<PAGE>
SCHEDULE 14A
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
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 (S) 240.14a-11(c) or (S) 240.14a-12
GIANT GROUP, LTD.
- --------------------------------------------------------------------------------
(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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] 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:
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
<PAGE>
[LOGO OF GIANT GROUP, LTD.]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 18, 1999
To the Stockholders of
GIANT GROUP, LTD.:
Notice is hereby given that the Annual Meeting of Stockholders (the "Meeting")
of GIANT GROUP, LTD. (the "Company") will be held at the Four Seasons Hotel, 57
East 57th Street, New York, New York, on May 18, 1999 at 9:30 a.m. (local time),
for the following purposes:
(1) To elect a Board of six directors;
(2) To approve an amendment to the Company's 1996 Employee Stock Option Plan
increasing by 500,000 the number of shares available for grant thereunder;
(3) To ratify the appointment of Arthur Andersen LLP as the Company's
independent auditors for fiscal 1999; and
(4) To transact such other business as may properly come before the Meeting
and any adjournment(s) or postponement(s) thereof.
A Proxy Statement describing matters to be considered at the Meeting is
attached to this Notice. Only stockholders of record at the close of business
on March 22, 1999 will be entitled to notice of and to vote at the Meeting.
By Order of the Board of Directors
/s/ William H. Pennington
WILLIAM H. PENNINGTON, Secretary
Los Angeles, California
April 5, 1999
IMPORTANT
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE MARK, DATE AND
SIGN THE ENCLOSED PROXY AND RETURN IT IN THE SELF-ADDRESSED, POSTAGE PREPAID
ENVELOPE WHICH HAS BEEN PROVIDED FOR YOUR CONVENIENCE. IN THE EVENT YOU ATTEND
THE MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE YOUR SHARES IN PERSON.
<PAGE>
GIANT GROUP, LTD.
9000 SUNSET BOULEVARD
16TH FLOOR
LOS ANGELES, CALIFORNIA 90069
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 18, 1999
GENERAL
This Proxy Statement and the accompanying proxy card are furnished in
connection with the solicitation of proxies by the Board of Directors of GIANT
GROUP, LTD., a Delaware corporation (the "Company"), for use at its Annual
Meeting of Stockholders (the "Meeting") and any adjournment(s) or
postponement(s) thereof. The Meeting is to be held on May 18, 1999 at 9:30 a.m.
at the Four Seasons Hotel, 57 East 57th Street, New York, New York. The
approximate date of the mailing of this Proxy Statement and accompanying proxy
card to the Company's stockholders is April 9, 1999.
In an effort to have as large a representation at the Meeting as possible,
proxy solicitation may be made personally or by telephone or telegram by
officers or employees of the Company, without added compensation. The Company
will reimburse brokers, banks and other custodians, nominees and fiduciaries for
their expenses in sending proxy materials to beneficial owners.
RECORD DATE AND VOTING SECURITIES
The close of business on March 22, 1999 (the "Record Date") has been fixed as
the Record Date for the determination of the stockholders of the Company
entitled to notice of and to vote at the Meeting. As of the Record Date, the
Company had outstanding 3,927,148 shares of Common Stock, par value $.01 per
share (the "Common Stock"). Each share of Common Stock entitles the record
holder thereof to one vote on all matters properly coming before the Meeting.
PRINCIPAL HOLDERS
The following lists the only stockholders who, to the knowledge of management
of the Company, based upon filings with the Securities and Exchange Commission
(the "SEC"), are the beneficial owners of more than 5% of the Common Stock.
<TABLE>
<CAPTION>
Name & Address of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership(1) Class(2)
---------------- ---------------------- ---------
<S> <C> <C>
Burt Sugarman................................................ 2,988,672 shares (3) 52.2%
9000 Sunset Boulevard, 16th Floor
Los Angeles, CA 90069
Glenn Sands.................................................. 721,386 shares (4) 18.4%
1407 Broadway, Suite 620
New York, NY 10018
Dimensional Fund Advisors, Inc............................... 293,800 shares (5) 7.5%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
David Gotterer............................................... 225,875 shares (6) 5.6%
c/o Mason & Company, LLP
400 Park Avenue
New York, New York 10022
</TABLE>
-1-
<PAGE>
- ---------------
(1) Under the rules of the SEC a person is deemed to be the beneficial
owner of a security if such person has or shares the power to vote or
to direct the voting of such security, or the power to dispose or to
direct the disposition of such security. A person is also deemed to be
the beneficial owner of any securities which that person has the right
to acquire beneficial ownership within 60 days as well as any
securities owned by such person's spouse, children or other relatives
living in the same house. Unless otherwise indicated, the named person
has sole voting and investment power with respect to the shares held by
them.
(2) Computed on the basis of 3,927,148 shares of Common Stock issued and
outstanding as of the Record Date plus stock options of each reporting
person currently exercisable or exercisable within 60 days of the
Record Date.
(3) Includes 1,799,202 shares underlying presently exercisable stock
options. Does not include 109,050 shares owned by Mr. Sugarman's spouse
as to which he disclaims beneficial ownership.
(4) Does not include up to 170,300 contingent shares which may be issued
based on the level of Periscope pre-tax profits, as defined in the
GIANT GROUP, LTD./Periscope Merger Agreement dated December 4, 1998,
exceeding $13 million for the year ending December 31, 1999.
(5) As reported in a Schedule 13G dated February 11, 1999, Dimensional Fund
Advisors, Inc. ("Dimensional"), a registered investment advisor is
deemed to have beneficial ownership of 293,800 shares of Common Stock
as of December 31, 1998. Dimensional disclaims beneficial ownership of
all such shares.
(6) Includes 113,375 shares underlying presently exercisable stock options,
but excludes 63,375 shares underlying options held by Mr. Gotterer, as
to which he disclaims beneficial ownership since a business partner is
entitled to the beneficial ownership of such shares upon any exercise
of such options.
-2-
<PAGE>
ELECTION OF DIRECTORS
[PROPOSAL NO. 1]
Nominees
At the Meeting, six directors are to be elected to serve until the Annual
Meeting of Stockholders in 2000 and until their successors are elected and
qualified. The Board of Directors has nominated Burt Sugarman, David Gotterer,
Terry Christensen, David Malcolm, Jeffrey Rosenthal and Glenn Sands, who are the
current directors of the Company.
The Board of Directors has no reason to expect that any of the nominees will
be unable to stand for election. In the event that a vacancy among the original
nominees occurs prior to the Meeting, the proxies will be voted for a substitute
nominee or nominees named by the Board of Directors and for the remaining
nominees.
The following table sets forth information as of the Record Date about each
nominee for director and the ownership of equity securities by all directors and
executive officers of the Company as a group:
<TABLE>
<CAPTION>
Shares and
Percent of
Director Common Stock
Age Since Owned(1)
---- -------- ------------
<S> <C> <C> <C>
BURT SUGARMAN.............................................. 60 1982 2,988,672 shs.(2)
Mr. Sugarman has been Chairman of the Board of the Company 52.2%
since 1983, and President and Chief Executive Officer since
Mr. Sugarman was Chairman of the Board of Rally's
Hamburgers, Inc. (NASDAQ) ("Rally's"), an operator and
franchiser of double drive-through hamburger restaurants in
which the Company has an equity investment, from November
1994 through October 1997, having served as its Chairman of
the Board and Chief Executive Officer from 1990 through
February 1994. He remains a director of Rally's and is also
a Director of Checkers Drive-In Restaurants, Inc. (NASDAQ)
("Checkers").
DAVID GOTTERER............................................. 70 1984 225,875 shs.(3)
Mr. Gotterer has been Vice Chairman of the Company since May 5.6%
1986. He has been a senior partner in the accounting firm of
Mason & Company, LLP, New York, New York, for more than the
last five years. He is a Director of Rally's.
TERRY CHRISTENSEN.......................................... 58 1994 75,000 shs.(4)
Christensen has been a partner in the law firm 1.9%
Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro,
LLP, Los Angeles, California, for more than the last five
years. He is a Director of MGM Grand, Inc. (New York Stock
Exchange), Rally's and Checkers.
DAVID MALCOLM.............................................. 46 1996 30,000 shs.(5)
Mr. Malcolm has been Chairman of the Board of Suncoast *
Financial Mortgage Corporation, a mortgage banking and real
estate development company, since 1978, President of West
Coast Restaurant Enterprises, an owner operator of 15
Rally's restaurants, since February 1995, and Vice
</TABLE>
-3-
<PAGE>
<TABLE>
<S> <C> <C> <C>
DAVID MALCOLM (cont.)
President of Artemis Capital Group, an investment banking
firm, since November 1996. Mr. Malcolm also served as
Executive Vice President of Grigsby Brandford & Co., Inc.,
an investment banking firm, from February 1994 to October,
1996. Mr. Malcolm is also a Commissioner on the San Diego
Unified Port District and a Commissioner on the California
Commission on Judicial Performance.
JEFFREY ROSENTHAL........................................... 41 1997 20,000 shs.(6)
Mr. Rosenthal has served as Chairman and Chief Executive *
Officer of TV Fanfare Publications, Inc., an international
advertising company with offices in 40 cities and four
countries, since 1984.
GLENN SANDS................................................. 43 1998 721,386 shs.(7)
Mr. Sands has served as Chairman and Chief Executive Officer 18.4%
of the Company's, recently acquired, wholly owned
subsidiary, Periscope Sportswear, Inc., an apparel
manufacturer for more than the last five years and has been
with Periscope for more than the last 20 years.
All Directors and Executive Officers as a group (7 persons).. 4,070,933 shs.(8)
68.3%
</TABLE>
- -------------
* indicates less than 1%
(1) Unless otherwise indicated, the beneficial owner has both sole voting
and sole investment powers with respect to his shares. Computed on the
basis of 3,927,148 shares of Common Stock outstanding as of the Record
Date plus stock options of each reporting person currently exercisable
or exercisable within 60 days of the Record Date.
(2) Includes 1,799,202 shares underlying presently exercisable stock
options. Does not include 109,050 shares of Common Stock owned by Mr.
Sugarman's spouse, as to which shares he disclaims beneficial ownership.
(3) Includes 113,375 shares that Mr. Gotterer may purchase under presently
exercisable stock options, but excludes 63,375 shares underlying options
held by Mr. Gotterer, as to which shares he disclaims beneficial
ownership since a business partner is entitled to the beneficial
ownership of such shares upon any exercise of such options.
(4) Includes 70,000 shares underlying presently exercisable stock options.
(5) Includes 25,000 shares underlying presently exercisable stock options.
(6) Includes 15,000 shares underlying presently exercisable stock options.
(7) Does not include up to 170,300 contingent shares which may be issued
based on the level of Periscope pre-tax profits, as defined in the GIANT
GROUP, LTD./Periscope Merger Agreement dated December 4, 1998, exceeding
$13 million for the year ending December 31, 1999.
(8) This total includes 2,032,577 shares which such executive officers and
directors may acquire upon the exercise of presently exercisable stock
options.
Meetings of the Board of Directors and Committees
During the 1998 fiscal year the Board of Directors of the Company met on five
occasions, excluding consents in lieu of meetings. Each of the directors who
served as a director in 1998 attended all meetings of the Board of Directors and
the meetings held by all committees of the Board on which such director served.
-4-
<PAGE>
Committees of the Board of Directors
The Company has an Executive Committee, a Compensation Committee, an Option
Committee, an Audit Committee and an Incentive Compensation Committee. The
members of each Committee are appointed by the Board of Directors for a term
beginning after the first regular meeting of the Board of Directors following
the Annual Meeting of Stockholders and serve until their respective successors
are elected and qualified.
The Executive Committee, consisting of Messrs. Gotterer and Christensen, did
not meet formally during 1998, but its members consulted regularly on an
informal basis in connection with the functions of this Committee. This
Committee was established to act in the place of the Board between Board
meetings.
The Compensation Committee presently consists of Messrs. Gotterer and
Christensen. The Compensation Committee did not meet formally during 1998, but
did consult regarding the new employment agreement with Burt Sugarman, Chairman
and Chief Executive Officer (see Compensation Committee Report).
The Option Committee presently consists of Messrs. Gotterer and Christensen.
The Option Committee did not meet formally during 1998. The Option Committee
administers the Company's stock option plans.
The Audit Committee is responsible for exercising such supervisory control
over the internal auditing and accounting procedures, practices and personnel of
the Company as the Audit Committee deems necessary or advisable and makes
recommendations annually to the Board of Directors concerning the appointment of
the Company's independent auditors for the ensuing fiscal year. The members of
the Audit Committee are Messrs. Christensen and Malcolm. The Audit Committee
met on one occasion during 1998, and its members consulted regularly on an
informal basis in connection with functions of this Committee.
The Incentive Compensation Committee presently consists of Messrs. Malcolm and
Rosenthal. The Incentive Compensation Committee did not meet formally during
1998.
There is no standing nominating committee or other committee performing
similar functions.
Compensation of Directors
Non-employee directors of the Company are compensated at a rate of $10,000 per
annum, plus $500 for each meeting of the Board of Directors attended. Non-
employee directors also participate in the Company's 1996 Stock Option Plan for
Non-Employee Directors (the "Director Plan"). Pursuant to the Director Plan
each non-employee director receives 5,000 options on each May 20 or, if a
director was not a director on May 20, 1996 (the adoption date of the Director
Plan), on each anniversary of his election to the Board of Directors. In
addition, each non-employee director who is appointed to the Executive Committee
will receive 5,000 options upon his appointment and 5,000 options on each
anniversary thereof. Each option has a five-year term and is immediately
exercisable. Prior to 1998 each non-employee director received annual grants of
10,000 options and an additional 10,000 options if such non-employee director
was a member of the Executive Committee. The exercise price of each option is
the fair market price of the options on the date of grant. Members of the Audit
Committee are compensated for their services thereon at the rate of $250 per
meeting attended.
-5-
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and long-term
compensation for services in all capacities to the Company for the three years
ended December 31, 1998, 1997, and 1996 of those persons who were (i) the Chief
Executive Officer and (ii) executive officers of the Company during 1998 and
whose cash compensation exceeded $100,000 for services performed by such persons
for the Company during 1998 (collectively, the "Named Executives").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation Awards
----------------------------------------------------- -------------------------------------------
Securities
Other Annual Restricted Underlying All Other
Name & Principal Salary Bonus Compensation Stock Option/SARS Compensation
Position Year $ $ $ Award (s) # $
- ---------------- ------------- ---------- -------- ------------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Burt Sugarman 1998 1,000,000 -0- 18,057 (1) -0- -0- 27,115 (2)
Chairman of the 1997 1,000,000 -0- 54,747 (1) -0- -0- 28,889 (2)
Board, President 1996 1,000,000 -0- 51,548 (1) -0- 200,000 25,000 (2)
and Chief
Executive Officer
William H. 1998 158,446 -0- -0- -0- -0- -0-
Pennington 1997 (3) 27,129 -0- -0- -0- 15,000 -0-
Vice President,
Secretary and
Chief Financial
Officer
</TABLE>
- ------------------
(1) Amounts represent the value of use of the Company's airplane, which was
sold in April 1998, and automobile.
(2) Represents amounts paid to Mr. Sugarman by Rally's.
(3) Mr. Pennington joined the Company in October 1997.
Employment Contracts
Mr. Sugarman is employed as Chairman of the Board, President and Chief
Executive Officer of the Company pursuant to an employment agreement dated
December 3, 1998 and expiring on December 31, 2005. The agreement, which was an
amendment and restatement of his agreement of February 24, 1997, provides that
Mr. Sugarman is to receive an annual base salary of $1,000,000 increased
annually by 10% over the prior year to a maximum of $1,600,000, life insurance
in the face amount of $5,000,000, and an annual bonus in an amount determined
from year to year by the Compensation Committee of the Board of Directors, at
its discretion, and certain additional benefits. The employment agreement is
terminable prior to the expiration of the term of the Agreement (1) by the
Company for cause (as defined therein) and (2) by Mr. Sugarman (a) for cause (as
defined therein), (b) at any time for any reason, after January 1, 2000 or (c)
if Mr. Sugarman ceases to own or control at least 10% of the Common Stock of the
Company. Should the employment agreement be terminated by the Company without
cause or by Mr. Sugarman for cause or for other reasons described in the
preceding sentence, Mr. Sugarman would be entitled to (1) continuation of all
health insurance benefits through the expiration of the term of the agreement,
or for 40
-6-
<PAGE>
months from termination, whichever period is longer and (2) a lump sum payment
in an amount equal to the greater of (a) two times the annual base salary, and
(b) the amount which would have been payable throughout the remainder of the
term of the agreement or 40 months, whichever is shorter, provided that if the
agreement is terminated within one year following a change in ownership of the
Company (as defined therein), Mr. Sugarman will receive a lump sum payment equal
to 2.99 times the average annual compensation paid to Mr. Sugarman by the
Company during the five years prior to such change in ownership. In the event
of Mr. Sugarman's death or disability he (or his estate) would be entitled to
receive a lump sum payment equal to the greater of (a) two times the annual base
salary and (b) the amount which would have been payable throughout the remainder
of the term of the agreement and continuation of all health insurance benefits
for the remainder of the term. In the event of Mr. Sugarman's death, the
Company would also be obligated to continue all health insurance benefits for
Mr. Sugarman's immediate family for two years. Upon the expiration of the
agreement, the Company is obligated to pay to Mr. Sugarman a lump sum equal to
two times the then annual base salary and continue all health insurance benefits
for two years. Pursuant to the employment agreement, Mr. Sugarman has agreed
during the term of the agreement, not to render services to, or plan for or
organize, a business which is materially competitive with or similar to the
business of the Company or any of its subsidiaries.
Mr. Glenn Sands is employed as President and Chief Executive Officer of
Periscope Sportswear, Inc., wholly owned subsidiary of the Company, pursuant to
an employment agreement dated January 1, 1998 and expiring on December 31, 2002.
The agreement provides that Mr. Sands is to receive an annual base salary of
$500,000, a performance bonus of $450,000 based upon certain levels of net
sales, with the 1999 level at $90 million, an annual nonaccountable $50,000
business expense allowance and certain additional benefits. The employment
agreement is terminable prior to the expiration of the term of the Agreement (1)
by the Company in the event Mr. Sands is disabled or dies, (2) by the Company
for cause (as defined therein) and (3) by Mr. Sands (a) for good reason (as
defined therein) and (b) if his compensation is reduced. Should the employment
agreement be terminated by the Company without cause or by Mr. Sands for good
reason, Mr. Sands would be entitled to a lump sum payment in an amount equal to
the amount of the compensation payments that would have been payable throughout
the remainder of the term of the agreement.
Option Plans
The Company has a 1985 Non-Qualified Stock Option Plan (the "1985 Stock Option
Plan"). The 1985 Stock Option Plan provides for the grant of options to
purchase 3,000,000 shares of Common Stock; provided that, pursuant to the terms
of the 1985 Stock Option Plan, no further grants may be made under the plan. As
of December 31, 1998, options to purchase 1,750,952 shares were outstanding, and
options for 307,500 shares had been exercised.
The Company has a 1996 Employee Stock Option Plan (the "1996 Stock Option
Plan") and the Director Plan. The 1996 Stock Option Plan presently provides for
the grant of options to purchase 500,000 shares of Common Stock to officers and
key management personnel of the Company. As of December 31, 1998, options to
purchase 215,000 shares were outstanding, no options had been exercised and
during fiscal 1998 options for 200,000 shares were granted. See Proposal No. 2
regarding an increase in the number of shares of Common Stock underlying the
1996 Stock Option plan. The Director Plan presently provides for the grant of
400,000 shares of Common Stock. As of December 31, 1998, options to purchase
140,000 shares were outstanding and no options had been exercised.
-7-
<PAGE>
FISCAL YEAR END OPTION VALUE
<TABLE>
<CAPTION>
Value of
Number of Unexercised Unexercised in
Options at the Money Options at
Shares December 31, 1998 December 31, 1998
Acquired On Value ------------------------------ --------------------
Name Exercise Realized Exercisable Unexercisable Exercisable
- ---- ----------- -------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Burt Sugarman................. -0- -0- 1,799,202 -0- $3,973,105 (1)
William H. Pennington......... -0- -0- 5,000 10,000 $ 6,563 (2)
</TABLE>
(1) Based upon the closing price of the Common Stock on December 31, 1998 of
$9.125 minus the option exercise price of $6.75 per share for 1,599,202
shares and $8.25 per share for 200,000 shares.
(2) Based upon the closing price of the Common Stock on December 31, 1998 of
$9.125 minus the option exercise price of $7.8125 per share for 5,000
shares.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
--------------------------------------------------
% of Total
Options/SARs
Granted to Exercise or Grant Date
Options/SARs Employees in Base Price Expiration Present
Name Granted Fiscal Year $/Sh Date Value ($) (1)
- ---- ------------ ------------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Burt Sugarman........... 200,000 100% $8.25 12/3/2005 $579,480
William H. Pennington... -0-
</TABLE>
(1) Options for 200,000 shares at an exercise price of $8.25 and an
expiration date of September 19, 2001 were cancelled and simultaneously
options for 200,000 shares were granted at an exercise price of $8.25.
The proxy rules require that either the potential realizable values at
assumed annual stock price appreciation rates or the present value at the
grant date be assigned to options. The Company has chosen a present value
method known as the "Black-Scholes" Option Pricing Model. The assumptions
used to arrive at the value shown were as follows: expected volatility-
36%; risk-free rate of return-4.48%; dividend yield-0%; and time of
exercise-seven years. The choice of the Black-Scholes valuation method
does not reflect any belief by the Company's management that such method,
or any other valuation method, can accurately assign a value to an option
at the grant date.
Compensation Committee Interlocks and Insider Participation
During 1998 the Compensation Committee and Option Committee of the Board
of Directors consisted of David Gotterer and Terry Christensen. David Gotterer
is Vice Chairman of the Company and a Senior Partner in the accounting firm of
Mason & Company, LLP, which received $92,150 from the Company for rendering
consulting, financial and accounting services to the Company during 1998. Terry
Christensen is a partner in the law firm of Christensen, Miller, Fink, Jacobs,
Glaser, Weil & Shapiro, LLP, which represents the Company and Rally's in certain
corporate and litigation matters. Both Mr. Gotterer and Mr. Christensen are
directors of Rally's.
-8-
<PAGE>
COMPENSATION COMMITTEE REPORT
In 1998 the Compensation Committee and Option Committee of the Board of
Directors consisted of Terry Christensen and David Gotterer. The Compensation
Committee is responsible for developing and making recommendations to the
Company with respect to executive officer compensation policies, addressing such
matters as salaries, bonuses, incentive plans, benefits and overall
compensation. The Compensation Committee also determines the compensation to be
paid to the Chief Executive Officer and each of the other executive officers of
the Company. The Compensation Committee, however, does not administer the
Company's 1997 Incentive Compensation Plan for Executive Officers (the
"Incentive Plan"). The Incentive Plan is administered by the Incentive
Compensation Committee. No amounts were earned under the Incentive Plan in
1998.
The objectives of the Compensation Committee in determining the type and
amount of executive officer compensation are to provide a level of compensation
that allows the Company to attract and retain competent executives. The
Compensation Committee further believes that the Company's compensation programs
should provide personnel with a financial interest in the Company similar to the
interests of the Company's stockholders and that there should be a correlation
between the performance of the Company and individual performance and
compensation. During 1998 the Compensation Committee did not award any bonuses
to either of the Named Executives.
Mr. Sugarman, the Chief Executive Officer of the Company is eligible to
participate in the same compensation plans available to the Company's other
executives. In 1998 Mr. Sugarman received base compensation of $1,000,000
pursuant to the terms of his employment agreement. The Compensation Committee
did not award Mr. Sugarman a discretionary bonus for 1998. On December 3, 1998,
the Company amended and restated Mr. Sugarman's employment agreement to, among
other things, extend the term of the agreement, increase his salary in future
years, grant him life insurance in the amount of $5,000,000 and provide him
certain other benefits. The members of the Compensation Committee approved the
amendment in order to ensure that Mr. Sugarman's services would be available to
the Company as the Company continues to pursue equity investment opportunities.
DAVID GOTTERER
TERRY CHRISTENSEN
-9-
<PAGE>
Performance Graph
The following graph compares the yearly percentage change in the Company's
cumulative total stockholder return on the Common Stock for the five years ended
December 31, 1998, based upon the market price of the Common Stock as reported
on the New York Stock Exchange with the cumulative total return (and assuming
reinvestment of dividends), with (i) the NYSE Stock Index,(ii) an index of a
group of companies in the fast food industry selected by the Company, consisting
of CKE Restaurants, Inc., Flagstar Companies, Inc.(1993-1996), Krystal Company
(1993-1996), Checkers, Foodmaker, Inc., and Sonic Corporation and (iii) an index
of a group of companies in the apparel industry selected by the Company,
consisting of Kellwood, Tropical Sportswear, Happy Kids and Supreme
International. Flagstar Companies, Inc. is excluded from 1997 and 1998 because
it is no longer publicly traded and Krystal Company is excluded from 1997 and
1998 because it was acquired by Port Royal Holdings in 1997 which is not
publicly traded. The Company, through its equity investment in Rally's, was
involved in the fast food industry through 1998. In December 1998 the Company
acquired Periscope Sportswear, Inc., an apparel company.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN AMONG GIANT GROUP, LTD.
NYSE STOCK MARKET AND PEER GROUP INDEXES
TOTAL RETURN TO SHAREHOLDERS
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
GIANT GROUP LTD. 100.00 62.79 84.88 77.91 65.12 84.88
Peer Group I (1) 100.00 41.86 59.86 104.29 159.10 172.02
Peer Group II (2) 100.00 82.10 85.98 86.37 130.25 139.33
NYSE Market Index 100.00 98.06 127.15 153.16 201.50 239.77
</TABLE>
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(1) For 1997 and 1998, excludes Flagstar Companies, Inc. which is no longer
publicly traded and Krystal Company which was acquired by Port Royal
Holdings in 1997 which is not publicly traded.
(2) In December 1998 the Company acquired an apparel company and, therefore, has
included a peer group of apparel companies as indicated above.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
David Gotterer, Vice Chairman and a Director of the Company and of Rally's,
is a Senior Partner in the accounting firm of Mason & Company, LLP, which
received $92,150 from the Company for rendering consulting, financial and
accounting services to the Company during 1998.
-10-
<PAGE>
AMENDMENT OF 1996 STOCK OPTION PLAN
[PROPOSAL NO. 2]
On March 15, 1999 the Board of Directors, pursuant to the recommendation of
the Compensation Committee and Option Committee and subject to the approval of
the stockholders, approved an amendment to the 1996 Stock Option Plan to
increase to 1,000,000 the number of shares of Common Stock subject to the 1996
Stock Option Plan. Presently, the 1996 Stock Option Plan covers 500,000 shares
of Common Stock (215,000 of which are outstanding). The Board of Directors
believes that the foregoing amendment to the 1996 Stock Option Plan will benefit
the Company by helping to attract, motivate and retain qualified executive,
administrative and professional employees. In December 1998, the Company
acquired Periscope Sportswear, Inc., which was a private company with
approximately 133 employees. In addition, the Company is seeking to effect
similar acquisitions of private companies, which, among other things, would
increase the number of Company employees. Management believes that the
availability of options for grant to these new employees should facilitate
effecting acquisitions and thereafter maintaining and attracting employees for
the acquired entities.
The affirmative vote of the holders of at least a majority of the shares of
Common Stock voted at the Annual Meeting is required to approve the amendment to
the 1996 Stock Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE AMENDMENT TO THE 1996 STOCK OPTION PLAN
Description of the 1996 Stock Option Plan
The 1996 Stock Option Plan presently provides for the grant of options to
purchase up to an aggregate of 500,000 shares of Common Stock and terminates on
May 19, 2006. Options may be either incentive options or non-qualified options.
The 1996 Stock Option Plan is administered by the Option Committee, whose
members are appointed by the Board of Directors. All employees of the Company
and its subsidiaries are eligible to receive options. As of the Record Date,
there were approximately 140 employees eligible to participate in the 1996 Stock
Option Plan. The exercise price in each instance is not less than 100% of the
fair market value of the Common Stock on the date of grant, subject to any
repricing at the option of the Option Committee, and is payable in cash, shares
of common stock or such other consideration acceptable to the Board or the
Committee. The vesting schedule and term of options granted under the 1996
Stock Option Plan is at the discretion of the Option Committee. Generally,
options terminate six months (three months in the case of an incentive option)
after termination of the optionee's employment for any reason other than the
optionee's death or disability, in which case options will terminate 18 months
after termination of the optionee's employment due to death or disability.
Options are non-transferable by the holder other than by will or laws of descent
and distribution.
In the event any change is made in the Company's capitalization that results
from a stock dividend, recapitalization, reorganization, merger, consolidation,
split-up, combination or exchange of shares of any similar change affecting the
Common Stock, appropriate adjustments, as determined by the Option Committee,
will be made in the exercise price and in the number and class of shares subject
to the options.
In the event of sale of all or substantially all of the assets of the
Company or the merger of the Company with or into another corporation, holders
of outstanding options will have the right to receive,
-11-
<PAGE>
upon exercise of the options and payment of the exercise price, the same
consideration which the stockholders of the Company received pursuant to such
transaction.
The Board of Directors may amend or terminate the 1996 Stock Option Plan
from time to time in such respect as the Board may deem advisable; provided that
any amendment requiring stockholder approval pursuant to Rule 16b-3 (as in
effect from time to time) under the Securities Exchange Act of 1934, as amended,
shall not be effective unless such approval is obtained.
An optionee who is granted an incentive option generally would not recognize
taxable income either upon the grant or the exercise of an incentive option,
although the exercise may be subject to the alternative minimum tax. No
deduction will ordinarily be available to the Company as a result of the grant
or exercise of incentive options. Upon the sale or exchange of the shares
underlying an incentive option more than two years after the date of grant and
one year after the date of exercise, any gain or loss will be treated as long-
term capital gain or loss. If these holding periods are not satisfied, the
optionee will recognize ordinary income at the time of sale or exchange equal to
the difference between the exercise price and the lower of (i) the fair market
value of the shares of the date of exercise or (ii) the sale price of the
shares. Any gain recognized on such premature disposition of shares in excess of
the amount treated as ordinary income will be characterized as long-term or
short-term capital gain, depending on the holding period.
An optionee granted non-qualified stock options will not recognize any
taxable income upon the grant of the option, but will generally realize ordinary
income for federal income tax purposes at the time of exercise of such options
equal to the difference between the fair market value of the Common Stock on the
date of exercise and the exercise price. Any taxable income recognized in
connection with an option exercised by an optionee who is an employee of the
Company will be subject to tax withholding by the Company. Upon resale of such
shares by the optionee, any difference between the sale price and the optionee's
exercise price, to the extent not recognized as taxable income as described
above, will be treated as long-term or short-term capital gain or loss,
depending upon the holding period. The Company will be entitled to a tax
deduction in the same amount as the ordinary income recognized by the optionee
with respect to shares acquired upon exercise of a nonqualified option.
The foregoing is only a summary of certain effects of federal income
taxation upon the optionee and the Company with respect to the grant and
exercise of options under the 1996 Stock Option Plan, does not purport to be
complete and does not discuss the tax consequences of the optionee's death or
the income tax laws of any local, state or foreign jurisdiction in which any
optionee may reside.
RATIFICATION OF AUDITORS
[PROPOSAL NO. 3]
Arthur Andersen LLP has been selected by the Board of Directors to serve as
the independent auditors for the Company for the year ending December 31, 1999.
The firm has served as the Company's accountants since 1996. A representative of
Arthur Andersen LLP is expected to be available by telephone and will be given
the opportunity to make a statement if he or she so desires and to respond to
appropriate questions from stockholders at the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE APPOINTMENT
OF ARTHUR ANDERSEN LLP AS THE COMPANY'S INDEPENDENT
AUDITORS FOR FISCAL 1999.
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<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 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, to file reports of
ownership and changes in ownership with the SEC and provide the Company with
copies of such reports. Based solely on its review of the copies of such forms
received by it, or written representations from certain reporting persons that
no Forms 5 were required for those persons, the Company believes that, during
the past fiscal year all filing requirements applicable to its executive
officers, directors, and greater than ten-percent stockholders were complied
with.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 2000 Annual Meeting
must be received by the Company for inclusion in its proxy statement and form of
proxy by January 4, 2000. To assure that a stockholder's proposal is included in
the proxy statement and form of proxy, it will be necessary for the stockholder
to comply with the regulations of the SEC governing inclusion of such proposals
in such documents. In addition, stockholders may directly nominate persons for
director only by complying with the following procedure set forth in the
Company's By-Laws; the stockholder must submit the names of such persons in
writing to the Secretary of the Company not less than 70 days nor more than 90
days prior to the date of the preceding year's annual meeting. The nominations
must be accompanied by all information relating to such person that is required
to be disclosed in solicitations of proxies for election of directors, or is
otherwise required, in each case pursuant to Regulation 14A under the Securities
Exchange Act of 1934, and the name, record address, and class and number of
shares of the Company owned by the stockholder making the nomination. A
stockholder may properly bring business before the Annual Meeting of
Stockholders only by complying with the following procedure set forth in the
Company's By-Laws; the stockholder must submit to the Secretary of the Company,
not less than 70 days nor more than 90 days prior to the date of the preceding
year's annual meeting, a written statement describing the business to be brought
by him at the Annual Meeting, the name, record address, and class and number of
shares of the Company owned by the stockholder making the submission, and a
description of any material interest of the stockholder in such business.
Any such proposal should be communicated in writing to the Secretary of the
Company at 9000 Sunset Boulevard, 16th Floor, Los Angeles, California, 90069.
VOTING PROCEDURES
At the Meeting, stockholders will be requested to act upon the matters set
forth in this Proxy Statement. If you are not present at the Meeting, your
shares can be voted only when represented by proxy. The shares represented by
your proxy will be voted in accordance with your directions if the proxy is
properly signed and returned to the Company at or before the Meeting. If no
instructions are specified in the proxy with respect to any proposal, the shares
represented thereby will be voted for the nominees for the Board of Directors
listed in this Proxy Statement, for approval of the amendment to the 1996 Stock
Option Plan, and for the ratification of Arthur Andersen, LLP as independent
auditors for the Company. If any other matters shall properly come before the
Meeting, the enclosed proxy will be voted in accordance with the best judgment
of the persons voting such proxy.
-13-
<PAGE>
A proxy may be revoked at any time prior to it being voted at the Meeting by
delivering to the Secretary of the Company a signed writing revoking the proxy
or a duly executed proxy bearing a later date, or by appearing and voting in
person at the Meeting. The mere presence at the Meeting of a person appointing
a proxy does not revoke the appointment. Please note that it is important to
date your proxy because the last dated proxy will revoke any earlier dated
proxies and will be the one that is voted at the Meeting.
A majority of the outstanding shares of Common Stock represented at the
Meeting, in person or by proxy, will constitute a quorum. The votes of
stockholders present in person or represented by proxy at the Meeting will be
tabulated by an inspector of election appointed by the Company. The six
nominees for director of the Company who receive the greatest number of votes
cast by stockholders present in person or represented by proxy at the Meeting
and entitled to vote thereon will be elected directors of the Company. The
affirmative vote of the holders of a majority of the shares of Common Stock
represented at the Meeting is required to approve proposal two and proposal
three. Abstentions will have no effect on the outcome of the vote for the
election of directors, but will have the effect of being cast against proposal
two and proposal three. Broker "non-votes" will have no effect on proposal two
and proposal three.
OTHER BUSINESS
The Board of Directors does not know of any matters to be presented for
action at the Meeting other than as set forth in this Proxy Statement. If any
other business should properly come before the Meeting, the persons named in the
proxy intend to vote thereon with their best judgment.
The Company's Annual Report to Stockholders for the fiscal year ended
December 31, 1998 (which contains a copy of the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1998) accompanies this Proxy
Statement.
THE COMPANY'S 1998 ANNUAL REPORT ON FORM 10-K (INCLUDING THE FINANCIAL
STATEMENTS AND SCHEDULE THERETO) WILL BE PROVIDED WITHOUT CHARGE TO EACH
STOCKHOLDER UPON WRITTEN REQUEST. EACH REQUEST MUST SET FORTH A GOOD FAITH
REPRESENTATION THAT, AS OF MARCH 22, 1999, THE RECORD DATE FOR THE MEETING, THE
PERSON MAKING THE REQUEST WAS THE BENEFICIAL OWNER OF SHARES OF COMMON STOCK OF
THE COMPANY. THE REQUEST SHOULD BE DIRECTED TO: WILLIAM H. PENNINGTON,
SECRETARY, GIANT GROUP, LTD., 9000 SUNSET BOULEVARD, 16TH FLOOR, LOS ANGELES,
CALIFORNIA 90069, TELEPHONE (310) 273-5678.
By Order of the Board of Directors
/s/ William H. Pennington
WILLIAM H. PENNINGTON, Secretary
April 5, 1999
-14-
<PAGE>
P R O X Y
GIANT GROUP, LTD.
This Proxy is Solicited on behalf of the Board of Directors
Annual Meeting of Stockholders - May 18, 1999
The undersigned hereby appoints Burt Sugarman and David Gotterer, and each
of them, proxies with power of substitution each, for and in the name of the
undersigned to vote all shares of Common Stock of GIANT GROUP, LTD., a Delaware
corporation (the "Company"), that the undersigned would be entitled to vote at
the Company's 1999 Annual Meeting of Stockholders (the "Meeting"), and at any
adjournments thereof, upon the matters set forth in the Notice of the Meeting as
stated hereon, hereby revoking any proxy heretofore given. In their discretion,
the proxies are further authorized to vote upon such other business as may
properly come before the Meeting.
The undersigned acknowledges receipt of the Notice of the Meeting and the
accompanying Proxy Statement and Annual Report.
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FOLD AND DETACH HERE
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THE BOARD RECOMMENDS A VOTE "FOR" PROPOSALS 1, 2 AND 3.
Please mark your votes [X]
as indicated in this example
FOR WITHHELD
1. Election of Directors Below. [_] [_]
Nominees: Terry Christensen, David Gotterer, David Malcolm, Jeffrey Rosenthal,
Glenn Sands, Burt Sugarman
For, except vote withheld from the following nominees(s):
- --------------------------------------------------------------------------------
2. Proposal to amend the Company's 1996 Employee Stock Option Plan.
FOR WITHHELD ABSTAIN
[_] [_] [_]
3. Ratification of the appointment of Arthur Andersen LLP as independent
auditors.
[_] [_] [_]
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED,
WILL BE VOTED FOR THE ELECTION OF THE NOMINEES FOR DIRECTORS LISTED ABOVE, FOR
THE AMENDMENT OF THE OPTION PLAN, FOR RATIFICATION OF THE APPOINTMENT OF THE
AUDITORS AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME
BEFORE THE MEETING.
_______
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|
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Signature______________________Signature______________________Date______________
NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
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FOLD AND DETACH HERE
