<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
AMERICAN BANKNOTE 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)(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:
- --------------------------------------------------------------------------------
<PAGE> 2
LOGO ------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 11, 1997
------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of AMERICAN BANKNOTE CORPORATION (the "Company") will be held on
Wednesday, June 11, 1997, at Chase World Headquarters, 270 Park Avenue, 11th
Floor Conference Room, New York, NY 10017 at 9:00 A.M., local time, for the
following purposes:
1. To elect seven Directors;
2. To approve the proposed appointment by the Board of Directors of
Deloitte & Touche LLP as independent auditors for the Company for the
fiscal year ending December 31, 1997 (the "Auditor Proposal"); and
3. To act upon such other matters as may properly come before the
Annual Meeting or any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on April 17, 1997 as
the record date for the determination of stockholders entitled to notice of and
to vote at the Annual Meeting and any adjournments or postponements thereof.
Stockholders are urged to attend the meeting in person. If you are not able
to do so, please sign, date and return the accompanying Proxy in the enclosed
envelope. No postage is required if mailed in the United States.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ITS NOMINEES
AS DIRECTORS AND FOR THE AUDITOR PROPOSAL.
By Order of the Board of Directors,
LOGO
HARVEY J. KESNER
Secretary
New York, New York
May 9, 1997
WHETHER YOU EXPECT TO ATTEND THE ANNUAL MEETING OR NOT, YOUR VOTE IS IMPORTANT.
ACCORDINGLY, YOU ARE REQUESTED TO SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE TO ENSURE THAT YOUR SHARES ARE REPRESENTED.
<PAGE> 3
AMERICAN BANKNOTE CORPORATION
200 PARK AVENUE
NEW YORK, NEW YORK 10166-4999
(212) 557-9100
------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
JUNE 11, 1997
------------------------
This Proxy Statement and the accompanying Notice of Annual Meeting and form
of Proxy are furnished in connection with the solicitation of Proxies by the
Board of Directors of American Banknote Corporation, a Delaware corporation (the
"Company"), for use at the Annual Meeting of Stockholders to be held on June 11,
1997 at 9:00 A.M., local time, at Chase World Headquarters, 270 Park Avenue,
11th Floor Conference Room, New York, New York 10017 and at any adjournments or
postponements thereof (the "Annual Meeting"). It is anticipated that this Proxy
Statement and the form of Proxy will be first mailed on or about May 9, 1997 to
holders of record on April 17, 1997 (the "Record Date") of the Company's common
stock, par value $.01 per share (the "Common Stock"). The Company's 1996 Annual
Report to Stockholders, which includes certified financial statements, is
enclosed with this Proxy Statement.
PROPOSAL 1. ELECTION OF DIRECTORS FOR A TERM OF ONE YEAR
The Board of Directors has nominated the following persons for election as
Directors at the Annual Meeting. Each nominee is presently a Director of the
Company.
<TABLE>
<CAPTION>
NAME INFORMATION CONCERNING NOMINEES DIRECTOR SINCE AGE
- ------------------------- -------------------------------------------- --------------- ---
<S> <C> <C> <C>
Bette B. Anderson........ Vice Chairperson since 1996 and President June 1994 68
prior thereto of Kelly, Anderson, Pethick &
Associates, Inc. since 1989, a Washington
based management firm. Undersecretary of the
Treasury from 1977 to 1981. Director, ITT
Corporation, ITT Educational Services,
United Payors & United Providers, Inc. and
ITT Hartford Group, Inc., and serves on
various Committees of such companies. Member
of the Treasury Historical Association, a
Director of the Miller Foundation at the
University of Virginia and a member of the
Advisory Council of the Girl Scouts of
America.
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
NAME INFORMATION CONCERNING NOMINEES DIRECTOR SINCE AGE
- ------------------------- -------------------------------------------- --------------- ---
<S> <C> <C> <C>
Dr. Oscar Arias S........ Director, Arias Foundation for Peace and September 1995 56
Human Progress. Former President of Costa
Rica and 1987 Nobel Peace Prize recipient.
President, International Press Service;
Director, Stockholm International Peace
Research Institute, International Center for
Human Rights and Democratic Development
Institute for International Studies at
Stanford University. Serves on the Board for
the InterAction Council, the International
Negotiation Network of the Carter Center and
Transparency International. In addition, Dr.
Arias is an active member of The Commission
on Global Governance, the Inter- American
Dialogue and the Society for International
Development.
C. Gerald Goldsmith...... Investor; Director, Palm Beach National Bank July 1990 68
and Trust, Nine West Group, Inc. and
Innkeepers, USA.
Ira J. Hechler........... Investor; Director, Leslie Fay Companies, February 1990 78
Inc. and Concord Camera Corp.
David S. Rowe-Beddoe..... Chairman of the Board, Welsh Development July 1990 59
Agency since 1993 and Development Board for
Rural Wales since 1994; Director, Cavendish
Services Ltd. and Development Securities
plc. Previously held various senior
management positions, including at Revlon,
Inc. and De La Rue plc, as an Executive
Director.
Alfred Teo............... Chairman and Chief Executive Officer of June 1996 51
Alpha Industries, Inc. of the Sigma Plastics
Group since 1979. Chairman and Chief
Executive Officer of Red Line Express since
1984; Hillman Eyes since 1992 and Alpha
Technologies since 1990. Director of Fleet
Bank N.A., Trustee, St. Joseph's Hospital
and Stevens Institute of Technology.
Morris Weissman.......... Chairman of the Board and Chief Executive February 1990 55
Officer of the Company since July 1990 and
Chief Operating Officer since July 1995;
Chairman of the Board and Chief Executive
Officer of United States Banknote Company
L.P. ("USBC") from 1986 through July 1990
and Vice Chairman and Director of USBC's
predecessor from 1976 to 1986. Director of
the Convenience and Safety Corporation and a
Trustee of the Jackie Robinson Foundation
and the Business Council for the United
Nations.
</TABLE>
Following the Annual Meeting, the Board will consist of seven Directors.
Between Annual Meetings the Board has the authority under the By-laws to
increase or decrease the size of the Board and to fill vacancies. The Company
expects each nominee for election to be available for election and if any
nominee is not available, Proxies will be voted for the election of such
substitutes as the Board may recommend, unless the Board reduces the number of
Directors.
2
<PAGE> 5
DIRECTOR MEETINGS AND STANDING COMMITTEES
The Board of Directors held four meetings in 1996. The Audit and
Compensation Committees each met formally four times during 1996 and the Stock
Option Committee met formally two times during 1996. Each of these committees
also met informally on several occasions. Overall attendance at Board and
Committee meetings was 98%. Attendance was at least 75% for each Director.
Audit Committee. The Audit Committee consists of Mr. Goldsmith (Chairman),
and Ms. Anderson, Messrs. Hechler and Rowe-Beddoe. The Audit Committee reviews
with the independent auditors the scope of their audit and non-audit assignments
and fees, the accounting principles applied by the Company in its financial
reporting, the scope of internal financial auditing procedures and the adequacy
of the Company's internal controls. The Audit Committee provides an open avenue
of communication between management, the external and internal auditors and the
Board of Directors. The Audit Committee provides similar reviews of the
Company's subsidiaries.
Compensation Committee. The Compensation Committee consists of Messrs.
Rowe-Beddoe (Chairman), Goldsmith, Hechler and Teo. The Compensation Committee
has responsibility for compensation arrangements for executive officers and
certain senior employees and reviews executive performance. The Committee
periodically consults with management and administers the Company's Long-Term
Performance Plan (the "Long-Term Performance Plan") and Executive Incentive Plan
(the "Executive Incentive Plan"). The Compensation Committee also reports to
stockholders on executive compensation matters as required by the Securities and
Exchange Commission.
Stock Option Committee. The Stock Option Committee consists of Messrs.
Hechler (Chairman), Goldsmith and Rowe-Beddoe. The Stock Option Committee
periodically consults with management and administers the Company's 1990
Employee Stock Option Plan (the "1990 Stock Option Plan").
The Audit, Compensation and Stock Option Committees are composed entirely
of outside directors who are neither officers nor employees of the Company or
its subsidiaries. Members of the Compensation and Stock Option Committees are
not eligible to participate in any of the plans those Committees administer. The
Committees of the Board, as well as the full Board, have access to outside
consultants and experts as needed in connection with their deliberations.
3
<PAGE> 6
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table reflects the number of shares of Common Stock
beneficially owned on April 15, 1997 by each Director, each of the Named
Executive Officers as set forth below in the Summary Compensation Table and by
all Directors and executive officers as a group. No other person is known to the
Company to beneficially own as of such date more than 5% of any class of equity
securities of the Company.
<TABLE>
<CAPTION>
AMOUNT AND PERCENTAGE
NATURE OF OF CLASS
BENEFICIAL BENEFICIALLY
NAME AND ADDRESS OWNERSHIP(1)(2) OWNED
------------------------------------------------ --------------- ------------
<S> <C> <C>
Bette B. Anderson............................... 13,600 *
Dr. Oscar Arias S. ............................. 11,150 *
Patrick J. Gentile.............................. 7,375 *
C. Gerald Goldsmith............................. 16,200 *
John T. Gorman.................................. 178,100(3) *
Ira J. Hechler.................................. 229,300 1.2%
Harvey J. Kesner................................ 59,459(4) *
David S. Rowe-Beddoe............................ 15,100 *
Alfred Teo...................................... 1,896,000 9.5%
Ward A.W. Urban................................. 7,108 *
Morris Weissman................................. 1,773,536(3)(5)(6) 8.5%
All Directors and executive officers as a group
(11 persons).................................. 4,206,928(3)(4)(5)(6) 19.9%
</TABLE>
- ---------------
(1) Unless otherwise indicated, each stockholder has sole voting and investment
power.
(2) Includes Common Stock issuable upon the exercise of stock options
exercisable within 60 days of April 15, 1997 in the amount of 5,500, 70,200,
18,834, 5,233 and 408,666 for Messrs. Gentile, Gorman, Kesner, Urban and
Weissman, and 508,433 for all executive officers, respectively. Includes
Director Common Stock equivalent units under the Deferred Stock and
Compensation Plan for Non-employee Directors in the amount of 13,100,
11,150, 15,100, 15,100, 15,100, and 7,500 units for Ms. Anderson, Dr. Arias
and Messrs. Goldsmith, Hechler, Rowe-Beddoe and Teo, respectively. Excludes
shares of Common Stock that may be issued to Directors in connection with
deferred director fees under the Deferred Stock and Compensation Plan for
Non-employee Directors in the amount of 242, 1,091, 788, 667, and 121 shares
for Ms. Anderson and Messrs. Goldsmith, Hechler, Rowe-Beddoe and Teo,
respectively.
(3) Includes Common Stock issuable upon the exercise of performance warrants
issued under the Company's Performance Warrant Plan that are exercisable
within 60 days of April 15, 1997 in the amount of 139,500 and 16,000 shares
for Messrs. Weissman and Gorman and 155,500 shares for all executive
officers, respectively.
(4) Includes 34,625 shares held in trust, as to which Mr. Kesner has sole voting
and investment power.
(5) Includes (i) 95,000 shares held by spouse as to which Mr. Weissman disclaims
beneficial ownership and (ii) 60,000 shares as to which Mr. Weissman has
sole voting power and a right of first refusal with respect to any future
sales.
(6) Excludes 30,625 shares of Common Stock held in trust as to which Mr.
Weissman disclaims beneficial ownership, issued March 27, 1995 in lieu of a
portion of Mr. Weissman's 1994 bonus.
* Less than 1%.
4
<PAGE> 7
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company believes that a strong link should exist between executive
compensation and management's success in maximizing stockholder value. This
belief is adhered to by developing both short-term and long-term incentive
compensation programs which provide competitive compensation and reflect Company
performance while taking into account the Company's particular circumstances.
The Compensation Committee's role and responsibilities involve the development
and administration of executive compensation policies and programs which are
consistent with, linked to and supportive of the basic strategic objective of
maximizing stockholder value, while taking into consideration the activities and
responsibilities of management.
During 1996, the Committee took action to place the Company's management on
a compensation program -- the Challenge 2000 Program -- providing for benefits
by way of bonuses, long-term incentives and stock ownership that would follow
the same general principles that had been previously adopted for the Chairman
and CEO. Since many of the Company's senior managers had prior contractual
arrangements, in many cases providing for guaranteed minimum annual bonus
awards, they were each offered an opportunity to participate in the Challenge
2000 Program and to forego the prior guarantees and bonus arrangements. These
offers were made in the early part of 1996 and, without exception, each of the
offerees has accepted.
The Challenge 2000 Program provides management with the opportunity for
significant bonuses and long-term rewards if division and corporate goals of
operating income above a 10% return on equity (ROE) are achieved. In certain
instances, a portion of the management member's bonus also is dependent on
division and individual goals being met. With the adoption of the Challenge 2000
Program, compensation for executive and operating management is linked to
corporate results with long-term benefits realizable in 3-5 years following
awards.
As part of the Challenge 2000 Program, participants also agreed to the
cancellation of certain outstanding options with no meaningful value and to the
award of some restricted shares and new options at or above the fair market
value at the date of grant. With respect to options canceled, the Company's
compensation consultant recommended and the Compensation Committee adopted a
formula by which a lesser number of options, with an exercise price of 125% of
fair market value, were issued in lieu of the larger number of vested options
canceled. In addition, new options granted during 1996 to the Chief Executive
Officer were awarded at 120% of fair market value. A three-year vesting schedule
also was imposed on the newly issued options to assure long-term commitment of
the employees.
COMPENSATION PHILOSOPHY AND ELEMENTS
The Compensation Committee adheres to five primary principles in
discharging its responsibilities, which have been applied through the adoption
of the Challenge 2000 Program. First, the majority of the annual bonus and
long-term compensation for the Company's CEO and other management members should
be in part at risk, with actual compensation levels correlating with the
Company's actual performance. Second, over time, incentive compensation of the
Company's management should focus more heavily on long-term rather than
short-term accomplishments and results. Third, equity-based compensation and
equity ownership requirements should be used on an increasing basis so as to
provide management with clear and direct links to stockholder interests. Fourth,
the overall compensation programs should be structured to ensure the Company's
ability to attract, retain, motivate and reward those individuals who are best
suited to achieving the desired performance results of the Company, both long
and short-term. Fifth, the total compensation for all management should be
competitive so as to attract and retain the best people in the Company's unique
industry and should take into account the duties and responsibilities of the
individual. In general, the Compensation Committee believes that sales and
earnings growth as well as continued improvement in cash flow should be
recognized in considering compensation levels along with improvements in overall
effectiveness, productivity, quality, return on equity and investment and
success in identifying and implementing further strategic alliances and business
combinations, while taking into account the Company's high depreciation and
amortization, non-recurring and extraordinary charges and continued non-cash
charges.
5
<PAGE> 8
In evaluating the performance and compensation of the management, the
Compensation Committee has taken particular note of the overall success in the
consolidation of the businesses that have been brought under the Company's
management during the past eight years, i.e., United States Banknote, American
Bank Note, Jeffries Banknote, American Bank Note Holographics, American Banknote
Company Grafica e Servicos (Brazil), Grafica Bradesco (Brazil), and Leigh-Mardon
(Australia and New Zealand) as well as fundamental changes affecting the markets
in which the Company operates. With foreign operations approaching 70% of
consolidated sales and growing, management has achieved its international
diversification goals and assumed added responsibilities for managing a global
business, as well as becoming well-positioned in the emerging field of
electronic commerce. Most notably, this progress has been reflected in a
profitable 1996 fiscal year in which the Company earned 27c per share (excluding
a special litigation reserve), and improved its market perception, the results
of which substantially increased the Company's share price relative to prior
years.
The Compensation Committee believes that the Challenge 2000 Program
complies with the provisions of Section 162(m) under the Internal Revenue Code
of 1986, as amended, with respect to qualifying the compensation paid to its
executive officers.
COMPENSATION COMMITTEE
David S. Rowe-Beddoe
C. Gerald Goldsmith
Ira J. Hechler
Alfred Teo
6
<PAGE> 9
PERFORMANCE GRAPH
The following performance graph compares the Company's cumulative total
stockholder return from December 31, 1991 through December 31, 1996 to that of
the Media General Composite, a broad market index, and a peer group index
created by the Company.
Because the Company is involved in a wide variety of businesses, including
security printing, holography, and credit and telephone cards, and nearly 50% of
its sales are derived from Latin America, no published peer group closely
reflects the Company's overall business or matches the relative contributions of
those businesses to the Company's overall performance. The following companies
have been included in the customized peer group index: Bowne & Co., Inc., Deluxe
Corporation, Devon Group Inc., John H. Harland Co., Merrill Corp., Moore
Corporation Limited, Multi-Color Corp., The Standard Register Company, Stevens
Graphics Corporation (Class A and Class B) and American Banknote Corporation.
The customized peer group weighs the constituent companies' common stock
performance on the basis of market capitalization, measured at the beginning of
each relevant time period.
The graph assumes that the value of the investment in the Company's Common
Stock and each index was $100 on December 31, 1991 and that all dividends were
reinvested. Stock price performances shown on the graph are not indicative of
future price performances. This data was furnished by Media General Financial
Services.
CUMULATIVE TOTAL RETURN AMONG AMERICAN
BANKNOTE CORPORATION, A CUSTOM PEER GROUP INDEX,
AND COMPOSITE BROAD MARKET INDEX
FROM DECEMBER 31, 1991 TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
MEASUREMENT PERIOD AMERICAN BANKNOTE
(FISCAL YEAR COVERED) CORP PEER GROUP BROAD MARKET
<S> <C> <C> <C>
1991 100.00 100.00 100.00
1992 113.04 110.52 104.00
1993 110.87 107.07 119.39
1994 39.13 94.89 118.39
1995 21.74 103.46 153.50
1996 82.61 131.26 185.38
</TABLE>
7
<PAGE> 10
SUMMARY COMPENSATION TABLE
The following table sets forth certain information for the three years
ended December 31, 1996, 1995 and 1994, regarding the compensation of the Chief
Executive Officer of the Company and each of the other four most highly
compensated executive officers of the Company who were serving at the end of the
last completed year and whose compensation exceeded $100,000 for such year
(collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-----------------------------------
AWARDS
----------------------- PAYOUTS
OTHER RESTRICTED -------
ANNUAL COMPENSATION ANNUAL STOCK LTIP ALL OTHER
NAME AND ----------------------------- COMPENSATION AWARD(S) PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(1) ($)(2) OPTIONS(#) ($) ($)(3)
- ------------------------ ----- --------- ---------- ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Morris Weissman......... 1996 750,000 1,217,000 -- 292,500 626,000(4) -- 19,488
Chairman and Chief 1995 750,000 -- -- -- 250,000 -- 19,040
Executive Officer 1994 750,000 183,750 -- 183,750 -- -- 21,918
John T. Gorman.......... 1996 244,723 250,000 32,500 90,600(4) -- 19,871
Executive Vice 1995 234,168 40,000 -- -- -- -- 15,938
President and Chief 1994 234,168 132,200 -- -- 20,000 -- 17,224
Financial Officer
Harvey J. Kesner........ 1996 195,000 200,000 -- 32,500 56,500(4) -- 10,717
Executive Vice
President 1995 173,824 30,000 -- -- -- -- 7,500
General Counsel and 1994 151,440 60,000 -- -- 15,000 -- 7,500
Secretary
Ward A.W. Urban......... 1996 125,000 81,000 -- 12,188 15,700(4) -- 9,958
Vice President,
Treasurer and Asst.
Secretary
Patrick J. Gentile...... 1996 111,667 66,125 -- 12,188 16,500(4) -- 9,755
Vice President and
Corporate Comptroller
</TABLE>
- ---------------
(1) The value of each of the named executive officer's perquisites did not
exceed the threshold for disclosure established under the Securities and
Exchange Commission's proxy rules.
(2) Amounts shown for 1996 consist of the market value on the date of grant of
180,000, 20,000, 20,000, 7,500 and 7,500 shares of restricted stock granted
effective April 25, 1996 to Messrs. Weissman, Gorman, Kesner, Urban and
Gentile, respectively, under the Long Term Performance Plan. Restrictions on
the total number of shares subject to the grant will lapse on the fifth
anniversary of the date of grant. In addition, 25% or more of the grant may
lapse per annum if the Company achieves certain earning levels in the years
1996-1999. As a result of achieving the 1996 performance criteria, all
restrictions lapsed on 25% of the 1996 shares. The total number of shares
granted are entitled to the right to vote and receive dividends, when and if
dividends are paid on the Common Stock. Under the Long Term Performance
Plan, upon the grantee's death, retirement or disability, the restrictions
will lapse on a pro-rata basis based upon the portion of the restricted
period which has elapsed and the remainder will be forfeited. All such
restrictions will immediately lapse upon a "change in control."
The amount shown for 1994 represents 91,875 shares of restricted stock
valued at $2.00 per share awarded on March 27, 1995 representing 50% of Mr.
Weissman's 1994 bonus under the Executive Incentive Plan. Restrictions lapse
on one-third of the shares upon each of the first three anniversaries of the
date of award. All such restrictions will immediately lapse upon Mr.
Weissman's death, retirement, disability, termination or upon a "change in
control" of the Company. Shares are held pursuant to a grantor trust subject
to claims of the Company's creditors until the date restrictions on the
shares lapse. Dividends are paid on these shares as, when and if dividends
are paid on the Common Stock.
As of December 31, 1996, the number and potential value of the aggregate
restricted stockholdings of each of the Named Executive Officers were as
follows (prior to determination of achievement of the criteria for lapse of
any restrictions): Mr. Weissman (241,250 shares with a value of $1,115,781);
Mr. Gorman (20,000 shares with a value of $92,500); Mr. Kesner (20,000
shares with a value of
8
<PAGE> 11
$92,500); Mr. Urban (7,500 shares with a value of $34,688); and Mr. Gentile
(7,500 shares with a value of $34,688).
Awards under the Long Term Performance Plan, Executive Incentive Plan and
1990 Stock Option Plan are subject to anti-dilution provisions.
(3) Amounts shown consist of contributions to the Company's defined contribution
Retirement Plan ($7,500 for each of Messrs. Weissman, Gorman and Kesner,
$7,000 for Mr. Urban and $6,231 for Mr. Gentile), premiums paid with respect
to life insurance ($11,988 for Mr. Weissman, $8,746 for Mr. Gorman and $592
for Mr. Gentile) and other tax payments for the Named Executive Officers
($3,625 for Mr. Gorman, $3,217 for Mr. Kesner, $2,958 for Mr. Urban and
$2,932 for Mr. Gentile).
(4) Amounts shown consist of 150,000 options issued at 120% of fair market value
($1.65) and 476,000 options issued at 125% of fair market value ($2.25) to
Mr. Weissman and 20,000, 20,000, 10,000 and 10,000 options issued at 100% of
fair market value ($1.375) and 70,600, 36,500, 5,700 and 6,500 options
issued at 125% of fair market value ($2.25) to Messrs. Gorman, Kesner, Urban
and Gentile, respectively.
EMPLOYMENT AGREEMENTS
Mr. Weissman serves pursuant to an employment agreement with the Company
with a term ending on December 31, 1999. The term of Mr. Weissman's agreement is
subject to automatic extension unless advance notice of non-renewal is given.
Mr. Weissman's agreement provides for his engagement as Chairman and Chief
Executive Officer of the Company. The agreement provides for a base salary of
$750,000, with no guaranteed bonus. Mr. Weissman participates in the Executive
Incentive Plan and receives an annual bonus equal to 6% of his annual base
salary in 1994 (adjusted in each subsequent year by compounding the 1994 base
salary by 1.07) multiplied by the number of percentage points by which "ROE" (as
defined below) exceeds 10% up to a maximum annual bonus equal to 200% of base
salary (as adjusted).
ROE is defined as the fraction the numerator of which is equal to the
Company's pre-tax income (including income from minority holdings, joint
ventures, dividends from investments and like income) before extraordinary
charges or similar one-time non-recurring losses or reserves not in the ordinary
course plus depreciation and amortization, and the denominator of which is
calculated as a simple average of the average monthly common equity (beginning
of month common equity plus end of month common equity divided by two) for the
calendar year.
Mr. Weissman's agreement also contains provisions for the continuation of
payments in the event of disability or death in addition to maintenance of
certain life insurance and participation in Company benefit plans. Upon
termination in the event of his permanent disability, until the earlier to occur
of (i) recovery from such disability, (ii) the date employment under the
employment agreement was scheduled to terminate or (iii) death, Mr. Weissman is
entitled to receive 75% of the then effective base salary and the pro rata
amount of the bonus he would have received for the year in which he became
permanently disabled based on the number of days he was not disabled and during
the time he receives 75% of his base salary all other benefits he would have
received but for the termination of employment due to disability.
In the event Mr. Weissman's employment with the Company is terminated by
the Company (other than for cause) or is terminated by Mr. Weissman for "good
reason," Mr. Weissman is entitled to receive a lump sum payment equal to the
greater of his "total direct compensation" (as defined) for 1994 or his
"estimated total direct compensation" (as defined) then in effect, as if his
employment agreement had remained in effect for the entire term or, if following
a "change in control," the greater of such amount or $5,000,000, plus the value
of his unexercised options and maintenance of certain benefits for the remainder
of the term of the agreement.
On July 24, 1996, Mr. Gorman's employment agreement was amended and
extended with a term ending on August 31, 1999. The term of Mr. Gorman's
agreement is subject to automatic extension unless advance notice of non-renewal
is given. Mr. Gorman's agreement provides for his engagement as Chief Financial
Officer of the Company. The agreement provides for a base salary of $250,000
with no guaranteed bonus. For 1996, Mr. Gorman's agreement provides for an
annual bonus in accordance with the Company's Challenge
9
<PAGE> 12
2000 Program. The bonus can range from 0-100% of base salary based upon the
level of achievement of corporate and personal goals.
In addition to the annual bonus, Mr. Gorman is entitled to participate in
all other benefits made available to executive officers of the Company,
including, a long-term incentive award as determined by the Compensation
Committee.
Mr. Gorman's employment agreement contains provisions for the continuation
of payments in the event of non-renewal by the Company, disability or death in
addition to maintenance of certain life insurance and participation in Company
benefit plans. The employment agreement entitles Mr. Gorman to certain payments
upon termination (other than for cause). Upon termination in certain
circumstances, including for "good reason," Mr. Gorman is entitled to a lump sum
cash payment in an amount equal to two times base salary plus bonus then in
effect plus the value of unexercised options held and maintenance of certain
benefits for an eighteen month period. Upon termination other than for cause,
death or disability, the agreement provides that the Company will retain Mr.
Gorman as a consultant for a term of 18 months at 150% of his base salary then
in effect.
Messrs. Kesner, Urban and Gentile participate in the Challenge 2000 program
under which they are entitled to bonuses which can range from 0-100% of base
salary for Mr. Kesner, 0-75% for Mr. Urban and 0-75% for Mr. Gentile. In
addition, Mr. Kesner's employment is subject to an agreement which provides for
payment upon termination of employment, disability or death, in addition to
maintenance of certain life insurance and participation in all other benefits
made available to executive officers, in a lump sum amount of one times base
salary then in effect, and, upon termination for "good reason", one times base
salary plus bonus, plus the value of unexercised options held and maintenance of
certain benefits for an eighteen-month period.
10
<PAGE> 13
OPTION GRANTS IN THE LAST FISCAL YEAR
The following table sets forth for each of the Named Executive Officers:
(a) the number of options granted during 1996; (b) the percent such number is of
the total options granted to all employees in 1996; (c) the exercise price per
share; (d) the expiration date; and (e) the potential realizable value of such
options at certain assumed rates of stock price appreciation.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------- POTENTIAL REALIZABLE VALUE AT
% OF TOTAL ASSUMED ANNUAL RATES OF
OPTIONS STOCK PRICE APPRECIATION FOR
OPTIONS GRANTED TO EXERCISE OPTION TERM(2)
GRANTED EMPLOYEES PRICE EXPIRATION -----------------------------
(#)(1) IN 1996 ($/SH) DATE 0%($) 5%($) 10%($)
------- ---------- ------ ---------- ----- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Morris Weissman............... 150,000 13.8% $1.65 2/5/06 $ -- $155,651 $ 394,451
Morris Weissman............... 476,000 43.9% $2.25 3/6/06 $ -- $673,546 $1,706,898
John T. Gorman................ 20,000 1.8% $1.375 2/5/06 $ -- $ 17,295 $ 43,828
John T. Gorman................ 70,600 6.5% $2.25 3/6/06 $ -- $ 99,900 $ 253,166
Harvey J. Kesner.............. 20,000 1.8% $1.375 2/5/06 $ -- $ 17,295 $ 43,828
Harvey J. Kesner.............. 36,500 3.4% $2.25 3/6/06 $ -- $ 51,648 $ 130,886
Ward A. W. Urban.............. 10,000 0.9% $1.375 2/5/06 $ -- $ 8,647 $ 21,914
Ward A. W. Urban.............. 5,700 0.5% $2.25 3/6/06 $ -- $ 8,066 $ 20,440
Patrick J. Gentile............ 10,000 0.9% $1.375 2/5/06 $ -- $ 8,647 $ 21,914
Patrick J. Gentile............ 6,500 0.6% $2.25 3/6/06 $ -- $ 9,198 $ 23,308
</TABLE>
- ---------------
(1) Options granted under the 1990 Employee Stock Option Plan. One-third of the
options vest and become fully exercisable upon each of the first three
anniversaries of the date of grant, except that all such options immediately
vest upon the holder's death while still employed or termination of
employment in connection with a change in control and are subject to
anti-dilution provisions. Payment of the purchase price of shares acquired
upon the exercise of options generally may be in cash, by check, or by
delivery of shares of Common Stock, or by other permitted methods, including
broker-assisted "cashless exercise" methods.
(2) The amounts set forth are based on assumed appreciation of 0% and the 5% and
10% rates as prescribed by the Securities and Exchange Commission rules and
are not intended to forecast future appreciation, if any, of the stock
price. The Company did not use an alternate formula for a grant date
valuation as it is not aware of any formula which will determine with
reasonable accuracy a present value based on future unknown or volatile
factors. Actual gains, if any, on stock option exercises and Common Stock
holdings are dependent on the future performance of the stock. There can be
no assurance that the amounts reflected in this table will be achieved.
REPORT ON REPRICING OF OPTIONS
As part of the Company's adoption of the Challenge 2000 Program in 1996,
certain options held by the Named Executive Officers were canceled and
replacement options for a lesser number of shares were granted.
11
<PAGE> 14
The following table sets forth certain information regarding the cancellation
and replacement of options effected by the Company during the past 10 years.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES MARKET
UNDERLYING PRICE OF EXERCISE
DATE OF OPTIONS STOCK AT PRICE AT NEW EXPIRATION
CANCELLATION (CANCELED) TIME OF TIME OF EXERCISE DATE OF
NAME AND PRINCIPAL AND AND REISSUED CANCELLATION CANCELLATION PRICE ORIGINAL
POSITION REISSUANCE (#) ($) ($) ($) OPTION
- ------------------------ ------------ ------------ ------------ ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Morris Weissman......... 05-Oct-92(1) (250,000) $4.375 $4.080 10-Jan-2002
Chief Executive
Officer 05-Oct-92(1) 237,500 $4.375
25-Apr-96(2) (60,000) $1.750 $4.190 08-Aug-2001
25-Apr-96(2) (237,500) $1.750 $4.375 05-Oct-2002
25-Apr-96(2) (285,000) $1.750 $6.188 08-Dec-2002
25-Apr-96(2) (250,000) $1.750 $6.625 13-Oct-2003
25-Apr-96(2) 476,000 $2.250(3)
John T. Gorman.......... 05-Oct-92(1) (40,000) $4.375 $4.080 10-Jan-2002
Executive Vice
President 05-Oct-92(1) 38,000 $4.375
and Chief Financial 25-Apr-96(2) (20,000) $1.750 $4.190 08-Aug-2001
Officer 25-Apr-96(2) (38,000) $1.750 $4.375 05-Oct-2002
25-Apr-96(2) (28,000) $1.750 $6.188 08-Dec-2002
25-Apr-96(2) (20,000) $1.750 $2.938 20-Sep-2004
25-Apr-96(2) 70,600 $2.250(3)
Harvey J. Kesner........ 05-Oct-92(1) (20,000) $4.375 $4.080 10-Jan-2002
Executive Vice 05-Oct-92(1) 19,000 $4.375
President, General 25-Apr-96(2) (3,333) $1.750 $3.940 19-Jun-2001
Counsel and 25-Apr-96(2) (5,000) $1.750 $4.190 08-Aug-2001
Secretary 25-Apr-96(2) (19,000) $1.750 $4.375 05-Oct-2002
25-Apr-96(2) (11,000) $1.750 $6.188 08-Dec-2002
25-Apr-96(2) (15,000) $1.750 $2.938 20-Sep-2004
25-Apr-96(2) 36,500 $2.250(3)
Ward A. W. Urban........ 25-Apr-96(2) (5,000) $1.750 $6.560 21-Sep-2003
Vice President, 25-Apr-96(2) (4,000) $1.750 $2.938 20-Sep-2004
Treasurer and 25-Apr-96(2) 5,700 $2.250(3)
Asst. Secretary
Patrick J. Gentile...... 25-Apr-96(2) (2,500) $1.750 $6.000 02-Mar-2002
Vice President and 25-Apr-96(2) (2,500) $1.750 $6.313 09-Mar-2003
Corporate Comptroller 25-Apr-96(2) (5,000) $1.750 $2.938 20-Sep-2004
25-Apr-96(2) 6,500 $2.250(3)
</TABLE>
- ---------------
(1) Options originally issued with an exercise price equal to 75% of market
value at the date of grant were canceled and re-issued at a higher exercise
price of $4.375, which reflected 100% of market value at the date of grant.
(2) Cancellations were effected in connection with the executive's acceptance of
the modifications to his compensation pursuant to the Challenge 2000 Program
as described elsewhere in this proxy statement. As a result, Mr. Weissman
was granted options to purchase 476,000 shares at an exercise price of 125%
of market value at the date of grant in lieu of 832,500 options canceled and
Messrs. Gorman, Kesner, Urban and Gentile were granted options to purchase
70,600, 36,500, 5,700 and 6,500 shares, respectively, at an exercise price
of 125% of market value at the date of grant in lieu of 106,000, 53,333,
9,000, and 10,000 options canceled.
(3) 125% of market value on April 25, 1996, as defined in the 1990 Employee
Stock Option Plan (average of high and low trading price)
COMPENSATION COMMITTEE
David S. Rowe-Beddoe
C. Gerald Goldsmith
Ira J. Hechler
Alfred Teo
12
<PAGE> 15
OPTION EXERCISES AND FISCAL YEAR END VALUES
The following table sets forth for each of the Named Executive Officers:
(a) the number of shares of Common Stock acquired upon the exercise of options
during 1996; (b) the value realized from options exercised during 1996; (c) the
number of options held as of December 31, 1996, both exercisable and
unexercisable; and (d) the value of such options as of that date. No named
executive officer exercised any options during the last fiscal year.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND OPTION VALUE AT LAST FISCAL YEAR END
<TABLE>
<CAPTION>
NUMBER OF
UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY
FISCAL OPTIONS AT FISCAL
SHARES YEAR END # YEAR-END
ACQUIRED VALUE EXERCISABLE(1)/ $ EXERCISABLE(1)/
NAME ON EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
- -------------------------------- ----------- -------- --------------- --------------------
<S> <C> <C> <C> <C>
Morris Weissman................. -- -- 116,666/792,667 $286,957/$1,983,001
John T. Gorman.................. -- -- 40,000/ 90,600 $100,600/ $232,675
Harvey J. Kesner................ -- -- 0/ 56,500 $0/ $151,688
Ward A. W. Urban................ -- -- 0/ 15,700 $0/ $46,038
Patrick J. Gentile.............. -- -- 0/ 16,500 $0/ $47,938
</TABLE>
- ---------------
(1) Amounts shown exclude Performance Warrants held by Messrs. Weissman and
Gorman under the Company's Performance Warrant Plan in the amounts of
139,500 and 16,000, respectively. All of such Performance Warrants are
presently exercisable through July 26, 2006 at an exercise price of $0.011
per share, subject to anti-dilution provisions. The aggregate value of
unexercised in-the-money Performance Warrants at 1996 fiscal year end was
$643,653 and $73,824 for Messrs. Weissman and Gorman, respectively.
LONG-TERM INCENTIVE PLAN AWARDS
The following table sets forth for each of the Named Executive Officers
certain information concerning long-term cash incentive awards granted in 1996
pursuant to the Company's Executive Incentive Plan.
LONG-TERM INCENTIVE PLANS-AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERFORMANCE OR ESTIMATED FUTURE PAYOUTS UNDER
NUMBER OF OTHER NON-STOCK PRICE-BASED PLANS
SHARES, UNITS PERIOD UNTIL ------------------------------------
OR OTHER MATURATION ON THRESHOLD TARGET MAXIMUM
NAME RIGHTS (#)(1) PAYOUT ($ OR #) ($ OR #)(2) ($ OR #)
- ------------------------------------ -------------- -------------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Morris Weissman..................... 25,000 Units 1996-1999 $50,000 $ 500,000 $1,000,000
John T. Gorman...................... 3,500 Units 1996-1999 $ 7,000 $ 70,000 $ 140,000
Harvey J. Kesner.................... 3,500 Units 1996-1999 $ 7,000 $ 70,000 $ 140,000
Ward A. W. Urban.................... 1,500 Units 1996-1999 $ 3,000 $ 30,000 $ 60,000
Patrick J. Gentile.................. 1,500 Units 1996-1999 $ 3,000 $ 30,000 $ 60,000
</TABLE>
- ---------------
(1) Awards consists of units under the Company's Executive Incentive Plan with a
nominal value of $2 per unit. Units will appreciate in value depending upon
the extent by which the Company's operating income exceeds 10% of ROE (as
defined) on a year-by-year or cumulative basis over the 1996-1999 period.
Awards are only payable in cash in two installments in 1999 and 2000, or
following a change in control, and are forfeited upon resignation or
termination prior to March 6, 1999. ROE is defined as the fraction the
numerator of which is equal to the Company's pre-tax income (including
income from minority holdings, joint ventures, dividends from investments
and like income) before extraordinary charges or similar one-time
non-recurring losses or reserves not in the ordinary course plus
depreciation and amortization, and the denominator of which is calculated as
a simple average of the average monthly
13
<PAGE> 16
common equity (beginning of month common equity plus end of month common
equity divided by two) for the calendar year.
(2) Target award is not determinable. Amounts are based on 1996 performance.
RETIREMENT PLAN
Effective April 1, 1994, the Board of Directors approved a supplemental
retirement plan for certain executives and management employees of the Company
(the "SERP"). In general, the SERP provides that a participant retiring at age
65 will receive a monthly retirement benefit equal to an amount determined, in
the case of the Company's senior executives, including the Named Executive
Officers, by multiplying the participant's "final average compensation" (as
defined in the SERP) by a percentage equal to 3% for each of the first ten years
plus 1.5% for each of the next twenty years, of service, or for junior level
executives, by a percentage equal to 2% for each of the first ten years, 1.5%
for each of the next ten years and 1% for each of the next ten years. The result
of the computation is decreased by a participant's Social Security Benefit and
any amounts available from the participant's pension or profit sharing plan from
the Company or its predecessors. The retirement income is to be paid at normal
or deferred retirement dates for life only with the appropriate actuarial
reduction of a joint and survivor election. Early retirement benefits are
available with a reduction of 2% for each year less than age 62. No benefit will
be provided prior to a participant achieving age 55 and 10 years of service. All
participants will receive credit for past service to the Company or any of its
wholly-owned subsidiaries. Amounts of compensation in excess of $300,000
increased by 6% on each plan anniversary date commencing April 1, 1995, will not
be considered when calculating plan benefits. The Company has established a
grantor trust to which the Company can contribute assets that will be held
subject to claims of the Company's creditors until paid to SERP participants and
their beneficiaries. Mr. Weissman's benefit in the SERP is calculated based upon
compensation of $750,000. Mr. Weissman will be required to provide minimum
numbers of service years as provided in his agreement.
The following table shows the estimated annual benefit payable to employees
in various compensation and years of service categories based upon the senior
executive accrual rates. The estimated benefits apply to an employee retiring at
age sixty-five in 1996 who elects to receive his or her benefit in the form of a
single life annuity. These benefits would be reduced by any benefits
attributable to the Company's (and its predecessor's) contributions (and the
earnings thereon) to pension and/or profit sharing plans and social security.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
-----------------------------------------------------
REMUNERATION 10 15 20 25 30
------------------------------------ --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
$100,000............................ $ 30,000 $ 37,500 $ 45,000 $ 52,500 $ 60,000
125,000............................ 37,500 46,875 56,250 65,625 75,000
150,000............................ 45,000 56,250 67,500 78,750 90,000
200,000............................ 60,000 75,000 90,000 105,000 120,000
250,000............................ 75,000 93,750 112,500 131,250 150,000
300,000............................ 90,000 112,500 135,000 157,500 180,000
337,080............................ 101,124 126,405 151,686 176,967 202,248
</TABLE>
DIRECTOR COMPENSATION
Non-employee Directors presently are paid $25,000 per annum for serving as
Directors and $2,000 for each Board meeting attended in excess of four in any
fiscal year. Non-employee Directors receive $1,000 for each committee meeting
attended. An amendment (the "Amendment") to the Deferred Stock and Compensation
Plan for Non-employee Directors (the "Directors Plan") was approved by
stockholders at the 1996 Annual Meeting. The Amendment increased to 3,000 the
number of Common Stock equivalent awards which each director will automatically
receive on an annual basis and provides automatic grants of up to 2,000
14
<PAGE> 17
Common Stock equivalents to Committee chairpersons. Newly appointed directors
will also receive a one-time award of 7,500 Common Stock equivalents under the
Amendment. Upon approval of the Amendment, Messrs. Goldsmith, Hechler and
Rowe-Beddoe canceled their awards of 15,000 options issued under the terminated
1992 Directors Plan and received a one-time award of 7,500 Common Stock
equivalents. A maximum of 5,000 common stock equivalents per year for each
director was awarded under the Amendment, exclusive of the one-time awards to
directors. In all other respects the Directors Plan remains unchanged. Under the
terms of the Directors Plan, Common Stock equivalents are held in a director's
deferred stock account. Directors elected or appointed other than at an annual
meeting are awarded a pro rata amount of Common Stock equivalents. As a result
of the Amendment, 10,500, 10,500, 12,500, 12,500, 12,500 and 7,500 Common Stock
equivalents were awarded to each of Ms. Anderson, Dr. Arias and Messrs.
Goldsmith, Hechler, Rowe-Beddoe and Teo, respectively, during 1996.
Effective October 1, 1996, non-employee Directors receive $2,000 per annum
for each committee membership and $5,000 for each committee chair held. These
committee fees are subject to forfeiture by any director who attends less than
75% of the meetings of committees on which he or she serves. These fees are
subject to irrevocable deferral elections, whereby (in addition to any other
cash fees elected for deferral) a cash/debenture account is credited in the
amount of the fees deferred which is convertible into the number of common
shares as would equal the fees deferred in January of the year following the
credit plus accrued interest at the seven-year treasury rate. Upon termination
of services, directors receive interest plus the greater of the value of the
debenture account (in cash in 5 annual installments) or the shares of common
stock into which the debentures are convertible. The deferred accounts are
payable in cash upon a change in control or as otherwise determined by the
Compensation Committee. At year end, approximately $1,054, $4,745, $3,427,
$2,900, and $528 were accrued for Ms. Anderson and Messrs. Goldsmith, Hechler,
Rowe-Beddoe and Teo, respectively.
A Common Stock equivalent is the hypothetical equivalent of the Common
Stock that has a value on any date equal to the mean of the high and low trading
prices of the Common Stock on such date, and is adjusted to reflect stock
dividends, splits and reclassifications. In January of the year following the
year of termination of services, each director receives payment in shares of
Common Stock equal to the balance of Common Stock equivalents in his or her
deferred stock account. In the event of a change in control, Common Stock
equivalents have a value based on the highest price of the Common Stock during
the thirty days preceding such change in control and will be paid in cash or
otherwise as the Compensation Committee may prescribe.
The Company does not provide any Director retirement benefits.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company retained Kelly, Anderson, Pethick & Associates, of which Ms.
Anderson, a Director, is Vice Chairperson and an owner, for marketing and
business development services primarily involving the Company's government
contracts business. During 1996, the Company paid approximately $72,400 for
services performed. The Company has for many years prior to Ms. Anderson's
election as a Director utilized the services of Ms. Anderson's firm as a
government consultant.
On April 13, 1995, the Company loaned Mr. Weissman $185,750. The loan bears
interest, payable annually, at a rate equal to the rate published by Citibank,
NA as its base rate, from time to time. The loan matures on April 13, 1998. On
December 31, 1996, the amount outstanding under the loan, including accrued
interest, was approximately $210,000, which was the maximum amount outstanding
during 1996. On May 5, 1997, Mr. Weissman paid in full all interest due and
owing under the loan.
PROPOSAL 2. AUDITOR PROPOSAL
Pursuant to the recommendation of the Audit Committee, the Board of
Directors has proposed the appointment of the firm of Deloitte & Touche LLP,
independent certified public accountants ("Deloitte"), to audit the consolidated
financial statements of the Company for the fiscal year ending December 31,
1997.
15
<PAGE> 18
Deloitte has acted as auditor of the Company or its predecessors since 1976. The
stockholders are requested to approve the proposed appointment at the Annual
Meeting.
It is expected that representatives of Deloitte & Touche LLP will be
present at the Annual Meeting and available to respond to appropriate questions,
and make a statement, if they so wish.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR
THE AUDITOR PROPOSAL.
RECOMMENDATION
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR THE ELECTION OF
ITS NOMINEES AS DIRECTORS AND FOR THE AUDITOR PROPOSAL.
LITIGATION INVOLVING CLAIMS AGAINST DIRECTORS
In January 1994, Vladimir v. United States Banknote Corporation, et al.,
and in February 1994, Sinay v. United States Banknote Corporation, et al. were
filed in the United States District Court for the Southern District of New York.
Also, in January 1994, Atencio v. Morris Weissman, et al. was filed in the Court
of Chancery for the State of Delaware, New Castle County, against various
directors and/or officers of the Company, on behalf of a purported class and
derivatively on behalf of the Company which was named as a nominal defendant. In
February 1994, Rosenberg v. Morris Weissman, et al. was filed in the same court
as Atencio, alleging similar claims to Atencio, but not on behalf of a class of
plaintiffs. On June 16, 1995, the Court approved certification of a class in the
Vladimir action consisting of all persons who purchased stock in the open market
from April 1, 1993 through January 6, 1994 and on February 26, 1996 dismissed
the Sinay action, without prejudice. On January 17, 1997, a jury verdict in
Vladimir was returned that found the Company's stock inflated by $0.79 per share
during the class period under Section 10(b) of the Securities Exchange Act of
1934 with respect to the Company with a finding of liability under Section 20(a)
to Mr. Weissman as a "control person" of the Company. The Company and Mr.
Weissman have filed Motions for Summary Judgement and Motions for Judgment as a
Matter of Law following the jury verdict and seeking a new trial, which are
pending. The Atencio and Rosenberg actions assert claims for breach of fiduciary
duty by the individual defendants, and allege that certain of the defendants
sold Common Stock while in possession of material non-public information and
seek recapture of the profits earned by the defendants who purportedly traded,
the repayment by the defendants of their 1993 salaries, damages for the costs to
the Company of defending the Vladimir and Sinay actions and the annulment of the
1993 election of directors.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's officers, directors and persons who own
more than 10% of a registered class of the Company's equity securities to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission and the New York Stock Exchange. Officers, directors and greater than
10% stockholders are required by regulations promulgated by the Securities and
Exchange Commission to furnish the Company with copies of all forms they file
pursuant to Section 16(a) of the Exchange Act.
16
<PAGE> 19
Based solely on review of the copies of such forms furnished to the Company
and written representations from the Company's executive officers and Directors,
the Company believes that during the year ended December 31, 1996 all persons
subject to the reporting requirements of Section 16(a) filed the required
reports on a timely basis except as follows: one late Form 4 by Mr. Teo
reporting ownership changes reported on Form 5 filed February 1997 and one late
Form 4 reporting sales by Mr. Weissman's spouse during 1996 reported on Form 4
filed May 1997.
OTHER BUSINESS
The Company knows of no other matters that may be presented to the Annual
Meeting. However, if any other matter properly comes before the Annual Meeting,
or any adjournment thereof, it is intended that proxies in the accompanying form
will be voted in accordance with the judgment of the persons named therein.
PROXIES AND VOTING AT THE MEETING
Only holders of record of Common Stock at the close of business on the
Record Date are entitled to receive notice of, and to vote at, the Annual
Meeting. At the close of business on the Record Date, 19,993,164 shares of
Common Stock were issued and outstanding, with each share entitled to one vote.
The presence in person or by proxy at the Annual Meeting of the holders of a
majority of such shares shall constitute a quorum.
The affirmative vote of the holders of a plurality of the votes cast by the
holders of shares of Common Stock present in person or represented by proxy at
the Annual Meeting and entitled to vote is necessary for the election of
Directors. Abstentions and broker non-votes will have no impact on the election
of Directors. The affirmative vote of the holders of a majority of the shares of
Common Stock present in person or represented by proxy at the Annual Meeting and
entitled to vote is required for the approval of the Auditor Proposal. With
respect to abstentions on this matter, the shares will be considered present and
entitled to vote at the Annual Meeting and they will have the same effect as
votes against the matter. With respect to broker non-votes, the shares will not
be considered entitled to vote at the Annual Meeting for such matter and the
broker non-votes will have the practical effect of reducing the number of
affirmative votes required to achieve a majority vote by reducing the total
number of shares from which the majority is calculated.
Any Proxy may be revoked at any time before it is actually voted by written
notification delivered to the Secretary of the Company, by voting in person at
the Annual Meeting or by submitting another Proxy bearing a later date. Properly
executed and unrevoked Proxies received by the Company will be voted by the
persons named therein at the Annual Meeting in the manner specified therein or,
if no specification is made, will be voted: (i) FOR the election of the seven
Directors listed herein and (ii) FOR the Auditor Proposal.
The expense of preparing, printing and distributing the Proxy materials
will be paid by the Company. In addition to use of the mail, Proxies may be
solicited in person or by telephone by Directors, officers or employees of the
Company without additional compensation. The Company has engaged D. F. King &
Co., Inc., 77 Water Street, New York, New York 10005, to assist in the
solicitation of Proxies from stockholders for a fee of $6,000 plus reimbursement
for reasonable out-of-pocket expenses.
17
<PAGE> 20
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be included in the Company's proxy
materials relating to and presented at the Company's 1998 annual meeting of
stockholders must be received at the Company's principal executive offices not
later than January 11, 1998. The Company's By-laws provide additional notice
requirements for stockholder nominations and proposals. At annual meetings,
stockholders may submit nominations for directors and other proposals only upon
60 days advance written notice (90 days if the meeting is on or after the
anniversary of the prior years meeting) to the Secretary of the Company.
By Order of the Board of Directors,
LOGO
HARVEY J. KESNER
Secretary
May 9, 1997
PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY. NO
POSTAGE STAMP IS NECESSARY IF MAILED IN THE UNITED STATES.
<PAGE> 21
PROXY
AMERICAN BANKNOTE CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Morris Weissman, John T. Gorman and Harvey
J. Kesner , or any one of them, with the full power of substitution, to
vote all shares of Common Stock, par value $.01 per share, of AMERICAN
BANKNOTE CORPORATION (the "Company") which the undersigned is entitled to
vote at the Company's Annual Meeting to be held on June 11, 1997 and at any
adjournments thereof, and the undersigned authorizes and instructs said
proxies to vote as directed.
Election of Directors:
The nominees are:
Bette B. Anderson David Rowe-Beddoe
Dr. Oscar Arias S. Alfred Teo
C. Gerald Goldsmith Morris Weissman
Ira J. Hechler
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this proxy
will be voted FOR all nominees listed in Proposal 1 and FOR Proposal 2.
Please mark, date and sign this proxy on the reverse side and return it
promptly using the envelope provided.
(See reverse side)
<PAGE> 22
Please mark your
/X/ vote as in this
example.
The Board of Directors recommends a vote FOR Proposal 2.
FOR VOTE WITHHELD FOR
ALL NOMINEES ALL NOMINEES
/ / / /
1. ELECTION OF
DIRECTORS
(See reverse side)
For, except vote withheld from the following nominee(s):
______________________________________________
FOR AGAINST ABSTAIN
2. PROPOSAL TO APPROVE / / / / / /
THE APPOINTMENT OF
DELOITTE & TOUCHE LLP
AS AUDITORS FOR THE
COMPANY FOR THE
FISCAL YEAR ENDED
DECEMBER 31, 1997.
3. IN THEIR DISCRETION, UPON ANY OTHER MATTERS WHICH MAY
PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENTS THEREOF.
Change of Address: / / Receipt of the Notice
Check this box and of Annual Meeting
print new address of Stockholders,
below: the Proxy Statement
_____________________________ and the 1996 Annual
_____________________________ Report of the Com-
_____________________________ pany is hereby
acknowledged.
SIGNATURE(S) _______________________ DATE _______, 1997
Your signatures should appear the same as
your name appears hereon, and if signing
as an attorney, executor, administrator,
trustee or guardian, please indicate the
capacity in which signing. When signing
as joint tenants, all parties to the joint
tenancy must sign. When the proxy is given
by a corporation, it should be signed by
an authorized officer.
