SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
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 Section 240.14a-11(c) or Section 240.14a-12
Approved Financial Corp.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than 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)(4) 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:
Insert logo
APPROVED FINANCIAL CORP.
3420 Holland Road # 107
Virginia Beach, Virginia 23452
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On July 27, 1998
At 2:30 PM prevailing local time
To the Stockholders of Approved Financial Corp:
The Annual Meeting of Stockholders ("Annual Meeting") of Approved
Financial Corp. (the "Company" or "Approved"), a Virginia Corporation, will be
held at the Ramada Plaza Resort Oceanfront at 57th Street, Virginia Beach,
Virginia 23451 on Monday, July 27, 1998 at 2:30 PM prevailing local time, for
the following purposes:
1. To elect ten Directors to the Board of Directors, three to
serve until the annual meeting of stockholders to be held in
the year 2001; three to serve until the year 2000 annual
meeting of stockholders; and four to serve until the year 1999
annual meeting of stockholders.
2. To ratify the appointment of Coopers & Lybrand L.L.P. as
independent accountants for the Company for the 1998 fiscal
year; and
3. To transact such other business as may be properly brought
before the meeting and any adjournment thereof. The Board is
presently aware of no other business to come before the Annual
Meeting.
The Board of Directors has fixed the close of business on June 23, 1998
as the record date for the determination of stockholders entitled to receive
notice of and to vote at the Annual Meeting or any adjournment thereof. Shares
of Common Stock can be voted at the Annual Meeting only if the holder is present
at the Annual Meeting in person or by valid proxy. We hope that you will attend
the meeting in person. Your Board of Directors and management look forward to
greeting those stockholders able to attend. We thank you for your support of
Approved.
By Order of the Board of Directors,
/s/ Allen D. Wykle
-----------------------------------
Allen D. Wykle
Chairman of the Board and Chief
Executive Officer
Virginia Beach, Virginia
June 26, 1998
IMPORTANT
Whether or not you plan to attend, please SIGN, DATE and RETURN the enclosed
Proxy in the enclosed postage paid envelope. If you do attend the meeting,
you may, if you wish, revoke your Proxy and vote your shares in person.
PROXY STATEMENT
General Information
This Proxy Statement and enclosed form of proxy are being furnished in
connection with the solicitation of proxies on behalf of the Board of Directors
(the "Board" or the "Board of Directors") of Approved Financial Corp. (the
"Company" or "Approved"), a Virginia Corporation, for use at the Annual Meeting
of Stockholders to be held on July 27, 1998 at the Ramada Plaza Resort
Oceanfront at 57th Street, Virginia Beach, Virginia 23451, at 2:30 PM prevailing
local time and any adjournment thereof, for the purposes set forth in the
accompanying Notice of Annual Meeting of Stockholders. Any proxy given pursuant
to such solicitation and received in time for the Annual Meeting will be voted
as specified in such proxy. If no instructions are given, proxies will be voted
FOR all proposals listed in the Notice of Annual Meeting of Stockholders and in
the discretion of the proxies named on the proxy card with respect to any other
matter properly brought before the Annual Meeting.
Only stockholders of record at the close of business on June 23, 1998
are entitled to notice of and to vote at the Annual Meeting or any adjournment
thereof. At the close of business on June 23,1998, there were 5,512,114 shares
of the Company's Common Stock, par value $1.00 per share (the "Common Stock"),
outstanding and the Company has no other class of voting equity securities
outstanding. Each share of Common Stock entitles the record holder thereof to
one vote on all matters properly brought before the Annual Meeting. The presence
at the Annual Meeting of a majority of the votes entitled to be cast,
represented in person or by proxy, will constitute a quorum for the transaction
of business at the Annual Meeting. A person giving the enclosed proxy has the
power to revoke it any time before it is exercised by (i) attending the Annual
Meeting and giving the Secretary notice of his or her intention to vote in
person, (ii) duly executing and delivering a proxy bearing a later date, or
(iii) sending a written notice of revocation to the Secretary of the Company,
3420 Holland Road #107, Virginia Beach, Virginia 23452.
The cost of solicitation will be borne by the Company. Arrangements
have been made with Company's registrar and transfer agent, and various
depositories, custodians, nominees and fiduciaries for the forwarding of
solicitation material to the beneficial owners of the Common Stock. First Union
National Bank, Corporate Trust Department, was appointed by the Company as the
tabulating agent for all proxy votes. A tabulation report will be available to
the Inspector of Elections at the Annual Meeting.
Abstentions may be specified on all proposals being submitted.
Abstentions and votes from brokerage firms on behalf of their clients who do not
furnish voting instructions within ten days of the Annual Meeting ("broker
non-votes"), will be treated as shares that are present and entitled to vote for
purposes of determining the presence of a quorum, but as unvoted for purposes of
determining the approval of any matter submitted to the Stockholders for a vote.
The Annual Report to Stockholders is being sent at the same time as
this Proxy Statement and Form of Proxy. Such Annual Report does not form any
part of the proxy solicitation materials. The date of this Proxy Statement is
the approximate date on which the Proxy Statement, Form of Proxy and the Annual
Report to Stockholders were first mailed or given to Stockholders.
Board of Directors
The Company has nine Directors as of June 23, 1998. On July 25, 1997,
the Board of Directors ratified the Company's Amended and Restated Articles of
Incorporation, which provides that the Board of Directors shall consist of at
least five Directors. The Company's Amended and Restated Bylaws, also ratified
by the Board at its meeting of July 25, 1997, provides that the number of
Directors shall be no less than five and not more than fifteen. In the past all
Directors were elected at the same time for a term of one year, however, the
Board of Directors, at a meeting on May 1, 1998 amended the Company's Amended
and Restated Bylaws to provide for three classes of members of the Board of
Directors, with each class to be as nearly equal in number of Directors as
possible. At the Annual Meeting to be held July 27, 1998, three classes of
Directors will be elected, a class consisting of four Directors to be elected
for a term of one year, a class consisting of three Directors to be elected for
a term of two years and a class consisting of three Directors to be elected for
a term of three years, all to serve until his or her successor is duly elected
and qualified. Beginning with the Annual Meeting of Stockholders in 1999, and at
each annual meeting thereafter, the successors to the class of Directors whose
terms expire at that time are to be elected to hold office for a term of three
years, and until their respective successors are elected and qualified, so that
the term of one class of Directors expires at each such annual meeting. A
Director may be removed at any time, with or without cause, at a special meeting
of Stockholders called for that purpose, by a vote of a majority of the shares
of stock represented and entitled to vote at such meeting. At any such meeting,
a successor to such Director may be elected for his unexpired term. In the event
of any vacancy caused by death, resignation, retirement, disqualification or
removal from office of a Director, or by failure of the stockholders to elect a
successor to a Director who has been removed, the Board of Directors may fill
such vacancy by vote of a majority of all the Directors then in office, though
less than a quorum. Directors so elected shall serve for the full unexpired term
of their predecessors, and until their successor is duly elected and qualified,
unless sooner displaced.
PROPOSAL 1.
ELECTION OF DIRECTORS.
At the Annual Meeting, ten Directors will be elected, four of whose
terms will expire at the Annual Meeting of Stockholders in 1999, three of whose
terms will expire at the Annual Meeting of Stockholders in 2000 and three of
whose terms will expire at the Annual Meeting of Stockholders in 2001. Messrs.
Wykle, Perlin and Warner, whose terms of office expire at the Annual Meeting,
have been nominated for re-election at the Annual Meeting for a term of three
years which will expire at the Annual Meeting of Stockholders in 2001, or until
their respective successors are elected and qualified. Messrs. Broaddus,
Peregoff and Ms. Schwindt whose terms expire at the Annual Meeting, have been
nominated for re-election at the Annual Meeting for a term of two years which
will expire at the Annual Meeting of Stockholders in 2000, or until their
respective successors are elected and qualified. Messrs. Salter, Phelan and
Diggins whose terms expire at the Annual Meeting, have been nominated for
re-election, and Mr. Witherspoon has been nominated for election at the Annual
Meeting for a term of one year which will expire at the Annual Meeting of
Stockholders in 1999 or until their respective successors are elected and
qualified. The shares represented by the enclosed proxy will be voted in favor
of all ten nominees unless a vote is withheld from the nominee. If a nominee
becomes unavailable for any reason, or if a vacancy should occur before the
election (which events are not anticipated), the shares represented by the
enclosed proxy may be voted for such other person as may be determined by the
holders of such proxy. Votes that are withheld will be excluded entirely from
the vote. Directors are elected by a plurality of the votes cast at the Annual
Meeting either in person or by proxy.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE NOMINEES.
Information Concerning Director Nominees
Background information with respect to the nominees for election at the
Annual Meeting appears below. See "Security Ownership of Certain Beneficial
Owners and Management" for information regarding such persons' holdings of
Approved Financial Corp. Common Stock.
Nominees for Class III Directors
(For a Three-Year Term Expiring at the Annual Meeting of Stockholders held in
the year 2001).
Allen D. Wykle (51) Mr. Wykle, in addition to being an initial investor,
organized and headed the initial management team that acquired the Company from
Government Employees Insurance Corporation (GEICO) in September of 1984. He has
served as Chairman of the Board, President and Chief Executive Officer of the
Company since September 1984. Mr. Wykle served as a Director of IMC Mortgage
Company from April 1996 until June 1998. Mr. Wykle was owner, President and
Chief Executive Officer of Best Homes of Tidewater, Inc., a residential
construction and remodeling company in Virginia, from 1972 to 1986.
Leon H. Perlin (70) Mr. Perlin was an initial investor in the Company in 1984
and has been a Director of the Company since 1984. For over 30 years, Mr. Perlin
has served as President and Chief Executive Officer of Leon H. Perlin Company,
Inc., a commercial construction concern.
Oscar S. Warner (81) Mr. Warner was an initial investor in the Company in 1984
and has been a Director and stockholder of the Company since 1984. Mr. Warner
has been retired for the past five years. Previously, he was owner and operator
of Oscar Warner Corporation, an import company.
Nominees for Class II Directors
( For a Two-Year Term Expiring at the Annual Meeting of Stockholders held in the
year 2000.)
Arthur Peregoff (79) Mr. Peregoff was an initial investor and has been a
Director of the Company since 1985. Mr. Peregoff has served as Chief Executive
Officer of Globe Iron Construction Company, Inc., a commercial construction
company, for over 25 years.
Stanley W. Broaddus (48) Mr. Broaddus was an initial investor and has been a
Director since 1985. Mr. Broaddus has served as Vice President and Secretary of
the Company since April 1987. Previous experience includes fourteen years as
Regional Sales Manager with the building products unit of Atlantic Richfield Co.
Jean S. Schwindt (42) Ms. Schwindt has been a Director of the Company since 1992
and joined the Company on June 16, 1998 as Executive Vice President. She served
as Vice President and Director of Investor Relations and Strategic Planning for
IMC Mortgage Company from March 1996 until June 15, 1998. From April 1989 to
March 1996 she served on the Board of Directors and as Senior Vice
President/Secretary of Anderson and Strudwick, Inc., a member of the New York
Stock Exchange. Ms. Schwindt, a Chartered Financial Analyst and a Registered
Investment Advisor, has been affiliated with the firm of Mills Value Advisers,
Inc. since January 1995.
Nominees for Class I Directors
(For a One-Year Term Expiring at the Annual Meeting of Stockholders held in
1999)
Robert M. Salter (50) Mr. Salter was an initial investor and has been a Director
since 1989. Mr. Salter has served as President of Salter and Hall, P.C. since
1979. Mr. Salter is a Certified Public Accountant and a Certified Financial
Planner.
Neil W. Phelan, (40) has been a Director since 1997.Mr. Phelan is Executive Vice
President and has been with the Company since April 1995. His primary role with
the Company is the management of the wholesale lending unit, Approved
Residential Mortgage. Immediately prior to joining the Company, Mr. Phelan
served on the senior management team of ITT Financial Services for 17 years.
Barry C. Diggins (34) Mr. Diggins has been a Director since 1997. Mr. Diggins
oversees a large portion of the Company's retail lending unit, Armada
Residential Mortgage. Mr. Diggins has been with the Company since October 1994.
He was Regional Marketing Director of ITT Financial Services from September 1985
to October 1994.
Gregory J. Witherspoon (51) Mr. Witherspoon is president of Witherspoon
Consulting, a company that provides consulting services to the financial
services industry. He served as a Director of Aames Financial Corporation from
1991 to March 1998, as Chief Financial Officer from 1987 until 1997,and was
Executive Vice President for Strategic Planning when he left in March of 1998 to
establish his consulting firm. He is a Certified Public Accountant. Mr.
Witherspoon previously served on the Board of Directors of Approved from July
1996 until January 1997.
Committees and Meetings of the Board of Directors.
The Board of Directors of the Company held four meetings in 1997. During such
year, each Director attended more than 75% of the meetings held by the Board of
Directors and the committees on which he or she served. The Board of Directors
has four committees, all of which were formally established at the meeting of
the Board of Directors held on February 6, 1998. They are the Executive
Committee, the Audit Committee, the Compensation Committee and the Option
Committee. The Board of Directors also acts from time to time by unanimous
written consent in lieu of meetings.
Executive Committee. The Executive Committee consists of Mr. Wykle, as
Chairman, Mr. Perlin, Ms. Schwindt and Mr. Broaddus. The Executive Committee
acts for the Board when the Board is not in session. The Executive Committee was
formed at the meeting of the Board of Directors held on February 6, 1998 and
therefore did not meet during 1997.
Audit Committee.The Audit Committee consists of Ms. Schwindt, as Chairman,
Mr. Perlin and Mr. Warner. The Audit Committee makes recommendations concerning
the engagements 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 accountants, 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. It also reviews and accepts the reports of the Company's
regulatory examiners. The Audit Committee was formed at the meeting of the Board
of Directors held on February 6, 1998 and therefore did not meet during 1997.
The Board acted on such matters prior to the formation of the Audit Committee.
Compensation Committee. The Compensation Committee was formed at the
meeting of the Board of Directors held on February 6, 1998. Prior to the formal
establishment of this Committee, the outside members of the Board of Directors
performed the duties now bestowed upon the Compensation Committee. The
Compensation Committee determines Mr. Wykle's compensation and establishes
guidelines for compensation for all employees. It consists of Mr. Warner, as
Chairman, Mr. Wykle, Mr. Perlin and Mr. Salter. Mr. Wykle abstains from voting
on his own compensation.
Option Committee. The Option Committee, which administers the Company's
stock option plan and grants options under the plan, consists of Mr. Perlin,
Chairman, Mr. Warner and Mr. Salter. The Option Committee was formed at the
meeting of the Board of Directors held on February 6, 1998 and therefore did not
meet during 1997. Prior to the formation of this Committee, the Board acted on
matters concerning the approval of and the granting of stock options.
The Company does not have a nominating committee. The functions customarily
performed by a nominating committee are performed by the Board of Directors as a
whole or by the Executive Committee. Any stockholder who wishes to make a
nomination at an annual or special meeting for the election of Directors must do
so in compliance with the applicable procedures set forth in the Company's
Bylaws. The Company will furnish Bylaw provisions upon written request Stanley
Broaddus, Secretary of the Company, at its principal executive offices at 3420
Holland Road # 107, Virginia Beach, Virginia 23452.
Directors' Compensation.
Directors who are compensated as employees of the Company receive no
additional compensation for service as Directors.
Each Director who is not an employee of the Company receives an annual
retainer of $9,000, payable in cash in quarterly installments of $2,250. All
Directors receive reimbursement of reasonable out-of-pocket expenses incurred in
connection with meetings of the Board of Directors. For 1997, the outside
Directors were paid an additional $5,000 for their services.
During 1996, the Board of Directors approved the grant of stock
appreciation rights ("SARs") to Ms. Schwindt. The SARs are for a period of three
years and entitle the holder to the appreciated value of 16,000 shares of common
stock, which represents the difference between the grant price and the fair
market value of the shares at the time of exercise. The grant price is $2.63.
The compensation expense associated with issuance of the SARs was approximately
$100,000 during 1997.
Compensation Committee Interlocks and Insider Participation.
Mr. Wykle is the only member of the Compensation Committee that is also an
employee. The other members, Messrs. Warner, Perlin and Salter are outside
Directors. No interlocking relationships exist between the Company's Board of
Directors or Officers responsible for compensation decisions and the Board of
Directors or compensation committee of any company, nor has any such
interlocking relationship existed in the past.
EXECUTIVE OFFICERS
The Executive Officers of the Company as of the date of this Proxy
Statement who are not also Directors are identified below, together with
information regarding the business experience of such officers. Information
regarding the business experience of Messrs. Wykle, Broaddus, Phelan, Diggins
and Ms. Schwindt is set forth above under the heading "Information Concerning
Director Nominees." Each Executive Officer is elected by the Board of Directors
of the Company and serves at the pleasure of the Board.
Name (Age) Position and Business Experience
- ------------ ---------------------------------
Eric S. Yeakel (33) Treasurer and Chief Financial Officer. Mr. Yeakel has been with the Company
since June 1994. He was a full time graduate student from September 1992 until
receiving a Masters in Business Administration in 1994. He served as Assistant
Controller with Office Warehouse, Inc. from October 1989 to August 1992. Mr.
Yeakel is a Certified Public Accountant who worked with Ernst & Young from July
1987 to October 1989.
Gregory W. Gleason (45) President of Approved Federal Savings Bank. Mr. Gleason joined the Company in
November 1996 with more than 20 years of savings institution management. Mr.
Gleason was Senior Vice President with Virginia First Savings Bank from February
1984 through June 1996, and was on the management team of BankAtlantic from May
1977 to January 1984.
Executive Compensation
Summary of Cash and Other Compensation
The following table sets forth the compensation paid to the Company's
Chief Executive Officer and the three most highly-compensated Executive Officers
other than the Chief Executive Officer, whose 1997 compensation exceeded
$100,000 (collectively, the "Named Executive Officers") during the three years
ended December 31, 1997:
Summary Compensation Table
Annual Compensation (1) Long Term Compensation
----------------------- ----------------------
Name and Stock Option All Other
Principal Position Year Salary Bonus Awards Compensation (2)
- ------------------ ---- ------ ----- ------ ----------------
Allen D. Wykle 1997 $ 421,218 $ 575,000 1000 $ 4,750
President and Chief 1996 300,000 400,000 4,750
Executive Officer 1995 200,000 - 49,062
Barry C. Diggins (3) 1997 132,638 209,564 6,821
Executive Director 1996 75,000 175,092 -
Retail Lending 1995 75,000 64,415 -
Neil W. Phelan 1997 110,000 75,000 1000 3,383
Executive Vice President 1996 100,000 75,000 1,500
Marketing and 1995 75,000 - 10,000
Broker Lending
Stanley W. Broaddus 1997 85,000 100,000 1000 2,437
Secretary and 1996 85,000 45,000 2,100
Vice President 1995 58,000 - 6,072
- -----------------------
(1) All benefits that might be considered of a personal nature did not exceed
the lesser of $50,000 or 10% of total annual salary and bonus for the
officer named in the table.
(2) Amounts reflect the Company's matching contribution under its 401(k)
retirement plan. The table also includes contributions to the
Company's non-qualified retirement plan of $47,000 in 1995 for Mr. Wykle
and $5,000 in 1995 for Mr. Broaddus. The table also reflects $10,000
paid to reimburse Mr. Phelan in 1995 for moving expenses.
(3) Mr. Diggins was paid an annualized base salary of $75,000 in 1996 and 1995.
In addition, Mr. Diggins was paid an incentive based on the earnings of
the retail lending division. His incentive amounts were $209,564 in 1997,
$175,092 in 1996 and $64,415 in 1995.
Stock Option/Stock Appreciation Right Grants in the Last Year
On January 27, 1997, the Company issued options to key employees to
purchase up to 9,800 shares of the Company's common stock. The employees have a
ten-year period to exercise the options at an exercise price of $9.75 per share.
The number of shares and exercise price for these options has been adjusted for
the 100% stock dividend on November 21, 1997.
The following table contains information regarding options to purchase
the Company's common stock granted to three Named Executive Officers. Mr.
Diggins did not receive an option grant. No stock appreciation rights were
granted to Named Executive Officers during 1997.
Individual Grants
----------------- Potential
Realizable
Value at Assumed
Number of Percent of Annual Rates of Stock
Securities Total Options Price Appreciation for
Underlying Granted to Per Share Option Term (2)
Options Employees Exercise Expiration ------------------------
Name Granted in Year Price (1) Date 0% 5% 10%
-----------------------------------------------------------------------------------------------------
Allen D. Wykle 1,000 10.9% $9.75 1-27-2007 $ - $ 6,132 $15,538
Neil W. Phelan 1,000 10.9% $9.75 1-27-2007 - 6,132 15,538
Stanley W. Broaddus 1,000 10.9% $9.75 1-27-2007 - 6,132 15,538
-------------------
(1) These shares are based on $9.75, the closing price of Common Stock on
January 26, 1997 (as adjusted for the 100% stock dividend on November
21, 1997). The exercise price may be paid in cash, in shares of Common
Stock valued at fair market value on the date of exercise or pursuant
to a cash-less exercise involving the same-day sale of the purchased
shares.
(2) The 5% and 10% assumed annual rates of compounded stock price
appreciation are permitted by rules of the Securities and Exchange
Commission. There can be no assurance provided to any Executive Officer
or any other holder of the Company's securities that the actual stock
price appreciation over the 10-year option term will be at the assumed
5% and 10% levels or at any other defined level. Unless the market
price of the Common Stock appreciates over the option term, no value
will be realized from the option grants to Executive Officers.
Aggregate Option and Warrant Exercises and Period-End Values
The following table sets forth information concerning the value
realized on exercise of warrants during 1997 and the value of unexercised
options held by three of the Company's Named Executive Officers at May 31, 1998.
No stock appreciation rights were exercised during 1997.
Number of Securities Value of Unexercised
Underlying Unexercised In-the-money options
Shares acquired Options as Fiscal Year End at Fiscal Year End (2)
Name on exercise(1) Value Realized(1) Exercisable Unexercisable Exercisable Unexercisable
- ---------------------------------------------------------------------------------------------------------------------------------
Allen Wykle 85,928 $ 612,237 333 667 $ 1,915 $ 3,835
Neil Phelan 333 667 $ 1,915 $ 3,835
Stanley Broaddus 4,460 $ 30,663 333 667 $ 1,915 $ 3,835
(1) Exercise of Warrants issued on a pro-rata basis to all stockholders
existing at the time of the Common Stock offering in April of 1992
providing for a five-year right to purchase shares of Approved Common Stock
at $1.875 per share. Value Realized is calculated by taking the stock price
on the day of the exercise less the exercise price, multiplied by the
number of shares acquired through exercise. Stock Price was $9.00 per share
on 4/8/97 ,the date of Mr. Wykle's exercise and $ 8.75 per share on
4/17/97, the date of Mr. Broaddus's exercise.
(2) Value of Unexercised Options is calculated using the price of Approved
Common Stock on 12/31/97 of $15.50 per share less the exercise price of $
9.75 per share, multiplied by the number of shares represented by the
options.
Employment Agreements
The Company has no employment agreement with Allen D. Wykle. The
Compensation Committee determines Mr. Wykle's salary and bonus (See: "CEO
Compensation").
The Company has employment agreements with three Executive Officers.
Neil W. Phelan. The Employment Agreement that commenced January 1, 1998 for
a three-year initial term , automatically renews for additional one-year terms
absent six months written notice by either party prior to the end of a term of
nonrenewal. Mr. Phelan's annual salary is currently $130,000. The agreement
provides salary increases of 10% per year and for an annual bonus to be awarded
to Mr. Phelan based on the achievement of a predetermined performance goal
("Profit Target"). The Profit Target, which is defined as a goal for the annual
after-tax net income of the Company for each fiscal year excluding income
derived from the Company's investment in IMC Mortgage Company, will be mutually
agreed upon by the Chief Executive Officer of the Company and Mr. Phelan by
January 31 of each new fiscal year. The Profit Target for Year Ending December
31, 1998 is $ 7,021,000 , representing a 10 % increase in the Company's
after-tax net income excluding income derived from the Company's investment in
IMC Mortgage Company when compared to the year ended December 31, 1997. If such
Profit Target is attained, then the Employee shall be paid 2 % of the Company's
net income after tax excluding income derived from the Company's investment in
IMC Mortgage Company subject to a maximum of two times Mr. Phelan's annual
salary during the fiscal year determining such bonus. If less than one hundred
percent (100%), subject to a minimum of seventy-five percent ($ 5,266,000 for
fiscal year 1998), of the Profit Target is attained, then the employee shall be
paid 1% of the Company's net income after-tax excluding income derived from the
Company's investment in IMC Mortgage Company. subject to a maximum of two times
Mr. Phelan's annual salary during the fiscal year determining such bonus. He
also is entitled to all standard group employee benefits and a car allowance.
The Employment Agreement provides for termination "for cause" as defined in
the Agreement. Under the Employment Agreement he has agreed not to compete with
the Company, as to the non-conforming loan business, for a period of one year
after termination within a prescribed geographic area and not to solicit or
employ Company employees for two years after termination. These restrictive
covenants apply upon termination by Mr. Phelan or termination for cause by the
Company.
Stanley W. Broaddus. The Employment Agreement which commenced January 1,
1997 was for a one year initial term and automatically renewed on January 1,
1998 and for additional one-year terms absent ninety day written notice by
either party prior to the end of a term of nonrenewal. It provides for an annual
salary of $95,000 with an annual 6% increase during the initial term. He is
entitled to a Company car and all standard group employee benefits. He is
entitled to a quarterly bonus based on 1 1/2% of net profits after taxes not to
exceed $100,000. He is also entitled to one year's annual salary in the event
that following a change in control of the Company (i.e. Mr. Wykle and Mr. Perlin
own less than 51% of the voting stock) Allen D. Wykle is no longer employed and
the Company terminates him without cause.
The Employment Agreement provides for termination "for cause" as defined in
the Agreement with notice and for termination upon 90 days prior written notice
without cause.
Under the Employment Agreement he has agreed not to compete with the
company for a period of one (1) year after termination within a prescribed
geographic area and not to solicit or employ Company employees for two (2) years
after termination. These restrictive covenants apply upon termination by either
party, with or without cause and upon expiration of the Agreement.
Barry C. Diggins. The Employment Agreement which commenced September 15,
1997 for a two year initial term and will automatically renew for additional
one-year terms absent 90 day written notice by either party prior to the end of
a term of nonrenewal. It provides for an annual salary of $130,000 with an
annual 6% increase during the initial term. It provides for a bonus of up to
100% of annual salary if he makes a specified "Profit Target" (net after tax
profits) for offices under his supervision. If he meets at least 75% of the
Profit Target, he earns a bonus computed by multiplying the percentage of the
Profit Target reached times 100% of salary. In addition he is entitled to
incentive compensation of 5% of annual after tax net profit attributable to the
offices supervised by him. Any such incentive compensation in excess of $150,000
per year may within the discretion of the Company be converted to nonstatutory
stock options. He is also entitled to 5% of gross written life insurance
premiums as well as the standard group benefits for employees.
The Employment Agreement provides for termination "for cause" as defined in
the Agreement. If he terminates his employment or it is terminated for cause as
defined in the Agreement or either party elects not to renew at the end of any
term with the required notice, the contract ceases, and no further compensation
or benefits are paid. If the Employment Agreement is terminated by the Company
without cause during the initial term, then in lieu of any other damages or
compensation, he is entitled to severance pay in the amount equal to $300,000
multiplied by a percentage equal to the number of days left at termination in
the initial term divided by 730. If terminated without cause in a renewal term,
the severance pay shall be equal to the base compensation for that renewal term
multiplied by a percentage equal to the number of days remaining in the renewal
term at termination divided by 365.
Under the Employment Agreement he has agreed not to compete with the
company for a period of one year after termination within a prescribed
geographic area and not to solicit or employ Company employees for two years
after termination. These restrictive covenants apply upon termination by either
party, with or without cause and upon expiration of the Agreement.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors has furnished the
following report on executive compensation for inclusion in this proxy
statement:
Compensation Philosophy.
Employment Agreements are described in more detail above and the
Compensation Committee believes that those agreements establish base salaries,
which are reasonable when compared the Company's industry peers. The Employment
Agreements call for incentive based bonuses and various other sources of
incentive compensation as explained above.
Bonus compensation awarded to the Company's Officers and other key
employees, generally results when the Company realizes net income after tax for
the year. Individual or divisional productivity and/or profitability relating
directly to a manager's efforts are frequently used in establishing guidelines
for bonus awards paid in the form of cash and/or in stock options (See; 1996
Incentive Stock Option Plan). The Compensation Committee believes that the
majority of all compensation plans throughout the Company and the Employment
Agreements for the Company's Executive Officers are in line with the Company's
dual goals of rewarding performance and establishing compensation arrangements
which align the interests of officers and other key employees with those of the
Company's Stockholders.
1996 Incentive Stock Option Plan
On June 28, 1996, the Company adopted the 1996 Incentive Stock Option Plan
(the "Incentive Plan"), pursuant to which key employees of the Company are
eligible for awards of stock options. The following sections summarize some of
the principle features of the Incentive Plan.
Purpose. The Board of Directors believes that long-term incentive
compensation is one of the fundamental components of compensation for the
Company's key employees and that stock options under the Incentive Plan will
play an important role in encouraging employees to have a greater financial
investment in the Company. The Board of Directors believes that the Incentive
Plan will help promote long-term growth and profitability by further aligning
stockholder and employee interests.
The purpose of the Incentive Plan is to promote the interests of the
Company and its Stockholders by affording participants an opportunity to acquire
a proprietary interest in the Company and by providing participants with
long-term financial incentives for outstanding performance. Under the terms of
the Incentive Plan, the Option Committee has a great deal of flexibility in the
types and amounts of awards that can be made and the terms and conditions
applicable to those awards.
Description of the Incentive Plan. The aggregate number of shares of Common
Stock that are available for grants under the Incentive Plan is 252,000 shares
(adjusted for the two-for-one stock splits paid to stockholders of record on
August 30, 1996 and December 16, 1996 and the 100% stock dividend paid to
stockholders of record on November 21, 1997.) All shares allocated to awards
under the Incentive Plan that are cancelled or forfeited are available for
subsequent awards.
Administration. The Option Committee administers the Incentive Plan. The
members of the Option Committee are not eligible to receive awards under the
Incentive Plan. The Option Committee has the full power to: (a) designate the
key employees to receive awards from time to time; (b) determine the sizes and
types of awards; (c) determine the terms and provisions of awards as it deems
appropriate; (d) construe and interpret the Incentive Plan and establish, amend
or waive rules and regulations relating to the administration of the Incentive
Plan; (e) amend the terms and provisions of any outstanding award to the extent
such terms and provisions are within the discretion of the Option Committee; and
(f) make all other decisions and determinations necessary or advisable for the
administration of the Incentive Plan. All determinations and decisions made by
the Option Committee pursuant to the Incentive Plan are final, conclusive and
binding.
Eligible Participants. Only "key employees" of the Company and its
subsidiaries are eligible to participate in the Incentive Plan. An employee who
is a Director is eligible for an award unless he or she is a member of the
Option Committee. The selection of the key employees is entirely within the
discretion of the Option Committee. The concept of a "key employee" is, however,
somewhat flexible and it is anticipated that such factors as the duties and
responsibilities of employees, the value of their services, their present and
potential contributions to the success of the Company and other relevant factors
will be considered. Accordingly, the number of persons who ultimately may be
eligible to participate in the Incentive Plan cannot presently be determined.
Option Price of Stock. The Incentive Plan provides for the grant of options
to purchase shares of Common Stock at option prices to be determined by the
Option Committee as of the date of grant. The option price may not be less than
the fair market value (or in the case of a 10% stockholder not less than 110% of
the fair market value) of the shares of Common Stock on the date of grant. For
such purpose "fair market value" means the average of the bid and asked price
per share of the Common Stock as reported by the NASDAQ Stock Market or the OTC
Bulletin Board, whichever is applicable at the time, on the date on which the
fair market value is determined or, if Common Stock is not traded on such
exchange or system on such date, then on the immediately preceding date on which
Common Stock was traded on such exchange or system. Each grant of options is to
be evidenced by an option agreement which is to specify the option price, the
term of the option, the number of shares subject to the option and such other
provisions as the Committee may determine.
Exercise of Options. The shares subject to an option may be purchased as
follows: none in the first year after the grant of option; one-third in each of
the second, third and fourth years. Options granted under the Incentive Plan
will expire not more than ten years (or in the case of a 10% stockholder not
more than five years) from the date of grant.
Awards of Options. Awards of options under the Incentive Plan are to be
determined by the Option Committee at its discretion. Notwithstanding the
foregoing, the Option Committee may not grant options to any participant that,
in the aggregate, are first exercisable during any one calendar year to the
extent that the aggregate fair market value of the shares subject to such
options, at the time of grant, exceeds $100,000.
Payments For Shares. Payments for shares issued pursuant to the exercise of
any option may be made either in cash or by tendering shares of Common Stock of
the Company with a fair market value at the date of the exercise equal to the
portion of the exercise price which is not paid in cash.
No Rights as Stockholder. A participant granted an option under the
Incentive Plan will have no rights as a stockholder of the Company with respect
to the shares subject to such option except to the extent shares are actually
issued.
Non-transferability. Options may not be sold, transferred, pledged or
assigned, except as otherwise provided by law or in an option agreement. The
Option Committee may impose restrictions on the transfer of shares acquired
pursuant to the exercise of options as it may deem advisable.
Termination of Employment. Except for termination for cause, death or
disability, options terminate three months after the employment terminates or on
such earlier date as the participant's option agreement specifies. In the event
of termination for cause as defined in the Incentive Plan, the option terminates
upon termination (subject to the Option Committee's right to reinstate for 30
days). In the event of death, the option will terminate six months after death,
and in the event of disability one year after disability (unless the option
period in the participant's option agreement expires earlier).
Amendment and Termination of the Incentive Plan. The Board of Directors may
alter, amend, discontinue, suspend or terminate the Incentive Plan at any time
in whole or in part. Notwithstanding the foregoing, stockholder approval is
required for any change to the material terms of the Incentive Plan and no
amendment or modification of the Incentive Plan may materially and adversely
affect any award previously granted without the consent of the participant.
401(k) Retirement Plan
On January 1, 1995, the Company implemented a 401(k) Retirement Plan (the
"401(k) Plan"). The 401(k) Plan is a defined contribution plan covering all
employees who have completed at least one year of service. The 401(k) Plan is
subject to the provisions of the Employee Retirement Income Security Act of
1974. The Company contributes an amount equal to 50% of a participant's payroll
savings contribution up to 6% of a participant's annual compensation. The
Company's contributions to the 401(k) Plan in 1997 and 1996 were $115,000 and
$33,000, respectively.
CEO Compensation.
The Compensation Committee determines compensation for Allen D. Wykle,
Chairman and Chief Executive Officer. Mr. Wykle has no formal Employment
Agreement with the Company, however, the Compensation Committee is of the
opinion that as the largest stockholder of the Company, beneficially owning 33%
of the Company's common stock outstanding , Mr. Wykle`s interest are aligned
with the best interest of the Company's Stockholders. The Committee has no
established quantitative procedure for determining Mr. Wykle's compensation. Mr.
Wykle's 1997 salary of $421,218 is at a level that the Committee deems to be
competitive with other companies in the industry and reasonable in view of his
level of involvement in the operations of the Company. From time to time,
adjustments are made to Mr. Wykle's salary with consideration given to the
magnitude of the Company's business activities and the demands placed on Mr.
Wykle. The Committee feels that Mr. Wykle's Bonus of $575,000 for 1997 was
appropriate in view of his responsibilities and his contribution to the
Company's geographic expansion, significant increase in loan originations and
overall profitability for the year ended December 31,1997 compared to 1996. On a
qualitative basis, Mr. Wykle's bonus is determined, giving consideration to his
and the Company's; position among peers, overall performance including the
attainment of Company goals and objectives, as well as, the profitability of the
Company relative to its peers and in light of the current industry environment.
Mr. Wykle is a member of the Compensation Committee but abstains from votes
concerning his own compensation.
APPROVED FINANCIAL
CORP. COMPENSATION
COMMITTEE:
Oscar Warner, Chairman
Leon Perlin
Allen D. Wykle
Robert Salter
STOCK PERFORMANCE GRAPH
The following graph depicts the cumulative total return on the Company's
Common Stock compared to the cumulative total return for The Russell 2000 Index
("Russell 2000") and the Russell 2000 Financials Index ("Russell 2000
Financials), a peer group selected by the Company on an industry and
line-of-business basis, commencing June 30, 1994 and ending December 31, 1997.
The graph assumes an investment in Approved Financial Corp. Common Stock of $100
on June 30, 1994, which is the first date for which public market trading data
was available. The graph assumes an investment of $100 in Russell 2000 on June
30, 1994 and an investment of $171.13 in the Russell 2000 Financials on June 30,
1995. June 30, 1995 is the first semi-annual date for which the pricing
information was available for the Russell 2000 Financials and $171.13 represents
the equivalent value of Approved's Common Stock on that date for purposes of
this graph.
[Line Graph Plot Points Below]
June 30, December 30, June 30, December 29, June 28, December 31, June 30, December 31,
1994 1994 1995 1995 1996 1996 1997 1997
-----------------------------------------------------------------------------------------------
Approved Financial Corp. 100.00 93.81 171.13 220.62 400.00 927.84 979.38 1597.94
Russell 2000 Index 100.00 104.19 118.04 131.50 144.25 150.91 164.95 181.87
Russell 2000 Financials 171.13 188.78 197.82 232.42 259.10 301.98
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of May 31, 1998 regarding the
number of shares of Common Stock beneficially owned by all Directors, Executive
Officers, and 5 % stockholders. Beneficial ownership includes shares, if any,
held in the name of the spouse, minor children or other relatives of the nominee
living in such person's home, as well as shares, if any, held in the name of
another person under an arrangement whereby the Director, Executive Officer or
5% stockholder can vest title in himself within sixty days of May 31, 1998.
Common Stock Percentage of
Name Beneficially Owned Class
------- ------------------ -------------
Allen D. Wykle (1)(2)(3)
3420 Holland Road #107
Virginia Beach Virginia, 23452 1,822,357 33.06%
Leon H. Perlin (4)
3360 South Ocean Boulevard
Apartment 5H2
Palm Beach, Florida 33480 933,256 16.93
JAM Partners, LP (5)
One Fifth Avenue
New York, New York 10003 297,200 5.28
Gregory J. Witherspoon (6)
1601 Blue Jay Way
Los Angeles, California 90069 232,800 4.22
Stanley W. Broaddus (1)(3)
3420 Holland Road #107
Virginia Beach, Virginia 23452 133,805 2.43
Barry C. Diggins (7)
8222 Glenmar Road
Ellicott City, Maryland 21043 108,034 1.96
Arthur Peregoff (8)
816 Oriole Drive
Virginia Beach, Virginia 23451 81,800 1.48
Oscar S. Warner (9)
215 Brooke Avenue Apt #905
Norfolk Virginia 23510 64,000 1.16
Jean S. Schwindt (10)
1062 Normandy Trace Road
Tampa, Florida 33602 62,400 1.13
Neil W. Phelan (1)
3420 Holland Road #107
Virginia Beach, Virginia 23452 10,953 *
Robert M. Salter
613 Lynnhaven Parkway
Virginia Beach, Virginia 23452 464 *
Gregory W. Gleason
2380 Court Plaza Dr. Suite 200
Virginia Beach, Virginia 23456 1,000 *
Eric S. Yeakel (1)
3420 Holland Road # 107
Virginia Beach, Virginia 23452 333 *
All present Executive
Officers,Directors & Nominees
as a group (12 persons) (1) 3,449,870 62.60
- ---------------------
* Owns less than 1% of class.
(1) Includes beneficial ownership of 333 shares issuable upon the
exercise of stock options exercisable within 60 days of May 31,
1998, and excludes 667 shares subject to stock options that
cannot be exercised within 60 days of May 31, 1998. For Mr.
Phelan included is the beneficial ownership of 333 shares
issuable upon the exercise of stock options exercisable within
60 days of May 31, 1998, and excludes 3667 shares subject to
stock options that cannot be exercised within 60 days of
May 31, 1998. For Mr. Yeakel included is the beneficial
ownership of 333 shares issuable upon the exercise of stock
options exercisable within 60 days of May 31, 1998, and excludes
1,167 shares subject to stock options that cannot be exercised
within 60 days of May 31, 1998.
(2) Excludes 4,000 shares registered to his adult children
and his grandchildren, as to which Mr. Wykle disclaims
beneficial ownership.
(3) Mr. Wykle and Mr. Broaddus are Co-Trustees of the Company's
Profit-Sharing Plan, which owns 39,680 of the Company's Common
Stock. They share voting power. Mr. Wykle's ownership interest
is 65%. Mr. Broaddus' share is 15%. All of the 39,680 shares
owned by the Profit-Sharing Plan are included under Mr.
Wykle's shares for the purposes of this disclosure, except for
the 5,952 shares owned by Mr. Broaddus. Mr. Wykle disclaims
beneficial ownership of all but the 65% he owns in the
Profit-Sharing Plan.
(4) Includes 594,000 shares owned by Mr. Perlin's wife.
(5) JAM Partners, LP is a Delaware limited partnership. It is an
investment partnership managed by Jacobs Asset Management LLC.
The General Partner is JAM Managers, LLC. The capital of JAM
Partners, LP at January 1, 1998 was approximately $35,500,000.
JAM Partners, LP's shares include 266,400 it owns directly. Also
included are 20,000 shares owned directly by Sy Jacobs and
10,800 shares owned directly by Bernard Sucher and his wife.
Mr. Jacobs and Mr. Sucher are general partners in JAM Managers
LLC.
(6) Excludes 3,000 shares owned by Mr. Witherspoon's brother to
which he disclaims beneficial ownership.
(7) Includes 1,888 shares owned jointly by Mr. Diggins' and his wife.
(8) Mr. Peregoff's shares are held jointly with his wife. Excludes
4,648 shares registered to Mr. Peregoff's adult children and his
grandchildren, to which he disclaims beneficial ownership.
(9) Includes 4,000 shares owned by Mr. Warner's wife. Excludes
30,000 shares registered to Mr. Warner's adult children and his
grandchildren, to which he disclaims beneficial ownership.
(10) Excluded are stock appreciation rights for 16,000 shares at $
2.63 per share. Excluded are 8,000 shares owned by her
parents to which Ms. Schwindt disclaims beneficial ownership.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has maintained business relationships and engaged in
certain transactions with affiliated companies and the parties as described
below. It is the policy of the Company to engage in transactions with related
parties only on terms that, in the opinion of the Company, are no less favorable
to the Company than could be obtained from unrelated parties and each of the
transactions described below conforms to that policy.
Agreement with IMC Mortgage Company
The Company has an agreement for the sale of mortgage loans to IMC
Mortgage Company ("IMC"). The terms of the mortgage loan sale agreement are set
forth in a contract, dated March 30, 1996 , between the Company and IMC which
was prepared in preparation of IMC's initial public offering of common stock,
(the "Pre-IPO Agreement"). The Company's contract with IMC requires the Company
to sell a minimum of $2 million of loans to IMC each month subject to prevailing
secondary market terms for pools of non-conforming mortgage loans for a five
year period commencing on June 25, 1996 (the date of IMC's Initial Public
Offering). The Pre-IPO Agreement and Amendment thereof, also includes an
incentive plan , whereby, quarterly the incentive plan participants are granted
$105,000 of fully paid shares of IMC Mortgage Company on a pro-rata basis,
based on the amount of loans sold to IMC in excess of their monthly commitment
amount, which is $ 2 million per month for Approved. In the event the Company
fails to sell $2 million of loans at prevailing secondary market terms to IMC in
any month, IMC could sue the Company for breach of contract. During 1997, the
Company sold 55.9% or approximately $235 million of its loans to IMC. These
transactions have resulted in the payment of a cash premium by IMC to the
Company of $16 million. Approved earned a total of 23,175 shares of IMC Company
Common Stock during 1997 under the Pre-IPO Agreement incentive plan. From time
to time, various other purchasers purchase more than 10% of the Company's loan
production. While there are several other major purchasers of non-conforming
mortgage loans as large or larger than IMC, the Company maintains a good working
relationship with IMC. Historically, IMC has offered to buy a wide range of the
Company's loan products at competitive prices. However, there can be no
assurance that IMC will be in a position to continue to purchase the Company's
loan production at margins favorable to the Company. The Company owned
approximately 3.2% of the outstanding common stock of IMC at December 31, 1997.
The Company has had since January 1996 a warehouse financing facility under
which IMC agreed to lend the Company $8 million secured by the Company's
mortgage loans. Borrowings under the facility bore interest at a rate of LIBOR
plus 1.75%. The line was due to expire on January 29, 1998 and was subject to
renewal. However, the Company had no outstanding balances when it terminated
this credit line and replaced it with a new credit line agreement with another
party, effective December 10, 1997. The Company paid IMC $79,651 in interest
payments during 1997. The Company's Chairman and Chief Executive Officer, Allen
D. Wykle, was a member of IMC's Board of Directors from April 1996 until June
1998. Mr. Wykle beneficially owns approximately 0.07% of IMC common stock,
including 12,992 issuable upon the exercise of stock options. Also, Jean S.
Schwindt, a member of the Company's Board of Directors and Executive Committee,
was an Officer of IMC from June of 1996 until June of 1998 and owns 18,020
shares of IMC common stock issuable upon the exercise of vested stock options.
Agreement with Mills Value Adviser, Inc.
The Company entered into an investment management agreement on March
28, 1996, with Mills Value Adviser, Inc. ("MVAI"), a registered investment
advisor. Under the agreement, MVAI manages a portion of the Company's
non-qualified Profit-Sharing Plan. The Plan's trustees retain all proxy voting
rights for securities managed by MVAI. During 1997, the Company paid $3,436 in
advisory fees to MVAI. Jean S. Schwindt, a member of the Company's Board of
Directors and Executive Committee, is a portfolio manager for MVAI.
Termination of Armada Residential Mortgage, LLC
Beginning in December 1994, the Company had conducted a portion of its
retail origination business through Armada Residential Mortgage, LLC ("Armada
LLC"), which was owned 83 % by the Company and 17 % was owned by Barry Diggins,
Armada LLC's President. Mr. Diggins has served on the Board of Directors of the
Company since June 1997. In connection with terminating Armada LLC in September
1997, the Company issued Mr. Diggins 106,146 shares of Approved Common Stock,
adjusted for the 100% stock dividend paid in November of 1997, to purchase his
ownership interest in Armada LLC and Mr. Diggins became an employee of the
Company.
Indebtedness of Management
The Company and the Savings Bank have no outstanding extensions of
credit to members of the Board of Directors or management at December 31, 1997.
On June 30, 1994, the Company made a loan to Director Leon H. Perlin. The
original principal balance on the loan was $300,000 and the loan bore an
interest rate of 9.50% . Mr. Perlin paid the loan off in full on September 2,
1997. During 1997, the Company made a loan to Stanley W. Broaddus consisting of
three promissory notes totaling $165,000. These notes bore interest rates
ranging from 9% to 12%. All notes were paid off in full on August 29, 1997.
Promissory Notes
The Company has, from time to time, issued promissory notes to assist
in cash flow. The notes are callable on 30 days notice from the holder and may
be prepaid by the Company. The notes are usually issued to Directors, Officers
or stockholders. As of December 31, 1997, the following Directors and Executive
Officers were holders of promissory notes in the amounts and interest rates
specified below:
Allen D. Wykle $539,220 10.00%
Stanley W. Broaddus 231,830 9.00
Stanley W. Broaddus 75,378 8.25
Leon H. Perlin 257,891 9.00
Oscar S. Warner 54,124 8.00
Arthur Peregoff 397,236 9.00
Future Employment Agreement
Jean Schwindt became a full time employee of the Company on June 16,
1998. The Company and Ms. Schwindt have verbally agreed to a three-year
employment agreement, which initially pays Ms. Schwindt a salary of $ 160,000
per year. It is anticipated that a formal agreement will be further negotiated
between and signed by both parties before year-end 1998.
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT
OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Coopers & Lybrand L.L.P.,
independent accountants, to audit the financial statements of the Company for
the 1998 fiscal year. Such nomination is being presented to the stockholders for
ratification at the Annual Meeting. The affirmative vote of the holders of a
majority of shares present in person or represented by proxy and entitled to
vote at the Annual Meeting is required to ratify the Board's appointment of
Coopers & Lybrand L.L.P. If the stockholders reject the nomination, the Board of
Directors may reconsider its selection. If the stockholders ratify the
appointment, the Board of Directors, in its sole discretion, may still direct
the appointment of new independent accountants at any time during the year if
the Board of Directors believe that such a change would be in the best interests
of the Company.
Coopers & Lybrand L.L.P. has audited and certified the Company's
financial statements since the year ended 1995. The Company has been advised
that a representative of Coopers & Lybrand L.L.P. will be present at the Annual
Meeting, will have the opportunity to make a statement, and is expected to be
available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
RATIFICATION OF THE APPOINTMENT OF COOPERS & LYBRAND L.L.P. AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE 1998 FISCAL YEAR.
PROPOSALS BY STOCKHOLDERS
Any stockholder proposal which is intended to be presented at the
Company's Annual Meeting of Stockholders to be held in the year 1999 must be
received at the Company's principal executive offices, located at 3420 Holland
Road # 107, Virginia Beach, Virginia 23452, Attention: Stanley Broaddus,
Secretary of the Company, by no later than February 1, 1999, if such proposal is
to be considered for inclusion in the Company's proxy statement and form of
proxy relating to such meeting. Stockholders of the Company who intend to bring
business before the meeting must also comply with the applicable procedures set
forth in the Company's Bylaws. The Company will furnish copies of such Bylaw
provisions upon written request to Stanley Broaddus at the above mentioned
address.
AVAILABILITY OF FORM 10-K
The Company will provide to any stockholder, without charge, upon
written request of such stockholder, a copy of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1997, as filed with the
Securities and Exchange Commission. Such requests should be addressed to
Approved Financial Corp., 3420 Holland Road, Virginia Beach, Virginia 23452,
Attn: Stanley Broaddus.
SECTION 16(a) REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's Directors and Executive Officers, and persons owning more than ten
percent of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership of such equity securities with the
Securities and Exchange Commission. The Company was not subject to the filing
requirements under Section 16(a) during 1997.
OTHER BUSINESS
The Annual Meeting of Stockholders scheduled for July 27, 1998 is being
held for the purposes as set forth in the Notice that accompanies this Proxy
Statement. The Board is not presently aware of business to be transacted at the
Annual Meeting other than as set forth in the Notice. However, if any other
business properly comes before the meeting, the Proxies named on the
accompanying proxy card will vote their Proxies in their discretion on such
business.
By Order of the Board of Directors
/s/ Allen D. Wykle
----------------------------------
Allen D. Wykle
Chairman of the Board
Virginia Beach, Virginia
June 26, 1998
APPROVED FINANCIAL CORP.
3420 Holland Road # 107
Virginia beach, Virginia 23452
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF
SHAREHOLDERS TO BE HELD ON JULY 27, 1998
The undersigned hereby appoints Allen D. Wykle and Stanley W. Broaddus,
or either of them, as Proxies, each with the power to appoint his substitute,
and hereby authorizes them or their substitutes to represent and to vote, as
designated below, all the shares of stock of Approved Financial Corp. held of
record by the undersigned on June 23, 1998, at the annual meeting of
shareholders to be held on July 27, 1998 or any adjournment thereof.
1. Election of Directors.
[ ] For Allen D. Wykle, Leon H. Perlin, Oscar S. Warner, to
serve a three year term, ending at the 2001 Annual Meeting of
Stockholder's, or until his or her replacement is duly elected
and qualified.
[ ] Withhold authority to vote for Allen D. Wykle
[ ] Withhold authority to vote for Leon H. Perlin
[ ] Withhold authority to vote for Oscar S. Warner
[ ] For Arthur Peregoff, Stanley W. Broaddus, Jean S. Schwindt
to serve a two year term, ending at the 2000 Annual Meeting of
Stockholder's, or until his or her replacement is duly elected
and qualified.
[ ] Withhold authority to vote for Arthur Peregoff
[ ] Withhold authority to vote for Stanley W. Broaddus
[ ] Withhold authority to vote for Jean S. Schwindt
[ ] For Robert M. Salter, Barry C. Diggins, Neil W. Phelan,
Gregory W. Witherspoon to serve a one year term, ending at the
1999 Annual Meeting of Stockholders, or until his or her
replacement is duly elected and qualified.
[ ] Withhold authority to vote for Robert M. Salter
[ ] Withhold authority to vote for Barry C. Diggins
[ ] Withhold authority to vote for Neil W. Phelan
[ ] Withhold authority to vote for Gregory W. Witherspoon
2. Proposal to ratify the appointment of Coopers & Lybrand L.L.P. as
independent accountants for the Company for the 1998 fiscal year.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
The shares represented by this proxy will be voted as directed. If no
direction is given, they will be voted FOR the election of Allen D. Wykle, Leon
H. Perlin, Oscar S. Warner, Arthur Peregoff, Stanley W. Broaddus,, Jean S.
Schwindt, Robert M. Salter, Barry C. Diggins, Neil W. Phelan, Gregory W.
Witherspoon as Directors and FOR the proposal in item 2 .
Please sign exactly as name appears below. When shares are
held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian,
please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized
officer. If a partnership, please sign in partnership name
by authorized person.
Dated:___________________________, 1998
____________________________________
Signature
_____________________________________
Signature if held jointly
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