SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K/A
AMENDMENT No.1
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
Commission File No.: 001-10785
THE MONEY STORE INC.
(Exact name of Registrant as specified in its charter)
New Jersey 22-2293022
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2840 Morris Avenue, Union, New Jersey 07083
(Address of principal executive offices) (Zip Code)
(908) 686-2000
(Registrant's telephone number, including area code).
Securities registered pursuant to Section 12(b) of the Act:
(Title of each class) (Name of each exchange on which registered)
- ---------------------- -------------------------------------------
Common Stock, no par value New York Stock Exchange
$1.72 Mandatory Convertible Preferred Stock
no par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicated by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes / X / No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K / /
As of March 23, 1998 the aggregate market value of voting stock held by
non-affiliates of the Registrant was approximately $1,176,743,671.
As of March 23, 1998 the shares outstanding of the Registrant's class of
common stock were 58,494,447.
<PAGE>
The Money Store Inc. (the "Registrant" or the "Company") hereby amends the
following Items in its Annual Report on Form 10-K for the year ended December
31, 1997 by replacing such Items in their entirety as set forth on the following
pages:
o Item 10. Directors and Executive Officers of the Registrant
o Item 11. Executive Compensation
o Item 12. Security Ownership of Certain Beneficial Owners and Management
o Item 13. Certain Relationships and Related Transactions
<PAGE>
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of the Company are as follows:
Director
NAME Age Since Positions Held with the Company
Alan Turtletaub............... 84 1974 Chairman of the Board of Directors
Marc Turtletaub............... 52 1981 President, Chief Executive Officer
and Director
Morton Dear................... 60 1981 Vice-Chairman of the Board of
Directors, Senior Executive Vice
President, Secretary and Director
Harry Puglisi................. 50 1983 Treasurer and Director
Alexander C. Schwartz, Jr..... 65 1993 Director
Anthony L. Watson 57 1991 Director
William S. Templeton.......... 49 1996 Executive Vice President and
Director
Michael H. Benoff............. 44 -- Executive Vice President and Chief
Financial Officer
James K. Ransom............... 48 -- Vice President and Principal
Accounting Officer
John A. Reeves................ 47 -- Senior Vice President, President
of the Company's Student Loan
subsidiary and Executive Vice
President of Home Equity Loan
subsidiaries
Lawrence J. Wodarski.......... 50 -- Senior Vice President and Chief
Administrative Officer
Paul R. Eber.................. 41 -- Executive Vice President of the
Company's Student Loan
subsidiary
Paul I. Leliakov.............. 40 -- President of the Company's
Commercial Loan subsidiaries
Biographical information follows for the directors and executive officers
named in the above chart.
Alan Turtletaub was a founder of the Company, has been a director of the
Company since 1974 and has been Chairman of the Board of the Company since 1989.
He was the President and Chief Executive Officer of the Company from 1979 to
1989. Mr. Turtletaub is a licensed real estate broker, a licensed broker in
life, fire and casualty insurance and a licensed mortgage banker. He is a member
of the Advisory Board to the Board of Mack-Cali Realty Corporation and is on the
Advisory Board of Valley National Bank.
Marc Turtletaub became a director of the Company in 1981. Mr. Turtletaub
has been the President and Chief Executive Officer of the Company since 1989. He
has been associated with the Company in various capacities since 1975. Mr.
Turtletaub is an attorney licensed to practice in California and New Jersey and
is a licensed real estate broker in California.
Morton Dear became a director of the Company in 1981. Mr. Dear has been
Senior Executive Vice President of the Company since 1997 and Secretary of the
Company since 1983. He was an Executive Vice President and the Chief Financial
Officer of the Company from 1983 until 1997 when he was named Vice-Chairman of
the Board of Directors of the Company. Since joining the Company in 1973, he has
served in a variety of positions. Mr. Dear is a Certified Public Accountant, a
licensed real estate broker and a licensed mortgage banker. He is a past
Chairman of the Board of Directors of the Easter Seal Society of New Jersey and
is on the Advisory Board of Valley National Bank.
Harry Puglisi became a director of the Company in 1983. Mr. Puglisi has
been the Treasurer of the Company since 1982. Since joining the Company in 1975,
Mr. Puglisi also has served as Assistant Controller and Controller of the
Company. Mr. Puglisi is a Certified Public Accountant.
Alexander C. Schwartz, Jr. became a director of the Company in 1993. Until
January 1996, Mr. Schwartz, currently a private investor, was a Managing
director in the Investment Banking Division of Prudential Securities
Incorporated, where he had been employed for 33 years.
Anthony L. Watson became a director of the Company in 1991. Mr. Watson has
been Chief Executive Officer of HIP Foundation Inc. and Chairman of the Board of
Directors of the Health Insurance Plan of Greater New York ("HIP") since
September 1997 and has been the President and Chief Executive Officer of HIP
since September 1990. Prior thereto, he served as an Executive Vice President of
HIP for five years. Mr. Watson also serves on the Boards of Directors or Boards
of Trustees of numerous organizations in the healthcare field.
William S. Templeton became a director of the Company in October 1996. Mr.
Templeton has been an Executive Vice President of the Company since 1997 and was
a Senior Vice President of the Company from 1990 to 1997. In 1998 Mr. Templeton
became the head of the Company's lending operations and, in such capacity, is
primarily responsible for their day-to-day operations. Since joining the Company
in 1973, Mr. Templeton has served in a variety of positions.
Michael H. Benoff was named Executive Vice President and Chief Financial
Officer of the Company in 1997. He had been a Senior Vice President of the
Company since 1994. Since joining the Company in 1987, Mr. Benoff's
responsibilities have been primarily in the finance area. He has been
responsible for the Company's investor relations since its initial public
offering in 1991.
James K. Ransom has been a Vice President of the Company since 1995 and was
appointed Principal Accounting Officer of the Company in February 1996. He
joined the Company in 1989 as the Assistant Treasurer. Mr. Ransom is a Certified
Public Accountant.
John A. Reeves has been a Senior Vice President of the Company since 1993
and was a Vice President of the Company from 1990 to 1993. In 1993, Mr. Reeves
was promoted to President of the Company's Student Loan subsidiary and became an
Executive Vice President of the Company's Home Equity Loan subsidiaries. From
1985, when he joined the Company, to 1988, he was an Assistant Corporate Counsel
of the Company.
Lawrence J. Wodarski has been a Senior Vice President of the Company since
1991, and from 1988 to 1996 was primarily responsible for the day-to-day
operations of the Company's Commercial Loan subsidiaries. In January 1996, Mr.
Wodarski relinquished his responsibilities for the Company's Commercial Loan
subsidiaries as a result of his appointment to the position of Chief
Administrative Officer of the Company. Since joining the Company in July 1987,
he has served in a variety of positions.
Paul R. Eber has been an Executive Vice President of the Company's Student
Loan subsidiary since joining the Company in 1993, and is in charge of its
operations. Prior to joining the Company, Mr. Eber was employed in a variety of
capacities by the Illinois Student Aid Commission from February 1983 to June
1990 and the Texas Guaranteed Student Loan Corporation from June 1990 to
February 1993.
Paul I. Leliakov has been President of the Company's Commercial Loan
subsidiaries since January 1996. Since joining the Company in 1986, Mr. Leliakov
has worked in a variety of positions serving as the Commercial Loan subsidiary's
Executive Vice President and Chief Operating Officer since 1993. In addition,
Mr. Leliakov is secondarily responsible for the day-to-day operations of all of
the Company's lending operations and in such capacity reports to Mr. Templeton.
<PAGE>
FAMILY RELATIONSHIPS
Marc Turtletaub is Alan Turtletaub's son. No other family relationship
exists among any of the directors or executive officers of the Company. No
arrangement or understanding exists between any director or executive officer or
any other person pursuant to which any director or executive officer was
selected as a director or executive officer of the Company. Subject to rights
under applicable employment agreements, each executive officer serves at the
pleasure of the Board of Directors.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company believes that during 1997 its officers and directors complied
with all requirements under Section 16(a) of the Exchange Act.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation for the past three years of
the Company's Chief Executive Officer and each of the Company's other four most
highly compensated executive officers (collectively, the "Named Executive
Officers"):
<TABLE>
<CAPTION>
Annual Compensation Long-Term
Compensation
Awards (3)
-----------------------------------------------------------------
Other Securities
Annual Underlying All Other
Name and Principal Position Year Salary Bonus(1) Compensation(2) Options Compensation (4)
- ---------------------------- ----- --------- -------- --------------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Marc Turtletaub................ 1997 $450,000 -- -- -- $ 7,638
Chief Executive Officer 1996 450,000 -- -- -- 7,119
1995 450,000 -- -- -- 7,164
Morton Dear.................... 1997 417,680 $295,600 -- 125,000 12,388
Senior Executive 1996 290,839 339,200 -- -- 11,619
Vice President 1995 267,500 237,400 -- 56,250 11,664
William S. Templeton........... 1997 409,211 184,750 -- 150,000 12,388
Executive Vice President 1996 252,996 240,750 -- -- 11,619
1995 213,833 164,000 $ 65,000 75,000 11,664
John A. Reeves................. 1997 263,334 110,850 -- 100,000 12,388
Senior Vice President 1996 175,000 148,450 -- -- 11,619
1995 135,280 83,400 -- -- 11,664
Harry Puglisi.................. 1997 222,033 147,800 -- 50,000 12,388
Treasurer 1996 180,417 164,600 -- -- 11,619
1995 157,726 111,200 -- 17,500 11,664
---------
(1) Consists of bonuses determined for the year indicated and paid either in
that year or the following year.
(2) Except for Mr. Templeton, the value of each of the Named Executive
Officer's perquisites did not exceed the threshold for disclosure
established under the proxy rules of the Securities and Exchange Commission
(the "Commission"). In connection with Mr. Templeton's promotion to
President of the Company's Home Equity Loan subsidiaries in 1992, Mr.
Templeton was required to relocate to Sacramento, California from Union,
New Jersey. The Company assisted Mr. Templeton in such relocation. At the
time, the Company also agreed to lend Mr. Templeton $100,000, after the
payment of any taxes, of which a portion was advanced in 1992 and the
balance in 1993. The loan did not bear interest and, therefore, the Company
agreed to reimburse Mr. Templeton for any resulting income tax liability.
One-third of the then current amount outstanding under the loan was
forgiven in November 1993, another one-third in 1994 and the final
one-third in November 1995. In 1995, Mr. Templeton's compensation included
$65,000 representing the forgiveness of the final one-third of his $100,000
loan from the Company and reimbursement for the tax effect thereon.
(3) No Named Executive Officer received restricted stock awards or long-term
incentive plan payouts during the periods covered by the table.
(4) Consists of contributions by the Company to the Named Executive Officers'
respective accounts pursuant to The Money Store Profit-Sharing Plan.
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information as to all grants of options
during 1997 to the Named Executive Officers. The options were granted under the
Company's 1997 Stock Incentive Plan (the "1997 Plan"). The table also sets forth
the value of the options granted at the end of the option terms (ten years) if
the stock price were to appreciate annually by 5 percent and 10 percent,
respectively. There is no assurance that the stock price will appreciate at the
rates shown in the table.
<TABLE>
<CAPTION>
Potential Realizable
Value at
Assumed Annual
Rates of Stock Price
Individual Grants (1) Appreciation for Option Term
---------------------------------------------------------------------- -----------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL EXERCISE
UNDERLYING OPTIONS PRICE EXPIRATION
OPTIONS GRANTED GRANTED TO ($/SH) DATE 5% 10%
--------------- EMPLOYEES ------ ----- --- ----
NAME IN FISCAL YEAR
- ----- ---------------
<S> <C> <C> <C> <C> <C> <C>
Marc Turtletaub............... 0 0% -- -- $0 $0
Morton Dear................... 125,000 7.0% $ 21.56 4/1/07 1,695,000 4,295,000
William S. Templeton.......... 150,000 8.4% 21.56 4/1/07 2,034,000 5,154,000
John A. Reeves................ 100,000 5.6% 21.56 4/1/07 1,356,000 3,436,000
Harry Puglisi................. 50,000 2.8% 21.56 4/1/07 678,000 1,718,000
(1) No stock appreciation rights ("SARs") have ever been granted to Named
Executive Officers.
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table provides information as to options exercised by each of
the Named Executive Officers during 1997. The table also sets forth the value of
options held by such officers at year end measured in terms of the difference
between the closing sales price of Common Stock on the NYSE on December 31, 1997
and the option exercise price.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
SHARES UNDERLYING UNEXERCISED
ACQUIRED UNEXERCISED IN-THE-MONEY
ON VALUE OPTIONS AT OPTIONS
EXERCISE (#) REALIZED($) FISCAL YEAR END AT FISCAL YEAR END ($)
------------ ----------- --------------- ----------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE($) UNEXERCISABLE($)
- ---- ----------- ------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Marc Turtletaub................. -- -- -- -- -- --
Morton Dear..................... 21,596 $ 616,404 -- 158,750 -- 538,650
William S. Templeton............ 35,000 776,875 26,375 195,000 $ 415,520 626,850
John A. Reeves.................. 33,750 1,043,173 -- 133,750 -- 538,650
Harry Puglisi................... 20,000 465,156 625 66,875 8,707 235,068
</TABLE>
PENSION PLAN TABLE
The Company has adopted a Supplemental Executive Retirement Plan (the
"SERP") which provides retirement benefits to certain key employees who are
designated for participation by the Board of Directors of the Company. The SERP
is an unfunded defined benefit plan, under which the amount of a retiree's
benefit is calculated pursuant to a formula based upon years of service with the
Company and compensation.
With the exception of Messrs. Dear, Templeton and Puglisi (as discussed
below), the SERP generally provides for three different benefit levels, which
are designated as Target Level I, Target Level II and Target Level III. The
Board of Directors, in its sole discretion, determines the Target Level at which
a named individual shall participate. For Target Level I participants, the SERP
provides for an annual benefit at the normal retirement date equal to 50 percent
of covered compensation, multiplied by a fraction (the "service fraction"), the
numerator of which is the participant's number of years of service with the
Company (subject to a maximum of 25) and the denominator of which is 25. For
participants in Target Level II or Target Level III, the benefit is 331/3
percent of covered compensation or 25 percent of covered compensation,
respectively, multiplied by the same fraction as for Target Level I. Covered
compensation means the highest average annual compensation, not to exceed
$300,000 annually, for any three consecutive calendar years.
Normal retirement date generally means the first day of the month following
the participant's 62nd birthday (or the date on which the participant completes
two years of participation in the SERP, if later). In general, benefit payments
will commence upon the participant's retirement from the Company at or after his
normal retirement date and will be made in installments over a period of ten
years or less (as determined by the Board of Directors of the Company), in an
amount which is the actuarial equivalent of the annual benefit determined
pursuant to the SERP benefit formula, as illustrated in the Table below.
With respect to Messrs. Dear, Templeton and Puglisi, in lieu of benefits
determined under the Target Level formula and payable as described above, the
SERP provides for a single sum benefit payable upon retirement at or after the
normal retirement date (in the case of Mr. Dear) or age 55 (in the case of
Messrs. Templeton and Puglisi) (hereinafter the "early retirement date") in the
amount of $2 million, $2 million and $1 million, respectively, in each case
multiplied by the participant's service fraction; provided, that if Mr.
Templeton or Mr. Puglisi continue in employment past age 55, their benefit will
be actuarially increased to the date of their actual termination but not beyond
age 62. If any of the foregoing participants continues in employment with the
Company until his normal retirement date, the benefit will be paid as of such
date, whether or not he continues in employment thereafter. For purposes of the
service fraction, as of December 31, 1997 Messrs. Dear and Templeton each had 25
years of service and Mr. Puglisi had 23 years of service.
The SERP also provides that if, upon or following a "Change in Control" (as
defined in the SERP) of the Company, which would include the Merger, a
participant's employment with the Company is terminated by the Company without
"Cause" (as defined in the SERP) or by the participant with "Good Reason" (as
defined in the SERP), prior to his normal retirement date or early retirement
date, then the participant will receive a lump sum payment of the then present
value of his projected benefit under the SERP determined as if the participant
continued in employment with the Company until his normal or early retirement
date. In such a case, for purposes of determining the present value of the
benefit, the participant will be assumed to be five years older than his actual
age, but the benefit payable under the SERP shall in no event exceed the
participant's unreduced benefit amount.
With respect to participants to whom the target level formula applies, the
following Pension Plan Table illustrates the annual benefit at normal retirement
date for participants in Target Level III. For participants in Target Level I or
Target Level II, the benefits would be 200 percent or 133 percent of the amount
shown in the Table, respectively.
YEARS OF SERVICE
AT NORMAL RETIREMENT DATE
Remuneration 15 20 25 or more
$125,000..................................... $18,750 $25,000 $31,250
150,000.................................... 22,500 30,000 37,500
175,000.................................... 26,250 35,000 43,750
200,000.................................... 30,000 40,000 50,000
225,000.................................... 33,750 45,000 56,250
250,000.................................... 37,500 50,000 62,500
275,000.................................... 41,250 55,000 68,750
300,000 or more............................ 45,000 60,000 75,000
For Mr. Reeves, the applicable Target Level, covered compensation and years
of service as of December 31, 1997 are Target Level III, $272,893 and 13 years.
There currently are no participants in Target Level I or Target Level II.
COMPENSATION OF DIRECTORS
Each director who is not an officer or employee of the Company is paid an
annual retainer of $25,000 in addition to a fee of $500, plus expenses, for each
meeting of the Board of Directors attended. Each committee member, who is not an
officer or employee of the Company, is paid a fee of $500 for each committee
meeting attended. Committee fees are paid only for meetings held on days when no
Board meeting is held. In February 1998, the Board of Directors authorized the
payment of a special directors' fee to the Board's two outside directors in the
amount of $112,500 in order to compensate them for the extraordinary amount of
time required of them in connection with the Board's deliberations with respect
to the Merger.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with Marc Turtletaub.
Marc Turtletaub's employment agreement was amended in March 1996 to expire on
December 31, 1999, subject to earlier termination under certain circumstances.
The agreement automatically continues from year to year after such term unless
terminated on at least 365 days' prior notice by either the Company or the
executive. The agreement with Marc Turtletaub provides for an annual base salary
of $450,000 and certain raises and bonuses also to be determined from time to
time in the discretion of the Board of Directors of the Company.
The Company has amended and restated employment agreements entered into in
September 1991 with Messrs. Dear, Puglisi and Templeton. The employment
agreements with Messrs. Dear, Puglisi and Templeton were amended in March 1996
to expire on December 31, 1999, subject to earlier termination under certain
circumstances. The amended and restated agreements automatically continue from
year to year after their respective terms unless terminated on at least 365
days' prior notice. The amended and restated agreements with Messrs. Dear,
Puglisi and Templeton provide for annual base salaries of $270,000, $170,000 and
$218,000, respectively, and certain raises and bonuses to be determined from
time to time in the discretion of the Board of Directors of the Company. The
agreement with Mr. Dear provides for payment of the difference, if any, between
$100,000 and the bonus otherwise payable to Mr. Dear on June 1 of each year,
pursuant to the Company's bonus plan. The agreements with Messrs. Puglisi and
Templeton provide for payment of the difference, if any, between $50,000 and the
bonus otherwise payable to Messrs. Puglisi and Templeton on June 1 of each year,
pursuant to the Company's bonus plan.
The employment agreements described above provide that if there is a Change
in Control (as defined below) of the Company, then the executives may at their
election, at any time within one year after a Change in Control, terminate their
employment agreements, or if the executives' employment is terminated for any
reason within one year after a Change in Control (other than by reason of death
or incompetence), the executives shall be entitled to receive a lump sum
severance payment equal to 200 percent of the executives' annual base salary in
effect as of the date of termination or, if greater, such salary as may be in
effect immediately prior to the Change in Control of the Company, plus an amount
equal to 200 percent of his bonus for the previous year, plus certain other
benefits. For purposes of the employment agreements, a "Change in Control" will
be deemed to have occurred if (a) both (i) any person or group of persons other
than the executives, acquires (or has acquired during the twelve-month period
ending on the date of the most recent acquisition by such person or group) the
beneficial ownership, directly or indirectly, of securities of the Company
representing 40 percent or more of the combined voting power of the then
outstanding securities of the Company and (ii) the combined direct and indirect
beneficial ownership of Alan Turtletaub and Marc Turtletaub of securities of the
Company represents less than 40 percent of the combined voting power of the then
outstanding securities of the Company; or (b) a person or group acquires (or has
acquired during the twelve-month period ending on the date of the most recent
acquisition by such person or group) assets from the Company that have a total
fair market value equal to or more than one-third of the total fair market value
of all of the assets of the Company immediately prior to such acquisition;
provided, however, that if any transaction or event or series of transactions or
events resulting in a Change in Control is approved by a majority of the members
of the Board of Directors of the Company holding office prior to the transaction
or event or series of transactions or events, then the transaction or event or
series of transactions or events shall not be deemed to be a Change in Control.
Notwithstanding the foregoing, for purposes of subsection (a), a Change in
Control will not be deemed to have occurred if the power to control (directly or
indirectly) the management and policies of the Company is not transferred from a
person or group to another person or group; and for purposes of subsection (b),
a Change in Control will not be deemed to occur if the assets of the Company are
transferred: (i) to a shareholder in exchange for his stock, (ii) to an entity
in which the Company has (directly or indirectly) a 50 percent ownership
interest, or (iii) to a person or group that has (directly or indirectly) at
least a 50 percent ownership interest of the Company with respect to its stock
outstanding, or to any entity in which such person or group possesses (directly
or indirectly) a 50 percent ownership interest. At December 31, 1997, and based
upon salary levels then in effect, in the event the Company had caused their
employment to be terminated in accordance with the employment agreements or upon
a Change in Control, Marc Turtletaub, Morton Dear, William S. Templeton and
Harry Puglisi would have been entitled pursuant to the employment agreements to
receive lump sums of approximately $900,000, $1,427,000, $1,188,000 and
$740,000, respectively, together with accelerated vesting of their stock
options.
Pursuant to the Merger Agreement, the Company has agreed with First Union
that it will offer new employment agreements to each of the foregoing
executives, as well as to other senior executives, including Mr. Reeves. If such
new employment agreements are entered into pursuant to the Merger Agreement and
the Merger is consummated, the above-described employment agreements will be
superseded by such employment agreements.
BONUS PLAN
In 1998, the Board of Directors of the Company adopted the 1998 Performance
Bonus Plan of The Money Store Inc. (the "Bonus Plan"). Under the Bonus Plan, a
performance bonus pool of up to $20 million will be established in the event of
an "Acquisition Transaction" (generally defined as an acquisition of at least 80
percent of the Company's voting securities or substantially all of the Company's
assets by any person other than (i) shareholders of the Company in exchange for
their stock, (ii) a 50 percent or more owned subsidiary of the Company, or (iii)
a person or entity which owns at least 50 percent of the Company). The
performance bonus pool will be available for performance bonus awards to nine
senior executive officers of the Company (including the Named Executive Officers
other than Mr. Turtletaub) and any other employee designated by the Board of
Directors of the Company. The amount of each individual's performance bonus will
be determined by the Board of Directors, in its sole discretion, and will be
paid in cash at the closing of the Acquisition Transaction. Any amount in the
performance bonus pool which is not paid out to participants will revert to the
Company. The Merger, if consummated, will constitute an Acquisition Transaction.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Other than the awarding of certain raises, bonuses and stock options, the
Compensation Committee, which is comprised of Messrs. Alan and Marc Turtletaub,
took no action with respect to compensation of the Company's executive officers
during 1997. All of the Company's other compensation plans and the employment
contracts applicable to the executive officers were in place prior to 1997.
STOCK OPTION PLANS
Augmenting the Company's 1991 Stock Option Plan (the "1991 Plan") and the
1995 Stock Incentive Plan of The Money Store Inc. (the "1995 Plan") the Company
adopted the 1997 Plan (together with the 1991 Plan and the 1995 Plan, the "Stock
Plans") on April 14, 1997, which was approved by the shareholders of the Company
on May 20, 1997.
The purpose of the Stock Plans is to encourage the Company's employees and
directors to acquire a larger proprietary interest in the Company and to provide
incentives to maximize the long-term growth of the Company. It is anticipated
that the opportunity for acquisition of such proprietary interest will aid the
Company in securing and retaining its employees.
The Board of Directors of the Company administers the Stock Plans. The
Board believes that equity ownership by management helps align management and
shareholder interests in enhancing shareholder value. The Board believes that,
based on the Company's performance, granting additional equity interest to
management is warranted to reward them for past performance and encourage their
future efforts. Subject to consummation of the Merger, the Board will continue
to review stock-based compensation from time to time and recommend rewards to
management with such compensation that is reflective of the Company's and
management's performance.
COMPENSATION PHILOSOPHY
In evaluating the performance and the compensation of the executive
officers of the Company, the Compensation Committee took note of management's
success in meeting the Company's goals for continued growth of revenues, income
from continuing operations and return on equity from continuing operations. For
1997, 10 percent, 25 percent, and 10 percent increases in these areas were
established and surpassed. However, the losses resulting from the closure of the
Company's auto finance division were taken into account in connection with the
determination of 1997 bonuses. These goals were established by the Compensation
Committee after evaluating trends in the Company's performance, the status of
the economy, and input from these key executives relative to their plans for
geographic and product expansion, cost containment, and increased productivity.
Raises and bonuses granted in 1997 primarily reward executive officers for
results and performance in 1996 while providing incentive for the reported year.
While certain key employees have employment agreements which guarantee a certain
base salary, the Compensation Committee seeks to reward them with both raises
and bonuses, the size of which are related to both the Company's aforementioned
goals and each individual's respective performance. The magnitude of these
increases were based on historic levels of the Company increases determined
without regard to increases for executives in comparable companies and with
equal weight given to the Company's stated goals.
BASE SALARY AND BONUS
Four executive officers, including the Chief Executive Officer, are
compensated pursuant to written employment agreements providing for base salary
and bonuses. Subject to such agreements, the amount of any raise or bonus
depends upon the Compensation Committee's evaluation of such officer's work
performance relative to the Company's goals of increasing revenues, profits and
return on equity or other contributions to the Company's success made by such
officer during the year. The Compensation Committee believes that a meaningful
base salary and bonus are important factors necessary to retain and attract
qualified executive personnel.
The salaries of the Chief Executive Officer and the Chairman of the Board
did not change in 1997 from their 1996 levels. The Compensation Committee
believes that since they own a controlling interest in the Company, money
available for salary increases and bonuses should be made available to other
executives. No bonuses were paid to either Marc or Alan Turtletaub in 1997.
EVALUATION PROCEDURE
In determining matters relating to executive officer compensation (other
than the Chief Executive Officer), the Compensation Committee reviews the
respective areas of authority of the various executive officers and the
performance and contribution of each to the efforts of the Company in meeting
its goals.
SECTION 162(M) OF THE INTERNAL REVENUE CODE
Section 162(m) of the Code limits the deductibility by a publicly-held
corporation of compensation paid in a taxable year to the Chief Executive
Officer and any other executive officer whose compensation is required to be
reported in the Summary Compensation Table to $1 million per executive officer.
For the 1997 taxable year, the Company did not exceed, and therefore was not
affected by, this limitation, except that $417,357 of compensation paid to John
Reeves in excess of the $1 million limit was not deductible.
Compensation Committee:
Marc Turtletaub Alan Turtletaub
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As stated above, during 1997, the Compensation Committee consisted of
Messrs. Marc Turtletaub, the President and Chief Executive Officer of the
Company, and Alan Turtletaub, the Chairman of the Board of Directors of the
Company.
Alan Turtletaub and Marc Turtletaub, directors and executive officers of
the Company, are the general partners in a general partnership which has a
one-half interest in a joint venture which is the lessor of the Company's
corporate headquarters in Union, New Jersey. During the past three years, the
Company has occupied approximately 50,000 square feet in Union under a lease
expiring in the year 2007. The annual rent under the lease, subject to certain
adjustments, is approximately $1,200,000.
The Company also has leased office space in Sacramento, California from a
partnership, the general partner of which is a corporation in which Marc
Turtletaub is a majority shareholder. The annual rent under this lease, which
expired in March 1998, was $110,000, $203,000 and $203,000 for the years ended
December 31, 1997, 1996 and 1995, respectively.
Because of the control by Alan Turtletaub and Marc Turtletaub over the
Company's operations, the above-described transactions were not the result of
arm's-length negotiations between independent parties. Additional or modified
agreements, arrangements or transactions may be entered into by the Company and
Alan Turtletaub and/or Marc Turtletaub from time to time in the future. Any such
future agreements, arrangements and transactions will be determined through
negotiations between the parties thereto. However, the Company will not enter
into any transaction with Marc Turtletaub or Alan Turtletaub or any other
director or executive officer, or with any affiliate of any of them, unless such
transaction has been approved by at least a majority of the independent
directors of the Company.
PERFORMANCE GRAPH
Set forth below is a graph comparing the total shareholder returns
(assuming reinvestment of dividends) of the Company from December 31, 1992
through December 31, 1997, to the Standard & Poor's 500 Composite Stock Index
("S&P 500") and the Dow Jones Financial Services Diversified Index ("DJ Index").
The graph assumes $100 invested on December 31, 1992 in the Company and each of
the other indices.
CUMULATIVE TOTAL RETURN
12/92 12/93 12/94 12/95 12/96 12/97
TMS 100 150 174 556 986 754
S & P 500 100 110 112 153 189 252
D J INDEX 100 115 114 184 250 400
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides information at February 1, 1998, with respect
to (i) any person known to the Company to be the beneficial owner of five
percent or more of the Common Stock, (ii) all directors (both continuing and
nominees) of the Company, (iii) each of the five most highly compensated
executive officers of the Company, and (iv) all directors and executive officers
as a group. Unless otherwise indicated, the beneficial ownership disclosed
consists of sole voting and investment power.
<TABLE>
<CAPTION>
AMOUNT
AND
NATURE OF PERCENT
BENEFICIAL OF
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNERSHIP(2) CLASS
<S> <C> <C>
Alan Turtletaub.............................................. 529,780(3) *
Marc Turtletaub.............................................. 19,943,700(4) 34.1%
Morton Dear.................................................. 122,082 *
Harry Puglisi................................................ 40,625 *
Anthony L. Watson (5)........................................ 8,125 *
Alexander C. Schwartz, Jr. (6)............................... 5,625 *
William S. Templeton......................................... 76,375 *
John A. Reeves............................................... 36,875 *
Pilgrim Baxter & Associates, Ltd. (7) ....................... 4,250,673 7.3%
FMR Corp. (8) ............................................... 3,437,400 5.9%
All directors and executive officers as a group (14 persons). 20,972,408 35.9%
- ---------
* Less than one percent.
(1) Unless otherwise indicated, the address of each beneficial owner is c/o The
Money Store Inc., 2840 Morris Avenue, Union, NJ 07083.
(2) Includes options held by directors and executive officers as a group
exercisable within 60 days of February 1, 1998 to purchase 309,400 shares
of Common Stock. Of such shares, Messrs. Dear, Watson, Puglisi, Templeton
and Reeves hold options to purchase 25,000, 8,125, 10,625, 56,375, and
36,875 shares, respectively.
(3) Includes 108,500 shares of Common Stock owned by a charitable foundation,
over which Mr. Alan Turtletaub has shared voting and investment power under
its certificate of incorporation.
(4) Includes (i) 2,913,160 shares of Common Stock over which Mr. Marc
Turtletaub has the sole power to vote as trustee of two trusts for the
benefit of a family member; (ii) 1,257,870 shares of Common Stock over
which he has sole voting and investment power for the benefit of a family
member, (iii) 3,750 shares of Common Stock owned by a family member, (iv)
3,750 shares of Common Stock over which a family member has sole voting and
investment power as custodian for the benefit of a family member, (v)
108,500 shares of Common Stock owned by a charitable foundation over which
he has shared voting and investment power under its certificate of
incorporation, and (vi) 3,500 shares over which he has joint ownership with
family members.
(5) Mr. Watson's address is c/o Health Insurance Plan of Greater New York, 7
West 34th Street, New York, NY 10001-8190.
(6) Mr. Schwartz's address is P. O. Box 424 Ridge Road, Tuxedo Park, New York
10987.
(7) Pilgrim Baxter & Associates, Ltd. has filed a Schedule 13G with the
Commission dated February 12, 1998 (the "Pilgrim Schedule 13G"). Based upon
the Pilgrim Schedule 13G, the address of such beneficial owner is 825
Duportail Road, Wayne, PA 19087. The Pilgrim Schedule 13G discloses that
such beneficial owner has sole voting power with respect to 3,664,623
shares of Common Stock, shared voting power with respect to 4,250,673
shares of Common Stock, and sole dispositive power with respect to
4,250,673 shares of Common Stock.
(8) FMR Corp., Edward C. Johnson 3d and Abigail P. Johnson have filed a
Schedule 13G with the Commission dated February 14, 1998 (the "FMR Schedule
13G"). Based upon the FMR Schedule 13G, the address of such beneficial
owners is 82 Devonshire Street, Boston, MA 02109. The FMR Schedule 13G
discloses that such beneficial owners have sole voting power with respect
to 73,300 shares of Common Stock and sole dispositive power with respect to
3,437,400 shares of Common Stock.
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Alan Turtletaub and Marc Turtletaub, directors and executive officers of
the Company, are the general partners in a general partnership which has a
one-half interest in a joint venture which is the lessor of the Company's
corporate headquarters in Union, New Jersey. During the past three years, the
Company has occupied approximately 50,000 square feet in Union under a lease
expiring in the year 2007. The annual rent under the lease, subject to certain
adjustments, is approximately $1,200,000.
The Company also has leased office space in Sacramento, California from a
partnership, the general partner of which is a corporation in which Marc
Turtletaub is a majority shareholder. The annual rent under this lease, which
expired in March 1998, was $110,000, $203,000 and $203,000 for the years ended
December 31, 1997, 1996 and 1995, respectively.
Because of the control by Alan Turtletaub and Marc Turtletaub over the
Company's operations, the above-described transactions were not the result of
arm's-length negotiations between independent parties. Additional or modified
agreements, arrangements or transactions may be entered into by the Company and
Alan Turtletaub and/or Marc Turtletaub from time to time in the future. Any such
future agreements, arrangements and transactions will be determined through
negotiations between the parties thereto. However, the Company will not enter
into any transaction with Marc Turtletaub or Alan Turtletaub or any other
director or executive officer, or with any affiliate of any of them, unless such
transaction has been approved by at least a majority of the independent
directors of the Company.
Diane Mansolillo, sister of William S. Templeton, a director and executive
officer of the Company, is a Regional Vice President of the Home Equity Loan
division. For 1997, Diane Mansolillo's compensation (including bonuses and stock
option exercises, but excluding Company contributions under the Profit Sharing
Plan) was approximately $349,000.
In October 1997, Mr. Puglisi was required to relocate to Sacramento,
California from Union, New Jersey. The Company assisted Mr. Puglisi in such
relocation. At the time, the Company also agreed to lend Mr. Puglisi $100,000,
after the payment of any taxes, all of which was advanced in 1997. The loan does
not bear interest and, therefore, the Company agreed to reimburse Mr. Puglisi
for any resulting income tax liability. One-third of the then current amount
outstanding under the loan will be forgiven in October 1998, another one-third
in 1999 and the final one-third in 2000.
The Company has adopted a policy of encouraging its employees to obtain
their mortgage financing from the Company. Pursuant to such policy, the Company
has written first and second mortgage loans for various employees, including,
from time to time, certain of its directors and executive officers and certain
members of their immediate families, other relatives and business associates.
Mortgages originated by the Company under the above policy are generally pooled
together with other mortgages originated by the Company in the ordinary course
of its business and sold in the secondary market as publicly offered
pass-through certificates. The Company also usually retains the right to service
the loans. Generally, the interest rates offered pursuant to this policy are
lower than rates offered to the Company's other borrowers, but are in excess of
the rate the Company believes it will have to pay to the institutional investors
to whom such loans are usually sold. When making these loans to employees, the
Company does not necessarily evaluate the specific rates otherwise available to
its employees if those employees were to obtain loans directly from the
Company's institutional investors or from other third parties. The maturities of
such loans range from 15 to 30 years. While such loans are generally made with
respect to primary residences, the Company has made loans with respect to other
properties, including investment properties because the Company believes that
such policy generates goodwill and loyalty among its employees. the Company
expects to continue such policy for the foreseeable future because the Company
believes that such policy generates goodwill and loyalty among its employees.
The following table sets forth certain information with respect to all
mortgage loans made by the Company to directors and executive officers of the
Company, or to members of their immediate families, other relatives or
associates, where the amount owing to the Company at any time during the year
ended December 31, 1997 exceeded $60,000:
<PAGE>
<TABLE>
<CAPTION>
NAMES OF BORROWERS AND TYPE DATE ORIGINAL
RELATIONSHIPS TO THE OF OF INTEREST PRINCIPAL OTHER
COMPANY (IF ANY) LOAN ORIGINATION RATE AMOUNT(1) INFORMATION
William S. Templeton (a director)
and Luz Amanda Templeton, his
<S> <C> <C> <C> <C> <C>
wife........................................... 1st Mtge. 09/14/93 7.50% $168,800(2) Investment Property
Michael H. Benoff (Senior Vice
President)..................................... 1st Mtge. 10/01/93 7.50% $137,000(3) Principal Residence
1st Mtge. 11/01/97 8.99% $400,000(4) Principal Residence
Paul I. Leliakov (President of Commercial
Loan subsidiaries)............................. 1st Mtge. 10/14/93 7.50% $ 94,000(5) Principal Residence
Diane J. Mansolillo (Regional Vice
President---Home Equity Loan subsidiaries
and sister of William S. Templeton)............ 1st Mtge. 03/25/94 7.85% $143,600(6) Principal Residence
2nd Mtge. 03/25/94 7.85% $ 36,000(7) Principal Residence
Anthony L. Watson (Director)................... 2nd Mtge. 09/30/92 8.25% $142,000(8) Investment Property
Fashion Mag Apparel, Inc.
(a principal stockholder is the son
of Morton Dear, a director).................... SBA 05/23/95 10.25% $250,000(9) SBA Loan
Adjusted
Quarterly
John A. Reeves (Senior Vice
President).................................. 2nd Mtge. 07/12/96 9.65% $ 77,000(10) Principal Residence
William S. Templeton and
Randall Oliver................................. 2nd Mtge. 09/21/95 11.00% $ 35,000(11) Investment Property
William S. Templeton and
Randall Oliver................................. 1st Mtge. 04/25/97 9.50% $178,000(12) Investment Property
William S. Templeton and 2nd Mtge. 09/21/95 11.00% $ 35,000(13) Investment Property
Randall Oliver...........................
William S. Templeton and 1st Mtge. 04/25/97 9.50% $135,000(14) Investment Property
Randall Oliver...........................
William S. Templeton and 1st Mtge. 01/27/93 9.00% $205,500(15) Investment Property
Randall Oliver...........................
William S. Templeton and 2nd Mtge. 08/30/88 10.75% $ 26,400(16) Investment Property
Randall Oliver...........................
William S. Templeton and 1st Mtge. 09/14/93 7.50% $168,800(17) Investment Property
Randall Oliver...........................
- ----------
(1) The original principal amount of these loans also represents the largest
aggregate amount of indebtedness of the borrowers pursuant to the loans
presented since the date of origination thereof.
(2) As of December 31, 1997, no amount was outstanding pursuant to this loan.
(3) As of December 31, 1997, no amount was outstanding pursuant to this loan.
(4) As of December 31, 1997, approximately $400,000 was outstanding pursuant to
this loan.
(5) As of December 31, 1997, approximately $90,000 was outstanding pursuant to
this loan.
(6) As of December 31, 1997, approximately $138,000 was outstanding pursuant to
this loan.
(7) As of December 31, 1997, approximately $30,000 was outstanding pursuant to
this loan.
(8) As of December 31, 1997, approximately $112,000 was outstanding pursuant to
this loan.
(9) As of December 31, 1997, approximately $245,000 was outstanding pursuant to
this loan.
(10) As of December 31, 1997, no amount was outstanding pursuant to this loan.
(11) As of December 31, 1997, approximately $34,300 was
outstanding pursuant to this loan.
(12) As of December 31, 1997, approximately $177,000 was
outstanding pursuant to this loan.
(13) As of December 31, 1997, approximately $34,300 was
outstanding pursuant to this loan.
(14) As of December 31, 1997, approximately $134,200 was
outstanding pursuant to this loan.
(15) As of December 31, 1997, approximately $195,600 was
outstanding pursuant to this loan.
(16) As of December 31, 1997, approximately $15,400 was
outstanding pursuant to this loan.
(17) As of February , 1997, no amount was outstanding pursuant
to this loan.
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereto duly authorized.
Dated: May 13, 1998 THE MONEY STORE INC.
By: /S/ MICHAEL H. BENOFF
Michael H. Benoff
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
