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 25, 1996
To the Stockholders of
Capital Associates, Inc.:
The 1996 Annual Meeting of Stockholders (the "Annual Meeting") of
Capital Associates, Inc., a Delaware corporation (the "Company"), will be held
on Friday, October 25, 1996, starting at 8:30 a.m. (local time), in the
Wadsworth Room of the Holiday Inn, 7390 West 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 1996 Stock Option Plan of Capital Associates,
Inc.;
3. to ratify the selection by the Board of Directors (the "Board")
of KPMG Peat Marwick LLP as independent auditors of the Company for the 1997
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 Friday, August 30,
1996, 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, 1996, a Proxy Statement and a proxy card accompany this notice. These
materials are first being sent to stockholders on or about September 16, 1996.
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,
JACQUELYN KILMER
Secretary
Lakewood, Colorado
September 16, 1996
<PAGE>
CAPITAL ASSOCIATES, INC.
7175 West Jefferson Avenue
Lakewood, Colorado 80235
PROXY STATEMENT
Annual Meeting of Stockholders
To Be Held on Friday, October 25, 1996
ON NOVEMBER 2, 1995, CAPITAL ASSOCIATES, INC. (THE "COMPANY"),
EFFECTED A ONE-FOR-TWO REVERSE SPLIT OF ITS COMMON STOCK, $.008 PAR VALUE PER
SHARE (THE "COMMON STOCK") (THE "REVERSE STOCK SPLIT"). SEE "REVERSE STOCK
SPLIT" BELOW. EXCEPT WHERE CLEARLY INDICATED OTHERWISE, ALL SHARE AMOUNTS SET
FORTH HEREIN ARE EXPRESSED ON A POST-REVERSE STOCK SPLIT BASIS.
This Proxy Statement and the accompanying proxy card are being
furnished to the stockholders of 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 1996 Annual Meeting of
Stockholders to be held on Friday, October 25, 1996, 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, 1996
("Fiscal 1996"), are first being mailed to stockholders on or about September
16, 1996. 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 six
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 1996
Stock Option Plan of Capital Associates, Inc. (the "1996 Plan"); (3) ratify KPMG
Peat Marwick LLP as the Company's auditors for the year ending May 31, 1997
("Fiscal 1997"); 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
Common Stock present or represented at the Annual Meeting and constituting a
quorum is required for the election of directors, approval of the 1996 Plan and
ratification of the Company's auditors.
The Board recommends a vote "FOR" (1) the election of the six
nominees for directors of the Company listed below, (2) approval of the 1996
Plan and (3) ratification of KPMG Peat Marwick LLP as the Company's auditors for
Fiscal 1997.
1
<PAGE>
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
Friday, August 30, 1996 (the "Record Date"), will be entitled to notice of, and
to vote at, the Annual Meeting. As of the Record Date, there were 5,001,994
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.
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 six nominees for directors of the Company listed below,
(2) approval of the 1996 Plan and (3) ratification of KPMG Peat Marwick LLP as
the Company's auditors for Fiscal 1997. 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., Robert A. Sharpe II and James D. Walker. All of the directors were elected
at the 1995 annual meeting of stockholders of the Company (the "1995 Annual
Meeting"). Mr. Patton is not standing for reelection at the Annual Meeting.
The Board proposes that the six 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.
2
<PAGE>
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 51 Director 1995
James D. Edwards 56 Director 1987
Gary M. Jacobs 49 Director 1978-1990 and 1994
Dennis J. Lacey 43 Chief Executive Officer, 1991
President and Director
James D. Walker 51 Chairman of the Board and 1994
Director
- ------------------------------------------
Mr. Buckland is Chairman of the Board, Secretary, Treasurer, a
director and 50% stockholder 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 is currently retired. From May 1989 to May 1995, Mr.
Edwards was President, Chief Executive Officer and a director of Tricord
Systems, Inc., a computer hardware and software development firm. 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 Chatcom, Inc.,
Netstar, Inc., and 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
3
<PAGE>
Equipment Leasing III Corp., CAI Equipment Leasing IV Corp., CAI Equipment
Leasing V Corp., CAI Leasing Canada, Ltd., CAI Partners Management Company, CAI
Securities Corporation, CAI Lease Securitization I Corp., CAI-UBK Equipment
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. Sharpe is currently Executive Vice President of Fairchild
Fasteners. From July 1994 through June 1996, Mr. Sharpe was 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, including Senior Vice President in charge of Mid-Atlantic Corporate
Banking relationships for NationsBank Corporation. Mr. Sharpe is also a director
of the Fairchild Corporation.
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
1996 and three (3) special meetings. The Board currently has an Audit and
Finance Committee, Compensation and Operations Committee, Nominating Committee
and Executive Committee. During the period June 1995 through October 1995, the
Company also had a Special Committee which completed its work in October 1995
and terminated thereafter.
Through October 1995, the Audit Committee consisted of Messrs.
Buckland, Jacobs and Peter F. Schabarum (who did not stand for reelection as a
director at the 1995 Annual Meeting). Mr. Schabarum resigned from the Audit
Committee in October 1995. In February 1996, the Board changed the name of the
Audit Committee to the Audit and Finance Committee and appointed Messrs. Lacey
and Sharpe to the Audit and Finance Committee. The Audit and Finance Committee
(and its predecessor, the Audit Committee) held a total of four (4) meetings
during Fiscal 1996. The Audit and Finance 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 and
certain finance matters. Mr. Jacobs currently serves as the Chairman of the
Audit and Finance Committee.
Through February 1996, the Compensation Committee consisted of
Messrs. Edwards, Patton (who is not standing for reelection at the Annual
Meeting) and Walker. In February 1996, the Board changed the name of the
Compensation Committee to the Compensation and Operations Committee and
appointed Mr. Lacey to the Compensation and Operations Committee. The
Compensation and Operations Committee (and its predecessor, the Compensation
Committee) held a total of five (5) meetings during Fiscal 1996. The
Compensation and Operations Committee is responsible for initiating, evaluating
and recommending to the Board amendments to the Company's compensation plans and
overseeing certain operations matters. Mr. Patton (who is not standing for
reelection at the Annual Meeting) currently serves as the Chairman of the
Compensation and Operations Committee.
4
<PAGE>
During Fiscal 1996, the Nominating Committee consisted (and
currently consists) of Messrs. Lacey, Patton (who is not standing for reelection
at the Annual Meeting) and Walker. The Nominating Committee held two (2)
meetings during Fiscal 1996. 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. On August 26,
1996, the Nominating Committee approved and recommended to the Board, and 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. Mr. Walker currently serves as the Chairman of the Nominating
Committee.
During Fiscal 1996, the Executive Committee consisted (and
currently consists) of Messrs. Buckland, Lacey and Walker. The Executive
Committee held a total of twelve (12) meetings during Fiscal 1996. 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.
In June 1995, the Board created a Special Committee to review the
possible acquisition of a financial services company affiliated with MCC. The
Special Committee consisted of Messrs. Buckland, Edwards, Jacobs and Lacey. The
Special Committee held three (3) meetings during Fiscal 1996. The Special
Committee completed its work and terminated in late October 1995.
During Fiscal 1996, all directors (including Mr. Schabarum through
the date of his resignation from the Board and Mr. Sharpe 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
and Finance Committee, Compensation and Operations Committee, Nominating
Committee, Executive Committee and Special 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 in Fiscal 1996 (the "Amended Policy"), effective on and as
of October 26, 1995. Pursuant to the Amended Policy, the Company pays each
director who is not an officer of the Company (a "Non-Employee Director") (1) a
$3,750 quarterly retainer ($5,000 in the case of the Chairman of the Board), (2)
$1,000 for each Board meeting attended, (3) $1,000 for each committee meeting
(other than Executive Committee meetings) attended, (4) consulting fees for
consulting services at a rate approved by the Board in advance of the
commencement of any consulting assignment and (5) all reasonable out-of-pocket
expenses of attending such meetings and performing any consulting services for
the Company. Pursuant to the Amended Policy, the Company paid each Non-Employee
Director who served as a member of the Executive Committee $187,500 for services
rendered during Fiscal 1996.
The following table sets forth the amount of quarterly retainer
fees, meeting fees, Executive Committee fees, consulting fees and total fees
paid to each of the Non-Employee Directors who served as directors at any time
during Fiscal 1996:
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
=========================================================================================================
Directors Quarterly Meeting Executive Consulting Total(1)
- --------- Retainer Fees Committee Fees --------
--------- ------- Fees ----------
---------
- ---------------------------------------------------------------------------------------------------------
William H. Buckland $15,000 $12,000 (6) $135,334 (13) $0 $162,334
- ---------------------------------------------------------------------------------------------------------
James D. Edwards $15,000 $15,000 (7) $0 $0 $ 30,000
- ---------------------------------------------------------------------------------------------------------
Gary M. Jacobs $15,000 $14,000 (8) $0 $0 $ 29,000
- ---------------------------------------------------------------------------------------------------------
William B. Patton, Jr. $17,075 (2) $14,000 (9) $0 $0 $ 31,075
- ---------------------------------------------------------------------------------------------------------
Robert A. Sharpe II $ 8,942 (3) $ 4,000 (10) $0 $0 $ 12,942
- ---------------------------------------------------------------------------------------------------------
James D. Walker $17,926 (4) $17,000 (11) $135,334 (14) $0 $170,260
- ---------------------------------------------------------------------------------------------------------
Peter F. Schabarum $ 6,058 (5) $ 7,000 (12) $0 $0 $ 13,058
=========================================================================================================
</TABLE>
(1) These amounts do not include (a) expense reimbursements paid to the
Non-Employee Directors during Fiscal 1996 and (b) the value of stock
options that were granted to the Non-Employee Directors in Fiscal 1996
and prior fiscal years that vested during Fiscal 1996.
(2) Mr. Patton elected to defer receipt of all of these fees beyond the
close of Fiscal 1996. Mr. Patton resigned as Chairman of the Board
effective October 31, 1995, and his quarterly retainer decreased to
$3,750 per quarter starting with the third quarter of Fiscal 1996. Mr.
Patton's quarterly retainer for the second quarter of Fiscal 1996 was
$4,574 (the prorated amount based on the number of days that he served
as Chairman of the Board during the second quarter of Fiscal 1996).
(3) This is the prorated amount of the quarterly retainers for Fiscal 1996,
commencing on October 27, 1995, the date Mr. Sharpe was elected to the
Board.
(4) Mr. Walker's quarterly retainer increased to $5,000 per quarter
starting with the third quarter of Fiscal 1996. Mr. Walker's quarterly
retainer for the second quarter of Fiscal 1996 was $4,176 (the prorated
amount based on the number of days that he served as Chairman of the
Board during the second quarter of Fiscal 1996). At Mr. Walker's
instructions, the Company paid (a) $4,000 of accrued Board fees
otherwise payable to Mr. Walker to MCC World Aviation, a corporation
owned 50% by Mr. Buckland and 50% by Mr. Walker ("MCC Aviation") and
(b) $2,926 (of the $17,926) of quarterly retainer amounts payable to
Mr. Walker to MCC Aviation.
(5) This is the prorated amount payable to Mr. Schabarum through October
26, 1995, the date he ceased to be a director.
(6) Consists of $1,000 per meeting for (a) three (3) special Board
meetings, (b) four (4) regular Board meetings and (c) five (5)
committee meetings.
(7) Consists of $1,000 per meeting for (a) three (3) special Board
meetings, (b) four (4) regular Board meetings and (c) eight (8)
committee meetings.
(8) Consists of $1,000 per meeting for (a) three (3) special Board
meetings, (b) four (4) regular Board meetings and (c) seven (7)
committee meetings. Mr. Jacobs elected to defer receipt of all of these
fees beyond the close of Fiscal 1996.
(9) Consists of $1,000 per meeting for (a) three (3) special Board
meetings, (b) four (4) regular Board meetings and (c) seven (7)
committee meetings. Mr. Patton elected to defer receipt of all of these
fees beyond the close of Fiscal 1996.
(10) Consists of $1,000 per meeting for (a) two (2) regular Board meetings
and (b) two (2) committee meetings. Mr. Sharpe elected to defer receipt
of $2,000 of these fees beyond the close of Fiscal 1996.
(11) Consists of $1,000 per meeting for (a) three (3) special Board
meetings, (b) four (4) regular Board meetings, (c) six (6) committee
meetings and (d) $4,000 of accrued fees earned in the fiscal year ended
May 31, 1995 ("Fiscal 1995").
6
<PAGE>
(12) Consists of $1,000 per meeting for (a) three (3) special Board
meetings, (b) two (2) regular Board meetings and (c) two (2) committee
meetings.
(13) Consists of (a) $5,667 of retainer and meeting fees accrued from Fiscal
1995 and (b) $129,667 of retainer and meeting fees for Fiscal 1996.
(14) Consists of (a) $5,667 of retainer and meeting fees accrued from Fiscal
1995 and (b) $129,667 of retainer and meeting fees for Fiscal 1996.
On June 1, 1995, the Company granted to each of the Non-Employee
Directors (including Mr. Schabarum, but not including Mr. Sharpe who did not
become a director until October 27, 1995) an option under the Non-Employee
Director Stock Option Plan of Capital Associates, Inc. (the "Non-Employee
Director Plan"), to acquire 5,000 shares of Common Stock at an exercise price of
$1.375 per share (the "1996 Director Options"), subject to the stockholders of
the Company approving the Non-Employee Director Plan, which they did at the 1995
Annual Meeting. All of the 1996 Director Options (other than Mr. Schabarum's
1996 Director Options which terminated upon his resignation from the Board)
vested in full on May 31, 1996. Mr. Lacey, a director and employee of the
Company, is not eligible to participate in the Non-Employee Director Plan. On
October 27, 1995, the Company granted to Mr. Sharpe a 1996 Director Option under
the Non-Employee Director Plan to acquire 2,959 shares of Common Stock at an
exercise price of $1.75 per share, which vested in full on May 31, 1996.
On September 18, 1995, the Company granted to each of Messrs.
Buckland and Walker (the two Non-Employee Director members of the Executive
Committee) (1) a stock option under the Non-Employee Director Plan to acquire
1,666.5 shares of Common Stock at an exercise price of $1.9063 per share (the
"1995 Executive Committee Options"), which vested in full on the grant date, and
(2) a stock option under the Non- Employee Director Plan to acquire an
additional 5,000 shares of Common Stock at an exercise price of $1.9063 per
share (the "1996 Executive Committee Options"), which vested in full on May 31,
1996. The grant of the 1995 and 1996 Executive Committee Options were subject to
the stockholders of the Company approving the Non-Employee Director Plan, which
they did at the 1995 Annual Meeting.
COMPENSATION AND OPERATIONS COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. Edwards, Patton
(who is not standing for reelection at the Annual Meeting) and Walker. In
February 1996, the Board changed the name of the Compensation Committee to the
Compensation and Operations Committee. Messrs. Edwards, Patton and Walker are
directors of the Company. However, none of the three of them is, was or ever has
been an officer or employee of the Company. Messrs. Edwards, Patton and Walker
also are directors of CAII, Mr. Walker is a director, officer and 50%
stockholder of MCC, which owns of record 2,138,369 shares of Common Stock and
has the right to purchase from Messrs. Durliat and Jacobs (and holds proxies
from Messrs. Durliat and Jacobs to vote) an additional 695,000 shares of Common
Stock. Mr. Patton is a director of Media Vision and Prolog Corporation.
CAII and MCC 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 no remarketing fees to MCC in Fiscal 1996.
7
<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 43 Chief Executive Officer; President; and
Director
John E. Christensen 48 Senior Vice President, Finance; Chief
Financial Officer; and Treasurer
David L. Fabian 48 Senior Vice President, Corporate Services
John F. Olmstead 52 Senior Vice President, Public Equity
Robert A. Golden 50 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 Equipment 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
and CAI Leasing Canada, Ltd.
8
<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 AND OPERATIONS COMMITTEE REPORT. The Compensation and
Operations Committee is composed currently of Messrs. Edwards, Patton (who is
not standing for reelection at the Annual Meeting) and Walker, all of whom are
Non-Employee Directors, and 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 and Operations 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 any existing employee stock option plan (and it is anticipated
that any stock options granted under the 1996 Plan) will meet the requirement of
being performance based, the Compensation and Operations 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 1996 executive officer 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 and
Operations Committee also relied, in part, on other subjective considerations in
setting executive officer compensation levels based on the Company's overall
performance goals.
In October 1995, the Compensation and Operations Committee
approved the Capital Associates Cash Incentive Bonus Plan for the Fiscal Year
Ending May 31, 1996 (the "1996 Cash Bonus Plan"). The maximum amount of the
bonus pool for senior executive officers (including the Chief Executive Officer)
was $479,000, which vested in increasing percentages (i.e., 15%, another 20%,
another 30% and another 35% of the aggregate bonus pool) as the Company
9
<PAGE>
achieved certain earnings targets. Each executive officer's share of the bonus
pool amount was based, in part, on the Company achieving certain earnings
targets and, in part, on the officer achieving his personal performance targets
(which were identified in an attachment to the 1996 Cash Bonus Plan). In setting
the earnings targets, the personal performance targets and the vesting
percentages in the 1996 Cash Bonus Plan, the Compensation and Operations
Committee sought to motivate management to increase operating earnings in a
responsible manner and with a view to establishing a basis for sustained growth
of the Company's stock price all in the context of (1) the Company's performance
against its Fiscal 1996 business plan, (2) the percentage of earnings from
ordinary operations as opposed to extraordinary or non-recurring transactions
and (3) the performance of the Company's Common Stock during Fiscal 1996. Based
on the foregoing, and in recognition of (a) the significant improvement in the
Company's net income from operations (adjusted for one-time items in Fiscal
1996) as compared to Fiscal 1995 (despite certain one-time charges that were
taken during Fiscal 1996) and (b) the increase in the stock price, the
Compensation and Operations Committee approved a bonus amount of $150,500 for
all of the senior officers, $50,000 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.
The Compensation and Operations Committee reviewed the Common
Stock and stock option ownership of the Company's executives at the beginning of
Fiscal 1996. Based on that review, the Compensation and Operations Committee
determined that increases in the price of the Common Stock during Fiscal 1996,
assuming the Company met its financial goals in Fiscal 1996, 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 1996, and, therefore, did not make any
additional Common Stock awards or stock option grants to the executive officers
during Fiscal 1996, except for the grant, in October 1995, of options to acquire
75,000 shares of Common Stock, to Mr. Lacey in accordance with the terms of the
Second Amendment to Mr. Lacey's Employment Agreement as discussed in detail
below in "Executive Employment Agreements". 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.
Effective as of May 31, 1996, the Company repurchased certain
stock options from employees of the Company. See "Summary Compensation Table"
below for a discussion of the stock option repurchases from the Named Executive
Officers and "Stock Option Repurchase Program" below for more information
concerning this program.
Dennis J. Lacey is the Company's President and Chief Executive
Officer. Mr. Lacey's compensation during Fiscal 1996 was governed by the terms
of the Lacey Employment Agreement, which is described in detail in "Executive
Employment Agreements" below. The Compensation and Operations Committee (which
set Mr. Lacey's Fiscal 1996 compensation prior to the date on which Mr. Lacey
became a member of the Compensation and Operations Committee) based Mr. Lacey's
Fiscal 1996 compensation on both quantitative and qualitative factors directly
linked to the Company's performance, achievement of short-and long-term
objectives, the enhancement of stockholder value and, in the case of Mr. Lacey's
Fiscal 1996 cash bonus, the factors set forth in the 1996 Cash Bonus Plan.
During Fiscal 1996, Mr. Lacey's annual base salary was $225,000 through October
1, 1995, which was, effective October 2, 1995, increased to $250,000 (up from
$225,000 for all of Fiscal 1995 and $214,000 for all of the fiscal year ended
May 31, 1994 ("Fiscal 1994")). Mr. Lacey's base salary in Fiscal 1996 was within
the range of salaries paid to chief executive officers of other independent
leasing companies. Mr. Lacey also received a $33,000 cash bonus in Fiscal 1996
10
<PAGE>
for services performed during Fiscal 1995. See "Summary Compensation Table"
below for a discussion of the bonus that was accrued for Mr. Lacey in Fiscal
1996 and paid to him in Fiscal 1997. The Compensation and Operations Committee
believes that the amount of the cash bonus paid to Mr. Lacey during Fiscal 1996
was reasonable in relation to the financial performance of the Company during
Fiscal 1995. In addition, prior to October 2, 1995 and pursuant to the terms of
the Lacey Employment Agreement, as defined below, Mr. Lacey was entitled to
receive shares of Common Stock when and if the trading price of the Common Stock
reached certain levels (the "Incentive Shares"). The Incentive Shares tied Mr.
Lacey's compensation to the long-term performance of the Company and to the
interests of the Company's stockholders. Effective October 2, 1995, however,
pursuant to the terms of the Second Amendment, as defined below, Mr. Lacey's
right to receive any unearned Incentive Shares was canceled.
The Compensation and Operations 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 and Operations Committee
James D. Edwards
Dennis J. Lacey
William B. Patton, Jr.
James D. Walker
May 31, 1996
EXECUTIVE EMPLOYMENT AGREEMENTS.
THE LACEY EMPLOYMENT AGREEMENT. During Fiscal 1996, 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 and Mr. Lacey was entitled
to receive up to 500,000 Incentive Shares of Common Stock (on a pre-Reverse
Stock Split basis) in 50,000 shares increments (on a pre-Reverse Stock Split
basis) 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 (on a pre-Reverse Stock Split basis) and an additional 25,000 shares
of Common Stock (on a pre-Reverse Stock Split basis) for each subsequent $.33
11
<PAGE>
increase (for a similar ten-day period) in the reported trading price of the
Common Stock (on a pre-Reverse Stock Split basis) between $4.00 and $5.00. If a
change of control of the Company (as defined in the Lacey Employment Agreement,
as amended by the Second Amendment) 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").
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") whereby, effective as of October 2, 1995: (1)
the term of the Lacey Employment Agreement was 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 increased to $250,000,
(3) Mr. Lacey's right to receive the unearned 450,000 Incentive Shares (on a
pre-Reverse Stock Split basis) under the Lacey Employment Agreement was
canceled, (4) Mr. Lacey was granted options under the Amended and Restated Stock
Option Plan of Capital Associates, Inc. to acquire 75,000 shares of Common Stock
at an exercise price of $1.6875 per share, all of which were fully vested and
immediately exercisable on the date of grant and (5) the change of control
provisions in the Lacey Employment Agreement were eliminated with respect to any
change of control effected by MCC and/or its affiliates.
Pursuant to the Lacey Employment Agreement, as amended by the
Second Amendment, 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 paid 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 and Operations 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 1997, Mr. Lacey received a cash bonus of $50,000 for
services rendered to the Company during Fiscal 1996. During Fiscal 1996, Mr.
Lacey received a cash bonus of $33,000 for services rendered to the Company
during Fiscal 1995. Mr. Lacey did not earn any Incentive Shares during Fiscal
1996 prior to their cancellation. During Fiscal 1996, the Company paid $3,193 of
premiums for a term life and long-term disability insurance policy owned by Mr.
Lacey and provided a $6,000 car allowance to Mr. Lacey in Fiscal 1996. During
Fiscal 1996, Mr. Lacey did not sell any Incentive Shares prior to their
termination; however Mr. Lacey did sell options to acquire 78,750 shares of
Common Stock to the Company for an aggregate price of $76,922 pursuant to the
Stock Option Repurchase Program. See "Summary Compensation Table, Note 4" for a
discussion of the bonus that was accrued for Mr. Lacey in Fiscal 1996 and paid
to him in Fiscal 1997.
12
<PAGE>
SUMMARY COMPENSATION TABLE. The following table provides certain
summary information for Fiscal 1996, Fiscal 1995 and Fiscal 1994, concerning
compensation awarded or paid to, or earned by, the Company's Chief Executive
Officer and each of the four other executive officers of the Company whose
aggregate base salary and bonus for Fiscal 1996 exceeded $100,000 (collectively
referred to herein as the "Named Executive Officers"):
<TABLE>
<CAPTION>
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
----------------- ---- --------- ----- ------------ ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
Dennis J. Lacey, 1996 $252,362 $50,000(4) $9,193(13) -0-(18) 75,000(18) $76,922(19)
Chief Executive Officer; 1995 $228,584 $33,000(5) $9,990(14) -0- -0- -0-
President and Director 1994 $220,400 $25,000(6) $7,477(15) -0- -0- -0-
- ------------------------------------------------------------------------------------------------------------------------------
John E. Christensen, 1996 $164,300 $10,000(7) -0- -0- -0- $83,766(20)
Senior Vice President, 1995 $164,300 $ 8,000(8) -0- -0- -0- -0-
Finance; Treasurer; and 1994 $163,900 -0- -0- -0- -0- -0-
Chief Financial Officer
- ------------------------------------------------------------------------------------------------------------------------------
David L. Fabian, 1996 $125,459 $ 2,500(9) -0- -0- -0- $73,828(21)
Senior Vice President, 1995 $125,450 $ 2,600(10) -0- -0- -0- -0-
Corporate Services 1994 $125,050 -0- -0- -0- -0- -0-
- ------------------------------------------------------------------------------------------------------------------------------
John F. Olmstead, 1996 $164,300 $30,000(11) -0- -0- -0- $81,527(22)
Senior Vice President, 1995 $164,300 $ 6,500(12) -0- -0- -0- -0-
Public Equity 1994 $163,900 -0- -0- -0- -0- -0-
- ------------------------------------------------------------------------------------------------------------------------------
Robert A. Golden, 1996 $165,362(2) -0- $ 6,000(16) -0- -0- $18,000(23)
Vice President and 1995 $130,093(3) -0- $ 5,000(17) -0- -0- -0-
National Sales Manager 1994 N/A (3) N/A (3) N/A (3) N/A (3) N/A (3) N/A (3)
==============================================================================================================================
</TABLE>
(1) Includes amounts earned but deferred at the election of the Named
Executive Officer and the accrual of a $6,800 ($6,800 in Fiscal 1995
and $6,400 in Fiscal 1994) 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 Company's 401(k) plan from being "top heavy"
under applicable Treasury regulations.
(2) Includes $29,799 of relocation expenses that were reimbursed in Fiscal
1996.
(3) Mr. Golden joined the Company on May 17, 1993, and did not become a
Named Executive Officer until January 1995. The $130,093 consists
$100,116 of base compensation and $29,977 of commissions.
(4) Consists of a $50,000 cash bonus earned in Fiscal 1996 but not paid
until Fiscal 1997, but does not include a $33,000 cash bonus earned
during Fiscal 1995 and paid in Fiscal 1996.
(5) Consists of a $33,000 cash bonus earned in Fiscal 1995 but not paid
until Fiscal 1996, but does not include a $25,000 cash bonus earned
during Fiscal 1994 and paid in Fiscal 1995.
(6) Consists of a $25,000 cash bonus earned in Fiscal 1994 but not paid
until Fiscal 1995, but does not include a $25,000 cash bonus earned
during the fiscal year ended May 31, 1993 ("Fiscal 1993") and paid in
Fiscal 1994.
13
<PAGE>
(7) Consists of a $10,000 cash bonus earned in Fiscal 1996 but not paid
until Fiscal 1997, but does not include an $8,000 cash bonus earned
during Fiscal 1995 and paid in Fiscal 1996.
(8) Consists of an $8,000 cash bonus earned in Fiscal 1995 but not paid
until Fiscal 1996.
(9) Consists of a $2,500 cash bonus earned in Fiscal 1996 but not paid
until Fiscal 1997, but does not include a $2,600 cash bonus earned
during Fiscal 1995 and paid in Fiscal 1996.
(10) Consists of a $2,600 cash bonus earned in Fiscal 1995 but not paid
until Fiscal 1996.
(11) Consists of a $30,000 cash bonus earned in Fiscal 1996 but not paid
until Fiscal 1997, but does not include a $6,500 cash bonus earned
during Fiscal 1995 and paid in Fiscal 1996.
(12) Consists of a $6,500 cash bonus earned in Fiscal 1995 but not paid
until Fiscal 1996.
(13) Includes a $6,000 automobile allowance and $3,193 of premiums paid for
term life and disability insurance.
(14) Includes a $6,000 automobile allowance and $3,990 of premiums paid for
term life and disability insurance.
(15) Includes a $6,000 automobile allowance and $1,477 of premiums paid for
term life and disability insurance.
(16) Includes a $6,000 automobile allowance in Fiscal 1996 ($5,000 in Fiscal
1995).
(17) Includes a $5,000 automobile allowance in Fiscal 1995.
(18) Through October 1, 1995, Mr. Lacey was entitled to earn up to 500,000
Incentive Shares (on a pre-Reverse Stock Split basis) 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 canceled and Mr. Lacey
received an option to acquire 75,000 shares of Common Stock (which
option was fully vested on the date of grant) at an exercise price of
$1.6875 per share. See the discussion of the Lacey Employment Agreement
and the Second Amendment in "Compensation and Operations Committee
Report" and "Executive Employment Agreements" above. As of the end of
Fiscal 1993, Mr. Lacey had earned 50,000 Incentive Shares (on a
pre-Reverse Stock Split basis) and an aggregate 450,000 Incentive
Shares (on a pre-Reverse Stock Split basis) remained subject to the
aforementioned earnout arrangements. Mr. Lacey was not entitled to
receive, and did not receive, the 50,000 Incentive Shares (on a
pre-Reverse Stock Split basis) 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 Shares (on
a pre- Reverse Stock Split basis) for an aggregate price of $20,236
(net of commissions). See "Executive Employment Agreements" above for a
discussion of the Lacey Employment Agreement and Second Amendment.
(19) In Fiscal 1997, Mr. Lacey received $76,922 of proceeds (net of the
option exercise prices) from the sale of options to acquire 78,750
shares of Common Stock to the Company pursuant to the Stock Option
Repurchase Program.
(20) In Fiscal 1997, Mr. Christensen received $83,766 of proceeds (net of
the option exercise prices) from the sale of options to acquire 50,625
shares of Common Stock to the Company pursuant to the Stock Option
Repurchase Program.
(21) In Fiscal 1997, Mr. Fabian received $73,828 of proceeds (net of the
option exercise prices) from the sale of options to acquire 46,875
shares of Common Stock to the Company pursuant to the Stock Option
Repurchase Program.
(22) In Fiscal 1997, Mr. Olmstead received $81,527 of proceeds (net of the
option exercise prices) from the sale of options to acquire 56,250
shares of Common Stock to the Company pursuant to the Stock Option
Repurchase Program.
(23) In Fiscal 1997, Mr. Golden received $18,000 of proceeds (net of the
option exercise prices) from the sale of options to acquire 15,000
shares of Common Stock to the Company pursuant to the Stock Option
Repurchase Program.
14
<PAGE>
STOCK OPTION GRANTS. The Company granted no stock options to the
Named Executive Officers during Fiscal 1996, except for a grant of stock options
covering 75,000 shares of Common Stock to Mr. Lacey on October 2, 1995, at an
exercise price of $1.6875 per share pursuant to the Second Amendment in exchange
for the surrender by Mr. Lacey of the right to receive unearned Incentive Shares
granted to him under the Lacey Employment Agreement. See "Executive Employment
Agreements" and Note 18 to the "Summary Compensation Table" above. See "Stock
Option Repurchase Program" below for a discussion of the stock option repurchase
program implemented by the Company during Fiscal 1996.
OPTION EXERCISES AND HOLDINGS. The following table provides
information with respect to the Named Executive Officers concerning the exercise
of stock options during Fiscal 1995 and unexercised stock options held as of the
end of Fiscal 1996 (after giving effect to sales of stock options to the Company
pursuant to the Stock Option Repurchase Program discussed below):
<TABLE>
<CAPTION>
====================================================================================================================================
Value of Unexercised
Number of Unexercised Options In-the-money Options
Number of at Year End at Year End (2)
Shares Acquired Value Realized ----------------------------- --------------------------------
Name On Exercise(1) on Exercise (1) Exercisable Unexercisable Exercisable Unexercisable
---- --------------- --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
Dennis J. Lacey -0- -0- 26,250 -0- $34,453 -0-
- ---------------------------------------------------------------------------------------------------------------------------------
John E. Christensen -0- -0- 16,875 -0- $31,641 -0-
- ---------------------------------------------------------------------------------------------------------------------------------
David L. Fabian -0- -0- 15,625 -0- $33,203 -0-
- ---------------------------------------------------------------------------------------------------------------------------------
John F. Olmstead -0- -0- 18,750 -0- $35,156 -0-
- ---------------------------------------------------------------------------------------------------------------------------------
Robert A. Golden -0- -0- 8,125 5,625 $12,344 $7,974
=================================================================================================================================
</TABLE>
(1) See "Stock Option Repurchase Program" below and "Executive Officers -
Summary Compensation Table" above for information concerning sales of
stock options by Named Executive Officers to the Company during Fiscal
1996.
(2) The value of unexercised in-the-money options at the end of Fiscal 1996
is based on the closing price of the Common Stock as reported on the
NASDAQ/NMS at May 31, 1996 ($3.00 per share), less the exercise price
per share of the options.
LONG-TERM INCENTIVE PLANS. The Company awarded no shares or other
compensation under long-term incentive plans to the Named Executive Officers
during Fiscal 1996, except for a grant of stock options covering 75,000 shares
of Common Stock to Mr. Lacey on October 2, 1995, at an exercise price of $1.6875
per share pursuant to the Second Amendment in exchange for the surrender by Mr.
Lacey of the right to receive unearned Incentive Shares granted to him under the
Lacey Employment Agreement. See "Executive Employment Agreements" and Note 18 to
the "Summary Compensation Table" above. See "Summary Compensation Table" above
for a discussion of long-term incentive plan awards in years prior to Fiscal
1996. See also "Stock Option Repurchase Program" below for information
concerning sales of stock options by Named Executive Officers to the Company
during Fiscal 1996.
15
<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]
1991 1992 1993 1994 1995 1996
- --------------------------------------------------------------------------------
NASDAQ $100 $117 $141 $149 $177 $257
- --------------------------------------------------------------------------------
SELECT PEER $100 $ 64 $ 70 $ 96 $129 $175
- --------------------------------------------------------------------------------
CAI $100 $112 $225 $175 $144 $300
- --------------------------------------------------------------------------------
* Assumes $100 Investment on January 1991
* Select Peer Group is comprised of the following independent leasing
companies:*
Amplicon Industrial Funding Corp.
Comdisco, Inc. Sunrise Leasing
LDI Corp.
* Chancellor Corp., which was included in the Fiscal 1995 Select Peer
Group, is not included in the Fiscal 1996 Select Peer Group because it
was delisted by NASDAQ during Fiscal 1996.
16
<PAGE>
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.
To the Company's knowledge, during Fiscal 1996, all Section 16(a)
filing requirements applicable to its directors, executive officers and 10%
Holders were complied with.
CERTAIN TRANSACTIONS
On October 2, 1995, the Company, Mr. Jack Durliat and Mr. Jacobs
terminated the Stockholders' Agreement to which they were parties. During Fiscal
1996, the Company paid premiums of $17,790 and $14,355 with respect to the life
insurance policies covering Messrs. Durliat and Jacobs, respectively (which
policies the Company was required to maintain by the terms of the Stockholders'
Agreement). As a result of the termination of the Stockholders' Agreement, the
Company was relieved of all of its obligations thereunder, including the
obligation to continue to maintain life insurance on Messrs. Durliat and Jacobs.
Pursuant to their rights under the Stockholders' Agreement, Messrs. Durliat and
Jacobs purchased such insurance policies from the Company for fifty percent
(50%) of their net cash surrender values (i.e., $218,933 in Mr. Durliat's case
and $128,164 in Mr. Jacobs' case).
On November 10, 1995, MCC acquired voting control of the Company
through a private stock purchase transaction and the delivery to MCC of proxies
for shares of Common Stock subject to purchase in the future pursuant to
agreements (the "Stock Purchase Agreements") executed by and among MCC, Messrs.
Durliat and Jacobs, who, at that time, were two of the Company's largest
stockholders. Pursuant to these Stock Purchase Agreements, MCC acquired 65,120
shares of Common Stock for a purchase price of $3.30 per share, or an aggregate
amount of $214,896. In addition, MCC acquired (1) the right to purchase an
additional 1,245,000 shares of Common Stock in the future for an aggregate
purchase price of approximately $4.5 million and (2) proxies from Messrs.
Durliat and Jacobs to vote such shares, pending their purchase. On January 9 and
10, 1996, pursuant to one of the Stock Purchase Agreements, MCC completed the
purchase of 550,000 shares of Common Stock for a purchase price of $3.30 per
share, or an aggregate amount of $1,815,000.
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 $31,708 in Fiscal
1996 for office supplies.
The Company believes that the transactions described above and
under the subheading "Compensation and Operations 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
17
<PAGE>
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"):
Beneficial Ownership(4)
----------------------------------------
Number of Shares Percent
---------------- -------
James D. Walker (1) 1,428,352 28.49%
8180 Greensboro Drive
Suite 920
McLean, Virginia 22102
William H. Buckland (1) 1,425,052 28.44%
8180 Greensboro Drive
Suite 920
McLean, Virginia 22102
Jack Durliat (2) -0- -0-
18 Borealis Way
Castle Rock, Colorado 80104
Gary M. Jacobs (3) 373,412 7.44%
2995 Baseline Road
Boulder, Colorado 80303
- --------------------
(1) MCC is the record owner of 2,138,369 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
11,667 vested stock options. Mr. Buckland owns 8,367 vested stock
options. These amounts do not include 10,000 unvested stock options
owned by each of Mr. Walker and Mr. Buckland. These amounts include
360,007 shares and 334,993 shares of Common Stock for which MCC holds
proxies from Mr. Durliat and Mr. Jacobs, respectively. See "Certain
Transactions" above.
(2) Mr. Durliat is the record owner of 360,007 shares of Common Stock that
are subject to proxies granted to MCC for which Mr. Durliat disclaims
beneficial ownership. See "Certain Transactions" above.
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(3) Includes (a) 15,971 shares of Common Stock that Mr. Jacobs is entitled
to acquire upon the exercise of vested stock options, (b) 13,000 shares
held in the name of Mr. Jacobs' minor children for which he disclaims
beneficial ownership and (c) another 344,441 shares held of record. See
"Certain Transactions" above. This does not include 5,000 unvested
stock options owned by Mr. Jacobs and 334,993 shares held of record by
Mr. Jacobs that are subject to proxies granted to MCC and for which Mr.
Jacobs disclaims beneficial ownership.
(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 stock 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 stock
options.
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) 57,876 1.15%
David L. Fabian (2) 15,625 .31%
James D. Edwards (3) 91,250 1.80%
John F. Olmstead (4) 47,250 .94%
Dennis J. Lacey (5) 133,750 2.66%
William B. Patton, Jr. (6) 149,000 2.90%
Robert A. Golden (7) 11,874 .24%
Robert A. Sharpe II (8) 2,959 .06%
Directors and Executive 572,084 10.06%
Officers (other than Major
Stockholders) as a Group (8
persons)
- --------------------------
(1) Includes 16,875 shares of Common Stock that Mr. Christensen is entitled
to acquire upon the exercise of vested stock options.
(2) Includes 15,625 shares of Common Stock that Mr. Fabian is entitled to
acquire upon the exercise of vested stock options.
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(3) Includes 76,250 shares of Common Stock that Mr. Edwards is entitled to
acquire upon the exercise of vested stock options. This does not
include 5,000 unvested stock options owned by Mr. Edwards.
(4) Includes 18,750 shares of Common Stock that Mr. Olmstead is entitled to
acquire upon the exercise of vested stock options.
(5) Includes 26,250 shares of Common Stock that Mr. Lacey is entitled to
acquire upon the exercise of vested stock options.
(6) Includes 144,000 shares of Common Stock that Mr. Patton is entitled to
acquire upon the exercise of vested stock options. This does not
include 5,000 unvested stock options owned by Mr. Patton.
(7) Includes 11,874 shares of Common Stock (including 3,749 shares that
vested after the end of Fiscal 1996 and before the Record Date) that
Mr. Golden is entitled to acquire upon the exercise of vested stock
options.
(8) Includes 2,959 shares of Common Stock that Mr. Sharpe is entitled to
acquire upon the exercise of vested stock options. This does not
include 5,000 unvested stock options owned by Mr. Sharpe.
(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 been exercised. The total outstanding shares used to
calculate each beneficial owner's percentage includes such options.
APPROVAL OF THE 1996 STOCK OPTION PLAN
OF CAPITAL ASSOCIATES, INC.
GENERAL
The Second Amended and Restated Stock Option Plan of Capital
Associates, Inc. (the "Existing Plan") will expire by its terms on October 19,
1996. The Board believes that, in order to continue to be able to attract
qualified employees to the Company and provide incentive to its current
employees, it is necessary to continue to have the ability to grant options to
such employees to purchase Common Stock. For this reason, on August 27, 1996,
the Board adopted the 1996 Plan. The number of shares ("Shares") reserved for
issuance upon the exercise of stock options granted under the 1996 Plan
("Options") is 500,000. As of the Record Date, no stock options had been granted
under the 1996 Plan. At the Annual Meeting, the stockholders of the Company are
being asked to approve the 1996 Plan.
SUMMARY OF THE 1996 PLAN
The Board administers the 1996 Plan and has full power to construe
and interpret the 1996 Plan. The Board has full power and authority to
determine, among other things, (1) the grant date and exercise date of each
Option, (2) the character of an Option as an incentive stock option ("ISO") or a
non-qualified stock option ("NQO"), (3) vesting restrictions, subject to certain
limitations discussed below, applicable to each Option, and (4) 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
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Option contain the same terms and conditions as any other Option, except as
otherwise discussed below. Any decision made or action taken by the Board
arising out of, or in connection with, interpreting or administering the 1996
Plan will be final, conclusive and binding on the Company and the persons who
hold Options ("Optionees").
Pursuant to the 1996 Plan, Options may be granted only to key
employees of the Company. Options granted under the 1996 Plan may be ISOs or
NQOs, vest according to a schedule determined by the Board (in its sole
discretion) at the time of grant of the Option (generally over a three- or
four-year period from the date of the grant) and have a term of up to ten (10)
years. The exercise prices of Options granted pursuant to the 1996 Plan will not
be less than fair market value at the time of grant, as determined by reference
to then current market prices for the Common Stock.
The purchase price for Shares covered by Options granted under the
1996 Plan 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 Board, 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.
The unvested portion of an Option generally expires upon
termination of the Optionee's employment. The vested portion of an Option also
generally expires upon termination of employment, subject to extension for up to
three (3) months in the case of normal retirement of the Optionee, up to six (6)
months in the case of death or disability of the optionee, or for any other
period approved by the Board. Options granted under the 1996 Plan are
non-transferable, except by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order.
Generally, the standard Option agreement used by the Company under
the 1996 Plan provides that Common Stock acquired upon exercise of an Option is
subject to certain rights of repurchase on the part of the Company. In addition,
the standard Option agreement also contains transfer restrictions with respect
to shares of Common Stock received upon exercise of an Option.
The number of Shares subject to an outstanding Option and the per
share exercise price of an outstanding Option are 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 the event of a merger, consolidation, change in control or other
reorganization, any Option which is not exercisable on the date of such event
shall become fully vested and exercisable only (1) as set forth in the
applicable Option agreement or (2) as otherwise agreed to by the Board, in its
sole and absolute discretion. In lieu of accelerating the vesting of any Option
in the event of a merger, consolidation, change in control or other
reorganization, the Board may, in its discretion, negotiate an agreement with
the acquiring or surviving corporation to assume the outstanding Options or to
authorize cash payments to Optionees 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 1996 Plan will affect each Optionee differently,
depending upon his individual tax situation. Under the current federal income
tax laws, the federal income tax consequences to the Company and each Optionee
of Options granted or exercised under the 1996 Plan are generally as follows:
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<PAGE>
ISO's. An Optionee will not recognize taxable income, and the
Company will not be entitled to a deduction, on the date of grant or exercise of
an ISO. The excess of the FMV of the Shares acquired upon exercise of an ISO
over the option price generally will, however, constitute an item of tax
preference which may subject the Optionee to alternative minimum tax. An
Optionee may be required to pay alternative minimum tax even though the Optionee
receives no cash upon exercise of his or her ISO with which to pay the tax.
Upon the sale or exchange of Shares received upon exercise of an
ISO ("ISO Shares") after the later of (a) two years after the ISO grant date or
(b) one year after the ISO exercise date (referred to herein as the "ISO Holding
Period"), an Optionee will recognize long-term capital gain or loss equal to the
difference between the price at which the Optionee sells the ISO Shares and the
Optionee's basis in such ISO Shares. The Company will not be entitled to any
deduction for such capital gain recognized by the Optionee.
If an Optionee disposes of ISO Shares before the end of either ISO
Holding Period (a "Disqualifying Disposition"), the Optionee generally will
recognize ordinary income equal to the difference between (a) the FMV of the ISO
Shares on the ISO exercise date or, if less, the sales price, and (b) the ISO
exercise price. However, if the Disqualifying Disposition is made by means of a
gift or sale to a related party (defined to include, for example, members of the
Optionee's family and corporations in which the Optionee holds the majority of
the equity interest), the Optionee will recognize ordinary income equal to the
excess of the FMV of the ISO Shares on the exercise date over the ISO exercise
price. Special rules apply for determining the amount of ordinary income an
Optionee must recognize if the Optionee makes a Disqualifying Disposition of ISO
Shares which he or she acquired by delivering previously-owned shares of Common
Stock as payment of the exercise price of an ISO. The Company will be entitled
to a deduction equal to the ordinary income recognized by the Optionee from a
Disqualifying Disposition.
If the sales price an Optionee receives from a Disqualifying
Disposition exceeds the FMV of the ISO Shares on the ISO exercise date, the
excess is taxable to the Optionee as capital gain, long- or short-term depending
upon whether the Optionee held the ISO Shares longer than twelve (12) months. An
Optionee may recognize additional capital gain if such Optionee makes a
Disqualifying Disposition of ISO Shares which he or she acquired by delivering
previously-owned shares of Common Stock. The Company will not be entitled to a
deduction for any capital gain recognized by the Optionee from such disposition.
If an Optionee pays the exercise price of his or her ISO entirely
in cash, the Optionee's adjusted basis in the ISO Shares will be equal to the
amount of cash the Optionee pays for such Shares, and the Optionee's holding
period for the ISO Shares will begin on the ISO exercise date. If, as payment in
whole or in part of the ISO exercise price, an Optionee delivers
previously-owned shares of Common Stock (other than ISO Shares not held for the
ISO Holding Period), then no gain or loss will be recognized because of such
delivery, and the Optionee's tax basis in, and holding period for, the
newly-acquired ISO Shares will be determined as follows: As to a number of
newly-acquired ISO Shares equal to the previously-owned shares delivered, the
Optionee's basis and holding period for capital gain purposes (but not for
Disqualifying Disposition purposes) for the previously-owned shares will carry
over to the ISO Shares on a share-for-share basis. As to each remaining ISO
share, the Optionee's basis will be zero (or, if the Optionee pays part of the
ISO exercise price in cash, the amount of such cash divided by the number of
remaining ISO Shares), and the Optionee's holding period for Disqualifying
Disposition and capital gain purposes will begin on the date such share is
transferred. Under Treasury regulations, any Disqualifying Disposition is deemed
made from the ISO Shares with the lowest basis first.
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<PAGE>
NQO's. An Optionee will not recognize any income, and the Company
will not be entitled to a deduction, on the date of grant of an NQO. Upon the
exercise of an NQO, the Optionee generally will recognize ordinary income in an
amount equal to the excess of the FMV of the NQO Shares acquired on the exercise
date over the NQO exercise price. However, an Optionee 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 NQO Shares on the date the Optionee may first freely
transfer such NQO Shares (the "Section 16 Termination Date") over the Exercise
Price, unless the Optionee 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 NQO exercise date to be taxed on the FMV of
the NQO Shares on the NQO exercise date. The Company will be entitled to a
deduction in an amount equal to the ordinary income recognized by the Optionee
from the exercise of an NQO and will be required to withhold federal income tax
based on the amount of such income.
Upon a sale or exchange of Shares received upon exercise of an
NQO, the Optionee will recognize capital gain or loss (long- or short-term,
depending upon whether the Optionee has held the Shares for longer than twelve
(12) months) in an amount equal to the difference between the sales price for
the NQO Shares and the Optionee's tax basis for such Shares. The Company will
not be entitled to a deduction for any capital gain recognized by the Optionee
from such sale or exchange.
If an Optionee pays the exercise price of an NQO entirely in cash,
the Optionee's tax basis in the Shares received upon such exercise 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 Optionee's holding period for
the NQO Shares will begin on the day after the date the Optionee's tax basis in
the NQO Shares is determined.
An Optionee will recognize no gain or loss on the delivery of
shares already owned (other than ISO Shares not held for the ISO Holding
Period), however acquired, as payment in whole or in part of the exercise price
of an NQO. An Optionee 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 previously-owned
shares, reduced by the amount of cash paid, if any. The Optionee's tax basis in,
and holding period for, the New Shares will be determined as follows: (1) as to
the number of New Shares equal to the number of previously-owned shares
delivered, the Optionee's tax basis in, and holding period for, the
previously-owned 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 Optionee's holding period will begin on the day after the date the
Optionee's tax basis in the New Shares is determined.
RULE 16b-3. Effective August 15, 1996, the SEC revised Rule 16b-3,
which creates several exemptions to the Section 16(b) short-swing profit rules.
The Company intends for all Options granted under the 1996 Plan to qualify for
one or more of these exemptions.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board has appointed KPMG Peat Marwick LLP, certified public
accountants, as auditors to examine the financial statements of the Company for
Fiscal 1997 and to perform other appropriate accounting services and is
requesting ratification of such appointment by the stockholders. KPMG Peat
Marwick LLP has served as the Company's auditors since May 3, 1993.
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In the event that the stockholders do not ratify the appointment
of KPMG Peat Marwick LLP, 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 1997 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
LLP 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 LLP 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
On November 2, 1995, the Company effected a one-for-two reverse
split of the Company's Common Stock. The Reverse Stock Split did not (1) change
the par value of the Common Stock (which remains $.008 per share), (2) change
the authorized number of shares of Common Stock (which remains at 15,000,000
shares) or (3) change the voting rights of the holders of Common Stock (which
remains one vote per share).
STOCK OPTION REPURCHASE PROGRAM
Effective as of May 31, 1996, the Company adopted and implemented
its Stock Option Repurchase Program, pursuant to which it repurchased 401,367
stock options granted under its employee stock option plan from 33 employees at
a price of $2.45 per option share less the exercise price of the repurchased
stock options (a total repurchase price, net of option exercise amounts, of
$557,240).
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 1997 annual meeting, they must
be received by the Company not later than June 15, 1997. Such proposals should
be addressed to the Company at 7175 West Jefferson Avenue, Suite 4000, Lakewood,
Colorado 80235, Attn: Corporate Secretary.
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.
24
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FORM OF PROXY
CAPITAL ASSOCIATES, INC.
7175 WEST JEFFERSON AVENUE
LAKEWOOD, COLORADO 80235
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 25, 1996
The undersigned hereby appoints each of James D. Walker and Jacquelyn
Kilmer 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 1996 Annual
Meeting of Stockholders to be held on October 25, 1996, 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 the contrary)to vote for all nominees
Nominees: William H. Buckland, James D. Edwards, Gary M. Jacobs,
Dennis J. Lacey, Robert A. Sharpe, II 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 1996 Stock Option Plan of Capital Associates, Inc.:
FOR____ AGAINST____ ABSTAIN____
- --------------------------------------------------------------------------------
3. Ratification of KPMG Peat Marwick LLP as auditors for the Company for the
1997 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.
