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As filed with the Securities and Exchange Commission on MARCH 29, 1996
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(MARK ONE)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended DECEMBER 31, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-9667
BULL & BEAR GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-1897916
(State of incorporation) (I.R.S. Employer Identification No.)
11 HANOVER SQUARE, NEW YORK, NEW YORK 10005
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 785-0900
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
CLASS A COMMON STOCK, PAR VALUE $.01 PER SHARE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
No voting stock was held by non-affiliates of the registrant as of March
15, 1996.
The number of shares outstanding of each of the registrant's classes of
common stock, as of March 15, 1996:
Class A Non-Voting Common Stock, par value $.01 per share - 1,348,017 shares
Class B Voting Common Stock, par value $.01 per share - 20,000 shares
TABLE OF CONTENTS
PART I
ITEM PAGE
1. Business ........................................................... 2
2. Properties ......................................................... 5
3. Legal Proceedings .................................................. 5
4. Submission of Matters to a Vote of Security Holder ................. 5
PART II
5. Market for Company's Common Equity and Related Stockholder Matters . 6
6. Selected Financial Data .............................................6
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations ....................................... 9
8. Financial Statements and Supplementary Data .........................11
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ..............................25
PART III
10. Directors and Executive Officers ................................... 26
11. Executive Compensation .............................................28
12. Security Ownership of Certain Beneficial Owners and Management ......30
13. Certain Relationships and Related Transactions .....................31
PART IV
14. Exhibits, Consolidated Financial Statements and Schedules,
and Reports on Form 8-K .........................................32
PART I
ITEM 1. BUSINESS
Bull & Bear Group, Inc., a Delaware corporation (the "Company"), is a
holding company with seven principal subsidiaries: Bull & Bear Advisers, Inc.
("BBAI"), Bull & Bear Securities, Inc. ("BBSI"), Investor Service Center, Inc.
("ISC"), Midas Management Corporation ("MMC"), Bull & Bear Properties, Inc.
("Properties"), Bull & Bear NJ Properties, Inc. ("NJ Properties") and Hanover
Direct Advertising Company, Inc. ("Hanover Direct").
BBAI and MMC act as investment managers to open-end management investment
companies (mutual funds) (the "Funds") registered under the Investment Company
Act of 1940 (the "Act"). The Funds are: Bull & Bear Special Equities Fund, Inc.;
Bull & Bear Gold Investors Ltd.; Bull & Bear U.S. and Overseas Fund and Bull &
Bear Quality Growth Fund, each a series of shares issued by Bull & Bear Funds I,
Inc.; Bull & Bear Dollar Reserves, Bull & Bear Global Income Fund and Bull &
Bear U.S. Government Securities Fund, each a series of shares issued by Bull &
Bear Funds II, Inc.; Bull & Bear Municipal Income Fund, a series of shares
issued by Bull & Bear Municipal Securities, Inc.; and, Midas Fund, Inc.
BBSI was organized in 1984 to operate a discount brokerage service. BBSI
has access to every major U.S. stock, option and bond exchange as well as the
over-the-counter market. Investors may use the discount brokerage services
provided by BBSI to trade stocks, bonds and options at substantial commission
discounts from full cost rates, access their investment in any of the Funds to
pay for securities purchased or invest proceeds of sales of securities in the
Funds. BBSI is registered with the Securities and Exchange Commission ("SEC") as
a broker/dealer and is a member of the National Association of Securities
Dealers, Inc. ("NASD") and Securities Investors Protection Corporation ("SIPC").
ISC (formerly Bull & Bear Service Center, Inc.) was organized in 1985 and
is registered with the SEC as a broker/dealer and is a member of the NASD. ISC
acts as the Funds' exclusive agent to be the principal distributor of the Funds
and also provides shareholder administration services to the Funds.
Properties was organized in 1986 and NJ Properties in 1994 both to invest
in real estate.
Hanover Direct was organized in 1988 and acts as an advertising agency,
which places advertising for ISC on behalf of the Funds and for BBSI. Currently,
the commission revenue generated by Hanover Direct from ISC and BBSI represents
a recapture of sums paid for advertising and, rather than additional income,
represents a reduction in advertising expense of ISC and BBSI. Hanover Direct
has not performed any work for unaffiliated clients.
The Company has granted each of the Funds and its subsidiaries a
non-exclusive license to use the service marks "Bull & Bear", "Bull & Bear
Performance Driven", and "Performance Driven" under certain terms and conditions
on a royalty free basis. Such license may be withdrawn from a Fund in the event
the investment manager of the Fund is not a subsidiary of the Company.
-2-
INVESTMENT MANAGEMENT BUSINESS
The Company is engaged, through its subsidiaries, in the business of
managing mutual funds registered under the Act. The Funds and their respective
net assets as of December 31, 1995 were as follows:
Bull & Bear Dollar Reserves $ 58,253,440
Bull & Bear Global Income Fund 36,452,690
Bull & Bear Gold Investors Ltd. 26,924,033
Bull & Bear Municipal Income Fund 16,220,031
Bull & Bear Quality Growth Fund 2,215,764
Bull & Bear Special Equities Fund, Inc. 56,339,551
Bull & Bear U.S. and Overseas Fund 9,807,779
Bull & Bear U.S. Government Securities Fund 15,403,714
Midas Fund, Inc. 15,753,043
--------------
TOTAL NET ASSETS $237,370,045
The mutual fund industry along with the entire financial sector of the
economy has been rapidly changing to meet the increasing needs of investors.
Competition for management of financial resources has increased as banks,
insurance companies and broker/dealers have introduced products and services
traditionally offered by independent mutual fund management companies. There are
also many mutual fund groups with substantially more resources than the Company.
While Congress, governmental agencies and special interest groups have been
struggling with regulatory problems created by consolidation of the financial
services industry, the Company continues to develop products to meet the
specialized requirements of investors. While the Company's business is not
seasonal, it is affected by the financial markets, which in turn, are dependent
upon current and future economic conditions.
Drastic material declines in the securities markets can have a significant
effect on the Company's business. Volatile stock markets may affect management
and distribution fees earned by the Company's subsidiaries. If the market value
of securities owned by the Funds declines, shareholder redemptions may occur,
either by transfer out of the equity Funds and into the fixed income Funds,
which generally have lower management and distribution fee rates than the equity
Funds, or by redemptions out of the Funds entirely. Lower asset levels in the
Funds may also cause or increase reimbursements to the Funds pursuant to the
expense limitations described below.
In general, investment management services are rendered to the Funds
pursuant to written contractual agreements. Such agreements relate to the
general management of the affairs of each Fund, in addition to supervising the
acquisition and sale of each Fund's portfolio investments. As provided in the
agreements, BBAI and MMC may receive management fees ranging from 0.4% to 1.0%
per annum of the Funds' average daily net assets. The Act requires that such
contractual agreements be initially approved by the Funds' Board of Directors,
including a majority of all of the directors who are not "interested persons"
(as defined in the Act), and by the vote of a majority of the outstanding shares
of the Fund (as defined in the Act). Agreements, if approved, may be for a term
of up to two years, and thereafter their continuance must be approved at least
annually by a majority of the directors of the Fund, including a majority of
those directors of the Fund who are not "interested persons", or by such a vote
of "disinterested" directors and the vote of a majority of the outstanding
shares of the Fund. In addition, all such agreements are subject to termination
on 60 days' notice by majority vote of the Board of Directors or the
shareholders and are subject to automatic termination in the event of
assignment. The termination of any of the agreements for investment management
services between any of the Funds, BBAI and MMC would have a serious adverse
impact upon the Company.
-3-
Pursuant to contracts with these Funds, BBAI and MMC are entitled to
management fees, which are received monthly and are based on annual percentages
of the average daily net assets of the Funds. Under the contracts, BBAI and MMC
are required to reimburse the Funds for certain expenses to the extent that such
expenses exceed limitations prescribed by any state in which shares of the Funds
are qualified for sale. In addition, from time to time BBAI and MMC may waive or
reimburse management fees to increase a Fund's performance. Each of BBAI and MMC
has a subadvisory agreement with respect to Bull & Bear Gold Investors Ltd. and
Midas Fund, Inc. Each of BBAI and MMC, not the respective Funds, pays the
Subadviser, Lion Resource Management Limited, based upon performance and net
assets of the Funds.
Each of the Funds has adopted a plan of distribution pursuant to Rule
12b-1 under the Act (the "Plan"). Pursuant to the Plans with eight of the Funds,
ISC may receive as compensation amounts ranging from one-quarter of one percent
to one percent per annum of the Funds' average daily net assets for distribution
and service activities. The service fee portion is intended to cover services
provided to shareholders in the Funds and the maintenance of shareholder
accounts. The distribution fee portion is to cover all other activities and
expenses primarily intended to result in the sale of the Funds' shares. Pursuant
to the Plan with the other Fund, ISC may be reimbursed in an amount of up to
one-half of one percent per annum of the Fund's average daily net assets for
expenditures that are primarily intended to result in the sale of the Fund's
shares. In connection with this Plan, if ISC incurs reimbursable expenditures in
excess of the limitations under the Plan, it may be reimbursed in future periods
at which time the fee income will be recorded as income. At December 31, 1995,
ISC incurred expenses in excess of the amounts previously reimbursable of
approximately $422,400 for this Plan.
The Act requires that a plan of distribution be initially approved by the
Fund's Board of Directors, including a majority of the directors who are not
"interested persons" and who have no financial interest in the Plan, and by the
vote of a majority of the outstanding shares of the Fund. If approved, a plan of
distribution may be for a term of one year, and thereafter it must be approved
at least annually by the entire Board of Directors and by a majority of the
"disinterested" directors. In addition, all plans of distribution are subject to
termination at any time by majority vote of the "disinterested" directors or
shareholders.
BBAI and MMC are registered with the SEC as investment advisers under the
Investment Advisers Act of 1940. The Funds are registered with the SEC under the
Act. The activities of BBAI and MMC and of the Funds are subject to regulation
under Federal and state securities laws. The provisions of these laws, including
those relating to the contractual arrangements between the Funds and their
investment manager, are primarily designed to protect the shareholders of the
Funds and not the shareholders of the Company.
DISCOUNT BROKERAGE BUSINESS
BBSI, with access to every major U.S. stock, option and bond exchange as
well as the over-the-counter market, provides discount brokerage services to
investors throughout the United States and various foreign countries.
Substantial commission savings off full service rates as well as prompt,
courteous service and professional order execution are available to all accounts
regardless of how often trades are made. All accounts are carried by U.S.
Clearing Corp., a New York Stock Exchange member firm. The SIPC, of which BBSI
and U.S. Clearing Corp. are members, protects each account against broker/dealer
insolvency (not market losses) for up to $500,000, of which $100,000 may be in
cash. In addition, Aetna Casualty and Surety Company protects each account for
an additional $49,500,000 in securities value.
BBSI offers investors commission savings of up to 84% over full cost
brokers (as of March 29, 1996) and guarantees commissions 20% less than Charles
Schwab & Co. on every stock, bond and option trade. BBSI customers may save an
additional 10% in commissions with every trade entered via personal computer
through Bull & Bear PC OnLine Investment Center and by touch tone telephone
using Bull & Bear TeleQuote/TeleTrade. Commencing November 1, 1995, BBSI
customers earn American Airlines AAdvantage miles with every trade -- 500
AAdvantage miles for each of the customer's first five trades and then 100 miles
per trade thereafter (limited to 35,000 miles in any 12 month period).
-4-
BBSI provides its customers free investment information such as:
*Standard & Poor's Market Month: Timely investment information with customer
statements each month.
*Standard & Poor's Stock Guide:Information, ranking and rating changes on 6,800
stocks each month.
*Standards & Poor's Stock Reports:Up-to-date information on over 4,600
companies by mail or by fax.
*Standard & Poor's Stock Screens: Thousands of stocks screened by objective
and investment results.
*Bull & Bear Tax Guide: Information to help investors compute and record gains
losses and dividend income to minimize taxes.
BBSI also offers its customers a no-fee cash management service featuring
unlimited free check writing with only a $100 minimum per check (Bull & Bear
Performance Plus Account), the Bull & Bear No-Fee IRA, and Bull & Bear Mutual
Funds Network (including a no transaction fee, no-load mutual funds service).
Volatile stock markets could have a significant effect on the brokerage
commissions earned by BBSI by affecting the number of transactions processed.
BBSI is responsible for potential losses resulting from trade errors of BBSI
personnel and customers' bad debts, including under- margined accounts. As a
discount broker, BBSI does not give investment advice and therefore management
believes it is less likely to be involved in significant litigation with
customers, as may be typical in the ordinary course of business of a broker that
does give investment advice to its customers.
ITEM 2. PROPERTIES
The principal office of the Company is located at 11 Hanover Square, New
York, New York 10005. The approximate area of the office is 11,400 square feet.
The rent is approximately $116,250 per annum plus $32,550 per annum for
electricity. The lease expires on December 31, 1996 and is cancelable at the
option of the Company on three months' notice. BBSI has a branch office at 395
East Palmetto Boulevard, Boca Raton, Florida consisting of approximately 1,000
square feet. The rent is approximately $21,600 per annum and is cancelable at
the option of the Company on six months' notice.
Properties purchased land and a two story office building located in
Middletown, Ohio in 1986. The building consists of approximately 45,000 square
feet. The property was purchased for cash, has no mortgage and was purchased as
an investment. NJ Properties purchased land and a two story office building
located in Red Bank, New Jersey in 1994. The building consists of approximately
13,000 square feet. The building was purchased for cash, has no mortgage and was
purchased as an investment.
-5-
ITEM 3. LEGAL PROCEEDINGS
The Company and its directors are defendants in a lawsuit brought on April
24, 1995 by Maxus Investment Group, Maxus Capital Partners, Maxus Asset
Management, Inc., and Maxus Securities Corp. as plaintiffs (collectively
"Maxus") claiming to collectively own or control 357,500 shares, or
approximately 26.5%, of the Class A common stock of the Company. The action,
seeking declaratory and injunctive relief, was filed in the federal district
court for the Southern District of New York and purports to be brought on the
plaintiffs' own behalf and derivatively on behalf of the Company. The complaint
alleges that defendants breached fiduciary duties to the Company regarding the
adoption and implementation of the Company's 1990 incentive stock option plan
("ISOP"), the rejection, in July 1994, of Maxus' proposal for the liquidation of
the Company and the Company's 1986 purchase of an office building. Plaintiffs
also allege that all the individual defendants have received excessive
compensation and other unspecified benefits. The complaint seeks rescission of
the ISOP and an accounting, attorneys' fees, the imposition of a constructive
trust and restitution regarding all allegedly improper benefits. On December 21,
1995, plaintiffs moved to file a supplemental complaint challenging the voiding
of certain stock option exercises that occurred in November 1993, and the
exercise by the Company's chairman of stock options that he received in 1990 in
accordance with their original terms. The supplemental complaint also seeks
attorneys' fees. The Company believes that the lawsuit is without merit and
intends to defend it vigorously.
From time to time, the Company and/or its subsidiaries are threatened or
named as defendants in litigation arising in the normal course of business. As
of December 31, 1995, neither the Company nor any of its subsidiaries was
involved in any other litigation that, in the opinion of management, would have
a material adverse impact on the consolidated financial statements.
-6-
PART II
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS DURING
FOURTH QUARTER OF THE YEAR ENDED DECEMBER 31, 1995
At a December 6, 1995 special meeting, the Class B shareholder voted to
ratify, approve, and confirm the actions of the Board of Directors of the
Company in adopting the Bull & Bear Group, Inc. 1995 Long-Term Incentive Plan.
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Class A Common Stock is traded under the Nasdaq symbol BNBGA.
The Company's Class B Common Stock has no public trading market. There were
approximately 330 holders of record of Class A Common Stock and 1 holder of
Class B Common Stock as of December 31, 1995. No dividends have been paid on
either class of Common Stock in the past five years and the Company does not
expect to pay any such dividends in the foreseeable future. The high and low
closing bid prices of the Class A Common Stock during each quarterly period over
the last two years were as follows. Such bid prices reflect inter-dealer prices
without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions.
1995 1994
------------------------ --------------
HIGH LOW HIGH LOW
First Quarter $1-1/2 $1-1/4 $3-3/8 $2-3/4
Second Quarter $2-1/4 $1-1/4 $2-5/8 $1-3/4
Third Quarter $1-3/4 $1-1/2 $2-1/2 $1-3/4
Fourth Quarter $1-3/4 $1-5/8 $2 $1-1/2
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data for the five years ended December 31, 1995 is
presented on the following pages.
-7-
BULL & BEAR GROUP, INC.
CONSOLIDATED SELECTED FINANCIAL DATA
FOR THE YEARS ENDED DECEMBER 31,
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
REVENUES:
Brokerage commissions 1,821,513 1,768,527 2,047,999 1,488,856 1,259,781
Dividends, interest and other 147,169 (7,378) 227,422 602,206 234,327
------------ -------------- ------------ ------------ ------------
5,291,030 5,547,215 6,367,650 5,477,215 5,303,327
----------- ----------- ----------- ----------- -----------
EXPENSES:
General and administrative 3,195,115 3,225,891 3,519,704 3,072,364 3,118,520
Marketing 779,026 1,361,155 1,389,204 1,356,060 1,257,490
Clearing and brokerage charges 576,096 532,832 619,673 512,968 433,858
Professional fees 454,430 208,012 205,316 228,975 374,450
Amortization and depreciation 97,399 98,094 125,399 193,156 161,537
------------ ------------- ------------ ------------ ------------
5,102,066 5,425,984 5,859,296 5,363,523 5,345,855
----------- ----------- ----------- ----------- -----------
Income (loss) before provision for income taxes 188,964 121,231 508,354 113,692 (42,528)
INCOME TAXES 32,588 37,771 39,149 38,198 38,626
------------ ------------- ------------ ------------- -------------
NET INCOME (LOSS) $ 156,376 $ 83,460 $ 469,205 $ 75,494 $ (81,154)
=========== ============ =========== ============ ============
NET INCOME (LOSS) PER SHARE OF WEIGHTED
AVERAGE COMMON STOCK OUTSTANDING:
Primary and fully diluted
Net income (loss) $.10 $.05 $.32 $.05 $(.07)
==== ==== ==== ==== =====
WEIGHTED AVERAGE SHARES OF
COMMON STOCK OUTSTANDING:
Primary 1,549,815 1,610,443 1,480,654 1,434,922 1,211,152
========= =========== =========== =========== ===========
Fully diluted 1,551,564 1,610,658 1,483,272 1,446,922 1,211,152
========= =========== =========== =========== ===========
TOTAL ASSETS $4,963,792 $4,240,241 $4,711,438 $3,817,556 $3,224,349
========== ========== ========== ========== ==========
LONG-TERM OBLIGATIONS $ - $ - $ - $ - $ -
================== ================= ================= ================= ===============
-8-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
1995 COMPARED TO 1994
Total revenues for the year decreased $256,185 or 4.6%. Management,
distribution and service fees decreased $192,611 or 10.3%, $167,532 or 11.5%,
and $103,575 or 22.2%, respectively. The decrease in management and distribution
fees was due to an overall decrease in the net asset levels of the Funds from
which these revenues are generated. Service fees represent reimbursement for
actual expenses incurred. Such fees decreased as the costs for providing these
services decreased. Net assets under management were approximately $236.1
million at December 31, 1994, $235.0 million at March 31, 1995, $236.9 million
at June 30, 1995, $245.9 million at September 30, 1995, and $237.4 million at
December 31, 1995. Brokerage commissions increased $52,986 or 3.0% while
brokerage customers' equity increased to $145.9 million or 32.2%. The increase
in brokerage commissions was due to an increase in customer transaction activity
and the continued growth in the number of discount brokerage accounts and
customers' equity. Dividends, interest and other amounted to $147,169 in 1995
compared to ($7,378) in 1994. Dividends and interest increased $56,773 or 62.8%
due to higher earnings on the Company's short term investments.
Total expenses, including income taxes, decreased $329,101 or 6.0% for the
year. General and administrative expenses decreased $30,776 or 1.0%. Marketing
expenses decreased $582,129 or 42.8%. Clearing and brokerage charges increased
$43,264 or 8.1% as a result of the previously noted increase in brokerage
commissions. Professional fees increased $246,418 or 118.5% due to the increase
in legal fees primarily associated with the lawsuit brought by Maxus.
Amortization and depreciation decreased $695 or 0.7% for the year.
Net income for 1995 was $156,376 or $.10 per share as compared to $83,460
or $.05 per share in 1994.
1994 COMPARED TO 1993
Total revenues for the year decreased $820,435 or 12.9%. Management and
distribution fees decreased $183,108 or 8.9% and $256,013 or 14.9%,
respectively. The decrease in management and distribution fees was due to an
overall decrease in the net asset levels of the Funds from which these revenues
are generated. Service fees increased $132,958 or 39.8%. Service fees represent
reimbursement for actual expenses incurred. The fees increased as the costs for
providing these services increased. Net assets under management were
approximately $317.3 million at December 31, 1993, $278.3 million at March 31,
1994, $251.6 million at June 30, 1994, $255.6 million at September 30, 1994 and
$236.1 million at December 31, 1994. Brokerage commissions decreased $279,472 or
13.6% while brokerage customers' equity remained substantially the same at
$110.4 million. The decrease in brokerage commissions was due to a decrease in
customer transaction activity despite continued growth in the number of discount
brokerage accounts. Dividends, interest and other amounted to ($7,378) in 1994
as compared to $227,422 in 1993. Dividends and interest increased $20,888 or
30.0% due to higher yields on the Company's short term fixed-income investments.
Realized and unrealized gain or loss for 1994 and 1993 amounted to a loss of
$97,774 and a gain of $157,914, respectively.
Total expenses, including income taxes, decreased $434,690 or 7.4% for the
year. General and administrative expenses decreased $293,813 or 8.4% due to a
slight reduction in staffing levels. Marketing expenses decreased minimally by
$28,049 or 2.0%. Clearing and brokerage charges decreased $86,841 or 14.0% as a
result of the previously noted decrease in brokerage commissions. Professional
fees increased $2,696 or 1.3%. Amortization and depreciation decreased $27,305
or 21.8% for the year.
Net income for 1994 was $83,460 or $.05 per share as compared to $469,205
or $.32 per share in 1993.
-9-
LIQUIDITY AND CAPITAL RESOURCES
The following table reflects the Company's consolidated working capital,
total assets, long-term debt and shareholders' equity as of the dates indicated.
DECEMBER 31,
1995 1994 1993
---- ---- ----
Working Capital $2,792,059 $2,779,722 $3,300,568
Total Assets $4,963,792 $4,240,241 $4,711,438
Long-Term Debt - - -
Shareholders' Equity $4,170,095 $3,909,699 $3,799,989
For the year 1995, working capital, total assets and shareholders' equity
increased $12,337, $723,551 and $260,396, respectively.
Working capital increased as a result of the net income for 1995, the
non-cash expense items of depreciation and amortization offset by the
acquisition of intangible assets and fixed assets. The increase in shareholders'
equity was primarily the result of the net income for 1995 of $156,376, the
issuance of common stock on exercise of stock options of $33,000 and the
unrealized capital gains on marketable securities of $66,020. Total assets
increased as a result of net income, the unrealized gains on marketable
securities and the increase in current liabilities.
For the year 1994, shareholders' equity increased $109,710 and working
capital and total assets decreased $520,846 and $471,197, respectively.
The decrease in working capital in 1994 was due to the liquidation and
dissolution on December 30, 1994 of Dover Regional Financial Shares ("Dover"), a
closed-end registered investment company, which resulted in the distribution of
its assets to the minority shareholders and the purchase of real estate held for
investment of $260,088. These decreases in working capital were offset by
working capital generated from net income from operations of $83,460 and by the
non-cash expense items of depreciation and amortization of $98,094. The increase
in shareholders' equity was due primarily to the net income for the year. As
discussed previously, significant changes in the securities market can have a
dramatic effect on the Company's results of operations. Based on current
information available, management believes that current resources are sufficient
to meet the Company's liquidity needs.
For the year 1993, working capital, total assets and shareholders' equity
increased $881,070, $893,882 and $471,205, respectively.
The increase in working capital and total assets was primarily the result
of the net income from operations for 1993 of $469,205 and the inclusion of the
balance sheet of Dover. Working capital was also positively affected by the
non-cash expense items of depreciation and amortization of $125,399. As
discussed previously, significant changes in the securities market can have a
dramatic effect on the Company's results of operations.
The increase in shareholders' equity was due primarily to the net income
for the year.
Management knows of no contingencies that are reasonably likely to result
in a material decrease in the Company's liquidity or that are likely to
adversely affect the Company's capital resources. This includes the restrictions
placed on the transfer of funds to the Company from BBSI and ISC as a result of
their regulatory net capital requirements. At December 31, 1995, the amount
subject to these restrictions was $278,700 or 5.7% of total assets.
EFFECTS OF INFLATION AND CHANGING PRICES
Since the Company derives revenue from investment management, distribution
and shareholder administration services from the Funds and from discount
brokerage services, it is not possible for it to discuss or predict with
accuracy the impact of inflation and changing prices on its revenues from
continuing operations.
-10-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements required by Regulation S-X and Supplementary
Financial Information required by Regulation S-K are presented herein.
FINANCIAL STATEMENTS AND SUPPORTING SCHEDULES
TABLE OF CONTENTS
PAGE
Report of Independent Certified Public Accountants 12
Consolidated Balance Sheets,
December 31, 1995 and 1994 13
Consolidated Statements of Income,
Years ended December 31, 1995, 1994 and 1993 14
Consolidated Statements of Changes in Shareholders' Equity,
Years ended December 31, 1995, 1994 and 1993 15
Consolidated Statements of Cash Flows,
Years ended December 31, 1995, 1994 and 1993 16
Notes to Consolidated Financial Statements 18
-11-
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
BULL & BEAR GROUP, INC.:
We have audited the accompanying consolidated balance sheets of Bull & Bear
Group, Inc. and subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of income, changes in shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Bull & Bear Group,
Inc. and subsidiaries at December 31, 1995 and 1994, and the consolidated
results of their operations and their consolidated cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
TAIT, WELLER & BAKER
PHILADELPHIA, PENNSYLVANIA
FEBRUARY 13, 1996
-12-
BULL & BEAR GROUP, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
1995 1994
---- ----
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,467,674 $ 2,316,040
Marketable securities (Note 3) 1,257,062 183,534
Management, distribution and service fees receivable 179,209 160,567
Interest, dividends and other receivables 248,241 215,854
Prepaid expenses and other assets 433,570 234,269
------------- -------------
TOTAL CURRENT ASSETS 3,585,756 3,110,264
------------ ------------
REAL ESTATE HELD FOR INVESTMENT, NET 308,799 315,388
EQUIPMENT, FURNITURE AND FIXTURES, NET 207,194 199,760
EXCESS OF COST OVER NET BOOK VALUE OF
SUBSIDIARIES, NET (Note 2) 735,368 505,352
OTHER 126,675 109,477
------------- -------------
1,378,036 1,129,977
------------ ------------
TOTAL ASSETS $ 4,963,792 $ 4,240,241
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 610,242 $ 197,523
Accrued professional fees 111,486 49,183
Accrued payroll and other related costs 43,208 45,293
Accrued other expenses 15,381 24,443
Other 13,380 14,100
-------------- --------------
TOTAL CURRENT LIABILITIES 793,697 330,542
------------- -------------
CONTINGENCIES (Note 10) - -
SHAREHOLDERS' EQUITY: (Notes 3, 4, 5, and 6)
Common Stock, $.01 par value
Class A, 10,000,000 shares authorized;
1,348,017 and 1,503,152 shares
issued and outstanding 13,481 15,032
Class B, 20,000 shares authorized;
20,000 shares issued and outstanding 200 200
Additional paid-in capital 6,232,347 6,497,796
Retained earnings (deficit) (2,141,953) (2,298,329)
Unrealized gains on marketable securities 66,020 -
Notes receivable for common stock issued - (305,000)
------------------- -------------
TOTAL SHAREHOLDERS' EQUITY 4,170,095 3,909,699
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 4,963,792 $ 4,240,241
=========== ===========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
-13-
BULL & BEAR GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31,
1995 1994 1993
---- ---- ----
REVENUES:
Management, distribution and service fees $3,322,348 $3,786,066 $4,092,229
Brokerage commissions and fees 1,821,513 1,768,527 2,047,999
Dividends, interest and other 147,169 (7,378) 227,422
-------------------------- ------------
5,291,030 5,547,215 6,367,650
----------- ----------- -----------
EXPENSES:
General and administrative (Note 9) 3,195,115 3,225,891 3,519,704
Marketing 779,026 1,361,155 1,389,204
Clearing and brokerage charges 576,096 532,832 619,673
Professional fees 454,430 208,012 205,316
Amortization and depreciation 97,399 98,094 125,399
------------- ------------- ------------
5,102,066 5,425,984 5,859,296
----------- ----------- -----------
Income before income taxes 188,964 121,231 508,354
Income taxes (Note 8) 32,588 37,771 39,149
------------- ------------- -------------
NET INCOME $156,376 $83,460 $469,205
=========== ============ ===========
PER SHARE DATA:
Primary and fully diluted
Net income $.10 $.05 $.32
==== ==== ====
AVERAGE SHARES OUTSTANDING:
Primary 1,549,815 1,610,443 1,480,654
========= ========= =========
Fully diluted 1,551,564 1,610,658 1,483,272
========= ========= =========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
-14-
BULL & BEAR GROUP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NUMBER OF SHARES AMOUNT
NOTES
RECEIVABLE NOTES
FOR UNREALIZED FOR UNREALIZED
ADDITIONAL COMMON RETAINED GAINS TOTAL
CLASS A CLASS B CLASS A CLASS B PAID-IN STOCK EARNINGS MARKETABLE SHAREHOLDERS'
COMMON COMMON COMMON COMMON CAPITAL ISSUED (DEFICIT) SECURITIES EQUITY
------ ------ ------ ------ ------------ --------- ---------- ----------- -----------
BAL., 12/31/92 1,191,152 20,000 11,912 200 6,167,666 (2,850,994) - 3,328,784
Issuance of Class
A Common stock
on exercise of
stock options 307,000 - 3,070 - 323,930 - - - 327,000
Issuance of notes
receivable (Note 6) - - - - - (325,000) - - (325,000)
Net income - - - - - - 469,205 - 469,205
---------- -------- ---------- -------- ----------- ---------- -------- ------------- ------------
BAL. 12/31/93 1,498,152 20,000 14,982 200 6,491,596 (325,000) (2,381,789) - 3,799,989
Issuance of Class A
Common stock
on exercise of
stock options 5,000 - 50 - 6,200 - - - 6,250
Collection of
note receivable - - - - - 20,000 - - 20,000
Net income - - - - - - 83,460 - 83,460
-------- ---------- -------- ---------- ----------- ---------- ------- --------- ----------
BAL. 12/31/94 1,503,152 20,000 15,032 200 6,497,796 (305,000) (2,298,329) 3,909,699
Voiding of exercise
of 1993 stock
options and
cancellation of
notes receivable (280,000) - (2,800) - (297,200) 300,000 - -
Issuance of Class
NOTE(6)A common stock
on exercise of
stock options 274,020 - 2,740 - 291,280 - - 294,020
Received in exchange
for exercise of
stock options (149,155) - (1,491) - (259,529) - - (261,020)
Collection of note
receivable - - - - - 5,000 - 5,000
Net income - - - - - - 156,376 156,376
Unrealized gains on
marketable securities - - - - - - - 66,020 66,020
---------- ----------------- ------------ ----------- ---------------- ----- ------------- --------
BAL., 12/31/95 1,348,017 20,000 $13,481 $200 $6,232,347 $(2,141,953) $66,020 $4,170,095
========= ====== ======= ==== ========== =============== =========== =======
ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
-15-
BULL & BEAR GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
1995 1994 1993
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $156,376 $83,460 $469,205
----------------------------------
ADJUSTMENTS TO RECONCILE NET INCOME
TO NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES:
Depreciation and amortization 97,399 98,094 125,399
Increase in cash value of life insurance (30,000) (16,675) --
Realized/unrealized (gain) loss on investments (26,048) 97,774 (157,914)
(Increase) decrease in:
Management, distribution and
service fees receivable (18,642) 62,628 51,515
Interest, dividends and other receivables (32,387) (12,556) (7,852)
Prepaid expenses and other assets (199,301) (6,571) (19,944)
Other 12,802 4,668 (17,470)
Increase (decrease) in:
Accounts payable 412,719 (151,530) 155,664
Accrued expenses 51,156 (64,095) 79,995
Due to affiliated partnership -- -- (57,062)
Other (720) (802) (121,139)
-------------------------------------
TOTAL ADJUSTMENTS 266,978 10,935 31,192
-----------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 423,354 94,395 500,397
-----------------------------------
-16-
BULL & BEAR GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
YEARS ENDED DECEMBER 31,
1995 1994 1993
---- ---- ----
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of real estate held for investment (2,105) (235,087) --
Capital expenditures (58,744) (37,076) (62,544)
Proceeds from sales of investments 414,790 2,671,623 682
Purchases of investments (1,396,250) (1,281,644)(518,732)
Acquisition of intangible assets (267,411) -- --
--------------------------------------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (1,309,720) 1,117,816 (580,594)
------------ ------------ --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Collection of note receivable 5,000 20,000 --
Issuance of notes receivable -- (80,000) (325,000)
Proceeds from issuance of
Class A Common Stock 33,000 6,250 327,000
Redemption of Minority Interest -- (364,480) --
--------------------------------------------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 38,000 (418,230) 2,000
-------------------------------------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (848,366) 793,981 (78,197)
INCREASE IN CASH FROM A CONSOLIDATED
SUBSIDIARY -- -- 140,094
CASH AND CASH EQUIVALENTS:
Beginning of year 2,316,040 1,522,059 1,460,162
------------ ------------ ----------
END OF YEAR $1,467,674 $2,316,040 $1,522,059
=========== =========== ==========
SUPPLEMENTAL DISCLOSURE:
The Company did not pay any Federal income taxes or interest in 1995, 1994 or
1993.
Common stock received and retired in exchange for exercise of stock options
was $261,020 in 1995.
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
-17-
BULL & BEAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Bull & Bear Group, Inc. ("Company") is a holding company. Its
subsidiaries' business consists of providing investment management,
distribution and shareholder administration services for the Bull &
Bear Funds and Midas Fund ("Funds") and discount brokerage services.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Bull &
Bear Group, Inc. and all of its subsidiaries. Substantially all
intercompany accounts and transactions have been eliminated.
ACCOUNTING ESTIMATES
In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of
the financial statements, as well as the reported amounts of revenues
and expenses during the reported period. Actual results could differ
from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, accounts receivable,
accounts payable, and accrued expenses and other liabilities
approximate fair value because of the short maturity of these items.
Marketable securities are recorded at market value which represents the
fair value of the securities.
CASH AND CASH EQUIVALENTS
Investments in money market funds are considered to be cash
equivalents. At December 31, 1995 and 1994, the Company and
subsidiaries had invested approximately $1,196,300 and $1,672,400,
respectively, in an affiliated money market fund.
MARKETABLE SECURITIES
The Company and its non-broker/dealer subsidiaries adopted Statement of
Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" (SFAS 115). SFAS 115
requires that, except for debt securities classified as
"held-to-maturity," marketable securities are to be reported at fair
value. The Company's marketable securities are considered to be
"available-for-sale" and recorded at market value, with the unrealized
gain or loss included in stockholders' equity. Marketable securities
for the broker/dealer subsidiaries continue to be valued at market with
unrealized gains and losses included in earnings. There was no effect
on income with the adoption of SFAS 115.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
In the normal course of business, the Company's customer activities
involve the execution and settlement of customer transactions. These
activities may expose the Company to risk of loss in the event the
customer is unable to fulfill its contracted obligations, in which case
the Company may have to purchase or sell financial instruments at
prevailing market prices. Any loss from such transactions is not
expected to have a material effect on the Company's financial
statements.
-18-
BULL & BEAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
DECEMBER 31, 1995, 1994 AND 1993
BROKERAGE INCOME AND EXPENSES
Brokerage commission and fee income and clearing and brokerage expenses
are recorded on a settlement date basis. The difference between
recording such income and expenses on a settlement date basis as
opposed to trade date, as required by generally accepted accounting
principles, is not material to the consolidated financial statements.
INCOME TAXES
The Company and its wholly-owned subsidiaries file consolidated income
tax returns. The Company's method of accounting for income taxes
conforms to Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes". This method requires the recognition of
deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between the financial reporting
basis and the tax basis of assets and liabilities.
REAL ESTATE HELD FOR INVESTMENT AND EQUIPMENT
Real estate held for investment is recorded at cost and is depreciated
on the straight-line basis over its estimated useful life. At December
31, 1995 and 1994, accumulated depreciation amounted to $123,138 and
$114,444, respectively. Equipment, furniture and fixtures are recorded
at cost and are depreciated on the straight-line basis over their
estimated useful lives, 5 to 10 years. At December 31, 1995 and 1994,
accumulated depreciation amounted to $680,039 and $628,728,
respectively.
EXCESS OF COST OVER NET BOOK VALUE OF SUBSIDIARIES
The excess of cost over net book value of subsidiaries is capitalized
and amortized over fifteen and forty years using the straight-line
method. At December 31, 1995 and 1994, accumulated amortization
amounted to $548,664 and $511,270, respectively.
MARKETING COSTS
Expenses in connection with the distribution of the Funds' shares are
charged to operations as incurred.
EARNINGS PER SHARE
Primary and fully diluted earnings per share for the years ended
December 31, 1995, 1994 and 1993 are determined by dividing net income
by the weighted average number of common shares outstanding after
giving effect for common stock equivalents arising from stock options
assumed converted to common stock.
RECLASSIFICATIONS
Certain reclassifications of the 1994 and 1993 financial statements
have been made to conform to the 1995 presentation.
-19-
BULL & BEAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
DECEMBER 31, 1995, 1994 AND 1993
2. ACQUISITION
During the year ended December 31, 1995, the Company purchased the assets
relating to the management of Midas Fund, Inc. for $182,500, plus related
costs of $84,911. This purchase was capitalized as part of excess of cost
over net book value and is being amortized over fifteen years using the
straight-line method.
3. MARKETABLE SECURITIES
At December 31, 1995, marketable securities consisted of:
Broker/dealer securities - at market
U.S. Treasury Note, due 7/31/97 $ 200,876
Affiliated mutual funds 62,494
-------------
Total broker/dealer securities (cost - $264,104) 263,370
------------
ther companies
Available-for-sale securities - at market
Unaffiliated mutual funds 29,024
Affiliated mutual funds 6,220
Equity securities 181,413
U.S. Treasury Notes, due 5/15/97 - 6/30/99 777,035
------------
Total available-for-sale securities (cost - $927,672) 993,692
------------
$1,257,062
At December 31, 1994, marketable securities consisted of:
Broker/dealer subsidiaries - at market
Equity securities (cost - $63,276) $110,558
Affiliated mutual funds (cost - $59,527) 53,941
Other companies
Available-for-sale securities - at market
Mutual Funds (cost - $19,035) 19,035
----------
$183,534
At December 31, 1995, the Company recognized $66,020 of unrealized gains
on "available- for-sale securities" which is reported as a separate
component of consolidated stockholder's equity.
4. SHAREHOLDERS' EQUITY
The Class A and Class B Common Stock are identical in all respects except
for voting rights, which are vested solely in the Class B Common Stock.
The Company also has 1,000,000 shares of Preferred Stock, $.01 par value,
authorized. As of December 31, 1995 and 1994, none of the Preferred Stock
was issued.
-20-
BULL & BEAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
DECEMBER 31, 1995, 1994 AND 1993
5. NET CAPITAL REQUIREMENTS
The Company's broker/dealer subsidiaries are member firms of the National
Association of Securities Dealers, Inc. and are registered with the
Securities and Exchange Commission as broker/dealers. Under the Uniform
Net Capital Rule (Rule 15c3-1 under the Securities Exchange Act of 1934),
a broker/dealer must maintain minimum net capital, as defined, of not less
than (a) $250,000 or, when engaged solely in the sale of redeemable shares
of registered investment companies, $25,000, or (b) 6-2/3% of aggregate
indebtedness, whichever is greater; and a ratio of aggregate indebtedness
to net capital, as defined, of not more than 15 to 1. At December 31,
1995, these subsidiaries had net capital of approximately $387,300 and
$106,100; net capital requirements of $250,000 and $28,700; excess net
capital of approximately $137,300 and $77,400; and the ratios of aggregate
indebtedness to net capital were approximately .93 to 1 and 4.06 to 1,
respectively.
6. STOCK OPTIONS
On December 6, 1995, the Company adopted a Long-Term Incentive Plan which
provides for the granting of a maximum of 300,000 options to purchase
Class A Common Stock to directors, officers and key employees of the
Company or its subsidiaries. The plan was amended on February 5, 1996.
With respect to non-employee directors, only automatic grants of stock
options of 10,000 are available on the date the non-employee director is
elected, except for the current two non-employee directors who were
granted 10,000 options each on December 6, 1995. The option price per
share may not be less than the fair value of such shares on the date the
option is granted, and the maximum term of an option may not exceed ten
years except as to non-employee directors for which the maximum term is
five years. If the recipient of any option owns 10% or more of the Class B
shares, the option price must be at least 110% of the fair market value
and the option must be exercised within five years of the date the option
is granted. The plan also provides for reload options in which
non-qualified options may be granted to officers and key employees when
payment of the option price of the original outstanding options is with
previously owned shares of the Company. These reload options have to be
equal to the number of shares surrendered in payment of the option price
of the original options, have an option price equal to the fair market
value of such shares on the date the reload option is granted and have the
same expiration date as the original option. As of December 31, 1995, no
options were granted under this plan except for the options granted to the
two non-employee directors.
The 1990 Incentive Stock Option Plan provided for the granting of a
maximum of 500,000 options to purchase Class A Common Stock to directors,
officers and key employees of the Company. The option price per share may
not be less than the greater of 100% of the fair market value or the par
value of such shares on the date the option is granted, and the maximum
term of an option may not exceed ten years. If the recipient of any option
owns 10% or more of the total combined voting power of all classes of
stock, the option price must be at least 110% of the fair market value and
the option must be exercised within five years of the date the option is
granted.
-21-
BULL & BEAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
DECEMBER 31, 1995, 1994 AND 1993
NUMBER OPTION PRICE
OF PER SHARE
STOCK OPTIONS SHARES RANGE
OUTSTANDING AT DECEMBER 31, 1993 165,000 $1.00 - $2.25
Granted 23,000 $1.50
Exercised (5,000) $1.25
Canceled (37,000) $1.00 - $2.25
---------
OUTSTANDING AT DECEMBER 31, 1994 146,000 $1.00 - $1.875
Voided exercise of previously issued
stock options (see below) 280,000 $1.00 - $1,10
Granted 29,000 $1.625 - $2.00
Exercised (268,020) $1.00 - $1.10
Canceled (137,980) $1.00 - $1.875
--------
OUTSTANDING AT DECEMBER 31, 1995 49,000 $1.50 - $2.00
=========
At December 31, 1995, no options to purchase shares were exercisable. In
addition, there were 20,000 non-qualified stock options at an exercise
price of $1.75 outstanding as of December 31, 1995, none of which were
exercisable. During 1995, 6,000 non-qualified stock options were
exercised.
In connection with the action by Maxus plaintiffs described in Note 10,
the Company's Board of Directors determined, at a meeting of the board
held on November 6, 1995, that the 1993 exercise of the 280,000 incentive
stock options by certain officers be voided and the 4.86% promissory notes
given in consideration ("1993 Notes") and Class A shares issued therefor
("1993 Shares") be canceled. As a result, the stock options were restored
to their previous outstanding status. Further, on November 6, 1995,
241,020 of these stock options were exercised. In December 1995, an
additional 7,000 of these stock options were exercised. The Company
received $7,000 in cash and 149,155 shares of Class A shares in payment
for the exercise of these options. The shares acquired by the Company were
canceled and retired. The cancellation of the 1993 Notes resulted in a
reduction of interest income of $29,768 in 1995.
In connection with the 1993 exercise of 280,000 stock options, the Company
had received from certain officers and directors notes with an interest
rate of 4.86% per annum. The balance of these notes at December 31, 1994
and 1993 was $385,000, of which $305,000 was classified as "notes
receivable for common stock issued" and $80,000 included in "other
assets", and $325,000, all classified as "notes receivable for common
stock issued", respectively.
7. PENSION PLAN
The Company has a 401(k) retirement plan for substantially all of its
qualified employees. Contributions to this are based upon a percentage of
earnings of eligible employees and are accrued and funded on a current
basis. Total pension expense for the years ended December 31, 1995, 1994
and 1993 was $31,125, $27,470 and $22,310, respectively.
-22-
BULL & BEAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
DECEMBER 31, 1995, 1994 AND 1993
8. INCOME TAXES
The provision for income taxes charged to operations was as follows:
1995 1994 1993
---- ---- ----
Current
State and local $32,588 $37,771 $39,149
Federal - - -
------------- ------------- -----------
$32,588 $37,771 $39,149
======= ======= =======
Deferred tax assets (liabilities) are comprised of the following at
December 31, 1995 and 1994:
1995 1994
Unrealized appreciation on investments $ (29,400) $ (14,200)
Net operating loss carryforwards 436,600 551,900
---------- ----------
Net deferred tax assets 407,200 537,700
Deferred tax asset valuation allowance (407,200) (537,700)
---------- ----------
Net deferred tax assets $ - $ -
================ =============
The full amount of the deferred tax asset was offset by a valuation
allowance due to uncertainties associated with the ultimate realization of
the net operating loss carryforwards. The change in the valuation
allowance for the year ended December 31, 1995 was the result of
utilization of net operating loss carryforwards and the increase in the
unrealized appreciation on investments.
For the year ended December 31, 1995, the provision for income taxes
differs from the amount of income taxes determined by applying the
applicable U.S. statutory federal tax rates to pre-tax income as a result
of utilization of net operating loss carryforwards.
At December 31, 1995, the Company had net operating loss carryforwards for
Federal income tax purposes of approximately $1,284,200, of which
$1,033,700, $187,800, and $62,700 expire in 2004, 2005 and 2006,
respectively.
9. RELATED PARTIES
MANAGEMENT, DISTRIBUTION AND SERVICE FEES
All management and distribution fees are from providing services to the
Funds. All such services are provided pursuant to agreements that set
forth the fees to be charged for these services. These agreements are
subject to annual review and approval by each Fund's Board of Directors
and a majority of the Fund's non-interested directors. Service fees
represent reimbursement of costs incurred by subsidiaries of the
Company on behalf of the Funds. Such reimbursement amounted to
$363,217, $466,792 and $333,834 for the years ended December 31, 1995,
1994 and 1993, respectively.
In connection with investment management services, the Company's
investment managers waived management fees from the Funds in the amount
of $270,233, $256,857 and $222,658 for the years ended December 31,
1995, 1994 and 1993, respectively, and are included in general and
administrative expenses in the Statement of Income.
-23-
BULL & BEAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
DECEMBER 31, 1995, 1994 AND 1993
Certain officers of the Company also serve as officers and/or directors
of the Funds.
Commencing August 1992, the Company has a key man life insurance policy
on the life of the Company's Chairman which provides for the payment of
$1,000,000 to the Company upon his death. As of December 31, 1995, the
policy had a cash surrender value of approximately $46,675 and is
included in other assets in the balance sheet.
The Company's discount broker/dealer received brokerage commissions of
approximately $153,200, $108,100 and $79,600 from the Funds for the
years ended December 31, 1995, 1994 and 1993, respectively.
10. COMMITMENTS AND CONTINGENCIES
The Company has a lease for approximately 9,300 square feet of office
space. The rent is approximately $116,250 per annum plus $32,550 per annum
for electricity. The lease expires December 31, 1996 and is cancelable at
the option of the Company on three months' notice. In addition, the
Company's discount broker/dealer has a branch office in Boca Raton,
Florida consisting of approximately 1,000 square feet. The rent is
approximately $21,600 per annum and is cancelable at the option of the
Company on six months' notice.
The Company and its directors are defendants in a lawsuit brought on April
24, 1995 by Maxus Investment Group, Maxus Capital Partners, Maxus Asset
Management, Inc., and Maxus Securities Corp. as plaintiffs (collectively
"Maxus") claiming to collectively own or control 357,500 shares, or
approximately 26.5%, of the Class A common stock of the Company. The
action, seeking declaratory and injunctive relief, was filed in the
federal district court for the Southern District of New York and purports
to be brought on the plaintiffs' own behalf and derivatively on behalf of
the Company. The complaint alleges that defendants breached fiduciary
duties to the Company regarding the adoption and implementation of the
Company's 1990 incentive stock option plan ("ISOP"), the rejection, in
July 1994, of Maxus' proposal for the liquidation of the Company and the
Company's 1986 purchase of an office building. Plaintiffs also allege that
all the individual defendants have received excessive compensation and
other unspecified benefits. The complaint seeks rescission of the ISOP and
an accounting, attorneys' fees, the imposition of a constructive trust and
restitution regarding all allegedly improper benefits. On December 21,
1995, plaintiffs moved to file a supplemental complaint challenging the
voiding of certain stock option exercises that occurred in November 1993
(See Note 6), and the exercise by the Company's chairman of stock options
that he received in 1990 in accordance with their original terms. The
supplemental complaint also seeks attorneys' fees. The Company believes
that the lawsuit is without merit and intends to defend it vigorously.
From time to time, the Company and/or its subsidiaries are threatened or
named as defendants in litigation arising in the normal course of
business. As of December 31, 1995, neither the Company nor any of its
subsidiaries was involved in any other litigation that, in the opinion of
management, would have a material adverse impact on the consolidated
financial statements.
In July 1994, the Company entered into a Death Benefit Agreement
("Agreement") with the Company's Chairman. Following his death, the
Agreement provides for annual payments to his wife until her death
amounting to 80% of his average annual salary for the three year period
prior to his death subject to certain adjustments. The Company's
obligations under the Agreement are not secured and will terminate if he
leaves the Company's employ under certain conditions.
-24-
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1995
REVENUES $1,292,575 $1,323,620 $1,362,963 $1,311,872
========== ========== ========== ==========
INCOME (LOSS)
Net Income (Loss) $113,764 $115,490 $50,894 $(123,772)
=========== =========== ============ ===========
INCOME (LOSS) PER SHARE
Net Income (Loss) $.07 $.07 $.03 $(.07)
==== ==== ==== ======
1994
REVENUES $1,579,794 $1,375,965 $1,412,499 $1,178,957
========== ========== ========== ==========
INCOME (LOSS)
Net Income (Loss) $(163,608) $(12,946) $93,642 $166,372
=========== ============ ============ ===========
INCOME (LOSS) PER SHARE
Net Income (Loss) $(.11) $(.01) $.06 $.11
===== ===== ==== ====
1993
REVENUES $1,365,348 $1,499,264 $1,598,014 $1,905,024
========== ========== ========== ==========
INCOME (LOSS)
Net Income (Loss) $187,948 $72,731 $228,338 $(19,812)
========== ========== ========== ==========
INCOME (LOSS) PER SHARE
Net Income (Loss) $.13 $.05 $.16 $(.02)
==== ==== ==== =====
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no changes in or disagreements with the Company's accountants
on accounting and financial disclosure matters during the two years ended
December 31, 1995.
-25-
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The following list contains the names, ages, positions and lengths of
service of all directors and executive officers of the Company.
NAME POSITION YEARS OF SERVICE AGE
DIRECTOR OFFICER
Bassett S. Winmill Chairman of the Board 19 19 66
Robert D. Anderson Vice Chairman of the Board, 19 19 66
Mark C. Winmill Co-President, 7 9 38
Chief Financial Officer,
Director
Thomas B. Winmill, EsqCo-President, 7 8 36
General Counsel, Director
Edward G. Webb, Jr. Director 10* - 56
Charles A. Carroll Director 4 - 65
Steven A. Landis Senior Vice President - 1 40
Brett B. Sneed, CFA Senior Vice President - 8 54
William J. Maynard Secretary - 1 31
James R. Mitchell, II Senior Vice President - 2 34
Joseph Leung Treasurer, - 1 30
Chief Accounting Officer
* 1985 TO 1990 AND 1992 TO PRESENT.
-26-
Set forth below is a description of the business experience of the
directors and executive officers of the Company during the past five years.
BASSETT S. WINMILL - Chairman of the Board of Directors. He is also
Chairman of the mutual funds managed by Company subsidiaries. He is a member of
the New York Society of Security Analysts, the Association for Investment
Management and Research and the International Society of Financial Analysts.
ROBERT D. ANDERSON - Vice Chairman of the Board of Directors. He is also
Vice Chairman of the mutual funds managed by Company subsidiaries and of the
subsidiaries of the Company. He is a member of the Board of Governors of the
Mutual Fund Educational Alliance.
MARK C. WINMILL - Co-President, Chief Financial Officer and Director. He is
also President of Bull & Bear Securities, Inc. and Co-President and Chief
Financial Officer of the mutual funds managed by Company subsidiaries and
certain other subsidiaries of the Company. He is a son of Bassett S. Winmill and
a brother of Thomas B. Winmill.
THOMAS B. WINMILL, ESQ. - Co-President, General Counsel and Director. He is also
President of Bull & Bear Advisers, Inc. and Co-President of the mutual
funds managed by Company subsidiaries and certain other subsidiaries of the
Company. He is a member of the New York State Bar. He is a son of Bassett
S. Winmill and a brother of Mark C. Winmill.
EDWARD G. WEBB, JR. - Director. He has been Investment Director for Home
Insurance Company since 1990. Prior to that, he served as a Senior Vice
President and Director of the Company.
CHARLES A. CARROLL - Director. From 1989 to the present, he has been
affiliated with Kalin Associates, Inc., a member firm of the New York Stock
Exchange.
STEVEN A. LANDIS - Senior Vice President. He is also Senior Vice President
of the mutual funds managed by Company subsidiaries. From 1993 to 1995 he was
Associate Director of Proprietary Trading at Barclays De Zoete Wedd Securities,
Inc., from 1992 to 1993 he was Director, Bond Arbitrage at WG Trading Company,
and from 1989 to 1992 he was Vice President of Wilkinson Boyd Capital Markets.
BRETT B. SNEED, CFA - Senior Vice President. He is also Senior Vice
President of the mutual funds managed by Company subsidiaries. He is a Chartered
Financial Analyst and a member of the New York Society of Security Analysts, the
Association for Investment Management and Research and the International Society
of Financial Analysts.
WILLIAM J. MAYNARD - Secretary. He is also Vice President and Secretary of
the mutual funds managed by Company subsidiaries. He is a member of the New York
State Bar. From 1991 to 1994 he was associated with the law firm of Skadden,
Arps, Slate, Meagher & Flom.
JAMES R. MITCHELL, II - Senior Vice President. He is also Senior Vice
President of BBSI.
JOSEPH LEUNG, CPA - Treasurer and Chief Accounting Officer. He is also
Treasurer and Chief Accounting Officer of the mutual funds managed by Company
subsidiaries. From 1992 to 1995 he held various positions with Coopers & Lybrand
L.L.P., a public accounting firm. From 1991 to 1992 he was the accounting
supervisor at Retirement Systems Group, a mutual fund company.
-27-
Each director is elected by the vote or written consent of the holder of a
majority of the Class B Common Stock and holds office until the next meeting of
the Class B common stockholder and until his successor is elected and qualified,
or until his earlier death, resignation or removal.
Based solely on the information from Forms 3, 4, and 5 furnished to it,
the Company believes that the following directors, officers, and owners of more
than 10 percent of the Class A Common Stock of the Company failed to file on a
timely basis reports required by Section 16(a) of the Securities Exchange Act of
1934 during the most recent fiscal year or prior fiscal years, and for each such
person sets forth the number of late reports, the number of transactions that
were not reported on a timely basis, and any known failure to file a required
form: Thomas B Winmill, 1 late report, 2 transactions not timely reported;
Bassett S. Winmill, 1 late report, 2 transactions not timely reported; Mark C.
Winmill, 1 late report, 2 transactions not timely reported; James R. Mitchell, 1
late report, 1 transaction not timely reported; William J. Maynard, 1 late
report; Steven A. Landis, 1 late report.
Based on information available to the Company, including a Schedule 13D,
amendment No. 9 filed with the SEC on Maxus Securities Corp. and First
Enterprise Group Limited Partners II are part of a group owning 357,500 shares
or 26.5% of the outstanding Class A Common Stock of the Company. Such entities
have not furnished the Company with any form under Section 16 of the Securities
Exchange Act of 1934.
ITEM 11. EXECUTIVE COMPENSATION
The following information and tables set forth the information required
under the Securities and Exchange Commission's executive compensation rules. Any
information not presented is omitted because the item is not applicable or not
required since the Company qualifies as a small business issuer.
SUMMARY COMPENSATION TABLE
The following table sets forth, for the three years ended December 31,
1995, the compensation paid to the chief executive officers and the other
executive officers whose total annual salary and bonus exceeded $100,000 in
1995.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION ALL OTHER
NAME AND SALARY BONUS OTHER ANNCOMPENSATION
PRINCIPAL POSITION YEAR ($) ($) COMPENSAT (A)* (B)
------------------ ---- -------------------------- --- ---
Bassett S. Winmill 1995 $160,000 $10,000 -- $4,788 $4,620
Chairman 1994 $160,000 $6,667 -- $3,790 $3,000
1993 $160,000 $13,333 -- $3,790 $2,249
Mark C. Winmill 1995 $100,000 $6,250 -- $132 $3,462
Co-President 1994 $100,000 $4,167 -- $132 $2,083
1993 $100,000 $8,334 -- $132 $1,612
Thomas B. Winmill 1995 $100,000 $6,250 -- $132 $3,678
Co-President 1994 $100,000 $4,167 -- $132 $2,083
1993 $100,000 $8,334 -- $108 $1,612
Brett B. Sneed 1995 $110,000 $15,125 -- $662 $4,091
Senior Vice President 1994 $110,000 $ -- -- $662 $2,420
1993 $110,000 $15,583 -- $662 $1,719
-28-
* Information omitted as perquisites do not exceed the lesser of $50,000 or
10% of the total annual salary and bonus for the year for the named
executive officers.
(a) Represents term life insurance
(b) Represents Company's matching contributions to 401(k) Plan.
OPTION GRANTS TABLE
There were no grants of stock options or stock appreciation rights during
the year ended December 31, 1995 to any of the previously named executive
officers.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE TABLE
The following table sets forth, for the year ended December 31, 1995,
information regarding the outstanding options for each of the executive officers
named in the Summary Compensation Table.
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
SHARES UNEXERCISED IN-THE-MONEY
ACQUIRED OPTIONS AT OPTIONS AT
ON VALUE 12-31-95 (#) 12-31-95 ($)
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
- ---- --------- ------------- ------------- -------------
Bassett S. Winmill200,000 130,000 - / - - / -
Mark C. Winmill 30,800 23,100 - / - - / -
Thomas B. Winmill 17,220 12,915 - / - - / -
Brett B. Sneed 20,000 15,000 - / - - / -
LONG-TERM INCENTIVE PLAN AWARDS TABLE
There were no long-term incentive plan awards made during the year ended
December 31, 1995.
COMPENSATION OF DIRECTORS
Edward G. Webb, Jr. and Charles A. Carroll were the only individuals who
received compensation for their service as directors of the Company in 1995.
They were each paid $100 per quarter as a retainer and $400 per quarterly
meeting attended plus expenses. For the year ended December 31, 1995, Mr. Webb
was paid $1,600 for attending 3 meetings and Mr. Carroll was paid $2,000 for
attending all four quarterly meetings. Mr. Webb and Mr. Carroll each also
received an option to purchase 10,000 shares of Class A Common Stock at an
exercise price of $1.75 per share.
EMPLOYMENT CONTRACTS
In July 1994, the Company entered into a Death Benefit Agreement
("Agreement") with the Company's Chairman. Following his death, the Agreement
provides for annual payments to his wife until her death amounting to 80% of his
average annual salary for the three year period prior to his death subject to
certain adjustments. The Company's obligations under the Agreement are not
secured and will terminate if he leaves the Company's employ under certain
conditions.
The Company has no employment or termination contracts with any of its
employees.
-29-
REPRICING OF OPTIONS TABLE
There was no repricing of options during the year ended December 31, 1995.
1995 LONG-TERM INCENTIVE PLAN
On December 6, 1995, the Board of Directors of the Company ("Board") and
the Class B voting common stockholder adopted the Bull & Bear Group, Inc. 1995
Long-Term Incentive Plan ("Plan"), under which options and stock-based awards
(collectively, "Awards") may be made to directors, officers and employees of the
Company or its subsidiaries. Under the Plan, only automatic Awards are made to
non-employee directors ("Non-Employee Directors"). The Plan was amended by the
Board and the Class B voting common stockholder on February 5, 1996. The amended
Plan is described below.
The purpose of the Plan is to assist the Company and its subsidiaries in
attracting and retaining highly competent officers and directors and otherwise
on behalf of the Company. The Plan also acts as an incentive in motivating
selected officers and key employees to achieve long-term objectives of the
Company, which will inure to the benefit of all stockholders of the Company. Any
proceeds raised by the Company under the Plan will be used for working capital
purposes.
GENERAL PROVISIONS
Duration of the Plan; Share Authorization. The Plan will terminate on
December 6, 2005, unless terminated earlier by the Board.
300,000 shares of the Company's Class A Common Stock ("Shares") are
available for Awards under the Plan. The Shares to be offered under the Plan are
authorized and unissued Shares, or issued Shares that have been reacquired by
the Company and held in its treasury. Holders of Shares do not have voting
rights except as specifically provided by the Delaware General Corporation Law.
Shares covered by any unexercised portions of terminated options, Shares
forfeited by Participants and Shares subject to any Awards that are otherwise
surrendered by a Participant without receiving any payment or other benefit with
respect thereto may again be subject to new Awards under the Plan. In the event
the purchase price of an option or tax withholding relating to an Award is paid
in whole or in part through the delivery of Shares, the number of Shares
issuable in connection with the exercise of the option may not again be
available for the grant of Awards under the Plan.
Plan Administration. The Plan is administered by the Stock Option
Committee ("Committee") of the Board. The Committee is composed of at least two
directors of the Company, each of whom is a "disinterested person" as defined in
Rule 16b-3 promulgated by the SEC ("Rule 16b-3") under Section 16 of the
Securities Exchange Act of 1934, as amended ("Exchange Act"). The Committee will
determine the officers and other key employees who will be eligible for and
granted Awards, determine the amount and type of Awards, establish and modify
administrative rules relating to the Plan, impose such conditions and
restrictions on Awards as it determines appropriate and take such other action
as may be necessary or advisable for the proper administration of the Plan. The
Committee may, with respect to Participants who are not subject to Section 16 of
the Exchange Act, delegate such of its powers and authority under the Plan as it
deems appropriate to certain officers or employees of the Company.
Plan Participants. Any employee of the Company or its subsidiaries,
whether or not a director of the Company, may be selected by the Committee to
receive an Award under the Plan. Non-Employee Directors only receive automatic
and non-discretionary stock options and are not eligible to receive any other
Awards under the Plan.
-30-
AWARDS AVAILABLE UNDER THE PLAN
Awards to employees under the Plan may take the form of stock options or
Restricted Share Awards. Awards under the Plan may be granted alone or in
combination with other Awards. The stock options awarded to Non-Employee
Directors are automatic and non-discretionary in operation. The consideration
for issuance of Awards under the Plan is the continued services of the employees
and non-employee directors to the Company and its subsidiaries.
Stock Options Granted to Employees. Stock options ("Incentive Stock
Options") meeting the requirements of Section 422 of the Internal Revenue Code
of 1986, as amended from time to time, or any successor thereto ("Code"), and
stock options that do not meet such requirements ("Non- Qualified Stock
Options") are both available for grant to employees under the Plan.
The term of each option will be determined by the Committee, but no option
will be exercisable prior to six months from the date of grant or more than ten
years after the date of grant. If, however, an Incentive Stock Option is granted
to a Participant who, at the time of grant of the option, owns (or is deemed to
own under Section 424(d) of the Code) more than 10% (a "Ten Percent
Shareholder") of the Company's Class B common stock, par value $0.01 per share
("Company Voting Securities"), the option is not exercisable more than five
years after the date of grant. Options may also be subject to restrictions on
exercise, such as exercise in periodic installments, performance targets and
waiting periods, as determined by the Committee.
The exercise price of each option is determined by the Committee; however,
the per share exercise price of an option must be at least equal to 100% of the
Fair Market Value (as defined below) of a Share on the date of grant of such
option. If, however, an Incentive Stock Option is granted to a Ten Percent
Shareholder, the per share exercise price of the option must be at least equal
to 110% of the Fair Market Value of a Share on the date of grant of such option.
Fair Market Value of a Share means, as of any given date, the most recently
reported sale price of a Share on such date as of the time when Fair Market
Value is being determined on the principal national securities exchange on which
the Shares are then traded or, if the Shares are not then traded on a national
securities exchange, the most recently reported sale price of the Shares on such
date as of the time when Fair Market Value is being determined on Nasdaq;
provided, however, that, if there were no sales reported as of such date, Fair
Market Value is the last sale price previously reported. In the event the Shares
are not admitted to trade on a securities exchange or quoted on Nasdaq, the Fair
Market Value of a Share as of any given date is as determined in good faith by
the Committee. Notwithstanding the foregoing, the Fair Market Value of a Share
will never be less than par value per share.
Subject to whatever installment exercise and waiting period provisions the
Committee may impose, options may be exercised in whole or in part at any time
prior to expiration of the option by giving written notice of exercise to the
Company specifying the number of Shares to be purchased. Such notice must be
accompanied by payment in full of the purchase price in such form as the
Committee may accept (including payment in accordance with a cashless exercise
program under which, if so instructed by the Participant, Shares may be issued
directly to the Participant's broker or dealer upon receipt of the purchase
price in cash from the broker or dealer). If and to the extent determined by the
Committee in its sole discretion at or after grant, payment in full or in part
may also be made in the form of Shares duly owned by the Participant (and for
which the Participant has good title, free and clear of any liens and
encumbrances) or by reduction in the number of Shares issuable upon such
exercise based, in each case, on the Fair Market Value of the Shares on the date
the option is exercised. In the case of an Incentive Stock Option, however, the
right to make payment of the purchase price in the form of Shares may be
authorized only at the time of grant.
Stock options granted under the Plan are not transferable except by will
or the laws of descent and distribution and may be exercised, during the
Participant's lifetime, only by the Participant.
-31-
Unless the Committee provides for a shorter period of time, upon a
Participant's termination of employment other than by reason of death or
disability, the Participant may, within three months from the date of such
termination of employment, exercise all or any part of his or her options as
were exercisable at the date of termination of employment but only if (x) the
Participant resigns or retires and the Committee consents to such resignation or
retirement and (y) such termination of employment is not for cause. In no event,
however, may any option be exercised after the time when it would otherwise
expire. If such termination of employment is for cause or the Committee does not
so consent, the right of such Participant to exercise such options will
terminate at the date of termination of employment.
Further, unless the Committee provides for a shorter period of time, upon
a Participant's becoming disabled (such date being the "Disability Date"), the
Participant may, within one year after the Disability Date, exercise all or a
part of his or her options that were exercisable upon such Disability Date. In
no event, however, may any option be exercised after the time when it would
otherwise expire.
Further, unless the Committee provides for a shorter period of time, in
the event of the death of a Participant while employed by the Company or prior
to the expiration of the option as provided for in the event of disability, to
the extent all or any part of the option was exercisable as of the date of death
of the Participant, the right of the Participant's beneficiary to exercise the
option will expire upon the expiration of one year from the date of the
Participant's death (but in no event more than one year from the Participant's
Disability Date) or on the stated termination date of the option, whichever is
earlier. In the event of the Participant's death, the Committee may, in its sole
discretion, accelerate the right to exercise all or any part of an Option that
would not otherwise be exercisable.
To the extent all or any part of an option was not exercisable as of the
date of a Participant's termination of employment, such right will expire at the
date of such termination of employment. Notwithstanding the foregoing, the
Committee, in its sole discretion and under such terms as it deems appropriate,
may permit a Participant who will continue to render significant services to the
Company after his or her termination of employment to continue to accrue service
with respect to the right to exercise his or her options during the period in
which the individual continues to render such services.
-32-
On February 5, 1996, the following options were granted to employees under
the Plan. Each of these options has a five year term and was granted with a
Reload Option (as described below):
Exercise Price
Name and Position Per Share Number of Units
Bassett S. Winmill $2.0625 50,000
Chairman of the Board of
Directors
Mark C. Winmill $1.875 50,000
Co-President, Chief
Financial Officer
Thomas B. Winmill $1.875 50,000
Co-President, General
Counsel
Robert D. Anderson $1.875 20,000
Vice Chairman
Steven A. Landis $1.875 20,000
Senior Vice President
Brett B. Sneed $1.875 20,000
Senior Vice President
Executive Officers as a Group 210,000
Non-Executive Officer $1.875 9,000
Employees as a Group
================================================== ============================
Reload Options. The Committee may provide, at the time of grant of
Incentive Stock Options and at or after the time of grant of Non-Qualified Stock
Options, that, if a Participant surrenders Shares in full or partial payment of
the purchase price of an option, then, concurrent with such surrender, the
Participant, subject to the availability of Shares under the Plan, will be
granted a new Non-Qualified Stock Option (a "Reload Option") covering a number
of Shares equal to the number so surrendered. No Reload Option may be granted to
a Non-Employee Director. A Reload Option may be granted in connection with the
exercise of an option that is itself a Reload Option. Each Reload Option will
have the same expiration date as the original option and a per share exercise
price equal to the Fair Market Value of a Share on the date of grant of the
Reload Option. A Reload Option is exercisable at such time or times as the
Committee determines (except that no Reload Option is exercisable during the
first six months after grant) and will be subject to such other terms and
conditions as the Committee may prescribe.
Restricted Shares. The Committee may award restricted Shares ("Restricted
Shares") to a Participant. Such a grant gives a Participant the right to receive
Shares subject to a risk of forfeiture based upon certain conditions. The
forfeiture restrictions on the Restricted Shares may be based upon performance
standards, length of service or other criteria as the Committee may determine.
Until all restrictions are satisfied, lapsed or waived, the Company will
maintain control over the Restricted Shares but the Participant will be entitled
to receive dividends on the Restricted Shares; provided, however, that any
Shares distributed as a dividend or otherwise with respect to any Restricted
Shares as to which the restrictions have not yet lapsed will be subject to the
same restrictions as such Restricted Shares. When all restrictions have been
satisfied and/or waived or have lapsed, the Company will deliver to the
Participant or, in the case of the Participant's death, his or her beneficiary,
stock certificates for the appropriate number of Shares, free of all
restrictions (except those imposed by law). None of the Restricted Shares may be
assigned or transferred (other than by will or the laws of descent and
distribution), pledged or sold prior to lapse or release of the applicable
restrictions.
-33-
All of a Participant's Restricted Shares and rights thereto are forfeited
to the Company unless the Participant continues in the service of the Company or
any parent or subsidiary of the Company as an employee until the expiration of
the forfeiture period, and all other applicable restrictions of the Restricted
Shares. Notwithstanding the foregoing, the Committee may, in its sole
discretion, waive the forfeiture period and any other applicable restrictions on
a Participant's Restricted Share Award, provided that the Participant must at
that time have completed at least one year of employment after the date of
grant.
Non-Employee Director Options. The Plan provides for the grant of a
Non-Qualified Stock Option ("Non-Employee Director Option") to purchase 10,000
Shares to each Non-Employee Director on the date said Non-Employee Director is
elected as such for the first time. However, with respect to directors Edward G.
Webb, Jr. and Charles A. Carroll, they were each granted a Non-Employee Director
Option on December 6, 1995. The per share exercise price for such Non- Employee
Director Options is the Fair Market Value of a Share on the date of grant.
Accordingly, the per share exercise price of the options granted to Messrs.
Carroll and Webb was $1.75. All such options are Non-Qualified Stock Options and
have a five year term. Each such option is fully exercisable six months after
the date of grant, but is forfeited if the person ceases to be a Non- Employee
Director within six months of the date of grant of such option.
If a Non-Employee Director's service with the Company terminates by reason
of death or disability, his or her options may be exercised for a period of one
year from the date of such disability or death or until the expiration of the
option, whichever is shorter. If a Non-Employee Director's service with the
Company terminates other than by reason of death or disability, his or her
options may be exercised for a period of three months from the date of such
termination or until the expiration of the option, whichever is shorter.
TERMINATION AND AMENDMENT
The Board may amend or terminate the Plan at any time it is deemed
necessary or appropriate; provided, however, that no amendment may be made,
without the affirmative approval of the holder of Company Voting Securities,
that would require stockholder approval under Rule 16b-3, the Code or other
applicable law unless the Board determines that compliance with Rule 16b-3
and/or the Code is no longer desired.
Except as provided by the Committee, in its sole discretion, at the time
of an Award or pursuant to certain antidilution provisions (as discussed below),
no Award granted under the Plan to a Participant may be modified (unless such
modification does not materially decrease the value of the Award) after the date
of grant except by express written agreement between the Company and the
Participant, provided that any such change (a) may not be inconsistent with the
terms of the Plan, and (b) must be approved by the Committee.
The Board has the right and the power to terminate the Plan at any time.
No Award may be granted under the Plan after the termination of the Plan, but
the termination of the Plan will not have any other effect and any Award
outstanding at the time of the termination of the Plan may be exercised after
termination of the Plan at any time prior to the expiration date of such Award
to the same extent such Award would have been exercisable had the Plan not
terminated.
-34-
ANTIDILUTION PROVISIONS
Recapitalization. The number and kind of shares subject to outstanding
Awards, the purchase price or exercise price of such Awards, and the number and
kind of shares available for Awards subsequently granted under the Plan will be
appropriately adjusted to reflect any stock dividend, stock split, combination
or exchange of shares, merger, consolidation or other change in capitalization
with a similar substantive effect upon the Plan or the Awards granted under the
Plan. The Committee has the power and sole discretion to determine the nature
and amount of the adjustment to be made in each case. However, in no event will
any adjustment be made in accordance with the Plan's antidilution provisions to
any previous grant of Restricted Shares if an adjustment has been or will be
made to the Shares awarded to a Participant in such person's capacity as a
stockholder.
Sale or Reorganization. After any reorganization, merger or consolidation
in which the Company is