SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant x
Filed by a party other than the Registrant o
Check the appropriate box:
o Preliminary proxy statement
x Definitive proxy statement
o Soliciting material pursuant to Rule 14a-1(c) or Rule 14a-2
Winston Resources, Inc.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
o $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1),
or 14a-6(i)(2).
o $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
o 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:
<PAGE>
(2) Aggregate number of securities to which transactions
applies:
(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule
0-11:
(4) Proposed maximum aggregate value of transaction:
o 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>
WINSTON RESOURCES, INC.
535 Fifth Avenue
New York, New York 10017
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 20, 1998
---------------------
The Annual Meeting of Stockholders of Winston Resources, Inc. (the
"Company") will be held at The Bank of New York, 51 West 51st Street, New York,
New York on Wednesday, May 20, 1998, at 9:00 a.m. local time for the following
purposes:
1. To elect two Class I directors to hold office for a term of two
years and three Class II directors to hold office for a term of three years,
until their successors have been elected and qualified.
2. To approve an amendment to the Company's 1996 Stock Plan to increase
the maximum aggregate number of shares which may be issued under options under
the plan from 400,000 shares of Common Stock to 800,000 shares of Common Stock.
3. To consider and act upon a proposal to ratify the selection of Ernst
& Young LLP as the Company's independent auditors for the current fiscal year.
4. To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.
Only stockholders of record at the close of business on April 15, 1998
are entitled to notice of and to vote at the Annual Meeting. A list of such
stockholders will be available at the Annual Meeting for examination by any
stockholder. During the ten days prior to the Annual Meeting, the list may be
inspected by any stockholder, for any purpose germane to the Annual Meeting,
during usual business hours at the offices of Company counsel, Newman Tannenbaum
Helpern Syracuse & Hirschtritt LLP, 900 Third Avenue, New York, New York 10022.
Your attention is drawn to the accompanying Proxy Statement.
By Order of the Board of Directors,
David Silver
Secretary
April 24, 1998
New York, New York
STOCKHOLDERS WHO DO NOT EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON
ARE URGED TO DATE, SIGN AND PROMPTLY RETURN THE ACCOMPANYING PROXY CARD IN THE
ENVELOPE PROVIDED WHICH REQUIRES NO POSTAGE.
<PAGE>
WINSTON RESOURCES, INC.
535 Fifth Avenue
New York, New York 10017
---------------------
PROXY STATEMENT
---------------------
This Proxy Statement and the accompanying proxy card are being mailed
to holders of shares of common stock, par value $.01 per share (the "Common
Stock"), of Winston Resources, Inc., a Delaware corporation (the "Company"),
commencing on or about April 24, 1998, in connection with the solicitation of
proxies by the Board of Directors of the Company (the "Board") for use at the
1998 Annual Meeting of Stockholders (the "Meeting") to be held on Wednesday, May
20, 1998 at 9:00 a.m. local time at The Bank of New York, 51 West 51st Street,
New York, New York.
Proxies in the form enclosed are solicited by the Board for use at the
Meeting. All properly executed proxies received prior to or at the Meeting will
be voted. If a proxy specifies how it is to be voted, it will be so voted. If no
specification is made, it will be voted (1) for the election of management's
nominees as directors, (2) for the amendment of the Company's 1996 Stock Plan,
(3) for ratification of the selection of Ernst & Young LLP as the Company's
independent auditors for the current fiscal year, and (4) if other matters
properly come before the Meeting, in the discretion of either of the persons
named in the proxy. The proxy may be revoked by a properly executed writing of
the stockholder delivered to the Company's Chairman of the Board or Secretary
before the Meeting, or by the stockholder at the Meeting before it is voted.
The Board has fixed the close of business on April 15, 1998 as the
record date for determining the stockholders of the Company entitled to notice
of and to vote at the Meeting. On that date, there were 3,220,620 shares of
Common Stock outstanding and entitled to vote. Each such share is entitled to
one vote on each matter submitted to a vote at the Meeting. Stockholders are not
entitled to vote cumulatively in the election of directors.
As required under Section 231 of the Delaware General Corporation Law
(the "DGCL"), the Company will, in advance of the Meeting, appoint one or more
Inspectors of Election to conduct the vote of the Meeting. The Company may
designate one or more persons as alternate Inspectors of Election to replace any
Inspector of Election who fails to act. If no Inspector or alternate Inspector
is able to act at the Meeting, the person presiding at the Meeting will appoint
one or more Inspectors of Election. Each Inspector of Election before entering
the discharge of his duties shall take and sign an oath faithfully to execute
the duties of inspector with strict impartiality. The Inspectors of Election
will (i) ascertain the number of shares of Common Stock outstanding as of the
record date, (ii) determine the number of shares of Common Stock present or
represented by proxy at the Meeting and the validity of the proxies and ballots,
(iii) count all votes and ballots, and (iv) certify the
1
<PAGE>
determination of the number of shares of Common Stock present in person or
represented by proxy at the Meeting and the count of all votes and ballots.
The holders of a majority of the shares of Common Stock issued and
outstanding and entitled to vote at the Meeting, present in person or
represented by proxy, shall constitute a quorum at the Meeting. Under Section
216 of the DGCL, any stockholder who abstains from voting on any particular
matter described herein will be counted for purposes of determining a quorum.
For purposes of voting on the matters described herein, the affirmative vote of
(i) a plurality of the shares of Common Stock present or represented at the
Meeting is required to elect management's nominees as directors; and (ii) a
majority of the shares present or represented at the Meeting is required to
approve the amendment to the 1996 Stock Plan and to ratify the selection by the
Board of Ernst & Young LLP as the Company's independent auditors for the current
fiscal year.
EXECUTIVE OFFICERS
The executive officers of the Company are identified in the table
below. Each executive officer of the Company serves at the pleasure of the Board
of Directors.
<TABLE>
<S> <C> <C>
Year Became an
Name and Age Position Executive Officer
Seymour Kugler...................... Chairman, President 1967
61............................... and Chief Executive Officer
Jesse Ulezalka...................... Chief Financial Officer 1995
49
Alan E. Wolf........................ Vice President 1974
53...............................
Todd Kugler......................... Vice President 1995
32
Gregg S. Kugler..................... Vice President 1993
35
David Silver........................ Vice President and Secretary 1992
67
</TABLE>
2
<PAGE>
ELECTION OF DIRECTORS
The Restated Certificate of Incorporation, as amended (the "Restated
Certificate of Incorporation"), and By-Laws, as amended (the "By-Laws"), of the
Company provide that the number of directors of the Company shall be fixed from
time to time by the Board of Directors but shall not be less than three
classified into three approximately equal classes. The Board of Directors has
fixed the number of directors constituting the entire Board of Directors at
nine, consisting of three Classes, each consisting of three directors. The only
current Class I director is Reuben Abrams, who holds office until the 2000
Annual Meeting of Stockholders. The current Class II directors are Martin
Wolfson, Martin A. Fischer and Martin J. Simon, who hold office until the 1998
Annual Meeting of Stockholders. The current Class III directors are Seymour
Kugler, Alan E. Wolf and Gregg S. Kugler, who hold office until the 1999 Annual
Meeting of Stockholders. There are currently two unfilled directorships on the
Board in Class I, which directorships may only be filled by action of the
Stockholders.
The Board of Directors has selected, and will cause to be nominated at
the Meeting, three persons for election as Class II directors, to hold office
until the 2001 Annual Meeting and until their successors shall have been duly
elected and qualified. The Board of Directors also has selected, and will cause
to be nominated at the Meeting, two persons for election to fill the vacant
Class I Board seats, to hold office until the 2000 Annual Meeting and until
their successors shall have been duly elected and qualified. Assuming that a
quorum of stockholders is present at the Meeting in person or by proxy, such
directors will be elected by a plurality of the votes cast at the Meeting.
The persons named on the enclosed proxy card or their substitutes will
vote all of the shares that they represent for the nominees listed below unless
instructed otherwise on the proxy card. If such nominees should be unavailable
to stand for election, the persons named on the proxy card or their substitutes
may vote for a substitute or substitutes designated by the Board of Directors.
At the date of this Proxy Statement, the Board of Directors has no reason to
believe that any nominee listed below will be unable to stand for election.
Set forth below is certain information concerning the directors of the
Company, including the incumbent directors nominated by the Board of Directors
for reelection at the Meeting, as well as information about the nominee to fill
the Class I Board vacancy. Other than such Class I nominee, all nominees for
election at the Meeting were previously elected by the Company's stockholders as
directors of the Company.
3
<PAGE>
Nominees for Election
Name and Age
Class I Director Since
Norton Sperling, 63........................................... - -
Todd Kugler, 32............................................... - -
Class II
Martin Wolfson, 61............................................ 1987
Martin A. Fischer, 61......................................... 1987
Martin J. Simon, 78........................................... 1992
Continuing Directors
Class I
Reuben Abrams, 75............................................. 1990
Class III
Seymour Kugler, 61............................................ 1967
Alan E. Wolf, 53.............................................. 1974
Gregg S. Kugler, 35........................................... 1992
THE BOARD RECOMMENDS A VOTE FOR THE NOMINEES FOR ELECTION AS DIRECTORS.
BIOGRAPHICAL INFORMATION
Certain information about the executive officers and the directors of
the Company is set forth below. This information has been furnished to the
Company by the individuals named.
Mr. Seymour Kugler, who is generally known to employees of the Company
as Sy Kaye, founded the Company in 1967 and has been its Chief Executive Officer
since that time.
Mr. Wolf has been a Vice President of the Company since September 17,
1987 and has been an Executive Vice President of the Company's permanent
placement division since 1974.
Mr. Gregg Kugler (who is known generally to clients and employees of the
Company as Gregg Kaye) has been employed by the Company since 1983. He became a
Vice President of the Company on August 12, 1993 and is President of the
Permanent Placement Division. Mr. Kugler is Sy Kaye's son.
4
<PAGE>
Mr. Wolfson, a certified public accountant, is Senior Vice President,
Chief Financial Officer and a director of Concord Fabrics, Inc., New York, New
York, which develops, designs, styles and produces woven and knitted fabrics for
sale to clothing manufacturers and fabric retailers. He has been employed by
that corporation since 1966, has been an officer and a director since 1973 and
was first elected to his present offices in 1981.
Mr. Fischer is a member of the Board of Trustees of Brooklyn Law School. He
is an attorney and is Vice Chairman and a member of the Board of Directors of
the Berkshire Bank, New York. Mr. Fischer was counsel to the law firm of Warshaw
Burstein Cohen Schlesinger & Kuh from 1986 to 1997.
Mr. Simon served as the Chairman of the Board and President of First
Central Financial Corporation and First Central Insurance Company from August
1985 and August 1980, respectively, through February 1997, at which time he
resigned from such positions. Mr. Simon is counsel to the law firm of Dienst
and Serrins, and also serves as a consultant to DBP International, an
international freight forwarding operation and to Simon Agency NY, Inc., a
managing general insurance agency. Mr. Simon also serves as Secretary of the
Board of Trustees of Brookdale University Hospital and Medical Center.
Mr. Abrams served as the Treasurer and Chief Financial Officer of the
Company from August 1988 through January 2, 1992, at which time he resigned from
such positions. He currently acts as a consultant to the Company on financial
and accounting matters.
Mr. Sperling has been President of Finity Apparel Group since 1997. From
1981 until 1997, Mr. Sperling was President and Vice Chairman of Norton
McNaughton. Finity and Norton McNaughton are makers of fine moderately priced
women's sportswear, dresses and casual knitwear. Mr. Sperling was a founder of
Norton McNaughton.
Mr. Silver has been Secretary of the Company since December 31, 1991
and Vice President - Administration/Human Resources of the Company since
November 1987.
Mr. Ulezalka has been the Chief Financial Officer of the Company since
August 4, 1995. Prior thereto he was CFO of Consultants for Architects, Inc.
from April 1995 August 1995, a financial consultant from April 1994 - April
1995, CFO, Vice President Finance of ECCO Staffing Services, Inc. from March
1992 - April 1994.
Mr. Todd Kugler (who is known generally to clients and employees of the
Company as Todd Kaye) has been employed by the Company since 1988. He became a
Vice President of the Company and its temporary staffing division on November
23, 1995. Mr. Kugler is Sy Kaye's son.
FUNCTIONS OF THE BOARD OF DIRECTORS AND CERTAIN COMMITTEES
Under the DGCL, the business and affairs of the Company are managed
under the direction of the Board. The Board establishes fundamental corporate
policies and authorizes various types of significant transactions, but is not
involved in day-to-day operational decisions. During 1997, the Board held four
meetings. Each of the directors attended over 75% of the meetings of the Board
held in 1997. The Board has appointed from its members
5
<PAGE>
an Executive Committee, an Audit Committee, a Compensation Committee, an
Option Committee and an Alternate Option Committee with the areas of
responsibility described below.
The Executive Committee consists of Seymour Kugler, Reuben W. Abrams
and Alan E. Wolf. Gregg Kugler is an alternate member. It is empowered to
exercise all of the authority of the Board, subject to certain limitations
specified in the By-Laws, during the intervals between meetings of the Board. It
is contemplated that meetings of the Executive Committee will be convened only
in extraordinary circumstances when it is not practicable to call a meeting of
the full Board. The Executive Committee did not meet during 1997.
The Audit Committee consists of Martin A. Fischer, Martin Wolfson and
Martin J. Simon. It is responsible for overseeing and reporting to the Board of
Directors concerning the policies and practices of the Company and its
subsidiaries with respect to accounting, financial reporting, and internal
auditing and financial controls. It also is responsible for maintaining a direct
exchange of information between the Board of Directors and the Company's
independent auditors. The Audit Committee met once during 1997.
The Compensation Committee consists of Martin A. Fischer, Martin J. Simon
and Martin Wolfson. It must approve the salary of each officer of the Company
and its subsidiaries which exceeds a specified amount and is responsible for
reviewing, and making recommendations to the management of the Company
concerning the general policies and practices of the Company and its
subsidiaries with respect to compensation and employee benefits. The
Compensation Committee did not meet during 1996.
The Option Committee consists of Martin A. Fischer, Martin Wolfson and
Martin J. Simon. It administers the Company's 1996 Stock Plan. The Alternate
Option Committee, which administers grants to outside directors under the
Company's 1990 Incentive Program consists of Seymour Kugler, Alan E. Wolf and
Gregg Kugler. The Option Committee acted by unanimous written consent once
during 1997 and the Alternate Option Committee acted by unanimous written
consent once during 1997.
The Board of Directors has not appointed a nominating committee.
SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock with respect to the Company's
directors, the Company's "named executive officers" within the meaning of Item
402(a)(2) of Regulation S-K of the Securities Act of 1933, as amended (the
"Act") and by all of the Company's directors and executive officers as a group,
as reported to the Company as of April 15, 1998. Beneficial ownership has been
determined for purposes of the following table in accordance, with Rule 13d-3 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), under
which a person is deemed to be the beneficial owner of securities if he or she
has or shares voting power or investment power in respect of such securities or
has the right to acquire beneficial ownership within 60 days.
6
<PAGE>
Percentage of Outstanding
Name and Address Number of Shares (1) Shares
---------------- -------------------- ------
Directors and Officers
Seymour Kugler (2)(3)
c/o Winston Resources, Inc.
535 Fifth Avenue
New York, New York 10017 1,362,955 40.98%
Gregg Kugler (3)(4)
c/o Winston Resources, Inc.
535 Fifth Avenue
New York, New York 10017 173,396 5.27%
Todd Kugler(3)(5)
c/o Winston Resources, Inc.
535 Fifth Avenue
New York, New York 10017 154,858 4.71%
Alan E. Wolf (3)(6)
c/o Winston Resources, Inc.
535 Fifth Avenue
New York, New York 10017 134,957 4.16%
David Silver (3)(7)
c/o Winston Resources, Inc.
535 Fifth Avenue
New York, New York 10017 47,067 1.45%
Reuben W. Abrams (8)
c/o Winston Resources, Inc.
535 Fifth Avenue
New York, New York 10017 28,967 *
Martin Wolfson (9)
c/o Concord Fabrics Inc.
1359 Broadway
New York, New York 10018 5,333 *
Martin A. Fischer (10)
West Center Associates
30-00 47 Avenue
Long Island City, NY 11101 8,333 *
Martin J. Simon (11)
360 Merrick Road
Lynbrook, New York 11563 9,333 *
All directors and executive
officers as a group
(10 persons) (12) 1,930,182 55.11%
7
<PAGE>
Percentage of
Outstanding
Name and Address Number of Shares (1) Shares
Other Beneficial Owners
Heartland Advisors, Inc. (13)
790 North Milwaukee Street
Milwaukee, Wisconsin 53202 437,100 13.57%
FMR Corp. (13)
82 Devonshire Street
Boston, Massachusetts 02109 191,600 5.94%
____________
* Represents less than 1% of outstanding shares.
(1) All shares are beneficially owned and, unless otherwise stated, the
sole voting power and investment power is held by the persons named.
(2) The amount set forth above includes 105,000 shares currently
issuable upon exercise of stock options.
(3) For the year ended December 31, 1997 such person was a "Named Executive
Officer" of the Company within the meaning of Item 402(a)(3) of
Regulation S-K of the Act.
(4) The amount set forth above includes 66,667 shares currently issuable
upon the exercise of stock options. Mr. Kugler disclaims beneficial
ownership of 26,000 shares owned by his children.
(5) The amount set forth above include 61,667 shares currently issuable
upon the exercise of stock options issued to Mr. Kugler and his wife.
Mr. Kugler disclaims beneficial ownership of 7,000 shares owned by his
child.
(6) The amount set forth above includes 22,000 shares currently issuable
upon the exercise of stock options.
(7) The amount set forth includes 13,967 shares currently issuable upon the
exercise of stock options.
(8) The amount set forth includes 334 Shares currently issuable upon the
exercise of stock options.
(9) The amount set forth includes 3,333 shares currently issuable upon the
exercise of stock options.
(10) The amount set forth above includes 1,353 shares currently issuable
upon the exercise of stock options.
(11) The amount set forth above includes 5,333 shares currently issuable
upon the exercise of stock options.
(12) The amount set forth above includes 283,154 shares currently issuable
upon the exercise of stock options.
(13) To the Company's knowledge, Heartland Advisors, Inc., FMR Corp. and
Seymour Kugler are the only beneficial owners of more than five
percent of the Common Stock.
8
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following summary compensation table sets forth certain information
concerning the compensation of the Company's "named executive officers" within
the meaning of Item 402(a)(3) of Regulation S-K of the Act, as amended, for each
of the three fiscal years during the period ending December 31, 1997.
<TABLE>
<S> <C> <C> <C> <C>
Long Term
Annual Compensation All Other
Compensation(1) Awards Compensation(3)
Options to Purchase
Salary Bonus Shares(2)
Name and Principal Position Year ($) ($) (#) ($)
--------------------------- ---- ---------------- ------------- ------------ ---
Seymour Kugler.................. Fiscal 1997 444,741 345,226 20,000 7,300
Chairman of the Board and Fiscal 1996 433,266 134,209 100,000 7,300
Chief Executive Officer Fiscal 1995 424,800 61,901 25,000 7,300
Alan E. Wolf.................... Fiscal 1997 190,000 10,233 0 2,900
Vice President, Executive Fiscal 1996 190,000 40,613 10,000 2,900
Vice President of Permanent Fiscal 1995 189,469 34,852 5,000 2,900
Placement Division
Gregg S. Kugler................. Fiscal 1997 224,539 116,523 20,000 2,500
Vice President Fiscal 1996 199,317 76,691 50,000 2,500
President of Permanent Placement Fiscal 1995 189,469 55,635 10,000 1,600
Division
Todd Kugler..................... Fiscal 1997 196,269 116,523 20,000 2,300
Vice President Fiscal 1996 146,865 76,691 40,000 2,300
Vice President of Temporary Fiscal 1995 139,039 67,718 10,000 600
Staffing Division
David Silver.................... Fiscal 1997 125,000 10,000 3,000 2,400
Vice President and Fiscal 1996 125,000 10,000 5,500 2,400
Secretary Fiscal 1995 124,750 10,000 5,000 2,400
</TABLE>
(1) The aggregate amount of perquisites and other personal benefits for
each of the "named executive officers" did not equal or exceed the
lesser of either $50,000 or 10% of the total of such individual's base
salary and bonus, as reported herein for the last fiscal year, and is
not reflected in the table.
(2) Stock options are granted under the terms and provisions of the
Company's 1996 Stock Plan. For a description of the stock options
issued in fiscal 1997, see "Option Grants in Last Fiscal Year."
(3) Amounts reported under this column reflect premiums paid by the Company
on behalf of the "named executive officers" for supplemental long-term
disability coverage in excess of the coverage provided to employees
generally.
9
<PAGE>
Option Grants In Last Fiscal Year
The following table provides certain summary information concerning
individual grants of stock options made to "named executive officers" within the
meaning of Item 402(a)(3) of Regulation S-K of the Act during the fiscal year
ended December 31, 1997 under the 1996 Stock Plan. Except as set forth in the
table below, during fiscal year 1997, the Company did not grant any stock
options under the Company's 1996 Stock Plan to any of the Named Executive
Officers.
Individual Grants
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Option Term (1)
Number of
Shares Percentage of Total
Underlying Options Granted to Exercise
Grant(1) Employees in Fiscal Year Price Expiration
Name (#) (%) ($) Date 5%($) 10%($)
- ---- --------------- ---------------------------- ------- ----- ---- -----
Seymour Kugler...... 20,000 17.6 5.775 11/21/07 18,509 53,603
Alan E. Wolf........ -0- - - - - - - - - - -
Gregg S. Kugler..... 20,000 17.6 5.25 11/21/07 66,034 167,543
Todd Kugler 20,000 17.6 5.25 11/21/07 66,034 167,543
David Silver........ 3,000 2.6 5.25 11/21/07 9,905 25,101
</TABLE>
- ------------------
(1) The stock options reported in this column vest in equal annual
installments of one third of the underlying shares commencing on the
one year anniversary of the date of grant and become fully exercisable
on the third year anniversary of the date of grant, provided that the
Optionee has been continuously employed by the Company during such
time. Subject to earlier termination as provided below, the options
terminate (i) ten years after the date of grant for Optionees in
general and (ii) five years after the date of grant for Optionees who
own stock possessing more than 10% of the total combined voting power
of all classes of stock of the Company or any of its affiliates. If
Optionee ceases to be employed by the Company for any reason other than
death, disability, termination "for cause" by the Company or voluntary
termination by Optionee, no further installments or options shall
become exercisable, and the options shall terminate on the earlier of
(i) ninety (90) days after the date of termination of employment or
(ii) the specified expiration dates of the options. If the Optionee's
employment is terminated "for cause" or if Optionee voluntarily
terminates his employment, all of his options then outstanding shall
terminate immediately. Options outstanding upon the death or disability
of an Optionee may be exercised by him, his heirs or legal
representative, to the extent otherwise exercisable on the date of
death or the date of termination due to disability, until the earlier
of (i) the specified expiration date of the options or (ii) one (1)
year from the date of the Optionee's death or date of termination due
to disability. Payment of options exercised may be in cash or shares of
Common Stock.
10
<PAGE>
Aggregated Option Exercises and Fiscal Year-End Option Values
The following table provides certain summary information concerning
stock option exercises during the fiscal year ended December 31, 1997, by the
"named executive officers" within the meaning of Item 402(a)(3) of Regulation
S-K under the Act and the value of unexercised stock options held by the "named
executive officers" as of December 31, 1997.
<TABLE>
<S> <C> <C> <C> <C>
Number of Unexercised "In the Money"
Options at Fiscal Options at Fiscal
Number of Year End(1) Year End(2)
Shares (#) ($)
Acquired Value ------------------------------ ------------------
on Realized
Name Exercise ($) Exercisable Unexercisable Exercisable Unexercisable
Seymour Kugler........ - - - - 105,000 70,000 272,363 146,040
Alan E. Wolf ......... 3,000 9,187.50 22,000 5,000 87,875 15,833
Gregg S. Kugler....... - - - - 66,667 43,333 272,293 85,832
Todd Kugler........... 8,939 32,336.83 40,000 40,000 154,165 70,834
David Silver.......... 8,500 43,031.25 13,967 5,833 53,464 9,873
</TABLE>
- -----------------------------------
(1) Represents the aggregate number of stock options held as of December
31, 1997 which can and cannot be exercised pursuant to
the terms and provisions of the stock options.
(2) Values were calculated by multiplying the closing market price of the
Common Stock as reported on the American Stock Exchange on December 31,
1997 ($5.625 per share), by the respective number of shares and
subtracting the exercise price per share, without any adjustment for
any termination or vesting contingencies.
Executive Employment Agreement
Mr. Seymour Kugler entered into a five-year employment agreement with
the Company, effective as of May 1, 1987, which was amended on March 2, 1992 and
January 1, 1997 (the "Employment Agreement"), pursuant to which he serves as
Chairman of the Board of Directors and the Chief Executive Officer of the
Company. Under the terms of the Amendment to the Employment Agreement dated
January 1, 1997, Mr. Kugler's term of employment was extended for an additional
five (5) year period ending on August 14, 2002. The Employment Agreement
provides for the payment to Mr. Kugler of (i) a base salary at the annual rate
of $445,638 per annum, subject to annual cost of living adjustments and
increases equal to the greater of (a) three percent (3%) per annum, compounded
or (b) an amount which is determined by multiplying the base salary by the
percentage increase, if any, of the Consumer Price Index for all Urban Workers
(New York-Northeastern New Jersey) (1967 = 100), issued by the Bureau of Labor
Statistics of the United States Department of Labor (the "Index") for such
subsequent year over the Index for the fiscal year ended December 31, 1997, and
(ii) incentive compensation with respect to each fiscal
11
<PAGE>
year during his term of employment of an amount equal to the aggregate of the
following percentages of Pre-Tax Income (as defined in the Employment
Agreement): (a) 6% of PreTax Income up to $1,000,000; (b) 10% of Pre-Tax Income
over $1,000,000 up to $2,000,000; (c) 20% of Pre-Tax Income over $2,000,000 up
to $3,200,000; and (d) 6% of Pre-Tax Income over $3,200,000, without limitation.
In the event of the termination of Mr. Kugler's employment by reason of his
death or disability, the Company will continue to pay his salary, including the
Incentive Compensation, to him or his beneficiary or estate, for a period of one
year thereafter.
In the event of the Company's termination of Mr. Kugler's employment
for any reason other than for death, disability or for cause, or in the event
Mr. Kugler resigns from his employment for Good Reason (as defined in the
Employment Agreement), Mr. Kugler is entitled to receive (i) his base salary,
fringe benefits and incentive compensation, if any, through the date of
termination, (ii) a lump sum severance payment equal to 2.99 times Mr. Kugler's
"base amount" as such term is defined in Section 28OG of the Internal Revenue
Code and (iii) continued coverage for the term of the Employment Agreement under
the Company's health and insurance plans applicable to Mr. Kugler immediately
prior to such termination or resignation or, if any such plan does not permit
continued coverage of Mr. Kugler, the Company shall arrange to provide a benefit
substantially similar to and no less favorable than the benefits he was entitled
to under such plan.
Compensation of Directors
Directors who are officers or employees of the Company or any of its
subsidiaries do not receive any compensation, other than their regular salaries,
for attending meetings of the Board of Directors or any committee thereof. See
"Summary Compensation Table." Other members of the Board (the "Non-Employee
Directors") receive a retainer of $2,000 per year payable quarterly in arrears,
plus a fee of $500 for each meeting of the Board and of any committee thereof
attended, but only for committee meetings that take place on days other than the
day of a Board meeting. Additionally, Non-Employee Directors are eligible to
receive stock options pursuant to the 1990 Incentive Program (the "Director
Options"). In 1997, the Non-Employee Directors, presently consisting of Messrs.
Martin Wolfson, Martin A. Fischer and Martin J. Simon, each received a Director
Option to purchase 2,000 shares of Common Stock exercisable at the fair market
value of the Common Stock on the date of grant. The Director Options vest in
annual installments of one-third of the underlying shares commencing on the one
year anniversary of the date of grant and terminate automatically ten years
after the date of grant, subject to early termination in the event that the
optionee ceases being a member of the Board.
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SECTION 16(a) REPORTING UNDER THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than ten percent of the Common Stock of the
Company to file reports of ownership and changes in ownership with the
Securities and Exchange Commission and the exchange on which the Common Stock is
listed for trading. Officers, directors and more than ten percent stockholders
are required by regulations promulgated under the Exchange Act to furnish the
Company with copies of all Section 16(a) reports filed.
The Company has reviewed copies of the Section 16(a) reports filed for
the year ended December 31, 1997 and written representations from certain
reporting persons that no delinquent Form 3 holdings or Form 4 transactions were
required to be reported on Form 5 for such persons for the year ended December
31, 1997. Based solely on this review, the Company believes that all reporting
requirements applicable to its officers, directors and more than ten percent
stockholders were complied with for the year ended December 31, 1997, except
that: (i) Mr. Ulezalka did not timely report an acquisition of shares in
connection with the exercise of options issued pursuant to the 1996 Stock Plan;
(ii) Mr. Silver did not timely report an acquisition of shares in connection
with the exercise of options issued pursuant to the 1996 Stock Plan; (iii) Mr.
Fischer did not timely report an acquisition of shares in connection with the
exercise of options issued pursuant to the 1996 Stock Plan; (iv) Mr. Todd Kugler
did not timely report an acquisition of shares in connection with the exercise
of options issued pursuant to the 1996 Stock Plan; and (v) Mr. Abrams did not
timely report an acquisition of shares in connection with the exercise of
options issued pursuant to the 1996 Stock Plan. All of such reports have been
filed.
Performance Graph
The following graph tracks an assumed investment of $100 on December
31, 1992 in the Common Stock of the Company, The American Stock Exchange Market
Value Index and a peer group comprised of ten companies whose principal
operations are similar to those of the Company, assuming full reinvestment of
dividends and no payment of brokerage or other commissions or fees. Past
performance is not necessarily indicative of future performance.
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COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG WINSTON RESOURCES, INC., THE AMERICAN STOCK
EXCHANGE MARKET VALUE INDEX
AND A PEER GROUP
Cumulative Total Return
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
Winston Res Inc WRS 100.00 516.67 400.00 350.00 916.67 1,500.00
PEER GROUP 100.00 121.54 156.33 249.77 316.71 394.94
AMEX MARKET VALUE 100.00 119.52 108.63 137.32 146.10 177.20
The peer group consists of Accustaff Inc., Barrett Business Services,
Inc., Employee Solutions, Inc., Interim Services, Inc., Norrell Corp., Olsten
Corp., On Assignment, Inc., Robert Half International, Inc., Romac
International, Inc. and SOS Staffing Services, Inc.
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Report of Compensation Committee on Executive Compensation
The Compensation Committee of the Board of Directors of the Company
(the "Committee") is responsible for setting and administering the compensation
policies which govern annual compensation, long-term compensation, and stock
ownership programs for the Company's executive officers as well as the other
employees of the Company and its subsidiaries. The Committee, during fiscal
1997, consisted of three outside directors, Martin A. Fischer, Martin J. Simon
and Martin Wolfson.
The policies and decisions of the committee are designed to achieve the
following goals:
o Reflect a pay-for-performance relationship where a portion of total
compensation is at risk, through bonuses and stock options.
o Attract and retain key management personnel critical to the
Company's long-term success.
The Committee reviews and evaluates information from independent
sources to determine senior executive officers of the Company, by comparison to
compensation paid by competing companies, companies of similar size, and the
Company's performance, taking into account activities that have special value to
the Company but have no immediate impact on operating results and the increased
level of revenues and income of the Company.
During 1996, the Committee was involved in negotiating the extension of
employment arrangements with senior management, which became effective January
1, 1997. The Committee did not meet during 1997.
The committee functioning as the Company's Stock Option Committee, also
monitors the Company's 1996 Stock Plan (the "Plan") and, prior to 1996,
monitored the Company's 1990 Incentive Program, pursuant to which stock options
were granted to eligible employees. The Committee granted options to employees
once during 1997. As of March 31, 1998, options to purchase an aggregate of
400,000 shares of Common Stock have been granted under the Plan of which 113,500
were granted during the fiscal year ended December 31, 1997. The Committee is of
the opinion that the Plan is an extremely effective means of attracting and
retaining key executives and employees of the Company and its subsidiaries and
motivating them to improve the Company's financial performance.
Section 162(m) of the Internal Revenue Code (the "Code"), enacted in 1993
and effective for taxable years beginning after January 1, 1994, generally
limits to $1 million per individual per year the federal income tax deduction
for compensation paid by a publicly-held company to the Company's chief
executive officer and its other four highest paid executive officers.
Compensation that qualifies as performance-based compensation for purposes of
Section 162(m) is not subject to the $1 million deduction limitation. The
Committee currently does not anticipate that any executive officer will be paid
compensation from the
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Company in excess of $1 million in any year (including amounts that do not
qualify as performance-based compensation under the Code), and accordingly, the
Committee anticipates that all amounts paid as executive compensation will be
deductible by the Company for federal income tax purposes.
Summary of Chief Executive Officer Compensation
During the fiscal year ended December 31, 1997, Mr. Seymour Kugler
received $444,741 in salary and $345,226 in bonuses. Mr. Kugler's total
compensation during the 1997 fiscal year, and the terms of his employment
agreement, which includes base salary of $445,638 per year adjusted annually
plus incentive bonuses, was designed to reward Mr. Kugler for his diligent
efforts overseeing the Company's development of new markets, upgrading of
systems, introduction of a range of new programs and pursuit of major new
customers, the effect of which has been record operating results for the
Company.
COMPENSATION COMMITTEE
Martin A. Fischer
Martin J. Simon
Martin Wolfson
AMENDMENT TO THE 1996 STOCK PLAN
The Company has adopted the Winston Resources, Inc. 1996 Stock Plan (the
"1996 Stock Plan"). The Board and management believe that the 1996 Stock Plan
helps the Company attract and retain competitively superior employees and
promotes long-term growth and profitability by further aligning employee and
stockholder interests. A summary of the essential features of the 1996 Stock
Plan is provided below. All defined terms used below have the meaning set forth
in the 1996 Stock Plan, unless otherwise indicated.
Purpose and Eligibility
The 1996 Stock Plan is intended to promote the interests of the Company by
affording employees, executive officers and directors of the Company and its
present and future subsidiaries and outside consultants or advisors to the
Company, an opportunity to acquire a proprietary interest in the Company in
order to attract and retain such persons, to provide them with long term
financial incentives to increase the value of the Company and to provide them
with a stake in the future of the Company which corresponds to the stake of each
of the Company's stockholders. The Administrator of the 1996 Stock Plan
determines which members of such class of eligible individuals shall receive
grants under the 1996 Stock Plan and the terms of such grants.
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Shares Subject to Plan
The aggregate number of shares of the Company's Common Stock that may be
granted under the 1996 Stock Plan is 400,000 ("Shares"), subject to adjustment
as provided in the 1996 Stock Plan. The 400,000 shares initially reserved under
the 1996 Stock Plan equalled approximately twelve percent of the Company's
then-outstanding common shares as of March 22, 1996, the date the 1996 Stock
Plan was approved by the Board.
Effective Date and Duration
The effective date of the 1996 Stock Plan was March 28, 1996. The 1996
Stock Plan shall terminate on March 27, 2006, unless earlier terminated by the
Board. No award shall be granted after the date which the 1996 Stock Plan
terminates.
Administration
The 1996 Stock Plan is administered by a committee (the "Administrator")
of the Board which consists of three disinterested directors of the Company, who
are appointed by the Board. A member of the Board shall be deemed to be
"disinterested" only if he satisfies such requirements as the SEC may establish
for disinterested administrators acting under the plans intended to qualify for
exemption under Rule 16b-3, promulgated under the Securities Exchange Act of
1934 (the "Exchange Act"). The Administrator shall, subject to the provisions of
the 1996 Stock Plan, (i) determine the amount of all grants, (ii) determine the
terms and conditions of grant agreements and all elections and other forms,
(iii) interpret the 1996 Stock Plan and (iv) make all other decisions relating
to the operations of the 1996 Stock Plan.
Awards Available Under 1996 Stock Plan
The Administrator may make the following types of grants under the 1996
Stock Plan, each of which shall be an "Award." One share of the Company's Common
Stock shall be the underlying security for any Award.
Stock Options. The Administrator may grant to participants Stock Options to
purchase Shares. The Option Price for each Share subject to a Stock Option shall
not be less than the greater of (i) the par value of a Share or (ii) the Fair
Market Value (as such term is defined in the 1996 Stock Plan) of a Share on the
date the Stock Option is granted. The Stock Options may be Non-Qualified Stock
Options ("NQSOs") or Incentive Stock Options ("ISOs") which are intended to
satisfy the requirement of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"). Each grant of Stock Options shall be evidenced by an
agreement which shall incorporate such terms and conditions (including the
expiration and exercise dates) as the Administrator, in its sole discretion,
deems to be consistent with the terms of the 1996 Stock Plan and other legal
requirements. The Administrator may prescribe the method of exercise and payment
of such Stock Options. The Administrator may issue
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new Stock Options equal to the number of Shares surrendered by a
participant upon exercise of previously granted Stock Options.
Restricted Shares. The Administrator may grant to participants the right
to purchase shares, subject to specified restrictions ("Restricted Shares").
Such restrictions may include, but are not limited to, the requirement of
continued employment with the Company or a subsidiary and achievement of
performance objectives. If a participant fails to meet the terms and conditions
set forth in the related agreement during the period of the restrictions, the
Restricted Shares shall be forfeited, and all rights of the participant to such
shares shall terminate without further obligation on the part of the Company.
Except to the extent restricted under the terms and conditions of the related
agreement, a participant who is granted Restricted Shares shall have all of the
rights of a stockholder, including, without limitation, the right to vote
Restricted Shares and the right to receive dividends on such Restricted Shares.
The Administrator shall determine and specify the purchase price of the
Restricted Shares, the nature of the restrictions and the performance objectives
in the related agreement. The performance objectives shall consist of (i) one or
more business criteria, including financial and individual performance criteria,
and (ii) a target level or levels of performance with respect to such criteria.
The performance objectives shall be objective and shall otherwise meet the
requirements of Section 162(m)(4)(C) of the Code.
Stock Payments. Stock Payments may be made to participants as a bonus or
as additional compensation, as determined by the Administrator. Once a
participant receiving Stock Payments becomes a holder of record of such Shares,
the participant shall have all voting, dividend, liquidation and other rights
with respect to Shares issued as Stock Payments.
Transferability During Lifetime
During the lifetime of a participant to whom an Award is granted, only the
participant, or participant's legal representative, may exercise or receive
payment of an Award; provided, however, that the Administrator may permit
transfers of awards other than ISOs pursuant to a valid domestic relations order
if and to the extent any such transfers do no cause a participant subject to
Section 16 of the Exchange Act to lose the benefit of the exemption under Rule
16b-3 for such transactions or violate other rules or regulations of the SEC or
the Internal Revenue Service or materially increase the cost of the Company's
compliance with such rules or regulations.
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Adjustments
In the event that there is any change in the Company's Common Stock by
reason of any dividend or other distribution, recapitalization, forward or
reverse split, reorganization, merger, consolidation, spin-off, combination,
repurchase, or share exchange, or other similar corporate transaction or events,
the number and kind of Shares which may be delivered, the exercise price, grant
price, or purchase price relating to any Award may be appropriately adjusted by
the Administrator at the time of such event.
Amendments
The Board shall have the right to amend, modify, suspend or terminate the
1996 Stock Plan at any time, for any purpose; provided that the 1996 Stock Plan
may not be amended in a manner which would disqualify the Plan from the
exemption provided by Rule 16b-3 under the Exchange Act.
Federal Income Tax Consequences
The rules governing the tax treatment of Stock Options, Restricted Shares
and Stock Payments are quite technical. Therefore, the description of the
Federal income tax consequences set forth below is necessarily general in nature
and does not purport to be complete. Moreover, statutory provisions are subject
to change, as are their interpretations, and their applications may vary in
individual circumstances. Finally, the tax consequences under applicable state
and local income tax laws may not be the same as under the Federal income tax
laws.
Incentive Stock Options. The participant recognizes no taxable gain or
loss when an ISO is granted or exercised, although upon exercise the spread
between the fair market value and the exercise price generally is an item of tax
preference for purposes of the participant's alternative minimum tax. If the
Shares acquired upon the exercise of an ISO are held for at least one year after
exercise and two years after grant (the "Holding Periods"), the participant
recognizes any gain or loss realized upon such sale as long-term capital gain or
loss and the Company is not entitled to a deduction. If the Shares are not held
for the Holding Periods, the gain is ordinary income to the participant to the
extent of the difference between the exercise price and the fair market value of
the Company's Common Stock on the date the option is exercised and any excess is
capital gain. Also, in such circumstances, the Company receives a deduction
equal to the amount of any ordinary income recognized by the participant.
Non-Qualified Stock Options. The participant recognizes no taxable income
and the Company receives no deduction when an NQSO is granted. Upon exercise of
an NQSO, the participant recognizes ordinary income and the Company receives a
deduction equal to the difference between the exercise price and the fair market
value of the Shares on the date of
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exercise. The participant recognizes as a capital gain or loss any subsequent
profit or loss realized on the sale or exchange of any Shares disposed of or
sold.
Restricted Shares. A participant granted Restricted Shares is not required
to include the value of such Shares in income until the first time such
participant's rights in the Shares are transferable or are not subject to
substantial risk of forfeiture, whichever occurs earlier, unless such
participant timely files an election under the Code Section 83(b) to be taxed on
the receipt of the Shares. In either case, the amount of such ordinary income
will be equal to the excess of the fair market value of the Shares at the time
the income is recognized over the amount (if any) paid for the Shares. The
Company receives a deduction, in the amount of the ordinary income recognized by
the participant, for the Company's taxable year in which the participant
recognizes such income.
Stock Payments. A participant granted Stock Payments recognizes income in
an amount equal to the fair market value of such shares as and when such becomes
payable to the participant. The Company receives a deduction for the same amount
in the year that income is recognized by the participant.
Section 162(m). Section 162(m) of the Code limits to $1 million per year
the Federal income tax deduction available to a public company for the
compensation paid to any of its chief executive officer and four other highest
paid executive officers. However, Section 162(m) provides an exception from this
limitation for certain "performance-based" compensation if various requirements
are satisfied. The Stock Plan is designed to satisfy this exception for Stock
Options. In addition, if the Administrator elects to issue Restricted Shares or
Stock Payments thereunder, it also can satisfy the exception for such grants by
utilizing "performance-based" award criteria.
As discussed above, the employees of the Company and its subsidiaries who
will receive awards under the Stock Plan and the size and terms of the awards
are generally to be determined by the Administrator in its discretion. Thus, it
is not possible either to predict the future benefits or amounts that will be
received by or allocated to particular individuals or groups of employees.
Shares Available for Grant; Proposed Amendment
As of April 15, 1998, 400,000 options to purchase common shares were
outstanding and no shares were reserved and available for additional grants
under the 1996 Stock Plan.
The Board of Directors has reviewed the results of the 1996 Stock Plan and
is of the opinion that the 1996 Stock Plan is an extremely effective means of
attracting and retaining key executives and employees of the Company and its
subsidiaries and in motivating them to improve the Company's financial
performance. Accordingly, the Board of Directors has amended the 1996 Stock
Plan, subject to stockholder approval, to increase the number of
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shares authorized for issuance thereunder by 400,000 shares, to an aggregate of
800,000 shares. Assuming stockholder approval of the proposed increase, an
aggregate of 400,000 shares would be available for additional grants under the
1996 Stock Plan.
THE BOARD RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
RATIFICATION OF SELECTION
OF
THE COMPANY'S INDEPENDENT AUDITORS
The Board has selected Ernst & Young LLP to serve as the Company's
independent auditors for the fiscal year ending December 31, 1998. Although it
is not required to do so, the Board is submitting its selection of Ernst & Young
LLP for ratification at the Meeting in order to ascertain the views of the
stockholders regarding such selection.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP AS THE
COMPANY'S INDEPENDENT AUDITORS.
SOLICITATION EXPENSES
The costs of this solicitation will be paid by the Company. Proxies
will be solicited principally by mail, but some telephone, telegraph or personal
solicitations of stockholders may be made. Officers or employees of the Company
who make or assist in such solicitations will receive no additional compensation
for doing so. The Company will request brokers, banks and other custodians and
fiduciaries holding shares in their names or in the names of nominees to forward
copies of the proxy solicitation materials to the beneficial owners of the
shares, and the Company will reimburse them for their reasonable expenses
incurred in doing so.
STOCKHOLDER PROPOSALS
Stockholder proposals for presentation at the Company's next Annual
Meeting of Stockholders must be received by the Secretary of the Company at its
principal executive offices for inclusion in its proxy statement and form of
proxy relating to that meeting no later than December 31, 1998.
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ANNUAL REPORT
Concurrently with the mailing of these Proxy Materials, the Company is
mailing a copy of its Annual Report to Stockholders for the fiscal year ended
December 31, 1997. Such Annual Report is not to be regarded as proxy
solicitation material.
Upon written request by a Stockholder entitled to vote at the 1998
Annual Meeting, the Company will furnish that person without charge with a copy
of the Form 10-K, Annual Report for 1997 which is filed with the Securities and
Exchange Commission, including the financial statements and schedules
thereto. If the person requesting the report was not a Stockholder of record on
April 15, 1998, the request must contain a good faith representation that the
person making the request was a beneficial owner of the Common Stock of the
Company at the close of business on such date. Requests should be addressed to
Winston Resources, Inc., 535 Fifth Avenue, New York, New York 10017 (Attn: David
Silver).
OTHER BUSINESS
Management does not know of any other matters to be brought before the
Meeting except those set forth in the notice thereof. If other business is
properly presented for consideration at the Meeting, it is intended that the
Proxies will be voted by the persons named therein in accordance with their
judgment on such matters.
By Order of the Board of Directors
/s/ David Silver
DAVID SILVER
Secretary
Dated: April 24, 1998
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