<PAGE>
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
Capital Associates, Inc.
--------------------------------------------
(Name of Registrant as Specified in Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
|x| $125 per Exchange Act Rules 0-11(c)(1)(ii) or 14a-6(i)(1), or 14a-6(i)(2)
| | $500 per each party to the controversy pursuant to Exchange Act Rule 14a-6
(1)(3)
| | 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:
- --------------------------------------------------------------------------------
(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:
|x| 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>
CAPITAL ASSOCIATES, INC.
7175 West Jefferson Avenue
Lakewood, Colorado 80235
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
October 27, 1995
To the Stockholders of
Capital Associates, Inc.:
The 1995 Annual Meeting of Stockholders (the "Annual Meeting") of
Capital Associates, Inc., a Delaware corporation (the "Company"), will be held
on Friday, October 27, 1995, starting at 8:30 a.m. (local time), in the
Wadsworth Room of the Holiday Inn, 7390 Hampden Avenue, Lakewood, Colorado, for
the following purposes:
1. to elect directors of the Company to serve until the next annual
meeting of stockholders or until their successors are duly elected and
qualified;
2. to approve the Non-Employee Director Stock Option Plan of Capital
Associates, Inc.;
3. to ratify the selection by the Board of Directors (the "Board") of
KPMG Peat Marwick as independent auditors of the Company for the 1996 fiscal
year; and
4. to transact such other business as may properly come before the
Annual Meeting, or any adjournment(s) or postponement(s) thereof.
The Board has fixed the close of business on Thursday, September 21,
1995, as the record date for determining the stockholders entitled to notice of,
and to vote at, the Annual Meeting. A complete list of stockholders entitled to
vote at the Annual Meeting will be available for examination during normal
business hours by any stockholder of the Company, for any purpose germane to the
Annual Meeting, for a period of ten (10) days prior to the Annual Meeting at the
Company's offices located at the address set forth above.
A copy of the Company's Annual Report for the fiscal year ended May 31,
1995, a Proxy Statement and a proxy card accompany this notice. These materials
are first being sent to stockholders on or about October 10, 1995.
Stockholders are cordially invited to attend the Annual Meeting in
person. However, to assure your representation at the Annual Meeting, please
complete and sign the enclosed proxy card and return it promptly. If you choose,
you may still vote in person at the Annual Meeting even though you previously
submitted a proxy card.
By Order of the Board of Directors,
JOHN L. RUPPERT
Secretary
Lakewood, Colorado
October 10, 1995
<PAGE>
CAPITAL ASSOCIATES, INC.
7175 West Jefferson Avenue
Lakewood, Colorado 80235
PROXY STATEMENT
Annual Meeting of Stockholders
To Be Held on October 27, 1995
This Proxy Statement and the accompanying proxy card are being
furnished to the stockholders of Capital Associates, Inc. (the "Company"), in
connection with the solicitation of proxies by and on behalf of the Board of
Directors of the Company (the "Board") for use at the Company's 1995 Annual
Meeting of Stockholders to be held on Friday, October 27, 1995, at 8:30 a.m.
(local time), in the Wadsworth Room of the Holiday Inn, 7390 Hampden Avenue,
Lakewood, Colorado, and at any adjournment(s) or postponement(s) thereof (the
"Annual Meeting"). This Proxy Statement, the accompanying proxy card and the
Company's Annual Report (the "Annual Report") for the fiscal year ended May 31,
1995 ("Fiscal 1995"), are first being mailed to stockholders on or about October
10, 1995. The Annual Report is not to be considered a part of the Company's
proxy solicitation materials.
PURPOSE OF ANNUAL MEETING
At the Annual Meeting, stockholders will be asked to (1) elect seven
directors of the Company to serve until the next annual meeting of stockholders
or until their successors are duly elected and qualified; (2) approve the
Non-Employee Director Stock Option Plan of Capital Associates, Inc. (the
"Director Plan"); (3) ratify KPMG Peat Marwick as the Company's auditors for the
year ending May 31, 1996 ("Fiscal 1996"); and (4) transact such other business
as may properly come before the Annual Meeting.
The affirmative vote of the holders of a majority of the shares of the
Common Stock of the Company (the "Common Stock") present or represented at the
Annual Meeting and constituting a quorum is required for the election of
directors, approval of the Director Plan and ratification of the Company's
auditors.
The Board recommends a vote "FOR" (1) the election of the seven
nominees for directors of the Company listed below, (2) approval of the Director
Plan and (3) ratification of KPMG Peat Marwick as the Company's auditors for
Fiscal 1996.
QUORUM AND VOTING RIGHTS
The presence, in person or by proxy, of the holders of a majority of
the outstanding shares of Common Stock is necessary to constitute a quorum at
the Annual Meeting. Only stockholders of record at the close of business on
Thursday, September 21, 1995 (the "Record Date"), will be entitled to notice of,
and to vote at, the Annual Meeting. As of the Record Date, there were 10,232,447
shares of Common Stock outstanding and entitled to vote. Holders of Common Stock
as of the Record Date are entitled to one vote for each share held.
<PAGE>
All shares of Common Stock represented by properly executed proxies
will, unless such proxies have previously been revoked, be voted in accordance
with the instructions indicated in such proxies. If no such instructions are
indicated, such shares will be voted in favor of (i.e., "FOR") (1) the election
of the seven nominees for directors of the Company listed below, (2) approval of
the Director Plan and (3) ratification of KPMG Peat Marwick as the Company's
auditors for Fiscal 1996. Broker non-votes will be counted as shares present for
quorum purposes, but otherwise will not count for any purpose in determining
whether a proposal has been approved. Abstentions will be counted as shares
present for quorum purposes, but otherwise will count as a vote against the
applicable proposal.
Any stockholder executing a proxy has the power to revoke such proxy at
any time prior to its exercise. A proxy may be revoked by (1) filing with the
Company a written revocation of the proxy, (2) appearing at the Annual Meeting
and casting a vote contrary to that indicated on the proxy or (3) submitting a
duly executed proxy bearing a later date.
The cost of preparing, printing, assembling and mailing this Proxy
Statement and other material furnished to stockholders in connection with the
solicitation of proxies will be borne by the Company. In addition to the
solicitation of proxies by use of the mails, officers, directors and regular
employees of the Company may solicit proxies by written communication,
telephone, telegraph or personal call. These persons are to receive no special
compensation for any solicitation activities. The Company will reimburse banks,
brokers and other persons holding Common Stock in their names, or those of their
nominees, for their expenses in forwarding proxy solicitation materials to
beneficial owners of Common Stock.
ELECTION OF DIRECTORS
Nominees
The Board currently consists of seven members: William H. Buckland,
James D. Edwards, Gary M. Jacobs, Dennis J. Lacey, William B. Patton, Jr., Peter
F. Schabarum and James D. Walker. All of the directors, other than Mr. Buckland,
were elected at the 1994 annual meeting of stockholders. Mr. Buckland was
elected to the Board in January 1995. Mr. Schabarum is not standing for
re-election to the Board. The Board proposes that the seven individuals listed
below as nominees be elected as directors of the Company to hold office until
the next annual meeting of stockholders or until their successors are duly
elected and qualified. Each nominee has consented to serve if elected to the
Board. In the event that any nominee is unable to serve as a director at the
time of the Annual Meeting (which is not expected), proxies with respect to
which no contrary direction is made will be voted "FOR" such substitute nominee
as shall be designated by the Board to fill the vacancy.
The names of the nominees, their ages at the Record Date and certain
other information about them are set forth below:
Nominee Age Position(s) with Company Director Since
------- --- ------------------------ --------------
William H. Buckland 50 Director 1995
James D. Edwards 55 Director 1987
<PAGE>
Gary M. Jacobs 48 Director 1978-1990
and 1994
Dennis J. Lacey 42 Chief Executive Officer, 1991
President and Director
William B.Patton,Jr. 59 Chairman of the Board and 1987
Director (1)
Robert A. Sharp II 37 None N/A
James D. Walker 50 Director (1) 1994
- ------------------------------------------
(1) Mr. Patton will resign as Chairman of the Board (but will remain a
Director), and Mr. Walker will assume the position of Chairman of the
Board, effective as of October 31, 1995.
Mr. Buckland is Chairman of the Board, Secretary, Treasurer, a director
and 50% shareholder of MCC Financial Corporation, an aircraft and equipment
lessor ("MCC"). Immediately prior to the purchase of MCC in 1988, Mr. Buckland
held, from 1978 to 1988, a number of executive positions at Fairchild
Industries, Inc. Mr. Buckland is also a director of MCC Aircraft Leasing I,
Inc., MCC World Aviation Associates, Inc. and Capital Associates International,
Inc., a wholly-owned subsidiary of the Company ("CAII").
Mr. Edwards was President, Chief Executive Officer and a director of
Tricord Systems, Inc., a computer hardware and software development firm, from
1989 through May 1995. From 1987 to 1989, Mr. Edwards was President and Chief
Executive Officer of Telwatch, Inc., a telecommunications firm. From 1983 to
1987, Mr. Edwards held various executive positions with AT&T, including
President of AT&T Computer Systems. Prior to 1983, Mr. Edwards held executive
positions with IBM Corporation, Xerox Corporation and Bausch & Lomb. Mr. Edwards
is also a director of CAII.
Mr. Jacobs is Executive Vice President and Secretary of Corporate
Express, Inc., an office products supply company ("CEI"). From 1992 to July
1995, Mr. Jacobs was also Chief Financial Officer of CEI. From 1990 through
November 1992, Mr. Jacobs served as the President and Chief Executive Officer of
Boulder Retail Finance Corporation, an investment firm controlled by Mr. Jacobs.
From 1978 through mid-1990, Mr. Jacobs served as Executive Vice President and in
various other senior executive positions with the Company and CAII. Prior to
joining the Company, Mr. Jacobs served as a director of finance for Storage
Technology Corporation, a public company which manufactures computer peripheral
devices. Mr. Jacobs served as a director of the Company and CAII from 1978
through mid-1990 and is currently a director of Boulder Retail Finance
Corporation and CAII.
Mr. Lacey joined the Company as Vice President, Operations, in October
1989. Mr. Lacey was appointed Treasurer on January 1, 1991, Chief Financial
Officer on April 11, 1991, a director on July 19, 1991, and President and Chief
Executive Officer on September 6, 1991. Prior to joining the Company, Mr. Lacey
was an audit partner for the public accounting firm of Coopers & Lybrand. Mr.
Lacey is also a director and senior officer of CAII, CAI Equipment Leasing I
Corp., CAI Equipment Leasing II Corp., CAI Equipment Leasing III Corp., CAI
<PAGE>
Equipment Leasing IV Corp., CAI Leasing Canada, Ltd., CAI Partners Management
Company, CAI Securities Corporation, CAI Lease Securitization I Corp. and
Capital Equipment Corporation (collectively referred to herein as the "CAI
Affiliates"), all of which are first- or second-tier wholly-owned subsidiaries
of the Company. Mr. Lacey is also a director of Guaranty National Corporation.
Mr. Patton was a Senior Vice President of UNISYS and President of U.S.
Information Systems, UNISYS Corporation from June 1991 through February 1995.
Mr. Patton was Chairman and Chief Executive Officer of Parallan Computer, Inc.,
from July 1990 to June 1991 and was a private investor from July 1989 to July
1990. From January 1985 to July 1989, Mr. Patton was President and Chief
Executive Officer of MAI Basic Four, Inc., a computer systems manufacturer.
Prior to 1985, Mr. Patton was Chairman, President and Chief Executive Officer of
CADO Systems Corporation, Executive Vice President of Ampex International, and
Vice President, Western Operations, of Honeywell, Inc. Mr. Patton is also a
director of Media Vision, Prolog Corporation and CAII.
Mr. Sharpe is currently Vice President, Corporate Development of Smithfield
Foods, Inc. Prior to joining Smithfield Foods, Inc., Mr. Sharpe had a ten year
career in corporate banking. From 1987 through June 1994, Mr. Sharpe served in a
number of capacities at NationsBank Corporation from 1987 through June 1994,
including Senior Vice President in charge of Mid- Atlantic Corporate Banking
relationships for NationsBank Corporation. Mr. Sharpe is also a director of
Fairchild Industries, Inc.
Mr. Walker is President, Chief Executive Officer, a director and 50%
stockholder of MCC. He has held these positions since 1988. Prior to that time,
Mr. Walker was involved in equipment lease management with Thomson McKinnon
Securities and Finalco, Inc. Prior to that, Mr. Walker held marketing and
engineering positions with IBM Corporation and TRW, Inc. Mr. Walker is also a
director of CAII.
Board Committees and Meetings
The Board held a total of four (4) regular meetings during Fiscal 1995
and no special meetings. The Board has an Audit Committee, Compensation
Committee, Nominating Committee and Executive Committee. The Executive Committee
was formed at the Board's January 1995 meeting. The other three (3) committees
were in existence during the entire Fiscal 1995.
Through August 1994, the Audit Committee consisted of Messrs. Edwards
and Jacobs. At the August 1994 Board meeting, Mr. Peter Schabarum (who is not
standing for re-election at the Annual Meeting) was appointed to the Audit
Committee. At the April 1995 Board meeting, Mr. Edwards resigned from the Audit
Committee (and was appointed to the Compensation Committee), and Mr. Buckland
was appointed to the Audit Committee. The Audit Committee held four (4) meetings
during Fiscal 1995. The Audit Committee recommends selection of the Company's
independent auditors and is primarily responsible for reviewing recommendations
made by the Company's independent auditors, evaluating the Company's adoption of
such recommendations and evaluating, and making recommendations with respect to,
the Company's internal audit functions. Mr. Jacobs currently serves as the
Chairman of the Audit Committee.
Through August 1994, the Compensation Committee consisted of Messrs. Patton
and Schabarum. At the August 1994 Board meeting, Mr. Schabarum (who is not
standing for re-election at the Annual Meeting) resigned from the Compensation
Committee (and was appointed to the Audit Committee), and Mr. Walker was
appointed to the Compensation Committee. At the April 1995 Board meeting, Mr.
Edwards was appointed to the Compensation Committee (and resigned from the Audit
Committee). The Compensation Committee held four (4) meetings during Fiscal
<PAGE>
1995. The Compensation Committee is responsible for initiating, evaluating and
recommending to the Board amendments to the Company's compensation plans. Mr.
Patton currently serves as Chairman of the Compensation Committee.
During Fiscal 1995, the Nominating Committee consisted of Messrs.
Lacey, Patton and Walker. The Nominating Committee held one (1) meeting during
Fiscal 1995. The Nominating Committee recommends to the Board nominees for
appointment to the Board and nominees for the slate of directors to be voted on
by the Company's stockholders at the annual meetings. The Board as a whole,
rather than the Nominating Committee, acted on and approved the nomination of
Mr. Buckland to the Board. On September 27,1995, the Nominating Committee
approved and recommended to the Board, and on October 2, 1995 the Board ratified
and approved, the slate of directors to be voted on at the Annual Meeting. The
Nominating Committee will consider nominees recommended by stockholders in
accordance with the procedures described in "Stockholder Proposals" below.
The Executive Committee was formed in January 1995 and consists of
Messrs. Buckland, Lacey and Walker. The Executive Committee held five (5)
meetings during Fiscal 1995. The Executive Committee is responsible for (1)
overseeing, reviewing and consulting with senior management, and approving
certain actions of senior management, concerning the execution and
implementation of the Company's business plan, (2) approving certain material
lease transactions, (3) approving promotions and compensation adjustments for
all employees below the senior vice president level and (4) performing such
other duties as may be assigned to it by the Board from time to time.
During Fiscal 1995, all directors (including Mr. Buckland for the
period commencing on the date he was elected to the Board) attended over 75% of
the aggregate number of regular meetings of the Board, and all members of the
Audit Committee, Compensation Committee, Nominating Committee and Executive
Committee attended over 75% of the aggregate number of their respective
committee meetings.
Director Compensation
The Board amended and restated the Company's Board of Directors
Compensation Policy at its January 1995 meeting (the "Amended Policy"). Pursuant
to the Amended Policy, the Company has agreed to (1) pay each director (other
than the Chairman of the Board) who is not an officer of the Company
("Non-Employee Directors") a $3,750 quarterly retainer ($2,500, prior to the
adoption of the Amended Policy), (2) pay the Chairman of the Board, provided
that he is a Non-Employee Director, a $5,000 quarterly retainer ($3,750, prior
to the adoption of the Amended Policy), (3) pay each Non-Employee Director
$1,000 for each Board meeting attended, (4) pay each Non-Employee Director
$1,000 for each committee meeting attended, (5) pay each director consulting
fees for consulting services at a rate approved by the Board in advance of the
commencement of the consulting assignment and (6) reimburse each Non-Employee
Director for the reasonable expenses of attending such meetings and performing
any consulting services for the Company.
The Board adopted its Non-Employee Director Executive Committee
Compensation Policy in August 1995, retroactive to February 1995 (the "Executive
Committee Policy"). Pursuant to the Executive Committee Policy, the Company
agreed to pay each Non-Employee Director who served on the Executive Committee
during Fiscal 1995 (1) a $1,250 quarterly retainer (prorated from February 1,
1995 through May 31, 1995) and (2) $1,000 for each Executive Committee meeting
attended. The Board also approved the grant of certain stock options to the
Non-Employee Directors who served (or will serve) on the Executive Committee
during Fiscal 1995 (and Fiscal 1996). See the discussion below of the Director
Plan, as defined below. The Executive Committee Policy also provides for the
payment of certain cash bonuses in Fiscal 1996 to the Non-Employee Director
<PAGE>
members of the Executive Committee if the Company's Fiscal 1996 earnings exceed
certain targets.
The following table sets forth the amount of quarterly retainer fees,
meeting fees, consulting fees and total fees paid to each of the Non-Employee
Directors during Fiscal 1995:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
=====================================================================================================================
Directors Quarterly Retainer Meeting Fees Consulting Fees Total (1)
- --------- ------------------ ------------ --------------- -----
- ---------------------------------------------------------------------------------------------------------------------
William H. Buckland $ 5,125 (2) $ 2,000 $ 0 $ 7,125
- ---------------------------------------------------------------------------------------------------------------------
James D. Edwards $15,000 $ 9,000 (5) $ 0 $24,000
- ---------------------------------------------------------------------------------------------------------------------
Gary M. Jacobs $15,000 $ 9,000 (6) $ 0 $24,000
- ---------------------------------------------------------------------------------------------------------------------
William B. Patton, Jr. $22,500 (3)(10) $17,000 (7)(10) $15,000 (9)(10) $54,500
- ---------------------------------------------------------------------------------------------------------------------
Peter F. Schabarum $15,000 $ 9,000 (5) $ 0 $24,000
- ---------------------------------------------------------------------------------------------------------------------
James D. Walker $15,000 (4) $ 4,000 (8) $ 0 $19,000
=====================================================================================================================
</TABLE>
(1) These amounts do not include (a) expense reimbursements paid to the
Non-Employee Directors during Fiscal 1995, and (b) the value of stock
options that were granted to the Non-Employee Directors in Fiscal 1995
and prior fiscal years that vested during Fiscal 1995.
(2) Mr. Buckland joined the Board in January 1995. This amount consists of
$3,750 paid directly to Mr. Buckland and $1,375 paid to MCC World
Aviation, a corporation owned 50% by Mr. Buckland and 50% by Mr.
Walker, on Mr. Buckland's behalf.
(3) This amount consists of $7,500 of quarterly retainer fees deferred from
the fiscal year ended May 31, 1994 ("Fiscal 1994") that were paid
pursuant to Mr. Patton's instructions in Fiscal 1995 and $15,000 of
Fiscal 1995 quarterly retainer fees . Mr. Patton has elected to defer
an additional $5,000 of Fiscal 1995 quarterly retainer fees beyond the
close of Fiscal 1995.
(4) This amount consists of $3,750 paid directly to Mr. Walker and $11,250
paid to MCC World Aviation, a corporation owned 50% by Mr. Buckland and
50% by Mr. Walker, on Mr. Walker's behalf.
(5) This amount includes a payment of $1,000 for a meeting held on May 31,
1994. The balance of these fees relate to meetings that occurred
during Fiscal 1995.
(6) Mr. Jacobs earned but has not yet requested payment of $12,000 of
meeting fees, $3,000 of which relate to meetings that occurred during
Fiscal 1994 and $9,000 of which relate to meetings that occurred during
Fiscal 1995.
(7) This amount consists of $11,000 of meeting fees deferred from Fiscal
1994 that were paid pursuant to Mr. Patton's instructions in Fiscal
1995 and $6,000 of Fiscal 1995 meeting fees. Mr. Patton has elected to
defer an additional $2,000 of Fiscal 1995 meeting fees beyond the close
of Fiscal 1995.
(8) This amount consists of $4,000 paid directly to Mr. Walker for meeting
fees. Mr. Walker has elected to defer an additional $4,000 meeting
fees beyond the close of Fiscal 1995.
(9) This amount consists entirely of consulting fees deferred from Fiscal
1994 that were paid pursuant to Mr. Patton's instructions in Fiscal
1995.
(10) The Company paid $54,500 (see the discussion of deferred payments in
notes (3), (7) and (9) above) to Canada Life for medical premiums
pursuant to Mr. Patton's instructions.
At its January 1995 meeting, the Board adopted the Director Plan, and
approved the grant of stock options for the following number of shares of Common
Stock to the Non-Employee Directors: (1) William H. Buckland - 3,400; (2) James
D. Edwards - 10,000; (3) Gary M. Jacobs - 10,000; (4) William B. Patton, Jr. -
<PAGE>
10,000; (5) Peter F. Schabarum - 10,000; and (6) James D. Walker - 10,000
(collectively referred to herein as the "1995 Director Options"). All of the
1995 Director Options vested in full on May 31, 1995, subject to the
stockholders approving the Director Plan at the Annual Meeting. Mr. Lacey, a
director and employee of the Company, is not eligible to participate in the
Director Plan. Also at the January 1995 meeting, the Directors approved the
grant of stock options to the Non-Employee Directors under the Amended and
Restated Stock Option Plan of Capital Associates, Inc. (the "Employee Plan") for
the same number of shares of Common Stock covered by the 1995 Director Options.
If the stockholders do not approve the Director Plan, among other things, all of
the 1995 Director Options will terminate retroactively to their grant date and
the options granted to the Non-Employee Directors on January 26, 1995 under the
Employee Plan will become effective on and as of that date. If the stockholders
approve the Director Plan, among other things, the 1995 Director Options will
become effective on their grant date and the options granted to the Non-Employee
Directors on January 26, 1995 under the Employee Plan will terminate
retroactively to their grant date.
On June 1, 1995, each Non-Employee Director (i.e., all directors other
than Mr. Lacey) received a stock option grant, in accordance with the terms of
the Director Plan, covering an additional 10,000 shares of Common Stock
(collectively referred to herein as the "1996 Director Options"). All of the
1996 Director Options will vest on May 31, 1996 (subject to the stockholders
approving the Director Plan at the Annual Meeting), provided that a director
continues to be a director on that date. If the stockholders do not approve the
Director Plan, among other things, all of the 1996 Director Options will
terminate retroactively to their grant date. If the stockholders approve the
Director Plan, among other things, the 1996 Director Options will become
effective as of their grant date.
Pursuant to the Executive Committee Policy, on September 18, 1995, the
Company granted to each Non-Employee Director who (1) served on the Executive
Committee during Fiscal 1995 (i.e., Messrs. Walker and Buckland) stock options
to acquire 3,333 shares of Common Stock under the Director Plan (the "1995
Executive Committee Options") and (2) were serving on the Executive Committee as
of June 1, 1995 (i.e., Messrs. Walker and Buckland) stock options to acquire
10,000 shares of Common Stock under the Director Plan (the "1996 Executive
Committee Options"). All of the 1995 Executive Committee Options are vested in
full. All of the 1996 Executive Committee Options will vest on May 31, 1996
(subject to the stockholders approving the Director Plan at the Annual Meeting),
provided that a director continues to be a member of the Executive Committee on
that date. If the stockholders do not approve the Director Plan, among other
things, all of the 1995 and 1996 Executive Committee Options will terminate
retroactively to their grant date. If the stockholders approve the Director
Plan, among other things, the 1995 and 1996 Executive Committee Options will
become effective as of their grant date.
Compensation Committee Interlocks and Insider Participation
Through August 1994, the Compensation Committee consisted of Messrs.
Patton and Schabarum (who is not standing for re-election at the Annual
Meeting). At the August 1994 Board meeting, Mr. Schabarum resigned from the
Compensation Committee (and was appointed to the Audit Committee) and Mr. Walker
was appointed to the Compensation Committee. At the April 1995 Board meeting,
Mr. Edwards was appointed to the Compensation Committee (and resigned from the
Audit Committee). Messrs. Edwards, Patton and Walker are directors (and Mr.
Schabarum, while he was member of the Compensation Committee, was a director) of
the Company. However, none of the four of them is, was or ever has been an
officer or employee of the Company. Messrs. Edwards, Patton and Walker, the
current members of the Compensation Committee, also are directors of CAII, and
Mr. Walker is a director of MCC.
<PAGE>
CAII and MCC, of which Mr. Walker is a director, officer and 50%
stockholder, entered into an Aircraft Remarketing Agreement in September 1992
(the "Aircraft Agreement"), pursuant to which CAII retained MCC to be its agent
in remarketing certain aircraft for CAII for compensation payable by CAII to MCC
in the amount of 4% (or such other amount as agreed to by the parties) of the
gross sales proceeds or gross rental proceeds from each such remarketing
transaction. The Aircraft Agreement terminated on September 6, 1995. CAII paid
MCC $106,080 in remarketing fees with respect to six (6) aircraft remarketing
transactions during Fiscal 1994 and $36,000 in remarketing fees with respect to
one (1) remarketing transaction during Fiscal 1995.
On June 1, 1994, MCC purchased 2,332,165 shares of Common Stock from
Richard Kazan for $2,651,642.38. See "Certain Transactions" for a further
description of this transaction. On November 17, 1994, MCC purchased, for
$80,000, an option from Richard Robinson to acquire the 230,000 shares of Common
Stock owned by Mr. Robinson, and on January 24, 1995, MCC exercised its option
in full and purchased 230,000 shares of Common Stock from Mr. Robinson for an
additional $150,000.
CAII has purchased in the past and continues to purchase computer
equipment from UNISYS Corporation ("UNISYS") for its own in-house use. In
addition, CAII entered into a contract with UNISYS in February 1994 for computer
maintenance services for CAII's own in-house computer system. The term of the
contract commenced in February 1994 and will expire in February 1997. As CAII
purchases additional pieces of computer equipment or upgrades, this contract is
amended to cover such additional items and the fees payable by CAII under the
contract increase accordingly. CAII paid UNISYS $16,875 under the contract in
Fiscal 1995. In February 1995, the fees payable to UNISYS under the contract
increased to $2,623 per month. Prior to February 1995, Mr. Patton was an
executive officer of UNISYS.
CAII and Tricord Systems, Inc. ("Tricord"), in July 1993, entered into
a vendor program agreement pursuant to which CAII agreed to provide lease
services to customers of Tricord who desire to lease rather than purchase
Tricord products. CAII is not obligated to pay any compensation to Tricord, and
Tricord is not obligated to pay any compensation to CAII, under this agreement.
All lease arrangements under this agreement are directly between CAII and the
Tricord customer. CAII has agreed, at its own expense, to conduct training
sessions for Tricord field sales personnel to familiarize them with CAII's
leasing programs, to provide periodic leasing rate quotes and to update those
quotes from time to time and to provide other leasing support services to
Tricord and its customers. Prior to May 1995, Mr. Edwards was the President,
Chief Executive Officer, a director and stockholder of Tricord.
Several stockholders of Tricord filed class action lawsuits during July
1994 against Tricord, and certain officers and directors of Tricord, including
Mr. Edwards, alleging certain violations of the federal securities laws. Mr.
Edwards has advised the Company that Tricord and its officers and directors are
vigorously defending these lawsuits.
<PAGE>
EXECUTIVE OFFICERS
The following table sets forth (i) the names of the executive officers,
(ii) their ages at the Record Date and (iii) the capacities in which they serve
the Company:
Name of Individual Age Capacities in Which Served
------------------ --- --------------------------
Dennis J. Lacey 42 Chief Executive Officer; President; and
Director
John E. Christensen 47 Senior Vice President, Finance; Chief
Financial Officer; and Treasurer
David L. Fabian 47 Senior Vice President, Corporate Services
John F. Olmstead 51 Senior Vice President, Public Equity
Robert A. Golden 49 Vice President and National Sales Manager
See "Election of Directors - Nominees" above for a description of Mr.
Lacey's background and the positions held by Mr. Lacey with the Company.
John E. Christensen joined the Company as Vice President and Treasurer
in November 1988. From November 1988 to January 1991, Mr. Christensen served as
Vice President and Treasurer of CAII. From January 1991 to October 1991, Mr.
Christensen served as Senior Vice President, Operations, and as the principal
accounting officer of the Company. In October 1991, Mr. Christensen was promoted
to Senior Vice President, Finance, Chief Financial Officer and Treasurer. Prior
to joining the Company, Mr. Christensen was employed from 1986 with Maxicare
Health Plans, Inc., as its Vice President and Treasurer. Before that, Mr.
Christensen held senior management positions with Global Marine, Inc. and Santa
Fe International, Inc. Mr. Christensen is a director and officer of Whitewood
Credit Corporation, a wholly-owned subsidiary of CAII, and all of the CAI
Affiliates (other than CAII and CAI Leasing Canada, Ltd.). Mr. Christensen is an
officer, but not a director, of CAII and CAI Leasing Canada, Ltd.
David L. Fabian is Senior Vice President, Corporate Services, of the
Company. Mr. Fabian joined the Company in his current position in April 1991.
Prior to joining the Company, he was Vice President of Human Resources for MAI
Systems Corporation, Vice President of Human Resources for Contel Computer
Systems and Vice President of Human Resources for TRW-Fujitsu. Before that, he
held human resources positions for eleven years with Data General and Honeywell
Information Systems. Mr. Fabian is an officer, but not a director, of CAII.
John F. Olmstead is Senior Vice President, Public Equity, of the
Company. Mr. Olmstead joined the Company as a Vice President in December 1988.
He was promoted to his current position in September 1991. From 1969 through
1983, Mr. Olmstead co-founded Finalco, Inc., an independent leasing company, and
served as a senior officer of Finalco Corporation. From 1983 through the
present, Mr. Olmstead has served as Chairman of the Board of Neo-kam Industries,
Inc., Matchless Metal Polish Company, Inc., and ACL, Inc. Mr. Olmstead is a
director and officer of all of the CAI Affiliates (other than CAII and CAI
Leasing Canada, Ltd). Mr. Olmstead is an officer, but not a director, of CAII.
<PAGE>
Robert A. Golden is Vice President and the National Sales Manager of
the Company. Mr. Golden joined the Company in 1993 as a Branch Manager. He was
promoted to his current position in September 1994. Prior to joining the
Company, he was an Executive Vice President with the U.S. Funds Group, President
of BoCon Capital Group and Vice President with Ellco/GE Capital for fifteen
years. Mr. Golden is an officer, but not a director, of CAII.
Executive Compensation
Compensation Committee Report. The Compensation Committee of the Board
is composed entirely of Non-Employee Directors and is responsible for setting
and administering the policies which govern both the annual compensation and
stock ownership programs for all employees, officers and directors of the
Company. The Company's compensation programs are designed to (1) relate the
level of compensation paid to individual executive officers and all executive
officers as a group to the Company's success in meeting its annual and long-term
performance goals and business plan(s), (2) reward individual, group and team
achievement(s), (3) attract and retain executives capable of leading the Company
to meet its performance and business plan goals and (4) motivate executive
officers to enhance long-term stockholder value.
The Compensation Committee annually evaluates the total cash
compensation (including base salary and incentive cash compensation) paid to,
Common Stock ownership of and stock option ownership of the Company's executive
officers, including its Chief Executive Officer, in light of corporate
performance compared with the Company's business plan and the performance of
other independent leasing companies. The Company has considered and will
continue to consider the potential impact of Section 162(m) of the Internal
Revenue Code of 1986, as amended. Section 162(m) disallows a tax deduction for
any publicly-held corporation for individual compensation exceeding $1 million
in any taxable year for the named executive officers, unless compensation is
performance based. Since the targeted cash compensation of each of the named
executive officers is well below the $1 million threshold and any stock options
granted under the Employee Plan will meet the requirement of being performance
based, the Compensation Committee believes that this section will not reduce the
tax deduction available to the Company. The Company's policy is to qualify to
the maximum extent possible its executives' compensation for deductibility under
applicable tax laws.
The Company's Fiscal 1995 executive compensation program was composed
entirely of base salary compensation and cash bonuses. The base salary
compensation of each of the Company's executives was established with survey
data of compensation paid by other independent leasing companies and was within
the salary range for executives performing similar duties and having similar
responsibilities at such other companies. The Compensation Committee also
relied, in part, on other subjective considerations in setting executive
compensation levels based on the Company's overall performance goals.
In determining the amount of the Fiscal 1995 bonus to be paid to senior
management in Fiscal 1996, the Compensation Committee reviewed at its September
1995 meeting (1) the Company's performance against its Fiscal 1995 business
plan, (2) operating income, (3) income from extraordinary transactions, (4) the
stock price and (5) the performances of each member of senior management against
his/her targets for the year, based on (a) the Board's evaluation of the Chief
Executive Officer's performance during Fiscal 1995 and (b) the Chief Executive
Officer's and the Executive Committee members' evaluations of the other senior
executives' performances during Fiscal 1995. Based on the foregoing, the
Compensation Committee approved a bonus amount of $102,600 for the senior
executives, $33,000 of which was awarded to Mr. Lacey. See "Summary Compensation
Table" for a discussion of the bonuses awarded to the Named Executive Officers,
as defined below.
<PAGE>
The Compensation Committee reviewed the Common Stock and stock option
ownership of the Company's executives at the beginning of Fiscal 1995. Based on
that review, the Compensation Committee determined that increases in the price
of the Common Stock during Fiscal 1995, assuming the Company met its financial
goals in Fiscal 1995, would be sufficient to reward the Company's executives,
each of whom owns Common Stock and stock options as the result of compensation
awards in prior fiscal years, for outstanding performance in Fiscal 1995, and,
therefore, did not make any additional Common Stock awards or stock option
grants to the executive officers during Fiscal 1995, except the grant of an
option to acquire 50,000 shares of Common Stock to Mr. Golden in August 1994.
The incentive Common Stock awards and stock option grants to executives in prior
fiscal years were paid pursuant to incentive plans that provided for awards and
grants to the executives only if the Company met certain key performance goals
established at the time the plans were adopted. These goals included, among
other things, earnings and other financial targets.
Dennis J. Lacey is the Company's President and Chief Executive Officer.
Mr. Lacey's compensation during Fiscal 1995 was governed by the terms of the
Lacey Employment Agreement, which is described in detail in "Executive
Employment Agreements and Severance Agreements" below. The Compensation
Committee bases Mr. Lacey's compensation on both quantitative and qualitative
factors directly linked to the Company's performance, achievement of short- and
long-term objectives and the enhancement of stockholder value. Mr. Lacey's base
salary was $225,000 during Fiscal 1995 (up from $214,000 in each of Fiscal 1994
and the fiscal year ended May 31, 1993 ("Fiscal 1993")) and is $225,000 for
Fiscal 1996. Mr. Lacey's base salary in Fiscal 1995 was within the range of
salaries paid to chief executive officers by other independent leasing
companies. Mr. Lacey also received a $25,000 cash bonus in Fiscal 1995 for
services performed during Fiscal 1994. See "Summary Compensation Table" for a
discussion of the bonus that was accrued for Mr. Lacey in Fiscal 1995 and paid
to him in Fiscal 1996. The Compensation Committee believes that the amount of
the cash bonus paid to Mr. Lacey during Fiscal 1995 was reasonable in relation
to the financial performance of the Company during Fiscal 1994. In addition,
pursuant to the terms of the Lacey Employment Agreement, as defined below, Mr.
Lacey is entitled to receive shares of Common Stock when and if the trading
price of the Common Stock reaches certain levels (the "Incentive Shares"). The
Incentive Shares tie Mr. Lacey's compensation to the long-term performance of
the Company and to the interests of the Company's stockholders. Mr. Lacey did
not earn any Incentive Shares in Fiscal 1995.
The Compensation Committee believes the Company's executive officer
compensation programs serve the Company's best interests by attracting and
retaining qualified professionals and providing those persons incentives to
attain financial and other goals which benefit the Company and its stockholders.
Compensation Committee,
James D. Edwards
William B. Patton, Jr.
James D. Walker
May 31, 1995
<PAGE>
Executive Employment Agreements and Severance Agreements.
The Lacey Employment Agreement. During Fiscal 1995, the terms of Mr.
Lacey's compensation were governed by the Lacey Employment Agreement (as defined
below). The parties amended and restated the Lacey Employment Agreement on
October 2, 1995 (see the discussion of the Second Amendment, as defined below).
The Lacey Employment Agreement is evidenced by that certain First
Amended and Restated Dennis J. Lacey Executive Employment Agreement, dated as of
June 15, 1993, as amended by that certain Amendment No. 1 to First Amended and
Restated Dennis J. Lacey Executive Employment Agreement, dated as of August 26,
1995 (collectively referred to herein as the "Lacey Employment Agreement"). The
term of the Lacey Employment Agreement was scheduled to expire upon the earliest
to occur of (1) the close of business on September 6, 1996, unless renewed by
the parties for one or more additional 12-month periods, (2) a date mutually
agreed to by the parties or (3) the termination of Mr. Lacey's employment by the
Company or Mr. Lacey. Pursuant to the Lacey Employment Agreement, the Company
agreed to pay Mr. Lacey an annual salary of $225,000. Pursuant to the Lacey
Employment Agreement, Mr. Lacey was entitled to receive up to 500,000 Incentive
Shares of Common Stock in 50,000 share increments when the trading price of the
Common Stock reached $1.00 (for ten consecutive trading days) and for each
subsequent $.50 increase (for a similar ten-day period) in the reported trading
price of the Common Stock up to $4.00 per share and an additional 50,000 shares
of Common Stock for each subsequent $.33 increase (for a similar ten-day period)
in the reported trading price of the Common Stock between $4.00 and $5.00. If a
change of control of the Company (as defined in the Lacey Employment Agreement)
occurred and Mr. Lacey did not maintain his current position and compensation
level or obtain and maintain a substantially similar position and compensation
level with any successor entity for at least two years after the date of the
change in control, all of the unvested Incentive Shares were to be deemed to
have been earned and would automatically vest as of Mr. Lacey's termination date
or the date of the change in control, as the case may be. During Fiscal 1994,
the Company registered all of the Incentive Shares with the Securities and
Exchange Commission ("SEC").
Pursuant to the Lacey Employment Agreement, Mr. Lacey receives an
automobile allowance of $500 per month and is entitled to participate in all
Company benefit plans. Mr. Lacey is also entitled to severance benefits upon the
termination of his employment with the Company for any reason, including a
change of control of the Company, unless his termination is voluntary or for
cause. The severance benefits are equal to 100% of his base salary, will be made
in twelve (12) equal monthly installments and will be reduced by any salary Mr.
Lacey receives from subsequent employment during such 12-month period. The Lacey
Employment Agreement provides that the Company will pay Mr. Lacey his share of
any bonuses declared by the Company's Compensation Committee, prorated based
upon the aggregate dollar amounts of the bonus and Mr. Lacey's employment for
the portion of the year prior to his termination date. The Company has also
agreed to maintain Mr. Lacey's health insurance for the period during which Mr.
Lacey receives severance payments.
During Fiscal 1995, Mr. Lacey received a cash bonus of $25,000 for
services rendered to the Company during Fiscal 1994. Mr. Lacey did not earn any
Incentive Shares during Fiscal 1995. During Fiscal 1995, the Company paid $3,990
of premiums for a term life and long-term disability insurance policy owned by
Mr. Lacey. During Fiscal 1995, Mr. Lacey did not sell any Incentive Shares. See
"Summary Compensation Table, Note 4" for a discussion of the bonus that was
accrued for Mr. Lacey in Fiscal 1995 and paid to him in Fiscal 1996.
<PAGE>
On October 2, 1995, the Company and Mr. Lacey executed that certain
Second Amended and Restated Dennis J. Lacey Executive Employment Agreement (the
"Second Amendment"). The Second Amendment makes the following substantive
changes to the Lacey Employment Agreement, effective as of October 2, 1995: (1)
the term of the Lacey Employment Agreement has been extended through September
30, 1997 (subject to the early termination provisions currently set forth in the
Lacey Employment Agreement), (2) Mr. Lacey's base salary is increased to
$250,000, (3) Mr. Lacey's right to receive the unearned 450,000 Incentive Shares
under the Lacey Employment Agreement is cancelled, (4) Mr. Lacey has been
granted options under the Employee Plan to acquire 150,000 shares at an exercise
price of $0.84375 per share, all of which are fully vested and immediately
exercisable and (5) the change of control provisions do not apply to a change of
control effected by MCC and/or its affiliates.
The Robinson Severance Agreement. Richard Robinson, a former executive
officer of the Company, and the Company are parties to that certain agreement,
dated as of January 26, 1995, pursuant to which Mr. Robinson resigned all of his
positions with the Company and its affiliates and subsidiaries (the "Robinson
Severance Agreement"). Pursuant to the Robinson Severance Agreement, the Company
has agreed (1) to pay Mr. Robinson $60,000 in twelve (12) equal monthly payments
of $5,000 each, with the first payment having been made on January 31, 1995, and
(2) to continue his medical insurance in effect through the earlier to occur of
December 31, 1995 or until Mr. Robinson notifies the Company that he desires to
terminate such coverage. Pursuant to the Robinson Severance Agreement, Mr.
Robinson has agreed to provide certain consulting services to the Company and
the Company, in turn, has agreed to reimburse Mr. Robinson for his out-of-pocket
costs in providing such services and, under certain circumstances to compensate
Mr. Robinson for consulting services provided by him in excess of four (4) hours
per day. In the Robinson Severance Agreement, Mr. Robinson has agreed, subject
to certain limitations, (a) through December 31, 1997, not to (i) solicit,
interfere with or attempt to hire away certain Company employees or (ii) attempt
to induce certain persons doing business with the Company to stop doing business
with the Company, and (b) not to disclose confidential information of the
Company to third parties. As a condition precedent to the effectiveness of the
Robinson Severance Agreement, the Company and Mr. Robinson entered into a
written release agreement whereby the parties mutually released each other from
any and all claims that each party had or might have against the other party,
except for fraud claims or claims arising out of intentional, knowing or willful
misconduct by a party to the Robinson Severance Agreement.
Summary Compensation Table. The following table provides certain
summary information for Fiscal 1995, Fiscal 1994 and Fiscal 1993, concerning
compensation awarded or paid to, or earned by, the Company's Chief Executive
Officer, each of the four other executive officers of the Company whose
aggregate base salary and bonus for Fiscal 1995 exceeded $100,000 and Mr.
Robinson who left the employ of the Company in January 1995 (collectively
referred to herein as the "Named Executive Officers"):
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
Long-Term Incentive
Compensation ("LTIP")
-----------------------------------------------
====================================================================================================================================
Awards
-----------------------
====================================================================================================================================
Annual Compensation
------------------------------------- Restricted
Fiscal Other Annual Stock Number of
Name and Position Year Salary(1) Bonus Compensation Awards Options LTIP
----------------- ------ --------- ----- ------------ ---------- --------- ----
Payouts
-------
- ------------------------------------------------------------------------------------------------------------------------------------
Dennis J. Lacey, 1995 $228,584 $58,000(4) $9,990(15) -0- -0-(19) -0-
Chief Executive Officer; 1994 $220,400 $25,000(5) $7,477(16) -0- -0- -0-
President and Director 1993 $220,400 $64,063(6) $29,432(17) -0- -0- 50,000(20)
- ------------------------------------------------------------------------------------------------------------------------------------
John E. Christensen, 1995 $164,300 $8,000(7) -0- -0- -0- -0-
Senior Vice President, 1994 $163,900 -0- -0- -0- -0- -0-
Finance; Treasurer; and 1993 $157,323 $54,272(8) -0- -0- -0- -0-
Chief Financial Officer
- ------------------------------------------------------------------------------------------------------------------------------------
David L. Fabian, 1995 $125,450 $ 2,600(9) -0- -0- -0- -0-
Senior Vice President, 1994 $125,050 -0- -0- -0- -0- -0-
Corporate Services 1993 $120,847 $16,250(10) -0- -0- -0- -0-
- ------------------------------------------------------------------------------------------------------------------------------------
John F. Olmstead, 1995 $164,300 $ 6,500(11) -0- -0- -0- -0-
Senior Vice President, 1994 $163,900 -0- -0- -0- -0- -0-
Public Equity 1993 $157,323 $40,750(12) -0- -0- -0- -0-
- ------------------------------------------------------------------------------------------------------------------------------------
Robert A. Golden, 1995 $130,093(2) -0- $5,000(13) -0- -0- -0-
Vice President and 1994 N/A (2) N/A (2) N/A (2) N/A (2) N/A (2) N/A (2)
National Sales Manager 1993 N/A (2) N/A (2) N/A (2) N/A (2) N/A (2) N/A (2)
- ------------------------------------------------------------------------------------------------------------------------------------
Richard H. Robinson, 1995 $121,139(3) -0- -0- -0- -0-(18) -0-
Senior Vice President, 1994 $163,900 -0- -0- -0- -0- -0-
Marketing 1993 $157,323 $57,500(14) -0- -0- -0- -0-
====================================================================================================================================
</TABLE>
(1) Includes amounts earned but deferred at the election of the Named
Executive Officer and the accrual of a $6,800 ($6,400 in Fiscal 1994
and $6,400 in Fiscal 1993) premium payment on behalf of each Named
Executive Officer for a universal life insurance policy pursuant to an
insurance benefit plan (the "Insurance Plan"). The amount of the annual
premium allowance under the Insurance Plan is determined by a formula
based on the value of certain benefits relinquished by the Named
Executive Officers under the Company's 401(k) plan, from which such
officers voluntarily withdrew during the fiscal year ended May 31, 1991
in order to prevent the 401(k) plan from being "top heavy" under
applicable Treasury regulations.
(2) Mr. Golden joined the Company in May 17, 1993, and did not become a
Named Executive Officer until January 1995. This amount consists of
$100,116 of base compensation and $29,977 of commissions.
(3) Represents partial year compensation through the date of his
resignation from the Company on January 26, 1995, plus severance
payable to Mr. Robinson pursuant to the terms of the Robinson Severance
Agreement.
(4) Consists of a $25,000 cash bonus paid during Fiscal 1995 for services
rendered during Fiscal 1994 and a $33,000 cash bonus earned during
Fiscal 1995 and paid in the fiscal year ending May 31, 1996 ("Fiscal
1996").
(5) Consists of a $25,000 cash bonus paid during Fiscal 1994 for services
rendered during the second half of Fiscal 1993.
<PAGE>
(6) Includes a $25,000 cash bonus, an award of 25,000 shares of Common
Stock, valued at $12,500, a second award of 25,000 shares of Common
Stock, valued at $23,438, and 5,000 shares of Common Stock, valued at
$3,125, that were awarded under the Company's 1990 Key Employee
Incentive Stock Option Plan (the "1990 Plan") and vested in Fiscal
1993. All stock grants/awards discussed in this table are valued at the
closing price of the Common Stock as reported on the NASDAQ National
Market System ("NASDAQ/NMS") on the award/grant date.
(7) This amount was earned in Fiscal 1995 and paid in Fiscal 1996.
(8) Includes 3,334 shares of Common Stock, valued at $2,084, that were
awarded under the 1990 Plan and vested in Fiscal 1993. Also includes
35,000 shares of Common Stock, valued at $17,500, that were awarded on
August 28, 1992, and an additional 37,000 shares of Common Stock,
valued at $34,688, that were awarded on January 15, 1993, pursuant to
the Crisis Recovery Employee Incentive Bonus Plan, adopted by the
Company in December 1991 (the "1992/1993 Plan"). The 1992/1993 Plan
covered the third and fourth quarters of the fiscal year ended May 31,
1992 ("Fiscal 1992") and the first and second quarters of Fiscal 1993.
The Company did not award any bonuses under the 1992/1993 Plan for the
third and fourth quarters of Fiscal 1992. During Fiscal 1993, as
described above, the Company awarded 72,000 shares of Common Stock
under the 1992/1993 Plan to Mr. Christensen.
(9) This amount was earned in Fiscal 1995 and paid in Fiscal 1996.
(10) Includes 10,000 shares of Common Stock, valued at $5,000, that were
awarded on August 28, 1992, and an additional 12,000 shares of Common
Stock, valued at $11,250, that were awarded on January 15, 1993,
pursuant to the 1992/1993 Plan.
(11) This amount was earned in Fiscal 1995 and paid in Fiscal 1996.
(12) Includes 29,000 shares of Common Stock, valued at $14,500, that were
awarded on August 28, 1992, and an additional 28,000 shares of Common
Stock, valued at $26,250, that were awarded on January 15, 1993,
pursuant to the 1992/1993 Plan.
(13) Includes a $5,000 automobile allowance (i.e., $500 per month), that
began on August 1, 1994.
(14) Includes 40,000 shares of Common Stock, valued at $20,000, that were
awarded on August 28, 1992, and an additional 40,000 shares of Common
Stock, valued at $37,500, that were awarded on January 15, 1993,
pursuant to the 1992/1993 Plan.
(15) Includes a $6,000 automobile allowance and $3,990 of premiums paid for
term life and disability insurance.
(16) Includes a $6,000 automobile allowance and $1,477 of premiums paid for
term life and disability insurance.
(17) Includes a $6,000 automobile allowance, $2,370 of premiums paid for
term life and disability insurance and income tax gross-up payments of
$21,062 relating to grants of Common Stock.
(18) Mr. Robinson exercised stock options to acquire 150,000 shares of
Common Stock in November 1994 and sold the shares received upon
exercise of the stock options along with 80,000 other shares of Common
Stock that he owned to MCC in January 1995 for an aggregate price of
$230,000. See "Option Exercises and Holdings" below for a discussion of
these transactions.
(19) As of October 2, 1995, the Incentive Share program (see footnote (20)
below) was cancelled and replaced with a grant under the Employee Plan
of options to acquire 150,000 shares, all of which are fully vested and
immediately exercisable. See the discussion of the Lacey Employment
Agreement and the Second Amendment thereto in "Compensation Committee
Report" and "Executive Employment Agreements and Severance Agreements"
above.
(20) Through October 1, 1995, Mr. Lacey was entitled to earn up to 500,000
Incentive Shares under the Lacey Employment Agreement, subject to
certain earnout arrangements tied to incremental increases in the
trading price of the Common Stock. As of October 2, 1995, the Incentive
Share program was cancelled (see footnote (19) above). See the
discussion of the Lacey Employment Agreement and the Second Amendment
thereto in "Compensation Committee Report" and "Executive Employment
Agreements and Severance Agreements" above. As of the end of Fiscal
1993, Mr. Lacey had earned 50,000 Incentive Shares and an aggregate
450,000 Incentive Shares remained subject to the aforementioned earnout
arrangements. Mr. Lacey was not entitled to receive, and did not
receive, the 50,000 Incentive Shares earned by reason thereof until
Fiscal 1994, when the Company completed the registration of such shares
with the SEC. During Fiscal 1994, Mr. Lacey sold 25,000 Incentive
<PAGE>
Shares for an aggregate price of $20,236 (net of commissions). See
"Executive Employment Agreements and Severance Agreements" above for a
discussion of the Lacey Employment Agreement and Second Amendment.
Stock Option Grants. The Company granted no stock options to the Named
Executive Officers during Fiscal 1995 except for a grant of stock options
covering 50,000 shares of Common Stock to Mr. Golden on August 26, 1994, at an
exercise price of $.6250 per share.
Option Exercises and Holdings. The following table provides information
with respect to the Named Executive Officers concerning the exercise of options
during Fiscal 1995 and unexercised options held as of the end of Fiscal 1995:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
Value of Unexercised
Number of Unexercised Options In-the-money Options
Number of at Year End at Year End (1)
Shares Acquired Value Realized ----------------------------- ------------------------------
Name On Exercise on Exercise Exercisable Unexercisable Exercisable Unexercisable
---- --------------- -------------- ----------- ------------- ----------- -------------
- ------------------------------------------------------------------------------------------------------------------------------------
Dennis J. Lacey -0- -0- 60,000(3) -0- $9,375 -0-
- ------------------------------------------------------------------------------------------------------------------------------------
John E. Christensen -0- -0- 116,250 18,750 $30,680 $7,102
- ------------------------------------------------------------------------------------------------------------------------------------
David L. Fabian -0- -0- 125,000 -0- $35,156 -0-
- ------------------------------------------------------------------------------------------------------------------------------------
John F. Olmstead -0- -0- 142,140 7,860 $27,456 $2,977
- ------------------------------------------------------------------------------------------------------------------------------------
Robert A. Golden -0- -0- 1,875 55,625 -0- $4,688
- ------------------------------------------------------------------------------------------------------------------------------------
Richard H. 150,000 $150,000 -0- -0- -0- -0-
Robinson (2)
====================================================================================================================================
</TABLE>
(1) The value of unexercised in-the-money options at the end of Fiscal 1995
is based on the closing price of the Common Stock as reported on the
NASDAQ/NMS at May 31, 1995 ($0.71875), less the exercise price per
share of the options.
(2) Mr. Robinson exercised options to acquire 150,000 shares of Common
Stock on November 29, 1994, and then sold the shares along with 80,000
other shares of Common Stock to MCC in January 1995 for an aggregate
purchase price of $230,000. See "Compensation Committee Interlocks and
Insider Participation" above for more information concerning these
transactions.
(3) Pursuant to the Second Amendment, effective as of October 2, 1995, Mr.
Lacey received a grant of options to acquire 150,000 shares of Common
Stock, all of which are fully vested and immediately exercisable. The
table does not include these options which were granted after May 31,
1995.
Long-Term Incentive Plans. The Company awarded no shares or other
compensation under long-term incentive plans to the Named Executive Officers
during Fiscal 1995. See "Summary Compensation Table" for a discussion of
long-term incentive plan awards in years prior to Fiscal 1995.
<PAGE>
Performance Graph. The following graph is a comparison of cumulative
total return on investment among the Company, the NASDAQ Composite Index (the
"NASDAQ Index") and a peer group index consisting of certain independent leasing
companies (the "Peer Group Index"):
[Performance Graph Appears Here]
1990 1991 1992 1993 1994 1995
- --------------------------------------------------------------------------------
NASDAQ $100 $113 $133 $160 $169 $201
- --------------------------------------------------------------------------------
SELECT PEER $100 $124 $81 $85 $112 $148
- --------------------------------------------------------------------------------
CAI $100 $16 $18 $36 $28 $23
- --------------------------------------------------------------------------------
* Assumes $100 Investment on January 1, 1990
* Select Peer Group is comprised of the following independent leasing companies:
Amplicon Chancellor Corp.
Comdisco, Inc. Industrial Funding Corp.
LDI Corp. Sunrise Leasing
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, (the
"Exchange Act") requires the Company's directors, executive officers and persons
who own more than ten percent of a registered class of the Company's equity
securities ("10% Holders") to file with the SEC initial reports of ownership and
reports of changes in ownership of Common Stock and other equity securities of
the Company. Directors, officers and 10% Holders are required by SEC regulations
to furnish the Company with copies of all of the Section 16(a) reports they
file.
<PAGE>
To the Company's knowledge, during Fiscal 1995, all Section 16(a)
filing requirements applicable to its directors, executive officers and 10%
Holders were complied with, except that (1) Robert Golden and Anthony DiPaolo
each failed to timely file their initial Forms 3 and (2) Richard Robinson failed
to timely file the required Form 4 in connection with the sale of his shares of
Common Stock to MCC. See "Compensation Committee Interlocks and Insider
Participation" above for a discussion of this transaction.
CERTAIN TRANSACTIONS
In June 1994, Richard Kazan exercised stock options to acquire (1)
32,750 shares of Common Stock at an exercise price of $1.0625 per share (an
aggregate exercise price of $34,796.88), (2) 58,250 shares of Common Stock at an
exercise price of $.75 per share (an aggregate exercise price of $43,687.50) and
(3) 200,000 shares of Common Stock at an exercise price of $.6188 per share (an
aggregate exercise price of $123,760.00). Mr. Kazan then sold (the "Kazan Sale")
all of his shares of Common Stock (consisting of the 2,041,165 shares of Common
Stock that he already owned plus the 291,000 shares of Common Stock that he
received upon exercise of his stock options (the "Option Shares")) to MCC. MCC
paid (a) the exercise price for the Option Shares directly to the Company (an
aggregate exercise price of $202,244.38) and (b) $2,449,398 directly to Mr.
Kazan for all of his shares of Common Stock.
In connection with the Kazan Sale, Mr. Kazan resigned as a director of
the Company and all of its subsidiaries and affiliates, and the Board elected
Mr. Walker to fill the vacancy on the Board caused by Mr. Kazan's resignation.
In addition, in connection with the Kazan Sale, the Board, after due
deliberation and consideration of all of the relevant facts, (1) waived its
right of first purchase under the Stockholders' Agreement (as defined below) to
purchase Mr. Kazan's shares of Common Stock, (2) approved certain amendments to
the Stockholders' Agreement (which are discussed in more detail below), (3)
entered into a standstill and confidentiality agreement with Mr. Kazan which
prohibits Mr. Kazan from purchasing shares of Common Stock for 48 months
following the closing of the Kazan Sale and obligates Mr. Kazan to maintain the
confidentiality of all Company confidential information in his possession for 24
months following the closing of the Kazan Sale and (4) approved the Kazan Sale
and expressed its intent that the Kazan Sale should not cause MCC to become
subject to any of the restrictions on business combinations with the Company set
forth in Section 203 of the Delaware General Corporation Law.
In connection with the Kazan Sale, Messrs. Jack Durliat, Gary M. Jacobs and
Richard Kazan and the Company amended the Stockholders' Agreement to which each
of them was a party. Pursuant to the Stockholders' Agreement, prior to its being
amended in connection with the Kazan Sale, each of Messrs. Durliat, Jacobs and
Kazan granted the Company and, secondarily, the other two of them a right of
first purchase with respect to the selling stockholder's shares of Common Stock
at current market value upon the occurrence of certain events, including a
proposed sale by one of them of his shares of Common Stock to a third party. In
connection with the Kazan Sale, the Company and Messrs. Durliat and Jacobs
waived their rights to purchase Mr. Kazan's shares of Common Stock in order to
permit Mr. Kazan to complete the Kazan Sale. In addition, in connection with the
Kazan Sale, Mr. Kazan withdrew as a participant to the Stockholders' Agreement,
Mr. Kazan waived his rights to any further benefits under the Stockholders'
Agreement and Messrs. Durliat and Jacobs and the Company released Mr. Kazan from
any further obligations under the Stockholders' Agreement. MCC did not become a
party to the Stockholders' Agreement or succeed to any of Mr. Kazan's former
rights and obligations under the Stockholders' Agreement.
On October 2, 1995, the Company, Messrs. Durliat and Jacobs agreed to
terminate the Stockholders' Agreement. During Fiscal 1995, the Company paid
<PAGE>
premiums of $51,212 and $37,323 with respect to the life insurance policies
covering Messrs. Durliat and Jacobs, respectively. In connection with the Kazan
Sale and as part of the amendments to the Stockholders' Agreement, Mr. Kazan
waived any interest in the life insurance policies maintained by the Company on
his life and declined the Company's offer to purchase such policies from the
Company. The Company cashed in the insurance policies on Mr. Kazan's life in
June 1994 and received $277,545.11 of cash surrender proceeds. The cash
surrender values of the life insurance policies on Messrs. Durliat's and Jacobs'
lives as of May 31, 1995 were $397,401 and $225,368, respectively. As a result
of the termination of the Stockholders' Agreement, the Company is relieved of
all of its obligations thereunder, including the obligation to continue to
maintain life insurance on Messrs. Durliat and Jacobs; however, pursuant to the
terms of the Stockholders' Agreement, Messrs. Durliat and Jacobs have the right
to purchase such insurance policies from the Company for fifty percent (50%) of
their net cash surrender values. Messrs. Durliat and Jacobs have advised the
Company that they intend to purchase their insurance policies. The net cash
surrender values of the policies as of August 31, 1995 was $415,446 for Mr.
Durliat and $239,102 for Mr. Jacobs.
CAII purchases substantially all of its office supplies from CEI. Mr.
Jacobs is an executive officer of CEI. CAII does not presently have, and does
not anticipate that it will enter into in the future, a written purchase/supply
contract with CEI. CAII paid CEI approximately $23,619 in Fiscal 1995 for office
supplies.
The Company believes that the transactions described above and under
the subheading "Compensation Committee Interlocks and Insider Participation"
were on terms no less favorable to the Company than could have been obtained in
arm's length transactions. All transactions or loans between the Company and its
directors, officers, principal stockholders and their affiliates occurring after
June 1, 1994 have been, and similar future transactions or loans will be,
approved in advance by disinterested directors and have been or will be on terms
believed by the Company to be no less favorable to the Company than those which
could be obtained in arm's length transactions.
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of the Record Date, the number of
shares and percentage of the outstanding Common Stock beneficially owned by each
person known by the Company to own more than 5% of the outstanding Common Stock
("Major Stockholders"):
<PAGE>
Beneficial Ownership(4)
---------------------------------
Number of Shares Percent
---------------- -------
James D. Walker (1) 1,536,582.5 15.00%
8180 Greensboro Drive
Suite 920
McLean, Virginia 22102
William H. Buckland (1) 1,529,982.5 14.95%
8180 Greensboro Drive
Suite 920
McLean, Virginia 22102
Jack Durliat 1,350,015 13.20%
18 Borealis Way
Castle Rock, Colorado 80104
Gary M. Jacobs (2) 1,946,607 18.99%
2995 Baseline Road
Boulder, Colorado 80303
- --------------------
(1) MCC is the record owner of 3,046,499 shares of Common Stock. Messrs.
Walker and Buckland, who are otherwise unrelated to each other, each
own 50% of the issued and outstanding stock of MCC. Mr. Walker owns
13,333 vested stock options. Mr. Buckland owns 6,733 vested stock
options. These amounts do not include 20,000 unvested stock options
owned by each of Mr. Walker and Mr. Buckland.
(2) Includes (a) 21,942 shares of Common Stock that Mr. Jacobs is entitled
to acquire upon the exercise of vested stock options and (b) up to
6,000 shares held in the name of Mr. Jacobs' minor children for which
he disclaims beneficial ownership. This does not include 10,000
unvested stock options owned by Mr. Jacobs.
(3) See "Certain Transactions" above for a discussion of the various rights
and obligations of Messrs. Durliat and Jacobs and the Company under the
Stockholders' Agreement.
(4) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within sixty (60) days from the Record Date
upon the exercise of options. The record ownership of each beneficial
owner is determined by assuming that options that are held by such
person and that are exercisable within sixty (60) days from the Record
Date have been exercised. The total outstanding shares used to
calculate each beneficial owner's percentage includes such options.
<PAGE>
The following table sets forth, as of the Record Date, the number of
shares and percentage of the outstanding Common Stock beneficially owned by
directors who are not Major Stockholders, the executive officers and the
directors and executive officers as a group:
Management Ownership(9)
--------------------------------------
Holder Number of Shares Percent
------ ---------------- -------
John E. Christensen (1) 198,252 1.92%
David L. Fabian (2) 147,000 1.42%
James D. Edwards (3) 172,500 1.66%
John F. Olmstead (4) 199,140 1.92%
Dennis J. Lacey (5) 275,000 2.67%
William B. Patton, Jr. (6) 413,000 3.93%
Robert A. Golden (7) 16,250 0.16%
Peter F. Schabarum (8) 152,750 1.48%
Directors and Executive 1,573,892 15.16%
Officers (other than Major
Stockholders) as a Group (8
persons)
- ------------------
(1) Includes 116,250 shares of Common Stock that Mr. Christensen is
entitled to acquire upon the exercise of vested stock options.
(2) Includes 125,000 shares of Common Stock that Mr. Fabian is entitled to
acquire upon the exercise of vested stock options.
(3) Includes 142,500 shares of Common Stock that Mr. Edwards is entitled to
acquire upon the exercise of vested stock options. This does not
include 10,000 unvested stock options owned by Mr. Edwards.
(4) Includes 142,140 shares of Common Stock that Mr. Olmstead is entitled
to acquire upon the exercise of vested stock options.
(5) Includes 60,000 shares of Common Stock that Mr. Lacey is entitled to
acquire upon the exercise of vested stock options.
(6) Includes 278,000 shares of Common Stock that Mr. Patton is entitled to
acquire upon the exercise of vested stock options. This does not
include 10,000 unvested stock options owned by Mr. Patton.
(7) Includes 16,250 shares of Common Stock that Mr. Golden is entitled to
acquire upon the exercise of vested stock options.
<PAGE>
(8) Includes 88,750 shares of Common Stock that Mr. Schabarum is entitled
to acquire upon the exercise of vested stock options. This does not
include 10,000 unvested stock options owned by Mr. Schabarum.
9) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within sixty (60) days from the Record Date
upon the exercise of options. The record ownership of each beneficial
owner is determined by assuming that options that are held by such
person and that are exercisable within sixty (60) days from the Record
Date have ben exercised. The total outstanding shares used to calculate
each beneficial owner's percentage includes such options.
The Company has been advised that its three largest stockholders are
engaged in negotiations concerning the sale of shares of Common Stock by two of
them, Mr. Jacobs, a director, and Mr. Durliat, to the third, MCC, whose
principals, Mr. Buckland and Mr. Walker, are also directors. The number of
shares under consideration for sale would be sufficient to provide MCC, which
currently owns approximately 30% of the issued and outstanding Common Stock,
with more than 50% of the ownership and voting rights of the Company. While no
agreement has yet been executed, the Company has been advised that the parties
have substantially agreed on the consideration to be paid for the shares of
Common Stock, which will include a premium to the current market price. The
three stockholders are in discussions regarding the remaining terms and
conditions of the proposed transaction.
APPROVAL OF THE DIRECTOR PLAN
General
The Director Plan was initially adopted by the Compensation Committee
(the "Committee") on January 26, 1995 (the "Plan Adoption Date"), and ratified
by the Board on January 27, 1995 (the "Plan Ratification Date"). A total of
500,000 shares of Common Stock ("Shares") were reserved for issuance upon the
exercise of stock options granted under the Director Plan ("Options"). As of the
Record Date, Options to acquire 140,066 Shares had been granted under the
Director Plan consisting of 53,400 1995 Director Options, 60,000 1996 Director
Options, 6,666 1995 Executive Committee Options and 20,000 1996 Executive
Committee Options (collectively referred to herein as the "Contingent Options").
Options to acquire 140,066 Shares were outstanding under the Director Plan, no
Options had been exercised, no Options had been forfeited and 359,934 Shares
remained available for Option grants under the Director Plan.
All of the Options granted under the Director Plan since the Plan
Adoption Date (a total of 140,066 Options to the existing six (6) Non-Employee
Directors, who represent all of the directors other than Mr. Lacey) are
contingent upon stockholder approval of the Director Plan. If stockholder
approval of the Director Plan is not obtained, all of the Contingent Options
will terminate retroactively to their grant date.
As of the Record Date, both the high and the low trading prices of the
Company's Common Stock as reported in the NASDAQ/NMS were $0.96875 according to
published sources.
Proposal to Obtain Stockholder Approval of the Director Plan
At the Annual Meeting, the stockholders are being asked to consider and
approve the Director Plan. The effect of the stockholders approving the Director
Plan would be to (1) finalize all of the Contingent Options (a total of 140,066
Options to the six (6) Non-Employee Directors) and (2) permit the Committee to
grant additional Options to acquire Shares under the Director Plan (up to a
total of 500,000 Shares) in the future.
If the stockholders approve the Director Plan, (1) Non-Employee
Directors will cease to be eligible, effective as of the Plan Adoption Date, to
receive grants of stock options under the Employee Plan, (2) the Contingent
Options will become final and (3) the stock options granted to the Non-Employee
Directors under the Employee Plan on January 26, 1995 covering the 53,400 shares
will terminate retroactively to their grant date. Each Non-Employee Director,
other than Mr. Buckland, holds stock options granted to him under the Employee
Plan prior to January 26, 1995 (the "Employee Plan Options"). The approval or
non-approval of the Director Plan by the stockholders will not affect the status
or terms of the Employee Plan Options, which will remain in existence following
such stockholder action.
If the stockholders approve the Director Plan, the Committee intends to
adopt certain technical amendments to the Employee Plan (the "Technical
Amendments") to (a) cause the Non-Employee Directors to cease to be eligible to
receive stock option grants under the Employee Plan (effective upon approval by
the stockholders of the Director Plan) and (b) amend and restate the Employee
Plan to reflect the amendments described in clause (a) and other amendments to
the Employee Plan previously approved by the Committee, the Board and/or the
stockholders. If the stockholders do not approve the Director Plan, (i) the
Technical Amendments related to the Director Plan will not become effective,
with the result that the Non-Employee Directors will continue to be eligible to
receive grants of stock options under the Employee Plan, (ii) the Director Plan
will not take effect and (iii) all of the Contingent Options will terminate
retroactively to their grant date.
Mr. Lacey is ineligible to receive grants under the Director Plan because
he is an employee of the Company. However, Mr. Lacey is eligible to receive, and
will continue to be eligible to receive, grants of stock options under the
Employee Plan, regardless of whether the stockholders approve the Director Plan.
Summary of the Director Plan
The Committee (or, if there is no Compensation Committee, the full
Board) administers the Director Plan and has full power to construe and
interpret the Director Plan. The Committee has full power and authority to
determine, among other things, (1) the grant date and exercise date of each
Option, (2) vesting restrictions, subject to certain limitations discussed
below, applicable to each Option, and (3) cancellation, forfeiture, transfer and
repurchase restrictions, if any, applicable to each Option and the Shares
acquired upon exercise of Options. The terms and conditions of each Option may
be different, and there is no requirement that any Option contain the same terms
and conditions as any other Option, except as otherwise discussed below. Any
decision made or action taken by the Committee arising out of, or in connection
with, interpreting or administering the Director Plan will be final, conclusive
and binding on the Company and the Non-Employee Directors.
Pursuant to the Director Plan, Options may be granted only to
Non-Employee Directors of the Company. A Non-Employee Director is defined in the
Director Plan as any director who is not, and has not in the immediately
<PAGE>
preceding thirty-six (36) months been, an employee of the Company. All of the
members of the Board (except Mr. Lacey) and all of the members of the Committee
are Non-Employee Directors and, therefore, eligible to receive grants of Options
under the Director Plan.
All Options granted under the Director Plan are nonqualified options,
will vest in full no later than the close of business on the last business day
of the fiscal year in which such Options are granted and have a term of up to
ten (10) years, subject to certain early termination provisions (see the
discussion below) if the director ceases to be a director. The Committee has the
authority to impose a longer (but not a shorter) vesting schedule on any Option
granted under the Director Plan.
The purchase price for Shares covered by Options is payable to the
Company in full at the time of, and to the extent of, the exercise of the
Option. The purchase price may be paid (1) in cash, (2) to the extent permitted
by the Committee, in shares held for at least one (1) year (valued at fair
market value ("FMV") on the date of exercise) or (3) a combination of cash and
shares.
Under the Director Plan, Option grants, other than the Contingent
Options, will be made to each Non-Employee Director automatically on the first
day of each fiscal year of the Company. The number of Options granted each
fiscal year is fixed in the Director Plan at (1) 10,000 Option Shares per
Non-Employee Director and (2) an additional 10,000 Option Shares per
Non-Employee Director who serves on the Executive Committee. Persons who become
Non-Employee Directors (or directors who become members of the Executive
Committee) after the first day of a fiscal year will receive a grant of Options
on the date they become Non-Employee Directors (and, if applicable, members of
the Executive Committee). The number of Shares granted to such persons shall be
reduced proportionately to reflect the percentage of the fiscal year (determined
on a daily basis) that such person serves as a Non-Employee Director For
example, if a Non-Employee Director joins the Board on the 75th day of the
fiscal year, he will receive an Option for a number of Shares equal to 10,000,
multiplied by a fraction, the numerator of which is 290 and the denominator of
which is 365). If a Non-Employee Director becomes a member of the Executive
Committee during the fiscal year, the director's additional 10,000 Option grant
for Executive Committee membership will be similarly prorated. Fractional Shares
will be rounded to the nearest whole Share.
All of the 1995 Director Options (covering 53,400 Shares) and the 1995
Executive Committee Options (covering 6,666 Shares) vested on May 31, 1995. All
of the 1996 Director Options (covering 60,000 Shares) and all of the 1996
Executive Committee Options (covering 20,000 Shares) will vest on May 31, 1996,
provided that the recipients continue as directors (and Executive Committee
members, as the case may be) through that date. All of the Contingent Option
agreements provide that (1) the Contingent Options vested as described above,
(2) except as otherwise provided in clause (3) of this sentence, the Company may
(but is not obligated to) repurchase any Shares received upon exercise of a
Contingent Option (at the then FMV of such Shares) upon the termination of a
Non-Employee Director's status as a director of the Company and (3) if a
Non-Employee Director is removed as a director for cause, then such Non-Employee
Director will forfeit all unexercised Options and the Company will have the
right (but not the obligation) to repurchase all Shares acquired upon exercise
of the Contingent Options for an amount equal to the exercise price paid by such
Non-Employee Director to acquire such Shares. The exercise price per Share of
(1) all of the 1995 Director Options is $0.6875 per Share, (2) all of the 1995
Executive Committee Options is $0.953125 per Share, (3) all of the 1996 Director
Options is $0.6875 per Share and (4) all of the 1996 Executive Committee Options
is $0.953125 per Share, in each case the FMV of the Company Common Stock on the
grant date. The term of all of the Contingent Options is ten (10) years from
their grant dates (except as otherwise provided in the Director Plan); provided,
however, that any Contingent Option that is not exercised within five (5) years
after the Non-Employee Director ceases to be a director of the Company will
expire at the end of such five (5) year period. It is anticipated that all
Options granted under the Director Plan in the future will be subject to the
<PAGE>
same or similar restrictions, although there is no requirement in the Director
Plan or legal obligation that such future Option grants contain such
restrictions.
The number of Shares subject to an outstanding Option, as well as the
exercise price thereof, is subject to adjustment from time to time to reflect
certain events, such as stock splits, stock dividends and the like, and to
reflect mergers and similar transactions involving the Company. In addition, in
the event of a merger, consolidation, change in control or other reorganization,
the Committee may, in its discretion, negotiate an agreement with the acquiring
or surviving corporation to assume the outstanding Options under the Director
Plan or to authorize cash payments to the Non-Employee Directors in an amount
equal to the difference between the exercise price of the Options and the FMV of
the Shares subject to such Options.
The federal income tax consequences of the grant and exercise of
Options granted under the Director Plan will affect each Non-Employee Director
differently, depending upon his individual tax situation. Under the current
federal income tax laws, the federal income tax consequences to the Company and
each Non-Employee Director of Options granted or exercised under the Director
Plan are generally as follows:
A Non-Employee Director will not recognize any income, and the Company
will not be entitled to a deduction, on the date of grant of an Option. On the
date of exercise of an Option (the "Exercise Date"), the Non-Employee Director
will recognize ordinary income in an amount equal to the excess of the FMV of
the Shares acquired on the Exercise Date over the Option exercise price (the
"Exercise Price"). However, a Non-Employee Director subject to Section 16(b) of
the Exchange Act will recognize ordinary income in an amount equal to the excess
of the FMV of such Shares on the date the Non-Employee Director may first freely
transfer such Shares (the "Section 16 Termination Date") over the Exercise
Price, unless the Non-Employee Director files an election under Section 83(b) of
the Internal Revenue Code of 1986, as amended (the "Code"), with the Internal
Revenue Service within thirty (30) days after the Exercise Date to be taxed on
the Shares' FMV on the Exercise Date. The Company will be entitled to a
deduction in an amount equal to the ordinary income recognized by the
Non-Employee Director from the exercise of an Option and will be required to
withhold federal income tax based on the amount of such income or,
alternatively, must timely issue a Form 1099 for such income to the Non-Employee
Director.
Upon a sale or exchange of Shares received upon exercise of an Option,
the Non-Employee Director will recognize capital gain or loss (long- or
short-term, depending upon whether the Non-Employee Director has held the Shares
for longer than twelve (12) months) in an amount equal to the difference between
the sales price for the Shares and the Non-Employee Director's tax basis for the
Shares. The Company will not be entitled to a deduction for any capital gain
recognized by the Non-Employee Director from such sale or exchange.
If a Non-Employee Director pays the Exercise Price entirely in cash,
the Non-Employee Director's tax basis in the Shares received will be equal to
the greater of (1) the FMV of the Shares on the Exercise Date (or, if later, the
Section 16 Termination Date), assuming no election has been made under Code
Section 83(b) or (2) the Exercise Price, and the Non-Employee Director's holding
period for the Shares will begin on the day after the date the Non-Employee
Director's tax basis in the Shares is determined.
A Non-Employee Director will recognize no gain or loss on the delivery
of shares already owned, however acquired ("Old Shares"), as payment in whole or
in part of the Exercise Price of an Option. A Non-Employee Director will,
however, recognize ordinary income equal to the FMV on the Exercise Date (or, if
applicable, the Section 16 Termination Date) of the newly-acquired Shares ("New
Shares") which are in excess of the Old Shares, reduced by the amount of cash
paid, if any. The Non-Employee Director's tax basis in, and holding period for,
<PAGE>
the New Shares will be determined as follows: (1) as to the number of New Shares
equal to the number of Old Shares delivered, the Non-Employee Director's tax
basis in, and holding period for, the Old Shares will carryover to the New
Shares on a share-for-share basis, and (2) as to each additional New Share
received, the tax basis for such New Share will be equal to its FMV on the
Exercise Date (or, if later, the Section 16 Termination Date, assuming no Code
Section 83(b) election is made), and the Non-Employee Director's holding period
will begin on the day after the date the Non-Employee Director's tax basis in
the Shares is determined.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board has appointed KPMG Peat Marwick, certified public
accountants, as auditors to examine the financial statements of the Company for
Fiscal 1996 and to perform other appropriate accounting services and is
requesting ratification of such appointment by the stockholders. KPMG Peat
Marwick has served as the Company's auditors since May 3, 1993.
In the event that the stockholders do not ratify the appointment of
KPMG Peat Marwick, the adverse vote will be considered as a direction to the
Board to select other auditors for the next fiscal year. However, because of the
difficulty and expense of making any substitution of auditors after the
beginning of the current fiscal year, it is contemplated that the appointment
for Fiscal 1996 will be permitted to stand unless the Board finds other reasons
for making a change.
It is understood that even if the selection of KPMG Peat Marwick is
ratified, the Board, in its discretion, may direct the appointment of a new
independent accounting firm at any time during the year if the Board feels that
such a change would be in the best interests of the Company and its
stockholders.
A representative of KPMG Peat Marwick is expected to attend the Annual
Meeting and will have an opportunity to make a statement if he desires to do so
and to respond to appropriate questions.
REVERSE STOCK SPLIT
The Board has approved a one-for-two reverse split of the Company's
Common Stock (the "Reverse Split"). Three stockholders of the Company owning
approximately sixty percent (60%) of the outstanding Common Stock have approved
the Reverse Split. Therefore, a vote of the stockholders at the Annual Meeting
is not required. However, an Information Statement describing the details of the
Reverse Split has been or after the mailing date of this Proxy Statement will be
sent to each stockholder of record of the Company. The Company anticipates that
the Reverse Split will become effective during the first two weeks of November
1995. Further information regarding the exchange of old stock certificates for
new stock certificates will be sent to all stockholders at that time.
STOCKHOLDER PROPOSALS
Stockholders may submit proposals on matters appropriate for
stockholder action at the Company's annual meetings consistent with regulations
adopted by the SEC. For such proposals to be considered for inclusion in the
proxy statement and form of proxy relating to the 1996 annual meeting, they must
be received by the Company not later than June 15, 1996. Such proposals should
be addressed to the Company at 7175 West Jefferson Avenue, Suite 4000, Lakewood,
Colorado 80235, Attn: Corporate Secretary.
<PAGE>
OTHER MATTERS
Management does not intend to present, and has no information as of the
date of preparation of this Proxy Statement that others will present, any
business at the Annual Meeting other than business pertaining to matters
required to be set forth in the Notice of Annual Meeting and Proxy Statement.
However, if other matters requiring the vote of the stockholders properly come
before the Annual Meeting, it is the intention of the persons named in the
enclosed proxy to vote the proxies held by them in accordance with their best
judgment on such matters.
CAPITAL ASSOCIATES, INC.
<PAGE>
FORM OF PROXY
CAPITAL ASSOCIATES, INC.
7175 WEST JEFFERSON AVENUE
LAKEWOOD, COLORADO 80235
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 27, 1995
The undersigned hereby appoints each of William B. Patton, Jr. and John
L. Ruppert as proxy and attorney-in-fact for the undersigned with full power of
substitution to vote on behalf of the undersigned at the Company's 1995 Annual
Meeting of Stockholders to be held on October 27, 1995, and at any
adjournment(s) or postponement(s) thereof, all shares of the Common Stock $.008
par value, of the Company standing in the name of the undersigned or which the
undersigned may be entitled to vote as follows:
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED "FOR" ITEMS 1, 2 AND 3. In their discretion, the proxies are
authorized to vote upon such other business as may properly come before the
Annual Meeting or any adjournments or postponements thereof, hereby revoking any
proxy or proxies heretofore given by the undersigned.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
1. ELECTION OF DIRECTORS.....FOR all nominees____ WITHHOLD AUTHORITY____
(except as indicated to vote for all nominees
to the contrary)
Nominees: William H. Buckland, James D. Edwards, Gary M. Jacobs,
Dennis J. Lacey, William B. Patton, Jr., Robert A. Sharpe and
James D. Walker
To withhold authority to vote for any individual nominee, write that
individual's name in the space provided below.
- --------------------------------------------------------------------------------
2. Approval of the Non-Employee Director Stock Option Plan of Capital
Associates, Inc.:
FOR____ AGAINST__ ABSTAIN____
- --------------------------------------------------------------------------------
3. Ratification of KPMG Peat Marwick LLP as auditors for the Company for the
1996 fiscal year:
FOR____ AGAINST__ ABSTAIN____
Please sign exactly as name appears at left:
Dated:
--------------------------------------
--------------------------------------------
Signature
--------------------------------------------
Signature (if held jointly)
When shares are held by joint tenants, both
should sign. When signing as attorney,
executor, administrator, trustee or
guardian, please give full title as such. If
a corporation, please sign in the corporate
name by president or other authorized
officer. If a partnership, please sign in
partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
