<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c), Rule 14a-12
WALNUT FINANCIAL SERVICES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
WALNUT FINANCIAL SERVICES, INC.
8000 Towers Crescent Drive
Suite 1070
Vienna, Virginia 22182
________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
________________
TO BE HELD ON DECEMBER __, 1998
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Stockholders (the
"Annual Meeting") of Walnut Financial Services, Inc. (the "Company") will be
held on _______________, December _____, 1998 at 10:00 a.m. at
_________________________________________________________________ for the
following purposes:
1. To elect seven directors of the Company to serve until the 1999
Annual Meeting of Stockholders and until their respective successors are duly
elected and qualified;
2. To ratify the selection of Richard A. Eisner & Company, LLP as the
Company's independent auditors;
3. To approve the Amendment to the Company's Articles of Incorporation to
effect a single reverse stock split of the Common Stock, such that each of a
whole number of not less than three nor more than six issued and outstanding
shares of Common Stock are converted into one share of common stock of the
Company, subject to the discretion of the Board of Directors to select a whole
number within such range and to determine whether to file such Amendment and to
effect such a reverse stock split; and
4. To consider and act upon any other matters that may properly be brought
before the 1998 Annual Meeting and at any adjournments or postponements
thereof.
Any action may be taken on the foregoing matters at the 1998 Annual
Meeting on the date specified above, or on any date or dates to which the 1998
Annual Meeting may be adjourned, or to which the 1998 Annual Meeting may be
postponed.
The Board of Directors has fixed the close of business on November __,
1998 as the record date for the 1998 Annual Meeting. Only stockholders of
record of the Company's Common Stock at the close of business on that date will
be entitled to notice of and to vote at the 1998 Annual Meeting and at any
adjournments or postponements thereof.
You are requested to fill in and sign the enclosed Proxy Card, which is
being solicited by the Board of Directors, and to mail it promptly in the
enclosed postage-prepaid envelope. Any proxy may be revoked by delivery of a
later dated proxy. Stockholders of record who attend the Annual Meeting may
vote in person, even if they have previously delivered a signed proxy.
By Order of the Board of Directors
Vienna, Virginia Joshua S. Kanter
November __, 1998 Secretary
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN, DATE AND
PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE POSTAGE-PREPAID ENVELOPE
PROVIDED. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU
WISH, EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 3
WALNUT FINANCIAL SERVICES, INC.
8000 Towers Crescent Drive
Suite 1070
Vienna, Virginia 22182
________________
PROXY STATEMENT
________________
FOR THE 1998 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER __, 1998
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Walnut Financial Services, Inc. (the
"Company") for use at the 1998 Annual Meeting of Stockholders of the Company to
be held on __________, December __, 1998, and at any adjournments or
postponements thereof (the "Annual Meeting"). At the Annual Meeting,
stockholders will be asked to vote on the election of seven directors of the
Company and the other matters discussed in this Proxy Statement and to act on
any other matters properly brought before them.
This Proxy Statement and the accompanying Notice of Annual Meeting and
Proxy Card are first being sent to stockholders on or about November __, 1998.
The Board of Directors has fixed the close of business on November __, 1998 as
the record date for the 1998 Annual Meeting (the "Record Date"). Only
stockholders of record of the Company's common stock, par value $0.01 per share
(the "Common Stock"), at the close of business on the Record Date will be
entitled to notice of and to vote at the Annual Meeting. As of the Record
Date, there were 19,811,178 shares of Common Stock outstanding and entitled to
vote at the Annual Meeting. Holders of Common Stock outstanding as of the
close of business on the Record Date will be entitled to one vote for each
share held by them.
STOCKHOLDERS OF THE COMPANY ARE REQUESTED TO COMPLETE, SIGN, DATE AND
PROMPTLY RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED POSTAGE-PREPAID
ENVELOPE. SHARES REPRESENTED BY A PROPERLY EXECUTED PROXY CARD RECEIVED PRIOR
TO THE VOTE AT THE ANNUAL MEETING AND NOT REVOKED WILL BE VOTED AT THE ANNUAL
MEETING AS DIRECTED ON THE PROXY CARD. IF A PROPERLY EXECUTED PROXY CARD IS
SUBMITTED AND NO INSTRUCTIONS ARE GIVEN, THE PERSONS DESIGNATED AS PROXY
HOLDERS ON THE PROXY CARD WILL VOTE (I) FOR THE ELECTION OF THE SEVEN NOMINEES
FOR DIRECTORS OF THE COMPANY NAMED IN THIS PROXY STATEMENT, (II) FOR THE
RATIFICATION OF THE SELECTION OF RICHARD A. EISNER & COMPANY, LLP AS THE
COMPANY'S INDEPENDENT AUDITORS, (III) FOR THE AUTHORIZATION AND APPROVAL OF THE
AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION TO EFFECT A SINGLE REVERSE
STOCK SPLIT SUCH THAT EACH OF A WHOLE NUMBER OF NOT LESS THAN THREE NOR MORE
THAN SIX ISSUED AND OUTSTANDING SHARES OF THE COMMON STOCK ARE CONVERTED INTO
ONE SHARE OF COMMON STOCK OF THE COMPANY AS DISCUSSED IN THIS PROXY STATEMENT;
AND (IV) IN THEIR OWN DISCRETION WITH RESPECT TO ANY OTHER BUSINESS THAT MAY
PROPERLY COME BEFORE THE STOCKHOLDERS AT THE ANNUAL MEETING. IT IS NOT
ANTICIPATED THAT ANY MATTERS OTHER THAN THOSE SET FORTH IN THE PROXY STATEMENT
WILL BE PRESENTED AT THE ANNUAL MEETING.
The presence, in person or by proxy, of holders of at least a majority of
the total number of outstanding shares of Common Stock entitled to vote is
necessary to constitute a quorum for the transaction of business at the Annual
Meeting. The affirmative vote of the holders of a plurality of the votes cast
with a quorum present at the Annual Meeting is required for the election of
directors (Proposal I). The affirmative vote of the holders of a majority of
the votes cast with a quorum present at the Annual Meeting is required for
Proposals II, III and any other matters to be brought before the stockholders
at the Annual Meeting. Abstentions and broker non-votes will not be counted as
votes cast and, accordingly, will have no effect on the vote required although
both will count towards the presence of a quorum.
<PAGE> 4
A stockholder of record may revoke a proxy at any time before it has been
exercised by filing a written revocation with the Secretary of the Company at
the address of the Company set forth above, by filing a duly executed proxy
bearing a later date, or by appearing in person and voting by ballot at the
Annual Meeting. Any stockholder of record as of the Record Date attending the
Annual Meeting may vote in person whether or not a proxy has been previously
given, but the presence (without further action) of a stockholder at the Annual
Meeting will not constitute revocation of a previously given proxy.
THE COMPANY'S 1997 ANNUAL REPORT ON FORM 10-K ("ANNUAL REPORT"), INCLUDING
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997, WAS MAILED TO
STOCKHOLDERS ON OR ABOUT APRIL 30, 1998. THE ANNUAL REPORT, HOWEVER, IS NOT
PART OF THE PROXY SOLICITATION MATERIAL. ADDITIONAL COPIES OF THE ANNUAL
REPORT AND ANY QUARTERLY REPORT ON FORM 10-Q, TOGETHER WITH EXHIBITS, ARE
AVAILABLE WITHOUT CHARGE UPON REQUEST IN WRITING TO WALNUT FINANCIAL SERVICES,
INC., 8000 TOWERS CRESCENT DRIVE, SUITE 1070, VIENNA, VIRGINIA 22182,
ATTENTION: INVESTOR RELATIONS OR BY FILLING OUT THE ENCLOSED SELF-ADDRESSED
POSTAGE PAID CARD SPECIFICALLY DESIGNED FOR REQUESTING A COPY OF THE ANNUAL
REPORT.
INTRODUCTION TO PROPOSALS
The stockholders of the Company are being asked to consider and vote upon
three items. Directors and the Company's independent auditors are presented
for election and ratification, respectively, to the stockholders annually. All
director nominees currently serve as directors and the selected independent
auditor has served as the Company's independent auditor since 1995. The third
item being presented to the stockholders is extraordinary. The stockholders
are being asked to authorize and approve an amendment to the Company's Articles
of Incorporation to effect a reverse stock split. Management is presenting
this item to the stockholders in an effort to avoid the Nasdaq Stock Market,
Inc. delisting the Common Stock from the Nasdaq Stock Market, Inc. National
Market System, where such shares are currently listed and traded.
PROPOSAL I
ELECTION OF DIRECTORS
The Board of Directors of the Company consists of seven members with the
directors serving for a term of one year and until their successors are duly
elected and qualified. The terms of all directors expire at each annual
meeting of stockholders.
At the Annual Meeting, all seven directors will be elected to serve until
the 1999 Annual Meeting of Stockholders and until their successors are duly
elected and qualified. The Board of Directors has nominated Burton W. Kanter,
Joel S. Kanter, William F. Burge, III, Gene E. Burleson, Solomon A. Weisgal,
Albert Morrison, Jr. and Earl Chapman to be directors (the "Nominees"). Each
of the Nominees served as a director of the Company since the 1997 Annual
Meeting of Stockholders. Each of the Nominees has consented to be named as a
nominee in this Proxy Statement. The Board of Directors anticipates that each
of the Nominees will serve as a director if elected. However, if any person
nominated by the Board of Directors is unable or unwilling to accept election,
the proxies will vote for the election of such other person or persons as the
Board of Directors may recommend.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE NOMINEES.
2
<PAGE> 5
INFORMATION REGARDING DIRECTOR NOMINEES AND EXECUTIVE OFFICERS
The following biographical descriptions set forth certain information with
respect to the Nominees for election as directors at the Annual Meeting and the
executive officers of the Company, based on information furnished to the
Company by each Nominee or executive officers. The following information is as
of November __, 1998, unless otherwise specified.
<TABLE>
<CAPTION>
<S> <C> <C>
Name Age Title
- --------------------- --- ----------------------------------------
Burton W. Kanter* 68 Director (Chairman) and Nominee
Joel S. Kanter* 41 Chief Executive Officer, President,
Director and Nominee
William F. Burge, III 57 Director and Nominee
Solomon A. Weisgal 71 Director and Nominee
Gene E. Burleson* 57 Director and Nominee
Albert Morrison, Jr. 61 Director and Nominee
Earl Chapman 73 Director and Nominee
Robert F. Mauer 44 Treasurer
Joshua S. Kanter* 36 Secretary and General Counsel
====================================================================
</TABLE>
* Such individuals may be deemed to be "interested persons" as such term is
defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended
(the "1940 Act").
BURTON W. KANTER Director since 1995
Mr. Kanter has served as a Director of the Company since February 27,
1995 and the Chief Executive Officer of Walnut Capital Corp., a Delaware
corporation ("Walnut Capital"), a subsidiary of the Company, since
February 27, 1995. He has been a director of Walnut Capital since 1983,
and was the President of Walnut Capital between 1987 and February 27,
1995, and Treasurer of Walnut Capital from January 1994 until February
27, 1995. Mr. Kanter is of counsel to Neal Gerber & Eisenberg, a
Chicago, Illinois law firm. From 1961 through 1985, Mr. Kanter was a
partner in the law firm of Kanter & Eisenberg or its predecessor firms.
He is the author of numerous articles and a frequent lecturer in the
field of Federal income taxation, and founder and senior editor of the
nationally known column in the Journal of Taxation called "Shop Talk."
He is a member of the faculty of the University of Chicago Law School.
He is a director of numerous companies, including the following public
companies: First Health Group Corp., Scientific Measurement Systems,
Inc., and Logic Devices Incorporated. He is a member of the Board of
Directors or the Board of Trustees of: the Midwest Film Center of the
Chicago Art Institute, the Chicago International Film Festival, and the
Museum of Contemporary Art of Chicago. He is also on the advisory board
of the Wharton School of the University of Pennsylvania Real Estate
Center and the University of Chicago Annual Tax Conference. Mr. Kanter
is the father of Joel S. Kanter and Joshua S. Kanter.
JOEL S. KANTER Director since 1995
Mr. Kanter has been a Director and the President of the Company since
February 27, 1995 and has been the Chief Executive Officer of the Company
since April 15, 1996. From 1988 to February 27, 1995,
3
<PAGE> 6
Mr. Kanter was a consultant to Walnut Capital. Mr. Kanter has been
President and a director of Walnut Capital since February 27, 1995. Mr.
Kanter has served as President of Windy City, Inc. ("WCI"), a privately
held investment firm, since July 1986. From 1978 through 1979, Mr. Kanter
served as a Legislative Assistant to Congressman Abner J. Mikva (D-Ill.)
specializing in Judiciary Committee affairs. From 1980 through 1982, Mr.
Kanter served as a Special Assistant to the National Association of
Attorneys General, representing that organization's positions in the
criminal justice and environmental arenas. From 1982 through 1984, Mr.
Kanter served as Staff Director of the House Subcommittee on Legislative
Process chaired by Congressman Gilles D. Long (D-La.). In that capacity,
he also lent assistance to the House Democratic Caucus which was also
chaired by Congressman Long. From 1985 through 1986, Mr. Kanter served as
Managing Director of The Investors' Washington Service, an investment
advisory company specializing in providing advice to large institutional
clients regarding the impact of federal legislative and regulatory
decisions on debt and equity markets. Clients of The Investors'
Washington Service included Amoco Oil, AT&T, Bankers Trust, Citicorp,
Chase Manhattan Bank, Chrysler Corporation, General Motors, J.C. Penney,
and others. Mr. Kanter currently serves on the Boards of Directors of
Mariner Post-Acute Network, Inc., I-Flow Corporation, Osteoimplant
Technology, Inc., Encore Medical Corporation and Magna-Lab, Inc., each of
which is a publicly-held company, as well as a number of private concerns.
Mr. Kanter is the son of Burton W. Kanter and the brother of Joshua S.
Kanter.
WILLIAM F. BURGE, III Director since 1995
Mr. Burge has been a Director of the Company since February 27, 1995.
Mr. Burge has been a director of Walnut Capital since 1992. He is on the
Board of Directors of Wallis State Bank, former Trustee of the University
of Houston Foundation and Tartan Corp. Recently, he was appointed
Vice-Chairman of Harris County-Houston Sports Authority. He was also
appointed to the Honorary Advisory Board of the International Business
College of Dalian, China. He is also a Board member and past Chairman
of the West Houston Association. Since 1980, he has been a Board member
of Sky Ranch and Vice Chairman of the Harris County Housing Finance
Corporation. Since 1970, Mr. Burge has served as Managing Director and
Vice Chairman of the Board of Directors of Mitsubishi Estate Company
Associates, USA, as well as President and Managing Director of Ayrshire
Corp. From 1987 through 1997, Mr. Burge was Chairman of the Houston
Metropolitan Transit Authority Board of Directors. He also has
experience in commercial and residential real estate development in
Houston, Dallas, New York, New Orleans, Atlanta and Los Angeles. He is
on the advisory board of the Wharton School of the University of
Pennsylvania Real Estate Center and a member of the Urban Land Institute.
GENE E. BURLESON Director since 1996
Mr. Burleson has been a Director of the Company and a director of Walnut
Capital since June 1996. Mr. Burleson served as Chairman of the Board and
Chief Executive Officer of GranCare, Inc., from 1994 to 1997. Following
the merger of GranCare, Inc.'s pharmacy operations with Vitalink Pharmacy
Services, Inc., he served as Chief Executive Officer of Vitalink Pharmacy
Services, Inc. from February 1997 to August 1997. His previous experience
included serving as President and Chief Operating Officer of American
Medical International, Inc. ("American"). Mr. Burleson is presently a
director of Decker's Outdoor Corp., Alternative Living Services Inc., and
Mariner Post-Acute Network, Inc., each publicly-held companies.
SOLOMON A. WEISGAL Director since 1995
Mr. Weisgal has been a Director of the Company since February 27, 1995.
Mr. Weisgal has been a director of Walnut Capital since 1984. Mr.
Weisgal is a Certified Public Accountant and has been President of
Solomon A. Weisgal, Ltd., a financial consulting firm, since its
inception in 1979. Mr. Weisgal is presently a director of The Alta Group
Ltd. and numerous other privately-held concerns.
4
<PAGE> 7
ALBERT MORRISON, JR. Director since 1997
Mr. Morrison has been a Director of the Company since August 13, 1997 and
a director of Walnut Capital since 1984. Mr. Morrison is President of
Morrison, Brown, Argiz & Company, Certified Public Accountants. He has
more than 30 years experience as an accountant and is a member of a
number of professional accounting institutes and associations. Mr.
Morrison is Vice Chairman of the Dade County Industrial Development
Authority, Treasurer of the Board of Trustees of Florida International
University, and a member of the Board of Directors of Chicago Holdings,
Inc., Heico Corporation, Logic Devices Incorporated and a Trustee of the
Greater Miami Chamber of Commerce.
EARL CHAPMAN Director since 1997
Mr. Chapman has been a Director of the Company and a director of Walnut
Capital since October 8, 1997. Mr. Chapman is currently the Chief
Executive Officer and Chairman of Booklines, Hawaii Ltd., a Hawaiian
distributor of books, music, video tapes and other souvenir products.
Prior to joining Booklines, Hawaii Ltd., Mr. Chapman was the Chief
Executive Officer and Chairman of SiLite Corporation, a manufacturer of
plastic food service products. Mr. Chapman serves as a member of the
Board of the Neighborhood Justice Center, a volunteer mediation agency
comprised of approximately 200 volunteer mediators.
ROBERT F. MAUER Treasurer
Mr. Mauer has been the Treasurer of the Company and Walnut Capital since
February 1996 and is currently also the Chief Financial Officer. From
1991 to February 1996, he was Director of Corporate Planning of
Washington Gas Light Company and, concurrently, Vice-President of its
non-utility subsidiaries. In this planning role, he developed the
strategic plan for the Washington Gas Light Company and was responsible
for acquisition and divestiture analysis. The non-utility subsidiaries
activities included manufacturing, contracting, home improvement and real
estate. Mr. Mauer was employed by Owens Corning from 1977 until 1991.
While there, he held a variety of financial positions that involved both
domestic and international assignments. His responsibilities included
roles of Manager of Consolidated Accounting, Controller and Treasurer of
British Operations in Wrexham, Wales, which encompassed complete
financial responsibilities of a manufacturing and import/export company.
Other financial roles included that of Assistant Treasurer in Brussels,
Belgium where he was in charge of all foreign currency transactions for
Owens Corning.
JOSHUA S. KANTER Secretary and General Counsel
Mr. Kanter has been the Secretary of the Company since February 28, 1995
and General Counsel of the Company since September 14, 1995. Mr. Kanter
has been the Assistant Secretary and General Counsel of Walnut Capital
since June 6, 1996. Since November 1997, Mr. Kanter has been Chief
Executive Officer of The Alta Group Ltd. and its wholly-owned subsidiary,
Greenway Environmental, Inc., companies specializing in waste management
services. Since June 1993, Mr. Kanter has also been of counsel to Barack
Ferrazzano Kirschbaum Perlman & Nagelberg ("BFKP&N"), a Chicago, Illinois
law firm specializing in securities, corporate and real estate law. Mr.
Kanter was an associate at that firm from September 1987 to February 1990.
Since 1986, Mr. Kanter has also been vice-president of WCI. Mr. Kanter is
the son of Burton W. Kanter and the brother of Joel S. Kanter.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth (i) the number of shares of Common Stock
beneficially owned by Burton W. Kanter, Joel S. Kanter and Robert F. Mauer
(collectively, the "Named Executive Officers"), and each of the directors of
the Company, individually, and the executive officers and directors of the
Company, as a group, and (ii)
5
<PAGE> 8
the percentage of ownership of the outstanding Common Stock represented by such
shares. Except for such persons, no owner of more than five percent (5%) of
the outstanding Common Stock is known to the Company. The share ownership is
reported as of October 31, 1998. All share numbers are provided based upon
information supplied to management of the Company by the respective individuals
and members of the group. Each person named in the table has sole voting and
investment power with respect to all shares shown as beneficially owned by such
person, except as otherwise set forth in the notes to the table.
<TABLE>
<CAPTION>
Names and Addresses of Directors Number of Percent of
and Executive Officers Shares Class
- -------------------------------- ----------- ------------
<S> <C> <C>
Burton W. Kanter(1)
Two North LaSalle St.
Suite 2200
Chicago, IL 60602 1,349,805 6.8%
Solomon A. Weisgal(2)
120 S. Riverside Plaza
Suite 1420
Chicago, IL 60606 440,057 2.2
Joel S. Kanter(3)
8000 Towers Crescent Drive
Suite 1070
Vienna, VA 22182 1,373,780 6.9
William F. Burge, III
Ayrshire Corporation
2028 Buffalo Terrace
Houston, TX 77019 0 0
Gene E. Burleson
One Ravinia Drive
Suite 1500
Atlanta, GA 30346 5,000 *
Albert Morrison, Jr.(4)
9795 South Dixie Highway
Miami, FL 33156 540,159 2.7
Earl Chapman(5)
2039 Laukahi Street
Honolulu, HI 96821 10,000 *
Robert F. Mauer(6)
8000 Towers Crescent Drive
Suite 1070
Vienna, VA 22182 56,250 *
Officers and Directors,
as a group(7) 3,608,011 18.2
</TABLE>
- ---------------------
* Less than one percent (1%).
6
<PAGE> 9
(1) The number of shares reported includes: (i) 9,017 shares owned by BWK, Inc.
("BWK"), (ii) 40,523 shares owned by Carlco, Inc. ("Carlco"), (iii) 566,098
shares owned by Mr. Kanter, not personally but solely as Co-Trustee of each
of the general partners of the HAP Trusts Partnership ("HAP"), (iv) 354,910
shares owned by The Holding Company ("THC"), (v) 40,078 shares owned by
TMT, Inc. ("TMT"), (vi) 52,500 shares owned by the Nominee Corp.
("Nominee"), (vii) Class A Warrants ("Class A Warrants") to purchase up to
36,750 shares at $1.50 per share, owned by Nominee, and (viii) options to
purchase up to 249,929 shares at $1.80 per share, all of which options are
presently exercisable.
Mr. Kanter disclaims any and all beneficial interest in any of the above
referenced shares of Common Stock owned by BWK, Carlco, HAP, THC, TMT or
Nominee. Mr. Kanter, as President of BWK, Carlco, TMT, THC, and Nominee,
has sole voting and investment control of the 497,028 shares owned by BWK,
Carlco, TMT, THC and Nominee and, upon exercise thereof, will have sole
voting and investment control over the 286,679 shares underlying Nominee's
Class A Warrants and Mr. Kanter's options. Mr. Kanter, as Co-Trustee of
each of the general partners of HAP, shares voting and investment control
of the 566,098 shares owned by HAP with his fellow co-trustee.
Each of BWK, Carlco, HAP, THC, TMT and Nominee disclaim any and all
beneficial ownership of the shares owned by the others.
(2) The number of shares reported includes: (i) 45,199 shares owned by
Cypress Lane Investments ("Cypress"), (ii) 45,199 shares owned by Nacha
Investment Company ("Nacha"), the general partners of which are individual
trusts of which Mr. Weisgal is trustee and Mr. Chapman and members of his
family are the beneficial owners, (iii) 10,000 shares owned by Cana
Investors ("Cana"), the general partners of which are Mr. Weisgal (or a
revocable trust of which he is the sole trustee and beneficiary), Mr.
Chapman (or a revocable trust of which he is the sole trustee and
beneficiary), Cypress and Nacha and (iv) 339,659 shares owned by the BRT
Partnership ("BRT"), the general partners of which are individual trusts
of which Mr. Weisgal is trustee and members of the Kanter family including
Joel S. Kanter and Joshua S. Kanter, but excluding Burton W. Kanter, are
the beneficiaries.
Mr. Weisgal disclaims any and all beneficial interest in any of the shares
owned by Nacha or BRT. As such, Mr. Weisgal has a beneficial interest only
in the 55,199 shares. Mr. Weisgal has sole voting and investment control
of the 384,858 shares owned by Nacha and BRT. Mr. Weisgal, as the trustee
of one of the general partners of Cypress, shares voting and investment
control of the 45,199 shares owned by Cypress. Mr. Weisgal, as one of the
general partners and as the trustee of two of the general partners of Cana,
shares with Mr. Chapman the voting and investment control of the 10,000
shares owned by Cana.
Each of BRT, Cana, Cypress and Nacha disclaim any and all beneficial
ownership in the shares owned by the others.
(3) The number of shares reported includes: (i) 411,993 shares owned by the
Kanter Family Foundation ("KFF"), (ii) 726,843 shares owned by WCI, (iii)
35,000 Class A Warrants owned by KFF, and (iv) options to purchase up to
199,944 shares at $1.80 per share, all of which options are presently
exercisable.
Mr. Kanter disclaims any and all beneficial interest in any of the above
referenced securities owned by KFF or WCI. Mr. Kanter, as President of KFF
and WCI, has sole voting and investment control of the 962,976 shares owned
by KFF and WCI and, upon exercise thereof, will have sole voting and
investment control over the 234,944 shares underlying KFF's Class A
Warrants and Mr. Kanter's options.
Each of KFF and WCI disclaim any and all beneficial ownership of the shares
owned by the other.
(4) The number of shares reported consists of 540,159 shares owned by
Federal Business Investment Company ("FBIC"). Mr. Morrison is the
president of FBIC and exercises sole voting and investment control over
such
7
<PAGE> 10
Common Stock. Trusts established for the benefit of members of Burton
Kanter's family (excluding Mr. Kanter) beneficially own 48% of the
outstanding common stock of FBIC. Trusts established for the benefit of
various members of Mr. Morrison's family (excluding Mr. Morrison himself)
beneficially owns 48% of the outstanding common stock of FBIC. The
remaining 4% of the outstanding common stock of FBIC and a class of
preferred stock of FBIC are beneficially owned by unrelated third parties.
Mr. Morrison disclaims beneficial interest to the 540,159 shares of Common
Stock owned by FBIC.
(5) The number of shares reported is 10,000 shares owned by Cana the
beneficial ownership of which has also been reported by Mr. Weisgal. Mr.
Chapman, as one of the general partners of Cana, shares voting and
investment control of the shares owned by Cana.
(6) The number of shares reported consists of options to purchase 50,000
shares at $2.00 per share and 6,250 shares at $2.00 per share, all of
which options are presently exercisable.
(7) Such group consists of nine persons. The number of shares reported
includes all of the shares reported at Footnotes 1 through 6, inclusive.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
SUMMARY COMPENSATION. The following table sets forth the fiscal year 1997
compensation paid by the Company, including its subsidiaries, to all of the
directors of the Company and each of the three highest paid executive officers
of the Company that received an aggregate compensation from the Company for
fiscal year 1996 in excess of $60,000. On October 15, 1997, the Company and
certain of its subsidiaries elected to become regulated as business development
companies ("BDCs") under the 1940 Act. The form of disclosure regarding
executive compensation included in this Proxy Statement is mandated by the
provisions of the 1940 Act and is different in several respects from the form
of disclosure otherwise required under the Securities Exchange Act of 1934, as
amended (the "1934 Act"). See CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
for additional amounts paid by the Company to its executive officers and their
affiliates.
8
<PAGE> 11
COMPENSATION TABLE (1997) (1)
<TABLE>
<CAPTION>
Aggregate
Compensation from
Name of Person, Position Company
- ------------------------------------------------------------------
<S> <C>
Burton W. Kanter,
Chairman of the Board $100,000
Joel S. Kanter,
President and Chief Executive Officer $250,000(2)
Robert F. Mauer,
Chief Financial Officer and Treasurer $130,000(2)
William F. Burge, III,
Director $13,500(3)
Gene E. Burleson
Director $13,500(3)
Earl Chapman,
Director $0(3)
Albert Morrison, Jr.,
Director $12,500(3)
Eugene Scalercio,
Director $67,500(4)
Solomon A. Weisgal,
Director $13,500(3)
</TABLE>
(1) Non-employee Directors of the Company other than Mr. Morrison received
compensation from the Company only. In addition, no pension or retirement
benefit is proposed to be paid to Non-employee Directors or the Named
Executives of the Company under any existing plan in the event of
retirement at normal retirement date nor were any such benefits accrued as
part of the Company's expenses. Accordingly, the columns entitled "Total
compensation from fund and fund complex paid to directors", "Estimated
annual benefits upon retirement" and "Pension or retirement benefits
accrued as part of Company's expenses" required by Item 22(b)(6)(i) of
Schedule 14A promulgated under the 1934 Act have been omitted.
(2) The Company paid bonuses of $50,000 and $30,000 to Mr. Kanter and Mr.
Mauer, respectively, in January 1998 with respect to their job performance
for the fiscal year 1997.
(3) Non-employee Directors receive meeting fees described in DIRECTOR
COMPENSATION below.
(4) Mr. Scalercio's compensation reflects his salary and other amounts paid
by NFS Services, Inc. ("NFS") during the period that such company was a
wholly-owned subsidiary of the Company. NFS was sold by the Company in
September 1997.
OPTIONS AND OTHER AWARDS. There were no options or SARs granted to any of
the directors of the Company or the Named Executives. No directors or
executive officers of the Company or its subsidiaries exercised any options
during fiscal year 1997. On October 8, 1997, the Compensation Committee
determined to reduce the exercise price to $2.00 per share of 100,000 incentive
stock options granted to Mr. Mauer in 1996 under the NFS Services, Inc. 1994
Stock Incentive Plan at an exercise price of $2.50 per share. The Compensation
Committee reasoned that this repricing would more closely align Mr. Mauer's
potential compensation with the performance of the Company and more effectively
provide an incentive for successful performance.
EMPLOYMENT AGREEMENTS WITH MANAGEMENT. The Company has entered into
employment agreements with each of Burton W. Kanter and Joel S. Kanter in the
past. Each of these agreements expired by its terms in February 1998 and has
not been renewed or replaced.
DIRECTOR COMPENSATION. During the 1997 fiscal year the Company paid its
non-employee directors $2,500 for each regularly scheduled meeting attended in
person or by telephone, $2,500 for each special meeting attended n person and
$500 for each committee meeting attended in person or by telephone. Mr.
Morrison received $2,500 for each meeting of the Board of Directors of Walnut
Capital which he attended prior to becoming a director of the Company. The
Company reimburses the directors for reasonable out-of-pocket expenses incurred
in connection with their activities on behalf of the Company. In the past, if
a director was re-elected, such director would receive, upon such re-election,
a 10-year option to purchase 6,000 shares of common stock at the market price
at the time of
9
<PAGE> 12
grant. Furthermore, any new director elected to the Board of Directors would
receive a 10-year option to purchase up to 10,000 shares of Common Stock at the
market price at the time of grant. In light of the Company's recent election
to be regulated as a BDC, its option granting policies must now be approved by
the SEC, and the Company is currently in the process of seeking such approvals.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
GENERAL. The Company is managed by a seven member Board of Directors.
The 1940 Act requires that at least a majority of the members of the board of
directors of a BDC not be "interested persons" as defined in Section 2(a)(19)
of the 1940 Act. The current non-interested persons are Messrs. Burge,
Chapman, Morrison and Weisgal. All seven seats on the Board of Directors are to
be filled at the Annual Meeting. Each director will hold office for the term
to which he is elected and until his successor is duly elected and qualified.
At each annual meeting of the stockholders of the Company, the successors to
the directors whose terms expire at that meeting will be elected to hold office
for a term continuing until the annual meeting of stockholders held in the year
following the year of their election and the election and qualification of
their successors.
The Board of Directors held 7 meetings during the 1997 fiscal year. Each
of the directors then in office attended at least 75% of the total number of
meetings of the Board of Directors and of the committees of the Board of
Directors of which he was a member except that Mr. Eugene Scalercio missed 2 of
4 meetings of the Board of Directors prior to his resignation therefrom in
August 1997.
The Board of Directors has appointed an Audit Committee, a Compensation
Committee and an Incentive Stock Option Plan Administrative Committee. Since
the end of the 1997 fiscal year, the Board of Directors has also appointed a
Finance Committee and an Investment Committee. The members of all such
committees serve at the discretion of the Board of Directors.
AUDIT COMMITTEE. The Audit Committee, which consists of Messrs. Burleson,
Burge and Weisgal, makes recommendations concerning the engagement of
independent public accountants, reviews with the independent public accountants
the plans and results of the audit engagement, approves professional services
provided by the independent public accounts, reviews the independence of the
independent public accountants, considers the range of audit and non-audit fees
and reviews the adequacy of the Company's internal accounting controls. The
Audit Committee met 1 time during the 1997 fiscal year. Mr. Weisgal is the
chairman of the Audit Committee.
COMPENSATION COMMITTEE. The Compensation Committee consists of Messrs.
Burleson, Burge and Weisgal. The Compensation Committee has the authority to
establish the compensation, benefits and perquisites for the executive
officers, directors and other employees of the Company and each of its direct
and indirect subsidiaries. The Compensation Committee met 1 time during the
1997 fiscal year. Mr. Burge is the chairman of the Compensation Committee.
INCENTIVE STOCK OPTION PLAN ADMINISTRATIVE COMMITTEE (the "Option Plan
Committee"). The Option Plan Committee consists of Messrs. Burleson, Burge and
Weisgal. The Option Plan Committee is empowered to administer the Walnut
Capital Corp. 1987 Stock Option Plan, the NFS Services, Inc. 1989 Incentive
Stock Plan and the NFS Services, Inc. (Utah) 1994 Incentive Stock Option Plan.
The Option Plan Committee met 2 times during the 1997 fiscal year. Mr.
Burleson is the chairman of the Option Plan Committee. In connection with the
Company's submission of the Company's Amended 1994 Stock Plan to the SEC for
approval as required by the 1940 Act, it is contemplated that a separate
Incentive Stock Option Plan Administrative Committee will be established solely
for purposes of the Amended 1994 Stock Plan and that the members of such new
committee will be Messrs. Burge and Weisgal.
FINANCE COMMITTEE. The Finance Committee consists of Messrs. Chapman,
Joel Kanter and Weisgal. The Financial Committee has the authority to approve
any business relationship of a certain magnitude between the
10
<PAGE> 13
Company and other entities engaged in the business of accounts receivable
factoring. The Finance Committee did not exist during the 1997 fiscal year.
Mr. Chapman is the chairman of the Financial Committee.
INVESTMENT COMMITTEE. The Investment Committee consists of Messrs.
Burleson, Joel Kanter and Weisgal. The Investment Committee has the authority
to oversee the disposition of the securities of public companies by Walnut
Capital and UPLP. The Investment Committee did not exist during the 1997 fiscal
year. Mr. Chapman is the Chairman of the Investment Committee.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has retained the firm of BFKP&N as its general counsel. Mr.
Joshua Kanter is of counsel to such firm. Walnut Capital paid approximately
$23,875 in legal fees and expenses to such firm during fiscal year 1997. In
addition, the Company paid approximately $217,800 in legal fees and expenses to
BFKP&N through December 31, 1997 and had current BFKP&N invoices outstanding as
of December 31, 1997 totaling approximately $62,775.
Walnut Capital has entered into a sublease agreement with WCI. Messrs.
Joel Kanter and Joshua Kanter are the President and Vice President,
respectively, of WCI. BRT owns all of the outstanding common stock of WCI.
Under the sublease agreement, Walnut Capital leases offices from WCI and WCI
provides Walnut Capital with secretarial and other administrative services.
The costs of the secretarial and other administrative services are included in
the sublease rental payments. Walnut Capital paid approximately $58,260 to WCI
under the sublease agreement in 1997. The sublease has a one-year term which
is renewable annually. Management believes the terms of such sublease
agreement and the amounts paid thereunder are commensurate to the amounts that
Walnut Capital would have to pay to unaffiliated third parties for comparable
leased offices and services.
THC, a company of which Burton W. Kanter is President, made an unsecured
loan to Walnut Capital in the principal amount of $400,000 bearing interest at
9.5% per annum in April 1997. BRT and trusts for the benefit of members of the
family of Mr. Burton Kanter, but excluding Mr. Burton Kanter, control a majority
of the outstanding common stock of THC. Management believes that such loan was
on terms no less favorable than the terms available from institutional lenders.
The terms of the loan were re-negotiated in 1997 and again in 1998 so that
interest continues to accrue at 9.5% per annum and the remaining principal
balance of $200,000 is to be repaid in four equal installments at the end of
each fiscal quarter of the Company beginning March 31, 1999.
The Company has a term loan from American National Bank and Trust Company
of Chicago which had an outstanding principal balance of $2,600,000 as of
December 31, 1997, following a principal payment of $250,000 on such date,
which matures in June 1999. Messrs. Burton W. Kanter and Joel S. Kanter have
personally guaranteed such term loan. In consideration for such guarantee, the
Company has agreed to pay Messrs. Kanter, in the aggregate, an amount equal to
.25% per annum of the amounts so guaranteed.
Both Universal Bridge Fund, Inc., a Delaware corporation ("UB") that is a
wholly-owned subsidiary of the Company, and a wholly-owned subsidiary of WCI
are general partners of Universal Partners, L.P., an Illinois limited
partnership ("UPLP"). The partnership agreement provides that each general
partner has the authority to bind UPLP and make decisions on behalf of UPLP.
To date, UB has primarily exercised management control over UPLP.
Pursuant to the exchange offer made December 18, 1997 to all holders of
warrants to purchase Common Stock at $3.00 per share, WCI exchanged warrants it
held to purchase 452,533 shares of Common Stock at $3.00 per share for 113,133
shares of unregistered, restricted Common Stock.
On September 29, 1997, the Company sold all of the outstanding stock of
its wholly-owned subsidiary NFS, which performs consulting and asset recovery
services, to a company owned and/or controlled by Mr. Eugene
11
<PAGE> 14
Scalercio, who had been a director of the Company until his resignation in
August 1997. Mr. Scalercio is the Chief Executive Officer of NFS.
PROPOSAL II
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The accounting firm of Richard A. Eisner & Company, LLP ("Eisner") has
served as the Company's independent auditors since March 1995. At a meeting on
September 24, 1998, the Audit Committee of the Company's Board of Directors
recommended the selection of Eisner as the Company's independent auditors for
fiscal year 1998 and the entire Board (including a majority of those directors
who are not "interested persons" of the Company within the meaning of the 1940
Act) made such selection at a meeting held in person on September 24, 1998. The
1940 Act requires that such selection be ratified by the stockholders of the
Company. A representative of Eisner will be present at the Annual Meeting, will
be given the opportunity to make a statement if he or she so desires and will be
available to respond to appropriate questions.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR RATIFICATION OF SELECTION OF
RICHARD A. EISNER & COMPANY, LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
PROPOSAL III
AUTHORIZATION AND APPROVAL OF AN AMENDMENT TO THE ARTICLES OF INCORPORATION OF
THE COMPANY TO EFFECT A REVERSE STOCK SPLIT
The Board of Directors of the Company has approved an Amendment (the
"Amendment") to the Company's Articles of Incorporation to effect a single
reverse stock split, pursuant to which each of a whole number of not less than
three nor more than six shares of Common Stock will become one share of common
stock of the Company (the "Reverse Stock Split"). The text of the proposed
Amendment to the Company's Articles of Incorporation to effect the Reverse
Stock Split is set forth in full in Exhibit A to this Proxy Statement. The
stockholders are being asked to authorize and approve this Amendment.
The authorization and approval of the stockholders is being requested
subject to certain discretion reserved to the Board of Directors of the
Company. If the requested authorization and approval is given, the Board shall
have the power to select the whole number of shares not less than three nor
more than six of Common Stock (the "Selected Number") which will be converted
into one share of common stock of the Company in the Reverse Stock Split. The
Board shall also have the authority to determine when to file the Amendment and
carry out the Reverse Stock Split, and may choose not to file the Amendment and
carry out the Reverse Stock Split at all. The Reverse Stock Split shall become
effective, if at all, upon the filing of the Amendment with Utah State
Department of Commerce, Division of Corporations and Commercial Code. The
Board's authority to file the Amendment shall terminate on the date of the
annual meeting of the stockholders of the Company next following the 1998
Annual Meeting (and any adjournments thereof) so that the Reverse Stock Split
cannot be effective if the Board does not elect to file the Amendment by such
date.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE AUTHORIZATION AND
APPROVAL OF THE AMENDMENT TO THE ARTICLES OF INCORPORATION OF THE COMPANY TO
EFFECT THE REVERSE STOCK SPLIT, SUBJECT TO THE DISCRETION OF THE BOARD OF
DIRECTORS AS SO DESCRIBED.
12
<PAGE> 15
REASONS FOR THE REVERSE STOCK SPLIT
The shares of Common Stock are listed and currently traded on the Nasdaq
Stock Market, Inc. National Market System (the "Nasdaq National Market").
Continued listing on the Nasdaq National Market requires that the shares of
Common Stock meet at least one of two sets of certain criteria, including a
closing bid price of at least $1.00 per share (the "Daily Bid Price Criteria").
The Nasdaq Stock Market, Inc. ("Nasdaq") has informed management of the Company
that if the Common Stock does not meet the Daily Bid Price Criteria for at least
ten consecutive days prior to November 27, 1998, then the Common Stock will be
delisted from trading on the Nasdaq National Market at the opening of business
on November 30, 1998. Nasdaq has also informed management that the Common Stock
meets all criteria under one set of standards to maintain the listing of the
Common Stock on the Nasdaq National Market other than the Daily Bid Price
Criteria.
Since Nasdaq informed the Company that the Common Stock may be delisted,
the closing bid price of the Common Stock has not met the Daily Bid Price
Criteria. The fall in the closing bid price of the Common Stock below $1.00
generally coincided with the unfavorable stock market conditions that prevailed
toward the end of the Summer, particularly for small capitalization stocks.
The Company, through the merger of a newly formed subsidiary, acquired Inland
Financial Services ("Inland"), an entity engaged in the business of accounts
receivable factoring, on October 19, 1998. Management anticipated that the
market price of the Common Stock would be positively impacted by this
acquisition because of its immediate positive impact on the consolidated
earnings of the Company. While a positive impact was experienced, it was not
sufficient to raise the closing bid price of the Common Stock to or above $1.00
per share. Management believes that the Common Stock may be delisted from the
Nasdaq National Market unless decisive action is taken now.
If the Common Stock ceases to be listed and traded on the Nasdaq National
Market, the Common Stock would likely thereafter be traded in the
over-the-counter market on the OTC Electronic Bulletin Board established for
securities that do not meet the Nasdaq listing requirements and also quoted in
what are commonly referred to as the "pink sheets". Common Stockholders would
likely find it more difficult to effect transactions in and to obtain accurate
quotations as to the price of Common Stock because stocks traded in such
markets generally have lower trading volume and fewer market makers than stocks
traded in the Nasdaq National Market. The spread between the bid and asked
prices for the Common Stock quoted in the OTC Electronic Bulletin Board or the
pink sheets may routinely exceed such spread quoted on the Nasdaq National
Market. In addition, if the Company's Common Stock were delisted, trading of
the Common Stock would be subject to "penny stock" rules that impose additional
sales practice requirements on broker-dealers who sell such securities.
Consequently, delisting could affect the ability of willingness of
broker-dealers to sell the Company's Common Stock and the ability of purchaser
of the Company's Common Stock to sell their securities in the secondary market.
The Company anticipates requesting that Nasdaq grant the Company an
exception from delisting for a period of time necessary to hold the 1998 Annual
Meeting of Stockholders, to file the Amendment and effect the Reverse Stock
Split if authorized and approved by the stockholders, and to permit the trading
of the common stock of the Company on the Nasdaq National Market following the
Reverse Stock Split for a period of time to determine whether the common stock
of the Company will meet the Daily Bid Price Criteria for at least ten
consecutive trading days. Management believes that the decrease in the number
of shares of common stock outstanding as a consequence of the Reverse Stock
Split will result in a corresponding increase in the price per share of the
Company's common stock that will allow the Company to satisfy the Daily Bid
Price Criteria. There can be no assurance, however, that the Reverse Stock
Split will result in the increase, if any, in the price of the common stock of
the Company sufficient to satisfy the Daily Bid Price Criteria. Under the rules
of Nasdaq, requests for hearings are granted after reasonable notice. The
Company has been informed by Nasdaq that the delisting of the Common Stock from
the Nasdaq National Market will be staid until such hearing is held. However,
there can be no assurance that the hearing panel will grant the Company its
requested exception, that the Reverse Stock Split Stock can be effected during
the time period granted in any such exception, or that the closing bid price of
the common stock of the Company will meet the Daily Bid Price Criteria for at
least ten consecutive trading days during the time period granted in any such
exception.
13
<PAGE> 16
MECHANICS OF THE REVERSE STOCK SPLIT
The Reverse Stock Split will be effected by filing an amendment to the
Company's Articles of Incorporation in the form attached hereto as Exhibit A.
Upon the filing of the Amendment, each share of the Common Stock issued and
outstanding immediately prior thereto will be reclassified as and reconstituted
as the appropriate fraction of a share of the Company's common stock equal to
one divided by the Selected Number, subject to the treatment of fractional share
interests as described below. The par value of such shares shall be $.01 per
share. Shortly after the date on which the Amendment is filed, the Company will
send transmittal forms to the holders of the Common Stock to be used in
forwarding their certificates formerly representing shares of common stock for
surrender and exchange for certificates representing whole shares of the newly
authorized common stock of the Company. Stockholders will not be required to
pay a transfer or other fee in connection with the exchange of certificates. No
certificates or script representing fractional share interests in the common
stock of the Company will be issued. All fractional shares held by a holder
after aggregating all of such holder's shares will be rounded up to the nearest
whole share.
EFFECTS OF THE REVERSE STOCK SPLIT
While the Reverse Stock Split would result in one new share of common
stock of the Company being issued for each Selected Number of presently
outstanding shares of Common Stock, each stockholder's percentage ownership
interest in the Company and proportional voting power will remain unchanged
except for minor differences resulting from rounding up for fractional shares.
The rights and privileges of the holders of shares of common stock of the
Company, including dividend rights, will otherwise be unaffected by the Reverse
Stock Split.
The Reverse Stock Split may result in some stockholders owning "odd-lots"
of less than 100 shares of Common Stock. Brokerage commissions and other costs
for transactions in odd-lots are generally higher than the cots of transactions
in "round-lots" of even multiples of 100 shares. In addition, the elapsed time
and other terms of execution for odd lots are also generally less favorable
than those for round lots.
As of November __, 1998, the Company had 50,000,000 authorized shares of
Common Stock of which 19,811,173 were issued and outstanding. Of the unissued
shares of Common Stock, an aggregate of 5,479,713 were reserved for issuance
upon the exercise of options and warrants and upon the satisfaction, if any, of
certain conditions set forth in the agreement to acquire Inland. As of November
__, 1998, 24,709,109 shares of the Common Stock remain unissued and unreserved.
The number of authorized shares of Common Stock will not be affected if
the Amendment is filed and the Reverse Stock Split is effected. The number of
issued and outstanding shares and the number of shares reserved for issuance
will be reduced. The precise number of issued and outstanding shares cannot be
calculated precisely due to the rounding of fractional shares but can be
predicted by dividing 19,811,173 by the Selected Number. The par value of the
common stock of the Company following the Reverse Stock Split will remain $.01
per share.
Since the Reverse Stock Split will not affect the number of authorized
shares of Common Stock, but will reduce the number of issued and outstanding
shares and the unissued and reserved shares, the Reverse Stock Split will
increase the number of authorized shares that have not been issued or reserved.
The Board of Directors can elect to issue such shares, so long as adequate
consideration is received therefor, without the vote of the stockholders unless
such a vote is required by the rules of the market in which such shares are
traded. The rules of the Nasdaq National Market, where the shares are currently
traded, and the rules of the Nasdaq Small Cap Market require the Company to
obtain shareholder approval of certain transactions in which the Company would
issue shares exceeding 20% of the number of shares of Common Stock outstanding
prior to such issuance. To the knowledge of management of the Company, there
are no similar requirements imposed on companies the shares of which are traded
in the over-the-counter market on the OTC Electronic Bulletin Board and/or
quoted in the pink sheets.
14
<PAGE> 17
FEDERAL INCOME TAX CONSEQUENCES
The following description of the federal income tax consequences of the
Reverse Stock Split is based upon the Internal Revenue Code of 1986, as
amended, the applicable Treasury Regulations promulgated thereunder, judicial
authority and current administrative rulings and practices as in effect on the
date of this Proxy Statement, all of which are subject to change at any time,
possibly with retroactive effect. The Company has not sought and will not seek
an opinion of counsel or a ruling from the Internal Revenue Service regarding
federal income tax consequences. This discussion is for general information
only and does not discuss consequences which may apply to special classes of
taxpayers or to specific situations of individual stockholders. Stockholders
are urged to consult their own tax advisors to determine the particular
consequences to them.
The exchange of shares of Common Stock for shares of newly authorized
common sock in the Reverse Stock Split will not cause stockholders to recognize
any gain or loss. The holding period of the shares of new Common Stock will
include the stockholder's holding period for the shares of Common Stock
exchanged therefor, provided that the shares of Common Stock were held as a
capital asset. The aggregate adjusted basis of the shares of common stock of
the Company received in the Reverse Stock Split will be the same as the
adjusted basis of the shares of Common Stock exchanged therefor.
The Company will not recognize any gain or loss from the Reverse Stock
Split.
DISSENTER'S RIGHTS
Under Utah law, stockholders are not entitled to dissenter's rights of
appraisal with respect to the Amendment or Reverse Stock Split.
OTHER MATTERS
SOLICITATION OF PROXIES. The cost of solicitation of proxies in the form
enclosed herewith will be borne by the Company. In addition to the
solicitation of proxies by mail, the directors, officers and employees of the
Company may also solicit proxies personally or by telephone without additional
compensation for such activities. The Company will also request persons, firms
and corporations holding shares in their names or in the names of their
nominees, which are beneficially owned by others, to send proxy materials to
and obtain proxies from such beneficial owners. The Company will reimburse
such holders for their reasonable expenses.
STOCKHOLDER PROPOSALS. Stockholder proposals intended to be presented at
the 1999 Annual Meeting of Stockholders must be received at the Company's
principal executive office no later than July __, 1999 in order to be
considered for inclusion in the proxy statement and on the proxy card that will
be solicited by the Board of Directors in connection with the 1999 Annual
Meeting of Stockholders so long as the 1999 Annual Meeting is held within 30
days from the date of the 1998 Annual Meeting on Stockholders. If there is
more than 30 days difference in such dates, then stockholder proposals intended
to be presented at the 1999 Annual Meeting of Stockholders and considered for
inclusion in the Board's proxy materials must be received a reasonable time
before the Company begins to print and mail its proxy materials.
OTHER MATTERS. The Board of Directors does not know of any matters other
than those described in this Proxy Statement that will be presented for action
at the Annual Meeting. If other matters are presented, it is the intention of
the persons named as proxies in the accompanying Proxy Card to vote in their
discretion all shares represented by validly executed proxies.
REGARDLESS OF THE NUMBER OF SHARES YOU OWN, YOUR VOTE IS IMPORTANT TO THE
COMPANY. PLEASE COMPLETE, SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY
CARD TODAY.
This Proxy Statement is dated November __, 1998.
15
<PAGE> 18
EXHIBIT A
ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
WALNUT FINANCIAL SERVICES, INC.
WALNUT FINANCIAL SERVICES, INC., a Corporation organized and existing
under the laws of the State of Utah hereby certifies as follows:
1. The name of the Corporation is WALNUT FINANCIAL SERVICES, INC.
2. Article IV of the Articles of Incorporation, which states the number of
shares that the Corporation shall have authority to issue, is hereby amended by
adding the following paragraph:
" On the effective date of the Articles of Amendment to the Articles of
Incorporation of the Corporation, each issued and outstanding share of the
Common Stock of the Corporation shall automatically and without any action on
the part of the holder thereof be reclassified and reconstituted as one-____*
of a share of Common Stock (the "Reverse Stock Split"). No fractional shares
shall be issued by the Corporation as a result of the Reverse Stock Split. In
lieu thereof, each holder whose aggregate shares of Common Stock are not evenly
divisible by ______* will receive one additional share of Common Stock for the
fractional share to which such holder would otherwise be entitled as a result
of the Reverse Stock Split."
WALNUT FINANCIAL SERVICES, INC.
By:
----------------------------------
Joel S. Kanter
President and Chief Executive Officer
ATTEST:
- ----------------------------------
Joshua S. Kanter
Secretary and General Counsel
*This blank will be filled with the Selected Number.
<PAGE> 19
WALNUT FINANCIAL SERVICES, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS ON DECEMBER __, 1998
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints Joel S. Kanter and Joshua S. Kanter, or either of
them, with full powers of substitution, as proxies of the undersigned, with the
authority to vote upon and act with respect to all shares of Walnut Financial
Services, Inc. (the "Company"), which the undersigned is entitled to vote, at
the 1998 Annual Meeting of Stockholders of the Company, to be held at
______________________________________________ commencing _____________,
December __, 1998, at 10:00 a.m. and at any and all adjournments thereof, with
all the powers the undersigned would possess if then and there personally
present, and especially (but without limiting the general authorization and
power hereby given) with the authority to vote on the following.
ITEM 1. ELECTION OF SEVEN DIRECTORS
<TABLE>
<S> <C> <C>
[ ] FOR NOMINEES (except as [ ] WITHHOLD AUTHORITY to [ ] ABSTAIN
marked to the contrary on vote for all nominees
the line below) listed below
</TABLE>
Nominees: William F. Burge, III, Gene E. Burleson, Earl Chapman, Burton W.
Kanter, Joel S. Kanter, Albert Morrison, Jr., and Solomon A. Weisgal
To withhold authority to vote for any individual nominee or nominees, write his
or their name or names in the space below:
- -----------------------------------------------------------------------------
ITEM 2. RATIFICATION OF THE SELECTION OF RICHARD A. EISNER & COMPANY, LLP AS
THE COMPANY'S INDEPENDENT AUDITORS.
<TABLE>
<S> <C> <C>
[ ] FOR [ ] AGAINST [ ] ABSTAIN
</TABLE>
ITEM 3. AUTHORIZATION AND APPROVAL OF THE AMENDMENT TO THE COMPANY'S ARTICLES
OF INCORPORATION TO EFFECT A SINGLE REVERSE STOCK SPLIT OF THE COMPANY'S COMMON
STOCK, SUCH THAT EACH OF A WHOLE NUMBER OF NOT LESS THAN THREE NOR MORE THAN
SIX ISSUED AND OUTSTANDING SHARES OF COMMON STOCK ARE CONVERTED INTO ONE SHARE
OF COMMON STOCK, SUBJECT TO THE DISCRETION OF THE BOARD OF DIRECTORS TO SELECT
A WHOLE NUMBER WITHIN SUCH RANGE AND TO DETERMINE WHETHER TO FILE SUCH
AMENDMENT AND TO EFFECT SUCH A REVERSE STOCK SPLIT.
<TABLE>
<S> <C> <C>
[ ] FOR [ ] AGAINST [ ] ABSTAIN
</TABLE>
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE 1998 ANNUAL MEETING OR AT ANY
ADJOURNMENT THEREOF.
The undersigned hereby revokes any proxy or proxies heretofore given to
vote upon or act with respect to said stock and hereby ratifies and confirms
all that the proxies named herein and their substitutes, or any of them, may
lawfully do by virtue hereof.
This Proxy, when properly executed, will be voted as specified herein.
If this Proxy does not indicate a contrary choice, it will be voted FOR the
nominees for director as listed in item 1, FOR the ratification of the selection
of Richard A. Eisner & Company, LLP as the Company's independent auditors as
listed in item 2, FOR the authorization and approval of the amendment to the
Company's Articles of Incorporation to effect the reverse stock split as listed
in item 3, and in the discretion of the persons named as proxies herein with
respect to any and all other matters as may properly come before the annual
meeting or at any adjournment thereof.
-----------------------------------------------
Signature of Stockholder
Dated:-----------------------------------------
NOTE: Please date proxy and sign it exactly as name or names appear above. All
joint owners of shares should sign. State full title when signing as executor,
administrator, trustee, guardian, et cetera. Please return signed proxy in the
enclosed envelope.
