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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 240.14a-11(c) or 240.14a-12
GIANT GROUP, LTD.
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(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
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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[GIANT GROUP, LTD LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 8, 1997
To the Stockholders of
GIANT GROUP, LTD.:
Notice is hereby given that the Annual Meeting of Stockholders (the
"Meeting") of GIANT GROUP, LTD. (the "Company") will be held on the M/Y
Kahalani, Crown Bay Marina, 40 Sub Base, St. Thomas, U.S.V.I., on May 8, 1997 at
10:30 a.m. (local time), for the following purposes:
(1) To elect a Board of five directors;
(2) To consider and vote upon a proposal to amend the Company's 1985
Non-Qualified Stock Option Plan;
(3) To consider and vote upon a proposal to amend the Company's 1996
Employee Stock Option Plan;
(4) To consider and vote upon a proposal to amend the Company's 1996 Stock
Option Plan for Non-Employee Directors;
(5) To consider and vote upon a proposal to adopt the Company's 1997
Incentive Compensation Plan for Executive Officers;
(6) To ratify the appointment of Arthur Andersen LLP as the Company's
independent auditors for fiscal 1997; and
(7) To transact such other business as may properly come before the Meeting
and any adjournment(s) or postponement(s) thereof.
A Proxy Statement describing matters to be considered at the Meeting is
attached to this Notice. Only stockholders of record at the close of business on
March 14, 1997 will be entitled to notice of and to vote at the Meeting.
By Order of the Board of Directors
[SIG]
CATHY WOOD, Secretary
Los Angeles, California
April 8, 1997
IMPORTANT
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE MARK, DATE
AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE SELF-ADDRESSED, POSTAGE PREPAID
ENVELOPE WHICH HAS BEEN PROVIDED FOR YOUR CONVENIENCE. IN THE EVENT YOU ATTEND
THE MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE YOUR SHARES IN PERSON.
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GIANT GROUP, LTD.
9000 SUNSET BOULEVARD
16TH FLOOR
LOS ANGELES, CALIFORNIA 90069
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 8, 1997
GENERAL
This Proxy Statement and the accompanying proxy card are furnished in
connection with the solicitation of proxies by the Board of Directors of GIANT
GROUP, LTD., a Delaware corporation (the "Company"), for use at its Annual
Meeting of Stockholders (the "Meeting") and any adjournment(s) or
postponement(s) thereof. The Meeting is to be held on May 8, 1997 at 10:30 a.m.
(local time) on the M/Y Kahalani, Crown Bay Marina, 40 Sub Base, St. Thomas,
U.S.V.I. The approximate date of the mailing of this Proxy Statement and
accompanying proxy card to the Company's stockholders is April 9, 1997.
In an effort to have as large a representation at the Meeting as possible,
proxy solicitation may be made personally or by telephone or telegram by
officers or employees of the Company, without added compensation, or by Morrow &
Company, which has been retained by the Company for a fee of $7,500 plus
expenses. The Company will reimburse brokers, banks and other custodians,
nominees and fiduciaries for their expenses in sending proxy materials to
beneficial owners.
RECORD DATE AND VOTING SECURITIES
The close of business on March 14, 1997 (the "Record Date") has been fixed
as the Record Date for the determination of the stockholders of the Company
entitled to notice of and to vote at the Meeting. As of the Record Date, the
Company had outstanding 3,619,255 shares of Common Stock, par value $.01 per
share (the "Common Stock"). Subsequent to the Record Date the Company purchased
408,600 shares of Common Stock. Such Common Stock will be neither voted nor
considered as outstanding for purposes of determining whether or not a quorum
exists. Each share of Common Stock entitles the record holder thereof to one
vote on all matters properly coming before the Meeting.
PRINCIPAL HOLDERS
The following lists the only stockholders who, to the knowledge of
management of the Company, based upon filings with the Securities and Exchange
Commission (the "SEC"), are the beneficial owners of more than 5% of the Common
Stock.
NAME & ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) CLASS(2)
- -------------------------------------------------------------- ----------------------- ----------
Burt Sugarman................................................. 2,988,672 shares(3) 55.2%
9000 Sunset Boulevard,
16th Floor
Los Angeles, CA 90069
Travelers Group, Inc.......................................... 343,200 shares(4) 9.5%
388 Greenwich Street
New York, NY 10013
Dimensional Fund Advisors, Inc................................ 318,500 shares(5) 8.8%
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
David Gotterer................................................ 195,875 shares(6) 5.4%
c/o Mason & Company, LLP
400 Park Avenue
New York, New York 10022
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(1) Under the rules of the SEC a person is deemed to be the beneficial owner of
a security if such person has or shares the power to vote or to direct the
voting of such security, or the power to dispose or to direct the
disposition of such security. A person is also deemed to be the beneficial
owner of any securities which that person has the right to acquire
beneficial ownership within 60 days as well as any securities owned by such
person's spouse, children or other relatives living in the same house.
Unless otherwise indicated, the named person has sole voting and investment
power with respect to the shares held by them.
(2) Computed on the basis of 3,619,255 shares of Common Stock issued and
outstanding as of the Record Date. Subsequent to the Record Date the Company
purchased 408,600 shares of Common Stock.
(3) Includes 1,799,202 shares underlying presently exercisable stock options.
Does not include 20,550 shares owned by Mr. Sugarman's spouse and 2,000
shares held as custodian for his minor child, as to which shares he
disclaims beneficial ownership.
(4) As reported in a Schedule 13G dated February 6, 1997, Travelers Group, Inc.,
a parent holding company, beneficially owned 343,200 shares of Common Stock
as of December 31, 1996.
(5) As reported in a Schedule 13G dated February 5, 1997, Dimensional Fund
Advisors, Inc. ("Dimensional"), a registered investment advisor, is deemed
to have beneficial ownership of 318,500 shares of Common Stock as of
December 31, 1996, all of which shares are held in portfolios of DFA
Investment Dimensions Group, Inc., a registered open-end investment company,
or in series of the DFA Investment Trust Company, a Delaware business trust,
or the DFA Group Trust and DFA Participation Group Trust, investment
vehicles for qualified employee benefit plans, all of which Dimensional
serves as investment manager. Dimensional disclaims beneficial ownership of
all such shares.
(6) Includes 83,375 shares that Mr. Gotterer may purchase under presently
exercisable stock options, but excludes 63,375 shares underlying options
held by Mr. Gotterer, as to which he disclaims beneficial ownership since a
business partner is entitled to the beneficial ownership of such shares upon
any exercise of such options.
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ELECTION OF DIRECTORS
[PROPOSAL NO. 1]
NOMINEES
At the Meeting, five directors are to be elected to serve until the Annual
Meeting of Stockholders in 1998 and until their successors are elected and
qualified. The Board of Directors has nominated Burt Sugarman, David Gotterer,
Terry Christensen, David Malcolm and Jeffrey Rosenthal.
The Board of Directors has no reason to expect that any of the nominees
will be unable to stand for election. In the event that a vacancy among the
original nominees occurs prior to the Meeting, the proxies will be voted for a
substitute nominee or nominees named by the Board of Directors and for the
remaining nominees.
The following table sets forth information as of the Record Date about each
nominee for director and the ownership of equity securities by all directors and
executive officers of the Company as a group:
SHARES AND
PERCENT OF
DIRECTOR COMMON STOCK
AGE SINCE OWNED(1)
--- -------- -----------------
BURT SUGARMAN.................................................. 58 1982 2,988,672 shs.(2)
Mr. Sugarman has been Chairman of the Board of the Company 55.2%
since 1983, and President and Chief Executive Officer since
May 1985. Mr. Sugarman has been Chairman of the Board of
Rally's Hamburgers, Inc. (NASDAQ) ("Rally's"), an operator
and franchisor of double drive-through hamburger restaurants
in which the Company has a significant equity investment,
since November 1994, having served as its Chairman of the
Board and Chief Executive Officer from 1990 through February
1994.
DAVID GOTTERER................................................. 68 1984 195,875 shs.(3)
Mr. Gotterer has been Vice Chairman of the Company since May 5.3%
1986. He has been a senior partner in the accounting firm of
Mason & Company, LLP, New York, New York, for more than the
past five years. He is a Director of Rally's.
TERRY CHRISTENSEN.............................................. 56 1994 33,834 shs.(4)
Mr. Christensen has been a partner in the law firm Christensen, *
Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP, Los
Angeles, California, for more than the last five years. He is
a Director of MGM Grand, Inc. (New York Stock Exchange),
Rally's and Checkers Drive-In Restaurants, Inc. (NASDAQ)
("Checkers").
DAVID MALCOLM.................................................. 44 1996 11,000 shs.(5)
Mr. Malcolm has been Chairman of the Board of Suncoast *
Financial Mortgage Corporation, a mortgage banking and real
estate development company, since 1978, President of West
Coast Restaurant Enterprises, an owner operator of 15 Rally's
restaurants, since February 1995, and Vice President of
Artemis Capital Group, an investment banking firm, since
November 1996. Mr. Malcolm also served as Executive Vice
President of Grigsby Brandford & Co., Inc., an investment
banking firm, from February 1994 to October, 1996. Mr.
Malcolm is also a Commissioner on the San Diego Unified Port
District and a Commissioner on the California Commission on
Judicial Performance.
JEFFREY ROSENTHAL.............................................. 39 1997 10,000 shs.(5)
Mr. Rosenthal has served as Chairman and Chief Executive *
Officer of TV Fanfare Publications, Inc., an international
advertising company with offices in 40 cities and four
countries, since 1984.
All Directors and Executive Officers as a group (6 persons).... 3,277,047 shs.(6)
58.6%
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* indicates less than 1%
(1) Unless otherwise indicated, the beneficial owner has both sole voting and
sole investment power with respect to his shares. Computed on the basis of
3,619,255 shares of Common Stock outstanding as of the Record Date.
Subsequent to the Record Date the Company purchased 408,600 shares of Common
Stock.
(2) Includes 1,799,202 shares underlying presently exercisable stock options.
Does not include 20,550 shares of Common Stock owned by Mr. Sugarman's
spouse and 2,000 shares of Common Stock held as custodian for his minor
child, as to which shares he disclaims beneficial ownership.
(3) Includes 83,375 shares that Mr. Gotterer may purchase under presently
exercisable stock options, but excludes 63,375 shares underlying options
held by Mr. Gotterer, as to which shares he disclaims beneficial ownership
since a business partner is entitled to the beneficial ownership of such
shares upon any exercise of such options.
(4) Includes 33,334 shares underlying presently exercisable stock options.
(5) Includes 10,000 shares underlying presently exercisable stock options.
(6) This total includes 1,972,577 shares which such executive officers and
directors may acquire upon the exercise of presently exercisable stock
options.
As of the Record Date, directors and officers of the Company beneficially
owned the following shares of Common Stock of Rally's, in which the Company has
a significant equity investment. Mr. Sugarman -- 485,833 shares which may be
acquired under stock options exercisable within 60 days, but excluding (i) 3,230
shares held as custodian for his minor child, as to which he disclaims
beneficial ownership, (ii) 3,136,849 shares owned by the Company, of which Mr.
Sugarman may be deemed to be a controlling person, and (iii) 145,884 shares
beneficially owned by Mr. Sugarman's spouse (including 104,692 shares underlying
presently exercisable options and warrants), as to which shares he disclaims
beneficial ownership; Mr. Gotterer -- 279,730 shares (including 251,615 shares
which may be acquired under stock options and warrants exercisable within 60
days) but excluding 22,500 shares underlying options held by Mr. Gotterer, as to
which shares he disclaims beneficial ownership since a business partner is
entitled to the beneficial ownership of such shares upon any exercise of such
options; Mr. Christensen -- 168,230 shares (including 165,615 shares which may
be acquired under stock options and warrants exercisable within 60 days); Mr.
Rosenthal 211,152 shares (including 198,076 shares which may be acquired under
presently exercisable stock options and warrants); Cathy Wood, the Company's
Vice President, Chief Financial Officer, Secretary and Treasurer, 25,000 shares
(including 25,000 shares which may be acquired under presently exercisable stock
options).
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
During the 1996 fiscal year the Board of Directors of the Company met on
twenty-one occasions. Each of the directors who served as a director in 1996
attended all meetings of the Board of Directors and the meetings held by all
committees of the Board on which such director served.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has an Executive Committee, a Compensation Committee, an Option
Committee, an Audit Committee and an Incentive Compensation Committee. The
members of each Committee are appointed by the Board of Directors for a term
beginning after the first regular meeting of the Board of Directors following
the Annual Meeting of Stockholders and until their respective successors are
elected and qualified.
The Executive Committee, consisting of Messrs. Gotterer and Christensen,
met formally on one occasion during 1996, and its members consulted regularly on
an informal basis in connection with the functions of this Committee. This
Committee was established to act in the place of the Board between Board
meetings.
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The Compensation Committee presently consists of Messrs. Gotterer and
Christensen. The Compensation Committee met on one occasion during 1996. See
"Compensation Committee Report."
The Option Committee presently consists of Messrs. Gotterer and
Christensen. The Option Committee met on one occasion in 1996. The Option
Committee administers the Company's stock option plans.
The Audit Committee is responsible for exercising such supervisory control
over the internal auditing and accounting procedures, practices and personnel of
the Company as the Audit Committee deems necessary or advisable and makes
recommendations annually to the Board of Directors concerning the appointment of
the Company's independent auditors for the ensuing fiscal year. The members of
the Audit Committee are Messrs. Christensen and Malcolm. The Audit Committee met
on one occasion during 1996, and its members consulted regularly on an informal
basis in connection with functions of this Committee.
The Incentive Compensation Committee presently consists of Messrs. Malcolm
and Rosenthal. The Incentive Compensation Committee was formed in 1997.
There is no standing nominating committee or other committee performing
similar functions.
COMPENSATION OF DIRECTORS
Non-employee directors of the Company are compensated at a rate of $10,000
per annum, plus $500 for each meeting of the Board of Directors attended.
Non-employee directors also participate in the Company's 1996 Stock Option Plan
for Non-Employee Directors (the "Director Plan"). Members of the Audit Committee
are compensated for their services thereon at the rate of $250 per meeting
attended.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and
long-term compensation for services in all capacities to the Company for the
three years ended December 31, 1996, 1995, and 1994 of those persons who were
(i) the Chief Executive Officer and (ii) executive officers of the Company
during 1996 and whose cash compensation exceeded $100,000 for services performed
by such persons for the Company during 1996 (collectively, the "Named
Executives").
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION AWARDS
ANNUAL COMPENSATION ----------------------------------------
--------------------------------------------- SECURITIES
OTHER RESTRICTED UNDERLYING
SALARY BONUS ANNUAL STOCK OPTION/SARS ALL OTHER
NAME & PRINCIPAL POSITION YEAR $ $ COMPENSATION AWARD(S) # COMPENSATION
- ------------------------- ------- --------- ------- ------------- ---------- ------------ ------------
Burt Sugarman............ 1996 1,000,000 -0- 51,548(1) -0- 200,000 25,000(3)
Chairman of the Board, 1995 1,000,000 -0- 26,774(1) -0- 1,899,202(2) 25,000(3)
President and Chief 1994 1,000,000 600,000 76,579(1) -0- -0- 174,038(3)
Executive Officer
Cathy L. Wood............ 1996 199,194 -0- -0- -0- -0- -0-
Vice President, Secretary 1995(4) 166,123 -0- -0- -0- 55,000(5) -0-
and Chief Financial
Officer
- ---------------
(1) Amounts represent the value of use of the Company's airplane and automobile.
(2) 1,899,202 options held by Mr. Sugarman exercisable at $6.33 per share and
expiring in 1996 were canceled and an identical number of new options were
issued to him with an exercise price of $6.75, which was the current market
price of the Common Stock at the time such options were granted.
(3) Represents amounts paid to Mr. Sugarman by Rally's for services as Chairman
and Chief Executive Officer of Rally's. In February 1994 Mr. Sugarman ceased
serving as Chairman and Chief Executive officer of Rally's, however, in
November 1994 Mr. Sugarman reassumed the duties of Chairman.
(4) Ms. Wood joined the Company in January 1995.
(5) Ms. Wood was granted 45,000 options in March 1995 and 10,000 options in July
1995.
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EMPLOYMENT CONTRACTS
Mr. Sugarman is employed as Chairman of the Board, President and Chief
Executive Officer of the Company pursuant to an employment agreement expiring on
December 31, 2000. The term of the agreement will be automatically extended for
successive two-year periods commencing January 1, 2001, unless the Company or
Mr. Sugarman notifies the other of its election not to extend the term of the
agreement one year prior to the expiration of the term. The agreement provides
that Mr. Sugarman is to receive an annual base salary of $1,000,000, an annual
bonus in an amount determined from year to year by the Compensation Committee of
the Board of Directors, at its discretion, and certain additional benefits. The
employment agreement is terminable prior to the expiration of the term of the
Agreement (1) by the Company for cause (as defined therein) and (2) by Mr.
Sugarman (a) for cause (as defined therein), (b) at any time for any reason,
after January 1, 1999 or (c) if Mr. Sugarman ceases to own or control at least
10% of the Common Stock of the Company. Should the employment agreement be
terminated by the Company without cause or by Mr. Sugarman for cause, Mr.
Sugarman would be entitled to (1) continuation of all health insurance benefits
through the expiration of the term of the agreement, or for 24 months from
termination, whichever period is longer and (2) a lump sum payment in an amount
equal to the greater of (a) two times the annual base salary, and (b) the amount
which would have been payable throughout the remainder of the term of the
agreement, provided that if Mr. Sugarman is terminated within one year following
a change in ownership of the Company (as defined therein), Mr. Sugarman will
receive a lump sum payment equal to 2.99 times the average annual compensation
paid to Mr. Sugarman by the Company during the five years prior to such change
in ownership. In the event of Mr. Sugarman's death or disability he (or his
estate) would be entitled to receive a lump sum payment equal to the greater of
(a) two times the annual base salary and (b) the amount which would have been
payable throughout the remainder of the term of the agreement. In the event of
Mr. Sugarman's death, the Company would also be obligated to continue all health
insurance benefits for Mr. Sugarman's immediate family for two years. Upon the
expiration of the agreement, the Company is obligated to pay to Mr. Sugarman a
lump sum equal to two times the annual base salary. Pursuant to the employment
agreement, Mr. Sugarman has agreed during the term of the agreement, not to
render services to, or plan for or organize, a business which is materially
competitive with or similar to the business of the Company or any of its
subsidiaries.
OPTION PLANS
The Company has a 1985 Non-Qualified Stock Option Plan (the "1985 Stock
Option Plan"). The 1985 Stock Option Plan provides for the grant of options to
purchase 3,000,000 shares of Common Stock; provided that, pursuant to the terms
of the 1985 Stock Option Plan, no further grants may be made under the plan. As
of December 31, 1996, options to purchase 1,805,952 shares were outstanding, and
options for 307,500 shares had been exercised. See Proposal 2 herein.
The Company has a 1996 Employee Stock Option Plan (the "1996 Stock Option
Plan") and the Director Plan. The 1996 Stock Option Plan presently provides for
the grant of options to purchase 250,000 shares of Common Stock. As of December
31, 1996, options to purchase 200,000 shares were outstanding and no options had
been exercised. The Director Plan presently provides for the grant of 250,000
shares of Common Stock. As of December 31, 1996, options to purchase 50,000
shares were outstanding and no options had been exercised. See Proposals 3 and 4
herein.
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FISCAL YEAR END OPTION VALUE
VALUE OF
UNEXERCISED IN
NUMBER OF UNEXERCISED THE MONEY OPTIONS AT
OPTIONS AT DECEMBER 31,
SHARES DECEMBER 31, 1996 1996(1)
ACQUIRED ON VALUE --------------------------- --------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE
- --------------------------------- ----------- -------- ----------- ------------- --------------------
Burt Sugarman.................... 300,000 $413,000 1,799,202 -0- $2,623,703
Cathy L. Wood.................... -0- -0- 36,666 18,334 51,216
- ---------------
(1) Based upon the closing price of the Common Stock on December 31, 1996 of
$8.375, minus the option exercise price of (i) $6.75 per share for 1,599,202
shares and $8.25 for 200,000 shares for Mr. Sugarman and (ii) $7.00 per
share for 30,000 shares and $6.88 per share for 6,666 shares for Ms. Wood.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
----------------------------------------------------------
% OF TOTAL
OPTIONS/SARS
GRANTED TO EXERCISE OR GRANT DATE
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME GRANTED # FISCAL YEAR $/SH DATE VALUE($)(1)
- -------------------------------- ------------ ------------ ---------------- --------- -----------
Burt Sugarman................... 200,000 100% $ 8.25 9/19/2001 $ 558,000
(1) Options are granted at market price on the date of the grant. The proxy
rules require that either the potential realizable values at assumed annual
stock price appreciation rates or the present value at the grant date be
assigned to options. The Company has chosen a present value method known as
the "Black-Scholes" Option Pricing Model. The assumptions used to arrive at
the value shown were as follows: expected volatility-20%; risk-free rate of
return-7.1%; dividend yield -- 0%; and time of exercise -- five years. The
choice of the Black-Scholes valuation method does not reflect any belief by
the Company's management that such method, or any other valuation method,
can accurately assign a value to an option at the grant date.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1996 the Compensation Committee and Option Committee of the Board of
Directors consisted of David Gotterer and Terry Christensen. David Gotterer is
Vice Chairman of the Company and a Senior Partner in the accounting firm of
Mason & Company, LLP, which received $139,091 from the Company for rendering
consulting, financial and accounting services to the Company during 1996. Terry
Christensen is a partner in the law firm of Christensen, Miller, Fink, Jacobs,
Glaser, Weil & Shapiro, LLP, which represents the Company and Rally's in certain
corporate and litigation matters. Both Mr. Gotterer and Mr. Christensen are
directors of Rally's.
COMPENSATION COMMITTEE REPORT
In 1996 the Compensation Committee and Option Committee of the Board of
Directors consisted of Terry Christensen and David Gotterer. The Compensation
Committee and the Option Committee consisted of the same directors so that the
same persons could administer all aspects of the Company's compensation
programs.
The Compensation Committee is responsible for developing and making
recommendations to the Company with respect to executive officer compensation
policies, addressing such matters as salaries, bonuses, incentive plans,
benefits and overall compensation. The Compensation Committee also determines
the compensation to be paid to the Chief Executive Officer and each of the other
executive officers of the Company. The Compensation Committee, however, will not
administer the Company's 1997 Incentive
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Compensation Plan for Executive Officers (the "Incentive Plan") if it is adopted
by the stockholders. The Incentive Plan will be administered by the Incentive
Compensation Committee. See Proposal 5 hereof.
The objectives of the Compensation Committee in determining the type and
amount of executive officer compensation are to provide a level of compensation
which allows the Company to attract and retain competent executives. The
Compensation Committee further believes that the Company's compensation programs
should provide personnel with a financial interest in the Company similar to the
interests of the Company's stockholders and that there should be a correlation
between the performance of the Company and individual performance and
compensation. During 1996 the Compensation Committee did not award any bonuses
to either of the Named Executives.
Mr. Sugarman, the Chief Executive Officer of the Company is eligible to
participate in the same compensation plans available to the Company's other
executives. In 1996 Mr. Sugarman received base compensation of $1,000,000
pursuant to the terms of his employment agreement. The Compensation Committee
did not award Mr. Sugarman a discretionary bonus for 1996. In 1996 Mr. Sugarman
exercised options to purchase 300,000 shares of Common Stock. In order to
provide Mr. Sugarman with a continued incentive to exert his best efforts on
behalf of the Company through the opportunity to benefit from appreciation in
the value of the Common Stock, the Option Committee granted Mr. Sugarman options
to purchase 200,000 shares of Common Stock at an exercise price of $8.25 per
share, the fair market value of the shares on the date of grant. Such options
expire in 2001. In February 1997 the Company amended Mr. Sugarman's employment
agreement to, among other things, extend the term of the agreement, provide for
certain payments to Mr. Sugarman upon a change in control of the Company and, if
approved by the stockholders, permit Mr. Sugarman (or his estate) to exercise
options granted to him pursuant to the 1985 Stock Option Plan and the 1996 Stock
Option Plan for up to 18 months following his death or disability. The
Compensation Committee approved the amendment in order to ensure that Mr.
Sugarman's services would be available to the Company as the Company continues
to pursue investment opportunities.
DAVID GOTTERER
TERRY CHRISTENSEN
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PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the Company's
cumulative total stockholder return on the Common Stock for the five years ended
December 31, 1996, based upon the market price of the Common Stock as reported
on the New York Stock Exchange with the cumulative total return (and assuming
reinvestment of dividends), with (i) the NYSE Stock Index and (ii) an index of a
group of companies in the fast food industry selected by the Company, consisting
of CKE Restaurants, Inc., Flagstar Companies, Inc., Krystal Company, Checkers,
Foodmaker, Inc., and Sonic Corporation. The Company, through its significant
equity investment in Rally's, is involved in the fast food industry.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN AMONG GIANT GROUP, LTD.
NYSE STOCK MARKET AND PEER GROUP INDEX
TOTAL RETURN TO SHAREHOLDERS
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) GIANT GROUP, LTD. PEER GROUP NYSE MARKET INDEX
1991 100.00 100.00 100.00
1992 143.61 143.82 104.70
1993 135.72 105.56 118.88
1994 85.22 52.26 116.57
1995 115.21 61.34 151.15
1996 105.74 99.65 182.08
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
David Gotterer, Vice Chairman and a Director of the Company and of Rally's,
is a Senior Partner in the accounting firm of Mason & Company, LLP, which
received $139,091 from the Company for rendering consulting, financial and
accounting services to the Company during 1996.
In September 1996 the Company purchased 200,000 shares of Common Stock from
Mr. Sugarman for $8.25 per share, the fair market value of the Common Stock on
the date of the purchase.
AMENDMENT OF 1985 STOCK OPTION PLAN
[PROPOSAL NO. 2]
On March 28, 1997 the Board of Directors, pursuant to the recommendation of
the Compensation Committee and subject to the approval of the stockholders,
approved certain amendments to the 1985 Stock Option Plan to permit options
granted pursuant to the 1985 Stock Option Plan to be exercised (i) in the case
of the death or disability of the option holder, until the later of the
expiration of the options or 18 months following the death or disability of the
holder, and (ii) in the case of the termination of the employment or
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engagement by the option holder for any reason other than death, disability,
"cause" (as defined in the 1985 Stock Option Plan), or retirement, until the
earlier of the expiration of the options and two months following the
termination of the employment or engagement. A copy of the proposed amendment is
set forth as Exhibit A attached hereto. Presently, options granted pursuant to
the 1985 Stock Option Plan may be exercised until the earlier of the expiration
of the options and 18 months following the death or six months following
disability of the option holder, as the case may be. Also, the 1985 Stock Option
Plan presently provides that options will immediately terminate upon the
termination without cause by the option holder of his or her employment or
engagement. Upon a termination by the Company of the option holder's employment
or engagement without cause, options will terminate six months following such
termination. The Board of Directors believes that the foregoing amendments to
the 1985 Stock Option Plan will benefit the Company by helping the Company
motivate and retain qualified executives and consultants. If the foregoing
amendments to the 1985 Stock Option Plan are approved, the Company intends to
amend the terms of the outstanding options granted pursuant to the 1985 Stock
Option Plan to be consistent with the foregoing. Certain directors and executive
officers hold options under the 1985 Stock Option Plan as follows:
NAME NO. OF OPTIONS
------------------------------------------------------- --------------
Burt Sugarman.......................................... 1,599,202
David Gotterer......................................... 126,750(1)
Terry Christensen...................................... 20,000
Cathy Wood............................................. 55,000
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(1) Includes 63,375 options for which a business partner of Mr. Gotterer is
entitled to the beneficial ownership of the Common Stock acquired upon
exercise of such options.
The affirmative vote of the holders of at least a majority of the shares of
Common Stock voted at the Annual Meeting is required to approve the amendment to
the 1985 Stock Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
AMENDMENT TO THE 1985 STOCK OPTION PLAN
DESCRIPTION OF THE 1985 STOCK OPTION PLAN
The 1985 Stock Option Plan was adopted in 1985 in order to offer officers,
directors, senior executives of and consultants to the Company incentives and
rewards in recognition of their efforts in the Company's progress and to
encourage them to continue to promote the best interests of the Company.
Pursuant to the terms of the 1985 Stock Option Plan, no further grants of
options may be made thereunder. However, options previously granted under the
1985 Stock Option Plan remain outstanding. The 1985 Stock Option Plan covered
options to purchase 3,000,000 shares of Common Stock. As of the Record Date
there were options to purchase 1,805,952 shares of Common Stock were
outstanding, which were held by 5 persons.
The 1985 Stock Option Plan is administered by the Option Committee, whose
members are appointed by the Board of Directors. The exercise price of options
may not be less than 85% of the fair market value of the Common Stock on the
date of grant, subject to any repricing at the discretion of the Option
Committee, and is payable in cash, in shares of Common Stock having a fair
market value equal to the option exercise price or in other consideration
acceptable to the Option Committee or the Board of Directors. The vesting
schedule and term of options granted under the 1985 Stock Option Plan is at the
discretion of the Option Committee. As of the Record Date options to purchase
1,779,285 shares were exercisable and the remainder of the options will become
exercisable by 1998. Generally, except in the case of death, disability,
retirement or termination without cause, options terminate upon the optionee's
termination of employment. In the case of death or disability of an optionee,
options terminate upon the earlier of the expiration of the option or 18 months
following the death of the optionee or six months following the disability of
the optionee, as the case may be. In the case of retirement, options terminate
upon the earlier of the expiration of the options and two months following the
optionee's retirement. Upon a termination of optionee by the Company without
cause, options
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terminate upon the earlier of the expiration of the options and 12 months after
the date of the termination. Options may not be transferred except by will or
the laws of descent and distribution.
In the event of a merger, reorganization, consolidation, recapitalization,
stock dividend, stock spilt or other change in corporate structure affecting the
Common Stock, appropriate adjustments will be made in the number of shares and
exercise price of options granted under the 1985 Stock Option Plan.
The Board of Directors may amend, suspend or discontinue the 1985 Stock
Option Plan, but may not, without the approval of the Company's stockholders
make any amendment which would (i) make any material change in the class of
persons eligible to participate in the 1985 Stock Option Plan, (ii) increase the
number of shares for which options may be granted under the 1985 Stock Option
Plan, (iii) extend the term or permit adjustments in the number and exercise
price of options granted under the 1985 Stock Option Plan, except as permitted
in the 1985 Stock Option Plan.
An optionee granted options under the 1985 Stock Option Plan will not
recognize any taxable income upon the grant of the option, but will generally
realize ordinary income for federal income tax purposes at the time of the
exercise of such options equal to the difference between the fair market value
of the Common Stock on the date of exercise and the exercise price. Any taxable
income recognized in connection with an option exercised by an optionee who is
an employee of the Company will be subject to tax withholding by the Company.
Upon resale of such shares by the optionee, any difference between the sale
price and the optionee's exercise price, to the extent not recognized as taxable
income as described above, will be treated as long-term or short-term capital
gain or loss, depending upon the holding period. The Company will be entitled to
a tax deduction in the same amount as the ordinary income recognized by the
optionee with respect to shares acquired upon exercise of an option.
The foregoing is only a summary of certain effects of federal income
taxation upon the optionee and the Company with respect to the grant and
exercise of options granted under the 1985 Stock Option Plan, does not purport
to be complete and does not discuss the tax consequences of the optionee's death
or the income tax laws of any local, state or foreign jurisdiction in which any
optionee may reside.
AMENDMENT OF 1996 STOCK OPTION PLAN
[PROPOSAL NO. 3]
On March 28, 1997 the Board of Directors, pursuant to the recommendation of
the Compensation Committee and Option Committee and subject to the approval of
the stockholders, approved certain amendments to the 1996 Stock Option Plan to
(i) increase to 500,000 the number of shares of Common Stock subject to the 1996
Stock Option Plan, (ii) permit options granted pursuant to the 1996 Stock Option
Plan to be exercised until the later of the expiration of the options or 18
months following the death or disability of the holder of the options, (iii)
permit the consideration to be delivered upon the exercise of non-qualified
options to consist of cash, shares of common stock or such other consideration
acceptable to the Board or the Committee; and (iv) permit the consideration to
be delivered upon the exercise of incentive options granted after May 8, 1997 to
consist of cash, shares of Common Stock or such other consideration acceptable
to the Board or the Committee. A copy of the proposed amendments to the 1996
Stock Option Plan is set forth as Exhibit B hereto. Presently, the 1996 Stock
Option Plan covers 250,000 shares of Common Stock (200,000 of which are
outstanding) and options terminate on the earlier of the expiration of the
option or 12 months following the death or disability of the holder. Also, the
consideration to be delivered upon the exercise of all options must consist of
cash or shares of Common Stock. The Board of Directors believes that the
foregoing amendments to the 1996 Stock Option Plan will benefit the Company by
helping to attract, motivate and retain qualified executive, administrative and
professional employees. If the foregoing amendments are approved, the Company
intends to amend the terms of options granted pursuant to the 1996 Stock Option
Plan (all of which are non-qualified options) to (i) terminate upon the later of
the expiration of the options and 18 months following the death or disability of
the option holder, and (ii) permit the consideration to be delivered upon
exercise of the options to consist of cash, shares of Common Stock or such other
consideration acceptable to the Board or the Committee. Mr. Sugarman holds
200,000 such options.
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The affirmative vote of the holders of at least a majority of the shares of
Common Stock voted at the Annual Meeting is required to approve the amendments
to the 1996 Stock Option Plan
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE AMENDMENT TO THE 1996 STOCK OPTION PLAN
DESCRIPTION OF THE 1996 STOCK OPTION PLAN
The 1996 Stock Option Plan presently provides for the grant of options to
purchase up to an aggregate of 250,000 shares of Common Stock and terminates on
May 19, 2006. Options may be either incentive options or non-qualified options.
The 1996 Stock Option Plan is administered by the Option Committee, whose
members are appointed by the Board of Directors. All employees of the Company
and its subsidiaries are eligible to receive options. As of the Record Date,
there were approximately nine employees eligible to participate in the 1996
Stock Option Plan. The exercise price in each instance is not less than 100% of
the fair market value of the Common Stock on the date of grant, subject to any
repricing at the option of the Option Committee, and is payable in cash or
shares of previously acquired Common Stock having a fair market value equal to
the option exercise price. The vesting schedule and term of options granted
under the 1996 Stock Option Plan is at the discretion of the Option Committee.
Generally, options terminate six months (three months in the case of an
incentive option) after termination of the optionee's employment for any reason
other than the optionee's death or disability. If the amendments to the 1996
Stock Option Plan are approved, options will terminate up to 18 months after
termination of the optionee's employment due to death or disability. Options are
non-transferrable by the holder other than by will or laws of descent and
distribution.
In the event any change is made in the Company's capitalization that
results from a stock dividend, recapitalization, reorganization, merger,
consolidation, split-up, combination or exchange of shares of any similar change
affecting the Common Stock, appropriate adjustments, as determined by the Option
Committee, will be made in the exercise price and in the number and class of
shares subject to the options.
In the event of a sale of all or substantially all of the assets of the
Company or the merger of the Company with or into another corporation, holders
of outstanding options will have the right to receive, upon exercise of the
options and payment of the exercise price, the same consideration which the
stockholders of the Company received pursuant to such transaction.
The Board of Directors may amend or terminate the 1996 Stock Option Plan
from time to time in such respect as the Board may deem advisable; provided that
any amendment requiring stockholder approval pursuant to Rule 16b-3 (as in
effect from time to time) under the Securities Exchange Act of 1934, as amended,
shall not be effective unless such approval is obtained.
An optionee who is granted an incentive option generally will not recognize
taxable income either upon the grant or the exercise of an incentive option,
although the exercise may be subject to the alternative minimum tax. No
deduction will ordinarily be available to the Company as a result of the grant
or exercise of incentive options. Upon the sale or exchange of the shares
underlying an incentive option more than two years after the date of grant and
one year after the date of exercise, any gain or loss will be treated as
long-term capital gain or loss. If these holding periods are not satisfied, the
optionee will recognize ordinary income at the time of sale or exchange equal to
the difference between the exercise price and the lower of (i) the fair market
value of the shares of the date of exercise or (ii) the sale price of the
shares. Any gain recognized on such a premature disposition of shares in excess
of the amount treated as ordinary income will be characterized as long-term or
short-term capital gain, depending on the holding period.
An optionee granted non-qualified stock options will not recognize any
taxable income upon the grant of the option, but will generally realize ordinary
income for federal income tax purposes at the time of exercise of such options
equal to the difference between the fair market value of the Common Stock on the
date of exercise and the exercise price. Any taxable income recognized in
connection with an option exercised by an optionee who is an employee of the
Company will be subject to tax withholding by the Company. Upon resale of such
shares by the optionee, any difference between the sale price and the optionee's
exercise price, to the extent not recognized as taxable income as described
above, will be treated as long-term or short-term capital
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gain or loss, depending upon the holding period. The Company will be entitled to
a tax deduction in the same amount as the ordinary income recognized by the
optionee with respect to shares acquired upon exercise of a nonqualified option.
The foregoing is only a summary of certain effects of federal income
taxation upon the optionee and the Company with respect to the grant and
exercise of options under the 1996 Stock Option Plan, does not purport to be
complete and does not discuss the tax consequences of the optionee's death or
the income tax laws of any local, state or foreign jurisdiction in which any
optionee may reside.
AMENDMENT OF 1996 STOCK OPTION PLAN FOR
NON-EMPLOYEE DIRECTORS
[PROPOSAL NO. 4]
On March 28, 1997 the Board of Directors, pursuant to the recommendation of
the Compensation Committee and the Option Committee and subject to the approval
of the stockholders, approved an amendment to increase to 400,000 the number of
shares of Common Stock covered by the Director Plan. Presently 250,000 shares of
Common Stock are covered by the Director Plan and 190,000 shares are available
for grant. A copy of the proposed amendment to the Director Plan is set forth in
Exhibit C attached hereto. The Board of Directors believes that increasing the
number of shares of Common Stock covered by the Director Plan will benefit the
Company by helping to attract and retain qualified persons to serve as directors
and by providing an incentive to directors whose rewards are dependent upon
those factors which directly benefit the Company's stockholders and appreciation
in the market value of the Common Stock.
The affirmative vote of the holders of at least a majority of the shares of
Common Stock voted at the Annual Meeting is required to approve the amendment to
the Director plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE AMENDMENT TO THE DIRECTOR PLAN
DESCRIPTION OF THE DIRECTOR PLAN
The Director Plan presently provides for the grant of Options to purchase
up to an aggregate of 250,000 shares of Common Stock and terminates on May 19,
2006. The Director Plan is administered by the Option Committee, whose members
are appointed by the Board of Directors.
Pursuant to the Director Plan, each Non-Employee Director of the Company,
as of May 20, 1996 (the "Adoption Date") who was nominated for reelection at the
1996 annual meeting was granted options to purchase 10,000 shares of Common
Stock effective as of the Adoption Date. Each Non-Employee Director (other than
Non-Employee Directors as of the Adoption Date) who is elected or appointed
subsequent to the Adoption Date will be granted options to purchase 10,000
shares of Common Stock as of the date of such election or appointment. In
addition, each Non-Employee Director of the Company who was elected or appointed
to the Executive Committee on July 12, 1996 was granted additional options to
purchase 10,000 shares of Common Stock, and each Non-Employee Director who is
appointed to the Executive Committee subsequent to July 12, 1996 will be granted
additional options to purchase 10,000 shares of Common Stock.
On each anniversary of the Adoption Date, or in the case of a Non-Employee
Director who is elected or appointed subsequent to the Adoption Date, on each
anniversary of the date of such election or appointment, each Non-Employee
Director shall be automatically granted options to purchase 10,000 shares of
Common Stock, and each Non-Employee Director who is a member of the Executive
Committee shall be automatically granted additional options to purchase 10,000
shares Common Stock on the anniversary of the date of his election or
appointment to the Executive Committee. Presently, there are four Directors
eligible to participate in the Director Plan.
The exercise price in each instance is not less than 100% of the fair
market value of the Common Stock on the date of grant, subject to any repricing
at the option of the Option Committee, and is payable in cash or shares of
previously acquired Common Stock having a fair market value equal to the option
exercise price.
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Options granted under the Director Plan have a five-year term and are
immediately exercisable. Options are non-transferrable by the holder other than
by will or laws of descent and distribution.
In the event any change is made in the Company's capitalization that
results from a stock dividend, recapitalization, reorganization, merger,
consolidation, split-up, combination or exchange of shares or any similar change
affecting the Common Stock, appropriate adjustments, as determined by the Option
Committee, will be made in the exercise price and in the number and class of
shares subject to the options.
In the event of a sale of all or substantially all of the assets of the
Company or the merger of the Company with or into another corporation, holders
of outstanding options will have the right to receive, upon exercise of the
options and payment of the exercise price, the same consideration which the
stockholders of the Company received pursuant to such transaction.
The Board of Directors may amend or terminate the Director Plan from time
to time in such respects as it may deem advisable; provided that any amendment
requiring stockholder approval pursuant to Rule 16b-3 (as in effect from time to
time) under the Securities Exchange Act of 1934, as amended, shall not be
effective unless such approval is obtained.
Any Non-Employee Director granted options pursuant to the Director Plan
will not recognize any taxable income at the grant of the option, but will
generally realize ordinary income for federal income tax purposes at the time of
exercise of such options equal to the difference between the fair market value
of the Common Stock on the date of exercise and the exercise price. Upon resale
of such shares by the optionee, any difference between the sale price and the
optionee's exercise price, to the extent not recognized as taxable income as
described above, will be treated as long-term or short-term capital gain or
loss, depending upon the holding period. The Company will be entitled to a tax
deduction in the same amount as the ordinary income recognized by the optionee
with respect to shares acquired upon exercise of an option.
The foregoing is only a summary of certain effects of federal income
taxation upon the optionee and the Company with respect to the grant and
exercise of options under the Director Plan, does not purport to be complete and
does not discuss the tax consequences of the optionee's death or the income tax
laws of any local, state or foregoing jurisdiction in which any optionee may
reside.
ADOPTION OF 1997 INCENTIVE COMPENSATION PLAN
FOR EXECUTIVE OFFICERS
[PROPOSAL NO. 5]
On March 28, 1997 the Board of Directors, pursuant to the recommendation of
the Incentive Compensation Committee of the Board of Directors consisting of
David Malcolm and Jeffrey Rosenthal and subject to the approval of the
stockholders, adopted the Incentive Compensation Plan. The Board of Directors
believes that the Incentive Plan will benefit the Company by, among other
things, (i) providing an incentive for superior performance, (ii) motivating
participating officers toward the highest levels of achievement and business
results, and (iii) tying the goals and interests of the participating officers
to those of the Company and its stockholders. A copy of the Incentive is
attached hereto as Exhibit D. The following summary of the principal features of
the Incentive Plan is qualified in its entirety by reference to Exhibit D.
The affirmative vote of the holders of at least a majority of the shares of
Common Stock voted at the Annual Meeting is required to approve the Incentive
Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE ADOPTION OF THE INCENTIVE PLAN
DESCRIPTION OF THE INCENTIVE PLAN
Executive officers of the Company are eligible to participate in the
Incentive Plan. The Incentive Plan will be administered by the Incentive
Compensation Committee of the Board of Directors. The Incentive Compensation
Committee will approve the specific executive officers who will participate in
the Incentive
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Plan in a given year prior to, or at the time of, the establishment of the
performance objectives for such calendar year.
Within 90 days of the beginning of each performance period, the Incentive
Compensation Committee will approve performance goals including specific
performance objectives and establish computation formulae or methods for
determining each participant's bonus for that performance period. Generally, the
performance period will be the Company's fiscal year; provided that the
Incentive Compensation Committee may adopt performance periods of less than one
year. The objectives include any one or more of the following criteria for the
year: (i) stock price, (ii) market share, (iii) gross revenue, (iv) pretax
operating income, (v) cash flow, (vi) earnings before interest, taxes,
depreciation and amortization, (vii) earnings per share, (viii) return on
equity, (ix) return on invested capital or assets, (x) return on revenues, (xi)
cost reductions and savings, or (xii) productivity. In addition, to the extent
consistent with the goal of providing for deductibility under Section 162(m) of
the Code, performance goals may include a participant's attainment of personal
objectives with respect to any of the foregoing performance goals or negotiating
transactions and sale or developing long-term business goals.
At or after the end of each performance period, the Incentive Compensation
Committee is required by the terms of the Incentive Plan to certify in writing
whether the pre-established performance goals and objectives have been satisfied
in such performance period. The actual bonus award for any participant for such
performance period shall then be determined based upon the pre-established
computation formulae or methods. In no event will any bonus award for any
performance period exceed five times the participant's annual base salary as in
effect at the beginning of the plan year. The Incentive Compensation Committee
has no discretion to increase the amount of any participant's bonus as so
determined, but may reduce the amount of, or totally eliminate, such bonus if
the Incentive Compensation Committee determines, in its absolute discretion,
that such a reduction or elimination is appropriate in order to reflect the
participant's performance or any other factors material to the goals, purposes
and administration of the Incentive Plan.
Approved bonus awards under the Incentive Plan are payable in cash, shares
of Common Stock, other consideration of commensurate value and/or a combination
thereof as soon as is practicable after the end of each performance period and
after the Incentive Compensation Committee has certified in writing that the
relevant performance goals were achieved. Awards that are otherwise payable to a
participant who is not employed by the Company as of the last day of the
performance period will be prorated or eliminated pursuant to specified rules
established by the Incentive Compensation Committee for the administration of
the Incentive Plan.
Since the Incentive Plan requires performance goals to be set and
participants to be selected for each performance period, it cannot determined
what benefits, if any, would have been paid to any executive officer if the
Incentive Plan had been in effect for the 1996 calendar year.
Amendments can be made to the Incentive Plan that can increase the costs of
the plan to the Company and can alter the allocation of benefits among
participating executive officers. However, no such amendment that is
inconsistent with its purpose or with its compliance with applicable law and the
requirements of Section 162(m) may be made without stockholder approval.
The Incentive Plan is designed to comply with Section 162(m) of the Code,
which limited the tax deductibility by the Company of compensation paid to
executive officers to $1,000,000. Compensation paid pursuant to a plan approved
by the stockholders that meets the requirements of Section 162(m) is exempted
from this limitation and is fully deductible. The Board of Directors and the
Incentive Compensation Committee have approved the Incentive Plan for such
submission to the stockholders in order to maintain the full deductibility of
compensation paid to executive officers.
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RATIFICATION OF AUDITORS
[PROPOSAL NO. 6]
Arthur Andersen LLP has been selected by the Board of Directors to serve as
the independent auditors for the Company for the year ending December 31, 1997.
This firm acted as auditors for the Company for the years ended December 31,
1995 and 1996. A representative of Arthur Andersen LLP is expected to be
available by telephone and will be given the opportunity to make a statement if
he or she so desires and to respond to appropriate questions from stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR
FISCAL 1997.
Arthur Andersen LLP, which was engaged by the Company on January 29, 1996
as independent auditors, are the independent accountants for Rally's, in which
the Company has a significant investment. The work of Coopers & Lybrand LLP as
independent auditors for the Company was terminated effective January 25, 1996.
The decision to change accountants was approved by the Audit Committee of the
Board of Directors.
During the two most recent fiscal years and subsequent interim period prior
to January 25, 1996, there have been no disagreements with Coopers & Lybrand LLP
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure or any reportable events. Coopers &
Lybrand LLP's report on the financial statements for the two fiscal years prior
to the change in accountants contained no adverse opinion or disclaimer of
opinion and was not qualified or modified as to uncertainty, audit scope or
accounting principles. Coopers & Lybrand LLP has furnished the Company with a
letter addressed to the SEC stating it agrees with the above statements. A copy
of which was filed as an exhibit to the Company's Form 8-K dated January 29,
1996.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 1998 Annual Meeting
must be received by the Company for inclusion in its proxy statement and form of
proxy by January 7, 1998. To assure that a stockholder's proposal is included in
the proxy statement and form of proxy, it will be necessary for the stockholder
to comply with the regulations of the SEC governing inclusion of such proposals
in such documents. In addition, stockholders may directly nominate persons for
director only by complying with the following procedure set forth in the
Company's By-Laws; the stockholder must submit the names of such persons in
writing to the Secretary of the Company not less than 70 days nor more than 90
days prior to the date of the preceding year's annual meeting. The nominations
must be accompanied by all information relating to such person that is required
to be disclosed in solicitations of proxies for election of directors, or is
otherwise required, in each case pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended, and the name, record address, and class and
number of shares of the Company owned by the stockholder making the nomination.
A stockholder may properly bring business before the Annual Meeting of
Stockholders only by complying with the following procedure set forth in the
Company's By-Laws; the stockholder must submit to the Secretary of the Company,
not less than 70 days nor more than 90 days prior to the date of the preceding
year's annual meeting, a written statement describing the business at the Annual
Meeting, the name, record address, and class and number of shares of the Company
owned by the stockholder making the submission, and a description of any
material interest of the stockholder in such business.
Any such proposal should be communicated in writing to the Secretary of the
Company at 9000 Sunset Boulevard, 16th Floor, Los Angeles, California, 90069.
VOTING PROCEDURES
At the Meeting, stockholders will be requested to act upon the matters set
forth in this Proxy Statement. If you are not present at the Meeting, your
shares can be voted only when represented by proxy. The shares
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represented by your proxy will be voted in accordance with your directions if
the proxy is properly signed and returned to the Company at or before the
Meeting. If no instructions are specified in the proxy with respect to any
proposal, the shares represented thereby will be voted for the nominees for the
Board of Directors listed in this Proxy Statement. If any other matters shall
properly come before the Meeting, the enclosed proxy will be voted in accordance
with the best judgment of the persons voting such proxy.
A proxy may be revoked at any time prior to it being voted at the Meeting
by delivering to the Secretary of the Company a signed writing revoking the
proxy or a duly executed proxy bearing a later date, or by appearing and voting
in person at the Meeting. The mere presence at the Meeting of a person
appointing a proxy does not revoke the appointment. Please note that it is
important to date your proxy because the last dated proxy will revoke any
earlier dated proxies and will be the one that is voted at the Meeting.
A majority of the outstanding shares of Common Stock represented at the
Meeting, in person or by proxy, will constitute a quorum. The votes of
stockholders present in person or represented by proxy at the Meeting will be
tabulated by an inspector of election appointed by the Company. The five
nominees for director of the Company who receive the greatest number of votes
cast by stockholders present in person or represented by proxy at the Meeting
and entitled to vote thereon will be elected directors of the Company. The
affirmative vote of the holders of a majority of the shares of Common Stock
represented at the Meeting is required to approve proposals two through six.
Abstentions will have no effect on the outcome of the vote for the election of
directors, but will have the effect of being case against each of proposals two
through seven. Broker "non-votes" will have no effect on proposals two through
six.
OTHER BUSINESS
The Board of Directors does not know of any matters to be presented for
action at the Meeting other than as set forth in this Proxy Statement. If any
other business should properly come before the Meeting, the persons named in the
proxy intend to vote thereon with their best judgment.
The Company's Annual Report to Stockholders for the fiscal year ended
December 31, 1996 (which contains a copy of the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1996) accompanies this Proxy
Statement.
THE COMPANY'S 1996 ANNUAL REPORT ON FORM 10-K (INCLUDING THE FINANCIAL
STATEMENTS AND SCHEDULE THERETO) WILL BE PROVIDED WITHOUT CHARGE TO EACH
STOCKHOLDER UPON WRITTEN REQUEST. EACH REQUEST MUST SET FORTH A GOOD FAITH
REPRESENTATION THAT, AS OF MARCH 14, 1997, THE RECORD DATE FOR THE MEETING, THE
PERSON MAKING THE REQUEST WAS THE BENEFICIAL OWNER OF SHARES OF COMMON STOCK OF
THE COMPANY. THE REQUEST SHOULD BE DIRECTED TO: CATHY WOOD, SECRETARY, GIANT
GROUP, LTD., 9000 SUNSET BOULEVARD, 16TH FLOOR, LOS ANGELES, CALIFORNIA 90069,
TELEPHONE (310) 273-5678.
By Order of the Board of Directors
[SIG]
CATHY WOOD, Secretary
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EXHIBIT A
The 1985 Stock Option Plan is proposed to be amended as follows:
Section 9 of the 1985 Stock Option Plan would be amended and restated as
follows:
9. Death, Retirement and Termination of Employment.
(a) Upon involuntary termination of employment or service (other than
by death, disability or for cause), at the discretion of the Board or the
Committee, as the case may be, an Optionee may, within twelve (12) months
after the date of such retirement or termination, purchase all or part of
the shares with respect to which such Optionee is entitled to exercise such
Option in accordance with the provisions of Section 7 hereof, but in no
event after the expiration of the term of the Option ("cause" for purposes
of this Plan shall mean (i) willful disregard of duties, (ii) habitual
absence from employment or service, (iii) drunkenness, or (iv) dishonesty);
(b) Upon retirement, an Optionee may within two (2) months after the
date of such retirement, purchase all or part of the shares with respect to
which such Optionee is entitled to exercise such Option in accordance with
the provisions of Section 7 hereof, but in no event after the expiration of
the term of the Option;
(c) Upon the "disability" of any Optionee, the Optionee may within six
(6) months after the date of such termination of employment, but in no
event after the expiration of the term of the Option, exercise such Option
in accordance with the provisions of Section 7 hereof (for purposes of the
Plan the term "disability" shall mean a physical or mental disability as
defined in Section 105 of the Code); and
(d) Upon the death of any Optionee while in active employment or
service, the person or persons to whom such Optionee's rights under the
Option are transferred by will or the laws of descent and distribution may,
within the later of (i) eighteen (18) months after the date of such
Optionee's death, and (ii) the expiration of the term of the Option,
purchase all or any part of the shares with respect to which the Option was
exercisable on the date of termination of employment or service in
accordance with the provisions of Section 7 hereof.
(e) Upon the termination of Optionee's employment or service for any
reason other than death, "disability," retirement or cause, the Optionee
may within two (2) months after the date of such termination, purchase all
or a part of the shares with respect to which such Optionee is entitled to
purchase in accordance with the provisions of Section 7 hereof, but in no
event after the expiration of the term of the Option.
21
EXHIBIT B
The 1996 Stock Option Plan is proposed to be amended as follows:
Section 4 of the 1996 Stock Option Plan would be amended and restated as
follows:
4. SHARES SUBJECT TO THE PLAN. The stock to be offered under the Plan
shall be shares of Common Stock, which shares may be unissued shares or
treasury shares. Subject to the adjustments provided for in Section 8, the
aggregate number of shares to be delivered upon exercise of all Options
granted under the Plan shall not exceed 500,000 shares. Shares of Common
Stock subject to, but not delivered under, an Option terminating or
expiring for any reason prior to its full exercise in full shall be deemed
available for Options to be granted thereafter during the term of the Plan.
Section 5(d) of the 1996 Stock Option Plan would be amended and restated as
follows:
(d) Termination of Option Upon Death or Disability. In the event of
the Optionee's death or Disability while in the employ of the Corporation,
or Optionee's death within six months (three months in case of Incentive
Options) after the termination of the Optionee's employment (other than by
reason of discharge for cause) the Options shall terminate upon the latest
to occur of (i) 18 months after the date of the Optionee's death or
Disability or such other date as shall be specified in the Option
Agreement, or (ii) the Option's expiration date. The Options shall be
exercisable during such period after the Optionee's death or Disability
with respect to the number of shares as to which the Options shall have
been exercisable on the date preceding the Optionee's death or Disability,
as the case may be.
Section 6(e) of the 1996 Stock Option Plan would be amended and restated as
follows:
(e) How Exercised. The method or time when the Options may be
exercised in whole or in part, including, but not limited to, whether such
Options may be exercised by delivery of cash, previously owned shares of
Common Stock or in the case of Incentive Options granted after May 8, 1997
and all Non-Qualified Options, such other consideration, shall be
determined by the Committee.
22
EXHIBIT C
Section 4 of the Director Plan would be amended and restated as follows:
Section 4. SHARES SUBJECT TO THE PLAN. The stock to be offered under
the Plan shall be shares of Common Stock, which shares may be unissued
shares or treasury shares. Subject to the adjustments provided for in
Section 7, the aggregate number of shares to be delivered upon exercise of
all Options granted under the Plan shall not exceed 400,000 shares. Shares
of Common Stock subject to, but not delivered under, an Option terminating
or expiring for any reason prior to its exercise in full shall be deemed
available for Options to be granted thereafter during the term of the Plan.
23
EXHIBIT D
GIANT GROUP, LTD.
1997 INCENTIVE COMPENSATION PLAN
FOR EXECUTIVE OFFICERS
PURPOSE
The GIANT GROUP, LTD. 1997 Incentive Compensation Plan For Executive
Officers (the "Plan") is an annual short-term incentive plan designed to reward
executive officers of GIANT GROUP, LTD. (the "Company") for achieving
preestablished corporate performance goals. The Plan is intended to provide an
incentive for superior performance and to motivate participating officers toward
the highest levels of achievement and business results, to tie their goals and
interests to those of the Company and its stockholders, and to enable the
Company to attract and retain highly qualified executive officers. The Plan is
also intended to preserve the Company's tax deduction for bonus compensation
paid to executive officers by meeting the requirements for performance-based
compensation under section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code").
ARTICLE 1
ELIGIBILITY AND PARTICIPATION
SECTION 1.1 Participation in the Plan is limited to persons who served as
an executive officer of the Company at any time during the taxable year. At or
prior to the time performance objectives for a "Performance Period" are
established, as defined in Section 2.2 below, the Incentive Compensation
Committee (the "Committee") of the Board of Directors (the "Board") will
designate in writing which executive officers among those eligible shall
participate in the Plan for such Performance Period (the "Participants").
ARTICLE 2
PLAN YEAR, PERFORMANCE PERIODS AND PERFORMANCE OBJECTIVES
SECTION 2.1 The fiscal year of the Plan (the "Plan Year") shall be the
fiscal year beginning on January 1 and ending on December 31. The performance
period with respect to which bonuses shall be calculated and paid under the Plan
(the "Performance Period") shall generally be the Plan Year; provided, however,
that the Committee shall have the authority to designate different Performance
Periods under the Plan.
SECTION 2.2 Within the first ninety days of each Performance Period the
Committee shall establish in writing, with respect to such Performance Period,
one or more performance goals, a specific target objective or objectives with
respect to such performance goals, and an objective formula or method for
computing the amount of bonus compensation awardable to each Participant if the
performance goals are attained. Notwithstanding the foregoing sentence, for any
Performance Period, such goals, objectives and formulae must be established
within that number of days, beginning on the first day of such Performance
Period, which is no more than twenty-five percent of the total number of days in
such Performance Period.
SECTION 2.3 Performance goals shall be based upon one or more of the
following business criteria for the Company as a whole or any of its
subsidiaries or operating units: stock price; market share; gross revenue;
pretax operating income; cash flow; earnings before interest, taxes,
depreciation and amortization; earnings per share; return on equity; return on
invested capital or assets; return on revenues; cost reductions and savings; and
productivity. In addition, to the extent consistent with the goal of providing
for deductibility of bonus compensation under the Code, performance goals may be
based upon a Participant's attainment of personal goals with respect to any of
the foregoing performance goals, negotiating transactions and sales, or
developing long-term business goals. Measurements of the Company's or a
Participant's performance against the performance goals established by the
Committee shall be objectively determinable and, to the extent they are
24
expressed in standard accounting terms, shall be determined according to
generally accepted accounting principles as in existence on the date on which
the performance goals are established.
ARTICLE 3
DETERMINATION OF BONUS AWARDS
SECTION 3.1 As soon as practicable after the end of each Performance
Period, the Committee shall certify in writing to what extent the Company and
the Participants have achieved the performance goal or goals for such
Performance Period, including the specific target objectives and the
satisfaction of any other material terms of the bonus award, and the Committee
shall calculate the amount of each Participant's bonus for such Performance
Period based upon the performance goals, objectives, and computation formulae
for such performance period established pursuant to Section 2.2 above. The
Committee shall have no discretion to increase the amount of any Participant's
bonus as so determined, but may reduce or totally eliminate any Participant's
bonus if it determines, in its sole and absolute discretion, that such a
reduction or elimination is appropriate with respect to the Participant's
performance or any other factors material to the goals, purposes, and
administration of the Plan.
SECTION 3.2 No Participant's bonus for any Plan Year shall exceed five
times the Participant's base annual salary as in effect as of the first day of
such Plan Year.
ARTICLE 4
PAYMENT OF BONUS AWARDS
SECTION 4.1 Approved bonus awards shall be payable to each Participant by
the Company in cash, shares of the Company's common stock, other consideration
of commensurate value and/or a combination thereof, or to the Participant's
estate in the event of the Participant's death, as soon as practicable after the
end of each Performance Period and after the Committee has certified in writing
pursuant to Section 3.1 that the relevant performance goals were achieved. Any
shares of the Company's common stock delivered to a Participant shall be valued
at the closing price of such common stock on the trading day prior to the date
such common stock is delivered to the Participant. If the Company's common stock
is not publicly traded the value of the common stock shall be determined in by
the Incentive Compensation Committee in its reasonable discretion. The value of
any other consideration delivered as payment of awards shall be determined by
the Incentive Compensation Committee in its reasonable discretion.
SECTION 4.2 A bonus award that would otherwise be payable to a Participant
who is not employed by the Company or one of its subsidiaries on the last day of
a Performance Period may be prorated or not paid based on rules to be
established by the Committee for the administration of the Plan.
ARTICLE 5
OTHER TERMS AND CONDITIONS
SECTION 5.1 No bonus awards shall be paid under the Plan unless and until
the material terms (within the meaning of the Code and regulations promulgated
thereunder) of the Plan, including the business criteria described in Section
2.3 above, are approved by the stockholders by a majority of votes cast in a
separate vote on the issue in person or by proxy (including abstentions to the
extent abstentions are counted as voting under applicable state law).
SECTION 5.2 No person shall have any legal claim to be granted an award
under the Plan and the Committee shall have no obligation to treat Participants
uniformly. Except as may be otherwise required by law, bonus awards under the
Plan shall not be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, charge, garnishment, execution or
levy of any kind, either voluntary or involuntary. Bonuses awarded under the
Plan shall be payable from the general assets of the Company and no Participant
shall have any claim with respect to any specific assets of the Company.
D-2
25
SECTION 5.3 Neither the Plan nor any action taken under the Plan shall be
construed as giving any employee the right to be retained in the employ of the
Company or any subsidiary or to obligate the Company or any subsidiary to
maintain any employee's compensation at any level.
SECTION 5.4 The Company or any of its subsidiaries may deduct from any
award any applicable withholding taxes or any amounts owed by the employee to
the Company or any of its subsidiaries.
ARTICLE 6
ADMINISTRATION
SECTION 6.1 All members of the Committee shall be persons who qualify as
"outside directors" as defined under the Code.
SECTION 6.2 The Committee shall have full power and authority to
administer and interpret the provisions of the Plan and to adopt such rules,
regulations, agreements, guidelines and instruments for the administration of
the Plan and for the conduct of its business as the Committee deems necessary or
advisable.
SECTION 6.3 Except with respect to matters which under the Code are
required to be determined in the sole and absolute discretion of the Committee,
the Committee shall have full power to delegate to any officer or employee of
the Company the authority to administer and interpret the procedural aspects of
the Plan, subject to the Plan's terms, including adopting and enforcing rules to
decide procedural and administrative issues.
SECTION 6.4 The Committee may rely on opinions, reports or statements of
officers or employees of the Company or any subsidiary thereof and of Company
counsel (inside or retained counsel), public accountants and other professional
or expert persons.
SECTION 6.5 The Board reserves the right to amend or terminate the Plan in
whole or in part at any time. Unless otherwise prohibited by applicable law, any
amendment required to conform the Plan to the requirements of the Code may be
made by the Committee. No amendment may be made to the class of individuals who
are eligible to participate in the Plan, the performance criteria specified in
Section 2.3 or the maximum bonus payable to any Participant as specified in
Section 3.2 without stockholder approval unless stockholder approval is not
required in order for bonuses paid to Participants to constitute qualified
performance-based compensation under the Code.
SECTION 6.6 No member of the Committee shall be liable for any action
taken or omitted to be taken or for any determination made by him or her in good
faith with respect to the Plan, and the Company shall indemnify and hold
harmless each member of the Committee against any cost or expense (including
counsel fees) or liability (including any sum paid in settlement of a claim with
the approval of the Committee) arising out of any act or omission in connection
with the administration or interpretation of the Plan, unless arising out of
such person's own fraud or bad faith.
SECTION 6.7 The place of administration of the Plan shall be the State of
California and the validity, construction, interpretation, administration and
effect of the Plan and of its rules and regulations, and rights relating to the
Plan, shall be determined solely in accordance with the laws of the State of
Delaware.
D-3
26
GIANT GROUP, LTD.
P
This Proxy is solicited on behalf of the Board of Directors
Annual Meeting of Stockholders -- May 8, 1997
R
The undersigned hereby appoints Burt Sugarman and David Gotterer,
and each of them, proxies with power of substitution each, for and in
O the name of the undersigned to vote all shares of Common Stock of
GIANT GROUP, LTD., a Delaware corporation (the "Company"), that the
undersigned would be entitled to vote at the Company's 1997 Annual
X Meeting of Stockholders (the "Meeting"), and at any adjournments
thereof, upon the matters set forth in the Notice of the Meeting as
stated hereon, hereby revoking any proxy heretofore given. In their
Y discretion, the proxies are further authorized to vote upon such other
business as may properly come before the Meeting.
The undersigned acknowledges receipt of the Notice of the Meeting
and the accompanying Proxy Statement and Annual Report.
- -----------------------------------------------------------------------------
- FOLD AND DETACH HERE -
27
THE BOARD RECOMMENDS A VOTE "FOR" Please enter ___
PROPOSALS 1, 2, 3, 4, 5 AND 6. your vote as
indicated in X
this example ___
FOR WITHHELD
1. Election of Directors below. ___ ___
___ ___
Nominees: Terry Christensen,
David Gotterer, David Malcolm,
Jeff Rosenthal, Burt Sugarman
For, except vote withheld from the following nominee(s):
________________________________________________________
FOR WITHHELD ABSTAIN
2. Amendment to the Company's 1985 ___ ___ ___
Non-Qualified Stock Option Plan. ___ ___ ___
3. Amendment to the Company's 1996 ___ ___ ___
Employee Stock Option Plan. ___ ___ ___
4. Amendment to the Company's 1996 ___ ___ ___
Stock Option Plan for ___ ___ ___
Non-Employee Directors.
5. Adoption of the Company's 1997 ___ ___ ___
Incentive Compensation Plan ___ ___ ___
for Executive Officers.
6. Ratification of the appointment ___ ___ ___
of Arthur Andersen LLP as ___ ___ ___
independent auditors.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR THE ELECTION OF THE NOMINEES FOR DIRECTORS
LISTED ABOVE, FOR THE AMENDMENT TO THE COMPANY'S 1985 NON-QUALIFIED STOCK
OPTION PLAN, FOR AMENDMENT TO THE COMPANY'S 1996 EMPLOYEE STOCK
OPTION PLAN, FOR AMENDMENT TO THE COMPANY'S 1996 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS, FOR ADOPTION OF THE COMPANY'S 1997 INCENTIVE
COMPENSATION PLAN FOR EXECUTIVE OFFICERS, FOR RATIFICATION OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS AND AS SAID
PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE
THE MEETING.
Signature ____________________ Signature _____________________ Date __________
NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
- ------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
ADMISSION TICKET TO BOARD THE M/Y KAHALANI
ANNUAL MEETING OF
STOCKHOLDERS OF GIANT GROUP, LTD.
THURSDAY, MAY 8, 1997
10:30 am (local time)
HELD ON
M/Y KAHALANI
CROWN BAY MARINA
40 SUB BASE
ST. THOMAS, U.S.V.I. 08803