<PAGE>
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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 Section 240.14a-11(c) or Section 240.14a-12
CARVER CORPORATION
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(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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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:
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(5) Total fee paid:
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[_] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[LOGO OF CARVER]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Tuesday, May 20, 1997
To the Shareholders of CARVER CORPORATION:
Notice is hereby given that the Annual Meeting of Shareholders of CARVER
CORPORATION (the "Company") will be held at 4:00 p.m. local time on Tuesday,
May 20, 1997 at Carver Corporation, 20121 - 48th Avenue W., Lynnwood,
Washington 98036, for the following purposes:
(1) To elect three directors to serve until the next annual meeting of
shareholders or until their successors are elected and qualified; and
(2) To transact such other business as may properly come before the meeting.
Shareholders of record on the books of the Company at the close of business on
April 2, 1997 are entitled to notice of and to vote at the meeting and any
adjournments or postponements thereof.
By order of the Board of Directors
/s/ John P. World
John P. World
Secretary
Lynnwood, Washington
April 14, 1997
IMPORTANT NOTICE
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE SIGN,
DATE, AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED STAMPED AND AD-
DRESSED ENVELOPE. THE GIVING OF THE PROXY WILL NOT AFFECT YOUR RIGHT TO
VOTE AT THE MEETING IF THE PROXY IS REVOKED AS SET FORTH IN THE ACCOMPA-
NYING PROXY STATEMENT.
<PAGE>
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CARVER CORPORATION
20121-48TH AVENUE WEST
P.O. BOX 1237
LYNNWOOD, WASHINGTON 98046-1237
PROXY STATEMENT
This proxy statement and the accompanying form of proxy are furnished in
connection with the solicitation of proxies by the Board of Directors of
Carver Corporation (the "Company") for use at the Annual Meeting of Sharehold-
ers to be held on Tuesday, May 20, 1997, at 4:00 P.M. local time, and at any
adjournments thereof. Only shareholders of record on the books of the Company
at the close of business on April 2, 1997 (the "Record Date") are entitled to
notice of and to vote at the meeting. Management anticipates that these proxy
solicitation materials and a copy of the Company's 1996 Annual Report to
Shareholders will be mailed to shareholders on or about April 15, 1997.
If the accompanying form of proxy is properly executed and returned, the
shares represented thereby will be voted in accordance with the instructions
specified thereon. IN THE ABSENCE OF INSTRUCTIONS TO THE CONTRARY, SUCH SHARES
WILL BE VOTED FOR ALL OF THE NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
LISTED IN THIS PROXY STATEMENT AND NAMED IN THE FORM OF PROXY.
Any shareholder executing a proxy has the power to revoke it at any time
prior to the voting thereof on any matter (without, however, affecting any
vote taken prior to such revocation) by (1) delivering written notice of revo-
cation to the Secretary of the Company, (2) executing and delivering to the
Company another proxy dated as of a later date, or (3) voting in person at the
meeting.
VOTING SECURITIES AND PRINCIPAL HOLDERS
The only voting securities of the Company are shares of: (1) common stock,
par value $.01 per share (the "Common Stock"), each of which is entitled to
one vote; and (2) Series A cumulative convertible preferred stock, par value
$.01, (the "Preferred Stock"), each of which is entitled to one vote. In addi-
tion to being entitled to vote on the election of the nominees to the Board of
Directors identified below, holders of the Preferred Stock are also entitled
as a class to elect two additional members to the Company's Board of Directors
(the "Series A Directors"). Holders of Common Stock are not entitled to vote
on the election of the Series A Directors. The transaction in which the Com-
pany sold Preferred Stock and the rights of the holders thereof are described
in the Certain Relationships and Related Transactions section, below. At the
Record Date, there were issued and outstanding 3,741,570 shares of Common
Stock and 1,411,764 shares of Preferred Stock of the Company (together, the
"Outstanding Shares"). The presence in person or by proxy of holders of record
of a majority of the Outstanding Shares is required to constitute a quorum for
the transaction of business at the meeting. Under Washington law and the
Company's Articles of Incorporation and Bylaws, if a quorum is present, the
three nominees for election to the Board of Directors who receive the greatest
number of affirmative votes cast at the Annual Meeting shall be elected direc-
tors. Shares of Common Stock underlying abstentions and broker non-votes will
be considered present at the Annual Meeting for purpose of calculating a quo-
rum and will have no effect on the election of directors. Proxies and ballots
will be received and tabulated by ChaseMellon Shareholder Services, an inde-
pendent business entity not affiliated with the Company.
The Company's Common Stock is traded on the over-the-counter Nasdaq National
Market. The last sale price for the Common Stock of the Company as reported by
Nasdaq on April 2, 1997 was $2.00.
The following table sets forth certain information regarding beneficial own-
ership of Carver's Preferred Stock and Common Stock, as of April 2, 1997, with
respect to each shareholder known by the Company to be the beneficial owner of
more than five percent of the outstanding Preferred or Common Stock; Except as
otherwise indicated, the Company believes that the beneficial owners of the
Preferred Stock and the Common Stock listed below have sole investment and
voting power with respect to such shares, subject to community property laws
were applicable.
1
<PAGE>
CARVER PROXY STATEMENT -- 1997 SHAREHOLDERS MEETING
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<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT OF
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNERSHIP OUTSTANDING SHARES (1)
- - -------------- ---------------- ----------------------- ----------------------
<S> <C> <C> <C>
PREFERRED STOCK
Renwick Alpha Fund, L.P. 1,411,764 (2) 100.0
Renwick Special Situations Fund, L.P.
900 Third Avenue, 27th Floor
New York, NY 10022
COMMON STOCK
Robert W. & Diana R. Carver 658,502 (3) 17.8
330 Avenue "A"
Snohomish, WA 98290
Paul E. Sackett, Jr. 365,351 (4) 9.8
Sackett & Company
555 California St., Suite 4490
San Francisco, CA 94104
Raj K. Bhatia 251,569 (5) 6.7
900 Third Avenue, 27th Floor
New York, NY 10022
James R. McCullough 253,569 (6) 6.8
900 Third Avenue, 27th Floor
New York, NY 10022
Dimensional Fund Advisors, Inc. 240,603 (7) 6.4
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Tweedy, Browne Company L.P. 202,000 (8) 5.4
TBK Partners, L.P.
Vanderbilt Partners, L.P.
52 Vanderbilt Avenue
New York, NY 10017
Renwick Alpha Fund, L.P. 187,708 (2)(9) 5.0
Renwick Special Situations Fund, L.P.
900 Third Avenue, 27th Floor
New York, NY 10022
</TABLE>
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(1) This table is based upon information supplied by directors, officers and
principal shareholders. Percentage of ownership is based on 3,741,570
shares of Common Stock outstanding as of April 2, 1997. Beneficial owner-
ship is determined in accordance with the Rules of the Securities and Ex-
change Commission (the "Commission"), and includes voting and investment
power with respect to the shares of Preferred Stock or Common Stock. Shares
of Common Stock subject to options, or warrants, which are exercisable cur-
rently or within 60 days of April 2, 1997 are deemed outstanding when com-
puting the percentage of the person holding such options, or warrants, but
are not deemed outstanding when computing the percentage of any other per-
son.
2
<PAGE>
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(2) Shares of Preferred Stock are convertible into shares of Common Stock at
any time at the option of the holder on a one for one basis, subject to po-
tential antidilution adjustment. Messrs. Bhatia and McCullough, both direc-
tors of the Company, are the Co-Presidents, sole directors and only share-
holders of Renwick Capital Management, Inc. ("Renwick") and the sole gen-
eral partners of Renwick Alpha Fund, L.P. ("RAF") and Renwick Special Situ-
ations Fund, L.P. ("RSSF"). Renwick holds currently exercisable warrants to
purchase 250,000 shares of Common Stock. Both RAF and RSSF are private in-
vestment limited partnerships. As the sole general partners of RAF and RSSF
and the sole executive officers of Renwick, Messrs. Bhatia and McCullough
may be deemed to have shared voting and investment power over the shares of
Preferred Stock and Common Stock beneficially owned by Renwick, RAF and
RSSF. RAF beneficially owns directly 185,211 shares of Common Stock and
470,588 shares of Preferred Stock and RSSF beneficially owns directly 2,497
shares of Common Stock and 941,176 shares of Preferred Stock. RAF disclaims
beneficial ownership of any shares held by Renwick, RSSF and Messrs. Bhatia
and McCullough. RSSF disclaims beneficial ownership of any shares held by
Renwick, RAF and Messrs. Bhatia and McCullough.
(3) Includes 10,000 shares subject to sale under a vested stock option granted
by Robert W. and Diana R. Carver to Thomas C. Graham, a director of the
Company exercisable within 60 days of April 2, 1997.
(4) Sackett & Company, a registered investment advisor, is deemed to be the
beneficial owner of 277,851 shares pursuant to separate arrangements
whereby Sackett & Company acts as investment advisor to certain persons;
and each such person has the right to receive or the power to direct the
receipt of dividends from, or the proceeds from the sale of, the securi-
ties. Mr. Sackett is the direct owner of 87,500 shares of Common Stock and
has shared voting and dispositive powers over 365,351 shares of Common
Stock.
(5) Mr. Raj K. Bhatia, a director of the Company, has sole voting and invest-
ment power with respect to 569 shares of Common Stock. Includes 1,000
shares of Common Stock subject to options exercisable within 60 days of
April 2, 1997. Also includes 250,000 shares of Common Stock issuable upon
exercise of currently exercisable warrants to purchase shares of Common
Stock beneficially owned by Renwick with respect to which Mr. Bhatia shares
voting and investment power. Does not include an aggregate of 1,411,764
shares of Preferred Stock and 187,708 shares of Common Stock held by RAF
and RSSF as to which Mr. Bhatia shares voting and investment power with Mr.
McCullough. See footnote (2) above.
(6) Mr. James McCullough, a director of the Company, has sole voting and in-
vestment power with respect to 2,569 shares of Common Stock. Includes 1,000
shares of Common Stock subject to options exercisable within 60 days of
April 2, 1997. Also includes 250,000 shares of Common Stock issuable upon
exercise of currently exercisable warrants to purchase shares of Common
Stock beneficially owned by Renwick with respect to which Mr. McCullough
shares voting and investment power. Does not include an aggregate of
1,411,764 shares of Preferred Stock and 187,708 shares of Common Stock held
by RAF and RSSF as to which Mr. McCullough shares voting and investment
power with Mr. Bhatia. See footnote (2) above.
(7) Dimensional Fund Advisors, Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 240,603 shares of Common
Stock. All of such shares are held in portfolios of DFA Investment Dimen-
sions Group Inc., a registered open-end investment company, or in series of
the DFA Investment Trust Company, a Delaware business trust, or the DFA
Group Trust and DFA Participation Group Trust, investment vehicles for
qualified employee benefit plans, with respect to all of which Dimensional
Fund Advisors Inc. serves as investment manager. Dimensional disclaims ben-
eficial ownership of all such shares.
(8) Shares beneficially owned by Tweedy, Browne Company L.P. ("TBC"), a regis-
tered broker-dealer and investment advisor, are held in the accounts of
various customers. TBK Partners, L.P. ("TBK") and Vanderbilt Partners, L.P.
("Vanderbilt") are each private investment partnerships and each of Messrs.
Christopher H. Browne, William H. Browne, and John D. Spears serve as gen-
eral partners of each of TBC, TBK and Vanderbilt with Mr. Thomas P. Knapp
acting as an additional general partner of TBK. The general partners of
each of TBC, TBK and Vanderbilt may be deemed to have shared power to vote
and dispose of shares beneficially
3
<PAGE>
CARVER PROXY STATEMENT -- 1997 SHAREHOLDERS MEETING
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owned by the respective partnerships. TBC may be deemed to be the benefi-
cial owner of 172,000 shares, over which TBC claims sole voting power with
respect to 147,000 shares and shared dispositive power over 172,000 shares.
TBK beneficially owns directly 20,000 shares and Vanderbilt beneficially
owns directly 10,000 shares. Each of TBC, TBK and Vanderbilt disclaim bene-
ficial ownership of shares held by the others.
(9) Does not include 1,411,764 shares of Common Stock issuable upon conversion
of Preferred Stock, 250,000 shares of Common Stock issuable upon exercise
of currently exercisable warrants held by Renwick or an aggregate of 4,938
shares of Common Stock held or subject to purchase by Messrs. Bhatia and
McCullough. See footnotes (2), (5) and (6) above.
ELECTION OF DIRECTORS
NOMINEES
A Board of Directors consisting of five directors will be elected at the An-
nual Meeting to hold office for a term of one year or until their successors
are elected and qualified. Three of the directors, Messrs. Graham, Vynne and
Williams, (the "Nominees") are to be elected by the holders of the Common and
Preferred Stock voting together. The Board of Directors has approved the Nomi-
nees, all of whom are members of the current Board of Directors. Unless other-
wise instructed, it is the intention of the persons named in the accompanying
form of proxy to vote shares represented by properly executed proxies for the
Nominees. Although the Board of Directors anticipates that all of the Nominees
will be available to serve as directors of the Company, should any one or more
of them not accept the nomination, or otherwise be unwilling or unable to
serve, it is intended that the proxies will be voted for the election of a
substitute nominee or nominees designated by the Board of Directors.
In addition to voting with the Common Stock on the election of the Nominees,
holders of the Preferred Stock are also entitled as a class to elect two di-
rectors (the "Series A Directors"). Raj K. Bhatia and James R. McCullough cur-
rently serve as the Series A Directors and are expected to be nominated and
reelected as the Series A Directors at or before the Annual Meeting.
4
<PAGE>
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The table below lists the names and ages of the directors and the amount and
nature of the beneficial ownership of the Company's voting securities of the
directors, the executives named in the Summary Compensation Table, and all di-
rectors and executive officers as a group, all as of April 2, 1997. Except as
noted in the table, each such person has sole voting and investment powers with
respect to the shares shown.
<TABLE>
<CAPTION>
AMOUNT AND PERCENT OF
NATURE OF OUTSTANDING
TITLE OF CLASS NAME AGE OWNERSHIP SHARES (1)
---------------- ---- --- ------------- -----------
<C> <S> <C> <C> <C>
PREFERRED STOCK
Renwick Alpha Fund L.P. (2) 1,411,764 (2) 100.0
Renwick Special Situations
Fund, L.P. (2)
COMMON STOCK
Raj K. Bhatia 31 251,569 (3) 6.7
Thomas C. Graham 58 44,898 (4) 1.2
James R. McCullough 29 253,369 (5) 6.8
John F. Vynne 52 34,000 (6) 1.0
Stephen M. Williams 47 105,067 (7) 2.8
John P. World 50 71,974 (8) 1.9
All current directors and ex-
ecutive officers as a group
(9 persons) 576,744 (9) 15.4
</TABLE>
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(1) This table is based upon information supplied by directors, officers and
principal shareholders. Percentage of ownership is based on 3,741,570
shares of Common Stock outstanding as of April 2, 1997. Beneficial owner-
ship is determined in accordance with the Rules of the Securities and Ex-
change Commission (the "Commission"), and includes voting and investment
power with respect to the shares of Preferred Stock or Common Stock. Shares
of Common Stock subject to options, or warrants, which are exercisable cur-
rently or within 60 days of April 2, 1997 are deemed outstanding when com-
puting the percentage of the person holding such options or warrants, but
are not deemed outstanding when computing the percentage of any other per-
son.
(2) Shares of Preferred Stock are convertible into shares of Common Stock at
any time at the option of the holder on a one for one basis, subject to po-
tential antidilution adjustment. Messrs. Bhatia and McCullough, both direc-
tors of the Company, are the Co-Presidents, sole directors and only share-
holders of Renwick Capital Management, Inc. ("Renwick") and the sole gen-
eral partners of Renwick Alpha Fund, L.P. ("RAF") and Renwick Special Situ-
ations Fund, L.P. ("RSSF"). Renwick holds currently exercisable warrants to
purchase 250,000 shares of Common Stock. Both RAF and RSSF are private in-
vestment limited partnerships. As the sole general partners of RAF and RSSF
and the sole executive officers of Renwick, Messrs. Bhatia and McCullough
may be deemed to have shared voting and investment power over the shares of
Preferred Stock and Common Stock beneficially owned by Renwick, RAF and
RSSF. RAF beneficially owns directly 185,211 shares of Common Stock and
470,588 shares of Preferred Stock and RSSF beneficially owns directly 2,497
shares of Common Stock and 941,176 shares of Preferred Stock. RAF disclaims
beneficial ownership of any shares held by Renwick, RSSF and Messrs. Bhatia
and McCullough. RSSF disclaims beneficial ownership of any shares held by
Renwick, RAF and Messrs. Bhatia and McCullough.
(3) Mr. Raj K. Bhatia, a director of the Company, has sole voting and invest-
ment power with respect to 569 shares of Common Stock. Includes 1,000
shares of Common Stock subject to options exercisable within 60 days of
April 2, 1997. Also includes 250,000 shares of Common Stock issuable upon
exercise of currently exercisable warrants to purchase shares of Common
Stock beneficially owned by Renwick with respect to which Mr. Bhatia shares
voting and investment power. Does not include an aggregate of 1,411,764
shares of Preferred Stock and 187,708 shares of Common Stock held by RAF
and RSSF as to which Mr. Bhatia shares voting and investment power with Mr.
McCullough. See footnote (2) above.
5
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CARVER PROXY STATEMENT -- 1997 SHAREHOLDERS MEETING
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(4) Includes options to purchase 28,000 shares exercisable within 60 days of
April 2, 1997 and 10,000 shares subject to a vested stock option granted to
Mr. Graham by Robert W. and Diana R. Carver.
(5) Mr. James McCullough, a director of the Company, has sole voting and in-
vestment power with respect to 2,569 shares of Common Stock. Includes 1,000
shares of Common Stock subject to options exercisable within 60 days of
April 2, 1997. Also includes 250,000 shares of Common Stock issuable upon
exercise of currently exercisable warrants to purchase shares of Common
Stock beneficially owned by Renwick with respect to which Mr. McCullough
shares voting and investment power. Does not include an aggregate of
1,411,764 shares of Preferred Stock and 187,708 shares of Common Stock held
by RAF and RSSF as to which Mr. McCullough shares voting and investment
power with Mr. Bhatia. See footnote (2) above.
(6) Includes options to purchase 25,500 shares granted by the Company exercis-
able within 60 days.
(7) Includes options to purchase 98,167 shares granted by the Company exercis-
able within 60 days.
(8) Includes options to purchase 62,521 shares granted by the Company exercis-
able within 60 days.
(9) Includes (i) 286,855 shares of Common Stock subject to options exercisable
within 60 days of April 2, 1997 and (ii) 250,000 shares of Common Stock is-
suable upon exercise of warrants to purchase shares of Common Stock which
are currently exercisable. Does not include an aggregate of 1,411,764
shares of Preferred Stock and 187,708 shares of Common Stock held by RAF
and RSSF as to which Messrs. Bhatia and McCullough share voting and invest-
ment power. See footnote (2) above.
RAJ K. BHATIA has been a director of the Company since June 1996. Mr. Bhatia
is a Co-founder of Renwick and has been its Co-President since January 1995.
Mr. Bhatia is the Managing Partner of RAF. From January 1994 through December
1994 Mr. Bhatia was enrolled at Columbia University Graduate School of Busi-
ness. From January 1990 to January 1994, Mr. Bhatia was employed by Trading
Technologies Corporation which develops and markets proprietary software sys-
tems for top-tier investment banking firms.
THOMAS C. GRAHAM has been a director of the Company since March 1991. From
March 1992 to September 1993, Mr. Graham served as the Company's President and
Chief Executive Officer. As a consultant to the Company, he acted as the
Company's Executive Vice President from November 1991 through February 1992.
Since 1970, he has been President of Pacific SBG Inc., which provides business
counseling and operating management services. He is also a principal in Ever-
green Services Corporation, a leading horticultural services company. Mr. Gra-
ham also serves as a director of MediaLink Technologies Corporation, a next
generation multi-media networking company, and Oridigm Corporation, a bio-tech-
nology company.
JAMES R. MCCULLOUGH has been a director of the Company since June 1996. Mr.
McCullough is a Co-founder of Renwick and has been its Co-President since Janu-
ary 1995. From January 1994 through December 1994 Mr. McCullough was enrolled
at Columbia University Graduate School of Business where he received his M.B.A.
Mr. McCullough is the Managing Partner of RSSF. From January 1992 to January
1994, Mr. McCullough was an Associate with Fiduciary Partners, L.P., a fund of
hedge funds investing in institutional equity managers. Mr. McCullough was a
manager of the Martlet Investment Fund, a Delaware Trust investing in convert-
ible debt special situations from January 1991 to January 1992.
JOHN F. VYNNE became a director of the Company in December 1991. Since 1988,
Mr. Vynne has been the President (and sole shareholder) of Thunderbird Pacific
Corporation, a Redmond, Washington based manufacturer of electronic instruments
and software used in the mining industry. From 1986 through 1987, Mr. Vynne was
the President of Vehicle Systems Inc., a wholly owned subsidiary of Caterpillar
Corporation, which manufactured electronic instrumentation for use in off high-
way vehicles and equipment.
STEPHEN M. WILLIAMS has been the Company's President and Chief Executive Of-
ficer since January 1996. Mr. Williams was the Company's Executive Vice Presi-
dent and Chief Operating Officer from February 1995 to January 1, 1996 and a
Director since February 1995. Mr. Williams joined the Company as Vice President
and General Manager--Consumer Products Division in September 1994. Prior to
that time, Mr. Williams was the Vice
6
<PAGE>
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President of International Operations of Onkyo Corporation, a manufacturer and
distributor of high fidelity audio equipment, starting in 1993. From 1987 to
1993, Mr. Williams was Vice President of Cybex, a division of Lumex Corpora-
tion, where he was responsible for marketing, sales, engineering and product
development of the Cybex fitness equipment division.
BOARD AND COMMITTEE MEETINGS
The Company's Board of Directors held fourteen meetings during the fiscal
year ended December 31, 1996. Each incumbent director attended at least 75% of
the meetings of the Board and of the Committees of the Board on which he
served during his term of service on the Board during 1996. The Board of Di-
rectors has standing Audit, Compensation and Nominating Committees.
The Board of Directors formed a Nominating Committee in November 1995 to re-
cruit and evaluate potential candidates for election to the Company's Board of
Directors The Nominating Committee will consider written proposals from the
Company's shareholders for nominees to serve as directors which are submitted
to the Secretary of the Company in accordance with the procedures described
below under the caption, Shareholder Proposals and Nomination Procedure for
the 1998 Annual Meeting of Shareholders. The Nominating Committee did not meet
in 1996 and currently consists of Mr. Vynne.
The Audit Committee currently consists of Messrs. Bhatia, Graham, and Vynne
and meets with the Company's internal financial staff and the Company's inde-
pendent public accountants to review the scope and findings of the annual au-
dit. The Audit Committee also periodically meets to review the Company's fi-
nancial executives' activities and to discuss the adequacy of the Company's
internal accounting controls. The Audit Committee held five meetings during
1996.
The Compensation Committee currently consists of Messrs. Graham, McCullough,
and Vynne and considers and acts upon management's recommendations to the
Board of Directors regarding salaries, bonuses and other forms of compensation
for the Company's executive officers. The Compensation Committee also adminis-
tered the Company's various stock option plans, the Company's 1995 Stock Bonus
Plan (the "Stock Bonus Plan"), the Employee Stock Purchase Plan and Stock Ap-
preciation Rights Plan. The Compensation Committee held six meetings during
1996.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Robert Fulton, Thomas C. Graham, James McCullough and John F. Vynne each
served as a member of the Compensation Committee of the Company's Board of Di-
rectors for all or part of the fiscal year ended December 31, 1996. Mr. Graham
was President and CEO of the Company from March 1992 to September 23, 1993 and
President of USS Corporation, a subsidiary of the Company, from December 22,
1992 to September 23, 1993.
DIRECTORS' COMPENSATION
Employee directors receive no additional compensation for service on the
Board of Directors or its committees. Each director who is not an employee of
the Company receives an annual fee of $10,000, paid in quarterly installments.
Pursuant to the Company's 1995 Stock Bonus Plan (the "Stock Bonus Plan"), each
non-employee director is awarded annually 1,000 shares of the Company's Common
Stock in quarterly installments of 250 shares. Each installment is awarded on
the 15th day of February, May, August and November to each non-employee direc-
tor who was a director of the Company on the last day of the preceding calen-
dar quarter.
The Company's 1995 Stock Option Plan (the "Option Plan") provides for the
grant of an option to purchase 2,500 shares of the Company's Common Stock to
each non-employee director upon his or her initial election to the Board and
again annually thereafter as of the first Wednesday of May for those non-em-
ployee directors who served in that capacity as of December 31 of the immedi-
ately preceding year (the "Date of Grant"). Options granted to non-employee
directors under the Option Plan vest as follows: 40% on the Date of Grant; 30%
on the first anniver-
7
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CARVER PROXY STATEMENT -- 1997 SHAREHOLDERS MEETING
- - --------------------------------------------------------------------------------
sary of the Date of Grant; 30% on the second anniversary of the Date of Grant.
Options granted to non-employee directors under the Option Plan, which have not
been exercised terminate upon the first to occur of the following: Ten years
after the Date of Grant; 90 days from the date of optionee's termination as a
Director of the Company for any reason other than death or disability, as de-
fined in the Option Plan; or one year from the date of death of the optionee or
the cessation of optionee's service by reason of disability. The Option Plan
further provides that vesting of options outstanding upon the occurrence of the
following conditions (an "Eligible Option") (such conditions referred to as
"Acceleration Events") shall become immediately vested and fully exercisable
for the periods indicated (each such exercise period referred to as an "Accel-
eration Window"): For a period of 45 days beginning on the day on which any
Person together with all Affiliates and Associates (as such terms are defined
in the Option Plan) of such Person shall become the Beneficial Owner (as de-
fined in the Option Plan) of 25% or more of the shares of Common Stock then
outstanding, but shall not include the Company, any subsidiary of the Company,
anyemployee benefit plan of the Company or of any subsidiary of the Company, or
any Person or entity organized, appointed or established by the Company for or
pursuant to the terms of any such employee benefit plan; beginning on the date
that a tender or exchange offer for Common Stock by any Person (other than the
Company, any subsidiary of the Company, any employee benefit plan of the Com-
pany or of any subsidiary of the Company, or any Person or entity organized,
appointed or established by the Company for or pursuant to the terms of any
such employee benefit plan) is first published or sent or given within the
meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended,
(the "Exchange Act") and continuing so long as such offer remains open (includ-
ing any extensions or renewals of such offer), unless by the terms of such of-
fer the offeror, upon consummation thereof, would be the Beneficial Owner of
less than 30% of the shares of Common Stock then outstanding; for a period of
20 days beginning on the day on which the shareholders of the Company (or, if
later, approval by the shareholders of any Person) duly approve any merger,
consolidation, reorganization or other transaction providing for the conversion
or exchange of more than 50% of the outstanding shares of Common Stock into se-
curities of any Person, or cash, or property, or a combination of any of the
foregoing; or for a period of 20 days beginning on the day on which, at any
meeting of the shareholders of the Company involving a contest for the election
of directors, individuals constituting a majority of the Board of Directors who
were not the Board of Director's nominees for election immediately prior to the
meeting are elected; provided, however, that with respect to the Accelerating
Events, such accelerated vesting shall not occur if the event that would other-
wise trigger the accelerated vesting of Eligible Options has received the prior
approval of a majority of all of the directors of the Company, excluding for
such purposes the votes of directors who are directors or officers of, or have
a material financial interest in any Person (other than the Company) who is a
party to the Accelerating Event which otherwise would trigger acceleration of
vesting.
Each current director, who was elected prior to 1995 and was not an employee
of the Company at the time of election, received an option to acquire 16,250
shares of the Company's Common Stock under the Company's 1985 Non-Qualified
Stock Option Plan (the "Directors' Plan"). The Directors' Plan terminated on
March 29, 1995 and provided for the automatic grant of an option to acquire
16,250 shares of the Company's Common Stock to each director who is not also an
employee of the Company upon his or her election as a director of the Company.
The exercise price for such option is equal to the last sale price of the
Company's Common Stock on the date of his or her election ("Date of Election").
The duration of an option is nine years and 364 days from the Date of Election.
3,125 shares granted in each option vest on the Date of Election, and 3,125,
5,000 and 5,000 shares vest upon the completion of 18, 36 and 54 consecutive
months of service, respectively, as a director of the Company. The Directors'
Plan further provides that vesting of options outstanding at least one year
prior to the below described events will be accelerated and shall become imme-
diately exercisable, as follows: (i) upon accumulation by any person or group
(other than a broker, bank or trust company holding any class of voting equity
securities of the Company for the account of customers) of beneficial ownership
of 25% or more of any class of the Company's voting equity securities; or (ii)
upon the occurrence of certain events leading to a change in control such as a
tender or exchange offer or upon approval by the Company's shareholders of cer-
tain mergers or similar events.
8
<PAGE>
- - --------------------------------------------------------------------------------
EXECUTIVE COMPENSATION
The following table shows compensation paid by the Company for services ren-
dered during the fiscal years ended December 31, 1996, 1995 and 1994, respec-
tively, to each person who was Chief Executive Officer during fiscal year 1996
and the only other executive officer whose salary and bonus exceeded $100,000
in 1996.
SUMMARY ANNUAL COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------- ------------
NUMBER OF
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL SALARY BONUS OPTIONS COMPENSATION
POSITION YEAR $ $ (#) ($)
- - ------------------ ---- ------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Robert A. Fulton 1996 55,500 (1) 0 (2) 16,850 (3)
President & CEO 1995 145,000 0 0 846 (4)
1994 100,000 0 100,000 623 (4)
Stephen M. Williams 1996 172,800 0 152,000 (5) 775 (4)
President & CEO 1995 144,000 30,000 25,000 741 (4)
1994 47,900 (6) 0 150,000 68 (4)
John P. World 1996 110,000 0 90,000 (7) 618 (4)
Ex. V. Pres. & 1995 86,400 0 25,000 516 (4)
General Manager 1994 73,900 0 0 470 (4)
</TABLE>
- - ------------------------
(1) Mr. Fulton resigned as President and CEO effective February 1996 but re-
ceived severance payments to May 1996 at the rate of his annual salary of
$145,000.
(2) Excludes an option granted to Mr. Fulton, as a non-employee director, on
May 1, 1996, to purchase 2,500 shares pursuant to the Option Plan which
vests in three annual installments 1,000, 750, and 750 shares, respective-
ly, beginning on May 1, 1996. The options expire on the earlier of (i) ten
years from the date of grant, (ii) the expiration of ninety days following
the date of the termination of Mr. Fulton's service as a director, or
(iii) one year from the date of death or disability of the optionee.
Shares may be acquired under the Option Plan by delivery of the exercise
price in cash or surrender of previously held shares. Upon an Acceleration
Event (as defined above), these options become immediately exercisable.
(3) Includes Company paid life insurance premiums of $150 and director's fees
of $16,700.
(4) Represents Company paid term life insurance premiums.
(5) Includes an option to purchase 62,000 shares of Common Stock granted on
January 15, 1996 pursuant to the Option Plan which vests in three equal
annual installments beginning on July 15, 1996; an option to purchase
45,000 shares of Common Stock granted on September 20, 1996 which vests in
three equal annual installments beginning on September 20, 1996; and an
option to purchase 45,000 shares of Common Stock which vests upon the
Company's achievement of certain performance objectives in 1996 and 1997.
The Company's failure to achieve the 1996 performance objective resulted
in the cancellation of options to purchase 22,500 shares. The options ex-
pire on the earlier of (i) ten years from the date of grant, (ii) the ex-
piration of ninety days following the date of the termination of Mr. Wil-
liam's employment, or (iii) one year from the date of death or disability
of the optionee. Shares may be acquired under the Option Plan by delivery
of the exercise price in cash or surrender of previously held shares. Upon
an Acceleration Event (as defined above), these options become immediately
exercisable.
9
<PAGE>
CARVER PROXY STATEMENT -- 1997 SHAREHOLDERS MEETING
- - --------------------------------------------------------------------------------
(6) Mr. Williams was employed by the Company on September 15, 1994 at an an-
nual salary of $144,000.
(7) Includes an option to purchase 30,000 shares of Common Stock granted on
January 15, 1996 pursuant to the Option Plan which vests in three equal
annual installments beginning on July 15, 1996; an option to purchase
30,000 shares of Common Stock granted on September 20, 1996 which vests in
three equal annual installments beginning on September 20, 1996; and an
option to purchase 30,000 shares of Common Stock which vests upon the
Company's achievement of certain performance objectives in 1996 and 1997.
The Company's failure to achieve the 1996 performance objective resulted
in the cancellation of options to purchase 15,000 shares. The options ex-
pire on the earlier of (i) ten years from the date of grant, (ii) the ex-
piration of ninety days following the date of the termination of Mr.
World's employment, or (iii) one year from the date of death or disability
of the optionee. Shares may be acquired under the Option Plan by delivery
of the exercise price in cash or surrender of previously held shares. Upon
an Acceleration Event (as defined above), these options become immediately
exercisable.
The following table summarizes the number and terms of stock options granted
in 1996 to the persons named in the Summary Compensation Table. Options were
granted without tandem SARs.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM (1)
----------------------------------------- --------------------
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES
OPTIONS IN EXERCISE EXPIRA-
GRANTED FISCAL PRICE TION
NAME # YEAR ($/SH) DATE 5% ($) 10% ($)
- - ----------- ----------- ---------- -------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Robert A. Fulton, 2,500 (2) 0.6% $2.25 5/1/06 $ 3,538 $ 8,965
President & CEO
Stephen M. Williams 152,000 (3) 35.2% $1.50 & 1/15/06 & $ 220,764 $ 560,149
President & CEO $2.875 9/20/06
John P. World 90,000 (4) 21.4% $1.50 & 1/15/06 & $ 136,485 $ 346,339
Ex. V. Pres. & $2.875 9/20/06
Gen. Mgr.
</TABLE>
- - ------------------------
(1) The potential realizable value is based on the assumption that the price of
the Common Stock appreciates at the annual rate shown (compounded annually)
from the date of grant until the end of the ten year option term. Actual
realizable value, if any, on stock option exercises is dependent on the fu-
ture performance of the Common Stock and overall market conditions, as well
as the option holder's continued employment through the vesting period.
These values are calculated pursuant to SEC requirements and do not reflect
the Company's estimate of future stock price growth.
(2) Represents an option granted to Mr. Fulton as a non-employee directors on
May 1, 1996 pursuant to the Option Plan which vests in three annual in-
stallments 1,000, 750, and 750 shares, respectively, beginning on May 1,
10
<PAGE>
- - -------------------------------------------------------------------------------
1996. The option expires on the earlier of (i) ten years from the date of
grant, (ii) the expiration of ninety days following the date of the termi-
nation of Mr. Fulton's service as a director, or (iii) one year from the
date of death or disability of the optionee. Shares may be acquired under
the Option Plan by delivery of the exercise price in cash or surrender of
previously held shares. Upon an Acceleration Event (as defined above), the
option becomes immediately exercisable.
(3) Includes an option to purchase 62,000 shares of Common Stock granted on
January 15, 1996 pursuant to the Option Plan which vests in three equal
annual installments beginning on July 15, 1996; an option to purchase
45,000 shares of Common Stock granted on September 20, 1996 which vests in
three equal annual installments beginning on September 20, 1996; and an
option to purchase 45,000 shares of Common Stock which vests upon the
Company's achievement of certain performance objectives in 1996 and 1997.
The Company's failure to achieve the 1996 performance objective resulted
in the cancellation of options to purchase 22,500 shares. The options ex-
pire on the earlier of (i) ten years from the date of grant, (ii) the ex-
piration of ninety days following the date of the termination of Mr. Wil-
liam's employment, or (iii) one year from the date of death or disability
of the optionee. Shares may be acquired under the Option Plan by delivery
of the exercise price in cash or surrender of previously held shares. Upon
an Acceleration Event (as defined above), these options become immediately
exercisable.
(4) Includes an option to purchase 30,000 shares of Common Stock granted on
January 15, 1996 pursuant to the Option Plan which vests in three equal
annual installments beginning on July 15, 1996; an option to purchase
30,000 shares of Common Stock granted on September 20, 1996 which vests in
three equal annual installments beginning on September 20, 1996; and an
option to purchase 30,000 shares of Common Stock which vests upon the
Company's achievement of certain performance objectives in 1996 and 1997.
The Company's failure to achieve the 1996 performance objective resulted
in the cancellation of options to purchase 15,000 shares. The options ex-
pire on the earlier of (i) ten years from the date of grant, (ii) the ex-
piration of ninety days following the date of the termination of Mr.
World's employment, or (iii) one year from the date of death or disability
of the optionee. Shares may be acquired under the Option Plan by delivery
of the exercise price in cash or surrender of previously held shares. Upon
an Acceleration Event (as defined above), these options become immediately
exercisable.
11
<PAGE>
CARVER PROXY STATEMENT -- 1997 SHAREHOLDERS MEETING
- - --------------------------------------------------------------------------------
The following table provides information with respect to option exercises
during the year ended December 31, 1996 by the persons named in the Summary
Compensation Table and the number and value of unexercised options held at De-
cember 31, 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNDER- UNEXERCISED
SHARES LYING UNEXERCISED IN-THE MONEY
ACQUIRED OPTIONS AT OPTIONS AT
ON VALUE DEC. 31, 1996 (#) DEC. 31, 1996 ($)
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE (1)
- - ------------ -------- -------- ----------------- -----------------
<S> <C> <C> <C> <C>
Robert A. Fulton,
President & CEO 0 N/A 67,250/1,500 $50,750/$ 1,125
Stephen M. Williams,
President & CEO 0 N/A 91,917/75,000 $54,426/$77,675
John P. World,
Ex. V. Pres. &
Gen. Mgr. 0 N/A 56,271/73,750 $20,070/$43,575
</TABLE>
- - ------------------------
(1) Calculation based on the closing price of the Company's Common Stock on De-
cember 31, 1996 less the exercise price, multiplied by the number of in-
the-money options held. There can be no assurance that if and when these
options are exercised they will have this value.
12
<PAGE>
- - --------------------------------------------------------------------------------
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors (the "Committee") is
currently comprised of three independent outside directors. The Committee is
responsible for administering the Company's various stock option plans, the
Stock Bonus Plan, Stock Appreciation Rights Plan and Employee Stock Purchase
Plan. The Company's overall executive compensation program is established and
administered by the Committee.
COMPENSATION PHILOSOPHY
The philosophy underlying the development and administration of the Company's
annual and long-term compensation plans is to align the interests of executive
management with those of the shareholders. Key elements of this philosophy are:
1. Establishing compensation plans which deliver pay commensurate with
industry norms and Company performance, as measured by operating, financial
and strategic objectives.
2. Providing significant equity-based incentives for executives to ensure
that they are motivated over the long-term to respond to the Company's
business challenges and opportunities as owners rather than just as employ-
ees.
3. Rewarding executives if shareholders receive an above-average return
on their investment over the long-term.
COMPENSATION FORMS
Executive compensation consists primarily of (i) base salary, (ii) annual in-
centive bonus compensation and (iii) long-term incentives in the form of stock
options. Base salary is determined on approximately March 1 of each year or at
the commencement of the executive's employment with the Company. Bonuses and
stock options are usually determined during the first quarter after the end of
the fiscal year to allow the Committee to take into account Company and indi-
vidual performance in determining these elements of executive compensation. The
Company also has an employee stock purchase plan which enables all employees,
including executives, to purchase shares of the Company's stock at discounted
prices and obtain a financial stake in the future success of the Company. Stock
options are also available to non-executive employees of the Company.
In developing executive compensation packages, the Committee has the objec-
tive of establishing an appropriate blend of the above-mentioned forms of com-
pensation which will be competitive generally and provide meaningful incentives
to the executives on both a short and long-term basis. Historically, the Com-
mittee has set salary levels below the median of those paid by other companies
in the electronics industry to persons with comparable responsibilities as
identified in the American Electronics Association salary surveys. This is done
with the objective of giving variable compensation tied to financial perfor-
mance greater weight than fixed base salary.
The annual bonus plan is a discretionary vehicle by which executives can earn
additional cash and/or equity compensation depending on individual and Company
performance relative to certain annual objectives. In making such discretionary
awards, the Committee considers with respect to each executive certain criteria
including the Company's operating, financial and strategic goals (e.g. net
sales, margin levels, expense control, earnings per share, operating income,
cash flow, technology/customer acquisition and product development).
The Company's long-term incentive program consists primarily of grants of
stock options. Grants under the Option Plan are made at exercise prices equal
to or exceeding the fair market value of the underlying Common Stock on the
date of grant, thereby aligning a significant portion of executive compensation
with shareholder interests. Executives receive value from their options only if
the Company's Common Stock appreciates over the long-term. The Company encour-
ages its officers to acquire shares of its Common Stock.
13
<PAGE>
CARVER PROXY STATEMENT -- 1997 SHAREHOLDERS MEETING
- - --------------------------------------------------------------------------------
CEO AND EXECUTIVE COMPENSATION
SALARY
The Chief Executive Officer's salary for 1996 was determined in accordance
with the Company's compensation philosophy and objectives, as set forth above.
In determining the salary of Mr. Williams for 1996, the Committee considered
salary levels of former chief executives of the Company and the Company's cur-
rent financial position.
In March 1996, the salary levels for three of the Company's executives were
reviewed, and, increased to reflect cost of living increases and changes in
their duties and responsibilities.
ANNUAL BONUS
During 1996, the Company failed to achieve some of its operating and finan-
cial goals which were a combination of sales levels, margins, operating income,
expense levels and earnings per share. No annual bonuses were awarded to Mr.
Williams or the Company's other executive officers for 1996.
STOCK OPTIONS
In 1996, options to purchase an aggregate of 352,000 shares of the Company's
stock were granted to five executive officers, including Mr. Williams. In 1996,
all options granted to executives were at the market price of the Company's
Common Stock on the date of grant. Vesting schedules and exercise prices of the
options granted were designed to motivate the Company's executives to achieve
goals which would build shareholder value over the next several years.
The material terms of the award of stock options to Mr. Williams in 1996 are
discussed elsewhere in this Proxy Statement. In making that award, the Commit-
tee considered the following in determining the number of shares and the
vesting schedule: grants made to other executives of the Company; an appropri-
ate incentive to encourage Mr. Williams to continue his employment with the
Company; and an adequate incentive for Mr. Williams to initiate, pursue and re-
alize goals and plans which, if successful, would build shareholder value.
Under the Omnibus Budget Reconciliation Act of 1993, beginning in 1994, the
federal income tax deduction for certain types of compensation paid to the
chief executive officer and four other most highly compensated officers of pub-
licly held companies is limited to $1 million per officer per fiscal year un-
less such compensation meets certain requirements. The Compensation Committee
is aware of this limitation and believes that, except possibly in the event of
exercise of a significant number of options by an executive officer following a
dramatic increase in the share price of the Company's Common Stock, no compen-
sation paid by the Company during 1996 will exceed the $1 million limitation.
COMPENSATION COMMITTEE:
Thomas C. Graham, Chairman
James R. McCullough
John F. Vynne
14
<PAGE>
- - --------------------------------------------------------------------------------
PERFORMANCE GRAPH
The following graph shows for the periods indicated a comparison of the cumu-
lative total shareholder return on the Company's Common Stock, Standard &
Poors' Composite Index, and the Center for Research and Security Prices
("CRSP") Index for Nasdaq Electronic Components Stocks.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG CARVER CORPORATION, S&P 500 STOCKS AND NASDAQ ELECTROCNI
COMPONENTS STOCKS SIC 3670-3679 US & FOREING
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
NASDAQ
ELECTRONIC
Measurement Period CARVER S&P COMPONENTS
(Fiscal Year Covered) CORPORATION 500 STOCK STOCK
- - ------------------- ------------ --------- ----------
<S> <C> <C> <C>
Measurement Pt- 12/31/91 $100 $100 $100
FYE 12/31/92 $105.3 $107.7 $156.4
FYE 12/31/93 $123.7 $118.2 $214.7
FYE 12/30/94 $121.1 $119.8 $237.2
FYE 12/29/95 $ 63.2 $164.8 $392.8
FYE 12/31/96 $140.1 $203.2 $678.7
</TABLE>
15
<PAGE>
CARVER PROXY STATEMENT -- 1997 SHAREHOLDERS MEETING
- - --------------------------------------------------------------------------------
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Based solely upon its review of Forms 3, 4 and 5 and any amendments thereto
furnished to the Company pursuant to Section 16 of the Securities and Exchange
Act of 1934, as amended, all such Forms were filed on a timely basis, except
for the late filings of Forms 4 by Raj K. Bhatia, James R. McCullough, Renwick
Alpha fund, L.P. and Renwick Special Situations, L.P. for acquisitions of the
Company's voting securities in the months of July, August, September, November
and December 1996 and the apparent failure to file a Form 4 by Robert W. and
Diana R. Carver relating to the sale by them of shares of the Company's Common
Stock.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain of the Company's amplifiers and receivers have employed Magnetic
Field Amplifier technology pursuant to a nonexclusive license negotiated in
March 1985 between Robert W. Carver and Diana R. Carver and the Company
relating to the use of three patents currently owned by the Carvers (the
"License Agreement"). The License Agreement requires the Company to make
royalty payments to Mr. and Mrs. Carver on products containing Magnetic Field
Amplifier technology. Such royalties amounted to approximately $9,200.00 in
1996.
RELATIONSHIP WITH RENWICK CAPITAL MANAGEMENT, INC.
In June and September 1996, the Company sold an aggregate of 1,411,764 shares
of Series A Cumulative Convertible Preferred Stock (the "Preferred Stock") and
issued five year warrants (the "Warrants") to acquire up to 250,000 shares of
the Company's Common Stock pursuant to a Stock Purchase Agreement (the "Agree-
ment") to Renwick Capital Management, Inc. and certain Renwick affiliates
("Renwick"). The shares of Preferred Stock and Warrants are convertible into or
exercisable for 1,711,764 shares of Common Stock, or approximately 46% of the
shares outstanding at April 2, 1997.
The price of the Preferred Stock was $2.125 per share and each share of Pre-
ferred Stock is convertible at any time at the option of the holder into one
share of Common Stock, subject to certain potential antidilution adjustments to
be triggered by the issuance of additional shares of Common Stock at less than
the lesser of the then current market price or $2.125. The Preferred Stock is
entitled to an 8% compounding annual dividend payable quarterly. In the first
year, such dividend will be and has been paid with shares of authorized but
unissued Common Stock. An aggregate of 37,926 shares of Common Stock were is-
sued and accrued for this purpose in 1996. In years two and three (the Pre-
ferred Stock will automatically be converted into Common Stock on the third an-
niversary of issuance, thereby terminating the accruing dividend), the Company
has the option of paying the dividend either in cash or with shares of Common
Stock. If paid with Common Stock, the number of shares will be based on the
greater of $2.125 per share or the average of the closing bid prices for the
Common Stock for the 30 days prior to the dividend payment date. The number of
shares of Common Stock which might be issued over the life of the dividend can-
not be determined at this time as such number will vary with the market price
of the Common Stock.
The holders of the Preferred Stock are entitled to one vote for each share of
Preferred Stock held by them. In addition, the holders of the Preferred Stock
are entitled to elect two representatives to the Company's Board of Directors.
In June 1996, the Company's Board of Directors was increased by two positions,
and Raj K. Bhatia and James R. McCullough were appointed to the Board of Direc-
tors to represent holders of the Preferred Stock. Messrs. Bhatia and McCullough
are partners of Renwick. Certain actions by the Company, such as a merger or
liquidation of the Company, the sale of substantially all of its assets, pay-
ment of dividends, amendment of the Company's articles of incorporation, the
issuance of additional securities or the incurrence of certain indebtedness
will require the approval of at least a majority of the Preferred Stock. The
Agreement also provides that the investors will have preemptive rights to sub-
scribe for additional shares issued by the Company and rights to have the Com-
pany register shares of Common Stock issued upon conversion of the Preferred
Stock or exercise of the Warrants.
The exercise price of the Warrants is $1.50 per share of Common Stock, if ex-
ercised from the date of the initial closing through the date two years from
the date of the initial closing, $1.75 for the next year, $2.00 for the next
year and $2.125 for the final year, again subject to certain potential
antidilution adjustments.
16
<PAGE>
- - --------------------------------------------------------------------------------
BY VIRTUE OF THE NUMBER OF VOTES CONTROLLED BY RENWICK AND ITS AFFILIATES,
THEIR RIGHT TO ELECT TWO OF THE COMPANY'S DIRECTORS AND THE FACT THAT VARIOUS
ACTIONS MAY NOT BE TAKEN BY THE COMPANY WITHOUT THE APPROVAL OF THE HOLDERS OF
AT LEAST A MAJORITY OF THE PREFERRED STOCK, SUCH HOLDERS MAY BE DEEMED TO HAVE
ACQUIRED CONTROL OF THE COMPANY.
In June 1996, the Company entered into a consulting agreement with Renwick
(the "Consulting Agreement") by which Renwick has been retained to serve as the
Company's financial advisor for a period of three years. The Consulting Agree-
ment provides that the Company pay Renwick a monthly fee of $4,167. In 1996,
the Company paid Renwick $50,000 in payment of the first year's fees.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Moss Adams to continue as its indepen-
dent accountants and to examine the financial statements of Carver Corporation
for the fiscal year ending December 31, 1997. Representatives of Moss Adams are
expected to be present at the Annual Meeting with the opportunity to make a
statement, if they desire to do so, and will be available to respond to appro-
priate questions.
OTHER BUSINESS
As of the date of this proxy statement, management knows of no other business
which will be presented for action at the Annual Meeting. If any other business
requiring a vote of the shareholders should come before the meeting, the per-
sons designated as proxies will vote or refrain from voting in accordance with
their best judgment.
SHAREHOLDER PROPOSALS AND NOMINATION PROCEDURE FOR THE 1998 ANNUAL MEETING OF
SHAREHOLDERS
The Company's Bylaws provide that advance notice of nominations for the elec-
tion of directors at a meeting of shareholders must be delivered to or mailed
and received by the Company ninety (90) days prior to the date one year from
the date of the immediately preceding annual meeting of shareholders or, in the
case of a special meeting of shareholders to elect directors, the close of
business on the 10th day following the date on which notice of such meeting is
first given to shareholders. The Bylaws also provide that advance notice of
proposals to be brought before an annual meeting by a shareholder must be sub-
mitted in writing and delivered to or mailed and received by the Company not
later than ninety (90) days prior to the date one year from the date of the im-
mediately preceding annual meeting of shareholders. Each notice of a nomination
or proposal of business must contain, among other things, (i) the name and ad-
dress of the shareholder who intends to make the nomination or proposal; (ii) a
representation that the shareholder is a holder of record of stock of the Com-
pany entitled to vote at such meeting and intends to appear in person or by
proxy at the meeting to nominate the person or persons specified in the notice
or to vote at the meeting for the proposal; (iii) a description of all arrange-
ments or understandings between the shareholder and each nominee and any other
person or persons (naming such person or persons) pursuant to which the nomina-
tion or nominations are to be made by the shareholder and any material interest
of such shareholder in any proposal to be submitted to the meeting; and (iv)
such other information regarding each nominee or proposal as would be required
to be included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission.
A copy of the full text of the provisions of the Company's Bylaws dealing
with shareholder nominations and proposals is available to shareholders from
the Secretary of the Company upon written request.
In order to be included in the Company's proxy statement and form of proxy
relating to its 1998 Annual Meeting of Shareholders, shareholder proposals or
nominations to be presented at the 1998 Annual Meeting of Shareholders must be
received by the Secretary at the Company's executive offices by December 19,
1997.
REPORT ON FORM 10-K
The Company's Annual Report on Form 10-K filed with the Commission for the
year ended December 31, 1996 is available to shareholders without charge upon
written request to Carver Corporation, P.O. Box 1237, Lynnwood, Washington
98046, Attention: Debra L. Griffith.
17
<PAGE>
CARVER PROXY STATEMENT -- 1997 SHAREHOLDERS MEETING
- - --------------------------------------------------------------------------------
SOLICITATION OF PROXIES
The form of proxy accompanying this proxy statement is solicited by the Board
of Directors of the Company. Proxies may be solicited by officers, directors,
and regular supervisory and executive employees of the Company, none of whom
will receive any additional compensation for their services. In addition, the
Company may engage an outside proxy solicitation firm to render proxy solicita-
tion services and, if so, will pay a fee for such services. The Company will
pay persons holding shares of Common Stock in their names or in the names of
nominees, but not owning such shares beneficially, such as brokerage houses,
banks, and other fiduciaries, for the expense of forwarding soliciting materi-
als to their principals. All costs of solicitation of proxies will be paid by
the Company.
By order of the Board of Directors
/s/ John P. World
John P. World
Secretary
Lynnwood, Washington
April 14, 1997
18
<PAGE>
CARVER CORPORATION PROXY
ANNUAL MEETING OF SHAREHOLDERS--MAY 20, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Stephen M. Williams and John P. World, or
either of them, as proxies, each with the power to appoint his substitute, and
hereby authorizes them to represent and to vote all shares of common stock of
Carver Corporation which the undersigned would be entitled to vote if
personally present at the annual meeting of shareholders to be held on May 20,
1997, or any adjournment thereof, as directed herein, and in their discretion,
to vote upon such other matters as may properly come before the meeting. The
undersigned directs that this proxy be voted as indicated on the reverse side
hereof:
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO SPECIFICATION IS MADE, A VOTE FOR
THE ELECTION OF ALL NOMINEES SPECIFIED ON THE REVERSE HEREOF WILL BE ENTERED
AND THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE DISCRETION OF THE PROXIES
ON ALL OTHER MATTERS WHICH MAY COME BEFORE THE MEETING OR ANY ADJOURNMENT.
FOLD AND DETACH HERE
<PAGE>
Please mark [X]
your votes
as indicated
THE UNDERSIGNED HEREBY REVOKES ANY PROXY OR PROXIES HERETOFORE GIVEN FOR SUCH
SHARES AND RATIFIES ALL THAT SAID PROXIES OR THEIR SUBSTITUTES MAY LAWFULLY DO
BY VIRTUE HEREOF.
FOR ALL
1. Election of the NOMINEES WITHHOLD
Directors nominated LISTED BELOW AUTHORITY
by the Board of (EXCEPT AS TO VOTE FOR
Directors MARKED TO ALL NOMINEES
THE CONTRARY) LISTED
NOMINEES: Thomas C. Graham
John F. Vynne
Stephen M. Williams [_] [_]
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
A LINE THROUGH THE NOMINEE'S NAME IN THE LIST ABOVE.
Raj K. Bhatia and James R. McCullough have been nominated by the holders of
the Company's Series A Cumulative Convertible Preferred Stock for election as
directors. Holders of Carver Corporation Common Stock are not entitled to
vote on these nominees.
2. In their discretion, the Proxies are authorized to vote in their discretion
upon such other business as may properly come before the meeting.
(Please sign exactly as name appears below. When shares are held jointly, both
persons should sign. When signing as attorney, executor, administrator, trustee
or guardian, please give full title as such. If a corporation, please sign full
corporate name by President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.)
Signature _______________________________ Dated ________________________,1997
Signature if held jointly _______________ Dated ________________________,1997
Please mark, sign, date and return the proxy card promptly using the enclosed
envelope.
