SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K/A
AMENDMENT NO. 2 TO ANNUAL REPORT PURSUANT TO SECTION 13 OR
15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
Commission File Number: 33-76930
TELEBANC FINANCIAL CORPORATION
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(Exact name of registrant as specified
in its charter)
Delaware 13-3759196
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(State or other jurisdiction of (IRS Employer
incorporation organization) Identification No.)
1111 North Highland Street 22201
Arlington, Virginia
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(Address of principal executive office) (Zip Code)
(703) 247-3700
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(Registrant's telephone number, including area code)
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the names, ages, positions and the
offices held in the Company and TeleBank by each of the executive officers and
directors of the Company as of April 30, 1998:
NAME AGE POSITIONS AND OFFICES
---- --- ---------------------
David A. Smilow 36 Chairman of the Board of the Company and TeleBank
Mitchell H. Caplan 40 Vice Chairman, President and Chief Executive Officer of the Company
and TeleBank
Aileen Lopez Pugh 30 Executive Vice President and Chief Financial Officer of the Company
and TeleBank
David R. DeCamp (1)(2) 38 Director of the Company and TeleBank
Mark Rollinson 61 Director of the Company and TeleBank
Arlen W. Gelbard (1)(2) 40 Director of the Company and TeleBank
Dean C. Kehler (1)(2) 41 Director of the Company and TeleBank
Steven F. Piaker (1)(2) 35 Director of the Company and TeleBank
(1) Member of the compensation committees of the Company and TeleBank and the
stock option committee of the Company.
(2) Member of the audit and compliance committees of the Company and TeleBank.
DAVID A. SMILOW, Chairman of the Board of the Company since March 1994,
also served as Chief Executive Officer of the Company from March 1994 to April
1998. Mr. Smilow has also served as Chairman of the Board of TeleBank since
January 1994, and from January 1994 to April 1998 served as Chief Executive
Officer of TeleBank. Prior to January 1994, Mr. Smilow served as President of
TeleBank.
MITCHELL H. CAPLAN has served as the Vice Chairman of the Board and
President of the Company since March 1994, and since April 1998 has served as
Chief Executive Officer of the Company. Mr. Caplan has also served as Vice
Chairman and President of TeleBank since January 1994, and since April 1998 has
served as Chief Executive Officer of TeleBank. From 1990 until December 1993,
Mr. Caplan was a member of the law firms of Danziger & Caplan and Zuckerman &
Gore, where he represented and advised private and public commercial
institutions, including MET Holdings.
AILEEN LOPEZ PUGH has served as Executive Vice President -- Chief
Financial Officer of the Company and TeleBank since August 1994. Prior to
joining management of the Company and TeleBank, Ms. Pugh served as a director
from 1993 to 1994. From December 1993 to May 1994, she served as a consultant to
MET Holdings in connection with the organization of the Company and its initial
public offering. From 1989 through 1992, Ms. Pugh, a certified public
accountant, was an auditor with KPMG Peat Marwick.
DAVID R. DECAMP has served as a director of the Company since its
formation in March 1994 and as a director of TeleBank since 1992. Mr. DeCamp is
a Senior Vice President of Grubb & Ellis, a commercial real estate broker. From
1988 to 1996, Mr. DeCamp was a commercial real estate broker with Cassidy &
Pinkard, Inc. Mr. DeCamp is the Chairman of the Audit and Compliance Committees
of the Company and TeleBank , respectively.
MARK ROLLINSON has served as a director of the Company since its
formation in March 1994 and as a director of TeleBank since 1992. He is a
self-employed attorney in Leesburg, Virginia.
ARLEN W. GELBARD has served as a director of the Company and TeleBank
since April 1996. Mr. Gelbard is a member of the law firm of Hofheimer Gartlir &
Gross, LLP, New York, New York where he has specialized in transactional real
estate, lending,
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leasing, foreclosures and workouts since 1982. Mr. Gelbard is a member of the
New York State Bar Association and American Bar Association. Mr. Gelbard is the
Chairman of the Compensation Committee of each of the Company and TeleBank.
DEAN C. KEHLER has served as a director of the Company and TeleBank
since February 1997. Mr. Kehler has been a Managing Director of CIBC Wood Gundy
Securities and co-head of the High Yield Group since August 1995. From February
1990 to August 1995, Mr. Kehler was a founding partner and Managing Director of
The Argosy Group, L.P., which was acquired by CIBC Wood Gundy in August 1995.
STEVEN F. PIAKER has served as a director of the Company since February
1997. Since 1994, Mr. Piaker has been a Senior Vice President and Partner of
Conning & Company, a provider of asset management, private equity capital,
corporate finance services and research to the insurance and financial services
industries. Prior to 1994 Mr. Piaker served as a Senior Vice President of
Conseco, Inc. where he was involved in the formation of that company, corporate
finance, leveraged buyouts and private placements.
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION
Set forth below is certain information for the three fiscal years ended
December 31, 1997, 1996 and 1995 relating to compensation received by the
Company's Chief Executive Officer and all executive officers of the Company
other than the Chief Executive Officer (collectively the "Named Executive
Officers") whose total annual salary and bonus for the fiscal year ended
December 31, 1997, exceeded $100,000 for services rendered in all capacities.
SUMMARY COMPENSATION TABLE
LONG-TERM
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ANNUAL COMPENSATION COMPENSATION AWARDS
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SECURITIES
NAME AND UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($)(A) BONUS ($) OPTIONS (#) COMPENSATION ($)(B)
- ------------------ ---- ------------- --------- ----------- -------------------
David A. Smilow, Chairman of the
Company and of TeleBank (c) 1997 $ 205,000 $ 200,000 100,000 $ 15,000
1996 205,000 188,000 --- 15,000
1995 205,000 150,000 --- 15,000
Mitchell H. Caplan, Vice Chairman,
President and CEO of the Company 1997 205,000 200,000 100,000 15,000
and Vice Chairman, President and 1996 205,000 188,000 --- 15,000
Chief Executive Officer of TeleBank(c) 1995 205,000 150,000 --- 15,000
Aileen Lopez Pugh, Executive Vice 1997 79,500 100,000 10,000 13,913
President - Chief Financial Officer 1996 75,000 60,000 15,000 13,500
of the Company and TeleBank 1995 75,000 60,000 5,000 13,500
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(a) Salary earned from the Company and TeleBank.
(b) Dollar value of contributions by TeleBank to each officer's account in the
Company's Employee Stock Option Plan.
(c) During 1997, Mr. Smilow served as the Company's Chief Executive Officer. In
April 1998, Mr. Caplan became the Company's Chief Executive Officer.
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STOCK OPTIONS
Option Grants. The following table contains information with respect to
grants of stock options for Common Stock to the Named Executive Officers who
received options during 1997. All such grants were made under the Company's 1994
or 1997 Stock Option Plan. The Company does not have any stock appreciation
rights ("SARs").
OPTION GRANTS IN 1997
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION FOR
INDIVIDUAL GRANTS (A) OPTION TERM (A)
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% OF TOTAL OPTIONS
NUMBER OF GRANTED
SECURITIES UNDERLYING TO EMPLOYEES EXERCISE OR BASE EXPIRATION
NAME OPTIONS GRANTED (#) IN FISCAL YEAR PRICE ($/SH) DATE 5% ($) 10% ($)
- ---- ------------------- ------------------------------ ------ ------- -------
David A. Smilow 40,000(b) 14.0% $13.50 2/28/07 $339,603 $ 860,621
60,000(c) 21.0 13.50 2/28/07 509,405 1,290,931
Mitchell H. Caplan 40,000(b) 14.0 13.50 2/28/07 339,603 860,621
60,000(c) 21.0 13.50 2/28/07 509,405 1,290,931
Aileen Lopez Pugh 10,000(d) 3.5 13.50 2/15/07 84,901 215,155
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(a) The dollar amounts under these columns are the result of calculations at
the 5% and 10% assumed annual growth rates mandated by the Commission and,
therefore, are not intended to forecast possible future appreciation, if
any, in the Company's Common Stock price.
(b) Grants covering 40,000 shares to Messrs. Caplan and Smilow are nonqualified
options vesting to the extent of 1/3 of such shares on each of the first
three anniversaries of the date of grant that expire if not exercised
within 30 days of first becoming exercisable.
(c) Options grants were made on February 28, 1997 with 20% immediately
exercisable and 20% becoming exercisable in each subsequent year through
2001.
(d) Option grants were made on February 15, 1997, with 20% immediately
exercisable and 20% becoming exercisable in each subsequent year through
2001.
Option Exercises and Holdings. The Named Executive Officers did not
exercise any stock options during 1997. The following table presents information
with respect to outstanding options held by the Named Executive Officers at
year-end 1997. There are no outstanding SARs.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
Number of Securities
Underlying Unexercised Options Value of Unexercised
at In-the-Money Options
FY-End (#) at FY-End ($) (1)
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Shares
Acquired on Value
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------ ------------ ----------- ------------- ----------- -------------
David A. Smilow 13,333 $74,998 129,365 62,667 $ 1,264,121 $ 266,333
Mitchell H. Caplan --- --- 142,698 62,667 1,320,787 266,333
Aileen Lopez Pugh --- --- 16,000 19,000 163,375 148,500
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(1) Based on last reported sale price of the Company's Common Stock on December
31, 1997 of $17.75 per share and applicable per share exercise price for the
options. For each of Messrs. Smilow and Caplan, 42,617 options were granted on
April 28, 1994 with an exercise price of $6.125, with the remainder having an
exercise price equal to $7.125. The options expire in April 2004 and were
granted with 20% immediately exercisable and 20% becoming exercisable in each
subsequent year for five years. Also for each of Messrs. Smilow and Caplan,
100,000 options were granted on February 28, 1997 with an exercise price of
$13.50 and an expiration date of 2007. Grants covering 60,000 shares to each
Messrs. Caplan and Smilow are ten-year, nonqualified options vesting 20% on the
date of grant and 20% per year thereafter. Grants covering 40,000 shares to
Messrs. Caplan and Smilow are nonqualified options vesting to the extent of 1/3
of such shares on each of the first three anniversaries of the date of grant
that expire if not exercised within 30 days of first becoming exercisable. As
for Ms. Pugh, the Company has granted a total of 35,000 options
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with 5,000 options granted on April 28, 1994 with an exercise price of $6.125,
5,000 options granted on February 15, 1995 with an exercise price of $5.50,
15,000 options granted on February 15, 1996 with an exercise price of $7.75 and
10,000 options granted on February 15, 1997 with an exercise price of $13.50.
The options expire in April 2004, February 2005, February 2006 and February
2007, respectively. All option grants for Ms. Pugh were granted with 20%
immediately exercisable and 20% becoming exercisable in each subsequent year for
five years.
COMPENSATION OF DIRECTORS
Non-employee directors of the Company receive $750 for each Company
board and committee meeting attended, and non-employee directors of TeleBank
receive $750 for each TeleBank board or committee meeting attended. In addition,
non-employee directors are reimbursed for travel costs and other out-of-pocket
expenses incurred in attending such meeting. Annual directors' fees are capped
at $3,000 per board member of the Company, and $12,000 per board member of
TeleBank.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth certain information regarding the
beneficial ownership of the Company's Common Stock and Series A Preferred Stock
as of April 30, 1998 by (i) any person known to the Company to be the beneficial
owner of more than 5% of any class of the Company's voting securities, (ii) each
director and person nominated to be a director as of December 31, 1997, (iii)
the Chief Executive Officer and the Named Executive Officers, and (iv) all
directors and executive officers as a group. Except as otherwise noted, each
beneficial owner has sole investment and voting power with respect to the listed
shares.
SECURITY OWNERSHIP OF THE COMPANY'S SECURITIES
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AMOUNT AND NATURE PERCENTAGE OF: CLASS
TITLE OF BENEFICIAL OUTSTANDING / COMPANY'S
OF CLASS NAME OF BENEFICIAL OWNER OWNERSHIP VOTING SECURITIES (a)
- -------- ------------------------ --------- ---------------------
Series A Conning Insurance Capital Limited 4,719 25.03% / 6.31%
Preferred Partnership III
Stock c/o Conning & Company
CityPlace II, 185 Asylum Street
Hartford, CT 06103
Conning Insurance Capital International 667 3.54% / 0.89%
Partners III, L.P.
c/o Conning & Company
CityPlace II, 185 Asylum Street
Hartford, CT 06103
General American Life Insurance Company 1,539 8.16% / 2.06%
700 Market Street
St. Louis, MO 63101
PC Investment Company 6,925 36.74% / 9.27%
401 Theodore Fremd Avenue
Rye, NY 10580
The Northwestern Mutual Life Insurance 5,000 26.53% / 6.69%
Company
720 East Wisconsin Avenue
Milwaukee, WI 53202
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(a) Each share of Series A Preferred Stock has 40.12519 votes, based on its
conversion into an equivalent number of shares of Common Stock.
Accordingly, the percentages reflected include (i) the percentage of Series
A Preferred Stock outstanding and (ii) the percentage of the Company's
Voting Securities beneficially owned, giving effect to the voting rights
held by the owners of Series A Preferred.
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AMOUNT AND NATURE
TITLE OF BENEFICIAL PERCENTAGE OF
OF CLASS NAME OF BENEFICIAL OWNER OWNERSHIP CLASS OUTSTANDING
- -------- ------------------------ --------- -----------------
Common Stock MET Holdings Corporation 1,433,081 63.9%
405 Park Avenue, Suite 1104
New York, NY 10022 (a)
David A. Smilow 155,290 (b) 6.9%
Mitchell H. Caplan 142,698 (c) 6.0%
David R. DeCamp 10,000 (d) *
Arlen W. Gelbard 4,000 (e) *
Dean C. Kehler 280,876 (f) 11.1%
Steven F. Piaker 224,139 (g) 9.1%
Mark Rollinson 12,000 (h) *
Aileen Lopez Pugh 29,300 (i) 1.3%
Directors and Executive Officers as a group
(9 individuals) 927,628 (j) 29.3%
TeleBanc Employee Stock Ownership Plan 75,525 3.4%
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* Less than 1%.
(a) MET Holdings is the predecessor savings and loan holding company of
Metropolitan Bank for Savings, F.S.B. ("Metropolitan Bank"). MET Holdings
organized the Company so that it could become, in March 1994, the holding
company for Metropolitan Bank as part of the Company's initial public
offering of debt and equity securities in 1994. Metropolitan Bank was
renamed "TeleBank" in March 1996, and is a wholly owned subsidiary of the
Company.
(b) Includes options to acquire 129,365 shares of Common Stock which are
exercisable within sixty days of April 30, 1998. Mr. Smilow also holds
significant ownership positions in the outstanding securities of MET
Holdings. See "Security Ownership of the Company's Parent by Management."
(c) Comprised of options to acquire 142,698 shares of Common Stock which are
exercisable within sixty days of April 30, 1998. Mr. Caplan also holds
significant ownership positions in the outstanding securities of MET
Holdings. See "Security Ownership of the Company's Parent by Management."
(d) Includes options to acquire 9,000 shares of Common Stock which are
exercisable within sixty days of April 30, 1998.
(e) Comprised of options to acquire 4,000 shares of Common Stock which are
exercisable within sixty days of April 30, 1998.
(f) Dean C. Kehler is the designated director for CIBC WG Argosy Merchant Fund
2, LLC., which holds the interest set forth above. Mr. Kehler disclaims any
beneficial ownership in such interest.
(g) Steven F. Piaker is the designated director for Conning Insurance Capital
Limited Partnership III and Conning Insurance Capital International
Partners III, L.P., which hold the beneficial interests set forth above.
Mr. Piaker disclaims any beneficial ownership in such interests.
(h) Includes options to acquire 4,000 shares of Common Stock which are
exercisable within sixty days of April 30, 1998.
(i) Includes options to acquire 16,000 shares of Common Stock which are
exercisable within sixty days of April 30, 1998 and warrants for 6,200
shares of Common Stock.
(j) Includes options to acquire 305,063 shares of Common Stock which are
exercisable within sixty days of April 30, 1998.
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SECURITY OWNERSHIP OF THE COMPANY'S PARENT BY MANAGEMENT
The following table sets forth certain information as of APRIL 30, 1998
with respect to the beneficial ownership by the management of the Company of
equity securities of the Company's parent, MET Holdings. MET Holdings has four
classes of equity securities, Class A Common Stock, Class B Common Stock, 6%
Class A Serial Preferred Stock ("Class A Serial Preferred Stock") and 6% Class B
Serial Preferred Stock ("Class B Serial Preferred Stock"). No shares of Class A
Serial Preferred Stock have been issued. The Class A Serial Preferred Stock and
Class B Serial Preferred Stock have certain limited voting rights. Unless
otherwise required by law, the Class B Common Stock is non-voting.
NAME EQUITY SECURITY OWNED PERCENT OF CLASS
- ---- --------------------- ----------------
David A. Smilow 4,091 (Class A Common Stock) (a) 41.5 %
1,641 (Class B Common Stock) (a) 26.5
2,091 (Class B Serial Preferred Stock) (a) 42.2
Mitchell H. Caplan 985 (Class A Common Stock) (b) 9.9
1,053 (Class B Common Stock) (b) 17.0
1,079 (Class B Serial Preferred Stock) (b) 21.8
Michael A. Smilow 110 (Class A Common Stock) 1.1
117 (Class B Common Stock) 1.9
Directors and Executive Officers 5,186 (Class A Common Stock) 52.6
of the Company as a group 2,811 (Class B Common Stock) 49.8
(9 individuals) 3,170 (Class B Serial Preferred Stock) 63.9
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(a) Includes 3,252 shares of Class A Common Stock, 980 shares of Class B Common
Stock and 893 shares of Class B Serial Preferred Stock, with respect to
which Mr. D. Smilow shares beneficial ownership with his wife and children.
(b) Includes 645 shares of Class A Common Stock, 655 shares of Class B Common
Stock and 1,079 shares of Class B Serial Preferred Stock, with respect to
which Mr. Caplan shares beneficial ownership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In February 1997, the Company consummated the purchase of the assets of
Arbor Capital Partners, Inc., which was majority owned by MET Holdings, through
the issuance of 162,461 shares of Common Stock and a $500,000 cash payment.
Messrs. D. Smilow and Caplan are shareholders of MET Holdings.
During 1997 the Company engaged Hofheimer Gartlir & Gross, LLP, of
which Mr. Gelbard is a member, on various matters. Additionally, CIBC Wood Gundy
Securities, of which Mr. Kehler is Managing Director, acted as placement agent
for the Company's private placement of trust preferred securities in June 1997
and invested in the securities through certain of its merchant funds. See Item
1. -- Business -- General.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this amendment to report to be
signed on its behalf by the undersigned, thereunto duly authorized.
TELEBANC FINANCIAL CORPORATION
/s/ Aileen Lopez Pugh
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Aileen Lopez Pugh
Executive Vice President --
Chief Financial Officer
April 30, 1998