PRIME CAPITAL CORPORATION
O'Hare International Center
10275 West Higgins Road
Rosemont, Illinois 60018
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS June 24, 1998
To the Stockholders of PRIME CAPITAL CORPORATION:
The Annual Meeting of Stockholders (the "Annual Meeting") of Prime Capital
Corporation, a Delaware corporation (the "Company"), will be held on June 24,
1998 at 2:00 o'clock p.m. (C.S.T.), at O'Hare International Conference
Center, 10275 West Higgins Road, Rosemont, Illinois 60018 for the following
purposes:
1. To elect a Board of Directors to serve for the ensuing year.
2. To consider and act upon a proposal to authorize the Board of Directors
to name a successor to the Board vacancy.
3. To consider and act upon a proposal to amend the by-laws of the Company to
increase the number of Directors to six.
4. To consider and act upon a proposal to ratify the selection by the Board
of Directors of KPMG Peat Marwick, LLP as auditors of the Company for the
current fiscal year.
5. To act upon any and all matters incident to any of the foregoing and
transact such other business as may properly be brought before the
meeting or any adjournments thereof.
Only stockholders of record at the close of business on May 10, 1998 will be
entitled to notice of, and to vote at, the Annual Meeting or any adjournments
thereof.
All stockholders of record on that date are entitled to be present and to
vote at the Annual Meeting and are cordially invited to attend the Annual
Meeting. If you plan to attend, you may obtain an admittance card by completing
the enclosed reservation form and returning it with your proxy. Stockholders
are urged, whether or not they plan to attend the Annual Meeting, to mark, date
and sign the enclosed proxy and return it promptly in the accompanying envelope.
If you attend the Annual Meeting and vote by ballot at the Annual Meeting, you
can revoke your proxy at that time and your vote at the Annual Meeting will be
counted.
By Order of the Board of Directors
Jeffrey A. Olson
Secretary
Rosemont, Illinois
April 30, 1998
<PAGE>
PRIME CAPITAL CORPORATION
O'Hare International Center
10275 West Higgins Road
Rosemont, IL 60018
PROXY STATEMENT FOR ANNUAL MEETING
June 24, 1998
INTRODUCTION
Solicitation, Voting and Revocation of Proxies
This Proxy Statement is furnished in connection with the solicitation by, and on
behalf of, the Board of Directors of Prime Capital Corporation, a Delaware
corporation (the "Company"), of proxies to be voted at the Annual Meeting of
Stockholders (the "Annual Meeting") of the Company on June 24, 1998, and at any
adjournment or adjournments thereof. This Proxy Statement and the
accompanying proxy card are being mailed to stockholders on or about
May 22, 1998. The Annual Meeting is called for the purposes stated in the
accompanying Notice of Annual Meeting of Stockholders (the "Notice") which
are to (i) elect a board of directors,(ii) consider and act upon a proposal
to authorize the Board of Directors to name a successor to the current Board
vacancy, (iii) consider and act upon a proposal to amend the by-laws of the
Company to increase the number of Directors to six, and (iv) ratify the
selection of auditors. If a proxy is properly signed and is not revoked by
the stockholder, the shares represented thereby will be voted by the Proxy
Committee in accordance with the stockholder's directions. Stockholders are
urged to specify their choices by marking the appropriate boxes on the
enclosed proxy card. If no choice has been specified, the shares will be
voted by the Proxy Committee "FOR" electing management's slate of directors,
authorizing the Board of Directors to name a successor to the Board vacancy,
amending the by-laws of the Company to increase the number of Directors to
six, and ratifying KPMG Peat Marwick LLP as auditors of the Company for the
current fiscal year. The Proxy Committee presently consists of James A.
Friedman, Mark P. Bischoff, William D. Smithburg and Robert T. Youngquist.
Proxy cards also confer upon the Proxy Committee discretionary authority to vote
the shares represented thereby on any matter which is not known at this time but
may be presented for action at the meeting. The Company does not know of any
other matters that will be presented at the Annual Meeting. If any other matter
comes before the Annual Meeting, or any of its adjournments, however, the
members of the Proxy Committee will vote in accordance with their best judgment.
A proxy may be revoked at any time before it is exercised by voting in
person at the Annual Meeting or by a later proxy, or by written notice of
revocation bearing a later date which is delivered to the Secretary of the
Company at or prior to the Annual Meeting.
Cost and Manner of Solicitation
The Company will bear the cost of the solicitation of proxies, including the
charges and expenses of brokerage firms and other custodians, nominees, and
fiduciaries for forwarding proxy materials to beneficial owners of the Company's
stock. Solicitations will be made primarily by mail, but certain directors,
officers or regular employees of the Company may solicit proxies in person or by
telephone or telegram without special compensation.
Available Reports: Incorporation by Reference
This Proxy Statement is accompanied by a copy of the Company's Annual Report to
Stockholders for the fiscal year ended December 31, 1997. That report
includes financial statements for the year ended December 31, 1997 audited by
KPMG Peat Marwick LLP, the Company's independent accountants. The Annual Report
to the Stockholders is furnished for information only and no part thereof is
incorporated by reference in this Proxy Statement.
UPON WRITTEN REQUEST OF ANY STOCKHOLDER, THE COMPANY WILL PROVIDE, WITHOUT
CHARGE, A COPY OF ITS ANNUAL REPORT ON FORM 10-KSB, WITHOUT EXHIBITS, AS FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCHI 31, 1998. THE EXHIBITS
THERETO WILL BE AVAILABLE AT A CHARGE OF $.20 PER PAGE. REQUESTS SHOULD BE
ADDRESSED TO THE COMPANY IN CARE OF INVESTOR RELATIONS, PRIME CAPITAL
CORPORATION, O'HARE INTERNATIONAL CENTER, 10275 W. HIGGINS ROAD, ROSEMONT,
ILLINOIS 60018.
Voting Securities
The Board of Directors has fixed the close of business on May 10, 1998 as the
record date for determining stockholders entitled to notice of, and to vote at,
the Annual Meeting. The voting securities issued and outstanding as of
April 30, 1998 consist of 4,335,398 shares of the Company's common stock,
$.05 par value ("common stock"), each share of which is entitled to one vote.
Proposal 1
ELECTION OF DIRECTORS
Voting for Directors
Unless the stockholders shall vote otherwise, a Board of four Directors
will be elected at the 1998 Annual Meeting. The By-laws of the Company provide
for five Directors. All Directors are elected annually and hold office until
the next annual meeting of stockholders or until their successors have been
elected and qualified.
The persons named below have been nominated by the Board for election as
Directors. Messrs. Friedman, Bischoff, Smithburg and Youngquist have served as
Directors since the respective dates set forth below. The Board has no reason
to anticipate that any nominee will decline or be unable to serve. In the event
that any nominee does decline or is unable to serve, proxies may be voted for
the election of a substitute nominee or may be voted for a lesser number of
Directors. In the absence of instructions to the contrary, proxies will be
voted for the election of the Directors named below.
The Board of Directors recommends a vote "FOR" the election of the nominees for
Directors.
Certain information concerning the nominees is set forth below.
<TABLE>
Principal Occupation During Past Director
NAME Five Years and Other Information Age Since
- ----- -------------------------------- --- --------
<S> <C> <C> <C>
James A. President and Chief Executive 52 1978
Friedman Officer of the Company or its
predecessor since November 1978.
William D. Former Chairman of The Quaker Oats 59 1986
Smithburg Company since 1983 and Chief
Executive Officer thereof since
1981; Director of The Quaker Oats
Company, Abbott Laboratories,
The Northern Trust Corporation and
Corning Glass Works.
Robert R.
Youngquist Practicing Orthodontist and owner of 49 1978
D.D.S. Robert R. Youngquist D.D.S., Ltd.
during the past seven years.
Mark P.
Bischoff Senior Partner of Bischoff & 51 1996
Swabowski, Ltd. since 1988;
Secretary of the Board of Directors
and Outside General Counsel of
the Company since 1986.
</TABLE>
The Board of Directors
The Company's business is managed under the direction of the Board of Directors.
During 1997, the Board of Directors held two regular meetings. The standing
Committees of the Board are the Executive Committee, the Audit Committee, and
the Compensation and Stock Option Committee. The Board does not have a standing
Nominating Committee. All Directors attended all meetings of the Board of
Directors and meetings held by all committees of the Board on which the
Director served during the period that the Director served.
Committees of the Board of Directors
The Executive Committee exercises all the powers and authority of the Board of
Directors in the management of the business and affairs of the Company during
the intervals between meetings of the Board, subject to the restrictions set
forth in the By-laws. The members of the Executive Committee are: James A.
Friedman (Chairman) and William D. Smithburg. The Executive Committee met two
times during 1997.
The Audit Committee has the general responsibility for establishing and
maintaining communications with the Company's internal and independent
accountants, reviewing the methods used and examinations made by the auditors in
connection with the Company's published financial statements and reviewing with
the auditors the Company's financial and operating controls. The members of the
Audit Committee are: Mark P. Bischoff and William D. Smithburg. The Audit
Committee met once during 1997.
The Compensation and Stock Option Committee (the "Compensation Committee")
oversees the Company's compensation and benefit policies and programs,
including the administration of the Company's 1997 Stock Option Plan
(the "1997 Plan"). The Compensation Committee also has general
responsibility for the Company's personnel and compensation matters.
The Compensation Committee presently consists of the following Directors
of the Company: Mark P. Bischoff, William D. Smithburg, and
Robert R. Youngquist. The Committee met six times during 1997.
Proposal 2
BOARD OF DIRECTORS PROPOSAL FOR BOARD VACANCY.
In December of 1997, a vacancy to the Board of Directors was created by the
death of Mr. Lee W. Jennings. The Board of Directors is currently conducting a
search to locate an appropriate candidate to fill the vacancy. The Board of
Directors does not believe it will locate a candidate prior to the Annual
Meeting. Therefore, the Board of Directors requests that the stockholders
grant it the authority to appoint the successor who will hold office until
the next annual election of Directors by the stockholders.
The Board of Directors recommends a vote "FOR" this proposal.
Proposal 3
AMENDMENT TO BY-LAWS TO INCREASE THE NUMBER OF DIRECTORS.
The Company wishes to amend the by-laws of the Company to increase the
number of Directors which shall constitute the whole Board of Directors to
six (6). The Company believes that increasing the number of Directors will
benefit the Company by broadening the experience and expertise of the Board
of Directors.
If such amendment to the by-laws is approved by the stockholders, the Board of
Directors will appoint the sixth Director after completing a search to locate an
appropriate candidate.
The Board of Directors recommends a vote "FOR" this proposal.
Proposal 4
SELECTION OF INDEPENDENT ACCOUNTANTS FOR FISCAL YEAR ENDING DECEMBER 31, 1998
The Board of Directors has selected the firm of KPMG Peat Marwick LLP,
independent accountants, to audit the accounts of the Company for its fiscal
year ended December 31, 1998. The Company has been advised that neither
that firm nor any of its partners has any other relationship, direct or
indirect, with the Company or its subsidiaries.
It is expected that a representative of KPMG Peat Marwick LLP will be
present at the Annual Meeting with an opportunity to make a statement, if they
desire to do so, and be available to respond to appropriate questions.
The Board of Directors recommends a vote "FOR" this proposal.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table shows all the cash compensation paid or to be paid by the
Company or any of its subsidiaries, as well as certain other compensation paid
or accrued, during the fiscal years indicated, to the President and Chief
Executive Officer, and the highest paid executive officers of the Company
whose compensation was at least $100,000 for the last fiscal year in all
capacities in which they served:
<TABLE>
<CAPTION> SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
=========================== ========================
Awards Payouts
(a) (b) (c) (d) (e) (f)
Other All
Annual Restricted Other
Name and Compen- Stock Options/ LTIP Compen-
Principal Position Year Salary Bonus sation Award(s) SAR Payouts sation
<S> <C> <C> <C> <C> <C> <C> <C> <C>
($) ($) ($) ($) ($)
James A. Friedman 1997 361,710 6,135
President and 1996 296,050
Chief Executive 1995 288,000
Officer
John W. Altergott 1997 157,800 257,646
Sr.Vice President 1996 97,500 195,849
1995 80,000 255,019
Philip M. Dinielli 1997 114,276 28,706 36,295
Vice President 1996 94,222 87,965
1995 80,000 23,306 20,000
Vern E. Landeck 1997 83,246 51,350
Vice President and 1996 53,643 20,000
Chief Financial
Officer
Joseph H. Rinehart 1997 148,132 180,834 264
Sr.Vice President 1996 80,152 16,717 50,000
</TABLE>
<TABLE>
<CAPTION> Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End
Option/SAR Values
(a) (b) (c) (d) (e)
Name Shares Acquired Value Number of Value of Unexercised
on Exercise (#) Realized($) Unexercised In-the-Money Options
Options at at FY-End ($)
FY-End (# Exercisable/
Exercisable/ Unexercisable
Unexercisable
<S> <C> <C> <C> <C>
John W. Altergott 101,665/33,335 $478,778/$108,172
Philip M. Dinielli 18,334/25,000 79,378/ 27,497
Vern E. Landeck 6,666/13,334 2,500/ 5,000
Joseph H. Rinehart 16,665/33,335 0/ 0
</TABLE>
<TABLE>
<CAPTION> EXECUTIVE OFFICERS OF THE REGISTRANT
Principal Occupation During Past
Name of Officer Five Years and Other Information Age
=============== ================================= ===
<S> <C> <C>
James A. Friedman President and Chief Executive Officer 52
of the Company or its predecessor
since November 1978.
John W. Altergott Senior Vice President of the Company 37
since January 1996. Vice President of
the Healthcare Finance Group of the
Company since March 1988.
Philip M. Dinielli Senior Vice President of the Company 39
since December 1997. Began employment
with Prime Capital in 1988 most recently
as Vice President of Credit and Underwriting
Operations
Thomas R. Ehmann Vice President, Finance of the Company 45
since September 1997. Vice President and
Chief Financial Officer at First Merchants
Acceptance Corporation from 1992 to 1997
Vern E. Landeck Vice President and Chief Financial Officer 39
of the Company since July 1997.
Vice President and Treasurer of the Company
from June 1996 through June 1997. President of
Atlantic Capital Exchange, Inc. 1988 to 1996.
</TABLE>
Director's Compensation
Each Director of the Company who is not an Executive Officer receives an
annual retainer of $10,000 plus a fee of $500 for attendance at each meeting of
the Board. In addition, members of the Committees of the Board who are not
Executive Officers receive a fee of $300 for each Committee meeting attended.
Directors of the Company who are also Executive Officers receive no compensation
for rendering services as a Director except for reimbursement of out-of-pocket
expenses.
Employment Agreements
With the exception of Mr. Friedman, the Company has entered into employment
agreements with each of the executive officers of the Company to assure the
continued service of such persons. Each of the agreements are substantively
similar, except with regard to compensation. Such agreements generally
provide for a one-year term of employment automatically renewable unless
otherwise terminated. The executive may terminate his employment at any time
upon appropriate notice. The executive agrees to be bound by certain
confidentiality, non-solicitation and non-compete provisions contained in the
respective agreements.
Compensation Pursuant to Plans
The Company has adopted the 1984 Incentive Stock Option Plan (the "ISO
Plan"), the 1986 Non-Qualified Stock Option Plan (the "Non-Qualified Plan"),
the 1987 Stock Option Plan (the "1987 Plan") and the 1997 Plan. All
descriptions of the various plans are qualified in their entirety by reference
to the actual Plan documents which are available for examination.
The 1997 Plan supercedes and replaces the ISO Plan, the Non-Qualified Plan
and the 1987 Plan (collectively, the "Former Plans"). No additional stock
options can be granted under the Former Plans. Any unexercised options
granted under the Former Plans that expire or are otherwise terminated
pursuant to the terms of the Former Plans shall be immediately made available
for the grant of new options under the 1997 Plan.
The 1997 Plan is administered by the Board of Directors. The Board selects
eligible persons for participation and determines the number of shares to be
subject to option, the per share option price, the time and conditions of
exercise, the vesting rights of the optionee, the repurchase rights of the
Company, and all other terms and conditions of the options not specified in the
1997 Plan. The Board interprets the provisions of the 1997 Plan, may
prescribe rules for its operation, and any such interpretation or rule will be
final and conclusive as to all parties. The Board may delegate the
responsibility for the administration of the 1997 Plan to the Compensation
Committee.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Current Ownership
The following table sets forth certain information as of December 31, 1997 with
respect to the beneficial ownership of the Company's common stock by each
stockholder or group known by the Company to be the beneficial owner of more
than 5% of its outstanding common stock, by each Director, and by all Executive
Officers and Directors as a group. The information is based, in part, on data
furnished by such Executive Officers, Directors and stockholders. The address
of each holder of more than 5% of the Company's common stock other than First
Financial Fund, Inc. and Wellington Management Company is O'Hare International
Center, 10275 West Higgins Road, Rosemont, Illinois 60018. The address for
Wellington Management Company is 75 State Street, Boston, Massachusetts 02109.
First Financial Fund, Inc.'s address is One Seaport Plaza, 25th Floor, New York,
New York 10292.
<TABLE>
Name of Amount and Nature
Beneficial Owner of Beneficial Ownership Percent of Class
================ ======================= ================
<S> <C> <C>
James A. Friedman (1) 2,198,375 51.1%
Mark P. Bischoff (2), (3) 478,309 11.1%
William D. Smithburg (2) 35,333 1.2%
Robert R. Youngquist, D.D.S. (2),(4) 28,333 *
Vern E. Landeck (2) 6,666 *
Philip M. Dinielli (2) 18,334 *
John W. Altergott (2) 118,335 2.8%
First Financial Fund, Inc. (5) 330,000 7.7%
All Executive Officers and Directors
as a group (7 persons) (2) 2,440,376 56.7%
</TABLE>
* Less than 1%
(1) Includes 459,975.67 shares owned by a trust for the benefit of Mr.
Friedman's children (the "Childrens Trust") for which Mr. Friedman
disclaims beneficial ownership. The named trustee of the trust is Mark
P. Bischoff.
(2) Includes outstanding options which are currently exercisable with respect
to the following named individuals or groups: Mr. Bischoff, 8,333 shares;
Mr. Smithburg, 37,500 shares; Mr. Youngquist, 8,333 shares; Mr. Landeck,
6,666 shares; Mr. Dinielli, 18,334 shares; Mr. Altergott, 118,335 shares.
All Executive Officers and Directors as a group, 226,665 shares.
(3) Includes 459,975.67 shares owned by the Childrens Trust for which Mr.
Bischoff is trustee but for which he disclaims beneficial ownership.
(4) Includes 15,000 shares held in a pension plan of which Dr. Youngquist is a
fiduciary and for which Dr. Youngquist disclaims beneficial ownership.
(5) According to Schedules 13G filed with the Securities and Exchange
Commission on February 10, 1998, First Financial Fund, Inc., an investment
company, is the beneficial owner of such shares, and Wellington Management
Company, its investment advisor, may also be deemed to be a beneficial
owner of those shares.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There are no family relationships among the Directors and Executive
Officers of the Company.
In September 1991, James A. Friedman purchased one lease and the underlying
telecommunications equipment from the Company for a price of approximately
$350,000, made up of cash and an assumption of the debt secured by those assets.
The transaction was approved by the Company's outside directors in accordance
with the Company's policy of related party transactions. The Company originally
purchased the equipment for approximately $456,000 and entered into this lease
in February, 1990. At the date of the sale to Mr. Friedman, the assets were
carried on the Company's books at approximately $373,000. There were no
proceeds received by Mr. Friedman on this lease in 1994. $27,511 was received
by Mr. Friedman in 1995 and $223,749 was received by Mr. Friedman in 1996 on
this transaction. The transaction was closed in 1996.
OTHER MATTERS
The Board of Directors does not intend to bring any other matters before
the meeting and is not informed of any other business which others may bring
before the meeting. However, if any other matter should properly come before
the meeting or any adjournment thereof, it is the intention of the persons named
in the accompanying Proxy to vote on such matters as they, in their discretion,
may determine.
DEADLINE FOR SHAREHOLDER PROPOSALS
Stockholder proposals intended to be presented at the next Annual Meeting must
be received by the Company, in writing, no later than January 31, 1999, in order
to be considered for inclusion in the Proxy Statement and proxy for the
Company's 1998 Annual Meeting. Any such proposal should be sent to the
attention of the Secretary of the Company at O'Hare International Center, 10275
West Higgins Road, Rosemont, IL 60018.
ALL SHAREHOLDERS ARE URGED TO MARK, SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED
PROXY CARD.
By Order of the Board of Directors
Jeffrey A. Olson
Secretary
Rosemont, Illinois
April 30, 1998
