SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
JANUS AMERICAN GROUP, INC.
-----------------------------------------------
(Name of Registrant as Specified in its Charter)
-----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
N/A
- --------------------------------------------------------------------------------
(5) Total Fee Paid:
N/A
- --------------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials:
N/A
- --------------------------------------------------------------------------------
[_] 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
- --------------------------------------------------------------------------------
<PAGE>
(2) Form, Schedule or Registration Statement No.:
N/A
- --------------------------------------------------------------------------------
(3) Filing Party:
N/A
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(4) Date Filed:
N/A
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2
<PAGE>
JANUS AMERICAN GROUP, INC.
2300 CORPORATE BLVD. N.W., SUITE 232
BOCA RATON, FLORIDA 33431-8596
TELEPHONE (561) 994-4800, FACSIMILE (561) 997-5331
May 2, 1998
To Our Stockholders:
On behalf of the Board of Directors of Janus American Group, Inc. (the
"Company"), I cordially invite you to attend the 1998 Annual Meeting of
Stockholders (the "Annual Meeting"). The Annual Meeting will be held at 2:00
p.m. Eastern Daylight Time on May 29, 1998, at The Holiday Inn Pompano Beach,
1350 South Ocean Boulevard, Pompano Beach, Florida, one of the hotels managed by
the Company. The formal notice of the Annual Meeting appears on the next page.
During the Annual Meeting, stockholders who are present will have the
opportunity to meet and ask questions of our senior management team.
We believe that type of interaction between stockholders and management is
important and hope that you will be able to attend the Annual Meeting.
Whether or not you are able to attend the Annual Meeting, it is important
that your views be represented. To be sure that happens, please sign and date
the enclosed proxy card and return it in the envelope provided. If you plan to
attend the Annual Meeting, please check the appropriate box on the proxy card.
Sincerely,
/s/ LOUIS S. BECK
----------------------------------
Louis S. Beck
Chairman of the Board of Directors
<PAGE>
JANUS AMERICAN GROUP, INC.
2300 CORPORATE BLVD., N.W. SUITE 232
BOCA RATON, FLORIDA 33431-8596
----------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 29, 1998
-----------------------------------------
To Our Stockholders:
The 1998 Annual Meeting of the Stockholders of Janus American Group, Inc.
(the "Company") will be held at The Holiday Inn Pompano Beach, 1350 South Ocean
Boulevard, Pompano Beach, Florida on May 29, 1998 at 2:00 p.m. Eastern Daylight
Time for the following purposes:
(1) To elect three (3) Class B directors;
(2) To ratify the selection of Grant Thornton LLP as the Company's
independent auditors for the fiscal year ending December 31, 1998; and
(3) To 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 May 1, 1998, as
the record date for determining the stockholders entitled to notice of and to
vote at the meeting and any adjournment thereof.
Your attention is directed to the accompanying Proxy Statement for the text
of the resolutions to be proposed at the meeting and further information
regarding each proposal to be made.
STOCKHOLDERS UNABLE TO ATTEND THE MEETING IN PERSON ARE ASKED TO COMPLETE, SIGN
AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY BY MAIL IN THE ENCLOSED
SELF-ADDRESSED ENVELOPE.
By Order of the Board of Directors
/s/ FRANK E. LAWATSCH, JR.
-----------------------------------------
Frank E. Lawatsch, Jr.
Secretary
May 2, 1998
Boca Raton, Florida
<PAGE>
JANUS AMERICAN GROUP, INC.
2300 CORPORATE BLVD., N.W. SUITE 232
BOCA RATON, FLORIDA 33431-8596
------------------------------------
PROXY STATEMENT
------------------------------------
This Proxy Statement is furnished by the Board of Directors (the "Board of
Directors") of Janus American Group, Inc., a Delaware corporation (the "Company"
or "Janus"), in connection with the solicitation of proxies to be used at the
Annual Meeting of Stockholders (the "Meeting") to be held at The Holiday Inn
Pompano Beach, 1350 South Ocean Boulevard, Pompano Beach, Florida, on May 29,
1998 at 2:00 p.m. Eastern Daylight Time, and at any adjournment thereof. This
Proxy Statement and the accompanying Annual Report, are being mailed to
stockholders on or about May 2, 1998. The principal executive offices of the
Company are located at 2300 Corporate Blvd., N.W., Suite 232, Boca Raton,
Florida 33431-8596.
Only stockholders of record at the close of business on the record date,
May 1, 1998, will be entitled to vote at the Meeting and at all adjournments
thereof.
On May 1, 1998 there were issued and outstanding 8,691,735 shares of the
Company's common stock, par value $.01 per share (the "Common Stock"). Each
share of Common Stock is entitled to one vote on each matter to be voted upon.
On May 1, 1998 there were issued and outstanding 10,451.88 shares of the
Company's preferred stock, Series B, par value $.01 per share (the "Preferred
Stock"). The holders of Preferred Stock do not have the right to vote on any
matter being considered at the Meeting. A majority of the shares of Common Stock
entitled to vote at the Meeting will constitute a quorum for the transaction of
business. There are no cumulative voting rights.
GENERAL INFORMATION
VOTING OF PROXIES
If a proxy is properly signed by a stockholder and is not revoked, the
shares represented thereby will be voted at the Meeting in the manner specified
on the proxy, or if no manner is specified with respect to any matter therein,
such shares will be voted by the persons designated therein (a) "FOR" the
election of each of Messrs. Peter G. Aylward, Arthur Lubell and Paul Tipps as
Class B directors of the Company with a term expiring in 2001; (b) "FOR" the
ratification of the selection of Grant Thornton LLP as the Company's independent
auditors for the fiscal year ending December 31, 1998; and (c) in connection
with the transaction of such other business as may properly be brought before
the meeting, in accordance with the judgment of the person or persons voting the
proxy. If any of the nominees for director is unable to serve or for good cause
will not serve, an event that is not anticipated by the Company, the shares
represented by the accompanying proxy will be voted for a substitute nominee
designated by the Board of Directors.
Votes will NOT be considered cast, however, if the shares are not voted for
any reason, including an abstention indicated as such on a written proxy or
ballot, directions are given in a written proxy to withhold votes or if the
votes are withheld by a broker.
<PAGE>
The proxy may be revoked by the stockholder at any time prior to the voting
thereof by giving notice of revocation in writing to the Secretary of the
Company, by duly executing and delivering to the Secretary of the Company a
proxy bearing a later date or by voting in person at the Meeting.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the capital stock of the Company as of May 1, 1998 for
(i) each person who is known by the Company to beneficially own more than 5% of
any class of capital stock; (ii) each named executive officer listed in the
Summary Compensation Table below; (iii) each director of the Company; and (iv)
all directors and executive officers of the Company as a group. Except as
otherwise indicated, each listed person has sole voting power and investment
power over the respective shares owned.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
AMOUNT AND NATURE AMOUNT AND NATURE PERCENT OF PERCENT OF
OF BENEFICIAL OF BENEFICIAL CLASS OF CLASS OF
NAME AND ADDRESS OF OWNERSHIP OF OWNERSHIP OF COMMON STOCK PREFERRED
BENEFICIAL OWNER (1) COMMON STOCK PREFERRED STOCK STOCK STOCK
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Louis S. Beck (2) 2,927,499 8,113.91 34% 78%
- ----------------------------------------------------------------------------------------------------------------------
Harry G. Yeaggy (3) 1,182,500 3,437.97 14% 33%
- ----------------------------------------------------------------------------------------------------------------------
Vincent W. Hatala, Jr. (4) 6,000 -- * --
- ----------------------------------------------------------------------------------------------------------------------
Anthony J. Pacchia (5) 6,000 -- * --
- ----------------------------------------------------------------------------------------------------------------------
Arthur Lubell (6) 6,000 -- * --
- ----------------------------------------------------------------------------------------------------------------------
Richard P. Lerner -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------
James E. Bishop (7) 4,000 -- * --
- ----------------------------------------------------------------------------------------------------------------------
C. Scott Bartlett, Jr. 1,000 -- * --
- ----------------------------------------------------------------------------------------------------------------------
Lucille Hart-Brown -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------
Richard A. Tonges -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------
Michael M. Nanosky -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------
Paul Tipps -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------
Peter G. Aylward -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------
The United States Lines, Inc. and 1,057,048 -- 12% --
United States Lines (S.A.), Inc.
Reorganization Trust, John Paulyson,
Trustee (8)
184-186 North Avenue East
Cranford, New Jersey 07016
- ----------------------------------------------------------------------------------------------------------------------
Beck Hospitality Inc. III (9) 310,000 1,100 4% 11%
8534 E. Kemper Road
Cincinnati, Ohio 45249
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Daewoo Corporation (10) 623,911 -- 7% --
c/o Lubell & Koven
350 Fifth Avenue
New York, New York 10118
- ----------------------------------------------------------------------------------------------------------------------
All directors and executive officers
as a group (13 persons) 4,132,999 10,451.88 47% 100%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Represents less than 1%.
- ------------
(1) Unless otherwise noted, the address of each of the listed persons is
c/o the Company, 2300 Corporate Boulevard, N.W., Suite 232, Boca Raton, Florida
33431-8596.
(2) Includes 310,000 shares of Common Stock and 1,100 shares of preferred
stock held by Beck Hospitality Inc. III. Mr. Beck is an officer, director and
controlling shareholder of Beck Hospitality Inc. III. Mr. Beck has sole voting
power over 2,617,499 shares of common stock and shared voting power over 310,000
shares of common stock.
(3) Includes 310,000 shares of Common Stock and 1,100 shares of preferred
stock held by Beck Hospitality Inc. III. Mr. Yeaggy is an officer, director and
shareholder of Beck Hospitality Inc. III. Mr. Yeaggy has sole voting power over
872,500 shares of common stock and shared voting power over 310,000 shares of
common stock.
(4) Includes options to purchase 6,000 shares of Common Stock that are
currently exercisable.
(5) Includes options to purchase 6,000 shares of Common Stock that are
currently exercisable.
(6) Includes options to purchase 6,000 shares of Common Stock that are
currently exercisable.
(7) Includes options to purchase 4,000 shares of Common Stock that are
currently exercisable.
(8) The Reorganization Trust is the record owner of 1,057,048 shares of
Common Stock for the benefit of former unsecured creditors of United States
Lines, Inc. (U.S. Lines) whose claims have not been resolved. In accordance with
an order of the United States Bankruptcy Court for the Southern District of New
York (In re United States Lines, Inc., Case No. 86B 12240), the Trustee of the
Reorganization Trust votes such shares, on each proposal before shareholders, in
the same proportion "for" or "against" (or "withhold" in the case of director
elections) such proposal as shareholders (other than the Trust) who actually
vote in person or by proxy, but disregarding for this purpose (i) shareholders
who do not vote or who vote "abstain" and (ii) shares of Common Stock issued
after March 16, 1997. The 3,799,999 shares held by Messrs. Beck, Yeaggy and
their affiliate are shares issued after March 16, 1997.
(9) Messrs. Beck and Yeaggy own 75% and 25%, respectively, of the stock of
Beck Hospitality Inc. III and are officers and directors of that corporation.
Beck Hospitality Inc. III has sole voting and investment power over 310,000
shares of common stock. Messrs. Beck and Yeaggy have reported they share voting
and investment power over these shares.
(10) Daewoo Corporation, a public corporation of South Korea with
headquarters in Seoul, was the largest unsecured creditor in the U.S. Lines
bankruptcy and, accordingly, the recipient of the greatest number of shares
through the Reorganization Trust.
PROPOSAL 1--ELECTION OF DIRECTORS
The Board of Directors manages the business of the Company. The Company's
Restated Certificate of Incorporation contains a provision that divides the
Board of Directors into three classes known as Class A, Class B and Class C,
with each class of directors serving a staggered term of three years. Each class
of directors must consist, as nearly as possible, of one-third of the authorized
number of directors. The authorized number of directors is determined from time
to time by a vote of a majority of the directors then in office.
3
<PAGE>
At a meeting of the Board of Directors on March 20, 1998, the Board of
Directors voted to reduce the number of directors from twelve (12) to eleven
(11). Thus, the authorized number of directors is presently fixed at eleven
(11). Three (3) individuals, all allocated to Class B, are standing for election
as directors at the Meeting. Upon election, they will serve for a term to expire
at the Annual Meeting in 2001 and until their successors are elected and
qualified. The terms of the Class A and Class C directors expire in 2000 and
1999 respectively.
Each of Messrs. Aylward, Lubell and Tipps, Class B Directors whose terms
are expiring at the Meeting, have agreed to stand for re-election. Each such
individual is at present available for election. Mr. Anthony J. Pacchia, a Class
B Director whose term also expires at the Meeting, will not be standing for
election at the Meeting.
The affirmative vote of the holders of a plurality of the shares of the
Company's Common Stock voted in person or by proxy at the Meeting is required
for the election of each director.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES.
DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The directors (including class designation), executive officers and
significant employees of the Company are as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
NAME AGE POSITION HELD POSITION SINCE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Peter G. Aylward 56 Director (Class B) 1997
- -----------------------------------------------------------------------------------------------------------
C. Scott Bartlett, Jr. 65 Director (Class A) 1996
- -----------------------------------------------------------------------------------------------------------
Louis S. Beck 52 Chairman of the Board and 1997
Chief Executive Officer
(Class A)
- -----------------------------------------------------------------------------------------------------------
James E. Bishop 46 Director and President (Class C) 1996
- -----------------------------------------------------------------------------------------------------------
Lucille Hart-Brown 49 Director (Class A) 1996
- -----------------------------------------------------------------------------------------------------------
Vincent W. Hatala, Jr. 67 Director (Class C) 1990
- -----------------------------------------------------------------------------------------------------------
Richard P. Lerner 59 Director (Class A) 1996
- -----------------------------------------------------------------------------------------------------------
Arthur Lubell 84 Director (Class B) 1990
- ----------------------------- -------------- --------------------------------------------------------------
Michael M. Nanosky 39 Director and President of 1997
Hotel Operations (Class C)
- -----------------------------------------------------------------------------------------------------------
Anthony J. Pacchia 42 Director (Class B) 1990
- -----------------------------------------------------------------------------------------------------------
Paul Tipps 61 Director (Class B) 1997
- -----------------------------------------------------------------------------------------------------------
Richard A. Tonges 42 Treasurer and Vice President 1997
of Finance
- -----------------------------------------------------------------------------------------------------------
Charles W. Thornton 55 Corporate Counsel 1997
- -----------------------------------------------------------------------------------------------------------
Harry Yeaggy 52 Vice Chairman of the Board 1997
(Class C)
- -----------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
During 1997, the Board of Directors of the Company held eight (8) meetings.
Anthony J. Pacchia, a Class B Director who is not standing for reelection,
attended only five (5) of such meetings which is less than 75% of the meetings
held during the year.
All directors of the Company hold office until their respective successors
are elected and qualified, or until their death, resignation or removal.
Officers serve at the discretion of the Board of Directors.
There are no family relationships between any directors or executive
officers of the Company.
DIRECTORS STANDING FOR REELECTION:
PETER G. AYLWARD
Mr. Aylward has been a director of the Company since April 24, 1997. Mr.
Aylward has been President of Strategic Property Advisers, Inc., an investment
advisory company, since 1987 and has operated his own law firm, specializing in
tax and securities law, since 1992.
ARTHUR LUBELL
Mr. Lubell was designated a creditor representative member of the Board of
Directors pursuant to the Plan of Reorganization in the U.S. Lines bankruptcy in
May 1990 and served as Treasurer of the Company from May 15, 1995 until April
24, 1997. Mr. Lubell has been a member of the law firm Lubell & Koven, New York
City, since 1960, and is counsel to Daewoo International (America) Corp., a
subsidiary of Daewoo Corporation, a former major unsecured creditor of U.S.
Lines and a current stockholder of the Company. On November 23, 1994, pursuant
to a plea agreement, Mr. Lubell pled guilty to a federal misdemeanor offense
charging that he offered compensation to an agent of the Internal Revenue
Service. Mr. Lubell was fined $5,000 and given six months of unsupervised
probation.
PAUL TIPPS
Mr. Tipps has been a Director of the Company since April 24, 1997. Mr.
Tipps has been president of Public Policy Consultants, Inc., a government
affairs consulting firm, since 1983. Since January 1997 he has been a director
of the Federal Home Loan Bank - Cincinnati.
DIRECTORS CONTINUING IN OFFICE
CLASS C DIRECTORS. The following Class C Directors were elected at the
Company's 1996 annual meeting for terms ending in 1999:
JAMES E. BISHOP
Mr. Bishop has served as President and a Director of the Company since
August 1996. Mr. Bishop was Chief Executive Officer of the Company from August
1996 until April 24, 1997 and Executive Vice President from October 1995 to
August 1996. From 1993 to 1995 he was Senior Vice President of Gates Capital
Corp., an investment banking firm. For the seventeen years prior thereto he was
an investment banker and senior manager for various public and private entities.
5
<PAGE>
VINCENT W. HATALA, JR.
Mr. Hatala was designated a creditor representative member of the Board of
Directors pursuant to the Plan of Reorganization in the U.S. Lines bankruptcy in
May 1990 and served as President of the Company from May 15, 1995 until August
28, 1996, and Chairman from May 15, 1995 until April 24, 1997. Mr. Hatala
operated an independent financial consulting business from 1971 until his
retirement from that business in 1990. He was a member of the U.S. Lines
Creditors' Committee from its inception until the conclusion of the U.S. Lines
bankruptcy proceeding in 1990 and served as a co-trustee of the Reorganization
Trust from 1990 to 1993.
MICHAEL M. NANOSKY
Mr. Nanosky has been a Director and President of Hotel Operations of the
Company since April 24, 1997. From March 1990 until he joined the Company, Mr.
Nanosky was President of Beck Group Management Corp., a company engaged in the
hotel management business.
HARRY G. YEAGGY
Mr. Yeaggy has been a Director and Vice Chairman of the Company since April
24, 1997. He has been a principal stockholder and chief operating officer of
Beck Hospitality Inc. III and predecessor companies engaged in the hotel
management business since 1986. He has also been a director and President of
Union Savings Bank in Cincinnati, Ohio since 1986. Union Savings Bank is a
wholly-owned subsidiary of U.S. Bancorp., a savings and loan holding company of
which Mr. Yeaggy is a director and Vice President and Secretary.
CLASS A DIRECTORS. The following Class A directors were elected at the Company's
1997 annual meeting for terms ending in 2000:
C. SCOTT BARTLETT, JR.
Mr. Bartlett has been a Director of the Company since August 1996. Mr.
Bartlett has served as an independent financial consultant advising financial
institutions in matters involving credit policy, loan approvals and loan
workouts since 1990. Mr. Bartlett served as Senior Vice President and Chief
Credit Officer of MTB Bank from 1992 until 1994. Mr. Bartlett served as
Executive Vice President, Senior Lending Officer and Chairman, Credit Policy
Committee for National Westminster Bank USA from 1973 until 1990. Mr. Bartlett
presently serves as a director of the following corporations: Harvard
Industries, Inc. (Chairman, Audit Committee; Compensation Committee); NVR, Inc.
(Audit Committee, Nominating Committee); and The Bibb Company.
LOUIS S. BECK
Mr. Beck has been a Director and Chairman of the Board of the Company since
April 24, 1997. He is also the Company's Chief Executive Officer. He has been a
principal stockholder and Chief Executive Officer of Beck Hospitality Inc. III
and predecessor companies engaged in the hotel management business since 1972.
He has also been a principal stockholder and Chairman of the Board of Union
Savings Bank in Cincinnati, Ohio since 1986. Union Savings Bank is a
wholly-owned subsidiary of U.S. Bancorp, a savings and loan holding company of
which Mr. Beck is a director and President. In addition, since 1992 he has
served as Chairman of the Board of Guardian Savings Bank in Cincinnati, Ohio and
serves as a director and President of its holding company, Guardian Bancorp,
Inc.
6
<PAGE>
LUCILLE HART-BROWN
Ms. Hart-Brown has been a Director since August 1996. Ms. Hart-Brown has
served as President of Benefit Services, Inc. since June 1996. Ms. Hart-Brown
served as Administrator of Marine Engineers' Beneficial Association from 1982
until 1996. Ms. Hart-Brown was a member of the U.S. Lines Creditors' Committee
from inception in 1986 until conclusion of the U.S. Lines bankruptcy proceeding
in 1990.
RICHARD P. LERNER
Mr. Lerner has been a Director of the Company since August 1996. Mr. Lerner
has been a partner with the law firm of Lambos & Junge, New York since 1996. Mr.
Lerner was a partner with the law firm of Lambos & Giardino, New York from 1978
to 1996. Mr. Lerner was a member of the U.S. Lines Creditors' Committee from
inception in 1986 until conclusion of the U.S. Lines bankruptcy in 1990.
OTHER POSITIONS:
CHARLES W. THORNTON
Mr. Thornton has been Corporate Counsel of the Company since April 24,
1997. Mr. Thornton presently is also employed as General Counsel to Beck
Hospitality Inc. III. Prior to joining the Company, Mr. Thornton was General
Counsel to Beck Group Management Corp. since 1989.
RICHARD A. TONGES
Mr. Tonges has been Vice President-Finance and Treasurer of the Company
since April 24, 1997. Mr. Tonges presently is also employed as Chief Financial
Officer to Beck Hospitality Inc. III. Prior to joining the Company, Mr. Tonges
was Chief Financial Officer of Beck Group Management Corp. since September 1978.
Mr. Tonges is a certified public accountant.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company has appointed three committees: the
Audit Committee, the Compensation Committee and the Operating Committee.
AUDIT COMMITTEE. The Audit Committee periodically reviews the Company's
auditing practices and procedures and makes recommendations to management or to
the Board of Directors as to any changes to such practices and procedures deemed
necessary from time to time to comply with applicable auditing rules,
regulations and practices, and recommends independent auditors for the Company.
Members: Peter G. Aylward (Chairman), C. Scott Bartlett, Jr., Richard P. Lerner
and Paul Tipps
COMPENSATION COMMITTEE. The Compensation Committee meets periodically to make
recommendations to the Board of Directors concerning the compensation and
benefits payable to the Company's executive officers and other senior
executives.
Members: Lucille Hart-Brown (Chairman), Richard P. Lerner, Arthur Lubell and
Paul Tipps
7
<PAGE>
OPERATING COMMITTEE. The Operating Committee advises and makes recommendations
to the full Board of Directors with respect to matters of policy relating to the
general conduct of the business of the Company.
Members: Louis S. Beck (Chairman), Peter G. Aylward, C. Scott Bartlett, Jr.,
James E. Bishop and Lucille Hart-Brown
None of the committees met during the year ended December 31, 1997.
STAGGERED BOARD OF DIRECTORS
The Company's Restated Certificate of Incorporation, as amended, provides
for a staggered Board of Directors having three classes: Class A, Class B and
Class C. The number of directors in each class shall consist, as nearly as may
be possible, of one-third of the authorized number of directors. The authorized
number of directors shall be determined from time to time by a majority of the
directors in office.
A classified Board of Directors may have the effect of making it more
difficult to remove incumbent directors, providing such directors with enhanced
ability to retain their positions. A classified Board of Directors may also make
the acquisition of control of the Company by a third party by means of a proxy
contest more difficult. In addition, the classification may make it more
difficult to change the majority of directors for business reasons unrelated to
a change of control.
The Certificate provides that the above provisions regarding classification
of the Board of Directors may not be amended, altered, changed or repealed
except by the affirmative vote of at least 66-2/3% of the shares of Common Stock
entitled to vote at a meeting of the stockholders called for the consideration
of such amendment, alteration, change or repeal, unless such proposal shall have
been proposed by a majority of the Board of Directors.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers and directors, and persons who own more than
10% of a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Based on a review of the copies of reports furnished to the Company, the Company
believes that during the year ended December 31, 1997 all filing requirements
applicable to its officers, directors and 10% beneficial owners were met, except
that initial reports of beneficial ownership on Form 3 by the Company's
directors were filed late.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
DIRECTOR COMPENSATION
The Company's non-employee directors receive an annual retainer of $15,000
and $1,000 per meeting attended of the Board of Directors or any committee
thereof.
8
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or accrued by the
Company for services rendered in all capacities for executive officers of the
Company who received compensation in excess of $100,000 during the period
January 1, 1997 to December 31, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------------ ------------------- ----------------------
AWARDS PAYOUTS
------------------- ----------------------
SECURITIES ALL
NAME AND PRINCIPAL OTHER ANNUAL UNDERLYING OTHER
POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS/SARS COMPENSATION(2)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Louis S. Beck, Chairman 1997 $183,333 -- -- -- $4,561
and Chief Executive 1996 -- -- -- -- --
Officer 1995 -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
James E. Bishop, 1997 $206,173(3) -- $28,705(4) 100,000 --
President 1996 $119,500 $25,000 -- 4,000 --
1995 -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
Michael M. Nanosky, 1997 $ 54,000 $60,000 -- -- $1,660
President of Hotel 1996 -- -- -- -- --
Operations 1995 -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
Harry G. Yeaggy, Vice 1997 $116,667 -- -- -- $3,068
Chairman 1996 -- -- -- -- --
1995 -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------
(1) Messrs. Beck, Nanosky and Yeaggy also receive reimbursement from the
Company for automobile expenses.
(2) The amounts shown in this column represent benefits associated with
split-dollar life insurance policies and disability insurance policies as
follows: (a) the dollar value, on a long-term approach, of the benefit of the
whole-life portion of the premiums for split-dollar life insurance policies paid
by the Company projected on an actuarial basis (Messrs. Beck, $494; Nanosky,
$102; and Yeaggy, $245); (b) Company payments of premiums attributable to the
term life insurance portion of split-dollar life insurance policies (Messrs.
Beck, $4067; Nanosky, $1,174; and Yeaggy, $2133); and (c) Company payments of
premiums attributable to disability insurance policies (Messrs. Nanosky, $384
and Yeaggy, $690).
(3) This figure includes an annual annuity payment of $10,000 paid by the
Company to the named executive officer and a payment of $3,960, representing the
income tax cost attributable to the annuity premium.
(4) In 1997 the Company reimbursed Mr. Bishop $2,203 for dental and medical
expenses and $26,502 for moving expenses incidental to the relocation of the
Company's executive officers from New Jersey to Boca Raton, Florida.
9
<PAGE>
EMPLOYMENT AGREEMENTS
The Company has entered into written employment agreements with Messrs.
Beck, Nanosky and Yeaggy, all dated April 24, 1997 and James E. Bishop dated
April 4, 1997.
The employment agreement with Mr. Beck is for a term of three years, which
ends on April 23, 2000. He is employed as Chairman of the Board, and is paid an
annual salary of $275,000, which may be increased from time to time at the
discretion of the Board of Directors. He may also be paid a bonus in an amount
determined by the Board of Director in its discretion and is entitled to such
benefits as the Board of Directors shall adopt. Mr. Beck expects to devote a
significant portion of his working time to the business of the Company. In the
employment agreement the Company has acknowledged that Mr. Beck is the owner, an
officer and director of other businesses that engage in the same business as the
Company and that, in certain instances, such businesses may be considered to be
in competition with the Company. Together with Mr. Yeaggy, Mr. Beck owns seven
hotels that are managed by the Company and five additional hotel properties that
are managed by their affiliate Beck Hospitality Inc. III. Mr. Beck has agreed
not to engage in any business that competes with the Company other than the
existing businesses. Matters involving potential conflicts of interests will be
referred by management to the Audit Committee of the Board of Directors for
consideration. The Audit Committee is comprised of independent directors.
The employment agreement with Mr. Yeaggy is for a term of three years,
which ends on April 23, 2000. He is employed as Vice Chairman of the Board and
is paid an annual salary of $175,000, which may be increased from time to time
at the discretion of the Board of Directors. His employment agreement is
otherwise substantially similar to the employment agreement between Mr. Beck and
the Company. Mr. Yeaggy expects to devote a significant portion of his working
time to the business of the Company.
The employment agreement with Mr. Bishop is for a term of three years,
which ends on April 23, 2000. He is employed as President of the Company with
general supervisory authority of the business of the Company and its
subsidiaries and charged with the responsibility of preparing and implementing a
strategic plan and seeking out and consummating acquisitions, under the
supervision of and in accordance with policies set by the Chairman of the Board
and the Board of Directors. Mr. Bishop is paid an annual salary of $200,000,
which may be increased from time to time at the discretion of the Board of
Directors. He is also entitled to an annual bonus in an amount to be determined
in accordance with the Company's then current bonus or incentive compensation
plan. Mr. Bishop is also entitled to a comprehensive medical indemnity policy
for himself and his family, an annual allowance of $2,000 for additional
out-of-pocket medical payments, an annual allowance of $2,000 for dental
expenses, an annual payment of $10,000 for the purchase of annuity, grossed up
for the income tax cost, term life insurance coverage in the amount of
$1,000,000 to the extent the same is available at normal market rates, long-term
disability insurance coverage and such other benefits as the Board of Directors
shall adopt and approve for him. In the event of a change in control of the
Company, Mr. Bishop is entitled to a lump sum payment of $300,000.
The employment agreement with Mr. Nanosky is for a term of three years,
which ends on April 23, 2000. He is employed as President of Hotel Operations of
the Company and charged with the responsibilities typical of a division
president. He is paid an annual salary of $120,000, which may be increased from
time to time at the discretion of the Board of Directors. He is also entitled to
an annual bonus of up to $100,000 based upon the Company's success in achieving
budgeted goals for the
10
<PAGE>
Company's hotel properties and operations. Mr. Nanosky is also entitled to a
comprehensive medical indemnity policy for himself and his family, "split
dollar" life insurance coverage in the amount of $480,000, long-term disability
insurance coverage and such other benefits as the Board of Directors shall adopt
and approve for him.
STOCK OPTIONS
In August 1996, the Board of Directors and stockholders of the Company
adopted the 1996 Stock Option Plan (the "Plan") and reserved 300,000 shares of
Common Stock for issuance thereunder. The Plan provides for the granting to
employees (including employee directors and officers) of options intended to
qualify as incentive stock options within the meaning of ss. 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), and for the granting of
nonstatutory stock options to employees and consultants. The Plan is currently
administered by the Company's Compensation Committee.
The Plan provides for the granting of both Incentive Stock Options ("ISOs")
and nonstatutory stock options (an "NSO") and in connection with such options
the granting of stock appreciation rights (an "SAR") or additional stock
options, known as progressive stock options, in the event the grantee exercises
such stock options by surrendering shares of Common Stock of the Company (a
"PSO"). NSOs and SARs may be issued to any key employee or officer of the
Company or its subsidiaries, or any other person who is an independent
contractor, agent or consultant of the Company or its subsidiaries but not any
director of the Company who is not an employee of the Company. ISOs may be
issued to key employees and officers of the Company and its subsidiaries, but
not to any independent contractor, agent or consultant. The Compensation
Committee also determines the times at which options become exercisable, their
transferability and the dates, not more than ten years after the date of grant,
on which options will expire. In the event of a tender offer for more than 25%
of the Company's outstanding stock, or a "change in control" (as defined in the
Plan) of the Company, all outstanding options become immediately exercisable.
The fair market value of the stock with respect to which ISOs under the Plan or
any other plan of the Company first become exercisable may not exceed $100,000
in any year. The option price of an ISO is to be at least 100% of the fair
market value on the date of grant (110% in the case of optionees holding more
than 10% of the combined voting power of all classes of stock of the Company).
The Plan, however, permits the Compensation Committee to grant NSOs at any
exercise price consistent with the purposes of the Plan, whether or not such
exercise price is equal to the fair market value of the stock on the date of
grant of the NSO. NSOs with an exercise price of less than fair market value on
the date of grant would not qualify as performance-based compensation under
ss. 162(m) of the Internal Revenue Code of 1986, as amended, and, therefore, any
compensation expense generated by the exercise of such an option would not be
deductible by the Company when the Company is considered to be subject to such
Section, if the optionee is a "covered employee" who is paid compensation from
the Company in an amount in excess of $1,000,000 in the year of exercise.
Options may be exercised by the payment of the exercise price in cash,
Common Stock or a combination thereof. Subject to compliance with the provisions
of applicable governmental regulations, the Company may make a loan for the
purpose of exercising any option granted under the Plan to an optionee in an
amount not to exceed 100% of the purchase price of the shares acquired upon
exercise of the options. The loan must be secured by a pledge of shares of the
Company having an aggregate purchase price equal to or greater than the amount
of the loan.
The Plan permits the Compensation Committee to grant SARs in connection
with any option granted under the Plan. SARs enable an optionee to surrender an
option and to receive a payment in cash or Common Stock, as determined by the
Compensation Committee, equal to the difference between the
11
<PAGE>
fair market value of the Common Stock on the date of surrender of the related
option and the option price.
The Plan also permits the Compensation Committee to grant PSOs in
connection with any option granted under the Plan. PSOs enable an optionee to
receive additional stock options in the event the grantee exercises a stock
option, in whole or in part, by surrendering shares of Common Stock of the
Company. Any PSO granted will be for a number of shares equal to the number of
surrendered shares of Common Stock, shall not be exercisable for a minimum of
six months from the grant date of the option, shall have an option price per
share equal to 100% of the fair market value of a share of stock on the grant
date and shall be subject to such other terms and conditions as the Compensation
Committee may determine.
Unless otherwise provided by the Compensation Committee, the following
rules will apply to all options granted under the Plan. Options granted under
the Plan expire immediately if an employee is terminated for cause. If
termination of employment is voluntary or involuntary, options granted expire
after a three-month period. In the event of an employee's death within such
three-month period, the employee's estate may exercise the option for the number
of shares for which it is exercisable at the date of termination, for one year
after death but in no event beyond the expiration dates of the option. An option
outstanding at the time an employee retires under a Company retirement plan or
becomes disabled is exercisable within one year of termination in the case of an
ISO and in the case of a NSO may be exercisable at any time to the extent that
the optionee was otherwise entitled to exercise it at the time of such cessation
of employment with the Company or a subsidiary thereof, but in no event after
the expiration of the option period. If an employee dies, whether before or
after such retirement or disability, the employee's estate may exercise the
option exercisable at the date of termination of employment for up to three
years after death (one year in the case of voluntary termination of employment),
but in no event beyond the expiration dates of the option.
STOCK APPRECIATION RIGHTS
Effective April 24, 1997, the Company granted a stock appreciation right to
James E. Bishop, the President of the Company, in connection with his employment
agreement with respect to 100,000 shares of Common Stock at an exercise price of
$3.25 per share, which vests 20,000 shares per year over a period of five years,
commencing that date, subject to accelerated vesting under certain
circumstances. Effective that date, Messrs. Hatala, Lubell, Pacchia, Bartlett,
Lerner, Aylward and Tipps and Ms. Hart-Brown were granted stock appreciation
rights with respect to 5,000 shares at an exercise price of $3.25 per share
(collectively, the "Director SARs"). Mr. Lerner subsequently waived all rights
with respect to his Director SARs. The Director SARs may be exercised during the
period October 25, 1997 through April 23, 2003. In no event may the appreciated
value per share paid in respect of the Director SARs exceed $7.00 per share.
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<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
During 1997, no options were granted under the Plan or otherwise by the
Company and no options granted were exercised.
The following table sets forth information concerning SARs granted to a
Named Executive Officer during the year ended December 31, 1997:
SAR GRANTS DURING FISCAL 1997
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
(INDIVIDUAL GRANTS)
- -----------------------------------------------------------------------------------------------------------------------
PERCENT OF
NUMBER OF TOTAL SARS
SECURITIES GRANTED
UNDERLYING SARS TO EMPLOYEES EXERCISE OR
GRANTED IN FISCAL BASE PRICE
NAME (#) YEAR ($/SH) EXPIRATION DATE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
James E. Bishop(1) 100,000 100% $3.25 April 23, 2007
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------
(1) SARs granted to Mr. Bishop vest at the rate of 20,000 per year,
commencing April 23, 1997 and continuing on each April 23rd thereafter until
April 23, 2001. Each 20,000 SAR segment has an exercise period of six years.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
Shown below is information with respect to the aggregated option/SAR
exercises in 1997 and the option/SAR values for the fiscal year-ended December
31, 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
NUMBER OF
SECURITIES VALUE OF
SHARES UNDERLYING UNEXERCISED
ACQUIRED UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ON VALUE AT FY-END (#) AT FY-END ($)
EXERCISE REALIZED
NAME (#) ($) EXERCISABLE EXERCISABLE(1)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
James E. Bishop 0 0 4,000 $9,000
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
(1) At December 31, 1997 there was no public market for the Common Stock
underlying the options. The Common Stock has been valued using the initial
trading price of the Common Stock on the Nasdaq SmallCap Market of $5.00 on
January 22, 1998.
13
<PAGE>
AGGREGATED SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END SAR VALUES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
SHARES UNDERLYING IN-THE-MONEY
ACQUIRED UNEXERCISED SARS SARS
ON VALUE AT FY-END (#) AT FY-END ($)
EXERCISE REALIZED ------------------------- -----------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE(1) UNEXERCISABLE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
James E. Bishop 0 0 20,000 80,000 $35,000 $140,000
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
(1) At December 31, 1997 there was no public market for the Common Stock
underlying the SARs. The Common Stock has been valued using the initial trading
price of the Common Stock on the Nasdaq SmallCap Market of $5.00 on January 22,
1998.
REPORT OF COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors of the Company
presents this report on the compensation policies of the Company for its
executive officers.
The Company's compensation program for executives consists of three key
elements: (i) a base salary, (ii) a performance-based annual bonus, and (iii)
periodic grants of stock options or other stock-based awards. This program
ensures that executive officers are compensated in a way that advances both the
short-term and long-term interests of stockholders. The variable annual bonus
permits individual performance to be recognized on an annual basis, and is
based, in significant part, on an evaluation of the contribution made by the
officer to the Company's performance. Stock options relate long-term
remuneration directly to stock price appreciation realized by all of the
Company's stockholders.
BASE SALARY. In making a determination whether to adjust base salaries, the
Committee will take into account such factors as competitive industry salaries,
the contribution and experience of the officer and the length of the officer's
service. Each of the Company's key executive officers' present base salaries
were set under employment contracts which became effective upon the Company's
acquisition of its hotel and hospitality business in late April 1997.
ANNUAL BONUS. The Committee met in March 1998 and authorized a bonus of
$60,000 to its President of Hotel Operations, Mr. Nanosky, on account of his
services during the year ended December 31, 1997. The Committee determined to
defer consideration of bonuses for the Company's other key executives until it
was in a better position to evaluate the Company's strategic growth and
development plan.
STOCK OPTIONS. The Committee did not grant any stock options during the
year ended December 31, 1997. Future grants may be made to executive officers
upon initial employment, in recognition of an individual's performance, upon
promotion to a position of higher responsibility or in connection with the
execution of a new or amended employment agreement.
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<PAGE>
CHIEF EXECUTIVE OFFICER COMPENSATION. As Chairman and Chief Executive
Officer, Mr. Beck is compensated pursuant to the employment agreement he entered
into in April 1997 which provides for a base salary of $275,000. The Committee
will consider increases in the base salary and bonuses based upon the
development and implementation of the Company's strategic growth and development
plan.
Members of the Compensation Committee
Lucille Hart-Brown, Chairman
Richard P. Lerner
Arthur Lubell
Paul Tipps
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the Compensation Committee is or has been an officer
or employee of the Company, except Mr. Lubell, who was Treasurer of the Company
from 1995 to 1997.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
INTEREST OF MESSRS. BECK AND YEAGGY IN HOTELS UNDER MANAGEMENT BY THE COMPANY
Seven hotels managed by the Company are owned by corporations or
partnerships owned by Messrs. Beck and Yeaggy. The management agreements with
those seven hotels provide for the payment to the Company of an annual
management fee equal to 5% of gross revenues and have an initial term expiring
in 2007. In the event of a sale of a hotel subject to a management agreement,
the Company is entitled to receive a payment equivalent to the discounted
present value of the anticipated management fees over the remainder of the
initial term.
INTEREST OF MESSRS. BECK AND YEAGGY IN PROPERTIES SUBJECT TO MORTGAGES HELD BY
THE COMPANY
The Company has financial participations in the form of promissory notes
secured by mortgages on a hotel in Juno Beach, Florida (the "Juno Note") and on
a KOA Campground in Kissimee, Florida (the "KOA Note"), both of which are owned
by affiliates of Messrs. Beck and Yeaggy. The principal balances of the Juno
Note and the KOA Note as of March 31, 1998 are $2,175,112 and $3,476,863
respectively. The Juno Note is subject to a prior lien in favor of The Provident
Bank as security for indebtedness of the Company in the remaining principal
amount of $1,570,724 as of March 31, 1998. Both the Juno Note and KOA Note
provide for monthly principal payments based upon a twenty-year amortization.
Both notes mature on May 1, 2000, but their respective maturity dates may be
extended for an additional three years if the notes are not in default on the
original maturity date. The Juno Note bears interest at a floating rate equal to
the prime rate plus 1%, but in no event less than 7.75% per annum. The KOA Note
bears interest at a fixed rate of 8% per annum. Messrs. Beck and Yeaggy have
jointly and severally guaranteed the payment of the notes. The Company does not
regard these guaranties as material to the ultimate satisfaction of either the
Juno Note or the KOA Note on the basis that the values of the respective
properties exceed the underlying mortgage indebtedness.
15
<PAGE>
INTEREST OF MESSRS. BECK AND YEAGGY IN SERVICE PROVIDERS TO THE COMPANY
The Company has a service agreement for a hotel property management system
with Computel Computer Systems, Inc. ("Computel"), a corporation wholly-owned by
Messrs. Beck and Yeaggy, for the hotels that the Company owns. The agreement
automatically renews for successive terms of one year, unless one party notifies
the other to the contrary at least three months prior to the scheduled
termination date. Computel is paid a monthly fee of $275 per hotel location for
its basic property management software package plus one computer terminal. For
each additional terminal at a hotel location there is an additional charge of
$75 per month. Additional monthly fees are charged for add-on software for such
services as guest messaging, call accounting interface, franchise central
reservation interface and movie interface. The Company believes that these are
market-rate fees. Based on the Company's present operations, the Company
projects aggregate payments to Computel of approximately $39,400 during 1998. On
each annual renewal of the agreement, Computel is entitled to increase its fees
commensurate with the fees charged to other customers. As a result of
requirements of one of the Company's franchisers, the Company anticipates that
during 1998 a substantial percentage of the hotels owned by the Company will
change to a computer reporting system controlled by a party unaffiliated with
the Company, which will result in a decrease in the volume of business with
Computel.
Personnel at the hotels owned by the Company are provided by Hospitality
Employee Leasing Program, Inc. ("HELP"), a corporation also wholly-owned by
Messrs. Beck and Yeaggy. The Agreement automatically renews for successive terms
of one year, unless one party notifies the other to the contrary at least three
months prior to the termination date. The Company pays HELP an administrative
fee of $8.15 per bi-monthly pay period per employee. The Company believes that
this is a market-rate fee. Based on the Company's present operations, the
Company projects aggregate fees of approximately $112,000 to HELP during 1998.
INTEREST OF MESSRS. BECK AND YEAGGY IN PREMISES OCCUPIED BY THE COMPANY
The Company subleases office space in Cincinnati, Ohio and Boca Raton,
Florida from affiliates of Messrs. Beck and Yeaggy. The Sublease agreements are
on a triple-net basis and provide for annual rental payments of $25,248 and
$18,240 respectively. The Company believes that these are market rate rentals.
INTEREST OF MESSRS. BECK AND YEAGGY IN BEST WESTERN, KINGS QUARTERS
The Company has an 85% general partnership interest in Kings Dominion
Lodge, a Virginia general partnership, the sole asset of which is the hotel
known as the Best Western, Kings Quarters, which is adjacent to the Kings
Dominion Amusement Park near Richmond, Virginia. The remaining 15% general
partnership interest is held by Elbe Properties, an Ohio general partnership
whose partners are Messrs. Beck and Yeaggy.
Under the partnership agreement for Kings Dominion Lodge, the Company is
the managing partner and has the authority to direct the day-to-day affairs of
the partnership's business. The managing partner may not construct any buildings
on the real property owned by the partnership without the consent of the other
partner. Any sale of an interest in the partnership requires the consent of the
other partner. The partnership agreement also provides for periodic
distributions of free cash flow except to the extent that any distribution would
impair the business of the partnership.
16
<PAGE>
INDEPENDENT HOSPITALITY BUSINESS MAINTAINED BY MESSRS. BECK AND YEAGGY
In addition to their ownership of seven hotels which are managed by the
Company, Messrs. Beck and Yeaggy own five additional hotel properties that are
managed by their affiliate Beck Hospitality Inc. III. In their respective
employment agreements with the Company, Messrs. Beck and Yeaggy have agreed with
the Company that, in some instances, these existing businesses may be
competitive with the hospitality business of the Company and, with the exception
of these existing businesses, they have agreed not to engage in any business
that competes with the Company.
LIMITED GUARANTEES BY MESSRS. BECK AND YEAGGY OF INDEBTEDNESS OF THE COMPANY
Messrs. Beck and Yeaggy have personally guaranteed the obligations of Envoy
Inns of Morrisville, L.L.C., a Delaware limited liability company, of which the
Company is the sole member, and Kings Dominion Lodge, a Virginia general
partnership, of which the Company owns an 85% interest, in connection with three
loans secured by mortgages on three hotels owned by the Company from State
Street Bank and Trust Company, as Trustee under a Pooling and Servicing
Agreement dated as of January 1, 1997 for J.P. Morgan Commercial Mortgage
Finance Corporation. The obligations of Messrs. Beck and Yeaggy pursuant to
their guarantees in connection with these loans are limited to payment of the
outstanding debt in the event of fraud or material misrepresentation by the
borrowing entities, and indemnification in connection with certain specific
liability and costs for the lender, such as environmental liability and
liability caused by the gross negligence or willful misconduct of the borrowing
entity, the failure to pay property taxes when due, the misapplication of
insurance and condemnation proceeds, damage or waste to the property subject to
lender's mortgage, and costs incurred by the lender as a result of certain
actions taken by the borrowing entity after an event of default.
In addition, Messrs. Beck and Yeaggy have personally guaranteed the
obligations of the Company in connection with two loans from Star Bank, N.A.,
which obligations were assumed by the Company on April 24, 1997 from affiliates
of Messrs. Beck and Yeaggy and are secured by mortgages on two hotels owned by
the Company. The guarantees of Messrs. Beck and Yeaggy pursuant to these loans
are limited to an aggregate total of $209,250, plus liability incurred by the
lender in connection with events such as fraud or intentional misrepresentation
by the Company or its predecessor and misapplication of insurance or
condemnation proceeds.
Messrs. Beck and Yeaggy are also personally obligated in connection with
loans from The Huntington National Bank in the original principal amount of
$3,260,000 with a balance of $2,669,225 as of March 31, 1998, and from 1st
National Bank, located in Warren County, Ohio, in the original principal amount
of $100,000, with a balance of $32,741 on March 31, 1998, each of which was
assumed by the Company on April 24, 1997 and are secured by mortgages on the
Days Inn, Sharonville, a hotel owned by the Company. Prior to its acquisition by
the Company, this property was appraised at $4,200,000.
ALLOCATION OF COMPENSATION EXPENSES OF KEY PERSONNEL
Certain key personnel of the Company including Richard A. Tonges, Vice
President of Finance and Charles W. Thornton, Corporate Counsel, work for and
are compensated by both the Company and affiliates of Messrs. Beck and Yeaggy.
The Company believes that the allocation of compensation expenses of these
employees between the Company and the affiliates of Messrs. Beck and Yeaggy is
fair.
17
<PAGE>
RESTRICTIONS ON TRANSFERS OF STOCK OWNED BY MESSRS. BECK AND YEAGGY AND
REGISTRATION RIGHTS
Messrs. Beck and Yeaggy, in the aggregate, directly and indirectly own
approximately 43% of the outstanding shares of the Company's Common Stock. They
have agreed that until April 23, 2001, they will not transfer, in any manner,
any shares of the Common Stock, without the consent of the Company's Board of
Directors. The Company shall have no obligation to consent to a transfer unless
it shall have received an opinion of counsel to the effect that the transfer
does not give rise to an "ownership change" under Code ss. 382 or otherwise
affect the availability to the Company of its "net operating loss carryforwards"
and any other applicable tax attributes for Federal income tax purposes. In
addition to the foregoing transferability restrictions that have been consented
to by Messrs. Beck and Yeaggy, the Company has imposed equivalent
transferability restrictions upon certain other "5-percent shareholders" for
purposes of Code ss. 382.
Messrs. Beck and Yeaggy have been granted certain registration rights with
respect to the Company's securities owned by them. On a one-time basis they may
demand registration, at the Company's expense, of shares of preferred stock
owned by them. In addition, if the Company proposes to register any of its
securities in connection with a public offering of such securities (other than
in connection with certain limited purpose registrations), Messrs. Beck and
Yeaggy may request that the preferred stock be registered incidental thereto.
Following the termination of the transferability restrictions referred to above,
on a one-time basis, Messrs. Beck and Yeaggy may also demand registration, at
the Company's expense, of their shares of Common Stock. In addition, if
following the termination of the transferability restrictions referred to above,
the Company proposes to register any of its securities in connection with a
public offering of such securities (other than in connection with certain
limited purpose registrations), Messrs. Beck and Yeaggy may request that their
Common Stock be registered incidental thereto.
PROPOSAL 2--RATIFICATION AND APPROVAL OF INDEPENDENT AUDITORS
The Board of Directors, subject to stockholder ratification, has selected
Grant Thornton, LLP ("Grant Thornton") to serve as its independent auditors for
the fiscal year ending December 31, 1998. If the stockholders do not ratify the
selection of Grant Thornton the Board of Directors may reconsider its selection.
A representative of Grant Thornton is expected to be available in person or
by telephone to respond to appropriate questions at the Meeting and will be
given the opportunity to make a statement if he or she desires to do so.
The affirmative vote of the holders of a majority of the shares of the
Company's common stock present, in person or by proxy, at the Meeting is
required for the ratification and approval of the selection of the auditors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION AND
APPROVAL OF THE SELECTION OF GRANT THORNTON AS INDEPENDENT AUDITORS.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
In April 1998, the Company engaged Grant Thornton as independent
accountants to perform the audit of the Company's annual financial statements as
successor to J.H. Cohn, L.L.P. ("J.H. Cohn"). The
18
<PAGE>
decision to change accounting firms was made by the Board of Directors based
upon the recommendation of the Audit Committee. J.H. Cohn informed the Company
that it was not aware of any disputes between its firm and the Company in the
context of its audits and tax return services performed for the years ended
December 31, 1996 and 1997. The Company had engaged J.H. Cohn as independent
accountants in November 1996 as successor to Arthur Anderson LLP ("Arthur
Anderson"). In October 1996, Arthur Anderson had informed the Company that it no
longer would serve as the Company's auditors. Arthur Anderson further informed
the Company that it was not aware of any disputes between its firm and the
Company in the context of its audits and tax return services performed for the
years ended December 31, 1994 and 1995. From the effective date of the Plan in
1990 until the date hereof, there have been no disagreements between the Company
and prior certified public accountants on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of such prior accountants,
would have caused them to make reference in connection with their report to the
subject matter of the disagreements.
OTHER MATTERS
The Board of Directors does not intend to bring any matters before the
Meeting other than as stated in this Proxy Statement, and is not aware that any
other matters will be presented for action at the Meeting. If any other matters
come before the Meeting, the persons named in the enclosed form of proxy will
vote the proxy with respect thereto in accordance with their best judgment,
pursuant to the discretionary authority granted by the proxy.
If you do not plan to attend the Meeting in person, please complete, sign,
date and return the enclosed proxy card promptly. Even if you do plan to attend
the Meeting, please so note where provided and return the proxy card promptly.
ADDITIONAL INFORMATION
STOCKHOLDERS' PROPOSALS FOR NEXT ANNUAL MEETING
Any stockholder proposals intended to be presented at the Company's next
annual meeting of stockholders must be received by the Company at its offices at
2300 Corporate Boulevard, N.W., Suite 232, Boca Raton, FL 33431-8596, on or
before January 2, 1999 for consideration for inclusion in the proxy material for
such annual meeting of stockholders.
EXPENSES OF SOLICITATION
The cost of the solicitation of proxies will be borne by the Company. In
addition to the use of the mails, proxies may be solicited by regular employees
of the Company, either personally or by telephone or telecopy. The Company does
not expect to pay any compensation for the solicitation of proxies.
JANUS AMERICAN GROUP, INC.
/s/ FRANK E. LAWATSCH, JR.
-----------------------------------
Frank E. Lawatsch, Jr.
Secretary
Dated: May 2, 1998
19
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JANUS AMERICAN GROUP, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 29, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints C. Scott Bartlett, Jr., Lucille Hart-Brown and
Richard P. Lerner and each of them, with full power of substitution as proxies
for the undersigned, to attend the annual meeting of stockholders of Janus
American Group, Inc. (the "Company"), to be held at The Holiday Inn Pompano
Beach, 1350 South Ocean Boulevard, Pompano Beach, Florida at 2:00 p.m. Eastern
Daylight Time on May 29, 1998, or any adjournment thereof, and to vote the
number of shares of common stock of the Company that the undersigned would be
entitled to vote, and with all the power the undersigned would possess, if
personally present.
(Continued on reverse side)
THE BOARD OF DIRECTORS RECOMMENDS Please mark your vote [X]
A VOTE "FOR" 1, 2 AND 3 as indicated in this
example
1. To vote for the FOR WITHHOLD AUTHORITY
following nominees
for election as
directors:
CLASS B DIRECTORS,
TERM EXPIRES 2001
Peter G. Aylward
Arthur Lubell [_] [_]
Paul Tipps
2. Approval of the appointment FOR AGAINST ABSTAIN
of Grant Thornton LLP as the
Company's independent [ ] [ ] [ ]
auditors for the fiscal year
ending December 31, 1998
3. In their discretion, on such
other business as may [ ] [ ] [ ]
properly come before the
meeting or any adjournment
thereof
(INSTRUCTION: To withhold authority to vote for any
individual nominee, write the nominee's name on the
line provided below.)
- ----------------------------------------------------
IF YOU PLAN TO ATTEND [ ]
THE ANNUAL MEETING
PLEASE CHECK BOX
Unless a contrary direction is
indicated, the shares represented
by this proxy will be voted FOR
approval of each of the proposals;
if specific instructions are
indicated, this proxy will be voted
in accordance with such
instructions.
SIGNATURE___________________ SIGNATURE_______________________ DATE _____________
NOTE: PLEASE SIGN AS NAME APPEARS HEREON. JOINT OWNERS SHOULD EACH SIGN. WHEN
SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE
FULL TITLE AS SUCH.
