SEC Info  
    Home      Search      My Interests      Help      Sign In      Please Sign In

Sunstates Corp/DE – ‘DEF 14C’ for 7/21/98

As of:  Tuesday, 7/21/98   ·   For:  7/21/98   ·   Accession #:  103575-98-4   ·   File #:  1-05300

  in   Show  &   Hints

  As Of                Filer                Filing    For·On·As Docs:Size

 7/21/98  Sunstates Corp/DE                 DEF 14C     7/21/98    1:88K

Definitive Proxy Information Statement   —   Schedule 14C
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: DEF 14C     Information Statement                                 36±   175K 


Document Table of Contents

Page (sequential) | (alphabetic) Top
 
11st Page   -   Filing Submission
2Security Ownership of Certain Beneficial Owners
"Election of Directors
3Directors
"Independent Certified Public Accountants
4Other Assets
9Litigation
DEF 14C1st "Page" of 9TOCTopPreviousNextBottomJust 1st
 

SUNSTATES CORPORATION 4600 Marriott Drive, Suite 200 Raleigh, North Carolina 27612 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD AUGUST 10, 1998 TO THE HOLDERS OF VOTING STOCK NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Sunstates Corporation will be held on Monday, August 10, 1998, at 8:00 a.m., local time, at the headquarters of Sew Simple Systems, Inc. ("Sew Simple"), the Company's major operating subsidiary, located on Highway 418 (3.3 miles West of Interstate 385), Fountain Inn, South Carolina to consider and act upon the following matters: 1. Election of directors of the Company for the ensuing year, and 2. Such other business as may properly come before the Meeting or any adjournment thereof. Only shareholders of record at the close of business on July 15, 1998 are entitled to notice of and to vote at the Meeting. Holders of Common Stock and of Class B Accumulating Convertible Stock will be entitled to vote on all business that may come before the Meeting except that holders of Class B Accumulating Convertible Stock will not be entitled to vote on the one member of the board to be elected solely by holders of Common Stock, voting as a separate class, as described in the accompanying Information Statement. The holders of the $3.75 Cumulative Preferred Stock will be entitled to vote to elect three directors at the Meeting. Holders of the $3.75 Cumulative Preferred Stock will not be entitled to vote upon any other matters coming before the Meeting. By Order of the Board of Directors, Richard A. Leonard Secretary Dated: July 21, 1998 ----------------- SEE INFORMATION STATEMENT ENCLOSED -----------------
DEF 14C2nd "Page" of 9TOC1stPreviousNextBottomJust 2nd
SUNSTATES CORPORATION 4600 Marriott Drive, Suite 200 Raleigh, North Carolina 27612 INFORMATION STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD AUGUST 10, 1998 This Information Statement is being sent to shareholders of Sunstates Corporation (the Company") on or about July 21, 1998, in connection with the Annual Meeting of Shareholders of the Company to be held Monday, August 10, 1998, at 8:00 a.m., local time, at the headquarters of Sew Simple Systems, Inc. ("Sew Simple"), the Company's major operating subsidiary, located on Highway 418, (3.3 miles West of Interstate 385), Fountain Inn, South Carolina. The Company's By-Laws provide that questions coming before the Meeting shall be decided by a majority of the votes present at the Meeting, either in person or by proxy, and eligible to vote. Accordingly, abstentions and withheld votes are effectively treated as a negative vote with respect to the question being decided. However, with respect to the election of directors, the Company's By-Laws provides that a nominee shall be elected by receiving a plurality of the votes cast. Accordingly, abstentions and withheld votes are not taken into account in the election of directors. VOTING SECURITIES The record of shareholders entitled to vote was taken at the close of business on July 15, 1998. At such date, the Company had outstanding 2,271,705 shares of Common Stock, $0.33 1/3 par value, 79,604 shares of Class B Accumulating Convertible Stock, $.10 par value ("Class B Stock") and 462,978 shares of $3.75 Cumulative Preferred Stock ("$3.75 Preferred Stock). Holders of Common Stock are entitled to one vote per share and holders of Class B Stock are entitled to 85.3125 votes per share. Holders of the $3.75 Preferred Stock are entitled to one vote per share only with respect to matters on which they are entitled to vote. WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY Holders of Common Stock will be entitled, voting as a separate class, to elect a number of directors equal to 25 % (rounded up to the next integer) of the members of the Board of Directors to be elected by holders of the Common Stock and the Class B Stock. There are three Directors to be elected at the Meeting by holders of the Common Stock and the Class B Stock, and accordingly, the holders of the Common Stock will, voting as a separate class, elect one Director. The holders of Common Stock will also vote together with the holders of Class B Stock to elect the remaining two directors. Holders of the $3.75 Preferred Stock will be entitled, voting as a separate class, to elect a number of directors equal to the combined number of directors elected by the holders of the Common Stock and Class B Stock. Accordingly, the holders of the $3.75 Preferred Stock will be entitled to vote as a separate class to elect three directors. Holders of the $3.75 Cumulative Preferred Stock will not be entitled to vote upon any other matters coming before the Meeting. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS The following table shows the name, address and beneficial ownership, as of July 15, 1998, of each person known to the Company to be the beneficial owner of more than 5% of any class of its outstanding securities entitled to vote. Information presented in this table and related notes has been obtained from the Company's shareholder lists, the beneficial owner or from reports filed by the beneficial owner with the Securities and Exchange Commission pursuant to Section 13 of the Securities Exchange Act of 1934 as amended, (the "Exchange Act"). [Enlarge/Download Table] Percent of Amount and Class of Equity Percent of Voting Name and Address of Beneficial Owner Securities Beneficially Owned (8) Class (1) Power (3) ------------------------------------ --------------------------------- --------- --------- COMMON AND CLASS B COMBINED (3): A group ("Engle Group") consisting of: Hickory Furniture Company 66,396 Shares of Class B Stock (2) 83.41% 62.36% ("Hickory") 4433 W. Touhy Avenue Lincolnwood, Illinois 60646 and and Percent of Amount and Class of Equity Percent of Voting Name and Address of Beneficial Owner Securities Beneficially Owned (8) Class (1) Power (3) ------------------------------------ --------------------------------- --------- --------- Indiana Financial Investors, Inc. 935,018 Shares of Common Stock (2) 41.16% 10.29% ("Indiana") 4433 W. Touhy Avenue Lincolnwood, Illinois 60646 and or Telco Capital Corporation 2,553,420 Shares of Common Stock 65.64% 50.9% ("Telco") issuable upon conversion of Class 4433 W. Touhy Avenue B Stock (4) Lincolnwood, Illinois 60646 and RDIS Corporation ("RDIS") 4433 W. Touhy Avenue Lincolnwood, Illinois 60646 and GSC Enterprises, Inc. ("GSC") 4433 W. Touhy Avenue Lincolnwood, Illinois 60646 and Siobhan Engle 4433 W. Touhy Avenue Lincolnwood, Illinois 60646 and Clyde Wm. Engle 4433 W. Touhy Avenue Lincolnwood, Illinois 60646 Coronet Insurance Company 3,563 Shares of Class B Stock 4.48% 3.35% 3500 West Peterson Avenue and Chicago, Illinois 60659 687,449 Shares of Common Stock 30.26% 7.59% or 774,297 Shares of Common Stock 32.83% 8.75% issuable upon conversion of Class B Stock (8) $3.75 PREFERRED STOCK (3): "Engle Group" (see above) 137,432 Shares of $3.75 Preferred 29.68% 29.68% Stock (2) John D. Weil TR 84,668 Shares of $3.75 Preferred 18.29% 18.29% U/A/D 6/28/91 Stock John D Weil Trust 509 Olive St. Suite 705 St. Louis, MO 63101 Coronet Insurance Company 96,256 Shares of $3.75 Preferred 20.79% 20.79% 3500 West Peterson Avenue Stock Chicago, Illinois 60659 <FN> (1) At July 15, 1998, there were 2,271,705 shares of Common Stock outstanding, net of 20,800 shares held by subsidiaries end therefore deemed to be treasury shares, 79,604 shares of Class B Stock outstanding and 462,978 shares of S3.75 Preferred Stock outstanding. (2) Siobhan Engle owns 17,775 shares of Class B Stock and 63,986 shares of Common Stock, Hickory owns directly 48,056 shares of Class B Stock, 845,630 shares of Common Stock, and 137,432 shares of $3.75 Preferred Stock, Indiana owns directly 565 shares of Class B Stock and 10,002 shares of Common Stock, and GSC owns directly 15,400 shares of Common Stock. (3) Holders of Common Stock are entitled to one vote per share and holders of Class B Stock are entitled to 85.3125 votes per share, voting together as a single class. Percentages indicated are based upon the combined total number of votes available to holders of Common Stock and Class B Stock, a total of 9,062,921 on July 15, 1998. Common Stock and S3.75 Preferred Stock are each entitled to one vote per share when voting as a separate class. (4) Each share of Class B Stock is convertible immediately into 24.375 shares of Common Stock. Were only Mrs. Engle, Hickory and Indiana to immediately convert their shares of Class B Stock into Common Stock, the group would then hold 50.9% of the voting power of the outstanding securities regularly entitled to vote. (5) Mr. Engle may be deemed the beneficial owner of the shares of Class B Stock beneficially owned by Hickory and Indiana by vinue of his ownership of RDIS. According to information filed with the Commission, Mr. Engle, Chairman of the Board of Directors of RDIS, possesses beneficial ownership in excess of 50 % of the outstanding shares of common stock of RDIS. RDIS owns 100% of the outstanding common stock of Telco; Telco owns approximately 92.6% of the outstanding common stock of Hickory; and Hickory owns approximately 69.4% of the outstanding common stock of Indiana. Mr. Engle may be deemed the beneficial owner of the shares of Common Stock owned by GSC Enterprises, a one-bank holding company, of which Mr. Engle is the majority owner. (6) All of the shares of common stock of Hickory owned by Telco have been pledged to an unaffiliated bank in Chicago to secure a loan to Telco by that bank, which loan is in default. (7) The amounts included do not include 14,300 shares of Sunstates Common Stock held directly by or in trust for members of Mr. Engle's immediate family. Mr. Engle specifically disavows beneficial ownership of such shares. (8) Each share of Class B Stock is convertible immediately into 24.375 shares of Common Stock. Were only Coronet Insurance Company to immediately convert their shares of Class B Stock into Common Stock, they would then hold 8.75% of the voting power of the outstanding securities regularly entitled to vote. </FN> As of July 15, 1998, all officers and directors of the Company as a group, a total of 8 persons, owned beneficially 936,018 shares of Common Stock, or 41.20% of the total shares of Common Stock outstanding, 66,396 shares of Class B Stock, or 83.41% of the total shares of Class B Stock outstanding, 138,232 shares of $3.75 Preferred Stock or 29.86% of the total shares of $3.75 Preferred Stock outstanding and 49,000 shares of Class E Preferred Stock or 15.16 % of the total shares of Class E Preferred Stock outstanding. If the group were to presently convert its Class B Stock into Common Stock, they would receive an additional 1,618,403 shares of Common Stock for a total ownership of 2,554,421 shares of Common Stock, or 65.66% of the total shares of Common Stock outstanding. Each share of Class B Stock is entitled to 85.3125 votes and votes together with the Common Stock as a single class, with respect to all matters to be voted upon by shareholders except with respect to the election of one director to be elected solely by the holders of Common Stock, voting as a separate class, and as otherwise provided by law. Officers and directors as a group are currently the beneficial owners of 72.82% of the voting power of all Common Stock and Class B Stock presently outstanding when these shares vote as a single class. (See separate section of this Information Statement for information as to securities ownership of individual directors and officers. ) ELECTION OF DIRECTORS At the Annual Meeting, members of the Board of Directors will be elected for one year and until the election and qualification of their successors. The holders of the Company's Common Stock, voting as a separate class, will vote for one of the three members (25 % rounded up to the next highest integer) of the Board of Directors to be elected by the holders of the Company's Common Stock and Class B Stock. The holders of Common Stock will then also vote together with the holders of the Class B Stock to elect the remaining two directors. Mr. Friedman is standing for election by holders of Common Stock voting as a separate class. Messrs. Engle and Mortenson will stand for election by the holders of the Common Stock and Class B Stock voting together as a single class. Messrs. Schubert, Sampson and Winston Engle are standing for election by holders of the Company's Preferred Stock voting as a separate class. In order to be elected, each nominee must receive the affirmative vote of a plurality of the votes of the class of security or securities represented at the meeting and voting upon his election. All of the nominees listed below, except Mr. Winston Engle, presently comprise the Board of Directors of the Company. Each nominee is at present available for election. Information concerning the Board's nominees, based on data furnished by them, is set forth below.
DEF 14C3rd "Page" of 9TOC1stPreviousNextBottomJust 3rd
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE FOLLOWING NOMINEES. [Enlarge/Download Table] Year First Shares and Class Became of Equity Director Securities Positions with Sunstates: Principal Occupations During Past of Beneficially Name (Age) Five Years; Other Directorships Sunstates Owned (1)(2) ---------- ------------------------------- --------- ------------ William D. Schubert Principal (since January 1989) of Advanced Management 1991 -0- (74) Concepts, a management consulting firm to the textile and apparel industries; Director (from 1973 to May 1991), Chairman of the Board of Directors (from December 1985 to December 1988) and President and Chief Executive Officer (from April 1974 to July 1988) of Alba-Waldensian, Inc., a manufacturer of textile apparel and medical specialty products; Director (since November 1990) of Wellco Enterprises, Inc. Winston E. Engle Self-employed. Son of Clyde Wm. Engle, Chairman of the Board. -- -0- (28) Clyde Wm. Engle (3) Mr. Engle has served as Chairman of the Board (since December 1985 See "Security (55) 1985) and Chief Executive Officer (since December 1990); Ownership of President and Chief Executive Officer (from December 1985 to Certain May 1988) of Sunstates Corporation (formerly Acton Beneficial Corporation); Director (from 1981 to May 1988) of Sunstates Owners". Corporation. He also holds positions with various businesses headquartered in Chicago, Illinois, including RDIS Corporation (formerly Libco Corporation) (Chairman of the Board and President), which is the sole shareholder of Telco Capital Corporation; Telco Capital Corporation (Chairman of the Board and Chief Executive Officer), which is the majority shareholder of Hickory Furniture Company; Hickory Furniture Company (Chairman of the Board), which is the majority shareholder of Sunstates Corporation; GSC Enterprises, Inc. (Chairman of the Board, President and Chief Executive Officer), a one bank holding company, and; Bank of Lincolnwood (Chairman of the Board and President); Director and Chairman of Alba-Waldensian, Inc.; Director and Chairman of Indiana Financial Investors, Inc. Howard Friedman Partner (since 1996) in the law firm of Schuyler, Roche & 1986 500 shares of (58) Zwirner; Chicago, Illinois; Partner (since 1971) in the law Common Stock firm of Altheimer & Gray, Chicago, Illinois; Director (since 1984) of Bank of Lincolnwood Percent of Amount and Class of Equity Percent of Voting Name and Address of Beneficial Owner Securities Beneficially Owned (8) Class (1) Power (3) ------------------------------------ --------------------------------- --------- --------- Lee N. Mortenson Mr. Mortenson has served as President (since May 1988), Chief 1988 500 shares of (62) Operating Officer (since December 1990) of Sunstates Common Stock, Corporation (formerly Acton Corporation); President and Chief 800 shares of Executive Officer (from July 1984 to May 1988) and Director $3.75 Preferred (from February 1985 to May 1988) of Sunstates Corporation. Stock Mr. Mortenson also serves as Director (since April 1984) and President and Chief Executive Officer (since February 1997) of Alba-Waldensian, Inc. He has also served as President, Chief Operating Officer and a Director of Telco Capital Corporation of Chicago, Illinois since January 1984. Telco Capital Corporation is principally engaged in the manufacturing and real estate businesses. Mr. Mortenson also serves as a Director of Rocky Mountain Chocolate Factory, Inc. On December 24, 1996, an agreed order of liquidation with a finding of insolvency was entered against the principal subsidiary of Sunstates Corporation, Coronet Insurance Company ("Coronet"), under the Illinois Insurance Code, pursuant to which, among other things, all of the assets of Coronet were transferred to the Office of the Special Deputy for the purpose of winding up the affairs of Coronet. Mr. Mortenson was a Director of Coronet and served as its President during the period 1994 to 1996. On January 24, 1997, Hickory White Company, a furniture-manufacturing subsidiary of Sunstates Corporation, filed a voluntary petition under Chapter 11 of the Federal Bankruptcy Code. All of the assets of Hickory White Company were sold to an unrelated party on March 17, 1997. Mr. Mortenson was Vice President and a Director of Hickory White Company. Mr. Mortenson previously served as Group Vice President of Gould, Inc. from 1980 to 1982. Prior to this, he was a Group Vice President with Becton Dickinson and Company. Mr. Mortenson holds a BS Degree and Masters Degree in Engineering from UCLA. Harold Sampson Chairman of the Board (since 1981) of Sampson Investments (a 1988 -0- (74) real estate holding company); Director (1986 through 1997) of Indiana Financial Investors, Inc.; Chairman of the Board of Diginet Communications, Inc. (since 1985); Director of Mt. Sinai Hospital (since 1960). <FN> (1) All stock information is as of July 15, 1998. Unless otherwise noted, all shares are owned directly, with sole voting and dispositive power. (2) Unless otherwise noted, the shares of equity securities owned by each director represents less than 1% of the class so owned. (3) Mr. Engle is the subject of a Cease and Desist Order dated October 7, 1993, issued by the Securities and Exchange Commission (the Commission) requiring Mr. Engle and certain of his affiliated companies to permanently cease and desist from committing any further violations of Section 16(a) of the Securities Exchange Act of 1934 as amended and the rules promulgated thereunder, which requires monthly and other periodic reports of transactions in certain securities. The Commission found some of the reports of such transactions to have been filed delinquently although many of these transactions were between affiliated entities or had been publicly reported in other reports filed with the Commission or had been otherwise publicly announced. </FN> COMPLIANCE WITH SECTION 16(a) OF SECURITIES EXCHANGE ACT OF 1934 Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to the Company during the fiscal year ended December 31, 1997, and Forms 5 and amendments thereto furnished to the Company with respect to the fiscal year ended December 31, 1997, and any written representations from a reporting person that no Form 5 is required, to the best of the Company's knowledge, no person who was a director, officer or beneficial owner of more than ten percent of any class of equity securities of the Company (a reporting person) failed to file on a timely basis, as disclosed in the above Forms, reports required by Section 16(a) of the Securities Exchange Act of 1934 during the most recent fiscal year. However, Mr. Engle has not furnished the Company with copies of any Form 5 or written representation with respect to reporting during the fiscal year ended December 31, 1997. Board of Directors and Standing Committees If elected, the six persons named in the foregoing table will constitute the Board of Directors of the Company. During 1997, the Board held a total of 2 regular meetings. The Board of Directors presently maintains three standing committees: an Executive Committee, an Audit Committee and a Compensation Committee that are described below. Members of these committees are elected annually at the regular Board of Directors meeting immediately following the Annual Meeting of Shareholders. The Executive Committee presently is composed of Messrs. Engle (Chairman), Friedman, and Mortenson. Subject to certain limitations specified by the Company's Bylaws and the laws of Delaware, the Executive Committee is authorized by the Company's Bylaws to exercise the powers of the Company's Board when the Board is not in session. The Audit Committee is presently composed of Messrs. Friedman, Sampson and Schubert. The principal responsibilities of and functions generally performed by the Audit Committee are as follows: (1) recommendation of the accounting firm to be employed by the Company as its independent auditors; (2) consultation with the Company's independent auditors with regard to the audit plan; (3) review of the Company's financial statements with the independent auditors; (4) determination that no restrictions are placed by management on the scope and implementation of the independent auditor's examination of the Company; and (5) supervision of the internal audit function. During 1997, the Audit Committee held no meetings. The Compensation Committee is presently composed of Messrs. Sampson (Chairman) and Schubert. The Committee has the responsibility for recommending to the Board the compensation arrangements for senior management of the Company. It also recommends to the Board adoption of any compensation plans in which officers and directors of the Company are eligible to participate, as well as the granting of stock options or other benefits under any such plans. During 1997, the Compensation Committee held no meetings. During the year ended December 31, 1997, all members of the Board nominated for re-election, which were members of the Board during the year, attended more than 75% of the meetings of the Board and all standing committees on which they served. Executive Officers [Enlarge/Download Table] Name Age Positions and Offices with Company Business Experience During Last Five Years ---- --- ---------------------------------- ------------------------------------------ Clyde Wm. Engle 55 Chairman and Chief Executive See "DIRECTORS" above Officer Lee N. Mortenson 62 Director, President and Chief See "DIRECTORS" above Operating Officer Glenn J. Kennedy 46 Vice President, Treasurer and Vice President (since July 1998) and Treasurer Chief Financial Officer and Chief Financial Officer (since May 1988) of the Company; Treasurer and Chief Financial Officer of Sunstates Corporation (from September 1986 to May 1988); Chief Financial Officer of Simms Investment Company (May 1984 to August 1986); Senior Audit Manager, Price Waterhouse (1978 to May 1984). Richard A. Leonard 51 Vice President and Secretary Vice President (since July 1988) and Secretary (since May 1988) of the Company; Vice President (from April 1986 to May 1988) and Secretary (from September 1986 to May 1988) of Sunstates Corporation; Administrative Vice President and Counsel (from June 1984 to April 1986) of Sunstates Properties, Inc., a wholly-owned subsidiary of Sunstates Corporation; President and Counsel of AMIC Title Insurance Company (January 1982 to June 1984). For information on security ownership of the Company's executive officers, see above sections captioned "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS" AND "ELECTION OF DIRECTORS". Mr. Kennedy and Mr. Leonard do not own any securities of Sunstates. COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY Directors The following summarizes the director compensation incurred by the Company during the year ended December 31, 1997. Each director other than Messrs. Engle and Mortenson is paid $5,000 per quarter for serving in such capacity. In addition, directors other than Messrs. Engle and Mortenson, receive $1,500 for each Board meeting attended and $600 for each standing committee meeting attended which is not held on the day of a regularly scheduled Board of Directors meeting. Directors are also compensated from time to time for special assignments, including serving on special committees, at the rate of $200 per hour ($1,600 per day maximum) plus expenses. Each director is reimburses for his actual expenses in attending meetings of the Board or any of its committees. As of December 31, 1997 there were unpaid fees totaling $61,000 due to directors. Employment Agreements Mr. Engle has entered into an employment agreement with the Company whereby he is to serve as Chairman and Chief Executive Officer the terms of which are described below in the Compensation Committee Report on Executive Compensation. There are no other employment agreements between the Company and any of its other executive officers. COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION The Compensation Committee of the Board of Directors of the Company (the Committee) provides overall guidance with respect to the Company's executive compensation programs. The Committee is responsible for only the executive officers of Sunstates Corporation and does not review the compensation of employees or officers of Sunstates' subsidiaries. The Committee is composed of two members (all outside directors) and meets to review the Company's compensation programs, including executive salary administration and incentive compensation plans. The Committee considers and makes final decisions regarding the compensation of the Chief Executive Officer and the other Executive Officers of the Company. Mr. Mortenson, President and Chief Operating Officer is primarily compensates by Sunstates' parent organizations which are responsible for the establishment of such compensation (see Summary Compensation Table below). Neither the Chief Executive Officer nor any other named Executive Officer participates in those discussions or in the making of such decisions. General Executive Compensation Policies The Company's executive compensation policies are designed to attract and retain top quality executive officers and to reward executive officers for performance measured by review of financial performance criteria and achievement of strategic corporate objectives. The Company awards its executive officers two principal types of compensation: base salary and annual incentive compensation, each of which is more fully described below. In addition, executive officers participate in the Company's various other employee benefits plans, including the Company's 401(K) Plan. 1. Base salary. The Company has historically established the base salary of its executive of officers on the basis of each executive officer's experience, scope of responsibility and accountability within the Company. In making compensation determinations with respect to executive officers other than Messrs. Mortenson and Engle, the Committee considers the recommendations of the Chairman and the President. The Committee then confirms executive salaries largely through Committee judgment based on the experience of its members regarding appropriate salaries to attract, motivate and retain superior executives. The Committee, after considering the recommendations of the Chairman and the President, determines annual salary adjustments based on the Company's performance, prevailing norms and the Committee members' knowledge and experience. To correlate the compensation of the executive officers to individual and corporate performance and increases in shareholder value, the Company also relies on performance-related annual incentive awards in addition to base salary. 2. Annual incentive compensation. On August 29, 1990, the Compensation Committee adopted the Corporate Officer Discretionary Bonus Plan. At the present time Mr. Kennedy and Mr. Leonard are the only participants of this Plan. The Plan is designed to provide both current and deferred performance related compensation to key executives through a two-tier approach. A base bonus of 20% of each participant's annual salary is payable upon the participant's satisfactory completion of normal duties and is considered to be a component of base compensation. The base bonus is paid 50% currently and 50 % is paid on a prorata basis over the following five years of continued employment. However, the Company is currently in default on the payment of the previously deferred portion of such bonuses. A special discretionary bonus of up to 20% of each participant's annual salary will be considered by the Compensation Committee upon recommendation of the Company's President based upon extra performance above normal duties. The extra bonus is paid 50% currently and 50% is paid on a prorata basis over the following five years of continued employment. In the past, bonuses for extra performance above normal duties have been awarded to executive officers who have worked long hours under time constraints to close a transaction, assumed significant additional responsibilities upon the departure of other personnel or successfully completed other significant transactions. However, the Company is currently in default on the payment of the previously deferred portion of such bonuses. 1997 Compensation for Mr. Engle The general policies described above for the compensation of executive officers also apply to Mr. Engle as the Company's Chairman and Chief Executive Officer, however, Mr. Engle does not participate in the Corporate Incentive Compensation Plan discussed above. Mr. Engle has entered into an Employment Agreement with Sunstates, effective January 1, 1991, and initially extending through 1998, whereby Mr. Engle receives a base annual salary of $500,000. Such amount increases each year by at least the increase in the Chicago Consumer Price Index. However, the Company has not paid certain amounts owed under his Employment Agreement. For the year ended December 31, 1997, $333,435 of compensation owed to Mr. Engle was not paid. As of June 30, 1998, the Company owes Mr. Engle $630,195 in unpaid compensation. SUBMITTED BY THE COMPENSATION COMMITTEE OF THE COMPANY'S BOARD OF DIRECTORS: Harold Sampson (Chairman) William D. Schubert SHAREHOLDER RETURN PERFORMANCE GRAPH On July 22, 1996, the Company's securities were delisted from the NASDAQ Stock Exchange for failure to meet several continuing listing requirements; among them being the maintenance of a minimum net worth and a minimum trading price. The Company's securities are not presently listed on an exchange, are not traded in significant volumes and are thereby not subject to the establishment of reliable trading values. Accordingly, the Company is not able to prepare a line graph comparing the yearly percentage change in the cumulative total stockholder return on the Company's Common Stock against the cumulative total return of a Market Value Index of a national exchange or the Company's Peer Group for the period covering the Company's five fiscal years ended December 31, 1997. The Company does however believe the performance of the Company's stock is materially below that of most market value indices or a group of the Company's peers. The following table sets forth a summary of the compensation earned by the Company's executive officers during 1997, 1996 and 1995: [Enlarge/Download Table] SUMMARY COMPENSATION TABLE Annual Compensation Name and Principal Position Other Annual All Other Year Salary ($) Bonus ($) Compensation Compensaton ($) ---- ---------- --------- ------------- --------------- (a) (b) (c) (d) (e) (i) Clyde Wm. Engle 1997 580,175 280,000 Chairman and Chief Executive 1996 694,938 280,000 Officer 1995 524,236 280,000 Lee N. Mortenson 1997 303,345 199,633 1,428 President and Chief Operating 1996 184,559 263,124 3,059 Officer 1995 187,369 150,000 250,333 3,537 Glenn J. Kennedy 1997 180,035 30,000 2,900 Vice President, Treasurer and 1996 160,097 92,800 3,669 Chief Financial Officer 1995 159,950 67,200 3,418 Richard A. Leonard 1997 146,186 3,540 Vice President and Secretary 1996 144,718 3,204 1995 139,950 26,800 3,897 <FN> (c) Salary: Total base salary paid by the Company and its consolidated subsidiaries during the calendar year. Mr. Engle and Mr. Mortenson are also employees of the Company's parent, Hickory, and receive compensation from Hickory for services rendered to the Company. The Company pays Hickory an annual management fee and the compensation received by Mr. Engle and Mr. Mortenson from Hickory attributable to services rendered to the Company is included in Other Annual Compensation (column "e"). (d) Bonus: Annual incentive compensation awarded on a discretionary basis for results achieved during the calendar year under a plan approved by the Board of Directors. One-half of the bonus amount is paid when awarded and the remaining half is paid over the succeeding five years on a prorate basis. Should the officer voluntarily leave the Company during that five-year period, he will forfeit all rights to any unpaid balance. However, the Company is currently in default of payments due for prior years' deferred bonuses, including interest, in the amounts of $48,088 for Mr. Kennedy and $21,607 for Mr. Leonard. The award for 1997 has not yet been determined. With respect to Mr. Mortenson, the 1995 bonus was special cash bonus awarded by the Compensation Committee of the Board of Directors for services rendered during 1993 and 1994. In addition, the amount shown for Mr. Kennedy in 1997 represents amounts paid by Alba-Waldensian, Inc., then a consolidated subsidiary of the Company, under a bonus plan providing for annual incentive compensation based upon achievement of financial targets and non-financial objectives for the year. No amounts are deferred under the Alba-Waldensian plan. (e) Other Annual Compensation: All additional forms of cash and non-cash compensation paid, awarded or earned. The amounts shown for Mr. Engle and Mr. Mortenson represent compensation paid or accrued by the Company's parent, Hickory, attributable to services rendered to the Company (see "c" above). The value of all other personal benefits and perquisites received by the Company's executive officers in 1997 were less than the required reporting threshold. (i) All Other Compensation: All other compensation that does not fall under any of the aforementioned categories. The amounts shown in this column for 1997 comprise the following payments made by the Company: (i) Mr. Mortenson: $258 - matching contribution to 401(k) plan and $1,170 - premium for term life insurance policy; (ii) Mr. Kennedy: $1,712 - matching contribution to 401(k) plan and $1,188 - premium for term life insurance policy; and (iii) Mr. Leonard: $2,352 - matching contribution to 401(k) plan and $1,188 - premium for term life insurance policy. </FN> INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS Mr. Engle serves as director of Indiana Financial Investors, Inc. Messrs. Engle and Mortenson serve as directors, and Mr. Engle is Chairman of the Board of Directors, President and Chief Executive Officer, of Hickory Furniture Company. Mr. Engle is Chairman of the Board and Chief Executive Officer and Mr. Mortenson is a director, President and Chief Operating Officer of Telco Capital Corporation. Please see "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS" for additional information regarding the relationship of the Company and management to the entities involved in the transactions described below. The law firm of Schuyler, Roche & Zwirner , of which Mr. Friedman is a member, has rendered legal services to the Company during 1997 (approximately $147,000, all of which remains unpaid) and the current fiscal year (approximately $80,500, all of which remains unpaid). See Note 13 to Unaudited Consolidated Financial Statements contained in Appendix A of this Information Statement for information regarding other related transactions. INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS The firm of BDO Seidman served as the auditors for the Company for the year ended December 31, 1994. However, they did not complete their audit of the Company's financial statements for the year ended December 31, 1995, and have not subsequently performed any services for the Company. Representatives of BDO Seidman are not expected to be present at the Annual Meeting of Shareholders. OTHER MATTERS The Board of Directors does not know of any other matters to come before the Meeting SHAREHOLDER PROPOSALS Shareholders who wish a proposal to be included in the Company's Proxy Statement and form of proxy relating to the 1999 Annual Meeting should deliver a written copy of their proposal to the principal executive offices of the Company no later than March 31, 1999. If the date of the 1999 Annual Meeting is delayed, there will be a proportionate extension of time for the filing of shareholder proposals as provided in the Company's By-Laws. To ensure prompt receipt by the Company, proposals should be sent certified mail, return receipt requested, to Richard A. Leonard, Corporate Secretary, Sunstates Corporation, 4600 Marriott Drive, Suite 200, Raleigh, North Carolina 27612. Proposals must comply with the proxy rules of the Securities and Exchange Commission relating to shareholder proposals in order to be included in the Company's proxy materials. ANNUAL REPORT Due to the incomplete status of the Company's 1995 financial statements (see "Independent Certified Public Accountants" above), the insolvency of the Company's major operating subsidiary (Coronet) in December 1996 (see Note 2 of Notes to Consolidated Financial Statements contained in Appendix A) and the bankruptcy of the Company's furniture manufacturing subsidiary in January 1997, the Company has not been able to prepare Annual Reports for the years of 1995, 1996 or 1997. However, attached as Appendix A to this Information Statement are unaudited consolidated financial statements of the Company for the year ended December 31, 1997. These statements do not comply with all requirements of generally accepted accounting principles or the regulations of the Securities and Exchange Commission. They are however, prepared from the books and records of the Company and its subsidiaries which are still available to the Company and represent the best information available to the Company as to its financial condition and results of operations. Dated: July 21, 1998
DEF 14C4th "Page" of 9TOC1stPreviousNextBottomJust 4th
[Enlarge/Download Table] APPENDIX A SUNSTATES CORPORATION Consolidated Balance Sheet December 31, 1997 (Unaudited) ASSETS: REAL ESTATE: Property, plant and equipment $ 629,927 Real estate held for development and sale 2,239,230 Mortgage loans 50,634 Land contracts receivable 199,454 3,119,245 INVESTMENTS: Investment in affiliates 10,771,318 OPERATING ASSETS: Cash 163,248 Restricted cash 212,217 Accounts receivable 1,325,889 Inventories 2,006,709 Prepaid expense 189,117 ------- 3,897,180 OTHER ASSETS: Receivable from affiliates 2,681,315 Other assets 2,225,766 Costs in excess of assets acquired 662,244 ------- 5,569,325 $ 23,357,068 See Accompanying Notes to Consolidated Financial Statements
DEF 14C5th "Page" of 9TOC1stPreviousNextBottomJust 5th
[Enlarge/Download Table] APPENDIX A SUNSTATES CORPORATION Consolidated Balance Sheet December 31, 1997 (Unaudited) LIABILITIES AND STOCKHOLDERS' DEFICIT: DEBT: Notes payable $ 10,210,150 Mortgage notes 365,538 ------- 10,575,688 OTHER LIABILITIES: Accounts payable 894,872 Accrued expenses 3,291,619 Payable to affiliates 8,017,072 Other liabilities 3,572,852 15,776,415 TOTAL LIABILITIES 26,352,103 MINORITY INTERESTS IN SUBSIDIARIES 2,519,798 STOCKHOLDERS' DEFICIT: Preferred stocks 11,631,750 Common stock, 2,271,705 shares outstanding 757,235 Class B Accumulating Convertible Stock, 79,604 shares outstanding 7,960 Capital in excess of par value 30,392,496 Accumulated deficit (48,304,274) ---------- Total stockholders' deficit (5,514,833) $ 23,357,068 See Accompanying Notes to Consolidated Financial Statements
DEF 14C6th "Page" of 9TOC1stPreviousNextBottomJust 6th
[Enlarge/Download Table] APPENDIX A SUNSTATES CORPORATION Consolidated Statement of Operations For the Year Ended December 31, 1997 (Unaudited) REVENUES: Newspaper revenues $ 4,838,222 Manufacturing sales 2,032,593 Real estate sales 445,767 Investment income 322,120 Equity in losses of affiliates (434,899) Other income 136,540 ------- Total revenues 7,340,343 COSTS AND EXPENSES: Newspaper publication costs 5,183,618 Cost of manufacturing sales 1,035,369 Cost of real estate sales 350,117 Other selling and operating costs 548,977 Corporate expenses 4,625,235 Interest expense 1,681,328 Adjustment to carrying value of investments 4,927,650 --------- Total costs and expenses 18,352,294 LOSS BEFORE ITEMS SHOWN BELOW (11,011,951) Provision for income taxes (29,250) Minority interest in loss of subsidiaries 254,397 NET LOSS $ (10,786,804) EARNINGS PER SHARE INFORMATION: Net Loss Applicable to Common Stock $ (12,522,972) Net Loss Per Common Share $ (3.38) See Accompanying Notes to Consolidated Financial Statements
DEF 14C7th "Page" of 9TOC1stPreviousNextBottomJust 7th
[Enlarge/Download Table] APPENDIX A SUNSTATES CORPORATION Consolidated Statement of Stockholders' Deficit For the Year Ended December 31, 1997 (Unaudited) $ 3.75 Class B Capital Cumulative Class B Class E Accumulating in Total Preferred Preferred Preferred Common Convertible Excess of Accumulated Stockholders' Stock Stock Stock Stock Stock Par Value Deficit Deficit ----- ----- ----- ----- ----- --------- ------- ------- Balances, January 1, 1997 $8,151,150 1 57,300 342,663 7,071 34,203,536 (37,517,470) 5,244,251 Net loss -- -- -- -- -- -- (10,786,804) (10,786,804) Conversion of Class B Preferred Stock -- (1) -- 133,333 -- (133,332) -- -- Sale of treasury stock 3,423,300 -- -- 281,239 889 (3,677,708) -- 27,720 --------- -- ---- ------- --- --------- ---- ------ Balances, December 31, 1997 $11,574,450 -- 57,300 757,235 7,960 30,392,496 (48,304,274) (5,514,833) ========== == ====== ======= ===== ========== ========== ========= See Accompanying Notes to Consolidated Financial Statements
DEF 14C8th "Page" of 9TOC1stPreviousNextBottomJust 8th
[Enlarge/Download Table] APPENDIX A SUNSTATES CORPORATION Consolidated Statement of Cash Flows For the Year Ended December 31, 1997 (Unaudited) OPERATING ACTIVITIES: Net loss $ (10,786,804) Adjustments to reconcile net loss to net cash utilized in operating activities: Depreciation and amortization 340,127 Realized loss on sale of investments 264,043 Reserves and writedowns 2,512,547 Adjustment to carrying value of investments 4,927,650 Equity in undistributed loss 434,899 Reduction of minority interest (254,397) Changes in assets and liabilities: Real estate held for development and sale 131,926 Mortgage loans on land contracts receivable 80,822 Mortgage notes payable on real estate held 109,636 Inventories (1,000,728) Operating assets and other liabilities 383,859 ------- Total adjustments 7,930,384 Net cash utilized in operating activities (2,856,420) INVESTING ACTIVITIES: Investment in securities sold 42,000 Purchases of property, plant and equipment (1,791) Repayments of mortgage loans 1,033 Other investments 926,099 ------- Net cash provided by investing activities 967,341 ------- FINANCING ACTIVITIES: Proceeds from notes payable 210,150 Borrowings from affiliates 441,000 Sale of treasury stock 27,720 ------ Net cash provided by financing activities 678,870 ------- Decrease in cash (1,210,209) Cash, beginning of year 1,585,674 --------- Cash, end of year 375,465 Less: restricted cash (212,217) ------- Unrestricted cash $ 163,248 ======= See Accompanying Notes to Consolidated Financial Statements
DEF 14CLast "Page" of 9TOC1stPreviousNextBottomJust 9th
APPENDIX A NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Going Concern The Company's current businesses do not generate sufficient cash flow to fund the Company's operations and overhead requirements. Without the ability to reach satisfactory agreements with its creditors and secure necessary outside financing, the Company may not be able to continue as a going concern. During the year ended December 31, 1997 the Company borrowed $512,000 on an unsecured basis from the Company's Chairman to fund operating deficits. Subsequent to December 31, 1997 the Company has borrowed an additional $405,200 from the Company's Chairman to fund continuing operating deficits. The Company's Chairman is not obligated to continue to provide funds to the Company and accordingly the Company cannot state with certainty that it will be able to continue to operate. The accompanying financial statements have (with the exception of Investments in Affiliates - See Notes 2, 5 and 14) been prepared utilizing historical cost accounting principles applicable to an entity which is expected to continue as a going concern. Accordingly, the accompanying financial statements do not contain adjustments that might be necessary to reflect the liquidation value of the Company's assets and liabilities. 2. Organization Parent Company Sunstates Corporation ("Sunstates" and/or the "Company") is a majority-owned subsidiary of Hickory Furniture Company ("Hickory") and Hickory in turn is a direct and indirect majority-owned subsidiary of the following companies: Telco Capital Corporation ("Telco") and RDIS Corporation ("RDIS"). Consolidated Subsidiaries The Company's principal operating subsidiaries are Sew Simple Systems, Inc. (a manufacturer of automated textile manufacturing equipment located in Fountain Inn, SC), and Lerner Communications, Inc. (a publisher of five neighborhood newspapers in the Chicago area). The Company also conducts less significant operations through National Development Company (resort lot development) and Sunstates Realty Group (commercial real estate). Other subsidiaries, which are consolidated in the accompanying financial statements, do not have significant operations. Unconsolidated Subsidiaries On December 24, 1996, the Company's principal operating subsidiary, Coronet Insurance Company, was placed in liquidation by the Illinois Department of Insurance ("IDOI"). The IDOI terminated all operations of Coronet, took possession of all of the business and financial records of Coronet and terminated all of its employees. The IDOI is presently in the process of liquidating all of the assets of Coronet for the benefit of creditors and policyholders. Inasmuch as Coronet is no longer under the control of Sunstates and its financial records are no longer available to the Company, the accompanying financial statements do not include the accounts of Coronet and its subsidiaries. On January 27, 1997, the Company's furniture manufacturing subsidiary, Hickory White Company, filed for bankruptcy protection under Chapter 11 of the Federal Bankruptcy Laws. Hickory White's operations have been sold with the proceeds to be distributed by the bankruptcy court to its creditors with no anticipated distribution to equity holders. Inasmuch as Hickory White is no longer under the control of Sunstates and its financial records are no longer available to the Company, the accompanying financial statements do not include the accounts of Hickory White. Operations for the first 27 days of 1997 are not considered material and are not included in the accompanying consolidated statement of operations. On February 28, 1997, the Company's apple orchard subsidiary, Normco, filed for bankruptcy protection under Chapter 11 of the Federal Bankruptcy Laws. The Company does not expect a significant distribution from the bankruptcy estate. On May 15, 1998, LaSalle National Bank, pursuant to a Notice of Private Sale of Collateral dated May 7, 1998 and as approved by an order issued by the Illinois Circuit Court, sold the common stock of Alba-Waldensian, Inc. (938,700 shares) it held under a loan to certain of the Company's subsidiaries (see Notes 5 and 14). The Company was not involved in the determination of the transaction pricing and substantially all of the proceeds from the sale were utilized to retire the subsidiaries' debt to LaSalle, which had been in default since January 1997. Prior to the sale, Alba-Waldensian, Inc. was a greater than 50% owned subsidiary of the Company. However, inasmuch as the Company's control of Alba at December 31, 1997 was temporary, Alba has been presented in the accompanying financial statements utilizing the equity method of accounting. 3. Significant Accounting Policies Management Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant areas involving estimates and assumptions by the Company's management include; net realizable values of real estate held for development and sale, collectibility of amounts owed by customers and affiliates, net realizable value of inventories, future realizability of amounts invested in the Company's operating businesses, and the future outcome of pending litigation. Actual results could differ from those estimates. Principles of Consolidation The consolidated financial statements include the accounts of Sunstates and all of its subsidiaries (except as set forth in Note 2 above). All significant intercompany accounts and transactions have been eliminated in consolidation. Property. Plant and Eguipment Property, plant and equipment consist of investment in productive facilities and equipment. Such assets are stated at cost and are depreciated and amortized over their estimated useful lives (ranging from 3 to 40 years) primarily on a straight-line basis. Real Estate Held for Development and Sale Real estate held for development and sale is recorded at the lower of cost or net realizable value. Depreciation, where appropriate, is provided using the straight-line method over the estimated useful lives of the assets (not exceeding forty years). Investments in Affiliates Investments in Affiliates represent investments that are accounted for utilizing the equity method of accounting. At December 31, 1997 the carrying value of these investments was adjusted to reflect their net realizable value to the Company from their sale by foreclosure on May 15, 1998 (see Notes 5 and 14). Cash Sunstates may invest cash in excess of operating requirements in income producing investments including certificates of deposit and money market accounts that have original maturities of three months or less. Such short-term investments are included in the cash balances reported in the accompanying financial statements. The carrying amount approximates fair value because of the short maturity of those instruments. Restricted Cash Restricted cash primarily represents cash of subsidiaries, which is restricted by law or by contract to specific purposes and is generally not available for other discretionary use. Receivables Accounts receivable result primarily from the Company's textile equipment manufacturing and newspaper publication subsidiaries. Due to the nature of the textile equipment manufacturing business, sales and trade receivables are concentrated in a low number of customers. In 1997, sales to two customers represented 90% of machine sales. Inventories Inventories, consisting mainly of raw materials and work in process related to the textile equipment manufacturing business are stated at the lower of cost (determined on a first-in, first-out method) or market. Receivable from Affiliates Receivable from affiliates primarily represents amounts owed to the Company by its parent companies and by subsidiaries of the Company now controlled by the Illinois Department of Insurance (IDOI) and no longer consolidated in the accompanying financial statements (see Note 1). Receivable from affiliates are stated at their estimated net realizable values and are net of reserves for uncollectible amounts totaling $16,831,357. Other Assets At December 31, 1997, other assets included $1,897,238 of collectible investments including oriental artwork, antique jewelry, rare books and other collectibles which are purchased and sold through dealers and at public auctions. Some of these collectibles are maintained in a specially designed, security-alarmed and environmentally controlled room in the residence of the Company's Chairman. Such collectible investments are carried at cost (which does not exceed market) and are saleable. Costs in Excess of Assets Acquired Costs in excess of assets acquired represents the excess of the purchase price over the fair value of net assets acquired (goodwill) in connection with the acquisition of the textile equipment manufacturing and newspaper publishing businesses. The Company evaluates the continued recoverability of its intangible assets, including cost in excess of assets acquired, whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Factors which would trigger such an evaluation would include, but not be limited to, a significant decrease in the market value of an asset or operation, a significant change in the extent or manner in which an asset is being used, a significant change in legal factors or business climate and an expectation of continuing future losses. The Company evaluates the realizability of goodwill based upon expectations of non-discounted cash flows and operating income for each subsidiary having a material amount of goodwill recorded. These costs are being amortized on a straight-line basis over a 10-year period. Cumulative amortization totaled $1,210,844 at December 31, 1997. Newspaper Revenue Revenues from the sale of advertising are recorded as earned. Prepaid subscriptions are deferred and recognized as income over the life of the subscription. Manufacturing Revenue Sales of automated textile machinery are recorded at the time the inventory is shipped. Real Estate Revenue Profits on sales of real estate are recorded under the full accrual method or other generally accepted methods, as appropriate. Interest, rent and other operating income is recorded when earned, except that interest is not accrued on loans which are in excess of sixty days past due and other income is not recognized if collectability is doubtful. Income Taxes Sunstates and its eligible United States subsidiaries file consolidated federal income tax returns. Income taxes for both federal and state tax purposes are provided based on both incomes reported for financial statement purposes and the applicable tax laws and rates in effect for the years presented. Significant net operating loss carryforwards for federal income tax purposes are available which may be utilized to eliminate, except for alternative minimum tax, substantially all federal income taxes. The current provision for income tax expense is presented net of any benefit recognized from the utilization of existing net operating loss carryforwards. The Company utilizes the asset and liability method of accounting for income taxes wherein deferred income taxes are recognized for the tax consequences of "temporary differences" by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized. In establishing such an allowance, the Company considers all available information, including but not limited to, its historical taxable income record, the likelihood of future taxable income, the availability of tax planning strategies and the existence of taxable temporary differences which will reverse during periods in which the Company's net operating loss carryforwards will be available to offset such taxable items. Financial Instruments The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value: Mortgage Loans - estimated by discounting future cash flows using the current rates at which similar loans would be made to borrowers with similar credit risks and for the same remaining maturities. Land Contracts Receivable - by discounting future cash flows using the current rates at which the Company was making such loans during 1997 (8%). Receivable from Affiliates - due to their related party nature and terms of the receivables from affiliates, the Company cannot estimate the fair market value of such financial instruments. Notes Payable - these notes substantially bear interest at a floating rate of interest based upon the lending institution's prime lending rate. Accordingly, the fair value approximates their reported carrying amount at December 31, 1997. Mortgage Notes - estimated based upon current market borrowing rates for loans with similar terms and maturities. The estimated fair values of the Company's financial instruments as of December 31, 1997 are as follows: Carrying Fair Amount Value Financial Assets: Mortgage Loan $50,634 51,426 Land Contracts Receivable 199,454 253,455 Investment in Affiliates 10,771,318 10,771,318 Financial Liabilities: Notes Payable 10,210,150 10,210,150 Mortgage Notes 365,538 365,538 4. Real Estate Property, Plant and Equipment Investment in property, plant and equipment as of December 31, 1997 is summarized as follows: [Download Table] Manufacturing $ 549,496 Newspaper Publication 62,574 Corporate and other 17,857 ------ Total $ 629,927 ======= Property, plant and equipment are shown net of accumulated depreciation and amortization of $1,559,705 at December 31, 1997. Property, plant and equipment totaling $549,496 is pledged as collateral under various notes and mortgages outstanding at December 31, 1997 (see Note 7). Real Estate Held For Development and Sale Real estate held for development and sale as of December 31, 1997 is summarized in the following table: [Download Table] Recreational lots 3,564 Other land 1,037,990 Interest in partnerships 364,824 Resort properties 1,311,039 Other 605,803 2,267,230 ------- Adjustment to historical cost (28,000) -------- $ 2,239,230 Certain of these assets are shown above at their fair values as established in connection with a 1985 merger. The adjustment to historical cost represents the difference between such fair values and the cost basis at which they are carried in the accompanying financial statements as allocated to those assets in connection with the merger. Approximately $623,740 of the real estate was pledged to secure various mortgage notes payable at December 31, 1997 (see Note 7). Real estate presented above is net of accumulated depreciation of $22,859 at December 31, 1997. Mortgage Loans Mortgage loans at December 31, 1997 are net of allowances for possible losses of $38,574. The effective interest rates used to discount these loans range from 8% to 16%. The weighted average interest rate on the mortgage loan portfolio was 9.6% for the year ended December 31, 1997. Estimated collections of principal on mortgage loans at December 31, 1997 are as follows: [Download Table] Years Ending Principal December 31 Collections 1998 $ 25,031 1999 42,888 2000 1,289 2001 1,357 2002 2,226 2003 and thereafter 16,417 ------ Total gross receivables 89,208 Less: Allowance for possible losses (38,574) $50,634 Land Contracts Receivable The Company typically finances its sales of recreational and second home resort lots, after a 10% down payment, over a period of three to seven years with an interest rate of 12%. Estimated collections of principal on land contracts receivable at December 31, 1997 are as follows: Years Ending Principal December 31 Collections ----------- ----------- 1998 $93,000 1999 69,750 2000 52,313 2001 39,235 2002 29,426 2003 and thereafter 27,216 ------ Total gross receivables 310,940 Less: Allowance for cancellation and uncollectible accounts (111,486) --------- $ 199,454 Land contracts receivables are discounted to reflect market rates of interest prevailing at the date of sale, primarily 12-15%. The discounts are amortized to operations using the interest method over the term of the respective notes. 5. Investments Investment in Affiliates Alba has been an investee of the Company since May 1987 and a greater than 50% owned subsidiary since June 30, 1993. However, due to the fact that the Company's control of Alba was temporary at December 31, 1997 (see Notes 1 and 14), Alba has not been consolidated in the accompanying financial statements and is presented therein utilizing the equity method of accounting. At December 31, 1997, the Company's investment in Alba stock totaled 50.61% of the outstanding shares, had a equity accounting carrying value of $6,654,629 and a quoted market value of $4,370,625, and substantially all was pledged to secure a note payable to a bank (see Note 6). Furthermore, the equity accounting carrying value of Alba has been written down by $6,108,549 at December 31, 1997 so as not to exceed the net value realized by the Company upon the sale of the Alba stock at foreclosure on May 15, 1997. Rocky Mountain Chocolate Factory, Inc. ("Rocky Mountain"), located in Durango, Colorado, manufactures, from its own recipes, a line of gourmet chocolates and other premium confectionery products for sale at company-owned and franchised stores. Since December 31, 1989, Rocky Mountain has been an equity method investee of Sunstates. At December 31, 1997, the Company's investment in Rocky Mountain stock totaled 27.45% of the outstanding shares, had an equity method carrying value of $2,268,257 and a quoted market value of $4,396,464, and was pledged to secure a note payable to a bank (see Note 6). Furthermore, the equity accounting carrying value of Rocky Mountain has been increased by $1,848,432 at December 31, 1997 to reflect the net value realized by the Company upon the sale of the Rocky Mountain stock at foreclosure on May 15, 1997. The difference between the cost of the investments and the underlying net assets of investees is allocated to the property, plant and equipment of the investee and amortized over the depreciable life of the assets. Also included in investment in affiliates on the accompanying Consolidated Balance Sheet is common stock of certain of Sunstates' direct and indirect parent companies which was purchased on the open market at an aggregate cost of $61,552 at December 31, 1997. Due to the financial condition of those entities, the Company's investment in such securities has been fully reserved. 6. Inventories The principal classifications of inventories as of December 31, 1997 are: Textile apparel manufacturing - Materials and supplies $ 74,117 Work in progress 981,395 Finished goods 951,197 ------- $ 2,006,709 7. Debt Notes Payable The following table summarizes notes payable as of December 31, 1997: Notes payable to bank $10,000,000 Other 210,150 $ 10,210,150 The Company's note payable to a bank bearing interest at Prime + 1% required a principal reduction down to $6,250,000 by January 1, 1997, with a final maturity on January 1, 1998. The note has been in default since January 1997 and is secured by the Company's common stock of Alba and Rocky Mountain (see Note 5). Additionally, the Company pledged substantially all of the assets of its then owned hotel and golf resort (now controlled by the IDOI - see Note 2) and its automated textile equipment manufacturing operations as collateral under this note. (See Note 14 - Subsequent Events for information concerning the foreclosure and sale of the Alba and Rocky Mountain collateral.) The Company's other note payable is payable to a major auction house and is collateralized by certain of the Company's collectibles (see "Other Assets" in Note 3) being held by the auction house for sale. The note bears interest at 11.5% and principal payments against the note are due upon sale of the collectibles. Mortgage Notes The following table summarizes mortgage notes payable as of December 31, 1997: Mortgage notes to financial institutions With maturities ranging from 1996 to 2011 at Interest rates ranging from 7.25% to 12% $ 365,538 $ 365,538 The above mortgage notes are collateralized by approximately $623,740 of real estate (see Note 4). At December 31, 1997, the prime rate of interest was 8.5%. Effective weighted average interest rates for mortgage notes payable approximated 9.3% for the year ended December 31, 1997. Five Year Maturity Schedule The following table reflects the required principal payments on debt, including notes payable and mortgage notes which would be made if the debt outstanding at December 31, 1997, was held to maturity: Years Ending Principal December 31. Pavments ------------ -------- 1998 $10,354,438 1999 127,500 2000 7,500 2001 7,500 2002 7,500 2003 and thereafter 71,250 ------ Net carrying value $10,575,688 With respect to the notes maturing in 1998, see Note 14 for information regarding the foreclosure and payoff of the $10,000,000 loan payable to LaSalle National Bank. Other notes maturing in 1998 include mortgages on various parcels of real estate held for sale. Although the Company believes that it will be able to sell or refinance the properties, the availability of real estate financing has been severely curtailed in recent years as the result of past problems in both the banking and real estate industries. Accordingly, Sunstates cannot state with certainty that it will be successful in obtaining such refinancing. Interest paid for the year ended December 31, 1997 totaled $1,607,494. 8. Minority Interest in Subsidiaries Included in minority interest in subsidiaries is the minority common stock interests of the IDOI in certain consolidated subsidiaries at December 31, 1997 as follows: Sew Simple Systems, Inc. 15% $ 1,694,948 Alba-Waldensian Holdings Company 20% 671,308 Wellco Holdings Company 10% 153,542 $ 2,519,798 9. Stockholders' Equity Preferred Stocks Sunstates has the following issues of preferred stock as of December 31, 1997: $3.75 Cumulative Preferred Stock $ 11,574,450 Class E Preferred Stock 57,300 Total Preferred Stock $ 11,631,750 ========== Class B Preferred Stock - $1.00 par value; preference in liquidation $100. Prior to January 30, 1997, the one and only authorized and issued share was held by a subsidiary of the Company controlled by the IDOI (see Note 1). On January 30, 1997, the Company exercised its option to convert this one share of Class B Preferred Stock into 400,000 shares of the Company's Common Stock. $3.75 Cumulative Preferred Stock - $25 par value per share, 471,100 shares authorized; 462,978 issued and outstanding at December 31, 1997. The $3.75 Cumulative Preferred Stock has no conversion, exchange, mandatory redemption, preemptive or other subscription rights or sinking fund provisions and is currently callable at $25 per share, in whole or in part, at the option of Sunstates. Dividends are cumulative and payable semi-annually, when and as declared. The $3.75 Cumulative Preferred Stock has no voting rights, except if two semi-annual dividend payments are unpaid and in arrears at the date of the Company's annual meeting the holders of the $3.75 Cumulative Preferred Stock have the right to elect fifty percent of the members of the Company's Board of Directors. At December 31, 1997, Sunstates was fourteen semi-annual dividends in arrears on its $3.75 Cumulative Preferred Stock. (See Note 13 regarding the sale to the Company's parent of 136,932 shares of the Company's $3.75 Cumulative Preferred Stock owned by subsidiaries of the Company.) Class E Preferred Stock, Series I and II - $.10 par value per share; 589,000 shares authorized; 573,000 issued and outstanding at December 31, 1997 with a $1.00 per share liquidation preference. Class E Preferred Stock has no conversion, exchange, mandatory redemption, preemptive or general voting rights and may be redeemed in whole or in part by action of Sunstates' Board of Directors. Non-cumulative dividends are payable on the Class E Preferred Stock at the annual rate of $.08 per share, when and as declared. There were no dividends declared during the year ended December 31, 1997. Common Stock - $.33 1/3 par value per share; 5,000,000 shares authorized; 2,292,505 shares issued as of December 31, 1997 of which 20,800 shares were held in treasury at December 31, 1997. See "Class B Preferred Stock" above regarding the conversion of Class B Preferred Stock into 400,000 shares of Common Stock. (See Note 13 regarding the sale to the Company's parent of 843,717 shares of the Company's Common Stock owned by subsidiaries of the Company.) Class B Accumulating Convertible Stock - ("Class B Stock") $.10 par value, 84,800 shares authorized. Class B Stock has the same rights as Common Stock other than with respect to voting rights and conversion privileges. Each share of Class B Stock has 85.3125 votes per share on each matter submitted to a vote of Sunstates' stockholders. Holders of Class B Stock also have the right, at their option, to convert Class B Stock into Common Stock at the rate of 24.375 shares of Common Stock per share of Class B Stock. (See Note 13 regarding the sale to the Company's parent of 8,890 shares of the Company's Class B Stock owned by subsidiaries of the Company.) Dividends Under the terms of Sunstates' $3.75 Preferred Stock, dividends may not be paid on common shares while preferred stock dividends remain in arrears. At December 31, 1997, Sunstates was in arrears fourteen semi-annual dividends on its $3.75 Cumulative Preferred Stock aggregating $12,153,173 ($26.25 per share). 10. Commitments and Contingencies Litigation In April of 1988, two essentially similar civil actions styled Jeremiah P. O'Connor, Sarah M. O'Connor, and Leonore Ballan v. Acton Corporation, et al., and VR Associates and PJE Associates v. Acton Corporation, et al., were filed in the Court of Chancery for the State of Delaware in and for New Castle County. Also named in these actions are Sunstates Corporation and the directors of Acton prior to the merger with Sunstates. These actions, along with another subsequently filed action styled Harry Lewis v. Clyde w. Engle, et al., have been consolidated into one action entitled In Re Acton Corporation Shareholders Litigation. All plaintiffs allege to be holders of common stock of Acton and seek to have the action designated a class action on behalf of all parties owning common stock of Acton. The action challenges the merger of Sunstates Corporation with and into Acton, alleges fraud and breach of fiduciary duty and seeks unspecified damages plus costs and expenses including attorney's fees. Acton intends to defend this action vigorously. The suit is still in the preliminary stages and management is unable to predict the outcome of the litigation; however, management is of the opinion that the outcome of the litigation is unlikely to have a material adverse effect on Sunstates' financial position, results of operations or cash flows. On June 4, 1990, VR Associates and Sonem Partners, L.P. filed a shareholder derivative action in the Court of Chancery for the State of Delaware in New Castle County against the directors of Acton and Hickory. The action alleges that certain transactions entered into and investments made by Acton constituted waste or a breach of fiduciary duty by the Board of Directors of Acton. In particular, the action alleges that Acton's purchase of the furniture operations of Hickory was not in the best interests of Acton and seeks various relief, including rescission of the purchase, unspecified damages and costs. The action also sought to obtain a temporary restraining order to prevent consummation of the purchase transaction. The request for a restraining order was denied by the Court on June 8, 1990. An essentially similar action was filed in the State of Delaware on June 12, 1990 by PJE Associates. These suits are still in the preliminary stages and management is unable to predict the outcome of the litigation; however, Sunstates intends to defend these actions vigorously. On June 14, 1991, a jury in a District Court of Dallas County, Texas awarded $3.5 million in actual damages and $5 million in punitive damages to the plaintiffs of a lawsuit filed against the Company. This dispute related to the amount of additional purchase consideration due plaintiffs under an agreement made in 1983 whereby the Company purchased National Development Company, a real estate company based in Dallas. The Company appealed the verdict based, in part, on the exclusion by the court of evidence crucial to the Company's defense. On August 9, 1995, the Court of Appeals Fifth District of Texas at Dallas reversed the trial court's judgement and remanded the case back to the trial court for a new trial. On December 19, 1998, the Company settled the case for a series of payments totaling $365,521. The Company is currently in default of the final payment due under the settlement agreement in the amount of $65,521. On December 8, 1993, Richard N. Frank filed a purported derivative and class action in the Court of Chancery for the State of Delaware in New Castle County against the directors of Acton, Hickory and Telco. The action alleges that certain transactions entered into and investments made by Acton constituted waste or a breach of fiduciary duty by the Board of Directors of Acton. The complaint also alleges that the Company and its insurance subsidiary repurchased shares of the Company's common stock and $3.75 Cumulative Preferred Stock in violation of the Company's certificate of incorporation. Finally, the complaint alleges that the proxy statement disseminated in connection with the Company's December 13, 1993, annual meeting was materially misleading. This suit is in the preliminary stages and management is unable to predict the outcome of the litigation; however, Sunstates intends to defend these actions vigorously. On January 10, 1994, Robert A. Lee, et al. filed a purported derivative action in the Court of Chancery for the State of Delaware in New Castle County against the directors of Acton, Hickory, Telco, Wisconsin Real Estate Investment Trust (WREIT), RDIS Corporation and nominally against the Company itself. The complaint alleges that certain transactions entered into and investments made by Acton constituted waste or a breach of fiduciary duty. This suit is in the preliminary stages and management is unable to predict the outcome of the litigation; however, Sunstates intends to defend these actions vigorously. On December 13, 1995, the Circuit Court, Hickman County, Tennessee certified as a class action a breach of contract claim filed on March 29, 1994, by individuals who purchased property from National Development Company at the Hidden Valley Lakes development in Hickman County, Tennessee prior to the end of 1994. The complaint alleges, in essence, that the Company breached its contract primarily with respect to the construction of a recreational lake on the property and seeks an unspecified amount of compensatory damages. The complaint also includes a prayer for recission of all purchase contracts between the Company and members of the class. The parties are now conducting discovery and no trial date has been set. Although Sunstates intends to defend these actions vigorously and cannot predict the outcome of the litigation, the Company has recorded a reserve of $1,250,000 in the accompanying financial statements. Sunstates Corporation and certain of its subsidiaries have been named as defendants in an action entitled Mark Boozel, Director of Insurance of the State of Illinois, and the Springs, Inc. v Alba-Waldensian Holdings Company, et. al., No. 96 Ch 13422 (Circuit Court of Cook County, Illinois) (the "Litigation"). In the Litigation the plaintiff asserts that the defendants, including Sunstates Corporation and certain of its subsidiaries, improperly removed assets with a value in excess of $30,000,000 from Coronet Insurance Company, National Assurance Indemnity Company, and Crown Casualty Company. Sunstates Corporation, and those of its subsidiaries that are defendants in the Litigation, deny those allegations, and intend to vigorously defend the Litigation. On June 10, 1996, a Judgment was entered in the Superior Court of Washington County, North Carolina against Sunstates Corporation (the "Company") in an action relating to the breach of a ground lease agreement. The amount of the Judgment was $254,829, plus interest on such sum at the legal rate of eight percent per annum from and after March 22, 1991 until paid in full, plus costs of the action. The Company appealed the granting of the Judgment to the North Carolina Court of Appeals, which on June 2, 1998 affirmed the decision of the Superior Court and upheld the Judgment against the Company. The Company has subsequently filed a Petition for Discretionary Review to the North Carolina Supreme Court. As of December 31, 1997, the Company has recorded a reserve of $338,483 with respect to this Judgment. At December 31, 1995, Sunstates and its subsidiaries also were, and currently are, defendants in other legal proceedings incidental to their business. Sunstates intends to defend such proceedings vigorously. 11. Income Taxes The provision (benefit) for income taxes for the year ended December 31, 1997 includes the following (amounts in thousands): Current - Federal $ -- - State 29 -- Total provision (benefit) $ 29 == The provision (benefit) for federal income taxes differs from the amounts computed by multiplying income before income taxes, minority interests and cumulative effect of accounting change by the statutory federal tax rates for the year ended December 31, 1997 as follows (amounts in thousands): Tax computed at statutory rate $ (3,744) State taxes, net of federal benefit 29 Effect of losses not utilized in the provision 3,744 ----- Total provision (benefit) $ 29 == Due primarily to the takeover of the Company's principal operating subsidiary by the IDOI (See Note 2), the Company has been unable to obtain the financial information necessary to allow it to complete the preparation of its 1995 (or subsequent years) consolidated federal income tax returns. Returns for certain states, in which consolidated income tax returns are required, have similarly not been able to be prepared. Accordingly, the Company cannot determine the current status of its deferred tax assets and liabilities, if any, nor can it determine the current status of its net operating loss carryforwards. Based upon information contained in the Company's 1994 consolidated federal income tax return, the Company had net operating loss carryforwards of approximately $65,507,000 which were available to offset future taxable income which, if not used, will expire in 1995 through 2009. The tax returns for the years during which these operating losses were generated have not been examined by the Internal Revenue Service and such returns could be examined at the time the loss carryforwards are utilized. Additionally, approximately $26,399,000 of these tax loss carryforwards were generated by subsidiaries prior to their acquisition and are thereby restricted to offsetting only future taxable income of the subsidiaries which generated the losses. Any future utilization of these pre-acquisition loss carryforwards may be treated for financial reporting purposes as a retroactive adjustment to the original purchase cost assigned to certain assets of such subsidiaries. State and federal income taxes paid for the year ended December 31, 1997 totaled $13,196. 12. Per Share Amounts Primary per share amounts are computed based upon the weighted average number of common equivalent shares outstanding. Common equivalent shares consist of common stock and the assumed conversion of the Class B stock at its current conversion ratio of 24.375 to 1. Primary per share amounts for 1997 have been computed based on weighted average common and common equivalent shares of 3,708,243. Net income applicable to common stock reflects the dividend requirements applicable to preferred stocks totaling $1,736,168 for the year ended December 31, 1997. 13. Related Party Transactions Following is a summary of the amounts receivable from and payable to affiliates as of December 31, 1997: [Download Table] Receivable Payable Clyde Wm. Engle, Chairman -- 858,022 Telco (net of reserve of $1,392,378) -- -- Hickory Furniture (net of reserve of $1,222,248) -- 259,000 Hickory White Company (net of reserve of $8,205,876) -- -- Coronet Insurance Company (net of reserve of $1,780,506) -- 3,001,839 National Assurance Indemnity Company (net of reserve of $121,257) -- -- Coronet Financial Group (net of reserve of $46,231) -- -- Pensacola Holding Company (net of reserve of $1,437,803) -- 3,763,013 The Springs, Inc. (net of reserve of $268,712) 2,490,954 5,369 Epernay Properties, Inc. 190,361 -- Normandy Financial Corporation (net of reserve of $25,816) -- 129,829 Normco (net of reserve of $2,330,530) -- -- -- -- $ 2,681,315 8,017,072 ========= ========= Amounts owed to Mr. Engle include amounts loaned to the Company to fund operating deficits. Such amounts are unsecured, due on demand and bear interest at Prime +1%. Additionally, at December 31, 1997, the Company owed Mr. Engle $333,528 for unpaid compensation during a portion of 1997. In December 1995, Sunstates determined that due to deterioration in the financial condition of Telco, the repayment of amounts owed to the Company by Telco was doubtful and established a reserve to reduce the reported carrying value of its receivable from Telco to zero. At December 31, 1997, the Company is holding Hickory Furniture Company 12% Debentures with a par value of $474,900 (and a carrying value of $160,305, including interest) which were due in January 1992 and remain in default. On June 27, 1995, the Company transferred 138,165 shares of common stock of Indiana Financial Investors, Inc. ("IFII", a majority owned subsidiary of Hickory), with a total cost of $800,789, including 3,720 shares purchased in 1995 at a cost of $11,907, to Hickory in exchange for two secured promissory notes with a face value totaling $800,789. These notes are due on June 26, 2000 and bear interest at the rate of prime + 1%, payable annually. Hickory has pledged 200,000 shares of IFII stock to the Company to secure these notes. Hickory Furniture Company has no significant liquid assets other than its ownership of securities of the Company and no source of operating cash flow to service its debts owed to the Company. Accordingly, the Company has established a reserve to reduce the reported carrying value of such amounts to zero. During the years ended December 31, 1997 Sunstates recognized interest income from affiliates of $225,438 and recorded interest expense totaling $577,873. During 1997 the Company accrued $529,000 for various professional services rendered to the Company by Hickory. At December 31, 1997 the Company owed Hickory $259,000 for such services. On June 12, 1997, certain subsidiaries of the Company sold securities of Sunstates held by such subsidiaries to Hickory at their then current quoted market values. The following sets forth the information concerning these transactions: Sunstates Security No. of Shares Price Common Stock 843,717 $ 8,437 Class B Stock 8,890 2,166 $3.75 Preferred Stock 136,932 17,117 $ 27,720 14. Subsequent Events On May 15, 1998, LaSalle National Bank, pursuant to a Notice of Private Sale of Collateral dated May 7, 1998 and as approved by an order issued by the Illinois Circuit Court, sold the common stock of Alba-Waldensian, Inc. (938,700 shares) and Rocky Mountain Chocolate Factory, Inc. (799,357 shares) it held under a loan to certain of the Company's subsidiaries. The Company was not involved in the determination of the transaction pricing and substantially all of the proceeds from the sale were utilized to retire the subsidiaries' debt to LaSalle, which had been in default since January 1997. The 938,700 shares of Alba, representing 50.27% of Alba's outstanding stock, was sold to investors, including Alba (295,000 shares) and Mr. Clyde Wm. Engle (543,700 shares), the Company's Chairman and beneficial owner of a substantial amount of the Company's stock, for cash proceeds totaling $7,040,250. Prior to the transaction, Alba was a consolidated subsidiary of the Company (see Note 1) and accordingly the Company utilized the equity method to account for its investment in Alba common stock. The recorded carrying value of these shares totaled $13,148,799 resulting in a loss of $6,108,549 upon the sale. The Company has reduced the carrying value of its investment in the Alba common stock in these financial statements to reflect the amount realized upon the foreclosure sale (see Note 4). The 799,357 shares of Rocky Mountain, representing 27.45% of Rocky Mountain's outstanding stock, was sold to investors including Rocky Mountain (336,000 shares), certain of Rocky Mountain's officers and directors (104,000 shares) and Mr. Clyde Wm. Engle (194,357 shares) for cash proceeds totaling $4,116,689. The Company utilized the equity method of accounting for its investment in Rocky Mountain common stock with a carrying value of $2,268,257 resulting in a gain of $1,848,432 upon the sale. The Company has adjusted the carrying value of its investment in the Rocky Mountain common stock in these financial statements to reflect the amount realized upon the foreclosure sale (see Note 5). On July 10, 1998, the Circuit Court of Cook County Illinois entered a consent judgment, to which the Company objected, ordering that specified properties owned by certain subsidiaries of the Company be transferred to Mr. Dan Sampson and Coach Horse Livery, Ltd. (both non-affiliates of the Company). The carrying value of such properties on the books of the Company as of December 31, 1997 totaled $275,907. With respect to one of the properties subject to the judge's order, the transfer would not be effected until the Company receives reimbursement of the $115,000 purchase price paid for such property. The Company intends to seek reconsideration of the consent judgment and/or appeal the judge's order.

Dates Referenced Herein   and   Documents Incorporated by Reference

Referenced-On Page
This ‘DEF 14C’ Filing    Date First  Last      Other Filings
6/26/009
3/31/993
12/19/989
8/10/9812
Filed on / For Period End:7/21/9813
7/15/9813
7/10/989
6/30/983
6/2/989
5/15/9898-K
5/7/989
1/1/989
12/31/9739
6/12/979
5/15/979
3/17/973
2/28/979
1/30/979
1/27/979
1/24/9738-K
1/1/9779
12/24/96398-K
7/22/963
6/10/969
12/31/9539NT 10-K
12/13/959
8/9/959
6/27/959
12/31/94310-K
3/29/949
1/10/949
12/13/939
12/8/939
10/7/933
6/30/939
 List all Filings 
Top
Filing Submission 0000103575-98-000004   –   Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Copyright © 2018 Fran Finnegan & Company.  All Rights Reserved.
AboutPrivacyRedactionsHelp — Wed., Nov. 21, 5:28:36.1am ET