<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934 (Amendment No. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ x ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
- ------------------------------------------------------------------------------
OLYMPIC FINANCIAL LTD.
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
5) Total fee paid:
----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
---------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
---------------------------------------------------------------
3) Filing Party:
---------------------------------------------------------------
4) Date Filed:
---------------------------------------------------------------
<PAGE>
[LOGO]
7825 WASHINGTON AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55439-2435
March , 1997
Dear Shareholder of Olympic Financial Ltd.:
I am pleased to invite you to attend the Annual Meeting of shareholders of
Olympic Financial Ltd., to be held at the Lutheran Brotherhood Building, 625
Fourth Avenue South, Minneapolis, Minnesota, on Monday, April 28, 1997, at 3:30
P.M.
At the Annual Meeting, you will be asked to vote for the election of
directors; to approve various proposals, including an amendment to the Company's
Articles of Incorporation to change the Company's corporate name to Arcadia
Financial Ltd., amendments to the Company's 1992 Director Stock Option Plan,
amendments to the Company's 1990 Stock Option Plan, the grant of options to
Director Warren Kantor for consulting services provided to the Company by Mr.
Kantor and the grant of an option to Richard A. Greenawalt the President and
Chief Executive Officer of the Company in connection with his employment by the
Company; and to ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending December 31, 1997.
I encourage you to vote FOR each of the matters listed above. Whether or not
you are able to attend the Annual Meeting in person, I urge you to sign and date
the enclosed proxy card and return it promptly in the enclosed envelope. On
behalf of our Board of Directors and associates, thank you for your continued
support of and interest in Olympic Financial Ltd.
Very truly yours,
[SIGNATURE]
Richard A. Greenawalt
PRESIDENT
AND CHIEF EXECUTIVE OFFICER
<PAGE>
[LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OF
OLYMPIC FINANCIAL LTD.
------------------------
The Annual Meeting of the shareholders of Olympic Financial Ltd. (the
"Company") will be held at 3:30 p.m. Minneapolis time, on Monday, April 28, 1997
at the Lutheran Brotherhood Building, 625 Fourth Avenue South, Minneapolis,
Minnesota, for the following purposes:
1. To elect nine directors for a term of one year and until their
successors shall be elected and duly qualified.
2. To consider and act upon a proposal to amend the Company's Restated
Articles of Incorporation to change the name of the Company from Olympic
Financial Ltd. to Arcadia Financial Ltd.
3. To consider and act upon a proposal to amend the Company's 1992 Director
Stock Option Plan to (i) increase to 15,000 (from 5,000) the number of
options to purchase the Company's Common Stock granted automatically each
year to each outside director commencing in 1997, and (ii) provide for
the additional grant to each outside Director of the Board of Directors
as of January 2, 1997 a one-time grant thereunder on such date of an
option to purchase 10,000 shares.
4. To consider and act upon a proposal to amend the Company's 1990 Stock
Option Plan to (i) increase by 3 million (to 5 million) the maximum
number of shares which may be issued upon exercise of options granted
under such Plan, (ii) make each option granted thereunder exercisable
cumulatively to the extent of 100% of the shares subject to the option,
upon the death of the optionee or a change of control (as defined in such
Plan) of the Company, and (iii) provide for a per person maximum on the
number of options granted thereunder.
5. To consider and approve grants of options to Warren Kantor in the
amounts of 125,000 shares on December 18, 1996 and 70,160 shares on
January 29, 1997 in consideration of consulting services to be rendered
to the Company by Mr. Kantor in 1997.
6. To consider and approve an option granted to Richard A. Greenawalt
pursuant to the Employment Agreement dated January 6, 1997 between Mr.
Greenawalt and the Company.
7. To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending December 31, 1997.
8. To transact such other business as may properly come before the meeting.
Only shareholders of record at the close of business on March 19, 1997 are
entitled to notice of and to vote at the meeting.
Whether or not you expect to attend the meeting in person, please complete,
date, and sign the enclosed proxy exactly as your name appears thereon and
promptly return it in the envelope provided, which requires no postage if mailed
in the United States. Proxies may be revoked at any time and if you attend the
meeting in person, your executed proxy will be returned to you upon request.
By Order of the Board of Directors
[LOGO]
James D. Atkinson III, SECRETARY
Dated: March , 1997
<PAGE>
OLYMPIC FINANCIAL LTD.
7825 WASHINGTON AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55439-2435
------------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
APRIL 28, 1997
------------------------
INTRODUCTION
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Olympic Financial Ltd. (the "Company") for
use at the Annual Meeting (the "Annual Meeting" or the "Meeting") of
shareholders to be held at the Lutheran Brotherhood Building, 625 Fourth Avenue
South, Minneapolis, Minnesota, on Monday, April 28, 1997 at 3:30 p.m., and at
any adjournment thereof.
All shares represented by properly executed proxies received in time will be
voted at the Meeting as follows, unless otherwise specified by the shareholder
in the proxy: (i) in favor of the election as directors of all of the nominees
listed herein; (ii) in favor of a proposal to amend the Company's Restated
Articles of Incorporation to change the name of the Company from Olympic
Financial Ltd. to Arcadia Financial Ltd. (iii) in favor of a proposal to amend
the Company's 1992 Director Stock Option Plan (the "DSOP") to (A) increase to
15,000 (from 5,000) the number of options to purchase the Company's Common Stock
automatically granted each year to each Outside Director under the DSOP
commencing in 1997, and (B) grant to each Outside Director of the Board of
Directors as of January 2, 1997 an additional one-time grant on such date of an
option to purchase 10,000 shares of the Company's Common Stock; (iv) in favor of
a proposal to amend the Company's 1990 Stock Option Plan to (A) increase by 3
million (to 5 million) the maximum number of shares which may be issued upon
exercise of options granted under the Plan, (B) make each option granted
thereunder exercisable upon the death of the optionee or a change of control (as
defined in such plan) of the Company cumulatively to the extent of 100% of the
shares subject to the option granted thereunder, and (C) provide for a per
person maximum on the number of option shares granted; (v) in favor of a
proposal to approve grants of two options in the amounts of 125,000 shares and
70,160 shares of the Common Stock of the Company, respectively, issued to Warren
Kantor in consideration of consulting services to be performed by Mr. Kantor;
(vi) in favor of a proposal to approve the grant of an option to purchase
1,200,000 shares of the Common Stock of the Company, issued to Richard A.
Greenawalt in connection with his employment by the Company; (vii) in favor of
the selection of Ernst & Young LLP as the independent auditors of the Company
for the fiscal year ending December 31, 1997; and (viii) in accordance with the
judgment of the persons named in the proxy, as to such other matters as may
properly come before the Meeting. If an executed proxy card is returned and the
shareholder has abstained from voting on any matter, the shares represented by
such proxy will be considered present at the Meeting for purposes of determining
a quorum and for purposes of calculating the vote, but will not be considered to
have been voted in favor of such matter. If an executed proxy is returned by a
broker holding shares in street name which indicates that the broker does not
have discretionary authority as to certain shares to vote on one or more
matters, such shares will be considered present at the Meeting for purposes of
determining a quorum, but will not be considered to be represented at the
Meeting for purposes of calculating the vote with respect to such matter.
1
<PAGE>
Expenses incurred in connection with the solicitation of proxies will be
paid by the Company. The proxies are being solicited principally by mail. In
addition, directors, officers and associates of the Company may solicit proxies
personally or by telephone, for which they will receive no additional
compensation. The Company will also request brokerage houses, nominees,
custodians and fiduciaries to forward soliciting material to the beneficial
owners of Common Stock of the Company and will reimburse such persons for their
expenses so incurred. The Company has engaged Georgeson & Company Inc. to assist
in proxy solicitation for a fee not to exceed $7,500 plus out-of-pocket
expenses.
Any shareholder who executes and returns a proxy may revoke it at any time
prior to the voting of the proxies by giving written notice to the Secretary of
the Company, by executing a later-dated proxy, or by attending the Meeting and
giving oral notice to the Secretary of the Company.
The Board of Directors of the Company has fixed the close of business on
March 19, 1997 as the record date for determining the holders of outstanding
shares of Common Stock entitled to notice of, and to vote at, the Annual
Meeting. On that date, there were shares of Common Stock issued and
outstanding. Each such share of Common Stock is entitled to one vote at the
Annual Meeting. The Notice of Annual Meeting, this proxy statement and the form
of proxy are first being mailed to shareholders of the Company on or about March
27, 1997.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Each of the Company's current directors has been nominated and has agreed to
stand for re-election at the Annual Meeting. Each director serves until the next
regular meeting of the shareholders, until a successor shall have been elected
and shall qualify, or until such director shall resign or shall have been
removed. Election as a director requires the affirmative vote of a majority of
the shares of Common Stock represented in person or by proxy and entitled to
vote at the Annual Meeting. THE BOARD OF DIRECTORS RECOMMENDS THAT THE
SHAREHOLDERS VOTE FOR THE ELECTION OF EACH OF THE NOMINEES LISTED BELOW. If,
prior to the Annual Meeting, the Board of Directors learns that any nominee will
be unable to serve by reason of death, incapacity, or other unexpected
occurrence, the proxies which would have otherwise been voted for such nominee
will be voted for a substitute nominee, if any, selected by the Board of
Directors.
2
<PAGE>
INFORMATION ABOUT NOMINEES
The names of the nominees, their principal occupations, and certain other
information regarding the nominees set forth below is based upon information
furnished to the Company by the respective nominees.
<TABLE>
<CAPTION>
DIRECTOR NAME AGE PRINCIPAL OCCUPATION DIRECTOR SINCE
- ----------------------------- --- ------------------------------------------------------------ ---------------
<S> <C> <C> <C>
Scott H. Anderson 39 Vice Chairman, Credit Administration and Operations of the 1995
Company
A. Mark Berlin Jr. 40 Executive Vice President, Strategic Development of the 1992
Company
Lawrence H. Bistodeau 53 President of CECO Ltd., a dealer in heavy construction 1991
equipment
Robert J. Cresci 53 Managing Director of Pecks Management Partners Ltd., an 1992
investment management firm
James L. Davis 52 President of Davis and Associates, Inc., a manufacturers' 1991
representative of commercial lighting
Richard A. Greenawalt 53 President and Chief Executive Officer of the Company 1997
Warren Kantor 55 Chairman of the Board of the Company, President and Chief 1994
Executive Officer of Society Hill Capital Corporation, a
private investment company
Robert A. Marshall 56 Retired President of Credit Card Division of Advanta 1997
Corporation
Frederick W. Zuckerman 61 Partner in Zuckerman, Firstenberg and Associates LLC, an 1995
investment banking firm
</TABLE>
Additional information concerning each incumbent director is set forth
below.
SCOTT H. ANDERSON was appointed Vice Chairman, Credit Administration and
Operations in December 1995. Mr. Anderson had previously served as Executive
Vice President and the Company's Chief Credit Officer from April 1991. From 1987
until joining the Company, he served as Vice President, Division Manager of Loan
Administration for Marquette Bank Minneapolis, N.A. Prior thereto he served as a
Regional Vice President for First Bank System, Inc.
A. MARK BERLIN, JR. was appointed Executive Vice President, Strategic
Development in December 1995. Mr. Berlin joined the Company as its Senior Vice
President, Strategic Development in December 1994. Mr. Berlin was employed by
the investment banking firm of Wessels, Arnold & Henderson L.L.C. from March
1993 through December 1994. From June 1991 to March 1993, Mr. Berlin was a
Senior Vice President of Kidder, Peabody & Co. Incorporated. From 1980 until
June 1991, Mr. Berlin was employed by Merrill Lynch & Co., most recently as a
Director in Investment Banking.
LAWRENCE H. BISTODEAU has been President of CECO Ltd., a dealer in heavy
construction equipment, for the past ten years. In addition, Mr. Bistodeau
served as Treasurer of the Company from June 1991 to September 1992.
ROBERT J. CRESCI has been a managing director of Pecks Management Partners
Ltd., an investment management firm, since September 1990. Mr. Cresci currently
serves as a director of Bridgeport Machines, Inc., Serv-Tech, Inc.; Garnet
Resources Corporation; Meris Laboratories, Inc.; HarCor Energy, Inc.; Sepracor,
Inc., GeoWaste, Inc.; Vestro Natural Foods, Inc.; Natures Elements, Inc.; Hitox,
Inc.; and several private companies.
3
<PAGE>
JAMES L. DAVIS has been President of Davis and Associates, Inc., a
manufacturer's representative of commercial lighting for more than five years.
RICHARD A. GREENAWALT was appointed a Director and elected President and
Chief Executive Officer of the Company on January 27, 1997 and commenced
employment with the Company on January 29, 1997. Prior to joining the Company,
Mr. Greenawalt served as President, Chief Operating Officer and a Director of
Advanta Corporation from November 1987 through January 1997. Prior to joining
Advanta Corporation, Mr. Greenawalt served as President of Transamerica
Financial Corp. from May 1986 through November 1987.
WARREN KANTOR was appointed Chairman of the Board of Directors in December
1996 and has served as a Director of the Company since December 1994. From
August 1996 until January 1997, Mr. Kantor served as the Chairman of the
Executive Committee of the Company's Board of Directors and as the Company's
Acting Chief Executive Officer. Mr. Kantor is the President and Chief Executive
Officer of Society Hill Capital Corporation, a private investment company. He
was a director of Advanta Corporation, a consumer finance firm, from April 1986
to December 1996 and served as Advanta Corp.'s Vice Chairman from November 1993
through September 1994 and as Executive Vice President and Chief Financial
Officer from April 1986 through November 1993. Prior to his employment with
Advanta Corporation, Mr. Kantor was employed by Arthur Andersen & Co., in charge
of the Financial Services Division of its Philadelphia office.
ROBERT A. MARSHALL was recently retired as President of the Credit Card
Division at Advanta Corporation where he was employed for over five years.
Before joining Advanta, Mr. Marshall served as Chief Operating Officer of a
subsidiary of Scudder, Stevens & Clark, an investment management firm based in
New York. Mr. Marshall also spent 14 years at Citicorp. His last assignment was
Senior Vice President of Citicorp Retail Services, Inc. Prior to his being
employed at Citicorp, Mr. Marshall was a Vice President for Bankers Trust and
also spent 5 years with Avon Products.
FREDERICK W. ZUCKERMAN has been a partner in the merchant banking firm,
Zuckerman, Firstenberg and Associates LLC, of which he was a founder, for over
five years. Mr. Zuckerman has served in senior management positions with
Chrysler Corporation, International Business Machines Corporation and RJR
Nabisco. Mr. Zuckerman currently serves on the Boards of Meditrust, NVR Inc.,
Turner Corp., Designer Holdings Inc., Caere Corporation, The Japan Equity Fund,
The Singapore Fund and Pantone, Inc.
During 1996, two directors, Jeffrey C. Mack and Richard A. Zona, resigned
from the Board. Mr. Mack resigned in August 1996 and Mr. Zona in October 1996.
In January 1997, Mr. Richard A. Greenawalt was elected by the Board to fill the
vacancy created by Mr. Mack's resignation. In February, 1997, Mr. Robert A.
Marshall was elected by the Board to fill the vacancy created by Mr. Zona's
resignation.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors held thirteen meetings during the fiscal year ended
December 31, 1996 ("fiscal 1996"). Each of the incumbent directors who was a
director during 1996 attended at least 75% of the meetings of the Board and of
each committee of the Board of Directors of which he was a member held while he
was a member during the last fiscal year.
In fiscal 1996, the Company paid each non-employee director an annual
director's fee in the amount of $27,500, plus $1,000 for each meeting of the
Board of Directors attended by the director. Each non-employee director who
served as chairman of the Executive, Audit or Compensation Committees of the
Board of Directors received $5,000 annually in respect of such service on each
such committee. Non-employee directors who served on the Executive, Audit or
Compensation Committees of the Board of Directors received $1,000 for each
meeting of each such committee attended by the
4
<PAGE>
director. In 1996, each non-employee director received options to purchase 5,000
shares under the 1992 Director Stock Option Plan. The shareholders are
considering a proposal to amend the Company's 1992 Director Stock Option Plan,
pursuant to which commencing in 1997 non-employee directors will receive options
for 15,000 shares per year up to a maximum of options of 120,000 shares per
non-employee director. This increase in the number of option shares granted
annually is being made in addition to an amendment that will provide with one
time grant of options to purchase 10,000 shares granted January 2, 1997. See
"Proposal No. 3--Proposal to Amend the 1992 Director Stock Option Plan."
In fiscal 1996, the Board of Directors had three committees: the Executive,
Audit, and Compensation Committees. In 1995, the Board of Directors elected to
hold monthly meetings of the full Board of Directors and, accordingly, the Board
of Directors disbanded the Executive Committee in December, 1995. However,
concurrent with the resignation of Jeffrey C. Mack as the Chief Executive
Officer of the Company in August 1996, the Board of Directors reinstated the
Executive Committee to assist in the management of the Company. Through December
31, 1996, the members of the Executive Committee were Scott H. Anderson, Robert
J. Cresci, A. Mark Berlin, Jr., James L. Davis, Warren Kantor, Lawrence
Bistodeau and Frederick W. Zuckerman. The Executive Committee was delegated the
full and complete powers of the Board of Directors to act in place of the full
Board of Directors during all periods between regularly scheduled meetings of
the Board of Directors and at any other time at which a meeting of the full
Board of Directors was not practicable for any reason. The Executive Committee
met once during fiscal 1996.
Concurrently with Jeffrey C. Mack's resignation on August 26, 1996, director
Warren Kantor agreed to serve as Chairman of the Executive Committee of the
Company's Board of Directors. Pursuant to a letter agreement dated August 26,
1996, Mr. Kantor received a grant of options to purchase 200,000 shares of the
Company's Common Stock at a purchase price of $17.375 per share, with 100,000 of
such options to vest immediately on the date of the letter agreement and 100,000
to vest proportionately on the basis of Mr. Kantor's tenure as Chairman of the
Executive Committee on and after February 14, 1997. In addition, the letter
agreement provided for a bonus to Mr. Kantor of up to 25,714 shares of the
Company's Common Stock. 12,857 of such shares were awarded on August 26, 1996.
The award of the remaining 12,857 was dependent upon Mr. Kantor's service as
Chairman of the Executive Committee after February 14, 1997. In addition, the
letter agreement provided that the Company would reimburse Mr. Kantor for all
reasonable expenses incurred in connection with his performance of his duties as
Chairman of the Executive Committee. By letter agreement dated December 18,
1996, the Company agreed to amend the terms of the letter agreement with Mr.
Kantor to accelerate the vesting of the second 100,000 options to February 14,
1997 and to provide for the issuance of the remaining 12,857 shares of Common
Stock on February 14, 1997; both without regard to service after February 14,
1997. Such amendments were made in consideration of additional services provided
by Mr. Kantor to the Company in his capacity as Chairman of the Executive
Committee which the Board determined to be equal to or in excess of those
contemplated to be performed through August 1997 at the time of the execution of
the letter agreement. The Company also has a consulting agreement with Mr.
Kantor. See--Consulting Agreements with Warren Kantor.
Through August, 1996, the members of the Audit Committee were Lawrence H.
Bistodeau, Richard A. Zona and Warren Kantor. As of September 30, 1996, Mr.
Kantor resigned from the Committee and as of October 11, 1996, Mr. Zona resigned
from the Committee. Upon Mr. Kantor's resignation, Robert J. Cresci was elected
to the Committee. The Audit Committee is empowered by the Board of Directors to
review the financial books and records of the Company in consultation with the
Company's accounting and auditing staff and its independent auditors and to
review with the accounting staff and independent auditors any questions raised
with respect to accounting and auditing policies and procedures. The Audit
Committee held eight meetings during fiscal 1996.
5
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee were Robert J. Cresci, Frederick
W. Zuckerman, and James L. Davis through December 31, 1996 . The Compensation
Committee makes recommendations to the Board of Directors as to general levels
of compensation for all associates of the Company, including the annual salary
of each of the executive officers of the Company, grants options to associates
under the Company's 1990 Stock Option Plan, grants restricted stock awards under
the 1994-1997 Restricted Stock Election Plan and the 1998-2000 Restricted Stock
Election Plan, and reviews and approves compensation and benefit plans of the
Company. The Compensation Committee held six meetings during fiscal 1996.
No member of the Compensation Committee of the Board of Directors was an
officer, former officer or associate of the Company or its subsidiaries during
the fiscal year ended December 31, 1996. No executive officer of the Company
served as a member of the Compensation Committee or Board of Directors of
another entity, one of whose executive officers served on the Company's
Compensation Committee or Board of Directors during the fiscal year ended
December 31, 1996.
In connection with the issuance of certain Senior Subordinated Notes due
June 1, 1999 and certain Senior Subordinated Warrants in 1992, the Company,
certain principal shareholders of the Company, including Jeffrey C. Mack, James
L. Davis, Bruce C. Elliasen, Scott H. Anderson and Lawrence M. Bistodeau (the
"Principal Shareholders"), and the Holders also entered into a Coinvestors'
Agreement, dated June 24, 1992 (the "Coinvestors' Agreement"), pursuant to
which, among other things, the Company and the Principal Shareholders agreed
that for so long as the initial investors in the Senior Subordinated Notes and
the Senior Subordinated Warrants own at least 25% of the Senior Subordinated
Notes, the Senior Subordinated Warrants or the shares of Common Stock issuable
on exercise of the Senior Subordinated Warrants, the Company and the Principal
Shareholders will cause the Company's Board of Directors to consist of not more
than nine members, two of whom would be designated by such investors, subject to
the reasonable approval of the Company. In connection with a March 1995
Amendment, the Company, the Principal Shareholders and the Holders agreed to an
amendment, dated May 19, 1995, to the Coinvestors' Agreement. Pursuant to such
amendment, the provisions in the Coinvestors' Agreement providing for the
election of two directors by the initial investors were amended to provide that
for so long as the initial investors in the Senior Subordinated Notes and the
Senior Subordinated Notes own at least 25% of the Senior Subordinated Warrants
or the shares of Common Stock issuable upon exercise of the Senior Subordinated
Warrants, the Company and the Principal Shareholders will take all action within
their respective powers to elect one individual designated by such investors,
subject to the reasonable approval of the Company. Robert J. Cresci is such
designee presently serving on the Board. Mr. Cresci is one of the nominees for
election at the 1997 Shareholder Meeting.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers, and
any persons who own more than 10% of a registered class of the Company's equity
securities to file with the Securities and Exchange Commission reports of
ownership and changes in ownership of Common Stock and other equity securities
of the Company. Officers, directors and greater than 10% shareholders are
required by the Exchange Act to furnish the Company with copies of all Sections
16(a) forms they file. Based solely on review of the copies of such reports
furnished to the Company or written representations that no other reports were
required, the Company believes that, during fiscal 1996, all filings required of
its officers, directors and greater than 10% beneficial owners were made;
provided, however, that reports for the following individuals were not filed in
a timely manner: Brian S. Anderson (one late filing as to one transaction);
Scott H. Anderson (two late filings as to two transactions), Lawrence H.
Bistodeau (one late filing as to one transaction); James L. Davis (one late
filing as to one transaction); Warren Kantor (two late filings
6
<PAGE>
as to four transactions); Richard A. Zona (one late filing as to one
transaction) and Frederick W. Zuckerman (one late filing as to one transaction).
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding ownership of
the Company's Common Stock as of February 28, 1997, by (i) each person known to
the Company to own beneficially more than 5% of its outstanding shares of Common
Stock; (ii) each director of the Company; (iii) each officer named in the
Summary Compensation Table on p. 9 of this Proxy Statement; and (iv) all
directors and executive officers of the Company as a group. Unless otherwise
indicated, each person in the table has sole voting and investment power as to
the shares shown. In addition, unless otherwise indicated, the address of each
person named below is the address of the Company.
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER NUMBER OF SHARES PERCENTAGE OWNED
- ---------------------------------------------------------------------------- ----------------- -----------------
<S> <C> <C>
Putnam Investments, Inc.(1) ................................................ 2,765,800 7.27%
One Post Office Square
Boston, MA 02109
AIM Management Group Inc.(2) ............................................... 2,005,400 5.27%
11 Greenway Plaza
Houston, TX 77046
James L. Davis(3)(5)........................................................ 1,213,519 3.18%
Robert J. Cresci(4)(5)...................................................... 859,387 2.25%
Warren Kantor(5)(12)........................................................ 673,782 1.75%
Jeffrey C. Mack(6).......................................................... 599,872 1.56%
Lawrence H. Bistodeau(5).................................................... 326,610 0.86%
Scott H. Anderson(7)........................................................ 202,698 0.53%
John A. Witham(8)........................................................... 137,269 0.36%
A. Mark Berlin, Jr.(9)...................................................... 115,857 0.30%
Richard A. Greenawalt(10)................................................... 87,894 0.23%
Robert A. Barbee(11)........................................................ 87,059 0.23%
Frederick W. Zuckerman(5)................................................... 20,000 0.05%
All Executive Officers and Directors as a Group (12 Persons)................ 4,388,848 11.17%
</TABLE>
- ------------------------
(1) Based on Schedule 13G as of December 31, 1996. Putnam Investments, Inc. held
shares on behalf of the following: Putnam Investments, Inc. (1,382,900
shares); Putnam Investment Management, Inc. (1,716,010 shares); and The
Putnam Advisory Company, Inc. (206,890 shares).
(2) Based on Schedule 13G as of December 31, 1996.
(3) Includes 192,857 shares owned by Davis & Associates Inc. Profit Sharing Plan
in which Mr. Davis is a principal participant, 11,000 shares held in trust
for the benefit of his minor children and a parent and 15,000 shares owned
by Mr. Davis' spouse. Mr. Davis disclaims beneficial ownership of shares
held by his spouse or in trust for his children and parent.
(4) Includes shares of Common Stock that are held by Pecks Management Partners
Ltd., an investment advisory firm of which Mr. Cresci is a managing
director. Pecks Management Partners Ltd. holds such shares on behalf of the
Delaware State Employee Pension fund (559,570 shares); Zeneca Holdings, Inc.
(108,717 shares); and ICI American Holdings, Inc. (131,100 shares).
(5) Includes shares which each non-employee director has the right to acquire
within 60 days pursuant to grants under the 1992 Director Stock Option Plan
("DSOP"). Vested options under the DSOP are as follows: Robert J. Cresci
(60,000 shares); Lawrence Bistodeau (5,000 shares);
7
<PAGE>
James L. Davis (50,000 shares); Frederick Zuckerman (15,000 shares); and
Warren Kantor (30,000 shares).
(6) Includes a total of 163,883 shares issuable upon exercise of stock options
and 25,714 shares granted, but not yet vested, under the 1994-1997 Stock
Election Plan and 55,042 shares granted, but not yet vested, under the
1998-2000 Stock Election Plan.
(7) Includes a total of 125,572 shares issuable upon exercise of stock options
and 11,047 shares granted, but not yet vested, under the 1994-1997 Stock
Election Plan and 28,725 shares granted, but not yet vested, under the
1998-2000 Stock Election Plan.
(8) Includes a total of 62,666 shares issuable upon exercise of stock options
and 11,238 shares granted, but not yet vested, under the 1994-1997 Stock
Election Plan and 18,532 shares granted, but not yet vested, under the
1998-2000 Stock Election Plan.
(9) Includes a total of 25,266 shares issuable upon exercise of stock options,
and 400 shares owned by Mr. Berlin's wife and children and 11,680 shares
granted, but not yet vested, under the 1994-1997 Stock Election Plan and
14,826 shares granted, but not yet vested under the 1998-2000 Stock Election
Plan.
(10) Includes 17,975 shares granted, but not yet vested, under the 1994-1997
Stock Election Plan and 59,919 shares granted, but not yet vested, under the
1998-2000 Stock Election Plan.
(11) Includes a total of 28,166 shares issuable upon exercise of stock options
and 9,926 shares granted, but not yet vested, under the 1994-1997 Stock
Election Plan and 14,826 shares granted, but not yet vested, under the
1998-2000 Stock Election Plan.
(12) Includes 200,000 shares issuable upon exercise of a stock option and 25,714
shares awarded pursuant to a letter agreement dated August 26, 1996 in
consideration of Mr. Kantor becoming Chairman of the Executive Committee of
the Board of Directors (see Proposal No. 5) and 140,000 options granted to
Mr. Kantor pursuant to a December 1994 Consulting Agreement with the
Company.
8
<PAGE>
EXECUTIVE COMPENSATION
The following table discloses compensation earned by the Company's Chief
Executive Officers and the four other most highly compensated executive officers
whose total annual salary exceeded $100,000 for the fiscal year ended December
31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION(1) ----------------------------------
RESTRICTED SECURITIES
---------------------- STOCK UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) AWARDS ($)(2)(3)(4) OPTIONS (#)
- ------------------------------------------------- --------- ----------- --------- ------------------ --------------
<S> <C> <C> <C> <C> <C>
Warren Kantor(5)(6) ............................. 1996 $ 0 $ 0 $ 0 325,000
Chairman of the Board, Acting Chief Executive
Officer
Jeffrey C. Mack(6) .............................. 1996 494,740 0 0 0
Former Chairman of the Board, President and 1995 324,430 0 891,000 100,000
Chief Executive Officer 1994 211,874 0 472,495 75,428
Scott H. Anderson ............................... 1996 310,260 0 0 75,000
Vice Chairman, Credit Administration and 1995 197,304 0 465,000 75,000
Operations 1994 136,000 0 202,986 20,572
John A. Witham .................................. 1996 250,624 0 $ 0 50,000
Executive Vice President and Chief Financial 1995 164,691 20,000 300,000 50,000
Officer 1994 152,176 206,498 50,000
A. Mark Berlin, Jr. ............................. 1996 196,440 0 0 50,000
Executive Vice President, Strategic Development 1995 139,007 0 240,000 75,000
Robert A. Barbee ................................ 1996 $ 200,363 0 0 50,000
Executive Vice President, Sales and Marketing 1995 137,701 0 240,000 50,000
</TABLE>
- ------------------------
(1) As permitted by the Securities and Exchange Commission's rules regarding
disclosure of executive compensation in proxy statements, this table
excludes perquisites and other personal benefits for the named executive
officer if their total cost did not exceed the lesser of $50,000 or 10% of
the total of annual salary and bonus reported for the named executive
officer for those years.
(2) 1995 restricted stock awards were made pursuant to a Stock Election Plan
(the "1998-2000 Stock Election Plan") adopted by the Board of Directors,
effective December 20, 1995. The value of each award shown is based upon the
closing market price of the Company's Common Stock on the date of grant
($16.19 per share). Awards granted under the 1998-2000 Stock Election Plan
vest over a five to seven year period from the date of grant, depending on
date of grant, subject to accelerated vesting during the years 1998-2000
based on a participant's achievement of annual target performance goals. In
each year in which a participant meets his or her performance goal, this
accelerated vesting will apply to a number of shares of restricted stock up
to a maximum of (i) the total number of shares awarded to such participant
under the 1998-2000 Stock Election Plan times (ii) a fraction (A) the
numerator of which is the number of days during that Plan year that the
participant participated in the Plan and (B) the denominator of which is the
total number of days from the first day of the participant's participation
in the Plan through the last day of the Plan (December 31, 2000).
Performance goals are determined annually by the Compensation Committee. The
percentage goal that is met in any given year determines what percentage of
the
9
<PAGE>
shares eligible for accelerated vesting will vest in that year. See
"Committee Report on Executive Compensation." A total of 131,951 shares of
restricted stock were granted under the 1998-2000 Stock Election Plan to the
executives named in the table in the respective numbers indicated: Jeffrey
C. Mack, 55,042 shares; Scott H. Anderson, 28,725 shares; John A. Witham,
18,532 shares; A. Mark Berlin, Jr., 14,826 shares; and Robert A. Barbee,
14,826 shares. Any dividends declared on the Company's Common Stock will be
paid on all shares of restricted stock granted under the 1998-2000 Stock
Election Plan.
(3) 1994 restricted stock awards were made pursuant to the Stock Election Plan
(the "1994-1997 Stock Election Plan") adopted by the Board of Directors,
effective July 1, 1994. The value of each award shown is based upon the
market price on the date of grant ($5.25 per share). Awards granted under
the 1994-1997 Stock Election Plan vest over a ten year period from the date
of grant, subject to accelerated vesting during the years 1994-1997 based on
participants' achievement of annual target performance goals. In each year
in which a participant meets his or her performance goal, this accelerated
vesting will apply to a number of shares of restricted stock up to a maximum
of (i) the total number of shares awarded to such participant under the
1994-1997 Stock Election Plan times (ii) a fraction (A) the numerator of
which is the number of days during that Plan year that the participant
participated in the Plan and (B) the denominator of which is the total
number of days from the first day of the participant's participation in the
Plan through the last day of the Plan (December 31, 1997). Performance goals
are determined annually by the Compensation Committee. The percentage of the
goal that is met in any given year determines what percentage of the shares
eligible for accelerated vesting will vest in the year. See "Committee
Report on Executive Compensation." A total of 235,710 shares of restricted
stock were granted under the 1994-1997 Stock Election Plan to the executives
named in the table in the respective numbers indicated: Jeffrey C. Mack,
89,999 shares; Scott H. Anderson, 38,664 shares; John A. Witham, 39,333
shares; A. Mark Berlin, Jr., 35,040 shares; and Robert A. Barbee, 32,674
shares. Any dividends declared on the Company's Common Stock will be paid on
all shares of restricted stock granted under the 1994-1997 Stock Election
Plan.
(4) As of December 31, 1996, the number and fair market value, based on the
closing market price of the Company's Common Stock of $14.25 on December 31,
1996, of the aggregate restricted stock holdings of the named executive
officers were: for Mr. Mack, 145,041 shares and $2,066,834; for Mr.
Anderson, 67,389 shares and $960,293; for Mr. Witham, 57,865 shares and
$824,576.25; for Mr. Berlin, 49,866 shares and $710,590; and for Mr. Barbee,
47,500 shares and $676,875.
(5) Does not include 12,857 shares which were issued at $17.375 a share,
received August 26, 1996 in consideration of Mr. Kantor becoming the
Chairman of the Executive Committee. This does include the options to
purchase 125,000 shares which is subject to shareholder approval pursuant to
Proposal No. 5.
(6) Mr. Mack resigned as President and CEO on August 26, 1996 (see Proposal No.
1--Election of Directors and Related Agreement, Severance Agreement with Mr.
Mack) Mr. Kantor served as acting Chief Executive Officer for no cash
compensation from August 26, 1996 to January 29, 1997, when Mr. Greenawalt
joined the Company as President and Chief Executive Officer.
10
<PAGE>
OPTION GRANTS IN FISCAL 1996
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF % OF ANNUAL RATES OF
SECURITIES TOTAL OPTIONS EXERCISE STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO PER SHARE FOR OPTION TERM(3)
OPTIONS ASSOCIATES IN PRICE EXPIRATION ----------------------------
NAME GRANTED(1) FISCAL YEAR(2) ($/SH) DATE 5% 10%
- ------------------------------ ------------- ----------------- ----------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey C. Mack............... 0 0 -- --
Scott H. Anderson............. 75,000 9% 14.88 12/17/06 701,846 1,778,617
John A. Witham................ 50,000 6% 14.88 12/17/06 467,898 1,185,744
A. Mark Berlin, Jr............ 50,000 6% 14.88 12/17/06 467,898 1,185,744
Robert A. Barbee.............. 50,000 6% 14.88 12/17/06 467,898 1,185,744
Warren Kantor ................ 200,000 39% 17.38 8/26/06 3,403,358 8,624,776
125,000(4) 14.88 12/17/06
5,000 15.13 12/19/06
</TABLE>
- ------------------------
(1) The exercise price of all options granted is equal to the market value of
the Company's Common Stock on the date of grant. Options awarded to Mr.
Anderson during fiscal 1996 vest on December 17, 1997, 1998 and 1999 (25,000
shares on each date). Options awarded to Mr. Witham during fiscal 1996 vest
on December 17, 1997 and 1998 (16,666 shares on each date) and December 17,
1999 (16,668 shares). Options awarded to Mr. Berlin during fiscal 1996 vest
on December 17, 1997 and 1998 (16,666 on each date) and the remaining
options vest on December 17, 1999 (16,668 shares). Options awarded to Mr.
Barbee during fiscal 1996 vest on December 17, 1997 and 1998 (16,666 shares
on each date), and December 17, 1999 (16,668 shares). All options expire 10
years from the date of grant. The 200,000 options awarded to Mr. Kantor on
August 26, 1996 vested on August 26, 1996 (100,000 shares) and February 14,
1997 (100,000 shares). The 125,000 options granted to Mr. Kantor on December
18, 1996, vest on December 31, 1997 and the 5,000 options granted to Mr.
Kantor on December 19, 1996 vest on December 19, 1997. See Proposal No. 1--
Election of Directors--The Board of Directors and its Committees,
--Consulting Agreements with Warren Kantor.
(2) The total number of options granted to employees by the Company in 1996 was
505,000. This total does not include the options granted to Mr. Kantor in
1996 as he was not an employee of the Company during fiscal 1996. Each such
option granted in 1996 terminates on the tenth anniversary of the grant date
thereof.
(3) The potential realizable value amounts shown illustrate the values that
might be realized upon exercise immediately prior to the expiration of their
term using 5 percent and 10 percent appreciation rates set by the Securities
and Exchange Commission, compounded annually such amounts are not intended
to forecast possible future appreciation, if any, of the Company's stock
price. Additionally, these values do not take into consideration the
provisions of the options providing for nontransferability, vesting over the
period set forth in each such option or termination of the options following
termination of employment.
(4) This option is subject to approval by the shareholders. See Proposal No. 5.
11
<PAGE>
AGGREGATED OPTION EXERCISES IN FISCAL 1996 AND FISCAL 1996 YEAR-END OPTION
VALUES
The following table provides information with respect to the named executive
officers, their stock option exercises during the last fiscal year and the value
of such officers' unexercised options on December 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR-END (#) AT FISCAL YEAR-END ($)(2)
ACQUIRED ON VALUE -------------------------- ----------------------------
NAME EXERCISE (#) REALIZED ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------- ----------- -------------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey C. Mack.............. -- -- 130,500 194,928 $ 1,360,410 $ 932,064
Scott H. Anderson............ 10,000 $ 162,700 125,572 125,000 1,132,895 0
John A. Witham............... 4,000 39,500 52,666 93,334 337,500 93,750
A. Mark Berlin, Jr........... 46,349 551,447 25,666 100,985 84,375 116,938
Robert A. Barbee, Jr......... 3,500 34,125 31,666 83,334 140,625 0
Warren Kantor................ -- -- 270,000 230,000 1,048,875 0
</TABLE>
- ------------------------
(1) Value realized is calculated based on the difference between the option
exercise price and the closing market price of the Company's Common Stock on
the date of exercise multiplied by the number of shares to which the
exercise relates.
(2) Value of unexercised in-the-money options is calculated based on the
difference between the option exercise price and the closing price of the
Company's Common Stock at fiscal year end, multiplied by the number of
shares underlying the options. The closing price of the Company's Common
Stock as reported on the New York Stock Exchange on December 31, 1996 was
$14.25.
EMPLOYMENT AGREEMENTS AND RELATED AGREEMENTS
In connection with his agreement to join the Company as Chief Executive
Officer, the Company and Richard A. Greenawalt entered into an Employment
Agreement dated as of January 6, 1997 (the "Greenawalt Employment Agreement"),
which became effective as of January 29, 1997. The Greenawalt Employment
Agreement provides that (i) not later than the effective date, the Company shall
grant Mr. Greenawalt a ten-year option to purchase 1,200,000 shares of the
Common Stock at an exercise price of $14.87 per share, which shall vest in three
equal installments on the first three anniversaries of the date of grant,
subject to accelerated vesting in the event of death, disability (as defined),
termination without Cause (as defined), termination for Good Reason (as defined)
or a change in control (as defined in the option agreement) which option was
granted January 29, 1997 (See Proposal No. 6--Greenawalt Option for additional
details) and terminates on the tenth anniversary of the grant date; (ii) the
Company shall file a registration statement on Form S-8 covering the shares
issuable upon exercise of such options; (iii) Mr. Greenawalt shall divide his
full time employment between the Company's offices in Minneapolis, Minnesota and
a location outside of Philadelphia, Pennsylvania; (iv) Mr. Greenawalt shall
receive an annual salary of not less than $100,000 per year, which base salary
shall be reviewed at least once each year and may be increased; (v) Mr.
Greenawalt shall be awarded an annual bonus based on reasonable and customary
criteria consistent with the Company's past practices, with a target amount per
fiscal year at least equal to $300,000, with provisions for prorating such bonus
in the event that a fiscal year begins but does not end during Mr. Greenawalt's
term of employment; (vi) Mr. Greenawalt's annual bonus shall be applied toward
participation in the 1994-1997 Restricted Stock Election Plan and the 1998-2000
Restricted Stock Election Plan on a basis commensurate with an executive having
a base salary of $500,000 (or, if greater, Mr. Greenawalt's annual base salary);
(vii) the Company shall provide fringe benefits including health, disability and
life insurance, not less than four weeks' vacation, expense reimbursement, use
of an automobile or automobile payments and certain club membership fees; (viii)
Mr. Greenawalt
12
<PAGE>
may voluntarily terminate his employment upon not less than 15 days' advance
notice to the Company; (ix) the Company may terminate Mr. Greenawalt's
employment effective on the 90th day after Mr. Greenawalt receives a written
notice of intention to terminate his employment after having established his
Disability (as defined), provided that Mr. Greenawalt has not returned to
full-time performance of his duties during such period, and provided further
that the Company shall continue to provide health, disability and life
insurance; (x) the Company may terminate Mr. Greenawalt's employment for Cause
(as defined), provided that the Company give written notice of such a
termination within 10 business days of having actual knowledge of all of the
events giving rise to such termination; (xi) Mr. Greenawalt may terminate his
employment for Good Reason (as defined), provided that he gives written notice
of such termination within 180 days of having actual knowledge of the events
giving rise to such termination; (xii) the Company may terminate Mr.
Greenawalt's employment without Cause and not on account of Disability on 15
days' written notice; (xiii) in the event that Mr. Greenawalt terminates his
employment as described in (xi) above or the Company terminates Mr. Greenawalt's
employment as described in (xii) above, then the Company shall pay in a lump
sum, within 15 days of the termination, a cash amount equal to two times the sum
of (a) Mr. Greenawalt's annual base salary, (b) Mr. Greenawalt's annual bonus,
(c) the average annual amount paid or reimbursed to Mr. Greenawalt with regard
to automobile and club membership payments and (d) the present value of the
annual cost to the Company of obtaining the health, disability and life
insurance then provided to Mr. Greenawalt; (xiv) the Company shall make certain
payments to cover certain excise tax amounts that may become due from Mr.
Greenawalt; and (xv) Mr. Greenawalt shall be bound by certain covenants
regarding noncompetition, non-solicitation of dealers and non-solicitation of
employees for one year following termination of his employment.
On November 7, 1996 the Company entered into an employment agreement with
Scott H. Anderson. The Agreement is effective until termination, but salary is
reviewed at least annually and may be increased. Commencing January 1, 1997, Mr.
Anderson receives an annual base salary of $341,000.
On November 7, 1996 the Company entered into an employment agreement with
John A. Witham for his employment as Executive Vice President and Chief
Financial Officer. The Agreement is effective until termination, but salary is
reviewed at least annually and may be increased. Commencing January 1, 1997, Mr.
Witham receives a base salary of $275,000 per year.
On November 7, 1996, the Company entered into an employment agreement with
A. Mark Berlin, Jr. for his employment as the Executive Vice President of
Strategic Development. The Agreement is effective until termination, but salary
is reviewed at least annually and may be increased. Commencing January 1, 1997,
Mr. Berlin receives a base salary of $220,000 per year.
On November 7, 1996, the Company entered into an employment agreement with
Robert A. Barbee for his employment as the Executive Vice President of Sales and
Marketing. The Agreement is effective until termination, but salary is reviewed
at least annually and may be increased. Commencing January 1, 1997, Mr. Barbee
receives a base salary of $220,000 per year.
The employment agreements with each of Mr. Anderson, Mr. Witham, Mr. Berlin
and Mr. Barbee provide that, upon termination by the Company of such executive's
employment without Cause (as defined therein), each such executive will be
entitled to receive a lump sum equal to two times the sum of (a) his base
salary, (b) Annual Bonus (as defined therein), (c) an award equal to the average
annual amount paid to him during the two years preceding the termination for
certain perquisites plus (d) the present value of certain additional insurance
benefits. The option agreements evidencing options granted to such executives
provide that, upon termination by the Company of the executive's employment
without Cause (as defined in his employment agreement) or upon a Change of
Control of the Company (as defined in the option agreement), any then unvested
options will vest. The terms of the 1994-1997 Stock Election Plan and the
1998-2000 Stock Election Plan provide that, in the event of a
13
<PAGE>
Change of Control (as defined in each such Plan, any then unvested shares of
restricted stock granted to such executives will vest. The terms of the Split
Dollar Insurance Agreements with each of such executives provide that, in the
event such executive's employment is terminated within the period commencing six
months prior to the date of a Change of Control (as defined in such agreement)
of the Company and ending eighteen months after the date thereof, the Company
will be obligated to fund such executive's split dollar life insurance policy
for a period of up to ten years thereafter.
SEVERANCE AGREEMENT WITH MR. MACK
In connection with Jeffrey C. Mack's resignation on August 26, 1996 as Chief
Executive Officer, President and member of the Board of Directors of the
Company, the Company and Mr. Mack entered into a severance agreement (as amended
to date, the "Mack Severance Agreement"). Under the Mack Severance Agreement,
(i) Mr. Mack's prior employment agreement was canceled, (ii) Mr. Mack agreed to
continue as an employee-consultant of the Company until August 26, 1998, at an
annual salary of $495,000, (iii) the parties agreed that, if a "change in
control" (as defined) occurs prior to August 26, 1998, then all unvested options
previously granted to Mr. Mack pursuant to the Company's 1990 Stock Option Plan
(which options cover 194,928 shares of Common Stock) shall become immediately
vested and exercisable and that, in the absence of a "change in control," all
such options shall vest on a periodic basis through August 26, 1998, as set
forth in the agreements evidencing such options, at which time all then unvested
options will vest, (iv) the parties agreed that, if a "change in control" occurs
prior to August 26, 1998, then all unvested shares of restricted stock
previously granted to Mr. Mack pursuant to the Company's 1994-1997 Restricted
Stock Election Plan (51,248 shares of Common Stock) shall become immediately
vested and that, in the absence of a "change in control," such shares shall vest
pursuant to the provisions of such Plan through January 1, 1998, (v) the parties
agreed that, if a "change in control" occurs prior to August 26, 1998, then all
unvested shares of restricted stock previously granted to Mr. Mack pursuant to
the Company's 1998-2000 Restricted Stock Election Plan (55,042 shares of Common
Stock) shall become immediately vested and that, in the absence of a "change in
control," 12,225 of such shares shall vest on August 26, 1998, (vi) the Company
agreed that Mr. Mack would continue to participate in the Company's benefit
plans in accordance with their terms through August 26, 1998, (vii) the Company
agreed to continue to pay premiums under the Split-Dollar Life Insurance Plan
through August 26, 1998, provided that, if a "change in control" occurs in such
period, the Company shall continue to pay premiums until August 26, 2006, (viii)
the Company agreed to continue to make certain car and club membership payments
on Mr. Mack's behalf through August 26, 1998, (ix) the Company agreed to
maintain a directors' and officers' liability insurance policy covering Mr. Mack
through August 26, 2002, (x) the Company agreed to reimburse Mr. Mack for
$10,000.00 of legal expenses in connection with his resignation, (xi) Mr. Mack
agreed to be bound by certain covenants regarding noncompetition in any business
which originates, purchases or sells automobile loans, contracts or leases,
non-solicitation of dealers and non-solicitation of employees through August 26,
1998 and (xii) the Company and Mr. Mack agreed to a mutual release of claims
relating to Mr. Mack's resignation.
CONSULTING AGREEMENT WITH WARREN KANTOR
In December 1994, the Company entered into a two-year consulting agreement
with Warren Kantor, a director of the Company (the "1994 Consulting Agreement")
for consulting services. On January 1, 1996, the Company entered into an
additional one-year consulting agreement with Mr. Kantor for additional
consulting services (the "1996 Consulting Agreement" and, together with the 1994
Consulting Agreement, the "Consulting Agreements"). Pursuant to the Consulting
Agreements Mr. Kantor renders consulting services, at the request of the
Company, in the following areas, among others: long range planning, tax
strategies, treasury operations, internal audit, asset liability strategies,
asset-backed securitization development and planning, corporate development,
investor and SEC relations, financing strategies, reserves and asset planning,
and such other related areas of
14
<PAGE>
business as the Chief Executive Officer of the Company may request from time to
time. Pursuant to each of the Consulting Agreements Mr. Kantor is to provide up
to 150 hours per year of such consulting services as requested by the Company,
for a total of 300 hours in fiscal 1996. The Consulting Agreements contain
provisions covering termination, non-disclosure of proprietary information and
non-competition customary in consulting agreements of this nature.
Mr. Kantor receives no cash compensation for services rendered pursuant to
the Consulting Agreements. In consideration for such services the Company has
granted, pursuant to the Consulting Agreements, non-statutory options to
purchase 140,000 shares of the Company's Common Stock. Under the 1994 Consulting
Agreement, Mr. Kantor was granted an option (the "1994 Option") to purchase
100,000 shares at an exercise price of $5.13 per share (the fair market value of
the shares on the date of grant), exercisable as to 50% of the shares covered on
December 18, 1995 and as to the remaining 50% on December 18, 1996. The 1994
Option expires December 18, 2004. Under the 1996 Consulting Agreement, Mr.
Kantor was granted an option (the "1996 Option" and, together with the 1994
Option, the "Options") to purchase 40,000 shares at an exercise price of $16.25
per share (the fair market value of the shares on the date of grant) exercisable
in full on December 31, 1996. The 1996 Option expires December 31, 2005.
Exercisability of the Options may be accelerated in the event of the Company's
termination of the Consulting Agreements or upon a change in control of the
Company. The Options are non-transferable otherwise than by will or by the laws
of descent or distribution.
In addition to the above grants, on December 18, 1996, the Board of
Directors of the Company agreed to retain Mr. Kantor to act as a consultant for
the Company for fiscal 1997. The terms of such retention are set forth in a
Consultation Agreement dated December 18, 1996 (the "Consultation Agreement").
Pursuant to the Consultation Agreement, Mr. Kantor agreed to provide 450 hours
of consulting services in 1997. In exchange for such services, Mr. Kantor
received a grant of a non-statutory option (the "Consulting Option") to purchase
125,000 shares of Olympic Common Stock at an exercise price equal to the fair
market value of those shares on the date of grant ($14.87). Such option vests as
of December 31, 1997, the last day of the one year term of the Consultation
Agreement and expires on the tenth anniversary of the grant date. On January 27,
1997, the Board determined that it would require more than 450 hours of
consulting services from Mr. Kantor in 1997. Pursuant to an amendment to the
Consultation Agreement, Mr. Kantor agreed that he would provide an unlimited
number of hours in return for the grant of a non-statutory option to purchase an
additional 70,160 shares of Olympic Common Stock at an exercise price equal to
the fair market value of the stock on the date of the grant ($14.87). Such
additional option grant was set forth in an Option Agreement dated January 29,
1997. The additional option vests December 31, 1997 and expires on the tenth
anniversary of the grant date. Exercisability of the options may be accelerated
in the event of the Company's termination of the Consultation Agreement or upon
a change of control (as defined) of the Company.
OLYMPIC FINANCIAL LTD
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
ROLE AND COMPOSITION OF COMPENSATION COMMITTEE
The Compensation Committee (the Committee) of the Board of Director's
principal responsibility with respect to executive compensation is to ensure
that the Company's compensation program is aligned with and supports the
Company's business objectives. The Committee evaluates the overall design and
administration of the compensation program in order to fulfill its
responsibilities. The Committee is comprised entirely of outside directors in
order to enhance its objectivity and independence.
15
<PAGE>
Specifically, the Committee is responsible for:
- Establishing an executive compensation philosophy
- Reviewing competitive compensation and performance data
- Establishing executive compensation plans and pay levels consistent with
the competitive data and the compensation strategy
- Overseeing the administration of the executive compensation program
COMPENSATION PHILOSOPHY AND PRINCIPLES
In conducting its review of executive compensation matters, the Committee
utilizes the compensation data and advisory services on an independent
compensation consultant. It is the Committee's belief that executive
compensation levels should be commensurate with the performance of the Company.
The Committee maintains an executive compensation program which is highly
incentive oriented in order to achieve this objective. The program is based on
the following principles:
- Executive compensation earned shall be directly linked with shareholder
value creation
- The program shall support the attainment of short and long term business
objectives by rewarding executives for continuous improvement in Earnings
Per Share and shareholder value creation
- Total compensation opportunities shall reflect competitive levels of
compensation when compared to the financial performance and compensation
levels of executives of financial industry companies against which the
Company competes for executive talent in order to ensure ability to
attract and retain executive talent
- Performance related pay shall be a significant component of total
compensation
- The program shall reflect the mission and values of the Company, and
foster a performance-oriented environment where outstanding personal,
business unit and Company performance is encouraged and rewarded
The Committee believes the Company's compensation arrangements consistently
meet these objectives.
COMPENSATION ELEMENTS / USE OF MARKET COMPARISONS
The executive compensation program consists of base salary, Stock Election
Plans, and stock options. A peer group of companies has been used to compare
both the executive total compensation levels and performance of the Company. For
the 1996 and future comparisons, companies were selected for the peer group
because they are in related businesses and are within a reasonable size range
for comparison purposes as measured by market capitalization and assets under
management. Approximately one-half of these companies are included in the NYSE
Financial Index illustrated in the Company Stock Performance Graph.
Target total compensation opportunities are established for each of the
Company's executive officers and are intended to be consistent with the pay
levels of the selected peer group of companies when performance is also
consistent with the peer group. The relationship between pay levels and Company
performance is reviewed by the Committee on a regular basis to ensure target
opportunities are competitive. In performing its assessment, the Committee
considers the position of each element and the total compensation opportunity
relative to market levels and the Company's compensation strategy. Because the
program is highly performance oriented, the ultimate value received by
executives is contingent upon Company performance and the fair market value of
the Company's stock.
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BASE SALARY
The Company's objective is to have a high pay for performance oriented
compensation program. As such, the role of base salary shall be minimized, while
variable elements of compensation are emphasized. Consistent with this
conservative approach to base salary management, executive base salary levels
are targeted at competitive median levels.
The independent consultant's assessment indicated that the base salary
levels paid to the Company's executives in 1996 were at or above median peer
group levels. The Committee determined individual executive officer base salary
increases in 1996 by evaluating the responsibilities of their positions and
their performance, and by reference to the competitive compensation levels
provided by the consultant.
TARSAP / STOCK ELECTION PLAN
Executive officers of the Company do not participate in a typical cash bonus
plan where participants receive cash payments at the conclusion of each fiscal
year based on the achievement of performance objectives. However, executive
officers participate in the Stock Election Plans, which are Time Accelerated
Restricted Stock Plans (TARSAP). These Plans accelerate the vesting of
restricted stock grants based on achievement of annual performance objectives.
The Committee has the authority to select executive officers and other key
management personnel to participate in the Stock Election Plans. These plans
provide for annual cash incentive bonuses based upon the Company's performance
relative to annually established Earnings Per Share (EPS) objectives. Each
participant is permitted to make an election that a portion of the bonus shall
be received in the form of restricted stock in increments of 0%, 25%, 50%, 75%
and 100%. Executive officers are required to receive 100% of the bonus in
restricted stock.
Executive officers who participate in the Stock Election Plan, including all
proxy named executives, received awards of restricted shares of the Company's
Common Stock. The number of shares awarded was dependent upon the executive
officer's position in the Company, the market price of the Company's Common
Stock on the date participation commenced, and the election of the executive
officer to receive his or her bonus in the form of restricted stock. These
awards are indicated under the restricted stock column of the summary
compensation table in the year the shares are granted, not the year in which
they are earned. The reported value of the shares is based on the number of
shares granted multiplied by the price on the grant date.
Grants have been made under two Stock Election Plans, the 1994-1997 Plan,
and the 1998-2000 Plan. Each Stock Election Plan restricted stock grant is
associated with a three year performance period (3.5 years for the 1994-1997
Plan). The value of restricted stock initially granted to executive officers
varies from 30% to 60% of their base pay as of the date of the award for each
year of the associated performance period.
The initial 1994-1997 Plan grants were made in July, 1994. These grants vest
at the end of 10 years. However, vesting of a fraction of the shares granted
will occur at the end of each of the years in the performance period if annually
established objectives are met. The initial 1998-2000 Plan grants were made in
December, 1995. These grants vest at the end of 7 years. Again, a fraction of
the shares will vest at the end of 1998, 1999, and 2000 if annually established
objectives are met. The Compensation Committee approves the goals prior to or
during each plan year.
Under the current provisions of the Plans, in the event the Company achieves
less than 75% of the goal established for each year in the performance period,
no bonuses are payable; if the Company achieves 75% to 84% of that goal,
one-half of the bonuses are payable; and if the Company achieves more than 84%
of that goal, 100% of the bonuses are payable. For each year in the performance
periods, the amount of bonus earned will be used to determine the percentage of
total shares awarded
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subject to accelerated vesting for those executives electing to receive the
bonus in restricted stock. In 1996, 100% of the restricted shares allocated to
executive officers for fiscal 1996 under the 1994-1997 Stock Election Plan
vested based on EPS performance.
The value received by the executive from these grants depends on the
Company's earnings performance and the market price of the Company's Common
Stock. Executive salary levels when grants were made under the Stock Election
Plans significantly influenced the grant amount. Because executive's salaries
have increased since the grant date, and will continue to increase throughout
the performance periods to keep pace with competitive levels, the value of the
Company's Common Stock also needs to increase for the awards to deliver their
intended targeted value relative to base salary.
Contingent and accelerated vesting schedules of the Stock Election Plans
(based upon percentage of goal achieved each year) are in keeping with the
Committee's philosophy that poor performance should not be rewarded and
incentive opportunities should be substantial for performance excellence. The
Stock Election Plans evidence the Committee's belief that executive compensation
should be comprised of both cash and equity-based programs which award
performance based upon Company-specific goals, measured by the earnings
performance of the Company. The Committee also believes that the Stock Election
Plans provide for ownership and retention of the Company's Common Stock by key
executive officers. Finally, because the value of the awards to executive
officers is dependent upon the value of the Company's Common Stock, the desired
direct relationship between officer compensation and enhancement of stockholder
value is achieved.
The Company established its annually oriented incentive compensation plan in
this way because it strongly links the executives to the value of the stock
while establishing a fixed expense which is based on the value of the shares on
the grant date. The Committee believes that this is a more effective way to
provide an annual incentive in a growth oriented Company than a traditional
cash-based plan.
STOCK OPTIONS
The Committee believes that long-term incentives should be related to
improvement in long-term shareholder value creation. In furtherance of this
objective, the Company awards stock options to its executive officers and other
key personnel. Stock options encourage and reward effective management that
result in long-term corporate financial success, as measured by stock price
appreciation. Stock options have value for the executive officers only if the
price of the Company's stock appreciates from the date the stock options are
granted. The Company's 1990 Stock Option Plan permits the granting of both
incentive stock options and non-qualified stock options. Stock option awards are
consistent with the Company's objective to include in total compensation a
long-term equity interest for executive officers, with greater opportunity for
reward if long-term performance is sustained. To encourage a long-term
perspective, options are typically exercisable over a multiple year period and
grants are made at an option price equal to the fair market value of the
Company's Common Stock on the date of grant.
In determining individual executive officer grant levels, the Committee
considers competitive practices, the desired relationship between long-term
incentives and other compensation elements, and each executive officer's level
of responsibility. Options for 385,000 shares were issued to Executive Officers
in 1996. Such options are non-qualified options issued with an exercise price
equal to fair market value on the date of grant.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The Company's Chief Executive Officer is compensated generally in accordance
with the criteria discussed above.
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As detailed under the Certain Employment and Related Agreements section,
Jeffrey C. Mack resigned from the position of Chief Executive Officer,
President, and member of the Board of Directors of the Company on August 26,
1996. Director Warren Kantor served as Acting Chief Executive Officer from the
time of Mr. Mack's effective resignation date through the end of the fiscal
year.
The Committee believes that the total compensation for Mr. Mack was at the
median for comparable companies. Mr. Mack's base salary at time of resignation
of $495,000 had been in effect since December 1995. Mr. Mack will continue to
receive an annual base salary of $495,000 for serving as an employee-consultant
of the Company until August 26, 1998. As a result of the Company achieving the
earnings per share target performance goal established by the Committee for
fiscal 1996, the vesting of 75,000 of the restricted shares awarded to Mr. Mack
in 1994 under the Company' 1994-1997 Stock Election Plan was accelerated. Mr.
Mack's continued participation in the Stock Election Plans is detailed in the
Certain Employment and Related Agreements section. Mr. Mack was not awarded
Company stock options in 1996.
Mr. Kantor received a grant of stock options to purchase 200,000 shares of
the Company's Common stock in connection with his service as Chairman of the
Executive Committee. In addition, Mr. Kantor had the opportunity to receive a
bonus of up to 25,714 shares of the Company's Common Stock. 12,857 of such
shares were awarded on August 26, 1996 and an additional 12,857 were issued on
February 14, 1997 in consideration of additional service provided by Mr. Kantor
to the Company in his capacity as Chairman of the Executive Committee. Mr.
Kantor also received an additional stock option grant of 125,000 shares on
December 18, 1996 pursuant to an agreement between the Board of Directors of the
Company and Mr. Kantor for Mr. Kantor to act as a consultant for the Company.
This equity oriented compensation package provided to Mr. Kantor is highly
performance oriented, as the ultimate value realized is contingent upon the
market value of the Company's Common Stock. Mr. Kantor received no cash
compensation for his services as Acting Chief Executive Officer. See Certain
Employment and Related Agreements Section and the Board of Directors and Its
Committees section.
CORPORATE TAX DEDUCTION ON COMPENSATION IN EXCESS OF $1 MILLION A YEAR
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to public companies for compensation over $1 million
paid to any of the Company's Chief Executive Officer and four other most highly
compensation executive officers. The Committee believes in the pay for
performance philosophy of Section 162(m) and will make an effort to qualify
compensation as performance based whenever possible. However, the Committee
believes that payment of compensation that is not deductible under Section
162(m) may sometimes be in the best interests of the Company, and the Committee
and the Board of Directors may accordingly approve such arrangements in certain
circumstances.
As set forth in Proposal No. 6 regarding the approval of the option granted
to Richard A. Greenwalt, on January 29, 1997, Mr. Greenawalt was granted on
option to purchase up to 1,200,000 shares of the Common Stock of the Company at
an exercise price of $14.87 per share. Such grant was made pursuant to an
Employment Agreement dated as of January 6, 1997 with the Company pursuant to
which he also agreed to accept a base salary at $100,000. Such option grant was
not made contingent upon the approval thereof by the shareholders of the
Company. Because pursuant to Section 162(m) shareholder approval of such option
is a prerequisite to the deductibility of compensation recognized by Mr.
Greenawalt upon the exercise thereof, Mr. Greenawalt and the Company entered
into an agreement dated March 14, 1997 pursuant to which the January 29, 1997
option grant was rescinded and a new option was granted contingent upon the
shareholders' approval thereof. Such new option is for 1,200,000 shares at an
exercise price of $14.87 and vests amounts 400,000 shares on each of January 29,
1998, January 29, 1999 and January 29, 2000. The option terminates January 29,
2007. In the event the shareholders approve the grant of such option, the
deductibility
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disallowance of Section 162(m) will not be applicable thereto. In the event the
shareholders do not approve such contingent option grant to Mr. Greenwalt at the
1997 Annual Meeting, the Company will be required to renegotiate the
compensation package offered to Mr. Greenawalt under his Employment Agreement.
Such renegotiated compensation package may include increased cash compensation
and grants of replacement options at an exercise price equal to the then fair
market value of the Company's Common Stock. Such renegotiated compensation
package may be less advantageous to the Company (including non-deductibility
under Section 162(m)) than the option proposed for approval by the shareholders
under Proposal No. 6.
James L. Davis
Robert J. Cresci
Frederick W. Zuckerman
MEMBERS OF THE COMPENSATION COMMITTEE
COMPANY STOCK PERFORMANCE
The graph below compares the cumulative total shareholder return, assuming
reinvestment of dividends, on $100 invested on January 30, 1992, the date of
closing of the Company's initial public offering, at the initial public offering
price of the Company's Common Stock ($3.00 per share), through December 31, 1996
with the cumulative total return for the same time period on the same amount
invested in the (i) the S & P 500 Index and (ii) the New York Stock Exchange
Financial Index.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
OLYMPIC FINANCIAL LTD S&P 500 NYSE FINANCIAL
<S> <C> <C> <C>
Jan-92 100 100 100
Dec-92 175 107 117
Dec-93 183 114 126
Dec-94 196 113 114
Dec-95 542 151 160
Dec-96 475 181 204
</TABLE>
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CERTAIN TRANSACTIONS
CONSULTING AGREEMENTS WITH WARREN KANTOR
For a description of certain transactions involving Warren Kantor, a
director of the Company, see "Proposal No.1--Election of Directors--The Board of
Directors and its Committees and consulting Agreements with Warren Kantor."
PROPOSAL NO. 2
PROPOSAL TO AMEND THE COMPANY'S RESTATED ARTICLES OF INCORPORATION TO APPROVE
ARTICLES OF AMENDMENT TO AMEND ARTICLE I OF THE RESTATED ARTICLES OF
INCORPORATION TO CHANGE THE NAME OF THE COMPANY FROM OLYMPIC FINANCIAL LTD. TO
ARCADIA FINANCIAL LTD.
BACKGROUND
The Company has entered into an agreement with the U.S. Olympic Committee
dated December 12, 1996, whereby the Company agreed with the U.S. Olympic
Committee to phase out the use of Olympic Financial Ltd. as its corporate name
after June 1, 1997. The U.S. Olympic Committee has federal trademark rights over
the use of the word "Olympic" that give the U.S. Olympic Committee legal
recourse to restrict the Company's use of that name. The Company is presently
using the name Arcadia Financial Ltd. as an assumed name in various states due
to the U.S. Olympic Committee's rights regarding that name in those states and
other state requirements. The Board of Directors has determined that to reduce
the costs and delays associated with selecting and implementing a different name
and for continuity and uniformity of marketing and operations, the Company's
name should be changed to Arcadia Financial Ltd.
PROPOSED ARTICLES OF AMENDMENT TO THE COMPANY'S RESTATED ARTICLES OF
INCORPORATION
The Board of Directors of the Company has approved, subject to shareholder
approval, Articles of Amendment to the Company's Restated Articles of
Incorporation. The Board of Directors is requesting approval by the shareholders
of the Articles of Amendment to the Company's Articles of Incorporation for
amending Article I of the Company's Restated Articles of Incorporation changing
the name of the Company from Olympic Financial Ltd. to Arcadia Financial Ltd.
The Board of Directors of the Company believes in lights of to the December
12, 1996 agreement with the U.S. Olympic Committee, that it is in the Company's
best interest to change the name of the Company prior to June 1, 1997. The Board
of Directors of the Company also believes that it is in the best interest of the
Company to change the name of the Company to Arcadia Financial Ltd.
REQUIRED VOTE
Approval of the Amendments to the Articles of Incorporation requires the
affirmative vote of the holders of a majority of the shares of Common Stock
represented in person or by proxy and entitled to vote at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
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PROPOSAL NO. 3
PROPOSAL TO AMEND THE 1992 DIRECTOR STOCK OPTION PLAN TO INCREASE THE NUMBER OF
OPTIONS TO PURCHASE SHARES GRANTED TO EACH OUTSIDE DIRECTOR EACH YEAR COMMENCING
IN 1997 TO 15,000 SHARES AND TO GRANT A ONE TIME GRANT OF AN ADDITIONAL OPTION
TO PURCHASE 10,000 SHARES TO EACH OUTSIDE DIRECTOR AS OF JANUARY 2, 1997
BACKGROUND AND SUMMARY OF THE PLAN
The 1992 Director Stock Option Plan (the "DSOP") was adopted by the Board of
Directors in January 1992, and approved by the shareholders at the annual
meeting in March 1993. An amendment to increase the number of shares reserved
for issuance under the DSOP to 840,000 shares and to increase the aggregate
number of shares that may be granted to an Outside Director (as defined below)
to 120,000 was adopted by the Board of Directors in March 1995 and approved by
the shareholders at the annual meeting in May 1995. The purpose of the DSOP is
to attract the best available individuals to serve as non-employee directors of
the Company ("Outside Directors") and to encourage their continued service on
the Board of Directors.
The DSOP provides for the automatic grant of options to purchase Common
Stock to Outside Directors according to fixed terms. Under the current DSOP, as
amended by an Amendment adopted by the Board of Directors in December 1995, and
approved by shareholders at the Annual Meeting in May 1996, each Outside
Director automatically receives options to purchase 5,000 shares upon first
becoming an Outside Director and an additional 5,000 shares on each anniversary
of the original grant, up to a maximum of 120,000 shares. (Such automatic grants
are subject to an increase to 15,000 shares pursuant to the proposed amendment.)
Each Outside Director will continue to receive automatic annual grants until the
Outside Director ceases to serve as such, until the DSOP terminates or until the
shares authorized for issuance under the DSOP are exhausted. Under the current
DSOP, each option has a term of ten years and is exercisable not earlier than
the first anniversary of the date of the grant of the option. The exercise price
for each share of Common Stock purchased pursuant to an option will be 100% of
the fair market value of such share on the date of the grant of each option.
No option granted under the DSOP may be transferred other than by will or by
the laws of descent and distribution, and all options are exercisable, during
the lifetime of the Outside Director, only by the Outside Director. Under the
current DSOP, if an optionee ceases to serve as a director or dies while serving
as a director, the option may be exercised at any time within two years
following the date the director ceases to be an Outside Director of the Company
or at any time within two years following the date of death, by the optionee or
his personal representative or heir, as the case may be, but only to the extent
such director had the right to exercise the option at the time such director
ceased to serve as such or at the date of death, as the case may be.
TAX INFORMATION
Under current law the options granted under the DSOP will not constitute
incentive stock options within the meaning of Section 422 of the Code. There is
no taxable income to an Outside Director as a result of the grant of an option
under the DSOP. Upon the exercise of an option under the DSOP, the amount by
which the fair market value of the shares of Common Stock exceeds the option
price will be treated as compensation (ordinary income) received by the Outside
Director. The Company will ordinarily be entitled to a corresponding tax
deduction at the time that the Outside Director recognizes compensation income.
Upon a subsequent sale of the shares so acquired, the Outside Director will
recognize a capital gain or loss equal to the difference between the amount
realized in the sale and the fair market value of the shares on the date of
exercise.
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PROPOSED PLAN AMENDMENTS
The Board of Directors of the Company has approved, subject to shareholder
approval, amendments to the DSOP. The Board of Directors is requesting approval
by the shareholders of amendments to the DSOP providing for (i) an increase in
the number of options to purchase shares of the Company's Common Stock granted
automatically to each Outside Director upon becoming an Outside Director and
each year during which such director remains an Outside Director from 5,000
shares to 15,000 shares commencing in 1997; and (ii) the one time grant on
January 2, 1997 of an option to purchase an additional 10,000 shares to each
Outside Director as of January 2, 1997.
The Board of Directors of the Company believes that stock option grants to
Outside Directors have made a significant contribution to the success of the
Company in attracting, motivating and retaining skilled Outside Directors. As
discussed above, the Company has altered the mix of compensation it provides to
its Outside Directors to include both a cash component and an option-based
component. The amendments proposed by the Board of Directors increase the amount
of long-term or stock based compensation awarded to directors. The Board of
Directors believes that this combination of cash and stock based compensation
will assist the Company in attracting and retaining qualified Outside Directors
and providing such directors with appropriate long term incentives for
performance.
On March 19, 1997, the closing price of a share of the Company's Common
Stock on the New York Stock Exchange was $ .
REQUIRED VOTE
Approval of the amendments to the DSOP requires the affirmative vote of the
holders of a majority of the shares of Common Stock represented in person or by
proxy and entitled to vote at the Annual Meeting. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR THIS PROPOSAL.
PROPOSAL NO. 4
PROPOSAL TO AMEND THE COMPANY'S 1990 STOCK OPTION PLAN TO (1) INCREASE THE
NUMBER OF SHARES RESERVED FOR THE GRANT OF OPTIONS, (2) ALLOW FOR THE EXERCISE
OF EACH OPTION CUMULATIVELY TO THE EXTENT OF 100% OF THE SHARES SUBJECT TO THE
OPTION REGARDLESS OF WHETHER OTHERWISE EXERCISABLE BY THE OPTIONEE IN THE EVENT
OF (I) DEATH OF OPTIONEE OR (II) A CHANGE OF CONTROL OF THE COMPANY, AND (3)
PROVIDE FOR A PER PERSON MAXIMUM ON THE NUMBER OF OPTION SHARES GRANTED
BACKGROUND AND SUMMARY OF THE PLAN
The Board of Directors and shareholders of the Company approved the Olympic
Financial Ltd. 1990 Stock Option Plan (the "Plan") effective January 1991. The
Plan as initially approved provided for the granting of options to designated
associates and non-associates, including consultants of the Company, to purchase
up to a maximum of 2,000,000 shares of Common Stock. Options that qualify as
"incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code of 1986 ("incentive stock options") and options that do not qualify
as such incentive stock options ("nonstatutory options") may be granted under
the Plan. The Plan is administered by the Compensation Committee of the Board of
Directors, which determines the associates, officers, directors and others who
are to receive options, the type of option to be granted, and the number of
shares subject to each option and the exercise price of each option. Options may
not be granted under the Plan after January 17, 2001. Incentive stock options
must be granted at an exercise price not less than the fair market value of the
Common Stock on the dates the options are granted (or, for persons who own more
than 10% of the Company's outstanding voting stock, incentive stock options must
be granted at not
23
<PAGE>
less than 110% of the fair market value on the date of grant). In March 1993,
the shareholders approved an amendment to the Plan permitting the grant of
nonstatutory options at not less than 85% of fair market value. Aside from the
maximum number of shares of Common Stock reserved for issuance under the Plan,
there is currently no minimum or maximum number of shares which may be subject
to options granted under the Plan. However, the aggregate fair market value
(determined as of the time the option is granted) of shares of Common Stock with
respect to which incentive stock options become exercisable for the first time
by an optionee under the Plan during any calendar year may not exceed $100,000.
Options may not be transferred other than by will or the laws of decent and
distribution, and during the lifetime of an optionee may be exercised only by
the optionee. The term of each option, which is fixed by the Compensation
Committee, may not exceed ten years from the date the option is granted (except
that the term may not exceed five years for incentive stock options granted to
persons who own more than 10% of the Company's outstanding voting stock). In May
1995, the shareholders approved an amendment to the Plan providing for the
increase by 1,000,000 shares (to 2,000,000) in the maximum number of shares
which may be issued upon exercise of options granted under the Plan.
Under current law there is no taxable income to a participant as a result of
the grant of an incentive stock option or the exercise of an incentive stock
option if the participant does not dispose of the acquired stock for certain
time periods. However, the difference between the fair market value of the
shares under the option at the time of exercise and the option price will
generate an item of adjustment that could result in an alternative minimum tax
liability for the associate. Upon sale of the shares, the difference between the
sale price and the option price will generally be taxable income. The Company is
not entitled to a federal income tax deduction upon grant or exercise of
incentive stock options.
Under current law, generally, there is no taxable income to a participant as
a result of the grant of a non-statutory stock option. Upon exercise of a
non-statutory stock option, the difference between the exercise price and the
fair market value at the time of exercise will be subject to taxation as
ordinary income. The Company is not entitled to a tax deduction upon grant of a
non-statutory stock option, but is entitled to a tax deduction equal to the
participant's taxable income realized upon exercise of the stock option.
Section 162(m) of the Internal Revenue Code generally provides that a
publicly held corporation will be denied a tax deduction for compensation paid
to its chief executive officer and four most highly compensated executive
officers to the extent such compensation exceeds $1 million per year. However,
certain performance-based compensation is exempt from the deduction limit. In
order to qualify as performance- based, the compensation must be based on
preestablished, objective performance goals, and paid pursuant to a plan or
agreement administrated by a committee comprised solely of two or more outside
directors. In addition, the material terms of the plan or agreement must be
approved by shareholders, and a plan providing for stock options or stock
appreciation rights must contain a per-person maximum on the number of awards
granted. Accordingly, the 1990 Plan needs to be amended to provide for a
per-person maximum on the number of awards granted in order for the Company to
avail itself of all available tax deductions.
PROPOSED PLAN AMENDMENT
The Board of Directors of the Company has approved, subject to shareholder
approval, certain amendments to the Plan. The Board of Directors is requesting
approval by the shareholders of amendments to the Plan providing for (1) an
increase by 3,000,000 (to 5,000,000) in the maximum number of shares which may
be issued upon exercise of options granted under the Plan, (2) all options
granted thereunder to be exercisable cumulatively to the extent of 100% of the
shares subject to the option by the optionee upon the death of the optionee or a
Change of Control (as defined) of the Company and (3) a per person maximum
number of option shares granted.
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On December 31, 1996, there were exercisable options outstanding to purchase
1,899,637 shares under the Plan. Since such date, the Compensation Committee has
granted options to purchase in excess of 100,363 shares under the Plan. Those in
excess of 100,363 were made contingent upon the shareholders approval of the
proposed increase set forth in this Proposal No. 4. Therefore, absent
shareholder approval of the proposed amendment, no shares remain available for
awards under the Plan. The Board of Directors deems it prudent to increase the
number of shares available for grant under the Plan by 3,000,000 shares to
facilitate future option grants and further the purposes of the Plan. At a fair
market value of $ as of March 19, 1997, the market value of the
additional shares which may be reserved under the Plan pursuant to the proposed
amendment was approximately $ .
The Board of Directors deems it prudent and equitable to permit Associates,
Officers, Directors and other who are to receive options to exercise the option
cumulatively to the extent of 100% of the shares subject to the option
regardless of whether otherwise exercisable by the optionee in the event of (1)
the death of the optionee or (2) a Change of Control (as defined) of the
Company. Certain option agreements issued by the Company include provisions
allowing for such acceleration in keeping with the intent of the Plan. The
proposed amendment is intended to clarify the optionees' rights and to
effectuate the intent of the Plan.
The Board is requesting approval by the shareholders for an amendment of
Plan providing that no Eligible Person, who is any employee of the Company at
the time of grant, may be granted any award or awards, the value of which awards
are based solely on an increase in the value of the Shares after the date of
grant of such awards for more than 1,500,000 shares in the aggregate, in any one
calendar year beginning with the period commencing January 1, 1997 and ending
December 31, 1997.
The purposes of the amendment to the Plan are (i) to enable the Company to
continue to provide incentive to key associates of the Company and its
subsidiaries by encouraging them to invest in the Company's stock and thereby
increase their proprietary interest in its business, (ii) to further the
personal commitment of key associates to the Company's success and progress,
(iii) to promote the interests of the Company and its shareholders by enabling
the Company to retain and attract key associates and, (iv) to enable the Company
to avail itself of all tax deductions under the Internal Revenue Code.
On March 19, 1997, the closing price of a share of the Company's Common
Stock on the New York Stock Exchange was $ .
REQUIRED VOTE
Approval of the amendments to the Plan requires the affirmative vote of the
holders of a majority of the shares of Common Stock represented in person or by
proxy and entitled to vote at the Annual Meeting. THE BOARD OF DIRECTORS OF THE
COMPANY RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENTS TO THE PLAN.
PROPOSAL NO. 5
PROPOSAL TO APPROVE
THE GRANTING OF VARIOUS STOCK OPTIONS TO WARREN KANTOR
BACKGROUND
On December 18, 1996 the Board of Directors agreed to retain Mr. Kantor as a
consultant to the Company for fiscal 1997. In exchange for 450 hours of
consulting service, Mr. Kantor received a grant of a nonstatutory option to
purchase 125,000 shares of Common Stock at an exercise price equal to $14.87.
Such options vest on December 31, 1997 the last day of the consulting agreement
and terminate on the tenth anniversay at the date of the grant thereof. On
January 27, 1997 the Board
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determined that more than 450 hours of consulting services would be required by
Mr. Kantor in 1997. In return for a grant of an additional option to purchase
70,160 shares of Common Stock at an exercise price of $14.87, Mr. Kantor agreed
to provide an unlimited number of hours of consulting services in 1997. The
Board of Directors believes that it was in the best interest of the Company to
grant the foregoing options to Mr. Kantor in exchange for his consulting
services to the Company. See the Proposal No. 1 -- Consulting Agreements with
Mr. Kantor section for additional details regarding Mr. Kantor's options.
In the event such option grants are not approved by the shareholders, the
Company will be required to renegotiate the terms of the Consulting Agreement
with Mr. Kantor. The rules of the New York Stock Exchange require that the
shareholders of the Company approve the grants of the options to Mr. Kantor as a
condition to the listing on the Exchange of the shares to be issued upon the
exercise of the options. Renegotiation may result in cash compensation being
paid to Mr. Kantor in lieu of equity based compensation in the form of options.
Mr. Kantor presently receives no cash for the consulting services he provides
pursuant to the Consulting Agreement.
On March 19, 1997, the closing price of a share of the Company's Common
Stock on the New York Stock Exchange was $ .
REQUIRED VOTE
Approval of the grants of options to Mr. Kantor requires the affirmative
vote of the holders of a majority of the shares of Common Stock represented in
person or by proxy and entitled to vote at the Annual Meeting. THE BOARD OF
DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
PROPOSAL NO. 6
PROPOSAL TO APPROVE THE GRANT OF AN OPTION TO PURCHASE 1,200,000 SHARES OF
COMMON STOCK TO RICHARD A. GREENAWALT.
BACKGROUND
As an inducement to join the Company and in connection with his agreement to
join the Company as President and Chief Executive Officer, the Company and
Richard A. Greenawalt entered into an Employment Agreement dated January 6, 1997
(the "Greenawalt Employment Agreement"), which became effective January 29,
1997. Such agreement provided, among other things, that not later than the
effective date, the Company grant to Mr. Greenawalt a ten year option to
purchase 1,200,000 shares of Common Stock at an exercise price of $14.87 per
share. Such option vests in three equal installments on the first three
anniversary dates of the grant, subject to accelerated vesting in the event of
death, Disability (as defined), Termination Without Cause (as defined),
Termination with Good Reason (as defined) or a Change of Control (as defined in
the Option Agreement). The Board of Directors believes that it is in the best
interests of the Company to grant of such option to Mr. Greenawalt as an
inducement for Mr. Greenawalt to join the Company.
Mr. Greenawalt was granted an option to purchase up to 1,200,000 shares of
the Common Stock of the Company at an exercise price of $14.87. Such grant was
made pursuant to an Employment Agreement dated as of January 6, 1997 with the
Company. Such option grant was not made contingent upon the approval thereof by
the shareholders of the Company. Because under Section 162(m) shareholder
approval of such option is a prerequisite to the deductibility of compensation
recognized by Mr. Greenawalt upon the exercise thereof, Mr. Greenawalt and the
Company entered into an agreement dated March 14, 1997 pursuant to which the
January 29, 1997 option grant was rescinded and a new option was granted
contingent upon the shareholders' approval thereof. Such new option is for
1,200,000 shares at an exercise price of $14.87 and vests 400,000 shares on each
of January 29, 1998, January 29, 1999 and January 29, 2000. The option
terminates January 29, 2007. In the event
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the shareholders approve the grant of such option, the deductibility
disallowance of Section 162(m) will not applicable. In the event the
shareholders do not approve such new option grant at the 1997 Annual Meeting,
the Company will be required to renegotiate the compensation package offered to
Mr. Greenawalt under his Employment Agreement. Such renegotiated compensation
package may include increased cash compensation and grants of replacement
options at an exercise price equal to the then fair market value of the
Company's Common Stock. Such renegotiated compensation package may be less
advantageous to the Company (including non-deductibility under Section 162(m))
than the option proposed for approval by the shareholders under this Proposal
No. 6.
REQUIRED VOTE
Approval of the grant of the option to purchase 1,200,000 shares of Common
Stock to Richard A. Greenawalt as an inducement to join the Company and the
qualification of such option under Section 162(m) of the Internal Revenue Code,
requires the affirmative vote of the holders of a majority of the shares of
Common Stock represented in person or by proxy and entitled to vote at the
Annual Meeting. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
PROPOSAL NO. 7
RATIFICATION OF
SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Company's Board of Directors, subject to shareholder approval, has
selected Ernst & Young LLP to serve as independent accountants for the Company's
fiscal year ending December 31, 1997. A representative of Ernst & Young LLP is
expected to be present at the Annual Meeting. The representative will be given
an opportunity to make a statement if he so desires and is expected to be
available to respond to appropriate questions.
VOTING ON THE APPOINTMENT
The approval of the appointment of Ernst & Young LLP as independent
accountants requires the affirmative vote of a majority of votes entitled to be
cast by those present in person or represented by proxy at the Meeting. THE
BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THIS PROPOSAL.
OTHER MATTERS
The Board of Directors knows of no other matters that may be brought before
the meeting which require submission to a vote of the shareholders. If any other
matters are properly brought before the Meeting, however, the persons named in
the enclosed proxy or their substitutes will vote in accordance with their best
judgment on such matters.
SHAREHOLDER PROPOSALS
Shareholders wishing to present proposals for action by the shareholders at
the next annual meeting must present such proposals at the principal offices of
the Company not later than December 12, 1997. Due to the complexity of the
respective rights of the shareholders and the Company in this area, any
shareholder desiring to propose such an action is advised to consult with his or
her legal counsel with respect to such rights. It is suggested that any such
proposals be submitted by certified mail, return receipt requested.
BY ORDER OF THE BOARD OF DIRECTORS
[LOGO]
Richard A. Greenawalt
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PRESIDENT
AND CHIEF EXECUTIVE OFFICER
Dated: March , 1997
Minneapolis, Minnesota
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