SCHEDULE 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box;
[ ] Preliminary Proxy Statement
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant
ALLSTATE FINANCIAL CORPORATION
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[ X ] $125 per Exchange Ace Rules 0-11(c)(1)(ii),14a-6(i)(1),or 14a-6(j)(2).
[ ] 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.
<PAGE>
ALLSTATE FINANCIAL CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR ANNUAL MEETING
NOVEMBER 7, 1996
The undersigned, having received the Notice of Annual Meeting,
Proxy Statement and Annual Report of Allstate Financial Corporation
for the year ended December 31, 1995, hereby appoint(s) Craig
Fishman, Eugene Haskin and Leon Fishman and each of them, with full
power of substitution, proxies of the undersigned to vote all
shares of the undersigned in Allstate Financial Corporation at the
Annual Meeting of Shareholders to be held on November 7, 1996 and
at any adjournments thereof.
1. Election of Directors Withhold Authority
to Vote
For Nominee For Nominee
Craig Fishman ____________ _______________
Eugene Haskin ____________ _______________
Leon Fishman ____________ _______________
James C. Spector ____________ _______________
Alan L. Freeman ____________ _______________
David M. Campbell ____________ _______________
William H. Savage ____________ _______________
Edward McNally ____________ _______________
Lawrence Vecker ____________ _______________
2. Approval of the amendment to the Company's 1990 Qualified
Stock Option Plan.
For Against Abstain
_______________ ______________ _______________
<PAGE>
(Continued from other side)
THE DIRECTORS RECOMMENDED A VOTE FOR ITEMS 1 AND 2.
3. In their discretion, the proxies are authorized to vote upon
matters not known to the Board of Directors as of the date of
the accompanying proxy statement, and to vote for any nominee
of the Board whose nomination results from the inability of
an above named nominee to serve.
UNLESS OTHERWISE INDICATED IN THE BLANKS PROVIDED, THE PROXIES
SHALL VOTE FOR ITEMS 1 AND 2 AS PROPOSED.
Please sign exactly as name appears below.
DATED ____________, 1996
_________________________________
Signature
_________________________________
Signature if held jointly
When shares are held by joint
tenants, both should sign. When
signing as attorney, executor,
administrator, trustee or
guardian, please give full title.
If a corporation,please sign in
full corporate name by president
or other authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY PROMPTLY USING THE
ENCLOSED ENVELOPE.
<PAGE>
ALLSTATE FINANCIAL CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
--------------------
The Annual Meeting of Shareholders of Allstate Financial
Corporation will be held at the Sheraton National Hotel, 900 South
Orme Street, Arlington, Virginia 22204, on November 7, 1996, at
11:00 A.M., for the following purposes:
1. To elect nine Directors for terms which will expire at the
Annual Meeting of Shareholders to be held in 1997.
2. To amend the Company's 1990 Qualified Stock Option Plan to
increase the number of shares of the Company's common stock
issuable thereunder from 175,000 to 275,000.
3. To transact such other business as may properly come before
the meeting.
October 3, 1996
BY ORDER OF THE BOARD OF DIRECTORS
Lawrence M. Winkler
Secretary
---------------------------
PLEASE VOTE, SIGN, DATE AND RETURN THE ENCLOSED PROXY PROMPTLY
IN THE ENCLOSED ENVELOPE.
A proxy card and postage free envelope are enclosed.
<PAGE>
ALLSTATE FINANCIAL CORPORATION October 3, 1996
2700 SOUTH QUINCY STREET
ARLINGTON, VIRGINIA 22206
PROXY STATEMENT
INTRODUCTION
The enclosed proxy is solicited by the Board of Directors of
Allstate Financial Corporation (the "Company") for use at the
Annual Meeting of Shareholders to be held at 11:00 A.M., at the
Sheraton National Hotel, 900 South Orme Street, Arlington, Virginia
22204 on November 7, 1996, and at any adjournment thereof (the
"Annual Meeting"). This proxy is first being sent to shareholders
on October 3, 1996.
At the Annual Meeting, shareholders will be asked to consider
and vote upon two proposals: (1) the election of nine directors to
serve until the 1997 Annual Meeting of Shareholders ("Proposal
Number One") and (2) the amendment of the Allstate Financial
Corporation 1990 Qualified Stock Option Plan (the "Plan") to
increase the number of shares of Common Stock issuable thereunder
from 175,000 to 275,000 ("Proposal Number Two").
In addition to solicitation by mail, officers, directors and
employees of the Company may solicit proxies by telephone,
telegraph or in person. None of these persons will receive
compensation but will be reimbursed for actual expenses in
connection therewith. Expenses in connection with the solicitation
of proxies, including the reasonable expenses of brokers,
fiduciaries and other nominees in forwarding proxy material, will
be borne by the Company.
VOTING OF PROXIES
Each holder of the Company's common stock is entitled to vote
in person or by proxy for each share held of record on the record
date, September 27, 1996, on all matters to be voted upon at the
Annual Meeting. As of the record date, the Company had 2,317,519
shares of common stock outstanding.
If a proxy in the accompanying form is properly executed and
returned to the Company in time for the annual Meeting and is not
revoked prior to the time it is exercised, the shares represented
by the proxy will be voted in accordance with the directions
specified therein for the matters listed on the proxy card. Unless
the proxy specifies that it is to be voted against or is an
abstention on a listed matter, proxies will be voted FOR Proposal
Number One and FOR Proposal Number Two and otherwise in the
discretion of the proxy holders as to any other matter that may
come before the Annual Meeting.
Abstentions and broker non-votes are counted for purposes of
determining the number of shares represented at the Annual Meeting.
Broker non-votes occur when a broker nominee, holding shares in
street name for the beneficial owner thereof, has not received
voting instructions from the beneficial owner and does not have
discretionary authority to vote. The approval of Proposal Number
One and Proposal Number Two requires the affirmative vote of a
majority of the shares of common stock present in person or
represented by proxy and entitled to vote. Accordingly,
abstentions and broker non-votes will have the effect of voting
AGAINST Proposal Number One and Proposal Number Two.
A shareholder who executes the enclosed proxy may revoke it at
any time before it is voted by giving written notice to the
Secretary of the Company or oral notice to the presiding officer at
the Annual Meeting.
BENEFICIAL OWNERSHIP OF SHARES
The following table sets forth, as of September 27, 1996, the
amount of common stock of the Company which may be deemed
beneficially owned by: (i) each person known to the Company to be
the beneficial owner of more than 5% of the aggregate shares of the
Company's outstanding common stock, (ii) each director of the
Company, (iii) each of the executive officers named in the Summary
Compensation Table below, and (iv) all executive officers and
directors as a group.
Common Shares Percent of
Name and Address Beneficially Owned Class
---------------- ------------------ ----------
Leon Fishman 251,250 10.81%
20191 E. Country Club Dr.
Aventura, FL 33180
Eugene Haskin 253,834 10.95%
4000 Island Blvd.
N. Miami Beach, FL 33160
Alan L. Freeman - -
20191 E. Country Club Drive
Aventura, FL 33180
Edward A. McNally 1,000 -
120-41 Prospect Street
Ridgefield, CT 06837
James C. Spector 3,434 .01%
10580 SW 77 Terrace
Miami, FL 33173
Craig Fishman 5,666 .02%
2687 Hillsman Street
Falls Church, VA 22043
<PAGE>
Common Shares Percent of
Name and Address Beneficially Owned Class
---------------- ------------------ ----------
Lawrence M. Winkler 3,384 .15%
1300 Crystal Drive
Arlington, VA 22202
David W. Campbell 1,000 -
6410 Noble Rock Court
Clifton, VA 22024
William H. Savage 7,000 .03%
314 Franklin Street
Alexandria, VA 22314
Lawrence Vecker - -
1600 Parker Avenue
Fort Lee, NJ 07024
Timothy G. Ewing 661,835 26.57%
Value Partners, Ltd.
2200 Ross Avenue
Dallas, TX 75201
Tweedy, Browne Company L.P. 223,200 9.63%
52 Vanderbilt Avenue
New York, NY 10017
Farley Capital 147,000 6.34%
655 Third Avenue
New York, NY 10015
For all Executive Officers and Directors
as a group (eleven persons) 536,902 22.99%
ELECTION OF DIRECTORS
The Company's Articles of Incorporation provide that the
number of directors shall be ten or such lesser number as the Board
of Directors shall fix. The Board of Directors has fixed that
number at nine. There is only one class of directors and they will
all be candidates for election at the Annual Meeting.
Mr. Leon Fishman is the father of Mr. Craig Fishman, President
and Chief Executive Officer of the Company.
Directors of the Company are elected to serve until the next
annual meeting of the shareholders of the Company and until their
respective successors are elected and qualified.
The nominees listed below will be candidates for election to
the Board of Directors at the Annual Meeting. The following
information is furnished with respect to the directors and Mr.
Winkler:
Principal Occupation Director
Name Age And Other Directorships Since
- --------------- --- -------------------------------------- -------
Craig Fishman 36 President and Chief Executive Officer 1995
(commencing July 1, 1996); formerly
Vice President and Senior Vice
President (April 1991 through June 30,
1996) and formerly General Counsel
(February 1993 through June 30, 1996)
of the Company. President of Lifetime
Options, Inc. (commencing May 1994).
Associated with the law firm of White &
Case in New York City (September 1987
to April 1991).
Leon Fishman 65 Vice Chairman (commencing July 1, 1982
1996); formerly President and Chief (excluding
Executive Officer of the Company (May 1995)
1989 through June 30, 1996) and
formerly Secretary/Treasurer of the
Company (July 1982 through May 1989).
Lawrence M.Winkler 60 Secretary/Treasurer and Chief Financial 1983
Officer of the Company; formerly
Second Vice President of the Company
(July 1983 - May 1989).
Eugene Haskin 67 Consultant to the Company and Chairman 1982
of the Board; formerly President of the
Company (June 1982 through May 1989);
Vice President of the Company (May 1989
through August 1989).
James C. Spector 62 Currently Executive Vice President of 1989
Bank Atlantic, Ft. Lauderdale, FL.
Consultant to the Company from November
1, 1993 to July 5, 1996. Formerly
Executive Vice President of the Company
(February 1991 through October 1993);
formerly Senior Vice President, Heller
Financial, Inc. (July 1985 through
September 1987).
Alan L. Freeman 55 Currently Managing Partner of Freeman, 1996
Buczyner & Gero (an accounting firm).
Formerly Partner with Deloitte & Touche
(1989-1991); and Partner with Shapiro,
Fleischmann & Co. (1966-1989).
David W. Campbell 49 Currently President and Chief Operating 1995
Officer and Director of Southern
Financial Bancorp, Inc. and Southern
Financial Bank in Warrenton Virginia
since April 1996. Formerly President
and Chief Executive Officer of
Ameribanc Savings Bank ("ASB") in
Annandale, Virginia (June 1990 through
March 1995); prior to that, Executive
Vice President and Chief Operating
Officer of ASB (1984 through June
1990); also, a director of ASB (1988
through March 1995). Served as a
Trustee of the Ameribanc Investors
Group from 1992 to March 1995.
William H. Savage 64 Since 1990 has been engaged in a 1995
variety of investment ventures in real
estate development and banking. Prior
to 1990, was the Chief Executive
Officer and Trustee of Ameribanc
Investors Group, a savings and loan
holding company, and its predecessor,
Mortgage Investors of Washington, a
Real Estate Investment Trust. Currently
Chairman of Island Preservation
Partnership, developer of a 1,200 acre
private, oceanfront retreat near
Charleston, S.C.; Chairman of Knights
Hill Corporation which owns and manages
timberlands in South Carolina;
President of Richards United
Corporation, a real estate investment
company based in Alexandria, Virginia,
and Chairman of Arbec Orchids
Dominicana, S.A., Santo Domingo, D.R.,
which propagates and cultivates orchid
plants for the U.S. market.
Edward A. McNally 53 Managing Director, Windham Partners, 1996
LLC (commencing August 1996);
President, McNally and Co. (commencing
August 1995); Independent management
consultant (commencing April 1991);
formerly Senior Vice President,
National Westminster Bank USA (1983
through 1992).
Lawrence Vecker 67 Currently Executive Vice President of 1996
North American Capital Corp., a New
York based private merchant bank.
Formerly, Executive Vice President of
Congress Financial Corp., a subsidiary
of CoreStates Financial Corp (1974
through 1995); Executive Vice
President, S.V. Associates (1971
through 1974); United Factors and UM&M
Financial Corporation, divisions of
United Merchants and Manufacturers,
Inc., attained position of Senior Vice
President (1948 through 1971).
Directors who are not officers of the Company receive a fee of
$2,000 per board meeting attended, plus reimbursement for their
expenses associated with attending those meetings. Commencing
November 1994, Directors who are not officers of the Company
receive a fee of $500 per board or committee meeting attended by
conference telephone call. In addition, commencing August, 1996 and
continuing through December 31, 1997, directors who are not
officers of the Company are granted 1,000 stock options per meeting
attended at an exercise price equal to the greater of (i)
$7.00/share and (ii) 110% of the average of the mean bid and ask
prices for the Company's common stock on the most recent three days
on which trading occurred in the Company's common stock preceding
such grant. The options are exercisable until December 31, 1999.
Directors who are officers of the Company receive no compensation
for serving as directors, but are reimbursed for out-of-pocket
expenses related to attending board or committee meetings.
MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors appointed an Audit Committee in 1989.
The Audit Committee currently consists of Messrs. Campbell, Freeman
and Vecker. The committee met twice during the year ended December
31, 1995. The Audit Committee reviewed the results of operations
for 1994 and the status of certain specific accounts.
The Board appointed a Compensation Committee in 1992. The
Compensation Committee currently consists of Messrs. Haskin,
Spector, Savage and McNally. The Compensation Committee met once in
1995.
The Board does not have a nominating committee. The functions
of this committee are performed by the Board of Directors.
During 1995 there were nine meetings of the Board of
Directors. Each of the directors of the Company attended 100% of
the meetings of the Board of Directors during 1995. During 1995,
there were two vacancies on the Board of Directors. Effective July
1, 1996, the board of Directors was increased to nine members.
EXECUTIVE COMPENSATION
The following tables provide certain summary information
concerning compensation paid or accrued by the Company to or on
behalf of the Company's Chief Executive Officer and each of the
four most highly compensated executive officers of the Company
whose total compensation exceeded $100,000 for the years ended
December 31, 1995, 1994 and 1993.
<TABLE>
SUMMARY COMPENSATION TABLE
AWARDS
<CAPTION>
-------------
Name and Other Annual Options/ All Other
Principal Position Year Salary Bonus Compensation(1) SAR Grants (4) Compensation (5)
- ---------------------- ---- -------- ------ --------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Leon Fishman 1995 $377,885 $ -0- - - $3,000
President & Chief 1994 $375,000 $ -0- - - $3,000
Executive Officer 1993 $375,000 $48,442 - - $4,717
Bret Kelly 1995 (2) $220,500 $ -0- - 10,000 (3) $3,000
Senior V.P. & Chief 1994 $220,502 $ -0- - - $3,000
Operating Officer 1993 $221,044 $15,000 - - $3,720
Lawrence Winkler 1995 $154,732 $ -0- - - $3,000
Secy/Treasurer & 1994 $143,533 $ 2,500 - - $2,889
Chief Financial 1993 $136,786 $10,000 - - $2,936
Officer
Craig Fishman 1995 $161,177 $ -0- - - $3,000
Sr. V.P. & General 1994 $126,405 $ 2,500 - - $2,578
Counsel 1993 $115,601 $15,600 - - $2,624
</TABLE>
- --------------------------------------
1) Does not include the value of various personal benefits provided to the
executives officers. The aggregate amount of such personal benefits
provided to each individual did not exceed the lesser of $50,000 or 10% of
his reported compensation.
2) Ceased full-time employment with the company effective November 3, 1995.
Commencing in November 1995, Mr. Kelly is entitled to salary continuation
of $220,500 payable over 12 months.
3) Options granted in connection with cessation of full-time employment.
4) No Stock Appreciation Rights have been granted.
5) Represents contributions made by the Company to 401(k) plan.
INDIVIDUAL GRANTS IN LAST FISCAL YEAR
In connection with the cessation of his full-time employment,
Mr. Kelly was granted an option to acquire 10,000 shares of the
company's common sock at an exercise price of $5.60 per share. The
exercise price of $5.60 per share exceeded the per share market
value of the Company's common stock at the time the option was
granted. The option is exercisable with respect to 5,000 shares on
or after November 3, 1997 and with respect to 5,000 shares on or
after November 3, 1998. The option expires on November 3, 1999.
AGGREGATE OPTIONS/SARS EXERCISED IN LAST YEAR AND VALUE AT YEAR END
<TABLE>
Shares Value of Unexercised
Acquired on Value Number of Unexercised In-the-Money Options/SARS
Name Exercise Realized Option/SARS at F/Y End (1) at F/Y End
- ---------------- ----------- -------- ------------------------- -------------------------
Exercisable/Unexercisable Exercisable/Unexercisable
<S> <C> <C>
Leon Fishman - - 15,000/ 2,500 $ - /$ -0-
Bret Kelly - - - /10,000 $ - /$ -0-
Lawrence Winkler - - 8,334/ 1,666 $ - /$ -0-
Craig Fishman - - 1,667/ 833 $ - /$ -0-
</TABLE>
- ---------------------------------------------
1) No SARs have been granted.
The Company is party to employment agreements with four
executive officers of the Company. Although these agreements have
not yet been reduced to writing, the following sets forth their
principal terms.
The Company is party to an employment agreement with Craig
Fishman, the Company's President and Chief Executive Officer. Mr.
Fishman's current base salary is $200,000 and is subject to annual
cost of living increases, but not less than 5% per annum. Any other
increases in his salary are at the discretion of the Compensation
Committee. The agreement will contain confidentiality and non-
compete provisions, obligates the Company to provide Mr. Fishman
with the use of an automoble and requires the Company to include
Mr. Fishman in any benefit plans made available to employees
generally. The agreement expires by its terms on June 30, 1998. If
Mr. Fishman dies or his employment is terminated (other than for
cause) during the term of the agreement, the Company is obligated
to pay him an amount equal to the lesser of (x) one year's
compensation and (y) the compensation due for the then remainder of
the agreement (but in no event less than six months compensation).
The Company is party to an employment agreement with Peter D.
Matthy, the Company's Executive Vice President and Chief Operating
Officer. Mr. Matthy's current base salary is $150,000; salary
increases are at the discretion of the Compensation Committee. The
agreement will contain confidentiality and non-compete provisions,
obligates the Company to provide Mr. Matthy with the use of an
automoble and requires the Company to include Mr. Matthy in any
benefit plans made available to employees generally. The agreement
expires by its terms on June 30, 1998. If Mr. Matthy dies or his
employment is terminated (other than for cause) during the term of
the agreement, the Company is obligated to pay him an amount equal
to one year's compensation.
The Company was party to an employment agreement with Lawrence
M. Winkler, the Company's Secretary/Treasurer and Chief Financial
Officer. That contract expired in January 1996. The Company is
curretnly party to an employment agreement with Mr. Winkler, under
which Mr. Winkler's current base salary is $160,000; salary
increases are at the discretion of the Compensation Committee. The
agreement will contain confidentiality and non-compete provisions,
obligates the Company to provide Mr. Winkler with the use of an
automoble and requires the Company to include Mr. Winkler in any
benefit plans made available to employees generally. The agreement
expires by its terms on June 30, 1998. If Mr. Winkler dies or his
employment is terminated (other than for cause) during the term of
the agreement, the Company is obligated to pay him an amount equal
to the lesser of (x) one year's compensation and (y) the
compensation due for the then remainder of the agreement (but in no
event less than six months compensation).
The Company was party to an employment agreement with Leon
Fishman, the Company's former President and Chief Executive Officer
and its current Vice Chairman. That contract expired in December
1995. The Company is currently party to an employment agreement
with Mr. Fishman under which Mr. Fishman's current base salary is
$150,000 and the Company is obligated to reimburse Mr. Fishman for
travel and living expenses incurred by him in performing Company
business. In addition to his base salary, Mr. Fishman is entitled
to incentive-based compensation equal to 2% of the Company's
consolidated total income for 1996 (excluding non-core
subsidiaries) in excess of $11,750,000. The agreement will contain
confidentiality and non-compete provisions, obligates the Company
to provide Mr. Fishman with the use of an automoble and requires
the Company to include Mr. Fishman in any benefit plans made
available to employees generally. The agreement expires by its
terms on December 31, 1996 (unless extended by recommendation from
the Compensation Committee). Mr. Fishman is not entitled to a
severance benefit upon his death or termination of employment.
OTHER TRANSACTIONS
In January 1989, a corporation wholly owned by Lawrence M.
Winkler (currently the Company's Secretary/Treasurer and Chief
Financial Officer), his wife and a son of Eugene Haskin (currently
Chairman of the Company's Board of Directors) purchased an
apartment building from the Company for consideration in the form
of a demand note to the Company in the principal amount of
$100,000. The Company created this ownership structure on the
advice of counsel who advised the Company not to take direct title
to real property. While it owned the apartment building, the
affiliate corporation paid to the Company all rental income
received from the apartment building. In 1995 the apartment
building was sold to an unaffiliated third party for consideration
of $20,000 cash and a note in the principal amount of $70,000. The
note bears interest at a rate of 9% per annum, is due on April 1,
2002 and is secured by the apartment building. The $20,000 was paid
to the Company and the note payable by the unaffiliated third party
(together with the collateral therefor) have been assigned to a
wholly-owned subsidiary of the Company in exchange for cancellation
of the original note payable from the Company's affiliate. At
December 31, 1995 the principal amount owing on the note was
$68,284.
Certain members of the immediate families of Eugene Haskin and
Leon Fishman, directly or through trusts, have provided financing
to Lifetime Options, Inc., a Viatical Settlement Company ("Lifetime
Options") a wholly-owned subsidiary of the Company, through
unsecured loans with interest payable monthly at an annual interest
rate of 1% over the prime rate. One percent (1%) over the prime
rate is the same rate paid by Lifetime Options to its unaffiliated
bank lender.
Lifetime Options' total indebtedness to members of Mr.
Haskin's immediate family was $15,146 at December 31, 1995 and
1994, respectively. During 1994, at the request of members of Mr.
Haskin's family, Lifetime Options repaid $445,400 of these loans.
During 1995 and 1994, Lifetime Options paid aggregate interest on
these loans of $1,500 and $16,300, respectively.
Lifetime Options' total indebtedness to members of Leon Fishman's
immediate family was $43,600 at December 31, 1995 and 1994,
respectively. During 1995 and 1994, Lifetime Options paid
aggregate interest on these loans of $4,400 and $8,800,
respectively. At various times during 1994, Leon Fishman loaned
Lifetime Options a total of $265,000 which was repaid in full by
December 31, 1994. During the periods of indebtedness, Mr. Fishman
received $2,500 of interest. At January 1, 1994, Craig Fishman was
owed $18,700 by Lifetime Options. The level of borrowings from
Craig Fishman increased at various intervals during 1994 to
$97,800. As of December 31, 1994 the indebtedness of $97,800 was
paid in full. Craig Fishman received interest from Lifetime
Options of $2,600 in 1994. Neither Craig Fishman nor Leon Fishman
loaned money to Lifetime Options in 1995 and neither of them
received any interest in 1995.
On September 11, 1995, the Company issued an aggregate of
$2,838,000 in principal amount of Convertible Subordinated Notes
(the "Notes") due September 30, 2000 to Scoggin Capital Management,
LP and Selig Partners, LP (collectively, the "Scoggin
Stockholders") in exchange for 447,200 shares of common stock of
the Company then owned by them. The Scoggin Stockholders (i) have
agreed not to convert their Notes into common stock prior to March
1, 1997, (ii) are entitled to certain demand and piggy-back
registration rights; and (iii) are entitled to nominate up to two
members of the Company's Board of Directors (depending on their
level of ownership of Company securities). Messrs. David W.
Campbell and William H. Savage have been nominated to serve as
directors by the Scoggin Stockholders.
Rental payments of $24,000 were received by the Company in
1995, 1994 and 1993, respectively, from Leon Fishman, the Company's
former President, for the personal use of a condominium owned by a
subsidiary of the Company.
PROPOSAL NUMBER TWO
AMENDMENT TO THE 1990 QUALIFIED STOCK OPTION PLAN
The Company's Board of Directors has unanimously approved a
proposal to amend the Company's Qualified Stock Option Plan (the
"Plan") to increase the number of shares issuable thereunder from
175,000 to 275,000. The Plan was approved at the 1990 Annual
Meeting of Shareholders. The proposed amendment to the Plan will
be effective upon shareholder approval.
The Board of Directors believes that stock options are
valuable tools for the recruitment, retention and motivation of
qualified employees, including officers, and other persons who can
contribute materially to the Company's success. As of September 30,
1996, only 15,005 of the 175,000 shares currently available for
issuance under the Plan remained available for issuance pursuant to
new option grants. The Board of Directors believes that it is
important to have additional shares available under the Plan to
provide adequate incentives to the Company's workforce.
The material features of the Plan, including the proposed
amendment, are outlined below. The following summary is qualified
in its entirety by reference to the full text of the Plan, a copy
of which has been filed with the Securities and Exchange
Commission.
Purpose
The purpose of the Plan is to attract and retain executives,
directors, consultants and other key employees and to provide an
opportunity for such individuals to acquire a proprietary interest
in the Company. It is the intention of the Company that options
granted pursuant to the Plan will consist of incentive stock
options that meet the requirements of Section 422 of the Internal
Revenue Code of 1986, as amended (hereinafter referred to as the
"Code").
Administration
The Plan shall be administered by the Administrative
Committee, which is comprised of at least three individuals
appointed by the Board of Directors of the Company. An individual
who is a member of the Administrative Committee may not be granted
an option under the Plan. The Administrative Committee interprets
the Plan and makes such rules as it deems necessary to effectuate
the operation of the Plan, which interpretations and rules are
binding on the Company and employees. If the Board of Directors
shall fail to appoint or shall dissolve the Administrative
Committee, the Board of Directors may exercise all powers of the
Administrative Committee and, notwithstanding anything to the
contrary in the Plan, members of the Board of Directors shall not
in that case be ineligible to receive options under the Plan.
Eligibility
The Plan provides for the grant to executives and other key
employees of the Company and its subsidiaries of qualified options
to purchase up to 175,000 shares of Common Stock. The proposed
amendment would increase the number of shares usable upon exercise
of qualified options to 275,000.
Terms of Options
The per share exercise price of the Common Stock subject to an
incentive stock option may not be less than the fair market value
of the Common Stock on the date the option is granted. The
aggregate fair market value (determined as of the date the option
is granted) of the Common Stock that first becomes exercisable by
any employee in any one calendar year pursuant to the exercise of
incentive stock options may not exceed $100,000. No person who
owns, directly or indirectly, at the time of the granting of an
incentive stock options to him, 10% or more of the total combined
voting power of all classes of stock of the Company (a "10%
Stockholder") shall be eligible to receive any incentive stock
options under the Plan unless the option price is at least 110% of
the fair market value of the Common Stock subject to the option,
determined on the date of the grant.
Incentive stock options granted under the Plan cannot be
exercised more than ten years from the date of grant except that
incentive stock options issued to a 10% Stockholder are limited to
five year terms.
Further, no incentive stock option granted under the Plan
shall be exercisable later than: (i) one year after an employee
dies (A) while employed by the Company or any subsidiary or (B)
within the three month period following termination of employment
for reasons other than dismissal for cause; (ii) the date of an
employee's termination of employment with the Company or any
subsidiary due to dismissal for cause; or (iii) three months after
an employee's employment with the Company or any subsidiary is
terminated for any other reason.
Subject to the foregoing, the Administrative Committee or the
Board may prescribe the date or dates on which an option may be
exercised.
The exercise price of options granted under the Plan may be
paid in whole or in part through the transfer of shares previously
acquired by the employee. For this purpose, the transferred shares
shall be valued at their fair market value on the date the Company
receives the transferred shares, or, if later, the date the Company
receives notice of exercise.
Nontransferability; Exercise by Beneficiary
During an employee's lifetime, an option granted under the
Plan shall only be exercisable by the employee. An option is not
transferable except by will or by the laws of descent and
distribution. No option may be subject to the claims of creditors
or liable to attachment, execution or other legal process.
Upon the death of an employee prior to the date that an
incentive stock option granted under the Plan has been exercised in
full or has expired, the employee's beneficiary or beneficiaries
(under the employee's will or under the laws of descent and
distribution, as the case may be) may exercise the incentive stock
option within one (1) year of the date of the death of the
employee, subject to the same conditions and expiration date that
were applicable to the employee during his lifetime. The rules
applicable to the exercise of a qualified stock option granted
pursuant to the Plan following the employee's death are set forth
in the written agreement evidencing the grant of the option.
Amendment and Termination of the Plan
The Board of Directors of the Company reserves the right to
amend and to terminate the Plan, subject to any required
shareholder approval; except that, other than as may be reasonably
necessary to ensure that all incentive stock options under the Plan
qualify as "incentive stock options," as defined in Section 422 of
the Code, no action of the Board of Directors may alter or impair
an employee's rights under any outstanding option without his or
her consent.
Federal Income Tax Information
Options granted under the Plan shall be "incentive stock
options," as defined in Section 422 of the Code.
If an option granted under the Plan is an incentive stock
option, the optionee will recognize no income upon grant of the
incentive stock option and incur no tax liability due to the
exercise unless the optionee is subject to the alternative minimum
tax. The Company will not be allowed a deduction for federal income
tax purposes as a result of the exercise of an incentive stock
option regardless of the applicability of the alternative minimum
tax. Upon the sale or exchange of the shares at least two years
after grant of the option and one year after transfer of the shares
to the optionee by the Company, any gain will be treated as long-
term capital gain. If these holding periods are not satisfied, the
optionee will recognize ordinary income equal to the difference
between the exercise price and the lower of the fair market value
of the stock at the date of the option exercise or the sale of the
stock. The Company will be entitled to a deduction in the same
amount as the ordinary income recognized by the optionee. Any gain
recognized on such a premature disposition of the shares in excess
of the amount treated as ordinary income will be characterized as
capital gain. Currently, the tax rate on net capital gain (net
long-term capital gain minus net short-term capital loss) is capped
at 28%. Capital losses are allowed in full against capital gains
plus $3,000 of other income.
The foregoing is only a summary of the effect of federal
income taxation upon the optionee and the Company with respect to
the grant and exercise of options under the Plan, does not purport
to be complete and references should be made to the applicable
provisions of the Code. In addition, this summary does not discuss
the income tax laws of any municipality, state or foreign country
in which an optionee may reside.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934
requires the Company's officers and directors, and persons who own
more than ten percent of its Common Stock, to file reports of
ownership and changes in ownership with the Securities and Exchange
Commission (the "Commission"). Officers, directors and greater than
ten percent stockholders are required by the Commission to furnish
the Company with copies of all Section 16(a) forms that they file.
Based solely on its review of the copies of such forms
received by it, or written representations from certain reporting
persons that no reports on Form 5 were required for those persons,
the Company believes that during 1995 all filing requirements
applicable to its officers, directors and greater than ten percent
stockholders were complied with.
OTHER MATTERS
At this date, there are no other matters management intends to
present or has reason to believe others will present to the Annual
Meeting. If other matters now unknown to the management come
before the meeting, those named as proxies on the enclosed form of
proxy will vote in accordance with their best judgement.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Company has selected the firm of Deloitte & Touche llp to
serve as the independent auditors for the Company for the current
fiscal year. That firm has served in this capacity for the Company
since 1988. Representatives of Deloitte & Touche llp are expected
to be present at the Annual Meeting to respond to appropriate
questions.
SHAREHOLDER PROPOSALS
If any shareholder desires to submit a proposal for action at
the Annual Meeting to be held in 1997, the proposal must be in
proper form and received by the Company no later than June 1, 1997.
PLEASE SIGN, DATE AND RETURN YOUR PROXY PROMPTLY.
October 3, 1996
BY ORDER OF THE BOARD OF DIRECTORS
Lawrence M. Winkler
Secretary
