<PAGE>
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
SCHEDULE 14A
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 (S) 240.14a-11(c) or (S) 240.14a-12
-------------------
FAIRFIELD COMMUNITIES, INC.
(Name of Registrant as Specified in its Charter)
FAIRFIELD COMMUNITIES, INC.
(Name of Person(s) Filing Proxy Statement)
-------------------
Payment of Filing Fee (Check the appropriate box):
[x] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
==============================================================================
<PAGE>
FAIRFIELD COMMUNITIES, INC.
2800 Cantrell Road
Little Rock, Arkansas 72202
-------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
-------------------
Dear Stockholder:
The Annual Meeting of Stockholders of Fairfield Communities, Inc. (the
"Company") will be held on Thursday, May 11, 1995, at 10:00 a.m. Central
Daylight Savings Time at the Capital Hotel, 111 West Markham Street, Little
Rock, Arkansas, for the following purposes:
1. To elect seven members of the Board of Directors; and
2. To transact such other business as may properly come before the Annual
Meeting or any adjournments or postponements thereof.
The Board of Directors has nominated certain individuals for election to
serve as directors. The Board of Directors recommends that you vote for these
nominees.
The close of business on March 29, 1995 has been fixed as the record date
for the meeting. All stockholders of record at that time are entitled to notice
of and to vote at the meeting and any adjournments or postponements thereof.
All stockholders are cordially invited to attend the meeting. The Board of
Directors urges you to date, sign and return promptly the enclosed proxy to give
voting instructions with respect to your shares of Common Stock. The proxies
are solicited by the Company's Board of Directors. The return of the proxy will
not affect your right to vote in person if you attend the meeting. A copy of
the Company's Annual Report to Stockholders for the year ended December 31, 1994
is also enclosed.
BY ORDER OF THE BOARD OF DIRECTORS
Marcel J. Dumeny
Secretary
April 5, 1995
TO ASSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, PLEASE COMPLETE THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ACCOMPANYING POSTAGE PREPAID
ENVELOPE.
<PAGE>
FAIRFIELD COMMUNITIES, INC.
2800 Cantrell Road
Little Rock, Arkansas 72202
(501) 664-6000
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 11, 1995
INTRODUCTION
GENERAL
This Proxy Statement is furnished in connection with the solicitation of
proxies by the board of directors (the "Board" or the "Board of Directors") of
Fairfield Communities, Inc. (the "Company") for use at the 1995 Annual Meeting
of Stockholders (the "Annual Meeting"), to be held on Thursday, May 11, 1995, at
10:00 a.m. Central Daylight Savings Time at the Capital Hotel, 111 West Markham
Street, Little Rock, Arkansas, and any adjournments or postponements thereof. At
the Annual Meeting, the holders (sometimes referred to herein as "stockholders")
of common stock, $0.01 par value per share, of the Company (the "Common Stock"),
will be asked to elect as directors the individuals nominated by the Board
(collectively, the "Nominees" and each individually a "Nominee") and to approve,
consent to, ratify or otherwise transact such other business as may properly
come before the Annual Meeting or any adjournments or postponements thereof. The
Board knows of no other business that will be presented for stockholder action
at the Annual Meeting.
The mailing address of the principal executive offices of the Company is
P.O. Box 3375, Little Rock, Arkansas 72203. This Proxy Statement is first
being mailed to stockholders of the Company on or about April 5, 1995.
The Company will bear the expense of preparing and mailing the proxy
materials and may use regular employees and associates, without additional
compensation, to request, by telephone or otherwise, the return of proxies or
attendance at the Annual Meeting.
RECORD DATE, SOLICITATION AND REVOCABILITY OF PROXIES
The Board has selected March 29, 1995 as the record date (the "Record
Date") for the Annual Meeting. Only those stockholders of record as of the close
of business on the Record Date are entitled to notice of and to vote at the
Annual Meeting. At the close of business on the Record Date, there were
9,963,742 shares of Common Stock issued and outstanding. Stockholders will be
entitled to one vote for each share of Common Stock held by them of record at
the close of business on the Record Date on any matters properly brought before
the Annual Meeting for a vote. A list of the stockholders of the Company will be
available at the Companys principal executive offices in Little Rock, Arkansas
for at least 10 days prior to the Annual Meeting for examination by any
stockholder for any purpose germane to the Annual Meeting.
Proxies in the form enclosed are solicited by the Board. Shares of Common
Stock represented by a properly executed proxy, if such proxy is received in
time and not revoked, will be voted at the Annual Meeting in accordance with the
instructions indicated in such proxy. IF NO INSTRUCTIONS ARE INDICATED, SHARES
OF COMPANY COMMON STOCK WILL BE VOTED FOR THE ELECTION OF THE NOMINEES AND IN
THE DISCRETION OF THE PROXY HOLDER AS TO ANY OTHER MATTER WHICH MAY PROPERLY
COME BEFORE THE ANNUAL MEETING FOR A VOTE. IF NECESSARY AND UNLESS
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CONTRARY INSTRUCTIONS ARE GIVEN, THE PROXY HOLDER MAY ALSO VOTE IN FAVOR OF A
PROPOSAL TO ADJOURN THE MEETING IN ORDER TO PERMIT FURTHER SOLICITATION OF
PROXIES, TO OBTAIN A QUORUM OR TO OBTAIN SUFFICIENT VOTES TO APPROVE THE
PROPOSALS.
A stockholder who has given a proxy may revoke it at any time prior to its
exercise at the Annual Meeting by any one of the following actions: (i) giving
written notice of revocation to the Secretary of the Company, (ii) properly
submitting to the Company a duly executed proxy bearing a later date than the
proxy being revoked or (iii) appearing in person at the Annual Meeting and
voting in person. All written notices of revocation or other communications
with respect to revocation of proxies should be addressed as follows: Fairfield
Communities, Inc., P.O. Box 3375, Little Rock, Arkansas 77203, Attention:
Marcel J. Dumeny, Secretary.
Abstentions and broker non-votes will be included in determining the number
of shares present or represented at the Annual Meeting, or any adjournments or
postponements thereof, for purposes of determining whether a quorum exists.
Abstentions and broker non-votes with regard to matters brought before the
Annual Meeting, or any adjournments or postponements thereof, will be treated as
shares not voted for purposes of determining whether the requisite vote has been
obtained. With regard to the election of directors, votes may be cast in favor
of or withheld from each Nominee. Votes that are withheld will be excluded
entirely from the vote and will have no effect.
VOTES REQUIRED
Provided a quorum is present, the affirmative vote of a plurality of the
shares of Common Stock represented at the Annual Meeting and entitled to vote is
required for election of each of the Nominees. Stockholders may not cumulate
their votes.
PROPOSAL 1 - ELECTION OF DIRECTORS
GENERAL
The Board is comprised of one class of directors, elected annually. Each
director serves a one-year term (and, in each case, until his or her respective
successor is duly elected and qualified). The Nominees have been nominated for
the seven director positions. The number of directors, currently set at seven,
is fixed from time to time by or in the manner provided in the Companys Second
Amended and Restated Bylaws (the "Bylaws").
Information regarding the Nominees is set forth below. Each of the
Nominees, except for Mr. Ronald Langley, is currently serving as a director of
the Company. Messrs. Russell A. Belinsky, Ernest D. Bennett, III, Daryl J.
Butcher, Philip L. Herrington and William C. Scott began serving as directors in
September 1992. Mr. John W. McConnell has been a director of the Company since
March 1990, and was an executive officer of the Company and certain of its
subsidiaries within the two years preceding their 1990 filing for reorganization
under Chapter 11 of the Unites States Bankruptcy Code. Mr. J. Steven Wilson,
whose current term as a director expires at the time of the Annual Meeting, is
retiring from the Board and is not standing for reelection as a director.
A plurality of the votes of the Common Stock cast at the Annual Meeting (or
any adjournments or postponements thereof) is required to elect directors. Each
Nominee has consented to being named in this Proxy Statement and to serve if
elected. If a Nominee should for any reason become unavailable for election,
proxies may be voted with discretionary authority by the proxy holder for a
substitute designated by the Board.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ELECTION OF THE
NOMINEES. PROXIES SOLICITED BY THE BOARD WILL BE SO VOTED UNLESS STOCKHOLDERS
SPECIFY IN THEIR PROXIES A CONTRARY CHOICE.
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NOMINEES FOR ELECTION AS DIRECTORS
RUSSELL A. BELINSKY, age 34, Managing Director, Chanin and Company, an
investment banking company, since December 1994. From 1990 to December 1994,
Mr. Belinsky was Senior Vice President and Principal of Chanin and Company and
Senior Vice President and Principal of GTC Capital Partners. From 1986 to 1990,
Mr. Belinsky was an associate at the law firm of Skadden, Arps, Slate, Meagher &
Flom.
ERNEST D. BENNETT, III, age 42, partner at the law firm of Taylor, Philbin,
Pigue, Marchetti and Bennett since June 1992. From 1989 to May 1992, Mr.
Bennett served as General Counsel at Robert Orr/Sysco Food Services Company.
From 1980 to 1989, Mr. Bennett was a partner at the law firm of Camp and
Bennett.
DARYL J. BUTCHER, age 55, President of Butcher Real Estate, Inc., a real
estate company involved in commercial and industrial development, asset
management and consulting, since September 1994. From June 1993 to Sepetmber
1994, Mr. Butcher was Vice President, Real Estate, WLD Enterprises, Inc., a
trust management company. From 1981 to May 1993, Mr. Butcher was President of
Butcher Real Estate, Inc., a real estate company developing commercial and
industrial properties in the Baltimore-Washington D.C. area.
PHILIP L. HERRINGTON, age 42, President of Herrington, Inc., a private
investment and business advisory firm, since 1986; Chairman and Chief Executive
Officer of Health Care Training Corporation since 1989; President and Chief
Operating Officer of Destin Guardian Corporation, a real estate development
company, since 1989.
RONALD LANGLEY, age 50, Chairman of Quaker Holdings Limited, an investment
banking firm, since October 1992. From July 1989 to September 1992, Mr. Langley
was Chairman of Pacific Southwest Corp., a holding company. Director of
Physicians Insurance Company of Ohio, an insurance company.
JOHN W. MCCONNELL, age 53, President and Chief Executive Officer of the
Company since 1991; President and Chief Operating Officer from 1990 to 1991;
Senior Vice President and Chief Financial Officer from 1986 to 1990.
WILLIAM C. SCOTT, age 58, President and Director of Summit Care
Corporation, a developer and operator of retirement and convalescent centers,
since 1985. Director of Pacific Southwest Corp., a holding company.
INFORMATION ABOUT THE COMMITTEES AND COMPENSATION OF THE BOARD
BOARD COMMITTEES
During the year ended December 31, 1994, there were seven meetings of the
Board. Each director attended at least 75 percent of the aggregate number of
meetings of the Board and all committees on which he served.
The Board during 1994 had two standing committees. Certain information
regarding the function of these standing committees, their membership and number
of meetings held during the year ended December 31, 1994 follows.
The Audit Committee, which met two times during the year ended December 31,
1994, recommends to the Board a firm to serve as the independent public
accountants for the Company and monitors the performance of such firm; reviews
and approves the scope of the annual audit and quarterly reviews and evaluates
with the independent public accountants the Company's annual audit and annual
consolidated financial statements; reviews with management the status of
internal accounting controls; and evaluates public financial reporting documents
of the Company. From January 1, 1994 to September 20, 1994, the members of the
Audit Committee were Messrs. Philip L. Herrington (Chairman), Ernest D. Bennett,
III and Russell A. Belinsky. From September 20, 1994 through the date hereof,
the members of the Audit Committee are Messrs. Ernest D. Bennett, III
(Chairman), Daryl J. Butcher and J. Steven Wilson.
3
<PAGE>
The Compensation Committee, which met two times during the year ended
December 31, 1994, reviews the administration of the Company's employee benefit
plans and takes certain actions (including, where appropriate, the making of
recommendations to the Board) with respect to the Companys compensation
policies. From January 1, 1994 to September 20, 1994, the members of the
Compensation Committee were Messrs. William C. Scott (Chairman), Daryl J.
Butcher and J. Steven Wilson. From September 20, 1994 through the date hereof,
the members of the Compensation Committee are Messrs. Russell A. Belinsky
(Chairman), Philip L. Herrington and William C. Scott.
During 1994, the Company had no standing nominating or similar committee.
On January 24, 1995, the Board established a Nominating Committee to review and
recommend to the Board proposed nominees for directors of the Company. The
members of the Nominating Committee, from the time of its establishment through
the date hereof, are Messrs. Philip L. Herrington (Chairman), Russell A.
Belinsky and John W. McConnell. The Nominating Committee will consider
stockholder recommendations which are submitted in writing and addressed to the
attention of the Secretary of the Company. Any recommendation should include the
name and address of the stockholder making the recommendation and the number of
shares owned by said stockholder, the candidate's name and address, a summary of
the candidate's educational background and business or professional experience
during the past five years, the names of any corporations of which the candidate
is or has been a director and any other information the proposing stockholder
considers relevant in evaluating the candidate's qualifications. The
recommendation also should indicate the candidate's willingness to serve if
nominated and selected.
DIRECTORS' COMPENSATION
The Company has a policy of compensating only outside directors for
attendance at meetings of the Board and meetings of Board committees. Prior to
November 18, 1994, directors received $1,500 for each in-person Board meeting,
$1,000 for each in-person committee meeting and 50% of those respective amounts
for each telephonic Board or Board committee meeting in which they participated.
In addition, through November 1994, the directors also received an annual
retainer fee of $30,000, payable in equal monthly installments. On November 18,
1994, the Board approved a change in the compensation of outside directors.
Effective from and after that date, outside directors receive $1,000 for each
in-person Board or Board committee meeting and $750 for each telephonic Board or
Board committee meeting in which they participate. Effective December 1994, the
amount of the retainer was reduced to $1,750 per month. Compensation payments to
directors totaled $239,000 for the year ended December 31, 1994. The Company
also reimburses directors for travel and out-of-pocket expenses incurred in
connection with attendance at meetings.
The Company's First Amended and Restated Warrant Plan (the "1992 Plan")
provides for the grant of nonqualified stock warrants to certain key employees
and directors to purchase up to 1,000,000 shares of Common Stock. Warrants under
the 1992 Plan are to be granted at prices not less than the fair market value of
such shares on the date of grant and may be exercisable for periods of up to 10
years from the date of grant. During the year ended December 31, 1994, warrants
were granted to outside directors to purchase a total of 3,000 shares each of
Common Stock. These warrants were granted effective November 18, 1994 at an
exercise price of $5.50 per share, become exercisable on the first anniversary
of the date of grant of such warrants and have a term of 10 years from the date
of grant, subject to earlier termination if a director ceases service as a
director. In 1993, warrants were granted to the outside directors to purchase a
total of 5,000 shares each of Common Stock, at an exercise price of $3.00 per
share, becoming exercisable as to 20% of the shares subject thereto on each of
the first through fifth anniversaries from the date of grant and having a term
of 10 years from the date of grant, subject to earlier termination if a director
ceases service as a director.
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COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation of the Chief Executive
Officer (the "CEO") and each of the other four most highly compensated executive
officers (collectively, the "named executive officers") for each of the last
three years:
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
------------------------- ------------
Securities
Underlying All Other
Name and Options/ Compen-
Principal SARS sation
Position Year Salary Bonus (#) (3)
- --------- ---- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C>
John W. McConnell 1994 $275,000 $275,000 - $113,136
President and 1993 275,000 185,625 - 68,054
Chief Executive 1992 250,005 - 150,000 3,239
Officer
Marcel J. Dumeny 1994 175,000 87,500 - 64,725
Senior Vice 1993 175,000 67,411 - 41,071
President and 1992 164,842 - 100,000 594
General Counsel
Robert W. Howeth 1994 173,823 88,429 - 62,873
Senior Vice 1993 164,800 49,440 100,000 33,795
President, Chief 1992 172,768 - - -
Financial Officer
and Treasurer (1)
Clayton G. Gring, Sr. 1994 150,000 183,750 - 56,513
Senior Vice 1993 150,000 37,500 100,000 35,877
President 1992 155,769 10,000 - -
Morris E. Meacham 1994 121,539 157,692 - 80,864
Vice President (2) 1993 200,000 72,051 - 43,589
1992 207,217 - 100,000 2,174
</TABLE>
- -------------
(1) During 1994, Mr. Howeth was elected Chief Financial Officer.
(2) Prior to January 1, 1994, Mr. Meacham served as Executive Vice President of
the Company.
(3) Compensation in 1994 includes (a) contributions to the Company's
Savings/Profit Sharing Plan (Mr. McConnell - $7,849; Mr. Dumeny - $7,568;
Mr. Howeth - $7,553; Mr. Gring - $6,724 and Mr. Meacham - $7,849), (b)
allocated benefits, including interest, under the Companys Excess Benefit
Plan (Mr. McConnell - $14,596; Mr. Dumeny - $5,174; Mr. Howeth - $4,752;
Mr. Gring - $2,036 and Mr. Meacham - $8,248), (c) dollar amounts of
premiums paid on life insurance policies for the benefit of the named
executives officers respective designated beneficiaries (Mr. McConnell -
$5,392; Mr. Dumeny - $1,189; Mr. Howeth - $1,598; Mr. Gring - $9,121 and
Mr. Meacham - $2,661) and (d) allocated benefits, including interest, under
the Companys Key Employee Retirement Plan (Mr. McConnell - $85,299; Mr.
Dumeny - $50,794; Mr. Howeth - $48,970; Mr. Gring - $38,632 and Mr. Meacham
- $62,106).
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Compensation in 1993 includes (a) contributions to the Company's
Savings/Profit Sharing Plan (Mr. McConnell - $10,513; Mr. Dumeny - $10,513;
Mr. Howeth -$8,579; Mr. Gring - $6,307 and Mr. Meacham - $10,513), (b)
allocated benefits under the Company's Excess Benefit Plan (Mr. McConnell -
$7,225; Mr. Dumeny - $334 and Mr. Meacham - $719), (c) dollar amounts of
premiums paid on life insurance policies for the benefit of the named
executives officers' respective designated beneficiaries (Mr. McConnell -
$4,941; Mr. Dumeny - $1,135; Mr. Howeth - $1,485; Mr. Gring - $11,209 and
Mr. Meacham -$2,357) and (d) allocated benefits under the Companys Key
Employee Retirement Plan (Mr. McConnell - $45,375; Mr. Dumeny - $29,089;
Mr. Howeth- $23,731; Mr. Gring - $18,361 and Mr. Meacham - $30,000).
Compensation in 1992 represents premiums paid on life insurance policies
for the benefit of the named executive officers' respective designated
beneficiaries.
EMPLOYEE BENEFIT PLANS
SAVINGS/PROFIT SHARING PLAN
The Company's Savings/Profit Sharing Plan (the "Profit Sharing Plan")
covers substantially all employees with one year or more of credited service,
and participants are fully vested after seven years of credited service.
Effective July 1, 1994, the Profit Sharing Plan was amended to allow employee
elective salary deferrals as permitted under Internal Revenue Code Section
401(k), with the Company currently matching a portion of such deferrals.
Employer discretionary contributions to the Profit Sharing Plan are determined
annually by the Board of Directors. The Company's contribution to the Profit
Sharing Plan totaled $0.7 million for the year end December 31, 1994.
EXCESS BENEFIT PLAN
In 1994, the Company adopted the Excess Benefit Plan (the "Excess Benefit
Plan"), which is a non-qualified, unfunded plan established to provide
designated employees with benefits to compensate for certain limitations imposed
by federal law on the amount of compensation which may be considered in
determining employer contributions to participants' accounts under the Profit
Sharing Plan. Participants' accounts under the Excess Benefit Plan are credited
with amounts that, except for the limits of the Internal Revenue Code, would
have been contributed to such participants' accounts under the Profit Sharing
Plan. Participants' accounts under the Excess Benefit Plan vest in accordance
with the vesting schedule set forth in the Profit Sharing Plan. Interest is
credited to the participants' accounts annually at the base (prime) rate of
interest charged by The First National Bank of Boston. Participants' accounts
under the Excess Benefit Plan were credited by a total of $0.1 million for the
year ended December 31, 1994.
KEY EMPLOYEE RETIREMENT PLAN
In 1994, the Company adopted the Key Employee Retirement Plan (the "Key
Employee Retirement Plan"), which is a non-qualified, unfunded plan established
to provide certain senior executives of the Company with retirement benefits.
Under the Key Employee Retirement Plan, participant accounts are credited on
each January 1 by a percentage of each participant's preceding year's total cash
compensation. In general, the benefit percentage can range from 0% to 20%,
depending on the Company's moving average rate of return on stockholders equity.
Participant accounts are fully vested after seven years of service or upon the
occurrence of a change in control of the Company, death of the participant,
termination of employment due to total disability or retirement on or after the
age 55, in each case while employed by the Company. Interest is credited to
participants' accounts monthly at the base (prime) rate of interest charged by
The First National Bank of Boston. Participants' accounts were credited by a
total of $0.3 million for the year ended December 31, 1994.
STOCK OPTIONS/WARRANTS
The Company's First Amended and Restated 1992 Warrant Plan (the "1992
Plan") provides for the grant of nonqualified stock warrants to purchase up to
1,000,000 shares of Common Stock. Under the 1992 Plan, the
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Compensation Committee of the Board of Directors ("Compensation Committee") may
grant to "key" employees warrants (options) to purchase shares of Common Stock
at a price which is no less than 100 percent of the fair market value of such
shares on the date of grant. "Key" employees are determined by the Compensation
Committee, and may include executive officers, and other officers and employees
of the Company and its subsidiaries. Warrants may be exercisable for periods up
to 10 years from the date of grant. There were no stock warrants (options)
granted to any named executive officers during the year ended December 31, 1994.
OPTION EXERCISES IN LAST YEAR AND YEAR-END OPTION VALUES
The following table sets forth certain information concerning the number of
unexercised options (warrants) at December 31, 1994. There were no options
(warrants) exercised by any named executive officer during the year ended
December 31, 1994.
<TABLE>
<CAPTION>
Value of Unexercised
Number of Securities in-the-Money
Underlying Unexercised Options Options
at Year End at Year End (1)
------------------------------ ------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
John W. McConnell 112,500 37,500 $281,250 $ 93,750
Marcel J. Dumeny 75,000 25,000 187,500 62,500
Robert W. Howeth 20,000 80,000 50,000 200,000
Clayton G. Gring, Sr. 20,000 80,000 50,000 200,000
Morris E. Meacham 75,000 25,000 187,500 62,500
- ---------------------------
</TABLE>
(1) The dollar amounts shown represent the amount by which the product of the
number of shares purchasable upon the exercise of the related options and
the December 31, 1994 closing market price of $5.50 per share exceeds the
aggregate purchase price payable upon such exercise.
EMPLOYMENT ARRANGEMENTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
The Company entered into employment agreements (the "Employment
Agreements"), effective September 1, 1992, with Messrs. John W. McConnell,
Morris E. Meacham and Marcel J. Dumeny (the "Executives"). The Employment
Agreements are for initial terms of three years, with automatic one-year
extensions, unless at least nine months termination notice is given by either
the Company or the Executives prior to the expiration of the initial or any
renewal term, and provide for (a) initial annual base salaries to Messrs.
McConnell, Meacham and Dumeny of $275,000, $200,000 and $175,000, respectively,
(b) Company paid term life insurance coverage equal to two times their
respective base salaries, (c) the grant to Messrs. McConnell, Meacham and Dumeny
of warrants, exercisable through August 31, 2002, to purchase 150,000, 100,000
and 100,000 shares, respectively, of Common Stock, at an exercise price equal to
$3.00 per share, with 25% of such warrants vesting (and becoming non-cancelable,
regardless of whether or not the Executive thereafter remains employed by the
Company) on each of September 1, 1992, August 31, 1993, August 31, 1994 and
August 31, 1995, and (d) incentive compensation programs at the discretion of
the Board of Directors. If, during the term of the Employment Agreements, an
Executive is terminated (i) for any reason other than "for cause" (as defined in
the Employment Agreements), death, disability or (ii) at the Executives option
due to "Constructive Discharge" (as defined in the Employment Agreements), then
such Executive shall receive termination pay, subject to the limitations of
Section 280G of the Internal Revenue Code, equal to 1.5 times
7
<PAGE>
his highest annualized salary prior to termination. No termination pay is due to
any Executive who voluntarily resigns, is terminated "for cause" or ceases to be
employed as a result of death or disability.
Effective January 1, 1994, Mr. Meacham entered into a new employment
agreement ("New Agreement") as Vice President of Special Projects. The New
Agreement, which replaces Mr. Meacham's prior Employment Agreement described
above, is for a three year term, with automatic one-year extensions, unless at
least nine months' termination notice is given by either the Company or Mr.
Meacham prior to the expiration of the initial or any renewal term, and provides
for an annual base salary of $120,000. The New Agreement also provides for
payment of annual incentive bonuses upon such terms as the Board may deem
appropriate. If, during the term of the New Agreement, Mr. Meacham is terminated
(a) for any reason, other than "for cause" (as defined in the New Agreement),
death, disability or (b) at his option due to "Constructive Discharge" (as
defined in the New Agreement), then Mr. Meacham is entitled to termination pay,
subject to the limitations of Section 280G of the Internal Revenue Code, equal
to (i) $300,000, if his termination date occurs at any time during the period
from January 1, 1994 through December 30, 1994, (ii) $240,000, if his
termination date occurs at any time during the period from December 31, 1994
through December 30, 1995, (iii) $180,000, if his termination date occurs at any
time during the period from December 31, 1995 through December 30, 1996, and
(iv) $120,000, if his termination date occurs at any time from and after
December 31, 1996. No termination pay is due to Mr. Meacham if he voluntarily
resigns, is terminated "for cause" or ceases to be employed as a result of death
or disability, except that Mr. Meacham may elect to terminate his employment
effective December 31, 1996 and receive $120,000, to partially compensate him
for his willingness to terminate his prior Employment Agreement and enter into
the New Agreement. The terms of Mr. Meacham's grant of warrants remain unchanged
from his prior Employment Agreement and Mr. Meacham continued to be entitled to
Company paid term life insurance coverage in the amount of $400,000.
During 1993, the Company entered into Severance Pay Agreements (the
"Severance Pay Agreements") with Messrs. Gring and Howeth. The Severance Pay
Agreements extend through August 31, 1995, with automatic one-year extensions,
unless at least nine months' termination notice is given by either the Company
or Messrs. Gring or Howeth prior to the expiration of the initial or any renewal
term. If, during the term of the Severance Pay Agreements, Messrs. Gring or
Howeth is terminated (i) for any reason, other than "for cause" (as defined in
the Severance Pay Agreements), death or disability, or (ii) at Messrs. Gring's
or Howeth's option, due to "Constructive Discharge" (as defined in the Severance
Pay Agreements), then Messrs. Gring or Howeth shall receive termination pay,
subject to the limitations of Section 280G of the Internal Revenue Code, equal
to 150% of their highest annualized base salary prior to termination. No
termination pay is due to Messrs. Gring or Howeth if they voluntarily resign,
are terminated "for cause" or cease to be employed as a result of death or
disability. Messrs. Gring and Howeth have also been separately granted Company
paid term life insurance coverage in amounts equal to two times their respective
base salaries.
During 1993, the Company granted Messrs. Gring and Howeth warrants, with a
term of 10 years from the date of grant (subject to earlier termination if
Messrs. Gring or Howeth ceases to be employed by the Company), to purchase
100,000 shares each of Common Stock at an exercise price equal to $3.00 per
share, with 20% of such warrants vesting on each of the first through fifth
anniversaries following the date of grant. Also during 1993, the Company
granted two other executive officers warrants, with a term of 10 years from the
date of grant (subject to earlier termination if either employee ceases to be
employed by the Company), to purchase, in the aggregate, 40,000 shares of Common
Stock at an exercise price equal to $3.00 per share, with 20% of such warrants
vesting on each of the first through fifth anniversaries following the date of
grant.
8
<PAGE>
REPORT ON EXECUTIVE COMPENSATION
The following Report on Executive Compensation (the "Report") and the
performance graphs in the next section shall not be deemed to be "soliciting
material" or to be "filed" with the Securities and Exchange Commission (the
"SEC") or subject to Regulations 14A or 14C of the SEC or to the liabilities of
Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act") and shall
not be deemed incorporated by reference into any filing under the Securities Act
of 1933 or the Exchange Act, notwithstanding any general incorporation by
reference of this Proxy Statement into any other document.
INTRODUCTION
The Compensation Committee of the Company's Board of Directors (the
"Committee") reviews, considers for approval and administers the granting of
benefits under all compensation programs for officers of the Company holding the
position of Vice President or above (the "Officers"). More specifically, on an
annual or more frequent basis, the Committee reviews and considers for approval
recommendations of the Chief Executive Officer ("CEO") for salary, incentive
compensation and stock warrant grants to the other Officers of the Company and
recommends to the Board of Directors the salary, incentive compensation and
stock warrant grants to the CEO. The actions taken by the Committee are
reported to the Board of Directors, which exercises final approval authority
over compensation decisions.
From January 1, 1994 to September 20, 1994, the members of the Committee
were William C. Scott, Chairman of the Committee, Daryl J. Butcher and J. Steven
Wilson. From September 20, 1994 through December 31, 1994, the members of the
Committee were Russell A. Belinsky, Chairman of the Committee, Philip L.
Herrington and William C. Scott. No member of the Committee is a current or
former employee or officer of the Company or any of its subsidiaries. Except as
otherwise stated, the Report discusses the Committees compensation policies
applicable to the officers of the Company at the executive level (the "Executive
Officers"), including the relationship between the Company's performance and
executive compensation, and describes the specific bases on which the Committee
made compensation decisions in 1994 with regard to the CEO.
During 1993, the Internal Revenue Code was amended, adding Section 162(m),
which, in general, limits the deductibility of annual compensation paid after
January 1, 1994 to any covered employee to $1,000,000, subject to certain
exceptions. The Internal Revenue Service has published proposed regulations
implementing this limitation, which were amended in December 1994. The
limitation is not currently expected to result in the loss of any tax deductions
for the Companys cash compensation programs, but may, in the future, result in a
loss of a tax deduction in connection with the Company's stock warrant plan,
since the ultimate value of the stock warrants is open-ended, depending upon the
market price for the Company's common stock at the time the warrants are
exercised, as compared to the exercise price. The Company has no current plans
to amend the stock warrant plan, or to take other actions, to comply with the
exemptions from the new limitation, but intends to monitor the Companys tax
situation, the Company's compensation practices and developments in this area of
the tax law in future years, to determine whether its executive compensation
plans should be amended, or other action taken, to meet the deductibility
requirements of the tax law.
POLICY AND OVERALL COMPENSATION OBJECTIVES
The Committee's general policy is to provide Officers of the Company with
competitive compensation opportunities, which are internally equitable,
including short and long term incentive awards based upon meeting or exceeding
business and/or individual performance goals. These performance goals are
annually reflected as specific targets designed to correspond to, in decreasing
order of importance, (i) measures of profitability and shareholder return (e.g.,
stock price), (ii) cash flow objectives and (iii) management priorities, which
change over time. The actual target levels and relative weights of each measure
are subjectively determined by the Committee, on an annual basis.
9
<PAGE>
COMPARABLE COMPENSATION INFORMATION
During 1994, the Committee retained William M. Mercer, Incorporated
("Mercer"), a national consulting firm, experienced in executive compensation
matters, to review the compensation programs of the Company applicable to the
named executive officers. The Committee believed that it was desirable to seek
independent advice concerning the Company's compensation programs, because the
company operates in a line of business for which comparable compensation
information is not readily available and because of the desire of the Board to
design a compensation structure that incentivizes management to maximize
shareholder value. In June 1994, Mercer presented the Board of Directors with
the results of its study of the Company's compensation programs for the named
executive officers (the "Study"). Compensation elements reviewed in the Study
included base salary, total cash compensation (salary plus short-term
incentives), short term incentive compensation practices, long term
incentive/capital accumulation practices and retirement benefits. In developing
market comparables, because of a lack of data from other publicly traded
companies whose primary focus is the vacation ownership business, the Study
relied upon a composite of a number of published surveys of executive
compensation, for public and private companies of similar size, which the
consulting firm independently compiled in the normal course of its business.
The Study found that that the named executive officer's base salaries
ranged from 77% to 109% of the market average for similar positions, with the
average of the five named executive officers as a group being 96% of the market
average for similar positions. Based upon the Company's projected growth in 1995
and 1996, the consulting firm found that marketplace salary levels for companies
of comparable size will be approximately 15% - 20% higher than the base salary
levels used in the Study for existing market rate comparisons. For total cash
compensation (salary plus short term incentives), the Study compared actual cash
compensation earned for 1993 (excluding certain minimum bonuses paid to three of
the named executive officers under the Company's plan of reorganization) to
survey data, and determined that the named executive officer's total
compensation ranged from 71% to 103% of the market average for similar
positions, with the average of the five named executive officers as a group
being 92% of the market average for similar positions.
In analyzing short term incentive compensation practices, the Study
developed target and maximum incentive awards, as a percentage of base salary,
by averaging data from real estate, miscellaneous service, hospitality, consumer
products and diversified industry segments, which resulted in the average
comparable target incentives being determined to be 31% of base salary, for
those named executive officers other than the CEO, and 47% for the CEO, and the
average comparable maximum incentives being determined to be 52%, for the named
executive officers other than the CEO, and 80% for the CEO. Due to the open-
ended nature of several of the named executive officers' incentive compensation
objectives for 1994 (as discussed in more detail below) and other factors,
Mercer found that three of the five named executive officers' possible maximum
incentive compensation awards could exceed the average of the market comparable
amounts, but found the 1994 incentive compensation award structure to be
appropriate, because the targets set for incentive compensation included a
number of goals which would be either achieved in their entirety or not achieved
at all, with no partial credit, which increased the risk and uncertainty to
certain of the named executive officers, and because of the one-time, strategic
nature of a number of the objectives, such as the divestiture of non-core
businesses and assets, which were critical to the Company's long term success,
with the study concluding that these factors together supported somewhat higher
than average possible incentive compensation maximum awards levels.
The Study compared marketplace practices concerning the use of long-term
incentives to the level of existing grants of warrants to named executive
officers under the Company's stock warrant plan. The Study concluded that, based
upon the comparable marketplace valuation of the amount of stock warrants
granted to executives as compared to base salary on an annualized basis, the
Board of Directors should consider granting the CEO either additional stock
warrants, or some form of cash-based long-term incentive compensation plan, in
1995, three of the four other named executive officers in 1996 and the other
named executive officer in 1997 or 1998.
The Study also examined the Company's retirement plan, compared to market
comparables. Mercer advised that the Company's existing Profit Sharing Plan did
not provide competitive retirement benefits, and that the benefit levels sought
to be achieved by the Key Employee Retirement Plan, described below, would be
appropriate. Specifically, the Key Employee Retirement Plan was designed with
the goal of replacing
10
<PAGE>
approximately 40% of the average of the last three years' cash compensation
(salary plus short term incentive compensation) for an executive with 20 years
of service. Mercer found this goal as being consistent with marketplace based
comparables, except for executives hired at mid to late career, where the
competitive practice is to provide a somewhat faster rate of benefit accrual,
replacing a somewhat higher percentage of cash compensation, than the design
goals of the Key Employee Retirement Plan. Additionally, all of the named
executive officers have a number of past years service with the company prior to
1993, for which no accrual has been made under the Key Employee Retirement Plan.
EXECUTIVE COMPENSATION PROGRAM COMPONENTS
The four components of the Company's compensation programs for Executive
Officers are (i) base salary, (ii) short term cash incentive compensation award
(bonus) plans, (iii) long term incentive award programs (stock warrants) and
(iv) benefits, each of which is discussed in detail below.
Base Salary. The Committee determined not to grant salary increases during
1994 for Executive Officers, except in one instance, involving an increase of
$10,200 per year, approved by the Board of Directors with the concurrence of the
Committee members, so that the affected person's base salary would be consistent
with the base salary of another Executive Officer at a subjectively comparable
level of job responsibility. One named executive officer's base salary was
reduced by 40%, from $200,000 to $120,000, effective January 1, 1994, to
compensate for a reduced time commitment to the Company, initiated at the
affected executive officers request.
Short Term Cash Incentive Compensation. The Committee, following
consultation with the Board of Directors, established short term cash incentive
compensation plans applicable to the Executive Officers for 1994, with possible
maximum awards ranging from a total of approximately 15% of base salary to more
than 100% of base salary, depending on job function and scope of responsibility.
A substantial portion of most Executive Officers' incentive compensation plans
was tied to meeting or exceeding budgeted profitability and cash flow, in four
cases for the Corporation and in one case for the Leisure Products business, all
of which were achieved at or near the maximum award target levels, with other
significant performance goals including (a) the sale of First Federal Savings
and Loan Association of Charlotte, the Company's wholly-owned savings and loan
subsidiary, which was disposed of in September 1994 at a book gain of
approximately $5.2 million, (b) the sale of the Company's Arizona home building
operations, which were disposed of in March 1994 at approximately the net book
value, (c) the opening of new vacation ownership sales centers having at least
$10 million in annual sales potential, with qualifying new sales centers being
opened during 1994 in Nashville, Tennessee and Orlando, Florida, (d) the sale of
certain non-core assets, for which two Executive Officers received a percentage
of the net proceeds from such asset sales, totaling approximately $61,900 in the
aggregate, based upon achieving in excess of $12 million of qualifying net asset
sales proceeds, (e) lowering the fees and interest rates associated with the
principal credit facilities of the Company, which was achieved, and (f) bringing
legal work in-house and cutting certain outside legal expenses, which was also
achieved.
Long Term Incentive Awards. The Committee believes that stock warrant
grants are desirable to align the interests of the Executive Officers and the
stockholders. In determining whether to grant stock warrants, the Committee
reviews the relationship of vested and unvested long-term compensation awards to
cash compensation, the desirability of providing additional incentives to
increase shareholder value and the potential for individual contribution to
affect the Company's performance. In light of the Committee's subjective
evaluation of these factors, during 1994, primarily due to the amount of stock
warrants granted since 1992 to the Executive Officers and the remaining time
period for the vesting of prior awards, the Committee elected not to recommend
any additional awards of stock warrants to Executive Officers.
Benefits. The Company's benefit programs include optional life, health,
dental and disability coverages and participation in a tax qualified Profit
Sharing Plan, which was adopted in 1977, all of which are generally available to
qualifying employees of the Company. In addition, as disclosed under the
heading "Compensation of Executive Officers - Employment Arrangements and
Termination of Employment Arrangements", the named executive officers have been
granted additional Company paid term life insurance and are entitled to certain
11
<PAGE>
severance benefits, in the event that their employment is terminated, other than
"for cause" or by reason of death or disability.
During 1994, the Company adopted a non-qualified, unfunded Excess Benefit
Plan, due to limitations on the amount of compensation which can be considered,
under the Internal Revenue Code, for highly compensated participants in
determining contribution allocations to individual Profit Sharing Plan accounts.
Accounts were established under the Excess Benefit Plan for all employees of the
Company who were affected by such limitations for the Profit Sharing
contribution for 1994. A total of $70,755 (including accrued interest) was
allocated to the 15 participants' accounts under the Excess Benefit Plan for
1994, which reflected the amount of additional contributions which would have
been allocated to such participants' accounts in the absence of the Internal
Revenue Code limitation, of which $34,806 was allocated to the accounts of the
five named executive officers and the remaining $35,949 was allocated to the
accounts of employees in sales management positions who are not officers of the
Company, but whose compensation subjected them to the Internal Revenue Code
compensation limitations.
In 1994, the Company adopted a non-qualified, unfunded Key Employee
Retirement Plan. Under the Key Employee Retirement Plan, an account is
established for each of the named executive officers, with a book entry credited
on January 1 of each year, based upon the Benefit Percentage determined under
the plan multiplied by each participant's prior year's total cash compensation.
The Benefit Percentage ranges from 0% to 20%, depending generally upon the
moving average rate of return on the Company's stockholder's equity, with tiers
ranging, on the low side, from "less than 5%" return on stockholders' equity,
generating a Benefit Percentage of "0%", to, on the high side, an "18% or more"
return on stockholders' equity, generating a Benefit Percentage of 20%. The tier
levels of return on stockholders' equity were established subjectively, using as
reference points the average rates of return on stockholders' equity achieved by
companies comprising the S&P 500 and the Dow Jones Industrials. For 1994, the
Benefit Percentage was 20%, based upon the average of the Company's 1993 and
1994 return on stockholders' equity being approximately 19.3%, which exceeded
the 18% maximum tier level under the plan, resulting in an aggregate accrual for
all participants of $285,802 (including accrued interest).
Effective July 1994, the Company amended its existing Profit Sharing Plan
to allow employees elective salary deferrals as permitted under Section 401(k)
of the Internal Revenue Code, in which qualifying employees of the Company may
elect to participate. Under the 401(k) plan, 100% of the first $300 in employee
cash contributions, and 50% of the remaining employee cash contributions (up to
a maximum of 3% of qualifying compensation), are matched by the Company. The
Company's matching contributions to the 401(k) plan for 1994 totaled $169,115.
The Board of Directors, with the concurrence of the Committee, authorized a
$558,260 cash contribution to the Company's Profit Sharing Plan for 1994, which
amount was calculated as being (a) 5% of the pre-contribution, pre-tax profit of
the Company for 1994, net of (b) the amounts allocated to the Excess Benefit
Plan and (c) the matching Company contributions under the 401(k) plan. This
percentage contribution was the same as for 1993 for the Profit Sharing and
Excess Benefit Plans, in the aggregate.
COMPENSATION OF THE PRESIDENT AND CHIEF EXECUTIVE OFFICER
During 1994, the base salary of Mr. John W. McConnell, President and CEO of
the Company, remained unchanged. Mr. McConnell was paid short term cash
incentive compensation awards, attributable to his and the Company's 1994
performance, totaling 100% of base salary, based upon (i) exceeding profit and
cash flow budgets (resulting in an incentive award equal to 60% of salary), (ii)
selling First Federal Savings and Loan Association of Charlotte (resulting in an
incentive award equal to 10% of base salary), (iii) selling the Company's
Arizona home building business (resulting in an incentive award equal to 10% of
base salary) and (iv) opening two new vacation ownership sales sites in 1994,
having the potential for at least $10 million in annual sales (resulting in an
incentive award equal to 20% of base salary).
As noted above, Mr. McConnell was not awarded any stock warrants or other
long term incentives during 1994, but received benefit allocations (a)
determined on a basis consistent with all other participating employees of the
Company, of $7,849 under the Profit Sharing Plan (inclusive of the Company
matching contribution of $2,400
12
<PAGE>
under the 401(k) plan), (b) determined on a basis consistent with all affected
employees, of $14,596 (including accrued interest) under the Excess Benefit Plan
and (c) determined on a basis consistent with all named executive officers, of
$85,299 (including accrued interest) under the Key Employee Retirement Plan. As
noted above, Mr. McConnell has been granted Company paid term life insurance, at
a premium cost in 1994 of $5,392.
COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
From January 1, 1994 to September 20, 1994: From September 20, 1994
through December 31, 1994:
William C. Scott, Chairman Russell A. Belinsky, Chairman
Daryl J. Butcher Philip L. Herrington
J. Steven Wilson William C. Scott
PERFORMANCE GRAPHS
The following graphs show (i) the annual cumulative stockholder return for
the periods from December 31, 1989 through July 2, 1992 and September 1, 1992
through December 31, 1994, following assumed investments of $100 each in shares
of Company Common Stock on each of December 31, 1989 and September 1, 1992,
respectively, and (ii) the quarterly cumulative total stockholder return since
September 1, 1992, following an assumed investment of $100 on that date. All
shares of Company common stock, $.10 par value (the "Old Common Stock"), that
were outstanding and traded during the period of December 31, 1989 through July
2, 1992 were canceled prior to the Company's reorganization, in September 1992,
under Chapter 11 of the United States Bankruptcy Code (the "Reorganization") and
no distributions were made on account of interests in such securities. all
shares of Company Common Stock that are currently outstanding (the "New Common
Stock") are shares that were issued after September 1, 1992 (and after
cancellation of the Old Common Stock) pursuant to, or following, the
Reorganization.
13
<PAGE>
COMPARISON OF CUMULATIVE TOTAL RETURN OF
COMPANY COMMON STOCK BEFORE AND AFTER REORGANIZATION
WITH THE NASDAQ U.S. INDEX AND A MARKET CAPITALIZATION PEER GROUP (1)(2)
OLD COMMON STOCK
<TABLE>
<CAPTION>
12/31 12/31 12/31 7/2 9/1 12/31 12/31 12/31
1989 1990 1991 1992 1992 1992 1993 1994
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FAIRFIELD COMMUNITIES $100 $ 7 $ 10 $ 0 $100 $100 $300 $367
TOTAL NASDAQ (U.S.) $100 $ 85 $136 $131 $100 $121 $138 $135
PEER GROUP $100 $101 $103 $ 89 $100 $100 $100 $ 81
</TABLE>
COMPARISON OF CUMULATIVE TOTAL RETURN BY
QUARTER SINCE SEPTEMBER 1, 1992 WITH THE NASDAQ U.S. INDEX
AND A MARKET CAPITALIZATION PEER GROUP (2)
NEW COMMON STOCK
<TABLE>
<CAPTION>
9/1 9/30 12/31 3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
1992 1992 1992 1993 1993 1993 1993 1994 1994 1994 1994
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FAIRFIELD COMMUNITIES $100 $100 $100 $100 $117 $183 $300 $371 $408 $417 $367
TOTAL NASDAQ (U.S.) $100 $104 $121 $123 $125 $136 $138 $132 $126 $136 $135
PEER GROUP $100 $101 $100 $105 $ 83 $ 92 $100 $107 $ 93 $ 88 $ 81
</TABLE>
14
<PAGE>
- ----------------------
(1) The amounts plotted in the left-hand box entitled "Old Common Stock" in the
first graph above represent the cumulative total return of the Old Common
Stock outstanding prior to the Company's Reorganization (i.e. during the
period December 31, 1989 through July 2, 1992 when trading in the Old
Common Stock was suspended permanently by the New York Stock Exchange),
which amounts are compared with (i) the National Association of Securities
Dealers, Inc.'s Automated Quotations System ("NASDAQ") Stock Market U.S.
Index and (ii) a peer group constructed of NASDAQ listed companies with
similar market capitalization (the "Market Capitalization Peer Group").
(2) The data which appears in the right-hand box entitled "New Common Stock" in
the first graph above compares the cumulative total return of the new
Common Stock outstanding subsequent to the Company's Reorganization (i.e.,
during the period September 1, 1992 through December 31, 1994) with the (i)
NASDAQ Stock Market U.S. Index and (ii) Market Capitalization Peer Group.
Additionally, the data which appear in the second graph above compares the
quarterly cumulative total return, since September 1, 1992, of the Company
Common Stock with the (i) NASDAQ Stock Market U.S. Index and (ii) Market
Capitalization Peer Group.
(3) The Company's primary operation is the Leisure Products business, with the
major sources of revenue and profitability being the sale of vacation
ownership intervals and interest income from installment contracts
receivable originated in connection with such sales. Very few other
publicly held companies engage in this line of business, and those that do,
such as The Walt Disney Company, Hilton Hotels Corporation and Host
Marriott Corporation, are (i) diversified, with such companies' similar
product segments providing substantially less than 50% of such companies'
revenues, and (ii) substantially larger, in terms of revenue, assets and
market capitalization, than the Company. Because of these factors, the
Company elected to compare the performance of its stock against (a) the
NASDAQ Stock Market U.S., which represents a broad-market index of
companies traded on the NASDAQ market, on which the Company's stock is
listed, and (b) the Market Capitalization Peer Group. The Market
Capitalization Peer Group is comprised of 10 NASDAQ companies immediately
above and below the Company's December 31, 1994 market capitalization
($55.68 million) as follows: RF Monolithics, Inc. (RFMI); 7th Level, Inc.
(SEVL); Merchants Bancorp, Inc., Del. (MBIA); Reading Co., Class A
(RDGC.A); Winsloew Furniture, Inc. (WLFI); Longhorn Steaks, Inc. (LOHO);
Calif. Fincl. Holding (CFHC); Webco Inds., Inc. (WBCO); Telebit Corp.
(TBIT); Piercing Pagoda, Inc. (PGDA); Imatron, Inc. (IMAT); Allied Waste
Indus., Inc. (AWIN); Ottawa Financial Corp. (OFCP); Arris Pharmaceutical
Corp. (ARRS); Data Transmission Network (DTLN); Software Pubg. Corp.
(SPCO); Builders Trans., Inc. (TRUK); Genesee Corp., Class B (GENB.B);
Eltron International, Inc. (ELTN); and Ciber, Inc. (CIBR).
15
<PAGE>
BENEFICIAL OWNERSHIP OF SECURITIES
CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information as of March 1, 1995 with
respect to any persons known by the Company to be the beneficial owner of more
than five percent of the Common Stock:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS (C)
- ------------------- --------------------- -----------
<S> <C> <C>
Physicians Insurance Company of Ohio
13515 Yarmouth Drive, NW 1,678,726 (a) 16.8%
Pickerington, Ohio 43147
Magten Asset Management Corp.
33 East 21st Street 1,600,162 (b) 16.1%
New York, New York 10010
</TABLE>
- --------------------------------------
(a) A report on Schedule 13D has been filed with the SEC by Physicians
Insurance Company of Ohio ("PICO") indicating that PICO has sole voting and
dispositive power over 1,678,726 shares. The foregoing information has
been included in reliance upon, and without independent verification of,
the disclosures contained in the above-referenced report on Schedule 13D.
(b) A report on Schedule 13G has been filed with the SEC by Magten Asset
Management Corp. ("Magten") indicating sole voting and dispositive power
over 1,253,655 shares and shared voting and sole dispositive power over
346,507 shares. Included in these amounts were shares held by Magten on
behalf of General Motors Employees Domestic Group Pension Trust, whose
shares exceeded five percent of the Company's outstanding Common Stock. The
foregoing information has been included in reliance upon, and without
independent verification of, the disclosures contained in the above-
referenced report on Schedule 13G.
(c) Calculated based on 9,963,742 shares outstanding as of March 1, 1995. The
total amount of Common Stock to be issued after resolution of all claims
under the plan of reorganization will differ from the amount of Common
Stock outstanding at March 1, 1995. Consequently, the ownership interest
of existing stockholders will be diluted.
16
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information as of March 1, 1995 with
respect to the beneficial ownership of the Company's Common Stock by each of the
non-management directors, each of the named executive officers and by all
directors and executive officers as a group. Except as noted, each individual
named has sole investment and voting power with respect to his shares of Common
Stock.
<TABLE>
<CAPTION>
NAME OF BENEFICIAL AMOUNT AND NATURE OF PERCENT OF
OWNER BENEFICIAL OWNER CLASS
----------------------- ------------------- -----
<S> <C> <C> <C>
NON-MANAGEMENT DIRECTORS Russell A. Belinsky 5,000(a) *
Ernest D. Bennett, III 1,000(a) *
Daryl J. Butcher 11,000(a) *
Philip L. Herrington 1,000(a) *
Ronald Langley 0(b) 0
William C. Scott 21,000(c) *
NAMED EXECUTIVE OFFICERS John W. McConnell 170,500(d) 1.7
Marcel J. Dumeny 111,000(e) 1.1
Robert W. Howeth 40,000(e) *
Clayton G. Gring, Sr. 20,024(e) *
Morris E. Meacham 75,000(e) *
ALL DIRECTORS AND 465,885(f) 4.5
EXECUTIVE OFFICERS AS A
GROUP
</TABLE>
- ---------------
* Beneficial ownership represents less than 1% of the outstanding shares.
(a) Includes 1,000 shares that each of the indicated persons has the right to
acquire (through the exercise of options) within 60 days after March 1,
1995.
(b) Excludes 1,678,726 shares held by PICO, as to which Mr. Langley disclaims
beneficial ownership.
(c) Includes 1,000 shares which Mr. Scott has the right to acquire (through the
exercise of options) within 60 days after March 1, 1995. Includes 20,000
shares held by Mr. Scott's wife, as to which Mr. Scott disclaims beneficial
ownership.
(d) Includes 112,500 shares which Mr. McConnell has the right to acquire
(through the exercise of options) within 60 days after March 1, 1995.
Includes 53,000 shares held by Mr. McConnell's wife, as to which Mr.
McConnell disclaims beneficial ownership.
(e) Includes shares that the indicated persons have the right to acquire
(through the exercise of options) within 60 days after March 1, 1995, as
follows: Marcel J. Dumeny (75,000), Robert W. Howeth (20,000), Clayton G.
Gring, Sr. (20,000) and Morris E. Meacham (75,000).
(f) Calculated based on 10,280,242 shares outstanding as of March 1, 1995,
which includes 316,500 shares that the directors and executive officers
have the right to acquire (through the exercise of warrants) within sixty
days after March 1, 1995. The total amount of Common Stock to be issued
after resolution of all claims under the plan of reorganization will differ
from the amount of Common Stock outstanding at March 1, 1995.
Consequently, the ownership interest of existing stockholders will be
diluted.
17
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and certain persons who own more than 10% of its Common
Stock, to file initial reports of ownership and reports of changes in ownership
with the SEC. Such persons are required by SEC regulations to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it with
respect to the year ended December 31, 1994, and written representations from
certain reporting persons, the Company believes that all filing requirements
have been complied with as they apply to its directors, executive officers and
persons who own more than 10% of the Common Stock.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board has selected Ernst & Young to serve as independent public
accountants for the Company. The independent public accountants have audited the
financial statements of the Company for the fiscal year ended December 31, 1994
and performed such other nonaudit services as the Board requested.
A representative of Ernst & Young is expected to be present at the Annual
Meeting. This representative will have the opportunity to make a statement, if
he or she so desires, and is also expected to be available to respond to
appropriate questions from stockholders.
STOCKHOLDER PROPOSALS
If stockholder proposals are to be considered by the Company for inclusion
in a proxy statement for a future meeting of the stockholders, such proposals
must be submitted on a timely basis and must meet the requirements established
by the SEC. Stockholder proposals for the Company's 1996 annual meeting of
stockholders will not be deemed to be timely submitted unless they are received
by the Company at its principal executive offices by December 7, 1995. Such
stockholder proposals, together with any supporting statements, should be
directed to the Secretary of the Company. Stockholders submitting proposals are
urged to submit their proposals by certified mail, return receipt requested.
ADDITIONAL INFORMATION AVAILABLE
A COPY OF THE FORM 10-K AS FILED WITH THE SEC WILL BE PROVIDED WITHOUT
CHARGE TO EACH PERSON SOLICITED WHO SUBMITS A WRITTEN REQUEST THEREFOR, STATING
THAT SUCH PERSON WAS A BENEFICIAL OWNER OF COMMON STOCK ON MARCH 29, 1995,
ADDRESSED TO ROBERT W. HOWETH, TREASURER, FAIRFIELD COMMUNITIES, INC., 2800
CANTRELL ROAD, LITTLE ROCK, ARKANSAS 72202.
OTHER BUSINESS
Management does not know of or intend to bring before the Annual Meeting
any other business. If, however, any other business should be presented to the
meeting, the proxies named in the enclosed form of proxy will vote the proxy in
accordance with their best judgment.
18
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WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE SIGN THE
ACCOMPANYING FORM OF PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE
PREPAID RETURN ENVELOPE.
BY ORDER OF THE BOARD OF DIRECTORS,
Marcel J. Dumeny
Secretary
Little Rock, Arkansas
April 5, 1995
19
<PAGE>
FORM OF PROXY CARD
FAIRFIELD COMMUNITIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF FAIRFIELD COMMUNITIES, INC. FOR USE AT THE ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD ON MAY 11, 1995
The undersigned hereby appoints John W. McConnell and Marcel J. Dumeny, and
each of them, jointly and severally and with full power of substitution, as
Proxies to vote, as designated below, all common stock of Fairfield Communities,
Inc. owned by the undersigned at the Annual Meeting of Stockholders to be held
on Thursday, May 11, 1995, at 10:00 a.m. Central Daylight Savings Time at the
Capital Hotel, 111 West Markham Street, Little Rock, Arkansas, and at any and
all postponements and adjournments thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION FOR VOTING IS GIVEN, THE
PROXY WILL BE VOTED "FOR" THE ELECTION TO THE BOARD OF DIRECTORS OF THE NOMINEES
LISTED IN PROPOSAL 1 AND IN ACCORDANCE WITH THE JUDGMENT OF THE PERSON OR
PERSONS VOTING THE PROXY WITH RESPECT TO ANY OTHER BUSINESS THAT MAY PROPERLY
COME BEFORE THE ANNUAL MEETING.
[REVERSE SIDE]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION TO THE BOARD OF
DIRECTORS OF THE NOMINEES LISTED IN PROPOSAL 1.
1. ELECTION OF DIRECTORS:
NOMINEES: Russell A. Belinsky, Ernest D. Bennett, III,
Daryl J. Butcher, Philip L. Herrington, Ronald Langley,
John W. McConnell, William C. Scott
FOR ALL NOMINEES / /
WITHHELD FROM ALL NOMINEES / /
______________________________________
For all nominees except as noted above
Please complete, date, sign and return this proxy promptly in the enclosed
envelope. If signing as attorney, executor, administrator, trustee or guardian,
please give full title as such. If signing on behalf of a corporation, please
sign in full corporate name by an authorized officer. If shares are registered
in more than one name, all holders must sign. The above-signed hereby
acknowledges receipt of the Notice of Annual Meeting of Stockholders, the Proxy
Statement and Annual Report to Stockholders for the year ended December 31, 1994
furnished therewith.
Signature:_________________ Date___________
Signature:_________________ Date___________
