SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
PILGRIM AMERICA CAPITAL CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
1) Amount previously paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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PILGRIM AMERICA CAPITAL CORPORATION
40 North Central Avenue, Suite 1200
Phoenix, Arizona 85004
(602) 417-8100
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NOTICE AND PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 24, 1999
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To the Holders of Our Common Stock:
The 1999 Annual Meeting of Stockholders of Pilgrim America Capital
Corporation (the "Company") will be held at the Company's headquarters in
Phoenix, Arizona on February 24, 1999, at 10:00 a.m., local time, (i) to elect
two directors to the Company's Board of Directors, (ii) to approve the Company's
1998 Directors' Stock Option Plan and (iii) to consider such other business as
may properly come before the Annual Meeting. Management is presently aware of no
other business to come before the Annual Meeting.
The Board of Directors has fixed the close of business on December 30, 1998
as the record date for the determination of stockholders entitled to receive
notice of and to vote at the Annual Meeting or any adjournment thereof. Shares
of Common Stock can be voted at the Annual Meeting only if the holder is present
at the Annual Meeting in person or represented by a valid proxy. A copy of the
Company's 1998 Annual Report to Stockholders, which includes audited
consolidated financial statements, was mailed with this Notice and Proxy
Statement on or about January 15, 1999 to all stockholders of record on the
record date for the Annual Meeting. The officers and directors of the Company
cordially invite you to attend the Annual Meeting.
Your attention is directed to the attached Proxy Statement.
By Order of the Board of Directors
/s/ Robert W. Stallings
Robert W. Stallings
Chairman of the Board
Phoenix, Arizona
January 15, 1999
IMPORTANT
Stockholders are requested to SIGN, DATE and MAIL the enclosed proxy. A
postage-paid envelope is provided for mailing in the United States.
<PAGE>
PILGRIM AMERICA CAPITAL CORPORATION
40 North Central Avenue, Suite 1200
Phoenix, AZ 85004
(602) 417-8100
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PROXY STATEMENT
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This Proxy Statement is furnished by the Board of Directors of PILGRIM
AMERICA CAPITAL CORPORATION (the "Company"), a Delaware corporation, in
connection with the Company's Annual Meeting of Stockholders (the "Annual
Meeting") to be held on February 24, 1999. The proxy materials were mailed on or
about January 15, 1999 to the Company's common stockholders (the "Stockholders")
of record at the close of business on December 30, 1998 (the "Record Date"). As
of the Record Date, there were 5,333,477 shares of the Company's common stock,
$.01 par value per share (the "Common Stock"), issued and outstanding. Only
holders of Common Stock on the Record Date will be entitled to vote at the
Annual Meeting. Each holder of shares of Common Stock issued and outstanding on
the Record Date is entitled to one vote for each share held on each matter of
business to be considered at the Annual Meeting. The holders of a majority of
the voting power of the issued and outstanding Common Stock entitled to vote,
present in person or represented by proxy, shall constitute a quorum at the
Annual Meeting.
The enclosed proxy is solicited by the Board of Directors of the Company. A
person giving the enclosed proxy has the power to revoke it at any time before
it is exercised by (i) attending the Annual Meeting and voting in person, (ii)
duly executing and delivering a proxy bearing a later date, or (iii) sending
written notice of revocation to the Company's Secretary at 40 North Central
Avenue, Suite 1200, Phoenix, Arizona 85004. The Company will bear the cost of
the solicitation of proxies, including the charges and expenses of brokerage
firms and others who forward solicitation material to beneficial owners of
Common Stock. In addition to the use of the mails, proxies may be solicited by
personal interview, telephone or other means deemed appropriate by the Board of
Directors.
If the enclosed proxy is properly executed and returned to the Company in
time to be voted at the Annual Meeting, it will be voted as specified on the
proxy, unless it is properly revoked prior thereto. If no specification is made
on the proxy as to any one or more of the proposals, the shares represented by
the proxy will be voted for the election of the nominees for directors named
below and for approval of the 1998 Directors' Stock Option Plan, and, with
respect to any other matters that may come before the Annual Meeting, at the
discretion of the proxy holders.
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the Inspectors of Election appointed for the meeting who will determine whether
or not a quorum is present. The Inspectors of Election will treat abstentions as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum, but as unvoted for purposes of determining the approval of
any matter submitted to the Stockholders for a vote. If a broker indicates on
the proxy that it does not have discretionary authority as to certain shares to
vote on a particular matter, those shares will not be considered as present and
entitled to vote with respect to that matter.
The information included herein should be reviewed in connection with the
consolidated financial statements, notes to consolidated financial statements
and independent auditors' report included in the Company's 1998 Annual Report to
Stockholders.
<PAGE>
ELECTION OF DIRECTORS
The Company's Board of Directors is comprised of six members classified in
three groups. Members of each group serve a three-year term. At the Annual
Meeting, two directors will be elected to the class of directors whose terms
expire at the close of the 2002 Annual Meeting of Stockholders. The shares
represented by the enclosed proxy will be voted for the election as directors of
the two nominees named below, unless a vote is withheld from either or both of
the individual nominees. If any nominee becomes unavailable for any reason or if
a vacancy should occur before election (which events are not anticipated), the
shares represented by the enclosed proxy may be voted for such other person as
may be determined by the holders of the proxy. The two nominees receiving the
highest number of votes cast at the meeting will be elected.
INFORMATION CONCERNING DIRECTORS AND NOMINEES
The present terms of Messrs. Robert W. Stallings and John M. Holliman, III
expire upon the close of the 1999 Annual Meeting of Stockholders. Both
individuals have been unanimously proposed by the Nominating Committee of the
Board as nominees for election as directors in the election to be held at the
meeting.
Information concerning the names, ages, terms, positions with the Company
and the Board, and business experience of the nominees and the directors whose
present terms continue after the Annual Meeting is set forth below. Each
director has served continuously with the Company since his first election as
indicated below.
DIRECTOR TERM
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NAME AGE POSITION (1) SINCE EXPIRES (1)
---- --- ------------ ----- -----------
Robert W. Stallings (2)(5) 49 Chairman of the Board, 1990 1999
President, Chief
Executive Officer
and Director
John C. Cotton (2)(3)(5) 60 Director 1991 2001
Roy A. Herberger, Jr.(2)(4) 56 Director 1992 2000
John M. Holliman, III(2)(4)(5) 45 Director 1991 1999
Stephen A McConnell(3)(4) 46 Director 1991 2000
Paul J. Renze(3) 42 Director 1991 2001
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(1) The Company's directors are classified into three groups; each elected on a
staggered basis for three-year terms.
(2) Member of Executive Committee.
(3) Member of Audit Committee.
(4) Member of Compensation Committee.
(5) Member of Nominating Committee.
3
<PAGE>
ROBERT W. STALLINGS has served as the Company's Chairman and Chief
Executive Officer since August 1990 and as its President since December 1993.
JOHN C. COTTON has served as a director of the Company since May 1991, and
as President of Maricopa Partnerships, Inc., a Phoenix-based merchant and
investment banking organization, since 1982.
ROY A. HERBERGER, JR. has served as a director of the Company since March
1992, and has served as President of the Thunderbird American Graduate School of
International Management, Glendale, Arizona, since April 1989. He served as Dean
of the Edwin L. Cox School of Business at Southern Methodist University from
1982 to July 1989. Mr. Herberger is a director of Pinnacle West Capital Corp.
and MicroAge Inc.
JOHN M. HOLLIMAN, III has served as a director of the Company since May
1991 and as a General Partner of AGP Management LP, the General Partner of
Valley Ventures LP, formerly Arizona Growth Partners LP, a Phoenix-based venture
investment partnership, since February 1993. Mr. Holliman served in various
capacities, most recently as Senior Managing Director, of Valley National
Investors, Inc., the venture investment subsidiary of Valley National Bank of
Arizona, from February 1985 to February 1993. Mr. Holliman is a director of
OrthoLogic Corporation, and DenAmerica Corporation.
STEPHEN A MCCONNELL has served as a director of the Company since May 1991,
and as the President of Solano Ventures, a Phoenix-based investment firm, since
January 1992. He served as Chairman of Mallco Lumber & Building Materials, Inc.,
a Phoenix based wholesale distributor of lumber and doors, from September 1991
to July 1997, and as President of Belt Perry Associates, Inc., a Phoenix-based
property tax consulting firm, from September 1991 until October 1995. He is
currently a director of Mobile Mini, Inc., Vodavi Technology, Inc.
and Capital Title Group, Inc.
PAUL J. RENZE has served as a director of the Company since May 1991, and
as General Partner of Apex Management Partnership, a Chicago-based venture
capital fund management company, since July 1988. Mr. Renze is also the
President of Chartwell Holdings Inc. and Chief Executive Officer of Schiavi
Leasing.
BOARD AND COMMITTEE MEETINGS
The Audit Committee makes recommendations to the Board concerning the
selection of outside auditors, reviews the financial statements of the Company
and considers such other matters in relation to the internal and external audit
of the financial affairs of the Company as may be necessary or appropriate to
facilitate accurate and timely financial reporting. The Audit Committee met
three times during the fiscal year ended September 30, 1998.
The Compensation Committee of the Board of Directors administers the
Company's Stock Option Plan and the Company's Performance Share Plan, reviews
all aspects of compensation of the Company's officers and makes recommendations
on such matters to the full Board of Directors. The Compensation Committee met
twice during the fiscal year ended September 30, 1998. The Compensation
Committee Report on Executive Compensation is set forth elsewhere herein.
The Nominating Committee of the Board of Directors makes recommendations to
the Board concerning the selection of nominees to stand for election to the
Board of Directors. The Nominating Committee met once during the fiscal year
ended September 30, 1998.
The Executive Committee of the Board of Directors has full authority to act
on behalf of the Board in the absence of regular Board Meetings. The Executive
Committee met six times during the fiscal year ended September 30, 1998.
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<PAGE>
During the fiscal year ended September 30, 1998, the Board of Directors of
the Company met on six occasions. Each director attended 80% or more of the
meetings of the Board and of the Board committees on which he served.
PRINCIPAL STOCKHOLDERS
AND STOCKHOLDINGS OF MANAGEMENT
The following table sets forth information, as of December 15, 1998,
concerning the Common Stock of the Company beneficially owned by each director
and nominee of the Company, by the Company's Chief Executive Officer and its
other four most highly compensated executive officers during the fiscal year
ended September 30, 1998 and all executive officers and directors as a group,
and by each Stockholder known by the Company to be the beneficial owner of more
than 5% of the outstanding Common Stock. The Common Stock is the only capital
stock of the Company issued and outstanding. All Common Stock amounts have been
adjusted for a three-for-two split that was effected at the close of business on
April 30, 1998.
COMMON SHARES BENEFICIALLY OWNED (2)
------------------------------------
NAME (1) SHARES PERCENT
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Robert W. Stallings 524,954 (3) 9.31%
John C. Cotton 291,314 (4) 5.45%
Roy A. Herberger, Jr. 29,650 .55%
John M. Holliman, III 52,226 (5) .98%
Stephen A McConnell 71,531 1.34%
Paul J. Renze 49,606 .93%
James R. Reis 255,060 4.66%
Robert J. Boulware 101,300 1.89%
Stanley D. Vyner 7,500 .14%
Howard Tiffen 66,639 1.24%
Cramer Rosenthal McGlynn, Inc. 728,223 (6) 13.65%
Dimensional Fund Advisors 359,950 (7) 6.75%
All directors and executive officers
as a group (11 persons) 1,574,663 26.27%
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(1) Except as otherwise noted below, the persons named in the table have sole
voting and investment power with respect to all shares of the Company's
Common Stock shown as beneficially owned by him, subject to applicable
community property law.
(2) Includes shares of Common Stock subject to options which were presently
exercisable or which may become exercisable within 60 days of December 15,
1998. All exercisable options were "in the money" as of December 15, 1998.
(3) Includes 24,917 shares owned by his wife.
(4) Includes 87,964 shares beneficially owned by the Cotton Family Limited
Partnership, a limited partnership of which Mr. Cotton is a general
partner, and 8,700 shares owned by his wife.
(5) Includes 3,824 shares owned by AGP Management LP. Mr. Holliman is a general
partner of AGP Management LP.
(6) Information with respect to Cramer Rosenthal McGlynn, Inc. ("CRM") has been
provided by the stockholder and is as of December 31, 1998. CRM's address
is 707 Westchester Avenue, White Plains, New York 10604. (See, "Certain
Transactions and Relationships").
(7) Information with respect to Dimensional Fund Advisors is provided in
reliance upon information included in a Schedule 13F-E dated August 5, 1998
filed by such stockholder. Dimensional Fund Advisor's address is 1299 Ocean
Avenue, 11th floor, Santa Monica, CA 90401.
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<PAGE>
EXECUTIVE COMPENSATION
The following information sets forth the aggregate compensation paid by the
Company for services rendered during the fiscal year ended September 30, 1998 to
the Company's (i) Chief Executive Officer and (ii) the four other most highly
compensated executive officers whose total salary and bonus exceeded $100,000
(collectively, the "named executive officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ------------
NAME AND ------------------- STOCK OPTIONS/ ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS PERFORMANCE SHARES COMPENSATION(1)
------------------ ---- ------ ----- ------------------ ---------------
<S> <C> <C> <C> <C> <C>
Robert W. Stallings 1998 $358,333 $550,000 0 $10,000
Chairman of the 1997 350,000 150,000 0 10,979
Board, President and 1996 350,000 0 157,000 9,500
Chief Executive
Officer
James R. Reis 1998 204,167 200,000 0 10,000
Vice Chairman and 1997 200,000 50,000 0 17,917 (2)
Chief Financial Officer 1996 200,000 0 63,000 17,333 (2)
Robert J. Boulware 1998 150,000 336,567 (3) 0 10,000
President and 1997 142,708 97,541 (3) 0 6,844
Chief Executive Officer, 1996 71,250 63,798 (3) 0 11,393 (2)
Pilgrim Securities, Inc.
Stanley D. Vyner 1998 200,000 100,000 0 10,000
President, 1997 200,000 50,000 25,000 13,000
Pilgrim Investments, 1996 108,333 0 0 33,500 (4)
Inc.
Howard Tiffen 1998 200,000 300,000 (5) 0 18,743 (6)
President, 1997(7) 200,000 200,000 (5) 0 21,926 (6)
Pilgrim Prime Rate 1996 168,939 50,000 25,000 15,943 (6)
Trust
</TABLE>
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(1) Except as otherwise indicated in the footnotes below, all amounts represent
401(k) matching contributions made under a tax deferred savings plan under
Section 401(k) of the Internal Revenue Code. The Company's 401(k) savings
plan was established in July 1991. The Company has discretion to match
participant's contributions and since May 1995 the Company has matched
participant contributions up to 7% of the compensation of each participant.
7
<PAGE>
(2) Includes payment for unused vacation of $8,333 annually in 1997 and 1996 to
Mr. Reis and $4,614 in 1996 to Mr. Boulware.
(3) Includes sales commissions of $336,567, $91,863 and $42,650 in 1998, 1997
and 1996, respectively.
(4) Until June 24, 1996, Mr. Vyner served as a consultant to the Company. Other
Compensation includes $30,000 for consulting fees paid to him prior to his
hire date.
(5) Mr. Tiffen's bonus is awarded at the discretion of the Chairman, and in
future years may vary and equal or exceed the amounts awarded in 1998 and
1997 based upon Mr. Tiffen's performance and the analysis of the
Compensation Committee.
(6) Includes taxable moving expenses paid to Mr. Tiffen in the amount of
$8,743, $12,092 and $6,443 in 1998, 1997 and 1996 respectively.
(7) Mr. Tiffen became an executive officer during the fiscal year ended
September 30, 1997.
DIRECTOR COMPENSATION
Directors who are not employees of the Company are each paid an annual
retainer of $20,000 plus $500 per meeting of the Board of Directors or a
committee thereof attended by the director. Until November 1997, the annual
retainer was $12,000.
EMPLOYMENT AGREEMENTS
During August 1995, at the direction of the Board of Directors, the Company
entered into employment agreements with Robert W. Stallings and James R. Reis.
The employment agreements with Messrs. Stallings and Reis automatically renew
for two-year terms unless either party determines not to renew. The current
terms of the agreements end on December 31, 2000.
The employment agreements provide that the Company shall pay an annual base
salary of at least $325,000 to Mr. Stallings and $200,000 to Mr. Reis. Mr.
Stallings' base salary was raised to $350,000 effective November 16, 1995, and
to $450,000 effective September 1, 1998. Mr. Reis's base salary was raised to
$250,000 effective September 1, 1998. The Board of Directors may terminate each
employment agreement at any time and by the employee with 90 days' advance
notice. If the employee is terminated by the Board of Directors other than for
just cause (as defined in the agreement), the employee will be entitled to a
lump sum payment in an amount not less than $675,000 in the case of Mr.
Stallings and $375,000 in the case of Mr. Reis.
During January 1998, at the direction of the Board of Directors, the
Company entered into a one-year renewable employment agreement with Howard
Tiffen. That agreement was replaced with a new two-year renewable agreement
effective October 1, 1998. The current employment agreement provides that the
Company shall pay an annual base salary of at least $250,000 to Mr. Tiffen. Mr.
Tiffen's employment may be terminated by the Board of Directors or by Mr. Tiffen
at any time. If Mr. Tiffen is terminated by the Company other than for "cause"
(as defined in the agreement), Mr. Tiffen will be entitled to a lump sum payment
in the amount of $250,000.
Executive officers of the Company and officers of the Company's operating
subsidiaries, and certain middle management personnel, who are not compensated
on an incentive commission basis, are eligible to be paid a discretionary
performance bonus annually.
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<PAGE>
EMPLOYMENT SEVERANCE AGREEMENTS
The Company has agreements with certain senior employees which provide that
if the employee is terminated, the employee will receive a lump sum payment
equal to between three and twelve months of the employee's base compensation.
STOCK OPTIONS AND PERFORMANCE SHARES
Pursuant to the Company's Stock Option Plan (the "Option Plan"), the
Company may grant to employees and officers of the Company (including directors
of the Company who are also employees) both incentive stock options and
nonstatutory stock options ("Options") to purchase an aggregate of up to 806,679
shares of the Company's common stock. The Option Plan is administered by the
Compensation Committee of the Board of Directors, which determines the terms of
Options granted, including the exercise price, the number of shares subject to
each Option, and the exercisability of each Option. Stock options were granted
by the Company under the Option Plan during the fiscal years ended September 30,
1996 and September 30, 1997. There were no Stock Options granted during the
fiscal year ended September 30, 1998.
On August 30, 1996, the Company adopted the 1996 Performance Share Plan
(the "Performance Share Plan"), approved and administered by the Company's Board
of Directors, in which certain officers and employees were granted interests
("Performance Shares") that entitle them to compensation amounts directly
related to the market price of the Company's Common Stock. These amounts are
payable in shares of Common Stock.
Performance Shares vest over a five-year period. The maximum aggregate
number of Performance Shares that may be issued under the plan as of September
30, 1998 is 375,000. Cancelled and forfeited Performance Shares may be reissued
under the Performance Share Plan. As of September 30, 1998, 307,500 Performance
Shares were outstanding, each with an assigned value between $3.83 and $26.25
per share and five year vesting, 20% each year, beginning on April 7, 1995 or
the employee's grant date, if later.
OPTION/PERFORMANCE SHARE GRANTS IN LAST FISCAL YEAR
There were no options or performance shares granted to the named executive
officers during the fiscal year ended September 30, 1998.
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<PAGE>
The table below contains certain information concerning exercises of
Options or Performance Shares during the fiscal year ended September 30, 1998 by
each of the Company's executive officers and the fiscal year end value of
unexercised Options or Performance Shares.
AGGREGATED OPTION/PERFORMANCE SHARE EXERCISES IN LAST FISCAL YEAR
AND OPTION VALUE AS OF SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/PERFORMANCE SHARES OPTIONS/PERFORMANCE SHARES
SHARES ACQUIRED VALUE AT FISCAL YEAR END AT FISCAL YEAR END (1)
NAME ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Robert W. Stallings 0 0 307,000 / 78,500 (Options) $4,694,542 / $1,200,396
James R. Reis 0 0 138,000 / 31,500 2,110,250 / 481,688
Robert J. Boulware 0 0 25,000 / 12,500 382,292 / 191,146
Stanley D. Vyner 0 0 7,500 / 30,000 65,938 / 263,750
Howard Tiffen 0 0 22,500 / 15,000 344,063 / 229,375
</TABLE>
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(1) Messrs. Stallings, Reis, Boulware and Tiffen's Performance Shares are
exercisable at a price of $3.83 per share. Mr. Vyner's Performance Shares
are exercisable at a price of $10.33 per share. The last reported sale
price of Common Stock as reported on September 30, 1998 by the NASDAQ
National Market System was $19.125 per share.
10
<PAGE>
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
The graph below compares the change in the Company's cumulative total
shareholder return on its Common Stock over the five fiscal year periods after
September 30, 1993 with the cumulative total return on equity securities traded
on NASDAQ and the relevant comparative benchmark during the period. For the
period from September 30, 1993 through March 31, 1995 (the quarter in which the
Company announced the discontinuance of its mortgage operations), the relevant
comparative benchmark was comprised of a peer group of public companies engaged
in the mortgage banking industry as described in (1) below. Subsequent to March
31, 1995, the relevant comparative benchmark is comprised of a peer group of
public companies engaged in the investment management industry due to the change
in the Company's business from mortgage banking to investment management
services.
PILGRIM AMERICA CAPITAL CORPORATION
COMPANY STOCK PRICE PERFORMANCE
Pilgrim America
Capitial Corp. NASDAQ Composite Comparative Benchmark (1)
-------------- ---------------- -------------------------
9/30/93 100 100 100
9/30/94 68.57 100.82 80.83
3/31/95 47.14 108.65 84.05
9/30/95 67.14 139.25 106.83
9/30/96 66.43 165.25 126.87
9/30/97 202.86 226.80 220.77
9/30/98 327.86 228.88 213.99
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(1) Prior to March 31, 1995, the comparative benchmark is represented by a peer
group of public companies engaged in the mortgage banking industry. The
peer group includes: Countrywide Credit Industries, Inc.; Fleet Mortgage
Group, Inc.; Imperial Credit Industries, Inc.; North American Mortgage
Company; and Plaza Home Mortgage Company. For the period March 31, 1995
through September 30, 1998, the comparative benchmark is represented by a
peer group of public companies engaged in the investment management
industry. The peer group includes: Alliance Capital Management L.P.; Eaton
Vance Corporation; Franklin Resources, Inc.; The John Nuveen Company;
Kansas City Southern Industries; Nvest, L.P.; PIMCO Advisors Holdings L.P.;
The Pioneer Group, Inc.; and T. Rowe Price Associates, Inc. This peer group
is used to better correspond to the Company's investment management
services business that began on April 7, 1995, concurrent with its purchase
of certain investment management assets at that date.
11
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's Compensation Committee (the "Committee") is composed entirely
of independent outside members of the Board of Directors. The Committee reviews
and approves each of the elements of the executive compensation program of the
Company and its subsidiaries, and periodically assesses the effectiveness and
competitiveness of the program. The Committee met twice during the fiscal year
ended September 30, 1998.
COMPENSATION PHILOSOPHY. The goals of the Company's executive compensation
program are to support and further the Company's financial performance and its
business plan and to enable the Company to attract and retain the quality of
executive personnel which the Company believes is necessary to meet the
Company's commitment to maximize shareholder value. The philosophy of the
Company is to provide compensation programs designed to reward achievement of
the Company's goals and to provide compensation opportunities that are
commensurate with those of companies engaged in similar businesses which are of
a size and type similar to the Company.
ELEMENTS OF THE EXECUTIVE COMPENSATION PROGRAM. The Company's salaries for
executive officers are set at levels consistent with competitive practices as
compared to other investment management services companies of a size and engaged
in business comparable to that of the Company. Salary increases are generally
designed to reflect performance of the executive. These elements will usually be
subjective in nature, as the Company does not have a practice of establishing
specific quantitative target goals for individual compensation levels.
Executive compensation levels for the fiscal years ended September 30, 1997
and 1998 were determined against the background of (i) the Company's increased
profitability; (ii) the increase of the share price of the Company's Common
Stock; (iii) the increase in sales of open-end fund shares distributed by the
Company; (iv) the increase in assets under management through the development of
private accounts; (v) the continuation of cost cutting, and (vi) the improvement
in the quality of the Company's staff. In establishing compensation levels for
newly appointed executives, the Committee considered the compensation levels
prevalent in the investment management industry generally.
Recently enacted provisions of the Internal Revenue Code limit to
$1,000,000 the amount of cash compensation that a company may pay each executive
officer and claim a tax deduction in a like amount, with amounts over $1,000,000
generally being a non-deductible expense. Because the Company has never paid
individual compensation amounts approaching the $1,000,000 threshold, the
Committee has not formulated a policy relating to compensation in excess of the
threshold.
BONUS PAYMENTS AND OTHER INCENTIVE PAYMENTS. Executive officers are
eligible to be paid performance bonuses. Bonus amounts are discretionary, are
recommended by the Committee and are subject to approval by the Board of
Directors. Bonuses are entirely discretionary, and neither the Board nor the
Committee sets performance levels or pre-established formulas for determining
whether bonuses will be paid or the amount of bonus paid. Accordingly, bonus
amounts are based on a subjective assessment of employee performance.
12
<PAGE>
Historically, the Company has awarded stock options to executives. During
the fiscal year ended September 30, 1998, the Company issued no Options under
the Option Plan.
In August 1996, the Committee approved the Performance Share Plan, and
amended it in February, 1997, to provide compensation to executives and other
employees based upon increases in the Company's common stock market price. The
Committee designed this Plan to reward executives and other employees for the
financial performance of the Company, which results in increased stockholder
value.
CEO COMPENSATION. The key performance measure the Committee used in
determining the CEO's compensation for 1998 was the Committee's assessment of
his vision and leadership in the development and expansion of the Company's
money management advisory and distribution businesses. The CEO's base salary
through December 31, 1997 was set at $350,000 per annum in connection with an
employment agreement entered into by the Company and the CEO in August 1995. On
September 1, 1998, the CEO's base salary was increased to $450,000. The
Committee believes this base salary is competitive with amounts paid other
experienced CEO's in similarly sized investment management companies.
Compensation Committee
Roy A. Herberger, Jr., Chairman
John M. Holliman, III
Stephen A McConnell
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
The Compensation Committee of the Board of Directors of the Company
consists of Messrs. Herberger, Holliman and McConnell. No Compensation Committee
interlocks exist and no insiders participated in compensation decisions. The
members of the Compensation Committee have at no time been officers or employees
of the Company or any of its subsidiaries, nor do they serve on the board of
directors of any mutual fund for which the Company serves as investment advisor.
CERTAIN TRANSACTIONS AND RELATIONSHIPS
Gerald B. Cramer resigned as a director of the Company in April 1995. Mr.
Cramer is a principal owner and officer of CRM Advisors, LLC, which became the
subadvisor to the Pilgrim MidCap Value Fund when it commenced operations in
September 1995. CRM receives a fee for subadvising this Fund which is managed
and advised by Pilgrim Investments, Inc., a subsidiary of the Company. During
the fiscal year ended September 30, 1998, CRM was paid an aggregate of $358,330
in such fees. CRM also is an affiliate of Cramer Rosenthal McGlynn, Inc. which
is the beneficial owner of 13.65% of the Company's common stock. See, "Principal
Stockholders and Stockholdings of Management."
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PROPOSAL 2
APPROVAL OF 1998 DIRECTORS' STOCK OPTION PLAN
BACKGROUND. Since it became a public company in 1992, a majority of the
Company's Board of Directors has been comprised of persons who are not employees
of the Company or any of its subsidiaries ("Outside Directors"). In April 1992,
the Company granted each of its Outside Directors an option to acquire 10,000
shares of Common Stock. In September 1998, the Board reviewed the opportunities
for directors to acquire additional interests in the Common Stock, and approved
the Company's 1998 Directors' Stock Option Plan (the "Plan"), subject to
approval by the Company's stockholders.
The Board of Directors believes that the Plan will enhance the Company's
ability to attract and retain qualified individuals to serve as Outside
Directors and will also further the identity of interest between the Outside
Directors and the Company's stockholders generally. The following summary of the
material provisions of the Plan is qualified in its entirety by reference to the
complete text of the Plan, which is attached to this Proxy Statement as Exhibit
A.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THIS PROPOSAL.
Under the Plan, each Outside Director will automatically be granted options
to purchase shares of Common Stock on October 1 of each year during the term of
the Plan (or such earlier date as all shares authorized for issuance under the
Plan have been issued or are subject to outstanding options). Under the Plan,
each Outside Director serving on the Board on October 1, 1998 was granted an
option to purchase 15,000 shares of Common Stock, and each Outside Director
first elected to the Board after October 1, 1998 shall upon his or her election
be granted an option to purchase 15,000 shares of Common Stock. Following the
receipt of the grant to purchase 15,000 shares, an Outside Director will be
granted an option to purchase 5,000 shares of Common Stock on each October 1
during the term of the Plan. A maximum of 250,000 shares of Common Stock may be
issued upon exercise of options granted under the Plan, subject to adjustment
upon the occurrence of certain events, such as stock splits, stock dividends or
similar recapitalization events. Options under the Plan do not qualify as
"incentive stock options" under the Internal Revenue Code of 1984, as amended
(the "Tax Code"). The options granted on October 1, 1998 are conditioned upon
stockholder approval of the Plan, and if the Plan is not approved those grants
will terminate automatically.
Options under the Plan are exercisable at a price which is equal to the
closing price of the Common Stock on the date of grant, plus $1.00 per share.
The closing price of the Common Stock on October 1, 1998 was $18.00 per share,
and the exercise price of the options granted under the Plan on that day are
exercisable at $19.00 per share. Options granted under the Plan generally vest,
or first become exercisable, in three equal annual installments beginning on the
first anniversary of the date of grant. If an Outside Director retires at or
after age 65, all options under the Plan will vest upon retirement. If a Change
of Control (as defined in the Plan) of the Company occurs, all options under the
Plan shall immediately vest. Unless earlier exercised or terminated, options
under the Plan will terminate on the tenth anniversary of their grant date.
Options will also terminate three months after the date an optionee ceases to be
an Outside Director for any reason other than normal retirement, disability or
death. Options are not transferable other than by will or the laws of descent
and distribution, and during the lifetime of an optionee may be exercised only
by the optionee. The Board has authority under the Plan to permit transfers to
certain members of an optionee's family and to certain trusts and other entities
the beneficiaries or members of which are primarily such family members.
The Plan will be administered by the Board, which will have the power to
construe and interpret the terms and provisions of the Plan. The Board may amend
or terminate the Plan at any time, except that it may
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not increase the total number of shares subject to the Plan, alter the class of
persons eligible to receive options under the Plan, extend the termination date
of the Plan, modify the exercise price of options under the Plan or take certain
other actions, in each case to the extent that stockholder approval is required
under applicable law or regulation. Only directors of the Company who are not
employees of the Company or any of its subsidiaries are eligible to participate
in the Plan. All directors of the Company except Mr. Stallings currently qualify
as Outside Directors.
FEDERAL INCOME TAX CONSEQUENCES
An Outside Director will not recognize any taxable income at the time an
option is granted. Ordinary income will be recognized by an Outside Director at
the time of exercise in an amount equal to the excess of the fair market value
of the shares of Common Stock received over the option price for such shares.
However, if other shares of Common Stock have been purchased by an Outside
Director within six months of the exercise of an option, recognition of the
income attributable to such exercise may under certain circumstances be
postponed for a period of up to six months from the date of such purchase of
such other shares of Common Stock due to liability to suit under Section 16(b)
of the Securities and Exchange Act of 1934, as amended (the "Exchange Act"). If
applicable, one effect of any such postponement would be to measure the amount
of the Outside Director's taxable income by reference to the fair market value
of such shares at the time such liability to suit under Section 16(b) of the
Exchange Act no longer exists (rather than at the earlier date of the exercise
of the option). The Outside Director will generally recognize a capital gain or
loss upon a subsequent sale of the shares of Common Stock.
Upon an Outside Director's exercise of an option granted under the Plan,
the Company may claim a deduction for compensation paid at the same time and in
the same amount as ordinary income is recognized by the director.
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 officers and directors, and persons who
beneficially own more than ten percent of a registered class of the Company's
equity securities, to file reports of ownership and change in ownership with the
Securities and Exchange Commission (the "SEC") and the National Association of
Securities Dealers Automated Quotation System. Such reports are filed on Form 3,
Form 4 and Form 5 under the Exchange Act. Officers, directors and greater than
ten-percent shareholders are required by Exchange Act regulations to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by the
Company or written representations from certain reporting persons that no Form
5's were required for those persons, the Company believes that during fiscal
year ended September 30, 1998 all officers, directors, and greater than
ten-percent beneficial owners complied with the applicable Section 16(a) filing
requirements.
RELATIONSHIP WITH INDEPENDENT PUBLIC AUDITORS
The principal independent auditors utilized by the Company during fiscal
years ended September 30, 1996, 1997 and 1998 were KPMG LLP, (the "Auditors").
It is presently contemplated that the Auditors will be retained as the principal
auditing firm to be utilized by the Company throughout the fiscal year ending
September 30, 1999. The Company anticipates that a representative of the
Auditors will attend the Annual Meeting for the purpose of responding to
appropriate questions. At the Annual Meeting, a representative of the Auditors
will be afforded an opportunity to make a statement if the Auditors so desire.
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PROPOSALS BY STOCKHOLDERS
Any Stockholder proposal which is intended to be presented at the Company's
2000 Annual Meeting of Stockholders must be received at the Company's principal
executive offices by no later than September 15, 1999, if such proposal is to be
considered for inclusion in the Company's proxy statement and form of proxy
relating to that meeting.
In order for a stockholder to bring other business before the Company's
2000 Annual Meeting, timely notice must be received by the Company at its
principal offices no later than November 28, 1999. Such notice must include a
description of the proposed business, the reasons therefor, and other specified
matters. These requirements are separate from and in addition to the
requirements a stockholder must meet to have a proposal included in the
Company's proxy statement. The time limit also applies in determining whether
notice is timely for purposes of rules adopted by the Securities and Exchange
Commission relating to exercise of discretionary voting authority.
OTHER BUSINESS
The Annual Meeting is being held for the purpose set forth in the Notice
that accompanies this Proxy Statement. The Board of Directors is not presently
aware of business to be transacted at the Annual Meeting other than as set forth
in the Notice.
By Order of the Board of Directors
/s/ Robert W. Stallings
Robert W. Stallings
Chairman of the Board
Phoenix, Arizona
January 15, 1999
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EXHIBIT A
1998 DIRECTORS' STOCK OPTION PLAN
1. DEFINITIONS.
As used in this Plan, the following terms have the meanings indicated:
"BOARD OF DIRECTORS" means the board of directors of the Corporation.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMON STOCK" means the shares of the common stock (including treasury
stock), par value $0.01 per share, of the Corporation.
"CORPORATION" means Pilgrim America Capital Corporation, a Delaware
corporation, and any successor thereto.
"DISABILITY" means inability of a Participant to perform his or her duties
as an Outside Director by reason of any medically determinable physical or
mental impairment which can be expected to result in death or which has
lasted or can be expected to last for a continuous period of not less than
12 months.
"FAIR MARKET VALUE" means the value of a share of Common Stock on a
particular day determined as follows:
(i) if the shares of Common Stock are listed or admitted to trading on
any securities exchange, the fair market value shall be the closing sales
price on such day on the New York Stock Exchange or, if the shares are not
then listed or admitted to trading on the New York Stock Exchange, on such
other securities exchange on which such stock is then listed or admitted to
trading or, if no sale takes place on such day on any such exchange, on the
next preceding day on which sales occur;
(ii) if the shares of Common Stock are not then listed or admitted to
trading on any securities exchange, the fair market value shall be the
closing sales price on such day or, if no sale takes place on such day, on
the next preceding day on which sales occur in the over-the-counter market
as furnished by the NASDAQ Stock Market, or if the NASDAQ Stock Market at
the time is not engaged in the business of reporting such prices, as
furnished by any similar firm then engaged in such business and selected by
the Board of Directors; or
(iii) if the shares of Common Stock are not then listed or admitted to
trading on a securities exchange or in the over-the-counter market, the
fair market value shall be the amount determined by the Board of Directors
in a manner consistent with Treasury Regulation 20.2031-2 promulgated under
the Code or such other manner prescribed by the Secretary of the Treasury
or the Internal Revenue Service.
"OUTSIDE DIRECTOR" means a person who is a member of the Board of Directors
but is not an employee of the Corporation or any subsidiary of the
Corporation.
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"PARTICIPANT" means an Outside Director, or other person or entity
specified in Section 5(f), who is granted a stock option hereunder,
together with such Outside Director's, or such other person's or entity's
transferees, assigns, and successors.
"PLAN" means this Pilgrim America Capital Corporation 1998 Directors' Stock
Option Plan.
"RULE 16B-3" means Rule 16b-3 promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended, and any
amendment or successor provision thereto.
2. PURPOSE OF PLAN.
(a) GENERAL PURPOSE. The purpose of this Plan is to further the interests
of the Corporation and its stockholders by providing an incentive based form of
compensation to motivate and reward its Outside Directors and promote the best
interests and long-term performance of the Corporation by offering such Outside
Directors a proprietary interest in its business and an increased personal
interest in the continued success and progress of the Corporation.
(b) TYPES OF AWARDS. The Plan provides for the grant by the Corporation of
options to purchase shares of the Corporation's Common Stock. None of the
options granted pursuant to this Plan will qualify as Incentive Stock Options,
as defined in Section 422 of the Code. It is also intended that grants under
this Plan not constitute "Discretionary Transactions" under the requirements of
Rule 16b-3. and that any Outside Directors participating hereunder will not be
disqualified, because of this Plan, as a "Non-Employee Director" under Rule
16b-3; any provision of this Plan deemed not to be in compliance with the
requirements of Rule 16b-3 shall be deemed null and void. This Plan is not
intended to preclude the use of Common Stock for other compensation purposes in
line with the needs and objectives of the Corporation.
3. STOCK AND MAXIMUM NUMBER OF SHARES SUBJECT TO PLAN.
(a) DESCRIPTION OF STOCK AND MAXIMUM SHARES ALLOCATED. The stock subject to
the provisions of this Plan and issuable upon exercise of options under the Plan
are shares of the Corporation's Common Stock, which may be either unissued or
treasury shares, as the Board of Directors from time to time may determine.
Subject to adjustment as provided in Section 6, the aggregate number of shares
of Common Stock covered by the Plan and issuable upon exercise of all options
granted hereunder shall be 250,000 shares.
(b) RESTORATION OF UNPURCHASED Shares. If an option expires or is
terminated or surrendered without having been fully exercised, the unpurchased
shares of Common Stock subject to the option shall again be available for other
options awarded under this Plan.
4. ELIGIBILITY. Except as otherwise provided in Section 5(f), stock options may
be granted under the Plan only to Outside Directors.
5. STOCK OPTIONS.
(a) GRANT OF STOCK OPTIONS. On October 1, 1998, each Outside Director then
serving shall be granted an option to purchase 15,000 shares of Common Stock and
on each October 1 thereafter throughout the term of this Plan, each Outside
Director then serving shall be granted an option to purchase 5,000 shares of
Common Stock. An Outside Director first elected after October 1, 1998 shall,
upon such election, be granted an option to purchase 15,000 shares of Common
Stock. In the event insufficient shares are available under this Plan to grant
the options specified above to all Outside Directors then serving, the number of
shares subject to the granted options shall be adjusted downward such that each
Outside Director shall receive an option to purchase the same number of shares
as the others without exceeding the number of shares available under this Plan.
In the event no shares are available for issuance of options, or if an
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insufficient number of shares are available for each Outside Director to receive
an option for the same number of shares as the others, no options shall be
granted at such time. Unless otherwise determined by the Board of Directors, the
right to purchase shares pursuant to options granted hereunder shall vest
annually in equal portions over a period of three years, and such vesting shall
occur on the anniversary of the relevant date of grant of the option.
Notwithstanding the terms and conditions of any options granted under this Plan,
including without limitation the terms and conditions of an individual agreement
executed pursuant to Section 5(d), the earliest time at which the right to
purchase shares under any option granted may vest is at the time of approval of
this Plan by the stockholders of the Corporation. By accepting an option granted
under this Plan, each Participant acknowledges and agrees to the terms,
conditions, restrictions and limitations contained in this Plan, including
without limitation those contained in the preceding sentence.
(b) OPTION PRICE. The purchase price of the Common Stock under each option
granted hereunder shall be one dollar ($1.00) in excess of the Fair Market Value
of the Common Stock on the day of the grant of the option.
(c) CONTINGENCY OF GRANTS. All grants of options pursuant to Section 5(a)
prior to approval of this Plan by the stockholders of the Corporation are
subject to such approval as provided in Sections 5(a) and 10.
(d) INDIVIDUAL AGREEMENTS; REQUIRED PROVISIONS. Options granted under this
Plan shall be evidenced by agreements in such form as the Board of Directors
from time to time approves, which agreements shall substantially comply with and
be subject to the terms of the Plan, including the conditions of this Section 5.
Each individual agreement shall include, in addition to other terms and
conditions as determined by the Board of Directors, the following: (i) the total
number of shares subject to the option; (ii) the exercise price for the shares
covered by the option; (iii) the time at which the option becomes exercisable;
(iv) the scheduled expiration date of the option; (v) the vesting period(s) for
such options; and (vi) the timing and conditions of issuance of any stock
received upon exercise.
(e) PERIOD. No option granted under the Plan shall be exercisable for a
period in excess of ten years from the date of its grant, subject to earlier
termination as provided in this Plan and as may be set forth in the individual
agreements evidencing the option. An option may be exercised in full or in part
at any time or from time to time during the term thereof, or may provide for its
exercise in stated installments at stated times during such term.
(f) NON-TRANSFERABILITY OF OPTIONS. Each option granted under the Plan
shall by its terms be non-transferable by the Participant other than by will or
the laws of descent and distribution. An option may be exercised, during the
lifetime of the Participant, only by the Participant. Notwithstanding the
foregoing, the Board of Directors may permit a Participant to transfer an option
or cause the Corporation to grant an option that would otherwise be granted to a
Participant, to any one or more of the following: a Participant's descendant,
spouse, descendant of a spouse, spouse of any of the foregoing, a trust
established primarily for the benefit of any of the foregoing, or of such
Participant, or to an entity which is a corporation, partnership, or limited
liability company (or any other similar entity) the owners of which are
primarily the aforementioned persons or trusts. Any such option so transferred
or granted directly to the aforementioned persons, trust or entities in respect
of a Participant shall be subject to the provisions of Section 5(g) concerning
the exercisability during and after the Participant's service on the Board of
Directors.
(g) TERMINATION OF SERVICE. Except as otherwise provided herein, if a
Participant voluntarily or involuntarily terminates service as an Outside
Director, the Participant may, to the extent the option has vested on the date
of termination, exercise any option held by such Participant, at any time within
three (3) months after the date of such termination, but not after the
expiration of the option. Any option not so exercised shall expire.
Notwithstanding the foregoing:
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(i) if a Participant retires as an Outside Director on or after
reaching age 65, the options shall vest upon such retirement and the
Participant (or the personal representative of the Participant if the
Participant has died) may exercise any or all of the Participant's
unexercised, unexpired options, provided such exercise is within twelve
(12) months after the date of the Participant's retirement but not after
the expiration of the option;
(ii) if a Participant's service as an Outside Director is terminated
by reason of death, the options shall vest upon death and the personal
representative of the Participant may exercise any or all of the
Participant's unexercised, unexpired options, provided such exercise occurs
within twelve (12) months of the date of the Participant's death but not
after the expiration of the option; and
(iii) if a Participant's service as an Outside Director is terminated
by reason of Disability, the options shall vest upon such termination and
the Participant (or the personal representative of the Participant if the
Participant has died) may exercise any or all of the Participant's
unexercised, unexpired options, provided such exercise is within twelve
(12) months of the date of the Participant's termination of service but not
after the expiration of the option.
Notwithstanding the forgoing, if the services of any Participant shall be
terminated because of the Participant's conviction of or plea bargain to a
felony involving fraud, theft, embezzlement or the like, all unexercised options
of such Participant shall lapse immediately and be unexerciseable on and after
the date of termination of the Participant's service
(h) NO FRACTIONAL SHARES. Options shall be granted and exercisable only for
whole shares; no fractional shares will be issuable upon exercise of any option
granted under the Plan.
(i) METHOD OF EXERCISING OPTION. Options be exercised by written notice to
the Corporation, addressed to the Corporation at its principal place of
business. Such notice shall state the election to exercise the option and the
NUMBER of shares with respect to which it is being exercised, and shall be
signed by the person exercising the option. Such notice shall be accompanied by
payment in full of the exercise price for the number of shares being purchased.
The exercise price is to be paid in full upon exercise of an option in one of
the following manners:
(1) Payment in cash;
(2) Payment in shares of Common Stock having a Fair Market Value equal
to the cash exercise price of the option being exercised; or
(3) Payment by a combination of cash and shares of Common Stock such
that the sum of the cash paid and the Fair Market Value of the shares of
Common Stock equals the cash exercise price of the option being exercised.
Any shares of Common Stock tendered in payment must be either shares owned by
the Participant and registered in the Participant's name and may not include
shares of Common Stock acquired by the Participant through exercise of an option
granted less than six months prior to the date of exercise of the option being
exercised.
(j) PROCEEDS FROM EXERCISE. The consideration received by the Corporation
upon exercise of an option, if cash, is to be added to the general funds of the
Corporation or, if shares of Common Stock, is to be added to the shares of the
Common Stock held in treasury and used for the corporate purposes of the
Corporation as the Board of Directors shall determine.
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(k) NO RIGHTS OF A STOCKHOLDER. A Participant shall have no rights as a
stockholder with respect to shares covered by an option. No adjustment will be
made for dividends with respect to an option for which the record date is prior
to the date a stock certificate is issued upon exercise of an option. Upon
exercise of an option, the holder of the shares of Common Stock so received
shall have all rights of a stockholder of the Corporation as of the date of
issuance.
(l) COMPLIANCE WITH LAW. No shares of Corporation Common Stock shall be
issued or transferred upon the exercise of any option unless and until the
following occurs;
(i) All legal requirements applicable to the issuance or transfer of
such shares have been complied with; and
(ii) All requirements of any national securities exchange or
association upon which the shares are listed, traded or quoted have been
met, in each case to the satisfaction of the Board of Directors and free of
any conditions unacceptable to the Board of Directors. The Board of
Directors shall have the right to condition the issuance of any shares made
to any Participant hereunder on such Participant's undertaking in writing
(whether prior to or after the grant of the options) to comply with such
restrictions on his or her subsequent disposition of such shares as the
Board of Directors shall deem necessary or advisable as a result of any
applicable law, regulation or official interpretation thereof, and a legend
may be placed on the certificates representing such shares to reflect any
such restriction.
6. CERTAIN ADJUSTMENTS.
(a) CAPITAL ADJUSTMENTS. Except as limited by Section 422 of the Code, the
aggregate number of shares of Common Stock subject to the Plan, the number of
shares covered by outstanding options, and the price per share stated in such
options shall be proportionately adjusted for any increase or decrease in the
number of outstanding shares of Common Stock of the Corporation resulting from a
subdivision or consolidation of shares or any other capital adjustment or the
payment of a stock dividend or any other increase or decrease in the number of
such shares effected without receipt by the Corporation of consideration
therefor in money, services or property.
(b) MERGERS, ETC. Except as limited by the provisions of Section 422 of the
Code, if the Corporation is the surviving corporation in any merger or
consolidation, any option granted under the Plan shall pertain to and apply to
the securities to which a holder of the number of shares of Common Stock subject
to the option would have been entitled. A dissolution or liquidation of the
Corporation shall cause every option outstanding hereunder to vest and be fully
exercisable on the date that the Corporation first announces publicly an intent
or a plan (whichever is earlier announced) of dissolution or liquidation. A
merger, consolidation or similar reorganization in which the Corporation is not
the surviving corporation shall cause every option outstanding hereunder to
terminate, unless specifically provided otherwise by the Board of Directors, but
each holder shall have the right, for a period of not less than the 30 days
immediately prior to a merger or consolidation in which the Corporation is not
the surviving corporation, to exercise such option in whole or in part without
regard to any vesting requirements or installment provisions contained in the
option agreement.
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7. CHANGE OF CONTROL ACCELERATION OF VESTING.
IN THE EVENT OF A CHANGE OF CONTROL (HEREIN DEFINED) SHALL OCCUR, ALL OPTIONS
OUTSTANDING UNDER THIS PLAN SHALL THEREUPON BECOME IMMEDIATELY EXERCISABLE IN
FULL, NOTWITHSTANDING ANY OTHER PROVISION TO THE CONTRARY HEREIN, FOR EACH
OPTION'S THEN REMAINING TERM.
For purposes of this Plan, a "Change of Control" of the Corporation shall
be deemed to occur if either: (A) after September 1, 1998, any person or entity,
or any group of persons or entities becomes the "beneficial owner" (as defined
in the Securities Exchange Act of 1934, as amended from time to time), directly
or indirectly, of 35% or more of combined voting power of the Corporation's then
outstanding securities; or (B) the occurrence within any thirty six month period
during the term of this Plan and thereafter while any options granted under this
Plan have not vested, of a change in the Board of Directors with the result that
the Incumbent Members do not constitute a majority of the Board of Directors.
"Incumbent Members" in respect of any thirty six-month period shall mean the
members of the Board of Directors on the date immediately preceding the
commencement of such thirty six-month period, provided that any person becoming
a Director during such period whose election or nomination for election was
supported by a majority of the Directors who, on the date of such election or
nomination for election, comprised the Incumbent Members shall be considered one
of the Incumbent Members in respect of such thirty six-month period.
8. DELIVERY OF STOCK; LEGENDS; REPRESENTATIONS.
(a) LEGEND ON CERTIFICATES. SUBJECT to Section 7(c), all certificates
representing shares of Common Stock issued upon exercise of options granted
under the Plan shall be endorsed with a legend reading as follows:
THE SHARES OF COMMON STOCK EVIDENCED BY THIS CERTIFICATE HAVE BEEN ISSUED
TO THE REGISTERED OWNER IN RELIANCE UPON WRITTEN REPRESENTATIONS THAT THESE
SHARES HAVE BEEN PURCHASED SOLELY FOR INVESTMENT. THESE SHARES MAY NOT BE
SOLD, TRANSFERRED OR ASSIGNED UNLESS IN THE OPINION OF THE CORPORATION AND
ITS LEGAL COUNSEL SUCH SALE, TRANSFER OR ASSIGNMENT WILL NOT BE IN
VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND
REGULATIONS THEREUNDER.
(b) PRIVATE OFFERING FOR INVESTMENT ONLY. The options are and shall be made
available only to Outside Directors who have knowledge of the Corporation's
financial condition, management and its affairs. The Plan is not intended to
provide additional capital for the Corporation, but to encourage stock ownership
among the Outside Directors. By the act of accepting an option, each Participant
agrees (i) that, if he or his successors exercise his option, he or his
successors will purchase the subject shares solely for investment and not with
any intention at such time to resell or redistribute those shares, and (ii) that
he or his successors will confirm such intention by an appropriate certificate
at the time the option is exercised. However, the neglect or failure to execute
such a certificate shall not limit or negate the foregoing agreement.
(c) REGISTRATION STATEMENT. If a Registration Statement covering the shares
of Common Stock issuable upon exercise of options granted under the Plan is
filed under the Securities Act of 1933, as amended, and is declared effective by
the Securities and Exchange Commission, the provisions of Section 7(a) relating
to endorsement of a restrictive legend and the provisions of Sections 7(b)
relating to investment covenants shall terminate during the period that the
Registration Statement, as periodically amended, remains effective.
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9. TERM OF PLAN; EFFECT OF AMENDMENT OR TERMINATION.
(a) TERM. This Plan shall continue in effect for a term of ten (10) years
unless sooner terminated by the Board of Directors
(b) EFFECT OF TERMINATION. Any option, outstanding at the termination of
this Plan, shall continue in full force and effect in accordance with its terms
and shall not be affected by the termination of the Plan.
(c) AMENDMENTS TO PLAN. The Board of Directors of the Corporation may, at
any time prior to that date, terminate this Plan or make such modifications of
the Plan as it may deem advisable; provided, however, that, if approval by
stockholders of the Corporation of any amendment is required to comply with Rule
16b-3 or other applicable requirement, such amendment shall be subject to
stockholder approval. Notwithstanding the foregoing, the Plan may not be amended
more than once every six (6) months, other than to comply with changes in the
Code, the Employee Retirement Income Security Act of 1974, as amended, or the
rules thereunder; provided that the Board of Directors may not, without consent
of the option holder, take any action which affects or impairs the rights of the
holder of any option outstanding under the Plan, and further provided that,
except as provided in Section 6, the Board of Directors may not, without the
approval of the Corporation's stockholders, take any of the following actions:
(i) increase the aggregate number of shares of Common Stock subject to the Plan;
(ii) change the class of persons eligible to receive options; (iii) modify the
period within which options may be granted; (iv) modify the period within which
options may be exercised, the exercise price or the terms upon which options may
be exercised; or (v) increase the material benefits accruing to participants
under the Plan to the extent that stockholder approval is required by applicable
law or regulation.
10. WITHHOLDING. The Corporation, at the time any distribution is made under
this Plan, whether in cash or in shares of stock, may withhold from such payment
any amount necessary to satisfy any federal and state income tax withholding
requirements with respect to such distribution. Such withholding may be in cash
or in shares of stock.
11. EFFECTIVENESS OF THE PLAN. This Plan will be effective upon adoption by the
Board of Directors of the Corporation, subject, however, to its approval by the
stockholders of the Corporation given within 12 months after the date the Plan
is adopted by the Board of Directors, at a regular meeting of the stockholders
or at a special meeting of the stockholders duly called and held for such
purpose, or by written consent of the stockholders. Grants of options made prior
to stockholder approval shall be subject to the obtaining of such approval and
if such approval is not obtained as aforesaid, such grants shall not be
effective for any purpose.
12. GOVERNING LAW. THIS PLAN AND ANY AND ALL STOCK OPTION AGREEMENTS EXECUTED IN
CONNECTION WITH THIS PLAN SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO CONFLICT OF LAWS
PRINCIPLES.
23
<PAGE>
PROXY PROXY
PILGRIM AMERICA CAPITAL CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints ROBERT W. STALLINGS, JAMES R.
REIS and JAMES M. HENNESSY, or any of them acting in absence of the others, with
full power of substitution, the true and lawful attorneys and proxies of the
undersigned, to attend the Annual Meeting of the stockholders of PILGRIM AMERICA
CAPITAL CORPORATION (the "Company") to be held at the Company's Corporate
Headquarters, 40 North Central Ave., Suite 1200, Phoenix, AZ 85004, on February
24, 1999, at 10:00 a.m., local time, and any adjournments directed below, with
all powers the undersigned would possess if personally present at the meeting.
This proxy will be voted in accordance with the directions indicated herein. If
no specific directions are given, this proxy will be voted for the approval of
all nominees listed herein, for approval of the proposals listed herein and,
with respect to any other business as may properly come before the meeting, in
accordance with the discretion of the proxies.
PLEASE PROMPTLY SIGN AND RETURN IN THE ENCLOSED ENVELOPE.
(Continued and to be signed on the reverse side.)
<PAGE>
PILGRIM AMERICA CAPITAL
CORPORATION PLEASE MARK VOTE IN OVAL IN THE
FOLLOWING MANNER USING DARK INK ONLY.
FOR WITHHOLD FOR ALL
1. Election of Directors-- ALL ALL Except these nominee(s)
written below.
Nominees: Robert W. Stallings,
John M. Holliman, III [ ] [ ] [ ]____________________
FOR AGAINST ABSTAIN
2. Directors' Stock Option Plan [ ] [ ] [ ]
Dated: , 1999
-------------------------
----------------------------------------
(Signature)
----------------------------------------
(Signature)
Please sign exactly as your name
appears. Joint owners should sign
personally. Where applicable, indicate
your official position or representation
capacity.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
YOUR VOTE IS IMPORTANT!
PLEASE PROMPTLY SIGN AND RETURN IN THE ENCLOSED ENVELOPE.
