<PAGE> 1
GRANITE FINANCIAL, INC.
16100 TABLE MOUNTAIN PARKWAY
SUITE A
GOLDEN, COLORADO 80403
PROXY STATEMENT
RELATING TO THE ANNUAL MEETING
OF SHAREHOLDERS TO BE HELD DECEMBER 17, 1997
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 [ ]
[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission only (as permitted by Rule
14a-6(e)(2)).
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
GRANITE FINANCIAL, INC.
(Name of Registrant as Specified in Its Charter)
-------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1 (Set forth the amount on
which the filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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<PAGE> 2
GRANITE FINANCIAL, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 17, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Granite Financial, Inc. will be held at the Company's offices at 16100 Table
Mountain Parkway, Suite A, Golden Colorado 80403 on Wednesday, December 17,
1997, at 9:00 a.m., Mountain Time, and thereafter as it may from time to time
be adjourned, for the following purposes:
1. To elect five directors to hold office for the term set forth
in the accompanying Proxy Statement and until their successors
shall have been duly elected and qualified;
2. To approve an amendment to the Company's 1996 Omnibus Stock
Option Plan to permit the issuance of an additional 450,000
shares of Common Stock pursuant to the Plan;
3. To ratify the appointment of Ehrhardt Keefe Steiner & Hottman
P.C. as independent auditors; and
4. To consider and transact such other business as may properly
come before the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on October 22,
1997, as the record date for the determination of shareholders entitled to
notice of and to vote at this meeting or any adjournment thereof. All
shareholders are cordially invited to attend the meeting, but only shareholders
on such date will be permitted to vote at this meeting.
By Order of the Board of Directors,
October 24, 1997 /s/ William W. Wehner
-----------------------------------
William W. Wehner,
Chairman of the Board
IMPORTANT
PLEASE MARK, DATE, SIGN, NOTE ANY CHANGE OF ADDRESS AND RETURN THE ENCLOSED
PROXY CARD IMMEDIATELY IN THE ENCLOSED, SELF-ADDRESSED ENVELOPE. NO POSTAGE IS
NECESSARY IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE MEETING, YOU MAY
REVOKE YOUR PROXY AND VOTE IN PERSON IF YOU DESIRE TO DO SO.
<PAGE> 3
GRANITE FINANCIAL, INC.
16100 TABLE MOUNTAIN PARKWAY
SUITE A, GOLDEN, COLORADO 80403
(303) 216-3500
PROXY STATEMENT
RELATING TO THE ANNUAL MEETING
OF SHAREHOLDERS TO BE HELD DECEMBER 17, 1997
GENERAL
The enclosed proxy is solicited by the Board of Directors of Granite
Financial, Inc. (hereinafter referred to as the "Company") for use at the
Annual Meeting of Shareholders to be held at the Company's principal offices
located at 16100 Table Mountain Parkway, Suite A, Golden, Colorado at 9:00
a.m., Mountain Time, on Wednesday, December 17, 1997, for the purposes set
forth in the foregoing Notice of Annual Meeting of Shareholders. This Proxy
Statement and the form of proxy will be mailed to shareholders on or about
October 28, 1997. A shareholder giving a proxy has the power to revoke it at
any time prior to its exercise by notifying the Secretary of the Company.
The record date with respect to this solicitation is October 22, 1997.
All holders of record of Common Stock of the Company as of the close of
business on that date are entitled to vote at the meeting. As of that date,
the Company had 6,140,000 shares of Common Stock outstanding. Each share of
Common Stock is entitled to one vote. A majority of the shares entitled to
vote, present in person or represented by proxy, constitutes a quorum. If a
quorum exists, action on any matter other than the election of directors will
be approved by the affirmative vote of the majority of shares present in person
or by proxy at the meeting and entitled to vote. Directors will be elected by
a plurality of the votes of the shares present in person or by proxy at the
meeting and entitled to vote in the election. Abstentions and broker non-votes
are not counted in the calculation of the vote.
A proxy may be revoked by the shareholder at any time prior to its
being voted. If a proxy is properly signed and is not revoked by the
shareholder, the shares it represents will be voted at the meeting in
accordance with the instructions of the shareholder. If the proxy is signed
and returned without specifying choices, the shares will be voted in accordance
with the recommendations of the Board of Directors. The cost of this
solicitation will be borne by the Company. Employees and directors of the
Company may solicit proxies but will not receive any additional compensation
for such solicitation. Proxies may be solicited personally or by mail,
facsimile, telephone or telegraph.
As a matter of policy, proxies, ballots and voting tabulations that
identify individual shareholders are held confidential by the Company. Such
documents are available for examination only by the inspectors of election,
none of whom is an employee of the Company, and certain employees associated
with tabulation of the vote. The identity of the vote of any shareholder is
not disclosed except as may be necessary to meet legal requirements.
<PAGE> 4
I. ELECTION OF DIRECTORS
The five nominees for election as directors are identified below. All
nominees are now members of the Board of Directors. The Board of Directors
knows of no reason why any nominee would be unable to serve as a director. If
any nominee should for any reason become unable to serve, the Board of
Directors may designate another nominee or may reduce the number of directors
to eliminate the vacancy. If the Board of Directors designates another
nominee, the shares represented by all valid proxies will be voted for the
election of such other person.
The following material contains information concerning the nominees,
including their recent employment, positions with the Company, other
directorships and age as of the date of this Proxy Statement.
<TABLE>
<CAPTION>
Capacities in Director
Name Age Which Served Since
- ---------------------------- --- ---------------------------- ---------
<S> <C> <C> <C>
William W. Wehner 56 Chairman of the Board and 1996
Chief Executive Officer
James E. Lewis 48 Director 1996
Laurence A. Schiffer 58 Director 1996
Andrew S. Love, Jr. 54 Director 1996
Samuel R. Freeman 68 Director 1997
- ----------------------------
</TABLE>
WILLIAM W. WEHNER has been the Chairman of the Board of the Company
since its formation in June 1996. Mr. Wehner co-founded and was the managing
member of Granite Financial, LLC, the Company's predecessor, from 1995 to 1996.
From 1989 through 1994, Mr. Wehner served in several capacities with the
Concord group of companies. In 1990, Mr. Wehner formed and was the senior
executive officer of First Concord Acceptance Corporation, an equipment leasing
company and an affiliate of the Concord group of companies. From 1984 through
1989, Mr. Wehner was the President of First Centennial Leasing Corporation, a
joint venture with The Hathaway Company which specialized in leasing high
technology and office equipment products. Mr. Wehner was President and Chief
Executive Officer of Colorado National Leasing, Inc. from 1972 through 1984.
Mr. Wehner is a Certified Lease Professional and is a member of the Equipment
Leasing Association ("ELA") and the United Association of Equipment Lessors
("UAEL"). Mr. Wehner is the father of William W. ("Skip") Wehner, an
executive officer of the Company.
JAMES E. LEWIS has been a director of the Company since its formation
in June 1996, and was a member of the managing board of Granite Financial, LLC,
the Company's predecessor, from its inception to October 1996. Since 1991, Mr.
Lewis has been the Chairman of the Board and President of the JELTEX group of
companies, a group of firms engaged in vegetable farming, fresh produce
distribution and vegetable canning. From 1991 to 1993, Mr. Lewis was a
consultant to the Concord group of companies. From 1986 to 1991, Mr. Lewis was
Vice Chairman and Executive Director of the Concord group of companies. Mr.
Lewis is a certified public accountant and is a member of the American
Institute of CPAs and the Colorado Society of CPAs.
-2-
<PAGE> 5
LAURENCE A. SCHIFFER has been a director of the Company since its
formation in June 1996, and was a member of the managing board of Granite
Financial, LLC, the Company's predecessor, from January 1996 until October
1996. Mr. Schiffer is the Chairman of the Board of Heartland Bank, a
wholly-owned subsidiary of Love Savings Holding Company. Mr. Schiffer is
President of Love Savings Holding Company and has been a member of its Board of
Directors since 1985. He currently is the Chairman of the Board of Love
Funding Corporation. Mr. Schiffer is also Chairman of the Board of Heartland
Leasing Corporation of Missouri, a wholly-owned subsidiary of Heartland Bank.
Mr. Schiffer has served as President of Love Investment Company and Love Real
Estate Company since 1971.
ANDREW S. LOVE, JR. has been a director of the Company since its
formation in June 1996, and was a member of the managing board of Granite
Financial, LLC, the Company's predecessor, from January 1996 until October
1996. Mr. Love is the Chairman of the Board of Love Savings Holding Company.
Mr. Love is also Chairman of the Finance Committee of Heartland Bank, where he
has been a director since 1985. Mr. Love has been a member of the Board of
Directors of Heartland Leasing Corporation of Missouri since its formation in
December 1995. Mr. Love engaged in the private practice of law and was a
partner of Bryan Cave, St. Louis, Missouri, from 1969 to 1992. Mr. Love is
also the Chairman of the Board of Love Investment Company and Love Real Estate
Company. Mr. Love currently serves as a trustee of the Missouri Investment
Trust, and has been a director and secretary of Love Funding Corporation since
1984.
SAMUEL R. FREEMAN has been a director of the Company since May 1997.
Mr. Freeman has been an associate of the JELTEX group of companies since
December 1996. From 1994 to 1996, he served as Chairman of the Denver Research
Institute of the University of Denver. Mr. Freeman was a consultant to the
Southern Pacific Railroad Company from 1993 to 1996 and to the Concord group of
companies from 1989 to 1991 and from 1992 to 1993. From 1991 to 1992, Mr.
Freeman served as Chairman of the Board and President of Belcaro Bank. From
1973 to 1989, he was Vice President and General Counsel of Rio Grande
Industries and the Denver Rio Grande Railroad. Mr. Freeman engaged in the
private practice of law from 1959 to 1973, and is a former Assistant Attorney
General in Colorado. He currently serves as an arbitrator with the American
Arbitration Association and the National Association of Securities Dealers,
Inc.
On February 23, 1995, Oren L. Benton and certain affiliates of Mr.
Benton which constitute a portion of the Concord group of companies filed for
protection under Chapter 11 of the United States Bankruptcy Code. The officers
and directors of the Company who had various affiliations with the Concord
group of companies, as described above, were not officers or directors of the
Concord group of companies at or within two years of the time of such
bankruptcy filings.
EXECUTIVE OFFICERS
The following information concerning the Company's executive officers
includes their prior employment, positions with the Company and age as of the
date of this Proxy Statement.
LARRY K. WHITE, age 43, has been the President and Chief Operating
Officer of the Company since May 1997. From August 1995 to May 1997, Mr. White
was Senior Vice President of Operations and Chief Operating Officer of Rockford
Industries, Inc., a publicly-held specialty finance company. From June 1985 to
August 1995, he held a number of management positions with Tokai Financial
Services, Inc., an equipment leasing company.
-3-
<PAGE> 6
WILLIAM S. COBB, age 41, has been the Senior Vice President of
Corporate Development of the Company since April 1997 and Chief Financial
Officer since June 1997. Mr. Cobb also served as the Chief Financial Officer of
the Company from June 1996 to April 1997, and was the chief financial manager of
Granite Financial, LLC from February 1995 to October 1996. He was also a
director of the Company from September 1996 to April 1997. Mr. Cobb served as
the Chief Financial Officer of the JELTEX group of companies from 1995 to
September 1996. From 1994 to 1995, Mr. Cobb was acting Chief Financial Officer
of Ramtron International Corporation. From 1988 through 1993, Mr. Cobb was Vice
President of Finance for the Concord group of companies. From 1983 to 1988, Mr.
Cobb was a commercial lending officer for Bank of the Southwest and MBank.
KELLY G. LONG, age 33, has been Senior Vice President since June 1996
and Chief Marketing Officer of the Company since April 1997. He was a
marketing director for Granite Financial, LLC from February 1995 to June 1996.
From 1991 until 1995, Mr. Long was marketing director for First Concord
Acceptance Corporation. From 1987 through 1991, Mr. Long was a sales director
for Business Credit Leasing.
WILLIAM W. ("SKIP") WEHNER, age 29, has been Senior Vice President and
Senior Operations Officer of the Company since April 1997. He was Vice
President of Marketing from June 1996 to April 1997, and was marketing director
for Granite Financial, LLC from February 1995 to June 1996. From 1992 through
February 1995, Mr. Wehner was a marketing representative for First Concord
Acceptance Corporation. William W. Wehner, the Chief Executive Officer, is his
father.
MARK A. MIYASAKI, age 33, has been Vice President and Chief Accounting
Officer of the Company since April 1997 and served as the Company's chief
accountant from April 1996 to April 1997. From April 1992 to April 1996, Mr.
Miyasaki was a Second Vice President of Corporate Planning for Life Partners
Group, a publicly-held life insurance company. From September 1986 to April
1992, he was employed by Gelfond Hochstadt Pangburn Stark & Co. (formerly
Laventhol & Horwath). Mr. Miyasaki is a certified public accountant and is a
member of the American Institute of CPAs, the Colorado State Board of
Accountancy and the Colorado Society of CPAs.
COMMON STOCK OWNERSHIP
The table on the following page sets forth certain information
regarding beneficial ownership of Common Stock as of the date of this proxy
statement by (i) each person known by the Company to own beneficially more than
5% of the outstanding Common Stock, (ii) each director or nominee, and (iii)
all executive officers and directors as a group. Except as noted, each person
has sole voting and sole investment or dispositive power with respect to the
shares shown. Unless otherwise indicated, the address of each person listed is
16100 Table Mountain Parkway, Suite A, Golden, Colorado 80403.
-4-
<PAGE> 7
<TABLE>
<CAPTION>
SHAREHOLDINGS ON
OCTOBER 24, 1997
-------------------------------
NUMBER OF PERCENT OF
NAME AND ADDRESS SHARES CLASS
- ------------------------------- ------------ -------------
<S> <C> <C>
William W. Wehner(1) . . . . . . . . . . . . . . . . . . . . . . . . . 545,000 8.7%
Larry K. White . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500 *
William S. Cobb(2) . . . . . . . . . . . . . . . . . . . . . . . . . . 23,000 *
William W. ("Skip") Wehner(3) . . . . . . . . . . . . . . . . . . . . . 5,630 *
Kelly G. Long(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000 *
Mark A. Miyasaki(4) . . . . . . . . . . . . . . . . . . . . . . . . . . 4,900 *
James E. Lewis(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . 765,000 12.4%
Heartland Leasing Corporation of Missouri . . . . . . . . . . . . . . . 1,050,000 17.1%
212 South Central Avenue
St. Louis, Missouri 63105
Laurence A. Schiffer(6)(7) . . . . . . . . . . . . . . . . . . . . . . 1,080,000 17.5%
212 South Central Avenue
St. Louis, Missouri 63105
Andrew S. Love, Jr.(6)(7) . . . . . . . . . . . . . . . . . . . . . . . 1,080,000 17.5%
212 South Central Avenue
St. Louis, Missouri 63105
Samuel R. Freeman(8) . . . . . . . . . . . . . . . . . . . . . . . . . 22,000 *
Kramer Spellman, L.P. . . . . . . . . . . . . . . . . . . . . . . . . . 550,500 9.0%
2050 Center Avenue
Fort Lee, New Jersey 07024
All Directors and Officers
as a Group (10 persons)(9) . . . . . . . . . . . . . . . . . . . . . . 2,480,530 38.6%
- -----------------------
</TABLE>
*Less than 1.0%
(1) Includes 140,000 shares of Common Stock issuable upon
exercise of options that are currently exercisable or will
become exercisable within 60 days of the date of this Proxy Statement.
(2) Includes 20,000 shares of Common Stock issuable upon exercise of options
that are currently exercisable or will become exercisable within 60 days of
the date of this Proxy Statement.
(3) Includes 4,000 shares of Common Stock issuable upon exercise of options
that are currently exercisable or will become exercisable within 60 days of
the date of this Proxy Statement.
(4) Includes 3,900 shares of Common Stock issuable upon exercise of options
that are currently exercisable or will become exercisable within 60 days of
the date of this Proxy Statement.
(5) Includes 45,000 shares of Common Stock issuable upon exercise of options
that are currently exercisable or will become exercisable within 60 days of
the date of this Proxy Statement.
(6) Includes shares owned of record by Heartland Leasing Corporation of
Missouri, a wholly-owned subsidiary of Heartland Bank. Mr. Schiffer is
Chairman of the Board of Heartland Leasing Corporation of Missouri and
Heartland Bank. Mr. Love is a director of Heartland Leasing Corporation
of Missouri and a director of Heartland Bank. Heartland Bank is
wholly-owned by Love Savings Holding Company, of which Mr. Love is Chairman
of the Board and a principal shareholder.
(7) Includes 30,000 shares of Common Stock issuable upon exercise of options
that are currently exercisable or will become exercisable within 60 days of
the date of this Proxy Statement.
(8) Includes 10,000 shares of Common Stock issuable upon exercise of options
that are currently exercisable or will become exercisable within 60 days of
the date of this Proxy Statement.
(9) Includes 286,900 shares of Common Stock issuable upon exercise of options
that are currently exercisable or will become exercisable within 60 days of
the date of this Proxy Statement.
-5-
<PAGE> 8
EXECUTIVE COMPENSATION AND OTHER MATTERS
Summary Compensation Table. The following table sets forth the annual and
long-term compensation for services in all capacities to the Company for the
two fiscal years ended June 30, 1997 and 1996 of the Company's Chief Executive
Officer (the "Named Officer"). No other officer of the Company received total
annual salary and bonus in excess of $100,000 during the year ended June 30,
1997.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
----------------------
AWARDS
ANNUAL COMPENSATION ------------
FISCAL ------------------- SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS/SARS(#) COMPENSATION($)
- --------------------------- ------ --------- -------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
William W. Wehner, 1997 $256,000 -- 50,000 $15,700(1)
Chairman of the Board and 1996 196,000 -- 90,000 10,037(1)
Chief Executive Officer
- -------------------
</TABLE>
(1) Such amount consists of an automobile allowance, club dues and associated
expenses.
Option Grants Table. The following table sets forth information on grants
of stock options during the fiscal year ended June 30, 1997 to the Named
Officer.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES PERCENT OF TOTAL EXERCISE OR
UNDERLYING OPTIONS/ OPTIONS/SARS GRANTED TO BASE PRICE EXPIRATION
NAME SARS GRANTED EMPLOYEES IN FISCAL YEAR ($/SHARE) DATE
- --------------- ------------------ ------------------------ ----------- ----------
<S> <C> <C> <C> <C>
William W. Wehner 50,000(1) 43.5% $ 10.45 April 25, 2007
- ---------------
</TABLE>
(1) Incentive options granted pursuant to the Company's Option Plan at 110% of
fair market value at the date of grant and exercisable at the time of
grant.
Fiscal Year-End Options/Option Values Table.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDER- VALUE OF UNEXERCISED IN-
LYING UNEXERCISED OPTIONS THE-MONEY OPTIONS AT
OPTIONS AT FISCAL YEAR-END(#) FISCAL YEAR-END($)(1)
----------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
William W. Wehner 140,000 -0- $ 198,000 -0-
- --------------------
</TABLE>
(1) The dollar values are calculated by determining the difference between the
exercise price of the options and the closing sale price for the Common
Stock of $8.75 on June 30, 1997, the last trading day of the fiscal year.
The Named Officer did not exercise any options in the fiscal year ended
June 30, 1997.
COMPENSATION OF DIRECTORS
No employee of the Company receives any additional compensation for his
services as a director. Non-employee directors each receive an annual retainer
of $10,000 per year payable monthly, $1,000 per meeting attended, $500 per
committee meeting attended and options to purchase 10,000 shares of Common
Stock. The Board of Directors has also authorized payment of reasonable travel
or other out-of-pocket expenses incurred by non-management directors in
attending meetings of the Board of Directors and the committees thereof. The
Board of Directors may consider alternative director compensation arrangements
from time to time.
-6-
<PAGE> 9
EMPLOYMENT CONTRACTS
Effective April 1, 1997, the Company entered into a three-year
employment agreement with William W. Wehner. The agreement provides for, among
other things: (a) a base salary of $250,000 per year, subject to increases at
the discretion of the Board of Directors; (b) a discretionary annual bonus
based upon the Company's performance, as measured by goals and objectives
established annually by the Board of Directors; (c) payment to Mr. Wehner of
his base salary (reduced by the amount received by him from state disability
insurance or workers' compensation or other similar insurance through policies
provided by the Company) for a period of 12 months and payment of $10,000 per
month for 12 months thereafter if he becomes disabled so that he is unable to
perform his duties; (d) four weeks annual vacation; (e) reimbursement of life
insurance premiums in an amount up to $10,000 per year; (f) an automobile
allowance in the amount of $10,000 per year; and (g) reimbursement for ordinary
and necessary expenses incurred by Mr. Wehner in connection with his
employment. The agreement further provides that Mr. Wehner will not, directly
or indirectly, compete with the Company in the equipment lease financing
business for a period of one year following the termination of the agreement
within 75 miles of the Company's offices or the offices of the Company's
independent lease originators. The agreement may be terminated by the Company
only with cause. Mr. Wehner may terminate the agreement with or without cause.
Upon termination of the agreement by Mr. Wehner for cause, and after failure by
the Company to remedy any noncompliance, Mr. Wehner shall be entitled to
receive his base salary and benefits during the remaining term of the
agreement. The agreement further provides that in the event Mr. Wehner's
employment is terminated following a change in control of the Company, Mr.
Wehner will be entitled to receive severance compensation in an amount equal to
2.9 times his compensation during the 12 months immediately preceding the
change in control.
Effective April 28, 1997, the Company entered into an employment
agreement with Larry K. White. The agreement provides for, among other things:
(a) a base salary of $120,000 per year, subject to annual increases at the
discretion of the Board of Directors; (b) annual bonuses at the discretion of
the Board of Directors and guaranteed bonuses of $5,000 and $30,000 on June 30,
1997 and 1998, respectively; (c) four weeks annual vacation; (d) the grant of
an incentive stock option to purchase 10,000 shares of Common Stock at a price
of $9.50 per share in accordance with an annual vesting schedule; and (e) a
term expiring on June 30, 1998, subject to extension by the Company for an
additional one-year period. The agreement further provides that the employee
will not engage in certain competitive activities commencing as of the date of
the agreement and continuing for one year following the date on which the
employee ceases to be employed by the Company.
OTHER COMPENSATION
Effective September 1, 1997, the Company adopted a defined contribution
savings plan (the "401(k) Plan") to provide retirement income to employees of
the Company. The 401(k) Plan is intended to be qualified under Section 401(a)
of the Internal Revenue Code of 1986, as amended. The 401(k) Plan covers all
employees who were employed by the Company on the effective date of the 401(k)
Plan and all employees hired after such effective date who are at least age 18
and have been employed one year. It is funded by voluntary pre-tax
contributions from employees up to a maximum amount equal to 15% of annual
compensation. The Company has the option to make contributions in an amount
determined by the Company, subject to certain limitations imposed by law. Upon
leaving the Company, each participant is 100% vested with respect to both the
participant's contributions and the Company's contributions. Contributions are
invested as directed by the participant in investment funds available under the
401(k) Plan. Full retirement benefits are payable to each participant in a
single cash payment or an actuarial equivalent form of annuity on the first day
of the month following the participant's retirement.
-7-
<PAGE> 10
The Company currently has no retirement, pension or profit sharing
program for the benefit of its directors, officers or other employees other
than the 401(k) Plan, but the Board of Directors may recommend one or more such
programs for adoption in the future.
COMMITTEES OF THE BOARD
The Board of Directors has established a Compensation Committee and an
Audit Committee. The members of the Compensation Committee are James E. Lewis,
Laurence A. Schiffer and Samuel R. Freeman, all of whom are non-management
directors. This Committee reviews and makes recommendations to the Board of
Directors as to general levels of compensation for all employees of the
Company, the annual salary and bonuses of each of the executive officers of the
Company, and reviews and approves compensation and benefit plans of the
Company.
The members of the Audit Committee are William W. Wehner, James E.
Lewis and Andrew S. Love, Jr. The Audit Committee is empowered by the Board of
Directors to review the financial books and records of the Company in
consultation with the Company's accounting and auditing staff and its
independent auditors, and to review with the accounting staff and independent
auditors any questions raised with respect to accounting, auditing policy and
procedure. The Audit Committee reports to the Board of Directors with respect
to such matters and recommends the selection of independent auditors.
BOARD AND COMMITTEE ATTENDANCE
In fiscal year 1997, the Board of Directors held two formal meetings
and all directors attended both meetings. Neither the Compensation Committee
nor the Audit Committee held any formal meetings. However, as permitted under
Delaware law, the Board of Directors, the Compensation Committee and the Audit
Committee took actions by unanimous written consent in lieu of meetings.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED AND RECOMMENDS THAT
SHAREHOLDERS VOTE FOR THE DIRECTOR NOMINEES IDENTIFIED ABOVE.
II. PROPOSAL TO APPROVE AMENDMENT
TO THE 1996 OMNIBUS STOCK OPTION PLAN
The Company's 1996 Omnibus Stock Option Plan (the "Option Plan") was
adopted in order to offer incentives and awards to those persons who are key to
the Company's growth, development and financial success. In light of the
Company's continued growth, the Board of Directors believes that the number of
shares remaining for issuance under the Option Plan is insufficient to provide
adequately for participation by the increased number of eligible employees,
directors and consultants to whom the Compensation Committee would consider
granting options during future periods. The Board of Directors has adopted an
amendment to the Option Plan to increase the number of shares available for
issuance under the Option Plan by an additional 450,000 shares of Common Stock,
bringing the total number of shares available for issuance under the Option
Plan to 900,000 shares of Common Stock.
SUMMARY OF PLAN
The Option Plan permits the grant of options to directors, officers,
employees, agents and consultants of the Company. The Option Plan combines the
features of an incentive and a nonqualified stock option plan, a stock award
plan and a stock appreciation rights ("SAR") plan.
-8-
<PAGE> 11
The Option Plan provides for the granting of incentive stock options
("Incentive Stock Options") within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code") and non-qualified stock options.
Non-qualified stock options may be granted to employees, directors and
consultants of the Company, while Incentive Stock Options may be granted only
to employees. The Option Plan is administered by the Board of Directors, which
determines the terms and conditions of the options granted under the Option
Plan, including the exercise price, number of shares subject to the option and
the exercisability thereof. The Board of Directors may delegate administration
of the Option Plan to the Compensation Committee thereof. The Option Plan was
approved by the sole stockholder of the Company as of June 22, 1996. The
Option Plan was amended and restated in April 1997 in order to make certain
technical modifications thereto and was further amended by the Board of
Directors in June 1997 to increase the number of shares of Common Stock
reserved for issuance thereunder to 900,000 shares.
The exercise price of all Incentive Stock Options granted under the
Option Plan must be at least equal to the fair market value of the Common Stock
of the Company on the date of grant, and must be 110.0% of fair market value
when granted to a 10.0% or more stockholder. The exercise price of all
non-qualified stock options granted under the Option Plan shall be not less
than 85.0% of the fair market value of the Common Stock on the date of grant.
The term of all options granted under the Option Plan may not exceed ten years,
except the term of Incentive Stock Options granted to a 10.0% or more
stockholder may not exceed five years. The Option Plan may be amended or
terminated by the Board of Directors, but no such action may impair the rights
of a participant under a previously granted option.
The Option Plan provides for the award of SARs. A SAR is an incentive
award that permits the holder to receive (per share covered thereby) the amount
by which the fair market value of a share of Common Stock on the date of
exercise exceeds the fair market value of such share on the date the SAR was
granted or at such date as the Compensation Committee designates. The
Compensation Committee may grant SARs independently, in addition to, or in
tandem (such that the exercise of the SAR or related stock option will result
in forfeiture of the right to exercise the related stock option or SAR for an
equivalent number of shares) with a stock option award.
The Option Plan provides the Board of Directors or the Compensation
Committee with the discretion to determine when options granted thereunder
shall become exercisable and the vesting period of such options. Upon
termination of a participant's employment or consulting relationship with the
Company, all unvested options terminate and are no longer exercisable. Vested
non-qualified options remain exercisable for a period not to exceed three
months following the termination date.
The Option Plan provides that, in the event the Company enters into an
agreement providing for the merger of the Company into another corporation or
the sale of substantially all of the Company's assets, any outstanding unvested
option shall become immediately exercisable as of the date of such agreement.
Upon the consummation of the merger or sale of assets, the successor
corporation shall assume such options or substitute another substantially
identical option therefor.
As of June 30, 1997, a total of 407,500 nonqualified and Incentive
Stock Options were outstanding, with exercise prices ranging from $5.95 to
$10.45. Of such outstanding options, 302,500 were exercisable on such date.
Also as of June 30, 1997, there were no SARs outstanding. On October 8, 1997,
301,000 Incentive Stock Options were granted pursuant to the Option Plan and
the amendment. If shareholders do not approve the amendment to the Option
Plan, Incentive Stock Options granted pursuant to the amendment may be
disqualified from favorable tax treatment.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED AND RECOMMENDS THAT
SHAREHOLDERS VOTE FOR APPROVAL OF THE AMENDMENT TO THE 1996 OMNIBUS STOCK
OPTION PLAN WHICH INCREASES THE NUMBER OF SHARES AVAILABLE PURSUANT TO THE PLAN
BY AN ADDITIONAL 450,000 SHARES.
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III. SELECTION OF AUDITORS
The firm of Ehrhardt Keefe Steiner & Hottman P.C. has examined the
financial statements of the Company from inception through June 30, 1997.
Subject to shareholder approval, Ehrhardt Keefe Steiner & Hottman P.C. has been
re-appointed by the Board of Directors to serve as the Company's independent
auditors for the ensuing fiscal year. Representatives of Ehrhardt Keefe
Steiner & Hottman P.C. are expected to be present at the Annual Meeting with
the opportunity to make a statement if it is their desire to do so, and will be
available to respond to appropriate questions from shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF EHRHARDT
KEEFE STEINER & HOTTMAN P.C. AS INDEPENDENT AUDITORS FOR THE COMPANY.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Company's
directors, its executive officers, and any persons holding more than ten
percent of the Company's Common Stock are required to report their initial
ownership of the Company's Common Stock and any subsequent changes in that
ownership to the Securities and Exchange Commission, The Nasdaq Stock Market,
Inc. and the Company. Specific due dates for these reports have been
established and the Company is required to disclose in this proxy statement any
failure to file, or late filing, of such reports. Based solely on the
Company's review of Forms 3, 4 and 5 and amendments thereto furnished to the
Company and written representations with respect to filing of such Forms, the
Company is aware that a Form 4 to report the open market purchase of 3,000
shares of Common Stock was not timely filed by Mr. William S. Cobb, an
executive officer of the Company. Such omitted report was filed with the
Securities and Exchange Commission as soon as Mr. Cobb became aware of the
omission.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In June 1995, Granite Financial, LLC entered into a Lease Sale
Agreement with Heartland Bank, St. Louis, Missouri. The Lease Sale Agreement
called for Heartland Bank to purchase leases from Granite Financial, LLC at a
price which was equal to the remaining cash flows of the leases purchased
(including residual equipment values), discounted to present value at an 11.5%
per annum rate. Lease sales were made in accordance with schedules prescribed
by the Lease Sale Agreement. The Lease Sale Agreement provided that the sale
of leases was on a non-recourse basis to the Company with the exception of any
leases under which a first payment default occurred. The Lease Sale Agreement
also provided that, in the event of any shortfall in the aggregate estimated
value of residual equipment value of the equipment underlying the leases,
Heartland Bank would have recourse to the Company to the extent of any such
shortfall, but only with respect to those leases without firm buy-out
obligations on the part of the lessees. From June 1995 to March 1996,
Heartland Bank purchased leases with a face amount of approximately $16.0
million from Granite Financial, LLC. Immediately prior to the execution of the
Lease Sale Agreement, Heartland Bank had entered into a letter of intent with
Granite Financial, LLC pursuant to which Heartland Bank had committed to
purchase an ownership interest in Granite Financial, LLC, subject to the
satisfaction of certain conditions.
In January 1996, Heartland Leasing, a wholly-owned subsidiary of
Heartland Bank, closed a purchase agreement with the members of Granite
Financial, LLC, Laurence A. Schiffer and Andrew S. Love, Jr., pursuant to which
Heartland Leasing purchased an interest in Granite Financial, LLC equal to
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<PAGE> 13
45% of the total outstanding membership interests of Granite Financial, LLC.
Concurrently with such purchase, Messrs. Schiffer and Love became members of
the board of managers of Granite Financial, LLC. In connection with the
purchase of such membership interests by Heartland Leasing, Messrs. Wehner and
Lewis and Heartland Leasing entered into an agreement granting each other the
right of first refusal to purchase any membership interests any of them
proposed to sell on substantially the same terms as a potential third-party
offer. Such right of first refusal was extinguished by agreement of the
parties on the date of the Company's initial public offering.
In April 1996, Granite Financial, LLC and Heartland Bank entered into a
lease purchase agreement ("Lease Purchase Agreement"), pursuant to which
Granite Financial, LLC repurchased approximately $16.0 million in leases
previously sold to Heartland Bank under the Lease Sale Agreement. The Lease
Purchase Agreement provided for price and discount terms which were identical
to the price and discount terms contained in the Lease Sale Agreement.
However, Heartland Bank received the income from payments under the leases
during the period from the date of sale to Heartland Bank until consummation of
the Lease Purchase Agreement. Granite Financial, LLC repurchased the leases
from Heartland Bank in order to facilitate its first securitization which was
completed in April 1996. The terms of the Lease Purchase Agreement were
negotiated on behalf of Granite Financial, LLC by Mr. Wehner and approved by
Messrs. Wehner and Lewis. Neither of Messrs. Schiffer or Love participated in
the approval of the Lease Purchase Agreement by Granite Financial, LLC.
Although Granite Financial, LLC did not secure an independent determination of
the fairness and reasonableness of such transaction, and believed that
individual leases could have been purchased from unaffiliated third parties at
a price more favorable than that negotiated with Heartland Bank, the Company's
disinterested directors believed that the Company could not have purchased a
similarly sized lease portfolio with comparable delinquency and charge-off
performance on terms more favorable than that negotiated with Heartland Bank.
Subsequent to the closing of the April 1996 asset securitization and
until completion of the initial public offering in October 1996, the Company
continued to sell leases to Heartland Bank in the ordinary course of business
on identical terms to the leases sold from June 1995 to March 1996. The sale
of these leases includes a stream of payments and any residual equipment value
under the leases. However, in the event that estimated residual equipment
value is less than projected by the Company, Heartland Bank will have recourse
to the Company to the extent of any shortfall in the aggregate residual
equipment value estimated by the Company, but only with respect to those leases
without firm buy- out obligations on the part of lessees and with respect to
the entirety of the purchase price of leases experiencing a first payment
default.
In September 1996, Messrs. Wehner and Lewis and Heartland Leasing
advanced an aggregate of $300,000 to Granite Financial, LLC. The advances were
evidenced by promissory notes in the amounts of $57,000 and $108,000 to Messrs.
Wehner and Lewis, respectively, and in the amount of $135,000 to Heartland
Leasing. The promissory notes were unsecured, accrued interest at the rate of
11.0% per annum, and were repaid out of the proceeds of the initial public
offering.
William S. Cobb, the Senior Vice President of Corporate Development and
Chief Financial Officer of the Company, has been employed by the Company since
its inception. Until September 1996, Mr. Cobb devoted approximately 50% of his
time to the operations of the Company. From February 1995 to September 1996,
Mr. Cobb's salary was paid in full by the JELTEX group of companies, of which
James E. Lewis, a director and principal stockholder of the Company, is a
director and principal stockholder. The Company has reimbursed the JELTEX
group of companies $76,000 paid to Mr. Cobb on the Company's behalf.
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<PAGE> 14
Granite Financial, LLC was formed as a limited liability company in
order to permit its members to recognize certain tax benefits, including the
taxation of earnings at the member level, as opposed to both the corporate and
stockholder level. In connection with completion of the initial public
offering, the Company was reorganized from a limited liability company to a C
Corporation under the Code. The board of managers of Granite Financial, LLC
declared a distribution of $111,000 payable to the members of Granite
Financial, LLC immediately prior to the initial public offering (the
"Distribution"). The Distribution was equal to tax liabilities as a result of
income deemed received by certain of the members of Granite Financial, LLC
prior to the date of the initial public offering. A portion of the net
proceeds received by the Company from the initial public offering was used to
pay the Distribution.
ANNUAL REPORT
The Annual Report to Shareholders for the fiscal year ended June 30,
1997 is being sent to all shareholders with this Proxy Statement. The Annual
Report to Shareholders does not form any part of the material for the
solicitation of any Proxy. The Annual Report to Shareholders contains the
Company's Annual Report on Form 10-KSB for the year ended June 30, 1997 as
filed with the Securities and Exchange Commission.
SHAREHOLDER PROPOSALS
Shareholders who intend to submit proposals for inclusion in the Proxy
Statement relating to the year ending June 30, 1998 must do so by sending the
proposal and supporting statements, if any, to the Company no later than June
27, 1998. Such proposals should be sent to the attention of the Corporate
Secretary, Granite Financial, Inc., 16100 Table Mountain Parkway, Suite A,
Golden, Colorado 80403.
OTHER MATTERS
Except for the matters described herein, management does not intend to
present any matter for action at the Annual Meeting and knows of no matter to
be presented at such meeting that is a proper subject for action by the
shareholders. However, if any other matters should properly come before the
Annual Meeting, it is intended that votes will be cast pursuant to the
authority granted by the enclosed Proxy in accordance with the best judgment of
the person or person acting under the Proxy.
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<PAGE> 15
GRANITE FINANCIAL, INC.
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON DECEMBER 17, 1997
KNOW ALL MEN BY THESE PRESENTS: that the undersigned shareholder of Granite
Financial, Inc. (the "Company") hereby constitutes and appoints William W.
Wehner and James E. Lewis, or either of them, as attorneys and proxies, each
with the power to appoint his substitute, and hereby authorizes them to
represent and vote, as designated below, all of the shares of Common Stock of
the Company which the undersigned is entitled to vote at the Annual Meeting of
Shareholders of the Company to be held December 17, 1997, and at any and all
adjournments thereof with respect to the matters set forth below and described
in the Notice of Annual Meeting of Shareholders and Proxy Statement dated
October 24, 1997, receipt of which is acknowledged.
1. TO CONSIDER AND ACT UPON A PROPOSAL TO ELECT MESSRS. WILLIAM W. WEHNER,
JAMES E. LEWIS, LAURENCE A. SCHIFFER, ANDREW S. LOVE, JR. AND SAMUEL R.
FREEMAN AS DIRECTORS TO HOLD OFFICE FOR ONE-YEAR TERMS OR UNTIL THEIR
SUCCESSORS ARE ELECTED AND QUALIFIED.
[ ] FOR ELECTION OF ALL NOMINEES (except as shown below)
Instruction: To withhold authority to vote for any individual
nominee, strike through the nominee's name below.
[ ] WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES
WILLIAM W. WEHNER
JAMES E. LEWIS
LAURENCE A. SCHIFFER
ANDREW S. LOVE, JR.
SAMUEL R. FREEMAN
2. TO CONSIDER AND ACT UPON AN AMENDMENT TO THE COMPANY'S 1996 OMNIBUS STOCK
PLAN TO PERMIT THE ISSUANCE OF AN ADDITIONAL 450,000 SHARES OF COMMON
STOCK PURSUANT TO THE PLAN.
[ ] FOR AMENDMENT
[ ] AGAINST AMENDMENT
[ ] ABSTAIN
3. TO RATIFY THE APPOINTMENT OF EHRHARDT KEEFE STEINER & HOTTMAN P.C. AS
AUDITORS OF THE COMPANY.
[ ] FOR RATIFICATION
[ ] AGAINST RATIFICATION
[ ] ABSTAIN
4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY AND ALL
ADJOURNMENTS THEREOF.
[ ] AUTHORIZED TO VOTE
[ ] ABSTAIN
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned shareholder(s). IF NO INDICATION IS MADE, THIS PROXY WILL
BE VOTED FOR THE NOMINEES LISTED AND FOR PROPOSALS 2 AND 3 AND THE PROXY
HOLDERS WILL VOTE ON ANY PROPOSAL UNDER 4 IN THEIR DISCRETION AND IN THEIR BEST
JUDGMENT.
Please mark, date, and sign exactly as your name appears on your stock
certificate. When shares are held by joint tenants, both should sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such. If a corporation, please sign in full corporate name by
president or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
Dated:
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Signature:
Dated:
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Signature if held jointly
