ITEM 11. EXECUTIVE COMPENSATION
The three components of the Company's executive officer compensation
program are base salary, annual incentive compensation in the form of a cash
bonus and long-term incentive compensation in the form of stock options.
Executive officers are also entitled to various benefits including participation
in the Company's medical, life insurance and long-term disability plans which
are generally available to employees of the Company. The Compensation Committee
of the Board of Trustees consisting of two outside trustees and the Company's
Chairman, is responsible for the evaluation and approval of the compensation of
Wedgestone Financial officers.
The following tabulation gives information with respect to remuneration
paid to each of the three highest paid executive officers of Wedgestone and its
subsidiaries for the years ended December 31, 1997, 1996, and 1995.
SUMMARY COMPENSATION
Long-Term
Annual Compensation Compensation
------------------------------------------- ------------
Year Salary Bonus Benefits Options
---- ------ ----- -------- --------
Jeffrey S. Goldstein, President 1997 $108,500 $ -0- $ -0- 85,000
Wedgestone Financial (through July 5, 1997) 1996 175,000 -0- -0- -0-
1995 160,200 -0- -0- -0-
David L. Sharp, President 1997 153,200 80,100 7,200 251,600
Wedgestone Financial 1996 126,200 25,000 6,000 -0-
1995 114,750 34,000 8,712 -0-
Eric H. Lee, Chief Financial Officer 1997 112,500 57,100 7,200 160,000
Wedgestone Financial 1996 99,000 25,000 6,000 -0-
1995 95,000 26,000 8,678 -0-
The following table shows, for those individuals named in the Summary
Compensation table, information concerning stock options granted during the year
ended December 31, 1997.
OPTION GRANTS IN 1997
Options % of Total Exercise Expiration Potential Realizable Value(2)
Granted(1) Granted in 1997 Price Date(1) 5% 10%
---------- --------------- ----- ------- -- ---
Jeffrey S. Goldstein 85,000 10.4% .31 9/22/02 25,489 31,437
David L. Sharp 251,600 30.9% .31 9/22/02 75,450 93,055
Eric H. Lee 160,000 19.7% .31 9/22/02 48,000 59,200
- ------------------------------
(1) Options indicated were immediately vested at date of grant and become
exercisable over a five year period ending September 22, 2002.
(2) Potential Realizable Value at assumed Annual Rates of Stock Price
Appreciation for Option terms at rates of 5% and 10% is information mandated by
the Securities and Exchange Commission and does not represent the Company's
estimate or projection of the future price of its shares of Beneficial Interest.
No executive officer exercised options during 1997. The following table sets
forth, for each of the executive officers named in the Summary Compensation
Table, the year-end value of unexercised options.
AGGREGATED OPTION EXERCISES IN 1997
AND YEAR-END OPTION VALUES
Number of Value of Unexercised
Unexercised Options In-The-Money Options
At Year-End At-Year-End
----------- -----------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
Jeffrey S. Goldstein 85,000 -0- $ 56,950 0
David L. Sharp 251,600 -0- $168,572 0
Eric H. Lee 160,000 -0- $107,200 0
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1996, the Compensation Committee of the Board of Trustees of the
Company was comprised of John J. Doran, Jeffrey A. Oberg and John C. Shaw. None
of the members of the Compensation Committee has ever been an employee or
officer of the Company or any of its subsidiaries, with the exception of Mr.
Shaw who is the Chairman of the Board but does not receive compensation for
acting in such capacity. Mr. Shaw, however, is a significant equity holder in
PSG Associates and Resource Holdings Associates, each of which respectively
provide financial and advisory services to St. James and Fey, subsidiaries of
the Company. In 1997 the Company paid PSG Associates $125,000 in connection
with such services to St. James and $60,000 and $120,000 to PFG and Resource
Holdings Associates, respectively for such services rendered to Fey. The Company
will pay PSG Associates $125,000 for financial and advisory services rendered to
St. James for the current year and $60,000 and $120,000 to PFG and Resource
Holdings Associates, respectively for such services rendered to Fey. Otherwise,
none of the members of the Compensation Committee has any relationship requiring
disclosure under any paragraph of Item 404 or in Item 402(j)(3) of Regulation
S-K promulgated by the Commission.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF TRUSTEES
The following is the report of the Compensation Committee of the Company
(the "Committee") on executive compensation for fiscal 1997.
COMPENSATION PHILOSOPHY. The Committee believes that it is in the best
interests of the shareholders for the Company to attract, maintain and motivate
top quality management personnel, especially its executive officers, by offering
and maintaining a competitive compensation package that exhibits an appropriate
relationship between executive pay and the creation of stockholder value. The
general philosophy of the committee is to integrate (i) adequate levels of
annual base compensation; (ii) annual cash bonuses and equity awards based on
achievement of short-term corporate and individual performance goals, such that
executive compensation levels will be higher in years in which performance goals
are achieved or exceeded; and (iii) equity awards, to ensure that management has
a continuing stake in the long term success of the Company and return of value
to its stockholders.