<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.__)
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(e)(2)
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11 or Rule 14a-12
ORLEANS HOMEBUILDERS, INC.
(formerly known as FPA Corporation)
------------------------------------------------
(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:
_____________________________________________________________________
2) Aggregate number of securities to which transaction applies:
_____________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined).
_____________________________________________________________________
4) Proposed maximum aggregate value of transaction:
_____________________________________________________________________
5) Total fee paid:
_____________________________________________________________________
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
1) Amount Previously Paid:
_____________________________________________________________________
2) Form, Schedule or Registration Statement no.:
_____________________________________________________________________
3) Filing Party:
_____________________________________________________________________
4) Date Filed:
<PAGE>
ORLEANS HOMEBUILDERS, INC.
3333 Street Road, Suite 101
Bensalem, Pennsylvania 19020
------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 11, 1998
------------------
To the Stockholders of Orleans Homebuilders, Inc.:
The Annual Meeting of Stockholders of Orleans Homebuilders, Inc. (the
"Company") will be held on Friday, December 11, 1998, at 9:30 a.m., Philadelphia
time, at the offices of the Company, 3333 Street Road, Suite 155, Bensalem,
Pennsylvania, for the following purposes:
1. Election of Directors;
2. Approval of an amendment to the 1992 Incentive Stock Option Plan
to increase the number of shares on which options may be granted
thereunder from 910,000 to 1,210,000;
3. Approval of amendments to the 1995 Stock Option Plan for
Non-Employee Directors to increase the number of shares on which
options may be granted thereunder from 100,000 to 125,000 and to
provide for the grant of additional options thereunder;
4. Ratification of the appointment of PricewaterhouseCoopers LLP as
independent accountants of the Company for the 1999 fiscal year;
and
5. Transaction of such other business as properly may be brought
before the Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on November 2,
1998 as the record date for determining the stockholders entitled to notice of
and to vote at the Meeting. Only stockholders of record on the transfer books of
the Company at the close of business on that date are entitled to notice of and
to vote at the Meeting.
IT WILL BE APPRECIATED IF THOSE WHO DO NOT EXPECT TO ATTEND THE MEETING
WILL MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED FOR
THAT PURPOSE. A PERSON GIVING A PROXY HAS THE POWER TO REVOKE IT BY WRITTEN
NOTICE TO THE SECRETARY OF THE COMPANY, AND ANY STOCKHOLDER WHO IS PRESENT AT
THE MEETING MAY WITHDRAW THE PROXY AND VOTE IN PERSON.
November 4, 1998 By Order of the Board of Directors
JOSEPH A. SANTANGELO,
Secretary-Treasurer and Chief Financial Officer
<PAGE>
ORLEANS HOMEBUILDERS, INC.
Corporate Headquarters:
3333 Street Road, Suite 101
Bensalem, Pennsylvania 19020
Telephone Number: (215) 245-7500
-------------------
PROXY STATEMENT
-------------------
GENERAL
This proxy statement is furnished to stockholders of Orleans
Homebuilders, Inc. (the "Company") in connection with the solicitation, by order
of the Board of Directors of the Company, of proxies for the Annual Meeting of
Stockholders (the "Meeting") to be held on Friday, December 11, 1998, at 9:30
a.m., Philadelphia time, at the offices of the Company, 3333 Street Road, Suite
155, Bensalem, Pennsylvania, for the purposes set forth in the accompanying
Notice of Annual Meeting of Stockholders. This proxy statement, the foregoing
notice and the enclosed proxy are being sent to stockholders on or about
November 4, 1998.
The record date of stockholders entitled to notice of and to vote at
the Meeting has been fixed as the close of business on November 2, 1998. The
transfer books have not been and will not be closed. Only stockholders of record
at the close of business on the record date shall be entitled to notice of and
to vote at the Meeting.
As of October 26, 1998, the Company had outstanding 11,356,018 shares
of Common Stock, par value $.10 per share (the "Common Stock"), and 1,342,113
shares held in treasury, which are not eligible to be voted. Each share of
outstanding Common Stock entitles the holder to one vote, without cumulation, on
each matter to be voted upon at the Meeting. The presence at the Meeting, in
person or by proxy, of the holders of a majority of the shares of Common Stock
entitled to vote is necessary to constitute a quorum.
The enclosed proxy is being solicited on behalf of the Board of
Directors of the Company and any costs of solicitation will be borne by the
Company. Such costs include preparation, printing and mailing of the Notice of
Annual Meeting of Stockholders, the proxy, this proxy statement and the Annual
Report, which are herewith enclosed. The solicitation will be conducted
principally by mail, although Directors, officers and regular employees of the
Company may solicit proxies personally or by telephone or telegram. Arrangements
will be made with brokerage houses and other custodians, nominees and
fiduciaries for proxy material to be sent to their principals, and the Company
will reimburse such persons for their reasonable expenses in so doing.
Shares of the Company's Common Stock represented by any unrevoked proxy
in the enclosed form will be voted in accordance with the specifications made on
such proxy, if it is properly executed and received prior to voting at the
Meeting. Any properly executed proxy received on a timely basis on which no
specification has been made by the stockholder will be voted (i) "FOR" the
election as Directors of the nominees listed herein (or for such substitute
nominees as may be nominated in the event the initial nominees become
unavailable); (ii) "FOR" the approval of an amendment to the 1992 Incentive
Stock Option Plan (the "1992 Plan") to increase the number of shares on which
options may be granted thereunder from 910,000 to 1,210,000; (iii) "FOR" the
approval of amendments to the 1995 Stock Option Plan for Non-Employee Directors
(the "1995 Plan") to increase the number of shares on which options may be
-1-
<PAGE>
granted thereunder from 100,000 to 125,000 and to provide for the grant of
additional options thereunder; (iv) "FOR" the ratification of
PricewaterhouseCoopers LLP as the Company's independent accountants for the
fiscal year ended June 30, 1999 ("Fiscal 1999"); and (v) in the discretion of
the Proxy Committee of the Board of Directors, upon all other matters requiring
a vote of stockholders which may properly come before the Meeting and of which
the Board of Directors was not aware a reasonable time before this solicitation.
The Proxy Committee, selected by the Board of Directors, consists of
Jeffrey P. Orleans, Chief Executive Officer and Chairman of the Board of
Directors of the Company, and Benjamin D. Goldman, Vice Chairman of the Board of
Directors of the Company. If the enclosed proxy is executed and returned, it
may, nevertheless, be revoked at any time before it has been exercised upon
written notice to the Secretary of the Company. The proxy shall be deemed
revoked if a stockholder is present at the Meeting and elects to vote in person.
PROPOSAL 1. ELECTION OF DIRECTORS
NOMINEES FOR ELECTION
The stockholders are being asked to elect seven Directors, who will
comprise the entire Board of Directors of the Company, to serve for the ensuing
year and until their successors are duly elected and qualified. The nominees
constitute seven of the current members of the Board of Directors, all of whom
were previously elected by the stockholders.
In the event that any nominee for Director should become unavailable,
which event the Board of Directors does not anticipate, it is intended that
votes will be cast pursuant to the enclosed proxy for such substitute nominee as
may be nominated by the Board of Directors unless otherwise indicated by the
stockholder on the proxy.
<TABLE>
<CAPTION>
Director
Name Age Present Position with the Company Since
- ---- --- --------------------------------- -----
<S> <C> <C> <C>
Sylvan M. Cohen(1)(3)(4)(6)........84 Director 1965
Benjamin D. Goldman(5)(6)..........52 Vice Chairman of the Board 1992
Robert N. Goodman(2)...............46 Director 1994
Andrew N. Heine(2).................69 Director 1994
David Kaplan(2)(3)(4)..............53 Director 1994
Lewis Katz(1)(3)(4)(5).............56 Director 1987
Jeffrey P. Orleans(1)(5)(6)........52 Chairman of the Board 1983
and Chief Executive Officer
</TABLE>
- ------------------
(1) Member of the Executive Committee, of which Mr. Cohen is Chairman.
(2) Member of the Audit Committee, of which Mr. Kaplan is Chairman.
(3) Member of the Compensation Committee, of which Mr. Kaplan is Chairman.
(4) Member of the committee designated to administer the 1992 Plan (the "1992
Incentive Stock Option Committee"), of which Mr. Kaplan is Chairman.
(5) Member of the committee designated to administer the 1992 Stock Option Plan
for Non-Employee Directors (the "1992 Director Option Plan Committee"), of
which Mr. Orleans is Chairman.
(6) Member of the committee designated to administer the 1995 Plan (the "1995
Director Option Plan Committee"). If Proposal 2 is approved by the
stockholders of the Company, Mr. Cohen shall no longer be a member of the
1995 Director Option Plan Committee.
-2-
<PAGE>
Directors
Jeffrey P. Orleans has served as Chairman of the Board and Chief
Executive Officer of the Company since September 1986. From September 1986 to
May 1992, he also served as President of the Company. In addition, Mr. Orleans
is a general partner of Orleans Builders & Developers and served as the Chief
Executive Officer and the sole shareholder of Orleans Construction Corp.
("OCC"), residential real estate developers, until its acquisition by the
Company on October 22, 1993. Mr. Orleans is a Trustee of Pennsylvania Real
Estate Investment Trust.
Benjamin D. Goldman was elected Vice-Chairman of the Board in April
1998 and has been a Director of the Company since May 1992. From May 1992 until
April 1998, he served as President and Chief Operating Officer of the Company.
Sylvan M. Cohen has been a Director of the Company since 1965. Until
October 1995, Mr. Cohen was a senior partner in the law firm of Cohen, Shapiro,
Polisher, Shiekman and Cohen, Philadelphia, Pennsylvania, which prior to October
1995 served as counsel to the Company. In October 1995, Mr. Cohen became of
Counsel to the law firm of Drinker Biddle & Reath LLP, Philadelphia,
Pennsylvania, which currently serves as counsel to the Company. Mr. Cohen is
also Chairman of the Board of Trustees of Pennsylvania Real Estate Investment
Trust, Fort Washington, Pennsylvania and a Trustee of EQK Realty Investors I.
Lewis Katz has been a Director of the Company since 1987. Since March
1998, he has been compensated by Resorts at Palm-Aire Inc., of which he and
Mr. Orleans are each 50% shareholders. From 1972 to 1997, he was a partner in
the law firm of Katz, Ettin, Levine, Kurzweil, Weber & Scialaeba, P.A.,
Cherry Hill, New Jersey, which has performed legal services for the Company in
the past year, and he is now counsel to such law firm. Mr. Katz is a Director of
Central Parking System.
Robert N. Goodman has been a Director of the Company since April
1994. For more than six years, he has served as President and Chief Operating
Officer of Goodtab Corporation, Los Angeles, California, which is engaged
principally in real estate and financial consulting on a nationwide basis. From
December 1990 through July 1992, Mr. Goodman also served as Chairman of the
Board and President of Regency Equities Corp., Los Angeles, California, which is
engaged in real estate-related investments. Mr. Goodman owns a controlling
equity interest in JDT Consulting Group, the sole general partner of La Jolla
Village Professional Center Associates, a California limited partnership (the
"Partnership"). The Partnership filed for a petition under Chapter 11 of the
federal bankruptcy code on April 23, 1996.
Andrew N. Heine has been a Director of the Company since April
1994. For more than six years, Mr. Heine has been an attorney and private
investor in New York, New York. Mr. Heine is a Director of Citizens Utilities
Company.
David Kaplan has been a Director of the Company since April 1994.
Since 1996, Mr. Kaplan has been a principal in Autumn Hill Capital, Inc., a real
estate advisory and investment banking firm and managing partner of Kingsbridge
Partners LLC, a real estate investment firm. Prior to that time, he was a
principal of Victor Capital Group, L.P., which engaged in real estate advisory
services and investment banking.
-3-
<PAGE>
Executive Officers
In addition to Messrs. Orleans and Goldman, the following persons serve
as executive officers of the Company:
Michael T. Vesey, 39, was elected President and Chief Operating Officer
of the Company on April 20, 1998. From July 1994 to April 1998, he was the
Executive Vice President-Project Management of the Company. Prior to 1994, Mr.
Vesey was responsible for project management of the Company's Pennsylvania
communities.
Joseph A. Santangelo, 44, is Chief Financial Officer, Treasurer and
Secretary of the Company. He has held the position of Chief Financial Officer
since July, 1994, and he has been Treasurer of the Company since 1987.
Michael Karmatz, 59, was elected Senior Vice President on September 24,
1998. Prior to that date and since February 1992, Mr. Karmatz was Senior Vice
President of OCC, a subsidiary of the Company.
Gary G. Schaal, 48, is Executive Vice President-Sales and Marketing of
the Company. He has held that position since September, 1995. From July 1987 to
November 1994, Mr. Schaal was a Senior Vice President of Scarborough
Corporation and a Vice President of Scarborough Homes, Inc.
Committees and Meetings of the Board of Directors
The Board of Directors held three meetings during the fiscal year ended
June 30, 1998 ("Fiscal 1998"). The Company has standing Executive, Audit,
Compensation, 1992 Incentive Stock Option, 1992 Director Option Plan and 1995
Director Option Plan Committees. The Board of Directors does not have a standing
Nominating Committee. The functions of a nominating committee are carried on by
the Board of Directors as a whole.
The Executive Committee has and exercises the authority of the Board of
Directors in the management of the business and affairs of the Company between
meetings of the Board. During Fiscal 1998, the Executive Committee acted by
unanimous consent and held no formal meetings.
The Audit Committee recommends the appointment of independent
accountants, reviews with the independent accountants the adequacy of the system
of internal accounting controls of the Company and discusses with management and
the independent accountants the annual financial statements and principal
accounting matters. During Fiscal 1998, the Audit Committee met once.
The Compensation Committee reviews the general compensation
arrangements and structure of the Company, reviews salaries and other
compensation arrangements for the executive officers of the Company and makes
recommendations concerning such compensation to the Board of Directors. During
Fiscal 1998, the Compensation Committee held no formal meetings.
The 1992 Incentive Stock Option Committee administers the Company's
1992 Plan and awards grants thereunder. During Fiscal 1998, the 1992 Incentive
Stock Option Committee held one meeting. The 1992 Director Option Plan Committee
awards options under the 1992 Director Option Plan. The 1992 Director Option
Plan Committee held no formal meetings during Fiscal 1998. The 1995 Director
Option Committee was established in February 1995 to administer the 1995 Plan.
If Proposal Number 3 is approved by the stockholders, the 1995 Director Option
Plan Committee, pursuant to the terms of the 1995 Plan, will be reconstituted
and Mr. Cohen will not be a member thereof. The 1995 Director Option Committee
held no formal meetings in Fiscal 1998.
-4-
<PAGE>
During Fiscal 1998, all incumbent directors attended in person or by
conference call at least 75% of the total number of meetings of the Board of
Directors and Committees of the Board on which they served, except for Mr. Katz
who attended two of the three meetings of the Board of Directors held in such
year.
Compensation of Directors
Each Director who is not an employee of the Company is entitled to
receive a basic fee of $6,000 annually for his service on the Board, plus an
attendance fee of $1,500 for each Board meeting and $500 for each Committee
meeting.
Each Director of the Company who was not an employee of the Company or
any affiliate of the Company and who had been a Director for at least three
years as of January 4, 1993 (the "1992 Eligible Directors") was granted an
option to purchase 25,000 shares of the Company's Common Stock under the 1992
Stock Option Plan for Non-Employee Directors (the "1992 Director Option Plan").
Under the 1992 Director Option Plan, shares subject to an option became eligible
for purchase on a cumulative basis in equal installments of 6,250 shares each,
beginning on August 19, 1994, the date stockholders approved the 1992 Director
Option Plan, and on January 1 of each of the years 1994 through 1996, inclusive.
Each option granted under the 1992 Director Option Plan expires 10 years from
the date of the grant and is subject to earlier termination upon the occurrence
of certain events, including under certain circumstances termination of service
on the Board of Directors. Messrs. Cohen and Katz have received options for
25,000 shares each under the 1992 Director Option Plan.
On February 27, 1995, the Board of Directors adopted, subject to
stockholder approval, the 1995 Plan. Under the 1995 Plan, options for 25,000
shares of the Company's Common Stock were granted on February 28, 1995, subject
to stockholder approval, to each Director who was not an employee of the Company
or any affiliate of the Company or who was ineligible to participate in any
other stock option plan of the Company on February 28, 1995. Options for 25,000
shares each were granted to Messrs. Goodman, Heine and Kaplan. Under the terms
of the 1995 Plan, 6,250 shares of Common Stock became eligible for purchase on
December 8, 1995, the date that the 1995 Plan was approved by the Company's
stockholders, and on each of February 28, 1996, 1997 and 1998.
On April 20, 1998, the Board of Directors adopted, subject to
stockholder approval, amendments to the 1995 Plan providing for the grant of an
option to purchase 10,000 shares of the Company's Common Stock to each Director
who was not an employee of the Company or any affiliate of the Company and who
is ineligible to receive grants under any other stock option plan of the Company
in effect on that date (Messrs. Cohen, Goodman, Heine, Kaplan and Katz). Under
the terms of the options granted in connection with the proposed amendments,
2,500 shares of Common Stock would become eligible for purchase on the date of
the approval by the stockholders of the amendments, and a total of 2,500 shares
of Common Stock would become eligible for purchase on each of the first, second
and third anniversary of April 20, 1998. The exercise price of the new options
is $1.19, the closing price of the Company's Common Stock on April 20, 1998. See
"Proposal 3."
-5-
<PAGE>
PROPOSAL 2. APPROVE AN INCREASE IN THE NUMBER OF SHARES ON WHICH
OPTIONS MAY BE GRANTED UNDER THE 1992 INCENTIVE
STOCK OPTION PLAN FROM 910,000 TO 1,210, 000 SHARES
On December 7, 1992, the Board of Directors of the Company adopted,
subject to stockholder approval, the 1992 Plan. The 1992 Plan is intended to
provide an incentive to selected officers and key employees of the Company and
its subsidiaries to acquire a proprietary interest in the Company, to continue
as officers and employees and to increase their efforts on behalf of the
Company. The 1992 Plan was approved by the stockholders of the Company by
partial written consent effective November 24, 1993 and again at the Company's
Annual Meeting held on August 19, 1994. Approximately eleven officers and key
employees are eligible to receive grants of options under the 1992 Plan.
As originally adopted, the 1992 Plan authorized the grant of options on
560,000 shares of the Company's Common Stock. When the stockholders approved the
1992 Plan on August 19, 1994, they also approved an increase in the number of
shares on which options could be granted under the 1992 Plan to 660,000. On
December 4, 1996, stockholders approved an increase in the number of shares on
which options could be granted under the 1992 Plan to 910,000. Prior to the
Fiscal 1998 grants, which are subject to stockholder approval (except as to
options granted out of shares currently available under the 1992 Plan), options
on 842,500 shares had been granted under the 1992 Plan and, absent a further
increase in the number of shares on which options may be granted under the 1992
Plan, the 1992 Plan will no longer be available (except to the extent of the
remaining 67,500 shares) to provide appropriate incentives to officers and key
employees.
On April 20, 1998, the Board of Directors resolved, subject to
stockholder approval, to amend the 1992 Plan to increase the number of shares on
which options may be granted from 910,000 to 1,210,000 shares. Further, on this
date, the 1992 Incentive Stock Option Committee also resolved to grant 170,000
options to certain officers and key employees at an exercise price of $1.19 per
share, which was the closing price of a share of Company's Common Stock on the
American Stock Exchange on such date. The options vest in four equal
installments, the first on April 20, 1998, and the balance on April 20, 1999,
2000 and 2001, and are expressly conditioned, except as to options granted out
of shares currently available under the 1992 Plan, on approval by the
stockholders of the increase from 910,000 to 1,210,000 shares. If the
stockholders approve Proposal 2, such approval shall be deemed a ratification
of the grant of 170,000 options under the 1992 Plan by the 1992 Incentive
Stock Option Committee.
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<PAGE>
-14-
The following table sets forth information with respect to grants made
in Fiscal 1998 under the 1992 Plan to the Company's CEO, the Named Executive
Officers (as hereinafter defined) and certain other individuals and groups:
Fiscal 1998 Grants Under the 1992 Plan
<TABLE>
<CAPTION>
Dollar Number of
Name and Position Value(1) Options
- ----------------- -------- -------
<S> <C> <C>
Jeffrey P. Orleans -
Chairman & CEO -
Benjamin D. Goldman - -
Vice Chairman
Michael T. Vesey $ 12,400 40,000
President & COO
Michael Karmantz 6,200 20,000
Senior Vice President
Joseph A. Santangelo 9,300 30,000
Secretary & Treasurer
Gary G. Schaal - -
Executive Vice President
Lawrence J. Dugan 6,200 20,000
Counsel to the Company
Kyle Upper 6,200 20,000
Land Acquisition Manager
Executive Group 27,900 90,000
Non-Executive Director Group - -
Non-Executive Officer Employee Group 24,800 80,000
</TABLE>
- ---------------
(1) Based on the difference between the reported closing price of $1.50
for the Company's Common Stock on the American Stock Exchange on
October 16, 1998 and the exercise price of $1.19.
The following summary of the material features of the 1992 Plan does
not purport to be complete and is qualified in its entirety by the full text of
the 1992 Plan.
-7-
<PAGE>
Shares Subject to the 1992 Plan
Subject to approval by the stockholders of the proposed amendment to
the 1992 Plan, the aggregate number of shares of Common Stock which may be
subject to options granted under the 1992 Plan shall be one million two hundred
ten thousand (1,210,000) or the number and kinds of shares or other securities
which shall be substituted for the shares of Common Stock or to which such
shares of Common Stock shall be changed as provided in "Adjustment in Event of
Capital Changes" below. The shares deliverable upon the exercise of an option
under the 1992 Plan may be made available from unissued shares not reserved for
any other purpose or shares reacquired by the Company. Prior to termination of
the 1992 Plan, all or any shares subjected under the 1992 Plan to an option
which, for any reason, terminates unexercised as to such shares, may again be
subjected to an option under the 1992 Plan.
Administration
The 1992 Plan provides that it shall be administered by a committee
consisting of three (3) or more members of the Board who are not eligible to
participate in the 1992 Plan while serving on the 1992 Incentive Stock Option
Committee and shall not have been, at any time within one (1) year prior to
appointment to the 1992 Incentive Stock Option Committee, eligible for selection
as a person to whom an option under the 1992 Plan may be granted pursuant to the
1992 Plan or any other plan of the Company and shall be a "disinterested person"
within the meaning of Rule 16b-3 promulgated under the Exchange Act, as that
rule may be amended from time to time. The 1992 Incentive Stock Option Committee
currently consists of Messrs. Cohen, Katz and Kaplan. The Board of Directors of
the Company intends to amend the 1992 Plan and to reconstitute the 1992
Incentive Stock Option Committee to provide that the 1992 Incentive Stock Option
Committee consist exclusively of "non-employee directors," as that term is
defined in recent amendments to Rule 16b-3.
The 1992 Incentive Stock Option Committee may exercise such power and
authority as may be necessary for the 1992 Incentive Stock Option Committee to
carry out its functions as described in the 1992 Plan. It shall have plenary
authority in its discretion, subject only to the express provisions of the 1992
Plan and of Section 422 of the Internal Revenue Code (the "Code"):
(i) to determine which of the eligible persons shall be granted
options and the number and terms of the options to be granted to each.
In making any determination, the 1992 Incentive Stock Option Committee
shall consider the position and responsibilities of the proposed
grantee being considered, the nature and value to the Company of his
or her services and accomplishments, his or her present and potential
contribution to the success of the Company and such other factors as
the 1992 Incentive Stock Option Committee may deem relevant;
(ii) to determine the dates of grant of options;
(iii) to prescribe the form of the instruments evidencing any options
granted under the 1992 Plan;
(iv) to interpret the 1992 Plan and determine the terms and provisions
of the agreements evidencing the options and to make all other
determinations necessary for 1992 Plan administration;
-8-
<PAGE>
(v) to adopt, amend and rescind rules and regulations for the
administration of the 1992 Plan and for its own acts and proceedings;
and
(vi) to decide all questions and settle all controversies and disputes
of general applicability which may arise in connection with the 1992
Plan.
Eligibility
Persons eligible to receive options under the 1992 Plan are such
officers or key employees of the Company as determined by the 1992 Incentive
Stock Option Committee. No person shall be eligible for the grant of an option
who owns, or would own immediately before the grant of such option, directly or
indirectly, shares possessing more than ten percent (10%) of the total combined
voting power of all classes of shares of the Company, as defined in Code Section
422 ("10% Stockholder"). The foregoing sentence shall not apply if, at the time
such option is granted, the option price is at least one hundred ten percent
(110%) of fair market value and the option is not, by its terms, exercisable
after the expiration of five (5) years from the date of grant.
Purchase Price
The purchase price of shares upon exercise of an option shall be no
less than the fair market value of the shares on the date of grant of an option;
provided, however, if an option is granted to a 10% Stockholder, the purchase
price shall be no less than 110% of the fair market value of the shares on the
date of grant of an option to such individual. The fair market value of the
shares on the date of grant shall be: (i) if the shares are listed on a national
securities exchange, the closing price of the shares on such date; provided,
however, if on such date the shares were traded on more than one national
securities exchange, then the closing price on the exchange on which the
greatest volume of shares was traded on such day; (ii) if the shares are not
listed on a national securities exchange and are traded over-the-counter, the
last sale price of the shares on such date as reported by Nasdaq or, if not
reported by Nasdaq, the average of the closing bid and asked prices for the
shares on such date; and (iii) if the shares are neither listed on a national
securities exchange nor traded in the over-the-counter market, such value as the
1992 Incentive Stock Option Committee shall in good faith determine. If the
shares are listed on a national securities exchange or are traded
over-the-counter but are not traded on the date of grant, then the price shall
be determined by the 1992 Incentive Stock Option Committee by applying the
principles contained in Treasury Regulation Section 20.2031-2 or successor
provisions thereto. The fair market value of the shares shall be determined by,
and in accordance with, procedures to be established by the 1992 Incentive Stock
Option Committee, whose determination shall be final.
Option Agreement
Each grantee is required to enter into a written agreement with the
Company, which shall contain such provisions, consistent with the 1992 Plan, as
may be established at any time or from time to time by the 1992 Incentive Stock
Option Committee. No grantee shall have rights under any option unless, and
until, a written agreement is entered into with the Company.
Vesting, Exercise and Term of Options; Limitation
Options under the 1992 Plan may be exercisable for terms of up to but
not exceeding ten (10) years from the date the particular option is granted;
provided, however, that options granted to a 10% Stockholder
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<PAGE>
may be exercisable for a term of up to but not exceeding five (5) years from the
date the particular option is granted. Subject to the foregoing, options shall
be exercisable at such time and in such amounts (up to the full amount thereof)
as may be determined separately in each instance by the 1992 Incentive Stock
Option Committee at the time of the grant. If an option granted under the 1992
Plan is exercisable in installments, the 1992 Incentive Stock Option Committee
shall determine what events, if any, will make it subject to acceleration.
The aggregate fair market value (determined at the time an option is
granted) of shares for which incentive options are exercisable for the first
time under the terms of the 1992 Plan by a grantee during any calendar year
(under all plans of the Company defined in Code Section 424) is limited to
$100,000; provided, however, should a grantee have unexercised options which are
exercisable (without the application of such limitation) when he or she
terminates employment, any option exercised in excess of such limitation shall
be treated as a nonqualified option. The value of shares for which options may
be granted to a grantee in a year may, however, exceed $100,000.
If a grantee's employment is terminated because he or she has attained
the age which the Company may from time to time establish as the retirement age
for any class of its employees or, with the approval of the 1992 Incentive Stock
Option Committee, because of permanent disability as defined in Code Section
22(e)(3), he or she may, within three (3) months following such termination,
exercise the option with respect to all or any part of the shares subject
thereto in which his or her right to purchase such shares had accrued or vested
at the time of termination of employment. However, if he or she dies before the
end of the three-month period after the termination of his or her employment,
his or her estate shall have the right, subject to the procedures set forth
below, to exercise such option within one (1) year following such termination.
If a grantee's employment is terminated by death, his or her estate
shall have the right for a period of one (1) year following the date of such
death to exercise the option to the extent that the right to exercise had
accrued or vested prior to the date of his or her death. A grantee's "estate"
shall mean his or her legal representative upon his or her death or any person
who acquires the right to exercise an option by reason of the grantee's death.
If the employment of a grantee is terminated for "Cause" (as defined
below), his or her right under any then outstanding option shall terminate at
the time of such termination of employment. In the case of any grantee not
subject to a written employment agreement, "Cause" shall mean any willful or
intentional act which is intended to have the effect of injuring the reputation,
business or business relationships of the Company. In the case of a grantee
subject to a written employment agreement, "Cause" shall mean any action giving
the Company the right to terminate such person's employment under such agreement
for cause.
In the case of a grantee whose employment is terminated for any reason
other than those provided above, the grantee may, within the three (3) month
period following such termination, exercise the option to the extent that the
right to exercise had accrued or vested prior to such termination. However, if
he or she dies prior to the end of the three (3) month period after termination
of his or her employment, his or her estate shall have the right, subject to the
procedures set forth above, to exercise such option within one (1) year
following such termination. Thereafter, all rights of such grantee in the option
and the shares issuable upon exercise of the option shall immediately cease.
-10-
<PAGE>
Amendment of the 1992 Plan
The Board of Directors may amend the 1992 Plan, may correct any defect
or supply any omissions or reconcile any inconsistency in the 1992 Plan or in
any option in the manner and to the extent it shall deem desirable without
action on the part of the stockholders of the Company; provided, however that,
except as provided in the 1992 Plan, without approval by the stockholders of the
Company: (i) the total number of shares on which options may be granted under
the 1992 Plan shall not be increased; (ii) no option shall be exercisable more
than ten (10) years after the date it is granted; (iii) the expiration date
shall not be extended; (iv) the Board may not transfer administration to any
person who would not meet the requirements for disinterested administration of
the 1992 Plan set forth in Rule 16b-3 promulgated under the Exchange Act and as
amended from time to time; and (v) no amendment shall be of any force and effect
which shall decrease the price at which options may be granted, permit the
modification of any outstanding option, increase the number of shares to be
received on exercise of an option, or materially modify the requirements as to
eligibility for participation in the 1992 Plan.
Subject to the terms and conditions and within the limitations of the
1992 Plan, the 1992 Incentive Stock Option Committee may modify, extend or renew
outstanding options, including amending the terms of an option at any time to
include provisions that have the effect of changing the option to a nonqualified
stock option, or accept the surrender of outstanding options (to the extent not
theretofore exercised) and authorize the granting of new options in substitution
therefor (to the extent not theretofore exercised). However, no modification of
an option shall, without the consent of grantee, impair any rights or alter any
obligations under any option theretofore granted, nor shall any modification be
made which shall adversely affect the status of an option as an incentive stock
option under Code Section 422.
Adjustment in Event of Capital Changes
The 1992 Plan provides that there shall be equitable adjustments made
in outstanding options as to price and other terms as may be necessary to
reflect any change in the corporate structure or shares including mergers,
consolidations, recapitalizations, reclassifications, splits, reverse splits,
combination of shares or otherwise.
Certain Corporate Transactions
In order to maintain all of a grantee's rights in the event of certain
corporate transactions (such as a dissolution of the Company or a merger or a
consolidation of the Company with or into another corporation), the Board of
Directors may amend all outstanding options (upon such conditions as it shall
deem appropriate) to (i) permit the exercise of all such options prior to the
effectiveness of any such transactions and to terminate such options as of such
effectiveness, or (ii) require the forfeiture of all options, provided the
Company pays to the grantee the excess of the fair market value of the shares in
which the grantee's rights have not become vested at such date over the purchase
price, or (iii) make such other provisions as the Board shall deem equitable.
-11-
<PAGE>
Payment for Shares
The purchase price for shares upon exercise of an option shall be paid
in full in United States dollars in cash or by check at the time of purchase;
provided, however, that at the discretion of the 1992 Incentive Stock Option
Committee at the time the option is granted, the purchase price may be paid with
(i) shares of the Company already owned by, and in possession of, the grantee;
or (ii) any combination of United States dollars or shares of the Company.
Shares of the Company used to satisfy the exercise price of an option shall be
valued as of the date of exercise at their fair market value determined in
accordance with the rules set forth above under "Purchase Price".
Options Non-Transferable
No options shall be transferable unless transferred by will or the laws
of descent and distribution and shall be exercisable during the grantee's
lifetime only by the grantee or the grantee's guardian or legal representative.
Federal Income Tax Consequences
To the extent an option qualifies as an incentive stock option under
Code Section 422, an employee will not recognize taxable income, and the Company
will not be entitled to a deduction, either at the time of grant or at the time
of exercise. The excess of the fair market value of the shares received over the
stock option price will, however, generally be included in the grantee's
alternative minimum taxable income in the year of exercise. If shares acquired
upon exercise of a stock option are held for a minimum of two (2) years from the
date of grant and one (1) year from the date of transfer of the shares to the
grantee, the gain or loss (in an amount equal to the difference between the
sales price and the exercise price) upon disposition of the shares will be
treated as long-term capital gain or loss and the Company will not be entitled
to any deduction.
If the statutory holding periods are not satisfied, i.e., the grantee
of a stock option makes a disqualifying disposition, the grantee generally will
recognize ordinary income equal to the difference between the exercise price
and the lower of (i) the fair market value of the shares at the date of the
option exercise; or (ii) the sale price of the shares, and the Company will be
entitled to a deduction in the same amount. Any gain recognized on a
disqualifying disposition of the shares in excess of the amount treated as
ordinary income will be characterized as capital gain. The Company will not
recognize any gain or loss upon the issuance of shares under the 1992 Plan.
The affirmative vote of the holders of a majority of the outstanding
shares of the Company's Common Stock present or represented, and entitled to
vote at the Meeting is required for adoption of Proposal 2. Abstentions will
have the same legal effect as a vote against this proposal, but specific
directions not to cast a vote will have no legal effect.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL
OF PROPOSAL 2.
-12-
<PAGE>
PROPOSAL 3. APPROVE AN INCREASE IN THE NUMBER OF SHARES ON WHICH
OPTIONS MAY BE GRANTED UNDER THE 1995 STOCK OPTION PLAN FOR
NON-EMPLOYEE DIRECTORS FROM 100,000 TO 125,000 SHARES AND TO PROVIDE
FOR THE GRANT OF ADDITIONAL OPTIONS THEREUNDER
On February 27, 1995, the Board of Directors of the Company adopted,
subject to stockholder approval, the 1995 Plan. The 1995 Plan is intended to
promote the Company's interests and those of its stockholders by permitting
grants of options to purchase Common Stock to non-employee Directors who are not
covered by any of the Company's existing option plans and whose services are
considered essential to the Company's continued progress by increasing their
ownership interest in the Company and providing a further incentive for these
non-employee Directors to serve as Directors of the Company. The 1995 Plan was
approved by the Stockholders of the Company at the Company's Annual meeting held
December 5, 1995.
As originally adopted, the 1995 Plan authorized the grant of options on
100,000 shares of the Company's Common Stock. Options on 75,000 shares have been
granted under the 1995 Plan and, absent a further increase in the number of
shares on which offering may be granted under the 1995 Plan, the 1995 Plan will
no longer be available (except to the extent of the remaining 25,000 shares) to
provide appropriate incentives for non-employee Directors to serve as Directors
of the Company.
On April 20, 1998, the Board of Directors resolved to amend the 1995
Plan to (a) increase the number of shares on which options may be granted
thereunder from 100,000 to 125,000 shares, (b) provide for the grant of an
option to purchase 10,000 shares of Common Stock thereunder to each Director who
is not an employee of the Company or any affiliate of the Company and who is
ineligible to receive grants under any other stock option plan of the Company in
effect on that date (Messrs. Cohen, Goodman, Heine, Kaplan and Katz), and (c) to
make certain other technical amendments to the 1995 Plan. Stockholder approval
is required with respect to clauses (a) and (b) above. The 1995 Plan provides
that the exercise price of the options granted under the plan shall be the
closing price of a share of Company Common Stock on the American Stock Exchange
on the date of the grant. On April 20, 1998, the closing price for the Company's
Common Stock on the American Stock Exchange was $1.19 per share.
The following table sets forth information with respect to the grants
made in Fiscal 1998 under the 1995 Plan to the Company's Non-Executive
Directors:
<TABLE>
<CAPTION>
Fiscal 1998 Grants Under the 1995 Plan
--------------------------------------
Dollar Number of
Name & Position Value(1) Options
--------------- -------- -------
<S> <C> <C>
Non-Executive Director Group $ 15,500 50,000
</TABLE>
- --------------
(1) Based on the difference between the reported closing price of $1.50
for the Company's Common Stock on the American Stock Exchange on
October 16, 1998 and the exercise price of $1.l9.
-13-
<PAGE>
The following summary of the material features of the 1995 Plan, as
amended, does not purport to be complete and is qualified in its entirety by the
full text of the 1995 Plan and the amendments to the 1995 Plan. A copy of the
amendments to the 1995 Plan is attached hereto as Appendix A.
Shares Subject to the 1995 Plan
Subject to approval by the stockholders of the proposed amendment to
the 1995 Plan and to adjustment as provided under "Adjustment in Event of
Capital Changes" below, an aggregate of 125,000 shares of the Company's Common
Stock may be issued upon the exercise of options granted under the 1995 Plan. If
any option granted under the 1995 Plan expires or terminates for any reason
without having been exercised in full, the shares subject to, but not delivered
under, such option may again become available for the grant of other options
under the 1995 Plan. All options under the 1995 Plan are non-statutory options
which are not intended to qualify as incentive stock options under the Code.
Eligibility
Upon approval of the proposed amendments to the 1995 Plan, Directors of
the Company who are not employees of the Company or any affiliate of the Company
and who are ineligible to receive grants under any other stock option plan of
the Company in effect at the time of grant of an option are eligible to
participate in the 1995 Plan (the "1995 Eligible Directors"). At present, the
only Directors eligible to participate in the 1995 Plan are Messrs. Cohen,
Goodman, Heine, Kaplan and Katz. Messrs. Goodman, Heine and Kaplan were each
granted on February 28, 1995 an option to purchase 25,000 shares of the
Company's Common Stock. On April 20, 1998, the Board of Directors adopted,
subject to stockholder approval, amendments to the 1995 Plan providing for the
grant of a new option to each of the 1995 Eligible Directors to purchase an
additional 10,000 shares with the effective date of the grant being April 20,
1998. See "Grants Under the Amendments to the 1995 Plan" and "Vesting, Exercise
and Term of Options" below.
Administration
The 1995 Plan provides that it shall be administered by a committee
consisting of Directors who are not eligible to participate in the 1995 Plan.
The 1995 Director Option Plan Committee has been designated to serve as the
committee under the 1995 Plan. Subject to the provisions of the 1995 Plan, the
1995 Director Option Plan Committee is authorized to interpret the 1995 Plan, to
establish, amend and rescind any rules and regulations relating to the 1995 Plan
and to make all other determinations necessary or advisable for the
administration of the 1995 Plan; provided, however, that the 1995 Director
Option Plan Committee shall have no discretion with respect to rules regarding
the eligibility or selection of Directors to receive options under the 1995
Plan, the number of shares subject to any such options under the 1995 Plan, or
the purchase price thereunder, and provided further that the full name shall not
have the authority to take any action or to make any determination that would
materially increase the benefits accruing to participants under the 1995 Plan.
Upon approval of the amendments to the 1995 Plan, the 1995 Director Option Plan
Committee will consist of Messrs. Goldman and Orleans.
Grants Under the Amendments to the 1995 Plan
The amendments to the 1995 Plan became effective upon adoption by the
Board of Directors on April 20, 1998, subject to approval by the holders of a
majority of outstanding shares entitled to vote. Grants of options to purchase
10,000 shares were made to each 1995 Eligible Director who was a 1995 Eligible
Director on such date (i.e., Messrs. Cohen, Goodman, Heine, Kaplan and Katz),
subject to the
-14-
<PAGE>
condition that such grants would become null and void if stockholder approval
were not received within 12 months of the date of approval of the amendments to
the 1995 Plan by the Board of Directors.
Purchase Price
The purchase price of shares of Common Stock to be paid upon exercise
of an option is 100% of the fair market value of the shares of Common Stock on
the date of grant of an option. Fair market value means: (i) if the shares of
Common Stock are listed on a national securities exchange, the closing price of
the Shares on such date; provided, however, if on such date the Shares were
traded on more than one national securities exchange, then the closing price on
the exchange on which the greatest volume of Shares was traded on such day; (ii)
if the Shares are not listed on a national securities exchange and are traded
over-the-counter, the last sale price of the Shares on such date as reported by
Nasdaq or, if not reported by Nasdaq, the average of the closing bid and asked
prices for the Shares on such date; and (iii) if the Shares are neither listed
on a national securities exchange nor traded in the over-the-counter market,
such value as the 1995 Director Option Plan Committee shall in good faith
determine. If the Shares are listed on a national securities exchange or are
traded over-the-counter but are not traded on the date of grant, then the price
shall be determined by the 1995 Director Option Plan Committee by applying the
principles contained in Proposed Treasury Regulation Section 1.422A-2(e) and
Treasury Regulation Section 20.2031-2 or successor provisions thereto. The fair
market value of the Shares shall be determined by, and in accordance with,
procedures to be established by the 1995 Director Option Plan Committee, whose
determination shall be final.
On April 20, 1998, the date options to purchase 50,000 Shares were
granted to the 1995 Eligible Directors, the exercise price established was $1.19
per share which was the closing price of the Company's Common Stock on the
American Stock Exchange on such date.
Vesting, Exercise and Term of Options.
Upon approval of the amendments to the 1995 Plan, each option granted
under the 1995 Plan or an amendment to the 1995 Plan shall not be exercisable
with respect to any shares until the date of approval of the 1995 Plan or
amendment to the 1995 Plan by the stockholders of the Company (the "Approval
Date"). From and after the Approval Date, shares subject to an option become
eligible for purchase on a cumulative basis in four (4) equal installments, as
follows: (i) a total of twenty-five percent (25%) of the number of shares on the
Approval Date, and (ii) a total of twenty-five percent (25%) of the number of
shares on each of the first, second and third anniversaries of the effective
date of grant of the option. Each option granted under the 1995 Plan or any
amendment to the 1995 Plan shall expire ten years from the date of the grant,
and shall be subject to earlier termination as hereinafter provided. Grants of
options under the 1995 Plan and any amendment to the 1995 Plan shall become null
and void if the 1995 Plan or any amendment requiring stockholder approval is not
approved by the stockholders of the Company within twelve months of approval of
the 1995 Plan or such amendment by the Board of Directors of the Company.
In the event of the termination of service on the Board by the holder
of any option granted under the 1995 Plan, other than by reason of total and
permanent disability or death, the then outstanding options of such holder may
be exercised only to the extent that they were exercisable on the date of such
termination and will expire three months after such termination, or on their
stated expiration date, whichever occurs first.
-15-
<PAGE>
In the event of termination of service by reason of the total and
permanent disability of the holder of any option under the 1995 Plan, the holder
may exercise the options in full at any time within one year after commencement
of such disability, but in no event after the expiration date of the term of the
option. In the event of the death of the holder of any option under the 1995
Plan, each of the then outstanding options of such holder will be exercisable in
full by the holder's legal representative at any time within a period of one
year after death, but in no event after the expiration date of the term of the
option. However, if the holder dies within one year following termination of
service on the Board by reason of total and permanent disability, such option
will be exercisable for one year after the holder's death, or until the
expiration date of the term of the option, if earlier.
Amendment, Suspension or Termination
The Board of Directors may suspend or terminate the 1995 Plan or revise
or amend it in any respect whatsoever; provided, however, that without approval
of the stockholders, no revision or amendment shall change the selection or
eligibility of Directors to receive options under the 1995 Plan, the number of
Shares subject to any such options under the 1995 Plan, the purchase price
thereunder, or materially increase the benefits accruing to participants under
the 1995 Plan.
Adjustment in Event of Capital Changes
The 1995 Plan provides that there shall be equitable adjustments made
in outstanding options as to price and other terms as may be necessary to
reflect any change in the corporate structure or shares including mergers,
consolidations, recapitalizations, reclassifications, splits, reverse splits,
combination of shares or otherwise.
Certain Corporate Transactions
In order to maintain all of a grantee's rights in the event of certain
corporate transactions (such as a dissolution of the Company or a merger or a
consolidation of the Company with or into another corporation), the Board may
amend all outstanding options (upon such conditions as it shall deem
appropriate) to (i) permit the exercise of all such options prior to the
effectiveness of any such transaction and to terminate such options as of such
effectiveness, or (ii) require the forfeiture of all options, provided the
Company pays to the grantee the excess of the fair market value of the Shares in
which the grantee's rights have not become vested at such date over the purchase
price, or (iii) make such other provisions as the Board shall deem equitable.
Payment for Shares
The purchase price for Shares upon exercise of an option shall be paid
in full in United States dollars in cash or by check at the time of purchase;
provided, however, that at the discretion of the Board, the purchase price may
be paid with (i) shares of the Company already owned by, and in possession of, a
grantee, or (ii) any combination of United States dollars or Shares of the
Company. Shares of the Company used to satisfy the exercise price of an option
shall be valued as of the date of exercise at their fair market value determined
in accordance with the rules set forth above under "Purchase Price".
-16-
<PAGE>
Options Non-Assignable and Non-Transferable
Each option granted under the 1995 Plan and all rights thereunder shall
be non-assignable and non-transferable other than by will or the laws of descent
and distribution and shall be exercisable during the holder's lifetime only by
the grantee or the grantee's guardian or legal representative.
Tax Aspects
The grant of options will not result in taxable income to the 1995
Eligible Director or a tax deduction for the Company. The exercise of an option
by a 1995 Eligible Director will result in taxable ordinary income to the
Director and a corresponding deduction for the Company, in each case equal to
the difference between the fair market value of the shares on the date the
option was exercised and the exercise price. A grantee exercising a
non-qualified stock option is subject to withholding for Federal, and generally
for state and local, income taxes.
The foregoing does not purport to be a complete summary of the effect
of Federal income taxation upon Eligible Directors under the 1995 Plan. It also
does not reflect provisions of the 1995 income tax laws of any municipality,
state or foreign country in which an 1995 Eligible Director may reside.
Approval of Stockholders
The affirmative vote of the holders of a majority of the outstanding
shares of the Company's Common Stock present or represented, and entitled to
vote at the Meeting is necessary for adoption of Proposal 3. Abstentions will
have the same legal effect as a vote against this proposal, but specific
directions not to cast a vote will have no legal effect.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL
OF PROPOSAL 3.
-17-
<PAGE>
PROPOSAL 4. RATIFICATION OF APPOINTMENT
OF INDEPENDENT ACCOUNTANTS
The Board of Directors has determined to appoint PricewaterhouseCoopers
LLP as independent accountants of the Company for the Company's 1999 fiscal
year, subject to ratification of such appointment by the stockholders at the
Meeting. The ratification of the appointment of independent accountants by the
stockholders is not required by law or by the Company's By-laws; however, the
Board of Directors has decided to submit this matter to the stockholders because
it believes that it is good practice to do so. A majority of the votes cast on
the ratification of the appointment of PricewaterhouseCoopers LLP is necessary
to approve this matter. For such purposes, the withholding of authority to vote,
an abstention or the specific direction not to cast a vote, such as a broker
non-vote, will not constitute the casting of a vote in favor of the
ratification. If a majority of the votes cast on this matter are not cast in
favor of the ratification of the appointment of PricewaterhouseCoopers LLP, the
Board of Directors will appoint other independent accountants as soon as is
practical and before the close of the 1999 fiscal year. In the absence of
instructions to the contrary, proxies will be voted in favor of the ratification
of the appointment of PricewaterhouseCoopers LLP as independent accountants of
the Company to serve until the next Annual Meeting of Stockholders.
A representative of PricewaterhouseCoopers LLP is expected to be
present at the Annual Meeting to make a statement if desired and will be
available to respond to any appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" RATIFICATION OF THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S INDEPENDENT
ACCOUNTANTS FOR FISCAL YEAR 1999.
OTHER MATTERS
The Board of Directors is not aware at present of any other matters
which will or may come before the Annual Meeting of Stockholders and which
require a vote of the stockholders. If any such matter is properly brought
before the meeting, the Proxy Committee will vote thereon in its discretion. You
are urged to mark, sign and date your proxy and return it immediately.
ADDITIONAL INFORMATION
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities and Exchange Act of 1934, as amended
(the "Exchange Act"), requires the Company's executive officers and directors
and persons who own more than ten percent of a registered class of the Company's
equity securities (collectively, the "reporting persons") to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and to furnish the Company with copies of these reports.
Based on the Company's review of the copies of these reports received
by it, and written representations, if any, received from reporting persons with
respect to the filing of reports on Form 3, 4 and 5, the Company believes that
all filings required to be made by the reporting persons for Fiscal 1998 were
made on a timely basis.
-18-
<PAGE>
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth as of the close of business on September
30, 1998, certain information with respect to the beneficial shareholdings of
each director or nominee, each of the executive officers named in the Summary
Compensation Table, and all executive officers and directors as a group, as well
as the holdings of each stockholder who was known to the Company to be the
beneficial owner, as defined in Rule 13d-3 under the Exchange Act, of more than
5% of the Company's shares of Common Stock, based upon Company records or
Securities and Exchange Commission records. Each of the persons listed below has
sole voting and investment power with respect to such shares, unless otherwise
indicated.
<TABLE>
<CAPTION>
Number of Shares Percent
Name of Beneficial Owner Beneficially Owned of Class
- ------------------------ ------------------ --------
<S> <C> <C>
Jeffrey P. Orleans, Director and Executive Officer........ 9,232,708(1) 69.1 %
3333 Street Road, Suite 101
Bensalem, PA 19020
Robert N. Goodman, Director .............................. 47,500(2) *
11400 West Olympic Boulevard
Suite 1560
Los Angeles, CA 90064
Benjamin D. Goldman, Director Vice Chairman of the Board 1,163,008(3) 9.9
Lewis Katz, Director ..................................... 481,500(4) 4.2
Sylvan M. Cohen, Director................................. 82,002(5) *
Joseph A. Santangelo, Executive Officer................... 80,000(6) *
Michael T. Vesey, President and Chief Operating Officer 251,000(7) 2.2
David Kaplan, Director ................................... 61,500(8) *
Michael Karmatz, Senior Vice President.................... 30,400(9) *
Gary Schaal, Executive Officer............................ 65,000(10) *
Andrew N. Heine, Director ................................ 27,500(11) *
All directors and executive officers
as a group (11 persons) ................................ 11,522,118(12) 81.5
</TABLE>
- -----------
* Less than 1% of the outstanding shares of Common Stock of the Company.
(1) The shares reflected include (a) 5,000 shares of 10,000 shares owned by a
privately-held corporation, of which Mr. Orleans is a 50% stockholder,
(b) 700 shares held as custodian for a minor son and minor daughter, and
(c) 2,000,000 Shares issuable upon conversion of the Company's $3 million
Convertible Subordinated 7% Note. See "Certain Relationships and Related
Transactions" for the terms of a transaction under which Mr. Orleans
could acquire additional shares of the Company's Common Stock.
(2) The shares reflected consist of (a) 20,000 shares owned by Goodtab
Corporation (of which Mr. Goodman is the sole shareholder), (b) 25,000
shares issuable upon exercise of the vested portion of outstanding stock
options, and (c) 2,500 shares issuable upon exercise of the vested
portion of outstanding options granted under the amendments to the 1995
Plan, assuming stockholder approval.
-19-
<PAGE>
(3) Includes (a) 450 shares held by Mr. Goldman in his capacity as trustee
for a minor child, (b) 400,000 shares issuable upon exercise of the
vested portion of outstanding stock options, and (c) 600,000 held in
three separate trusts for the benefit of the children of Mr. Orleans, as
to which Mr. Goldman is, in each case, sole trustee.
(4) The shares reflected include (a) 25,000 shares issuable upon exercise of
the vested portion of outstanding stock options, and (b) 2,500 shares
issuable upon exercise of the vested portion of outstanding options
granted under the amendments to the 1995 Plan, assuming stockholder
approval.
(5) The shares reflected include (a) 5,000 shares of 10,000 shares owned by a
privately-held corporation of which Mr. Cohen is a 50% shareholder, (b)
450 shares held by Mr. Cohen's adult sons (for which Mr. Cohen disclaims
beneficial ownership), (c) 6,125 shares held by Mr. Cohen's wife (for
which Mr. Cohen disclaims beneficial ownership), (d) 25,000 shares
issuable upon exercise of the vested portion of outstanding stock
options, and (e) 2,500 shares issuable upon exercise of the vested
portion of outstanding options granted under the amendments to the 1995
Plan, assuming stockholder approval.
(6) The shares reflected include (a) 40,000 shares issuable upon the exercise
of vested portion of outstanding stock options, and (b) 7,500 shares
issuable upon exercise of the vested portion of outstanding options
granted under the amendments to the 1992 plan, assuming stockholder
approval.
(7) The shares reflected include (a) 125,000 shares issuable upon exercise of
the vested portion of outstanding stock options, and (b) 10,000 shares
issuable upon exercise of the vested portion of outstanding options
granted under the amendment to the 1992 Plan, assuming stockholder
approval .
(8) The shares reflected include (a) 25,000 shares issuable upon exercise of
the vested portion of outstanding stock options, and (b) 2,500 shares
issuable upon exercise of the vested portion of outstanding options
granted under the amendments to the 1995 Plan, assuming stockholder
approval.
(9) Includes (a) 14,000 shares held by Mr. Karmatz's wife (for which
Mr. Karmatz disclaims beneficial ownership), (b) 10,000 shares issuable
upon exercise of the vested portion of outstanding stock options, and
(c) 5,000 shares issuable upon exercise of the vested portion of
outstanding options granted under the amendments to the 1992 Plan, assuming
stockholder approval.
(10) Includes 40,000 shares issuable upon the exercise of the vested portion
of stock options.
(11) Consists of (a) 25,000 shares issuable upon exercise of the vested portion
of outstanding stock option, and (b) 2,500 shares issuable upon
exercise of the vested portion of outstanding options granted under
the amendments to the 1995 Plan, assuming stockholder approval.
(12) The shares reflected consist of (a) 740,000 shares issuable upon exercise
of the vested portion of outstanding stock options, (b) 35,000 shares
issuable upon exercise of the vested portion of outstanding options
assuming stockholder approval of the amendments to the 1992 Plan and the
1995 Plan, and (c) 2,000,000 shares issuable upon conversion of the
Company's $3 million convertible subordinated 7% note.
-20-
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information as to all compensation paid by
the Company for services in each of the Company's last three fiscal years ended
June 30, 1998 to (i) the Company's Chief Executive Officer and (ii) the four
most highly compensated officers other than the Chief Executive Officer who were
serving as executive officers at the end of Fiscal 1998 and whose total annual
salary and bonus exceeded $100,000 in Fiscal 1998 (together with the Chief
Executive Officer, the "Named Executive Officers").
<TABLE>
<CAPTION>
Long-Term
Compensation
------------
Annual Compensation Awards
------------------- ------
Other Annual Number of Securities
Name and Principal Position Fiscal Year Salary Bonus Compensation* Underlying Options
- --------------------------- ----------- ------ ----- ------------ ------------------
<S> <C> <C> <C> <C> <C>
Jeffrey P. Orleans 1998 $300,000 $ 88,620 $3,123 --
Chairman and CEO 1997 300,000 59,100 2,375 --
1996 300,000 28,590 2,375 --
Benjamin D. Goldman 1998 250,000 59,080 1,722 --
Vice Chairman of the Board 1997 250,000 39,400 2,375 --
1996 250,000 19,060 2,111 --
Michael T. Vesey (1) 1998 178,845 30,000 2,888 40,000
President and Chief 1997 175,000 20,000 2,375 200,000
Operating Officer 1996 175,000 10,000 2,375 70,000
Michael Karmatz (1) 1998 150,000 15,000 2,324 20,000
Senior Vice President 1997 150,000 11,000 2,000 --
1996 150,000 6,200 1,866 --
Gary G. Schaal 1998 125,000 29,540 2,240 --
Executive Vice President 1997 125,000 19,700 2,375 --
Sales and Marketing 1996 98,558 9,530 1,404 60,000
</TABLE>
- ------------------
* In all cases, amounts contributed by the Company to a 401(k) (defined
contribution) retirement plan.
(1) Includes options granted upon approval by the stockholders of the amendment
to the 1992 Plan. See "Proposal 2."
On July 18, 1994, the Board of Directors, upon the favorable
recommendation of the Compensation Committee, adopted a bonus compensation plan
(the "Bonus Plan") to be applied in fiscal 1995 and thereafter. For a summary of
the Bonus Plan (including recent amendments thereto) and certain awards made
thereunder, see "Compensation Committee Report on Executive Compensation."
-21-
<PAGE>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table sets forth individual exercises of stock options
during Fiscal 1998 and year-end values by the Named Executive Officers.
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised
Unexercised Options at In-the-Money Options
June 30, 1998 (#) at June 30, 1998 ($)(1)
----------------------------- --------------------------
Shares
Acquired Value
Name on Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
----------------------- --------------- -------------- ------------- ------------- ------------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey P. Orleans -- -- -- -- -- --
Benjamin D. Goldman -- -- 400,000 -- $650,000 --
Michael T. Vesey(2) -- -- 95,000 240,000 56,875 $199,375
Michael Karmatz(2) -- -- 15,000 15,000 5,938 17,813
Gary G. Schaal -- -- 30,000 30,000 33,750 33,750
</TABLE>
- ------------------
(1) In-the-money options are those where the fair market value of the
underlying securities exceeds the exercise price of the option. The
closing market price of the Company's Common Stock on June 30, 1998 was
$2.375 per share.
(2) Includes options granted subject to approval by the stockholders of the
amendment to the 1992 Plan. See "Proposal 2."
Option/SAR Grants Table
The following table sets forth information concerning individual grants
of stock options and stock appreciation rights made during the fiscal year ended
June 30, 1998 to the Named Executive Officers. Neither the Chief Executive
Officer nor the other most highly compensated executed officers named in the
"Summary Compensation Table" above, other than Mr. Vesey and Mr. Karmatz, were
granted stock options or stock appreciation rights during the fiscal year ended
June 30, 1998.
<TABLE>
<CAPTION>
Potential realizable value at
Assumed Annual Rates of Stock
Individual Grants Price Appreciation for Option Term(1)
--------------------------------------------------------------------- -------------------------------------
Number of % of Total
Securities Options/SARs
Underlying Granted to
Options/SARs Employees in Exercise Expiration
Name Granted (#)(2) Fiscal Year Price (R/SH) Date 0%($)(3) 5%($) 10%($)
---- -------------- ----------- ------------ ---- -------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michael T. Vesey (4) 40,000 24% $1.19 4/20/08 -0- $29,872 $75,703
Michael Karmatz(4) 20,000 12% 1.19 4/20/08 -0- $14,936 $37,851
</TABLE>
- ----------------------
(1) These assumed annual rates of stock price appreciation are specified by the
Securities and Exchange Commission. No assurance can be given that such
rates will be achieved.
(2) Assumes that the amendment to the 1992 Plan set forth herein has been
approved by the stockholders of the Company.
(3) Reflects no appreciation because the exercise price was equal to the
closing price of the Common Stock on the American Stock Exchange on the
date of grant.
(4) Upon approval by the stockholders of the amendments to the 1992 Plan, the
shares of stock become eligible for purchase on the following: 25%
immediately and 25% on each of April 20, 1999, 2000 and 2001.
-22-
<PAGE>
Performance Graph
The graph set forth below compares the yearly percentage change in the
cumulative total stockholder return on the Common Stock of the Company during
the five years ended June 30, 1998 with (i) the cumulative total return on the
American Stock Exchange Index and (ii) the cumulative total return on a selected
peer group consisting of six companies engaged in residential real estate
development similar in scope and character or in reasonable geographic proximity
to the Company's development activities: Continental Homes Holding Corp.
(acquired in April 1998), Hovnanian Enterprises, Inc. (Class A), Oriole Homes
Corp. (Class B), Calton Inc., Standard-Pacific Corp. and Toll Brothers, Inc. The
comparison assumes $100 was invested on June 30, 1993 in the Company's Common
Stock and in each of the foregoing indices and assumes the reinvestment of any
dividends. The closing market price of the Company's Common Stock as of June 30,
1998 was $2.375.
Comparison of Five Year Cumulative Total Return
300 |-----------------------------------------------------------------------|
| |
| |
250 |-----------------------------------------------------------------------|
D | |
| |
O 200 |-----------------------------------------------------------------------|
| # |
L | & |
150 |-----------------------------------------------------------------------|
L | & & |
| & # |
A 100 |-----*#&---------&#-----------#----------#-----------------------------|
| * * |
R | |
50 |-----------------------------------------------------------------------|
S | * * * |
| |
0 |-----------------------------------------------------------------------|
June 1993 June 1994 June 1995 June 1996 June 1997 June 1998
*Orleans Homebuilders Inc. & American Stock Exchange Ind # Peer Group
Years Ending
<TABLE>
<CAPTION>
June 30, 1993 June 30, 1994 June 30, 1995 June 30, 1996 June 30, 1997 June 30, 1998
<S> <C> <C> <C> <C> <C> <C>
ORLEANS HOMEBUILDERS INC. 100 78.26 36.94 39.13 30.43 82.61
AMERICAN STOCK EXCHANGE IND 100 97.66 115.19 132.83 143.37 166.10
PEER GROUP 100 97.14 95.25 101.14 115.34 191.28
</TABLE>
-23-
<PAGE>
Compensation Committee Interlocks and Insider Participation
During Fiscal 1998, Messrs. Cohen, Kaplan and Katz served on the
Compensation Committee of the Board of Directors. Mr. Cohen is Of Counsel to
Drinker Biddle & Reath LLP, counsel to the Company, and Mr. Katz is counsel to
Katz, Ettin, Levine, Kurzweil, Weber & Scialaeba, P.A., which has performed
legal services for the Company in the past year. On July 18, 1994, the 1992
Incentive Stock Option Committee was reconstituted with Messrs. Cohen, Kaplan
and Katz as its sole members.
Mr. Cohen is Chairman of the Board of Trustees and Chief Executive
Officer of Pennsylvania Real Estate Investment Trust, Fort Washington,
Pennsylvania ("PREIT"). Mr. Orleans also serves as a Trustee of PREIT. Mr. Katz
draws a salary from Resorts at Palm Aire, Inc. of which he and Mr. Orleans are
each 50% shareholders.
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
Compensation Committee
The Compensation Committee consists of Messrs. Cohen, Kaplan and Katz.
The Committee is chaired by Mr. Kaplan and reviews and recommends salaries,
bonuses and other forms of compensation for officers and key employees of the
Company. On July 18, 1994, the members of the current Compensation Committee
were appointed as the sole members of the 1992 Incentive Stock Option Committee.
Overview and Philosophy
The Compensation Committee is mindful of the need to align the
interests of management with the interests of the Company's stockholders. The
establishment of the 1992 Plan was designed to permit the Company to attract and
retain talented managers and motivate such managers to enhance profitability and
stockholder returns. The Committee believes that the utilization of stock option
plans serves the interests of the stockholders, especially by permitting the
Company to preserve cash for other operational purposes during the recovery from
unfavorable economic conditions in the residential real estate industry. The
Committee believes that the objectives of the stockholders will be best achieved
by having a substantial portion of executive cash compensation tied to annual
corporate earnings and by providing incentives to management through the use of
stock options. Commencing in fiscal 1990, the Company asked its management to
reduce overhead, substantially eliminate high interest funded debt obligations
and restructure the Company to enable it to have sufficient funds to meet
operating needs. Since the last quarter of fiscal 1994, the Committee has
analyzed the impact and effectiveness of the results of the most recent
restructuring transactions and initiatives of internal Company management. It
has made and will continue to make compensation adjustments to executive
officers commensurate with its evaluation.
Senior Executive Officers' Compensation
The Board of Directors or Compensation Committee did not determine the
compensation of the Company's Chief Executive Officer, Jeffrey P. Orleans, in
recent fiscal years. From 1987 until 1993, such compensation had been fixed
under an employment agreement with Mr. Orleans at the same salary of $200,000
per year and an incentive compensation formula. While the formal employment
agreement expired by its terms on December 31, 1992, the compensation for Mr.
Orleans continued unchanged. During fiscal 1992, Mr. Orleans voluntarily waived
his right to receive his salary under the employment agreement for the major
part of such fiscal year. During fiscal 1994, Mr. Orleans' compensation was
-24-
<PAGE>
continued in accordance with the previous employment agreement until the
consummation, on October 22, 1993, of the acquisition of OCC, which was
formerly wholly-owned by Mr. Orleans.
Following the OCC acquisition, Mr. Orleans' salary was increased to
$300,000 and the salary of Benjamin D. Goldman, Vice Chairman of the Board, was
increased to $250,000, each on an annualized basis, for fiscal 1994 subject to
approval by the Board of Directors, which approval was given on July 18, 1994
after review of the matter by the Compensation Committee. During Fiscal 1998,
the Compensation Committee made no changes in the base salaries of any of the
senior officers, other than in May 1998 to increase Mr.
Vesey's salary to $200,000 on an annualized basis.
Other Executive Officers' Compensation
The Compensation Committee has assumed responsibility for the cash and
other incentive compensation, if any, to be paid to the Company's executive
officers and key employees, other than compensation under the Company's stock
option plans. The amount and nature of the compensation received by the
Company's executives in Fiscal 1998 was determined in accordance with the
recommendations of the Chief Executive Officer. The executive compensation
program consists of three major components: base salaries, potential for annual
bonuses and stock options.
Base Salary
The compensation to executive officers of the Company is generally in
the low range of base salary amounts paid to comparable executive officers at
similar companies included in the table under "Executive Compensation -
Performance Graph." Increases in base salaries have been limited over the last
several fiscal years and are adjusted based on the performance of an individual
executive, increased responsibilities assumed by such executive, compensation
trends in the real estate industry and general market compensation levels for
comparable positions.
Incentive Compensation Programs
The Compensation Committee believes that it is important for the
Company to further align its executive officers and key employees with the
stockholders' interests by establishing a direct link between executive pay and
the Company's operating financial performance. Accordingly, on July 18, 1994,
the Board of Directors, upon the favorable recommendation of the Compensation
Committee, adopted a bonus compensation plan (the "Bonus Plan") to be applied in
fiscal 1995 and thereafter, as follows (as amended by the Board of Directors on
September 24, 1998, retroactive to June 30, 1998):
A total of eight percent (8%) of the Company's consolidated
operating profits (before taxes and excluding nonrecurring
items, income or loss arising from extraordinary items,
discontinued operations, debt repurchase at a discount, and
the amount of awards under the Bonus Plan ("Pre-Tax Profits"),
if any) shall be allocated for award as bonus compensation.
Three percent (3%) and two percent (2%) of the Pre-Tax Profits
shall be awarded as an incentive to the Chairman and the Vice
Chairman, respectively, provided each is in office at the end
of the fiscal year, subject to certain exceptions. Three
percent (3%) of the Pre-Tax Profits shall be
-25-
<PAGE>
allocated for award at the discretion of the Chairman in
consultation with the Vice Chairman to other executive
officers and key employees of the Company whose performance
merits recognition under goals and policies established by
the Board. Any award will be pro-rated for any eligible
employee who has served less than the full year with the
Company.
For Fiscal 1998, the Board continued management performance goals which
included continued growth in profitability, reduction of unproductive assets,
acquisition and financing of new and existing assets, and improvements by
management to reduce overhead and increase efficiency. With respect to Fiscal
1998, pursuant to the Bonus Plan, 3% and 2% of the Pre-Tax Profits were awarded,
respectively, to Messrs. Orleans and Goldman. The remaining 3% of Pre-Tax
Profits was awarded to the Company's other senior officers based upon their
attainment of certain performance goals, except that Mr. Schaal was awarded 1%
of the Pre-Tax Profits under a separate agreement with him.
1992 Incentive Stock Option Plan
The 1992 Plan established by the Board of Directors is intended to
align directly the interests of the Company's executives and the stockholders in
the enhancement of stockholder value. The ultimate value, if any, received by
option holders is directly tied to increases in the Company's stock price and,
therefore, stock options serve to link closely the interests of management and
stockholders by motivating executives to make decisions that will serve to
increase the long-term return to the stockholders. Additionally, grants under
the 1992 Plan include vesting and termination provisions which the Board
believes will encourage option holders to remain employees of the Company. With
respect to Fiscal 1998, the Board of Directors adopted, subject to stockholder
approval, the grant of options to 11 employees totaling 170,000 shares of Common
Stock. See "Proposal 2" for more information with respect to such grants.
Generally, options granted under the 1992 Plan have exercise prices equal to the
fair market value of the Company's Common Stock on the date of grant, become
exercisable in installments within a period of three years from the date of
grant, and are contingent upon the grantee's continued employment. The number of
shares for which options may be granted to an individual varies according to his
or her job title, level of responsibility, and performance results.
With respect to stock option awards granted in previous fiscal years,
considerations of the 1992 Incentive Stock Option Plan Committee have included
recognition of the Company's progress with respect to its restructuring and
financing transactions, the fact that the Company has been engaged in several of
these long-term transactions of substantial complexity extending over several
years and the effect of continuing efforts to restore profitability by reducing
overhead and increasing operating efficiency. The Company's success is
considered to depend in large part on the sustained effort and commitment of
management. The Board of Directors and Compensation Committee believe that
option awards provide long-term incentive to focus managers on building
profitability and stockholder value and, as a consequence, intend to continue to
utilize option awards in the future.
-26-
<PAGE>
Other Benefits
The Company makes available health care benefits and a 401(k) plan for
executive officers on terms generally available to all Company employees. The
Board of Directors believes that such benefits are comparable to those offered
by other real estate developers of similar size. The amount of perquisites as
determined in accordance with the rules of the Securities and Exchange
Commission relating to executive compensation, did not exceed $50,000 or 10% of
the salary of any executive officer in the last fiscal year.
Respectfully submitted,
The Compensation Committee
David Kaplan, Chairman
Sylvan M. Cohen
Lewis Katz
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with the Company's discretionary secured line of credit
in the maximum principal amount of $6.6 million entered into in April, 1996, the
Company and the lending bank agreed to enter into certain arrangements with
Jeffrey P. Orleans, Chairman and Chief Executive Officer of the Company,
relating to existing borrowings by the Company from Mr. Orleans. These
arrangements included the deferral of payment by Mr. Orleans, until April 1,
1998, of an aggregate of $1.35 million due Mr. Orleans from the Company under
the Company's Series A Variable Rate Notes and the Company's Series B Variable
Rate Mortgage Notes, and the subordination to the bank of $3 million of advances
by Mr. Orleans to the Company. During Fiscal 1998, the original maturity date of
April 1, 1998 was extended two years.
The Board appointed a Special Committee of non-employee directors to
review and recommend the permanent terms of the aggregate $3 million in advances
by Mr. Orleans to the Company and the terms of the $2 million to be advanced by
Mr. Orleans to the Company. On July 9, 1996, after receiving the report of the
Special Committee and a preliminary report from Howard, Lawson & Co., an
investment banking firm, on the fairness of the proposed terms, the Board of
Directors unanimously approved the proposed terms (Mr. Orleans abstaining), and
delegated to the Special Committee the authority to approve the final
documentation, subject to the receipt of a written opinion from Howard, Lawson &
Co. as to the fairness of the proposed terms to the shareholders of the Company.
In August 1996, after receipt of an opinion from Howard, Lawson & Co., to the
effect that the proposed arrangements with Mr. Orleans relating to such advances
were fair to the stockholders of the Company, other than Mr. Orleans, from a
financial point of view, the Special Committee approved the documentation under
which these advances would be made by Mr. Orleans to the Company.
The $3 million advance by Mr. Orleans to the Company is evidenced by
the Company's $3 million Convertible Subordinated 7% Note, due January 1, 2002
(the "Convertible Note") issued pursuant to a note purchase agreement dated as
of August 1, 1996, as amended and restated as of June 28, 1997. The Convertible
Note provides for interest at 7% per annum and principal payments of $1 million
on or before January 1 of each of 2000, 2001 and 2002. The Convertible Note
contains commercially standard default and other provisions and is subordinated
in right of payment to the Company's obligations under the Company's $6.6
million discretionary secured line of credit referred to above. The holder of
the Convertible Note may convert all or any portion (in integral multiples of $1
million) of the principal amount
-27-
<PAGE>
of the Convertible Note into shares of the Company's Common Stock at a
conversion price of $1.50 per share, subject to adjustment for splits,
combinations, and other capital changes. The closing price of the Company's
Common Stock on the American Stock Exchange on July 8, 1996, the date the Board
of Directors approved the terms of the borrowing, was $1.125 per share.
The Company also entered into a note purchase agreement, also dated as
of August 1, 1996 and subsequently amended, with Mr. Orleans under which Mr.
Orleans agreed to advance to the Company up to $2 million against the Company's
$2 million Variable Rate Note due December 31, 2000 (the "Variable Rate Note").
The Company has borrowed the entire $2 million under this agreement on the date
hereof. The Variable Rate Note will bear interest at 2% in excess of the prime
rate of interest and will be repayable in annual principal installments of
$500,000 commencing December 31, 1997. The 1997 repayment was deferred by Mr.
Orleans. The Variable Rate Note is not secured and is not subordinated by its
terms to the claims of any creditor of the Company.
In fiscal 1996, the Company agreed to acquire two real estate brokerage
firms, A.P. Orleans, Inc.-PA and A.P. Orleans, Inc.-NJ, for an aggregate
purchase price equal to the aggregate net book value of those two companies. The
sale was completed in fiscal 1997 for an aggregate cash price of $169,136.
Jeffrey P. Orleans and the Selma H. Orleans Trust each owned one-half of the
outstanding shares of each such company.
In December 1997, the Company purchased land from Mr. Orleans in
exchange for a $500,000 Purchase Money Mortgage (the "PMM"). During Fiscal 1998,
the Company repaid $200,000 of the PMM and began development of the land. The
remaining balance of $300,000 will be repaid from the proceeds of units sold at
this development. The PMM bears interest at 7% annually and is due no later than
60 months from the date of issuance.
On March 27, 1998 and April 6, 1998, the Company issued to Mr. Orleans
two demand notes in the aggregate principal amount of $1,000,000 (the "Demand
Notes"). The Demand Notes were issued by the Company in consideration of a total
of $1,000,000 advanced as loans by Mr. Orleans that enabled the Company to
acquire land in Chester County, Pennsylvania. The Demand Notes bear interest,
payable quarterly, at a rate two percent in excess of the prime rate. During
Fiscal 1998, Mr. Orleans also advanced the Company an additional $1,496,000 to
fund various land acquisitions. The $1,496,000 was advanced in exchange for five
demand notes (the "Additional Demand Notes") and one revolving working capital
note (the "Working Capital Note"). Interest on the Additional Demand Notes is at
prime plus 2% and is payable quarterly. The Working Capital Note is for the
initial principal amount of $750,000, is due on November 30, 1998 (but may be
automatically renewed in one year increments) and bears interest payable monthly
at the prime rate.
On April 20, 1998, the Board approved, subject to the receipt of a
written opinion confirming the fairness of the transaction from an investment
banking firm satisfactory to the Board, the exchange with Mr. Orleans of an
aggregate of $3 million of indebtedness represented by the Variable Rate Note
and the Demand Notes for shares of the Company's Series D Preferred Stock (the
"Series D Preferred Stock"). On September 24, 1998, the Board received the
written opinion of Howard, Lawson & Co. to the effect that the proposed exchange
with Mr. Orleans was fair to the stockholders of the Company, other than Mr.
Orleans, from a financial point of view. The Board then took final action to
authorize the terms of the Series D Preferred Stock and the execution of an
Exchange Agreement with Mr. Orleans. On October 20, 1998, the Company entered
into an Exchange Agreement with Mr. Orleans under which Mr. Orleans exchanged
the Variable Rate Note and the Demand Notes for 100,000 shares of Series D
Preferred Stock.
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<PAGE>
The 100,000 shares of Series D Preferred Stock were issued from the
500,000 shares of Preferred Stock authorized under the Company's Certificate of
Incorporation. The Series D Preferred Stock has a liquidation value of
$3,000,000, or $30.00 per share, and requires annual dividends of 7% of the
liquidation value. The dividends are cumulative and will be payable quarterly,
with the first payment due December 1, 1998. The Series D Preferred Stock is
redeemable by the Company at any time after December 31, 2003, in whole or in
part, at a cash redemption price equal to the liquidation value plus all accrued
and unpaid dividends on such shares to the date of redemption. The Series D
Preferred Stock is convertible into 2,000,000 shares of Common Stock at a
conversion price of $1.50 per common share, upon the approval by the American
Stock Exchange of a supplemental listing application covering such shares. The
Company expects to make such application during Fiscal 1999. The closing price
of the Company's Common Stock on the American Stock Exchange on April 20, 1998
(the date of Board approval of the issuance) was $1.19. If Mr. Orleans were to
convert the Series D Preferred Stock in full at its initial conversion prices of
$1.50 per share, his beneficial ownership of the Company's Common Stock would
increase by 2,000,000 shares, and his percentage ownership of the outstanding
common stock of the Company, based on the number of shares of Common Stock
outstanding on October 20, 1998 would increase from 69.1% to approximately
73.1%.
On September 24, 1998, Mr. Orleans proposed to the Board of Directors a
loan to the Company of $4,000,000 in additional funds on a revolving basis for
the purchase of land. Although the terms of the loan have yet to be resolved, it
is intended that the loan will be unsecured.
A. P. Orleans Insurance Agency Inc., of which Mr. Orleans is the sole
shareholder, provided services to the Company in the placement of insurance
during Fiscal 1998. The Company incurred approximately $50,000 for such
services.
During Fiscal 1998, Jeffrey P. Orleans purchased from the Company
twenty six (26) multifamily housing units with an aggregate cash sales value of
approximately $1.4 million. Such units are designated for occupancy by low
income families under New Jersey regulation designed to assure available housing
at various income levels. The selling prices for these homes, which were
determined by state statute, are the same as those which the Company would have
received from sales of the units to unaffiliated third parties.
In the opinion of the Board of Directors, all of the transactions
described in "Certain Relationships and Related Transactions," insofar as they
involve transactions by affiliates of the Company with the Company, are on terms
that are comparable to, or not less favorable than, terms which would have been
obtainable by the Company from unaffiliated third parties.
Deadline for Filing Stockholder Proposals for 1999 Annual Meeting
Proposals which stockholders desire to have included in the Company's
Proxy Statement for the Annual Meeting in 1999 pursuant to Exchange Act Rule
14a-5(e) must be received by the Company on or before July 7, 1999.
-29-
<PAGE>
ANNUAL REPORT ON FORM 10-K
THE COMPANY, UPON REQUEST, WILL FURNISH TO RECORD AND BENEFICIAL
HOLDERS OF ITS COMMON STOCK, FREE OF CHARGE, A COPY OF ITS ANNUAL REPORT ON FORM
10-K (INCLUDING FINANCIAL STATEMENTS AND SCHEDULES BUT WITHOUT EXHIBITS) FOR
FISCAL 1998. COPIES OF EXHIBITS TO THE FORM 10-K ALSO WILL BE FURNISHED UPON
REQUEST AND THE PAYMENT OF A REASONABLE FEE. ALL REQUESTS SHOULD BE DIRECTED TO
JOSEPH A. SANTANGELO, SECRETARY-TREASURER, AT THE OFFICES OF THE COMPANY SET
FORTH ON PAGE ONE OF THIS PROXY STATEMENT.
November 4, 1998 By Order of the Board of Directors
JOSEPH A. SANTANGELO,
Secretary-Treasurer
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<PAGE>
APPENDIX - A
FIRST AMENDMENT OF THE
FPA CORPORATION
1995 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
WHEREAS, Orleans Homebuilders, Inc. (formerly named FPA Corporation)
(the "Company") established the FPA Corporation 1995 Stock Option Plan for
Non-Employee Directors (the "Plan"); and
WHEREAS, Section 12 of the Plan provides that, subject to certain
limitations, the Board of Directors of the Company (the "Board") may amend the
Plan; and
WHEREAS, the Company desires to amend the Plan (i) to expand the number
of non-employee directors eligible to participate therein, (ii) to increase the
number of shares of Common Stock that may be subject to options thereunder;
(iii) to provide for the grant of a new option to each eligible director; and
(iv) to make certain other changes (collectively "the Amendments");
WHEREAS, on April 20, 1998, at a duly convened meeting of the Board,
the Board approved and adopted the Amendments;
WHEREAS, pursuant to Section 12 of the Plan, the stockholders of the
Company must approve the Amendments;
NOW, THEREFORE, effective as of April 20, 1998, and subject to the
approval of the stockholders of the Company, the Plan is hereby amended as
follows:
1. Section 4 of the Plan is hereby amended to read as follows:
4. Participation in the Plan. Directors of the
Company who are not employees of the Company or any affiliate
of the Company and are ineligible to receive grants under any
other stock option plan of the Company in effect at the time
of grant of an option shall be eligible to participate in the
Plan ("Eligible Directors").
<PAGE>
2. The first sentence of Section 5 of the Plan is hereby amended to
read as follows:
5. Shares Subject to the Plan. Subject to adjustment
as provided in Section 8, an aggregate of One Hundred Twenty
Five Thousand (125,000) Shares shall be available for issuance
upon the exercise of options granted under the Plan. ***
3. Section 7(a) of the Plan is amended by adding the following new
heading before the first paragraph thereof:
(a) Option Grant Dates.
(i) Initial Grant. ***
4. Section 7(a) of the Plan is further amended by adding the following
new paragraph to the end thereof to read as follows:
(ii) Subsequent Grant. The Committee shall
grant to each Eligible Director (herein sometimes
referred to as "holder" or "Grantee") an option to
purchase 10,000 shares (as adjusted pursuant to
Section 8) effective as of April 20, 1998.
5. Section 7(c) of the Plan is amended to read as follows:
(c) Exercisability and Term of Options. Each option
granted under the Plan or an Amendment to the Plan shall not
be exercisable with respect to any shares until the date of
approval of the Plan or Amendment to the Plan by the
stockholders of the Company (the "Approval Date"). From and
after the Approval Date, shares subject to an option become
eligible for purchase on a cumulative basis in four (4) equal
installments, as follows: (i) a total of twenty-five percent
(25%) of the number of shares on the Approval Date, and (ii) a
total of twenty-five percent (25%) of the number of shares on
each of the first, second and third anniversaries of the
effective date of grant of the option. Each option granted
under the Plan or any Amendment to the Plan shall expire ten
years from the date of the grant, and shall be subject to
earlier termination as hereinafter provided. Grants of options
under the Plan and any Amendment to the Plan shall become null
and void if the Plan or any Amendment requiring stockholder
approval is not approved by the stockholders of the Company
within twelve months of approval of the Plan or such Amendment
by the Board of Directors of the Company.
6. The reference to "the discretion of the Committee" in Section 7(f)
is replaced with a reference to "the discretion of the Board."
A-2
<PAGE>
IN WITNESS WHEREOF, the Company has caused these presents to
be duly executed this 13th day of October, 1998.
ORLEANS HOMEBUILDERS, INC.
/s/ Michael T. Vesey
---------------------------------------------
Name: Michael T. Vesey
Title: President and Chief Operating Officer
A-3
<PAGE>
REVOCABLE PROXY
ORLEANS HOMEBUILDERS, INC.
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
ANNUAL MEETING OF STOCKHOLDERS
FRIDAY, DECEMBER 11, 1998
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Jeffrey P. Orleans and Benjamin D. Goldman as
proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated below, all the Common Stock of
Orleans Homebuilders, Inc. held of record by the undersigned on the close of
business on November 2, 1998 at the Annual Meeting of Stockholders to be held on
Friday December 11, 1998 or at any adjournment thereof.
Please be sure to sign and date
this Proxy in the box below. Date
- ----------------------------------------------------------------
Stockholder sign above Co-holder (if any) sign above
- ----------------------------------------------------------------
FOR ALL
1. ELECTION OF DIRECTORS FOR WITHHOLD EXCEPT
Sylvan M. Cohen, Benjamin D. Goldman, Robert [ ] [ ] [ ]
N. Goodman, Andrew N. Heine, David Kaplan,
Lewis Katz and Jeffrey P. Orleans
INSTRUCTION: To withhold authority to vote
for any individual nominee, mark "For All
Except" and write that nominee's name in the
space provided below.
_____________________________________ FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. Approval of an amendment to the 1992
Incentive Stock Option Plan to increase the
number of shares on which options may be
granted thereunder from 910,000 to 1,210,000;
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Approval of amendments to the 1995 Stock
Option Plan for Non-Employee Directors to
increase the number of shares on which
options may be granted thereunder from
100,000 to 125,000 and to provide for the
grant of additional options thereunder;
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. Proposal to ratify the appointment of
PricewaterhouseCoopers LLP as the independent
public accountants of the company for the
fiscal year ending June 30, 1999.
5. In their discretion, the Proxies are
authorized, to the extent permitted by the
rules of the Securities and Exchange
Commission, to vote upon such other business
as may properly come before the meeting or
any adjournment.
<PAGE>
- --------------------------------------------------------------------------------
+ DETACH ABOVE CARD, SIGN, DATE AND MAIL IN POSTAGE PAID ENVELOPE PROVIDED. +
ORLEANS HOMEBUILDERS, INC.
3333 Street Road, Suite 101, Bensalem, Pennsylvania 19020
________________________________________________________________________________
PLEASE ACT PROMPTLY SIGN, DATE AND MAIL YOUR PROXY CARD TODAY
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE ABOVE SIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
IN FAVOR OF ALL NOMINEES LISTED FOR ELECTION AS DIRECTORS; FOR PROPOSALS 2, 3
AND 4; AND IN ACCORDANCE WITH THE PROXIES' BEST JUDGMENT UPON OTHER MATTERS
PROPERLY COMING BEFORE THE MEETING AND ANY ADJOURNMENTS THEREOF.
________________________________________________________________________________
The above signed acknowledges receipt from the Company, prior to the execution
of this Proxy, of notice of the Annual Meeting of Stockholders, a Proxy
Statement and an Annual report to Stockholders.
Please date and sign exactly as your name(s) appear(s) above. When shares are
held by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
