a direct or indirect majority voting
interest (including all divisions, affiliates and related entities), provided
that for ISOs "Subsidiary" has the meaning set forth in Code Section 422.
2.32. "TANDEM SAR" means an SAR, awarded under Article 9 in connection with
an Option, the exercise of which forfeits the right to purchase a Share under
the related Option (and which SAR is itself forfeited if and when a Share is
purchased under the related Option).
ARTICLE 3. SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS
3.1. NUMBER OF SHARES AVAILABLE FOR GRANTS. Subject to adjustment as
provided in Section 3.3, the maximum number of Shares with respect to which
Awards may be made shall be 20,799,268. Shares issued under the Plan may be
either authorized but unissued Shares, treasury Shares or any combination
thereof.
3.2. LAPSED AWARDS. If any Award is canceled, terminates, expires or lapses
for any reason without the issuance of Shares or payment in respect thereof
(with the exceptions of termination of a Tandem SAR upon exercise of the related
Option or termination of an Option upon exercise of the related Tandem SAR), any
Shares subject to such Award shall be available again for an Award to the
fullest extent permitted under Rule 16b-3 of the General Rules and Regulations
promulgated under the Exchange Act and Code Sections 162(m) and 422.
3.3. ADJUSTMENTS IN AUTHORIZED SHARES. In the event of any change in
capitalization of the Company (such as a stock split, stock dividend or
combination of shares), corporate transaction (such as any merger,
consolidation, separation, including a spin-off, or other distribution of stock
or property of the Company), reorganization (whether or not such reorganization
comes within the definition of such term in Code Section 368) or partial or
complete liquidation of the Company, an adjustment shall be made in the number
and class of Shares with respect to which Awards may be made, in the number and
class of and/or price of Shares subject to outstanding Awards, and in the Award
limits set forth with respect to Options and SARs in Section 3.4, as may be
determined to be appropriate and equitable by the Committee, in its sole
discretion, to reflect such change in capitalization, corporate transaction,
reorganization or partial or complete liquidation; provided, however, that the
number of Shares subject to any Award shall always be a whole number.
3.4. MAXIMUM AWARDS. The maximum aggregate number of Shares with respect to
which Options, with or without Tandem SARs, or Freestanding SARs may be awarded
to any one individual under the Plan in any one calendar year shall be 400,000.
The maximum Corporate Annual Performance Pay that may be awarded to any one
individual under the Plan in any one calendar year shall be $5,000,000.
ARTICLE 4. ELIGIBILITY AND PARTICIPATION
4.1. ELIGIBILITY. Any officer of the Company or salaried Employee,
including any Employee who is a Director, with potential to contribute to the
success of the Company and/or any Subsidiary shall be eligible to be selected as
a Participant by the Committee.
4.2. PARTICIPATION. Subject to the provisions of the Plan, the Committee
shall, from time to time and in its sole discretion, select from among all
eligible Employees, as specified in Section 4.1, those to whom Awards shall be
made and shall determine the nature, amount, terms and conditions of each Award.
ARTICLE 5. CORPORATE ANNUAL PERFORMANCE PAY
5.1. GENERAL. Subject to the provisions of the Plan, the Committee may
award Corporate Annual Performance Pay to a Participant at any time and from
time to time in such amount and upon such terms and conditions as the Committee
may determine.
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<PAGE> 36
5.2. DETERMINATION OF CAPP INCENTIVE POOLS. Corporate Annual Performance
Pay shall be payable each year from two incentive pools, one of which shall fund
CAPP Awards solely to the Named Executive Officers (the "Named Executive
Officers' Incentive Pool") and the other of which shall fund CAPP Awards solely
to Participants other than the Named Executive Officers (the "General Incentive
Pool"). The amount of the Named Executive Officers' Incentive Pool shall be
determined by multiplying (a) a fixed base amount, established by the Committee
concurrent with establishment of performance targets pursuant to Section 5.3, by
(b) a performance percentage determined by reference to the Company's
achievement of the performance targets established by the Committee pursuant to
Section 5.3. The Committee shall determine the amount of the General Incentive
Pool in its discretion.
5.3. PERFORMANCE MEASURES AND TARGETS. The Committee shall establish each
year, within the first 90 days of such year, performance targets that must be
achieved in order for CAPP Awards to be payable to the Named Executive Officers.
Such performance targets shall be based upon one or more performance measures,
which the Committee shall select (concurrent with establishing each year's
performance targets) from among profits, net income (either before or after
taxes), share price, earnings per share, total stockholder return, return on
assets, return on equity, operating income, return on capital or investments, or
economic value added. At the same time the Committee selects performance
measures and specifies performance targets, the Committee shall also determine
the manner in which such performance measure(s) shall be calculated or measured,
including the extent to which such measure(s) shall be adjusted to take into
account certain factors over which Participants have no or limited control,
including, without limitation, changes in accounting principles and
extraordinary charges to income.
5.4. DETERMINATION OF CAPP AWARDS TO NAMED EXECUTIVE OFFICERS. The
Committee shall specify each year, concurrent with establishing performance
measure(s) and targets pursuant to Section 5.3, the percentage of the Named
Executive Officers' Incentive Pool that shall be payable to each Named Executive
Officer as a CAPP Award for that year, subject to the maximum CAPP Award limit
specified in Section 3.4 and subject to the Committee's exercise of negative
discretion to adjust downward any such CAPP Award.
5.5. DETERMINATION OF CAPP AWARDS TO OTHER PARTICIPANTS. The Committee
shall determine the CAPP Award, if any, payable from the General Incentive Pool
to each Participant who is not a Named Executive Officer.
5.6. PAYMENT OF CAPP AWARDS. CAPP Awards shall be payable to Participants
at such time(s) and in cash or in Shares of equivalent value or in some
combination thereof, as the Committee shall determine.
5.7. TERMINATION OF EMPLOYMENT. The Committee shall determine if, and the
extent to which, any Participant shall have the right to receive payment of a
CAPP Award following termination of the Participant's employment with the
Company or any Subsidiary. Any determinations under this Section shall be made
in the sole discretion of the Committee, need not be uniform among all CAPP
Awards and may reflect distinctions based on the reasons for termination of
employment.
5.8. NONTRANSFERABILITY OF CAPP AWARD. No right to a CAPP Award may be
sold, transferred, pledged, assigned or otherwise alienated or hypothecated,
other than by will or by the laws of descent and distribution.
ARTICLE 6. INCENTIVE AND NONQUALIFIED STOCK OPTIONS
6.1. GENERAL. Subject to the provisions of the Plan, the Committee may
award Options to a Participant at any time and from time to time in such number
and upon such terms and conditions as the Committee may determine.
6.2. OPTION AWARD AGREEMENT. Each Award of an Option shall be evidenced by
an Award Agreement that shall specify the Option Price, the duration of the
Option, the number of Shares that may be purchased pursuant to exercise of the
Option and such other terms and conditions as the Committee may determine. The
Award Agreement also shall specify whether the Option is intended to qualify as
an "incentive stock option" within the meaning of, and be governed by, Code
Section 422 or a NQSO not intended to be treated as an "incentive stock option"
within the meaning of Code Section 422.
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<PAGE> 37
6.3. OPTION PRICE. The Option Price for each Award of an Option shall be at
least equal to 100 percent (100%) of the Fair Market Value of a Share on the
Option's date of grant.
6.4. DURATION OF OPTIONS. Each Option shall expire at such time as the
Committee shall determine at the time of grant; provided, however, that no
Option shall be exercisable later than the 10th anniversary of the Option's date
of grant.
6.5. EXERCISE OF OPTIONS. Each Option shall be exercisable at such time(s)
and in such manner and subject to such conditions as the Committee shall in each
instance determine, which need not be the same for each Award or for each
Participant.
6.6. PAYMENT OF OPTION PRICE. The aggregate Option Price shall be payable
in full upon exercise of any Option either (a) in cash in the form of currency
or check or other cash equivalent acceptable to the Company; (b) by tendering
previously acquired, nonforfeitable, nonrestricted Shares having an aggregate
fair market value at the time of exercise equal to the aggregate Option Price
(provided that any Shares so tendered must have been owned by the Participant
for at least six (6) months prior to their tender); or (c) by a combination of
the foregoing methods. The Committee may permit a Participant to satisfy the
requirement of payment in cash from the proceeds of a sale through a broker of
some or all of the Shares to which the exercise relates (a "cashless exercise"),
subject to applicable securities laws restrictions, or by any other means that
the Committee determines to be consistent with the Plan's purpose and applicable
law.
6.7. PAYMENT OF SHARES OR PROCEEDS. As soon as practicable after exercise
of an Option is completed, the Company shall deliver the Shares purchased to the
Participant; provided, however, that if the Committee permits cashless exercise
of Options, a Participant may elect to receive the cash proceeds from the
cashless exercise in lieu of Shares.
6.8. TERMINATION OF EMPLOYMENT. Each Participant's Option Award Agreement
shall set forth if, and the extent to which, the Participant shall have the
right to exercise the Option following termination of the Participant's
employment with the Company or any Subsidiary. Such terms and conditions shall
be determined in the sole discretion of the Committee, need not be uniform among
all Option Awards and may reflect distinctions based on the reasons for
termination of employment.
6.9. NONTRANSFERABILITY OF OPTIONS. Except as otherwise provided in a
Participant's Option Award Agreement with respect to NQSOs, (a) ISOs and NQSOs
shall be exercisable during a Participant's lifetime only by the Participant or,
in the event of the Participant's legal incapacity, by the Participant's legal
guardian or representative acting in a fiduciary capacity on behalf of the
Participant under state law and court supervision, and (b) no ISO or NQSO may be
sold, transferred, pledged, assigned or otherwise alienated or hypothecated,
other than by will or by the laws of descent and distribution.
ARTICLE 7. PERFORMANCE SHARES AND PERFORMANCE UNITS
7.1. GENERAL. Subject to the provisions of the Plan, the Committee may
award Performance Shares and/or Performance Units to a Participant at any time
and from time to time in such number and upon such terms and conditions as the
Committee may determine.
7.2. PERFORMANCE SHARES/UNITS AWARD AGREEMENT. Each Award of Performance
Shares and/or Performance Units shall be evidenced by an Award Agreement that
shall specify the initial value of such Performance Shares and/or Performance
Units, the time period during which preestablished performance goals must be met
(the "Performance Period"), the performance goals upon which payment of such
Performance Shares and/or Performance Units depends (the "Performance Goals"),
the number of Performance Shares and/or Performance Units awarded and such other
terms and conditions as the Committee may determine.
7.3. INITIAL VALUE OF PERFORMANCE SHARES/UNITS. The initial value of each
Performance Share shall equal the Fair Market Value of a Share on the
Performance Share's date of grant. The Committee shall establish the initial
value of each Performance Unit at the time of grant.
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<PAGE> 38
7.4. DURATION OF PERFORMANCE SHARES/UNITS AWARDS. Each Award of Performance
Shares and/or Performance Units shall expire at the end of the applicable
Performance Period, without payment of the Performance Shares or Performance
Units, if the Performance Goals established for that Performance Period have not
been achieved during such Performance Period.
7.5. SATISFACTION OF PERFORMANCE GOALS. The Committee shall determine at
the end of each Performance Period if, and the extent to which, the applicable
Performance Goals have been achieved.
7.6. PAYMENT OF PERFORMANCE SHARES/UNITS. As soon as practicable after the
end of a Performance Period, if the applicable Performance Goals for that
Performance Period have been achieved (as determined by the Committee pursuant
to Section 7.5), the Company shall deliver to a Participant payment for such
Participant's Performance Shares and/or Performance Units in an amount
determined, as specified in such Participant's Performance Share and/or Unit
Award Agreement, on the last day of the Performance Period by reference to the
achievement of the applicable Performance Goals. The Committee may permit a
Participant to elect payment of the aggregate value of such Participant's
Performance Shares and/or Performance Units in cash or in Shares of equivalent
value or in some combination thereof, subject to the availability of Shares to
the Company. If, and to the extent that, dividends with respect to Shares are
declared or paid during the Performance Period, the Committee may direct payment
of dividend equivalents to a Participant in an amount equal to the dividends
that such Participant would receive or have received if such Participant's
Performance Shares were Shares; provided, however, that such dividend
equivalents shall be subject to the same restrictions as apply to dividends
payable with respect to Restricted Stock pursuant to Section 8.4.
7.7. TERMINATION OF EMPLOYMENT. Each Participant's Performance Share and/or
Unit Award Agreement shall set forth if, and the extent to which, the
Participant shall have the right to receive payment of Performance Shares and/or
Performance Units following termination of the Participant's employment with the
Company or any Subsidiary. Such terms and conditions shall be determined in the
sole discretion of the Committee, need not be uniform among all Performance
Share and/or Performance Unit Awards and may reflect distinctions based on the
reasons for termination of employment.
7.8. NONTRANSFERABILITY OF PERFORMANCE SHARES/UNITS. Except as otherwise
provided in a Participant's Performance Share and/or Unit Award Agreement, (a)
all rights with respect to Performance Shares and/or Performance Units shall be
exercisable during a Participant's lifetime only by the Participant or, in the
event of the Participant's legal incapacity, by the Participant's legal guardian
or representative acting in a fiduciary capacity on behalf of the Participant
under state law or court supervision, and (b) no Performance Shares or
Performance Units may be sold, transferred, pledged, assigned or otherwise
alienated or hypothecated, other than by will or by the laws of descent and
distribution.
ARTICLE 8. RESTRICTED STOCK
8.1. GENERAL. Subject to the provisions of the Plan, the Committee may
award Restricted Stock to a Participant at any time and from time to time in
such number and upon such terms and conditions as the Committee may determine.
8.2. RESTRICTED STOCK AWARD AGREEMENT. Each Award of Restricted Stock shall
be evidenced by an Award Agreement that shall specify the restrictions that
limit transferability of the Restricted Stock and create a substantial risk of
forfeiture (the "Restrictions"), the time period during which such Restrictions
apply (the "Period of Restriction"), the number of Shares of Restricted Stock
awarded and such other terms and conditions as the Committee may determine
(which may, but are not required to, include a stipulated purchase price for
each Share of Restricted Stock).
8.3. ISSUANCE OF SHARES OF RESTRICTED STOCK. Certificates representing
Restricted Stock shall be issued on the Restricted Stock's date of grant in the
name of each Participant to whom the Committee awards such Restricted Stock.
Certificates so issued shall be retained by the Company or its designee during
the applicable Period of Restriction.
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8.4. DIVIDENDS AND VOTING RIGHTS DURING PERIOD OF RESTRICTION. During the
applicable Period of Restriction, each Participant to whom the Committee has
awarded Restricted Stock may receive regular cash dividends, if any, paid with
respect to the Restricted Stock; provided, however, that the Committee may apply
any restrictions to such dividends that the Committee deems appropriate. In the
event that any dividend constitutes a "derivative security" or an "equity
security" within the meaning of Rule 16(a) of the General Rules and Regulations
promulgated under the Exchange Act, such dividend shall be subject to a period
of restriction equal to the remaining Period of Restriction applicable to the
Restricted Stock with respect to which the dividend has been paid. Each
Participant to whom the Committee has awarded Restricted Stock may exercise full
voting rights during the Period of Restriction with respect to such
Participant's Restricted Stock.
8.5. LAPSE OF RESTRICTIONS. Restrictions on Restricted Stock shall lapse at
such time(s) and in such manner and subject to such conditions as the Committee
shall in each instance determine, which need not be the same for each Award or
for each Participant. Restricted Stock shall become freely transferable by the
Participant upon the lapse of all Restrictions on such Restricted Stock.
8.6. TERMINATION OF EMPLOYMENT. Each Participant's Restricted Stock Award
Agreement shall set forth if, and the extent to which, Restrictions on a
Participant's Restricted Stock shall lapse following termination of the
Participant's employment with the Company or any Subsidiary. Such terms and
conditions shall be determined in the sole discretion of the Committee, need not
be uniform among all Restricted Stock Awards and may reflect distinctions based
on the reasons for termination of employment.
8.7. NONTRANSFERABILITY OF RESTRICTED STOCK. Except as otherwise provided
in a Participant's Restricted Stock Award Agreement, (a) all rights with respect
to Restricted Stock shall be available during a Participant's lifetime only to
the Participant or, in the event of the Participant's legal incapacity, to the
Participant's legal guardian or representative acting in a fiduciary capacity on
behalf of the Participant under state law or court supervision, and (b) no
Restricted Stock may be sold, transferred, pledged, assigned or otherwise
alienated or hypothecated, other than by will or by the laws of descent and
distribution, during the applicable Period of Restriction.
ARTICLE 9. STOCK APPRECIATION RIGHTS
9.1. GENERAL. Subject to the provisions of the Plan, the Committee may
award SARs to a Participant at any time and from time to time in such number and
upon such terms and conditions as the Committee may determine.
9.2. SAR AWARD AGREEMENT. Each Award of an SAR shall be evidenced by an
Award Agreement that shall specify the grant price of the SAR, the duration of
the SAR, the number of Shares to which the SAR pertains and such other terms and
conditions as the Committee may determine. The Award Agreement also shall
specify whether the SAR is a Freestanding SAR or a Tandem SAR.
9.3. GRANT PRICE. The grant price for each Award of a Freestanding SAR
shall equal the Fair Market Value of a Share on the Freestanding SAR's date of
grant. The grant price for each Award of a Tandem SAR shall equal the Option
Price of the related Option.
9.4. DURATION OF SARS. Each SAR shall expire at such time as the Committee
shall determine at the time of grant; provided, however, that no SAR shall be
exercisable later than the 10th anniversary of such SAR's date of grant and
provided, further, that a Tandem SAR awarded in connection with an ISO shall
expire no later than the date of expiration of the related ISO.
9.5. EXERCISE OF SARS. Each SAR shall be exercisable at such time(s) and in
such manner and subject to such conditions as the Committee shall in each
instance determine, which need not be the same for each Award or for each
Participant. A Tandem SAR may be exercised for all or a portion of the Shares
subject to the related Option upon the surrender of the right to exercise the
equivalent portion of the related Option; provided, however, that a Tandem SAR
may be exercised only with respect to the Shares with respect to which its
related Option is then exercisable and provided, further, that a Tandem SAR
awarded in connection
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with an ISO may be exercised only when the Fair Market Value of the Shares
subject to the related ISO exceeds the ISO's Option Price.
9.6. PAYMENT OF SHARES OR PROCEEDS. As soon as practicable after exercise
of an SAR, the Company shall deliver to the Participant payment in an amount
equal to the aggregate appreciation in value of the Shares with respect to which
the SAR was exercised, such appreciation to be measured by the difference
between the aggregate grant price and the aggregate fair market value of such
Shares on the date of exercise; provided that, with respect to a Tandem SAR
awarded in connection with an ISO, the value of the amount payable upon exercise
of the Tandem SAR may not exceed 100 percent (100%) of the difference between
the aggregate Option Price of the related ISO and the aggregate fair market
value of the Shares subject to the related ISO at the time the Tandem SAR is
exercised. The Committee may permit a Participant to elect payment of the
aggregate appreciation in cash or in Shares of equivalent value or in some
combination thereof, subject to the availability of Shares to the Company.
9.7. TERMINATION OF EMPLOYMENT. Each Participant's SAR Award Agreement
shall set forth if, and the extent to which, the Participant shall have the
right to exercise the SAR following termination of the Participant's employment
with the Company or any Subsidiary. Such terms and conditions shall be
determined in the sole discretion of the Committee, need not be uniform among
all SAR Awards and may reflect distinctions based on the reasons for termination
of employment.
9.8. NONTRANSFERABILITY OF SARS. Except as otherwise provided in a
Participant's SAR Award Agreement, (a) all SARs shall be exercisable during a
Participant's lifetime only by the Participant or, in the event of the
Participant's legal incapacity, by the Participant's legal guardian or
representative acting in a fiduciary capacity on behalf of the Participant under
state law or court supervision, and (b) no SAR may be sold, transferred,
pledged, assigned or otherwise alienated or hypothecated, other than by will or
by the laws of descent and distribution.
ARTICLE 10. COMPLIANCE WITH APPLICABLE LAWS, RULES AND REGULATIONS
10.1. GENERAL. Awards and Shares issued or transferred pursuant to Awards
shall be subject to all applicable laws, rules and regulations and to such
approvals by any governmental agencies or national securities exchanges as may
be required.
10.2. RESTRICTIONS ON SHARES. The Committee may impose such restrictions,
including restrictions on transferability, on Awards and/or Shares issued or
transferred pursuant to any Award as the Committee may deem advisable,
including, without limitation, restrictions under United States federal
securities laws or other applicable securities laws, under the requirements of
any securities exchange or market upon which Shares are then listed and/or
traded and/or under any blue sky or state securities laws applicable to Shares.
10.3. RESTRICTIONS ON INSIDERS. With respect to Insiders, transactions
under the Plan are intended to comply with all applicable conditions of Rule
16b-3 of the General Rules and Regulations promulgated under the Exchange Act.
To the extent any provision of the Plan or action by the Committee fails to so
comply, such provision or action shall be deemed null and void, to the extent
permitted by law and deemed advisable by the Committee.
ARTICLE 11. DEFERRALS
The Committee may permit or require a Participant to defer such
Participant's receipt of the payment of cash or the delivery of Shares that
would otherwise be due to such Participant under the Plan. If any such deferral
election is required or permitted, the Committee shall establish rules and
procedures for such payment deferrals.
ARTICLE 12. ADMINISTRATION
12.1. DESIGNATION OF COMMITTEE. The Plan shall be administered by a
committee consisting of not fewer than two Non-Employee Directors, each of whom
qualifies as an "outside director" within the meaning of
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Code Section 162(m), which committee shall be the Compensation Committee of the
Board (provided that its members so qualify) unless the Board specifically
appoints a different committee to administer the Plan.
12.2. AUTHORITY OF THE COMMITTEE. Except as limited by law or by the
Certificate of Incorporation or Bylaws of the Company, and subject to the
provisions of the Plan, the Committee shall have full power and authority, in
its sole discretion, to (a) select Participants from among all eligible
Employees and determine the nature, amount, terms and conditions of Awards in a
manner consistent with the Plan; (b) make Awards to Participants; (c) construe
and interpret the Plan and any agreement or instrument entered into under the
Plan; (d) adopt, amend, waive or rescind such rules and regulations as the
Committee may deem appropriate for the proper administration or operation of the
Plan; (e) subject to the provisions of Article 13, amend the terms and
conditions of any outstanding Award to the extent such terms and conditions are
within the discretion of the Committee as provided in the Plan; and (f) make all
other determinations and take all other actions as may be necessary, appropriate
or advisable for the administration or operation of the Plan. As permitted by
law, the Committee may delegate its authority, or any part thereof, as it deems
necessary, appropriate or advisable for proper administration or operation of
the Plan; provided, however, that no such delegation shall be permitted if, and
to the extent that, such delegation would cause an Award designed to qualify for
the Performance-Based Exception to fail to so qualify.
12.3. DECISIONS BINDING. All determinations, interpretations, decisions or
other actions made or taken by the Committee pursuant to the provisions of the
Plan and all related orders and resolutions of the Board shall be final,
conclusive and binding for all purposes and upon all persons, including without
limitation the Company, its stockholders, Employees, Participants, and
Participants' estates and beneficiaries.
ARTICLE 13. AMENDMENT, ADJUSTMENT AND TERMINATION
13.1. AMENDMENT AND TERMINATION. Subject to Section 13.3, the Board may at
any time, and from time to time, in its sole discretion alter, amend, suspend or
terminate the Plan in whole or in part for any reason or for no reason;
provided, however, that no amendment or other action that requires stockholder
approval in order for the Plan to continue to comply with applicable law shall
be effective unless such amendment or other action shall be approved by the
requisite vote of stockholders of the Company entitled to vote thereon.
13.2. ADJUSTMENT OF AWARDS. Subject to Section 13.3, the Committee may make
adjustments to Awards and in the terms and conditions of, and the criteria
included in, Award Agreements in recognition of (a) unusual or nonrecurring
events (including, without limitation, the events described in Section 3.3)
affecting the Company or the financial statements of the Company, and/or (b)
changes in applicable laws, regulations or accounting principles whenever the
Committee determines that such adjustments are appropriate; provided, however,
that no such adjustment shall be made or authorized to the extent that such
adjustment or authority would cause any Award designed to qualify for the
Performance-Based Exception to fail to so qualify.
13.3. AWARDS PREVIOUSLY GRANTED. No alteration, amendment, suspension or
termination of the Plan shall adversely affect in any material way any Award
previously made under the Plan without the written consent of the affected
Participant; provided, however, that the Committee may modify, without a
Participant's consent, any Award previously made to a Participant who is a
foreign national or employed outside the United States to recognize differences
in local law, tax policy or custom.
ARTICLE 14. MISCELLANEOUS
14.1. NO RIGHTS TO EMPLOYMENT. Nothing in the Plan shall interfere with or
limit in any way the right of the Company to terminate the employment of any
Employee, whether or not a Participant, at any time; nor shall anything in the
Plan be deemed to create or confer upon any Employee, whether or not a
Participant, or other individual, any rights to employment of any kind or nature
whatsoever for any period of time or at any particular rate of compensation,
including, without limitation, any right to continue in the employ of the
Company.
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14.2. NO RIGHTS TO PARTICIPATION. No Employee, whether or not a
Participant, or other individual shall have any right to be selected to receive
an Award or, having been so selected, to be selected to receive a future Award;
nor shall anything in the Plan be deemed to create or confer upon any Employee,
whether or not a Participant, or other individual any such right.
14.3. WITHHOLDING. The Company shall have the power and the right to deduct
or withhold from any amount to be paid to any Participant or beneficiary
hereunder, or require such a Participant or beneficiary to remit to the Company,
an amount sufficient to satisfy any federal, state and/or local taxes, domestic
or foreign, required by applicable law or regulation to be withheld with respect
to any taxable event arising as a result of the Plan. The Company may permit a
Participant or beneficiary to elect to satisfy any withholding requirement with
respect to an Award, in whole or in part, either by surrendering to the Company
(either directly or through its designee) a portion of the Shares issued or
transferred to the Participant or beneficiary pursuant to that Award or by
tendering previously acquired, nonforfeitable, nonrestricted shares (provided
that any Shares so tendered by a Participant must have been owned by the
Participant for at least six (6) months prior to their tender); provided,
however, that any such election by an Insider shall be subject to express
approval by the Committee if such approval is then required by Rule 16b-3 of the
General Rules and Regulations promulgated under the Exchange Act. To the extent
that a Participant or beneficiary satisfies any withholding requirement by
surrendering or tendering Shares, the Shares so surrendered or tendered shall be
credited against any such withholding requirement at the fair market value per
Share on the date of such surrender or tender. All withholding elections shall
be irrevocable, made in writing and signed by the Participant, and shall be
subject to any restrictions or limitations that the Committee deems appropriate.
14.4. DESIGNATION OF BENEFICIARY. A Participant may designate a beneficiary
or beneficiaries (who may be named contingently or successively) who, in the
event of the Participant's death prior to payment, exercise or lapse of
restrictions with respect to any Awards to such Participant, shall be entitled
to exercise any unexercised Options or SARs, receive any Restricted Stock and
receive payment of any CAPP Award, Performance Shares and/or Performance Units,
subject in each case to the terms and conditions of the Participant's Award
Agreement, as applicable. Any such beneficiary designation shall be made by the
Participant in writing (on the appropriate form as provided by the Company) and
shall automatically revoke all prior designations by such Participant. The
Participant may, at any time and from time to time, change or revoke such
designation. A beneficiary designation, or revocation of a prior beneficiary
designation, will be effective only if it is signed by the Participant and
received by the Company prior to the Participant's death. If the Participant
does not designate a beneficiary or all beneficiaries die prior to payment,
exercise or lapse of restrictions with respect to an Award, the Participant's
estate shall be the beneficiary. If a beneficiary dies after at least partial
payment, exercise, or lapse of restrictions with respect to an Award, the
beneficiary's estate shall be the beneficiary of any remaining payments or
unexercised rights.
14.5. SUCCESSORS. All obligations of the Company under the Plan with
respect to Awards shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.
14.6. SEVERABILITY. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
though the illegal or invalid provision had not been included.
14.7. APPROVAL BY STOCKHOLDERS. Notwithstanding any other provision of the
Plan to the contrary, under no circumstances shall any Award to a Named
Executive Officer, or to an individual whom the Committee considers likely to
become a Named Executive Officer, be made under the Plan on or after the date of
the first annual meeting of the Company's stockholders following the Effective
Date unless the Company's stockholders approve the material terms of the Plan at
such meeting.
14.8. GOVERNING LAW. To the extent not preempted by United States federal
law or other comparable law, the Plan and all agreements hereunder, including
Award Agreements, shall be construed in accordance with and governed by the laws
of the State of Texas.
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CLASS A COMMON STOCK
ASSOCIATES FIRST CAPITAL CORPORATION
P.O. BOX 660237, DALLAS, TEXAS 75266-0237
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby nominates and appoints Chester D. Longenecker and
John M. Rintamaki, and each of them, proxies with full power of substitution to
each, and hereby authorizes them to represent and to vote, as designated
hereon, all shares of Class A Common Stock of ASSOCIATES FIRST CAPITAL
CORPORATION (the "Company") which the undersigned is entitled to vote on all
matters that come before the Annual Meeting of Stockholders to be held on May
29, 1997, and any adjournments thereof.
(Continued and to be signed on the reverse side)
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* FOLD AND DETACH HERE *
<PAGE> 44
7947
[ X ] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR (I) THE ELECTION OF THE NOMINATED DIRECTORS, (II) APPROVAL OF THE
COMPANY'S INCENTIVE COMPENSATION PLAN, AND (III) RATIFICATION OF THE SELECTION
OF COOPERS & LYBRAND L.L.P. AS INDEPENDENT PUBLIC ACCOUNTANTS OF THE COMPANY
FOR 1997.
1. Election of Directors
(See Reverse)
FOR WITHHELD
[ ] [ ]
Keith W. Hughes, J. Carter Bacot,
John M. Devine, Harold D. Marshall,
H. James Toffey, Jr., Kenneth Whipple
For, except vote withheld from the following nominee(s):
- --------------------------------------------------------
2. APPROVAL OF THE COMPANY'S INCENTIVE COMPENSATION PLAN
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. RATIFICATION OF THE SELECTION OF COOPERS & LYBRAND L.L.P. AS INDEPENDENT
PUBLIC ACCOUNTANTS OF THE COMPANY
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
CHECK HERE IF YOU PLAN TO ATTEND THE [ ]
STOCKHOLDERS MEETING ON MAY 29, 1997.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or authorized
person. If a partnership, please sign in full partnership name by
authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
ELECTION OF THE NOMINATED DIRECTORS, THE APPROVAL OF THE COMPANY'S
INCENTIVE COMPENSATION PLAN, AND RATIFICATION OF THE SELECTION OF COOPERS
& LYBRAND L.L.P. AS INDEPENDENT PUBLIC ACCOUNTANTS OF THE COMPANY FOR
1997.
SIGNATURE(S) DATE
------------------------------------- -----------------------
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* FOLD AND DETACH HERE *
ASSOCIATES FIRST CAPITAL CORPORATION LOGO
ANNUAL MEETING OF STOCKHOLDERS
MAY 29, 1997
