(Interstate/Johnson Lane Logo Goes Here)
Interstate/Johnson Lane
INTERSTATE/JOHNSON LANE, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 20, 1998
------------------------------------------------------
TO THE STOCKHOLDERS OF
INTERSTATE/JOHNSON LANE, INC.
The annual meeting of the stockholders of Interstate/Johnson Lane, Inc.
(the "Company") will be held on Tuesday, January 20, 1998, at 3:00 P.M. at the
Radisson Plaza Hotel, 101 South Tryon Street, Charlotte, North Carolina, for the
following purposes:
(1) To elect three directors to serve as Class I directors for
a three-year term expiring in 2001 or until their respective successors
are duly elected and qualified.
(2) To ratify the appointment of Coopers & Lybrand L.L.P. as
the Company's independent certified public accountants for the fiscal
year ending September 30, 1998.
(3) To approve the terms of Long-Term Incentive Plan
compensation for the Company's executive and senior officers.
(4) To transact such other business as may properly come
before the meeting or any adjournment thereof.
The Board of Directors has fixed November 28, 1997, as the record date
for the determination of stockholders entitled to notice of and to vote at the
meeting.
Michael D. Hearn, Secretary
Dated: December 16, 1997
- ------------------------------------------------------------------------------
AFTER VOTING THE ENCLOSED PROXY, PLEASE SIGN, DATE AND MAIL IN THE ENCLOSED
ENVELOPE SO AS TO ENSURE A QUORUM AT THE MEETING. THIS IS IMPORTANT WHETHER YOU
OWN FEW OR MANY SHARES. DELAY IN RETURNING YOUR PROXY MAY SUBJECT THE COMPANY TO
ADDITIONAL EXPENSE.
- ------------------------------------------------------------------------------
<PAGE>
INTERSTATE/JOHNSON LANE, INC.
INTERSTATE TOWER
POST OFFICE BOX 1012
CHARLOTTE, NORTH CAROLINA 28201-1012
-------------------------
PROXY STATEMENT
-------------------------
This proxy statement is furnished in connection with the solicitation
by the Board of Directors of Interstate/Johnson Lane, Inc. (the "Company") of
proxies from the holders of the Company's Common Stock (the "Common Stock") for
use at the annual meeting of stockholders of the Company to be held on Tuesday,
January 20, 1998, and at any adjournment thereof. Unless the context requires
otherwise, all references in this proxy statement to the Company refer to
Interstate/Johnson Lane, Inc. and its subsidiaries. This proxy statement and the
accompanying proxy card are first being mailed to stockholders on or about
December 16, 1997.
Only stockholders of record at the close of business on November 28,
1997, are entitled to vote at the meeting. As of such date, the Company had
outstanding and entitled to vote 6,100,305 shares of Common Stock, and
approximately 970 stockholders of record. Each outstanding share entitles the
stockholder of record to one vote. The representation in person or by proxy of a
majority of the outstanding shares of Common Stock is necessary for a quorum at
the annual meeting.
All proxies which are properly executed and received prior to the
meeting will be voted at the meeting. If a stockholder specifies how the proxy
is to be voted on any of the business to come before the meeting, the proxy will
be voted in accordance with such specification. If no specification is made, the
proxy will be voted for the election of directors as proposed, for the
ratification of the appointment of Coopers & Lybrand L.L.P. as the Company's
independent certified public accountants for the fiscal year ending September
30, 1998, and for the approval of the terms of the Long-Term Incentive Plan
compensation for the Company's executive and senior officers. A proxy may be
revoked, to the extent it has not been exercised, at any time prior to its
exercise, by written notice to the Secretary of the Company, by executing and
delivering a proxy with a later date, or by voting in person at the meeting.
2
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation, as amended, and
Bylaws provide that the Board of Directors be divided into three classes, with
each class having a three-year term. The term of office for Class I directors
expires at the 1998 Annual Meeting of Stockholders, and the term of office for
Class II and III directors will expire at the 1999 and 2000 Annual Meetings,
respectively.
In April, 1997, the Board of Directors was expanded to ten (10)
directors and Mr. B. Franklin Skinner was appointed as a Class I director to
serve until the next Annual Meeting of Stockholders. In October, 1997, the Board
of Directors was expanded to eleven (11) directors and Ms. Minor Mickel Shaw was
appointed as a Class I director to serve until the next Annual Meeting of
Stockholders.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote at the meeting. Shares represented by
executed proxies will be voted, if authority to do so is not withheld, for the
election of the three nominees named below. Withheld votes will be excluded
entirely from the vote and will have no effect therein. In the event that any
nominee should be unavailable for election as a result of an unexpected
occurrence, such shares will be voted for the election of such substitute
nominee as management may propose. Each person nominated for election has agreed
to serve if elected, and management has no reason to believe that any nominee
will be unable to serve.
THREE DIRECTORS ARE PROPOSED FOR ELECTION TO A TERM EXPIRING AT THE
2001 ANNUAL MEETING OF STOCKHOLDERS: PETER R. KELLOGG, B. FRANKLIN SKINNER AND
MINOR MICKEL SHAW. THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR THIS
PROPOSAL.
Information with respect to each current director and nominee,
including five-year biographical data, is set forth below:
CLASS I DIRECTORS CONTINUING IN OFFICE UNTIL THE 1998 ANNUAL MEETING
Claude S. Abernethy, Jr.
-------------------------
Mr. Abernethy, age 70, was elected a director of the Company in June,
1985. He was a director of Interstate/Johnson Lane Corporation, the Company's
wholly owned subsidiary (hereinafter "IJL Corporation") from 1953 to 1987 and a
Senior Vice President from 1963 to the present date. He has been affiliated with
IJL Corporation since 1951. Mr. Abernethy is also a director of Air
Transportation Holding Company, an air freight company and Ridgeview, Inc., a
manufacturer of sports socks and hosiery.
Parks H. Dalton
---------------
Mr. Dalton, age 68, served as Chairman of the Company from 1985 until
his retirement in 1988, and as Chief Executive Officer from 1985 to 1986. He was
re-elected as a director of the Company in July, 1990, and as Chairman and Chief
Executive Officer of the Company in September, 1990. He served as Chief
Executive Officer from September, 1990, until October, 1994, and still serves as
Chairman. He was also a director of IJL Corporation from 1985 until his
retirement in 1988, and served as Chief Executive Officer of IJL Corporation
from 1968 to 1988, President from 1968 to 1983, and Chairman from 1983 to 1988.
In November, 1990, he was re-elected Chairman and Chief Executive Officer of IJL
Corporation until October, 1994, when he was elected Chairman, the position in
which he currently serves.
3
<PAGE>
Peter R. Kellogg
----------------
Mr. Kellogg, age 55, was elected a director of the Company in October,
1989. Mr. Kellogg is Senior Managing Director and Chief Executive Officer of the
investment firm of Spear, Leeds & Kellogg ("SLK"), having joined them in 1967.
Mr. Kellogg is also the Chairman of IAT Reinsurance Syndicate Ltd. The Troster
Singer Division of SLK provides execution services to the Company on certain
transactions in over-the-counter securities. Mr. Kellogg is also a director of
The Ziegler Companies, Inc., an investment firm.
B. Franklin Skinner
--------------------
Mr. Skinner, age 66, was elected a director of the Company in April,
1997. Mr. Skinner was Chairman and CEO of BellSouth Telecommunications, Inc.
before retiring in 1992. He currently serves as a director of Shoney's Inc., and
on the board of trustees of Davidson College and the Columbia Presbyterian
Theological Seminary. He previously has served as a director of NationsBank
Corporation and the Barclays American Corporation.
Minor Mickel Shaw
------------------
Ms. Shaw, age 50, was elected a director of the Company in October,
1997. For more than five years, she has served as President of Micco Corporation
and Mickel Investment Group, both privately-held companies. She also currently
serves on the board of trustees of Wofford College and The Daniel/Mickel
Foundation of South Carolina.
CLASS II DIRECTORS CONTINUING IN OFFICE UNTIL THE 1999 ANNUAL MEETING
Dudley G. Pearson
-----------------
Mr. Pearson, age 54, was elected a director of the Company in January,
1991. Mr. Pearson is Senior Vice President and Regional Manager, having joined
Interstate/Johnson Lane Corporation in January, 1987. Mr. Pearson served as
Branch Manager of the Atlanta Monarch office from October, 1988, through April,
1995.
Edward C. Ruff
----------------
Mr. Ruff, age 58, was elected a director of the Company in 1988 and has
served as its Chief Financial Officer since 1985. He has been a director, Senior
Vice President and Chief Financial Officer of IJL Corporation since he joined
that firm in 1976, and in April, 1996 was elected a Senior Managing
Director/Chief Financial Officer. In October, 1997, Mr. Ruff was elected
Executive Vice President and Chief Operating Officer of the Company and
Executive Managing Director/Chief Operating Officer of IJL Corporation. Mr. Ruff
is also a director of ISC Realty Corporation, which is the managing general
partner of Marketplace Income Properties, Atlantic Income Properties Limited
Partnership, Interstate Land Investors I Limited Partnership and Interstate Land
Investors II Limited Partnership, all publicly held real estate investment
partnerships.
Grady G. Thomas, Jr.
--------------------
Mr. Thomas, age 54, was elected a director of the Company in November,
1988. He joined IJL Corporation in 1977, was elected Senior Vice President in
1978 and served as a director from 1987 to 1991. Mr. Thomas directs the
activities of The Interstate Group, a division of IJL Corporation, which
provides institutional trading and independent research products and services to
money managers and plan sponsors.
4
<PAGE>
CLASS III DIRECTORS CONTINUING IN OFFICE UNTIL THE 2000 ANNUAL MEETING
John B. Ellis
---------------
Mr. Ellis, age 73, was elected a director of the Company in April,
1992. He retired in 1986 as Senior Vice President-Finance and Treasurer from
Genuine Parts Company, a national distributor of automotive replacement parts,
and is presently director emeritus of that firm. Mr. Ellis is also a director of
Hughes Supply Inc., Integrity Music, Inc., Intermet Corp. and UAP, Inc.
J. Alex McMillan, III
---------------------
Mr. McMillan, age 65, was elected a director of the Company in July,
1996. Mr. McMillan retired from the U.S. House of Representatives in 1994 after
a decade of public service. He is currently President of the McMillan Group, a
merchant banking and public affairs consulting firm specializing in health care,
energy, telecommunications, environment and financial services. Mr. McMillan is
also a director of Alydaar Software Corporation.
James H. Morgan
---------------
Mr. Morgan, age 50, was elected President and Chief Operating Officer
of both the Company and IJL Corporation in September, 1990, and as a director of
both in October, 1990. He served as Chief Operating Officer from September,
1990, until October, 1994, when he was elected President and Chief Executive
Officer. In October, 1997, he was elected as Chairman and Chief Executive
Officer, effective January 21, 1998. From July, 1989, to September, 1990, Mr.
Morgan was President of Morgan Investments, Inc., a privately owned and operated
investment advisory business. Mr. Morgan served as Vice President of the Company
from 1987 to 1989, and was a director and Senior Vice President of IJL
Corporation in various research, equity marketing and investment policy roles
from 1986 to 1989.
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Coopers & Lybrand L.L.P. as
independent certified public accountants to examine the Company's financial
statements for the fiscal year ending September 30, 1998. A representative of
such firm is expected to attend the meeting, to respond to appropriate questions
from stockholders present at the meeting and, if such representative desires, to
make a statement. THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR THIS PROPOSAL.
PROPOSAL 3
TO APPROVE THE TERMS OF LONG-TERM INCENTIVE PLAN
COMPENSATION FOR THE COMPANY'S EXECUTIVE AND SENIOR OFFICERS
In 1996, the Board of Directors approved a stock-based Long-Term
Incentive Plan ("LTIP") for a group of up to fifteen executive and other senior
officers. The purpose of the plan was to recognize their contribution to the
outstanding prior years' stockholder returns (as illustrated on page 14) and to
continue to align the interests of the Company's senior management and its
stockholders by allowing them to earn increased stock ownership. The LTIP
provides for awards of company stock ranging from 100,000 to 650,000 shares,
depending upon the level of aggregate earnings per share (before charges for the
LTIP) attained during the three-year period commencing October 1, 1995, and
ending September 30, 1998. No awards are payable for less than $3.51 aggregate
earnings per share (as defined) during that measurement period.
5
<PAGE>
Because this measurement period has not ended, because the value of the
share awards depends upon the price of the Common Stock at the end of that
period, and the awards have not yet been made, it currently is not possible to
quantify the maximum dollar amount of an award to any participant. However, the
Compensation and Plans Committee has determined that the maximum share award to
any participant will not exceed the lesser of 50% of the total share award or
325,000 shares. Assuming this Proposal is approved by the stockholders, the
Compensation and Plans Committee will certify the total shares earned and
allocate awards among the group of executives within 30 days after September 30,
1998. Should there be a change in control of the Company prior to that date, the
plan provides that the awards would be made at that time based upon a proration
formula. It is expected that a portion of the award will be made in restricted
shares forfeitable by the recipient if he is not employed by the Company on
September 30, 2001, other than by reason of his death, disability, or
retirement. Additionally, recipients may elect to receive up to 50% of their
unrestricted share awards in cash at the time of grant.
As discussed in the Compensation and Plans Committee Report, depending
upon the price of the Company's stock at that time, the awards could cause one
or more eligible executive officers' total annual remuneration to exceed $1
million. Section 162(m) of the Internal Revenue Code of 1986, as amended, does
not allow deductions for compensation in excess of $1 million (per taxable year)
by a public corporation paid to its Chief Executive Officer or to any other
named executive officer unless certain criteria are met. As noted above, the
Compensation and Plans Committee of the Board, comprised solely of independent
directors, has approved this performance-based Plan and will certify in October,
1998 as to which performance goals have been met before any awards are made. The
final requirement is that stockholders approve the material terms under which
the compensation will be paid. Therefore, the Board of Directors is seeking
stockholders' approval to ensure that the Company can accomplish its
compensation objectives in a manner that maximizes the deductibility of
compensation for federal income tax purposes. Assuming a quorum is present in
person or by proxy at the annual meeting, approval of Proposal 3 requires the
affirmative vote of a majority of the votes cast on the proposal. Abstentions
and broker nonvotes will have the practical effect of reducing the number of
affirmative votes required to approve the proposal by reducing the total number
of votes cast. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE
TERMS OF THE LONG-TERM INCENTIVE PLAN COMPENSATION.
OTHER MATTERS
The Board of Directors of the Company knows of no matters which will be
presented for consideration at the meeting other than those set forth in this
Proxy Statement. However, if any other matters are properly presented for
action, it is the intention of the persons named in the Proxy to vote on them in
accordance with their best judgment.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of November 30, 1997, the number and
percentage of outstanding shares beneficially owned by each person known by the
Company to own more than 5% of the Common Stock, by each director, nominee for
director and named executive officer of the Company, and by all directors and
executive officers of the Company as a group. Unless otherwise indicated, each
stockholder named has sole voting and dispositive power with respect to such
stockholder's shares.
6
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
NAME BENEFICIALLY OWNED(1) OF CLASS
------- ------------------------- ----------
<S> <C> <C>
Claude S. Abernethy, Jr. 260,567 (2) 4.27%
Douglas R. Aldridge 76,048 (3) 1.25
Edwin A. Dalrymple, Jr. 63,828 (4) 1.05
Parks H. Dalton 72,371 (5) 1.19
John B. Ellis 5,191 (6) *
Peter R. Kellogg 1,052,499 (7) 17.26
J. Alex McMillan, III 1,240 (8) *
James H. Morgan 181,813 (9) 2.98
Reliance Trust Company, Trustee of
Interstate/ Johnson Lane Corporation Employee
Stock Ownership and PAYSOP Plan and Trust 388,871 (10) 6.38
Dudley G. Pearson 11,645 (11) *
Edward C. Ruff 151,599 (12) 2.49
Lewis F. Semones, Jr. 53,438 (13) *
Minor Mickel Shaw 999 (14) *
B. Franklin Skinner 1,500 (15) *
Grady G. Thomas, Jr. 124,907 (16) 2.05
All directors and executive officers
as a group (19 persons) 2,206,013 (17) 36.16
*Less than 1%
</TABLE>
(1) Does not include shares that might be deemed to be beneficially owned by a
director, nominee or executive officer serving on a committee which may direct
the investment of Common Stock in the Company's Profit Sharing and Capital
Accumulation Plan and Trust ("PSP/CAP") or Employee Stock Ownership and PAYSOP
Plan and Trust ("ESOP/ PAYSOP").
(2) Mr. Abernethy's shares include 43,991 shares owned by his wife; 32,800
shares owned by his children; 2,703 shares of restricted stock; and 13,474
shares held in the ESOP/PAYSOP and PSP/CAP plans.
(3) Mr. Aldridge's shares include 1,600 shares owned by his wife; 3,075 shares
of restricted stock; 50,000 shares issuable under currently exercisable stock
options; and 163 shares held in the ESOP/PAYSOP and PSP/CAP plans.
(4) Mr. Dalrymple's shares include 5,045 shares owned by his wife; 2,203 shares
of restricted stock; 1,378 shares held in the ESOP/PAYSOP and PSP/CAP plans; and
37,500 shares issuable under currently exercisable stock options.
(5) Mr. Dalton's shares include 7,371 shares held in the ESOP/PAYSOP and
PSP/CAP plans.
(6) Mr. Ellis' shares include 499 shares of restricted stock obtained from the
Company in payment of his annual director retainer fee.
(7) Mr. Kellogg's shares include 100,000 shares held by his wife; 100,000 shares
held by a Trust, of which he is a trustee; 499,500 shares held by IAT
Reinsurance Syndicate, Ltd., a Bermuda corporation, of which he is the sole
holder of the voting stock; and 499 shares of restricted stock obtained from the
Company in payment of his annual director retainer fee.
(8) Mr. McMillan's shares include 499 shares of restricted stock obtained from
the Company in payment of his annual director retainer fee.
7
<PAGE>
(9) Mr. Morgan's shares include 86 shares owned by his wife, 274 shares owned by
his children, 747 shares of restricted stock, 218 shares held in the ESOP/PAYSOP
and PSP/CAP plans; and 115,000 shares issuable under currently exercisable stock
options.
(10) This stockholder has dispositive power with respect to these shares, and
voting power only as to shares not allocated to participants' accounts. The
address of this holder is: One Atlantic Plaza, Suite 2840, 950 East Paces Ferry
Road, Atlanta, GA 30326-1142.
(11) Mr. Pearson's shares include 767 shares of restricted stock; and 160 shares
held in the ESOP/PAYSOP and PSP/CAP plans.
(12) Mr. Ruff's shares include 6,258 shares held in the ESOP/PAYSOP and PSP/CAP
plans; and 45,000 shares issuable under currently exercisable stock options.
(13) Mr. Semones' shares include 1,405 shares of restricted stock; 217 shares
held in the ESOP/PAYSOP and PSP/CAP plans; and 30,000 shares issuable under
currently exercisable stock options.
(14) Ms. Shaw's shares include 499 shares of restricted stock obtained from the
Company in payment of her annual director retainer fee.
(15) Mr. Skinner's shares include 499 shares of restricted stock obtained from
the Company in payment of his annual director retainer fee.
(16) Mr. Thomas' shares include 474 shares restricted stock; 3,987 shares held
in the ESOP/PAYSOP and PSP/CAP plans; and 35,000 shares issuable under currently
exercisable stock options.
(17) Shares of all directors, nominees for director and executive officers as a
group include 363,500 shares issuable under currently exercisable stock options;
28,575 shares of restricted stock; and 43,098 shares held in the ESOP/PAYSOP and
PSP/CAP plans.
MEETINGS AND COMMITTEES
BOARD OF DIRECTORS
During the fiscal year ended September 30, 1997, there were four
meetings of the Company's Board of Directors.
AUDIT COMMITTEE
Messrs. McMillan, Kellogg and Ellis served as the members of the Audit
Committee during the fiscal year ended September 30, 1997. The principal
functions of this Committee are to review the Company's internal controls and
confer with the Company's independent public accountants concerning the scope
and results of their audit and any recommendations they may have, and to
consider such other matters relating to auditing and accounting as the Committee
may deem appropriate. During the fiscal year ended September 30, 1997, the Audit
Committee held three meetings.
8
<PAGE>
COMPENSATION AND PLANS COMMITTEE
Messrs. Ellis, McMillan and Skinner served as the members of the
Compensation and Plans Committee during the fiscal year ended September 30,
1997. The principal function of this Committee is to review and approve the
compensation of the executive officers of the Company, to determine who will
receive options and/or stock appreciation rights under the Company's 1985
Non-Qualified Stock Option Plan, and to determine who will receive options,
restricted stock, unrestricted stock, and/or stock appreciation rights under the
Company's 1987 Stock Award Plan. During the fiscal year ended September 30,
1997, the Compensation and Plans Committee held three meetings.
NOMINATING COMMITTEE
Messrs. Kellogg, Skinner and Dalton served as the members of the
Nominating Committee during the fiscal year ended September 30, 1997. The
principal function of this Committee is to seek out and nominate qualified
candidates for the Board of Directors of the Company. During the fiscal year
ended September 30, 1997, the Nominating Committee held three meetings.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation
during the last three fiscal years of the Company's Chief Executive Officer, and
each of its four other most highly compensated executive officers (the "named
executive officers") during the 1997 fiscal year:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
------------------------------------------------------------
Executive Officer Yr.End Salary Bonus Other Annual All Other
- ------------------- 9/30 --------- ------------------------------ Compensation Compensation
---- ----------- ------------
(3) (4)
Cash Stock Total
--------- ------- -------
(1)(2)
<S> <C> <C> <C> <C> <C> <C> <C>
(1) James H. Morgan 1997 225,000 885,000 0 885,000 0 3,135
PRESIDENT AND 1996 225,000 675,000 0 675,000 3,053 3,020
CHIEF EXECUTIVE OFFICER 1995 200,000 248,750 26,258 275,008 0 3,018
(2) Edward C. Ruff 1997 160,000 525,000 0 525,000 0 3,015
CHIEF FINANCIAL OFFICER (6) 1996 160,000 400,000 0 400,000 0 3,020
1995 150,000 140,000 10,003 150,003 0 3,018
(3) Douglas R. Aldridge 1997 150,000 503,557 0 503,557 15,053 3,625
SR. MANAGING DIRECTOR (7)
IJL CORPORATION
(4) Edwin A. Dalrymple, Jr. 1997 160,000 460,000 0 460,000 11,292 3,232
SR. MANAGING DIRECTOR 1996 150,000 525,000 0 525,000 5,428 3,020
IJL CORPORATION 1995 140,000 167,000 13,005 180,005 0 3,018
(5) Lewis F. Semones, Jr. 1997 135,000 475,000 0 475,000 3,851 3,369
SR. MANAGING DIRECTOR (6) 1996 125,000 300,000 0 300,000 4,528 3,020
IJL CORPORATION 1995 110,000 105,000 24,257 129,257 2,642 3,018
</TABLE>
(1) In fiscal 1995, the named executive officers (who served as executive
officers in those years) were awarded 13,068 shares of Common Stock restricted
for one year and bearing the rights to dividends, if any.
(2) Aggregate restricted shareholdings and their respective values at September
30, 1997, for each of the named executive officers were as follows: Mr. Morgan,
747 shares, $9,151; Mr. Dalrymple, 1,378 shares, $16,268; Mr. Semones, 217
shares, $2,658; and Mr. Aldridge 163 shares, $1,996.
(3) Amounts reported herein reflect the price discount on Common Stock deemed
purchased as of September 30 of that year by the named executive officers under
the Company's Employee Deferred Stock Purchase Program, which shares were issued
subsequent to the close of the respective fiscal year.
(4) Amounts reported herein reflect allocations of contributions by the Company
to the defined contribution plans described on page 12 of this proxy statement
and also reflect the dividends paid by the Company on the officers' restricted
shares.
(5) There were no awards or payouts of long-term compensation as defined in item
402(b)(2)(iv) of Regulation S-K under the Securities Exchange Act of 1934.
(6) Messrs. Ruff and Semones were elected Chief Operating Officer and Chief
Financial Officer, respectively, of both the Company and IJL Corporation on
October 21, 1997.
(7) Mr. Aldridge became an executive officer on October 21, 1996.
STOCK OPTIONS
The following options to purchase Common Stock were granted to the
named executive officers during the fiscal year ended September 30, 1997:
OPTION GRANTS IN THE LAST FISCAL YEAR
<TABLE>
<CAPTION>
Percent of
Total Options Exercise or
Options Granted Granted Base Price Expiration Grant Date
(1) (2) ($/Share) Date Value(3)
Executive Officer -------------- -------- ------------ ---------- -----------
-----------------
<S> <C> <C> <C> <C> <C>
Douglas R. Aldridge 25,000 7.7% $13.50 10/21/06 $112,000
Edwin A. Dalrymple, Jr. 25,000 7.7 13.50 1/21/07 112,000
12,500* 3.8 13.50 1/21/07 50,250
James H. Morgan 70,000 21.5 13.50 1/21/07 313,600
35,000* 10.8 13.50 1/21/07 140,700
Edward C. Ruff 25,000 7.7 13.50 1/21/07 112,000
12,500* 3.8 13.50 1/21/07 50,250
Lewis F. Semones, Jr. 20,000 6.2 13.50 1/21/07 89,600
10,000* 3.1 13.50 1/21/07 40,200
</TABLE>
*These options were granted subject to contingent exercisability. The options
were only exercisable after the shares of the Company's stock traded at $26.00
per share during at least any ten days prior to 01/21/04. This contingency has
been met. 10
<PAGE>
(1) Options granted pursuant to the Interstate/Johnson Lane, Inc. Restated Stock
Award Plan and the Amended Non-Qualified Stock Option Plan. Options are fully
vested at the time of issuance. The options were granted at the fair market
value of the shares subject to the option on the date of the grant.
(2) Reflects the percent of total options granted to all employees during the
fiscal year ended September 30, 1997.
(3) Grant date fair values were calculated by multiplying the fair values of the
options at the grant date (as calculated using the Black-Scholes option pricing
model) by the number of options granted. The following weighted-average
assumptions were used in the pricing model: risk-free interest rate of 6.61%;
expected volatility of 27%; dividend yield of 1.9%; and expected life of 6.1
years.
<TABLE>
<CAPTION>
OPTION EXERCISES IN THE LAST FISCAL YEAR
Number of Unexercised *Value of Unexercised
Options at In-The-Money Options at Fiscal
Option Exercises Fiscal Year-End Year-End
---------------------- ----------------------- ---------------------------------
Shares Value
Acquired Realized Exercisable Unexercisable Exercisable Unexercisable
Executive Officer (#) ($) (#) (#) ($) ($)
- ----------------- ------------- ------ --------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Douglas R. Aldridge 0 0 25,000 0 $440,625 n/a
Edwin A. Dalrymple, Jr. 0 0 37,500 0 660,938 n/a
James H. Morgan 0 0 105,000 0 1,850,625 n/a
Edward C. Ruff 5,000 $61,438 45,000 0 849,375 n/a
Lewis F. Semones, Jr. 0 0 30,000 0 528,750 n/a
</TABLE>
*Based on the difference between the exercise price of the options and the
closing price of the Common Stock on The New York Stock Exchange at September
30, 1997 ($31.125).
LONG-TERM INCENTIVE PLAN
In 1996, the Board of Directors approved a stock-based Long-Term
Incentive Plan (LTIP) for executive officers (including the executive officers
named above), and other senior executives . The LTIP provides for awards of
company stock ranging from 100,000 to 650,000 shares, depending upon the level
of aggregate earnings per share (before charges for the LTIP) attained during
the three-year period commencing October 1, 1995, and ending September 30, 1998.
No awards are payable for less than $3.51 aggregate earnings per share (as
defined) during that period. The Committee has determined that no person shall
receive more than the lesser of 350,000 shares or 50% of the total shares
awarded.
All awards will be made within 30 days after the close of the Company's
fiscal year at September 30, 1998. Should the Company in 1998 achieve the
average earnings per share (before LTIP charges) of 1996 and 1997, the total
award to the eligible group would be 350,000 shares. Under the terms of the
Plan, portions of the share grants may be made in restricted shares forfeitable
by the recipient if he is not employed by the Company for the duration of the
period ending September 30, 2001, other than for his death, disability, or
retirement. Additionally, recipients may elect to receive up to 50% of their
unrestricted share awards in cash at the time of grant.
COMPENSATION OF DIRECTORS
For the fiscal year ended September 30, 1997, the Company paid
directors who are not employees of the Company an annual retainer of $10,000 in
restricted stock, plus $1,000 and reimbursement of reasonable expenses for each
directors' meeting attended, and $1,000, plus expenses, for each committee
meeting not held in conjunction with a directors' meeting. In October,
11
<PAGE>
1997, the amount of the annual retainer was raised to $15,000. Meeting fees will
remain the same. Directors who are non-salaried employees receive $1,000 per
meeting, plus expenses. The Company anticipates that the Board of Directors will
continue to meet quarterly.
PROFIT SHARING AND CAPITAL ACCUMULATION PLAN AND TRUST (PSP/CAP)
The Company maintains the PSP/CAP, which provides for participant
contributions on a pretax compensation reduction basis (a 401(k) arrangement).
To participate, an employee must have at least one full calendar quarter of
service. An employee meeting the standards of service required under the plan
may elect to defer receipt of a percentage of his annual compensation and
contribute that amount to the Capital Accumulation Plan. That amount was limited
by federal regulation to $9,500 in 1997. The employee's deferrals will be fully
vested at all times.
The Company discretionarily matches employee contributions up to three
percent of covered compensation. Additional discretionary contributions may be
made by the Company and are allocated among participating employees at the end
of each fiscal year on the basis of their relative eligible compensation.
Company contributions, if any, are allocated to eligible participating employees
who are employed on the last day of the fiscal year. A participant's interest in
the Company's matching contributions vests over five years. This interest also
becomes fully vested upon retirement at age 65, early retirement (age 62 with
ten years of service), death or total disability.
EMPLOYEE STOCK OWNERSHIP (ESOP) AND PAYSOP PLAN AND TRUST
The Company maintains an ESOP/PAYSOP, to which it may make annual
contributions of cash, securities of the Company or other property for the
benefit of participating employees. The eligibility and vesting provisions and
administration responsibilities of the ESOP/PAYSOP are the same as those which
apply to the Profit Sharing and Capital Accumulation Plan and Trust. Cash
contributions to the ESOP/PAYSOP have been primarily invested in the Common
Stock and are allocated among participating employees at the end of each fiscal
year on the basis of their relative eligible compensation.
RELATED TRANSACTIONS
From time to time, directors and executive officers of the Company may
borrow money from IJL Corporation through margin accounts. These loans are made
in the normal course of IJL Corporation's business as a broker-dealer, are made
on substantially the same terms and conditions, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other persons, and do not involve more than the normal risks of credit or
present other unfavorable features. Additionally, IJL Corporation loaned Mr.
Aldridge $100,000 in February, 1997, at an interest rate equal to the prime rate
of a national bank, which averaged 8 3/8% during the fiscal year. The principal
and interest are being forgiven on a monthly basis over a 42-month period, and
the balance as of November 15, 1997, was $77,380. The loan was made to assist
Mr. Aldridge in relocating to Charlotte to assume his current duties.
COMPENSATION AND PLANS COMMITTEE REPORT
The Compensation and Plans Committee (the "Committee") establishes base
salaries for the Company's executive officers at the beginning of the fiscal
year upon the recommendations of the Chief Executive Officer. Salary levels are
intended to reflect responsibilities in one or more of the Company's operating
units and to be competitive with positions of similar responsibility in other
comparable investment and financial services organizations, whether publicly
owned or privately held, some of which may be included in the Peer Group Index.
Compensation surveys by
12
<PAGE>
independent third parties, industry associations and ad hoc conference groups,
as well as published proxy data for firms of comparable size and scope, all
serve as resources to the Chief Executive Officer and to the Committee in its
deliberations.
Annual bonuses for executive officers are discretionary, not
contractual. Messrs. Dalrymple and Aldridge are compensated primarily from the
contributions of the respective business units that they direct. The other named
executive officers and certain additional executive officers participate in a
corporate bonus pool which is based in part on the Company's annual return on
average beginning equity (ROBE), after giving effect to such bonuses, and in
part on discretionary adjustments by the Committee. The specifics of the
formularized portion of the corporate bonus pool vary from year to year. For
fiscal 1997 it provided for a bonus pool in an amount equal to 7% of pretax
profits (before giving effect to such bonuses and to LTIP charges) at a 10%
ROBE, up to a maximum 12% of pretax profits (as defined) if a 24% or greater
ROBE was achieved. In fiscal 1997 the pretax ROBE was 17.8%, and total funds
available from the corporate pool were $2,200,000 of which $1,885,000 was
allocated among the named executive officers on the basis of recommendations to
the Committee by the Chief Executive Officer.
In assessing total 1997 compensation for the named executive officers
relative to the Company's performance, the Committee considered the following
factors:
(bullet) Compensation paid to senior executives of other regional full-service
securities firms (including but not limited to some firms in the Peer
Group Index), as disclosed in proxy statements, relative to various
financial characteristics of those firms such as revenues, net
income, and return on equity.
(bullet) Substantial improvement from 1996 in the financial performance of the
Company.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code") disallows a publicly held corporation's deduction for that portion of
annual compensation exceeding $1 million paid to any named executive officer.
For performance-based compensation, Section 162(m) of the Code and the
regulations thereunder establish certain conditions under which
performance-based compensation in excess of $1 million may be deducted for
federal income tax purposes. In regard to the $1 million limit on tax deductible
compensation, the Committee believes it is important to balance the
effectiveness of executive compensation plans with the materiality of
potentially reduced tax deductions. In balancing the value of the tax benefit
with the flexibility of administering its executive compensation programs for
fiscal 1997, the Company did not seek to comply with the requirements of Section
162(m) of the Code, and thus incurred disallowed deductions of approximately
$100,000.
In 1998, the Committee anticipates making both unrestricted and
restricted share awards of Common Stock under the LTIP to the Chief Executive
Officer and to other executives who may be named executive officers for that
fiscal year. Depending upon certain income tax elections available to these
individuals, the taxable value of such awards, when aggregated with other annual
compensation payable to them, could cause the applicable employee remuneration
(as defined under the Code) for any or all of such individuals to exceed $1
million. Accordingly, the Company, in accordance with Section 162(m) of the
Code, has decided to request stockholder approval of the performance goals
established in the LTIP by the Committee as set forth in Proposal 3 on page 5 of
this proxy statement.
COMPENSATION AND
PLANS COMMITTEE: JOHN B. ELLIS
J. ALEX MCMILLAN, III
B. FRANKLIN SKINNER
<PAGE>
STOCK PERFORMANCE GRAPHS
The following graph compares the five-year cumulative total return on
shares of the Common Stock with the cumulative total return of the S&P 500 Index
and a Peer Group Index comprised of eleven comparable regional securities firms.
The graph assumes that $100 was invested on September 30, 1992, in the Common
Stock and each of the other indexes, and that all dividends were reinvested.
The Peer Group Index, which is weighted by market values, includes the
following firms:
Advest Group, Inc. Piper Jaffray Companies, Inc.
First Albany Companies, Inc. Rodman & Renshaw Capital Group, Inc.
Interra Financial, Incorporated Scott & Stringfellow Financial, Inc.
Legg Mason, Inc. Southwest Securities Group, Inc.
McDonald & Company Investments, Inc. Stifel Financial Corp.
Morgan Keegan, Inc.
Comparative Five-Year Total Returns*
Interstate/Johnson Lane, Inc., S&P 500, Peer Group
(Performance results from 9/30/97)
1992 1993 1994 1995 1996 1997
- -------------------------------------------------------------------------------
UL [ ] $100.00 $163.27 $129.85 $167.11 $206.98 $531.19
S&P 500 ^ $100.00 $113.01 $116.57 $151.25 $182.00 $255.61
Peer Group * $100.00 $158.56 $124.65 $179.19 $207.47 $457.74
(Performance Graph Goes Here)
Assumes $100 invested at the close of trading on the last trading day
preceding the first day of the fifth preceeding year in the Company's Common
Stock, S&P 500, and Peer Group.
* Cumulative total returns assures reinvestment of dividends.
<PAGE>
COMPENSATION AND PLANS COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Kellogg, a member of the Compensation and Plans Committee, is
Senior Partner and Chief Executive Officer of SLK which, through its Troster
Singer Division, provides execution services to the Company of certain
transactions in over-the-counter securities.
SECTION 16(A) BENEFICIAL REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of a registered class of the Company's equities securities, if any, to
file with the Securities and Exchange Commission ("SEC") initial reports of
ownership and reports of changes in ownership of equity securities of the
Company.
To the Company's knowledge, based solely on a review of information
provided to it by its directors and executive officers and written
representations that no other reports were required, all Section 16(a) filing
requirements applicable to its officers, directors and greater than ten percent
beneficial owners were complied with except that the reports for January, 1997
for nine of the Company's directors and executive officers were filed one day
late, due to difficulties with a vendor's electronic system. The filings were
for Messrs. Abernethy, Dalrymple, Dalton, Morgan, Ruff, Semones, Thomas, Hearn
and Harvey D. Harrelson, and each had one transaction reported on that filing.
STOCKHOLDER PROPOSALS
Stockholder proposals relating to the Company's 1999 annual meeting of
stockholders must be received by the Company no later than Tuesday, August 25,
1998. Stockholders should send their proposals to the attention of the Company's
Secretary at its principal offices, P. O. Box 1012, Interstate Tower, Charlotte,
North Carolina 28201-1012.
SOLICITATION
The expense of preparing, printing and mailing the proxy statement to
stockholders will be borne by the Company. In addition to soliciting proxies by
mail, the Company may make requests for proxies by telephone or by personal
solicitation by employees of the Company at nominal cost to the Company. W. F.
Doring & Co. has been retained by the Company on behalf of the Board of
Directors to assist in the solicitation of proxies from brokers and nominees for
a fee of approximately $4,000, plus reimbursement of reasonable out-of-pocket
expenses. The Company also will reimburse brokers, dealers, banks and other
custodians, nominees and fiduciaries for their reasonable expenses in forwarding
proxy solicitation materials to beneficial owners of the Common Stock.
The Board of Directors
INTERSTATE/JOHNSON LANE, INC.
DECEMBER 16, 1997
<PAGE>
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APPENDIX
- ------------------------------------------------------------------------------
INTERSTATE/JOHNSON LANE, INC.
P R O X Y
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Parks H. Dalton, James H. Morgan and Michael
D. Hearn, and each of them, with full power of substitution, attorneys and
proxies to appear and vote, as indicated below, all of the shares of Common
Stock of Interstate/Johnson Lane, Inc. that the undersigned would be entitled to
vote at the annual meeting of stockholders of Interstate/Johnson Lane, Inc. to
be held on January 20, 1998 and at any and all adjournments thereof. The Board
of Directors recommends a vote FOR the following items:
1. ELECTION OF DIRECTORS
<TABLE>
<S> <C>
[ ] FOR all nominees except as marked to the [ ] WITHHOLD AUTHORITY to vote for all nominees
contrary
</TABLE>
NOMINEES: CLASS I DIRECTORS: Peter R. Kellogg, B. Franklin Skinner and
Minor Mickel Shaw;
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name in the space below.)
---------------------------------------------
2. RATIFICATION OF THE SELECTION OF COOPERS & LYBRAND AS THE COMPANY'S
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING
SEPTEMBER 30, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. APPROVAL OF THE TERMS OF THE LONG-TERM INCENTIVE PLAN COMPENSATION FOR
THE COMPANY'S EXECUTIVE AND SENIOR OFFICERS.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the meeting or any adjournment thereof.
<PAGE>
<PAGE>
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" THE NOMINEES FOR DIRECTOR (PROPOSAL 1), "FOR" PROPOSAL 2 AND
"FOR" PROPOSAL 3.
Dated ____________________________
----------------------------------
----------------------------------
Signature
Please sign exactly as your name
appears hereon. If holder is a
corporation, partnership or other
association, please sign its name
and add your name and title. When
signing as attorney, executor,
administrator, trustee or
guardian, please also give your
full title. If shares are held
jointly, EACH holder should sign.
PLEASE MARK, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY TO ENSURE A QUORUM
AT THE MEETING. THIS IS IMPORTANT WHETHER YOU OWN FEW OR MANY SHARES. DELAY IN
RETURNING YOUR PROXY MAY SUBJECT THE COMPANY TO ADDITIONAL EXPENSE.
<PAGE>
ANNUAL MEETING OF STOCKHOLDERS OF INTERSTATE/JOHNSON LANE, INC.
Voting Direction to Reliance Trust Company as Trustee for the Interstate/Johnson
Lane Corporation
Employee Stock Ownership and PAYSOP Plan and Trust ("ESOP/PAYSOP"), and
Profit Sharing and Capital Accumulation Plan and Trust ("PSP/CAP")
The undersigned hereby appoints Reliance Trust Company (the "Trustee") to
vote as indicated below, the shares of Common Stock of Interstate/Johnson Lane,
Inc. (the "Company") allocated to the account of the undersigned in the
ESOP/PAYSOP and PSP/CAP Plans of Interstate/Johnson Lane Corporation at the
annual meeting of stockholders of the Company to be held on January 20, 1998
and at any and all adjournments thereof. The Board of Directors recommends a
vote FOR the following items:
1. ELECTION OF DIRECTORS
<TABLE>
<S> <C>
[ ] FOR all nominees except as marked to the [ ] WITHHOLD AUTHORITY to vote for all nominees
contrary
</TABLE>
NOMINEES: CLASS I DIRECTORS: Peter R. Kellogg, B. Franklin Skinner,
Minor Mickel Shaw;
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name in the space below.)
---------------------------------------------
2. RATIFICATION OF THE SELECTION OF COOPERS & LYBRAND AS THE COMPANY'S
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING
SEPTEMBER 30, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. APPROVAL OF THE TERMS OF THE LONG-TERM INCENTIVE PLAN COMPENSATION FOR
THE COMPANY'S EXECUTIVE AND SENIOR OFFICERS.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED "FOR" THE NOMINEES FOR DIRECTOR (PROPOSAL 1), "FOR" PROPOSAL 2 AND
"FOR" PROPOSAL 3.
Dated ____________________________
----------------------------------
----------------------------------
Signature
Please sign exactly as your name
appears hereon.
PLEASE MARK, DATE AND SIGN THIS DIRECTION TO TRUSTEE AND RETURN IT PROMPTLY TO
ENSURE A QUORUM AT THE MEETING.
