<PAGE>
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
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
THE UNION CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing the
Information Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(j)(2) or
Item 22(a)(2) of Schedule 14A
/ / $500 per each party to the controversy pursuant to Exchange Act Rules
14a-6(i)(3)
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11
1) Title of each class of securities to which transaction applies:
N/A
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
N/A
------------------------------------------------------------------------
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):
N/A
------------------------------------------------------------------------
<PAGE>
4) Proposed maximum aggregate value of transaction:
N/A
------------------------------------------------------------------------
5) Total fee paid:
N/A
------------------------------------------------------------------------
/ / 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:
N/A
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
N/A
------------------------------------------------------------------------
3) Filing Party:
N/A
------------------------------------------------------------------------
4) Date Filed:
N/A
------------------------------------------------------------------------
<PAGE>
T H E U N I O N C O R P O R A T I O N
145 MASON STREET
GREENWICH, CONNECTICUT 06830
------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 16, 1995
------------------------------
To the Stockholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Stockholders of The
Union Corporation (the "Company") will be held on November 16, 1995 at 10:00
a.m. Eastern Standard Time in the Harmonie Room of the Harmonie Club, Second
Floor, 4 East 60th Street, New York, New York for the following purposes:
1. To elect three members to the Board of Directors to serve until the
expiration of their respective terms of office and until their successors are
duly elected and qualified; and
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed September 25, 1995 as the record date for
the determination of the stockholders entitled to notice of and to vote at such
meeting or any adjournment thereof, and only stockholders of record at the close
of business on that date are entitled to notice of and to vote at such meeting.
A COPY OF THE COMPANY'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30,
1995 IS ENCLOSED HEREWITH.
You are cordially invited to attend the meeting. Whether or not you plan
to attend, you are urged to complete, date and sign the enclosed proxy and
return it promptly. If you receive more than one form of proxy, it is an
indication that your shares are registered in more than one account, and each
such proxy must be completed and returned if you wish to vote all of your shares
eligible to be voted at the meeting.
By Order of the Board of Directors,
Nicholas P. Gill, Secretary
Dated: Greenwich, Connecticut
October 12, 1995
YOUR VOTE IS IMPORTANT.
TO ENSURE A QUORUM, PLEASE COMPLETE AND RETURN THE PROXY IN THE
ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. IF YOU ATTEND THE MEETING, YOUR PROXY WILL BE RETURNED TO YOU
UPON REQUEST TO THE SECRETARY OF THE MEETING.
<PAGE>
T H E U N I O N C O R P O R A T I O N
145 MASON STREET
GREENWICH, CONNECTICUT 06830
------------------------------
P R O X Y S T A T E M E N T
------------------------------
The enclosed proxy is solicited on behalf of the Board of Directors of The
Union Corporation (the "Company") pursuant to this proxy statement (to be mailed
on or about October 12, 1995) for use at the Annual Meeting of Stockholders to
be held at the time and place shown in the attached notice of annual meeting.
Shares represented by properly executed proxies, if returned in time, will be
voted at the meeting as specified or, if not otherwise specified, in favor of
the election as directors of the nominees named herein. Such proxies are
revocable at any time before they are exercised by written notice to the
Secretary of the Company or by your requesting the return of the proxy at the
annual meeting. Any later dated proxies would revoke proxies submitted earlier.
RECORD DATE
The record date for the determination of holders of common stock, par value
$.50 per share, of the Company ("Common Stock") who are entitled to notice of
and to vote at the annual meeting is September 25, 1995.
VOTING SECURITIES
As of September 25, 1995, 5,580,617 shares of Common Stock of the Company
were outstanding. Holders of record of Common Stock as of such date will be
entitled to one vote for each share held. A majority of all shares of Common
Stock issued, outstanding and entitled to vote at the meeting, present in person
or represented by proxy, shall constitute a quorum. Abstentions and broker non-
votes are considered present for purposes of determining whether the quorum
requirement is met. A broker non-vote occurs when a nominee holds shares for a
beneficial owner but cannot vote on a proposal because the nominee does not have
discretionary voting power and has not received instructions from the beneficial
owner as to how to vote the shares. Brokers which are members of the New York
Stock Exchange are permitted to vote their clients' proxies in their own
discretion as to the election of directors if the clients have not furnished
voting instructions within ten days of the meeting.
The election of directors shall be determined by a plurality of the voting
power present in person or represented by proxy at the meeting and entitled to
vote. Only shares that are voted in favor of a particular nominee will be
counted towards such nominee's achievement of a plurality. Shares present at
the meeting that are not voted for a particular nominee and shares present by
proxy where the shareholder properly withholds authority to vote for such
nominee will not be counted towards such nominee's achievement of a plurality.
Broker non-votes are not considered "shares present" for voting purposes and
have no impact on the outcome of the proposal.
<PAGE>
To the knowledge of the Board of Directors, the only persons who
beneficially owned more than 5% of the voting securities of the Company, as of
the record date, are named below:
<TABLE>
<CAPTION>
NUMBER AND PERCENTAGE OF
SHARES BENEFICIALLY OWNED
--------------------------
PERCENT OF
NAME OF BENEFICIAL OWNER COMMON STOCK CLASS(1)
- ------------------------ ------------ ----------
<S> <C> <C>
Southeastern Asset Management, Inc. 1,212,200(2) 21.7%
6075 Poplar Avenue, Suite 900
Memphis, Tennessee 38119
Schwerin Boyle Capital Management, Inc. 723,960(3) 13.0%
1391 Main Street
Springfield, Massachusetts 01103
Quest Advisory Corp. 542,700(4) 9.7%
1414 Avenue of the Americas
New York, New York 10019
G. T. Capital Management, Inc. 388,200(5) 7.0%
50 California Street, 27th Floor
San Francisco, California 94111
Janus Venture Fund, Inc. 349,400(6) 6.3%
100 Fillmore Street, Suite 300
Denver, Colorado 80206-4923
Dimensional Fund Advisors, Inc. 317,600(7) 5.7%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
College Retirement Equities Fund 306,800(8) 5.5%
730 Third Avenue
New York, New York 10017
John D. Weil 288,500(9) 5.2%
200 N. Broadway, Suite 825
St. Louis, Missouri 63102
<FN>
- ---------------
(1) Based on 5,580,617 shares issued and outstanding on the record date.
(2) According to Amendment No. 6 to Schedule 13G, dated January 31, 1995, filed
with the Securities and Exchange Commission ("SEC") by Southeastern Asset
Management, Inc. ("Southeastern"), O. Mason Hawkins, the Chairman of the
Board and Chief Executive Officer of Southeastern, Longleaf Partners Fund
(formerly Southeastern Asset Management Value Trust)("Longleaf Fund") and
Longleaf Partners Small-Cap Fund (formerly Southeastern Asset Management
Small-Cap Fund) ("Longleaf Small-Cap Fund"), (i) Southeastern has sole
power to vote and dispose of 630,000 shares, shares power to vote and
dispose of 579,200 shares and
-2-
<PAGE>
possesses no power to vote or dispose of 3,000 shares, (ii) Longleaf
Fund shares power to vote or dispose of 279,200 shares but does not have
the sole power to vote or dispose of any shares and (iii) Longleaf Small-
Cap Fund shares power to vote and dispose of 300,000 shares but does not
have the sole power to vote or dispose of any shares. The Amendment
further states that, with respect to shares as to which Southeastern shares
voting and dispositive powers, certain of such shares are owned by Longleaf
Fund, certain of such shares are owned by Longleaf Small-Cap Fund and
certain of such shares are owned by two series of Longleaf Partners Fund
Trust (formerly Southeastern Asset Management Funds Trust), an open-end
management investment company. Mr. Hawkins, as Chairman of the Board and
Chief Executive Officer of Southeastern, may be deemed to have the ability
to exert control over Southeastern. Mr. Hawkins disclaims beneficial
ownership of the Company's shares held by Southeastern.
(3) According to Amendment No. 2 to Schedule 13G, dated February 6, 1995, filed
with the SEC by Schwerin Boyle Capital Management, Inc. ("Schwerin Boyle"),
Schwerin Boyle has sole power to dispose of 683,960 shares and shares power
to dispose of 40,000 shares, but possesses no voting power with respect to
such shares.
(4) According to Amendment No. 1 to Schedule 13G, dated February 10, 1995,
filed with the SEC by Quest Advisory Corp., Quest Management Company and
Charles M. Royce, as a group, Quest Advisory Corp. has sole power to vote
and dispose of 542,700 shares and Quest Management Company has sole power
to vote and dispose of an additional 18,300 shares. The Schedule also
reports that Charles M. Royce may be deemed to be the controlling person of
both entities. In such event, he would be in a position to direct the vote
or disposition of an aggregate of 561,000 shares, or 10.05%, of the
Company's Common Stock.
(5) According to Schedule 13G, dated February 15, 1991, filed with the SEC,
G.T. Capital Management, Inc. has sole power to dispose of such shares but
possesses no voting power with respect to such shares.
(6) According to Amendment No. 3 to Schedule 13G of Janus Venture Fund, Inc.
("Janus Venture"), dated August 6, 1992, and Amendment No. 3 to Schedule
13G of Janus Capital Corporation ("Janus Capital"), Kansas City Southern
Industries, Inc. ("KCSI") and Thomas H. Bailey, dated August 6, 1992, each
of which was filed with the SEC, Janus Venture has sole power to vote and
dispose of such shares and the remaining parties may be deemed to have the
power to direct the exercise of such voting or dispositive power by Janus
Venture. As a result of its role as investment adviser to Janus Venture,
Janus Capital may be deemed to be the beneficial owner of the shares of the
Company's Common Stock held by such fund. As the Chairman of the Board,
the President and the owner of 17.6% of Janus Capital, Mr. Bailey may be
deemed to share beneficial ownership of the Company's shares held by Janus
Venture. As the owner of 81% of Janus Capital, KCSI may be deemed to have
the ability to exert control over Janus Capital. Janus Capital, KCSI and
Mr. Bailey disclaim beneficial ownership of the Company's shares held by
Janus Venture. Janus Capital and Mr. Bailey have the same registered
address as Janus Venture. The registered address of KCSI is 114 West 11th
Street, Kansas City, Missouri 64105.
(7) According to Schedule 13G, dated January 30, 1995, filed with the SEC by
Dimensional Fund Advisors, Inc. ("Dimensional"), Dimensional has sole power
to vote 258,500 shares and sole power to dispose of 317,600 shares. The
Schedule 13G further states that individuals who are officers of
Dimensional also serve as officers of DFA Investment Dimensions Group Inc.
(the "DFA Fund") and The DFA Investment Trust Company (the "DFA Trust"),
each an open-end
-3-
<PAGE>
management investment company, and in their capacities as officers of the
DFA Fund and the DFA Trust, such individuals have the power to vote 20,000
shares owned by the DFA Fund and 39,100 shares owned by the DFA Trust.
(8) According to Schedule 13G, dated February 10, 1995, filed with the SEC,
College Retirement Equities Fund has sole power to vote and dispose of all
306,800 shares.
(9) According to Schedule 13D, dated June 7, 1995, filed with the SEC, Mr. Weil
has sole power to vote and dispose of 126,200 shares, of which 90,000
shares are held directly by Mr. Weil and 36,200 shares are held in trusts
for which Mr. Weil acts as the sole trustee, and shares power to vote and
dispose of 9,000 shares. The Schedule 13D further states that Mr. Weil
does not have the power to vote or dispose of any of the remaining shares
of the Company's Common Stock which are not held directly by him or in
trusts for which he acts as the sole trustee.
</TABLE>
The following chart sets forth the number of shares of Common Stock of the
Company beneficially owned, as of the record date, by each director, by each
executive officer listed in the Summary Compensation Table and by all directors
and executive officers as a group, which amount includes the number of shares
which each person may have the right to acquire within sixty days after such
date upon exercise of stock options:
<TABLE>
<CAPTION>
NUMBER AND PERCENTAGE OF
SHARES BENEFICIALLY OWNED(1)
----------------------------
PERCENT OF
NAME OF BENEFICIAL OWNER COMMON STOCK CLASS
- ------------------------ ------------ ----------
<S> <C> <C>
John E. Angle 26,715(2) *
Melvin L. Cooper 205,827(3) 3.6%
Gordon S. Dunn 110,000 1.9%
William B. Hewitt 70,000 1.2%
Robert A. Kerr 26,330(4) *
George M. Macaulay 35,050(5) *
James C. Miller III 13,200(6) *
Stuart J. Northrop 24,000 *
Herbert R. Silver 19,666(7) *
Sheldon Zucker 5,666 *
All directors and executive
officers, as a group (12 persons) 582,120 9.7%
<FN>
- ---------------
*Less than 1%
(1) Unless otherwise indicated, the person named in each case has sole
investment and voting power over the shares. The percentage of class is
based on 5,580,617 shares issued and outstanding on the record date plus
the following number of shares which the individual or the group may have
the right to acquire within sixty days of the record date upon exercise of
stock options, although certain of these options have exercise prices which
are higher than the current
-4-
<PAGE>
market price of the Common Stock: Mr. Angle -- 20,500; Mr. Cooper --
131,000; Mr. Dunn -- 100,000; Mr. Hewitt -- 60,000; Mr. Kerr -- 10,500; Mr.
Macaulay -- 31,000; Mr. Miller -- 10,500; Mr. Northrop -- 20,500; Mr.
Silver -- 6,666; Mr. Zucker -- 4,666; and all directors and executive
officers as a group -- 433,498. Each of Mr. Hewitt's options is only
exercisable if the market value of the Common Stock on the date of exercise
of such option is equal to or greater than 150% of the exercise price of
the option. The exercise prices of his options are $14.125 and $12.00 and,
assuming the precondition to exercise is met, each option entitles him to
purchase 30,000 shares.
(2) Includes 2,215 shares held by the trustees of a revocable trust of which
Mr. Angle is co-trustee with power of revocation.
(3) Includes 5,800 shares held in Mr. Cooper's profit sharing plan and 69,027
shares held by the trustees of a revocable trust of which Mr. Cooper is the
sole beneficiary and a co-trustee.
(4) Includes 2,000 shares owned by Mr. Kerr's wife and 1,000 shares held in
Mr. Kerr's HR-10 Plan.
(5) Includes 2,400 shares owned jointly by Mr. Macaulay and his wife and 1,650
shares held in Mr. Macaulay's account in the profit sharing plan of a
wholly-owned subsidiary of the Company.
(6) Includes 2,700 shares owned jointly by Mr. Miller and his wife.
(7) Includes 1,000 shares owned by Mr. Silver's wife.
</TABLE>
-5-
<PAGE>
PROPOSAL TO BE ACTED UPON AT THE ANNUAL MEETING
ELECTION OF DIRECTORS
The certificate of incorporation of the Company divides the Board of
Directors into three classes, with the directors of each class to be elected at
every third annual meeting of stockholders. The certificate further provides
that the number of directors which shall constitute the full Board of Directors
may be fixed by the Board of Directors from time to time and that vacancies
occurring between annual meetings may be filled only by the Board of Directors,
with the directors so chosen to serve until the next annual meeting. The Board
of Directors has nominated John E. Angle, James C. Miller III and Herbert R.
Silver for the three-year term in the class whose term expires in 1998. The
nominees are presently serving as directors of the Company and have expressed
their willingness to continue to serve as such. If, for any reason not
presently known, any of said nominees is not available for election, the proxies
will be voted for substitute nominees, if any.
RECOMMENDATION OF BOARD OF DIRECTORS
The Board of Directors recommends a vote FOR election as directors for the
three-year term in the class whose term expires in 1998 the nominees identified
above.
INFORMATION REGARDING DIRECTORS
Information regarding each of the nominees is set forth below:
<TABLE>
<CAPTION>
YEAR OF ANNUAL
MEETING AT
DIRECTOR WHICH TERM
NAME PRINCIPAL OCCUPATION AGE SINCE WILL EXPIRE
- ---- -------------------- --- -------- --------------
<S> <C> <C> <C> <C>
John E. Retired; formerly 86 1983 1998
Angle Executive Vice
President-Production
of United States Steel
Corporation
James C. Counselor, Citizens 53 1991 1998
Miller for a Sound Economy (a
III not-for-profit
corporation); formerly
Director of the
Federal Office of
Management and Budget
Herbert Co-Chairman and 59 1992 1998
R. Silver Co-Chief Executive
Officer of Allied Bond
& Collection Agency,
Inc. (a subsidiary of
the Company)
</TABLE>
-6-
<PAGE>
The following persons will continue to serve as directors after the meeting:
<TABLE>
<CAPTION>
YEAR OF ANNUAL
MEETING AT
DIRECTOR WHICH TERM
NAME PRINCIPAL OCCUPATION AGE SINCE WILL EXPIRE
- ---- -------------------- --- -------- --------------
<S> <C> <C> <C> <C>
Melvin L. Chairman of the Board 68 1984 1996
Cooper and Chief Executive
Officer of the Company
Gordon S. Chairman of Transworld 65 1991 1996
Dunn Systems, Inc. (a
subsidiary of the
Company)
William Chairman and Chief 57 1991 1997
B. Hewitt Executive Officer of
Capital Credit
Corporation (a
subsidiary of the
Company); President
and Chief Operating
Officer of the Company
Robert A. Retired; formerly 75 1984 1997
Kerr Chairman and Chief
Executive Officer of
Banc One, Dayton, Ohio
Stuart J. Retired; formerly 69 1986 1997
Northrop Chairman and Chief
Executive Officer of
Huffy Corporation
(bicycle
manufacturer), Dayton,
Ohio
</TABLE>
DIRECTORS. Messrs. Angle, Cooper, Kerr, Miller and Northrop have each been
engaged in the principal occupation identified above for more than the past five
years. Mr. Cooper is also a director of Golden Cycle Gold Corporation. Mr.
Miller is also a director of Goulds Pumps, Inc., Ameribanc Investors Group and
Washington Mutual Investors, Inc. Mr. Northrop is also a director of Wolverine
World Wide, Inc., Power Spectra, Inc., DSLT Inc., Elbit Systems of America and
Lukens, Inc.
Mr. Silver has been Co-Chairman and Co-Chief Executive Officer of Allied
Bond & Collection Agency, Inc. ("Allied Bond"), a subsidiary of the Company,
since December 1992, when the Company acquired substantially all of the assets
and assumed certain liabilities of Allied Bond & Collection Agency, a
Pennsylvania general partnership (the "Partnership"). For more than five years
prior thereto, he and his brother, Bernard Silver, served as general partners of
the Partnership, which they founded in 1958. Pursuant to the terms of the
purchase agreement, Herbert
-7-
<PAGE>
R. Silver was elected to the Board of Directors of the Company and the Company
agreed that, for so long as either Herbert R. Silver or Bernard Silver is
employed by Allied Bond under their respective employment agreements, the
Company will include one of them as a nominee for election to the Board of
Directors and will solicit proxies in favor of such nominee's election.
Mr. Dunn became Chairman of Transworld Systems, Inc. ("TSI"), a subsidiary
of the Company, effective July 1, 1994. Prior to becoming Chairman, Mr. Dunn
had served as President and Chief Executive Officer of TSI since 1978.
Mr. Hewitt became Chairman and Chief Executive Officer of Capital Credit
Corporation ("CCC"), a subsidiary of the Company, in September 1991 and
President and Chief Operating Officer of the Company effective May 22, 1995.
From 1980 until joining CCC, Mr. Hewitt was Executive Vice President of First
Manhattan Consulting Group, a management consulting firm. Mr. Hewitt is also a
director of Rexene Corporation.
EXECUTIVE OFFICERS. Messrs. Cooper, Dunn, Hewitt, Nicholas P. Gill (Vice
President, Chief Financial Officer, Treasurer and Secretary of the Company),
George M. Macaulay (President of TSI), Herbert R. Silver and Bernard Silver (Co-
Chairmen and Co-Chief Executive Officers of Allied Bond) and Sheldon Zucker
(Executive Vice President and Chief Operating Officer of Allied Bond) are
members of the Company's Executive Management Group and currently constitute all
of the executive officers of the Company. Mr. Gill, age 40, has served as Vice
President of the Company since January 1995, as Chief Financial Officer of the
Company since February 1991 and as Treasurer and Secretary since 1989, and
served as Controller from 1986 through 1990. Mr. Macaulay, age 55, has been
President of TSI since July 1, 1994 and was Vice President of TSI from 1989 to
June 30, 1994, President of the Credit Management Services division of TSI since
1988 and Vice President of such division prior thereto. Bernard Silver, age 57,
has been Co-Chairman and Co-Chief Executive Officer of Allied Bond since
December 1992 and for more than five years prior thereto was a general partner
of the Partnership. Mr. Zucker, age 47, has been Executive Vice President and
Chief Operating Officer of Allied Bond since December 1992 and for more than
five years prior thereto was the Chief Operating Officer of the Partnership.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has standing Audit, Employee Benefit and
Compensation, Stock Option and Executive Committees. None of the directors who
serve on the Audit, Employee Benefit and Compensation or Stock Option Committees
is an employee of the Company or any of its subsidiaries. The Board of
Directors has no nominating committee; the full Board of Directors performs such
function.
The Audit Committee reviews the preparations for and scope of the audit of
the Company's annual financial statements, reviews drafts of such statements,
makes recommendations as to the engagement and fees of the independent auditors
and monitors the functioning of the Company's accounting and internal control
systems by meeting with the representatives of management, the independent
auditors and the Company's internal auditor. The Committee has direct access to
the independent auditors, the internal auditor and counsel to the Company, and
it performs such other duties relating to the financial statements of the
Company and other matters as the Board of Directors may assign from time to
time. The Audit Committee met four times during fiscal 1995. The members of the
Audit Committee are Messrs. Angle, Kerr, Miller and Northrop and Mr. Angle
serves as Chairman.
-8-
<PAGE>
The Employee Benefit and Compensation Committee supervises and makes
recommendations with respect to employee compensation levels and all benefit
plans involving employees of the Company. It also approves, upon the
recommendation of the Chairman of the Board of Directors or other appropriate
officer, the terms of employment of all officers of the Company (except the
Chairman of the Board) and recommends the terms of employment of the Chairman of
the Board to the Board of Directors for approval. The Employee Benefit and
Compensation Committee met three times during fiscal 1995. The members of the
Employee Benefit and Compensation Committee are Messrs. Angle, Kerr, Miller and
Northrop and Mr. Kerr serves as Chairman.
The Stock Option Committee administers the Company's stock option plans,
including the grant of options and stock appreciation rights thereunder. The
Stock Option Committee met twice during fiscal 1995. The members of the Stock
Option Committee are Messrs. Angle, Kerr, Miller and Northrop and Mr. Kerr
serves as Chairman.
The Executive Committee has all the powers of the Board of Directors in the
management of the business and affairs of the Company, except as such powers are
limited by Delaware General Corporation Law. The Executive Committee met twice
during fiscal 1995. The current members of the Executive Committee are Messrs.
Cooper, Kerr and Northrop and Mr. Cooper serves as Chairman.
The Board of Directors met five times in fiscal 1995. With the exception
of Mr. Silver, who attended two of the five meetings of the Board of Directors,
and Messrs. Dunn and Hewitt, who each attended three of the five meetings of the
Board of Directors, no director attended fewer than 75% of the total number of
meetings of the Board of Directors and all committees thereof which he was
eligible to attend.
DIRECTORS' COMPENSATION
Directors who are not employees of the Company or its subsidiaries were
paid a quarterly retainer of $5,000, plus $500 for each Board and/or Committee
meeting attended during fiscal 1995. Each non-employee director who serves as
chairman of a Committee of the Board of Directors is also paid a further
quarterly retainer of $250 for each such position. Upon retirement from the
Board of Directors any non-employee director who has served as a director for
more than five years will receive an amount equal to a specified percentage of
the annual retainer then in effect (the "Annual Retainer") for such directors,
payable in quarterly installments over a period of ten years. The percentage of
the Annual Retainer to be paid to a director upon retirement will be based upon
the number of years a director has served on the Board. If a director has
served more than five years, but less than six years, a director (or his estate)
shall be entitled to receive 50% of the Annual Retainer each year for a period
of ten years. The percentage of the Annual Retainer to be paid to a director
shall increase for each year of service thereafter by 10% until a director has
served more than ten years at which time he shall be entitled to receive upon
retirement 100% of the Annual Retainer. In March 1995, the Board of Directors
authorized the establishment of a trust for the benefit of all non-employee
directors into which the Company will deposit an amount sufficient to cover the
deferred compensation benefits payable to such non-employee directors.
In addition, under the Company's 1991 Non-Employee Directors' Stock Option
Plan (the "Directors' Plan"), each non-employee director who has served in such
capacity for at least one full year automatically receives an option to purchase
3,500 shares of the Company's Common Stock on November 19th of each year, until
the director receives options to purchase a total of 10,500 shares. Options are
granted at an exercise price equal to the fair market value of a share of such
-9-
<PAGE>
Common Stock on the date of such grant. During fiscal 1995, Mr. Miller
automatically received an option to purchase 3,500 shares of the Common Stock on
November 19, 1994 at an exercise price of $14.625 per share pursuant to the
Directors' Plan. All eligible directors have received options to purchase
10,500 shares, the maximum permitted under the Directors' Plan. The exercise
price of options granted under the Directors' Plan may be paid in cash or,
subject to certain restrictions, with shares of Common Stock with a fair market
value equal to the exercise price on the date of exercise. Options may be
exercised within the period commencing six months after the date of grant and
ending on the earlier to occur of the tenth anniversary of the date of grant or
the first anniversary of the director's death or disability. The Directors'
Plan expires on December 31, 1995. The expiration of the Directors' Plan does
not affect rights under outstanding options which were not exercised prior
thereto.
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth certain information
regarding compensation earned in each of the last three fiscal years by Mr.
Cooper, the Chairman of the Board and Chief Executive Officer of the Company,
and by each of the four most highly compensated executive officers of the
Company other than Mr. Cooper (collectively, the "Named Executive Officers"):
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARD
---------------------------------------- ------------
NAME AND FISCAL OTHER ANNUAL ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS COMPENSATION(2)
------------------ ------ ------ ----- --------------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Melvin L. Cooper 1995 $326,243 $326,243 -- $127,494
Chairman of the Board and Chief 1994 319,118 319,118 -- 61,201
Executive Officer of the Company 1993 310,134 310,134 -- 61,901
Gordon S. Dunn 1995 150,000 100,000 -- 103,174
Chairman of TSI, a subsidiary of the 1994 300,000 650,000 -- 82,024
Company 1993 300,000 650,000 -- 73,751
William B. Hewitt 1995 296,117 249,569 7,523(3) 9,793
Chairman and Chief Executive Officer 1994 290,111 -- 30,000 9,342
of CCC, a subsidiary of the Company, 1993 283,360 -- 30,000 7,531
and President and Chief Operating
Officer of the Company
George M. Macaulay 1995 300,000 400,000 -- 58,459
President of TSI, a subsidiary of the 1994 75,000 572,357 20,000 4,500
Company 1993 75,000 533,795 8,000 4,733
Sheldon Zucker 1995 215,250 52,500 -- 6,156
Executive Vice President and 1994 204,616 51,250 -- 7,563
Chief Operating Officer of Allied 1993(4) 111,404 25,000 7,000 875
Bond, a subsidiary of the Company
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<PAGE>
<FN>
(1) The dollar value of perquisites and other personal benefits for each of the
Named Executive Officers did not exceed, in each case, the lesser of either
$50,000 or 10% of the total of annual salary and bonus for such Named
Executive Officer.
(2) The amounts listed under All Other Compensation for Messrs. Cooper, Dunn,
Hewitt, Macaulay and Zucker for fiscal 1995 include $56,361, $48,174,
$7,401, $28,459 and $4,656, respectively, which represent premiums paid by
the Company or a subsidiary for disability and/or life insurance policies
for the benefit of the respective executive officer. The amounts listed
under All Other Compensation for Messrs. Dunn, Hewitt, Macaulay and Zucker
for fiscal 1995 include $25,000, $2,392, $15,000 and $1,500, respectively,
which represent amounts contributed by the Company or a subsidiary of the
Company to defined contribution plans for the benefit of the respective
executive officer. The amounts listed under All Other Compensation for
Messrs. Dunn and Macaulay also include $30,000 and $15,000, respectively,
accrued by a subsidiary of the Company for non-qualified retirement
benefits. The amount listed under All Other Compensation for Mr. Cooper
also includes $71,133, which represents unused vacation pay for prior years
which was paid to him in fiscal 1995.
(3) Represents options granted to Mr. Hewitt in August 1995 based on the
financial results of CCC for fiscal 1995 and issued pursuant to the terms
of Mr. Hewitt's employment agreement.
(4) Amount includes compensation earned by Mr. Zucker from December 1992, when
he became Executive Vice President and Chief Operating Officer of Allied
Bond following the Company's acquisition of substantially all of the assets
and assumption of certain liabilities of Allied Bond & Collection Agency, a
Pennsylvania general partnership, through June 30, 1993.
</TABLE>
STOCK OPTION PLANS
The Company currently has outstanding options to purchase Common Stock
under three stock option plans for the benefit of employees -- the 1994
Incentive Stock Plan (the "1994 Plan"), the 1984 Stock Option Plan (the "1984
Plan") and the 1973 Non-Qualified Stock Option Plan (the "1973 Plan"). The 1994
Plan, the 1984 Plan and the 1973 Plan are interpreted and administered by the
Stock Option Committee of the Board of Directors.
THE 1994 PLAN. The 1994 Plan authorizes the grant of stock options,
restricted stock, deferred stock, bonus shares, performance awards, dividend
equivalent rights, limited stock appreciation rights and other stock-based
awards, or any combination thereof, to executives, directors who are also
employees of the Company or any of its subsidiaries and other key employees of
the Company and its subsidiaries. During any calendar year, no person may be
granted under the 1994 Plan awards aggregating more than 150,000 shares of
Common Stock (which number is subject to adjustment to prevent dilution in the
event of stock splits, stock dividends or other changes in the capitalization of
the Company). Unless terminated earlier by action of the Board of Directors, no
awards may be granted under the 1994 Plan after August 24, 2004. As of the date
hereof, the only awards granted under the 1994 Plan have been stock options.
Options granted under the 1994 Plan may be "incentive stock options"
("Incentive Options") within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), or stock options which are not incentive
stock options ("Non-Incentive Options" and, collectively with the Incentive
Options, hereinafter referred to as "Options"). The Stock Option Committee
determines the persons to whom Options will be granted, the number of shares
subject to each
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<PAGE>
Option granted, the prices at which Options may be exercised (which shall not be
less than the fair market value of shares of Common Stock on the date of grant),
whether an Option will be an Incentive Option or a Non-Incentive Option, the
time or times and the extent to which Options may be exercised and all other
terms and conditions of Options.
The exercise price of the shares to be purchased pursuant to each Option
shall be paid (i) in full in cash, (ii) by delivery (i.e., surrender) of shares
of Common Stock owned by the optionee at the time of the exercise of the Option,
(iii) in installments, payable in cash, if permitted by the Stock Option
Committee or (iv) any combination of the foregoing. The stock-for-stock payment
method permits an optionee to deliver one or more shares of previously owned
Common Stock in satisfaction of the exercise price of subsequent Options. The
optionee may use the shares obtained on each exercise to purchase a larger
number of shares on the next exercise. (The foregoing assumes an appreciation
in value of previously acquired shares). The result of the stock-for-stock
payment method is that the optionee can generally avoid immediate tax liability
with respect to any appreciation in the value of the stock utilized to exercise
the Option.
The Stock Option Committee is authorized, in connection with any Option
granted under the 1994 Plan, to grant the holder of such Option a limited stock
appreciation right ("LSAR"), entitling the holder to receive, within 60 days
following a Change in Control (as defined in the 1994 Plan), an amount in cash
equal to the difference between the exercise price of the Option and the fair
market value of the Common Stock on the effective date of the Change in Control.
The LSAR may be granted in tandem with an Option or subsequent to grant of the
Option. The LSAR will only be exercisable to the extent the related Option is
exercisable and will terminate if and when the Option is exercised.
The 1994 Plan also authorizes awards of restricted stock and deferred
stock. Restricted stock is subject to restrictions on transferability and other
restrictions as may be imposed by the Stock Option Committee at the time of
grant. In the event the holder of restricted stock ceases to be employed by the
Company during the applicable restrictive period, restricted stock that is at
the time subject to restrictions shall be forfeited and reacquired by the
Company. Except as otherwise provided by the Stock Option Committee at the time
of grant, a holder of restricted stock shall have all the rights of a
stockholder including, without limitation, the right to vote restricted stock
and the right to receive dividends, if any, thereon. An award of deferred stock
is an award that provides for the issuance of stock upon expiration of a
deferral period established by the Stock Option Committee. Except as otherwise
determined by the Stock Option Committee, upon termination of employment of the
recipient during the applicable deferral period, all stock that is at the time
subject to deferral shall be forfeited. Until such time as the stock which is
the subject of the award is issued, the recipient of the award has no rights as
a stockholder.
The 1994 Plan also authorizes the Stock Option Committee to grant (i)
dividend equivalent rights that give the recipient the right to receive cash or
other property equal in value to the dividends that would be paid if the
recipient held a specified number of shares of Common Stock, (ii) shares as a
bonus and (iii) shares or other awards in lieu of obligations of the Company to
pay cash under other plans or compensatory arrangements, in each case upon such
terms as shall be determined by the Stock Option Committee.
Under the 1994 Plan, the Stock Option Committee is authorized to specify
that the exercisability or settlement of an award (other than an Option granted
with an exercise price equal to 100% of the fair market value of a share of
Common Stock at the time of grant) may be conditioned upon the achievement of
certain specified performance goals, if the award is granted
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<PAGE>
to an executive officer of the Company whose compensation, at the time of grant,
is subject to the limit on deductible compensation under Section 162(m) of the
Code.
The 1994 Plan further provides that, in the event the Company or any of its
subsidiaries incurs any tax withholding obligations in connection with the
exercise of an award by a participant under the plan, the Stock Option Committee
is authorized, either on a mandatory basis or at the election of such
participant, to satisfy the tax obligation by withholding stock receivable upon
exercise of such award or by receiving shares of Common Stock previously owned
by such participant.
Upon a Change in Control (as defined in the 1994 Plan) of the Company, any
award carrying a right to exercise that was not previously exercisable shall
become fully exercisable, the restrictions, deferral limitations and forfeiture
conditions applicable to any other award granted shall lapse and any performance
conditions imposed with respect to awards shall be deemed to be fully achieved
(except in certain circumstances involving performance goals for executive
officers whose compensation exceeds $1,000,000, in which case the performance
goal shall be deemed achieved to the extent of actual achievement on the date of
the Change in Control).
THE 1984 PLAN. The 1984 Plan authorized the grant of stock options (both
"incentive stock options" within the meaning of Section 422 of the Code and non-
incentive stock options) and stock appreciation rights to employees of the
Company or any of its subsidiaries, including employees who were also directors
of the Company, who shared primary responsibility for the management, growth or
protection of the business of the Company or any of its subsidiaries. Under the
1984 Plan, stock appreciation rights could have been granted in tandem with
either type of option, and generally permitted the holder to receive Common
Stock or cash (at the option of the Stock Option Committee) equal to a certain
percentage (not to exceed 100%) of the excess of the fair market value of the
stock subject to the related option over the exercise price of the option. The
exercise price of all options granted under the 1984 Plan was equal to 100% of
the fair market value of the Common Stock on the applicable date of grant. The
1984 Plan expired on September 17, 1994, and no options were permitted to be
issued under the 1984 Plan since that date. The expiration of the 1984 Plan
does not affect rights under outstanding options and stock appreciation rights
which were not exercised prior thereto.
THE 1973 PLAN. Under the 1973 Plan, the Stock Option Committee was
authorized to grant non-statutory stock options and stock appreciation rights to
employees of the Company or any of its subsidiaries. The terms of such options
and stock appreciation rights were substantially similar to the terms of non-
incentive options and stock appreciation rights granted under the 1984 Plan,
except that the minimum exercise price of stock options granted under the 1973
Plan was the par value of the Common Stock. The exercise price of all options
currently outstanding under the 1973 Plan is equal to 100% of the fair market
value of the Common Stock on the date of grant. The 1973 Plan has expired and
no options were permitted to be granted thereunder since the date of such
expiration. The expiration of the 1973 Plan does not affect rights under
outstanding options and stock appreciation rights which were not exercised prior
thereto.
Effective February 1, 1992, the 1984 Plan and the 1973 Plan were amended to
add a tax withholding feature allowing optionees under either plan to satisfy
certain tax withholding obligations by electing to have the Company withhold
stock receivable upon exercise of an option or by surrendering previously owned
Common Stock to the Company.
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<PAGE>
OPTION GRANTS DURING FISCAL 1995
The following table provides information related to options granted to the
Named Executive Officers during fiscal 1995. No stock appreciation rights were
issued by the Company during fiscal 1995.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES OPTION TERM
OPTIONS IN FISCAL EXERCISE OR BASE EXPIRATION ----------------------
NAME GRANTED YEAR PRICE ($/SH) DATE 5% 10%
---- ---------- ---------- ---------------- ---------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Melvin L. Cooper - - - - - -
Gordon S. Dunn - - - - - -
William B. Hewitt - - - - - -
George M. Macaulay - - - - - -
Sheldon Zucker - - - - - -
</TABLE>
OPTION EXERCISES DURING FISCAL 1995 AND YEAR END OPTION/SAR VALUES
The following table provides information related to options exercised by
the Named Executive Officers during fiscal 1995 and the number and value of
options and stock appreciation rights held at fiscal year-end which are
currently exercisable. No stock appreciation rights were exercised during
fiscal 1995.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS/SARS
OPTIONS/SARS AT FY-END(#) AT FY-END ($)(1)
SHARES ACQUIRED VALUE ----------------------------- ----------------------------
NAME ON EXERCISE (#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ----------- ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Melvin L. Cooper 69,000 $608,408(2) 131,000(3) -0- $671,375 -
Gordon S. Dunn - - 100,000 -0- 425,000 -
William B. Hewitt - - -0- 60,000(4) - $168,750
George M. Macaulay - - 31,000 13,334 52,544 45,002
Sheldon Zucker - - 4,666 2,334 9,999 5,001
<FN>
(1) The values of Unexercised In-the-Money Options represent the aggregate
amount of the excess of $15.875, the closing price for a share of Common
Stock on June 30, 1995, over the relevant exercise prices of all "in-the-
money" options.
(2) The value realized upon the exercise of such options represents the
aggregate amount of the excess of the closing price for a share of Common
Stock on the date of such exercise ($13.4375 per share), over the exercise
price of such options ($4.62 per share). In
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<PAGE>
connection with the exercise of such options, Mr. Cooper elected to pay the
aggregate exercise price thereof by surrendering to the Company 23,723
shares of Common Stock previously owned by him having a fair market value
on the date of exercise equal to the aggregate exercise price of such
options.
(3) Such options were issued with related SARs which entitle Mr. Cooper to
surrender the unexercised option, or any portion thereof, and receive a
number of shares having an aggregate market value equal to 75% of the
difference between the option price ($10.75 per share) and the market value
of the shares to the extent such appreciation is less than $5.00 per share,
and 90% of such appreciation over $5.00 per share. The Stock Option
Committee, in its sole discretion, has the option of settling any
obligation arising out of the exercise of this SAR in stock, cash or a
combination thereof.
(4) Each of Mr. Hewitt's options is only exercisable if the market value of
Common Stock on the date of exercise of such option is equal to or greater
than 150% of the exercise price of the option. The exercise prices of his
options are $14.125 and $12.00, and each option entitles him to purchase
30,000 shares.
</TABLE>
DEFINED BENEFIT PLAN
Until October 31, 1993, TSI, a subsidiary of the Company, maintained a
defined benefit plan covering substantially all of its employees. Effective as
of such date, the defined benefit plan was terminated and all benefits under the
plan were frozen. Under the plan, benefits were based on years of employment
multiplied by a percentage of the participant's average monthly compensation
(excluding overtime, commissions and bonuses) for the five consecutive years
producing the highest average during the fifteen years prior to the date of
normal retirement. Messrs. Dunn and Macaulay, as executive officers and
employees of TSI, are the only Named Executive Officers who participated in the
defined benefit plan and had eighteen and sixteen credited years of service,
respectively, at the time of the termination of such plan. In October 1994, TSI
distributed the accumulated benefits under the defined benefit plan to plan
participants, including $773,669 directly to Mr. Dunn and $99,113 to Mr.
Macaulay, which amount was transferred into Mr. Macaulay's account in TSI's
profit sharing plan.
EMPLOYMENT AGREEMENTS AND CHANGE OF CONTROL ARRANGEMENTS
EMPLOYMENT AGREEMENT WITH MR. COOPER. The Company and Mr. Cooper entered
into an employment agreement dated as of January 1, 1986, which agreement was
amended on September 30, 1986 and amended and restated as of November 10, 1988
and was further amended as of September 13, 1990, as of September 1, 1992 and as
of March 15, 1995. The agreement expires on December 31, 1997, subject to
earlier termination upon certain conditions, including without limitation a
Change in Control Event (as defined) of the Company. Under the employment
agreement, Mr. Cooper is entitled to receive an annual salary of not less than
$225,000, subject to adjustment for increases in the Consumer Price Index. The
annual salary under the agreement is currently $330,270. He is also entitled to
an annual bonus each fiscal year in which he is employed, which bonus shall not
exceed 100% of the salary earned in such fiscal year, equal to 10% of the amount
by which the Company's pretax income, as adjusted for discontinued operations
and certain unusual, nonrecurring items, in such fiscal year exceeds the product
of the Company's net worth at the beginning of such fiscal year times the
average coupon equivalent rate during such fiscal year for thirteen-week
treasury bills. Mr. Cooper is also entitled to amounts, not to exceed 10% of
his salary in each year, for legal and accounting services rendered to him, and
the Company is required
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<PAGE>
to provide disability insurance, $1,000,000 of life insurance and $1,000,000 of
travel and accident insurance on Mr. Cooper's life, payable to his designated
beneficiary.
Under the agreement, Mr. Cooper is entitled to receive upon his termination
of employment a lump sum payment equal to the salary plus pro rata bonus to
which he was entitled at the time of such termination for the year in which such
termination occurs. Mr. Cooper is also entitled to receive upon the termination
of his employment, including his voluntary retirement prior to the expiration of
his employment agreement, a lump sum payment equal to the discounted present
value of (i) the annual payments for his remaining life expectancy, as
calculated in accordance with specified actuarial assumptions, equal to 50% of
the highest aggregate annual compensation (salary plus bonus) paid to him during
the last three years of his employment, plus (ii) the premiums payable on the
insurance policies described above. If Mr. Cooper dies during the term of his
employment agreement, his designated beneficiary shall receive the lump sum
amount payable pursuant to clause (i) above, except that such payment shall be
based on a period of ten years. The employment agreement further provides that
if Mr. Cooper dies during the term of his employment agreement, his designated
beneficiary will also be entitled to a lump sum payment equal to the discounted
present value of one year's compensation plus $5,000. Upon the termination of
Mr. Cooper's employment, the Company shall continue to include Mr. Cooper and
his spouse in its medical and hospitalization plan for the life of Mr. Cooper
and his spouse. Mr. Cooper will also be retained as a consultant for the ten-
year period following the termination of his employment or his voluntary
retirement (which consulting period, prior to the March 1995 amendment to Mr.
Cooper's employment agreement, was to have continued for the remainder of his
life). For such consulting services, Mr. Cooper shall be paid a monthly
consulting fee equal to one-half of the highest average aggregate monthly
compensation (including base salary and bonus) paid to him by the Company in
any 12 months during the last three years of his employment and the Company
will be required to continue during the consulting period the life, disability
and travel and accident insurance described above. Pursuant to the employment
agreement, the Company is required to deposit into a trust at the time of
Mr. Cooper's termination or retirement an amount equal to the discounted
present value of the aggregate consulting fees to be paid by the Company to
Mr. Cooper during such ten-year consulting period.
EMPLOYMENT AGREEMENT WITH MR. HEWITT. Pursuant to an employment agreement
between Mr. Hewitt, the Company and CCC which became effective on July 1, 1994
and expired on September 30, 1995, Mr. Hewitt was employed as Executive Vice
President of the Company and as Chairman and Chief Executive Officer of CCC.
Under this agreement, Mr. Hewitt was entitled to a base salary of $296,117 per
annum and was also entitled to a bonus for the fiscal year ended June 30, 1995
which was based in part on the extent to which the operating income of CCC, as
adjusted, for such fiscal year exceeded the operating income of CCC, as
adjusted, for the 1994 fiscal year, and in part (not to exceed 50% of his base
salary) on whether certain performance objectives of the Company, agreed to by
Mr. Hewitt and the Company, had been met. Mr. Hewitt was also entitled during
the term of the agreement to amounts, not exceeding 10% of his base salary in
each year, for legal, accounting and tax advisory services rendered to him, and
other miscellaneous expenses, and the Company was required to provide $1,000,000
of life insurance on Mr. Hewitt's life, as well as a disability income insurance
policy which provides Mr. Hewitt with a $1,000,000 benefit.
In addition, pursuant to this employment agreement, the Company agreed to
provide to Mr. Hewitt the opportunity to receive an option to purchase up to
30,000 shares of Common Stock, of
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<PAGE>
which (i) up to 15,000 shares of Common Stock would be based on the financial
performance of CCC during the fiscal year ended June 30, 1995 and (ii) up to
15,000 shares would be at the discretion of the Chief Executive Officer and
Board of Directors of the Company, based on the performance objectives of the
Company referred to above. On August 29, 1995, the Company issued to Mr.
Hewitt, pursuant to the terms of his employment agreement, an option to purchase
7,523 shares of Common Stock at an exercise price of $14.75 (i.e., the fair
market value of a share of Common Stock on the date of grant) based on the
financial performance of CCC during the fiscal year ended June 30, 1995. Such
option, which was granted under the 1994 Plan, vests over a three-year period
from the date of grant, with one-third of the shares subject to such option to
vest on each of the first three anniversaries of the date of grant, and expires
ten years and six months from the date of grant. The vesting of such option
will accelerate upon the occurrence of certain events, including a change of
control.
Mr. Hewitt was elected by the Board of Directors to serve as President and
Chief Operating Officer of the Company effective May 22, 1995. The Company, CCC
and Mr. Hewitt are currently finalizing the terms of a new three-year employment
agreement pursuant to which Mr. Hewitt will continue to be employed as the
President and Chief Operating Officer of the Company and as Chairman and Chief
Executive Officer of CCC. Pursuant to his new agreement, Mr. Hewitt will be
entitled to a base salary of $300,000 per annum and a bonus and stock options
each year of the agreement based on (i) the operating income of CCC, (ii) the
operating results of new significant business ventures and (iii) certain defined
non-financial objectives.
EMPLOYMENT AGREEMENT WITH MR. GILL. Pursuant to an employment agreement
effective January 1, 1995 between Mr. Gill and the Company, Mr. Gill is employed
as the Vice President, Chief Financial Officer, Secretary and Treasurer of the
Company. The agreement expires on June 30, 1997, subject to earlier termination
upon the occurrence of one or more events, including without limitation, Mr.
Gill's election to treat certain events which may involve a change of control of
the Company as a material breach of the agreement.
Under the employment agreement, Mr. Gill is entitled to a base salary of
not less than $170,000 per annum and may also receive a discretionary bonus as
determined by the Employee Benefit and Compensation Committee or the Board of
Directors. The employment agreement also provides that the Company is required
to provide Mr. Gill with $500,000 in disability benefits and $500,000 in life
insurance benefits.
EMPLOYMENT AGREEMENT WITH MR. DUNN. Pursuant to an employment agreement
effective July 1, 1995 between Mr. Dunn, the Company and TSI, Mr. Dunn is
employed as Chairman of the Board of TSI. Under the employment agreement, Mr.
Dunn is required to devote not less than 75% of his business time and efforts to
his employment as Chairman of the Board of TSI. The agreement expires on June
30, 1997, subject to earlier termination upon the occurrence of one or more
events, including, without limitation, Mr. Dunn's election to terminate the
agreement in the event of certain events which may involve a change of control
of the Company.
Pursuant to his employment agreement, Mr. Dunn is entitled to a base
salary of $200,000 per annum. He is also entitled to a bonus during each year
of the agreement, which bonus shall not exceed $250,000 in any such year, based
on the adjusted pretax earnings of TSI. If Mr. Dunn's employment is terminated
for any reason during the term of the agreement, other than for cause, the
amount of such bonus shall be prorated to reflect the portion of the year in
which Mr. Dunn
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<PAGE>
was employed. The employment agreement also provides that the bonus payments
which were earned and deferred by Mr. Dunn in prior years shall be deposited by
TSI into a trust. The agreement further provides that Mr. Dunn shall be
entitled to withdraw up to $250,000 per year from such trust in each year
commencing 1995. Upon the termination of Mr. Dunn's employment with TSI, the
balance of the deferred payments, together with any earnings thereon, shall be
paid to Mr. Dunn (or to his designated beneficiary in the event of his death),
at his option, either in a lump sum payment or in equal monthly installments
over a period not to exceed 120 months. During the term of Mr. Dunn's
employment agreement, the Company will also be required to contribute $30,000
per year to a non-qualified retirement plan established for him.
Pursuant to Mr. Dunn's employment agreement, TSI maintains a total of
$2,000,000 face amount of life insurance on the life of Mr. Dunn, of which
$1,000,000, in the form of a term life policy, is payable to a beneficiary
designated by Mr. Dunn and the remaining $1,000,000, in the form of a $600,000
whole life policy and a $400,000 term life policy, is payable to TSI. The
premiums for all such insurance are paid by TSI. The employment agreement
provides that TSI will transfer to Mr. Dunn, at any time upon his request, the
$1,000,000 term life policy and continue to pay the premiums on such policy
until termination of Mr. Dunn's employment. TSI has also agreed to transfer to
Mr. Dunn, upon termination of his employment at the end of the term of the
employment agreement or earlier under certain circumstances, the $400,000 term
life and $600,000 whole life policies, net of the cash surrender value, if any.
In addition, if Mr. Dunn retires from regular employment with TSI, he shall be
entitled to continued medical insurance coverage paid by TSI.
The employment agreement also provides that, upon the termination of the
agreement in accordance with its terms on June 30, 1997, or in the event Mr.
Dunn voluntarily terminates his employment prior to such date, TSI may, at its
option, elect to continue his employment through June 30, 2000 or such earlier
date as TSI may choose in order to continue various requirements of the
agreement. In the event of any such extension of the term of his employment,
the only compensation to which Mr. Dunn shall be entitled is the sum of $50,000
per annum for each year of such extension period, and TSI shall not be obligated
to make the $30,000 per annum contribution to the non-qualified retirement plan
established for him or to maintain the life insurance policies described above.
The agreement further provides that, during any such extension period, Mr. Dunn
shall not be required to devote any specified amount of his business time and
efforts to the business of the Company.
The employment agreement supersedes a prior employment agreement between
Mr. Dunn and TSI, which became effective July 1, 1994 and was scheduled to
expire June 30, 1996, pursuant to which Mr. Dunn was employed as the Chairman of
the Board of TSI. Under the prior employment agreement, Mr. Dunn received a
base salary of $150,000 and a bonus based on the pretax income of TSI. In
addition, pursuant to this prior agreement, the Company contributed $30,000 to
the non-qualified retirement plan established for Mr. Dunn and maintained the
life insurance policies described above.
EMPLOYMENT AGREEMENT WITH MR. MACAULAY. Pursuant to an employment
agreement effective July 1, 1995 between Mr. Macaulay and TSI, Mr. Macaulay is
employed as the President of TSI. The agreement expires on June 30, 1997,
subject to earlier termination upon the occurrence of one or more events,
including without limitation, Mr. Macaulay's election to treat certain events
which may involve a change of control of the Company as a material breach of the
agreement.
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<PAGE>
Under the employment agreement, Mr. Macaulay is entitled to a base salary
of $300,000 per annum and is also entitled to receive during each year of the
fiscal years ended June 30, 1996 and 1997 a bonus, which shall not exceed
$600,000 in any such fiscal year, based on the Adjusted Pretax Income (as
defined) of TSI. During the term of Mr. Macaulay's employment agreement, TSI
will be required to contribute $15,000 per annum to a non-qualified retirement
plan established for him. The employment agreement also provides that TSI will
provide Mr. Macaulay with $1,000,000 in disability insurance benefits and
$1,000,000 in life insurance benefits.
The employment agreement also provides that, upon the termination of the
agreement in accordance with its terms on June 30, 1997, or in the event Mr.
Macaulay voluntarily terminates his employment prior to such date, TSI may, at
its option, elect to continue his employment through June 30, 1999 or such
earlier date as TSI may choose in order to continue various requirements of the
agreement. In the event of any such extension of the term of his employment,
the only compensation to which Mr. Macaulay shall be entitled is the sum of
$50,000 per annum for each year of such extension period, and TSI shall not be
obligated to make the $15,000 per annum contribution to the non-qualified
retirement plan established for him or to provide the disability and life
insurance benefits described above. The agreement further provides that Mr.
Macaulay shall not be required to devote any specified amount of his business
time and efforts to the business of the Company during any such extension
period.
The employment agreement supersedes a prior employment agreement between
Mr. Macaulay and TSI, which became effective July 1, 1994 and was scheduled to
expire June 30, 1997, pursuant to which Mr. Macaulay was employed as the
President of TSI. Under the prior employment agreement, Mr. Macaulay received a
base salary of $300,000 and a bonus, not to exceed $600,000 in any such fiscal
year, based on the Adjusted Pretax Income of TSI. In addition, pursuant to this
prior agreement, the Company contributed $15,000 to the non-qualified retirement
plan established for Mr. Macaulay and provided him with the disability and life
insurance benefits described above.
EMPLOYMENT AGREEMENTS WITH MR. HERBERT R. SILVER AND BERNARD SILVER.
Pursuant to identical employment agreements dated as of December 1, 1992 between
each of Mr. Herbert R. Silver and Mr. Bernard Silver and the Company and Allied
Bond, Herbert R. Silver and Bernard Silver are employed as Co-Chairmen and Co-
Chief Executive Officers of Allied Bond. Each agreement expires on June 30,
1998, subject to earlier termination upon the occurrence of one or more events
including, without limitation, the executive's election to treat certain events
which may involve a change of control of the Company as a material breach of the
agreement. Each executive may also elect to terminate his employment in the
event that the Co-Chairmen and Co-Chief Executive Officers and/or their nominees
no longer constitute a majority of the members of the Board of Directors of
Allied Bond. In such event, Allied Bond would continue to pay base salary due
through the remaining term of the agreement plus the pro-rated share of any
bonus due through the date of termination.
Under the employment agreement, each executive is entitled to an initial
base salary of $125,000 per annum, subject to adjustment annually for increases
in the Consumer Price Index. The employment agreement provides for the payment
of bonuses equal to a specified percentage of base salary paid during the fiscal
year if the Adjusted Pretax Income (as defined) of Allied Bond for the fiscal
year exceeds the highest Adjusted Pretax Income for any of the fiscal years
during the period of employment under the employment agreement. The employment
agreement also provides that
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Allied Bond is required to provide each executive with $1,000,000 in disability
insurance benefits and $1,000,000 in life insurance benefits.
EMPLOYMENT AGREEMENT WITH MR. ZUCKER. Pursuant to an employment agreement
dated as of December 1, 1992 between Mr. Zucker and Allied Bond, Mr. Zucker is
employed as Executive Vice President and Chief Operating Officer of Allied Bond.
The agreement expires on December 31, 1997, subject to earlier termination at
Mr. Zucker's election if both the Co-Chairmen and Co-Chief Executive Officers of
Allied Bond elect to terminate their employment as a result of one or more
events which may involve a change of control of the Company.
Under the employment agreement, Mr. Zucker is entitled to an initial base
salary of $200,000 per annum, subject to adjustment annually by an amount equal
to the greater of 5% or the annual increase in the Consumer Price Index. The
employment agreement provides for the payment of a performance-related bonus
equal to a specified percentage of base salary paid during the fiscal year if
the Adjusted Pretax Income (as defined) of Allied Bond for the fiscal year
exceeds the Adjusted Pretax Income of the Partnership for the calendar year
ending December 31, 1992. At the discretion of the Board of Directors of Allied
Bond, Mr. Zucker may also receive a discretionary bonus of up to 25% of annual
base salary, provided, however, that the sum of the performance related bonus
and the discretionary bonus for any fiscal year may not exceed 150% of annual
base salary for such fiscal year. The employment agreement also requires Allied
Bond to provide Mr. Zucker with disability income insurance which will provide a
monthly benefit of $7,500 per month and $500,000 in life insurance benefits. If
Mr. Zucker's employment is terminated other than for "cause" or as a result of
Mr. Zucker's disability or a change of control, Mr. Zucker shall be entitled to
severance equal to the greater of one year of his annual base salary or 62.5% of
the base salary that would have been paid to him from the date of termination to
the expiration date of the agreement. In such event, he shall also be entitled
to the pro-rated share of any bonus due for such year in which his employment is
so terminated.
CHANGE IN CONTROL ARRANGEMENTS. Each of the employment agreements with
Messrs. Cooper, Hewitt, Gill, Dunn, Macaulay, H. Silver, B. Silver and Zucker
contains provisions providing for payments in the event of a change in control
of the Company (as defined in the respective agreements). The agreements
entered into with Messrs. Hewitt, Gill, Macaulay, H. Silver and B. Silver
generally provide that if the employee elects to terminate his employment
following a change in control, he will be entitled to receive 299% of his "base
amount" (as defined under the Code) within a specified period following such
termination. If Herbert R. Silver and Bernard Silver have both terminated their
employment with Allied Bond following a change in control of the Company, Mr.
Zucker's agreement also provides that he may elect to terminate his employment
and receive 299% of his "base amount" within a specified period following such
termination. Mr. Dunn's agreement specifies that under such circumstances he
will receive the lesser of $1,500,000 or 299% of his "base amount" and will be
entitled to the insurance policies described above. The "base amount", as
defined under the Code, is the average annual compensation paid for the five
taxable years (or such shorter period during which services are performed on
behalf of the Company) prior to a change of control of the Company.
Mr. Cooper's agreement provides that if his employment terminates as a
result of a change in control, he will receive an amount equal to the discounted
present value of the sum of (i) unpaid salary and bonus to which he would have
been entitled under the agreement through December 31, 1997 (assuming a 5%
yearly increase in the annual salary and a bonus in each year equal to the
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amount of the annual salary paid during such year), (ii) the pension that would
have been payable to Mr. Cooper starting in 1998 based on his life expectancy at
the time of termination assuming that his employment had continued with the
Company until December 31, 1997, (iii) the amount that would be payable to Mr.
Cooper as a consultant for a period of ten years and (iv) 10% of Mr. Cooper's
annual salary for each remaining year of the agreement for legal and accounting
services to which Mr. Cooper was entitled under the agreement.
A portion of any payments which may be made to employees upon a change in
control of the Company may be deemed an "excess parachute payment" within the
meaning of the Code, in which event such portion will not be a tax-deductible
expense for the Company.
SHAREHOLDER RIGHTS PLAN. On February 17, 1988, the Board of Directors of
the Company declared a dividend distribution of one common stock purchase right
(a "Right") for each outstanding share of Common Stock. The dividend was
payable to holders of record of Common Stock at the close of business on March
14, 1988 (the "Record Date").
The Rights were issued pursuant to a Rights Agreement dated as of March 14,
1988 between the Company and Registrar and Transfer Company, as Rights Agent
(the "Rights Agreement"), which Rights Agreement has been amended effective as
of May 23, 1990 and as of September 16, 1992. Pursuant to an agreement dated as
of August 22, 1994, The First National Bank of Boston was substituted as the
Rights Agent under the Rights Agreement. The Rights will not be exercisable
until the Distribution Date (as defined below) and will expire at the close of
business on December 31, 1998, unless earlier redeemed by the Company as
described below. Each Right entitles the registered holder to purchase from the
Company one-half of one share of Common Stock at an exercise price of $30 per
whole share (the "Exercise Price"), subject to adjustment. The Exercise Price
may be paid, at the option of the holder, in cash or shares of Common Stock
having a market value at the time of exercise equal to the Exercise Price.
Until the earlier to occur of (i) 30 days following a public announcement
that a person or group of affiliated or associated persons ("Acquiring Person"),
other than certain Exempted Persons and Schedule 13G Filers, as defined in the
Rights Agreement, have acquired, or obtained the right to acquire, beneficial
ownership of 15% or more of the outstanding shares of Common Stock, unless such
acquisition was previously authorized by a vote of the Company's stockholders,
and (ii) the tenth business day following the commencement, or announcement, of
a tender offer or exchange offer, the consummation of which would result in a
person or group (other than Exempted Persons) beneficially owning 30% or more of
such outstanding shares of Common Stock (the earlier of such dates is hereafter
referred to as a "Distribution Date"), the Rights will be evidenced by the
Common Stock certificates and will be transferred with and only with such Common
Stock certificates. The transfer of any certificates for Common Stock
outstanding will also constitute the transfer of the Rights associated with the
Common Stock represented by such certificate. Common Stock certificates issued
after the Record Date contain a notation incorporating the Rights Agreement by
reference. Under the Rights Agreement, "Exempted Persons" are defined to
include American Diversified Enterprises, Inc. and its subsidiaries, affiliates
and associates, and "Schedule 13G Filers" are defined as certain persons or
entities who have filed and remain eligible to file a Schedule 13G under
Regulations 13d-1(b) and 13d-2(b) promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act").
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In the event that (i) the Company is the surviving corporation in a merger
or other business combination with an Acquiring Person and the Company's Common
Stock remains outstanding and unchanged, (ii) after the Distribution Date a
person becomes the beneficial owner of 40% or more of the then outstanding
shares of Common Stock except pursuant to an offer for all outstanding shares of
Common Stock at a price at least equal to or greater than $30 per share cash net
to seller (the "Minimum Cash Amount"), (iii) an Acquiring Person engages in one
or more "self-dealing" transactions as set forth in the Rights Agreement, or
(iv) during such time as there is an Acquiring Person, an event occurs which
results in such Acquiring Person's ownership interest being increased by more
than 1% (e.g., a reverse stock split), the number of shares of Common Stock to
be acquired upon exercise of a Right shall be adjusted so that each holder of
record of a Right, other than Rights that are beneficially owned by the
Acquiring Person or certain transferees of the Acquiring Person (which will
thereafter be void), will thereafter have the right to receive, upon exercise of
each Right, that number of shares of Common Stock having a market value equal to
two times the Exercise Price of the Right, provided, however, that such
adjustment shall not be applicable if the stockholders of the Company have
previously approved any such transaction in accordance with the provisions of
the Company's Certificate of Incorporation. For example, if the Exercise Price
were $30 and the current market price were $20, each Right not owned by an
Acquiring Person (or certain transferees) following an event set forth in the
preceding paragraph would entitle its holder to purchase three shares of Common
Stock for $30 (payable in cash or shares of Common Stock).
In the event there is insufficient Common Stock authorized to satisfy the
exercise of all Rights outstanding, the Company may suspend the exercise of
Rights for a period of 90 days to obtain stockholder approval for authorization
of a sufficient number of shares of Common Stock, and if such approval is not
obtained, the Rights Agreement provides for the payment in cash to each holder
of record of a Right in an amount equal to two times the Exercise Price, subject
to the limitations of any applicable loan or other restrictive agreements.
In the event that, at any time after there exists an Acquiring Person and a
public announcement to that effect has been made, (i) the Company is acquired in
a merger or other business combination transaction in which the Company is not
the surviving corporation or in which its Common Stock is changed or exchanged,
or (ii) 50% or more of the Company's assets or earning power is sold or
transferred, each holder of a Right (except Rights held by an Acquiring Person,
or certain transferees of an Acquiring Person) thereafter will have the right to
receive, upon exercise of each Right, that number of shares of common stock of
the acquiring company having a fair market value equal to two times the Exercise
Price of the Right, unless the stockholders of the Company have approved any
such transaction in accordance with the provisions of the Certificate of
Incorporation.
The Exercise Price payable and the number of shares of Common Stock or
other securities or property issuable upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on or a subdivision, combination or reclassification of the Common
Stock, (ii) if holders of the Common Stock are granted certain rights or
warrants to subscribe for Common Stock or securities convertible into Common
Stock at less than the current market price of the Common Stock, or (iii) upon
the distribution to holders of the Common Stock of evidences of indebtedness or
assets (excluding cash dividends out of earnings or retained earnings at a rate
not in excess of $1.00 per annum) or of subscription rights or warrants (other
than those referred to above). The Minimum Cash Amount is also subject to
similar
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adjustment. With certain exceptions, no adjustment in the Exercise Price will
be required until cumulative adjustments amount to at least 1% of the Exercise
Price. No fractional shares or Rights will be issued and, in lieu thereof, an
adjustment in cash will be made based on the market price of the Common Stock on
the last trading date prior to the date of exercise.
At any time until 30 days following the date on which a person becomes an
Acquiring Person, the Company may redeem the Rights in whole, but not in part,
at a price of $.01 per Right. After the redemption period has expired, the
Company's right of redemption may be reinstated if no triggering event (as
defined in the Rights Agreement) has occurred and an Acquiring Person reduces
its beneficial ownership to 10% or less of the outstanding shares of Common
Stock in a transaction or series of transactions not involving the Company at a
time when there exists no other Acquiring Person. Immediately upon the action
of the Board of Directors ordering redemption of the Rights, the Rights will
terminate and the holders of Rights only will be entitled to receive the $.01
per Right redemption price.
Any of the provisions of the Rights Agreement may be amended by the Board
of Directors of the Company prior to the Distribution Date. After the
Distribution Date, the provisions of the Rights Agreement may be amended by the
Board of Directors in order to cure any ambiguity, to make changes which do not
adversely affect the interests of holders of Rights (excluding the interests of
any Acquiring Person), or to shorten or lengthen any time period under the
Rights Agreement; provided, however, that no amendment to lengthen the time
period governing redemption shall be made at such time as the Rights are not
redeemable.
INDEMNIFICATION AGREEMENTS WITH DIRECTORS AND EXECUTIVE OFFICERS
The Company has entered into indemnification agreements with each of its
directors and executive officers. Under those agreements, the Company has
agreed to indemnify such directors and executive officers against certain
liabilities arising out of their service as a director or officer of the Company
and/or any subsidiary of the Company. The indemnification agreements provide,
as a contract right, substantially the same protection as is currently provided
by the Company's Certificate of Incorporation and By-Laws and also provide a
clear procedure for pursuit of a claim to indemnification. In addition, the
agreements provide for the creation and funding of a trust to satisfy
indemnification claims in the event of the occurrence of a Potential Change in
Control (as defined). The indemnification agreements are applicable to claims
asserted after their respective effective dates arising from acts or omissions
occurring before or after their effective dates.
Two stockholder class actions brought in June 1991 in the United States
District Court for the District of New Jersey were certified as class actions
and consolidated into one action entitled UNION SECURITIES LITIGATION. The
actions, which were brought against the Company, CCC, certain directors and
current and former executive officers of the Company, as well as certain former
directors and officers of CCC, allege violations of Sections 10(b) and 20 of the
Exchange Act, and Rule 10b-5 promulgated thereunder, in connection with the
Company's restatement of certain of its financial statements for the first three
fiscal quarters of its 1990 and 1991 fiscal years. The Company and the
individual defendants denied any and all wrongdoing or liability and vigorously
defended the action. In order to end the substantial expense and distraction of
continued litigation, the Company and the other defendants settled the action,
which settlement was approved by the court. Pursuant to such settlement, all
claims against the Company and the other defendants have
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been dismissed with prejudice. The Company and its insurer each paid one-half
of the $1,500,000 settlement amount and related legal costs. That portion of
the settlement amount that was not covered by insurance was charged against
existing reserves, all of which had been recorded in prior fiscal years.
In a lawsuit brought in 1993 in the United States District Court for the
Northern District of California against TSI and certain directors and officers
of TSI, three individuals engaged by TSI as independent contractors allege that
TSI improperly treated them as independent contractors rather than employees.
All of the asserted claims have been dismissed by the court with prejudice. In
1993, some of the same individuals who initiated the preceding lawsuit, together
with certain other individuals, brought an action in the United States District
Court for the Northern District of California against TSI and certain directors
and officers of TSI alleging breach of contract and mental distress as a result
of TSI's failure to supply them with copies of a monthly publication distributed
by TSI. One individual has also brought suit alleging wrongful termination.
The claims in each of these actions have been reviewed by counsel and, based on
their assessment, management has concluded that the claims are without merit.
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Employee Benefit and Compensation Committee consists of John E. Angle,
Robert A. Kerr, James C. Miller III and Stuart J. Northrop, each of whom is a
non-employee member of the Board of Directors. The same directors comprise the
Stock Option Committee, and the committees met jointly on two occasions in
fiscal 1995 to afford the members the opportunity to consider all compensation
related matters at one time. The Employee Benefit and Compensation Committee
also met separately on one occasion in fiscal 1995. For purposes hereof, the
Employee Benefit and Compensation Committee and the Stock Option Committee will
be referred to herein as the "Committee".
GENERAL. The Company's executive compensation policies are intended to
provide competitive levels of compensation in order to attract and retain
qualified executives and to provide incentives to its senior management to
enhance profitability and stockholder returns. The Committee believes such
objectives are best achieved by having a substantial portion of an executive
officer's cash compensation tied to annual earnings of the Company or the
relevant business unit and by providing long-term incentives through the use of
stock options. The Committee also believes in rewarding exceptional performance
and contributions to the development of the Company's business.
To achieve these objectives and to retain the services of senior management
for an extended period, the Company has entered into employment agreements with
each of its executive officers. The terms of each employment agreement are more
particularly described under the heading "Employment Agreements and Change of
Control Arrangements." These agreements (other than in the case of Mr. Gill)
generally provide for a competitive base salary plus a cash bonus which is based
on the annual financial performance of the Company, in the case of Mr. Cooper,
and, in the case of executives with responsibility for specific business units,
on the annual financial performance of the business unit for which the executive
has overall responsibility. In the case of Mr. Gill, the Company's employment
agreement with Mr. Gill provides for a competitive base salary plus a
discretionary bonus to be determined by the Board of Directors or the Committee.
By calculating a major component of the executive's cash compensation on the
basis of annual financial
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performance, the Committee seeks to encourage the senior executive to achieve
maximum profitability. The Committee also reviews the performance of each
executive officer on an annual basis and may approve additional compensation or
waive requirements of the executive's employment contract to reward an
exceptional individual effort or performance.
The Committee believes that stock-based compensation arrangements are
beneficial in aligning the interests of management and the Company's
shareholders over the long-term. Since 1984, the two principal vehicles for
awarding stock-based compensation have been the 1984 Plan and the 1994 Plan.
Under the 1994 Plan, which was approved and adopted by the Company's
stockholders on November 17, 1994, the Committee is authorized to grant to key
employees stock options as well as other stock-based awards, including but not
limited to restricted stock grants, deferred stock and performance-based stock
awards. A total of 500,000 shares have been reserved for issuance under the
1994 Incentive Stock Plan. It is contemplated that the principal form of awards
under the 1994 Incentive Stock Plan will be stock options. The number of
options granted to each executive officer under the 1994 Plan will generally
depend on the executive's performance, the performance of the Company or the
executive's business unit, the level of his responsibility, the extent of other
forms of compensation payable to him, the terms of his employment agreement, if
applicable, and the number of options previously granted to him. In fiscal
1995, the Committee awarded options under the 1994 Plan to purchase an aggregate
of 30,000 shares of the Company's Common Stock. Under the terms of such plan,
all grants of stock options were made at no less than market value, so that the
person receiving options will benefit from appreciation of the price of the
stock to the same extent as other stockholders.
From 1984 to September 1994, the Committee awarded stock options to
executive officers principally under the Company's 1984 Plan, which expired
according to its terms on September 17, 1994. All options granted under such
plan were issued with an exercise price equal to the fair market value of a
share of Common Stock on the date of grant, generally vested within three years
from the date of grant and were generally exercisable until the expiration of
ten years and six months from the date of grant. In fiscal 1995, the Committee
awarded options under the 1984 Plan to purchase an aggregate of 68,083 shares of
the Company's Common Stock. The exercise provisions, vesting provisions and
expiration date of the options granted to Mr. Hewitt under the 1984 Plan conform
to the specific terms included in his employment agreement for options issued
pursuant thereto.
COMPENSATION OF THE CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER.
During fiscal 1995, the compensation paid to Melvin L. Cooper, the Chairman of
the Board and Chief Executive Officer, was governed by the terms of his
employment agreement described above. In fiscal 1995, the Board of Directors
approved an amendment to extend the term of Mr. Cooper's employment through
December 31, 1997 and to provide for the lump-sum payments to be made to Mr.
Cooper in the event of the termination of his employment or his voluntary
retirement prior to the expiration of his employment agreement. In addition, in
fiscal 1993 the Committee approved an amendment to Mr. Cooper's employment
agreement to continue disability insurance coverage, if available, for the
remainder of his life. The disability insurance premium for fiscal 1995 was
$12,251. The payment of premiums otherwise would have terminated when Mr.
Cooper attained the age of 65. The foregoing amendments were considered merited
by Mr. Cooper's performance as Chief Executive Officer.
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<PAGE>
COMPENSATION DEDUCTION LIMITATION. As part of the 1993 Omnibus Budget
Reconciliation Act, Congress enacted Section 162(m) of the Code, effective in
1994, which limited to $1 million per year the federal income tax deduction
available to public companies for compensation paid to its chief executive
officer and its four other highest paid executive officers, unless that
compensation qualifies for certain "performance-based" exceptions provided for
in that section of the Code. The Committee will consider ways to maximize the
deductibility of executive compensation, while retaining the discretion the
Committee deems necessary to compensate executive officers in a manner
commensurate with performance and the competitive environment for executive
talent. Under present employment arrangements, it is not anticipated that any
officer will receive compensation subject to this limitation during the fiscal
year ending June 30, 1996.
Submitted by the Employee Benefit and Compensation Committee and the Stock
Option Committee of the Board of Directors: John E. Angle, Robert A. Kerr, James
C. Miller III, Stuart J. Northrop.
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STOCK PERFORMANCE GRAPH
The following graph charts, on an annual basis, the total stockholders'
return over a five-year period commencing on June 30, 1990, with respect to an
investment in the Company's Common Stock as compared to the S&P 500 and a peer
group selected by the Company for purposes of comparison (the "Peer Group").
The Peer Group consists of Payco American Corporation and FCA International
Limited. With respect to companies in the Peer Group, dividend reinvestment has
been assumed and the returns of each such company have been weighted to reflect
stock market capitalization. The Company has paid no dividends with respect to
its Common Stock during the five-year period.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG THE UNION CORPORATION, THE S&P 500 AND A PEER GROUP
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED LINE GRAPH
<TABLE>
<CAPTION>
UCO
Cumulative Total Return
------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
6/90 6/91 6/92 6/93 6/94 6/95
Union Group 100 95 81 50 40 66
PEER GROUP 100 87 67 42 50 41
S & P 500 100 107 122 138 140 177
<FN>
* Assumes $100 invested on June 30, 1990 in stock or index, with reinvestment of
all dividends.
</TABLE>
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CERTAIN TRANSACTIONS
In December 1992, Allied Bond, a subsidiary of the Company, acquired
substantially all of the assets and assumed certain liabilities of Allied Bond &
Collection Agency, a Pennsylvania general partnership (the "Partnership"), for
an initial purchase price of $40,300,000, which included acquisition related
costs. Contingent payments not to exceed approximately $8,300,000 may be
payable by the Company if the earnings of Allied Bond exceed certain levels over
the five and one-half year period ending June 30, 1998. During the fiscal year
ended June 30, 1995, the Company made contingent payments of approximately
$260,000 to the Partnership. Herbert R. Silver, a director and executive
officer of the Company, and Bernard Silver, an executive officer of the Company,
were the general partners of the Partnership.
Allied Bond leases its main facility from a partnership of which Herbert R.
Silver and Bernard Silver are general partners pursuant to a lease agreement
that expires in July 2002. The Company believes the terms of the lease are
comparable to those that would have been obtained under arrangements with
unrelated third parties. During the fiscal year ended June 30, 1995, Allied
Bond paid approximately $513,000 to the partnership pursuant to such lease.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the next annual meeting
of stockholders, to be held in 1996, must be received by the Company at 145
Mason Street, Greenwich, Connecticut 06830 by June 14, 1996 to be included in
the proxy statement and form of proxy relating to that meeting.
AUDITORS
Representatives of Ernst & Young LLP are expected to attend the annual
meeting and, while they are not expected to make a statement, they will have an
opportunity to do so if they desire. They will also be available to answer
appropriate questions.
OTHER INFORMATION
The cost of soliciting proxies will be borne by the Company. Following the
original mailing of proxy soliciting material, regular employees of the Company
may solicit proxies by mail, telephone, telegraph and personal interview.
Arrangements have been made with brokerage houses and other custodians, nominees
and fiduciaries which are record holders of the Company's stock to forward proxy
soliciting material and annual reports to the beneficial owners of such stock,
and the Company will reimburse such record holders for their reasonable expenses
incurred in providing such services. As of the date of this Proxy Statement,
the Company has not retained the services of a proxy solicitor to assist in the
solicitation of proxies; however, the Company may determine prior to the date of
the annual meeting to retain a proxy solicitor, in which case the Company
anticipates that the cost of doing so will not exceed $5,000.
A copy of the Company's annual report for the fiscal year ended June 30,
1995 is enclosed.
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The Board of Directors is aware of no other matters that are to be
presented to stockholders for formal action at the meeting. If, however, any
other matters properly come before the meeting or any adjournment thereof, it is
the intention of the persons named in the enclosed form of proxy to vote such
proxy in accordance with their judgment on such matters.
By Order of the Board of Directors.
Nicholas P. Gill
SECRETARY
Dated: Greenwich, Connecticut
October 12, 1995
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[FRONT]
PROXY THE UNION CORPORATION
PROXY SOLICITED BY
THE BOARD OF DIRECTORS OF THE UNION CORPORATION
FOR THE ANNUAL MEETING OF STOCKHOLDERS--NOVEMBER 16, 1995
The undersigned hereby appoints MELVIN L. COOPER, and NICHOLAS P. GILL, and
each of them, with power of substitution to each, as the proxies and attorneys
of the undersigned to vote, as designated below, all shares of common stock
which the undersigned would be entitled to vote if personally present at the
Annual Meeting of Stockholders of The Union Corporation to be held in the
Harmonie Room of the Harmonie Club, Second Floor, 4 East 60th Street, New York,
New York at 10:00 a.m. Eastern Standard Time on November 16, 1995.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
(to be valid, this proxy must be signed and dated on the reverse side)
<PAGE>
[BACK]
If no direction is given, this proxy will be voted FOR the election of the
nominees set forth in Proposal No. 1
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1.
1. Election of Directors
Nominees: John E. Angle, James C. Miller III and
Herbert R. Silver
/ / FOR / / WITHHOLD
/ / ------------------------------------
For all nominees except as noted above
2. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the meeting or any
adjournment thereof.
Mark Here / /
For Address
Change and
Note at Left
Please mark, date and sign as your name appears above and return in
the enclosed envelope. If acting as executor, administrator,
trustee, guardian, etc. you should so indicate when signing. If the
signer is a corporation, please sign the full corporate name, by a
duly authorized officer. If shares are held jointly, each
stockholder named should sign.
Date:
-------------------------------------------------------
Signature:
--------------------------------------------------
Signature:
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