SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
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Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Approved Financial Corp.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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[_] Fee computed on table below per Exchange Act Rules
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Insert logo
APPROVED FINANCIAL CORP.
1716 Corporate Landing Parkway
Virginia Beach, Virginia 23454
April 30, 2001
Dear Shareholders,
You are cordially invited to attend the Annual Meeting of Shareholders for
Approved Financial Corp. on June 11, 2001, 2:30 PM eastern standard time, at the
corporate headquarters of Approved Financial Corp. located at 1716 Corporate
Landing Parkway, Virginia Beach, Virginia 23454.
As a stockholder of Approved Financial Corp., you have a right to vote on
certain matters affecting the company. This proxy statement discusses the
proposals you are voting on this year. Please read it carefully because it
contains important information for you to consider when deciding how to vote.
Your vote is important.
The following abbreviations as indicated below occur throughout this document:
. Approved Financial Corp. is the referred to as "Company" or "Approved"
. The Proxy Statement, the Proxy Card and our 2001 Annual Report to
Shareholders are collectively referred to as the "proxy materials"
. The Board of Directors of Approved Financial Corp. as a group is referred
to as the "Board"
. An individual member of the Board is referred to as "Director"
. The Annual Meeting of Shareholders scheduled for June 11, 2001 is referred
to as the "Meeting"
Your support of Approved is greatly appreciated by the Board and the management
of the Company.
Sincerely,
/s/ Allen D. Wykle
Allen D. Wykle, Chairman of the Board
President and Chief Executive Officer
Table of Contents
NOTICE OF 2001 ANNUAL MEETING OF STOCKHOLDERS................................................ 4
PROXY STATEMENT.............................................................................. 5
QUESTIONS AND ANSWERS................................................................... 5
Questions and Answers concerning proxy materials and voting procedures
ITEMS PROPOSED FOR VOTE................................................................. 8
Proposal # 1. Election of Directors
Proposal # 2. Appointment of Independent Certified Public Accountants
THE BOARD OF DIRECTORS.................................................................. 9
INFORMATION CONCERNING DIRECTORS AND DIRECTOR NOMINEES.................................. 10
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS....................................... 11
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION............................. 13
DIRECTOR COMPENSATION................................................................... 13
EXECUTIVE OFFICERS...................................................................... 14
EXECUTIVE COMPENSATION.................................................................. 15
OPTION/SAR GRANTS....................................................................... 17
OPTION/SAR EXERCISES & YEAR-END VALUES.................................................. 18
EMPLOYMENT AGREEMENTS................................................................... 19
COMPENSATION COMMITTEE REPORT........................................................... 24
The 1996 Stock Incentive Plan / 401 (K) PLAN / CEO Compensation
STOCK PERFORMANCE GRAPH................................................................. 28
BENEFICIAL STOCKHOLDER TABLE............................................................ 29
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS........................................... 31
FEES FOR SERVICES RENDERED BY AUDITORS................................................... 32
AVAILABILITY OF FORM 10 K................................................................ 32
SECTION 16(A) REPORTING COMPLIANCE....................................................... 32
PROPOSALS BY SHAREHOLDERS................................................................ 32
OTHER BUSINESS........................................................................... 33
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held On June 11, 2000
At 2:30 PM prevailing local time
The Annual Meeting of Shareholders of Approved Financial Corp., a Virginia
Corporation, will be held at Approved Financial Corp. corporate headquarters
located at 1716 Corporate Landing Parkway, Virginia Beach, Virginia 23454, on
Monday, June 11, 2001 at 2:30 PM prevailing local time, for the following
purposes:
. Elect three Directors to the Board of Directors
. Appoint PricewaterhouseCoopers LLP as the Company's independent public
accountants for 2000
. Conduct other business properly brought before the Meeting
We will also report on Approved's and the mortgage industry's performance for
2001 at the Meeting.
The record date for the Meeting, which is the date used to determine which
Shareholders are entitled to vote at the Meeting and receive these materials, is
April 20, 2001. Shareholders can vote at the Meeting in person or by proxy. We
look forward to greeting those Shareholders able to attend the Meeting.
The Board is sending these proxy materials, including the Annual Report to all
shareholders. However, the Annual Report to Shareholders does not form any part
of the Proxy Statement. The date of this Proxy Statement is April 30, 2001 and
the approximate date on which the Company is sending the proxy materials is
May 11, 2001.
The Board is asking you to vote your shares by completing and returning the
proxy card. If you return the proxy card in time for the Meeting, then your
shares will be voted according to your instructions. All cost associated with
the proxy materials are paid by the Company.
By Order of the Board of Directors,
/s/ Allen D. Wykle
Allen D. Wykle
Chairman of the Board and Chief Executive Officer
Virginia Beach, Virginia
April 30, 2001
IMPORTANT
Whether or not you plan to attend, please SIGN, DATE and RETURN the enclosed
Proxy in the enclosed postage paid envelope. If you do attend the meeting, you
may, if you wish, revoke your Proxy and vote your shares in person.
PROXY STATEMENT
QUESTIONS AND ANSWERS
Q: WHY AM I RECEIVING THESE PROXY MATERIALS?
A: You are receiving these proxy materials because you own shares of Approved
Financial Corp. common stock ($1.00 par value) of as of April 20, 2001 (the
record date). This proxy statement describes proposals on which we request you,
as a stockholder, to vote. It also gives you information on these proposals, as
well as other information, so that you can make an informed decision.
Q: WHO CAN VOTE AT THE MEETING?
A: Stockholders who owned Company common stock on April 20, 2001 may attend and
vote at the Meeting. Each share is entitled to one vote. There were 5,482,114
shares of Company common stock outstanding on April 20, 2001.
Q: WHAT IS THE PROXY CARD?
A: The proxy card enables you to appoint Allen D. Wykle and Stanley Broaddus as
your representatives at the Meeting. By completing and returning the proxy card,
you are authorizing Messrs. Wykle and/or Broaddus to vote your shares at the
Meeting, as you have instructed them on the proxy card. This way, your shares
are voted whether or not you attend the Meeting. Even if you plan to attend the
meeting, it is a good idea to complete and return your proxy card before the
Meeting date just in case your plans change.
Q: HOW MANY SHARES MUST BE PRESENT TO HOLD THE MEETING?
A: To hold the meeting and conduct business, a majority of the Company's
outstanding shares as of April 20, 2001 must be present at the meeting. This is
called a quorum.
Shares are counted as present at the meeting if the stockholder either:
- - is present and votes in person at the meeting, or
- - has properly submitted a proxy card.
Q: WHAT AM I VOTING ON?
A: We are asking you to vote on:
- the re-election of three Directors,
- appointment of PricewaterhouseCoopers LLP as the Company's public
accountants for 2001
Q: HOW DO I SUBMIT MY VOTE?
A: You can vote by:
(1) VOTING BY MAIL.
You do this by marking your voting instructions and signing your proxy card and
mailing it in the enclosed, prepaid and addressed envelope.
If you do not mark your voting instructions on the proxy card, your shares will
be voted:
- FOR the three named nominees for directors,
- FOR the appointment of PricewaterhouseCoopers LLP as the Company's public
accountants
(2) VOTING IN PERSON AT THE MEETING.
We will pass out written ballots to anyone who wants to vote at the meeting.
However, if you hold your shares in street name, you must request a proxy from
your stockbroker in order to vote at the meeting. Holding shares in "street
name" means you hold them in an account at a brokerage firm.
Q: WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY CARD?
A: It means that you have multiple accounts with stockbrokers or that you hold
stock certificates with multiple registrations according to the Company's
transfer agent, which is First Union. Please complete and return ALL proxy cards
to ensure that all of your shares are voted.
Q: WHAT IF I CHANGE MY MIND AFTER I RETURN MY PROXY?
A: You may revoke your proxy and change your vote at any time, however, your
change MUST be received before the polls close at the Meeting. You may do this
by:
- - signing and returning by mail another proxy with a later date, or
- - voting at the meeting
Q: WILL MY SHARES BE VOTED IF I DO NOT RETURN MY PROXY CARD?
A: If your shares are in street name, your brokerage firm, under certain
circumstances, may vote your shares if they do not receive your proxy in a
timely manner prior to the Meeting.
In this event, your brokerage firm may either:
- - vote your shares on certain voting proposals, or
- - not vote your shares
When a brokerage firm votes a customer's shares, these shares are counted as
present at the Meeting to determine if a quorum exists in order to conduct
business at the Meeting.
The proposals for voting described in the Proxy Statement are matters for which
your broker may vote your shares if your proxy is not received in a timely
manner.
We encourage you to provide instructions to your brokerage firm by
giving your proxy. This ensures your shares will be voted at the meeting.
Q: HOW WILL THE COMPANY COUNT MY VOTE?
A: Tabulating Agent. Voting results submitted by proxy are tabulated and
certified by our transfer agent, First Union National Bank, Corporate Trust
Department.
A: The Inspector(s) of Elections, an employee of the Company, will have a
tabulation report from the transfer agent available at the Meeting and will make
adjustments for votes submitted by ballot at the Meeting in order to determine
and present the final voting results.
Q: WHAT ARE MY VOTING OPTIONS AND WHAT HAPPENS IF I ABSTAIN FROM A VOTE?
A: You may vote either "for" or "against" or "withhold authority to vote"
concerning each Director nominee.
A: You may vote "for," "against" or "abstain" on the proposal to ratify the
appointment of PricewaterhouseCoopers LLP as the Company's independent
accountants.
If you "abstain" or "withhold" a vote, then it will be treated as shares that
are present and entitled to vote for purposes of determining the presence of a
quorum in order to transact business at the Meeting.
However, if you "abstain" or "withhold" a vote, it will be counted as shares
that are not voted for purposes of determining the approval of any proposal
submitted by a majority of the votes.
If you give your proxy without voting instructions, your shares will be counted
as a vote FOR each proposal.
Q: WHO PAYS THE EXPENSES OF THESE PROXY MATERIALS AND THE MEETING?
A: The Company pays the cost directly associated with the proxy materials and
the Meeting. This includes expense items such as obtaining the list of
shareholders as of the record date, preparing, printing and mailing proxy
materials.
Q: WHAT IF OTHER VOTING MATTERS COME UP AT THE MEETING?
A: The matters described in this Proxy Statement are the only matters of which
the Company is currently aware. However, if another proposal comes up for vote
at the Meeting that is not on the proxy card, Messrs. Wykle and/or Broaddus will
vote your shares, under your proxy, according to their best judgment.
ITEMS PROPOSED FOR VOTE
PROPOSAL # 1. - ELECTION OF DIRECTORS
Three Class II Directors, whose terms expire at the Meeting, are nominated for
re-election for a term of three years, which will expire at the annual meeting
of shareholders in 2003 or until their respective successors are elected and
qualified.
Class I Directors nominated for re-election:
(Background information can be found below under "Information Concerning
Directors And Director Nominees")
1. Allen D. Wykle
2. Leon H. Perlin
3. Oscar S. Warner
The shares represented by the enclosed proxy will be voted in favor of all three
nominees unless a vote is withheld from the nominee.
Votes that are withheld will be excluded entirely from the vote.
Directors are elected by a majority of the votes cast at the Meeting either in
person or by proxy.
If a nominee becomes unavailable for any reason, or if a vacancy should occur
before the election (which events are not anticipated), the shares represented
by the enclosed proxy may be voted for such other person as may be determined by
the holders of such proxy.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" ALL DIRECTOR
NOMINEES.
PROPOSAL # 2 - RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected PricewaterhouseCoopers LLP, independent
accountants, to audit the financial statements of the Company for the 2001
fiscal year. Such nomination is being presented to the Shareholders for
ratification at the Meeting.
A vote FOR this proposal by a majority of shares present in person or
represented by proxy and entitled to vote at the Meeting is required to ratify
the appointment of PricewaterhouseCoopers LLP. If the Shareholders reject the
nomination, the Board of Directors may reconsider its selection. If the
Shareholders ratify the appointment, the Board of Directors, in its sole
discretion, may still direct the appointment of new independent accountants at
any time during the year if the Board of Directors believe that such a change
would be in the best interests of the Company.
A representative of PricewaterhouseCoopers LLP is attending the Meeting.
PricewaterhouseCoopers LLP has audited and certified the Company's financial
statements since the year ended 1995. The Company is advised that a
representative of PricewaterhouseCoopers LLP will be present
at the Meeting, will have the opportunity to make a statement, and is expected
to be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" RATIFICATION OF
THE APPOINTMENT OF PRICEWATERHOUSECOOPERS L.L.P. AS THE COMPANY'S INDEPENDENT
AUDITORS FOR THE 2001 FISCAL YEAR.
THE BOARD OF DIRECTORS
Our Board of Directors is divided into three classes, with one class being
elected each year and members of each class holding office for three-year terms.
The Board of Directors currently consists of nine directors divided as follows:
Class I - three Directors with terms expiring at the 2001 Annual Meeting
Class II - three Directors with terms expiring at the 2003 Annual Meeting
Class III - three Directors with terms expiring at the 2002 Annual Meeting
At the Meeting to be held June 11, 2001, three Class I Directors will be
re-elected for a term of three years or until his or her successor is duly
elected and qualified.
A Director may be removed at any time, with or without cause, by a vote of a
majority of the shares of stock represented and entitled to vote at a special
meeting of Shareholders called for that purpose. A successor to a Director
removed in this manner may be elected for his or her remaining term at the
special meeting.
A Board vacancy may result from death, resignation, retirement, disqualification
or removal from office of a Director, or by failure of the Shareholders to elect
a successor to a Director who has been removed. In this event, the Board of
Directors may fill such vacancy by vote of a majority of all the Directors then
in office. Directors so elected shall serve for the full remaining term of their
predecessors, and until their successor is duly elected and qualified, unless
sooner displaced.
INFORMATION CONCERNING DIRECTORS AND DIRECTOR NOMINEES
Background information with respect to the Directors and the Director nominees
for re-election at the Meeting appears below. See "Security Ownership of Certain
Beneficial Owners and Management" for information regarding such persons'
holdings of Approved Financial Corp. Common Stock.
Class I Directors - Nominees for Re-election at Shareholder's Meeting scheduled
for June 11, 2001. (Term expiring at the annual meeting of shareholders to be
held in 2001 or until their successor is duly elected and qualified)
Allen D. Wykle (54) Mr. Wykle, in addition to being an initial investor,
organized and headed the initial management team that acquired the Company from
Government Employees Insurance Corporation (GEICO) in September of 1984. He has
served as Chairman of the Board, President and Chief Executive Officer of the
Company since September 1984. Mr. Wykle served as a Director of IMC Mortgage
Company from April 1996 until June 1998. Mr. Wykle was owner, President and
Chief Executive Officer of Best Homes of Tidewater, Inc., a residential
construction and remodeling company in Virginia, from 1972 to 1986.
Leon H. Perlin (73) Mr. Perlin was an initial investor in the Company in 1984
and has been a Director of the Company since 1984. Mr. Perlin has served as
President and Chief Executive Officer of Leon H. Perlin Company, Inc., a
commercial construction concern, for over 30 years.
Oscar S. Warner (84) Mr. Warner was an initial investor in the Company in 1984
and has been a Director and Shareholder of the Company since 1984. Mr. Warner
has been retired for the past six years. Previously, he was owner and operator
of Oscar Warner Corporation, an import company.
Class II Directors -
(Term expiring at the annual meeting of shareholders to be held in 2003 or until
their successor is duly elected and qualified)
Arthur Peregoff (82) Mr. Peregoff was an initial investor and has been a
Director of the Company since 1985. Mr. Peregoff has served as Chief Executive
Officer of Globe Iron Construction Company, Inc., a commercial construction
company, for over 25 years.
Stanley W. Broaddus (51) Mr. Broaddus was an initial investor and has been a
Director since 1985. Mr. Broaddus has served as Vice President and Secretary of
the Company since April 1987. Previous experience includes fourteen years as
Regional Sales Manager with the building products unit of Atlantic Richfield Co.
Jean S. Schwindt (45) Ms. Schwindt has been a Director of the Company since 1992
and joined the Company in June 1998 as Executive Vice President. She served as
Vice President and Director of Investor Relations and Strategic Planning for IMC
Mortgage Company from March 1996 until June 1998. Ms. Schwindt was elected by
the Board of Directors of IMC Mortgage Company ("IMC") to fill a vacancy on the
IMC Board effective April 11, 2000. From April 1989 to March 1996 she served on
the Board of Directors and as Senior Vice President/Secretary of Anderson and
Strudwick, Inc., a member of the New York Stock Exchange. Ms. Schwindt, a
Chartered Financial Analyst and a Registered Investment Advisor, has been
affiliated with the firm of Mills Value Advisers, Inc. since January 1995.
Class III Directors
(Each Class III Director is serving a Three-Year Term Expiring at the Annual
Meeting of Shareholders held in 2002 or until their successor is duly elected
and qualified)
Robert M. Salter (53) Mr. Salter was an initial investor and has been a Director
since 1989. He is a Partner with Goodman and Company LLP, a Certified Public
Accounting firm. Previously, Mr. Salter served as President of Salter and Hall,
P.C. from 1979 - 1999. Mr. Salter is a Certified Public Accountant and a
Certified Financial Planner.
Neil W. Phelan, (43) Mr. Phelan is Executive Vice President and has been
associated with the Company since April 1995. He has been a Director since 1997.
His primary responsibility with the Company is the management of the wholesale
lending unit. Immediately prior to joining the Company, Mr. Phelan served on the
senior management team of ITT Financial Services for 17 years.
Gregory J. Witherspoon (54) Mr. Witherspoon has been a Director since 1998. He
is president of Witherspoon Consulting, a company that provides financial and
management consulting services. He served as a Director of Aames Financial
Corporation from 1991 to March 1998, as Chief Financial Officer from 1987 until
1997,after which, he served as Executive Vice President for Strategic Planning.
He is a Certified Public Accountant. Mr. Witherspoon previously served on the
Board of Directors of Approved from July 1996 until January 1997.
Barry C. Diggins (37) Mr. Diggins resigned from the Company and the Board of
Directors effective July 28, 2000. He was Executive Vice President and was
associated with the Company since October 1994. He served as a Director since
1997. Mr. Diggins was responsible for the majority of the Company's retail
lending locations. Before joining the Company, Mr. Diggins was Regional
Marketing Director of ITT Financial Services from September 1985 to October
1994.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors of the Company held four meetings in 2000. During such
year, each Director attended more than 75% of the meetings held by the Board of
Directors and the committees on which he or she served. The Board of Directors
also acts from time to time by unanimous written consent in lieu of meetings.
The Board of Directors has four committees, all of which were formally
established at the meeting of the Board of Directors held on February 6, 1998.
. Executive Committee
. Audit Committee
. Compensation Committee
. Option Committee
Executive Committee. The Executive Committee acts for the Board when the Board
is not in session. The Executive Committee did not formally meet during 2000.
Executive Committee Members:
. Mr. Wykle, as Chairman
. Mr. Perlin
. Ms. Schwindt
. Mr. Broaddus
Audit Committee: The Audit Committee makes recommendations concerning the
engagements of independent public accountants, reviews with the independent
public accountants the plans and results of the audit engagement, approves
professional services provided by the independent public accountants, reviews
the independence of the independent public accountants, considers the range of
audit and non-audit fees and reviews the adequacy of the Company's internal
accounting controls. It also reviews and accepts the reports of the Company's
regulatory examiners. The Audit Committee met on June 7, 2000 and March 12,
2001.
Audit Committee Members:
. Mr. Witherspoon, as Chairman
. Mr. Perlin
. Mr. Warner.
Compensation Committee. The Compensation Committee determines Mr. Wykle's
compensation and establishes guidelines for compensation of Executive Officers
and all other employees. The Compensation Committee on December 12, 2000.
Compensation Committee Members:
. Mr. Warner, as Chairman
. Mr. Perlin
. Mr. Salter
. Mr. Wykle, who abstains from voting on his own compensation
Option Committee. The Option Committee administers the Company's stock option
plan and grants options under the plan. The Option Committee did not meet during
the year 2000. The Board of Directors as a group addressed option grants during
normal Board meetings held during the year 2000.
Option Committee Members:
Mr. Perlin, as Chairman
Mr. Warner
Mr. Salter
Nominating Committee. The Company does not have a nominating committee. The
Board of Directors performs the functions customarily performed by a nominating
committee as a whole or by the Executive Committee.
Any Shareholder who wishes to make a nomination at an annual or special meeting
for the election of Directors must do so in compliance with the applicable
procedures set forth in the Company's Bylaws.
The Company will furnish Bylaw provisions upon written request to Stanley
Broaddus, Secretary of the Company, at its principal executive offices at 1716
Corporate Landing Parkway, Virginia Beach, Virginia 23454.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Wykle is the only member of the Compensation Committee that is also an
employee. The other members, Messrs. Warner, Perlin and Salter are outside
Directors. No interlocking relationships exist between the Company's Board of
Directors or Officers responsible for compensation decisions and the Board of
Directors or compensation committee of any company, nor has any such
interlocking relationship existed in the past.
DIRECTORS' COMPENSATION
Directors employed by the Company
Directors who are employees of the Company receive no additional compensation
for service as Directors.
Outside Directors
Each Director who is not an employee of the Company receives an annual retainer
of $9,000, payable in cash in quarterly installments of $2,250. All Directors
receive reimbursement of reasonable out-of-pocket expenses incurred in
connection with meetings of the Board of Directors.
During 1996, which was before Ms. Schwindt became an employee of the Company,
the Board of Directors granted stock appreciation rights ("SARs") to Ms.
Schwindt. The SARs, with an initial term of three years, entitle the holder to
the appreciated value of 16,000 shares of common stock. The appreciated value is
the difference between the grant price and the fair market value of the shares
at the time of exercise. The grant price is $2.63. At the Board meeting held on
February 21, 1999, the Board extended the term of the SARs granted to Ms.
Schwindt for three years from the initial expiration date in 1999.
Mr. Witherspoon was issued 4,500 non-qualified options with an exercise price of
$4 per share. The options vest over a period of ten years and under certain
circumstances may vest in less than 10 years. These options are payment for
on-going consulting services to the Company in addition to normal board duties.
EXECUTIVE OFFICERS
The Executive Officers of the Company as of the date of this Proxy Statement who
are not also Directors are identified below, together with information regarding
the business experience of such officers. Information regarding the business
experience of Messrs. Wykle, Broaddus, Phelan and Ms. Schwindt is set forth
above under the heading "Information Concerning Directors and Director Nominees"
Each Executive Officer is elected by the Board of Directors of the Company and
serves at the pleasure of the Board.
Name (Age) Position and Business Experience
- ---------- --------------------------------
Eric S. Yeakel (36) Treasurer and Chief Financial Officer. Mr. Yeakel
has been with the Company since June 1994. He was a
full time graduate student from September 1992 until
receiving a Masters in Business Administration in
1994. He served as Assistant Controller with Office
Warehouse, Inc. from October 1989 to August 1992.
Mr. Yeakel is a Certified Public Accountant who
worked with Ernst & Young from July 1987 to October
1989.
EXECUTIVE COMPENSATION
Summary of Cash and Other Compensation
The following table sets forth the compensation paid to the Company's Chief
Executive Officer and the most highly compensated Executive Officers other than
the Chief Executive Officer. (collectively, the "Named Executive Officers")
during the three years ended December 31, 2000:
Summary Compensation Table
Annual Compensation (1) Long-term Compensation
----------------------------------------------------------------
Securities underlying All Other
Name and Principal Position Year Salary Bonus Options(2) Compensation
------------- ------------------- --------------
Allen D. Wykle (3,4) 2000 $392,250 $ - - $5,250
President and Chief 1999 418,368 - - 5,000
Executive Officer 1998 418,368 - 20,000 4,750
Neil W. Phelan (3,4) 2000 $155,968 $ - - $4,540
Executive Vice President, 1999 143,000 - - 3,960
Director 1998 130,000 - 8,500 3,383
Jean S. Schwindt (3,4,5) 2000 $ 50,107 $ - - $4,032
Executive Vice President 1999 160,000 - - 4,800
Director 1998 86,667 - 12,500 2,250
Greg Gleason (3,4,6) 2000 $114,569 $ - - $2,107
President Approved Federal 1999 110,000 - - 3,300
Savings Bank 1998 111,000 - 1,350 3,330
Eric S. Yeakel(3,4) 2000 $112,483 $ - - $3,372
Chief Financial Officer and 1999 120,000 - - 3,600
Treasurer 1998 102,500 - 13,000 2,213
Stanley W. Broaddus (3,4) 2000 $ 93,970 $ - - $2,806
Secretary and 1999 95,000 - - 2,850
Vice President 1998 95,000 29,216 7,000 2,437
Director
_______________________
1) All benefits that might be considered of a personal nature did not exceed
the lesser of $50,000 or 10% of total annual salary and bonus for the
officer named in the table and therefore are omitted according to SEC rules.
2) Options are granted from the 1996 Incentive Option Plan.
3) Other compensation amounts reflect the Company's matching contribution under
its 401(k) retirement plan.
4) Options granted in 1998 carry an exercise price of $4 per share.
5) Other compensation for 1998 represents fees earned as an outside Director.
6) Mr. Gleason resigned his position with the Company as of 4/24/01.
STOCK OPTION/STOCK APPRECIATION RIGHT GRANTS IN THE LAST YEAR
In February of 2000, the Company granted common stock options to employees to
purchase 15,000 shares of common stock at $4.00 per share. In October of 2000,
the Company granted common stock options to employees to purchase 4,000 share of
common stock at $4.00 per share. All grants are from the 1996 Incentive Stock
Option Plan and have a term of ten years and a vesting schedule of three years.
No new stock options or stock appreciation rights were granted to Named
Executive Officers during 2000.
Aggregate Option /Stock Appreciation Rights ("SAR") Exercises and Period-End
Values
The following table sets forth information concerning the December 31,
1999 value of unexercised options/SARs held by the Company's Named Executive
Officers on April 15, 2000.
Number of Securities Value of Unexercised
Underlying Unexercised In-the-money options
Options as Fiscal Year End at Fiscal Year End (1)
Name Exercisable Unexercisable Exercisable Unexercisable
- --------------------------------------------------------------------------------------------
Allen Wykle 14,333 6,667 0 0
Eric Yeakel 9,667 4,333 0 0
Jean Schwindt(2) 24,333 4,167 0 0
Neil Phelan 6,667 2,833 0 0
Stanley Broaddus 5,667 2,333 0 0
Greg Gleason 900 450 0 0
(1) Value of Unexercised Options is calculated using the price of Approved
Common Stock on 12/31/00 of $0.31 per share less the exercise prices of
$4.00, $9.75 & $13.50 per share, multiplied by the number of shares
represented by the options. There were no common stock options issued and
outstanding to Executive Officers with an exercise price lower than the year
end common stock market price ("in the money options") on December 31, 2000
and thus having a value based on this formula at 12/31/00.
(2) Includes 16,000 exercisable SARs with a price of $2.63 per share.
EMPLOYMENT AGREEMENTS
As of December 31, 2000 we have employment agreements with five Executive
Officers, Messrs. Wykle, Yeakel, Broaddus, Phelan and Ms. Schwindt. We had an
Employment Agreement with Barry Diggins, prior to termination of his full time
employment with us effective July 28, 2000. (See:"Class III Directors")
Mr. Wykle has not received an increase in base salary or total compensation
since 1998 and he voluntarily commenced a reduction in salary effective July 1,
2000. Mr. Broaddus voluntarily forgave an increase in base salary or bonus
compensation due to him under the terms of his employment agreement during 2000.
Mr. Yeakel and Ms. Schwindt voluntarily forgave the increase in base salary due
to them in January 2000 under the terms of their employment agreements and
reduced their base salaries effective July 1, 2000. Mr. Phelan received the ten
percent increase in base salary due to him under his employment agreement
effective January 2000, however, he voluntarily reduced his total compensation
effective July 1, 2000.
Allen D. Wykle
Chairman, President and Chief Executive Officer
Prior to December 1, 2000, Allen D. Wykle had no formal employment agreement
with us and the Compensation Committee of the Board of Directors determined his
base salary and bonus. Mr. Wykle entered into an employment agreement with us on
December 1, 2000.
TERM, RENEWAL AND CHANGE IN CONTROL. The initial term of this agreement shall be
from December 1, 2000 until December 31, 2001. After December 31, 2001, this
Agreement will be renewable on a year to year basis. Either party must give one
hundred and eighty (180) days written notice if this Agreement is not going to
be renewed after December 31, 2001. Upon failure to give such notice, this
Agreement will automatically renew for an additional year on the same terms.
This notice requirement shall continue for all subsequent renewal periods. In
the event of a Change of Control (i.e. (i) a reduction in the percentage of our
common stock owned and controlled by Allen D. Wykle of 50% or greater, or (ii)
the cessation of Allen D. Wykle's full time employment with us as Chairman of
the Board, President or Chief Executive Officer) and during the calendar year in
which the Change of Control occurred he is notified of nonrenewal of this
Employment Agreement 180 or more days before the end of the then current
calendar year term then that term shall be extended for six (6) months i.e.
until June 30 of the following calendar year, thereby allowing Employee at least
one full year of remaining employment. If the notice of nonrenewal is given with
less than 180 days remaining before the end of the then current calendar year
term the then current term will not be extended because the then current term
will automatically renew for another year (due to failure to give 180 days
notice) thereby assuring him of at least one full year of continued employment.
SALARY: The agreement provides for an initial base salary at an annual rate
of $418,368 and provides for increases of 3% or 10% per year effective as of
January for any renewal term. The yearly salary increase is 10% if our net
income after tax increases by 10% or greater from the prior year increases by 3%
if our net income after tax does not increase by a minimum of 10%. Mr. Wykle
voluntarily reduced his current base salary by 10% to $376,531 due to our
current financial condition. He is entitled to transportation and all standard
group employee benefits.
BONUS: The bonus plan under the agreement provides for a bonus beginning in
the year 2001 of up to a maximum of 100% of the annual salary for each year. The
bonus is based on the annual return on equity ("ROE") percentage per share in
excess of a base annual ROE of 20% (after accrual for bonuses.) A bonus is
payable 50% in cash or stock at our discretion and 50% in cash or stock at the
employee's discretion.
Bonus Example.
-------------
If ROE per share for a year is 30%
Then he will be entitled to a bonus equal to 33% of his base salary
(30%-20%)/20% = 50%
If his Base Salary is $418,368
Then his bonus would be $418,368 * 50% = $209,184
NON-COMPETE: Under the Employment Agreement he has agreed not to compete with
us for a period of one year after termination within a prescribed geographic
area and not to solicit or employ our employees for two years after termination.
These restrictive covenants apply upon termination by either party, with or
without cause and upon expiration of the Agreement.
COMPENSATION AFTER TERMINATION. If he dies, becomes permanently disabled,
terminates his employment or is terminated for cause as defined in the
Agreement, this contract shall cease, and no further compensation or benefits in
any form shall be paid Employee. If this Agreement is terminated by us without
cause, then he shall be entitled to the compensation and benefits which he would
have received but for the termination without cause.
Neil W. Phelan
Director and Executive Vice President
TERM: The Employment Agreement that commenced January 1, 1998 for a three-
year initial term, was amended in November of 2000 for a term ending December
31, 2001. The agreement automatically renews for additional one-year terms
absent three months written notice of non-renewal by either party prior to end
of a term.
SALARY & OTHER BENEFITS: Mr. Phelan's annual salary for 1999 was $143,000.
His pre-amended Employment Agreement provided for a 10% increase in base salary
to and annualized rate of $157,300, which he received for the six months ended
June 30, 2000. For the third and fourth quarters of 2000,his base salary was
reduced to an annualized rate of $150,000. His amended agreement provides for a
base salary at an annualized rate of $135,000 for the first quarter of 2001 and
reducing to an annualized rate of $125,000 for the remainder of the term of the
agreement. He also is entitled to all standard group employee benefits. Mr.
Phelan received a car allowance of $700 per month in 1999 and $750 per month
during the first six months of 2000.Mr. Phelan voluntarily discontinued receipt
of a car allowance effective July 1, 2000.
BONUS: Mr. Phelan's amended agreement provides for a bonus plan consisting of
two parts, (1) an override bonus on production of certain account executives and
(2) participation in the senior management bonus.
Override Bonus: Mr. Phelan will earn a 5 basis points commission for monthly
loan origination volume produced by new wholesale account executives hired after
October 1, 2000 who are directly managed by
Mr. Phelan. To qualify in the calculation of this bonus the individual sales
person must produce a minimum of $750,000 per month in loan volume.
Senior Management Bonus: The senior management bonus provides for a bonus of
up to a maximum of 100% of the annual salary for each year. The bonus is based
on the annual return on equity ("ROE") percentage per share in excess of a base
annual ROE of 20% (after accrual for bonuses.) A bonus is payable 50% in cash or
stock at our discretion and 50% in cash or stock at the employee's discretion.
Bonus Example.
-------------
If ROE per share for a year is 30%
Then he will be entitled to a bonus equal to 50% of his base salary
(30%-20%)/20% = 50%
If his Base Salary is $125,000
Then his bonus would be $125,000 * 50% = $41,250
NON-SOLICITATION: Under the Employment Agreement Mr. Phelan has agreed not to
solicit our employees for two years after termination. This restrictive covenant
applies upon termination for any reason by Mr. Phelan or termination for cause
by us.
Stanley W. Broaddus
Vice President and Secretary
TERM: The Employment Agreement which commenced January 1, 1997 was for a one
year initial term and automatically renews on January 1, of each subsequent year
for additional one-year terms absent ninety day written notice by either party
prior to the end of a renewed term. The agreement was amended December 1, 2000.
SALARY & OTHER BENEFITS: His current base annual salary is $95,000. He is
entitled to a car and all standard group employee benefits.
BONUS: The bonus plan under the agreement beginning in 2001 provides for a
bonus of up to a maximum of 100% of the annual salary for each year. The bonus
is based on the annual return on equity ("ROE") percentage per share in excess
of a base annual ROE of 20% (after accrual for bonuses.) A bonus is payable 50%
in cash or stock at our discretion and 50% in cash or stock at the employee's
discretion.
Bonus Example.
-------------
If ROE per share for a year is 30%
Then he will be entitled to a bonus equal to 50% of his base salary
(30%-20%)/20% = 50%
If his Base Salary is $95,000
Then his bonus would be $95,000 * 50% = $47,250
TERMINATION & NON-COMPETE: The Employment Agreement provides for termination
"for cause" as defined in the Agreement with notice and for termination upon 90
days prior written notice without cause. Under the Employment Agreement he has
agreed not to compete with us for a period of one (1) year after termination
within a prescribed geographic area and not to solicit or employ our employees
for two (2) years after termination. These restrictive covenants apply upon
termination by either party, with or
without cause and upon expiration of the Agreement. He is also entitled to one
year's annual salary in the event that we experience a change in control, which
results in Allen D. Wykle no longer being employed by us and if we terminate Mr.
Broaddus without cause.
Jean S. Schwindt
Executive Vice President
TERM, RENEWAL AND CHANGE IN CONTROL. The employment agreement with Ms. Schwindt
dated July1, 1998 and amended December 1, 2000 was for an initial term from July
1, 1998 through December 31, 1998. On January 1, 1999 it automatically renewed
for a three (3) year term with each year running from January 1st through
December 31st. After December 31, 2001, this Agreement will be renewable on a
year to year basis. Either party must give one hundred and eighty (180) days
written notice if this Agreement is not going to be renewed after December 31,
2001. Upon failure to give such notice, this Agreement will automatically renew
for an additional year on the same terms. This notice requirement shall continue
for all subsequent renewal periods. In the event of a Change of Control (i.e.
(i) a reduction in the percentage of our common stock owned and controlled by
Allen D. Wykle of 50% or greater, or (ii) the cessation of Allen D. Wykle's full
time employment with us as Chairman of the Board, President or Chief Executive
Officer) and during the calendar year in which the Change of Control occurred
she is notified of nonrenewal of this Employment Agreement 180 or more days
before the end of the then current calendar year term then that term shall be
extended for six (6) months i.e. until June 30 of the following calendar year,
thereby allowing her at least one full year of remaining employment. If the
notice of nonrenewal is given with less than 180 days remaining before the end
of the then current calendar year term the then current term will not be
extended because the then current term will automatically renew for another year
(due to failure to give 180 days notice) thereby assuring her of at least one
full year of continued employment.
SALARY: It provides for an initial base salary at an annual rate of $160,000,
and provides for increases of 6% or 10% per year effective as of January 2000
and January 2001 and any renewal terms. Her yearly salary increase is 10% if our
net income after tax increases by 10% or greater from the prior year and
increases by 6% if our net income after tax does not increase by a minimum of
10%.
The Employment Agreement with Ms. Schwindt, as described above, provides for a
base salary during the year 2000 of $169,600. However, as contribution to our
expense reduction program, she voluntarily forgave her 6% salary increase due
January of 2000 and reduced her current annualized base salary to $144,000, a
reduction of 15% from the amount provided in the agreement. .
BONUS: The bonus plan under the agreement beginning in 2001 provides for a bonus
of up to a maximum of 100% of the annual salary for each year. The bonus is
based on the annual return on equity ("ROE") percentage per share in excess of a
base annual ROE of 20% (after accrual for bonuses.) A bonus is payable 50% in
cash or stock at our discretion and 50% in cash or stock at the employee's
discretion.
Bonus Example.
--------------
If ROE per share for a year is 30%:
Then she will be entitled to a bonus equal to 50% of her base salary
(30%-20%)/20% = 50%
If her Base Salary is $160,000
Then her bonus would be $160,000 * 50% = $80,000
NON-COMPETE: Under the Employment Agreement she has agreed not to compete with
us for a period of one year after termination within a prescribed geographic
area and not to solicit or employ our employees for two years after termination.
These restrictive covenants apply upon termination by either party, with or
without cause and upon expiration of the Agreement.
COMPENSATION AFTER TERMINATION. If she dies, becomes permanently disabled,
terminates her employment or is terminated for cause as defined in the
Agreement, this contract shall cease, and no further compensation or benefits in
any form shall be paid to her. If this Agreement is terminated by us without
cause, then she shall be entitled to the compensation and benefits which she
would have received but for the termination without cause.
Eric S. Yeakel
Chief Financial Officer and Treasurer
TERM, RENEWAL AND CHANGE IN CONTROL. The initial term of the employment
agreement with Mr. Yeakel was from July 1, 1998 through December 31, 1998 and
amended December 1, 2000. On January 1, 1999 it automatically renewed for a
three (3) year term with each year running from January 1st through December
31st. After December 31, 2001, this Agreement will be renewable on a year to
year basis. Either party must give one hundred and eighty (180) days written
notice if this Agreement is not going to be renewed after December 31, 2001.
Upon failure to give such notice, this Agreement will automatically renew for an
additional year on the same terms. This notice requirement shall continue for
all subsequent renewal periods. In the event of a Change of Control (i.e. (i) a
reduction in the percentage of our common stock owned and controlled by Allen D.
Wykle of 50% or greater, or (ii) the cessation of Allen D. Wykle's full time
employment with us as Chairman of the Board, President or Chief Executive
Officer) and during the calendar year in which the Change of Control occurred he
is notified of nonrenewal of this Employment Agreement 180 or more days before
the end of the then current calendar year term then that term shall be extended
for six (6) months i.e. until June 30 of the following calendar year, thereby
allowing him at least one full year of remaining employment. If the notice of
nonrenewal is given with less than 180 days remaining before the end of the then
current calendar year term the then current term will not be extended because
the then current term will automatically renew for another year (due to failure
to give 180 days notice) thereby assuring him of at least one full year of
continued employment.
SALARY: It provides for an initial base salary at an annual rate of $120,000,
and provides for increases of 6% or 10% per year effective as of January 2000
and January 2001 and any renewal terms. The yearly salary increase is 10% if our
net income after tax increases by 10% or greater from the prior year. His yearly
salary increases by 6% if our net income after tax does not increase by a
minimum of 10%.
The Employment Agreement with Mr. Yeakel, as described above, provides for a
base salary during the year 2000 of $127,200. However, as contribution to our
expense reduction program, he voluntarily forgave his 6% salary increase due
January of 2000 and reduced his current annualized base salary to $108,000, a
reduction of 15% from the amount provided in the agreement.
BONUS: The bonus plan under the agreement beginning in 2001 provides for a bonus
of up to a maximum of 100% of the annual salary for each year. The bonus is
based on the annual return on equity ("ROE") percentage per share in excess of a
base annual ROE of 20% (after accrual for bonuses.) A bonus is payable 50% in
cash or stock at our discretion and 50% in cash or stock at the employee's
discretion.
Bonus Example.
--------------
If ROE per share for a year is 30%
Then he will be entitled to a bonus equal to 50% of his base salary
(30%-20%)/20% = 50%
If his Base Salary is $120,000
Then his bonus would be $120,000 * 50% = $60,000
NON-COMPETE: Under the Employment Agreement he has agreed not to compete with us
for a period of one year after termination within a prescribed geographic area
and not to solicit or employ our employees for two years after termination.
These restrictive covenants apply upon termination by either party, with or
without cause and upon expiration of the Agreement.
COMPENSATION AFTER TERMINATION. If he dies, becomes permanently disabled,
terminates his employment or is terminated for cause as defined in the
Agreement, this contract shall cease, and no further compensation or benefits in
any form shall be paid to him. If this Agreement is terminated by us without
cause, then he shall be entitled to the compensation and benefits which he would
have received but for the termination without cause.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors has furnished the following
report on executive compensation for inclusion in this proxy statement:
COMPENSATION PHILOSOPHY
Employment Agreements are described in more detail above and the Compensation
Committee believes that those agreements establish base salaries, which are
reasonable when compared to the Company's industry peers. The Employment
Agreements call for incentive based bonuses and various other sources of
incentive compensation as explained above.
Bonus compensation awarded to the Company's Officers and other key employees,
generally results when the Company realizes net income after tax for the year.
Individual or divisional productivity and/or profitability relating directly to
a manager's efforts are frequently used in establishing guidelines for bonus
awards paid in the form of cash and/or in stock options (See; 1996 Incentive
Stock Option Plan).
The Compensation Committee believes that the majority of all compensation plans
throughout the Company and the Employment Agreements for the Company's Executive
Officers are in line with the Company's dual goals of rewarding performance and
establishing compensation arrangements which align the interests of officers and
other key employees with those of the Company's Shareholders.
1996 INCENTIVE STOCK OPTION PLAN
On June 28, 1996, the Company adopted the 1996 Incentive Stock Option Plan (the
"Incentive Plan"), pursuant to which key employees of the Company are eligible
for awards of stock options. The following sections summarize some of the
principle features of the Incentive Plan.
Purpose. The Board of Directors believes that long-term incentive compensation
is one of the
fundamental components of compensation for the Company's key employees and that
stock options under the Incentive Plan will play an important role in
encouraging employees to have a greater financial investment in the Company. The
Board of Directors believes that the Incentive Plan will help promote long-term
growth and profitability by further aligning Shareholder and employee interests.
The purpose of the Incentive Plan is to promote the interests of the Company and
its Shareholders by affording participants an opportunity to acquire a
proprietary interest in the Company and by providing participants with long-term
financial incentives for outstanding performance. Under the terms of the
Incentive Plan, the Option Committee has a great deal of flexibility in the
types and amounts of awards that can be made and the terms and conditions
applicable to those awards.
Description of the Incentive Plan. The aggregate number of shares of Common
Stock that are available for grants under the Incentive Plan is 252,000 shares
(adjusted for the two-for-one stock splits paid to Shareholders of record on
August 30, 1996 and December 16, 1996 and the 100% stock dividend paid to
Shareholders of record on November 21, 1997.) All shares allocated to awards
under the Incentive Plan that are cancelled or forfeited are available for
subsequent awards.
Administration. The Option Committee administers the Incentive Plan. The members
of the Option Committee are not eligible to receive awards under the Incentive
Plan. The Option Committee has the full power to: (a) designate the key
employees to receive awards from time to time; (b) determine the sizes and types
of awards; (c) determine the terms and provisions of awards as it deems
appropriate; (d) construe and interpret the Incentive Plan and establish, amend
or waive rules and regulations relating to the administration of the Incentive
Plan; (e) amend the terms and provisions of any outstanding award to the extent
such terms and provisions are within the discretion of the Option Committee; and
(f) make all other decisions and determinations necessary or advisable for the
administration of the Incentive Plan. All determinations and decisions made by
the Option Committee pursuant to the Incentive Plan are final, conclusive and
binding.
Eligible Participants. Only "key employees" of the Company and its subsidiaries
are eligible to participate in the Incentive Plan. An employee who is a Director
is eligible for an award unless he or she is a member of the Option Committee.
The selection of the key employees is entirely within the discretion of the
Option Committee. The concept of a "key employee" is, however, somewhat flexible
and it is anticipated that such factors as the duties and responsibilities of
employees, the value of their services, their present and potential
contributions to the success of the Company and other relevant factors will be
considered. Accordingly, the number of persons who ultimately may be eligible to
participate in the Incentive Plan cannot presently be determined.
Option Price of Stock. The Incentive Plan provides for the grant of options to
purchase shares of Common Stock at option prices to be determined by the Option
Committee as of the date of grant. The option price may not be less than the
fair market value (or in the case of a 10% Shareholder not less than 110% of the
fair market value) of the shares of Common Stock on the date of grant. For such
purpose "fair market value" means the average of the bid and asked price per
share of the Common Stock as reported by the NASDAQ Stock Market or the OTC
Bulletin Board, whichever is applicable at the time, on the date on which the
fair market value is determined or, if Common Stock is not traded on such
exchange or system on such date, then on the immediately preceding date on which
Common Stock was traded on such exchange or system. Each grant of options is to
be evidenced by an option agreement which is to specify the option price, the
term of the option, the number of shares subject to the option and such other
provisions as the Committee may determine.
Exercise of Options. The shares subject to an option may be purchased as
follows: none in the first year after the grant of option; one-third in each of
the second, third and fourth years. Options granted under the Incentive Plan
will expire not more than ten years (or in the case of a 10% Shareholder not
more than five years) from the date of grant.
Awards of Options. Awards of options under the Incentive Plan are to be
determined by the Option Committee at its discretion. Notwithstanding the
foregoing, the Option Committee may not grant options to any participant that,
in the aggregate, are first exercisable during any one calendar year to the
extent that the aggregate fair market value of the shares subject to such
options, at the time of grant, exceeds $100,000.
Payments For Shares. Payments for shares issued pursuant to the exercise of any
option may be made either in cash or by tendering shares of Common Stock of the
Company with a fair market value at the date of the exercise equal to the
portion of the exercise price which is not paid in cash.
No Rights as Shareholder. A participant granted an option under the Incentive
Plan will have no rights as a Shareholder of the Company with respect to the
shares subject to such option except to the extent shares are actually issued.
Non-transferability. Options may not be sold, transferred, pledged or assigned,
except as otherwise provided by law or in an option agreement. The Option
Committee may impose restrictions on the transfer of shares acquired pursuant to
the exercise of options as it may deem advisable.
Termination of Employment. Except for termination for cause, death or
disability, options terminate three months after the employment terminates or on
such earlier date as the participant's option agreement specifies. In the event
of termination for cause as defined in the Incentive Plan, the option terminates
upon termination (subject to the Option Committee's right to reinstate for 30
days). In the event of death, the option will terminate six months after death,
and in the event of disability one year after disability (unless the option
period in the participant's option agreement expires earlier).
Amendment and Termination of the Incentive Plan. The Board of Directors may
alter, amend, discontinue, suspend or terminate the Incentive Plan at any time
in whole or in part. Notwithstanding the foregoing, Shareholder approval is
required for any change to the material terms of the Incentive Plan and no
amendment or modification of the Incentive Plan may materially and adversely
affect any award previously granted without the consent of the participant.
401(K) RETIREMENT PLAN
On January 1, 1995, the Company implemented a 401(k) Retirement Plan (the
"401(k) Plan"). The 401(k) Plan is a defined contribution plan covering all
employees who have completed at least one year of service. The 401(k) Plan is
subject to the provisions of the Employee Retirement Income Security Act of
1974. The Company contributes an amount equal to 50% of a participant's payroll
savings contribution up to a maximum of 6% of a participant's annual
compensation. The Company's contributions to the 401(k) Plan in 2000 was $94,000
and was $141,000 in 1999. The Company's matching contribution has a vesting
schedule.
CEO COMPENSATION
The Compensation Committee determines compensation for Allen D. Wykle, Chairman
and Chief Executive Officer. A summary of Mr. Wykle's employment agreement with
the Company is contained in this proxy under the executive management employment
agreements section. The Compensation Committee is of the opinion that as the
largest Shareholder of the Company, beneficial owner of 33% of the Company's
common stock outstanding, Mr. Wykle`s interest are aligned with the best
interest of the Company's Shareholders.
SALARY: Mr. Wykle's current salary of $376,531 is at a level that the Committee
deems to be reasonable in view of his level of involvement in the operations of
the Company. Mr. Wykle took a 10% pay decrease from his contractual salary of
418,368 on July 1, 2000. He did not receive an increase in salary during 1998,
1999, or 2000.
BONUS: Mr. Wykle did not receive a bonus for the year ended December 31, 2000.
The terms Mr. Wykle to achieve a bonus are discussed in the executive management
employment agreements section of the proxy.
APPROVED FINANCIAL CORP.
COMPENSATION COMMITTEE:
Oscar Warner, Chairman
Leon Perlin
Allen D. Wykle
Robert Salter
STOCK PERFORMANCE GRAPH
The following graph depicts the cumulative total return on the Company's Common
Stock compared to the cumulative total return for The Russell 2000 Index
("Russell 2000") and the Russell 2000 Financials Index ("Russell 2000
Financials), a peer group selected by the Company on an industry and line-of-
business basis, commencing June 30, 1994 and ending December 31, 2000. The graph
assumes an investment in Approved Financial Corp. Common Stock of $100 on June
30, 1994, which is the first date for which public market trading data is
available. The graph assumes an investment of $100 in Russell 2000 on June 30,
1994 and an investment of $171 in the Russell 2000 Financials on June 30, 1995.
June 30, 1995 is the first semi-annual date for which the pricing information
was available for the Russell 2000 Financials and $171 represents the equivalent
value of Approved's Common Stock on that date for purposes of this graph.
[GRAPHIC]
-----------------------------------------------------------------------------------------------------------------
30-Jun- 30-Dec- 30-Jun- 29-Dec- 28-Jun- 31-Dec- 30-Jun- 31-Dec- 30-Jun- 31-Dec- 30-Jun- 31-Dec- 30-Jun- 31-Dec-
94 94 95 95 96 96 97 97 98 98 99 99 00 00
- ------------------------------------------------------------------------------------------------------------------------------------
Approved Financial
Corp. 100 94 171 221 400 929 981 1600 1432 348 245 90 103 41
Russell 2000
Index 100 104 118 131 144 151 165 182 190 176 190 210 215 201
Russell 2000
Financials 171 189 198 232 259 302 297 263 273 241 236 277
- ------------------------------------------------------------------------------------------------------------------------------------
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of April 15, 2001
regarding the number of shares of Common Stock beneficially owned by all
Directors, Executive Officers, and 5 % Shareholders. Beneficial ownership
includes shares, if any, held in the name of the spouse, minor children or other
relatives of the nominee living in such person's home, as well as shares, if
any, held in the name of another person under an arrangement whereby the
Director, Executive Officer or 5% Shareholder can vest title in himself within
sixty days of April 15, 2001.
Common Stock Percentage of
Name Beneficially Owned Class
---- ------------------ -----
Allen D. Wykle (1)(2)(3)
1716 Corporate Landing Parkway
Virginia Beach, VA 23454 1,864,153 33.4%
Leon H. Perlin (4)
3360 South Ocean Boulevard
Apartment 5H2
Palm Beach, FL 33480 929,256 17.0
Gregory J. Witherspoon (1)
Blue Jay Way
Los Angeles, CA 90069 232,800 4.2
Stanley W. Broaddus (1)(3)
1716 Corporate Landing Parkway
Virginia Beach, VA 23454 145,424 2.5
Jean S. Schwindt (1,5)
1062 Normandy Trace Road
Tampa, FL 33602 85,983 1.6
Oscar S. Warner (6)
215 Brooke Avenue, Apt #905
Norfolk, VA 23510 59,000 1.1
Arthur Peregoff (7)
816 Oriole Drive
Virginia Beach, VA 23451 51,750 *
Neil W. Phelan (1)
1716 Corporate Landing Parkway
Virginia Beach, VA 23454 20,787 *
Gregory W. Gleason (1)
2380 Court Plaza Drive, Suite 200
Virginia Beach, VA 23456 5,300 *
Eric S. Yeakel (1)
1716 Corporate Landing Parkway
Virginia Beach, VA 23454 9,833 *
Robert M. Salter
613 Lynnhaven Parkway
Virginia Beach, VA 23452 464 *
All present Executive
Officers, Directors & Nominees
as a group (12 persons) (1,2,3,4,6,7,8,9) 3,404,150 60.1
________________________
* Owns less than 1% of class.
(1) For Mr. Wykle includes beneficial ownership of 14,333 shares that may be
issued upon the exercise of stock options exercisable within 60 days of
April 15, 2001, and excludes 6,667 shares subject to stock options that
cannot be exercised within 60 days of April 15, 2001. For Mr. Witherspoon,
includes beneficial ownership of 3,000 shares subject to non-qualified
stock options that may be exercised within 60 days of April 15, 2001, and
excludes 1,500 shares subject to non-qualified stock options that cannot be
exercised within 60 days of April 15, 2001. For Ms. Schwindt includes
beneficial ownership of 8,333 shares that may be issued upon the exercise
of stock options exercisable within 60 days of April 15, 2001, excluded are
4,167 shares subject to stock options that cannot be exercised within 60
days from April 15, 2001. For Mr. Phelan included is the beneficial
ownership of 6,667 shares which may be issued upon the exercise of stock
options exercisable within 60 days of April 15, 2001, and excludes 2,833
shares subject to stock options that cannot be exercised within 60 days of
April 15, 2001. For Mr. Yeakel included is the beneficial ownership of
9,667 shares that may be issued upon the exercise of stock options
exercisable within 60 days of April 15, 2001, and excludes 4,333 shares
subject to stock options that cannot be exercised within 60 days of April
15, 2000. For Mr. Broaddus includes beneficial ownership of 5,667 shares
that may be issued upon the exercise of stock options exercisable within 60
days of April 15, 2001, and excludes 2,333 shares subject to stock options
that cannot be exercised within 60 days of April 15, 2001. For Mr. Gleason,
includes beneficial ownership of 900 shares that may be issued upon the
exercise of stock options exercisable within 60 days of April 15, 2001,
excluded are 450 share subject to stock options that cannot be exercised
within 60 days of April 15, 2001.
(2) Excludes 7,000 shares registered to his adult children and his
grandchildren, as to which Mr. Wykle disclaims beneficial ownership.
(3) Mr. Wykle and Mr. Broaddus are Co-Trustees of the Company's profit-sharing
Plan ("Plan"), that owns 39,680 of the Company's Common Stock. They share
voting power. Mr. Wykle's ownership interest in the Plan is 65% and Mr.
Broaddus' share is 15%. Included under Mr. Wykle's shares for the purposes
of this disclosure are 25,792 Plan shares, which exclude the 5,952 shares
(15% of the Plan shares) which are included under Mr. Broaddus's ownership.
Mr. Wykle claims voting rights but disclaims beneficial ownership of all
but the 65% he owns in the Plan.
(4) Includes 594,000 shares owned by Mr. Perlin's wife.
(5) Excluded are stock appreciation rights for 16,000 shares at $2.63 per
share. Excluded are 8,000 shares owned by her parents, to which Ms.
Schwindt disclaims beneficial ownership.
(6) Excludes 68,600 shares registered to Mr. Warner's adult children and his
grandchildren, to which he disclaims beneficial ownership.
(7) Mr. Peregoff's shares are held jointly with his wife. Excludes 33,848
shares registered to Mr. Peregoff's adult children and his grandchildren,
to which he disclaims beneficial ownership.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has maintained business relationships and engaged in certain
transactions with affiliated companies and the parties as described below. It is
the policy of the Company to engage in transactions with related parties only on
terms that, in the opinion of the Company, are no less favorable to the Company
than could be obtained from unrelated parties and each of the transactions
described below conforms to that policy.
Agreement with Mills Value Adviser, Inc.
The Company entered an investment management agreement on March 28, 1996, with
Mills Value Adviser, Inc. ("MVAI"), a registered investment advisor. Under the
agreement, MVAI manages a portion of the Company's non-qualified profit-sharing
Plan. The Plan's trustees retain all proxy voting rights for securities managed
by MVAI. During 2000, the Company paid $4,517 in advisory fees to MVAI. Jean S.
Schwindt, an officer, Director and member of the Executive Committee, is a
portfolio manager for a small number of individual advisory clients of MVAI.
Indebtedness of Management
The Company and the Savings Bank have no outstanding extensions of credit to
members of the Board of Directors or management as of April 30, 2001. As of
December 31, 2000, the Savings Bank held a conforming mortgage loan made to Ms.
Schwindt in the amount of $220,000. The sale transaction for this mortgage loan,
which was approved for purchase by the investor prior to funding, had not
settled as of December 31, 2000, but settled in 2001.
Promissory Notes
The Company has, from time to time, issued promissory notes to assist in cash
flow. The notes are callable on 30 days notice from the holder and may be
prepaid by the Company. The notes are usually issued to Directors, Officers or
Shareholders. As of December 31, 2000, the following Directors and Executive
Officers were holders of promissory notes in the amounts and interest rates
specified below:
Allen D. Wykle $714,803 10.00%
Stanley W. Broaddus 456,496 10.00
Leon H. Perlin 194,122 9.00
Leon H. Perlin 8,939 8.00
Oscar S. Warner 46,000 8.00
Oscar S. Warner 71,782 8.75
Arthur Peregoff 400,000 10.00
FEES FOR SERVICES RENDERED BY PRICEWATERHOUSECOOPERS LLP DURING 2000 ARE AS
FOLLOWS:
Audit Fees:
Annual audit $105,600
Quarterly review 27,815
--------
Total Audit Fees $133,415
--------
All Other Fees:
Annual audit of employee benefit plans $ 10,425
Review of form S-1 Filing 33,895
--------
Total All other Services $ 44,320
========
The Audit Committee has determined that the non-audit services provided by
PricewaterhouseCoopers LLP is compatible with maintaining the independence of
PricewaterhouseCoopers LLP. In addition, all audit services are provided by
full-time employees of PricewaterhouseCoopers LLP.
AVAILABILITY OF FORM 10-K
The Company will provide to any Shareholder, without charge, upon written
request of such Shareholder, a copy of the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 2000, as filed with the Securities and
Exchange Commission. Such requests should be addressed to Approved Financial
Corp., 1716 Corporate Landing Parkway, Virginia Beach, Virginia 23454, Attn:
Investor Relations Dept.
SECTION 16(a) REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors and Executive Officers, and persons owning more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership of such equity securities with the Securities
and Exchange Commission ("SEC"). The copies of Form 4 and Form 3 filings
received by the Company during 1999 reflect that Messrs. Peregoff and Warner
were each delinquent concerning one Form 4 filing.
PROPOSALS BY SHAREHOLDERS
Any Shareholder proposal which is intended to be presented at the Company's
annual meeting of Shareholders to be held in the year 2002 must be received at
the Company's principal executive offices, located at 1716 Corporate Landing
Parkway, Virginia Beach, Virginia 23454, Attention: Stanley Broaddus, Secretary
of the Company, by no later than February 1, 2002, if such proposal is to be
considered for inclusion in the Company's proxy statement and form of proxy
relating to such meeting. Shareholders of the Company who intend to bring
business before the meeting must also comply with the applicable procedures set
forth in the Company's Bylaws. The Company will furnish copies of such Bylaw
provisions upon written request to Stanley Broaddus at the above-mentioned
address.
OTHER BUSINESS
The Meeting scheduled for June 11, 2001 is held for the purposes as set forth in
the Notice that accompanies this Proxy Statement. The Board is not presently
aware of business to be transacted at the Meeting other than as set forth in the
Notice. However, if any other business properly comes before the meeting, the
Proxies named on the accompanying proxy card will vote their Proxies in their
discretion on such business.
By Order of the Board of Directors
/s/ Allen D. Wykle
----------------------------------
Allen D. Wykle
Chairman of the Board
Virginia Beach, Virginia
April 30, 2001
APPROVED FINANCIAL CORP.
ANNUAL MEETING OF STOCKHOLDERS
June 11, 2001
Proxyholder ballot
CIRCLE THE APPROPRIATE ANSWERS TO INDICATE YOUR VOTE ON EACH RESOLUTION BELOW:
I, the undersigned, pursuant to proxy given, hereby vote:
FOR AGAINST ABSTAIN
the following resolution:
RESOLVED, that Allen D. Wykle be, and he hereby is, elected as a director of the
Company to serve for a term of office expiring at the Company's Annual Meeting
of Stockholders to be held in the year 2004 and until his successor shall have
been duly elected and qualified:
I, the undersigned, pursuant to proxy given, hereby vote:
FOR AGAINST ABSTAIN
the following resolution:
RESOLVED, that Leon H. Perlin be, and he hereby is, elected as a director of the
Company to serve for a term of office expiring at the Company's Annual Meeting
of Stockholders to be held in the year 2004 and until his successor shall have
been duly elected and qualified:
I, the undersigned, pursuant to proxy given, hereby vote:
FOR AGAINST ABSTAIN
the following resolution:
RESOLVED, that Oscar S. Warner be, and he hereby is, elected as a director of
the Company to serve for a term of office expiring at the Company's Annual
Meeting of Stockholders to be held in the year 2004 and until his successor
shall have been duly elected and qualified:
I, the undersigned, pursuant to proxy given, hereby vote:
FOR AGAINST ABSTAIN
the following resolution:
RESOLVED, that the appointment of PricewaterhouseCoopers L.L.P. as independent
accountants for the Company for the fiscal year ending December 31, 2001 be, and
it hereby is, ratified.
Dated this 11/th/ day of June, 2001.
Signature: __________________________________
Name: _______________________________________
# of shares represented _____________________