<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, AS AMENDED
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
FirstCity Financial Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
[FIRSTCITY LOGO]
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 24, 1996
------------------------
TO THE STOCKHOLDERS OF FIRSTCITY FINANCIAL CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of FIRSTCITY
FINANCIAL CORPORATION (the "Company") will be held at the First City Main
Building, 1021 Main, Houston, Texas 77002 at 2:00 p.m. local time on Wednesday,
April 24, 1996, for the following purposes:
1. To elect ten directors to serve until the next annual meeting of
stockholders and until their successors shall have been elected and
qualified;
2. To consider and vote upon a proposal to approve the Company's 1995 Stock
Option and Award Plan;
3. To consider and vote upon a proposal to approve the Company's 1995
Employee Stock Purchase Plan;
4. To consider and vote upon a proposal to approve the Company's 1996 Stock
Option and Award Plan;
5. To ratify the Board of Directors' appointment of independent certified
public accountants for the Company and its subsidiaries for fiscal year
1996;
6. To transact such other business as may properly come before the meeting
or any adjournments thereof.
Only holders of record of the Company's Common Stock outstanding as of the
close of business on March 11, 1996 will be entitled to notice of and to vote at
the Annual Meeting and at any adjournments thereof. A proxy card is enclosed in
the pocket on the front of the envelope in which these materials were mailed to
you. Please complete, sign and date the proxy card and return it promptly in the
enclosed postage-paid return envelope. If you attend the meeting you may, if you
wish, withdraw your proxy and vote in person.
A copy of the Company's Annual Report on Form 10-K for the year ended
December 31, 1995 is enclosed.
By Order of the Board of Directors
Waco, Texas
March 27, 1996
IT IS IMPORTANT THAT YOUR SHARES ARE REPRESENTED AT THE MEETING, WHETHER OR NOT
YOU ARE ABLE TO ATTEND PERSONALLY. ACCORDINGLY, PLEASE COMPLETE, SIGN, DATE AND
RETURN PROMPTLY THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED.
<PAGE> 3
FIRSTCITY FINANCIAL CORPORATION
PROXY STATEMENT
INTRODUCTION
This Proxy Statement is furnished to stockholders of FirstCity Financial
Corporation, a Delaware corporation (the "Company"), in connection with the
solicitation of proxies by the Company's Board of Directors for use at the
Annual Meeting of Stockholders to be held on Wednesday, April 24, 1996, and at
any adjournments thereof. The date of this Proxy Statement is March 27, 1996,
and this Proxy Statement and the form of proxy are first being mailed or given
to the Company's stockholders on or about such date. The Company's principal
executive offices are located at 6400 Imperial Drive, Waco, Texas 76712, where
its telephone number is (817) 751-1750.
At the Annual Meeting, the holders of shares of common stock, par value
$.01 per share, of the Company (the "Common Stock") will be asked (1) to elect
ten directors to serve on the Board of Directors of the Company, such directors
to serve until the next annual meeting of stockholders and until their
successors shall have been elected and qualified, (2) to consider and vote upon
a proposal to approve the Company's 1995 Stock Option and Award Plan (the "1995
Stock Option and Award Plan"), (3) to consider and vote upon a proposal to
approve the Company's 1995 Employee Stock Purchase Plan (the "1995 Employee
Stock Purchase Plan"), (4) to consider and vote upon a proposal to approve the
Company's 1996 Stock Option and Award Plan (the "1996 Stock Option and Award
Plan") and (5) to ratify the Board of Directors' appointment of KPMG Peat
Marwick LLP ("KPMG") as independent certified public accountants for the Company
and its subsidiaries for fiscal year 1996.
Only holders of record of the Common Stock outstanding as of the close of
business on March 11, 1996 (the "Record Date") are entitled to notice of and to
vote at the Annual Meeting and at any adjournments thereof. As of the close of
business on the Record Date, 4,921,422 shares of Common Stock were issued and
outstanding and entitled to vote at the Annual Meeting. Unless otherwise
indicated, all references herein to percentages of outstanding shares of Common
Stock are based on 4,921,422 shares outstanding. Each share of Common Stock is
entitled to one vote at the Annual Meeting with respect to each matter to be
voted on.
The presence, in person or by proxy, of holders of a majority of the
outstanding shares of Common Stock entitled to vote is necessary to constitute a
quorum at the Annual Meeting. Abstentions and broker non-votes will be counted
in determining whether a quorum is present. Directors will be elected by a
plurality of the votes of the shares of Common Stock present in person or
represented by proxy at the Annual Meeting and entitled to vote on the election
of directors (and therefore abstentions and broker non-votes will have no legal
effect on such election). The affirmative vote of a majority of the shares of
Common Stock present in person or represented by proxy at the Annual Meeting and
entitled to vote will be necessary to approve each of the other proposals
presented at the Annual Meeting (and therefore abstentions will have the effect
of a negative vote on such proposals). An automated system administered by the
Company's transfer agent will tabulate the votes cast.
All shares of Common Stock represented by properly executed and unrevoked
proxies will be voted at the Annual Meeting in accordance with the direction on
the proxies. IF NO DIRECTION IS INDICATED, THE SHARES WILL BE VOTED "FOR" THE
ELECTION OF THE NOMINEES NAMED HEREIN AS DIRECTORS, "FOR" EACH OF THE PROPOSALS
TO APPROVE THE 1995 STOCK OPTION AND AWARD PLAN, THE 1995 EMPLOYEE STOCK
PURCHASE PLAN AND THE 1996 STOCK OPTION AND AWARD PLAN, AND "FOR" THE PROPOSAL
TO RATIFY THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS FOR THE COMPANY AND ITS SUBSIDIARIES FOR FISCAL YEAR 1996.
The Company does not know of any matters, other than those described above,
which will come before the Annual Meeting. If any other matters are properly
presented for action at the Annual Meeting, the persons named in the proxies and
acting thereunder will have discretion to vote on such matters in accordance
with their best judgment.
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<PAGE> 4
A record holder of Common Stock who executes and returns a proxy has the
power to revoke it at any time before it is voted. A holder who wishes to revoke
a proxy can do so by executing a later dated proxy relating to the same shares
and by delivering it to the Secretary of the Company prior to the vote at the
Annual Meeting, by giving written notice of the revocation to the Secretary of
the Company prior to the vote at the Annual Meeting or by appearing in person at
the Annual Meeting and voting in person the shares to which the proxy relates.
All written notices of revocation and other communications relating to the
revocation of proxies should be addressed as follows: FirstCity Financial
Corporation, 6400 Imperial Drive, Waco, Texas 76712, Attention: Secretary.
James R. Hawkins, Chairman of the Board and Chief Executive Officer of the
Company, James T. Sartain, President and Chief Operating Officer of the Company,
and ATARA I, LTD., a Texas limited partnership ("ATARA"), are parties to a
Shareholder Voting Agreement (the "Shareholder Voting Agreement"), dated as of
June 29, 1995, with Cargill Financial Services Corporation, a Delaware
corporation ("Cargill"). The sole general partner of ATARA is ATARA Corp., a
Texas corporation, the Chairman of the Board and President of which is Rick R.
Hagelstein, the Executive Vice President and Chief Credit Officer of the
Company. Under the terms of the Shareholder Voting Agreement, Messrs. Hawkins
and Sartain, and ATARA, are required to vote their shares of Common Stock to
elect one designee of Cargill as a director of the Company, and Cargill is
required to vote its shares of Common Stock to elect one or more of the
designees of Messrs. Hawkins and Sartain, and ATARA, as directors of the
Company. With respect to the Board nominees for director named below under the
caption "Election of Directors," (1) Messrs. Hawkins and Sartain, and ATARA,
will vote their shares of Common Stock for the election of such nominees as
directors, including nominee David W. MacLennan, Cargill's designee under the
Shareholder Voting Agreement, and (2) Cargill will vote its shares of Common
Stock for the election of such nominees as directors, which nominees are the
designees of Messrs. Hawkins and Sartain, and ATARA, under the Shareholder
Voting Agreement. Information pertaining to the number of shares of Common Stock
owned on February 29, 1996 by each of Messrs. Hawkins and Sartain, and ATARA and
Cargill, is set forth under the caption "Security Ownership of Certain
Beneficial Owners and Management."
The Company's Annual Report on Form 10-K for the year ended December 31,
1995, which includes, among other things, the Company's audited consolidated
balance sheets at December 31, 1995 and 1994, and the Company's audited
consolidated statements of income, statements of shareholders' equity and
statements of cash flows for the three years ended December 31, 1995, 1994 and
1993, respectively, has been mailed to stockholders of record as of the Record
Date.
The Company will bear the cost of soliciting its proxies, including the
expenses of distributing its proxy materials. In addition to the use of the
mail, proxies may be solicited by personal interview, telephone or telegram by
directors, officers, employees and agents of the Company who will receive no
additional compensation for doing so. The Company will reimburse brokers,
custodians, nominees and fiduciaries for reasonable out-of-pocket expenses
incurred by them in forwarding proxy materials to the beneficial owners of the
Common Stock held by them as stockholders of record.
The Joint Plan of Reorganization by First City Bancorporation of Texas,
Inc., Official Committee of Equity Security Holders, and J-Hawk Corporation,
with the Participation of Cargill Financial Services Corporation, Under Chapter
11 of the United States Bankruptcy Code, Case No. 392-39474-HCA-11 (the "Plan"),
became effective on July 3, 1995 (the "Effective Date"). Pursuant to the Plan,
and an Agreement and Plan of Merger, dated as of July 3, 1995, between First
City Bancorporation of Texas, Inc., a Delaware corporation (the "Debtor"), and
J-Hawk Corporation, a Texas corporation and specialized financial services
company ("J-Hawk"), on July 3, 1995, J-Hawk was merged (the "Merger") with and
into the Debtor. Pursuant to the Merger and the Plan, (1) the former holders of
common stock of J-Hawk received, in the aggregate, approximately 49.9 percent of
the Company's outstanding Common Stock in exchange for their shares of J-Hawk
common stock, (2) approximately 50.1 percent of the Company's outstanding Common
Stock was distributed among former security holders of the Debtor, and (3) the
name of the Debtor was changed to "FirstCity Financial Corporation." Immediately
following the Merger (after giving effect to such conversion of shares of J-Hawk
common stock and the distribution of the Company's securities to certain former
J-Hawk stockholders in respect of certain shares of common stock of the Debtor
acquired by them
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prior to the consummation of the Merger), approximately 50 percent of the
Company's outstanding Common Stock was beneficially owned by former J-Hawk
stockholders. Such former J-Hawk stockholders include James R. Hawkins, James T.
Sartain and Rick R. Hagelstein, respectively the Chairman of the Board and Chief
Executive Officer, the President and Chief Operating Officer and a director, and
the Executive Vice President and Chief Credit Officer and a director, of the
Company. Information with respect to the Common Stock owned on February 29, 1996
by such persons is set forth under the caption "Security Ownership of Certain
Beneficial Owners and Management."
In connection with the consummation of the Plan, the Company entered into
an Omnibus Exchange and Disbursement Agreement (the "Exchange and Disbursement
Agreement") dated as of the Effective Date with FirstCity Liquidating Trust, a
trust organized under the laws of Texas (the "Trust"), and American Stock
Transfer & Trust Company, as the Company's Exchange and Disbursement Agent (the
"Exchange and Disbursement Agent"). (Under the Plan, substantially all of the
Debtor's assets were transferred to the Trust or subsidiaries of the Trust, to
be liquidated pursuant to a liquidating trust agreement. Under the terms of such
agreement, the Company, as the sole holder of the Trust's Class A Certificate,
will receive from the Trust amounts sufficient to pay certain expenses, certain
pre-Merger claims against the Debtor and its obligations under its 9% Senior
Subordinated Notes due 1997 and its special preferred stock, and any amounts in
excess of such sums will be paid to certain of the former security holders of
the Debtor pursuant to the terms of the Trust's Class B and Class C Certificates
issued to such holders.) Under the Exchange and Disbursement Agreement, (1) a
global certificate, representing those shares of Common Stock (the "Common Stock
Global Certificate") to be disbursed under the Plan to holders of certain Debtor
securities was issued in the name of the Exchange and Disbursement Agent for
purposes of facilitating such disbursement and (2) the Exchange and Disbursement
Agent agreed to vote, at the request of the Company (which request has been or
will be delivered by the Company to the Exchange and Disbursement Agent in
connection with the Annual Meeting), any shares represented by the Common Stock
Global Certificate in the same manner and to the same extent as other issued
shares of Common Stock are voted.
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<PAGE> 6
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the Common
Stock owned on February 29, 1996 by: (1) each person who is known by the Company
to be the beneficial owner of more than 5 percent of the Common Stock as of such
date, (2) each of the Company's directors and the nominees for director named
herein, (3) each of the executive officers of the Company named in the Summary
Compensation Table under the caption "Executive Compensation" and (4) all
directors and executive officers of the Company as a group. Except as otherwise
indicated, all shares of Common Stock shown in the table are held with sole
voting and investment power. The "Percent of Class" column represents the
percentage that the named person or group would beneficially own if such person
or group, and only such person or group, exercised all currently exercisable
warrants to purchase Common Stock held by such person or group.
<TABLE>
<CAPTION>
SHARES PERCENT
BENEFICIALLY OF
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNED CLASS
- ------------------------------------------------------------------- --------- ----
<S> <C> <C>
James R. Hawkins................................................... 970,000(2) 19.7
C. Ivan Wilson..................................................... 2,664(3) *
James T. Sartain................................................... 372,400(2) 7.6
Rick R. Hagelstein................................................. 372,400(4) 7.6
Matt A. Landry, Jr................................................. 53,065(5) 1.1
Richard E. Bean.................................................... 78,633(6) 1.6
Bart A. Brown, Jr.................................................. -- --
Donald J. Douglass................................................. 19,130(7) *
David W. MacLennan................................................. --(8) --
David Palmer....................................................... 114,677 2.3
Robert W. Brown.................................................... 263(9) *
All directors and executive officers as a group (19 persons)....... 2,086,053 42.3
ATARA I, LTD....................................................... 372,400(2) 7.6
P.O. Box 8216
Waco, Texas 76714
ATARA Corp. ....................................................... 372,400(10) 7.6
P.O. Box 8216
Waco, Texas 76714
</TABLE>
- ---------------
* Less than 1%
(1) The business mailing address of each of such persons (except for ATARA I,
LTD. and ATARA Corp.) is 6400 Imperial Drive, Waco, Texas 76712.
(2) Includes 506 shares that may be acquired within sixty days of February 29,
1996 through the exercise of warrants of the Company to purchase Common
Stock. Each of Messrs. Hawkins and Sartain, and ATARA (as defined below),
acquired warrants to purchase 506 shares of Common Stock pursuant to the
exchange under the Plan of shares of common stock of the Debtor owned by
such persons. Messrs. Hawkins and Sartain, and ATARA, are parties to a
Shareholder Voting Agreement with Cargill regarding the Common Stock. See
"Introduction." Each of Messrs. Hawkins and Sartain, and ATARA, disclaims
beneficial ownership of the shares of Common Stock owned by Cargill.
(3) Includes 676 shares that may be acquired within sixty days of February 29,
1996 through the exercise of warrants of the Company to purchase Common
Stock (which warrants were acquired pursuant to the exchange under the Plan
of shares of common stock of the Debtor owned by Mr. Wilson).
(4) 371,894 of such shares of Common Stock are held of record by ATARA I, LTD.,
a Texas limited partnership ("ATARA"). 506 of such shares are subject to
warrants of the Company to purchase Common Stock held of record by ATARA.
See note (2) to this table. ATARA is principally engaged in the investment
in the Company's Common Stock. The sole general partner of ATARA is ATARA
Corp., a Texas corporation ("ATARA Corp."), which is also principally
engaged in the investment in
(Notes continued on following page)
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<PAGE> 7
the Company's Common Stock. Mr. Hagelstein may be deemed to beneficially
own all such 372,400 shares by virtue of being the Chairman of the Board
and President of ATARA Corp., and by reason of the fact that his wife is
the only other officer or director of ATARA Corp. and owns 33.33 percent of
the outstanding shares of common stock of ATARA Corp.
(5) All such shares of Common Stock are held of record by Enovest Associates,
Ltd., a Texas limited partnership ("Associates"), which is principally
engaged in the business of investments, including its investment in the
Company's Common Stock. The sole general partner of Associates is Enovest
Investments, Inc., a Texas corporation ("Investments"). Mr. Landry may be
deemed to beneficially own all such shares by virtue of being a Vice
President of Investments and a limited partner of Associates.
(6) Includes 9,964 shares that may be acquired within sixty days of February
29, 1996 through the exercise of warrants of the Company to purchase Common
Stock (which warrants were acquired pursuant to the exchange under the Plan
of shares of common stock of the Debtor owned by Mr. Bean).
(7) Includes 2,424 shares that may be acquired within sixty days of February
29, 1996 through the exercise of warrants of the Company to purchase Common
Stock (which warrants were acquired pursuant to the exchange under the Plan
of shares of common stock of the Debtor owned by Mr. Douglass).
(8) Mr. MacLennan is an officer of certain affiliates of Cargill, which, as of
February 29, 1996, was the record owner of 241,137 shares of Common Stock.
Mr. MacLennan disclaims beneficial ownership of such shares. Cargill is
party to a Shareholder Voting Agreement with Messrs. Hawkins and Sartain,
and ATARA, regarding the Common Stock. See "Introduction."
(9) Includes 66 shares that may be acquired within sixty days of February 29,
1996 through the exercise of warrants of the Company to purchase Common
Stock (which warrants were acquired pursuant to the exchange under the Plan
of shares of common stock of the Debtor owned by Mr. Brown).
(10) 371,894 of such shares of Common Stock are held of record by ATARA. 506 of
such shares are subject to warrants of the Company to purchase Common Stock
held of record by ATARA. See note (2) to this table. ATARA Corp. may be
deemed to beneficially own all such 372,400 shares by virtue of being the
sole general partner of ATARA.
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers, and
persons who own more than 10 percent of the Common Stock, to file with the
Securities and Exchange Commission certain reports of beneficial ownership of
the Common Stock. Based solely on copies of such reports furnished to the
Company and written representations that no other reports were required, the
Company believes that all applicable such Section 16(a) filing requirements were
complied with by its directors, officers and 10 percent stockholders during the
last fiscal year.
ELECTION OF DIRECTORS
Directors of the Company are elected each year to hold office until the
next annual meeting of stockholders or until their successors are duly elected
and qualified. The Company's Bylaws provide for a minimum of one and a maximum
of twelve directors, and the exact number is set by the Board of Directors. The
current Board of Directors consists of ten members, each of which has been
nominated by the Board to stand for election at the Annual Meeting. The Board of
Directors recommends that such ten nominees, each of which is named below, be
elected to serve as directors. Each such nominee initially became a director of
the Company on the Effective Date.
Under the Company's Bylaws, nominations of persons for election to the
Board of Directors also may be made at the Annual Meeting by any stockholder of
the Company entitled to vote for the election of directors at the Annual Meeting
who complies with the notice procedures described in this paragraph. Any such
nomination must be made pursuant to notice in writing to the Secretary of the
Company, and must be delivered to or mailed and received at the principal
executive offices of the Company not later than the close of business on April
6, 1996. Any such notice must set forth (1) as to each person whom such
stockholder
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<PAGE> 8
proposes to nominate for election or reelection as a director, all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors, or as otherwise required, in each case
pursuant to Regulation 14A under the Exchange Act or any successor regulation
thereto (including such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected); and (2) as to
the stockholder giving such notice, (a) the name and address, as they appear on
the Company's books, of such stockholder, and (b) the class or series and number
of shares of stock of the Company that are held of record, beneficially owned,
and represented by proxy on the date of such stockholder nomination and on the
Record Date by such stockholder on such dates.
It is intended that the proxies received from holders of the Company's
Common Stock, in the absence of contrary instructions, will be voted at the
Annual Meeting for the election of the Board nominees named below. Although the
Company does not contemplate that any of the nominees will be unable to serve,
decline to serve, or otherwise be unavailable as a nominee at the time of the
Annual Meeting, in such event the proxies will be voted in accordance with the
discretionary authority granted in the proxies for such other candidate or
candidates as may be nominated by the Board of Directors.
James R. Hawkins, Chairman of the Board and Chief Executive Officer of the
Company, James T. Sartain, President and Chief Operating Officer of the Company,
and ATARA, are parties to a Shareholder Voting Agreement with Cargill regarding
the voting of their shares of Common Stock in connection with the election of
directors. See "Introduction."
Further information concerning the Board nominees for election as directors
at the Annual Meeting, including their business experience during the past five
years, appears below.
James R. Hawkins, 60, has been Chairman of the Board and Chief Executive
Officer of the Company since the Effective Date, and was Chairman of the Board
and Chief Executive Officer of J-Hawk from 1976 until the Merger.
C. Ivan Wilson, 68, has been Vice Chairman of the Company since the
Effective Date, and was Chairman of the Board and Chief Executive Officer of the
Debtor from 1991 to the Effective Date. Prior to 1991, Mr. Wilson was the Chief
Executive Officer of First City, Texas -- Corpus Christi, one of the Debtor's
banking subsidiaries.
James T. Sartain, 47, has been President and Chief Operating Officer of the
Company since the Effective Date, and was President and Chief Operating Officer
of J-Hawk from 1988 until the Merger.
Rick R. Hagelstein, 49, has been Executive Vice President and Chief Credit
Officer of the Company since the Effective Date, and was Executive Vice
President and Chief Credit Officer of J-Hawk from 1990 until the Merger. From
1988 to 1990, Mr. Hagelstein was Executive Vice President of ASK Corporation, a
manufacturer of solar energy devices. Mr. Hagelstein has also been a member of
the Portfolio Committee of the Trust since the Effective Date, which committee
administers the Trust.
Matt A. Landry, Jr., 53, has been Executive Vice President and Chief
Financial Officer of the Company since the Effective Date, and was Executive
Vice President and Chief Financial Officer of J-Hawk from 1992 until the Merger.
From 1988 to 1992, Mr. Landry was President and Chief Operating Officer and a
director of AmWest Savings Association, a savings and loan association (and a
predecessor to First American Bank, S.S.B., a state savings bank). From 1989 to
1992, Mr. Landry was also a director of First American Bank, a state chartered
commercial bank.
Richard E. Bean, 52, has been Executive Vice President and Chief Financial
Officer of Pearce Industries, Inc. since 1976, which company, through its
subsidiaries, markets a variety of oilfield equipment and machinery. Mr. Bean
has also been a member of the Portfolio Committee of the Trust since the
Effective Date, which committee administers the Trust. Prior to the Effective
Date, Mr. Bean was Chairman of the Debtor's Official Committee of Equity
Security Holders.
Bart A. Brown, Jr., 64, has been Chairman and Chief Executive Officer of
Color Tile, Inc., since August of 1995. Color Tile, Inc. operates speciality
flooring and wallcovering retail stores throughout the continental United
States. Prior to joining Color Tile, Mr. Brown was Chief Executive Officer of
The Circle K
6
<PAGE> 9
Corporation from 1991 to 1993, and served as Chairman of that company from June
of 1990 until August of 1995. Mr. Brown currently serves on the Boards of
Directors of The Circle K Corporation, Barry's Jewelers, Inc. and Spreckels
Industries, Inc.
Donald J. Douglass, 64, has been Chairman and Chief Executive Officer of
Alamo Group, Inc. since 1969, which company, through its subsidiaries, designs
and markets a variety of mowing equipment replacement parts and other products.
Prior to the Effective Date, Mr. Douglass was a member of the Debtor's Official
Committee of Equity Security Holders.
David W. MacLennan, 36, has been with subsidiaries of Cargill,
Incorporated, regarded as one of the world's largest, privately-held
corporations, since 1991. From 1993 to February 1996, Mr. MacLennan was a Vice
President of Cargill Financial Services Corporation, a wholly-owned subsidiary
of Cargill, Incorporated engaged primarily in the investment of proprietary
funds and in the proprietary trading of financial instruments and assets. Since
February 1996, Mr. MacLennan has been Managing Director of Cargill Financial
Markets, PLC in London.
David Palmer, 53, has been a private investor for the past 25 years. Mr.
Palmer has been a member of the Portfolio Committee of the Trust since the
Effective Date, which committee administers the Trust. Prior to the Effective
Date, Mr. Palmer was a member of the Debtor's Official Committee of Equity
Security Holders. From 1970 to 1995, Mr. Palmer was a Professor of Philosophy at
the State University of New York -- Fredonia, New York.
BOARD OF DIRECTORS AND COMMITTEES
The Company's Board of Directors has the following five standing
committees: an Executive Committee; an Audit Committee; a Compensation
Committee; an Investment Committee; and a Nominating Committee. Members of these
committees generally are elected annually at the regular meeting of the Board of
Directors immediately following the annual meeting of stockholders. During 1995,
the Board of Directors held two meetings. Further information concerning the
Board's standing committees appears below.
EXECUTIVE COMMITTEE
The Executive Committee presently consists of Messrs. Hawkins (Chairman),
Sartain, Hagelstein, Landry and Wilson. Subject to certain limitations specified
by the Company's Bylaws and the Delaware General Corporation Law, the Executive
Committee is authorized to exercise the powers of the Board of Directors when
the Board is not in session. During 1995, the Executive Committee held four
meetings.
AUDIT COMMITTEE
The Audit Committee presently consists of Messrs. Bean (Chairman), Palmer
and Douglass. The functions of the Audit Committee include recommending to the
Board of Directors which firm of independent public accountants should be
engaged by the Company to perform the annual audit, consulting with the
Company's independent public accountants concerning internal control and
accounting matters during their annual audit, approving certain other types of
professional service rendered to the Company by the independent public
accountants and considering the possible effects of such services on the
independence of such public accountants. During 1995, the Audit Committee held
one meeting.
COMPENSATION COMMITTEE
The Compensation Committee presently consists of Messrs. Hawkins
(Chairman), MacLennan and Brown. The functions of the Compensation Committee
include making recommendations to the Board of Directors regarding compensation
for executive officers of the Company and its subsidiaries. A separate
subcommittee of the Compensation Committee, the Stock Option Subcommittee
(consisting of Messrs. MacLennan and Brown), is responsible for all
recommendations, reviews, modifications and approvals with respect to the 1995
Stock Option and Award Plan, the 1995 Employee Stock Purchase Plan and the 1996
Stock Option and Award Plan. During 1995, the Compensation Committee held two
meetings.
7
<PAGE> 10
INVESTMENT COMMITTEE
The Investment Committee presently consists of Messrs. Sartain (Chairman),
Douglass, Brown, Palmer, MacLennan and Bean. The functions of the Investment
Committee include providing oversight and approval of prospective investments
based on thresholds of risk exposure to the Company's balance sheet. During
1995, the Investment Committee held two meetings.
NOMINATING COMMITTEE
The Nominating Committee presently consists of Messrs. Hawkins (Chairman)
and Douglass. The functions of the Nominating Committee include recommending to
the Board of Directors those persons it believes should be nominees for election
as directors. In this regard, the Nominating Committee considers the performance
of incumbent directors in determining whether such directors should be nominated
to stand for reelection. During 1995, the Nominating Committee held one meeting.
Under the Company's Bylaws, nominations of persons for election to the
Board of Directors also may be made by stockholders as described under the
caption "Election of Directors."
During 1995, each director of the Company attended all of the meetings of
the Board and committees of the Board on which such director served, except as
follows: (1) Mr. Brown attended one of the two Board meetings and one of the two
meetings of the Investment Committee, and (2) Mr. Douglass attended one of the
two Board meetings and one of the two meetings of the Investment Committee, and
did not attend the meeting of the Audit Committee.
DIRECTOR COMPENSATION
Directors of the Company who are not employees of the Company or any of its
subsidiaries receive a retainer of $3,000 per quarter for their services as
directors (from the Effective Date through December 31, 1995, each such director
received an aggregate of $6,000 for such director's services as director for
such period). Such directors also receive $1,000 plus expenses for each regular
and special Board meeting attended, and $1,000 plus expenses for each meeting of
any committee of the Board attended, in each case other than telephonic
meetings. Directors who are employees of the Company do not receive directors'
fees.
8
<PAGE> 11
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning compensation
for services during each of the last three years to (1) the Company's Chief
Executive Officer during 1995, (2) the Company's other four most highly
compensated executive officers during 1995 serving as such at the end of 1995
and (3) one additional executive officer of the Company during 1995 who would
have been one of such four most highly compensated executive officers but who
was not serving as such at the end of 1995:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION(1) AWARDS ALL OTHER
---------------------------- ----------- COMPENSA-
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(4)(#) TION(5)($)
- ------------------------------- ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
James R. Hawkins,.............. 1995
Chairman of the Board 07/03-12/31 155,769 225,000(2) 22,500 3,086
and Chief Executive Officer 01/01-07/02 150,000 -- -- 3,086
Total 1995 305,769 225,000(2) 22,500 6,172
1994 245,000 580,000 -- 7,202
1993 120,000 880,000 -- 5,444
C. Ivan Wilson,................ 1995
Vice Chairman of the Board 07/03-12/31 125,000 -- 13,000 14,984
01/01-07/02 125,000 500,000(3) -- 19,169
Total 1995 250,000 500,000(3) 13,000 34,153
1994 250,000 -- -- 31,372
1993 250,000 -- -- 29,876
James T. Sartain,.............. 1995
President and Chief 07/03-12/31 155,769 225,000(2) 24,800 2,529
Operating Officer 01/01-07/02 150,000 -- -- 2,529
Total 1995 305,769 225,000(2) 24,800 5,058
1994 245,000 531,000 -- 5,491
1993 120,000 880,000 -- 3,908
Rick R. Hagelstein,............ 1995
Executive Vice President 07/03-12/31 155,769 225,000(2) 24,800 2,991
and Chief Credit Officer 01/01-07/02 150,000 -- -- 2,991
Total 1995 305,769 225,000(2) 24,800 5,982
1994 245,000 420,000 -- 5,491
1993 120,000 705,000 -- 4,476
Matt A. Landry, Jr.,........... 1995
Executive Vice President 07/03-12/31 129,808 185,000(2) 21,300 3,003
and Chief Financial Officer 01/01-07/02 125,000 -- -- 3,003
Total 1995 254,808 185,000(2) 21,300 6,006
1994 119,231 225,000 -- 5,929
1993 100,000 575,000 -- 4,596
Robert W. Brown(6),............ 1995
Executive Vice President and 07/03-12/31 125,000 -- -- 3,412
Secretary 01/01-07/02 125,000 500,000(3) -- 1,460
Total 1995 250,000 500,000(3) -- 4,872
1994 250,000 -- -- 6,656
1993 250,000 -- -- 4,881
</TABLE>
- ---------------
(1) With respect to Messrs. Hawkins, Sartain, Hagelstein and Landry, all amounts
shown for (a) the period July 3, 1995 through December 31, 1995 were for
services in all capacities to the Company and its subsidiaries, (b) the
period January 1, 1995 through July 2, 1995, and the years 1994 and 1993,
were for services in all capacities to J-Hawk and its subsidiaries. With
respect to Messrs. Wilson and Brown, all
(Notes continued on following page)
9
<PAGE> 12
amounts shown for (a) the period July 3, 1995 through December 31, 1995 were
for services in all capacities to the Company and its subsidiaries (unless
otherwise indicated, with respect to Mr. Wilson, 50 percent of which amounts
were paid by the Company and 50 percent of which were paid by the Trust, and
with respect to Mr. Brown, all of which amounts were paid by the Trust, in
each case pursuant to the terms of their respective employment agreements as
described under the caption "Employment Agreements and Severance and
Change-in-Control Arrangements") and (b) the period January 1, 1995 through
July 2, 1995, and the years 1994 and 1993, were for services in all
capacities to the Debtor and its subsidiaries.
(2) Such bonus amount was awarded under the Company's 1995 Performance Bonus
Plan. See "Board Compensation Committee Report on Executive
Compensation -- Bonus."
(3) Such bonus was paid on the Effective Date pursuant to the Plan from funds of
the Debtor.
(4) Expressed in terms of the numbers of shares of the Company's Common Stock
underlying options granted during the year indicated. All such options were
granted under the 1995 Stock Option and Award Plan, subject to stockholder
approval of such plan. See "Proposal To Approve The 1995 Stock Option and
Award Plan."
(5) With respect to Messrs. Hawkins, Sartain, Hagelstein and Landry, the total
amounts indicated under "All Other Compensation" for 1995 consist of (a)
amounts contributed to match a portion of such employee's contributions
under a 401(k) plan (Mr. Hawkins, $3,000; Mr. Sartain, $3,000; Mr.
Hagelstein, $3,000; and Mr. Landry, $3,000), (b) excess premiums paid on
supplemental life insurance policies (Mr. Hawkins, $1,890; Mr. Sartain,
$731; Mr. Hagelstein, $1,079; and Mr. Landry, $1,890), (c) premiums paid on
long term disability insurance policies (Mr. Hawkins, $732; Mr. Sartain,
$732; Mr. Hagelstein, $732; and Mr. Landry, $732), and (d) personal use of a
business vehicle (Mr. Hawkins, $550; Mr. Sartain, $595; Mr. Hagelstein,
$1,171; and Mr. Landry, $384). One-half of such total amounts paid to or on
behalf of Messrs. Hawkins, Sartain, Hagelstein and Landry were paid by the
Company (with respect to the period July 3, 1995 through December 31, 1995)
and one-half were paid by J. Hawk (with respect to the period January 1,
1995 through July 2, 1995). With respect to Mr. Wilson, the total amount
indicated under "All Other Compensation" for 1995 consists of (a) amounts
contributed to match a portion of his contributions under a 401(k) plan
($3,000), (b) excess premiums paid on supplemental life insurance policies
($5,691), (c) personal use of a business vehicle ($1,875), (d) personal use
of a business apartment ($16,800) and (e) reimbursement of personal taxes
paid on each of the amounts set forth in items (a) through (d) of this
sentence ($6,787). $14,984 of such total amount paid to or on behalf of Mr.
Wilson was paid by the Company (with respect to the period July 3, 1995
through December 31, 1995) and $19,169 of such total amount was paid by the
Debtor (with respect to the period January 1, 1995 through July 2, 1995).
With respect to Mr. Brown, the total amount indicated under "All Other
Compensation" for 1995 consists of (a) amounts contributed to match a
portion of his contributions under a 401(k) plan ($2,507), (b) excess
premiums paid on supplemental life insurance policies ($1,633) and (c)
premiums paid on long term disability insurance policies ($732). $3,412 of
such total amount paid to or on behalf of Mr. Brown was paid by the Company
(with respect to the period July 3, 1995 through December 31, 1995) and
$1,460 of such total amount was paid by the Debtor (with respect to the
period January 1, 1995 through July 2, 1995).
(6) After the Effective Date, Mr. Brown resigned from the Company in order to
devote substantially all of his time to the Trust. See "Employment
Agreements and Severance and Change-in-Control Arrangements."
EMPLOYMENT AGREEMENTS AND SEVERANCE AND
CHANGE-IN-CONTROL ARRANGEMENTS
The Company entered into an employment agreement with C. Ivan Wilson in
connection with the consummation of the Plan. Under the terms of such agreement,
Mr. Wilson will serve as Vice-Chairman of the Company's Board of Directors for a
term of three years, beginning on the Effective Date. Also under such terms, Mr.
Wilson (1) was paid $500,000 on the Effective Date (from funds of the Debtor),
(2) will be paid an annual salary of $250,000 (50 percent of which is paid by
the Company and 50 percent of which is paid by
10
<PAGE> 13
the Trust so as to reflect Mr. Wilson's obligations thereunder to assist in the
administration of the Trust assets) and (3) if certain conditions with respect
to the payment of certain claims and interests under the Plan (as prescribed by
such agreement) are satisfied, such determination to be made by the Portfolio
Committee of the Trust (which committee administers the Trust), will be paid
additional, separate conditional bonuses in an aggregate amount up to $500,000
plus 1.67 percent of specified additional payments made to the holders of the
Trust's Class B and Class C Certificates. Mr. Wilson may terminate his
employment under such agreement upon thirty days advance notice (if such
termination occurs within the three year term thereof, Mr. Wilson will forfeit
any unpaid conditional bonuses and his annual salary will immediately cease).
The Company may terminate Mr. Wilson's employment under such agreement for cause
(as such term is defined therein), for certain additional specified reasons, for
disability or for death (if Mr. Wilson's employment is terminated by the Company
for reasons other than such cause or such additional specified reasons, Mr.
Wilson will receive a severance payment equal to one year's annual salary;
additionally, the Trust has certain rights to prevent such termination, in which
case the Trust must assume all obligations of the Company to Mr. Wilson under
such agreement).
The Company also entered into an employment agreement with Robert W. Brown
in connection with the consummation of the Plan, under which Mr. Brown served as
Executive Vice President of the Company, on substantially the same terms as
those set forth in Mr. Wilson's agreement (except that the Trust is responsible
for all of Mr. Brown's annual salary). After the Effective Date, Mr. Brown
resigned from the Company in order to devote substantially all of his time to
the liquidating business of the Trust and, in connection therewith, entered into
an employment agreement with the Trust on substantially the same terms as his
employment agreement with the Company. Mr. Brown has been a member of the
Portfolio Committee of the Trust since the Effective Date, which committee
administers the Trust.
Under the 1995 Stock Option and Award Plan and the 1996 Stock Option and
Award Plan, each of which is subject to stockholder approval, a Change in
Control (as defined therein) results in the vesting of awards thereunder, in
each case as described under the respective captions "Proposal to Approve the
1995 Stock Option and Award Plan -- Awards Under the 1995 Stock Option and Award
Plan -- Changes in Control" and "Proposal to Approve the 1996 Stock Option and
Award Plan -- Awards Under the 1996 Stock Option and Award Plan -- Changes in
Control."
OPTION GRANTS
The following table sets forth certain information with respect to grants
of stock options under the 1995 Stock Option and Award Plan during 1995, subject
to stockholder approval, to the Company's Chief Executive Officer and each of
the other executive officers of the Company named in the Summary Compensation
Table under the caption "Executive Compensation." In addition, there are shown
hypothetical gains or "option spreads" that could be realized for the respective
options, based on arbitrarily assumed rates of annual compound stock price
appreciation of 5 percent and 10 percent from the date the options were granted
over the full option terms.
OPTION GRANTS IN 1995
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------
PERCENT
OF POTENTIAL
TOTAL REALIZABLE VALUE AT
NUMBER OPTIONS EXERCISE ASSUMED ANNUAL
OF GRANTED OR RATES OF STOCK
SHARES TO BASE PRICE APPRECIATION
UNDERLYING EMPLOYEES PRICE FOR OPTION TERM(3)
OPTIONS IN (PER EXPIRATION -------------------
NAME(1) GRANTED(#)(2) 1995 SHARE) DATE 5%($) 10%($)
------- ------------- ---- ------ ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
James R. Hawkins.................. 22,500 9.8 22.00 10/27/2000 136,759 302,202
C. Ivan Wilson.................... 13,000 5.7 20.00 10/27/2005 163,513 414,373
James T. Sartain.................. 24,800 10.8 20.00 10/27/2005 311,932 790,496
Rick R. Hagelstein................ 24,800 10.8 20.00 10/27/2005 311,932 790,496
Matt A. Landry, Jr................ 21,300 9.3 20.00 10/27/2005 267,909 678,934
</TABLE>
(See notes on following page)
11
<PAGE> 14
- ---------------
(1) No grants of stock options under the 1995 Stock Option and Award Plan were
made to Robert W. Brown during 1995. After the Effective Date, Mr. Brown
resigned from the Company in order to devote substantially all of his time
to the Trust. See "Employment Agreements and Severance and Change-in-Control
Arrangements."
(2) All options granted to the named executive officers were granted as of
October 27, 1995, subject to stockholder approval of the 1995 Stock Option
and Award Plan, at exercise prices equal to the fair market value of the
Common Stock on the date of grant (except for those options granted to Mr.
Hawkins, with respect to which the exercise price was equal to 110 percent
of such fair market value). The shares of Common Stock underlying such
options will vest as follows: (1) with respect to all such options granted
to Messrs. Hawkins, Sartain, Hagelstein and Landry, in five equal,
consecutive annual installments, commencing on the first anniversary of the
grant date, and (2) with respect to all such options granted to Mr. Wilson,
in four equal, consecutive annual installments, commencing on the first
anniversary of the grant date. Subject to the terms of the 1995 Stock Option
and Award Plan, such options may be exercised to purchase all or any portion
of such vested shares at any time prior to the termination thereof. The
unexercised portions of such options, if any, terminate as follows: (1) with
respect to all such options granted to Mr. Hawkins, five years from the
grant date, and (2) with respect to all such options granted to Messrs.
Wilson, Sartain, Hagelstein and Landry, ten years from the grant date. Such
options are non-transferable other than by will or the laws of descent and
distribution. Under the 1995 Stock Option and Award Plan, the right to
exercise options with respect to unvested shares may be accelerated in
certain circumstances. See "Proposal to Approve the 1995 Stock Option and
Award Plan -- Awards Under the 1995 Stock Option and Award Plan -- Changes
in Control."
(3) These amounts represent certain assumed rates of appreciation only. There
can be no assurance that the amounts reflected will be achieved.
OPTION EXERCISES AND YEAR-END VALUES
The following table sets forth, for the Company's Chief Executive Officer
and each of the other executive officers of the Company named in the Summary
Compensation Table under the caption "Executive Compensation," the number of
shares of Common Stock underlying both exercisable and non-exercisable stock
options held by such persons as of December 31, 1995, and the year-end values
for unexercised "in-the-money" options, which represent the positive spread
between the exercise price of any such options and the year-end market price of
the Common Stock. All such options were granted under the 1995 Stock Option and
Award Plan, subject to stockholder approval of such plan, and no such options
were exercisable during 1995.
AGGREGATED 1995 OPTION EXERCISES
AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT DECEMBER 31, IN-THE-MONEY OPTIONS AT
1995(#) DECEMBER 31, 1995($)(2)
----------------------------- -----------------------------
NAME(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------ ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
James R. Hawkins.................... -- 22,500 -- --
C. Ivan Wilson...................... -- 13,000 -- 6,500
James T. Sartain.................... -- 24,800 -- 12,400
Rick R. Hagelstein.................. -- 24,800 -- 12,400
Matt A. Landry, Jr.................. -- 21,300 -- 10,650
</TABLE>
- ---------------
(1) No grants of stock options under the 1995 Stock Option and Award Plan were
made to Robert W. Brown during 1995. After the Effective Date, Mr. Brown
resigned from the Company in order to devote substantially all of his time
to the Trust. See "Employment Agreements and Severance and Change-in-Control
Arrangements."
(2) Aggregate market value (based on December 29, 1995 stock price of $20 1/2
per share) of the shares of Common Stock underlying such options, less the
aggregate exercise price payable.
12
<PAGE> 15
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following report concerning the specific factors, criteria and goals
underlying decisions on payments and awards of compensation to each of the
executive officers of the Company for fiscal year 1995 is provided by the
Compensation Committee of the Company's Board of Directors.
GENERAL
Recommendations regarding compensation of the Company's executive officers
are prepared by the Compensation Committee of the Board of Directors and are
subject to the review, modification and approval of the Board, except that (1)
the Chief Executive Officer does not participate in the preparation of
recommendations, or the review, modification or approval thereof, with respect
to his compensation and (2) all such recommendations, reviews, modifications and
approvals with respect to awards under the 1995 Stock Option and Award Plan are
made solely by the Stock Option Subcommittee of the Compensation Committee.
The Company's compensation program is designed to enable the Company to
attract, motivate and retain high-quality senior management by providing a
competitive total compensation opportunity based on performance. Toward this
end, the Company provides for competitive base salaries, annual variable
performance incentives payable in cash for the achievement of financial
performance goals, and long-term, stock-based incentives which strengthen the
mutuality of interests between senior management and the Company's stockholders.
Section 162(m) ("Section 162(m)") of the Internal Revenue Code of 1986, as
amended (the "Code"), provides that no deduction for federal income tax purposes
shall be allowed to a publicly held corporation for applicable employee
remuneration with respect to any covered employee of the corporation to the
extent that the amount of such remuneration for the taxable year with respect to
such employee exceeds $1.0 million. For purposes of this limitation, the term
"covered employee" generally includes the chief executive officer of the
corporation and the four highest compensated officers of the corporation (other
than the chief executive officer). The term "applicable employee remuneration"
generally means, with respect to any covered employee for the taxable year, the
aggregate amount allowable as a federal income tax deduction for such taxable
year for remuneration for services performed by such employee (whether or not
during the taxable year); provided, however, that applicable employee
remuneration does not include, among other items, certain remuneration payable
solely on account of the attainment of one or more performance goals
("performance-based compensation"). It is the Company's general intention that
the remuneration paid to its covered employees not exceed the deductibility
limitation established by Section 162(m). Nevertheless, due to the fact that not
all remuneration paid to covered employees may qualify as performance-based
compensation, it is possible that the Company's deduction for remuneration paid
to any covered employee during a taxable year may be limited by Section 162(m).
SALARIES
Salaries for the year 1995 for each of the Company's executive officers,
including its Chief Executive Officer, were determined based upon such officer's
level of responsibility, time with the Company, contribution to the Company and
individual performance. The evaluation of these factors was subjective, and no
fixed, relative weights were assigned thereto.
BONUS
In 1995, the Compensation Committee of the Board of Directors recommended
to the Board, and the Board approved, the Company's 1995 Performance Bonus Plan
(the "1995 Performance Bonus Plan"). Under the 1995 Performance Bonus Plan, all
executive officers who were employed by the Company or its subsidiaries during
calendar year 1995 and who remained so employed on March 18, 1996 received, as a
bonus, for services rendered to the Company or such subsidiary during 1995, a
prescribed portion of $1,250,000 (which is an amount equal to fifty percent of
the Company's net profits after a twenty-five percent return on stockholders'
equity (after payment or accrual of preferred dividends) calculated for the
period beginning July 3, 1995 and ending December 31, 1995). Each of the
executive officers of the Company named
13
<PAGE> 16
in the Summary Compensation Table under the caption "Executive Compensation"
received such a bonus for the year 1995 pursuant to the 1995 Performance Bonus
Plan, except for Messrs. Wilson and Brown.
STOCK OPTIONS
The Stock Option Subcommittee of the Compensation Committee believes that
stock options are critical in motivating and rewarding the creation of long-term
shareholder value, and the subcommittee has established a policy of awarding
stock options each year based on the continuing progress of the Company as well
as on individual performance.
In October of 1995, the Stock Option Subcommittee recommended, and the
Board of Directors approved, the grant of 229,600 stock options under the 1995
Stock Option and Award Plan (173,600 of which were granted to the Company's
executive officers), subject to stockholder approval of such plan. The exercise
price with respect to all such grants was equal to or greater than the fair
market value of the underlying Common Stock at the date of grant so that the
holders of such options will benefit from such options only when, and to the
extent, the price of the Common Stock increases after such grant. The
performance of individual executive officers and other key employees was
considered by the Stock Option Subcommittee in allocating such grants, taking
into account the Company's performance, each individual's contributions thereto
and specific accomplishments in each individual's area of responsibility.
The Summary Compensation Table under the caption "Executive Compensation"
sets forth the number of options granted under the 1995 Stock Option and Award
Plan to the executive officers of the Company named therein (including the Chief
Executive Officer), all of which grants are subject to stockholder approval of
such plan.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Recommendations regarding compensation of the Company's Chief Executive
Officer are prepared by those members of the Compensation Committee, and are
subject to the review, modification and approval of those members of the Board,
other than the Chief Executive Officer. Such recommendations, reviews,
modifications and approvals for 1995 were based on the Chief Executive Officer's
level of responsibility, time with the Company, individual performance and
significant contributions to the successful implementation of several important
decisions that are expected to benefit the Company in future years, including
the consummation of the Merger and the acquisition of various purchased asset
portfolios.
THE COMPENSATION COMMITTEE
James R. Hawkins, Chairman
David W. MacLennan
Bart A. Brown, Jr.
14
<PAGE> 17
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Hawkins (Chairman), MacLennan and Bart A. Brown, Jr. served as
members of the Compensation Committee of the Board of Directors during 1995.
Messrs. MacLennan and Brown served as members of the Stock Option Subcommittee
of the Compensation Committee during 1995. Mr. Hawkins was Chairman of the Board
and Chief Executive Officer of the Company, and Chairman of the Board and Chief
Executive Officer of each of the corporate general partners of each of the
affiliated acquisition partnerships through which the Company acquires interests
in various financial asset pools, during 1995. See "Certain Relationships and
Related Transactions." Neither of Messrs. MacLennan or Brown was an officer or
employee of the Company or any of its subsidiaries during 1995 or any prior
year. The Company leases the office space for its principal executive offices
from a trust created for the benefit of the children of Mr. Hawkins. See
"Certain Relationships and Related Transactions."
CUMULATIVE TOTAL SHAREHOLDER RETURN
The following performance graph (the "Performance Graph") compares the
cumulative total shareholder return on the Company's Common Stock, based on the
market price thereof, with the cumulative total return of the CRSP Total Return
Index for the Nasdaq Stock Market (US) prepared for the National Association of
Securities Dealers Automated Quotations System ("NASDAQ") by the Center for
Research in Security Prices ("CRSP," and such index, the "NASDAQ Market Index")
and the CRSP Financial Stocks Index prepared for NASDAQ by CRSP (the "NASDAQ
Industry Index") for the period beginning on July 3, 1995 (the date the
Company's Common Stock commenced trading on NASDAQ) and ending on December 29,
1995 (the last trading day on NASDAQ during 1995). Cumulative total shareholder
return is based on an annual total return, which assumes the reinvestment of all
dividends for the period shown and assumes that $100 was invested on July 3,
1995 in each of the Company's Common Stock, the NASDAQ Market Index and the
NASDAQ Industry Index. The Company has not declared any dividends during the
period covered by the Performance Graph. The results shown in the Performance
Graph are not necessarily indicative of future performance.
COMPARISON OF JULY 3, 1995 -- DECEMBER 29, 1995 CUMULATIVE TOTAL SHAREHOLDER
RETURN
AMONG FIRSTCITY FINANCIAL CORPORATION, NASDAQ MARKET INDEX AND NASDAQ INDUSTRY
INDEX
<TABLE>
<CAPTION>
FIRSTCITY NASDAQ
FINANCIAL NASDAQ MARKET INDUSTRY
CORPORATION INDEX INDEX
<S> <C> <C> <C>
JULY 3, 1995 100 100 100
DECEMBER 29, 1995 171 113 122
</TABLE>
[THE ABOVE TABLE WAS ALSO REPRESENTED BY A GRAPH IN THE PRINTED MATERIAL]
15
<PAGE> 18
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company owns equity interests in various purchased asset portfolios
through limited partnerships ("Acquisition Partnerships") in which a corporate
affiliate of the Company is the sole general partner and the Company and other
nonaffiliated investors are limited partners. Certain directors and executive
officers of the Company may also serve as directors and/or executive officers of
such general partner, but receive no additional compensation from or on behalf
of such general partner for serving in such capacity. The Company provides asset
servicing to such Acquisition Partnerships pursuant to servicing agreements
between the Company and such Acquisition Partnerships.
The Company has entered into certain agreements with Cargill under which
Cargill provides the Company a fixed monthly payment to defray overhead expenses
and to reimburse one-half of all approved due diligence expenses incurred by the
Company in connection with evaluating prospective acquisitions of purchased
asset portfolios. Under such agreements, Cargill has the right to participate as
an equity investor in such acquisitions. Cargill also provides the Company with
a $25 million revolving credit facility, expiring on December 31, 1996, to fund
the Company's purchased asset portfolio acquisitions and for certain other
working capital purposes. Borrowings under such facility bear interest at LIBOR
plus 5% and are secured by substantially all of the Company's unencumbered
assets. As of December 31, 1995, outstanding borrowings under such facility were
$5.2 million. David W. MacLennan, a director of the Company, is an officer of
certain affiliates of Cargill.
Pursuant to a noncancellable operating lease, the Company leases the office
space for its principal executive offices in Waco, Texas from a trust created
for the benefit of the children of James R. Hawkins, the Chairman of the Board
and Chief Executive Officer of the Company. Such lease expires in December of
2001 and contains an option in favor of the Company pursuant to which the
Company may renew such lease for two additional five-year periods, with
escalating lease payments. Rental expenses under such lease for calendar year
1995 were $90,000. As of December 31, 1995, the future minimum lease payments
for each of the next five years under such lease are $90,000 per year. The
Company believes that the terms of such lease are generally as favorable to the
Company as the terms it would receive from an independent third party.
Pursuant to the Plan, substantially all of the Debtor's assets were
transferred to the Trust or subsidiaries of the Trust, to be liquidated pursuant
to a liquidating trust agreement. Under the terms of such agreement, the
Company, as the sole holder of the Trust's Class A Certificate, will receive
certain amounts from the Trust. See "Introduction." Additionally pursuant to the
Plan, the liquidation of the Debtor's assets transferred to the Trust is
serviced by the Company pursuant to an investment management agreement between
the Trust and the Company. Under the terms thereof, the Company will receive an
incentive fee equal to (1) three percent of all cash proceeds derived from the
assets owned by the Trust and its subsidiaries (including assets acquired
pursuant to a loss-sharing settlement in connection with the Plan) ("Net Cash
Proceeds") plus (2) five percent of the Net Cash Proceeds (excluding net
proceeds realized from certain contingent asset claims under the Plan) realized
above $248,600,000 (the "Estimated Threshold Collection Amount") up to an amount
equal to $25 million in excess of the Estimated Threshold Collection Amount; ten
percent of the Net Cash Proceeds (excluding net proceeds realized from such
contingent asset claims) realized above $25 million in excess of the Estimated
Threshold Collection Amount up to an amount equal to $50 million in excess of
the Estimated Threshold Collection Amount; and fifteen percent of the Net Cash
Proceeds (excluding net proceeds realized from such contingent asset claims)
realized above $50 million in excess of the Estimated Threshold collection
Amount.
In connection with the consummation of the Plan, J-Hawk formed a new
corporation, Combined Financial Corporation, a Texas corporation ("CFC"), and,
prior to the Merger, transferred certain of its assets and indebtedness to CFC
(which assumed such indebtedness) (such transfer and assumption, the "Spin-
off"), the stockholders of J-Hawk receiving the same proportionate common stock
interests in CFC as they had in J-Hawk. As a result of the Spin-off, certain
directors and executive officers of J-Hawk, who are also directors and executive
officers of the Company, became directors and/or executive officers of CFC, as
well as stockholders of CFC. The Company has entered into a servicing agreement
with CFC under which the
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Company provides asset servicing to CFC for a fee based on a percentage of
assets serviced. The fee paid by CFC to the Company in 1995 was approximately
$94,000.
In connection with the Spin-off, J-Hawk sold approximately $12 million
(allocated cost) of loans to a limited partnership owned by James R. Hawkins,
James T. Sartain and Rick R. Hagelstein, respectively the Chairman of the Board
and Chief Executive Officer, the President and Chief Operating Officer and a
director, and the Executive Vice President and Chief Credit Officer and a
director, of the Company. The Company recognized approximately $3 million in
gain from such sale. The Company has entered into a servicing agreement with
such partnership under which the Company provides asset servicing to such
partnership for a fee based on a percentage of assets serviced. The fee paid by
such partnership to the Company in 1995 was approximately $193,000.
PROPOSAL TO APPROVE THE 1995 STOCK OPTION AND AWARD PLAN
The Board of Directors of the Company has adopted, subject to stockholder
approval at the Annual Meeting, the Company's 1995 Stock Option and Award Plan.
If approved by stockholders, the 1995 Stock Option and Award Plan will become
effective as of October 27, 1995 (the "1995 Plan Effective Date"). 229,600 stock
options have been granted under the 1995 Stock Option and Award Plan, subject to
stockholder approval of such plan at the Annual Meeting. See "New Plan
Benefits." Certain of such options were granted to certain executive officers of
the Company, as set forth in the Summary Compensation Table under the caption
"Executive Compensation." The 1995 Stock Option and Award Plan is intended to
provide the Stock Option Subcommittee of the Compensation Committee of the
Company's Board of Directors broad discretion to fashion the terms of awards to
provide eligible participants with such stock-based incentives as such
subcommittee deems appropriate.
The following summary of certain terms of the 1995 Stock Option and Award
Plan is qualified in its entirety by reference to the full text thereof, which
is set forth as Exhibit A attached hereto.
ADMINISTRATION
The 1995 Stock Option and Award Plan will be administered by the Stock
Option Subcommittee of the Compensation Committee of the Board of Directors, all
the members of which will be eligible to administer such plan pursuant to Rule
16b-3(c)(2) promulgated under the Exchange Act. Subject to the limitations set
forth in the 1995 Stock Option and Award Plan, such plan vests broad powers in
such subcommittee to administer such plan, including authority to (1) select the
persons to be granted awards thereunder, (2) determine the size and type of
awards granted thereunder, (3) construe and interpret such plan, (4) establish,
amend or waive rules and regulations for the administration of such plan and (5)
determine whether an award, award agreement or payment of an award should be
amended.
NUMBER OF SHARES AVAILABLE
The 1995 Stock Option and Award Plan provides for the grant of up to
230,000 shares of Common Stock. Under certain circumstances, shares subject to
an award that remain unissued upon termination of the award will become
available for additional awards under such plan. In the event of a stock split,
recapitalization or similar event, or a corporate transaction, such as a merger,
consolidation or similar event, the Stock Option Subcommittee will equitably
adjust the aggregate number of shares subject to such plan and the number, class
and price of shares subject to outstanding awards.
AWARDS UNDER THE 1995 STOCK OPTION AND AWARD PLAN
AWARDS AND ELIGIBILITY. The 1995 Stock Option and Award Plan permits the
issuance of the following awards: (1) nonqualified stock options ("1995 Plan
NQSOs") and incentive stock options ("1995 Plan ISOs"), (2) performance shares
and (3) restricted stock. In general, any key employee of the Company or any
subsidiary of the Company, including key employees who are also directors, as
well as any other persons, including consultants, independent contractors or
other service providers, are eligible to receive awards under
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<PAGE> 20
such plan. Notwithstanding the foregoing, no person who is a member of the Stock
Option Subcommittee is eligible to receive awards under such plan, and only
employees of the Company are eligible to receive grants of 1995 Plan ISOs,
performance shares or restricted stock under such plan.
STOCK OPTIONS. Under the 1995 Stock Option and Award Plan, the Stock Option
Subcommittee has discretion to determine the number of stock options to be
granted thereunder to any participant, but no participant who is a "covered
employee" ("1995 Plan Covered Employee") (as such term is defined in the
regulations promulgated under Section 162(m) of the Code) may be granted stock
options to purchase more than 50,000 shares during any one plan year. The Stock
Option Subcommittee may grant 1995 Plan NQSOs, 1995 Plan ISOs or any combination
thereof to participants. 1995 Plan ISOs, however, may only be granted to
employees of the Company or its subsidiaries, and may only be granted if the
aggregate fair market value of the Common Stock underlying 1995 Plan ISOs and
other incentive stock options granted under all incentive stock option plans of
the Company that become exercisable for the first time by a participant during
any calendar year is equal to or less than $100,000. 1995 Plan ISOs granted
under the 1995 Stock Option and Award Plan provide for the purchase of Common
Stock at prices not less than 100 percent of the fair market value thereof on
the date such option is granted (or 110 percent with respect to holders of more
than ten percent of the combined voting power of all classes of stock of the
Company). 1995 Plan NQSOs granted under the 1995 Stock Option and Award Plan
provide for the purchase of Common Stock at prices determined by the Stock
Option Subcommittee, but in no event less than 85 percent of the fair market
value thereof on the date such option is granted. No stock option granted under
the 1995 Stock Option and Award Plan is exercisable later than the tenth
anniversary date of its grant (or, as to 1995 Plan ISOs, fifth anniversary with
respect to holders of more than ten percent of the combined voting power of all
classes of stock of the Company).
Under the 1995 Stock Option and Award Plan, stock options are exercisable
at such times and subject to such restrictions and conditions as the Stock
Option Subcommittee approves. The option exercise price is payable in cash or,
if approved by the Stock Option Subcommittee, in shares of Common Stock having a
fair market value equal to the exercise price, or, in part, by delivering to the
Company a promissory note on such terms as the Stock Option Subcommittee shall
determine in its discretion, along with a perfected pledge of Common Stock as
security therefor, which Common Stock must have a fair market value at least
equal to the principal amount of such note (such principal amount may not exceed
ninety percent of the aggregate purchase price of the Common Stock then being
purchased pursuant to such exercise, unless otherwise permitted by applicable
law), or by a combination of any of the above means of payment. The Stock Option
Subcommittee may also allow cashless exercises or other means of payment
consistent with applicable law. Upon termination of a participant's employment
due to death, disability or retirement, all stock options outstanding will be
exercisable for the shorter of their remaining term or one year after
termination of employment in the case of death, one year after termination of
employment in the case of disability, and three months after termination of
employment in the case of retirement. Upon termination of employment of a
participant other than for any reason set forth above, all stock options held by
such participant which are not vested as of the effective date of such
termination will be forfeited; provided that, the Stock Option Subcommittee, in
its sole discretion, may immediately vest all or any portion of the stock
options of such participant not vested as of such date. In the case of
termination of employment by the Company without cause, a participant may
exercise any vested stock options for three months following the termination of
employment, and in the case of termination of employment by the Company for
cause or voluntary termination of employment by the participant (other than due
to retirement), the participant's stock options will be forfeited immediately
upon such termination.
A holder of stock options may be able to transfer such options, under
certain circumstances, to members of such holder's immediate family (as defined
in the 1995 Stock Option and Award Plan), to one or more trusts for the benefit
of such holder's immediate family or to partnerships in which immediate family
members are the only partners, if such holder's award agreement expressly
permits such transfer and such holder does not receive any consideration in any
form whatsoever for such transfer. Other than the foregoing, stock options are
not transferable by a holder other than by will or applicable laws of descent
and distribution.
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PERFORMANCE SHARES. Under the 1995 Stock Option and Award Plan, the Stock
Option Subcommittee may grant performance shares to employees of the Company or
its subsidiaries in such amounts, and subject to such terms and conditions, as
the Stock Option Subcommittee in its discretion determines; provided that, no
participant who is a 1995 Plan Covered Employee may be granted more than 50,000
performance shares with respect to any performance period. Each performance
share will have a value equal to the fair market value of a share of Common
Stock on the date the performance share is earned. The Stock Option Subcommittee
in its discretion will set performance goals to be achieved over performance
periods of not less than two years. The extent to which the performance goals
are met will determine the number of performance shares earned by participants.
The performance measure to be used for purposes of grants to 1995 Plan Covered
Employees is one or more of the following: total shareholder return, return on
equity, earnings per share and ratio of operating overhead to operating revenue,
unless and until the Company's stockholders vote to change such performance
measures. In the event that applicable tax and/or securities laws change to
permit the Stock Option Subcommittee discretion to alter the governing
performance measures without obtaining stockholder approval, the Stock Option
Subcommittee will have the sole discretion to make such changes without
obtaining stockholder approval. In any event, with respect to employees that are
not 1995 Plan Covered Employees, the Stock Option Subcommittee may approve
performance measures not listed above without stockholder approval.
After the applicable performance period has ended, the Stock Option
Subcommittee will certify the extent to which the established performance goals
have been achieved, and each holder of performance shares will be entitled to
receive payout on the number of performance shares, if any, earned by such
holder over the performance period. The grantee of a performance share award
will receive payment within seventy-five days following the end of the
applicable performance period, in cash or shares of Common Stock which have, as
of the close of the applicable performance period, an aggregate fair market
value equal to the value of the earned performance shares (or a combination of
cash and such shares). If the employment of a participant is terminated by
reason of death, disability or retirement or by the Company without cause during
a performance period, the participant will receive a prorated payout with
respect to the performance shares earned, which will be determined by the Stock
Option Subcommittee, in its sole discretion, and will be based upon the length
of time the participant held the performance shares during the applicable
performance period and upon achievement of the established performance goals.
Such payment will be made at the same time as payments are made to participants
whose employment did not terminate during the applicable performance period. If
a participant's employment is terminated for any other reason, all performance
shares will be forfeited by the participant to the Company. Unless otherwise
provided by the Stock Option Subcommittee in an award agreement, performance
shares which are not yet earned may not be sold, transferred, pledged, assigned
or otherwise alienated or hypothecated, other than by will or by the laws of
descent and distribution.
RESTRICTED STOCK. Under the 1995 Stock Option and Award Plan, the Stock
Option Subcommittee may from time to time grant restricted stock awards to
employees of the Company or its subsidiaries. Each grant of restricted stock
will be evidenced by a written award agreement between the participant and the
Company setting forth the terms and conditions of the grant, as determined by
the Stock Option Subcommittee, in its discretion, to be necessary or desirable.
Such terms may include a requirement for payment by the participant to the
Company for the restricted stock which is granted, with respect to which the
Stock Option Subcommittee may establish a purchase price below fair market
value.
Each grant of restricted stock will be subject to restrictions, determined
by the Stock Option Subcommittee in its discretion, for a period (the "1995 Plan
Restricted Period") of at least one year (unless otherwise provided by the Stock
Option Subcommittee). Such restrictions may include only the requirement of
continued employment or may include other performance based criteria established
by the Stock Option Subcommittee. The Stock Option Subcommittee may, after a
grant, in its discretion, shorten the 1995 Plan Restricted Period or waive any
condition to the lapse of the restrictions. The award agreement may, at the
discretion of the Stock Option Subcommittee and subject to any prescribed terms
and conditions, also provide for the lapse of restrictions upon the occurrence
of such specified events as a change in control of the Company or the
termination of a participant's employment by reason of such participant's death,
disability, retirement or discharge without cause.
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During the 1995 Plan Restricted Period, the participant will have all the
rights of a Company stockholder, including the right to receive dividends and
vote the shares of restricted stock, with certain exceptions, including the
exception that cash dividends will be paid either in cash or in restricted
stock, as the Stock Option Subcommittee determines. In addition, the restricted
stock may not be sold, transferred, assigned or encumbered during the 1995 Plan
Restricted Period and unless and until all restrictions have lapsed. All shares
of restricted stock that have not vested will be forfeited unless the
participant has remained a full-time employee of the Company or its subsidiaries
until the expiration or termination of the 1995 Plan Restricted Period and all
other applicable conditions have been satisfied. Unless otherwise provided by
the Stock Option Subcommittee in an award agreement, no restricted stock may be
assigned, encumbered or transferred except by will or the laws of descent and
distribution.
CHANGES IN CONTROL. Under the 1995 Stock Option and Award Plan, upon the
occurrence of a Change in Control (as defined below), (1) all stock options
outstanding thereunder will become fully vested and immediately exercisable; (2)
the target payout attainable under all performance shares outstanding thereunder
will be deemed to have been fully earned for the entire performance period and,
within thirty days of such Change in Control, such performance shares will be
paid out in accordance with the terms thereof (provided that, there will not be
an accelerated payout with respect to performance shares granted less than six
months prior to the effective date of such Change in Control), (3) all
restrictions on restricted stock outstanding thereunder will lapse and such
restricted stock will be delivered to the participant in accordance with the
terms thereof (provided that, there will not be an accelerated delivery with
respect to restricted stock granted less than six months prior to the effective
date of such Change in Control) and (4) the Stock Option Subcommittee may, in
its discretion, make any other modifications to any awards thereunder as
determined by the Stock Option Subcommittee to be deemed appropriate before the
effective date of such Change in Control.
Under the 1995 Stock Option and Award Plan, a "Change in Control" means:
(1) an acquisition by any person of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of Common Stock
or voting securities of the Company entitled to vote generally in the
election of directors; provided that, such acquisition would result in such
person beneficially owning twenty-five percent or more of Common Stock or
twenty-five percent or more of the combined voting power of the Company's
voting securities; and provided further that, immediately prior to such
acquisition such person was not a direct or indirect beneficial owner of
twenty-five percent or more of Common Stock or twenty-five percent or more
of the combined voting power of the Company's voting securities, as the
case may be; or
(2) The approval of the Company's stockholders of a reorganization,
merger, consolidation, complete liquidation or dissolution of the Company,
the sale or disposition of all or substantially all of the assets of the
Company or similar corporate transaction or, if consummation of such
corporate transaction is subject, at the time of such approval by
stockholders, to the consent of any government or governmental agency, the
obtaining of such consent (either explicitly or implicitly); or
(3) A change in the composition of the Company's Board of Directors
such that the individuals who, as of the Effective Date, constitute the
Board cease for any reason to constitute at least a majority of the Board;
provided that, any individual who becomes a member of the Board subsequent
to the Effective Date whose election, or nomination for election by the
Company's stockholders, was approved by at least a majority of those
individuals who are members of the Board and who were also members of such
incumbent Board (or deemed to be such pursuant to this proviso) shall be
considered as though such individual were a member of such incumbent Board;
and provided further that, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened election
contest (within the meaning of Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a person other than the Board shall
not be so considered as a member of such incumbent Board.
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Notwithstanding the foregoing, the following will not constitute a Change in
Control: (a) any acquisition of Common Stock by, or consummation of a
transaction of the type described in subparagraph (2) above with, any subsidiary
of the Company or an employee benefit plan (or related trust) sponsored or
maintained by the Company or an affiliate thereof; or (b) any acquisition of
Common Stock, or consummation of such a transaction, following which more that
fifty percent of the common stock then outstanding of the corporation resulting
from such acquisition or transaction and more than fifty percent of the combined
voting power of the voting securities then outstanding of such corporation
entitled to vote generally in the election of directors, is then beneficially
owned, directly or indirectly, by all or substantially all of the individuals
and entities who were beneficial owners of Common Stock and the Company's voting
securities, respectively, immediately prior to such acquisition or transaction
in substantially the same proportions as their ownership, immediately prior to
such acquisition or transaction, of Common Stock and the Company's voting
securities, as the case may be.
AMENDMENT AND TERMINATION
The 1995 Stock Option and Award Plan may be amended, modified or terminated
by the Company's Board of Directors, subject to stockholder approval if such an
amendment would materially modify the eligibility requirements thereunder,
increase the total number of shares allowed to be issued thereunder, extend the
term thereof, require stockholder approval under Rule 16b-3 under the Exchange
Act, or, in any case, if the Board determines that stockholder approval is
appropriate. Unless earlier terminated by the Board of Directors, the 1995 Stock
Option and Award Plan will terminate on the day prior to the tenth anniversary
of the 1995 Plan Effective Date.
SECTION 162(m)
At all times when the Stock Option Subcommittee determines that it is
desirable to satisfy the conditions of Section 162(m) of the Code, all awards
granted under the 1995 Stock Option and Award Plan will comply with such
conditions. The Stock Option Subcommittee is nevertheless empowered to grant
awards that would not constitute "performance based" compensation under Section
162(m), which may vest based solely on continued employment rather than any
performance based criteria. If changes are made to Section 162(m) to permit
greater flexibility with respect to any awards available under the 1995 Stock
Option and Award Plan, the Stock Option Subcommittee may, subject to the
restrictions set forth in the preceding paragraph regarding amendment thereof,
make any adjustments it deems appropriate.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary of certain federal income tax consequences with
respect to the 1995 Stock Option and Award Plan is not comprehensive and is
based upon laws and regulations currently in effect. Such laws and regulations
are subject to change.
STOCK OPTIONS. There are generally no federal income tax consequences
either to the employee receiving stock options (the "1995 Plan Optionee") or to
the Company upon the grant of a stock option under the 1995 Stock Option and
Award Plan. On exercise of a 1995 Plan ISO, the 1995 Plan Optionee will not
recognize any income and the Company will not be entitled to a deduction for tax
purposes, although such exercise may give rise to a liability for such optionee
under the Alternative Minimum Tax provisions of the Code. Generally, if the 1995
Plan Optionee disposes of shares acquired upon exercise of a 1995 Plan ISO
within two years of the date of grant or one year of the date of exercise, such
optionee will recognize compensation income and the Company will be entitled to
a deduction for tax purposes in the taxable year in which such disposition
occurred in the amount of the excess of the fair market value of the shares of
Common Stock on the date of exercise over the option exercise price (or the gain
on sale, if less). Otherwise, the Company will not be entitled to any deduction
for tax purposes upon dispositions of such shares, and the entire gain for the
1995 Plan Optionee will be treated as a capital gain. On exercise of a 1995 Plan
NQSO, the amount by which the fair market value of the Common Stock on the date
of exercise exceeds the option exercise price will generally be taxable to the
1995 Plan Optionee as compensation income and will generally be deductible for
tax purposes by the Company. The dispositions of shares of Common Stock acquired
upon exercise of a 1995 Plan
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NQSO will generally result in a capital gain or loss for the 1995 Plan Optionee,
but will have no tax consequences for the Company.
PERFORMANCE SHARES. The grant of a performance share award will not result
in income for the grantee or in a tax deduction for the Company. Upon the
settlement of such a right or award, the grantee will recognize ordinary income
equal to the fair market value of any shares of Common Stock and/or any cash
received and the Company will be entitled to a tax deduction in the same amount.
RESTRICTED STOCK. The Company is of the opinion that the participant will
realize compensation income in an amount equal to the fair market value of the
restricted stock (whether received as a grant or as a dividend), less any amount
paid for such restricted stock, at the time when the participant's rights with
respect to such restricted stock are no longer subject to a substantial risk of
forfeiture, unless the participant elected, pursuant to a special election
provided in the Code, to be taxed on the restricted stock at the time it was
granted or received as a dividend, as the case may be. Dividends paid to the
participant during the 1995 Plan Restricted Period will be taxable as
compensation income, rather than as dividend income, unless the election
referred to above was made. The Company is also of the opinion that it will be
entitled to a deduction under the Code in the amount and at the time that
compensation income is realized by the participant. The amount of income
realized by each participant and the amount of the deduction available to the
Company will be affected by any change in the market price of the Common Stock
during the 1995 Plan Restricted Period.
VOTING REQUIREMENTS
Approval of the 1995 Stock Option and Award Plan will require the
affirmative vote of a majority of the shares of Common Stock present, in person
or represented by proxy, and entitled to vote at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE 1995 STOCK
OPTION AND AWARD PLAN.
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PROPOSAL TO APPROVE THE 1995 EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors of the Company has adopted, subject to stockholder
approval at the Annual Meeting, the Company's 1995 Employee Stock Purchase Plan.
If approved by stockholders, the 1995 Employee Stock Purchase Plan will become
effective as of January 1, 1996.
The following summary of certain terms of the 1995 Employee Stock Purchase
Plan is qualified in its entirety by reference to the full text thereof, which
is set forth as Exhibit B attached hereto.
ADMINISTRATION
The 1995 Employee Stock Purchase Plan will be administered by an
administrator or committee appointed by the Company's Board of Directors, which
will initially be the Company's Vice President-Human Resources (the
"Administrator"). The Administrator will have full authority to interpret and
administer the Stock Purchase Plan.
NUMBER OF SHARES AVAILABLE
A total of 100,000 shares of Common Stock will be made available for
purchase under the 1995 Employee Stock Purchase Plan, subject to appropriate
adjustment for stock dividends, stock splits or combination of shares,
recapitalization or other changes in the Company's capitalization.
GRANT AND EXERCISE OF OPTIONS
All employees of the Company and its subsidiaries are eligible to
participate in the 1995 Employee Stock Purchase Plan. An eligible employee may
elect to become a participant in such plan by filing with the Company a request
form which authorizes a regular payroll deduction from the employee's paycheck.
A participant's payroll deduction must be in any whole percentage from one to
ten percent of such participant's total compensation payable each pay period. An
employee may not participate in the 1995 Employee Stock Purchase Plan for an
Option Period (i.e., each calendar quarter beginning January 1, April 1, July 1
and October 1 of each year) if such employee owns (as determined under the Code)
five percent or more of the total combined voting power or value of all classes
of stock of the Company or any of its subsidiaries, including the right to
purchase shares having an aggregate fair market value of more than $25,000.
On the first day of each Option Period, each participant who has properly
filed a request form is granted an option ("1995 Employee Stock Purchase Plan
Option") to purchase on the last day of such Option Period, at a price
determined as described below (the "1995 Employee Stock Purchase Plan Option
Price"), the number of full shares of Common Stock which the cash credited to
his or her account at that time will purchase at the 1995 Employee Stock
Purchase Plan Option Price. Unless the cash credited to a participant's account
is withdrawn or distributed, his or her 1995 Employee Stock Purchase Plan Option
will be deemed to have been exercised automatically on the last day of the
Option Period. The 1995 Employee Stock Purchase Plan Option Price for each
Option Period will be eighty-five percent of the fair market value (as defined
in the 1995 Employee Stock Purchase Plan) of the Common Stock on the last
trading day of the Option Period. No fractional shares will be issued or
purchased under the 1995 Employee Stock Purchase Plan. Any accumulated cash
balances remaining in a participant's account will be held in the participant's
account for the next Option Period if a valid request form is in effect for such
Option Period, or otherwise distributed to the participant without interest. If
a participant dies, the cash balance in his or her account will be distributed
to the participant's beneficiary, in cash, without interest, as soon as
practicable. Since the shares will be purchased at less than market value,
employees will receive a benefit from participating in the 1995 Employee Stock
Purchase Plan.
In the event of a participant's discontinuance of payroll deductions, the
cash balance in such participant's account will be returned to the participant,
without interest, as soon as practicable. Until the participant requests
otherwise, stock certificates for shares of Common Stock acquired upon the
exercise of the participant's 1995 Employee Stock Purchase Plan Option will be
issued in the participant's name.
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A participant may request a change or discontinuance in the amount of any
payroll deduction for future pay periods, by filing a notice with the
Administrator. Any such notice of change will be effective no less than ninety
days from the date of the filing of the notice, and any such notice of
discontinuance will be effective thirty days from the date of filing the notice.
A participant that files a notice of discontinuance may not resume payroll
deductions within ninety days of the filing of the notice.
The 1995 Employee Stock Purchase Plan Option to purchase shares of Common
Stock under the 1995 Employee Stock Purchase Plan is exercisable only by the
participant to whom such option was granted.
AMENDMENT AND TERMINATION
The Board of Directors of the Company may amend the 1995 Employee Stock
Purchase Plan at any time provided that no amendment will, without stockholder
approval, disqualify such plan under Section 423 of the Code, increase the
number of shares of Common Stock available for purchase thereunder, or change
the designation of corporations whose employees are eligible to participate
therein. The 1995 Employee Stock Purchase Plan may be terminated by the Board of
Directors at any time, and in any event will terminate when the maximum
aggregate number of shares available thereunder have been acquired pursuant to
the exercise of 1995 Employee Stock Purchase Plan Options thereunder.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary of certain federal income tax consequences with
respect to the 1995 Employee Stock Purchase Plan is not comprehensive and is
based upon laws and regulations currently in effect. Such laws and regulations
are subject to change.
The 1995 Employee Stock Purchase Plan is designed to qualify as an
"employee stock purchase plan" under Section 423 of the Code. There are
generally no federal income tax consequences either to the participant receiving
a 1995 Employee Stock Purchase Plan Option or to the Company upon the grant of
such an option under the 1995 Employee Stock Purchase Plan. On exercise of a
1995 Employee Stock Purchase Plan Option, the participant will not recognize any
income and the Company will not be entitled to a deduction for tax purposes.
If Common Stock acquired in connection with the exercise of a 1995 Employee
Stock Purchase Plan Option is disposed of by the participant after the
expiration of two years from the date of grant of such option or one year from
the date of purchase of the Common Stock (the "Required Holding Period"), or in
the event of death of the participant (whenever occurring) while owning such
Common Stock, and the 1995 Employee Stock Purchase Plan Option Price of such
Common Stock is less than 100 percent (but not less than 85 percent) of the fair
market value of such Common Stock at the time such option was granted, the
participant will recognize compensation income in an amount equal to the lesser
of (1) the excess of the fair market value of the Common Stock at the time of
such disposition or death over the amount paid for the Common Stock under the
1995 Employee Stock Purchase Plan, or (2) the excess of the fair market value of
the Common Stock at the time the 1995 Employee Stock Purchase Plan Option was
granted over the 1995 Employee Stock Purchase Plan Option Price. Any gain
recognized by the participant in addition to the amount treated as compensation
income will be treated as a long-term capital gain. Notwithstanding that a
participant may be required to recognize compensation income in accordance with
the foregoing rules, the Company will not be entitled to any deduction for tax
purposes in respect of such amounts.
If a participant disposes of Common Stock acquired upon exercise of a 1995
Employee Stock Purchase Plan Option before the expiration of the Required
Holding Period, such participant will recognize compensation income and the
Company will be entitled to a deduction for tax purposes in the taxable year in
which such disposition occurred in an amount equal to the excess of the fair
market value of the Common Stock on the date of exercise of the 1995 Employee
Stock Purchase Plan Option over the 1995 Employee Stock Purchase Plan Option
Price (or the gain on sale, if less). Otherwise, the Company will not be
entitled to any deduction for tax purposes upon such a disposition of Common
Stock, and the entire gain for the participant will be treated as capital gain.
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VOTING REQUIREMENTS
Approval of the 1995 Employee Stock Purchase Plan will require the
affirmative vote of a majority of the shares of Common Stock present, in person
or represented by proxy, and entitled to vote at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE 1995
EMPLOYEE STOCK PURCHASE PLAN.
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<PAGE> 28
PROPOSAL TO APPROVE THE 1996 STOCK OPTION AND AWARD PLAN
The Board of Directors of the Company has adopted, subject to stockholder
approval at the Annual Meeting, the Company's 1996 Stock Option and Award Plan.
If approved by stockholders, the 1996 Stock Option and Award Plan will become
effective as of January 1, 1996 (the "1996 Plan Effective Date"). The 1996 Stock
Option and Award Plan is intended to provide the Stock Option Subcommittee of
the Compensation Committee of the Company's Board of Directors broad discretion
to fashion the terms of awards to provide eligible participants with such
stock-based incentives as such subcommittee deems appropriate.
The following summary of certain terms of the 1996 Stock Option and Award
Plan is qualified in its entirety by reference to the full text thereof, which
is set forth as Exhibit C attached hereto.
ADMINISTRATION
The 1996 Stock Option and Award Plan will be administered by the Stock
Option Subcommittee of the Compensation Committee of the Board of Directors, all
the members of which will be eligible to administer such plan pursuant to Rule
16b-3(c)(2) promulgated under the Exchange Act. Subject to the limitations set
forth in the 1996 Stock Option and Award Plan, such plan vests broad powers in
such subcommittee to administer such plan, including authority to (1) select the
persons to be granted awards thereunder, (2) determine the size and type of
awards granted thereunder, (3) construe and interpret such plan, (4) establish,
amend or waive rules and regulations for the administration of such plan and (5)
determine whether an award, award agreement or payment of an award should be
amended.
NUMBER OF SHARES AVAILABLE
The 1996 Stock Option and Award Plan provides for the grant of up to
500,000 shares of Common Stock. Under certain circumstances, shares subject to
an award that remain unissued upon termination of the award will become
available for additional awards under such plan. In the event of a stock split,
recapitalization or similar event, or a corporate transaction, such as a merger,
consolidation or similar event, the Stock Option Subcommittee will equitably
adjust the aggregate number of shares subject to such plan and the number, class
and price of shares subject to outstanding awards.
AWARDS UNDER THE 1996 STOCK OPTION AND AWARD PLAN
AWARDS AND ELIGIBILITY. The 1996 Stock Option and Award Plan permits the
issuance of the following awards: (1) nonqualified stock options ("1996 Plan
NQSOs") and incentive stock options ("1996 Plan ISOs"), (2) performance shares
and (3) restricted stock. In general, any key employee of the Company or any
subsidiary of the Company, including key employees who are also directors, as
well as any other persons, including consultants, independent contractors or
other service providers, are eligible to receive awards under such plan.
Notwithstanding the foregoing, no person who is a member of the Stock Option
Subcommittee is eligible to receive awards under such plan, and only employees
of the Company are eligible to receive grants of 1996 Plan ISOs, performance
shares or restricted stock under such plan.
STOCK OPTIONS. Under the 1996 Stock Option and Award Plan, the Stock Option
Subcommittee has discretion to determine the number of stock options to be
granted thereunder to any participant, but no participant who is a "covered
employee" ("1996 Plan Covered Employee") (as such term is defined in the
regulations promulgated under Section 162(m) of the Code) may be granted stock
options to purchase more than 50,000 shares during any one plan year. The Stock
Option Subcommittee may grant 1996 Plan NQSOs, 1996 Plan ISOs or any combination
thereof to participants. 1996 Plan ISOs, however, may only be granted to
employees of the Company or its subsidiaries, and may only be granted if the
aggregate fair market value of the Common Stock underlying 1996 Plan ISOs and
other incentive stock options granted under all incentive stock option plans of
the Company that become exercisable for the first time by a participant during
any calendar year is equal to or less than $100,000. 1996 Plan ISOs granted
under the 1996 Stock Option and Award Plan provide for the purchase of Common
Stock at prices not less than 100 percent of the fair market value thereof on
the date such option is granted (or 110 percent with respect to holders of more
than ten
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<PAGE> 29
percent of the combined voting power of all classes of stock of the Company).
1996 Plan NQSOs granted under the 1996 Stock Option and Award Plan provide for
the purchase of Common Stock at prices determined by the Stock Option
Subcommittee, but in no event less than 85 percent of the fair market value
thereof on the date such option is granted. No stock option granted under the
1996 Stock Option and Award Plan is exercisable later than the tenth anniversary
date of its grant (or, as to 1996 Plan ISOs, fifth anniversary with respect to
holders of more than ten percent of the combined voting power of all classes of
stock of the Company).
Under the 1996 Stock Option and Award Plan, stock options are exercisable
at such times and subject to such restrictions and conditions as the Stock
Option Subcommittee approves. The option exercise price is payable in cash or,
if approved by the Stock Option Subcommittee, in shares of Common Stock having a
fair market value equal to the exercise price, or, in part, by delivering to the
Company a promissory note on such terms as the Stock Option Subcommittee shall
determine in its discretion, along with a perfected pledge of Common Stock as
security therefor, which Common Stock must have a fair market value at least
equal to the principal amount of such note (such principal amount may not exceed
ninety percent of the aggregate purchase price of the Common Stock then being
purchased pursuant to such exercise, unless otherwise permitted by applicable
law), or by a combination of any of the above means of payment. The Stock Option
Subcommittee may also allow cashless exercises or other means of payment
consistent with applicable law. Upon termination of a participant's employment
due to death, disability or retirement, all stock options outstanding will be
exercisable for the shorter of their remaining term or one year after
termination of employment in the case of death, one year after termination of
employment in the case of disability, and three months after termination of
employment in the case of retirement. Upon termination of employment of a
participant other than for any reason set forth above, all stock options held by
such participant which are not vested as of the effective date of such
termination will be forfeited; provided that, the Stock Option Subcommittee, in
its sole discretion, may immediately vest all or any portion of the stock
options of such participant not vested as of such date. In the case of
termination of employment by the Company without cause, a participant may
exercise any vested stock options for three months following the termination of
employment, and in the case of termination of employment by the Company for
cause or voluntary termination of employment by the participant (other than due
to retirement), the participant's stock options will be forfeited immediately
upon such termination.
A holder of stock options may be able to transfer such options, under
certain circumstances, to members of such holder's immediate family (as defined
in the 1996 Stock Option and Award Plan), to one or more trusts for the benefit
of such holder's immediate family or to partnerships in which immediate family
members are the only partners, if such holder's award agreement expressly
permits such transfer and such holder does not receive any consideration in any
form whatsoever for such transfer. Other than the foregoing, stock options are
not transferable by a holder other than by will or applicable laws of descent
and distribution.
PERFORMANCE SHARES. Under the 1996 Stock Option and Award Plan, the Stock
Option Subcommittee may grant performance shares to employees of the Company or
its subsidiaries in such amounts, and subject to such terms and conditions, as
the Stock Option Subcommittee in its discretion determines; provided that, no
participant who is a 1996 Plan Covered Employee may be granted more than 50,000
performance shares with respect to any performance period. Each performance
share will have a value equal to the fair market value of a share of Common
Stock on the date the performance share is earned. The Stock Option Subcommittee
in its discretion will set performance goals to be achieved over performance
periods of not less than two years. The extent to which the performance goals
are met will determine the number of performance shares earned by participants.
The performance measure to be used for purposes of grants to 1996 Plan Covered
Employees is one or more of the following: total shareholder return, return on
equity, earnings per share and ratio of operating overhead to operating revenue,
unless and until the Company's stockholders vote to change such performance
measures. In the event that applicable tax and/or securities laws change to
permit the Stock Option Subcommittee discretion to alter the governing
performance measures without obtaining stockholder approval, the Stock Option
Subcommittee will have the sole discretion to make such changes without
obtaining stockholder approval. In any event, with respect to employees that are
not 1996 Plan
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<PAGE> 30
Covered Employees, the Stock Option Subcommittee may approve performance
measures not listed above without stockholder approval.
After the applicable performance period has ended, the Stock Option
Subcommittee will certify the extent to which the established performance goals
have been achieved, and each holder of performance shares will be entitled to
receive payout on the number of performance shares, if any, earned by such
holder over the performance period. The grantee of a performance share award
will receive payment within seventy-five days following the end of the
applicable performance period, in cash or shares of Common Stock which have, as
of the close of the applicable performance period, an aggregate fair market
value equal to the value of the earned performance shares (or a combination of
cash and such shares). If the employment of a participant is terminated by
reason of death, disability or retirement or by the Company without cause during
a performance period, the participant will receive a prorated payout with
respect to the performance shares earned, which will be determined by the Stock
Option Subcommittee, in its sole discretion, and will be based upon the length
of time the participant held the performance shares during the applicable
performance period and upon achievement of the established performance goals.
Such payment will be made at the same time as payments are made to participants
whose employment did not terminate during the applicable performance period. If
a participant's employment is terminated for any other reason, all performance
shares will be forfeited by the participant to the Company. Unless otherwise
provided by the Stock Option Subcommittee in an award agreement, performance
shares which are not yet earned may not be sold, transferred, pledged, assigned
or otherwise alienated or hypothecated, other than by will or by the laws of
descent and distribution.
RESTRICTED STOCK. Under the 1996 Stock Option and Award Plan, the Stock
Option Subcommittee may from time to time grant restricted stock awards to
employees of the Company or its subsidiaries. Each grant of restricted stock
will be evidenced by a written award agreement between the participant and the
Company setting forth the terms and conditions of the grant, as determined by
the Stock Option Subcommittee, in its discretion, to be necessary or desirable.
Such terms may include a requirement for payment by the participant to the
Company for the restricted stock which is granted, with respect to which the
Stock Option Subcommittee may establish a purchase price below fair market
value.
Each grant of restricted stock will be subject to restrictions, determined
by the Stock Option Subcommittee in its discretion, for a period (the "1996 Plan
Restricted Period") of at least one year (unless otherwise provided by the Stock
Option Subcommittee). Such restrictions may include only the requirement of
continued employment or may include other performance based criteria established
by the Stock Option Subcommittee. The Stock Option Subcommittee may, after a
grant, in its discretion, shorten the 1996 Plan Restricted Period or waive any
condition to the lapse of the restrictions. The award agreement may, at the
discretion of the Stock Option Subcommittee and subject to any prescribed terms
and conditions, also provide for the lapse of restrictions upon the occurrence
of such specified events as a change in control of the Company or the
termination of a participant's employment by reason of such participant's death,
disability, retirement or discharge without cause.
During the 1996 Plan Restricted Period, the participant will have all the
rights of a Company stockholder, including the right to receive dividends and
vote the shares of restricted stock, with certain exceptions, including the
exception that cash dividends will be paid either in cash or in restricted
stock, as the Stock Option Committee determines. In addition, the restricted
stock may not be sold, transferred, assigned or encumbered during the 1996 Plan
Restricted Period and unless and until all restrictions have lapsed. All shares
of restricted stock that have not vested will be forfeited unless the
participant has remained a full-time employee of the Company or its subsidiaries
until the expiration or termination of the 1996 Plan Restricted Period and all
other applicable conditions have been satisfied. Unless otherwise provided by
the Stock Option Subcommittee in an award agreement, no restricted stock may be
assigned, encumbered or transferred except by will or the laws of descent and
distribution.
CHANGES IN CONTROL. Under the 1996 Stock Option and Award Plan, upon the
occurrence of a Change in Control (as defined below), (1) all stock options
outstanding thereunder will become fully vested and immediately exercisable; (2)
the target payout attainable under all performance shares outstanding thereunder
will be deemed to have been fully earned for the entire performance period and,
within thirty days of
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<PAGE> 31
such Change in Control, such performance shares will be paid out in accordance
with the terms thereof (provided that, there will not be an accelerated payout
with respect to performance shares granted less than six months prior to the
effective date of such Change in Control), (3) all restrictions on restricted
stock outstanding thereunder will lapse and such restricted stock will be
delivered to the participant in accordance with the terms thereof (provided
that, there will not be an accelerated delivery with respect to restricted stock
granted less than six months prior to the effective date of such Change in
Control) and (4) the Stock Option Subcommittee may, in its discretion, make any
other modifications to any awards thereunder as determined by the Stock Option
Subcommittee to be deemed appropriate before the effective date of such Change
in Control.
Under the 1996 Stock Option and Award Plan, a "Change in Control" means:
(1) an acquisition by any person of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of Common Stock
or voting securities of the Company entitled to vote generally in the
election of directors; provided that, such acquisition would result in such
person beneficially owning twenty-five percent or more of Common Stock or
twenty-five percent or more of the combined voting power of the Company's
voting securities; and provided further that, immediately prior to such
acquisition such person was not a direct or indirect beneficial owner of
twenty-five percent or more of Common Stock or twenty-five percent or more
of the combined voting power of the Company's voting securities, as the
case may be; or
(2) The approval of the Company's stockholders of a reorganization,
merger, consolidation, complete liquidation or dissolution of the Company,
the sale or disposition of all or substantially all of the assets of the
Company or similar corporate transaction or, if consummation of such
corporate transaction is subject, at the time of such approval by
stockholders, to the consent of any government or governmental agency, the
obtaining of such consent (either explicitly or implicitly); or
(3) A change in the composition of the Company's Board of Directors
such that the individuals who, as of the Effective Date, constitute the
Board cease for any reason to constitute at least a majority of the Board;
provided that, any individual who becomes a member of the Board subsequent
to the Effective Date whose election, or nomination for election by the
Company's stockholders, was approved by at least a majority of those
individuals who are members of the Board and who were also members of such
incumbent Board (or deemed to be such pursuant to this proviso) shall be
considered as though such individual were a member of such incumbent Board;
and provided further that, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened election
contest (within the meaning of Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a person other than the Board shall
not be so considered as a member of such incumbent Board.
Notwithstanding the foregoing, the following will not constitute a Change in
Control: (a) any acquisition of Common Stock by, or consummation of a
transaction of the type described in subparagraph (2) above with, any subsidiary
of the Company or an employee benefit plan (or related trust) sponsored or
maintained by the Company or an affiliate thereof; or (b) any acquisition of
Common Stock, or consummation of such a transaction, following which more that
fifty percent of the common stock then outstanding of the corporation resulting
from such acquisition or transaction and more than fifty percent of the combined
voting power of the voting securities then outstanding of such corporation
entitled to vote generally in the election of directors, is then beneficially
owned, directly or indirectly, by all or substantially all of the individuals
and entities who were beneficial owners of Common Stock and the Company's voting
securities, respectively, immediately prior to such acquisition or transaction
in substantially the same proportions as their ownership, immediately prior to
such acquisition or transaction, of Common Stock and the Company's voting
securities, as the case may be.
AMENDMENT AND TERMINATION
The 1996 Stock Option and Award Plan may be amended, modified or terminated
by the Company's Board of Directors, subject to stockholder approval if such an
amendment would materially modify the
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<PAGE> 32
eligibility requirements thereunder, increase the total number of shares allowed
to be issued thereunder, extend the term thereof, require stockholder approval
under Rule 16b-3 under the Exchange Act, or, in any case, if the Board
determines that stockholder approval is appropriate. Unless earlier terminated
by the Board of Directors, the 1996 Stock Option and Award Plan will terminate
on the day prior to the tenth anniversary of the 1996 Plan Effective Date.
SECTION 162(m)
At all times when the Stock Option Subcommittee determines that it is
desirable to satisfy the conditions of Section 162(m) of the Code, all awards
granted under the 1996 Stock Option and Award Plan will comply with such
conditions. The Stock Option Subcommittee is nevertheless empowered to grant
awards that would not constitute "performance based" compensation under Section
162(m), which may vest based solely on continued employment rather than any
performance based criteria. If changes are made to Section 162(m) to permit
greater flexibility with respect to any awards available under the 1996 Stock
Option and Award Plan, the Stock Option Subcommittee may, subject to the
restrictions set forth in the preceding paragraph regarding amendment thereof,
make any adjustments it deems appropriate.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary of certain federal income tax consequences with
respect to the 1996 Stock Option and Award Plan is not comprehensive and is
based upon laws and regulations currently in effect. Such laws and regulations
are subject to change.
STOCK OPTIONS. There are generally no federal income tax consequences
either to the employee receiving stock options (the "1996 Plan Optionee") or to
the Company upon the grant of a stock option under the 1996 Stock Option and
Award Plan. On exercise of a 1996 Plan ISO, the 1996 Plan Optionee will not
recognize any income and the Company will not be entitled to a deduction for tax
purposes, although such exercise may give rise to a liability for such optionee
under the Alternative Minimum Tax provisions of the Code. Generally, if the 1996
Plan Optionee disposes of shares acquired upon exercise of a 1996 Plan ISO
within two years of the date of grant or one year of the date of exercise, such
optionee will recognize compensation income and the Company will be entitled to
a deduction for tax purposes in the taxable year in which such disposition
occurred in the amount of the excess of the fair market value of the shares of
Common Stock on the date of exercise over the option exercise price (or the gain
on sale, if less). Otherwise, the Company will not be entitled to any deduction
for tax purposes upon dispositions of such shares, and the entire gain for the
1996 Plan Optionee will be treated as a capital gain. On exercise of a 1996 Plan
NQSO, the amount by which the fair market value of the Common Stock on the date
of exercise exceeds the option exercise price will generally be taxable to the
1996 Plan Optionee as compensation income and will generally be deductible for
tax purposes by the Company. The dispositions of shares of Common Stock acquired
upon exercise of a 1996 Plan NQSO will generally result in a capital gain or
loss for the 1996 Plan Optionee, but will have no tax consequences for the
Company.
PERFORMANCE SHARES. The grant of a performance share award will not result
in income for the grantee or in a tax deduction for the Company. Upon the
settlement of such a right or award, the grantee will recognize ordinary income
equal to the fair market value of any shares of Common Stock and/or any cash
received and the Company will be entitled to a tax deduction in the same amount.
RESTRICTED STOCK. The Company is of the opinion that the participant will
realize compensation income in an amount equal to the fair market value of the
restricted stock (whether received as a grant or as a dividend), less any amount
paid for such restricted stock, at the time when the participant's rights with
respect to such restricted stock are no longer subject to a substantial risk of
forfeiture, unless the participant elected, pursuant to a special election
provided in the Code, to be taxed on the restricted stock at the time it was
granted or received as a dividend, as the case may be. Dividends paid to the
participant during the 1996 Plan Restricted Period will be taxable as
compensation income, rather than as dividend income, unless the election
referred to above was made. The Company is also of the opinion that it will be
entitled to a deduction under the Code in the amount and at the time that
compensation income is realized by the participant. The amount
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<PAGE> 33
of income realized by each participant and the amount of the deduction available
to the Company will be affected by any change in the market price of the Common
Stock during the 1996 Plan Restricted Period.
VOTING REQUIREMENTS
Approval of the 1996 Stock Option and Award Plan will require the
affirmative vote of a majority of the shares of Common Stock present, in person
or represented by proxy, and entitled to vote at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE 1996 STOCK
OPTION AND AWARD PLAN.
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NEW PLAN BENEFITS
The following table sets forth certain information with respect to stock
options that have been granted under the 1995 Stock Option and Award Plan during
1995 (which grants are subject to stockholder approval) held by (1) the
Company's Chief Executive Officer and each other executive officer of the
Company named in the Summary Compensation Table under the caption "Executive
Compensation," (2) all executive officers of the Company as of the date hereof,
as a group, (3) all directors of the Company who are not executive officers of
the Company as of the date hereof, as a group, (4) each nominee named herein for
election as a director, (5) each associate of any of such directors, executive
officers or nominees, (6) each person who has been granted five percent or more
of such options and (7) all employees, including all current officers who are
not executive officers, as a group. On March 22, 1996, the last reported sale
price of the Common Stock, as reported on NASDAQ, was $20 1/2. No awards or
other benefits have been awarded under the 1995 Employee Stock Purchase Plan or
the 1996 Stock Option and Award Plan, both of which are subject to stockholder
approval.
NEW PLAN BENEFITS TABLE
<TABLE>
<CAPTION>
1995 STOCK OPTION
AND AWARD PLAN
-------------------
NUMBER
DOLLAR OF
NAME AND POSITION(1) VALUE($)(2) OPTIONS(3)
- --------------------------------------------------------------------- ----------- ----------
<S> <C> <C>
James R. Hawkins,.................................................... -- 22,500
Chairman of the Board and Chief Executive Officer
C. Ivan Wilson,...................................................... -- 13,000
Vice Chairman of the Board
James T. Sartain,.................................................... -- 24,800
President and Chief Operating Officer
Rick R. Hagelstein,.................................................. -- 24,800
Executive Vice President and Chief Credit Officer
Matt A. Landry, Jr.,................................................. -- 21,300
Executive Vice President and Chief Financial Officer
Richard E. Bean,..................................................... -- --
Director
Bart A. Brown, Jr.,.................................................. -- --
Director
Donald J. Douglass,.................................................. -- --
Director
David W. MacLennan,.................................................. -- --
Director
David Palmer,........................................................ -- --
Director
Tom Landry(4),....................................................... -- 4,000
Vice President
Terry Dewitt,........................................................ -- 11,500
Senior Vice President, Due Diligence Manager
Steve Fillip,........................................................ -- 11,500
Senior Vice President, Branch Operations Manager
All current executive officers, as a group (14 persons).............. -- 173,600
All current directors who are not executive officers, as a group
(five persons)..................................................... -- --
All employees (including officers who are not executive officers),
as a group (16 persons)............................................ -- 56,000
</TABLE>
(See notes on following page)
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<PAGE> 35
- ---------------
(1) No grants of stock options under the 1995 Stock Option and Award Plan were
made to Robert W. Brown during 1995. After the Effective Date, Mr. Brown
resigned from the Company in order to devote substantially all of his time
to the Trust. See "Employment Agreements and Severance and Change-in-Control
Arrangements."
(2) None of such options granted under the 1995 Stock Option and Award Plan is
presently exercisable. See note (2) to the Option Grants in 1995 table under
the caption "Option Grants." Because actual dollar values which may be
realized upon exercise of such options will be based on the exercise price
and the market price of the Common Stock on the date of exercise, such
dollar values are indeterminable at this time.
(3) Number of options refers to the number of shares of Common Stock underlying
options which have been granted under the 1995 Stock Option and Award Plan,
subject to stockholder approval of such plan.
(4) Tom Landry is the son of Matt A. Landry, Jr., the Company's Executive Vice
President and Chief Financial Officer.
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed KPMG Peat Marwick LLP ("KPMG") to
serve as independent certified public accountants for the Company and its
subsidiaries for fiscal year 1996. It is intended that such appointment be
submitted to the stockholders of the Company for ratification at the Annual
Meeting. KPMG has served as the Company's auditors since October 27, 1995 (on
which date KPMG was so appointed by the Board of Directors, which appointment
was recommended by the Board's Audit Committee) and has no investment in the
Company or its subsidiaries.
Although the submission of this matter to the stockholders is not required
by law, the Board of Directors will reconsider its selection of independent
accountants if this appointment is not ratified by the stockholders.
Ratification will require the affirmative vote of the majority of the shares of
Common Stock represented at the meeting, in person or by proxy.
It is expected that representatives of KPMG will be present at the Annual
Meeting with an opportunity to make a statement should they desire to do so and
to respond to appropriate questions from stockholders.
During the Debtor's two most recent fiscal years prior to the Effective
Date, no audited financial statements of the Debtor were prepared, and therefore
no report on such financial statements was prepared. Prior thereto, Arthur
Andersen & Co. L.L.P. served as the Debtor's independent public accountants.
Prior to the Merger, Jaynes, Reitmeier, Boyd & Therrell, P.C. ("Jaynes
Reitmeier") served as J-Hawk's independent public accountants. Jaynes
Reitmeier's accountant's report with respect to the J-Hawk annual financial
statements for the year 1994 did not contain an adverse opinion, disclaimer or
qualification. During such period, Jaynes Reitmeier and J-Hawk had no
disagreements regarding any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure of the type
referred to in Item 304(a)(1)(iv) of Regulation S-K promulgated under the
Securities Act of 1933, as amended, and no reportable event described in Item
304(a)(1)(v) of such Regulation S-K occurred.
STOCKHOLDERS' PROPOSALS
Pursuant to the Exchange Act, and regulations thereunder, individual
stockholders have a limited right to propose for inclusion in the proxy
statement a single proposal for action to be taken at an annual meeting of
stockholders. Proposals intended to be presented at the Annual Meeting to be
held in 1997 must be received at the Company's principal executive offices no
later than November 27, 1996. Such proposals should be addressed as follows:
FirstCity Financial Corporation, 6400 Imperial Drive, Waco, Texas 76712,
Attention: Secretary.
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<PAGE> 36
OTHER MATTERS
Management does not presently know of any matters which may be presented
for action at the Annual Meeting other than those set forth herein. However, if
any other matters properly come before the Annual Meeting, it is the intention
of the persons named in the proxies solicited by management to exercise their
discretionary authority to vote the shares represented by all effective proxies
on such matters in accordance with their best judgment.
By Order of the Board of Directors
March 27, 1996
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<PAGE> 37
EXHIBIT A
<PAGE> 38
FIRSTCITY FINANCIAL CORPORATION
1995 STOCK OPTION AND AWARD PLAN
ARTICLE 1. Establishment, Purpose and Duration
1.1 Establishment of the Plan. FIRSTCITY FINANCIAL CORPORATION,
a Delaware corporation (hereinafter referred to as "FIRSTCITY FINANCIAL
CORPORATION 1995 Stock Option and Award Plan" (the "Plan"), as set forth in
this document. The Plan permits the grant of Nonqualified Stock Options,
Incentive Stock Options, Performance Shares and Restricted Stock.
Subject to approval by FIRSTCITY's stockholders at their 1996 Annual
Meeting, the Plan shall become effective as of October 27, 1995 (the "Effective
Date") and shall remain in effect as provided in Section 1.3.
1.2 Purpose of the Plan. The purpose of the Plan is to secure for
FIRSTCITY and its stockholders the benefits of the incentive inherent in stock
ownership in FIRSTCITY by key employees, directors and other persons who are
largely responsible for its future growth and continued success. The Plan
promotes the success and enhances the value of FIRSTCITY by inking the personal
interests of Participants to those of FIRSTCITY's stockholders, and by
providing Participants with an incentive for outstanding performance.
The Plan is further intended to provide flexibility to FIRSTCITY in its
ability to motivate, attract and retain the services of Participants upon whose
judgement, interest and special effort the successful conduct of its operation
largely depends.
1.3 Duration of the Plan. The Plan shall commence on the
Effective Date and shall remain in effect, subject to the right of the Board of
Directors to amend or terminate the Plan at any time pursuant to Article 13,
until the day prior to the tenth (10th) anniversary of the Effective Date.
1.4 Types Of Options. The Options granted under the Plan are
intended to be either Incentive Stock Options within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended, or options that do not meet
the requirements for Incentive Options ("Nonqualified Stock Options").
FIRSTCITY makes no warranty, however, as to the qualification of any Option as
an Incentive Option.
ARTICLE 2. Definitions
Whenever used herein, the following terms shall have the meanings set
forth below and, when the meaning is intended, the initial letter of the word
is capitalized:
(a) "Award" means, individually or collectively, a grant under this
Plan of Nonqualified Stock Options, Incentive Stock Options, Performance Shares
or Restricted Stock.
EXHIBIT A-1
<PAGE> 39
(b) "Award Agreement" means an agreement entered into by each
Participant and FIRSCITY, setting forth the terms and provisions applicable to
Awards granted to Participants hereunder.
(c) "Beneficial Owner" or "Beneficial Ownership" shall have the
meaning ascribed to such term in Rule 13d-3 of the General Rules and
Regulations under the Exchange Act.
(d) "Board" or "Board of Directors" means the Board of Directors
of FIRSTCITY.
(e) "Cause" means: (i) willful or negligent misconduct on the part
of a Participant that is detrimental to FIRSTCITY; or (ii) the indictment of a
Participant for the commission of a felony. The existence of "Cause" under
either (i) or (ii) shall be determined by the Committee. Notwithstanding the
foregoing, if the Participant has entered into an employment agreement that is
binding as of the date of employment termination, and if such employment
agreement defines "Cause" and/or provides a means of determining whether
"Cause" exists, such definition of "Cause" and the means of determining its
existence shall apply to the Participant for purposes hereof.
(f) "Change in Control" shall be deemed to have occurred if
(i) An acquisition by any Person of Beneficial Ownership
of the Shares then outstanding ("FIRSTCITY Common Stock
Outstanding") or the voting securities of FIRSTCITY then
outstanding entitled to vote generally in the election of
directors "(FIRSTCITY Voting Securities Outstanding")-
provided such acquisition of Beneficial Ownership would result
in the Person's beneficially owning (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) twenty-five
percent (25%) or more of FIRSTCITY Common Stock Outstanding or
twenty-five percent (25%) or more of the combined voting power
of FIRSTCITY Voting Securities Outstanding; and provided
further, that immediately prior to such acquisition such
Person was not a direct or indirect Beneficial Owner of
twenty-five percent (25%) or more of FIRSTCITY Common Stock
Outstanding or twenty-five percent (25%) or more of the
combined voting power of FIRSTCITY Voting Securities
Outstanding, as the case may be, or
(ii) The approval of the stockholders of FIRSTCITY of a
reorganization, merger consolidation, complete liquidation or
dissolution of FIRSTCITY, the sale or disposition of all or
substantially all of the assets of FIRSTCITY or similar
corporate transaction (in each case referred to in this
Section 2(f) as a "Corporate Transaction") if consummation of
such Corporate Transaction is subject, at the time of such or,
approval by stockholders, to the consent of any government or
governmental agency, the obtaining of such consent (either
explicitly or implicitly): or
(iii) A change in the composition of the Board such that the
individuals who, as of the Effective Date, constitute the
Board (such Board shall be hereinafter referred to as the
"incumbent Board") cease for any reason to constitute at least
a majority of the
EXHIBIT A-2
<PAGE> 40
Board; provided, however, for purposes of this Section 2(f),
that any individual who becomes a member of the Board
subsequent to the Effective Date whose election, or nomination
for election by FIRSTCITY's stockholders, was approved by at
least a majority of those individuals who are members of the
Board and who were also members of the Incumbent Board (or
deemed to be such pursuant to this proviso) shall be
considered as though such individual were a member of the
Incumbent Board: but, provided, further, that any such
individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as
such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act, including any successor to
such Rule) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the
Board shall not be so considered as a member of the Incumbent
Board.
Notwithstanding the provisions set forth in subparagraphs (I) and (ii) of this
Section 2(f), the following shall not constitute a Change in Control for
purposes hereof; (1) any acquisition of shares of common stock of FIRSTCITY by,
or consummation of a Corporate Transaction with, any Subsidiary or an employee
benefit plan (or related trust) sponsored or maintained by FIRSTCITY or an
affiliate; or (2) any acquisition of shares of common stock of FIRSTCITY, or
consummation of a Corporate Transaction, following which more that fifty
percent (50%) of the shares of common stock then outstanding of the corporation
resulting from such acquisition or Corporate Transaction and more than fifty
percent (50%) of the combined voting power of the voting securities then
outstanding of such corporation entitled to vote generally in the election of
directors, is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were Beneficial Owners of
FIRSTCITY Common Stock Outstanding and FIRSTCITY Voting Securities Outstanding,
respectively, immediately prior to such acquisition or Corporate Transaction in
substantially the same proportions as their ownership, immediately prior to
such acquisition or Corporate Transaction, of FIRSTCITY Common Stock
Outstanding and FIRSTCITY Voting Securities Outstanding, as the case may be.
(g) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(h) "Committee" means the committee appointed by the Board to
administer the Plan with respect to grants of Awards, as specified in Article
3.
(i) "Director" means any individual who is a member of the Board
of Directors.
(j) "Disability" shall have the meaning ascribed to such term in
the FIRSTCITY long-term disability plan covering the Participant, or in the
absence of such plan, a meaning consistent with Section 22(e)(3) of the Code.
(k) "Employee" means any full-time, salaried employee of
FIRSTCITY, or FIRSTCITY's Subsidiaries.
EXHIBIT A-3
<PAGE> 41
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor act thereto.
(m) "Fair Market Value" shall be determined as follows:
(i) If, on the relevant date, the Shares are traded on a
national or regional securities exchange or on The Nasdaq
Stock Market ("Nasdaq") and closing sale prices for the Shares
are customarily quoted, on the basis of the closing sale price
on the principal such securities exchange on which the Shares
may then be traded or, if there is no such sale on the
relevant date, then on the immediately preceding day on which
a sale was reported;
(ii) If, on the relevant date, the Shares are not listed
on any securities exchange or traded on Nasdaq, but
nevertheless are publicly traded and reported on Nasdaq
without closing sale prices for the Shares being customarily
quoted, on the basis of the mean between the closing bid and
asked quotations in such other over-the-counter market as
reported by Nasdaq on that date, then the mean between the
closing bid and asked quotations in the over-the-counter
market as reported by Nasdaq on the immediately preceding day
such bid and asked prices were quoted. For purposes of the
foregoing, a market in which trading is sporadic and the ask
quotations generally exceed the bid quotations by more than
15% shall not be deemed to be a "regular, active public
market." and
(iii) If, on the relevant date, the Shares are not publicly
traded as described in (i) or (ii), on the basis of the good
faith determination of the Committee.
(n) "Final Award" means the actual award earned during a
performance period by a Participant, as determined by the Committee at the end
of the performance period pursuant to Article
(o) "Incentive Payment Date" means the seventy-fifth (75th) day
following the last day of the performance period during which the Final Award
under Article 7 was earned, or such earlier date upon which Final Awards are
paid to Participants.
(p) "Incentive Stock Option" or "ISO" means an option to purchase
Shares, granted under Article 6 which is designated as an Incentive Stock
Option and is intended to meet the requirements of Section 422 of the Code.
(q) "Insider" shall mean a Person who is, on the relevant date, a
director, officer or beneficial owner of ten percent (10%) or more of any class
of FIRSTCITY's equity securities that is registered pursuant to Section 12 of
the Exchange Act, all as defined under Section 16 of the Exchange Act.
(r) "Named Executive Officer" means a Participant who, as of the
date of vesting and/or payout of an Award is one of the group of "covered
employees," as defined in the regulations
EXHIBIT A-4
<PAGE> 42
promulgated under Code Section 162(m), or any successor statute.
(s) "Nonqualified Stock Option" or "NQSO" means an option to
purchase Shares granted under Article 6 which is not intended to meet the
requirements of Code Section 422.
(t) "Option" means an Incentive Stock Option or a Nonqualified
Stock Option.
(u) "Option Price" means the price at which a Share may be
purchased by a Participant pursuant to an Option, as determined by the
Committee.
(v) "Participant" means an Employee, director or other person who
has been granted an Award which is outstanding.
(w) "Performance Share" means an Award of shares granted to an
Employee, as described in Article 7.
(x) "Person" shall have the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act and used in Section 13(d) and 14(d)
thereof, including a "group" as defined in Section 13(d) thereof.
(y) "Plan Year" shall mean, for purposes of Article 7,
FIRSTCITY's fiscal year which coincides with each calendar year during the
term hereof.
(z) "Retirement" shall have the meaning ascribed to such term in
the FIRSTCITY FINANCIAL CORPORATION 401(k) Plan.
(aa) "Restricted Stock" means an Award of restricted Shares
granted in accordance with the terms of Article 8 and the other provisions
hereof
(ab) "Shares means the shares of common stock of FIRSTCITY, par
value $0.01 per share.
(ac) "Subsidiary" means any corporation, partnership, joint
venture or other entity in which FIRSTCITY has a fifty percent (50%) or
greater voting interest.
(ad) "Window Period" means the period beginning on the third (3rd)
business day following the date of public release of FIRSTCITY's quarterly
sales and earnings information, and ending on the twelfth (12th) business day
following such date.
ARTICLE 3. Administration
3.1 The Committee. The Plan shall be administered by the Compensation
Committee of the Board, or by any other Committee appointed by the Board
consisting of not less than two (2) Directors who meet the "disinterested
administration" requirements of Rule 16b-3 or any successor
EXHIBIT A-5
<PAGE> 43
thereto under the Exchange Act and each of whom qualifies as an outside
director under Section 162(m) of the Code or any successor thereto under the
Code. The members of the Committee shall be appointed from time to time by,
and shall serve at the discretion of, the Board of Directors.
The Committee shall be comprised solely of Directors who are eligible
to administer the Plan pursuant to Rule 16b-3(c)(2) or any successor thereto
under the Exchange Act. However, if for any reason the Committee does not
qualify to administer the Plan, as contemplated by Rule 16b-3(c)(2) of the
Exchange Act, the Board of Directors may appoint a new Committee member who
complies with Rule 16b-3(c)(2).
3.2 Authority of the Committee. Subject to the provisions hereof,
the Committee shall have full power to select the Employees and other Persons
who are responsible for the future growth and success of FIRSTCITY, who may
include, without limitation, consultants, independent contractors or other
providers of services to FIRSTCITY, who shall participate herein (who may
change from year to year); determine the size and types of Awards, determine
the terms and conditions of Awards in a manner consistent herewith (including
vesting provisions and the duration of the Awards); construe and interpret the
Plan and any agreement or instrument entered into hereunder; establish, amend
or waive rules and regulations for the Plan's administration; and (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 herein, including to establish different terms and
conditions relating to the effect of the termination of employment or other
service to FIRSTCITY. Further, the Committee shall make all other
determinations which may be necessary or advisable for the administration
hereof As permitted by law, the Committee may delegate its authority hereunder.
3.3 Decisions Binding. All determinations and decisions made by
the Committee pursuant to the provisions hereof and all related orders and
resolutions of the Board shall be final, conclusive and binding on all Persons,
including FIRSTCITY, the stockholders, Employees, Participants and their
estates and beneficiaries.
ARTICLE 4. Authorized Shares
4.1 Number of Shares. Subject to adjustment a as provided in
Section 4.3, the total number of Shares available for grant of Awards shall be
an aggregate of two hundred thirty thousand (230,000). These Shares may, in
the discretion of FIRSTCITY, be either authorized but unissued Shares or Shares
held as treasury shares, including Shares purchased by FIRSTCITY.
The following rules shall apply for purposes of the determination of
the number of Shares available for grant hereunder;
(a) The grant of an Option or Restricted Stock shall
reduce the Shares available for grant hereunder by the number of Shares
subject to such Award.
EXHIBIT A-6
<PAGE> 44
(b) The Committee shall in each case determine the
appropriate number of Shares to deduct from the authorized pool in
connection with the grant of Performance Shares.
(c) While an Option, Restricted Stock or Performance Share
is outstanding, it shall be counted against the authorized pool of
Shares, regardless of its vested status.
(d) In the event an Award is paid in the form of Shares or
derivatives of Shares, the authorized pool shall be reduced by the
number of Shares or Share derivatives paid to the Participant as
determined by the Committee.
(e) To the extent that an Award is settled in cash rather
than in Shares, the authorized Share pool shall be credited with the
appropriate number of Shares represented by the cash settlement of the
Award, as determined at the sole discretion of the Committee (subject
to the limitation set forth in Section 4.2).
4.2 Lapsed Awards. If any Award is canceled, terminates, expires
or lapses for any reason, any Shares subject to such Award shall again be
available for grant of an Award. However, in the event that prior to the
Award's cancellation, termination, expiration or lapse, the holder of the Award
at any time received one (1) or more "benefits of ownership" pursuant to such
Award (as defined by the Securities and Exchange Commission, pursuant to any
rule or interpretation promulgated under Section 16 of the Exchange Act), the
Shares subject to such Award shall not be made available for regrant hereunder.
4.3 Adjustment in Authorized Shares. In the event of any change
in corporate capitalization, such as a stock split, or a corporate transaction,
such as any merger, consolidation, separation, including a spin-off, or other
distribution of stock or property of FIRSTCITY, any reorganization (whether or
not such reorganization comes within the definition of such term in Code
Section 368) or any partial or complete liquidation of FIRSTCITY, such
adjustment shall be made in the number and class of Shares which may be
delivered hereunder, and in the number and class of and/or price of Shares
subject to outstanding Awards, as may be determined to be appropriate and
equitable by the Committee, in its sole discretion, to prevent dilution or
enlargement of rights; provided, however, that the number of Shares subject to
any Award shall always be a whole number and the Committee shall make such
adjustments as are necessary to insure Awards of whole Shares.
ARTICLE 5. Eligibility and Participation
Any key Employee of FIRSTCITY, or of any Subsidiary, including any such
Employee who is also a director of FIRSTCITY, or of any Subsidiary, or any
other Person, including consultants, independent contractors or other service
providers, whose judgement, initiative and efforts contribute or may be
expected to contribute materially to the successful performance of FIRSTCITY or
any Subsidiary shall be eligible to receive an Award. In determining the
Employees and other Persons to whom an Award shall be granted and the number of
Shares which may be granted pursuant to that Award, the Committee shall take
into account the duties of the respective Person, their present and
EXHIBIT A-7
<PAGE> 45
potential contributions to the success of FIRSTCITY or any Subsidiary, and such
other factors as the Committee shall deem relevant in connection with
accomplishing the purposes hereof
No person who is a member of the Committee shall be eligible to be
granted any Award hereunder while so serving.
ARTICLE 6. Stock Options
6.1 Grant of Options. Subject to the terms and provisions hereof,
Options may be granted to Employees or other Persons at any time and from time
to time as shall be determined by the Committee. The Committee shall have
discretion in determining the number of Shares subject to Options granted to
each Participant; provided, however, that in the case of any ISO, only an
Employee may receive such grant and the aggregate Fair Market Value (determined
at the time such Option is granted) of the Shares to which ISOs are exercisable
for the first time by the Optionee during any calendar year (hereunder and
under all other Incentive Stock Option Plans of FIRSTCITY and any Subsidiary)
shall not exceed $100,000. The Committee may grant a Participant ISOs, NQSOs
or a combination thereof, and may vary such Awards among Participants.
The maximum number of Options that a Named Executive Officer can be
granted hereunder during any twelve month period is 50,000.
6.2 Award Agreement. Each Option grant shall be evidenced by an
Award Agreement that shall specify the Option Price, the duration of the
Option, the number of Shares to which the Option pertains and such other
provisions as the Committee shall determine. The Award Agreement shall further
specify whether the Award is intended to be an ISO or an NQSO. Any portion of
an Option that is not designated as an ISO or otherwise fails or is not
qualified to be treated as an ISO (even if designated as an ISO) shall be a
NQSO.
6.3 Option Price. The Option Price for each grant of an ISO shall
be not less than one hundred percent (100%) of the Fair Market Value of a Share
on the date the ISO is granted. In no event, however, shall any Participant,
who at the time he would otherwise be granted an Option owns (within the
meaning of Section 424(d) of the Code) stock of FIRSTCITY possessing more than
ten percent (10%) of the total combined voting power of all classes of stock of
FIRSTCITY be eligible to receive an ISO at an Option Price less than one
hundred ten percent (110%) of the Fair Market Value of a Share on the date
the ISO is granted. The price at which each share covered by each NQSO shall
be purchased by an Optionee shall be established by the Committee, but in no
event shall such price be less than eight-five percent (85%) of the Fair
Market Value (or such other percentage of Fair Market Value as may be
established by Internal Revenue Service rules or regulations as the limit for
granting discounted stock options without causing immediate tax consequences to
the Participant) of a Share on the date the Option is granted.
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
EXHBIT A-8
<PAGE> 46
tenth (1Oth) anniversary date of its grant, provided, further, however, that
any ISO granted to any Participant who at such time owns (within the meaning of
Section 424(d) of the Code) stock of FIRSTCITY possessing more than ten percent
(10%) of the total combined voting power of all classes of stock in FIRSTCITY,
shall be exercisable not later than the fifth (5th) anniversary date of its
grant.
6.5 Exercise of Options. Options shall be exercisable at such
times and be subject to such restrictions and conditions as the Committee shall
in each instance approve, which need not be the same for each grant or for each
Participant. Each Option shall be exercisable for such number of Shares and at
such time or times, including periodic installments, as may be determined by
the Committee at the time of the grant. Except as otherwise provided in the
Award Agreement and Article 12, the right to purchase Shares that are
exercisable in periodic installments shall be cumulative so that when the right
to purchase any Shares has accrued, such Shares or any part thereof may be
purchased at any time thereafter until the expiration or termination of the
Option.
6.6 Payment. Options shall be exercised by the delivery of a
written notice of exercise to FIRSTCITY, setting forth the number of Shares
with respect to which the Option is to be exercised, accompanied by full payment
for the Shares. The Option Price upon exercise of any Option shall be payable
to FIRSTCITY in full either: (a) in cash, or (b) if approved by the Committee,
by tendering previously acquired Shares having an aggregate Fair Market Value
at the time of exercise equal to the total Option Price (provided that the
Shares which are tendered must have been held by the Participant for at least
six (6) months prior to their tender to satisfy the Option Price), or (c) in
part, by delivering to FIRSTCITY an executed promissory note on such terms and
conditions as the Committee shall determine at the time of grant, in its sole
discretion, but which shall require a perfected pledge of shares of Common
Stock of FIRSTCITY as security for such promissory note, which shares shall
have a fair market value (as defined in Section 5 hereof) at least equal to the
principal amount of such promissary note; provided, however, that the principal
amount of such note shall not exceed ninety percent (90%) (or such lesser
percentage as would be permitted by applicable margin regulations) of the
aggregate purchase price of the Shares then being purchased pursuant to the
exercise of such Option, or (d) by a combination of (a) and (b) and (c). The
Committee also may allow cashless exercises as permitted under Federal Reserve
Board's Regulation T, subject to applicable securities law restrictions or by
any other means which the Committee determines to be consistent with the Plan's
purpose and applicable law.
As soon as practicable after receipt of a written notification of
exercise and full payment, FIRSTCITY shall deliver to the Participant, in the
Participant's name, Share certificates in an appropriate amount based upon the
number of Shares purchased under the Options(s).
6.7 Termination of Employment Due to Death, Disability or
Retirement. Unless otherwise provided by the Committee in an Award Agreement,
the following rules shall apply in the event of the Participant's termination
of employment due to death, Disability, or Retirement. With respect to a
Participant that is a non-employee director of FIRSTCITY or is otherwise not
an Employee, the following references to employment shall be deemed to be
references to service as a director or in
EXHIBIT A-9
<PAGE> 47
such other capacity as is determined by the Committee
(a) if any Employee shall die while in the employ of such corporation
or during either the one (1) year or three (3) month period, whichever
is applicable, specified in clauses (b) and (c) below, any Option
granted hereunder, unless otherwise specified by the Committee in the
Option, shall be exercisable for any or all of such number of Shares
that such Employee is entitled to purchase at the time of death, by
the legal representative of such Employee or by such person who
acquired such Option by bequest or inheritance or by reason of the
death of such Employee, at any time up to and including one (1) year
after the date of death;
(b) if the employment of any Employee shall terminate by reason of such
Employee's disability (as described in Section 22(e)(3) of the Code),
any Option granted hereunder shall be exercisable for any or all of
such number of Shares that such Employee is entitled to purchase at the
effective date of termination of employment by reason of disability, at
any time up to and including on (1) year (or such shorter period
specified by the Committee in the Option) after the effective date of
such termination of employment);
(c) if the employment of any Employee shall terminate (i) by reason of
the Employee's age or upon such conditions as shall be specified by the
Committee in the Option), (ii) by the Employee for "good reason" (only
if such Employee is party to a written employment agreement with
FIRSTCITY or any subsidiary corporation or parent corporation which
expressly provides for termination by the Employee for "good reason,"
and such Employee validly terminates his or her employment
("Termination For Good Reason")), or (iii) by the employer other than
for cause (as defined below), such option, unless otherwise specified
by the committee in the option, shall be exercisable for any or all of
the such number of Shares that such Employee is entitled to exercise
at the effective date of termination of employment, at any time up to
and including three (3) months after the effective date of such
termination of employment; and
(d) if the employment of any Employee shall terminate by any reason
other than that provided for in clauses (a), (b) or (c) above, such
option, unless otherwise specified by the Committee in such Option
shall, to the extent not theretofore exercised, become immediately null
and void
None of the events described in clauses (a), (b) or (c) above shall
extend the period of exercisability of the Option beyond the expiration
date thereof.
6.8 Termination of Employment for Other Reasons. If the
employment of a Participant shall terminate for any reason other than the
reasons set forth in Section 6.7, all Options held by the Participant which
are not vested as of the effective date of employment termination immediately
shall be forfeited to FIRSTCITY (and shall once again become available for
grant hereunder). However, the Committee, in its sole discretion, shall have
the right to immediately vest all or any portion of such Options, subject to
such terms as the Committee, in its sole discretion, deems appropriate.
EXHIBIT A-10
<PAGE> 48
In the event an Employee's employment is terminated by FIRSTCITY for
cause, or an Employee voluntarily terminates his employment (other than upon
retirement), the rights under any then vested outstanding Options shall
terminate immediately upon such termination of employment. If the Employee's
employment is terminated by FIRSTCITY without Cause, any options vested as of
the date of termination shall remain exercisable at any time prior to their
expiration date or for three (3) months after his date of termination of
employment, whichever period is shorter.
6.9 Limited Transferability. A Participant may transfer an Option
to members of his or her Immediate Family to one or more trusts for the benefit
of such Immediate Family members, or to one or more partnerships where such
Immediate Family members are the only partners, if (i) the Award Agreement
evidencing such Option expressly provides that the Option may be transferred
and (ii) the Participant does not receive any consideration in any form
whatsoever for said transfer. Any Options so transferred shall continue to be
subject to the same terms and conditions in the hands of the transferee as were
applicable to said Option immediately prior the transfer thereof Any reference
in any such Award Agreement to the employment by or performance of services for
FIRSTCITY by the Participant shall continue to refer to the employment of or
performance by the transferring Participant. For purposes hereof, "Immediate
Family" shall mean the Participant and the Participant's spouse, and their
respective ancestors and descendants. Any Option that is granted pursuant to
any Award Agreement that did not initially expressly allow the transfer of said
Option and that has not been amended to expressly permit such transfer, shall
not be transferable by the Participant otherwise than by will or by the laws of
descent and distribution and such Option thus shall be exercisable during the
Participant's lifetime only by the Participant.
ARTICLE 7. Performance Shares
7.1 Grant of Performance Shares. Subject to the terms hereof,
Performance Shares may be granted to eligible Employees at any time and from
time to time for no consideration, as shall be determined by the Committee.
The Committee shall have complete discretion in determining the number of
Performance Shares granted to each Participant; provided, however, that unless
and until FIRSTCITY's stockholders vote to change the maximum number of
Performance Shares that may be earned by any one Named Executive Officer
(subject to the terms of Article 13, none of the Named Executive Officers may
earn more than fifty thousand (50,000) Performance Shares with respect to any
performance period.
7.2 Value of Performance Shares. Each Performance Share shall
have a value equal to the Fair Market Value of a Share on the date the
Performance Share is earned. The Committee shall set performance goals in its
discretion which, depending on the extent to which they are met, will
determine the number of Performance Shares that will be earned by the
Participants. The time period during which the performance goals must be met
shall be called a "performance period." Performance periods shall, in all
cases, equal or exceed two (2) years in length. The performance goals shall be
established at the beginning of the performance period (or within such time
period as is permitted by Code Section 162(m)).
EXHIBIT A- 11
<PAGE> 49
Unless and until FIRSTCITY's stockholders vote to change the general
performance measures (subject to the terms of Article 13), the attainment of
which shall determine the number of Performance Shares earned hereunder, the
Committee will use one or more of the following performance measures for
purposes of grants to Named Executive Officers: Total shareholder return,
return on equity, earnings per share and ratio of operating overhead to
operating revenue. Each Plan Year, the Committee, in its sole discretion, may
select among the performance measures specified in this Section 7.2 and set the
relative weights to be given to such performance measures. However, in the
case of Participants who are not Named Executive Officers, the Committee may
approve performance measures that are not specified in this Section 7.2 without
obtaining stockholder approval of such measures.
In the event that applicable tax and/or securities laws (including, but
not limited to, Code Section 162(m) and Section 16 of the Exchange Act) change
to permit Committee Discretion to alter the governing performance measures
without obtaining stockholder approval of such changes, the Committee shall
have sole discretion to make such changes without obtaining stockholder
approval.
7.3 Earning of Performance Shares. After the applicable
performance period has ended, the Committee shall certify the extent to which
the established performance goals have been achieved. Subsequently, each
holder of Performance Shares shall be entitled to receive payout on the number
of Performance Shares earned by the Participant over the performance period, to
be determined as a function of the extent to which the corresponding
performance goals have been achieved. The Committee may, in Its sole
discretion, decrease the amount of a Final Award otherwise payable to a
Participant under this Article 7. The Committee shall have no discretion,
however, to increase the amount of a Final Award otherwise payable to a Named
Executive Officer under this Article 7.
7.4 Form and Timing of Payment of Performance Shares. Payment of
earned Performance Shares shall be made, in a single lump sum, promptly but in
no event later than the Incentive Payment Date. The Cornmittee, in its sole
discretion, may pay earned Performance Shares in the form of cash or in Shares
(or in a combination thereof) which have, as of the close of the applicable
performance period, an aggregate Fair Market Value equal to the value of the
earned Performance Shares.
7.5 Termination of Employment Due to Death, Disability or
Retirement or at the Request of FIRSTCITY Without Cause. In the event the
employment of a Participant is terminated by reason of death, Disability or
Retirement or by FIRSTCITY without Cause during a performance period, the
Participant shall receive a prorated payout with respect to the Performance
Shares. The prorated payout shall be determined by the Committee, in its sole
discretion, and shall be based upon the length of time that the Participant
held the Performance Shares during the performance period, and shall further be
adjusted based on the achievement of the established performance goals at the
time of his termination.
Payment of earned Performance Shares shall be made at the same time
payments are made to Participants who did not terminate employment during the
applicable performance period.
EXHIBIT A-12
<PAGE> 50
7.6 Termination of Employment for Other Reasons. In the event
that a Participant's employment terminates for any reason other than those
reasons set forth in Section 7.5, all Performance Shares shall be forfeited by
the Participant to FIRSTCITY.
7.7 Nontransferability. Unless the Committee provides otherwise
in the Award Agreement, Performance Shares which are not yet earned may not be
sold, transferred, pledged, assigned or otherwise alienated or hypothecated,
other than by will, by the laws of descent and distribution. Further, a
Participant's Performance Share rights hereunder shall be exercisable during
the Participant's lifetime only by the Participant or the Participant's legal
representative.
ARTICLE 8. Restricted Stock
8.1 Grants. The Committee may from time to time In its discretion
grant Restricted Stock to Employees and may determine the number of Shares of
Restricted Stock to be granted and the terms and conditions of, and the amount
of payment, if any, to be made by the Employee for, such Restricted Stock. A
grant of Restricted Stock may require the Employee to pay for such Shares of
Restricted Stock, but the Committee may establish a price below Fair Market
Value at which the Employee can purchase the Shares of Restricted Stock. Each
grant of Restricted Stock will be evidenced by an Award Agreement containing
terms and conditions not inconsistent herewith as the Committee shall determine
to be appropriate in its sole discretion. Such Restricted Stock shall be
granted subject to the restrictions prescribed pursuant hereto and the Award
Agreement.
8.2 Restricted Period; Lapse of Restrictions. At the time a grant
of Restricted Stock is made, the Committee shall establish a period or periods
of time (the "Restricted Period") applicable to such grant which, unless the
Committee otherwise provides, shall not be less than one (1) year. Subject to
the other provisions of this Article 8, at the end of the Restricted Period all
restrictions shall lapse and the Restricted Stock shall vest in the
Participant. At the time a grant is made, the Committee may, in its
discretion, prescribe conditions for the incremental lapse of restrictions
during the Restricted Period and for the lapse or termination of restrictions
upon the occurrence of other conditions in addition to or other than the
expiration of the Restricted Period with respect to all or any portion of the
Restricted Stock. Such conditions may, but need not, include without
limitation, (a) the death, Disability or Retirement of the Employee to whom
Restricted Stock is granted, (b) the occurrence of a Change in Control or (c)
the attainment of certain performance goals. The Committee may also, in its
discretion, shorten or terminate the Restricted Period, or waive any conditions
for the lapse or termination of restrictions with respect to all or any portion
of the Restricted Stock at any time after the date the grant is made.
8.3 Rights of Holder; Limitations Thereon, Upon a grant of
Restricted Stock, a stock certificate (or certificates) representing the number
of Shares of Restricted Stock granted to the Employee shall be registered in
the Employee's account. Following such registration, the Employee shall have
rights and privileges of a stockholder as to such Restricted Stock, including
the right to receive dividends and to vote such Restricted Stock, except that
the right to receive cash dividends shall be the fight to receive such
dividends either in cash currently or by payment in Restricted Stock,
EXHIBIT A-13
<PAGE> 51
as the Committee shall determine, and except further that, the following
restrictions shall apply:
(a) The Employee shall not be entitled to delivery of a
certificate until the expiration or termination of the Restricted
Period for the Shares represented by such certificate and the
satisfaction of any and all other conditions prescribed by the
Committee;
(b) None of the Shares of Restricted Stock may be sold,
transferred, assigned, pledged, or otherwise encumbered or disposed of
during the Restricted Period and until the satisfaction of any and all
other conditions prescribed by the Committee; and
(c) All of the Shares of Restricted Stock that have not vested
shall be forfeited and all rights of the Employee to such Restricted
Stock shall terminate without further obligation on the part of
FIRSTCITY unless the Employee has remained a full-time employee of
FIRSTCITY or any of its Subsidiaries until the expiration or
termination of the Restricted Period and the satisfaction of any and
all other conditions prescribed by the Committee applicable to such
Restricted Stock. Upon forfeiture of any Shares of Restricted Stock,
such forfeited Shares shall be transferred to FIRSTCITY without further
action by the Employee, and shall, in accordance with Section 4.2,
again be available for grant hereunder.
With respect to any Shares received as a result of adjustments under
Section 4.3) and any Shares received with respect to cash dividends declared on
Restricted Stock, the Participant shall have the same rights and privileges,
and be subject to the same restrictions, as are set forth in this Article 8.
8.4 Delivery of Unrestricted Shares. Upon the expiration or
termination of the Restricted Period for any Shares of Restricted Stock and the
satisfaction of any and all other conditions prescribed by the Committee, the
restrictions applicable to such Restricted Stock (including, without
limitation, the restrictions specified in Section 8.5) shall lapse and a stock
certificate for the number of Shares of Restricted Stock with respect to which
the restrictions have lapsed shall be delivered, free of all such restrictions
except any that may be imposed by law, to the holder of the Restricted Stock.
FIRSTCITY shall not be required to deliver any fractional Share but will pay,
in lieu thereof the Fair Market Value (determined as of the date the
restrictions lapse) of such fractional share to the holder thereof Prior to or
concurrently with the delivery of a certificate for Restricted Stock, the
holder shall be required to pay an amount necessary to satisfy any applicable
federal, state and local tax requirements as set out in Article 14.
8.5 Nonassignability of Restricted Stock. Unless the Committee
provides otherwise in the Award Agreement, no grant of, nor any night or
interest of a Participant in or to any Restricted Stock, or in any instrument
evidencing any grant hereunder, may be assigned, encumbered or transferred
except, in the event of the death of a Participant, by will or the laws of
descent and distribution.
ARTICLE 9. Beneficiary Designation
EXHIBIT A-14
<PAGE> 52
Each Participant hereunder may, from time to time, name any beneficiary
or beneficiaries (who may be named contingently or successively) to whom any
benefit hereunder is to be paid in case of his or her death before he or she
receives any or all of such benefit. Each designation shall revoke all prior
designations by the same Participant, shall be in a form prescribed by
FIRSTCITY and shall be effective only when filed by the Participant, in
writing, with FIRSTCITY during the Participant's lifetime. In the absence of
any such designation, benefits remaining unpaid at the Participant's death
shall be paid to the Participant's estate.
The spouse of a married Participant domiciled in a community property
Jurisdiction shall join in any designation of beneficiary or beneficiaries
other than the spouse.
ARTICLE 10. Deferrals
The Committee may permit a Participant, to defer to another plan or
program such Participant's receipt of the payment of cash or the delivery of
Shares that would otherwise be due to such Participant by virtue of the
exercise of an Option, the satisfaction of any requirements or goals with
respect to Performance Shares or the vesting of Restricted Stock. If any such
deferral election is required or permitted, the Committee shall, in its sole
discretion, establish rules and procedures for such payment deferrals.
ARTICLE 11. Rights of Employees
11.1 Employment. Nothing herein shall interfere with or limit in
any way the right of FIRSTCITY or a subsidiary to terminate any Participant's
employment or engagement by FIRSTCITY at any time, nor confer upon any
Participant any right to continue in the employ or service of FIRSTCITY or a
Subsidiary. For purpose hereof transfer of employment of a Participant between
FIRSTCITY and any one of its Subsidiaries (or between Subsidiaries) shall not
be deemed a termination of employment.
11.2 Participation. No Employee shall have the right to be selected
to receive an Award, or, having been so selected, to be selected to receive a
future Award.
ARTICLE 12. Change in Control
Upon the Occurrence of a Change in Control, except as provided in the
Award Agreement or unless otherwise specifically prohibited by the terms of
Article 17:
(a) Any and all Options granted hereunder shall become fully
vested and immediately exercisable;
(b) The target payout opportunity attainable under all outstanding
Performance Shares shall be deemed to have been fully earned for the
entire performance period(s) as of the effective date of the Change in
Control, and all earned Performance Shares shall be paid out in
EXHBIT A-15
<PAGE> 53
accordance with Section 7.4 to Participants within thirty (30) days
following the effective date of the Change in Control; provided,
however, that there shall not be an accelerated payout with respect to
Performance Shares which were granted less than six (6) months prior to
the effective date of the Change in Control;
(c) All restrictions on a grant of Restricted Stock shall lapse
and such Restricted Stock shall be delivered to the Participant in
accordance with Section 8.4; provided, however, that there shall not be
an accelerated delivery with respect to Restricted Stock which was
granted less than six (6) months prior to the effective date of the
Change in Control; and
(d) Subject to Article 13, the Committee shall have the authority
to make any modifications to the Awards as determined by the Committee
to be appropriate before the effective date of the Change of Control.
ARTICLE 13. Amendment, Modification and Termination
13.1 Amendment, Modification and Termination. The Board may, at
any time and from time to time, alter, amend, suspend or terminate the Plan in
whole or in part, provided, that. Unless approved by the holders of a majority
of the total number of Shares of FIRSTCITY represented and voted at a meeting
at which a quorum is present, no amendment shall be made hereto if such
amendment would (a) materially modify the eligibility requirements provided in
Article 5; (b) increase the total number of shares (except as provided in
Section 4.3) which may be granted hereunder, as provided in Section 4.1; (c)
extend the term hereof; or (d) amend the Plan in any manner which the Board, in
its discretion, determines should become effective only if approved by the
stockholders even though such stockholder approval is not expressly required
hereby or by law. No amendment which requires stockholder approval in order
for the Plan to continue to comply with Rule 16b-3 under the Exchange Act,
including any successor to such Rule, shall be effective unless such amendment
shall be approved by the requisite vote of stockholders.
13.2 Awards Previously Granted. No termination, amendment or
modification hereof shall adversely affect in any material way any Award
previously granted hereunder, without the written consent of the Participant
holding such Award. The Committee with the written consent of the Participant
holding such Award, shall have the authority to cancel Awards outstanding and
grant replacement Awards therefore.
13.3 Compliance With Code Section 162(m), At all times when the
Committee determines that compliance with Code Section 162(m) is desired, all
Awards shall comply with requirements of Code Section 162(m). In addition, in
the event that changes are made to Code Section 162(m) to permit greater
flexibility with respect to any Award or Awards, the Committee may, subject to
this Article 13, make any adjustments it deems appropriate.
ARTICLE 14. Withholding
EXHIBIT A-16
<PAGE> 54
FIRSTCITY may require an Employee exercising a Nonqualified Stock
Option granted hereunder, or disposing of Shares acquired pursuant to the
exercise of an Incentive Stock Option in a disqualifying disposition (within
the meaning of Section 421 (b) of the Code), to reimburse the corporation which
employs such Employee for any taxes required by any governmental regulatory
authority to be withheld or otherwise deducted and paid by such corporation in
respect of the issuance or disposition of such Shares. In lieu thereof, the
corporation which employs such Employee shall have the right to withhold the
amount of such taxes from any other sums due or to become due from such
corporation to the Employee upon such terms and conditions as the Committee
shall prescribe. The corporation that employs such Employee may, in its
discretion, hold the stock certificate to which such Employee is entitled upon
the exercise of an Option as security for the payment of such withholding tax
liability, until cash sufficient to pay that liability has been accumulated.
In addition, at any time that FIRSTCITY becomes subject to a withholding
obligation under applicable law with respect to the exercise of a Nonqualified
Stock Option (the "Tax Date"), except as set forth below, a holder of a
Nonqualified Stock Option may elect to satisfy, whole or in part, the holder's
related personal tax liabilities (an "Election") by (a) directing FIRSTCITY to
withhold from Shares issuable in the related exercises either a specified value
(in either case not in excess of the related personal tax liabilities). (b)
tendering Shares previously issued pursuant to the exercise of an Option or
other shares of FIRSTCITY's Common Stock owned by the holder or (c) combining
any or all of tile foregoing Elections in any fashion. An Election shall be
irrevocable. The withheld Shares and other shares of Common Stock tendered in
payment shall be valued at their fair market value (as determined under section
5) on the Tax Date. The Committee may disapprove of any Election, suspend or
terminate the right to make Elections or provide that the right to make
Elections shall not apply to particular Shares or exercises. The Committee may
impose any additional conditions or restrictions on the right to make an
Election as it shall deem appropriate. In addition, FIRSTCITY shall be
authorized, without the prior written consent of the Employee, to effect any
such withholding upon exercise of a Nonqualified Stock Option by retention of
Shares issuable upon such exercise having a Fair Market Value equal to the
amount to be withheld, provided, however that FIRSTCITY shall not be authorized
to effect such withholding without the prior written consent of the Employee if
such withholding would subject such Employee to liability under Section 16 (b)
of the Exchange Act. The Committee may prescribe such rules as it determines
with respect to Employees subject to the reporting requirements of Section (a)
of the Exchange Act to effect such tax withholding in compliance with the Rules
established by the Securities and Exchange Commission (the "Commission") under
Section 16 of the Exchange Act and the positions of the staff of the
Commission thereunder expressed in no-action letters exempting such tax
withholding from liability under Section 16(b) of the Exchange act.
ARTICLE 15. Indemnification
Each person who is or shall have been a member of the Committee, or the
Board, shall be indemnified and held harmless by FIRSTCITY against and from any
loss, cost, liability or expense that may be imposed upon or reasonably
incurred by him or her in connection with or resulting from any claim, action,
suit or proceeding to which he or she may be a party or in which he or she may
be involved by reason of any action taken or failure to act hereunder and
against and from any and all
EXHIBIT A-17
<PAGE> 55
amounts paid by him or her in settlement thereof, with FIRSTCITY's approval, or
paid by him in satisfaction of any judgement in any such action, suit or
proceeding against him, provided he shall give FIRSTCITY an opportunity, at its
own expense, to handle and defend the same before he undertakes to handle and
defend it on his own behalf. The foregoing right of indemnification shall be in
addition to any other rights of indemnification to which such persons may be
entitled under FIRSTCITY's Certificate of Incorporation or Bylaws, as a matter
of law, or otherwise, or any power that FIRSTCITY may have to indemnify them or
hold them harmless.
ARTICLE 16. Successors
All obligations of FIRSTCITY hereunder, with respect to Awards, shall be
binding on any successor to FIRSTCITY, 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
FIRSTCITY.
ARTICLE 17. Legal Construction
17.1 Gender and Number. Except where otherwise indicated by the
context, any masculine term used herein also shall include the feminine; the
plural shall include the singular and the singular shall include the plural.
17.2 Severability. In the event any provision hereof shall be held
illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts hereof, and the Plan shall be construed and enforced
as if the illegal or invalid provision had not been included.
17.3 Requirements of Law. The granting of Awards and the issuance
of Shares under the Plan 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.
17.4 Regulatory Approvals and Listing. FIRSTCITY shall not be
required to issue any certificate or certificates for Shares hereunder prior
to (i) obtaining any approval from any governmental agency which FIRSTCITY
shall, in its discretion, determine to be necessary or advisable, (ii) the
admission of such Shares to listing on any national securities exchange or
Nasdaq on which FIRSTCITY's Shares may be listed or quoted and (iii) the
completion of any registration or other qualification of such Shares under any
state or federal law or ruling or regulations of any governmental body which
FIRSTCITY shall, in its sole discretion, determine to be necessary or advisable.
Notwithstanding any other provision set forth herein, if required by
the then-current Section 16 of the Exchange Act, any "derivative security" or
"equity security" offered pursuant hereto to any insider may not be sold or
transferred for at least six (6) months after the date of grant of such Award.
The terms "equity security" and "derivative security" shall have the meanings
ascribed to them in the then-current Rule 16(a) under the Exchange Act.
EXHIBIT A-18
<PAGE> 56
17.5 Securities Law Compliance. With respect to Insiders,
transactions hereunder are intended to comply with all applicable conditions of
Rule 16b-3 or its successors under the Exchange Act. To the extent any
provisions hereof or action by the Committee falls to so comply, it shall be
deemed null and void, to the extent permitted by law and deemed advisable by
the Committee.
17.6 Governing Law. To the extent not preempted by federal law,
the Plan, and all agreements hereunder, shall be construed in accordance with
and governed by the laws of the State of Delaware.
EXHIBIT A-19
<PAGE> 57
EXHIBIT B
<PAGE> 58
FIRST CITY FINANCIAL CORPORATION
1995 EMPLOYEE STOCK PURCHASE PLAN
1. ESTABLISHMENT AND DURATION OF PLAN
FIRSTCITY FINANCIAL CORPORATION ("FIRSTCITY") hereby establishes the
1995 Employee Stock Purchase Plan (the "Plan"), under which employees of
FIRSTCITY and its subsidiaries shall have the right pursuant to Options (as
hereinafter defined) granted under the Plan to purchase shares of common stock,
par value $.01 per share, of FIRSTCITY (the "Common Stock") through payroll
deductions as provided herein. It is intended that the Plan shall qualify
under the provisions of Section 423 of the Internal Revenue Code of 1986, as
amended (the "Code"), and shall be construed accordingly. The Plan shall be
effective as of the date it is originally approved by the Board of Directors
(the "Board") of FIRSTCITY (the "Effective Date"), subject to any registration
requirements under the Securities Act of 1933, as amended (the "Act"), and the
approval of stockholders of FIRSTCITY under Section 423 of the Code, and shall
continue until terminated in accordance with Section 10. Rights to purchase
shares offered pursuant to the Plan are a matter of separate inducement and not
in lieu of any salary or other compensation for the services of any employee.
2. ADMINISTRATION
The Board shall appoint a committee (the "Committee") comprised of not
less than three persons (at least two of whom shall be members of the Board)
who shall not be eligible, and shall not have been eligible at any time within
one year prior thereto, for selection as a person to whom Options may be
granted pursuant to the Plan. The Committee shall designate an administrator
(the "Administator") of the Plan, who may be, but shall not be required to be,
a member of the Committee. The Committee and the Administrator shall
administer the Plan, all as provided herein. The members of the Committee
shall serve at the pleasure of the Board, and the Administrator shall serve at
the pleasure of the Committee. The Committee shall hold meetings at such times
and places as it may determine and may take action by unanimous written consent
or by means of a meeting held by conference telephone call or similar
communications equipment pursuant to which all persons participating in the
meeting can hear each other. The Committee may request advice or assistance or
employ such other persons as it deems necessary for proper administration of
the Plan. Subject to the express provisions of the Plan and the requirements
of applicable law, the Committee shall have authority, in its discretion, to
determine: (i) when each offering hereunder of Options (hereinafter, an
"Offering") shall be made; (ii) the duration of each Offering; (iii) the dates
on which the purchase period for each Offering shall begin and end; and (iv)
the total number of shares subject to each Offering. Subject to the express
provisions of the Plan, the Committee shall have the discretionary authority:
(a) to construe and interpret Offerings, Options, the Plan and the respective
rights to purchase shares; (b) to prescribe, amend and rescind rules and
regulations relating to the Plan; (c) to supply omissions, reconcile
inconsistencies, and correct defects in the Plan and correct errors made in
EXHIBIT B-1
<PAGE> 59
the administration of the Plan; and (d) to make all other determinations
necessary or advisable for administering the Plan. Except as to matters which
are herein expressly reserved for determination by the Board, the decisions and
determinations of the Committee with respect to matters referred to in this
Section 3 as within its province shall be final, conclusive and binding upon
all persons, including, but not limited to, FIRSTCITY and its subsidiaries,
their stockholders and directors and any person having any interests in any
Options which are granted hereunder, except that, to the extent required by law
or by the Certificate of Incorporation or Bylaws of FIRSTCITY, the terms of any
Offering shall be subject to ratification by the Board of Directors prior to
the effective date of such Offering.
3. PARTICIPATION
(a) Grant of Options. Except as otherwise provided herein, each
employee of FIRSTCITY or of any corporation, partnership or other legal entity
at least 50% of the combined voting power of which is owned directly or
indirectly by FIRSTCITY (a "Subsidiary"), including, but not limited to, any
corporation which becomes a Subsidiary of FIRSTCITY on or after the adoption
hereof, as are designated by the Committee), shall automatically, on the first
day of an Offering, be granted an option ("Option") hereunder to purchase
shares of Common Stock (employees to whom Options are granted are hereinafter
sometimes referred to as "Participants"), which Option shall continue through
the term of such Offering period. Each such Offering period is referred to
herein as an "Offering Period".
(b) Excluded Employees. Notwithstanding the foregoing, Options
cannot be granted to the following employees: (i) employees whose customary
employment is 20 hours or less per week or not more than five months in any
calendar year; and (ii) employees who have been employed less than ninety (90)
days as of the effective date of an Offering hereunder (notwithstanding the
foregoing, with respect to the first Offering under the Plan, persons who are
employees of FIRSTCITY on the effective date of this Plan shall be deemed to
have satisfied the requirements of this clause (ii)).
(c) 5% Shareholders. Notwithstanding the foregoing, an employee
cannot be granted an Option if such employee, immediately after the Option is
granted, would own stock possessing 5% or more of the total combined voting
power or value of all class of stock of the employee's employer or of any
subsidiary or parent corporation of the employee's employer (in determining
stock ownership of an individual, the rules of Section 424(d) of the Code shall
be applied; in addition, an employee is considered for this purpose as also
owning stock which he or she may purchase under any outstanding stock options
(including an Option)). No Option shall be exercisable for shares of Common
Stock except to the extent of that number of shares which would not cause the
Participant to whom such Option is granted to be a 5% or more shareholder as
described above.
(d) Conditions of an Offering. The terms and conditions of each
Offering shall: (i) state its effective date; (ii) define the duration of such
Offering and the purchase period
EXHIBIT B-2
<PAGE> 60
thereunder; (iii) specify the maximum number of shares of Common Stock that may
be purchased thereunder.
(e) Rights and Privileges. All employees of FIRSTCITY or any of
its Subsidiaries shall have the same rights and privileges hereunder, except
that the amount of Common Stock which may be purchased by any employee under an
Option shall bear a uniform relationship to the total compensation of employees
in accordance with the maximum authorized payroll deduction or other
limitations as set forth in Section 4(b).
4. TERMS AND CONDITIONS OF OPTIONS
Each Option shall be evidenced by such written document as may be
prescribed by the Administrator or its designee. Options and their exercise
shall be subject to the following requirements:
(a) Option Price. The price to be paid for Common Stock upon
exercise of an Option shall not be less than 85% of the Fair Market Value of
the Common Stock on the last trading day of each Offering Period. "Fair Market
Value" shall be determined as follows:
(i) If, on the relevant date, the Common Stock is traded
on a national or regional securities exchange or on the Nasdaq Stock
Market ("Nasdaq") and closing sale prices for the Common Stock are
customarily quoted, on the basis of the closing sale price on the
principal such securities exchange on which the Common Stock may then
be traded or, if there is no such sale on the relevant date, then on
the immediately preceding day on which a sale was reported;
(ii) If, on the relevant date, the Common Stock is not
listed on any securities exchange or traded on Nasdaq, but nevertheless
is publicly traded and reported without closing sale prices for the
Common Stock being customarily quoted, on the basis of the mean between
the closing bid and asked quotations in such other over-the-counter
market as reported by The National Quotation Bureau Incorporated on
that date, or if such prices shall not have been reported on such date,
then the mean between the closing bid and asked quotations in the
over-the-counter market as reported on the immediately preceding the
day on which such bid and asked prices were quoted; and
(iii) If, on the relevant date, the Common Stock is not
publicly traded as described in (i) or (ii), on the basis of the good
faith determination of the Committee.
(b) Manner of Exercise and Payment.
(i) FIRSTCITY shall maintain a payroll deduction account
for each Participant. In order to exercise an Option, a Participant
must, on the effective date of an Offering, or thereafter during the
Offering, authorize payroll deductions in advance for future pay
EXHIBIT B-3
<PAGE> 61
periods, which do not necessarily have to be taken for each consecutive
pay period. Such payroll deductions may not exceed, in the aggregate
for any purchase period, IO% of the total salary, wages and bonuses
paid such Participant during the purchase period specified in the
Offering (or for such portion thereof as the employee is eligible to
participate), subject to appropriate adjustments that would exclude
items such as reimbursement of moving, travel, trade or business
expenses. The Administrator may, in its sole discretion, establish a
minimum amount of any such payroll deduction, and/or may require that
any payroll deduction must be made in whole percentages (i.e., 1%, 2%,
3%, etc.) and not in any fraction of a percentage. Such payroll
deduction authorizations shall be made by filing with the Administrator
or its designee a completed form prescribed or approved by the
Administrator or its designee. The form will authorize a regular
payroll deduction from the employee's compensation and must specify the
date on which such deduction is to commence, which may not be
retroactive.
(ii) A Participant may at any time and for any reason
withdraw the entire cash balance then accumulated in his or her payroll
deduction account and thereby withdraw from participation in an
Offering. Upon withdrawal of the cash balance in his or her payroll
deduction account, an employee shall cease to be eligible to
participate in the Offering pursuant to which the withdrawn funds were
withheld. Partial withdrawals shall not be permitted. Any cash
balance withdrawn in accordance with this Section 4(b)(ii) may not be
transferred to any payoll deduction account maintained for the employee
pursuant to another offering, whether under the Plan or under another
such plan. No interest shall be paid on cash balances in an employee's
payroll deduction account.
(iii) Subject to Section 4(f), an Option shall be deemed to
be exercised automatically on the last day of each Offering Period
during which a payroll deduction is taken. Such Option shall be
exercised each such time to the extent of the number of full shares of
Common Stock which may be purchased with the funds in the respective
Participant's payroll deduction account. Any amount remaining because
such remaining amount was not sufficient to purchase a full share may
be retained by FIRSTCITY for the Participant's account and applied to
the purchase price of shares of Common Stock pursuant to subsequent
Offerings undertaken by FIRSTCITY, or may be withdrawn therefrom by a
Participant pursuant to Section 4(b)(ii) hereof.
(iv) A Participant may prospectively increase the amount
authorized as payroll deductions or temporarily discontinue payroll
deductions, effective as of the time specified, by filing a notice to
such effect with the Administrator or its designee on a form prescribed
by the Administrator or its designee; provided, however, that no such
change or temporary discontinuance shall be effective earlier than the
next payroll period after receipt of such form; and, further provided,
that any Participant who temporarily discontinues may not resume
payroll deductions until the expiration of ninety (90) days from the
date of discontinuance. Such decrease or discontinuance shall be
effective thereafter until another election authorizing a payroll
deduction is filed with the
EXHIBIT B-4
<PAGE> 62
Administrator or its designee in the manner described above. Options
may only be exercised by paying the Option price through a payroll
deduction as provided above. Notwithstanding the foregoing, no
Participant shall be entitled to decrease his or her payroll deduction
more than twice during any Offering Period.
(c) Term of Option. No Option may be exercised after the
expiration of five (5) years from and after the date such Option is initially
granted, and thus each Option shall, unless earlier exercised, expire five (5)
years after the date of its initial grant. Notwithstanding the foregoing, all
Options will expire at such time as the maximum aggregate number of shares of
Common Stock available hereunder, as set forth in Section 5(a), has been issued
pursuant to the exercise of Options. and an Option will expire upon the
effective date of termination of the employment of the Participant to whom such
Option has been granted or on the date of his or her death.
(d) Options Non-Assignable. Except as provided in Section 5(g)
regarding exercise by a beneficiary (or executor or person performing similar
duties), an Option shall be exercisable only by the Participant to whom such
Option has been granted during his or her lifetime, and no Option shall be
assignable by any Participant.
(e) Voting and Other rights as a Stockholder. Each Participant
shall have full stockholder rights with respect to all shares of Common Stock
purchased upon exercise of an Option, including, but not limited to, voting,
dividend and liquidation rights. A Participant shall have no rights as
stockholder with respect to shares subject to an option for which such Option
has not then been exercised. No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash or in other property) or
distributions or other rights for which the record date is prior to the date on
which a stock certificate is issued, except as provided in Section 5(a).
(f) Annual $25,000 Limit. No employee at any time may be granted
an Option which permits his or her rights to purchase Common Stock hereunder,
and under any other plans qualifying under Section 423 of the Code, of
FIRSTCITY and its subsidiaries, taken in the aggregate, to accrue at a rate
which exceeds $25,000 of fair market value of such stock determined at the
time the Option is granted for each calendar year in which such Option is
outstanding. For purposes hereof, (i) the right to purchase Common Stock under
an Option accrues when the Option (or any portion thereof) first becomes
exercisable during the calendar year; (ii) the right to purchase Common Stock
under an Option accrues at the rate provided in the Option, but in no case may
such rate exceed $25,000 of fair market value of Common Stock (determined at
the time such Option is granted) for any one calendar year; and (iii) a right
to purchase Common Stock which has accrued under one Option may not be carried
over to any other Option. Subject to the other limitations herein, if a
Participant does not purchase the maximum amount of Common Stock in a given
calendar year, the excess of $25,000 over the amount of Common Stock purchased
may be carried over to a subsequent year for a later purchase. Thus, a
Participant may purchase $25,000 of Common Stock for the year of purchase and,
in addition, that amount for each of the preceding years during which the
Option was
EXHIBIT B-5
<PAGE> 63
outstanding to the extent that the $25,000 ceiling was not purchased in the
preceding year. However, a Participant may not purchase Common Stock in
anticipation that the limit will not be used in future years.
(g) Retirement, Termination and Death. In the event of a
Participant's retirement or termination of employment, the amount in such
Participant's payroll deduction account shall be refunded to the Participant
and any shares of Common Stock purchased by the Participant that have not been
issued shall be issued and delivered to the Participant. In the event of a
Participant's death, the amount in the deceased Participant's payroll deduction
account may, at the option of the beneficiaries designated by such Participant
pursuant to Section 5(h) (or such Participant's executor or a person performing
similar duties), be utilized to purchase Common Stock at the end of the
Offering Period during which the deceased Participant dies, whereupon all
shares so purchased shall be delivered to such beneficiary (or executor or
person performing similar duties).
(h) Designation of Beneficiary. A Participant may file a written
designation of a beneficiary who is to receive any shares of Common Stock
and/or cash. Such designation of beneficiary may be changed by the Participant
at any time by written notice to the Committee. Upon the death of a
Participant and upon receipt by the Committee of proof of identity and
existence at the Participant's death of a beneficiary validly designated by him
or her under the Plan, FIRSTCITY shall deliver such shares and/or cash to such
beneficiary. In the event of the death of a Participant and in the absence of
a beneficiary validly designated under the Plan who is living at the time of
such Participant's death, FIRSTCITY shall deliver such shares and/or cash to
the executor or administrator of the estate of the Participant, or if no such
executor of administrator has been appointed (to the knowledge of the
Committee), the Committee, in its discretion, may cause the delivery of such
shares and/or cash to the spouse or to any one or more dependents of the
Participant as the Committee may designate. No beneficiary shall, prior to the
death of the Participant by whom he or she has been designated, acquire any
interest in the shares or cash credited to the Participant under the Plan.
5. SHARES SUBJECT TO OPTION
(a) Limitation. No more than an aggregate of one hundred thousand
(100,000) shares of Common Stock may be purchased or issued pursuant to the
exercise of Options; provided, however, the number of shares subject to the
Plan or subject to any Offering or Option under the Plan shall automatically be
adjusted from and after the Effective Date to reflect appropriately any of the
following events: (i) any stock split in the form of a stock dividend payable
in shares of Common Stock; (ii) any recapitalization, reclassification,
split-up, consolidation of, or other change in, the Common Stock; or (iii) any
exchange of the then outstanding shares of Common Stock in connection with a
merger, consolidation, share exchange or other reorganization of FIRSTCITY;
provided, however, that any such adjustment shall comply with the rules of
Section 424(a) of the Code if the transaction is one described in said Section
424(a); provided further that in no event shall any adjustment be made that
would render any Offering other than an offering
EXHIBIT B-6
<PAGE> 64
pursuant to an employee stock purchase plan within the meaning of Section 423
of the Code. If an Option under the Plan expires or is terminated unexercised
for any reason, the shares as to which such right so expired or terminated
again may be made subject to Options under the Plan.
(b) Source of Shares. FIRSTCITY will, in accordance with and to
the extent of the exercise of each Option, apply all payroll deductions to the
purchase of full shares of Common Stock for the account of the respective
Participant. Such shares may be available from either authorized but
theretofore unissued shares of Common Stock, Common Stock held in treasury or
shares of Common Stock reacquired by FIRSTCITY or which may be purchased from
Participants who are receiving Common Stock pursuant to the exercise of Options
or from persons who are entitled to receive or who have received Common Stock
from any benefit program maintained by FIRSTCITY upon retirement, other
termination of employment or any other event. Such purchase may be subject to
such terms with respect to price, delivery and other terms and conditions as to
which FIRSTCITY may agree. FIRSTCITY may appoint an independent agent to
purchase the Common Stock, with the independent agent determining the amount of
such purchases, the price to be paid and the broker or dealer, if any, through
or from whom the purchases are to be made. For the purposes of making
purchases, FIRSTCITY may commingle each Participant's funds with those of all
other Participants. The manner and timing of the issuance or purchases of
Common Stock hereunder shall be in accordance with applicable
federal securities laws.
6. ISSUANCE OF STOCK CERTIFICATES
Certificates representing shares of Common Stock purchased under the
Plan may be issued in the name of the employee or if he or she so indicates on
an appropriate form (i) in his or her name, jointly with a member of his or her
family, with right of survivorship, (ii) in the name of a fiduciary for the
employee (in the event the employee is under a legal disability to have
certificates issued in his or her name) or (iii) in a manner giving effect to
the status of such shares as community property in jurisdictions where
applicable. Upon termination of employment, certificates representing Common
Stock purchased under the Plan will be issued in the name of the employee and
forwarded to his or her account address on file with the Plan's transfer agent
of record. FIRSTCITY shall pay all issue or initial transfer taxes with
respect to the issuance or initial transfer of shares, as well as all fees and
expenses necessarily incurred by FIRSTCITY in connection with such issuance or
initial transfer.
7. SECURITIES REGULATION
FIRSTCITY shall not be required to issue any certificate or
certificates for shares of Common Stock hereunder prior to (i) obtaining any
approval from any governmental agency which FIRSTCITY shall in its discretion,
determine to be necessary or advisable, (ii) the admission of such shares to
listing on any national securities exchange or Nasdaq on which the shares of
Common Stock may be listed and (iii) the completion of any registration or
other qualification of such shares under any state or federal law or ruling or
regulations of any
EXHIBIT B-7
<PAGE> 65
governmental body which FIRSTCITY shall, in its sole discretion, determine to
be necessary or advisable.
8. AMENDMENT
The Plan may, from time to time, be amended or modified by the Board
in such respects as it shall deem advisable, including, without limitation,
amendments to ensure that Options qualify under Section 423 of the Code, or
amendments thereto, to conform to any change in any law or regulation governing
same; provided, however, that no such amendment or modification shall (i)
disqualify the Plan under Section 423 of the Code, (ii) increase the aggregate
number of shares of Common Stock which may be purchased or issued pursuant to
the exercise of Options (other than an increase merely reflecting a change in
capitalization such as a stock dividend or stock split-up), (iii) change the
designation of corporations whose employees may be offered Options, (iv) modify
the requirements as to eligibility for participation in the Plan, or (v)
increase the benefits to officers and di-rectors of FIRSTCITY. Any amendment
which would have the effect of (ii), (iii), (iv) or (v) above must be approved
by FIRSTCITY's stockholders in accordance with Section 423 of the Code and any
securities law requirements.
9. TERMINATION OF PLAN
The Plan shall continue until the first to occur of (i) the maximum
aggregate number of shares of Common Stock available hereunder, as set forth in
Section 5(a) hereof, being acquired pursuant to the exercise of Options, or
(ii) the termination of the Plan by the Board. In the event that the Plan
terminates under the circumstances described in clause (i) above, shares of
Common Stock remaining available for purchase pursuant to Options under the
Plan as of the termination date shall be issued, upon exercise of such Options,
to participating employees on a pro rata basis (in proportion to their payroll
deduction accounts); provided, however, that notwithstanding the foregoing, the
Board may, at any time in its absolute discretion, terminate the Plan and,
unless disallowed by applicable law, terminate any then outstanding Options so
that such terminated Options may not be exercised after the effective date of
such termination. Any cash balances remaining in Participant's payroll
deduction accounts upon termination of the Plan shall be refunded as soon
thereafter as practicable. The powers, of the Committee provided by Section 2
hereof to construe and administer the Plan shall nevertheless continue after
such termination.
10. THIRD PARTY BENEFICIARIES
None of the provisions of the Plan shall be for the benefit of or
enforceable by any creditor of a Participant or any other third party (except
for a beneficiary designated by a Participant pursuant to Section 5(h) (or such
Participant's executor or person performing similar duties)). A Participant
may not create a lien, encumbrance or assignment on any portion of the cash
balance accumulated in his or her payroll deduction account or on any shares
covered by an Option before a stock certificate for such shares is issued for
his or her benefit.
EXHIBIT B-8
<PAGE> 66
11. GENERAL PROVISIONS
The Plan shall neither impose any obligation on FIRSTCITY or on any
parent or subsidiary corporation to continue the employment of any Participant,
nor impose any obligation on any Participant to remain in the employ of
FIRSTCITY or of any parent or subsidiary corporation. For purposes of the
Plan, an employment relationship shall be deemed to exist between an individual
and a corporation if, at the time of the determination, the individual is an
"employee" of such corporation within the meaning of Section 423(a)(2) of the
Code and the regulations and rulings interpreting such section. For purposes
of the Plan, the transfer of an employee from employment with FIRSTCITY to
employment with a parent or subsidiary of FIRSTCITY, or vice versa, shall not
be deemed a termination of employment of the employee. Subject to the specific
terms of the Plan, all employees granted rights to purchase shares hereunder
shall have the same rights and privileges.
12. GOVERNING LAW
The Plan and rights to purchase shares that may be granted hereunder
shall be governed by and construed and enforced in accordance with the laws of
the State of Delaware without regard to principles of conflicts of laws.
13. EFFECTIVE DATE
The Plan shall be deemed effective upon its approval by the Board of
Directors; provided, however, that no shares of Common Stock shall be purchased
through the operation of Section 4(b) hereof until such time as this Plan has
been approved by the stockholders of FIRSTCITY; and provided further that no
purchase period under the Plan may begin until a registration statement under
the Securities Act of 1933, as amended, covering the shares to be issued under
the Plan has become effective.
EXHIBIT B-9
<PAGE> 67
EXHIBIT C
<PAGE> 68
FIRSTCITY FINANCIAL CORPORATION
1996 STOCK OPTION AND AWARD PLAN
ARTICLE 1. Establishment, Purpose and Duration
1.1 Establishment of the Plan. FIRSTCITY FINANCIAL CORPORATION, a
Delaware corporation establishes this stock option and award plan for fiscal
year 1996 (hereinafter referred to as "FIRSTCITY FINANCIAL CORPORATION 1996
Stock Option and Award Plan (the "Plan"), as set forth in this document. The
Plan permits the grant of Nonqualified Stock Options, Incentive Stock Options,
Performance Shares and Restricted Stock.
Subject to approval by FIRSTCITY's stockholders at their 1996 Annual
Meeting, the Plan shall become effective as of January 1, 1996 (the "Effective
Date") and shall remain in effect as provided in Section 1.3.
1.2 Purpose of the Plan. The purpose of the Plan is to secure for
FIRSTCITY and its stockholders the benefits of the incentive inherent in stock
ownership in FIRSTCITY by key employees, directors and other persons who are
largely responsible for its future growth and continued success. The Plan
promotes the success and enhances the value of FIRSTCITY by linking the
personal interests of Participants to those of FIRSTCITY's stockholders, and by
providing Participants with an incentive for outstanding performance.
The Plan is further intended to provide flexibility to FIRSTCITY in its
ability to motivate, attract and retain the services of Participants upon whose
judgement, interest and special effort the successful conduct of its operation
largely depends.
1.3 Duration of the Plan. The Plan shall commence on the Effective
Date and shall remain in effect, subject to the right of the Board of Directors
to amend or terminate the Plan at any time pursuant to Article 13, until the
day prior to the tenth (10th) anniversary of the Effective Date.
1.4 Types Of Options. The Options granted under the Plan are
intended to be either Incentive Stock Options within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended, or options that do not meet
the requirements for Incentive Options ("Nonqualified Stock Options").
FIRSTCITY makes no warranty, however, as to the qualification of any Option as
an Incentive Option.
ARTICLE 2. Definitions
Whenever used herein, the following terms shall have the meanings set
forth below and, when the meaning is intended, the initial letter of the word
is capitalized:
(a) "Award" means, individually or collectively, a grant under this
Plan of Nonqualified Stock Options, Incentive Stock Options, Performance Shares
or Restricted Stock.
EXHIBIT C-1
<PAGE> 69
(b) "Award Agreement" means an agreement entered into by each
Participant and FIRSTCITY, setting forth the terms and provisions applicable to
Awards granted to Participants hereunder.
(c) "Beneficial owner" or "Benificial Ownership" shall have the
meaning ascribed to such term in rule 13d-3 of the General Rules and
Regulations under the Exchange Act.
(d) "Board" or "Board of Directors" means the Board of Directors of
FIRSTCITY.
(e) "Cause" means: (i) willful or negligent misconduct on the
part of a Participant that is detrimental to FIRSTCITY; or (ii) the indictment
of a Participant for the commission of a felony. The existence of "Cause"
under either (i) or (ii) shall be determined by the Committee. Notwithstanding
the forgoing, if the Participant has entered into an employment agreement that
is binding as of the date of employment termination, and if such employment
agreement defines "Cause" and/or provides a means of determining whether
"Cause" exists, such definition of "Cause" and the means of determining its
existence shall apply to the Participant for purposes hereof.
(f) "Change in Control" shall be deemed to have occurred if:
(i) An acquisition by any Person of Beneficial Ownership of
the Shares then outstanding ("FIRSTCITY Common Stock Outstanding") or
the voting securities of FIRSTCITY then outstanding entitled to vote
generally in the election of directors "(FIRSTCITY Voting Securities
Outstanding"); provided such acquisition of Beneficial Ownership would
result in the Person's beneficially owning (within the meaning of Rule
13d-3 promulgated under the Exchange Act) twenty-five percent (25%) or
more of FIRSTCITY Common Stock Outstanding or twenty-five percent
(25%) or more of the combined voting power of FIRSTCITY Voting
Securities Outstanding; and provided further, that immediately prior
to such acquisition such Person was not a direct or indirect
Beneficial Owner of twenty-five percent (25%) or more of FIRSTCITY
Common Stock Outstanding or twenty-five percent (25%) or more of the
combined voting power of FIRSTCITY Voting Securities Outstanding, as
the case may be; or
(ii) The approval of the stockholders of FIRSTCITY of a
reorganization, merger consolidation, complete liquidation or
dissolution of FIRSTCITY, the sale or disposition of all or
substantially all of the assets of FIRSTCITY or similar corporate
transaction (in each case referred to in this Section 2(f) as a
"Corporate Transaction") or, if consummation of such Corporate
Transaction is subject, at the time of such approval by stockholders,
to the consent of any government or governmental agency, the obtaining
of such consent (either explicitly or implicitly): or
EXHIBIT C-2
<PAGE> 70
(iii) A change in the composition of the Board such that the
individuals who, as of the Effective Date, constitute the Board (such
Board shall be hereinafter referred to as the "Incumbent Board") cease
for any reason to constitute at least a majority of the Board;
provided, however, for purposes of this Section 2(f), that any
individual who becomes a member of the Board subsequent to the
Effective Date whose election, or nomination for election by
FIRSTCITY's stockholders, was approved by at least a majority of those
individuals who are members of the Board and who were also members of
the Incumbent Board (or deemed to be such pursuant to this proviso)
shall be considered as though such individual were a member of the
Incumbent Board: but, provided, further, that any such individual whose
initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act, including any
successor to such Rule) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board
shall not be so considered as a member of the Incumbent Board.
Notwithstanding the provisions set forth in subparagraphs (i) and (ii) of this
Section 2(f), the following shall not constitute a Change in Control for
purposes hereof: (1) any acquisition of shares of common stock of FIRSTCITY by,
or consummation of a Corporate Transaction with, any Subsidiary or an employee
benefit plan (or related trust) sponsored or maintained by FIRSTCITY or an
affiliate; or (2) any acquisition of shares of common stock of FIRSTCITY, or
consummation of a Corporate Transaction, following which more that fifty
percent (50%) of the shares of common stock then outstanding of the corporation
resulting from such acquisition or Corporate Transaction and more than fifty
percent (50%) of the combined voting power of the voting securities then
outstanding of such corporation entitled to vote generally in the election of
directors, is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were Beneficial Owners of
FIRSTCITY Common Stock Outstanding and FIRSTCITY Voting Securities Outstanding,
respectively, immediately prior to such acquisition or Corporate Transaction in
substantially the same proportions as their ownership, immediately prior to
such acquisition or Corporate Transaction, of FIRSTCITY Common Stock
Outstanding and FIRSTCITY Voting Securities Outstanding, as the case may be.
(g) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(h) "Committee" means the committee appointed by the Board to
administer the Plan with respect to grants of Awards, as specified in Article
3.
(i) "Code" means any individual who is a member of the Board
of Directors.
(j) "Disability" shall have the meaning ascribed to such term in
the FIRSTCITY long-term disability plan covering the Participant, or in the
absence of such plan, a meaning consistent with Section 22(e)(3) of the Code.
EXHIBIT C-3
<PAGE> 71
(k) "Employee" means any full-time, salaried employee of FIRSTCITY,
or FIRSCITY's Subsidiaries.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor act therto.
(m) "Fair Market Value" shall be determined as follows:
(i) If, on the relevant date, the Shares are traded on a
national or regional securities exchange or on The Nasdaq Stock Market
("NASDAQ) and closing sale prices for the Shares are customarily
quoted, on the basis of the closing sale price on the principal such
securities exchange on which the Shares may then be traded or, if there
is no such sale on the relevant date, then on the immediately preceding
day on which a sale was reported;
(ii) If, on the relevant date, the Shares are not listed on
any securities exchange or traded on Nasdaq, but nevertheless are
publicly traded and reported on Nasdaq without closing sale prices for
the Shares being customarily quoted, on the basis of the mean between
the closing bid and asked quotations in such other over-the-counter
market as reported by Nasdaq on that date, then the mean between the
closing bid and asked quotations in the over-the-counter market as
reported by Nasdaq on the immediately preceding day such bid and asked
prices were quoted. For purposes of the foregoing, a market in which
trading is sporadic and the ask quotations generally exceed the bid
quotations by more than 15% shall not be deemed to be a "regular,
active public market." and
(iii) If, on the relevant date, the Shares are not publicly
traded as described in (i) or (ii), on the basis of the good faith
determination of the Committee.
(n) "Final Award" means the actual award earned during a
performance period by a Participant, as determined by the Committee at the end
of the performance period pursuant to Article
(o) "Incentive Payment Date' means the seventy-fifth (75th) day
following the last day of the performance period during which the Final Award
under Article 7 was earned, or such earlier date upon which Final Awards are
paid to Participants.
(p) "Incentive Stock Option' or "ISO' means an option to purchase
Shares, granted under Article 6 which is designated as an Incentive Stock
Option and is intended to meet the requirements of Section 422 of the Code.
(q) "Insider" shall mean a Person who is, on the relevant date, a
director, officer or beneficial owner of ten percent (10%) or more of any
class of FIRSTCITY's equity securities that is registered pursuant to Section
12 of the Exchange Act, all as defined under Section 16 of the
EXHIBIT C-4
<PAGE> 72
Exchange Act.
(r) "Named Executive Officer" means a Participant who, as of the
date of vesting and/or payout of an Award is one of the group of "covered
employees," as defined in the regulations promulgated under Code Section
162(m), or any successor statute.
(s) "Nonqualified Stock Option" or "NQSO" means an option to
purchase Shares granted under Article 6 which is not intended to meet the
requirements of Code Section 422.
(t) "Option" means an Incentive Stock Option or a Nonqualified
Stock Option.
(u) "Option Price" means the price at which a Share may be
purchased by a Participant pursuant to an Option, as determined by the
Committee.
(v) "Participant" means an Employee, director or other person who
has been granted an Award which is outstanding.
(w) "Performance Share" means an Award, of shares granted to a
Participant, as described in Article 7.
(x) "Person" shall have the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act and used in Section 13(d) and 14(d)
thereof, including a "group" as defined in Section 13(d) thereof.
(y) "Plan Year" shall mean, for purposes of Article 7, FIRSTCITY's
fiscal year which coincides with each calendar year during the term hereof.
(z) "Retirement" shall have the meaning ascribed to such term in
the FIRSTCITY FINANCIAL CORPORATION 401(k) Plan.
(aa) "Restricted Stock" means an Award of restricted Shares
granted in accordance with the terms of Article 8 and the other provisions
hereof.
(ab) "Shares" means the shares of common stock of FIRSTCITY, par
value $0.01 per share.
(ac) "Subsidiary" means any corporation, partnership, joint
venture or other entity in which FIRSTCITY has a fifty percent (50%) or greater
voting interest.
(ad) "Window Period" means the period beginning on the third (3rd)
business day following the date of public release of FIRSTCITY's quarterly
sales and earnings information, and ending on the twelfth (12th) business day
following such date.
EXHIBIT C-5
<PAGE> 73
ARTICLE 3. Administration
3.1 The Committee. The Plan shall be administered by the
Compensation Committee of the Board, or by any other Committee appointed by the
Board consisting of not less than two (2) Directors who meet the "disinterested
administration" requirements of Rule 16b-3 or any successor thereto under the
Exchange Act and each of whom qualifies as an outside director under Section
162(m) of the Code or any successor thereto under the Code. The members of the
Committee shall be appointed from time to time by, and shall serve at the
discretion of, the Board of Directors.
The Committee shall be comprised solely of Directors who are eligible to
administer the Plan pursuant to Rule 16b-3(c)(2) or any successor thereto under
the Exchange Act. However, if for any reason the Committee does not qualify to
administer the Plan, as contemplated by Rule 16b-3(c)(2) of the Exchange act,
the Board of Directors may appoint a new Committee member who complies with
Rule 16b-3(c)(2).
3.2 Authority of the Committee. Subject to the provisions hereof,
the Committee shall have full power to select the Employees and other Persons
who are responsible for the future growth and success of FIRSTCITY, who may
include, without limitation, consultants, independent contractors or other
providers of services to FIRSTCITY, who shall participate herein (who may
change from year to year); determine the size and types of Awards, determine
the terms and conditions of Awards in a manner consistent herewith (including
vesting provisions and the duration of the Awards); construe and interpret the
Plan and any agreement or instrument entered into hereunder; establish, amend
or waive rules and regulations for the Plan's administration; and (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 herein, including to establish different terms and
conditions relating to the effect of the termination of employment or other
service to FIRSTCITY. Further, the Committee shall make all other
determinations which may be necessary or advisable for the administration
hereof. As permitted by law, the Committee may delegate its authority
hereunder.
3.3 Decisions Binding. All determinations and decisions made by
the Committee pursuant to the provisions hereof and all related orders and
resolutions of the Board shall be final, conclusive and binding on all Persons,
including FIRSTCITY, the stockholders, Employees, Participants and their
estates and beneficiaries.
ARTICLE 4. Authorized Shares
4.1 Number of Shares. Subject to adjustment a as provided in
Section 4.3, the total number of Shares available for grant of Awards shall be
an aggregate of five hundred thousand (500,000) Shares. These Shares may, in
the discretion of FIRSTCITY, be either authorized but unissued Shares or Shares
held as treasury shares, including Shares purchased by FIRSTCITY.
The following rules shall apply for purposes of the determination of
the number of Shares
EXHIBIT C-6
<PAGE> 74
available for grant hereunder;
(a) The grant of an Option or Restricted Stock shall reduce the
Shares available for grant hereunder by the number of Shares subject
to such Award.
(b) The Committee shall in each case determine the appropriate number
of Shares to deduct from the authorized pool in connection with the
grant of Performance, Shares,
(c) While an Option, Restricted Stock or Performance Share is
outstanding, it shall be counted against the authorized pool of Shares,
regardless of its vested status.
(d) In the event an Award is paid in the form of Shares or
derivatives of Shares, the authorized pool shall be reduced by the
number of Shares or Share derivatives paid to the Participant as
determined by the Committee.
(e) To the extent that an Award is settled in cash rather than in
Shares, the authorized Share pool shall be reduced by the appropriate
number of Shares represented by the cash settlement of the Award, as
determined at the sole discretion of the Committee (subject to the
limitation set forth in Section 4.2).
4.2 Lapsed Awards. If any Award is canceled, terminates, expires
or lapses for any reason, any Shares subject to such Award shall again be
available for grant of an Award. However, in the event that prior to the
Award's cancellation, termination, expiration or lapse, the holder of the Award
at any time received one (1) or more "benefits of ownership" pursuant to such
Award (as defined by the Securities and Exchange Commission, pursuant to any
rule or interpretation promulgated under Section 16 of the Exchange Act), the
Shares subject to such Award shall not be made available for regrant hereunder.
4.3 Adjustment in Authorized Shares. In the event of any change
in corporate capitalization, such as a stock split, or a corporate transaction,
such as any merger, consolidation, separation, including a spin-off, or other
distribution of stock or property of FIRSTCITY, any reorganization (whether or
not such reorganization comes within the definition of such term in Code
Section 368) or any partial or complete liquidation of FIRSTCITY, such
adjustment shall be made in the number and class of Shares which may be
delivered hereunder, and in the number and class of and/or price of Shares
subject to outstanding Awards, as may be determined to be appropriate and
equitable by the Committee, in its sole discretion, to prevent dilution or
enlargement of rights; provided, however, that the number of Shares subject to
any Award shall always be a whole number and the Committee shall make such
adjustments as are necessary to insure Awards of whole Shares.
ARTICLE 5. Eligibility and Participation
Any key Employee of FIRSTCITY, or of any Subsidiary, including any such
Employee who is also adirector of FIRSTCITY, or of any Subsidiary, or any other
Person, including
EXHIBIT C-7
<PAGE> 75
consultants, independent contractors or other service providers, whose
judgement, initiative and efforts contribute or may be expected to contribute
materially to the successful performance of FIRSTCITY or any Subsidiary shall
be eligible to receive an Award. In determining the Employees and other
Persons to whom an Award shall be granted and the number of Shares which may be
granted pursuant to that Award, the Committee shall take into account the
number of duties of the respective Person, their present and potential
contributions to the success of FIRSTCITY or any Subsidiary, and such other
factors as the Committee shall deem relevant in connection with accomplishing
the purposes hereof.
No person who is a member of the Committee shall be eligible to be
granted any Award hereunder while so serving.
ARTICLE 6. Stock Options
6.1 Grant of Options. Subject to the terms and provisions hereof,
Options may be granted to Employees or other Persons at any time and from time
to time as shall be determined by the Committee. The Committee shall have
discretion in determining the number of Shares subject to Options granted to
each Participant; provided, however, that in the case of any ISO, only an
Employee may receive such grant and the aggregate Fair Market Value (determined
at the time such Option is granted) of the Shares to which ISOs are exercisable
for the first time by the Optionee during any calendar year (hereunder and
under all other Incentive Stock Option Plans of FIRSTCITY and any Subsidiary)
shall not exceed $100,000. The Committee may grant a Participant ISOs, NQSOs
or a combination thereof, and may vary such Awards among Participants.
The maximum number of Options that a Named Executive Officer can be granted
hereunder during any twelve month period is 50,000.
6.2 Award Agreement. Each Option grant shall be evidenced by an
Award Agreement that shall specify the Option Price, the duration of the
Option, the number of Shares to which the Option pertains and such other
provisions as the Committee shall determine. The Award Agreement shall further
specify whether the Award is intended to be an ISO or an NQSO. Any portion of
an Option that is not designated as an ISO or otherwise fails or is not
qualified to be treated as an ISO (even if designated as an ISO) shall be a
NQSO.
6.3 Option Price. The Option Price for each grant of an ISO shall
be not less than one hundred percent (100%) of the Fair Market Value of a Share
on the date the ISO is granted. In no event, however, shall any Participant,
who at the time he would otherwise be granted an Option owns (within the
meaning of Section 424(d) of the Code) stock of FIRSTCITY possessing more than
ten percent (10%) of the total combined voting power of all classes of stock of
FIRSTCITY be eligible to receive an ISO at an Option Price less than one
hundred ten percent (I 10%) of the Fair Market Value of a Share on the date the
ISO is granted. The price at which each share covered by each NQSO shall be
purchased by an Optionee shall be established by the Committee, but in no event
shall such price be less than eight-five percent (85 %) of the Fair
EXHIBIT C-8
<PAGE> 76
Market Value (or such other percentage of Fair Market Value as may be
established by Internal Revenue Service rules or regulations as the limit for
granting discounted stock options without causing immediate tax consequences to
the Participant) of a Share on the date the Option is granted.
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 tenth (10th) anniversary date of its
grant; provided, further, however, that any ISO granted to any Participant who
at such time owns (within the meaning of Section 424(d) of the Code) stock of
FIRSTCITY possessing more than ten percent (10%) of the total combined voting
power of all classes of stock in FIRSTCITY, shall be exercisable not later than
the fifth (5th) anniversary date of its grant.
6.5 Exercise of Options. Options shall be exercisable at such
times and be subject to such restrictions and conditions as the Committee shall
in each instance approve, which need not be the same for each grant or for each
Participant. Each Option shall be exercisable for such number of Shares and at
such time or times, including periodic installments, as may be determined by
the Committee at the time of the grant. Except as otherwise provided in the
Award Agreement and Article 12, the right to purchase Shares that are
exercisable in periodic installments shall be cumulative so that when the right
to purchase any Shares has accrued, such Shares or any part thereof may be
purchased at any time thereafter until the expiration or termination of the
Option.
6.6 Payment. Options shall be exercised by the delivery of a
written notice of exercise to FIRSTCITY, setting forth the number of Shares
with respect to which the Option is to be exercised, accompanied by full
payment for the Shares. The Option Price upon exercise of any Option shall be
payable to FIRSTCITY in full either: (a) in cash, or (b) if approved by the
Committee, by tendering previously acquired Shares having an aggregate Fair
Market Value at the time of exercise equal to the total Option Price (provided
that the Shares which are tendered must have been held by the Participant for
at least six (6) months prior to their tender to satisfy the Option Price), or
(c) in part, by delivering to FIRSTCITY an executed promissory note on such
terms and conditions as the Committee shall determine at the time of grant, in
its sole discretion, but which shall require a perfected pledge of shares of
Common Stock of FIRSTCITY as security for such promissory note, which shares
shall have a fair market value (as defined in Section 5 hereof) at least equal
to the principal amount of such promissory note; provided, however, that the
principal amount of such note shall not exceed ninety percent (90%) (or such
lesser percentage as would be permitted by applicable margin regulations) of
the aggregate purchase price of the Shares then being purchased pursuant to the
exercise of such Option, or (d) by a combination of (a) and (b) and (c). The
Committee also may allow cashless exercises as permitted under Federal Reserve
Board's Regulation T, subject to applicable securities law restrictions or by
any other means which the Committee determines to be consistent with the Plan's
purpose and applicable law.
As soon as practicable after receipt of a written notification of
exercise and full payment,
EXHIBIT C-9
<PAGE> 77
FIRSTCITY shall deliver to the Participant, in the Participant's name, Share
certificates in an appropriate amount based upon the number of Shares purchased
under the Options(s).
6.7 Termination of Employment Due to Death, Disability or
Retirement. Unless otherwise provided by the Committee in an Award Agreement,
the following rules shall apply in the event of the Participant's termination
of employment due to death, Disability, or Retirement. With respect to a
Participant that is a non-employee Director of FIRSTCITY or is otherwise not an
Employee, the following references to employment shall be deemed to be
references to service as a Director or in such other capacity as is determined
by the Committee:
(a) if, any Employee shall die while in the employ of such
corporation or during either the one (1) year or three (3) month
period, whichever is applicable, specified in clauses (b) and (c)
below, any Option granted hereunder, unless otherwise specified by the
Committee in the Option, shall be exercisable for any or all of such
number of Shares that such Employee is entitled to purchase at the time
of death, by the legal representative of such Employee or by such
person who acquired such Option by bequest or inheritance or by reason
of the death of such Employee, at any time up to and including one (1)
year after the date of death;
(b) if the employment of any Employee shall terminate by reason of
such Employee's disability (as described in Section 22 (e) (3) of the
Code), any Option granted hereunder shall be exercisable for any or all
of such number of Shares that such Employee is entitled to purchase at
the effective date of termination of employment by reason of
disability, at any time up to and including on (1) year (or such,
shorter period specified by the Committee in the Option) after the
effective date of such termination of employment);
(c) if the employment of any Employee shall terminate (i) by reason
of the Employee's retirement (at such age or upon such conditions as
shall be specified by the Committee in the Option), (ii) by the
Employee for "good reason" (only if such Employee is party to a written
employment agreement with FIRSTCITY or any subsidiary corporation or
parent corporation which expressly provides for termination by the
Employee for "good reason," and such Employee validly terminates his or
her employment ("Termination For Good Reason")), or (iii) by the
employer other than for cause (as defined below), such option, unless
otherwise specified by the committee in the option, shall be
exercisable for any or all of the such number of Shares that such
Employee is entitled to exercise at the effective date of termination
of employment, at any time up to and including three (3) months after
the effective date of such termination of employment; and
(d) if the employment of any Employee shall terminate by any
reason other than that provided for in clauses (a), (b) or (c) above,
such option, unless otherwise specified by the Committee in such Option
shall, to the extent not theretofore exercised, become immediately null
and void.
None of the events described in clauses (a), (b) or (c) above shall
extend the period of
EXHIBIT C-10
<PAGE> 78
exercisability of the Option beyond the expiration date thereof.
6.8 Termination of Employment for Other Reasons. If the employment
of a Participant shall terminate for any reason other than the reasons set
forth in Section 6.7, all Options held by the participant which are not vested
as of the effective date of employment termination immediately shall be
forfeited to FIRSTCITY (and shall once again become available for grant
hereunder). However, the Committee, in its sole discretion, shall have the
right to immediately vest all or any portion of such Options, subject to such
terms as the Committee, in its sole discretion, deems appropriate.
In the event an Employee's employment is terminated by FIRSTCITY for
cause, or an Employee voluntarily terminates his employment (other than upon
retirement), the rights under any then vested outstanding Options shall
terminate immediately upon such termination of employment. If the Employee's
employment is terminated by FIRSTCITY without Cause, any options vested as of
the date of termination shall remain exercisable at any time prior to their
expiration date or for three (3) months after his date of termination of
employment, whichever period is shorter.
6.9 Limited Transferability. A Participant may transfer an
Option to members of his or her Immediate Family to one or more trusts for the
benefit of such Immediate Family members, or to one or more partnerships where
such Immediate Family members are the only partners, if (i) the Award Agreement
evidencing such Option expressly provides that the Option may be transferred
and (ii) the Participant does not receive any consideration in any form
whatsoever for said transfer. Any Options so transferred shall continue to be
subject to the same terms and conditions in the hands of the transferee as were
applicable to said Option immediately prior the transfer thereof. Any
reference in any such Award Agreement to the employment by or performance of
services for FIRSTCITY by the Participant shall continue to refer to the
employment of or performance by the transferring Participant. For purposes
hereof, "Immediate Family" shall mean the Participant and the Participant's
spouse, and their respective ancestors and descendants. Any Option that is
granted pursuant to any Award Agreement that did not initially expressly allow
the transfer of said Option and that has not been amended to expressly permit
such transfer, shall not be transferable by the Participant otherwise than by
will or by the laws of descent and distribution and such Option thus shall be
exercisable during the Participant's lifetime only by the Participant.
ARTICLE 7. Performance Shares
7.1 Grant of Performance Shares. Subject to the terms hereof,
Performance Shares may be granted to eligible Participants at any time and from
time to time for no consideration, as shall be determined by the Committee. The
Committee shall have complete discretion in determining the number of
Performance Shares granted to each Participant; provided, however, that unless
and until FIRSTCITY's stockholders vote to change the maximum number of
Performance Shares that may be earned by any one Named Executive Officer
(subject to the terms of Article 13,) none of the Named Executive Officers may
earn more than fifty thousand (50,000) Performance
EXHIBIT C-11
<PAGE> 79
Shares with respect to any performance period.
7.2 Value of Performance Shares. Each Performance Share shall
have a value equal to the Fair Market Value of a Share on the date the
Performance Share is earned. The Committee shall set performance goals in its
discretion which: depending on the extent to which they are met, will determine
the number of Performance Shares that will be earned by the eligible
Participants. The time period during which the performance goals must be met
shall be called a "performance period." Performance periods shall, in all
cases, equal or exceed two (2) years in length. The performance goals shall be
established at the beginning of the performance period (or within such time
period as is permitted by Code Section 162(m)).
Unless and until FIRSTCITY's stockholders vote to change the general
performance measures (subject to the terms of Article 13), the attainment of
which shall determine the number of Performance Shares earned hereunder, the
Committee will use one or more of the following performance measures for
purposes of grants to Named Executive Officers: Total shareholder return,
return on equity, earnings per share and ratio of operating overhead to
operating revenue. Each Plan Year, the Committee, in its sole discretion, may
select among the performance measures specified in this Section 7.2 and set the
relative weights to be given to such performance measures. However, in the
case of Participants who are not Named Executive Officers, the Committee may
approve performance measures that are not specified in this Section 7.2 without
obtaining stockholder approval of such measures.
In the event that applicable tax and/or securities laws (including, but
not limited to, Code Section 162(m) and Section 16 of the Exchange Act) change
to permit Committee Discretion to alter the governing performance measures
without obtaining stockholder approval of such changes, the Committee shall
have sole discretion to make such changes without obtaining stockholder
approval.
7.3 Earning of Performance Shares. After the applicable
performance period has ended, the Committee shall certify the extent to which
the established performance goals have been achieved. Subsequently, each
holder of Performance Shares shall be entitled to receive payout on the number
of Performance Shares earned by the Participant over the performance period, to
be determined as a function of the extent to which the corresponding
performance goals have been achieved. The Committee may, in its sole
discretion, decrease the amount of a Final Award otherwise payable to a
Participant under this Article 7. The Committee shall have no discretion,
however, to increase the amount of a Final Award otherwise payable to a Named
Executive Officer under this Article 7.
7.4 Form and Timing of Payment of Performance Shares. Payment of
earned Performance Shares shall be made, in a single lump sum, promptly but in
no event later than the Incentive Payment Date. The Committee, in its sole
discretion, may pay earned Performance Shares in the form of cash or in Shares
(or in a combination thereof) which have, as of the close of the applicable
performance period, an aggregate Fair Market Value equal to the value of the
earned Performance Shares.
EXHIBIT C-12
<PAGE> 80
7.5 Termination of Employment Due to Death, Disability or
Retirement or at the Request of FIRSTCITY without Cause. In the event the
employment of an eligible employee is terminated by reason of death, Disability
or Retirement or by FIRSTCITY without Cause during a performance period, the
Participant shall receive a prorated payout with respect to the Performance
shares. With respect to a Participant that is a non-employee Director of
FIRSTCITY or is otherwise not an Employee, the foregoing reference to
employment shall be deemed to be a reference to service as a Director or in
such other capacity as is determined by the Committee. The prorated payout
shall be determined by the Committee, in its sole discretion, and shall be
based upon the length of time that the Participant held the Performance Shares
during the performance period, and shall further be adjusted based on the
achievement of the established performance goals at the time of his
termination.
Payment of earned Performance Shares shall be made at the same time
payments are made to Participants who did not terminate employment during the
applicable performance period.
7.6 Termination of Employment for Other Reasons. In the event
that a Participant's employment terminates for any reason other than those
reasons set forth in Section 7.5, all Performance Shares shall be forfeited by
the Participant to FIRSTCITY.
7.7 Nontransferability. Unless the Committee provides otherwise
in the Award Agreement, Performance Shares which are not yet earned may not be
sold, transferred, pledged, assigned or otherwise alienated or hypothecated,
other than by will or by the laws of descent and distribution. Further, an
eligible Participant's Performance Share rights hereunder shall be exercisable
during the Participants' lifetime only by the Participant or the Participant's
legal representative.
ARTICLE 8. Restricted Stock
8.1 Grants. The Committee may from time to time in its discretion
grant Restricted Stock to Employees and may determine the number of Shares of
Restricted Stock to be granted and the terms and conditions of, and the amount
of payment, if any, to be made by the Employee for, such Restricted Stock. A
grant of Restricted Stock may require the Employee to pay for such Shares of
Restricted Stock, but the Committee may establish a price below Fair Market
Value at which the Employee can purchase the Shares of Restricted Stock. Each
grant of Restricted Stock will be evidenced by an Award Agreement containing
terms and conditions not inconsistent herewith as the Committee shall determine
to be appropriate in its sole discretion. Such Restricted Stock shall be
granted subject to the restrictions prescribed pursuant hereto and the Award
Agreement.
8.2 Restricted Period; Lapse of Restrictions. At the time a grant
of Restricted Stock is made, the Committee shall establish a period or periods
of time (the "Restricted Period') applicable to such grant which, unless the
Committee otherwise provides, shall not be less than one (1) year. Subject to
the other provisions of this Article 8, at the end of the Restricted Period all
restrictions shall lapse and the Restricted Stock shall vest in the
Participant. At the time a
EXHIBIT C-13
<PAGE> 81
grant is made, the Committee may, in its discretion, prescribe conditions for
the incremental lapse of restrictions during the Restricted Period and for the
lapse or termination of restrictions upon the occurrence of other conditions in
addition to or other than the expiration of the Restricted Period with respect
to all or any. portion of the Restricted Stock. Such conditions may, but need
not, include without limitation, (a) the death, Disability or Retirement of the
Employee to whom Restricted Stock is granted, (b) the occurrence of a Change in
Control or (c) the attainment of certain performance goals. The Committee may
also, in its discretion, shorten or terminate the Restricted Period, or waive
any conditions for the lapse or termination of restrictions with respect to all
or any portion of the Restricted Stock at any time after the date the grant is
made.
8.3 Rights of Holder; Limitations Thereon. Upon a grant of
Restricted Stock, a stock certificate (or certificates) representing the number
of Shares of Restricted Stock granted to the Employee shall be registered in
the Employee's account. Following such registration, the Employee shall have
rights and privileges of a stockholder as to such Restricted Stock, including
the right to receive dividends and to vote such Restricted Stock, except that
the right to receive cash dividends shall be the right to receive such
dividends either in cash currently or by payment in Restricted Stock, as the
Committee shall determine, and except further that, the following restrictions
shall apply:
(a) The Employee shall not be entitled to delivery of a
certificate until the expiration or termination of the Restricted
Period for the Shares represented by such certificate and the
satisfaction of any and all other conditions prescribed by the
Committee;
(b) None of the Shares of Restricted Stock may be sold,
transferred, assigned, pledged, or otherwise encumbered or disposed
of during the Restricted Period and until the satisfaction of any and
all other conditions prescribed by the Committee; and
(c) All of the Shares of Restricted Stock that have not vested
shall be forfeited and all rights of the Employee to such Restricted
Stock shall terminate without further obligation on the part of
FIRSTCITY unless the Employee has remained a full-time employee of
FIRSTCITY or any of its Subsidiaries until the expiration or
termination of the Restricted Period and the satisfaction of any and
all other conditions prescribed by the Committee applicable to such
Restricted Stock. Upon forfeiture of any Shares of Restricted Stock,
such forfeited Shares shall be transferred to FIRSTCITY without
further action by the Employee, and shall, in accordance with Section
4.2, again be available for grant hereunder.
With respect to any Shares received as a result of adjustments under
Section 4.3 and any Shares received with respect to cash dividends declared on
Restricted Stock, the Participant shall have the same rights and privileges,
and be subject to the same restrictions, as are set forth in this Article 8.
8.4 Delivery of Unrestricted Shares. Upon the expiration or
termination of the Restricted Period for any Shares of Restricted Stock and
the satisfaction of any and all other conditions
EXHIBIT C-14
<PAGE> 82
prescribed by the Committee, the restrictions applicable to such Restricted
Stock (including without limitation, the restrictions specified in Section 8.5)
shall lapse and a stock certificate for the number of Shares of Restricted
Stock with respect to which the restrictions have lapsed shall be delivered,
free of all such restrictions except any that may be imposed by law, to the
holder of the restricted stock. FIRSTCITY shall not be required to deliver
any fractional Share but will pay, in lieu thereof, the Fair Market Value
(determined as of the date the restrictions lapse) of such fractional share to
the holder thereof. Prior to or concurrently with the delivry of a certificate
for Restricted Stock, the holder shall be required to pay an amount necessary
to satisfy any applicable federal, state and local tax requirements as set out
in Article 14.
8.5 Nonassignability of Restricted Stock. Unless the Committee
provides otherwise in the Award Agreement, no grant of, nor any right or
interest of a Participant in or to any Restricted Stock, or in any instrument
evidencing any grant hereunder, may be assigned, encumbered or transferred
except, in the event of the death of a Participant, by will or by the laws of
descent and distribution.
ARTICLE 9. Beneficiary Designation
Each Participant hereunder may, from time to time, name any beneficiary
or beneficiaries (who may be named contingently or successively) to whom any
benefit hereunder is to be paid in case of his or her death before he or she
receives any or all of such benefit. Each designation shall revoke all prior
designations by the same Participant, shall be in a form prescribed by
FIRSTCITY and shall be effective only when filed by the Participant, in
writing, with FIRSTCITY during the Participant's lifetime. In the absence of
any such designation, benefits remaining unpaid at the Participant's death
shall be paid to the Participant's estate.
The spouse of a married Participant domiciled in a community property
jurisdiction shall join in any designation of beneficiary or beneficiaries
other than the spouse.
ARTICLE 10. Deferrals
The Committee may permit a Participant, to defer to another plan or
program such Participant's receipt of the payment of cash or the delivery of
Shares that would otherwise be due to such Participant by virtue of the
exercise of an Option, the satisfaction of any requirements or goals with
respect to Performance Shares or the vesting of Restricted Stock. If any such
deferral election is required or permitted, the Committee shall, in its sole
discretion, establish rules and procedures for such payment deferrals.
ARTICLE 11. Rights of Employees
11.1 Employment. Nothing herein shall interfere with or limit in
any way the right of FIRSTCITY or a subsidiary to terminate any Participant's
employment or engagement by FIRSTCITY at any time, nor confer upon any
Participant any right to continue in the employ or service of FIRSTCITY or a
Subsidiary. For purpose hereof, transfer of employment of a
EXHIBIT C-15
<PAGE> 83
Participant between FIRSTCITY and any one of its Subsidiaries (or between
Subsidiaries) shall not be deemed a termination of employment.
11.2 Participation. No Employee shall have the right to be selected to
receive an Award, or, having been so selected, to be selected to receive a
future Award.
ARTICLE 12: Change in Control
Upon the occurrence of a Change in Control, except as provided in the
Award Agreement or unless otherwise specifically prohibited by the terms of
Article 17:
(a) Any and all Options granted hereunder shall become fully
vested and immediately exercisable;
(b) The target payout opportunity attainable under all
outstanding Performance Shares shall be deemed to have been fully
earned for the entire performance period(s) as of the effective date
of the Change in Control, and all earned Performance Shares shall be
paid out in accordance with Section 7.4 to Participants within thirty
(30) days following the effective date of the Change in Control;
provided, however, that there shall not be an accelerated payout with
respect to Performance Shares which were granted less than six (6)
months prior to the effective date of the Change in Control;
(c) All restrictions on a grant of Restricted Stock shall lapse
and such Restricted Stock shall be delivered to the Participant in
accordance with Section 8.4; provided, however, that there shall not
be an accelerated delivery with respect to Restricted Stock which was
granted less than six (6) months prior to the effective date of the
Change in Control; and
(d) Subject to Article 13, the Committee shall have the authority
to make any modifications to the Awards as determined by the Committee
to be appropriate before the effective date of the Change of Control.
ARTICLE 13. Amendment, Modification and Termination
13.1 Amendment, Modification and Termination. The Board may, at
any time and from time to time, alter, amend, suspend or terminate the Plan in
whole or in part; provided, that. Unless approved by the holders of a majority
of the total number of Shares of FIRSTCITY represented and voted at a meeting
at which a quorum is present, no amendment shall be made hereto if such
amendment would (a) materially modify the eligibility requirements provided in
Article 5; (b) increase the total number of shares (except as provided in
Section 4.3) which may be granted hereunder, as provided in Section 4.1; (c)
extend the term hereof; or (d) amend the Plan in any manner which the Board, in
its discretion, determines should become effective only if approved by the
stockholders even though such stockholder approval is not expressly required
hereby or by law. No amendment which requires stockholder approval in order
for the Plan to continue to comply with Rule 16b-3 under the Exchange Act,
including any successor to such
EXHIBIT C-16
<PAGE> 84
Rule, shall be effective unless such amendment shall be approved by the
requisite vote of stockholders.
13.2 Awards Previously Granted. No termination, amendment or
modification hereof shall adversly affect in any material way any Award
previously granted hereunder, without the written consent of the Participant
holding such Award. The Committee with the written consent of the Participant
holding such Award, shall have the authority to cancel Awards outstanding and
grant replacement Awards therefor.
13.3 Compliance With Code Section 162(m). At all times when the
Committee determines that compliance with Code Section 162(m) is desired, all
Awards shall comply with requirements of Code Section 162(m). In addition, in
the event that changes are made to Code Section 162(m) to permit greater
flexibility with respect to any Award or Awards, the Committee may, subject to
this Article 13, make any adjustments it deems appropriate.
ARTICLE 14. Withholding
FIRSTCITY may require an Employee exercising a Nonqualified Stock
Option granted hereunder, or disposing of Shares acquired pursuant to the
exercise of an Incentive stock Option in a disqualifying disposition (within
the meaning of Section 421 (b) of the Code), to reimburse the corporation which
employs such Employee for any taxes required by any governmental regulatory
authority to be withheld or otherwise deducted and paid by such corporation in
respect of the issuance or disposition of such Shares. In lieu thereof, the
corporation which employs such Employee shall have the right to withhold the
amount of such taxes from any other sums due or to become due from such
corporation to the Employee upon such terms and conditions as the Committee
shall prescribe. The corporation that employs such Employee may, in its
discretion, hold the stock certificate to which such Employee is entitled upon
the exercise of an Option as security for the payment of such withholding tax
liability, until cash sufficient to pay that liability has been accumulated.
In addition, at any time that FIRSTCITY becomes subject to a withholding
obligation under applicable law with respect to the exercise of a Nonqualified
Stock Option (the "Tax Date"), except as set forth below, a holder of a
Nonqualified Stock Option may elect to satisfy, in whole or in part, the
holder's related personal tax liabilities (an "Election") by (a) directing
FIRSTCITY to withhold from Shares issuable in the related exercises either a
specified value (in either case not in excess of the related personal tax
liabilities). (b) tendering Shares previously issued pursuant to the exercise
of an Option or other shares of FIRSTCITY's Common Stock owned by the holder or
(c) combining any or all of the foregoing Elections in any fashion. An
Election shall be irrevocable. The withheld Shares and other shares of Common
Stock tendered in payment shall be valued at their fair market value (as
determined under section 5) on the Tax Date. The Committee may disapprove of
any Election, suspend or terminate the right to make Elections or provide that
the right to make Elections shall not apply to particular Shares or exercises.
The Committee may impose any additional conditions or restrictions on the right
to make an Election as it shall deem appropriate. In addition, FIRSTCITY shall
be authorized, without the prior written consent of the Employee, to effect any
such withholding upon exercise of a Nonqualified Stock Option by retention of
Shares issuable upon such exercise
EXHIBIT C-17
<PAGE> 85
having a Fair Market Value equal to the amount to be withheld; provided,
however, that FIRSTCITY shall not be authorized to effect such withholding
without the prior written consent of the Employee if such withholding would
subject such Employee to liability under Section 16(b) of the Exchange Act.
The Committee may prescribe such rules as it determines with respect to
employees reporting requirements of Section (a) of the Exchange Act to effect
such tax withholding in compliance with the Rules established by the Securities
and Exchange Commission (the "Commission') under Section 16 of the Exchange Act
and the positions of the staff of the Commission thereunder expressed in
no-action letters exempting such tax withholding from liability under Section
16(b) of the Exchange Act.
ARTICLE 15. Indemnification
Each person who is or shall have been a member of the Committee, or
the Board, shall be indemnified and held harmless by FIRSTCITY against and from
any loss, cost, liability or expense that may be imposed upon or reasonably
incurred by him or her in connection with or resulting from any claim, action,
suit or proceeding to which he or she may be a party or in which he or she may
be involved by reason of any action taken or failure to act hereunder and
against and from any and all amounts paid by him or her in settlement thereof,
with FIRSTCITY's approval, or paid by him in satisfaction of any judgement in
any such action, suit or proceeding against him, provided he shall give
FIRSTCITY an opportunity, at its own expense, to handle and defend the same
before he undertakes to handle and defend it on his own behalf. The foregoing
right of indemnification shall be in addition to any other rights of
indemnification to which such persons may be entitled under FIRSTCITY's
Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or
any power that FIRSTCITY may have to indemnify them or hold them harmless.
ARTICLE 16. Successors
All obligations of FIRSTCITY hereunder, with respect to Awards, shall
be binding on any successor to FIRSTCITY, 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 FIRSTCITY.
ARTICLE 17. Legal Construction
17.1 Gender and Number. Except where otherwise indicated by the
context, any masculine term used herein also shall include the feminine; the
plural shall include the singular and the singular shall include the plural.
17.2 Severability. In the event any provision hereof shall be held
illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts hereof, and the Plan shall be construed and enforced
as if the illegal or invalid provision had not been included.
17.3 Requirements of Law. The granting of Awards and the issuance
of Shares under the
EXHIBIT C-18
<PAGE> 86
Plan 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.
17.4 Regulatory Approvals and Listing. FIRSTCITY shall not be
required to issue any certificate or certificates for Shares hereunder prior to
(i) obtaining any approval from any governmental agency which FIRSTCITY shall,
in its discretion, determine to be necessary or advisable, (ii) the admission
of such Shares to listing on any national securities exchange or Nasdaq on
which FIRSTCITY's Shares may be listed or quoted and (iii) the completion of
any registration or other qualification of such Shares under any state or
federal law or ruling or regulations of any governmental body which FIRSTCITY
shall, in its sole discretion, determine to be necessary or advisable.
Notwithstanding any other provision set forth herein, if required by
the then-current Section 16 of the Exchange Act, any "derivative security" or
"equity security" offered pursuant hereto to any insider may not be sold or
transferred for at least six (6) months after the date of grant of such Award.
The terms "equity security" and "derivative security" shall have the meanings
ascribed to them in the then-current Rule 16(a) under the Exchange Act.
17.5 Securities Law Compliance. With respect to Insiders,
transactions hereunder are intended to comply with all applicable conditions of
Rule 16b-3 or its successors under the Exchange Act. To the extent any
provisions hereof or action by the Committee fails to so comply, it shall be
deemed null and void, to the extent permitted by law and deemed advisable by
the Committee.
17.6 Governing Law. To the extent not preempted by federal law,
the Plan, and all agreements hereunder, shall be construed in accordance with
and governed by the laws of the State of Delaware.
EXHIBIT C-19
<PAGE> 87
APPENDIX A
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FIRSTCITY FINANCIAL CORPORATION
COMMON
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
1996 ANNUAL MEETING OF STOCKHOLDERS ON APRIL 24, 1996
The undersigned hereby appoints James R. Hawkins, C. Ivan Wilson,
James T. Sartain, Rick R. Hagelstein and Matt A. Landry, Jr., and any one
of them, and any substitute or substitutes, to be the attorneys and
proxies of the undersigned at the 1996 Annual Meeting of Stockholders of
FirstCity Financial Corporation (the "Company") to be held at the First
City Main Building, 1021 Main, Houston, Texas 77002, at 2:00 p.m. local
time on Wednesday, April 24, 1996, or at any adjournment(s) of said
meeting, and to vote at such meeting the shares of common stock the
undersigned held of record on the books of the Company on the record date
for such meeting:
Item 1. / / For the election as a director of each nominee listed below
(except as marked to the contrary below).
/ / Withhold authority to vote for all nominees listed below.
NOMINEES: James R. Hawkins, C. Ivan Wilson, James T. Sartain, Rick
R. Hagelstein, Matt A. Landry, Jr., Richard E. Bean, Bart A.
Brown, Jr., Donald J. Douglass, David W. MacLennan and David
Palmer.
INSTRUCTION: To withhold authority to vote for individual
nominees, write their name(s) in the space below.
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Item 2. Proposal to approve the Company's 1995 Stock Option and Award
Plan.
/ / FOR / / AGAINST / / ABSTAIN
Item 3. Proposal to approve the Company's 1995 Employee Stock Purchase
Plan.
/ / FOR / / AGAINST / / ABSTAIN
Item 4. Proposal to approve the Company's 1996 Stock Option and Award
Plan.
/ / FOR / / AGAINST / / ABSTAIN
Item 5. Proposal to ratify the appointment of KPMG Peat Marwick LLP as
the independent certified public accountants for the Company and
its subsidiaries for fiscal year 1996.
/ / FOR / / AGAINST / / ABSTAIN
Item 6. In their discretion, upon such other matters that may properly
come before the meeting or any adjournment(s) thereof.
(THIS PROXY MUST BE DATED AND SIGNED ON THE REVERSE SIDE.)
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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 ALL NOMINEES AS DIRECTORS, FOR EACH OF THE
PROPOSALS TO APPROVE THE COMPANY'S 1995 STOCK OPTION AND AWARD PLAN, THE
COMPANY'S 1995 EMPLOYEE STOCK PURCHASE PLAN AND THE COMPANY'S 1996 STOCK
OPTION AND AWARD PLAN, FOR THE PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG
PEAT MARWICK LLP AS THE INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FOR THE
COMPANY AND ITS SUBSIDIARIES FOR FISCAL YEAR 1996 AND IN ACCORDANCE WITH
THE DISCRETION OF THE PERSONS DESIGNATED ABOVE WITH RESPECT TO ANY OTHER
BUSINESS PROPERLY BEFORE THE MEETING.
Please sign exactly as your name appears on this Proxy Card. When
signing as attorney, executor, administrator, trustee, guardian or
corporate or partnership official, please give full title as such and the
full name of the entity on behalf of whom you are signing. If a
partnership, please sign in partnership name by authorized person.
DATED: , 1996
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Signature of Stockholder
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Signature if held jointly
PLEASE COMPLETE, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
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