<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. ________)
Filed by the Registrant: [X]
Filed by a Party other than the Registrant: [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
CapRock Communications Corp.
- ------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- -----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
---------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction: $
-------------
(5) Total fee paid:
------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------
(3) Filing Party:
--------------------------------------------------
(4) Date Filed:
----------------------------------------------------
<PAGE> 2
CAPROCK COMMUNICATIONS CORP.
15601 DALLAS PARKWAY, SUITE 700
DALLAS, TEXAS 75248
April 20, 1999
To Our Shareholders:
We are pleased to invite you to attend CapRock Communications Corp.'s 1999
Annual Meeting, which will be held at the Hotel Inter-Continental Dallas, 15201
Dallas Parkway, Dallas, Texas at 10:00 a.m. local time on Monday, May 3, 1999.
The doors will open at 9:00 a.m.
The matters to be acted on at the meeting are described in the Proxy
Statement. We hope that you will be able to attend the meeting. However, whether
or not you attend, it is important that you vote. Please mark, date, sign and
return the enclosed proxy card to ensure that your shares will be represented at
the meeting.
The Board of Directors and the management team look forward to seeing you
at the meeting.
Sincerely,
Jere W. Thompson, Jr.
Chairman Of The Board
<PAGE> 3
CAPROCK COMMUNICATIONS CORP.
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 3, 1999
---------------------
To the Shareholders of CapRock Communications Corp.:
NOTICE IS HEREBY GIVEN that the 1999 Annual Meeting of Shareholders of
CapRock Communications Corp., a Texas corporation ("CapRock"), will be held on
May 3, 1999, at 10:00 a.m. local time at the Hotel Inter-Continental Dallas,
15201 Dallas Parkway, Dallas, Texas for the following purposes:
1. To elect directors to serve for the following year and until their
successors are duly elected and qualified;
2. To ratify the appointment of KPMG LLP as independent accountants of
CapRock for the fiscal year ending December 31, 1999; and
3. To transact such other business as may properly come before the
meeting or any adjournments thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Shareholders of record at the close of business on March 10, 1999 are
entitled to notice of, and to vote at, the meeting. Only holders of record of
CapRock's common stock on that date are entitled to vote on matters coming
before the meeting and any adjournment or postponement thereof. A complete list
of shareholders entitled to vote at the meeting will be maintained in CapRock's
offices at 15601 Dallas Parkway, Suite 700, Dallas, Texas 75248 for ten days
prior to the meeting and will be open to the examination of any shareholder
during ordinary business hours of CapRock.
Please advise CapRock's Transfer Agent, American Securities Transfer &
Trust, Inc., 1825 Lawrence Street, Suite 444, Denver, Colorado 80202 of any
change in your address.
All shareholders are cordially invited to attend the meeting in person.
However, to ensure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed Proxy as soon as possible in the envelope
enclosed for that purpose. Any shareholder attending the meeting may vote in
person even if he or she previously returned a Proxy.
By Order of the Board of Directors
Kevin W. McAleer
Secretary
Dallas, Texas
April 20, 1999
<PAGE> 4
CAPROCK COMMUNICATIONS CORP.
15601 DALLAS PARKWAY, SUITE 700
DALLAS, TEXAS 75248
---------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MAY 3, 1999
---------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
CapRock Communications Corp. (the "Company" or "CapRock") for the 1999 Annual
Meeting of Shareholders to be held on May 3, 1999, at 10:00 a.m. local time at
the Hotel Inter-Continental Dallas, 15201 Dallas Parkway, Dallas, Texas, or any
adjournment or adjournments thereof, for the purposes set forth herein and in
the accompanying Notice of Annual Meeting.
This proxy statement and the enclosed proxy card are being sent beginning
approximately April 20, 1999, to all shareholders entitled to vote at the
meeting. CapRock's annual report for the fiscal year ended December 31, 1998 is
being mailed herewith to all shareholders entitled to vote at the Annual
Meeting. The annual report does not constitute a part of the soliciting
materials.
RECORD DATE; OUTSTANDING SHARES
Only shareholders of record at the close of business on March 10, 1999 (the
"Record Date") are entitled to receive notice of and to vote at the meeting. The
outstanding voting securities of CapRock as of such date consisted of 28,948,113
shares of common stock, par value $.01 per share (the "Common Stock"). CapRock
has no other class of stock outstanding. For information regarding holders of
more than 5% of the outstanding Common Stock, see "Election of
Directors -- Security Ownership of Certain Beneficial Owners and Management."
REVOCABILITY OF PROXIES
The enclosed proxy is revocable at any time before its use by delivering to
CapRock a written notice of revocation or a duly executed proxy bearing a later
date. If a person who has executed and returned a proxy is present at the
meeting and wishes to vote in person, he or she may elect to do so and thereby
suspend the power of the proxy holders to vote his or her proxy.
VOTING AND SOLICITATION
Every shareholder of record on the Record Date is entitled, for each share
held, to one vote on each proposal or item that comes before the meeting. Each
shareholder will be entitled to vote for seven nominees in the election of
directors, and the seven nominees with the greatest number of votes will be
elected. There are no cumulative voting rights.
The cost of this solicitation will be borne by CapRock. CapRock may
reimburse expenses incurred by brokerage firms and other persons representing
beneficial owners of shares in forwarding soliciting materials to beneficial
owners. Proxies may be solicited by certain of CapRock's directors, officers and
regular employees, without additional compensation, personally, by telephone, by
facsimile or by telegram.
<PAGE> 5
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the Annual Meeting
is a majority of the shares of Common Stock entitled to vote at the Annual
Meeting, in person or by proxy. Shares that are voted "FOR," "AGAINST" or
"WITHHELD FROM" a matter are treated as being present at the meeting for
purposes of establishing a quorum and are also treated as shares "represented
and voting" at the Annual Meeting (the "Votes Cast") with respect to such
matter.
While there is no definitive statutory or case law authority in Texas as to
the proper treatment of abstentions, CapRock believes that abstentions should be
counted for purposes of determining both (i) the presence or absence of the
quorum for the transaction of business and (ii) the total number of Votes Cast
with respect to a proposal. In the absence of controlling precedent to the
contrary, CapRock intends to treat abstentions in this manner. Accordingly,
abstentions will have the same effect as a vote against a proposal.
Broker non-votes will not be counted for purposes of determining the
presence or absence of a quorum for the transaction of business or for purposes
of determining the number of Votes Cast with respect to a proposal.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Proposals of shareholders of CapRock that are intended to be presented by
such shareholders at CapRock's 2000 Annual Meeting must be received by CapRock,
addressed to Kevin W. McAleer, Secretary, CapRock Communications Corp., 15601
Dallas Parkway, Suite 700, Dallas, Texas 75248, no later than December 22, 1999
for inclusion in the proxy statement and form of proxy relating to that meeting.
Such proposals must comply with the Bylaws of CapRock and the requirements of
Regulation 14A (including Rule 14a-8) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
Pursuant to Rule 14a-4 of the Exchange Act, CapRock may exercise
discretionary voting authority at the 2000 Annual Meeting under proxies it
solicits to vote on a proposal made by a shareholder that does not meet the
requirements of Rule 14a-8, unless CapRock is notified about the proposal no
later than March 6, 2000 (assuming that CapRock's 2000 Annual Meeting of
Shareholders is held on a date that is within 30 days from the date on which the
1999 Annual Meeting was held), and the shareholder satisfies the other
requirements of Rule 14a-4(c).
With respect to business to be brought before the Annual Meeting to be held
on May 3, 1999, CapRock has not received any notices from shareholders that
CapRock is required to include in this Proxy Statement.
2
<PAGE> 6
ELECTION OF DIRECTORS
(ITEM 1)
A Board of seven directors is to be elected at the meeting. All nominees
are currently directors, except for Richard G. Ellenberger. Unless otherwise
instructed, the proxy holders will vote all of the proxies received by them for
CapRock's seven nominees named below. In the event that additional persons are
nominated for election as directors, the proxy holders intend to vote all
proxies received by them in such a manner as will ensure the election of as many
of the nominees listed below as possible and, in such event, the specific
nominees to be voted for will be determined by the proxy holders. In the event
that any of the nominees shall become unavailable, the proxy holders will vote
in their discretion for a substitute nominee. It is not expected that any
nominee will be unavailable. The term of office of each person elected as a
director will continue until the next Annual Meeting of Shareholders and until
his successor has been elected and qualified.
VOTE REQUIRED
The seven nominees receiving the highest number of affirmative votes of the
shares entitled to be voted shall be elected to the Board of Directors. Votes
withheld from any director are counted for purposes of determining the presence
or absence of a quorum and for purposes of determining the total number of votes
cast regarding such director, but have no other legal effect under Texas law.
If any nominee of CapRock is unable or declines to serve as a director at
the time of the meeting, the proxies will be voted for any nominee who is
designated by the present Board of Directors to fill the vacancy. It is not
expected that any nominee will be unable or will decline to serve as a director.
Byron M. Allen, who is currently a director of CapRock, has declined to stand
for re-election as a director, and Richard G. Ellenberger has been nominated to
fill such vacancy.
The Board of Directors recommends that shareholders vote FOR the nominees
listed below.
The names and certain information about the nominees for directors are set
forth below:
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE POSITIONS/PRINCIPAL OCCUPATION SINCE
--------------- --- ------------------------------ --------
<S> <C> <C> <C>
Jere W. Thompson, Jr............ 42 Chairman of the Board, Chief Executive 1998
Officer and Director of CapRock
Ignatius W. Leonards............ 45 Vice Chairman of the Board, President 1998
and Director of CapRock
Timothy W. Rogers............... 36 Executive Vice President of Retail 1998
Sales and Network Operations and
Director of CapRock
Mark Langdale(1)................ 44 President of Posadas USA, Inc. 1998
Christopher J. Amenson(1)(2).... 48 President, Chief Executive Officer and 1998
Director of SBS Technologies, Inc.
John R. Harris(1)(2)............ 50 Information Technology Services 1998
Industry Consultant
Richard G. Ellenberger.......... 46 Chief Executive Officer and President --
of Cincinnati Bell, Inc.
</TABLE>
- ---------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
Except as set forth below, each of the nominees has been engaged in the
principal occupation described above during the past five years. There is no
family relationship between any director or executive officer of CapRock.
3
<PAGE> 7
Set forth below is certain information with respect to each of the nominees
for director and each other executive officer of CapRock:
NOMINEES
Mr. Jere W. Thompson, Jr. has served as Chairman of the Board and Chief
Executive Officer of CapRock since its formation in February 1998. Mr. Thompson
also has served as President of CapRock Telecommunications Corp. ("CapRock
Telecommunications"), one of our predecessor companies, since April 1994, and
since July 1992, upon founding CapRock Fiber Network Ltd. ("CapRock Fiber"),
another of our predecessor companies, as the President of its general partner.
In 1987, Mr. Thompson joined The Thompson Company, an investment company, where
he became a Vice President and assisted in the acquisition and management of
several of The Thompson Company portfolio companies. From 1982 to 1986, Mr.
Thompson worked in commercial real estate as a broker and then with Trammell
Crow Community Development Company. Since 1989, Mr. Thompson has been a member
of the board of directors and since 1995 he has served as Chairman of the North
Texas Tollway Authority and its predecessor, the Texas Turnpike Authority. Mr.
Thompson is also a board member of Cistercian Preparatory School. Mr. Thompson
has a B.A. in Economics from Stanford University and a M.B.A. from The
University of Texas Graduate School of Business.
Mr. Ignatius W. Leonards has served as Vice Chairman of the Board and
President of CapRock since its formation in February 1998. Mr. Leonards served
as Chairman of the Board, Chief Executive Officer and a director of IWL
Communications, Incorporated ("IWL Communications"), one of our predecessor
companies, since founding IWL Communications in 1981 and served as President
from 1981 until February 1997. Mr. Leonards has an industrial electronics degree
from the T.H. Harris Technical Institute in Opelousas, Louisiana.
Mr. Timothy W. Rogers has served as Executive Vice President of Retail
Sales and Network Operations and as a director of CapRock since its formation in
February 1998. Mr. Rogers served as Executive Vice President of Retail Sales and
Network Operations and as a Director of CapRock Telecommunications since April
1994. In 1992, Mr. Rogers co-founded Synergy Telecommunications, Inc.
("Synergy"), a telecommunications company responsible for marketing a fiber
optic network in West Texas, Oklahoma, Colorado and New Mexico, and from
February 1992 to April 1994 served as one of its three executive officers. In
April 1994, CapRock Investors purchased half of Synergy and subsequently Synergy
changed its name to CapRock Telecommunications. From August 1989 to December
1991, Mr. Rogers was a sales manager of Qwest. From July 1988 to August 1989,
Mr. Rogers was a Senior Account Executive for Southwest Network Services. From
April 1987 to June 1988, Mr. Rogers was an account executive with Sprint. Mr.
Rogers has a B.B.A. in Marketing from Southwest Texas State University.
Mr. Mark Langdale has served as a director of CapRock since its formation
in February 1998. Mr. Langdale served as a Director of CapRock
Telecommunications since April 1994 and Secretary of the general partner of
CapRock Fiber since 1992. Mr. Langdale is President of Posadas USA, Inc., a
subsidiary of Grupo Posadas S.A. De C.V., a hotel management company domiciled
in Mexico, a position he has held since 1989. From 1987 to 1989, he served as
Vice President for Thompson Realty Company, a real estate investment company.
Mr. Langdale currently serves as a member of the Board of Directors of Grupo
Posadas S.A. De C.V., a director of the Texas Department of Commerce Policy
Board and as Chairman of the Texas Department of Economic Development.
Mr. Christopher J. Amenson has served as a director of CapRock since
February 1998. Mr. Amenson has served as a director of IWL Communications since
June 1997. Mr. Amenson has served as President and Chief Operating Officer of
SBS Technologies, Inc., a manufacturer of computer components, since April 1992
and as a director since August 1992. In October 1996 he became the Chief
Executive Officer and in May 1997 he became Chairman of the Board of Directors
of SBS Technologies, Inc. For five years before joining SBS Technologies, Inc.,
Mr. Amenson was President of Industrial Analytics, Inc., a Boston-based
investment banking firm. Mr. Amenson holds a B.A. Degree in Government from the
University of Notre Dame and a
4
<PAGE> 8
Master's Degree in Business Management from the Sloan Fellows Program at the
Massachusetts Institute of Technology.
Mr. John R. Harris has served as a director of CapRock since August 1998.
Mr. Harris is currently an information technology services industry consultant.
Prior thereto, Mr. Harris served as a Corporate Vice President at Electronic
Data Systems Corporation, an information and technology outsourcing and data
processing company ("EDS"), from 1997 until March 31, 1999 (when he resigned
from EDS), where he was responsible for marketing and corporate strategy. From
1989 to 1997, he served as a Vice President of the Communications Industry Group
at EDS where he was responsible for four business units directed toward
wirelines, wireless, media and interactive services. Mr. Harris is on the Board
of Directors of Applied Graphics Technologies, Inc., an independent provider of
digital prepress services. Mr. Harris received his undergraduate and graduate
degrees in business administration from West Georgia University.
Mr. Richard G. Ellenberger has agreed, if elected at the 1999 Annual
Meeting of Shareholders, to serve as a director of CapRock. Mr. Ellenberger has
served as President and Chief Executive Officer of Cincinnati Bell, Inc., a
telecommunications company, since March 1, 1999, its Chief Operating Officer
since September 1, 1998, a director since November 1998 and as President and
Chief Executive Officer of Cincinnati Bell Telephone since June 1997. From 1996
to 1997, Mr. Ellenberger served as Chief Executive Officer of XLConnect, a
technical services company. From 1992 to 1996, Mr. Ellenberger served in various
capacities with MCI Telecommunications and was its President, Business Services,
from 1995 to 1996. Mr. Ellenberger served as Chief Operating Officer of Entrade
Corporation, a natural gas company, from 1990 to 1992. Mr. Ellenberger currently
serves on the Cincinnati Chamber of Commerce Board of Directors and is a member
of the Family Services Board of Greater Cincinnati. Mr. Ellenberger is a
graduate of Old Dominion University.
OTHER EXECUTIVE OFFICERS
Mr. Kevin W. McAleer, age 48, has served as Senior Vice President and Chief
Financial Officer of CapRock since April 1998 and as Treasurer and Secretary
since August 1998. From 1996 to 1998, Mr. McAleer served as Chief Financial
Officer, Secretary and as a member of the Executive Management Committee of
American Pad and Paper Co., one of the largest manufacturers and marketers of
paper-based office products in North America. From 1990 to 1996, Mr. McAleer
served as Executive Vice President, Chief Financial Officer and as a member of
the Executive Management Committee of Rexene Corporation, which manufactures
plastic film and plastic resins. From 1985 to 1990, Mr. McAleer served as Senior
Vice President-Administration, Chief Financial Officer, Secretary and Treasurer,
and as a member of the Executive Management Committee and the Board of Directors
of Varo, Inc., which manufactures electronics supplied primarily to U.S.
military agencies, such as proprietary night vision systems, high-reliability
power systems and airborne missile launchers. From 1981 to 1985, Mr. McAleer
served as Vice President-Finance, Chief Financial Officer, Secretary and
Treasurer, and as a member of the Executive Management Committee of Tocom, Inc.,
which designs and manufactures high-technology communications products and
services for the cable industry. Mr. McAleer is a certified public accountant
and is a member of the American Institute of Certified Public Accountants and
the Texas Society of Certified Public Accountants. Mr. McAleer has a B.S. in
Accounting/Economics from LaSalle University in Philadelphia, Pennsylvania.
Mr. Byron M. Allen, age 51, has served as Executive Vice President of
International and a Director of CapRock since its formation in February 1998.
Mr. Allen served as President and a director of IWL Communications since
February 1997 and served as a Vice President of IWL Communications from December
1993 until February 1997. From 1986 to 1993, Mr. Allen served as Executive Vice
President of SBS Technologies, Inc., a manufacturer of computer components. Mr.
Allen was a co-founder of SBS Technologies, Inc. Mr. Allen graduated from the
University of Alabama with a degree in Mathematics.
Mr. Timothy M. Terrell, age 36, has served as Executive Vice President of
Carrier Sales of CapRock since its formation in February 1998. Mr. Terrell
served as Executive Vice President, Carrier Sales, and a Director of CapRock
Telecommunications since April 1994. In 1992, Mr. Terrell co-founded Synergy and
from February 1993 to April 1994 served as one of its three executive officers.
From February 1989 to
5
<PAGE> 9
January 1993, Mr. Terrell was Director of Sales of Qwest and acted as Vice
President of Sales during a transition period following Qwest's buyout by MCI
WorldCom. From July 1988 to January 1989, Mr. Terrell held the same position at
Metromedia Long Distance. Mr. Terrell has a B.B.A. in Marketing from Southwest
Texas State University.
Mr. Scott L. Roberts, age 37, has served as Executive Vice President of
International Sales of CapRock since its formation in February 1998. Mr. Roberts
served as Executive Vice President, International Sales, and a Director of
CapRock Telecommunications since April 1994. In 1992, Mr. Roberts co-founded
Synergy and served as one of its three executive officers from February 1992 to
April 1994. From September 1989 to February 1992, Mr. Roberts was a carrier
sales manager of Qwest. From April 1987 to September 1989, Mr. Roberts was a
major account representative with Sprint. Mr. Roberts has a B.S. in Business
Administration from the University of Nebraska.
Mr. Matthew M. Kingsley, age 34, has served as Corporate Controller of
CapRock since August 1998. From August 1996 to August 1998, Mr. Kingsley was an
audit manager for KPMG LLP and held various positions with such firm from
January 1988 until February 1992. From February 1992 until August 1996, Mr.
Kingsley held various positions, including Senior Manager of Financial Planning,
with DSC Communications Corporation, a telecommunications equipment
manufacturer. Mr. Kingsley is a certified public accountant and is a member of
the American Institute of Certified Public Accountants and the Texas Society of
Certified Public Accountants. Mr. Kingsley has a B.B.A. in Accounting from the
University of Wisconsin.
Our Board of Directors is currently composed of seven directors. Each
director serves until the next annual meeting of shareholders and until his
successor is duly elected and qualified. Our officers are elected by and serve
at the discretion of the Board of Directors. There are no family relationships
among any of our directors or executive officers.
6
<PAGE> 10
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of February 28, 1999, certain
information with respect to the beneficial ownership of CapRock's Common Stock
by (i) each person known by CapRock to own beneficially more than five percent
(5%) of the outstanding shares of Common Stock, (ii) each current director and
director nominee of CapRock, (iii) the executive officers of CapRock named in
the table under "Executive Compensation -- Summary Compensation Table," and (iv)
all directors and executive officers as a group. CapRock does not know of any
agreements among its shareholders that relate to voting or investment power of
its shares of Common Stock. The address for Messrs. Jere W. Thompson, Jr.,
Rogers, Roberts, Terrell and McAleer, CapRock Investors and Greenway Holdings,
L.P. is 15601 Dallas Parkway, Suite 700, Dallas, Texas 75248. The address for
Messrs. Leonards and Allen is 12000 Aerospace Ave., Suite 200, Houston, Texas
77034.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
OF COMMON STOCK SHARES OF
BENEFICIALLY COMMON STOCK
NAME AND ADDRESS OWNED(1) OUTSTANDING(1)
- ---------------- ---------------- --------------
<S> <C> <C>
Jere W. Thompson, Jr.(2).................................... 10,775,218 37.2%
Ignatius W. Leonards(3)..................................... 1,897,528 6.6%
Timothy W. Rogers(4)........................................ 2,883,628 10.0%
Scott L. Roberts............................................ 2,883,628 10.0%
Timothy M. Terrell.......................................... 2,883,628 10.0%
Byron M. Allen(5)........................................... 214,200 *
Kevin W. McAleer............................................ -- --
Mark Langdale(6)............................................ 11,224,352 38.8%
5950 Berkshire, Suite 990
Dallas, TX 75225
Christopher J. Amenson(7)................................... 5,333 *
c/o SBS Technologies, Inc.
2400 Louisiana Blvd., N.E.
AFC Building 5, Suite 600
Albuquerque, NM 87110
John R. Harris.............................................. 7,000 *
4225 Versailles Avenue
Dallas, Texas 75205
Richard G. Ellenberger...................................... -- --
c/o Cincinnati Bell, Inc.
201 East Fourth Street
Cincinnati, Ohio 45201
Jere W. Thompson, Sr.(8).................................... 10,647,930 36.8%
Two Turtle Creek Village
3838 Oak Lawn Ave., Suite 1850
Dallas, TX 75219
Greenway Holdings, L.P.(2).................................. 2,014,082 7.0%
CapRock Investors(2)........................................ 8,650,884 29.9%
All executive officers and directors as a group(7) (eleven
persons).................................................. 24,014,699 83.0%
</TABLE>
- ---------------
* Less than 1% of the outstanding shares of the class.
(1) Based upon 28,939,627 shares of Common Stock issued and outstanding as of
February 28, 1999. The information contained in this table with respect to
beneficial ownership reflects "beneficial ownership" as defined in Rule
13d-3 under the Exchange Act, which means generally any person who, directly
or
7
<PAGE> 11
indirectly, has or shares voting power or investment power with respect to a
security. Shares of Common Stock not outstanding but deemed beneficially
owned by virtue of the right of an individual or group to acquire such
shares within 60 days after February 28, 1999 are treated as outstanding
only when determining the amount and percentage of Common Stock owned by
such individual or group. All information with respect to the beneficial
ownership of any principal shareholder was furnished by such principal
shareholder and we believe that, except as otherwise noted or pursuant to
community property laws, each shareholder has sole voting and investment
power with respect to shares shown.
(2) Includes 8,650,884 shares held of record by CapRock Investors, 108,932
shares held of record by CapRock Systems, Inc. and 2,014,082 shares held of
record by Greenway Holdings, L.P. CapRock Investors is a Texas joint
venture, of which Jere W. Thompson, Jr. is the managing venturer and in
which he owns a controlling interest. The Joint Venture Agreement of CapRock
Investors grants to Mr. Thompson, Jr. certain authority, including the
authority to decide and cast all votes on behalf of CapRock Investors as a
shareholder of CapRock. As a consequence, both CapRock Investors and Mr.
Thompson, Jr. may each be deemed to be the beneficial owner of all of the
shares. CapRock Systems, Inc. is a Texas corporation of which Mr. Thompson,
Jr. owns 50% of the outstanding common stock and is an officer and a
director; as a result he has shared voting, investment, and dispositive
power with respect to the 108,932 shares held by CapRock Systems, Inc.
Greenway Holdings, L.P. is a Texas limited partnership of which Mr.
Thompson, Jr. is the general partner and has sole voting, investment and
dispositive power; as a result, he may be deemed to be the beneficial owner
of all of the shares held of record by Greenway Holdings, L.P.
(3) Includes 20,166 shares held by Ignatius W. Leonards as custodian for minor
children.
(4) Includes 8,970 shares held by Neal S. Rogers as custodian for the minor
children of Timothy W. Rogers. Neal S. Rogers is Timothy W. Roger's brother.
(5) Includes 7,300 shares held by Byron M. Allen as custodian for minor children
and 7,300 shares held by Mr. Allen's daughters, the voting, investment and
dispositive power of which are shared by Mr. Allen with his daughter.
(6) Includes 8,650,884 shares held of record by CapRock Investors and 108,932
shares held of record of CapRock Systems, Inc. Under the Joint Venture
Agreement of CapRock Investors, the approval of a majority-in-interest of
the venturers is required to approve the disposition of the shares. Because
of the ownership interest of Jere W. Thompson, Jr., Mark Langdale, and Jere
W. Thompson, Sr. (23.5%, 42.5% and 30.9%, respectively), two of the three
acting together can authorize or prevent a disposition of the shares. As a
result, each may be deemed to be the beneficial owner of all of the shares.
CapRock Systems, Inc. is a Texas corporation of which Mr. Langdale owns 50%
of the outstanding common stock and is an officer and a director; as a
result he has shared voting, investment and dispositive power with respect
to the 108,932 shares held by CapRock Systems, Inc.
(7) Includes 3,333 shares subject to currently exercisable options.
(8) Includes 1,302,283 shares held of record by The Williamsburg Corporation,
8,650,884 shares held of record by CapRock Investors and 289,677 shares held
of record by Jere W. Thompson, Sr.'s spouse. Under the Joint Venture
Agreement of CapRock Investors, the approval of a majority-in-interest of
the venturers is required to approve the disposition of the shares. Because
of the ownership interest of Jere W. Thompson, Jr., Mark Langdale, and Jere
W. Thompson, Sr., (23.5%, 42.5% and 30.9%, respectively), two of the three
acting together can authorize or prevent a disposition of the shares. As a
result, each may be deemed to be the beneficial owner of all of the shares.
The Williamsburg Corporation is a Texas corporation, of which Mr. Thompson,
Sr. is the president and a director; as a result he has shared voting,
investment, and dispositive power with respect to the 1,302,283 shares held
by The Williamsburg Corporation.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of CapRock held a total of two meetings during the
fiscal year ended December 31, 1998. In addition, the Board of Directors acted
nine times by unanimous consent during the
8
<PAGE> 12
fiscal year ended December 31, 1998. During the fiscal year ended December 31,
1998, each director attended at least 75% of the aggregate number of meetings of
the Board of Directors and meetings of committees on which such director served
held during the period for which he was a director or a member of the committee.
The Audit Committee, currently consisting of directors Christopher J.
Amenson, John R. Harris and Mark Langdale (who was elected to the Audit
Committee on February 18, 1999), met once during the last fiscal year. The Audit
Committee reviews our internal accounting procedures and consults with and
reviews the services provided by our independent auditors.
The Compensation Committee, currently consisting of directors Christopher
J. Amenson and John R. Harris, acted one time by unanimous consent during the
last fiscal year. The Compensation Committee reviews and recommends to the Board
of Directors the compensation and benefits of all our executives and establishes
and reviews general policies relating to compensation and benefits of our
employees, including the administering of our Equity Incentive Plan.
All members of the Compensation Committee are and will be "Non-Employee
Directors" within the meaning of Rule 16b-3 under the Exchange Act and "outside
directors" within the meaning of Section 162(m) of the Internal Revenue Code of
1986, as amended.
BOARD COMPENSATION
We reimburse each member of our Board of Directors for out-of-pocket
expenses incurred for attending board meetings. Each non-employee director
receives a $10,000 annual retainer and a $1,000 fee for each meeting of the
Board of Directors and each meeting of any committee of the Board attended by
the director. No employee director on our Board of Directors currently receives
any additional cash compensation. Our non-employee directors are eligible to
participate in and receive nonqualified stock options under our 1998 Director
Stock Option Plan.
During the fiscal year ended December 31, 1998, Christopher J. Amenson,
John R. Harris and Mark Langdale, who are non-employee directors of CapRock,
were each granted options to purchase 10,000 shares of Common Stock at an
exercise price of $6.50 per share of Common Stock.
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<PAGE> 13
REPORT OF THE COMPENSATION COMMITTEE
The following is the Report of the Compensation Committee of CapRock,
describing the compensation policies and rationale applicable to CapRock's
executive officers with respect to the compensation paid to the executive
officers for the fiscal year ended December 31, 1998. The information contained
in the Report of the Compensation Committee shall not be deemed to be
"soliciting material" or to be "filed" with the SEC, nor shall such information
be incorporated by reference into any future filing under the Securities Act or
the Exchange Act except to the extent that CapRock specifically incorporates it
by reference into such filing.
TO THE BOARD OF DIRECTORS:
The Board of Directors appointed the Compensation Committee, consisting of
Messrs. Amenson and Harris, in August 1998 concurrent with the consummation of
CapRock's business combination with its predecessor companies. Since that time,
decisions regarding compensation of CapRock's executive officers have been made
by the Compensation Committee. The Compensation Committee also administers
CapRock's Equity Incentive Plan and other discretionary bonuses for CapRock's
employees. No member of the Compensation Committee is an employee of CapRock.
Compensation Policies Toward Executive Officers
The goals of the Compensation Committee in establishing CapRock's executive
compensation program are as follows:
(1) To fairly compensate the executive officers of CapRock for their
contributions to CapRock's short-term and long-term performance. The
elements of CapRock's compensation program are (i) annual base salaries,
(ii) annual cash bonuses and (iii) equity incentives.
(2) To allow CapRock to attract, motivate and retain the management
personnel necessary to CapRock's success by providing an executive
compensation program comparable to that offered by similar companies.
(3) To provide an executive compensation program with incentives
linked to the financial performance of CapRock. Under such program,
incentive compensation for executive officers is linked to the general
financial performance of CapRock as measured by such items as revenues and
income from operations.
Base Salaries. The annual base salaries of the Chief Executive Officer, the
President and the other executive officers of CapRock were predetermined
pursuant to employment agreements that were entered into by CapRock and such
individuals prior to the appointment of the Compensation Committee and became
effective upon consummation of the business combination in August 1998. The
Compensation Committee has, however, reviewed such base salaries in light of
corporate performance, individual performance, experience and a comparison with
salary ranges reflecting similar positions, duties and levels of responsibility
of other companies in similar industries and with comparable revenues and has
found them to be reasonable. Each executive officer's base salary is reviewed
annually by the Compensation Committee and is subject to upward adjustment on
the basis of individual and corporate performance.
Annual and Other Bonuses. CapRock's annual bonuses to its executive
officers are based upon CapRock's financial performance in the current year, the
furthering of CapRock's strategic position in the marketplace and individual
performance.
Equity Incentives. Equity incentives, including grants of stock options,
are determined based on the Compensation Committee's assessment of the ability
of such officers to positively impact CapRock's future performance and enhance
shareholder value as determined by their individual performances. Stock option
grants and other equity incentives are not awarded annually but as the
individual performance and experience of each executive officer warrants. Option
awards generally vest over five years. The amount and vesting of stock options
are not contingent on achievement of any specific performance targets. All
options granted will
10
<PAGE> 14
benefit the executive only to the extent that there is appreciation in the
market price of the Common Stock during the option period.
Equity and cash incentives are not limited to executive officers. Grants of
stock options have been made to employees upon joining CapRock in amounts
consistent with guidelines established by the Compensation Committee and are
also made to selected employees as performance related awards and as awards for
certain promotions. The amounts of such grants are determined based on the
individual employee's position with CapRock and his or her potential ability to
beneficially impact the performance of CapRock. By giving employees a stake in
the financial performance of CapRock, the Compensation Committee's goal is to
provide incentives to employees of CapRock to enhance the financial performance
of CapRock.
Chief Executive Officer Compensation. Mr. Thompson's compensation is
determined by application of the policies described above. Mr. Thompson
generally participates in the same executive compensation plans and arrangements
available to the other executive officers. Accordingly, his compensation
consists of annual base salary, bonus, and equity incentives. The Compensation
Committee's general approach in establishing Mr. Thompson's compensation is to
be competitive with peer companies, and to have a large percentage of his target
compensation based upon the long-term performance of CapRock, as reflected in
the market price of CapRock's common stock.
Mr. Thompson's compensation during the year ended December 31, 1998,
included $194,583 in base salary and $110,000 in cash bonus. Mr. Thompson's
salary and bonus payments for 1998 were based, in part, on CapRock's performance
and the 1997 compensation of chief executive officers of peer companies,
although his compensation was not targeted to any particular group of these
companies.
Respectfully Submitted,
Compensation Committee
Christopher J. Amenson
John R. Harris
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors established a Compensation Committee, consisting of
Messrs. Amenson and Harris, effective upon consummation of our business
combination (which occurred in August 1998). Before that, during fiscal 1998,
compensation decisions for executive officers of CapRock Telecommunications were
made by the Board of Directors of CapRock Telecommunications, compensation
decisions for the officers of CapRock Fiber's general partner were made by its
Board of Directors and compensation decisions for executive officers of IWL
Communications were made by Christopher J. Amenson and Myron Goins, the sole
members of IWL Communications' compensation committee.
Our business combination with our predecessor companies was completed on
August 26, 1998. During the last fiscal year prior to the consummation of our
business combination, no executive officer of IWL Communications served as a
member of the Board of Directors or compensation committee of CapRock
Telecommunications or CapRock Fiber's general partner or any entity that had one
or more executive officers serving as a member of IWL Communications' Board of
Directors or compensation committee. During the last fiscal year, prior to the
consummation of our business combination, no executive officer of CapRock
Telecommunications or CapRock Fiber's general partner served as a member of the
Board of Directors or compensation committee of IWL Communications or any entity
(other than CapRock Telecommunications or the general partner of CapRock Fiber)
that had one or more executive officers serving as a member of their Board.
During the last fiscal year, after consummation of our business combination, no
executive officer of CapRock served as a member of the Board of Directors or
compensation committee of any entity that has one or more executive officers
serving as a member of CapRock's Board of Directors or Compensation Committee.
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<PAGE> 15
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Caroline Fontenot, the sister of Mr. Leonards, our President, lent IWL
Communications, one of our predecessor companies, $75,000 on June 1, 1992 at an
interest rate of 12% per annum. We used a portion of the net proceeds from the
offering of our senior notes in July 1998 to repay the loan in full.
Our operations support system was developed by RiverRock Systems, Ltd.
CapRock owns a 49% limited partnership interest in RiverRock and David E.
Thompson, the brother of Jere W. Thompson, Jr., owns a 50% limited partnership
interest in RiverRock. Thompson Technology, Inc., a Texas corporation that is
owned by David E. Thompson, is the general partner and owns a 1% general
partnership interest in RiverRock. Although it is the intention of RiverRock to
market and sell licenses for the system to third parties, as of the date of this
Proxy Statement, no marketing or sales to third parties have been made.
RiverRock was formed when CapRock and TTI transferred all rights to the system
developed by CapRock and TTI into RiverRock. CapRock has been granted a
royalty-free, perpetual and non-exclusive license for the use of the system.
CapRock also receives upgrades, maintenance and other support from RiverRock for
three years, without the payment of any fees or royalties, which expires in June
2001. Thereafter, CapRock will be required to pay the same fees and royalties
for system upgrades, maintenance and support as other licensees of RiverRock.
During the fiscal year ended December 31, 1998, CapRock contributed a total of
$170,000 to RiverRock for the development of the system and has committed to
fund up to a total of $700,000 as capital contributions to RiverRock, which will
be used for the continued development of the system.
Jere W. Thompson, Sr. is the president of The Williamsburg Corporation, a
Texas corporation. The Williamsburg Corporation lent CapRock Telecommunications,
one of our predecessor companies, $1,170,000 in 1995 at the rate of 13% per
annum and payable on demand, but no later than March 31, 1998. During the fiscal
year ended December 31, 1995, The Williamsburg Corporation converted $750,000 of
the outstanding principal and interest amount of such note into 727,925 shares
of CapRock Telecommunications common stock. The remaining principal balance of
the note, together with interest thereon, was repaid by CapRock
Telecommunications during the fiscal year ended December 31, 1997. Jere W.
Thompson, Sr. is the father of Jere W. Thompson, Jr.
CapRock currently leases private line services from TISP, Inc. ("TISP").
TISP is owned by Patrick J. Thompson, a brother of Jere W. Thompson, Jr. Total
payments to TISP in the fiscal year ended December 31, 1998 were $1,176,000. We
believe that the prices charged for such services do not exceed prices charged
by unrelated parties for such services. Pricing of private line services is a
function of the capacity, term and distance of the circuit involved. Circuits
are usually available from multiple vendors, and vendors are selected on the
basis of price, speed of provisioning and circuit diversity. Rates are fixed and
payable monthly, generally in advance. The actual rates paid to TISP are
determined in the same manner as rates for unrelated parties.
In 1994, CapRock Telecommunications executed three promissory notes, one
payable to the order of each of Scott L. Roberts, Timothy M. Terrell and Timothy
W. Rogers, each an Executive Vice President of CapRock, relating to 334 shares
of common stock of CapRock Telecommunications repurchased from each of them with
such shares of stock pledged by CapRock Telecommunications to repay the notes.
The aggregate purchase price for the 334 shares from each individual was
$50,000. Each of the original notes were in the amount of $50,000 with no stated
interest rate. The notes were discounted using an interest rate of 5.8% and were
payable in three annual installments beginning April 1998. We used a portion of
the net proceeds from the offering of our senior notes in July 1998 to repay the
notes in full.
CapRock Telecommunications had a revolving credit facility with Bank One,
Texas, N.A. in the amount of $2,500,000, which was guaranteed by Jere W.
Thompson, Jr. We used a portion of the net proceeds from the offering of our
senior notes in 1998 to repay in full all amounts outstanding under the line of
credit, and at that time Mr. Thompson was released from his guaranty.
Mark Langdale, one of our directors, Joe C. Thompson, Jr., an uncle of Jere
W. Thompson, Jr., The Florida Company (which is owned by Joe C. Thompson), The
Hayden Company (which is owned by John P. Thompson, an uncle of Jere W.
Thompson, Jr.), and Jere W. Thompson, Sr. guaranteed portions of the $10,000,000
loan from Bank One, Texas, N.A. to CapRock Fiber, one of our predecessor
companies, in 1996,
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<PAGE> 16
which was repaid on August 27, 1998 totaling $439,602. Each guarantor received
in exchange for each $1 million of indebtedness guaranteed (1) a 2.67% limited
partnership interest in CapRock Fiber (which was converted into shares of our
Common Stock in our business combination in August 1998), (2) a commitment fee
equal to 1% of the amount guaranteed, which accrued interest at the rate of 12%
per annum commencing July 1, 1997 and increased 2% on each July 1 thereafter
that the commitment fee remained unpaid and (3) an annual loan guaranty fee
equal to 7% of the amount of each partner's guarantee multiplied by a fraction,
the numerator being the lesser of $8 million or the average outstanding daily
principal of the loan guaranteed and the denominator being $8 million. The
guarantees (other than the joint and several guarantees of Mark Langdale and
Jere W. Thompson, Jr.) were released in April 1997 and, therefore, no guaranty
fees have been accrued after April 1, 1997 other than the accrued interest. The
total commitment fees, loan guarantee fees, \and accrued interest thereon, as of
December 31, 1996, 1997, and 1998 were approximately $208,000 and $406,000 and
$430,000. Additionally, in exchange for Mark Langdale remaining on his joint and
several guaranty, CapRock Fiber agreed to pay him $20,000 which was paid in
1998. We used a portion of the net proceeds from the offering of our senior
notes in 1998 to pay in full all of such commitment and guaranty fees.
CapRock entered into an agreement with CapRock Systems, which was the
general partner of CapRock Fiber prior to our business combination, to manage
the construction of our fiber optic network build out for the initial 260 route
miles, which was completed in 1997. Under this agreement, CapRock paid 4% of the
costs of constructing this portion of the network, payable monthly at a minimum
of $15,000 per month. CapRock paid management fees of $296,576 in 1997 and
$461,576, cumulative under the arrangement since construction of this segment
commenced. This arrangement ended in 1997.
In 1998, CapRock granted to Myron J. Goins, a former director of one of its
predecessor companies and currently one of CapRock's consultants, 3,514 shares
of "Restricted Stock" under the terms of a Restricted Stock Agreement under our
Equity Incentive Plan. The restriction period under the agreement with Mr. Goins
expired on February 28, 1999.
CapRock sold telecommunications services in the amount of approximately
$70,000 from June 1998 through December 1998 and $50,000 from January 1999
through February 1999 to Summit Communications, Inc., which is owned by Sherwood
Allen, a brother of Bryon M. Allen. Byron Allen is an Executive Vice President
and Director of CapRock.
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<PAGE> 17
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on an
investment of $100 on August 27, 1998 (the date CapRock's Common Stock started
trading after completion of its business combination with its predecessor
companies) in (i) CapRock's Common Stock, (ii) the S&P 500 Index, and (iii) the
Total Return Index of the Nasdaq Stock Market -- Telecommunications Components.
The values with each investment as of August 27, 1998 are based on share price
appreciation and the reinvestment of dividends.
The information contained in the Performance Graph shall not be deemed to
be "soliciting material" or to be "filed" with the SEC, nor shall such
information be incorporated by reference into any future filing under the
Securities Act or the Exchange Act except to the extent that CapRock
specifically incorporates it by reference into such filing.
The graph above assumes $100 invested on August 27, 1998 and was plotted using
the following data:
<TABLE>
<CAPTION>
CapRock
Measurement Period Communications Nasdaq
(Fiscal Year Covered) Corp. S & P 500 Telecommunications
<S> <C> <C> <C>
8/27/98 100 100 100
8/31/98 97 86 76
9/30/98 93 91 85
10/31/98 91 98 92
11/30/98 77 104 97
12/31/98 72 110 116
1/31/99 103 119 147
2/28/99 166 115 145
</TABLE>
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<PAGE> 18
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table shows the compensation that
we paid or awarded to our Chief Executive Officer and our other four most highly
compensated executive officers for the fiscal year ended December 31, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SHARES
--------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION(S) YEAR SALARY(1) BONUS OPTIONS COMPENSATION
- ------------------------------ ---- --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Jere W. Thompson, Jr. ............. 1998 $194,583 $110,000(2) 125,000 $ --
Chief Executive Officer and 1997 146,920(3) 100,000(4) -- 205,908(5)
Chairman of the Board
Kevin W. McAleer................... 1998 128,846 80,000(2) 100,000 18,750(6)
Senior Vice President, Chief
Financial Officer, Secretary and
Treasurer
Timothy M. Terrell................. 1998 135,555 107,500(2) 55,000 --
Executive Vice President 1997 125,781 125,000(7) -- --
Timothy W. Rogers.................. 1998 138,555 100,000(2) 62,500 --
Executive Vice President 1997 126,814 125,000(7) -- --
Scott L. Roberts................... 1998 133,055 70,000(2) 40,000 --
Executive Vice President 1997 124,521 125,000(7) -- 4,937(8)
</TABLE>
- ---------------
(1) Under the terms of their employment agreements with CapRock (which were
entered into in February 1998), the annual base salary for Messrs. Thompson,
Terrell, Rogers and Roberts through December 31, 1998 was $180,000,
$133,333, $133,333, and $133,333, respectively, in each case subject to
increase upon review annually by the Board of Directors. Under the terms of
his employment agreement with CapRock (which was entered into in May 1998),
the annual base salary for Mr. McAleer through December 31, 1998 was
$200,000, subject to increase upon review annually by the Board of
Directors. Mr. McAleer became an employee of CapRock in May 1998.
(2) Represents bonus amount earned from CapRock in fiscal year 1998 and paid in
fiscal year 1999.
(3) Includes $24,638 salary paid to Mr. Thompson by CapRock Fiber.
(4) Represents bonus amount earned from CapRock Telecommunications in fiscal
year 1997 and paid in fiscal year 1998.
(5) Such amounts represent the fees paid by the general partner of CapRock Fiber
and were based upon the total construction services revenues earned by the
general partner of CapRock Fiber in 1996 and 1997.
(6) Represents amounts paid to Mr. McAleer as a consultant prior to his
employment.
(7) Includes $125,000 bonus earned from CapRock Telecommunications in fiscal
year 1997 and paid in fiscal year 1998.
(8) Represents payment by CapRock Telecommunications of club dues for Mr.
Roberts.
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<PAGE> 19
Option Grants in Last Fiscal Year. The following table contains information
concerning the stock option grants made to each of our executive officers who
are named in the "Summary Compensation Table" during the fiscal year ended
December 31, 1998.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM(2)
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION -----------------------
NAME GRANTED(1) FISCAL YEAR PRICE DATE 5% 10%
- ---- ----------- ------------- -------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Jere W. Thompson, Jr............ 125,000 7.26% $6.50 10/13/08 $510,977 $1,294,916
Kevin W. McAleer................ 100,000 5.81% 6.50 10/13/08 408,782 1,035,933
Timothy M. Terrell.............. 55,000 3.20% 6.50 10/13/08 224,830 569,763
Timothy W. Rogers............... 62,500 3.63% 6.50 10/13/08 255,488 647,458
Scott L. Roberts................ 40,000 2.32% 6.50 10/13/08 163,513 414,373
</TABLE>
- ---------------
(1) The options generally vest over a five-year period and expire on the tenth
anniversary of the date of grant.
(2) The potential realizable value is calculated based on the term of the option
at its time of grant (ten years). It is calculated assuming that the fair
market value of the Common Stock on the date of grant appreciates at the
indicated annual rate compounded annually for the entire term of the option
and that the option is exercised and sold on the last day of its term for
the appreciated stock price.
Fiscal Year-End Option Values. The following table contains information
through December 31, 1998 concerning options held by each of our executive
officers who are named in the "Summary Compensation Table".
<TABLE>
<CAPTION>
NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
DECEMBER 31, 1998 AT DECEMBER 31, 1998(1)
--------------------------------- ----------------------------
NAME EXERCISABLE(2) UNEXERCISABLE(2) EXERCISABLE UNEXERCISABLE
- ---- -------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C>
Jere W. Thompson, Jr...................... -- 125,000 -- $23,438
Kevin W. McAleer.......................... -- 100,000 -- 18,750
Timothy M. Terrell........................ -- 55,000 -- 10,313
Timothy W. Rogers......................... -- 62,500 -- 11,719
Scott L. Roberts.......................... -- 40,000 -- 7,500
</TABLE>
- ---------------
(1) Value is determined by subtracting the exercise price from the fair market
value of the Common Stock at December 31, 1998 ($6.6875 per share),
multiplied by the number of shares underlying the options.
(2) "Exercisable" refers to those options which were vested and exercisable at
December 31, 1998, while "Unexercisable" refers to those options which were
unvested at such time.
EMPLOYMENT AGREEMENTS
In February 1998 we entered into employment agreements with each of Jere W.
Thompson, Jr., Ignatius W. Leonards, Byron M. Allen, Scott L. Roberts, Timothy
W. Rogers and Timothy M. Terrell. In addition, on May 11, 1998, we entered into
an employment agreement with Kevin W. McAleer (collectively, the "Employment
Agreements"). The following is a summary of the principal terms of the
Employment Agreements.
Each Employment Agreement is for an initial term of three years, subject to
the right of either party to terminate their agreement upon 30 days' advance
written notice.
The Employment Agreements provide for Mr. Thompson to serve as Chief
Executive Officer and Mr. Leonards to serve as President of our company. Mr.
Thompson receives an annual base salary of $180,000 and Mr. Leonards receives
$168,000, both subject to increase upon review annually by the Board of
Directors.
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<PAGE> 20
The Employment Agreements provide for Mr. McAleer to serve as our Senior
Vice President and Chief Financial Officer (Mr. McAleer also serves as our
Treasurer and Secretary), and for Messrs. Allen, Roberts, Rogers and Terrell
each to serve as an Executive Vice President. Messrs. McAleer, Allen, Roberts,
Rogers, and Terrell will receive annual salaries of $200,000, $125,000,
$133,333, $133,333 and $133,333, in each case subject to increase upon review
annually by the Board of Directors.
Each Employment Agreement provides that, at the discretion of the Board of
Directors, each employee may be paid bonus compensation or may be allowed to
participate in a management incentive bonus plan should we adopt one or both.
Each Employment Agreement also provides for certain insurance benefits and
provides that the employee be eligible to participate in all retirement and
other benefit plans generally available to employees of CapRock and any equity
or other employee benefit plan of CapRock that is generally available to senior
executive officers of such company. In addition, each Employment Agreement
provides for certain payments and benefits if the employee is terminated without
cause or due to death or permanent disability.
Each Employment Agreement generally provides that the employee will keep
confidential certain non-public information regarding our company and further
provides that, during the period after termination of employment specified
therein (generally two years), the employee will not, subject to certain
exceptions, own, manage, control, or participate in the ownership, management or
control of, or be employed by or otherwise associated with, or receive
compensation from or otherwise engage in any business in which we are engaged in
during such restricted period, including the provision of local and long
distance telecommunications services. The restricted territory under each
Employment Agreement is generally the entire United States, but in certain cases
is limited to certain Southern states. Each employee further agrees that during
the restricted period he will not (1) solicit or engage the business of any of
our clients or our clients of our affiliates or (2) solicit any of our employees
or employees of our affiliates to terminate any relationship that person may
have with us or our affiliates or engage, employ or compensate any of our
employees or employees of our affiliates.
INDEBTEDNESS OF MANAGEMENT
See "Certain Relationships and Related Transactions" above.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires CapRock's officers and
directors, and persons who own more than ten percent of a registered class of
CapRock's equity securities, to file reports of ownership on Form 3 and changes
in ownership on Form 4 or Form 5 with the SEC. Such officers, directors and ten
percent stockholders are also required by SEC rules to furnish CapRock with
copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it,
CapRock believes that, during the fiscal year ended December 31, 1998, CapRock's
officers, directors and ten percent shareholders complied with all applicable
Section 16(a) filing requirements, except that Messrs. Jere W. Thompson, Jr.,
Ignatius W. Leonards, Timothy W. Rogers, Timothy M. Terrell, Scott L. Roberts,
Byron M. Allen, Kevin W. McAleer and Matthew M. Kingsley filed Form 5s to report
stock option grants under the 1998 Equity Incentive Plan after the due date of
February 14, 1999 and Mr. Rogers subsequently amended his late Form 5 to reflect
a gift to his minor children.
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<PAGE> 21
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
(ITEM 2)
The Board of Directors has selected KPMG LLP, independent accountants, to
audit the books, records and accounts of CapRock for the fiscal year ending
December 31, 1999. KPMG LLP has audited CapRock's financial statements beginning
with the fiscal year ended December 31, 1996, and the financial statements of
IWL Communications, one of its predecessor companies, for the four fiscal years
ended June 30, 1997.
The affirmative vote of the holders of a majority of CapRock's Common Stock
represented and voting at the meeting will be required to approve and ratify the
Board's selection of KPMG LLP. The Board of Directors recommends voting "FOR"
approval and ratification of such selection. In the event of a negative vote on
such ratification, the Board of Directors will reconsider its selection.
A representative of KPMG LLP is expected to be available at the Annual
Meeting to make a statement if such representative desires to do so and to
respond to appropriate questions.
On January 20, 1998, Burds, Reed & Mercer, P.C. resigned as the independent
certified public accountants of CapRock Telecommunications and CapRock Fiber,
two of CapRock's predecessor companies. On the same day, the Board of Directors
of CapRock Telecommunications and the Board of Directors of the general partner
of CapRock Fiber approved the appointment of KPMG LLP to replace Burds, Reed &
Mercer, P.C. as independent certified public accountants. As a result, Burds,
Reed & Mercer, P.C. did not perform the audit of the financial statements of
CapRock Telecommunications or CapRock Fiber for the fiscal year ended December
31, 1997. The accountant's report on the financial statements for the fiscal
year ended December 31, 1996 did not contain any adverse opinion or disclaimer
of opinion or qualification or modification as to uncertainty, audit scope, or
accounting principles. During CapRock Telecommunications' and CapRock Fiber's
fiscal years ended December 31, 1995 and 1996, and through the date of their
replacement, there have been no disagreements between CapRock Telecommunications
or CapRock Fiber and Burds, Reed & Mercer, P.C. on any matters of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedures and there were no "reportable events," as that term is defined in
item 304(a)(1)(v) of Regulation S-K under the Securities Act.
OTHER MATTERS
Management does not intend to bring before the meeting any matters other
than those set forth herein, and has no present knowledge that any other matters
will or may be brought before the meeting by others. However, if any other
matters properly come before the meeting, it is the intention of the persons
named in the enclosed form of Proxy to vote the Proxies in accordance with their
judgment.
CapRock has borne the cost of preparing, assembling and mailing this proxy
solicitation material. CAPROCK WILL PROVIDE WITHOUT CHARGE A COPY OF CAPROCK'S
ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998,
INCLUDING THE FINANCIAL STATEMENTS, TO EACH SHAREHOLDER UPON WRITTEN REQUEST TO
PAM WALKER, CAPROCK COMMUNICATIONS CORP., 15601 DALLAS PARKWAY, SUITE 700,
DALLAS, TEXAS 75248.
By Order Of The Board of Directors
Kevin W. McAleer
Secretary
18
<PAGE> 22
CAPROCK COMMUNICATIONS CORP.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
1999 ANNUAL MEETING OF SHAREHOLDERS - MAY 3, 1999
The undersigned shareholder(s) of CapRock Communications Corp., a Texas
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement and hereby appoints Jere W. Thompson, Jr. and
Kevin W. McAleer, and each of them, Proxies and Attorneys-in-Fact, with full
power to each of substitution, on behalf and in the name of the undersigned, to
represent the undersigned at the Annual Meeting of Shareholders of CapRock
Communications Corp. to be held May 3, 1999, at 10:00 a.m. local time at the
Hotel Inter-Continental Dallas, 15201 Dallas Parkway, Dallas, Texas, and any
adjournments thereof, and to vote all shares of Common Stock that the
undersigned is entitled to vote on the matters set forth below.
1. ELECTION OF / / FOR all nominees listed below / / WITHHOLD AUTHORITY
DIRECTORS: (except as indicated) to vote for all nominees
listed below
(IF YOU WISH TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH THE NOMINEE'S NAME BELOW)
Jere W. Thompson, Jr., Ignatius W. Leonards, Timothy W. Rogers, Richard G.
Ellenberger, Mark Langdale, Christopher J. Amenson, and John R. Harris.
2. PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG LLP AS INDEPENDENT ACCOUNTANTS
OF CAPROCK FOR THE FISCAL YEAR ENDING DECEMBER 31, 1999.
/ / FOR / / AGAINST / / ABSTAIN
3. IF YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE CHECK THIS BOX: / /
(Continued on other side)
<PAGE> 23
- -------------------------------------------------------------------------------
(Continued from reverse side)
In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS BALLOT WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES NAMED ABOVE, FOR
RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS INDEPENDENT AUDITORS AND AS SAID
PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS ALLOWED BY RULE 14a-4 OF THE
SECURITIES EXCHANGE ACT OF 1934 AS MAY COME BEFORE THE MEETING.
____________________________________________________________
Signature
____________________________________________________________
Signature (To be signed if shares are held by joint tenants
as community property.)
____________________________________________________________
Title, if applicable
Dated:_________________________________, 1999
____________________________________________________________
This proxy should be dated and signed by the Shareholder(s)
exactly as his or her name appears thereon and returned
promptly in the enclosed envelope. Persons signing in a
fiduciary capacity should so indicate. If shares are held by
joint tenants as community property, both should sign.
