0000868075-01-500011.txt : 20011026 0000868075-01-500011.hdr.sgml : 20011026 ACCESSION NUMBER: 0000868075-01-500011 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20011022 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CLASSICA GROUP INC CENTRAL INDEX KEY: 0000868075 STANDARD INDUSTRIAL CLASSIFICATION: DAIRY PRODUCTS [2020] IRS NUMBER: 133413467 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 1934 Act SEC FILE NUMBER: 000-19721 FILM NUMBER: 1763655 BUSINESS ADDRESS: STREET 1: 1835 SWARTHMORE AVENUE CITY: LAKEWOOD STATE: NJ ZIP: 08701 BUSINESS PHONE: 7323633800 MAIL ADDRESS: STREET 1: 1835 SWARTHMORE AVE CITY: LAKEWOOD STATE: NJ ZIP: 08701 FORMER COMPANY: FORMER CONFORMED NAME: EMPIRE SPECIALTY FOODS INC /NY/ DATE OF NAME CHANGE: 19600201 DEF 14A 1 prxy01.txt 2001 PROXY STATEMENT September 28, 2001 Dear Shareholders: We cordially invite you to attend the Meeting of the Shareholders of The Classica Group, Inc. (the "Company") to be held at 10:00 a.m. on Wednesday, October 31, 2001, at the offices of Greenbaum, Rowe, Smith, Ravin, Davis & Himmel LLP, 99 Wood Avenue South, Iselin, New Jersey 07095. The purposes of this meeting are to (i) elect a Board of five (5) directors, and (ii) ratify the appointment of auditors. These matters are described in the accompanying Notice of Meeting and Proxy Statement. The Board of Directors recommends that Shareholders vote in favor of each proposal. We encourage all Shareholders to participate by voting their shares by Proxy whether or not they plan to attend the meeting. Please sign, date and mail the enclosed Proxy as soon as possible. If you do attend the Annual Meeting, you may still vote in person. Sincerely, Bernard F. Lillis, Jr. Secretary NOTICE OF ANNUAL MEETING OF SHAREHOLDERS To be held on October 31, 2001 Notice is hereby given that the Annual Meeting of Shareholders (the "Meeting") of The Classica Group, Inc. (the "Company") will be held at the offices of Greenbaum, Rowe, Smith, Ravin, Davis & Himmel LLP, 99 Wood Avenue South, Iselin, New Jersey 07095 at 10:00 a.m. Eastern Time, for the following purposes: 1. To elect a Board of Directors of five (5) persons to serve until the 2002 Annual Meeting of Shareholders or until a successor is duly elected and qualified. 2. To approve the appointment of Ehrenkrantz Sterling & Co. LLC as the Company's independent auditors. 3. To transact such other business as may properly come before the Meeting or any adjournment thereof. Only shareholders of record at the close of business on September 25, 2001 will be entitled to notice of and to vote at the Meeting. Whether or not you intend to attend the Meeting, please complete, date and sign the enclosed Proxy. Your Proxy will be revocable, either in writing or by voting in person at the Meeting, at any time prior to its exercise. By Order of the Board of Directors --------------------------------- BERNARD F. LILLIS, JR., Secretary Lakewood, New Jersey September 28, 2001 THE CLASSICA GROUP, INC. 1835 Swarthmore Avenue Lakewood, New Jersey 08701 PROXY STATEMENT Accompanying this Proxy Statement is a Notice of Annual Meeting of Shareholders, the Company's Form 10KSB for the year ended December 31, 2000, and a form of Proxy for such meeting solicited by the Board of Directors. The Board of Directors has fixed the close of business on September 25, 2001, as the record date for the determination of shareholders that are entitled to notice of and to vote at the meeting or any adjournment thereof. The holders of a majority of the outstanding shares of Common stock present in person, or represented by Proxy, shall constitute a quorum at the meeting. As of the record date, the Company had 2,367,598 outstanding shares of common stock, $.001 par value (the "Common Stock"), the holders of which are entitled to one vote per share. A Proxy that is properly submitted to the Company may be revoked at any time before it is exercised by written notice to the Secretary of the Company, and any Shareholder attending the meeting may vote in person and by doing so revokes any Proxy previously submitted by him. Where a Shareholder has specified a choice on his Proxy with respect to Proposals 1 and 2, it will be complied with. If no direction is given, all the shares represented by the Proxy will be voted in favor of such Proposals. The cost of soliciting Proxies will be paid by the Company, which will reimburse brokerage firms, custodians' nominees and fiduciaries for their expenses in forwarding proxy material to the beneficial owners of the Company's stock. Officers and regular employees of the Company may solicit Proxies personally and by telephone. The Annual report of the Company for the fiscal year ended December 31, 2000, containing audited financial statements for such year, is enclosed with this Proxy Statement. This Proxy Statement and the enclosed Proxy are being sent to the shareholders of the Company on or about September 28, 2001. IN ORDER THAT YOUR SHARES MAY BE REPRESENTED AT THIS MEETING, YOU ARE REQUESTED TO PLEASE SIGN, DATE AND MAIL THE PROXY PROMPTLY. Proposal 1 ELECTION OF DIRECTORS According to the Company's By-Laws, the Board of Directors is composed of five (5) members. At each Annual Meeting, all directors will be elected to serve for one year expiring on the date of the Annual Meeting of shareholders for the following year. Each director elected will continue in office until a successor has been elected or until resignation or removal in the manner provided by the Company's By-Laws. The names of the nominees for the Board of directors are listed below. Shares represented by a properly executed proxy in the accompanying form will be voted for such nominees. However, discretionary authority is reserved to vote such shares in the best judgment of the persons named in the event that any person or persons other than the nominees listed below are to be voted on at the meeting due to the unavailability of any nominee so listed. All persons named below are directors of the Company at the present time. There are no family relationships between any nominees, directors or executive officer of the Company. NOMINEES FOR ONE-YEAR TERMS Scott G. Halperin has been Chairman of the Company since July 1, 1997 and Chief Executive Officer since August 16, 1994. He also served as Treasurer from May of 1994 through June 30, 1997. Bernard F. Lillis, Jr. has been a director, Chief Operating Officer, and Treasurer of the Company since July 1, 1997. He has been Chief Financial Officer since Apri1 15, 1996. Prior to joining he served as Chief Financial Officer of several companies, as Deputy City Manager - Finance of Rochester, New York and on the audit staff of Deloitte & Touche, Certified Public Accountants. Mr. Lillis is a CPA. Joseph M. Greene has been a director of the Company since February 23, 1998. He has served as Acting Chief Operating Officer of Marx Toys, Inc. since January 2001. He is the founder and has been the Chief Executive Officer of Advanced Trading Concepts since January of 1990, a sales agency for various, fully tariffed, switch and network based domestic and international carriers of telephone services. Alan Rubin has been a director of the Company since January 28, 2000. Since 2001 he has been a partner of Targeted Financial Services, a Registered Investment Advisor. Prior to 2001 he has been a named partner of Nalven, Paredes, Payne, & Rubin, a Registered Investment Advisor. Prior to 1998, he had an advisory role with Lincoln Securities Corporation and Lincoln National Equity Sales Corporation. He was appointed a member of Corestates Bank Investment Advisory Committee to advise on management, due diligence and availability of client investment programs and supervision of representatives. Harry J. Friedberg has been a director of the Company since March 2, 1998. He has been engaged in the private practice of law since 1963. INFORMATION CONCERNING BOARD The Board of Directors met 1 time in fiscal 2000. No director attended fewer than 75% of the meetings of the Board of Directors. In addition, the Board acted by unanimous consent 4 times during fiscal 2000. The Board of Directors has an Audit Committee. The Audit Committee is responsible for reviewing the Company's audited financial statements, meeting with the Company's independent accountants to review the Company's internal controls and financial management practices and examining all agreements or other transactions between the Company and its directors and officers to determine whether such agreements or transactions are fair to the Company's shareholders. Messrs. Greene, Rubin, and Halperin currently serve on the Audit Committee. REPORT OF THE CLASSICA GROUP, INC. BOARD OF DIRECTORS AUDIT COMMITTEE The primary purpose of the Audit Committee (consisting of the Company's Chairman Mr. Halperin, and independent Directors, Messrs. Greene and Rubin) is to assist the Board of Directors in its general oversight of the Company's financial reporting process, and is more fully described in its charter which the Committee has adopted and is included as Exhibit I to this proxy statement. Management is responsible for the preparation, presentation and integrity of the Company's financial statements, accounting and financial reporting principles, internal controls, and procedures designed to ensure compliance with accounting standards, applicable laws, and regulations. The Company's independent auditors, Ehrenkrantz Sterling & Co. LLC, are responsible for performing an independent audit of the consolidated financial statements and expressing an opinion on the conformity of those financial statements with generally accepted accounting principles. The Committee has reviewed and discussed the financial statements of the Company for the fiscal year ended December 31, 2000 with the Company's management and has discussed with Ehrenkrantz Sterling & Co. LLC the matters required to be discussed by Statement on Auditing Standards Board Standard NO. 61, as amended, "Communication with Audit Committees". In addition, Ehrenkrantz Sterling & Co. LLC has provided the Audit Committee with the written disclosures and the letter required by the Independence Standards Board Standard No. 1, "Independence Discussions with Audit Committees", and the Audit Committee has discussed with Ehrenkrantz Sterling & Co. LLC their independence. Based upon these reviews and discussions, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company's Annual Report on Form 10KSB for the year ended December 31, 2000, for filing with the Securities and Exchange Commission. FEES PAID TO EHRENKRANTZ STERLING & CO. LLC Audit Fees $ 31,305.60 Financial Information Systems Design and Implementation -0- Other -0- Since no non-audit services were performed for the Company by Ehrenkrantz Sterling & Co. LLC, no issues of independence relative to fees paid to them required review by the Audit Committee, and as such the Audit Committee concludes that Ehrenkrantz Sterling & Co. LLC are independent in accordance with NASDAQ Marketplace Rules 4350(d)(1)(b) and 4350(d)(1)(c). SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information, as of September 25, 2001, regarding the ownership of the Common Stock by (i) each director and nominee for director of the Company; (ii) each of the executive named officers and nominees, (iii) each person known to the Company to beneficially own five percent (5%) or more of the Company's Common Stock, and (iv) all directors and executive officers of the Company as a group. (A) Common Stock Percentage of Name of Beneficial Owner (A) Number of Shares Outstanding (H) Scott G Halperin 504,142 (B) 19.6% 1835 Swarthmore Avenue Lakewood, N.J. 08701 -------------------------------------------------------------------------------- Bernard F. Lillis, Jr. 368,950 (C) 14.6% 1835 Swarthmore Avenue Lakewood, N.J. 08701 -------------------------------------------------------------------------------- Joseph M. Greene 25,000 (D) 1.0% 1835 Swarthmore Avenue Lakewood, N.J. 08701 -------------------------------------------------------------------------------- Harry J. Friedberg 33,000 (E) 1.4% 551 Fifth Avenue, Suite 3400 New York, N.Y. 10176 -------------------------------------------------------------------------------- Alan Rubin 20,000 (F) 0.8% 1835 Swarthmore Avenue Lakewood, N.J. 08701 -------------------------------------------------------------------------------- Robert Castellano 28,000 (G) 1.2% 1835 Swarthmore Avenue Lakewood, N.J. 08701 -------------------------------------------------------------------------------- All Directors and executive officers as a group 979,092 35.0% All information with respect to beneficial ownership of the shares is based upon filings made by the respective beneficial owners with the Securities and Exchange Commission or information provided by such beneficial owners to the Company. Shares include stock options and warrants exercisable within 60 days. (B) Includes options to purchase 199,111 shares at $1.25 held by Mr. Halperin. (C) Includes options to purchase 158,778 shares at $1.25 held by Mr. Lillis. (D) Includes options to purchase 15,000 shares at $1.25 held by Mr. Greene. (E) Includes options to purchase 23,000 shares at $1.25 held by Mr. Friedberg. (F) Includes options to purchase 10,000 shares at $1.25 held by Mr. Rubin. (G) Includes options to purchase 20,000 shares at $1.25 held by Mr. Castellano. (H) For each beneficial owner, the "Percentage of Outstanding" equals each owner's actual holdings of shares plus shares represented by unexercised options and warrants held, divided by total shares outstanding of the Company at July 13, 2001, of 2,367,598, plus the above-referenced unexercised options and warrants of the referenced holder only. In other words, individual percentages of the listed holders will not add to the group total because the calculations are made separately for each holder. EXECUTIVE COMPENSATION The following table sets forth, for each of the last fiscal years, cash and certain other compensation paid or accrued by the Company for the Chief Executive Officer and Chief Operating Officer. There are no other executive officers who earned at least $100,000 for any of the last three fiscal years. SUMMARY COMPENSATION TABLE
Annual Compensation ($) Long-Term Compensation ($) ------------------------------------------------------------------------------------------------------------------- Restricted Securities Long-Term Name and Principal Other Annual Stock Underlying Incentive Plan All Other Position Year Salary Bonus Compensation Awards Options Payouts Compensation ($) ------------------------------------------------------------------------------------------------------------------- Scott G. Halperin 2000 190,008 - 10,778 - - - - Chairman of the Board 1999 190,008 - 7,936 - 160,000 - - Chief Executive Officer 1998 190,008 - 6,213 - 149,838 - - ------------------------------------------------------------------------------------------------------------------- Bernard F. Lillis, Jr. 2000 160,006 - 7,482 - - - - Chief Operating Officer 1999 160,006 - 5,504 - 125,000 - - Chief Financial Officer 1998 160,008 - 5,700 - 96,531 - - ------------------------------------------------------------------------------------------------------------------- Robert Castellano 2000 106,033 - 10,778 - - - President, 1999 106,033 - 7,936 - 20,000 - Cucina Classica Italiana 1998 97,552 - 6,213 - - - -------------------------------------------------------------------------------------------------------------------
OPTION GRANTS IN LAST FISCAL YEAR Individual Grants % of Total Number of Options Securities Granted to Exercise Underlying Employees or Base Options in Fiscal Price Expiration Name Granted (#) Year ($/Sh) Date -------------------------------------------------------------------------------- Scott G. Halperin - 0.0% 0 - -------------------------------------------------------------------------------- Bernard F. Lillis, Jr. - 0.0% 0 - -------------------------------------------------------------------------------- Robert Castellano - 0.0% 0 -------------------------------------------------------------------------------- AGGREGATED OPTION EXERCISES IN 2000 AND DECEMBER 31, 2000 OPTION VALUES
Number of Securities Shares Underlying Unexercised Value of Unexercised In-the- Acquired on Value Options at Fiscal Year-End(#)* Money Options at FY-End ($) Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable ------------------------------------------------------------------------------------------------------------ Scott G. Halperin - - 199,111 0 925,866 0 ------------------------------------------------------------------------------------------------------------ Bernard F. Lillis, Jr. - - 158,778 0 738,320 0 ------------------------------------------------------------------------------------------------------------ Robert Castellano - - 20,000 0 93,000 0 ------------------------------------------------------------------------------------------------------------
* Options are "in-the-money" if, on July 13, 2001, the market price of the Common Stock ($5.90) exceeded the exercise price of such options. The value of such options is calculated by determining the difference between the aggregate market price of the Common Stock covered by such options on July 13, 2001, and the aggregate price of such options. Employment Agreements The Company has employment agreements with both Scott G. Halperin, the Company's Chairman and Chief Executive Officer and Bernard F. Lillis, Jr, the Company's Chief Financial Officer and Chief Operating Officer. Reference is made to exhibits 10 (ae) and 10(af) for all terms and conditions of the agreements, which are summarized below. Scott G. Halperin On August 1, 1997, the Company entered into an employment agreement the ("Halperin Agreement") with Scott G. Halperin. This Halperin Agreement superseded and replaced Mr. Halperin's previous employment agreement. The Halperin Agreement provides that Mr. Halperin shall serve as Chairman of the Board and Chief Executive Officer of the Company from August 1, 1997 through July 31, 2005. The Employment Agreement provides that the Company shall pay Mr. Halperin at the annual rate of $220,000 for the initial term of the Employment Agreement. The Employment Agreement may be renewed by the Company for successive three year periods commencing on the termination date, by mutual agreement of the Company and Mr. Halperin provided however that the Company may elect to terminate the agreement at the end of the term hereof, or the then renewal term, as the case may be, giving written notice of such non-renewal not less than 180 days prior to the then current term or the renewal term of the agreement. Mr. Halperin's base compensation shall be increased annually by twenty percent from August 1 1998 through July 31, 2001 and by fifteen percent from August 1, 2001 through July 31 2005. Additionally, Mr. Halperin's base compensation shall increase by fifteen percent on the date of renewal and annually thereafter. In addition to his base salary, Mr. Halperin is entitled to receive additional incentive compensation during each fiscal year in an amount not less than 2% of the increase in gross revenues of the Company during each such year as compared to the prior year, commencing with the fiscal year ended December 31, 1996, and any other bonus the Company's Board of Directors may award to Mr. Halperin. The Employment Agreement provides that the Company shall pay Mr. Halperin an automobile expense allowance in the amount of $12,000 per annum. The Company shall maintain a medical and dental plan for qualified employees that covers Mr. Halperin, his spouse and his minor children and it shall bear the premiums related to Mr. Halperin and his family. The Company may terminate Mr. Halperin for "Cause," which is defined as (a) willfully damaging the Company's property, (b) conviction of a felony, (c) willfully engaging in theft, fraud, embezzlement or securities law violations with respect to the Company, or (d) willfully and substantially failing to perform his duties under the Employment Agreement (other than a failure resulting from Mr. Halperin's incapacity due to physical or mental illness). Mr. Halperin may terminate the Employment Agreement for Good Reason (as defined below) or if his health should become impaired to an extent that makes the continued performance of his duties under the Employment Agreement hazardous to his physical or mental health. "Good Reason" includes, but is not limited to, failure of the Company to comply with the Company's material obligation and agreement, or an assignment to Mr. Halperin of any duties or reporting obligations other than those contemplated by, or any limitation of the powers of Mr. Halperin in any respect not contemplated by, the Employment Agreement. Upon the early termination of the Employment Agreement by the Company (other than for Mr. Halperin's death, his disability or cause) or upon the early termination of the Employment Agreement by Mr. Halperin for Good Reason, the Company is required to pay to Mr. Halperin his full base salary through the time notice of termination is given and a lump sum payment equal to the greater of (i) the remaining compensation (including incentive compensation) payable to Mr. Halperin as though the Employment Agreement had been performed through July 31, 2005 or such later date to which the term of the employment has been extended and (ii) the total compensation earned by Mr. Halperin during the one year period prior to the date of termination. Under such circumstances, Mr. Halperin is also entitled to receive all employee benefits until the later of (A) July 31, 2005 or such later date to which the term of the Employment Agreement has been extended or (B) one year from the date of termination. In addition, all stock awards and options theretofore awarded or granted to Mr. Halperin shall, to the fullest extent permitted by applicable law, immediately vest. The Employment Agreement prohibits Mr. Halperin from disclosing confidential information or trade secrets of the Company during the term of his employment under the Employment Agreement and for 12 months thereafter. The Employment Agreement also prohibits Mr. Halperin from competing, during the period of his employment under the Employment Agreement and for 12 months thereafter, within any county (or adjacent county) in any state within the United States in which the Company is engaged in business during Mr. Halperin's employment by the Company. However, the restrictions on disclosure and competition do not apply if the Company terminates Mr. Halperin without Cause or if Mr. Halperin terminates the Employment Agreement for Good Reason. The Employment Agreement also grants Mr. Halperin certain demand and "piggyback" registration rights with respect to the shares of common stock owned by him. Mr. Halperin waived cash compensation in excess of $190,000 for 1998, 1999 and 2000. Bernard F. Lillis, Jr. On August 1, 1997, the Company entered into an employment agreement the ("Lillis Agreement") with Bernard F. Lillis, Jr. The Lillis Agreement provides that Mr. Lillis shall serve as Chief Financial Officer and Chief Operating Officer of the Company from August 1, 1997 through July 31, 2005. The Employment Agreement provides that the Company shall pay Mr. Lillis at the annual rate of $190,000 for the initial term of the Employment Agreement. The Employment Agreement may be renewed by the Company for successive three year periods commencing on the termination date, by mutual agreement of the Company and Mr. Lillis provided however that the Company may elect to terminate the agreement at the end of the term hereof, or the then renewal term, as the case may be, giving written notice of such non-renewal not less than 180 days prior to the then current term or the renewal term of the agreement. Mr. Lillis's base compensation shall be increased annually by twenty percent from August 1 1998 through July 31, 2001 and by fifteen percent from August 1, 2001 through July 31 2005. Additionally, Mr. Lillis's base compensation shall increase by fifteen percent on the date of renewal and annually thereafter. In addition to his base salary, Mr. Lillis is entitled to receive additional incentive compensation during each fiscal year in an amount not less than 2% of the increase in gross revenues of the Company during each such year as compared to the prior year, commencing with the fiscal year ended December 31, 1996, and any other bonus the Company's Board of Directors may award to Mr. Lillis. The Employment Agreement provides that the Company shall pay Mr. Lillis an automobile expense allowance in the amount of $12,000 per annum. The Company shall maintain a medical and dental plan for qualified employees that covers Mr. Lillis, his spouse and his minor children and it shall bear the premiums related to Mr. Lillis and his family. The Company may terminate Mr. Lillis for "Cause," which is defined as (a) willfully damaging the Company's property, (b) conviction of a felony, (c) willfully engaging in theft, fraud, embezzlement or securities law violations with respect to the Company, or (d) willfully and substantially failing to perform his duties under the Employment Agreement (other than a failure resulting from Mr. Lillis's incapacity due to physical or mental illness). Mr. Lillis may terminate the Employment Agreement for Good Reason (as defined below) or if his health should become impaired to an extent that makes the continued performance of his duties under the Employment Agreement hazardous to his physical or mental health. "Good Reason" includes, but is not limited to, failure of the Company to comply with the Company's material obligation and agreement, or an assignment to Mr. Lillis of any duties or reporting obligations other than those contemplated by, or any limitation of the powers of Mr. Lillis in any respect not contemplated by, the Employment Agreement. Upon the early termination of the Employment Agreement by the Company (other than for Mr. Lillis's death, his disability or cause) or upon the early termination of the Employment Agreement by Mr. Lillis for Good Reason, the Company is required to pay to Mr. Lillis his full base salary through the time notice of termination is given and a lump sum payment equal to the greater of (i) the remaining compensation (including incentive compensation) payable to Mr. Lillis as though the Employment Agreement had been performed through July 31, 2005 or such later date to which the term of the employment has been extended and (ii) the total compensation earned by Mr. Lillis during the one year period prior to the date of termination. Under such circumstances, Mr. Lillis is also entitled to receive all employee benefits until the later of (A) July 31, 2005 or such later date to which the term of the Employment Agreement has been extended or (B) one year from the date of termination. In addition, all stock awards and options theretofore awarded or granted to Mr. Lillis shall, to the fullest extent permitted by applicable law, immediately vest. The Employment Agreement prohibits Mr. Lillis from disclosing confidential information or trade secrets of the Company during the term of his employment under the Employment Agreement and for 12 months thereafter. The Employment Agreement also prohibits Mr. Lillis from competing, during the period of his employment under the Employment Agreement and for 12 months thereafter, within any county (or adjacent county) in any state within the United States in which the Company is engaged in business during Mr. Lillis's employment by the Company. However, the restrictions on disclosure and competition do not apply if the Company terminates Mr. Lillis without Cause or if Mr. Lillis terminates the Employment Agreement for Good Reason. The Employment Agreement also grants Mr. Lillis certain demand and "piggyback" registration rights with respect to the shares of common stock owned by him. Mr. Lillis waived cash compensation in excess of $160,000 for 1998, 1999 and 2000. DIRECTORS' REPORT ON COMPENSATION The Board of Directors reviews, recommends and approves changes to the Company's compensation policies and programs and is responsible for reviewing and approving the compensation of the Chief Executive Officer and other senior officers of the Company. The following report shall not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933 or under the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates this information by reference, and shall not otherwise be deemed filed under such Acts. The Board of Directors is responsible for reviewing the compensation and benefits of the Company's executive officers concerning compensation and benefits for such executive officers and administering the Company's stock option plans. The Company believes that executive compensation should be based upon value returned to shareholders. The Company has developed and is developing compensation programs designed to reflect Company performance and to be competitive in the marketplace. In designing compensation programs, the Company attempts to reflect both value created for shareholders while supporting the Company's strategic goals. The Company's compensation programs reflect the following themes: o Compensation should be meaningfully related to the value created for shareholders o Compensation programs should support the Company's short-term and long-term strategic goal and objectives. o Compensation programs should promote the Company's value and reward individuals for outstanding contributions to the Company's success. o Short-term and long-term compensation should be designed to attract and retain superior executives. The Company's executive compensation is based upon three components, base salary, annual incentive bonuses and long-term incentives, which are intended to serve the overall compensation philosophy. Base Salary The base salary of each executive officer is determined as a function of three principal factors: the individual's performance, the relationship of the individual's salary to similar executives in comparable companies, and increases in the individual's responsibilities, whether through promotions or otherwise. Annual Incentive Bonus The Company's annual incentive bonuses are designed to reflect the individual officer's contribution to the profitability of the Company and any special achievements by the respective officers. Each officer's bonus is based upon the Company's performance in various areas, such as sales, profit margins, operating expenses and net income, as compared to a pre-determined plan for each officer each year. PERFORMANCE TABLE Growth of $100 -------------------------------------------------------------------------------- CSRP Non-Financial The Classica Group, Inc. NASDAQ Market Index -------------------------------------------------------------------------------- 12/30/95 100.000 100.000 100.000 -------------------------------------------------------------------------------- 12/30/96 121.476 20.536 123.036 -------------------------------------------------------------------------------- 12/29/97 142.197 13.690 150.692 -------------------------------------------------------------------------------- 12/31/98 208.727 10.119 212.509 -------------------------------------------------------------------------------- 12/31/99 408.734 3.690 394.942 -------------------------------------------------------------------------------- 12/31/00 238.523 4.524 237.676 -------------------------------------------------------------------------------- Pct. Ch. 238.523% -95.476% 237.676% -------------------------------------------------------------------------------- This TABLE shall not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933 or under the Securities Exchange Act of 1934, except to the extent that the Company specifically incorporates this graph by reference, and shall not otherwise be deemed filed under such Acts. THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE TO ELECT THE AFOREMENTIONED NOMINEES TO SERVE ON THE BOARD OF DIRECTORS. PROPOSAL 2 RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS The selection of independent auditors to examine the financials statements of the Company for the fiscal year ending December 31, 2001 to be transmitted or made available to shareholders and filed with the Securities and Exchange Commission is to be submitted to the meeting for ratification. THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE RATIFICATION OF EHRENKRANTZ STERLING & CO. LLC AS THE COMPANY'S INDEPENDENT AUDITORS. COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934 The Securities Exchange Act of 1934 requires the Company's directors and executive officers and person who own more than ten percent of a registered class of the Company's equity securities to file reports of beneficial ownership and changes in beneficial ownership with the Securities and Exchange Commission. To the knowledge of the Company, all filing requirements under Section 16(a) in respect of the Company were complied within the year ended December 31, 2000. GENERAL The expense of this solicitation is to be borne by the Company. The Company may also reimburse persons holding shares in their names or in the names of their nominees for their expenses in sending proxies and proxy material to their principals. Unless otherwise directed, the persons named in the accompanying form of proxy intend to vote all proxies received by them in favor of the election of nominees to the Board herein, and the ratification of selected independent auditors. All proxies will be voted as specified. Management does not intend to present any business at the meeting other than that set forth in the accompanying Notice of Annual Meeting, and it has no information that others will do so. If other matters requiring the vote of the shareholders properly come before the meeting and any adjournments thereof, it is the intention of the persons named in the accompanying form of proxy to vote the proxies held by them in accordance with their judgment on such matters. SHAREHOLDER PROPOSALS FOR THE 2002 ANNUAL MEETING Shareholder proposals for inclusion in the proxy materials related to the 2001 Annual Meeting of Shareholders must be received by the Company no later than December 31, 2001. A Shareholder must have been a record or beneficial owner of the Company's common stock for at least one year prior to December 31, 2001, and the shareholder must continue to own such shares, worth at least $1,000, through the date on which the Meeting is held. The Company's by-laws outline procedures, including minimum notice provisions, for shareholder nominations of directors and other shareholder business to be brought before shareholders at the Annual Meeting. A copy of the pertinent by-laws provisions is available upon request to Bernard F. Lillis, Jr., Secretary, The Classica Group, Inc., 1835 Swarthmore Avenue, Lakewood, New Jersey 08701. By order of the Board of Directors THE CLASSICA GROUP, INC. ------------------------ BERNARD F. LILLIS, JR. Secretary Lakewood, New Jersey September 28, 2001 EX-99.A4 2 audt.txt AUDIT COMMITTEE CHARTER Audit Committee Charter - Exhibit I This Audit Committee Charter ("Charter") has been adopted by the Board of Directors (the "Board") of The Classica Group, Inc. (the "Company"). The Audit Committee of the Board (the "Committee") shall review and reassess this charter annually and recommend any proposed changes to the Board for approval. Role and Independence; Organization The Committee assists the Board in fulfilling its responsibility for oversight of the quality and integrity of the accounting, auditing, internal control and financial reporting practices of the Company. It may also have such other duties as may from time to time be assigned to it by the Board. The membership of the Committee shall consist of at least three directors, a majority of whom are each free of any relationship that, in the opinion of the Board, may interfere with such member's individual exercise of independent judgment. Each Committee member shall also meet the independence and financial literacy requirements for serving on audit committees, and at least one member shall have accounting or related financial management expertise, all as set forth in the applicable rules of the NASDAQ. The Committee shall maintain free and open communication with the independent auditors, the internal auditors and Company management. In discharging its oversight role, the Committee is empowered to investigate any matter relating to the Company's accounting, auditing, internal control or financial reporting practices brought to its attention, with full access to all Company books, records, facilities and personnel. The Committee may retain outside counsel, auditors or other advisors. One member of the Committee shall be appointed as chair. The chair shall be responsible for leadership of the Committee, including scheduling and presiding over meetings, preparing agendas, and making regular reports to the Board. The chair will also maintain regular liaison with the CEO, CFO, and the lead independent audit partner. The Committee shall meet (either telephonically or in person) at least four times a year, or more frequently as the Committee considers necessary. At least once each year the Committee shall have separate private meetings with the independent auditors and management. Responsibilities Although the Committee may wish to consider other duties from time to time, the general recurring activities of the Committee in carrying out its oversight role are described below. The Committee shall be responsible for: Recommending to the Board the independent auditors to be retained (or nominated for shareholder approval) to audit the financial statements of the Company, which auditors are ultimately accountable to the Board and the Committee, as representatives of the shareholders. Evaluating, together with the Board and management, the performance of the independent auditors and, where appropriate, replacing such auditors. Obtaining annually from the independent auditors a formal written statement describing all relationships between the auditors and the Company, consistent with Independence Standards Board Standard Number 1. The Committee shall actively engage in a dialogue with the independent auditors with respect to any relationships that may impact the objectivity and independence of the auditors and shall take or recommend that the Board take appropriate actions to oversee and satisfy itself as to the auditors' independence. Reviewing the audited financial statements and discussing them with management and the independent auditors. These discussions shall include the matters required to be discussed under Statement of Auditing Standards No. 61 and consideration of the quality of the Company's accounting principles as applied in its financial reporting, including a review of particularly sensitive accounting estimates, reserves and accruals, judgmental areas, audit adjustments (whether or not recorded), and other such inquiries as the Committee or the independent auditors shall deem appropriate. Based on such review, the Committee shall make its recommendation to the Board as to the inclusion of the Company's audited financial statements in the Company's Annual Report on Form 10-KSB [(or the Annual Report to Shareholders, if distributed prior to the filing of the Form 10-KSB)]. Issuing annually a report to be included in the Company's proxy statement as required by the rules of the Securities and Exchange Commission. Overseeing the relationship with the independent auditors, including discussing with the auditors the nature and rigor of the audit process, receiving and reviewing audit reports, and providing the auditors full access to the Committee (and the Board) to report on any and all appropriate matters. Discussing with a representative of management and the independent auditors (1) the interim financial information contained in the Company's Quarterly Report on Form 10-QSB prior to its filing, (2) the earnings announcement prior to its release (if practicable), and (3) the results of the review of such information by the independent auditors. (These discussions may be held with the Committee as a whole or with the Committee chair in person or by telephone.) Overseeing internal audit activities, including discussing with management and the internal auditors the internal audit function's organization, objectivity, responsibilities, plans, results, budget and staffing. Discussing with management, the internal auditors and the independent auditors the quality and adequacy of and compliance with the Company's internal controls. Discussing with management and/or the Company's general counsel any legal matters (including the status of pending litigation) that may have a material impact on the Company's financial statements, and any material reports or inquiries from regulatory or governmental agencies. The Committee's job is one of oversight. Management is responsible for the preparation of the Company's financial statements and the independent auditors are responsible for auditing those financial statements. The Committee and the Board recognize that management (including the internal audit staff) and the independent auditors have more resources and time, and more detailed knowledge and information regarding the Company's accounting, auditing, internal control and financial reporting practices than the Committee does; accordingly the Committee's oversight role does not provide any expert or special assurance as to the financial statements and other financial information provided by the Company to its shareholders and others.