<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
MEDALLION FINANCIAL CORP.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT,
IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1)Title of each class of securities to which transaction applies:
(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>
MEDALLION FINANCIAL CORP.
205 EAST 42ND STREET, SUITE 2020
NEW YORK, NY 10017
(212) 682-3300
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 5, 1997
The Annual Meeting of Stockholders of Medallion Financial Corp. (the
"Company") will be held at the Helmsley Hotel, 212 East 42nd Street, New York,
New York on Thursday, June 5, 1997 at 10:00 a.m., Eastern Standard Time, to
consider and act upon the following matters:
1. To elect two directors to serve until the 2000 Annual Meeting of
Stockholders.
2. To ratify and approve the selection by the Board of Directors of
Arthur Andersen LLP as independent public accountants for the Company for
the current fiscal year ending December 31, 1997.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Stockholders of record at the close of business on April 21, 1997 will be
entitled to vote at the meeting or any adjournment thereof.
By Order of the Board of Directors,
Marie Russo, Secretary
New York, New York
April 29, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED VOTER INSTRUCTION CARD AND MAIL IT PROMPTLY IN THE ENCLOSED
ENVELOPE IN ORDER TO ASSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE
AFFIXED IF THE VOTER INSTRUCTION CARD IS MAILED IN THE UNITED STATES.
<PAGE>
MEDALLION FINANCIAL CORP.
205 EAST 42ND STREET, SUITE 2020
NEW YORK, NEW YORK 10017
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
JUNE 5, 1997
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Medallion Financial Corp. (the "Company")
for use at the Annual Meeting of Stockholders to be held on June 5, 1997 (the
"Annual Meeting") and at any adjournment of the Annual Meeting. All shares of
Common Stock will be voted in accordance with the stockholders' instructions.
Any proxy may be revoked by a stockholder at any time before its exercise by
delivery of a written revocation to The First National Bank of Boston, c/o
Boston EquiServe, Shareholder Services Division, P.O. Box 664, Boston,
Massachusetts 02102-0664.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K/A FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1996 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION,
EXCEPT FOR EXHIBITS, IS BEING MAILED TO STOCKHOLDERS WITH THE MAILING OF THIS
NOTICE AND PROXY STATEMENT ON OR ABOUT APRIL 30, 1997.
VOTING SECURITIES AND VOTES REQUIRED
On April 21, 1997, the record date for the determination of stockholders
entitled to notice of and to vote at the Annual Meeting, there were
outstanding and entitled to vote an aggregate of 8,250,000 shares of Common
Stock of the Company, $.01 par value per share (the "Common Stock").
Stockholders are entitled to one vote per share.
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock entitled to vote at the meeting shall be
necessary to constitute a quorum for the transaction of business. Abstentions
and broker non-votes will be considered as present for quorum purposes but
will not be counted as votes cast. Accordingly, abstentions and "broker non-
votes" will have no effect on the voting on a matter that requires the
affirmative vote of a certain percentage or a plurality of the votes cast or
shares voting on a matter.
The affirmative vote of the holders of a plurality of the shares of Common
Stock present or represented at the meeting is required for the election of
directors and the appointment of auditors.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of April 21, 1997, regarding
the ownership of the Company's Common Stock by (i) the only persons known by
the Company to own more than five percent of the outstanding shares, (ii) all
directors and nominees of the Company, (iii) each of the executive officers of
the Company named in the Summary Compensation Table (the "Named Executive
Officers") and (iv) all directors and executive officers of the Company as a
group. The number of shares beneficially owned by each director or executive
officer is determined under rules of the Securities and Exchange Commission
(the "Commission"), and the information is not necessarily indicative of
beneficial ownership for any other purpose. Under such rules, beneficial
ownership includes any shares as to which the individual has the sole or
shared voting power or investment power and also any shares which the
individual has the right to acquire within 60 days of April 21, 1997 through
the exercise of any stock option or other right. Unless otherwise indicated,
each person has sole
<PAGE>
investment and voting power (or shares such power with his or her spouse) with
respect to the shares set forth in the following table. The inclusion herein of
any shares deemed beneficially owned does not constitute an admission of
beneficial ownership of such shares.
<TABLE>
<CAPTION>
SHARES OF COMMON PERCENTAGE OF
STOCK BENEFICIALLY COMMON STOCK
NAME AND ADDRESS OWNED BENEFICIALLY OWNED
---------------- ------------------ ------------------
<S> <C> <C>
Alvin Murstein(1)........................ 1,340,000 16.24%
Chairman, Chief Executive Officer and
Director
205 East 42nd Street, Suite 2020
New York, NY 10017
Andrew Murstein Family Trust(2).......... 1,250,000 15.15
205 East 42nd Street, Suite 2020
New York, NY 10017
Daniel F. Baker(3)....................... 13,636 0.17
Treasurer and Chief Financial Officer
205 East 42nd Street, Suite 2020
New York, NY 10017
Michael Fanger(3)........................ 13,636 0.17
Executive Vice President
205 East 42nd Street, Suite 2020
New York, NY 10017
Michael J. Kowalsky(3)................... 15,152 0.18
Executive Vice President
205 East 42nd Street, Suite 2020
New York, NY 10017
Marie Russo(3)........................... 9,200 0.11
Senior Vice President and Secretary
205 East 42nd Street, Suite 2020
New York, NY 10017
Mario M. Cuomo, Director(3).............. 2,424 0.03
Wilkie, Farr & Gallagher
153 E. 53rd Street
New York, NY 10022
Stanley Kreitman, Director(3)............ 2,424 0.03
Manhattan Associates
375 Park Avenue, Suite 1606
New York, NY 10152
David L. Rudnick, Director(3)............ 2,424 0.03
Century Properties, Inc.
365 West Passaic Street
Rochelle Park, NJ 07662
Benjamin Ward, Director.................. 2,424 0.03
Brooklyn Law School
250 Joralemon
Brooklyn, NY 11201
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
SHARES OF COMMON PERCENTAGE OF
STOCK BENEFICIALLY COMMON STOCK
NAME AND ADDRESS OWNED BENEFICIALLY OWNED
---------------- ------------------ ------------------
<S> <C> <C>
All officers and directors as a group..... 2,651,320 31.90
(10 persons)(4)
Janus Capital Corporation(5).............. 748,300 9.07
100 Fillmore Street
Denver, CO 80206
The Capital Group Companies, Inc.(6)...... 646,500 7.83
333 South Hope Street
Los Angeles, CA 90071
John Hancock Advisers, Inc.(7)............ 503,100 6.09
John Hancock Place
Boston, MA 02117
</TABLE>
- --------
(1) Includes 1,250,000 shares owned by the Alvin Murstein Second Family Trust
of which Alvin Murstein is a trustee and beneficiary.
(2) Andrew Murstein, President and Chief Operating Officer of the Company, is
a trustee and beneficiary of the Andrew Murstein Family Trust.
(3) Consists of shares issuable upon the exercise of outstanding options
exercisable on or before June 20, 1997.
(4) Includes (i) 1,250,000 shares owned by the Andrew Murstein Family Trust,
(ii) 1,250,000 shares owned by the Alvin Murstein Family Trust, (iii)
90,000 shares owned by Alvin Murstein (the Alvin Murstein Family Trust and
Andrew Murstein Family Trust hereinafter referred to collectively as the
"Murstein Family Trusts") and (iv) 61,320 shares issuable upon the
exercise of outstanding options which rest and become exercisable on or
before June 20, 1997.
(5) Janus Capital Corporation ("Janus Capital") beneficially owns shares held
by several affiliated investment management companies that beneficially
own 748,300 shares of Common Stock. One such affiliate, the Janus Venture
Fund, beneficially owns 449,950 shares of Common Stock. Thomas H. Bailey
is President, Chairman and a stockholder of Janus Capital and may also be
deemed to beneficially own all 748,300 shares.
(6) The Capital Group Companies, Inc. beneficially owns shares held by several
affiliated investment management companies that beneficially own 646,500
shares of Common Stock. One such affiliate, The Capital Guardian Trust
Company, beneficially owns 575,000 shares of Common Stock.
(7) John Hancock Advisers, Inc. ("JHA") beneficially owns shares held by
several affiliated investment management companies that beneficially own
503,100 shares of Common Stock. Through their parent or subsidiary
relationship to JHA, John Hancock Mutual Life Insurance Company, John
Hancock Subsidiaries, Inc., John Hancock Asset Management and The Berkeley
Financial Group may also be deemed to beneficially own these shares.
ELECTION OF DIRECTORS
Directors are to be elected at the Annual Meeting. The number of directors
remains fixed at six for the coming year. The Company's Restated Certificate
of Incorporation provides that the Board of Directors is divided into three
classes, each with a term of three years. Only one class of directors stands
for election in any year. Messrs. Kreitman and Rudnick are in the first class
and stand for election at the Annual Meeting; Mr. Cuomo is in the second class
and stands for election in 1998; and Messrs. Alvin Murstein and Ward are in
the
3
<PAGE>
third class and stand for election in 1999. There is currently a vacancy in
the second class of directors. Pursuant to the Company's Restated Certificate
of Incorporation, the Board of Directors may from time to time after the
Annual Meeting appoint an additional director to fill the vacancy and increase
the number of directors. Any newly appointed directors must stand for election
at the next meeting of stockholders.
The Board of Directors has nominated Messrs. Kreitman and Rudnick for
election and recommends that they be elected directors of the Company. The
persons named in the enclosed proxy card, Alvin Murstein and Andrew Murstein,
will vote to elect Messrs. Kreitman and Rudnick as directors of the Company
unless authority to vote for the election of any or all of the nominees is
withheld by marking the proxy card to that effect. Mr. Kreitman and Mr.
Rudnick each presently serves as a director and has consented to being named
in this Proxy Statement and to serve if elected. If for any reason any nominee
should become unavailable for election prior to the Annual Meeting, the person
acting under the proxy may vote the proxy for the election of a substitute. It
is not presently expected that either Mr. Kreitman or Mr. Rudnick, or both,
will be unavailable.
Set forth below are the name, age and length of service as a director for
each member of the Board of Directors and the positions and offices held by
him, his principal occupation and business experience during the past five
years and the names of other publicly-held companies of which he serves as a
director. Information with respect to the number of shares of Common Stock
beneficially owned by each director, directly or indirectly, as of April 21,
1997, appears under "Security Ownership of Certain Beneficial Owners and
Management."
Alvin Murstein is 62 years old and has been Chairman of the Board of
Directors of the Company since its founding in 1995 and has been Chief
Executive Officer of the Company since February 1996. Mr. Murstein has also
been Chairman of the Board of Directors and Chief Executive Officer of
Medallion Funding Corp. ("MFC"), a wholly-owned subsidiary of the Company,
since its founding in 1979 and of Medallion Taxi Media, Inc. ("Media"), a
wholly-owned subsidiary of the Company, since its founding in 1994. Mr.
Murstein has been Chairman of the Board of Directors and Chief Executive
Officer of Edwards Capital Corp. ("Edwards") and Transportation Capital Corp.
("TCC"), also wholly-owned subsidiaries of the Company, since June 1996. He
served as Chairman of the Board of Directors and Chief Executive Officer of
Tri-Magna Corporation ("Tri-Magna") from its founding in 1989 until its
acquisition by the Company in May 1996. Mr. Murstein received a B.A. and an
M.B.A. from New York University and has been an executive in the taxicab
industry for over 40 years. Alvin Murstein is the father of Andrew Murstein.
Mario M. Cuomo is 64 years old and has served as a director of the Company
since February 1996. Mr. Cuomo served as Governor of the State of New York
from January 1983 through 1994. Mr. Cuomo has been a partner in the law firm
of Willkie Farr & Gallagher since February 1995. Willkie Farr & Gallagher
serves as counsel to the Underwriters in connection with this Offering. Mr.
Cuomo received a B.A., summa cum laude, from St. John's University and a J.D.,
magna cum laude, from St. John's University School of Law.
Stanley Kreitman is 65 years old and has served as a director of the Company
since February 1996. Mr. Kreitman serves as Vice Chairman of Manhattan
Associates, an investment banking company. Mr. Kreitman served as a Director
of Tri-Magna from 1991 until May 1996. Mr. Kreitman served as President of the
United States Banknote Corporation, a securities printing company, from 1975
until his retirement in 1994. Mr. Kreitman is Chairman of the Board of
Trustees of the New York Institute of Technology. Mr. Kreitman received an
A.B. from New York University and an M.B.A. from New York University Graduate
School of Business.
David L. Rudnick is 56 years old and has served as a director of the Company
since February 1996. Mr. Rudnick serves as President of Century Properties,
Inc., a national commercial real estate concern. Mr. Rudnick
4
<PAGE>
joined Century Properties, Inc. in 1966. Mr. Rudnick was a director of West
Side Federal Savings & Loan Association. Mr. Rudnick received an A.B. in
economics from Harvard University and an M.B.A. from Columbia University
Graduate School of Business. Mr. Rudnick is Andrew Murstein's father-in-law.
Benjamin Ward is 70 years old and has served as a director of the Company
since February 1996. Mr. Ward served as a Director of Tri-Magna from 1992
until May 1996. Mr. Ward served as Police Commissioner of New York City from
1984 until 1989. Mr. Ward received a B.A. in sociology, magna cum laude, from
Brooklyn College and a J.D. from Brooklyn Law School.
THE BOARD OF DIRECTORS RECOMMENDS THE ELECTION OF MESSRS. KREITMAN AND
RUDNICK.
APPOINTMENT OF AUDITORS
The Board of Directors of the Company has appointed Arthur Andersen LLP,
independent accountants, to audit the Company's consolidated financial
statements for the fiscal year ending December 31, 1997, and recommends that
stockholders vote for ratification of such appointment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF SUCH
APPOINTMENT.
BOARD AND COMMITTEE MEETINGS
The Company has a standing Audit Committee of the Board of Directors, which
reviews the results and scope of the audit and other services provided by the
Company's independent public accountants. The Audit Committee met one time
during fiscal 1996 to review the (i) the effectiveness of the public
accountants during the fiscal 1996 audit, (ii) the adequacy of the fiscal 1996
financial statement disclosures, (iii) the Company's internal control policies
and procedures, and (iv) the selection of the Company's independent public
accountants. The members of the Audit Committee are Messrs. Kreitman, Rudnick
and Ward.
The Company also has a standing Compensation Committee of the Board of
Directors, which it is currently anticipated will make recommendations
concerning compensation of the directors and executive officers of the Company
including (i) all incentive or stock option plans or arrangements established
by the Company for officers and employees, including the grant of stock
options to employees, (ii) adoption and amendment of all employee stock option
and other employee benefit plans and (iii) arrangements and the engagement of,
terms of any employment agreements and arrangements with, and termination of,
all officers of the Company. The Compensation Committee did not meet during
fiscal 1996 because its functions were performed by the entire Board of
Directors during the Company's initial year of operations, and by management
prior to the Company's initial public offering on May 29, 1996. The members of
the Compensation Committee are Messrs. Kreitman, Murstein* and Ward. See
"Report of the Board of Directors as to Compensation Matters."
The Board of Directors does not have a standing nominating committee. The
Board of Directors held five formal meetings during fiscal 1996. Each director
attended at least 75% of the meetings of the Board of Directors and all
committees of the Board on which he served.
- --------
*Mr. Murstein is an "interested person" as such term is defined in Section
2(a)(19) of the Investment Company Act of 1940, as amended (the "1940 Act").
5
<PAGE>
DIRECTORS' COMPENSATION
The non-employee directors of the Company are each paid $10,000 per year for
each year they serve and each receive $2,000 for each meeting of the Board of
Directors that they attend and $1,000 for every meeting of a committee of the
Board of Directors that they attend. Directors who are not employees, officers
or interested persons of the Company ("Non-interested Directors") are entitled
to participate in the Company's 1996 Non-interested Directors' Stock Option
Plan (the "Directors Plan") which is administered by the directors who are not
eligible to participate in such Plan. The Director Plan, which provides for
the automatic grant of options to directors of the Company who are not
employees, officers or interested persons of the Company. In accordance with
the provisions of the 1940 Act, the automatic grant of options under the
Director Plan did not occur until after the date of the approval of such Plan
by the Commission. The Commission approved the Director Plan on December 23,
1996 (the "Approval Date"). The Company intends to amend the Director Plan and
seek an amendment of the order it received from the Commission approving such
Plan to include directors who are "interested persons" for purposes of the
1940 Act so long as they are not employees or officers of the Company.
Employee directors of the Company are eligible to participate in the
Company's 401(k) Investment Plan. More information concerning the Company's
401(k) Investment Plan can be found under "Report of the Board of Directors as
to Compensation Matters." The Company does not provide any other pension or
retirement plan with respect to its directors or employees.
Information with respect to the aggregate compensation paid to directors of
the Company, including options to purchase shares of the Company's Common
Stock under the Director Plan, appears under "Compensation of Directors and
Executive Officers."
CERTAIN TRANSACTIONS
Approximately $13.4 million of the net proceeds from the Company's initial
public offering were used by the Company to acquire Tri-Magna. Of this amount,
approximately $1.7 million, representing 12.7% of the Tri-Magna purchase
price, was paid to certain stockholders of Tri-Magna who are officers,
directors or 5.0% stockholders of the Company as follows: Alvin Murstein--$1.4
million; Andrew Murstein--$105,000; Marie Russo--$24,000; Michael Fanger--
$92,660; Stanley Kreitman--$10,000 and Benjamin Ward--$10,000. Alvin Murstein
used all of the net proceeds from his sale of Tri-Magna common stock to the
Company to purchase shares of Common Stock of the Company at the initial
public offering price per share of $11.00. In addition, approximately $2.5
million, representing 18.7% of the Tri-Magna purchase price was paid to
certain stockholders of Tri-Magna who were also directors and officers of Tri-
Magna as follows: Myron Cohen--$652,000; Robert Fanger--$686,000; Richard
Giesser--$253,000; Barnet Lieberman--$212,000; Michael Miller--$663,980 and T.
Lincoln Morison, Jr.--$10,000. Messrs. Cohen, Fanger, Giesser, Lieberman,
Miller and Morison did not become officers, directors or 5.0% stockholders of
the Company. As discussed in the following paragraph, Messrs. Cohen, Fanger
and Miller are officers, directors and stockholders of the Company's
investment adviser, FMC Advisers, Inc. ("FMC").
In May 1996, the Company and FMC entered into a Sub-Advisory Agreement
pursuant to which the Company retains FMC to serve as its investment adviser
and to consult with management in the review and refinement of the Company's
strategies. Under the Sub-Advisory Agreement, the Company pays FMC monthly in
arrears, as compensation for the services rendered by FMC, a fee of $18,750.
Myron Cohen, Robert Fanger and Michael Miller control FMC. They had served as
directors and executive officers of Tri-Magna and MFC since inception and,
along with Alvin Murstein, comprised Tri-Magna's Executive Committee. Messrs.
Cohen,
6
<PAGE>
Fanger and Miller ceased to hold their offices with Tri-Magna and MFC when
these businesses were acquired by the Company in May 1996. Subject to certain
limitations, the Murstein Trusts have agreed to maintain in escrow Common
Stock worth 200% of the advisory fees payable by the Company under the Sub-
Advisory Agreement during the first 48 months of service, thereby assuring FMC
of the payment of $900,000 in advisory fees. In the event that the Company or
its stockholders terminate or do not renew the Sub-Advisory Agreement during
this period for any reason other than (i) breach of the Sub-Advisory Agreement
by FMC or (ii) FMC's willful malfeasance, bad faith or gross negligence, the
escrow agent will assign to FMC Common Stock in escrow equal in value to the
amount of the fees payable over the balance of the 48-month period. If the
value of the Common Stock required to be deposited in escrow is less than the
value of the fees payable, FMC will have no further recourse against the
Murstein Trusts.
Mario M. Cuomo is a director of the Company and a partner in the law firm of
Willkie Farr & Gallagher which served as counsel to the underwriters in
connection with the Company's initial public offering and now serves as
counsel to the underwriters in connection with the Company's pending follow-on
public offering.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Summary Compensation Table. The table below sets forth certain compensation
information for the Company's (i) Chief Executive Officer, (ii) directors and
(iii) each of the Company's four most highly compensated executive officers
other than the Company's Chief Executive Officer, for the period from May 30,
1996 (inception) through December 31, 1996 (the "Period") (collectively, the
"Compensated Persons").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
COMPENSATION FOR THE PERIOD AWARDS
---------------------------------- ------------
SECURITIES
OTHER PERIOD UNDERLYING
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) COMPENSATION($) OPTIONS(#)
--------------------------- --------- -------- --------------- ------------
<S> <C> <C> <C> <C>
Alvin Murstein................. $151,667 -- -- --
Chairman and Chief Executive
Officer
Andrew Murstein................ 90,417 -- -- --
President and Chief Operating
Officer
Daniel F. Baker................ 75,833 $45,000 -- 68,182
Treasurer and Chief Financial
Officer
Michael Fanger................. 84,583 15,000 -- 68,182
Executive Vice President
Michael J. Kowalsky............ 87,500 -- -- 45,456
Executive Vice President
</TABLE>
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION(1)
---------------
SECURITIES
UNDERLYING
DIRECTOR'S FEES($) OPTIONS(#)
------------------ ---------------
<S> <C> <C>
Mario M. Cuomo, Director..................... $9,500 4,848(2)
Stanley Kreitman, Director................... 9,500 2,424(3)
David L. Rudnick, Director................... 9,500 2,424(3)
Benjamin Ward, Director...................... 9,500 7,272(4)
</TABLE>
7
<PAGE>
- --------
(1) Options granted under the Director Plan.
(2) These shares vest in two equal installments of 2,424 shares on the date of
the Annual Meeting and the 1998 annual meeting of the Company's
stockholders, respectively.
(3) These shares vest on the date of the Annual Meeting.
(4) These shares vest in three equal installments of 2,424 shares on the date
of the Annual Meeting and the date of the 1998 and 1999 annual meetings of
the Company's stockholders, respectively.
The following table sets forth certain information regarding options granted
during the Period by the Company to the following Named Executive Officers:
OPTION GRANTS
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(2)
--------------------------------------------- -----------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL
UNDERLYING OPTIONS EXERCISE OR
OPTIONS GRANTED TO BASE PRICE EXPIRATION
NAME GRANTED(#) EMPLOYEES ($/SHARE)(1) DATE 5%($) 10%($)
---- ---------- ---------- ------------ ---------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
Alvin Murstein.......... -- -- -- -- -- --
Andrew Murstein......... -- -- -- -- -- --
Daniel F. Baker......... 68,182(3) 33.85% $11.00 5/22/06 $ 471,672 $ 1,195,310
Michael Fanger.......... 68,182(3) 33.85 11.00 5/22/06 471,672 1,195,310
Michael J. Kowalsky..... 45,456(4) 22.57 11.00 5/22/06 314,457 796,897
</TABLE>
- --------
(1) The exercise price of these options is equal to the fair market value of
the Company's Common Stock on the date of grant, as determined by the
Company's Board of Directors.
(2) The dollar amounts under these columns are the result of calculations at
the 5% and 10% rates set by the Commission and, therefore, are not
intended to forecast possible future appreciation, if any, in the price of
the underlying Common Stock. No gain to the optionees is possible without
an increase in price of the underlying Common Stock, which will benefit
all stockholders proportionately.
(3) Options granted under the Company's 1996 Stock Option Plan (the "1996
Plan"). These shares vest in five equal annual installments beginning May
22, 1997.
(4) Options granted under the 1996 Plan. These shares vest in twelve equal
quarterly installments beginning August 22, 1996.
8
<PAGE>
The following table sets forth certain information concerning exercisable
and unexercisable stock options held by the following Named Executive Officers
in the Period:
AGGREGATED OPTION EXERCISES IN THE PERIOD AND YEAR-END OPTION VALUES(1)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTION AT
YEAR-END YEAR-END(2)
----------------------------------- -------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C>
Alvin Murstein.......... -- -- -- --
Andrew Murstein......... -- -- -- --
Daniel F. Baker......... -- 68,182 -- $289,774
Michael Fanger.......... -- 68,182 -- 289,774
Michael J. Kowalsky..... 7,576 37,880 $32,198 160,990
</TABLE>
- --------
(1) No options were exercised during the Period by the Named Executive
Officers.
(2) Based on the difference between closing price of the underlying shares of
Common Stock on December 31, 1996 as reported by the Nasdaq National
Market ($15.25) and the option exercise price ($11.00).
EMPLOYMENT AGREEMENTS
In May 1996, Alvin Murstein and Andrew Murstein entered into employment
agreements with the Company. The agreements automatically renew annually for a
five-year term unless either party terminates the agreement. The agreements
contain non-competition covenants in favor of the Company. Michael J. Kowalsky
has entered into an employment agreement with the Company which became
effective in May 1996. This agreement includes a three-year term and contains
non-competition covenants in favor of the Company.
REPORT OF THE BOARD OF DIRECTORS AS TO COMPENSATION MATTERS
Prior to the Company's initial public offering on May 29, 1996, the
Company's executive compensation arrangements were administered by management.
During the initial period of the Company's operations from May 29 through
December 31, 1996, the Company's compensation program has been administered by
the full Board of Directors. The Board of Directors of the Company has
delegated the authority to establish compensation policies with respect to the
Company's executive officers to the Compensation Committee of the Company's
Board of Directors and the Company anticipates that this program will be
administered by the Compensation Committee in the near future.
The objectives of the Company's executive compensation program are to
establish compensation levels designed to enable the Company to attract,
retain and reward executive officers who contribute to the long-term success
of the Company so as to enhance stockholder value. The Board of Directors or
the Compensation Committee, as appropriate, will make decisions each year
regarding executive compensation, including annual base salaries, bonus awards
and stock option grants. Option grants are key components of the executive
compensation program and are intended to provide executives with an equity
interest in the Company so as to link a meaningful portion of the compensation
of the Company's executives with the performance of the Company's Common
Stock. This report is submitted by the full Board of Directors and addresses
the
9
<PAGE>
compensation policies for fiscal 1996 as they affected Alvin Murstein, in his
capacity as the Chief Executive Officer of the Company, as well as each of the
Company's other officers.
Compensation Philosophy
The Company's executive compensation philosophy is based on the belief that
competitive compensation is essential to attract, motivate and retain highly
qualified and industrious employees. The Company's policy is to provide total
compensation that is competitive for comparable work and comparable corporate
performance. The compensation program includes both motivational and
retention-related compensation components. Bonuses are included to encourage
effective performance relative to current plans and objectives. Stock options
are included to help retain productive people and to more closely align their
interests with those of stockholders.
In executing its compensation policy, the Company seeks to relate
compensation with the Company's financial performance and business objectives,
reward high levels of individual performance and tie a significant portion of
total executive compensation to both the annual and long term performance of
the Company. While compensation survey data are useful guides for comparative
purposes, the Company believes that a successful compensation program also
requires the application of judgment and subjective determinations of
individual performance, and to that extent the Board of Directors applies
judgment in reconciling the program's objectives with the realities of
retaining valued employees.
Executive Compensation Program
Annual compensation for the Company's executives consists of three principal
elements: base salary, cash bonus and stock options.
Base Salary and Cash Bonus
In setting the annual base salaries for the Company's executives, the Board
of Directors reviews the aggregate salary and bonus compensation for
individuals in comparable positions with other companies, including
competitors of the Company, and adjusts such amounts to reflect individual
performance. Many of these companies are specialty finance companies. The
Company also regularly compares the salary levels of its executive officers
with other leading companies.
Increases in annual base salary are based on a review and evaluation of the
performance of the activity for which the executive has responsibility, the
impact of that activity on the Company and the skills and experience required
for the job, coupled with a comparison of these elements with similar elements
for other executives both inside and outside the Company.
Cash bonuses are tied directly to the Company's financial performance and
the contribution of the executive to such performance.
Equity Ownership
Executive officer compensation also includes long-term incentives afforded
by options to purchase shares of Common Stock. The purposes of the Company's
stock ownership program are to (i) highlight and reinforce the mutuality of
long-term interests between employees and the stockholders and (ii) to assist
in the attraction and retention of critically important key executives,
managers and individual contributors who are essential to the Company's growth
and development.
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The Company's stock programs include long vesting periods to optimize the
retention value of these options and to orient the Company's executive
officers to longer term success. Generally, stock options vest in equal annual
installments over three to five years commencing on the first anniversary of
the date of grant, and, if employees leave the Company before these vesting
periods, they forfeit the unvested portions of these awards. The Company also
makes annual grants of options which vest in one year.
Except for executives with substantial holdings of the Company's stock, the
number of shares of Common Stock subject to option grants is generally
intended to reflect the significance of the executive's current and
anticipated contributions to the Company. The exercise price of options
granted by the Company is required under the 1940 Act to equal not less than
100% of the fair market value per share on the date of grant. Prior to
determining the 1996 option grants to the Company's executives, the Board of
Directors considered the equity compensation policies of competitors and other
companies, both privately held and publicly traded, with comparable
capitalizations. The value realizable from exercisable options is dependent
upon the extent to which the Company's performance is reflected in the price
of the Company's Common Stock at any particular point in time. However, the
decision as to whether such value will be realized through the exercise of an
option in any particular year is primarily determined by each individual
within the limits of the vesting schedule and not by the Board of Directors.
401(k) Plan
In 1996, the Company became a participating employer in the Medallion
Funding Corp. 401(k) Investment Plan (the "401(k) Plan") which covers all full
and part-time employees of the Company who have attained the age of 21 and
have a minimum of one-half year of service. Under the 401(k) Plan, an employee
may elect to defer not less than 1.0% and no more than 15.0% of the total
annual compensation that would otherwise be paid to the employee, provided,
however, that employees' contributions may not exceed certain maximum amounts
determined under Section 402(g) of the Internal Revenue Code of 1986, as
amended (the "Code"). Employee contributions are invested in various mutual
funds, according to the direction of the employee. At this time, employee
contributions are not matched by the Company, but they may be in the future.
ALVIN MURSTEIN'S 1996 COMPENSATION
The Board of Directors has set Alvin Murstein's total annual compensation at
a level it believes to be competitive with the chief executive officers of
similarly capitalized specialty finance companies. Alvin Murstein, in his
capacity as Chief Executive Officer, is eligible to participate in the same
executive compensation program available to the Company's other senior
executives.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Code, enacted in 1993, generally disallows a tax
deduction to public companies for compensation over $1 million paid to its
chief executive officer and its four other most highly compensated executive
officers. However, qualifying performance-based compensation will not be
subject to the deduction limit if certain requirements are met. The Company
currently intends to structure its stock options grants to executive officers
in a manner that complies with these performance-based requirements.
11
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BOARD OF DIRECTORS
Alvin Murstein
Mario M. Cuomo
Stanley Kreitman
David L. Rudnick
Benjamin Ward
COMPENSATION COMMITTEE AND INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are Messrs. Murstein, Kreitman and
Ward. Mr. Murstein, Chairman and Chief Executive Officer of the Company, is a
member of the Compensation Committee and is an "interested person" as such term
is defined in Section 2(a)(19) of the 1940 Act. Additional information
concerning certain transactions between Alvin Murstein and the Company appears
above under the section "Certain Transactions."
STOCK PERFORMANCE GRAPH
The following graph compares cumulative total stockholder return on the
Company's Common Stock since May 23, 1996, the date of the Company's initial
public offering, with the cumulative total return for the Nasdaq (U.S.) Index
and the Nasdaq Financial Index. This graph assumes the investment of $100 on
May 23, 1996 in the Company's Common Stock, the Nasdaq (U.S.) Index and the
Nasdaq Financial Index and assumes dividends are reinvested.
[GRAPH APPEARS HERE]
CUMULATIVE TOTAL RETURN
BASED ON REINVESTMENT OF $100 BEGINNING MAY 23, 1996
<TABLE>
<CAPTION>
23-MAY-96 JUN-96 SEP-96 DEC-96
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Medallion Financial Corp /1/ $100 $114 $132 $143
- -------------------------------------------------------------------------------------------
Nasdaq (US) Index /2/ $100 $108 $112 $118
- -------------------------------------------------------------------------------------------
Nasdaq Financial Index /2/ $100 $102 $111 $123
- -------------------------------------------------------------------------------------------
</TABLE>
/1/ The cumulative total return for Medallion Financial Corp. is based upon the
company's initial public offering price of $11.00 on May 23, 1996.
/2/ The cumulative total returns for the Nasdaq (U.S.) Index and the Nasdaq
Financial Index commence May 31, 1996.
12
<PAGE>
OTHER INFORMATION
ACCOUNTING MATTERS
The Board of Directors has selected the independent accounting firm of
Arthur Andersen LLP to audit the accounts of the Company for the year ended
December 31, 1997.
Representatives of Arthur Andersen LLP are expected to be present at the
Annual Meeting. They will have the opportunity to make a statement if they
desire to do so and will also be available to respond to appropriate questions
from stockholders.
OTHER MATTERS
Management does not know of any other matters which may come before the
meeting. However, if any other matters are properly presented to the meeting,
it is the intention of persons named in the accompanying proxy to vote, or
otherwise act, in accordance with their judgment on such matters.
All costs of solicitations of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's directors, officers and
regular employees, without additional remuneration, may solicit proxies by
telephone, telegraph and personal interviews. Brokers, custodians and
fiduciaries will be requested to forward proxy soliciting material to the
owners of stock held in their names, and the Company will reimburse them for
their out-of-pocket expenses in this connection.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 and the disclosure
requirements of Item 405 of Regulation S-K require the directors and executive
officers of the Company, and any persons holding more than 10% of any class of
equity securities of the Company, to report their ownership of such equity
securities and any subsequent changes in that ownership to the Securities and
Exchange Commission, the Nasdaq National Market and the Company. Based solely
on a review of the written statements and copies of such reports furnished to
the Company by its executive officers, directors and greater than 10%
beneficial owners, the Company believes that during fiscal 1995 all Section
16(a) filing requirements applicable to its executive officers, directors and
stockholders were timely satisfied, except that (i) one report relating to a
single transaction by Marie Russo, Senior Vice President and Secretary of the
Company and (ii) four reports relating to options granted under the Director
Plan on December 23, 1996 to each of Mario M. Cuomo, Stanley Kreitman, David
L. Rudnick and Benjamin Ward were not timely filed.
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 1998 Annual
Meeting of Stockholders must be received by the Company at its principal
office in New York, New York not later than December 29, 1997 for inclusion in
the proxy statement for that meeting.
By Order of the Board of Directors,
Marie Russo, Secretary
April 29, 1997
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY OR VOTING INSTRUCTION CARD IN THE ACCOMPANYING
ENVELOPE. PROMPT RESPONSE WILL GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING
AND YOUR COOPERATION WILL BE APPRECIATED.
13
<PAGE>
MEDALLION FINANCIAL CORP.
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 5, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE
COMPANY AND SHOULD BE RETURNED AS SOON AS POSSIBLE TO THE FIRST
NATIONAL BANK OF BOSTON, C/O BOSTON EQUISERVE, SHAREHOLDER SERVICES
DIVISION, P.O. BOX 664, BOSTON, MASSACHUSETTS 02102-0664.
The undersigned, having received notice of the meeting and management's proxy
statement therefor, and revoking all prior proxies, hereby appoint(s) Alvin
Murstein and Andrew Murstein, and each of them, attorneys or attorney of the
undersigned (with full power of substitution in them and each of them) for and
in the name(s) of the undersigned to attend the Annual Meeting of Stockholders
of MEDALLION FINANCIAL CORP. (the "Company") to be held at the Helmsley Hotel,
212 East 42nd Street, New York, New York on Thursday, June 5, 1997 at 10:00
a.m., Eastern Standard Time, and any adjourned sessions thereof, and there to
vote and act upon the following matters in respect of all shares of stock of the
Company which the undersigned will be entitled to vote or act upon, with all the
powers the undersigned would possess if personally present.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
The proxy when properly executed will be voted in the manner directed herein
by the undersigned stockholder. THE SHARES REPRESENTED BY THIS PROXY WILL BE
VOTED AS DIRECTED BY THE UNDERSIGNED. IF NO DIRECTION IS GIVEN WITH RESPECT TO
ANY PROPOSAL, THIS PROXY WILL BE VOTED FOR SUCH PROPOSAL. Attendance of the
undersigned at the meeting or at any adjournment thereof will not be deemed to
revoke this proxy unless the undersigned shall revoke this proxy in writing.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE URGED
TO COMPLETE, DATE, SIGN AND RETURN THIS PROXY IN THE ACCOMPANYING
ENVELOPE.
1. To elect the following Directors (except as marked below):
Stanley Kreitman
David L. Rudnick
[_] FOR all nominees [_] AGAINST
(except as marked below) all nominees
<PAGE>
(Instruction: To vote against an individual nominee, write the name of such
nominee(s) in the space provided below)
2. To ratify and approve the selection by the Board of Directors of Arthur
Andersen LLP as independent public accountants for the Company for the
current fiscal year ending December 31, 1997.
[_] FOR [_] AGAINST [_] ABSTAIN
3. To transact such other business as may properly come before the meeting or
any adjournment thereof.
[_] FOR [_] AGAINST [_] ABSTAIN
MARK HERE MARK HERE
FOR ADDRESS [_] IF YOU PLAN [_]
CHANGE AND TO ATTEND
NOTE AT LEFT THE MEETING
Dated: ______________________, 1997
___________________________________
Signature
___________________________________
Signature if held jointly
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. WHEN SHARES ARE HELD BY JOINT
OWNERS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A CORPORATION, PLEASE
SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
