SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
SCOTT & STRINGFELLOW FINANCIAL, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
( ) $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) 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>
Scott & Stringfellow Financial, Inc.
909 East Main Street
Richmond, Virginia 23219
Notice of 1996 Annual Meeting of Shareholders
TO THE SHAREHOLDERS OF SCOTT & STRINGFELLOW FINANCIAL, INC.:
The 1996 Annual Meeting of Shareholders of Scott & Stringfellow Financial,
Inc. (the "Company") will be held at the Crestar Bank Building, 919 East Main
Street, Richmond, Virginia, on Tuesday, October 22, 1996, at 4:30 p.m., Eastern
Daylight Time, for the following purposes:
1. To elect four directors for three-year terms.
2. To approve the Scott & Stringfellow Financial, Inc. Management
Stock Purchase Loan Plan.
3. To ratify the selection by the Board of Directors of KPMG Peat
Marwick LLP as independent certified public accountants of the Company
for the fiscal year ending June 27, 1997; and
4. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Only holders of record of shares of Common Stock at the close of business
on September 20, 1996, will be entitled to vote at the meeting and any
adjournments thereof. Your attention is directed to the accompanying Proxy
Statement and 1996 Annual Report.
All Shareholders are cordially invited to attend the meeting. Whether or
not you plan to attend the meeting, it is important that your shares be
represented and voted at the meeting. Please promptly vote, date, sign, and
return the enclosed proxy card using the envelope provided. Thank you.
By Order of the Board of Directors,
DAVID PLAGEMAN
Executive Vice President and Secretary
September 30, 1996
<PAGE>
Scott & Stringfellow Financial, Inc.
909 East Main Street
Richmond, Virginia 23219
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement, mailed to shareholders on or about September 30, 1996,
is furnished in connection with the solicitation by Scott & Stringfellow
Financial, Inc. (the "Company") of proxies in the accompanying form for use at
the Annual Meeting of Shareholders (the "Annual Meeting") to be held on October
22, 1996, and at any adjournments thereof. A copy of the Annual Report of the
Company for the fiscal year ended June 28, 1996, has been mailed to you with
this Proxy Statement.
In addition to the solicitation of proxies by mail, the Company's officers
and regular employees, without compensation other than regular compensation, may
solicit proxies by telephone, telegraph, and personal interview. The Company
will bear the cost of all solicitation.
On September 20, 1996, the date for determining shareholders entitled to
vote at the meeting, there were 1,999,247 shares of common stock of the Company
("Common Stock") outstanding and entitled to vote. Each such share of Common
Stock entitles the holder thereof to one vote.
Any shareholder giving a proxy may revoke it at any time before it is voted.
A proxy may be revoked by filing with the Secretary of the Company written
notice of revocation bearing a later date than the proxy, by duly executing a
later dated proxy relating to the same shares, or by attending the Annual
Meeting and voting in person. A proxy, if executed and not revoked, will be
voted for the election of the nominees for director named herein, for the
proposed adoption of the Scott & Stringfellow Financial, Inc. Management Stock
Purchase Loan plan, and for the ratification of KPMG Peat Marwick LLP as
independent certified public accountants of the Company unless such proxy
contains specific instructions to the contrary, in which event it will be voted
in accordance with such instructions.
ELECTION OF DIRECTORS
The Company's Articles of Incorporation provide for three classes of
directors with staggered terms of office and provide that upon the expiration of
the term of office for a class of directors, nominees for that class shall be
elected for a term of three years. At this year's Annual Meeting, Sidney Buford
Scott, John J. Muldowney , William W. Berry, and William F. Calliott are
nominees for re-election for three-year terms as directors. Proxies may not be
voted for a greater number of persons than the number of nominees named herein.
Although the Company anticipates that all of the nominees will be able to
serve, if at the time of the meeting any nominees are unable or unwilling to
serve, shares represented by properly executed proxies will be voted at the
discretion of the persons named therein for such other person or persons as the
Board of Directors may designate.
The Company was formed in 1984 for the purpose of becoming the holding
company of Scott & Stringfellow, Inc. ("Scott & Stringfellow"). Accordingly, all
service by the Company's officers and directors prior to 1984 refers to service
as an officer or director of Scott & Stringfellow.
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The following contains certain information concerning the nominees for
election and those directors whose terms continue beyond the date of the Annual
Meeting.
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" ALL OF THE
NOMINEES.
Nominees for Election for Three-Year Terms
Sidney Buford Scott, age 63, has served as Chairman of the Board of the Company
since 1974. Mr. Scott, a first cousin of Mr. Bocock (see below), joined Scott &
Stringfellow in 1958. He is a member of the Executive Committee, and serves as a
Director of Ethyl Corporation and Great Eastern Energy and Development
Corporation.
John J. Muldowney, age 57, has served as a director of the Company since
1974. Mr. Muldowney, an Investment Broker and Chairman of the Credit
Committee, joined Scott & Stringfellow in 1970 and was named Senior Vice
President in 1980. Prior to January 1994, Mr. Muldowney also served as head
of the Over-the-Counter Trading Department.
William W. Berry, age 64, has served as a director of the Company since June of
1993. He is retired from the position of Chairman of the Board of Dominion
Resources, Inc., which he held from May 1990 to December 1992. Prior to May
1990, he served as Chairman of the Board and Chief Executive Officer of Dominion
Resources since July 1986. Mr. Berry is a director of Ethyl Corporation and
Universal Corporation.
William F. Calliott, age 52, has served as a director of the Company since
October 1993. He has been an Executive Vice President and director of Scott &
Stringfellow since the 1989 acquisition of Investment Corporation of Virginia,
which he joined in 1967. Mr. Calliott is an Investment Broker in Scott &
Stringfellow's Norfolk office.
Directors Continuing in Office
Directors whose terms expire in 1997
Frederic Scott Bocock, age 64, Vice Chairman of the Board of Directors, has
served as a director of the Company since 1974 and is a member of the Executive
Committee. He also serves as Chairman of Scott & Stringfellow Capital
Management, an investment advisory subsidiary of the Company. Mr. Bocock, a
first cousin of Mr. Scott (see above), joined Scott & Stringfellow in 1957.
R. Bruce Campbell, age 56, joined Scott & Stringfellow in 1971 and has served as
a director of the Company since 1978. Mr. Campbell, an Investment Broker in the
Staunton office, has held the position of Senior Vice President since 1987 and
has responsibility for the nine branch offices which comprise the Blue Ridge
Region.
R. Gordon Smith, age 58, has served as a director of the Company since 1987. He
is a partner in the law firm of McGuire, Woods, Battle & Boothe, L.L.P., which
serves as General Counsel to the Company.
Steven C. DeLaney, age 42, has served as a director of the Company since 1995.
Mr. DeLaney serves as Senior Vice President and Director of Capital Markets with
overall responsibility for the investment banking, research, trading, and
institutional sales functions of the Company. Mr. DeLaney served as Chief
Financial Officer of the Company from 1992 to 1995. Prior to joining the Company
in 1992, Mr. DeLaney was a senior financial executive for a financial services
holding company for over fifteen years.
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Directors whose terms expire in 1998
William P. Schubmehl, age 64, has served as a director of the Company since
1981. Mr. Schubmehl served as President and Chief Executive Officer of the
Company from 1992 through 1995. Prior to his term as President, Mr. Schubmehl
served the Company as Executive Vice President from 1990 until April 1992, and
as Senior Vice President from 1986 to 1990, during which periods he had primary
responsibility for branch administration and retail sales. Mr. Schubmehl, who
now has Investment Broker responsibilities and serves as Vice Chairman of Scott
& Stringfellow, joined Scott & Stringfellow in 1978.
Robert L. Hintz, age 66, has served as a director of the Company since 1989. He
is Chairman of the Board of R. L. Hintz and Associates, a management consulting
firm. He was an Executive Vice President of CSX Corporation from 1984 to 1988,
during which time he held the additional positions of Chief Executive Officer of
CSX Energy and Property Groups, 1985-1988, and Chairman and Chief Executive
Officer of Sea-Land Corporation, 1987-1988. Mr. Hintz is a director of Reynolds
Metals Company, Chesapeake Corporation, and Ashland Coal, Inc.
David Plageman, age 56, has served as a director of the Company since 1976.
He has served as Executive Vice President and Secretary of the Company since
1984. Mr. Plageman, an Investment Broker, joined Scott & Stringfellow in
1974. Mr. Plageman was a member of the Executive Committee until 1995.
John Sherman, Jr., age 50, has served as a director of the Company since1995.
Mr. Sherman was elected President and Chief Executive Officer of the Company in
January 1996. Prior to that, he served as Executive Vice President and Chief
Operating Officer during 1995 , Senior Vice President for Branch Administration
from 1993 to 1995, and Branch Manager of the Kinston, N.C. office from 1988,
upon joining the Company, until 1993. Mr. Sherman is a member of the Executive
Committee.
CERTAIN INFORMATION CONCERNING THE
BOARD OF DIRECTORS AND ITS COMMITTEES
Committees of the Board and Board Meetings
The Board of Directors held 11 meetings during the fiscal year ended June
28, 1996. All directors attended at least 75% of the aggregate of the meetings
of the Board and the meetings of all committees thereof on which they serve.
Messrs. Scott, Bocock, Sherman and DeLaney serve on the Executive Committee,
which held approximately 50 meetings during fiscal 1996. The Executive Committee
is empowered to exercise all of the authority of the Board of Directors during
the interim between Board meetings, subject to the limitations of the Virginia
Stock Corporation Act.
Messrs. Plageman, Sherman, Berry, Hintz, and Smith serve on the Audit
Committee, which held four meetings during fiscal 1996. The Audit Committee
meets with the Company's internal auditing staff and reviews and reports to the
Board with respect to various auditing and accounting matters, including the
selection and fees of the Company's independent auditors, the scope of audit
procedures, the nature of services to be performed by the independent auditors,
and the Company's accounting practices.
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The Board has established two standing committees which administer and
monitor certain executive and management compensation programs. These committees
are the Compensation Committee consisting of Messrs. Berry, Hintz, and Smith,
and the Stock Option Committee consisting of Messrs. Berry, Hintz, and Smith.
For additional information on these two committees and the compensation
programs which they administer, see the section of this Proxy Statement entitled
Committee Report on Executive Compensation.
The Company does not have a standing Nominating Committee.
Compensation of Directors
Directors who are employees of the Company receive no fees for serving as
directors or for serving on any committee of the Board. Any director who is not
an employee of the Company receives an annual director's fee of $6,000.
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding shares of Common Stock
beneficially owned as of September 20, 1996 by (i) each person who is known by
the Company to beneficially own more than 5% of the outstanding shares of Common
Stock; (ii) each director and nominee for director of the Company; and (iii) the
directors and executive officers as a group. Unless otherwise noted, each
individual has sole voting power and sole investment power with respect to the
number of shares set forth opposite his name. The address of Mr. Bocock and Mr.
Scott is 909 East Main Street, Richmond, Virginia 23219. The address of Mr.
Kellogg is c/o Spear, Leeds & Kellogg, 120 Broadway, New York, New York 10271.
Percent of
Name Number of Shares (7) Outstanding Shares
Peter R. Kellogg (1) 250,000 12.5%
Frederic Scott Bocock (2) 194,160 9.7
Sidney Buford Scott (3) 171,580 8.6
John J. Muldowney 85,464 4.3
David Plageman (4) 48,120 2.4
William F. Calliott 34,936 1.7
R. Bruce Campbell (5) 32,736 1.6
John Sherman, Jr. (6) 21,840 1.1
William P. Schubmehl 14,232 0.7
Steven C. DeLaney (6) 8,466 0.4
Robert L. Hintz 6,000 0.3
R. Gordon Smith 4,800 0.2
William W. Berry 2,400 0.1
All directors and executive officers
as a group (17 persons) (6) 649,849 32.1
(1) Information concerning the shares owned by Mr. Kellogg was derived from a
Form 4 filed with the Securities and Exchange Commission on March 7, 1995.
According to this filing, Mr. Kellogg owns 60,000 shares directly. He also
indirectly controls: 95,000 shares through a corporation which he owns;
60,000 shares owned by his wife; and 35,000 shares owned by a family trust
of which he is a trustee. Mr. Kellogg disclaims beneficial ownership of the
shares owned by the corporation, his wife, and the trust.
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(2) Includes 130,000 shares owned by Mr. Bocock's children and trusts for his
children, as to which shares Mr. Bocock disclaims beneficial ownership.
(3) Includes 21,600 shares owned by Mr. Scott's wife and children, as to
which shares Mr. Scott disclaims beneficial ownership.
(4) Includes 2,200 shares owned by Mr. Plageman's children as to which Mr.
Plageman shares voting and/or investment power.
(5) Includes 15,000 shares owned by Mr. Campbell's wife, as to which shares
Mr. Campbell disclaims beneficial ownership.
(6) Includes shares purchased pursuant to the Management Stock Purchase Loan
Plan for the following individuals: Mr. Sherman -- 6,960 shares; Mr.
DeLaney -- 6,960 shares, and all directors and executive officers as a
group -- 27,840 shares. (See "Approval of shares authorized for
issuance under the Scott & Stringfellow Financial, Inc. Management Stock
Purchase Loan Plan.")
(7) Beneficial ownership shown for the following individuals and group
includes the indicated number of shares of Common Stock that may be
purchased upon the exercise of stock options which are exercisable
within the next sixty days: Mr. Bocock (4,560), Mr. Scott (2,880), Mr.
Muldowney (1,464), Mr. Calliott (3,480), Mr. Plageman (420), Mr.
Campbell (2,736), Mr. Sherman (936), Mr. DeLaney (720), and all other
executive officers as a group (3,672).
EXECUTIVE COMPENSATION
The following table provides information concerning the compensation and stock
option grants received by the Company's Chief Executive Officer and each of its
four other most highly compensated executive officers for the fiscal year ended
June 28, 1996, and for each of the two previous fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation All Other
Name and Other Annual Options Compensation
Principal Position Year Salary Bonus (1) Compensation (2) Granted (#)(3) (4)(5)(6)
<S> <C>
John Sherman, Jr. 1996 $149,054 $98,678 $12,072 2,500 $45,866
President and 1995 110,000 90,000 13,337 2,500 28,073
Chief Executive Officer 1994 96,250 68,958 29,305 2,400 56,484
William P. Schubmehl 1996 147,758 173,500 6,715 0 36,681
(former) President and 1995 154,350 120,000 2,106 0 19,758
Chief Executive Officer 1994 154,350 188,000 1,200 2,400 26,152
Frederic Scott Bocock 1996 40,000 139,500 1,776 0 249,381
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Vice Chairman 1995 40,000 94,195 2,106 0 222,868
1994 25,000 143,602 1,100 0 258,297
Steven C. DeLaney 1996 107,500 106,500 204 2,500 9,046
Senior Vice President 1995 90,000 73,000 1,581 2,500 7,575
1994 80,000 80,000 0 2,400 7,695
Charles E. Mintz 1996 94,382 57,849 9,918 2,500 16,050
Senior Vice President and 1995 10,833 0 22,855 1,200 89,874
Chief Financial Officr 1994 - - - - -
John K. Thurston 1996 78,577 59,018 48,186 2,500 1,820
Senior Vice President 1995 - - - - -
1994 - - - - -
</TABLE>
(1) The Company pays discretionary cash bonuses to executive and
management personnel based on individual performance and Company
financial results. See Committee Report on Executive Compensation
-- Cash Bonuses. Included in the amounts shown as Bonus for 1996, are the
following discretionary cash bonuses: Mr. Schubmehl -- $173,500; Mr.
Bocock -- $115,000; Mr. DeLaney -- $106,500; and Mr. Mintz -- $45,000.
The 1996 Bonus amounts also include certain bonuses paid to the following
officers based on individual department results: Mr. Sherman -- $98,678; Mr.
Bocock -- $24,500; and Mr. Mintz -- $12,849.
(2) Included in Other Annual Compensation for 1996 are amounts representing
forgivable loan expense for Mr. Sherman in the amount of $9,028, for Mr.
Mintz in the amount of $9,714, and for Mr. Thurston in the amount of
$14,947. Included in Other Annual Compensation for 1996 are reimbursements
of relocation expenses for Mr. Thurston in the amount of $32,912. Also
included are the following amounts representing non-cash awards and other
miscellaneous perquisities and benefits: Mr. Sherman -- $3,044; Mr.
Schubmehl -- $6,715; Mr. Bocock -- $1,776; Mr. DeLaney -- $204; Mr. Mintz
-- $204; and Mr. Thurston -- $327.
(3) The stock options granted to Mr. Sherman, Mr. DeLaney , and Mr. Mintz in the
year ended June 28, 1996, carry an exercise price of $14.125 per share which
was the fair market value of the Company's common stock as of the date of
grant, which was March 8, 1996. The stock options granted to Mr. Thurston
carry an exercise price of $13.75 per share which was the fair market value of
the Company's common stock as of the date of grant, which was November 8,
1995. All of these options have a ten-year term and vest at the rate of 20%
per year beginning on the second anniversary of the date of grant. See
Committee Report on Executive Compensation -- Stock Options.
(4) Included in All Other Compensation for fiscal 1996, the following amounts
of commissions and incentives earned from securities brokerage activities:
Mr. Sherman -- $33,065; Mr. Schubmehl -- $21,737; Mr. Bocock -- $233,568;
Mr. Mintz -- $8,180; and Mr. Thurston -- $1,220.
(5) The Company has a voluntary contributory profit sharing plan that covers
substantially all employees. See Committee Report on Executive Compensation --
Profit Sharing and Deferred Plans. Company contributions to the plan may be in
the form of either discretionary matching contributions or additional
discretionary contributions. Included in All Other Compensation for fiscal
year 1996 are the following amounts representing Company contributions to the
profit sharing plan: Mr. Sherman -- $8,164, Mr. Schubmehl -- $8,164; Mr.
Bocock -- $8,164; Mr. DeLaney -- $8,164; Mr. Mintz -- $7,870; and Mr. Thurston
-- $600.
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(6) The Company has established a non-qualified deferred compensation plan for
selected highly-compensated employees. See Committee Report on Executive
Compensation -- Profit Sharing and Deferral Plans. Voluntary deferrals under
the deferred compensation plan during fiscal 1996 are included in the category
of compensation from which such deferrals were elected. Company contributions
under the deferred compensation plan for fiscal 1996 in the following amounts
are included in All Other Compensation: Mr. Sherman -- $4,647; Mr. Schubmehl
-- $6,780; Mr. Bocock -- $7,649; and Mr. DeLaney -- $882.
The following table provides a summary of the stock options granted to the
Company's five most highly-compensated executive officers during the fiscal year
ended June 28, 1996.
OPTION GRANTS TABLE
<TABLE>
<CAPTION>
% of Total Potential Realizable
Options Granted Value at Assumed
Options To Employees Exercise Price Expiration Appreciation Rates (2)
Name Granted(#)(1) In Fiscal Year ($/Share) Date 5 % ($) 10% ($)
<S> <C>
John Sherman, Jr. 2,500 4.56% $14.125 3-08-06 22,188 56,188
William P. Schubmehl 0 N/A N/A N/A N/A N/A
Frederic Scott Bocock 0 N/A N/A N/A N/A N/A
Steven C. DeLaney 2,500 4.56% 14.125 3-08-06 22,188 56,188
Charles E. Mintz 2,500 4.56% 14.125 3-08-06 22,188 56,188
John K. Thurston 2,500 4.56% 13.75 11-08-05 21,625 54,775
</TABLE>
(1) The fiscal 1996 option grants shown above were made pursuant to the terms of
the Scott & Stringfellow Financial, Inc. Stock Option Plan , as amended. The
exercise price of the options granted was equal to the fair market value of
the Company's Common Stock on the date of grant. The options are not
exercisable during the first two years from the date of grant, and thereafter
vest at the cumulative rate of 20% on each anniversary of the date of grant
beginning with the second anniversary, such that the options are fully vested
on the sixth anniversary of the date of grant.
(2) The potential realized values shown above assume that the market price of
the Company's Common Stock appreciates at the compound annual percentage rates
indicated from the date of grant to the end of the ten-year option term. These
amounts are provided only to comply with Securities and Exchange Commission
rules and are based on theoretical assumptions. There is no assurance that the
actual values realized will approximate the amounts shown above.
The following table provides information concerning any stock options exercised
in the fiscal year ended June 28, 1996 by the Company's five most
highly-compensated executive officers and the value of their unexercised stock
options at June 28, 1996.
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AGGREGATE OPTION EXERCISES DURING FISCAL
1996 AND FISCAL YEAR END OPTION VALUE
<TABLE>
<CAPTION>
Number Of Value of Unexercised
Unexercised Options At In-The-Money Options
Shares Acquired Value June 28, 1996(#) At June 30, 1995($)(1)(2)
Name On Exercise(#)(1) Realized Exercisable Unexercisable Exercisable Unexercisable
<S> <C>
John Sherman, Jr. -- -- 936 7,424 $4,419 $29,020
William P. Schubmehl 2,808 $19,467 0 4,320 0 22,778
Frederic Scott Bocock -- -- 4,560 2,040 34,439 11,522
Steven C. DeLaney -- -- 720 7,280 3,555 28,444
Charles E. Mintz -- -- 120 4,180 592 13,707
John K. Thurston -- -- 0 2,500 0 6,875
</TABLE>
(1) The closing price of the Company's Common Stock was $16.50 per share on June
28, 1996.
(2) The value of unexercised options is determined by the difference between the
fair market value of the option shares ($16.50 per share) and the exercise
prices of the options held at June 28, 1996.
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Board of Directors of the Company has granted authority to three
committees to administer the various forms of compensation paid to executive
officers. These committees include the Compensation Committee, the Stock Option
Committee, and the Executive Committee (collectively, the "Committees"). The
recommendations of each of these Committees are reviewed and approved by the
full Board of Directors.
The Committees
The Compensation Committee consists of the three outside directors: Mr.
Berry, Mr. Hintz, and Mr. Smith. The primary function of this committee is to
recommend to the Board of Directors the amount of any discretionary annual
bonuses paid to each executive officer under the Company's executive and
management bonus plan.
The Stock Option Committee is responsible for the granting of stock option
awards to executive officers and other employees under the Company's Stock
Option Plan. This committee is comprised of the three outside directors: Messrs.
Berry, Hintz and Smith.
The Executive Committee has the responsibility for determining the base
salary to be paid to each executive officer except Mr. Scott, Mr. Bocock, and
Mr. Sherman, whose salaries are set by the Board of Directors. In addition, the
Executive Committee makes a recommendation to the Board of Directors with
respect to the annual discretionary contribution to the Company's profit sharing
plan, and determines which executive officers and other employees are eligible
to participate in the deferred compensation plan.
General Objective
The Company believes that maintaining and motivating a highly qualified
management team is essential for the continued growth and prosperity of the
Company, and will inure to the benefit of the shareholders. The objective of the
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Company's compensation programs is to provide its executive officers with both a
short-term incentive for maintaining and improving the profitability of the
Company long-term deferred compensation, and a long-term incentive aligned with
the interests of the shareholders. Accordingly, the Company's compensation
program consists of five principal components: base salary, annual cash bonus,
profit sharing contributions, non-qualified deferred compensation, and stock
option awards.
Base Salary
The Company strives to maintain base salaries for full-time management at
levels which are generally competitive with the marketplace. Annual increases in
base salary are determined largely by individual performance subject to a
percentage limitation based in part on Company performance and the rate of
inflation among other things. Given the relatively cyclical nature of the
securities industry, the Company attempts to limit its exposure to fixed salary
expense by providing its executives with the opportunity for additional cash
bonus payments when the Company's performance dictates.
Annual Cash Bonus
The Company has traditionally established a calendar year cash bonus pool
based largely on Company financial performance. Individual awards made from this
bonus pool are determined by the Compensation Committee with input from
executive management and are based on factors such as individual and
departmental performance and length of service. In the year ended June 28, 1996,
total cash bonus awards of $932,000 were paid to a total of twenty-six (26)
individuals. This total bonus amount was equivalent to 12% of operating income
before discretionary compensation and income taxes for calendar year 1995.
Profit Sharing and Deferral Plans
The Company maintains a voluntary contributory profit sharing plan which
covers substantially all of its employees. At its discretion, the Company may
make both matching contributions on employee contributions and additional
contributions based on Company performance. Employee participants may contribute
up to fifteen percent of their earnings to the plan per year, subject to a
maximum Internal Revenue Code limitation. For the year ended June 30, 1995, the
Company's contributions to the profit sharing plan included matching
contributions of approximately $308,000, and an additional discretionary
contribution of approximately $1,287,000. The additional discretionary
contribution was equivalent to approximately 17% of operating income before
discretionary compensation and income taxes for calendar 1995.
In addition, the Company has established the Scott & Stringfellow, Inc.
Deferral Plan for selected highly compensated employees. This non-qualified and
unfunded deferred compensation plan allows participants to defer compensation
and to receive discretionary profit sharing contributions beyond the Internal
Revenue Code limitations governing the Company's profit sharing plan. For the
year ended June 28, 1996, the Company's contributions to the deferral plan,
which covers 50 employees, was approximately $413,000.
Stock Option Plan
The Stock Option Committee generally awards stock option grants on an annual
basis to those officers and employees of the firm who have contributed to the
growth and profitability of the Company and who can be expected to continue to
make such contributions in the future. Under the terms of the Company's Stock
Option Plan, the option price may not be less than the fair market value of the
stock on the date of grant. Options are generally granted with ten-year terms
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and are subject to vesting over a six-year period. In the year ended June 28,
1996, options to acquire a total of 54,850 shares of common stock at a price of
$14.13 per share were granted to a total of 58 officers and employees.
SUBMITTED BY THE FOLLOWING COMMITTEES
OF THE COMPANY'S BOARD OF DIRECTORS:
Compensation Committee Stock Option Committee
William W. Berry William W. Berry
Robert L. Hintz Robert L. Hintz
R. Gordon Smith R. Gordon Smith
Executive Committee
Sidney Buford Scott
Frederic Scott Bocock
John Sherman, Jr.
Steven C. DeLaney
STOCK PERFORMANCE GRAPH
The following graph and table compare the cumulative total shareholder return
on the Company's Common Stock for the last five fiscal years with the cumulative
total return of the NASDAQ Market Value Index and the cumulative total return of
a Peer Group Index consisting of eleven (11) publicly-held, regional investment
companies, which management believes are relatively comparable to the Company.
The peer group index, which is weighted by market value, consists of the Common
Stock of the following companies:
A.G. Edwards, Inc. Morgan Keegan, Inc.
Alex. Brown Inc. Piper Jaffray Companies
First Albany Companies Inc. Raymond James Financial, Inc.
Interstate/Johnson Lane, Inc. Scott and Stringfellow Financial, Inc.
Legg Mason, Inc. The Ziegler Company, Inc.
McDonald & Company Investments, Inc.
The graph and table assume that $100 was invested on June 28, 1991, in the
Company's Common Stock, the NASDQ Market Value Index and the peer group index,
and that all dividends were reinvested over the ensuing 5-year period.
Fiscal Year Ended June,
1991 1992 1993 1994 1995 1996
Scott and Stringfellow Financial $100 $121 $147 $143 $159 $221
NASDAQ Market Value Index $100 $108 $132 $145 $170 $214
Selected Peer Group Index $100 $122 $165 $162 $227 $275
10
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11
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APPROVAL OF THE SCOTT & STRINGFELLOW FINANCIAL, INC.
MANAGEMENT STOCK PURCHASE LOAN PLAN
Introduction
At its December 1995 meeting, the Board of Directors, subject to shareholder
approval, approved the Scott & Stringfellow Financial, Inc. Management Stock
Purchase Loan Plan (the "Stock Loan Plan"). The Stock Loan Plan became effective
on December 19, 1995. The plan initially authorizes up to 200,000 shares to be
issued under its terms, which would be equal to approximately 10% ot total
shares outstanding if, and when, all authorized shares were issued under the
plan. From December 19, 1995 through September 20, 1996, a total of 33,440
shares were issued to five management employees, including four executive
officers, in exchange for interest-bearing promissory notes with aggregate
principal amounts of $475,840. Shares issued to the four executive officers
included consisted of: to John Sherman, Jr., director, President, and Chief
Executive Officer, 6,960 shares in exchange for a promissory note in the
principal amount of $99,010; to Steven C. DeLaney, director and Senior Vice
President, 6,960 shares in exchange for a promissory note in the principal
amount of $99,010; to Charles E. Mintz, Senior Vice President and Chief
Financial Officer, 6,960 shares in exchange for a promissory note in the
principal amount of $99,010; and, to John K. Thurston, Senior Vice President,
6,960 shares in exchange for a promissory note in the principal amount of
$99,010.
The principal features of the Plan are summarized below under General
Description. This summary is qualified by reference to the complete text of the
Plan, which is attached as Exhibit A to this Proxy Statement.
General Description
The purpose of the Stock Loan Plan is to facilitiate the accumulation of a
meaningful position in shares of Scott & Stringfellow Financial, Inc. common
stock by key management employees. Participation is restricted to key management
employees as selected by the Board of Directors.
To facilitate purchase of the shares, the Company will issue shares to
participants at fair market value. Participants may borrow funds necessary to
purchase the shares from the Company, subject to certain individual and
aggregate limitations. Each loan must be separately approved by the Board of
Directors.
Each loan will be evidenced by a full recourse promissory note, bearing
interest at the Applicable Federal Rate for short term loans then in effect. The
loans are payable on demand, with a maximum amortization period of 10 years from
the last day of the calendar year in which the loan is made. Unless soooner
demanded by the Company, no scheduled principal payments are due for the first
three years a loan is outstanding. Partial interest payments are due quarterly,
with accrued, but unpaid, interest due annually. As security for repayment of
the loans, participating employees are required to pledge collateral, consisting
of shares of Scott & Stringfellow Financial, Inc. common stock acquired under
the Stock Loan Plan and all dividends and any other distributions attributable
thereto.
Administration and Future Amendments
The Stock Loan Plan will be administered by the Compensation Committee unless
the Board of Directors should appoint another committee to administer the plan.
The Stock Loan Plan may not be changed, modified, or amended without approval of
the Board of Directors and, where required by applicable regulation or law, the
shareholders.
12
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Vote Required
Approval of the Stock Loan Plan requires the affirmative vote of the holders of
a majority of the shares of Common Stock voting at the annual meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
APPROVAL OF THE STOCK LOAN PLAN.
CERTAIN TRANSACTIONS
Certain directors and executive officers maintain margin accounts with Scott &
Stringfellow. Such extensions of credit are made in the ordinary course of
business, on the same terms, 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 risk of collectability or present other
unfavorable features.
McGuire, Woods, Battle & Boothe, L.L.P., of which R. Gordon Smith is a
partner, serves as General Counsel to the Company and its subsidiaries. R.
Gordon Smith is a Director of the Company.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Upon the recommendation of the Audit Committee, the Board of Directors has
designated KPMG Peat Marwick LLP to serve as the independent certified public
accountants of the Company for its fiscal year ending June 27, 1997, and has
directed a vote of shareholders to be taken to ascertain their approval or
disapproval of that designation. In the event the shareholders do not ratify the
appointment of KPMG Peat Marwick LLP, the election of other independent auditors
will be considered by the Board of Directors.
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE APPOINTMENT OF
KPMG PEAT MARWICK LLP AS INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FOR THE
FISCAL YEAR ENDING JUNE 27, 1997.
A representative of KPMG Peat Marwick LLP is expected to be present at the
Annual Meeting. He will have an opportunity to make a statement if he so desires
and will be available to answer appropriate questions from shareholders.
OTHER MATTERS THAT MAY COME BEFORE THE MEETING
If any other matters should properly come before the meeting, and any
adjournment thereof, it is the intention of the persons named in the
accompanying Proxy to vote such Proxy in the manner they deem best.
PROPOSALS FOR THE 1997 ANNUAL MEETING
Any shareholder desiring to make a proposal to be acted upon at the 1997 Annual
Meeting of Shareholders must present such proposal to the Company at its
principal office in Richmond, Virginia, no later than May 24, 1997, in order for
the proposal to be considered for inclusion in the Company's Proxy Statement.
SIDNEY BUFORD SCOTT
Chairman of the Board
13
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EXHIBIT A
SCOTT & STRINGFELLOW FINANCIAL, INC.
MANAGEMENT STOCK PURCHASE LOAN PLAN
1. Statement of Purpose.
The purpose of the plan is to facilitate the accumulation of a meaningful
position in Scott & Stringfellow Financial, Inc. common stock by selected key
management employees. To encourage and facilitate the purchase of shares, the
Company will extend interest-bearing loans to Participants with a fixed
repayment schedule.
The Company believes the plan is of mutual benefit to itself and the
Participant by creating a long-term performance incentive directly aligned with
the best interests of the Company's shareholders.
This plan is restricted to key management employees selected by the Board
of Directors of Scott & Stringfellow Financial, Inc. and is not intended to
constitute a "qualified plan" for federal income tax purposes and is not subject
to the retirement plan provisions of ERISA.
2. Purchase of Shares.
Shares will be issued to the Participants at fair market value from the
Company's existing authorized shares. For this purpose, fair market value will
be equal to the average of the closing bid and asked prices of the Company's
common stock for the five trading days immediately preceding the date of
issuance
Shares acquired by Participants under this plan will be issued under the
SEC's private placement rules and will be restricted for resale for two (2)
years from the date such shares have been fully paid for. The Company may elect,
at its option, to register the maximum number of shares to be issued under this
plan with the Securities and Exchange Commission by filing a Form S-8
registration statement.
All voting rights and dividends with respect to shares held as collateral
under this plan will be attributed to the Participant.
In no event will the total number of shares of Scott & Stringfellow
Financial, Inc. issued under this plan exceed 200,000 shares unless otherwise
approved by the Board of Directors.
3. Determination of Loan Amounts.
Each management employee selected by the Board of Directors to be a
Participant in the plan will be eligible to borrow the funds necessary to
purchase shares up to a maximum individual loan amount no greater than the
Participant's annual compensation multiplied by two (2) and no less than a
minimum individual loan amount of fifty thousand dollars ($50,000.00). The
minimum loan amount will not apply during the period from December 19, 1995 to
the date the plan is approved by the Company's shareholders. Each such loan must
be separately approved by the Board of Directors and be evidenced by a full
recourse promissory note made on terms established for this plan. Although more
than one (1) loan may be approved for each employee, the maximum amount of all
loans outstanding under this plan for each employee shall not exceed two (2)
times the Participant's annual compensation at any time and each Participant may
obtain only one (1) loan in any calendar year.
A-1
<PAGE>
For purposes of this Plan, annual compensation is defined to be the
employee's compensation as reported on Form W-2 for the calendar year
immediately preceding the year of the date of the loans. If the employee was
employed for less than 12 months for the preceding calendar year, the company
will determine annual compensation using a method the Compensation Committee
deems appropriate.
The aggregate amount of loans outstanding under this plan to all
participants shall not exceed 10% of the total stockholders' equity of Scott &
Stringfellow Financial, Inc., unless otherwise approved by the Board of
Directors.
4. Interest.
Interest will be charged on the entire outstanding principal balance of the
loans and will accrue on a quarterly basis on the last days of March, June,
September, and December each year at a rate equal to the Applicable Federal Rate
for short-term loans then in effect, adjusted monthly. Payments of accrued
interest shall be due on a quarterly basis on the 15th days of January, April,
July, and October of each year. The amount of each quarterly interest payment
shall be equal to the lesser of a) the amount of the quarterly dividends
received attributable to shares held as collateral under this plan or b) the
actual amount of interest accrued on the last preceding quarter-end accrual
date. Regardless of the amount of quarterly dividends paid, the Participant
agrees to pay at least 25% of the preceding quarter's interest accrued on the
interest payment dates specified. Additional annual payment of interest shall be
due on January 31 of each year equal to any remaining interest accrued but
unpaid from the preceding calendar year.
5. Loan Terms and Repayment.
Each loan shall be made on a demand basis with a maximum amortization
period of ten (10) years from the last day of the calender year in which the
loan is made, unless sooner demanded by the Company.
No scheduled principal payments shall be due for the first three (3) years
that a loan is outstanding, except in the event that a Participant receives
bonus compensation for a calendar year in addition to base salary. In the event
the Participant receives bonus compensation, the Participant will make a
principal repayment on the loan on January 31 equal to ten percent (10%) of such
bonus compensation applicable to the prior calendar year.
The following schedule of minimum required principal repayments, expressed
as a percentage of the outstanding principal balance on the third anniversary
date of the loan, will apply to loans made under this plan:
Year Principal %
1 0%
2 0%
3 0%
4 10%
5 10%
6 10%
7 15%
8 15%
9 20%
10 20%
---
100%
A-2
<PAGE>
The minimum required principal repayments shall be due on January 31 of
each year following the applicable anniversary date of the loan. The entire
remaining principal balance and accrued but unpaid interest shall be due not
later than January 31 of the year following the tenth anniversary date of the
loan.
6. Pledge and Control of Shares.
Participating employees will be required to pledge collateral, consisting
of the shares of Scott & Stringfellow Financial, Inc. common stock acquired
through this plan and all dividends, both regular and special, and any other
distributions of cash, property or securities attributable thereto. The pledged
collateral will be placed in a separate brokerage account at Scott &
Stringfellow, Inc. in the name of the employee.
The company will release a pro rata number of pledged collateral shares at
the time of each principal repayment. The number of shares released shall be
equal to the amount of principal repayment divided by the original per share
purchase price, as adjusted for any stock splits or stock dividends. Only the
Chief Financial Officer or Treasurer of Scott & Stringfellow Financial, Inc.
shall be authorized to execute or direct transfers of cash or securities into
and out of these special accounts and any such action must be authorized by the
Compensation Committee of the Board of Directors.
Regardless of any SEC restrictions on re-sale, the Participant agrees that
he will not sell any shares acquired under this plan within two (2) years from
the date any such shares have been fully paid for and released from the pledge
agreement. The shares will contain a legend to this effect. This restriction on
sale will not apply in the event of the termination of a Participant's
employment with the Company or in the event of a change of control of the
Company. A change of control shall be defined as the acquisition of more than
fifty percent (50%) of the Company's outstanding shares by another party.
7. Death, Disability or Termination of Employee.
In the event of the death or permanent disability of any Participant, the
entire principal balances and any accrued but unpaid interest on loans
outstanding under this plan shall be due and payable not later than nine (9)
months following the date of such event.
In the event of termination of a Participant's employment with the Company,
whether voluntary or involuntary and for any reason other than death or
permanent disability, the entire principal balances and any accrued but unpaid
interest on loans outstanding under this plan shall be due and payable not later
than thirty (30) days following the date of termination or such longer period as
may be required to sell the collateral shares in compliance with Rule 144.
In the event a Participant's loans are to be repaid from the sale of
collateral shares, the Company shall have the right of first refusal to purchase
collateral shares from the employee or his estate at Fair Market Value, as
defined in this plan.
8. Tax Consequences.
The granting of loans to participants is not intended to constitute taxable
compensation to the participants as they are bona fide, recourse loans.
All dividends paid on the collateral shares will be taxable to the employee
at the time of payment.
A-3
<PAGE>
Interest payments by the participants on loans outstanding under this plan
are intended to qualify as investment interest expense under section 163(d) of
the Internal Revenue Code and be deductible to the extent of the participants'
net investment income, which would include dividends received on the collateral
shares.
9. Corporate Reorganization.
In the event of a change in control, merger, or other reorganization of the
Company, the Company, its successors, and employee participants shall continue
to be bound by the original terms of this plan.
10. Approval and Administration of the plan.
This plan was approved by action of the Board of Directors of Scott &
Stringfellow Financial, Inc. on December 19, 1995 and will become effective on
December 19, 1995. The plan will be submitted to the shareholders of Scott &
Stringfellow Financial, Inc. for their approval at the October 1996 annual
meeting. The plan will be administered by the Compensation Committee of the
Board unless the Board should appoint another committee to administer the plan.
The plan may not be changed, modified, or amended without the approval of the
Board and, where required by applicable regulation or law, the shareholders.
A-4
<PAGE>
SCOTT & STRINGFELLOW FINANCIAL, INC.
PROXY MATERIAL SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON OCTOBER 22, 1996
The undersigned hereby appoints David Plageman and R. Gordon Smith (each
with power to act alone and with power of substitution) as Proxies, and hereby
authorizes them to represent and vote, as directed herein, all of the shares of
Common Stock of Scott & Stringfellow Financial, Inc. held of record by the
undersigned on September 20, 1996, at the Annual Meeting of Shareholders to be
held on October 22, 1996, and any adjournment thereof.
This proxy when properly executed will be voted in the manner described
herein by the undersigned shareholder. If no direction is made, this proxy will
be voted FOR each of the nominees named in proposal 1 and FOR proporals 2 and 3.
(Continued and to be signed on other side)
FOLD AND DETACH HERE
<PAGE>
SCOTT & STRINGFELLOW FINANCIAL, INC.
EMPLOYEE STOCK PURCHASE PLAN
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON OCTOBER 22, 1996
The undersigned hereby instructs the Trustee to vote all shares of Common
Stock of Scott & Stringfellow Financial, Inc. held of record by the undersigned
on September 20, 1996, and credited to my account under the Employee Stock
Purchase Plan, at the Annual Meeting of Shareholders to be held on October 22,
1996, and any adjournment thereof.
This proxy when properly executed will be voted as you specify, provided
written instructions are received by the Trustee by October 18, 1996. If no
direction is made, this proxy will be voted FOR each of the nominees named in
proposal 1 and FOR proposals 2 and 3.
YOUR VOTING INSTRUCTIONS WILL BE KEPT CONFIDENTIAL
(Continued and to be signed on other side)
FOLD AND DETACH HERE
<PAGE>
Please mark
your vote as [ X ]
indicated in
this example
1. ELECTION OF DIRECTORS for the terms set forth in the Proxy Statement. Sidney
Buford Scott, John J. Muldowney, William W. Berry, William F. Calliott
FOR all WITHHOLD (INSTRUCTIONS: to withhold authority
nominees listed AUTHORITY to vote for any individual nominee,
(except as marked to vote for all write that nominee's name on the
to the contrary) nominees listed line provided below.)
[ ] [ ] ------------------------------------
2. To approve the Scott & Stringfellow Financial, Inc. Management Stock Purchase
Loan Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To ratify the election of KPMG Peat Marwick LLP as independent certified
public accountants for the fiscal year ending June 27, 1997.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
Please sign exactly as name appears to the left. Executors, trustees, etc.
should so indicate when signing. If a corporation, sign in full corporate name
by authorized officer. If a partnership, sign in partnership name by authorized
person.
- ---------------------------------------------
(Signature)
- ---------------------------------------------
(Signature)
Dated: _________________________________ 1996
Please date, sign and return this Proxy in the enclose envelope.
FOLD AND DETACH HERE
