<PAGE> 1
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
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
EXSTAR FINANCIAL CORPORATION
- - - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
- - - --------------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
- - - --------------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
- - - --------------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
- - - --------------------------------------------------------------------------------
5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
- - - --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
1) Amount Previously Paid:
- - - --------------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
- - - --------------------------------------------------------------------------------
4) Date Filed:
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<PAGE> 2
EXSTAR FINANCIAL CORPORATION
-----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 16, 1997
-----------------
To the Stockholders of
EXSTAR FINANCIAL CORPORATION
The Annual Meeting of Stockholders of Exstar Financial Corporation (the
"Company") will be held at 9:00 a.m., local time, on Tuesday, September 16,
1997, at the Los Olivos Grand Hotel, 2860 Grand Avenue, Los Olivos, California.
A Proxy and a Proxy Statement for the Annual Meeting are enclosed. The Annual
Meeting is for the following purposes:
(1) To elect two Class II directors to the Company's Board of Directors;
and
(2) To transact such other business as may properly come before the Annual
Meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on Friday, August
15, 1997 as the record date for determining stockholders entitled to notice of,
and to vote at, the Annual Meeting. Information concerning the matters to be
acted upon at the Annual Meeting is set forth in the accompanying Proxy
Statement.
By order of the Board of Directors,
RICHARD G. KERSTEN
Secretary
Solvang, California
August 22, 1997
ALL STOCKHOLDERS ARE URGED TO ATTEND THE MEETING IN PERSON OR BY PROXY.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE COMPLETE, SIGN
AND DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE
PAID ENVELOPE FURNISHED FOR THAT PURPOSE.
<PAGE> 3
EXSTAR FINANCIAL CORPORATION
2029 VILLAGE LANE
SOLVANG, CALIFORNIA 93463-2275
(805) 688-8013
-----------------
PROXY STATEMENT
-----------------
ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 16, 1997
The accompanying proxy is solicited by the Board of Directors of Exstar
Financial Corporation, a Delaware corporation (the "Company"), for use at the
Annual Meeting of Stockholders (the "Annual Meeting") to be held at 9:00 a.m.,
local time, on Tuesday, September 16, 1997, at the Los Olivos Grand Hotel, 2860
Grand Avenue, Los Olivos, California, and any adjournments thereof. This Proxy
Statement and accompanying form of proxy were first released to stockholders on
or about August 22, 1997.
VOTING SECURITIES; PROXIES; REQUIRED VOTE
VOTING SECURITIES. The Board of Directors has fixed the close of business
on August 15, 1997, as the record date for the determination of stockholders
entitled to notice of, and to vote at, the Annual Meeting or any adjournments
thereof. As of August 15, 1997, the record date for determining stockholders
entitled to notice of, and to vote at, the Annual Meeting, the Company had
4,961,500 shares of Common Stock, par value $.01 per share (the "Common
Stock"), outstanding. The outstanding shares of Common Stock constitute the
only voting securities of the Company entitled to be voted at the Annual
Meeting. Holders of Common Stock are entitled to one vote per share on all
matters to come before the Annual Meeting.
PROXIES. Steven C. Shinn, the person named as proxy on the proxy card
accompanying this Proxy Statement, was selected by the Board of Directors of
the Company to serve in such capacity. Mr. Shinn is the President and a
director of the Company. Each executed and returned proxy will be voted in
accordance with the directions indicated thereon, or if no direction is
indicated, such proxy will be voted in accordance with the recommendations of
the Board of Directors contained in this Proxy Statement. Each stockholder
giving a proxy has the power to revoke it at any time before the shares it
represents are voted. Revocation of a proxy is effective upon receipt by the
Secretary of the Company of either (i) an instrument revoking the proxy, or
(ii) a duly executed proxy bearing a later date. Additionally, a stockholder
may change or revoke a previously executed proxy by voting in person at the
Annual Meeting.
REQUIRED VOTE. A majority of the outstanding shares of the Company's
Common Stock voting in person or by proxy constitutes a quorum. The
affirmative vote of the holders of a plurality of the shares represented at the
Annual Meeting in person or by proxy is required to elect a nominee for
director. Stockholders will not be allowed to cumulate their votes in the
election of directors.
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the election inspectors appointed for the meeting, who will determine whether
or not a quorum is present. Abstentions and broker non-votes will be included
in determining the presence of a quorum, but will have no effect on the voting
on the proposal to elect directors.
<PAGE> 4
ELECTION OF DIRECTORS
The Company's Board of Directors consists of four directors. Article
Fifth of the Company's Certificate of Incorporation provides that the Board of
Directors will be classified with respect to the terms for which its members
hold office by dividing the members into three classes. At the 1997 Annual
Meeting, two Class II directors will be elected for a term of three years
expiring at the 2000 Annual Meeting. Nominees Steven C. Shinn and David W.
Fleming are presently serving as directors of the Company.
The Board of Directors recommends that the stockholders vote IN FAVOR
of the election of Mr. Shinn and Mr. Fleming to serve as directors of the
Company. Unless otherwise directed, proxies will be voted "FOR" the election
of Mr. Shinn and Mr. Fleming.
The two directors whose terms of office do not expire in 1997 will
continue to serve after the 1997 Annual Meeting until such time as their
respective terms of office expire or their successors are duly elected and
qualified. See "Executive Officers and Other Directors" below.
If at the time of the Annual Meeting either of the nominees is unable
or declines to serve, the persons named in the proxy will vote for such
substitute nominee as the Board of Directors recommends, or vote to allow the
vacancy created thereby to remain open until filled by the Board, as the Board
recommends. The Board of Directors has no reason to believe that the nominees
will be unable or will decline to serve as directors if elected.
The vote of the holders of a plurality of shares represented in person
or by proxy at the Annual Meeting, or any adjournments thereof, provided a
quorum is present, will be required to elect the nominees as directors. Each
stockholder will be entitled to vote the number of shares of Common Stock held
as of the record date by the stockholder. Peter J. O'Shaughnessy, who owns
65.3% of the outstanding Common Stock of the Company, has advised the Company
that he intends to vote for both of the nominees to the Board of Directors.
NOMINEES
The names of the nominees for the office of director, together with
certain information concerning the nominees, are set forth below:
<TABLE>
<CAPTION>
SERVED AS
NAME AGE POSITION WITH COMPANY DIRECTOR SINCE
------------------------------ ------- ------------------------------------- ------------------
CLASS II DIRECTORS
TERM TO EXPIRE IN 2000
<S> <C> <C> <C>
Steven C. Shinn 49 President and a Director 1988 (1)
David W. Fleming (2)(3) 62 Director 1994
- - - ------------------
</TABLE>
(1) Director of the Company (or one or more of its predecessor organizations)
since 1988.
(2) Member and Chairman of Audit Committee.
(3) Member of Compensation Committee.
Mr. Shinn has served as President of the Company since September 1993.
He served as an Executive Vice President of the Company (or its predecessor
organizations) from its formation in 1988 until September 1993. Mr. Shinn has
been a director of the Company (or its predecessor corporations) since its
formation in 1988. Mr. Shinn has been a director of Alpine Insurance Company,
an Illinois property and casualty insurance company ("Alpine"), which is an
indirect subsidiary of the Company, since 1987. He was an executive officer of
Alpine from 1987 to June 1993 and has been its President since September 1996.
Mr. Shinn was also an executive officer of Transco Syndicate #1 Ltd.
2
<PAGE> 5
("Syndicate") from 1987 to June 1993 and served as its President from September
1996 through December 1996. The Syndicate was a subsidiary of the Company
through which the Company previously conducted insurance business. However,
effective December 31, 1996, the Syndicate merged its operations with its
wholly-owned subsidiary, Alpine, and changed its name to Alpine Holdings, Inc.
Mr. Shinn has been an executive officer and director of TCO Insurance Services,
a California corporation ("TCO-CA") since 1987, and was an executive officer
and director of TCO Insurance Services, Inc., an Illinois corporation
("TCO-IL"), from 1987 to June 1993. TCO-CA and TCO-IL are subsidiaries of TCO
Holdings, Inc. ("TCO Holdings"), a Delaware corporation affiliated with, but
not owned by, the Company. TCO-CA, TCO-IL, TCO Holdings and their affiliates,
other than the Company and its subsidiaries, are sometimes collectively
referred to herein as "TCO". Mr. Shinn has served as a director of Advanced
Hardware Architectures, Inc., a designer of computer chips located in Pullman,
Washington, since 1989.
Mr. Fleming has been of counsel to the law firm of Latham & Watkins
since 1992. From 1960 to 1992, he was a senior partner at the law firm of
Fleming and Ingalls in the San Fernando Valley region. Mr. Fleming has been
Vice President of the Los Angeles City Board of Fire Commissioners since 1993
and Chairman of Valley Presbyterian Hospital since 1988. He has been a
director of Valley Industry and Commerce Association ("VICA") for 25 years and
served as VICA's Chairman from 1988 to 1990.
EXECUTIVE OFFICERS AND OTHER DIRECTORS
The following table sets forth certain information with respect to
each of the executive officers of the Company and the directors who will
continue to serve as directors of the Company after the Annual Meeting until
their terms of office expire or until their successors are elected and
qualified:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
- - - ---------------------------- ------- -------------------------------------------------------------
<S> <C> <C>
Peter J. O'Shaughnessy 55 Chief Executive Officer, Chairman of the Board and a Director
Mark Rosenberg 46 Senior Vice President and Chief Financial Officer
Richard G. Kersten 51 Senior Vice President, Secretary and General Counsel
Frank A. Johnson(1)(2) 62 Director
- - - ------------------
</TABLE>
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
Mr. O'Shaughnessy has served as the Chief Executive Officer and Chairman of
the Board of the Company (or its predecessor organizations) since its formation
in 1988, and served as its President from 1988 to September 1993. Mr.
O'Shaughnessy's term as a director expires in 1998. Mr. O'Shaughnessy has been
Chairman of the Board of Alpine since 1988 and was an Executive Vice President
of Alpine from 1986 to June 1993. Mr. O'Shaughnessy has served as Chairman of
the Board of the Syndicate and was President of the Syndicate from 1985 to June
1993. He has been Chairman of the Board and Chief Executive Officer of TCO-CA
since 1977 and was President of TCO-CA and its predecessors from 1977 to
September 1993. He has also been a director of TCO-IL since 1987. From 1986
to December 1993, Mr. O'Shaughnessy was a member of the Board of Trustees of
the Illinois Insurance Exchange ("IIE"), and a member, as well as chairman, of
a number of committees of the IIE Board.
Mr. Rosenberg has served as Chief Financial Officer and Senior Vice
President of the Company since January 1, 1997. From 1988 to 1997, he served
as Controller and Reinsurance Manager of TCO-CA. Mr. Rosenberg has been a
director of Alpine since September 1996.
3
<PAGE> 6
Mr. Kersten served as a Director of Exstar from its formation in 1988 until
1992, and has served as a director and/or Senior Vice President, Secretary and
General Counsel of Alpine, the Syndicate and TCO since the inceptions of these
companies.
Mr. Johnson was appointed as a Director of the Company by the Board of
Directors on August 6, 1997. His term expires in 1998. Mr. Johnson is the
President of RSA Soil Products, a wholesale distributor of soil products, which
he founded in 1954. He is also the President of Sutter Enterprises, a trucking
company for RSA Soil Products, a position he has held since its formation in
1969.
BOARD MEETINGS. During the years ended December 31, 1995 and 1996, the
Board of Directors held 15 and 4 meetings, respectively (including taking
action by written consent). No director attended fewer than 75% of the total
number of board meetings held (during the period for which he was a director)
or 75% of the total number of committee meetings held (during the period for
which he was a committee member) during each of such periods.
COMMITTEES OF THE BOARD OF DIRECTORS. In March 1993 the Board of Directors
established an Audit Committee. The Audit Committee generally has
responsibility for recommending independent auditors to the Board for
selection, reviewing the plan and scope of the accountants' audit, reviewing
the Company's audit and control functions and reporting to the full Board of
Directors regarding all of the foregoing. During 1995, the Audit Committee,
which was then comprised of Mr. Fleming and another independent director held 5
meetings, at which both members were present. During 1996, the Company's Board
of Directors included only one independent director, and, thus, the Board did
not maintain an Audit Committee. The Audit Committee currently consists of
Messrs. Fleming and Johnson.
In February 1995, the Board of Directors established a Compensation
Committee which generally has the responsibility to establish the overall
compensation policies to be followed by the Board of Directors and recommends
the compensation of the Company's key employees. In 1995, the Compensation
Committee (which was then comprised of Mr. Fleming and another independent
director) held 5 meetings, at which both members were present. During 1996,
the Company's Board of Directors included only one independent director, and,
thus, the Board did not maintain a Compensation Committee. During 1996, the
full Board of Directors participated in deliberations concerning executive
officer compensation. The Compensation Committee is currently comprised of
Messrs. Fleming and Johnson.
EXECUTIVE OFFICERS
All executive officers of the Company are identified in the tables entitled
"Election of Directors--Nominees" and "--Executive Officers and Other
Directors."
The executive officers are elected by the Board of Directors of the Company
annually and such officers serve at the discretion of the Board of Directors.
See "Executive Compensation." There are no family relationships among any of
the directors or executive officers of the Company.
Section 16(a) of the Securities Exchange Act of 1934 ("1934 Act"), as
amended, requires the Company's executive officers, directors and persons who
own greater than ten percent of a registered class of the Company's equity
securities ("Reporting Persons") to file reports of ownership and changes in
ownership with the SEC and any exchange on which the Company's securities may
be listed. Reporting Persons are required by SEC regulations to furnish the
Company with copies of all Section 16(a) forms they file. Based solely on a
review of the forms it has received and on written representations from certain
Reporting Persons that no such forms were required for them, the Company
4
<PAGE> 7
believes that during the year ended December 31, 1996, the Reporting Persons
complied with all filing requirements applicable to them, except as described
below.
In 1996, Mr. Shinn inadvertently failed to timely file a report on Form 5
for 1995. The Form 5, which was required to be filed by February 14, 1996, was
filed April 15, 1996.
EXECUTIVE COMPENSATION
GENERAL
From the date of the Company's initial public offering through the end of
December 1994, neither the Company nor any of its subsidiaries had any
compensated employees. During that period, employees of TCO (including
individuals who were executive officers of the Company) performed all
administrative, management, underwriting, finance, claims, investment and other
services for the Company and its subsidiaries pursuant to a Master Agreement
entered into in December 1992 in connection with the Company's initial public
offering ("Master Agreement") and management agreements between TCO-IL and the
Company. Under these management agreements, TCO-IL received commissions based
upon fixed percentages of the gross premium, profit and invested assets of
Alpine and the Syndicate; its compensation was not based on the time devoted,
or services provided, to the Company by TCO personnel. Further, the
compensation received by the Company's executive officers from TCO was not
directly related to services provided by them to the Company or to the results
of the Company's operations. Neither the Company nor any of its subsidiaries
paid any salary to the Company's executive officers in 1994. All such
executive officers were remunerated directly by TCO, in their capacities as
employees of TCO.
In early 1995, the Company adopted certain accounting changes which
affected its historical and future consolidated financial statements prepared
in accordance with GAAP. As a result of one of these changes, decreases in
TCO's stockholder's equity are treated as expenses of the Company, even though
TCO is not a subsidiary of the Company. Conversely, certain increases in TCO's
stockholder's equity in any period result in increases in the Company's net
income in such period, provided that the aggregate increase in the Company's
net income as a result of increases in TCO's stockholder's equity does not
exceed the aggregate amount of losses previously recognized by the Company as a
result of TCO's operations. In view of these GAAP accounting changes and the
direct impact that TCO's changes in stockholder's equity have on the Company's
GAAP financial statements, the Company elected to provide the information
required by Item 402 of Regulation S-K with respect to compensation received by
its executive officers from TCO for 1994.
Effective January 1, 1995, the Company's executive officers became direct
employees of the Company, and, as such, began to receive compensation directly
from the Company. Each such individual continued to hold the offices and
directorships he previously held with TCO, and certain of such individuals
continued to receive salaries from TCO until August 1, 1996.
Effective August 1, 1996, portions of the compensation paid to the
Company's executive officers were allocated to and reimbursed to the Company by
Transre Insurance Services ("Transre") and Exstar E&S Insurance Services
("E&S"), two entities which are affiliated with, but are not subsidiaries of,
the Company. The Company directly pays such amounts solely for administrative
convenience. The amounts paid by Transre and E&S are not in any way related to
the Company's results or the time devoted, or services provided, to the
Company. Accordingly, such amounts reimbursed by Transre and E&S are not
reflected in the body of the Summary Compensation Table below.
5
<PAGE> 8
SUMMARY COMPENSATION
The following table provides information concerning the annual and other
compensation for services in all capacities to the Company and TCO (but not for
services to Transre or E&S) for 1996, 1995 and 1994 of those persons who were
at December 31, 1996 (i) the Chief Executive Officer of the Company, (ii) two
executive officers of the Company whose salaries exceeded $100,000 for 1996 and
(iii) two executive officers who left the employ of the Company during 1996,
for whom, but for that fact, disclosure would have been required (collectively,
the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
ANNUAL
COMPENSATION AWARDS
------------ ------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION OPTIONS COMPENSATION
POSITION YEAR ($) ($) ($) (#) ($)
- - - -------------------------- ---- --------- ----- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Peter J. O'Shaughnessy, 1996 665,462(1) -- 33,532(2) -- --
Chairman of the Board, 1995 1,314,052(3) -- 79,569(4) -- --
Chief Executive Officer 1994 1,004,159(5) -- 208,746(6) -- --
Steven C. Shinn, President 1996 207,310(7) -- -- 13,175(8) --
1995 237,522 -- -- 13,175(8) --
1994 200,310(5) -- -- 26,352(8) --
Richard G. Kersten, 1996 129,945(9) -- -- -- --
Senior Vice President, 1995 156,625(5) -- -- -- --
General Counsel and 1994 148,550(5) -- -- -- --
Secretary
Craig L. Rice (10) 1996 100,475 -- -- -- 42,764(11)
1995 194,249 -- -- -- --
1994 190,310(5) -- -- -- --
John T. Clark (12) 1996 105,528(13) -- -- -- --
1995 135,237 -- -- -- --
1994 119,998 -- -- -- --
</TABLE>
__________________
(1) Includes $37,505 paid by TCO. The TCO companies are not subsidiaries of
the Company and are directly or indirectly wholly owned by Mr.
O'Shaughnessy. Excludes $123,175 paid by the Company in 1996 but
reimbursed to the Company by Transre and E&S.
(2) This amount is attributable to various services and benefits provided to
Mr. O'Shaughnessy by TCO ($23,818) and by the Company ($9,714).
(3) Includes $592,347 paid by TCO.
(4) This amount is attributable to various services and benefits provided to
Mr. O'Shaughnessy by TCO ($37,569) and by the Company ($42,000).
(5) Paid by TCO.
(6) This amount is attributable to various services and benefits provided to
Mr. O'Shaughnessy by TCO ($195,899) and by the Company ($12,847). Of the
amount paid by TCO, $79,589 is attributable to salaries of certain
individuals for the performance of maintenance services for Mr.
O'Shaughnessy or his family in connection with a venture unrelated to the
Company.
(7) Excludes $20,740 paid by the Company in 1996 but reimbursed to the Company
by Transre and E&S.
(8) The indicated number reflects issued and outstanding shares of the
Company's Common Stock which were owned by TCO and which were available for
purchase upon the exercise of options granted under the TCO Insurance
Services 1992 Stock Incentive Plan ("TCO Plan"). Such options were
terminated by mutual agreement of Mr. Shinn and TCO effective April 1,
1997.
(9) Includes $81,817 paid by TCO. Excludes $12,032 paid by the Company in 1996
but reimbursed to the Company by Transre and E&S.
6
<PAGE> 9
(10) Employment terminated during 1996. Mr. Rice was the Executive Vice
President, Chief Financial Officer and Treasurer of the Company.
(11) Represents payments made pursuant to a consulting agreement entered
into by the parties in connection with the lawsuit against the
Company's former auditors after Mr. Rice left the employ of the
Company.
(12) Employment terminated during 1996. Mr. Clark was the Senior Vice
President (Regulatory Matters) of the Company.
(13) Excludes $7,804 paid by the Company in 1996 but reimbursed to the
Company by Transre and E&S.
Effective January 1, 1997, and again effective July 1, 1997, the
Company reduced the portions of the salaries of its executive officers paid by
the Company. The salaries payable by the Company for 1997 are: (i) $200,000
for Mr. O'Shaughnessy (plus an additional $300,000 allocated to and payable by
Transre and E&S), (ii) $190,313 for Mr. Shinn (plus an additional $72,187
allocated to and payable by Transre and E&S); and (iii) $107,953 for Mr.
Kersten (plus an additional $46,300 allocated to and payable by Transre and
E&S). The foregoing amounts do not take into account any bonuses, options or
other non-salary compensation paid or that could be paid during the year.
OPTION GRANTS IN 1996
No stock options or stock appreciation rights were granted by the
Company in 1996. TCO granted Mr. Shinn options in 1996 to purchase 13,175
shares of the Company's Common Stock from TCO pursuant to the TCO Plan.
AGGREGATED OPTION EXERCISES AND YEAR-END 1996 OPTION VALUES
No options or stock appreciation rights were exercised by the Named
Officers in 1996. The following table provides information on unexercised
options held by the Named Officers at December 31, 1996. All of such options
were granted pursuant to the TCO Plan.
YEAR-END 1996 OPTION VALUES
<TABLE>
<CAPTION>
NUMBERS OF SHARES VALUE OF
UNDERLYING UNEXERCISED UNEXERCISED IN-THE-MONEY
OPTIONS AT 12/31/96 OPTIONS AT 12/31/96
(#) ($)(1)
------------------------- -------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- - - ------------------------- ------------------------- -------------------------
<S> <C> <C>
Peter J. O'Shaughnessy 0/0 0/0
Steven C. Shinn 75,450/37,725 0/0
Richard G. Kersten 18,323/9,165 0/0
Craig L. Rice 36,646/18,329 0/0
John T. Clark 18,323/9,165 0/0
- - - ------------------
</TABLE>
(1) There were no "in-the-money" options at December 31, 1996.
TERMINATION OF TCO PLAN OPTIONS AND NEW OPTION GRANTS IN 1997
Prior to April 1, 1997, TCO owned 536,000 shares of the Company's
common stock. Of this amount, 274,781 shares were the subject of options
issued by TCO to TCO employees, Company employees and others. The exercise
price of such options was $2.73 per share, and options for all but 916 of the
shares were fully vested. In connection with the Company's hiring and
continuing employment of the former employees of TCO, effective April 1, 1997,
all such TCO options were terminated, and the 536,000 shares of the Company's
Common Stock owned by TCO were transferred to the Company for a total payment
of $5,360. Generally in exchange for the transfer, and also effective April 1,
1997, the Company agreed to issue incentive stock options with respect to
400,000 shares of the Company's Common Stock to employees of the Company and
its affiliates, including options with respect to 215,682 shares to replace
options previously issued by TCO and options with respect to 184,314 additional
shares. Of the options granted by the Company, options with respect to 50,000
shares were issued to Mr. O'Shaughnessy, options with respect to 146,350 shares
were issued to Mr. Shinn (126,350 of which were
7
<PAGE> 10
issued to replace options previously issued under the TCO Plan), options with
respect to 16,000 shares were issued to Mark Rosenberg, the Company's Chief
Financial Officer (1,374 of which were issued to replace options previously
issued under the TCO Plan), and options with respect to 27,488 shares were
issued to Mr. Kersten (all of which were issued to replace options previously
issued under the TCO Plan). The vesting periods for these options generally
run through at least January 1, 1999, and the exercise prices for these options
are $1.40 per share. In addition, the Company agreed to issue non-qualifying
stock options with respect to 59,099 shares of the Company's Common Stock to
persons not employed by the Company or its affiliates to replace vested options
previously issued by TCO. All such non-qualifying stock options are
immediately exercisable and have exercise prices of $1.40 per share.
EMPLOYMENT AGREEMENT
In 1994, TCO-CA entered into an employment agreement with Mr. Shinn
which initially had a term ending August 31, 1996. Pursuant to the agreement,
Mr. Shinn agreed to serve as President of both TCO-CA and the Company. The
employment agreement was terminated by mutual agreement of the parties on
August 6, 1997. Notwithstanding the termination of the employment agreement,
Mr. Shinn continues to be employed by and serve as President of the Company.
DIRECTOR COMPENSATION
Non-management directors receive $15,000 per year paid in quarterly
installments of $3,750, and $1,000 per day for each day they attend a board
meeting or a committee meeting. Non-employee directors are also eligible to
receive options under the Exstar Financial Corporation 1995 Directors Stock
Option Plan; no options have been granted to such directors under this plan.
REPORT ON EXECUTIVE COMPENSATION
COMPENSATION POLICIES TOWARD EXECUTIVE OFFICERS
In determining executive officer compensation for 1996, the Board of
Directors aimed to provide competitive levels of compensation that relate
compensation with the Company's annual and long-term performance goals,
recognize individual initiative and achievements and assist the Company in
attracting and retaining qualified executives. In reducing the compensation
for the Named Executive Officers for 1996, the Board of Directors considered
the Company's performance in relation to the performances of comparable
companies in the insurance industry.
EXECUTIVE OFFICER COMPENSATION
The compensation for Mr. Shinn and the other executive officers,
including the Named Executive Officers, for 1996 were determined by the Board
of Directors based on subjective evaluations of each individual officer's
performance and the Company's performance.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. O'Shaughnessy's compensation for 1996 was determined by the Board
of Directors based on a subjective evaluation of his performance and the
Company's performance.
COMPENSATION COMMITTEE
Peter J. O'Shaughnessy
Steven C. Shinn
David W. Fleming
8
<PAGE> 11
PERFORMANCE GRAPH
The graph set forth below compares the cumulative total stockholder
return on the Common Stock of the Company from December 18, 1992 through
December 31, 1996 with the cumulative total return on the Nasdaq Market Index
and an index of publicly traded companies included in the Standard Industrial
Classification Code #633 (Fire, Marine and Casualty Insurance) (the "Peer
Group"), over the same period (assuming the investment of $100 in the Common
Stock and each index at its closing on December 18, 1992 and the reinvestment
of all dividends, if any). For calendar year 1992, the graph set forth below
represents only the period from December 18, 1992 (the date of the Company's
initial public offering) through December 31, 1992. For calendar year 1996,
the graph set forth below represents only the period from January 1, 1996
through July 18, 1996 (the date the Company's Common Stock was delisted from
the Nasdaq National Market).
9
<PAGE> 12
COMPARISON OF CUMULATIVE TOTAL RETURN
OF COMPANY, INDUSTRY INDEX AND BROAD MARKET
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
- - - ------------------------------ -----------------------------------
COMPANY 1992 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
EXSTAR FINANCIAL CORP. 100 101.79 75.00 33.93 8.04 5.36
SIC. INDUSTRY INDEX 100 115.27 121.55 122.66 177.77 217.84
NASDAQ MARKET 100 100.98 121.13 127.17 164.96 204.98
</TABLE>
The Company has selected the Peer Group rather than a published
industry index because it believes that the Peer Group companies more
accurately reflect the company's market segment and size. In management's
view, the published indices considered either included companies in insurance
businesses (such as life, medical and title insurance) which are not comparable
to the Company's business or were dominated by companies with much larger
market capitalizations.
CERTAIN TRANSACTIONS
In June 1995, TCO acquired from Mr. O'Shaughnessy, its sole
stockholder, a five acre parcel of real estate in satisfaction of amounts
advanced to Mr. O'Shaughnessy during the second quarter of 1995. The purchase
price, $285,000, was equal to Mr. O'Shaughnessy's basis in the property. The
appraised value of the parcel as of the date of transfer was $325,000.
During July 1995, the Company acquired from Mr. O'Shaughnessy eight
parcels ranging in size from 20 to 28 acres for which the off-site improvements
had been completed. The property was acquired subject to a first trust deed to
an unrelated financial institution in the amount of $595,000. Also during July
1995, the Company acquired from Mr. O'Shaughnessy an eight acre residential
property with a house and other improvements. This property was acquired
subject to existing indebtedness of $1,126,000 and $644,000 to unrelated
financial institutions, secured by first and second trust deeds, respectively.
The purchase prices, as approved by the disinterested members of the Company s
board
10
<PAGE> 13
of directors, were equal to Mr. O'Shaughnessy's costs in the properties, which
were $1,114,000 in the case of the eight parcels (compared to an appraised
value as of the date of transfer of $1,045,000) and $2,125,000 in the case of
the residential property (compared to an appraised value as of the date of
transfer of $2.8 million). If the properties are sold for less than the
Company s costs, Mr. O'Shaughnessy has agreed to reimburse the Company for the
differences. If the properties are sold at amounts less than their appraised
values as of the dates they were acquired by the Company but more than their
costs, any excess of proceeds (less costs to carry and sell the properties)
over their costs will be paid to Mr. O'Shaughnessy. If the properties are sold
for more than their appraised values as of the dates they were acquired by the
Company, the excess over appraised values will be shared between the Company
and Mr. O'Shaughnessy. During 1996, the Company sold six of the eight parcels
for net proceeds of $623,000. As of December 31, 1996, Mr. O'Shaughnessy would
have a liability to the Company of $213,000 based on such sales, though his
ultimate liability, if any, will not be determined or payable until all of the
properties have been sold. At December 31, 1996 the appraised values of the
remaining parcels and the eight acre residential property totaled $2.7 million.
Effective July 1995, the Company leased the eight acre residential property to
Mr. O'Shaughnessy, which lease was terminated effective June 30, 1996. Rental
income with respect to the eight acre residential property from Mr.
O'Shaughnessy included in the income statements for the years ended December
31, 1996 and 1995 was $42,000 in each year. The rent for 1996 was settled
though accruing an amount due from TCO, and TCO's adding the accrued amount to
Mr. O'Shaughnessy's loan. The 1995 rent was treated as income to Mr.
O'Shaughnessy with the Company recording compensation expense offset by rental
income. Effective July 1996, the Company leased a different residential
property included in real estate held for sale to Mr. O'Shaughnessy. Rental
income from Mr. O'Shaughnessy on this property included in the income statement
for the year ended December 31, 1996 was approximately $19,000, which amount
was paid in cash by Mr. O'Shaughnessy. Rental income on the property included
in the income statement from January 1997 through July 1997 was approximately
$22,000, substantially all of which has been paid in cash by Mr.
O'Shaughnessy. During 1997, the principal amount of Mr. O'Shaughnessy's loan
to TCO increased by $100,000.
During each of 1995 and 1996, in consideration of TCO s meeting its
repayment obligations under a loan agreement entered into by the Company and TCO
in December 1993 ("Loan Agreement"), the Company released 170,000 of the shares
of the Company's Common Stock then pledged to secure TCO s obligations under the
Loan Agreement. As of December 31, 1996, 160,000 shares of the Company's Common
Stock owned by TCO were still pledged under the Loan Agreement. Effective April
1, 1997, the Company acquired all of the shares of its Common Stock owned by TCO
(536,000 shares) from TCO, including the 160,000 shares pledged at December 31,
1996, for a total payment of $5,360.
The Master Agreement sets forth a number of rights and
responsibilities between the Company and TCO and covers, among other things,
the circumstances under which the Company has the option to acquire certain TCO
operations. Under the terms of the Master Agreement, the Company has the
option to acquire these operations in the event that, among other things,
TCO-IL becomes insolvent or unable to continue operations. The purchase price,
based on formulas defined in the Master Agreement, is to be equal to the sum of
a multiple of the operations' then book value, plus a multiple of the
operations' then revenues unrelated to the Company, net of certain expenses.
Management believes the Company s right to acquire the TCO operations has been
triggered, but has not elected to exercise such right.
Since the end of 1995, the Company believes it has had a number of
rights and remedies it could potentially assert against or with respect to TCO
under the Master Agreement, the management agreements, the Loan Agreement and a
lease between the Syndicate and TCO-CA. Among other things, the Company (i)
could have asserted its right to acquire TCO or TCO s operations or otherwise
asserted
11
<PAGE> 14
its remedies under the Master Agreement, (ii) could have, because TCO s
financial condition apparently breached certain financial covenants of the Loan
Agreement, asserted its right to accelerate TCO s loan payments or otherwise
asserted its remedies under the Loan Agreement, and (iii) could have asserted
its rights under the lease to require that TCO-CA continue as lessee or pay
damages. Additionally, the Company believes TCO failed to pay the Syndicate
and Alpine $9.7 million of agents balances due in accordance with the terms
and conditions of the management agreements. As a result, the Company could
have sought to assert its remedies, including retaining ownership of TCO s
renewals, under the management agreements.
The Company determined to forego asserting the foregoing or other
rights it could have asserted under the Master Agreement, the management
agreements, the Loan Agreement, the lease or otherwise. In lieu thereof, the
Company agreed to termination of the management agreements, subject to a final
determination of obligations and liabilities between the Company and TCO, and
to the termination of the lease. The management agreement between Alpine and
TCO was terminated effective July 31, 1996. The management agreement between
TCO and the Syndicate was terminated effective December 31, 1996 (except with
respect to the profit sharing provision which was terminated effective
September 30, 1996).
In addition, the Company agreed to accept certain business assets and
receivables of TCO in satisfaction of certain obligations owed to the Company
and Alpine under the Loan Agreement. As of December 31, 1996, TCO owed
principal of $2.2 million to the Company and $2.4 million to Alpine pursuant to
the Loan Agreement. In June 1997, the Company's Board of Directors approved
the Company's acceptance of furniture, fixtures and computer hardware and
systems of TCO with a book value of approximately $36,000 and a current
appraised value of approximately $2.4 million in repayment of principal owed to
the Company under the Loan Agreement. In addition, TCO satisfied its payment
obligations to the Company and Alpine in the first and second quarters of 1997,
in part, through the transfer to the Company and Alpine of TCO's rights in
interest receivable from an unaffiliated insurer under an Insurance
Underwriting Management Agreement between TCO and the unaffiliated insurer
dated April 1, 1987. The amounts of interest payable by TCO to the Company and
Alpine under the Loan Agreement not otherwise paid in cash (and,
correspondingly, the amounts of receivables transferred) in the first and
second quarters of 1997 were $80,000 and $64,000, respectively. No resolution
has yet been reached with respect to the principal amount of TCO's debt to
Alpine.
Further, in lieu of exercising its rights under the Master Agreement,
the management agreements, the Loan Agreement or otherwise, the Company agreed
to allow certain remaining assets of TCO to be used by Transre and Claims
Control Corporation ("Claims Control"), which are subsidiaries of TCO Holdings,
and E&S, a company wholly owned by Peter O'Shaughnessy. The assets are being
used to produce insurance and handle claims for United Capitol Insurance
Company (together with its affiliates, "UCIC"), which agreed, effective April
1, 1997, to cede to Alpine as a reinsurer a portion of such insurance.
The Company has also consented to TCO s use of certain of TCO s assets
and cash flows, that the Company otherwise might have attempted to claim for
itself, to satisfy obligations to third parties, including tax obligations,
obligations to an unaffiliated insurance company, obligations owed to the
holder of preferred stock of TCO Holdings, and obligations under an office
lease to which TCO is subject. It is anticipated that such obligations will be
satisfied, in whole or in part, from (i) a portion of any profits realized by
Transre and E&S under the Limited Agency Agreement (as defined below), and (ii)
a fee paid to TCO Holdings in connection with the Quota Share Arrangement (as
defined below). Mr. O'Shaughnessy may have contingent liability with respect
to certain of these TCO obligations, and, consequently, may benefit from their
satisfaction through the use of such assets and cash flows.
12
<PAGE> 15
Pursuant to the respective management agreements between the Syndicate
and TCO and Alpine and TCO, commissions and fees, including profit sharing,
credited by the Syndicate and Alpine to TCO totaled $5,582,000, $24,672,000 and
$18,956,000 in 1996, 1995 and 1994, respectively. The management agreements
were terminated in 1996.
During 1987, the Syndicate and Alpine issued a policy to provide
stop-loss coverage on business written by an unaffiliated insurer and produced
by TCO. As consideration, the Syndicate and Alpine are entitled to 2.5% of the
unaffiliated insurer s written premium on the business. Total written premium
subject to the stop-loss coverage was $345,000, $1,320,000 and $2,253,000 in
1996, 1995 and 1994, respectively. Both the Syndicate and Alpine have
furnished the unaffiliated insurer with letters of credit fully collateralized
by fixed maturity investments, certificates of deposit and other short-term
investments in the amount of $7,900,000 as of December 31, 1996, 1995 and 1994,
to provide security for their and TCO's performance in connection with this
arrangement. Since July 1, 1992, as consideration for the letters of credit
provided by the Syndicate and Alpine, the Company has been receiving the
interest earned on funds on deposit with the unaffiliated insurance company.
As additional consideration, TCO has assigned to the Company any contingent
amounts from the unaffiliated insurance company up to $1.0 million per year.
The Company did not receive any amounts under this arrangement in 1997 (through
July 31), 1996 or 1995. The Company received $1.3 million in 1994 under this
arrangement.
The Company owns two office buildings in Solvang, California. The
Company, until June 1996, leased the two office buildings to TCO. The rental
income from TCO included in the income statements for the years ended December
31, 1996, 1995, and 1994 was $228,000, $584,000 and $577,000, respectively.
The lease was terminated in 1996, as described above.
Effective as of April 1, 1997, Alpine entered into a casualty quota
share reinsurance agreement ("Quota Share Arrangement") with UCIC. In
connection with the Quota Share Arrangement, Alpine has agreed to pay UCIC a
ceding commission of 30% of the premium assumed by Alpine. This ceding
commission is to compensate UCIC for expenses incurred by UCIC generally in
obtaining the insurance which is subject to the Quota Share Arrangement. In
addition, Transre and E&S have entered into a Limited Agency Agreement
("Limited Agency Agreement") with UCIC pursuant to which Transre and E&S
produce for UCIC business of the type previously produced for the Company by
TCO-IL. UCIC pays Transre and E&S a fee of 27.5% of the premium produced by
them pursuant to the Limited Agency Agreement. The ceding commission paid by
Alpine, consequently, may indirectly benefit Transre and E&S, as well as the
employees of Alpine whose compensation is paid in part by reimbursements to
Alpine from Transre and E&S. In addition, effective April 1, 1997, Alpine and
TCO Holdings entered into a Service Agreement under which Alpine agreed to pay
to TCO Holdings a fee equal to 3.75% of the reinsurance premiums received by
Alpine from UCIC pursuant to the Quota Share Arrangement. In return, TCO
Holdings agreed to perform certain services for Alpine in connection with the
structuring, consummation and administration of the Quota Share Arrangement.
Such fee is expected to be utilized by TCO Holdings for the satisfaction of
obligations to certain third parties not affiliated with the Company.
The Syndicate contracted under an underwriting management agreement
with Camelback Reinsurance Underwriters, Inc., a subsidiary of TCO Holdings
("Camelback"), to assume premiums on various treaties for which Camelback was
the underwriting manager. The Syndicate's total premiums assumed pursuant to
those treaties were $147,000, $1,150,000 and $1,257,000 in 1996, 1995 and 1994,
respectively. The contract was terminated during 1996, and Camelback is in the
process of winding up its operations.
The Syndicate and Alpine derived premiums on insurance produced for
them by Trinity E&S Insurance Services, a company majority owned by Mr.
O'Shaughnessy ("Trinity"). The gross premiums
13
<PAGE> 16
derived by the Syndicate and Alpine from Trinity were $1,575,000, $5,726,000
and $4,452,000 in 1996, 1995 and 1994, respectively.
During 1991, the Company made construction loans to Trinity for
construction of a new office building. The outstanding loan balances at
December 31, 1996 and 1995, were $1,096,000 and $1,105,000, respectively. The
outstanding loan balance at July 31, 1997 was $1,089,000.
14
<PAGE> 17
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of July 31, 1997, certain
information with respect to the beneficial ownership of Exstar Common Stock by
(i) each person known by the Company to own beneficially more than five percent
of the outstanding shares of Common Stock, (ii) each director and nominee, and
(i/ii) all Company executive officers, directors and nominees as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES BENEFICIALLY PERCENT OF
NAME AND ADDRESS OWNED(1) OWNERSHIP
---------------------- ------------------------------ -----------
<S> <C> <C>
Peter J. O'Shaughnessy 3,244,967(2) 65.18%
1460 Calzada Avenue
Santa Ynez, CA 93460
Steven C. Shinn 120,483(3) 2.4%
705 Mesa Drive
Solvang, CA 93463
David W. Fleming 10,000 *
c/o Latham & Watkins
10 Universal City Plaza
Suite 2570
Universal City, CA 91608-1002
Richard G. Kersten 9,163(4) *
Mark Rosenberg 5,333(4) *
Frank A. Johnson -- --
All executive officers,
directors and nominees as
a group (6 persons) 3,389,946(5) 67.2%
- - - ------------------
</TABLE>
(1) Unless otherwise indicated below, the persons in the above table have sole
voting and investment power with respect to all shares shown as
beneficially owned by them.
(2) Includes 16,667 shares issuable upon the exercise of vested options.
(3) Includes 48,783 shares issuable upon the exercise of vested options.
(4) Represents shares issuable upon the exercise of vested options.
(5) Includes a total of 79,946 shares issuable upon the exercise of vested
options owned by Messrs. O'Shaughnessy, Shinn, Kersten and Rosenberg.
* Less than 1%.
OTHER MATTERS
STOCKHOLDER LIST. A list of stockholders entitled to vote at the
Annual Meeting, arranged in alphabetical order, showing the address of and
number of shares registered in the name of each stockholder, will be open to
the examination of any stockholder, for any purpose germane to the Annual
Meeting, during ordinary business hours, commencing September 6, 1997 and
continuing through the date of the Annual Meeting, at the principal offices of
the Company, 2029 Village Lane, Solvang, California 93463-2275 and at the Los
Olivos Grand Hotel, 2860 Grand Avenue, Los Olivos, California 93441.
SOLICITATION. The cost of this proxy solicitation will be borne by
the Company. The Company may also request banks, brokers, fiduciaries,
custodians, nominees and certain other record holders to send proxies, proxy
statements and other materials to their principals at the Company's expense.
Such banks, brokers, fiduciaries, custodians, nominees and other record holders
will be reimbursed by the Company for their reasonable out-of-pocket expenses
of solicitation. The Company does not anticipate that costs and expenses
incurred in connection with this proxy solicitation will exceed an amount
normally
15
<PAGE> 18
expended for a proxy solicitation for an election of directors in the absence
of a contest. This Proxy Statement and the accompanying proxy materials are
being sent to stockholders on or about August 22, 1997.
PROPOSALS OF STOCKHOLDERS. Proposals of stockholders intended to be
considered at the 1998 Annual Meeting of Stockholders must be received by the
Secretary of the Company not less than 120 days nor more than 150 days prior to
August 22, 1998.
OTHER BUSINESS. The Board of Directors is not aware of any other
matters to be presented at the September 16, 1997 Annual Meeting of
Stockholders other than those mentioned in the Company's Notice of Annual
Meeting of Stockholders enclosed herewith. If any other matters are properly
brought before the meeting, however, it is intended that the persons named in
the proxy will vote as the Board of Directors directs.
ANNUAL REPORT TO STOCKHOLDERS. The Company's Annual Report to
Stockholders for the fiscal year ended December 31, 1996 containing financial
and other information pertaining to the Company is being furnished to
stockholders simultaneously with the Proxy Statement. The Financial Statements
of the Company contained in the Annual Report are incorporated herein by
reference.
ADDITIONAL INFORMATION. The Company will furnish without charge a
copy of its Annual Report on Form 10-K for its fiscal year ended December 31,
1996, as filed with the SEC upon the written request of any person who is a
stockholder as of the record date. Requests for such materials should be
directed to Exstar Financial Corporation, 2029 Village Lane, Solvang,
California 93463-2275, Attention: Richard G. Kersten.
By order of the Board of Directors
RICHARD G. KERSTEN
Secretary
16
<PAGE> 19
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
<TABLE>
<S> <C>
EXSTAR FINANCIAL THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
CORPORATION
2029 VILLAGE LANE, SOLVANG, TO VOTE AT THE ANNUAL MEETING IN ACCORDANCE WITH THE RECOMMENDATIONS
CALIFORNIA 93463-2275 OF THE BOARD OF DIRECTORS OF EXSTAR FINANCIAL CORPORATION, SIGN AND
PROXY FOR THE ANNUAL DATE THE REVERSE SIDE OF THIS CARD WITHOUT CHECKING ANY BOX.
MEETING OF STOCKHOLDERS
TO BE HELD ON The undersigned holder of Common Stock, par value $.01 per share, of
SEPTEMBER 16, 1997 Exstar Financial Corporation (the "Company") hereby appoints Steven C.
Shinn as proxy to cast all votes which the undersigned stockholder is
entitled to cast at the Annual Meeting of Stockholders (the "Annual
Meeting") to be held on Tuesday, September 16, 1997, at 9:00 a.m.,
local time, at the Los Olivos Grand Hotel, 2860 Grand Avenue, Los
Olivos, California, and at any adjournments thereof, upon the
following matters. The undersigned stockholder hereby revokes any
proxy or proxies heretofore given.
1. ELECTION OF DIRECTORS [ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees listed below
(INSTRUCTION: To withhold authority to vote for any individual nominee strike a line through the nominee's name
in the list below)
STEVEN C. SHINN DAVID W. FLEMING
If a nominee becomes unavailable for election or unable to serve as a director, the votes will be cast for a
person that will be designated by the Board of Directors of the Company.
</TABLE>
2. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the Annual Meeting, or any
adjournments thereof.
(continued, and to be signed, on reverse side.)
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
(continued from other side)
This proxy, when properly executed, will be voted in the manner as directed
herein by the undersigned stockholder. UNLESS CONTRARY DIRECTION IS GIVEN, THIS
PROXY WILL BE VOTED FOR PROPOSAL 1 AND IN ACCORDANCE WITH THE DETERMINATION OF
THE BOARD OF DIRECTORS AS TO OTHER MATTERS. The undersigned stockholder may
revoke this proxy at any time before it is voted by delivering to the Corporate
Secretary of the Company either a written revocation of the proxy or a duly
executed proxy bearing a later date, or by appearing at the Annual Meeting and
voting in person. The undersigned stockholder hereby acknowledges receipt of the
Notice of Annual Meeting of Stockholders and Proxy Statement.
PLEASE MARK, SIGN, DATE AND RETURN THIS CARD PROMPTLY USING THE ENCLOSED
ENVELOPE. If you receive more than one proxy card, please sign and return ALL
cards in the enclosed envelope.
---------------------------
Dated:
---------------------------
Signature of Stockholder or
Authorized Representative
---------------------------
Signature (if held jointly)
Please date and sign exactly as the name appears hereon. When signing as
executor, administrator, trustee, guardian, attorney-in-fact or other fiduciary,
please give title as such. When signing as corporation, please sign in full
corporate name by President or other authorized officer. If you sign for a
partnership, please sign in partnership name by an authorized person.
